Health Care: Antitrust Enforcement Under Maryland's Hospital All-Payer
System (Letter Report, 04/27/94, GAO/HEHS-94-81).

One issue being raised in the debate over health care reform is how
antitrust law should be applied to health care providers.  Federal and
state antitrust law seeks to prevent price fixing and predatory pricing
and to ensure access to and quality of goods and services for consumers.
Since 1974, Maryland has operated a rate-setting program that sets how
much hospitals can charge for their services. Also, health care
facilities operating in Maryland must obtain a certificate of need if
they wish to change the type of services they provide or to make major
capital expenditures.  Because Maryland regulates hospital prices
similar to the way in which public utilities are regulated, state
antitrust concerns about hospital pricing are not an issue, and Planning
Commission-approved mergers and joint actions by hospitals are exempt
from the state's antitrust law.  Also, to the extent that the state
actively regulates hospitals, federal antitrust enforcement concerning
such regulated activities may not be relevant under the Supreme Court's
state action immunity doctrine. Other concerns about anticompetitive
conduct and its possible harmful effect on the public may still be
relevant and covered by federal or state antitrust law.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-94-81
     TITLE:  Health Care: Antitrust Enforcement Under Maryland's 
             Hospital All-Payer System
      DATE:  04/27/94
   SUBJECT:  Hospital care services
             Health care cost control
             Antitrust law
             State-administered programs
             Monopolies
             Price regulation
             Law enforcement
             Hospital planning
             Price fixing
IDENTIFIER:  Maryland
             Medicaid Program
             Medicare Program
             Maryland All-Payer Rate-Setting System
             Maryland Certificate of Need Program
             
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Cover
================================================================ COVER


Report to the Honorable
Fortney H.  (Pete) Stark,
House of Representatives

April 1994

HEALTH CARE - ANTITRUST
ENFORCEMENT UNDER MARYLAND'S
HOSPITAL ALL-PAYER SYSTEM

GAO/HEHS-94-81

Antitrust and Maryland All-Payer System


Abbreviations
=============================================================== ABBREV

  CON - Certificate of Need
  DOJ - Department of Justice
  FTC - Federal Trade Commission
  HHS - Department of Health and Human Services

Letter
=============================================================== LETTER


B-251477

April 27, 1994

The Honorable Fortney H.  (Pete) Stark
House of Representatives

Dear Mr.  Stark: 

One of the issues involved in the debate surrounding health care
reform is how antitrust law should be applied to health care
providers.  Federal and state antitrust law seeks to prevent price
fixing and predatory pricing and to ensure access to and quality of
goods and services for consumers. 

The American Hospital Association claims that the threat of antitrust
enforcement has had a "chilling effect" on the behavior of hospital
executives, preventing them from seeking joint ventures or mergers. 
The association says that additional joint ventures and mergers could
promote greater efficiency in the delivery of health care services
and help to reduce the current oversupply of facilities.  To
facilitate joint ventures and mergers, the association has suggested
that certain hospital cooperative actions should be excluded from
antitrust enforcement.  On the other hand, proponents of antitrust
enforcement claim that the antitrust laws promote competition, which
will protect consumers. 

Maryland has taken a different approach to address the concerns
surrounding antitrust enforcement, and you asked us to review the
state's experience under this approach.  Since 1974, Maryland has
operated a rate-setting program that establishes how much hospitals
can charge for their services.  Also, as is done in most other
states, health care facilities operating in Maryland must obtain a
certificate of need (CON) if they wish to change the type of services
they provide or to make major capital expenditures.  You asked us to
study the effect Maryland's all-payer rate-setting and CON programs
have had on antitrust enforcement in the state and whether these
programs have rendered antitrust enforcement in the state completely
or partially unnecessary for hospitals. 

In doing our work, we did not attempt to determine the effectiveness
of Maryland's rate-setting and CON programs.  Our scope and
methodology are presented on page 12. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Maryland has supplanted state antitrust enforcement actions
concerning prices, mergers, and joint ventures with regulation of
hospitals through its rate-setting and CON programs.  Maryland's
regulation reduces the likelihood of federal antitrust enforcement in
these areas.  Other potentially anticompetitive conduct not covered
by state regulatory oversight could be subject to federal and state
antitrust enforcement actions. 

Concerning pricing, Maryland's regulatory approach, which is similar
in operation to public utility regulation, enables the state to set
the level of each hospital's prices.  Under Maryland's system, the
state establishes through budget review the amount of revenues each
hospital can receive and requires that all payers be charged the same
rates for services.  Based on a waiver, Medicare and Medicaid also
pay on the basis of the state-approved rates.  Thus, hospital pricing
is not a state antitrust concern for Maryland.  This regulatory
scheme appears to have had the desired effect of controlling hospital
prices.  In 1976, for example, Maryland's average cost per admission
was 25 percent above the national average, but in 1993 it was 11
percent below the national average. 

Concerning access to services, Maryland uses its CON program to
regulate mergers and joint ventures, rather than relying on antitrust
enforcement.  The program's overall goals are to prevent the costly
proliferation and unnecessary duplication of facilities, while
assuring sufficient services to meet the public's needs.  With
approval of the state CON agency, hospital mergers or joint ventures
to own and operate major medical equipment are exempt from the
state's antitrust laws. 

A third objective of antitrust policy is to assure quality of
services, but the federal and state governments have not used
antitrust law specifically to address this area of concern.  Rather,
the chief protection mechanisms to assure quality services are state
licensing and inspection programs and quality assurance programs. 

Whether hospital pricing in Maryland and the mergers and joint
ventures the state approves are subject to federal antitrust laws
depends on whether the courts would judge Maryland's regulatory
program to meet the requirements of the Supreme Court's state action
immunity doctrine.  (See p.  11.)


   BACKGROUND
------------------------------------------------------------ Letter :2


      MONOPOLIES AND MARKETS
---------------------------------------------------------- Letter :2.1

In a competitive market, the price and supply of goods and services
are set by market forces.  In theory, such markets will reach
equilibrium at a price where suppliers' marginal costs equal their
marginal revenues; that is, the cost of producing one more unit of
output equals the additional revenue the supplier will receive from
selling that unit of output.  When a competitive market is in
equilibrium, suppliers earn what economists call "normal profits."

Under noncompetitive conditions, a single supplier or small group of
suppliers may gain unfair advantage.  If suppliers obtain
monopolistic power, they can set prices at levels higher than what
would prevail under competitive conditions.  Under monopolistic
conditions, suppliers tend to set output at the point where marginal
revenue equals marginal costs, as under competitive market
conditions, but are able to set prices at higher levels than would
exist in a competitive market.  Thus, monopolists can gain excess
profits. 

A related concern is unfair control over supply and quality of the
goods and services available.  If a single supplier or a small group
of suppliers collude to restrict output, they can limit supply,
forcing prices higher than the market would otherwise bear. 
Alternatively, a single supplier or small group of suppliers could
reduce quality while maintaining prices, thereby lowering the value
of their goods or services. 


      LIMITING MONOPOLY POWER
---------------------------------------------------------- Letter :2.2

There are two general ways that the government attempts to control or
mitigate the undesirable effects of monopolies in the private sector. 
The first is through the application of the public utility regulation
approach.  In some industries, such as electricity and natural gas,
natural monopolies exist.  Because of the high capital costs
associated with setting up these industries and inefficiencies that
would arise from duplication of capital goods necessary for
competition, the government grants a monopoly to one firm and
regulates the prices that it can charge.  The goal of this form of
regulation is to assure adequate supplies at reasonable prices while
permitting the firm to earn a reasonable return on investment.  This
approach has been criticized for not necessarily assuring the lowest
possible prices for consumers. 

The second approach is through the application of antitrust law,
whose goal is to ensure a marketplace where suppliers compete fairly. 
The country's antitrust laws seek to prevent any supplier from
obtaining substantial market power, unless that power is obtained
through fair competition.  The primary federal antitrust laws most
pertinent to hospitals are the Sherman Antitrust Act and the Clayton
Act. 


      FEDERAL ANTITRUST LAWS
---------------------------------------------------------- Letter :2.3

Section 1 of the Sherman Act\1 prohibits all conspiracies or
agreements that restrain trade.  As interpreted by the courts, this
prohibition applies to unreasonable restraints on trade, which have
included agreements or conspiracies to fix prices, divide market
territories or groups of customers, boycott other firms, or use
coercive tactics with the intent and effect of injuring competition. 
Section 7 of the Clayton Act\2 prohibits all mergers and acquisitions
of stock or assets that may substantially lessen competition or that
tend to create a monopoly. 

A merger or joint venture between two or more hospitals may be
investigated by either the Federal Trade Commission (FTC) or the
Department of Justice (DOJ), the agencies with primary responsibility
for enforcing the federal antitrust laws.  These agencies have
established a procedure for deciding which agency will investigate a
particular merger or joint venture based on staff expertise, prior
dealings with the parties involved, and case load.  While either
agency may investigate a merger or joint venture for civil
violations, once criminal conduct is suspected, the case is referred
to DOJ.  Private parties and state attorneys general may also sue to
block mergers or joint ventures under either the Sherman or the
Clayton Act. 


--------------------
\1 July 2, 1890, c.647,1,26 Stat.  209, classified to 15 U.S.C.  1
(Supp.  IV 1992). 

\2 Oct.  15, 1914, c.323,7,38 Stat.  731, classified to 15 U.S.C.  18
(1988). 


      STATE ANTITRUST LAWS
---------------------------------------------------------- Letter :2.4

Historically, states took the lead in passing antitrust legislation
more than a century ago.\3 By 1890, when Congress passed the Sherman
Act, 27 states had either a constitutional or statutory provision
banning monopolies and other restraints of trade.  Today, all states,
with the exception of Pennsylvania and Vermont,\4 have an antitrust
law generally applicable to activity within the state.  Each of these
state antitrust laws contains a provision that is analogous to
section 1 of the Sherman Act.  Twelve states' laws have provisions
relating to mergers but only half of those are analogous to section 7
of the Clayton Act. 

Most states have adopted exemptions from the antitrust laws for
various activities or industries.  These exemptions vary among the
states, and several states have enacted specific exemptions for
health care activities.  For example, Maryland's antitrust law
exempts hospital mergers, consolidations, or joint ownership and
operation of major medical equipment to the extent that the activity
is approved by the state Health Resources Planning Commission. 


--------------------
\3 This summary of state antitrust laws is condensed from "State
Antitrust Law and Its Application to Health Care:  An Overview" (a
presentation by Michael F.  Brockmeyer and Ellen S.  Cooper before
The National Health Lawyers Association, Washington, D.C., Feb.  15,
1991). 

\4 While they do not have a state antitrust law of general
applicability, Pennsylvania and Vermont incorporated the provisions
of section 1 of the Sherman Act into statutes applying to bid rigging
on governmental contracts. 


   MARYLAND'S ALL-PAYER
   RATE-SETTING SYSTEM AND
   CERTIFICATE OF NEED PROGRAM
------------------------------------------------------------ Letter :3


      THE RATE-SETTING SYSTEM
---------------------------------------------------------- Letter :3.1

A major concern of antitrust policy is to prevent monopolistic
pricing, and, in effect, Maryland has substituted a hospital
rate-setting system for antitrust enforcement in this area. 
Maryland's payment system, enacted in 1971, was developed by the
state's Health Services Cost Review Commission--the first all-payer
hospital rate-setting agency in the country.  After a 3-year phase-in
of a uniform reporting system, the Commission began reviewing and
approving hospital rates in 1974.  At the same time, the Commission
began negotiating with the Department of Health and Human Services
(HHS) for a demonstration project that would include a waiver of
Medicare and Medicaid reimbursement principles in favor of the
Commission's rate-setting methodology.  This waiver was granted
effective July 1, 1977.  In 1983, the Congress made the waiver
permanent provided that certain conditions are maintained, including
(1) Maryland's system remains all payer and (2) the rate of increase
in Medicare payments per admission in Maryland remains below the
national rate of increase in Medicare payments per admission. 

Maryland's all-payer system covers all acute care inpatient,
emergency, and outpatient services provided at hospitals.  Although
hospital services are not exactly analogous to the natural monopoly
model, such as public utilities, Maryland's all-payer system follows
a quasi-public-utility approach.  The Commission sets unit rates for
each hospital department and adjusts them annually for inflation,
volume changes, and productivity gains.  Hospitals are required to
charge those rates, and all payers pay on the basis of those rates. 
The system is a "macromanagement" approach, which places overall
constraints on a hospital's revenue but allows the institution
flexibility to operate within the overall limit approved by the
Commission.  Proponents of Maryland's system claim it benefits
hospitals because it provides financial predictability and allows
hospital managers to concentrate on controlling costs. 

Maryland's hospital rate-setting system includes four processes: 
full rate review, inflation adjustments, guaranteed inpatient
revenue, and screening.  The full rate review, required of all
hospitals when the all-payer system was implemented and of all new
hospitals, involves submitting detailed cost information on a
prescribed form for all departmental cost centers.  Under full rate
review (1) bad debts and uncompensated care expenses are included in
the base rate; (2) cross-subsidization among hospital services is
prohibited; (3) most non-patient revenue (such as income from parking
lots and vending machines) is used to reduce patient care rates; (4)
a uniform markup for working capital is included in rates; (5)
discounts are provided for prompt payment; and (6) discounts are
allowed for Medicare, Medicaid, and other third-party payers who
adhere to practices designed to mitigate hospital uncompensated care
(for example, by providing open enrollment periods for people to sign
up for health insurance).  During the rate review process, each
hospital's departmental costs are compared with costs of similar
hospitals.  Hospitals are grouped into one of six comparison groups
based on such items as size of institution, case mix, and geographic
location (inner city/suburban/
rural). 

Inflation adjustments are used to modify hospital rates each year for
inflation and other factors, such as volume changes.  Thus, rates can
be adjusted annually without the need for a full rate review. 
Because this adjustment is based on general rates of inflation, not
the actual cost experience of individual hospitals, hospitals have a
strong incentive to hold their own cost increases at or below the
rate increase granted by the Commission, the Commission's Executive
Director told us.  Furthermore, because the system covers all payers,
hospitals cannot shift costs among payers.  The guaranteed inpatient
revenue component establishes a target revenue per admission, similar
to Medicare's prospective payment system.  This target gives
hospitals an incentive to control how services are used, because the
hospital can keep the dollar difference if it can serve a patient for
lower costs than the approved target amount.  The screening
component, introduced in 1982, ranks hospitals relative to their
peers based on inpatient revenue per admission after a series of
adjustments for such factors as case mix, direct and indirect
education, labor market differences, and disproportionate share of
low-income patients.  The Commission's Executive Director told us the
Commission attempts to adjust for those factors it believes reflect
legitimate differences among hospitals that may not be explicitly
accounted for in the marketplace.  Hospitals exceeding the benchmark
set by the Commission are denied inflation increases and are expected
either to request a full rate review or negotiate a spend-down
agreement to bring their costs in line with their peers within 2 to 5
years. 

The primary goal of Maryland's system is cost control, and the state
has been relatively effective in this endeavor.  The Commission
reported that in 1976 the average cost per admission to a Maryland
hospital was more than 25 percent above the national average.  In
1993, the average cost was about 11 percent below the national
average.\5 (See fig.  1.)

   Figure 1:  Costs per Hospital
   Admission in Maryland Versus
   U.S.  Average, 1976-93

   (See figure in printed
   edition.)

Source:  Maryland Health Services Cost Review Commission. 

These constraints on hospital costs have allowed the state to
maintain its waiver from the Medicare hospital prospective payment
system.  Under this waiver, hospitals in the state are paid
Commission-approved rates for Medicare and Medicaid patients. 

Maryland's reimbursement system is unique in its treatment of
uncompensated care (charity care and bad debts).  Medicare, Medicaid,
and Blue Cross typically do not pay for such costs, so the cost of
uncompensated care is often shifted to private payers or other
insurance; however, in Maryland, the burden of uncompensated care is
shared by all payers.  According to representatives of the Maryland
Hospital Association, uncompensated care in 1992 totaled about $400
million in Maryland, about 9 percent of the total costs of Maryland's
51 hospitals.  Hospital charges include a markup over patient care
costs to cover overhead, uncompensated care, discounts for qualifying
payers, and other factors.  In 1992, the average markup between
hospitals' costs and gross charges nationally was 41 percent; in
Maryland, it was 13 percent.  According to a hospital association
representative, the markup in Maryland was lower than in any other
state because Maryland's hospital rate-setting system does not allow
cost shifting. 


--------------------
\5 A recent review of literature on hospital rate-setting mechanisms
found that Maryland's all-payer hospital rate-setting program was
effective in controlling costs per discharge in that state.  At the
same time, the author found that rate-setting systems have expanded
access to services for uninsured persons and have small, if any,
effect on quality of care.  See Gerard F.  Anderson, "All-payer
ratesetting:  Down but not out," Health Care Financing Review, 1991
Annual Supplement, HCFA Pub.  No.  03322, Office of Research and
Demonstrations, Health Care Financing Administration (Washington,
D.C.:  U.S.  Government Printing Office, Mar.  1992), pp.  35-41. 


      THE CERTIFICATE OF NEED
      PROGRAM
---------------------------------------------------------- Letter :3.2

A second major concern of antitrust policy is to assure adequate
supplies of goods and services, and Maryland uses its CON program to
address this issue.  State CON programs are also borrowed from the
public utility regulation approach.  The main goal of the CON program
is to contain costs by preventing the oversupply of expensive
technology and health care services.  CON laws typically require
providers to receive state approval for major capital expenditures,
including the purchase of high-technology equipment and addition of
services. 

Beginning in 1975, the federal government encouraged the development
of state CON programs by making the receipt of federal Public Health
Service funds conditional on states passing CON laws.  Although the
District of Columbia and all states except Louisiana eventually
adopted a CON program, the effort was short-lived.  Start-up problems
delayed the law's implementation until 1977.  Early state CON laws
were designed to create a state network of health planning and
development agencies to regulate proposed health services and
facilities.  With the Reagan administration's emphasis on
deregulation, federal funding declined and the Congress repealed the
law effective in 1987.  Despite the elimination of federal funding,
38 states and the District of Columbia continue to operate CON
programs,\6 which are aimed primarily at cost containment.  State
laws vary considerably, but most state CON programs cover acute care
hospitals and nursing homes.  Some states also cover psychiatric and
rehabilitation hospitals, and some cover ambulatory care facilities
and mobile high-technology units (such as lithotripters and magnetic
resonance imaging machines).\7

The goals of Maryland's CON program are to make sure that sufficient
health care capacity exists in the state and to restrict development
of health facilities and services to what is needed.  Maryland
requires a CON before (1) a new health care facility\8 is built,
developed, established, or moved to another site; (2) bed capacity is
changed; (3) a type of health care service is added or the scope of
one is changed; (4) an additional home health agency or home health
care service is established by an existing agency or facility; or (5)
capital-related expenditures exceeding the threshold, currently $1.25
million, are incurred.  An exception allows a hospital to spend any
amount it wants for a capital project if the hospital pledges to
finance the project substantially out of its existing rate structure. 
To qualify for this exception, a hospital must pledge not to seek
rate increases of more than $1.5 million to finance the project. 
According to the Commission, 39 hospitals have requested this
exception since July 1, 1988 (the effective date); during the same
time, six hospitals have applied for and received CON approval for
capital projects.  Also, a CON is not required for capital
expenditures directly related to acquisition and installation of
major medical equipment.\9

The Maryland CON program is administered by the state Health
Resources Planning Commission.  The Director of the Maryland CON
program told us the Planning Commission tries to strike a balance
between need and availability of health care services.  Hospitals
desiring to merge are required to notify the Planning Commission. 
The Planning Commission may approve a health care facility merger and
exempt it from full CON review if the Planning Commission finds that
the merger is in the public interest, will result in more efficient
and effective hospital service delivery, and is not inconsistent with
the state health plan or any institution-specific plan. 


--------------------
\6 Between 1983 and 1988, Arizona, California, Colorado, Idaho,
Kansas, Minnesota, New Mexico, South Dakota, Texas, Utah, and Wyoming
repealed their CON legislation.  Louisiana never established a CON
review program, but the state operates a capital expenditure review
program for long-term care services eligible for federal
reimbursement.  See "Certificate of Need:  An Overview of 1992 State
Legislative Activity," The George Washington University,
Intergovernmental Health Policy Project (Washington, D.C.:  1993). 

\7 "States Rediscover Certificate-Of-Need Laws," Medicine and Health
Perspectives (New York:  Faulkner and Gray, Feb.  23, 1993). 

\8 Under Maryland's program, a health care facility is a hospital,
ambulatory surgery center, inpatient rehabilitation facility, home
health agency, hospice, or related institution, such as an
intermediate care facility, nursing home, or substance abuse
facility. 

\9 The acquisition and installation of major medical equipment is
subject to approval by the Office of Licensing and Certification
within the Maryland Department of Health and Mental Hygiene. 


      QUALITY ASSURANCE
---------------------------------------------------------- Letter :3.3

The final area of concern for antitrust policy is quality of
services.  Neither the federal government nor the states rely on
antitrust law as their major defense against the potential adverse
consequences of monopolistic practices on quality of hospital care. 
Rather, the federal government requires hospitals that participate in
the Medicare and Medicaid programs, which include virtually all
hospitals, to undergo a periodic survey and certification process. 
Federal law also requires the Medicare and Medicaid programs, as well
as hospitals themselves, to operate quality assessment programs to
help ensure that hospitals provide quality services to patients. 
Finally, every state licenses or approves hospitals to operate and
requires periodic inspections.  Quality of care problems can arise
under any hospital payment system, and quality assurance measures are
necessary in any case. 


   EFFECT OF ANTITRUST LAWS ON
   MARYLAND'S ALL-PAYER AND
   CERTIFICATE OF NEED SYSTEMS
------------------------------------------------------------ Letter :4

Because of significant state regulation of and statutory exemptions
pertaining to certain hospital activities in Maryland, the likelihood
of federal and state antitrust enforcement has been minimized.  To
the extent that hospital rates are set and monitored by the state
Health Services Cost Review Commission, concerns about hospital price
fixing are not relevant.  Similarly, to the extent that new or
existing hospitals receive approval from the state Health Resources
Planning Commission to participate in any of the activities requiring
a CON under Maryland law, these activities are unlikely to generate
significant state antitrust concern.  In addition, those Planning
Commission-approved activities involving the merger or consolidation
of hospitals or the joint ownership and operation of major medical
equipment by hospitals are specifically exempted from the application
of Maryland's antitrust law. 

Depending on the degree of state supervision and control of their
activities, hospitals may also be exempt from the application of
federal antitrust laws, based on the Supreme Court's state action
immunity doctrine.  Under this doctrine, the Supreme Court has held
that private anticompetitive conduct is immune from federal antitrust
liability provided that the state (1) clearly articulates and
affirmatively expresses a policy to displace competition with
regulation and (2) actively supervises and controls the private
anticompetitive conduct.  To date, DOJ and FTC have not brought any
antitrust actions in Maryland on the basis of hospital pricing,
mergers, or joint ventures. 

Activities that do not meet the federal standard for state action
immunity are not exempt from federal antitrust enforcement.  Also,
the statutory exemptions in Maryland are limited to certain Planning
Commission-approved activities; other hospital activities continue to
be subject to state antitrust scrutiny. 


   SUMMARY
------------------------------------------------------------ Letter :5

Antitrust laws exist to protect the public from the adverse effects
of monopoly power, and enforcement of the nation's antitrust laws
will be an important consideration as the Congress considers health
care reform.  Because Maryland regulates hospital prices similar to
the way in which public utilities are regulated, state antitrust
concerns about hospital pricing are not an issue, and Planning
Commission-approved mergers and joint actions by hospitals are exempt
from the state's antitrust law.  Also, to the extent that the state
actively regulates hospitals, federal antitrust enforcement
concerning such regulated activities may not be relevant under the
Supreme Court's state action immunity doctrine.  Other concerns about
anticompetitive conduct and its possible adverse effect on the public
(for example, actions that could restrict access to or lower the
quality of services) may still be relevant and covered by federal or
state antitrust laws. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6

We discussed the applicability of antitrust laws in the state's
health care industry with representatives of Maryland's rate-setting
commission, planning commission, and the state Attorney General's
office.  We also met with representatives of the Department of
Justice, Federal Trade Commission, American Hospital Association,
Joint Commission on the Accreditation of Hospitals, and Federation of
American Health Systems.  We analyzed information obtained through a
literature search concerning hospital mergers.  We did not attempt to
assess the effectiveness of Maryland's rate-setting, CON, or
licensure and inspection programs. 

We conducted our work between November 1992 and December 1993 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :6.1

Representatives of both the Maryland Health Services Cost Review
Commission and Health Resources Planning Commission reviewed an
earlier draft of this report, and their comments are reflected in
this report where appropriate. 

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 7 days after its issue date.  At that time, we will send copies
to the Director, Office of Management and Budget; the Secretary of
HHS; the Attorney General; the Chairman, Federal Trade Commission;
the Maryland Health Services Cost Review Commission; and the Maryland
Health Resources Planning Commission.  Copies will also be made
available to other interested parties on request. 

If you have any questions, please call me at (202) 512-7119.  The
major contributors to this report are listed in the appendix. 

Sincerely yours,

Sarah F.  Jaggar
Director, Health Financing
 and Policy Issues


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I

Thomas Dowdal, Assistant Director, (410) 965-8021
Jerry Baugher, Evaluator-in-Charge
Roger Hultgren, Assignment Manager
