Hospital rate regulation in Maryland was established by an act of the Maryland legislature in 1971. The law created the Health Services Cost Review Commission (HSCRC), an independent State agency with seven Commissioners appointed by the Governor.

The law was strongly supported by the hospital industry. The HSCRC was given broad responsibility regarding the public disclosure of hospital data and operating performance and was authorized to establish hospital rates to promote cost containment, access to care, equity, financial stability and hospital accountability.

The HSCRC has set rates for all payers, including Medicare and Medicaid, since 1977 and has largely achieved the key policy objectives established by the Maryland legislature. In recent years, the HSCRC has devoted considerable resources toward the development and implementation of payment-related initiatives designed to promote the overall quality of care in Maryland hospitals.

Maryland remains the only state to retain such a system. The market for health care services in the United States has failed to produce results consistent with the Maryland legislature’s founding goals. The Maryland system shows that a “macro-oriented” approach to regulation, which seeks to correct only for the most obvious market failures, can assist policy-makers in controlling cost growth and, at the same time, enhancing access to care.