In nineteen hundred seventy-eight, the General Assembly passed Senate Bill No. 259 establishing the Virginia Health Services Cost Review Commission to aid in cost containment of health services to consumers in the Commonwealth.

By this legislation, health care institutions are required to file certain data with the Commission for analysis to determine if the charges and costs of each institution are reasonable.

The Commission may comment publicly on its findings, but has no regulatory authority over the institutions.

In 1979, The General Assembly passed S.B. 773, an amendment to S.B. 259,to include Virginia Commonwealth University and University of Virginia Hospitals in the institutions subject to this bill.

The enabling legislation, Title 9, Chapter 26, Code of Virginia, and the amendment are attached at the conclusion of this report, (Appendix 1).

The Commission established a plan of action and a budget for the calendar year 1979.

The first step was to bring the approximately 65 hospitals in the existing voluntary program into the "mandated" Cost Review as set forth in this legislation. This was done with a minimum of inconvenience to these institutions. Thus, the flow of data was not interrupted, and the prior large accumulation of data was available for the future work of this Commission. It was for this reason that strenuous efforts were made by the Commission to get a program "on line" in the short period between November 6, 1978 and January 1, 1979.

Beginning in January, 1979, the Commission attempted to bring into the system the approximately 55 hospitals that had not participated previously in the voluntary rate review program. The commission recognized that there would be an adjustment process -- difficult for some of these hospitals -- as they had to comply with standardized reporting forms. They have to file with the Commission historical data (audits for year ending December, 1978), information on anticipated changes in charges, and prospective data (budgets) for their forthcoming fiscal year. The Program Contractor held workshops around the State for the Commission to help these 55 or so institutions to learn the system as quickly as possible.

The Virginia Health Services Cost Review Commission met as a body twelve times since its inception in July 1978. (See Appendix II) The first several meetings dealt primarily with getting the Commission organized and functioning, election of Chairman, contracting for technical assistance, requirements for Commission staff and offices, administrative budget and fee collections, hospital reporting requirements establishing communications with hospitals, adoption of Rules and Regulations, financial reports, and record keeping.

Subsequent meetings provided training for Commission members including technical process of screening, review of hospital charge schedules, staff demonstrations of procedures for analysis calculations, and joint meeting with the Virginia Hospital Rate Review Board to observe their review process.

In addition to the training for Commission members, six training sessions were held across the state for 273 hospital Administrators, Controllers and Budget Directors on the process of reporting their historical and budgetary data. (See Appendix VI)

Matters addressed at later commission meetings included changes to the Rate Review Manual (See Appendix IV and V), updating screens, confidentiality and dissemination of information, and establishing goals and objectives for the Commission. (See Appendix VII)

Two public hearings have been held regarding the Commission's Rules and Regulations. In January 1980 a third public hearing will be held on another addition to the Rules and Regulations dealing with confidential of information. (See Appendix III)

In April the Commission started receiving and reviewing historical data and rate change requests and other budgetary data. From this time through December 31, 1979,the Commission reviewed 196 filings from the 114 health care institutions mandated to participate in the program. The staff findings and recommendations and related Commission decisions on these filings are kept in the Commission's office for public inspection. Of the 196 filings, 144 were approved or accepted as filed, 4 required additional financial data, 18 were conditionally approved pending year-end financial report, 1 was disapproved as filed, changes recommended, 2 were rescinded and 27 are pending review.

Samples of hospital reviews and a complete Production Report follow.