Regulating hospital labor costs: A case study in the politics of state rate commissions

With the advent of various attempts to control hospital costs by direct state regulation, labor input costs have become a target of particular attention. This focus is due in part to the unique discretion administrators can exercise over labor factors, and in part to the large absolute part of hospital resources devoted to labor costs, conservatively estimated to be about 55 percent of total budget. This paper examines the impact of state efforts in prospectively setting rates on collective bargaining outcomes in the hospital sector. Specifically, bargaining in New York, Maryland and Connecticut is examined. The paper concludes that government attempts at controlling costs have, in all cases, required the regulatory bodies to consciously exert influence on the collective bargaining process. Further, while such attempts seem to be within the paradigm of multilateral bargaining, there are significant distinguishing features in the role hospital regulatory bodies play in the bargaining process. These variations from the multilateral paradigm may impede the long run ability of rate review efforts to control bargaining outcomes with respect to wages.