Since Maryland established global payments for its statewide all-payer model in 2014, net savings in Medicare total cost of care have amounted to $319 million and hospital spending growth rate was more than 4% less than the national average, according to a Health Affairs blog post.
Quality has also improved according to some performance measurements, such as readmission rates, which have fallen 57% from 7.9% above the national average in 2013 to 3.4% above the national average in 2015.
- Maryland is on pace to meet four of five requirements set by CMS that enabled adoption of the payment model and the progress being made so far could inform future healthcare reform efforts in other states.
Maryland established its all-payer system decades ago and the below average hospital costs in the state could be attributed to this model. In 2014, the state tweaked the model with approval from CMS to cap hospital spending. The experiment appears to be making progress.
State regulators have been responsible for setting hospital rates since the 1970s. Whereas payers in other states independently negotiate rates with hospitals, every payer in Maryland pays the same rate set for a certain procedure at any given hospital. Only Medicare and Medicaid charged hospitals according to their own rules.
The 2014 changes allowed the state to continue setting rates, but cap growth in hospital spending. This essentially means a budget is set for each hospital by the state at the beginning of every year. “The premise behind global hospital payments is simple,” authors of the Health Affairs blog post wrote. “Providing fixed, predictable revenues allows hospitals flexibility to invest in care and health improvement activities.”
According to an agreement with CMS that allows Maryland to charge federal public health plans according to its own rules rather than federal payment systems, the state has to meet certain targets related to growth in spending and quality performance. Through 18 months, Maryland was on pace to meet four out of five requirements, as Carmela Coyle wrote for Health Affairs in November 2015.
If Maryland meets these requirements, the scope of its agreement with CMS will expand beginning in 2019. The payment model only applies to hospitals now, but it will begin to expand to other care settings. Individual physicians will also take on more responsibility for improving quality, meeting population health goals, and reducing spending.
While the Health Affairs authors of the most recent update on the model in Maryland suggest improvements could be made, progress to date could attract the attention of regulators elsewhere. “As more evidence of Maryland’s experience becomes available over time, states may increasingly seek federal flexibility to accomplish broad changes in health care delivery," they wrote.