Maryland hospital payment model cuts costs, improves care quality

Unlike most states, Maryland pays for hospital services using preset annual hospital budgets, fundamentally changing how hospitals are paid.

The majority of hospitals in all other states are paid per service provided, a way to incentivize them to generate more revenue by providing more services.

Maryland’s global budget formula could serve as a model for all states, given that everyone who pays for hospital care is looking for ways to improve hospital quality and reduce costs. Journalists reporting on rising health care costs should point out that unlike any other state, Maryland has shown how to contain costs and improve the quality of care patients receive in hospitals.

Moreover, journalists should write about Maryland’s program because the federal government The Centers for Medicare and Medicaid Services CMS is also calling for other states to adopt similar omnibus funding methods, also known as total cost of care programs. States can use omnibus funding to reduce avoidable health care costs by investing in primary care and reducing unnecessary long-term stays in hospitals and rehabilitation facilities, CMS said.

As Sarah True reports for the Baltimore Banner In 2023, Maryland hospitals will be paid based on a global budget formula. The global budget is based on the number of patients they’ve treated and services they’ve provided in the past. The budget is adjusted depending on how well hospitals provide quality care and other factors, such as inflation and changes in the population they serve, True wrote.

Budget Benefits

The Global Budget Methodology has generated net savings of $689 million for Medicare in the first three years of the program (2019-2021) and has also improved the quality of care provided by Maryland hospitals. According to an April 2024 report by MathematicaConsulting firm in Princeton, New Jersey Mathematica created the report Under a contract with the federal Centers for Medicare and Medicaid Services.

Another name for the global budget is the Total Cost of Care (TCOC) model. In the first four years of the TCOC program (2019-2022), Mathematica reported that total Medicare spending for Medicare Part A and Medicare Part B fell by an average of $292 per beneficiary per year, or 2.1%. At the same time, hospitals improved quality measures and reduced racial disparities, Mathematica added.

Under the TCOC model, Maryland is the only state that uses a uniform pricing system that pays hospitals the same rates regardless of whether the funds come from Medicare, Medicaid, private health insurers or individuals paying cash, True explained. The state has been exempt from federal Medicare and Medicaid payment rules since 1977 as long as Medicare spending does not exceed the national rate of spending growth, True added.

“Global budgets allow hospitals to make more money by providing less care, and when you combine that with quality measures that are tied to financial rewards, it creates an incentive for hospitals to keep patients healthier and out of hospital.” Explaining the truth.

“Maryland is currently the only state where hospitals are responsible for the health of their communities,” said Nicole Stallings, executive vice president of the Maryland Department of Health. Maryland Hospital Association“So that really accelerated the investment that was happening outside of the hospitals,” True said.

According to Mathematica, the cost and quality goals of the TCOC model are:

• Reduce total out-of-pocket Medicare costs per person.
• Reduce preventable hospitalizations.
• Reducing disparities within hospitals reduces readmissions.
• Improve timely follow-up after acute exacerbations of chronic diseases.
• Improve population health by reducing patients’ mean body mass index, incidence of diabetes, overdose deaths, severe maternal morbidity, and pediatric asthma-related emergency department visits.

During the program’s first four years, the Global Budget Model reduced hospital spending by 6.1%, reduced hospitalizations by 16.2%, reduced outpatient emergency department visits by 5.9%, and reduced preventable hospitalizations by 16.8%. Mathematica reportsThe model also reduced disparities between Black and White beneficiaries in terms of unplanned readmissions, preventable hospitalizations, and timely follow-up.