Earlier this year, the Centers for Medicare and Medicaid Services (CMS) through its Innovation Center (CMMI) released a request for information (RFI) (see here) on the use of global budgets, a payment scheme that “prospectively establishes an annual budget for the health care services delivered to patients by each participating provider.” Global payments are currently employed under the Maryland All-Payer Model.
CMS says that under the concept, providers could receive a prospective budget for the care of the population of a community, and “would be accountable for the total cost of care across the entire continuum of care and health outcomes for the entire population.” The approach would seek to lower costs and improve quality by providing clear revenue expectations and through better care coordination.
Maryland Model
The Maryland All-Payer Model is a type of payment system that brings more incentive for healthcare providers to keep their patient base healthy, reduce hospital readmission rates, and essentially keep their consumers out of the inpatient hospital setting. An All-Payer Model also positions clinicians to invest in population health management and the prevention of disease.
Since the advent of Medicare and Medicaid, states and the federal government have struggled to operate a hospital reimbursement policy that pays reasonable prices to cover costs and a modest profit. One model is an all-payer program, where commercial and government-funded health plans are all required to pay hospitals the same price. It is similar to the system used by countries like France and Germany, and 30 years ago 10 states tried it, including Maryland, Massachusetts and New York, seeing mixed success. All but Maryland abandoned their all-payer policies in the 1980s, but Maryland has kept on.
Updated Model
CMS and the state of Maryland partnered to modernize Maryland’s all-payer rate-setting system for hospital services in the hopes that it will improve patients’ health and reduce costs. This initiative updated Maryland’s 36-year-old Medicare waiver to allow the state to adopt new policies that reduce per capita hospital expenditures and improve health outcomes as encouraged by the Affordable Care Act.
While hospitals in Maryland have not brought down the state’s total costs of care, the all-payer system seems promising enough to state and federal leaders under universal healthcare coverage. In a five-year program with Maryland and state hospitals, Medicare is expecting savings of more than $300 million and an inspiration for other states.
Under Maryland’s policy, in place since the 1970s thanks to a Medicare waiver, an independent government commission sets a rate structure for each hospital that all insurers must pay.
More Model Details
- Maryland will agree to permanently shift away from its current statutory waiver, which is based on Medicare payment per inpatient admission, in exchange for the new Innovation Center model based on Medicare per capita total hospital cost growth.
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This model will require Maryland to generate $330 million in Medicare savings over a five year performance period, measured by comparing Maryland’s Medicare per capita total hospital cost growth to the national Medicare per capita total hospital cost growth.
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This model will require Maryland to limit its annual all-payer per capita total hospital cost growth to 3.58%, the 10-year compound annual growth rate in per capita gross state product.
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Maryland will shift virtually all of its hospital revenue over the five-year performance period into global payment models.
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Maryland will achieve a number of quality targets designed to promote better care, better health and lower costs. Under the model, the quality of care for Maryland residents, including Medicare, Medicaid, and CHIP beneficiaries will improve as measured by hospital quality and population health measures.
- Readmissions: Maryland will commit to reducing its aggregate Medicare 30-day unadjusted all-cause, all-site hospital readmission rate in Maryland to the national Medicare 30-day unadjusted all-cause, all-site readmissions rate over five years.
- Hospital Acquired Conditions: Maryland currently operates a program that measures 3M’s 65 Potentially Preventable Conditions. Under this model, Maryland will achieve an annual aggregate reduction of 6.89% in the 65 PPCs over five years for a cumulative reduction of 30%.
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Population Health: Maryland will submit an annual report demonstrating its performance along various population health measures.
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If Maryland fails during the five-year performance period of the model, Maryland hospitals will transition over two years to the national Medicare payment systems.
- Before the start of the fourth year of the model, Maryland will develop a proposal for a new model based on a Medicare total per capita cost of care test to begin no later than after the end of the five year performance period.
Moving Forward
According to a recent Advisory Board report, as Maryland’s experience with the global budget cap model evolves, the state’s ability to meet the waiver’s performance requirements and drive improvements in population health depends on several critical elements.
Early results, as well as conversations with provider executives, suggest that the model is progressing in the right direction. But it is essential to monitor whether the state is able to maintain the positive pace of progress seen at the outset
While Maryland’s all-payer model is unique, it offers lessons for officials and providers in other states even if specific reforms differ from those implemented in Maryland. Although the model has faced some setbacks and needs for adjustment over the years, the fact that it is still in place after forty years and has largely achieved its goals is no small feat.
Certainly, some factors of success in Maryland may be difficult to replicate outside of Maryland, but many principles have broad applicability across efforts to transform payment and care delivery.