Posts Tagged global hospital budgets

Maryland’s Global Hospital Budgets — a start

marylandmapMaryland and Medicare started a global payment scheme for hospitals January 1, 2014, and data on the program are now being reported (NPR and NEJM).  Some success is noted for reducing unnecessary procedures and blunting the rise in costs for Medicare and the 28 Maryland health insurance companies.

Maryland is a small state but has 6 million residents.  They have had a cost control system for hospitals for the past 40 years — up until now all insurance companies, except Medicare, paid the same amount for any given hospital service — Medicare paid less.

The “Maryland All-Payer Model” adopted in 2014 had 2 basic elements:  1)  Hospitals would be paid the same rate by all payers including Medicare and 2) Hospitals would be paid a global fee rather than the previous “fee-for-service” model.   The global fee is adjusted to some degree by quality targets.  There is no adjustment for number of services.

Maryland healthcare overall was ranked 17th by the Commonwealth Fund within the 50 states and District of Columbia.  But, the hospitals were ranked much lower at 33rd in the category of “Avoidable Hospital Use & Costs”.  The All-Payer Model was designed to target the unnecessary services by hospitals.

The Hospitals liked the plan because Medicare would be contributing more money and they could get the same revenue without driving so hard to perform services (like cardiac catheterizations).   The insurance companies liked the plan because it reduced risk and potentially could reduce cost — they could make more money.

Doctors are not very happy because they make money by charging fee-for-service associated with many of the services (like cardiac catheterization) — fewer services, fewer charges.  Likely, a number of hospital physicians will look for positions elsewhere as services are reduced.

The program seems to be having some effect:  the growth in Medicare service continued to rise but was reduced by about 1% whereas nationally the growth increased by 1%.  From a patient standpoint the rates of potentially preventable conditions in Maryland made big improvements (except for catheter-related urinary tract infections and foreign bodies left in people after surgery which both had a big increase for unknown reasons).

The obvious future direction is to gradually reduce the payments to hospitals — to mitigate a potential huge windfall profit.  Hopefully, quality monitoring will be expanded to make sure the hospitals are not just “studying for the test” and ignoring other areas with less scrutiny.   It seems Maryland and Medicare have taken an important step away from fee-for-service.  Hopefully other states will follow suit.

It is interesting to note that Colorado will have a ballot question next year to move to a single payer for health care in that state.  Similar to Maryland, but circumventing insurance companies all together.  Perhaps we are seeing the start of efforts to get rid of fee-for-service which is a huge driver of excess cost in the US health care system.

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