Maryland all-payer model expands beyond hospitals

CMS has approved an extension of Maryland’s model of offering a fixed payment for most hospital services, allowing physician practices and nursing homes to voluntarily participate in a program that has saved Medicare hundreds of millions of dollars. 

The current all-payer model was first adopted in 2014. Hospitals in the state were moved to a global budget set by the state for inpatient, outpatient and emergency care, regardless of payer. With the CMS-approved extension, physician offices and nursing homes can voluntarily join the model.

“Over the past five years, Maryland’s hospitals have laid the foundation for linking quality health care with cost containment,” Bob Atlas, president and CEO of the Maryland Hospital Association, said in a statement. “During this time, the model has saved Medicare and patients hundreds of millions of dollars and has enabled hospitals to invest in innovative, proactive initiatives. Now, Maryland’s hospitals stand ready and committed to continue our work with the state by engaging our care partners to meet the health care needs of every Marylander—allowing them to live healthier, more fruitful lives.”

Maryland has long had a unique arrangement with Medicare payments, being the first to be allowed to set its own rates in 1977. The Maryland Health Services Cost Review Commission reported the first three years of the current model exceeded nearly all its targets—by 2016, hospital revenue growth was capped at 0.8 percent, cost growth was 2.08 percent lower than the rest of nation, rates of hospital-acquired infections declined by 44 percent and 100 percent of hospitals’ revenues came from the global budgeting system.

In the process, Medicare saved a cumulative $586 million through those first three years. The only target it hadn’t hit by 2016 was eliminating the gap in readmissions between Maryland and the rest of the nation.

The program does have its critics. A study led by University of Pittsburgh health policy professor Eric Roberts, PhD, found while the model did decrease slow growth in Medicare expenditures, it didn’t shift utilization away from the hospital. That research, however, only looked at the program’s 2014 and 2015 results and admitted more time may be needed to capture its full impact.

Under the changes for the next five years of the model, physicians and nursing homes will have financial incentives to work on care coordination with hospitals. There would be quality targets to hit on managing chronic conditions like hypertension and diabetes, but facilities seem eager to participate.

“It gives us the opportunity to transition from being the vendors of hospitals to being the partners of hospitals,” Joseph DeMattos Jr., president of the Health Facilities Association of Maryland, said in a statement.

The success of Maryland’s model has been eyed closely by other states. California lawmakers have proposed creating their own all-payer rate setting commission. Unlike Maryland, the proposal has attracted fierce opposition from the state’s hospitals and physicians, with the California Hospital Association saying its whole purpose “is to reduce payments to hospitals.”