Maryland's Global Budget System For Hospital Payments Saves Millions In Health Care CostsKaiser Health News


Saturdays at Mercy Medical Center was once perversely lucrative. The dialysis clinic next door was closed on weekends.

That meant the downtown Baltimore hospital would see patients with failing kidneys who should have attended the dialysis center. So Mercy admitted them, collecting around $30,000 for treatment that typically costs hundreds of dollars.

“That's the way the system worked,” said Mercy CEO Thomas Mullen. Rather than finding more affordable alternatives, he said, “our financial people were saying, 'We have to admit them.'”

Maryland's ambitious hospital-payment overhaul, set up in 2021, is different such crass calculations, which are still business as always for many of American health care. A modification of a long-standing state regulation that might be difficult to replicate elsewhere, the system is nevertheless attracting national attention, analysts say.

As soon as Mercy started being penalized rather than rewarded for such avoidable admissions, it persuaded the dialysis facility to spread out on weekends, saving government insurance programs along with other payers close to $1 million annually.

In the 4 years since Maryland implemented a statewide system of pushing hospitals to reduce admissions, such savings are accumulated to vast sums of dollars for that taxpayers, employers yet others who ultimately pay the bills, a new report shows.

Maryland essentially pays hospitals to keep people from the hospital. Analysts often describe the modification because the most far-reaching attempt in america to control the medical costs driving up insurance costs and government spending.

Like a huge health maintenance organization, their state caps hospitals' revenue every year, letting them keep your difference when they reduce inpatient and outpatient treatment while keeping care quality. Such “global budgets,” that have attracted rare, bipartisan support during a duration of rancor over healthcare, are supposed to make hospitals continue to work harder to keep patients healthy outside their walls.

Maryland's system, which evolved from a decades-old effort to oversee hospitals as though these were public utilities, regulates all hospital payments by every private and government insurer. That makes it radically different from piecemeal attempts to lasso health spending, for example creating accountable care organizations, which seek savings among smaller groups of patients.

From the program's launch in 2021 through 2021, per capita hospital spending by all insurers grew by less than 2 percent a year in Maryland. That's underneath the economic growth rate, according to new is a result of the state's hospital regulator and also the federal Department of Health insurance and Human Services.

Keeping hospital spending below economic growth – defined 4 years ago as 3.58 percent annually – is really a key goal for the program and something that rarely happened.

Counting The Savings

The state plan saved the Medicare program for seniors and the disabled about 50 % a billion dollars over three years and achieved “substantial reductions in hospitalization and especially improvements in quality of care,” said a Medicare spokesman.

In the three years measured so far, he added, “the state has already exceeded the required performance for the full 5 years of the model.”

As high costs for hospital care happen to be growing more slowly nationwide, Maryland hospital costs over that period rose even less.

“It appears like it has very strong results,” said John McDonough, a Harvard health policy professor who helped craft the federal Affordable Care Act.

What Maryland is doing, he explained, “is pretty bold and it's pretty thoughtfully done and has generated a lot of interest round the country.”

Comprehensive results through 2021 are the newest offered by Maryland and HHS, although savings continued this past year, Maryland officials said. Independent researchers found mixed results for savings in the earlier many years of Maryland's system.

Maryland's global budgets saved Medicare $293 million – 1.8 percent of total Medicare spending – in 2021 and 2021, research firm RTI International reported in August.

A separate paper from the team led by Eric Roberts at the University of Pittsburgh discovered that Maryland's enter in those years couldn't be clearly credited for reducing hospital use.

The system's advocates say many years of results are needed to show it's working.

“These are not fake savings,” said Joseph Antos, an economist at the conservative-leaning American Enterprise Institute who sits on Maryland's hospital-payment commission. “It didn't happen instantaneously. It's taken this number of years to achieve the types of savings that you simply see” for 2021 and beyond.

Even boosters such as Joshua Sharfstein, the former Maryland health secretary who got approval for global budgets in the Federal government, the product is not even close to perfect or finalized.

“There is really a range of responses. Some hospitals happen to be able to do more than others,” said Sharfstein, now an associate dean at the Johns Hopkins Bloomberg School of Public Health in Baltimore. “Change in healthcare is notoriously slow.”

Hospitals have lagged in delivering primary, preventive care to individuals with chronic conditions for example asthma, diabetes and heart failure, particularly in low-income neighborhoods.

Maryland's system does nothing to manage soaring costs of drugs or nursing home care, doctors' office treatments and other care not connected to hospitals, although policymakers are working on proposals to do both.

Even so, “what Maryland has been doing is just to date ahead of many of these other models” to try to control costs, said Dan D'Orazio, a management consultant that has worked with hospitals across the country. One Maryland hospital CEO told him: “This has fundamentally changed how we awaken and conduct business every single day,” D'Orazio said.

Seeing A Difference

At Mercy, explained policymakers weight loss aggressive than many hospitals in watching costs, about a third of the sufferers now leave the hospital with medications in hand, said Dr. Wilma Rowe, the hospital's chief medical officer. That bypasses the tendency for patients to skip a follow-up pharmacy visit and risk landing during the emergency room.

A statewide data network notifies Mercy along with other hospitals when one of their sufferers ends up in an emergency room elsewhere. That helps coordinate care.

Greater Baltimore Clinic, north of the city, has hired dozens of primary care doctors to trace around 1,000 people with diabetes – remaining in touch, advising on diets and keeping them on insulin so they avoid the hospital.

Often clinicians visit elderly patients' homes to prevent what might become an ambulance call and admission, said the hospital's CEO, Dr. John Chessare.

Before global budgets, “I'd consider the waiting room in the [emergency department], and when it wasn't full I'd get scared,” he said.

Now he worries it may be filled with people who could be better treated elsewhere – including Gilchrist, a GBMC affiliate delivering hospice take care of those at the end of life.

These days, he explained, “we contemplate it a defect if a person with chronic disease dies in the hospital.”