Global Budget in Maryland Saved Medicare Money By Limiting Hospital Costs

MedicalResearch.com Interview with:
RTI
Susan G. Haber, Sc.D. 
Director, Health Coverage for Low-Income and Uninsured Populations
RTI International
Waltham, MA 02452-8413

MedicalResearch.com: What is the background for this study?

Response: In 2014, the state of Maryland and the federal Centers for Medicare and Medicaid Services (CMS) began testing an alternative payment structure for inpatient and outpatient hospital services. Known as the All-Payer Model, the new system limits hospitals’ revenues from Medicare, Medicaid, and private insurers to a global budget for the year. This builds on Maryland’s hospital rate-setting system that had operated since the 1970s, where all payers pay the same rates. CMS wanted to test whether global budgets could help Maryland limit cost growth and reduce avoidable hospital use. The goal of the model is to limit per capita total hospital cost growth for both Medicare and all payers and to generate $330 million in Medicare savings over 5 years.

MedicalResearch.com: What are the main findings?

Response: RTI researchers studied the impact of hospital global budgets on Medicare beneficiary expenditures and utilization, using Medicare claims data to compare changes in Maryland before and after adoption of global budgets with changes in matched comparison areas outside of the state. Our report found Maryland has reduced total Medicare expenditures by approximately $293 million and total hospital expenditures by about $200 million in its first two years of operation. The reduction in overall expenditures indicates that “squeezing the balloon” on hospital expenditures did not simply produce a cost-shift to other health care sectors. Hospital expenditure savings for Medicare were achieved by reducing expenditures for outpatient emergency department and other hospital outpatient department services. Although inpatient admissions declined, there were no savings in Medicare expenditures for inpatient hospital services because the payment per admission increased. Maryland hospitals reduced avoidable utilization, including admissions for ambulatory care sensitive conditions, and readmissions and emergency department visits following hospital discharge.

Despite the success in reducing expenditures, interviews with senior leaders at Maryland hospitals and focus group discussions with physicians and nurses suggest that many hospitals had not yet made fundamental changes in how they operate or developed partnerships with community physicians to divert care from the hospital, although there was variation in how hospitals responded.

MedicalResearch.com: What should readers take away from your report?

Response: Two years into the All-Payer Model, our study suggests global budgets can be a promising strategy for reducing hospital expenditures. Interest in global budgets appears to be spreading to other states.

Pennsylvania has entered into an agreement with CMS to adopt global budgets for rural hospitals beginning in 2018. It will be important to continue monitoring experience in Maryland to see if savings are sustained and if hospitals make more significant changes in how they operate. Hospital global budgets in Maryland include all payers, but to date we only have findings for the Medicare population. At this point, we don’t know if there are similar impacts for the privately-insured and Medicaid populations. We are conducting an ongoing study of Maryland’s global budget system for the Centers for Medicare & Medicaid Services and future reports will include findings for additional years and for other payers in addition to Medicare.

MedicalResearch.com: What recommendations do you have for future research as a result of this study?

Response: Although we found Medicare savings for Maryland hospitals overall, undoubtedly savings are not uniform across hospitals. Future research could look at whether performance under global budgets differs among different types of hospitals – for example, safety net hospitals or hospitals in urban vs. rural areas. It would also be helpful to know if hospitals that were more successful in reducing expenditures adopted different strategies in response to global budgets than hospitals that were less successful. 

MedicalResearch.com: Is there anything else you would like to add?

Response: Our full report is available at https://innovation.cms.gov/Files/reports/md-all-payer-secondannrpt.pdf

This study was funded by the CMS under contract no. HHSM-500-2010-00021I, Task Order HHSM-500-T0013. The findings are solely those of the authors and do not necessarily reflect the views or policies of CMS.

Citation:

 Evaluation of the Maryland All-Payer Model: Second Annual Report. August 2017. Haber S, Beil H, Adamache W, Amico P, Beadles C, Berzin O, Cole-Beebe M, Greenwald L, Kim K, Mittman L, Morrison M, O’Brien T, Perry R, Wright A. 

MedicalResearch.com: Thank you for your contribution to the MedicalResearch.com community.

Note: Content is Not intended as medical advice. Please consult your health care provider regarding your specific medical condition and questions. 

 

 

 

 

 

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.