MedicalResearch.com Interview with: Susan G. Haber, Sc.D. Director, Health Coverage for Low-Income and Uninsured Populations RTI International Waltham, MA MedicalResearch.com: What is the background for this study? What are the main findings? 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. 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. (more…)