04 Apr Maryland’s Global Budget Plan Did Not Change Hospital or Primary Care Usage

MedicalResearch.com Interview with:

Dr. Roberts

Eric T. Roberts, PhD
Assistant Professor of Health Policy & Management
University of Pittsburgh Graduate School of Public Health
Pittsburgh, PA 15261

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

Response: There is considerable interest nationally in reforming how we pay health care providers and in shifting from fee-for-service to value-based payment models, in which providers assume some economic risk for their patients’ costs and outcomes of care.  One new payment model that has garnered interest among policy makers is the global budget, which in 2010 Maryland adopted for rural hospitals.  Maryland subsequently expanded the model to urban and suburban hospitals in 2014.  Maryland’s global budget model encompasses payments to hospitals for inpatient, emergency department, and hospital outpatient department services from all payers, including Medicare, Medicaid, and commercial insurers.  The intuition behind this payment model is that, when a hospital is given a fixed budget to care for the entire population it serves, it will have an incentive to avoid costly admissions and focus on treating patients outside of the hospital (e.g., in primary care practices).  Until recently, there has been little rigorous evidence about whether Maryland’s hospital global budget model met policy makers’ goals of reducing hospital use and strengthening primary care.

Our Health Affairs study evaluated how the 2010 implementation of global budgets in rural Maryland hospitals affected hospital utilization among Medicare beneficiaries.  This study complements work our research group published in JAMA Internal Medicine (January 16, 2018) that examined the impact of the statewide program on hospital and primary care use, also among Medicare beneficiaries.

MedicalResearch.com: What are the main findings?

Response: The main finding from both of our studies is that we did not find changes in hospital or primary care use that could be attributed to Maryland’s global budget program.  In populations served by hospitals receiving global budgets, we saw declines in inpatient admissions and 30-day readmission, along with increases in ED visits that did not lead to an inpatient admission.  However, we also saw similar changes in similar populations not served by global budget hospitals.  In other words, changes in use after hospitals switched to global budgets were similar to changes we would have expected without the global budget policy, based on trends we observed in control populations.

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

Response: Our results question whether Maryland’s global budget program for hospitals was leading to hoped-for changes in hospital and primary care use.  We recognize that it may take time for hospitals to shift to a new incentive and care delivery paradigm, and our evaluations (which examined 3 years of global budget experience in rural hospitals and 2 years of experience in urban and suburban hospitals) might not have detected longer-term changes in care.  Nevertheless, our studies highlight limitations of Maryland’s global budget model that may have limited its effectiveness in changing care patterns.

First, Maryland’s program was not truly “global”: only hospital spending was under a budget, but payments to physicians — including physicians practicing in the hospital — remained fee-for-service .  Consequently, physicians continued to have an economic incentive to provide more care in the hospital, even though hospitals receiving global budgets did not.   The siloed payment systems for hospitals and physicians may have limited incentive alignment across providers.  Maryland recognizes this limitation and plans to move towards a total cost-of-care payment model, in which  physicians bear risk and share in the savings of avoided hospital use, in future updates to its program.

Second, hospitals in Maryland weren’t actually given an annual budget to invest in patient care and primary care innovation. Rather, Maryland’s model was designed as a revenue “constraint,” which limited the amount of revenue a hospital could take in each year.  To adhere to this constraint, hospitals were required to adjust their prices throughout the year if their patient volume went up or down relative to a prospectively forecast level. (For example, if a hospital’s volume increased, it would have to cut its prices to stay on budget, whereas if a hospital’s volume decreased, it could raise its prices and increase its operating margin.)  Because of this structure, hospitals had to admit some patients to receive their budgets.  Moreover, because there was a “ceiling” on the amount hospitals could adjust their prices up, Maryland’s program implicitly established a “floor” on the amount hospitals could practically reduce volume.  This complex system — though well-intentioned — may have added operational complexity to Maryland’s global budget program while constraining its incentives.  

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

Response: Rigorous, independent evaluation of new payment models is needed as efforts to reform health care payment in the United States continue.  Ongoing monitoring of Maryland’s program, and careful evaluation of future changes to the state’s global budget model, will help educate policy makers and providers about which payment models are effective in controlling health care costs and improving care quality.

We have no disclosures to make. 

Citations:

Health Affairs 2018 37:4, 644-653 

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Last Updated on April 4, 2018 by Marie Benz MD FAAD