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Maryland works to bring doctors, nursing homes into Medicare cost control program

Maryland faces a year-end deadline to submit a plan to expand a massive experiment in how it manages health care costs by including doctors, nursing homes and other health care providers.

The state is halfway through the five-year pilot program authorized by the Centers for Medicare and Medicaid Services that attempts to control rising hospital costs. The program flipped hospitals' incentive from boosting volume to ensuring patient health, and significantly changed the way they do business.

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The program is designed to benefit consumers — and taxpayers — by stemming soaring health care costs and improving their health, while stabilizing the financial future of the health care system.

To keep it going, state officials and hospitals must convince primary-care practices, nursing homes, specialists and other providers to do the same — keep costs in check while improving the well-being of patients — by better coordinating care from the emergency room to the follow-up at your family doctor.

One way of doing this is by improving communication among providers. The duplicate tests, incompatible prescriptions and repetitive hospital visits caused by a lack of shared medical records cost billions of dollars a year nationally.

For patients, the result should be a system with fewer tests, emergency room visits and return trips to the hospital, as all the providers who treat a patient coordinate their care. But patient advocates worry that the focus on cost control could overshadow patients' needs if hospitals neglect needed care to save a few bucks.

"We appreciate the fact that they have created — on paper — a patient-centered model," said Leni Preston, president of the advocacy group Consumer Health First.

So far the pilot program has focused on hospital costs, but, to keep the deal beyond 2018, Maryland must come up with a way to address the expenses patients rack up in all the other places they receive health care. And state officials must do it while assessing whether the program is even effective at delivering sustainable savings and improving patient health.

"Certainly therein lies the real experiment, and I think it's going to be difficult," said Carmela Coyle, CEO of the Maryland Hospital Association. "We are building the bike while riding it."

To make it work, Maryland and its hospitals must convince other providers to embrace a shift in how they're compensated and how they collaborate with each other.

As a year-end deadline approaches for the state to submit a plan to the federal Medicare agency, state officials, hospitals and other health care providers still are trying to determine what the overall plan will look like.

The proposal will be a blueprint for how the state will get doctors, nursing homes and other providers, who are still paid for every service they provide, to work more closely with hospitals to achieve goals for both health care costs and quality, perhaps by offering incentives. The federal agency would likely work with the state to refine the plan before it could be implemented.

Developing it won't be easy. While Maryland's Health Services Cost Review Commission has long regulated hospital prices, it doesn't regulate other health care providers, so a deal must be negotiated that would make them want to participate.

The stakes for finding consensus are high. The pilot program is an overhaul of the state's so-called Medicare waiver, which allows the state to regulate hospital rates so that all payers — private insurance companies, Medicare and Medicaid — pay about the same price.

In every other state, Medicare reimburses less than the cost of services, so hospitals negotiate higher prices for private insurance companies and the uninsured are charged even more. As a result, Medicare pays more here than anywhere else — about $1.7 billion more than the state would receive otherwise — and hospital prices aren't inflated for other payers.

Maryland could lose this beneficial system, dating to the 1970s, if regulators are unable to find a way to involve the other providers.

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But if the state succeeds at both controlling costs and improving patient health under the expanded program, it could become a model for other states.

"The hospital system took a big risk to buy in to it, and they bought in to it — every one of them," said Jack Meyer, a health economist and former commission member, who is moderating the panel drafting the expansion plan. "Maryland is a pacesetter."

Instead of being paid for each time a patient gets something done, hospitals receive a pool of money with which they must treat the population they serve. This shift aims to better align hospital reimbursement with what's best for patients' health.

In addition to treating illness, hospitals now have a financial incentive to help patients connect with a primary-care doctor to prevent a chronic condition like high blood pressure from becoming an emergency surgery, to set them up with rehabilitation services after a procedure, and to make sure they don't get sick again.

In theory, hospitals could make more money under this system by improving their population's health, effectively limiting how much their costs are growing.

Todd Pollyea of Reisterstown is an example of these changes at work. Pollyea, 70, is in good health but, on a couple of occasions, has seen a specialist, a doctor employed by Greater Baltimore Medical Center, for knee pain after a few too many golf swings.

If he were to tear the cartilage in his knee playing golf, Pollyea could go to GBMC's emergency department. Through its electronic record system, the hospital would see he'd been treated for knee pain and call that doctor. A record of the visit would be sent to his primary-care physician at GBMC and a care coordinator could check up on his recovery.

GBMC has been making changes for years aimed at improving patients' health and the quality of care they receive, while reducing costs — what analysts call the "triple aim."

But those changes would not be sustainable without also changing the way hospitals are paid, said GBMC CEO Dr. John Chessare.

"If we didn't change the payment system, those of us trying to get to the triple aim could do the right thing into extinction," Chessare said.

Maryland's health care system is less disjointed under the new approach, but there's still some disconnect.

Pollyea's doctors at GBMC are motivated to support the hospital's approach because they get paid by GBMC. But if he saw a primary-care doctor at a private practice or chose another hospital, his health care experience — and possibly his health — could be different.

The next phase of the state's pilot program will try to better align doctors, rehabilitation centers and others who treat patients with what hospitals have begun doing, for example, by improving their communication.

"If I take my car to the shop, it accesses my records, it knows everything that's ever happened to my car," said Donna Kinzer, executive director of the Health Services Cost Review Commission. "But still, when you go to a doctor's office, you still have to fill out the sheet with your family history — every single time."

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To encourage other providers to embrace practices that help hospitals, such as shared record systems, the plan will likely propose incentive systems because doctors don't fall under the commission's regulatory authority.

"We're trying to get different parts of the system all working toward the same goals," Kinzer said. "We don't feel like we need to control them to make that happen."

Most doctors want to work with the state, partly because Medicare already plans significant changes to the way they're paid in the coming years, said Gene Ransom III, the CEO of MedChi, which represents many state physicians. Their Medicare payments will be more closely tied to quality measures, and doctors could lose money if they don't meet expectations.

Since doctors must get on board eventually, Ransom said, many believe cooperating with the state might help them meet these new federal requirements.

"Anyone who looks at the ledger sheet, when you see the $1.7 [billion] to $2 billion that comes into Maryland because of the waiver and the stability it offers, you have to see that as a positive, and we have to work to keep that in place," Ransom said.

Access to more data could help Dr. Willarda Edwards' two-doctor primary-care practice in Dundalk learn more about patients and make better care decisions, she said. But for the plan to work, she said, it must help doctors upgrade their technology.

"You're going to get a lot more push-back from those of us in small primary-care practices, where we can't necessarily afford all the technology that we're being asked to invest in," Edwards said. "If somebody else is going to provide that, then all is well and good. But if it's coming out of my pocket and decreasing my payments if I don't give them data, then we're at a standstill."

The expanded experiment could do more to address the high cost of treating patients who qualify for both Medicare and Medicaid. There are about 73,000 Marylanders who qualify for Medicare and Medicaid, and in 2012 their health care costs topped $2 billion.

Many of these patients are nearing the end of their lives and have multiple chronic conditions that are expensive to treat, said Isabella Firth, president of LifeSpan Network, which represents nursing homes, assisted-living and home health organizations in Maryland. Nursing homes and others tasked with their care often struggle with how best to treat elderly patients who are often too frail for medical procedures. Stronger connections with hospitals and other doctors could help, she said.

"What we stand to gain is better outcomes," Firth said. "We can do right by the patients we're taking care of."

While other providers are open to working with the state, analysts and hospitals warn that Maryland is making seismic changes in an industry that typically moves slowly.

Maryland's cost control experiment carries huge financial risk for hospitals, said Henry J. Franey, chief financial officer for the University of Maryland Medical System.

He believes Maryland hospitals are headed the right way, but worries how even more changes will affect the health system's stability. Federal regulators need to be flexible in judging the state's success, he said, so hospitals, doctors and other providers aren't scared of taking the chance.

"It's a question of patience," Franey said. "Are we an industry that understands the word 'experiment'? Are we patient enough to fail?"

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What's at stake? If Maryland fails, Medicare could revert to paying less. Hospitals would charge higher rates to other payers, including the uninsured and private insurers, who would pass on the expense to consumers.

Maryland's changing health care payment system

What is Maryland's Medicare waiver? Since the 1970s, Maryland has regulated how much hospitals are paid for services under a unique agreement with the Centers for Medicare and Medicaid Services.

What's next? Maryland must develop a plan by the end of the year to expand the program in 2019 to encourage primary care doctors, specialists, nursing homes and others who treat patients outside the hospital.

Why does this matter? The program is designed to stem soaring health care costs and improve patient health at the same time, while stabilizing the financial future of the health care system.

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