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Maryland's plan to control health costs gets federal approval

The federal government has approved a plan Maryland has been testing for the past four years to control health costs by shifting more care out of hospitals and better coordinating care with doctors, nursing homes and community groups, state officials announced Monday.

The Centers for Medicare and Medicaid Services has been closely watching the state's pilot program, first implemented in 2014, as a possible model for other states.


The program scrapped a hospital payment model that reimbursed them for the volume of services they provided in favor of annual spending budgets that hospitals were not allowed to exceed. The medical institutions began working with doctors, social workers, community groups and others to ensure patients took their medications, made follow-up visits and took other preventive measure that would keep them out of hospitals.

The pilot program resulted in substantial cost savings and improved care for patients, state officials said. The program saved $586 million in health costs between 2014 and 2016 and is now expected to continue to save an additional $300 million a year.


Under the agreement with the Centers for Medicare and Medicaid, the new five-year program will start in January with the option to extend after 2023.

"This contract will make it possible for the next decade, for the state of Maryland to first control the growth of health care costs [and second] increase access and have substantial quality improvement along the way," Maryland Health Secretary Robert R. Neall said.

The approval by the federal government builds on a unique arrangement the state has had with the federal government since 1977, when it became the only state in the nation with a waiver from federally set Medicare rates. The state has been allowed to set its own rates for Medicare patients as well as rates charged to private insurers. Under the agreement, the state's Health Services Cost Care Commission sets the rates hospitals charge insurers.

The state launched the pilot program looking for a way to update the arrangement after rising health care costs made it difficult to meet a waiver test that required the state to show that Medicare costs grew more slowly in Maryland than elsewhere. Without a new way of doing things, many predicted the state's health system would wind up in turmoil and hospitals might close.

"It's in everybody's interest to keep this going because we get a lot of benefits from it," said Gene M. Ransom III, CEO of MedChi, The Maryland State Medical Society, which represents doctors.

Critics of the state's new system have said it hasn't shown a direct link to cost savings or reductions in hospital stays in the pilot years. One of those critics, Eric T. Roberts, a professor at the University of Pittsburgh who has analyzed the system, said he still thinks the state is moving in the right direction.

"This is complex," Roberts said. "There are really smart people in Maryland thinking about this, but we need to see how this plays out."

He said the success of the program will depend on the way it is implemented, including the way incentives are awarded.


Donna Kinzer, executive director of the Health Services Cost Review Commission, which now assigns those budgets to the state's hospitals, said critics were looking at the earlier models of the program.

"It takes time to really implement and start to reach success," Kinzer said. "We have seen an escalation of our savings as we have gotten into the later years of the model."

State officials said they hope the new program gives patients more say in their care and holds hospitals, who are penalized for things such as too many readmissions, more accountable.

"The new Maryland Model will expand health care access and affordability — and ultimately improve quality of life — for Marylanders, especially those with chronic and complex medical conditions," Gov. Larry Hogan said in a statement. "Maryland continues to lead the nation in innovative health care delivery, and the expansion of our successful model is a huge step forward in our efforts to ensure that every Marylander has access to quality care."

The new pact offers doctors and nursing homes bonuses and incentives to help coordinate preventive care for patients. That might mean working with a nursing coordinator to set up follow-up appointments or call a patient to make sure they have picked up a prescription. Convincing nursing homes, physicians and other providers to keep costs in check was essential to making the new agreement work, state officials have said.

"The fact is you have to include the doctors and the nursing homes and the people in the community because that is where care needs to be," said Jim Reiter, a spokesman for the Maryland Hospital Association.


It still would be up to individual doctors and nursing homes whether to participate.

MedChi's Ransom said that he believes participation won't be a problem. Physicians had worried they would be regulated like hospitals and the state would try to determine what they charge. They are on board with incentives.

"Doctors are definitely going to sign up for this," Ransom said.

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The new agreement allows nursing homes to play a larger role in the health care of patients, said Joseph DeMattos Jr., president of the Health Facilities Association of Maryland, which represents skilled nursing, sub-acute facilities, assisted living programs, and continuing care facilities.

"It gives us the opportunity to transition from being the vendors of hospitals to being the partners of hospitals." DeMattos said.

Providers would have quality goals to meet, under the new agreement. There would be a focus on addressing opioid use and overdoses and chronic conditions, such as diabetes and hypertension. People with chronic conditions tend to use the health system more frequently, especially when the conditions aren't managed, driving up costs.


The Greater Baltimore Medical Center already had been paying its in-house doctors to provide coordinated care, but Dr. John Chessare, the hospital's president, said there would be more money to do this now. He said most primary care physicians have slim margins and often don't have the resources to coordinate care with multiple providers.

"This is another step toward a more rational health care system," Chessare said.