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Mixed reviews for Maryland's unique hospital payment system

An audit by independent consultants found Maryland's experimental program to curb health care spending has saved money and improved the health of citizens, but another evaluation by professors from Harvard University and the University of Pittsburgh painted a less rosy picture.

The state entered into an agreement with the Centers for Medicare and Medicaid Services four years ago to implement a system that scrapped the fee-for-service payment model for hospitals. State regulators now cap the budgets of hospitals so that they are not allowed to generate more revenue than is budgeted. The hope was that hospitals would work to reduce admissions and treat people in less costly ways while maintaining good care.


Under the agreement with CMS, Maryland must generate $330 million in Medicare savings over five years. CMS is watching the system closely as a possible model for hospitals across the country.

An audit of the system by RTI International, a consultancy hired by CMS, found that Medicare saved $554 million in hospital spending in the study's first three years. There also were 4.9 percent fewer acute inpatient admissions under Medicare, the report found.


Those results echoed one released in mid-March by Maryland's Health Services Cost Review Commission and the Maryland Department of Health that found $586 million in hospital-related savings and $461 million in total savings for Medicare in the program's first three years, 2014-2016.

The evaluation by Harvard and Pitt professors, however, found no direct link between Maryland's program and any cost savings or reduced hospital use by patients in the program's pilot years at the state's rural hospitals from 2010 to 2013.

But the researchers from both universities said they don't think the state should abandon the program, noting it has been difficult for Maryland hospitals to change how they deliver care. A weakness in the program is that it only regulates hospital spending and not physician services, which also contribute to health spending. The researchers also noted there needs to be better coordination of care between hospitals and services and programs outside of hospitals.

"We don't think the program is bad. It is a solid foundation," said researcher Ateev Mehrotra, associate professor of health care policy and medicine at Harvard Medical School and a hospitalist at Beth Israel Deaconess Medical Center. "It should be refined to include a broader scope of care."

State officials said the universities' study is limited because it only looked at older data from the limited pilot. The researchers said they examined the state's rural hospitals because they adopted the global budgets earlier than Maryland's other hospitals and it was easier to compare them with the state's other hospitals.

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Important policy changes have been made to the system since that time, said Donna Kinzer, executive director of the Health Services Cost Review Commission, which assigns the budgets to the state's hospitals. For instance, an amendment was added in 2017 that allowed hospitals to share resources and data with physicians to align incentives between hospitals and physicians. This helped improve the quality of care delivered to patients and improve health outcomes, she said.

The program's benefits weren't truly realized until its third year in 2016, state officials said.

The university researchers noted the state has been making improvements to the system, but said they need to be made more quickly,


Kinzer acknowledged there remain many improvements that can be made to the program, including better coordinating patient care outside of the hospital.

"I definitely think it's moving in the right direction," Kinzer said. "It is a work in progress."