Maryland and federal officials Monday announced the approval of the state's Total Cost of Care All-Payer Model, the continuation and expansion of Maryland's unique-among-the-states experiment in controlling rising health care costs.
In 2014, Maryland had entered a special four-year agreement with the federal Centers for Medicare and Medicaid Services, where Maryland hospitals would be given a global budget, that is, set amount of money each year. Rather than earning revenue by charging fees for more services provided, Maryland hospitals would earn more by keeping patients healthier and reducing errors and readmissions — it's an approach that saved Medicare $586 million in the first three years of the program.
That agreement is set to end in December of this year, and as Gov. Larry Hogan noted in a Monday interview while visiting Westminster, the announcement actually expands the "Maryland Model" beyond a hospital setting.
"We have had an all payer model here in Maryland for a while, but it was coming to an end, and so we had to get it renewed," he said. "We were able to get it approved, and we got it to expand to include more than just hospitals and to provide more care to more people in more places."
What that means, according to Carroll Hospital Chief Financial Officer Kevin Kelbly, is that hospitals will now be reaching out to primary care physicians, nursing homes and other providers in an attempt to reduce total costs, not just hospital costs, for each Medicare patient. That's the goal of both CMS and the Maryland Health Services Cost Review Commission, which regulates hospital revenues in Maryland, according to Kelbly.
"What they are really doing is tracking how effective we are at managing the quality and the costs of those particular patients that are managed by the physicians and the hospital together," he said. "They will have set up certain parameters. If we hit those parameters, there could be a shared savings opportunity between the hospital and the providers."
A payout of money, in other words, that would go back to doctors and nursing homes as an incentive for working with hospitals to keep costs down, Kelbly said.
"We will all be incentivized to work together to reduce the total cost of care," he said.
The new system takes effect on Jan. 1, 2019, and runs through 2023, with an option for a five year extension after a review, according to information from the governor's office. It's expected to save $300 million in Medicare dollars annually, or $1 billion over the first five years of the program.
Maryland has long been a trailblazer when it comes to controlling medical costs. Since the late 1970s, Maryland has had a special agreement with Medicare wherein Medicare would pay the rates for medical services at Maryland hospitals set by the Health Services Cost Review Commission rather than negotiating with each Maryland hospital as it would in hospitals in others states — a so called "all payer" system, since all payers pay the same rate set by the commission.
The global revenue model established in 2014 replaced that old system, according to Dr. Joshua Sharfstein, former secretary of the Maryland Health Department, currently vice dean for public health practice at the Johns Hopkins Bloomberg School of Public Health, while expanding Maryland's unique experiment.
"Maryland remains at the forefront of efforts to control costs and improve health at the same time," Sharfstein said. "Now it's up to Maryland's hospitals, doctors, long-term care facilities, public health agencies and many others to make this innovative approach work well for state residents."
And that's the key for the governor, who said the new model serves both individual patients and a systemic purpose.
"We are going to save about a billion dollars over the next five years, but we are also providing better quality health care," he said. "So it's going to affect real people in Maryland and it helps us keep the whole healthcare system from collapsing, quite frankly."
In fact, Hogan added, given the bipartisan support the Maryland Model has received, it could be something federal lawmakers in Washington might want to take a good look at.
"On both sides of the aisle there's just a lot of arguing going on and nothing getting done. But here in Maryland we found a way to come together," he said. "We are the only state that has a program like this in America. We think it's a good model for other people to take a look at."