Any conversation about Maryland's new waiver to Medicare's reimbursement rules can quickly devolve into mind-numbing complexity. But Gary L. Attman, the CEO of FutureCare, can sum up its effect quite simply. He was recently headed to a meeting with a hospital president but arrived late because he couldn't find a parking space. When he offered his apologies, the hospital chief made the wry observation that he used to be happy when the parking lot was full, but now he prefers to find it empty.
It has been a year since Maryland embarked on the first state-wide experiment in a new way to finance hospital care that, effectively, pays hospitals to keep people well rather than paying them for admitting patients, running tests and doing procedures. The hospital president Mr. Attman met with was absolutely right; it's no longer in his institution's financial interests to fill the beds but instead to make sure that the patients are cared for in the least intensive — and least expensive — setting possible. The waiver is a big bet by the state and its health care community that we can substantially reduce the growth in health care spending without harming patients.
So far, it appears to be working. The Maryland Hospital Association recently calculated that the new waiver had resulted in $100 million in savings for the first year, well ahead of the pace needed to keep the state's promise to the Centers for Medicare and Medicaid Services to save $330 million over five years, and advocates say they've not found evidence that the savings were achieved by skimping on patient care. The big question, though, is whether that initial success reflects the system plucking the low-hanging fruit or whether it is the first step in what could be an accelerating trend of health care savings. There is reason to believe it could be the latter.
Hospitals can keep their beds empty without sacrificing patients' health by doing a better job of coordinating care, following up and working more closely with those who provide health care in other settings. Skilled nursing and rehabilitation facilities like Mr. Attman's, for example, have lower overhead because they lack emergency rooms and surgical suites, but they have become increasingly sophisticated in recent years in their ability to perform more complex care. They now have more short-term patients than those who live permanently in nursing homes, and their clientele is becoming younger as hospitals increasingly rely on them to help patients recuperate and regain their full health. Other models, including home care, can similarly help patients spend less time in the hospital and stand a lower chance of readmission.
One year into the waiver, that strategy has not yet fully run its course. Hospitals are likely to form even closer partnerships with skilled nursing facilities and other providers in the years ahead and to become more sophisticated in terms of which kinds of patients do best in which settings. The hospitals have already devoted more resources to following up on patients they discharge to make sure they are getting the care they need, taking their medications and doing whatever else is necessary to reduce the chances that they will be readmitted. But building up those resources takes time. Similarly, it will take time for nursing facilities and other providers to increase their staffs' skills so that they can care for more complex patients in non-hospital settings.
Beyond that, many skilled nursing facilities and other providers still lack electronic medical records. As they invest in those systems — whether with assistance from the hospitals or on their own out of a need to compete — their ability to coordinate with hospitals will increase. Eventually, we could see more formal resource sharing or arrangements in which hospitals and nursing and rehabilitation facilities share in the risks and rewards of caring for particular patients. One barrier that the state's initial waiver does not eliminate is a 50-year-old requirement that patients have a qualifying hospital stay of at least three days before Medicare will pay for rehabilitation care in a nursing facility. The rule is a relic of the health care system of the 1960s, and Maryland provides an ideal test case to show it has outlived its usefulness. The Hogan administration should request a waiver from that requirement, at least on a pilot basis, as soon as possible.
Maryland has been operating under a unique system of hospital rate setting since the 1970s, and that history made the right place to try this kind of approach to health care financing. It wasn't easy to get buy-in from all the health care constituencies here, and it would be that much harder elsewhere. But Maryland is showing every indication that it can pull this off. If so, it could and should serve as a model for how we can provide better care for less.