North Arundel Hospital in Glen Burnie, Md., has developed the state's first capitated payment arrangement with a managed-care plan, and healthcare experts in Maryland predict many other facilities will follow North Arundel's lead.
The Maryland Health Services Cost Review Commission last month approved North Arundel's plan to establish a capitated payment arrangement with four HMOs.
The hospital has created a for-profit subsidiary, called New American Health, to contract with the four plans. Under the arrangement, the HMOs will pay the hospital $33 per month for each patient enrolled in New American Health and another $33 per month to the plan's contracting physicians.
The money paid to the hospital will be set aside in a special fund. When contingency money available from the HMOs is taken into account, the hospital could incur losses of $40 per patient per month before it loses any money.
Hospital executives say they hope to enroll as many as 25,000 people in New American Health within three years and eventually expand enrollment to 100,000.
The new system would be the first of its kind in Maryland. The state's providers operate under an all-payer system in which hospitals and physicians are paid the same amount for each service, regardless of who is paying. The capitated system required a waiver of the rules governing Maryland's system.
"We see this as the direction that the system and the industry are moving in, and we do expect other allocations," said Robert Murray, deputy director of the Maryland Health Service Cost Review Commission.
Michael Steinberg, M.D., a Baltimore-based consultant who helped the hospital develop the capitated arrangement, said the system's advantage is that it "allows hospitals and physicians to have incentives that are common."
The hospital said it wants to reduce the average number of inpatient days to 225 per 1,000 enrollees. The average in Maryland is more than 400 days per 1,000 enrollees, the hospital said in a report submitted to the commission.
The capitated system would fit well with a managed competition-based healthcare reform plan, Dr. Steinberg added.