The new proposal underscores a shift toward more aggressive attempts to curb the rise in healthcare costs ahead of an expansion of health insurance coverage next year under the Patient Protection and Affordable Care Act. If approved by federal officials, Maryland would join Massachusetts as a state that seeks to tie health spending to growth in the state economy.
A Massachusetts law enacted last year sets a target for spending growth in healthcare at the rate of expansion of the state's economy through 2018, when the target will drop to economic growth minus half a percentage point. The state lacks Maryland's power to dictate prices and will try to enforce the target through a health policy commission that can require corrective action plans for high-spending hospitals and public reporting.
“We have two states now that are seeking their own authority to hold health spending to within the limits of economic growth,” said Dr. John McDonough, director of the Center for Public Health Leadership at the Harvard School of Public Health, and who has studied Massachusetts' policy development. “It bears watching.”
Maryland, to help its plan work, is asking HHS to remove legal barriers to Medicare payment models known as bundles and accountable care, which can tie varying degrees of profit or loss to cost-control and quality performance.
The Affordable Care Act requires Medicare to test bundled payments and accountable care, and 250 organizations have entered into accountable care contracts with Medicare since January 2012. Hospital use and readmissions have emerged as leading targets for accountable care savings initiatives.
But Maryland's unique all-payer authority left its hospitals ineligible to form accountable care organizations that contract with Medicare. Maryland hospitals also are excluded from bundled payments under Medicare. The state's plan would grant hospitals authority to do both.
Mark Pauly, a health economist and healthcare management professor at the University of Pennsylvania, noted that early adopters of accountable care programs have been among providers eager to test the payment model. Although the results are limited so far, that could prove to be an advantage over Maryland's approach if the state pushes unwilling providers into ACOs.
Dr. Robert Berenson, a health policy expert and fellow at the Urban Institute, said the “aspiration is exactly right.” But, he added, “operationally, it will be very challenging.” That's because patients often have options to move among providers and aren't required to consistently seek care from a single hospital or medical group that could oversee and coordinate care. “The tension is that we have a system in which people guard their freedom of choice,” he said.
Several Maryland health systems said they continue to analyze the proposal and declined to comment.
Carmela Coyle, president and CEO of the Maryland Hospital Association, said any policy effort that seeks to address use of healthcare services must confront the challenge of identifying which care is inappropriate and should be reduced at a time when uninsured patients who have been disenfranchised will gain insurance coverage and access to care they previously lacked. “That's not bad use, that's good use,” she said.
Maryland's economy—as measured by the state's per capita gross product—increased 3.57% annually, on average, during the past decade. Hospital revenue per patient grew 6.8% each of the past 10 years, on average.
Maryland would save $1.2 billion over three years if the state manages to keep the pace of hospital costs in line with the state's economy, the health department projected. Any additional savings created by expansion of accountable care, bundled payments or other efforts would be shared by hospitals and payers. That would deliver another $241 million in savings over three years, the state projected.
Maryland's Health Services Cost Review Commission would enforce the spending limit using its ability to set prices. Hospitals with high or low spending could see their rates adjusted the next year to offset their revenue accordingly.
The state's current federal waiver sets up the system to fail if providers get things right and keep all but the sickest patients out of hospitals, said John Colmers, chairman of the Maryland Health Services Cost Review Commission and vice president of healthcare transformation and strategic planning for Johns Hopkins Medicine. Hospital costs would rise. Under the proposal, Maryland would track per capita spending growth for inpatient and outpatient hospital service.
The state would seek to expand the spending cap from hospitals to all healthcare spending after five years under a proposal yet to be developed.
Follow Melanie Evans on Twitter: @MHmevans
