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January 10, 2014 11:00 PM

Maryland to set global budget for hospitals

Melanie Evans and Harris Meyer
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    Maryland's healthcare system is going to start looking more like Germany's. The state has won federal approval for a unique five-year experiment to set a global budget for hospital spending per capita that tracks with state economic growth.

    Maryland already regulates hospital prices—with all payers negotiating uniform rates with hospitals—under an existing federal agreement. Under the new agreement, the state will enforce a cap for inpatient and outpatient hospital revenue at 3.58% annual growth, the average of the state's economic growth over a decade. The state has set a goal of saving Medicare $330 million over five years. It will work with the CMS Innovation Center to evaluate the effort.

    If the experiment fails to achieve the targeted savings, Maryland will convert to Medicare's national payment model. But the state will ask for a five-year extension if it succeeds. The new program arises from the fact that the state has struggled to keep healthcare price growth below Medicare prices, a requirement of the previous all-payer arrangement with Medicare. There also have been concerns that providers were jacking up volume to make up for the price controls.

    “We are spending a lot for healthcare,” said Dr. Joshua Sharfstein, Maryland's Secretary of Health and Mental Hygiene. “We are spending more than most other places in the world, and we should be able to get more for that investment.”

    The Maryland agreement will set targets to reduce unnecessary hospitalizations and preventable conditions and shift hospital payments into global budgets within five years. Each of the state's 46 hospitals will be given a budget. “Hospitals will be paid more on the basis of value than volume,” Sharfstein said.

    Under the deal, Maryland's aggregate rate of hospital readmissions within 30 days cannot exceed the national average. Incidence of 65 conditions identified as potentially preventable must drop by 30% over five years. The state will increase performance incentives tied to the 65 conditions starting in 2015 from 2% reductions or bonuses, based on outcomes, to 3%.

    Researchers estimate the state's all-payer system saved $45 billion over four decades.

    Follow Melanie Evans on Twitter: @MHmevans

    Follow Harris Meyer on Twitter: @MHHmeyer

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        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
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      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
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      • Sponsored Video Series - Checking In with Dan Peres
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