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.
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