Global budgets pushing Maryland hospitals to target population health

Ambulances used to make frequent trips to the Morris H. Blum Senior Apartments, a subsidized low-income housing facility in downtown Annapolis, Md., whose residents would be transported to the emergency department of the nearby Anne Arundel Medical Center.

To reduce those ED visits, in October 2013 the hospital opened a one-doctor clinic inside the apartment building, based on the patient-centered medical home model. It focuses on proactively helping patients manage their own health.

“We realized a high number of frequently admitted patients were coming from the same address,” said Victoria Bayless, Anne Arundel's CEO. “We found a residence in our own backyard whose main access to primary care was calling 911.”

The hospital spent about $185,000 to build the clinic, receiving an $800,000 state grant to help with operations. It serves residents with chronic conditions such as congestive heart failure, diabetes, chronic obstructive pulmonary disease and end-stage renal disease. Up to 20 patients visit the clinic each day, and the staff also makes house calls inside the building.

During those calls, clinic staffers can determine whether patients' back pain is caused by a bad mattress, check the refrigerator and make suggestions to improve patients' diets, and see what medications patients are taking and whether they are at risk for harmful interactions.

In the first year of operation, medical 911 calls fell 13% and ED visits dropped 8%. “We expect it to drop again,” Bayless said. “We're finding a lot of illness and disease that has gone untreated.”

The new clinic is one example of innovative strategies Maryland hospitals are employing to improve population health and reduce costs under their state's unique new global budget revenue, or GBR, program. State officials negotiated the program with the CMS Innovation Center and launched it last January, moving the state toward paying healthcare providers based on improving population health rather than on volume of services. Other hospitals are launching similar initiatives to keep their patient populations healthier.

“It has literally, overnight, changed the hospital business model 180 degrees,” said Carmela Coyle, CEO of the Maryland Hospital Association. “It is now in the hospitals' economic interest to keep people well and out of the hospital.”

The GBR system has led to more collaboration and trust between hospitals and insurers because their financial incentives now are aligned, said Scott Furniss, senior vice president and chief financial officer at St. Agnes Hospital in Baltimore.

“There's a whole new level of opportunity,” he said. Now, when insurance officials propose strategies for reducing utilization, the hospital will invite them over to discuss it. “Historically, I would have thought, 'What are they up to? Probably less revenue for me,' ” Furniss said.

But the extent to which other states will follow Maryland's example remains an open question. Still, experts say providers around the country will be watching how Maryland acute-care providers respond to the incentives. They particularly will study how Maryland hospitals improve coordination of services with post-acute-care providers, where a lot of the potential for quality improvement and cost savings lies.

Paul Keckley, managing director of the Navigant Center for Healthcare Research and Policy Analysis, said the population health focus will force hospitals and post-acute-care providers to better coordinate services and standardize clinical practices. Post-acute “folks will now be under the spotlight hospitals have been under,” he said. “The post-acute world is so fragmented and not as closely regulated or monitored as hospitals. Any way you can integrate the post-acute with the acute, it's all an upside—if you do it well.”

Under Maryland's new global budget revenue system, the state's per-admission rate-setting power has been replaced by limits on per-capita expenditures for hospital services and a focus on improving healthcare quality and population-health outcomes. To go forward with the new waiver proposal, Dr. Joshua Sharfstein, Maryland's secretary of health and mental hygiene, said an agreement first had to be negotiated among healthcare stakeholders before taking the proposal to the CMS. Now, he said, “the state has a lot invested in seeing the community health system come together.”

Maryland hospitals receive an agreed-upon amount of revenue each year regardless of the number of people they treat and the amount of services they deliver, as long as they provide efficient, high-quality care to their communities. Adjustments also can be made to recognize an increase in market share or improved efficiency.

Many rules are still being developed, so exact details are “a little murky,” Furniss said. “But we're working with what we know, and that's enough for now.”

Maryland's hospitals have committed to saving Medicare $330 million over five years, limiting per capita annual growth of hospital inpatient and outpatient costs to 3.58%, and capping growth of all Medicare spending to the national average.

They've also committed to lowering the state's 30-day hospital readmission rate for Medicare beneficiaries and reducing hospital-acquired conditions by 30% over a five-year period. If the state fails to meet its targets, hospitals face financial penalties and Maryland could lose its unique authority to set targets and be exempted from Medicare rate-setting. In addition, before the start of the program's fourth year, Maryland must submit a proposal for extending the program beyond its fifth year.

The new payment system revised Maryland's all-payer rate system, which was launched in the 1970s. In 1977, a federal waiver expanded this to include Medicare and Medicaid. For years, Maryland was one of four states that had the authority to set its own rates. But, one by one, Massachusetts, New Jersey and New York relinquished this authority in the 1990s.

John McDonough, a health policy professor at Harvard University, said that because of Maryland's one-of-a-kind waiver, the GBR model is not one other states can follow. But that could change in 2017, when states have the ability under Section 1332 of the Patient Protection and Affordable Care Act to request broad waivers to opt out of Obamacare and implement their own programs to expand insurance coverage and control costs. “Because 1332 gives states a potentially large amount of running room on experimentation, including with Medicare, it's possible a state could attempt to emulate Maryland,” he said. “That will depend greatly on the next occupant of the White House.” It also could depend on the results Maryland achieves.

St. Agnes' Furniss explained that Maryland hospitals now are on the hook to provide service for the population in the service area defined for them by the state Health Services Cost Review Commission, and their budget may not change whether “100 people come through the door or 50” because of the way the population-revenue methodology is geared toward not rewarding “potentially avoidable utilizations” such as patients admitted 30 days after discharge.

Just as the new system has led to more collaboration between hospitals and insurers, Furniss said there's “slightly less fear” among hospitals about collaborations with competing hospitals. Such collaborations have been bolstered by Local Health Improvement Coalitions. The coalition in Allegany County, for example, helped establish a transportation assistance program after it was found that a large percentage of missed appointments at local clinics were due to transportation problems.

Providers increasingly are looking at community-based initiatives to improve health. The Bon Secours Community Works program in West Baltimore, sponsored by the Bon Secours Baltimore Health System, addresses social determinants of health. Projects include economic revitalization, parenting classes, job training, pre-school classes, community vegetable gardens and eviction-prevention workshops. “Our approach has been holistic,” said Sister Patricia Dowling, president of the Community Works board of directors. “The need in the community drives what happens—like when the only bank in the area left, we brought in a credit union.”

Dowling described population health as “a buzzword, but it's a good buzzword.” She noted how it raises awareness of problems that exist and the services that are available to address them.

The hospital association's Coyle said the state's health information exchange system, the Chesapeake Regional Information System for our Patients, known as CRISP, is aiding population health-management efforts. All 46 of Maryland's acute-care hospitals participate in the exchange, as do more than 150 medical practices. “If you want to manage the health of a population, you have to know who your superusers are, where they live and what they need.”

St. Agnes has made a number of care-delivery changes in response to the new GBR system. It has hired navigators to work with patients before and after discharge to make sure they see a primary-care doctor within seven days and fill their prescriptions. The hospital is working on delivering patients' medications to their bedside prior to discharge. Even though the hospital is not paid for these care-coordination services, this could save the hospital money by reducing readmissions.

Doctors Community Hospital, in Lanham, Md., has identified patients who frequently needed emergency care and opened facilities tailored to them. It launched free clinics for congestive heart failure and COPD patients, offering four-week educational programs to teach them how to manage their conditions. There is also a clinic for sickle-cell anemia patients—a population with a high readmission rate. Camille Bash, the hospital's chief financial officer, said the readmission rate for sickle-cell patients has dropped from about 33% to 10% or less.

In 2013, the hospital's quality-improvement strategies led to a $2 million loss, Bash said. But for fiscal 2014, the not-for-profit hospital saw a $2 million operating margin. “Reimbursement was volume-driven,” she said. “We have swung back because we have shifted the focus to doing the right things.”

Not only is the state's global budget revenue program allowing hospitals to do the right things, Bash said, it's incentivizing them to stop doing the wrong things. This has helped to lower the 30-day readmission rate at Doctors Community. Between Jan. 1 and Aug. 1, 2014, it fell from 11.7% to 10.4%, and the figure is expected to continue to drop.

Bash said a close scrutiny of hospital expenses also led to a $4 million decrease in spending despite a $2 million increase in compensation for the hospital's more than 1,500 employees.

The hospital's lower patient census has allowed it to eliminate 80 vacant positions over the past 24 months. With the money it saved, Doctors Community created patient navigator positions, employing nurses who work with patients after hospital discharge. “These are things we couldn't do before because we weren't paid for it and couldn't afford,” Bash said.

When it was discovered some vendors were charging the hospital more for physician preference items, Bash said the doctors rallied behind Doctors Community and told their suppliers, “If you don't cut your price, we'll find another vendor who will.” This led to $1 million in savings and to giving similar ultimatums to other vendors. These savings also allowed the hospital to dedicate the $200,000 generated by the hospital's annual gala fundraiser entirely toward population-health initiatives.

Gene Ransom, CEO of the Maryland State Medical Society, said most Maryland doctors support the state's GBR model because they understood that the old system was financially unsustainable. In addition, they know that shifting the focus of care from the hospital to the physician office works in their favor.

“Physicians are very excited about working on gain-sharing and shifting the focus from quantity to quality,” he said. Nevertheless, “there's a lot of nervousness and a lot (of doctors) still don't realize how big of a deal this really is.”

Follow Andis Robeznieks on Twitter: @MHARobeznieks