A Grand Experiment

As readers of this blog know, Maryland is different from the other 49 states in the union because we don’t get reimbursed from Medicare for hospital services by the national prospective payment system. Instead, Medicare pays hospital rates that are set for all payers by the Health Services Cost Review Commission (HSCRC). The rates vary significantly from one hospital to another.

In the other states, Medicare and Medicaid generally pay below what private insurers pay and hospitals negotiate payment rates with the private insurers, trying to pass the costs not covered (by Medicaid in particular) on to the private insurers. In Maryland, hospitals don’t negotiate rates with private payers because they are set by the HSCRC.

Since 2014, Maryland hospitals have been working to improve health outcomes and the care experience of patients while keeping the annual increase in the cost of care for hospital services below 3.58% (the projected annual increase in our State’s economy). Maryland has succeeded in reducing hospital-acquired conditions and in keeping cost increases below 3.58% annually over the past 5 years.

Beginning on January 1, 2019, Maryland’s hospitals have committed to a new waiver extension. You can read the details by clicking here. The agreement commits Maryland to improving the health of our citizens while controlling the cost of care. A new element to the waiver will be Maryland’s need to reduce the rate of increase for the total cost of care to Medicare beneficiaries relative to the rate of increase in the total cost of care for Medicare beneficiaries in the rest of the country. By the fifth year of this new waiver, Maryland is required to generate $300 million in savings annually. Until this year, Maryland’s performance has been judged based on hospital costs only, but now it will include physician billing, nursing home billing, and all that is included in Medicare Part B billing.

Since hospitals are now responsible for charges outside of the hospital itself, it will be more important than ever to get physicians on board. For this reason, the new waiver will include THREE programs designed to incentivize providers of care to generate better health outcomes at lower costs. The first is the Maryland Primary Care Program (see my blog from Jan. 4 by clicking here). The Maryland Primary Care program will create more advanced primary care practices which are better equipped to keep patients with chronic diseases out of the hospital and as healthy as possible. The other two programs that involve physician leadership in improvement are the Episode of Care Improvement Program (ECIP) and the Hospital Care Improvement Program (HCIP).

The ECIP incentivizes clinical teams to improve outcomes and lower costs for an episode of care, like an artificial hip transplant. Medicare will ‘bundle’ the total costs for a hip transplant and if the team can reduce the total costs, the hospital that the team is associated with will keep a portion of the savings. For example, if the team can eliminate stays on a rehab unit and send the patient home from the hospital with physical therapy, thereby saving the cost of the rehab unit stay, the team will receive a percentage of the savings.

In HCIP, clinician-led groups work to improve clinical outcomes within a hospital stay by designing better processes, using care coordination, and creating better handoffs at discharge. Teams will work to drive out waste, resulting in reduced costs. Hospitals that reduce their costs will keep the savings, thereby increasing their profitability and making rate increases in subsequent years less necessary.

Everyone agrees that the current healthcare system in the U.S. is wasteful and unsustainable. The Centers for Medicare and Medicaid Services are using Maryland as a laboratory to see if changing financial incentives can help care providers to transform the system and drive better value to the people we are serving. It is a very exciting time to be in healthcare in our state! The GBMC HealthCare System is a key player in this transformational movement as we continue driving toward our four aims of the best health outcomes with the best care experience and the least waste of resources with the most joy for those providing the care – the definition of what we want for our own loved ones and for every patient, every time. Let’s use the new waiver to move us faster toward our vision.