Maryland’s Rate Setting For Hospitals : A Successful Plan that Needs to be Updated

Last week I attended my first Maryland Hospital Association Executive Committee meeting and one of the topics of focus was Maryland’s unique all-payer rate-setting system, governed by the state’s Health Services Cost Review Commission (HSCRC).  We certainly had some experts in attendance  for our discussions as we were addressed by Dr. Josh Sharfstein, Maryland’s Secretary of Health; John Colmers, Dr. Sharfstein’s predecessor as state health secretary and former executive director of the Maryland Health Care Commission (MHCC) who is now serving as HSCRC’s chairman; and by Chet Burrell, President and Chief Executive Officer of CareFirst Blue Cross Blue Shield.

For the uninitiated, the HSCRC was established nearly 40 years ago as an independent agency of the government and is primarily charged with setting hospital rates with ultimate goals of keeping hospital stays affordable, providing access to care for patients who are uninsured or underinsured, and covering some of the costs of uncompensated care.

Based on a federal waiver which exempts Maryland from adhering to Medicare and Medicaid reimbursement rates, the HSCRC sets rates for all payers: private insurance companies, HMOs, Medicare, and Medicaid – a system referred to as the "all-payer" system because all payers pay for their fair share of hospital costs. Additionally, Maryland hospitals cannot “mark up” their charges for patients as can hospitals in other parts of the country.  Maryland is the only state in the country that has a Medicare waiver. Under this agreement, Medicare reimburses Maryland hospitals according to HSCRC rates.

Some experts say Maryland’s system has saved citizens more than a billion dollars in hospital costs because hospital rates in Maryland have grown at a rate slower than at hospitals across the country.

Maryland’s story is one of success – the stipulation from the federal government was that the increase in the cost of healthcare in Maryland as a result of the waiver be less than the increase in the rest of the country and that has happened.  Now, our conversation is turning to how Maryland can continue to do things differently when it comes to healthcare and further our successes for the benefits of our citizens.

There’s been some deliberation on linking the waiver request to do things differently that are more in tune with what we are actually trying to do today. With the current waiver if we actually do things that reduce payments to hospitals we actually put the waiver potentially at risk.

However, there was unanimous agreement that Maryland should be a trend setter and we should take advantage of being different and try things that get us closer to the “Triple Aim” of better health, better care, and lower cost.

One such approach being implemented at some of Maryland’s smaller, often rural hospitals is the Total Patient Revenue concept.  Under TRP, essentially hospitals are given a budget based on their base revenue, regardless of volume.  Although this essentially puts a cap on revenue, any dollars that the hospital is able to cut – for example for unnecessary admissions/re-admissions or shifting care to less expensive outpatient services - they get to keep.

Hospital leaders at the meeting agreed to explore this and other innovative concepts more in-depth.  The movement is setting us in a direction of payments for health rather than payments for how many services we can do, and that will be a win for– hospitals, insurers, and most importantly, patients.

On a final note, on behalf of GBMC HealthCare I'd like to extend congratulations and a warm welcome to Dr. Maravene S. Loeschke, who earlier this week was named as the next president of Towson University.

It's a homecoming for Dr. Maravene, a Baltimore native who received both a bachelor’s degree in theater and English and a master’s degree in education from TU. She spent more than 30 years at TU, moving up through the faculty ranks and serving as dean of the College of Fine Arts and Communication from 1997 to 2002. We look forward to continuing the excellent working relationship with our neighbor and Towson Four (GBMC, TU, St. Joseph’s, Sheppard Pratt) partner under Dr. Loeschke's leadership.