The GBMC System is Prepared for Maryland’s New Medicare waiver

We in Maryland are fortunate to live in a state that is willing to experiment with novel healthcare payment systems. Maryland is the only state where the standard federal Medicare hospital payment program doesn't apply, and this is because, since the mid-1970s, Maryland has had a waiver from Medicare rules that brings more than $1 billion extra Medicare dollars to the state annually. This waiver is for a demonstration project with the Federal government to test the idea that an all-payer rate setting commission in Maryland, working with hospitals, could keep the rate of increase of Medicare inpatient payments below the average rate of increase in Medicare inpatient payments in the other 49 states.

Maryland is, in fact, the only state where hospitals don’t negotiate rates with individual insurance companies. The Maryland Health Services Cost Review Commission (HSCRC) sets hospital rates. So, whether a patient is on Medicare or Medicaid, or has Blue Cross or some other private insurance, or is uninsured and comes to GBMC for care, our hospital is paid the same amount.  The HSCRC pays different rates to different hospitals.  Since the 1970’s, the federal government has been calculating the increase in Medicare inpatient costs in Maryland and comparing that to the average increase in inpatient Medicare costs in the other states and Maryland has kept its rate of increase lower. But recently, we have gotten dangerously close to exceeding the national rate of increase and have put ourselves at risk of “failing the waiver test.”

However, the 40-year-old “waiver” test is out of date.

In order for Maryland to not fail the test, in recent years the HSCRC has been increasing hospital rates in the outpatient area and holding inpatient rates fairly constant. The net effect of this, however, is to increase overall costs to Medicare. The Centers for Medicare and Medicaid (CMS) are not happy that overall Medicare costs are getting significantly higher in Maryland. This, coupled with the fact that everyone knows that our national healthcare costs are unsustainable, has made CMS believe that the current waiver test is no longer a good idea. CMS welcomed an application from Maryland for a new demonstration. So, Maryland began negotiating with the Federal government for a new waiver where Maryland would continue to have an all payer system hospital rate setting, but now, the test would be more designed to reduce all-payer hospital spending, both inpatient and outpatient and reduce Medicare costs. The Affordable Care Act created the Centers for Medicare and Medicaid Innovation (CMMI) and this agency within CMS has been negotiating with Maryland to get a new waiver that would drive towards the triple aim of better health, better care and lower cost.

The overall objectives for the new waiver are:

• To CHANGE the way we pay for and provide health care
• To BUILD on the system we have that allows hospitals in Maryland to be paid for the care of the uninsured and make it even better (e.g. more affordable, safer and to create a healthier Maryland)
• To provide the opportunity for Maryland to be a NATIONAL LEADER in health care

So, with the support of the Maryland Hospital Association (MHA), a new application is being submitted to the Federal government through the partnership of Maryland hospitals, the State and insurance companies for a new, five-year demonstration project.  The MHA has more information on this “waiver” on its website, for anyone who wants to read more about this. 

This new test will look at how we can:

1. Work together to slow growth in spending for hospital care
2. Continue Maryland’s unique way of setting hospital prices
3. Change how hospitals are paid to reward the right things (such as reducing waste and services that don’t get hospitals to a goal of better health for patients)

With this new waiver test, growth in all-payer Maryland spending per capita cannot exceed Maryland’s rate of increase in Gross Domestic Product which is projected to be 3.58% over the next 10 years. In addition, Maryland must generate Medicare savings of $330 million over five years.

Is GBMC ready for this new waiver?

For GBMC, we've been working for three years to get ready for this new payment system. We've already started transforming our company away from hospital-centric fee-for-service to patient-centric fee-for-health.

The way I see it, the only people who can truly lead the charge in this change are physicians. This is why, over the past few years, we have been working toward building a legitimate physician leadership hierarchy within our hospital, as well as establishing the Greater Baltimore Health Alliance (GBHA), our accountable care organization that is already participating in the Medicare Shared Savings program and which is made up of both employed and private practicing doctors. Following the idea that physicians must lead the change, GBHA’s Board of Directors is comprised of 75% doctors - the physicians have to, and are, redesigning the way care is delivered.

This new waiver will ultimately change how hospitals are paid to reward value over volumes. A simple way to look at this is rather than wait for the patient to get really sick and then pay the hospital to fix the problem, the new system will pay to keep the well healthy and to better manage chronic disease.

Opportunities and Benefits

The new waiver will incentivize all to do what we have begun to do over the last three years.  It will give our state, our hospitals and our communities a number of opportunities, from the ability to continue our unique hospital rate-setting system and provide more equitable care for low income and uninsured people to putting a statewide focus on quality and safety and hopefully slow the growth in insurance premiums. The drive toward less waste and lower cost will lessen the burden on employers who want to continue to provide insurance for their workers and lessen the Medicaid strain on the State budget.

This will be a challenging but very exciting next chapter in healthcare in Maryland! And, GBMC is proud to be out in front as we continue to achieve our four aims, and move closer to our vision.