Maryland's global budgeting push hospitals closer to 'Triple Aim'

Maryland's shift to global budgets has led to some impressive successes, but many challenges remain, according to the president of that state's hospital association.

The global budget strategy for the state's hospitals was initiated by Joshua Sharfstein, M.D., Maryland's former Secretary of Health and Mental Hygiene. Sharfstein said the initiative was a sound way for hospitals to control costs while preparing for treating fewer inpatients. Essentially, the program pays hospitals a fixed sum to cover the cost of care for all of their patients. If there are cost overruns, the hospitals are responsible for making up the shortfall. A pilot program involving some rural providers a couple of years ago had yielded significant results in cutting down on admissions and readmissions while also beefing up the bottom lines of the hospitals.

Maryland Hospital Association Chief Executive Officer Carmela Coyle discussed in the Health Affairs blog how the global budgeting project has pushed the state's inpatient providers closer to the "Triple Aim" of cutting costs while improving the quality of care both for individual patients and the communities that the hospitals serve.

The waiver currently in place with the Centers for Medicare & Medicaid Services is a modernization of the price control initiative Maryland has had in place since the 1970s, and it is testing the boundaries of what it means to control costs while boosting quality, according to Coyle. Per capita spending growth is capped at 3.58 percent, with the goal of cutting Medicare spending by $330 million over five years.

The hospitals appear to be slightly ahead of their goals. Just a year into the waiver, inpatient admissions and inpatient use rates declined more than 4 percent; avoidable utilization fell 6 percent, and the program has realized savings of $116 million so far.

However, some challenges remain for the hospitals participating in the program, Coyle observed.

"When Maryland's hospitals operated under traditional fee-for-service models, annual revenue increases were determined largely based on utilization growth and inflation. Now, the system must account for myriad other factors, including the inherent and substantial risk in caring for an unknown number of patients with unpredictable care needs within a fixed global budget," she wrote. "Insurance organizations refer to these unknown, but expected, costs as 'actuarial risk.' Because hospitals are now fully accountable for managing this risk under a global budget, resources must be available to mitigate the long-term risk."

To learn more:
- read the Health Affairs blog post

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