Maryland reaches deal with feds to cut hospital costs

The state of Maryland and the federal government have come to an agreement that would provide financial incentives to hospitals to keep patients off their premises, Kaiser Health News reported.

Under the deal, which is a five-year demonstration project under the guidance of the U.S. Department of Health and Human Services, hospitals will limit annual revenue growth to no more than the growth of the overall economy, 3.58 percent a year. Hospitals will also slow Medicare spending statewide, saving the feds $330 million over the next five years.

Since the 1970s, Maryland regulators reserved the right to dictate prices hospitals may charge for procedures. However, Medicare spending had been higher than other states.  Hospitals also did not receive incentives to improve quality of care and reduce hospital-acquired infections and readmissions. For example, at least 20 percent of Maryland's hospitals have readmission rates above the national average.

"There is enormous focus on caring for people after they get sick and very little attention to keeping people healthy. The incentives that underlie payment are a major reason we have that lack of balance," Joshua Sharfstein, M.D., Maryland's health secretary, told the Baltimore Sun.

According to the Sun, the state's hospitals will share a pool of money that will cover all inpatient care. It will be adjusted annually for inflation.

"This is without any question the boldest proposal in the United States in the last half century to grab the problem of cost growth by the horns," Uwe Reinhardt, a healthcare economist at Princeton University, told Kaiser Health News.

However, concerns remain that incentives aren't properly aligned with physicians and other providers in Maryland's medical community.

"This has some policy objectives, some measurable financial goals, that I think are very difficult to meet," Joseph Antos, a health economist at the American Enterprise Institute, told Kaiser Health News. "It doesn't necessarily give the hospitals enough tools or the will to make all this work out."

To learn more:
- read the Kaiser Health News article
- here's the Baltimore Sun article

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