Maryland's global hospital budgeting saves millions, reduces readmissions

Maryland has always been an outlier in how it pays hospitals. But state officials recently tried a new approach toward cost-containment, and it appears to be working, according to NPR.

The concept is called global budgeting--hospitals receive a fixed payment from the state for all the patients they care for in a year, according to the article. If there are cost overruns, the hospitals are responsible for making up the shortfall. If there is a surplus, the hospitals get to keep it. This provides incentives to hospitals to treat patients as efficiently as possible and strive to avoid readmissions.

The program has been a success to date since it went statewide at the start of last year as part of a demonstration project with the Centers for Medicare & Medicaid Services (CMS), NPR reports. Citing data from the Maryland Hospital Association, NPR said that costs were cut by $100 million in the first year, and that readmissions were down more than the nationwide average. And, according to CMS, the program is expected to reach its five-year target of cutting costs by $330 million.

Data released by Maryland earlier this year has been impressive: Readmissions were cut by 4 percent last year, while there were zero central-line associated bloodstream infections per month for 90 percent of providers in the program. In the previous rural hospital pilot, some providers saw their readmissions drop as much as 15 percent, while their bottom lines increased.

Joshua Sharfstein, M.D., Maryland's Secretary of Health and Mental Hygiene, helped initiate the program prior to leaving his post. Sharfstein said global budgeting is a way for hospitals to fiscally survive while treating fewer patients.

"To a certain extent in the United States of America, a healthier community may mean a financial problem for the hospital, but no longer is that the case in Maryland. And that creates a great opportunity for public health," Sharfstein told NPR.

To learn more:
- read the NPR article

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