Three years after the Centers for Medicare & Medicaid Services (CMS) and the state of Maryland launched a bold approach to improve care for Marylanders and slow the growth in health care costs, Maryland continues to focus on limiting total per capita hospital spending and improving quality and health for all of its residents, including approximately 800,000 Medicare fee-for-service beneficiaries.
To implement the new model, the state converted its hospital payment system from traditional fee-for-service to a global system, in which hospital total revenue for all payers is set at the beginning of the year. The premise behind global hospital payments is simple: providing fixed, predictable revenues allows hospitals flexibility to invest in care and health improvement activities that reduce avoidable utilization and improve value for consumers and purchasers. For more about the history and specifics of the program, read these previous Health Affairs Blog posts from 2014 and 2015.
We now update earlier results to report on experience to date and to summarize the state’s progression plan to move the model beyond hospitals beginning in 2019. As the model begins its fourth year, Maryland is meeting or exceeding all of its key CMS requirements.
All-Payer Model Progress to Date
Success of Public/Private Partnerships
Although Maryland’s rural hospitals adopted global payment systems in 2011, there were significant challenges in implementing the new model. The state formed an Advisory Council of stakeholders to help address the profound changes in the delivery system and its incentives. During the first six months of 2014, Maryland hospitals quickly adopted the statewide global payment system. In the second half of the year, hospitals began to expand their efforts to help patients transition home or to post-acute settings after discharge. They also used case managers in emergency departments to connect patients to primary care and other resources.
Since the initial year, hospitals have continued to expand their efforts to include more proactive treatment of chronic conditions such as diabetes, heart disease, and pulmonary disease, as well as to provide additional supports for patients after discharge. In the second year, providers were encouraged to collaborate to support person-centered care. To date, ten regional partnerships have been formed. These partnerships are providing preventive services, chronic care management, and other care supports for high needs patients, and organizing care management approaches across larger geographic areas.
In addition, the state invested in public/private partnerships to expand infrastructure. Maryland’s private health information exchange—the Chesapeake Regional Information System for our Patients (CRISP)—supports infrastructure needs that can best be accomplished cooperatively, augmenting resources of payers, health systems, and providers. CRISP furnishes analytics derived from administrative and other data collected by the state, real time encounter notifications and actionable care coordination information from hospitals, and other information from electronic health records, all aimed at supporting better care coordination. Accurate, timely data are essential to care redesign; for example, CRISP notifies physicians, other providers, and care managers when patients are hospitalized to facilitate follow-up care. This partnership improves the richness of clinical information available at the point-of-care and is critical to the success of Maryland’s progression efforts. For example, these partnerships create an environment where the care plan, the patient’s designated care manager, and other critical information can be communicated among hospitals, care managers, physicians, and other providers.
Slowing Per Capita Hospital Cost Growth
Under the model, hospital spending per Medicare beneficiary rose less rapidly than it did nationwide. At the same time, hospital spending for all payers was kept in check. These trends indicate that the Medicare savings Maryland achieved were not shifted to the private sector.
Maryland committed to limiting the growth in the per capita hospital revenues for all payers to the long-term growth rate of the State’s economy (3.58 percent per year). Actual growth was much lower (1.47 percent in 2014 and 2.31 percent in 2015), and the year-to-date growth in 2016 over 2015 was 0.35 percent per capita (Exhibit 1). This success is largely attributable to the efforts of hospitals and others working under the global payment system. Lower inflation and reductions in uncompensated care also contributed.
Exhibit 1: Maryland Hospital Revenue Growth (All Payers)
Source: Hospitals’ monthly revenue and usage reports to Maryland Health Services Cost Review Commission (HSCRC). Year-to-date 2016 results compare hospital revenues for January-September 2016 to January-September 2015.
Meeting Hospital Savings Targets
Maryland has achieved an estimated $429 million in total Medicare hospital savings to date (Exhibit 2), exceeding the model’s five-year hospital savings requirement of $330 million. Hospital savings for Medicare relative to the base year of 2013 were $116 million in 2014, $135 million in 2015, and are estimated to be $178 million through August 2016. From 2013 through August 2016, the hospital spending growth rate underlying the savings was more than 4 percent below the national growth rate.
Exhibit 2: Maryland Medicare Hospital Savings Relative to National Medicare Per Capita Growth Rate (millions of dollars)
Source: State of Maryland analysis of data from CMS. 2016 figures are for a partial year through August, and results for the full calendar year could vary from partial year results. Base year is 2013.
Controlling Total Cost of Care
Maryland monitors non-hospital cost growth to ensure it does not undermine expected savings. In 2014, both hospital and non-hospital growth rates were below national rates. However, non-hospital utilization rose in 2015 as hospitals referred more patients for home health and skilled nursing facility services and provided increased levels of care management. These investments reduced Maryland’s readmission rate, but cost increases in non-hospital services outpaced incremental hospital savings in 2015. The non-hospital costs reduced, but did not negate, overall savings for 2015. In 2016, hospital savings are once again exceeding non-hospital spending. This improvement is partly attributable to hospitals’ and care partners’ continuing focus on complex and high needs patients, reducing readmissions, and other avoidable utilization.
To date, Maryland estimates that the $429 million in hospital savings cited above was partially offset by an additional $110 million in non-hospital spending, resulting in a net savings of $319 million in Medicare total cost of care. Non-hospital costs are expected to rise as the delivery system begins to invest in better ambulatory care. The investment in non-hospital spending helped produce nearly four times its amount in hospital savings. These results reinforce the importance for Maryland and CMS to monitor total costs of care, including a focus on spending over a longer evaluation cycle.
Key Quality Indicators Improving
To date, Maryland hospitals have exceeded key quality goals outlined in the model. Maryland hospitals have reduced potentially preventable complications by 48 percent, exceeding the five-year 30 percent reduction target. In 2013, Maryland’s Medicare all-cause readmission rate was more than 7.9 percent above the national rate. Maryland committed to closing this gap over five years, bringing Medicare readmissions to national levels or below. Through 2015, Maryland’s readmission rate was 3.4 percent above the national rate, closing the gap by 57 percent. The trend continues in 2016. Still, Maryland’s readmission rate exceeds national levels and requires continued improvement. Maryland is also acting on the need to improve Hospital Consumer Assessment of Healthcare Providers and Systems ratings, placing increasing levels of hospital revenue at-risk for patient satisfaction in the coming year.
Next Steps for Maryland’s All-Payer Model
Transformation Beyond Hospitals
The current model, with its focus on hospitals, creates a foundation for health care payment and delivery transformation for all patients and payers. However, the current model does not have the full set of tools needed to address total cost of care. As 2016 ended, Maryland submitted a progression plan to CMS to extend the model beyond hospitals. The Advisory Council, which advised the state on initial implementation, was expanded and reconvened to help develop the plan.
The progression plan lays out strategies to further improve outcomes, reduce potentially avoidable utilization in higher acuity settings, and reduce costs. Strategies include the continued development and scaling up of support for complex and high needs patients; new efforts to support chronic care management and prevention; and further transformation of the payment and delivery system to align goals. In 2016, CMS approved an amendment to the All-Payer Model to give hospitals the opportunity to share data and resources and to offer incentives to hospital-based and community-based providers. This amendment enables hospitals and their care partners to redesign care to better serve high needs patients across episodes of care, including in post-acute settings. Maryland is also working to increase needed supports and coordination for beneficiaries who are covered by both Medicare and Medicaid.
Meeting the Rising Levels of Need
While hospital-initiated programs are essential, they do not address the rising needs and growing numbers of individuals in the community with multiple chronic conditions. Maryland’s progression plan includes a proposal to extend chronic care management and prevention to Medicare beneficiaries through a voluntary Maryland Comprehensive Primary Care Model. Based on CMS’ Comprehensive Primary Care Plus (CPC+) model, the Maryland Comprehensive Primary Care Model is designed to work with Maryland’s delivery system.
Addressing Alignment Challenges and Local Needs
Maintaining the pace of improvement will be challenging with increasing reliance on complex delivery system transformation and coordinated efforts beyond and among hospitals. As Maryland moves to expand the scope of its agreement with CMS for the all-payer model in January 2019, providers will be increasingly responsible for care outcomes, population health, and total cost of care for Medicare beneficiaries and dually eligible beneficiaries. Maryland’s regulatory authority is limited to hospitals and Medicaid services; the progression plan calls for engaging physicians and other clinicians in voluntary efforts to redesign care. The Medicare Access and CHIP Reauthorization Act (MACRA), along with the flexibility provided under the model and its amendment, are essential to Maryland’s long-term transformation efforts. Maryland also plans to evaluate payment models and incentives for post-acute and long-term care in order to optimize resource use and flexibility to improve care for Medicare and dually eligible beneficiaries.
Maryland will continue to address the unique situation of rural hospitals and other local needs as the Model progresses toward broader accountability. For example, Maryland expects to utilize geographic value-based incentives to create local responsibility for care outcomes and population health. This approach provides a direct link to Medicare total cost of care, limits overall risk, and includes all beneficiaries.
Maryland’s adoption of hospital global payments systems and performance standards helped reduce Medicare costs relative to the nation in the first two years of the new model, and it is likely that the current year will continue that successful record. Hospitals have begun to redesign the way health care is delivered. The state helped by investing in private sector infrastructure, including data and care coordination resources. Maryland will continue its proven track record of engaging public and private stakeholders and fostering partnerships. Elements of Maryland’s model are relevant to other states; global models are one potential strategy to address the critical financial condition of rural hospitals in tandem with the health needs of their communities. As more evidence of Maryland’s experience becomes available over time, states may increasingly seek federal flexibility to accomplish broad changes in health care delivery, to improve chronic care in the community, and to reduce the need for higher cost settings.