Maryland Health Officials Seek Sweeping Changes in Hospital Reimbursements

by webadmin on April 2, 2013

Maryland health officials are suggesting drastic measures to reform its hospital payment system. Last week, they submitted to CMS changes that can only be described as sweeping.

As the Associated Press reports, these changes are “the most significant in 40 years” for the state, with the goal being to keep Maryland’s “unique Medicare waiver agreement with the federal government — a deal that has provided enormous financial benefits to the state in recent decades.”

The changes would take the focus of incentives off patient volumes and place it on patient health. According to the AP, “A key component would commit to limiting inpatient and outpatient hospital costs for all payers to a trend based on growth in the state’s economy. Under one of the proposal’s main ideas, Maryland would switch from a system in which hospitals primarily make money when a patient is admitted to one in which hospitals would share in savings as patients stay healthy.”

This proposed shift, of course, reflects many of the changes that are occurring nationwide. Maryland health secretary Joshua Sharfstein believes “meaningful savings” would be achieved for small businesses, state taxpayers, families, and Medicare. However, the Maryland health system “is the largest private sector employer in the state,” routinely bringing in $14 billion per year. To make the reimbursement system dependent on state economic growth, especially in the midst of a turbulent marketplace, is wisdom that Carmela Coyle, president and CEO of the Maryland Hospital System, finds questionable.

She told the AP, “What we have, in essence, is a road map. We know where we are; we’ve drawn a picture of where we want to go, but when we start to unfold it, there are a whole lot of blanks in between. That means uncertainty. It means uncertainty for hospital leaders. It means uncertainty for payers. The mechanics of how this will work remain undecided.”

Maryland state officials are mainly concerned about losing the Medicare waiver, the only one of its kind within the 50 states, the AP explains. “It allows Medicare reimbursement rates to providers be based on those set by a state commission, instead of national federal payment principals. However, Maryland must meet tests showing that cumulative growth in state payments doesn’t exceed the growth rate of Medicare payments nationally.”

The waiver is largely a dinosaur, since it hails from an era in which “inpatient services were predominate, and cost per discharge and average length of stay were the only measures of efficiency.” Losing the waiver is increasingly likely as healthcare shifts its focus away from inpatient services. Losing it, however, would slash Medicare reimbursements within Maryland by $1 billion.

As state officials await CMS’ ruling on their proposed changes, they continue to implement healthcare reform within Maryland, including the opening of the Maryland Benefit Exchange and the expansion of Medicaid eligibility.

Even so, this is another sign that the standard template for hospital reimbursements is undergoing a fixed and permanent transformation. Our question to you: Is this for the better, not just in Maryland, but nationwide?

-by Pete Fernbaugh

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