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Looking Beyond the Affordable Care Act

Looking Beyond the Affordable Care Act

Maryland hospitals prepare for next phase of the state’s hospital payment agreement with the federal Centers for Medicare and Medicaid Services.

While the rest of the country debates the future of the Affordable Care Act following the election, hospitals in Maryland are preparing for the second phase of the unique, five-year hospital payment agreement we have with the federal Centers for Medicare and Medicaid Services (CMS)—the folks who pay the bulk of our bills.

The state of Maryland has until the end of December 2016 to submit a proposal for a new comprehensive, Maryland-only CMS payment process that would take effect in 2019. We are actively working on the draft of this plan.

Maryland has operated a unique, highly effective, all-payer hospital payment system for nearly 40 years. In 1977, Maryland created what is now the country’s only statewide Health Services Cost Review Commission (HSCRC), which sets uniform rates that every hospital must charge for services to all payers. In the other 49 states, the rates Medicare and Medicaid pay vary widely from what other insurers pay for exactly the same services.

Although this system worked well for many years, recently, CMS wanted Maryland to move to a system that rewarded value rather than volume. Instead of paying hospitals based on the number of patients they admit and how long these patients are hospitalized, the new waiver would concentrate on the overall, per-capita expenditures for hospital services, as well as on improvements in the quality of care provided and health outcomes for the general population.

Maryland wanted to make sure that our nearly four-decade-old, all-payer system didn’t go away. The HSCRC, with the help of an advisory council on which I sit, devised a proposal to CMS to continue our waiver. We recommended that Maryland hospitals link the growth in our budgets to the long-term growth in the state economy and that the HSCRC reward hospitals for keeping people healthy, instead of paying us for the number of patients we admit.

In January 2014, CMS agreed to our proposal and gave Maryland a new, five-year waiver, creating what the federal government calls a “demonstration” because it is designed to demonstrate its effectiveness.

Over the past two years, the state’s new CMS waiver has been successful. The all-payer hospital cost per capita in Maryland has risen at nearly half of the targeted annual increase. In addition, Medicare savings have reached nearly 75 percent of the overall five-year goal of $330 million—in just the first two years. Quality measures have also exceeded the targets.

Although we’re still refining our blueprint for a phase two plan to continue the waiver, its basic concepts are in place.

We propose developing a total cost-of-care model that focuses on the entire patient experience, inside the hospital and out.

We also want to coordinate or align the efforts and financial interests of all health care providers—hospitals, skilled nursing facilities, physicians—by providing incentives to slow the rate of cost increases and by providing care in the most appropriate setting.

In addition, we wish to ensure more patient-centered care, including a more well-defined program for primary care and for “dually eligible patients” who are eligible for both Medicare and Medicaid.

Finally, we want to make sure that this new model fairly recognizes the unique nature of the patients treated in academic medical systems, like Johns Hopkins, and that our culture of innovation and discovery continues to thrive. 

We are proud in Maryland—and at Johns Hopkins—for long being a leader in curbing health care costs and advancing medical breakthroughs. We hope the new administration supports the adoption of phase two of our new CMS waiver to help us advance that tradition.

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