Fwd: qotd: Maryland moving toward global budgets for hospitals

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Subject: qotd: Maryland moving toward global budgets for hospitals
Date: Fri, 10 Jan 2014 13:00:00 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



Centers for Medicare and Medicaid Services
January 10, 2014
Maryland All-Payer Model to Deliver Better Care and Lower Costs

On January 10, 2014, the Centers for Medicare & Medicaid Services (CMS)
and the state of Maryland jointly announced a new initiative to
modernize Maryland's unique all-payer rate-setting system for hospital
services that will improve patient health and reduce costs.

Maryland operates the nation's only all-payer hospital rate regulation
system. This system is made possible, in part, by a 36 year old
Medicare waiver (codified in Section 1814(b) of the Social Security Act)
that exempts Maryland from the Inpatient Prospective Payment System
(IPPS) and Outpatient Prospective Payment System (OPPS) and allows
Maryland to set rates for these services. Under the waiver, all third
party purchasers pay the same rate. The State of Maryland and CMS
believe that the new model test announced today will provide an
opportunity for Maryland to reform its delivery system to align with the
goals of delivering better health, better care, and lower cost.

Terms of the Model

Maryland's all-payer rate setting system for hospital services presents
an opportunity for Maryland and CMS to test a unique model that has the
potential to inform CMS and other states. This opportunity is available
through the authority of the Innovation Center, which was created by the
Affordable Care Act to test payment and service delivery models.

Under the terms of the Maryland All-Payer Model:

• Maryland will agree to permanently shift away from its current
statutory waiver, which is based on Medicare payment per inpatient
admission, in exchange for the new Innovation Center model based on
Medicare per capita total hospital cost growth.

• This model will require Maryland to generate $330 million in Medicare
savings over a five year performance period, measured by comparing
Maryland's Medicare per capita total hospital cost growth to the
national Medicare per capita total hospital cost growth.

• This model will require Maryland to limit its annual all-payer per
capita total hospital cost growth to 3.58%, the 10-year compound annual
growth rate in per capita gross state product.

• Maryland will shift virtually all of its hospital revenue over the
five year performance period into global payment models, incentivizing
hospitals to work in partnership with other providers to prevent
unnecessary hospitalizations and readmissions.

• Maryland will achieve a number of quality targets designed to promote
better care, better health and lower costs. Under the model, the
quality of care for Maryland residents, including Medicare, Medicaid,
and Children's Health Insurance Program (CHIP) beneficiaries will
improve as measured by hospital quality and population health measures.

• If Maryland fails during the five-year performance period of the
model, Maryland hospitals will transition over two years to the national
Medicare payment systems.

• Before the start of the fourth year of the model, Maryland will
develop a proposal for a new model based on a Medicare total per capita
cost of care test to begin no later than after the end of the five year
performance period.

This model will test whether an all-payer system for hospital payment
that is accountable for the total hospital cost of care on a per capita
basis is an effective model for advancing better care, better health and
reduced costs. CMS expects that this model will be used to engage all
Maryland hospitals, as well as other care providers, in payment reform
and innovation.

CMS and Maryland expect that the All-Payer Model will be successful in
improving the quality of care and reducing program expenditures for
Maryland residents, including Medicare, Medicaid, and CHIP
beneficiaries. Moreover, the Maryland system may serve as a model for
other states interested in developing all-payer payment systems.

http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-Sheets/2014-Fact-sheets-items/2014-01-10.html

****

January 31, 2014
Guiding Principles for Implementation of Population­-Based and Patient
Centered Payment Systems: A Report from the Advisory Council to the
Maryland Health Services Cost Review Commission

The State of Maryland is leading a potentially transformative effort to
lower health care spending in the State while at the same time improving
access to care and quality of care. Stated in terms of the "Three Part
Aim," the goal is a health care system that enhances patient care,
improves health outcomes, and lowers total costs.

To achieve this goal, the State of Maryland worked closely with the
Centers for Medicare and Medicaid Services (CMS) throughout 2013 to
craft an innovation plan that would make Maryland a national leader
achieving the Three Part Aim and permit the federal government to
continue to participate in the four‐decade long all‐payer system that
has proven to be both successful and enduring. The federal government is
anticipated to approve Maryland's new Model Design application and
implementation begins in January 2014.

Building on the Commission's existing authority to regulate and set
hospital rates across all payers including Medicare, the State is
preparing to tie system‐wide hospital inpatient and outpatient payment
to economic growth. Effectively, the State is instituting a plan to
shift from payment based on inpatient hospital cost per admission to
total hospital cost per capita. The ultimate goal is to tie total health
care spending per capita to the per capita growth of the state's
economy. New health care delivery and payment models will be aligned
with numerous existing initiatives to help meet the goals.

Advisory Council Recommendations

2. Hospital Global Payment Models are the best strategy for the first
phase of implementation.

The HSCRC anticipates that most hospitals will be operating under global
payment models by early 2014. These models hold the most promise for
meeting the revenue targets in the early years because they move away
from incentives in fee‐for‐service payment that foster a greater volume
of services and offer strong budget discipline. In addition, global
payments provide clear and simple revenue targets with flexibility for
hospitals to manage within these macro goals. In the long‐run, these
models will need to evolve to ensure that the revenue in the system
follows the patients.

(DISCLAIMER: This is a draft document for discussion purposes which has
been prepared by consultants to the Advisory Council. The contents of
this draft have not been reviewed or approved by Advisory Council members.)

Draft Report:
http://www.hscrc.state.md.us/documents/md-maphs/ac-meet-2014-01-09/hscrc-advisory-council-initial-draft-report-2014-01-07.pdf

Maryland Health Services Cost Review Commission
All Payer Hospital System Modernization: Advisory Council:
http://www.hscrc.state.md.us/hscrc-advisory-council.cfm

Overview of Proposed New All-Payer Model:
http://www.hscrc.state.md.us/documents/md-maphs/ac-meet-2013-11-13/hscrc-overview-of-maryland-all-payer-model-proposal.pdf


Comment: The model for a single payer national health program, as
proposed by Physicians for a National Health Program, includes placing
hospitals on global budgets. Just as police and fire departments are
funded by single, publicly-financed global budgets rather than being
paid for each fire or crime intervention as they arise, hospitals would
likewise be placed on single, publicly-financed global budgets that are
adjusted based on some reasonable index of inflation. Not only does that
cost less, partly by dramatically reducing administrative waste, it also
improves quality by providing the hospital administration with the
flexibility to improve the allocation patient care dollars, plus it
slows health care inflation to a sustainable level.

Maryland is the only state that currently has an all-payer hospital rate
regulation system. Under this system, all payers, including Medicare,
Medicaid, CHIP, private insurers, and individuals pay the same rates for
the same hospital services. This has reduced administrative complexity,
made payment for hospital services more equitable, and has slowed the
increases in hospital spending from one of the most expensive states
down to average.

Since their all-payer system pays for services provided, incentives
remain to increase volume of services. Under the new system just
approved by CMS, payment will still be all-payer but will not be based
on volume of services, but rather will be based on "the Medicare per
capita total hospital cost growth." In essence, that establishes "global
budget" as a form of hospital financing in the United States, though it
is limited to Maryland under the authority of the Innovation Center,
which was created by the Affordable Care Act to test payment and service
delivery models.

We certainly have many questions about the details that have not yet
been revealed. It does fall short of hospital global budgets as
envisioned by PNHP. For instance, this model still seems to pool funds
from multiple public and private sources, whereas the PNHP model would
use only public funds from a single pool funded by equitable taxes. That
is a crucial difference since multiple sources leads to administrative
complexity and inequities in funding.

In general though, it seems that we can celebrate this step towards a
more equitable and just financing system. It won't get us in the back
door of single payer, but it will provide us with another talking point
on policy - the fact that global budgets are an improvement but that we
can make them even better when we mesh them in with a bona fide,
comprehensive single payer system - an improved Medicare that covers
everyone.