Maryland To Modernize Healthcare Payout Model


Backed by the Centers for Medicare & Medicaid Services (CMS), Maryland plans to modernize its all-payer rate-setting system for hospital services will improve patient health and reduce health care costs. The agreement will allow the state to adopt new policies that reduce per capita hospital expenditures and improve health outcomes as encouraged by the Affordable Care Act (ACA). A statement from the Governor’s office says the plan could serve as a national model for healthcare payouts.

Under Maryland’s current Medicare waiver, Maryland has set its own rates for hospital services for 36 years. Maryland is the only state in the nation to operate an all-payer hospital rate setting system, under which all patients pay the same rate for services at the state’s hospitals. The new model will allow Maryland to set global budgets and other alternative approaches to payment that reward systems of care that provide improved outcomes at lower cost. Support for this new model has come from a coalition of the hospitals, the insurance companies, the state and CMS all working together with a common vision.

The ACA is designed to spur a shift from fee-for-service to fee-for-outcomes based care. States and hospitals will have to experiment with how that shift looks based on local patient population needs. Maryland is aiming for prime mover status with this agreement.

Under the new model, Maryland’s hospitals have committed to achieving significant quality improvements, including reductions in hospital readmission rates and hospital acquired conditions rates. The model will limit the growth in hospital spending per capita, including inpatient and outpatient care, to growth in the state’s economy. It will also limit annual Medicare per capita hospital cost growth to a rate lower than the national annual per capita growth rate. The model is expected to save the federal government at least $330 million in Medicare spending over the next five years.

“Today’s announcement is an encouraging step to ensure that Maryland’s unique health care delivery system can also be aligned with the goals of lowering cost and improving health outcomes for our citizens,” said CMS Administrator Marilyn Tavenner. “We hope that this can serve as an example for other states that they can work with us to achieve the shared goals of creating a more efficient health system that also delivers improved care for the American people.”