Sam Robinson
In an effort to control spiraling healthcare costs, the Centers for Medicare and Medicaid Innovation (CMMI) was established as a part of the Affordable Care Act (ACA) in 2010. Its purpose was to identify and test Alternative Payment Models (APMs)—innovative healthcare payment structures that reduce Medicare and Medicaid spending while maintaining the same quality of care provided to their beneficiaries.
The CMMI has tested more than 50 APMs that have found varied success. Only a handful of payment models have been able to demonstrate significant cost control without sacrificing quality—one of those being the Maryland All-Payer Model (MDAPM).
The MDAPM is a payment model unique to the state of Maryland, aimed at generating savings by regulating how much its hospitals are reimbursed for medical care. Under Section 1814b of the Social Security Act, states can deviate from standard Medicare payments systems if they are able to demonstrate that an alternative payment system is effective in containing costs without sacrificing quality and access to care.
Maryland was the first state to take advantage of this provision. In 1997, it established the Maryland Health Services Cost Review Commission (HSCRC), an independent state agency that was responsible for setting hospital reimbursement rates to “promote cost containment, access to care, equity, financial stability and hospital accountability”.
Maryland operated under this model until its healthcare costs per patient admission began rising faster than the national rate. In 2014, the HSCRC responded by building on Maryland’s hospital reimbursement system to create the MDAPM.
The MDAPM’s core provision is limiting each hospital’s payments to a “global budget”—a budget based on the total amount of expected annual revenue for a hospital, predetermined by the Maryland HSCRC. This budget was based on revenue from previous years, adjusted for several factors like inflation and shifting population demographics. Once global budgets were established, the HSCRC set payer reimbursement rates for hospitals to match these global budgets, based on projections in expected volume. This system limited the amount of revenue hospitals could generate in a given year, transferring profit drivers from service volume and throughput to savings and effective utilization.
As an experimental payment model overseen by the CMMI, the MDAPM was only scheduled to last for a 5-year period and had to maintain several performance benchmarks throughout its existence. These included limiting the all-payer hospital cost growth rate to 3.58%, generating $330 million in savings for Medicare, and reducing 30-day readmissions to the Medicare national average. If Maryland failed to meet such benchmarks, the CMS had the authority to impose penalties, terminate the model agreement, and revert Maryland to the national payment system.
Following its implementation, the CMS contracted with RTI International to evaluate the effectiveness of the MDAPM’s provisions across the 6 domains below, with expected outcomes in mind for each:
To assist hospitals in meeting the goals of the MDAPMs, the CMS and Maryland modified their agreement to include the Care Redesign Program (CRP), which began operating in July of 2017. The CRP’s core objective was to improve patient transitions between care settings and emphasize population health management. Through creating partnerships with external community-based providers and by emphasizing primary care initiatives, the CRP had the goal of helping hospitals keep patients healthy at a lower cost.
The CRP was comprised of two distinct initiatives. The first, the Hospital Care Improvement Program (HCIP), engaged hospital-based providers in improving hospital care quality and patient transitions between care settings. The second, the Complex and Chronic Care Improvement Program (CCIP), engaged community-based providers in managing the health needs of high-cost patients. Under the CRP, hospitals provided participating physicians with a share of financial savings generated from proactive, lower-cost interventions. Provider participation in the CRP and its impact on outcomes were used to evaluate both the CRP and the MDAPM.
The performance of Maryland hospitals under the MDAPM was evaluated against comparable hospitals across the country, as defined by hospital and county characteristics, demographics, and market profiles. By matching Maryland hospitals with “equivalent” counterparts, a control group was established to assess the impacts of the MDAPM provisions.
So how did the MDAPM do?
Results were divided into two categories—qualitative, based on interviews and survey results from participating providers and healthcare leaders, and quantitative, based on hospital performance in certain predetermined metrics.
Hospital leaders and stakeholders generally reported performing well under the MDAPM in their final year of participation, despite the major transformations and challenges that hospitals faced in this novel system.
Based on survey results, hospital CFOs reported being able to achieve their budget targets, avoid significant penalties, and shift their spending towards higher-value care. Negative perspectives regarding the fixed-revenue aspect of the model that were present in the early years of its implementation were absent in the final year, indicating that hospital management is capable of adapting to new, more value-driven financial healthcare frameworks.
Hospital CFOs emphasized the importance of care-coordination implements, such as care coordinators, social workers, appropriate referrals and addressing patients’ social determinants of health. Compared to other interventions, staffing-related changes were a dominant strategy—having appropriate personnel to both interact with patients and coordinate treatment plans was essential for hospitals to effectively implement value-based initiatives.
One of the biggest reported challenges was patient compliance. It was difficult for hospitals to see significant returns on value-based investments like preventive interventions. Patients had issues attending appointments, following up with referrals, using post-discharge guidance, and sticking to treatment regimens. There was also an apparent lack of physician participation and alignment. Hospitals were challenged by the inherent opposition between fixed global budgets and the financial incentives of physician practices. Physicians perceived shared savings through the CRP as a weak motivator for participation, although the period of employment for this program was relatively short.
Hospital Financial Performance
By the end of the program, 85% of hospitals were compliant with their global budgets. The rates hospitals charged for services varied by quarter (within an allowed range) but matched closely to those set by the HSCRC annually, suggesting that the HSCRC was reasonably accurate in its projections for the program.
From 2012 to 2018, total revenues increased 16% from $16.2B to $18.8B, with gross inpatient revenue remaining relatively stable while gross outpatient revenues increased. This is consistent with a shift of emphasis from inpatient services to lower-cost care in the outpatient setting.
The MDAPM did not undermine the financial strength of its hospitals, as their operating margins increased from 2.5% in 2012 to 3.4% in 2018.
Health Care Expenditure & Utilization
As a result of the MDAPM, Medicare expenditure for Maryland beneficiaries had 2.8% slower growth relative to the comparison group, which translated to $975 million in savings. A majority of this savings resulted from 4.1% slower growth in total hospital expenditures, which generated $796 million in savings for Medicare.
Commercial payers also saw savings on hospital expenditures, which had 6.1% slower growth throughout the same period, fueled by 9.3% slower growth in inpatient facility expenditures. However, total expenditure growth did not slow among commercial plan members, which was attributed to an increase in the use of professional services outside of the hospital. Maryland Medicare beneficiaries were admitted to the hospital less often but had higher payments per admission relative to the comparison group, which could be attributed to higher costs from an increased hospital service mix.
Post-acute care (PAC) experienced a 5.9% decline in expenditures relative to the control group, driven chiefly by decreases in expenditure for skilled nursing facilities. Inpatient admission is required for patients to qualify for PAC, so a decrease in PAC spending is consistent with a transition in care emphasis from inpatient to outpatient. It may also reflect savings generated from investments in post-discharge planning.
Quality of Care
To avoid penalties and decrease spending, Maryland hospitals invested in interventions to reduce avoidable utilization. Unplanned readmissions for both Medicare and commercial payers decreased, but this decrease was no different from the comparison group—reflective of reducing utilization as a national trend throughout this study’s duration.
Admissions for ambulatory care sensitive conditions (ACSCs) decreased for both Medicare and commercial plans relative to the comparison, reflective of hospital programs aimed at reducing utilization by improving care management, care transitions, and keeping patients healthy.
Hospital Service Mix
Relative to the control group, admission severity increased 2.4% more for Medicare beneficiaries. The number of unplanned admissions remained the same for both Medicare groups, but commercial plans saw a 2.3% relative decrease. These results indicate that hospitals were effective in admitting higher acuity Medicare beneficiaries and avoiding unplanned admissions for the commercially insured.
Spillover to Other Sectors
Little evidence of spillover was observed following the implementation of the MDAPM. Admissions of Medicare patients that resulted in transfers to other short term acute care (STAC) hospitals and PAC hospitals both decreased relative to the comparison group. This is likely attributed to reduced readmissions by assuring more appropriate care transitions. Hospital LOS was higher than the comparison group, confirming that Maryland hospitals did not quickly transfer patients to avoid the costs of caring for them.
Commercial plans saw an increase in medical outpatient visits in hospitals, but a decrease in visits to physician offices relative to the control group. This finding is consistent with the attempt to shift patient care towards the outpatient setting.
This program served as a springboard for hospitals to begin transitioning to cheaper care venues. By mandating fixed global budgets, hospitals were incentivized to maximize the value of each healthcare dollar and implement health interventions based on value. The results of the MDAPM were consistent with expectations—the MDAPM was able to slow hospital expenditure growth, incentivize treatment in cost-effective care venues, and motivate hospitals to invest in care support outside of the hospital, all without sacrificing quality.
The main obstacle for providers within the MDAPM was motivating patient compliance with follow-up care as well as the lack of substantive health networks available for care support outside the hospital. The CRP was the MDAPM’s attempt at population-level health management, but its support mechanisms lacked the necessary scope to drive significant health maintenance and savings.
The CMS and Maryland HSCRC seemed to recognize this shortcoming in their establishment of the Maryland Total Cost of Care (TCOC) Model in 2019 and the planned 2026 transition to the All-Payer Health Equity Approaches and Development Model (AHEAD). Both of these programs built off the MDAPM’s foundational provisions (such as global budgets) while incorporating greater population-level initiatives, such as the Maryland Primary Care Program (MDPCP). The goal of MPCP is to promote coordinated, team-based care across the healthcare continuum to more effectively manage chronic conditions, avoid ER visits and hospital readmissions, and address social determinants of health.
It is through the foundational work of the MDAPM that the Maryland TCOC and AHEAD models can build toward a future of more sustainable healthcare. The MDAMP serves as an effective model for those hoping to utilize value-based initiatives to control healthcare spending—policymakers should make note of both its successes and flaws when attempting to build toward a more sustainable healthcare environment.
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