Maryland’s All-Payer Model Shows Promising First Year Results

November 16, 2015 - Last week, the Department of Health and Human Services (HHS) announced the state of Maryland’s first year results from its All-Payer Model. Maryland has implemented a global budget payment system in which insurers are required to pay hospitals a set amount every year for both inpatient and outpatient services.  

This does not account for the actual use or provision of each and every service. Hospitals in Maryland essentially receive an annual amount of funds regardless of the number of patients these healthcare providers serve.

The Maryland All-Payer Model is a type of payment system that brings more incentive for healthcare providers to keep their patient base healthy, reduce hospital readmission rates, and essentially keep their consumers out of the inpatient hospital setting. An All-Payer Model also positions clinicians to invest in population health management and the prevention of disease.

HHS explains that the first year results from Maryland’s All-Payer Model already show the benefits of this type of payment method. The quality data of this payment method holds true promise for the Triple Aim of Healthcare – improved quality of care and patient satisfaction, better population health standards, and reduced medical costs.

The first year quality results from Maryland’s All-Payer Model show the real advantages of this payment system, as the composite quality measures for preventing disease strengthened by more than 26 percent. Additionally, there was also a decrease in the Medicare fee-for-service 30-day readmission rate throughout the state, HHS reported.

The Centers for Medicare & Medicaid Services (CMS) provides more background on Maryland’s All-Payer Model on its website. The state partnered with CMS to design this payment and reimbursement system. The All-Payer Model is expected to improve health outcomes among the citizens of the state and reduce overall hospital spending.

Maryland is the only state in the nation that has adopted this system of reimbursement among its hospitals. A 36-year old Medicare waiver within the state has enabled the region’s government agencies to adopt the All-Payer Model because it exempts Maryland from the Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS), allowing establishments within the state to set the rates for these programs themselves.

It is expected that this reimbursement model will enable providers in improving the quality of care across the region all the while reducing spending among Medicare, Medicaid, and CHIP beneficiaries as well as other residents of the state.

This pioneering model of payment within the state of Maryland will likely show CMS, HHS, and other federal government agencies whether an All-Payer Model reduces hospital spending significantly and improves population health outcomes. If the rest of the country sees real advantages from the program, it is not out of the question for more states to adopt this model of reimbursement.

Some quality improvements that the state has committed to include reducing the 30-day hospital readmission rates and preventing hospital-acquired infections or other medical conditions. As the state moved away from its Medicare payment for its inpatient admission standard – a similar method to fee-for-service, Maryland hospitals aim to generate $330 million in Medicare cost savings throughout a five-year time period.

Over the five-year period, Maryland will also be moving all of its hospitals into these global payment methods and will continue submitting reports based on the population health outcomes of this reimbursement model.

This whole method of payment is essentially built on the idea of value-based care, which is a pillar of the Patient Protection and Affordable Care Act. Decreasing skyrocketing costs and improving quality of care are the biggest goals of the Affordable Care Act, according to a CMS brief.

Value and care coordination is vital for the healthcare industry while test duplications or volume of services do not always show a real benefit to the patient. HHS has now formed four categories of payment across the healthcare spectrum with the one most strive toward consisting of a population-based payment.

In order to further push toward a reduction in healthcare costs and better quality care, HHS aims to have 30 percent of Medicare payments reimbursed in alternative payment models by the end of 2016 and 50 percent of the payments in these later categories by the end of 2018.

The one problem with establishing these goals and actually achieving them is whether private payers will continue working on a fee-for-service payment model, which may make it more difficult for healthcare providers to make real changes to their day-t0-day operations in an effort to cut costs.

As such, at the beginning of this year, HHS announced the creation of the Health Care Payment Learning and Action Network. Along with state Medicaid programs, HHS will work alongside private payers, consumers, employers, and providers to grow alternative payment models through the Health Care Payment Learning and Action Network.

“Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely and results in healthier people.  Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” Secretary Burwell said in a public statement. “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.”