MD Extends All-Payer Model, Targets $1B in Medicare Savings

May 15, 2018 - Maryland Governor Larry Hogan and CMS have announced a five year extension of the state’s All-Payer Model, targeting an additional $1 billion in Medicare savings over the coming years, according to a public statement from Hogan’s office.  

Since 2014, the Maryland All-Payer Model has generated $554 million in Medicare savings, exceeding initial savings goals set by the state and CMS.

The model implements a regulated hospital payment rate for all healthcare payers in the state and shifts hospital reimbursement into global payment systems. Hospitals can earn incentive payments by improving population health, patient experience scores, and operational efficiency, as well as by performing well on other value-based care metrics.

Hogan, state officials, and CMS estimate that extending the model through 2023 will save the state over $300 million per year in Medicare costs and drive significant improvements in patient outcomes.

“The new Maryland Model will expand health care access and affordability – and ultimately improve quality of life – for Marylanders, especially those with chronic and complex medical conditions,” Hogan said.

“Maryland continues to lead the nation in innovative health care delivery, and the expansion of our successful model is a huge step forward in our efforts to ensure that every Marylander has access to quality care.”

The extension will require Maryland to work with CMS to add new performance goals related to rural healthcare, chronic disease management, care coordination, and public health issues.  

“It has been a pleasure working with Governor Hogan, and CMS applauds his leadership on this serious effort to drive down costs, improve the quality of care and putting patients first,” said CMS Administrator Seema Verma. “The Trump Administration is ushering in a new era of state flexibility and local leadership, and we welcome state-level innovations, such as the All-Payer Model.

Evaluations of the All-Payer Model found that the state quickly reduced Medicare spending and drove noticeable improvements in hospital care outcomes.

The model achieved every cost efficiency and population health target within the first three years.

CMS and the state designed the model to limit all-payer hospital revenue growth by 3.58 percent each year, reduce Medicare spending by $330 million over five years, reduce hospital-acquired condition (HAC) rates by 30 percent, and reduce all-cause readmission rates to at or below the national average

The state’s Health Services Cost Review Commission found that model produced $200 million more in savings than originally anticipated.  Hospital revenue growth only increased by 1.53 percent and the state experienced a $414 million reduction in total Medicare costs.

The model generated a 44 percent reduction in hospital-acquired conditions as well, exceeding the 30 percent target.

The only shortfall was around readmission rates. However, the model did reduce the difference between state and national readmission rates by 79 percent, indicating significant progress towards the goal.

CMS and other states are also experimenting with all-payer models to create similar advancements in cost reductions and patient outcomes.

The Vermont All-Payer ACO Model launched at the start of 2017 and aims to increase the number and scope of accountable care organization (ACO) partnerships between payers and providers.

By 2022, Vermont hopes to bring 70 percent of its residents under an ACO, limit per capita expenditure growth for payers to 3.5 percent, and limit Medicare per capita growth to at least 0.1 to 0.2 percentage points below the national average. The state will implement incentive payments related to care delivery outcomes and population health to support the initiative.

The Pennsylvania Rural Care Model also launched in 2017 and will use a global budget to help rural providers invest in preventive care services and tailor healthcare services to community needs.

Early financial goals of the Rural Care Model include a 3.38 percent limit on annual hospital spending growth per patient. The model will measure performance based on reductions in deaths related to substance abuse, decreases in rural healthcare disparities, and increases in primary care access.

Healthcare leaders in Maryland fully back the all-payer model and are eager to see how it can drive future Medicare savings and generate improved patient outcomes for state residents.

Maryland Department of Health Secretary Robert Neall thanked state and federal officials for assisting in the model’s implementation and helping create positive outcomes.

“The Maryland Model is designed to transform hospitals’ care models to a value-based system by investing in coordinated, quality care for patients across all health care settings, improving health outcomes, and constraining the growth of health care costs in Maryland,” Neall said.