Maryland’s All-Payer Model Saves Medicare Nearly $1 Billion

Dec. 1, 2019
State’s new Total Cost of Care Model addresses limitations in All-Payer Model by continuing efforts to engage nonhospital providers

The final report is in on the first five years of Maryland’s All-Payer Model for hospitals, and the results are impressive. Medicare beneficiaries had 2.8 percent slower growth in total expenditures ($975 million in savings) during the Maryland All-Payer Model relative to a comparison group, largely driven by 4.1 percent slower growth in total hospital expenditures, according to the report from RTI International. Slower growth in emergency department expenditures (30.6 percent) and other hospital expenditures (17.2 percent) drove total Medicare hospital savings in Maryland.

In 2014, the state implemented a model that shifted the state’s hospital payment structure to an all-payer, annual, global hospital budget that encompassed inpatient and outpatient hospital services.

 Maryland’s All-Payer Model was built on the state’s all-payer hospital rate-setting system, which had operated since the 1970s. The All-Payer Model operated under an agreement with the Centers for Medicare & Medicaid Services (CMS) that exempted Maryland hospitals from Medicare’s Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS). Under the agreement with CMS, Maryland was expected to limit per-capita total hospital cost growth for all payers, including Medicare, and generate $330 million in Medicare savings over 5 years. The All-Payer Model ended in December 2018 and was succeeded in January 2019 by the Total Cost of Care (TCOC) Model, which operates under a new agreement with CMS.

 RTI’s report described some of the ways hospitals changed their investment strategies under the model, including investing in care coordination, discharge planning, social work staffing, patient care transition programs, and systematic use of patient care plans. Hospital leadership also considered health data and analytics core strategies and took advantage of  Maryland’s health information exchange, CRISP.

 The report noted that the model reduced both total expenditures and total hospital expenditures for Medicare beneficiaries without shifting costs to other parts of the healthcare system outside of the global budgets. The reductions in hospital expenditures were driven by reduced expenditures for outpatient hospital services. The emergency department (ED) visit rate declined 2.6 percent more among commercial plan members in Maryland than in the comparison group in the first four years of the All-Payer Model. The ED visit rate also declined among Medicaid beneficiaries in Maryland.

 The report noted several areas that still need improvement. For instance, although hospitals increasingly acknowledged the importance of developing partnerships with community providers, coordination of care with community providers, as measured by follow-up visits after hospital discharge, did not improve. RTI found that hospital leaders increasingly focused on developing partnerships with community providers, but lack of provider engagement and provider shortages posed barriers to improving care coordination. Hospital leaders also expressed concern about patient compliance and responsibility, which can affect post-discharge follow-up.

 Hospital leaders expressed other concerns: the complexity and limited transparency of the payment methodologies; dissatisfaction with the market shift adjustment and the inability to retain their full global budgets; the perceived inadequacy of rate update factors; and frustration with the large relative impact of patient satisfaction ratings on hospital budget updates.

 Outcomes improved for beneficiaries with multiple chronic conditions and beneficiaries dually eligible for Medicare and Medicaid relative to other Medicare beneficiaries during the All-Payer Model period. These outcomes suggest that hospitals may have prioritized high-cost, high-need patients as they changed their care delivery practices.

 Yet contrary to expectations, hospitals aligned with an accountable care organization performed more poorly on patient follow-up visits than non-aligned hospitals under the All-Payer Model. Given an ACO’s contractual arrangements with both inpatient and outpatient providers, the ACO-participating hospitals should have better alignment with community physicians to improve the follow-up visit rate, as well as greater incentives to improve follow-up care to achieve shared savings, the report says.

 Total Cost of Care Model

 Jack Meyer, Ph.D., prepared a white paper for the Roundtable on Maryland Health Reforms at the School of Public Policy at the University of Maryland held in October 2019. He noted that the All-Payer Model was envisioned as a stepping-stone to a population-based payment model that would hold hospitals responsible for use of all healthcare services by the populations they serve. “The Total Cost of Care (TCOC) Model, launched in January 2019, addresses limitations in the All-Payer Model by continuing efforts to engage non-hospital providers through the Care Redesign Program, recognizing the role of community-based primary care providers, and putting hospitals partially at risk for total patient care costs,” he wrote. “The All-Payer Model demonstrated the feasibility of holding hospitals accountable for a population’s use of hospital services. The next phase of Maryland’s experiment will provide an opportunity to test whether these achievements can be sustained and expanded.”

Supporting Primary Care Practices

Meyer’s report notes that an important feature of the TCOC Model is primary care practice transformation. The new Maryland Primary Care Program began in January 2019 and is designed to enable Maryland to transition away from encouraging more services and higher costs to rewarding efficiency, value, and better health outcomes. “Practices in the program are expanding their capabilities to offer comprehensive health care including expanded access to care, robust care management services, coordinated services with other health care entities, improved beneficiary supports and care planning, and a data-focused approach to managing the health of the practices’ patient population,” Meyer wrote. “With enhanced payments to allow for hiring a broader set of care team members and visual data analytics in an integrated view on the Chesapeake Regional Information System for our Patients (CRISP), practices are spending more time with patients who need extra support while providing non-traditional services to the broader patient panel.”

 As of September 2019, the Maryland Department of Health had recruited 380 primary care practices into the new program. These practices include a total of nearly 1,600 primary care physicians. Regional entities called Care Transformation Organizations (CTOs) are providing support via care management personnel, infrastructure, and technical assistance. CTOs will help primary care practices work with CRISP to offer practices on-site assistance in how to provide, receive and use data from CRISP, Maryland’s Health Information Exchange. This could include real-time alerts to primary care doctors when a patient in the practice is in the ER or is admitted to a hospital.

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