The Centers for Medicare & Medicaid Services (CMS) and the state of Maryland are partnering to modernize Maryland’s unique all-payer rate-setting system for hospital services that will improve patients' health and reduce costs. This initiative will update Maryland’s 36-year-old Medicare waiver to allow the state to adopt new policies that reduce per capita hospital expenditures and improve health outcomes as encouraged by the Affordable Care Act.
Maryland operates the nation’s only all-payer hospital rate regulation system. This system is made possible, in part, by a 36-year-old Medicare waiver (codified in Section 1814(b) of the Social Security Act) that exempts Maryland from the Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) and allows Maryland to set rates for these services. Under the waiver, all third parties pay the same rate. The State of Maryland and CMS expect that the All-Payer Model will be successful in improving the quality of care and reducing program expenditures for Maryland residents, including Medicare, Medicaid, and CHIP beneficiaries. Moreover, the Maryland system may serve as a model for other states interested in developing all-payer payment systems.
Maryland’s all-payer rate setting system for hospital services presents an opportunity for Maryland and CMS to test whether an all-payer system for hospital payment that is accountable for the total hospital cost of care on a per capita basis is an effective model for advancing better care, better health and reduced costs. Under the new model, Maryland hospitals will commit to achieving significant quality improvements, including reductions in Maryland hospitals’ 30-day hospital readmissions rate and hospital acquired conditions rate. Maryland will limit all-payer per capita hospital growth, including inpatient and outpatient care, to 3.58 percent. Maryland will also limit annual Medicare per capita hospital cost growth to a rate lower than the national annual per capita growth rate per year for 2015-2018. Moreover, the Maryland system may serve as a model for other states interested in developing all-payer payment systems. Under this model, Medicare is estimated to save at least $330 million over the next five years. This opportunity is available through the authority of the Innovation Center, which was created by the Affordable Care Act to test to payment and service delivery models.
Under the terms of the Maryland All-Payer Model:
- Maryland will agree to permanently shift away from its current statutory waiver, which is based on Medicare payment per inpatient admission, in exchange for the new Innovation Center model based on Medicare per capita total hospital cost growth.
- This model will require Maryland to generate $330 million in Medicare savings over a five year performance period, measured by comparing Maryland’s Medicare per capita total hospital cost growth to the national Medicare per capita total hospital cost growth.
- This model will require Maryland to limit its annual all-payer per capita total hospital cost growth to 3.58%, the 10-year compound annual growth rate in per capita gross state product.
- Maryland will shift virtually all of its hospital revenue over the five year performance period into global payment models.
- Maryland will achieve a number of quality targets designed to promote better care, better health and lower costs. Under the model, the quality of care for Maryland residents, including Medicare, Medicaid, and CHIP beneficiaries will improve as measured by hospital quality and population health measures.
- Readmissions: Maryland will commit to reducing its aggregate Medicare 30-day unadjusted all-cause, all-site hospital readmission rate in Maryland to the national Medicare 30-day unadjusted all-cause, all-site readmissions rate over five years.
- Hospital Acquired Conditions: Maryland currently operates a program that measures 3M’s 65 Potentially Preventable Conditions. Under this model, Maryland will achieve an annual aggregate reduction of 6.89% in the 65 PPCs over five years for a cumulative reduction of 30%.
- Population Health: Maryland will submit an annual report demonstrating its performance along various population health measures.
- If Maryland fails during the five-year performance period of the model, Maryland hospitals will transition over two years to the national Medicare payment systems.
- Before the start of the fourth year of the model, Maryland will develop a proposal for a new model based on a Medicare total per capita cost of care test to begin no later than after the end of the five year performance period.