Study Suggests Maryland’s Plan to Cut Health Costs Does Not Reduce Hospital Stays

Maryland’s unique plan to cap hospital expenditures has saved hundreds of millions of dollars since its enactment in 2010, but a new study published Monday in the journal Health Affairs raises questions about whether the state’s all-payer global budget is encouraging the reduction of expensive hospital stays in the state, one aim of the program.

Under the plan, hospitals receive a fixed budget each year to incentivize them to spend less because they get to keep the difference in funds as long as they improve care and reduce hospital stays.

The program was first enacted in eight rural hospitals in 2010, followed by statewide expansion in 2014.

While hospital admissions have gone down since the program took effect, Eric Roberts, the lead researcher on the study, said it doesn’t appear that the program is leading to a decline in unnecessary visits, which was one of the goals of Maryland health officials and the Centers for Medicare and Medicaid Services when the “all-payer” program was created.

“There’s no evidence that the program is itself kind of causing a departure from trends that we would have expected without this model coming into existence,” said Roberts, an assistant professor in the Department of Health Policy and Management at the University of Pittsburgh, in a Friday phone interview.

Roberts does not contest that the program has led to large Medicare savings in the state, but he said his study’s analysis underscores the need for policymakers to consider more changes to all-payer proposals.  

Researchers compared hospital enrollment and claims data of Medicare beneficiaries in Maryland between 2007 and 2009, before the program was enacted, and after its implementation from 2011 to 2013.

The patients were divided into two groups, one consisting of people who live close to one of the rural hospitals that participated in the program, and a control group of beneficiaries who resided at least 15 miles farther from the participating hospitals than from any other hospital.

Researchers compared admissions, observation stays and emergency department visits of both populations before and after the program was enacted. They found that any changes in hospital stays could not be attributed to the program.

Roberts said there are several possible reasons that Maryland’s global budget is not reducing hospital use. One explanation is that the program excludes physicians, who play a critical role in coordinating patient care.

“I think it’s a stretch to argue that by just putting a hospital on a budget, you’re going to somehow change the behavior of physicians,” Roberts said. “It could be that the behavior change just takes longer to be realized, but we think it’s potentially a limitation of the model that the focus really is only on hospitals.”

The program’s advocates said the study is too limited in scope and does not take into account parts of the system that took effect more recently.

The Maryland Hospital Association said in a statement emailed Monday to Morning Consult that the study only analyzed data from the first three years of the program -- before most hospitals joined the system and policies aimed at reducing hospital stays took effect.

Joseph Antos, an economist at the American Enterprise Institute and a member of Maryland's Health Services Cost Review Commission, said in a Monday phone interview that he was not surprised that the study didn’t see “gigantic decreases” in utilization in three years. “But it also doesn’t tell you, me or anybody else anything about what we’re doing now or what we intend to do,” he said.

Maryland is seeking approval from the CMS to increase the involvement of physicians and other providers. The Trump administration has not yet made a decision on the proposal, which was filed on Dec. 16, 2016, but Antos said he expects it to be approved before next year.

“We’re going to be upping the ante next year because we are going to be involving doctors in the community and services provided in the community outside the business control of the hospitals,” he said.

Maryland’s payment structure for hospitals could also have lowered hospitals’ incentives to reduce unnecessary hospitalizations, the study said, because “hospitals continued to bill payers per visit and were expected to adjust their prices” to meet their annual budgets.

It could also simply take longer for the program to lead to changes in hospital use, Roberts said.  

“Hospitals are sort of like ocean liners,” Roberts said. “It takes a while to sort of steer to a new care paradigm.”

The CMS did not respond to a request for comment.