Can hospital costs be constrained? Maryland’s unique test says ‘yes,’ for now

maryland-flag-300x200Yes, Virginia (and Washington, D.C., and the rest of the U.S.): Ever-rising hospital costs can be constrained without the world coming to an end. Maryland’s four-year-old experiment — converting hospitals from a fee-for-service model to a global payment system with total revenues set at the outset of each year — is saving millions of dollars annually for patients, taxpayers, employers, and others who pay for medical services in the state.

The Baltimore Sun reported that Maryland’s Health Services Cost Review Commission and the Maryland Department of Health, found that the state’s unique test, already produced $586 million in hospital-related savings for Medicare in its first three years.

As the Sun said:

Maryland essentially pays hospitals to keep people out of the hospital. Analysts often describe the change as the most far-reaching attempt in the nation to control the medical costs driving up insurance premiums and government spending. Like a giant health maintenance organization, the state caps hospitals’ revenue each year, letting them keep the difference if they reduce inpatient and outpatient treatment while maintaining care quality. Such ‘global budgets,’ which have attracted rare, bipartisan support during a time of rancor over health care, are supposed to make hospitals work harder to keep patients healthy outside their walls. Maryland’s system, which evolved from a decades-old effort to oversee hospitals as if they were public utilities, regulates all hospital payments by every private and government insurer. That makes it radically different from piecemeal attempts to lasso health spending, such as creating accountable care organizations, which seek savings among smaller groups of patients.

The state’s experiment in medical economics, struck as a deal with the federal Centers for Medicare and Medicaid Services (CMS), has been closely watched by national experts in the field — even though distinctive circumstances in the state make it an unlikely model to be followed elsewhere. Not all observers have been as upbeat about the cost-controlling program.

But Maryland’s system has hit a rare mark: It kept per capita spending by insurers in the state from growing above 2 percent a year — far below the target of 3.58 percent, based on the economic growth in the state.

Those results offer careful cause for optimism, though more time and data will be needed for proponents to declare the effort a success.

Further, hospitals in the state — while asserting the quality of their care didn’t slip under cost controls — still are under fire for their shortfalls in delivering primary care to the poor and Marylanders with chronic conditions like diabetes and asthma.

Johns Hopkins, a renowned medical services provider in Maryland, also has raised some eyebrows because it has reaped profits by admitting and treating lots of patients, especially in lucrative oncology and surgical practices, at its 288-bed Sibley Memorial Hospital. Because Sibley’s in the District of Columbia, it is not bound by Maryland’s cost controls, and it became one of the most profitable hospitals in the Johns Hopkins hospital system.

In my practice, I see not only the significant harms that patients suffer while seeking medical services but also their huge struggles to access and afford safe, quality medical care. Medical debt is a major contributor still to personal bankruptcy, and even among patients with health insurance, 20 percent of respondents in a national poll said they experience major woes in paying their doctor, hospital, and other medical bills.

The rising cost of medical care, it turns out, isn’t just an American bane. It’s global, too. But a large new study, published in the Journal of the American Medical Association, found key differences between America and 10 of the highest-income countries examined, including the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland, and Denmark.

Contrary to what some advocates may have argued, Americans’ medical costs aren’t higher just because they go to hospitals or doctors more than others do. As Margot Sanger-Katz explained in the New York Times’ evidence-based “Upshot” column:

There were two areas where the United States really was quite different: We pay substantially higher prices for medical services, including hospitalization, doctors’ visits and prescription drugs. And our complex payment system causes us to spend far more on administrative costs. The United States also has a higher rate of poverty and more obesity than any of the other countries, possible contributors to lower life expectancy that may not be explained by differences in health care delivery systems.

Clearly, we need to find ways to eliminate unnecessary and costly tests and procedures. We need to look at social determinants of health, and figure how to get ourselves less fat, fitter, and living in healthier environs.

But Maryland also shows that the federal government, the CMS notably, can work with states to see their individual circumstance and to work with them on innovative medical services there — not just to engage in extreme partisan assaults on the poor, old, and sick, with Draconian work rules or harsh requirements aimed at booting those most in need from Medicaid and the public safety net.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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