The Maryland global budget payment program, launched in 2014 is a Center for Medicare and Medicaid Services and Maryland all payer model in which aggregate insurers pay hospitals a fixed annual amount for inpatient and outpatient services. The premise is simple – to provide fixed predictable revenues allowing hospitals to focus on value rather than volume and rewarding these institutions for investing in population health management.

This issue was discussed on April 5, 2016 on The Business of Health Care broadcast on channel SIRIUSXM 111. The broadcast featured a panel of three experts including two Wharton MBA graduates from the health care program who were intimately involved in the implementation of the global budget payment program: Michael Robbins, WG’79 who leads the Maryland Hospital Association’s (MHA) financial and regulatory advocacy efforts for Maryland’s hospitals with the Health Services Cost Review Commission; Robb Cohen, WG’92, CEO of Advanced Health Collaborative, a network of independent hospitals and health systems in Maryland, including seven health systems with 10 hospitals; and Karoline Mortensen, PhD, Associate Professor of Health Sector Management and Policy in the School of Business Administration at the University of Miami.

So is the program working early on? The consensus was that yes, it is moving in the right direction regarding access to care, quality, and lowering costs.  Some of the more interesting or novel aspects of this system are that payers and providers are sharing information in a way that allows more efficient and lower cost care to take place. A very simple example was provided: a patient who had asthma was repeatedly seen in the emergency department of a hospital participating in the program. The hospital realized that the patient needed a dehumidifier in their home. The hospital purchased it for the patient because it saved their system money – the patient’s repeated trips to the hospital would be reduced. In the prior system, the volume of visits would have generated money for the hospital. However, now that the hospital is on the hook for the cost of care (they receive a set amount for the patients they care for in the region), it was advantageous for them to purchase the dehumidifier.

Other examples where the Maryland system is ahead of the rest of the country is in re-admissions for hospital-related causes. There are over 50 conditions in which the provider/hospital is now responsible, versus approximately 20 for Medicare. Additionally, the Maryland system is ahead of the curve in the way that it cares for uninsured patients. The cost for uninsured patients is included in overall rates to hospitals, so every hospital in Maryland now cares for these types of patients. In the United States in general, these types of patients end up in county or city-owned hospitals.

One of the main goals in an all payer system (via rate setting) is for hospitals to compete on measures such as quality, service, and patient experience rather than pricing. The key drivers for success in this model include: population-based and patient-centered care management, provider alignment (physician, hospital, long-term care, skilled nursing facility, home care), data and infrastructure, payer-provider collaboration, a trusted and long-term per capita payment system that accurately addresses market share, avoidable volume, and quality. All of these are aimed at producing efficiencies which in turn can reduce costs. An update on this will be aired later in the year on Wharton’s Business Radio SiriusXM.