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Since the 1970s, Maryland has set prices charged by hospitals within its borders. In other states, hospital prices are determined via direct negotiations between a hospital and every health insurer--and thus the price for a given service will vary depending on who the patient's insurer happens to be. Maryland's hospitals, on the other hand, have "all-payer" prices, meaning everybody pays the same price for the same service at the same facility. The same way that the price of a gallon of milk doesn't change depending on which customer is pulling it off the shelf.
A few years back, using options created by the Affordable Care Act to test ways to control health care costs, Medicare went a step further. It started setting total budgets for hospitals in the state, budgets achieved via tinkering with their existing price-setting system. (See older threads for more detail: Maryland hospitals targeting HEALTH or Maryland hospital experiment saves Medicare $100 million). That approach has some important implications for hospital financial incentives, moving beyond the traditional sick-bed-filling imperative and rewarding hospitals for finding ways to invest in healthier communities writ large.
But the interesting observation today is how that system helped them deal with the pandemic. Hospitals around the country hemorrhaged money, particularly in the first two quarters of 2020, through some combination of states halting elective procedures and patients putting off care as they became less willing to physically visit medical settings. But Maryland's ability to twist its price-setting dials to ramp up funds available to hospitals helped them to bounce back rather quickly.
Today the conservative American Enterprise Institute shares the takeaways from a JAMA paper ("Hospital Revenue Under Maryland’s Total Cost of Care Model During the COVID-19 Pandemic, March-July 2020") published this week that one of its scholars had a hand in:
All-payer rate regulation during the COVID-19 pandemic: What can we learn?
Interesting, though not particularly shocking!
Worth noting as an aside that the Trump administration estimated ("CMS Innovation Center at 10 Years — Progress and Lessons Learned") that of all the prominent cost containment experiments tried so far under the ACA option that Maryland used, Maryland's hospital budget experiment was the most effective at generating health care savings.
A few years back, using options created by the Affordable Care Act to test ways to control health care costs, Medicare went a step further. It started setting total budgets for hospitals in the state, budgets achieved via tinkering with their existing price-setting system. (See older threads for more detail: Maryland hospitals targeting HEALTH or Maryland hospital experiment saves Medicare $100 million). That approach has some important implications for hospital financial incentives, moving beyond the traditional sick-bed-filling imperative and rewarding hospitals for finding ways to invest in healthier communities writ large.
But the interesting observation today is how that system helped them deal with the pandemic. Hospitals around the country hemorrhaged money, particularly in the first two quarters of 2020, through some combination of states halting elective procedures and patients putting off care as they became less willing to physically visit medical settings. But Maryland's ability to twist its price-setting dials to ramp up funds available to hospitals helped them to bounce back rather quickly.
Today the conservative American Enterprise Institute shares the takeaways from a JAMA paper ("Hospital Revenue Under Maryland’s Total Cost of Care Model During the COVID-19 Pandemic, March-July 2020") published this week that one of its scholars had a hand in:
All-payer rate regulation during the COVID-19 pandemic: What can we learn?
Interesting, though not particularly shocking!
Worth noting as an aside that the Trump administration estimated ("CMS Innovation Center at 10 Years — Progress and Lessons Learned") that of all the prominent cost containment experiments tried so far under the ACA option that Maryland used, Maryland's hospital budget experiment was the most effective at generating health care savings.