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Maryland Plans to Reform Health Care Spending in Hospitals

Plan marks first step in state’s plan to move away from fee-for-service financing.

Maryland Gov. Martin O'Malley announces approval of Medicare waiver and a plan for healthcare and wellness reform at a press conference at the Mercy Medical Center. Photo: Amanda Salvucci | Capital News Service
Maryland Gov. Martin O'Malley announces approval of Medicare waiver and a plan for healthcare and wellness reform at a press conference at the Mercy Medical Center. Photo: Amanda Salvucci | Capital News Service

By PATRICK FARRELL | Capital News Service

State and federal officials announced Friday the approval of a Medicare waiver in Maryland that could put the state at the forefront of progressive health care.  

The plan marks the first step in the state’s plan to move away from fee-for-service financing in hospitals in an attempt to establish a system of preventative, better quality care.

“The new waiver will allow us to improve the wellbeing of whole populations that are served by hospitals, while at the same time giving our hospitals the [financial] predictions they need over time to be able to be sustainable - to keep their doors open,” Gov. Martin O’Malley said at a press conference at Mercy Medical Center in Baltimore.  

In the past, a link between reimbursement and admissions led hospitals to admit as many patients, for as much treatment as possible, in order to receive the most financial support - a system O’Malley called “treating hospitals like hotels.”

Under the new system, hospitals will be allotted a set number of funds to utilize in a global budget - which will be limited to a 3.58 percent increase during each of the first five years.  It is designed to encourage systems of preventative care that will reduce the burden placed on emergency rooms and hospital readmissions.  

Speaking on the rollout of these preventative care measures, Vincent DeMarco, president of the Maryland Health Care for All Coalition, said, “the methods have been there, but no one had any incentive for using them.”

U.S.  Sen. Barbara Mikulski, D-Md., Sen. Ben Cardin, D-Md., and Lt. Gov. Anthony Brown, indicated Friday they believe the waiver approval will be a key component in the effort to provide those incentives.

Joshua Sharfstein, secretary of the Maryland Department of Health and Mental Hygiene, noted that there are 10 rural hospitals - including Western Maryland Medical Center - that are currently paid on a global budget instead of fee-for-service.

Sharfstein noted that when he has visited these hospitals, they have a “different feel” that highlights the new plan’s effort to reinforce quality over quantity.

“The hospitals are quieter … and emergency departments have a special team that meets with each patient,” Sharfstein said.

Maryland will remain the only state with a waiver from the federal Medicare rates. Under the waiver, rates for medical services are set by the state Health Services Cost Review Commission. Advocates believe this will allow Maryland to show lower Medicare costs, compared to the rest of the nation, and could become a model for other states to follow.

Additionally, Maryland is currently the only state to utilize an all-payer system of health care, under which hospital payments are identical for all payers.

The success of the waiver and preventative-care reform will play a key part in health care reform on a national scale, as other states look to the successes and difficulties of the program’s rollout as a benchmark for progressive health care strategies.

“We in Maryland will set the example for what other states can do, and we’ll do it by modernizing,” Brown said.

 

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