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Putting a human face on Maryland’s unique all-payer system Date: 12/02/14

By Sarah Gantz

Maryland is the only state with an “all-payer” hospital system – a system in which every health plan and every payer pay about the same rate to a given hospital for a given procedure or treatment. That includes Medicare, under a waiver from the federal government.  A commission sets the costs and there’s a lot less cost-shifting in the system if everyone is playing by the same rules.

I have been fascinated with Maryland’s Medicare waiver for a little more than two and a half years. That’s when the Baltimore Business Journal hired me to write about health care and I first learned about the policy that is the lifeblood of Maryland’s $15 billion hospital industry.

The Medicare waiver is vitally important in Maryland, yet most people write it off as a wonky hospital rule that doesn’t affect them. With help from the AHCJ Reporting Fellowship on Health Care Performance, I set out to explain why this policy is worth taking the time to understand, regardless of whether you’re a CEO, a business owner or just someone who will eventually have to go to the hospital.  

The task was daunting, at first, because the policy is complex.

Here’s the big picture: Maryland has a deal with the federal government that exempts hospitals from standard Medicare rules. Instead, a state agency sets hospital rates and everyone – private insurers, uninsured patients who pay out of pocket and Medicare – all pay roughly the same price. Elsewhere, hospitals typically negotiate individually with insurers; privately insured and especially uninsured patients are often charged more to compensate for low Medicare payments. That doesn’t happen in Maryland, so patients see much less variation in prices from one hospital to the next. And hospitals in poor neighborhoods don’t go out of business just because they serve a disproportionate number of Medicare and Medicaid patients. Some argue that price stability at hospitals helps keep in check private insurers’ annual premium increases.

But costs remained high. In January, the state modified its waiver, using new power the federal Medicare agency has under the Affordable Care Act.  In an effort to shift away from fee-for-service to a pay-for-performance model, Maryland now controls hospitals’ entire in-state revenue. Budget caps limit how much revenue each hospital can bring in from Maryland residents; they must find a way to treat patients without going over budget. Hospitals are on the hook to lower readmissions, hospital infections and unnecessary visits, ideally by playing a bigger role in keeping people well enough to not need the hospital, at least not as soon or as often.

After following Maryland’s health care system for years, I had so many (too many!) story ideas. But they all seemed too in-the-weeds for my readers at the Baltimore Business Journal – most of whom are not deeply interested in wonky health policies.   

I realized that to convey the big meaning of Maryland’s hospital payment system, I needed to drill down to small, specific examples of how it affects people.

I peeled away at the issue, first asking hospital executives why their patients are most commonly readmitted and what ideas they have for reducing readmissions. (This goal isn’t unique to Maryland; readmission reduction is part of the ACA nationwide but has a prominent role under the Maryland waiver.) One of the first stories in my project focused on a Baltimore hospital’s effort to curb emergency department visits by stationing case managers in the emergency room to intercept “frequent fliers.”

Next, I talked to community health leaders who had ideas about the socioeconomic factors behind patients’ chronic health problems and knew of people struggling with those issues.

Finally, I found the people. It was these people who made my stories interesting and approachable.

Our readers got to know a family struggling to pay the mortgage and put food on the table because of their twin daughters’ crippling hospital bills from asthma attacks. Baltimore has among the highest asthma rates in the country and asthma complications are a major reason for local emergency department admissions. My story showed why hospitals looking to reduce ED traffic might want to focus on asthma and questioned whether the problem is too big to tackle with constrained hospital budgets.

They met Mark Schumann, who was able to get his diabetes under control and improve his mental health after getting off Baltimore’s streets. Homelessness nonprofits are hopeful that hospitals will see the benefit of investing in housing, to keep homeless patients from constantly turning to the hospital for help managing chronic health problems like diabetes. I explained why, even though hospitals have new reason to address social causes of disease, they won’t invest heavily in housing anytime soon.

The final story in my project took me to Follansbee, W.V., a small town an hour west of Pittsburgh. Lorraine Milantoni, a 49-year-old lifelong Follansbee resident, is battling breast cancer for the second time. Her doctor at Allegheny General Hospital in Pittsburgh was able to talk her into an aggressive chemotherapy regimen by consulting with Johns Hopkins Hospital specialists. Milantoni’s experience helped me illustrate a new growth strategy for Hopkins — partnerships with out-of-state health systems.

In between these personal stories, our readers learned why Maryland’s Medicare waiver matters.

Sarah Gantz is a health care reporter for the Baltimore Business Journal and a 2014 AHCJ Reporting Fellow on Health Care Performance. Her work focuses on the business of health care and health reform.