Value-Based Care News

MD All-Payer Alternative Payment Model Met Medicare Spending Goal

The Maryland all-payer alternative payment model reduced Medicare spending on hospitals by $586 million, exceeding the five-year goal of $330 million.

Maryland all-payer alternative payment model and Medicare spending

Source: Thinkstock

By Jacqueline LaPointe

- The Maryland All-Payer alternative payment model has already met and exceeded its five-year goal of reducing Medicare spending on hospitals by $330 million and the state is on its way to achieving care quality improvement goals, the state’s Health Services Cost Review Commission recently reported.

CMS partnered with Maryland in 2014 to implement the first all-payer alternative payment model that uses a global budget payment structure tied to patient populations. Under the model, Medicaid, Medicare, private payers, and self-pay payers reimburse hospitals the same amount for the same services.

The federal agency outlined several goals for the Maryland All-Payer alternative payment model to ensure the payment structure improved care quality while reducing Medicare spending and overall costs. The goals included:

• Limiting all-payer per capita total hospital revenue growth to 3.58 percent per year

• Reducing Medicare spending on hospitals by at least $330 million over five years

• Decreasing Medicare spending per beneficiary growth below national growth rates

• Dropping the aggregate Medicare 30-day all-cause readmission rate to or below the national average

• Reducing the hospital-acquired condition rates by 30 percent

• Shifting hospital reimbursement away from volume-based payments

By the third year of the alternative payment model, the Maryland Health Services Cost Review Commission found that the state has met or is on track to meet all of the goals set by CMS.

The data showed a 1.53 percent average growth per capita for all-payer hospital revenue, $586 million drop in Medicare spending on hospitals, and $416 million decline in Medicare spending on total cost of care.

All hospitals in the state also earned reimbursement under the global budget system by 2016.

Additionally, the commission reported a 44 percent reduction in potentially preventable conditions under the Maryland All-Payer hospital-acquired conditions program. CMS required the alternative payment model to reduce hospital-acquired condition rates by just 30 percent over five years.

The only goal that the alternative payment model has yet to achieve is decreasing the hospital readmissions rate for Medicare beneficiaries below the national average after five years of model implementation.

However, the state reported that the model is on track to reach this goal. Between 2014 and 2016, the state saw a 79 percent reduction in the gap between its statewide readmission rate and the national rate since 2013.

Hospitals have reduced the Medicare readmissions rate more quickly than the nation, the report added. As a result, Maryland should meet the performance goal of having a Medicare readmission rate at or below the national average by the alternative payment model’s fifth performance year.

The report also showed that Maryland met CMS expectations regarding a plan to reduce healthcare costs beyond the hospital system. The federal agency required the state to file a plan with the federal government by December 2016 detailing its strategy for limiting the growth in costs in other care settings for Medicare beneficiaries.

The state submitted a proposal that expands on the all-payer model for hospitals. The plan would align hospitals, physicians, and other providers under similar delivery system reforms focused on improving outcomes, engaging patients, and reducing costs.

Maryland’s governor submitted the plan December 16, 2016, and the model is currently under federal review.

CMS also recently granted a one-year extension of the Maryland All-Payer alternative payment model.

“Provider-led delivery system transformation has continued to accelerate over time,” the report concluded. “The State aims to improve beyond these results and continue to reduce costs while improving quality of care in Maryland through the completion of the current model term, and continue under a new Total Cost of Care Model.”

The results show promise for all-payer alternative payment models. While all-payer models are not common alternative payment models, Vermont plans to build on Maryland’s success by implementing an all-payer model centered around accountable care organizations (ACOs) in the state.

The Vermont All-Payer ACO model will align quality measures, financial risk structures, payment mechanisms, and other ACO structures across Medicare, Medicaid, and commercial organizations.

Like the Maryland All-Payer alternative payment model, Vermont’s model will also have cost and quality improvement goals. The state aims to limit annual per capita healthcare spending growth by 3.5 percent for all major payers and cap Medicare spending growth at 0.1 to 0.2 percentage points below the estimated national Medicare spending growth rate.

Vermont ACOs will also be held accountable for population-level health outcomes, healthcare delivery system performance goals, and process milestones that show population-level and care delivery system improvements.

All-payer alternative payment models may become more popular as promising results from Maryland’s and Vermont’s experiments emerge.