Becker's Hospital Review

74 Financial Management Although it's still not a perfect system, "in terms of being a fundamental turn- ing upside down of the payment incentives…it's a very positive thing," says John Deane, president of Advisory Board Consulting at The Advisory Board Company. "We're noticing institutions in Maryland are having an awakening of having the imperatives to deliver value both in terms of cost and quality. They're excited that the new payment methodology will reward that." Karoline Mortensen, PhD, an assistant professor in the University of Mary- land's Department of Health Services Administration in College Park, echoes the impression that people across the state are enthused by the updated all- payer project. "We like this idea that we are finally the state focusing on popu- lation health," she says. The new model and the switch to global hospital budgets makes sense in promoting population health efforts, according to Mr. Mullen. "We're all working on ways to take out unnecessary volume in the system, because that volume drives costs, and, on a global budget, if we save that cost we keep it," he says. "It's actually worth the investment to provide care coordinators and connect with these patients to make sure these patients are stable and don't need to use our resources. That's actually the right way to do healthcare." For instance, Mercy Medical Center has identified opportunities to improve care for and decrease spending on diabetic patients, particularly those on re- nal dialysis. If these patients miss their dialysis visit for a day or two, they can go into a toxic state and require admission to the hospital. Mr. Mullen says the hospital has worked with dialysis providers to create space in off-hours, so they can, for instance, administer treatment at 10 p.m. Under the global budget, that frees up dollars that would have been spent on preventable hos- pital admissions to go toward more population health management efforts. "A hospital admission for a renal patient can be $25,000 to $30,000," Mr. Mullen says. "There might be, at our hospital, three of those a week. Three times $25,000…$75,000 dollars a week we could save." Still, he anticipates succeeding under the new reimbursement model won't necessarily be easy. Physicians aren't included in the all-payer system, and Mercy Medical Center is looking at how to effectively coordinate with them through gainsharing. "Primary care doctors are aligned with this type of sys- tem because of patient-centered medical home initiatives, but the specialists aren't," he says. "Specialists are still paid on a per-procedure basis." Dr. Mortensen confirms that physicians "feel sort of left out," since gainshar- ing hasn't been established for them at a lot of hospitals: "Physicians don't really feel that they have all the support that's necessary. The state's going to have to keep in very close contact with physicians and pay attention to their concerns." Could Maryland's method work elsewhere? If the revamped all-payer model fails to meet its goals after five years, Mary- land's hospitals will spend two years transitioning back to national Medicare payment systems. If it succeeds, it could potentially inspire similar payment innovation plans throughout the U.S. However, industry experts say what works in Maryland won't necessarily prove effective in other states. Although it's the only one with an all-payer system right now, other states have implemented and failed to sustain similar models. For instance, New Jersey created an all-payer system in the '80s, according to a 1993 Health Af- fairs article. But various stumbling blocks — including Medicare's withdraw- al from the system in 1988 and a 1992 court decision finding the all-payer model was largely pre-empted by the Employee Retirement Income Security Act — led to the system's collapse in the early '90s. As for why the all-payer system in Maryland hasn't met with a similar fate, Dr. Sharfstein offers a couple of reasons: "There has been a degree of collabora- tion between the hospitals and the state and the payers that has really been re- markable over the last several decades. There's a real feeling that everybody's in this together. And then I think the other major factor is there's a provision in the Social Security Act that assures Medicare participation under certain conditions. It's a combination of some provisions in law that are really help- ful and the spirit in the state." Maryland's Democratic-leaning political atmosphere and small size — with only a couple of dominant hospital systems and, historically, one major in- surer — have also contributed to the sustainability of the all-payer system, according to Dr. Mortensen of the University of Maryland. Mr. Deane of The Advisory Board also cited politics as a possible hurdle for implementation in other states or nationwide, noting that "the notion that state government or federal government would be so involved in the American healthcare system as to prescribe the rates by all payers…would be a challeng- ing position to take." Still, Maryland's new initiative could shift that attitude. "If Maryland proves measurable success in terms of reducing the cost of care I think it may push policymakers to take a closer look," he says. "But they are going to need to see that success first, and there may still be questions about how other markets will respond to the same approach." It will be years before it's clear whether Maryland's new payment model is the answer to the healthcare cost containment question or not. For now, though, hospitals and state regulators seem to feel it holds promise. "I've been in this business since 1978, and this is probably the most meaning- ful thing I've ever seen in controlling costs without it affecting quality," Mr. Mullen says. "We don't have it solved, but I think we're moving in the right direction." n SAVE THE DATE! Becker's Hospital Review 6th Annual Meeting May 7-9, 2015 • Swissôtel - Chicago, Illinois 153 Great Health System Executives Speaking • 119 Sessions - 212 Speakers Great Topics and Speakers Focused on Strategy, Physician-Hospital Integration, Improving Profitability, ACOs and Key Specialties To learn more visit www.BeckersHospitalReview.com To register, visit www.regonline.com/hospitalreview6thannualmeeting

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