Mid-Atlantic Health Law TOPICS

The State of Maryland and the Centers for Medicare and Medicaid Services (CMS) continue to push Maryland hospitals to be on the front lines of health care savings programs with a new Medicare Performance Adjustment (MPA) framework. The MPA is part of the Total Cost of Care Model (TCOC), which went into effect on January 1, 2019, with the goal of saving Medicare money in Maryland, compared to the growth of Medicare spending nationwide.

Maryland’s Health Services Cost Review Commission (HSCRC) will administer the MPA on behalf of CMS, and the MPA has two new, albeit related, components.

A.  Care Transformation Initiatives

Under the MPA, hospitals are encouraged to reduce costs via Care Transformation Initiatives (CTIs), and can keep a portion of the savings they generate. Hospitals can submit proposals for CTIs, which can be any initiative that reduces the total cost of care for a defined population among Medicare fee-for-service beneficiaries that can be linked to claims data.

Maryland hospitals already can benefit by bringing down hospital utilization, because they can raise their prices for hospital services up to their Guaranteed Budgeted Revenue, but now they will also be able to share in the savings Medicare experiences from reducing the utilization of services provided by other types of health care providers via CTIs.

B. TCOC Benchmarks

The HSCRC will also set a Total Cost of Care Benchmark for each hospital. The benchmarks will be set, based in part, on an aggregate of all Medicare Part A and B spending across the hospital’s attributed beneficiaries over the course of a year, adjusted by total cost of care trends and quality of care metrics designed to ensure the State hits savings targets.

The HSCRC will allocate Medicare beneficiaries to each hospital, based on where each patient receives a plurality of care, or if patients have no history of hospital utilization, then based on geographic service areas. 

If the hospitals do not achieve savings, their prospective payments from Medicare will be reduced. Each hospital’s risk is capped at up to 1% of its Medicare revenue for the first year of the program, although the HSCRC could request that CMS increase or decrease this amount in future years. 

This 1% “discount” is a radical departure for the HSCRC.  For the life of the HSCRC, a tenet of Maryland’s “all payor” system has been that all payors are charged the same price for the same service their beneficiaries receive from the same Maryland hospital, albeit an approximate 4% discount to Medicare has always been baked into the system. Now, for the first time in more than 40 years, that 4% Medicare discount could grow to 5%.

The MPA is still a work in progress, and the HSCRC is still making adjustments to the MPA framework in real time. For example, CMS usually does not like to pay different provider groups for the same savings. Therefore, one can expect CMS to require a carve-out for beneficiaries covered by other programs, such as Accountable Care Organizations or the Maryland Primary Care Program.

Alexandria K. Montanio
(410) 576-4278 • amontanio@gfrlaw.com