Mid-Atlantic Health Law TOPICS

This is the second in a three-part series addressing Maryland's unique Health Services Cost Review Commission.

Recently, the State's Health Services Cost Review Commission (HSCRC) has become particularly innovative to correct certain unintended consequences of the system, to improve quality and to reduce costs.

A. One Day Stays

With respect to unintended consequences, the HSCRC has relatively recently recognized an odd effect of its case rate system, namely case rates encourage hospitals to admit patients for one day stays. In fact, prior to correcting this problem, Maryland hospitals admitted patients for one day stays much more than the rest of the country.

Because there was a cap on each hospital's charges equal to that hospital's case rate target, for example, $10,000, multiplied by the number of that hospital's admissions, hospitals were encouraged to admit a patient for one day to increase the number of their admissions. More specifically, each time a hospital, with a $10,000 per admission case rate target, for example, admitted a patient for one day, and charged that patient $5,000, that hospital would then generally be able to raise its rates to some other patient by the other $5,000.

To correct this problem, the HSCRC limited each hospital's case rate target to hospital stays that are longer than one day, resulting in many fewer patients being admitted for one day. Instead, those patients are now being "observed", without ever being admitted.

Unfortunately, a cascading effect of lowering the number of one day stays in Maryland is added pressure on Maryland's waiver from the Medicare system. (Medicare will only pay HSCRC rates, as opposed to Medicare rates, as long as the cost to Medicare per admission in Maryland does not grow at a faster pace than the amount Medicare pays elsewhere.)

However, as inexpensive one day stays are eliminated at Maryland's hospitals, the "average" price of a Maryland hospital stay has gone up, because the remaining hospital stays are more complicated. That means that the average cost to Medicare of each hospital admission has also gone up in comparison to the rest of the nation.
B. Hospital-Acquired Complications
The HSCRC has also adopted a new complicated analysis of hospital-acquired complications, recognizing a certain oddity inherent in hospital charges.
To explain this oddity, it may help to offer an analogy. If you took your car to a service station to repair your brakes, you would be shocked if the service station told you that your bill is higher than you expected, because, while your car was in the shop, the service station punctured several of your tires, and had to repair them at an additional fee.
Unfortunately, however, sometimes when patients are admitted to a hospital, they do become sicker due to arguably preventable hospital-acquired complications. Moreover, in that situation, a patient's bill actually grows, because the hospital not only has to cure the original ailment, but also the hospital-acquired complication.
In response, the HSCRC now requires Maryland hospitals to catalogue carefully what is wrong with patients when they arrive, and monitor their conditions during their hospital stays to identify arguably preventable hospital-acquired complications. Further, hospitals with low preventable hospital-acquired complications are permitted to raise their rates slightly, while hospitals with higher preventable hospital-acquired complications must lower their rates an equivalent amount. This incentive has resulted in a net lowering of hospital-acquired complications throughout the State.

C. Readmissions

A similar oddity occurs with respect to readmissions, in that patients who are readmitted to a hospital actually generate more revenue for the hospital. However, there is evidence that, if hospitals do a better job during discharge, and following up with patients to make sure they know what they should be doing to avoid readmission, readmissions decrease.
Accordingly, to encourage hospitals to reduce their readmissions, the HSCRC has initiated a voluntary program that allows hospitals to raise their rates, if their readmissions go down, but those hospitals are also at risk to lower their rates if their readmissions increase.
Believing that lowering readmissions is a good thing, and achievable, 31 Maryland hospitals volunteered to participate in the HSCRC's readmissions program.

D. Total Patient Revenue

Another significant new HSCRC initiative is called "Total Patient Revenue" or "TPR." Instead of capping a hospital's charges according to its average case rate target, the HSCRC has allowed "rural" hospitals to cap their charges totally. Each rural hospital volunteering for this initiative can charge whatever it likes on an a la carte basis for the services provided to patients, as long as the hospital's charges to all payors are generally the same, and provided that at the end of the year the hospital's total charges to all patients are no greater than an established Total Patient Revenue target.
In fact, ten Maryland hospitals have opted to participate in this TPR experiment.
The TPR option encourages hospitals to admit less patients, because if they admit more patients, then they will not be able to charge more than their Total Patient Revenue target. The HSCRC believes that total hospital costs are driven by volume or utilization, as much as by rate, and that a Total Patient Revenue cap will put enormous pressure on a hospital to lower its volume or utilization.
The HSCRC also believes that "rural" hospitals will not be able to "game" the TPR system by encouraging a patient to go next door, because there is no hospital next door. Nevertheless, whether this innovation is successful may depend upon the HSCRC policing rural hospitals so that they do not eliminate services or encourage patients to seek care at outpatient centers.