Will Maryland's Rate Shift Send Tremors Around the Country?

Although the rate change, which takes effect July 1, is technically an increase, the uptick was so paltry it is considered more of a freeze, explains Mahan. The HSCRC accomplished this by raising rates for patients receiving outpatient services by 2.59%, while lowering rates for inpatients by 1.25%.

"It's basically flat. But I could certainly imagine that Medicare could say they will have a [national] rate drop. That's what they already said on the physician side, and they might say it's the best way to constrain expense growth," says Mahan. "In this case, it is another waiver strategy—they're trying to keep our waiver cushion."

The Maryland healthcare system holds overall costs down by spreading the expense of patient care throughout the entire system of providers. All insurers, including private companies, state Medicaid, and federal Medicare, pay hospitals the same reimbursement rates. Therefore, regardless of the hospital's payer mix, a rate change affects all hospitals equally. For the last few years, Maryland hospitals have had overall rate increases that have been lower than their cost increases. Additionally, hospitals have started to see a decrease in patient volumes, causing leaders to take an even harder look at cost reductions.