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

The Maryland healthcare model's linchpin is its Medicare waiver, exempting the state from national Medicare payment methodologies and permitting the HSCRC to set rates for all payers—governmental, commercial, and self-pay. However, the Medicare waiver comes with the requirement that the state's charge per case cannot grow faster than the rate at which national Medicare payments grow. In recent years, Maryland's charges have been catching up with the nation's, causing the HSCRC to try to find ways to keep the Maryland rates and costs in check.

Maryland hospitals are piloting a payment bundling program in which a subset of Medicare providers receives a single payment for an episode of acute care in a hospital followed by post-acute care in a skilled nursing or rehabilitation facility, the patient's home, or other appropriate setting. "Right now we're doing per charge, per episode [care] and charging a flat rate for readmissions. And we already have some quality indicators in effect," Mahan says.

The state's need to keep the payment lower has consequences on hospital budgets, as it would for financial leaders at any organization.

"Costs must come down to accommodate the rate changes, and we'll have to look at our labor [budget]," says Mahan. "We've made a point of not laying off staff and we plan to continue that." She says Frederick Regional will likely restrict new hires and leave vacant positions open. Other healthcare organizations in Maryland may not be able to take a similar approach, however.