This week, senior Maryland health officials said they're "very close" to finalizing a deal with the Obama administration that would introduce radical changes to the way hospitals are paid in the state.
The revised waiver to the standard Medicare program, unique in the country, would shift government hospital payments from a per-widget scheme to one that considers the success of treatment in contributing to a patient's overall health — and limits spending growth to the same rate as general inflation. That's an extraordinarily tall order for a sector that's outpaced the general economy for generations.
Since the 1970s, an old Medicare waiver has allowed Maryland to centrally set rates for all hospitals as long as costs stayed lower than the rest of the country. Recently, increases have moved closer to the national average, requiring this new revision.
I spoke with Kevin Sexton, CEO of Silver Spring-based Holy Cross Health, to learn more about what this esoteric regulatory change means in the real world.
What's a real-world situation for a patient that would be handled differently under this plan? My hope is there will be more flexibility in terms of organizing care, particularly, the handoff to post-acute care and the physician relationships.
I'll give you a great example. Today, we provide a robust palliative care service at the hospital, but essentially there is no reimbursement for it. We cover it, basically, out of the hospital's treasury because we think that it does a lot of good. In one sense, that doesn't change. In another sense, the degree to which that service can improve the care planning for the patients involved, and that it might lead to them using other services that we could make them aware of, and that they might find preferable to repeated visits to the hospital — that has the potential under this system to save the system money.
That's the hope. That by aligning things we like to do with the way we're going to get paid, that we have a better chance of doing some of those things better.
What's the goal of this plan? Hospitals for the first time are not measured by what it costs for an admission, where palliative care is an added cost. They are going to be judged by: "What does it cost per person you took care of for all services, inpatient and outpatient?"
So hopefully, whether it's prevention on the front end or good care planning on the back end, we hope that will allow us to meet the test, which is a tight test, but maybe help us do a little bit better and better allocate resources. We're using a different measuring stick, and the hope is that drives behavioral changes. I think what that's going to take is willingness to change.
You said it's a "tight test" to keep total hospital costs growing no faster than inflation. What do you mean? In a way, while hospitals are always going to have some element of competition, the state has to meet this target, and that means we're all in it together.
It's always been hard to meet this target. The reason health care costs were 6 percent of the economy in 1965, and now it's 18 percent, is that it hasn't been true for a very, very long time. This is a dramatic change, and is a performance level that would be better than the country has certainly been able to do. In that case, yes, it's tough. It hasn't been done consistently ever.