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Early success for hospital waiver, but hard work ahead

While Maryland’s experimental hospital payment system has seen early success — such as reported cost savings of more than $100 million during its first full year — officials say hard work lies ahead.

In the program’s second year, the state will expand data-sharing between hospitals, doctors and other caregivers and will try to develop financial incentives for doctors similar those in place for hospitals, officials say.

The global-budget payment system is part of a unique, five-year agreement between the state and the federal Centers for Medicare & Medicaid Services that places a cap on hospital revenue in an effort to reduce health care costs. The state’s hospitals then have an incentive to lower their expenses by reducing preventable admissions and improving the overall health of the populations they serve.

One of the program’s goals is a $330 million reduction in Medicare spending over the five years.

In 2014 hospital spending increased just 1.47 percent from 2013, below the 3.58 percent limit; Medicare hospital spending in the state fell by $100 million, exceeding the state’s goal. The number of conditions, such as infection, that patients acquire in the hospital dropped by 26 percent, easily exceeding the goal of a 6.89 percent drop, according to the hospital association.

The agreement moves hospitals from the fee-for-service model — where they are paid for each service provided; more services equals more payment — to a model that promotes higher-quality care. But independent physicians still operate on a fee-for-service model, said Carmela Coyle, president and CEO of the Maryland Hospital Association.

The interests of those doctors need to be brought in line with those of hospitals, and one possible solution is known as gain sharing, where doctors can earn a portion of the money hospitals save by improving the quality of care, she said.

As part of a recent, three-year pilot program, 12 hospitals in New Jersey offered gain sharing to physicians who met certain efficiency goals, said Jo Surpin, president of Applied Medical Software, the New Jersey-based company that developed the program.

Those hospitals reduced their per-admission costs by about 8.5 percent for a total savings of $113 million dollars; nearly $19 million of that was paid as incentives to the 1,300 participating physicians, according to the company.

The Maryland Hospital Association is working with MedChi, The Maryland State Medical Society, and the state’s Health Services Cost Review Commission, which sets the rates for all of the state’s hospitals, to develop a similar model in Maryland, officials said.

But a more immediate goal of state officials over the next year is to connect more doctors to data-sharing resources such as CRISP, the state’s health information exchange, said Stephen Ports, the cost review commissions deputy director of policy and operations.

The CRISP systems allows health care providers to share patient information electronically, so a doctor treating someone at a hospital can see what tests and treatments have been administered by the patient’s other care-givers, among other information.

All of the state’s hospitals are connected to CRISP, but many physicians are not, said Ports. Additional “shared tools” can also help track a patient’s progress and coordinate care through different facets of the health care system, he said.

Hospitals also need tools to help analyze data about the patients in their communities to help identify high-risk patients, such as those likely to be hospitalized for chronic conditions such as diabetes or heart disease, Coyle said.

“The challenge is not only knowing what’s going on in the hospital, but what’s going on outside the hospital,” said Coyle.

Gene Ransom, CEO of Medchi, praised the reported savings in the first year but warned that continuing to reduce expenses will be difficult. “We need to be cautious about being overly excited,” he said.