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The Total Cost of Care Model


Barry RosenThe state of Maryland and the Centers for Medicare and Medicaid Services (CMS) have reached an agreement on a new Maryland Total Cost of Care Model that will allow Maryland to continue to set hospital rates for all payers, including Medicare.

Under Maryland’s existing agreement with CMS, which was set to expire at the end of 2018, the Maryland Health Services Cost Review Commission (HSCRC) had already implemented a global budget payment cap for each Maryland hospital.

The new Total Cost of Care Model reaches beyond just hospital payments and consists of several separate programs.  The new arrangement is designed to save Medicare over one billion dollars over the next five years, compared to the growth of Medicare spending nationwide. It also targets population level improvements on six high-priority issues, from substance-use disorders to obesity.

Total Cost of Care Model

Alexandria K. Montanio

Alexandria K. Montanio

The new Total Cost of Care Model went into effect on Jan. 1, 2019, and runs for a 10-year term. At or before the sixth year, CMS and the state will determine if they should ultimately expand the Total Cost of Care Model, try a new model, or transition to the national Medicare fee-for-service payment system. The Total Cost of Care Model sets a per capita limit on Medicare spending for Maryland residents, not just in hospitals, but across care settings.

Specifically, Part A and B Medicare payments for Marylanders paid to hospitals for inpatient and outpatient facility charges on hospital campuses; to hospitals and non-hospital facilities for off-campus outpatient facility charges; and to doctors for inpatient and outpatient services performed anywhere, must grow slower than those payments are growing elsewhere in the country by $1.065 billion over the next five years.

This will be a heavy lift because the HSCRC only regulates the inpatient and outpatient facility prices charged on hospital campuses, and does not regulate the amounts paid to off-campus facilities or to doctors anywhere.

The four major components of this Total Cost of Care Program are as follows.

1. The Hospital Payment Program

A part of the Total Cost of Care Model is a continuation of the existing hospital specific global budgets.  These global budgets provide predictability and financial stability for hospitals. They also incentivize efficient care, for example, by rewarding hospitals that decrease unnecessary hospital utilization and readmissions. Specifically, hospitals can keep the savings if they provide quality care while remaining below their allocated budgets.

These budgets have kept per-capita hospital spending by all insurers to a much lower growth rate than the national average, which the State and CMS hope to continue under the Total Cost of Care Model.

2. The Care Redesign Program

The Total Cost of Care Model will also continue the successful Care Redesign Program (CRP), a voluntary program that encourages hospitals to collaborate with non-hospital based providers. The CRP allows hospitals to give incentive payments to other providers for activities that improve the quality of patient care and contribute to savings. As of July 1, 2018, 42 Maryland hospitals participate in the program.

The CRP encourages innovation in areas such as transitions of care, management of inpatient resources, and primary care support for patients with chronic conditions to reduce avoidable hospital utilization.

Participating hospitals may only make incentive payments if the hospital has attained savings under its fixed global budget, and the payments cannot exceed the amount of the savings.

3. Maryland Primary Care Program

The Maryland Primary Care Program is a new and novel piece of the new Total Cost of Care Model. It is designed to incentivize Maryland primary care providers by CMS giving those doctors an additional per beneficiary per month payment for participating in care management services.

Participating providers will partner with Care Transformation Organizations (CTOs) to help Medicare patients receive care coordination services and access to services from nutritional to social work counseling.

This program, in conjunction with the other aspects of the Total Cost of Care Model, intends to keep patients healthier and receiving more patient-centered care in communities, rather than in hospital emergency rooms.

4. Outcomes-Based Credits

In addition to saving money on Medicare spending, the new Total Cost of Care Model is intended to improve outcomes on six key health issues on a population level: substance-use disorders, diabetes, hypertension, obesity, smoking, and asthma. The state will set targets for improvement in each area, and can receive Outcomes-Based Credits for hitting those targets.

These credits can be used by the state to discount the total cost of Medicare spending, which will help the state meet its $1 billion Medicare financial savings target.

Barry F. Rosen is the chairman & CEO of the law firm of Gordon Feinblatt LLC, heads the firm’s health care practice group, and can be reached at 410-576-4224 or [email protected]  Alexandria K. Montanio is an associate in the firm’s health care and litigation practice groups, and she can be reached at 410-576-4278 or [email protected]