Maryland’s Hospital Rate Setting: A Case Study

Rationale and Adoption

Maryland’s hospital rate-setting system is a unique approach to healthcare cost containment. Implemented in the 1970s, it was a response to rapidly escalating healthcare costs. The state recognized that a fee-for-service model was unsustainable and that a more global approach to hospital payment was necessary. To establish this system, Maryland required a waiver from the federal government to bypass certain Medicare and Medicaid regulations.

1. Home – Health Services Cost Review Commission (HSCRC) – Maryland.gov

hscrc.maryland.gov

2. Hospital Rate Setting: Successful in Maryland but Challenging to Replicate :: Altarum

www.healthcarevaluehub.org

3. Maryland: All-Payer Approach to Nonpayment – Commonwealth Fund

www.commonwealthfund.org

Funding Structure

Maryland’s hospital rate-setting system relies on a global budget for hospitals. The state Health Services Cost Review Commission (HSCRC) sets annual rates for hospital services, which are based on historical costs, inflation, and other factors. Hospitals are paid a predetermined amount for each patient, regardless of the services provided. This system incentivizes hospitals to control costs and improve efficiency while maintaining quality care.

1. Price Regulation, Global Budgets, and Spending Targets: A Road Map to Reduce Health Care Spending, and Improve Affordability – Report – KFF

www.kff.org

2. How Maryland Hospitals are Paid – WearTheCost.org

www.wearthecost.org

3. Rate Setting :: Altarum – Healthcare Value Hub

www.healthcarevaluehub.org

Impact and Ethical Considerations

While Maryland’s hospital rate-setting system has been effective in controlling healthcare costs, it has also faced criticism.

• Positive impacts:

• • Lower healthcare costs compared to other states
  • Improved hospital efficiency and quality of care
  • Increased access to care for some populations

• Negative impacts:

• • Potential for reduced investment in new technologies and services
  • Concerns about equity in access to care across different regions of the state
  • Potential for hospitals to shift costs to other areas, such as outpatient services

Ethical considerations include ensuring equitable access to care for all Maryland residents, balancing cost control with quality of care, and preventing unintended consequences that may harm patients or providers.

Conclusion

Maryland’s hospital rate-setting system is a complex policy with both benefits and drawbacks. While it has been successful in controlling costs, it is essential to continuously monitor its impact on patient care and access to services. The state must also address potential equity issues and explore ways to incentivize innovation and quality improvement within the rate-setting framework.