By shifting away from fee-for-service, the state encouraged collaboration between hospitals and physicians to improve care and lower costs
Maryland “leads the way” in value-based payment reform, according to a series of articles published in Health Affairs. “The evidence is clear,” the article declares, “Maryland’s application of uniform prices within global budgets lowers total care costs, reduces unnecessary utilization, and incentivizes proactive preventive and chronic disease management care. Can other states implement Maryland-like payment models and achieve similar financial success?” It’s a fair question.
It is widely-known that clinical laboratory testing is integral to early and accurate diagnosis, and, under Maryland’s current reimbursement model, hospital/health system C-suite administrators have recognized that a robust clinical laboratory service is invaluable to showing progress toward cost containment and patient outcomes goals. But how did that come about? And what can other states learn from Maryland’s success?
Focusing on Better Patient Outcomes at Reduced Costs
Maryland’s current value-based payment arrangement set its first roots back in 2014. That is the year when the state of Maryland and the federal Centers for Medicare and Medicaid Services (CMS) announced a “new initiative to modernize Maryland’s unique all-payer rate-setting system for hospital services aimed at improving patient health and reducing costs,” declared a press release at that time.
Dubbed Maryland’s “All-Payer Model,” the press release went on to say, “This initiative will replace Maryland’s 36-year-old Medicare waiver to allow the state to adopt new policies that reduce per capita hospital expenditures and improve health outcomes as encouraged by the Affordable Care Act. Under this model, Medicare is estimated to save at least $330 million over the next five years.” Did that happen? Apparently so.
The state designed its “All-Payer Model” hospital payment system to render reimbursements based on populations served and the quality of care provided. The program focused on better patient outcomes and higher quality care at a reduced cost, instead of concentrating on the volume of care. The system incentivized hospitals to prevent readmissions, infections, and other potentially avoidable events.
“By shifting away from traditional fee-for-service payment, Maryland’s new model encourages collaboration between hospitals and physicians to improve patient care, promotes innovative approaches to prevention, and accelerates efforts to avoid unnecessary admissions and readmissions,” said pediatrician Joshua Sharfstein, MD, Vice Dean for Public Health Practice and Community Engagement at the Johns Hopkins Bloomberg School of Public Health in a 2014 CMS press release.
Sharfstein was the Secretary of Maryland’s Department of Health from 2011 to 2014.
Then, in 2019, Maryland implemented the successor to the state’s “All-Payer Model” dubbed the “Total-Cost-of-Care (TCOC) Model.”
According to the CMS, whereas the All-Payer Model “established global budgets for certain Maryland hospitals to reduce Medicare hospital expenditures and improve quality of care for beneficiaries,” the TCOC “builds on the success of the Maryland All-Payer Model by creating greater incentives for healthcare providers to coordinate with each other and provide patient-centered care, and by committing the State to a sustainable growth rate in per capita total cost of care spending for Medicare beneficiaries.”
The TCOC began on January 1, 2019, and runs through December 31, 2026.
Results of Maryland’s All-Payer-Model Program
In general, an all-payer system allows a state to manage healthcare prices via rate setting where all healthcare payers, including the government, private insurers, and employer healthcare plans, pay similar prices for services provided at individual hospitals.
When it announced the results of the five-year All-Payer-Model program, Maryland’s Health Services Cost Review Commission—the state agency responsible for regulating cost and quality of hospital care in Maryland—declared the program’s targets had been achieved. They included:
1.92% average annual growth per capita in hospital revenue (goal was to be less than or equal to 3.58%).
$1.4 billion cumulative Medicare savings in hospital expenditures.
Below national average for hospital readmissions of Medicare patients within five years.
All of Maryland’s 47 acute-care hospitals paid based on health populations served—not number of services rendered—with 98% of total hospital revenue under Global Budget Revenue (GBR) payment method.
In addition, the Maryland HSCRC report indicated that innovative care was a key tenet of the model and that hospitals benefitted from being given the ability to:
Invest in new healthcare programs that improve collaboration with other providers in the community.
Implement new clinical protocols, patient safety techniques, and follow-up procedures for high-risk patients at hospital discharge.
Create hubs of care to triage needs, coordinate important services, and ensure patients in need are connected to services outside the hospital.
After the success of the Maryland All-Payer Model, the state’s Total-Cost-of-Care Model program continued to focus on healthcare cost savings to Medicare. But it introduced population health improvement activities across the entire healthcare delivery system.
Future of Maryland’s Total-Cost-of-Care Model Program
Maryland’s TCOC Model program seeks more than $1 billion in Medicare savings by the end of 2023, or the fifth performance year of the program. According to the CMS Innovation Models webpage, Maryland’s TCOC Model includes the following three programs:
The Hospital Payment Program, where each hospital receives a population-based payment amount which covers all hospital services provided during a year.
The Care Redesign Program, which allows hospitals to make incentive payments to nonhospital healthcare providers who partner with hospitals to provide care.
The Maryland Primary Care Program, which incentivizes primary care providers to offer advanced care services to their patients.
An analysis of the first two years of the TCOC program found some significant improvements particularly in the areas of care management, access, and continuity.
In the first performance year of Maryland’s TCOC model, the state reduced spending by $365 million, relative to national trends, according to a Mathematica implementation report.
Part of the success of the model is due to its use of global, fixed budgets that are set for every hospital. Rates are established by an independent commission which prevents cost shifting and provides a more equitable system for patients where they pay the same price for the same service at all hospitals throughout the state, Mathematica noted.
“We believe [global budgets are] a real distinguishing factor, because unlike the rest of the country, our hospitals aren’t paid more to do more,” said Nicole Stallings, told State of Reform. Stallings is Chief External Affairs Officer and Senior Vice President, Government Affairs and Policy at the Maryland Hospital Association (MHA).
Expanding Maryland’s All-Payer-Model Program to Other States
In 2016, CMS established the Center for Medicare and Medicaid Innovation (CMMI) to identify ways to improve healthcare quality and reduce overall costs in the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) programs. Maryland’s All-Payer model has produced the most savings out of any of the projects and experimental payment programs researched by CMMI. The success of Maryland’s programs prompted CMMI to look at expanding similar programs in other states.
Reductions in hospital costs combined with improved outcomes can only benefit patients and the healthcare industry in the long run. Since clinical laboratory testing is integral to early diagnoses and treatment of diseases, under Maryland’s current reimbursement model a robust clinical laboratory service is invaluable for succeeding at cost containment and patient outcome goals.
CMMI, an organization within the Centers for Medicare and Medicaid Services (CMS), is charged with developing and testing new healthcare delivery and payment models as alternatives to the traditional fee-for-service (FFS) model. On November 1, 2019, CMMI released an informal Request for Information (RFI) seeking comments for the proposed Oncology Care First (OCF) model, which would be the successor to the Oncology Care Model (OCM) launched in 2016.
“The inefficiency and variation in oncology care in the
United States is well documented, with avoidable hospitalizations and emergency
department visits occurring frequently, high service utilization at the end of
life, and use of high-cost drugs and biologicals when lower-cost, clinically
equivalent options exist,” the CMMI RFI states.
With the proposed new model, “the Innovation Center aims to build on the lessons learned to date in OCM and incorporate feedback from stakeholders,” the RFI notes.
How the Oncology Care First Model Works
The OCF program, which is voluntary, will be open to
physician groups and hospital outpatient departments. CMMI anticipates that
testing of the model will run from January 2021 through December 2025.
It will offer two payment mechanisms for providers that
choose to participate:
A Monthly Population Payment (MPP) would apply
to a provider’s Medicare beneficiaries with “cancer or a cancer-related
diagnosis,” the RFI states. It would cover Evaluation and Management (EM)
services as well as drug administration services and a set of “Enhanced
Services,” including 24/7 access to medical records.
Of particular interest to medical laboratories, the RFI also
states that “we are considering the inclusion of additional services in the monthly
population payment, such as imaging or medical laboratory services, and seek
feedback on adding these or other services.”
In addition, providers could receive a
Performance-Based Payment (PBP) if they reduce expenditures for patients
receiving chemotherapy below a “target amount” determined by past Medicare
payments. If providers don’t meet the threshold, they could be required to
Practices that wish to participate in the OCF model must go through an application process. It is also open to participation by private payers. CMS reports that 175 practices and 10 payers are currently participating in the 2016 Oncology Care Model (OCM).
Medical Lab Leaders Concerned about the CMMI OCF Model
One group raising concerns about the inclusion of medical laboratory service reimbursements in the Monthly Population Payment scheme is the Personalized Medicine Coalition. “Laboratory services are crucial to the diagnosis and management of many cancers and are an essential component of personalized medicine,” wrote Cynthia A. Bens, the organization’s senior VP for public policy, in an open letter to CMMI Acting Director Amy Bassano. “We are concerned that adding laboratory service fees to the MPP may cause providers to view them as expenses that are part of the total cost of delivering care, rather than an integral part of the solution to attain high-value care,” Bens wrote.
She advised CMMI to “seek further input from the laboratory
and provider communities on how best to contain costs within the OCF model,
while ensuring the proper deployment of diagnostics and other laboratory
Members of the coalition include biopharma companies, diagnostic companies, patient advocacy groups, and clinical laboratory testing services. Lab testing heavyweights Quest Diagnostics (NYSE:DGX) and Laboratory Corporation of America (NYSE:LH) are both members.
CMS ‘Doubles Down’ on OCM
The proposal received criticism from other quarters as well. “While private- and public-sector payers would be well served to adopt and support a VBP [value-based payment] program for cancer care, we need to better understand some of the shortcomings of the original OCM design and adopt lessons learned from other successful VBP models to ensure uptake by providers and ultimately better oncology care for patients,” wrote members of the Oncology Care Model Work Group in a Health Affairs blog post. They added that with the new model, “CMS seems to double down on the same design as the OCM.”
Separately, CMMI has proposed a controversial Radiation
Oncology (RO) alternative payment model (APM) that would be mandatory for
practices in randomly-selected metro areas. The agency estimates that it would
apply to approximately 40% of the radiotherapy practices in the US.
These recent actions should serve to remind pathologists and
clinical laboratories that CMS continues to move away from fee-for-service and
toward value-based care payment models, and that it is critical to plan for
changing reimbursement strategies.
In an informal Request for Information (RFI), the Center for Medicare and Medicaid Innovation (CMMI) sought feedback on a “new direction to promote patient-centered care and test market-driven reforms that empower beneficiaries as consumers, provide price transparency, increase choices and competition to drive quality, reduce costs, and improve outcomes.”
CMS to ‘Move Away’ from Engineering Healthcare ‘From Afar’
Comments from healthcare providers, clinicians, states, payers, and stakeholders were accepted through November 20, 2017.
In a Wall Street Journal (WSJ) op-ed, CMS Administrator Seema Verma explained the agency’s process moving forward. “We will move away from the assumption that Washington can engineer a more efficient healthcare system from afar—that we should specify the processes healthcare providers are required to follow,” she wrote.
CMS Administrator Seema Verma (above) plans to lead the Center for Medicare and Medicaid Innovation “in a new direction” and may be signaling a willingness to give providers more flexibility with value-based care payment models for Medicare services. (Photo copyright: Healthcare Dive.)
The RFI states the new model design will follow six guiding principles:
1. Choice and competition in the market;
2. Provider choice and incentives;
3. Patient-centered care;
4. Benefit design and price transparency;
5. Transparent model design and evaluation; and,
6. Small scale testing.
Providers Need Freedom to Design New Approaches to Healthcare
Verma said CMS plans to review all Innovation Center models to determine “what is working and should continue, and what isn’t and shouldn’t.” She voiced concern that the complexity of some of the current models may have encouraged consolidation in the healthcare system, resulting in fewer choices for patients.
“We must shift away from a fee-for-service system that reimburses only on volume and move toward a system that holds providers accountable for outcomes and allows them to innovate,” Verma wrote in the WSJ op-ed. “Providers need the freedom to design and offer new approaches to delivering care. Our goal is to increase flexibility by providing more waivers from current requirements.”
Actual Progress of Value-based Healthcare ‘Herky-Jerky’
However, Neil Smiley, CEO of Loopback Analytics, which assists healthcare organizations with managing outcome-based care, believes the transition to value-based care may face stiffer headwinds under the new administration. He points to an August CMS proposal that canceled some mandatory bundled payment programs and scaled back others as an indication that healthcare transformation could be slowing.
“The pace at which CMS committed to rolling out value-based care is fundamentally different from the pace we’re currently seeing,” he told Health IT. “The progress toward value-based care, instead of this steady momentum they expected, is more of a herky-jerky fashion.”
The Health Care Transformation Task Force (HCTTF), a 42-member industry consortium, was among the stakeholders who responded to CMS’ RFI. In a 22-page letter, the task force reiterated its support for the healthcare system’s transformation to value-based payment and care delivery, while outlining areas for improvements. The group urged CMS to continue to develop new models while modifying, rather than abandoning, existing models that show promise and need time to achieve a lasting return.
“We would like CMS to continue support for promising models while balancing the current portfolio with new, innovative payment models,” Clare Wrobel, Director of Payment Reform Models at HCTTF, told Home Health Care News. “[But] it would be a mistake to discard current models that providers have already invested in and are showing real promise.”
Smiley, meanwhile, suggests clinical laboratory managers, pathologists, and other healthcare providers keep watch as healthcare transformation continues to evolve.
“The fee-for-service model, love it or hate it, is not dying. The organism has adapted,” he told Health IT. “For those that were aggressive early adopters of value-based care and really believed what they were hearing, and have gone fully after value-based care, some of them may feel a little exposed. If they go too hard too fast, they may suffer economically if they misjudge the pace at which this moves.”
Industry experts predict private payers will adopt bundled payment arrangements for both inpatient and outpatient procedures
Early evidence indicates that Medicare’s bundled-payment pilot has helped participating providers improve the quality of care while better managing healthcare costs. Should more detailed findings confirm these outcomes, Medicare could decide to expand the range of clinical services it wants covered by a bundled-payment arrangement.