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Maryland’s Statewide Value-Based Payment Models Benefit both Healthcare Providers and Patients

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.

Nicole Stallings of the Maryland Hospital Association
“Our focus is really on the health of our communities,” Nicole Stallings of the Maryland Hospital Association told State of Reform. “We don’t have a public hospital system, we don’t have tiered hospitals, we don’t have hospitals that are having to close because we are able to spread cost really equitably across our system. Equity being a core pillar is something that we know is critically important to maintain. We want to see more alignment there as we now try to tackle these population health goals. But we believe there’s more collaboration happening here than anywhere else,” she added. Clinical laboratories have an important role to play in population health. (Photo copyright: Center Maryland/Vimeo.)

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.
  • 53% reduction in hospital-acquired conditions (goal was 30% reduction over five years).
  • 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.   

JP Schlingman

Related Information:

Meaningful Value-Based Payment Reform, Part 1: Maryland Leads the Way

Meaningful Value-Based Payment Reform, Part 2: Expanding The Maryland Model to Other States

The National Implications of Maryland’s All-Payer System

The Total Cost of Care Model: Uniquely Maryland, Uniquely Successful

CMS and Maryland Announce Joint Initiative to Modernize Maryland’s Health Care System to Improve Care and Lower Costs

Maryland All-Payer Model to Deliver Better Care and Lower Costs

CMS: Maryland All-Payer Model

CMS: Maryland Total-Cost-of-Care Model

Maryland’s All-Payer Model Results

Evaluation of the Maryland Total Cost of Care Model: Implementation Report

Maryland Total Cost of Care Model Reduced Spending by $365 Million in First Year

New Value-Based Payment Model for Oncology Care Could Affect How Pathologists and Medical Laboratories Get Paid for Their Services

Centers for Medicare and Medicaid Innovation is considering adding clinical laboratory services to bundled payments in its proposed Oncology Care First model

Anatomic pathologists, surgical pathologists, and medical laboratories could find some of their services shifted to a bundled payment scheme as the Center for Medicare and Medicaid Innovation (CMMI) considers a new value-based alternative payment model (APM) for providers of cancer care.

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 repay CMS.

CMMI initially announced the public listening session and set a Nov. 25 deadline for written feedback, then extended it to Dec. 13, 2019. The feedback period is now closed.

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).

“We want better quality care for patients,” explained Lara Strawbridge, MPH (above), Director of the CMMI Division of Ambulatory Payment Models, during a US Department of Health and Human Services public listening session on Nov. 8. “We hope that at the same time, costs are maintained or reduced.” The new OCF payment model will feature a Monthly Population Payment mechanism that could include reimbursements for medical laboratory services, which has some medical laboratory organizations concerned. (Photo copyright: Center for Medicare and Medicaid Innovation.)

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 services.”

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.

The RO APM was originally set to take effect this year, but after pushback from industry groups, CMS delayed implementation until July 18, 2022, Healthleaders Media reported.

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.

—Stephen Beale

Related Information:

Oncology Care First: What You Need to Know about the Proposed Oncology Care First

Redesigning Oncology Care: A Look at CMS’ Proposed Oncology First Model

CMS, CMMI Seek Feedback on Oncology Care First, Successor to OCM

We Need Better Quality Measures for Oncology Care First

What You Should Know about the Proposed Oncology Care First Model

Oncology Care First Resource Hub

ACR Expresses Concerns about Potential Oncology Care First Payment Model

Redesigning the Oncology Care Model

ACR Wants CMS Radiation Oncology Model Delayed

ASTRO Calls for Voluntary Start, Scaling Back Excessive Cuts in CMS’ Proposed Radiation Oncology Model

Mandatory CMS Radiation Oncology Model Goes on the Backburner

CMS Seeks ‘New Direction’ for its Innovation Center as the Agency Evaluates Current Value-Based Payment Models for Medicare Services, including Medical Laboratory Testing

Federal agency receives input on eight focus areas as it looks for ways to enable providers ‘to design and offer new approaches to delivering care’

Medical laboratories and anatomic pathology groups preparing for the transition from fee-for-service healthcare will want to keep a close eye on the Centers for Medicare and Medicaid Services (CMS). The federal agency’s administrator plans to set a “new direction” for CMS as it shifts to value-based reimbursement models for Medicare services that could impact clinical laboratory revenues.

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’

The agency requested input on eight focus areas:

1. Increased participation in Advanced Alternative Payment Models (APMs);

2. Consumer-directed care and market-based innovation models;

3. Physician specialty models;

4. Prescription drug models;

5. Medicare Advantage innovation models;

6. State-based and local innovation;

7. Mental and behavioral health models; and,

8. Program integrity.

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’

In its reporting on the recent CMS announcements, Healthcare DIVE suggested that the U.S. Department of Health and Human Services (HHS) “is looking to make some potentially major changes” in value-based payment models.

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.”

Modify, Don’t Abandon Existing Payment Models, suggests HCTTF

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.”

—Andrea Downing Peck

Related Information:

Centers for Medicare and Medicaid Services: Innovation Center New Direction

Medicare and Medicaid Need Innovation

CMS Seeks ‘New Direction’ for Innovation Center

Comprehensive Care for Joint Replacement Payment Model

Task Force Calls on CMS to Encourage Alternative Payment Models

CMS Request for Information: Innovation Center New Direction

Task Force Urges CMS to Preserve Value Based Payment Models

Early Evidence from Medicare’s Bundled Payment Pilots Show Improved Quality at Reduced Cost of Care in Findings with Consequences for Medical Laboratories

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.

As of the first of this year, in fact, Medicare officials expanded the bundled-payment program associated with the hospital Outpatient Prospective Payment System (OPPS) by requiring certain clinical laboratory, anatomic pathology, and other clinical services be reimbursed as part of the bundled payment initiative. This action was taken independent of the bundled-payment pilot program. (more…)