Global budgets in Maryland: early evidence on revenues, expenses, and margins in regulated and unregulated services

Abstract

Maryland implemented one of the most aggressive payment innovations the nation has seen in several decades when it introduced global budgets in all its acute care hospitals in 2014. Prior to this, a pilot program, total patient revenue (TPR), was established for 8 rural hospitals in 2010. Using financial hospital report data from the Health Services Cost Review Commission from 2007 to 2013, we examined the hospitals' financial results including revenue, costs, and profit/loss margins to explore the impact of the adoption of the TPR pilot global budget program relative to the remaining hospitals in the state. We analyze financial results for both regulated (included in the global budget and subject to rate-setting) and unregulated services in order to capture a holistic image of the hospitals' actual revenue, cost and margin structures. Common size and difference-in-differences analyses of the data suggest that regulated profit ratios for treatment hospitals increased (from 5% in 2007 to 8% in 2013) and regulated expense-to-gross patient revenue ratios decreased (75% in 2007 and 68% in 2013) relative to the controls. Simultaneously, the profit margins for treatment hospitals' unregulated services decreased (- 12% in 2007 and - 17% in 2013), which reduced the overall margin significantly. This analysis therefore indicates cost shifting and less profit gain from the program than identified by solely focusing on the regulated margins.

Accounting facilitating sociopolitical aims: The case of Maryland hospitals

“…A quite different picture emerges upon examination of the unregulated services. Among individual hospitals, unregulated services show increasing deficits between 2010 and 2015 (Malmmose, Mortensen, & Holm, ). The unregulated deficits can diminish the regulated profits by more than 50%, suggesting that unregulated services can have a significant negative impact on overall financial performance.…”

Response to “The effects of global budget payments on hospital utilization in rural Maryland”

“…In Maryland, only services provided on a hospital's campus were subject to a budget, while services in off‐campus outpatient clinics were not (even if these off‐campus clinics were owned by hospitals). This provided a “loophole” by which hospitals could have met their budgets by shifting some outpatient services to off‐campus clinics . Done and Herring only assessed volume in on‐campus outpatient clinics, while Roberts et al .…”

“…This provided a "loophole" by which hospitals could have met their budgets by shifting some outpatient services to off-campus clinics. 15 lion-and to have slowed the growth rate of hospital spending for all payers. 10,16 These savings could have been realized without reductions in hospital use if hospitals adjusted their prices to meet the state's budget targets, as is allowed under the program.…”

Maryland’s Global Budget Revenue model associated with lower inpatient costs and 30-day readmissions in patients undergoing total hip arthroplasty

“…Maryland's GBR model aims to reduce hospital costs, improve quality, and decrease readmissions [2]. This hospital payment system moves away from a "fee-for-service" payment system to the one focused on controlling total hospital revenue per capita, with each hospital's annual revenue defined at the beginning of each fiscal year based on volume and quality indicators measured in prior years [3][4][5][6]. Specifically, the annual revenue assigned to an institution is generated by utilizing a preceding base period and subsequently adjusting for inflation, infrastructure requirements, changes in population volume, performance measures, marketshifts, and changes in payer mix [3].…”