Don’t be Naïve about the Players in the Game

Maryland, with its history of creative experimentation, once again has served as a laboratory to aid in the debate over fee for service (FFS) versus global budgeting. The state’s Health Services Cost Review Commission allowed hospitals to elect a Total Patient Revenue (TPR) program where they were allowed to charge FFS rates. However, if a hospital’s charges surpassed its global budget allotment for that year, it was paid less in the subsequent year to offset the excess payments. 

Many of the hospitals found that reducing services provided one year would allow for price hikes to those services the following year. The study, using a difference-in-difference model, found TPR hospitals admitted fewer patients (direct admissions as well as those from the ED) than control hospitals. Of note, the 23% drop in services provided by TPR hospitals was accompanied by only a 6% decline in services received by residents of TPR counties suggesting that these patients sought care elsewhere. Unexpectedly, county-level spending on FFS Medicare beneficiaries showed per beneficiary spending increase of 8% in TPR counties.

The study raises many questions, not the least of which relate to patients – health outcomes, personal cost of care, and additional barriers to receiving treatment. Additionally, data analysis was limited to the hospitals designated in the study and did not capture potential increases in patient care load and cost potential borne by surrounding institutions. We do not know how the system as a whole fared with this seemingly isolated change. 

With the effects to those who should matter most left unknown, the demonstrated decrease in services provided, and the extrapolated increase in per person cost, it seems as if TPR-style global budgeting should be approached cautiously. At the very least, strict guardrails must be built and enforced such that a shift that may lower access to care is not rewarded with increased profits. Frequent and thorough reviews of budgets as compared to the hospitals’ services must be routine. Irrespective of the administrative details, the fundamental issue with such a change is the naïve presumption that tweaking the incentive structure for one party (in this case, providers) will somehow bring system-wide change. In order to drive health costs down, we have to make certain that every player in the health care game is induced to maximize efficiency and quality.

This Health Policy Journal Club review is written by Aanchal Thadani as part of our collaboration with the Health Policy Journal Club at Baylor College of Medicine where she is a medical student.

Abstract

In 2010 Maryland replaced fee-for-service payment for some rural hospitals with “global budgets” for hospital-provided services called Total Patient Revenue (TPR). A principal goal was to incentivize hospitals to manage resources efficiently. Using a difference-in-differences design, we compared eight TPR hospitals to seven similar non-TPR Maryland hospitals to estimate how TPR affected hospital-provided services. We also compared health care use by “treated” patients in TPR counties to that of patients in counties containing control hospitals. Inpatient admissions and outpatient services fell sharply at TPR hospitals, increasingly so over the period that TPR was in effect. Emergency department (ED) admission rates declined 12 percent, direct (non-ED) admissions fell 23 percent, ambulatory surgery center visits fell 45 percent, and outpatient clinic visits and services fell 40 percent. However, for residents of TPR counties, visits to all Maryland hospitals fell by lesser amounts and Medicare spending increased, which suggests that some care moved outside of the global budget. Nonetheless, we could not assess the efficiency of these shifts with our data, and some care could have moved to more efficient locations. Our evidence suggests that capitation models require strong oversight to ensure that hospitals do not respond by shifting costs to other providers.

PMID: 30933597

 Pines JM, et al. Health Affairs. 2019; 38 (4): 594?603.