Maryland’s Global Budget Disappoints

It seems simple: give hospitals one overall budget, instead of fee-for-service reimbursement, and they will cut how much they spend. Maryland set out with this plan to reduce health spending in 2010. They implemented global budgets for eight rural hospitals, later expanding the program to 36 other Maryland hospitals. The program premiered to some fanfare in the midst of a national focus on federal health care reform, but eight years later, a new study in Health Affairs asks whether the reforms actually had the intended long-term effects. 

The authors assessed the overall inpatient and outpatient spending of each globally-budgeted hospital and whether there were more hospital stays and readmissions after the implementation of global budgeting. Authors compared Medicare claims data from rural beneficiaries for whom the closest hospital was one of the affected rural hospitals to claims data for rural beneficiaries not living near the hospitals. They compared the change in spending, hospital stays, and readmissions for both groups in the time periods before and after the global budget implementation. The difference-in-differences analysis found no overall significant differences between the groups with global-budgets and those without global-budgets, although both groups experienced increases in acute hospital stays, decreases in per-beneficiary acute hospital spending, and increases in per-beneficiary outpatient department spending.

Despite increasing interest in global budgeting as an alternative payment model, the Maryland experience did not reduce acute care hospital use or spending. The authors note that their findings may be at odds with prior, more positive analyses, because they did not completely include outpatient costs in their analyses. This may dampen the enthusiasm around global budgeting, but it shouldn’t rule the concept out altogether: Maryland plans to adjust the program to account for more out-of-hospital costs and will continue to evaluate the program. 

Overall, though, this study means that without incentives for hospitals and physicians to change their behaviors, global budgeting alone is not enough to change spending in the long term. Other states and policymakers should take note: global budgeting may not be as simple as it seems.

Abstract

In a substantial shift in payment policy, the State of Maryland implemented a global budget program for acute care hospitals in 2010. Goals of the program include controlling hospital use and spending. Eight rural hospitals entered the program in 2010, while urban and suburban hospitals joined in 2014. Prior analyses, which focused on urban and suburban hospitals, did not find consistent evidence that Maryland’s program had contributed to changes in hospital use after two years. However, these studies were limited by short follow-up periods, may have failed to isolate impacts of Maryland’s payment change from other state trends, and had limited generalizability to rural settings. To understand the effects of Maryland’s global budget program on rural hospitals, we compared changes in hospital use among Medicare beneficiaries served by affected rural hospitals versus an in-state control population from before to after 2010. By 2013-three years after the rural program began-there were no differential changes in acute hospital use or price-standardized hospital spending among beneficiaries served by the affected hospitals, versus the within-state control group. Our results suggest that among Medicare beneficiaries, global budgets in rural Maryland hospitals did not reduce hospital use or price-standardized spending as policy makers had anticipated.

PMID: 29608370 Roberts, ET, et al. Health Affairs. 2018; 37 (4): 644-653.