The volume conundrum

The Maryland Global budget model has created an volume conundrum. I would love to here your thoughts.

The state of Maryland has implemented  a payment  model for hospitals which caps revenue and attempts to regulate volume. The initial attraction was,  if  hospitals knew what there operating budget would be and if there were able to reduce cost, than the difference would be profit that could be reallocated for improvements, personel, or overall growth.  Now approximately 5 % was assigned to quality metrics The regulatory body,HSCRC, also has the ability to readjust  based on inflation, volume shift and failure to meet quality metrics.  To note, if a hospital exceeds its volume threshold than that excess is paid at 50% which, for  most hospital, is below cost.  The other issue is that most hospitals are part of a system but are viewed by HSCRC independently. Now as hospitals will shift volume for a variety  of reasons, i.e. too complicated, too costly, the receiving hospital is potentially exceeding budget and volume and the sending hospital may or may not be with in their financial corridor. Now, you may ask yourself, why doesn’t HSCRC realize this. The answer is the transfer is  defended by the institutions as the right thing for the patient.  So now let me explain the conundrum.  Since the introduction of this payment model, most hospitals have figured out the game and volume is not your friend. Most hospitals continue to struggle with controlling volume especially tertiary hospitals.  So, the response by these facilities is to use elective volume as its flux. They will ask surgeons to shift volume when a hospital is at risk for too much volume or if a hospital, within its system, needs volume.  As you can imagine, this is very disruptive to patients and employees.  When volume is needed at a sister hospital, the hospital that is above threshold is asked to close ORs ( this lowers expense) and the employees and doctors are asked to shift to the other hospital to provide volume.  As you can imagine, this is not what the doctors or employees signed up for.  So as ask for your help is solving this conundrum.


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Participant comments on The volume conundrum

  1. As you mentioned in your post “most hospitals are part of a system but are viewed by HSCRC independently”. Is there any opportunity to remedy that and allow aligned hospitals (believe there are many in Maryland) to band together to “share” capped revenue targets. This would potentially allow some smoothing and reduce the need to do patient ping pong between hospitals. Also interested in seeing if this could refocus the health systems on the task of reducing expense .

  2. The volume measured on a per-hospital basis seems like a crazy system, and certainly a challenge for you and your colleagues in Maryland. Does CMS have to approve any major changes to the HSCRC readjustment mechanisms under the State’s current agreement? I am not familiar with the logistics of the Maryland system, but based on a quick read of the “final term sheet” of the current model on the HSCRC website (link below-but again I’m not sure how applicable this is to these facts), there appears to be at least some (admittedly arbitrary) criteria for going back to the State and CMS about changes in circumstances. The below language in particular is interesting, as it is very broad but also seems to be anticipating some fairly concrete contingent future events (e.g. new hospital construction–assume one in particular is in the pipeline)? Are there opportunities for regular education/outreach/dialogue with health system leaders/State HSCRC officials and CMS?

    Sorry that’s not more helpful, but good luck! Very interesting issues.

    From the “final terms” document p. 17:

    Exogenous Factors, Prince George’s County, ACA impact
    Maryland and CMS recognize the potential for exogenous factors to affect cost growth and other
    performance metrics, both for the all-payer and Medicare trends, in unpredictable ways. For example,
    Maryland could experience a localized disease outbreak that does not occur in other parts of the nation.
    Additionally, the Agreement will specifically identify four future events that could impact the projected
    (1) Changes in health insurance coverage and funding, which are currently available
    under the Affordable Care Act,
    (2) Construction of a new hospital facility in Prince George’s County,
    (3) Rapid adoption speed of a new technology, and
    (4) Investments in care redesign at an accelerated pace.

  3. This sounds like an attempt at shifting the volume proposition in medicine to value. Looking at the incentives of staying under the cap, both financial as well as quality of life for providers and staff; a strategic focus on maximizing efforts to excel in metrics will improve the bottom line as well as provider/employee satisfaction.

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