Healthcare News & Insights

One state’s success with hospital cost control could signal national trend

In one state, efforts to curb healthcare spending and hospital costs have saved millions, and because of its success, the methods used may soon be adopted nationwide.

164548595As discussed in an article in the New York Times, Maryland hospitals have some of the lowest healthcare costs in the nation.

One hospital system in particular stands out: Western Maryland Health Systems. The hospital serves primarily poor and disadvantaged patients in a rural area, a factor that would normally drive costs of care higher. However, the health system has taken an integrated approach to patient care, and a conservative, state-mandated approach toward costs.

In some senses, care delivery resembles what you’d see with an accountable care organization, with access to all points of care coordinated by the hospital. Western Maryland has opened local clinics for diabetes care, heart failure care and wound care that are accessible to its patients. The hospital system has also invested in primary care, opening several practices in various areas.

And it has a comprehensive post-discharge procedure for patients, going so far as to hire specific staff members to follow-up with some of its oldest and sickest patients after they’ve been discharged.

As a result of this approach, readmissions have fallen. In fact, in two years, from 2011 to 2013, readmissions went from 16% of patients admitted to the hospital to 9% of patients, cutting out many costly hospital stays.

To save costs even further, Western Maryland accomplished this success under tight price controls set by the state.

How state keeps costs low

In a pioneering program, the hospital agreed to operate under a guaranteed budget to serve its patients. If the hospital brings in less revenue than budgeted, it’s allowed to increase prices to make up the difference. But if it brings in revenue that puts it over the budget, the hospital must cut prices and give the extra money back to the state.

Similar price controls extend to every hospital in the state. In Maryland, all patients must pay the same for hospital care, regardless of their insurance status. This keeps cost contributions similar from private payors, Medicare/Medicaid, and self-pay patients. Each hospital kicks in money to cover the cost of caring for the uninsured, which further serves to keep costs down.

Hospital price controls have been in place in Maryland since the late ’70s. Over the past few decades, the state has experienced the slowest rise in healthcare costs per patient in the country – and recently, it’s been as much as 4% lower than the national average.

Given the success of this pricing model, and the push toward more transparency when it comes to hospital costs, it’s likely that many states, and even individual health systems, may make the move toward a similar model of care delivery.

It’s estimated that, if every state had followed Maryland’s lead back in the late ’70s, the country could have saved close to $2 trillion in healthcare costs by now – certainly not an amount to sneeze at.

Models that control the amount hospitals are allowed to charge, while placing more of an effort on continuity of care for patients, seem to be the future of the healthcare industry.

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