Global Budgets and Spending

Will putting providers on a fixed budget reduce spending and will it have any impacts on quality?  That is the question examined by research reported in the Journal of the American Medical Association Internal Medicine.    (JAMA Int. Med. Article)   The state of Maryland’s global budget program was the source of the analysis.  Maryland has been an innovator in paying hospitals, for a number of years it operated an all-payer fixed reimbursement schedule under a waiver from CMS.  That system did not have incentives to reduce unnecessary services, so a few years ago the state moved to a global budgeting plan.  Under that, each hospital in the state receives a fixed amount to cover all inpatient, outpatient and ER services.  This program also applies to all payers.  The goal was to limit increases in the global budgets to no more than 3.58%.  Hospitals continue to bill each service, but must adjust prices to hit the global budget target.  There are adjustments to prevent volume-shifting and to reward supposedly better quality.  The theory is that this reimbursement method would encourage hospitals to avoid inpatient stays and improve primary care.  The researchers compared utilization for Medicare patients in Maryland with a similar group in counties in other states that did not use global budgeting.

The researchers conducted two basic analyses.  In one they assumed that Maryland’s trends, to the extent they were different from those in the comparison counties, would continue.  In the other, they assumed that Maryland’s trends after the introduction of global budgets would be parallel to those of the comparison counties.  The program began in 2014 and there were no significant differences with he comparison counties using either trend assumption.  For 2015, however, if you assumed that pre-intervention trends would persist, there was a decline of 3% in hospital stays.  If you assumed Maryland’s trend would parallel those of other places, the decline was a more modest 1%.  Similarly, on the pre-existing trend, readmissions declined 4.7%, while parallel trend analysis showed a lower decline of 2.8%.  Differential trend analysis reflected a 3% decline in ER use, while the parallel one indicated a .5% decrease.  In regard to primary care, the parallel analysis indicated a significant increase, while the continuation of pre-existing different trend would actually find a decrease in those visits.  Overall, the results could be interpreted as either showing a modest impact of global budgets on hospital stays and primary care use or no impact but rather a continuation of pre-program trends.  Given the short analysis period, a longer term evaluation will be very helpful.