Maryland’s Global Budget and Hospital Use

A few weeks ago we posted on an analysis of the impact of Maryland’s global budget initiative on total health spending, the answer to which was not much.  Another piece of research in Health Affairs examines the effect on inpatient hospital utilization.   (HA Article)  The Maryland hospital global budget experiment started with eight rural hospitals in 2010, and added 36 mostly larger urban and suburban facilities in 2014.  The obvious intent of the program was to discourage unnecessary hospital use and encourage better cost control.  Hospitals may not always have a lot of control over the former.  Prior research has suggested that the program hasn’t had much effect on anything, but many of those studies were relatively soon after enactment and there were other major changes, like the federal reform law, at the same time that may have made disentangling various factors difficult.  For this study the authors focused on the rural hospitals with three full years of experience under the payment method and used data on Medicare beneficiaries to examine potential cost and utilization effects, comparing the periods before and after the program started, and matching beneficiaries treated at one of the rural hospitals with those treated elsewhere.

While rural hospital spending started out lower at the rural hospitals early in the pre-program period, it caught up in the last year before the start of global budgets, suggesting they might have accelerated spending to affect the budget amounts.  In any event, after the start of the program, there was little difference in admissions, and thirty-day readmissions, for beneficiaries treated at the rural hospitals versus those hospitals not yet in the global budgeting program.  After three years, there was still no statistically significant difference.  There was also no significant difference in spending in any of the three years following initiation of the reimbursement method.  These results, along with those in the prior research, suggest very little impact from use of hospital global budgets.  But maybe the budgets are set too high to create an incentive for utilization and cost reductions.  Or maybe the hospitals are happy to have minimal margins, which is okay since most of them are likely non-profits.  One advantage of a global budget is that it can limit increases in spending by fiat; the state just limits how much growth there is in the budget every year.