Effects of Global Budgets on Hospital Utilization in Rural Maryland Hospitals

Background. As the Affordable Care Act extended coverage to millions of Americans, there is increased pressure to contain utilization and spending. Hospital costs remain the largest component of health care spending in the US, and are projected to grow at an annual rate of over 6 percent by 2018. Payment models that incentivize population health management and care coordination instead of service volume hold promise to lower spending growth over time. The State of Maryland implemented the Total Patient Revenue (TPR) pilot program in fiscal year 2011. As part of this three-year contract, eight acute care rural hospitals voluntarily received global payments calculated for defined service areas.

Objective. This study evaluates the impact of the TPR program on utilization of care among the privately insured and Medicaid population in Maryland.

Methods. The analysis uses 2010 – 2014 data from the Maryland Medical Care Data Base, encompassing all health care claims incurred by the privately insured and Medicaid enrollees and covering more than 4 million lives. Using a difference-in-differences approach coupled with propensity score matching we compare the trends in patients serviced by participating hospitals to those in two control groups. The first control group consists of individuals serviced by 3 rural hospitals who did not participate in the program. The second control group consists of individuals serviced by all non-participating hospitals in the state, excluding academic medical centers.

Results. TPR hospitals were slightly smaller and had lower volume than the main control group the year before the intervention (151 vs. 196 staffed beds, 10,994 vs 13,369 total discharges on average). Their population also had a higher proportion of white and older patients on average. The number of hospitalizations per beneficiary decreased in both groups following TPR implementation, but decreased more in the intervention group (coefficient on the Treatment×Post = 0.061, p<0.05) compared to the first control group. Total inpatient spending per enrollee also decreased significantly more in the intervention group (coefficient on the Treatment×Post = 0.042, p<0.05). No significant difference in outpatient spending per enrollee was detected between the two groups. The results were robust with respect to the second control group.

Conclusion. Inpatient hospital utilization and spending has decreased for both TPR and non-TPR hospitals in Maryland. Although these reductions cannot be attributed solely to the adoption of global budgets, the TPR program seems to offer a promising model for payment. More research is needed to evaluate the effect of TPR on quality of care and population health outcomes