Saving Money, Saving Lives: Maryland Paves the Way on Payment Reform

As policymakers across the country look to balance their budgets, some are turning to Medicaid, recycling the same harmful policies they’ve used year-after-year: eliminating coverage for vulnerable Americans, restricting critical benefits like prescription drug coverage, imposing premiums on those who can’t afford them, and slashing already-low provider reimbursement rates.

Community Catalyst and Georgetown University Health Policy Institute Center for Children and Families created the States of Innovation blog series to shine a spotlight on states that are trying to find a better way. We will highlight states that are pioneering new approaches to making Medicaid more sustainable without harming – and often by improving – care for the millions of vulnerable seniors, people with disabilities, children and low-income parents that rely on Medicaid. Our inaugural blog focuses on an initiative in Maryland to reduce the incidence of costly hospital-acquired infections and other medical errors.

By improving how Medicaid and other health insurers reimburse hospitals, Maryland dramatically lowered its rates of costly, potentially avoidable events (PAEs) such as hospital-acquired infections. Maryland’s initiative is far more exciting than that sentence would lead you to believe, and we’ll tell you why.

What’s Really at Stake Wonky terms like “potentially avoidable events” – and even wonkier acronyms like “PAEs” – obscure what this is really about: the hundreds of thousands of people each year whose lives are shortened and who endure needless pain or lengthy hospital stays because of preventable medical errors.

Indeed, “PAE” takes on personal meaning to people like Ginny Harvey. In 1996, Ginny broke her ankle stepping off a curb and had surgery at a prominent hospital in Boston. That’s where her story should have ended.

But during her hospital stay she acquired a staph infection, which quickly escalated into a fast-moving bone infection. After enduring 28 surgeries over the course of five years – including painful bone and muscle graphs – Ginny was forced to amputate her leg to save her life. “The staph infection did not ruin my life,” she says, “but it has altered my life forever.” For more on Ginny’s story, click here.

Maryland vs. Medical Errors Maryland is tackling this type of hospital-acquired infection and other medical errors head on. Before we talk about how the state is doing it, let’s start with why we selected Maryland for our debut blog in the series. The state achieved tremendous results across the health care system (not just in Medicaid) in just the first year of their initiative:

• — A nearly 20 percent reduction in hospital-acquired infections, like the type that Ginny suffered from.
• — A 12 percent drop in overall hospital-acquired complication rates. This includes infections but also other harmful preventable events like accidental punctures during invasive procedures.
• — More than $60 million in savings. Because the health care needed to treat these types of preventable complications is extremely costly, as Maryland’s complication rates dropped so did its health care costs.

How Did Maryland Do It? Maryland’s reforms build on a common-sense concept: hospitals should get paid more for providing higher quality care, and less for providing harmful care. This may seem obvious, but many states’ Medicaid payment methodologies fully reimburse hospitals for the costs associated with treating harmful conditions that could have been prevented. Those payment systems fail to reward hospitals for investing in preventing the types of infections Ginny endured.

The Affordable Care Act will soon require all states to take the first step: stop paying for the costs associated with a handful of medical errors that are virtually always preventable, such as operating on the wrong body-part. But these particularly egregious and extremely rare medical errors represent only a tiny sliver of the potentially preventable hospital-acquired complications that alter families’ lives and drive up our nations’ health care costs every day.

Maryland is the first state to tackle a broader list of 49 adverse events including ones that are usually – but not always – preventable, such as the type of infection that invaded Ginny’s bones. Because these infections are not always preventable, and no hospital could be expected to lower its rate to zero, Maryland did not eliminate payment altogether for the costs associated with them. Instead, it adjusted a portion of hospital payments based on the rates of these complications; hospitals that do a good job at avoiding these events relative to their peers get a little extra money, and hospitals with a relatively high rate get a little less. This provides hospitals with the incentive to lower their overall rates of complications – saving money and saving lives.

The Real Question: Why Aren’t Other States Doing It? Remarkably few states are following Maryland’s lead. And while they leave this cost-saving option on the table, Republican Governors are flocking to Capitol Hill and insisting that they need to cut vulnerable Americans off Medicaid to get their budgets under control. For example, Governor Christie is requesting that CMS allow New Jersey to freeze Medicaid enrollment for parents earning more than $439 a month. This proposal would result in 23,000 people being denied health coverage, and would save the state only nine million dollars.

Harmful eligibility cuts like these are unconscionable, particularly when New Jersey – and other states like it – could save even more money through payment reforms like Maryland’s that improve health care quality and better families’ lives.

To learn more about moving payment reform in your state’s Medicaid program, please read Community Catalyst’s policy brief. Over the summer, Community Catalyst will also be releasing model Medicaid payment reform legislation, as well as a state-by-state report card to help you track which states are following Maryland’s lead.

-Katherine Howitt, Policy Analyst Community Catalyst

This blog was based partly on an interview with Robert Murray, Executive Director of Maryland’s Health Services Cost Review Commission.