Maryland’s hospital revenue model is undergoing a significant transformation, and the changes will ripple across the healthcare system, affecting patients, hospitals, employers, and healthcare providers alike. As an employer, now is the time to understand how these changes can provide cost savings and improved treatment options for both employees and their families.
Understanding the New Model and Its Origins
This shift originates from a groundbreaking January 1, 2014, agreement between Maryland and the Centers for Medicare and Medicaid Services (CMS). Maryland hospitals are now tasked with reducing Medicare hospital spending by $330 million, lowering readmissions, and cutting down hospital-acquired infection rates. Hospitals now receive a lump-sum payment based on the health outcomes of the population they serve. Meeting these goals allows hospitals to reinvest leftover funds, but falling short could result in deficits, impacting financial stability.
How Will Healthcare Change?
Previously, hospitals earned revenue based on the services they provided and patient admission numbers. Under the new model, however, they are incentivized to lower admissions and infection rates, collaborate with community healthcare partners, and improve overall health outcomes. The model encourages preventive healthcare measures and partnerships with healthcare providers, aiming to deliver better patient outcomes at lower costs.
Impact on Employers and Patients
For employers, this model provides an opportunity to evaluate hospital performance and choose networks that best serve employee needs while reducing overall healthcare costs. Employers can offer three-tier provider networks, encouraging employees to choose high-quality care options at lower costs.
- Centers of Excellence: Hospitals with proven quality care and outcomes, offering the lowest out-of-pocket costs.
- Preferred Provider Networks: Discounted patient fees.
- Non-Participating Providers: The highest rates, with the highest out-of-pocket expenses for employees.
For patients, this model offers choices based on quality and cost. Hospitals with lower infection and readmission rates become attractive, and improved collaboration between hospitals and primary care providers enhances follow-up care and communication.
Looking Forward
Hospitals are rapidly adapting to this new revenue model and seeking partnerships with employers to develop mutually beneficial options. As an employer, staying informed on these changes will allow you to optimize healthcare benefits for employees and capitalize on a reformed healthcare system.
To learn more about how the new hospital revenue model impacts your business’s healthcare plan or to discuss potential employer-hospital partnerships, feel free to contact me.
Frank Strueber
Email: fstrueber@psafinancial.com
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