COVID and the Maryland Model

Aug 3, 2020

We are by no means finished with COVID-19, so it may be premature to try to answer this question: Does the Maryland model of health care financing protect our hospitals against pandemic shock in ways not found in other states?

Independent commentators have weighed in, arguing global budgets such as we have in Maryland are a boon to hospitals. They see the purported guarantee of a preset amount of annual revenue as a near-perfect antidote to the deep loss of revenue that came about when hospitals lost volume in the spring.

We here in Maryland know the global budgeted revenue mechanism does not guarantee revenue to a hospital unconditionally. The system is designed to handle volume swings in the single-digit percentages, allowing hospitals to adjust prices up to 5%, sometimes as much as 10%. But the double blow of the shutdown of elective procedures and patients’ fears of seeking care caused usage for several months to fall about 30% for inpatient care and 60% for outpatient services.

Fortunately, the Health Services Cost Review Commission (HSCRC) did use its authority to grant hospitals extra relief. The commission raised the allowable percentage for price increases and extended the time period over which the augmented prices may run.

Though, not unreasonably, HSCRC says federal relief payments hospitals receive must be considered in measuring net revenue shortfalls. MHA staff are working with members and HSCRC staff to iron out the details of that accounting. Importantly, with COVID caseloads rising again now and possible future waves coming, members tell us the end of rate year 2020 is much too soon to settle up.

Maryland hospital and health system leaders who’ve spoken with peers in other states tell us it does appear the financial damage in our state will be less harsh, thanks to the model and to the way the regulator has employed its powers.

We truly hope the model does indeed hold up as a buffer that enables the magnificent work of our hospitals to endure through COVID and well beyond.

Bob Atlas
President & CEO