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Quality Improvement | Process Measures (QBR)

Maryland Hospital Aquired Conditions (MHAC)


The MHAC program was implemented in state fiscal year (FY) 2011 to link hospital payment with hospital performance using 3M’s Potentially Preventable Complication (PPC) classification system. PPCs are post-admission complications that may result from hospital care and treatment, such as accidental puncture/laceration during an invasive procedure or infections related to central venous catheters. In contrast to complications resulting from underlying disease progression, PPCs are considered potentially preventable. 3M identified 65 PPC measures through secondary diagnosis codes not present when patients is admitted to hospital.


The initial methodology for the MHAC program estimated the number of PPCs above the statewide average, or “excess PPCs,” for each hospital and calculated the percentage of inpatient hospital revenue associated with these excess PPCs. Hospitals with higher PPC costs than the statewide average received penalties and hospitals with lower PPC costs than the statewide average collected rewards. Because the initial program was required to be revenue neutral, this process resulted in unpredictable payment adjustments as amount of revenue available for rewards was determined by the penalties assessed within the program.

Current Program

On January 1, 2014 the State of Maryland entered into a new All-Payer Model demonstration contract with the Center for Medicare and Medicaid Innovation. This new contract included a requirement that the State of Maryland reduce the rate of PPCs by 30% over the 5-year contract term. To achieve this goal, the HSCRC modified the MHAC programs guiding principles and methodology. These are the revised guiding principles for all performance-based programs in the state:
  • Payers: The program must improve care for all patients, regardless of payer.

  • Measures: The program must utilize measures that are at least as stringent as the Medicare national program, and are high volume, high cost, opportunity for improvement, and are areas of national focus.

  • Rewards/Penalties: The program must include rewards/penalties that have at least as much potential impact on hospital inpatient revenue as the Medicare national program (“revenue at risk”) and do not penalize high performing hospitals for lack of improvement.

  • Performance targets: The program should identify predetermined performance targets and financial impact, as well as an annual improvement target based on previous trends and progress towards achieving the All-Payer Model goals, and the expectation for continuous quality improvement.

  • Program design should encourage cooperation and sharing of best practices.

  • Tracking/feedback: Hospitals should have the ability to track their progress during the performance period, and HSCRC should continue to provide a mechanism on an ongoing basis to receive input and feedback from the industry and other stakeholders to refine and improve the measurement and methodologies.

Key Program Components of Revised MHAC Methodology (starting with Rate Year FY 2016)

  • Determine hospital scores based on observed-to-expected PPC ratios rather than excess PPC costs. The expected number of PPCs for each hospital are calculated by multiplying the base year statewide PPC rate by the number of discharges at each hospital, adjusted for diagnosis and severity of illness categories.

  • Prioritize PPCs according to All-Payer Model priorities by grouping PPCs into tiers and weighting them according to their level of priority.

  • Calculate both attainment (hospitals at a high performing level) and improvement scores and use the better score for each hospital to determine payments, which strengthens incentives for low-performing hospitals to improve and avoids penalizing high-performing hospitals.

  • Determine payment rewards/penalties through a preset point scale developed with base year scores. This approach improves the financial predictability of the program and allows for statewide rewards to exceed penalties to adequately reward hospitals with better or improved performance.

  • Link individual hospital performance with statewide performance by creating a “contingent” payment adjustment scale. In this collective incentive system, hospital-specific penalties increase if the state does not reach statewide pre-determined PPC reduction targets, incentivizing hospitals to work together to reduce PPCs.

  • Focus payment adjustments on higher and lower performing hospitals by making adjustments only at the top and bottom end of the score distribution.

Policy Implementation Documents and Analysis

Rate Year FY2018 (July 2017-June 2018)

Rate Year FY2017 (July 2016-June 2017)

Rate Year FY2016 (July 2015-June 2016)

**New material and revisions ends here**

ARCHIVED RATE YEARS - *To be reorgainized

Communications and Memos

Final Staff Recommendation on QBR and MHAC Scaling Magnitudes and Standard for Expected Values for the FY 2014 and FY 2015 Updates to Hospital Rates

Final Staff Recommendation on QBR and MHAC Magnitudes and Scaling for the FY 2013 Update to Hospital Rates

MHAC Workgroup Meeting Documents

Please click here to email questions or inquiries about HSCRC’s Quality Improvement Initiatives or contact Dianne Feeney by telephone at 410-764-2605.