Hospital rate regulation in Maryland was established by an act of the Maryland legislature in 1971. The law created the Health Services Cost Review Commission (HSCRC), an independent State agency with seven Commissioners appointed by the Governor. After a three-year phase-in period, the Commission began setting hospital rates in July 1974. At that time, its authority extended only to the rates hospitals charged to the non-governmental purchasers of care. In 1977, however, Maryland was the first of five states granted a waiver by the federal government exempting the State from national Medicare and Medicaid reimbursement principles. Maryland remains the only state to retain such a system.
The HSCRC was given broad responsibility regarding the public disclosure of hospital data and operating performance and was authorized to establish hospital rates to promote cost containment, access to care, equity, financial stability and hospital accountability. Since that time, all payers pay Maryland hospitals on the basis of the rates established by the HSCRC. The goals of the Commission are:
- Constrain hospital cost growth
- Ensure that hospitals have the financial ability to provide efficient, high quality services to all Marylanders
- Increase the equity or fairness of hospital financing
The Commission’s rate setting authority applies to 47 acute general, three specialty, and three private psychiatric hospitals in the State with regulated revenue in excess of $16 billion annually. The HSCRC’s rate regulatory authority applies to inpatient services (as defined by Medicare) and outpatient and emergency services at a hospital (on the campus). The Commission does not regulate physician fees.
The Commission’s primary mandates are to review and approve reasonable hospital rates and publicly disclose information on the costs and financial performance of Maryland hospitals. The Commission establishes hospital-specific and service-specific rates for all inpatient, hospital-based outpatient and emergency services. In approving hospital rates, the Commission is required to assure that:
- The total costs of all services offered by a hospital are reasonable;
- Aggregate revenues of a hospital are reasonably related to its aggregate costs; and
- Rates are set equitably among all purchasers of hospital services.
To meet this rate setting charge, the Commission created a significant data infrastructure that includes a uniform accounting and reporting system and extensive data collection on, and analysis of, every aspect of hospital operations. To fulfill its broad disclosure responsibilities, it distributes annual reports on hospital operations and makes all such Commission files accessible to the public.
On January 1, 2014, the State of Maryland and the Centers for Medicare & Medicaid Services (CMS) entered into a new initiative to modernize Maryland’s unique all-payer rate-setting system for hospital services. The Center for Medicare and Medicaid Innovation (CMMI) oversees the Model under the authority of CMS. This initiative, replacing Maryland’s 36-year-old Medicare waiver, allows Maryland to adopt new and innovative policies aimed at reducing per capita hospital expenditures and improving patient health outcomes. Success of the New All-Payer Model will reduce cost to purchasers of care—businesses, patients, insurers, Medicare, and Medicaid—and improve the quality of the care that patients receive both inside and outside of the hospital.