​​Potentially Avoidable Utilization (PAU) Savings​ Policy

The Maryland Health Services Cost Review Commission (HSCRC or Commission) operates a potentially avoidable utilization (PAU) savings policy as part of its portfolio of value-based payment policies. PAU is defined as hospital care that is unplanned and can be prevented through improved care, care coordination, or effective community based care.  With the introduction of the new All-Payer Model and global budgets, reducing PAU through improved care coordination and enhanced community-based care became a central focus. To this end, the Commission sets a statewide PAU savings adjustment, equivalent to the percentage of hospital inpatient revenue the state expects to save through PAU reduction in that year. In contrast to HSCRC’s other quality programs that reward or penalize hospitals based on performance, the PAU Savings policy is intentionally designed to assure savings to payers.

The PAU Savings Policy builds on the former Readmission Shared Savings Policy (RSSP)​ implemented in conjunction with the Admission-Readmission Revenue (ARR) program. In Rate Year 2017, the savings program transitioned to focus more broadly on potentially avoidable utilization and the policy was renamed PAU Savings. The PAU savings policy is also important for maintaining Maryland’s exemption from the Centers for Medicare & Medicaid Services (CMS) quality-based payment programs, as this exemption allows the state to operate its own programs on an all-payer basis.  

While hospitals have achieved significant progress in transforming the delivery system to date, there needs to be a continued emphasis on care coordination, improving quality of care, and providing care management for complex and high-needs patients. To this end, the current PAU Savings Policy includes readmissions and hospital admissions for ambulatory-care sensitive conditions in the PAU definition. Ambulatory care sensitive conditions are conditions for which good outpatient care could potentially prevent the need for hospitalization or for which early intervention can prevent complications or more severe disease, such as hypertension or bacterial pneumonia. These admissions are measured using the Agency for Health Care Research and Quality’s Prevention Quality Indicators (PQIs) measurement approach.  Reducing PQI admissions is critical for success in meeting Medicare financial targets under the All-Payer Model. 

​Define PAU as inpatient readmissions costs for the receiving hospital, outpatient readmissions, and PQIs. 

• Inpatient and observation status readmissions: PAU hospital readmission rates include the number of 30-day all cause inpatient and observation stay readmissions at each hospital, regardless of where the original (index) admission occurred. Assigning readmissions to the receiving hospital should incentivize hospitals to work within their service areas to reduce readmissions, regardless of where the index stay took place. Additionally, the savings associated with readmission reductions will accrue to the receiving hospital. This is unlike the Readmission Reduction Incentive Program (RRIP) where readmissions are counted for hospitals discharging patients who are later admitted.
  
• Prevention Quality Indicators: The number of admissions with at least 1 PQI.
  

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• As the PAU Savings policy is applied prospectively, the HSCRC sets a targeted dollar amount for savings, and thus guarantees a fixed amount of savings statewide.  
  
• All Maryland hospitals contribute to the statewide PAU savings; however, each hospital’s reduction is proportional to the hospital’s PAU revenue (i.e., hospital revenue associated with PQI admissions and observation stays or readmissions) in the most recent year. 
  
• The PAU savings adjustment amount is not related to year-over-year improvement in PAU during the rate year, hence providing an incentive for all hospitals to reduce PAU. Hospitals that reduce their PAU beyond the savings benchmark during the rate year will retain 100 percent of the difference between their actual reduction and the savings benchmark. 
  
• Cap the PAU savings reduction at the statewide average reduction for hospitals with higher socio-economic burden measured using percent Medicaid and Self-Pay/Charity inpatient utilization.

 ​Rate Year 201​7