Module Components

• Overview
• Assignments

Topics

• MD: The ONLY State without DRGs
• Behind the HRCSC “Curtain”
• Current Challenges
• Moving Forward

NDNP 803 - Executive Leadership and Healthcare Economics

Module 12: Reforming Health Care in Maryland

MD: The ONLY State without DRGs

Maryland is the only state with an all-payer system of hospital finance, operating outside the traditional system of DRGs. This all-payer system is overseen by the Health Services Cost Review Commission (HSCRC). HSCRC’s statute was enacted in 1971 and 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. Since that time, all payers pay Maryland hospitals on the basis of the rates established by the HSCRC.

The HSCRC is governed by seven volunteer Commissioners appointed by the Governor. No more than three members can have provider affiliations. The Commissioners serve four year staggered terms and bring with them a broad array of health care expertise and backgrounds. The Commission’s day-to-day operations are the responsibility of 28 full-time professional staff with expertise in accounting, hospital financing, policy development, and data systems, with some knowledge of hospital operations.

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 $13 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.