Surgical Costs, Complications Slowed Under MD’s All-Payer Model

September 30, 2021 - An all-payer model that puts caps on hospital spending has slowed surgical spending and the rate of avoidable complications across major surgical procedures, according to a recent study published in JAMA Network Open.

Maryland has operated under the all-payer model since January 2014. The model reimburses hospitals using capitated payments, or global budgets, for major episodes of care, including inpatient. It also encompasses all payers operating in the state, including commercial payers, and requires the state to meet healthcare spending and quality targets. For example, the model was meant to reduce Medicare spending by $330 million or mine over five years and decrease select hospital-acquired conditions by 30 percent.

The study from researchers at Johns Hopkins University, University of Texas, and Rice University found that the model is associated with desired outcomes.

Researchers examined over 525,000 Maryland patients who underwent surgery before and after implementation of the all-payer model. The study showed lower complication rates for coronary artery bypass grafting (11 percent decrease), carotid endarterectomy (2 percent decrease), hip arthroplasty (1 percent decrease), knee arthroplasty (less than 1 percent decrease), and cesarean delivery (1 percent decrease).

Additionally, the growth of surgical costs tapered. Increases were reduced by $6,236 for coronary artery bypass grafting, $730 for carotid endarterectomy, $328 for hip arthroplasty, $415 for knee arthroplasty, $300 for cesarean delivery, and $745 for hysterectomy.

However, researchers noted that the reduced rate of surgical costs in Maryland during the period may have been influenced by reductions in case-mix severity. Hospital payer mix also shifted during the period, swaying more toward younger, healthier populations.

But “data suggest that the use of capitated payment models may be associated with durable modifications in physician behavior,” researchers state. One cited study even reported a 12 percent reduction in treatment intensity during lower back pain treatment episodes.

“This study of a large, diverse surgical patient population found that after the first 3 years of implementation of the all-payer model, Maryland hospitals experienced significant decreases in the probability of avoidable complications and reductions in the rate of increase in index hospitalization costs,” researchers concluded.

They called for further study into “other overlapping associations or unintended consequences in care delivery (eg, changes in site of care or variation in patient experience) as the all-payer program matures.”

The findings come at time though when CMS and other stakeholders consider all-payer models to stymy the growth of healthcare spending in the US. Spending in the US increased by 4.6 percent to $3.8 trillion in 2019, data from CMS shows. Healthcare expenditures accounted for nearly 18 percent of gross domestic product (GDP) at that time, significantly more than the average of 10 percent of GDP in comparable countries.

While the US continues to spend more on healthcare than its peers, patient outcomes suffer. Policymakers and healthcare stakeholders intend for efforts like the all-payer model to reverse the trends—reduce overall spending while improving patient outcomes.

A recent evaluation of alternative payment models approved by CMS’ Innovation Center showed that the Maryland all-payer model generated the most financial savings. Another evaluation, this time of the model specifically, also found that hospitals successfully reduce utilization and expenditures for key populations, including those with chronic conditions. The model was also associated with 6.1 percent slower growth in commercial payer spending on hospital stays.