Maryland Total Cost of Care Model reduced spending by $365 million in first year

The Maryland Total Cost of Care (TCOC) Model reduced the state’s total cost of health care spending by $365 million in 2019, $88 million more than the reduction in spending from 2018, according to a recent report by Mathematica.

The model tests if state accountability and provider incentives can improve care and population health while reducing Medicare spending across the state, according to Nicole Stallings, Chief External Affairs Officer & Senior VP, Government Affairs & Policy at Maryland Hospital Association (MHA).


Get the latest state-specific policy intelligence for the health care sector delivered to your inbox.


The TCOC Model achieved considerable savings, but also brought significant progress in engaging health care providers across the state including hospitals, primary care providers, post-acute care providers and community organizations, said Stallings. 

“I would say anytime you invest in primary care, you see a return, you see an improvement in the health of your communities.”

One of the model’s core features is its use of global budgets. These fixed budgets are set for every hospital, which Stallings said significantly distinguishes the TCOC Model from other delivery models.

“We believe [global budgets are] a real distinguishing factor, because unlike the rest of the country, our hospitals aren’t paid more to do more. Our focus is really on the health of our communities.”

Through the TCOC Model, there are less avoidable hospital visits and avoidable procedures compared to the rest of the country. Maryland hospitals are then able to take any savings and reinvest them into improving population health efforts. The system is incentivizing the right things, which is the value of health, and not the volume of services, said Stallings.  

Hospital rates are set by an independent commission, which eliminates cost shifting, in turn providing an equitable system for patients. In Maryland, you pay the same price for the same service at all of the hospitals across the state.

The global budgets of the TCOC Model took away hospitals’ ability to seek higher prices from other payers, said Stallings. 

“We don’t have a public hospital system, we don’t have tiered hospitals, we don’t have hospitals that are having to close because we are able to spread cost really equitably across our system. Equity being a core pillar is something that we know is critically important to maintain.

We want to see more alignment there as we now try to tackle these population health goals. but we believe there’s more collaboration happening here than anywhere else.”

When there is a significant drop in utilization that might cause hospitals in other states to close, Maryland’s unique financial model and the stability of the payment system allows for the continued access to care.

“We had this radical shift to look at the utilization side…We are looking way upstream to ensure that we are addressing those avoidable admissions and services.”

There is a lot of expected growth around accountability of state actions and agencies in the next evaluation, said Stallings. Success in population health is going to require going beyond incentives from the rate-setting commission and programs from the Department of Health. There needs to be active engagement from commercial payers and the Departments of Housing, Aging, Transportation, Education, and Agriculture in a much more meaningful way. 

To bring all these organizations together, the state has the Stakeholder Innovation Group, led by MHA. This group brings together diverse stakeholders from payers to providers, consumer organizations to business representatives to think about what needs to be done to improve the health of communities. Together they come up with payment models that hospitals are engaged in with post acute providers. 

Stallings said: 

“We’re excited to see that [the hospitals] realize the value. The hospitals have made every financial goal and surpassed it along the way with this model. As they did that, they looked at how to better use those dollars, and that’s what the total cost of care model is about.”

The goal is to continue demonstrating that investments made in population and community health and these robust partnerships between hospitals and community partners continue to grow over time and continue to reduce costs.

The second evaluation is set to be published in 2023 and Stallings expects to see a much deeper level of accountability from all partners — state agencies, commercial payers and non-hospital partners, which is critical for success. 

“We’re not just transforming hospital care, but really transforming Maryland’s health care delivery system.”