Maryland’s Total Cost of Care model is shaping post Covid health financing

Maryland’s unique Total Cost of Care (TCOC) model continues to shape the state’s recovery from the pandemic, especially among hospitals and other health facilities. 

Bob Atlas, President and CEO of the Maryland Hospital Association; Katie Wunderlich, Executive Director of the Health Services Cost Review Commission (HSCRC); and Joe DeMattos, President & CEO of the Health Facilities Association of Maryland, discussed the future of health financing at the 2022 Maryland State of Reform Health Policy Conference last week. 

 

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Atlas first identified the adverse impact of workforce shortages on both hospital operations and costs. Workforce burnout amid continuing patient treatment during the pandemic has led to a 25% vacancy rate among registered nurses and 20% vacancy rate among overall hospital staff.

“There was only so much capacity in our hospitals,” he said. “We were maintaining about 8,000 beds throughout the pandemic. We did try to increase beds, but one thing we quickly learned, particularly as the pandemic wore on, was that the real constraint wasn’t equipment. It wasn’t beds, it wasn’t ventilators. It was people, and the people constraint became even tougher and tougher as time went on.”

To make up for staffing shortages, hospitals relied heavily on contracted workers, which in turn drove up costs. According to Atlas, hospital expenditures increased seven and a half times over the course of the pandemic. In February 2022, hospitals spent $97 million on contract labor, which he said was not sustainable. 

However, without an adequately staffed health workforce, patients run the risk of not being able to access the care they need. DeMattos pointed out that by 2030, 1.7 million Marylanders will be over the age of 60. He said health care providers will have to focus on preventative care for the younger part of that curve, and delay the onset of chronic conditions for older individuals. 

In the reality of increasing health care costs, DeMattos said ongoing collaboration between different health care silos and the state’s unique TCOC model provide a “tremendous opportunity” to focus on health equity and population health in Maryland. 

“There’s potential savings in reducing hospitalizations and getting people in their appropriate care setting that meets the cross section of finance and quality,” he said. 

Wunderlich offered an in-depth perspective on the HSCRC’s work to continue improving the TCOC model. The TCOC has already helped provide health systems with stabilizing benefits throughout the uncertainty of the pandemic, she said. 

For example, the HSCRC utilized its primary care networks to provide vaccination, testing, and community outreach. HSCRC also leveraged CRISP, the state’s health information exchange, to consolidate Covid data for patients and providers. 

Hospitals under the TCOC model are subject to fixed budgets and rely more on meeting quality measures than patient volume, with a goal of reducing overall spending. When patient volumes dropped due to the halt in elective surgeries and other pandemic restrictions, the model helped stabilize hospital revenue. 

Despite the challenges of operating during Covid, Wunderlich said the model was on track to meet both quality measurements and its annual cost-saving targets. In 2020, the model reduced hospital spending and cumulative care spending by approximately $2.5 billion and $1.6 billion, respectively. 

Future goals for the HSCRC include improving the model by focusing on high quality care, cost-sharing methods, and goals outlined in the Statewide Integrated Health Improvement Strategy (SIHIS). 

“I’m really excited about what’s coming next,” Wunderlich said. “It takes all of us, our payers [and] everybody in the room, to make sure we are continuing to evolve down the right path.”