Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

If you build a budget, hospitals will adapt

Peter Ubel, MD
Policy
September 30, 2019
Share
Tweet
Share

U.S. health care spending is maddeningly high. As in fifty percent higher than what other wealthy countries spend, with no evidence we’re getting any bang for all those additional health care bucks.

In 2014, the state of Maryland took direct aim at this profitless profligacy, enacting a bold (dare I say European?) approach: It gave hospitals fixed budgets to cover the costs not only of inpatient hospital care, but also outpatient care and emergency room services. It basically told hospitals that, if they wanted to stay in business, they better figure out how to care for patients more efficiently.

Audacious! Maryland didn’t simply trim the cost of caring for its Medicaid beneficiaries. It wasn’t content to rein in Medicare costs. Instead, it gave hospitals a budget to cover the costs of all their patients: Medicaid, Medicare, and privately insured.

So how’s that worked out so far? In a study published in JAMA Internal Medicine, a team of researchers analyzed data from the second year of Maryland’s bold experiment. They wondered: did hospitals constrain spending by reducing health care utilizations? Did they beef up primary care services to help people avoid expensive hospital care?

A couple things to keep in mind before I tell you what these researchers discovered.

First, Maryland didn’t try to reduce health care spending; it tried to limit the growth of health care spending. Its budgets limited health care spending to a cap of 3.8 percent per year.

Second, the budgets were imposed on 36 hospitals in the state, not on every hospital.

Third, hospitals have two ways to stay within their budgets: reduce utilization or reduce their prices. That means that as the year goes on, hospital systems that are headed for a budget overrun are expected to lower their prices accordingly.

Fourth, the budgets are adjusted based on the size of the population the hospital serves. So a hospital that diverts (aka dumps) patients to other hospitals will see a corresponding reduction in their budget.

Fifth and finally, the Maryland program applies to all patients regardless of what kind of insurance they have, but the researchers only had access to Medicare data.

With these thoughts in mind, we can now look at what the researchers found.

1. Hospitals stays were unchanged. The budget pressure didn’t lead to any reduction in the number of people who required hospitalization. Instead, budgeted hospitals looked like non-budgeted ones: continuing a slow and steady trend toward reduced hospital stays:

ADVERTISEMENT

Unadjusted Trends in Hospital and Primary Care Utilization Among Medicare Beneficiaries in the Maryland and Control Counties, 2009-2015: This plots show unadjusted annual rates of hospital stays among fee-for-service Medicare beneficiaries residing in the 8 Maryland counties where hospitals received global budgets in 2014 vs the matched control counties. The error bars represent 95 percent confidence intervals for the point estimates in a given year and are calculated using standard errors clustered by county.

2. ER Visits were also unchanged. It’s hard to find two lines more simpatico than the following:

Unadjusted Trends in Hospital and Primary Care Utilization Among Medicare Beneficiaries in the Maryland and Control Counties, 2009-2015

3. No change in primary care visits either.  

Unadjusted Trends in Hospital and Primary Care Utilization Among Medicare Beneficiaries in the Maryland and Control Counties, 2009-2015

What do all of these nondifferences mean? That we can hold budgets inline without reducing utilization, by getting providers to lower their prices (or at least to reduce their price hikes).

That change isn’t necessarily fast. It is a lot to expect hospital-based health care systems to transform themselves in a matter of months, after spending decades learning how to thrive in a fee-for-service world.

That governments can aggressively constrain health care inflation without expecting huge immediate upheaval in the normal processes of health care delivery.

If you build a budget, hospitals will adapt.

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel. He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices Together. This article originally appeared in Forbes.

Image credit: Shutterstock.com

Prev

Medical schools need to produce more clinician-activists to help drive social change

September 30, 2019 Kevin 3
…
Next

Being on the stretcher instead of beside it changed this nurse

October 1, 2019 Kevin 0
…

Tagged as: Public Health & Policy

Post navigation

< Previous Post
Medical schools need to produce more clinician-activists to help drive social change
Next Post >
Being on the stretcher instead of beside it changed this nurse

ADVERTISEMENT

More by Peter Ubel, MD

  • Clinicians shouldn’t be punished for taking care of needy populations

    Peter Ubel, MD
  • Patients alone cannot combat high health care prices

    Peter Ubel, MD
  • Is the FDA too slow to handle the pandemic?

    Peter Ubel, MD

Related Posts

  • How hospitals drive up health costs

    Elisabeth Rosenthal, MD
  • Why are there vending machines in hospitals?

    Jered Haynor, DO
  • Why the Build Back Better Act is an investment, not a cost

    Shirin Shafazand, MD
  • It’s time we start voting at our local hospitals

    Stephen Haff and Hussain Lalani, MD
  • Why quality reports for hospitals and doctors are interesting but flawed

    Mark Kelley, MD
  • How hospitals prepare for hurricanes

    Daniel B. Hess, PhD

More in Policy

  • Why health care leaders fail at execution—and how to fix it

    Dave Cummings, RN
  • Healing the doctor-patient relationship by attacking administrative inefficiencies

    Allen Fredrickson
  • The hidden health risks in the One Big Beautiful Bill Act

    Trevor Lyford, MPH
  • The CDC’s restructuring: Where is the voice of health care in the room?

    Tarek Khrisat, MD
  • Choosing between care and country: a dual citizen’s Independence Day reflection

    Kathleen Muldoon, PhD
  • How fragmented records and poor tracking degrade patient outcomes

    Michael R. McGuire
  • Most Popular

  • Past Week

    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • How New Mexico became a malpractice lawsuit hotspot

      Patrick Hudson, MD | Physician
    • Why doctors are reclaiming control from burnout culture

      Maureen Gibbons, MD | Physician
    • Why health care leaders fail at execution—and how to fix it

      Dave Cummings, RN | Policy
    • 5 blind spots that stall physician wealth

      Johnny Medina, MSc | Finance
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • Why flashy AI tools won’t fix health care without real infrastructure

      David Carmouche, MD | Tech
  • Recent Posts

    • Why judgment is hurting doctors—and how mindfulness can heal

      Jessie Mahoney, MD | Physician
    • Why medical schools must ditch lectures and embrace active learning

      Arlen Meyers, MD, MBA | Education
    • Why helping people means more than getting an MD

      Vaishali Jha | Education
    • How digital tools are reshaping the doctor-patient relationship

      Vineet Vishwanath | Tech
    • Why evidence-based management may be an effective strategy for stronger health care leadership and equity

      Olumuyiwa Bamgbade, MD | Physician
    • Why health care leaders fail at execution—and how to fix it

      Dave Cummings, RN | Policy

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

View 2 Comments >

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

  • Most Popular

  • Past Week

    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • How New Mexico became a malpractice lawsuit hotspot

      Patrick Hudson, MD | Physician
    • Why doctors are reclaiming control from burnout culture

      Maureen Gibbons, MD | Physician
    • Why health care leaders fail at execution—and how to fix it

      Dave Cummings, RN | Policy
    • 5 blind spots that stall physician wealth

      Johnny Medina, MSc | Finance
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • Why flashy AI tools won’t fix health care without real infrastructure

      David Carmouche, MD | Tech
  • Recent Posts

    • Why judgment is hurting doctors—and how mindfulness can heal

      Jessie Mahoney, MD | Physician
    • Why medical schools must ditch lectures and embrace active learning

      Arlen Meyers, MD, MBA | Education
    • Why helping people means more than getting an MD

      Vaishali Jha | Education
    • How digital tools are reshaping the doctor-patient relationship

      Vineet Vishwanath | Tech
    • Why evidence-based management may be an effective strategy for stronger health care leadership and equity

      Olumuyiwa Bamgbade, MD | Physician
    • Why health care leaders fail at execution—and how to fix it

      Dave Cummings, RN | Policy

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

If you build a budget, hospitals will adapt
2 comments

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...