Global budgets in Maryland: early evidence on revenues, expenses, and margins in regulated and unregulated services
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Global budgets in Maryland: early evidence on revenues, expenses, and margins in regulated and unregulated services Margit Malmmose1 · Karoline Mortensen2 · Claus Holm1
Received: 2 January 2017 / Accepted: 26 March 2018 © Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract Maryland implemented one of the most aggressive payment innovations the nation has seen in several decades when it introduced global budgets in all its acute care hospitals in 2014. Prior to this, a pilot program, total patient revenue (TPR), was established for 8 rural hospitals in 2010. Using financial hospital report data from the Health Services Cost Review Commission from 2007 to 2013, we examined the hospitals’ financial results including revenue, costs, and profit/loss margins to explore the impact of the adoption of the TPR pilot global budget program relative to the remaining hospitals in the state. We analyze financial results for both regulated (included in the global budget and subject to ratesetting) and unregulated services in order to capture a holistic image of the hospitals’ actual revenue, cost and margin structures. Common size and difference-in-differences analyses of the data suggest that regulated profit ratios for treatment hospitals increased (from 5% in 2007 to 8% in 2013) and regulated expense-to-gross patient revenue ratios decreased (75% in 2007 and 68% in 2013) relative to the controls. Simultaneously, the profit margins for treatment hospitals’ unregulated services decreased (− 12% in 2007 and − 17% in 2013), which reduced the overall margin significantly. This analysis therefore indicates cost shifting and less profit gain from the program than identified by solely focusing on the regulated margins.
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10754018-9239-y) contains supplementary material, which is available to authorized users.
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Margit Malmmose [email protected] Karoline Mortensen [email protected] Claus Holm [email protected]
1
Aarhus School of Business and Social Sciences, Aarhus University, Fuglesangsalle 4, 8210 Aarhus V, Denmark
2
School of Business Administration, Coral Gables, FL 33124, USA
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M. Malmmose et al.
Keywords Global budgets · Maryland · Health care finance · Regulated and unregulated services JEL Classification I11 · I18 · G0
Introduction The innovative payment mechanisms implemented in the state of Maryland have garnered significant attention (Coyle 2015; Hancock 2014; Patel et al. 2015; Reinhardt 2011). In January of 2014, the state changed from a volume-based, fee-for-service hospital financing approach to a prospective global budget for all 46 acute care hospitals in the state. This new all-payer model, the Global Budget Revenue initiative (Evans and Meyer 2014), is combined with and based off of the Total Patient Revenue program that was implemented in 8 rural hospitals in July of 2010 (Maryland Health Services Cost Review Commission 2015; Mortensen et al. 2014; Sharfstein 2016). The new all-p
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