Global budgets in Maryland: early evidence on revenues, expenses, and margins in regulated and unregulated services

Maryland implemented one of the most aggressive payment innovations the nationhas seen in several decades when it introduced global budgets in all its acute care hospitalsin 2014. Prior to this, a pilot program, total patient revenue (TPR), was established for8 rural hospitals in 2010. Using financial hospital report data from the Health ServicesCost Review Commission from 2007 to 2013, we examined the hospitals’ financial resultsincluding revenue, costs, and profit/loss margins to explore the impact of the adoption ofthe TPR pilot global budget program relative to the remaining hospitals in the state. Weanalyze financial results for both regulated (included in the global budget and subject to rate-setting) and unregulated services in order to capture a holistic image of the hospitals’ actualrevenue, cost and margin structures. Common size and difference-in-differences analyses ofthe data suggest that regulated profit ratios for treatment hospitals increased (from 5% in2007 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 fortreatment hospitals’ unregulated services decreased (− 12% in 2007 and − 17% in 2013),which reduced the overall margin significantly. This analysis therefore indicates cost shiftingand less profit gain from the program than identified by solely focusing on the regulatedmargins.