Hospitals P4P Quality

P4P for Maryland Hospitals

Maryland is a unique state for Hospitals. Since 1977, Maryland’s Health Services Cost Review Commission sets payment rates for all hospitals regardless of the payer. This approach is only feasible because Maryland receives a federal waiver that exempts its hospitals from national Medicare and state Medicaid fee schedules.

Just as Medicare has begun implementing its own value-based purchasing system, Maryland has already established a similar program.

In 2003, as the federal government was first developing hospital pay-for-performance programs for Medicare, Maryland began to develop its own program, called the Quality-Based Reimbursement Program. Maryland launched its program in 2008. The program provides financial incentives—both rewards and penalties—in Maryland hospital rates to encourage improvements in process-of-care measures…Maryland’s program initially included nineteen core CMS and Joint Commission process measures in the following four care domains: heart attack, heart failure, pneumonia, and surgical infection prevention.

Maryland also second has a quality monitoring probram that measures rates of hospital-acquired conditions.

Using data from 2007-2010, a paper by Calikoglu, Murray and Feeney (2012) finds that the effect of the Marlyand incentive program was as follows.

In the first program, all clinical process-of-care measures improved from 2007 to 2010, and variations among hospitals decreased substantially. For example, the statewide average rate of provision of influenza vaccines to patients with pneumonia increased by 20.5 percentage points, from 71.5 percent in 2007 to 92.0 percent in 2010. As a result of the second program, hospital-acquired conditions in the state declined by 15.26 percent over two years, with estimated cost savings of $110.9 million over that period.

Whether or not Medicare can achieve similar improvements in cost and decreases in quality, however, is still unknown.



  1. The pay-for-performance experience in the hospital sector generally has been characterized by very slow progress, with a tendency to err on the side of caution and incrementalism.

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