Setting Hospital Rates To Control Costs And Boost Quality: The Maryland Experience

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Abstract
For decades Maryland has maintained a hospital payment system in which all payers—public and private—pay the same rates. This paper describes Maryland’s all-payer hospital payment system—the legislative goals and principles that directed regulatory efforts in the state; how well the system performs in meeting these goals; and current initiatives on payment design, quality-based reimbursement, and their application elsewhere in the health sector. Maryland’s rate-setting system is one of the most enduring and successful cost containment programs in the United States. Lessons learned are relevant to other states and provide useful bases for consideration of future health reform strategies.