Hospital Reimbursement Changes to Improve Market for Branded Drugs in Baltimore

BURLINGTON, Mass., May 13, 2014 /PRNewswire/ -- Decision Resources Group finds that new legislation enacted in Maryland may have a significant impact on branded drugs sold in the Baltimore market. Health systems will have greater incentives to better monitor readmissions, hospital-acquired infections and population health through the revised all-payer rate setting system. The system was created decades ago, and Maryland is the only state that has it, but new rules adopted this year shift the focus to outpatient services and health outcomes. The state has also adopted separate step therapy legislation.

Other key findings from the Baltimore Market Overview report:  

• By looking to reduce readmissions, hospitals will be placing a heavier emphasis on facilitating drug adherence for discharged patients. A second phase of the waiver program is planned that will go beyond the scope of hospitals to affect physician payment rates as well. 
• While Johns Hopkins Medicine was chosen to participate as an accountable care organization (ACO) in the Medicare Shared Savings Program, substantial interest in commercial ACOs is not expected as the all-payer system makes it difficult for them to gain traction. Cigna, however, is involved in a commercial ACO with Greater Baltimore Medical Center.
• The governor of Maryland has signed a bill that puts limitations on the ability of insurers to enact step therapy on medications, thereby giving doctors increased authority to prescribe branded drugs.

Comments from Decision Resources Group Analyst Christopher Silva:

• "The model requires Maryland to limit its annual all-payer per capita total hospital growth to 3.6 percent. The state is implementing two bundled payment strategies under which hospitals are incentivized to eliminate unnecessary procedures."
• "The national trend toward insurers engaging in narrow network activity with providers is not nearly as evident in Maryland, as the all-payer rate setting system effectively nullifies much of the gains that could be made by strategically including or excluding particular parties from such an arrangement."

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SOURCE Decision Resources Group