The Use of Ambulatory Patient Groups for Regulation of Hospital Ambulatory Surgery Revenue in Maryland

Abstract

The Maryland Health Services Cost Review Commission (HSCRC or the commission) is a government agency with the authority to establish rates for both inpatient and outpatient services for all general acute care hospitals in the state. By law and consistent with the state's unique Medicare waiver, all payers (including Medicare and Medicaid) must pay hospitals on the basis of these rates. The HSCRC has used diagnosis related groups to set case-mix-adjusted limits on the revenue per discharge for inpatient services (similar to Medicare inpatient prospective payment nationally) yet, the Maryland rate-setting system for outpatient services has not embodied incentives to control utilization of services. Beginning in the state's fiscal year 2008, the HSCRC is implementing regulation of ambulatory surgery services using ambulatory patient groups to provide better incentives to control utilization, and to facilitate comparisons of the case-mix-adjusted charges per ambulatory surgery case across hospitals. Maryland has been an innovator in the design and successful implementation of payment systems and other incentive mechanisms to constrain hospital cost, maintain payment equity, and ensure access to needed hospital care. The HSCRC's adoption of all patient refined diagnosis related groups and the hospital-specific relative value method for establishing diagnosis related group weights in 2005 was relevant to the Centers for Medicare and Medicaid Services' decision to move to Medicare severity diagnosis related groups beginning in federal fiscal year 2008, and to consider the use of hospital-specific relative value weights. The HSCRC's decision to use ambulatory patient groups for ambulatory surgery is an attempt to apply the most effective features of inpatient payment systems, prospective payment, including incentives to control service volumes. As such, it represents a radical departure from prevailing payment arrangements in that it seeks to remove the traditional distinction between inpatient and outpatient surgical services, a distinction that has blocked the development of effective and well-integrated outpatient payment systems for decades. This article describes the policy rationale for this system, the analysis that was performed, and the methods that will be used to control the revenue per case and compare the relative charges of the hospitals.