Hospital pay-for-performance programs in Maryland produced strong results, including reduced hospital-acquired...

Over the past decade Medicare has put in place several pay-for-performance programs for hospitals, including one that stopped paying hospitals for treating hospital-acquired conditions and the Hospital Value-Based Purchasing Program that went into effect in October 2012. In this article we describe how the State of Maryland crafted two pay-for-performance programs applicable to all hospitals and payers-a Quality-Based Reimbursement Program similar to Medicare's value-based purchasing program and a separate program that compared hospitals' risk-adjusted relative performance on a broad array of hospital-acquired conditions. 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. Extrapolating these results, the Medicare fee-for-service program nationally would have saved $1.3 billion over two years by implementing a similar hospital-acquired conditions program. The state programs used strong and consistent financial incentives to motivate hospitals' efforts to improve quality. This experience demonstrates that successful state experimentation can inform and influence federal policy and efforts to coordinate payment strategies in other states.