Global budgets in Maryland: early evidence on revenues, expenses, and margins in regulated and unregulated services

Research Article

Abstract

Maryland implemented one of the most aggressive payment innovations the nation has seen in several decades when it introduced global budgets in all its acute care hospitals in 2014. Prior to this, a pilot program, total patient revenue (TPR), was established for 8 rural hospitals in 2010. Using financial hospital report data from the Health Services Cost Review Commission from 2007 to 2013, we examined the hospitals’ financial results including revenue, costs, and profit/loss margins to explore the impact of the adoption of the TPR pilot global budget program relative to the remaining hospitals in the state. We analyze financial results for both regulated (included in the global budget and subject to rate-setting) and unregulated services in order to capture a holistic image of the hospitals’ actual revenue, cost and margin structures. Common size and difference-in-differences analyses of the data suggest that regulated profit ratios for treatment hospitals increased (from 5% in 2007 to 8% in 2013) and regulated expense-to-gross patient revenue ratios decreased (75% in 2007 and 68% in 2013) relative to the controls. Simultaneously, the profit margins for treatment hospitals’ unregulated services decreased (− 12% in 2007 and − 17% in 2013), which reduced the overall margin significantly. This analysis therefore indicates cost shifting and less profit gain from the program than identified by solely focusing on the regulated margins.

Keywords

Global budgets Maryland Health care finance Regulated and unregulated services 

JEL Classification

I11 I18 G0 

Supplementary material

10754_2018_9239_MOESM1_ESM.docx (20 kb)
Supplementary material 1 (DOCX 20 kb)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Margit Malmmose
    • 1
  • Karoline Mortensen
    • 2
  • Claus Holm
    • 1
  1. 1.Aarhus School of Business and Social SciencesAarhus UniversityAarhus VDenmark
  2. 2.School of Business AdministrationCoral GablesUSA

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