How Maryland Hospitals are Paid

Hospital Rate Setting in Maryland

Maryland is the only state in the country that sets the rates that hospitals charge. This unique system has been in place since 1977 and has resulted in Maryland hospital charges increasing at a slower rate than the rest of the country. In this rate-setting system, the State sets a fixed reimbursement amount for each health care procedure provided in a hospital setting, so that all payers (including private and government) pay the same price at the same hospital. However, the rates are hospital-specific, which contributes to overall differences in costs across hospitals. Hospitals are not allowed to negotiate these rates with different payers or consumers. Outside of hospitals (and often within hospitals), other health care providers are not paid under this rate-setting system.

The Maryland hospital rate setting system has been evolving to improve population health, provide better overall health care, and reduce costs. For example, since 2014, hospitals in Maryland are no longer paid based on the volume of procedures they produce. Instead, each hospital receives a fixed annual amount — called a global budget — with opportunities for additional funding if they reduce hospital-acquired complications and make other improvements. This change in incentives has already been shown to improve hospital quality in Maryland while limiting cost growth, saving taxpayers money.

The State of Maryland, including the Health Services Cost Review Commission (HSCRC), along with the federal government, has provided hospitals with the ability to partner with other healthcare providers to further improve health care quality and the health of Marylanders while, hopefully, reducing the cost of care. Accomplishing this will take everyone’s focus on the cost and quality of care.

For more information on how Maryland’s hospital rate-setting system works, visit the HSCRC website.


Helpful information on Maryland's New Payment Model:

Maryland’s Total Cost of Care Model

What the Centers for Medicare and Medicaid say:

Maryland All-Payer Model

Maryland Total Cost of Care Model