U. of Maryland system thrives despite state payment shake-up
Baltimore-based University of Maryland Medical System improved its financial performance in the past year, despite the state’s first-in-thenation experiment with hospital global budget caps.
The system reported an operating surplus of $118.1 million on $3.4 billion in revenue for the year ended June 30, compared with an operating surplus of $48.2 million on $3 billion in revenue last year. Its operating margin jumped to 3.5% from 1.6%.
The system’s improvement in topline revenue was largely because of its December 2013 merger with Upper Chesapeake Health System, whose addition led to an overall 3.4% increase in admissions year over year. But inpatient volume remained flat or declined at most of the University of Maryland’s 11 hospitals, while outpatient visits rose 9.8%.
The new hospital global budget payment model in Maryland, initiated in January 2014, is designed to control healthcare spending. It caps inpatient and outpatient revenue growth at 3.58% annually. The fixed payment is adjusted for patient volume changes, inflation and other factors, but aims to incentivize hospitals to reduce costs instead of attracting new admissions.
The University of Maryland did take a hit to its bottom line from the volatility in the financial markets, which led to investment income losses. It ended the year with $95.1 million in total surplus for 2015, compared with a total surplus of $225.9 million in the previous year.