Maryland's Patient Referral Law
  • Maryland's Patient Referral Law was adopted in 1993 to address concerns about potential overutilization or unnecessary utilization of health care services.  Maryland's law was put in place at a time when a fee-for-service payment system was in place.

  • That fee-for-service payment structure has rapidly evolved, particularly in Maryland given our unique All-Payer Model contract that is no longer volume based and instead drives collaboration among providers through a patient-based approach that focuses on improving outcomes and management of resources.  At the same time, changes at the federal level to Medicare reimbursements are shifting away from fee-for-service through the implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) by the Centers for Medicare and Medicaid Services (CMS).

  • Complying with this changing landscape will require collaboration and the adoption of alternative payment models that allow providers to share in the revenue saved by better care management and coordination for patients.   CMS has recognized that this transformation would be impeded by the federal Stark law (the federal self-referral law on which Maryland's law and the law in other States are based) and has granted several waivers to the Stark law to facilitate the use of value-based payment models.  The effort to reform Stark at the federal level continues.

  • Maryland's law, however, does not have a provision that would allow for waivers, and a waiver of the federal law does not protect providers from the provisions of Maryland's law.  This problem is particularly acute because Maryland's law is more restrictive than the federal law and the law in other States, given the definition of "compensation agreement" and the application of the law to a broad range of providers.

  • Recognizing this, many regulators, hospitals, physicians and other providers have been concerned that Maryland's self-referral law is outdated and impedes the implementation of, and compliance with, the All-Payer contract and MACRA.  In 2015, the Maryland Health Care Commission convened a Maryland Provider-Carrier Workgroup to look at the patient referral law and make recommendations.  While no firm agreement or proposal came from the group, the report notes several points of consensus that emerged, most notably that the law "should be modernized to allow for the development of additional bona-fide value-based payment models, risk-sharing agreements, and alignment models."

  • In the 2016 Session, two bills were introduced, each with a different approach to addressing this issue (House Bill 929 and Senate Bill 886).  Discussion and negotiations took place for several months, but ultimately no bill passed.  Legislative leaders, however, asked the interested parties to get together over the interim to see if a compromise could be reached.

  • During the 2016 interim, stakeholders met many times to discuss the issue through an Interim Provider Alignment Workgroup, convened by the Maryland Hospital Association, the Maryland Patient Care and Access Coalition, and the Maryland Radiological Society.  A broad range of interested parties, including payers, regulators and many provider groups, participated in the discussion.

  • That work culminated in the compilation of a Report of the Provider Alignment Workgroup in November 2016.  The Report conveyed to legislative leaders that there were varying levels of support for allowing certain types of payment models.  Briefly, those options ranged from the adoption of federally-approved models that would allow for compliance with MACRA and implementation of the Waiver, to broadly permitting commercial-based value-based payment models that advanced cost reduction and quality improvement goals.

  • During this same time period, the Maryland Health Services Cost Review Commission was working diligently with stakeholders to implement changes to the Waiver contract (that included federally approved waivers to federal fraud and abuse restrictions) - the Hospital Care Improvement Program (HCIP) and the Complex and Chronic Care Improvement Program (CCIP).  HSCRC grew increasingly concerned that controversy over some parts of the Workgroup's report may result in the passage of no legislation in the 2017 Session of the Maryland General Assembly.  Such an outcome would have thwarted their efforts to successfully implement HCIP and CCIP, again because of the restrictive nature of Maryland's self-referral law.

  •  Senate Bill 369 and House Bill 403 - Maryland Patient Referral Law - Compensation Arrangements under Federally Approved Programs and Models were introduced by the Chairs of the two policy committees, Senator Mac Middleton and Delegate Shane Pendergrass at the request of the HSCRC.  As introduced and passed, the new law now permits the participation of providers in compensation agreements, despite the general prohibition against self-referral, if the arrangement is funded by or paid under:

            --  a Medicare Shared Savings Program accountable care organization (ACO);

            -- an advanced payment ACO model, a pioneer ACO model, or a next generation ACO model, as authorized under federal law;

            -- an alternative payment model approved by CMS; or

            -- another model approved by CMS that may be applied to health care services provided to both Medicare and non-Medicare beneficiaries.

  •  The law also requires that the exemption only applies if a copy of the participation agreement and other relevant documents (only for agreements that are not funded fully by or paid fully under Medicare or Medicaid) are submitted to the Maryland Insurance Administration (MIA) for MIA's review to ensure that the agreement does not amount to the provision of insurance under Maryland law.

  • The legislation was signed by the Governor on April 18, 2017 and took effect June 1.  Despite this progress, many in the provider community believe that more needs to be done to encourage and allow these new alternative payment models.  The new law, for example, covers primarily hospital-based (not provider-provider) agreements, and addresses the government side, but not the commercial side, of payers.  It is anticipated that stakeholders will continue to work to make progress in those areas.