Work AHEAD: State, Federal Officials Finalizing Terms Of New Hospital System In Maryland

By Danielle J. Brown, Maryland Matters

November 13, 2025

State and federal officials are finalizing the terms of an agreement to usher in a new hospital payment system in Maryland to replace the one set to expire at the end of the year.

The state’s hospital-rate setting commission gave an overview Wednesday of some of the terms laid out in a future agreement with federal officials to transition the state into a federal program called the States Advancing All-Payer Health Equity Approaches and Development, or AHEAD, model.

There are still some details to work out, some that may take several years to complete, officials said. But the new model will let the state retain some of the authority it has now to set rates and global budgets for hospitals, even if there is more federal involvement than in the prior system.

“This is going to be an ongoing discussion,” Jonathan Kromm, executive director for the Health Services Cost Review Commission, said at the Wednesday meeting. “With a two-year time window before some significant changes happen.”

The comments come as the finalized AHEAD model is expected to be signed in the near future.

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Maryland’s current system, called the Total Cost of Care model, allows the state to set annual payments to hospitals in advance but includes patient outcome goals — reducing readmissions, for example — as incentives.

With that system ending this year, state health officials have been working out a new system with federal agencies. Maryland was one of the first states, with Vermont, selected by the Biden administration last year to implement the new AHEAD model.

The federal AHEAD program is actually modeled on Maryland’s Total Cost of Care system and took inspiration from similar models in Vermont and Pennsylvania.

Gov. Wes Moore signed an agreement with Biden administration officials last November on terms of the AHEAD model, but the incoming Trump administration put that plan on hold so it could take another look at the model agreement and make some changes.

The state has been negotiating with officials at the federal Center for Medicare and Medicaid Innovation (CMMI) on the revised AHEAD model since February. The parties appear to be near an agreement, as the HSCRC is now mapping out what policy changes are ahead for the commission.

One of the major changes is that Maryland will likely lose its ability to set Medicare rates, an authority that’s been in place for about 40 years under a waiver granted by CMMI.

In the time since, the state’s health care system has evolved and the HSCRC now determines the rates for care across all hospitals in the state, so that health care service costs are similar whether someone has private insurance, Medicare or Medicaid.

Draft terms of the revised AHEAD model indicate that Maryland is set to lose the authority to set Medicare rates. That could have ripple effects on rates for Medicaid and private insurance, due to the state’s all-payer model that aims to keep costs for health care consistent across the board, according to health care advocates.

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That said, the new agreement seems to also prompt Maryland to “stabilize” the state’s uniquely challenging Medicare Advantage market.

Insurance carriers say that Maryland’s current hospital system is costly for them to do business in. This is leading to several carriers pulling out of the state or reducing their coverage, kicking thousands of retirees off their health care plans in the process.

The revised agreement still aims to track population health as the previous agreement had, but adds a new emphasis on finding new ways to enhance choice and competition in the health care market. The HSCRC is also expected to “determine services that could be carved out of global budgets” while still meeting population health goals and hospital revenues.

As the state moves closer to this change, HSCRC Commissioner Nicki McCann said it will be an opportunity to track the effectiveness of the state’s hospital model going forward.

“What we’re doing is meaningless if we’re not improving the health of Marylanders, and so I think this is critically important to measure success of this over the long term,” she said during the meeting.

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