How to Manage a Hospital Under a Global Budget: A Practical Guide for Maryland Executives

By Two Pillars & Co Advisory Group · Sources checked October 2026

How does strategy change under a global budget?

In a volume-based system, growth in activity is growth in revenue, and the main questions are about pricing and payer mix. Under a Maryland global budget the question shifts. Annual revenue is known at the start of the year, determined from an historical base adjusted for inflation, volume, quality, payer mix and uncompensated care.^[1] The Health Care Transformation Task Force describes the operating consequence: hospitals continue to bill at HSCRC-set rates, monitor total year-to-date charges and revenue against the annual global budget, and adjust unit charges to remain within the approved budget.^[3] The financial result therefore depends mostly on cost, quality, utilization and the adjustments the HSCRC applies. This guide is Two Pillars’ practical perspective, and each policy statement is sourced.

Lever 1: Manage charges and cash against the budget

Because rates are a tool for collecting approved revenue, the monthly discipline is to compare year-to-date charges with the budget and adjust. The HSCRC divides approved revenue into a mid-year target and a year-end target, because the financial tests use calendar-year results; for rate year 2026, staff applied 49.73 percent of approved revenue to the mid-year target.^[4] A hospital that ignores seasonality can find itself over or under budget at the point the Commission measures it. Build a monthly report that shows charges, revenue, the target and the projected year-end position, and set triggers for rate adjustments.

Lever 2: Manage cost per capita

With revenue largely fixed, margin comes from the cost of delivering care to the population the hospital serves. Executives should know unit cost by service line, the cost growth that the inflation allowance does and does not cover, and the efficiency expectations in the model. In the rate year 2026 recommendation, for example, the Commission proposed that hospitals in the third quartile or better of the Interhospital Cost Comparison, or within one historical standard deviation of the average, not be penalized under the Integrated Efficiency policy.^[4] Knowing where your cost stands in that comparison tells you whether efficiency is a risk to your budget.

Lever 3: Reduce potentially avoidable utilization

PAU is where financial and clinical goals meet. The PAU savings policy reduces revenue growth in proportion to PAU, and for rate year 2026 the statewide permanent reduction was 0.53 percent, about $113.8 million.^[4] The GBR-PAU Efficiency Adjustment further reduces the demographic adjustment based on historical PAU performance.^[5] A hospital that reduces avoidable admissions and readmissions improves its position on both and improves patients’ outcomes. The HSCRC’s policy page emphasizes care coordination and care management for complex, high-needs patients.^[9] Practical steps include follow-up within days of discharge, care management for high-risk patients, partnerships with primary care and community organizations, and a data feed that identifies who is at risk.

Lever 4: Protect revenue at risk in the quality programs

The HSCRC puts up to two percent of inpatient revenue at risk in each of MHAC, QBR and RRIP.^[6][10][11] For a hospital with $300 million in inpatient revenue, an invented example, two percent is $6 million for a single program. The statewide net effect in rate year 2026 was small, at -0.06 percent,^[4] but hospital results vary and the scoring rules reward specific behaviors, such as preventing complications, patient experience and readmission reduction. Assign an executive owner to each program, know the measures that drive points, and monitor results during the performance period, not only after.

The agreement moves Medicare patients to CMS quality programs, and HSCRC materials place the formal change in 2030, with State quality programs still adjusting Medicare budgets for 2028 and 2029, while Maryland programs continue for other payers.^[7][12] One quality plan that serves both is more efficient than two.

Lever 5: Understand the adjustments that change your budget

Several adjustments are largely outside the hospital’s direct control but not outside its influence. The demographic adjustment depends on the ages and ZIP codes of the patients a hospital serves.^[2] The market shift adjustment moves revenue when patients shift between hospitals, capped at the lesser of the gain or the loss, so winning or losing a service line changes the budget.^[2] Uncompensated care is pooled statewide, so collection practices and financial assistance affect a hospital’s position in the pool.^[8] Read each adjustment on your last rate order, and model how changes in your service mix and market would play out.

Lever 6: Prepare for 2028 and 2029

The AHEAD agreement changes the rules from January 1, 2028: CMS-designed Medicare global budgets, a rising Medicare savings component (0.30 percent in 2028 and 0.38 percent in 2029), a bridge adjustment (State redistribution of Medicare budgets) capped at 30, 20 and then 10 percent through 2030, and a staged move to CMS quality programs for Medicare.^[7][12] The State plans to shift costs to commercial payers starting in 2028. Build a multi-year plan that stress-tests your margin under the new rules, shapes your Medicare volume and mix strategy given the 2026 baseline year, and identifies the cost, quality and utilization improvements that will be needed. A separate guide in this series covers the details.

Key dates to put in your calendar

The HSCRC has published a schedule that finance and strategy teams can plan around. Comments on the draft RY 2029 quality-based reimbursement recommendation are due October 29, 2026, and comments on the draft Bridge Adjustment are due November 11, 2026.^[13] CMS is expected to finalize its Medicare methodology in January 2027, the HSCRC plans final policy presentations between January and March 2027, and the fiscal year 2028 update factor is planned for approval in June 2027, giving hospitals a roughly nine-month planning window before the January 1, 2028 start.^[13] Several of these items, including the Bridge Adjustment and the rate year 2029 quality policy, are still drafts that the Commission has not voted on, so check for changes before relying on them.^[13] Hospitals receiving AHEAD transition funding must also file a chief financial officer attestation by July 31 following each of rate years 2027 and 2028.^[13]

A simple management dashboard

The dashboard is a starting point. The right metrics depend on your hospital, and the Commission’s policies change, so revisit it each rate year.

Frequently asked questions

What to do next

1. Build a monthly budget-position report.
2. Assign an owner to each lever.
3. Model the 2028 and 2029 changes for your hospital.
4. Review your dashboard each rate year.