What Changes for Maryland Hospitals in 2028 and 2029 Under the AHEAD Model

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

Why do 2028 and 2029 matter so much?

Maryland has set hospital rates for Medicare since 1977. The amended AHEAD agreement ends that arrangement for Medicare fee-for-service rates at the start of 2028. The Regulatory Working Group describes the change as transitioning rate-setting authority for Medicare fee-for-service from the HSCRC to CMS’s Innovation Center under a hospital global budget approach, while the HSCRC continues to set rates and global budgets for all other payers.^[2] The Maryland Association of Counties adds that officials had anticipated that the renegotiated terms would allow the federal government to set Medicare rates from 2028, with a transition to full CMS authority in 2031.^[4]

This guide relies on the executed agreement, the Regulatory Working Group’s proposal and the HSCRC’s own meeting records. Details that CMS has yet to publish, such as final financial specifications, may change, and executives should confirm the current status with CMS and the HSCRC.

A timeline of what changes

The rest of this guide explains each item.

2028: what changes first

Who sets Medicare rates. Section 5 of the agreement states that as of January 1, 2028, CMS will not waive the requirements of the Social Security Act to allow the HSCRC to set Medicare fee-for-service hospital rates.^[1] From performance year 3, CMS calculates and pays each participant hospital’s Medicare fee-for-service hospital global budget under the CMS-designed methodology, and services excluded from that methodology are paid at hospital-specific rates set at the reimbursement levels under it.^[1]

How the Medicare budget is built. For performance year 3, CMS will calculate a hospital’s global budget baseline from baseline revenue and Medicare inpatient and outpatient prospective payment system claims data for calendar year 2026, and apply an adjustment factor in the form of an annual payment adjustment, plus other adjustments such as service line adjustments described in the Financial Specification Document. If the update factors for 2025 and 2026 exceed the cumulative national per capita cost trend for those years, CMS will instead use one of two alternate baselines: calendar year 2024 revenue with an adjustment factor, or a pro rata reduction to the 2026 claims data.^[1] Critical access hospitals have a baseline informed by their latest cost report.^[1] Because the baseline year is calendar 2026, what happens in a hospital’s Medicare volume and mix this year can matter for 2028.

What adjusts the Medicare budget. The agreement describes a savings adjustment: if the State fails to meet the Medicare fee-for-service target in a performance year, CMS will apply a savings adjustment to hospital global budgets, with CMS retaining final decision-making authority, and an upward adjustment in a later year if savings exceed the target. CMS will also apply two-sided performance adjustments in the first year data are available, and will notify each hospital of its budget at least 30 days before the performance year.^[1]

Medicaid. The State continues to set Medicaid hospital global budgets, but from performance year 3 through 7, Medicaid rates are to change commensurate with Medicare rate changes, with Medicaid rates aligned with the savings component and set based on Medicare rates published by CMS.^[1]

Quality programs. The agreement says that beginning in performance year 3, participant hospitals transition from State-administered quality programs to CMS programs for Medicare beneficiaries: Hospital Value-Based Purchasing, the Hospital-Acquired Condition Reduction Program, the Hospital Readmissions Reduction Program, and the inpatient and outpatient quality reporting programs. The State may maintain its approved programs for Medicaid and commercial payers.^[1] The HSCRC has described the timing more gradually. Its March 2026 memo on the rate year 2028 QBR program says hospitals will be moving to the CMS programs for rate year 2029 or 2030, and an August 2026 workgroup presentation says that CMS will formally transition to its hospital quality programs in calendar year 2030 using CMS fiscal year 2030 results, with calendar year 2028 and 2029 adjustments to Medicare fee-for-service global budgets based on the State all-payer quality programs for rate years 2028 and 2029.^[6][7]

Geo AHEAD and primary care. CMS will operate Geo AHEAD beginning in performance year 3, with a first performance period from January 1, 2028 through December 31, 2031. MDPCP-AHEAD runs for performance years 1 through 3 (through 2028) unless modified.^[1]

The State’s response: moving costs to commercial payers

Because Medicare and Medicaid revenue will grow more slowly under the savings schedule, the State has acted to protect hospital revenue by shifting costs to commercial payers. The Regulatory Working Group recommended a $435 million annual increase to commercial rates for hospitals, to replace dollars lost under other payers, phased in from 2028 to 2032 at $87 million each year, estimated to increase commercial premiums by 1.8 percent by 2032. It describes the $435 million as half of the anticipated required Medicare fee-for-service savings when those savings are extended across all public payers.^[2]

The Commission acted on this. The approved minutes of the January 14, 2026 public meeting record that, under the approved recommendation, Maryland will shift $435 million to commercial rates over a seven-year period, beginning in 2028 at $87 million per year, effectively covering about half of the projected savings requirement. The minutes also record a Medicare Advantage stabilization plan that uses the HSCRC’s rate-setting authority to give qualified plans an 11.55 percent discount on hospital rates, a public payer differential.^[3] According to reporting based on State documents, total increases to commercial rates across both policies would amount to 2.55 percent by 2032, with the largest single-year increases in 2028, at 0.6 percent combined, and the Commission’s executive director said both policies could be refined in future discussions.^[5]

The bridge adjustment: how the transition is cushioned

The agreement does not switch Medicare budgets from one method to another overnight. Section 12(b)(ii) lets the State modify each participant hospital’s CMS-calculated Medicare fee-for-service global budget for performance years 3, 4 and 5 by redistributing part of the total Medicare hospital global budget revenue among participating hospitals: no more than 30 percent of the total in 2028, 20 percent in 2029 and 10 percent in 2030. The purpose is to adjust for the effects of transitioning from the State-designed to the CMS-designed methodology for any particular hospital.^[1] The HSCRC calls this the Bridge Adjustment.^[9]

Status: draft. The Commission has not voted on the Bridge Adjustment; what is described here is staff’s draft recommendation, and the final policy may differ.^[9] At its October 21, 2026 meeting the Commission received staff’s draft recommendation for how to apply it. In practice, the Bridge Adjustment blends the trended historical State-defined Medicare budget with the CMS-defined budget, using a State weight that shrinks over time (staff propose ranges of 50 to 85 percent for 2028, 25 to 65 percent for 2029 and 0 to 35 percent for 2030). It must be revenue neutral, so it moves dollars among hospitals without adding any, and staff present two calculation options and ask for authority to implement the policy in late 2027 without a further vote. Comments are due November 11, 2026.^[9][10] Our separate guide to the Bridge Adjustment walks through the options with the HSCRC’s worked example.

The HSCRC separately uses the phrase “bridge period” in its quality workplan for the interim years before CMS quality programs formally apply, aiming for a minimum viable product rather than a perfect end state.^[7]

2029: what changes next

2029 is the first year in which several phase-downs take hold. The Medicare savings component rises from 0.30 percent in 2028 to 0.38 percent, raising the efficiency the State must deliver.^[1] The bridge adjustment, the State’s ability to redistribute Medicare hospital global budget revenue among hospitals, falls from no more than 30 percent of total Medicare hospital global budget revenue in 2028 to no more than 20 percent in 2029 and 10 percent in 2030, which the agreement describes as an adjustment for the effects of transitioning from the State-designed to the CMS-designed methodology.^[1] The agreement provides the bridge adjustment only for performance years 3 to 5, so on its terms hospitals’ Medicare budgets follow the CMS methodology without State modification from 2031.

The Working Group’s cost-shift recommendation adds another $87 million each year from 2029 to 2032, so that by 2032 the total equals $435 million.^[2] And primary care policy is due for a decision: in performance year 3, CMS and the State will evaluate the capitated tracks in Primary Care AHEAD and decide whether the Maryland Primary Care Program continues in performance year 4 and after. If CMS develops a similar program approved for implementation in 2029, it will consult with the State on whether to extend MDPCP-AHEAD or move participants to Primary Care AHEAD.^[1]

Assessments under split global budgets

A less visible 2028 change concerns the assessments hospitals’ rates help fund. At its October 21, 2026 meeting the Commission received a draft report on how assessments will work under split global budgets from fiscal year 2028. HSCRC staff list assessments included in the base-year Medicare global budgets: the Medicaid Deficit Assessment, the Healthcare Coverage Fund, the CRISP assessment, Nurse Support Programs I and II, and HSCRC and Maryland Health Care Commission user fees. The report notes that beginning in January 2028 the HSCRC will not have regulatory authority over Medicare payments and so will not control the Medicare portion of assessments, and that staff are addressing the technical question of how much funding to deem included in the Medicare baseline.^[10] An illustrative example with dummy numbers shows the idea: if a base-year assessment of $100 million is 35 percent Medicare fee-for-service ($35 million), then in a later year with a $125 million assessment the Medicare share grows only by Medicare’s inflation (to about $36 million in the example) and the remaining $89 million is assessed on multi-payer global budgets.^[10] The figures are the HSCRC’s dummy values, not forecasts.

What the HSCRC says is coming: the implementation calendar

The HSCRC describes its work as shifting from AHEAD policy negotiation to implementation. In September 2026 the Acting Executive Director said staff would organize their work across six domains (rate assessments, financial policies, quality programs, care innovation, model operations and multi-agency State initiatives), publish finalized guidance early to give hospitals a nine-month planning window, and support the transition with bi-weekly Payment Model Workgroup meetings, a report on physician spending, submission of an all-payer total cost of care target to CMMI and safety-net bridge policies designed to cushion hospitals against financial cliffs.^[10] The workplan presented in October 2026 lists the all-payer total cost of care growth and primary care investment targets and the operationalization of the Medicare Advantage stabilization policy as completed.^[10]

Transition funding already approved. The Commission approved $100 million in one-time funding over rate years 2027 and 2028, $50 million a year, to help hospitals cover AHEAD transition costs. On September 9, 2026 it unanimously approved the distribution formula: a $500,000 base allocation to each acute care hospital, totaling $21.5 million (about 40 percent of each year’s $50 million), with the remaining $28.5 million distributed in proportion to gross patient revenue, and freestanding medical facilities and Shock Trauma counted with their parent hospitals. Each hospital must submit a chief financial officer attestation by July 31 following each rate year describing how the funds were used, and staff said they would review the program after the first year and might change the second year, including potentially increasing the amount.^[10] The League of Life and Health Insurers of Maryland asked that future funding be integrated into the annual update factor process.^[10]

Medicaid and Medicare Advantage parity. The October 2026 Medicaid update explained that under AHEAD the Medicare fee-for-service rates will be set by CMMI separately from other payers, that the agreement commits CMS and the State to change Medicaid rates commensurate with Medicare rate changes, and that the HSCRC will need a comparison calculation to evaluate parity between payer rates. It is expected to need to show that effective Medicaid and Medicare Advantage rates are equal to or below Medicare fee-for-service. Exact compliance rules are unknown because of federal rulemaking on state-directed payments and provider taxes under House Resolution 1; the proposed state-directed payment rule would limit Medicaid payment to 100 percent of the total published Medicare rate in expansion states such as Maryland and tie compliance to the individual claim or service level, which the HSCRC notes contradicts AHEAD’s per-capita metrics.^[10]

What is still uncertain?

Several details are not final, and the Commission has not yet voted on the Bridge Adjustment or the rate year 2029 quality policy, which are both still drafts.^[9] CMS’s financial specifications for the Medicare global budget method are still being finalized: the HSCRC’s October 2026 draft recommendation reports that CMS’s Innovation Center has released version 3.2, that finalized specifications are due in mid-January 2027, and that CMS’s preliminary hospital budget estimates so far rely on fiscal year 2024 data, with final budgets, based on calendar year 2026 data, likely in 2027.^[9] An HSCRC Volume Workgroup presentation in July 2026 added that the HSCRC was still discussing with CMS the alignment of a list of carved-out services.^[8] The agreement provides for up to sixty days of public comment on draft specifications each year and for the final performance year 3 specifications to be reflected in CMS’s Financial Specification Document by January 15, 2027.^[1] The HSCRC is also developing carve-outs from hospital global budgets for certain highly specialized, high-acuity cases, covered in the guide on annual adjustments.^[8] The Commission’s executive director has said the State’s cost-shifting and Medicare Advantage policies may be refined.^[5] The all-payer total cost of care growth targets for later years are to be set by the State.^[1] And the agreement itself can be amended. Executives should treat this guide as a map of the current agreement and policy, not as a forecast of their hospital’s revenue.

What should executives do now?

This section is practical guidance from Two Pillars, not a statement of any agency. Ask the HSCRC how it will apply the bridge adjustment to your hospital, and build a Medicare revenue walk: estimate your hospital’s Medicare fee-for-service share and how 2028 revenue could differ from today under the CMS method, including the 2026 baseline year. Stress-test margin against the savings component rising each year. Plan for two quality scorecards, CMS for Medicare and Maryland’s programs for others. Model the commercial rate changes and what they mean for your payer mix. Review primary care alignment and your position in your region if Geo AHEAD entities compete for attribution. And take part in CMS’s public comment on the financial specifications, because the agreement provides for up to sixty days of comment each year.^[1]

Frequently asked questions

What to do next

1. Estimate your Medicare fee-for-service share and 2028 exposure.
2. Plan for CMS and Maryland quality programs together.
3. Model commercial rate changes and payer mix.
4. Track CMS’s financial specifications and comment periods.

Sources

1. Maryland Health Services Cost Review Commission (hosting the executed agreement), Amended and Restated Achieving Healthcare Efficiency through Accountable Design (AHEAD) Model Maryland State Agreement. Accessed October 2026.
2. Maryland Regulatory Working Group (published by the HSCRC), Proposal of the Regulatory Working Group: Cost-Shifting and Medicare Advantage (November 2025). Accessed October 2026.
3. Maryland Health Services Cost Review Commission, February 2026 Post-Meeting Materials, including approved minutes of the January 14, 2026 public meeting. Accessed October 2026.
4. Maryland Association of Counties (Conduit Street), 2026 Issue Preview: Hospital Rate Setting and the AHEAD Model (December 31, 2025). Accessed October 2026.
5. Maryland Matters (republished by Yahoo Finance), State turns to private insurers to help fund shift to new hospital rate-setting framework (January 2026). Accessed October 2026.
6. Maryland Health Services Cost Review Commission, Maryland Rate Year 2028 Quality Based Reimbursement Program (memo, March 2, 2026). Accessed October 2026.
7. Maryland Health Services Cost Review Commission, Performance Measurement Workgroup meeting slides (August 19, 2026). Accessed October 2026.
8. Maryland Health Services Cost Review Commission, Volume Workgroup Meeting #4: GBR Carve-outs (July 2026). Accessed October 2026.
9. Maryland Health Services Cost Review Commission, October 2026 Public Pre-Meeting Materials (646th meeting, October 21, 2026), including the Draft Recommendation: Bridge Adjustment. Accessed October 2026.
10. Maryland Health Services Cost Review Commission, October 2026 Public Post-Meeting Materials (646th meeting, October 21, 2026), including presentation slides. Accessed October 2026.

Sources checked October 2026. This guide is general information for hospital leaders and is not legal, financial or regulatory advice. HSCRC and CMS policies change, and rate-year figures here are examples from the documents named in the sources. Confirm current figures with the HSCRC and CMS before relying on them. Two Pillars & Co is independent of the organizations cited. See our editorial policy.