What Is the HSCRC? Maryland’s Hospital Rate-Setting Commission Explained

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

What is the HSCRC, in plain English?

Most hospitals in the United States negotiate their prices separately with each insurer and are paid by Medicare on a schedule set by the federal government. Maryland works differently. The Health Services Cost Review Commission, usually called the HSCRC, is an independent agency of the State of Maryland that regulates hospital rates.^[1] Rather than every payer bargaining on its own, a state commission decides what Maryland hospitals may charge and, under global budgets, how much revenue each hospital is approved to earn in a year.

The HSCRC describes itself as an independent state agency that works to ensure all Marylanders have access to high-value, affordable health care. It regulates hospital rates, advances health system transformation and supports the AHEAD Model.^[1] A useful way to think about it is as a combination of a public utility regulator and a payment-system designer: it sets the price rules, it decides how much revenue each hospital may earn, and it uses financial rewards and penalties to encourage quality and efficiency.

How did Maryland end up with a rate-setting commission?

The Maryland legislature established the rate-setting system in 1971 and created the HSCRC as an independent agency with hospital rate-setting authority. The Commission was given responsibility for rate-setting for private payers in 1974, and it was extended to Medicare and Medicaid under a 1977 federal waiver.^[2] The waiver is the reason Medicare, which elsewhere pays hospitals according to national rules, pays Maryland hospitals according to HSCRC-set rates. A separate article in this series traces the full history from 1971 to the AHEAD Model.

The core idea has stayed constant for decades. Maryland has been built on an all-payer concept, in which all payers pay the same rate for hospital care with the exception of certain small policy-driven adjustments. The Regulatory Working Group notes that a payer differential was established at the inception of the first Medicare waiver in 1977, that the public payer differential is 5.7 percent for all public payers, and that payers may also be eligible for an additional 2 percent prompt-pay discount.^[3] The group also reports HSCRC benchmarking showing that commercial payers in Maryland incur approximately 20 percent lower hospital costs than in demographically similar areas across the country.^[3]

What does the HSCRC actually do?

The HSCRC’s own website groups its work into several program areas, and each matters to a hospital executive.^[1]

• Rate setting. The Commission sets rates for each hospital’s cost centers and publishes annual rate reports. A rate report lists all rates calculated for each applicable cost center for each hospital for the rate year, using three-letter center codes for daily, ancillary and ambulatory cost centers. Each cost center has a standard unit of measure defined in the Commission’s Accounting and Budget Manual.^[6]
• Global budgets. Under Global Budget Revenue, each hospital’s total annual revenue is known at the start of the fiscal year, based on a historical base period and adjusted each year.^[7]
• Quality programs. The Commission runs pay-for-performance programs that put a share of hospital revenue at risk, including the Maryland Hospital Acquired Conditions program, the Readmission Reduction Incentive Program, Quality Based Reimbursement and the GBR-PAU Efficiency Adjustment.^[1]
• Hospital data. The Commission collects financial and clinical data from hospitals, publishes annual reports and administers programs such as community benefit reporting and financial assistance and debt collection oversight.^[1]
• Modernization. The Commission supports the AHEAD Model, the successor to Maryland’s Total Cost of Care Model.^[1]

Together these functions make the HSCRC the single most important external body for a Maryland hospital’s finances.

How does the annual cycle work?

The Commission’s year revolves around the rate year, which runs from July 1 to June 30.^[4] The HSCRC updates hospitals’ rates and approved revenues on July 1 of each year to account for inflation, policy-related adjustments, performance adjustments and settlements from the prior year.^[4] The update factor is developed in public: staff prepare a recommendation, a Payment Models Workgroup and stakeholders review it, hospitals, insurers and others submit comment letters, and the Commissioners vote. For rate year 2026, the final recommendation was approved at the Commission’s June 11, 2025 meeting.^[4]

The Commission holds regular public meetings; for example, the January 14, 2026 public meeting included a presentation by the Maryland Secretary of Health on the AHEAD Model transition.^[8] Hospital finance teams, insurers, trade associations and consultants follow these meetings closely because the policies decided there flow directly into rate orders and approved revenue.

Which hospitals does the HSCRC cover?

The great majority of Maryland’s acute care hospitals operate under global budgets. A small group of hospitals is treated separately. In the rate year 2026 update recommendation, hospitals not under global budgets, namely psychiatric hospitals and Mt. Washington Pediatric Hospital, received an inflation-only update of 3.36 percent rather than the per-capita global budget update.^[4] Under the AHEAD agreement, an Eligible Hospital is an acute care hospital, critical access hospital or rural emergency hospital located in Maryland that meets the model’s eligibility criteria, and a Participant Hospital is an Eligible Hospital that has signed a Hospital Participation Agreement with CMS and the State and a global budget revenue agreement with the State.^[5]

Because rules differ by hospital type, an executive should confirm early which policies apply to their own facility, rather than assuming that a policy described for “Maryland hospitals” applies in every detail.

Why does the HSCRC matter more now than ever?

The HSCRC’s authority is about to change in an important way. Under the amended AHEAD Model agreement between Maryland and the federal Centers for Medicare & Medicaid Services, CMS will no longer waive Medicare requirements to allow the HSCRC to set Medicare fee-for-service hospital rates as of January 1, 2028.^[5] The Regulatory Working Group summarizes the shift this way: AHEAD will transition 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 will continue to set hospital rates and implement global budgets for all other payers.^[3]

For executives, that means the HSCRC will remain central for commercial and Medicaid revenue, while Medicare revenue will increasingly follow federal rules. Preparing for that split is a core theme of the 2028 and 2029 changes covered later in this series.

Frequently asked questions

What to do next

1. Confirm which HSCRC policies apply to your hospital type.
2. Find your hospital’s latest rate report and approved revenue figures.
3. Read the next guide in this series on Global Budget Revenue.
4. List which parts of your revenue will move to CMS rules in 2028.