Ambulatory practice variation in Maryland: Implications for Medicaid cost management

Simulation modeling with data from the Maryland Medicaid Management Information System has provided an opportunity to examine policy options and assess their likely impact on savings before program decisions were made. Analysis of a large sample of the Maryland Aid to Families with Dependent Children (AFDC) Medicaid subpopulation confirms that a significant difference in utilization and cost to Medicaid exists between usual sources of care for AFDC clients even after controlling for patient demographics and case-mix differences. Findings indicate that savings from reduced use of hospital outpatient departments may offset increases of as much as 40–50 percent in physician fees under certain assumptions.