Rural health care—or at least the closure of hospitals in rural areas—has gotten a lot of attention. Rural hospital closures more than doubled between 2013 through 2017, from 31 to 64 closures (see 64 Rural Hospitals Close In Past Five Years). Delivering health care services to isolated populations across broad geographies has always been a logistical challenge. And, getting a critical mass of consumers and driving distances to do home-based care is a financial challenge—with the traditional fee-for-service (FFS) reimbursement model at the heart of financial sustainability problems. Largely as a result of the reliance of rural hospitals on FFS admissions, many of them (41% by some counts) have negative operating profit margins (see The Pennsylvania Rural Health Model).
The net effect of these longstanding consumer access and financial challenges is apparent in the health care statistics. Rural populations (roughly 46 million people) lead the country in five leading causes of death including heart disease, cancer, unintentional injuries, chronic lower respiratory disease, and stroke (see Rural Americans At Higher Risk Of Death From Five Leading Causes).
One possible solution is the use of telehealth, which surprisingly, rural populations have not embraced as thoroughly as they should. According to the United States Department of Agriculture (see Rural Individuals’ Telehealth Practices: An Overview), while 11% of urban residents used telehealth for health maintenance activities—such as “make appointments, examine and maintain medical records and accounts, pay medical bills, communicate with their health providers, and have direct online interaction with medical staff”—only 7% of rural consumers used telehealth for health maintenance. Those percentages drop to 2.5% of urban consumers and 1.3% of rural consumers who use health monitoring tools, or “medical devices ranging from simple self-actuated or automated medical alert devices.”
While I think it is critical to increase the use of tech-enabled services, that won’t bring financial sustainability for rural hospitals. But a new reimbursement model on the horizon holds potential for stabilizing the finances of rural care delivery. In 2017, the Centers for Medicare & Medicaid Services (CMS) and the Commonwealth of Pennsylvania announced the formation of the Pennsylvania Rural Health Model that will allow rural hospitals to transition from a FFS reimbursement system based on volume to a multi-payer global budget payment method (see Pennsylvania Rural Hospital Financing Model Announced In CMS/State Collaboration).
The financial underpinnings of the Pennsylvania model? A global budget—a fixed amount set in advance and funded by participating payers. The global budget in this model is a fixed annual prospective payment that is calculated based on historic net patient revenue data (either the average of the past three years or the most recent year, whichever is highest) and paid to the hospitals on a monthly basis. The global budget is adjusted annually for transformation-related changes in service utilization. The model is simple in its construct:
- Each performance year of the model, Pennsylvania will prospectively set the all-payer global budget for each participating rural hospital, based primarily on hospitals’ historical net revenue for inpatient and outpatient hospital-based services from all participating payers.
- Each payer will then pay the participating rural hospitals for all inpatient and outpatient hospital-based services based on the payer’s respective portion of this global budget.
- In the first two years, participating hospitals will retain 100% of the realized savings. In the third year, participating hospitals will retain 75% of the savings. In the fourth and fifth years, the payers and hospitals are expected to share an equal portion of the savings.
The global payment also hinges on whether the hospitals meet performance expectations. Specific performance targets haven’t been announced yet, but will be centered on “increasing access to primary and specialty care; reducing rural health disparities through improved chronic disease management; and decreasing deaths from substance use” (see Pennsylvania Rural Health Model).
What I think is most important about this model is that it allows rural hospitals and health systems to participate in value-based reimbursement, with a model that doesn’t jeopardize financial stability. And, the model allows flexibility and promotes innovation in programming. An example of this in practice is the Geisinger Jersey Shore (Pa.) Hospital, which has used this model to hire a health coach and an emergency department care manager, and is currently developing telehealth access to pulmonologists and cardiologists for its consumers (see Pa. Taps Hospitals, Payers For Rural Global Budget Experiment).
We’ll be covering the challenges and successes of this model over time. And I think it could be a reimbursement approach that could be applied to other geographies or consumer groups where the “fit” of traditional value-based reimbursement models don’t work well. For an update on rural health issues, check out our recent coverage:
- Texas Blues & Texas A&M University To Test Drones & Self-Driving Cars For Rural Health Delivery
- About 5% Of Medicare Psychiatrists Provide Telemental Health Services
- Top Recruiting Targets Of Rural Behavioral Health Provider Organizations – Occupational Therapists, Pharmacists & Nurse Practitioners
- One In Five Rural Hospitals At High Risk Of Closing, Analysis Finds
- Higher Rates Of Neonatal Abstinence Syndrome Found In Counties With High Unemployment & In Counties With Shortages Of Mental Health Professionals
- Characteristics Of The Rural Behavioral Health Workforce: A Survey Of Medicaid/ Medicare Reimbursed Providers
- Indian Health Service Announces New Policy To Expand MAT For Opioid Treatment In Remote Locations
- Rural Hospital Closures: Number & Characteristics Of Affected Hospitals & Contributing Factors
- PHI Launches Home Health Rural Workforce Pilot In Minnesota & Wisconsin
- ECHO Autism Teleconsultation Program Reduced Wait Times Up To Six Months For Highest-Risk, Rural Children
And for more on value-based reimbursement, join my colleague OPEN MINDS Senior Associate Ken Carr on June 3 in New Orleans for his executive seminar, Succeeding With Value-Based Reimbursement: An OPEN MINDS Executive Seminar On Organizational Competencies & Management Best Practices For Value-Based Contracting.