Pennsylvania charts a path forward for rural hospitals 

stethoscope, coins and calculator
Pennsylvania's new global budget program could boost cash-strapped rural hospitals. (Getty/mckare)

As many rural hospitals struggle to stay open, Pennsylvania is looking to adopt a global budget payment model that could provide relief to facilities in the state. 

The Centers for Medicare & Medicaid Services and the state announced last year they would join forces on the Pennsylvania Rural Health Model, and the program could be a model for other states looking to provide support to their rural hospitals, according to an editorial from Karen Murphy, R.N., chief innovation officer for Geisinger Health System; Lauren Hughes, M.D., deputy secretary for health innovation in the Pennsylvania Department of Health; and Patrick Conway, M.D., former CMS administrator. 

Hospitals that participate in the program will be paid from a multipayer global budget based on their net revenue instead of the traditional fee-for-service model. It's a similar setup to Maryland's program, which was launched in 2014. 

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"This approach is expected to provide rural hospitals with a predictable revenue stream that could support the transformation of healthcare delivery services," the authors wrote in the Journal of the American Medical Association piece. 

Based on that funding stream, hospitals can seeks out local partners to address their community's needs and build new and innovative programs, according to the article. The state also plans to launch a Rural Health Redesign Center that will receive $25 million from CMS over the next five years. 

RELATED: The impact of Medicaid expansion on hospital closures 

The Rural Health Model is working with six hospitals in its first test year, according to the article, but is looking to expand to 30 by year three. 

A third of rural hospitals in the U.S. are at risk for closure and could benefit from participating in value-based care models. But funding mechanisms for these payment models don't often account for the unique needs of rural facilities, such as a small patient pool or high operational costs, so designing models that target them better could encourage participation. 

RELATED: Rural health crisis escalates—Sometimes there's only 1 doctor in town (if you're lucky) 

Pennsylvania's approach will face its own challenges, according to the article. The state's model differs from Maryland's in that it does not set inpatient hospitalization reimbursement rates for its participating payers, so that approach still requires testing. Pennsylvania is also a very large state with a large rural patient population and a high number of commercial and Medicaid managed care organization to manage in the program. 

In addition, there is natural tension between the program's two main goals: improving the finances of rural hospitals while also reducing costs to payers, according to the editorial. 

Plus, Maryland's global health budgets did lead to lower costs, according to a recent study, but it didn't necessarily lead to quality improvement at participating facilities. 

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