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JAMA Article Outlines Pennsylvania’s Rural Global Budget Pilot

April 09, 2018

A recent Journal of the American Medical Association (JAMA) article, “A Path to Sustain Rural Hospitals,” provided an overview of the recent work in Pennsylvania to create a global budget pilot for rural hospitals in the state. During January 2017, the Centers for Medicare & Medicaid Services (CMS) and the Commonwealth of Pennsylvania announced the launch of a new, voluntary program aimed at shifting reimbursement from a fee-for-service model based on volume to a multi-payor global budget methodology focused on population health.

The article’s co-authors—Karen Murphy, RN, PhD, Executive Vice President, Chief Innovation Officer and Founding Director of the Steele Institute for Healthcare Innovation, Geisinger; Lauren S. Hughes, MD, MPH, MSc, FAAFP, Deputy Secretary for Health Innovation, Pennsylvania Department of Health; and, Patrick Conway, M.D., MSc, President and CEO, Blue Cross Blue Shield of North Carolina—highlight some unique issues that are specific to rural hospitals.

Difficulties with financial stability include the combination of declining inpatient admissions and disproportionate reliance on public payors yielding a lower price per service.

Results of these challenges include:

  • Nationwide, 83 of 2244 rural hospitals have closed during the last seven years, with an estimated 673 hospitals at risk during the next five years
  • According to the Pennsylvania Health Care Cost Containment Council’s fiscal year 2016 financial analysis, 58 percent of the state’s 67 rural hospitals reported break-even or negative operating margins

Loosely modeled after the global payment approach implemented in Maryland during 2010, the Pennsylvania proposal is designed to provide hospitals with a prospective budget which provides hospitals with a predictable revenue stream that will be used to transform health care delivery services in their communities. The model is intended to include Medicare, Medicaid, and commercial payors.

Participating hospitals will develop transformation plans that detail their intended approach to improving the health and meeting the needs of their communities. Hospitals will be supported in their transformation by a yet-to-be created Rural Health Redesign Center (RHRC), largely funded by $25 million from CMS during the next five years. The RHRC will serve in a technical assistance role including:

  • Reviewing and approving hospitals’ global budgets and transformation plans
  • Data collection
  • Analytics
  • Practicing transformation support

HAP has served to convene interested hospitals, and serves as an intermediate between the state and providers in the early phases of pre-implementation. HAP will continue to provide support to members as they begin to evaluate the feasibility of joining the pilot in future years.

For additional information, contact Kate Slatt, HAP’s senior director, innovative payment and care delivery.

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