What’s the Future of Value-Based Care for Rural Hospitals?
Over the last year, 18 rural hospitals closed or converted to an operating model that excludes inpatient care, according to a new analysis from the Chartis Center for Rural Health. That brings the total number of closures since 2010 to 182. During this week’s Value-Based Payment Summit, Janice Walters, M.S.H.A., executive director of the Rural Health Care Redesign Center in Harrisburg, Pa., said more innovation is needed in rural payment models as she discussed her experience working with 18 rural hospitals under a global budget in Pennsylvania.
Walters’ organization led the Pennsylvania Rural Health Model, a CMMI demonstration model transitioning hospitals from a fee-for-service model to a global budget payment. It ran from 2019 to 2024. Payment for the global budget came from multiple payers, including private and public insurers. Instead of hospitals getting paid when someone is admitted to the hospital, they received a predictable amount of money at a specified time to provide services in the community. The goal was that through this change in payment model, the hospitals would be able to transform care locally to better meet the health needs of the community. This included opportunities to assess items that may traditionally fall outside of the role of the hospital, such as transportation and broadband Internet access.
Walters said alternative payment models are necessary in rural settings as she described an imbalance of demographics and utilization in the fee-for-service payment model. "Even most of the value-based work that's happened today is tied to fee for service or volume of activity,” she said. “I think the biggest thing that rural communities or healthcare leaders face is that you need to be able to provide a large volume of services in order to keep healthcare access in these communities. And there's lots of data out there that shows that the population of rural communities is actually shrinking. So as the demographics have moved to more urban centers, getting paid for the volume of services you provide is no longer a strategy that works in rural areas.”
Because the current course is not sustainable, we need to use innovative thinking about redesign and change, Walters stressed. “But the reality is, we have to preserve what we have in order to have a foundation to build upon.”
Rural hospitals are looking at higher costs, but she said it helps to think in terms of achieving savings. “Changing the trajectory starts with thinking about cost avoidance, and thinking about the consequences if we continue at the pace that we're on,” Walters added. “There is lots of data to support that rural healthcare costs are higher, but it’s because of how the current system is designed. Unfortunately, I think we've got exactly what the current system is designed to create. I think we have to change our thinking of how we define cost as well, as improving health and wellness, and also bring cost avoidance into that conversation, which has not historically been done.”
The Pennsylvania Rural Health Model, was the first CMMI demonstration specifically focused on rural health with a global budget framework. “I believe it's been wildly successful, maybe not through the lens of how our federal partners view success, but as it relates to keeping our hospitals open through the pandemic. It is important to note we launched this program in 2019,” she said. “At the end of the day, we had 18 hospitals that voluntarily chose to do this, which in and of itself, is a success story that the hospital leaders could see the burning platform for change, and raise their hand to test something new, because they knew the fee-for-service paradigm is not going to be sustainable for them. All of our hospitals stayed open during the pandemic. All of them chose to stay in the program through the duration. So that's a testament to what that budget has been able to produce for them.”
The program had two equally important pillars, Walters explained. One was the alternative payment that helped stabilize the hospital's finances so that they could focus on health and wellness activities in their community. The second was the development of a transformation plan, where they asked each participant hospital to write a strategic plan around moving from volume to value. She said this was really about teaching them skill sets. “Developing a value-based transformation plan is not something that came naturally to our rural hospital leaders.”
Some of the hospitals stood up walk-in clinics, because, for the first time they didn't have to worry about keeping their hospital open. “They could say, through my budget I'm going to have this revenue, and now I can start investing in population health and wellness,” she said.
“We've got some favorable data as it relates to reducing what's called avoidable utilization, which is fancy term for saying providing the right care in the right setting, reducing care that did not need to be provided in the emergency room but provided in primary care settings, focusing on keeping folks out of the hospital who don't need to be in the hospital through better outpatient services.”
Her organization also is working with provider organizations considering the Rural Emergency Hospital designation, which is a relatively new attempt by CMS to try to meet some of the challenges that rural hospitals are facing with respect to providing acute inpatient care. The program allows rural hospitals to close down their inpatient operations and maintain a freestanding emergency department and outpatient care services. In exchange for doing that, Medicare provides them with a facility fee and a Medicare outpatient payment add-on for providing those outpatient services.
It's the first new licensure type rural hospital in decades. Walters called it a a step in the right direction as it offers a blend of an alternative payment and fee-for-service reimbursement. “I think it's a tool in the toolbox for the smallest of small rural hospitals to keep access to care,” she said. “It has preserved some rural hospitals. But we've got larger rural institutions that are in need of better solutions.”
