Pennsylvania to Pilot Global Budget Payment Model for Rural Hospitals

March 5, 2019
Rural Health Model designed to improve rural community health, provide financial stability for rural hospitals

From 2013 to 2017, 64 rural U.S. hospitals closed, more than twice as many as during the previous 5-year period. In one example in Pennsylvania, UPMC Pinnacle announced last December that it would close a hospital near downtown Lancaster called UPMC Pinnacle Lancaster. To address this challenge, the Commonwealth of Pennsylvania has launched a pilot program designed to improve rural community health and provide financial stability for rural hospitals.

The Rural Health Model is a global budget payment model in which hospitals are provided a fixed amount of funding for a fixed period of time to improve the health of Pennsylvania’s rural communities, rather than a model that reimburses hospitals for individual services or cases. The program is a partnership between Pennsylvania’s rural hospital community, the state Department of Health, and the federal Center for Medicare & Medicaid Innovation.

 The pilot formally began Jan. 1, 2019, with five rural hospitals participating in the first year of the program. The first-year pilot hospital participants are:

  • Barnes-Kasson Hospital
  • Endless Mountains Health Systems
  • Geisinger Jersey Shore Hospital
  • UPMC Kane
  • Wayne Memorial Hospital

 The commonwealth’s rural hospitals care for approximately 3.4 million individuals—approximately one in four Pennsylvanians. Rural hospitals tend to treat older patients with more medically complex conditions; the communities they serve face social, geographic, and economic barriers that contribute to poorer health outcomes; and the patient base relies more on government insurers, which reimburse hospitals at rates below the cost of care.

Also, despite contributing more than $6 billion to the state’s economy and supporting more than 43,760 jobs, the state’s rural hospitals face unique challenges, and more than half reported negative total operating margins during fiscal year 2016.

Hospitals participating in the Rural Health Model pilot are customizing their programs to address community-specific needs, including behavioral health care, solutions to the opioid crisis, geriatric services and diabetes management.

 At the press conference announcing the program, Andy Carter, president and CEO of the Hospital and Health System Association of Pennsylvania (HAP), said, the “Rural Health Model pilot demonstrates the kind of collaborative innovation that we can achieve when the hospital community and government partners work together to problem solve and plan for the future.”