Researchers: Rural Hospitals Need a Whole New Reimbursement Model

Rural healthcare is in crisis; there is virtually no disagreement whatsoever in the healthcare industry about that. But what can actually be done about it? A team of researchers is sharing their perspectives in a new “Viewpoint” commentary published online on Oct. 7 in the JAMA Network online, under the headline “Rural Hospitals Deserve More Than Patchwork Policies.”

The authors are Cody Lendon Mullens, M.D., M.P.H.; Janice C. Probst, Ph.D.; and Andrew M. Ibrahim, M.D., MSc. Doctors Mullens and Ibrahim are both members of the faculty of the Department of Surgery at the University of Michigan, Ann Arbor and also both on the faculty of the Center for Healthcare Outcomes and Policy at the University of Michigan, Ann Arbor, while Dr. Probst is on the faculty of the Arnold School of Public Health at the University of South Carolina, Columbia.

Drs. Mullens, Probst, and Ibrahim begin by framing the situation, writing that, “Across the US, rural hospitals continue to shut their doors at an alarming pace, with more than 150 closing in the last decade.1 Although some hospitals continue to provide robust services, many are staying open in name only but have either hollowed out key services or eliminated inpatient care altogether. Financial pressures, which primarily drive these challenges, are not new, but today’s policy climate presents a long-overdue opportunity to rethink funding and organization of rural hospital care. Rather than operating under the existing patchwork, rural health care needs a cohesive, modernized framework that is practical and reflective of how care is delivered and ultimately enhances the longevity of rural hospitals.”

They note that “During the past 4 decades, federal agencies have created an array of carve-out programs and designations designed to support rural hospitals: critical access hospitals, sole community hospitals, rural emergency hospitals, low-volume hospitals, Medicare-dependent hospitals, the 340B Drug Pricing Program, and swing bed programs, among others.” In other words, a patchwork of supports has evolved over time, but according to these healthcare policy researchers, that patchwork has been wholly inadequate to secure the future of rural hospitals in particular.

So what can be done? The researchers recommend a comprehensive reform of reimbursement, based either on annual global budgets, or on population-based capitation models. They note that global budgeting has been tested in Maryland and Pennsylvania, and offers “a promising strategy to keep rural hospitals financially sustainable.” Meanwhile, they note that “Population capitation models provide predictable monthly revenue to a rural hospital based on a per-member, per-month measure of patients in the hospital’s catchment area. As such, hospitals are buffered from month-to-month patient volume variability and can maintain a predictable workforce.”

Indeed, they write, “Either model, while addressing the predictability of rural hospital payments, must also address reimbursement rates. Rural hospitals consistently are reimbursed at lower rates than their urban counterparts for the same services. Without reconciling these differences, payment model details will be moot.” They also write that administrative and reporting burdens on rural hospitals must be relieved.

Ultimately, the article’s authors insist, “The sustainability of rural health care will not be secured through continued patchwork policies or incremental tweaks to legacy programs. It requires a modernized cohesive framework, one that simplifies access to and enrollment in programming, aligns financing with clinical needs, and streamlines accountability in ways that reflect rural volume and capacity.” A comprehensive effort at reform will be required; but, they make it clear, “Federal and state policymakers have the tools to act. Current policy momentum around new payment models should be refined with greater flexibility.”