Six as-yet-unchosen rural hospitals will take part in a pilot program that Gov. Tom Wolf calls “something truly historic.”
On Thursday, Wolf was joined by Secretary of Health Dr. Karen Murphy, Dr. Stephen Cha of the Center for Medicare and Medicaid Innovation and state Rep. Matt Baker, R-Wellsboro, in making the announcement.
Cha summed up the new system: “We are now making it more profitable for a hospital to keep people healthy rather than put them in the hospital.”
For the past 18 months, the Wolf administration has been developing a plan to transform rural health across Pennsylvania. Earlier this year Pennsylvania submitted a plan to the Center for Medicare and Medicaid Innovation to implement a Rural Health Transformation Initiative. The federal government reviewed Pennsylvania’s proposal and on Thursday announced that they would give Pennsylvania a $25 million grant to put this model into place.
“Today, I am proud to announce that the federal government has awarded Pennsylvania a $25 million grant to enact our initiative to transform rural health,” said Wolf, in an address that was streamed live on his website. “The Pennsylvania Rural Health Transformation Initiative is designed to address the challenges faced by rural hospitals and promote a transition to higher quality, integrated and value-based care through several changes to the current model. This will improve health outcomes in rural areas, which face significant challenges and have been especially hard hit by the opioid and heroin epidemic. Rural hospitals are the economic engines of many of these communities and the success of health care in our rural communities impacts every Pennsylvanian.”
The governor explained that in cooperation with the major health insurance carriers in the state, and the Center for Medicare and Medicaid, the way payments are made to rural hospitals is going to change. The new plan will pull away from a payment based on how many patients are admitted to hospitals, and instead will be a set rate in a “global budgeting” format.
Murphy explained, “Doctors and hospitals are paid based on a fee for service. The more services they perform, the more revenue is generated. The bulk of the revenue is made by admission to hospitals.”
However, hospital admissions are decreasing in favor of outpatient visits, and Murphy explained, “The revenue isn’t enough to make up for the loss. In rural hospitals, those results are magnified.
“Our rural communities are losing access to care in their community and potentially losing a major job source as well,” she added. In the state, 1.8 million people use rural hospitals, and 27,000 are employed by them.
Under the transformation initiative’s global payment model, the cost reimbursement to hospitals will be steady. “It’s not based on the volume of services. It’s based on increasing the health of communities.”
Cha explained, “The new payment and service delivery model is to improve care and reduce costs. Today we reward hospitals for patient admissions when admissions are declining. We should reward these systems for improving health of communities. We want to test ways to reverse” the current payment paradigm, he said.
“We want to make people healthier, not pay to put people in hospital beds,” Cha said. He explained this system is designed to improve the health of rural Pennsylvanians while creating a stable funding stream for rural hospitals.
“This will allow rural hospitals to redesign care to meet the needs of the community,” he said.
Baker, who has one of the largest and most rural districts in the state, which includes a portion of Potter County, said it was his pleasure to work on this initiative. He is chairman of the House Health Committee.
“As someone who represents a rural area, I understand the many challenges our hospitals and health care workers face when trying to deliver the best possible health care,” said Baker. “Unlike more urban areas, we don’t have as large a pool of resources to pull from and are geographically encumbered when trying to work with various specialty services. This funding will help us put into action a new health model that will provide more financial stability for our hospitals and improve patient care.”
Dennis McCarthy, spokesman for Bradford Regional Medical Center, said after the governor’s press conference that this is a great start.
“The CMS $25 million grant is a great kick start to help ensure the future of rural health care in Pennsylvania and we, along with all providers in the Commonwealth will be following this program closely,” McCarthy said. “Governor Wolf should be applauded for his efforts to create a model of care that ensures quality care and protects the mission of rural hospitals.
“No doubt there is much work ahead,” he added. “To be successful in a global budget arrangement hospitals will need to function at a high level in terms of efficiency and quality and fully understand the population they are charged with caring for.”
