Pennsylvania to test global budgets

Rural hospital executives and policy wonks nationwide are watching the Keystone State closely to see how a radical new payment model unfolds.

The Pennsylvania Rural Health Model, an unprecedented five-year Medicare demonstration program, aims to pay 30 rural hospitals under a monthly global budget so they can retarget their services. Both public and private payers are expected to participate, with the Center for Medicare and Medicaid Innovation kicking in $25 million to establish a Rural Health Redesign Center that will support the hospital transformation.

Six hospitals will start receiving payment via a global budget starting next January, and more are expected to join the program over the following two years.

“With a more stable cash flow, rural hospitals can step back and say this service line we rolled out for volume is not aligned with what the community needs, and now we can shift to behavioral health and substance abuse treatment,” said Dr. Lauren Hughes, deputy secretary for health innovation at the Pennsylvania Health Department.

The inaugural participants intend to keep providing inpatient care even as they develop population health strategies to improve health outcomes and reduce costs, such as greater use of telehealth. Still, Hughes predicted some participating hospitals eventually will move away from acute care.

“This model provides a tremendous opportunity to transform rural hospitals and preserve a level of access that otherwise wouldn’t be there if the hospitals close,” said Karen Murphy, chief innovation officer at the Geisinger Health System and former Innovation Center official.

Geisinger Jersey Shore Hospital is one participant. “It’s unlikely under straight fee for service that rural hospitals will be sustainable,” Murphy said.

Many other states are intrigued. Hughes said eight others have contacted her to discuss the project. In addition, the Milbank Memorial Fund, the Robert Wood Johnson Foundation and the National Rural Health Association, working with the CMS, recently conducted a webinar for 36 states that are interested in launching similar global budgeting demonstrations for rural hospitals.

The groups held a global budgeting policy academy

30. for officials from 14 states on May