Pennsylvania taps hospitals, payers for rural global budget experiment
SEEING LOTS OF PATIENTS with heart and respiratory disease, Geisinger Jersey Shore (Pa.) Hospital decided to hire a health coach to work with patients on tobacco cessation. It also just added a care manager in its emergency department to help people avoid having to come to the ED.
And the 25-bed critical-access hospital in rural central Pennsylvania has shifted its clinical dietitian from heading food services to training patients with diabetes and other chronic conditions how to eat better. It’s also developing telehealth access to pulmonologists and cardiologists for the 140,000 people living in its two-county service area.
All that was made possible by Pennsylvania’s recent launch of a global budget payment system for rural hospitals. The program pays the hospitals a fixed monthly total and allows them to use the money how they think best serves their communities.
The Pennsylvania Rural Health Model is a radical experiment to help rural hospitals transform into more financially viable organizations that redesign their services to focus on the best ways to keep their populations healthy. That could eventually involve some hospitals closing their inpatient units and shifting to outpatient, emergency and behavioral-health services.
Last week, the Pennsylvania Health Department said the initiative will start with five hospitals—Barnes-Kasson County Hospital, Endless Mountains Health Systems, Geisinger Jersey Shore, UPMC Kane, and Wayne Memorial Hospital. State Health Secretary Dr. Rachel Levine hopes 30 hospitals will participate by January 2021.
Medicare, Medicaid and four private insurers—Gateway Health Plan, Geisinger Health Plan, Highmark Blue Cross and Blue Shield, and UPMC Health Plan—have joined, with more expected in the coming months. The private plans will not be required to publicly disclose their payment rates and the state won’t set the rates—as is the case in Maryland, which has an all-payer, global budget system.
The global budget developed for each hospital is based on historical net revenue, considering either the average of the past three years or the most recent fiscal year, whichever is higher. The hospitals and payers will continue to adjudicate claims in order to track how the global budget payments are working.
As part of the five-year Medicare demonstration program, the Center for Medicare and Medicaid Innovation kicked in $25 million to establish a Rural Health Redesign Center to support the hospitals’ transformation.
Nearly 100 rural hospitals have closed since 2010, according to the University of North Carolina’s Sheps Center for Health Services Research. More than half of Pennsylvania’s rural facilities reported negative operating margins in 2017, according to Modern Healthcare Metrics. Experts say global budgeting is a promising way to help them adapt and survive.
“With a global budget, hospitals are not relying on illness to generate revenue and profit,” said Dr. Anand Parekh, chief medical adviser for the Bipartisan Policy Center in Washington. “Now they have a pot of money they can use to focus on keeping people healthy.”
State officials and rural hospital leaders across the country are closely watching the experiment.
“It’s a long-term strategy,” said Tammy Anderer, CEO at Geisinger Jersey Shore. “It could make a big difference today for an individual patient, but for the larger population it will take time.”
The CMS presented the concept of global budgeting to dozens of other states. The American Hospital Association, which supports the demo, predicts the innovation center may expand it to other states within the next year.
A 2017 report by RTI International found that under Maryland’s unique global budget model—which includes all hospitals and payers and has been in effect since 2014—average monthly hospital spending per beneficiary grew more slowly than before the model was implemented. That occurred without adverse financial impacts on hospitals or shifting costs to other parts of the healthcare system.
“The incentives to turn the hospitals more toward population health and keeping patients out of the hospital will take some time,” said Joanna Hiatt Kim, vice president for payment policy at the AHA. “Not everything works perfectly, and there will be experimentation. Plus, every hospital is at a different point in the transformation process.”