Hailey Tran
Rural hospitals in Pennsylvania have faced financial challenges, and the state has responded by implementing a model that transitions these hospitals from fee-for-service to global budget payments. This model, known as the Pennsylvania Rural Health Model (PARHM), aims to improve the financial viability of rural hospitals and enhance health outcomes for rural residents. It involves hospitals preparing Rural Hospital Transformation Plans, outlining proposed improvements to care delivery, quality, and access to preventive care. With CMS providing funding and support, the model has been adopted by several rural hospitals in the state, and Pennsylvania's approach has gained attention from other states seeking to improve rural healthcare. This introduction sets the context for exploring the process of opening a rural hospital in Pennsylvania, including the specific steps, requirements, and strategies for success within this unique healthcare landscape.
| Characteristics | Values |
|---|---|
| Name of Model | Pennsylvania Rural Health Model (PARHM) |
| Goal | Improve financial viability of rural hospitals and health outcomes, while maintaining access to care for rural residents |
| Hospitals Involved | Critical access hospitals and acute care hospitals in rural Pennsylvania |
| Payers | Medicare, Medicaid, and certain commercial plans |
| Funding | Up to $25 million provided by CMS |
| Performance Years | 6 performance years (2019-2024) |
| Participating Hospitals as of December 31, 2024 | Armstrong County Memorial Hospital (Kittanning, PA) |
| Global Budget | Hospitals paid a fixed amount in advance to cover inpatient and outpatient items and services |
| Transformation Plans | Rural Hospital Transformation Plans outlining proposed care delivery transformation |
| Rural Health Redesign Organization (RHRCO) | Established in 2020 to support fundraising for long-term sustainability of PARHM |
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What You'll Learn
- Funding: CMS made $25 million available to help implement the Pennsylvania Rural Health Model
- Rural Hospital Transformation Plans: Hospitals must outline how they plan to improve quality and access to care
- Global budgets: Hospitals are paid a fixed amount in advance to cover inpatient and outpatient services
- Payers: Medicare, Medicaid, and commercial plans are among the payers participating in the Model
- Performance years: The Model has six performance years during which rural hospitals may participate in global budgets
Funding: CMS made $25 million available to help implement the Pennsylvania Rural Health Model
The Pennsylvania Rural Health Model (PARHM) is an alternative payment model that aims to improve the financial viability of rural hospitals and health outcomes for rural residents. It does so by transitioning from fee-for-service to global budget payments, which are fixed amounts set in advance to cover inpatient and hospital-based outpatient items and services. CMS made $25 million in funding available to help implement the Pennsylvania Rural Health Model, which was matched by Pennsylvania. This funding was used to oversee the Model, aggregate and analyze data, compile and submit reports, propose and administer global budgets, approve Rural Hospital Transformation Plans, conduct quality assurance, and provide technical assistance to participant hospitals.
The Model was open to critical access hospitals and acute care hospitals in rural Pennsylvania, with the goal of improving the health of beneficiaries in rural areas and maintaining access to healthcare. Participating hospitals worked with the state's Rural Health Redesign Center to develop fixed budgets for all six years of the project. Hospitals received a consistent monthly payment from the same insurance companies and government sources, including Medicaid, Medicare, and private insurers. This funding model allowed hospitals to invest in quality and preventive care and tailor their services to better meet the needs of their local communities.
Rural Hospital Transformation Plans were prepared by participating hospitals, outlining their proposed care delivery transformation and describing how they intended to improve quality, increase access to preventive care, and generate savings for the Medicare program. These plans were submitted to Pennsylvania and CMS for approval. The Model included a pre-implementation period from 2017 to 2018, followed by six performance years from 2019 to 2024. During the pre-implementation period, Pennsylvania secured final commitments from participating rural hospitals and payers.
The Pennsylvania Rural Health Model is the first of its kind in the country, focusing entirely on rural hospitals. It has gained attention from other states, with over a dozen reaching out to learn from Pennsylvania's experience. The Model's success is attributed to close collaboration between various state departments and organizations, including the CMMI, the Pennsylvania Department of Human Services, the Pennsylvania Insurance Department, and hospital associations. The Model has also received support from the Rural Health Redesign Organization (RHRCO), a nonprofit corporation dedicated to fundraising for the long-term sustainability of the Model and improving rural healthcare across the country.
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Rural Hospital Transformation Plans: Hospitals must outline how they plan to improve quality and access to care
Rural hospitals in Pennsylvania face financial pressure, workforce shortages, and care disparities. To address these challenges, the state implemented the Pennsylvania Rural Health Model (PARHM), which aims to improve the financial viability of rural hospitals and enhance health outcomes while maintaining access to care for rural residents. As part of this model, rural hospitals developed Rural Hospital Transformation Plans, outlining their strategies for improving quality and access to care.
The Rural Hospital Transformation Plans are a critical component of PARHM's goal to transform the care provided by rural hospitals to better meet community needs. These plans detail specific actions and initiatives that hospitals will undertake to enhance the quality of care and increase access for patients in rural areas.
One key strategy to improve quality and access is the utilization of technology and innovation. Rural hospitals can invest in technology infrastructure and adopt health information technology to improve diagnostic speed, enhance care team coordination, and provide timely attention to patients with critical conditions. Artificial intelligence (AI) plays a vital role in this transformation. AI-powered platforms, such as Aidoc, can be integrated into imaging workflows to expedite the diagnosis of life-threatening conditions, ensuring that patients in rural facilities receive rapid care comparable to larger urban centers. Additionally, mobile, nurse-led clinics can be deployed to increase care continuity and reduce unnecessary emergency department visits at a relatively low cost.
Another important aspect of the Rural Hospital Transformation Plans is addressing financial constraints. Rural hospitals often struggle with fixed costs associated with maintaining essential services, including staffing and equipment. To alleviate this burden, a patient-centered payment approach is recommended. This payment system ensures that rural hospitals receive adequate funding to cover the costs of delivering high-quality care. It is designed to support the services that patients need rather than increasing profits for hospitals or insurance plans. By increasing spending and providing larger payments, payers can help prevent closures of at-risk hospitals and preserve access to rural healthcare services.
Furthermore, the plans should outline strategies to address gaps in EMS coverage. This may include investing in transportation infrastructure and exploring innovative solutions, such as partnering with drone companies to deliver essential medications and supplies to remote communities. By improving EMS coverage, rural hospitals can reduce transport times and provide timely care to patients in need.
In conclusion, the Rural Hospital Transformation Plans are instrumental in outlining the steps that rural hospitals in Pennsylvania will take to enhance the quality of care and increase access for their communities. By leveraging technology, adopting innovative solutions, addressing financial challenges, and improving EMS coverage, rural hospitals can transform the healthcare experience for their patients and ensure sustainable access to quality care.
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Global budgets: Hospitals are paid a fixed amount in advance to cover inpatient and outpatient services
The Pennsylvania Rural Health Model (PARHM) is an alternative payment model designed to address the financial challenges faced by rural hospitals. The model aims to improve the financial viability of rural hospitals and improve health outcomes, while maintaining continued access to care for Pennsylvania's rural residents. Under PARHM, CMS and other participating payers pay participating rural hospitals on a global budget—a fixed amount, set in advance, to cover inpatient and hospital-based outpatient items and services.
Each performance year of the Model, Pennsylvania prospectively sets the all-payer global budget for each participating rural hospital, based primarily on hospitals' historical net revenue for inpatient and outpatient hospital-based services from participating payers. Each participating payer then pays the hospitals for inpatient and outpatient hospital-based services based on the payer's respective portion of this global budget. The global budgets are designed to limit or reduce the amount of spending on hospitals, not to reduce financial losses and prevent closures of small, rural hospitals.
The Pennsylvania model builds on all-payer models in Maryland and Vermont, which shift hospital payments to global budgets that reward value over volume. In Maryland, hospitals have a single global budget for their inpatient and outpatient revenue from all payers, and each payer’s share of the budget may differ from year to year depending on how many of that payer’s members received services and what types of services they received. In Pennsylvania, a hospital has a separate budget amount for each payer, and there is no requirement for these budgets to change in proportion to the relative numbers and types of services received by each payer’s insured patients.
The Model tests whether the predictable nature of global budgets enables participating rural hospitals to invest in quality and preventive care, and to tailor their services to better meet the needs of their local communities. Participating rural hospitals prepare Rural Hospital Transformation Plans, outlining their proposed care delivery transformation, which must be approved by Pennsylvania and CMS. The Model was open to both critical access hospitals and acute care hospitals in rural Pennsylvania.
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Payers: Medicare, Medicaid, and commercial plans are among the payers participating in the Model
The Pennsylvania Rural Health Model (PARHM) is an alternative payment model designed to address the financial challenges faced by rural hospitals. The model aims to improve the financial viability of rural hospitals and improve health outcomes, while maintaining continued access to care for Pennsylvania’s rural residents. The model was first launched in January 2019 with five rural hospitals and five payers participating. Since then, more hospitals and payers have joined, with a total of eighteen rural hospitals and six payers participating as of 2021.
Medicare, Medicaid, and certain commercial plans are among the payers participating in the Model. During the pre-implementation period, Pennsylvania secured final commitments from participating rural hospitals and participating payers. The participating rural hospitals developed Rural Hospital Transformation Plans, which outlined their proposed care delivery transformation and how they intended to improve quality, increase access to preventive care, and generate savings for the Medicare program. These plans were submitted to Pennsylvania and CMS for approval.
Medicare is federal health insurance for anyone aged 65 and over, as well as some people under 65 with certain disabilities or conditions. Medicaid, on the other hand, is a joint federal and state program that provides health coverage for certain low-income individuals, families, children, pregnant women, the elderly, and people with disabilities. In some states, Medicaid also helps cover medical costs for other adults.
Medicare and Medicaid work together to provide coverage for eligible individuals. If an individual has both Medicare and full Medicaid coverage, they are considered "dually eligible". Medicare pays first when an individual is dually eligible, and Medicaid may cover additional costs that Medicare doesn't, such as certain drugs and services.
The Pennsylvania Rural Health Model is designed to improve access to high-quality care for rural residents through care delivery transformation and hospital global budgets. Under the Model, participating hospitals are paid based on prospectively-set, all-payer global budgets, which cover inpatient and hospital-based outpatient items and services. This allows rural hospitals to transform the care they deliver to better meet the needs of their local communities.
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Performance years: The Model has six performance years during which rural hospitals may participate in global budgets
The Pennsylvania Rural Health Model (PARHM) is an alternative payment model designed to address the financial challenges faced by rural hospitals. It aims to improve the financial viability of rural hospitals and health outcomes, while maintaining access to care for Pennsylvania’s rural residents. The model was first launched in January 2019 with five rural hospitals and five payers participating. Over time, more hospitals and payers joined the initiative.
The model includes six performance years during which rural hospitals may participate in global budgets. These performance years range from 2019 to 2024, following a pre-implementation period from 2017 to 2018. During the pre-implementation period, Pennsylvania secured final commitments from participating rural hospitals and payers. The participating rural hospitals developed Rural Hospital Transformation Plans, outlining their proposed care delivery transformation, which were approved by Pennsylvania and CMS.
During the six performance years, participating rural hospitals were paid based on prospectively set, all-payer global budgets, and they implemented their Rural Hospital Transformation Plans. Pennsylvania set targets for each performance year, including population health outcomes, access and quality measures, model financial targets, and payer and rural hospital participation scale targets. For instance, Pennsylvania committed to having each participating rural hospital’s global budget represent at least 75% of that hospital’s net revenue for inpatient and outpatient hospital-based services in Performance Year 1 (2019). For Performance Years 2 through 6, the global budget for each participating rural hospital was to be at least 90% of the hospital’s net revenue.
The model tested whether the predictable nature of global budgets enabled participating rural hospitals to invest in quality and preventive care, and to tailor their services to better meet the needs of their local communities. It also encouraged the participation of commercial payers and Medicaid.
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Frequently asked questions
The Pennsylvania Rural Health Model is an alternative payment model designed to address the financial challenges faced by rural hospitals by transitioning them from fee-for-service to global budget payments.
The model's goal is to improve the financial viability of rural Pennsylvania hospitals and improve health outcomes, while maintaining continued access to care for Pennsylvania's rural residents.
To open a rural hospital in Pennsylvania, you would need to work with the Pennsylvania Office of Rural Health and develop a Rural Hospital Transformation Plan that outlines your proposed care delivery transformation and demonstrates how you will improve quality, increase access to preventive care, and generate savings for the Medicare program. Your plan would need to be approved by Pennsylvania and CMS, and you would need to secure funding and participate in the PRHM to help improve the financial viability of your hospital.
