Eight additional hospitals across Pennsylvania will join the new Rural Health Model launched by the Governor’s Office and the state’s Department of Health. The model started off in early 2019 with five rural hospitals, mostly in the northeastern part of the state, and four private insurers, plus Medicaid.
Insurers participating in the program pay hospitals regular lump sums so they can provide services to their communities, rather than pay through a traditional fee-for-service model. Paying a hospital per patient, per service may work where there is a steady flow of clientele coming through the door, but in rural areas with more sparse populations, it’s hard to guarantee the cash flow necessary to keep hospitals afloat.
That’s why nearly half of rural hospitals in Pennsylvania are operating in negative margins and are in danger of closing, according to the state Health Department. Nationwide, 19 rural hospitals closed this year, the most in any single year since 2010. In Pennsylvania, officials announced in early December that Sunbury Susquehanna Hospital would shut down in March 2020.
Still, rural hospitals are essential parts of their communities. In many cases, they offer the only opportunity for health care for miles. And residents rely on them as huge economic drivers and job providers.
“This is a step that will help achieve financial stability for these facilities and aims to improve the overall health of the community,” Secretary of Health Rachel Levine said in a statement.
In March, the state’s Insurance, Health and Human Services departments worked with regional hospital councils to launch the program. The first five hospitals were Barnes Kasson and Endless Mountains in Susquehanna County, Jersey Shore in Lycoming County, UPMC in McKean County, and Wayne Memorial in Wayne County. Five insurance companies also signed on: Gateway, Geisinger, Highmark, UPMC and Medicaid, the public government insurance for people living in poverty.
Though it might seem like a raw deal for insurers to pay more up front without knowing which services will end up being provided, Health Department press secretary Nate Wardle said the idea is that, eventually, the new funding model offers a cost savings for the payer, too.
“Up front, it may be more expensive for insurers because they’re paying on a regular basis, as opposed to paying when somebody goes to a facility for treatment,” Wardle said. “But the common belief is, in the long run, this is going to benefit everybody because it’s going to improve the health care of communities.”
Wardle pointed to immunizations, vaccines, health screenings, and heart checks as preventative services that the new model would allow rural hospitals to fund, with the hope that ultimately proactive care would lead to fewer hospitalizations.
In a traditional fee-for-service model, preventative care might not pay out as well to hospitals, which creates a disincentive to offer it. This new structure avoids that. Plus, the hospitals will have more spending discretion that could allow them to cover costs not typically covered by insurance payments, such as transportation to appointments or broadband internet, Wardle said.
“They can provide health services to the community, and they’re not relying on the number of people who are coming into the hospital, or heads in beds, so to speak,” Wardle said.
The initiative, which state officials say is the first of its kind in the nation, is too new to know how well it’s working. But eight more hospitals have signed on, along with Aetna to make a total of six insurers. The hospitals are Armstrong County Memorial Hospital, Chan Soon-Shiong Medical Center in Somerset County, Fulton County Medical Center, Greene Hospital in Greene County, Monongahela Valley and Washington Hospitals in Washington County, Punxsutawney Area Hospital in Jefferson County, and Tyrone Hospital in Blair County.
Governor Tom Wolf recently signed a bill into law that will create an authority to oversee and regulate the initiative.