Pa. pilot program aims to improve financial health of rural hospitals

A new initiative aims to help out Pennsylvania’s struggling rural hospitals, and it involves a new funding formula and a $25 million investment from the federal government.

Rural hospitals in the commonwealth provide care to 1.8 million people. But, according to Gov. Tom Wolf, most aren’t in great shape.

“Half of our rural hospitals are operating at a loss. And the other half are operating at net-profit margins that are less than 3 percent,” he said. “In some cases very, very close to 0 percent.”

Wolf noted that the state’s rural hospitals have been declining for decades — something that ultimately harms the entire state.

“We need to make sure that you don’t pay a price for living, working, building a business, making Pennsylvania stronger, simply because you’re living in a rural area,” he said.

State Health Department Secretary Karen Murphy said part of the problem is that most rural hospitals rely on a “fee for service” revenue model, which can incentivize giving patients more treatments, regardless of outcome.

The new approach instead charges insurers a uniform fee per patient, so the hospital can focus on effective treatment instead of keeping beds full.

To help implement the new system, the federal government’s investing $25 million over the next five years.

Six hospitals will be part of the initial pilot program and will be named in the spring. An additional 24 hospitals will be added to the effort over the next three years.