When the COVID-19 pandemic broke and hospitals were forced to cancel lucrative electoral procedures, it dealt a financial blow, especially to rural hospitals with low operating margins. But for 18 rural institutions in Pennsylvania, it wasn’t all that bad.
They used a global budget model, which was tested by the Center for Medicare and Medicaid Innovation, to determine if improving the financial stability of rural hospitals could help them stay open without tying volume and income and creating incentives to invest in public health.
There isn’t much evidence yet as to whether global budgets can stop the trend of rural hospital closures, but it has helped these Pennsylvania institutions weather the pandemic, said Gary Zegestowski, executive director of the Pennsylvania Rural Health Modernization Center, the agency running the model. …
“It was a lifeline to ensure financial stability, allowing these hospitals to continue to work with a fully staffed and cope with everything that happened with the pandemic and COVID,” Zegestovsky said.
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So-called global budgets, in which Medicare and other payers pay hospitals a fixed amount to treat a population, have caught the attention of advocates and hospital leaders as a potential way to stop hospital closures that make communities worse off and lose access to health care. …
Value over volume
CMMI launched a pilot program in Pennsylvania in 2019, making it the first alternative payment model focused exclusively on rural health.
The voluntary model is now in its third year, involving 18 hospitals and six payers. The program aims to improve public health by providing value-based care, preventing rural hospital closures and reducing costs.
According to the model, each hospital’s budget is determined by the patients’ historical net income from inpatient and outpatient services, with payers providing a fixed amount of money on a regular basis to cover treatment costs.
Each hospital must also draw up and receive approval “transformation plans” that outline how they intend to improve quality, expand access to preventive care, and achieve efficiency and economy.
CMMI also announced this month a similar model called CHART, which will be tested in Alabama, South Dakota, Texas and Washington State to address the social determinants of health and improve financial stability for rural providers through upfront investment and capitation payments.
This is a unique approach to the million dollar question that policymakers, experts and advocates have tried to answer for decades: How to keep rural hospitals running?
Rural hospital closures are due to a number of factors, including high rates of uninsured, competition from larger and newer health facilities further away, declining Medicare benefits, and declining patient numbers.
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“The entire payments system is now paid by volume, and paying hospitals by volume has always been and always will be a losing proposition,” said Alan Morgan, director general of the National Association of Rural Health.
“It is clear that in rural areas you do not have the same volume as in the city. This basic concept, which works very well in the urban context, just never worked well in the countryside. “
According to Morgan, CMMI’s efforts on global budgets are “a step in the right direction.” “Hopefully we can really quickly focus on the CHART model, learn from the lessons and see how this can be applied to a much broader nationwide approach,” he said.
The CHART and Pennsylvania models emerged as the US health care system is trying to move towards cost-based care rather than fee-based care, which puts small providers at a disadvantage.
Impact of COVID-19
While this argument has been made by rural health advocates for a long time, it has become even more pressing when COVID-19 arrived and hospitals needed to suspend outpatient services, which account for more than three-quarters of rural hospital revenues, according to Chartis. Rural Health Center.
On the march survey80% of 18 hospital executives said the program reduced financial pressure, and 95% said it helped them stay open during the pandemic.
While it’s too early to tell how effective the Pennsylvania program is in halting closures and improving health, Zegestowski hopes it will be successful and replicated elsewhere, he said. More than a dozen states have already contacted Pennsylvania about this model, according to the state health department.
In the past, Congress’s response to the closure of rural hospitals has been to create new appointments that increased fees for related institutions.
Last year, Congress drafted a different policy whereby rural hospitals would pay for abandoning inpatient services while maintaining and expanding outpatient services.
But the global budget model takes a different approach, allowing rural hospitals to maintain their special payment destinations while changing the way those funds are delivered. In Pennsylvania, Medicare pays a fixed amount to participating hospitals every two weeks, which can help maintain stability during times when volumes and revenues fall.
The idea has intrigued hospital leaders across the country, who see it as a possible solution to one of their biggest problems.
“In a past life, I was the general director of a rural hospital. We would have known if it hadn’t paid off in the winter months, we would have had problems in the summer months, ”said John Henderson, president of the Texas Rural and Community Organization. Hospitals. “Fixed monthly payments can provide budget certainty without a roller coaster of claims,” he said.
Global budgets can play an important role in maintaining the financial sustainability of rural hospitals in the future as the US health care system tries to move away from service fees, said Eric Roberts, assistant professor of health policy and management at the University of Pittsburgh. But you have to do it right, ”he said.
“There is potential value in the global budgeting mechanism for rural hospitals, but how it is implemented is really key to whether the hospital will actually have the resources it needs to serve the population, and this requires careful model refinement,” Roberts said. …
Medicare’s two-week payments helped stabilize income in troubled hospitals in the short term, but did not improve overall profitability in 2019, when Pennsylvania had a program in its first year in Pennsylvania, according to the Centers for Medicare and Medicaid Services. study found. “We’re just going out of business more slowly,” the CEO of one hospital told the agency. The study concludes that there is still no consensus on the long-term implications of the Pennsylvania pay model.
The high fixed costs mean that achieving savings that can be invested in communities is challenging, some critical access hospitals told CMS. The Pennsylvania program may turn out to be volatile over time due to federal policies, such as cut Medicare payments as a result of budget sequestration, which means that participating hospitals are not effectively reimbursed based on their costs, agencies said.
“We’re still losing money, maybe it’s not that much,” a Critical Access Hospital executive told CMS.
There are many issues that policymakers need to tackle in order to pinpoint the budgets of hospitals participating in such programs, Roberts said. “We need to be a little more thoughtful than just saying, ‘How much did the hospital get paid last year? “Due to policy differences that existed before the creation of global budgets,” he said. “This may require us to reconsider how we should set initial budgets if some hospitals were already operating with negative margins in the beginning,” he said.
“There is reason for widespread acceptance, but in practice there are many other things that need to be addressed,” Roberts said. “With a large uninsured population, the global budget itself is not a panacea, because we do not have a payer for whom the majority of the population can allocate funds.”
The model’s effectiveness depends on whether the government has expanded Medicaid under the Affordable Care Act, Roberts said. Twelve states have yet to open the program to more low-income adults, leaving more than 2 million people uninsured and rural hospitals vulnerable to closure.
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