Insurance Providers Launch New Payment Model To Save Rural Hospitals In Pennsylvania

posted by AHIP

on September 5, 2019

Closures and mergers of rural hospitals affect millions of Americans across all states and regions. Rural hospitals provide the primary access point to care for many of the 60 million people living in rural communities. Unfortunately, the rate of closure is faster than at any other time and raises great concerns for these residents, even triggering a Congressional hearing in March 2019.

Highmark, Gateway Health, Geisinger Health Plan, Medicare, and UPMC Health Plan participate in the Pennsylvania Rural Health Model – an innovative project launched in January 2019 to buoy the finances of rural hospitals in the Commonwealth. In this project, spearheaded by the Pennsylvania Department of Health, the five insurance providers collaborate to provide more consistent funding through global payments to rural hospitals.

Each insurance provider contributes to a global budget for the hospital, where the insurance provider determines a single payment based on the expected volume of transactions instead of paying for individual services.

The participating insurance providers evaluated historical claims data from the participating hospitals and tracked trends in hospital utilization. The insurance providers determined a dollar amount for each hospital based on how each plan’s members used the hospital. Each hospital created an individual “Transformation Plan,” which addressed the challenges they faced, defined opportunities to provide better care, proposed how to link patients with primary care providers, and listed available community resources for patients.

The insurance providers will gradually move towards capitation and value-based care, and by 2021, hospitals will use data analysis to improve efficiency and reduce avoidable hospitalizations and admissions. By this point, payments will be tracked against targets, with the hope that the budgets will be reduced with each year of the program.

As the program progresses, insurance providers will adjust their budgets to account for demographic changes and age factors to ensure consistency.

As part of their participation in the project, hospitals will have access to additional resources, including technology assistance and access to vendors, to sustain the model for years to come. Even in the early stages of the program, there are already five participating hospitals in the first year and it is expected to grow to 18 hospitals by year 2, and 30 hospital in year 3.

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