On January 12, 2017, the Centers for Medicare & Medicaid Services (CMS) and the Commonwealth of Pennsylvania announced the launch of the Pennsylvania Rural Health Model. The program provides rural hospitals an opportunity to transition from a fee-for-service reimbursement system based on volume to a multipayer global budget payment method that is intended to improve population health outcomes and quality of care while lowering costs.
While rural hospitals provide essential health care services for 57 million people across the country, the ability to achieve financial stability is difficult for some hospitals.1 The reasons for the instability are multifaceted. Nationally, the number of inpatient admissions is declining, a trend that is also prevalent in rural hospitals. Rural hospitals frequently lack the financial and human resources to offer complex, highly specialized inpatient care that is required for most admissions today. In addition, reimbursement for rural hospitals remains predominantly fee for service, with public payers contributing a sizable percentage of the hospitals’ revenue. The combination of declining inpatient admissions resulting in decreased reimbursement and a payer mix that yields a lower price per service has been a large contributor to the current crisis in rural hospitals. Over the past 7 years, 83 of 2244 rural hospitals in the United States have closed.2 One analysis suggests that without intervention, an estimated 673 rural hospitals in the United States may also close over the next 5 years.3
Murphy KM, Hughes LS, Conway P. A Path to Sustain Rural Hospitals. JAMA. 2018;319(12):1193–1194. doi:10.1001/jama.2018.2967
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