Fact Sheets

Pennsylvania Rural Health Model

Pennsylvania Rural Health Model

(Updated 1/21/21)

Overview
The Pennsylvania Rural Health Model (PARHM) seeks to test whether care delivery transformation in conjunction with hospital global budgets increases rural Pennsylvanians’ access to high-quality care and improve their health, while also reducing the growth of hospital expenditures across payers, including Medicare, and improving the financial viability of rural Pennsylvania hospitals to improve health outcomes of and maintain continued access to care for Pennsylvania’s rural residents.

Under this Model, CMS and other participating payers pay rural hospitals on a global budget—a fixed amount of revenue, set in advance, to cover all inpatient and hospital-based outpatient services. In addition, participating rural hospitals are working to redesign the delivery of care for their beneficiaries, to improve quality of care and better meet the health needs of their local communities. Pennsylvania, through its Department of Health, is be a key partner in jointly administering this Model with CMS.

Model Timeline
There are seven performance years for the Pennsylvania Rural Health Model (PY0-PY6). Specific details of each performance year are listed below:

Performance Year 0 (2017 - 2018): During Performance Year 0, which we consider to be the “pre-implementation period,” CMS made funding available to Pennsylvania to begin Model operations, obtain participation from rural hospitals and payers, aggregate data from participating payers, and calculate global budgets. During the pre-implementation period, Pennsylvania secured commitments with participating rural hospitals and participating payers, the state signed agreements with payers, and CMS and the state signed agreements with the participating rural hospitals for participation in Performance Year 1. The participating rural hospitals developed Rural Hospital Transformation Plans describing how they intend to improve quality, increase access to preventive care, and generate savings to the Medicare program, which they submitted to Pennsylvania and CMS for approval.

Performance Years 1 – 6 (2019-2024): Rural hospitals and payers began participation in the Pennsylvania Rural Health Model in Performance Year 1, beginning January 2019. During this period, the participating rural hospitals will be paid based on prospectively-set, all-payer global budgets, and will implement their Rural Hospital Transformation Plans. In addition, Pennsylvania must meet the Model targets, including the population health outcomes, access and quality measures and targets; Model financial targets; and payer and rural hospital participation scale targets.

Financial Targets
Pennsylvania commits to achieving $35 million in cumulative Medicare hospital savings over the course of the Model. In addition, the growth rate of rural Pennsylvania total Medicare expenditures per beneficiary must not exceed the growth rate of the rural National total Medicare expenditures per beneficiary by more than a certain percentage for Performance Years 2 through 5.

Population Health Outcomes, Access, and Quality Targets
Pennsylvania commits to achieving targets related to population health outcomes and access under this Model, and may tie financial incentives for participating rural hospitals to Pennsylvania’s performance on the following three goals:

1. increasing access to primary and specialty services;
2. reducing rural health disparities through improved chronic disease management and preventive screenings; and
3. decreasing deaths from substance use disorder and improve access to treatment for opioid abuse.

Global Budget Methodology
Under the Model, Pennsylvania proposes a methodology for calculating the global budget for each participant rural hospital. On an annual basis, CMS reviews and approves Pennsylvania’s proposed global budget methodology and the Medicare FFS portion of the global budget calculated using this methodology for every participant rural hospital for each Performance Year, beginning in Performance Year 1. CMS makes biweekly payments to participant rural hospitals, equivalent to 1/26 of the approved Medicare FFS portion of their global budget.

Global budget payments to participant rural hospitals include payment for inpatient and hospital-based outpatient items and services. For CAHs with swing-bed approval from CMS, global budget payments also include payment for post-hospital skilled nursing facility care.

Each participating rural hospital’s global budget for each performance year is calculated by applying certain adjustments to the rural hospital’s historical net revenue for inpatient and hospital outpatient items and services. For a rural hospital’s first year of participation in the Model, the baseline revenue will be the greater of 1) the revenue from the most recent fiscal year for which complete claims data are available or 2) the simple average of that fiscal year and the two previous years. For subsequent performance years, the baseline revenue will be the prior year’s final fixed payment amount. Each performance year, the global budget methodology must include adjustments to account for inflation, demographic changes, quality performance, and other factors.

Eligible Participants
The Model is open to both critical access hospitals and acute care hospitals in rural Pennsylvania. Participating payers include Medicare, Pennsylvania Medicaid, and commercial plans. Pennsylvania has committed to attaining broad participation in the Model among payers and rural hospitals to help transform the care that rural hospitals provide and to improve the quality of care for as many rural Pennsylvanians as possible. The hospitals in Pennsylvania that are eligible to participate in the Model are as follows:

Current Model Participants

The Performance Year 3 participant rural hospitals, representing a mix of both critical access hospitals and acute care hospitals across Pennsylvania, are:

• Armstrong County Memorial Hospital (began participation in Performance Year 2)
• Barnes-Kasson County Hospital (began participation in Performance Year 1)
• Clarion Hospital (began participation in Performance Year 3)
• Endless Mountains Health Systems (began participation in Performance Year 1)
• Fulton County Medical Center (began participation in Performance Year 2)
• Geisinger Jersey Shore Hospital (began participation in Performance Year 1)
• Highlands Hospital and Health Center (began participation in Performance Year 3)
• Indiana Regional Medical Center (began participation in Performance Year 3)
• UPMC Kane (began participation in Performance Year 1)
• Meadville Medical Center (began participation in Performance Year 3)
• Monongahela Valley Hospital (began participation in Performance Year 2)
• Olean General Hospital (Bradford Regional Medical Center) (began participation in Performance Year 3)
• Punxsutawney Area Hospital (began participation in Performance Year 2)
• Washington Health System Greene (began participation in Performance Year 2)
• Tyrone Hospital (began participation in Performance Year 2)
• Washington Hospital (began participation in Performance Year 2)
• Wayne Memorial Hospital (began participation in Performance Year 1)
• Chan Soon-Shiong Medical Center at Windber (began participation in Performance Year 2)

The CMS Innovation Center
The CMS Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care for Medicare, Medicaid and Children’s Health Insurance Program beneficiaries. More information on all of these initiatives is available on the CMS Innovation Center website at https://innovation.cms.gov/.

Additional Resources
More information about the PARHM Model, including global budgets, quality measures, and other features of the Model, is available on the CMS Innovation Center website at the PARHM webpage. Any questions about the PARHM Model can be directed to pennmodel@cms.hhs.gov.

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