Pennsylvania Rural Health Model
The Pennsylvania Rural Health Model (PARHM) seeks to increase rural Pennsylvanians’ access to high-quality care and improve their health, while also reducing the growth of hospital expenditures across payers, including Medicare, and increasing the financial viability of rural Pennsylvania hospitals.
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.
There will be six performance years for the Pennsylvania Rural Health Model (PY1-PY6), following a pre-implementation period. Specific details of each performance year is listed below:
Pre-implementation period (2017 - 2018): 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 final commitments and signed agreements with participating rural hospitals and participating payers, and CMS signed agreements with the participating rural hospitals. 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 1, 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.
Pennsylvania commits to achieving $35 million in 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.
Population Health 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:
- increasing access to primary and specialty care;
- reducing rural health disparities through improved chronic disease management; and
- decreasing deaths from substance use.
Global Budget Methodology
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, beginning for Performance Year 1, for every participant rural hospital. CMS makes biweekly payments to participant rural hospitals, equivalent to 1/26 of the approved Medicare FFS portion of their global budget.
The fixed payment for each performance year is calculated by applying certain adjustments to baseline revenue. For a hospital’s first year of participation, 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, adjustments are applied to the baseline revenue to account for unit price trends, demographic changes, quality performance, and other factors.
Revenue furnished under the global budget includes: inpatient acute care, outpatient ambulance, outpatient ED, outpatient imaging, outpatient lab, and other outpatient services. For CAHs, only, facility spend for swing beds is included.
Performance Year 1 Participants
The Model is open to both critical access hospitals and acute care hospitals in rural Pennsylvania. Participating payers include Medicare, 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 Performance Year 1 participating hospitals, representing a mix of both critical access and acute care hospitals across the state, are:
- Barnes-Kasson County Hospital
- Endless Mountain Health System
- Geisinger Jersey Shore Hospital
- UPMC Kane
- Wayne Memorial Hospital
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/.
More information about the PARHM Model, including payment arrangements, quality measures, and benefit enhancements, is available on the CMS Innovation Center website at the PARHM webpage. Any questions about the PARHM Model can be directed to firstname.lastname@example.org.