The Pennsylvania Rural Health Model (PARHM) is testing if rural Pennsylvania resident’s access to high-quality care could be improved through care delivery transformation and hospital global budgets. PARHM aims to improve overall health of rural Pennsylvania residents, while also reducing the growth of hospital expenditures across payers, including Medicare. The model’s goal is to improve both the financial viability of rural Pennsylvania hospitals and improve health outcomes, while maintaining continued access to care for Pennsylvania’s rural residents.
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Participating hospitals include:
- Armstrong County Memorial Hospital (Kittanning, PA)
- Barnes-Kasson County Hospital (Susquehanna, PA)
- Clarion Hospital (Clarion, PA)
- Endless Mountains Health Systems (Montrose, PA)
- Fulton County Medical Center (McConnellsburg, PA)
- Highlands Hospital and Health Center (Connellsville, PA)
- Indiana Regional Medical Center (Indiana, PA)
- UPMC Kane (Kane, PA)
- Meadville Medical Center (Meadville, PA)
- Monongahela Valley Hospital (Monongahela, PA)
- Olean General Hospital, Bradford Regional Medical Center (McKean, PA)
- Punxsutawney Area Hospital (Punxsutawney, PA)
- Washington Health System Greene (Waynesburg, PA)
- Tyrone Hospital (Tyrone, PA)
- Washington Hospital (Washington, PA)
- Chan Soon-Shiong Medical Center at Windber (Windber, PA)
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Background
Under PARHM, CMS and other participating payers pay participating rural hospitals on a global budget—a fixed amount, set in advance—to cover inpatient and hospital-based outpatient items and services. Participating rural hospitals work 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, acting through its Department of Health, is a key partner in jointly administering this Model with CMS.
CMS believes this Model furthers CMS’ goals of improving the health of beneficiaries in rural areas, maintaining access to health care for rural populations, and determining the impact of an alternative payment model on rural providers, who have generally had lower rates of participation in alternative payment models.
Model Details
The Model tests whether the predictable nature of global budgets enables participating rural hospitals to invest in quality and preventive care, and tailor their services to better meet the needs of their local communities. Participating rural hospitals prepared Rural Hospital Transformation Plans, outlining their proposed care delivery transformation, which must be approved by Pennsylvania and CMS.
The Model is open to both critical access hospitals and acute care hospitals in rural Pennsylvania. Participating payers include Medicare, Medicaid, and certain commercial plans. Pennsylvania is committed to attain 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.
CMS made available up to $25 million in funding to help Pennsylvania implement the Model. Under the Model, Pennsylvania is using this funding to oversee the Model, aggregate and analyze data, compile and submit reports, propose and administer global budgets, approve Rural Hospital Transformation Plans, conduct quality assurance, and provide technical assistance to participant rural hospitals as they redesigned the care they deliver. The goal of this funding is to help Pennsylvania operationalize the Model and, ultimately, to achieve the Model’s targets described below. Pennsylvania also is contributing funding for the operation of the Model.
Performance Period
There are six performance years during which rural hospitals may participate in a global budget through the Pennsylvania Rural Health Model (Performance Year 1-Performance Year 6, 2019-2024), following a pre-implementation period (“PY0”, 2017-2018). Specific details of each performance year are listed below:
- Performance Year 0: 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 from participating rural hospitals and participating payers. 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: 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 described below, including the population health outcomes, access and quality measures and targets; Model financial targets; and payer and rural hospital participation scale targets.
Two key components of the model that are present throughout the performance years include:
- Hospital Global Budgets: Each performance year of the Model, Pennsylvania prospectively set the all-payer global budget for each participating rural hospital, based primarily on hospitals’ historical net revenue for inpatient and outpatient hospital-based services from participating payers. Each participating payer then pays participating rural hospitals for inpatient and outpatient hospital-based services based on the payer’s respective portion of this global budget. The Medicare fee for service (FFS) portion of the global budgets that Pennsylvania proposed for each participating rural hospital, as well as Pennsylvania’s methodology for calculating the global budgets are subject to CMS review and approval.
- Hospital Care Delivery Transformation: Participating rural hospitals also plan deliberate changes to redesign the care they provide. As part of their Rural Hospital Transformation Plans, hospitals develop plans to invest in quality and coordinate care, to obtain support and continuous feedback from stakeholders in the community, and to tailor the services they provided to the needs of their local community. Pennsylvania and CMS must have approved a rural hospital’s Rural Hospital Transformation Plan before that hospital could participate in the Model. Pennsylvania provides rural hospitals with the technical assistance they need to prepare Rural Hospital Transformation Plans in accordance with the requirements of the Model. Pennsylvania and CMS expect that this care delivery transformation will help rural hospitals make meaningful improvements in the quality of the care they provide and impact the largest health needs in their community.
Model Targets
Under the Pennsylvania Rural Health Model, Pennsylvania agrees to meet several different targets:
- payer and rural hospital participation scale targets;
- financial targets; and
- population health outcomes, access, and quality targets.
Together, these targets create incentives for Pennsylvania to help hospitals improve quality; enhance collaboration among health care providers and the Pennsylvania public health system to improve health for the rural population of Pennsylvania; and reduce the growth in hospital expenditures.
Pennsylvania encourages rural hospitals to participate in the model, commit to achieving rural hospital participation scale targets for each Performance Year.
Additionally, Pennsylvania secured the participation of commercial payers and Medicaid. Pennsylvania committed to having each participating rural hospital’s global budget represent at least 75 percent of that hospital’s net revenue for inpatient and outpatient hospital-based services in Performance Year 1 (2019), and at least 90 percent of each participating rural hospital’s global budget for each of Performance Years 2 through 6.
Pennsylvania committed 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.
Across participating payers, Pennsylvania agrees to an all-payer financial target of no more than 3.38% in cumulative annual hospital cost of care growth on inpatient and outpatient hospital-based items and services per beneficiary (for the purposes of this calculation, a beneficiary is a Pennsylvania resident who resides in a rural area of Pennsylvania served by a participating rural hospital and receives coverage from a participating payer). 3.38% represents the compound annual growth rate for Pennsylvania’s gross state product from 1997 to 2015.
Pennsylvania committed to achieving targets related to population health outcomes and access under this Model, and may have tied 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 preventive screenings; and
- decreasing deaths from substance use disorder and improve access to treatment for opioid abuse.
Pennsylvania commits to meeting population health outcomes and access measures and targets. Participating rural hospitals are held accountable for a targeted set of quality measures. State-specific measures and targets under an all-payer quality program designed by Pennsylvania are in place.
State Models
The Pennsylvania Rural Health Model is the fourth state specific model tested by the Innovation Center, and provides valuable insight in the development of other models that focus on all-payer payment and care delivery transformation efforts to address the challenges faced by rural health providers. CMS has been working with Maryland since 2014 through the testing of the Maryland All-Payer Model and more recently the Maryland Total Cost of Care Model to test innovative hospital payments, advanced primary care incentives, and total cost of care accountability. In October 2016, CMS announced the Vermont All-Payer Accountable Care Organization (ACO) Model, which offers a Medicare ACO model tailored to the state and provides Vermont up to $9.5M in start-up investment to assist Vermont providers with care coordination and bolster their collaboration with community-based providers. In 2023, CMS announced the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model, a voluntary state total cost of care model.
Evaluation Reports
Latest Evaluation Reports
- Two Pager: At-A-Glance Report (PDF)
Prior Evaluation Reports
- Two Pager: At-A-Glance Report (PDF)
- Two Pager: At-A-Glance Report (PDF)
- Two-Pager: At-A-Glance Report (PDF)