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Pennsylvania Rural Health Transformation Pilot: Interested Hospitals Must Express Interest by the End of June

June 27, 2016

Under the leadership of Secretary of Health Dr. Karen Murphy, the commonwealth is proposing to develop and implement a multi-payer global budget initiative in rural Pennsylvania. A global budget is a payment model in which states provide a fixed amount of funding for a fixed period of time for a specified population, rather than fixed rates for individual services or cases.

Hospitals interested in participating in Pennsylvania’s global budget initiative pilot must communicate their interest to Secretary Murphy by the end of June.

During HAP’s recent Council of Rural Hospitals’ meeting, Secretary Murphy presented the commonwealth’s proposed model titled “Pennsylvania Rural Health Transformation,” and outlined the following details for the program:

  • Six hospitals initially will be selected to pilot this approach
  • An memorandum of understanding must be signed by the end of 2016
  • A formal contract with the Rural Health Redesign Center must occur in 2017
  • Implementation of the initiative is targeted for January 2018
  • An additional 12 hospitals are expected to come “on-line” during 2019
  • Secretary Murphy hopes to reach a target of 30 hospitals by 2020

Global budget programs are being modeled after a successful program in Maryland. The Maryland All-Payer Model introduced global budgets for the state’s hospitals and pays them a fixed annual amount for inpatient and outpatient services, with adjustments for quality. Hospital utilization is not a factor. The program already is showing promising results with reduced utilization and realized savings.

The exploration of new and innovative programs is critical for Pennsylvania hospitals. The cost of providing care continues to outpace payment from federal, state, and some commercial payers. In addition, rural hospitals are challenged by licensing barriers, outdated regulatory requirements, and other matters that impede their long-term sustainability. Other efforts—including telemedicine initiatives—also are being evaluated to help address the needs of rural communities.

HAP has been fully engaged in the State Innovation Models (SIM) initiative, designed to promote state-led, transformation work to increase the quality of care, contain costs, and improve the performance of health care systems as a whole. In Pennsylvania, this SIM effort is being referred to as the Health Innovation in Pennsylvania (HIP) Plan. The rural global budget pilot is part of this effort.

For additional information or questions about the global budget pilot, please contact Kate Slatt, HAP’s senior director, health care finance policy.

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