NRHA on rural health innovation
Innovation has been essential to sustaining providers of care in rural communities, and as the single largest payer for rural care, Medicare has been the primary driver of innovation. However, from the program’s inception in 1965, the vicious cycle of Medicare payment policy has forced rural hospitals to find creative solutions to keep operating.
For example, the advent of the Prospective Payment System (PPS) in 1983 closed over 400 rural hospitals nationwide. This government payment program was never tested or demonstrated on rural, small volume hospitals prior to its implementation. Rural advocates spent the 1990s calling attention to the inadequacies of PPS and called for solutions such as the creation of the State Offices of Rural health, Medicare Dependent Hospital (MDH), Montana Assistance Facilities (MAF) and the Essential Access Community Hospital (EACH)/Rural Primary Care Hospital (PeaCH). It was out of these payment innovations that came the Critical Access Hospital (CAH) program in 1997. This single innovation stemmed the closure of rural hospitals and stabilized their operations for over a decade to follow.
Rural innovations since 1965 have centered on a fee-for-service payment system that is fragmented across multiple insurers, creating a confusing mix of incentives and outcomes. For example, a rural community may participate in an Accountable Care Organization (ACO) through the Medicare Shared Savings Program (MSSP), but for only a portion of their total revenue. The remaining payers may have different incentives and quality reporting programs.
Recently, Value-based Payment (VBP) methodologies have been called into question. VBP payment incentives apply mostly to PPS hospitals. According to Burns and Pauly, “the transformation from ‘volume to value’ appears to be driven more by ideology and aspiration than by evidence.” VBP for providers that serve vulnerable populations (e.g., rural) is even more problematic. The NEJM documented the impact of VBP programs on providers that serve the poor, where social determinants of health impede safety-net providers’ ability to score well in these programs. Value-based innovation around a fee-for-service, volume-based system has spelled trouble for rural providers of care.
This vicious cycle has led to what NRHA is calling the second wave of rural hospital closures. Because they serve largely vulnerable populations, 83 rural hospitals have closed since 2010. Innovations in payment systems to this point in time aren’t enough to overcome the impact of sequestration, the automatic 2% reduction in Medicare payments to all providers and bad debt cuts which have cost rural hospitals $3.8B over 10 years. Due to lack of payer alignment and misguided cuts in payments to providers, perverse incentives have shuttered services in rural hospitals, such as delivering babies. From 2005 to 2014 over 179 rural hospitals have ceased providing obstetrical care, with 54% of rural counties now without hospital-based obstetrical services—creating what many are calling “maternity deserts.”
Einstein is reported to have said, “We can't solve problems by using the same kind of thinking we used when we created them.” It is on this principle that NRHA supports the implementation of Global Budget Payment (GBP) programs in Pennsylvania and Maryland. This program uses different thinking and energy to catapult rural health out of the orbit it is currently spinning in. NRHA has chosen Lauren Hughes, M.D., M.P.H., Deputy Secretary for Health Innovation at the Pennsylvania Department of Health, as the keynote speaker for this year’s Rural Health Clinic/Critical Access Hospital (RHC/CAH) Conference. Dr. Hughes oversees the implementation of the Pennsylvania GBP and will give attendees an overview of this exciting program as it approaches a January 1, 2019 start date. The GBP seeks to solve problems differently from the past. Here are reasons why this program shows potential for rural communities:
- It’s the only rural-centric innovation project currently at Center for Medicare and Medicaid Innovation (CMMI).
- It begins January 1, 2019 with six rural hospitals, and will continue for five years.
- The Pennsylvania state government is solidly behind this rural transformation project.
- It aligns payments from all payers (Medicare, Medicaid and Commercial Carriers) toward fulfilling a hospital’s global budget. The goal is for 90% of hospital revenues to be paid through this program.
- It aligns quality measurement programs around a unified data set across all payers, which reduces the reporting burden that rural providers experience;
- It enables clinical systems to fully transform to emphasize prevention and chronic disease management as a central priority.
- It enables hospital leaders to “do the right thing” for their communities by improving population health status while lowering the cost.
- It stabilizes rural hospital payment structures, giving assurance that the hospital won’t “save itself out of business” by implementing population health strategies.
- Perhaps most importantly, it allows rural hospitals to request waivers to Medicare Conditions of Participation (COP) that impede their progress toward the above stated goals.
- Finally, it solves the paradox of changing payment arrangements to keep pace with delivery system reforms.
For these reasons, NRHA enthusiastically supports this rural innovation project which fulfills longstanding policy goals of the Association for rural providers of care. With COP waivers, rural communities could become laboratories for micro-demonstrations of innovations such as new provider types, like the proposed “community outpatient hospital.” Around 35 states have responded with intense interest in joining a possible next round of this CMMI demonstration project. NRHA’s next goal is to make that happen.