TRANSFORMING HEALTH:- Rural hospitals see an average of 10 percent more Medicare and Medicaid patients than elsewhere, according to Hospital and Health System Association of Pennsylvania. Those insurers pay less than commercial insurance. Rural hospitals also have a higher rate of patients who have no means of payment. (Stock image)
A state Senate proposal aims to help struggling rural hospitals by changing the way they get paid. The proposal, by Republican state Senator Lisa Baker, Luzerne County, taps into a funding method known as 'value-based' payment. Some health care industry officials hope the change will prevent hospital closures and improve resources. Of the state's roughly 50 rural hospitals, 30 of them are at risk for closure, according to data from Hospital and Health System Association of Pennsylvania. The health care industry considers profit margins between 4 and 6 percent to be healthy, said Jeff Bechtel, the association's Senior Vice President of Health Economics and Policy. Many rural hospitals operate on lower margins than that. Those hospitals often see a 10 percent higher rate of Medicare and Medicaid patients than hospitals overall, and those insurers pay less than commercial insurers. In addition, rural hospitals have higher-than-average rates of patients who have no way to pay for emergency services, Bechtel said. Those factors threaten the financial viability of hospitals that are at crucial resources for communities with few other nearby options. The planned change would transition rural hospitals from a "volume-based" billing model, which bills insurance for itemized procedures, to the "value-based" model, said Lisa Davis at the Pennsylvania Office of Rural Health. Under the value-based model, hospitals set up annual contracts with insurers, which pay a monthly sum to hospitals, regardless of services provided. The model uses data to track costs patient outcomes, Davis said. That gives hospitals a strong incentive to focus on quality of care. If the bill passes, hospitals and insurers will be able to opt-in to the program, through the "Rural Health Redesign Center," which stands to receive $25 million in federal funding. Davis said the value based model makes sense in rural hospitals where beds aren't always full. If the legislation passes, it will initially be funded by a $25 million federal grant.