Deep within the Patient Protection and Affordable Care Act there is a mandate that extends the Centers for Medicare & Medicaid Services' Rural Community Hospital Demonstration Program for an additional five years beyond its 2010 expiration date. The objective of the program is to increase the capability of the selected rural hospitals to meet the needs of their service areas.
And while being selected to participate in the federal program is seen as a boon to the bottom line, its real rewards may not come entirely in the form of direct reimbursements, nor may they come immediately. Let's take a look.
This week we learn that four hospitals in Maine have been selected to participate in the demo. They are: Inland Hospital in Waterville, Maine Coast Memorial Hospital in Ellsworth, Miles Memorial Hospital in Damariscotta, and Franklin Memorial Hospital in Farmington.
CMS reports that since the program began in 2004, all hospitals participating during the first two years benefitted financially, albeit within a wide range of variation. I don't like to be the ant at the picnic, but a couple of the observations from the first years of the project come as no surprise:
- Problems with physician recruitment and retention were ubiquitous. On-call rotations for hospital inpatient coverage were especially challenging.
- Expenses related to capital improvements and major equipment purchases pose a continuing challenge for all demonstration hospitals.
In other words, the problems that vex small, rural hospitals remain, despite the more generous federal reimbursements.
Still, FMH's CEO was understandably pleased that her hospital was among those chosen for the demo. "Participation in this program allows us to receive cost-based reimbursement for inpatient services that will provide additional Medicare reimbursement to FMH annually for five years,” said Rebecca Ryder, FMH president/CEO in a statement. “This is a key bridge strategy for our organization as we make the transition from fee-for-service care to the new health care world of managing population health and will allow us to focus on initiatives to improve efficiencies and clinical outcomes.”
And her assessment of what participation in the demo means to her hospital is dead on. She's not crowing about the chance to cash in on hefty reimbursements (though in the first two years of the program they ranged from less than 10% to over 75% above the inpatient prospective payment system).
Instead, Ryder is taking the long view. Program participation (and the financial rewards that come with it) is a vehicle toward a place in the near future that exists beyond fee-for-service care. There, clinical outcomes matter. Readmissions are to be avoided. Patient satisfaction will be tied directly to reimbursements. These are value-based incentives and they will be used to generate FY 2013 DRG payments.
As my colleague Cheryl Clark wrote regarding CMS’s value-based payment plans, "The regulations will apply to discharges at 3,000 acute care hospitals. All these hospitals will have their funding reduced starting with 1% in fiscal year 2013, rising to 2% by FY 2017, but will have a chance to earn that money back, and perhaps more, under the incentives algorithm."
The four hospitals in Maine shouldn't expect to see their financial worries melt away. But they should expect to be better positioned to operate under the coming post-fee-for-service "incentives" as a result of participating in the CMS Rural Community Hospital Demonstration Program.