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Analysis

Pennsylvania Rural Hospitals May be Better Positioned to Weather COVID-19 Due to Global Budget Model

By Jack O'Brien  
   June 10, 2020

Pennsylvania's rural hospitals could benefit from use of a global budget model during the pandemic, according to a JAMA article released Wednesday afternoon.

Despite sizable financial headwinds and the lingering effects of the coronavirus disease 2019 (COVID-19) pandemic, Pennsylvania's rural hospitals could be well-positioned to sustain operations due to the use of a global budget model, according to a JAMA article released Wednesday afternoon.

An all-payer global budget model, according to the article, acts as a financing program where payers "agree to pay hospitals a fixed amount (ie, a budget) to deliver care to a population over a specified time period."

The article acknowledges that Maryland also has a global budget model but notes that Pennsylvania's program "focuses on sustaining rural hospitals."

One of the coauthors of the piece, Eric Roberts, Ph.D., assistant professor of health policy and management at the University of Pittsburgh Graduate School of Public Health, told HealthLeaders that policymakers should consider implementing a global budget model, noting that the current fee-for-service system that is "not viable" for rural providers.

Roberts added that global budget models allow rural hospitals to know their prospective revenues up front, focus on the total cost of care, and reconfigure operations as needed without worrying about profit margins.

"We think there's some urgency for acting," Roberts said. "There are a number of authorities that states and the federal government can use to expand the global budget program for rural hospitals, learning from the Pennsylvania and Maryland experiences but recognizing the fact that some of this is going to involve financially stabilizing rural hospitals."

The JAMA article is the latest research to analyze the steep financial challenges faced by rural providers, which have only been exacerbated by the coronavirus outbreak, and offer a policy-based solution.

Earlier this month, Health Affairs released a study that found over a six year-period, median overall profit margins declined for all rural hospital types except for critical access hospitals.

Related: Profit Margins Declined for Rural Hospital Types Except Nonprofit Critical Access Hospitals

The study was released almost two months after a Guidehouse analysis found that one quarter of rural hospitals are at high risk of closing due to financial challenges.

Amid the first wave of the coronavirus pandemic, the financial health of hospitals in Pennsylvania has remained a focal point.

Last week, Capital BlueCross announced plans to issue advance payments to independent healthcare providers affected by the ongoing outbreak.

Related: Capital BlueCross Offers Advance Payments to Pennsylvania Providers Affected by COVID-19

The Hospital and Healthsystem Association of Pennsylvania (HAP) estimated in May that hospitals across the state have lost $10.2 billion due to the pandemic.

Related: Pennsylvania Hospital Association Projects $10B Deficit for State's Hospitals

Hospitals have a significant economic impact on the Keystone State, accounting for more than one in every 10 jobs in Pennsylvania, according to a HAP study released in December.

Providers in the state made a total economic impact of $136.1 billion in Fiscal Year 2018, according to the same report.

Related: Pennsylvania Hospitals Made $136.1B Impact in FY 2018

To remedy the financial pressures related to the coronavirus outbreak this spring, Pennsylvania state government established the Hospital Emergency Loan Program (HELP) and dispensed $324 million in short-term relief funding to affected providers. Geisinger Health received $100 million in HELP funding.

Related: Hospitals Across Pa. Get $324M via Loan Program; Geisinger Gets $100M

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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