New payment model could save rural hospitals from a post-COVID collapse
The COVID-19 pandemic hit rural hospitals especially hard—and that’s bad news for patients in areas already associated with poor cardiovascular outcomes. According to a new analysis in JAMA, one way rural providers could potentially recover from this “unprecedented challenge” is the implementation of all-payer global budgets.
Under global budgets, both public and private insurers reach an agreement to pay hospitals a set amount of money over a set amount of time. This “predictable stream of income,” the authors explained, can gives hospitals stability and flexibility, allowing them to provide care without depending so much on the connection between volume and revenue.
“As a financing mechanism, global budgets help to address economic challenges that have long affected rural hospitals and have been exacerbated by COVID-19,” wrote lead author Jonathan E. Fried, MD, MPP, Harvard Medical School in Boston, and colleagues. “Rural hospitals have high fixed costs and limited cash reserves or access to credit, and rely on outpatient and surgical volume for revenue. The poor financial outlook of rural hospitals prior to COVID-19 has made them less able to weather the rapid decline in revenue from clinic visits and procedures during the crisis. A global budget would insulate rural hospitals from this volatility and could obviate the need for payers to construct piecemeal financial aid packages during crises.”
Maryland and Pennsylvania have already experimented with global budgets, and the experiences of those two states shows that more work must be done for this idea to truly make an impact on rural care. For example, the authors explained, the Center for Medicare and Medicaid Innovation (CMMI) said that hospitals in those two states had to reduce Medicare spending as a part of their agreements—but in rural hospitals, is it fair to expect that outcome when the facility is simply struggling to stay afloat?
“If the primary goal of a global budget is to sustain rural hospitals, policy makers could refrain from imposing savings mandates or could even increase the budgets of financially distressed hospitals relative to historic spending levels,” the authors wrote. “Accordingly, CMMI could prioritize preservation of access over demonstration of savings in future global budget models for rural hospitals.”
Collaboration would also be key, the team added. In both Maryland and Pennsylvania, stakeholders worked together to determine the best methods for monitoring hospital performance, providing support, and so on.
“Other states seeking to implement global budget models will need to develop similar structures,” Fried et al. wrote. “The federal government can have an important role in laying the foundation for future state-initiated models.”
Rural patients and cardiovascular outcomes
It’s no secret that cardiovascular outcomes are often worse for patients living in rural areas. In 2017, for instance, a report from the CDC found that such areas were associated with higher age-adjusted death rates for heart disease, stroke and numerous other conditions. A more recent study found that cardiovascular disease mortality related to hypertension were up 72% in rural areas, and a separate study found that premature coronary artery disease mortality was on the rise among women in rural areas.
If more rural hospitals are forced to close in the aftermath of COVID-19, it could make those troublesome statistics much worse.
“These facilities are often the principal source of acute care for communities that have substantial public health challenges, including an aging population, poverty, and the opioid epidemic, and are often an important component of the economy of rural communities,” the authors concluded. “The COVID-19 pandemic has exposed the fragility of financing these hospitals on a fee-for-service model. The long recovery from the pandemic is likely to prompt reconsideration of how the US finances rural hospital care.”
Michael has more than 18 years of experience as a professional writer and editor. He has written at length about cardiology, radiology, artificial intelligence and other key healthcare topics.