Pennsylvania will be testing a new payment model for rural hospitals designed to improve the health of residents and help the hospitals they depend on stay financially solvent.
With $25 million funding from the U.S. Centers for Medicare and Medicaid, the Pennsylvania Rural Health Model will try an innovative payment structure in which hospitals will be paid a fixed amount each month, instead of being reimbursed for services provided.
"Today we reward rural hospitals for in-patient admissions, in a world where in-patient admissions are declining and hospitals are struggling to stay afloat," said physician Stephen Cha, director of the state innovations group at the federal Center for Medicare and Medicaid Innovation.
He said the same areas are struggling with chronic disease and poor access to services.
In a briefing at the Capitol on Thursday, Gov. Wolf said, "We need to make the quality of life for our fellow Pennsylvanians everything it can be." The project could become a model for rural areas across the U.S., he added.
State Health Secretary Karen Murphy, who spearheaded the proposal, said the $25 million will be used to create a rural health redesign center to provide data analytics and other support.
Six Pennsylvania hospitals will be selected in the spring to participate in a pilot project to launch in 2018. Then 24 hospitals will be added in the next three years.
Murphy said the goal is to include both independent hospitals and hospitals affiliated with larger health systems.
Financial reports and surveys in recent years show how much small, rural hospitals have struggled.
For the July-September 2016 period, hospitals in Western Pennsylvania with fewer than 100 beds collectively lost $10.4 million, for a negative 4.84 percent operating margin, according to a survey by the Healthcare Council of Western Pennsylvania.
Hardest hit have been small, rural hospitals that have fewer than 100 beds but are long-established with their communities and often are the only accessible acute-care setting for miles.
The Healthcare Council has said these hospitals have had negative margins in six of the last seven years, making it difficult for them to fund capital expenditures.
State Rep. Matthew Baker (R., Tioga) noted during Thursday's briefing that one in five Pennsylvanians lives in a rural area while rural hospitals, with 27,000 workers, "are operating on thin margins and they need all the help they can get."