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Pitt Study Casts Doubt On Policy Aimed To Sustain Rural Hospitals

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Jersey Shore Hospital in Lycoming County is among the 30 rural hospitals expected to try a new revenue model that aims to both reduce patient admissions and increase profits.

A new University of Pittsburgh study asks whether a revenue model set to be introduced in six rural Pennsylvania hospitals next year can both reduce patient admissions and increase profits.

The program is expected to be implemented in 30 rural hospitals by 2023. Data from Pennsylvania's Department of Health Innovation shows that in 2015, 47 percent of all rural hospitals in Pennsylvania had negative operating profit margins

Researchers looked at a similar program that was implemented in rural Maryland. Participating hospitals there use a fixed amount of money to pay for patient care—meaning the more people they hospitalized, the more profits margins decreased.

According to the Pennsylvania Hospital Association, the benefits of revenue restrictive models are that it creates a more proactive care system while offering predictable cash flows. But data analysis in the Pitt study found that three years after the program's implementation in Maryland, there was no reduction in admissions.

“Obviously we don’t know, until it’s implemented in Pennsylvania,” said co-author Dr. Ateev Mehrotra, a health policy expert at Harvard Medical School.  “But, given the findings in Maryland, I have some skepticism that it’s going to change the way care is delivered.”

Like Maryland, Pennsylvania’s model will only focus on hospital payments, and researchers said that might be why the desired outcomes were not achieved. Pennsylvania facilities will be expected to negotiate monthly payments with Medicare, Medicaid and private insurers, like UPMC and Highmark. 

“Physicians in Maryland were not part of the global budget model. They did not bear in the risk or share in the rewards of any savings that would accrue to hospitals from reducing unnecessary hospitalizations or ED visits,” said Pitt’s Eric T. Roberts, the study’s lead author.

The study was published this week by the journal Health Affairs.