The US is considered by many to be a fee-for-service system, and many European countries are more likely to use global capitation for providers. Those who dislike fee-for-service claim it encourages overtreatment and inhibits prevention, using terms such as “wasteful” and “too expensive.” Those who dislike global headcounting claim that this approach results in reduced access to care and longer wait times for care, using terms such as “rationing” and “queuing.” However, the United States is testing the waters of the global population.
An example of global pay per capita in the US is Pennsylvania Rural Health Model (Palm). How does this program work?a recent paper Scanlon et al. (2022) Explained:
The Pennsylvania Rural Health Model is a $25 million, 6-year demonstration funded by the Center for Medicare and Medicaid Innovation (CMMI). Ultimately, the model will test whether global payments for the population’s healthcare needs will lead to a transformation of healthcare delivery, improved quality of care and lower costs in rural Pennsylvania.
Under Global Pay, participants receive historical patient net income for inpatient and outpatient hospital services for each participating payer. In 2010, Maryland adopted a global budget model for its 10 rural hospitals, in part due to interest in global per capita costs. This system replaces the previous fee-for-service system.
One Report of the first year of the evaluation plan The model is explained in more detail. PARM is a multi-payer initiative that includes participation in Medicare, commercial payers, commercial payers’ Medicaid managed care, and Medicare Advantage plans.
Which hospitals are participating in the program?
When the demonstration was released (2017), there were 67 rural hospitals, of which 15 [critical access hospitals] CAH is eligible to participate in the model. Five hospitals joined the PY1 (2019) model, 8 hospitals joined the PY2 (2020) model, and 5 hospitals joined the PY3 (2021) model. All participants to date remain models of PY3 (2021). Participating commercial payers included four Pennsylvania payers and a national insurance company.
How was the hospital before the implementation of PARHM, and what happened after?
Short- and long-term financial viability of cohort 1 hospitals deteriorated during baseline [i.e., prior to PARHM]- their potential motivators to participate in PARHM. Declines in hospital admissions and fixed costs could negatively impact financial performance during the baseline period…
[After the adoption of PARHM] Bi-weekly payments under the global budget address changes in payments due to seasonality and volume changes. The hospital considers this an important model feature. During the first fiscal year (2019), prior to final reconciliation of Medicare reimbursement, the interim global budget payment exceeded the interim Medicare reimbursement amount that cohort 1 hospitals would have paid under the FFS and cost-based reimbursement methods.
In short, rural hospitals appear to be in better financial shape under PARHM. It will be interesting to see how PARHM operates in the dynamic environment of the COVID-19 pandemic, where costs and utilization are more difficult to predict under a pandemic. On the one hand, the global head may lose revenue by postponing elective surgeries, thereby providing financial stability for hospitals; -19 Pandemic related activities.
