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News | Value-Based Payment

Rural payment pilots could pave the way to revamped hospital business models

News | Value-Based Payment

Rural payment pilots could pave the way to revamped hospital business models

  • CMS is funding opportunities for rural hospitals to participate in either capitated payments or an ACO model with per-member, per-month payments.
  • The capitated model may encourage a hospital shift to providing outpatient and emergency care exclusively.
  • More details are needed for participation decisions within the model’s tight time frame.

CMS plans to test voluntary rural payment models using either capitated payments or accountable care organization (ACO) structures, potentially encouraging hospitals to shift to outpatient-only business models.

The agency on Aug. 11 unveiled the Community Health Access and Rural Transformation (CHART) model, implementing President Donald Trump’s recent executive order that aims to improve rural healthcare and telehealth.

Rural patients “have a shortage of healthcare providers from which to receive care, with many hospitals or providers having closed or standing on the brink of closure due to financial insecurity,” Seema Verma, administrator of CMS, said in a call with reporters.

She noted 130 rural hospitals have closed since 2010, and 40% of rural providers operate with negative margins.

The capitated model option

The CHART model offers two tracks, including the Community Transformation (CT) Track.

Details of that track include:

  • Allocating $75 million in upfront payments
  • Opening up the model to hospitals in 15 rural communities to be determined
  • Establishing capitated payments for hospitals
  • Offering operational and regulatory flexibilities
  • Waiving cost-sharing for certain Part B services
  • Providing transportation support
  • Offering gift cards for chronic disease management
  • Waiving certain Medicare hospital conditions of participation (CoP)
  • Requiring participation of state Medicaid agencies and Medicaid managed care providers

The CoP waivers could allow rural outpatient departments and emergency departments to be paid at inpatient hospital rates, according to CMS.

Such waivers could allow rural hospitals “to move to outpatient, ER-focused models versus entirely inpatient models, but still for those services they do provide, [to] be able to receive the current rates that they have today,” said Brad Smith, director of the Center for Medicare and Medicaid Innovation.

The model also could encourage rural hospitals to establish “hub and spoke” agreements with larger metro hospitals, with the rural organization providing primary care or behavioral health, Smith said.

The model echoes the hospital-backed Save Rural Communities Act, which would provide rural hospitals with the option to scale down to an outpatient-only, 24-hour emergency care center.

A participating organization’s performance in the CT Track would be gauged based on outcomes measures, including ED visits, admissions and measures selected by the community. Each of the 15 communities will have a designated “lead organization,” which will coordinate the efforts of participating providers, Medicaid and other aligned health plans.

“The participation from other payers is particularly important because we know that for providers, if they are just doing a payment model in Medicare it is hard to transform for just one payer,” Verma said.

The lead organizations could be hospitals, health systems, state Medicaid agencies, state offices of rural health, local public health departments, independent practice associations or academic medical centers.

In September, CMS will select up to 15 rural communities to participate in the CT Track before announcing the choices “in early 2021,” with a summer 2021 start date.

“It appears to be an interesting model, but there are a lot of details that need to be clarified and not a lot of time if CMS sticks to its original timeline,” said Chad Mulvany, director of healthcare finance policy, strategy and development, for HFMA.

The ACO model option

The second track, called the ACO Transformation Track, will build on the ACO Investment Model, which has saved $382 million for Medicare over three years. Up to 20 ACOs with as many as 10,000 members will be selected for the five-year model.

  • Details of the ACO Transformation Track include:
  • Both upfront payments and per-member, per-month payments
  • Two-sided risk arrangements
  • Inclusion of all waivers available in the Medicare Shared Savings Program
  • Leadership by hospitals or physician practices
  • A request for applications in Spring 2021

The model will select up to 20 rural ACOs to participate starting in January 2022.

The model drew praise from the National Association of ACOs (NAACOS).

The ACO track “offers resource-deprived rural providers a helping hand to invest in the tools needed to build accountable care models, including health IT, data analytics and care managers,” said Clif Gaus, ScD, president and CEO of NAACOS.

Verma said the two tracks will test approaches “that can be adopted across the country into other communities and provide the building blocks for much-needed transformation of the rural healthcare delivery system.”

CMS plans to provide an overview of the CHART model in an Aug. 18 webinar.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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