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DANVILLE, Pa. -- Rural hospitals are facing mounting financial challenges. Without intervention, many will close, impacting both the health and economy of the communities they serve. 

Karen M. Murphy, Ph.D., RN, executive vice president and chief innovation officer at Geisinger along with Dr. Lauren Hughes and Dr. Patrick Conway published a paper in the Journal of the American Medical Association (JAMA) proposing a strategy to preserve rural hospitals. The paper, entitled “A Path to Sustain Rural Hospitals,” tackles the issue and offers a potential solution based on an innovative payment and delivery model introduced in 2017 by the Pennsylvania Department of Health and the Centers for Medicare & Medicaid Services called the Pennsylvania Rural Health Model. The Department of Health and CMS will begin testing the model in 2018.

The new program will provide rural hospitals an opportunity to transition from a fee-for-service reimbursement system, based on volume, to a multipayer global budget payment method, which is based on value of services that are intended to improve population health outcomes and quality of care while lowering costs. 

“The Pennsylvania model was designed to meet the health needs of rural residents and to aid in sustaining a health care system that improves population health and access to health care while offering rural hospital a sustainable business mode,” said Murphy.

In the paper, Murphy points out that more than 58 percent of the hospitals have mounting financial pressures, resulting in break even or negative operating margins. She further explains that there has been a significant number of rural hospital closures in less than a decade. In the past seven years, 83 of the 2,244 rural hospitals in the U.S. have closed due to financial challenges.  

The Pennsylvania Rural Health Model is designed to include Medicare, Medicaid and commercial payers. The plan provides that the hospital budget will be calculated and each month the hospital will be paid 1/12 of the total budget amount. This is intended to give rural hospitals a revenue stream to allow sustainability and improved healthcare. The global budget will incentivize rural hospitals to retain the revenue regardless of hospital use. 

Murphy explains that other elements of the model include support in transition through the creation of a Rural Health Design Center. The model also includes the implementation of strategies that could save an estimated minimum of $35 million to Medicare over the life of the model. 

“Rural hospitals provide imperative health care services and also provide economic stability in the regions they serve,” said Murphy. “If the Pennsylvania Rural Health Model achieves better quality and lower costs, it could be scaled as a model for the nation for rural health care delivery.”

About Geisinger
Geisinger is committed to making better health easier for the more than 1 million people it serves. Founded more than 100 years ago by Abigail Geisinger, the system now includes 10 hospital campuses, a health plan with more than half a million members, a research institute and the Geisinger College of Health Sciences, which includes schools of medicine, nursing and graduate education. With more than 25,000 employees and 1,700+ employed physicians, Geisinger boosts its hometown economies in Pennsylvania by billions of dollars annually. Learn more at or connect with us on Facebook, Instagram, LinkedIn and Twitter.

Dr. Karen Murphy