The Impact of Medicare’s New CHART Alternative Payment Model on Rural Health

Sarah Gaskell, Dave Mosley, Abdul Shaikh, PhD, MHSc, William Faber, MD, and Dan DeBehnke, MD, MBA

Significant changes continue to occur in rural health. On August 3, President Trump signed an Executive Order to expand access to care for rural communities, with White House Press Secretary Kayleigh McEnany citing Guidehouse’s (formerly known as Navigant) 2019 study in the administration’s press briefing the next day.

In response to the President’s Order, on August 11, the Centers for Medicare & Medicaid Services Innovation Center debuted its new Community Health Access and Rural Transformation (CHART) Model focused on improving financial sustainability, removing regulatory burdens, and enhancing access to care for rural residents.

In our work, we have been privileged to partner with our nation’s rural health frontline as they continue to pursue financial sustainability. The recent changes create the following opportunities for rural providers:

  • Offers predictability for unpredictable revenue streams: Like Pennsylvania’s All-Payer Global Budget Model, the Community Transformation Track proposes a predictable revenue stream for rural hospitals. As we wrote in our most recent Rural Hospital Sustainability Index, a quarter of rural hospitals were at-risk, pre-COVID-19, of closure due to financial constraints. COVID-19 has increased financial pressures on hospitals and health systems large and small, but for rural hospitals operating on low volumes, the margin of error is narrow and indeed, we have seen more than 130 rural hospitals close in the last 10 years with another 354 at risk. Creating a predictable revenue stream for rural hospitals may help offset these pressures and sustain care in communities nationwide.

  • Expands access to providers via telehealth without the overhead cost of employment and recruitment: Like their urban counterparts, rural hospitals struggle with succession planning, recruitment, and retention of providers. Competing in an already competitive physician recruitment market, a key difference for rural hospitals is that locally retained volumes may not require an entire full time equivalent of coverage from a specialist. Telehealth provides an opportunity to extend access to care for rural communities. Pre-COVID, financial incentives were not directly aligned with telehealth adoption. Through expanded telehealth reimbursement, rural providers are better positioned than ever to provide access to specialists and therefore keeping their patients closer to home without the overhead cost of employing physicians locally. This may also create additional revenue for larger providers that ramped up their telehealth platforms due to COVID to extend support to rural providers.

  • Opportunity to transform delivery model: Our 2020 research found that most rural patients may already be leaving the community to seek inpatient care elsewhere, but emergency and outpatient services are still critical for local delivery. Today, when one of these hospitals closes, the community loses access to inpatient care and may also lose access to emergency and outpatient services as well. Waiver of Medicare hospital requirements will allow rural providers more flexibility to align their facility operations with services in demand in the community and to provide benefits not previously allowed for hospitals.

  • Incentivizes movement to population health models by modifying ACO terms for rural providers via the Accountable Care Organization (ACO) Transformation Track: The proposed ACO Transformation Track through CMS’ CHART would specifically focus on Medicare beneficiaries, which already contribute nearly half (46%) of an average rural hospital’s gross patient revenue. For up to 20 rural ACOs, CMS will grant significant initial investments, provide prospective payments and relax certain requirements to make it more feasible for rural communities to participate in ACO models that reward population health management. For another 15 Lead Organizations in the Community Transformation Tract, CMS investments will be even greater. ACO models do have downside risks. Our 2018 analysis of participants that earned shared savings in the Medicare Shared Savings Program found ACO tracks ranging from Next Gen to Track 1 lost an average of $3 per member per month (PMPM) in a Next Gen ACO and up to $31 PMPM in a Track 1 ACO. New accommodations in the CHART model may make it possible for rural communities to manage their downside ACO risk.

Some key considerations for state and rural hospital leaders include:

  • Since the declaration of the pandemic in March, rural hospitals have received financial support to offset revenue losses due to COVID-19 and mandatory cessation of elective procedures through sources like CARES and state-based funding. Leaders should consider what other supports are needed at a state and local level to promote both current and post-COVID-19 sustainability of rural hospitals and to develop an agile strategy for potential surges.

  • Opportunities exist to further promote rural health sustainability. These may include:
  • Centralizing common operational and strategic functions to create a shared services center for rural hospitals or incentivizing partnerships between larger providers with resources that can be scaled to rural providers.
  • Assistance with provider recruitment and succession planning for onsite providers aligned with new and emerging legislative funding streams.
  • Supporting strategic collaborations to enhance funding potential among CHART-eligible entities spanning hospital, state/local health agencies, independent practice associations and academic medical centers.
  • Service line strategy and marketing to further strengthen local low acuity services, promote awareness of existing service lines, and increase retention of cases that can be performed locally.

State and local health agencies, independent practice associations, academic medical centers, health systems with rural hospitals, and independent rural hospitals have an opportunity to invest in new and sustainable business innovation whether it’s through CHART or other avenues. Leaders should consider and prioritize the opportunities that will improve financial sustainability and promote access to quality care for all rural communities.

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