Recommendation 5. The Centers for Medicare and Medicaid Services should establish 5-year pay-for-performance demonstration projects in five rural communities starting in fiscal year 2006. During the first 18 months, the communities should receive grants and technical assistance for establishing processes to capture the patient data and other information needed to assess performance using a standardized performance measure set appropriate for rural communities. For the remaining 3.5 years, different approaches to implementing pay for performance should be tested in the various demonstration sites. The selected communities should be diverse with respect to socio-demographic variables, as well as the degree and type of formal integration of local and regional providers.
Many rural health care delivery systems are financially unstable. Although significant steps have been taken to correct historical underpayment of rural providers under Medicare, the operating margins of many hospitals are still very low, and concerns about the equity of physician payments persist. Rural providers have been heavily impacted as states have modified eligibility criteria or lowered provider payments under Medicaid and the Children’s Health Insurance Program in response to worsening state financial conditions.
Rural health care delivery systems must be financially stable if they are to finance investments in human resource networks and information and communications technology and to implement pay-for-performance initiatives. The committee concludes that an assessment is needed of the aggregate impact of changes in the Medicare program, state Medicaid programs, private health plans, and insurance coverage on the financial stability of rural health care providers, and that the Agency for Healthcare Research and Quality is well positioned to coordinate this assessment.
Recommendation 6. Rural health care delivery systems must be sufficiently stable financially to underwrite investments in human resources and information and communications technology and to implement pay-for-performance initiatives. The Agency for Healthcare Research and Quality should produce a report by no later than fiscal year 2006 analyzing the aggregate impact of changes in the Medicare program, state Medicaid programs, private health plans, and insurance coverage on the financial stability of rural health care providers. The report should detail specific actions that should be