Pennsylvania Rural Health Model
A first-of-its-kind approach to stabilizing rural healthcare
Overview
The Pennsylvania Rural Health Model (PARHM) was an initiative produced from the Centers of Medicare and Medicaid Innovation (CMMI) designed to improve the financial stability of rural hospitals.
Launched as the first rural-focused alternative payment model of its kind, the Model shifted participating hospitals from traditional fee-for-service reimbursement to a global budget, providing fixed, predictable revenue in exchange for accountability around cost and quality.
Act 108 in 2019 created the Rural Health Redesign Center Authority (RHRCA) to advance innovative approaches to rural healthcare delivery across the Commonwealth, including governance of the PARHM. In 2020, the RHRC was formed as a supporting nonprofit to the RHRCA to provide technical assistance, research, and program support.
Our Role
Through an interagency management agreement, the RHRC was responsible for implementing the PARHM, including:
- Designing the model structure and payment methodology
- Establishing governance and program operations
- Coordinating across hospitals, payers, and state and federal partners
- Managing performance monitoring and reporting
- Providing ongoing technical assistance to support hospital transformation
RHRC’s role ensured the Model moved from concept to full implementation with consistency, transparency, and accountability.
Model Participation
Participation in the model was voluntary and included:
Prospective Payment System Hospitals
Medicare and Medicaid
As a result of this participation, it is estimated the PARHM’s footprint covered over 1.3M Pennsylvania residents.
Approach
The PARHM was built on a global budget framework that was designed to:
- Provided predictable, all-payer hospital revenue
- Reduced reliance on volume-driven reimbursement
- Supported care redesign and operational flexibility
- Encouraged coordination across care settings
The intent of this structure was to allow hospitals to focus on maintaining services and improving care delivery rather than maximizing volume.
Key Objectives of PARHM
Improving the financial stability of rural hospitals
Improving population health outcomes
Reducing total cost of care overtime
Outcomes
While the Model’s methodology had some faults, it demonstrated that rural-focused alternative payment strategies can be successfully implemented at scale.
Key outcomes include:
- Improved financial predictability for participating hospitals
- Reduced avoidable utilization across readmissions, ambulatory sensitive conditions, and emergency room visits
- 150+ transformation goals implemented, spanning case management, substance use, geriatric care, operational efficiency, and more.
- Strong collaboration across providers, payers, and public partners
- Establishment of a scalable framework for rural payment reform
Visit the CMS website for additional information and evaluation reports.
Voices From the Model
What Comes Next
Building on the lessons learned from the PARHM, RHRC continues to work with partners across the Commonwealth to advance next-generation alternative payment strategies.
This ongoing work focuses on:
- Evolving alternative payment methodologies
- Strengthening long-term sustainability
- Aligning payment approaches with future federal opportunities, including the Rural Health Transformation Program (RHTP)
RHRC remains committed to supporting Pennsylvania as a national leader in rural healthcare innovation.