In Brief:
- H.R. 1 (the “One Big Beautiful Bill”) includes $50 billion for rural health-care improvement.
- Half of this money will be awarded on a competitive basis. The program was launched Sept. 15, and states only have until early November to submit applications.
- Lynn Barr, who has helped hundreds of rural hospitals improve service and profitability, spoke with Governing about challenges states may face in making the most of this opportunity.
Mixed in with cuts for Medicaid and social programs, the One Big Beautiful Bill included a historic allocation of $50 billion for states to improve rural health care.
The aim, he said, is to “deliver dignity and dependable care to rural communities, making sure every American has access to affordable, high-quality treatment.”
The window is unusually tight for a federal grant program. Submissions are due by early November. Funding decisions will be made by the end of December.
The stakes are high: the program will distribute $10 billion a year over five years, but the November deadline will be the only opportunity to apply. If a state’s application is not approved, it won’t have a chance to submit another one.
Lynn Barr founded the first National Rural Accountable Care Organization in 2013. In an ACO, providers work together to improve outcomes and quality of care. If this lowers costs to Medicare or Medicaid, CMS will pay them half of the savings.
Barr worked with CMS to help rural hospitals and clinics in 44 states and Guam develop ACOs. They managed to cut costs by half a billion dollars, half of which came back to them.
In a conversation with Governing, Barr offers thoughts about the CMS funding opportunity and navigating a complex application process on an urgent timeline.
Barr is a commissioner of MedPAC, which advises Congress on Medicare issues. Her comments are based on personal experience, not the views of MedPAC, she tells Governing. The interview has been edited for length and clarity.
In your work with rural health-care providers, what did you learn about that system and its needs?
There is a lot of beauty in the rural health-care system. The hospitals are very engaged in their communities. They know almost everyone personally.
The people that work in those systems are doing everything possible to serve that community of people, and so they will work very hard on their behalf. They all wear a lot of hats. These are tremendous assets, but the other side of it is they have no profit.
In rural communities, about 75 percent of patients are Medicare, Medicaid and uninsured. The clinics and hospitals can't survive unless we find a way to make them profitable on Medicare and Medicaid. You can't live on 99 percent of costs, which is what we pay today, and expect to thrive. There simply aren’t enough commercial patients to make them sustainable, a uniquely rural issue.
Is $50 billion over 10 years enough to make a real difference?
That kind of money can completely change the system, but it will only make a difference if it's well executed. We’ve thrown away tens of billions of dollars in the last decade on projects that we got almost nothing from.
(USDA)
The application released last week was a surprise that will force states to reconsider their plans if they want to get maximum funding. States will be scored against the total points that can be awarded, and they’ll get their share of the second half of the money based on that score.
Seventy percent of the score is discretionary, based on how many initiatives the state pursues and the quality of their plan. You really don't know how much is available, because it depends on the quality of the other states’ applications.
The discretionary points are divided into three buckets: health-care transformation, state policy changes, and data enhancements. Transformation initiatives are about making America healthy again by transforming how we work with patients, focused on prevention, wellness, nutrition and access, with a strong emphasis on technology like telemedicine and remote patient monitoring.
I don't know what ability state Medicaid offices will have to be able to change policies that have been entrenched for a long time in their states. States who already have policies the administration would like to see in place automatically score higher, putting further pressure on states who do not. The third bucket is improving data infrastructure.
What happens if states aren’t able to accomplish things included in their application?
The first $25 billion is solely based on a successful application with no claw backs. On the other half, they said, “Okay, we're going to divide it based on your scores and what you said you were going to do. Then every year we're going to look and see what you did, and if you didn't do what you said, we're going to re-score you, and either adjust your score and payments going forward or take back payments you already received.”
States have got to be very careful about what their goals are. They must really think about what they can reasonably do and be very careful about not over committing.
This funding opportunity reflects the Make America Health Again priority of preventing disease by changing habits such as diet and exercise. This is consistent with practices you’ve helped rural hospitals implement to reduce the cost of providing treatment. Do you have any advice based on that experience?
I think this is the hardest part of the application to write, because getting a high score means implementing a transformative and sustainable model. The Notice of Funding Opportunity includes criteria that very few models have achieved in the past.
I developed the ACO Investment Model (AIM) in 2015 with CMS to spread Accountable Care Organizations to rural America. Based on my experience, I developed a model that should help states score highly. This is an open-source document that states can look at and consider, so that everybody doesn't have to start with a blank canvas. They can use it as a framework for a competitive application.
I would encourage states to give themselves six months to launch, because they've had no time to plan any of this. Have modest, foundational goals in year one and then kill it in years two through five.
Any other important things that could get lost during such a short planning window?
Tom Morris from the Federal Office of Rural Health Policy mentioned to me that nobody's thinking about sustainability. States may be thinking, “We're going to have these [Medicaid] payment cuts and we'll give rural hospitals this money, and then they'll be okay for five years.”
But then what? Sixty percent of the projected cuts hit in 2030. States need to think about how they create a model that also creates profit and sustains rural providers.
The best way for them to do that is to improve the health of their population. We should be able to reduce the total cost of care per beneficiary by at least 10 percent, given our costs are twice as high as most developed nations.
If providers get half of that through shared savings, it should cover their payment cuts in 2030. Creating profitable services is also key to access in rural America.
