A multi-year health policy experiment to support rural hospitals in Pennsylvania ended with mixed results, but other states are poised to start similar programs.
Rural hospitals in the U.S. have struggled financially for years. In 2019, at the start of the health policy experiment in Pennsylvania, the state department of health reported that nearly half of rural hospitals were operating on a negative margin and in danger of closing.
From 2019 to 2024, 18 rural hospitals in Pennsylvania were part of a state and federal experiment to change the way that insurers pay for hospitals. Hospitals committed to transformation plans in exchange for fixed revenue they could rely on.
Traditionally, hospitals get paid when patients come for tests, treatments and procedures; the hospitals provide those services and charge insurance providers afterwards. Hospitals effectively subsidize the cost of services that don't make as much money with services that do, like large surgeries.
The experiment, called the Pennsylvania Rural Health Model, paid hospitals fixed amounts so they could invest that money in preventative health services to keep people from getting so sick they needed inpatient services from the hospital. The idea was that the hospitals would benefit from having a regular source of revenue, the communities would benefit from becoming healthier overall, and insurance providers would benefit by not having to spend as much on hospital services.
Researchers say the experiment produced mixed results, and could not definitively say that being a part of the model helped hospitals financially, nor that it made the communities healthier. One of the hospitals involved even closed this year.
Other states are poised to start similar experiments in the coming years, starting with Maryland, which transitioned to its new model this year. Connecticut, Hawaii, Rhode Island, and New York are set to follow in 2028.
However, researchers and experts have big questions: whether the experiment will work this time, and how states work with a federal government that could suddenly change policy priorities.
The Pennsylvania Rural Health model did not permanently solve the problems that rural hospitals suffer from, said Harold Miller, a health policy expert and adjunct professor at Carnegie Mellon University. He said the models for the other states are "equally bad, equally problematic in terms of how well it's going to work."
He explained that one big problem with the experiments is that the amount of money a hospital received was based on how much money they got paid for services in previous years. However, the problem is that rural hospitals simply do not have enough money to begin with.
"The problem is you don't need predictable revenue, you need an increase in it. And the global budget doesn't solve that."
The inspiration for these experiments was Maryland, which embarked on a similar program in 2014, and has successfully saved hospitals money, reduced patient complications, and reduced the rate at which patients have to be sent back to hospitals, according to the Maryland Hospital Association.
These measures mean "there's no question that Maryland is healthier because of the Maryland model," said Joshua Sharfstein, former secretary at the Maryland Department of Health and a public health professor at Johns Hopkins University.
As an example of how a model like Maryland's can benefit the community hospitals, and insurance providers, he points to a service like pulmonary rehabilitation, which are programs that help patients with chronic lung disease manage their conditions through classes and exercises.
Sharfstein said that in the traditional hospital financing model, insurance providers don't pay very well for preventative services like that. However, in a model like Maryland's, "you can invest in that and essentially make it back from the savings, because you have fewer people coming into the hospital struggling to breathe. So it's really like a win for the patients and a win for the hospital, you're aligning the health of the hospital with the health of the community."
Maryland is the first state to join a new federal global budget experiment, but Sharfstein explained that not much changed right away, because the experiment is based on the model that Maryland already has.
While Maryland embraced the new federal experiment, Vermont signed on to join in 2023 under the Biden administration, but decided to pull out earlier this year, citing changes in federal policy in September 2025 under the Trump administration which would have, among other effects, reduced the amount that Vermont could have invested in primary care practices, according to Vermont's Secretary of Human Services.
Vermont should continue to work with the federal government on health policy innovations, but this kind of abrupt policy change is unprecedented, said Mike Fisher, chief health advocate for Vermont, an independent, government funded job in charge of serving as a state healthcare watchdog.
"I don't think there's any dispute the way this administration is approaching how to govern … even down to the depths of how to partner with states to make sure people get the care they need, is a real change."
"Nothing happens in four year increments, everything happens in much longer time spans," he said. "This experience is real concerning that it's hard to trust our federal partner to be there through different political leadership to continue to partner to solve the serious challenges we all have."
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