BELLEFONTE — The outlook for rural hospitals in Pennsylvania remains grim as the state prepares to make the best of decreased federal investments and faces budgetary challenges that officials say make it impossible to absorb the cuts.
Policy experts say the $50 billion, five-year Rural Health Transformation Program won’t offset deep Medicaid cuts approved in a sweeping federal budget package that slashed spending by roughly $1 trillion over the next decade and tightened eligibility requirements.
Pennsylvania officials estimate the state will lose about $20 billion in federal Medicaid funding over 10 years starting in 2028.
Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, said the federal program was offered almost as a “consolation prize” to ease fear that more hospitals would close because of the Medicaid cuts.
While $50 billion is a lot of money, hospitals and health systems will feel the funding reductions “when they begin to address the needs of the uninsured,” Lisa Davis, director of the Pennsylvania Office of Rural Health, told Spotlight PA.
Shapiro’s $53.3 billion budget proposal, presented to the divided legislature in early February, mostly keeps hospital funding intact and adds $1 billion in Medicaid spending, primarily to cover services and keep up with rising costs. He also called for a higher minimum wage — from $7.25 to $15 an hour — hoping that could reduce the number of people who are insured through Medicaid.
But some health experts say it’s still not enough to solve the problems making it hard for hospitals to stay open.
A recent analysis commissioned by the Hospital and Healthsystem Association of Pennsylvania, which has long warned about the pressures facing providers, estimates that a dozen more facilities could close over the next five years without more help from policymakers.
HAP, which represents 235 hospitals statewide, supports efforts to boost insurance coverage. However, President and CEO Nicole Stallings said hospitals need more. Rural communities often have older residents and treat people more reliant on government-funded insurance, which reimburses at lower rates than private plans and hasn’t kept up with inflation.
For rural hospitals operating on tight margins, that dynamic has meant cutting services or closing altogether, leaving patients with longer commutes and waits for care.
“The governor’s budget, for the most part, maintains funding for hospitals. But at a time when less than half of Pennsylvania’s hospitals have margins necessary for long-term stability, the status quo is not enough,” she told Spotlight PA. “Access to care that our communities depend on is at risk.”
Ahead of Shapiro’s budget speech, HAP sent him an open letter asking that Medicaid reimbursement to hospitals “reflect the actual cost of providing care.” At the same time, the group acknowledged the state’s competing budgetary demands, so HAP proposed a mix of relief strategies, such as raising the base payment rates for some providers, creating new supplemental payments for things like emergency care and surgery, and boosting support for distressed hospitals.
And while the state Department of Human Services, which administers the Medicaid program, agrees the federal money won’t offset cuts, an agency spokesperson said the new transformation dollars could expand rural health care access through wellness hubs, mobile medical units, workforce training and stipends, and other projects outlined in its funding request.
The U.S. Centers for Medicare and Medicaid Services administers the $10 billion-per-year program, giving approved states $100 million annually, with the potential for more based on rural population, the number of health facilities, and other factors. Direct payments to providers are capped at 15% of total funds, so most dollars go toward workforce development, infrastructure upgrades, and new ways of delivering care. Any unspent money goes back to the federal program — giving states the chance to apply for more.
Pennsylvania’s application detailed plans for so-called Rural Care Collaboratives — which would include elected leaders, business officials, health providers, patients, and schools — to identify needs and prioritize investments to meet specific goals for care.
The state pitched a short-term Rapid Response Access Stabilization Program for the first two years of the federal program to target investments in hospital and emergency services capacity, technology projects, and workforce initiatives.
Some of the state’s application focused on legislation, including a bill that would bring Pennsylvania into a compact allowing for out-of-state physician assistants, also known as physician associates, to treat patients here.
Jennifer Campbell, president of the Pennsylvania Society of Physician Associates, said the agreement could expand access to care in rural areas and reduce administrative burden for health professionals, who wouldn’t have to maintain licenses in separate states.
“It will expand the workforce in our state and then, hopefully, expand access to care for patients that need it,” she told Spotlight PA.
The state cited the University of Pittsburgh School of Dental Medicine’s regional training centers as a possible way to address service gaps in the field. With current plans to launch in Cambria, Crawford, and McKean Counties, Pennsylvania said startup funds could support another three centers over the next two years — offering certification programs in dental assisting and hygiene.
Helen Hawkey, executive director of the Pennsylvania Coalition for Oral Health, said the goal is to train students in the communities that need providers most and encourage them to stay.
“You’re not going to get a student that grew up in Pittsburgh to go practice along the New York border. That’s just not going to happen,” she told Spotlight PA. “But if you can grab a couple of those students from those rural areas and get them into dental school and get them trained, there’s a better, much better chance they’re going to go back to those areas and practice there.”
Still, Hawkey said the cost of dental school is a major barrier, with many students facing roughly $500,000 in debt. Scholarships, she added, are “a much better way” to boost enrollment in Pennsylvania’s dental programs, which have struggled to attract in-state applicants.
Even then, building a workforce pipeline takes time — far longer than the five-year federal program, she said.
While the money wasn’t something states could afford to walk away from, Hempstead doubts it will lead to a full “transformation” of rural health.
“It’s not new to think about rural workforce and transportation,” she told Spotlight PA. “Will there be some big breakthrough that comes from these applications for these grants? Will we get lightning in a bottle somehow? I’m not going to rule it out, but I don’t think it’s preordained.”
Some problems, she added, can’t be solved through innovation alone.
“I don’t think there’s a startup or a tech solution, or AI, that can solve problems created by too few paying customers, really long distance, and just the complexities of delivering quality health care,” Hempstead said.