CIRHM Report

Policy Implications for California's Rural Health Networks: The DRIS Initiative

This FAQ sheet highlights the policy implications derived from the Developing Rural Integrated Systems (DRIS) Initiative experience, as they relate to the evolution of California's rural health networks.

The James Irvine Foundation funded the DRIS technical assistance initiative from 1997 to 2001 in four rural California communities to support locally owned entities that would integrate clinical, administrative or financial systems to help them deal with managed care.

POLICY RECOMMENDATIONS

Develop state action immunity legislation that provides guidance to rural health care providers on permissible pro-competitive networking activities.

Through the Department of Managed Health Care, offer critical guidance and include enforcement services to review and oversee health plan contracts for rural health care providers, in order to ensure that the scope of risk and reimbursement do not jeopardize health care quality or destabilize the health care safety-net in rural California.

Provide the necessary technical assistance resources to rural integrated health system networks, in order to develop local capacity to compete effectively in Medi-Cal and Medicare managed care.

Implement a policy that would allow Medi-Cal to offer Medicare's enhanced reimbursement in the Critical Access Hospital program, in order to ensure that all eligible small rural hospitals in California have the opportunity to financially stabilize their operations.

FACTS

Despite HMO pullouts from rural California, it is expected that managed care will continue in the form of discounted fee-for-service PPO health insurance.
At this time, without publicly financed managed care programs present in rural California, there are not enough commercially insured lives to finance community owned integrated health system organizations without the support of additional grant funding.
It was found that rural health care providers participating in the DRIS Initiative were often approached by health plans to sign contracts that required them to assume greater than reasonable risk levels and consequently less than fair and reasonable reimbursement amounts.
Ongoing access to State and Federal government grants as well as private and corporate foundation funding is critical to ensure the availability of the necessary technical assistance to develop and maintain rural health systems.
It is important to ensure that efforts to develop managed care in urban settings do not serve as a catalyst to undermine integrated health care systems development in nearby rural communities.
Conversion to a CAH designation and the enhanced reimbursement that it would allow has the potential to financially stabilize small essential rural hospitals, to strengthen their referral systems and to improve their quality assurance systems only when Medi-Cal can offer the same enhanced reimbursement as Medicare.