Delaware Public Media

Nanticoke hospital to change how it gets paid

Dec 19, 2018

Nanticoke Health Services in Western Sussex County is completely overhauling the way it approaches the cost of health care.


Nanticoke plans to switch all of its health care contracts to value-based care contracts sometime next year.

That means the health system will no longer be paid for the number of services it provides. It will instead set annual goals for health care costs and either share in the savings when the goals are met or be penalized by the insurance company or the state for going over budget.

This is meant to incentivize the hospital to reduce unnecessary visits and tests and keep patients healthy.

“We’re going to have to somehow say a year in advance, ‘this is how much money we’re going to be able to spend,’” said Nanticoke Senior Vice President Thomas Brown. “And not only how does that work, but how is that monitored? How is that monitored by the state and the payers?”

Brown calls the move a radical departure but adds he believes it’s the future for small rural hospitals across the country.

“Small hospitals have a hard time and they’re closing all over the country for a variety of reasons, but not least of which is the unpredictability of the revenue stream under fee-for-service,” said Brown. “Some months more revenue comes in than others, or it comes in unevenly, whereas expenses tend to be very even.”

Brown says about 80% of Nanticoke’s patients receive care through Medicare or Medicaid.

The Delaware Health Care Commission is giving Nanticoke $250,000 from a federal grant to cover hiring expert consultants who have helped hospitals in Maryland set up similar payment systems.

Delaware Secretary of Health and Social Services Dr. Kara Odom Walker says the state is working with Nanticoke to revamp the hospital’s entire economic structure in the coming months.

“Clearly the state has to make sure that we’re at the table, that we provide information, that we have an ongoing role in the data, the payment policy, the billing strategy,” said Walker.

Brown says Nanticoke may also need to hire more care coordinators or upgrade its data infrastructure.

Nanticoke is the first hospital in Delaware to commit its entire revenue stream to shared risk value-based care contracts.