Rural Hospitals’ Profitability: Which Special Programs Matter?

Abstract

Objective:  To assess Medicare special programs’ effectiveness in preserving the financial viability of rural hospitals.  Data sources:  This study utilizes national data for non-federal, short-term, general, and critical access hospitals in operation for at least 360 days during the period 2012–2019, obtained from the Centers for Medicare & Medicaid Services Healthcare Cost Report Information System (HCRIS) and the American Hospital Association (AHA) Annual Survey Database.  Study Design:  This longitudinal study consists of 2,214 rural hospitals during the period 2012-2019 and relies on an unbalanced panel design to examine the relationship between Medicare special programs and the financial performance of rural hospitals. Data Collection/Extraction methods: The analysis was performed using fixed-effects regression analysis. Robust standard errors are clustered at the hospital level to correct for possible heteroskedasticity and autocorrelation.  Principal Findings:  The base average operating margin (OM) of rural hospitals was significantly lower level (-7.40% vs. -1.35%) than metropolitan hospitals in the beginning of the study and fell by 2.49% over the years. In comparison, the OM of metropolitan hospitals fell by 1.35% during the eight-year study period. Our analysis indicates that the special Medicare programs targeted for rural hospitals did not significantly help the financial position of rural hospitals.  Conclusions:  Policy makers need to explore and identify more effective policies to improve the financial viability of rural hospitals.