Evaluation of the Rural Hospital Flexibility Act and the Critical Access Hospital Program

Funder:	Office of Rural Health Policy (ORHP)
Research center:	North Carolina Rural Health Research and Policy Analysis Center Phone: 919.966.5541
Lead researcher:	William N. Zelman, PhD , 919.966.7387, wzelman@unc.edu
Project completed:	August 2002
Topic:	Critical Access Hospitals and Rural Hospital Flexibility Program

The North Carolina Rural Health Research Program at the University of North Carolina's (UNC) Cecil G. Sheps Center for Health Services Research and the Department of Health Policy and Administration, also at UNC, are collaborating with the other Rural Health Research and Policy Analysis Centers in a comprehensive evaluation of the Rural Hospital Flexibility Program (RHFP), which includes Critical Access Hospitals (CAHs). As a collaborative evaluation, each Center will have lead responsibility for one or more components of the study but will also participate in other parts of the evaluation as well. The UNC researchers will assume the lead role in understanding the financial effects of the RHFP on CAHs. Along with the collaborators, UNC will use a combination of site visits, and primary and secondary data collection to evaluate the program effects. UNC's focus will be on three tasks in the coordinated evaluation effort:

1. Tracking state activities in the RHFP and the names and locations of designated Critical Access Hospitals.
2. Determining the relative placement of CAHs in underserved areas.
3. Assessing whether conversion to CAH status substantively improves the financial status of the hospital. If there are improvements, the evaluation will attempt to determine whether the improvements are the result of cost-based reimbursement (which is provided for in the CAH legislation), or of restructuring of the hospitals' mission and operations.

The financial analytical work will be accomplished through:

1. A traditional financial analysis using standard ratio calculations and the financial flexibility index.
2. A balanced scorecard approach to ascertain the positioning of CAHs for long-term strategic success by measuring each hospital's performance in four areas financial perspective, internal perspective, customer perspective, and innovation and learning perspective.

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