Alternative Methods for Defining Rural Hospital Service Area Market

For decades, the health services research community has relied on the Centers for Medicare & Medicaid Services (CMS) Hospital Service Area File (HSAF) to construct hospital market files and to use in other analyses. The HSAF is a dataset that contains aggregate beneficiary information based on annual Medicare inpatient fee-for-service (FFS) claims data, including the number of discharges, total days of care, and total charges matched to hospital provider number and the ZIP code of the Medicare beneficiary. Despite the limitations of using HSAF to create hospital market files (e.g., Medicare FFS only, no beneficiary-level info), it has been widely used for several reasons, but mostly due to the widespread availability of this file. We used HSAF to construct hospital markets used in our Financial Distress Index (FDI) and many other research projects. However, CMS has been expanding its data suppression policy – "The policy stipulates that no cell (e.g., admissions, discharges, patients, services, etc.) containing a value of 1 to 10 can be reported directly." – meaning the HSAF is not very useful for rural applications.

To overcome these limitations and create a better hospital market file, we plan to develop new market definitions. This study will provide better understanding of the communities served by rural hospitals and allow better modeling of FDI and other research topics explicitly considering community effects. Improving the methods for creating the hospital market file will also have downstream impacts on much of our other research.