Rural-urban Comparison of Hospital Financial Performance by Medicare Payment Classification

Lead researcher:
Project funded:
September 2008
Project completed:
August 2010
The standard mechanism for Medicare payment for hospital services is the Prospective Payment System, but four specific hospital classifications, each with different payment enhancements and qualification criteria, are available to hospitals that serve rural communities [sole community hospital (SCH), Medicare-dependent hospital (MDH), rural referral center (RRC), and critical access hospital (CAH)]. While the benefits of conversion to CAH status have led to calls for expansion of cost-based reimbursement to other groups of rural hospitals that are purported to be under financial pressure, there has been no systematic analysis of the financial performance and condition of non-CAH rural hospitals. Using a set of standard financial ratios, this study will compare rural-urban hospital financial performance by Medicare reimbursement classification over a recent three-year period. The goals are to determine the profitability, liquidity, and capital structure of SCHs, MDHs, RRCs, and CAHs compared to other rural hospitals and urban hospitals. Products from this research would include a final report, a focused Findings Brief, and an article for submission to a peer-reviewed journal.