Community and Financial Experience of Medicare Dependent Hospitals in Comparison to Other Rural Hospitals

Lead researcher:
Project funded:
September 2010
Project completed:
January 2012
The standard mechanism for Medicare payment for hospital services is the Prospective Payment System, but a hospital classification available to hospitals that have a large proportion of patients who are Medicare beneficiaries is Medicare-dependent hospital (MDH). Created in 1987, the MDH classification was set to expire at the end of FY 2006 but has been extended in the health reform legislation recently passed by Congress until October 1, 2012. Unless further legislative action occurs, the MDH classification will cease to exist at this time.

This research will investigate the community and financial experience of MDHs in comparison with other rural hospitals. The availability of alternative facilities, and the socioeconomic and demographic characteristics of MDH service areas will be compared to other rural hospital service areas. Analysis of the financial experience will include comparison of the long-term profitability of MDHs to other rural hospitals, estimation of the potential profitability consequences of eliminating the payment classification altogether, and estimation of the potential consequences of maintaining the payment classification but failing to update the base year from which costs are trended forward. Project data will come from the hospital market service area file, the hospital cost report information system, the area resource file, and census data. Products from this research would include a final report, a focused Findings Brief, and an article for submission to a peer-reviewed journal.


  • Communities Served by Rural Medicare Dependent Hospitals
    North Carolina Rural Health Research and Policy Analysis Center
    Date: 03/2012
    This findings brief explores the potential consequences of termination of the Medicare Dependent Hospitals (MDHs) program by comparing MDHs to rural prospective payment system hospitals in terms of utilization and the characteristics of the communities they serve.