The Financial and Community Experience of Sole Community Hospitals in Comparison to Other Rural Hospitals

Lead researcher:
Project funded:
September 2015
Project completed:
November 2017

The standard mechanism for Medicare payment for hospital services is the Prospective Payment System (PPS), but a hospital classification available to hospitals that maintain health services in isolated areas is the Sole Community Hospital (SCH). Sole Community Hospitals predate PPS when certain hospitals were granted exemptions from cost limits prior to 1983. Effective in 1990, additional hospitals qualified as SCHs through meeting certain isolation, weather and travel condition criteria. Once designated as a SCH, there is no need to apply for re-approval.

This research will investigate the financial and community experience of SCHs in comparison with other rural hospitals. The availability of alternative facilities, and the socioeconomic and demographic characteristics of SCH 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 SCHs 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 health resource file, and census data.


  • Characteristics of Communities Served by Hospitals at High Risk of Financial Distress
    North Carolina Rural Health Research and Policy Analysis Center
    Date: 12/2017
    This brief compares the characteristics of communities served by rural hospitals at high risk of financial distress to those served by rural hospitals that are not at high risk of financial distress.
  • Differences in Community Characteristics of Sole Community Hospitals
    Policy Brief
    North Carolina Rural Health Research and Policy Analysis Center
    Date: 11/2017
    The purpose of this brief is to present a snapshot of Sole Community Hospitals (SCHs) and the communities served by them in 2015 (cross-sectional analysis), and identify some trends in selected SCH and community characteristics between 2006 and 2015 (longitudinal analysis).
  • The Financial Importance of the Sole Community Hospital Payment Designation
    Policy Brief
    North Carolina Rural Health Research and Policy Analysis Center
    Date: 11/2016
    Assesses the financial importance of the Sole Community Hospital (SCH) program by: the proportion of SCHs that was reimbursed at the hospital specific rate between 2006 and 2015; the profitability of providing services to Medicare patients in SCHs between 2006 and 2015, and; the financial consequences if the SCH program had not existed in 2015.