What Would be the Financial Consequence of Eliminating Low Volume Hospital Payments?

Lead researcher:
Project funded:
September 2015
Project completed:
October 2016

The standard mechanism for Medicare payment for hospital services is the Prospective Payment System, but hospitals receive an additional payment if they qualify as a low-volume hospital (LVH). Created in 1987, the LVH classification was set to expire at the end of FY 2014 but was extended in the health reform legislation passed by Congress until October 1, 2016. Subsequently, the "Medicare Access and CHIP Reauthorization Act of 2015" increased inpatient hospital payment adjustment for certain low-volume hospitals until October 1, 2017. Unless further legislative action occurs, the LVH classification will cease to exist at this time.

Analysis will include comparison of the long-term profitability of LVHs to other rural hospitals and estimation of the potential profitability consequences of eliminating the payment classification altogether. Project data will come from the hospital market service area file, the hospital Cost Report information system, the area resource file, and census data.