Profitability of Rural Hospitals


The profitability and financial performance of small, rural hospitals has been a concern to federal and state agencies regulators for a long time. 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)]. In addition, there are rural hospitals paid under prospective payment (R-PPS). The profitability of all types of rural hospitals will be compared using a set of standard financial ratios. The purpose of this study is to track the profitability of the hospital classifications that serve Medicare beneficiaries in rural communities over a recent three-year period. The goals are to track, compare, and identify trends in the profitability of SCHs, MDHs, RRCs, CAHs, and R-PPS hospitals. The research design is based on standard financial statement analysis. Four indicators of profitability (total margin, cash flow, margin, operating margin, and return on equity) will be calculated and descriptive analyses performed.

North Carolina Rural Health Research and Policy Analysis Center
George Pink, Victoria Freeman, Randy Randolph, G. Mark Holmes