Estimated Reduction in CAH Profitability From Loss of Cost‐Based Reimbursement for Swing Beds


Rural communities and Critical Access Hospitals (CAHs) are concerned by a few reports and proposed legislation that suggested changing swing bed reimbursement at CAHs from cost-based to the Skilled Nursing Facility Prospective Payment System (SNF PPS). Their concern is the likely reduction in Medicare reimbursement to CAHs. Approximately 92% of CAHs provide care in swing beds, and for some rural communities, swing beds are the only source of post-acute care.

This brief estimates the impact of potential loss of cost-based reimbursement for swing beds on CAH profitability and examines the characteristics of CAHs that would be most affected by such a change in reimbursement. Using the reimbursement formula from the Medicare cost report, we estimated Medicare reimbursement to CAHs assuming SNF PPS instead of cost-based reimbursement for skilled swing bed days. We found that changing the Medicare reimbursement method for CAH swing bed days from cost-based to the SNF PPS would result in an estimated median change in operating margin of -2.16 percentage points. CAHs most likely to be heavily impacted are smaller and more isolated, depend more heavily on swing beds, serve a higher percentage of Medicare beneficiaries, are located farther from the nearest skilled nursing facility, and are in the South.

North Carolina Rural Health Research and Policy Analysis Center
Kristin Reiter, Drake Broussard