2016-18 Profitability of Urban and Rural Hospitals by Medicare Payment Classification


To remain open, businesses generally need to be profitable. Hospitals are no different. Hospitals use profits to pay for new and upgraded buildings, equipment, technology, programs, and other patient care needs. To assess hospital profitability, we often look at total margin. Total margin measures the control of expenses relative to revenues, and expresses the profit a hospital makes as a proportion of revenue brought in. This study compares the 2016-18 profitability of urban Prospective Payment System (PPS) hospitals to that of rural hospitals. Rural hospitals are further divided by size of rural PPS hospitals and by the rural Medicare payment classifications. We found that overall: 1) profitability of rural hospitals decreased while the profitability of urban hospitals increased between 2016 and 2018. 2) Compared to other hospitals, Rural Referral Centers and urban hospitals had the highest profitability in every year between 2016 and 2018. 3) In 2018, Rural Prospective Payment System hospitals with 0‐25 beds and Medicare Dependent Hospitals had the lowest profitability compared to urban hospitals and other rural hospitals. Rural hospitals with long-term unprofitability are at higher risk for financial distress and potential closure.

North Carolina Rural Health Research and Policy Analysis Center
Andrew Maxwell, H. Ann Howard, George Pink