Do Current Medicare Rural Hospital Payment Systems Align With Cost Determinants?


The financial performance of small, rural hospitals has long been a concern to federal and state agencies. Federal law makers have enacted legislation authorizing the Medicare program to develop reimbursement methods that provide higher payments to hospitals that serve rural communities (Critical Access Hospitals, Sole Community Hospitals, Medicare-Dependent Hospitals, and Standard Prospective Payment Systems hospitals). Current payment methods reflect legislative changes that have occurred since the rural hospital Medicare payment classifications were created more than 15-20 years ago. As a result, current rural hospital payment methods differ in eligibility criteria, adjustment factors, formulae, and timeliness of data. These differences may contribute to the variation in financial condition that has been found across the four types of rural hospitals. To inform policy discussions on how complex current payment models may affect rural hospitals, the North Carolina Rural Health Research Program studied differences in financial condition among rural hospitals, and important determinants of differences in rural hospital costs. Results are reported in the Findings Brief: Do Current Medicare Rural Hospital Payment Systems Align with Cost Determinants?

North Carolina Rural Health Research and Policy Analysis Center
Kristin Moss, Mark Holmes, George Pink