Communities Served by Rural Medicare Dependent Hospitals

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Overview

The Medicare Dependent Hospital (MDH) program provides enhanced reimbursement to support rural health infrastructure and to support small rural hospitals for which Medicare patients make up a significant percentage of inpatient days or discharges. This greater dependence on Medicare may make these hospitals more financially vulnerable to prospective payment, and the MDH designation is designed to reduce this risk. A hospital qualifies for the MDH program if it is located in a rural area, has no more than 100 beds, is not classified as a Sole Community Hospital, and has at least 60 percent of inpatient days or discharges covered by Medicare. Hospitals meeting these criteria may benefit from two provisions. First, they are eligible to receive half or 75% (depending on the year) of the amount by which the highest of hospital-specific base year costs per discharge for Medicare patients (updated to the current year) exceeds the PPS rate in addition to the PPS payment rate. Second, an MDH with a caseload that falls by more than 5 percent (due to circumstances beyond its control) may receive payments necessary to fully compensate it for fixed costs. These provisions aim to reduce the risk of financial distress to the hospital, and improve financial health and sustainability of the facility. As an element in the Affordable Care Act, the MDH program will be terminated on October 1, 2012. When this happens, MDHs will revert to being reimbursed under the prospective payment system, which has potentially important implications for the communities served by MDHs. This findings brief explores the potential consequences of termination of the MDH program by comparing MDHs to rural prospective payment system hospitals (R-PPS) in terms of utilization and the characteristics of the communities they serve.

Key findings

In comparison to R-PPS hospitals:

  • MDHs are more dependent on Medicare, and serve relatively smaller, more isolated, market areas.
  • The mean total population is smaller in markets served by MDHs than in markets served by R-PPS hospitals.
  • The average percentage of the population age 65 and over is higher in markets served by MDHs than in markets served by R-PPS hospitals.
  • The mean percentage of inpatient days attributable to Medicare is higher for MDHs than for R-PPS hospitals.
  • MDHs are smaller facilities and have lower patient volumes, but have greater average market share in rural areas.
  • At the mean, MDHs have fewer total beds, discharges, and inpatient days than R-PPS hospitals.
  • Average market share for MDHs is greater than R-PPS hospitals.
  • Driving distances to the next closest hospital with more than 100 beds are, on average, greater for rural residents living in markets served by MDHs versus R-PPS hospitals.

 

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