Comparison of Rural Hospitals With Special Medicare Payment Provisions to Hospitals Paid Under Prospective Payment

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A Financial Comparison of Rural Hospitals With Special Medicare Payment Provisions to Hospitals Paid Under Prospective Payment overview

The financial performance of rural hospitals has long been a concern to federal and state agencies as well as banks, creditors, bond rating firms, and regulators. For these reasons, Federal law makers have created and modified special payments categories under the Medicare program to address the challenges faced by different types of rural hospitals, recognizing that many are the only health facility in their community and their survival is vital to ensure access to health care. There are currently four classifications of rural hospitals that can qualify for special payment provsions under Medicare: Critical Access Hospitals (CAHs), Medicare Dependent Hospitals (MDHs), Sole Community Hospitals (SCHs), and Rural Referral Centers (RRCs). This Findings Brief compares the profitability of the hospitals with these classifications to urban and rural hospitals paid under prospective payment (U-PPS and R-PPS, respectively) over a recent three-year period. Standard financial statement analysis is used to determine the median profitability of each group of hospitals and negative margins are assessed as a sign of financial distress.