OBJECTIVE:

The purpose of this research study is to determine the effect of surgery on the profitability of rural hospitals.

BACKGROUND:

Small rural hospitals are often the sole health care provider in their communities and the only source of care for many people.  The provision of surgery in rural hospitals saves the lives of many trauma victims and people with surgical emergencies.  Surgery can also have a substantial impact on the finances of a rural hospital as well as the local economy.

METHODS:

Longitudinal hospital financial data and market data from 2000 to 2008 were used to determine the relationship between volume of surgery services and profitability of hospitals that serve rural populations.

RESULTS:

There is a positive and statistically significant relationship between volume of surgery and operating margin (p <.001 ); an increase of 10 percentage points in the volume of surgery relative to net patient revenue increases operating margin by 2.0 percentage points, controlling for hospital and market characteristics.

CONCLUSIONS:

Surgery is an important service provided by rural hospitals.  The service not only impacts the health of patients in rural communities but it also affects the financial performance of rural hospitals.  Policy changes that affect the volume, reimbursement, and cost of surgery in rural hospital should be carefully assessed for consequences on the long-run financial viability of rural hospitals.

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