The Impact of the Low Volume Hospital (LVH) Program on the Viability of Small, Rural Hospitals
Background
In response to the widening gap between rural and urban hospital profitability margins, the Medicare Payment Advisory Commission (MedPAC) asserted that Medicare payment policies penalized small-scale hospital operations and recommended that Congress authorize a Low Volume Hospital (LVH) payment adjustment.1 This designation and payment adjustment was created in the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and applied only to hospitals reimbursed through the Inpatient Prospective Payment System (IPPS).2 (Because they are reimbursed on a cost basis, Critical Access Hospitals are not eligible for the LVH payment adjustment.) The Centers for Medicare & Medicaid Services (CMS) implemented the LVH adjustment in federal fiscal year (FFY) 2005 according to the following definition: to qualify for a payment adjustment, hospitals had to have less than 200 total discharges in the most recently submitted Medicare cost report year and be located more than 25 driving miles from another IPPS acute care hospital. Under these requirements, only five hospitals qualified for the adjustment in FFY 2005. Qualifying hospitals saw a 25% increase in their Medicare inpatient revenue.