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Impact of Critical Access Hospital Conversionon Other Rural Hospitals
Laura Morlock, PhDDepartment of Health Policy and Management
Johns Hopkins Bloomberg School of Public Health
Project Sponsorship
This analysis is part of a larger study:
Rural Hospitals: Environment, Strategy, and Viability (RO1 HS011444)
Funded by the Agency for Healthcare Research and Quality
Research Team
Johns Hopkins Bloomberg School of Public Health
Laura Morlock, PhD David Salkever, PhD
Peter Pronovost, MD, PhD Marlene Miller, MD, MSc
Ann Skinner, MSW Lilly Engineer, MD, MHA
Cyrus Engineer, MHA, MHS Maureen Fahey, MLA
Andrew Shore, PhD Rebecca Clark, BA
Robin Newhouse, RN, PhD
Research Team cont.
Virginia Commonwealth University
Stephen Mick, PhD and team Rural Policy Research Institute (RUPRI)
Keith Mueller, PhD--Univ. of Nebraska
Andrew Coburn, PhD--Univ. of Southern Maine
Timothy McBride, PhD--Univ. of Missouri
A. Clinton MacKinney, MD, MS--Mayo Clinic
Mary Wakefield, PhD--George Mason Univ.
Rebecca Slifkin, PhD--Univ. of North Carolina
Overall Project Objective
To assess the impact of Federal policy changes and healthcare market forces on the organizational and management strategies, financial viability and clinical performance of U.S. rural hospitals.
• Clinical Performance
HealthcareMarket Forces
Rural Hospitals
Outcome Measures
Federal Policy Legislation
• Financial Viability
• Survival
• Organizational & Management Strategies, including Conversion
Study Design
Background and Significance:Rural Hospitals
Approximately 50 million people in the U.S. live in rural areas
Rural communities are served by about 2000 rural hospitals.
Residents of rural areas are less healthy than urban residents on most measures of health status.
Rural hospitals play a critical role in their communities by:– Providing access to health care;– Serving as a hub for public health, wellness, and social services;– Providing jobs, recruiting health practitioners, making
communities more attractive places to live and work.
Background and Significance:Viability of Many Rural Hospitals is in Question
Compared to their urban counterparts, rural hospitals:– are usually more geographically isolated,– are in smaller communities,– tend to be more dependent on Medicare funding,– have a higher proportion of outpatient services.
Like their urban counterparts, rural hospitals:– face workforce shortages for nurses and other
professionals.
Source: American Hospital Association
Source: American Hospital Association
Background: Payment Policy ChangesBalanced Budget Act of 1997
Made the most far-reaching revisions to the Medicare program since its inception.
Was in response to what was viewed as an impending health care crisis: – double digit growth in Medicare reimbursements– estimated insolvency of the Medicare Trust Fund
by 2008.
Background: Payment Policy ChangesBalanced Budget Act of 1997 (cont.) The BBA sharply reduced inpatient payments, to be
phased in during 1998-2002. Implemented prospective payment methods for:
– Hospital outpatient care
– Other ambulatory care services
– Skilled nursing care
– Home health care
Reduced payments to hospitals serving disproportionate shares of Medicaid and nonpaying patients.
BBRA and BIPA restored about $48 billion in proposed cuts.
Background: Payment Policy Changesfor Small Rural Hospitals
The BBA legislation also created a new hospital category—Critical Access Hospital—which can receive cost-based inpatient and outpatient payments from Medicare.
The “distance requirements” for qualifying: hospitals had to be at least 15 miles by secondary road and 35 miles by primary road from the next nearest hospital, or be declared a “necessary provider” by the State.
Background: Payment Policy Changesfor Small Rural Hospitals
Subsequent legislation and regulations made the program even more beneficial for rural hospitals with fewer than 26 acute care beds.
The number of CAHs grew rapidly from 1997 through 2006.
Currently there are approximately 1288 CAHs. Most have qualified through the “necessary
provider” criterion. Approximately two-thirds of CAHs are 16-34 road
miles from the next nearest hospital, and about 15% are within 15 or fewer miles.
Key Policy Questions
How do the various available programs interact to protect rural hospitals? What hospitals are left out of these programs?
How can payment strategies be further designed to recognize the special circumstances of rural hospitals?
Objective of This Analysis
To examine how CAH conversions affected other hospitals in their service areas that did not convert to CAH status.
Study Design Study sample: Fifty per cent regionally
stratified national sample of rural hospitals in the U.S. with Medicare Cost Report data (N= 821), excluding hospitals that merged during the study time period.
Time Frame: 1996-2003 Outcome variable: Financial status as
measured by Total Margin (Net income/Total revenues)
Sources of Data
Medicare Cost Reports American Hospital Association Annual Surveys Area Resource File Dartmouth Atlas of Health Care
Independent (Predictor) Variable
Per cent of beds in the Hospital Referral Region (HRR) that are CAH beds
Sources of data: Dartmouth Atlas of Health Care and the Medicare Cost Reports
Control Variables
County Variables (ARF)– Census population– Per capita income– Educational level– Rural-urban continuum code
Hospital Referral Region Variables– Total beds in operation– Per cent of operating beds in Rural Referral Center, Sole Community
Provider and PPS hospitals Type of hospital Medicare reimbursement
– Rural Referral Center, CAH, Sole Community Provider, PPS Fiscal Year
– 1996 (base year) -- 2003
Methods of Analysis
Three level hierarchical model– XT mixed model using STATA
Repeated measures of hospitals over time Random effects (random intercept) model Adjusted for clustering by state
Multi-Level Model Results:Predictors of Total Margin
Variable Regression Coefficients P value
Census population (in 1000s) .052 .000Per capita income (in 1000s) .108 .094Fiscal year (base 1996)
1997-2003 -0.850 to -3.643 all .000Educational level (low) -1.393 .036Type of reimbursement (PPS omitted) Rural Referral Center 2.259 .001
Critical Access Hospital 4.096 .000Sole Community Provider 1.547 .001
Per cent beds in HRRCAH -0.397 .000 Rural Referral Center 0.001 .888Sole Community Provider 0.001 .844
Total operating beds in HRR 0.002 .004Rural-urban continuum code - 2.521 .000
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