Vulnerability of Rural Hospitals to Medicare Outpatient Payment Reform

By Mohr, Penny E.; Franco, Sheila J. et al. | Health Care Financing Review, Fall 1999 | Go to article overview

Vulnerability of Rural Hospitals to Medicare Outpatient Payment Reform


Mohr, Penny E., Franco, Sheila J., Blanchfield, Bonnie B., Cheng, C. Michael, Evans, William N., Health Care Financing Review


INTRODUCTION

Under the BBA, a PPS for Medicare hospital outpatient services was to be implemented in 1999. (However, HCFA has recently announced that updating information systems to be compliant with the year 2000 will delay the implementation of outpatient PPS.) The move from a quasi-retrospective cost-based system to a PPS for outpatient services may constrain the ability of hospitals to generate revenue from these services. Although outpatient services have become an increasingly important source of revenue for acute care hospitals in general, these services may be critical to the survival of some rural hospitals. A major concern is that Medicare outpatient prospective payment reform could further harm rural hospitals that are already struggling to remain financially viable.

OBJECTIVES

To evaluate the potential impact of Medicare outpatient payment reform on rural hospitals, we address the following research questions:

* How dependent are rural hospitals on revenue from outpatient services in general and on revenue from outpatient services provided to Medicare beneficiaries? How has this changed over time? How does this compare with urban hospitals?

* Are rural hospitals 'more likely than urban hospitals to be vulnerable to the effects of Medicare outpatient payment reform?

* What types of rural hospitals will be most vulnerable to the effects of Medicare outpatient payment reform?

BACKGROUND

When Congress enacted a PPS for inpatient services, analysts were concerned that rural hospitals would be more adversely affected than urban hospitals (Rosko and Broyles, 1984; Sheingold, 1986). These concerns were partly realized in the years immediately following inpatient PPS. Rural hospitals had substantially lower margins on Medicare services than urban hospitals, and 10 percent of rural hospitals closed in the 1980s (Congressional Budget Office, 1991).

Although one study showed that greater Medicare involvement was associated with reduced patient profitability in rural hospitals (Rizzo, 1991), others have shown that Medicare payment was not a primary reason for the poor financial condition of rural hospitals during this period (Prospective Payment Assessment Commission, 1990; Guterman et al., 1990). Among other factors, declining rural populations, dramatic reductions in admissions, and disproportionately increased per case costs contributed to declining margins in rural hospitals (Prospective Payment Assessment Commission, 1990; U.S. Department of Health and Human Services, 1989; Hendricks et al., 1989).

Over the years, concerns about access in rural areas has led Congress to design a number of programs to assist financially vulnerable rural hospitals (Buto, 1996). Three of these programs, the Sole Community Hospital (SCH) Program, implemented in 1972, the Essential Access Community Hospital/Rural Primary Care Hospital Program, implemented in 1993, and the Medicare Dependent Small Rural Hospital Program, operating between 1990 and 1993, allow selected rural hospitals to receive cost-based reimbursement. Also introduced was a program that classified large rural hospitals that were providing more complex and diverse services than their rural counterparts as rural referral centers. These hospitals were paid a PPS rate using the standardized amount given to hospitals in "other urban" locations, rather than that paid to rural hospitals, increasing their average payment rate. Until 1995, when HCFA equalized payment rates for these two locations, rural referral centers benefited substantially from this designation. Rural referral centers still qualify for disproportionate-share payments and, potentially, higher wage indexes than other rural facilities.

These programs have played a major role in improving the rural hospital's fiscal condition. By 1991, more than one-half of rural hospitals qualified for one or more of these special payment categories (Congressional Budget Office, 1991). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Vulnerability of Rural Hospitals to Medicare Outpatient Payment Reform
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.