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Inefficiency differences between critical access hospitals and prospectively paid rural hospitals.

The Medicare prospective payment system (PPS) contains incentives for hospitals to improve efficiency by placing them at financial risk to earn a positive margin on services rendered to Medicare patients. Concerns about the financial viability of small rural hospitals led to the implementation of th...

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Published in:Journal of Health Politics, Policy & Law Vol. 35; no. 1; pp. 95 - 127
Main Authors: Rosko MD, Mutter RL
Format: equations & formulas research tables/charts Journal Article
Published: Duke University Press Feb2010
Online Access:View this record in EBSCOhost
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        03616878
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      jtl: Journal of Health Politics, Policy & Law
      issn: 03616878
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      dt: Feb2010
      vid: 35
      iid: 1
      pid: 154
      pub: Duke University Press
      place: Durham, North Carolina
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        105139861
        2010588019
        10.1215/03616878-2009-042
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      tig:
        atl: Inefficiency differences between critical access hospitals and prospectively paid rural hospitals.
      aug:
        au:
          Rosko MD
          Mutter RL
        affil: Widener University
      sug:
        subj:
          Emergency Service Administration
          Financial Management
          Hospitals, Rural Administration
          Hospitals, Rural Economics
          Organizational Efficiency Economics
          Prospective Payment System
          Comorbidity
          Costs and Cost Analysis
          Cross Sectional Studies
          Data Analysis Software
          Descriptive Statistics
          Emergency Service Economics
          Human
          Insurance, Health, Reimbursement
          Medicare Economics
          Pearson's Correlation Coefficient
          Reimbursement Mechanisms
      ab: The Medicare prospective payment system (PPS) contains incentives for hospitals to improve efficiency by placing them at financial risk to earn a positive margin on services rendered to Medicare patients. Concerns about the financial viability of small rural hospitals led to the implementation of the Medicare Rural Hospital Flexibility Program (Flex Program) of 1997, which allows facilities designated as critical access hospitals (CAHs) to be paid on a reasonable cost basis for inpatient and outpatient services. This article compares the cost inefficiency of CAHs with that of nonconverting rural hospitals to contrast the performance of hospitals operating under the different payment systems. Stochastic frontier analysis (SFA) was used to estimate cost inefficiency. Analysis was performed on pooled time-series, crosssectional data from thirty-four states for the period 1997 - 2004. Average estimated cost inefficiency was greater in CAHs (15.9 percent) than in nonconverting rural hospitals (10.3 percent). Further, there was a positive association between length of time in the CAH program and estimated cost inefficiency. CAHs exhibited poorer values for a number of proxy measures for efficiency, including expenses per admission and labor productivity (full-time-equivalent employees per outpatient-adjusted admission). Non-CAH rural hospitals had a stronger correlation between cost inefficiency and operating margin than CAH facilities did.
      pubtype: Academic Journal
      doctype:
        equations & formulas
        research
        tables/charts
        Journal Article
      ougenre: Article
    language: English
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