Converting to critical access status: how does it affect rural hospitals' financial performance?

Inquiry. 2009 Spring;46(1):46-57. doi: 10.5034/inquiryjrnl_46.01.46.


To improve rural access to care, the Balanced Budget Act of 1997 allowed eligible rural hospitals to convert to critical access hospitals (CAHs), which changed their Medicare payment from a prospective payment system (PPS) to a cost-based system. The objective of this paper is to examine the effects of CAH conversion on rural hospital operating revenues, operating expenses, and operating margins using an eight-year panel of 89 rural hospitals in Iowa. Ad hoc hospital revenue, cost, and profit functions were estimated using panel data fixed-effects linear models. We found that rural hospital CAH conversion was associated with significant increases in hospital operating revenues, expenses, and margins.

Publication types

  • Comparative Study
  • Research Support, U.S. Gov't, P.H.S.

MeSH terms

  • Budgets
  • Critical Care*
  • Health Services Accessibility*
  • Hospital Costs
  • Hospitals, Rural / classification
  • Hospitals, Rural / economics*
  • Hospitals, Rural / statistics & numerical data
  • Iowa
  • Medicare / economics
  • Models, Statistical
  • Organizational Innovation
  • Reimbursement Mechanisms
  • United States