Responses to prospective payment by rural New Mexico hospitals

A cross-sectional study is used to determine how rural New Mexico hospitals altered service diversification, inpatient service emphasis, and service promotion during Medicare's prospective payment system (PPS) transition and posttransition phases. Results suggest that the hospitals implemented distinct strategies in response to PPS. The posttransition strategies were examined for their association with improved revenue and utilization indicators. Few of the service diversification and promotional strategies were consistent predictors of performance. Emphasis on fine-tuning inpatient services was the most promising predictor of higher utilization and revenue measures. The implications for other rural hospitals are discussed.