Impact of critical access hospital conversion on beneficiary liability

While the Medicare Critical Access Hospital (CAH) program has improved the financial viability of small rural hospitals and enhanced access to care in rural communities, the program puts beneficiaries at risk for paying a larger share of the cost of services covered under the Medicare part B benefit.

This paper examines the impact of hospital conversion to CAH status on beneficiary out-of-pocket coinsurance payments for hospital outpatient services.

The study is based on a retrospective observational design using administrative data from Medicare hospital cost reports and fee-for-service beneficiary claims from 1999 to 2003. The study compares changes in beneficiary co-payments before versus after CAH conversion with payment trends among small rural non-converting hospitals over the same period.

Conversion to CAH status is associated with an increase in beneficiary coinsurance payments per outpatient visit of $17.19, equivalent to 34% of the sample average. However, CAH designation had no significant effect on the share of outpatient costs paid by the beneficiary. Most of the increase in beneficiary liability associated with conversion is attributable to the provision of more services per outpatient visit.

While this and other studies show that conversion to CAH status results in more intensive outpatient care, CAH conversion does not appear to inadvertently create financial barriers to accessing ambulatory services in remote rural communities by forcing beneficiaries to pay a higher share of their Medicare part B costs.