Rural Hospital Service Lines: Changes Over Time and Impacts on Profitability

To document shifts in rural hospital service line offerings between 2010 and 2021 and to assess the resulting impacts on hospital profitability.

We used annual Medicare cost report data for all rural hospitals that did not change payment classifications between 2010 and 2021. We documented changes in the percentages of hospitals offering each of the 37 inpatient or ancillary service lines included in the data. We then used panel event studies to assess effects on hospital operating margin for specific service lines that changed most prominently during this period.

Twelve service lines changed by more than 5% during our period of analysis. These are highlighted by hospitals adding rural health clinics (+32%) and CT scans (+20%) and removing delivery rooms (-21%) and skilled nursing facilities (-19%). Panel event studies demonstrated that the addition or subtraction of most services did not have statistically significant impacts on future hospital operating margins. Notable exceptions were the addition of rural health clinics and the removal of delivery services, both of which positively affected future operating margins. The addition of occupational therapy services had a positive effect on operating margin in the near term, but adding MRI services had a negative effect.

The finding that only a select few service line changes resulted in meaningful impacts to hospital operating margins suggests that hospital leaders should be wary of implementing such changes as a means of improving financial viability.