Sharp Rise In Urban Hospitals With Rural Status In Medicare, 2017-23

In 2016, in response to two federal court decisions, the Centers for Medicare and Medicaid Services began allowing geographically urban hospitals to be dually classified as both rural and urban simultaneously. This dual classification enables hospitals to use urban wage indexes for calculating Medicare reimbursements, while also benefiting from Medicare policies solely intended to support rural health. Using Medicare cost reports and impact files, we documented a substantial increase in administratively rural hospitals in the US, driven by the dual classification of existing hospitals located in urban areas, which rose from 3 in 2017 to 425 in 2023, with prevalence varying by state. More than three-quarters of dually classified hospitals were nonprofit, including many large academic medical centers in metropolitan areas. Congress should ensure that federal programs supporting rural health are directed solely to geographically rural hospitals.