Payer mix shifts and profitability at critical access hospitals, 2011 to 2023

Critical Access Hospitals (CAHs) are essential providers in rural communities but face persistent financial challenges due to narrow operating margins and dependence on public payers. This study examines how changes in payer mix affect both overall and payer-specific profit margins in CAHs from 2011 to 2023.

Using data from the National Academy for State Health Policy Hospital Cost Tool and the American Hospital Association Annual Survey, we analyzed 15 819 hospital-year observations from 1384 CAHs. We estimated multivariable linear mixed-effects models with profit margin as the dependent variable and 4 payer categories (Commercial, Medicare, Medicaid, and Uncompensated Care) as independent variables. Regression models included fixed year and state effects.

Each percentage point increase in Medicare and Medicaid payer mix relative to Commercial payer mix was associated with a 0.10% and 0.09% point increase in overall hospital operating margin. Higher Medicare, Medicaid, and Uncompensated Care payer mixes corresponded to higher Commercial profit margins.

Hospitals with high public-payer dependence may need high margins on their Commercial cases to offset losses from public payers. Policy efforts to sustain Medicaid coverage and preserve Medicare's cost-based payments are essential to the financial viability of critical access hospitals.