Slide Presentation from the AHRQ 2007 Annual Conference

Background

• Many of the smallest rural hospitals were not able to recover their Medicare costs under the prospective payment system (PPS) rates (Dalton, et al, 2005; Stensland, et al, 2004)
• Medicare Rural Hospital Flexibility Program of the 1997 Balanced Budget Act
  • To protect small, financially vulnerable rural hospitals
  • Allowed hospitals meeting certain criteria to convert to critical access hospitals (CAHs)
  • Changed Medicare reimbursement mechanism from prospective (PPS) to cost-based.
  • One of the objectives of the policy was to increase the quality of care in these hospitals