Medicare Advantage and rural hospital profitability

Abstract

Purpose: This study compares 2018-2023 Medicare Advantage (MA) days as a percentage of total Medicare days in rural and urban hospitals, describes 2022-2023 operating profitability of rural and urban hospitals by quartiles of MA days as a percentage of total Medicare days, and explores hospital characteristics that may be important for understanding the relationship between MA and profitability of rural hospitals.

Methods: Financial and hospital data were obtained from the Centers for Medicare & Medicaid Services (CMS) Healthcare Cost Report Information System (HCRIS) for the years 2018 to 2023. Hospitals were assigned to quartiles based on MA days as a percentage of total Medicare days. Descriptive analyses were conducted to compare hospital characteristics and financial performance across quartiles.

Findings: Between 2018-2019 and 2022-2023, the median percentage of total Medicare days from MA grew from 11.3% to 28.0% for rural hospitals. The 2022-2023 median operating margin varied from 0.0% for rural hospitals in Q1 (lowest MA days as a percentage of total Medicare days) to 3.4% for hospitals in Q4 (highest MA days as a percentage of total Medicare days).

Conclusion: Among rural hospitals, higher MA days as a percentage of total Medicare days was found to be associated with higher operating margin. However, results suggest that MA is not randomly distributed: rural hospitals with higher MA days as a percentage of total Medicare days exhibit distinct characteristics. This non-random distribution suggests that descriptive analysis may not fully capture the actual financial impact of MA on rural hospitals. Future research should recognize these complexities.

Keywords: Medicare; Medicare Advantage; rural health care; rural hospitals.