How Would Rural Hospitals Be Affected by Loss of the Affordable Care Act's Medicare Low-Volume Hospital Adjustment?

Abstract

The low-volume hospital (LVH) payment adjustment established in the Patient Protection and Affordable Care Act (ACA) of 2010 is scheduled to sunset on October 1, 2017. The purpose of this analysis was: (1) to estimate the effect of the ACA LVH adjustment on qualifying hospitals' profitability margins; and (2) to examine hospital and market characteristics of the hospitals that would be most adversely affected by the loss of the ACA LVH adjustment. 2004-2015 data from the Hospital Cost Report Information System, Hospital Market Service Area File and Nielsen-Claritas Pop-Facts file were used to estimate difference-in-difference regression models with hospital-level random effects in order to determine whether the ACA LVH adjustment improved qualifying rural hospitals' profitability margins. Recycled predictions estimated the effect of losing the ACA LVH adjustment on profitability margins. Bivariate analyses explored associations between the predicted profitability margins and hospital and market characteristics. The ACA LVH adjustment significantly improved Sole Community Hospitals' Medicare inpatient margins in the year they received the adjustment, and it had a large but statistically insignificant effect on the profitability margins of other rural hospitals. Hospitals that would be the most adversely affected by loss of the ACA LVH adjustment were more likely to be small, located in the South, and in high-poverty markets with higher proportions of black and uninsured individuals. Elimination of the ACA LVH adjustment would have differential effects on subgroups of hospitals, and those located in markets serving historically underserved populations would be the most adversely affected.