Critical Access Hospitals Face Uphill Battle: 6 Things To Know

Posted on by lad3

From Becker’s Financial Management

A Dec. 20 study published in JAMA from researchers at Baltimore-based Johns Hopkins University and Providence, R.I.-based Brown University has shed light on financial disparities between critical access hospitals and larger acute care hospitals.

The study looked at 2016 to 2022 financial data from more than 4,500 hospitals in the U.S., and provides financial health CAH insights and the impact that system affiliation has on their performance.

Here are six things to know:

  1. Critical access hospitals are defined as having 25 or fewer beds in areas that are geographically isolated. While they play an essential role in rural healthcare, they often struggle financially compared to non-CAHs.
  2. The study found that independent CAHs saw overall average operating margins of 2.6%, while CAHs that are system-affiliated reached 7%. Separately, independent and system-affiliated non-CAHs saw margins of 11.4% and 16.6%, respectively.
  3. System-affiliated CAHs saw 63% higher operating margins compared to those that were independent, a statistic that was largely attributed to enhanced commercial insurer negotiating powers. The hospitals also charged higher prices for services compared to independent CAHs, with both inpatient commercial prices rising 7.1% and outpatient commercial prices rising 11.7%.
  4. CAHs also saw consistently negative Medicaid operating margins, with an average of around -18%. CAHs did see around a 2% Medicare operating margin while non-CAHs saw losses in this area.
  5. Disparities in pricing were also highlighted in the study, with independent CAHs typically charged lower commercial prices than hospitals that are system-affiliated. System-affiliated non-CAHs were priced 13.2% higher than independent CAHs, underscoring the influence of system affiliation on pricing strategies that, while improving hospital finances, can increase patient and insurer costs.
  6. The study shared how CAHs financial fragility is raising concerns about the ability to provide rural communities with essential services. As hospital consolidations and closures continue, the study suggested that policymakers need to be cautious when evaluating hospital consolidation trade-offs. While financial sustainability can be achieved through system affiliation, it can also lead to uneven care access and higher prices.