Can amputation save the hospital? The impact of the Medicare Rural Flexibility Program on demand and welfare

Author(s)
Gautam Gowrisankaran, Claudio Lucarelli, Philipp Schmidt-Dengler, Robert Town
Abstract

This paper seeks to understand the impact of the Medicare Rural Hospital Flexibility (Flex) Program on hospital choice and consumer welfare for rural residents. The Flex Program created a new class of hospital, the Critical Access Hospital (CAH), which receives more generous Medicare reimbursements in return for limits on capacity and length of stay. We find that conversion to CAH status resulted in a 4.7 percent drop in inpatient admissions to participating hospitals, almost all of which was driven by factors other than capacity constraints. The Flex Program increased consumer welfare if it prevented the exit of at least 6.5 percent of randomly selected converting hospitals.

Organisation(s)
Department of Economics
External organisation(s)
University of Arizona, HEC Montréal, NBER, University of Pennsylvania, Universidad de Los Andes (Chile)
Journal
Journal of Health Economics
Volume
58
Pages
110-122
No. of pages
13
ISSN
0167-6296
DOI
https://doi.org/10.1016/j.jhealeco.2018.01.004
Publication date
03-2018
Peer reviewed
Yes
Austrian Fields of Science 2012
Economic policy, Industrial economics, Health economics
Keywords
ASJC Scopus subject areas
,
Portal url
https://ucris.univie.ac.at/portal/en/publications/can-amputation-save-the-hospital-the-impact-of-the-medicare-rural-flexibility-program-on-demand-and-welfare(a896cf5a-281f-4aaf-b1cf-905ebcb6eb89).html