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Analysis: Medicare-Dependent Hospitals on the Decline

A recent analysis shows that the number of Medicare-dependent hospitals fell 28 percent from 2011 to 2017. Learn more about how Medicare covers costs for hospital care.

Published March 5, 2020

The number of Medicare-dependent hospitals (hospitals that treat a disproportionately high amount of Medicare patients) declined 28 percent from 2011 to 2017, according to a recent report from the Government Accountability Office (GAO).1

The GAO analysis found that the number of Medicare-dependent hospitals dropped from 183 in 2011 to 139 in 2017. 

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What are Medicare-dependent hospitals?

The Medicare-dependent hospital (MDH) program was created in 1989 to provide financial support to smaller and more rural hospitals where:

  • Medicare patients make up at least 60 percent of the inpatient days or discharges
  • There are 100 or fewer beds
  • The hospital’s location is generally more rural

The program was recently extended through 2022 as part of the Bipartisan Budget Act of 2018.

Rural hospitals face financial problems

Many rural hospitals struggle to stay afloat financially operating as standalone facilities with no additional support from Medicare or other state or federal programs.

Some hospitals that lost their MDH designation during the GAO study period because they failed to meet eligibility standards concerning the volume of Medicare patients treated or the number of beds in the facility. Others lost MDH status because of mergers or closures. 

Additional findings from the GAO analysis include:

  • Approximately 15 fewer percent of participating hospitals received a payment from the MDH program during the study period, despite maintaining eligibility.

  • MDH profit margins fell nearly two percentage points during the study period and turned the overall margin from a slight positive to a slight negative.

  • Medicare profit margins at MDH facilities fell by six percent, which was three percentage points higher than the corresponding decline at all hospitals.

  • Medicare revenue at MDH facilities dropped 13 percent during the study period, compared to 10 percent for all hospitals.

Medicare offers four additional designations for hospitals: critical access hospital, sole community hospital, low-volume adjustment hospital and rural referral center. Each designation earns the hospital financial support for treating Medicare patients. 

But while the four programs above are permanent, the MDH program is temporary and must be periodically renewed by Congress to continue – which has occurred consistently since 1989.

Medicare Part A offers inpatient hospital coverage

Medicare Part A offers hospital insurance and covers some of the costs of inpatient care at hospitals and skilled nursing facilities (SNF).

Learn more about Medicare hospital observation coverage and other Medicare Part A inpatient benefits.

Christian

About the author

Christian Worstell is a senior Medicare and health insurance writer with MedicareAdvantage.com. He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.

Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

Christian has written hundreds of articles for MedicareAvantage.com that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism.

If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at Mike@tzhealthmedia.com.

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