Medicare Advantage and rural hospital profitability

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.