Closed, Converted, Merged, and New Hospitals with Medicare Rural Designations: January 2018-November 2022

April 26, 2023 R47526

Closed, Converted, Merged, and New Hospitals April 26, 2023
with Medicare Rural Designations: January
Marco A. Villagrana,
2018-November 2022
Coordinator
Analyst in Health Care
Hospital closures, conversions (or downsizes), and mergers, particularly hospitals
Financing
located in rural areas, can have a significant impact, raising concerns about access to

hospital and other health care services in affected communities. Over time, Congress has
Elayne J. Heisler
enacted legislation to increase the Medicare payment rate to qualifying hospitals that
Acting Section Research
have characteristics associated with financial distress from what would otherwise be the
Manager
Medicare payment rate for inpatient hospital services. Four Medicare hospital

designations increase payment rates for inpatient hospital services furnished by certain
Paul D. Romero
rural or geographically isolated hospitals. These Medicare rural hospital designations are
Research Assistant
critical access hospital (CAH), low-volume hospital (LVH), Medicare dependent

hospital (MDH), and sole community hospital (SCH).

The reasons for hospital financial distress or closure are complex; however, the literature identifies several key
characteristics of hospitals that have closed, are at risk of closing, or are experiencing financial distress that may
lead to merging with another hospital or hospital system or downsizing. The Medicare rural hospital designations
generally try to address one or more of the following factors associated with financial distress:
 Demographics and health status of the population served by a hospital
 Patient volume or size of a hospital
 Diversity of third-party payers of the patients served by a hospital—a balance of payers that
includes the uninsured or self-pay, private insurance, and government coverage, such as Medicare
and Medicaid.
This report contains analysis about closed, converted or downsized, merged, and new—both new and existing
non-hospital health care facilities that upsized—hospitals for the period January 2018 through November 2022,
with a focus on hospitals with Medicare rural designations. Not all rural or geographically isolated hospitals that
are eligible to obtain a Medicare rural hospital designation do so. The Congressional Research Service (CRS)
determined which hospitals—by Medicare designation, and compared to non-designated small, rural hospitals that
are most similar to designated hospitals, and non-designated urban hospitals—were under- or over-represented in
each status change category—closed, converted, merged, and new.
CRS’s analysis found that of the designated hospitals, only MDHs are over represented in the closed, converted,
and merged categories. Specifically, MDHs comprise 3.9% of all hospitals with a status change but comprise 10%
of closed, 6.7% of converted and 7% of merged hospitals. Similarly, non-designated hospitals are over
represented in the same categories, and in the new status change category. Thus, MDHs and non-designated
hospitals tend to be over represented in the closed, converted, and merged status change categories. CRS’s
analysis cannot determine why MDHs are over represented in these status change categories or whether the
differences between MDHs and the other designated hospitals are statistically significant.
Given the results, Congress may examine the effects of particular designations on closures, conversions, and
mergers. For example, what, if any, characteristics do MDHs share with non-designated hospitals, or that make
MDHs more likely than other designated hospitals to experience a closure, conversion, or merger.

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Introduction
Congress and other stakeholders have an ongoing interest in maintaining access to health care
services in rural areas. Of particular focus are rural hospitals, because many rural hospitals are the
primary or sole source of access to emergency and other health care services in their
communities. The health care access and other effects of rural hospital closures are well
documented by the general press and by academic and policy researchers.1 To this end, Congress
has enacted numerous Medicare payment designations over time to assist qualifying rural
hospitals through increased payments. These Medicare rural hospital designations are critical
access hospital (CAH), low-volume hospital (LVH), Medicare dependent hospital (MDH), and
sole community hospital (SCH).
Another rural hospital designation—rural emergency hospital (REH)—enacted by the
Consolidated Appropriations Act, 2021 (P.L. 116-260) became effective on January 1, 2023. REH
information was not available at the time of this analysis thus is not included in this report.2
However, REH may have implications for other rural designated hospitals, thus this report
addresses potential considerations for Congress. (See “Considerations for Congress.”)
Medicare rural hospital designations provide increased payment amounts for inpatient services
furnished by a designated hospital to patients who receive their Medicare coverage through
traditional Medicare—Medicare Parts A and B. The designations do not necessarily apply to
Medicare Advantage (Medicare Part C) plan payments to the same hospitals for the same
services.3
Medicare payments have been a focus of congressional interest in hospitals because traditional
Medicare payments are entirely federally determined.4 Other sources of payments to hospitals
may come from private health insurers, and other federal non-Medicare public coverage (e.g.,
Medicaid), or the uninsured. States set Medicaid payment rates, and private insurance plan
payment rates are based on negotiations between the plans and the providers (e.g., hospitals) in a
specific insurance market.5 There is limited financial support to hospitals to defray the cost of the

1 For example, Katherine E. M. Miller et al., “The Effect of Rural Hospital Closures on Emergency Medical Service
Response and Transport Times,” Health Services Research, vol. 55, no. 2 (January 27, 2020), pp. 288-300; Sean
McCarthy et al., “Impact of Rural Hospital Closures on Health-Care Access,” Journal of Surgical Research, vol. 258
(February 2021), pp. 170-178; Emily Baumgaertner, “A Rural Hospital’s Excruciating Choice: $3.2 Million a Year or
Inpatient Care?,” New York Times, December 9, 2022; and Brystana G. Kaufman et al., “The Rising Rate of Rural
Hospital Closures,” Journal of Rural Health, vol. 32, no. 1 (July 14, 2015), pp. 35-43.
2 See Section 125 of the Consolidated Appropriations Act, 2021 (P.L. 116-260).
3 Medicare Parts A and B are referred to collectively as traditional Medicare. Medicare beneficiaries have the option to
receive covered benefits through a private health plan. Under Medicare Advantage (MA, or Part C), Medicare pays
private health plans a per-person amount to provide all Medicare covered benefits, with some exceptions. The MA plan
then pays providers (e.g., hospitals) based on contracts negotiated between the MA plan and the providers. According
to CMS, 43% of Medicare beneficiaries were enrolled in private plans through MA in 2021. For more information on
Medicare enrollment by type, see Wafa Tarazi et al., Medicare Beneficiary Enrollment Trends and Demographic
Characteristics, Office of the Assistant Secretary for Planning and Evaluation, HP-2022-08, March 2, 2022, at
https://aspe.hhs.gov/sites/default/files/documents/f81aafbba0b331c71c6e8bc66512e25d/medicare-beneficiary-
enrollment-ib.pdf. For more information on MA plans, see CRS Report R40425, Medicare Primer.
4 Medicare rural hospital designations, which provide additional Medicare payment to designated hospitals, do not
necessarily apply to other private or public health coverages, such as private insurance or Medicaid. In addition, as
noted, the rural hospital designations do not apply to Medicare hospital payments made by MA plans or to MA
payments for inpatient hospital services.
5 For information on Medicaid hospital payments, see CRS Report R43357, Medicaid: An Overview. Commercial
insurer payments to hospitals for hospital services are determined largely by the market share and power a hospital has
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uninsured patients hospitals treat, and few programs provide general financial assistance for rural
hospitals.6
Hospital closures, particularly for hospitals located in rural areas, garner congressional and media
attention.7 The reasons for a hospital closure are complex; however, the literature identifies
several key characteristics of hospitals that have closed, are at risk of closing, or are experiencing
financial distress. These characteristics include low inpatient volume and a payer mix that
includes a small proportion of privately insured patients and a relatively higher proportion of
public sources of health care coverage, such as Medicare or Medicaid. (Private insurance
payment rates tend to be greater than public payer rates such as Medicare.8)
Hospitals qualify for one or more of the Medicare payment designations by virtue of having one
or more of these characteristics, and the designations attempt to address some of the
characteristics associated with hospitals’ financial distress. The designations generally result in
higher Medicare payments for services furnished to Medicare beneficiaries in designated
hospitals than Medicare typically would pay for the same services furnished in hospitals without
these designations, thus providing additional support to potentially financially distressed
hospitals.9 (See Appendix A for an overview of Medicare payment for inpatient hospital services
and each of the rural hospital designations.)

in a particular geographic area. Commercial insurer payment amounts are negotiated between the insurer and the
hospital or hospital system; in such negotiations, the relative strength of each party’s negotiating position influences the
outcome. For further information about commercial insurer payments to hospitals, see Chapin White and Christopher
M. Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely:
Findings from an Employer-Led Transparency Initiative, RAND Corporation, 2019, at https://doi.org/10.7249/RR3033.
6 CRS Insight IN12057, Federal Support for Financially Distressed Hospitals.
7 As an example of congressional attention, see the explanatory statement accompanying the Consolidated
Appropriations Act, 2023 (P.L. 117-328), which included language directing the Centers for Medicare & Medicaid
Services (CMS) to provide feedback to specified congressional committees about “providing appropriate relief for
struggling hospitals in rural and under-served communities.” (Explanatory Statement Submitted by Sen. Leahy, Chair
of the Senate Committee on Appropriations, Regarding H.R. 2617, Consolidated Appropriations Act, 2023,
Congressional Record, vol. 168, part 198-Book II [December 20, 2022], p. S8890.) Service line closures also have
generated congressional and media attention because, in recent years, hospitals have been closing certain service lines,
most notably obstetric care. An evaluation of hospital reduction in services is beyond the scope of this report. For
information on declines in obstetric care, see U.S. Government Accountability Office (GAO), Maternal Health:
Availability of Hospital-Based Obstetric Care in Rural Areas, GAO-23-105515, October 19, 2022, at
https://www.gao.gov/products/gao-23-105515.
8 Chapin White and Christopher M. Whaley, Prices Paid to Hospitals by Private Health Plans Are High Relative to
Medicare and Vary Widely: Findings from an Employer-Led Transparency Initiative, RAND Corporation, 2019.
9 For purposes of these Medicare rural hospital designations, rural means a hospital is located in, or is otherwise treated
as being located in, a rural geographic area. Rural also may refer to the distance, such as a minimum number of miles,
between the designated hospital and another designated or non-designated hospital. Treated as being located in a rural
area means, for example, a hospital that meets the statutory requirements at 42 U.S.C. §1395ww(d)(8)(E)(ii) or the
regulations at 42 C.F.R. §412.64(b)(3).
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Selected Research on Rural Hospital Closures
The Government Accountability Office (GAO) has performed analyses that assessed, among other things, the
number of rural hospital closures, factors associated with rural hospital closures, and the closures’ effect on access
to health care services. The research team of the Cecil G. Sheps Center for Health Services Research at the
University of North Carolina at Chapel Hil (UNC Sheps Center) analyzes and tracks rural hospital closures. In
addition, the Medicare Payment Advisory Commission (MedPAC), as a result of congressionally mandated work,
assessed Medicare beneficiaries’ access to health care services in rural areas and recommended potential
modifications to Medicare payment and delivery systems to preserve access to health care services in rural areas.
Sources: GAO, Rural Hospital Closures: Number and Characteristics of Affected Hospitals and Contributing Factors,
GAO-18-634, August 2018; GAO, Rural Hospital Closures: Affected Residents Had Reduced Access to Health Care
Services, GAO-21-93, January 2021; UNC Sheps Center for Health Services Research, “Rural Hospital Closures
Since January 2005”; and MedPAC, “Chapter 7: Improving Efficiency and Preserving Access to Emergency Care in
Rural Areas,” in Report to Congress: Medicare and the Health Care Delivery System, June 2016.
Hospital closures receive considerable attention due to the potential service and access impacts
for the relevant community. (See text box “Selected Research on Rural Hospital Closures.”)
Merged hospitals also receive attention, particularly related to the effect a merger may have on
health care delivery efficiencies, prices, services, among other effects. Converted hospitals—
those that downsize from a full-service inpatient and outpatient hospital to an outpatient-only
facility, such as an urgent care center or outpatient clinic—and new hospitals receive less
attention.
This report provides a data snapshot of hospitals with a Medicare rural hospital designation that
have closed, converted, merged, or that are new—both new health care facilities and existing non-
hospital facilities that upsized to a hospital—for the period January 2018-November 2022.
Specifically, this report
 identifies the total number of hospitals with each designation;
 provides the number of designated hospitals that have closed, merged, converted,
or opened;10
 compares the number of designated hospitals with the number of non-designated
hospitals; and
 notes whether some rural hospital designations are overrepresented in any of the
status change categories, particularly closed and converted categories, relative to
their numbers overall.
This analysis is intended to inform Congress about aggregate hospital status changes—closed,
converted, merged, and new—during the 2018-2022 period with a Medicare rural hospital
designation.11 It also complements existing analyses, raises questions and issues that warrant
future analyses, and presents considerations for Congress as it deliberates policies for rural
hospitals. This report will be updated periodically as new data become available.
The text box immediately below presents key terms used throughout this report, followed by a
brief overview of the Medicare rural hospital designations. Next, the report describes key
characteristics and factors related to hospital financial distress that the Medicare rural hospital

10 In the remainder of this report, the four hospital statuses (closed, merged, converted, opened) are referred to
collectively as hospital change status.
11 This analysis does not include an analysis of facilities operated by federal government entities including those
operated by the Departments of Defense or Veterans Affairs. It also does not include facilities operated or funded by
the Indian Health Service. In some cases these facilities may be located in rural areas and may affect the patient volume
(and therefore financial stability) of the facilities included in this analysis. Available data are not sufficient to determine
whether this occurs.
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designations are intended to address; trends in hospital closures; and selected policies designed to
assist rural hospitals. In addition, the report presents analyses of hospital status changes by
Medicare rural hospital designation; this analysis includes a comparison with non-designated
rural hospitals that have similar characteristics to designated hospitals, such as size (small, as
determined by the number of inpatient beds).
The information in this report is not exhaustive;12 rather, it provides context for understanding the
rural hospital designations and status change data presented later in the report.
Key Terms Used in This Report
Inpatient Prospective Payment System (IPPS): The Medicare payment system for inpatient hospital services
consisting of a predetermined, fixed payment rate subject to certain adjustments that is based on the national
average cost of furnishing inpatient hospital services to Medicare beneficiaries rather than a hospital’s actual cost
of furnishing such services to each individual beneficiary served.
Medicare Rural Hospital Designation: For purposes of this report, any of four designations that generally
apply to small, rural hospitals—critical access hospital (CAH), low-volume hospital (LVH), Medicare dependent
hospital (MDH), and sole community hospital (SCH). These designations permit a qualifying hospital to receive
higher Medicare payments than it would otherwise receive absent the designation. In some cases, a hospital can
have multiple designations, where applicable (as noted below).
Critical Access Hospital: A hospital that provides low-intensity, short-stay, acute care hospital services in
remote geographic areas. This designation allows CAHs to receive cost-based, rather than IPPS, payments
from Medicare. CAH is a mutually exclusive designation relative to the other three designations addressed
below.
Low-Volume Hospital: A hospital that receives increased IPPS payments to account for the higher
incremental costs associated with a low volume of patients. An LVH is not a mutually exclusive designation;
an LVH may also have either an MDH or a SCH designation.
Medicare Dependent Hospital: A small, rural hospital serving a high proportion of patients who are
Medicare beneficiaries. MDHs receive increased IPPS payments. An MDH cannot also have an SCH
designation but can have an LVH designation.
Sole Community Hospital: A hospital that is the sole source of health care in a community. SCHs receive
increased IPPS payments. An SCH cannot also have an MDH designation but can have an LVH designation.
Reasonable Cost: The Medicare payment method that generally pays a hospital for the (reasonable) cost of
furnishing inpatient hospital services to Medicare beneficiaries. Sometimes also referred to as cost-based payment.
Reasonable cost is unlike IPPS (defined above), which is a predetermined, fixed payment based on the average cost
of furnishing inpatient hospital services to Medicare beneficiaries.
Status Change: For purposes of this report, one of four statuses: closed, converted, merged, or new.
Closed: A hospital that ceased all health care services.
Converted: A hospital that no longer provides inpatient services, only outpatient services, such as urgent
care, and thus no longer qualifies as a hospital. Sometimes also referred to as downsized from a hospital to an
outpatient-only health care facility.
Merged: A hospital acquired by another hospital or health system.
New: A hospital that opened that did not previously exist as a hospital.

Source: CRS analysis and summary of relevant federal statute, regulations, and nongovernment sources.

12 For example, the American Hospital Association (AHA) Hospital Universe Change Report does not reflect the status
change of non-member hospitals. Thus, it is possible for a non-member hospital to be in the universe of hospitals from
which AHA has collected data in its annual survey but not be in the change report.
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Medicare Rural Hospital Designations
To understand the Medicare rural hospital designations, one must first know how Medicare pays
non-designated hospitals. Medicare pays general acute care hospitals—not specialized hospitals,
such as psychiatric or rehabilitation hospitals—a predetermined, fixed payment amount, subject
to adjustments for factors such as geographic differences in hospital employee wages and patient
diagnoses and underlying health conditions. This fixed payment for general acute care inpatient
hospital services is the inpatient prospective payment system (IPPS).13 The IPPS payment amount
is set using the average cost of inpatient hospital services furnished to Medicare beneficiaries
during the base period September 30, 1982 through August 31, 1983, updated for inflation.14 In
other words, it is the average cost, not the actual cost, of furnishing inpatient hospital services to a
specific beneficiary. (Prior to the IPPS, Medicare paid hospitals for inpatient hospital services
furnished to Medicare beneficiaries based on reasonable cost. See “Prospective Payment Versus
Reasonable Cost Payment” textbox for information about prospective payment systems versus
cost reimbursement.)
Prospective Payment Versus Reasonable Cost Payment
Prior to Medicare’s inpatient prospective payment system (IPPS), Medicare paid most short-term acute care
hospitals reasonable cost for inpatient hospital services furnished to Medicare beneficiaries. Reasonable cost meant
a hospital would bil Medicare an amount that was unique for each inpatient episode, as long as the episode met
Medicare requirements for “reasonable and necessary.” As a result, reasonable cost-based payments varied from
hospital to hospital or patient to patient. In contrast, IPPS—like most prospective payment systems—pays a
predetermined, fixed payment pegged to the average cost of furnishing inpatient hospital services to a Medicare
beneficiary. In addition, the IPPS payment amount is a single payment for a bundle of services furnished by a
hospital during an inpatient stay, rather than multiple payments for an itemized list of services, supplies, or pieces
of medical equipment used during an inpatient stay.
Concerned about the rapid increase in Medicare spending on hospital services year over year, Congress enacted
legislation (Tax Equity and Fiscal Responsibility Act of 1982; P.L. 97-248) that limited the year-to-year increase in
Medicare reasonable cost payments for inpatient hospital services. Shortly thereafter, Congress enacted additional
legislation (Social Security Amendments of 1983; P.L. 98-21) authorizing the Secretary of Health and Human
Services to establish a prospective payment system for short-term acute care hospital inpatient services under
Medicare. The resulting IPPS is intended to encourage hospitals to control costs.
IPPS payments to a hospital for inpatient services furnished to beneficiaries, in aggregate, should cover a hospital’s
costs. That is, a hospital may not cover its costs on some Medicare patients, may break even on others, and may
more than recover its costs on stil others. Thus, the goal for hospitals, presumably, is to at least break even or,
preferably, to have Medicare payments exceed costs by some margin in aggregate for furnishing inpatient hospital
services to Medicare beneficiaries.
Medicare pays three of the four designations addressed in this report using the IPPS method—(1)
LVHs, (2) MDHs, and (3) SCHs. Medicare pays an “add-on” amount (i.e., adjustment) in the case
of LVHs. It also permits MDHs and SCHs to use a baseline cost year different from the IPPS
baseline year; in other words, MDHs and SCHs can use baseline costs from 1982, 1987, 1996, or
2006, if doing so would yield a greater Medicare payment than the IPPS baseline costs from
1984.15 (See Appendix A for further details about the payment methodology of these designated
hospitals.)

13 For a brief overview of the inpatient prospective payment system (IPPS), see MedPAC, Payment Basics, “Hospital
Acute Inpatient Services Payment System,” revised October 2022.
14 42 C.F.R. §412.71(a)(1). Generally, Medicare used as the IPPS base costs those amounts reflected in the Medicare
cost reports of hospitals whose cost-reporting period ended during September 30, 1982 through August 31, 1983.
15 Health Care Financing Administration, “Medicare Program; Prospective Payments for Medicare Inpatient Hospital
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The fourth rural hospital designation, CAH, is not paid using the IPPS method. Rather, CAHs
receive Medicare payments based on reasonable cost plus 1%. (Refer to Appendix A for further
detail about the Medicare payment methodology for CAHs.16)
Payment enhancements that hospitals receive under these designations apply only to Medicare
payments for Medicare beneficiary inpatients.17 The payment enhancements do not apply to non-
Medicare patients who have other health coverage, such as private insurance or Medicaid. The
enhancements also do not apply to Medicare beneficiaries who receive their Medicare coverage
through a Medicare Advantage (MA, or Medicare Part C) plan.
Table 1 contains the number of hospitals with and without a Medicare rural hospital
designation—CAH, LVH, MDH, and SCH—for the period January 2018-November 2022.18
Table 1. Annual Number and Percentage of Short-Term Acute Care Hospitals and
Applicable Medicare Rural Designations
(January 2018-November 2022)
2022a
Hospitals and Applicable
(Through
Medicare Rural Designation
2018a
2019a
2020a
2021a
November)
Critical Access Hospital (CAH)b
1,356
1,352
1,350
1,349
1,343
Low-Volume Hospital (LVH)
2c
608
621
621
615
Medicare Dependent Hospital
0d
156
169
170
180
(MDH)
Sole Community Hospital (SCH)
448
446
451
454
460
Non-Designated (IPPS) Hospitals
2,626
2,371
2,280
2,138
2,076
Source: Congressional Research Service (CRS) analysis of Medicare Impact File data and Flex Monitoring Team
(an academic consortium funded by the Federal Office of Rural Health Policy) for the relevant years.
Notes: IPPS = Inpatient prospective payment system. This table does not contain totals because LVH is not a
mutually exclusive Medicare rural hospital designation; some hospitals that are either MDH or SCH are also
LVH. Thus, summing each column would result in duplicate counts. The time frame (beginning with 2018) in this
table reflects CRS’s access to American Hospital Association (AHA) hospital status change data, which are the
basis for the analysis in the remainder of this report; the time frame does not reflect when the Medicare rural
hospital designations were enacted. See “Medicare Rural Hospital Designations” an d Appendix A for more
details about each designation.
a. The SCH, MDH, and LVH data use fiscal years, and the CAH data are by calendar year. In any year noted in
this table, there are approximately 3,300 IPPS hospitals, including LVHs, MDHs, and SCHs, and non-
designated hospitals, in addition to approximately 1,350 CAHs.

Services; Final Rule,” 49 Federal Register 233, January 3, 1984, p. 327.
16 For a graphical summary of the Medicare eligibility criteria and payment methodology of critical access hospitals
(CAHs), low-volume hospitals (LVHs), Medicare dependent hospitals (MDHs), and sole community hospitals (SCHs) ,
and, see CRS Infographic IG10023, Medicare Payment for Rural or Geographically Isolated Hospitals, 2021.
17 In addition, independent of these Medicare rural hospital designations, Medicare pays a portion of qualifying
hospitals’ uncompensated care costs and some of the costs associated with serving a disproportionate amount of low-
income patients.
18 To calculate the average number of MDHs and LVHs for the period, CRS excluded FY2018 because of the unusually
low number of MDHs and LVHs due to expiration of the MDH program and the enhanced eligibility criteria for LVHs.
Congress later temporarily extended and modified eligibility for both MDH and LVH designations. In addition, IPPS
hospitals, including rural designation IPPS hospitals LVH, MDH, and SCH use fiscal years; the CAH data are by
calendar year.
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b. Facilities operated by the Indian Health Service or operated by Indian Tribes or Tribal Organizations using
Indian Health Service funds may be designated as critical access hospitals and receive Medicare
reimbursement using CAH methodology for the IHS beneficiaries who are enrol ed in Medicare and receive
Medicare covered services. These CAHs are not included in the data in this table because IHS facilities are
beyond the scope of this report. For information on IHS CAHs, see Indian Health Service, “Critical Access
Hospitals,” Critical Access Hospitals, Fact Sheets (ihs.gov).
c. The modified, temporary eligibility criteria for the LVH designation expired at the end of FY2017; Congress
later extended the modified, temporary eligibility criteria multiple times, most recently through September
30, 2024.
d. The MDH designation is a temporary program that briefly expired at the end of FY2017; Congress later
extended the program multiple times, most recently through September 30, 2024.
Key Characteristics Addressed by Medicare Rural
Hospital Designations
Rural hospitals, whether paid under IPPS or reasonable cost, share certain characteristics that may
make it more challenging to maintain financial stability. Factors that are often associated with the
financial condition of a hospital include the
 demographics and health status of the population served by a hospital;
 patient volume or size of a hospital; or
 diversity of third-party payers of the patients served by a hospital—a balance of
payers that includes self-pay for the uninsured, private insurance, and
government-sponsored coverage such as Medicare or Medicaid.19
These factors are not mutually exclusive and are often interrelated. In addition, these factors are
the primary basis for the Medicare rural hospital designations addressed in this report. The
sections below briefly address each of these factors individually.
Demographics and Population Health Status
The demographics and health status of the rural population may affect the costs of care in rural
areas. The population in rural areas tends to have higher rates of certain chronic conditions and
health risk factors relative to urban areas that may make it costlier to deliver care in rural areas.
The rural population is on average older and sicker than the population residing in urban areas.20
For example, rural areas have higher rates of risk factors for mortality (e.g., smoking) and certain
chronic diseases (e.g., obesity) than urban areas.21 Rural areas also have higher age-adjusted rates
of certain conditions, such as heart disease, lung cancer, and stroke, than urban areas. In addition,
the rural population is on average older than the urban population; specifically, nearly one out of
every five people living in a rural area is over the age of 65 (18%), versus 14% of the population

19 Medicare pays a portion of qualifying hospitals’ uncompensated care costs and some of the costs associated with
serving a disproportionate amount of low-income patients (i.e., Medicaid or Medicare Supplemental Security Income).
These payments do not make a hospital “whole”; they only compensate for a portion of a hospital’s uncompensated
care and disproportionate share costs. See CRS In Focus IF10918, Hospital Charity Care and Related Reporting
Requirements Under Medicare and the Internal Revenue Code, for an overview of uncompensated care and federal tax-
exempt status.
20 Centers for Disease Control and Prevention, “Rural Americans Are Dying More Frequently from Preventable Causes
Than Their Urban Counterparts,” press release, November 7, 2019, at https://www.cdc.gov/media/releases/2019/
p1107rural-americans.html.
21 Ibid.
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in urban areas.22 As a result, because Medicare eligibility begins at the age of 65, a higher
proportion of the rural population than the urban population is Medicare eligible. Poverty rates
are also higher in rural areas (16.1% of rural residents live below the poverty line, in contrast to
12.6% of people who reside in metropolitan areas).23 In addition, unemployment rates are higher
in rural areas than in urban areas.24
The health status of patients in rural areas may be a source of financial distress for hospitals.
Although Medicare adjusts hospital payments to account for clinical diagnoses, comorbidities,
and certain patient characteristics, these payment adjustments apply only to Medicare
beneficiaries. Medicare’s payment adjustments that account for these patient characteristics may
not apply to patients in the same hospitals who are covered by other insurance, such as Medicaid,
or who are uninsured. In addition, for the more than 3,000 hospitals paid under Medicare IPPS,
the goal is to provide services at or below the average cost set under Medicare for as many
beneficiaries as possible. If a hospital cannot accomplish that goal for any number of reasons—
including patient volume, inefficiency, and unpredictable cost increases (e.g., staffing)—the
hospital may experience financial distress.
Patient Volume and Hospital Size
A hospital, by long-standing Medicare definition, must maintain inpatient services and the
staffing appropriate to provide these services.25 As such, there are fixed costs to maintain a
hospital that must be offset by revenue obtained from patient care. Given the fixed payment rate
structures under most private health insurance and government-sponsored health coverage, higher
patient volume makes it more likely a hospital will offset financial losses on some patients with
gains on others under a particular insurance coverage type.26 In other words, higher patient
volume may mitigate large financial losses on a smaller but more expensive subset of insured
patients or patients who are uninsured. Smaller hospitals or those with relatively low patient
volume may not be able to make up financial losses on some patients with gains on others. Thus,
rural hospitals, especially if they are small or have low patient volume, may have difficulty
covering their fixed costs because they cannot spread those costs across more patients, or may not
be able to offset the cost of a few relatively expensive patients.27 In general, according to a 2021
report by the Medicaid and CHIP Payment Access Commission, “rural hospitals face financial
pressures due to the low occupancy rates, high levels of uncompensated care, competition from

22 Anna Nicholson, Rapporteur, Roundtable on Population Health Improvement: Board on Population Health and
Public Health Practice; Health and Medicine Division, National Academies of Sciences, Engineering and Medicine,
Population Health in Rural America in 2020: Proceedings of a Workshop, (Washington, DC: National Academies
Press, 2021), p. 6.
23 Ibid., p. 10.
24 Ibid., p. 10.
25 However, this definition of hospital changed with the enactment the REH designation, which became effective
January 1, 2023. REHs are not required to furnish inpatient care, must provide emergency care, and may provide other
outpatient services.
26 The kinds of services hospitals provide (or do not provide) are determined by many factors, including Medicare
conditions of participation, community need, staffing, and profitability. This report does not address hospital decisions
about which services not to furnish (e.g., pediatric or obstetrics services). For further reading about how hospitals
choose which lines of services to provide, see, for example, Katy B. Kozhimannil et al., “Rural Hospital
Administrators’ Beliefs About Safety, Financial Viability, and Community Need for Offering Obstetric Care,” JAMA
Health Forum, vol. 3, no. 3 (March 25, 2022) at doi: 10.1001/jamahealthforum.2022.0204; or Advisory Board, “Why
So Many Hospitals Are Cutting Back on Services,” September 6, 2022.
27 Ibid.
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other hospitals, and weak local economies.”28 These factors make rural hospitals less profitable
and more likely to close than urban hospitals.29
Payer Mix
Payer mix refers to the range of payment sources for health care services furnished—in this case,
inpatient hospital services. Payment sources include third-party payers such as employer-
sponsored insurance, or government coverage such as Medicare or Medicaid, or self-pay or
uninsured persons. As noted above, the payer mix is an important factor for hospital finances and
high rates of uninsured or publicly insured populations may contribute to hospital financial stress.
The economic circumstances of the rural population (e.g., unemployment and poverty rates; see
“Demographics and Population Health Status”) affect the health insurance coverage of rural
residents, who are more likely to be uninsured than are residents of urban areas.30 In addition,
Medicaid covers a larger share of the rural population than the urban population.31 These
relatively higher rates of publicly insured or uninsured populations may be financially
challenging for rural hospitals.
The lack of a balanced payer mix, which includes both private insurance and public program
(e.g., Medicare coverage), is associated with hospital closures and financial distress. The North
Carolina Rural Health Research Program built a model to examine financial distress at rural
hospitals to predict hospitals most at risk of closing. The model characterized a hospital’s
profitability, taking into account numerous factors, including the hospital’s cash on hand and
share of Medicare discharges. It found that a hospital’s share of Medicare-covered patients is
predictive of financial distress, as is the poverty rate of the population the hospital serves.32
Similarly, greater uninsured rates are associated with hospital closures and financial distress.
Regarding private insurance, one estimate found that payment rates from private insurance are
50% higher than hospital costs.33 Rural areas, due to their comparatively higher rates of uninsured
residents and residents with government-sponsored insurance, have smaller proportions of
commercially insured residents than urban areas. These trends make rural hospitals more likely to
experience financial distress, especially given the differences between private insurance,
Medicare, and Medicaid payment rates. Specifically, a RAND study of medical claims data from
4,000 hospitals in all states between 2018 and 2020 found that on average private insurance
payment rates were 224% higher than Medicare payments though they found variation across
states, with prices ranging from 175% higher than Medicare prices to 310% higher than Medicare
prices.34

28 Medicaid and CHIP Payment Access Commission (MACPAC), Medicaid and Rural Health, Issue Brief, April 2021,
p. 3, at https://www.macpac.gov/wp-content/uploads/2021/04/Medicaid-and-Rural-Health.pdf.
29 Ibid.
30 U.S. Census Bureau, “Rates of Uninsured Fall in Rural Counties, Remain Higher Than Urban Counties,” press
release, April 9, 2019, at https://www.census.gov/library/stories/2019/04/health-insurance-rural-america.html.
31 Julia Foutz, Samantha Artiga, and Rachel Garfield, The Role of Medicaid in Rural America, Kaiser Family
Foundation, Issue Brief, April 2017, at https://files.kff.org/attachment/Issue-Brief-The-Role-of-Medicaid-in-Rural-
America.
32 Brystana Kaufman, George Pink, and Mark Holmes, Prediction of Financial Distress Among Rural Hospitals, NC
Rural Health Research Program, Findings Brief, January 2016, at https://www.shepscenter.unc.edu/wp-content/
uploads/2016/01/2015Prediction-of-Distress.pdf.
33 Testimony of Medicare Payment Advisory Commission (MedPAC) Executive Director Mark E. Miller, in U.S.
Congress, House Committee on Ways and Means, 114th Cong., 1st sess., July 22, 2015.
34 Christopher M. Whaley et al., Prices Paid to Hospitals by Private Health Plans Findings from Round 4 of an
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Trends and Characteristics of Rural Hospitals
The Cecil G. Sheps Center for Health Services Research at the University of North Carolina at
Chapel Hill (UNC Sheps Center), which monitors rural hospital closures throughout the
continental United States, found that 193 rural hospitals have closed since 2005 (as of the date of
this report’s publication). Of these, 100 completely closed, meaning they no longer provide any
health care services, and 89 converted, meaning they no longer provide inpatient care but provide
some type of health services (e.g., outpatient urgent care).35 Additionally, 4 hospitals converted to
REH, the newest Medicare hospital payment designation. Of the 193 closures or conversions,
150occurred since 2010, including 37 between 2020 and 2023.
The CAH designation, established in the 1980s,36 is credited with slowing the rate of closures in
the late 1990s and early 2000s. However, rural hospitals continued to close and the rates began to
grow again during the 2008-2009 recession.37
It is not yet clear how the Coronavirus Disease 2019 (COVID-19) pandemic emergency period
will affect hospital closures going forward.38 Data from 2020 show that 19 hospitals closed, a
similar number to the 18 hospitals that closed in 2019. In contrast, in 2021, only two rural
hospitals closed; 2022 saw another seven closures. The relatively low numbers in 2021 and 2022
may be due to the availability of COVID-19 funding for rural facilities through both the Provider
Relief Fund and the American Rescue Plan Act during those years.39 At the time of this report’s
publication, no additional COVID-19 funding for rural providers is available.
Some experts suggest that rural hospitals remain vulnerable to closures despite the lower closure
numbers in 2021 and 2022, as approximately 40% are operating in deficit status.40 As such, 2023
and thereafter may bring closure numbers similar to those of 2019 and 2020.
The UNC Sheps Center and others have examined trends among closures. Researchers have
found that (1) closures are most common in the South, where poverty rates are higher and people
are less likely to be insured than in other parts of the country;41 and (2) most hospitals (both rural
and urban) that close do so because of financial problems, but rural hospitals are more likely than
urban hospitals to be unprofitable.42 Other research identified similar trends and noted that closed

Employer-Led Transparency Initiative, RAND Corporation, July 2022, p. 13.
35 Cecil G. Sheps Center for Health Services Research, “Rural Hospital Closures,” at https://www.shepscenter.unc.edu/
programs-projects/rural-health/rural-hospital-closures/.
36 Brystana G. Kaufman, “The Rising Rate of Hospital Closures,” Journal of Rural Health, vol. 32, no. 2016 (2015),
pp. 35-43.
37 Ibid., see “Frequently Asked Questions.”
38 A public health emergency was initially declared effective January 31, 2020 and is set to end on May 11, 2023. The
public health emergency made additional funding and flexibilities available to hospitals. For more information, see
HHS, Administration for Strategic Preparedness and Response, “Declarations of Public Health Emergency,” at
https://aspr.hhs.gov/legal/PHE/Pages/default.aspx and “Fact Sheet: COVID-19 Public Health Emergency Transition
Roadmap,” at https://www.hhs.gov/about/news/2023/02/09/fact-sheet-covid-19-public-health-emergency-transition-
roadmap.html.
39 CRS Report R46897, The Provider Relief Fund: Frequently Asked Questions.
40 The Chartis Group, “Pandemic Increases Pressure on Rural Hospitals and Communities,” National Rural Health
Association Rural Health Policy Institute Conference, Washington, DC, February 2022.
41 For example, the Sheps Center data show more than five closures in each of the following states Alabama, Florida,
Georgia, and more than 10 closures in North Carolina and Tennessee. Overall, Texas had the highest number of
closures (27).
42 Brystana G. Kaufman, George Pink, and Mark Holmes, “Predictions of Financial Distress Among Rural Hospitals,”
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hospitals were likely to be a greater distance from the nearest hospitals, were more likely to serve
non-White populations, and had lower utilization than hospitals that did not close.43
Researchers also have examined differences between hospitals that closed and those that
converted to another type of provider such as an urgent care center that no longer furnishes
inpatient services. Hospitals that closed (which the UNC Sheps Center termed abandoned) were
more likely to serve populations with higher poverty rates, be further away from the nearest
hospitals, and have lower profitability and liquidity prior to having closed than hospitals that
converted.44
Selected Policies to Maintain Health Care Services
in Rural Areas
In addition to the four Medicare rural hospital designations addressed in this report, the Centers
for Medicare & Medicaid Services (CMS) tests payment models designed to provide increased
payment across different payers to rural hospitals to increase financial stability. For example,
beginning in 2019, the CMS Innovation Center is testing a new model for rural hospitals in
Pennsylvania. This demonstration uses a global budget model in which hospitals receive a set
payment amount in advance for inpatient and outpatient care. This model is intended to provide
hospitals financial stability through predictable, steady income (rather than income that fluctuates
based on patient volume) and incentives to coordinate care and invest in preventive care.45
To respond to the COVID-19 pandemic, CMS permitted some hospitals to provide and receive
reimbursement for services rendered beyond the four walls of the hospital, termed Hospital
Without Walls.46 Though not exclusively rural, this flexibility allows hospitals to expand the
number of beds and patients they serve without adding physical infrastructure; as such, it could
provide additional revenue for rural hospitals.
The Medicare program has other incentives available to outpatient providers in rural areas,
including bonus payments to physicians who practice in geographic health professional shortage
areas. In addition, facilities with the Medicare designation of rural health clinic receive payments
that are generally considered higher than payments in other outpatient settings.47 Similar to rural
health clinics, but not exclusively rural, Medicare designates certain outpatient facilities in health
professional shortage areas as federally qualified health centers; this designation enables the

NC Rural Health Research Program, Findings Brief, January 2016, 2015, at https://www.shepscenter.unc.edu/wp-
content/uploads/2016/01/2015Prediction-of-Distress.pdf.
43 Shawnda Schroeder, “Effects of Rural Hospital Closures,” Rural Health Research Gateway, December 2017;
Brystana G. Kaufman, “The Rising Rate of Hospital Closures,” Journal of Rural Health, vol. 32, no. 2016 (2015), pp.
35-43.
44 Shawnda Schroeder, “Effects of Rural Hospital Closures,” Rural Health Research Gateway, December 2017.
45 CMS, “Pennsylvania Rural Health Model,” at https://innovation.cms.gov/innovation-models/pa-rural-health-model.
46 CMS, “CMS Announces Comprehensive Strategy to Enhance Hospital Capacity amid COVID-19 Surge,” press
release, November 25, 2020, at https://www.cms.gov/newsroom/press-releases/cms-announces-comprehensive-
strategy-enhance-hospital-capacity-amid-covid-19-surge.
47 See CMS, Medicare Learning Network, “Health Professional Shortage Area Physician Bonus Payment Program,”
February 2021, at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/
Downloads/HPSAfctsht.pdf; and CMS, Medicare Learning Network, “Rural Health Clinic,” January 2022, at
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/
RuralHlthClinfctsht.pdf.
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facilities to receive payments that are generally considered higher than payments in other
outpatient settings.48
Beyond Medicare payments, the federal government has programs to assist rural hospitals. In
general, existing programs generally take one or more of the following approaches:
 Maintain hospital-level services in rural areas through technical assistance to
improve hospital operations and quality or payment policies
 Increase services available through telehealth
 Encourage cooperation among rural providers to minimize duplication of
services in an attempt to maintain access to care when low patient volume may
not be sufficient to support multiple providers
 Maintain access to non-hospital-level health care services in rural areas (i.e.,
converting hospitals into outpatient-only urgent and other outpatient services)
The HHS Federal Office of Rural Health Policy (FORHP) supports programs that demonstrate
each of these policy approaches. Through its rural hospital programs, FORHP provides technical
assistance to rural hospitals and funding for activities such as quality improvement and targeted
support for vulnerable rural hospitals.49 FORHP also supports rural community programs,
including programs that provide grants to coordinate care in rural areas and establish rural health
networks.50 In addition, FORHP provides funds to health care providers (including but not
exclusive to hospitals) to increase their capacity to provide services via telehealth; these funds
support broadband services and encourage the provision of specific health services, such as
behavioral health, through telehealth.51 Outside of HHS, the U.S. Department of Agriculture
(USDA) also provides financial support in the form of loans and grants to rural facilities,
including rural hospitals, through its Community Facilities Program. In addition, USDA received
one-time funding through the American Rescue Plan Act of 2021 (P.L. 117-2) to provide
emergency funding to rural providers, including hospitals.52
Policy approaches also have included efforts to preserve access to health care in rural areas by
moving away from inpatient care models. For example, in 2020, Congress enacted a new
Medicare payment model designed to preserve emergency care in rural areas. This model, unlike
current Medicare rural hospital designations, does not require that the facility primarily focus on
inpatient care. The new payment model, which creates a new Medicare provider type called a
rural emergency hospital (REH), became effective January 1, 2023.

48 CMS, Medicare Learning Network, “Federally Qualified Health Center,” October 2022, at https://www.cms.gov/
outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/fqhcfactsheet.pdf.
49 Health Resources and Services Administration (HRSA), Federal Office of Rural Health Policy (FORHP), “Rural
Hospital Programs,” at https://www.hrsa.gov/rural-health/rural-hospitals. The President’s Budget for the FORHP
included a new $10 million funding stream to provide targeted technical assistance to rural hospitals at risk of closure
and included a proposed $20 million pilot program for rural hospitals that would provide start-up capital funding to
enhance existing or add new service lines. For more information see HRSA, “Health Resources and Services
Administration, FY2024: Justification of Estimates for Appropriations Committees,” at https://www.hrsa.gov/sites/
default/files/hrsa/about/budget/budget-justification-fy2024.pdf, pp. 377-382.
50 HRSA, FORHP, “Rural Community Programs,” at https://www.hrsa.gov/rural-health/community/index.html.
51 HRSA, FORHP, “Office of Advancement of Telehealth,” at https://www.hrsa.gov/rural-health/telehealth.
52 U.S. Department of Agriculture, “Community Facilities Programs,” at https://www.rd.usda.gov/programs-services/
community-facilities; and CRS Report R46834, American Rescue Plan Act of 2021 (P.L. 117-2): Public Health,
Medical Supply Chain, Health Services, and Related Provisions.
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The REH model grew out of congressionally mandated analysis published in 2016 by the
Medicare Payment Advisory Commission (MedPAC) in which it presented various policy options
for preserving access to emergency health care services in rural areas.53 Hospital emergency
services are considered outpatient services; some of these outpatient services result in an inpatient
stay. Medicare rural hospital designations are targeted to hospitals and inpatient services. To that
end, MedPAC noted that Congress could consider options to provide Medicare payment and
support for emergency departments or urgent care clinics with ambulance service—both focusing
on maintaining emergency services without inpatient capacity.54 To assist hospitals with
conversion to REH, in FY2022, the FORHP received an appropriation of $5 million to provide
technical assistance to support public nonprofit hospitals that seek to convert to REHs.55
Hospital Status Change
Table 2 contains information about closed, converted, merged, and new hospitals by Medicare
rural designation—CAH, LVH, MDH, and SCH. Medicare rural hospital designations are by
definition hospitals that are small (based on number of beds) or have low inpatient volume. To put
the designated hospitals in context, where possible, Table 2 compares designated hospitals with
similar non-designated small (≤ 100 beds) rural hospitals and with all other non-designated
hospitals.
One hundred ninety-eight unique hospitals had a status change—closed, converted, merged, or
new—during the period January 2018-November 2022. Of those, 61 hospitals had at least one
Medicare rural designation and 137 did not. Of the hospitals with a Medicare rural designation,
24 were CAHs, 26 LVHs, 16 MDHs, and 6 SCHs.56 Of the 137 non-designated hospitals that had
a status change, 12 were small (≤100 beds) rural hospitals and 125 were other non-designated
hospitals. The sections below following the table provide additional detail about each of the status
changes.
Table 2. Unique Number and Percentage of Medicare Rural
Hospitals by Designation and Status Change
(January 1, 2018-November 30, 2022)
Merged
Closed
Converted
(% of
New
Hospital Designation
(% of Closed)
(% of Converted)
Merged)
(% of New)
All Hospitalsa
110
15
57
16
Critical Access Hospitals
19
2
2
1
(CAH)
(17%)
(13%)
(4%)
(6%)
Low-Volume Hospitals
18
2
6
0
(LVH)
(16%)
(13%)
(11%)

53 Medicare Payment Advisory Commission (MedPAC), June 2016 Report To The Congress: Medicare And The
Health Care Delivery System, June 2016, Chapter 7, pp. 201-225.
54 Ibid. See pp. 218-221.
55 Rep. Nancy Pelosi, “Division H-Department of Labor, Health and Human Services, and Education, and Related
Agencies, Appropriations Act, 2022,” Text of the House Amendment to the Senate Amendment to the Text,
Congressional Record, daily edition, vol. 168, part 42-Book II (March 9, 2022), p. H1534.
56 A hospital can have more than one Medicare rural designation; therefore, the sum of these hospitals will not equal
47.
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Merged
Closed
Converted
(% of
New
Hospital Designation
(% of Closed)
(% of Converted)
Merged)
(% of New)
Medicare Dependent Hospitals
11
1
4
0
(MDH)
(10%)
(7%)
(7%)
Sole Community Hospitals
6
0
0
0
(SCH)
(5%)
All Non-designated Hospitalsb
65
10
47
15
(59%)
(67%)
(82%)
(94%)
IPPS Small (≤100 beds) Rural
9
1
2
0
Hospitals
(8%)
(7%)
(4%)
All Other IPPS Hospitals
56
9
45
15
(51%)
(60%)
(79%)
(94%)
Source: CRS analysis of Medicare Impact File data, FLEX Monitoring Team, and AHA DataQueryTM.
Notes: IPPS = Inpatient prospective payment system. One closed hospital was removed from the data because it
was identified as a CAH, LVH, and MDH; a CAH is not permitted to also hold either an LVH or an MDH
designation. Thus, CRS determined this was an error in the source data set(s).
a. The “All Hospitals” row contains the total, unduplicated number of hospitals for each change status. These
totals are used as the denominator for the percent values in all remaining rows of the table. Because
hospitals can have more than one designation, the sum of the percent values in each column wil not add to
100.
b. “Non-designated Hospitals” category included for comparison with rural designated hospitals.
Almost seven times as many hospitals closed as opened (i.e., new hospitals) between January 1,
2018, and November 30, 2022—110 versus 16. This disparity resulted in a net loss of 94 (110 −
16 = 94) health care facilities.57 However, the loss or gain of a hospital did not necessarily affect
the same geographic areas. The sections below describe the number and percentage of hospitals
in each of the status change categories—closed, converted, merged, or new.
Closed
The hospital status change that garners the greatest attention is a closure. Fifty-six percent (56%)
of status changes between January 1, 2018, and November 30, 2022, were closures.58 During this
period, 110 hospitals closed—45 rural designated hospitals (41% of closed hospitals) and 65 non-
designated hospitals (59% of closed hospitals). Of the rural designated hospitals, 19 were CAHs
(17% of all closed hospitals), 18 were LVHs (16% of all closed hospitals), 11 were MDHs (10%
of all closed hospitals), and 6 were SCHs (5% of all closed hospitals). Of the 65 non-designated
hospitals, 9 were small (≤100 beds) rural hospitals (8% of all closed hospitals) and 56 were other
non-designated hospitals (51% of all closed hospitals).
Converted
Of the 15 hospitals that converted between January 1, 2018, and November 30, 2022, 5 (33% of
all converted hospitals) were rural designated hospitals and 10 (67% of all converted hospitals)

57 For purposes of this report, a merged or converted hospital is not counted as a loss, because the facility still provides
health care services.
58 For purposes of this report, closed means a hospital that ceased all health care operations—inpatient and outpatient
services—and does not include hospitals that changed from one Medicare rural hospital designation to another (e.g., an
IPPS hospital changing to an IPPS with an SCH designation, or a CAH switching back to being an IPPS hospital).
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were non-designated. Of designated hospitals that converted, two (13%) were CAHs, two (13%)
were LVHs, and one (7%) was an MDH; no SCHs converted. All but one of the non-designated
converted hospitals were in the “Other IPPS Hospitals” group.
Merged
Of the 57 hospitals that merged between January 1, 2018, and November 30, 2022, 10 (18%)
were rural designated and 47 (82%) were non-designated. Of the rural designated hospitals, two
(4% of all merged hospitals) were CAHs, six (11%) were LVH, and four (7%) were MDH; no
SCHs merged. Of the non-designated merged hospitals, 2 (4%) were small rural hospitals and 45
(79%) were other non-designated hospitals.
New
Of the 16 hospitals that opened between January 1, 2018, and November 30, 2022, 1 (6%) was a
rural designated hospital and 15 (94%) were non-designated. The only new rural designated
hospital was a CAH. All 15 of the new non-designated hospitals were in the “Other IPPS
Hospitals” category; none of the non-designated hospitals was a small, rural hospital.
Differences in Status Change by Medicare Rural
Hospital Designation
Certain hospitals are represented in each of the status change categories to a greater or lesser
extent than their shares overall. Figure 1 illustrates this information. For example, MDHs
represent 3.9% of all hospitals but represent a higher percentage of closed, converted, and merged
facilities relative to their proportion of all hospitals—10.0%, 6.7%, and 7.0%, respectively. Only
SCHs and CAHs represent a smaller proportion of closed hospitals than each represents among
all hospitals—SCHs are 10.3% of all hospitals but only 5.5% of closed hospitals, and CAHs
represent 28.3% of all hospitals but only 17.3% of closed hospitals.
For comparison, Figure 1 includes two additional categories of hospitals (“IPPS, Other Non-
designated” and “IPPS Small, Rural); both comprise hospitals that do not have a Medicare rural
designation. The “IPPS Small, Rural” hospitals are somewhat comparable to the designated
hospitals based on certain characteristics, such as being located in a rural area and having a
limited number of acute inpatient beds.59 The “IPPS, Other Non-designated” category contains
non-designated hospitals that are not small and rural.60
Like most of the Medicare rural designated hospitals, hospitals in both of the non-designated
categories have greater representation in the status change categories than their numbers overall
(with the exception of new hospitals defined as “IPPS Small, Rural”). Specifically, “IPPS Small,
Rural” hospitals represent 1.6% of all hospitals but 8.2% of closed, 6.7% of converted, 3.5% of
merged, and 0.0% of new hospitals. “IPPS, Other Non-designated” hospitals represent 39.0% of
all hospitals but 50.9% of closed, 60.0% of converted, 78.9% of merged, and 93.8% of new
hospitals.

59 For purposes of this report, the comparison category “IPPS Small, Rural” contains hospitals that are located in a rural
area, as defined by Medicare, and have 100 or fewer inpatient beds.
60 Using the threshold of 100 or fewer inpatient beds to define a hospital as small, the “IPPS, Other Non-Designated”
category could contain hospitals that are small and urban, large and urban, or large and rural.
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These data do not allow us to determine with a high level of confidence why differences exist or
whether the differences are significant, but it is worth noting that there are differences. For
example, of the Medicare rural designated hospitals, MDHs are overrepresented in the closed
category, given that they comprise a relatively small proportion of all acute care hospitals. CRS is
unable to determine the reason for this overrepresentation. MDH is the only Medicare rural
hospital designation that expires in its entirety after September 30, 2024, unless Congress enacts
legislation to extend it.61 Whether or how the temporary nature of this designation affects the
financial condition of these hospitals is unclear and may be worth further research.
Figure 1. Percentage of Medicare Rural Designation Hospitals with a Status Change
Relative to All Hospitals with a Status Change
(January 2018-November 2022)

Source: CRS analysis of Medicare Impact File data, FLEX Monitoring Team, and AHA DataQueryTM.
Notes: IPPS = Inpatient prospective payment system. The information contained in this figure does not imply
causation or correlation. Rather, it is the proportion of hospitals that have a specific change status relative to all
hospitals (column headers), by Medicare rural hospital designation or type of hospital—IPPS small rural, IPPS
other non-designated as comparison (row headers). This figure does not contain totals because low-volume
hospital is not a mutually exclusive Medicare designation; some hospitals that are either Medicare dependent
hospitals or sole community hospitals also hold the low-volume hospital designation. However, hospitals cannot
be both Medicare dependent hospitals and sole community hospitals. Thus, summing each column would result
in duplicate counts.
Considerations for Congress
As Congress debates policy options for rural hospitals and access to health care services in rural
areas, below is a list of select considerations.

61 Additionally, the LVH’s current eligibility criteria and payment methodology will expire after September 30, 2024, if
Congress does not enact legislation to extend them The LVH designation does not expire—only the existing eligibility
criteria and payment methodology. SCH and CAH are permanent designations.
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 Congress may continue to monitor the effects of the COVID-19 pandemic public
health emergency on rural hospital closures, conversions, and mergers. Few rural
hospital closures occurred in 2021 and 2022, which may be associated with the
availability of federal funding to support these providers during the height of the
COVID-19 public health emergency. Congress may wish to monitor whether
rural hospital closures remain at 2021-2022 levels or return to or exceed 2020
levels (19 closures) to determine the need for policy intervention.62
 The COVID-19 pandemic increased the use of telehealth and expanded payment
for telehealth services under federal programs. Recent payment changes enacted
in the Consolidated Appropriations Act, 2023 (P.L. 117-328), will continue the
expanded Medicare reimbursement for telehealth. Telehealth’s full effects on
access to care and its spillover effects on brick and mortar providers are not yet
known. Congress may consider monitoring how telehealth affects rural hospital
finances.
 The REH model became effective January 1, 2023. Congress may consider
analyses of the REH designation’s effect on rural hospitals to determine whether
to modify aspects of REH or the Medicare rural hospital designations addressed
in this report.
 Congress may examine the effects of particular designations on closures or other
status changes, as noted in this report. This report found that MDH and LVH
comprised a greater percentage of closures relative to their respective proportion
of all hospitals. Congress may consider exploring the factors that underlie these
trends. For example, the MDH designation is temporary, though Congress has
enacted legislation to temporarily extend the designation multiple times since its
enactment. The LVH designation’s current eligibility criteria and payment
adjustment also are temporary, and Congress has enacted legislation to
temporarily extend the current eligibility criteria and payment adjustment.63 The
temporary nature of these designations may make them unpredictable and
therefore less attractive to hospitals as they explore ways to stabilize their
finances. Congress may explore the role Medicare rural hospital designations
have on the rural hospitals that may qualify for these designations and whether
temporary designations are less effective than permanent designations at
preventing closures or conversions.
 The Medicare rural hospital designations provide enhanced payment only for
Medicare beneficiaries served by designated hospitals. Hospitals may not receive
similar enhanced reimbursement under other third-party payers—public or
private. Thus, Medicare payment enhancements to hospitals for Medicare
patients may not address financial distress due to payments for patients covered
under Medicaid, private insurance, or those who are uninsured.

62 A public health emergency was initially declared effective January 31, 2020 and is set to end on May 11, 2023. The
public health emergency made additional funding and flexibilities available to hospitals. For more information, see
HHS, Administration for Strategic Preparedness and Response, “Declarations of Public Health Emergency,” at
https://aspr.hhs.gov/legal/PHE/Pages/default.aspx and “Fact Sheet: COVID-19 Public Health Emergency Transition
Roadmap,” at https://www.hhs.gov/about/news/2023/02/09/fact-sheet-covid-19-public-health-emergency-transition-
roadmap.html.
63 For a legislative history of the LVH and MDH designations, see CRS congressional distribution memorandum,
Legislative History of Medicare Rural Hospital Payment Designations: Low-Volume Hospital, Medicare Dependent
Hospital, and Sole Community Hospital, available to congressional clients upon request.
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 In addition to Medicare rural hospital designation, the FORHP and USDA have
programs that can be used to support rural hospitals. Congress may seek to
evaluate the interactions of these programs to identify potential duplication and
gaps.
 Although this report focuses on status changes among Medicare designated
hospitals, this analysis found that both designated and undesignated hospitals
closed, converted, and merged between January 2018 and November 2022.
Congress may examine the effects of closures, conversions, and mergers on
access to health care in general, including any similarities and differences
between designated and undesignated hospitals that are also financially distressed
or at risk of closing.
 This analysis does not address federal government-operated hospitals such as
Veterans Affairs and those operated or funded by the Indian Health Service. It is
unclear how, or whether, the presence of these federal facilities may affect the
financial viability of the rural hospitals that are the basis of this analysis. In areas
with patients using federal facilities, patient volume at non-federal rural hospitals
may be affected, thereby potentially negatively affecting their finances. Whether
or not this occurs is beyond the scope of this report’s analysis; however, the
interaction between federal facilities and rural hospital closures may be an area to
consider for Congressional oversight and investigation.
 Congress may explore whether there is a need for general financial support for
certain hospitals and health care services outside of the Medicare hospital IPPS.
Medicare is not a grant or general financial support program; rather, Medicare is
primarily a health insurance program that pays hospitals (and other providers) for
services furnished to Medicare beneficiaries. As noted earlier, the REH
designation is the first hospital designation whose payment is a hybrid
prospective payment system and annual lump sum payment. The lump sum is
intended to cover an REH’s fixed costs that otherwise may not be covered under
a pure PPS.

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Appendix A. Medicare Rural Hospital Designations
Medicare pays for most hospital inpatient services furnished in short-term acute care hospitals
under the inpatient prospective payment system (IPPS);64 IPPS has been in effect since October 1,
1986.65 The IPPS payment is a predetermined, fixed amount that is set administratively by the
Centers for Medicare & Medicaid Services (CMS) for a Medicare beneficiary who is discharged
from the hospital. All IPPS payments are subject to adjustments related to (1) the cost of hospital
labor in the geographic area where a hospital is located relative to the national cost of labor and
(2) the patient’s diagnoses, comorbidities, and complications. Some IPPS payments are subject to
further adjustments—for example, the cost of a medical residency program or serving a
disproportionate share of low-income and uninsured patients. The payment covers most services,
supplies, and room and board costs from the time the hospital admits the patient through
discharge. The payment also covers pre-admission-related services such as diagnostic tests
performed within three days prior to and including the day of admission. Hospitals may not bill
separately for items and services that Medicare pays for under the fixed IPPS payment.66
Certain hospitals are exempt from the IPPS and are paid under different prospective payment
system models or on a reasonable cost basis.67 For example, the following hospital types (or such
units or wards within an IPPS hospital) are paid under their respective Medicare payment
methodologies (i.e., not IPPS): (1) inpatient rehabilitation facilities, (2) long-term care hospitals,
(3) psychiatric facilities, (4) children’s hospitals, and (5) cancer hospitals.68
Medicare’s IPPS payment is intended to cover the average cost of providing inpatient services to
a Medicare beneficiary, with applicable adjustments as noted above. It is intended to provide an
incentive for hospitals to deliver inpatient services to Medicare beneficiaries efficiently—ideally
for the hospital, the IPPS payment is greater than its costs. However, if a hospital’s costs of
furnishing inpatient services to Medicare beneficiaries consistently exceed the Medicare IPPS
fixed payment amount, the hospital may experience financial distress. Additionally, if a hospital
has low patient volume or a disproportionate share of Medicare beneficiaries (relative to patients
who have commercial insurance, for example)—characteristics that are associated with hospital
financial distress—IPPS may not work financially for such a hospital.69

64 As distinguished from, for example, long-term care hospitals, psychiatric hospitals, or rehabilitation hospitals or from
services provided to Medicare beneficiaries in such a unit or ward of an IPPS hospital. These non-IPPS hospitals or
units within an IPPS hospital are paid under different prospective payment system methodologies from IPPS.
65 Social Security Amendments of 1983 (SSA 1983; P.L. 98-21), §601. SSA 1983 established a transition period from
October 1, 1983, through September 30, 1985, during which Medicare paid hospitals for inpatient services using a
blend of cost-based payment rates and the new IPPS rate.
66 Physician services provided during a hospital inpatient stay are paid separately by Medicare. For example, if an
inpatient stay required anesthesiology, the anesthesiologist’s fee would be paid separately from the hospital’s IPPS
payment under the Medicare physician fee schedule.
67 The reasonable cost payment method involves paying an amount that is not fixed or predetermined by the Centers
for Medicare & Medicaid Services (CMS), such as is done under the IPPS. Prior to the IPPS, Medicare paid for
inpatient hospital services based on reasonable cost, subject to certain limits on costs.
68 Additionally, other hospitals that are exempt from the IPPS and are reimbursed by Medicare under different methods
include hospitals in Maryland, hospitals in U.S. territories (with the exception of Puerto Rico), and hospitals of the
Indian Health Service. Children’s hospitals focus on patients from birth to the age of 18 and may serve few Medicare
beneficiaries, because Medicare eligibility is generally for those over the age of 65 or who are disabled (although some
disabled patients may be children).
69 Private insurer payments to hospitals for hospital services are largely determined on the market share and power a
hospital has in a particular geographic area. Commercial insurer payment amounts are negotiated between the insurer
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For qualifying rural or low-volume hospitals for which IPPS does not work financially, Medicare
has numerous payment designations that permit such hospitals to receive a modified IPPS
payment amount or an add-on payment for each Medicare beneficiary the hospital serves. These
designations include critical access hospital (CAH), low-volume hospital (LVH), Medicare
dependent hospital (MDH), and sole community hospital (SCH), which are described below.
Critical Access Hospitals
Critical access hospitals were established by the Balanced Budget Act of 1997 (P.L. 105-33) to
maintain access to hospital care in rural areas and are paid by Medicare outside of the IPPS.
CAHs are modeled on a medical assistance facility (MAF) demonstration conducted in Montana
to test alternative payment models for hospital care. MAFs focused on low-intensity, short-stay,
acute care hospital services in remote geographic areas. As such, MAFs provided a maximum of
96 hours of inpatient care; patients with serious illnesses or injuries were stabilized at an MAF
and transported to a full-service hospital. The MAF demonstration expired and was replaced with
the Medicare Rural Hospital Flexibility Program and the establishment of a new Medicare
hospital designation, CAH. Facilities that were MAF participants were grandfathered as CAHs.
Unlike IPPS hospitals, Medicare pays CAHs at 101% of the CAH’s reasonable costs for most
hospital inpatient, outpatient, laboratory, therapy, and post-acute services in swing beds.70
To become a CAH, a hospital must meet all five of the following criteria:
1. Be located in a rural county71
2. Be located more than a 35 mile drive from another CAH or IPPS hospital,72 or
meet one of the following criteria:
 Be located more than a 15 mile drive in mountainous terrain or where only
secondary roads are available
 Be certified as a CAH prior to January 1, 2006, based on state designation as
a “necessary provider”73
3. Provide 24/7 emergency services
4. Have 25 or fewer inpatient beds
5. Have an annual average length of stay of 96 hours or less
The CAH designation is mutually exclusive of any of the other Medicare rural designations
addressed in this report.

and hospital; in such negotiations, the relative strength of each party’s negotiating position influences the outcome. For
further information about commercial insurer payments to hospitals, see Chapin White and Christopher M. Whaley,
Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely: Findings from an
Employer-Led Transparency Initiative, RAND Corporation, 2019, at https://doi.org/10.7249/RR3033.
70 A swing bed refers to a bed that can be used for either acute (hospital) or skilled (such as skilled nursing or
rehabilitation) levels of care.
71 Rural is defined, for purposes of qualifying as a critical access hospital, as a geographic area that is outside of a
metropolitan statistical area or New England County Metropolitan Area, as defined by the Office of Management and
Budget, or that meets other regulatory requirements at 42 C.F.R. §412.64(b). Certain hospitals that are not located in
rural areas may be considered rural if the hospital reclassifies as rural for purposes of the Medicare IPPS wage index
adjustment under an urban-to-rural reclassification. See 42 U.S.C. §1395ww(d)(8)(E) and 42 C.F.R. §412.103.
72 Indian Health Service hospitals do not count as “another CAH or IPPS hospital” for purposes of qualifying as critical
access hospital (CAH) based on the driving distance between hospitals.
73 42 U.S.C. §1395i-4(c)(2)(B)(i)(II).
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Low-Volume Hospital Adjustment
Under Medicare, qualifying hospitals receive an adjustment to some of their IPPS per discharge
payments to account for the higher incremental costs associated with a low volume of discharges.
LVH was enacted by the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (P.L. 108-173).
LVHs receive up to a 25% increase in their per discharge Medicare IPPS payment for a limited
number of discharges. The Secretary of Health and Human Services determines the appropriate
percentage increase per discharge by hospital, up to the 25% ceiling. LVHs with fewer discharges
receive a larger payment adjustment. The adjustment declines in a continuous linear manner—
from a maximum 25% adjustment per Medicare discharge for discharges 1-500, with a reduced
per discharge LVH adjustment for every additional Medicare discharge up to 3,800 discharges.
Currently, to receive the LVH designation a hospital must meet both of the following criteria:
1. Have less than 3,800 total discharges
2. Be more than 15 road miles from another IPPS hospital
After September 30, 2024, if Congress does not act to extend or otherwise modify the current
eligibility criteria and payment adjustment, the LVH criteria will revert to less than 800 total
(Medicare and non-Medicare) discharges and being located more than 25 road miles from another
IPPS hospital.74 Also, under the statutory criteria, although hospitals may have as many as 800
total discharges to qualify for LVH, CMS previously established through rulemaking that only
hospitals with fewer than 200 total discharges and that meet the aforementioned distance
requirement qualify for LVH.75
The LVH designation is not mutually exclusive; a hospital may have LVH and either MDH or
SCH, in addition. (An SCH may not also be an MDH, and an MDH may not also be an SCH. As
noted above, a CAH is mutually exclusive; a CAH cannot also be designated an SCH, MDH, or
LVH.)
Medicare Dependent Hospitals
The Medicare dependent small, rural hospital designation provides for IPPS payment adjustments
to assist certain hospitals that serve a high proportion of patients who are Medicare beneficiaries.
MDH is a temporary designation, originally enacted by the Omnibus Reconciliation Act of 1989
(P.L. 101-239) and authorized for Medicare cost reporting periods April 1, 1990, through March
31, 1993. Congress has extended and modified the MDH designation multiple times since then.
MDH is set to expire after September 30, 2024, if Congress does not extend the program or make
it permanent.76

74 42 U.S.C. §1395ww(d)(12). The current eligibility criteria and the payment adjustment were most recently extended
by the Consolidated Appropriations Act, 2023 (P.L. 117-328), Title IV, Subtitle A, §4101. For a legislative history of
the Medicare dependent hospital (MDH) designation, see CRS congressional distribution memorandum, Legislative
History of Medicare Rural Hospital Payment Designations: Low-Volume Hospital, Medicare Dependent Hospital, and
Sole Community Hospital, available to congressional clients upon request.
75 42 C.F.R. §412.101.
76 The Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239) established the MDH designation as a temporary
program. Congress has not made MDH permanent but has temporarily extended it multiple times. The MDH
designation was most recently extended in the Consolidated Appropriations Act, 2023 (P.L. 117-328), Title IV, Subtitle
A, §4102. For a legislative history of MDH, see CRS congressional distribution memorandum, Legislative History of
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Currently, Medicare pays an MDH the IPPS base payment rate plus 75% of the difference
between the IPPS base rate and the hospital’s hospital-specific rate, constructed from either
FY1982, FY1987, or FY2002 costs, whichever yields the greater payment.77 In addition,
Medicare adjusts the MDH payment to fully compensate for fixed costs that exceed a hospital’s
IPPS payment when inpatient volume declines by more than 5% in a given year.
To qualify as an MDH, a hospital must meet all four of the following criteria:
1. Be located in a rural area78
2. Have no more than 100 beds
3. Not be designated a SCH
4. Have at least 60% of its inpatient days attributed to Medicare beneficiaries (for
two of the three most recently audited cost reporting periods)79
Sole Community Hospitals
The SCH designation was established in 1972, predating the hospital IPPS, to recognize hospitals
that were the sole source of health care in a community.80 The Social Security Amendments of
1972 (P.L. 92-603), Section 223, established limitations on Medicare’s reasonable cost
reimbursement; hospitals designated as SCHs were allowed to exceed those limits.81 The limit on
cost increases, and therefore Medicare payment increases in a pre-IPPS environment, was thought
to disadvantage some rural or geographically isolated hospitals.
Currently, Medicare may pay SCHs using an IPPS base payment rate that is constructed from a
different cost reporting year than other IPPS hospitals. SCHs receive a base payment rate that is
either the IPPS base rate or an SCH’s hospital-specific rate constructed from its FY1982,
FY1987, FY1996, or FY2006 costs, whichever yields the greater IPPS payment.82 In addition,
Medicare adjusts payment to SCHs for costs that exceed the hospitals’ IPPS reimbursement when
inpatient volume declines by more than 5% in a given year. Further, SCHs receive a 7.1%
increase to their Medicare hospital outpatient reimbursements.83

Medicare Rural Hospital Payment Designations: Low-Volume Hospital, Medicare Dependent Hospital, and Sole
Community Hospital, available to congressional clients upon request.
77 A hospital’s unique base rate is trended forward.
78 See footnote 71 for the definition of rural. Similar to the sole community hospital (SCH) designation, if the
geographic area where the MDH is located changes to urban due to a population shift, the MDH loses its designation.
See 42 C.F.R. §412.108(b).
79 42 U.S.C. §1395ww(d)(5)(G).
80 Hospital IPPS was enacted by the Social Security Act Amendments of 1983 (P.L. 98-21).
81 See Marc P. Freiman and Jerry Cromwell, “Reimbursement of Sole Community Hospitals Under Medicare’s
Prospective Payment System,” Health Care Financing Review, vol. 9, no. 2 (winter 1987), p. 39, at
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4192868/.
82 42 C.F.R. §412.92(d).
83 CMS, Hospital Outpatient Prospective Payment System, January 2023, at https://www.cms.gov/Outreach-and-
Education/Medicare-Learning-Network-MLN/MLNProducts/html/medicare-payment-systems.html#Hospital.
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Generally, a hospital is eligible for the SCH designation if it meets one of the following four
criteria:
1. Be located more than 35 miles from another IPPS hospital
2. Be rural (i.e., not located in an urban area as defined by OMB), be located between 25
and 35 miles from another hospital, and meet one of the following:84
 Be the exclusive hospital provider in the area based on certain criteria related
to the minimum proportion of residents or Medicare beneficiaries in the
geographic area who become inpatients at that hospital
 Have fewer than 50 beds and would have met the aforementioned
requirement but for the fact that the hospital lacked the specialty care
services needed by some residents or beneficiaries
3. Be rural and located between 15 and 25 miles from another hospital but inaccessible for
at least 30 days in each of two out of three years due to local topography or periods of
prolonged severe weather conditions
4. Be rural and at least 45 minutes from the nearest hospital due to distance, posted
speed limits, and predicted weather conditions85

84 See footnote 71 for the definition of rural. If the basis for a hospital’s SCH designation is that it is located in a rural
area, and the area becomes urban due to a population changes, as determined by the Office of Management and Budget,
the SCH must either meet the SCH “greater than 35 miles” from a like hospital criterion or lose the SCH designation.
See 42 C.F.R. §412.92(b)(3)(ii)(D).
85 42 U.S.C. §1395ww(d)(5)(D)(iii).
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Appendix B. Data, Methodology, and Limitations
To determine the closed, converted, merged, and new hospitals, the Congressional Research
Service (CRS) used the American Hospital Association (AHA) dataset AHA Hospital Universe
Change Report.86 The report lists hospitals added or deleted from AHA DataQueryTM universe of
hospitals each month based on changes reported to the AHA membership department.87 The status
change may be a result of a hospital opening, closing, merging, or no longer meeting the AHA
definition of a hospital. AHA defines a hospital as follows:
Community hospitals are defined as all nonfederal, short-term general, and other special
hospitals. Other special hospitals include obstetrics and gynecology; eye, ear, nose, and
throat; long term acute-care; rehabilitation; orthopedic; and other individually described
specialty services. Community hospitals include academic medical centers or other
teaching hospitals if they are nonfederal short-term hospitals. Excluded are hospitals not
accessible to the general public, such as prison hospitals or college infirmaries.
Other hospitals include nonfederal long-term care hospitals and hospital units within an
institution such as a prison hospital or school infirmary. Long-term care hospitals may be
defined by different methods; here they include other hospitals with an average length of
stay of 30 or more days.88
The basis of analysis for this report are hospitals with certain Medicare rural designations—
Medicare dependent hospital (MDH), low-volume hospital (LVH), sole community hospital
(SCH)—that also had a status change in the AHA Hospital Universe Change Report.89
CRS performed a data match between the AHA Hospital Universe Change Report and multiple
years of the Medicare IPPS Impact File.90 This involved an intermediate step of matching the
AHA Universe Change Report and the AHA Universe of U.S. Hospitals data to obtain the
Medicare ID. Once the AHA change report hospitals had a Medicare ID, CRS matched the AHA
change report dataset to the Medicare IPPS Impact File. For hospitals with the critical access
designation that also had a status change, CRS used the variable identifying these types of
hospitals in the AHA Universe of U.S. Hospitals.
The universe of status change hospitals was extracted from the AHA Hospital Universe Change
Report data from January 1, 2018, through November 30, 2022. AHA compiles change report
data by the 15th of each month for the previous month’s data.

86 AHA Hospital Universe Change Report is a dataset that contains hospitals that have been added or deleted from the
American Hospital Association’s (AHA) AHA DataQueryTM universe of hospitals database. It contains the reason for
the addition or deletion; the reason for the addition or deletion is noted as resulting from a hospital opening, closing,
merging, or downsizing from a hospital to another type of health care facility.
87 The American Hospital Association (AHA) Hospital Universe Change Report does not reflect the status change of
non-member hospitals. Thus, it is possible for a non-member hospital to be in the universe of hospitals from which
AHA has collected data in its annual survey but not be in the change report.
88 AHA, “Fast Facts on U.S. Hospitals, 2021,” at https://www.aha.org/statistics/fast-facts-us-hospitals.
89 This analysis does not include federal government-operated hospitals such as Departments of Defense, Veterans
Affairs, and those operated or funded by the Indian Health Service.
90 CRS used multiple years in the matching process to ensure hospitals that may have been in one year’s file but not in
another year’s file were not erroneously excluded from the analysis. CRS used fiscal year 2016 through 2022 Medicare
Inpatient Prospective Payment System (IPPS) Impact File data. CMS publishes the Impact File annually; it contains
information about short-term acute care hospitals, most of which are paid by Medicare under the IPPS. For each
hospital, it contains information such as name, number of beds, average daily census, ownership type, and eligibility for
certain IPPS payment adjustments such as Medicare Disproportionate Share Hospital (DSH).
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A separate analysis was required to identify the total number of hospitals with a certain rural
designation that were operational at some point between 2018 and 2022. This number would
include hospitals with and without a status change.91 CRS used the 2018-2022 Medicare IPPS
Impact Files and the 2018-2022 Flex Monitoring Team files of CAHs for this analysis.92 The
2018-2022 Medicare IPPS Impact Files were appended together, and then the unique hospitals
over this period were identified using their Medicare IDs. CRS identified the total number of
hospitals with the MDH and SCH rural designations using the Medicare IPPS Impact File
variable that identifies the type of rural designation of each hospital. CRS used this same variable
to isolate non-designated hospitals in the Medicare IPPS Impact File (labeled “inpatient
prospective payment system” or “IPPS” hospitals). Then, CRS used the variable that identifies
the number of beds in a hospital to determine if the hospital was small or large.93 CRS used the
Urban or Rural Designation for the Standardized Payment Amount (URSPA) variable to identify
whether a hospital is urban or rural.94 These variables together comprise the “IPPS, Other Non-
designated” and “IPPS Small, Rural” categories. CRS used a separate variable from the Medicare
IPPS Impact File to identify hospitals that have the LVH designation.95
The total number of CAHs that were operational between 2018 and 2022 was determined using
the FLEX Monitoring Team CAH files. For this analysis, CRS appended the quarterly CAH files
between 2018 and 2022 and then identified each unique CAH, using a combination of the hospital
name, ZIP code, and state.
This analysis and the nature of the multiple data sources make it difficult to identify causation or
correlation. Thus, CRS can identify differences between the types of hospitals by change status
but cannot determine why these differences exist and whether the differences are significant. For
example, CRS cannot determine whether the differences are due to the characteristics that are
unique to a particular rural designation, be it volume-based (e.g., LVH) or a higher proportion of
Medicare patients (e.g., MDH). CRS also cannot determine whether these differences relate to the
unique structure of Medicare payments of each of the designations. In addition, CRS cannot
determine from this analysis how effective any of the Medicare rural hospital designations are in,
for example, preventing or delaying a closure or a conversion.
This analysis covers the time period that includes the Coronavirus Disease 2019 (COVID-19)
public health emergency (PHE) declared on January 31, 2020, which is still in effect as of the
publication date of this report.96 In response to the PHE, Congress created two programs—the
Provider Relief Fund and the American Rescue Plan Rural Distribution—that provided
supplemental funding to rural hospitals; these programs may have prevented or delayed a status

91 Specifically, these numbers were used to determine the percentages in the “All Hospitals” column of Figure 1.
92 The FLEX Monitoring Team is an academic consortium funded by the Federal Office of Rural Health Policy. It
compiles critical access hospital data and publishes analyses.
93 This report defines a small hospital as one with less than 100 beds.
94 There is no standard definition of rural or urban across federal programs. For purposes of Medicare payments to
hospitals, a hospital is urban when it is located in (or reclassifies into) a metropolitan statistical area (MSA) and rural
when it is located in (or reclassifies into) a non-MSA. For further information about geographic adjustments to the
IPPS payment, referred to as the wage index adjustment, see CRS Report R46702, Medicare Hospital Payments:
Adjusting for Variation in Geographic Area Wages.
95 In both the status change analysis and the analysis of the overall number of designated hospitals, it is possible for a
hospital to be designated as a low-volume hospital and either a Medicare dependent hospital or a sole community
hospital. One designation was not chosen over another (i.e., recoding a low-volume hospital as a Medicare dependent
hospital) to show the true number of hospitals with a certain designation.
96 CRS Report R46809, Federal Emergency and Major Disaster Declarations for the COVID-19 Pandemic.
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Closed, Converted, Merged, and New Hospitals with Medicare Rural Designations

change. This time period may be anomalous. Whether this proves to be true will be examined in
future CRS analyses.97

Author Information

Marco A. Villagrana, Coordinator
Paul D. Romero
Analyst in Health Care Financing
Research Assistant

Elayne J. Heisler

Acting Section Research Manager

Acknowledgments
Michele Malloy, Research Librarian, provided support identifying literature and information for this report.
Simi V. Siddalingaiah, formerly an Analyst in Health Economics at CRS, contributed to early drafts of this
report.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

97 CRS Report R46897, The Provider Relief Fund: Frequently Asked Questions.
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