The Rural Hospital Advantage

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Compared with urban hospitals, a new report finds that rural hospitals fare quite nicely. In fact, this report finds that “rural hospitals have achieved a noteworthy level of comparative performance….”


Kaiser Family Foundation

On average nationwide, 21 percent of Medicare beneficiaries live in rural counties in 2010. In seven states, less than 15 percent of the Medicare population lives in rural counties. (There are no counties designated as rural in New Jersey, Rhode Island, or the District of Columbia.) In contrast, nearly half or more of the Medicare population live in rural counties in 12 states—with Vermont (73 percent), Wyoming (69 percent), and Montana (67 percent) having the largest share of beneficiaries living in rural areas in 2010.

The National Rural Health Association released a report that compares the effectiveness of rural and urban hospitals. On most measures, rural hospitals compare quite favorably with their urban counterparts.

In fact, the study finds that, when matched against urban hospitals,  “rural hospitals have achieved a noteworthy level of comparative performance…” Rural health care is not more expensive than care in urban areas, and rural care is equal to, if not better, than care given in urban hospitals.

The comparison was done by iVantage Health Analytics, a private health care research company. Below are excerpts from the report. The company collected data on Medicare costs and health outcomes for doctors and hospitals for a 12 month period and then divided the results into rural and urban groups based on zip code. (The company used the same metro and nonmetro designations we commonly employ at the Daily Yonder.)

If you’d like the full copy, click here.  Here is a summary of the company’s report:

Rural hospitals have an opportunity to play an important and unique role in the implementation of the new health care reform law, the Patient Protection and Affordable Care Act (PPACA) because they have demonstrated cost effectiveness, high quality care and equivalent patient experience.  

In addition to these positive performance traits, rural hospitals have the potential to augment regional integrated delivery systems to ensure rural residents receive the right care in the right place at the right price.  

At this critical, post-­healthcare reform implementation stage, it is essential to understand how rural hospitals perform against their urban counterparts on industry standards of measurement, and how payments to rural residents compare to payments made to urban residents if they are to play a meaningful role.    

Rural residents tend to receive routine inpatient, outpatient and physician care at a local rural facility while seeking care for more complex treatments at urban facilities.  

Urban residents rarely out-migrate to rural settings for either routine or advanced treatments or care, yet many rural patients are referred to or voluntarily travel to urban providers based on the myth of better care.  

Perhaps more important, research demonstrates that rural residents have less access to primary care and fare worse than their urban counterparts on health status measures.  The combination of less availability of preventative/routine care and the existence of higher morbidity and pathology in rural areas presents a policy challenge that is borne out in this study.   

The tectonic shift triggered by the PPACA will have major rural implications.  

To prepare for increased provider-to-provider integration and coordination based on quality and cost, rural hospitals need to be able to demonstrate value. 

At the same time, larger urban hospitals and health systems that embark on development should use the planning phase to better understand and leverage the proven performance of rural hospitals as a means of ensuring optimal delivery model design, implementation and execution.

Summary of Medicare Beneficiary Payment Findings

• Approximately $7.2 billion in annual savings to Medicare alone if the average cost per urban beneficiary were equal to the average cost per rural beneficiary,

• Approximately $2.2 billion in annual cost differential (savings) occurred in 2010 because the average cost per rural beneficiary was 3.7% lower than the average cost per urban beneficiary,

• Approximately $9.4 billion per year is the existing and potential differential between Medicare beneficiary payments for rural vs. urban including the opportunity for savings if all urban populations could be treated at the rural equivalent,

• Per-capita Inpatient Hospital Service payments for rural beneficiaries are 2% less costly than payments for urban beneficiaries,