Working Paper: NBER ID: w18894
Authors: Gautam Gowrisankaran; Claudio Lucarelli; Philip Schmidt-Dengler; Robert Town
Abstract: This paper seeks to understand the impact of the Medicare Rural Hospital Flexibility (Flex) Program on hospital choice and consumer welfare for rural residents. The Flex Program created a new class of hospital, the Critical Access Hospital (CAH), which receives more generous Medicare reimbursements in return for limits on capacity and length of stay. We find that conversion to CAH status resulted in a 4.7 percent drop in inpatient admissions to participating hospitals, almost all of which was driven by factors other than capacity constraints. The Flex Program increased consumer welfare if it prevented the exit of at least 6.5 percent of randomly selected converting hospitals.
Keywords: Medicare; Rural Hospitals; Consumer Welfare; Critical Access Hospitals; Healthcare Policy
JEL Codes: I11; I18; L11; L38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Flex Program (Y60) | hospital demand (I11) |
| conversion to CAH status (I19) | hospital admissions (I19) |
| conversion to CAH status (I19) | consumer welfare (D69) |
| Flex Program prevents exit of hospitals (I19) | consumer welfare (D69) |
| conversion to CAH status (I19) | patient demand through service offerings (J23) |
| Flex Program (Y60) | hospital closures (I11) |
| conversion to CAH status (I19) | decline in inpatient volume (I11) |
| conversion to CAH status (I19) | decline in admissions for acute myocardial infarction (I11) |
| conversion to CAH status (I19) | decline in admissions for pneumonia (I19) |