overall costs for rural care lower than for urban care






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Publication: Healthcare Financial Management
Author: Shell, Eric
Date published: January 1, 2012

Rural hospitals have historically received special payment provisions to preserve access and address rural health disparities. "With the increasing belt-tightening of public budgets, these special payments are increasingly questioned.

The Dartmouth Atlas of Health Care, which has a well-established process to define hospital service areas (HSAs), earlier this year published a new dataset that makes an adjustment for cost-of-living differences among regions, along with their historical adjustments for age, sex, and race. The Dartmouth data for Medicare Parts A and B reimbursements per beneficiary provide the basis for the following analysis of the differences in spending between rural and urban HSAs.

The data show significant variation among different regions-a finding consistent with Dartmouth's historical research. Nationally, spending in rural HSAs is 4.5 percent lower than in urban HSAs, on average. With 6.45 million rural Medicare beneficiaries, this differential totals $2.76 billion, which includes the Medicare special payment provisions to rural providers.

The Dartmouth HSAapproach includes the payments for Medicare beneficiaries residing in the area, regardless of where they received services, as long as the services were delivered predominantly within the HSA. The differential identified in this analysis represents a conservative estimate of spending differences, given that many rural providers do not provide advanced and more costly services. Yet this outmigration is still captured in the cost picture for the HSA.

More research is needed on reasons for the differences between rural and urban spending. Dartmouth data on end-of -life care, however, suggest that in rural HSAs, spending during the last six months of life is 18 percent lower than in urban HSA, and the rural HSAs see 17 percent lower use of ICU/CCU services (See The DartmouthAtlas: Selected Measures of Inpatient Utilization During the Last Six Months of Life by HSA, 2007).

Many rural providers believe they are already operating within the coordinated Medical Home-Type approach that promises to reduce healthcare costs. Even with the special payment provisions, this analysis supports that contention.

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