Can Amputation Save the Hospital? The Impact of the Medicare Rural Flexibility Program on Demand and Welfare

Gautam Gowrisankaran, Claudio Lucarelli, Philip Schmidt-Dengler, Robert Town

NBER Working Paper No. 18894
Issued in March 2013
NBER Program(s):   HC   IO

This paper seeks to understand the impact of the Medicare Rural Hospital Flexibility (Flex) Program on rural resident hospital choice and welfare. The Flex program created a new class of hospital, the Critical Access Hospital (CAH), which receives more generous reimbursement in return for limits on capacity and length of stay. A hospital that converted to CAH status would see its inpatient admissions drop by a mean of 5.4%, of which almost all was driven by factors other than capacity. The program increased consumer welfare if it reduced the closure rate by at least 4 percentage points.

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Acknowledgments and Disclosures

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