“Can Amputation Save the Hospital? The Impact of the Medicare Rural Flexibility Program on Demand and Welfare,” by Gautam Gowrisankaran, Claudio Lucarelli, Philip Schmidt-Dengler, and Robert Town (w18894, March 2013, .pdf format, 35p.).
Abstract:
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.
