Research Alert: July 24, 2024

The Low-Volume Hospital Adjustment Before and During COVID-19

A 2016 publication analyzed characteristics of low-volume and non-low-volume rural Prospective Payment System (PPS) hospitals from 2012 to 2014 under the Affordable Care Act's qualifying criteria. Researchers found that, without the adjustment, rural Low-Volume Hospitals (LVHs) would have had significantly lower profitability margins. This brief provides an update to those findings and uses the current LVH adjustment qualifying criteria to compare low-volume hospitals to all other rural PPS hospitals and explore the effect of taking away the adjustment on LVHs in the two years before COVID-19 (April 2018 to March 2020) and two years during COVID (April 2020 to March 2022).

The LVH adjustment is for hospitals with fewer than 3,800 patient discharges in the previous year that are more than 15 miles from the nearest Inpatient Prospective Payment System acute care hospital. Qualifying hospitals receive a payment adjustment up to an additional 25% for every Medicare patient discharge.

Key Findings:

• The number of rural PPS hospitals that received a low-volume hospital adjustment increased during the study period (April 2018- March 2022).
• Low-volume hospitals had lower total, operating, and Medicare inpatient margins than non-LVHs across all study years.
• Low-volume hospitals would have had substantially lower profitability margins without the LVH adjustment, with the largest impact on Medicare inpatient margins.

Additional Resources of Interest:

• How Would Rural Hospitals Be Affected by Loss of the Affordable Care Act's Medicare Low-Volume Hospital Adjustment?
• More FORHP-funded research on Healthcare financing
• More information about the North Carolina Rural Health Research and Policy Analysis Center
• More information from the Rural Health Information Hub's topic guide: Healthcare Payment