This Findings Brief looks at the effects of year-to-year changes in annual inpatient discharges on costs per Medicare discharge. The analysis finds that small hospital costs are more vulnerable to change than larger hospital costs. As a result, average costs per discharge are less stable, making it difficult for these facilities to predict and manage profitability under fixed payment schemes. The study finds that among the lowest volume hospitals, there is a 10% decrease in discharges with every 3% increase in the cost per Medicare case. In addition, the study found that hospitals allowed to use swing-beds for long-term care patients are not less sensitive to volume fluctuations.