Rural communities and Critical Access Hospitals (CAHs) are concerned by a few reports and proposed legislation that suggested changing swing bed reimbursement at CAHs from cost-based to the Skilled Nursing Facility Prospective Payment System (SNF PPS). Their concern is the likely reduction in Medicare reimbursement to CAHs. Approximately 92% of CAHs provide care in swing beds, and for some rural communities, swing beds are the only source of post-acute care.

This brief estimates the impact of potential loss of cost-based reimbursement for swing beds on CAH profitability and examines the characteristics of CAHs that would be most affected by such a change in reimbursement. Using the reimbursement formula from the Medicare cost report, we estimated Medicare reimbursement to CAHs assuming SNF PPS instead of cost-based reimbursement for skilled swing bed days. We found that changing the Medicare reimbursement method for CAH swing bed days from cost-based to the SNF PPS would result in an estimated median change in operating margin of -2.16 percentage points. CAHs most likely to be heavily impacted are smaller and more isolated, depend more heavily on swing beds, serve a higher percentage of Medicare beneficiaries, are located farther from the nearest skilled nursing facility, and are in the South.