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The impact of the Medicare Rural Hospital Flexibility Program on patient choice

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  • Gowrisankaran, Gautam
  • Lucarelli, Claudio
  • Schmidt-Dengler, Philipp
  • Town, Robert

Abstract

This paper seeks to understand the impact of the Medicare Rural Hospital Flexibility (Flex) Program on rural resident hospital choice. The program created a new class of hospital, the Critical Access Hospital (CAH), which receives more generous reimbursement in return for limiting its beds and services. The program's goal is to maintain access to hospital care. Estimates from a patient choice model show that patient utility from visiting a hospital was negatively affected by conversion. While the lower bed capacity appears to play a minor role, the reduction in services results in a 28% drop in admission rates.

Suggested Citation

  • Gowrisankaran, Gautam & Lucarelli, Claudio & Schmidt-Dengler, Philipp & Town, Robert, 2011. "The impact of the Medicare Rural Hospital Flexibility Program on patient choice," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 342-344, May.
    • Handle: RePEc:eee:indorg:v:29:y:2011:i:3:p:342-344
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    References listed on IDEAS

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    1. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    2. Cardell, N. Scott, 1997. "Variance Components Structures for the Extreme-Value and Logistic Distributions with Application to Models of Heterogeneity," Econometric Theory, Cambridge University Press, vol. 13(2), pages 185-213, April.
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    Cited by:

    1. Pennerstorfer, Astrid & Pennerstorfer, Dieter, 2019. "How small are small markets? Local market size for child care services," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 340-355.
    2. Philippe Choné & Lionel Wilner, 2022. "Financial Incentives and Competitive Pressure: The Case of the Hospital Industry," Journal of the European Economic Association, European Economic Association, vol. 20(2), pages 626-666.
    3. P. Choné & F. Evain & L. Wilner & E. Yilmaz, 2013. "Introducing activity-based payment in the hospital industry: Evidence from French data," Documents de Travail de l'Insee - INSEE Working Papers g2013-11, Institut National de la Statistique et des Etudes Economiques.
    4. Astrid Pennerstorfer & Dieter Pennerstorfer, 2018. "How Small are Small Markets? Location Choice and Geographical Market Size for Child Care Services," Economics working papers 2018-14, Department of Economics, Johannes Kepler University Linz, Austria.
    5. Gowrisankaran, Gautam & Lucarelli, Claudio & Schmidt-Dengler, Philipp & Town, Robert, 2018. "Can amputation save the hospital? The impact of the Medicare Rural Flexibility Program on demand and welfare," Journal of Health Economics, Elsevier, vol. 58(C), pages 110-122.
    6. Philippe CHONÉ & Lionel WILNER, 2019. "Competition on Unobserved Attributes: The Case of the Hospital Industry," Working Papers 2019-21, Center for Research in Economics and Statistics.

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