Medicare Hospital Payment:

PPS Includes Several Policies Intended to Help Rural Hospitals

HEHS-00-174R: Published: Sep 15, 2000. Publicly Released: Sep 15, 2000.

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Pursuant to a congressional request, GAO provided information on the scope and efficacy of Medicare's existing rural hospital inpatient payment policies, focusing on the major special payment provisions available to rural hospitals under the prospective payment system (PPS) and to provide information on the inpatient financial performance of these hospitals under PPS.

GAO noted that: (1) Medicare has implemented a variety of inpatient payment policies that have the effect of increasing payments under PPS to certain rural hospitals; (2) two-thirds of rural hospitals obtain some sort of special status to modify their Medicare PPS payments; (3) rural hospitals with special designations generally have fared better than other rural hospitals, although as a group they have still experienced consistently poorer financial performance under Medicare's PPS than have urban hospitals; and (4) there is considerable variation in performance behind this average, and many rural hospitals operate at a loss in providing Medicare inpatient services.

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