Healthcare Economics of Critical Access Hospitals Term Paper

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AbstractThis week’s written assignment sought to identify what critical access hospitals (CAH) are, whether or not they are profitable, barriers to their profitability, and possible alternatives to CAHs. CAHs came into existence following the passage of the 1997 Balanced Budget Act (BBA) with the primary aim of increasing access to care in rural communities. Their distinguishing feature is the use of the cost-based Medicare reimbursement system as opposed to the traditional prospective payment system. The cost-based reimbursement system is where Medicare reimburses hospitals based on costs rather than at a standard flat rate. The subsequent sections of this text demonstrate that CAHs are not operating profitably despite running under the cost-based system. Most of them are operating inefficiently, incurring high costs for serving a relatively small number of patients. This text provides possible reasons for the high costs that characterize CAH and recommends the adoption of community outpatient hospitals as a possible alternative.Transforming Critical Access Hospitals into Profitable OrganizationsIntroduction of Topics and Facts as Presented in the CaseThis written assignment focused on critical access hospitals (CAH), their costs, and strategies for increasing their profitability.

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More specifically, the assignment explains what critical access hospitals are, whether or not they are profitable, barriers to their profitability, and possible alternatives to CAHs. CAHs came into existence following the passage of the 1997 Balanced Budget Act (BBA). The Act sought to protect citizens in the rural areas by increasing access to healthcare services. With the passage of the Act, rural hospitals could transform into CAHs, which are characterized by the cost-based Medicare reimbursement as opposed to the Prospective Payment System that sets a standard amount of Medicare reimbursement independent of costs. As per the provisions of the BBA, CAHs have the following fundamental features: they are located in non-metropolitan areas, are non-profit nature, are located at least35 miles away from the next nearest general hospital, have a maximum of 25 beds, and limit patients’ hospital stays to not more than 96 hours......

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"Healthcare Economics Of Critical Access Hospitals" (2022, June 23) Retrieved July 7, 2025, from
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"Healthcare Economics Of Critical Access Hospitals", 23 June 2022, Accessed.7 July. 2025,
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