Rural vs. urban: A comparison of hospital costs and charges

Rural acute care hospitals charge far less than their urban counterparts, according to a broad analysis of Medicare costs and charges by iVantage Health Analytics, a firm that compiles a hospital strength index that is based on data about financial stability, patients and quality indicators.

For the study, iVantage used data from CMS' Medicare Provider Analysis and Review file from 2014 to compare costs and charges at a DRG and service-line level. Outpatient data was sourced from the Medicare Outpatient Standard Analytical file for 2014.

Charge comparison
Hospital charges are essentially their list prices for medical services. Using a normalized ranking of average inpatient and outpatient Medicare charges, rural hospitals earned an average rank of 63.48 out of 100, indicating relatively low charges. That means two-thirds of all hospitals charge more than the average rural hospital. In contrast, urban hospitals earned an average score of 35.84 out of 100, indicating relatively high charges.

When iVantage compared charges for 10 common outpatient procedure, it found average rural charges were lower than average urban charges in eight of 10 cases. Concerning inpatient charges, average rural charges were lower than average urban charges in all 10 cases.

Cost comparison
The analysis revealed the direct costs rural hospitals incur to provide care were on average higher than their urban counterparts.  

When iVantage compared costs for 10 common outpatient procedures, it found average rural costs were higher than the average urban costs for all analyzed procedures. With regard to inpatient procedures, average rural direct costs were higher than average urban direct costs for six of nine analyzed DRGs.

"Often, rural hospitals maintain access to key community services that are used infrequently and therefore they become high cost outliers as there is lower patient volume across which to distribute these costs," said iVantage. "However, their significantly lower charge position is further demonstration of the value of these facilities to Medicare and consumers. That is, they are not passing along much of the higher costs they bear as a result of lower volumes, to the communities they serve."

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