Rural Hospitals under PPS: A Five‐Year Study

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Abstract
This research examines the impact of prospective payment (PPS) on the financial performance of Kansas hospitals, which are predominantly rural. Financial ratios are presented and regressed on bed size and year. The data suggest that bed size has the strongest effect on financial viability. There are indications of a delayed effect of PPS on the rural, smallest hospitals (fewer than 25 beds), suggesting that non-operating sources of revenue (local property tax mill levies) are being used to subsidize them in the short term. Small hospitals appear to be delaying all capital and long-term costs to survive. The research suggests that the effect of PPS may be long term.