The Impact of the Medicare Rural Hospital Flexibility Program on Patient Choice

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 percent drop in admission rates.