Rural Hospital Mergers Increased Between 2005 and 2016—What Did Those Hospitals Look Like?

• Published in: Inquiry (Chicago) 2020, Vol.57, p.1-16
• Main Authors: Williams, Dunc, Reiter, Kristin L., Pink, George H., Holmes, G. Mark, Song, Paula H.
• Format: Article
• Language: English
• Subjects: Acquisitions & mergers; Capital expenditures; Capital structure; Censuses; Community; Competition; Debt service; Efficiency; Financial Management - economics; Financial Management - statistics & numerical data; Health Facility Merger - economics; Hospitals; Hospitals, Rural - economics; Hospitals, Rural - statistics & numerical data; Humans; Market shares; Markets; Medicare; Original Research; Profitability; Profits; Reimbursement; Rural areas; Rural health care; United States; Value creation
• ISSN: 0046-9580; 1945-7243; 1945-7243
• DOI: 10.1177/0046958020935666

The objective of this study is to determine whether key hospital-level financial and market characteristics are associated with whether rural hospitals merge. Hospital merger status was derived from proprietary Irving Levin Associates data for 2005 through 2016 and hospital-level characteristics from HCRIS, CMS Impact File Hospital Inpatient Prospective Payment System, Hospital MSA file, AHRF, and U.S. Census data for 2004 through 2016. A discrete-time hazard analysis using generalized estimating equations was used to determine whether factors were associated with merging between 2005 and 2016. Factors included measures of profitability, operational efficiency, capital structure, utilization, and market competitiveness. Between 2005 and 2016, 11% (n = 326) of rural hospitals were involved in at least one merger. Rural hospital mergers have increased in recent years, with more than two-thirds (n = 261) occurring after 2011. The types of rural hospitals that merged during the sample period differed from nonmerged rural hospitals. Rural hospitals with higher odds of merging were less profitable, for-profit, larger, and were less likely to be able to cover current debt. Additional factors associated with higher odds of merging were reporting older plant age, not providing obstetrics, being closer to the nearest large hospital, and not being in the West region. By quantifying the hazard of characteristics associated with whether rural hospitals merged between 2005 and 2016, these findings suggest it is possible to determine leading indicators of rural mergers. This work may serve as a foundation for future research to determine the impact of mergers on rural hospitals.