Impact of CAH Participation in Flex Financial and Operations Improvement Activities on Hospital Financial Indicators


Under the Medicare Rural Hospital Flexibility Program, states with Critical Access Hospitals (CAHs) are eligible to receive federal funds to provide technical assistance and/or direct support to CAHs for four types of financial and operational improvement: 1) Activity 2.01: a required statewide financial needs assessment, 2) Activity 2.02: an optional CAH-specific needs assessment and action planning activity, 3) Activity 2.03: an optional financial improvement project, and 4) Activity 2.04: an optional operations improvement project.

The purpose of this brief is to explore the impact of participation in financial and operational improvement activities on key hospital financial indicators. 

This study finds that:

  • Compared to CAHs with no participation, CAHs with two years of participation and three years of participation showed increases in total margin of 1.60 and 3.95 percentage points, respectively.
  • Compared to CAHs with no participation, CAHs with three years of participation showed a 3.16 percentage point increase in operating margin.
  • There is no evidence that one year of participation improved profitability indicators, suggesting that continued participation may be necessary to see changes in financial indicators.
  • Because interventions were not randomly assigned, we were unable to determine whether there was a causal relationship between participation and financial performance. Results were sensitive to model specification and should be interpreted with caution.