An evaluation of subsidized rural primary care programs: IV. Impact of the rural hospital on clinic self-sufficiency.

Abstract

Subsidized rural clinics and providers have long depended on the rural hospital for the care of some of their patients; the hospital has also been a source of revenue for these providers and programs. We studied a representative national sample of 116 subsidized rural clinics, focusing on the impact on rural clinic costs and revenues of the use of the hospital by the clinics' providers. Both clinic costs and revenue are reduced by the use of the hospital by rural practice providers, but costs are lowered to a greater extent than revenues, thereby enhancing the financial self-sufficiency of the subsidized clinic. The cost savings affect all aspects of clinic operation, but especially laboratory costs, community services costs, and administrative costs. The dependence of these rural clinics on the hospital indicates that the condition of subsidized rural clinics would be worsened by decreased availability of hospital services.

Competition and Rural Primary Care Programs*

“…This effect is probably due to the shifting of X-ray, laboratory, and other overhead costs related to inpatient treatment onto the hospital while the clinic still receives revenue. This relationship is explored in detail by McLaughlin, Ricketts, Freund, and Sheps (1985) where the possibility of a symbiotic arrangement between clinics and hospitals is discussed. Interestingly, more extensive after-hours coverage provided by the clinic was related to lower cost (row 6 in Table 2).…”