Evaluating the Impact of Uncompensated Care Reimbursement on Texas’ Rural Hospital Closures

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The rate of rural hospital closures across the past ten years has accelerated across the nation, reducing access to healthcare for millions across the United States. Texas leads the nation in the rate of rural hospital closures despite state and federal policies designed to combat it. This study evaluates the impact on rural hospital closures of one such intervention--the Texas Healthcare Transformation and Quality Improvement Program Waiver. Initiated in 2012, this waiver funds eligible hospitals’ uncompensated (UC) care. Using a Difference-in-Difference model estimated from publicly available data from the Centers for Medicare and Medicaid Services from 2006 to 2018, this study found that the change in probability of closure following the waiver was 5.4-percentage-points higher in rural waiver-participating hospitals than in non-participating hospitals (P-val<0.001). This result for county-level covariates and state- and year- fixed effects and is robust to an interrupted time series analysis specification. This result suggests that the waiver was ineffective at preserving access to hospital care in rural settings, and that compensating UC costs may inadvertently promote financially detrimental hospital behavior.