Cutler Institute for Health and Social Policy

Why Do Some Critical Access Hospitals Close Their Skilled Nursing Facilities While Others


Critical Access Hospitals (CAHs) have long played an important role in the provision of Skilled Nursing Facilities (SNF), swing bed, and other long term care (LTC) in rural communities and are more likely than other rural and urban hospitals to offer these services. The implementation of the Medicare SNF prospective payment system (PPS) in 1998 and subsequent exemption of CAH-based swing bed services from the SNF PPS in July, 2002 created financial incentives from CAHs to close their SNF units in favor of providing skilled level care using swing beds. During the period 2004 through 2007, 42 CAHs closed their SNF units. Despite the changing financial incentives related to the operation of SNF units by CAHs, 42% of CAHs (456) in 2010 continued to operate SNF units. Little is known about the reasons CAHs decide to close or retain their LTC services. This briefing paper and associated policy brief address this gap by examining the factors related to operation of skilled nursing services by CAHs, and specifically the factors related to closure of skilled nursing units by some CAHs and the continued provision of these services by others.

Key Findings:

  • Critical Access Hospitals (CAHs) that closed Skilled Nursing Facility (SNF) units cited a range of financial challenges related to payer mix, operating costs, cost allocation methods, and service utilization patterns.
  • The availability of alternative local long term care services, including swing beds, often contributed to hospitals’ decisions to close their SNF units.
  • CAHs that continued to operate SNF units were driven primarily by community need, despite the financial disincentive for doing so.
  • Hospitals reported substantial variation in their strategies for using swing beds for SNF, rehabilitation, and post-acute services.
  • Given ongoing concerns about financial viability and low census rates among some CAHs, further research on the ability of CAHs to expand patient services and revenues through swing bed use is warranted.
  • Additional research on the quality and outcomes of skilled care delivered by CAHs in SNF and swing beds is also recommended.

Suggested citation: Gale JA, Croll ZT, Coburn AF, et al.  Why Do Some Critical Access Hospitals Close Their Skilled Nursing Facilities While Others Retain Them?  Portland, ME: Flex Monitoring Team; December 2012.

Publication Type: 
Publish Date: 
December 30, 2012