Non-operating revenue is an important source of funding for rural hospitals, especially those that are government-owned

Purpose

Non-operating revenue (NOR), derived from investments, contributions, government appropriations, and medical space rentals, can contribute to financial stability of hospitals by offsetting operating losses and improving profitability. NOR might benefit rural hospitals that often face intense financial pressures. However, little is known about how much rural hospitals rely on NOR and if certain organizational characteristics are associated with differences in NOR.

Methods

Healthcare Cost Report Information System data from 2011 to 2019 were used to analyze sources of revenue among Critical Access Hospitals (CAHs) and Rural Prospective Payment System (R-PPS) hospitals through descriptive statistics and regression models. Reliance on NOR was measured by the percentage of total revenue from non-operating sources.

Findings

Results indicate that both CAHs and R-PPS hospitals rely on NOR; however, CAHs have a higher percentage of total revenue derived from non-operating sources (3.2%) as compared to R-PPS hospitals (1.9%) (p < 0.001). Government-owned hospitals have significantly higher reliance on NOR than other ownership types. System affiliation also influences reliance on NOR. Lastly, results suggest that NOR may play a role in improving overall profit margins.

Conclusions

As rural hospitals disproportionately face challenges related to declining profitability and the risk for closure, they may rely on NOR to continue to strengthen financial performance and provide health care to their communities. However, NOR is not guaranteed, and reliance on NOR further reiterates the value of stable, adequate reimbursement to guard against fluctuations in NOR.