Effect of Critical Access Hospital Designation on Inpatient Prices in Employer-Sponsored Insurance

Presenter: Jessica Chang, University of Minnesota
Discussant: Ian McCarthy, Emory University and NBER

ASHEcon, June 13, 2023


U.S. regularly ranks very low in terms of access to care, for two general reasons:

  1. Affordability
  2. Availability

The United States trailed other countries in making health care affordable and ranked poorly on providing timely access to medical care (except specialist care)

Critical Access Hospital

  • Essentially form of financial assistance to hospitals in rural and underserved areas
  • Directly addresses availability
  • May also affect affordability

Research Question

What effect does CAH designation have on private insurance prices?

What does this paper do?

Empirical strategy

  • Compare CAH prices (allowed amounts) to other (non-CAH) rural hospitals
  • Focus on inpatient stays among patients with employer-sponsored insurance
  • Data from HCCI, 2012 through 2021
  • 36 CAH “switchers” between 2014 and 2017


  1. CAH have lower inpatient prices on average compared to non-CAH
  1. CAH designation has essentially no effect on inpatient prices

Some thoughts

Conceptual framework

  • CAH designation is essentially a change in Medicare and Medicaid payments
  • The effects of such changes on private insurance prices is akin to cost shifting

Ways to think of cost shifting

  1. Don’t 😁
  2. Two-price model. CAH ➡️ higher prices
  3. Bargaining model. CAH ➡️ no change (maybe lower)
  4. Utility maximizing hospital. CAH ➡️ lower prices
    • Utility from something other than profits (Dranove, 1988)
    • Diminishing marginal utility of profit (Darden et al., 2022)

A few empirical questions

  • How does a hospital become newly designated as CAH?
  • How many inpatient observations in the treatment group? How much do CAHs rely on ESI?
  • Can we say much with just 30ish treated hospitals?

Some suggestions

  • Identify reasons for CAH switch and summarize (if possible)
  • Consider synthetic control for individual hospitals with “exogenous” CAH switching status (e.g., due to policy changes rather than hospital decisions)
  • What about spillovers to other “nearby” hospitals? Pure competition and bargaining framework


  • Does CAH designation affect prices? Natural question but hard to answer empirically
  • Answer: Probably not

Thank You!

Ian McCarthy, Emory University & NBER