Organizational Characteristics of Rural Emergency Hospitals and Impact of Conversion on Profitability

Objective: The Rural Emergency Hospital (REH) designation became effective on January 1, 2023. The objectives of this study are to (1) identify the organizational and financial characteristics of hospitals that chose to convert to REH, (2) compare hospital profitability before and after conversion to REH, and (3) build an exploratory model to predict which hospitals are likely to convert to REH over the short term. Methods: This study includes 2021-2025 Medicare Cost Report data on all REHs and hospitals eligible for conversion to REH from the September 2025 release of data from the CMS’ Healthcare Cost Report Information System (HCRIS). Mann-Whitney-Wilcoxon tests and χ² tests of independence were used to compare REH converters to non-converters across an array of financial and organizational characteristics. Paired t-tests were used to compare total margin and operating margin for the last pre-conversion period and first post-conversion period. Logistic regression was used to build three models to predict conversion to REH. Findings: Compared to non-converters, REH converters were much smaller, in poorer financial condition, and disproportionately located in the South. REH converters and non-converters did not differ on many financial and organizational characteristics, including system affiliation, ownership, provision of long-term care, or operation of a Rural Health Clinic. The strongest single predictor of conversion to REH was low net patient revenue, with the median among REH converters in 2022 being more than $20,000,000 lower than that of non-converters. Conclusion: Early REH converters can be distinguished from non-converters by financial characteristics like net patient revenue and organizational characteristics like census region. Results indicate that conversion to REH is improving financial stability and preventing closure in the short run.