Market Shares for Rural Inpatient Surgical Services: Where Does the Buck Stop?
Authors: Williamson Harold A. , Gary Hart L. , Pirani Michael J. , Rosenblatt Roger A. 
Published: April 2008

Utilization of surgical services by rural citizens is poorly understood, and few data are available about rural hospitals’surgical market shares and their financial implications. Understanding these issues is particularly important in an era of financially stressed rural hospitals.

In this study information about rural surgical providers and services was obtained through telephone interviews with administrators at Washington state's 42 rural hospitals. The Washington State Department of Health's Commission Hospital Abstract Recording System (CHARS) data were used to measure market shares and billed charges for rural surgical services. ZIP codes were used to assign rural residents to a hospital service area (HSA) of the nearest hospital, providing the geographic basis for market share calculations. “Total hospital expenses” from the American Hospital Association Guide were used as a proxy for hospital budget, and the surgical financial contribution was expressed as a ratio of billed surgical charges to total hospital expense.

For rural hospitals as a whole, 21 percent of admissions and 43 percent of billed inpatient charges resulted from surgical services. In 1989, 27,202 rural Washington residents were hospitalized for surgery. Overall, 42 percent went to the closest rural hospital, 14 percent went to other rural hospitals, and 44 percent went to urban hospitals. The presence of surgical providers markedly increased local market shares, but a substantial proportion of basic surgical procedures bypassed available local services in favor of urban hospitals. For example, about one‐third of patients needing cholecystectomies, a basic general surgery of low complexity, bypassed local hospitals with staff surgeons.

Thirty‐eight percent of hospitals had no general surgeon (classified as “minimal service” hospitals), 41 percent had at least one (“basic service” hospitals), and 21 percent had a comprehensive surgical staff consisting of general surgeons plus at least one anesthesiologist, gynecologist, orthopedist, and urologist (“comprehensive service” hospitals). Minimal service hospitals billed a mean of $90,000 annually for surgery; basic service hospitals, $1.5 million; and comprehensive service hospitals, $7.1 million. Billed surgical charges were 4 percent of total expenses at minimal service hospitals, 31 percent for basic service hospitals, and 41 percent for comprehensive service hospitals. There was a moderate amount of surgical activity at larger rural hospitals that represented rural‐to‐rural movement of surgical care, and this amounted to $14 million. More importantly, 60 percent of surgical charges billed on behalf of rural citizens ($116 million) went to urban hospitals.

These data demonstrate the considerable potential financial advantage to hospitals that have surgical services. This financial advantage can in turn be used to support other important but less lucrative rural hospital services. If supporting some or all rural hospitals as they struggle financially is an important rural health goal, then public policy should be directed toward supporting appropriate surgical services at rural hospitals and encouraging the proper training and recruitment of rural surgeons.