What is a Volume Decline Adjustment?

By Marc Levy March 27, 2026

One of the benefits of having Sole Community Hospital (SCH) or Medicare Dependent Hospital (MDH) status is an opportunity called a Volume Decline Adjustment (VDA). A VDA can provide additional Medicare reimbursement for eligible hospitals that have experienced notable reductions in patient discharges. These reimbursements can be significant, and meaningfully impactful for small rural hospitals.

Is your hospital eligible for a Volume Decline Adjustment?

The first qualification for a VDA opportunity is if your hospital’s total discharges (A&P and ICU only) decrease by more than 5%.

The second step is to determine the potential reimbursement opportunity by comparing your allowable inpatient Medicare costs (Worksheet D-1, Line 53) to your total inpatient prospective payments (Worksheet E, Part A, Line 49). If your costs are greater than your payments and you meet the first qualifier, then you have an opportunity to request a VDA from Medicare. Please note that the final potential additional Medicare reimbursement will be impacted by other factors such as the hospital’s variable cost to total cost percentage.

How to prepare your Volume Decline Adjustment

A VDA request is like a college research paper in that it is on the hospital to prove to Medicare that the decrease was not due to any decision or actions by the hospital but rather caused by circumstances beyond the hospital’s control. The request may focus on an individual physician or entire practice and includes any discussions that demonstrate the circumstances of the decrease.

These circumstances can range from overarching issues impacting the industry to more specific and personal minutia affecting your team. Here are some examples of discussions we have included in VDA requests:

• The longtime lead surgeon at a small rural hospital was older and more cautious about a malpractice lawsuit. They abruptly retired with little notice to the hospital. Despite the hospital’s immediate efforts to recruit, it took them several months to replace the existing surgeon.
• The lead orthopedic surgeon’s dog bit their dominant surgical hand and required surgery. The surgeon could not provide care to patients for a prolonged period through surgery and recovery.
• The COVID pandemic was beyond the hospital’s control.

Keep in mind that if your practices and/or physicians are employed, you have another hurdle to overcome in your discussion because you have direct control of their practices/specialties.

VDA requests can result in potentially significant additional reimbursement. It’s important for hospitals to be thorough in their documentation, ensuring that all cost report data is entered correctly and proper, and that your cost reporting structure (i.e., cost report lines and/or stepdown methodologies) is continuously analyzed.

If you have questions or would like to discuss these matters further, please contact Marc Levy.

Want to learn more?

BNN’s Healthcare Advisory team specializes in cost report and Medicare/Medicaid reimbursement across the continuum of care and can support your hospital through complex VDA requests. If your healthcare organization is experiencing challenges with reimbursement, accounting practices, or you are interested in learning more about improving your processes, technology, and strategy, get in touch with our healthcare industry specialists today!

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