New Medicare Provider Designation to Prevent Rural Hospital Closures

CMS has proposed a rule to establish a new rural hospital designation that would enable small rural hospitals and critical access hospitals (CAHs) to expand access to care and receive Medicare payment for those services.

The rule would establish some rural hospitals as “rural emergency hospitals,” or REHs. The new Medicare provider designation would enable the facilities to deliver continued access to emergency services, as well as observation care and other medical and outpatient services.

CMS is also seeking comment through the proposed rule on allowing REHs to provide low-risk childbirth-related labor and delivery services and whether CMS should enable REHs also to furnish outpatient surgical services if that surgical labor and delivery intervention is needed.

Rural hospitals converting to the REH provider designation would be able to receive Medicare payment for the expanded services starting on Jan. 1, 2023, according to the proposed rule. The rule states that payment rates would be equal to the amount that applies under the Medicare Hospital Outpatient Prospective Payment System plus 5 percent. However, Medicare payment policies for REHs will be established in separate rulemaking, CMS noted in the rule.

CMS intends for the new provider designation and corresponding Medicare payment structure to avoid rural hospital closures and promote health equity. Since 2010, 138 rural hospitals have closed, with a historic high of 19 closures occurring in 2020 alone, CMS reported. The closures have disproportionately impacted communities with higher levels of racial and ethnic minorities and with higher poverty rates.

Medicare payment has created challenges for struggling rural hospitals. Hospital leaders have complained that they do not have the patient volumes needed to offer traditional hospital inpatient services required for Medicare payment. Yet, their communities still need emergency and outpatient services.

“The availability of the new Rural Emergency Hospital provider type will maintain access to essential health care services and help to reduce disparities in rural communities,” CMS Administrator Chiquita Brooks-LaSure said in an announcement last Thursday. “CMS is committed to advancing health equity, driving high-quality person-centered care, and promoting the sustainability of our programs. Today’s action to strengthen rural health furthers our goal of ensuring everyone served by our programs the has access to quality, affordable health care.”

The proposed rule follows through on Congress’ intent to create the new provider designation and establish Conditions of Participation for REHs. The rule also proposes to update CAH Conditions of Participation. The rule would add a definition of primary roads to the location and distance requirements, create Conditions of Participation for patient rights, and enable integrated systems for infection control and prevention and antibiotic stewardship program, medical staff, and quality assessment and performance improvement. The latter would apply if the CAH is part of a health system with more than one hospital or CAH, CMS clarified.

To read the complete proposed rule, click here. The comment period is open until Aug. 29, 2022.