The new law offers rural hospitals a new payment model — if they discard hospital beds


“This new model is really aimed at communities that, for whatever reason, are not able to sustain an inpatient hospital. This is seen as an alternative to having a closure,” said George Pink, a professor at the University. of North Carolina in Chapel Hill’s Department of Health Policy and Management.

The rural emergency hospital model is the first newly designed hospital designation Congress in decades. In 1997, legislators established the “Critical Access Hospital“model that has stimulated Medicare reimbursements in an attempt to plant rural hospital closures, but has had limited success. Most of the nation’s rural hospitals are CAH. And these facilities must maintain at least 25 hospital beds to maintain that designation and special The new policy is aimed at small rural hospitals with very low hospitalization volumes, only one day or another.

For some rural hospitals, the high fixed costs of maintaining hospital services due to declining local populations and declining patient volumes has become an albatross around the neck, with an increasing number it eventually closes under financial pressure.

The ability to leave those hospital services while still receiving higher reimbursements from CMS through the designation of the Rural Emergency Hospital could be a lifeline for some, said John Hawkins, senior vice president of government relations. of the Austin-based Texas Hospital Association.

“I think there are a considerable number of hospitals that benefit from this,” he said. Twenty-four rural hospitals have closed in Texas since 2005, most of all states in that time period, the UNC database shows.

“They basically maintained their internal status so they could access the 101% reimbursement based on costs,” Hawkins said. “We need to let them rename themselves in a way that meets the needs of the community but still gives them increased federal funding.”

Under the new policy, the current Critical Access hospitals and rural hospitals of the Prospective Payment System with less than 50 beds can be converted into the new status of Rural Emergency Hospital (REH).

Using this designation, they can provide outpatient services, including 24-hour emergency care, observation, nursing facility services and ambulances — but not hospital services. In order to get rid of inpatient care, REHs must have transfer agreements with Level 1 or Level 2 regional trauma centers.

In return, hospitals that adopt the REH model will receive a Medicare outpatient rate that is 5% higher than what full-service hospitals receive, and will receive monthly payments for ease, even if the size of these payments remains undetermined. The program begins on January 1, 2023.

The Medicare Payment Advisory Council (MedPAC) has called for a voluntary payment model aimed at autonomous emergency departments in rural areas that cannot support admission services in a 2018 report, a recommendation reflected in the new statute .

MedPAC has raised concerns about the impact on access to emergency care in rural communities when hospitals close their doors. Helping an establishment maintain outpatient services by eliminating costly inpatient care that can be provided elsewhere – even if in a more remote location – can help these rural facilities stay in business, the panel concluded.

“They want to continue to be that access point of care in their communities, but staying open as an acute care facility may not be the most feasible option – either financially, and it’s just what the community has lately. need, ”said Carrie Cochran- McClain, the political leader of the National Association of Rural Health (NRHA), based in Overland Park, Kansas.

“It’s scary to give up hospital services, but that could be a better alternative than losing a hospital altogether,” he said.


An estimated NRHA between 50 and 100 hospitals will be eligible to become REH. There are more than 1,800 rural hospitals in the United States, and a quarter of them are vulnerable to closure based on financial benefits, according to the Chartis Center for Rural Health. Even more it could become at risk of closure in the post-pandemic landscape, according to the center.

A MedPAC report released earlier this month analyzed 40 rural hospitals that closed between 2015 and 2019: In all cases, they experienced a large decline in the admissions of all incoming payers in the years before the closure, largely due to patients who go elsewhere for treatment. From 2005 to 2014, these hospitals had an average 54% decrease in patient admissions.

“I think the model has promised to be a new alternative and innovative way of responding to health needs in rural communities where inpatient hospitals could be closed,” Pink said of UNC. “The assumption will depend on the outcome of the regulatory process that CMS goes through. There has to be a financial case for hospitals to take over.”

However, the program is voluntary. Hospitals must go through more levels of analysis to determine if changing designations is advisable, said Martie Ross, director of the office for PYA, a Kansas-based health and accounting consulting firm. The fact that CMS has not yet issued regulations is a significant obstacle to the hospital’s decision in the meantime.

Facilities should consider factors such as the need for inpatient services in their communities, their capacity for EMS services and their relationships with other regional hospitals.

While some rural hospitals could save money and improve their margins by shutting down hospital services, it is unclear whether the new model will provide enough revenue to cover operating costs. That could prove a tough sale.

“Where I think that makes sense, or where I think it’s likely that math works, are smaller hospitals that are part of health systems,” Ross said.

For many rural hospitals, the decision will no doubt come down to money for other considerations. The PYA state analysis of the REH payment model found that it will cover between 80% to 87% of the costs of rural hospitals.

That analysis does not take into account the monthly payment for the facility that the REHs will receive in the program, but CMS has not revealed what it will be. Based on the formula set out in the law, each REH could earn about $ 1 million per year in facility payments, Ross estimated. Hospital industry groups argue that the law allows CMS to increase these payments so that REH gets ahead financially.

Other obstacles to the transition to an REH include state licensing requirements and community objections to the loss of local access to hospital services.

“The law basically says, We want to help you by giving you money, but the only way we will give you money is if you give up a service that could be critically important to your community,” said Harold Miller, president and CEO for the Center for Health Care Quality and Payment Reform in Pittsburgh. “If a hospital shuts down more services, it will be easier for it to shut down altogether and transfer all outpatient services into a larger system.”

Whether the beneficial REH designation to specific hospitals could be “random,” Miller said. The formula provided by law for the payment of facilities – which could be key to the successful program for rural hospitals – does not take into account the specific characteristics of each hospital, such as its patient population and its finances. Instead, each participating facility will receive the same amount of money.

While a REH designation could be beneficial for some hospitals, especially those already looking to discard hospital services, “there is no solution for others in this situation,” Miller said.

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