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Will the proposed rural emergency hospital designation catch on?

Starting January, rural hospitals can receive additional CMS payments if they forego inpatient services, but few appear eager to participate.
By admin
Aug 1, 2022, 8:00 AM

The Centers for Medicare & Medicaid Services (CMS) has released its proposed rule that throws a lifeline to struggling rural hospitals, but some healthcare leaders worry that the benefits of the rural emergency hospital (REH) designation may not be enough to encourage facilities to participate starting Jan. 1.

The Consolidated Appropriations Act of 2021 created the REH provider type. Critical access hospitals or designated rural hospitals with fewer than 50 beds are eligible. An REH cannot provide inpatient services but is allowed to provide emergency, observation, laboratory, and outpatient services; in addition, it qualifies as an originating site for telehealth services.

Under the CMS proposed rule, an REH would receive 105% of the Outpatient Prospective Payment System rate for eligible services. In addition, it would will receive a monthly facility fee of roughly $268,000, according to calculations from the Healthcare Financial Management Association.

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With the REH provider type, CMS is trying to help rural hospitals stay open. The agency noted in a statement that 138 rural hospitals have closed since 2010, including 19 in 2020 alone. CMS indicated that these closures disproportionately affect communities with high poverty rates and a high proportion of people of color. The Center for Healthcare Quality and Payment Reform has estimated that another 600 rural hospitals, or more than 30% of the nation’s total, are at risk of closing.

Impact of rural hospital closures

Rural hospital closures have a ripple effect. Patients must travel farther for necessary treatment; along with community residents, which may include visitors to National Parks or other popular destinations in rural areas. Along with a shortage of providers, this contributes to lower life expectancy, worse health outcomes, and higher mortality rates, CMS noted. Finally, rural hospitals often rank among the largest employers in their communities; closures contribute to a depleted tax base and increased unemployment.

Despite this urgency, it’s unclear how many hospitals will join the program. In a July 2021 analysis, researchers at the University of North Carolina predicted that 68 hospitals were likely to seek the REH designation. This is a small fraction of the total number of critical access hospitals (1,360) or rural hospitals with 50 or fewer beds (1,166).

Leaders of hospital associations in Iowa and Kansas told Kaiser Health News that none of the dozens of eligible facilities in their states has expressed interest. Some concern stems from the tight timeline for converting to an REH. (CMS will accept comments on the proposed rule until Aug. 29 and issue a final rule weeks before the program begins.) Others point to the regulation itself. In particular, REHs aren’t allowed to have “swing beds” that would let patients recover from acute care episodes or stay for longer observations. (Under the proposed rule, an REH must maintain an average length of stay under 24 hours).

Finally, there are financial concerns. Hospital leaders worry that a facility fee amounting to $3.2 million per year and a 5% payment boost on already-low patient volumes may not be enough for hospitals routinely facing negative margins and assets.


Brian Eastwood is a Boston-based writer with more than 10 years of experience covering healthcare IT and healthcare delivery. He also writes about enterprise IT, consumer technology, and corporate leadership.

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