The rural emergency hospital is the first new federal payment program since the critical-access hospital model was introduced in 1997.
Sen. Chuck Grassley (R-Iowa), who co-sponsored legislation leading to the new program’s creation, hoped it would stave off hospital closures that decimate local economies and force patients to travel farther for care. Around 140 rural hospitals have shuttered or converted to outpatient-only facilities over the past 12 years, with more than 40 closing since 2019, according to data from the University of North Carolina.
Under the CMS 2023 Outpatient Prospective Payment System final rule issued in November outlining the model’s specifics, rural emergency hospitals would eliminate their inpatient beds in exchange for a 5% boost to Medicare outpatient reimbursement and an average facility fee payment of $3.3 million a year.
Converted hospitals must always have a clinician on call, staff their emergency departments 24 hours a day, implement a quality assurance and performance improvement program, have a per-patient average length of stay under 24 hours and maintain an infection prevention program. States must also pass laws to register and license the converted facilities.
Kansas, Nebraska and South Dakota have passed such laws allowing hospitals to convert. As of last week, a handful of Texas hospitals hoping to transition were waiting for Gov. Greg Abbott (R) to implement emergency rulemaking to expedite the process.
Rural hospitals with fewer than 50 beds that were enrolled in Medicare as of Dec. 27, 2020, are eligible, totaling about 1,400 facilities around the country. But a 2021 brief from the North Carolina Rural Health Research Program predicted about 68 conversions. The number has likely dropped, industry observers said.
The program’s appeal has been limited by the prospect of losing 340B drug discount revenue and swing beds, along with concern regarding community perception of eliminating inpatient services.
“The final version of the legislation offers a lifeline for a very limited class of hospitals,” said Travis Lloyd, a healthcare attorney for law firm Bass Berry & Sims who specializes in healthcare regulatory issues. “It is not the broad-based antidote that rural hospitals need to alter the trajectory of closures.”
Before CMS issued its final rule, rural hospitals hoped the agency would include provisions allowing them to maintain their revenue under the 340B program, which enables some hospitals that serve low-income communities to purchase outpatient drugs at a significant discount. The agency said in the final rule it doesn’t have the statutory authority to include those provisions, meaning Congress would have to pass another law. Critical-access hospitals that convert would also have to sacrifice their cost-based reimbursement.