New Rural Emergency Hospital Provider Type Offers Potential Solution for Struggling Rural Hospitals

Under the Consolidated Appropriations Act (CAA), a new Medicare provider type, the rural emergency hospital (REH), has been created with the goal of preserving access to outpatient hospital services in rural communities. Rural providers already face numerous financial and operational challenges, and the high number of recent closures of rural hospitals has only compounded the health disparities in rural communities. The introduction of this new provider type offers a targeted solution for small rural providers that cannot continue to operate a full-service hospital.

Under the new classification, an REH is a Medicare-enrolled provider that must furnish emergency department services and observation care. REHs may also provide other outpatient services, but may not provide inpatient services, except for certain skilled nursing facility services. Currently, for outpatient services, an REH’s annual per patient average length of stay cannot exceed 24 hours. Additionally, REHs benefit from two basic payment policies: a monthly facility payment of $272,866 per month in 2023 and payment at 105% of the Outpatient Prospective Payment System (OPPS) rate for services that qualify as REH services.

To enroll as an REH, eligible providers must submit a Form CMS-855A change of information application, rather than an initial enrollment application. This process avoids the gap in payment that typically accompanies initial enrollment and helps ease the burden that would otherwise fall on prospective REHs. The provider must also submit an action plan for initiating REH services, including a transition plan that lists the services the provider will retain, modify, add, and discontinue. The action plan must also include a description of the services the REH elects to provide, in addition to the required emergency department services and observation care, and a description of how it will use the facility payment. An eligible provider may only become an REH by converting from a critical access hospital (CAH) or rural hospital. Only providers that were a CAH or rural hospital with 50 beds or less on the enactment date of the CAA (December 27, 2020) are eligible to convert to an REH.

By eliminating the requirement for a hospital to provide inpatient acute care services, the REH designation gives eligible rural providers the flexibility to cease inpatient operations while continuing to furnish emergency and other outpatient services. Through favorable payment policies for outpatient services, including the fixed monthly facility payment and above-fee schedule payment for covered outpatient services, the REH classification also seeks to address the financial challenges many rural providers face, offering the potential for sustainability of continued operations. Providers contemplating conversion to an REH should be cognizant of several key considerations, including the suitability of ceasing inpatient operations, complex financial analyses, and other potential federal and state law constraints.

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