Published April 22, 2022

Rural Emergency Hospital Program: Some Thoughts While Waiting for Implementing Regulations

The Rural Emergency Hospital (REH) Program, established in Section 125 of the Consolidated Appropriations Act of 2021 (CAA), is required by law to launch January 1, 2023. However, the Centers for Medicare & Medicaid Services (CMS) still has not released proposed regulations to implement the program. 

An REH is a new category of hospital that does not provide inpatient services, but serves its community’s needs for emergency and outpatient hospital services. The CAA defines the following parameters for the REH Program:   

  1. Eligibility – Critical Access Hospitals (CAHs) and other rural hospitals with 50 or fewer beds will be eligible to convert to REHs, provided the facility is in a state that allows for the licensing of such hospitals. The program is not available to previously closed hospitals.
  2. Application – As part of the application process, a hospital must present a detailed transition plan, specifying the services it will offer. The applicant also must have in place a transfer agreement with a Level 1 or Level 2 trauma center.
  3. Staffing – An REH’s emergency department must be staffed 24/7, and a physician, nurse practitioner, clinical nurse specialist, or physician assistant must be available to furnish services in the facility 24/7. REHs are subject to the Emergency Medical Treatment and Labor Act (EMTALA).
  4. Reimbursement – REHs will receive 105% of the Prospective Payment System (PPS) rate for hospital outpatient department services. An REH also will receive an additional monthly facility payment, which will be the same amount for all REHs. For 2023, the monthly facility payment will be calculated by (a) subtracting from the total amount actually paid to all CAHs in 2019 the amount that would have been paid to all CAHs under PPS rates that year, (b) dividing that number by the total number of CAHs in 2019 (about 1,350), and (c) dividing that number by 12. Each year thereafter, the monthly amount will be increased by the hospital market basket percentage increase. An REH will be required to report on its use of the monthly facility payment.

For a deeper dive into these statutory requirements, you may access PYA’s January 21, 2021, webinar, Introducing the New Rural Emergency Hospital.

As usual, the devil is in the details: the success of the REH Program will depend in large part on whether CMS’ implementing regulations address the unique challenges rural providers face. Otherwise, the REH Program will not provide a real solution for communities struggling to maintain access to care. 

In particular, we’re eager to see how CMS proposes to address the following regarding payment provisions and scope of services. 

Payment Provisions

  1. Fixed Payment Amount

To permit hospitals to fully evaluate the viability of the REH model for their communities, CMS should include the specific calculation and the amount of the fixed payment in its proposed rule for the program, as well as the specific formula for future annual updates based on hospital market basket percent increases.

Regarding the calculation, CMS should utilize the per diem rate for inpatient hospital and swing bed services and the ratio of cost to charges for hospital outpatient charges each CAH received in 2019 without regard to final settlement. To calculate the skilled nursing facility (SNF) PPS payment CAHs would have received in place of swing bed cost-based reimbursement, CMS should use the RUG-IV model for the entire year, disregarding the transition to the Patient Driven Payment Model at the beginning of FFY 2020. Finally, the six CAHs that closed in 2019 should be excluded from the calculation because they did not operate and did not receive payments for the full year.   

  1. Use of Outpatient PPS (OPPS) to Reimburse REHs

The OPPS system is established based on assigning the resources consumed by full-service hospitals into weights used to pay for outpatient services. Because an REH will provide limited services, utilizing the OPPS APC weighting system to determine reimbursement may not provide sufficient alignment of the resources needed to care for REH patients. CMS, therefore, should consider creating a new weighting scale for REHs based on REH resource consumption to be implemented once sufficient historical REH claim data is available.

  1. Post-Acute Care

Today, CAH swing beds make available SNF services for rural residents who would otherwise be forced to remain miles away from their homes following an inpatient admission. Under the CAA, an REH may include a distinct part unit licensed as a SNF to furnish post-hospital extended care services reimbursed under SNF PPS. The CAA does not include any enhanced payment to account for the lower patient volumes in rural areas.

This abrupt conversion to SNF PPS is problematic, given the lack of infrastructure needed to perform minimum data set (MDS) assessments and required quality reporting. CMS should develop a transition plan to support this conversion, including establishing supplemental payments as part of SNF PPS to maintain essential services in these rural communities. 

  1. Outpatient Therapy Services

While the CAA includes an enhanced payment for REHs for services reimbursed under OPPS, it makes no provision for services that would be reimbursed under the Medicare Physician Fee Schedule, such as outpatient therapy services. However, the same reason for including enhanced reimbursement for OPPS services applies to outpatient therapy services—lower patient volumes result in higher per-service costs. CMS should incorporate into the Medicare Physician Fee Schedule additional reimbursement for services furnished in an REH comparable to the additional payment under OPPS. 

  1. Ambulance Transportation

Today, when residents must leave their community to receive tertiary or quaternary care, out-of-pocket transportation costs often are exorbitant, as Medicare coverage for ambulance services is limited. With an REH, residents would have to travel outside their community to receive any level of acute care (absent the opportunity to receive acute hospital care at home). Unless transportation issues associated with patient transfers are addressed, rural residents will face serious inequities in access to acute care services. 

CMS must re-evaluate current Medicare reimbursement rules for ambulance services to align such payment with the REH model. CMS should specifically define what constitutes “medically necessary and reasonable” and “nearest appropriate facility” when an REH patient is transported to another facility for acute care services.   

  1. Other Payers

In developing regulations and implementing the REH Program, CMS should, to the fullest extent possible, direct or encourage other payers to implement substantially similar REH payment policies, including state Medicaid programs, Medicare Advantage plans, federal employee benefit plans, and qualified health plans. Such consistency across payers would eliminate uncertainty and thus enhance REH planning and operations. 

Again, to the fullest extent possible, CMS should direct or encourage other payers to fairly reimburse REHs in a manner that accounts for these facilities’ higher cost structures. According to the Center for Healthcare Quality and Payment Reform, the majority of rural hospitals with less than $20 million in annual expenses experienced greater losses on patients with private health insurance plans and self-pay patients than losses on Medicare, Medicaid, and uninsured charity care patients combined.  These payers should share responsibility for ensuring the rural residents for whom they provide health insurance coverage maintain access to local care.  

Finally, CMS should direct or encourage other payers to either eliminate or expedite prior authorizations for REH transfers to other hospitals for inpatient care. Hospitals have long complained about the slow turnaround times, as well as the lack of prior authorization approvals by Medicare Advantage plans.

Scope of Services

  1. Staffed Emergency Department

The CAA requires an REH to have a “physician…, nurse practitioner, clinical nurse specialist, or physician assistant…available to furnish rural emergency hospital services in the facility 24 hours a day.” Rather than defining availability as the number of minutes in which a physician or non-physician practitioner must arrive at the facility, CMS should permit an REH to meet this requirement by securing 24/7 access via telehealth to emergency physicians. During the COVID-19 pandemic, patients at rural hospitals have been well-served by physicians immediately available via telehealth to address their emergent and urgent conditions. 

The REH’s cost of securing telehealth coverage will be significantly less than paying local physicians and non-physician practitioners to assume these additional responsibilities, making resources available for the REH to provide additional services. Telehealth coverage will improve rural hospitals’ ability to recruit physicians and non-physician practitioners to their communities, as many have been unwilling to assume the heavy call coverage responsibilities required of rural providers.       

  1. 24-Hour Length of Stay

The CAA states services furnished in an REH cannot “exceed an annual per-patient average of 24 hours….” The calculation of this average for compliance purposes should exclude those patients for whom transport to another facility is delayed for reasons beyond the REH’s control including, for example, delays in securing an available bed at a receiving hospital and delays in transporting a patient due to weather or lack of available ambulance services. REH staff should not be expected to micro-manage the time each patient spends in the facility to account for uncontrollable circumstances.  

  1. Transfer Agreements

The CAA requires an REH to have a transfer agreement with a Level I or Level II trauma center.  In many states, however, the distance from a rural community to such a facility is well over 100 miles. Given these distances and the fact they often cannot accept transfers due to a lack of available beds, CAHs frequently transfer patients to Level III or Level IV facilities based on the patient’s specific needs. A CAH that discontinues inpatient services will need to arrange for transfers of lower acuity patients for whom it previously provided inpatient services; there are currently in place arrangements to transfer higher acuity patients. 

To facilitate appropriate transfers and to support their local hospitals, REHs should be held to a standard similar to the CAH requirement regarding participation in rural health networks, as specified in 45 CFR 485.603. In addition to the elements included in Section 485.603 (transfers, communication systems, and transportation), these network agreements should identify other areas of collaboration among the network members, e.g., telehealth and virtual services, training, and staffing arrangements.

Additionally, to facilitate collaboration and care coordination among an REH and the hospitals to which it transfers patients, CMS should promulgate appropriate Anti-Kickback Safe Harbors protecting an REH’s financial arrangements with rural health network participants. Compliance concerns relating to the fraud and abuse laws have limited the scope of collaborative arrangements among hospitals. Similar concerns should not restrict the close working relationships REHs must foster with regional hospitals to ensure access to care for their communities.   

  1. Quality Measures

The CAA requires CMS to establish an REH quality reporting program. When considering quality measures for this program, CMS should start small, automate as much as possible, and make sure the measures are rural relevant. Some of the Medicare Beneficiary Quality Improvement Project (MBQIP) measures, such as the Emergency Department Transfer of Communication Measures, may apply to REHs. Other areas to consider would include time from arrival to being seen, time to transfer for a few specific critical diagnoses (e.g., heart attack and stroke), healthcare worker immunization rates, antibiotic prescribing rates, and/or opioid prescribing rates.

CMS should limit reporting requirements to measures with broad application as opposed to those focused on a specific patient population. The relatively small number of patients served in rural facilities can skew the story the numbers tell. If a facility has served only a handful of patients that meet specific measure criteria, a single missed measure can result in a low overall score.   

CMS has not provided any timeline for the publication of the proposed rule implementing the REH program. We encourage you to keep a careful watch for this proposed rule, as industry feedback will be key to establishing a workable program that maintains access to care in rural communities. 

For more information about our rural health expertise, please visit PYA’s Center for Rural Health Advancement. If you would like additional guidance with the REH Program, or any matter related to compliance, valuation, or strategy and transactions, one of our executive contacts would be happy to assist. You may email them below, or call (800) 270-9629.

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