On December 27, 2020, the latest COVID-19 relief bill, titled the Consolidated Appropriations Act, 2021 (the “Act”), was signed into law. In addition to substantial economic relief, the Act included several other provisions relevant to rural health providers, including the establishment of a new type of rural hospital provider and increases in payments for some rural health clinics (“RHCs”).
Takeaways
- The Act created a new Medicare provider type called a Rural Emergency Hospital that provides 24/7 emergency services and certain other outpatient health services.
- Critical access hospitals and other small rural hospitals may convert to Rural Emergency Hospital status and qualify for enhanced payments starting on January 1, 2023.
- The Act would increase the Medicare Upper Payment Limit for some RHCs.
- Provider-based RHCs that are not currently subject to the Upper Payment Limit, however, would see the increases in their costs per visit capped by the changes in the Medicare Economic Index.
Rural Emergency Hospitals
The Act creates a new Rural Emergency Hospital provider type (“REH”). Critical access hospitals (“CAHs”) and rural hospitals with 50 beds or fewer could transition to REH status starting January 1, 2023.
REHs must provide emergency department and observation services. An REH may act as an originating site for telehealth services and provide other outpatient health services as specified through rulemaking by the Secretary of HHS. An REH may also have a distinct part skilled nursing facility unit and provide ambulance services. Importantly, an REH cannot provide any inpatient hospital services.
In order to qualify for REH status, a CAH or small rural hospital must:
- Be licensed under State law as an REH (which will require future state-level legislative or regulatory changes in most cases) or as a hospital (if the State does not have standards for licensing REHs, but an REH may not qualify as a hospital in some states because, for example, it cannot provide inpatient care).
- Staff their emergency department 24 hours a day, 7 days a week with a physician, nurse practitioner, clinical nurse specialist or physician assistant.
- Maintain an annual per-patient average of 24 hours or less.
- Enter into a transfer agreement with a Level I or II trauma center.
- Comply with the anti-dumping rules under the Emergency Medical Treatment And Labor Act (EMTALA).
- Submit an application that includes an action plan for initiating REH services, including how the facility plans to change services, planned non-emergency outpatient services, how the facility plans to use the REH facility payments (described below), and other information as required by HHS.
REHs will be paid for outpatient services at 105% of the otherwise applicable rates under the Outpatient Prospective Payment System. In addition, REHs will receive a monthly facility payment equal to 1/12th of the average annual benefit experienced by CAHs in 2019 of cost reimbursement over the payment that would have been received under a prospective payment system. This facility payment will be adjusted each year by the annual hospital market basket update factor.
The new REH provider type will be a welcome addition for some CAHs and small rural hospitals that have struggled to support an inpatient facility and would allow providers to serve its community with emergency services and some outpatient services. However, there are downsides as well. For example, it may be difficult for an REH to stay below the 24 hour per patient average depending on how long it takes the facility to transfer patients to nearby hospitals. In addition, hospitals that were CAHs would not be able to maintain swing beds or continue Method II billing after converting to REH status. Another open question is whether an REH would be eligible for 340B status. An REH will no longer be a CAH automatically eligible, nor will it have inpatient volume to measure the requisite 11.75% disproportionate share adjustment. Finally, the Act only appears to allow existing CAHs and small rural hospitals as of December 27, 2020 to convert to REH status, and it does not appear that a new facility would be able to obtain REH status.
Increased Payments for Some Rural Health Clinics, Decreases for Others
The Act also increases the Medicare cap for RHCs subject to the Upper Payment Limit (i.e., freestanding RHCs and RHCs provider-based to hospitals with 50 beds or more) to $100 per visit starting April 1, 2021, with annual scheduled rate increases until the maximum rate is $190 per visit in 2028 as shown in the table below.
Beginning |
RHC Upper Payment Limit |
| 1/1/2021 | $87.52 |
| 4/1/2021 | $100 |
| 1/1/2022 | $113 |
| 1/1/2023 | $126 |
| 1/1/2024 | $139 |
| 1/1/2025 | $152 |
| 1/1/2026 | $165 |
| 1/1/2027 | $178 |
| 1/1/2028 | $190 |
After 2028, the rate will increase by the Medicare Economic Index.
It is important to note that RHCs do not automatically get these higher rates. If the cost per visit as calculated on the RHC’s cost report is less than the cap, then the RHC is paid at the lower cost per visit amount. This will make the cost reporting process more important for these RHCs to capture all their costs and correctly count the total visits.
RHCs that are provider-based to hospitals with fewer than 50 beds and certified on or before December 31, 2019 will no longer be paid at an uncapped cost per visit. Instead, such RHCs will be paid at the greater of their 2020 cost per visit updated by the Medicare Economic Index or the increased Upper Payment Limits described above. Provider-based RHCs (to hospitals with fewer than 50 beds) that were certified after December 31, 2019 will be paid the same as freestanding RHCs starting on April 1, 2021 (i.e., subject to the Upper Payment Limit).
If you have questions or would like additional information about this topic, please contact:
- David Snow at (303) 801-3536 or dsnow@wp.hallrender.com;
- Lori Wink at (414) 721-0456 or lwink@wp.hallrender.com;
- Joseph Krause at (414) 721-0906 or jkrause@wp.hallrender.com;
- Benjamin Fee at (720) 282-2030 or bfee@wp.hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
