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Innovation and Stabilization: Stopping the Rural Hospital Closure Crisis

The Problem: Rural hospitals are closing where patient populations are most vulnerable; rural patients and rural economies suffer.

Rural populations are some of the most vulnerable in the nation. Our rural communities face unique challenges and barriers to care: limited resources, geographic isolation, low population density, and persistent poverty. Rural Americans are on average, older, sicker, and poorer than their distant urban peers, and we see significantly higher rates of suicide, death from opioid use and substance use disorders, heart disease, cancer, and chronic respiratory disease. Additionally, rural populations are more likely to be underinsured or uninsured and to be poorer than their urban counterparts.

Further, there is a severe deficiency, and a growing shortage, of community resources to provide critical local care. Seventy-seven percent of rural counties in the United States are Primary Care Health Professional Shortage Areas while nine percent have no physicians at all. Rural Americans are forced to travel significant distances for care, especially for specialty services.

Eighty-three rural hospitals have closed since 2010. Right now, 673 additional facilities are vulnerable and could close—this represents over 1/3 of rural hospitals in the U.S.  Today, 44% of rural hospitals operate at a loss, an increase from 41% just one year ago, and 30% operate below a -3% margin. In fact, the rate of rural hospital closures has steadily increased because of the sequester and bad debt cuts. Continued cuts in hospital payments have taken their toll, forcing more and more rural hospitals to close their doors.  Medical deserts are appearing across rural America, leaving many of our nation’s most vulnerable populations without timely access to care. 

The Solution: Stopping significant reimbursement cuts and offering innovative care models can stabilize rural hospitals and provide opportunities for the growth and development of new and existing facilities.

The Save Rural Hospitals Act will stop the impending flood of rural hospital closures and provide needed access to care for rural America.  Additionally, it will create an innovative delivery model that will ensure emergency access to care for rural patients across the nation. 
Part 1: Stabilize rural hospitals and provide regulatory relief.
  • Rural hospital stabilization includes: the elimination of Medicare Sequestration for rural hospitals (CAH, SCH, MDH, and subsection (d) facilities in rural census tracks and non-MSA counties); Reversal of  “bad debt” reimbursement cuts (The Middle Class Tax Relief and Job Creation Act of 2012); Permanent extension of current Low-Volume and Medicare Dependent Hospital payment levels; Reinstatement of Sole Community Hospital “Hold Harmless” payments;  Extension of Medicaid primary care payments; Elimination of Medicare and Medicaid DSH payment reductions;  Establishment of Meaningful Use support payments for rural facilities struggling to maintain MU compliance; permanent extension of the rural ambulance and super-rural ambulance payment’ Equalize patient copayments for outpatient services at CAHs with copays at other hospitals.
  • Regulatory relief includes: Elimination of the CAH 96-Hour Condition of Payment; Rebase of supervision requirements for outpatient therapy services at CAHs and rural PPS facilities; and modification to 2-Midnight Rule and RAC audit and appeals process.
Part 2: Create an innovative future model solution.

The innovative future model solution, created by the Save Rural Hospitals Act, establishes a new Medicare payment designation, the Community Outpatient Hospital (COH). This model will ensure access to emergency care and allow hospitals the choice to offer outpatient care that meets the population health needs of their rural community. 

Eligibility: Critical Access Hospitals (CAH) and rural hospitals with 50 beds or less as of December 31, 2014 are eligible to become COH (this includes facilities as described that have closed within 5 years prior to enactment).


Emergency Services – a COH must provide emergency medical care and observation care (not to exceed an annual average of 24 hours), 24 hours a day, 7 days a week; and have protocols in place for the timely transfer of patients who require a higher level of care or inpatient admission.

Meeting the Needs of Rural Communities – Based upon a community needs assessment, a COH could provide medical services in addition to the Emergency services, but not limited to observation care, skilled nursing facility (SNF) care, infusion services, hemodialysis, home health, hospice, nursing home care, population health and telemedicine services.

COHs are encouraged to provide primary care services though a FQHC (or FQHC look alike) or rural health clinic. These primary care services will ensure the community don’t lose primary care and inappropriately use the emergency room. The COH will not operate any inpatient acute care beds, but can operate swing beds and observation beds. ​

Payments: The Medicare payment rate for services furnished at a COH (emergency care and outpatient services) will be 105% of reasonable cost. Plus, wrap around grants for population health to ensure sufficient payments to allow the COH to serve the needs of the community.

Conversion: For every CAH that converts to a COH, another hospital currently not designated as a CAH and located in the same state, would be eligible to become a CAH so long as all criteria other than the distance criteria are met.

CAHs that convert to COHs may revert back to the CAH designation at any time and under the same conditions they were originally designated.

Rural Hospital Grants: New grants are included for Rural EMS. Hospital based grants are available to assist rural hospitals with the change to value based payment models and for rural hospitals working on population health (included a grant program targeted at COHs).

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