Congress established a new provider type, Rural Emergency Hospitals (REH) in the Consolidated Appropriations Act of 2021 to address mounting concerns around closures of rural hospitals. Effective January 1, 2023, eligible hospitals may seek an REH designation, which would result in an increase in Medicare reimbursement for relevant outpatient services and a monthly facility payment. States will need to enable eligible hospitals to apply for the designation and adopt regulations and licensure to support the provider type.

To be eligible to receive the REH designation, a hospital must be a Critical Access Hospital (CAH) or a rural Prospective Payment System (PPS) hospital with no more than 50 beds. A hospital with a REH designation must provide emergency services and observation care, and may provide additional medical and health outpatient services while not exceeding an annual per patient average visit length of 24 hours.

This is the first new rural provider type since the CAH provider type was created in 1997. The Centers for Medicare and Medicaid Services (CMS) has published proposed Medicare payment rules for hospitals with REH designation as well as proposed Conditions of Participation to ensure quality which will be finalized before the beginning of 2023.

Opportunity for Rural Hospitals

Creation of the REH designation comes in response to a high rate of rural hospital closures. Between January 1, 2010, and August 15, 2022, 139 rural hospitals closed, 44 of which were CAHs. The REH designation is an opportunity for CAHs and some other rural hospitals to continue to provide essential emergency and outpatient services for the communities they serve while reducing the risk of closure. In addition, the REH provider type also allows rural hospitals to maintain a service array that falls between the requirements for a traditional acute-care hospital and an ambulatory care facility. Further, the REH designation allows hospitals to operate skilled nursing facilities as distinct, separate units on-site.

The REH designation will provide an option for rural hospitals most at risk of closing to change their service delivery, eliminate inpatient care, and receive an additional facility payment each month in order to ensure emergency services remain available to the many rural Americans who need them. Research published in July 2021 by the North Carolina Rural Health Research Program (NCRHRP) indicates that hospitals most likely to convert to the REH designation are in areas with declining populations, high percentages of people without adequate or any insurance, higher percentages of Black and non-white residents, lower high school graduation rates, and higher unemployment rates.

Payment

An REH will receive fee-for-service Medicare payments for outpatient services at the Hospital Outpatient Prospective Payment System (OPPS) rate as well as an extra 5 percent reimbursement to cover higher expected intended to cover higher REH costs. Plus, Medicare will provide an additional facility payment; this payment will be established by first calculating the difference between all payments to CAHs in 2019 and all payments that would have been made to CAHs in 2019 under the Inpatient Prospective Payment, the OPPS, and Skilled Nursing Facility payment systems. The REH will be required to keep detailed records regarding how it uses the additional facility payment. All REHs will receive the same additional facility payment, regardless of size or volume, and in the proposed rule, CMS estimated the additional facility payment based on the formula set in the law.

State Actions

Several states have already enacted laws initiating state-level requirements for REH licensing, and state legislative actions related to the designation are being tracked by the National Conference of State Legislatures (NCSL). States have the opportunity to develop specific requirements that will determine what REH licensure looks like within their provider landscapes.

• Kansas added REH as a licensure type, requiring coverage for REH services by private insurers, setting eligibility for the licensure, protecting REHs from antitrust laws, and requiring the adoption of REH facility regulations.
• Nebraska added REH as a licensure type, requiring coverage for REH services by private insurers, and setting eligibility for licensure.
• South Dakota added REH as a licensure type.

Looking Ahead

In the spring of 2023, NASHP and the Health Resources Services Administration (HRSA) will convene state officials for a day-long, in-person peer-to-peer learning opportunity to learn more about the REH model, identify emerging opportunities to support rural health initiatives, and create implementation plans for individual states.

In partnership with HRSA, NASHP will release model REH licensing standards in the summer of 2023, as well as other supporting resources.

Acknowledgements

This blog was supported by the Health Resources and Services Administration (HRSA) of the U.S. Department of Health and Human Services (HHS) as part of a financial assistance under a supplementary project with the Federal Office of Rural Health Policy (FORHP), within the National Organizations of State and Local Officials (NOSLO) cooperative agreement. The contents are those of the author(s) and do not necessarily represent the official views of, nor an endorsement, by HRSA, HHS, or the U.S. Government. For more information, please visit HRSA.gov. The authors would like to thank FORHP partners for their guidance and helpful feedback.

Rural Emergency Hospital Components

REH services must include emergency department services and observation care, and REH sites may choose to provide other outpatient services.

A REH cannot provide acute care inpatient services but must:

• Staff its emergency department 24 hours a day, 7 days a week by a physician, nurse practitioner, clinical nurse specialist, or physician assistant.
• Comply with Emergency Medical Treatment and Labor Act (EMTALA) regulations.
• Have a transfer agreement with a level I or level II trauma center.