The goal of the program is to test the feasibility and advisability of cost based reimbursement for small rural hospitals that are too large to be Critical Access Hospitals. In recent years, hospitals in this category have experienced negative Medicare margins on inpatient services. CMS is conducting an extensive evaluation of the demonstration, testing the benefits to the community and financial impact on participating hospitals.
Background
The Centers for Medicare & Medicaid Services (CMS) is conducting the Rural Community Hospital Demonstration Program, which was initiated as a 5-year program under its original mandate, section 410A of the Medicare Modernization Act of 2003, and extended for an additional 5-year period under section 10313 of the Affordable Care Act. Congress included these provisions in these laws in response to the financial concerns of small rural hospitals.
Participating rural community hospitals must be located in one of the 20 states with the lowest population density. These States are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming.
Initiative Details
In 2004, thirteen rural hospitals in eight sparsely populated States elected to participate. In 2005, 4 hospitals dropped out after one year and converted to Critical Hospital Hospital status, leaving 9 hospitals participating in the demonstration. In 2008, four additional hospitals were selected when the solicitation was reopened, totaling 13 hospitals.
Between April 2009 and August 2010, 4 hospitals dropped out of the demonstration, 3 returned to sole community hospital status and one converted to become a Critical Access Hospital. This left 8 hospitals participating in the demonstration. These hospitals would continue for an additional 5-year period following upon the conclusion of their first 5-year period. The hospitals that have withdrawn from the demonstration were able to take advantage of other opportunities within the Medicare program that offer more favorable reimbursement.
In August 2010, CMS announced a solicitation for new hospitals in accordance with the Affordable Care Act mandate. Applications were due October 14, 2010, and in April 2011 CMS announced that 18 new hospitals would begin the demonstration for a 5-year period beginning for each hospital with its cost report year beginning on or after April 1, 2011.
Since the new awards to the hospitals in 2011, 3 hospitals have withdrawn from the demonstration. One, among the original hospitals that was selected in 2004, withdrew on account of more favorable relative reimbursement from the standard program. One hospital among those receiving awards in 2011 withdrew to become a Critical Access Hospital. One hospital among those receiving awards in 2011 withdrew, saying that the standard program reimbursement was more favorable. There are currently 23 hospitals participating in the demonstration.
Additional Information
