Brief Rural Emergency Hospitals

Rural Emergency Hospital Overview

Section 125 of the Consolidated Appropriations Act of 2021 established the Rural Emergency Hospital as a new Medicare provider type. This designation will allow struggling rural hospitals to continue operating with outpatient and emergency services only, instead of closing. Under the act, REHs can receive enhanced payment upon meeting certain requirements:

There are four broad statutory requirements for facilities seeking REH designation:

• Eligibility: Two types of facilities may convert to an REH:
  • Critical access hospitals.
  • Rural hospitals with no more than 50 beds.

Facilities must have met these requirements at the time of the act (Dec. 27, 2020).

• Application: Existing hospitals seeking REH designation must have an action plan for initiating and providing emergency services, including:
  • Specific services the facility will retain, modify, add and discontinue.
  • How the facility will use the additional funds it receives.
• Requirements: REHs must abide by the following:
  • Not providing acute care inpatient services (with some exceptions, such as post-hospital extended care services).
  • Not exceeding annual average patient length of stay of 24 hours.
  • Having a transfer agreement with a level I or II trauma center.
  • Meeting certain licensure and staffing requirements.
  • Meeting other requirements, including those the secretary of Health and Human Services finds necessary.
• Reimbursement: Covered outpatient department services provided by REHs will receive an additional 5% payment for each service. Beneficiaries will not be charged coinsurance on the additional 5% payment. Additionally, REHs will receive a monthly additional facility payment set by the Centers for Medicare and Medicaid Services.

CMS is responsible for setting Medicare payment rates, establishing conditions of participation, finalizing REH provider type regulations and monitoring compliance.

CMS released the final rule for the Medicare hospital outpatient prospective payment system (OPPS), which includes rural emergency hospitals, on Nov. 23, 2022. The provisions of this rule are effective Jan. 1, 2023.

State Actions

Rural Emergency Hospitals

State policymakers have an important role to play in establishing and regulating this new provider type, as REHs are required to meet applicable state licensing, staffing, educational training and scope of practice requirements.

States that have enacted laws enabling REH licensure include: 

• Arkansas HB 1127 (Enacted 2023)—Creates the Rural Emergency Hospital Act and state licensure for rural emergency hospitals.
• Illinois HB 240 (Enacted 2023)—Adds rural emergency hospitals to the state’s Hospital Licensing Act.
• Indiana HB 1457 (Enacted 2023)—Establishes licensing standards for rural emergency hospitals.  
• Iowa SF 75 (Enacted 2023)—Establishes licensure for rural emergency hospitals and sets forth requirements for hospital conversions to rural emergency hospitals. 
• Kansas HB 2208 (Enacted 2021)—Enacts the Rural Emergency Hospital Act and creates a category of licensure to enable certain state hospitals to receive federal health care reimbursement as rural emergency hospitals.
• Michigan SB 183 (Enacted 2022)—Establishes licensure for rural emergency hospitals.
• Nebraska LB 697 (Enacted 2022)—Provides for the licensure of rural emergency hospitals and requires coverage for REH services.
• New Mexico SB 245 (Enacted 2023)—Allows rural health facilities to apply for rural emergency hospital licensure and establishes rural emergency hospital licensure requirements.
• New York SB 4007 (Enacted 2023)—Adds rural emergency hospital to “hospital” definition in N.Y. Pub. Health Law § 2801, allowing for the establishment or incorporation of rural emergency hospitals. 
• South Dakota HB 1123 (Enacted 2022)—Establishes licensure for rural emergency hospitals.
• Texas SB 1621 (Enacted 2019)—Creates a license for certain rural medical facilities, including limited services rural hospitals. 
• West Virginia HB 2993 (Enacted 2023)—Establishes the Rural Emergency Hospital Act and provides for rural emergency hospital licensure. 

You can search new REH legislation in NCSL’s Health Costs, Coverage and Delivery Database (under the “Market—Payment and Delivery Reform” tag). 

Other Health Care Facilities

Many rural hospitals struggle to maintain financial viability under traditional Medicare payment models. In response, other types of health care facilities, including critical access hospitals (CAHs) and freestanding emergency departments (FSEDs), have emerged as options for rural communities.

The new REH provider type aims to fill a gap in the services offered by other types of health care facilities, like critical access hospitals (CAHs) and freestanding emergency departments (FSEDs). REHs are intended to provide emergency services as a new Medicare provider.

Critical Access Hospitals

Critical Access Hospitals (CAH) are one of two types of facilities that can convert to an REH. The CAH designation was created in 1997 in response to widespread rural hospital closures. Similar to an REH, a CAH is designed to reduce the financial vulnerability of hospitals and improve access to health care. CAHs receive cost-based reimbursement for Medicare services and other benefits, including flexible staffing and services, and access to certain resources and technical assistance.

Kansas was one of the first states to codify the CAH designation (SB 425; 1998), followed over the next several years by Washington, North Carolina and West Virginia, among others. As of July 2022, 1,360 CAHs were operating across all 50 states.

Visit the Rural Health Information Hub for additional information on CAHs.

Freestanding Emergency Departments

Free-standing emergency departments (FSEDs) function as fully operational emergency departments and are often required by state statute to be open 24/7. These stand-alone facilities operate under a larger health system, subjecting them to the same federal or state regulations as the parent health system, or are independently owned and operated. However, since independent FSEDs do not meet the federal definition of a hospital, they are ineligible for Medicare and Medicaid reimbursement.

At least 21 states have established licensure requirements for FSEDs, beginning with Texas (HB 1357) in 2009. In addition, at least seven states maintain certificate of need approval for establishing or expanding the service capacity of FSEDs in state statute.