Rural Emergency Hospitals

8/12/2022

Emergency hospital sign

Rural emergency hospital (REH) is a new Medicare provider designation established by Congress through the Consolidated Appropriations Act of 2021. REHs are meant to reinforce access to outpatient medical services and reduce health disparities in areas that may not be able to sustain a full-service hospital. Starting in January 2023, Critical Access Hospitals (CAHs) and small rural hospitals with no more than 50 beds may apply for REH designation and receive Medicare payment for providing emergency services.

Approximately 1 in 7 Americans live in rural communities that face distinct challenges including higher rates of some chronic diseases and limited access to health care. Some of these challenges have been exacerbated in the last decade. Since 2010, nearly 140 rural hospitals across the nation have closed and the financial viability of remaining rural facilities is of ongoing concern. The National Advisory Committee on Rural Health and Human Services notes that when a rural hospital closes, mortality in that community increases, the local economy suffers and residents must travel further to obtain medical care.

The new REH designation aims to maintain access to emergency services, observation care, and additional medical and outpatient services, in rural areas.

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:

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 & Medicaid Services.

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

CMS has proposed standards that align with the current Conditions of Participation for CAHs and is in the process of seeking input from rural communities. The final rule is expected to be included in the calendar year 2023 Outpatient Prospective Payment System-Ambulatory Surgical Center final rule, which is anticipated in fall 2022.

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.

A handful of states have enacted laws establishing REH licensure:

  • Kansas HB 2208 (2021)—Enacts the Rural Emergency Hospital Act and creates a category of licensure to enable certain Kansas hospitals to receive federal health care reimbursement as rural emergency hospitals.
  • Nebraska LB 697 (2022) —Provides for the licensure of rural emergency hospitals and requires coverage for REH services.
  • South Dakota HB 1123 (2022) —Establishes licensure for rural emergency hospitals.

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

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. CAH designation was created in 1997 in response to widespread rural hospital closures. Similar to an REH, it 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 CAH designation in through SB 425 in 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 either 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.

Additional Resources