Medicare Payment and Reimbursement

Final regulations for rural emergency hospitals set the stage for first year of eligibility

REHs will be reimbursed for providing emergency care and outpatient services and must abide by terms and conditions that include limiting average length of stay to 24 hours.

November 18, 2022 11:02 am

Medicare’s rural emergency hospital (REH) payment category gets underway Jan. 1, with CMS having finalized rates and policies this month.

Congress established the REH option in late-2020 legislation, seeking to preserve a level of healthcare access in areas where potential hospital closures risk leaving residents without options. About 175 rural hospitals have closed since 2005, according to a fact sheet, and 600 more are deemed to be in danger of closing “in the near future.” The latter number is about 30% of all rural hospitals.

Critical access hospitals (CAHs) and rural hospitals with fewer than 50 beds now are eligible to convert to REHs and receive reimbursement for providing emergency and observation care, along with other outpatient care at their discretion.

REHs must cease to deliver inpatient care, and that reportedly has given some hospitals pause about taking up the designation. Another possible area of concern is that REHs are not eligible to participate in the 340B Drug Pricing Program.

study cited by CMS projected that 68 hospitals would seek to convert to REHs due to the financial challenges of providing a fuller array of services.

Key payment and policy measures

REHs must deliver emergency and observation care and can choose to offer any other service that’s covered under the Medicare payment system for outpatient services. They’re eligible to be reimbursed for using telehealth services and remote monitoring.

Among the required services are lab, radiology and pharmaceutical core services. Examples of discretionary services include outpatient obstetric and behavioral care.

Reimbursement will be 105% of the general outpatient rate. If the service isn’t covered under the outpatient payment system, it will be paid in accordance with the applicable fee schedule (e.g., for clinical lab services) and won’t be subject to the 5% add-on.

REH’s also will receive a monthly facility fee that amounts to $272,866 in 2023 and increases annually in conjunction with the hospital market basket.

Medicare terms and conditions for REHs generally mirror those for CAHs. One difference is that an REH’s annual per-patient length of stay cannot exceed 24 hours.

As described in a CMS final rule with comment period, other notable requirements include:

  • Having a clinician on-call at all times and available on-site within 30 minutes (or 60 minutes for facilities located in a designated frontier area)
  • Ensuring 24/7 ED staffing by individuals who are “competent in the skills needed to address emergency medical care” and can receive patients and activate the appropriate medical resources to provide necessary care
  • Developing, implementing and maintaining a facility-wide, data-driven Quality Assurance and Performance Improvement program that addresses outcome indicators related to staffing
  • Implementing programs for infection prevention and control and antibiotic stewardship that adhere to nationally recognized guidelines

Considerations for quality reporting

Stakeholders have been concerned about possible quality-reporting requirements for REHs, hoping the requirements would not create an administrative burden for hospitals that may lack the resources to comply with such regulations.

The quality-reporting program for REHs is still in the works and won’t be implemented until further rulemaking takes place. Requirements that have been finalized include having a secure account through the QualityNet website and designating an official who will be responsible for meeting security and account management requirements.

“We recognize these challenges faced by the hospitals eligible to convert to REH status may increase reporting burden and may necessitate limiting the number of quality measures in use for the REHQR Program to facilitate success,” CMS wrote in the final rule.

The agency said steps to mitigate administrative burden could include incorporating:

  • Medicare claims-based measures
  • Digital quality measures instead of chart-abstracted measures

Alignment of quality measures across Medicare, Medicaid and other payers also should be promoted to reduce burden, CMS said.

Regulatory accommodations

For CAHs that seek to convert to an REH, CMS hopes to expedite the process by allowing the use of the Form CMS-855A change-of-information application rather than an initial application.

REHs also can utilize an existing exception to the Physician Self-Referral Law (i.e., the Stark Law) for hospitals that provide at least 75% of designated health services to rural residents. But unlike in an earlier proposed rule, no exception will apply for REHs if a referring physician has had an ownership or investment interest in a Medicare-enrolled facility since at least 2010.

“After reviewing comments on the physician self-referral law proposals, we are persuaded that financial relationships permitted under the REH exception, as it was proposed, may present a risk of patient or program abuse,” CMS wrote.


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