Medicare Payment and Reimbursement

New rule sets forth proposed Medicare payment policies for rural emergency hospitals

July 21, 2022 5:37 pm

REHs will receive both a 5% add-on to most outpatient payments and a monthly payment that’s projected to amount to $268,000 in 2023.

For hospitals that choose to begin operating under the new rural emergency hospital (REH) designation in 2023, Medicare will pay for any service that’s covered by the payment system for hospital outpatient services.

The payment rate for REHs will be the standard outpatient rate plus 5%, CMS wrote in the 2023 proposed rule for hospital outpatient payments (previous regulations described conditions of participation for REHs).

As established by 2020 legislation, critical access hospitals (CAHs) and designated rural hospitals may convert to REHs starting in 2023 if they have fewer than 50 beds and won’t provide acute care inpatient services. They must provide emergency and observation care and can choose to offer other outpatient services.

A payment flag would be used on claims to indicate the provider is an REH and thus should receive the 5% add-on to the outpatient payment rate. The add-on would be excluded from calculations of beneficiary copayments.

REHs also can receive payment for services that aren’t covered under the general outpatient payment system. Among the additional services that will be covered as outpatient services when provided by REHs are lab services, outpatient therapy and post-hospital extended care delivered “in a unit of the facility that is a distinct part of the facility licensed as a skilled nursing facility.”

However, if the service is not specifically covered under the outpatient payment system, it would be paid for according to the applicable fee schedule (e.g., for skilled nursing facilities or clinical laboratory services) and would not qualify for the 5% increase.

CMS also proposed that services provided at off-campus provider-based departments of REHs be exempt from site-neutral payment policies. Those services would be paid at the outpatient payment rate plus 5%. However, the agency floated the possibility that such services would be subject to site-neutral payment if such payment was in place at the off-campus facility before the hospital converted to an REH.

REHs also will receive a monthly facility payment that, in 2023, will be based on a complex statutory formula that considers 2019 payments — including beneficiary copayments — to CAHs.

The projected monthly payment for next year is about $268,000. In ensuing years, the amount will increase based on the hospital market-basket update.

REHs must offer detailed information on how they spend the facility payment. “We believe that this requirement can be met using existing cost-reporting requirements for outpatient hospital facilities that would include REHs,” CMS said. “This information will show if a sufficient share of revenue to the REH is being directed to outpatient care.”

REH quality reporting

The proposed rule also discusses pending quality-reporting requirements for REHs. CMS seeks stakeholder feedback on incorporating:

  • Several measures that are part of the quality-reporting program for outpatient care
  • The Emergency Department Transfer Communications measure for CAHs
  • Additional measures pertaining to services in areas such as telehealth, maternal health, behavioral health and emergency care
  • Measures to promote health equity

“We recognize REHs will be smaller hospitals that have limited resources compared with larger hospitals in metropolitan areas,” CMS stated. “Certain measures, particularly those that are chart-abstracted, may be more burdensome than other measures to report.”

Workarounds could include using Medicare claims-based measures and replacing chart-abstracted measures with digital quality measures, CMS said.

Miscellaneous provisions

To expedite the review process when a facility seeks to convert to an REH, the facility could submit a change-of-information application instead of an initial enrollment application. “The facility would be merely reporting its conversion from a CAH or hospital … and not newly enrolling in the Medicare program,” the proposed rule states.

Stark Law updates for REHs would include:

  • A new exception for ownership or investment interests in an REH
  • Revisions to certain existing exceptions to make them applicable to compensation arrangements involving an REH


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