$3.2 Million Annual Payment Proposed for Rural Emergency Hospital
The Rural Emergency Hospital (REH) is a new Medicare designation for small, rural hospitals. CLA has been tracking this new option since before it was even enacted under the Consolidated Appropriations Act, 2021 (CAA, 2021) and signed into law on December 27, 2020.
The CAA, 2021 sets January 1, 2023, as the earliest data an REH can exist. The REH must also be in a state that has licensed the REH designation and then the REH is licensed/approved accordingly. An REH conversion is only allowed for Critical Access Hospitals (CAHs) and rural Prospective Payment System (PPS) hospitals with fewer than 50 beds.
Since enactment, the Centers for Medicare & Medicaid Services (CMS) has been hard at work developing detailed requirements for this new Medicare designation. CMS has now released two proposed regulations on the REH – one outlining Conditions of Participation and another outlining reimbursement and other policies.
CLA’s REH Analysis
Based on the CAA, 2021’s statutory text, earlier this year CLA simulated potential financial benefits of REH conversions.
- Read CLA’s original article on the REH, A Path Forward: CLA’s Simulations on Rural Emergency Hospital Designation, which was also cited by CMS in its two proposed REH rules.
On July 6, CMS released its proposed REH Conditions of Participation (CoP) rule.
- Read CLA’s Regulatory Advisor on the proposed REH CoP, CMS Cites CLA Study in Proposed Rural Emergency Hospital Rule, where CMS cites our simulations.
Proposed REH Reimbursement
On July 26, CMS released the proposed 2023 Outpatient Prospective Payment System (OPPS) rule and detailed payment-related REH policies. We provide a quick look at the these payment-related policies in today’s blog, but make sure to watch for our full summary in our CY 2023 OPPS Regulatory Advisor by subscribing to CLA communications or regularly checking CLA Insights.
In defining “REH services” as discussed in statute, CMS takes a broad view and considers all covered outpatient department services under the OPPS and furnished in an REH as payable under the OPPS. These would all receive the 5% payment bump, as required by statute.
CMS also proposes to reimburse other services provided by an REH that are not covered under the OPPS. Those claims would be paid for by Medicare but under the appropriate fee schedule but without the additional 5% bump. CMS does not believe the underlying statute allows the 5% boost for items or services that are not specifically defined as covered outpatient “REH services.”
CMS proposes that an REH would not be covered by the existing site neutral payments related to “off-campus provider-based departments.”
Proposed REH Annual Facility Payment
One of the biggest questions that CMS has now answered in the proposed OPPS rule is how it will calculate the Annual Facility Payment. The underlying REH statute requires this to be calculated as the difference between what all Critical Access Hospitals (CAHs) were paid in 2019 compared to what those payments would have been if paid under prospective payment systems (PPS), like the OPPS. The difference is divided by the total number of CAHs in 2019 to get an annual rate.
CMS takes a broad perspective when determining what payments to include in both the 2019 actual versus 2019 prospective payment amounts.
For 2019 actual CAH payments, CMS proposes to use CAH claims data with service dates in CY 2019 to calculate the actual Medicare spending for CY 2019, including CAH claims data for inpatient hospital services, inpatient rehabilitation services, inpatient psychiatric services, outpatient hospital services, and skilled nursing services including both hospital-based and swing bed services. Swing bed payments were a big question CLA had when we first simulated the REH model in our “A Path Forward” article. CMS including those payments is favorable for REH conversions.
For 2019 prospective payments, CMS proposes to use the various PPSs, using claims data from the last nine months of FY 2019 and the first three months of FY 2020 to calculate payment data for CY 2019 for both inpatient hospital services and skilled nursing facility services, and then use claims data from CY 2019 for outpatient hospital services. CMS proposes to use the Medicare payment and the beneficiary payment when setting the amount.
CMS will also include services and items paid under other payment subsystems, like the physician fee schedule and clinical lab fee schedule among others. CMS also proposes to include add-ons and supplemental payments, for example indirect medical education (IME) payments and Disproportionate Share Hospital (DSH). For IME and DSH adjustments, CMS will estimate an aggregate amount of IME and DSH spending for all CAHs. CMS discusses how it will develop SNF per diems and swing bed payments.
CMS provides considerable details surrounding these payments and its approach. Again, watch for CLA’s Regulatory Advisory coming out soon for a more in-depth discussion.
The resulting calculations by CMS would equal a monthly REH facility payment of $268,294 or an annual amount of $3,219,523.
The Annual Facility Payment calculation is as follows:
Step 1. 2019 CAH Actual ($12.08 billion) – 2019 CAH Prospective Payment ($7.68 billion) = $4,404,308,465
Step 2. $4,404,308,465/1,368 (# of CAHs in 2019) = $3,219,523 annual facility payment (or $268,294/month)
Next Steps
In addition to the financial-related policies, CMS also proposes Stark-related changes, addresses REH Medicare provider enrollment and quality reporting program requirements in the proposed 2023 OPPS rule. All of these are covered in our forthcoming Regulatory Advisory.
It’s never too early to begin discussing the REH internally and with CLA to see if it’s a fit for you. CLA knows rural hospitals. Health care takes balance. We’ll help you get there.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
Great job CLA! Thank you for helping CMS understand the challenges our rural challenges!