New designation could be a game-changer

Beginning January 1, 2023, certain struggling rural hospitals and all Critical Access Hospitals will be able to convert to a new designation, Rural Emergency Hospital (REH). This new designation can be a game-changer for many rural hospitals with unprofitable inpatient business operations, by keeping such facilities intact to maintain access to emergency services, observation care and outpatient services. The Center for Medicare & Medicaid Services (CMS) recently shared the following key facts about the new REH designation.

What is a Rural Emergency Hospital (REH)?

A Rural Emergency Hospital (REH) is a facility that converts from either a Critical Access Hospital (CAH) or a rural hospital (or one treated as such under section 1886(d)(8)(E) of the Social Security Act) with no more than 50 beds, and does not provide acute care inpatient services, with the exception of skilled nursing facility services furnished in a distinct part unit.

How can an REH designation be helpful to your hospital?

REH is a new provider type that was Established in December 2020 by the Consolidated Appropriations Act in an effort to address the growing concern over closures of rural hospitals. With the REH designation, Critical Access Hospitals (CAHs) and rural hospitals with fewer than 50 beds may avert potential closure and continue to provide essential services for the communities they serve. Conversion to an REH allows for the provision of emergency services, observation care, and additional medical and health outpatient services, if elected by the REH, that do not exceed an annual per patient average of 24 hours. This new provider type will be effective January 1, 2023 and will promote equity in health care for those living in rural communities by facilitating access to needed services.

REH Payment Rate

REH services include emergency department services and observation care and may include other outpatient medical and health services. Covered outpatient department services provided by REHs will receive an additional 5% payment for each service above the Outpatient Prospective Payment System (OPPS) payment rate. Beneficiaries will not be charged coinsurance on the additional 5% payment. REHs will also receive a monthly facility payment. After the initial year, the payment amount will increase in subsequent years by the hospital market basket percentage increase.

REHs may provide outpatient services that are not otherwise paid under the OPPS (such as services paid under the Clinical Lab Fee Schedule) as well as post-hospital extended care services furnished in a unit of the facility that is a distinct part of the facility licensed as a skilled nursing facility. Services provided in a distinct part of the facility, however, will not be considered REH services and therefore will be paid under the applicable fee schedule for such services. In other words, such services will not receive the additional 5% payment increase that applies to REH services.

REH Provider Enrollment

Providers and suppliers are required to enroll in Medicare to receive payments for services and items furnished to Medicare beneficiaries. The purpose of the provider enrollment process is to help confirm that providers and suppliers seeking to bill Medicare meet all federal and state requirements to do so. The provider enrollment procedure that addresses requirements for REHs will be updated and provided in the existing Medicare provider enrollment regulations in 42 CFR Part 424, subpart P. With the final rule, a facility may submit a Form CMS-855A change of information application (rather than an initial enrollment application) in order to convert from a CAH to an REH. CMS reports that not requiring an initial application, which generally takes longer for a Medicare Administrative Contractor (MAC) to process than a change of information application, would help expedite the CAH-to-REH conversion.

REH Physician Self-Referral Law Update

In the 2023 OPPS/Ambulatory Surgery Center (ASC) final rule released on Nov. 1, CMS is providing updates to the physician self-referral law for the new rural emergency hospital (REH) provider type, as well as revisions to certain existing exceptions to make them applicable to compensation arrangements to which an REH is a party. CMS is not finalizing the exception for ownership or investment interests in an REH which was in the proposal stage.

Conditions of Participation

The five conditions of REH participation are as follows:

  • A clinician must be on-call at all times and available on-site within 30 or 60 minutes, depending on if the facility is located in a frontier area, which is the most remote and sparsely populated places along the rural-urban continuum.
  • The emergency department must have 24/7 coverage by an individual competent in emergency care.
  • A Quality Assurance and Performance Improvement program must be developed, implemented and maintained, and it must address outcome indicators related to staffing.
  • The annual per pertinent average length of stay cannot exceed 24 hours, beginning with registration and ending with discharge of the patient.
  • An infection prevention and control and antibiotic stewardship program must be established that adheres to nationally recognized guidelines.

Next Steps

Since 2010, 138 rural hospitals have closed, including a record 19 in 2020. LBMC Healthcare Consulting team can assist with these struggling rural hospitals by analyzing the unprofitability of your inpatient business in relation to your other operations. Our team can help determine if there is a remedy operationally for your inpatient business or if your best action is to convert to this new REH designation. Contact us today!

Content provided by LBMC Healthcare Consulting’s Dan Schoenbaechler.