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HHS inspectors want to cut hospitals from critical access program

Nearly two in three hospitals do not meet program requirements

Topics: Access to Care, Quality, Performance Improvement, Appropriateness, Finance, Health Policy, Market Trends, Strategy

August 19, 2013

Nearly two-thirds of critical access hospitals (CAHs) would not meet current standards if required to reapply for certification, according to an HHS Office of Inspector General (OIG) report released last week.

Background on CAH program

By definition, a CAH must have 25 or fewer beds and must be located at least 35 miles from another facility in communities that would otherwise lack adequate access to health care services. These facilities receive Medicare reimbursements that cover 101% of costs, while traditional hospitals are typically reimbursed 93% of costs.

Until 2006, states were allowed to bypass distance requirements and could define certain hospitals as "necessary providers," even if they were in close proximity to other facilities. Although Congress closed this loophole in 2006, hospitals that already had received an exemption were not required to be recertified.

Report findings and recommendations

In its latest CAH report, OIG looked at more than 1,300 CAHs and discovered that 846 were located fewer than 35 miles from another hospital, while 71 were fewer than 10 miles from another facility.

The inappropriate certification was mostly attributed to the state-approval process. The OIG report found that 88% of the hospitals that did not meet the program's distance rules had been qualified through the now-banned process.

The report recommended that CMS:

  • Examine all of the hospitals currently enrolled in the CAH program to ensure facilities that retain their certifications "are those that continue to serve the beneficiaries who would otherwise be unable to reasonably access hospital services;" and
  • Seek legislative authority from Congress to remove the permanent exemption from all necessary provider facilities.

The report found that the extra payments to CAH hospitals cost an extra $860,000 per facility per year. In all, forcing such hospitals to reapply could save the government $1.1 billion annually, the report estimates. However, Modern Healthcare notes that losing the additional Medicare payments that come with being a CAH facility could result in the closure of hundreds of facilities.

Hospital groups take issue with the report

According to Joanne Hiatt Kim, the American Hospital Association's VP for payment policy, "The OIG's recommendation that CMS seek legislative authority to remove and reevaluate certain CAH's special Medicare status is completely inappropriate." She added that the initiative "demonstrates an unfortunate understanding of how health care is delivered in rural America."

Alan Morgan—CEO of the National Rural Health Association—said that cutting off the additional Medicare funding to certain CAHs "would effectively kill rural health care."

He said there is a "larger issue" that needs to be discussed, including where a patient seeks treatment if they cannot access a rural hospital (Gold, "Capsules," Kaiser Health News, 8/15; Carlson, Modern Healthcare, 8/15 [subscription required]; Bunis, CQ HealthBeat, 8/15 [subscription required]).

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