Little-Known Facts About Critical Access Hospitals

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It’s a familiar term, but one that begs to be better understood.

What is a Critical Access Hospital (CAH)?

Many involved in the healthcare industry are familiar with term, but may not know exactly what one is. A CAH is a designation given to eligible rural hospitals by the Centers for Medicare & Medicaid Services (CMS).

Congress created the CAH designation through the Balanced Budget Act of 1997 (Public Law 105-33) in response to more than 400 rural hospital closures taking place during the 1980s and early 1990s. Since its creation, Congress has amended the CAH designation and related program requirements several times through additional legislation.

The CAH designation is designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare by keeping essential services in rural communities. To accomplish this goal, CAHs receive certain benefits, such as cost-based reimbursement for Medicare services, which is explained below.

Eligible hospitals must meet the following conditions to obtain CAH designation:

  • Be located in a state that has established a State Medicare Rural Hospital Flexibility Program;
  • Be designated by the state as a CAH;
  • Be located in a rural area or an area that is treated as rural;
  • Be located either more than 35 miles from the nearest hospital or CAH, or more than 15 miles in areas with mountainous terrain or only secondary roads; prior to Jan. 1, 2006, facilities were certified as a CAH based on state designation as a “necessary provider” of healthcare services to residents in the area;
  • Maintain no more than 25 inpatient beds that can be used for either inpatient or swing-bed services;
  • Maintain an annual average length of stay of 96 hours or less, per patient, for acute inpatient care (excluding swing-bed services and beds that are within distinct part units);
  • Demonstrate compliance with the CAH Conditions of Participation (CoPs) found at 42 CFR Part 485, subpart F; and
  • Furnish 24-hour emergency care services seven days a week.

Critical Access Hospital Payments

For most inpatient and outpatient services provided to patients, CAHs are paid at 101 percent of reasonable costs. “Reasonable cost” is the cost that was actually incurred in order to provide a medical service, to the extent that the cost is necessary in order to efficiently deliver that service.

The usual short-term acute-care hospital is paid a prospectively determined amount, hence the “prospective payment system.” Private insurance payors do not reimburse on a cost basis, but rather on the prospective payment system (or on a percent of charges).

Lastly, CAH services are paid according to Part A and Part B deductibles and coinsurance amounts – and they don’t limit the 20-percent CAH Part B outpatient copayment amount by the Part A inpatient deductible amount.

In summary, CAHs are essential to the care of residents of our rural areas; and survival is essential.

Programming note: Listen to Dr. John Zelem every Tuesday on Talk Ten Tuesdays at 10 a.m. EST.


John Zelem, MD, FACS

John Zelem, MD, is principal owner and chief executive officer of Streamline Solutions Consulting, Inc. providing technology-enabled, expert physician advisor services. A board-certified general surgeon with more than 26 years of clinical experience, Dr. Zelem managed quality assessment and improvement as a former executive medical director in the past. He developed expertise in compliance, contracts and regulations, utilization review, case management, client relations, physician advisor programs, and physician education. Dr. Zelem is a member of the RACmonitor editorial board.

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