KENTUCKY REGIONAL EXTENSION CENTER

0905hhn_rural_tocOn August 15, 2013, the Office of the Inspector General of the Department of Health and Human Services (OIG) released a report entitled “Most Critical Access Hospitals Would Not Meet the Location Requirements if Required to Re-enroll in Medicare” (Report). If the recommendations in the Report are fully executed, it could have a significant negative impact on critical access hospitals (CAHs). There are approximately 1,300 CAHs currently in operation.

To be designated as a CAH, a hospital must meet multiple conditions of participation, which include being located in a rural area and at least 35 miles (or 15 miles in the case of secondary roads or mountainous terrain) from any other hospital. Collectively, these are known as the “location requirement.” However, if prior to December 31, 2005, a facility was designated as a “necessary provider” pursuant to a State plan and was approved by Medicare as meeting the CAH conditions of participation, the facility is permanently exempt from the distance portion of the location requirement. Medicare officials lack statutory authority to decertify CAHs which have been given the necessary provider status by individual State waivers.

As a result of their findings, OIG made, and CMS concurred with, three recommendations in its Report:

  1. CMS should “seek legislative authority to remove necessary provider CAHs’ permanent exemption from the distance requirement, thus allowing CMS to reassess these CAHs;”
  2. CMS should “ensure that it periodically reassesses CAHs for compliance with all location-related requirements;” and,
  3. CMS should “ensure that it applies its uniform definition of ‘mountain terrain’ to all CAHs.”

OIG also recommended that CMS “seek legislative authority to revise the CAH conditions of participation to include alternative location-related requirements.” CMS did not concur with this suggestion. The Report found that if CAHs less than 15 miles from the nearest hospital were removed from the program, savings would be more than $268 million a year.

It is questionable what real savings would be realized by eliminating CAHs, as many patients without a local provider would have to seek care at a more urban hospital or delay care until it reached emergency status. Proponents of CAHs also maintain that these hospitals provide important jobs in rural areas, benefit other local healthcare providers, and bring critical services to high poverty areas where chronic illnesses are prevalent. Additionally, the CAH program was never designed as a cost saving program but instead was created to preserve access to healthcare for vulnerable populations living in medically underserved areas.

Currently, there are 29 CAHs in Kentucky.  Cost report data shows that 60% of Kentucky’s CAHs had a negative profit margin in 2011. Struggling economies, persistent unemployment rates and lack of private insurance are still significant challenges CAHs face in Kentucky. If executed, these recommendations would create a significant loss in access to quality acute care hospital services in rural Kentucky. Under this report, the majority of Kentucky CAHs would lose their CAH designation and many report they would not be able to continue services to their communities. Kentucky’s 29 CAHs provide care for the residents of 40 Kentucky counties with no hospital. If Kentucky lost one CAH, it reduces access not only for that county but for surrounding counties with no hospital.  

CAHs will no doubt continue to lobby against implementation of the Report’s recommendations. We will continue to track this issue and inform you of any changes to the CAH program.