Rural Community Hospital Demonstration Program Expanded  

August 31, 2010

The U.S. Department of Health and Human Services is expanding the Rural Community Hospital Demonstration program, which will increase the number of facilities eligible to receive enhanced reimbursement for inpatient services. 

The move will add 20 hospitals to the 10 that already participate in the program.

The expansion, which will pay participating hospitals under a cost-based methodology for services rendered to Medicare beneficiaries, was provided for in the health reform bill passed earlier this.

To be eligible for the extra funds, a hospital has to have fewer than 51 beds, provide 24-hour emergency care, and be located in one of the 20 states with the lowest population density:  Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, and Wyoming. 

In addition to the program expansion, an additional $32 million is to be spent improving access to health care in rural areas.

The intent of the program is to test the feasibility and advisability of cost based reimbursement for small rural hospitals that are too large to be Critical Access Hospitals.  Recently, hospitals in this category have experienced negative Medicare margins on inpatient services.

“One in five Americans lives in a rural area and small community hospitals are often their only source of care,” said HHS Secretary Kathleen Sebelius in announcing the expansion.

“This demonstration project and other important investments in hospitals, infrastructure, and the health care workforce, will help ensure that Americans living in rural areas can get the quality health services they need.”

The Center for Medicare and Medicaid Services is conducting an extensive evaluation of the demonstration to determine the benefits to the community and financial impact on participating hospitals.