Small, Rural Hospital

Big News for Small and Rural Hospitals – CMS Notice Outlines Requirements to Obtain Increased Medicare

Reimbursement for FY 2013

The Department of Health and Human Services, Centers for Medicare and Medicaid Services  issued a notice on March 7, 2013 regarding its implementation of two provisions of the American Taxpayer Relief Act of 2012 (“ATRA”) that may significantly affect the reimbursement of smaller and rural hospitals for fiscal year 2013. (78 FR 14689) Specifically, this notice addresses actions that facilities qualifying for the low-volume hospitals payment adjustment or the Medicare Dependent Small Rural Hospital Program may have to take to receive increased reimbursement for FY 2013.

The Affordable Care Act provided for increased reimbursement of smaller and rural facilities under these two programs for FY 2011 and 2012.  With the end of FY 2012 on September 30, 2012, the increased reimbursement to these facilities expired.  However, with the enactment of ATRA on January 2, 2013 Congress retroactively funded a one year extension of these programs beginning October 1, 2012.

Low Volume Hospital Payment Adjustment

The low volume hospital payment adjustment may be very significant for smaller providers.  Under this program, a facility may receive a percentage increase of reimbursement based on a sliding scale  ranging from 25% for hospitals with fewer than 200 discharges to zero percent for facilities with greater than 1600 annual discharges.

To qualify for the Low Volume Hospital Payment  Adjustment program, a facility must have fewer than 1,600 discharges of individuals  entitled to or enrolled in benefits under Medicare Part A during the fiscal year, and be located more than 15 miles from another subsection (d) hospital.   A hospital that qualified for the low volume hospital status in FY 2012 may continue to receive the adjusted payment on FY 2013 without reapplying to the program, if it continues to meet the criterion based on the March 2012 update to the FY 2011 MedPAR data.  However, the hospital must verify in writing to its fiscal intermediary or MAC no later than March 22, 2013, that it continues to be more than 15 miles from any other subsection (d) hospital. Furthermore, hospitals that wish to participate in this program must also apply by March 22, 2013.

Medicare Dependent, Small Rural Hospital Program

ATRA also provides a one year extension to the Medicare Dependent Small Rural Hospital program (MDH).  As with the low volume hospital payment adjustment, this program was also set to expire at the end of FY 2012.  Hospitals that previously qualified for MDH status will be automatically reinstated as an MDH retroactively to October 1, 2012. However, since this program was set to expire on September 30, 2012 many facilities elected to apply for alternative programs. If a facility applied for the sole community program by August 31, 2012 and was approved, it will receive a SCH designation effective October 1, 2012, and will not receive an MDH designation unless the facility reapplies for this program. Additionally, if a facility missed the August 31, 2012 and subsequently applied for the SCH status with an effective date after October 1, 2012, the facility must  reapply for their MDH status, and such status will be effective 30 days from the date of approval.

Some facilities also requested to cancel their rural classification after the expiration of the MDH program.  For these facilities to re-qualify for the MDH program, they will be required to again request a rural designation and reapply for the MDH program. Therefore, any provider that that was reclassified as a SCH or canceled its rural designation status effective October 1, 2012 will not have its MDH status retroactively reinstated to October 1, 2012.

If you have any question regarding these Medicare programs or any other healthcare care regulation, please contact Clark Hill’s Health Care Practice Group at the information located on this page.