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This month, the Department of Health and Human Services, Office of Inspector General (HHS), issued a report detailing its study of Critical Access Hospitals (CAHs); specifically, whether or not CAHs would meet the location requirements if required to re-enroll in Medicare.  The findings are alarming and could, potentially, result in the future decertification of current CAHs. 

To be certified as a CAH, a hospital must meet certain regulatory requirements, including, but not limited to, a “location” requirement, determined by distance.  This location requirement holds that in order for a hospital to be certified as a CAH, the hospital must (i ) be located more than a 35-mile drive from a hospital or another CAH, or (ii) be located more than a 15-mile drive from a hospital or another CAH in areas of mountainous terrain or where only secondary roads are available.  Additionally, to be certified as a CAH, the hospital must be in a rural area or area generally treated as rural. 

Prior to 2006, however, States had the ability to permanently exempt certain CAHs from the distance requirement by designating a CAH a “necessary provider.”  States, however, no longer have the ability to make this designation.  Of the CAHs analyzed by HHS, nearly 75% were designated “necessary provider” CAHs and, thus, exempt from the distance requirement. 

HHS, through the use of mapping technology, plotted the locations of all CAHs and determined that a significant portion, without the State “necessary provider” exemption, would not comply with the distance requirement and, thus, would not be certified as CAHs.  This, HHS found, would have saved Medicare and beneficiaries nearly $450 million in 2011 alone.  It is important to note that CAHs are reimbursed by Medicare at 101% of their reasonable inpatient and outpatient costs. 

HHS does not possess the ability to de-certify CAHs.  In its report, HHS recommends that the Centers for Medicare and Medicaid Services seek legislative authority to remove “necessary provider” CAHs permanent exemption from the distance requirement, therefore, allowing CMS to reassess each “necessary provider” CAH for certification purposes.  Such legislation, if introduced and enacted, could place current “necessary provider” CAHs in peril, potentially leading to closures and resulting in less available health care to rural areas.