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Next Steps for the Rural Emergency Hospital Model

In January 2023 the Rural Emergency Hospital (REH) model launches, becoming the first new Medicare rural provider type in over 25 years. Congress developed the REH program to keep financially strained rural hospitals from closing and help them better align their services with the evolving needs of their communities. Specifically, the new REH designation will allow communities to transform inpatient hospitals into emergency and outpatient care facilities and adjust payment incentives to reflect a widespread shift from traditional inpatient services to outpatient settings.

Today, one in five Americans lives in a rural community where access to local and convenient health services is far from a given. Rural residents on average travel twice as far as their urban counterparts to receive health care services. And with the closure of 138 rural hospitals over the last 10 years, the situation for many has only worsened.

Of the hospitals that have kept their doors open, many have had been forced to cut important services such as obstetrics units. While rural hospitals benefited from federal financial assistance during the COVID-19 pandemic, early evidence shows that many rural hospitals will struggle again to make ends meet when the federal relief ends, making the success of the new Rural Emergency Hospital model critical.

This opportunity for rural hospitals to transform and focus more on emergency and outpatient services holds great promise, but much of the program’s success depends on the Department of Health and Human Services (HHS) implementation of REH and Congress’s willingness to pass needed legislative fixes.

Why are rural hospitals closing?

Rural health care has long centered on inpatient hospital services. However, the need for inpatient care has diminished as medical advancements and innovations have allowed many common procedures to shift to the outpatient setting. For example, certain invasive and therapeutic surgeries that providers used to perform primarily in inpatient settings, such as cataract surgery or certain knee and hernia repairs, now commonly take place in ambulatory settings where patients are in and out the same day.

Meanwhile, rural populations continue to shrink, reducing the need for inpatient hospital beds. Over the last decade, the number of people living in rural areas declined by 0.5%, or 226,000 people, while urban areas grew by about 8%, or roughly 21 million people. Taken together, these trends have decreased the number of rural residents needing inpatient hospital care and, in turn, negatively impacted the finances of small rural hospitals whose reimbursement structures typically depend on maintaining certain levels of inpatient care.

Policymakers support a new care delivery and reimbursement model

The Consolidated Appropriations Act of 2021 created the REH program for rural hospitals with fewer than 50 beds. It gives rural communities a new care delivery option within the Medicare program and allows communities to transform inpatient hospitals into emergency and outpatient care facilities. Under the new program, REH facilities will be reimbursed for patient care via the Medicare outpatient prospective payment system. In addition, REHs will receive a new, additional “facility payment” that stakeholders hope will be used to provide extra medical and support services. These additional patient services could include wellness and preventive care, behavioral health, oral health care services, and other patient supports like transportation to medical appointments and nutrition assistance. The amount and the allowable use of the additional facility payment will be key to the program’s success.

Regulators will soon release final rules on the new Rural Emergency Hospital model

Regulators are now finalizing the details of the Rural Emergency Hospital Program. The Bipartisan Policy Center recently submitted comments to HHS’s proposed rules for REHs, which outlined the conditions for participation for the new program and how providers would be paid.

BPC’s key comments include recommendations for HHS to:

  • Support local communities embarking on a community needs assessment that involves the input of an array of stakeholders. Such assessment will ensure transformation to the REH model will improve access to high-quality care in the local area.
  • Evaluate the REH reimbursement structure on an ongoing basis to ensure it will support sustained transformation among rural hospitals for both the near and long-term.
  • Support allowing additional, allowable outpatient medical and health care services in the REH setting and ensure access to critical maternal care and behavioral health care services.
  • Maintain access to critical ambulance care.
  • Ensure REHs can provide telehealth services as a way to expand access to care.
  • Provide necessary capital infrastructure investments and technical assistance to support REHs.

BPC is working to ensure the REH model is successful across rural America and looks forward to continuing to work with Congress and the administration to further refine this critical new rural hospital model.

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