Medicare Rural Hospital Flexibility Program
Beginning with the Balanced Budget Act of 1997 (Public Law 105-33), the U.S. Congress started a process designed to improve the financial ability of small, rural hospitals. The initial program was "fine-tuned" through provisions of the Balanced Budget Refinement Act of 1999 and the Benefits Improvement and Protection Act of 2000. As noted elsewhere, rural hospitals suffer not only from small, relatively poor patient populations but have also been penalized by Medicare which provided service reimbursement rates lower than those provided to urban hospitals for the same services. Oftentimes, the reimbursement was for less than the actual cost of care, thereby actually costing the hospital money. This is especially important for rural hospitals since they have proportionally more Medicare patients than do urban hospitals. The Medicare Rural Hospital Flexibility Program was intended to rectify some of these imbalances. The program presented a new reimbursement category for rural hospitals, that of the Critical Access Hospital. This new type of hospital is an acute care facility that provides emergency, outpatient, and limited inpatient services.
Critical Access Hospitals may have no more than 15 beds with another 10 "swing beds" allowed (these are inpatient beds which may also be used for other services such as part of a Skilled Nursing Facility.) Average annual length of stay for all inpatients must be 96 hours (4 days) or less. Emergency services must be available 24 hours per day, seven days per week. Certain other regulations must be followed concerning physical location, relations with larger, tertiary care hospitals, and credentialing and quality assurance procedures. In return, these hospitals will be reimbursed on a "reasonable cost" basis for inpatient, outpatient, and laboratory services delivered to Medicare patients. For small hospitals with significant numbers of Medicare patients this, at the very least, allows them to stop losing money on services delivered. The Florida Office of Rural Health oversees the conversion applications, financial feasibility studies, community needs assessments, and conversion of rural hospitals to Critical Access status.
The Medicare Rural Hospital Flexibility Program also contains a grant program, administered by the Federal Office of Rural Health Policy. Grants of up to $775,000 per state per year are provided to improve rural health systems with an emphasis on improving Emergency Medical Services. The Florida Office of Rural Health applies for, receives, and administers these grant funds.