It's been a boom time for critical-access hospitals, and the rural hospital lobby would like to keep it that way.
The critical-access program allows small rural hospitals to receive cost-based reimbursement from the CMS instead of reimbursement based on the prospective payment system that other acute-care hospitals must use. The Medicare Modernization Act of 2003 helped entice hospitals to join the program by increasing their payments to 101% of cost from 100% and raising the number of inpatient beds that critical-access hospitals may operate to 25 from 15. The result has been a 23.5% jump in the number of critical-access hospitals to 1,050 at the end of 2004 from 850 in 2003. However, the act also imposed a Dec. 31 deadline on another popular way to become a critical-access hospital that involves a state designating it as a necessary provider.
Under this designation, a hospital can get around a requirement that it be at least 35 miles away from another one. Terry Hill, executive director of the Rural Health Resource Center, said about 200 hospitals that haven't yet converted to critical-access status may be eligible with such a state waiver. However, they would have to apply by year-end or lose the chance.
Faced with that deadline, Mitchell County Hospital of Beloit, Kan., used the necessary-provider provision to apply for critical-access status, and last week it officially converted, said John Osse, the hospital's administrator.
The American Hospital Association and the National Rural Health Association, the trade group for rural hospitals, said they plan to work with Congress to extend the so-called necessary-provider provision or seek another way for hospitals to keep converting to critical-access status. The Medicare Payment Advisory Commission is also expected to release a report later this year on payments to critical-access hospitals.
Don May, the AHA's vice president of policy, said the number of beds a critical-access hospital is allowed to operate might need to be increased again because there are some hospitals that have more than 25 beds but not enough volume to survive under the prospective payment system. Mitchell County Hospital's Osse said one solution would be amending the law to require a certain daily average census instead of a fixed bed count.
The CMS is running a five-year rural demonstration project, mandated under the Medicare reform act, that allows rural hospitals with up to 50 beds to receive cost-based Medicare payments for inpatient services. Currently the project isn't part of the critical-access program, but it may lead to larger rural hospitals receiving cost-based reimbursements.
Calvin Hiner, administrator of Tri-County Area Hospital in Lexington, Neb., said his 40-bed hospital expects to receive a 15%, or $350,000, increase in annual Medicare payments under the demonstration project. Hiner said all rural hospitals with 50 or fewer beds should be eligible for critical-access status.
"There's a group of hospitals-about 400-that are too big for critical access and too small for PPS to work," he said.