On July 1, 2022, CMS issued a proposed rule in which the agency proposes to update and potentially liberalize the distance rules applicable to Critical Access Hospitals (CAHs) as well as procedures for monitoring the continued eligibility of CAHs (the Proposed Rule). CMS also proposes to establish the enrollment rules and conditions of participation (COPs) for Rural Emergency Hospitals (REHs). Comments on the Proposed Rule are due August 29, 2022.

CMS regulations currently require CAHs to be located more than a 35-mile drive from a hospital or another CAH, or 15 miles in the case of mountainous terrain or in areas with only secondary roads. The regulations do not define secondary roads. But in 2015, CMS issued guidance defining “primary road” to include all U.S. highways. This meant that only roads that were not U.S. highways could qualify as secondary roads. CMS’s new definition put the status of many CAHs in jeopardy because they could no longer meet the 15-mile criterion if any part of the route they relied upon for eligibility was on a U.S. highway. Under the proposed new definition, a primary road would include all numbered federal highway (with any number of lanes) plus all state highway with two or more lanes in each direction.

The threat to CAHs was very real. In 2017, the United States Court of Appeals for the Fifth Circuit upheld CMS’s decision to deny CAH status to a hospital that was located 31.8 driving miles from the nearest hospital. Baylor Cnty. Hosp. Dist. v. Price, 850 F.3d 257, 259 (5th Cir. 2017). The single road connecting the hospitals has only one lane, no median strip, no passing lanes and no paved shoulders. CMS nonetheless denied CAH status because 28.4 miles of the road was designated a federal highway.

Several members of Congress, including Senator Chuck Schumer (D-NY) and Representative Elise Stefanik (R-NY), among others, have urged CMS to reconsider its definition of primary road. In response to those concerns, CMS proposes in the Proposed Rule to codify and potentially liberalize its definition of “primary road.” Again, under the proposed new definition, a primary road would include all numbered federal highways (with any number of lanes) plus all state highways with two or more lanes in each direction. Notably, this proposed definition would not have helped the hospital in Baylor because a primary road would continue to include all federal highways. However, CMS is also soliciting comments as to whether federal highways, like state highways, should have two or more lanes in each direction to qualify as a primary road.

CMS is also proposing to establish a “centralized, data-driven review procedure” to determine both the initial and continued eligibility of CAHs. Under the proposal, every three years CMS will review whether new hospitals have opened within a 50-mile radius of each CAH. If no new hospitals have opened within that radius, the CAH will be automatically recertified. CAHs will be subject to further review if new hospitals have opened within a 50-mile radius since the last review cycle.

CMS’s Proposed Rule also proposes eligibility rules and conditions of participation (COPs) for Rural Emergency Hospitals (REHs). The Consolidated Appropriations Act of 2021 (CAA) created REHs as a new type of Medicare provider effective January 1, 2023. REHs will be the only Medicare provider type that cannot offer inpatient services. They will only be permitted to offer emergency department, observation, and other outpatient services as specified by CMS. REHs will receive enhanced payments from Medicare. This includes 105% of the OPPS rate for covered outpatient services and an additional monthly stipend. REHs will also have to comply with quality reporting requirements.

The Proposed Rule does not address the payment policies or quality reporting requirements for REHs. CMS says those topics will be addressed in a future rulemaking. The Proposed Rule only addresses the enrollment rules and conditions of participation for REHs.

CMS proposes that in order to enroll as an REH, a hospital must have been either a CAH or a rural hospital with fewer than 50 beds as of December 27, 2020 (the date CAA was enacted). An urban hospital that has reclassified as rural would qualify if its reclassification was active as of December 27, 2020. CMS further proposes that REHs will have to maintain an average length of stay of fewer than 24 hours (as required by the statute).

The agency proposes that hospitals that enroll as REHs will have to comply with a laundry list of conditions to participate in the Medicare program, including but not limited to the following:

• Compliance with state and federal laws, including being located in a state that will license REHs;
• Possess a governing body that is legally responsible for the conduct of the REH;
• Furnish health services in accordance with a written policy that is consistent with state law and developed with the advice and input of the medical staff;
• Provide emergency care necessary to meet the needs of its patients;
• Provide 24/7 laboratory services that are consistent with nationally recognized standards of care for emergency services;
• Provide diagnostic radiologic and pharmacy services to meet the needs of the community;
• Provide mental health services;
• Have a doctor, physician assistant, or nurse practitioner on call and immediately available to provide emergency care; and
• Have in place a transfer agreement with a Level I or Level II trauma center.

The Proposed Rule is expected to be published in the Federal Register on July 6, 2022. A display copy of the Proposed Rule is available here. The CMS fact sheet is available here.