The Center for Medicare and Medicaid Innovation (CMMI) announced it is accepting applications from qualifying hospitals for the Rural Community Hospital Demonstration (RCHD) program. It seeks an additional 10 hospitals to participate in the program, and applications are due by 11:59 p.m. ET on March 1, 2025. Under current law, the program expires on June 30, 2028. However, the program has been extended by Congress multiple times since its inception.
What Is the Rural Community Hospital Demonstration Program?
The RCHD provides cost-based payment for inpatient and swing bed services to hospitals during the first cost-reporting year of participation. After the first year, hospitals are paid based on the lesser of reasonable costs or a target amount. Medicare payments under the Outpatient Prospective Payment System or for services provided in a distinct part skilled nursing facility are not impacted by participation in the RCHD.
As the RCHD adjustment for years two through five is based on the initial base year cost report and the case mix index (CMI) adjustment factor for the subsequent years, it is important to understand the implications of total cost and Medicare discharges in the first year as well as the CMI on a go-forward basis.
To participate, hospitals must meet the following criteria:
- Rural Area: Located in rural areas as defined in Section 1886(d)(2)(D) of the Social Security Act (SSA) or treated as rural based on §1886(d)(8)(E) of the SSA.
- Bed Count: Has 51 or fewer acute beds.
- Emergency Services: Provides emergency services 24 hours per day.
- Not a Critical Access Hospital (CAH): Is neither eligible for CAH status nor has been designated as a CAH.
- Specific States: Located in Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Vermont, or Wyoming.
How to Apply for RCHD
For the application, hospitals must submit selected cost report pages and respond to narrative questions. The narrative questions focus on how the increased funding will be used to maintain access to a “full-service” hospital while improving the quality of care and enhancing patient care options within the community. CMS will prioritize applications based on factors that include distance to the nearest hospital, whether it has a special status, i.e., Medicare Dependent, Sole Community, or Rural Referral Center, approval for swing beds, occupancy and utilization data from the prior three years, and Medicare operating margin for inpatient services.
How Forvis Mazars Can Help
Our team has extensive experience helping rural healthcare providers navigate a wide range of reimbursement and performance improvement opportunities. If you have questions or need assistance evaluating the RCHD or improving the financial performance of your organization, please reach out to a professional at Forvis Mazars.