The History of the Medicare Rural Hospital Flexibility Program

The Medicare Rural Hospital Flexibility Program is a federal program administered by states that is designed to improve the financial stability of smaller hospitals in rural areas. In short, the program attempts to create more fairness in Medicare reimbursement rates to rural and urban hospitals.

Background

• The U.S. Congress created the Rural Hospital Flexibility Program as part of the Balanced Budget Act of 1997. In 1998, West Virginia became the first state approved by the U.S. Centers for Medicare and Medicaid Services to implement this program for rural hospitals in that state.

Eligibility

• To be eligible for grant funding, a hospital must be designated a Critical Access Hospital. These are acute care hospitals that have 15 inpatient beds or fewer, with another 10 "swing" beds that can be for inpatient services or other purposes. The hospital must provide emergency services seven days a week, 24 hours a day, and the average annual length of stay must be 96 hours or less.

Benefits

• The Rural Hospital Flexibility Program was created because many smaller, rural hospitals have disproportionately high numbers of Medicare patients than urban hospitals. However, rural hospitals' Medicare reimbursement rates were lower than urban hospitals for the same services. This meant that many rural hospitals were losing money on Medicare-related services.