IG10023 — Medicare Payment for Rural or Geographically Isolated Hospitals, 2021

/ Medicare Payment for Rural or Geographically Isolated Hospitals Medicare pays most acute-care hospitals under the inpatient prospective payment system (IPPS). Some IPPS hospitals receive payment adjustments, which may help address the potential financial distress associated with rural, geographically isolated, and low volume hospitals. These Medicare payment designations are Sole Community Hospitals (SCHs), Medicare-Dependent Hospitals (MDHs), and Low-Volume Hospitals (LVHs). Other similar acute-care hospitals—Critical Access Hospitals (CAHs)—are paid based on reasonable cost, not under IPPS. 2021 Medicare Hospital Payment IPPS Inpatient Prospective Payment System A predetermined, fixed, per discharge payment for inpatient services furnished to Medicare beneficiaries, subject to adjustments. All IPPS Designations SCH, MDH, LVH No duplications Hospital Designation Locations Eligibility Criteria Adjusted payment No. of Hospitals Sole Community Hospital (SCH) Meets ONE of the following FOUR criteria: > 35 miles from another IPPS hospital Rural and 25-35 miles from another hospital and Is the exclusive hospital provider in the area, or < 50 beds, meets exclusive hospital provider criterion but for patient transfers to other hospitals for specialized care Rural and 15-25 miles from a hospital that is inaccessible Rural and 45 minute drive to nearest other hospital The > of the following: IPPS rate FY82 FY87 FY96 FY06 Hospital-specific rate applicable reference years1 FY - Fiscal Year 453 14%* Medicare-Dependent Hospital (MDH) Meets ALL of the following criteria: 1. Rural 2. 100 beds 3. Not an SCH 4. 60% are Medicare patients MDH will expire effective October 1, 2022, if Congress does not extend the program. 75% of the difference between the highest historic cost and the IPPS rate IPPS rate FY82 FY87 FY96 1+2+$ 170 5%* Low-Volume Hospital (LVH) Meets ALL of the following criteria: 1. > 15 miles from another IPPS hospital 2. < 3,800 annual total discharges LVH eligibility criteria are scheduled to change on October 1, 2022, if Congress does not extend the current criteria. Continuous linear adjustment Annual patient discharges 621 19%* $= IPPS + (IPPS x Applicable %) Critical Access Hospital (CAH) Meets ALL of the following criteria: 1. Rural 2. 25 inpatient beds 3. 24/7 emergency services 4. Annual average length of stay of 96 hours 5. >35 mile drive from another IPPS hospital or CAH, or 6. > 15 mile drive in mountainous terrain, or 7. Designated as a “necessary provider” before 1/1/2006 101% CAH’s reasonable costs 1,350 % not applicable CAHs are not paid by Medicare under IPPS. 1Hospital-specific rate (HSR): A per discharge payment based on a hospital’s average operating costs for furnishing inpatient services to Medicare beneficiaries. In contrast, IPPS is a per discharge payment based on the national average operating cost of furnishing inpatient services to Medicare beneficiaries. Both HSR and IPPS use costs from statutorily defined reference years, trended forward. Class ranges display only discrete values found in the data. Designations: Not mutually exclusive Mutually exclusive *Total number of IPPS hospitals: 3,228 (Excludes hospitals in Maryland; they are exempt from the IPPS.) Sources: CRS analysis of relevant statute, regulations, and Centers for Medicare & Medicaid Services (CMS), “Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Final Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals,” 85 Federal Register 58432, September 18, 2020. CAH data as of October 2020 provided by the Flex Monitoring Team—an academic consortium—funded by the Federal Office of Rural Health Policy. Information prepared by Marco Villagrana, Analyst in Health Care Financing, Paul Romero, Research Assistant, Domestic Social Policy, Mari Lee, Visual Information Specialist, and Calvin DeSouza, Geospatial Information Systems Analyst.

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