CMS Releases New Guidance on Rural Emergency Hospitals

In December 2020, Congress passed the Consolidated Appropriations Act of 2021, creating a new Medicare provider type: Rural Emergency Hospitals (“REHs”). This Act was introduced in response to losses of emergency services in rural areas due to hospital closures from financial distress. Effective January 1, 2023, REHs will be eligible to participate in Medicare and receive payment for items and services furnished on or after this date. REHs will receive enhanced Medicare payment for services, plus a monthly facility payment. In exchange for increased reimbursement, REHs are prohibited from providing inpatient care.

Recently, on January 26, 2023, CMS released guidance on REHs covering, among other things, the conversion process and REH Conditions of Participation. Some key takeaways are below.

• What is an REH? An REH is a facility that provides emergency department services and observation care, and other outpatient medical and health services that the facility may elect, that do not exceed a per patient average length of stay of 24 hours. REHs are prohibited from providing inpatient services, except for those furnished in a distinct unit licensed as a skilled nursing facility. This means that REHs must either discharge patients within 24 hours or transfer them to another hospital or facility.
• What facilities are eligible for REH designation? Critical Access Hospitals (“CAHs”) and small rural hospitals with 50 or fewer beds that were participating in Medicare as of December 27, 2020 may be eligible to convert to an REH. Eligible hospitals that were participating as of that date but subsequently closed could also seek REH designation if they re-enroll in Medicare and otherwise meet all applicable requirements. CMS anticipates that the vast majority of REHs will be conversions from a CAH or rural hospital and that very few REHs will complete an initial enrollment as a new provider.
• How does a facility become an REH? Eligible facilities wishing to convert to an REH must complete and submit the Form CMS-855A (Medicare Enrollment Application) as a change of information submission (not an initial enrollment). REHs must also submit an action plan, transfer agreement, and an attestation that the REH meets the REH Conditions of Participation. CMS has indicated that the action plans will be made available to the public and eventually posted to the CMS website.

Effective December 22, 2022, Michigan Governor Gretchen Whitmer approved Public Act 265 which amends Michigan’s Public Health Code to define REHs and allow eligible hospitals to convert to an REH. Notably, hospitals must notify the Michigan Department of Health and Human Services if the hospital applies for conversion to an REH. The Public Health Code also now includes a mechanism for REHs to temporarily delicense beds, presumably to give REHs flexibility to convert back to an inpatient hospital. The Michigan Department of Licensing and Regulatory Affairs is working to revise the current health facility licensure application to include an REH designation.

For questions about REHs or how to convert to an REH, please contact any member of the Honigman Health Care Practice Group.