HHS Inspector General Report’s Recommendations Threaten Federal Payments to Rural Hospitals

September 12, 2013

Plan could be problematic for rural EMS as well

Recommendations within a new report by the Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS) to change Medicare payments “threatens enhanced payments to two-thirds of critical-access hospitals,” according to a recent article in ModernHealthcare.com. Likewise a subsequent article from Medlaw.com suggests that the “OIG Plan Could Kill Rural EMS If Congress Approves It.”

The OIG report examines the status of certain critical-access hospitals (CAHs), which receive higher-than-normal payments from Medicare to ensure that beneficiaries in rural areas, where services cost more to deliver, are able to access hospital services. CAHs must be a certain distance from other hospitals or CAHs and be located in rural areas. Prior to 2006, states could exempt CAHs from the distance requirement by designating them as “necessary provider” (NP) CAHs.

NP CAHs are permanently exempt from meeting the distance requirement under current law. The OIG report examined CAHs to determine how many of them would meet the location and distance requirements if they were required to re-enroll in Medicare. The report found that nearly two thirds of CAHs would not meet the distance requirements and that the majority of these were NP CAHs, which the Centers for Medicare and Medicaid Services (CMS) does not currently have the authority to decertify. CMS concurred with several recommendations made in the report, including that CMS seek legislative authority to remove NP CAHs’ permanent exemption from the distance requirement.

Essentially, at issue in the OIG report and recommendations is how and whether CMS should be able to reassess the status of NP CAHs and revoke the CAH status for hospitals that aren’t remote but were designated NP CAHs prior to 2006 and continue to reap the benefits of that status. The Medlaw.com article claims that a large number of CAHs would go out of business if they lost their CAH status. This, the article argues, would hurt volunteer EMS providers:

“Rural EMS systems typically are heavily supported by training, medical direction, and in some cases actual ownership by local rural hospitals. Many systems operated by volunteers and paid-on-call personnel also depend on the shorter transport times to rural facilities to make their operations feasible. Loss of these resources would severely impact as many as half of the systems, with some forced to close.”

Having to travel longer distances to transport patients to hospitals could be a significant problem for volunteer EMS providers. Recruitment and retention of volunteer fire and EMS providers has become increasingly challenging in recent years as the number of hours required to do the job has expanded even as there are fewer people with less time available to serve in rural areas. Additionally, many volunteer emergency services agencies may soon have to take steps to reduce the number of hours per week that their members serve to avoid paying a tax penalty under the Patient Protection and Affordable Care Act.

Congress would need to pass legislation removing the NP CAHs’ statutory exemption before CMS could act to revoke their CAH status. The President’s FY 2014 budget request includes a far more limited proposal to scale back the number of CAHs and it is unclear at this time whether even that proposal will be approved by Congress. The NVFC will continue to monitor this issue and weigh in, as necessary, to protect the interests of volunteer emergency services providers as it relates to this issue.