However, 88 percent of the non-compliant CAHs are categorized as "necessary provider" CAHs, and are permanently exempted from having to meet one of the location requirements. Medicare certified CAHs must be at least 35 miles from another hospital or at least 15 miles from another hospital in mountainous terrain or areas that are served only by secondary roads. CAHs must also be locate in rural areas. 

OIG recommended that CMS ask Congress to remove the permanent exemption from the distance requirement for necessary provider CAHS, and said CMS should reassess CAH compliance with the location requirements on a regular basis. Joanna Hiatt Kim, vice president, payment policy at the American Hospital Association, said the OIG recommendation to remove the distance requirement exemption would harm rural hospitals. "If the recommendation were implemented, many of these facilities may be forced to close and patients could lose their access to essential medical services", Kim in an Aug. 15 statement.