OIG: Majority of Critical Access Hospitals Do Not Comply With Certification Standards

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By James Swann

Roughly two-thirds of all critical access hospitals (CAHs) would not have met location requirements for Medicare certification if they had been required to re-enroll in 2011, according to a report from the Department of Health and Human Services Office of Inspector General released Aug. 15.

“Because services provided at CAHs are typically reimbursed at rates that are higher than the base rates, Medicare could realize substantial savings if CMS [Centers for Medicare & Medicaid Services] were to decertify some CAHs that would not meet the location requirements,” the report said.

However, 88 percent of the non-qualifying CAHs were categorized as “necessary provider” CAHs, which are permanently exempt from having to meet one of the location requirements for Medicare certification, OIG said.

The report, Most Critical Access Hospitals Would Not Meet The Location Requirements If Required To Re-Enroll In Medicare (OEI-05-12-00080), said that out of the 1,329 CAHs across the country, 849 would not have met location requirements.

Out of the non-qualifying CAHs, 846 would not have met a requirement that they be located at least 35 miles from another hospitals or at least 15 miles in mountainous terrain or areas that are only served by secondary roads.

The remaining three CAHs would not have met a requirement that they be located in rural areas.

The Medicare program and beneficiaries could have saved $449 million in 2011 if CMS had been able to decertify all CAHs operating within 15 miles of another hospital, OIG said.

CAH certification was created by the Balanced Budget Act of 1997 to ensure that rural beneficiaries had access to services. In exchange for meeting several requirements, such as being located a certain distance away from other hospitals, Medicare reimburses CAHs at 101 percent of their costs.

OIG Recommendations

OIG said CMS should certify only CAHsthat provide services to beneficiaries who would otherwise not have access to a hospital and recommended that CMS:

• ask Congress to remove the permanent exemption from the distance requirement for necessary provider CAHs;

• ask Congress to revise CAH conditions of participation to include alternative location-based requirements. For example, if a CAH did not meet location requirements, but served a population with elevated levels of poverty, it could still be certified;

• make sure to reassess CAH compliance with location requirements on a regular basis; and

• apply a uniform definition of mountainous terrain to all CAHs.


CMS agreed with all of OIG's recommendations, with the exception of creating alternative location-based requirements.

“Establishing new criteria such as those that have been recommended could not only be duplicative of existing criteria, but could be administratively burdensome to implement,” CMS said in response to the OIG report.

Alan Morgan, the chief executive officer of the National Rural Health Association, said the report's recommendations would harm rural health care.

“If the full report were implemented, it would result in shutting down up to 70 percent of a state's rural hospitals,” Morgan said in an Aug. 15 blog post.


The OIG report is at https://oig.hhs.gov/oei/reports/oei-05-12-00080.pdf.

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