Arkansas Valley Regional Medical Center was notified by the Center for Medicare and Medicaid Services (CMS) on Feb. 3, 2017, that the designation as a “Critical Access Hospital” has been awarded to the facility effective Oct. 28, 2016.

Arkansas Valley Regional Medical Center was notified by the Center for Medicare and Medicaid Services (CMS) on Feb. 3, 2017, that the designation as a “Critical Access Hospital” has been awarded to the facility effective Oct. 28, 2016. This designation does not decrease any services at AVRMC, but allows AVRMC to qualify for the payment of 101 percent of its costs associated in the treatment of Medicare patients.

Medicare beneficiaries can receive care in over 1,300 small hospitals called Critical Access Hospitals (CAHs). CAHs are limited to 25 beds and primarily operate in rural areas. Unlike traditional hospitals (which are paid under prospective payment systems), Medicare pays CAHs based on each hospital’s reported costs. Each CAH receives 101 percent of its costs for outpatient, inpatient, laboratory and therapy services, as well as post-acute care in the hospital’s swing beds.

History of the CAH program

In 1988, the Montana Hospital Research and Education Foundation designed a demonstration of a type of hospital called a Medical Assistance Facility (MAF) that received cost-based reimbursement from Medicare. MAFs were isolated, limited-service hospitals that could admit patients for no more than a four-day length of stay. In 1989, Congress authorized the Rural Primary Care Hospital (RPCH) program, a second demonstration program whereby small, rural hospitals would receive cost-based payments from Medicare. In 1997, the Balanced Budget Act of 1997 merged the MAF and RPCH programs into a new category of hospitals called Critical Access Hospitals. CAHs would receive cost-based inpatient and outpatient payments from Medicare.

To qualify for the CAH program, a hospital had to be at least 15 miles by secondary road and 35 miles by primary road from the nearest hospital or be declared a “necessary provider” by the state. Within Colorado, there are 30 Critical Access Hospitals.

Defining the care that Medicare buys from CAHs

Medicare pays for the same services from CAHs as from other acute care hospitals (e.g., inpatient stays, outpatient visits, laboratory tests, and post-acute skilled nursing days). However, CAHs’ payments are not based on the type of service provided or the number of services provided. Payments are based on each CAH’s costs and the share of those costs that are allocated to Medicare patients.

Medicare pays CAHs 101 percent of their allowable costs for most services. The cost of treating Medicare patients is estimated using cost accounting data from Medicare cost reports. CMS’s cost accounting methodology allocates costs among patients based on a combination of factors such as the number of days a patient stays in the hospital and the dollar value of charges the patient incurs for ancillary services. Beneficiaries pay the standard hospital deductible for inpatient services and cost sharing equal to 20 percent of charges (not costs) for outpatient services.

Certification Process

In order for AVRMC to pursue the CAH designation, a financial feasibility study was performed by the Colorado Rural Health Center which is appointed by the State to administer the program. That study indicated AVRMC qualified, and the application was submitted to Novitas which is the Medicare Administrative Contractor for Colorado. The Medical Center underwent a certification survey on October 2016 and based on those results was recommended for certification by the Center for Medicare and Medicaid Services.