Little-Known Facts About Critical Access Hospitals

Medlearn Media NPOS Non-patient outcome spending

It’s a familiar term, but one that begs to be better understood.

What is a Critical Access Hospital (CAH)?

Many involved in the healthcare industry are familiar with term, but may not know exactly what one is. A CAH is a designation given to eligible rural hospitals by the Centers for Medicare & Medicaid Services (CMS).

Congress created the CAH designation through the Balanced Budget Act of 1997 (Public Law 105-33) in response to more than 400 rural hospital closures taking place during the 1980s and early 1990s. Since its creation, Congress has amended the CAH designation and related program requirements several times through additional legislation.

The CAH designation is designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare by keeping essential services in rural communities. To accomplish this goal, CAHs receive certain benefits, such as cost-based reimbursement for Medicare services, which is explained below.

Eligible hospitals must meet the following conditions to obtain CAH designation:

  • Be located in a state that has established a State Medicare Rural Hospital Flexibility Program;
  • Be designated by the state as a CAH;
  • Be located in a rural area or an area that is treated as rural;
  • Be located either more than 35 miles from the nearest hospital or CAH, or more than 15 miles in areas with mountainous terrain or only secondary roads; prior to Jan. 1, 2006, facilities were certified as a CAH based on state designation as a “necessary provider” of healthcare services to residents in the area;
  • Maintain no more than 25 inpatient beds that can be used for either inpatient or swing-bed services;
  • Maintain an annual average length of stay of 96 hours or less, per patient, for acute inpatient care (excluding swing-bed services and beds that are within distinct part units);
  • Demonstrate compliance with the CAH Conditions of Participation (CoPs) found at 42 CFR Part 485, subpart F; and
  • Furnish 24-hour emergency care services seven days a week.

Critical Access Hospital Payments

For most inpatient and outpatient services provided to patients, CAHs are paid at 101 percent of reasonable costs. “Reasonable cost” is the cost that was actually incurred in order to provide a medical service, to the extent that the cost is necessary in order to efficiently deliver that service.

The usual short-term acute-care hospital is paid a prospectively determined amount, hence the “prospective payment system.” Private insurance payors do not reimburse on a cost basis, but rather on the prospective payment system (or on a percent of charges).

Lastly, CAH services are paid according to Part A and Part B deductibles and coinsurance amounts – and they don’t limit the 20-percent CAH Part B outpatient copayment amount by the Part A inpatient deductible amount.

In summary, CAHs are essential to the care of residents of our rural areas; and survival is essential.

Programming note: Listen to Dr. John Zelem every Tuesday on Talk Ten Tuesdays at 10 a.m. EST.

Facebook
Twitter
LinkedIn

John Zelem, MD, FACS

John Zelem, MD, is principal owner and chief executive officer of Streamline Solutions Consulting, Inc. providing technology-enabled, expert physician advisor services. A board-certified general surgeon with more than 26 years of clinical experience, Dr. Zelem managed quality assessment and improvement as a former executive medical director in the past. He developed expertise in compliance, contracts and regulations, utilization review, case management, client relations, physician advisor programs, and physician education. Dr. Zelem is a member of the RACmonitor editorial board.

Related Stories

Transparency in Coverage Final Rule

Transparency in Coverage Final Rule

The healthcare industry’s landscape shifted dramatically with the implementation of the Transparency in Coverage (TiC) Final Rule. For compliance professionals navigating this regulatory terrain, understanding

Read More
Abe Sutton and MA Reform

Abe Sutton and MA Reform

From think tanks to federal agencies, health policy in the U.S. is often shaped by voices we don’t always see in the headlines. Abe Sutton,

Read More

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

2026 IPPS Masterclass 3: Master MS-DRG Shifts and NTAPs

2026 IPPS Masterclass Day 3: MS-DRG Shifts and NTAPs

This third session in our 2026 IPPS Masterclass will feature a review of FY26 changes to the MS-DRG methodology and new technology add-on payments (NTAPs), presented by nationally recognized ICD-10 coding expert Christine Geiger, MA, RHIA, CCS, CRC, with bonus insights and analysis from Dr. James Kennedy.

August 14, 2025
2026 IPPS Masterclass Day 2: Master ICD-10-PCS Changes

2026 IPPS Masterclass Day 2: Master ICD-10-PCS Changes

This second session in our 2026 IPPS Masterclass will feature a review the FY26 changes to ICD-10-PCS codes. This information will be presented by nationally recognized ICD-10 coding expert Christine Geiger, MA, RHIA, CCS, CRC, with bonus insights and analysis from Dr. James Kennedy.

August 13, 2025
2026 IPPS Masterclass 1: Master ICD-10-CM Changes

2026 IPPS Masterclass Day 1: Master ICD-10-CM Changes

This first session in our 2026 IPPS Masterclass will feature an in-depth explanation of FY26 changes to ICD-10-CM codes and guidelines, CCs/MCCs, and revisions to the MCE, presented by presented by nationally recognized ICD-10 coding expert Christine Geiger, MA, RHIA, CCS, CRC, with bonus insights and analysis from Dr. James Kennedy.

August 12, 2025

Trending News

Featured Webcasts

The Two-Midnight Rule: New Challenges, Proven Strategies

The Two-Midnight Rule: New Challenges, Proven Strategies

RACmonitor is proud to welcome back Dr. Ronald Hirsch, one of his most requested webcasts. In this highly anticipated session, Dr. Hirsch will break down the complex Two Midnight Rule Medicare regulations, translating them into clear, actionable guidance. He’ll walk you through the basics of the rule, offer expert interpretation, and apply the rule to real-world clinical scenarios—so you leave with greater clarity, confidence, and the tools to ensure compliance.

June 19, 2025
Open Door Forum Webcast Series

Open Door Forum Webcast Series

Bring your questions and join the conversation during this open forum series, live every Wednesday at 10 a.m. EST from June 11–July 30. Hosted by Chuck Buck, these fast-paced 30-minute sessions connect you directly with top healthcare experts tackling today’s most urgent compliance and policy issues.

June 11, 2025
Open Door Forum: The Changing Face of Addiction: Coding, Compliance & Care

Open Door Forum: The Changing Face of Addiction: Coding, Compliance & Care

Substance abuse is everywhere. It’s a complicated diagnosis with wide-ranging implications well beyond acute care. The face of addiction continues to change so it’s important to remember not just the addict but the spectrum of extended victims and the other social determinants and legal ramifications. Join John K. Hall, MD, JD, MBA, FCLM, FRCPC, for a critical Q&A on navigating substance abuse in 2025.  Register today and be a part of the conversation!

July 16, 2025

Trending News

Prepare for the 2025 CMS IPPS Final Rule with ICD10monitor’s IPPSPalooza! Click HERE to learn more

Get 15% OFF on all educational webcasts at ICD10monitor with code JULYFOURTH24 until July 4, 2024—start learning today!

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24