Rural Regulatory Policy

Regulatory Policy and Rulemaking


AHA’s litigation challenging the payment reduction continues. A federal judge has ruled in favor of AHA’s law suit, finding that CMS failed to meet the legal requirements for rulemaking when implementing this payment cut. CMS recently announced it has dropped the cut as a response to judicial pressure.

CMS Certification of Necessary Providers

On March 25 in Transmittal 153, CMS updated the state operations manual (SOM) with a new recertification guidance and checklist for distance and location of necessary provider CAHs. The AHA is pleased that this new guidance acts on the concerns we have expressed to the agency and provides additional flexibility to state survey agencies, which is critical to helping CAHs that rightfully obtained necessary provider status prior to 2006 from losing their CAH designation. See the Special Bulletin.

Exclusive Use and Co-location of Visiting Specialists

CMS has increased the requirements for communication and separation of resident physicians from visiting specialists to include signage, entrances, partitions, and waiting areas. This issue does not just involve the conditions of participation, compliance and payment provisions; it involves the Stark and anti-kick-back laws and other rules. Given the complexity of this issue, CMS is likely to take several months to work through it before providing hospitals with any further information. See the Regulatory Update.

Star Ratings

CMS delayed its scheduled April 21 release at least until July to make public an overall hospital quality “star rating” on Hospital Compare. The AHA and others have repeatedly raised significant concerns about the accuracy and validity of CMS’s star rating approach and 60 Senators and 225 Representatives sent a “Dear Colleague” letter asking CMS to better account for how hospitals treat diverse patients and to share its methodology in developing the star ratings. See the Special Bulletin.

340B Drug Discount Pricing Program

The Medicare Payment Advisory Commission Jan. 14 voted to reduce Part B drug payment rates for hospitals participating in the 340B Drug Pricing Program by 10% of the average sales price and redistribute those savings to hospitals providing uncompensated care services. AHA continues to urge Congress and MedPAC to oppose cuts to the 340B program and work with HRSA to protect patient access as it revises the rules for this program. See the AHA Blog for more information.

CJR Bundled Payments of Care

On July 9, 2015 CMS proposed the CJR bundled payment of care model. Acute care hospitals in 67 selected geographic areas will take on quality and payment accountability for retrospectively calculated bundled payments for a new payment model that would bundle payment to acute care hospitals for hip and knee replacement surgery. Under this program, the hospital in which the joint replacement takes place would be held financially accountable for quality and costs for the entire episode of care, from the date of surgery through 90 days post-discharge. CAHs will have to be best-value providers if they wish to participate. See the Special Bulletin.


EHR Incentive Program

CMS proposes to offer flexibility in the Medicare Electronic Health Record (EHR) Program. Specifically, CMS proposes to shorten the EHR reporting period for 2016 from a full year to 90 days for all eligible hospitals (EHs), critical access hospitals (CAHs) and eligible physicians (EPs). In connection with this proposal, CMS also proposes a 90-day reporting period for electronic clinical quality measures (eCQMs) in 2016 for all EHs, CAHs and EPs. CMS proposes to revise the meaningful use objectives and measures for EHs and CAHs by removing the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures for Modified Stage 2 and Stage 3 for 2017 and subsequent years. CMS also proposes to modify the Modified Stage 2 threshold of the View, Download, Transmit (VDT) measure under the Patient Electronic Access objective. Specifically, CMS proposes to reduce the threshold from 5 percent to at least one patient. Finally, CMS proposes to reduce several measure thresholds for select Stage 3 objectives: Patient Access to Health Information, Coordination of Care through Patient Engagement, and Health Information Exchange objectives. For the Stage 3 Public Health and Clinical Data Registry Reporting objective, CMS proposes to reduce the threshold to report to three registries, from the final Stage 3 requirement to report to four registries. Unfortunately, it retains Stage 3 application program interfaces and other unrealistic requirements for patient engagement and coordination of care. This issue is covered in depth in the OPPS/ASC Special Bulletin.

Computed Radiography Standards

The Consolidated Appropriations Act of 2016 contained provisions that will cut payments to providers enrolled in the Outpatient Prospective Payment System (OPPS) or Medicare Physician Fee Schedule (MPFS) for diagnostic radiology performed on equipment that is not fully digital. Beginning in 2018, claims for x-rays performed using CR technology will be reduced by 7%. The cuts will increase to 10% beginning in 2023. 20% cuts for analog begin 2017. Medicare Claims Processing Manual Chapter 13. These provisions apply to only OPPS and MPFS not CAHs.

Computed Tomography Diagnostic Imaging Services

The Protecting Access to Medicare Act (PAMA) of 2014 required providers that offer CT scanning services to comply with the National Electrical Manufacturers Association (NEMA) XR-29 standard attributes on CT equipment related to dose optimization and management. Effective January 1, 2016, a payment reduction of 5 percent applies to the technical component of CT procedures billed in hospital outpatient settings. The payment reduction increases to 15 percent in 2017. These provisions apply to only OPPS and MPFS not CAHs.

Rural Health Clinic Qualified Visits

A RHC claim must include one of the services listed on the RHC Qualifying Visit List, which was recently updated with additional medically-necessary billable visits, effective April 1. The newly added codes are not payable through the claim system if reported as the only billable qualifying visit code on the claim until October 1, when the Medicare claims system will be updated to accept the new codes. As such, RHCs would need to hold any such claims with April 1date of service forward until Fiscal Intermediary Standard System Guide is updated in the fall. However, if a new code is billed together on the same claim with another stand-alone billable qualifying visit code, the RHC claim may be submitted for services on or after April 1.

Site Neutral Payments

Section 603 of the Bipartisan Budget Act includes payment reductions for Medicare services that are furnished in new off-campus hospital outpatient departments (HOPDs). A “new” off-campus HOPD is defined as an off-campus department that started billing for Medicare outpatient services under the outpatient prospective payment system (OPPS) on or after Nov. 2, 2015. The AHA supports allowing off-campus provider-based HOPDs already under development when the BBA was signed into law to qualify as grandfathered facilities. This technical correction also clarifies that changes in ownership of a facility do not impact the grandfathered status of a PB HOPD and that grandfathered HOPDs may relocate when they meet criteria determined by the Secretary of HHS. This matter is covered in depth in the OPPS/ASC Special Bulletin.


Telehealth is the provision of health care services via telecommunications technologies, such as live video interactions and asynchronous medical data transfers, like "store-and-forward technologies.”  Remote patient monitoring refers to personal medical data transmitted securely from an individual in one location via electronic communications technologies to a provider in a different location for the purposes of medical care. AHA will urge Congress to expand Medicare coverage and payment for telehealth and provide resources for additional study of the cost-benefit of telehealth. AHA also will work with the administration to include telehealth waivers in all new care models and adopt a more flexible approach to adding new telehealth services to Medicare. AHA will continue to work with the allied associations to address state-level issues, including licensure and reimbursement for telehealth services. Visit the AHA Telehealth web page for additional resources.


CMS Releases Inpatient PPS Proposed Rule. CMS April 18 issued its hospital inpatient prospective payment system (PPS) and long-term care hospital (LTCH) PPS proposed rule for fiscal year (FY) 2017. See the Special Bulletin.

The proposed rule would increase inpatient PPS rates by 0.85 percent in FY 2017, after accounting for inflation and other adjustments required by law. Specifically, the update includes a proposed market-basket increase to the standardized amount of 2.8 percent. CMS proposes a 0.5 percentage point reduction to this update for productivity, as well as an additional 0.75 percentage point reduction, as mandated by the Affordable Care Act (ACA).

In addition, CMS proposes a 0.8 percent positive adjustment related to two-midnight policy. This proposed change represents an important, hard-fought victory for hospitals and health systems in reversing the unlawful 0.2 percent payment reduction for inpatient services. The AHA successfully challenged CMS’s implementation of this cut in federal court and convinced CMS to restore the resources that hospitals are lawfully due.

CMS also proposes a cut of 1.5 percentage points in response to the American Taxpayer Relief Act of 2012 (ATRA). Although a cut to hospital payments was mandated by ATRA, CMS’s proposal is significantly larger than Congress indicated and the hospital field anticipated. The AHA will urge CMS to reduce the amount of this cut in the inpatient PPS final rule for FY 2017.

Hospital Outpatient Prospective Payment (OPPS) and Ambulatory Surgical Center (ASC) Payment Systems and Quality Reporting Programs. On July 6, the Centers for Medicare and Medicaid Services (CMS) proposed updated payment rates and policy changes in the OPPS and ASC Payment System. In this proposed rule, CMS is proposing changes to the objectives and measures of meaningful use for Modified Stage 2 and Stage 3 starting with the EHR reporting periods in calendar year 2017. Under both Modified Stage 2 in 2017 and Stage 3 in 2017 and 2018, for eligible hospitals and CAHs attesting under the Medicare EHR Incentive Program, CMS is proposing to eliminate the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures, and lower the reporting thresholds for a subset of the remaining objectives and measures, generally to the Modified Stage 2 thresholds. In addition, CMS is proposing a one-time significant hardship exception from the 2018. See the Special Bulletin.

Physician Fee Schedule Proposed Rule. On July 6th, CMS released the 2017 Physician Fee Schedule (PFS) proposed rule. This is one of the major annual rules CMS uses to announce proposed changes to the Medicare program. Most notably for Rural Health Clinics (RHCs), this year’s PFS makes numerous changes to the RHC Chronic Care Management (CCM) requirements, including changing the supervision requirement that should make it easier to implement CCM services.

Medicare Conditions of Participation (CoP). CMS on June 16 issued a proposed rule to update select CoPs that hospitals and CAHs must meet to participate in Medicare and Medicaid. CMS believes the changes are necessary to align the Medicare requirements with current practice standards, improve quality and reduce barriers to care. See the AHA Regulatory Advisory. Among the proposed changes, CMS would:

  • Require hospitals and CAHs to implement antibiotic stewardship programs that adhere to nationally recognized guidelines and best practices;
  • Augment infection prevention and control regulations for both hospitals and CAHs;
  • Update quality assessment and performance improvement (QAPI) requirements, including the establishment of robust, ongoing, data-driven QAPI programs for CAHs;
  • Make several changes related to the content of hospital medical records;
  • Allow qualified dieticians/nutrition professionals in CAHs to order patient diets, as authorized by the medical staff and state law; and
  • Require hospitals and CAHs to implement written policies to prohibit discrimination on the basis of race, color, religion, national origin, sex (including gender identity), sexual orientation, age or disability, and to inform patients of their right to be free from discrimination. 


Life-Safety Code Update. On May 4, 2016, CMS issued a final rule adopting the National Fire Protection Association’s (NFPA) 2012 Life Safety Code (LSC) with minor amendments and most chapters of its 2012 Health Care Facilities Code (HCFC) for hospitals, CAH and certain other facilities that participate in the Medicare and Medicaid programs. The final rule takes effect July 5. The LSC includes general requirements for all new and existing buildings.  The HCFC contains more detailed provisions for health care building systems and equipment. The AHA’s American Society for Healthcare Engineering affiliate provided input to NFPA as it developed the revisions and encourages its members to comment on the draft 2018 editions of the codes available at and AHA will continue to urge the agency to keep the fire-safety standards more current going forward, as there is already a 2015 edition of the LSC.

Regional Budget Payment Concept. The Centers for Medicare & Medicaid Services (CMS) is seeking input on a Regional Budget Payment Concept that promotes accountability for the health of the population in a geographically defined community. It builds on the experience of a new hospital global budget payment program in Maryland in which all payers in aggregate pay hospitals a fixed annual amount for inpatient and outpatient services, adjusted for quality and irrespective of hospital utilization. CMS is seeking input on the feasibility of similar approaches for other geographical areas, which could include areas smaller than a state. In this concept, providers could receive a prospective budget for the care of the population of a community, and would be accountable for the total cost of care across the entire continuum of care and health outcomes for the entire population.

Medicaid, CHIP managed care plans final rule. CMS issued its long awaited final rule on Medicaid managed care that would provide new standards for managed care provider networks, quality measures, external quality review, and beneficiary rights and protections. In addition, the final rule imposes new requirements for medical loss ratios for managed care plans, implements best practices identified in existing managed long-term care services and support programs, and requires states to develop a Medicaid managed care quality rating system for health plans. The final rule also permits states flexibility to allow managed care enrollees aged 21 to 64 to access psychiatric services in inpatient psychiatric hospitals. Under the rule, states will be required to set standards to ensure patients have adequate access to doctors and other providers, and will require insurers to frequently update their provider directories.

Implementing MACRA Physician Payment Proposed Rule*

  • MACRA of 2015 repeals the flawed Medicare physician SGR formula and calls for CMS to implement a new two-track payment system for physicians and other eligible professionals that will take effect in 2019:
  • The default track is the Merit-Based Incentive Payment System (MIPS), which consolidates previously separate physician quality programs into a single program, with up to 9 percent of payment at risk for performance; and
  • The Alternative Payment Model (APM) track, which will award bonuses (from 2019 – 2014) to physicians who receive a sufficient amount of payment from APMs like ACOs or medical homes.
  • Other key issues for your consideration:
  • For the first two years of MIPS, Eligible Professionals (EPs) would include physicians, physician assistants, nurse practitioners, clinical nurse specialists and certified registered nurse anesthetists.  Other professionals may be added in later.
  • EPs below the low-volume threshold would be excluded from MIPS.  The proposal defines the threshold as having Medicare billing charges less than or equal to $10,000 and providing care for 100 or fewer Part B-enrolled Medicare beneficiaries.
  • The MIPS adjustment would apply to EPs who have assigned their billing rights to a Critical Access Hospital (i.e. Method II CAH billing).
  • Currently, Rural Health Clinics and Federally Qualified Health CRHCs and FQHCs are excluded from reporting to MIPS since they are paid differently under Medicare. CMS is asking for comment on whether these safety net providers should but have the option to voluntarily report on applicable measures and activities with no penalty in order to remain in alignment with broader efforts under Delivery System Reform.
  • Only certain APMs are considered as qualifying for receipt of incentive payments and exclusion from MIPS payment adjustments. See the AHA Regulatory Advisory.


Reducing Rx Drug Prices

The high cost of prescription drugs is putting a strain on Medicare, Medicaid and the entire health care system, including patients. The AHA has been working with a number of stakeholders including the Campaign for Sustainable Rx Pricing, to raise awareness of and develop policy solutions to combat the problems caused by drug price increases. Members provided their insights on several policy options proposed to help rationalize drug prices while still supporting innovation

 Medicare Part B Rx Drug Payment Model

Medicare currently pays physicians and HOPDs for Part B drugs at the rate of the average sales price (ASP) plus 6 percent. This ASP-based payment for drugs is in addition to a separate payment made in physician offices and HOPDs for administering the drug. In Phase I, CMS would continue to pay half of hospitals and physicians as they are today.  For the others, they would change the add-on payment from 6 percent to 2.5 percent plus a flat fee payment of $16.80 per drug per day. On average for hospitals the cut is 0.3%, with slightly higher (0.5%) for teaching hospitals and slightly lower for rural hospitals. Under Phase 2, half of each Phase 1 group would be required to use VBP tools similar to those employed by commercial health plans and other entities that manage health benefits and drug utilization. See the Special Bulletin.

 Quality Measurement

While the field is committed to quality improvement and transparency, complying with data requests is burdensome for providers. Consumers can be confused by the volume of information. Data collection and reporting activities would be more valuable if federal agencies and others asking for data agreed on a manageable list of high-priority aspects of care on which providers would be asked to make meaningful improvement, and then to use a small and critically important set of measures to track and report on progress toward improving the care delivered as well as the outcomes for patients. AHA is working with the administration to prioritize and simplify quality reporting and improve the transition to required reporting of electronic measures. The Institute of Medicine (now National Academy of Medicine) has proposed a list of high-priority topics from which this work would begin.




Small or Rural Section

Click here to access the Section for Small or Rural Hospitals page.

About AHA


Member Constituency Sections

Key Relationships

News Center

Performance Improvement

Advocacy Issues

Products & Services


Research & Trends


155 N. Wacker Dr.
Chicago, Illinois 60606

800 10th Street, N.W.
Two CityCenter, Suite 400
Washington, DC 20001-4956