Rural Regulatory Policy


Medicare policy changes and payment adjustments often have significant and problematic consequences for rural providers. AHA is sensitive to the administrative burden and cost created by rules that fail to consider the unique circumstances of small or rural community hospitals. Recent policy changes are reviewed for their impact on the delivery of care in rural communities.


Outpatient PPS Payment Update

CMS has published its proposed rule to update Medicare Hospital Outpatient Prospective Payment System (OPPS) rates and policies for calendar year (CY) 2018. In addition to proposing rate updates, CMS solicits comments on a wide range of topics including deep OPPS reimbursement cuts for drugs obtained through the 340B drug discount program. CMS includes a “Request for Information on CMS Flexibilities and Efficiencies,” as it has in other proposed Medicare payment rules this year. Specifically, CMS is seeking suggestions for ways the Administration can made improvements to the health care delivery system that reduce unnecessary burdens, increase quality of care, and lower costs. CMS will accept comments on the proposed rule until September 11, 2017.

Highlights of the proposed rule include:

  • Reduces reimbursement for 340B-purchased drugs from ASP+6% to ASP-22.5%, which could disproportionately affect rural hospitals given already smaller margins and strained finances. Note: CAHs will continue to receive cost-based reimbursement for their 340B-purchased drugs rather than ASP-22.5% (or ASP+6% for non-340B drugs) since they are not paid under OPPS. Please view the AHA Member Advisory for key messages about the program that you can use when discussing it with your community, policymakers and the media.
  • Reinstates the non-enforcement of direct supervision requirement for outpatient therapeutic services in CAHs and small rural hospitals having 100 or fewer beds for CY 2018 and CY 2019 to allow such facilities more time to comply.
  • Overall, proposed policy changes increase CY 2018 OPPS payments by 1.9%, or $897 million, compared to CY 2017, with projected payment increases of 2.0% for both urban and rural hospitals.
  • Continues application of the frontier floor for the wage index, which likely avoids some payment reductions for hospital outpatient services in remote rural states.
  • Continues the 7.1% payment adjustment for OPPS services at Sole Community Hospitals.
  • Proposes regulatory language to conform to a policy adopted last year to implement a reduction in reimbursement for film X-rays. CMS also proposes to implement a statutory requirement that CMS reduce the OPPS payment for the technical component of an X-ray taken using computed radiography technology. The reduction equals 7% during 2018 through 2022, with a 10% reduction applicable beginning in 2023. These provisions apply to only OPPS and MPFS not CAHs.

Physician Fee Schedule Update

The CMS notice of proposed rulemaking for the physician fee schedule (PFS) was released July 13 and proposes to make significant additional site-neutral cuts in payment for services furnished in off-campus provider-based departments (PBDs) of a hospital that began billing under the OPPS on or after Nov. 2, 2015. Comments are due by Sept. 11.

Highlights of the proposed rule include:

  • Further reduces payments to off-campus PBDs for items and services now excluded from the OPPS in alignment with Section 603 “site-neutral payment” requirements. This most recent change would further reduce the PFS Relativity Adjuster to 25 percent (from 40 percent) of the amount that would have been paid under the OPPS.
  • Creates a general care management bundled code for RHCs/FQHCs with one payment amount for CCM and behavioral health integration services and another for the psychiatric Collaborative Care Model (CoCM).
  • Proposes payment and policy updates for Medicare Diabetes Prevention Program including use of virtual MDPP services in the limited case of make-up sessions.

Inpatient PPS Payment Update

CMS on April 14 issued its hospital IPPS proposed rule for FY 2018.The proposed rule would increase IPPS rates by 1.6 percent in FY 2018, after accounting for inflation and other adjustments required by law. The proposed rule effectively terminates the programs buoyed by the Medicare extenders as well as outlines some promising proposals intended to reduce regulatory barriers for hospitals, health systems and the patients they serve, such as on the CAH 96-hour rule, electronic clinical quality measures (eCQMs) and the electronic health record (EHR) incentive program.

Highlights of the proposed rule include:

Deemphasizes review of CAH 96-hour certification requirement. The agency will direct Quality Improvement Organizations, Medicare Administrative Contractors, the Supplemental Medical Review Contractor and Recovery Audit Contractors to make the requirement a low priority for medical record reviews conducted on or after Oct. 1, 2017. This means that absent concerns of probable fraud, waste or abuse of the coverage requirement, these contractors will not conduct medical record reviews to determine compliance with the CAH 96-hour certification requirement.

  • Terminates Medicare-dependent hospital (MDH) program as of October 1 (per MACRA)
    • CMS estimate: 96 of 158 current MDHs lose $119 million
  • Terminates temporary expansion of low-volume hospital (LVH) adjustment
  • Reinstates pre-ACA 25% LVH adjustment for hospitals >25 miles from like hospital and <200 discharges
  • Decreases LVH payments by $311 million from FY 2017 to 2018
  • Establishes $7 billion disproportionate share hospital (DSH) uncompensated care pool to be allotted according to Worksheet S-10 data
    • PhasePhases in Worksheet S-10 data, using FY 2014 Worksheet S-10 data and low-income proxy data from FYs 2013 and 2012In effect, redistribution of DSH uncompensated care dollars from more urban, Medicaid-expansion states to more rural, non-expansion statess in Worksheet S-10 data, using FY 2014 Worksheet S-10 data and low-income proxy data from FYs 2013 and 2012
    • In effect, redistribution of DSH uncompensated care dollars from more urban, Medicaid-expansion states to more rural, non-expansion states.

The proposed rule also includes a request for information soliciting feedback on how Medicare can contribute to making the delivery system less bureaucratic and complex, and how it can reduce burden for clinicians, providers and patients in a way that increases quality of care and decreases costs.

AHA submitted detailed comments to CMS on the proposed rule as well as its response to the request for information on CMS flexibilities and efficiencies. A Regulatory Advisory is available for reference.

FCC Rural Health Care Program

The Federal Communication Commission should update its Rural Health Care Program to meet the growing demand for broadband telehealth services, the AHA said in comments submitted recently. Specifically, AHA recommends the program increase the Healthcare Connect Fund and HCF discount percentage; reduce administrative burden; support consortium administrative expenses and remote patient monitoring; and reconsider how it defines an eligible rural area. The comments were submitted in response to a public request for comments on how to accelerate access to broadband-enabled health care solutions in rural and other underserved areas.

AHA also is working with the FCC through its listening sessions on broadband. The Connect2Health Task Force is soliciting input from stakeholders regarding regulatory policy, technical and infrastructure issues the emerging “broadband-enabled health care ecosystem.”

MACRA Proposed Rule

On June 30 CMS issued a proposed rule updating the requirements of the quality payment program (QPP) for physicians and other eligible clinicians mandated by the Medicare Access and CHIP Reauthorization Act of 2015. The QPP includes two tracks – the default Merit-based Incentive Payment System and advanced alternative payment models. The rule proposes what eligible clinicians must report for the QPP's 2018 performance period, which will affect eligible clinicians' payment under the Medicare physician fee schedule in calendar year 2020.

Highlights of the proposed rule include:

  • Increases the low volume threshold to exclude individual MIPS eligible clinicians or groups with ≤$90,000 in Part B allowed charges or ≤200 Part B beneficiaries, which are applicable to clinicians in Health Professional Shortage Areas (HPSA), rural, non-patient facing, hospital Based, and small practices. The proposed rule solicits comment on allowing MIPS excluded clinicians to opt-in in future years so they can be eligible for payment adjustments.
  • Allows FQHCs and RHCs that voluntarily report to opt-out of sharing their data on Physician Compare. FQHCs and RHCs are exempt from participating if they choose. Method II CAHs are required to participate if above the low volume threshold.
  • Adds Virtual Groups as participation option for year 2 -- solo practitioners and groups of 10 or fewer eligible clinicians.
  • Adjusts the final score of any eligible clinician or group who’s in a small practice (15 or fewer clinicians) by adding 5 points to the final score
  • Proposes to allow facility-based eligible clinicians, including those practicing in rural hospitals, to convert their hospital’s Total Performance Score under the Hospital Value Based Purchasing Program into a MIPS Quality performance category and Cost performance category score.
  • Makes change to the performance period and weight to final MIPS score:
  • Quality and Cost: 12-month calendar year performance period, and proposed continuation of 60% weight for quality and 0% weight for cost in final score in 2020, and
  • Advancing Care Information and Improvement Activities: 90 days minimum performance period.
  • Details policies for All-Payer Combination Option Qualifying Participant Determinations and proposes to expand the definition of “physician-focused payment models” submitted to the Physician-Focused Payment Model Technical Advisory Committee to include Other Payer Advanced APMs (beyond Medicare-specific Advanced APMs), expanding opportunities and incentives through the QPP for rural hospital and clinician collaboration and participation in alternative payment models.

AHA is encouraged by CMS's proposal for a facility-based clinician reporting option, and applauds the agency's proposal to extend the use of modified stage 2 meaningful use requirements through 2018. AHA will encourage CMS to provide the same relief to hospitals. See the AHA Special Bulletin for highlights of the proposed rule. The agency’s Quality Payment Program website has additional resources.


Health Care Policy and Regulatory Guidance

Guidance on Shared Space

CMS is working to finalize updated guidance related to co-location, which should clarify policies governing how hospitals can share space with other providers, the agency told the AHA recently. AHA has been urging CMS to provide more transparency about the agency’s expectations for shared space and to allow for flexibility where needed and appropriate, especially for rural areas where hospitals may have visiting specialists. We continue to appreciate CMS’s openness to hearing our concerns. We have asked CMS to make this guidance a priority and to align its policies as much as possible with the agency’s broader mission to promote coordinated, patient-centered care across the continuum.

Bundled Payment Programs

The rules for the new Episode Payment Models (EPMs) for cardiac care and expanded Comprehensive Care for Joint Replacement (CJR) model are now effective May 20 with a start date of January 1, 2018. Hospitals in selected metropolitan areas will begin the new EPM bundles for heart attack and coronary bypass, including incentive payments for cardiac rehabilitation, and CJR will be expanded to include hip fracture surgeries. Although most rural hospitals will not participate in the bundles as the site of cardiac care or orthopedic surgery, rural hospitals may collaborate with EPM or CJR participants as providers of post-acute care.

Clinical Decision Support (CDS) Mandate under the Physician Fee Schedule

In the Protecting Access to Medicare Act of 2014, Congress included a mandate ordering providers to consult appropriate use criteria via electronic CDS when ordering outpatient advanced imaging exams for Medicare patients. Jan. 1, 2018 is the deadline for referring providers to begin consulting CDS when placing advanced outpatient imaging orders, and for furnishing providers to submit documentation of CDS use on Medicare claims for reimbursement.

EHR Incentive Program

CMS recently finalized rules making some needed changes to the program to increase flexibility in the short term. Unfortunately at the same time, it also finalized rules raising the bar on meaningful use requirements yet again with Stage 3 requirements that are required in 2018. These rules contain provisions that are challenging, if not impossible, to meet and require use of immature technology standards. AHA urges CMS to cancel Stage 3 of meaningful use by removing the 2018 start date from the regulation, and gather input from stakeholders on ways to further reduce the burden of the meaningful use program requirements.

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.

Access to Care in Vulnerable Communities

In 2016, an AHA task force released its report on Ensuring Access to Care in Vulnerable Communities, which offers hospital and health system leaders nine innovative ways to preserve access to essential health services in vulnerable communities. These nine strategies are:

1.Addressing the social determinants of health

2.Global budgets

3.Inpatient/outpatient transformation strategy

4.Emergency medical centers

5.Urgent care centers

6.Virtual care strategy

7.Frontier health system

8.Rural hospital-health clinic strategy

9.Indian health service strategy

Successful implementation of these emerging strategies by vulnerable communities is dependent on numerous public policy changes. As such, AHA is developing the specific legislative and regulatory changes that are necessary to enable their implementation. We are advocating that policy makers make such changes a priority so that hospitals and health systems can better ensure access to care in vulnerable urban and rural communities. Learn more at




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