Members in Action Case Study: Co-Located Critical Access & Behavioral Health Hospital

Charles A. Cannon Jr. Memorial Hospital and Appalachian
Regional Behavioral Hospital | Avery County, N.C.


In November 2021, leaders at Charles A. Cannon, Jr. Memorial Hospital (Cannon) formed Appalachian Regional Behavioral Health (ARBH) Hospital, a 37-bed, walk-in inpatient facility — and the first Critical Access Hospital (CAH) in the country to also house a behavioral health hospital on its campus. Cannon leaders formed the 37-bed hospital by converting an existing, 10-bed, distinct part unit, which had historically operated as part of the CAH. They also added 27 newly licensed psychiatric beds.

Critical Access Hospitals are traditionally not allowed to operate within 35 miles of other hospitals (15 miles in mountainous terrain), per a Centers for Medicare and Medicaid Services’ (CMS) rule. But when the behavioral health needs in the mountainous region of western North Carolina skyrocketed, the leaders at Appalachian Regional Healthcare System (ARHS) knew they had to make a change.

While many of Cannon’s medical beds sat empty, the demand for behavioral health beds skyrocketed. “Canon’s emergency departments were full of people who were experiencing mental health crises, but had no place to go,” said Chuck Mantooth, president and CEO of ARHS. “And while they waited for transfer for days or weeks, we were running up operating expenses and delaying care for a very fragile patient population.”

ARHS sought and eventually received a historic exemption to the CMS rule, allowing it to become the first CAH to build another hospital nearby. This exemption now paves the way for others to do the same. Federal law dictates that co-located hospitals be independently licensed and physically distinct from acute care facilities. Fortunately, Cannon already had a fire barrier which separated the existing unit from the rest of the hospital.

ARHS renovated the unit with a $6.5 million grant from the North Carolina Department of Health and Human Services, enabling them to enabling them to increase their psychiatric bed capacity overall by 27 beds. The grant covered the majority cost of the construction, but the bigger challenge was securing the exemption. Without it, Cannon would lose its CAH status and cost-based reimbursement for Medicare services, threatening Cannon’s financial stability.

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