From the December 2013 issue of HealthCare Business News magazine


Pullman, which is 9.8 miles away from its nearest competitor, just barely misses the 10-mile criteria, meaning both facilities would lose their critical-access designation should Obama’s budget proposal come to pass.

However, the OIG report released this August would go further than the initial budget proposal, affecting a much broader swath of hospitals in the United States and cutting hundreds of millions a year in Medicare spending.


Since 1997, critical-access hospitals have received higher levels of reimbursement on average than traditional Medicare hospitals that receive payments based on uniform fees, according to the American Hospital Association.

But the OIG report argues that about two-thirds of the small hospitals that receive additional funding to reach remote residents are actually not all that remote.

In fact, 846 of the small hospitals were less than 35 miles from another hospital, failing to meet official CMS guidelines that require that hospitals be located at least that distance apart in order to qualify for the critical-access funding boost.

About three-quarters of the 1,328 critical-access hospitals in the U.S. were certified under an old process that gave states the power to exempt hospitals from CMS' 35-mile requirement, according to the report. Though Congress closed that loophole in 2006, the law bars CMS from overturning the states' decisions in those cases.

According to the report, if the distance rules were applied across the board, 88 percent of the hospitals benefitting from those state exemptions would lose their Medicare funding.

The OIG recommended that the CMS get rid of the state-granted exemptions and create more uniform criteria that could be applied nationally. The report argued that if even half of the 846 hospitals that were less than 35 miles from another hospital were kicked out of the program, Medicare would spend $373 million less.

The report has been met with outcry from many hospitals, but critics argue the program has outgrown its original intent of ensuring health care access to remote, rural communities. And overindulging hospitals that don’t meet CMS criteria may actually wind up depriving facilities that truly need help providing critical access of funding to stay open.

Marilyn Tavenner, CMS Administrator, wrote that the agency is in favor of requesting that Congress give it the power to decertify critical-access status previously appointed by states. However, it disagrees with the OIG's recommendation to establish new, revised criteria because it could affect hospitals' payment status and be too time-consuming.

December 2013 Magazine

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