How Do Medicaid Programs Pay CAHs For Outpatient Services?

Outpatient Medicaid business is often of greater financial importance than inpatient revenues for small rural hospitals. Officials in 13 of the 42 states studied reported that they have a special outpatient payment policy for CAHs. Although this represents fewer states than have adopted alternative Medicaid reimbursement policies for inpatient services, 45% of all certified CAHs are located in these 13 states. Nine of these 13 states reimburse CAHs for 100% of the costs associated with treating Medicaid beneficiaries. The other four states provide an enhanced rate to CAHs, but do not guarantee 100% cost settlement. In two other states, Kentucky and North Dakota, it was not necessary to create a special policy for CAHs, as all hospitals are paid costs for outpatient care. Only one state contact (from California) reported that small rural hospitals have a different fee schedule than other hospital groups.

Has Risk-Based Medicaid Managed Care Had An Impact On CAH Payments?

In states with risk-based Medicaid health plans, most state Medicaid agencies told us that they do not get involved in the rate-setting process between the health plans and the hospitals. Only two states among the 27 that have risk-based Medicaid managed care in rural areas have systems to ensure that all CAHs receive cost reimbursement. Officials in one state said that the impact of risk-based health plan payments to CAHs had become an issue for several CAHs.

How Does Medicaid Reimburse CAHs For Other Hospital Services?

None of the state Medicaid officials we spoke with mentioned that there are any special provisions for payment of CAHs for psychiatric services. Among the 30 states where Medicaid officials offered information on payment of hospital-based skilled nursing facilities (SNFs), only Alabama and Hawaii have payment methodologies for SNFs in CAHs that differ from the ones used for other hospitals. There were no reported differences in payment for hospital-based home health services to CAHs versus other hospital types.

Do CAHs Receive Medicaid DSH Payments?

Although no regulations preclude CAHs from receiving DSH payments if they meet the necessary criteria, most do not have sufficient Medicaid or low-income volume to do so. Based on our interviews, West Virginia and Ohio are the only states that specifically target CAHs under their DSH programs. In both states, the objective is to compensate CAHs for some or all of their Medicaid shortfall. Georgia Medicaid officials described an effort to modify DSH policies to create an additional benefit for CAHs. Six other states have DSH provisions that benefit rural hospitals (including CAHs), though the policies were not designed to target CAHs.

What Is The Impact Of The Flex Program On State Medicaid Programs?

State contacts could not provide quantitative estimates of the financial impact of special payment provisions for CAHs on state Medicaid Programs. They were nearly unanimous, however, in their opinion that the impact of cost-based payment for CAHs on Medicaid expenditures is likely to be minimal, as most CAHs have very small Medicaid inpatient volume. Although outpatient Medicaid use is much higher among CAHs than inpatient use, the total outpatient volume and expenditures in CAHs accounts for a very small portion of statewide Medicaid outpatient volume and expenditures.

Where Can I Get More Information? About this report:     Stephanie Poley, North Carolina Rural Health Research & Policy Analysis Center, UNC, (919) 843-8248, stephanie_poley@unc.edu About this Project:     Check out our website http://www.rupri.org/rhfp-track Background The Rural Hospital Flexibility Program is a federal initiative to strengthen rural health. The Program: 1. Allows small hospitals the flexibility to reconfigure operations and be licensed as Critical Access Hospitals (CAHs). 2. Offers cost-based reimbursement for Medicare acute inpatient and outpatient services. 3. Encourages the development of rural-centric health networks. 4. Offers grants to states to help implement a CAH program in the context of broader initiatives to strengthen the rural health care infrastructure. Previous Findings From The Field and Tracking Project Reports Report:              Rural Hospital Flexibility Program Tracking Project Year Three Vol. 2, No. 7:     State Flex Programs--Perspectives of the Flex Coordinators Vol. 2, No. 6:     A Critical Access Hospital Update, September 2002 Vol. 2, No. 5:     Reauthorizing the Medicare Rural Hospital Flexibility Grant Program:  Lessons from the Field Vol. 2, No. 4:     Critical Access Hospitals and Community Development Vol. 2, No. 3:     Administration in Critical Access Hospitals Vol. 2, No. 2:     Regionalization of Emergency Medical Services:  The Experience of Michiganšs Upper Peninsula Vol. 2, No. 1:     Impact of the Rural Hospital Flexibility Program on Rural Emergency Medical Services:  Evidence From the First Two Years

CAH/FLEX - National Tracking Project FINDINGS FROM THE FIELD Volume 2, Number 6, September 27, 2002 Consortium Members Project HOPE Walsh Center for Rural Health Analysis Rural Policy Research Institute University of Minnesota Rural Health Research Center University of North Carolina Rural Health Research and Policy Analysis Program University of Southern Maine Rural Health Research Center WWAMI Rural Health Research Center