WASHINGTON – Health and Human Services Secretary Kathleen Sebelius has announced the expansion of the Centers for Medicare & Medicaid Services’ Rural Community Hospital demonstration program.

Made possible through the Affordable Care Act, up to 20 small rural hospitals in selected states will be eligible for enhanced reimbursement for inpatient services, in addition to the 10 hospitals already participating in the program.

“Improving healthcare for rural Americans is a top priority in the Affordable Care Act,” said Sebelius. “One in five Americans lives in a rural area and small community hospitals are often their only source of care. This demonstration project and other important investments in hospitals, infrastructure and the healthcare workforce will help ensure that Americans living in rural communities can get the quality health services they need.”

The program will pay participating hospitals under a cost-based methodology for inpatient hospital services furnished to Medicare beneficiaries for an additional five years.

Participating rural community hospitals must be located in one of the 20 states with the lowest population density: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah and Wyoming.

A hospital must also meet several other criteria to be classified as a rural community hospital and qualify for participating in this demonstration.

A hospital must:

• Be located in a rural area;
• Have fewer than 51 beds;
• Provide 24-hour emergency care services; and
• Not be designated or eligible for designation as a critical access hospital under section 1820 of the act.

The goal of the program is to test the feasibility and advisability of cost-based reimbursement for small rural hospitals that are too large to be critical access hospitals. Officials say that in recent years, hospitals in this category have experienced negative Medicare margins on inpatient services.