Critical Access Hospitals (CAHs)

Characteristics of the Program

The Medicare Rural Hospital Flexibility Grant Program, more commonly known as the Flex Program, established a new hospital category, the CAH, designed to provide financial stability to small, rural hospitals that were losing money after changes in the prospective payment system (PPS) implemented by Medicare in 1983. The program permits designated CAHs to function as limited-service facilities with flexible staffing and service requirements not permissible in larger hospitals. It also allows simplified billing methods and offers incentives to develop local, integrated health-delivery systems, including acute, primary, emergency, and long-term care. Although targeted at very small hospitals, the program covers healthcare [Page 263]facilities and issues at the national, state, and local levels.

The Flex Program consists of two components: cost-based Medicare reimbursement for designated CAHs; and a state Flex Grant Program administered by the federal Office of Rural Health Policy (ORHP) to strengthen rural healthcare systems. The ORHP, which is within the Health Resources and Services Administration (HRSA) of the Department of Health and Human Services (HHS), manages the program nationally, making funds available to state Flex Programs and providing program oversight.

CAHs, which are designated to act as nuclei of organized, local systems of care in rural areas, work to encourage the growth of collaborative rural delivery systems across the continuum of care at the community level with appropriate external relationships for referral and support. In addition to designating and supporting the conversion of hospitals to CAHs, the statutory and regulatory provisions of the national program require states to develop and maintain a State Rural Health Plan, create a CAH network that is complementary to providing a wide range of services, fostering local Emergency Medical Services (EMS) linkages with CAH networks, supporting quality improvement initiatives, and evaluating their programs within the framework of national program goals.

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