Trends in Special Medicare Payments and Service Utilization for Rural Areas in the 1990s

By Donna O. Farley; Lisa R. Shugarman et al. | Go to book overview

APPENDIX
A. SPECIAL MEDICARE PAYMENTS FOR RURAL HOSPITALS
The scope and history of the Medicare special payment policies for inpatient services by rural hospitals reflect the diversity of issues faced by rural hospitals serving Medicare beneficiaries. By 1990, the full set of these special payment policies had been established for the following designated hospitals, although modifications continued throughout the 1990s:
Sole Community Hospitals (SCH)
Rural Referral Centers (RRC)
SCH/Rural Referral Centers
Medicare-Dependent Hospitals (MDH)
Essential Access Community Hospital (EACH)
EACH/Rural Referral Center

Because each special payment designation responded to a unique set of issues for rural hospitals, both the eligibility criteria and payment methodologies differ substantially. We summarize these provisions below. In addition, we describe two other provisions that increase payments for rural hospitals: reclassifying hospitals so an urban standardized amount or wage index is used to establish PPS payments, and higher DSH payments for certain rural hospitals. The provisions described here were applicable during the 1990–1998 time period covered by this research. The BBA and follow-up legislation subsequently modified many of these provisions.


SPECIAL PAYMENT DESIGNATIONS

Sole Community Hospitals

This designation provides payment protection for hospitals in isolated locations that are the sole source of inpatient services reasonably available to Medicare beneficiaries. Effective April 1, 1990, hospitals that qualified as sole community hospitals were paid the highest of three rates: (1) the updated hospital-specific rate based on the hospital's 1982 costs per discharge, (2) the updated hospital-specific rate based on its 1987 costs per discharge, or (3) the federal PPS rate, including any applicable outlier amount. A provision of the BBRA allows a sole community hospital to elect to rebase its special payments on the basis of the hospital's costs per discharge for its fiscal year 1996 reporting period, if the hospital was paid during 1999 on the basis of either its 1982 or 1987 costs per discharge. Sole community hospitals also receive special treatment under criteria for geographic reclassification and DSH payment adjustment (discussed below).

Designation as a sole community hospital remains in effect without need for reapproval unless there is a change in the circumstances under which the designation was approved. Hospitals that were granted exemptions from the hospital cost limits before October 1,1983, were automatically classified as sole community hospitals. Any other rural hospital seeking designation must meet one of the following criteria:24

____________________
24
A hospital not in a rural area may be designated as a sole community provider if it is more than 35 miles from other similar hospitals.

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