Inspector General Proposes Decertifying Most Critical Access Hospitals

The Office of Inspector General for the Department of Health and Human Services has recommended decertifying hundreds of Critical Access Hospitals (CAHs) because they do not meet the distance requirements under law.

In a report published this week, the OIG found that the majority of CAHs are within 35 miles of another hospital, the minimum distance to qualify for CAH designation. In the past hospitals could win an exemption of the distance requirement by having their respective state authorities declare them a “necessary provider.” That law was changed in 2006, but hospitals with necessary provider designation were grandfathered to continue under that status into perpetuity.

Over the past few weeks, CAHs also have come under scrutiny by the Centers for Medicare and Medicaid Services and by the president, the latter of whom has recommended in his 2014 budget proposal that CAH reimbursements be cut from 101 percent of reasonable costs to 100 percent across the board, and that hospitals less than 10 miles from another hospital be stripped of their CAH designation completely, which would cost those hospitals on average $1.3 million per year.

The OIG report recommends even deeper cuts, proposing that hospitals within 35 miles of another hospital be stripped of the CAH designation and be required to reapply. Of the 1,329 CAHs across the country, 846 would not meet the location requirements, according to OIG. By comparison the president’s proposed cuts would strip the CAH designation from 71 hospitals because they are within 10 miles of another hospital.

Of the 846 hospitals less than 35 miles from another hospital, 749 are exempt because their respective states have declared them necessary providers.

Neither the president, nor CMS, nor the OIG can strip hospitals of necessary provider status; that requires action by Congress to change the law. The OIG recommends that the law be changed giving CMS authority to review CAH hospital status on a regular basis. While CMS concurred with this recommendation, it rejected another proposal by OIG to give CMS the ability to apply certain discretion metrics to waive the distance metrics, such as the level of poverty of the population served by a hospital. “Establishing new criteria such as those that have been recommended could not only be duplicative of existing criteria, but could be administratively burdensome to implement,” CMS Administrator Marilyn Tavenner wrote in a response to the OIG report.