Rural health clinic reimbursement changes and strategies

The Consolidated Appropriations Act of 2021 (CAA), passed in December 2020, included comprehensive payment reforms for rural health clinics (RHCs). Among the most significant changes, the CAA established a payment limit per visit for all new RHCs.

Here we provide an overview of how the CAA will impact RHCs, followed by opportunities and strategies RHCs may want to consider optimizing reimbursement. These changes are relevant for any rural health center, rural health clinic, or all-inclusive care clinic interested in understanding and improving RHC reimbursement logistics.

RHC Medicare cap payment reform

The CAA includes changes to RHC Medicare rates. New reimbursement caps will apply to all RHCs (both independent and provider-based), impacting the cost per visit.

Previously, a provider-based clinic to a RHC hospital with fewer than 50 beds was reimbursed from Medicare based on actual costs, while an independent RHC and a provider-based RHC to a hospital with more than 50 beds was reimbursed from Medicare up to a capped reimbursement rate or upper payment limit of approximately $90 per visit.

Now, under the CAA, all RHCs will be subject to a capped all-inclusive rate. This change could increase the availability of rural urgent care as larger hospitals may now consider establishing provider-based RHCs.

For any new RHCs, independently owned RHCs and specified provider-based RHCs to a hospital with more than 50 beds, the payment limit per visit started at $100 on April 1, 2021, and will increase based on statutorily set levels. The capped rates will continue to increase annually to a payment limit per visit of $190 in 2028. After 2028, the payment limit per visit will increase based on the Medicare Economic Index (MEI).

Cap rates by year

Note the increase rates are not guaranteed. RHCs will receive the lesser of the payment limit per visit or the actual rate per visit calculated by the Medicare Cost Report.

RHC reimbursement opportunities

Provider-based RHCs to a hospital with fewer than 50 beds that applied to become an RHC before December 31, 2020, and previously established RHCs to a hospital with fewer than 50 beds, were grandfathered in and will not be subject to the above new payment limits per visit.

These RHCs are now subject to new RHC-specific limitations, determined on a 2020 "base rate" indexed annually by MEI. A grandfathered provider-based-RHC can lose this designation if the hospital bed count exceeds 50 beds on the filed Medicare Cost Report. Healthcare organizations that operate as an RHC, and those considering RHC designation to provide RHC services, should consider the impact of these RHC payment updates.

Strategy: HOPD to RHC?

As the Medicare payment limit per visit continues to grow, it may be advantageous to convert an existing hospital outpatient department (HOPD) to an RHC. Why? Because Medicare RHC rates may eventually be higher than the Medicare fee-for-service rates for outpatient primary care services. Plus, RHCs require CMS certification only, not hospital licensure as with HOPDs.

However, if the Medicaid mix is relatively low, HOPD status could be advantageous depending on the service mix. Specialty services are often reimbursed at a higher rate by Medicare Part B payment in a HOPD. The calendar year 2023 decrease in the Medicare physician fee schedule may also be a factor when evaluating between HOPD or RHC.

Strategy: Review the Medicaid RHC rate

Make sure your RHC Medicaid rates are maximized under any alternative payment methodology. Currently there is uncertainty around reimbursement related telehealth visits. With changes to Medicare reimbursement for behavioral health telehealth visits, it is unclear how this will impact or change reimbursement for Medicaid.

Note: A loss in Medicare RHC reimbursement may be offset by reimbursement gains. RHC status may still make sense depending on your state's RHC reimbursement rates and your clinic's payor mix.

Strategy: Specialty services

You may want to reevaluate the use of high-cost specialists in an RHC. General surgery and/or orthopedic surgery may be reimbursed better under a Medicare physician fee schedule or in an HOPD. Consider concentrating Medicare services, such as internal medicine, into higher AIR cost-limited RHCs.

Strategy: Transfer of ownership

Organizations may consider RHC ownership realignment within the health system. Evaluate where RHCs are currently reported and if realignment would result in increased Medicare and Medicaid reimbursement.

Critical access hospital reimbursement may increase if the RHC ownership is transferred to a Prospective Payment System hospital with fewer than 50 beds. A RHC may be an eligible site under the 340B program if ownership is transferred to a disproportionate share hospital with fewer than 50 beds.

Strategy: Expansion of mental health telehealth services

Mental telehealth services are now reimbursed at the all-inclusive rate or $113 in 2022 for non-grandfathered provider-based RHCs. In response, organizations should evaluate where mental health services are currently reported on the hospital cost report data and within the system. Consider whether realignment would increase the RHC reimbursement rate for these medically necessary services.

Remember, between 2022 and 2028 the reimbursement for non-grandfathered RHCs will increase from $113 per visit to $190 per visit. Given the increase, organizations may want to expand the reach of their mental health services to rural underserved areas and shortage areas, and offering telehealth services is one strategy to consider. RHC practitioners like nurse practitioners, physician assistants, and certified nurse midwives can also provide preventive services via telehealth, even after the public health emergency period ends.

Your rural healthcare consulting specialists

Medicare administrative contractors will be providing more guidance to RHCs on these changes and how to properly bill for services like basic laboratory services in the cost report. RHCs should stay tuned for more updates from CMS on the changing regulations for non-physician providers.

Wipfli can answer questions around the new RHC reimbursement system and eligibility requirements. For assistance in optimizing your RHC status and reimbursement rates, reach out to your Wipfli advisor or contact us.

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