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Rural health clinic reimbursement changes and strategies

Apr 10, 2022

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 cap rate 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 to optimize their reimbursement.

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).

Previously, a provider-based RHC to a 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 of approximately $90 per visit.

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

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

Cap rates by year

2022 $113
2023 $126
2024 $139
2025 $152
2026 $165
2027 $178
2028 $190
2029 on +MEI

Note, however, that the increase rates are not guaranteed. RHCs will receive the lesser of the cap rate or the actual rate per visit calculated by the Medicare Cost Report.

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 per-visit caps. 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 exceeds 50 beds on the filed Medicare Cost Report.

RHC reimbursement opportunities

Healthcare organizations that currently operate as an RHC, and those that are considering RHC designation, should consider the impact of these reimbursement changes. For example:

Strategy: HOPD to RHC?

As the Medicare cap 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. Plus, RHCs require 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 in a HOPD. The 2022 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. 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 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 within the health system. Evaluate where RHCs are currently reported and if realignment within the health system would result in increased Medicare and Medicaid reimbursement.

Critical access hospital reimbursement may increase if the RHC ownership is transferred to a PPS 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 AIR 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 and within the system. Consider if realignment would increase the reimbursement for these services provided within an RHC setting. 

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, and telehealth is one strategy to consider.

Your rural healthcare consulting specialists

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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Joshua J. Boyle
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