What is a Critical Access Hospital?  

Critical Access Hospital is a designation given to primarily rural hospitals to improve infrastructure and care delivery to the surrounding rural communities.

Key Takeaways

  • In 1997, CAHs were established after a string of rural hospital closures, in hopes of reducing healthcare disparities in rural communities.

  • One major benefit of being a CAH is getting reimbursed at cost rather than at Medicare’s PPS.

What are Critical Access Hospitals

Why the CAH Designation was Created

The CAH designation was created to support hospitals in rural areas in response to a series of rural hospital closures during the 1980s and 1990s. These hospitals are often in geographically isolated areas and cater to rural communities that otherwise may not have access to inpatient care. 

The CAH designation was first introduced in the 1997 Balanced Budget Act in a federal effort designed to improve the infrastructure of rural healthcare, ranging from increased educational resources to technical assistance. By directing financial resources to rural hospitals allowed them to stay open, preserving access to care in these much-needed areas, where patients may reside in mountainous areas or in areas only accessible by secondary roads. 

To attain CAH status, the facility must meet certain requirements such as being located more than 35 miles from the nearest hospital, containing no more than 25 inpatient beds and being owned by a public or nonprofit entity. A CAH also must participate in the Medicare Rural Hospital Flexibility program or “Flex Program” to receive financial support (sorry, Connecticut, Delaware, Maryland, New Jersey, and Rhode Island). When a facility is granted CAH designation, it becomes eligible for reimbursement at 101% of reasonable costs as opposed to Medicare’s diagnosis related group-based reimbursement structure. 

CAHs vs non-CAHs: quality of care

CAHs have increased access to care for many rural communities. However, the quality and outcomes of care are still not comparable to its more resourced and funded counterparts. In an analysis of almost 5,000 US hospitals, CAHs have fewer clinical resources such as ICUs, specialists, and the ability to perform surgeries. EHRs are used less and mortality rates remain higher than non-CAHs. 

Personnel issues in rural communities are not unheard of. For instance, while CAHs have more flexibility in providing care, ERs may not always have a doctor on-site. The same study points to this issue as a potential factor in decreasing healthcare quality and higher mortality rates in rural areas.

How come only 30% of rural hospitals apply for CAH designation?

Even though CAHs have the benefit of being reimbursed at 101% reasonable costs, a hospital still must perform its own financial analysis to see if it would fare better with this new reimbursement model. This causes some rural hospitals to forgo the CAH designation. According to a financial analysis of eligible hospitals, 48% do not benefit because their current reimbursement model through Medicare’s PPS payment rules is greater than the CAH payment rule. 

The Future of Rural Care

We are witnessing a new wave of rural hospital closures. In the last decade, 113 rural hospitals have closed, 39 of which were Critical Access Hospitals according to the Chartis Center for Rural Health. The same report shows a correlation between the lack of Medicaid expansion and the states with the highest number of rural hospital closures. Further, it shows that CAHs, and rural facilities in general, are currently at risk for closure. 

The rural healthcare system is facing existing and emerging obstacles such as a shortage of physicians, the Opioid Crisis, the COVID-19 pandemic and a patient pool that primarily relies on Medicaid and Medicare. However, discussions about potential solutions are occurring and include new models of care and telehealth, connecting primary care physicians to much-needed specialists who don’t reside in the area. The biggest takeaways from these solutions are adaptability, financial analysis, and collaboration with other healthcare facilities. It will take policy decisions and federal support to help with the aforementioned.

Many iterations of legislation have passed to improve rural healthcare including the 1989 Rural Primary Care Hospital (RPCH) program, but none have had as big of an impact as the 1997 Balanced Budget Act, discussed earlier. 

Over the years, more attention has been given to rural care, with more policies coming into effect to help CAHs. Effective in 2004, the Flex program increased its grant funding from $25 to $35 million. And when the Affordable Care Act passed, the 340B drug discount program expanded to include certain CAHs. Recently, CMS is testing out the CHART Model with 15 rural communities with hopes of transforming rural healthcare.


Outside the Huddle


Reviewed by Geetika Rao, MPH | Edited by Nidhi Mahagaokar, MPH | Fact checked by Jared Dashevsky, M.Eng