Rural Emergency Hospitals (REHs) are a new Medicare provider type created to preserve essential emergency and outpatient access in rural communities where low inpatient volume makes full-service hospitals financially unsustainable. They receive enhanced outpatient payments and a fixed monthly facility payment in exchange for forgoing acute inpatient care. CMS has an REH fact sheet that gives a high level overview, but here are some more details.
What is a Rural Emergency Hospital?
A Rural Emergency Hospital is a rural facility that furnishes emergency department, observation, and other outpatient services but does not provide acute inpatient care, except in distinct-part units like skilled nursing or certain behavioral health units. REHs were established as a separate Medicare provider category effective January 1, 2023, with dedicated Conditions of Participation and payment rules. CMS codified the REH Conditions of Participation at 42 CFR Part 485 Subpart E.
Why were REHs created?
The CMS website states that REHs were created in response to accelerating rural hospital closures and persistently low inpatient volumes at many small rural hospitals, especially critical access hospitals (CAHs). A 2024 MedPAC report notes that converting to an REH can preserve 24/7 emergency access and key outpatient services in communities that cannot support a largely empty inpatient unit. CMS and Congress framed the model as a way to stabilize rural providers’ finances by paying explicitly for standby emergency capacity rather than subsidizing low-occupancy inpatient beds.
What legislation created the REH provider type?
The REH provider type was created by Section 125 of the Consolidated Appropriations Act (CAA) of 2021, which directed the Secretary of Health and Human Services to establish a new rural emergency hospital category under Medicare. CMS implemented this statutory authority in the CY 2023 Outpatient Prospective Payment System (OPPS) final rule, which finalized REH payment policies, Conditions of Participation, quality reporting, and enrollment rules effective January 1, 2023. The Act also mandated MedPAC to report annually on payments to REHs, starting with the March 2024 report to Congress.
How does a hospital qualify and convert to an REH?
To qualify, a facility must be located in a rural area and, as of December 27, 2020, have been either a (i) critical access hospital (CAH) or a (ii) rural prospective payment system (PPS) hospital with no more than 50 beds. The hospital must enroll in Medicare as an REH, attest to meeting REH Conditions of Participation (including transfer agreements, staffing, and quality program requirements), and agree not to furnish acute inpatient services other than in allowed distinct-part units. CMS guidance also requires an REH to maintain an annual average patient length of stay under 24 hours and to maintain a 24/7 staffed emergency department.
How are REHs paid by Medicare, and how does this differ from standard hospitals?
Medicare pays REHs for outpatient services at the standard OPPS rate plus a 5 percent add-on for REH-designated services, while beneficiary copayments are calculated on the underlying OPPS amount without the 5 percent increment. In addition, REHs receive a fixed monthly facility payment—about 3.2–3.3 million dollars annually in 2023—updated by the hospital market basket each year (for example, roughly 276–286 thousand dollars per month in 2024–2025). By contrast, standard rural PPS hospitals and CAHs are paid under IPPS/OPPS (or CAH cost-based methods) without this dedicated monthly facility payment and without the across-the-board 5 percent outpatient bump tied specifically to giving up inpatient services.
What services can REHs provide, and what are the key operational requirements?
REHs must operate a 24/7 emergency department and can furnish a broad range of outpatient services, including emergency care, observation, imaging, lab, outpatient surgery, maternal health, and behavioral health services. They may operate distinct-part skilled nursing facility units or certain other inpatient-type units under separate payment rules, but they cannot maintain a general acute inpatient hospital unit. Operationally, REHs must meet CAH-like Conditions of Participation, including staffing with qualified emergency clinicians, maintaining transfer agreements with at least one Medicare-certified Level I or II trauma hospital, and operating data-driven quality assessment and performance improvement programs.
What does early evidence from MedPAC say about the impact of REHs?
MedPAC’s 2024 report states that 21 hospitals had converted to REH status in the first year and that these hospitals were already providing relatively low volumes of inpatient care prior to conversion. The Commission concludes that the REH designation likely prevented some rural closures in 2023 and appears more efficient than subsidizing largely unused inpatient capacity, while still preserving emergency and basic outpatient access. At the same time, MedPAC notes variation in distance to alternative hospitals and calls for continued monitoring of payments, volumes, and community impact in future reports.
The CMS website has more details on REHs for those interested.
