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Rural Health Clinic Payment Reform

On December 27, 2020 the Consolidated Appropriations Act of 2021 introduced changes to the existing Rural Health Clinic payment structure.

Changes to the Rural Health Clinic Payment Structure

This legislation introduced the following reforms:

  • Phase-in steady increases in the RHC statutory cap over an eight year period
  • Subjects all new RHCs to the new Medicare per-visit cap
  • Controls the annual rate of growth for uncapped RHCs whose payments are above the new payment cap
  • Allows RHCs to furnish and bill for Hospice attending physician services when the RHC patient becomes terminally ill and elects the Hospice benefit beginning January 1, 2022

This bill contained drafting errors that were corrected with H.R. 1868, which was signed into law on April 14, 2021, and to become effective as of April 1, 2021.

Rural Health Clinic Payment Reform

Along with the corrections, this new bill also introduced some additional clarifications:

  • Corrects the drafting error on the effective date of grandfathered RHCs from 12/31/2019 to 12/31/2020. All uncapped provider-based RHCs enrolled in Medicare by the end of 2020 will be grandfathered into the new RHC payment structure.
  • Allows clinics owned by hospital with fewer than 50 beds, who submitted an 855a enrollment for the Medicare RHC program by 12/31/2020, but have not yet completed the certification process, to be grandfathered into the new payment structure. These clinics will have their clinic-specific RHC rate cap set based on their 2021 cost per visit.
  • Requires that grandfathered RHCs must be owned by a hospital with fewer than 50 beds in order to maintain grandfathered status. Should the parent hospital exceed the 50-bed limit, the RHC would lose grandfathered status and be subject to the new statutory rate cap.
  • Retroactively extends the suspension of the 2% Medicare sequestration through the end of 2021.

New Statutory Rate Cap

The new statutory rate cap enacted by the Consolidated Appropriations Act is set at $100 beginning April 1, 2021. This is for all new RHCs, whether independent of provider-based, unless they qualify for grandfathered status under one of the above scenarios.

The cap is set to increase over the next eight years:

  • April 1, 2021 – YE 2021: $100
  • 2022: $113
  • 2023: $126
  • 2024: $139
  • 2025: $152
  • 2026: $165
  • 2027: $178
  • 2028: $190

Once the cap reaches $190 in 2028, the capped rate will be adjusted annually according to the Medicare Economic Index (MEI).

All existing RHCs who are considered “grandfathered” will have their rate capped at their cost per visit as determined by their 2020 cost report. The exception to this is for any “new” RHCs who were considered “in process” and have not yet completed certification, in which case, their capped rate will be set according to their 2021 cost per visit. The rates for all grandfathered RHCs will be adjusted annually according to the Medicare Economic Index (MEI).

Continuous Development

The National Association of Rural Health Clinics (NARHC) is continuing to work with Congress regarding legislation for clinics that were under construction as of 12/31/2020 but had not yet filed an 855a enrollment with Medicare for the RHC program. The hope is that these clinics will also be included as grandfathered RHCs rather than being subject to the new statutory cap.

If you have questions about how the original payment reform language, or the corrected language could impact your Rural Health Clinic, or if you would like additional information about starting a Rural Health Clinic, please contact one of the following individuals:

Kyle Smith, CPA, 340B ACE, Director

Amanda Dennison, MBA, CPC, CRHCP, Senior Consultant

Austin Fisher, CPA, Manager

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