Rural Health Clinics (RHCs) play a vital role in providing medical services to the underserved rural population. A RHC's financial sustainability largely depends on the reimbursement it receives for the services provided. The Consolidated Appropriations Act 2021 (CAA) introduced significant payment reforms for RHCs, impacting their revenue cycle. This article explores these changes, their effect on RHCs, and potential strategies to optimize reimbursement.

The Consolidated Appropriations Act and Its Impact on Rural Health Clinics

The CAA, which was passed in December 2020, brought substantial changes to the reimbursement structure for RHCs. One of the most noteworthy developments was the implementation of a cap rate for all new RHCs. The rising caps on cost-per-visit could indicate a higher chance for reimbursement compared to the usual Medicare Part B payments.

RHC Medicare Cap Payment Reform Under CAA

The new reimbursement caps will apply to all RHCs, both independent and provider-based. Historically, a provider-based RHC linked to a hospital with fewer than 50 beds received Medicare reimbursement based on actual expenses. In contrast, an independent RHC and a provider-based RHC linked to a hospital with more than 50 beds received Medicare reimbursement up to a capped rate of around $90 per visit.

However, the CAA brought all RHCs under a capped rate system. This shift could potentially increase the availability of rural care as larger hospitals might now consider establishing provider-based RHCs. There are potential negative impacts to reimbursement for smaller “grandfathered” RHCs as they are now limited to the lower of their capped rate or their actual cost per visit.

What New Reimbursement Caps Mean for RHCs

For any newly established RHCs, independently owned RHCs, and provider-based RHCs linked to a hospital with more than 50 beds, the cap started at $100 per visit on April 1, 2021, and is now up to $139 per visit in 2024. These capped rates are set to increase annually up to $190 per visit in 2028. After 2028, the capped rate will adjust based on the Medicare Economic Index (MEI).

The table below illustrates the cap rates by year:

It's important to note that these 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 linked to a hospital with fewer than 50 beds that applied to become an RHC before December 31, 2020, were granted a special, grandfathered status. These RHCs will not be subject to the new per-visit caps and are now subject to RHC-specific limitations determined on a 2020 "base rate" indexed annually by the MEI.

Reimbursement Opportunities and Strategies for RHCs

These changes in reimbursement structure call for healthcare establishments that currently operate as an RHC and those considering RHC designation to reassess the impact of these alterations on their financial sustainability. Here are a few strategies to consider:

1. Accurate Visit and FTE Count

Make sure the RHC visit count is accurate, and you are not hitting a productivity penalty. Proper management of visit counts and full-time equivalents (FTEs) can ensure that RHCs are not inadvertently limiting their reimbursement potential or failing to meet productivity standards that could influence their financial performance. In certain situations, the RHC’s MAC may approve a request for a productivity exemption if certain requirements are met.

2. Ensure Accurate Expense Coding

If an RHC's actual cost per visit is over the CAP, make sure expenses being coded to the RHC are accurate and not for other departments of the hospital. This approach can help accurately reflect the cost of services the RHC provides, potentially leading to improved reimbursement opportunities.

3. Conversion from HOPD to RHC

As the Medicare cap grows, it might be beneficial to convert an existing hospital outpatient department (HOPD) to an RHC. The reason is that Medicare RHC rates may eventually surpass the Medicare fee-for-service rates. Furthermore, RHCs require only certification, not hospital licensure, as with HOPDs.

4. Specialty Services

RHCs may want to reconsider the use of high-cost specialists. General and orthopedic surgery may yield better reimbursement under the Medicare physician fee schedule or in an HOPD.

How Lutz’s Healthcare Accounting Services Can Help

The new RHC reimbursement methodology and eligibility requirements have significant implications for RHCs. To optimize reimbursement rates, you must thoroughly understand these changes and adapt your strategies accordingly. If you need assistance, please contact us. Lutz’s healthcare accounting services can help you navigate this area.