H.R. 3684 — Save America’s Rural Hospitals Act

This section exempts Medicare payments under parts A and B for items and services furnished by critical access hospitals, sole community hospitals, Medicare-dependent small rural hospitals, or subsection (d) hospitals (i.e., inpatient prospective payment system hospitals) located in a rural area from sequestration reductions (previously capped at 4%). The exemption applies to sequestration orders effective on or after 60 days after enactment.

This section increases Medicare bad debt reimbursement (i.e., for unrecovered beneficiary deductibles, coinsurance, and copayments under the reasonable cost payment methodology) for rural hospitals and critical access hospitals (CAHs). (1) It limits the reduction for rural hospitals to 15% of the otherwise allowable bad debt amount (from 35%, thus increasing reimbursement to 85% from 65%). (2) It exempts CAHs from the applicable bad debt reimbursement reduction (thus providing 100% reimbursement). The amendments apply to cost reporting periods beginning more than 60 days after the date of enactment.

This section permanently extends Medicare inpatient prospective payment system (IPPS) add-on payments for Medicare-dependent hospitals (MDHs) (i.e., small rural hospitals with a Medicare inpatient utilization rate of at least 60 percent) and low-volume hospitals (i.e., rural hospitals with Medicare discharges of 800 or fewer and Medicare inpatient days of 5,000 or fewer annually). For MDHs, the amendments (1) extend the payment methodology under SSA section 1886(d)(5)(G) indefinitely by striking the sunset date of before October 1, 2025; and (2) make conforming changes to extend target amount updates under section 1886(b)(3)(D) and the period for declining urban reclassification under section 13501(e)(2) of the Omnibus Budget Reconciliation Act of 1993 to subsequent fiscal years (from through FY2025). For low-volume hospitals, the amendments to section 1886(d)(12) restructure subparagraphs (B), (C), and (D) to establish permanent applicable percentage increases of 25 percent for FY2011 and subsequent fiscal years (from FY2011 through 2025) and tiered increases of 15 percent or 25 percent for FY2019 and subsequent fiscal years (from FY2019 through 2025), limiting prior temporary increases to FY2005 through 2010.

This section extends eligibility for disproportionate share hospital (DSH) payments under the Medicare inpatient hospital prospective payment system to sole community hospitals (SCHs) paid under the special rate in SSA Section 1886(d)(5)(D)(i)(I) and Medicare-dependent small rural hospitals (MDHs) paid under Section 1886(d)(5)(G), for discharges occurring in fiscal year 2026 and each subsequent fiscal year. (SCHs are rural hospitals that are the sole or primary source of inpatient care within a defined geographic area; MDHs are small rural hospitals with ≤100 beds where Medicare patients account for ≥60% of total inpatient days.)

This section rebases the base cost reporting periods used to determine target amounts—the hospital-specific rates used under Medicare's inpatient prospective payment system (IPPS) to protect sole community hospitals (SCHs, i.e., the sole inpatient providers for rural communities) and Medicare-dependent, small rural hospitals (MDHs, i.e., those with Medicare patients comprising at least 60% of inpatient days)—for discharges occurring on or after October 1, 2025, as follows: (1) for SCHs under sec. 1886(b)(3)(K)(i), to the 12-month cost reporting period beginning during FY2024 (from FY2002) in subclause (I), and to the first cost reporting period beginning on or after October 1, 2025 (from October 1, 2006) in subclause (II); and (2) for MDHs under sec. 1886(b)(3)(L)(ii), to the 12-month cost reporting period beginning during FY2024 (from FY2006) in subclause (I), and to the first cost reporting period beginning on or after October 1, 2025 (from January 1, 2009) in subclause (II). (Thus, these hospitals' IPPS target amount payments will reflect more recent cost experience.)

This section codifies a low-wage index policy and establishes area wage index floors for Medicare payments to hospitals not located in frontier states (i.e., states with low population density such as Montana and Wyoming). (As background, the area wage index adjusts Medicare hospital payments to account for geographic differences in labor costs, with lower-index hospitals generally receiving lower payments absent adjustments.) Specifically, for hospital inpatient prospective payment system (IPPS) discharges on or after October 1, 2025 (i.e., FY2026 and subsequent years), it (1) increases the wage index for hospitals below the 25th percentile wage index nationwide by ½ of the difference between that hospital's index and the 25th percentile index and (2) sets a minimum wage index of 0.85 for hospitals not in frontier states, with both changes implemented in a budget-neutral manner (i.e., the Secretary establishes a maximum wage index as an offset). For hospital outpatient prospective payment system (OPPS) services furnished on or after January 1, 2026, it similarly sets a minimum wage adjustment factor of 0.85 for hospital outpatient departments not in frontier states, implemented in a budget-neutral manner via a maximum factor. (Thus, these changes increase payments to low-wage and rural non-frontier hospitals while reducing payments to some high-wage hospitals to maintain aggregate spending levels.)

This section makes permanent the increase in Medicare payment amounts for ground ambulance services furnished in rural areas, previously applicable before October 1, 2025.

This section permanently extends Medicare telehealth service authorization and payment enhancements for federally qualified health centers (FQHCs) and rural health clinics (RHCs)—which provide primary care to Medicare beneficiaries in underserved areas under a prospective payment system—beginning on the first day of the public health emergency period under SSA §1135(g)(1)(B) (previously, during such period and, if it ended before December 31, 2024, through September 30, 2025). It further provides that payment for such services furnished through the date 60 days after enactment continues under the existing telehealth payment rule (subparagraph (B)), with payment thereafter equal to the amount payable had the services been furnished without telecommunications (previously, all such services paid under subparagraph (B)).

This section amends Medicare critical access hospital (CAH) designation criteria under section 1820(c)(2)(B)(i) of the Social Security Act to authorize states to certify, and the Secretary to approve, CAHs located more than 35 miles from another hospital if the hospital meets specified criteria (notwithstanding the standard distance requirement). (As background, CAHs are small rural hospitals eligible for cost-based Medicare reimbursement rather than prospective payment system rates to support healthcare access in underserved areas; the 35-mile rule generally requires a CAH to be the closest provider unless waived for necessary providers.) The qualifying hospital must (1) be a sole community hospital, Medicare-dependent small rural hospital, low-volume hospital receiving a 2021 payment adjustment, subsection (d) hospital with fewer than 50 beds, or (subject to limits) a facility that met prior CAH distance criteria as of enactment; (2) be in a rural area; (3) be in a high-poverty county or health professional shortage area, or have above-average Medicare/Medicaid inpatient days in 2019 or 2020; (4) generally have two years of negative operating margins preceding state certification; and (5) submit a good governance attestation, multi-year solvency plan, and application within 120 days of final regulations. The Secretary may designate no more than 175 such CAHs total (of which no more than 20% may be prior near-CAH facilities), and no more than 10 per state; the negative margins criterion does not apply to prior near-CAH facilities. The Secretary must issue final implementing regulations within 120 days of enactment, and the amendments do not affect designations under existing distance or alternative criteria.