S. 502 — Rural Hospital Closure Relief Act of 2025

This section amends Medicare critical access hospital (CAH) designation criteria under SSA §1820(c)(2)(B)(i) to authorize states to certify, subject to new caps, certain rural hospitals as necessary providers of health care services notwithstanding the 35-mile distance requirement from another hospital. (As background, CAHs are small rural hospitals with no more than 25 acute care beds that receive cost-based reimbursement under Medicare Part A to support access to care in underserved areas; states may waive the distance rule for necessary providers.) Eligible hospitals must (1) be a sole community hospital, Medicare-dependent small rural hospital, low-volume hospital receiving a payment adjustment in 2021, or subsection (d) prospective payment system hospital; (2) be located in a rural area or rural census tract of a metropolitan statistical area; (3) be in a county with above-average poverty in 2023 or 2024, a health professional shortage area, or have above-average Medicare Part A inpatient days in 2023 or 2024; (4) have been operating as of enactment with two consecutive years of negative operating margins preceding state certification; and (5) submit an application attesting to good governance, a multi-year financial solvency plan, and commitment to a new or expanded high-demand service line (e.g., obstetrics or behavioral health) based on the hospital's community health needs assessment. The Secretary of HHS may certify no more than 120 such CAHs nationwide (no more than 5 per state) pursuant to state certifications from enactment of the Rural Hospital Closure Relief Act of 2025 through 9 years after enactment of this provision, allocating first one designation per state with eligible hospitals and then remaining slots proportionally by state based on eligible hospitals. Such CAHs must submit specified reports on their new or expanded service and notice of material changes, with certification subject to revocation for noncompliance.

This section directs the Medicare Payment Advisory Commission (MedPAC) to conduct a study, using data from 2018 through 2028, on payment systems for rural hospitals under Medicare (title XVIII of the Social Security Act). The study must analyze (1) critical access hospitals designated pursuant to section 1820(c)(2)(B)(i)(III) of the Social Security Act (as added by section 2(a)); (2) payment system features, including value-based systems, to ensure Medicare financial sustainability and preserve beneficiary access to care; and (3) transition impacts for any recommended new payment system. MedPAC must submit a report to Congress with legislative and administrative recommendations no later than eight years after enactment. The section defines rural hospital to include critical access hospitals, subsection (d) hospitals in rural census tracts of metropolitan statistical areas (per Goldsmith Modification), sole community hospitals, Medicare-dependent small rural hospitals, and low-volume hospitals.

This section requires the Secretary, not later than 9 years after the date of enactment, to establish a mechanism and provide guidance and technical assistance enabling any facility designated as a critical access hospital (CAH) pursuant to a State certification under SSA section 1820(c)(2)(B)(i)(III)—as added by section 2(a)—to transition within 1 year to one of the following Medicare payment models: (1) any new model or models recommended by the Medicare Payment Advisory Commission in its report under section 3; (2) the prospective payment model or models under which the facility was paid prior to such CAH designation; or (3) payment as a rural emergency hospital under SSA section 1834(x) (42 U.S.C. 1395m(x)). (Thus, such CAHs—which receive cost-based reimbursement to support rural access to hospital services—must end their CAH status under this provision after the transition period.)