“Critical Access Hospital” is a designation given to certain rural hospitals by the Centers for Medicare and Medicaid Services (CMS). This designation was created by Congress in the 1997 Balanced Budget Act in response to a string of hospital closures in the 1980s and early 1990s.

The CAH designation is designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare by keeping essential services in rural communities. This is accomplished through cost-based Medicare reimbursement. To ensure that CAHs deliver services to improve access to rural areas that need it most, restrictions exist concerning what types of hospitals are eligible for the CAH designation. The primary eligibility requirements for CAHs are:

  • A CAH must have 25 or fewer acute care inpatient beds.
  • It must maintain an annual average length of stay of 96 hours or less for acute care patients.
  • It must provide 24/7 emergency care services.

The Medicare Rural Hospital Flexibility Program or Flex Program was established by the Balanced Budget Act (BBA) of 1997, with the purpose of supporting new and existing critical access hospitals. The Flex Program provides federal grants to each state which are used to implement a Critical Access Hospital program with the following goals:

  • Support for CAH quality improvement efforts
  • Improve the financial and operational performance of CAHs
  • Support for health system development and community engagement

The design of the CAH model and Flex Program was based primarily on the experiences of the Medical Assistance Facility (MAF) Demonstration Project and the Rural Primary Care Hospital (RPCH) Project. MAFs were initially developed through a demonstration project of the Montana Health Research and Education Foundation (MHREF) in Montana in 1987 and received Medicare waivers in 1990. Building on the experience of Rural Primary Care Hospitals (RPCHs) developed under the Essential Access Community Hospital (EACH) program (in New York, West Virginia, North Carolina, South Dakota, Kansas, Colorado and California), CAH designation was designed to decrease rural hospital closures, strengthen local health care delivery and improve rural health care access.

The legislation has undergone many changes and updates such as the Balanced Budget Refinement Act (BBRA) in late 1999, the Benefits Improvement Protection Act (BIPA) in late 2000 and the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003.

CAHs must be located in rural areas and must be over 35 miles from another hospital, or 15 miles from another hospital in mountainous terrain or areas with only secondary roads. Prior to January 1, 2006, States had the authority to waive the CAH location relative to other facilities requirement by designating a facility as a necessary provider CAH.

The State of Kansas established the following requirements to be designated as a “necessary provider.”   A facility must meet at least one of the below criteria to be certified by the Kansas Department of Health and Environment as a Necessary Provider of Health Care Services.