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From Health Law Daily, September 15, 2014

CMS says thanks for observing that it failed to issue an RHC regulation

By Jay Nawrocki, MA

CMS’ failure to issue regulations as required by the Balanced Budget Act of 1997 (BBA) (P.L. 105-33) resulted in 12 percent of rural health clinics (RHCs) continuing to be paid as an RHC even though they no longer meet the location requirements. RHCs were authorized in 1977 in an effort to bring more medical care to underserved rural areas of the country. To accomplish that goal RHCs were paid on a different basis, but over time the definition of rural and medically underserved areas change and RHCs may be operating in areas that are neither rural nor underserved. The BBA provided a mechanism by which RHCs not in rural or underserved areas could be transitioned out of the RHC program, but 16 years after the adoption of the BBA, CMS has not yet implemented that mechanism (OIG Report, No OEI-05-13-00290, September 11, 2014).

RHCs. The Rural Health Clinic Services Act of 1977 (P.L. 95-210) created a rural health clinic certification. Physicians working in those areas would be reimbursed at a higher rate in an effort to attract physicians to work in these rural and underserved areas. To qualify as an RHC the clinic had to be located in a non-urbanized area as defined by the Census Bureau and be located in one of the following health care shortage areas: (1) a primary care Geographic Health Professional Shortage Area known as a HPSA; (2) a primary care population group HPSA; (3) a medically underserved area; or (4) a governor-designated and Secretary-certified shortage area as defined by the Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239). Census-defined urbanized areas are updated every 10-years. HPSAs boundaries are changed approximately every four years. The location of medically underserved areas does not change.

HHS’ Office of Inspector General (OIG) looked at the location of 3,521 of the 4,019 certified RHCs and determined that due to changes in urban areas or HPSA areas 434 RHCs do not meet the qualification of an RHC: 169 are now located in urban areas, 257 are no longer located in a shortage area, and 8 are in neither a rural or shortage area. The number of RHCs that do not meet the location requirement has increased 56 percent since 2003 when the OIG prepared a similar report. In FY 2012, $132 million was paid by Medicare to RHCs that did not meet the location requirements, according to the OIG. Overall approximately $1 billion is reimbursed per year to RHCs.

BBA requirement. The BBA required the HHS Secretary to promulgate rules that would allow RHCs that no longer met the location requirements to be classified as an essential-provider RHC and to continue to receive enhanced payment. RHCs that were not found to be an essential-provider and did not meet the location requirement would cease to be an RHC. The BBA required the new regulations to be in effect no later than January 1, 1999. To date no regulations have been adopted to enforce this BBA requirement. CMS has previously proposed regulations in the Federal Register on February 28, 2000 (65 FR 10450) and again on June 27, 2008 (73 FR 36696) that would implement the BBA requirements, but in both cases the proposed rule was not finalized. CMS’ response to the OIG’s report and recommendation that it finalize regulations was to simply thank the OIG for its work.

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