Health Care Facilities
Mortgage Insurance for Critical Access Hospitals

Recent Program improvements have made it easier for critical access hospitals (CAH) to access capital through the Federal Housing Administration. Because some CAHs treat a large number of non-acute patients, these needed facilities are exempt from the Program's acute care patient day rule. FHA's staff, with experience in rural hospital and CAH management, understands the unique challenges faced by these facilities.

FHA, in partnership with the US Department of Health and Human Services and the US Department of Agriculture, created a CAH Planning, Design, and Construction Guide to assist CAHs with modernization projects. You can take a virtual tour of a new CAH here!

Rio Grande Hospitals, Del Norte, CO

Since 2003, FHA has insured eight mortgages for CAHs. These mortgages allowed these facilities to renovate, expand, and replace their facilities. A list of CAHs insured by FHA is shown below.

Frequently Asked Questions
Critical Access Hospital Program

What is the Critical Access Program?

A Critical Access Hospital (CAH) is a hospital designation made possible by the Medicare Rural Hospital Flexibility Program created in the Balanced Budget Act of 1997. The program is available to any state that chooses to establish a state rural health plan and implement the Centers for Medicare and Medicaid Services (CMS) requirements of the CAH program. The state plan then defines the rural and necessary provider eligibility requirements for hospitals within that state. Critical access designation is an opportunity for small, rural hospitals to increase revenues through cost-based reimbursement from Medicare. The hospital will essentially provide the same services and function under the same hospital licensure standards and Medicare Conditions of Participation as before. The hospital must provide 24-hour emergency services along with core inpatient and outpatient services. Most hospitals that elect to be a CAH have a Medicare patient mix of greater than 60% and find that the business has shifted from inpatient to outpatient.

What are the criteria to be a CAH?

Critical access hospitals are limited-services hospitals located in rural areas that receive 101% of cost based reimbursement. To be designated a critical access hospital, a facility must, among other requirements: (1) be located in a county or equivalent unit of a local government in a rural area; (2) be located more than a 35-mile drive from a hospital or another health care facility; or (3) be certified by the State as being a necessary provider of health care services to residents in the area.

General questions about CAH

What about observation patients?--Patients can be admitted as an observation patient and follow the same CMS guidelines for observation as before. Patients in observation are not counted in the daily acute care census.

Are newborns counted in the daily acute care census?--Newborns are not counted in the daily census; however, if a newborn is admitted as a pediatric patient, the newborn is counted.

Are pediatric patients counted in the daily acute care census?--Yes, pediatric patients are counted unless the baby or child is admitted as an observation patient.

How are hospice patients counted?--Hospice patients (Medicare certified) admitted as an inpatient are included in the daily acute care count ; hospice patients admitted to a swing bed are included in that count. Hospice patients in a respite, SNF, or long-term bed are not included in the CAH daily census count.

Can a CAH accept a transfer patient?--Yes, a transfer patient can be accepted in both the acute care and swing bed program.

Does JCAHO accredit critical access hospitals?--Yes. The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) does accredit CAHs. JCAHO has developed its own standards of operation for CAHs.

Will staffing requirements change when a hospital receives CAH designation?--The federal requirements for CAH allows for flexibility with staffing; however, each State has its own hospital staffing requirements.

What is the role of a mid level in a CAH?--The federal requirements for CAH allow for a nurse practitioner and physician assistant to admit and provide inpatient and emergency care under the supervision of a MD. The physician does not have to be on site but must be available through telecommunications.

Can a hospital change its CAH designation?--Yes, hospitals would be responsible to notify CMS and the fiscal intermediary. The provider number would then need to be changed and a new billing process established. The hospital may be required to go through another survey because of the change in provider number.

Are CAHs exempted from using ambulatory procedure codes (APCs) and line item dates of services on outpatient bills?--Yes. Since CAHs are paid under the cost based reimbursement system, CMS exempted critical access hospitals from the outpatient coding and billing system. CAH can implement the AACS within their hospital and use line item billing, if they choose to do so.

Annual CAH Evaluation--Critical access hospitals are required to complete an annual evaluation of hospital services and the CAH program.

What are the advantages of CAH?

• Cost based reimbursement/potentially increased revenues
• Opportunity to refocus efforts to meet community needs
• CAH network of hospitals
• Flexibility with staffing and hospital programs (state requirements)
• Expense capital improvements and equipment per guidelines
• Outpatient P.P.S. exemption for reimbursement
• Network development opportunities
• Increase in operating margin and greater financial stability
• Capital improvement costs included in the Medicare cost report
• CAH grants and telehealth support
• Increased hospital viability - patient satisfaction with hospital
• Opportunity to cost your ER physician standby time