Your Help Needed on CMS Geographical Standards for Critical Access Hospitals

July 22, 2015

The Centers for Medicare & Medicaid Services (CMS) recently clarified rural status, location and distance requirements for critical access hospitals (CAHs). Importantly, the recently released memo (
S&C 15-45-CAH) clarifies existing guidance to specify that a CAH’s compliance with mileage and distance requirements for hospitals and all facilities it operates must be reassessed at the time of each CAH recertification. The Washington State Hospital Association (WSHA) urges CAH staff to review the requirements to identify any off-site hospital-based services impacted under the requirements. 

All Washington CAHs meet the requirements for recertification of their main campuses. CMS, however, will also review new services or facilities owned by the CAH that were acquired or created on or after January 1, 2008 that are physically located more than 250 yards from the CAH main facility. Such facilities, with the exception of Medicare Certified Rural Health Clinics (RHCs), are also subject to the 35/15-mile rule. This includes non-RHC provider-based clinics, therapy centers, clinical diagnostic laboratories and diagnostic services.

WSHA is concerned about the impact this will have on provider-based clinics operated by CAHs and would like to hear from you if you believe that your hospital has clinics that will be impacted. Please contact Ben Lindekugel, Association of Washington Public Hospital Districts’ Executive Director, with questions or comments at

HCA Adjusts PPS Hospital Rates for Budget Neutrality

Under the inpatient and outpatient Medicaid rebasing for Prospective Payment System (PPS) hospitals effective July 1, 2014, the Washington State Health Care Authority (HCA) makes periodic budget neutrality adjustments to ensure aggregate payment for hospitals services is in-line with what the same services would have been paid under the prior system. Adjustments are made prospectively rather through reprocessing of prior claims with the amount of the budget adjustments intended to compensate for aggregate overpayments or underpayments for the prior period.
HCA has now determined that overall inpatient payments for the first three quarters of State Fiscal Year 2015 were slightly higher than the allowed range and is proposing an overall percentage adjustment factor of 0.9915 to inpatient conversion factors. At the same time, HCA has determined that aggregate outpatient payments for the same period were less than the allowed range and is proposing an overall percentage adjustment factor of 1.0820 to hospital outpatient EAPG conversion factors. HCA sent rate notices to hospitals the week of July 12 and plans to implement the new rates effective August 1, 2015. 

WSHA is asking HCA and Navigant staff to explain to hospital finance staff, via a webinar, the methodology used for the adjustments. We will send additional information once this has been arranged. (Andrew Busz,

HCA Shares Plans to Implement a New Readmissions Payment Policy


The HCA is in the process of finalizing plans to implement a new policy on payment for readmissions for PPS hospitals. Under the new proposal, HCA will use a software program to identify Potentially Preventable Readmissions (PPR) and apply a payment rate penalty to hospitals that experience higher readmission rates than expected given their mix of inpatient cases. This policy will replace the existing policy that allows readmissions that occur within 14 days of a related inpatient stay to be reviewed and potentially denied. HCA and Navigant staff met twice with a group of clinical and finance staff from WSHA-member hospitals to receive input on the policy. While some details of the new policy are not yet final, the main details shared with the group are as follows: 

  • Hospitals determined by the software to have actual PPR rates higher than the threshold of expected rates for their mix of cases will get a reduction to their inpatient Medicaid rate, effective January 1, 2016. Medicaid Managed Care Plans that base hospital payment on the posted Medicaid rates will be prohibited from applying separate denials of readmission claims.
  • Under the proposal, the maximum cut to a hospital’s inpatient Medicaid payment rate will be one percent. In aggregate, the rate reductions will be budget neutral, so that they do not exceed the dollar payment amount of denied readmissions under the current policy. HCA will send each hospital a statement detailing any rate cut and estimated impact. HCA also agreed to review the effect of the policy on readmission rates over time and reevaluate the need for rate penalties for future periods. 
  • HCA committed to providing hospitals with quarterly reports to enable hospitals to identify types of cases where readmissions could be reduced. Critical access hospitals will not be subject to payment rate reductions but will be included in the determination of PPR rate averages and will also receive case detail reports.  

More information is available in a draft set of frequently asked questions prepared by the HCA. A completed copy will be available once details are finalized. (Andrew Busz,

WHS Industry Partner Provides Financing

Kingsbridge Healthcare Finance, one of Washington Hospital Services’ (WHS) industry partners, recently helped Snoqualmie Valley Hospital finance furniture and equipment. They can make new technology affordable both by maximizing the utilization of the asset while at the same time minimizing its cost. For more information, please contact Reid Lukes, Kingsbridge Healthcare Finance’s local representative, at 949-542-7447 or (Paul Unsworth,



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