Georgia Medicare Critical Access Hospital 2026 Guide

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Georgia Medicare Critical Access Hospital (CAH) Designation

When a Medicare beneficiary in Mitchell County, Georgia, is admitted overnight for observation of a worrisome chest pain, or when an elderly woman in Habersham County is taken by family to the local emergency department after a fall, or when a hospice patient in Treutlen County needs a brief inpatient stay for pain management, the hospital that delivers that care may be operating under a Medicare payment framework most patients have never heard of. The framework is called the Critical Access Hospital designation. Authorized at Section 1820 of the Social Security Act and implemented through the Conditions of Participation at 42 CFR Part 485 Subpart F and the payment regulation at 42 CFR 413.70, the CAH designation gives small rural hospitals something that no other Medicare hospital category provides. Instead of being paid under the Inpatient Prospective Payment System, with all of the diagnosis-related-group calculations and the federal-rate-versus-hospital-specific-rate comparisons that govern other hospitals, a CAH is paid under cost-based reimbursement. Medicare pays a CAH one hundred one percent of its reasonable costs for delivering inpatient and outpatient care to Medicare beneficiaries. The hospital's actual costs determine the payment. The one percent margin above costs is the federal protection that gives the CAH program its financial stability.

The CAH framework grew out of Section 4201 of the Balanced Budget Act of 1997, which created the Medicare Rural Hospital Flexibility Program (commonly called the Flex Program) to address a worsening crisis in rural hospital closures during the mid-1990s. Congress concluded that the standard prospective payment system, even with the SCH and MDH protections that already existed, was not enough to keep the smallest rural hospitals open. A new framework was needed for facilities with twenty-five beds or fewer that served as the last line of inpatient care in geographically isolated communities. The Flex Program would let states designate qualifying hospitals as CAHs. Federal Medicare payment for designated CAHs would convert from prospective DRG payment to cost-based reimbursement at one hundred one percent of reasonable costs. The trade-off was real. CAHs would have to operate within strict operational limits, including a twenty-five-bed maximum, a ninety-six-hour annual average length of stay for acute care patients, twenty-four-hour-a-day emergency services, and distance criteria from other hospitals. In exchange they would receive a payment guarantee that few other Medicare providers receive.

For Georgia, the CAH designation is critical. The state has approximately thirty to thirty-five certified Critical Access Hospitals, distributed across the rural counties of South Georgia, Middle Georgia, the Mountain region of North Georgia, and other rural areas. These hospitals are the front line of inpatient care for hundreds of thousands of rural Georgians. Without CAH designation, many of these hospitals would have closed years ago. With it, they remain open, continuing to provide emergency care, basic surgical capacity, brief inpatient stays, skilled nursing care through swing bed arrangements, and outpatient services that include lab, radiology, and clinical care. The Georgia State Office of Rural Health at 229-401-3070 administers the state Flex Program, providing technical assistance, quality improvement support, and grant administration that supplements the federal CAH framework.

This guide explains how CAH works, who qualifies, how the cost-based reimbursement is calculated, how the Method 1 versus Method 2 election affects outpatient professional services billing, how swing bed provisions allow CAHs to flex between acute and skilled nursing care, how CAH coordinates (or does not coordinate) with DSH and IME and other IPPS adjustments, and what it all means for the beneficiary who calls the Eldercare Locator at 1-800-677-1116 trying to understand the bill from a hospital with twenty beds in a county they have never visited. Brevy publishes these Georgia Medicare guides at brevy.com because the federal protections for rural hospital access are not technical curiosities. They are the financial scaffolding that keeps the buildings open in the places where buildings closing matters most. :::

::: callout Key takeaways for Georgia Medicare beneficiaries and small rural hospitals

1. CAH authority lives in Section 1820 of the Social Security Act. The Conditions of Participation are at 42 CFR Part 485 Subpart F. The payment methodology is at 42 CFR 413.70. The program was originally established by Section 4201 of the Balanced Budget Act of 1997 as part of the Medicare Rural Hospital Flexibility Program.

2. The eligibility criteria are operational and geographic. A CAH must have no more than twenty-five inpatient beds, must maintain an annual average length of stay of ninety-six hours or less for acute care patients, must provide twenty-four-hour emergency services, and must be located in a rural area meeting distance criteria (more than thirty-five miles from another hospital, or fifteen miles in mountainous terrain or areas with only secondary roads) or be grandfathered as a necessary provider designated by the state before 2006.

3. Payment is cost-based at one hundred one percent of reasonable costs. This is fundamentally different from IPPS prospective payment. The hospital's actual costs determine payment. The one percent margin provides the federal protection that supports financial viability.

4. CAHs are exempt from the Inpatient Prospective Payment System and from the Outpatient Prospective Payment System. They do not receive DRG payment, OPPS payment, or any of the IPPS-specific adjustments like DSH, IME, or low-volume.

5. The Method 1 versus Method 2 election governs outpatient professional services billing. Under Method 1, the CAH bills the facility component at cost and physicians bill the professional component under the fee schedule. Under Method 2, the CAH bills combined facility-plus-professional charges with the professional component reimbursed at one hundred fifteen percent of the fee schedule.

6. Swing bed provisions allow CAHs to use any of their inpatient beds for either acute care or skilled nursing care. The same physical bed can flex between purposes based on patient need. This flexibility is critical for small rural hospitals that cannot maintain separate acute and SNF beds.

7. The Medicare Rural Hospital Flexibility Program (Flex Program) is administered at the state level by the Georgia State Office of Rural Health at 229-401-3070. The state agency recommends designations to CMS, provides technical assistance, supports quality improvement, and administers grants.

8. Necessary provider grandfathering preserved CAH status for hospitals designated as necessary providers by the state before January 1, 2006. Most existing Georgia CAHs are grandfathered necessary providers. After 2006 the necessary provider path was closed for new designations; subsequent designations must meet the geographic distance criteria.

9. Palmetto GBA is the Medicare Administrative Contractor for Georgia. CAH cost reports, interim payment determinations, and final settlements all route through Palmetto. Beneficiary questions about Medicare hospital benefits go to 1-800-MEDICARE.

10. Beneficiary cost-sharing is largely unchanged. The Section 1813 Part A inpatient deductible and coinsurance apply identically at a CAH and at a non-CAH hospital for inpatient stays. Outpatient services are subject to the standard Part B twenty percent coinsurance, though the methodology differs because outpatient services at CAHs are cost-based rather than under OPPS. :::

Why the Critical Access Hospital designation exists

The Critical Access Hospital designation responded to a specific crisis. In the years following implementation of the Inpatient Prospective Payment System in 1983, and especially through the early and mid-1990s, rural hospitals across the United States closed at an accelerating rate. The financial pressures of prospective payment, the demographic decline of many rural service areas, and the rising fixed-cost demands of modern medical practice combined to make the smallest rural hospitals unsustainable. The Sole Community Hospital and Medicare-Dependent Hospital designations provided some protection but were not enough. SCH and MDH operated within the IPPS framework with adjustments. The smallest rural hospitals, often with twenty beds or fewer and serving counties of five thousand or ten thousand residents, could not generate enough volume to operate viably under any version of prospective payment.

The Balanced Budget Act of 1997 included Section 4201, which created the Critical Access Hospital framework. The structural innovation was twofold. First, the law established a new category of Medicare hospital that operated outside the IPPS framework entirely. CAHs would be paid based on their costs rather than based on DRG rates. Second, the law created the Medicare Rural Hospital Flexibility Program, a state-administered program that would identify qualifying hospitals and recommend them for CAH designation. Federal funding would support state implementation. The combination of cost-based reimbursement and state administration distinguished CAH from any prior rural hospital protection.

The original 1997 framework included several elements that have evolved over time. The bed count limit was originally fifteen inpatient beds, later raised to twenty-five through subsequent legislation. The annual average length of stay limit was originally seventy-two hours, later increased to ninety-six hours. The original payment methodology was cost-based but at one hundred percent of reasonable costs; the one percent margin to one hundred one percent was added through Section 405 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The Method 2 outpatient professional services election was also created by MMA 2003. The necessary provider designation path, which allowed states to designate hospitals as necessary providers regardless of distance criteria, was preserved for grandfathered hospitals but closed for new designations after January 1, 2006 by the Medicare Modernization Act and subsequent regulations.

The current framework reflects nearly three decades of legislative refinement. Section 1820 of the Social Security Act provides the underlying authority. The Conditions of Participation at 42 CFR Part 485 Subpart F set out the operational requirements. The payment regulation at 42 CFR 413.70 implements the cost-based methodology. Subsequent legislation including BIPA 2000 Section 401, MMA 2003 Section 405, DRA 2005 Section 5006, ACA 2010 Section 3128, and various extender bills have refined the framework. The American Hospital Association, the National Rural Health Association, and state hospital associations have advocated for further refinements including bed count increases and necessary provider restoration. To date, the twenty-five-bed limit and the closure of the necessary provider path have remained.

Who qualifies under Section 1820

The statutory definition of a Critical Access Hospital is set out at Section 1820(c)(2)(B) of the Social Security Act, with elaboration in 42 CFR 485.610. There are several elements that must all be satisfied for a hospital to qualify.

The first element is the bed count. The hospital must have no more than twenty-five inpatient beds. The bed count includes all inpatient beds. Swing beds, which can be used flexibly for either acute care or skilled nursing care, count toward the twenty-five-bed limit. The hospital cannot exceed twenty-five inpatient beds regardless of swing bed allocation. The twenty-five-bed limit is a hard ceiling. A hospital with twenty-six beds does not qualify.

The second element is the rural location. The hospital must be located in a rural area as defined for Medicare purposes. Generally this means outside a metropolitan statistical area, though hospitals in metropolitan areas may qualify in some circumstances if treated as rural for IPPS purposes through reclassification or other mechanisms. The rural location requirement reflects the program's purpose of supporting rural hospital access.

The third element is the distance criteria. The hospital must be located more than thirty-five miles by road from the nearest hospital, or more than fifteen miles in mountainous terrain or in areas with only secondary roads. The fifteen-mile alternative recognizes that geographic distance is not the only determinant of isolation. A hospital fifteen miles from another facility in steep terrain or via narrow unpaved roads may be effectively as isolated as a hospital thirty-five miles away on a highway. The distance is measured by the most direct road route.

Hospitals that cannot meet the distance criteria may still qualify if they were designated as necessary providers by the state before January 1, 2006. The necessary provider path allowed states to designate hospitals critical to local healthcare access regardless of distance criteria. The path was closed for new designations after January 1, 2006 by the Medicare Modernization Act and subsequent regulations. Hospitals designated as necessary providers before the cutoff retain their CAH status. Most existing Georgia CAHs are grandfathered necessary providers, having received state designation before the 2006 sunset.

The fourth element is the annual average length of stay. The hospital must maintain an annual average length of stay of ninety-six hours or less for acute care patients. The length of stay is calculated as the total acute care days divided by total acute care discharges over the fiscal year. The ninety-six-hour limit means that on average, acute care patients must be discharged within four days. Longer stays are permitted for individual patients, but the annual average must remain at or below ninety-six hours. Hospitals that exceed the limit may lose CAH status.

The fifth element is the twenty-four-hour emergency services requirement. The hospital must provide emergency services twenty-four hours a day, seven days a week. The emergency services must include physician coverage either on-site or on-call within thirty minutes of receiving a call (forty-five minutes in some frontier areas). Mid-level providers including nurse practitioners and physician assistants may provide initial emergency services with physician on-call backup.

The Conditions of Participation at 42 CFR Part 485 Subpart F include additional operational requirements covering governance, medical staff organization, nursing services, pharmaceutical services, laboratory and radiology services, patient rights, discharge planning, infection control, and quality assessment. CAHs must comply with all of these conditions to maintain certification.

The cost-based reimbursement methodology

CAH payment is calculated under 42 CFR 413.70 as one hundred one percent of reasonable costs. The mechanism for determining reasonable costs is fundamentally different from the prospective payment that applies to IPPS hospitals.

For each cost reporting period, the CAH prepares a Medicare cost report on Form CMS-2552-10 (the standard hospital cost report) with CAH-specific worksheets. The cost report captures the hospital's total operating costs, total capital costs, total Medicare patient volume, and the various allocation steps required to determine the Medicare share of each cost category. The cost report includes worksheets for inpatient costs, outpatient costs, swing bed costs, skilled nursing costs (if applicable), and various ancillary services. Each cost center is allocated between Medicare and non-Medicare patients based on appropriate statistics.

The total Medicare-allowable costs are determined through the cost reporting process. These costs are then multiplied by one hundred one percent to determine the total Medicare payment due. Interim payments made during the year are reconciled against the final calculated amount. Underpayments are remitted to the hospital. Overpayments are recouped.

The cost-based methodology produces several important characteristics. First, payment tracks actual costs. If the hospital's costs rise (due to inflation, labor increases, technology investments, or other factors), payment rises correspondingly. If costs fall, payment falls. The hospital does not benefit financially from operating more efficiently than its peer hospitals, but it also is not penalized for operating less efficiently if its costs reflect legitimate operational requirements.

Second, the one percent margin provides modest financial cushion. The hospital can generate one percent positive margin on Medicare patients before reaching the breakeven point. For a CAH with five million dollars in annual Medicare reasonable costs, the one percent margin provides approximately fifty thousand dollars of annual Medicare margin. This is not a large amount, but it is positive rather than negative, and it provides financial stability that prospective payment cannot guarantee.

Third, capital costs are reimbursed alongside operating costs. There is no separate capital methodology like the IPPS capital prospective payment system. The hospital's capital costs (depreciation, interest expense on debt-financed capital, return on equity capital) are included in the cost report and reimbursed at one hundred one percent. This treatment supports CAH capital investment in modern facilities and equipment, though the actual amount depends on the cost-allocation methodology and applicable Medicare cost principles.

Fourth, certain cost categories are excluded or limited by Medicare cost principles. Bad debts are reimbursed only at sixty-five percent (after the Bipartisan Budget Act of 2018 reduction from one hundred percent) for the Medicare-related portion. Certain administrative costs are subject to limits. Provider-related expenses must be reasonable and related to patient care. The cost reporting process determines which costs qualify.

The interim payment system is designed to provide cash flow during the year. Palmetto GBA establishes interim payment rates based on the prior cost report. The hospital receives interim payments throughout the year as it submits claims. After the fiscal year ends and the cost report is filed and audited, the final settlement determines the actual amount due. Interim payment overpayments and underpayments are reconciled.

Method 1 versus Method 2 election

The treatment of professional services for outpatient care at CAHs has special rules established by Section 405 of the Medicare Modernization Act of 2003. CAH outpatient services involve both a facility component (the cost of the hospital's facility, staff, equipment, and supplies used in delivering the service) and a professional component (the physician's professional service). The two components are typically billed separately but the CAH can elect to combine them through the Method 2 election.

Under Method 1 (the standard method), the CAH bills the facility component on its cost report at cost. The physician bills the professional component separately under the Medicare Physician Fee Schedule. The patient receives two bills (or two line items on one bill) for the same outpatient visit: one for the facility services and one for the physician services. Medicare pays the facility component through CAH cost-based reimbursement and the professional component under the standard fee schedule (typically eighty percent after deductible).

Under Method 2 (the optional method), the CAH bills combined facility-plus-professional charges. The professional component is paid at one hundred fifteen percent of the Medicare Physician Fee Schedule rather than at standard fee schedule rates. The election applies to all outpatient professional services at the CAH, not to individual cases. To elect Method 2, the CAH must obtain reassignment of physician benefits, meaning that the physicians who provide professional services at the CAH must assign their Medicare billing rights to the CAH.

The Method 2 election typically produces higher total payment than Method 1 because of the one hundred fifteen percent factor applied to the professional component. The trade-off is operational complexity. The CAH must administer reassignment agreements with all physicians providing services at the facility, must handle combined billing, and must report combined data appropriately. Many CAHs elect Method 2 because the financial benefit outweighs the operational complexity. Others remain on Method 1 because their physician arrangements do not support reassignment.

The Method 1 versus Method 2 election is made by the CAH and applies for the entire fiscal year. The election can be changed at the start of a subsequent fiscal year. CAHs typically review the election periodically to confirm that the chosen method continues to produce favorable financial results.

Swing bed provisions

Swing beds are a critical operational feature for CAHs. The swing bed concept, established at Section 1883 of the Social Security Act for rural hospitals generally and extended to CAHs by the BBA 1997, allows the same hospital bed to be used for either acute care or skilled nursing care depending on patient need. The hospital "swings" the bed between purposes based on the current patient.

For a small rural hospital with twenty beds, swing bed flexibility is essential. The hospital cannot afford to maintain separate acute care and skilled nursing units. With swing beds, the hospital can admit a Medicare patient for an acute medical condition, treat the acute phase, and then transition the patient to skilled nursing care (post-acute recovery, rehabilitation, IV antibiotic therapy, wound care, or similar) in the same bed. The bed designation flips from acute to swing bed status, and the payment methodology and care plan adjust accordingly.

Payment for swing bed services is calculated under cost-based methodology like other CAH services. The cost report includes a worksheet for swing bed costs, which are determined through cost allocation. The CAH receives one hundred one percent of swing bed reasonable costs.

Swing bed eligibility requires that the patient meet skilled nursing facility criteria. The patient must have a qualifying three-day inpatient hospital stay (the SNF qualifying stay) before swing bed admission, must require daily skilled nursing or rehabilitation services, and must meet other SNF requirements. Patients without a qualifying hospital stay cannot receive skilled-level swing bed care through Medicare Part A.

Swing bed care must be distinguished from acute inpatient care for cost reporting purposes. The CAH must track the number of days each bed is used for acute purposes versus swing bed purposes. The ninety-six-hour annual average length of stay applies only to acute care patients; swing bed patients are not counted in that calculation.

State Flex Program administration

The Medicare Rural Hospital Flexibility Program (Flex Program) is administered through state-level offices in partnership with the federal Health Resources and Services Administration. In Georgia, the Flex Program is administered by the Georgia State Office of Rural Health at 229-401-3070. The state office responsibilities include:

• Recommending hospitals for CAH designation
• Providing technical assistance to current and prospective CAHs
• Supporting quality improvement activities including MBQIP
• Administering federal Flex Program grants
• Coordinating with the federal HRSA program office
• Providing peer learning and networking opportunities for Georgia CAHs
• Supporting workforce recruitment and retention initiatives
• Assisting with infrastructure and capital investment planning

CMS retains final authority over CAH certification. The state recommendation begins the process, but the actual certification is made by CMS through its regional offices and the Center for Clinical Standards and Quality. CMS conducts initial and ongoing surveys of CAHs to verify compliance with Conditions of Participation. Survey findings can result in plans of correction, condition-level deficiencies, or in serious cases termination of the CAH certification.

The Flex Program provides federal grant funding to support state-level activities. Grants support quality improvement, financial and operational improvement, population health, and rural emergency medical services. Georgia CAHs benefit from Flex Program activities through technical assistance, quality measurement support, and various improvement initiatives.

Worked example one: a Georgia CAH with twenty beds and thirty-five-mile distance

Consider a hypothetical small rural hospital in Telfair County, Georgia. The hospital has twenty inpatient beds, all of which can be used as swing beds. The closest other hospital is approximately thirty-seven miles away by road. The hospital provides general medical and surgical services, twenty-four-hour emergency services, basic laboratory and radiology, and limited specialty services.

The hospital pursues CAH designation. It satisfies the bed count limit (twenty beds, under twenty-five). It is in a rural area. The closest hospital is thirty-seven miles away, satisfying the more-than-thirty-five-miles criterion. The hospital provides twenty-four-hour emergency services. The hospital's prior year average length of stay for acute care patients was approximately ninety hours, under the ninety-six-hour limit.

The hospital prepares an application package documenting the criteria. The Georgia State Office of Rural Health reviews and recommends the application to CMS. CMS conducts initial certification survey to verify Conditions of Participation compliance. Following successful survey, CMS issues a certification effective with the hospital's selected effective date.

Following certification, the hospital begins billing Medicare under CAH cost-based methodology. The hospital files its initial CAH cost report at the end of its first CAH fiscal year. Palmetto GBA reviews the cost report. Total Medicare reasonable costs for the period are approximately twelve million dollars across inpatient, outpatient, and swing bed services. The CAH payment is one hundred one percent of this amount, or approximately twelve million one hundred twenty thousand dollars. Interim payments made during the year are reconciled. Final settlement is processed.

The financial impact of CAH designation versus what the hospital would have received under IPPS is substantial. Before designation, the hospital was receiving approximately ten and a half million dollars in Medicare payments as an IPPS hospital with some adjustments. After CAH designation, the hospital receives approximately twelve million one hundred twenty thousand dollars. The difference of approximately one million six hundred twenty thousand dollars represents the value of cost-based reimbursement plus the one percent margin compared to prospective payment.

Worked example two: one hundred one percent of reasonable cost calculation

Consider a Georgia CAH preparing its annual cost report. The hospital has the following total operating data for the fiscal year:

• Total operating costs (allocated across cost centers): $14,500,000
• Total capital costs (depreciation, interest, equipment): $1,800,000
• Total combined costs: $16,300,000
• Medicare patient volume (statistics for cost allocation): inpatient days, outpatient visits, ancillary services

After cost allocation, the Medicare-related portion is determined. Suppose Medicare-allowable inpatient costs are $5,200,000, Medicare-allowable outpatient costs are $4,800,000, and Medicare-allowable swing bed costs are $1,500,000. Total Medicare-allowable costs are $11,500,000.

The CAH payment is one hundred one percent of total Medicare-allowable costs: $11,500,000 × 1.01 = $11,615,000. This is the total amount Medicare owes the hospital for the period.

During the year, Palmetto GBA made interim payments of approximately $11,400,000 based on prior period data and current period claims submissions. The final settlement determines the difference between interim payments and the calculated amount: $11,615,000 minus $11,400,000 = $215,000 underpayment. The contractor remits the additional $215,000 to the hospital.

The cost report also captures bad debt reimbursement (at the reduced sixty-five percent post-BBA 2018 rate for the Medicare-related portion), specific cost limitations under Medicare cost principles, and other technical items. The bottom line is that the hospital received one hundred one percent of its Medicare-allowable reasonable costs for the period.

Worked example three: ninety-six-hour annual average length of stay calculation

Consider a Georgia CAH tracking its annual average length of stay for compliance with the ninety-six-hour requirement. The fiscal year data:

• Total acute care inpatient days: 3,200
• Total acute care discharges: 850
• Annual average length of stay: 3,200 ÷ 850 = 3.76 days = 90.4 hours

The hospital's annual average length of stay is 90.4 hours, which is below the ninety-six-hour limit. The hospital satisfies the requirement.

The calculation excludes swing bed days, which are skilled nursing services, not acute care. Suppose the hospital also had 1,200 swing bed days with 90 swing bed discharges. The swing bed average length of stay is 1,200 ÷ 90 = 13.3 days, but this is not counted toward the CAH annual average length of stay for the ninety-six-hour requirement.

The hospital documents the ALOS calculation in its cost report and in its quality reporting. If the hospital's ALOS were to exceed ninety-six hours, the hospital would risk losing CAH status. Hospitals approaching the limit may need to adjust admission and discharge patterns or refer longer-stay patients to other facilities.

Individual patient stays exceeding ninety-six hours are not prohibited. The limit is on the annual average. A hospital can have some patients stay seven, ten, or fifteen days as long as the overall average across all acute care patients is ninety-six hours or less. In practice CAHs manage this by transitioning longer-stay patients to swing bed status (when criteria are met) or by transferring patients requiring extended care to larger facilities.

Worked example four: Method 1 versus Method 2 election comparison

Consider a Georgia CAH evaluating the Method 1 versus Method 2 election for outpatient professional services. The hospital has the following outpatient activity:

• Annual outpatient professional service charges: $3,200,000 in physician work
• Medicare Physician Fee Schedule rates for these services: approximately $2,400,000 in allowed amounts
• Estimated Medicare-related portion: 65% of total = $2,080,000 in physician work, or approximately $1,560,000 in fee schedule allowed amounts

Under Method 1, the CAH bills the facility component at cost (separately captured in the cost report). Physicians bill the professional component directly to Medicare. Medicare pays physicians under standard fee schedule rates (eighty percent of allowed amount after deductible). Medicare pays the CAH facility component at one hundred one percent of cost. The CAH's revenue from outpatient services is solely the facility component cost-based payment. The professional component flows to the physicians, not the CAH.

Under Method 2, the CAH bills combined facility-plus-professional charges. The CAH receives the facility component at cost plus the professional component at one hundred fifteen percent of fee schedule. Physicians have reassigned their billing rights to the CAH. The hospital must compensate physicians through its own arrangements, typically employed physician salaries or service contracts.

Method 2 calculation: $1,560,000 in fee schedule allowed amounts × 1.15 = $1,794,000 in professional component payment to the CAH. After eighty percent Medicare share: $1,435,200 in Medicare payment for professional services at the CAH. Plus the facility component cost-based payment.

Under Method 1, Medicare pays physicians $1,248,000 (eighty percent of $1,560,000) directly. The CAH does not receive this revenue.

Under Method 2, Medicare pays the CAH $1,435,200 for professional services, plus the CAH operates its physician compensation arrangements. The difference of $187,200 (the fifteen percent additional payment) accrues to the CAH after netting against physician compensation. If physician compensation under Method 2 is roughly comparable to fee-schedule amounts, the CAH retains most of the fifteen percent additional payment.

The election depends on physician arrangements. Hospitals with employed physicians or strong contracted relationships typically benefit from Method 2. Hospitals with independent physicians who prefer to bill Medicare directly may stay on Method 1.

Worked example five: CAH swing bed billing

Consider a Georgia CAH using its bed capacity flexibly between acute and swing bed care. The annual data:

• Total bed days available: 20 beds × 365 days = 7,300 bed days
• Acute care patient days: 3,200
• Swing bed patient days: 2,800
• Total occupied days: 6,000
• Occupancy rate: 82%

The hospital's twenty beds were used for acute care 3,200 days and for swing bed care 2,800 days. The occupancy rate of eighty-two percent represents efficient utilization for a small rural CAH.

For each swing bed day, the patient must meet skilled nursing facility eligibility criteria. The patient must have a qualifying three-day prior inpatient hospital stay (which often was at the same CAH if the patient transitioned from acute to swing bed status). The patient must require skilled nursing or rehabilitation services daily.

Cost reporting captures the swing bed days separately from acute days. Swing bed costs are determined through cost allocation, with separate worksheets capturing the swing bed share of various cost categories. Medicare reimburses the swing bed costs at one hundred one percent of reasonable costs through the standard CAH payment methodology.

The patient experience differs between acute and swing bed status. Acute care patients are treated as inpatients with the standard Part A hospital stay framework, including the Section 1813 deductible and the day coinsurance structure. Swing bed patients are treated as SNF patients, with Part A SNF coverage following the qualifying inpatient stay. SNF cost-sharing is different from inpatient cost-sharing: the first twenty days are fully covered after the qualifying stay, and days twenty-one through one hundred incur a daily coinsurance.

For the hospital, swing bed flexibility allows the bed to generate revenue across both purposes. A patient admitted for pneumonia might receive three days of acute care followed by ten days of swing bed care for IV antibiotic completion and physical therapy. The bed generates acute care revenue for three days and swing bed revenue for ten days, all at cost-based reimbursement.

Worked example six: necessary provider grandfathered CAH

Consider a Georgia CAH that was designated as a necessary provider by the state before January 1, 2006. The hospital is located fourteen miles from another hospital, less than the thirty-five-mile criterion or the fifteen-mile mountainous-terrain alternative. Under post-2006 rules, the hospital could not become a CAH because it does not meet the distance criteria. But the hospital received necessary provider designation from Georgia before the 2006 sunset, and it retained its CAH status through grandfathering.

The hospital continues to receive CAH cost-based reimbursement. The Conditions of Participation, the ninety-six-hour ALOS, the twenty-five-bed limit, and other requirements all apply identically to grandfathered necessary provider CAHs as to distance-qualifying CAHs. The only difference is the path of original certification.

If the hospital were to lose CAH certification for any reason (failure to meet Conditions of Participation, change in ownership without proper transfer procedures, voluntary withdrawal), it could not regain CAH status through the necessary provider path because that path is closed. It would need to meet the distance criteria, which it does not, or wait for legislative change.

This dynamic is significant for many Georgia CAHs. The state aggressively designated qualifying hospitals as necessary providers in the early 2000s before the 2006 sunset. The state designations preserved CAH access for many hospitals that would not have qualified under distance alone. The grandfathering has been a critical protection for Georgia rural hospital access. Restoration of the necessary provider path has been advocated by AHA, NRHA, and other organizations but has not been adopted in subsequent legislation.

Coordination with other Medicare programs

CAHs operate outside the IPPS framework, which means that several IPPS-specific payment provisions do not apply.

The Inpatient Prospective Payment System DRG payment does not apply to CAHs. CAHs do not receive payment based on DRG relative weights. They receive cost-based payment based on actual operating and capital costs.

The Outpatient Prospective Payment System (OPPS) does not apply to CAHs for facility services. OPPS APC payment rates do not apply to CAH outpatient services. The facility component of CAH outpatient services is paid cost-based.

The disproportionate share hospital payment authorized at Section 1886(d)(5)(F) does not apply to CAHs in the traditional IPPS form. CAHs do not receive Medicare DSH adjustment payment. The cost-based payment captures the hospital's actual costs of providing care, including the costs associated with serving low-income patients, but there is no separate DSH supplement.

The indirect medical education payment authorized at Section 1886(d)(5)(B) does not apply to CAHs in IPPS form. Teaching CAHs (rare but possible) receive cost-based reimbursement for resident-related costs through their cost reports.

The new technology add-on payment authorized at Section 1886(d)(5)(K) does not apply to CAHs. CAH cost-based reimbursement captures the actual costs of providing new technologies through ordinary cost reporting.

The outlier payment authorized at Section 1886(d)(5)(A) does not apply to CAHs. Cost-based reimbursement captures actual costs without need for outlier supplementation.

The low-volume hospital adjustment authorized at Section 1886(d)(12) does not apply to CAHs. Low-volume is an IPPS adjustment, and CAHs are outside IPPS.

The wage index does not apply to CAH facility payment in the same way as for IPPS hospitals because cost-based payment already captures the hospital's actual labor costs.

The hospital readmissions reduction program, hospital-acquired condition reduction program, and hospital value-based purchasing program apply to IPPS hospitals; CAHs participate in quality reporting through the Medicare Beneficiary Quality Improvement Project (MBQIP) but are not subject to IPPS-specific payment adjustments.

CAHs are eligible for the 340B Drug Pricing Program established at Section 340B of the Public Health Service Act. The 340B program provides discounted outpatient drug prices to participating providers, including most CAHs. The 340B savings on outpatient drug costs help support CAH financial viability. The 340B program operates separately from the CAH cost-based reimbursement framework.

CAHs participate in the Promoting Interoperability Program (formerly Meaningful Use) for electronic health records. The PI requirements and payment incentives apply to CAHs in modified form. Quality reporting through Promoting Interoperability is integrated with CAH operations.

CAHs are eligible to participate in Medicare Advantage networks, with payment determined by contract between the CAH and the MA plan. Beneficiaries in MA plans receiving care at CAHs are subject to MA cost-sharing and network rules, which may differ from fee-for-service Medicare.

CAHs participate in state Medicaid programs. Georgia Medicaid payment for CAH services is determined under the Georgia Medicaid State Plan. The state Medicaid agency, Georgia Department of Community Health, manages Medicaid payment for CAHs. Medicaid payment is separate from Medicare cost-based reimbursement.

Quality reporting and Promoting Interoperability

CAHs participate in the Medicare Beneficiary Quality Improvement Project (MBQIP), a voluntary quality measurement framework specifically designed for CAHs. MBQIP measures cover patient safety, patient engagement, care transitions, outpatient care, and emergency department care. State Flex Program offices including the Georgia State Office of Rural Health support MBQIP participation by Georgia CAHs.

MBQIP differs from the mandatory quality reporting programs that apply to IPPS hospitals. The Inpatient Quality Reporting program is for IPPS hospitals; CAHs may participate voluntarily in some measures but are not subject to the IQR payment incentive. The Hospital Readmissions Reduction Program and Hospital-Acquired Condition Reduction Program apply only to IPPS hospitals. The Hospital Value-Based Purchasing program likewise applies only to IPPS hospitals.

CAH participation in MBQIP supports quality improvement and provides a framework for performance measurement. Many Georgia CAHs are active MBQIP participants, with the state Flex office providing data analysis, peer comparison, and improvement strategies.

CAHs also participate in the Medicare Promoting Interoperability (PI) Program. PI requirements include electronic health record adoption, interoperability standards, and reporting of measures related to EHR use. Payment incentives and adjustments under PI apply to CAHs in modified form compared to IPPS hospitals.

Telehealth and CAH operational flexibilities

CAHs have benefited from telehealth expansions in recent years, particularly during and after the COVID-19 public health emergency. Section 1834(m) of the Social Security Act provides Medicare telehealth payment, with originating-site facility fees for the location where the patient receives services and distant-site professional fees for the practitioner location.

CAHs can serve as originating sites for telehealth services, receiving facility fees when patients receive services at the CAH from a distant practitioner. CAHs can also serve as distant sites, with practitioners at the CAH providing services to patients at other originating sites.

During the COVID-19 PHE, various telehealth flexibilities expanded the scope of services and the originating sites eligible for telehealth. Several flexibilities were extended by subsequent legislation including the Consolidated Appropriations Acts of 2021, 2022, and 2023. Telehealth expansion provides important access support for rural areas served by CAHs.

The COVID-19 PHE also allowed temporary expansions of the CAH bed count limit under hospital-at-home and other waivers. Most of those temporary expansions have ended with PHE termination. Permanent bed count increases have been proposed but not enacted.

PRRB appeals and OIG audits

When disputes arise about CAH eligibility, certification, or cost report settlement, the formal appeal mechanism is the Provider Reimbursement Review Board (PRRB) established under Section 1878 of the Social Security Act. PRRB appeals follow the standard process: the hospital files within one hundred eighty days of the contractor determination, the Board conducts a hearing, the Board issues a written decision, the CMS Administrator may review, and judicial review may follow.

Common CAH-related appeals include:

• Disputes about cost report items including allocations and cost limits
• Disputes about bad debt reimbursement
• Disputes about Method 1 versus Method 2 elections and their consequences
• Disputes about swing bed cost allocation
• Disputes about distance criteria interpretation
• Disputes about Conditions of Participation findings

The Office of Inspector General conducts audits of CAH cost reporting and payment. Common OIG focuses include:

• Cost report accuracy and supporting documentation
• Bad debt reimbursement compliance
• Swing bed cost allocation
• Method 2 election compliance and physician compensation arrangements
• 340B program compliance for CAH outpatient drug services
• Quality reporting accuracy

The Section 1128A civil monetary penalty authority applies to false claims, false statements, and other regulatory violations including CAH compliance matters. Penalties can be substantial.

Industry perspectives and reform debate

The American Hospital Association supports the CAH program as essential rural hospital protection. AHA testimony at congressional hearings emphasizes the role of cost-based reimbursement in maintaining rural hospital viability. AHA has advocated for several reforms including bed count increases (to thirty-five or fifty beds), necessary provider restoration, and ALOS limit increases.

The National Rural Health Association has been a leading advocate for CAH and rural health policy generally. NRHA testimony and policy positions support CAH program continuation and various enhancements. NRHA conducts research on rural hospital performance, financial viability, and access implications.

MedPAC has analyzed CAH policy in multiple reports. Analyses have generally supported the program's role while raising questions about specific elements including the precise calibration of the one hundred one percent payment level, the ALOS limit, and the bed count limit. MedPAC has at times recommended adjustments but has not recommended elimination.

The Congressional Budget Office scores CAH-related provisions in legislation. The budgetary impact of CAH modifications depends on the specific changes considered.

State hospital associations including the Georgia Hospital Association support the CAH program and advocate for refinements. GHA testimony and policy positions emphasize the importance of CAH for Georgia rural hospital viability.

Beneficiary advocacy organizations support CAH because of its connection to rural hospital access. Medicare Rights Center at 1-800-333-4114 and similar organizations field questions from beneficiaries seeking care at CAHs.

Major Georgia Critical Access Hospitals

Georgia has approximately thirty to thirty-five certified CAHs, distributed across the state's rural regions. Specific designation status of individual hospitals can change over time as hospitals open, close, or change ownership. For current information on a particular hospital's CAH status, the hospital itself, Palmetto GBA at 1-866-238-9650, or the Georgia State Office of Rural Health at 229-401-3070 can provide guidance.

South Georgia CAHs include hospitals in Brooks County, Crisp, Donalsonville, Jeff Davis, Mitchell, Treutlen, and other rural counties. These hospitals serve agricultural counties with aging populations and significant Medicare share.

Middle Georgia CAHs include hospitals in counties such as Putnam, Taylor, Upson, Wilkes, and others. These hospitals serve small-town and rural communities.

Mountain region CAHs include hospitals such as Habersham Medical Center, Mountain Lakes Medical Center, and others in North Georgia counties. These hospitals serve mountain communities with significant tourism populations and retiree settlement patterns.

Coastal Georgia CAHs include hospitals serving rural coastal counties. The interplay of coastal geography, barrier islands, and inland rural areas creates distinct service patterns.

The Phoebe Putney Health System operates rural affiliates including Phoebe Putney Memorial Hospital - Sumter and Phoebe Worth Medical Center, both of which are or have been Georgia CAHs depending on current status. Other regional systems also operate CAH facilities.

The CAH designation provides Georgia rural hospitals the strongest available federal payment protection. Without CAH designation, many of these hospitals would have closed during the rural hospital crisis of the past fifteen years. With CAH designation, they continue to provide essential healthcare services to rural communities.

Palmetto GBA implementation

Palmetto GBA is the Medicare Administrative Contractor serving Jurisdiction J, which includes Georgia. Palmetto's responsibilities related to CAH designation include:

• Processing CAH cost reports for Georgia hospitals
• Setting and adjusting interim payment rates based on prior cost reports
• Processing CAH claims under cost-based reimbursement
• Calculating final cost report settlements
• Administering bad debt reimbursement
• Coordinating with CMS on certification matters
• Responding to hospital inquiries about CAH payment

Hospitals with CAH-related questions work directly with Palmetto. Beneficiary questions about Medicare hospital benefits route through 1-800-MEDICARE. Palmetto customer service at 1-866-238-9650 handles provider inquiries.

Future trajectory and reform discussions

The CAH designation has been a feature of Medicare hospital payment policy since 1997. Periodic legislative refinements have updated the framework. Several reform discussions are ongoing.

Bed count increase has been proposed. The current twenty-five-bed limit dates to the early 2000s. Some advocates argue for increasing the limit to thirty-five or fifty beds to allow CAHs to serve broader populations. Counterarguments emphasize that the twenty-five-bed limit defines the CAH program's identity as a small rural hospital framework, and that expansion could blur the lines with IPPS rural hospitals operating under SCH or MDH designations.

Necessary provider restoration has been advocated by AHA, NRHA, and state hospital associations. The closure of the necessary provider path after January 1, 2006 prevents new CAH designations for hospitals that do not meet the geographic distance criteria. Restoration would allow additional small rural hospitals to qualify. The financial impact and policy implications continue to be debated.

ALOS limit increase has been proposed. The current ninety-six-hour limit may pressure CAHs to transfer patients prematurely or to limit admissions of patients likely to require extended stays. Limit increase could provide additional flexibility but could also blur the distinction between CAHs and small IPPS hospitals.

Telehealth expansion is a continuing development. Pandemic-era flexibilities have evolved into permanent expansions for some service categories. CAHs benefit from telehealth as both originating and distant sites.

Coordination with REH (Rural Emergency Hospital) designation is a newer consideration. The REH option created by CAA 2021 allows hospitals to convert from inpatient operation to emergency-and-outpatient operation. Some financially stressed CAHs may consider REH conversion, eliminating inpatient services for monthly facility payment plus enhanced outpatient reimbursement. The trade-off involves complex financial and community service considerations.

State Medicaid policy continues to interact with CAH framework. Georgia's Medicaid policy decisions affect CAH financial environments through their effect on uncompensated care levels.

The trajectory of rural hospital closures remains a central concern. CAH designation has been the most successful federal mechanism for preserving rural hospital access, but it has not been sufficient alone to prevent all closures. Continued attention to rural hospital payment policy is essential.

Best practices for Georgia rural hospitals considering CAH designation

1. Conduct early eligibility analysis. Review bed count, rural status, distance to other hospitals, ALOS, and operational capacity. Identify whether all CAH criteria are met or could be met through restructuring.

2. Engage the Georgia State Office of Rural Health. The state Flex Program at 229-401-3070 provides guidance on CAH designation pathways and operational requirements.

3. Engage experienced consultants. CAH conversion involves complex operational and financial analysis. Specialized consultants can guide the process.

4. Evaluate financial impact carefully. Compare projected CAH cost-based payment to current IPPS payment with any applicable adjustments. The financial analysis should include both operating and capital implications.

5. Plan operational changes. CAH operation requires meeting Conditions of Participation, maintaining ALOS limits, providing twenty-four-hour emergency services, and other operational requirements. Plan operational changes systematically.

6. Decide on Method 1 versus Method 2 election. Analyze physician arrangements. Method 2 typically provides higher payment but requires reassignment.

7. Plan swing bed operations. Develop policies and procedures for swing bed admissions, qualifying stay verification, skilled nursing services, and cost allocation.

8. Build MBQIP participation. Quality reporting through MBQIP supports performance measurement and provides comparison to other CAHs.

9. Coordinate with Palmetto GBA. Build relationships with the contractor's provider relations and cost report staff.

10. Engage GHA and NRHA. Trade associations provide policy advocacy and technical resources.

11. Plan for capital investment. Cost-based reimbursement includes capital costs. Plan capital investment within the framework.

12. Prepare for cost report compliance. CAH cost reporting is more complex than IPPS cost reporting in some respects. Build internal capacity or contractor relationships for cost report preparation.

13. Consider necessary provider history. If the hospital has pre-2006 necessary provider designation, document it carefully to preserve grandfathered status.

14. Evaluate alternative designations periodically. Compare CAH to SCH, MDH, low-volume, and REH options as conditions change.

Common issues and considerations

1. ALOS limit pressure. The ninety-six-hour annual average length of stay limit can pressure CAHs to transfer or discharge patients prematurely. Care management practices must balance ALOS compliance with clinical needs.

2. Bed count flexibility. The twenty-five-bed limit including swing beds requires careful allocation. During high-demand periods the limit can be constraining.

3. Capital reimbursement adequacy. Cost-based reimbursement of capital costs may not fully support major capital projects. Grant funding, philanthropy, and other sources may be needed.

4. Physician recruitment. Small rural CAHs face physician recruitment challenges similar to other rural hospitals.

5. Method 2 election complexity. The Method 2 election requires physician benefit reassignment and combined billing. Hospitals must build operational capacity for Method 2.

6. Swing bed compliance. Swing bed eligibility requires prior qualifying stay and skilled-level need. Documentation must support each swing bed admission.

7. Bad debt reimbursement reduction. The BBA 2018 reduction of Medicare bad debt reimbursement to sixty-five percent affects CAH cost recovery for unpaid Medicare cost-sharing.

8. Cost report complexity. CAH cost reports require careful preparation. Errors can result in payment delays or audit findings.

9. Telehealth opportunities. CAHs can leverage telehealth for both originating-site and distant-site services. Operational integration requires planning.

10. MA plan negotiations. MA contracts may pay less than fee-for-service cost-based reimbursement. Hospitals must evaluate MA participation carefully.

11. 340B compliance. CAH 340B participation provides outpatient drug savings but requires compliance with 340B program requirements.

12. Workforce sustainability. CAH staffing models must balance cost efficiency with operational requirements including twenty-four-hour emergency services.

13. Necessary provider grandfathering preservation. Pre-2006 designation should be carefully documented. Ownership changes or facility closures could affect grandfathered status.

14. REH conversion consideration. REH may be appropriate for hospitals unable to sustain inpatient operations. Analysis should consider community service implications and financial trade-offs.

::: accordion Frequently asked questions about Georgia Medicare Critical Access Hospital designation

What is a Critical Access Hospital and why does it matter for Medicare?

A Critical Access Hospital is a small rural hospital designated under Section 1820 of the Social Security Act. CAHs operate outside the Inpatient Prospective Payment System and receive cost-based reimbursement at one hundred one percent of reasonable costs. The designation provides the strongest federal payment protection available to small rural hospitals. Without CAH designation, many small rural hospitals would face additional financial pressure and potentially closure. With it, they remain financially viable and continue to provide essential healthcare services to rural communities.

How does a Georgia hospital qualify as a CAH?

A hospital qualifies if it meets several criteria. It must have no more than twenty-five inpatient beds. It must be located in a rural area. It must meet distance criteria (more than thirty-five miles from another hospital, or fifteen miles in mountainous terrain or with only secondary roads) or be a grandfathered necessary provider designated by the state before January 1, 2006. It must maintain an annual average length of stay of ninety-six hours or less for acute care patients. It must provide twenty-four-hour emergency services. It must meet the Conditions of Participation at 42 CFR Part 485 Subpart F. The Georgia State Office of Rural Health at 229-401-3070 administers the state Flex Program and recommends designations.

What does cost-based reimbursement at 101% mean?

The CAH receives payment from Medicare equal to one hundred one percent of its reasonable costs of providing care to Medicare beneficiaries. Reasonable costs are determined through Medicare cost reporting principles. Total Medicare-allowable costs across inpatient, outpatient, and swing bed services are multiplied by 1.01 to determine total payment. The one percent margin provides modest positive financial cushion compared to operating exactly at cost. This is fundamentally different from prospective payment, which pays predetermined amounts regardless of actual costs.

What is the difference between CAH and SCH or MDH?

CAH, SCH, and MDH are three different rural hospital designations. SCH (Section 1886(d)(5)(D)) and MDH (Section 1886(d)(5)(G)) keep hospitals within the IPPS framework with hospital-specific payment adjustments. CAH (Section 1820) takes hospitals out of IPPS entirely and provides cost-based reimbursement. SCH applies to geographically isolated hospitals. MDH applies to small rural hospitals with at least sixty percent Medicare days. CAH applies to small rural hospitals with no more than twenty-five beds. The designations have different eligibility criteria and different payment frameworks.

Can my hospital convert from IPPS to CAH?

Yes, if the hospital meets the CAH eligibility criteria. The hospital must reduce to twenty-five beds or fewer, must be in a rural location, must meet distance criteria or have grandfathered necessary provider status, must maintain the ninety-six-hour ALOS, and must provide twenty-four-hour emergency services. The conversion involves regulatory steps including state Flex Program recommendation and CMS certification survey. Conversion analysis should compare projected CAH cost-based payment to current IPPS payment to evaluate the financial impact.

What are swing beds at a CAH?

Swing beds are inpatient beds that can be used flexibly for either acute care or skilled nursing care. The same physical bed can "swing" between purposes based on patient need. For a small rural hospital with twenty beds, swing bed flexibility allows the hospital to serve patients across the acute-to-skilled-nursing continuum without maintaining separate units. Swing bed services require the patient to meet skilled nursing facility eligibility (typically including a qualifying three-day prior hospital stay) and to require daily skilled nursing or rehabilitation services.

What is the Method 1 versus Method 2 election?

The Method 1 versus Method 2 election governs how outpatient professional services are billed at a CAH. Under Method 1, the CAH bills the facility component on its cost report at cost, and physicians bill the professional component separately under the Medicare Physician Fee Schedule. Under Method 2, the CAH bills combined facility-plus-professional charges, with the professional component reimbursed at one hundred fifteen percent of the fee schedule. Method 2 requires physician benefit reassignment to the CAH. The election applies to all outpatient professional services at the CAH and is made for the entire fiscal year.

What is the ninety-six-hour annual average length of stay requirement?

The CAH must maintain an annual average length of stay of ninety-six hours or less for acute care patients. This is calculated as total acute care days divided by total acute care discharges over the fiscal year. The ninety-six-hour limit (four days on average) is a requirement for continued CAH certification. Individual patient stays can exceed ninety-six hours; the limit is on the annual average. Swing bed days are excluded from the ALOS calculation. Hospitals approaching the limit may need to manage admission and discharge patterns or refer extended-stay patients to other facilities.

What is the necessary provider grandfathering?

Before January 1, 2006, states could designate hospitals as "necessary providers" for CAH certification purposes, regardless of geographic distance criteria. Many Georgia CAHs received necessary provider designation before the 2006 sunset. These hospitals retained their CAH status through grandfathering. After the 2006 sunset, new CAH designations must meet the geographic distance criteria (more than thirty-five miles from another hospital or fifteen miles in mountainous terrain or with secondary roads). The grandfathering preserved CAH status for hospitals that would not have qualified under distance alone. Restoration of the necessary provider path has been advocated by AHA, NRHA, and others.

What is the Medicare Rural Hospital Flexibility Program?

The Medicare Rural Hospital Flexibility Program (Flex Program) was established by Section 4201 of the BBA 1997 as part of the CAH creation. The Flex Program is administered at the state level in partnership with the federal Health Resources and Services Administration (HRSA). State Flex Program offices recommend hospitals for CAH designation, provide technical assistance, support quality improvement (MBQIP), administer grants, and coordinate with HRSA and CMS. In Georgia, the Flex Program is administered by the Georgia State Office of Rural Health at 229-401-3070.

Does CAH designation affect my Medicare cost-sharing as a patient?

The Section 1813 Part A inpatient hospital deductible and coinsurance apply identically at a CAH and at a non-CAH hospital for inpatient stays. For outpatient services, the standard Part B twenty percent coinsurance applies, though the underlying payment methodology differs (cost-based at CAHs versus OPPS at most other hospitals). Swing bed services are paid under SNF Part A rules with associated cost-sharing. Overall, beneficiary cost-sharing at CAHs is largely the same as at other Medicare hospitals.

Who is Palmetto GBA and what role does it play?

Palmetto GBA is the Medicare Administrative Contractor for Jurisdiction J, which includes Georgia. Palmetto processes CAH cost reports, sets interim payment rates, processes claims under cost-based reimbursement, calculates final cost report settlements, administers bad debt reimbursement, and responds to hospital inquiries. Beneficiary questions go to 1-800-MEDICARE. Palmetto provider services are at 1-866-238-9650.

How is CAH bad debt reimbursement handled?

Medicare bad debt reimbursement for CAHs follows the general Medicare bad debt rules. Reimbursement is at sixty-five percent of allowable bad debt amounts following the reduction by the Bipartisan Budget Act of 2018, down from one hundred percent previously. The bad debt amount must reflect Medicare-related cost-sharing amounts that the hospital made reasonable collection efforts to recover but ultimately could not collect. The CAH cost report captures bad debt for reimbursement.

Are CAHs eligible for the 340B Drug Pricing Program?

Yes, most CAHs are eligible for the 340B Drug Pricing Program under Section 340B of the Public Health Service Act. The 340B program provides discounted outpatient drug prices to participating providers. The 340B savings on outpatient drug costs help support CAH financial viability. The 340B program operates separately from the CAH cost-based reimbursement framework, with its own compliance requirements administered by HRSA's Office of Pharmacy Affairs.

Are CAHs eligible for DSH, IME, low-volume, NTAP, or outlier payments?

No. These IPPS-specific payment adjustments do not apply to CAHs. DSH (Section 1886(d)(5)(F)), IME (Section 1886(d)(5)(B)), low-volume (Section 1886(d)(12)), NTAP (Section 1886(d)(5)(K)), and outlier (Section 1886(d)(5)(A)) all operate within the IPPS framework. CAHs are outside IPPS and receive cost-based payment that captures actual costs across all categories without separate adjustments. Cost-based reimbursement is the comprehensive payment mechanism.

How do CAH quality reporting programs work?

CAHs participate in the Medicare Beneficiary Quality Improvement Project (MBQIP), a voluntary quality measurement framework. State Flex offices support MBQIP participation. CAHs also participate in the Medicare Promoting Interoperability Program for electronic health records. The mandatory IPPS quality reporting programs (Inpatient Quality Reporting, Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program, Hospital Value-Based Purchasing) do not apply to CAHs because they are IPPS-specific.

How does telehealth interact with CAH operations?

CAHs can serve as both originating sites and distant sites for Medicare telehealth services under Section 1834(m). Originating-site facility fees apply when patients receive services at the CAH from distant practitioners. Distant-site professional fees apply when CAH-based practitioners provide services to patients at other locations. COVID-19 PHE flexibilities expanded telehealth substantially, with several flexibilities extended by subsequent legislation. Telehealth represents an important access mechanism for rural communities served by CAHs.

How does the Georgia rural hospital crisis context affect CAHs?

Georgia has experienced multiple rural hospital closures over the past fifteen years. CAH designation provides the strongest federal payment protection and has been an important factor in keeping many Georgia rural hospitals open. State policy decisions including non-expansion of full Medicaid increase the financial pressure on rural hospitals. The Georgia Rural Hospital Tax Credit (HB 769 2016) provides supplemental private donation revenue. CAH designation, state programs, and federal grants together support the rural hospital ecosystem.

How many CAHs are in Georgia?

Georgia has approximately thirty to thirty-five certified Critical Access Hospitals, distributed across the rural counties of South Georgia, Middle Georgia, the Mountain region, and coastal rural areas. The exact count changes over time as hospitals open, close, or change designation. For current information on specific hospitals, contact the Georgia State Office of Rural Health at 229-401-3070 or Palmetto GBA at 1-866-238-9650.

Can my CAH convert to Rural Emergency Hospital (REH)?

Yes, technically, but the conversion eliminates inpatient services. The Rural Emergency Hospital designation authorized by the Consolidated Appropriations Act of 2021 creates a new category for facilities providing emergency and outpatient services without inpatient capacity. REH receives a monthly facility payment plus enhanced outpatient reimbursement. Conversion from CAH to REH means closing the inpatient unit. The decision involves complex financial, community service, and beneficiary access considerations.

How can a Medicare beneficiary find out if their local hospital is a CAH?

The CAH status of a hospital may be disclosed on the hospital's website, on Medicare's Care Compare website (medicare.gov/care-compare), or through public CMS data files. Beneficiaries can also ask the hospital directly or contact Palmetto GBA. For most beneficiaries, the more practical question is whether the local hospital is open, accepts Medicare, and provides the services needed.

What appeal rights does a hospital have on CAH-related disputes?

Hospitals may appeal CAH-related determinations through the Provider Reimbursement Review Board (PRRB) under Section 1878 of the Social Security Act. PRRB appeals require the disputed amount to meet jurisdictional thresholds (typically $10,000 for individual appeals, $50,000 for group appeals). The Board conducts hearings, accepts evidence, and issues written decisions. The CMS Administrator may review PRRB decisions. The hospital may seek judicial review in federal district court.

What types of OIG audits affect CAHs?

The Office of Inspector General audits CAH cost report accuracy, bad debt reimbursement compliance, swing bed cost allocation, Method 2 election compliance, 340B program compliance, and quality reporting. OIG audit findings can result in payment recoupments, certification issues, or referrals for civil monetary penalty or False Claims Act enforcement.

How does Medicare Advantage interact with CAH designation?

CAHs can participate in Medicare Advantage networks. MA payment is determined by contract between the CAH and the MA plan, which may differ from fee-for-service cost-based reimbursement. MA contracts may pay less than fee-for-service cost-based payment, which can affect CAH financial viability. Beneficiaries enrolled in MA receiving care at CAHs are subject to MA cost-sharing and network rules.

What resources are available for Medicare beneficiaries in rural Georgia who need help understanding hospital benefits?

Several resources are available. Medicare beneficiaries can call 1-800-MEDICARE for general questions. GeorgiaCares SHIP at 1-866-552-4464 provides free counseling on Medicare benefits. The Medicare Rights Center at 1-800-333-4114 provides national-level Medicare counseling. Atlanta Legal Aid at 404-377-0701 and Georgia Legal Services Program at 1-800-498-9469 provide legal assistance for low-income beneficiaries. The Eldercare Locator at 1-800-677-1116 connects beneficiaries with local Area Agencies on Aging. The Georgia State Office of Rural Health at 229-401-3070 provides information on the state Flex Program and CAH operations.

What is the future trajectory of the CAH designation?

The CAH designation has been a stable feature of Medicare hospital payment policy since 1997, with periodic legislative refinements. Reform discussions include bed count increases, necessary provider restoration, ALOS limit increases, telehealth expansions, and coordination with REH designation. The fundamental CAH framework appears likely to continue, but specific parameters may evolve through future legislation.

How does the Affordable Care Act affect CAH designation?

The Affordable Care Act of 2010 included Section 3128 with CAH-related provisions, primarily addressing cost reporting and quality reporting. The ACA did not fundamentally alter the CAH framework. The ACA's broader provisions have indirect effects on CAH financial environments. Medicaid expansion under the ACA would have reduced the uncompensated care burden on CAHs in expansion states; Georgia did not adopt full expansion, continuing to leave Georgia CAHs with higher uncompensated care levels. :::

::: cta Get help with Medicare hospital benefits and rural hospital questions in Georgia

If you have questions about Medicare hospital benefits, rural hospital access, or how CAH designation affects your local hospital, these resources can help.

Medicare and CAH-related contacts

• Medicare: 1-800-MEDICARE (1-800-633-4227)
• Palmetto GBA Customer Service (Georgia MAC, provider line): 1-866-238-9650
• CMS Provider Enrollment: 1-866-484-8049

Georgia state agencies

• Georgia Department of Community Health Medicaid Member Services: 1-866-211-0950
• Georgia State Office of Rural Health (Flex Program): 229-401-3070

Counseling and advocacy

• GeorgiaCares SHIP (State Health Insurance Assistance Program): 1-866-552-4464
• Medicare Rights Center: 1-800-333-4114
• Atlanta Legal Aid: 404-377-0701
• Georgia Legal Services Program: 1-800-498-9469

Community resources

• 211 Georgia: Dial 2-1-1 from any phone in Georgia
• Eldercare Locator: 1-800-677-1116
• AARP Georgia: 1-866-295-7280
• Georgia Council on Aging: 404-657-5343

Other federal resources

• Social Security Administration: 1-800-772-1213
• Department of Veterans Affairs Benefits: 1-800-827-1000
• Office of Inspector General Hotline (Medicare fraud): 1-800-HHS-TIPS (1-800-447-8477)
• National Rural Health Association: 816-756-3140

For Georgia rural hospitals with questions about CAH designation, application, or payment, the first contacts are the Georgia State Office of Rural Health at 229-401-3070 and Palmetto GBA provider services at 1-866-238-9650.

Brevy publishes comprehensive Medicare and Medicaid guides for every state at brevy.com. Our Georgia Medicare hospital payment series covers the CAH designation in this guide, the Sole Community Hospital designation, the Medicare-Dependent Hospital designation, the low-volume hospital adjustment, the disproportionate share hospital payment, the outlier methodology, the new technology add-on payment, the wage index, the cost report, and other essential elements of Medicare hospital reimbursement. These guides are written for families, caregivers, hospital staff, and policy professionals who need accessible explanations of complex Medicare provisions.

This guide is educational information about Medicare hospital payment policy. It is not legal advice, tax advice, or specific guidance for individual financial or healthcare decisions. Medicare beneficiaries with specific questions about their coverage, costs, or hospital options should consult Medicare directly at 1-800-MEDICARE, work with their healthcare providers, or seek counseling through GeorgiaCares SHIP at 1-866-552-4464. Hospitals with specific questions about CAH designation or payment should consult Palmetto GBA, the Georgia State Office of Rural Health, qualified healthcare finance counsel, and CMS regulatory guidance. Information in this guide reflects Medicare hospital payment policy as understood through May 2026 and may be modified by subsequent legislation, regulation, or administrative guidance.

Find personalized help navigating Medicare Critical Access Hospital benefits at brevy.com. :::