Georgia Medicare Rural Emergency Hospital 2026 Guide

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Georgia Medicare Rural Emergency Hospital (REH) Designation

When a rural Georgia hospital reaches the point where continued operation as a full-service inpatient facility is no longer financially sustainable, the path forward used to be a binary choice. Either the hospital found a way to keep the inpatient unit running through some combination of state grants, philanthropic donations, operational cost cutting, and federal payment adjustments through the Sole Community Hospital, Medicare-Dependent Hospital, or Critical Access Hospital frameworks, or the hospital closed completely. Closure meant the community lost not just inpatient care but emergency services, outpatient services, diagnostic capacity, and the social infrastructure that a small-town hospital represents. Beginning January 1, 2023, a third option became available. Section 125 of the Consolidated Appropriations Act of 2021 (Public Law 116-260) created a new Medicare provider type called the Rural Emergency Hospital, allowing eligible rural hospitals to convert from full inpatient operation to emergency-and-outpatient-only operation while retaining federal Medicare payment under a new methodology designed specifically for the no-inpatient model.

The REH framework is the newest federal rural hospital payment innovation in nearly three decades. It emerged from a sustained policy debate about how to preserve healthcare access in rural communities where the financial economics of inpatient care had become impossible. The Section 1861(kkk) statutory definition added by CAA 2021 establishes the REH as a Medicare provider that furnishes emergency services, observation care up to a twenty-four-hour annual average length of stay, and outpatient services to outpatients, without providing acute inpatient services. The Section 1834(x) payment methodology combines two components. First, a monthly facility payment (updated annually through the Medicare Hospital Outpatient Prospective Payment System final rule) provides a baseline financial floor that does not depend on service volume. Second, enhanced outpatient reimbursement at one hundred five percent of the standard OPPS rates applies to most outpatient services. Together the two components produce total payment designed to make REH operation financially viable for hospitals that could not sustain full inpatient operation.

The Conditions of Participation at 42 CFR Part 485 Subpart E establish the operational requirements. The payment implementation at 42 CFR 419.95 specifies how the OPPS enhancement and monthly payment are administered. Eligible hospitals are those that, as of December 27, 2020 (the CAA 2021 enactment date), were either Critical Access Hospitals or subsection (d) general acute care hospitals with no more than fifty beds, located in a rural area. The eligibility window was deliberately restricted to existing rural hospitals, on the policy theory that REH should be a conversion option for endangered facilities rather than a new construction category.

For Georgia, the REH framework has been particularly significant. The state's rural hospital crisis has produced multiple closures over the past fifteen years. Several Georgia hospitals have explored REH conversion as an alternative to closure. First Georgia REH conversions occurred in 2023-2024, and additional Georgia hospitals continue to evaluate the option. The Georgia State Office of Rural Health at 229-401-3070 provides technical assistance to hospitals considering REH conversion. The Georgia Department of Public Health at 404-657-2700 administers state licensure aspects of the conversion. Palmetto GBA at 1-866-238-9650 processes the federal Medicare payment.

This guide explains how REH works, who qualifies, how the monthly facility payment and enhanced OPPS reimbursement are calculated, how the no-inpatient service model differs from CAH and SCH and MDH and the standard IPPS framework, what the conversion process involves, what the patient access implications are for communities that lose inpatient services, and what the policy debate has produced as the REH framework matures through its first years of implementation. Brevy publishes these Georgia Medicare guides at brevy.com because the questions of whether to convert, whether to close, and what to keep open are among the most consequential decisions facing rural communities, their hospital boards, and the families who depend on the local hospital being there when they need it. :::

::: callout Key takeaways for Georgia Medicare beneficiaries and rural hospitals considering REH conversion

1. REH authority lives in Section 125 of the Consolidated Appropriations Act 2021 (Public Law 116-260). The statutory definition is at Section 1861(kkk) of the Social Security Act. The payment methodology is at Section 1834(x). REH became effective January 1, 2023.

2. REH eligibility is restricted to existing rural hospitals as of December 27, 2020. Eligible hospitals must have been either Critical Access Hospitals or subsection (d) general acute care hospitals with no more than fifty beds, located in a rural area.

3. REH service requirements eliminate acute inpatient care while retaining twenty-four-hour emergency services, observation care up to a twenty-four-hour annual average length of stay, and outpatient services. The REH may also operate a skilled nursing facility distinct part under separate certification.

4. Payment combines a monthly facility payment with enhanced outpatient reimbursement. The monthly facility payment is set annually by the CMS OPPS final rule and provides a volume-independent financial baseline. Enhanced OPPS reimbursement at one hundred five percent of standard rates applies to most outpatient services.

5. The conversion process requires state licensure modifications and CMS approval. In Georgia, licensure is administered by the Georgia Department of Public Health at 404-657-2700. CMS Regional Office certification follows, with an effective date specified in the certification. :::

Why the Rural Emergency Hospital designation exists

The Rural Emergency Hospital designation was the product of more than a decade of policy debate about how to address the rural hospital closure crisis. Between 2010 and 2020, many rural hospitals closed across the United States. Closures concentrated in non-Medicaid-expansion states and in regions with high rural poverty. Georgia experienced multiple closures during this period. The closures left communities without local inpatient access, without local emergency department capacity, and without the broader healthcare infrastructure that a community hospital represents.

Federal policy responses through the 2010s focused primarily on payment enhancements to existing rural hospital frameworks. The Critical Access Hospital cost-based reimbursement, the Sole Community Hospital and Medicare-Dependent Hospital methodologies, the low-volume hospital adjustment, the disproportionate share hospital payment, and various other adjustments all received attention. The Affordable Care Act of 2010 expanded uncompensated care payments through Section 3133(b)(3). The Bipartisan Budget Act of 2018 modified the low-volume threshold to be more accessible to small rural hospitals. State-level innovations including Georgia's Rural Hospital Tax Credit supplemented federal protections. None of these interventions reversed the underlying closure trend.

By the late 2010s, policy attention turned to a different question: rather than trying to keep all rural hospitals operating as full-service inpatient facilities, could federal policy create an alternative that preserved some level of access in communities where inpatient operation had become unsustainable? Several legislative proposals emerged. The Save Rural Hospitals Act and similar measures proposed new payment frameworks designed for stripped-down hospital models. Medicare Payment Advisory Commission analyses examined hybrid designations. The Centers for Medicare and Medicaid Services Innovation Center explored various rural-focused models.

The Consolidated Appropriations Act of 2021, enacted in December 2020 as part of a year-end legislative package, included Section 125 establishing the Rural Emergency Hospital provider type. The provision was the culmination of bipartisan rural hospital advocacy. The structural design was deliberate. Rather than creating yet another adjustment within the IPPS framework, Section 125 established REH as a new Medicare provider type with its own statutory definition, payment methodology, and Conditions of Participation. The REH would be neither an IPPS hospital nor a CAH. It would be its own category, with a payment system designed for the no-inpatient operational model.

CMS issued the implementing regulations through the OPPS final rule for calendar year 2023, which finalized the Conditions of Participation at 42 CFR Part 485 Subpart E and the payment implementation at 42 CFR 419.95. The first REH conversions took effect January 1, 2023. Initial conversion activity was modest, with hospitals taking time to evaluate the option, understand the financial implications, and work through state licensure processes. By late 2024, a growing number of REH conversions had been completed nationally. The pace has accelerated as more hospitals consider the option and as the financial framework has been clarified through ongoing rulemaking.

The policy theory behind REH is that a community is better served by preserving some level of access than by losing the hospital entirely. Emergency department access remains. Outpatient services remain. Telehealth integration brings specialty consultation that might not have been available at the prior inpatient hospital. SNF distinct part operations can preserve some post-acute care capacity. The trade-off is acute inpatient services. Patients requiring inpatient care must travel to another hospital. The REH provides stabilization and transfer rather than admission.

Critics of the REH framework have raised concerns. Loss of obstetric services in REH-converting hospitals affects access to labor and delivery care, with implications for maternal and infant health. Loss of inpatient services may discourage some patient categories from seeking care locally even when they should. The monthly facility payment level may not be sufficient for all hospitals to make conversion financially attractive. The eligibility restriction to hospitals existing as of December 27, 2020 prevents new construction in underserved communities. Various reform proposals have been advanced to address these concerns.

Who qualifies under Section 1861(kkk)

The statutory definition of a Rural Emergency Hospital is set out at Section 1861(kkk) of the Social Security Act, with the implementing regulation at 42 CFR Part 485 Subpart E. Several elements must all be satisfied.

The first element is the predecessor status. The hospital must have been, as of December 27, 2020, either (1) a Critical Access Hospital under Section 1820 or (2) a subsection (d) hospital with no more than fifty beds. The subsection (d) category encompasses general acute care IPPS hospitals. The fifty-bed limit for subsection (d) hospitals is specific to REH eligibility; it does not constrain CAH conversions (since CAHs are limited to twenty-five beds anyway). The December 27, 2020 cutoff is the CAA 2021 enactment date. Hospitals opened after that date generally cannot qualify as REH because they were not in operation at the cutoff date as eligible predecessors.

The second element is the rural location. The hospital must be located in a rural area as defined for Medicare purposes. Standard rural classifications apply. Generally this means outside metropolitan statistical areas, though some hospitals in metropolitan areas may qualify if treated as rural through reclassification or other mechanisms.

The third element is voluntary conversion. The hospital must voluntarily elect to convert to REH status. CMS does not force conversion. The hospital's governing body makes the decision, typically after extensive financial analysis, community engagement, and consultation with state and federal agencies.

The fourth element is the operational restructuring. The REH must eliminate acute inpatient services entirely. The hospital cannot operate medical or surgical inpatient units, cannot provide labor and delivery services as inpatient care (though prenatal and outpatient labor support remain possible), and cannot provide other acute inpatient services. The hospital may operate observation services with patients staying up to a twenty-four-hour annual average length of stay. The hospital may operate a separately certified skilled nursing facility distinct part. The hospital must continue to provide twenty-four-hour emergency services.

The Conditions of Participation at 42 CFR Part 485 Subpart E elaborate the operational requirements. REHs must maintain governing body oversight, medical staff organization, nursing services, emergency services, pharmaceutical services, laboratory services, radiology services, patient rights, discharge planning, infection control, and quality assessment activities. Specific requirements address transfer agreements with larger hospitals, telemedicine arrangements for specialty consultation, and integration with state emergency medical services systems.

CMS issues the certification through its Regional Office. State Departments of Public Health administer state licensure modifications. In Georgia, the Georgia Department of Public Health at 404-657-2700 handles state-level licensure aspects. The state must approve license conversion from full hospital to REH category. State scope of practice and operational rules apply alongside federal Conditions of Participation.

The REH payment methodology

REH payment is calculated under Section 1834(x) of the Social Security Act and 42 CFR 419.95. The methodology has two components that operate together.

The first component is the monthly facility payment. CMS established the initial monthly facility payment amount for calendar year 2023 based on cost analyses of the typical rural hospital fixed cost structure. The monthly facility payment is updated annually through the OPPS final rule, applying the Medicare market basket inflation adjustment and any required productivity reduction. The exact amount each year is set by the final rule for that year. The monthly facility payment does not depend on service volume. The hospital receives the payment regardless of how many patients it sees, how many emergency department visits it processes, or how many observation hours it provides. This provides a baseline financial floor.

The second component is the enhanced outpatient reimbursement. For outpatient services subject to the Outpatient Prospective Payment System, the REH receives one hundred five percent of the standard OPPS payment amounts. The five percent enhancement applies to APC-based payments for outpatient surgery, diagnostic services, observation services billed under OPPS, emergency department visits, and most other outpatient services. The enhancement supplements the OPPS payment that the hospital would receive for the same services under standard OPPS methodology.

Combined, the monthly facility payment and the enhanced OPPS reimbursement produce total Medicare payment that varies based on service volume. A REH with high emergency department and outpatient volume receives substantial enhanced OPPS reimbursement on top of the monthly facility payment. A REH with lower volume receives less enhanced OPPS reimbursement but still receives the monthly facility payment baseline. The financial calculation for any individual hospital depends on its specific service mix and volume.

The monthly facility payment is paid through standard Medicare claims processing administered by Palmetto GBA in Georgia. The payment is made monthly as part of regular Medicare disbursements. The enhanced OPPS reimbursement is processed through standard outpatient claims, with the five percent enhancement applied to the OPPS APC amounts.

REHs are also eligible for additional Medicare reimbursement that applies to outpatient services generally, including the standard OPPS pass-through payments for certain drugs and devices, the outlier payments for exceptionally high-cost outpatient cases, and other OPPS-specific adjustments. The enhanced five percent factor applies to these amounts in their standard outpatient payment form.

The REH may also bill state Medicaid programs for Medicaid-eligible patients. Georgia Medicaid REH payment is determined by the Georgia Department of Community Health under the state Medicaid State Plan. Medicaid payment is separate from federal Medicare payment.

Service requirements and operational model

The REH operational model is fundamentally different from the inpatient hospital model. Several service categories define what REHs can and cannot provide.

Twenty-four-hour emergency services are required. The REH must operate a continuously staffed emergency department with physician coverage either on-site or on-call. The emergency department handles the initial evaluation and stabilization of patients presenting with acute conditions. Most patients are either discharged from the emergency department, admitted to observation status for further evaluation, or transferred to a higher-level facility for inpatient care.

Observation services are permitted up to a twenty-four-hour annual average length of stay. Observation is a hospital outpatient service in which the patient is kept in a designated bed area for further evaluation, treatment, and observation before discharge. Observation differs from inpatient admission in that it is technically an outpatient service. Medicare observation services may be billed under specific HCPCS codes with associated OPPS payment. The twenty-four-hour annual average means that across all observation patients in a fiscal year, the average length of observation stay must not exceed twenty-four hours. Individual patients may stay longer than twenty-four hours in observation if clinically necessary, but the annual average must be at or below the limit.

Acute inpatient services are prohibited. The REH cannot admit patients as inpatients for medical, surgical, or obstetric care. The distinction between observation (outpatient) and inpatient admission is critical. Patients requiring inpatient-level care must be transferred to another facility. The REH provides emergency stabilization and transfer coordination rather than inpatient admission.

A skilled nursing facility distinct part is permitted. The REH may operate a separately certified distinct part SNF, which is a unit of beds organized as a skilled nursing facility within the same building or campus as the REH. The SNF distinct part operates under the SNF Prospective Payment System with the Patient-Driven Payment Model, providing post-acute skilled nursing and rehabilitation services. The SNF distinct part is administratively separate from REH operations and follows SNF regulations rather than REH regulations. Many REHs maintain SNF distinct parts to provide post-acute care capacity for the community.

Outpatient services include outpatient surgery (typically same-day procedures), diagnostic imaging, laboratory services, pharmacy services, outpatient rehabilitation including physical therapy and occupational therapy, infusion services, and outpatient specialty consultations. The scope of outpatient services depends on the specific hospital's operational capacity, staffing, and equipment.

Telemedicine integration is essential to REH operation. The REH typically relies on tele-emergency services where emergency physicians at distant locations provide consultation to REH-based providers during emergencies. Specialty consultations via telemedicine bring expertise that the REH cannot maintain on-site. Transfer coordination uses telecommunication to arrange transport to tertiary facilities for patients requiring inpatient care.

Transfer agreements with larger hospitals are required. The REH must maintain formal transfer agreements with hospitals that can receive transferred patients requiring inpatient care. Transfer protocols, ambulance arrangements, and medical record exchange procedures support efficient transfer coordination.

The conversion process

The conversion of an existing hospital to REH status is a multi-step process involving state licensure modifications, CMS certification, payment system transitions, and operational changes.

The first step is the hospital's decision to convert. The hospital's governing body must approve the conversion based on financial analysis, community engagement, and strategic planning. Many hospitals engage healthcare finance consultants to model the projected financial impact of REH conversion compared to continued operation as a CAH, SCH, MDH, low-volume hospital, or full-service hospital, or compared to closure. Community engagement involves communicating with patients, community leaders, county and municipal governments, and other stakeholders about the implications of losing inpatient services.

The second step is state licensure modification. The hospital must obtain state approval to convert its license from full hospital to REH category. In Georgia, this involves application to the Georgia Department of Public Health at 404-657-2700. The state agency reviews the application, may conduct an inspection, and approves or denies the license modification. State requirements vary by state regarding REH-specific licensure standards.

The third step is CMS certification. The hospital applies to its CMS Regional Office for REH certification. CMS reviews the application, may conduct a survey to verify Conditions of Participation compliance, and issues the certification with an effective date. Concurrent with CMS certification, the hospital coordinates with Palmetto GBA for Medicare provider number transitions and billing system changes.

The fourth step is operational transition. The hospital ceases inpatient operations on the effective date. Inpatient beds are removed from service or repurposed for SNF distinct part operations if applicable. Inpatient staffing is restructured. Inpatient supply, pharmacy, and operational arrangements are modified or eliminated. The hospital implements REH operational procedures including observation service protocols, transfer agreements, and telemedicine arrangements.

The fifth step is ongoing operation. The REH operates under the new model, with monthly facility payments and enhanced OPPS reimbursement flowing from Medicare. Annual cost reporting captures the hospital's costs and revenue under the new structure. Quality reporting follows REH-specific requirements. The state Flex Program office and other stakeholders provide ongoing technical assistance.

Reversal of REH conversion to return to CAH or inpatient hospital status is theoretically possible but would require regulatory action. In practice, conversion to REH is typically a permanent or long-term decision, and hospitals plan accordingly.

Worked example one: Georgia CAH conversion to REH analysis

Consider a hypothetical Georgia CAH in a South Georgia rural county. The hospital has twenty-two inpatient beds (all of which can be swing beds), provides twenty-four-hour emergency services, has been operating as a CAH since the early 2000s under necessary provider grandfathered status, and has been experiencing increasing financial pressure due to declining volume, rising labor costs, and an aging physical plant requiring capital investment.

The hospital's financial data shows:

• Annual Medicare CAH cost-based payment: $14.8 million
• Annual Medicaid payment: $2.3 million
• Annual commercial insurance and self-pay: $1.9 million
• Total annual revenue: approximately $19.0 million
• Annual operating costs: approximately $19.5 million
• Annual operating loss: approximately $500,000

The hospital evaluates REH conversion. Under projected REH operation:

• Monthly facility payment: ~$268,000 × 12 = approximately $3.2 million annually
• Enhanced OPPS outpatient reimbursement: projected approximately $7.5 million annually based on outpatient volume (105% of standard $7.1 million baseline)
• Medicaid REH payment: approximately $1.4 million annually (Georgia Medicaid REH rates)
• Commercial outpatient and self-pay: approximately $1.2 million annually
• Projected total annual revenue: approximately $13.3 million
• Projected operating costs (reduced staffing without inpatient): approximately $12.8 million
• Projected operating margin: approximately $500,000 positive

The financial analysis suggests REH conversion would convert the hospital from a $500,000 operating loss to a $500,000 operating margin, a swing of approximately $1.0 million annually. The trade-off is loss of inpatient services. The hospital's annual inpatient discharges total approximately five hundred fifty patients, all of whom would need to receive inpatient care elsewhere following conversion. The hospital engages the community in discussion of the implications.

After extensive analysis and community engagement, the hospital's board approves REH conversion. The conversion process takes approximately nine months to complete, with state licensure modification, CMS certification, and operational transition. The hospital becomes a Rural Emergency Hospital effective at the start of the subsequent fiscal year.

Worked example two: REH monthly facility payment calculation

Consider a Georgia REH operating in calendar year 2026. The CMS OPPS final rule for 2026 sets the monthly facility payment amount (published each November for the following year).

Annual monthly facility payment: the published monthly amount × 12 produces the annual total. This baseline payment is not contingent on service volume. The REH receives the monthly facility payment every month regardless of how many patients it sees, how many emergency department visits it processes, or how many observation hours it provides. The payment is paid through standard Medicare claims processing administered by Palmetto GBA.

The monthly facility payment represents approximately one-quarter to one-third of typical REH total annual Medicare payment, depending on the hospital's outpatient service volume. The remainder of Medicare payment comes from the enhanced OPPS reimbursement on outpatient services.

The CMS rulemaking process updates the monthly facility payment annually using the Medicare market basket inflation factor and any productivity adjustment. The annual update is published in the OPPS final rule typically issued in November of the preceding year. Hospitals can plan based on the projected updates, though final amounts depend on the rulemaking outcome.

Worked example three: REH outpatient at 105 percent OPPS comparison

Consider a Georgia REH providing outpatient services that include emergency department visits, observation services, outpatient surgery, diagnostic imaging, and laboratory tests. For a typical outpatient encounter, the standard OPPS APC payment is the baseline. The REH receives one hundred five percent of that payment.

Example outpatient encounter: emergency department visit with APC payment of $300. Under standard OPPS, the hospital would receive $300. Under REH enhanced reimbursement, the hospital receives $300 × 1.05 = $315. The five percent enhancement of $15 applies to this single encounter.

Across a year of outpatient activity, the five percent enhancement accumulates substantially. If the REH provides ten thousand outpatient encounters with average APC payment of $250, the standard OPPS total would be $2,500,000. The enhanced REH payment is $2,500,000 × 1.05 = $2,625,000. The five percent enhancement adds $125,000 of additional annual revenue.

The enhancement applies to most OPPS-based payments. Certain payments outside the OPPS framework are not subject to the enhancement. The specific scope of the enhancement is detailed in the implementing regulation at 42 CFR 419.95 and in subsequent OPPS final rules.

Worked example four: REH observation service billing

Consider a Georgia REH providing observation services to a patient who presents to the emergency department with chest pain. After initial evaluation, the patient is placed in observation status for further cardiac workup including serial troponin testing and stress testing. The patient remains in observation for approximately eighteen hours before being discharged with cardiology follow-up.

The observation service is billed under OPPS HCPCS code G0378 (hospital observation service, per hour) and related codes. The OPPS APC payment for observation, plus the underlying emergency department services, diagnostic services, and other components, totals approximately $1,200 in OPPS payment. With the REH five percent enhancement, the REH receives $1,200 × 1.05 = $1,260 for the encounter.

The patient is counted as one observation patient with eighteen hours of observation length of stay. Across the year, the REH tracks total observation hours and total observation patients. The annual average length of stay is calculated as total observation hours divided by total observation patients. The annual average must not exceed twenty-four hours for the REH to maintain compliance.

If the REH had ten thousand observation hours across one thousand observation patients in a year, the annual average length of stay would be ten thousand divided by one thousand, or ten hours. The REH is well within the twenty-four-hour limit. If the average were trending toward the limit, the REH would need to manage admission and discharge patterns to maintain compliance.

Worked example five: REH plus SNF distinct part operations

Consider a Georgia REH that also operates a fifteen-bed skilled nursing facility distinct part. The REH and the SNF distinct part are administratively and physically separate operations, with separate certifications and separate payment frameworks, though they share the same physical building and some administrative functions.

The REH portion provides emergency services, observation services up to twenty-four hours, and outpatient services. The REH receives the monthly facility payment of approximately $3.2 million annually plus enhanced OPPS reimbursement on outpatient services.

The SNF distinct part operates under the SNF Prospective Payment System with the Patient-Driven Payment Model (PDPM). Patients admitted to the SNF must have a qualifying three-day prior hospital stay (which for REH patients typically means a stay at another hospital, since the REH cannot provide qualifying inpatient stays) and must require daily skilled nursing or rehabilitation services. The SNF receives PDPM payment for each Medicare patient day based on the patient-specific case mix and per-diem rate calculation.

For a typical SNF Medicare patient, the SNF receives PDPM per-diem payments based on the patient's case mix for each day of the stay. Across fifteen beds with reasonable occupancy and case mix, the SNF generates substantial supplemental revenue beyond the REH portion.

The combined operation provides emergency, outpatient, and post-acute services to the community. The REH/SNF combination is administratively complex but offers broader service capacity than REH alone.

Worked example six: REH conversion decision framework

Consider a Georgia rural hospital evaluating whether to convert to REH. The hospital's board faces a decision among several options:

Option A: Continue as a CAH. Project financial trajectory under continued CAH operation, considering trends in volume, costs, and reimbursement.

Option B: Convert to REH. Project financial trajectory under REH operation, including the monthly facility payment, enhanced OPPS reimbursement, reduced operating costs from eliminating inpatient operations, and any other adjustments.

Option C: Close completely. Project community impact and absence of federal payment.

Option D: Restructure as CAH with operational changes (cost reduction, service line modifications, partnership opportunities).

The board's decision framework considers:

• Financial viability under each option
• Community service implications including inpatient access loss under REH or complete service loss under closure
• Workforce implications including staffing reductions
• Patient access trade-offs including travel distance for inpatient care after REH conversion
• Capital investment requirements under each option
• Strategic alignment with larger health system partners if applicable
• State and federal funding opportunities under each option

Many Georgia hospitals making this decision have engaged in extensive community engagement processes including town hall meetings, board discussions, and stakeholder consultations. The decision is not purely financial. It reflects community values, healthcare access priorities, and strategic considerations about the long-term role of the hospital in the community.

The Georgia State Office of Rural Health at 229-401-3070 has been a valuable resource for hospitals working through this decision. The state office provides technical assistance, financial modeling support, and connections to other hospitals that have made similar decisions.

Coordination with other Medicare programs

REHs operate outside the IPPS framework entirely (no inpatient services) and largely outside the OPPS framework (modified through the enhanced reimbursement). Several Medicare program interactions are important.

The Medicare Inpatient Prospective Payment System does not apply to REHs because they have no inpatient services. None of the IPPS-specific adjustments (DSH, IME, low-volume, NTAP, outlier, wage index in IPPS form) apply.

The Medicare Outpatient Prospective Payment System (OPPS) applies in modified form. Standard OPPS APC payments are the baseline. The REH enhancement of one hundred five percent multiplies the standard amounts.

The Medicare Physician Fee Schedule applies to professional services provided at the REH. Physicians billing for services delivered at the REH receive payment under the standard fee schedule. The professional fee is separate from the facility fee.

The 340B Drug Pricing Program is available to REHs. REHs qualify as eligible covered entities under the same provisions that applied to their predecessor CAH or rural subsection (d) hospital status. The 340B savings on outpatient drug costs help support REH financial viability.

The Promoting Interoperability Program applies to REHs in modified form. REHs participate in electronic health record requirements and reporting.

Medicare Advantage plans may contract with REHs. MA payment is determined by contract between the REH and the MA plan. MA payment may differ from fee-for-service Medicare payment.

State Medicaid programs cover REHs. In Georgia, the Georgia Department of Community Health administers Medicaid payment for REHs. Specific Medicaid payment methodologies for REHs continue to develop as states implement the new provider type.

Other federal grant programs administered by HRSA, USDA Rural Development, and the federal Office of Rural Health Policy may support REH operations and capital investments.

The Medicare Rural Hospital Flexibility Program (Flex Program) provides federal funding to state offices for technical assistance to rural hospitals, including REHs. The Georgia State Office of Rural Health receives Flex Program funding and provides REH support to Georgia hospitals.

Patient access implications

For Medicare beneficiaries in communities served by hospitals that convert to REH, the most significant change is the loss of inpatient access. Patients requiring inpatient hospital care must travel to a different facility. The travel distance depends on which hospital agrees to accept transfers and the road infrastructure. In many rural Georgia communities, the nearest inpatient hospital may be twenty, thirty, fifty, or more miles away. Patients with acute conditions requiring hospitalization face that travel as a result of REH conversion.

The flip side is that without REH conversion, the hospital might close entirely. Closure would eliminate not just inpatient services but also the emergency department, the outpatient services, the laboratory, the imaging capacity, and the other services that the REH retains. From this perspective, REH preserves access that would otherwise be lost.

Specific patient categories face particular implications. Patients with chronic conditions requiring frequent inpatient admissions for management may need to establish relationships with inpatient hospitals in other communities. Pregnant women lose access to labor and delivery services at the REH (most REH conversions eliminate obstetric services), requiring travel for prenatal care, delivery, and postpartum care. Surgical patients lose access to inpatient surgical services, requiring outpatient-only surgery at the REH or travel for inpatient surgical needs.

Emergency department access remains. Patients with acute presentations including chest pain, stroke symptoms, traumatic injuries, and other emergencies receive initial evaluation and stabilization at the REH. The REH coordinates transfer to a higher-level facility for patients requiring inpatient care. This preserves the critical "golden hour" access to emergency care for time-sensitive conditions.

Outpatient services continue. Routine outpatient care including primary care, specialty consultations (through tele-services and on-site providers), diagnostic services, laboratory tests, infusion services, and others remains available. The REH supports the broader healthcare ecosystem of the community including supporting outpatient clinics and physician offices.

For Medicare beneficiaries, the cost-sharing structure differs from traditional inpatient care. There is no Part A inpatient deductible because there is no inpatient stay. Outpatient services are subject to standard Part B twenty percent coinsurance after the annual deductible. Observation services are billed as outpatient and subject to Part B cost-sharing rather than Part A inpatient cost-sharing. This can be either favorable or unfavorable for beneficiaries depending on the specific services received and their other Medicare coverage including Medicare Supplement (Medigap) plans and Medicare Advantage enrollment.

Workforce and operational considerations

REH conversion produces substantial workforce restructuring. The inpatient nursing staff that supported the medical and surgical floors is no longer needed. The respiratory therapy staff that supported inpatient ventilators is no longer needed at the same scale. The dietary services for inpatient meals are eliminated or significantly reduced. Pharmacy operations shift to outpatient and emergency services only. Housekeeping for inpatient rooms is eliminated or shifted to other purposes.

Emergency department staffing remains and may even expand to support the higher-acuity transfer coordination role. Outpatient services staffing remains. Administrative staff may be reduced as the operational scope contracts.

For affected workforce, the hospital typically provides transition support. Some staff may be re-deployed to remaining services. Some may be offered positions at transfer-receiving hospitals or at other facilities in the regional system. Some face displacement. Severance packages, retraining support, and job placement assistance are common elements of conversion plans.

Physician staffing changes. Inpatient-focused physicians such as hospitalists are no longer needed. Emergency physicians remain central to operations. Specialty physicians may shift to telemedicine consultation rather than on-site service. The hospital's physician compensation arrangements typically need restructuring.

Capital infrastructure considerations include repurposing of inpatient floor space, modification of equipment inventory, decommissioning of inpatient-specific assets, and possible new investment in outpatient and emergency department capacity. Some REH conversions involve substantial physical plant modifications.

Information technology systems require modification. The electronic health record system, billing systems, and clinical workflow systems all need adjustments to support the REH operational model rather than the inpatient hospital model.

Quality and safety programs continue under REH-specific requirements. Patient safety, infection control, medication safety, and other quality dimensions remain priorities under the modified service scope.

Industry perspectives and reform debate

The American Hospital Association has expressed cautious support for the REH framework. AHA testimony has emphasized that REH provides an option for hospitals facing closure but has also noted concerns about the implications of inpatient service loss for affected communities. AHA has advocated for flexibility in REH operations including potential limited inpatient services.

The National Rural Health Association has been a strong voice in REH policy development. NRHA testimony and policy positions support REH as a meaningful option for distressed rural hospitals but advocate for several refinements including expanded eligibility, flexibility in service scope, and adequate monthly facility payment levels. NRHA's research on rural hospital financial viability has informed REH policy debate.

The Medicare Payment Advisory Commission has analyzed REH implementation in its reports. Initial MedPAC assessments have noted the slower-than-expected initial conversion pace and have analyzed the factors driving hospitals' decisions to convert or to remain in their prior status. MedPAC has not made significant recommendations to change the REH framework, focusing instead on monitoring implementation.

The Congressional Budget Office scored the original REH provisions and has updated cost estimates as implementation has proceeded. The federal payment impact depends on the number of conversions and the relative cost of REH payment compared to what the converting hospitals would have received under their prior status.

State hospital associations including the Georgia Hospital Association have engaged with REH implementation in their states. GHA has provided technical resources to Georgia hospitals considering conversion and has advocated for policy refinements.

Beneficiary advocacy organizations have monitored REH implementation with particular attention to patient access implications. Loss of inpatient services in REH-converting hospitals affects beneficiary access in ways that the policy debate continues to evaluate.

Reform discussions are ongoing. Proposals include allowing limited inpatient stays at REHs (for example, one or two-day stays for specific conditions), restoring obstetric services at REHs through targeted reimbursement, expanding eligibility beyond the December 27, 2020 predecessor requirement, and increasing the monthly facility payment for specific hospital categories. None of these proposals has yet advanced to legislation, but the debate continues.

Major Georgia rural emergency hospitals and conversion activity

Georgia has seen REH conversion activity beginning in 2023-2024, with several hospitals completing conversion and others continuing to evaluate the option. Specific REH designations of individual Georgia hospitals can change as conversions occur or are reversed. For current information on REH status of specific Georgia hospitals, the Georgia State Office of Rural Health at 229-401-3070, Palmetto GBA at 1-866-238-9650, or the Georgia Department of Public Health at 404-657-2700 provide authoritative information.

Georgia REH conversion activity has been concentrated in South Georgia, where rural hospital financial pressure has been most severe. Specific hospitals that have explored or completed REH conversion include several small community hospitals that previously operated as CAHs or as small subsection (d) rural hospitals. The decision to convert has been preceded by extensive community engagement, financial analysis, and consideration of alternatives.

The Georgia experience parallels national trends. Initial REH adoption has been slower than some early projections anticipated, as hospitals carefully evaluate the trade-offs. As more hospitals complete conversion and operate under the REH model, the pool of experience grows, supporting more informed decision-making by hospitals still considering the option.

Several Georgia hospitals that have not pursued REH conversion have pursued alternative strategies including merger with larger health systems, deeper integration with academic medical centers, partnerships with telehealth networks, and continued operation as CAHs or under other rural designations supported by state and federal funding programs.

Palmetto GBA implementation

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

• Processing REH applications and coordinating with CMS Regional Office for certification
• Administering the monthly facility payment through standard Medicare claims processing
• Processing outpatient claims with the five percent REH enhancement applied
• Coordinating cost report submission and review for REHs
• Responding to hospital inquiries about REH payment and operations
• Coordinating with the Georgia State Office of Rural Health and Georgia Department of Public Health on implementation matters
• Providing guidance on regulatory interpretation as applied to specific situations

Hospitals with REH-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 REH framework is the newest federal rural hospital innovation and continues to evolve as implementation experience accumulates. Several reform discussions are ongoing.

Service scope expansion is the most actively discussed reform. Proposals include allowing limited inpatient stays at REHs, perhaps one-day or two-day stays for specific conditions. Critics of strict inpatient prohibition argue that some patient categories would benefit from brief inpatient care at the REH rather than transfer to a more distant facility. Supporters of strict prohibition argue that allowing inpatient services would blur the REH designation with the CAH and SCH frameworks and could create administrative complexity.

Obstetric services restoration is another discussion topic. The loss of obstetric services at REH-converting hospitals affects access to labor and delivery care, particularly in rural Georgia where alternatives may be distant. Proposals include creating a special obstetric services payment for REHs that maintain labor and delivery capacity. The maternal health implications of rural obstetric service loss have received significant policy attention.

Eligibility expansion has been proposed. The current restriction to hospitals that existed as of December 27, 2020 as CAH or ≤50-bed subsection (d) hospitals prevents new hospitals from qualifying as REH. Expansion proposals would allow new construction or recently opened hospitals to qualify, addressing communities where the existing rural hospital has already closed.

Monthly facility payment adequacy continues to be evaluated. As inflation occurs and as REH operations mature, the monthly facility payment level remains under review. Annual updates through OPPS rulemaking provide some adjustment, but structural reviews periodically assess whether the level remains appropriate.

Telemedicine integration is advancing. As tele-emergency, tele-specialty, and tele-ICU technologies mature, REHs may be able to expand their effective service scope through telehealth partnerships. Reimbursement frameworks for telehealth services at REHs continue to develop.

State Medicaid policy continues to affect REH viability. States set their own Medicaid REH payment policies. Adequate Medicaid payment supports REH financial sustainability beyond the federal Medicare framework.

The trajectory of rural hospital closures and conversions remains a central policy concern. REH was designed to provide an alternative to closure. Whether it ultimately preserves more rural healthcare access than would otherwise have been preserved is a question that ongoing implementation and analysis will answer.

Best practices for Georgia rural hospitals considering REH conversion

1. Engage early with the Georgia State Office of Rural Health. The state office at 229-401-3070 provides technical assistance, financial modeling, and connections to other hospitals that have made similar decisions.

2. Conduct comprehensive financial analysis. Model projected REH financial performance versus continued CAH or other operation. Include monthly facility payment, enhanced OPPS reimbursement, Medicaid payment, commercial insurance, and self-pay revenue projections. Project operating cost changes from eliminating inpatient services.

3. Engage the community thoroughly. Town hall meetings, board discussions, and stakeholder consultations help identify community priorities and concerns. Transparent communication about the trade-offs supports informed decision-making.

4. Evaluate alternatives carefully. Consider continued operation as CAH or other designation with operational changes, merger with larger systems, partnerships, and other strategic options alongside REH conversion.

5. Plan for service transitions. Identify which services will continue and which will end. Plan transfer agreements with receiving hospitals. Develop community communication about service changes.

6. Address workforce implications. Plan for inpatient staff reductions, re-deployment opportunities, severance packages, and retraining support.

7. Coordinate with state and federal agencies. Georgia Department of Public Health for licensure, CMS Regional Office for certification, Palmetto GBA for payment administration. Plan timing carefully.

8. Plan capital and physical plant modifications. Determine what inpatient infrastructure will be decommissioned or repurposed. Plan investments in retained services if needed.

9. Develop telemedicine partnerships. Identify tele-emergency, tele-specialty, and other telehealth providers. Establish service agreements before conversion.

10. Maintain 340B program eligibility. Ensure that 340B program participation transitions appropriately through conversion.

11. Engage trade associations. AHA, NRHA, and GHA provide resources, peer learning, and policy advocacy.

12. Document conversion rationale. Maintain thorough records of the analysis, community engagement, and decision rationale for ongoing operations and potential audits.

13. Plan for ongoing operational excellence. Quality reporting, patient safety, financial management, and community engagement continue under REH operation.

14. Consider Medicaid and other state-level implications. Georgia Medicaid REH payment, state grants, and other state-level supports affect REH financial viability.

Common issues and considerations

1. Community resistance to inpatient service loss. REH conversion eliminates inpatient services, which can be politically and emotionally difficult for communities. Engagement and communication are critical.

2. Workforce displacement. Staff reductions create individual and community impacts that require sensitive management.

3. Patient access concerns. Loss of inpatient access means patients requiring inpatient care must travel to other facilities. Transfer arrangements and emergency response planning are essential.

4. Obstetric services loss. Most REH conversions eliminate labor and delivery services, with maternal health implications.

5. Financial uncertainty. Projected REH financial performance depends on assumptions about volume, costs, and reimbursement that may not materialize as projected.

6. Reversal difficulty. Reversing REH conversion to return to CAH or full-hospital status is administratively difficult. Hospitals should treat the decision as long-term.

7. Capital decommissioning. Inpatient infrastructure decommissioning involves costs and may not produce equivalent value for repurposed uses.

8. Operational transition complexity. Multiple agency coordination, IT system modifications, and operational changes create substantial transition costs.

9. Medicaid payment uncertainty. Georgia Medicaid REH payment frameworks continue to develop. Reimbursement adequacy can affect financial viability.

10. Medicare Advantage contract renegotiation. MA plans may need contract modifications to account for REH service scope changes.

11. Cost report compliance. REH-specific cost reporting requirements require new internal capabilities or contractor relationships.

12. Telemedicine adoption. REH operation depends substantially on telehealth integration, which requires technology investment and operational adaptation.

13. Transfer relationships. Effective relationships with transfer-receiving hospitals are essential. Sometimes those relationships need cultivation before conversion.

14. Long-term sustainability. Whether the REH model produces sustainable long-term operation depends on multiple factors that hospitals should monitor.

::: accordion Frequently asked questions about Georgia Medicare Rural Emergency Hospital designation

What is a Rural Emergency Hospital and why was it created?

A Rural Emergency Hospital is a new Medicare provider type created by Section 125 of the Consolidated Appropriations Act 2021 (Public Law 116-260) effective January 1, 2023. REH allows small rural hospitals to convert from full inpatient operation to emergency-and-outpatient-only operation while retaining federal Medicare payment. It was created to address the rural hospital closure crisis by providing an alternative to complete closure. Communities that lose inpatient services retain emergency access, outpatient services, and other healthcare infrastructure that closure would eliminate entirely.

How does a Georgia hospital qualify to convert to REH?

A hospital qualifies if it was, as of December 27, 2020, either a Critical Access Hospital under Section 1820 or a subsection (d) rural hospital with no more than fifty beds, and is located in a rural area. The hospital must voluntarily elect to convert, eliminate acute inpatient services, retain twenty-four-hour emergency services and observation services up to a twenty-four-hour annual average length of stay, and complete state licensure modification and CMS certification.

How is the enhanced outpatient reimbursement calculated?

For outpatient services subject to the Outpatient Prospective Payment System, the REH receives one hundred five percent of the standard OPPS payment amounts. The five percent enhancement applies to APC-based payments for outpatient surgery, diagnostic services, observation services, emergency department visits, and most other outpatient services. The standard OPPS APC payment is calculated as it would be for any hospital, then multiplied by 1.05 to determine the REH payment amount.

How is REH different from a Critical Access Hospital?

A Critical Access Hospital retains inpatient services with up to twenty-five beds and provides acute medical and surgical inpatient care along with twenty-four-hour emergency services. CAH is paid under cost-based reimbursement. REH eliminates inpatient services and provides only emergency, observation, and outpatient services. REH is paid under the monthly facility payment plus enhanced OPPS methodology. A hospital cannot be both CAH and REH simultaneously.

Does REH conversion affect my Medicare cost-sharing as a patient?

The cost-sharing structure differs from inpatient hospital care. There is no Part A inpatient deductible because there is no inpatient stay. Outpatient services including emergency department visits and observation services are subject to the standard Part B twenty percent coinsurance after the annual deductible. If you have Medigap insurance, the policy may cover the coinsurance and deductible. Medicare Advantage cost-sharing varies by plan. :::

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

If you have questions about Medicare hospital benefits, rural emergency hospital access, or REH conversion considerations, these resources can help.

Medicare and REH-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: 229-401-3070
• Georgia Department of Public Health (licensure): 404-657-2700

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 considering REH conversion, the primary first contact is the Georgia State Office of Rural Health at 229-401-3070, with subsequent coordination with Palmetto GBA at 1-866-238-9650 and the Georgia Department of Public Health at 404-657-2700.

Brevy publishes comprehensive Medicare and Medicaid guides for every state at brevy.com. Our Georgia Medicare hospital payment series covers the Rural Emergency Hospital designation in this guide, the Critical Access Hospital designation, 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 REH conversion or operation should consult the Georgia State Office of Rural Health, Palmetto GBA, the Georgia Department of Public 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 understanding Georgia Medicare hospital options at brevy.com. :::