Among the jargon most commonly used when referring to rural hospitals is its designation as a Critical Access Hospital, or CAH. 

But what exactly is a CAH? 

According to the Centers for Medicaid and Medicare Services, a CAH is a hospital that, for the most part and with a few exceptions, 

  • Has 25 or fewer acute care inpatient beds.
  • Is located more than 35 miles from another hospital by primary roads, or more than 15 miles from another hospital via mountainous terrain or secondary roads. 
  • Maintains an annual average length of stay of 96 hours or less for acute care patients.
  • And provides 24/7 emergency care services.

CAHs were established in 1997, as part of the Balanced Budget Act. The designation is designed to reduce a rural hospital’s financial vulnerability while helping maintain rural residents’ access to essential healthcare services. In exchange, CAHs receive certain benefits, including cost-based reimbursement for Medicare Services, flexibility in staffing and services and access to grants and other resources. 

Prior to the 1980s, there were just over 7,100 hospitals in the U.S. As more people moved to private insurance, hospital construction boomed. The Hill-Burton Act, passed in 1946, provided federal grants to states for the construction of hospitals, even in rural areas, in an effort to achieve a ratio of 4.5 hospital beds per 1,000 citizens. By 1980, it had accomplished its goal. 



But, soon after, hospitals started to close. Changes in hospital Medicare and Medicaid reimbursement methods, changes in technology that led to shorter stays and better care, and a shift from inpatient care to outpatient services for hospitals led to decreased revenues. 

The result? By the end of the 1980s, some estimates said as many as 698 hospitals had closed, more than 200 of them rural areas. Between 1990 and 2000, an additional 200 rural hospitals and 300 urban hospitals closed. 

Congress reacted then and passed measures to solidify rural hospitals’ financial situation as an effort to keep them open.

The legislation also created the Medicare Rural Hospital Flexibility (Flex) Program which allowed any state with rural hospitals to establish a Flex Program and apply for federal funding to improve rural residents’ access to hospitals.

Certified by Centers for Medicaid and Medicare Services, Critical Access Hospitals represent two thirds of all rural hospitals. As of July 2020, that number was about 1,350 hospitals across the country. But, if your state doesn’t have a Flex program, it won’t have any CAHs. Five states – Connecticut, Delaware, Maryland, New Jersey and Rhode Island – lack Flex Programs and therefore have no hospitals with a CAH status. 

Not all rural hospitals qualify to be CAHs, however, and in some cases, CAH status does not benefit hospitals financially. Other statuses, like Sole Community Hospital, or Medicare-Dependent Hospital may be more beneficial to their bottom line. It’s up to individual hospitals to determine which status best suits their needs, and to apply for certification. 

Recently, rural hospitals have become more reliant on Medicare. Rural residents are more likely to be Medicare or Medicaid recipients. That means that rural hospitals, according to the American Hospital Association, see as much as 56% of their net revenues come from Medicare and Medicaid patients. 

As changes in Medicare and Medicaid reimbursements continue, with some states opting not to expand the programs, the resulting revenue declines are having an impact. In the past decade, more than 130 rural hospitals have closed in 31 states. 

Lawmakers are once again reacting. In Congress, the Consolidated Appropriations Act of 2018 created the Rural Emergency Hospital (a new provider type) and other pilot programs to give rural hospitals new ways of making ends meet.