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Medicare Program; Rural Community Hospital Demonstration Program; Solicitation of Additional Participants

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Centers for Medicare & Medicaid Services (CMS), HHS.




This notice announces a solicitation for up to six additional hospitals to participate in the Rural Community Hospital Demonstration Program for the remainder of the 5-year time period allowed by section 410A of Start Printed Page 6972the MMA that is currently scheduled to end in 2010.


Application Submission Deadline: Applications must be received by 5 p.m., e.s.t. on or before March 24, 2008. Only applications that are considered “timely” will be reviewed and considered by the technical panel.


The applications should be MAILED or sent by an overnight delivery service to the following address: Centers for Medicare & Medicaid Services, ATTN: Sid Mazumdar, Rural Community Hospital Demonstration, Medicare Demonstrations Program Group, Mail Stop C4-17-27, 7500 Security Boulevard, Baltimore, MD 21244.

Please allow sufficient time for mailed information to be received in a timely manner in the event of delivery delays. Because of staffing and resources limitations, and because we require an application containing an original signature, we cannot accept applications by facsimile (Fax) transmission.

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Sid Mazumdar at (410) 786-6673 or by e-mail at:

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I. Background

Section 410A(a) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) (MMA) requires the Secretary to establish a demonstration to test the feasibility and advisability of establishing “rural community hospitals” for Medicare payment purposes for covered hospital inpatient services furnished to Medicare beneficiaries. A rural community hospital, as defined in section 410A(f)(1) of the MMA, is a hospital that—

  • Is located in a rural area (as defined in section 1886(d)(2)(D) of the Social Security Act (the Act) (42 U.S.C. 1395ww(d)(2)(D))) or treated as being so located pursuant to section 1886(d)(8)(E) of the Act (42 U.S.C. 1395ww(d)(8)(E));
  • Has fewer than 51 acute care inpatient beds, as reported in its most recent cost report;
  • Makes available 24-hour emergency care services; and
  • Is not eligible for critical access hospital (CAH) designation, or has not been designated a CAH under section 1820 of the Act.

Section 410A(a)(4) of the MMA specifies that the Secretary is to select for participation no more than 15 rural community hospitals in rural areas of States that the Secretary identifies as having low population densities. Using 2002 data from the U.S. Census Bureau, we identified the 10 States with the lowest population densities in which rural community hospitals must be located to participate in the demonstration: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and Wyoming. (Source: U.S. Census Bureau, Statistical Abstract of the United States: 2003).

The demonstration is designed to test the feasibility and advisability of reasonable cost reimbursement for inpatient services to small rural hospitals. The demonstration is aimed at increasing the capability of the selected rural hospitals to meet the needs of their service areas.

Section 410A(a)(5) of the MMA states the Secretary shall conduct the demonstration program for a 5-year period. We originally solicited applicants for the demonstration in May 2004; 13 hospitals began participation with cost report years beginning on or after October 1, 2004. Four of these 13 hospitals have withdrawn from the program and have become CAHs. For the remaining 9 participating hospitals, the demonstration will end in 2010 when each hospital has completed its fifth cost report year.

II. Provisions of the Notice

This notice announces the solicitation for up to six additional hospitals to participate in the Rural Community Hospital Demonstration Program. Hospitals that enter the demonstration under this solicitation will be able to participate for no more than 2 years. We will adhere to the requirement under section 410A of the MMA to limit the demonstration to 5 years, that is, the program will end in 2010.

A. Demonstration Payment Methodology

Section 410A of the MMA requires that “in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.” In order to achieve budget neutrality for this demonstration program for FYs 2005, 2006, 2007, and 2008, we adjusted the national hospital inpatient prospective payment system (IPPS) rates by an amount sufficient to offset the added costs of this demonstration program. We will present an estimate of the amount needed to offset the additional costs incurred under the demonstration in FY 2009, including the cost of newly selected rural community hospitals, in the FY 2009 IPPS proposed rule.

Hospitals selected for participation in the demonstration will receive payment for covered inpatient services, with the exclusion of services furnished in a psychiatric or rehabilitation unit that is a distinct part of the hospital, using the following rules. For discharges occurring—

  • In the first cost reporting period on or after the implementation of the program, their reasonable costs for covered inpatient services; or
  • During the second or subsequent cost reporting period, the lesser of their reasonable costs or a target amount. The target amount in the second cost reporting period is defined as the reasonable costs of providing covered inpatient hospital services in the first cost reporting period, increased by the IPPS update factor (as defined in section 1886(b)(3)(B) of the Act) for that particular cost reporting period. The target amount in subsequent cost reporting periods is defined as the preceding cost reporting period's target amount increased by the IPPS update factor for that particular cost reporting period.

Covered inpatient hospital services means inpatient hospital services (defined in section 1861(b) of the Act) and including extended care services furnished under an agreement under section 1883 of the Act.

B. Participation in the Demonstration

To participate in this demonstration, a hospital must be located in one of the identified States and meet the criteria for a rural community hospital. Eligible hospitals that desire to participate in the demonstration must submit an application to CMS. Information about the demonstration and details on how to apply can be found on the CMS Web site at​DemoProjectsEvalRpts/​downloads/​2004_​Rural_​Community_​Hospital_​Dem- onstration_Program.pdf.

III. Collection of Information Requirements

The information collection requirements contained in this notice are subject to the Paperwork Reduction Act of 1995 (PRA). As discussed in section II.B. of this notice, a hospital must submit the required information on the cover sheet of the CMS Medicare Waiver Demonstration Application to receive consideration by the technical review panel. The burden associated with voluntary requirement is the time and effort necessary to complete the Medicare Waiver Demonstration Application and submit the information Start Printed Page 6973to CMS. The burden associated with this requirement is currently approved under OMB control number 0938-0880 with an expiration date of November 20, 2010.

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Authority: Section 410A of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173. (Catalog of Federal Domestic Assistance Program No. 93.773 Medicare—Hospital Insurance Program; and No. 93.774, Medicare—Supplementary Medical Insurance Program).

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Dated: January 11, 2008.

Kerry Weems,

Acting Administrator, Centers for Medicare & Medicaid Services.

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[FR Doc. 08-511 Filed 2-1-08; 10:00 am]