On September 12, 2014, OIG released its report regarding CMS’s enforcement of the statutory provisions governing Rural Health Clinics (RHCs).  According to OIG’s report, twelve percent of RHCs no longer meet the location requirements but are still receiving enhanced Medicare reimbursement.

Through a certification process established in 1977, RHCs receive additional reimbursement from Medicare for providing healthcare in rural areas that have a shortage of healthcare providers.  Previously, RHCs could retain their certification indefinitely.  However, the Balanced Budget Act of 1997 (BBA) ended the permanent certification status.  Under the BBA, RHCs must continue to meet the location requirements or be deemed “essential providers.”  The BBA instructed CMS to issue regulations defining “essential providers” no later than January 1, 1999.  CMS issued two proposed rules to define “essential providers,” one in 2000 and one in 2008, but neither was finalized.  Because proposed rules must be finalized within three years of issuance, CMS must now issue a new proposed rule defining “essential providers.”   

In accordance with the BBA, to continue receiving the increased reimbursement associated with RHC status, these providers should have been recognized as “essential providers.”  CMS’s delay in issuing the defining regulations has allowed these providers to continue to receive RHC reimbursement.  According to the OIG, these RHCs received $132 million from Medicare beneficiaries in 2012.  In response to the report, CMS thanked OIG “for their efforts on this issue” and provided no further comment.

Reporter, Paige Fillingame, Houston, +1 713 615 7632, pfillingame@kslaw.com.