[Federal Register Volume 61, Number 93 (Monday, May 13, 1996)]
[Rules and Regulations]
[Pages 21969-21973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11990]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 412

[BPD-856-FC]


Medicare and Medicaid Program; Criteria for a Rural Hospital To 
Be Designated as an Essential Access Community Hospital (EACH)

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This final rule revises the criteria that a rural hospital 
must meet to be designated as an Essential Access Community Hospital 
(EACH). The revised criteria permit HCFA to designate a hospital as an 
EACH if the hospital cannot be designated as an EACH by the State only 
because it has fewer than 75 beds and is located 35 miles or less from 
another hospital. Hospitals in rural areas that are designated as EACHs 
by HCFA are treated, for payment purposes, as sole community hospitals.
    The revised criteria are designed to facilitate development of 
network affiliations between rural EACHs and small rural facilities, 
known as Rural Primary Care Hospitals (RPCHs). The revisions would 
affect only hospitals located in rural areas of the States of 
California, Colorado, Kansas, South Dakota, New York, West Virginia, 
and North Carolina, or in an adjacent State.

DATES: Effective Date: This regulation is effective May 13, 1996.
    Comment Period: Comments will be considered if received at the 
appropriate address, as provided below, no later than 5 p.m. on July 
12, 1996.

ADDRESSES: Mail written comments (one original and three copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-856-FC, P.O. Box 7517, 
Baltimore, MD 21207-0517.
    If you prefer, you may deliver your written comments (one original 
and three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., 
Washington, DC 20201, or
Room C5-09-26, Central Building, 7500 Security Boulevard, Baltimore, MD 
21244-1850.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-856-FC. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's offices at 200 Independence Avenue SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).
    For comments that relate to information collection requirements, 
mail a copy of comments to: Health Care Financing Administration, 
Office of Financial and Human Resources, Management Planning and 
Analysis Staff, Room C2-26-17, 7500 Security Boulevard, Baltimore, MD 
21244-1850.
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8.00. As an alternative, you can view 
and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
academic libraries throughout the country that receive the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: George Morey, (410) 786-4653.

SUPPLEMENTARY INFORMATION:

I. Background

    On May 26, 1993, we published in the Federal Register (58 FR 30630) 
a final rule to implement the Essential Access Community Hospital 
(EACH) Program. That program, which is authorized by

[[Page 21970]]

section 1820 of the Social Security Act (the Act), is intended to 
promote regionalization of health services in rural areas, improve 
access to hospital and other health services for rural residents, and 
enhance the provision of emergency and other transportation services 
related to health care. The program is not national in scope, but is 
limited to the States (not to exceed seven) that have been given 
Federal grants for their activities in support of it. The States that 
have received such grants are California, Colorado, Kansas, South 
Dakota, New York, West Virginia, and North Carolina.
    An important component of the EACH program is the rural health 
network, which is an organization made up of at least one Rural Primary 
Care Hospital (RPCH), and at least one EACH, regional referral center, 
or hospital located in an urban area that meets the criteria for 
classification as a regional referral center. An RPCH is a small, 
limited-service facility that is located in a rural area and furnishes 
outpatient and short-term inpatient care needed to stabilize a patient 
before discharge or transfer to another facility for further care. An 
EACH is a larger, full-service hospital that has agreed to provide 
emergency and medical backup services to the RPCH (or RPCHs) 
participating in its network. Network membership is optional for RPCHs, 
but a hospital cannot be designated as an EACH unless it has a network 
agreement. EACHs in rural areas are treated for Medicare payment 
purposes as sole community hospitals, which typically entitles the 
facilities to a higher level of payment for their inpatient services 
than they would otherwise receive.
    As is the case with any other relationships between providers or 
between providers and other persons or entities, any arrangements are 
subject to the provisions of the Medicare and Medicaid anti-kickback 
statute (section 1128B(b) of the Social Security Act, 42 U.S.C. 1320a-
7b(b)). That statute prohibits knowingly and willfully offering, 
paying, soliciting or receiving remuneration in order to induce 
business reimbursed under the Medicare, Medicaid or other State health 
care programs. Prohibited conduct includes the transferring of anything 
of value intended to induce referrals of patients, as well as 
soliciting or receiving remuneration in return for the purchasing, 
leasing, ordering or arranging for any good, facility, service or item 
paid for by Medicare, Medicaid, or other State health care program.

II. Criteria for Designation of EACHs

    Under section 1820(I)(1)(A) of the Act, HCFA can designate a 
hospital as an EACH only if it meets specific requirements and is first 
designated as such by the grant State. The criteria for State 
designation are set forth in section 1820(e). Under these criteria, a 
State may designate a rural facility as an EACH only if the hospital--
     Is located in a rural area, as defined in section 
1886(d)(2)(D);
     Is located more than 35 miles from any hospital that--
    + Has been designated as an essential access community hospital;
    + Is classified by the Secretary as a rural referral center under 
section 1886(d)(5)(C); or
    + Meets such other criteria relating to geographic location as the 
State may impose with the approval of the Secretary;
     Has at least 75 inpatient beds or is located more than 35 
miles from any other hospital;
     Has in effect an agreement to provide emergency and 
medical backup services to rural primary care hospitals participating 
in the rural health network of which it is a member and throughout its 
service area;
     Has in effect an agreement, with each rural primary care 
hospital participating in the rural health network of which it is a 
member, to accept patients transferred from such primary care hospital, 
to receive data from and transmit data to such primary care hospital, 
and to provide staff privileges to physicians providing care at such 
primary care hospital; and
     Meets any other requirements imposed by the State with the 
approval of the Secretary.
    Section 1820 also contains a provision that allows the Secretary 
some flexibility in designating hospitals as EACHs even though they do 
not meet the general bed size and geographic location criteria. Section 
1820(i)(1)(B) of the Act allows the Secretary to designate a hospital 
as an EACH if it is not eligible for designation by the State only 
because it does not have 75 or more beds, or is not located more than 
35 miles from another hospital. While we were preparing the final rule 
published May 26, 1993 (58 FR 30629), we received comments suggesting 
that we use this authority to designate facilities as EACHs, even 
though they do not meet the bed size and geographic criteria specified 
in section 1820(e)(2). We considered these comments carefully but 
decided to exercise the authority only with respect to hospitals that 
have fewer than 75 beds and are located within 35 miles of another 
hospital, but are not located within 35 miles of any hospital having 75 
or more beds. Where such hospitals meet other applicable criteria and 
are recommended by the State as the EACH member of a proposed network, 
HCFA will designate them as EACHs. Regulations permitting such 
designations are set forth at 42 CFR 412.109(c)(2) (ii) and (iii).
    Based on our further experience in administering the EACH program, 
we now believe that in order to increase access to hospital services in 
rural areas, there may be other circumstances in which it would be 
appropriate to exercise our section 1820(i)(1)(B) authority for rural 
hospitals. For example, a full-service hospital that meets other 
requirements to be the EACH member of a network may be located within 
35 miles of another hospital that has 75 or more beds. In this 
situation the hospital could not, under existing regulations, be 
designated as an EACH, even if it is the only hospital that is willing 
and able to furnish the rural health network emergency and medical 
backup services available from EACHs that might be needed to permit a 
third facility to operate successfully as an RPCH, thus preserving 
access to care in its area. Under these circumstances, section 
1820(i)(1)(B) authority may appropriately be exercised to permit 
designation of an EACH, thus allowing the small facility to be 
converted successfully to an RPCH and to continue providing services to 
its patients.
    To allow for designation of facilities as EACHs in these 
circumstances while not defeating the purpose of the basic statutory 
requirements for EACH designations, we are revising Sec. 412.109(c) of 
our regulations to specify additional criteria under which designations 
by HCFA will be made. As revised, the regulations allow a hospital 
located 35 miles or less from another hospital to be designated as an 
EACH only if--
     The hospital is not eligible for State designation as an 
EACH solely because it has fewer than 75 beds and is located 35 miles 
or less from any other hospital; and
     The hospital is located more than 35 miles from the 
nearest hospital having 75 or more beds, and is recommended by the 
State for designation as the EACH member of a proposed network; or
     The following criteria are met--

--The hospital seeking EACH designation has entered into a network 
agreement under 42 CFR

[[Page 21971]]

485.603 with a facility that the State has designated as an RPCH, and 
the hospital designated as an RPCH by the State does not have a network 
agreement with any existing EACH;
--The facility that the State has designated as an RPCH, and that has 
entered into the network agreement described above, is located more 
than 35 miles from any other hospital having 75 or more inpatient beds;
--The distance between the facility that the State has designated as an 
RPCH and the hospital seeking designation as an EACH is less than the 
distance between the facility that the State has designated as an RPCH 
and the nearest hospital that has 75 or more inpatient beds or is 
designated as an EACH; and
--The State certifies to HCFA that--

    + The rural health network emergency and medical backup services 
actually being provided by the hospital seeking EACH designation are 
essential to the continued existence of the facility as an RPCH; and
    + The existence of the facility as an RPCH is needed to ensure 
access to health care services in the area of the State served by the 
facility that the State has designated as an RPCH.
    The criteria described above are designed to ensure that the 
section 1820(i)(1)(B) authority is exercised only in appropriate cases. 
First, there must be a network agreement in effect between the hospital 
seeking EACH designation and a particular facility that the State has 
designated an RPCH, and the RPCH must not have entered into any network 
agreement with any other hospital that is currently an EACH. This 
criterion is needed to ensure that there is a valid network agreement 
linking the two facilities, and that only one hospital is able to 
achieve EACH designation based on its agreement with a particular RPCH. 
In addition, a prospective EACH will not be able to qualify if the RPCH 
with which it has entered into a network agreement is within 35 miles 
of any other hospital having 75 or more inpatient beds or is designated 
as an EACH. We also are requiring that the hospital seeking designation 
as an EACH under these criteria be closer to the RPCH than the nearest 
hospital that has 75 or more beds or is designated as an EACH. We are 
including these provisions because we do not wish to encourage EACH 
designations that are inappropriate in terms of the location of the 
EACH or RPCH relative to other facilities.
    In applying these criteria, we will consider only a hospital's 
location relative to other facilities that participate in Medicare as 
general hospitals (that is, under the criteria in 42 CFR 482.1 through 
482.57). We will not take into account the location of nonparticipating 
hospitals or of those that participate in Medicare as psychiatric 
hospitals, since those hospitals would not be appropriate referral 
sites for most Medicare patients following care at an RPCH.
    In addition, we require that the State make certain certifications 
to HCFA. These are--
     That the rural health network and emergency medical backup 
services actually being provided by the hospital seeking EACH 
designation are essential to the continued existence of the facility as 
an RPCH; and
     That the RPCH is needed to ensure access to health care 
services in its service area.
    We have decided not to prescribe specific criteria for the State to 
follow in determining what constitutes a desirable level of patient 
access to care in rural areas, or whether the assistance of the EACH is 
needed to help ensure that a certain level of access is maintained. We 
believe each State should develop its own criteria and procedures for 
making these determinations, based on local and Statewide 
characteristics such as population density, travel conditions, existing 
referral patterns, availability of health care professionals, and other 
factors that affect access.
    We are including a requirement under which EACH designation made 
under our revised regulation will remain in effect only as long as the 
criteria in Sec. 412.109(c)(2)(D)(ii) continue to be met. Thus, for 
EACH designation to continue, the EACH must continue to carry out its 
network responsibilities with respect to the RPCH, and the continued 
existence of the facility as an RPCH must remain necessary to ensure 
patient access to care in the facility's service area. If we determine 
that these criteria are no longer met (because, for example, another 
source of care becomes available to patients in the area of the RPCH), 
or if a false certification was made, we will terminate the EACH status 
of the hospital prospectively, effective with discharges occurring on 
or after 30 days after the date of the determination. We are 
redesignating Sec. 412.109(f) as new paragraph (g), and adding a new 
paragraph (f) that specifies this requirement.
    Although we expect that States will notify us promptly of any 
changes in hospitals' activities and will not make false or inaccurate 
certifications, we reserve the right to review any information that 
calls the accuracy of a certification into question, and to terminate a 
hospital's EACH designation if we find factual information sufficient 
to convince us that the designation is no longer appropriate. The 
hospital's Medicare participation would not be affected by this change 
but, as of the effective date of the change, it would no longer be paid 
by Medicare as a sole community hospital. As in the case of any other 
determination that the hospital does not meet the criteria for EACH 
designation or that a hospital's EACH designation should be terminated, 
the determination would be subject to review under the provider appeals 
regulations at 42 CFR Part 405, Subpart R.
    We note that a separate provision of the law and regulations allows 
a hospital to be designated as an EACH only if it has in effect an 
agreement for acceptance of patients and sharing of patient data with 
each RPCH in the network of which it is a member (section 1820(e)(4) of 
the Act and the implementing regulations at 42 CFR 412.109(d)(3)). 
Since an agreement of this kind can be made only with a facility 
participating in Medicare as an RPCH, the effect of this requirement is 
to allow EACH status for any hospital to be effective no earlier than 
the first date of participation of an affiliated RPCH. This provision 
is not subject to waiver under section 1820(I)(1)(B), and thus is not 
affected by this final rule.

III. Other Required Information

A. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, agencies are required to 
provide 60 days' notice in the Federal Register to solicit public 
comments before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3504(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment in the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
     The accuracy of the agency's estimate of the information 
collection burden;
     The quality, utility, and clarity of the information to be 
collected; and
     Recommendation to minimize the information collection 
burden on the affected public, including automated collection 
technique.
    Following is a discussion of these requirements:
    Under Sec. 412.109(c), a hospital can be considered for HCFA 
designation as an

[[Page 21972]]

EACH, even though it does not meet the requirements for State 
designation as set forth in Sec. 412.109(d), if the State makes certain 
certifications to HCFA. These include the importance of the EACH to the 
continued existence of the facility as an RPCH, by providing emergency 
and medical backup services with respect to the RPCH under its network 
agreement, and the importance of RPCH ongoing operation to access to 
care for residents of its service area. While the regulations do not 
require direct reporting of information to HCFA, we expect that as a 
practical matter the prospective EACH will be required to furnish the 
State with some information in order to support the second item of the 
certification, and that the prospective RPCH will need to supply the 
State with information in support of the other items.
    Public reporting burden for this collection of information is 
estimated to be 2 hours for the hospital's first year of operation as 
an EACH and one hour for each subsequent year of operation as an EACH. 
Existing regulations require EACHs to furnish HCFA with information 
regarding their agreements with RPCHs, and we believe very little 
additional time will be required to supply the State with similar 
information.
    Public reporting burden for the RPCH for this collection of 
information is estimated to be 6 hours for the hospital's first year of 
operation as an RPCH and 2 hours for each subsequent year of operation 
as an RPCH. These information collection and record keeping 
requirements are not effective until they have been approved by OMB. A 
notice will be published in the Federal Register when approval is 
obtained. Organizations and individuals desiring to submit comments on 
these information collection and record keeping requirements should 
direct them to the Health Care Financing Administration, Office of 
Financial and Human Resources, Management Planning and Analysis Staff, 
Room C2-26-17, 7500 Security Boulevard, Baltimore, MD 21244-1850.

B. Regulatory Flexibility Analysis

    We generally prepare an initial regulatory flexibility analysis 
that is consistent with the Regulatory Flexibility Act (RFA)(5 U.S.C. 
601 through 612) unless the we certify that the final rule will not 
have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, we consider all hospitals to be 
small entities. Individuals and States are not included in the 
definition of a small entity.
    Also, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for any final rule that may have a 
significant impact on a substantial number of small rural hospitals. 
Such an analysis must conform to the provisions of section 603 of the 
RFA. For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside a Metropolitan 
Statistical Area and has fewer than 50 beds.
    We have determined, and certify, that these regulations will not 
have a significant impact on a substantial number of small rural 
hospitals. As noted earlier, EACH designation is available only in 
seven States and in the States adjacent to those seven States. 
Moreover, only a few prospective EACHs would be so located relative to 
other hospitals that they would be affected by the changes in this 
rule. Therefore, we have not prepared a regulatory flexibility analysis 
or an analysis of the effect on small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was not reviewed by the Office of Management and Budget.
    Under the provisions of Public Law 104-121, we have determined that 
the rule is not a major rule.

C. Waiver of Notice of Proposed Rulemaking and 30-Day Delay in the 
Effective Date

    We ordinarily publish a notice of proposed rulemaking for a rule to 
provide a period for public comment. However, we may waive that 
procedure if we find good cause that prior notice and comment are 
impractical, unnecessary, or contrary to public interest. We find good 
cause to implement this rule as a final rule because the delay involved 
in prior notice and comment procedures for the new provisions of this 
rule would be contrary to the public interest.
    This rule does not impose an additional burden or obligation on any 
hospital or community; on the contrary, it relaxes a restriction on the 
designation of certain rural hospitals as EACHs. We expect that the 
resulting assistance will enable the small facilities to avoid closure 
and to continue to provide needed services to their communities. In 
view of the precarious financial status of many small rural hospitals, 
and in consideration of the likelihood that Medicare beneficiaries and 
other patients served by these facilities would be left without access 
to care if they closed, we believe it is necessary to implement this 
change as soon as possible. Thus, we find that the delay involved in 
prior notice and comment would be contrary to the public interest. We 
have concluded that it is appropriate to implement the revisions to 
Sec. 412.109 as final in this instance.
    We also normally provide a delay of 30 days in the effective date 
of a regulation. However, if adherence to this procedure would be 
impractical, unnecessary, or contrary to public interest, we may waive 
the delay in the effective date. We may also waive the delay in the 
case of a rule that grants an exemption or relieves a restriction. We 
find good cause to waive the usual 30-day delay in this instance. As 
explained above, it is in the public interest for the transition from 
hospital to RPCH to be made by many small facilities as soon as 
possible, so as to avert insolvency and complete closure. A 30-day 
delay in the effective date would only postpone unnecessarily the start 
of the transition for many facilities, and place them at greater risk. 
Therefore, we believe that a 30-day delay in the effective date for 
this provision would be contrary to the public interest, and we find 
good cause to waive the usual 30-day delay in the effective date.

List of Subjects in 42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and record keeping requirements.
    42 CFR part 412 is amended as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

    1. The authority citation for part 412 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart G--Special Treatment of Certain Facilities Under the 
Prospective Payment System for Inpatient Operating Costs

    2. In Sec. 412.109, paragraph (c) is revised, paragraph (f) is 
redesignated as paragraph (g), and a new paragraph (f) is added to read 
as follows:


Sec. 412.109  Special treatment: Essential access community hospitals 
(EACHs).

* * * * *
    (c) Criteria for HCFA designation.
    (1) HCFA designates a hospital as an EACH if the hospital is 
located in a State that has received a grant under section 1820(a)(1) 
of the Act or in an adjacent State and is designated as an

[[Page 21973]]

EACH by the State that has received the grant.
    (2) HCFA designates a hospital as an EACH if--
    (i) The hospital--
    (A) Is not eligible for State designation as an EACH solely because 
the hospital has fewer than 75 inpatient beds and is located 35 miles 
or less from any other hospital; and
    (B) Is located more than 35 miles from the nearest hospital having 
75 or more inpatient beds, and is recommended by the State for 
designation as the EACH member of a proposed network; or
    (ii) The following criteria are met--
    (A) The hospital seeking EACH designation has entered into a 
network agreement under Sec. 485.603 of this chapter with a facility 
that the State has designated as an RPCH, and the hospital designated 
as an RPCH by the State does not have a network agreement with any 
existing EACH;
    (B) The facility that the State has designated as an RPCH, and that 
has entered into the network agreement described in paragraph 
(c)(2)(ii)(A) of this section, is located more than 35 miles from any 
other hospital having 75 or more inpatient beds;
    (C) The distance between the facility that the State has designated 
as an RPCH and the hospital seeking designation as an EACH is less than 
the distance between the facility that the State has designated as an 
RPCH and the nearest hospital that has 75 or more inpatient beds or is 
designated as an EACH;
    (D) The State certifies to HCFA that--
    (1) The rural health network emergency and medical backup services 
actually being provided by the hospital seeking EACH designation are 
essential to the continued existence of the facility as a RPCH; and
    (2) The existence of the facility as an RPCH is needed to ensure 
access to health care services in the area of the State served by the 
RPCH.
    For purposes of this paragraph (c)(2)(ii), the location of a 
hospital will not be considered unless the hospital participates in 
Medicare under Secs. 482.1 through 482.57 of this chapter.
* * * * *
    (f) Termination of EACH designation under paragraph (c)(2)(ii)(D). 
If HCFA determines that the criteria in paragraph (c)(2)(ii)(D) of this 
section are no longer met with respect to a hospital HCFA has 
designated as an EACH under that paragraph, HCFA will terminate the 
EACH designation of the hospital, effective with discharges occurring 
on or after 30 days after the date of the determination.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance, and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: May 6, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: May 8, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-11990 Filed 5-9-96; 10:26 am]
BILLING CODE 4120-01-P