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H H S Department of Health and Human Services
Health Resources and Services Administration
Rural Health

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Medicare Rural Hospital Flexibility Grant Program

The Balanced Budget Act of 1997 established the Medicare Rural Hospital Flexibility Grant Program with the intent to assist rural hospitals and improve access through critical access hospital (CAH) designation. The Flex program provides funding to States for the designation of Critical Access Hospitals (CAHs) in rural communities. Medicare reimburses CAHS on a reasonable cost basis for inpatient and outpatient services (including lab and qualifying ambulance services) provided to Medicare patients. 

With the vast majority of CAHs having been converted, the Flex program has evolved into a program that assists CAHs through providing funding to state governments to spur quality and performance improvement activities; stabilize rural hospital finance; and integrate emergency medical services (EMS) into their health care systems. Only States with CAHs or potential CAHs are eligible for the Flex program. 

Flex funding encourages the development of cooperative systems of care in rural areas -- joining together CAHs, EMS providers, clinics, and health practitioners to increase efficiencies and quality of care. 

The Flex program focuses on four core areas: 

  1. Support for Quality Improvement in CAHs 
  2. Support for Operational and Financial Improvement in CAHs 
  3. Support for Health System Development and Community Engagement, including integrating EMS in regional and local systems of care 
  4. Designation of CAHs in the State The Flex program operates on the National, State, community, and facility levels to cover a broad range of fundamental health service issues and “modernization” goals. States use Flex resources for performance management activities, training programs, needs assessments, and network building. 

The Flex Program has also begun a new special project, the Medicare Beneficiary Quality Improvement Project (MBQIP) focused on Medicare Beneficiary Health Status improvement. 

Find Grantees

Medicare Rural Hospital Flexibility grantees with active projects
Medicare Rural Hospital Flexibility Evaluation cooperative agreement

Authorizing Legislation

Section 1820(j) of the Social Security Act (42 U.S.C. 1395) as reauthorized in the Medicare Improvements for Patients and Providers Act of 2008 

Key Accomplishments

  • More than 70 percent of CAHs voluntarily reported quality data to the Centers for Medicare and Medicaid Services’ Hospital Compare Web site, even though they received no financial incentives. 
  • More than 1,300 hospitals have converted to CAH status; and most have shown improvement in their financial status, while simultaneously expanding the array of services needed in their communities. 
  • 70 percent of CAHs are participating in the Medicare Beneficiary Quality Improvement Program.