“Tweener” hospitals eye financial relief after Supreme Court ruling

Editor's Note

The Supreme Court’s recent “Chevron” ruling could offer additional financial security to hundreds of so-called "tweener" rural hospitals—those too large to be considered critical access hospitals but too small to be rural referral centers. Modern Healthcare reported the news July 29.

According to the article, critical access hospitals, capped at 25 beds, receive Medicare payments covering 101% of their costs, while rural referral centers with 275+ beds get extra Medicare payments for complex care. In contrast, Olympic Medical Center in Port Angeles, Washington, a “tweener” location with 67 beds, had only 82% of costs covered by Medicare in 2022. However, the Supreme Court's decision to end deference to federal agencies could lead to revised criteria for the critical access hospital program, potentially benefiting such hospitals.

According to the article, this change could come about via lawsuits challenging current exclusions. Thanks to the Chevron ruling, these lawsuits could prompt the Centers for Medicare and Medicaid Services (CMS) to overhaul regulations, expanding eligibility for the critical access designations and providing a lifeline for many small rural hospitals.

Critical access hospitals have a protective financial advantage, the article notes, with a 0.5% operating margin in Q3 2023 compared to a negative 2.1% for small rural hospitals under the Prospective Payment System (PPS). Despite this, any regulatory changes could take years. 

Potential challenges to CMS definitions—such as what constitutes a hospital bed or mountainous region— also could influence future regulations, Modern Healthcare reports. If courts find CMS regulations inconsistent or improperly enacted, it could lead to significant changes benefiting rural hospitals.