Rural Community Hospital Demonstration

The goal of the program is to test the feasibility and advisability of cost based reimbursement for small rural hospitals that are too large to be Critical Access Hospitals. CMS is conducting an intensive evaluation of the demonstration, assessing the financial impact on participating hospitals, as well as the effect on health care for the populations served.


The Centers for Medicare & Medicaid Services (CMS) began conducting the Rural Community Hospital Demonstration in 2004.  The demonstration was initiated as a 5-year program under its original mandate, section 410A of the Medicare Modernization Act of 2003, and extended for an additional 5-year period under sections 3123 and 10313 of the Affordable Care Act. Section 15003 of the 21st Century Cures Act (Cures Act), enacted December 13, 2016, requires another 5-year extension period for the demonstration.

Initiative Details

Section 15003 of the Cures Act allows for hospitals that were participating in the demonstration as of the last day of the initial 5-year period or as of December 30, 2014 to participate in the second extension period, unless the hospital makes an election to discontinue participation. Section 15003 also requires that no later than 120 days after enactment of the 21st Century Cures Act that the Secretary issue a solicitation for applications to select additional hospitals to participate in the demonstration program for this second 5-year extension period so long as the maximum number of 30 hospitals stipulated by the Affordable Care Act is not exceeded.

CMS issued a solicitation for additional hospitals on April 17, 2017. Applications were due on May 17, 2017. As a result of this solicitation, CMS has selected 13 additional hospitals to join 17 hospitals that will continue participation in the demonstration. Thus, thirty hospitals, the maximum number allowed by the authorizing statute, will be participating in the demonstration.

Please see the link below for a fact sheet with provisions of the authorizing statute and features of the demonstration. This fact sheet also identifies hospitals selected under the recent solicitation and the previously participating hospitals that are continuing participation.

Each year since 2004, CMS has included a segment specific to the Rural Community Hospital Demonstration in the proposed and final rules for the Medicare inpatient prospective payment system (IPPS). On an annual basis, this segment has detailed the status of the demonstration, as well as the methodology for ensuring budget neutrality. CMS intends to continue this approach of proposing a budget neutrality methodology in future IPPS rulemaking.  

The Fiscal Year 2018 IPPS proposed rule, published April 14, 2017, includes information on the implementation of the second 5-year extension period authorized by the 21st Century Cures Act.

Additional Information