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 (MMA) of 2003, and extended for an additional 5-year period under sections 3123 and 10313 of the Affordable Care Act (ACA). Section 15003 of the 21st Century Cures Act (Cures Act), enacted December 13, 2016, required another 5-year extension period for the demonstration. These authorizing statutes stipulate a maximum of 30 hospitals for participation in the program.

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Initiative Details

CMS has conducted 4 solicitations for applications – in 2004 and 2008, in accordance with the MMA, in 2010, upon re-authorization by the ACA, and, most recently, in 2017, as mandated by the Cures Act. There are currently 28 participating hospitals. Please see the link below for a fact sheet with provisions of the authorizing statute, features of the demonstration, and a list of the participating hospitals.

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 intend to continue this approach of proposing a budget neutrality methodology in future IPPS rulemaking

In addition, the authorizing statutes require the Secretary to submit a Report to Congress on the program. This report was issued in October 2018.

Additional Information


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