The Rural Emergency Hospital Designation: What to Know
The rural emergency hospital designation gives rural hospitals a way to stay open when inpatient care becomes unprofitable. Instead of running inpatient units, hospitals can shift to a model that relies on emergency and outpatient services. This arrangement provides more consistent Medicare reimbursements and reduces financial uncertainty. It can benefit hospitals facing challenges due to low patient numbers and revenue.
Knowing the requirements of the REH model and its impact on daily operations lets you decide if becoming an REH is a good move for your hospital and community.
What Is the Rural Emergency Hospital Designation?
The rural emergency hospital designation is a Medicare provider type. It was created by the Consolidated Appropriations Act of 2021. The purpose is to help small rural hospitals stay open when inpatient care isn’t sustainable. Hospitals that qualify have to offer emergency care around the clock along with basic outpatient services. These include simple lab tests, diagnostic imaging, access to pharmacy services or safe medication storage, and discharge planning done by trained clinical staff.
Beyond the required services, REHs can provide other outpatient options. These may include behavioral health, rehabilitation, radiology, and additional lab work. REHs can also have a separately run skilled nursing facility unit for short-term care after a hospital stay. They can even serve as a starting point for telehealth visits.
To qualify for REH status, your hospital must have previously been either:
- A critical access hospital (CAH) at least 35 miles from another hospital, with an average acute-care stay of 96 hours or less, no more than 50 inpatient or swing beds, and 24×7 emergency services.
- A subsection (d) rural acute care hospital paid under Medicare’s Inpatient Prospective Payment System (IPPS).
Your facility must also have been participating in Medicare as of December 27, 2020. Once approved, eligible hospitals shift their focus to 24-hour emergency and outpatient/observation services, and stop providing traditional acute inpatient care.
What Are the Advantages of Becoming a Rural Emergency Hospital?
Reimbursement Advantages with the Rural Emergency Hospital Designation
One of the biggest benefits of REH status is a more predictable revenue stream. In 2025, REHs received a monthly facility payment of $285,625.90, no matter how many inpatients they had. They also earned 105% of the Hospital Outpatient Prospective Payment System (OPPS) rate for Medicare services (OPPS + 5%).
For hospitals with low, decreasing, or unstable numbers of inpatients, the consistent revenue offers a more dependable financial base. And it keeps emergency and outpatient services in the community.
Operational Flexibility with the REH Designation
Becoming an REH lets you step back from inpatient care and focus on emergency and outpatient operations. This shift can ease staffing pressures, make resource allocation simpler, and improve coordination for patient transfers when a longer inpatient stay is needed.
Case Example: DeWitt Hospital
DeWitt Hospital in Arkansas made the switch from a CAH to an REH in May 2024. CEO Brian Miller said, “Taking everything into consideration, the numbers came out very positive for us.” The hospital benefits from the monthly facility payment while maintaining services like emergency care, radiology, and lab operations, and transfers patients for longer when needed, including to its own nursing home.
Additional Advantages for REHs
- Reduced administrative burden and costs from managing inpatient units.
- Chance to focus on the quality of the patient experience in outpatient and emergency settings.
- Stronger referral networks through partnerships with larger hospitals or trauma centers for inpatient transfers.
- Lower financial risk by stepping away from low-volume inpatient services and their inconsistent reimbursements in rural areas.
What Are the Disadvantages of Becoming a Rural Emergency Hospital?
While the REH designation brings more predictable revenue and operational flexibility, there are important trade‑offs to consider.
Loss of Inpatient Revenue
REHs can’t provide standard acute inpatient services. When your hospital transitions to an REH, you give up income from inpatient admissions and related service lines. This can impact facilities where operations and community expectations depend on inpatient revenue.
340B Program and Swing-Bed Limitations
Some hospitals lose eligibility for the 340B Drug Pricing Program, which is a key financial resource for many rural safety-net hospitals.
Additionally, REHs generally can’t continue traditional swing-bed operations the way CAHs can. If your hospital relies on swing-bed or 340B revenue, converting to an REH creates a financial adjustment you need to plan for.
Impact on Patient Experience
Patients who need inpatient care have to be transferred from an REH to a hospital. This may mean longer travel times and added stress for families.
Patients though may not even notice. Most don’t know if they are an inpatient or under observation. Still, the transition may signal the community that the hospital is moving from a “full hospital” model to a more limited one, potentially affecting perception and satisfaction.
Suitability Concerns
If your hospital has higher inpatient numbers, investments in inpatient facilities, or depends on inpatient income, transitioning to a rural emergency hospital (REH) may lead to financial difficulties or community resistance. The REH model may not suit every rural hospital, so consider your own needs and community before making a switch.
What’s Required to Get a Rural Emergency Hospital Designation?
Hospitals considering the rural emergency hospital designation need to meet federal criteria that cover location, services, staffing, patient-care parameters, enrollment, and state licensure.
Location and Size
For a hospital to be eligible as an REH, it must be in a rural region as per the Social Security Act’s definition or have been previously acknowledged as rural. And it needs to have 50 or fewer inpatient beds as of December 27, 2020, and be enrolled in Medicare. It
Services and Staffing
REHs are required to provide 24×7 emergency services. The emergency department must be staffed continuously, with a physician, nurse practitioner, clinical nurse specialist, or physician assistant/associate available.
Length of Stay/Patient Care Parameters
For an REH, the annual average per‑patient length of stay can’t be longer than 24 hours. That average is calculated from the time of registration, check-in or triage (whichever comes first) to the time of discharge.
An REH must have a formal agreement with at least one Level I or Level II trauma center to take patients who need full inpatient care.
If a patient needs to stay longer than 24 hours (for example, due to delayed transport), the REH must document why. CMS expects facilities to track exceptions and monitor when their average stays exceed 24 hours.
Enrollment, Medicare Participation, and State Licensure
To receive REH payments, your hospital must be enrolled in Medicare (or in the process of converting via enrollment). During conversion, you use the Medicare enrollment system and submit a change of information through the Provider Enrollment, Chain, and Ownership System (PECOS) or a paper application (CMS‑855A) to your Medicare Administrative Contractor (MAC).
Your hospital must also be licensed under state law as a hospital in the state you operate in and meet all state licensure requirements.
State‑Specific Considerations
Some states have additional licensing or regulatory rules for REHs. Find out what your state’s requirements are before switching to make sure you’re in compliance.
A Snapshot of Rural Emergency Hospitals Today
According to the Rural Health Information Hub, 36 facilities nationwide had converted to REH status by February 2025. Just a year earlier, in December 2023, only 19 rural hospitals had switched.
Adoption has been regionally concentrated, particularly in states with supportive regulatory frameworks, mostly across the South. Of the 19 hospitals that converted by the end of 2023, 16 were in southern states.
While more than 1,500 rural hospitals are estimated to be eligible for conversion, adoption has been slow. The newer nature of the designation, varying state requirements, and the trade-offs involved all contribute to slower adoption.
Early adopters are providing valuable insight into the model’s feasibility, community impact, and financial implications. Over time, these experiences will help guide other hospitals considering REH conversion and may inform visual data or maps showing adoption by state.
Rural Emergency Hospital vs Critical Access Hospital
The rural emergency hospital designation was carved out of federal law to offer rural hospitals an alternative path to closure.
The CAH designation (established in 1997) focuses on acute‑care inpatient services in rural communities. The number of beds is limited (traditionally up to 25 acute plus swing beds) and stricter inpatient‑stay rules apply.
CAHs are reimbursed largely on a cost basis (101% of reasonable costs) for inpatient and outpatient services under Medicare. So their financial success is more closely tied to actual patient volumes and costs.
For hospitals that still depend heavily on inpatient admissions (obstetrics, surgery, inpatient rehab) or swing‑bed income, remaining a CAH may make sense. The decision hinges on whether the volume and margin of inpatient services justify the overhead and risk, or whether moving to an REH model offers better long‑term sustainability.
The following table offers a side-by-side look at the two hospital types.
|
Rural Emergency Hospital (REH) |
Critical Access Hospital (CAH) |
|
|
Purpose/Focus |
Designed for rural hospitals to prevent closure, focuses on emergency and outpatient care |
Designed to support rural hospitals providing acute-care inpatient services |
|
Year Established |
2021 |
1997 |
|
Inpatient Services |
Can’t provide traditional acute-care inpatient services Stays generally limited to < 24 hours Can have up to 50 inpatient beds Must have agreements to transfer patients to another hospital for inpatient care |
Can provide acute-care inpatient services Inpatient care can exceed 24 hours Typically have up to 25 beds (acute + swing beds) |
|
Outpatient Services |
Central focus, strengthened by enhanced Medicare outpatient reimbursement |
Provided as part of operations, reimbursed on cost basis |
|
Revenue |
More predictable due to fixed monthly payment and OPPS +5% uplift |
Less predictable; tied to patient volume and cost structure |
|
Financial Risk |
Lower risk from inpatient volume and cost volatility |
Higher; financial performance depends on inpatient census, costs, and service mix |
|
Trade-Offs |
Loss of inpatient capability, must manage patient transfer logistics |
Must maintain inpatient operations and associated overhead, revenue can fluctuate |
Rural Emergency Hospitals and the 340B Program
The 340B Drug Pricing Program lets eligible hospitals purchase outpatient drugs at discounted rates. It can provide crucial pharmacy revenue for rural facilities. Current REH legislation doesn’t include REHs in entities eligible for 340B participation. Hospitals converting to REH status may lose access to 340B pricing unless Congress updates the law.
For many rural hospitals, 340B revenue supports other service lines or offsets the cost of caring for underinsured patients. Losing that eligibility can pose a financial risk. Several bills, including the Rural 340B Access Act of 2024, have been introduced to extend eligibility to REHs.
When evaluating REH conversion, factor the 340B issue into your pro forma analysis.
The REH Designation and the One Big Beautiful Bill Act
Although the REH designation itself was established under Medicare law, the One Big Beautiful Bill Act (OBBBA) passed in July 2025, influences REHs in two key ways:
- By expanding which hospitals can convert to REH status
- By reshaping the broader Medicaid and rural-health financing environment, which makes the REH’s predictable Medicare payments more appealing for some facilities.
With the OBBBA’s passage, Congress broadened the REH eligibility window to include hospitals that operated between January 1, 2014 and December 26, 2020, but later closed, which increases the pool of hospitals eligible for the REH designation.
The OBBBA also passed large reductions in federal Medicaid spending over the next decade (projected in the hundreds of billions) and introduced new work and eligibility requirements for certain Medicaid beneficiaries. For rural hospitals that depend heavily on Medicaid reimbursements, these changes could mean reduced patient volumes and shrinking revenue streams, which may make Medicare’s fixed REH payments more attractive.
Every hospital wants to carefully assess whether its patient mix, service lines, and financial structure align with the REH model.
Resources for Rural Hospitals Considering the Rural Emergency Hospital Designation
Hospitals exploring an REH transition can benefit from practical tools and peer guidance:
- Hospitals can lean on transition-planning support through transformation centers and their state office of rural health. Organizations like the Rural Health Redesign Center offer resources and help with pro forma modeling, community needs assessments, and transfer or outpatient service mapping.
- The Arkansas Rural Health Partnership (ARHP) is an example of a successful collaboration. Rural hospital leaders, including Brian Miller, CEO of DeWitt Hospital & Nursing Home (which converted to REH status in May 2024), share real-world experiences with conversion, financial modeling, and service planning.
- Azalea Health’s OBBBA and RHT Program Resource Center includes guidance on the One Big Beautiful Bill Act (OBBBA) and the Rural Health Transformation (RHT) program, a practical tool for operational and regulatory support.
You also want to analyze your revenue drivers, patient volumes, staffing models, outpatient-to-inpatient mix, payer mix, and local care gaps to align your findings with REH requirements and decide if the designation is right for your hospital.
What the REH Designation Means for Your Hospital
The REH designation gives rural hospitals a way to stay open when inpatient care becomes too costly. It offers steadier income, clearer expectations, and a structure that helps hospitals focus resources where the community needs them most.
The shift also comes with tradeoffs. Hospitals have to stop providing inpatient care, rethink which services they offer, and plan for how patients will move to other hospitals when they need longer stays.
Hospitals that study their finances and review local service needs are better prepared to make a decision about whether to convert. For some, REH services become a lifeline. For others, staying in a critical access hospital or exploring different options may make more sense.
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