Should Your Clinic Become a Rural Health Clinic?
Deciding whether to transform your clinic into a Rural Health Clinic (RHC) is a significant decision with far-reaching implications. To help you make an informed choice, this guide breaks down everything you need to know about RHCs—their requirements, benefits, challenges, and more.
What Is A Rural Health Clinic?
A Rural Health Clinic (RHC) is an outpatient care facility tailored to deliver primary healthcare services in underserved rural communities. RHCs were established in 1977 under the Rural Health Clinic Services Act to tackle healthcare access shortages in rural America. Today, over 5,200 RHCs across the U.S. provide vital services to patients who might otherwise struggle to access care.
RHCs are regulated by the Centers for Medicare and Medicaid Services (CMS), and their purpose is to improve access to care while addressing the unique challenges rural populations face.
Types of RHCs
There are two main types of RHCs: independent RHCs and provider-based RHCs.
Independent RHCs are often freestanding clinics owned by a healthcare provider or entity. They can also be owned by other healthcare organizations, such as nursing homes or home health agencies. The key is that they operate independently and aren’t affiliated with a hospital.
Provider-Based RHCs are hospital-owned clinics that operate under the hospital’s administrative supervision. They can be either nonprofit or for-profit entities.
Are You Eligible to Become an RHC?
Not every clinic is eligible to become an RHC. There are specific requirements that need to be met. Let’s take a look.
Location: The clinic must be situated in a non-urban area with a population of less than 50,000.
HPSA or MUA Designation: The clinic must have a Health Professional Shortage Area (HPSA) or Medically Underserved Area (MUA) designation, which can be determined by examining data scores and census information. Use this guide to find out if clinics in your area are eligible for conversion.
Primary Care Services: At least 51% of the clinic’s activities must focus on primary care services.
Staffing: Non-physician providers, such as nurse practitioners, must be present for at least 50% of the clinic’s operating hours.
Certified Electronic Health Records (EHR) Software: The clinic must have a certified medical records system that allows for organized and structured charting, physician sign off, and documentation of care.
Diagnostic and Lab Services: The clinic must offer a set of routine diagnostic and lab services. Additionally, it should have a contract with a hospital or another provider to offer services that cannot be provided within the clinic.
The 4 lab services that an RHC is required to offer are (according to CMS):
- Urinalysis
- Blood Sugar Testing
- Pregnancy Testing
- Primary Culturing for Transferring Specimens
How to Become an RHC
Transitioning into an RHC involves multiple steps and requires preparation.
Eligibility Evaluation: The first step is to determine if your clinic meets the eligibility criteria. This involves assessing your location, HPSA or MUA designation, and other factors.
Financial Feasibility Study: Before proceeding, it’s essential to conduct a financial feasibility study to determine if becoming an RHC makes sense financially. This includes evaluating your patient population, payor mix, and potential costs. If your area has a higher patient census of commercial insurance and lower in Medicare and Medicaid then maybe the conversion would not make sense for you.
Facility Updates: You’ll need to assess the costs of converting or updating your facility to meet RHC regulations. This may include hiring additional staff or making necessary renovations to the facility to allow for patient accessibility.
Paperwork Submission: Prepare all the necessary paperwork, including IRS documents, incorporation papers, and board member information. Ensure that all information is accurate and up to date. If there was a CEO change or practice relocation it can often show as wrong information within the PECOS system for CMS unless updated.
CMS Application: Submit your application to CMS (Centers for Medicare and Medicaid Services) for initial certification. This process can be time-consuming and requires attention to detail.
State Survey: Once CMS approves your application, the state will conduct a survey to ensure compliance with RHC regulations. Be prepared for a thorough on-site inspection of your clinic’s operations. The survey can last between 4 hours to two full days, so make sure everything is fully completed by this point. This process varies from state to state, but is overall consistent in requirements.
Receive Tie-in Notice: After passing the state survey, you’ll receive a tie-in notice (TIN) that allows you to bill for RHC services.
This certification process typically spans several months, so careful planning is essential. Certification is valid for five years, with periodic surveys for recertification.
The Benefits of Becoming an RHC
Let’s take a closer look at both the financial benefits and patient care benefits when becoming an RHC.
Financial Benefits
While not guaranteed, clinics can see between a 33% and 50% increase in revenue with the RHC reimbursement structure. Complete a feasibility study to get an idea of your costs and potential revenue.
Revenue Growth: One of the primary incentives for clinics to become RHCs is the prospective payment system (PPS). Under this system, RHCs receive payments based on a set rate, which can be higher than the typical fee-for-service reimbursement received by traditional clinics. This can significantly boost a clinic’s revenue
340B Drug Pricing Program: RHCs qualify for discounts on prescription drugs, making vital medications more affordable for patients and supporting cost-efficient care. Savings are estimated to be up to 50%.
Bad Debts Reimbursement: Medicare can reimburse up to 65% of a deductible for Medicare beneficiaries that remain unpaid as long as the clinic has made a reasonable effort to collect. Utilize reports and logs through the EHR’s analytic platform to account for these debts and maximize revenue.
Equitable Compensation: All of the services from Medicare and Medicaid are paid at an all inclusive, or per diem, rate which is based on a calculation of obtained costs to the clinic. RHCs use a reasonable cost-based reimbursement model, which means both physicians and non-physician providers receive more equitable compensation.
Patient Care Benefits
Comprehensive Care: RHCs emphasize community care coordination, encouraging collaboration among various healthcare providers—including physicians, nurses, home health agencies, and nursing homes. This coordinated approach leads to more comprehensive and balanced patient care within the community.
Preventative Medicine: Preventative exams help reduce the risk of illness for patients and lower the chance of an inpatient visit, which lessens the financial burden on both hospitals and patients. These improve community care by allowing patients to address medical problems before having to go to the ER.
Chronic Care Management: RHCs are well-suited for managing patients with chronic conditions like diabetes. The patient-centered approach and emphasis on comprehensive care improve long-term health outcomes. Notes on the visit and about prescribed medication are stored in a patient portal which allows for reference later.
Pharmacy Services: Many RHCs offer pharmacy services on-site or through partnerships with local pharmacies. This can improve medication adherence and patient convenience.
Telehealth Visits: RHCs can increase patient accessibility and reach to those who cannot travel through telehealth technology.
Increased Community Care: Coordinate care among all facilities in the area to keep patients healthier and out of the emergency room. Allowing walk-in clinic appointments helps to avoid higher costs patients would be burdened with.
Expanded Services: RHCs are versatile in the range of services they can provide. These services can include preventative medical visits, home visits, telehealth services, assisted living home, and even hospice care. This versatility allows you to cater to diverse patient needs and expand your service offerings. For example, physicians or nurse practitioners can visit nursing homes that are part of the RHC and be paid at the all inclusive rate.
Challenges and Considerations
While RHCs offer numerous benefits, there are hurdles to clear.
Specialized Billing: RHCs require UB-04 forms for facilities and CMS-1500 forms for physicians. Ensure your billing staff and software are trained for compliance. (Tip: Find an EHR that includes these features and outsource RCM services to avoid penalties and maximize revenue.)
Initial Investment: Renovations, compliance equipment, and hiring can be costly. Conducting a feasibility study is essential to understanding long-term ROI.
Data Capture and Reporting: Effective data capture and reporting are critical for compliance and reimbursement. Your EHR system should support the unique needs of RHCs, including tracking patient encounters, services provided, and compliance metrics.
Cost Reporting: RHCs are required to submit annual cost reports, detailing their expenses and revenues. Preparing these reports accurately is essential to maintain compliance. Use your EHR’s built-in analytic tools to simplify reporting and reduce the burden of this process.
Credit Balance Reporting: Proper management of credit balance reports is crucial to avoid overpayments and potential delays in revenue. This report must be filed quarterly by the RHC. This process can be simplified through the EHR’s reporting tools through premade templates.
Patient Population: The success of your RHC may depend on having a substantial Medicare and Medicaid patient population in your area. Be sure to evaluate the demographics and insurance coverage of your community when considering the transition to an RHC.
Navigating EHR Solutions
In today’s digital landscape, EHRs are the backbone of efficient RHCs. Far from being mere digital storage for patient records, EHR systems serve as powerful tools to manage finances, track patient data, and ensure compliance with reporting requirements. Here’s what your EHR system needs to meet your unique demands and optimize both patient care and reimbursement.
Special Reporting and Data Capture
Streamlined Reporting for Cost Reports
Managing Split Claims and Billing Codes
Efficient Cost Reporting and Credit Balance Management
Comprehensive Tracking of Visits and Procedures
Maximizing Reimbursement and Avoiding Penalties
What's Next?
Deciding whether or not to become an RHC is a complex decision, but the potential benefits—from financial sustainability to improved healthcare access for underserved populations—can make it worth the effort.
If this is a path you’re considering, start by evaluating your clinic’s current setup, compliance readiness, and financial feasibility. Then, create a step-by-step action plan to ensure a smooth transition.
To address your clinic’s unique needs and streamline the process, speak with industry experts who can guide you. Whether it’s navigating EHR systems or breaking down billing complexities, ensure you approach this transformation with clarity and confidence.
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