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Medicare Dependent Hospital (MDH)

Background:

Under the acute care hospital inpatient prospective payment system, special payment protections are provided to a MDH. Section 1886 (d) (5) (G) of the Act created the category of MDH. The regulations (42 CFR 412.108) set forth the criteria a hospital must meet to be classified as a MDH.

Criteria for classification as a Medicare-dependent, small rural hospital:

  1. For cost reporting periods beginning on or after April 1, 1990 and ending before October 1, 1994, or discharges beginning on or after October 1, 1997 and ending before October 1, 2011, a hospital is classified as a Medicare-dependent, small rural hospital if it is located in a rural area (as defined in 412.63(b)) and meets all of the following conditions:
    • The hospital has 100 or fewer beds are as defined in 412.105(b) during the cost reporting period.
    • The hospital is not also classified as a sole community hospital under 412.92.
    • At least 60 percent of the hospital’s inpatient days or discharges were attributable to individuals receiving provisions of paragraph (1)(iv) of this section.
  1. The hospital’s cost reporting period ending on or after September 30, 1987 and before September 30, 1988.
  2. If the hospital does not have a cost reporting period that meets the criterion set forth in paragraph 1(iii)(A) above of this section, the hospital’s cost reporting period beginning on or after October 1, 1986, and before October 1, 1987.
  3. At least two of the last three most recent audited cost reporting periods for with the Secretary has a settled cost report.

If the cost reporting period determined under paragraph (1)(iii) above of this section is for less than 12 months, the hospital’s most recent 12-month or longer cost reporting period before the short period is used.

Classification Procedures:

  1. The MAC typically determines whether a hospital meets the criteria for an MDH based on the above criteria. However, in New York and Connecticut (Region 2) the CMS regional office makes the determination. In this region, the MAC will forward its recommendation to CMS.
  2. A hospital must submit a written request along with qualifying documentation to its MAC to be considered for MDH status based on at least two of the last three most recent audited cost reporting periods for which the Secretary has a settled cost report.
  3. The MAC will make its determination and notify the hospital with 90 days from the date that it receives the hospital’s request and all of the required documentation.  In Region 2, The MAC will make its recommendation to CMS with 90 days from the date that it receives the hospital’s request and all of the required documentation. The request is not considered approved if not responded to timely. A formal notification is required to provider indicating approval or denial.
  4. A determination of MDH status made by the MAC is effective 30 days after the date the MAC provides written notification to the hospital. An approved MDH status determination remains in effect unless there is a change in the circumstances under which the status was approved.

    An approved MDH must notify the MAC if any change occurs that is specified in the above criteria for classification.  If CMS determines that an MDH failed to comply with this requirement, CMS will cancel the hospital’s classification as an MDH effective with the date that the hospital no longer met the criteria for such status.

    An MDH must report to the MAC within 30 days if their number of beds increases to more than 100 or the provider’s geographic classification changes.

MDH must report to the MAC if it becomes aware of any changes that would affect its classification as an MDH beyond the two previously listed events within 30 days of that event. If CMS determines that an MDH has failed to comply with this requirement, CMS will cancel the hospital’s classification as an MDH effective with the date the hospital became aware of the event that resulted in the MDH no longer meeting the criteria for such classification.

Please submit documentation to j15.reimbursement@cgsadmin.com

Reviewed: 12.02.22

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