
Critical Access Hospitals
Unlike hospitals that are paid under the Prospective Payment System, Medicare pays CAHs for patient services based on each hospital’s costs of providing care. Under this cost-based payment system, Medicare payments (and in many states Medicaid payments) to CAHs are based on the “covered costs” of furnishing Medicare-covered services to beneficiaries.
Generally speaking, covered costs include “all necessary and proper costs associated with furnishing the services” plus 1%. Some examples of covered costs are:
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General & Administrative
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Housekeeping & Laundry
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Dietary & Cafeteria
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Nursing Administration
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Medical/Surgical
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Emergency Room
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Cardiology
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Pharmacy
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Speech & Respiratory Therapies
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Provider-Based Clinics
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Maintenance & Repair
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Medical Records
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Salary and Benefits
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Physical & Occupational Therapies
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Operating Room
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Laboratory
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Radiology
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Medical Supplies
Also included as “covered costs” are those costs associated with the property, plant, and equipment used in providing Medicare services, thus providing to CAHs a methodology by which they can once again invest in capital assets through reimbursement of interest expense and depreciation.
