The Rural Hospital Closure Relief Act of 2025 amends Medicare’s critical access hospital (CAH) rules to let States certify certain struggling rural hospitals for CAH status even if they fail the 35‑mile distance test. The change is explicitly limited in time and tied to financial distress and commitments by the hospital to maintain or expand high‑need services.
The bill pairs that temporary certification authority with reporting obligations, a revocation mechanism for noncompliance, and mandated studies by the GAO and MedPAC on fiscal impacts and alternative payment models. It also requires the Department of Health and Human Services to issue implementing guidance and creates a statutory mechanism for facilities to transition off the temporary designation after the program ends.
At a Glance
What It Does
Allows States to certify certain rural hospitals as critical access hospitals despite the 35‑mile rule, contingent on hospital attestations about governance, recent financial losses, and plans to offer or expand locally scarce services.
Who It Affects
Rural hospitals that already qualify under other Medicare rural designations and are financially distressed, State health agencies that must certify facilities, CMS/HHS for rulemaking and oversight, and Medicare program finances.
Why It Matters
It creates a targeted, temporary pathway to preserve local hospital capacity in underserved areas while attempting to limit wide‑scale program expansion through eligibility conditions and federal oversight.
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What This Bill Actually Does
The bill revises section 1820 of the Social Security Act to let States certify certain rural facilities as critical access hospitals even when they do not meet the statutory 35‑mile distance requirement. To be eligible for State certification under this pathway, a facility must already fall into an existing rural hospital category (for example, a sole community hospital, medicare‑dependent small rural hospital, low‑volume hospital, or a subsection (d) hospital) and be located in a rural area or a rural census tract.
The facility must attest that it was operating at enactment and that it experienced two consecutive years of negative operating margins immediately before certification; it must also submit a strategic plan for multi‑year solvency and commit to create or expand a service line that the facility’s community assessment shows is in short supply (examples cited include obstetrics and behavioral health).
Certification under this special pathway is time‑limited and subject to federal caps and an allocation process administered by the Secretary of HHS. The Secretary must set up an initial assessment of eligible hospitals, guarantee at least one allocation to any State with eligible facilities, and then distribute remaining designations proportionally.
HHS also gains explicit authority to revoke a designation if hospitals fail to provide required annual reports on the new or expanded service line or fail to notify the Secretary of material changes to that service. The statute directs HHS to issue final regulations or program instructions within one year of enactment to operationalize these requirements.The bill builds oversight and evaluation into the policy: the Comptroller General must study implementation and report on program impact, facility characteristics, financial outcomes, and changes in Medicare expenditures relative to a baseline; GAO’s report is due six years after enactment.
Separately, MedPAC must study payment systems for rural hospitals using a 2018–2028 data window and deliver recommendations (with a statutory report deadline eight years after enactment). Finally, the temporary certification authority sunsets, and the statute requires HHS to provide a mechanism so any facility designated under this pathway can transition within one year at sunset to either MedPAC‑recommended models, its prior payment system, or rural emergency hospital payment status.
The Five Things You Need to Know
The special State‑certification pathway applies only to facilities certified between the bill’s enactment and up to 9 years after enactment.
A facility must show two consecutive years of negative operating margins immediately before certification and submit an attestation including a governance plan and a strategic, multi‑year solvency plan.
Federal limits cap certifications at 120 facilities nationwide and no more than 5 per State; the Secretary must allocate one slot to each State with eligible hospitals and then distribute remaining slots proportionally.
Designated hospitals must report annually on the new or expanded service line required by their attestation and notify HHS of material changes; failure to comply can trigger revocation of CAH status.
At the 9‑year sunset the statute requires a one‑year transition to either MedPAC‑recommended payment models, the facility’s prior Medicare payment model, or payment as a rural emergency hospital.
Section-by-Section Breakdown
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Short title
Designates the bill as the 'Rural Hospital Closure Relief Act of 2025.' This is purely nominative but signals the statutory purpose: short‑term relief for rural hospitals at risk of closure.
Eligibility criteria for State‑certified CAHs
Adds precise eligibility requirements for facilities a State can certify despite failing the 35‑mile test: the hospital must already be a listed rural hospital type (sole community hospital, medicare dependent small rural hospital, low‑volume hospital, or subsection (d) hospital), be sited in a rural area or rural MSA census tract, meet poverty/HPSA or high‑Medicare inpatient share thresholds, and demonstrate recent financial distress. The facility must apply to CMS with an attestation that includes governance credentials and a strategic plan to achieve multi‑year solvency and to open or expand a service line identified as scarce in its community health needs assessment. Practically, this effectively ties eligibility to both structural classification and demonstrable community need plus a financial rescue plan.
Caps and allocation process for special certifications
Establishes a twofold quantitative limit: no more than 120 designations nationwide using the State‑certification route, and no more than 5 in any single State. The Secretary must perform an initial inventory of eligible facilities, allocate one designation for each State with at least one eligible hospital, then distribute the remaining slots proportionally based on the count of eligible hospitals per State. The provision also creates a statutory expiration for new certifications under this pathway after 9 years.
Reporting requirements and revocation authority
Requires hospitals certified under the special pathway to submit reports (content tied to the new/expanded service line) and to notify the Secretary if they materially change that service or their plans to sustain access. CMS is instructed to align reporting where practicable with existing CAH reporting. The Secretary may revoke a facility’s CAH certification for failing to provide required reports or notices. This gives CMS a concrete enforcement lever and creates periodic data flow to monitor whether the statutory goals are met.
Rulemaking deadline and territorial adjustments
Directs the Secretary to issue final regulations or program instructions within one year of enactment to implement the amendments. Separately, the bill tweaks CAH bed‑count rules for U.S. territories (Guam, American Samoa, Northern Mariana Islands, and the Virgin Islands) by allowing the Secretary to set an appropriate number of acute‑care beds rather than a flat 25‑bed cap—an administrative flexibility designed to acknowledge territorial differences.
Studies, reports, and mandatory transition at sunset
Mandates two major evaluations: a GAO study (report due six years after enactment) analyzing characteristics, finances, and Medicare spending impacts of facilities designated under the pathway, and a MedPAC study (report due eight years after enactment) on payment systems for rural hospitals over a 2018–2028 data window with recommendations for alternative payment models. The statute requires HHS, at the nine‑year sunset, to establish a mechanism for affected facilities to transition within one year to either MedPAC‑recommended payment models, their prior payment system, or rural emergency hospital payment—formalizing the temporary nature of the relief and tying future payment policy to MedPAC analysis.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Financially distressed rural hospitals that already meet other rural designations: They gain a temporary pathway to CAH status (and its payment protections) even if they fail the 35‑mile distance test, provided they can demonstrate recent negative operating margins and commit to service expansion.
- Rural communities with limited local services: The attestation requirement to open or expand high‑need services (for example, obstetrics or behavioral health) increases the chance the local population retains or gains access to those services.
- State health agencies: States regain a policy lever to prevent local hospital closures and to make targeted certification decisions based on community need and financial condition.
- Hospitals in U.S. territories: The bed‑count flexibility recognizes diversity in territorial needs and may make CAH classification more practicable for those facilities.
Who Bears the Cost
- Medicare program (trust funds): Allowing additional CAH designations under a temporarily relaxed rule is likely to increase Medicare outlays relative to the baseline, at least while the special pathway is in effect.
- Designated hospitals: Meeting the attestation’s requirement to add or expand service lines and to submit regular reports creates operational and capital costs and may strain already thin staffing and financial resources.
- CMS/HHS and State agencies: The statute increases administrative burdens—developing rulemaking and program instructions, conducting the initial assessment and allocation, monitoring annual reports, and carrying out revocation decisions.
- Competing rural providers: Facilities that are not selected for one of the limited slots may face continued financial stress and potential market shifts if nearby hospitals gain preferential Medicare reimbursement as CAHs.
Key Issues
The Core Tension
The central dilemma is balancing a short‑term rescue tool to preserve rural access against the risk of creating moral hazard and higher long‑term Medicare spending: the statute aims to save hospitals and local services now, but doing so by relaxing CAH entry rules risks subsidizing facilities that may not be sustainable without ongoing higher payments or structural payment reform.
The bill is deliberately procedural: it creates a temporary, tightly circumscribed pathway to shore up select rural hospitals rather than a permanent expansion of the CAH program. That design reduces the risk of unchecked program growth, but it raises several practical and policy questions.
First, the selection mechanics—one guaranteed allocation per State followed by proportional allocation—will leave some States with many eligible hospitals but few slots; that creates an administrative necessity for prioritization criteria that the statute does not prescribe. Second, the attestation requirements (two years of negative operating margins, a governance and solvency plan, and a commitment to add or expand specified services) are sensible in principle but difficult to verify in practice.
Defining 'negative operating margins' and assessing the realism of a solvency plan will require detailed agency guidance and raise disputes between hospitals and regulators.
Operational tension also exists around the required service expansions. Adding or restarting services like obstetrics or behavioral health is resource‑intensive: recruiting clinicians, securing appropriate facilities, and meeting liability and credentialing requirements take time and capital—resources that financially distressed hospitals may lack.
There is therefore a risk that some hospitals will achieve CAH status for the reimbursement benefit but fail to make sustainable service‑line improvements, forcing CMS into revocation decisions that are politically and technically fraught. Finally, while GAO and MedPAC studies are required, the timing (GAO at six years, MedPAC at eight years, sunset at nine years) compresses the window for evidence to shape durable payment reforms.
MedPAC’s recommendations could inform transition choices, but the statute leaves open how much weight policymakers will give those recommendations when they must make programmatic decisions at the nine‑year mark.
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