Two U.S. Congressional Representatives – Dave Taylor (R-OH) and Carol Miller (R-WV) – last week introduced a bill that they hope becomes a law called the Defend Rural Health Act. The bill aims to “protect the integrity of federal rural health benefits” by eliminating the “dually classified” loophole that the two legislators say has “allowed urban hospitals to double dip into benefits designed for rural hospitals.”
“Although there are federal benefits and programs that have been designed to uplift rural hospitals, urban hospitals in big cities like Manhattan, Boston, and San Francisco are taking advantage of a harmful loophole to siphon benefits intended for rural hospitals,” stated Rep. Taylor. “I’m proud to right this wrong and protect the integrity of taxpayer dollars, rural hospitals, and rural America.”
Rep. Miller stated, “Urban hospitals have been exploiting a loophole to claim both urban and rural status, siphoning resources meant for rural providers. This bill protects rural hospitals by ending that practice and ensuring federal support stays where it is truly intended, serving rural communities.”
The legislators say that, prior to 2016, CMS prevented urban hospitals that reclassified as “rural” from simultaneously receiving Medicare’s urban wage index payments, which are typically higher than rural wage indexes, to account for higher operations and living costs in urban areas.
Two federal court rulings around that time, however, determined that CMS “did not have the authority to deny urban hospitals the ability to dually classify as both urban and rural,” they state. “This allowed urban hospitals to simultaneously benefit from programs designed to help rural hospitals, essentially dipping into the best of both worlds.”
Other benefits they say urban hospitals have undeservedly received from CMS since those rulings include a lower threshold for eligibility in the 340B program, increased Graduate Medical Education (GME) funding, and potential eligibility for sole community hospital status, rural referral center status, and Medicare-dependent small rural hospital status.
After these rulings, they state, “urban hospitals realized they could dually classify themselves as both urban and rural to maximize the dollars they receive from the federal government. Between 2017 and 2023, the number of dually classified hospitals grew from three to 425.” The loophole, they state, has allowed urban dually classified hospitals to increase total federal health spending and divert resources away from “truly rural providers.”
The Defend Rural Health Act would require urban hospitals to meet stricter criteria to reclassify as a rural hospital, and prohibit dual reclassifications through the Medicare Geographic Classification Review Board, “which is the mechanism through which urban hospitals are currently able to retain their higher Medicare urban wage index payments while simultaneously claiming to be rural for other benefits,” they state.
Read the full bill text here (PDF).
