Rural Community Hospital Demo

Rural Community Hospital Demonstration Program: Solicitation for 10 Additional
Participants
Overview
As part of the Agency’s broader rural strategy initiative, CMS
is conducting a new solicitation to select additional hospitals
to participate in the Rural Community Hospital Demonstration
Program (“RCH Demonstration” or “the demonstration”).
Hospitals that are currently participating in the demonstration
shall continue their participation in accordance with their
currently scheduled periods of performance; they do not need
to complete a new application.
The RCH Demonstration Program was initially authorized by
section 410A of the Medicare Modernization Act (MMA) of
2003. The demonstration was extended three times—by
sections 3123 and 10313 of the Affordable Care Act, by
section 15003 of the 21st Century Cures Act, and by section
128 of the Consolidated Appropriations Act of 2021, which
extended the authorization period for participating hospitals.
The final period ends June 30, 2028.
The statute states that no more than 30 rural community
hospitals can participate in the demonstration. Twenty
hospitals are currently participating in the demonstration as of
December 18, 2024; therefore, up to 10 additional qualifying
hospitals may be selected to be able to begin participation in
the demonstration in 2025.
The RCH Demonstration provides and tests payment under a
reasonable cost-based methodology for inpatient services
furnished by participant hospitals. The goal is to increase the
financial viability and capability of the selected rural
community hospitals to meet the health care needs of
Medicare beneficiaries in their services areas, and to promote
high quality and efficient health care delivery. Information on
the RCH Demonstration and evaluation reports can be found
at: https://www.cms.gov/priorities/innovation/innovationmodels/rural-community-hospital.

CMS will select up to 10
additional qualifying hospitals to
participate in the Rural
Community Hospital
Demonstration Program.
Due Date
Applications must be received by
11:59pm Eastern Standard
Time March 1, 2025.
Application Submission
Submit the application by email
to: RCHDemo@cms.hhs.gov.
Applications should be no more
than 20 double-spaced pages—
exclusive of cost report pages,
responses to specific items under
“Descriptive Information,” and
maps.
Applicants must complete, sign,
date, and return the Medicare
Waiver Demonstration Applicant
Data Sheet.
Selected hospitals enter the
demonstration on a rolling basis
May 1, 2025 - June 30, 2028

The MMA requires that the demonstration be budget-neutral.
CMS has met this requirement by offsetting the amount of
payment enhancement attributable to the demonstration from the national payment rates
to hospitals. Each of the past 21 years, the proposed and final rules for the Medicare
Inpatient Prospective Payment System (IPPS) have updated the status of the
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demonstration and explained the methodology for estimating additional costs for the
demonstration. For the RCH Demonstration segment in the fiscal year 2025 IPPS final
rule, please see this link: https://www.cms.gov/newsroom/fact-sheets/fy-2025-hospitalinpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective-0.
We anticipate that we may receive more applications than open slots. Applicants not
selected will be placed on a wait list and may be approved on a rolling basis to join the
demonstration should a participant leave the demonstration.
Demonstration Payment Methodology
Hospitals selected for participation in the demonstration will receive payment for
Medicare inpatient services, with the exclusion of services furnished in a psychiatric or
rehabilitation unit that is a distinct part of the hospital, using the following rules:
1. For discharges occurring in the first cost reporting period on or after the
implementation of the program, their reasonable costs of providing covered inpatient
services;
2. For discharges occurring during the second or subsequent cost reporting period, the
lesser of their reasonable costs or a target amount. The target amount in the second
cost reporting period is defined as the reasonable costs of providing covered inpatient
hospital services in the first cost reporting period, increased by the IPPS update factor
(as defined in section 1886(b)(3)(B)) for that particular cost reporting period. The
target amount in subsequent cost reporting periods is defined as the preceding cost
reporting period’s target amount increased by the IPPS update factor for that
particular cost reporting period.
Eligibility Requirements for Participation
The following eligibility requirements must be met for a hospital to be considered for
participation in the demonstration. These requirements are specified in section 410A of
the MMA, the original authorizing legislation. An applicant must be a hospital that:
•
•
•
•

Is located in a rural area (as defined in section 1886(d)(2)(D) of the Social
Security Act (the Act), or is treated as being rural pursuant to section
1886(d)(8)(E) of the Act;
Has fewer than 51 acute care inpatient beds, as reported in its most recent
cost report (beds in a psychiatric or rehabilitation unit which is a distinct
part of the hospital shall not be counted);
Makes available 24-hour emergency care services; and
Is not eligible for Critical Access Hospital (CAH) designation or has not
been designated a CAH under section 1820 of the Act.

The original authorizing legislation, section 410A of the MMA, requires that CMS
conduct this demonstration in States with low population densities, as determined by the
Secretary. Therefore, CMS will only accept applications to this solicitation from hospitals
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in the 20 least densely populated States, according to data for 2020 from the U.S. Census
Bureau.1
These States are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine,
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma,
Oregon, South Dakota, Utah, Vermont, and Wyoming. CMS will not accept
applications from hospitals located in other states or in the US territories.
Application Process
Each hospital seeking to participate in the demonstration must submit an application.
Required Descriptive Information
Applicants must submit the following descriptive information:
A. Provide the following to verify that the hospital meets the eligibility requirements
for participation:
1.
Evidence that the hospital is located in a rural area (as defined in section
1886(d)(2)(D) of the Social Security Act (the Act) or treated as being rural
pursuant to section 1886(d)(8)(E) of the Act and is located in one the 20
least densely populated states.
2.
Number of acute care inpatient beds, from the latest cost report (beds in a
psychiatric or rehabilitation unit of a hospital shall not be counted toward
the total number of beds).
3.
Evidence that the hospital makes available 24-hour emergency care
services.
B. The following is additional information that CMS may use in ranking hospitals in
the case we receive more applications than open slots:
1. Road miles to the nearest hospital or CAH, and a list of all hospitals or CAHs
within 35 road miles of the hospital.
2. Indicate if the hospital is designated as a sole community hospital, Medicaredependent hospital, rural referral center, or other hospital designation.
3. Medicare swing bed approval, if applicable.
4. Most recent 3 years of data on occupancy rate, average daily census
(including in the emergency department), number of discharges, average
inpatient length of stay, payer mix. Specify the numbers for each year.
5. Total Medicare payment for inpatient services from the latest cost report (if
applicable, this should include Medicare payment for swing bed services).
6. Toal costs for Medicare inpatient services from the latest cost report (if
applicable, this should include costs for Medicare swing bed services).
7. The hospital’s Medicare inpatient operating margin (including inpatient
services, outpatient services, distinct part psychiatric units, and rehabilitation
units). The applicant should specify which among these is used in calculating
this.
1

See the United States Census Bureau: Historical Population Density Data (1910-2020) available at:
https://www.census.gov/data/tables/time-series/dec/density-data-text.html

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C. The applicant should submit the relevant pages from the most recently submitted
cost report to address:
1.
Number of acute care inpatient beds, from the latest cost report (beds in a
psychiatric or rehabilitation unit of a hospital shall not be counted toward
the total number of beds); (Worksheet S-3 Part I);
2.
Total Medicare payment for inpatient services from the latest cost report
(if applicable, this should include Medicare payment for swing bed
services); (Worksheet E, Part A (for swing beds, Worksheet E-2));
3.
Total costs for Medicare inpatient services from the latest cost report (if
applicable, this should include costs for Medicare swing bed services);
(Worksheet D-1 (for swing beds, also Worksheet D-3));
4.
Medicare Inpatient Operating Margin - the applicant should calculate this
amount from Total Medicare Payment for Inpatient Services and Total
Medicare Inpatient Costs).
5.
The hospital’s total operating margin (including inpatient services,
outpatient services, distinct part psychiatric units, and rehabilitation units).
The applicant should specify which among these is used in calculating
this.
D. Narrative Responses: The applicant should address the following questions in
narrative format. This narrative should be no more than 20 pages, double spaced.
Cost report pages, and specific responses to the items requested above, including
any maps, do not count toward this page limit. To be considered complete, an
application must address each category among those listed below.
Applicants should specify proposed interventions that increase access to and improve
quality of care, while enhancing patient care options and the ability for beneficiaries to
remain in their communities. Applicants should also describe how additional funding
under the demonstration will sustain operation as a full-service hospital, and how
essential the hospital’s health care services are to meeting the health care needs of the
community.
1. Problem Statement (40 out of 100 points): Explain why the applicant
hospital desires to receive payment under a reasonable cost-based
methodology instead of payment under the current IPPS.
•

•

List current challenges and how payment under a reasonable costbased methodology will improve the situation. For example, would
participation in this demonstration allow the hospital to stay open, not
reduce needed services, or improve care quality?
Identify any specific services that are currently or likely to be
threatened due to funding shortfalls. Explain the hospital’s role in
providing health care services to the surrounding population and
indicate whether there are issues of remoteness, isolation, and/or
absence of other hospital or shortage of health care providers in the
area.
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•

•
•

Identify the needs of the surrounding population and the potential
benefits of addressing the critical gaps. Is the hospital or area
experiencing any demographic shifts or changes in service mix that are
important to address? Please identify any critical areas or populations
of unmet need, such as maternal health, behavioral health, older adults,
or minorities.
Describe any barriers to converting to other hospital types (i.e., CAH
or Rural Emergency Hospital), and how remaining as a full-service
hospital addresses community need.
Describe if any rural hospitals have closed in the applicant’s state or
surrounding area during the past 5 years, and, if so, how that has
affected the delivery of needed health care services, and any resulting
impact on this hospital. Is the applicant hospital filling gaps left by the
closure of other hospitals?

2. Strategy for Financial Viability (20 out of 100 points): The applicant
should describe its strategy for improving its financial situation, both in terms
of efforts it has undertaken recently and those that it plans under the
demonstration. Please explain how participation in the demonstration will
assist the hospital in responding to financial, demographic, and health care
delivery factors that pose risk to sustaining operation. Will participation in the
demonstration fill a gap in funding that currently threatens operations and
essential health care services?
The applicant should describe how its strategy will both enhance revenue and
reduce costs. Do revenue enhancement proposals apply to needed acute care
and swing-bed services that will generate funding? Please include realistic and
substantiated utilization and revenue projections.
Please also identify financial and utilization trends for other service lines (e.g.,
outpatient, skilled nursing facility, Rural Health Clinic) and for other payers
(e.g., commercial insurance, Medicare Advantage).
Is the hospital owned or managed by an outside organization or entity? If it is
part of a health system, please describe the system’s network. If so, the
application should describe how participation in the demonstration will
complement this relationship.
The applicant should also detail efforts to control costs so as to be viable. Cost
control strategies should include documented activities within the hospital;
and, if applicable, on the part of a larger ownership or management entity.
3. Goals for Demonstration (20 out of 100 points): The applicant should
describe any specific projects for which it will use additional Medicare funds
obtained through the demonstration, and how any such projects will benefit
Medicare beneficiaries in the hospital’s service area. Goals of such projects
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may include increased access to care and provision of additional services, and
they may also include participation in value-based payment and quality of
care programs, such as accountable care organizations, bundled payment
initiatives, or regional collaboratives. Please provide a realistic and feasible
plan for implementing these projects. This description should also include
plans for improving the overall quality of care, and, if applicable, decreasing
the number of potentially avoidable admissions, readmissions, transfers, and
skilled nursing facility (SNF) admissions.
4. Collaboration with Other Providers (20 out of 100 points): The applicant
should describe how it works with other health care providers and facilities to
serve the Medicare population overall and how any enhancements supported
by additional Medicare funds will contribute to the population’s health. Will
relationships with other providers change as a result of participation in the
demonstration?
The applicant should describe integration of goals for meeting patients’ needs
with other service lines within the geographic area – e.g., primary care, SNF,
home health, and hospice. It is encouraged but not required for applicants to
propose collaborations with a larger and more dispersed network, such as for
ED coverage, specific services and specialties, telemedicine, administrative
functions, and education and training.
Application Submission
In addition to responding to the items under “Descriptive Information,” applicants must
complete, sign, date, and return the Medicare Waiver Demonstration Applicant Data
Sheet found on this web page (https://www.cms.gov/priorities/innovation/innovationmodels/rural-community-hospital). CMS will specify the periods of performance for
participating hospitals when the selections are announced. The entire application will
consist of the above data sheet, all narrative information requested in the solicitation,
responses to specific information items, cost report pages, and maps.
Please see the attached application checklist (Appendix) to help you make sure you have
all required documents included in your application.
Please submit the application by email to the following mailbox:
RCHDemo@cms.hhs.gov.
Application Review Process
The selection process will be competitive. If an applicant meets the eligibility
requirements, the application will be referred to an independent technical review panel
for evaluation and scoring. The panelists’ evaluations will rate responses to the questions
asked above: problem statement, strategy for financial viability, goals for the
demonstration, and collaboration with other providers, in conjunction with the other
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required descriptive information requested above, which will help to provide additional
data to support the problem statement.
The CMS Administrator will make the final selection from among the applications with
the highest scores. Scores will be based on the quality and clarity of the information and
responses provided in a hospital’s application, and on the feasibility of proposals.
Hospitals not selected will be placed on a wait list, ordered from highest to lowest score
with the highest score being at the top of the list. If any participants drop out, CMS may
draw new demonstration participants from the top of the wait list until that slot is filled.
Decisions will be final, and no appeals will be granted, however, CMS will release the
score to each applicant, and discuss with an applicant their score, upon request.
Selected hospitals may begin participation in the RCH Demo on a rolling basis beginning
May 1, 2025 through June 30, 2028.
Due Date
Applications will be considered timely if we receive them on or before 11:59pm Eastern
Standard Time (E.S.T.) March 1, 2025.
Only applications that are considered as timely will be reviewed and considered by the
independent technical review panel.
For further information, please send an email to RCHDemo@cms.hhs.gov.

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Appendix: RCH Document Checklist
Does your application include:
Document
All the following pages from the most recent cost report

Y/N

(Worksheet S-3 Part I);
This should show the number of acute care inpatient beds, from the
latest cost report (beds in a psychiatric or rehabilitation unit of a
hospital shall not be counted toward the total number of beds);
(Worksheet E, Part A (for swing beds, Worksheet E-2));
This should show the number of Total Medicare payment for
inpatient services from the latest cost report (if applicable, this
should include Medicare payment for swing bed services);
(Worksheet D-1 (for swing beds, also Worksheet D-3));
This should show the total costs for Medicare inpatient services
from the latest cost report (if applicable, this should include costs for
Medicare swing bed services);
Medicare Inpatient Operating Margin the applicant should calculate
this amount from Total Medicare Payment for Inpatient Services and
Total Medicare Inpatient Costs).
The hospital’s total operating margin (including inpatient services,
outpatient services, distinct part psychiatric units, and rehabilitation
units). The applicant should specify which among these is used in
calculating this.

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