A. - Criteria for Sole Community Hospitals (SCHs)
A sole community hospital (SCH) is a hospital that is paid under the Medicare hospital
inpatient prospective payment system (IPPS) and is either located more than 35 miles
from other like hospitals or is located in a rural area, and meets the criteria for SCH status
as specified at 42 CFR 412.92 (Title 42 of the Code of Federal Regulations, Section
412.92, Special treatment: Sole community hospitals). A hospital may be designated as
an SCH effective with cost reporting periods beginning on or after October 1, 1990.
B. - Criteria for Medicare Dependent Hospitals (MDHs)
A Medicare-dependent, small rural hospital (MDH) is a hospital that is paid under the
Medicare hospital inpatient prospective payment system (IPPS) and meets the criteria for
MDH status as specified at 42 CFR 412.108 (Title 42 of the Code of Federal Regulations,
Section 412.108 Special treatment: Medicare-dependent, small rural hospitals). A
hospital may be designated as an MDH effective with cost reporting periods beginning on or after April 1, 1990, and ending on or before March 31, 1993, and for discharges
occurring on or after October 1, 1997, and before October 1, 2011.
C. - Payment to SCHs and MDHs
SCHs and MDHs are paid based on either the Federal rate or their hospital-specific (HSP)
rate, whichever will result in the greatest payment. The HSP rate is the hospital’s rate
based on their updated costs per discharge for a particular fiscal year (FY) as specified in
statute. Like all IPPS hospitals paid, SCHs and MDHs are paid for their discharges based
on the diagnosis-related DRG classification and weights regardless of whether payment
based on the Federal rate or the hospital’s HSP rate results in the greatest payment.
SCHs will be paid based on their HSP rate for either FY 1982, 1987, 1996 (for cost
reporting periods beginning on or after October 1, 2000) or 2006 (for cost reporting
periods beginning on or after January 1, 2009) if this results in a greater payment than the
Federal rate. For more detail, see 42 CFR 412.92(d) and 42 CFR 412.73, 412.75, 412.77,
and 412.78, respectively, for determining the HSP rates for FYs 1982, 1987, 1996 and
2006.
MDHs will be paid based on their HSP rate for either FY 1982, 1987, or 2002 (for cost
reporting periods beginning on or after October 1, 2006) if this results in a greater
payment than the Federal rate. For more detail, see 42 CFR 412.108(c) and 42 CFR
412.73, 412.75, and 412.79, respectively, for determining the HSP rates for FYs 1982,
1987, and 2002.
In addition, qualifying SCHs and MDHs that experience a significant decrease in its
number of discharges may receive an additional payment as specified at 42 CFR 412.92(e)
and 42 CFR 412.108(d), respectively.
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