Rural Hospital Services Strategic Plan

HHSC created the Rural Hospital Services Strategic Plan to improve health care access and outcomes in rural communities. The 86th Texas Legislature added Texas Government Code Section 531.201, which requires HHSC to create the strategic plan to ensure rural Texans have access to hospital services. Per the government code, HHSC must submit a progress report regarding the development and implementation of the strategic plan by November 1 of each even-numbered year. HHSC published its first Rural Hospital Services Strategic Plan Progress Report in November 2020.

In the most recent Rural Hospital Services Strategic Plan Progress Report (PDF), published in November 2022, HHSC provided an update on activities that support the three strategies identified in the previous report published in November 2020. These strategies, outlined below, were identified to further the goal of ensuring access to hospital services and reducing rural hospital closures:

  1. Ensure Medicaid reimbursements are adequate and appropriate.
  2. Increase access to established revenue opportunities to maximize reimbursement for hospitals.
  3. Identify challenges hospitals experience in providing services to persons covered by Medicare and other payers.

The key initiatives HHSC is pursuing to support these goals are detailed below.

New Rural Emergency Hospital Designation

A Rural Emergency Hospital (REH) is a new Medicare provider type designed to maintain access to critical emergency and outpatient hospital services in communities that may be unable to support or sustain a Critical Access Hospital (CAH) or small inpatient rural hospital. U.S. Congress established the REH designation in December 2020 through Section 125 of the Consolidated Appropriations Act, 2021, which became effective Jan. 1, 2023. Conversion to an REH allows for the provision of emergency services, observation care and additional medical and health outpatient services, if elected by the REH, that do not exceed an annual per patient average of 24 hours.

According to CMS, the REH designation provides an opportunity for CAHs and certain rural hospitals to avert a potential closure and continue to provide essential services for the communities they serve. Facilities eligible to apply for the REH designation include CAHs and rural acute care hospitals with 50 or fewer beds that were open on Dec. 27, 2020.

Learn more about the REH designation through the following resources:

HHSC Licensure Information

For hospitals to apply to the Centers for Medicare and Medicaid Services (CMS) to obtain an REH designation, states must first establish licensing requirements for this new provider type. On October 5, 2023, HHSC adopted standard rules (Texas Administrative Code (TAC) Title 26 Chapter 511) concerning Limited Services Rural Hospitals. These rules permit a qualified rural hospital to be designated as an REH under the Code of Federal Regulations §§485.502 and 485.506, and to apply to HHSC for a limited services rural hospital (LSRH) license under Texas Health and Safety Code (HSC) Chapter 241, Subchapter K.

To apply for an LSRH license, applicants must complete Form 3240, LSRH License Application (PDF), follow the application’s instructions, and submit all required information to HHSC. An LSRH license is necessary for a provider to apply to become an REH Medicare provider.

Grant Funding

Texas Rural Emergency Hospitals Financial Stabilization Grant

Rural hospitals that have obtained both the state Limited Services Rural Hospital (LSRH) license under Texas Health and Safety Code Chapter 241, Subchapter K and the federal Rural Emergency Hospital (REH) designation from CMS by Aug. 31, 2023, were eligible to apply for the Texas Rural Emergency Hospitals Financial Stabilization Grant. This Grant is intended to provide time-limited financial support for hospital operational costs to support the transition to the new REH designation.

For each eligible hospital, HHSC will provide a two-year Grant in the amount of $750,000 distributed quarterly in four flat fee amounts of $187,500 for the first Grant year and $375,000 distributed quarterly in four flat fee amounts of $93,750 for the second Grant year.

The funding is provided by House Bill 1, Eighty-Eighth Legislature, Regular Session 2023, Article II, Rider 88, Rural Hospital Grant Program.

The Open Enrollment for the Texas Rural Emergency Hospitals Financial Stabilization Grant application closed on Oct. 13, 2023. HHSC is currently reviewing submitted applications.

Rural Hospital COVID-19 in Healthcare Relief Grant Program

In 2021, the Texas Legislature enacted Senate Bill 8, 87th Legislature, 3rd Called Session, and appropriated funds to HHSC for grants to support Texas health care providers affected by the COVID-19 pandemic. The legislation allocated $75 million in grants through the federal American Rescue Plan Act to support rural hospitals during the COVID-19 pandemic in 2022. The funding was distributed in two tiers under the Rural Hospital COVID-19 In Healthcare Relief Grant program (RH-CHRG). Tier 1 funds totaled $38 million and were released as direct grant awards. Tier 2 funds totaled $37 million and were released through competitive grants. The grants require HHSC receive documentation on which hospital costs were paid through the funds.

Community Hospital Access and Rural Transformation Model Program

In August 2020, CMS announced a new funding opportunity specifically for rural hospitals.

The Community Health Access and Rural Transformation (CHART) Model tests whether aligned financial incentives, increased operational flexibility and robust technical support can assist rural health care providers’ capacity to implement an effective redesign of their health care delivery system. The CMS Innovation Center evaluates the impact of the CHART Model on Medicare and Medicaid expenditures, access to care, quality of care and health outcomes.

To assist rural communities overcome challenges and build on previous successes, HHSC partnered with a limited number of rural Texas hospitals to apply for the CHART Model funding opportunity for the Community Transformation Track.

On Sept. 10, 2021, CMS announced HHSC is among four Lead Organizations selected for the Community Transformation Track federal funding opportunity. As the Lead Organization, HHSC is responsible for driving a health care delivery system redesign by leading the development and implementation of transformation plans, as well as convening and an Advisory Council.