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 that Texans residing in rural areas have access to hospital services. Per Section 531.201, HHSC must submit a progress report regarding the development and implementation of the strategic plan by November 1 of each even numbered year. The first Rural Hospital Services Strategic Plan Progress Report was published in November 2020.

In the most recent Rural Hospital Services Strategic Plan Progress Report (PDF), published November 2022, HHSC provided an update on the activities undertaken to support the three strategies identified in the Rural Hospital Services Strategic Plan Report published November 2020. The three 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 that hospitals experience in providing services to persons covered by Medicare and other payers.

Key initiatives HHSC is pursuing to support these goals and that stakeholders might find of interest are detailed below. 

New Rural Emergency Hospital Designation

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 not be able to support or sustain a Critical Access Hospital (CAH) or small inpatient rural hospital. The REH designation was established by Congress in December 2020 through Section 125 of the Consolidated Appropriations Act, 2021 and became effective January 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 potential closure and continue to provide essential services for the communities they serve. Facilities that are eligible to apply for the REH designation include CAHs and rural acute care hospitals with 50 or fewer beds that were open on December 27, 2020.

To learn more about the REH designation, please see 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 January 13, 2023, HHSC adopted an emergency rule in Texas Administrative Code (TAC) Title 26 Chapter 600, Section 600.1, concerning Limited Services Rural Hospitals. This emergency rule permits a qualified rural hospital that meets the requirements to be designated as a Rural Emergency Hospital under the Code of Federal Regulations §§485.502 and 485.506 to apply to HHSC for a limited services rural hospital (LSRH) license under Texas Health and Safety Code (HSC) Chapter 241, Subchapter K.

This emergency rule took effect on January 13, 2023 and expires on May 12, 2023.

To apply for an LSRH license, applicants must complete Form 3240, Limited Services Rural Hospital (LSRH) License Application (PDF) . An LSRH license is necessary for a provider to apply to become an REH Medicare provider. Note: Form 3240 is only for use while the emergency rule is in effect. Any applicant using the license under the emergency rule at 26 TAC Section 600.1 must complete the initial LSRH Initial Licensing form once the standard LSRH rule takes effect in 26 TAC Chapter 511.

Grant Funding

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 healthcare providers affected by the COVID-19 pandemic. The legislation identified $75 million in federal American Rescue Plan Act funding to rural hospitals for grants to support health care providers 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). The Tier 1 funds totaled $38 million and was released as direct grant awards and Tier 2 funds, totaled $37 million was released through competitive grants. The grant reporting requirements include documentation to HHSC to describe what types of costs were paid for with the funds.


Community Hospital Access and Rural Transformation Model Program

In August 2020, CMS announced a new funding opportunity called the Community Health Access and Rural Transformation (CHART) Model specifically for rural hospitals.

The CHART Model will test 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 Center for Medicare and Medicaid Innovation will evaluate 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 September 10, 2021, CMS announced HHSC is one of four Lead Organizations selected for the Community Transformation Track federal funding opportunity. As the Lead Organization, HHSC will be responsible for driving health care delivery system redesign by leading the development and implementation of Transformation Plans as well as convening and engaging the Advisory Council.