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Medicare Rural Hospital Flexibility Program

The Medicare Rural Hospital Flexibility (Flex) Grant Program was established by the Balanced Budget Act (BBA) of 1997 and, at that time, any state with rural hospitals could establish a Flex Program and apply for federal funding. The Flex Program also created critical access hospitals (CAHs). CAH designation allows the hospital to be reimbursed on a ‘reasonable cost basis’ for inpatient and outpatient services including lab and qualifying ambulance services that are provided to Medicare patients and, in some states, Medicaid patients.


The CAH designation is designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare by keeping essential services in rural communities. To accomplish this goal, CAHs receive certain benefits, such as cost-based reimbursement for Medicare services.


Eligible hospitals must meet the following conditions to obtain CAH designation:

  • Have 25 or fewer acute care inpatient beds
  • Be located more than 35 miles from another hospital
  • Maintain an annual average length of stay of 96 hours or less for acute care patients
  • Provide 24/7 emergency care services

The Flex grant provides funding to the Oklahoma Office of Rural Health to support 38 CAHs in: quality improvement, quality reporting, performance improvements and benchmarking, designating facilities as CAHs and the provision of rural emergency medical services (EMS). Only states with CAHs or hospitals eligible to convert to CAH status and a state rural health plan are eligible to participate in the Flex Program.


Flex funding encourages the development of cooperative systems of care in rural areas, joining together CAHs, providers of EMS services, clinics and health practitioners to increase efficiencies and quality of care. The Flex Program requires states to assess statewide needs and funds their efforts to implement community level outreach and technical assistance to advance the following goals:

  • Improve the quality of care provided by CAHs
  • Improve the financial and operational outcomes of CAHs
  • Understand the community health and EMS needs of CAHs
  • Enhance the health of rural communities through population health improvement initiatives
  • Improve identification and management of time critical diagnoses and support EMS capacity and performance improvement in rural communities
  • Support the financial and operational transition to value based models of health care payment


The Flex Grant is organized into five program areas with goals, objectives and related activities:

  1. Quality Improvement: The Medicare Beneficiary Quality Improvement Project (MBQIP) is a quality improvement activity under the Medicare Rural Hospital Flexibility (Flex) grant program.The goal of MBQIP is to improve the quality of care provided in CAHs, by increasing quality data reporting by CAHs and then driving quality improvement activities based on the data. This project provides an opportunity for individual hospitals to look at their own data, measure their outcomes against other CAHs and partner with other hospitals in the state around quality improvement initiatives to improve outcomes and provide the highest quality care to each and every one of their patients. MBQIP activities are grouped in four different quality domains: Patient Safety, Patient Engagement, Care Transitions and Outpatient.
  2. Financial and Operational Improvement: Identify financial and operational strengths and challenges and to identify statewide and targeted strategies for improvement.
  3. Population Health Management and EMS Integration
  4. Designation of CAHs in the State
  5. Integration of Innovative Health Care Models



For more information, contact Corie Kaiser at 405-945-8606. 

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