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CMS Has Yet To Enforce a Statutory Provision Related to Rural Health Clinics


The Rural Health Clinic (RHC) certification was created in 1977 to address the shortage of physicians in rural areas. RHCs had to meet two location requirements: (1) being located in rural areas and (2) being located in areas that have a shortage of health care providers. RHCs receive enhanced Medicare and Medicaid reimbursements for most services.

Prior to the enactment of the Balanced Budget Act of 1997 (BBA), RHCs retained their certifications indefinitely. However, the BBA removed their permanent status and allowed for the termination of RHCs that no longer met the location requirements as long as they were not determined to be "essential provider" RHCs.

A 2005 OIG report found that nearly 300 RHCs did not meet the location requirements and that CMS had not issued regulations that would allow RHCs to apply as essential provider RHCs.


We plotted RHC locations onto a digital map to determine whether RHCs met the two location requirements in 2013. Additionally, we used 2012 claims data to calculate the amount Medicare paid to the RHCs we determined did not meet the location requirements. Finally, we reviewed Federal regulations and interviewed CMS staff to determine whether essential-provider criteria had been established or were in the process of being established.


Approximately 12 percent of RHCs no longer met the location requirements in 2013. Pursuant to the BBA, these RHCs should continue to qualify as RHCs-and receive enhanced reimbursement-only if they are determined to be essential providers. However, CMS has yet to issue final regulations that would allow RHCs that do not meet the location requirements to qualify as essential-provider RHCs.


More than 16 years have elapsed since Congress directed CMS to issue regulations that would allow RHCs that no longer meet location criteria to qualify as essential providers. Without these regulations, CMS can neither terminate RHCs nor identify them as essential providers in accordance with the BBA provision. Consequently, RHCs that no longer meet location criteria continue to receive enhanced reimbursement. To ensure that CMS can enforce the BBA provisions relating to RHCs, we recommend that CMS issue regulations to ensure that RHCs determined to be essential providers remain certified as RHCs. CMS responded to the report but neither concurred nor nonconcurred with our recommendation.