HR-8967-119
Referred to the House Committee on Ways and Means.
Sponsored by Randy Feenstra (R-IA)
What it does
This bill would extend the Rural Community Hospital Demonstration Program for five additional years. The program tests whether cost-based Medicare reimbursement — where hospitals are paid based on their actual costs rather than fixed rates — is a workable model for small rural hospitals that are too large to qualify as critical access hospitals. The bill would also allow hospitals that participated in the program between December 30, 2024, and January 1, 2027, to continue participating during the new extension period.
Who benefits
Small rural hospitals with more than 25 beds that are too large to qualify as critical access hospitals, as they would continue receiving cost-based Medicare reimbursements rather than lower fixed rates. Rural communities that depend on these hospitals for local healthcare access. Rural patients who may retain access to nearby hospital services that might otherwise close. Hospital staff and employees at participating facilities whose jobs may be more secure if their hospitals remain financially viable.
Who is hurt
Medicare's Hospital Insurance Trust Fund, which pays higher cost-based rates rather than the standard prospective payment rates that apply to most hospitals. Taxpayers who fund Medicare, to the extent cost-based reimbursement exceeds standard rates. Larger rural or suburban hospitals that do not qualify for the program and compete for patients under standard Medicare payment rules. Hospitals that participated before December 30, 2024, and are not covered by the continuity provision, who may face uncertainty about their eligibility.
Supporters argue
Supporters argue that small rural hospitals operate with thin margins and serve geographically isolated populations who have no alternative care options, making standard Medicare payment rates — designed for higher-volume facilities — financially unsustainable for them. They contend that rural hospital closures have accelerated in recent years, with over 140 rural hospitals closing since 2010, and that cost-based reimbursement provides a targeted, evidence-based mechanism to test whether these facilities can remain viable without a broader overhaul of Medicare payment policy.
Opponents argue
Opponents argue that cost-based reimbursement removes the financial incentive for hospitals to operate efficiently, potentially rewarding higher spending rather than better outcomes or value. They contend that after years of demonstration, the program has not produced clear evidence that cost-based reimbursement is superior to alternative rural payment models — such as expanding critical access hospital eligibility — and that continued extensions defer a permanent policy decision while adding ongoing costs to Medicare.