HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 309 Rural Emergency Hospitals
SPONSOR(S): Select Committee on Health Innovation, Shoaf
TIED BILLS: IDEN./SIM. BILLS:
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Select Committee on Health Innovation 11 Y, 0 N, As CS Lloyd Calamas
2) Health & Human Services Committee 18 Y, 0 N Lloyd Calamas
SUMMARY ANALYSIS
Rural hospital closures result in patients having to travel farther for medical care, which delays or reduces their
health care access. Since 2020, five rural hospitals in Florida have closed. In response to rural hospital
closures, in 2020, Congress created a special Rural Emergency Hospital (REH) licensure provision in
Medicare. Once designated as an REH, the facility qualifies for a supplemental monthly payment which is re-
calibrated every year based on hospital market basket pricing, as well as a five percent increase over Medicaid
rates for outpatient services compared to rates for a general, acute care hospital.
Hospitals, including rural hospitals, are licensed by the Agency for Health Care Administration (AHCA)under
Ch. 395, F.S. Current law does not recognize rural emergency hospitals as a licensure category. In addition,
under Ch. 395, licensed hospitals must provide inpatient and other non-emergency services; not just
emergency services.
CS/HB 309 changes Florida licensure requirements to allow rural hospitals complying with federal REH
requirements to be designated as REH hospitals by AHCA. The bill exempts licensed REHs from those
requirements applicable to all licensed hospitals but contrary to federal REH standards.
The bill has indeterminate, insignificant negative impact on the state Medicaid program and no fiscal impact on
local government.
The bill provides an effective date of July 1, 2024.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Rural Hospitals
More than 60 million Americans live in what is defined as “rural America”. 1 As a population, rural
residents tend to be sicker and older, therefore needing more health care services. However, access to
these services in a rural area can be difficult and often require travel of greater than 20 miles. Since
2020, at least 120 rural hospitals have closed, with the worst year occurring in 2019, when there were
19 rural hospital closures nationwide.2 Many other hospitals nationally, and some in Florida, are
considered “vulnerable” to closure. In Florida, one report identified 10 vulnerable hospitals; and of
those, five were considered the “most vulnerable” 3 and the other five were designated as “at risk”. 4
Hospital Licensure
Chapter 395, F.S. and Part II of Chapter 408, F.S., govern licensure of hospitals in Florida, including
tasking the Agency for Health Care Administration (AHCA) to provide administrative oversight. Under s.
395.002, F.S., a “hospital” is any establishment that:
(a) Offers services more intensive than those required for room, board, personal services, and
general nursing care, and offers facilities and beds for use beyond 24 hours by individuals
requiring diagnosis, treatment, or care for illness, injury, deformity, infirmity, abnormality,
disease, or pregnancy; and
(b) Regularly makes available at least clinical laboratory services, diagnostic X-ray services,
and treatment facilities for surgery or obstetrical care, or other definitive medical treatment of
similar extent, except that a critical access hospital, as defined in s. 408.07, shall not be
required to make available treatment facilities for surgery, obstetrical care, or similar services as
long as it maintains its critical access hospital designation and shall be required to make such
facilities available only if it ceases to be designated as a critical access hospital.5
An applicant for a hospital license may apply online or through a hardcopy application, whether seeking
initial licensure or renewal or re-activation of a license. However, before AHCA will accept an
1 United States Government Accountability Office, Why Health Care is Harder to Access in Rural America, available at: Why Health
Care Is Harder to Access in Rural America | U.S. GAO (May 16, 2023 Blog) (last visited January 30, 2024).The definition of “rural”
varies based on its purpose and which federal or state agency is using the word as a measurement. For hospitals, rural is def ined by
the Health Resources and Services Administration and means a non-metropolitan county; or a census tract that is a Rural Urban
Community Code (RUCA) of 4 or greater; or a census tract in a metropolitan county that is (a) at least 400 square miles, (b) has a
population density of 35 or fewer persons per square mile, and (c) has a RUCA code of 2 or 3; or an outlying county in a metropolitan
area that does not have an urbanized area. This last criterion was added in 2022, causing several dozen hospitals to be recla ssified as
rural instead of urban.
2 The Chartis Center for Rural Health, The Rural Health Safety Net Under Pressure, available at https://www.chartis.com/insights/rural-
health-safety-net-under-pressure-rural-hospital-vulnerability last visited January 30, 2024).
3 Id. The report defined the “most vulnerable” group as those hospitals whose median percentage change in total revenue was -1.4
percent, the median occupancy rate was 20,7, the median capital efficiency was -6.3, the percentage of outpatient revenue was 75.9
percent, and the median operating margin was -8.6 percent.
4 Id. The report defined the “at risk” group as those hospitals h ave a lower likelihood of closure compared to the most vulnerable group.
This group had a median change in total revenue of 1.7 percent, median occupancy 26.9 percent, the median capital efficiency was -
1.1 percent, the median percentage of outpatient revenue is 77.6, and the median operating margin was -2.6 percent.
5 Exceptions include any institution conducted by or for the adherents of any well -recognized church or religious denomination that
depends exclusively upon prayer or spiritual means to heal, care for, or treat any person. Additionally, for purposes of local zoning
matters, the term “hospital” includes a medical office building located on the same premises as a hospital facility, provided the land on
which the medical office building is constructed is zoned for use as a hospital; provided the premises were zoned for hospital purposes
on January 1, 1992.
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application for initial licensure, an applicant must either have a current project order under review by
AHCA’s Office of Plans and Construction (OPC) for a new facility. 6
The OPC reviews the plans to ensure compliance with ch. 395, F.S., including standards for the
delivery of the minimum-level of required services and a physical review for the capacity, security and
sufficiency of the building itself.7 In addition to providing this evidence, the applicant organization must
also submit financial information. The financial component includes detailed information about
management of cash flow, staffing levels and salary costs, anticipated billing hours and billing charges
for professional health care services, and expected budgets by department. 8
.
An applicant must identify the hospital’s classification from one of four categories:
Class I is a general hospital category which includes general acute care, long term care, rural
hospitals, and a subcategory of rural hospitals, critical access hospitals.
Class II Hospitals are the Specialty Hospitals for Children and the Specialty Hospitals for
Women.
Class III Specialty Hospitals include the specialty medical, rehabilitation, psychiatric, and
substance abuse hospitals.
Class IV Specialty Hospitals are intensive residential treatment facilities for children and
adolescents.9
All Class I hospitals are considered general acute care hospitals, and as licensed hospital facilities, are
required to have at least:
Inpatient beds.
A governing authority legally responsible for the conduct of the hospital.
A chief executive officer or other similarly titled official to whom the governing authority
delegates full-time authority for the operation of the hospital in accordance with the policy of the
governing authority.
An organized medical staff which maintains proper standards of care.
Maintenance of a complete and accurate medical record for each admitted patient.
A policy requirement that patients be admitted under the authority and care of a member of the
organized medical staff;
Facilities and staff with ability to provide patients with food that meets patients’ nutritional needs.
Procedures for provisions of emergency care.
Methods for infection control.
An ongoing organized program to enhance quality of patient care. 10
Class I hospitals are also required to have certain professional staff and services either in the facility or
by contract to meet patient needs, including access to clinical laboratory, diagnostic, operating room,
anesthesia, and pharmaceutical services.11 Hospitals can also seek exemptions from providing
designated services or requirements if they meet certain conditions, such as when a required medical
professional is not available in a region and cannot be contracted for coverage in the emergency room
or hospital staff, or if a hospital seeks an exemption from the requirement for an emergency
department.12
Rural Hospital Licensure
One type of Class I is a rural hospital. A rural hospital is an acute care hospital that has 100 or fewer
beds and an emergency room, and also meets at least one of the following criteria:
6 59A-3.066, F.A.C., Licensure Procedures.
7 Agency for Health Care Administration, Hospital and Outpatient Care Unit, availab le at Hospitals (myflorida.com) (last visited January
29, 2024).
8 Agency for Health Care Administration, Health Care Policy and Oversight – Licensure and Forms, Health Care Policy and Oversight
Application for Licensure Forms (myflorida.com) (last visited January 29, 2024).)
9 59A-3.252, F.A.C., Classification of Hospitals.
10 Id.
11 Id.
12 S. 395.1041, F.S.
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Is the sole provider within a county with a population density of up to 100 persons per square
mile;
Is an acute care hospital, in a county with a population density of up to 100 persons per square
mile, which is at least 30 minutes of travel time, on normally traveled roads under normal traffic
conditions, from any other acute care hospital within the same county;
Is a hospital supported by a tax district or sub-district whose boundaries encompass a
population of up to 100 persons per square mile;
Is a hospital classified as a sole community hospital under 42 C.F.R. s. 412.92, regardless of
the number of licensed beds;
Is a hospital with a service area13 that has a population of up to 100 persons per square mile or
Is a hospital designated as a critical access hospital, as defined in s. 408.07, F.S. 14
However, the current definitions and provisions do not allow a rural hospital to seek an exclusion from
any of the mandatory elements of being a hospital, such as providing inpatient services.15
According to AHCA, there are currently 22 licensed rural hospitals in Florida accounting for 948
licensed beds.16 Of these,10 are critical access hospitals, and an additional 7 have 50 beds or fewer. 17
Closure of Rural Hospitals
Rural hospitals face operational challenges due to low patient volumes, which can make it harder to
meet fixed operating costs and performance standards, and because many of the patients treated in
rural hospitals are older, sicker, and poorer when compared with the national average.18
Between 2017 and 2021, nationally, the total number of rural hospitals declined by 75.19 In 2020 alone,
a record number of 19 U.S. rural hospitals shuttered.20 More than 100 rural hospitals have closed in the
past 10 years, and another 400-600 rural hospitals are deemed “at risk” or vulnerable to closure by
different health care analysts.21 The chart below indicates rural hospital closures in Florida since 2000.
13 The term “service area” means the fewest number of zip codes that account for 75 percent of the hospital’s discharges for the most
recent 5-year period, based on information available from the hospital discharge database in the Florida Center for Health Information
and Transparency at the agency.
14
A “critical access hospital” means a hospital that meets the definition of “critical access hospital” in s. 1861(mm)(1) of the Social
Security Act and that is certified by the Secretary of Health and Human Services as a critical access hospital.
15 Agency for Health Care Administration, 2024 Legislative Bill Analysis – HB 309 (November 7, 2023)(on file with Select Committee on
Health Innovation).
16 Id.
17 Id.
18 Rural Hospital Closures Threaten Access – Solutions to Preserve Care in Local Communities, The American hospital, September
2022, available at https://www.aha.org/system/files/media/file/2022/09/rural-hospital-closures-threaten-accessreport.pdf (last visited
January 30, 2024).
19 American Hospital Association, Fast Facts: U.S. Rural Hospitals Infographic, available at Fast Facts: U.S. Rural Hospitals Infographic
| AHA (last visited January 30, 2024).
20 Id.
21 Center for Healthcare Quality and Reform, Saving Rural Hospitals, available at https://ruralhospitals.chqpr.org/ (last visited January
30, 2024). See also Supra, n. 3.
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Rural Hospital Closures in Florida since 200022
Hospital City Year Closed
Gadsden Community Hospital Quincy 2005
Gulf Pines Hospital Port St Joe 2000
Trinity Community Hospital Jasper 2008
Campbellton Graceville Hospital Graceville 2017
Regional General - Williston Williston 2019
Shands Lake Shore Regional Starke 2019
Lake City Medical Center Suwanee Lake City 2020
North Florida Regional Medical Ctr Starke 2020
In addition to the patient-side issues, rural hospitals also suffer from increased staffing shortages. For
instance, only 10 percent of physicians practice in rural areas, despite 20 percent of the population
residing in those areas.23 The COVID-19 pandemic increased the severity of staffing shortages,
increased costs, and worsened health outcomes. 24
Medicare Rural Emergency Hospitals
To respond to a number of rural hospital closures, Congress created a new Medicare provider type, the
Rural Emergency Hospital (REH), 25 through the federal Consolidated Appropriations Act of 2021
(Act).26 Effective January 1, 2023, REH’s were eligible for enhanced reimbursements through
Medicare.
Recently finalized federal rules further define an REH. An REH is an entity that operates for the
purpose of providing emergency department services, observational care, and other outpatient medical
and health services specified by the Secretary of the Department of Health and Human Services in
which the annual per patient length of stay does not exceed 24 hours. 27 However, the Act and
regulations specify that an REH must provide emergency care and observation services, but they may
not provide inpatient services.28 Only rural hospitals with 50 or fewer beds and critical access hospitals
that were enrolled and certified to participate in Medicare on or before the date of the enactment of the
Act (December 27, 2020), qualify for certification as a REH. 29
To be recognized as an REH, the Act requires the following:
Compliance with applicable Federal laws and regulations related to the health and safety of
patients.
Assurances that personnel are licensed or meet other applicable standards that are required by
state or local laws to provide services within the applicable scope of practice.
Maintenance of a Medicare provider agreement with the Centers for Medicare and Medicaid
Services (CMS) as provided for in 42 CFR s. 485.5 through 42 CFR s. 485.546.
Have an organized medical staff that op