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Faced with rural hospital closings, the Balanced Budget Act of 1997 set up criteria to establish critical access hospitals (CAHs) and alternative payment mechanisms for these facilities. The designation was intended for hospitals in areas where there was not another hospital within 35 miles. Until 2006, states had the ability to designate hospitals as necessary provider CAHs even if the 35-mile standard were not fulfilled. CAHs receive cost-based payments rather than prospective payments provided that they have no more than 25 beds and their annual average length of stay does not exceed 4 days. Currently there are more than 1300 CAHs.
Bigby J. Examine Critical Access Hospital Payment Policies Within the Context of Integrated Systems. JAMA Intern Med. 2014;174(1):144-145. doi:10.1001/jamainternmed.2013.11469