About the Flex Program

In the 1990s Congress created the Medicare Rural Hospital Flexibility (Flex) Program in response to economic and demographic changes that threatened the availability of health care resources for many rural Americans and put their health status at risk. The Flex Program was designed to improve access and quality and relieve some of the financial pressures on rural hospitals and emergency medical services (EMS).

Medicare Rural Hospital Flexibility Program

The Balanced Budget Act of 1997 (Public Law 105-33) established the Flex Program to help rural communities preserve access to primary and emergency health care service by:

• Establishing and supporting Critical Access Hospitals
• Enhancing emergency medical services
• Improving health care quality and performance
• Promoting rural health networks and community development.

Each state began participating in this program by developing and approving a Rural Health Plan. Minnesota’s initial Rural Health Plan was approved in July 1998 and updated in 2004 and in 2008. Federal funding is available on a competitive basis to support state Flex Programs. The Minnesota Department of Health-Office of Rural Health and Primary Care (ORHPC) has applied for and received federal funds since the implementation of the program. The ORHPC Flex program assists rural communities through grant programs, technical assistance, research, work groups and special initiatives.

Critical Access Hospitals

As the Flex program began, small rural hospitals meeting state and federal criteria were eligible to convert from traditional hospital licensure status to Critical Access Hospital (CAH) licensure status. CAHs receive higher cost-based reimbursement for Medicare services. In Minnesota, they also receive cost-based reimbursement for some Medicaid services. CAHs are also allowed greater flexibility in staffing. In return, CAHs must:

• Make emergency services available 24 hours per day
• Have no more than 25 beds
• Maintain an annual average length of stay of 96 hours or less and
• Participate in networking relationships with other health care providers

Federal regulations required that CAHs needed to be 35 miles or more from the nearest provider, or be designated by the state as a “Necessary Provider;” however, the Medicare Prescription Drug Improvement and Modernization Act of 2003 rescinded the states’ ability to provide a “necessary provider” designation. As of the federal deadline of January 1, 2006, all qualifying hospitals in Minnesota had become CAHs. Minnesota now has 77 Critical Access Hospitals.

The Future Needs and Plans of the Flex Program

With Critical Access Hospital conversion complete, Minnesota´s Flex Program is shifting its focus from the CAH designation process to promoting regionalization, enhancing emergency medical services, establishing and maintaining rural health networks, and ensuring access to quality health services. The Office of Rural Health and Primary Care will accomplish this through:

• Continuation of grant programs
• Expansion of performance and quality improvement initiatives
• Continuation of EMS–related research, workforce development, partnering activities, grants and assistance
• Continuation of technical assistance and providing information and training in areas such as reimbursement, licensing survey assistance and grant writing
• Assistance and leadership in community health development efforts