Rural Hospital Payment Programs Are Moving in Congress

Two bipartisan bills working their way through Congress deserve attention from any elder law attorney who has a rural practice or serves rural clients. The bills address different pieces of the rural hospital payment puzzle with different origins. One is a long-running structural fix being extended, while the other is a direct legislative response to recent policy losses. Together, they reflect the same underlying dynamic: rural healthcare infrastructure is financially unstable, and the federal policy environment is simultaneously creating new pressure and attempting to shore up the programs that have historically provided relief.

The first is the Rural Community Hospital Demonstration Reauthorization Act (“RCHDRA”), introduced by Sen. Chuck Grassley (R-IA) and Sen. Michael Bennet (D-CO) with fourteen additional cosponsors.[i] The cosponsors — nine Republicans and five Democrats — include the chairs and ranking members of the Senate Finance Committee. The bill would extend the Rural Community Hospital Demonstration program (“RCHD”), which has provided cost-based Medicare reimbursement to “tweener” rural hospitals. The RCHD serves facilities too large to qualify as Critical Access Hospitals — currently capped at 25 beds[ii] — but too small to sustain themselves on standard Medicare prospective payment rates. It is not the extension itself that is significant; the significance is that this is now the fourth reauthorization of a program designed to address a stubbornly persistent gap in rural health care financing that has resisted a fix for over two decades.

Hospitals participating in the RCHD typically have fewer than 51 beds, provide 24-hour emergency services, and have received substantially more annual financial support through the program than standard rates would have generated.[iii] CMS data covering 2016 through 2021 showed new participants received an average of $1.6 million more per year; continuing participants received $2.7 million more. While the financial benefit generated by the RCHD is well-documented, so too are the program’s limitations. CMS has noted that even with those additional payments from the RCHD, combined margins “still did not reach a breakeven point for all participants”[iv] — meaning the RCHD bridges the gap partially, but these hospitals remain structurally thin. The program is currently set to expire in June 2028, and the reauthorization would tack on another five years.

The second legislative action is the Save Struggling Hospitals Act (“SSHA”), introduced in the Senate by Sen. Mark Warner (D-VA) and Sen. Marsha Blackburn (R-TN), with companion legislation in the House from Rep. David Kustoff (R-TN) and Rep. Terri Sewell (D-AL). That bill would codify a CMS low-wage index policy that increased Medicare reimbursements for hospitals in the bottom 25th percentile of wage indexes — a category that skews heavily rural. The policy was in place from fiscal years 2020 through 2024 before being struck down by the U.S. Court of Appeals for the D.C. Circuit in Bridgeport Hospital v. Becerra, 105 F.4th 445 (D.C. Cir. 2024) (holding that HHS exceeded its statutory authority under 42 U.S.C. § 1395ww by adopting a wage-index redistribution policy that departed from the congressionally prescribed formula). Under the policy, hospitals in the bottom quartile of the Medicare wage index received an upward adjustment to their wage index value, effectively increasing their reimbursement rate for covered inpatient services. The SSHA would restore and make permanent what the court took away.

Both bills are worth watching in the context of Congress’ recent legislative actions. The 2025 One Big Beautiful Bill Act (“OBBBA”) reduced federal Medicaid matching rates, tightened Medicaid eligibility requirements, and imposed restrictions on states’ ability to raise and collect provider taxes. Each of these policy decisions results in financial strain on state programs. OBBBA also authorized a $50 billion Rural Health Transformation Fund (“RHTF”) to fund infrastructure, workforce development, and access initiatives in rural healthcare markets in an attempt to alleviate the resulting financial pressures.[v] While the $50 billion price tag grabbed headlines, analysts have flagged that the funding structure restricts use for construction and renovation by limiting eligible uses of expenditures, workforce costs, and technology investments, expressly excluding most capital construction and facility renovation projects.[vi] This could trigger service cuts in some communities rather than supplement existing service capacity.[vii] Meanwhile, OBBBA’s Medicaid provisions add financial pressure to the state programs that rural hospitals already depend on for patient revenue.

The RCHDRA and the SSHA respond to this financial stress differently, and against different political headwinds. OBBBA’s Medicaid cuts reduce the per-patient revenue rural hospitals receive for a disproportionate share of their patient population. The RCHD reauthorization addresses that indirectly by preserving the Medicare-side cost-based payments that have long partially offset structural underfunding. However, since the RCHD is already in place, its extension is not only tied to the impacts of OBBBA. The RCHDRA’s path forward is relatively clear given committee backing and the program’s two-decade track record, though even uncontroversial extensions can stall in a crowded floor calendar. And to the broader issue of financial stress on rural hospitals increasing, the RCHDRA extends a program already in place and providing its alleviating effect; extending its provisions does not create a new solution, it extends one that has so far not been able to stop the financial bleeding.

The SSHA targets financial pressure tied more directly to OBBBA’s implementation rather than the pre-existing structural framework the RCHD was designed to address. Specifically, the loss of the low-wage index adjustment — struck down by the D.C. Circuit in Bridgeport Hospital and not yet restored — makes rural hospital labor costs structurally harder to recover under Medicare. This in turn compresses margins already thinned by Medicaid reimbursement reductions. Restoring that adjustment is the SSHA’s solution to these compressed margins and difficult-to-recover labor costs. But the bill faces a steeper climb than the RCHDRA as it requires Congress to effectively reverse a court decision and override a policy outcome the D.C. Circuit reached on administrative law grounds, which invites procedural resistance even from members who support the underlying policy goal.

Rural hospitals anchor the care ecosystem that surrounds a long-term care event. These facilities handle hospitalization, skilled nursing referrals, discharge planning, and the clinical picture that drives a family’s first serious conversation about Medicaid. When those medical institutions are financially stressed, access tightens, planning timelines compress, and facility options narrow. In rural markets already running thin on skilled nursing capacity, any further erosion of the hospital base compounds the challenge. Understanding the underlying issue and the pending bills designed to address it is crucial for any elder law practitioner, but especially those with rural clients or practices.

Nearly half of rural hospitals (46%) are currently operating at a loss, according to February data from Chartis, a national healthcare analytics and advisory firm.[viii] 432 are identified as vulnerable to closure — a number that has grown steadily as reimbursement pressures compound and patient volumes in rural markets remain low. The financial profile of these facilities tracks closely with the populations elder law attorneys serve: older, sicker, and more reliant on Medicare and Medicaid than their urban counterparts. That is why rural hospitals are indispensable to long-term care service delivery, and the reason they are disproportionately exposed to the financial pressures both bills hope to address.

When a rural hospital closes or curtails services there are tangible downstream impacts. Skilled nursing placements become harder to arrange, discharge windows compress, and families making time-sensitive Medicaid planning decisions lose access to the clinical infrastructure those decisions depend on. The 432 facilities Chartis identified as vulnerable to closure are not nameless buildings with faceless administrators, doctors, nurses, and patients. They are real facilities serving real people in real rural areas where many elder law attorneys practice.

Both the RCHDRA and the SSHA carry meaningful bipartisan support, including from Senate Finance Committee Chair Sen. Mike Crapo (R-ID) and Ranking Member Sen. Ron Wyden (D-OR). That’s a reasonable signal for eventual passage — though as always, support and floor time are different things. And only time will tell whether the designed fixes have their intended impact.

We’ll keep tracking both.

[i]S. 4460, 119th Cong. (introduced May 1, 2026), https://www.congress.gov/bill/119th-congress/senate-bill/4460/text.

[ii] Critical Access Hospitals are defined under 42 U.S.C. § 1395i-4, as originally established by the Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4201, 111 Stat. 251, 369 (1997), and subsequently amended. Current eligibility criteria, including the 25-bed cap, are set forth in 42 U.S.C. § 1395i-4(c)(2) and implementing regulations at 42 C.F.R. § 485.610.

[iii] Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, § 410A(f)(1), 117 Stat. 2066, 2272–73 (2003) (defining “rural community hospital” as a hospital located in a rural area with fewer than 51 acute care inpatient beds as reported in its most recent cost report, that makes available 24-hour emergency care services, and is not eligible for or designated as a critical access hospital).

[iv] Ctrs. for Medicare & Medicaid Servs. & Ctr. for Medicare & Medicaid Innovation, Evaluation of the Rural Community Hospital Demonstration CCA Extension Final Report (Covering 2016–2021) (Sept. 2025), https://www.cms.gov/priorities/innovation/data-and-reports/2025/rchd-finalrpt-execsumm.

[v] One Big Beautiful Bill Act, Pub. L. No. 119-21, § 71401, 139 Stat. 72, 328 (2025) (codified at 42 U.S.C. § 1397ee(h)).

[vi] See One Big Beautiful Bill Act, Pub. L. No. 119-21, § 71401, 139 Stat. 72, 331 (2025) (codified at 42 U.S.C. § 1397ee(h)(6)) (enumerating eligible uses of RHTF allotments as prevention and chronic disease interventions, provider payments, technology solutions, workforce recruitment and retention, information technology, care delivery system restructuring, substance use and mental health services, and innovative care models — with no provision authorizing use for capital construction or facility renovation).

[vii] Chartis Center for Rural Health, Medicaid Cuts Would Push Rural Hospitals — and Care for Rural Communities — Over the Edge, The Chartis Group (May 2025), at 2,

https://www.chartis.com/insights/medicaid-cuts-rural-hospitals.

[viii] Chartis Center for Rural Health, 2025 Rural Health State of the State: Instability Continues to Threaten Rural Health Safety Net, The Chartis Group (Feb. 11, 2025), at 2, https://www.chartis.com/insights/2025-rural-health-state-of-the-state.