Critical Access Hospital (CAH)

Key facts

Created by

Balanced Budget Act of 1997

Federal standards

42 CFR Part 485, Subpart F

Bed limit

No more than 25 inpatient beds, including swing beds

Length of stay

Annual average of 96 hours or less per acute inpatient

Medicare payment

101 percent of reasonable cost for inpatient and most outpatient services

What is a Critical Access Hospital?

Congress created the Critical Access Hospital designation in the Balanced Budget Act of 1997, as part of the Medicare Rural Hospital Flexibility Program. Fixed prospective payments can fail to cover the costs of low-volume rural hospitals, so Medicare instead reimburses a CAH based on its reasonable costs.

CAHs are often the only hospital in their community. They provide emergency care around the clock, short inpatient stays and outpatient services, and they transfer complex cases to larger hospitals. The Health Resources and Services Administration (HRSA) funds state Flex Programs that support CAH quality improvement and financial operations.

Who qualifies as a Critical Access Hospital

A hospital must be designated by its state and meet federal Conditions of Participation. Core requirements include:

A CAH may also operate distinct-part psychiatric and rehabilitation units of up to 10 beds each, which do not count toward the 25-bed limit.

• Location in a rural area, or in an area treated as rural under Medicare rules.
• More than a 35-mile drive from another hospital or CAH, or a 15-mile drive in mountainous terrain or areas with only secondary roads. Hospitals that states certified as necessary providers before January 1, 2006 keep their status without meeting this test.
• No more than 25 inpatient beds, which can also be used as swing beds for post-acute care.
• An annual average length of stay of 96 hours or less for acute inpatients.
• Emergency services available 24 hours a day, 7 days a week.

Why Critical Access Hospital status matters

CAH status changes how a hospital is paid, measured and supplied:

• Cost-based payment changes the economics of adding services, so CAH finances respond to volume differently than IPPS hospitals.
• CAHs are not subject to the IPPS quality payment programs, so many report few measures on Care Compare and receive no overall star rating.
• CAHs can enroll in the 340B Drug Pricing Program without meeting the disproportionate share threshold that applies to general acute care hospitals.
• Rural health and market access teams use CAH locations to assess access gaps, closures and conversions to Rural Emergency Hospitals, a designation available since 2023.