A Rural Emergency Hospital (REH) is a relatively new type of Medicare-certified facility that provides 24/7 emergency care and outpatient services in rural areas but does not admit patients for overnight hospital stays. Created by the Consolidated Appropriations Act of 2021 and operational since January 2023, the REH designation gives struggling rural hospitals a way to keep their doors open by converting to a leaner model focused on emergency and outpatient care, backed by significant federal funding.
Why the REH Designation Exists
Rural hospitals across the United States have been closing at an alarming rate for over a decade. Many of these facilities serve as the only source of emergency care for communities where the nearest alternative may be 30 miles or more away. The core problem: small rural hospitals often can’t fill enough inpatient beds to cover the cost of maintaining a full hospital license. They lose money year after year until they shut down entirely, leaving their communities with nothing.
The REH program, overseen by the Centers for Medicare and Medicaid Services (CMS), offers a middle path. Instead of requiring these facilities to meet the full definition of a hospital, it lets them drop inpatient services and focus on what rural communities need most urgently: a functioning emergency department and basic outpatient care. In exchange, they receive a new payment structure designed to keep them financially viable.
Who Can Convert to an REH
Not every hospital qualifies. To be eligible, a facility must have been either a Critical Access Hospital (CAH) or a rural hospital with 50 or fewer beds as of December 27, 2020. Hospitals that closed after that date are also eligible to reopen under the REH designation. The facility must be located in a rural area or carry a rural classification.
What Services REHs Provide
An REH provides three core categories of care. First, emergency department services, available around the clock. Second, observation care for patients who need monitoring but not a full hospital admission. Third, additional outpatient medical services that the facility chooses to offer, such as lab work, imaging, or minor procedures. The key limitation: the average patient stay across all these outpatient services cannot exceed 24 hours.
REHs are prohibited from providing inpatient services, with one exception. A facility can operate a distinct section licensed as a skilled nursing facility, offering post-hospital extended care for patients who need it after being discharged from another hospital. This carve-out recognizes that many rural communities also lack nursing facility beds, and losing them during conversion would compound the access problem.
Because REHs operate emergency departments, they must comply with the Emergency Medical Treatment and Labor Act (EMTALA). This means they are legally required to provide a medical screening exam to anyone who comes to the emergency department requesting one, and they cannot refuse to stabilize anyone experiencing an emergency medical condition, regardless of the patient’s ability to pay.
Staffing Requirements
The emergency department must be staffed 24 hours a day, 7 days a week by at least one person competent in emergency medical care who can receive patients and activate additional medical resources as needed. A registered nurse, clinical nurse specialist, or licensed practical nurse must be on duty whenever any patient is receiving emergency or observation care. Organized nursing services must be available around the clock.
A physician (doctor of medicine or osteopathy) does not need to be physically present at all times, but must be on-site for “sufficient periods” to provide medical direction, consultation, and supervision. When not present, the physician must be reachable by phone, radio, or electronic communication for consultations, emergencies, or patient referrals. This flexibility reflects the reality of physician shortages in rural areas, where requiring a doctor on-site 24/7 would make the model unworkable for many communities.
Transfer Agreements
Since REHs cannot admit patients who need inpatient-level care, getting those patients to the right facility quickly is essential. Every REH must have a formal transfer agreement in place with a Level I or Level II trauma center. In practice, this means the REH stabilizes a patient in the emergency department and then arranges transport to a larger hospital for surgery, intensive care, or other services that require admission.
This makes local ambulance and transport services a critical piece of the equation. Health policy experts have flagged that communities considering the REH model should assess whether their emergency medical services, including both ambulance and non-emergent medical transportation, are adequate to support a steady flow of patient transfers. Some communities may need to strengthen those services before or alongside conversion. The transfer agreements themselves should cover not just emergencies but also non-emergent transfers and telehealth coordination with regional health systems.
How REHs Are Paid
The financial model is what makes the REH designation viable for facilities that were bleeding money as traditional hospitals. REHs receive two streams of Medicare payment. The first is reimbursement for their emergency and outpatient services under the Outpatient Prospective Payment System, with an enhanced rate compared to what standard outpatient departments receive.
The second, and more significant, stream is a monthly facility payment from Medicare. For 2024, that payment was set at approximately $272,000 per month (after sequestration adjustments), totaling roughly $3.3 million per year. This amount increases annually based on the hospital market basket percentage, which tracks inflation in hospital operating costs. The monthly payment is designed to cover the fixed costs of keeping an emergency department open and staffed in a community that may not generate enough patient volume to support itself through service fees alone.
What This Means if You Live Near One
If your local hospital converts to an REH, you’ll still have access to emergency care, imaging, lab services, and other outpatient treatments. What you won’t have is the ability to be admitted overnight for conditions that require extended monitoring, surgery, or intensive care. For those situations, you’ll be stabilized locally and transferred to a larger hospital.
For many rural residents, this is a significant trade-off but a better alternative than a full hospital closure. A community that loses its hospital entirely often loses not just emergency services but also the physicians, nurses, and allied health professionals who practiced there. An REH keeps the facility operating, maintains a local health care workforce, and preserves the emergency safety net that can mean the difference between life and death for heart attacks, strokes, serious injuries, and other time-sensitive conditions.
The model is still relatively new, and adoption has been gradual. Converting from a full hospital to an REH involves navigating state licensing requirements, renegotiating payer contracts, and managing the community impact of eliminating inpatient beds. For facilities already on the brink of closure, though, the REH designation offers a structured path to stay open rather than shut down completely.