Article
The program
The Rural Community Hospital Demonstration, created in 2003, pays participating rural hospitals with fewer than 51 beds largely on a reasonable cost basis rather than through the inpatient prospective payment system. It is aimed at so-called tweener hospitals: facilities that cannot become critical access hospitals but are too small to do well on standard per-case rates.
All 30 slots are filled, according to CMS, and the program has helped more than 50 rural hospitals keep inpatient care open over its life. CMS filled 10 open slots in May 2025. The most recent performance data showed that new participants improved their Medicare margins and invested more in capital.
The bill
Sens. Chuck Grassley (R-Iowa) and Michael Bennet (D-Colo.) introduced the Rural Community Hospital Demonstration Reauthorization Act on April 30 with 14 cosponsors from both parties, including Mike Crapo, Ron Wyden, Jerry Moran and Lisa Murkowski. The bill would extend the demonstration for five years. Grassley’s office notes that the AHA counts hospitals with 50 or fewer beds among those most vulnerable to closure. Four Iowa hospitals take part today; one, St. Anthony Regional Hospital in Carroll, recently left after converting to critical access status.
What rural leaders should do
- Participants: model inpatient Medicare revenue under standard rates as a downside case and share it with your board and lenders, so the stakes of a lapse are clear.
- Eligible nonparticipants: confirm whether you meet the criteria and be ready to apply if an extension adds or reopens slots.
- Everyone: the demonstration is one of several rural payment options. Compare it with critical access and rural emergency hospital designations as part of a long-range service plan.
- Advocacy: brief your congressional delegation with your own margin data. Specific numbers carry more weight than general warnings.
The bill has broad support on paper, but its timing will depend on the larger health care legislative calendar. Rural hospitals in the program should not assume an extension until it becomes law.
Archive entry for May 14, 2026, added Nov. 11, 2026.