How Do Critical Access Hospitals Bill Medicare?
A critical access hospital (CAH) bills Medicare Part A inpatient services on type of bill 11X and all outpatient services on 85X, and Medicare pays 101 percent of reasonable cost for the facility, settled on the cost report. The one real choice is how professional fees are billed: the practitioner bills the Medicare contractor directly (the standard method, often called Method I), or the CAH bills for them under the optional Method II.
Written by Salman Saeed, CEO and Co-Founder · Reviewed by a Certified Medical Coder · 
In short: a CAH bills on cost-based bill types, not prospective rates, so the remittance is an interim payment until the cost report settles. Pick the professional-fee method before the cost reporting period starts, then keep inpatient, outpatient, swing-bed and professional lines on the right bills.
Which Bill Type Goes with Which Service?
Match the service to the bill type before anything else, because the payment path follows the bill. The critical access hospital billing rule explains the payment rules, and this table is the claim map for the billing office. Claims go to the A/B MAC on a UB-04 or 837I, except professional claims billed to the MAC (B).
| Service | Bill type | How it is paid | Source |
|---|---|---|---|
| Inpatient CAH stay | 11X | 101 percent of reasonable cost, with Part A deductible and coinsurance | Chapter 3, section 30.1.1 |
| Outpatient visit, including outpatient services before or on the day of admission | 85X, separate from the inpatient bill | 101 percent of reasonable cost for the facility | Chapter 3, section 30.1.1; chapter 4, section 250 |
| Swing-bed SNF-level care | Separate swing-bed bill; Medicare accepts 18X or 21X where a state agreement calls for it | 101 percent of reasonable cost | Chapter 3, section 60 |
| Lab tests for non-patients | 14X | Lab fee schedule | Chapter 4, section 250.6 |
| Professional services, standard method | Practitioner bills the MAC (B) | Fee schedule, as in a hospital outpatient department | Chapter 4, section 250.1 |
| Professional services, Method II | 85X, in revenue code 096X, 097X or 098X with HCPCS | 115 percent of the fee schedule amount, less deductible and coinsurance | Chapter 4, section 250.2 |
Two details save rework. A CAH is exempt from the 1-day and 3-day payment windows, so outpatient services given before admission are not folded into the 11X bill. The 3-day payment window rule covers what other hospitals must bundle. And inpatient payment rests on a physician's certification that the patient can reasonably be expected to be discharged or transferred within 96 hours of admission, completed no later than 1 day before the claim is submitted (42 CFR 424.15).
How Does a CAH Elect Method II?
Elect in writing, before the cost reporting period starts, and then collect a reassignment from each practitioner. The rule is in 42 CFR 413.70(b)(3) and chapter 4, section 250.2, of the Claims Processing Manual.
- Decide before the new cost reporting period. Send a written election to the A/B MAC (A) at least 30 days before the period in which it should take effect.
- Know that the election stays in place. Since cost reporting periods beginning on or after October 1, 2010, an election continues until the CAH terminates it with a written request at least 30 days before the start of the next period.
- Collect a Form CMS-855R from every practitioner who wants to reassign billing rights to the CAH. Under the optional method each practitioner chooses whether to reassign or to bill the MAC (B), and the CAH forwards a copy of each 855R to the MAC (A).
- Keep the attestation. The manual says the practitioner signs an attestation that he or she will not bill the MAC (A) or MAC (B) for services at the CAH once reassigned, and that the attestation stays at the CAH.
- Bill the reassigned practitioner's services on the 85X claim in revenue code 096X, 097X or 098X with the HCPCS code, and stop the practitioner's own claims for those services.
Billing a practitioner's services under Method II before the reassignment is in effect is the usual way to create a recoupment.
What Does the Payment Arithmetic Look Like?
Facility lines are paid on cost, not on a rate you can look up. Under the standard method the manual pays the lesser of 80 percent of 101 percent of reasonable cost or 101 percent of reasonable cost less the Part B deductible and coinsurance. Under Method II, professional lines use the facility-specific fee schedule amount, less deductible and coinsurance, times 1.15, and nurse practitioners, clinical nurse specialists and physician assistants billed with modifier GF are first reduced to 85 percent of the fee schedule amount.
The reasonable cost of the facility services is invented at $200 and the deductible and coinsurance at $60. The professional line has an invented fee schedule amount of $80 and invented coinsurance of $16.
Clinical diagnostic lab tests are different. Chapter 4, section 250.6, says beneficiaries owe no coinsurance, deductible or other cost sharing for clinical diagnostic laboratory services furnished as a CAH outpatient service. Because final payment is based on the cost report (42 CFR 413.70(c)), a remittance is an interim amount, and your A/R should carry it that way.
What Goes Wrong on CAH Claims?
Four mistakes cause most of the rework. Check for them before the month closes.
| Mistake | Why it fails | Fix |
|---|---|---|
| Outpatient services on the inpatient bill | The CAH is exempt from the payment windows, so they belong on 85X | Cancel and rebill the outpatient services on a separate 85X bill |
| Method II professional line before reassignment is effective | The practitioner is not yet reassigned to the CAH | Hold the line until the 855R and attestation are on file, then bill it in 096X to 098X |
| Missing 96-hour certification | Part A pays only with the certification (42 CFR 424.15) | Complete and sign it in the record no later than 1 day before the claim, so check before releasing the 11X |
| Swing-bed days billed without the qualifying stay | 42 CFR 409.30(a)(1) needs 3 consecutive calendar days of inpatient care, not counting the discharge date | Bill the acute stay first with patient status 03 when the patient swings, then the swing-bed bill |
Claim-level appeals follow the Medicare appeal levels: a redetermination must be filed within 120 calendar days from the date the notice is received (42 CFR 405.942).
What Should a CAH Check at Month End?
- Every outpatient claim is on 85X, and none sits on an 11X bill.
- Each Method II professional line has a current 855R and attestation behind it and uses revenue code 096X, 097X or 098X.
- Each 11X claim has a physician certification dated no later than 1 day before submission.
- Interim payments are posted as interim, with the cost report as the settlement point.
- The 25-bed limit and the 96-hour annual average length of stay in 42 CFR 485.620 are tracked, because a CAH that exceeds the average must develop a corrective action plan or risk losing its provider agreement (chapter 3, section 30.1).
How Does Nucleus Align Handle Critical Access Hospital Billing?
Our hospital and facility billing work covers UB-04 claim preparation, revenue-code validation, submission, payment reconciliation and denial management for inpatient, outpatient and emergency care. Small rural hospitals often run a family practice clinic too, so see family medicine billing. Questions on the clinic side are in how to bill provider-based clinics. You can book a call or return to the blog.
- 42 CFR 413.70, Payment for services of a CAH · eCFR
- 42 CFR 424.15, Requirements for inpatient CAH services · eCFR
- 42 CFR Part 485 Subpart F, Conditions of Participation for Critical Access Hospitals · eCFR
- Medicare Claims Processing Manual, Chapter 3, Inpatient Hospital Billing · CMS
- Medicare Claims Processing Manual, Chapter 4, Part B Hospital · CMS
- 42 CFR 405.942, Time frame for filing a request for a redetermination · eCFR
- 42 CFR 409.30, Basic requirements for coverage of SNF services · eCFR
We check every rule, code and deadline against the official source. See our editorial policy.
Common Questions
Straight answers from the team that does the work.
Ask a billing lead directly. A 20-minute call, Monday to Friday, 9am to 5pm Eastern.
01What bill type does a critical access hospital use for outpatient services?
A CAH bills all outpatient services on type of bill 85X, including services approved as ASC services. Tests for non-patients go on 14X and are paid on the laboratory fee schedule. Chapter 4, section 250, of the Claims Processing Manual sets this, and chapter 3 says inpatient services go on 11X.
02How do you elect Method II for a critical access hospital?
Send a written election to the A/B MAC (A) at least 30 days before the start of the cost reporting period in which it should take effect. For periods beginning on or after October 1, 2010, it stays in place until the CAH sends a termination request at least 30 days before the next period begins.
03Does the 3-day payment window apply to a critical access hospital?
No. Chapter 3, section 30.1.1, says a CAH is exempt from the 1-day and 3-day window provisions. Outpatient services given before admission, and on the day of admission, are billed and paid separately on an 85X bill instead of being bundled onto the 11X inpatient bill.
04Do patients owe coinsurance for lab tests at a CAH?
Not for clinical diagnostic lab tests furnished as a CAH outpatient service. Chapter 4, section 250.6, says beneficiaries owe no coinsurance, deductible, copayment or other cost sharing for them. The person must be a CAH outpatient, either receiving services that day or with the specimen collected by a CAH employee.
05How much does Medicare pay a critical access hospital?
Medicare pays 101 percent of the reasonable costs of inpatient and outpatient facility services under 42 CFR 413.70, for cost reporting periods beginning on or after January 1, 2004, with final payment based on the cost report. Professional services are paid separately, at the fee schedule or at 115 percent under Method II.
Talk to a Billing Lead.
A 20-minute call about your payers, volume and setup. Monday to Friday, 9am to 5pm Eastern.