A program initiated by the federal government to help struggling rural hospitals has not been widely used in Alabama. The Critical Access Hospital program, well-entrenched in other states, doesn't seem a good fit for most of Alabama's rural healthcare facilities. In 1997 the Medicare Rural Hospital Flexibility Program introduced a program offering rural hospitals an opportunity to be designated as Critical Access Hospitals. The program's goal was to boost rural acute care hospitals by increasing Medicare reimbursement to cost plus one percent for facilities that qualified. Hospitals qualified for the program by meeting size, services, length of stay and proximity specifications. However, the program has not been as advantageous to hospitals in Alabama as in surrounding states. "It's all in the demographics," said Jane Knight, vice president of member relations for the Alabama Hospital Association. She said the program's specifications have not suited Alabama's hospitals as well as those of other states. "At first, we thought there might be five or ten hospitals that would participate," Knight said. "But the bed count and length of stay are limiting factors." Among the list of requirements, Critical Access hospitals must offer 24-hour emergency rooms, include 25 beds or less (with added allowances for rehab or psychiatric beds) and average no more than 96 hour length of stays. These hospitals must also be at least 35 miles from another healthcare facility of any size. Governors could waive the proximity requirement until January 1, 2006. However, the 35-mile rule is now firmly in place. Critical Access hospitals have flourished in sparsely populated sections of the country, including western states and even in neighboring southern states. The U.S. Department of Health and Human Services' Rural Assistance Center counted 1,165 certified Critical Access Hospitals nationwide as of October 2005. However, only four hospitals in Alabama have chosen to participate in the program. These facilities represent the far corners of the state: Washington County Hospital in Chatom, Red Bay Hospital in Franklin County, Atmore Community Hospital in Escambia County and the newest to the program, Randolph Medical Center in Roanoke. There are no Critical Access hospitals in the Birmingham area, due in part to population densities that boost both bed count and proximity to other facilities, Knight said. "It's a great program," Knight said, "but basically, it didn't fit our niche." She said each hospital must determine whether they have a sufficiently high Medicare population to justify the program's limitations. Although considered a good way to stabilize rural hospitals, Critical Access is not a one-size-fits-all panacea. Some hospitals do enough surgery to bump them over the 96-hour average stay limit. Others do not have a sufficient Medicare population to ensure significant reimbursement. When hospitals do meet the designated criteria, the positive results can be significant. Douglas Tanner is administrator and chief executive officer for Washington County Hospital, the first Alabama facility to qualify for Critical Access reimbursement. He said the fixed costs associated with running a small rural hospital make it difficult for facilities such as Washington County to thrive when Medicare reimbursement is based on diagnoses rather than actual expenses. Patients requiring more expensive care, such as heart surgery, are transferred to larger facilities. Smaller hospitals are left with patients generating lower reimbursement fees. However, the number of Medicare patients at Washington County insures that hospital expenses will be reimbursed at least 60% in the Critical Access program. That means the hospital can more confidently invest in new diagnostic tools and contracted staff to better its level of care. Tanner gave two examples. The first was in Washington County's emergency room. Formerly the hospital hired medical residents from Mobile's University of South Alabama College of Medicine to staff the ER after hours. The arrangement was not perfect; limitations on both residents'working hours and their experience concerned hospital officials. However, that concern was alleviated with the Critical Access program. Since about 75% of the ER's patients are Medicare patients, the hospital can now afford to hire a contracted ER group providing a board certified physician on a 24-hour basis. The additional fee, Tanner said, would have been cost-prohibitive under the previous reimbursement system. However, since 75% of that cost is covered by the 101% reimbursement, the additional cost is affordable. "We're not acquiring expenses unnecessarily, but Critical Access gives you the vehicle to take the fear away of investing in additional technologies or services if you know you're going to get reimbursed for that," said Tanner. The hospital has also added a CT scanner because of the program, knowing they would be credited for a portion of the cost. "It's been incredible as to how often it has been used," said Tanner. "It's a huge diagnostic tool. I don't know how we lived without it." There are complications with Critical Access reimbursement. Cost reports are done retrospectively, with costs declining as volume increases. When costs are settled up at the end of the year, "it can sting you a little bit," said Tanner, if the cost per unit has gone down due to increased use or declining Medicare numbers. While Tanner said Critical Access is not for everyone and may not fit a large number of Alabama hospitals, "It has been very advantageous for us. It causes us to look at costs from a different perspective."