Federal Flex Program

Sparked by a large number of rural hospital closures in the 1980s and 1990s, Congress, through the Balanced Budget Act of 1997, established the Medicare Rural Hospital Flexibility (Flex) Program, which was designed to help strengthen the financial sustainability of rural hospitals and preserve access to basic hospital services (including emergency departments) in rural communities. The program was modeled after the Medical Assistance Facility Demonstration Project, which operated in Montana’s frontier communities beginning in the 1980s, and the Rural Primary Care Hospital Project.

Since the late 1990s, the Flex Program — which has been amended by the Balanced Budget Refinement Act; the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act; the Medicare Prescription Drug, Improvement and Modernization Act; and the Patient Protection and Affordable Care Act — has:

  • Created the critical access hospital (CAH) designation, which allows hospitals that meet Medicare conditions of participation, and certification and survey requirements to be reimbursed on a reasonable cost basis for inpatient and outpatient services (including lab and qualifying ambulance services) provided to Medicare patients. (In some states, the same level of reimbursement is also provided to CAHs treating Medicaid patients.)
  • Created the Flex Grant Program, which awards funds to states to support CAHs through training and technical assistance to build capacity, encourage innovation, and promote sustainable improvements in the rural health care system. (In most states, these funds are awarded to State Offices of Rural Health and the activities they support focus on five key program areas: quality improvement, operational and financial improvement, population health improvement, rural emergency medical services improvement, and rural innovative model development.) Only states with CAHs (or hospitals eligible to convert to CAH status) and a state rural health plan can participate in the Flex Grant Program.
  • Established the Medicare Beneficiary Quality Improvement Project (MBQIP), which seeks to improve the quality of care that CAHs provide by increasing quality data reporting and driving quality improvement activities based on the data.

The overall goal of the Flex Program, which is funded by the Health Resources and Services Administration’s Federal Office of Rural Health Policy (FORHP), is to ensure that high quality health care — preventative, ambulatory, pre-hospital, emergent, and inpatient care — is available in rural communities and aligned with community needs.

Program Technical Assistance

The National Rural Health Resource Center’s Technical Assistance and Services Center, supported by a FORHP cooperative agreement, provides information, tools, and education in the five key Flex Program areas to the 45 state Flex Programs and other rural providers.

Stratis Health, through the FORHP-supported Rural Quality Improvement Technical Assistance cooperative agreement, provides quality improvement-related technical assistance to state Flex Programs, with a particular focus on MBQIP.

Program Evaluation

To evaluate the impact of the Flex Program, FORHP supports the Flex Monitoring Team (FMT), a consortium of three university-based rural health research centers (located at the University of Minnesota, the University of North Carolina at Chapel Hill, and the University of Southern Maine) that conducts research on hospitals to assess quality improvement, financial and operational improvement, and community engagement. The aim of FMT is to improve the accessibility, viability, and quality of health care for rural residents and communities. The consortium makes a range of resources publicly available: a national listing of CAHs; state- and national-level CAH data; as well as reports, policy briefs, and presentations.