SB556

SECTION 1. The legislature finds that the federal government has recently authorized the creation of rural emergency hospitals, a new type of medicare provider meant to help address the concerning increase in rural hospital closures nationwide. Rural emergency hospitals provide rural communities with emergency department services, observation care, and tailored outpatient medical and health services, including laboratory and imaging services. By adopting the rural emergency hospital designation, a hospital can focus on these important services while eliminating certain high-cost services that the community is not utilizing, such as inpatient care. This focus allows the hospital to allocate its limited resources to better address needs of the community the hospital serves.

The legislature further finds that the creation of the rural emergency hospital designation may be beneficial to the financial health of certain hospitals and the communities they serve. By adopting a rural emergency hospital designation, a hospital can take advantage of medicare reimbursement policies that allow the hospital to adapt to community needs while sustaining budget requirements. Specifically, rural emergency hospitals receive a fixed monthly payment equal to about $3,200,000 annually. In addition, medicare payments for outpatient services such as diagnostic services are five per cent higher for rural emergency hospitals. Significantly, patients do not pay additional fees or premiums for receiving services at a rural emergency hospital. States can also determine their own ways to support rural emergency hospitals through medicaid and commercial reimbursement policies.

The legislature also finds that although the cessation of inpatient services may seem like a loss for a community, for many rural hospitals, such as Lanai hospital, the volume of inpatient care is extremely low. For example, Lanai is a critical access hospital that averages less than one patient per day in its acute inpatient care beds. This low volume illustrates that people are seeking inpatient care at other locations. Despite this low volume, hospitals that maintain inpatient care services must still pay the increasingly high costs of staffing, equipment, and supplies needed to maintain inpatient care.

Besides inpatient care, Lanai hospital currently provides emergency services along with thousands of days of nursing and skilled nursing care. Importantly, if Lanai hospital becomes a rural emergency hospital, it would be able to surrender its inpatient licensed beds and allow the hospital to expand its availability of long-term care and skilled nursing beds, which are sorely needed by the community. The legislature notes that each rural emergency hospital is responsible for meeting higher‑level patient care needs by having transfer agreements with local trauma centers.

The legislature finds that the federal government designed the rural emergency hospital program for hospitals like Lanai hospital, to allow those hospitals to best meet the healthcare needs of its communities by emphasizing emergency services, long-term care, and skilled nursing.

The legislature also finds that hospitals must first be recognized as an emergency rural hospital at the state level before those hospitals can pursue the new rural emergency health designation with the Centers for Medicare and Medicaid Services. A state can address licensure through the enactment of legislation, which should also ensure that the medicaid policy protections that currently support hospitals and the services the hospitals provide will continue after those facilities attain a rural emergency hospital designation.

Accordingly, the purpose of this Act is to:

(1) Provide a statutory framework for the licensure of rural emergency hospitals at the state level; and

(2) Provide for the continuation of medicaid policy protections for hospitals transitioning to a rural emergency hospital designation.

SECTION 2. Chapter 321, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§321- Rural emergency hospitals; licensing. (a) The department of health shall license a hospital as a rural emergency hospital if the hospital:

(1) Elects to receive the medicare designation as a rural emergency hospital;

(2) Provides emergency treatment and stabilization services for an average length of stay of twenty-four hours or less; and

(3) Meets the requirements of title 42 United States Code section 1395x(kkk)(2).

(b) For purposes of medicaid reimbursement for services provided, any reference in Hawaii law or the Hawaii administrative rules to a critical access hospital, a hospital‑based unit to a critical access hospital, or a sub‑provider to a critical access hospital, shall be interpreted to also reference a rural emergency hospital, a hospital‑based unit to a rural emergency hospital, or a sub‑provider to a rural emergency hospital; provided that the rural emergency hospital was previously designated as a critical access hospital.

(c) No later than one hundred eighty days after the effective date of this section, the department of health shall adopt rules pursuant to chapter 91 necessary to implement this section; provided that the rules shall not conflict with, be more restrictive than, or prevent the application of, regulations promulgated by the United States Secretary of Health and Human Services under title 42 Code of Federal Regulations part 485."

SECTION 3. Section 346-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Rural emergency hospital" means a rural emergency hospital licensed under section 321- that was previously designated as a critical access hospital."

SECTION 4. Section 346D-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Rural emergency hospital" means a rural emergency hospital licensed under section 321- that was previously designated as a critical access hospital."

SECTION 5. Section 346-59, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The department shall adopt rules under chapter 91 concerning payment to providers of medical care. The department shall determine the rates of payment due to all providers of medical care, and pay [~~such~~] those amounts in accordance with the requirements of the appropriations act and the Social Security Act, as amended. Payments to critical access hospitals and rural emergency hospitals for services rendered to medicaid beneficiaries shall be calculated on a cost basis using medicare reasonable cost principles."

SECTION 6. Section 346-59.1, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) For the purposes of this section:

"Distant site" means the location of the health care provider delivering services through telehealth at the time the services are provided.

"Health care provider" means a provider of services, as defined in title 42 United States Code section 1395x(u), a provider of medical and other health services, as defined in title 42 United States Code section 1395x(s), other practitioners licensed by the State and working within their scope of practice, and any other person or organization who furnishes, bills, or is paid for health care in the normal course of business, including but not limited to primary care providers, mental health providers, oral health providers, physicians and osteopathic physicians licensed under chapter 453, advanced practice registered nurses licensed under chapter 457, psychologists licensed under chapter 465, and dentists licensed under chapter 448.

"Interactive telecommunications system" has the same meaning as the term is defined in title 42 Code of Federal Regulations section 410.78(a).

"Originating site" means the location where the patient is located, whether accompanied or not by a health care provider, at the time services are provided by a health care provider through telehealth, including but not limited to a health care provider's office, hospital, critical access hospital, rural emergency hospital, rural health clinic, federally qualified health center, a patient's home, and other nonmedical environments such as school-based health centers, university‑based health centers, or the work location of a patient.

"Telehealth" means the use of telecommunications services, as defined in section 269-1, to encompass four modalities: store and forward technologies, remote monitoring, live consultation, and mobile health; and which shall include but not be limited to real-time video conferencing-based communication, secure interactive and non-interactive web-based communication, and secure asynchronous information exchange, to transmit patient medical information, including diagnostic-quality digital images and laboratory results for medical interpretation and diagnosis, for the purpose of delivering enhanced health care services and information while a patient is at an originating site and the health care provider is at a distant site. Except as provided through an interactive telecommunications system, standard telephone contacts, facsimile transmissions, or e-mail text, in combination or alone, do not constitute telehealth services."

SECTION 7. Section 346D-1.5, Hawaii Revised Statutes, is amended to read as follows:

"§346D-1.5 Medicaid reimbursement equity. Not later than July 1, 2008, there shall be no distinction between hospital‑based and nonhospital-based reimbursement rates for institutionalized long-term care under medicaid. Reimbursement for institutionalized intermediate care facilities and institutionalized skilled nursing facilities shall be based solely on the level of care rather than the location. This section shall not apply to critical access hospitals[.] or rural emergency hospitals."

SECTION 8. Section 671-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) For purposes of this section:

"Distant site" means the location of the health care provider delivering services through telehealth at the time the services are provided.

"Originating site" means the location where the patient is located, whether accompanied or not by a health care provider, at the time services are provided by a health care provider through telehealth, including but not limited to a health care provider's office, hospital, critical access hospital, rural emergency hospital, rural health clinic, federally qualified health center, a patient's home, and other non-medical environments such as school-based health centers, university‑based health centers, or the work location of a patient.

"Telehealth" means the use of telecommunications services, as defined in section 269‑1, to encompass four modalities: store and forward technologies, remote monitoring, live consultation, and mobile health; and which shall include but not be limited to real-time video conferencing-based communication, secure interactive and non‑interactive web-based communication, and secure asynchronous information exchange, to transmit patient medical information, including diagnostic-quality digital images and laboratory results for medical interpretation and diagnosis, for the purpose of delivering enhanced health care services and information while a patient is at an originating site and the health care provider is at a distant site. Standard telephone contacts, facsimile transmissions, or e-mail text, in combination or by itself, does not constitute a telehealth service for the purposes of this section."

SECTION 9. Act 226, Session Laws of Hawaii 2000, is amended by amending section 6 to read as follows:

"SECTION 6. The State's share of matching funds shall be provided through the Hawaii health systems corporation and other designated critical access hospitals' and rural emergency hospitals' appropriations to the extent funding is available. If funding is not available, medicaid reimbursement to critical access hospitals and rural emergency hospitals' shall revert back to the existing medicaid payment methodology."

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect upon its approval; provided that the amendments made to section 346-59.1, Hawaii Revised Statutes, by section 6 of this Act shall not be repealed when that section is reenacted on December 31, 2025, pursuant to section 8 of Act 107, Session Laws of Hawaii 2023.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	556
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII