SB 502, the Rural Hospital Closure Relief Act of 2025, would restore and expand state authority to help certain rural hospitals qualify as Medicare critical access hospitals by waiving the 35-mile distance rule. The bill creates a new pathway for a limited number of financially distressed rural hospitals to be certified by their states as “necessary providers” if they meet specified criteria, including being a sole community hospital, Medicare-dependent small rural hospital, low-volume hospital, or other qualifying subsection (d) hospital located in a rural area or rural census tract. Eligible hospitals must also serve high-need communities, such as counties with above-average poverty, health professional shortage areas, or areas with above-average Medicare inpatient use, and must attest to recent operating losses and a plan for financial stability and expanded or new services.
The bill also places limits and conditions on this new designation authority. No more than 120 hospitals nationwide, and no more than five in any one state, could be certified under the new state-waiver pathway. The Secretary of Health and Human Services would have to allocate designations across states using an initial and proportional process, issue implementing regulations within one year, and may revoke certification if hospitals fail to submit required reports or notices. The bill further requires a GAO study on the effects of the new designations and a MedPAC study on broader rural hospital payment systems, with reports due to Congress in six and eight years, respectively.
In terms of state law and federal program impact, the bill would amend Section 1820 of the Social Security Act and change how critical access hospital designations work under Medicare. It would not alter the existing distance-based or other traditional eligibility criteria, but it would add a new state-certified exception for certain rural hospitals facing financial distress. The measure also creates a future transition framework: nine years after enactment, facilities designated under this new authority would need a pathway to move to another payment model, such as a MedPAC-recommended rural payment system, their prior prospective payment model, or rural emergency hospital payment.
The general sentiment reflected by the bill’s sponsorship and structure is supportive of rural hospitals and access to care. The bill is framed as relief for hospitals at risk of closure, with an emphasis on preserving local services in underserved areas and encouraging expanded service lines such as obstetrics or behavioral health. The bipartisan sponsorship by Senators Durbin, Lankford, and Smith suggests cross-party interest in rural health access and hospital stability.
The main points of contention are likely to center on Medicare spending, the size and fairness of the new exemption, and whether the bill could weaken the traditional 35-mile rule. The bill anticipates these concerns by capping the number of eligible hospitals, requiring financial distress and community-need showings, mandating reporting, and directing GAO and MedPAC to study costs and access effects. No committee debate or votes were provided, so there is no recorded opposition in the supplied materials, but the statutory limits and oversight provisions indicate an effort to balance access goals against fiscal and program-integrity concerns.
The bill would amend Section 1820 of the Social Security Act to create a new, temporary state-certified pathway for certain rural hospitals to be designated as Medicare critical access hospitals even if they do not meet the existing 35-mile rule. It would affect Medicare reimbursement and hospital classification for a limited number of rural facilities, while preserving the current distance-based and other existing eligibility criteria for all other hospitals. It also requires HHS rulemaking, imposes reporting and compliance obligations on newly designated facilities, and establishes GAO and MedPAC review requirements that could influence future Medicare rural hospital payment policy.
The bill appears broadly favorable toward rural hospitals and rural access to care, with bipartisan sponsorship indicating support across party lines. Its purpose is framed as preventing rural hospital closures and preserving essential services in underserved communities. The absence of recorded committee debate or votes means no formal opposition is documented in the provided materials, but the bill’s built-in caps, oversight, and sunset provisions suggest awareness of likely concerns about cost and program expansion.
The likely areas of contention are whether restoring state waiver authority is the right way to support rural hospitals, how many facilities should be allowed to qualify, and whether the policy could increase Medicare expenditures or create uneven treatment among hospitals. Critics may question the relaxation of the 35-mile rule and the potential for broader use of critical access hospital status, while supporters are likely to emphasize financial distress, rural poverty, workforce shortages, and access gaps. The bill addresses these concerns through strict eligibility criteria, a national cap of 120 facilities, a per-state cap of five, reporting requirements, and a sunset/transition mechanism.