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The Medicare Rural Hospital Flexibility (Flex) Program was established by the Balanced Budget Act (BBA) of 1997 and, at that time, any state with rural hospitals could establish a Flex Program and apply for federal funding. The Flex Program also created critical access hospitals (CAHs). CAH designation allows the hospital to be reimbursed on a ‘reasonable cost basis’ for inpatient and outpatient services including lab and qualifying ambulance services that are provided to Medicare patients and, in some states, Medicaid patients.

Flex funding encourages the development of cooperative systems of care in rural areas, joining together CAHs, providers of EMS services, clinics and health practitioners to increase efficiencies and quality of care. The Flex Program requires states to assess statewide needs and funds their efforts to implement community-level outreach and technical assistance to advance the following goals:

• Improve the quality of care provided by CAHs
• Improve the financial and operational outcomes of CAHs
• Understand the community health and EMS needs of CAHs
• Enhance the health of rural communities through population health improvement initiatives
• Improve identification and management of time critical diagnoses and support EMS capacity and performance improvement in rural communities
• Support the financial and operational transition to value based models of health care payment


The Medicare Beneficiary Quality Improvement Project (MBQIP) is a quality improvement activity under the Federal Office of Rural Health Policy’s (FORHP) Medicare Rural Hospital Flexibility (Flex) grant program. Launched in 2011, the goal of MBQIP is to improve the quality of care provided in critical access hospitals (CAHs) by increasing quality data reporting by CAHs and then driving quality improvement activities based on the data. MBQIP provides an opportunity for individual hospitals to look at their data, compare their results against other CAHs, and partner with other hospitals around quality improvement initiatives to improve outcomes and provide the highest quality care to every patient.

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