What is a Rural Health Clinic?

A Rural Health Clinic (RHC) is a clinic certified to receive heightened Medicare and Medicaid reimbursement. An RHC may be a public or private, for-profit or not-for-profit entity.


RHCs were established by the Rural Health Clinic Service Act of 1977 to address an inadequate supply of physicians serving Medicare beneficiaries in underserved rural areas, and to increase the utilization of nurse practitioners (NP) and physician assistants (PA) in these areas.



In order to qualify, your primary care outpatient clinic must have an Advanced Practitioner (NP, PA, CNM) there during RHC hours. You must be 51% primary care and located in a "rural" area as defined by the American Census Bureau and CMS. This means in a non-urbanized area (population less than 50,000).

Lastly, the clinic must reside in an HPSA or MUA documenting that there currently is a shortage of primary care services.

The following types of shortage area designations qualify:

  • Primary Care geographic HPSA
  • Primary Care Population-based HPSA
  • Medically Underserved Area (MUA)
  • Governor Designated and Secretary certified shortage area

*The shortage designation must be current within the last 4 years.


RHCs receive special Medicare and Medicaid reimbursement rates. Medicare visits are reimbursed based on allowable costs and Medicaid visits are reimbursed under the cost-based method or an alternative Prospective Payment System (PPS). This results in an increase in reimbursement.

RHCs may see improved patient flow through the utilization of NPs, PAs, and CNMs, as well as more efficient clinic operations. RHCs are required to file a cost report annually in order to determine their payment rate and reconcile interim payments.


Provider-Based RHCs vs. Independent RHCs

Provider-Based RHCs are clinics owned and operated as an "integral part" of a hospital, nursing home, or home health agency. Provider-Based RHCs are ideal for practices with high Medicare reimbursement.

Internal Medicine clinics are the most financially viable for Provider-Based RHCs due to the high Medicare rate. RHCs that are Provider-Based to a hospital with less than 50 active beds (e.g. a Critical Access Hospital) are exempt from the per-visit reimbursement cap.

Independent RHCs are predominately stand-alone clinics. They are often owned by physicians, Advanced Practitioners, or hospitals. An Independent RHC’s focus is generally on higher Medicaid reimbursement.

The clinics that are most commonly financially viable have a Medicaid payer mix of 35% or more. Pediatric clinics are usually the most successful due to the high volume of Medicaid patients.

The reimbursement rates will change on a state-by-state basis so be sure to know what your projected Medicaid rate will be for the state your clinic is located in.

Other Benefits

RHCs may receive direct graduate medical education (GME) payment for training residents. The RHC must fund all or most of the training program to be eligible.

However, there also is nursing education debt loan forgiveness for RN, NP, and CNMs working at nonprofit RHCs. Over the course of three years, the Nurse Corps will forgive 85% of the nurses’ education debt with no required match from the employer.

It is a wonderful recruitment and retention program for your devoted and growing nursing staff.

Overall, establishing a Rural Health Clinic can improve access to primary care in underserved areas and can substantially increase financial return for Medicare and Medicaid services.