U.S. Rep. Jill Tokuda has introduced a bipartisan bill aimed at fixing a rural hospital rescue program that has barely been used since Congress created it back in 2020. Of more than 1,500 hospitals nationwide eligible to convert to Rural Emergency Hospital status, only about 40 have actually done so, according to Tokuda's office. The new measure, dubbed REH 2.0, seeks to remove the financial trade-offs that have kept most struggling rural facilities from signing on.
The Rural Emergency Hospital Designation Improvement Act was introduced with bipartisan co-sponsors including Reps. Jack Bergman, Tracey Mann, Carol Miller, Sharice Davids, and Don Davis, according to Maui Now. A Senate companion version was introduced on July 31 by Sens. Jerry Moran and Tina Smith, according to the Office of Senator Jerry Moran, showing momentum for the reform effort in both chambers before the House bill even appeared.
“Too many rural hospitals are on the brink of closure,” Tokuda said, per Maui Now's report. She added that rural hospitals in Hawaiʻi face higher costs of delivering care than many mainland facilities, a point underscored by the state's geography. Hawaiʻi maintains nine designated Critical Access Hospitals, including island-isolated facilities such as Molokai General Hospital, Lanai Community Hospital, Kula Hospital, and Kohala Hospital, according to the Hawaii State Department of Health, meaning transporting patients off-island during emergencies can drive delivery costs far higher than in typical mainland rural communities.
Why So Few Hospitals Signed Up
Congress created the Rural Emergency Hospital category under Section 125 of the Consolidated Appropriations Act, 2021, with the program officially taking effect on January 1, 2023, according to the Centers for Medicare & Medicaid Services. The designation offers a monthly facility payment — $295,051.54 under calendar year 2026 Medicare rules, or more than $3.54 million annually — plus a 5% reimbursement premium above standard outpatient rates, according to Azalea Health.
But the trade-offs proved steep. Hospitals cited costly facility requirements, restrictive eligibility rules, and loss of inpatient and other essential services as barriers, per Maui Now's report. Converting also strips a facility of eligibility for the federal 340B Drug Pricing Program, which safety-net hospitals rely on for discounted outpatient prescription drugs, according to the Oklahoma State University Center for Health Sciences. The current designation also requires hospitals to transition away from traditional inpatient care altogether.
What REH 2.0 Would Change
The new bill allows Rural Emergency Hospitals to maintain distinct inpatient psychiatric, obstetric, and rehabilitation units — service lines many facilities previously had to shed to qualify for the designation. It also provides dedicated funding for laboratory services and increases Medicare payments for lab services by 5%, per the bill's text as described by Maui Now. Additionally, REH 2.0 expands access to swing beds and skilled nursing care and clarifies both state Medicaid payment flexibilities and Medicaid payment for REH services.
The bill would also let hospitals that closed or downsized between 2015 and 2020 apply for REH status, effectively reopening a door for facilities that shut down before the program existed. It authorizes the U.S. Department of Health and Human Services to establish a related waiver program, according to Alabama Daily News. Certain Rural Emergency Hospitals would also be allowed to return to Critical Access Hospital status, and federal health officials may approve similar rural facilities under the expanded framework.
Backing From Rural Health Advocates
The National Rural Health Association has voiced support for the bill's introduction. Alan Morgan, the organization's chief executive officer, said REH designations preserve access to care by allowing financially strained rural facilities to convert their licenses rather than shut their doors entirely.
The stakes behind the legislation are significant. A 2025 financial stability analysis by the Chartis Center for Rural Health identified 432 rural hospitals across the U.S. as vulnerable to closure, with more than 40% of all rural medical facilities operating on negative margins, according to the Rural Health Information Hub. Separately, data from the University of North Carolina's Sheps Center for Health Services Research indicates that 152 rural hospitals nationwide completely shut down or ceased offering inpatient medical care between January 2010 and late 2025, the same source reports.
Hawaiʻi's rural hospital challenges are not new to Tokuda's legislative agenda. She has previously pushed measures such as the Tariff Free Farming Act aimed at rural cost pressures, part of a broader platform that has also included gas relief and Social Security priorities. Elsewhere, the operational reality of the current REH framework played out earlier this year when Nevada's Boulder City Hospital ended all acute inpatient care and cut 71 jobs while converting to Rural Emergency Hospital status, as Hoodline previously reported in its piece on the rural ER shakeup. Supporters of REH 2.0 argue that expanding the designation's flexibility could prevent similar bed and job cuts at other struggling facilities going forward.
.jpg){kind=link}