Medicare VDA for Sole Community and Medicare-Dependent Hospitals
When a Sole Community Hospital (SCH) or Medicare-Dependent Hospital (MDH) has a decline of more than 5% in total discharges from the prior cost reporting period, due to circumstances beyond its control, Medicare may pay a lump sum for the fixed costs it still carries. The request is due within 180 days of the date on the Medicare Administrative Contractor’s (MAC’s) Notice of Amount of Program Reimbursement (NPR). A missed deadline means the payment is lost.
No upfront fee. RRP is paid based on what your hospital is paid.
Send us your hospital’s Medicare provider number. We’ll review your most recent public cost report for Medicare reimbursement opportunities and reply within one business day. We don’t need any patient data.
Key staff left. Discharges fell more than 5%. The qualifying hospitals got paid.
A rural health system lost key physicians
RRP identified the hospitals in the system with qualifying years, prepared a request for each, and every one was paid.
Two bad years, two different causes
Anesthesia, nursing and physician losses, documented year by year. Both years were paid.
“We’ve been very happy with the outcome. We engaged the team for a Medicare Volume Decrease Adjustment (VDA) payment, and the result was strong enough that we extended for another year. They handled every question from our Medicare Administrative Contractor (MAC). At a time when every bit of revenue matters, the $1.6 million in VDA payments we received has made a real difference.”
It doesn’t take a catastrophe
The examples from the Centers for Medicare & Medicaid Services (CMS) sound dramatic: strikes, floods, severe weather. The declines RRP sees are usually more ordinary, and they hit small hospitals hard:
- Physicians leaving or retiring, with no replacement in time
- Losing the physicians or staff a service line depends on
- Nursing and other staffing shortages that limit beds or force transfers
- A cyberattack that disrupts operations
- The COVID-19 public health emergency and the orders that came with it, documented year by year
If your hospital had a decline of more than 5% in total discharges from the prior cost reporting period, due to circumstances beyond its control, it’s worth a call.
What goes into a VDA request
A VDA request isn’t a form. It makes the case that the decline was outside your control and backs every point with evidence: discharge data reconciled to your cost reports, records showing the cause and how your hospital responded, and the fixed and semi-fixed cost support behind the calculation. The MAC decides whether the request qualifies and what is paid.
RRP does the research before asking your staff for anything, so your team’s part can be small. The team interviews the people who were there, reconciles several years of data to your own cost report numbers, and builds the calculation from them, then answers the MAC’s questions through audit and settlement. Over decades of work on Medicare bad debt, disproportionate share hospital (DSH) payments, transfer DRGs, IME/GME and VDA, RRP’s team has worked with every MAC.
Experience shows in the details that can sink a request: a hospital that relocated or changed status, a short cost report period, a designation that needs a MAC ruling, or staffing decisions that need to be explained the right way. One senior contact works with your team throughout.
Your hospital’s part
- The staff who saw what happened give RRP a few focused interviews.
- You supply items you already have, such as board minutes and internal discharge data.
- You review the request and send your comments before anything is filed.
- A hospital official signs the request and the cover letter, and signs a letter authorizing RRP to act for the hospital.
- Once you authorize RRP, the team supports the submission and answers the MAC through the decision.
Where requests fall short
- Calculation errors. The payment depends on specific cost report values, and small errors carry through.
- Treating it as just a narrative. The story has to be backed by evidence tied to your cost report.
- Missing the deadline. The request is due 180 days after the NPR, and a late request means the payment is lost.
- A finance team that’s already stretched. A request squeezed in around month-end close rarely gets the attention it needs.
RRP’s team has handled these questions for decades.
Already filed or denied? Get a second opinion
If another firm filed your request, or a request was denied, RRP will review it at no cost and tell you plainly whether there’s more to pursue. For periods beginning before October 1, 2017, the Lake Region decision opened the older calculation method to challenge (see The calculation, under Rules and sources), so an older denial may be worth a second look if it is still within the time to appeal or already on appeal.
Request a second-opinion review
See how this works in practice in RRP’s VDA case studies.
Walk through the ten questions in RRP’s VDA eligibility checklist before you file. A VDA review is also a good time to check for unclaimed bad debt; see Medicare bad debt recovery.
Questions hospitals ask
Isn’t this the low-volume adjustment we already get?
No. The low-volume hospital adjustment and the VDA are separate payments. If your hospital receives a low-volume adjustment, the VDA calculation accounts for it, so nothing is counted twice (PRM-1 §2810.1.D.2.b).
Our discharge numbers don’t match yours.
That’s common. The VDA uses the discharges on your cost report, which often differ from internal reports. RRP reconciles the two so you can see where the difference comes from before anything is filed.
What does it cost?
Nothing up front. RRP is paid based on what your hospital is paid, and if nothing is paid, you owe nothing. See how fees work.
Can we talk to another hospital you’ve worked with?
Yes. References are available to prospective clients on request.
Rules and sources
The rules and sources behind every request. Open any item for the detail and citations.
Eligibility
The VDA is available to hospitals classified as an SCH under 42 CFR 412.92 or a Medicare-dependent, small rural hospital (MDH) under 42 CFR 412.108; the adjustment itself is set out at 42 CFR 412.92(e) and 42 CFR 412.108(d). Those Code of Federal Regulations (CFR) sections set the rule; CMS guidance is in the Provider Reimbursement Manual, Part 1 (PRM-1), §2810.1; the MDH provision applies the same methodology (§2810.1.H).
1. A decrease of more than 5% in total discharges
Total inpatient discharges in the cost reporting period must be more than 5% lower than in the immediately preceding cost reporting period. If either period is not 12 months long, discharges are converted to a monthly figure and multiplied by 12. Each year is compared only with the year before it: in a sustained decline, a later year qualifies only if it is itself more than 5% below its own prior year (PRM-1 §2810.1.A.2).
2. Circumstances beyond the hospital’s control
The decline must result from an unusual situation or occurrence imposed on the hospital from outside. CMS’s examples include strikes, floods, inability to recruit essential physician staff, unusually prolonged severe weather, and serious, prolonged economic recessions that directly affect admissions. CMS also considers how often the hospital has requested a VDA, whether it relies repeatedly on the same circumstances, and whether it took reasonable steps to mitigate the decline, such as recruiting a replacement physician or cutting costs where possible (PRM-1 §2810.1.A.1).
3. Costs exceed payments
The request must show that total Program inpatient operating cost, excluding pass-through costs, exceeds the total payment for inpatient operating costs (plus the operating portion of any low-volume hospital adjustment). (PRM-1 §2810.1.C.4).
MDH hospitals: see the dated notice at the top of this page about the December 1, 2026 SCH application deadline.
Timeline
| Milestone | Rule |
|---|---|
| Earliest request | With the cost report for the period, or any time after it is filed. A request before the NPR can produce an interim determination, which is not appealable (PRM-1 §2810.1.C and D.1.a). |
| Deadline | No later than 180 days after the date on the MAC’s NPR for that cost report (42 CFR 412.92(e)(2); 412.108(d)(2)). |
| MAC determination | Within 180 days of the date the MAC receives the request and all required information (42 CFR 412.92(e)(3)(ii); 412.108(d)(3)(ii)). |
| Final determination | Issued with the NPR or after it, through a reopening and revised NPR if needed. Only the final determination is appealable (PRM-1 §2810.1.D.1.b). |
| Reconsideration | One request to the MAC, within the reconsideration window (PRM-1 §2810.1.F). After that, appeal under 42 CFR Part 405, Subpart R. |
| Appeal | Under 42 CFR Part 405, Subpart R, before the Provider Reimbursement Review Board (PRRB) (42 CFR 412.92(e)(3)(iii); 412.108(d)(3)(iii); PRM-1 §2810.1.G). |
The calculation
For cost reporting periods beginning on or after October 1, 2017, the payment covers the fixed costs your Medicare inpatient payments didn’t cover. RRP runs the calculation with your own cost report numbers.
Source: PRM-1 §2810.1.C.6.b sets out the method for periods beginning on or after October 1, 2017. For periods beginning before October 1, 2017, the manual’s earlier method (§2810.1.D.2.a) is open to challenge: in Lake Region Healthcare Corp. v. Becerra, 113 F.4th 1002 (D.C. Cir. 2024), the court held that method did not fully compensate one hospital’s fixed costs for 2013, and the PRRB now applies the fixed-cost method to those years (for example, PRRB Decision 2025-D40, remanding a fiscal year 2014 VDA for recalculation), and the CMS Administrator has declined review of such decisions (for example, PRRB Decision 2025-D06, review declined January 8, 2025).
If your hospital has an older VDA on appeal, or a final determination still within the time to appeal, ask RRP to re-run the calculation. A court decision alone is not a basis for reopening a settled year (42 CFR 405.1885(c)(2)).
Documentation the request must include
Per PRM-1 §2810.1.C, the request must include the following, or have it readily available to the MAC:
- General information: signed by a hospital official, with the hospital’s name, address, CMS Certification Number (CCN), and date of SCH (or MDH) classification.
- Discharge data: discharges for the requested period and the immediately preceding period, annualized if either is not 12 months.
- Circumstances: a narrative of the occurrence, its onset date, its end date if applicable, and how it affected discharges.
- Cost data: the requested and preceding periods, showing Program inpatient operating cost exceeds total inpatient operating payment.
- Cost actions: a narrative of what the hospital did to reduce costs or align them with the lower volume.
- Fixed and semi-fixed cost support: the classification behind the fixed cost ratio. (Core staff comparisons by cost center apply to periods beginning before October 1, 2017.)
How RRP’s VDA request works
Each step follows the VDA rules for Sole Community and Medicare-Dependent Hospitals. One senior contact stays with your hospital from the eligibility check to the MAC’s final decision.
- 1Confirm eligibilityA decline of more than 5% in total discharges, due to circumstances beyond the hospital’s control.42 CFR 412.92(e) · 412.108(d)
- 2Build the cost and staffing analysisFixed and semi-fixed costs, core staff and services, tied to your cost report.PRM-1 §2810.1
- 3Prepare the requestEvery cost the rules allow, with the documentation the manual requires.PRM-1 §2810.1.C
- 4Your hospital reviews and signsThe one step that is yours: a hospital official signs the request.
- 5Submit and supportFiled within 180 days of the NPR, and supported through MAC review and the final decision.42 CFR 412.92(e)(3)
Who you’ll work with on VDA
Salim Nice or Laura Kortokrax runs your engagement personally, with RRP’s reimbursement team on the day-to-day work.
Primary sources
- 42 CFR 412.92(e), Sole community hospitals: volume decrease adjustment (eCFR)
- 42 CFR 412.108(d), Medicare-dependent, small rural hospitals: volume decrease adjustment (eCFR)
- CMS Provider Reimbursement Manual, Part 1 (Pub. 15-1), Chapter 28, §2810.1 (Volume Decrease Adjustment)
- CMS MLN MM14415: Low-Volume Hospital Adjustment & MDH Program FY 2026 Extensions
Sources checked October 16, 2026. This page is general information, not legal or reimbursement advice for a specific hospital.
How RRP estimates. RRP keeps Healthcare Cost Report Information System (HCRIS) cost report data for every hospital, every cost report and every version, going back more than two decades. For a VDA, the team steps through the CMS calculation using the actual cost report values that drive the payment.
Did your discharges fall more than 5%?
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