A plan that will mean millions in federal dollars for local healthcare has received a green light from the federal government.

In a letter dated June 27, the Center for Medicare and Medicaid Services granted preliminary approval for the merger of St. Andrews Hospital and Miles Memorial Hospital under St. Andrews’ critical access hospital provider agreement.

The decision would allow both facilities to operate under one hospital license and be reimbursed by Medicare at the higher level afforded to critical access hospitals.

Medicare’s approval is preliminary and LCH still must demonstrate compliance with appropriate regulations.

Under the LCH plan, St. Andrews will seek to relocate to the Miles Memorial Hospital campus and combine with Miles Memorial Hospital. St. Andrews will retain its provider agreement. Miles Memorial Hospital will apply to Medicare to combine with St. Andrews and will relinquish its provider agreement.

In April, when LCH first proposed merging the two hospitals under St. Andrews’ critical access agreement, CEO Jim Donovan said the plan could provide $3.5 to $6 million in additional federal dollars across the LCH system annually.

Critical access hospitals are remotely located hospitals with fewer than 25 beds that receive 101 percent reimbursement from Medicare. Although St. Andrews Hospital is closer to the nearest hospital than the critical access standard, it was one of several hospitals specially designated by state governor nomination in 1999.

Earlier this month, Donovan said this proposal will have no effect on LCH’s plan to convert St. Andrews’ 24 hour emergency room to an urgent care center.