To amend title XVIII of the Social Security Act to extend and improve protections for sole community hospitals under the Medicare Program.

Summary: Sole Community Hospital Preservation Act of 2005 - Amends title XVIII (Medicare) of the Social Security Act with respect to the prospective payment system (PPS) for hospital outpatient department (OPD) services, particularly the transitional adjustment for sole community hospitals to limit any decline in payment. Holds sole community hospitals permanently harmless from any decline in payment. Increases the payment for covered OPD services in a sole community hospital by the amount of any difference between the pre-Balanced Budget Act of 1997 (pre-BBA) amount and a lesser PPS amount.

Directs the Secretary of Health and Human Services to substitute a specified minimum base payment-to-cost ratio for determining the pre-BBA amount for sole community hospitals.

Specifies the rebasing of the payment -to-cost ratio for sole community hospitals for cost reporting periods beginning on or after October 1, 2005.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sole Community Hospital Preservation 
Act of 2005''.

SEC. 2. PERMANENT HOLD HARMLESS FOR SOLE COMMUNITY HOSPITALS UNDER THE 
              PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
              DEPARTMENT SERVICES UNDER THE MEDICARE PROGRAM.

    Section 1833(t)(7)(D) of the Social Security Act (42 U.S.C. 
1395l(t)(7)(D)) is amended by adding at the end the following new 
clause:
                            ``(iii) Permanent hold harmless for sole 
                        community hospitals.--In the case of a sole 
                        community hospital (as defined in section 
                        1886(d)(5)(D)(iii)), for covered OPD services 
                        furnished after December 31, 2005, for which 
                        the PPS amount is less than the pre-BBA amount, 
                        the amount of payment under this subsection 
                        shall be increased by the amount of such 
                        difference.''.

SEC. 3. ESTABLISHMENT OF MINIMUM BASE PAYMENT-TO-COST RATIO FOR 
              DETERMINATION OF PRE-BBA AMOUNT FOR SOLE COMMUNITY 
              HOSPITALS.

    (a) Minimum Base Payment-to-Cost Ratio.--Section 1833(t)(7)(F)(ii) 
of the Social Security Act (42 U.S.C. 1395l(t)(7)(F)(ii)) is amended by 
adding at the end the following new sentence: ``Notwithstanding the 
previous sentence, in determining the pre-BBA amount for covered OPD 
services furnished by a sole community hospital (as defined in section 
1886(d)(5)(D)(iii)), the Secretary shall substitute a minimum base 
payment-to-cost ratio if such substitution results in a greater amount 
of payment for such services under this subsection furnished by the 
sole community hospital. For purposes of the preceding sentence, a 
minimum base payment-to-cost ratio is equal to the 75th percentile of 
the payment-to-cost ratios for fiscal year 1996 of all hospitals with a 
designation as a sole community hospital in effect during fiscal year 
2004 (as determined by the Secretary).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to covered OPD services furnished on or after January 1, 2006.

SEC. 4. REBASING FOR SOLE COMMUNITY HOSPITALS.

    (a) Rebasing Permitted.--Section 1886(b)(3) of the Social Security 
Act (42 U.S.C. 1395ww(b)(3)) is amended by adding at the end the 
following new subparagraph:
    ``(K)(i) For cost reporting periods beginning on or after October 
1, 2005, in the case of a sole community hospital there shall be 
substituted for the amount otherwise determined under subsection 
(d)(5)(D)(i) of this section, if such substitution results in a greater 
amount of payment under this section for the hospital--
            ``(I) with respect to discharges occurring in fiscal year 
        2006, 75 percent of the subsection (d)(5)(D)(i) amount (as 
        described in subparagraph (I)(i)(I)) and 25 percent of the 
        subparagraph (K) rebased target amount (as defined in clause 
        (ii));
            ``(II) with respect to discharges occurring in fiscal year 
        2007, 50 percent of the subsection (d)(5)(D)(i) amount and 50 
        percent of the subparagraph (K) rebased target amount;
            ``(III) with respect to discharges occurring in fiscal year 
        2008, 25 percent of the subsection (d)(5)(D)(i) amount and 75 
        percent of the subparagraph (K) rebased target amount; and
            ``(IV) with respect to discharges occurring after fiscal 
        year 2008, 100 percent of the subparagraph (K) rebased target 
        amount.
    ``(ii) For purposes of this subparagraph, the `subparagraph (K) 
rebased target amount' has the meaning given the term `target amount' 
in subparagraph (C), except that--
            ``(I) there shall be substituted for the base cost 
        reporting period the 12-month cost reporting period beginning 
        during fiscal year 2000 or 2001, whichever results in the 
        greater amount of payment under this section for the hospital;
            ``(II) any reference in subparagraph (C)(i) to the `first 
        cost reporting period' described in such subparagraph is deemed 
        a reference to the first cost reporting period beginning on or 
        after October 1, 2005; and
            ``(III) the applicable percentage increase shall only be 
        applied under subparagraph (C)(iv) for discharges occurring in 
        fiscal years beginning with fiscal year 2007.''.
    (b) Conforming Amendments.--Section 1886(b)(3) of such Act (42 
U.S.C. 1395ww(b)(3)) is amended--
            (1) in subparagraph (C), by inserting ``and subparagraph 
        (K)'' after ``subject to subparagraph (I)'' in the matter 
        preceding clause (i); and
            (2) in subparagraph (I)(i)--
                    (A) by striking ``For'' in the matter preceding 
                subclause (I) and inserting ``Subject to subparagraph 
                (K), for''; and
                    (B) in subclause (I), by inserting ``and 
                subparagraph (K)'' after ``referred to in this 
                clause''.