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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 172 Introduced in Senate (IS)]

108th CONGRESS
  1st Session
                                 S. 172

 To amend title XVIII of the Social Security Act to improve the access 
 of medicare beneficiaries to services in rural hospitals and critical 
               access hospitals, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 15, 2003

  Mr. Dayton introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
 To amend title XVIII of the Social Security Act to improve the access 
 of medicare beneficiaries to services in rural hospitals and critical 
               access hospitals, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMENDMENTS TO THE SOCIAL 
              SECURITY ACT.

    (a) Short Title.--This Act may be cited as the ``Rural Health Care 
Equity Act of 2003''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Permitting hospitals to allocate swing beds and acute care 
                            inpatient beds subject to a total limit of 
                            25 beds.
Sec. 3. Elimination of isolation test for cost-based CAH ambulance 
                            services.
Sec. 4. Adjustment to wage index.
Sec. 5. Establishing a single standardized amount under medicare 
                            inpatient hospital PPS.
Sec. 6. Restoring full market basket update for inpatient PPS 
                            hospitals.
Sec. 7. Freezing indirect medical education (IME) adjustment percentage 
                            at 6.5 percent.
Sec. 8. Establishment of rural community hospital (RCH) program.
Sec. 9. Removing barriers to establishment of distinct part units by 
                            RCH and CAH facilities.
Sec. 10. Improvements to medicare critical access hospital (CAH) 
                            program.
Sec. 11. 5-year extension of the authorization for appropriations grant 
                            program.
Sec. 12. GAO study on wage indexing and placement of hospitals in MSAs.
    (c) Amendments to the Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to, or repeal of, a section or other 
provision, the reference shall be considered a reference to that 
section or other provision of the Social Security Act.

SEC. 2. PERMITTING HOSPITALS TO ALLOCATE SWING BEDS AND ACUTE CARE 
              INPATIENT BEDS SUBJECT TO A TOTAL LIMIT OF 25 BEDS.

    (a) In General.--Section 1820(c)(2)(B)(iii) (42 U.S.C. 1395i-
4(c)(2)(B)(iii)) is amended to read as follows:
                            ``(iii) provides not more than a total of 
                        25 extended care service beds (pursuant to an 
                        agreement under subsection (f)) or acute care 
                        inpatient beds (meeting such standards as the 
                        Secretary may establish) for providing 
                        inpatient care for a period that does not 
                        exceed, as determined on an annual, average 
                        basis, 96 hours per patient;''.
    (b) Conforming Amendment.--Section 1820(f) (42 U.S.C. 1395i-4(f)) 
is amended by striking ``and the number of beds used at any time for 
acute care inpatient services does not exceed 15 beds''.

SEC. 3. ELIMINATION OF ISOLATION TEST FOR COST-BASED CAH AMBULANCE 
              SERVICES.

    Section 1834(l)(8) (42 U.S.C. 1395m(l)), as added by section 205(a) 
of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (Appendix F, 114 Stat. 2763A-463), as enacted 
into law by section 1(a)(6) of Public Law 106-554, is amended by 
striking the comma at the end of subparagraph (B) and all that follows 
and inserting a period.

SEC. 4. ADJUSTMENT TO WAGE INDEX.

    (a) In General.--Section 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)) 
is amended--
            (1) by striking ``wage levels.--The Secretary'' and 
        inserting ``wage levels.--
            ``(i) In general.--Except as provided in clause (ii), the 
        Secretary''; and
            (2) by adding at the end the following new clause:
            ``(ii) Alternative proportion to be adjusted in fiscal 
        years 2003, 2004, and 2005.--
                    ``(I) In general.--Except as provided in subclause 
                (II), for discharges occurring on or after October 1, 
                2002, and before October 1, 2005, the Secretary shall 
                substitute `63 percent' for the proportion described in 
                the first sentence of clause (i).
                    ``(II) Hold harmless for certain hospitals.--For 
                discharges occurring on or after October 1, 2002, and 
                before October 1, 2005, if the application of subclause 
                (I) would result in lower payments to a hospital than 
                would otherwise be made, then this subparagraph shall 
                be applied as if this clause had not been enacted.
    (b) Waiving Budget Neutrality.--Section 1886(d)(3)(E) (42 U.S.C. 
1395ww(d)(3)(E)), as amended by subsection (a), is amended by adding at 
the end of clause (i) the following new sentence: ``The Secretary shall 
apply the previous sentence for any period as if clause (ii) had not 
been enacted.''.

SEC. 5. ESTABLISHING A SINGLE STANDARDIZED AMOUNT UNDER MEDICARE 
              INPATIENT HOSPITAL PPS.

    (a) In General.--Section 1886(d)(3)(A) (42 U.S.C. 1395ww(d)(3)(A)) 
is amended--
            (1) in clause (iv), by inserting ``and ending on or before 
        September 30, 2002,'' after ``October 1, 1995,''; and
            (2) by redesignating clauses (v) and (vi) as clauses (vii) 
        and (viii), respectively, and inserting after clause (iv) the 
        following new clauses:
            ``(v) For discharges occurring in the fiscal year beginning 
        on October 1, 2002, the average standardized amount for 
        hospitals located in areas other than a large urban area shall 
        be equal to the average standardized amount for hospitals 
        located in a large urban area.
            ``(vi) For discharges occurring in a fiscal year beginning 
        on or after October 1, 2003, the Secretary shall compute an 
        average standardized amount for hospitals located in all areas 
        within the United States equal to the average standardized 
        amount computed under clause (v) or this clause for the 
        previous fiscal year increased by the applicable percentage 
        increase under subsection (b)(3)(B)(i) for the fiscal year 
        involved.''.
    (b) Conforming Amendments.--
            (1) Update factor.--Section 1886(b)(3)(B)(i)(XVII) (42 
        U.S.C. 1395ww(b)(3)(B)(i)(XVII)) is amended by striking ``for 
        hospitals in all areas,'' and inserting ``for hospitals located 
        in a large urban area,''.
            (2) Computing drg-specific rates.--
                    (A) In general.--Section 1886(d)(3)(D) (42 U.S.C. 
                1395ww(d)(3)(D)) is amended--
                            (i) in the heading by striking ``in 
                        different areas'';
                            (ii) in the matter preceding clause (i)--
                                    (I) by inserting ``for fiscal years 
                                before fiscal year 1997'' before ``a 
                                regional DRG prospective payment rate 
                                for each region,''; and
                                    (II) by striking ``each of which 
                                is'';
                            (iii) in clause (i)--
                                    (I) by inserting ``for fiscal years 
                                before fiscal year 2003,'' after 
                                ``(i)''; and
                                    (II) in subclause (II), by striking 
                                ``and'' after the semicolon at the end;
                            (iv) in clause (ii)--
                                    (I) by inserting ``for fiscal years 
                                before fiscal year 2003,'' after 
                                ``(ii)''; and
                                    (II) in subclause (II), by striking 
                                the period at the end and inserting ``; 
                                and''; and
                            (v) by adding at the end the following new 
                        clause:
                    ``(iii) for a fiscal year beginning after fiscal 
                year 2002, for hospitals located in all areas, to the 
                product of--
                            ``(I) the applicable average standardized 
                        amount (computed under subparagraph (A)), 
                        reduced under subparagraph (B), and adjusted or 
                        reduced under subparagraph (C) for the fiscal 
                        year; and
                            ``(II) the weighting factor (determined 
                        under paragraph (4)(B)) for that diagnosis-
                        related group.''.
                    (B) Technical conforming sunset.--Section 
                1886(d)(3) of such Act (42 U.S.C. 1395ww(d)(3)) is 
                amended in the matter preceding subparagraph (A) by 
                inserting ``for fiscal years before fiscal year 1997'' 
                before ``a regional DRG prospective payment rate''.

SEC. 6. RESTORING FULL MARKET BASKET UPDATE FOR INPATIENT PPS 
              HOSPITALS.

    Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
amended--
            (1) in subclause (XV), by adding ``and'' at the end;
            (2) in subclause (XVI)--
                    (A) by inserting ``and each subsequent fiscal 
                year'' after ``for fiscal year 2001''; and
                    (B) by striking the comma at the end and inserting 
                a period; and
            (3) by striking subclauses (XVII), (XVIII), and (XIX).

SEC. 7. FREEZING INDIRECT MEDICAL EDUCATION (IME) ADJUSTMENT PERCENTAGE 
              AT 6.5 PERCENT.

    (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended--
            (1) in subclause (V), by adding ``and'' at the end; and
            (2) by striking subclauses (VI) and (VII) and inserting the 
        following:
                    ``(VI) on or after October 1, 2001, `c' is equal to 
                1.6.''.
    (b) Conforming Amendment Relating to Determination of Standardized 
Amount.--Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 
amended--
            (1) by striking ``1999 or'' and inserting ``1999,''; and
            (2) by inserting ``, or of section 7 of the Rural Health 
        Care Equity Act of 2003'' after ``2000''.

SEC. 8. ESTABLISHMENT OF RURAL COMMUNITY HOSPITAL (RCH) PROGRAM.

    (a) In General.--Section 1861 (42 U.S.C. 1395x) is amended by 
adding at the end of the following new subsection:

     ``Rural Community Hospital; Rural Community Hospital Services

    ``(ww)(1) The term `rural community hospital' means a hospital (as 
defined in subsection (e)) that--
            ``(A) is located in a rural area (as defined in section 
        1886(d)(2)(D)) or treated as being so located pursuant to 
        section 1886(d)(8)(E);
            ``(B) subject to subparagraph (B), has less than 51 acute 
        care inpatient beds, as reported in its most recent cost 
        report;
            ``(C) makes available 24-hour emergency care services;
            ``(D) subject to subparagraph (C), has a provider agreement 
        in effect with the Secretary and is open to the public as of 
        January 1, 2002; and
            ``(E) applies to the Secretary for such designation.
    ``(2) For purposes of paragraph (1)(B), beds in a psychiatric or 
rehabilitation unit of the hospital which is a distinct part of the 
hospital shall not be counted.
    ``(3) Subparagraph (1)(C) shall not be construed to prohibit any of 
the following from qualifying as a rural community hospital:
            ``(A) A replacement facility (as defined by the Secretary 
        in regulations in effect on January 1, 2002) with the same 
        service area (as defined by the Secretary in regulations in 
        effect on such date).
            ``(B) A facility obtaining a new provider number pursuant 
        to a change of ownership.
            ``(C) A facility which has a binding written agreement with 
        an outside, unrelated party for the construction, 
        reconstruction, lease, rental, or financing of a building as of 
        January 1, 2002.
    ``(4) Nothing in this subsection shall be construed as prohibiting 
a critical access hospital from qualifying as a rural community 
hospital if the critical access hospital meets the conditions otherwise 
applicable to hospitals under subsection (e) and section 1866.''.
    (b) Payment.--
            (1) Inpatient services.--Section 1814 (42 U.S.C. 1395f) is 
        amended by adding at the end the following new subsection:

``Payment for Inpatient Services Furnished in Rural Community Hospitals

    ``(m) The amount of payment under this part for inpatient hospital 
services furnished in a rural community hospital, other than such 
services furnished in a psychiatric or rehabilitation unit of the 
hospital which is a distinct part, is, at the election of the hospital 
in the application referred to in section 1861(ww)(1)(D)--
            ``(1) the reasonable costs of providing such services, 
        without regard to the amount of the customary or other charge, 
        or
            ``(2) the amount of payment provided for under the 
        prospective payment system for inpatient hospital services 
        under section 1886(d).''.
            (2) Outpatient services.--Section 1834 (42 U.S.C. 1395m) is 
        amended by adding at the end the following new subsection:
    ``(n) Payment for Outpatient Services Furnished in Rural Community 
Hospitals.--
            ``(1) In general.--The amount of payment under this part 
        for outpatient services furnished in a rural community hospital 
        is, at the election of the hospital in the application referred 
        to in section 1861(ww)(1)(D)--
                    ``(A) the reasonable costs of providing such 
                services, without regard to the amount of the customary 
                or other charge and any limitation under section 
                1861(v)(1)(U), or
                    ``(B) the amount of payment provided for under the 
                prospective payment system for covered OPD services 
                under section 1833(t).
    ``(2) Beneficiary cost sharing for outpatient services furnished in 
a rural community hospital.--The amounts of beneficiary cost sharing 
for outpatient services furnished in a rural community hospital under 
this part shall be as follows:
            ``(A) For items and services that would have been paid 
        under section 1833(t) if provided by a hospital, the amount of 
        cost sharing determined under paragraph (8) of such section.
            ``(B) For items and services that would have been paid 
        under section 1833(h) if furnished by a provider or supplier, 
        no cost sharing shall apply.
            ``(C) For all other items and services, the amount of cost 
        sharing that would apply to the item or service under the 
        methodology that would be used to determine payment for such 
        item or service if provided by a physician, provider, or 
        supplier, as the case may be.''.
            (3) Home health services.--
                    (A) Exclusion from home health pps.--
                            (i) In general.--Section 1895 (42 U.S.C. 
                        1395fff) is amended by adding at the end the 
                        following:
    ``(f) Exclusion.--
            ``(1) In general.--In determining payments under this title 
        for home health services furnished on or after October 1, 2002, 
        by a qualified RCH-based home health agency (as defined in 
        paragraph (2))--
                    ``(A) the agency may make a one-time election to 
                waive application of the prospective payment system 
                established under this section to such services 
                furnished by the agency shall not apply; and
                    ``(B) in the case of such an election, payment 
                shall be made on the basis of the reasonable costs 
                incurred in furnishing such services as determined 
                under section 1861(v), but without regard to the amount 
                of the customary or other charges with respect to such 
                services or the limitations established under paragraph 
                (1)(L) of such section.
            ``(2) Qualified rch-based home health agency defined.--For 
        purposes of paragraph (1), a `qualified RCH-based home health 
        agency' is a home health agency that is a provider-based entity 
        (as defined in section 404 of the Medicare, Medicaid, and SCHIP 
        Benefits Improvement and Protection Act of 2000 (Public Law 
        106-554; Appendix F, 114 Stat. 2763A-506) of a rural community 
        hospital that is located--
                    ``(A) in a county in which no main or branch office 
                of another home health agency is located; or
                    ``(B) at least 35 miles from any main or branch 
                office of another home health agency.''.
                            (ii) Conforming changes.--
                                    (I) Payments under part a.--Section 
                                1814(b) (42 U.S.C. 1395f(b)) is amended 
                                by inserting ``or with respect to 
                                services to which section 1895(f) 
                                applies'' after ``equipment'' in the 
                                matter preceding paragraph (1).
                                    (II) Payments under part b.--
                                Section 1833(a)(2)(A) (42 U.S.C. 
                                1395l(a)(2)(A)) is amended by striking 
                                ``the prospective payment system 
                                under''.
                                    (III) Per visit limits.--Section 
                                1861(v)(1)(L)(i) (42 U.S.C. 
                                1395x(v)(1)(L)(i)) is amended by 
                                inserting ``(other than by a qualified 
                                RCH-based home health agency (as 
                                defined in section 1895(f)(2))'' after 
                                ``with respect to services furnished by 
                                home health agencies''.
                            (iii) Consolidated billing.--
                                    (I) Recipient of payment.--Section 
                                1842(b)(6)(F) (42 U.S.C. 
                                1395u(b)(6)(F)) is amended by inserting 
                                ``and excluding home health services to 
                                which section 1895(f) applies'' after 
                                ``provided for in such section''.
                                    (II) Exception to exclusion from 
                                coverage.--Section 1862(a) (42 U.S.C. 
1395y(a)) is amended by inserting before the period at the end of the 
second sentence the following: ``and paragraph (21) shall not apply to 
home health services to which section 1895(f) applies''.
            (4) Return on equity.--Section 1861(v)(1)(P) (42 U.S.C. 
        1395x(v)(1)(P)) is amended--
                    (A) by inserting ``(i)'' after ``(P)''; and
                    (B) by adding at the end the following:
    ``(ii)(I) Notwithstanding clause (i), subparagraph (S)(i), and 
section 1886(g)(2), such regulations shall provide, in determining the 
reasonable costs of the services described in subclause (II) furnished 
by a rural community hospital on or after October 1, 2002, for payment 
of a return on equity capital at a rate of return equal to 150 percent 
of the average specified in clause (i).
    ``(II) The services described in this subparagraph are inpatient 
hospital services, outpatient hospital services, home health services 
furnished by a qualified RCH-based home health agency (as defined in 
section 1895(f)(2)), and ambulance services.
    ``(III) Payment under this clause shall be made without regard to 
whether a provider is a proprietary provider.''.
            (5) Exemption from 30 percent reduction in reimbursement 
        for bad debt.--Section 1861(v)(1)(T) (42 U.S.C. 1395x(v)(1)(T)) 
        is amended by inserting ``(other than a rural community 
        hospital)'' after ``In determining such reasonable costs for 
        hospitals''.
    (c) Conforming Amendments.--
            (1) Part a payment.--Section 1814(b) (42 U.S.C. 1395f(b)) 
        is amended by inserting ``other than a rural community hospital 
        furnishing inpatient hospital services,'' after ``critical 
        access hospital services,'' in the matter preceding paragraph 
        (1).
            (2) Part b payment.--
                    (A) In general.--Section 1833(a) (42 U.S.C. 
                1395l(a)) is amended--
                            (i) in paragraph (2), in the matter 
                        preceding subparagraph (A), by striking ``and 
                        (I)'' and inserting ``(I), and (K)'';
                            (ii) in paragraph (8), by striking ``and'' 
                        after the semicolon at the end;
                            (iii) in paragraph (9), by striking the 
                        period at the end and inserting ``; and''; and
                            (iv) by adding at the end the following new 
                        paragraph:
            ``(10) in the case of outpatient services furnished by a 
        rural community hospital, the amounts described in section 
        1834(n).''.
                    (B) Ambulance services.--Section 1834(l)(8) (42 
                U.S.C. 1395m(l)(8)), as added by section 205(a) of the 
                Medicare, Medicaid, and SCHIP Benefits Improvement and 
                Protection Act of 2000 (Appendix F, 114 Stat. 2763A-
                463), as enacted into law by section 1(a)(6) of Public 
                Law 106-554, is amended--
                            (i) in the heading, by striking ``critical 
                        access hospitals'' and inserting ``certain 
                        facilities'';
                            (ii) by striking ``or'' at the end of 
                        subparagraph (A);
                            (iii) by redesignating subparagraph (B) as 
                        subparagraph (C);
                            (iv) by inserting after subparagraph (A) 
                        the following new subparagraph:
                    ``(B) by a rural community hospital (as defined in 
                section 1861(ww)(1)), or''; and
                            (v) in subparagraph (C), as so 
                        redesignated, by inserting ``or a rural 
                        community hospital'' after ``critical access 
                        hospital''.
            (3) Technical amendments.--
                    (A) Consultation with state agencies.--Section 1863 
                (42 U.S.C. 1395z) is amended by striking ``and 
                (dd)(2)'' and inserting ``(dd)(2), (mm)(1), and 
                (ww)(1)''.
                    (B) Provider agreements.--The first sentence of 
                section 1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is 
                amended by inserting ``section 1834(n)(2),'' after 
                ``section 1833(b),''.
    (d) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after October 1, 2002.

SEC. 9. REMOVING BARRIERS TO ESTABLISHMENT OF DISTINCT PART UNITS BY 
              RCH AND CAH FACILITIES.

    (a) In General.--Section 1886(d)(1)(B) (42 U.S.C. 1395ww(d)(1)(B)) 
is amended by striking ``a distinct part of the hospital (as defined by 
the Secretary)'' and inserting ``a distinct part (as defined by the 
Secretary) of the hospital, critical access hospital, or rural 
community hospital'' in the matter following clause (v)(III).
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to determinations with respect to distinct part unit status that 
are made on or after October 1, 2002.

SEC. 10. IMPROVEMENTS TO MEDICARE CRITICAL ACCESS HOSPITAL (CAH) 
              PROGRAM.

    (a) Exclusion of Certain Beds From Bed Count.--Section 1820(c)(2) 
(42 U.S.C. 1395i-4(c)(2)) is amended by adding at the end the following 
new subparagraph:
                    ``(E) Exclusion of certain beds from bed count.--In 
                determining the number of beds of a facility for 
                purposes of applying the bed limitations referred to in 
                subparagraph (B)(iii) and subsection (f), the Secretary 
                shall not take into account any bed of a distinct part 
                psychiatric or rehabilitation unit (described in the 
                matter following clause (v) of section 1886(d)(1)(B)) 
                of the facility, except that the total number of beds 
                that are not taken into account pursuant to this 
                subparagraph with respect to a facility shall not 
                exceed 10.''.
    (b) Payments to Home Health Agencies Owned and Operated by a CAH.--
Section 1895(f)(1) (42 U.S.C. 1395fff(f)(1)), as added by this title, 
is further amended by inserting ``or by a home health agency that is 
owned and operated by a critical access hospital (as defined in section 
1861(mm)(1))'' after ``as defined in paragraph (2))'' in the matter 
preceding subparagraph (A).
    (c) Payments to CAH-Owned SNFs.--
            (1) In general.--Section 1888(e) (42 U.S.C. 1395yy(e)) is 
        amended--
                    (A) in paragraph (1), by striking ``and (12)'' and 
                inserting ``(12), and (13)''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(13) Exemption of cah facilities from pps.--In 
        determining payments under this part for covered skilled 
        nursing facility services furnished on or after October 1, 
        2002, by a skilled nursing facility that is a distinct part 
        unit of a critical access hospital (as defined in section 
        1861(mm)(1)) or is owned and operated by a critical access 
        hospital--
                    ``(A) the prospective payment system established 
                under this subsection shall not apply; and
                    ``(B) payment shall be made on the basis of the 
                reasonable costs incurred in furnishing such services 
                as determined under section 1861(v), but without regard 
                to the amount of the customary or other charges with 
                respect to such services or the limitations established 
                under subsection (a).''.
            (2) Conforming changes.--
                    (A) In general.--Section 1814(b) (42 U.S.C. 
                1395f(b)), as amended by section 8(c)(1), is further 
                amended in the matter preceding paragraph (1)--
                            (i) by inserting ``other than a skilled 
                        nursing facility providing covered skilled 
                        nursing facility services (as defined in 
                        section 1888(e)(2)) or posthospital extended 
                        care services to which section 1888(e)(13) 
                        applies,'' after ``inpatient critical access 
                        hospital services''; and
                            (ii) by striking ``1813 1886,'' and 
                        inserting ``1813, 1886, 1888,''.
                    (B) Consolidated billing.--
                            (i) Recipient of payment.--Section 
                        1842(b)(6)(E) (42 U.S.C. 1395u(b)(6)(E)) is 
                        amended by inserting ``services to which 
                        paragraph (7)(C) or (13) of section 1888(e) 
                        applies and'' after ``other than''.
                            (ii) Exception to exclusion from 
                        coverage.--Section 1862(a)(18) (42 U.S.C. 
                        1395y(a)(18)) is amended by inserting ``(other 
                        than services to which paragraph (7)(C) or (13) 
                        of section 1888(e) applies)'' after ``section 
                        1888(e)(2)(A)(i)''.
    (d) Payments to Distinct Part Psychiatric or Rehabilitation Units 
of CAHs.--Section 1886(b) (42 U.S.C. 1395ww(b)) is amended--
            (1) in paragraph (1), by inserting ``, other than a 
        distinct part psychiatric or rehabilitation unit to which 
        paragraph (8) applies,'' after ``subsection (d)(1)(B)''; and
            (2) by adding at the end the following new paragraph:
    ``(8) Exemption of certain distinct part psychiatric or 
rehabilitation units from cost limits.--In determining payments under 
this part for inpatient hospital services furnished on or after October 
1, 2002, by a distinct part psychiatric or rehabilitation unit 
(described in the matter following clause (v) of subsection (d)(1)(B)) 
of a critical access hospital (as defined in section 1861(mm)(1))--
            ``(A) the limits imposed under the preceding paragraphs of 
        this subsection shall not apply; and
            ``(B) payment shall be made on the basis of the reasonable 
        costs incurred in furnishing such services as determined under 
        section 1861(v), but without regard to the amount of the 
        customary or other charges with respect to such services.''.
    (e) Return on Equity.--Section 1861(v)(1)(P) (42 U.S.C. 
1395x(v)(1)(P)), as amended by section 8(b)(4), is further amended by 
adding at the end the following new clause:
    ``(iii)(I) Notwithstanding clause (i), subparagraph (S)(i), and 
section 1886(g)(2), such regulations shall provide, in determining the 
reasonable costs of the services described in subclause (II) furnished 
by a rural community hospital on or after October 1, 2002, for payment 
of a return on equity capital at a rate of return equal to 150 percent 
of the average specified in clause (i).
    ``(II) The services described in this subclause are inpatient 
critical access hospital services (as defined in section 1861(mm)(2)), 
outpatient critical access hospital services (as defined in section 
1861(mm)(3)), extended care services provided pursuant to an agreement 
under section 1883, posthospital extended care services to which 
section 1888(e)(13) applies, home health services to which section 
1895(f) applies, ambulance services to which section 1834(l) applies, 
and inpatient hospital services to which section 1886(b)(8) applies.
    ``(III) Payment under this clause shall be made without regard to 
whether a provider is a proprietary provider.''.
    (f) Technical Corrections.--
            (1) Section 403(b) of bbra 1999.--Section 1820(b)(2) (42 
        U.S.C. 1395i-4(b)(2)) is amended by striking ``nonprofit or 
        public hospitals'' and inserting ``hospitals''.
            (2) Section 203(b) of bipa 2000.--Section 1883(a)(3) (42 
        U.S.C. 1395tt(a)(3)) is amended--
                    (A) by inserting ``section 1861(v)(1)(G) or'' after 
                ``Notwithstanding''; and
                    (B) by striking ``covered skilled nursing 
                facility''.
    (g) Effective Dates.--
            (1) Elimination of requirements.--The amendment made by 
        subsections (a) and (b) shall apply to services furnished on or 
        after October 1, 2002.
            (2) Technical corrections.--
                    (A) BBRA.--The amendment made by subsection (f)(1) 
                shall be effective as if included in the enactment of 
                section 403(b) of the Medicare, Medicaid, and SCHIP 
                Balanced Budget Refinement Act of 1999 (Appendix F, 113 
                Stat. 1501A-321), as enacted into law by section 
                1000(a)(6) of Public Law 106-113.
                    (B) BIPA.--The amendment made by subsection (f)(2) 
                shall be effective as if included in the enactment of 
                section 203(b) of the Medicare, Medicaid, and SCHIP 
                Benefits Improvement and Protection Act of 2000 
                (Appendix F, 114 Stat. 2763A-463), as enacted into law 
                by section 1(a)(6) of Public Law 106-554.

SEC. 11. 5-YEAR EXTENSION OF THE AUTHORIZATION FOR APPROPRIATIONS FOR 
              GRANT PROGRAM.

    Section 1820(j) (42 U.S.C. 1395i-4(j)) is amended by striking 
``through 2002'' and inserting ``through 2007''.

SEC. 12. GAO STUDY ON WAGE INDEXING AND PLACEMENT OF HOSPITALS IN MSAS.

    (a) Study.--The Comptroller General of the United States shall 
conduct a study on the reformation of wage indexing and the rules 
governing the placement of hospitals in metropolitan statistical areas.
    (b) Report.--Not later than 1 year after the date of enactment of 
this Act, the Comptroller General shall submit to Congress a report on 
the study conducted under subsection (a) together with recommendations 
for such legislation or administrative actions as the Comptroller 
General considers appropriate.
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