II 

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMEND4 MENTS TO THE SOCIAL SECURITY ACT. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Rural Health Care Equity Act of 2003’’. 

7 (b) TABLE OF CONTENTS.—The table of contents of 

8 this Act is as follows:
2

•S 172 IS 

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.

1 (c) AMENDMENTS TO THE SOCIAL SECURITY ACT.—

2 Except as otherwise specifically provided, whenever in this 

3 Act an amendment is expressed in terms of an amendment 

4 to, or repeal of, a section or other provision, the reference 

5 shall be considered a reference to that section or other 

6 provision of the Social Security Act. 

7 SEC. 2. PERMITTING HOSPITALS TO ALLOCATE SWING 

8 BEDS AND ACUTE CARE INPATIENT BEDS 

9 SUBJECT TO A TOTAL LIMIT OF 25 BEDS. 

10 (a) IN GENERAL.—Section 1820(c)(2)(B)(iii) (42 

11 U.S.C. 1395i–4(c)(2)(B)(iii)) is amended to read as fol12 lows: 

13 ‘‘(iii) provides not more than a total 

14 of 25 extended care service beds (pursuant 

15 to an agreement under subsection (f)) or 

16 acute care inpatient beds (meeting such 

17 standards as the Secretary may establish) 
3

•S 172 IS 

1 for providing inpatient care for a period 

2 that does not exceed, as determined on an 

3 annual, average basis, 96 hours per pa4 tient;’’. 

5 (b) CONFORMING AMENDMENT.—Section 1820(f) 

6 (42 U.S.C. 1395i–4(f)) is amended by striking ‘‘and the 

7 number of beds used at any time for acute care inpatient 

8 services does not exceed 15 beds’’. 

9 SEC. 3. ELIMINATION OF ISOLATION TEST FOR COST-BASED 

10 CAH AMBULANCE SERVICES. 

11 Section 1834(l)(8) (42 U.S.C. 1395m(l)), as added 

12 by section 205(a) of the Medicare, Medicaid, and SCHIP 

13 Benefits Improvement and Protection Act of 2000 (Ap14 pendix F, 114 Stat. 2763A–463), as enacted into law by 

15 section 1(a)(6) of Public Law 106–554, is amended by 

16 striking the comma at the end of subparagraph (B) and 

17 all that follows and inserting a period. 

18 SEC. 4. ADJUSTMENT TO WAGE INDEX. 

19 (a) IN GENERAL.—Section 1886(d)(3)(E) (42 U.S.C. 

20 1395ww(d)(3)(E)) is amended—

21 (1) by striking ‘‘WAGE LEVELS.—The Sec22 retary’’ and inserting ‘‘WAGE LEVELS.—

23 ‘‘(i) IN GENERAL.—Except as provided in 

24 clause (ii), the Secretary’’; and 
4

•S 172 IS 

1 (2) by adding at the end the following new 

2 clause: 

3 ‘‘(ii) ALTERNATIVE PROPORTION TO BE AD4 JUSTED IN FISCAL YEARS 2003, 2004, AND 2005.—

5 ‘‘(I) IN GENERAL.—Except as provided in 

6 subclause (II), for discharges occurring on or 

7 after October 1, 2002, and before October 1, 

8 2005, the Secretary shall substitute ‘63 per9 cent’ for the proportion described in the first 

10 sentence of clause (i). 

11 ‘‘(II) HOLD HARMLESS FOR CERTAIN HOS12 PITALS.—For discharges occurring on or after 

13 October 1, 2002, and before October 1, 2005, 

14 if the application of subclause (I) would result 

15 in lower payments to a hospital than would oth16 erwise be made, then this subparagraph shall be 

17 applied as if this clause had not been enacted. 

18 (b) WAIVING BUDGET NEUTRALITY.—Section 

19 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)), as amended 

20 by subsection (a), is amended by adding at the end of 

21 clause (i) the following new sentence: ‘‘The Secretary shall 

22 apply the previous sentence for any period as if clause (ii) 

23 had not been enacted.’’. 
5

•S 172 IS 

1 SEC. 5. ESTABLISHING A SINGLE STANDARDIZED AMOUNT 

2 UNDER MEDICARE INPATIENT HOSPITAL 

3 PPS. 

4 (a) IN GENERAL.—Section 1886(d)(3)(A) (42 U.S.C. 

5 1395ww(d)(3)(A)) is amended—

6 (1) in clause (iv), by inserting ‘‘and ending on 

7 or before September 30, 2002,’’ after ‘‘October 1, 

8 1995,’’; and 

9 (2) by redesignating clauses (v) and (vi) as 

10 clauses (vii) and (viii), respectively, and inserting 

11 after clause (iv) the following new clauses: 

12 ‘‘(v) For discharges occurring in the fiscal year 

13 beginning on October 1, 2002, the average standard14 ized amount for hospitals located in areas other than 

15 a large urban area shall be equal to the average 

16 standardized amount for hospitals located in a large 

17 urban area. 

18 ‘‘(vi) For discharges occurring in a fiscal year 

19 beginning on or after October 1, 2003, the Secretary 

20 shall compute an average standardized amount for 

21 hospitals located in all areas within the United 

22 States equal to the average standardized amount 

23 computed under clause (v) or this clause for the pre24 vious fiscal year increased by the applicable percent25 age increase under subsection (b)(3)(B)(i) for the 

26 fiscal year involved.’’.
6

•S 172 IS 

1 (b) CONFORMING AMENDMENTS.—

2 (1) UPDATE FACTOR.—Section 

3 1886(b)(3)(B)(i)(XVII) (42 U.S.C. 

4 1395ww(b)(3)(B)(i)(XVII)) is amended by striking 

5 ‘‘for hospitals in all areas,’’ and inserting ‘‘for hos6 pitals located in a large urban area,’’. 

7 (2) COMPUTING DRG-SPECIFIC RATES.—

8 (A) IN GENERAL.—Section 1886(d)(3)(D) 

9 (42 U.S.C. 1395ww(d)(3)(D)) is amended—

10 (i) in the heading by striking ‘‘IN DIF11 FERENT AREAS’’; 

12 (ii) in the matter preceding clause 

13 (i)—

14 (I) by inserting ‘‘for fiscal years 

15 before fiscal year 1997’’ before ‘‘a re16 gional DRG prospective payment rate 

17 for each region,’’; and 

18 (II) by striking ‘‘each of which 

19 is’’; 

20 (iii) in clause (i)—

21 (I) by inserting ‘‘for fiscal years 

22 before fiscal year 2003,’’ after ‘‘(i)’’; 

23 and 

24 (II) in subclause (II), by striking 

25 ‘‘and’’ after the semicolon at the end; 
7

•S 172 IS 

1 (iv) in clause (ii)—

2 (I) by inserting ‘‘for fiscal years 

3 before fiscal year 2003,’’ after ‘‘(ii)’’; 

4 and 

5 (II) in subclause (II), by striking 

6 the period at the end and inserting ‘‘; 

7 and’’; and 

8 (v) by adding at the end the following 

9 new clause: 

10 ‘‘(iii) for a fiscal year beginning after fiscal 

11 year 2002, for hospitals located in all areas, to 

12 the product of—

13 ‘‘(I) the applicable average standard14 ized amount (computed under subpara15 graph (A)), reduced under subparagraph 

16 (B), and adjusted or reduced under sub17 paragraph (C) for the fiscal year; and 

18 ‘‘(II) the weighting factor (determined 

19 under paragraph (4)(B)) for that diag20 nosis-related group.’’. 

21 (B) TECHNICAL CONFORMING SUNSET.—

22 Section 1886(d)(3) of such Act (42 U.S.C. 

23 1395ww(d)(3)) is amended in the matter pre24 ceding subparagraph (A) by inserting ‘‘for fiscal 
8

•S 172 IS 

1 years before fiscal year 1997’’ before ‘‘a re2 gional DRG prospective payment rate’’. 

3 SEC. 6. RESTORING FULL MARKET BASKET UPDATE FOR 

4 INPATIENT PPS HOSPITALS. 

5 Section 1886(b)(3)(B)(i) (42 U.S.C. 

6 1395ww(b)(3)(B)(i)) is amended—

7 (1) in subclause (XV), by adding ‘‘and’’ at the 

8 end; 

9 (2) in subclause (XVI)—

10 (A) by inserting ‘‘and each subsequent fis11 cal year’’ after ‘‘for fiscal year 2001’’; and 

12 (B) by striking the comma at the end and 

13 inserting a period; and 

14 (3) by striking subclauses (XVII), (XVIII), and 

15 (XIX). 

16 SEC. 7. FREEZING INDIRECT MEDICAL EDUCATION (IME) 

17 ADJUSTMENT PERCENTAGE AT 6.5 PERCENT. 

18 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42 

19 U.S.C. 1395ww(d)(5)(B)(ii)) is amended—

20 (1) in subclause (V), by adding ‘‘and’’ at the 

21 end; and 

22 (2) by striking subclauses (VI) and (VII) and 

23 inserting the following: 

24 ‘‘(VI) on or after October 1, 2001, ‘c’ is 

25 equal to 1.6.’’. 
9

•S 172 IS 

1 (b) CONFORMING AMENDMENT RELATING TO DE2 TERMINATION OF STANDARDIZED AMOUNT.—Section 

3 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 

4 amended—

5 (1) by striking ‘‘1999 or’’ and inserting 

6 ‘‘1999,’’; and 

7 (2) by inserting ‘‘, or of section 7 of the Rural 

8 Health Care Equity Act of 2003’’ after ‘‘2000’’.

9 SEC. 8. ESTABLISHMENT OF RURAL COMMUNITY HOSPITAL 

10 (RCH) PROGRAM. 

11 (a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x) 

12 is amended by adding at the end of the following new sub13 section: 

14 ‘‘Rural Community Hospital; Rural Community Hospital 

15 Services 

16 ‘‘(ww)(1) The term ‘rural community hospital’ means 

17 a hospital (as defined in subsection (e)) that—

18 ‘‘(A) is located in a rural area (as defined in 

19 section 1886(d)(2)(D)) or treated as being so lo20 cated pursuant to section 1886(d)(8)(E); 

21 ‘‘(B) subject to subparagraph (B), has less than 

22 51 acute care inpatient beds, as reported in its most 

23 recent cost report; 

24 ‘‘(C) makes available 24-hour emergency care 

25 services; 
10

•S 172 IS 

1 ‘‘(D) subject to subparagraph (C), has a pro2 vider agreement in effect with the Secretary and is 

3 open to the public as of January 1, 2002; and 

4 ‘‘(E) applies to the Secretary for such designa5 tion. 

6 ‘‘(2) For purposes of paragraph (1)(B), beds in a 

7 psychiatric or rehabilitation unit of the hospital which is 

8 a distinct part of the hospital shall not be counted. 

9 ‘‘(3) Subparagraph (1)(C) shall not be construed to 

10 prohibit any of the following from qualifying as a rural 

11 community hospital: 

12 ‘‘(A) A replacement facility (as defined by the 

13 Secretary in regulations in effect on January 1, 

14 2002) with the same service area (as defined by the 

15 Secretary in regulations in effect on such date). 

16 ‘‘(B) A facility obtaining a new provider num17 ber pursuant to a change of ownership. 

18 ‘‘(C) A facility which has a binding written 

19 agreement with an outside, unrelated party for the 

20 construction, reconstruction, lease, rental, or financ21 ing of a building as of January 1, 2002. 

22 ‘‘(4) Nothing in this subsection shall be construed as 

23 prohibiting a critical access hospital from qualifying as a 

24 rural community hospital if the critical access hospital
11

•S 172 IS 

1 meets the conditions otherwise applicable to hospitals 

2 under subsection (e) and section 1866.’’. 

3 (b) PAYMENT.—

4 (1) INPATIENT SERVICES.—Section 1814 (42 

5 U.S.C. 1395f) is amended by adding at the end the 

6 following new subsection:

7 ‘‘Payment for Inpatient Services Furnished in Rural 

8 Community Hospitals 

9 ‘‘(m) The amount of payment under this part for in10 patient hospital services furnished in a rural community 

11 hospital, other than such services furnished in a psy12 chiatric or rehabilitation unit of the hospital which is a 

13 distinct part, is, at the election of the hospital in the appli14 cation referred to in section 1861(ww)(1)(D)—

15 ‘‘(1) the reasonable costs of providing such 

16 services, without regard to the amount of the cus17 tomary or other charge, or 

18 ‘‘(2) the amount of payment provided for under 

19 the prospective payment system for inpatient hos20 pital services under section 1886(d).’’. 

21 (2) OUTPATIENT SERVICES.—Section 1834 (42 

22 U.S.C. 1395m) is amended by adding at the end the 

23 following new subsection:

24 ‘‘(n) PAYMENT FOR OUTPATIENT SERVICES FUR25 NISHED IN RURAL COMMUNITY HOSPITALS.—
12

•S 172 IS 

1 ‘‘(1) IN GENERAL.—The amount of payment 

2 under this part for outpatient services furnished in 

3 a rural community hospital is, at the election of the 

4 hospital in the application referred to in section 

5 1861(ww)(1)(D)—

6 ‘‘(A) the reasonable costs of providing such 

7 services, without regard to the amount of the 

8 customary or other charge and any limitation 

9 under section 1861(v)(1)(U), or 

10 ‘‘(B) the amount of payment provided for 

11 under the prospective payment system for cov12 ered OPD services under section 1833(t). 

13 ‘‘(2) BENEFICIARY COST SHARING FOR OUTPATIENT

14 SERVICES FURNISHED IN A RURAL COMMUNITY HOS15 PITAL.—The amounts of beneficiary cost sharing for out16 patient services furnished in a rural community hospital 

17 under this part shall be as follows: 

18 ‘‘(A) For items and services that would have 

19 been paid under section 1833(t) if provided by a 

20 hospital, the amount of cost sharing determined 

21 under paragraph (8) of such section. 

22 ‘‘(B) For items and services that would have 

23 been paid under section 1833(h) if furnished by a 

24 provider or supplier, no cost sharing shall apply. 
13

•S 172 IS 

1 ‘‘(C) For all other items and services, the 

2 amount of cost sharing that would apply to the item 

3 or service under the methodology that would be used 

4 to determine payment for such item or service if pro5 vided by a physician, provider, or supplier, as the 

6 case may be.’’. 

7 (3) HOME HEALTH SERVICES.—

8 (A) EXCLUSION FROM HOME HEALTH

9 PPS.—

10 (i) IN GENERAL.—Section 1895 (42 

11 U.S.C. 1395fff) is amended by adding at 

12 the end the following: 

13 ‘‘(f) EXCLUSION.—

14 ‘‘(1) IN GENERAL.—In determining payments 

15 under this title for home health services furnished on 

16 or after October 1, 2002, by a qualified RCH-based 

17 home health agency (as defined in paragraph (2))—

18 ‘‘(A) the agency may make a one-time elec19 tion to waive application of the prospective pay20 ment system established under this section to 

21 such services furnished by the agency shall not 

22 apply; and 

23 ‘‘(B) in the case of such an election, pay24 ment shall be made on the basis of the reason25 able costs incurred in furnishing such services 
14

•S 172 IS 

1 as determined under section 1861(v), but with2 out regard to the amount of the customary or 

3 other charges with respect to such services or 

4 the limitations established under paragraph 

5 (1)(L) of such section. 

6 ‘‘(2) QUALIFIED RCH-BASED HOME HEALTH

7 AGENCY DEFINED.—For purposes of paragraph (1), 

8 a ‘qualified RCH-based home health agency’ is a 

9 home health agency that is a provider-based entity 

10 (as defined in section 404 of the Medicare, Medicaid, 

11 and SCHIP Benefits Improvement and Protection 

12 Act of 2000 (Public Law 106–554; Appendix F, 114 

13 Stat. 2763A–506) of a rural community hospital 

14 that is located—

15 ‘‘(A) in a county in which no main or 

16 branch office of another home health agency is 

17 located; or 

18 ‘‘(B) at least 35 miles from any main or 

19 branch office of another home health agency.’’. 

20 (ii) CONFORMING CHANGES.—

21 (I) PAYMENTS UNDER PART A.—

22 Section 1814(b) (42 U.S.C. 1395f(b)) 

23 is amended by inserting ‘‘or with re24 spect to services to which section 
15

•S 172 IS 

1 1895(f) applies’’ after ‘‘equipment’’ in 

2 the matter preceding paragraph (1). 

3 (II) PAYMENTS UNDER PART

4 B.—Section 1833(a)(2)(A) (42 U.S.C. 

5 1395l(a)(2)(A)) is amended by strik6 ing ‘‘the prospective payment system 

7 under’’. 

8 (III) PER VISIT LIMITS.—Section 

9 1861(v)(1)(L)(i) (42 U.S.C. 

10 1395x(v)(1)(L)(i)) is amended by in11 serting ‘‘(other than by a qualified 

12 RCH-based home health agency (as 

13 defined in section 1895(f)(2))’’ after 

14 ‘‘with respect to services furnished by 

15 home health agencies’’. 

16 (iii) CONSOLIDATED BILLING.—

17 (I) RECIPIENT OF PAYMENT.—

18 Section 1842(b)(6)(F) (42 U.S.C. 

19 1395u(b)(6)(F)) is amended by in20 serting ‘‘and excluding home health 

21 services to which section 1895(f) ap22 plies’’ after ‘‘provided for in such sec23 tion’’. 

24 (II) EXCEPTION TO EXCLUSION

25 FROM COVERAGE.—Section 1862(a)
16

•S 172 IS 

1 (42 U.S.C. 1395y(a)) is amended by 

2 inserting before the period at the end 

3 of the second sentence the following: 

4 ‘‘and paragraph (21) shall not apply 

5 to home health services to which sec6 tion 1895(f) applies’’. 

7 (4) RETURN ON EQUITY.—Section 

8 1861(v)(1)(P) (42 U.S.C. 1395x(v)(1)(P)) is amend9 ed—

10 (A) by inserting ‘‘(i)’’ after ‘‘(P)’’; and 

11 (B) by adding at the end the following: 

12 ‘‘(ii)(I) Notwithstanding clause (i), subparagraph 

13 (S)(i), and section 1886(g)(2), such regulations shall pro14 vide, in determining the reasonable costs of the services 

15 described in subclause (II) furnished by a rural commu16 nity hospital on or after October 1, 2002, for payment 

17 of a return on equity capital at a rate of return equal to 

18 150 percent of the average specified in clause (i). 

19 ‘‘(II) The services described in this subparagraph are 

20 inpatient hospital services, outpatient hospital services, 

21 home health services furnished by a qualified RCH-based 

22 home health agency (as defined in section 1895(f)(2)), and 

23 ambulance services. 
17

•S 172 IS 

1 ‘‘(III) Payment under this clause shall be made with2 out regard to whether a provider is a proprietary pro3 vider.’’.

4 (5) EXEMPTION FROM 30 PERCENT REDUCTION

5 IN REIMBURSEMENT FOR BAD DEBT.—Section 

6 1861(v)(1)(T) (42 U.S.C. 1395x(v)(1)(T)) is amend7 ed by inserting ‘‘(other than a rural community hos8 pital)’’ after ‘‘In determining such reasonable costs 

9 for hospitals’’. 

10 (c) CONFORMING AMENDMENTS.—

11 (1) PART A PAYMENT.—Section 1814(b) (42 

12 U.S.C. 1395f(b)) is amended by inserting ‘‘other 

13 than a rural community hospital furnishing inpatient 

14 hospital services,’’ after ‘‘critical access hospital 

15 services,’’ in the matter preceding paragraph (1). 

16 (2) PART B PAYMENT.—

17 (A) IN GENERAL.—Section 1833(a) (42 

18 U.S.C. 1395l(a)) is amended—

19 (i) in paragraph (2), in the matter 

20 preceding subparagraph (A), by striking 

21 ‘‘and (I)’’ and inserting ‘‘(I), and (K)’’; 

22 (ii) in paragraph (8), by striking 

23 ‘‘and’’ after the semicolon at the end; 
18

•S 172 IS 

1 (iii) in paragraph (9), by striking the 

2 period at the end and inserting ‘‘; and’’; 

3 and 

4 (iv) by adding at the end the following 

5 new paragraph: 

6 ‘‘(10) in the case of outpatient services fur7 nished by a rural community hospital, the amounts 

8 described in section 1834(n).’’. 

9 (B) AMBULANCE SERVICES.—Section 

10 1834(l)(8) (42 U.S.C. 1395m(l)(8)), as added 

11 by section 205(a) of the Medicare, Medicaid, 

12 and SCHIP Benefits Improvement and Protec13 tion Act of 2000 (Appendix F, 114 Stat. 

14 2763A–463), as enacted into law by section 

15 1(a)(6) of Public Law 106–554, is amended—

16 (i) in the heading, by striking ‘‘CRIT17 ICAL ACCESS HOSPITALS’’ and inserting 

18 ‘‘CERTAIN FACILITIES’’; 

19 (ii) by striking ‘‘or’’ at the end of sub20 paragraph (A); 

21 (iii) by redesignating subparagraph 

22 (B) as subparagraph (C); 

23 (iv) by inserting after subparagraph 

24 (A) the following new subparagraph: 
19

•S 172 IS 

1 ‘‘(B) by a rural community hospital (as de2 fined in section 1861(ww)(1)), or’’; and 

3 (v) in subparagraph (C), as so redes4 ignated, by inserting ‘‘or a rural commu5 nity hospital’’ after ‘‘critical access hos6 pital’’. 

7 (3) TECHNICAL AMENDMENTS.—

8 (A) CONSULTATION WITH STATE AGEN9 CIES.—Section 1863 (42 U.S.C. 1395z) is 

10 amended by striking ‘‘and (dd)(2)’’ and insert11 ing ‘‘(dd)(2), (mm)(1), and (ww)(1)’’. 

12 (B) PROVIDER AGREEMENTS.—The first 

13 sentence of section 1866(a)(2)(A) (42 U.S.C. 

14 1395cc(a)(2)(A)) is amended by inserting ‘‘sec15 tion 1834(n)(2),’’ after ‘‘section 1833(b),’’. 

16 (d) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to items and services furnished on 

18 or after October 1, 2002. 

19 SEC. 9. REMOVING BARRIERS TO ESTABLISHMENT OF DIS20 TINCT PART UNITS BY RCH AND CAH FACILI21 TIES. 

22 (a) IN GENERAL.—Section 1886(d)(1)(B) (42 U.S.C. 

23 1395ww(d)(1)(B)) is amended by striking ‘‘a distinct part 

24 of the hospital (as defined by the Secretary)’’ and insert25 ing ‘‘a distinct part (as defined by the Secretary) of the 
20

•S 172 IS 

1 hospital, critical access hospital, or rural community hos2 pital’’ in the matter following clause (v)(III). 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall apply to determinations with respect 

5 to distinct part unit status that are made on or after Octo6 ber 1, 2002. 

7 SEC. 10. IMPROVEMENTS TO MEDICARE CRITICAL ACCESS 

8 HOSPITAL (CAH) PROGRAM. 

9 (a) EXCLUSION OF CERTAIN BEDS FROM BED

10 COUNT.—Section 1820(c)(2) (42 U.S.C. 1395i–4(c)(2)) is 

11 amended by adding at the end the following new subpara12 graph: 

13 ‘‘(E) EXCLUSION OF CERTAIN BEDS FROM

14 BED COUNT.—In determining the number of 

15 beds of a facility for purposes of applying the 

16 bed limitations referred to in subparagraph 

17 (B)(iii) and subsection (f), the Secretary shall 

18 not take into account any bed of a distinct part 

19 psychiatric or rehabilitation unit (described in 

20 the matter following clause (v) of section 

21 1886(d)(1)(B)) of the facility, except that the 

22 total number of beds that are not taken into ac23 count pursuant to this subparagraph with re24 spect to a facility shall not exceed 10.’’.
21

•S 172 IS 

1 (b) PAYMENTS TO HOME HEALTH AGENCIES OWNED

2 AND OPERATED BY A CAH.—Section 1895(f)(1) (42 

3 U.S.C. 1395fff(f)(1)), as added by this title, is further 

4 amended by inserting ‘‘or by a home health agency that 

5 is owned and operated by a critical access hospital (as de6 fined in section 1861(mm)(1))’’ after ‘‘as defined in para7 graph (2))’’ in the matter preceding subparagraph (A). 

8 (c) PAYMENTS TO CAH-OWNED SNFS.—

9 (1) IN GENERAL.—Section 1888(e) (42 U.S.C. 

10 1395yy(e)) is amended—

11 (A) in paragraph (1), by striking ‘‘and 

12 (12)’’ and inserting ‘‘(12), and (13)’’; and 

13 (B) by adding at the end the following new 

14 paragraph: 

15 ‘‘(13) EXEMPTION OF CAH FACILITIES FROM

16 PPS.—In determining payments under this part for 

17 covered skilled nursing facility services furnished on 

18 or after October 1, 2002, by a skilled nursing facil19 ity that is a distinct part unit of a critical access 

20 hospital (as defined in section 1861(mm)(1)) or is 

21 owned and operated by a critical access hospital—

22 ‘‘(A) the prospective payment system es23 tablished under this subsection shall not apply; 

24 and 
22

•S 172 IS 

1 ‘‘(B) payment shall be made on the basis 

2 of the reasonable costs incurred in furnishing 

3 such services as determined under section 

4 1861(v), but without regard to the amount of 

5 the customary or other charges with respect to 

6 such services or the limitations established 

7 under subsection (a).’’. 

8 (2) CONFORMING CHANGES.—

9 (A) IN GENERAL.—Section 1814(b) (42 

10 U.S.C. 1395f(b)), as amended by section 

11 8(c)(1), is further amended in the matter pre12 ceding paragraph (1)—

13 (i) by inserting ‘‘other than a skilled 

14 nursing facility providing covered skilled 

15 nursing facility services (as defined in sec16 tion 1888(e)(2)) or posthospital extended 

17 care services to which section 1888(e)(13) 

18 applies,’’ after ‘‘inpatient critical access 

19 hospital services’’; and 

20 (ii) by striking ‘‘1813 1886,’’ and in21 serting ‘‘1813, 1886, 1888,’’. 

22 (B) CONSOLIDATED BILLING.—

23 (i) RECIPIENT OF PAYMENT.—Section 

24 1842(b)(6)(E) (42 U.S.C. 1395u(b)(6)(E)) 

25 is amended by inserting ‘‘services to which 
23

•S 172 IS 

1 paragraph (7)(C) or (13) of section 

2 1888(e) applies and’’ after ‘‘other than’’. 

3 (ii) EXCEPTION TO EXCLUSION FROM

4 COVERAGE.—Section 1862(a)(18) (42 

5 U.S.C. 1395y(a)(18)) is amended by in6 serting ‘‘(other than services to which 

7 paragraph (7)(C) or (13) of section 

8 1888(e) applies)’’ after ‘‘section 

9 1888(e)(2)(A)(i)’’. 

10 (d) PAYMENTS TO DISTINCT PART PSYCHIATRIC OR

11 REHABILITATION UNITS OF CAHS.—Section 1886(b) (42 

12 U.S.C. 1395ww(b)) is amended—

13 (1) in paragraph (1), by inserting ‘‘, other than 

14 a distinct part psychiatric or rehabilitation unit to 

15 which paragraph (8) applies,’’ after ‘‘subsection 

16 (d)(1)(B)’’; and 

17 (2) by adding at the end the following new 

18 paragraph: 

19 ‘‘(8) EXEMPTION OF CERTAIN DISTINCT PART PSY20 CHIATRIC OR REHABILITATION UNITS FROM COST LIM21 ITS.—In determining payments under this part for inpa22 tient hospital services furnished on or after October 1, 

23 2002, by a distinct part psychiatric or rehabilitation unit 

24 (described in the matter following clause (v) of subsection
24

•S 172 IS 

1 (d)(1)(B)) of a critical access hospital (as defined in sec2 tion 1861(mm)(1))—

3 ‘‘(A) the limits imposed under the preceding 

4 paragraphs of this subsection shall not apply; and 

5 ‘‘(B) payment shall be made on the basis of the 

6 reasonable costs incurred in furnishing such services 

7 as determined under section 1861(v), but without re8 gard to the amount of the customary or other 

9 charges with respect to such services.’’. 

10 (e) RETURN ON EQUITY.—Section 1861(v)(1)(P) (42 

11 U.S.C. 1395x(v)(1)(P)), as amended by section 8(b)(4), 

12 is further amended by adding at the end the following new 

13 clause: 

14 ‘‘(iii)(I) Notwithstanding clause (i), subparagraph 

15 (S)(i), and section 1886(g)(2), such regulations shall pro16 vide, in determining the reasonable costs of the services 

17 described in subclause (II) furnished by a rural commu18 nity hospital on or after October 1, 2002, for payment 

19 of a return on equity capital at a rate of return equal to 

20 150 percent of the average specified in clause (i). 

21 ‘‘(II) The services described in this subclause are in22 patient critical access hospital services (as defined in sec23 tion 1861(mm)(2)), outpatient critical access hospital 

24 services (as defined in section 1861(mm)(3)), extended 

25 care services provided pursuant to an agreement under 
25

•S 172 IS 

1 section 1883, posthospital extended care services to which 

2 section 1888(e)(13) applies, home health services to which 

3 section 1895(f) applies, ambulance services to which sec4 tion 1834(l) applies, and inpatient hospital services to 

5 which section 1886(b)(8) applies. 

6 ‘‘(III) Payment under this clause shall be made with7 out regard to whether a provider is a proprietary pro8 vider.’’. 

9 (f) TECHNICAL CORRECTIONS.—

10 (1) SECTION 403(b) OF BBRA 1999.—Section 

11 1820(b)(2) (42 U.S.C. 1395i–4(b)(2)) is amended 

12 by striking ‘‘nonprofit or public hospitals’’ and in13 serting ‘‘hospitals’’. 

14 (2) SECTION 203(b) OF BIPA 2000.—Section 

15 1883(a)(3) (42 U.S.C. 1395tt(a)(3)) is amended—

16 (A) by inserting ‘‘section 1861(v)(1)(G) 

17 or’’ after ‘‘Notwithstanding’’; and 

18 (B) by striking ‘‘covered skilled nursing fa19 cility’’. 

20 (g) EFFECTIVE DATES.—

21 (1) ELIMINATION OF REQUIREMENTS.—The 

22 amendment made by subsections (a) and (b) shall 

23 apply to services furnished on or after October 1, 

24 2002. 

25 (2) TECHNICAL CORRECTIONS.—
26

•S 172 IS 

1 (A) BBRA.—The amendment made by 

2 subsection (f)(1) shall be effective as if included 

3 in the enactment of section 403(b) of the Medi4 care, Medicaid, and SCHIP Balanced Budget 

5 Refinement Act of 1999 (Appendix F, 113 Stat. 

6 1501A–321), as enacted into law by section 

7 1000(a)(6) of Public Law 106–113. 

8 (B) BIPA.—The amendment made by sub9 section (f)(2) shall be effective as if included in 

10 the enactment of section 203(b) of the Medi11 care, Medicaid, and SCHIP Benefits Improve12 ment and Protection Act of 2000 (Appendix F, 

13 114 Stat. 2763A–463), as enacted into law by 

14 section 1(a)(6) of Public Law 106–554.

15 SEC. 11. 5-YEAR EXTENSION OF THE AUTHORIZATION FOR 

16 APPROPRIATIONS FOR GRANT PROGRAM. 

17 Section 1820(j) (42 U.S.C. 1395i–4(j)) is amended 

18 by striking ‘‘through 2002’’ and inserting ‘‘through 

19 2007’’.
27

•S 172 IS 

1 SEC. 12. GAO STUDY ON WAGE INDEXING AND PLACEMENT 

2 OF HOSPITALS IN MSAs. 

3 (a) STUDY.—The Comptroller General of the United 

4 States shall conduct a study on the reformation of wage 

5 indexing and the rules governing the placement of hos6 pitals in metropolitan statistical areas. 

7 (b) REPORT.—Not later than 1 year after the date 

8 of enactment of this Act, the Comptroller General shall 

9 submit to Congress a report on the study conducted under 

10 subsection (a) together with recommendations for such 

11 legislation or administrative actions as the Comptroller 

12 General considers appropriate.

Æ