(I) PAYMENTS UNDER PART A.—
Section 1814(b) (42 U.S.C. 1395f(b))
is amended by inserting ‘‘or with re-
spect 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 strik-
ing ‘‘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 in-
serting ‘‘(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 in-
serting ‘‘and excluding home health
services to which section to which sec-
tion 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 sec-
tion 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 pro-
vide, in determining the reasonable costs of the services
described in subclause (II) furnished by a rural commu-
nity 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 referred to in subclause (I) are in-
patient hospital services, outpatient hospital services,
home health services furnished by an RCH-based home
health agency (as defined in section 1895(f)(2)), and am-
bulance services.
‘‘(III) Payment under this clause shall be made with-
out regard to whether a provider is a proprietary pro-
vider.’’.
(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 amend-
ed by inserting ‘‘(other than a rural community hos-
pital)’’ after ‘‘In determining such reasonable costs
for hospitals’’.
(c) BENEFICIARY COST-SHARING FOR OUTPATIENT
SERVICES.—Section 1834(n) (as added by subsection
(b)(2)) is amended—
(1) by inserting ‘‘(1)’’ after ‘‘(n)’’; and
(2) adding at the end the following:
‘‘(2) The amounts of beneficiary cost sharing for out-
patient 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 pro-
vided by a physician, provider, or supplier, as the
case may be.’’.
(d) CONFORMING AMENDMENTS.—
(1) PART
A
PAYMENT.—Section 1814(b) (42
U.S.C. 1395f(b)) is amended by inserting ‘‘other
than inpatient hospital services furnished by a rural
community hospital,’’ after ‘‘critical access hospital
services,’’.
(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 be-
fore subparagraph (A), by striking ‘‘and
(I)’’ and inserting ‘‘(I), and (K)’’;
(ii) by striking ‘‘and’’ at the end of
paragraph (8);
(iii) by striking the period at the end
of paragraph (9) and inserting ‘‘; and’’;
and
(iv) by adding at the end the fol-
lowing:
‘‘(10) in the case of outpatient services fur-
nished 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 Protec-
tion 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 ‘‘CRIT-
ICAL
ACCESS
HOSPITALS’’ and inserting
‘‘CERTAIN FACILITIES’’;
(ii) by striking ‘‘or’’ at the end of sub-
paragraph (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 de-
fined in section 1861(ww)(1)), or’’; and
(v) in subparagraph (C), as so redes-
ignated, by inserting ‘‘or a rural commu-
nity hospital’’ after ‘‘critical access hos-
pital’’.
(3) TECHNICAL AMENDMENTS.—
(A) CONSULTATION
WITH
STATE
AGEN-
CIES.—Section 1863 (42 U.S.C. 1395z) is
amended by striking ‘‘and (dd)(2)’’ and insert-
ing ‘‘(dd)(2), (mm)(1), and (ww)(1)’’.
(B) 
PROVIDER
AGREEMENTS.—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),’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after October 1, 2002.
SEC. 3. REMOVING BARRIERS TO ESTABLISHMENT OF DIS-
TINCT PART UNITS BY RCH AND CAH FACILI-
TIES.
(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)’’ in the mat-
ter following cause (v) and inserting ‘‘a distinct part (as
defined by the Secretary) of the hospital or of a critical
access hospital or a rural community hospital’’.
(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 Octo-
ber 1, 2002.
SEC. 4. 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:
‘‘(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 ac-
count pursuant to this subparagraph with re-
spect to a facility shall not exceed 10.’’.
(b) PAYMENTS TO HOME HEALTH AGENCIES OWNED
AND OPERATED BY A CAH.—Section 1895(f) (42 U.S.C.
1395fff(f)), as added by section 2(b)(3), is further amend-
ed 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))’’.
(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 thereof the fol-
lowing:
‘‘(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 facil-
ity 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 es-
tablished 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 subsection
(b)(2)(A), 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 sec-
tion 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 in-
serting ‘‘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 in-
serting ‘‘(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:
‘‘(8) EXEMPTION OF CERTAIN DISTINCT PART PSY-
CHIATRIC OR REHABILITATION UNITS FROM COST LIM-
ITS.—In determining payments under this part for inpa-
tient 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 sec-
tion 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 re-
gard to the amount of the customary or other
charges with respect to such services.’’.
(e) ELIMINATION OF ISOLATION TEST FOR COST-
BASED CAH AMBULANCE SERVICES.—Paragraph (8) of
section 1834(l) (42 U.S.C. 1395m(l)), as added by section
205(a) of BIPA, is amended by striking the comma at
the end of the last subparagraph and all that follows and
inserting a period.
(f) RETURN ON EQUITY.—Section 1861(v)(1)(P) (42
U.S.C. 1395x(v)(1)(P)), as amended by section 2(b)(4),
is further amended by adding at the end the following:
‘‘(iii)(I) Notwithstanding clause (i), subparagraph
(S)(i), and section 1886(g)(2), such regulations shall pro-
vide, in determining the reasonable costs of the services
described in subclause (II) furnished by a rural commu-
nity 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 referred to in subclause (I) are in-
patient critical access hospital services (as defined in sec-
tion 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 sec-
tion 1834(l) applies, and inpatient hospital services to
which section 1886(b)(8) applies.
‘‘(III) Payment under this clause shall be made with-
out regard to whether a provider is a proprietary pro-
vider.’’.
(g) 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 in-
serting ‘‘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 fa-
cility’’.
(h) 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 Medi-
care, 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 sub-
section (f)(2) shall be effective as if included in
the enactment of section 203(b) of the Medi-
care, Medicaid, and SCHIP Benefits Improve-
ment 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.
Æ