H. R. 1—205
‘‘(B) APPLICABLE
PERCENTAGE
INCREASE.—The Sec-
retary shall determine an applicable percentage increase
for purposes of subparagraph (A) as follows:
‘‘(i) The Secretary shall determine the empirical
relationship for subsection (d) hospitals between the
standardized cost-per-case for such hospitals and the
total number of discharges of such hospitals and the
amount of the additional incremental costs (if any)
that are associated with such number of discharges.
‘‘(ii) The applicable percentage increase shall be
determined based upon such relationship in a manner
that reflects, based upon the number of such discharges
for a subsection (d) hospital, such additional incre-
mental costs.
‘‘(iii) In no case shall the applicable percentage
increase exceed 25 percent.
‘‘(C) DEFINITIONS.—
‘‘(i) LOW-VOLUME HOSPITAL.—For purposes of this
paragraph, the term ‘low-volume hospital’ means, for
a fiscal year, a subsection (d) hospital (as defined in
paragraph (1)(B)) that the Secretary determines is
located more than 25 road miles from another sub-
section (d) hospital and has less than 800 discharges
during the fiscal year.
‘‘(ii) DISCHARGE.—For purposes of subparagraph
(B) and clause (i), the term ‘discharge’ means an
inpatient acute care discharge of an individual regard-
less of whether the individual is entitled to benefits
under part A.’’.
(b) 
JUDICIAL
REVIEW.—Section 
1886(d)(7)(A) 
(42 
U.S.C.
1395ww(d)(7)(A)) is amended by inserting after ‘‘to subsection (e)(1)’’
the following: ‘‘or the determination of the applicable percentage
increase under paragraph (12)(A)(ii)’’.
SEC. 407. TREATMENT OF MISSING COST REPORTING PERIODS FOR
SOLE COMMUNITY HOSPITALS.
(a) 
IN
GENERAL.—Section 
1886(b)(3)(I) 
(42 
U.S.C.
1395ww(b)(3)(I)) is amended by adding at the end the following
new clause:
‘‘(iii) In no case shall a hospital be denied treatment as a
sole community hospital or payment (on the basis of a target rate
as such as a hospital) because data are unavailable for any cost
reporting period due to changes in ownership, changes in fiscal
intermediaries, or other extraordinary circumstances, so long as
data for at least one applicable base cost reporting period is avail-
able.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to cost reporting periods beginning on or after January
1, 2004.
SEC. 408. RECOGNITION OF ATTENDING NURSE PRACTITIONERS AS
ATTENDING PHYSICIANS TO SERVE HOSPICE PATIENTS.
(a) 
IN
GENERAL.—Section 
1861(dd)(3)(B) 
(42 
U.S.C.
1395x(dd)(3)(B)) is amended by inserting ‘‘or nurse practitioner
(as defined in subsection (aa)(5))’’ after ‘‘the physician (as defined
in subsection (r)(1))’’.
(b) CLARIFICATION
OF
HOSPICE
ROLE
OF
NURSE
PRACTI-
TIONERS.—Section 1814(a)(7)(A)(i)(I) (42 U.S.C. 1395f(a)(7)(A)(i)(I))
H. R. 1—206
is amended by inserting ‘‘(which for purposes of this subparagraph
does not include a nurse practitioner)’’ after ‘‘attending physician
(as defined in section 1861(dd)(3)(B))’’.
SEC. 409. RURAL HOSPICE DEMONSTRATION PROJECT.
(a) IN GENERAL.—The Secretary shall conduct a demonstration
project for the delivery of hospice care to medicare beneficiaries
in rural areas. Under the project medicare beneficiaries who are
unable to receive hospice care in the facility for lack of an appro-
priate caregiver are provided such care in a facility of 20 or fewer
beds which offers, within its walls, the full range of services pro-
vided by hospice programs under section 1861(dd) of the Social
Security Act (42 U.S.C. 1395x(dd)).
(b) SCOPE OF PROJECT.—The Secretary shall conduct the project
under this section with respect to no more than 3 hospice programs
over a period of not longer than 5 years each.
(c) COMPLIANCE WITH CONDITIONS.—Under the demonstration
project—
(1) the hospice program shall comply with otherwise
applicable requirements, except that it shall not be required
to offer services outside of the home or to meet the requirements
of section 1861(dd)(2)(A)(iii) of the Social Security Act; and
(2) payments for hospice care shall be made at the rates
otherwise applicable to such care under title XVIII of such
Act.
The Secretary may require the program to comply with such addi-
tional quality assurance standards for its provision of services in
its facility as the Secretary deems appropriate.
(d) REPORT.—Upon completion of the project, the Secretary
shall submit a report to Congress on the project and shall include
in the report recommendations regarding extension of such project
to hospice programs serving rural areas.
SEC. 410. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND FEDER-
ALLY QUALIFIED HEALTH CENTER SERVICES FROM THE
PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING
FACILITIES.
(a) 
IN
GENERAL.—Section 
1888(e)(2)(A) 
(42 
U.S.C.
1395yy(e)(2)(A)) is amended—
(1) in clause (i)(II), by striking ‘‘clauses (ii) and (iii)’’ and
inserting ‘‘clauses (ii), (iii), and (iv)’’; and
(2) by adding at the end the following new clause:
‘‘(iv) EXCLUSION OF CERTAIN RURAL HEALTH CLINIC
AND FEDERALLY QUALIFIED HEALTH CENTER SERVICES.—
Services described in this clause are—
‘‘(I) rural health clinic services (as defined in
paragraph (1) of section 1861(aa)); and
‘‘(II) federally qualified health center services
(as defined in paragraph (3) of such section);
that would be described in clause (ii) if such services
were furnished by an individual not affiliated with
a rural health clinic or a federally qualified health
center.’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to services furnished on or after January 1, 2005.
H. R. 1—207
SEC. 410A. RURAL COMMUNITY HOSPITAL DEMONSTRATION PRO-
GRAM.
(a) ESTABLISHMENT
OF RURAL COMMUNITY HOSPITAL (RCH)
DEMONSTRATION PROGRAM.—
(1) IN
GENERAL.—The Secretary shall establish a dem-
onstration program to test the feasibility and advisability of
the establishment of rural community hospitals (as defined
in subsection (f)(1)) to furnish covered inpatient hospital serv-
ices (as defined in subsection (f)(2)) to medicare beneficiaries.
(2) DEMONSTRATION
AREAS.—The program shall be con-
ducted in rural areas selected by the Secretary in States with
low population densities, as determined by the Secretary.
(3) APPLICATION.—Each rural community hospital that is
located in a demonstration area selected under paragraph (2)
that desires to participate in the demonstration program under
this section shall submit an application to the Secretary at
such time, in such manner, and containing such information
as the Secretary may require.
(4) SELECTION OF HOSPITALS.—The Secretary shall select
from among rural community hospitals submitting applications
under paragraph (3) not more than 15 of such hospitals to
participate in the demonstration program under this section.
(5) DURATION.—The Secretary shall conduct the demonstra-
tion program under this section for a 5-year period.
(6) IMPLEMENTATION.—The Secretary shall implement the
demonstration program not later than January 1, 2005, but
may not implement the program before October 1, 2004.
(b) PAYMENT.—
(1) IN GENERAL.—The amount of payment under the dem-
onstration program for covered inpatient hospital services fur-
nished 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—
(A) for discharges occurring in the first cost reporting
period beginning on or after the implementation of the
demonstration program, the reasonable costs of providing
such services; and
(B) for discharges occurring in a subsequent cost
reporting period under the demonstration program, the
lesser of—
(i) the reasonable costs of providing such services
in the cost reporting period involved; or
(ii) the target amount (as defined in paragraph
(2), applicable to the cost reporting period involved.
(2) TARGET AMOUNT.—For purposes of paragraph (1)(B)(ii),
the term ‘‘target amount’’ means, with respect to a rural
community hospital for a particular 12-month cost reporting
period—
(A) in the case of the second such reporting period
for which this subsection is in effect, the reasonable costs
of providing such covered inpatient hospital services as
determined under paragraph (1)(A), and
(B) in the case of a later reporting period, the target
amount for the preceding 12-month cost reporting period,
increased by the applicable percentage increase (under clause
(i) of section 1886(b)(3)(B) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B))) in the market basket percentage increase
H. R. 1—208
(as defined in clause (iii) of such section) for that particular
cost reporting period.
(c) FUNDING.—
(1) IN
GENERAL.—The Secretary shall provide for the
transfer from the Federal Hospital Insurance Trust Fund under
section 1817 of the Social Security Act (42 U.S.C. 1395i) of
such funds as are necessary for the costs of carrying out the
demonstration program under this section.
(2) BUDGET NEUTRALITY.—In conducting the demonstration
program under this section, the Secretary shall ensure that
the aggregate payments made by the Secretary do not exceed
the amount which the Secretary would have paid if the dem-
onstration program under this section was not implemented.
(d) WAIVER
AUTHORITY.—The Secretary may waive such
requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) as may be necessary for the purpose of carrying
out the demonstration program under this section.
(e) REPORT.—Not later than 6 months after the completion
of the demonstration program under this section, the Secretary
shall submit to Congress a report on such program, together with
recommendations for such legislation and administrative action as
the Secretary determines to be appropriate.
(f) DEFINITIONS.—In this section:
(1) RURAL COMMUNITY HOSPITAL DEFINED.—
(A) IN GENERAL.—The term ‘‘rural community hospital’’
means a hospital (as defined in section 1861(e) of the
Social Security Act (42 U.S.C. 1395x(e))) that—
(i) is located in a rural area (as defined in section
1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D)))
or treated as being so located pursuant to section
1886(d)(8)(E) of such Act (42 U.S.C. 1395ww(d)(8)(E));
(ii) subject to paragraph (2), has fewer than 51
acute care inpatient beds, as reported in its most recent
cost report;
(iii) makes available 24-hour emergency care serv-
ices; and
(iv) is not eligible for designation, or has not been
designated, as a critical access hospital under section
1820.
(B) TREATMENT OF PSYCHIATRIC AND REHABILITATION
UNITS.—For purposes of paragraph (1)(B), beds in a psy-
chiatric or rehabilitation unit of the hospital which is a
distinct part of the hospital shall not be counted.
(2) COVERED
INPATIENT
HOSPITAL
SERVICES.—The term
‘‘covered inpatient hospital services’’ means inpatient hospital
services, and includes extended care services furnished under
an agreement under section 1883 of the Social Security Act
(42 U.S.C. 1395tt).
H. R. 1—209
Subtitle B—Provisions Relating to Part B
Only
SEC. 411. TWO-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR
SMALL RURAL HOSPITALS AND SOLE COMMUNITY HOS-
PITALS UNDER THE PROSPECTIVE PAYMENT SYSTEM
FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES.
(a) HOLD HARMLESS PROVISIONS.—
(1) IN
GENERAL.—Section 1833(t)(7)(D)(i) (42 U.S.C.
1395l(t)(7)(D)(i)) is amended—
(A) in the heading, by striking ‘‘SMALL’’ and inserting
‘‘CERTAIN’’;
(B) by inserting ‘‘or a sole community hospital (as
defined in section 1886(d)(5)(D)(iii)) located in a rural area’’
after ‘‘100 beds’’; and
(C) by striking ‘‘2004’’ and inserting ‘‘2006’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1)(B) shall apply with respect to cost reporting periods begin-
ning on and after January 1, 2004.
(b) STUDY; AUTHORIZATION OF ADJUSTMENT.—Section 1833(t)
(42 U.S.C. 1395l(t)) is amended—
(1) by redesignating paragraph (13) as paragraph (16);
and
(2) by inserting after paragraph (12) the following new
paragraph:
‘‘(13) AUTHORIZATION
OF
ADJUSTMENT
FOR
RURAL
HOS-
PITALS.—
‘‘(A) STUDY.—The Secretary shall conduct a study to
determine if, under the system under this subsection, costs
incurred by hospitals located in rural areas by ambulatory
payment classification groups (APCs) exceed those costs
incurred by hospitals located in urban areas.
‘‘(B) AUTHORIZATION OF ADJUSTMENT.—Insofar as the
Secretary determines under subparagraph (A) that costs
incurred by hospitals located in rural areas exceed those
costs incurred by hospitals located in urban areas, the
Secretary shall provide for an appropriate adjustment
under paragraph (2)(E) to reflect those higher costs by
January 1, 2006.’’.
SEC. 412. ESTABLISHMENT OF FLOOR ON WORK GEOGRAPHIC ADJUST-
MENT.
Section 1848(e)(1) (42 U.S.C. 1395w–4(e)(1)) is amended—
(1) in subparagraph (A), by striking ‘‘subparagraphs (B)
and (C)’’ and inserting ‘‘subparagraphs (B), (C), and (E)’’; and
(2) by adding at the end the following new subparagraph:
‘‘(E) FLOOR AT 1.0 ON WORK GEOGRAPHIC INDEX.—After
calculating the work geographic index in subparagraph
(A)(iii), for purposes of payment for services furnished on
or after January 1, 2004, and before January 1, 2007,
the Secretary shall increase the work geographic index
to 1.00 for any locality for which such work geographic
index is less than 1.00.’’.
H. R. 1—210
SEC. 413. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS
FOR PHYSICIAN SCARCITY.
(a) ADDITIONAL INCENTIVE PAYMENT FOR CERTAIN PHYSICIAN
SCARCITY AREAS.—Section 1833 (42 U.S.C. 1395l) is amended by
adding at the end the following new subsection:
‘‘(u) INCENTIVE PAYMENTS FOR PHYSICIAN SCARCITY AREAS.—
‘‘(1) IN GENERAL.—In the case of physicians’ services fur-
nished on or after January 1, 2005, and before January 1,
2008—
‘‘(A) by a primary care physician in a primary care
scarcity county (identified under paragraph (4)); or
‘‘(B) by a physician who is not a primary care physician
in a specialist care scarcity county (as so identified),
in addition to the amount of payment that would otherwise
be made for such services under this part, there also shall
be paid an amount equal to 5 percent of the payment amount
for the service under this part.
‘‘(2) DETERMINATION OF RATIOS OF PHYSICIANS TO MEDICARE
BENEFICIARIES IN AREA.—Based upon available data, the Sec-
retary shall establish for each county or equivalent area in
the United States, the following:
‘‘(A) NUMBER OF PHYSICIANS PRACTICING IN THE AREA.—
The number of physicians who furnish physicians’ services
in the active practice of medicine or osteopathy in that
county or area, other than physicians whose practice is
exclusively for the Federal Government, physicians who
are retired, or physicians who only provide administrative
services. Of such number, the number of such physicians
who are—
‘‘(i) primary care physicians; or
‘‘(ii) physicians who are not primary care physi-
cians.
‘‘(B) NUMBER OF MEDICARE BENEFICIARIES RESIDING IN
THE AREA.—The number of individuals who are residing
in the county and are entitled to benefits under part A
or enrolled under this part, or both (in this subsection
referred to as ‘individuals’).
‘‘(C) DETERMINATION OF RATIOS.—
‘‘(i) PRIMARY CARE RATIO.—The ratio (in this para-
graph referred to as the ‘primary care ratio’) of the
number of primary care physicians (determined under
subparagraph (A)(i)), to the number of individuals
determined under subparagraph (B).
‘‘(ii) SPECIALIST CARE RATIO.—The ratio (in this
paragraph referred to as the ‘specialist care ratio’)
of the number of other physicians (determined under
subparagraph (A)(ii)), to the number of individuals
determined under subparagraph (B).
‘‘(3) RANKING OF COUNTIES.—The Secretary shall rank each
such county or area based separately on its primary care ratio
and its specialist care ratio.
‘‘(4) IDENTIFICATION OF COUNTIES.—
‘‘(A) IN GENERAL.—The Secretary shall identify—
‘‘(i) those counties and areas (in this paragraph
referred to as ‘primary care scarcity counties’) with
the lowest primary care ratios that represent, if each
such county or area were weighted by the number
H. R. 1—211
of individuals determined under paragraph (2)(B), an
aggregate total of 20 percent of the total of the individ-
uals determined under such paragraph; and
‘‘(ii) those counties and areas (in this subsection
referred to as ‘specialist care scarcity counties’) with
the lowest specialist care ratios that represent, if each
such county or area were weighted by the number
of individuals determined under paragraph (2)(B), an
aggregate total of 20 percent of the total of the individ-
uals determined under such paragraph.
‘‘(B) PERIODIC REVISIONS.—The Secretary shall periodi-
cally revise the counties or areas identified in subparagraph
(A) (but not less often than once every three years) unless
the Secretary determines that there is no new data avail-
able on the number of physicians practicing in the county
or area or the number of individuals residing in the county
or area, as identified in paragraph (2).
‘‘(C) IDENTIFICATION OF COUNTIES WHERE SERVICE IS
FURNISHED.—For purposes of paying the additional amount
specified in paragraph (1), if the Secretary uses the 5-
digit postal ZIP Code where the service is furnished, the
dominant county of the postal ZIP Code (as determined
by the United States Postal Service, or otherwise) shall
be used to determine whether the postal ZIP Code is in
a scarcity county identified in subparagraph (A) or revised
in subparagraph (B).
‘‘(D) JUDICIAL REVIEW.—There shall be no administra-
tive or judicial review under section 1869, 1878, or other-
wise, respecting—
‘‘(i) the identification of a county or area;
‘‘(ii) the assignment of a specialty of any physician
under this paragraph;
‘‘(iii) the assignment of a physician to a county
under paragraph (2); or
‘‘(iv) the assignment of a postal ZIP Code to a
county or other area under this subsection.
‘‘(5) RURAL CENSUS TRACTS.—To the extent feasible, the
Secretary shall treat a rural census tract of a metropolitan
statistical area (as determined under the most recent modifica-
tion of the Goldsmith Modification, originally published in the
Federal Register on February 27, 1992 (57 Fed. Reg. 6725)),
as an equivalent area for purposes of qualifying as a primary
care scarcity county or specialist care scarcity county under
this subsection.
‘‘(6) PHYSICIAN DEFINED.—For purposes of this paragraph,
the term ‘physician’ means a physician described in section
1861(r)(1) and the term ‘primary care physician’ means a physi-
cian who is identified in the available data as a general practi-
tioner, family practice practitioner, general internist, or
obstetrician or gynecologist.
‘‘(7) PUBLICATION
OF
LIST
OF
COUNTIES; POSTING
ON
WEBSITE.—With respect to a year for which a county or area
is identified or revised under paragraph (4), the Secretary shall
identify such counties or areas as part of the proposed and
final rule to implement the physician fee schedule under section
1848 for the applicable year. The Secretary shall post the
list of counties identified or revised under paragraph (4) on
H. R. 1—212
the Internet website of the Centers for Medicare & Medicaid
Services.’’.
(b) IMPROVEMENT
TO MEDICARE INCENTIVE PAYMENT PRO-
GRAM.—
(1) IN GENERAL.—Section 1833(m) (42 U.S.C. 1395l(m)) is
amended—
(A) by inserting ‘‘(1)’’ after ‘‘(m)’’;
(B) in paragraph (1), as designated by subparagraph
(A)—
(i) by inserting ‘‘in a year’’ after ‘‘In the case of
physicians’ services furnished’’; and
(ii) by inserting ‘‘as identified by the Secretary
prior to the beginning of such year’’ after ‘‘as a health
professional shortage area’’; and
(C) by adding at the end the following new paragraphs:
‘‘(2) For each health professional shortage area identified in
paragraph (1) that consists of an entire county, the Secretary shall
provide for the additional payment under paragraph (1) without
any requirement on the physician to identify the health professional
shortage area involved. The Secretary may implement the previous
sentence using the method specified in subsection (u)(4)(C).
‘‘(3) The Secretary shall post on the Internet website of the
Centers for Medicare & Medicaid Services a list of the health
professional shortage areas identified in paragraph (1) that consist
of a partial county to facilitate the additional payment under para-
graph (1) in such areas.
‘‘(4) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, respecting—
‘‘(A) the identification of a county or area;
‘‘(B) the assignment of a specialty of any physician under
this paragraph;
‘‘(C) the assignment of a physician to a county under this
subsection; or
‘‘(D) the assignment of a postal ZIP Code to a county
or other area under this subsection.’’.
(2) EFFECTIVE DATE.—The amendments made by paragraph
(1) shall apply to physicians’ services furnished on or after
January 1, 2005.
(c) GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS
FOR PHYSICIANS’ SERVICES.—
(1) STUDY.—The Comptroller General of the United States
shall conduct a study of differences in payment amounts under
the physician fee schedule under section 1848 of the Social
Security Act (42 U.S.C. 1395w–4) for physicians’ services in
different geographic areas. Such study shall include—
(A) an assessment of the validity of the geographic
adjustment factors used for each component of the fee
schedule;
(B) an evaluation of the measures used for such adjust-
ment, including the frequency of revisions;
(C) an evaluation of the methods used to determine
professional liability insurance costs used in computing
the malpractice component, including a review of increases
in professional liability insurance premiums and variation
in such increases by State and physician specialty and
methods used to update the geographic cost of practice
H. R. 1—213
index and relative weights for the malpractice component;
and
(D) an evaluation of the effect of the adjustment to
the physician work geographic index under section
1848(e)(1)(E) of the Social Security Act, as added by section
412, on physician location and retention in areas affected
by such adjustment, taking into account—
(i) differences in recruitment costs and retention
rates for physicians, including specialists, between
large urban areas and other areas; and
(ii) the mobility of physicians, including specialists,
over the last decade.
(2) REPORT.—Not later than 1 year after the date of the
enactment of this Act, the Comptroller General shall submit
to Congress a report on the study conducted under paragraph
(1). The report shall include recommendations regarding the
use of more current data in computing geographic cost of prac-
tice indices as well as the use of data directly representative
of physicians’ costs (rather than proxy measures of such costs).
SEC. 414. PAYMENT FOR RURAL AND URBAN AMBULANCE SERVICES.
(a) PHASE-IN PROVIDING FLOOR USING BLEND OF FEE SCHEDULE
AND
REGIONAL
FEE
SCHEDULES.—Section 1834(l) (42 U.S.C.
1395m(l)) is amended—
(1) in paragraph (2)(E), by inserting ‘‘consistent with para-
graph (11)’’ after ‘‘in an efficient and fair manner’’; and
(2) by redesignating paragraph (8), as added by section
221(a) of BIPA (114 Stat. 2763A–486), as paragraph (9); and
(3) by adding at the end the following new paragraph:
‘‘(10) PHASE-IN
PROVIDING
FLOOR
USING
BLEND
OF
FEE
SCHEDULE AND REGIONAL FEE SCHEDULES.—In carrying out the
phase-in under paragraph (2)(E) for each level of ground service
furnished in a year, the portion of the payment amount that
is based on the fee schedule shall be the greater of the amount
determined under such fee schedule (without regard to this
paragraph) or the following blended rate of the fee schedule
under paragraph (1) and of a regional fee schedule for the
region involved:
‘‘(A) For 2004 (for services furnished on or after July
1, 2004), the blended rate shall be based 20 percent on
the fee schedule under paragraph (1) and 80 percent on
the regional fee schedule.
‘‘(B) For 2005, the blended rate shall be based 40
percent on the fee schedule under paragraph (1) and 60
percent on the regional fee schedule.
‘‘(C) For 2006, the blended rate shall be based 60
percent on the fee schedule under paragraph (1) and 40
percent on the regional fee schedule.
‘‘(D) For 2007, 2008, and 2009, the blended rate shall
be based 80 percent on the fee schedule under paragraph
(1) and 20 percent on the regional fee schedule.
‘‘(E) For 2010 and each succeeding year, the blended
rate shall be based 100 percent on the fee schedule under
paragraph (1).
For purposes of this paragraph, the Secretary shall establish
a regional fee schedule for each of the nine census divisions
(referred to in section 1886(d)(2)) using the methodology (used