that is a distinct part of the long-term care hospital, 
if the distinct part meets the requirements (includ-
ing conditions of participation) that would otherwise 
apply to a distinct-part rehabilitation unit if the dis-
tinct part were established by a subsection (d) hos-
pital in accordance with the matter following clause 
(v) of section 1886(d)(1)(B) of such Act, including 
any regulations adopted by the Secretary in accord-
ance with this section, except that the one-year wait-
ing period described in section 412.30(c) of title 42, 
Code of Federal Regulations, applicable to the con-
version of hospital beds into a distinct-part rehabili-
tation unit shall not apply to such units. 
(2) Services provided in inpatient rehabilitation 
units established under paragraph (1) shall not be 
reimbursed as long-term care hospital services under 
section 1886 of such Act and shall be subject to pay-
ment policies established by the Secretary to reim-
burse services provided by inpatient hospital reha-
bilitation units. 
(d) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (b), and subsection (c), shall apply to 
discharges occurring on or after January 1, 2008. 
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SEC. 3. IMPLEMENTATION OF FACILITY AND PATIENT CRI-
TERIA. 
(a) REPORT.—No later than 1 year after the date 
of the enactment of this Act, the Secretary of Health and 
Human Services (in this Act referred to as the ‘‘Sec-
retary’’) shall submit to the appropriate committees of 
Congress a report containing recommendations regarding 
the promulgation of the national long-term care hospital 
facility and patient criteria for application under para-
graphs (4) and (5) of section 1861(ccc) and section 
1886(m) of the Social Security Act, as added by section 
2. In the report, the Secretary shall consider recommenda-
tions contained in a report to Congress by the Medicare 
Payment Advisory Commission in June 2004 for long- 
term care hospital-specific facility and patient criteria to 
ensure that patients admitted to long-term care hospitals 
are medically complex and appropriate to receive long- 
term care hospital services. 
(b) IMPLEMENTATION.—No later than 1 year after 
the date of submittal of the report under subsection (a), 
the Secretary shall, after rulemaking, implement the na-
tional long-term care hospital facility and patient criteria 
referred to in such subsection. Such long-term care hos-
pital facility and patient criteria shall be used to screen 
patients in determining the medical necessity and appro-
priateness of a Medicare beneficiary’s admission to, con-
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tinued stay at, and discharge from, long-term care hos-
pitals under the Medicare program and shall take into ac-
count the medical judgment of the patient’s physician, as 
provided for under sections 1814(a)(3) and 1835(a)(2)(B) 
of the Social Security Act (42 U.S.C. 1395f(a)(3), 
1395n(a)(2)(B)). 
SEC. 4. EXPANDED REVIEW OF MEDICAL NECESSITY. 
(a) EXPANDED DUTIES OF QIOS.—Section 1154(a) 
of the Social Security Act (42 U.S.C. 1320c–3(a)) is 
amended by adding at the end the following new para-
graph: 
‘‘(18)(A) The organization shall review the 
medical necessity of admissions to long-term care 
hospitals (described in section 1886(d)(1)(B)(iv)(I)) 
and continued stay at such hospitals, of individuals 
entitled to, or enrolled for, benefits under part A of 
title XVIII, on a hospital-specific basis. 
‘‘(B) The medical necessity reviews under sub-
paragraph (A) shall be conducted for each such 
long-term care hospital on an annual basis in ac-
cordance with rules (including a sample method-
ology) specified by the Secretary. Such sample meth-
odology shall— 
‘‘(i) provide for a statistically valid and 
representative sample of admissions of such in-
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dividuals sufficient to provide results at a 95 
percent confidence interval; and 
‘‘(ii) guarantee that no less than 65 per-
cent of overpayments received by long-term care 
hospitals for medically unnecessary admissions 
and continued stays of individuals in long-term 
care hospitals will be identified and recovered 
and that related days of care will not be count-
ed toward the length of stay requirement con-
tained in section 1886(d)(i)(B)(iv)(I). 
‘‘(C) The Secretary shall establish a denial rate 
with respect to such reviews that, if exceeded, could 
require further review of the medical necessity of ad-
missions and continued stay in the hospital involved. 
‘‘(D)(i) Subject to clause (iii), the previous pro-
visions of this paragraph shall cease to apply as of 
the date specified in clause (ii). 
‘‘(ii) The date specified in this clause is the 
later of January 1, 2013, or the date of implementa-
tion of national long-term care hospital facility and 
patient criteria under section 3 of the Medicare 
Long-Term Care Patient Safety and Improvement 
Act of 2007. 
‘‘(iii) As of the date specified in clause (ii), the 
Secretary shall determine whether to continue to 
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guarantee, through continued medical review and 
sampling under this paragraph, recovery of no less 
than 65 percent of overpayments received by long- 
term care hospitals due to medically unnecessary ad-
missions and continued stays.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to discharges occurring on or 
after October 1, 2007. 
SEC. 5. LIMITED, QUALIFIED MORATORIUM OF LONG-TERM 
CARE HOSPITALS. 
(a) IN GENERAL.—Subject to subsection (b), the Sec-
retary shall impose a temporary moratorium on the certifi-
cation of new long-term care hospitals (and satellite facili-
ties) for purposes of the Medicare program under title 
XVIII of the Social Security Act. The moratorium shall 
terminate at the end of the 3-year period beginning on 
the date of the enactment of this Act. 
(b) EXCEPTIONS.— 
(1) IN GENERAL.—The moratorium under sub-
section (a) shall not apply— 
(A) to a long-term care hospital or satellite 
facility that is under development as of the date 
of the enactment of this Act; or 
(B) to a long-term care hospital in an area 
in which there is not a long-term care hospital, 
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