subparagraph is deemed a reference to the first cost 
reporting period beginning on or after October 1, 
2006; and 
‘‘(III) the applicable percentage increase shall 
only be applied under subparagraph (C)(iv) for dis-
charges occurring in fiscal years beginning with fis-
cal year 2008.’’. 
(b) 
CONFORMING
AMENDMENTS.—Section 
1886(b)(3) of such Act (42 U.S.C. 1395ww(b)(3)) is 
amended— 
(1) in subparagraph (C), by inserting ‘‘and sub-
paragraph (K)’’ after ‘‘subject to subparagraph (I)’’ 
in the matter preceding clause (i); and 
(2) in subparagraph (I)(i)— 
(A) by striking ‘‘For’’ in the matter pre-
ceding subclause (I) and inserting ‘‘Subject to 
subparagraph (K), for’’; and 
(B) in subclause (I), by inserting ‘‘and 
subparagraph (K)’’ after ‘‘referred to in this 
clause’’. 
SEC. 105. ESTABLISHMENT OF RURAL COMMUNITY HOS-
PITAL (RCH) PROGRAM. 
(a) IN GENERAL.—Section 1861 of the Social Secu-
rity Act (42 U.S.C. 1395x), as amended by section 201, 
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is amended by adding at the end of the following new sub-
section: 
‘‘Rural Community Hospital; Rural Community Hospital 
Services 
‘‘(ddd)(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 lo-
cated pursuant to section 1886(d)(8)(E); 
‘‘(B) subject to paragraph (2), has less than 51 
acute care inpatient beds, as reported in its most re-
cent cost report; 
‘‘(C) makes available 24-hour emergency care 
services; 
‘‘(D) subject to paragraph (3), has a provider 
agreement in effect with the Secretary and is open 
to the public as of January 1, 2006; and 
‘‘(E) applies to the Secretary for such designa-
tion. 
‘‘(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)(D) shall not be construed to 
prohibit any of the following from qualifying as a rural 
community hospital: 
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‘‘(A) A replacement facility (as defined by the 
Secretary in regulations in effect on January 1, 
2006) with the same service area (as defined by the 
Secretary in regulations in effect on such date). 
‘‘(B) A facility obtaining a new provider num-
ber 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 financ-
ing of a building as of January 1, 2006. 
‘‘(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. 
‘‘(5) Nothing in this subsection shall be construed as 
prohibiting a rural community hospital participating in 
the demonstration program under Section 410A of the 
Medicare Prescription Drug, Improvement, and Mod-
ernization Act of 2003 (Public Law 108–173; 117 Stat. 
2313) from qualifying as a rural community hospital if 
the rural community hospital meets the conditions other-
wise applicable to hospitals under subsection (e) and sec-
tion 1866.’’. 
(b) PAYMENT.— 
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