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(2) QUALITY
STANDARDS
AND
QUALITY
RE-
PORTING.—Section 1852(e)(3) of such Act (42 
U.S.C. 1395w–22(e)(3) is amended— 
(A) in subparagraph (A)(i), by adding at 
the end the following: ‘‘In the case of a special-
ized Medicare Part C plan for special needs in-
dividuals described in paragraph (2), (3), or (4) 
of section 1859(f), the organization shall pro-
vide for the reporting on quality measures de-
veloped for the plan under subparagraph 
(D)(iii).’’; and 
(B) in subparagraph (D), as added by sec-
tion 422(a)(1), by adding at the end the fol-
lowing new clause: 
‘‘(iii) SPECIFICATION OF ADDITIONAL 
QUALITY
MEASUREMENTS
FOR
SPECIAL-
IZED PART C PLANS.—For implementation 
for plan years beginning not later than 
January 1, 2010, the Secretary shall de-
velop new quality measures appropriate to 
meeting the needs of— 
‘‘(I) beneficiaries enrolled in spe-
cialized Medicare Part C plans for 
special needs individuals (described in 
section 
1859(b)(6)(A)(ii)(I)) 
that 
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serve predominantly individuals who 
are dual-eligible individuals eligible for 
medical assistance under title XIX by 
measuring the special needs for care 
of individuals who are both Medicare 
and Medicaid beneficiaries; 
‘‘(II) beneficiaries enrolled in 
specialized Medicare Part C plans for 
special needs individuals (described in 
section 
1859(b)(6)(A)(ii)(II)) 
that 
serve predominantly institutionalized 
individuals by measuring the special 
needs for care of individuals who are 
a resident in long-term care institu-
tion; and 
‘‘(III) beneficiaries enrolled in 
specialized Medicare Part C plans for 
special needs individuals (described in 
section 
1859(b)(6)(A)(ii)(III)) 
that 
serve predominantly individuals with 
severe or disabling chronic conditions 
by measuring the special needs for 
care of such individuals.’’. 
(3) EFFECTIVE
DATE; GRANDFATHER.—The 
amendments made by paragraph (1) shall take effect 
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for enrollments occurring on or after January 1, 
2009, and shall not apply— 
(A) to a Medicare Advantage plan with a 
contract with a State Medicaid integrated Medi-
care-Medicaid plan program that had been ap-
proved by the Centers for Medicare & Medicaid 
Services as of January 1, 2004; and 
(B) to plans that are operational as of the 
date of the enactment of this Act as approved 
Medicare demonstration projects and that pro-
vide services predominantly to individuals with 
end-stage renal disease. 
(4) TRANSITION FOR NON-QUALIFYING SNPS.— 
(A) RESTRICTIONS IN 2008 FOR CHRONIC 
CARE SNPS.—In the case of a specialized MA 
plan for special needs individuals (as defined in 
section 1859(b)(6)(A) of the Social Security Act 
(42 U.S.C. 1395w–28(b)(6)(A)) that, as of De-
cember 31, 2007, is not described in either sub-
clause (I) or subclause (II) of clause (ii) of such 
section, as amended by paragraph (1), then as 
of January 1, 2008— 
(i) the plan may not be offered unless 
it was offered before such date; 
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(ii) no new members may be enrolled 
with the plan; and 
(iii) there may be no expansion of the 
service area of such plan. 
(B) TRANSITION
OF
ENROLLEES.—The 
Secretary of Health and Human Services shall 
provide for an orderly transition of those spe-
cialized MA plans for special needs individuals 
(as defined in section 1859(b)(6)(A) of the So-
cial 
Security 
Act 
(42 
U.S.C. 
1395w– 
28(b)(6)(A)), as of the date of the enactment of 
this Act), and their enrollees, that no longer 
qualify as such plans under such section, as 
amended by this subsection. 
(c) SUNSET OF ADDITIONAL DESIGNATION AUTHOR-
ITY.— 
(1) IN
GENERAL.—Subsection (d) of section 
231 of the Medicare Prescription Drug, Improve-
ment, and Modernization Act of 2003 (Public Law 
108–173) is repealed. 
(2) EFFECTIVE
DATE.—The repeal made by 
paragraph (1) shall take effect on January 1, 2009, 
and shall apply to plans offered on or after such 
date. 
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SEC. 432. EXTENSION AND REVISION OF AUTHORITY FOR 
MEDICARE REASONABLE COST CONTRACTS. 
(a) EXTENSION FOR 3 YEARS OF PERIOD REASON-
ABLE COST PLANS CAN REMAIN IN THE MARKET.—Sec-
tion 1876(h)(5)(C)(ii) of the Social Security Act (42 
U.S.C. 1395mm(h)(5)(C)(ii)) is amended, in the matter 
preceding subclause (I), by striking ‘‘January 1, 2008’’ 
and inserting ‘‘January 1, 2011’’. 
(b) APPLICATION OF CERTAIN MEDICARE ADVAN-
TAGE REQUIREMENTS TO COST CONTRACTS EXTENDED 
OR RENEWED AFTER ENACTMENT.—Section 1876(h) of 
such Act (42 U.S.C. 1395mm(h)), as amended by sub-
section (a), is amended— 
(1) by redesignating paragraph (5) as para-
graph (6); and 
(2) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5)(A) Any reasonable cost reimbursement 
contract with an eligible organization under this sub-
section that is extended or renewed on or after the 
date of enactment of the Children’s Health and 
Medicare Protection Act of 2007 shall provide that 
the provisions of the Medicare Part C program de-
scribed in subparagraph (B) shall apply to such or-
ganization and such contract in a substantially simi-
lar manner as such provisions apply to Medicare 
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Part C organizations and Medicare Part C plans 
under part C. 
‘‘(B) The provisions described in this sub-
paragraph are as follows: 
‘‘(i) Section 1851(h) (relating to the 
approval of marketing material and appli-
cation forms). 
‘‘(ii) Section 1852(e) (relating to the 
requirement of having an ongoing quality 
improvement program and treatment of ac-
creditation in the same manner as such 
provisions apply to Medicare Part C local 
plans that are preferred provider organiza-
tion plans). 
‘‘(iii) Section 1852(f) (relating to 
grievance mechanisms). 
‘‘(iv) Section 1852(g) (relating to cov-
erage determinations, reconsiderations, and 
appeals). 
‘‘(v) Section 1852(j)(4) (relating to 
limitations on physician incentive plans). 
‘‘(vi) Section 1854(c) (relating to the 
requirement of uniform premiums among 
individuals enrolled in the plan). 
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‘‘(vii) Section 1854(g) (relating to re-
strictions on imposition of premium taxes 
with respect to payments to organizations). 
‘‘(viii) Section 1856(b)(3) (relating to 
relation to State laws). 
‘‘(ix) The provisions of part C relating 
to timelines for contract renewal and bene-
ficiary notification.’’. 
TITLE 
V—PROVISIONS 
RELAT-
ING TO MEDICARE PART A 
SEC. 501. INPATIENT HOSPITAL PAYMENT UPDATES. 
(a) FOR ACUTE HOSPITALS.—Clause (i) of section 
1886(b)(3)(B) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)) is amended— 
(1) in subclause (XIX), by striking ‘‘and’’; 
(2) by redesignating subclause (XX) as sub-
clause (XXII); and 
(3) by inserting after subclause (XIX) the fol-
lowing new subclauses: 
‘‘(XX) for fiscal year 2007, subject to clause 
(viii), the market basket percentage increase for hos-
pitals in all areas, 
‘‘(XXI) for fiscal year 2008, subject to clause 
(viii), the market basket percentage increase minus 
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0.25 percentage point for hospitals in all areas, 
and’’. 
(b) FOR OTHER HOSPITALS.—Clause (ii) of such sec-
tion is amended— 
(1) in subclause (VII) by striking ‘‘and’’; 
(2) by redesignating subclause (VIII) as sub-
clause (X); and 
(3) by inserting after subclause (VII) the fol-
lowing new subclauses: 
‘‘(VIII) fiscal years 2003 through 2007, is the 
market basket percentage increase, 
‘‘(IX) fiscal year 2008, is the market basket 
percentage increase minus 0.25 percentage point, 
and’’. 
(c) DELAYED EFFECTIVE DATE.— 
(1) ACUTE
CARE
HOSPITALS.—The amend-
ments made by subsection (a) shall not apply to dis-
charges occurring before January 1, 2008. 
(2) 
OTHER
HOSPITALS.—The 
amendments 
made by subsection (b) shall be applied, only with 
respect to cost reporting periods beginning during 
fiscal year 2008 and not with respect to the com-
putation for any succeeding cost reporting period, by 
substituting ‘‘0.1875 percentage point’’ for ‘‘0.25 
percentage point’’. 
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SEC. 502. PAYMENT FOR INPATIENT REHABILITATION FA-
CILITY (IRF) SERVICES. 
(a) PAYMENT UPDATE.— 
(1) IN GENERAL.—Section 1886(j)(3)(C) of the 
Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is 
amended by adding at the end the following: ‘‘The 
increase factor to be applied under this subpara-
graph for fiscal year 2008 shall be 1 percent.’’. 
(2) DELAYED EFFECTIVE DATE.—The amend-
ment made by paragraph (1) shall not apply to pay-
ment units occurring before January 1, 2008. 
(b) INPATIENT REHABILITATION FACILITY CLASSI-
FICATION CRITERIA.— 
(1) IN GENERAL.—Section 5005 of the Deficit 
Reduction Act of 2005 (Public Law 109–171) is 
amended— 
(A) in subsection (a), by striking ‘‘apply 
the applicable percent specified in subsection 
(b)’’ and inserting ‘‘require a compliance rate 
that is no greater than the 60 percent compli-
ance rate that became effective for cost report-
ing periods beginning on or after July 1, 
2006,’’; and 
(B) by amending subsection (b) to read as 
follows: 
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‘‘(b) CONTINUED USE OF COMORBIDITIES.—For por-
tions of cost reporting periods occurring on or after the 
date of the enactment of the Children’s Health and Medi-
care Protection Act of 2007, the Secretary shall include 
patients with comorbidities as described in section 
412.23(b)(2)(i) of title 42, Code of Federal Regulations 
(as in effect as of January 1, 2007), in the inpatient popu-
lation that counts towards the percent specified in sub-
section (a).’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1)(A) shall apply to portions of cost 
reporting periods beginning on or after the date of 
the enactment of this Act. 
(c) PAYMENT FOR CERTAIN MEDICAL CONDITIONS 
TREATED IN INPATIENT REHABILITATION FACILITIES.— 
(1) IN GENERAL.—Section 1886(j) of the Social 
Security Act (42 U.S.C. 1395ww(j)) is amended— 
(A) by redesignating paragraph (7) as 
paragraph (8); 
(B) by inserting after paragraph (6) the 
following new paragraph: 
‘‘(7) SPECIAL
PAYMENT
RULE
FOR
CERTAIN 
MEDICAL CONDITIONS.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (H), in the case of discharges occurring 
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on or after October 1, 2008, in lieu of the 
standardized payment amount (as determined 
pursuant to the preceding provisions of this 
subsection) that would otherwise be applicable 
under this subsection, the Secretary shall sub-
stitute, for payment units with respect to an 
applicable medical condition (as defined in sub-
paragraph (G)(i)) that is treated in an inpa-
tient rehabilitation facility, the modified stand-
ardized payment amount determined under sub-
paragraph (B). 
‘‘(B) MODIFIED STANDARDIZED PAYMENT 
AMOUNT.—The modified standardized payment 
amount for an applicable medical condition 
shall be based on the amount determined under 
subparagraph (C) for such condition, as ad-
justed under subparagraphs (D), (E), and (F). 
‘‘(C) AMOUNT DETERMINED.— 
‘‘(i) IN GENERAL.—The amount de-
termined under this subparagraph for an 
applicable medical condition shall be based 
on the sum of the following: 
‘‘(I) An amount equal to the av-
erage per stay skilled nursing facility 
payment rate for the applicable med-
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ical condition (as determined under 
clause (ii)). 
‘‘(II) An amount equal to 25 per-
cent of the difference between the 
overhead costs (as defined in subpara-
graph (G)(ii)) component of the aver-
age inpatient rehabilitation facility per 
stay payment amount for the applica-
ble medical condition (as determined 
under the preceding paragraphs of 
this subsection) and the overhead 
costs component of the average per 
stay skilled nursing facility payment 
rate for such condition (as determined 
under clause (ii)). 
‘‘(III) An amount equal to 33 
percent of the difference between the 
patient care costs (as defined in sub-
paragraph (G)(iii)) component of the 
average inpatient rehabilitation facil-
ity per stay payment amount for the 
applicable medical condition (as deter-
mined under the preceding para-
graphs of this subsection) and the pa-
tient care costs component of the av-
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erage per stay skilled nursing facility 
payment rate for such condition (as 
determined under clause (ii)). 
‘‘(ii) DETERMINATION
OF
AVERAGE 
PER
STAY
SKILLED
NURSING
FACILITY 
PAYMENT RATE.—For purposes of clause 
(i), the Secretary shall convert skilled 
nursing facility payment rates for applica-
ble medical conditions, as determined 
under section 1888(e), to average per stay 
skilled nursing facility payment rates for 
each such condition. 
‘‘(D) ADJUSTMENTS.—The Secretary shall 
adjust the amount determined under subpara-
graph (C) for an applicable medical condition 
using the adjustments to the prospective pay-
ment rates for inpatient rehabilitation facilities 
described in paragraphs (2), (3), (4), and (6). 
‘‘(E) UPDATE FOR INFLATION.—Except in 
the case of a fiscal year for which the Secretary 
rebases the amounts determined under subpara-
graph (C) for applicable medical conditions pur-
suant to subparagraph (F), the Secretary shall 
annually update the amounts determined under 
subparagraph (C) for each applicable medical 
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condition by the increase factor for inpatient re-
habilitation facilities (as described in paragraph 
(3)(C)). 
‘‘(F) REBASING.—The Secretary shall pe-
riodically (but in no case less than once every 
5 years) rebase the amounts determined under 
subparagraph (C) for applicable medical condi-
tions using the methodology described in such 
subparagraph and the most recent and complete 
cost report and claims data available. 
‘‘(G) DEFINITIONS.—In this paragraph: 
‘‘(i) APPLICABLE
MEDICAL
CONDI-
TION.—The term ‘applicable medical condi-
tion’ means— 
‘‘(I) unilateral knee replacement; 
‘‘(II) unilateral hip replacement; 
and 
‘‘(III) unilateral hip fracture. 
‘‘(ii) OVERHEAD
COSTS.—The term 
‘overhead costs’ means those Medicare-al-
lowable costs that are contained in the 
General Service cost centers of the Medi-
care cost reports for inpatient rehabilita-
tion facilities and for skilled nursing facili-
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ties, respectively, as determined by the 
Secretary. 
‘‘(iii) PATIENT
CARE
COSTS.—The 
term ‘patient care costs’ means total Medi-
care-allowable costs minus overhead costs. 
‘‘(H) SUNSET.—The provisions of this 
paragraph shall cease to apply as of the date 
the Secretary implements an integrated, site- 
neutral payment methodology under this title 
for post-acute care.’’; and 
(C) in paragraph (8), as redesignated by 
paragraph (1)— 
(i) in subparagraph (C), by striking 
‘‘and’’ at the end; 
(ii) in subparagraph (D), by striking 
the period at the end and inserting ‘‘, 
and’’; and 
(iii) by adding at the end the fol-
lowing new subparagraph: 
‘‘(E) 
modified 
standardized 
payment 
amounts under paragraph (7).’’. 
(2) SPECIAL
RULE
FOR
DISCHARGES
OCCUR-
RING IN THE SECOND HALF OF FISCAL YEAR 2008.— 
(A) IN
GENERAL.—In the case of dis-
charges from an inpatient rehabilitation facility 
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occurring during the period beginning on April 
1, 2008, and ending on September 30, 2008, 
for applicable medical conditions (as defined in 
paragraph (7)(G)(i) of section 1886(j) of the 
Social Security Act (42 U.S.C. 1395ww(j)), as 
inserted by paragraph (1)(B), in lieu of the 
standardized payment amount determined pur-
suant to such section, the standardized payment 
amount shall be $9,507 for unilateral knee re-
placement, $10,398 for unilateral hip replace-
ment, and $10,958 for unilateral hip fracture. 
Such amounts are the amounts that are esti-
mated would be determined under paragraph 
(7)(C) of such section 1886(j) for such condi-
tions if such paragraph applied for such period. 
Such standardized payment amounts shall be 
multiplied by the relative weights for each case- 
mix group and tier, as published in the final 
rule of the Secretary of Health and Human 
Services for inpatient rehabilitation facility 
services prospective payment for fiscal year 
2008, 
to 
obtain 
the 
applicable 
payment 
amounts for each such condition for each case- 
mix group and tier. 
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(B) IMPLEMENTATION.—Notwithstanding 
any other provision of law, the Secretary of 
Health and Human Services may implement 
this subsection by program instruction or other-
wise. Paragraph (8)(E) of such section 1886(j) 
of the Social Security Act, as added by para-
graph (1)(C), shall apply for purposes of this 
subsection in the same manner as such para-
graph applies for purposes of paragraph (7) of 
such section 1886(j). 
(d) RECOMMENDATIONS
FOR CLASSIFYING INPA-
TIENT REHABILITATION HOSPITALS AND UNITS.— 
(1) REPORT TO CONGRESS.—Not later than 12 
months after the date of the enactment of this Act, 
the Secretary of Health and Human Services, in 
consultation with physicians (including geriatricians 
and physiatrists), administrators of inpatient reha-
bilitation, acute care hospitals, skilled nursing facili-
ties, and other settings providing rehabilitation serv-
ices, Medicare beneficiaries, trade organizations rep-
resenting inpatient rehabilitation hospitals and units 
and skilled nursing facilities, and the Medicare Pay-
ment Advisory Commission, shall submit to the 
Committee on Ways and Means of the House of 
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Representatives and the Committee on Finance of 
the Senate a report that includes— 
(A) an examination of Medicare bene-
ficiaries’ access to medically necessary rehabili-
tation services; 
(B) alternatives or refinements to the 75 
percent rule policy for determining exclusion 
criteria for inpatient rehabilitation hospital and 
unit designation under the Medicare program, 
including determining clinical appropriateness 
of inpatient rehabilitation hospital and unit ad-
missions and alternative criteria which would 
consider a patient’s functional status, diagnosis, 
co-morbidities, and other relevant factors; and 
(C) an examination that identifies any con-
dition for which individuals are commonly ad-
mitted to inpatient rehabilitation hospitals that 
is not included as a condition described in sec-
tion 412.23(b)(2)(iii) of title 42, Code of Fed-
eral Regulations, to determine the appropriate 
setting of care, and any variation in patient 
outcomes and costs, across settings of care, for 
treatment of such conditions. 
For the purposes of this subsection, the term ‘‘75 
percent rule’’ means the requirement of section 
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412.23(b)(2) of title 42, Code of Federal Regula-
tions, that 75 percent of the patients of a rehabilita-
tion hospital or converted rehabilitation unit are in 
1 or more of 13 listed treatment categories. 
(2) CONSIDERATIONS.—In developing the re-
port described in paragraph (1), the Secretary shall 
include the following: 
(A) The potential effect of the 75 percent 
rule on access to rehabilitation care by Medi-
care beneficiaries for the treatment of a condi-
tion, whether or not such condition is described 
in section 412.23(b)(2)(iii) of title 42, Code of 
Federal Regulations. 
(B) An analysis of the effectiveness of re-
habilitation care for the treatment of condi-
tions, whether or not such conditions are de-
scribed in section 412.23(b)(2)(iii) of title 42, 
Code of Federal Regulations, available to Medi-
care beneficiaries in various health care set-
tings, taking into account variation in patient 
outcomes and costs across different settings of 
care, and which may include whether the Medi-
care program and Medicare beneficiaries may 
incur higher costs of care for the entire episode 
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of illness due to readmissions, extended lengths 
of stay, and other factors. 
SEC. 503. LONG-TERM CARE HOSPITALS. 
(a) LONG-TERM CARE HOSPITAL PAYMENT UP-
DATE.— 
(1) IN GENERAL.—Section 1886 of the Social 
Security Act (42 U.S.C. 1395ww) is amended by 
adding at the end the following new subsection: 
‘‘(m) PROSPECTIVE
PAYMENT
FOR
LONG-TERM 
CARE HOSPITALS.— 
‘‘(1) REFERENCE TO ESTABLISHMENT AND IM-
PLEMENTATION OF SYSTEM.—For provisions related 
to the establishment and implementation of a pro-
spective payment system for payments under this 
title for inpatient hospital services furnished by a 
long-term care hospital described in subsection 
(d)(1)(B)(iv), see section 123 of the Medicare, Med-
icaid, and SCHIP Balanced Budget Refinement Act 
of 1999 and section 307(b) of Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protection 
Act of 2000. 
‘‘(2) UPDATE FOR RATE YEAR 2008.—In imple-
menting the system described in paragraph (1) for 
discharges occurring during the rate year ending in 
2008 for a hospital, the base rate for such dis-
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charges for the hospital shall be the same as the 
base rate for discharges for the hospital occurring 
during the previous rate year.’’. 
(2) DELAYED
EFFECTIVE
DATE.—Subsection 
(m)(2) of section 1886 of the Social Security Act, as 
added by paragraph (1), shall not apply to dis-
charges occurring on or after July 1, 2007, and be-
fore January 1, 2008. 
(b) PAYMENT
FOR LONG-TERM CARE HOSPITAL 
SERVICES; PATIENT AND FACILITY CRITERIA.— 
(1) DEFINITION
OF
LONG-TERM
CARE
HOS-
PITAL.— 
(A) DEFINITION.—Section 1861 of the So-
cial Security Act (42 U.S.C. 1395x), as amend-
ed by section 201(a)(2), is amended by adding 
at the end the following new subsection: 
‘‘Long-Term Care Hospital 
‘‘(ddd) The term ‘long-term care hospital’ means an 
institution which— 
‘‘(1) is primarily engaged in providing inpatient 
services, by or under the supervision of a physician, 
to Medicare beneficiaries whose medically complex 
conditions require a long hospital stay and programs 
of care provided by a long-term care hospital; 
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‘‘(2) has an average inpatient length of stay (as 
determined by the Secretary) for Medicare bene-
ficiaries of greater than 25 days, or as otherwise de-
fined in section 1886(d)(1)(B)(iv); 
‘‘(3) satisfies the requirements of subsection 
(e); 
‘‘(4) meets the following facility criteria: 
‘‘(A) the institution has a patient review 
process, documented in the patient medical 
record, that screens patients prior to admission 
for appropriateness of admission to a long-term 
care hospital, validates within 48 hours of ad-
mission that patients meet admission criteria 
for long-term care hospitals, regularly evaluates 
patients throughout their stay for continuation 
of care in a long-term care hospital, and as-
sesses the available discharge options when pa-
tients no longer meet such continued stay cri-
teria; 
‘‘(B) the institution has active physician 
involvement with patients during their treat-
ment through an organized medical staff, physi-
cian-directed treatment with physician on-site 
availability on a daily basis to review patient 
progress, and consulting physicians on call and 
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capable of being at the patient’s side within a 
moderate period of time, as determined by the 
Secretary; 
‘‘(C) the institution has interdisciplinary 
team treatment for patients, requiring inter-
disciplinary teams of health care professionals, 
including physicians, to prepare and carry out 
an individualized treatment plan for each pa-
tient; and 
‘‘(5) meets patient criteria relating to patient 
mix and severity appropriate to the medically com-
plex cases that long-term care hospitals are designed 
to treat, as measured under section 1886(n).’’. 
(B) NEW PATIENT CRITERIA FOR LONG- 
TERM
CARE
HOSPITAL
PROSPECTIVE
PAY-
MENT.—Section 1886 of such Act (42 U.S.C. 
1395ww), as amended by subsection (a), is fur-
ther amended by adding at the end the fol-
lowing new subsection: 
‘‘(n) PATIENT CRITERIA
FOR PROSPECTIVE PAY-
MENT TO LONG-TERM CARE HOSPITALS.— 
‘‘(1) IN GENERAL.—To be eligible for prospec-
tive payment under this section as a long-term care 
hospital, a long-term care hospital must admit not 
less than a majority of patients who have a high 
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level of severity, as defined by the Secretary, and 
who are assigned to one or more of the following 
major diagnostic categories: 
‘‘(A) Circulatory diagnoses. 
‘‘(B) Digestive, endocrine, and metabolic 
diagnoses. 
‘‘(C) Infection disease diagnoses. 
‘‘(D) Neurological diagnoses. 
‘‘(E) Renal diagnoses. 
‘‘(F) Respiratory diagnoses. 
‘‘(G) Skin diagnoses. 
‘‘(H) Other major diagnostic categories as 
selected by the Secretary. 
‘‘(2) 
MAJOR
DIAGNOSTIC
CATEGORY
DE-
FINED.—In paragraph (1), the term ‘major diag-
nostic category’ means the medical categories formed 
by dividing all possible principle diagnosis into mu-
tually exclusive diagnosis areas which are referred to 
in 67 Federal Register 49985 (August 1, 2002).’’. 
(C) ESTABLISHMENT OF REHABILITATION 
UNITS WITHIN CERTAIN LONG-TERM CARE HOS-
PITALS.—If the Secretary of Health and 
Human Services does not include rehabilitation 
services within a major diagnostic category 
under section 1886(n)(2) of the Social Security 
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Act, as added by subparagraph (B), the Sec-
retary shall approve for purposes of title XVIII 
of such Act distinct part inpatient rehabilitation 
hospital units in long-term care hospitals con-
sistent with the following: 
(i) A hospital that, on or before Octo-
ber 1, 2004, was classified by the Sec-
retary as a long-term care hospital, as de-
scribed in section 1886(d)(1)(B)(iv)(I) of 
such 
Act 
(42 
U.S.C. 
1395ww(d)(1)(V)(iv)(I)), and was accred-
ited by the Commission on Accreditation of 
Rehabilitation Facilities, may establish a 
hospital rehabilitation unit that is a dis-
tinct part of the long-term care hospital, if 
the distinct part meets the requirements 
(including conditions of participation) that 
would otherwise apply to a distinct-part re-
habilitation unit if the distinct part were 
established by a subsection (d) hospital 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 accordance with this sec-
tion, except that the one-year waiting pe-
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