I
104TH CONGRESS
2D SESSION
H. R. 3753
To amend the Social Security Act and the Public Health Service Act with
respect to the health of residents of rural areas, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 27, 1996
Mr. GUNDERSON (for himself, Mr. POSHARD, Mr. ROBERTS, Mr. STENHOLM,
Mr. BEREUTER, Mr. BONILLA, Mr. BUNN of Oregon, Mr. HILLIARD,
Mrs. JOHNSON of Connecticut, Mrs. LINCOLN, Mr. PAYNE of Virginia,
Mr. WILLIAMS, Mr. BAKER of Louisiana, Mr. BARRETT of Nebraska, Mr.
BOEHLERT, Mr. BOUCHER, Mr. BREWSTER, Mr. CLINGER, Mr. COM-
BEST, Mr. CONDIT, Mr. COOLEY of Oregon, Ms. DANNER, Mr. EHLERS,
Mr. EVANS, Mr. FAZIO of California, Mr. HALL of Texas, Mr. JOHNSON
of South Dakota, Mr. KLUG, Mr. MCHUGH, Mr. NEY, Mr. NUSSLE, Mr.
PETERSON of Minnesota, Mr. RAHALL, Mr. RAMSTAD, Mr. SANDERS, Mr.
SKELTON, Mr. STUPAK, Mr. THORNBERRY, Mr. WALSH, and Mr.
WHITFIELD) introduced the following bill; which was referred to the Com-
mittee on Commerce, and in addition to the Committee on Ways and
Means, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
To amend the Social Security Act and the Public Health
Service Act with respect to the health of residents of
rural areas, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Rural Health Improve-
ment Act of 1996’’.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Sense of Congress on work of Bill Emerson.
TITLE I—EQUALIZATION OF MEDICARE REIMBURSEMENT RATES
TO HEALTH MAINTENANCE ORGANIZATIONS AND COMPETITIVE
MEDICAL PLANS
Sec. 101. Payments to health maintenance organizations and competitive medi-
cal plans.
TITLE II—GRANTS TO ENCOURAGE ESTABLISHMENT OF
COMMUNITY RURAL HEALTH NETWORKS
Sec. 201. Assistance for development of access plans for chronically under-
served areas.
Sec. 202. Technical assistance grants for networks.
Sec. 203. Development grants for networks.
Sec. 204. Definitions.
Sec. 205. Financing through termination of certain grant programs.
TITLE III—MEDICARE RURAL PRIMARY CARE HOSPITALS AND
RURAL EMERGENCY ACCESS CARE HOSPITALS
Subtitle A—Rural Primary Care Hospital Program
Sec. 301. Designation of rural primary care hospitals.
Sec. 302. Payment on a reasonable cost basis.
Sec. 303. Lengthening maximum period of permitted inpatient stay.
Sec. 304. Payment continued to designated essential access community hos-
pitals.
Sec. 305. Effective date.
Subtitle B—Rural Emergency Access Care Hospitals
Sec. 311. Establishment of hospitals.
TITLE IV—INCENTIVES FOR HEALTH PROFESSIONALS TO
PRACTICE IN RURAL AREAS
Subtitle A—National Health Service Corps
Sec. 401. National Health Service Corps scholarship and loan repayments ex-
cluded from gross income.
Sec. 402. Study regarding allocation of Corps members among shortage areas.
Sec. 403. Priority in assignment of Corps members; community rural health
networks.
Subtitle B—Primary Care Services Furnished in Shortage Areas
Sec. 411. Additional payments under medicare for primary care services fur-
nished in rural shortage areas.
TITLE V—CLASSIFICATION OF RURAL REFERRAL CENTERS
Sec. 501. Classification of centers.
TITLE VI—PROMOTION OF HEALTH CENTERS IN RURAL
REGIONS
Sec. 601. Expansion of health centers in rural regions.
Sec. 602. Collaboration of health centers with community hospitals.
TITLE VII—MEDICARE PAYMENT METHODOLOGIES
Sec. 701. Telemedicine services.
TITLE VIII—ANTITRUST
Sec. 801. Sense of Congress relating to application of guidelines.
TITLE IX—FINANCING
Sec. 901. Extension and expansion of existing medicare secondary payer re-
quirements.
SEC. 3. SENSE OF CONGRESS ON WORK OF BILL EMERSON.
It is the sense of the Congress that this Act reflects
the dedication of the late Representative Bill Emerson,
who served on the Steering Committee of the Rural Health
Care Coalition of the House of Representatives, to ensur-
ing health care access for all rural Americans.
TITLE 
I—EQUALIZATION 
OF
MEDICARE REIMBURSEMENT
RATES TO HEALTH MAINTE-
NANCE ORGANIZATIONS AND
COMPETITIVE 
MEDICAL
PLANS
SEC. 101. PAYMENTS TO HEALTH MAINTENANCE ORGANI-
ZATIONS AND COMPETITIVE MEDICAL PLANS.
(a) IN GENERAL.—Section 1876(a) of the Social Se-
curity Act (42 U.S.C. 1395mm(a)) is amended to read as
follows:
‘‘(a)(1)(A) The Secretary shall annually determine,
and shall announce (in a manner intended to provide no-
tice to interested parties) not later than August 1 before
the calendar year concerned—
‘‘(i) a per capita rate of payment for individuals
who are enrolled under this section with an eligible
organization which has entered into a risk-sharing
contract and who are entitled to benefits under part
A and enrolled under part B, and
‘‘(ii) a per capita rate of payment for individ-
uals who are so enrolled with such an organization
and who are enrolled under part B only.
For purposes of this section, the term ‘‘risk-sharing con-
tract’’ means a contract entered into under subsection (g)
and the term ‘‘reasonable cost reimbursement contract’’
means a contract entered into under subsection (h).
‘‘(B) The annual per capita rate of payment for each
medicare payment area (as defined in paragraph (5)) shall
be equal to the adjusted capitation rate (as defined in
paragraph (4)), adjusted by the Secretary for—
‘‘(i) individuals who are enrolled under this sec-
tion with an eligible organization which has entered
into a risk-sharing contract and who are enrolled
under part B only; and
‘‘(ii) such risk factors as age, disability status,
gender, institutional status, and such other factors
as the Secretary determines to be appropriate so as
to ensure actuarial equivalence. The Secretary may
add to, modify, or substitute for such factors, if such
changes will improve the determination of actuarial
equivalence.
‘‘(C) In the case of an eligible organization with a
risk-sharing contract, the Secretary shall make monthly
payments in advance and in accordance with the rate de-
termined under subparagraph (B) and except as provided
in subsection (g)(2), to the organization for each individ-
ual enrolled with the organization under this section.
‘‘(D) The Secretary shall establish a separate rate of
payment to a eligible organization with respect to any indi-
‘‘(I) in the case of 1997, 80 percent of the
input-price-adjusted national adjusted capita-
tion rate for the year, as determined under sub-
paragraph (D); and
‘‘(II) in the case of a succeeding year, the
amount specified in this clause for the preced-
ing year increased by the national average per
capita growth percentage specified under sub-
paragraph (F) for that succeeding year.
‘‘(iii) An amount equal to—
‘‘(I) in the case of 1997, 102 percent of
the annual per capita rate of payment for 1996
for the medicare payment area (determined
under this subsection, as in effect on the day
before the date of enactment of the Rural
Health Improvement Act of 1996; and
‘‘(II) in the case of a subsequent year, 102
percent of the adjusted capitation rate under
this subsection for the area for the previous
year.
‘‘(B) For purposes of subparagraph (A)(i)—
‘‘(i) for 1997, the ‘area-specific percentage’ is
90 percent and the ‘national percentage’ is 10 per-
cent,
‘‘(ii) for 1998, the ‘area-specific percentage’ is
85 percent and the ‘national percentage’ is 15 per-
cent,
‘‘(iii) for 1999, the ‘area-specific percentage’ is
80 percent and the ‘national percentage’ is 20 per-
cent,
‘‘(iv) for 2000, the ‘area-specific percentage’ is
75 percent and the ‘national percentage’ is 25 per-
cent, and
‘‘(v) for a year after 2000, the ‘area-specific
percentage’ is 70 percent and the ‘national percent-
age’ is 30 percent.
‘‘(C) For purposes of subparagraph (A)(i), the area-
specific adjusted capitation rate for a medicare payment
area—
‘‘(i) for 1997, is the average of the annual per
capita rates of payment for the area for 1994
through 1996, after adjusting the 1994 and 1995
rates of payment to 1996 dollars, increased by the
national average per capita growth percentage for
1997 (as defined in subparagraph (F)); or
‘‘(ii) for a subsequent year, is the area-specific
adjusted capitation rate for the previous year deter-
mined under this subparagraph for the area, in-
creased by the national average per capita growth
percentage for such subsequent year.
‘‘(D)(i) For purposes of subparagraph (A)(i) and
subparagraph (A)(ii), the input-price-adjusted national
adjusted capitation rate for a medicare payment area for
a year is equal to the sum, for all the types of medicare
services (as classified by the Secretary), of the product
(for each such type of service) of—
‘‘(I) the national standardized adjusted capita-
tion rate (determined under clause (ii)) for the year,
‘‘(II) the proportion of such rate for the year
which is attributable to such type of services, and
‘‘(III) an index that reflects (for that year and
that type of services) the relative input price of such
services in the area compared to the national aver-
age input price of such services.
In applying subclause (III), the Secretary shall, subject
to clause (iii), apply those indices under this title that are
used in applying (or updating) national payment rates for
specific areas and localities.
‘‘(ii) In clause (i)(I), the ‘national standardized ad-
justed capitation rate’ for a year is equal to—
‘‘(I) the sum (for all medicare payment areas)
of the product of (aa) the area-specific adjusted
capitation rate for that year for the area under sub-
paragraph (C), and (bb) the average number of
standardized medicare beneficiaries residing in that
area in the year; divided by
‘‘(II) the total average number of standardized
medicare beneficiaries residing in all the medicare
payment areas for that year.
‘‘(iii) In applying this subparagraph for 1997—
‘‘(I) medicare services shall be divided into 2
types of services: part A services and part B serv-
ices;
‘‘(II) the proportions described in clause (i)(II)
for such types of services shall be—
‘‘(aa) for part A services, the ratio (ex-
pressed as a percentage) of the national average
annual per capita rate of payment for part A
for 1996 to the total average annual per capita
rate of payment for parts A and B for 1996,
and
‘‘(bb) for part B services, 100 percent
minus the ratio described in item (aa);
‘‘(III) for part A services, 70 percent of pay-
ments attributable to such services shall be adjusted
by the index used under section 1886(d)(3)(E) to
adjust payment rates for relative hospital wage levels
for hospitals located in the payment area involved;
and
‘‘(IV) for part B services—
‘‘(aa) 66 percent of payments attributable
to such services shall be adjusted by the index
of the geographic area factors under section
1848(e) used to adjust payment rates for physi-
cians’ services furnished in the payment area,
and
‘‘(bb) of the remaining 34 percent of the
amount of such payments, 70 percent shall be
adjusted by the index described in subclause
(III).
The Secretary may continue to apply the rules described
in this clause (or similar rules) for 1998.
‘‘(E) For each year, the Secretary shall compute a
budget neutrality adjustment factor so that the aggregate
of the payments under this section shall be equal to the
aggregate payments that would have been made under this
section if the area-specific percentage for the year had
been 100 percent and the national percentage had been
0 percent.
‘‘(F) In this section, the ‘national average per capita
growth percentage’ is equal to the percentage growth in
medicare fee-for-service per capita expenditures, which the
Secretary shall project for each year.
‘‘(5)(A) In this section, except as provided in sub-
paragraph (C), the term ‘medicare payment area’ means
a county, or equivalent area specified by the Secretary.
‘‘(B) In the case of individuals who are determined
to have end stage renal disease, the medicare payment
area shall be specified by the Secretary.
‘‘(C)(i) Upon written request of the Chief Executive
Officer of a State for a contract year (beginning after
1997) made at least 7 months before the beginning of the
year, the Secretary shall adjust the system under which
medicare payment areas in the State are otherwise deter-
mined under subparagraph (A) to a system which—
‘‘(I) has a single statewide medicare payment
area,
‘‘(II) is a metropolitan based system described
in clause (iii), or
‘‘(III) which consolidates into a single medicare
payment area noncontiguous counties (or equivalent
areas described in subparagraph (A)) within a State.
Such adjustment shall be effective for payments for
months beginning with January of the year following the
year in which the request is received.
‘‘(ii) In the case of a State requesting an adjustment
under this subparagraph, the Secretary shall adjust the
payment rates otherwise established under this section for
medicare payment areas in the State in a manner so that
the aggregate of the payments under this section in the
State shall be equal to the aggregate payments that would
have been made under this section for medicare payment
areas in the State in the absence of the adjustment under
this subparagraph.
‘‘(iii) The metropolitan based system described in this
clause is one in which—
‘‘(I) all the portions of each metropolitan statis-
tical area in the State or in the case of a consoli-
dated metropolitan statistical area, all of the por-
tions of each primary metropolitan statistical area
within the consolidated area within the State, are
treated as a single medicare payment area, and
‘‘(II) all areas in the State that do not fall
within a metropolitan statistical area are treated as
a single medicare payment area.
‘‘(iv) In clause (iii), the terms ‘metropolitan statis-
tical area’, ‘consolidated metropolitan statistical area’, and
‘primary metropolitan statistical area’ mean any area des-
ignated as such by the Secretary of Commerce.
‘‘(6) Subject to subsections (c)(2)(B)(ii) and (c)(7),
if an individual is enrolled under this section with an eligi-
ble organization having a risk-sharing contract, only the
eligible organization shall be entitled to receive payments
from the Secretary under this title for services furnished
to the individual.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect on October 1, 1996.
TITLE II—GRANTS TO ENCOUR-
AGE 
ESTABLISHMENT 
OF
COMMUNITY RURAL HEALTH
NETWORKS
SEC. 201. ASSISTANCE FOR DEVELOPMENT OF ACCESS
PLANS FOR CHRONICALLY UNDERSERVED
AREAS.
(a) AVAILABILITY OF FINANCIAL ASSISTANCE TO IM-
PLEMENT ACTION PLANS TO INCREASE ACCESS.—
(1) IN GENERAL.—The Secretary shall provide
grants (in amounts determined in accordance with
paragraph (3)) over a 3-year period to an eligible
State for the development of plans to increase access
to health care services during such period for resi-
dents of areas in the State that are designated as
chronically underserved areas in accordance with
subsection (b).
(2) ELIGIBILITY REQUIREMENTS.—A State is
eligible to receive grants under this section if the
State submits to the Secretary (at such time and in
such form as the Secretary may require) assurances
that the State has developed (or is in the process of
developing) a plan to increase the access of residents
of a chronically underserved area to health care serv-
ices that meets the requirements of subsection (c),
together with such other information and assurances
as the Secretary may require.
(3) AMOUNT OF ASSISTANCE.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the amount of assistance provided to
a State under this subsection with respect to
any plan during a 3-year period shall be equal
to—
(i) for the first year of the period, an
amount equal to 100 percent of the
amounts expended by the State during the
year to develop the plan described in para-
graph (1) (as reported to the Secretary in
accordance with such requirements as the
Secretary may impose);
(ii) for the second year of the period,
an amount equal to 50 percent of the
amounts expended by the State during the
year to develop the plan; and
(iii) for the third year of the period,
an amount equal to 33 percent of the
amounts expended by the State during the
year to develop the plan.
(B) AGGREGATE
PER
PLAN
LIMIT.—The
amount of assistance provided to a State under
this subsection with respect to any plan may
not exceed $100,000 during any year of the 3-
year period for which the State receives assist-
ance.
(b) DESIGNATION OF AREAS.—
(1) DESIGNATION BY GOVERNOR.—In accord-
ance with the guidelines developed under paragraph
(2), the Governor of a State may designate an area
in the State as a chronically underserved area for
purposes of this section upon the request of a local
official of the area or upon the Governor’s initiative.
(2) GUIDELINES FOR DESIGNATION.—
(A) DEVELOPMENT BY SECRETARY.—Not
later than 1 year after the date of the enact-
ment of this Act, the Secretary shall develop
guidelines for the designation of areas as chron-
ically underserved areas under this section.
(B) FACTORS CONSIDERED IN DEVELOP-
MENT
OF
GUIDELINES.—In developing guide-
lines under paragraph (1), the Secretary shall
consider the following factors:
(i) Whether the area (or a significant
portion of the area) is a rural area (under
section 1886(d)(2)(D) of the Social Secu-
rity Act) and—
(I) is designated as a health pro-
fessional shortage area (under section
332(a) of the Public Health Service
Act), or meets the criteria for des-
ignation as such an area; or
(II) was previously designated as
such an area or previously met such
criteria for an extended period prior
to the designation of the area under
this section (in accordance with cri-
teria established by the Secretary).
(ii) The availability and adequacy of
health care providers and facilities for resi-
dents of the area.
(iii) The extent to which the availabil-
ity of assistance under other Federal and
State programs has failed to alleviate the
lack of access to health care services for
residents of the area.
(iv) The percentage of residents of the
area whose income is at or below the pov-
erty level.
(v) The percentage of residents of the
area who are age 65 or older.
(vi) The existence of cultural or geo-
graphic barriers to access to health care
services in the area, including weather con-
ditions.
(3) REVIEW BY SECRETARY.—No designation
under paragraph (1) shall take effect under this sec-
tion unless the Secretary—
(A) has been notified of the proposed des-
ignation; and
(B) has not, within 60 days after the date
of receipt of the notice, disapproved the des-
ignation.
(4) PERIOD OF DESIGNATION.—A designation
under this section shall be effective during a period
specified by the Governor of not longer than 3 years.
The Governor may extend the designation for addi-
tional 3-year periods, except that a State may not
receive assistance under subsection (a)(3) for
amounts expended during any such additional
periods.
(c) REQUIREMENTS FOR STATE ACCESS PLANS.—A
State plan to increase the access of residents of chronically
underserved areas to health care services meets the re-
quirements of this section if the Secretary finds that the
plan was developed with the participation of health care
providers and facilities and residents of the area that is
the subject of the plan, together with such other require-
ments as the Secretary may impose.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated for assistance under this
section $10,000,000 for each of the first 3 fiscal years
beginning after the date on which the Secretary develops
guidelines for the designation of areas as chronically un-
derserved areas under subsection (b)(2).
SEC. 202. TECHNICAL ASSISTANCE GRANTS FOR NET-
WORKS.
(a) IN GENERAL.—The Secretary shall make funds
available under this section to provide technical assistance
(including information regarding eligibility for other Fed-
eral programs) and advice for entities described in sub-
section (b) seeking to establish or enhance a community
rural health network (as defined in section 204) in an un-
derserved rural area.
(b) ENTITIES ELIGIBLE TO RECEIVE FUNDS.—The
following entities are eligible to receive funds for technical
assistance under this section:
(1) An entity receiving a grant under section
203.
(2) A State or unit of local government.
(3) An entity providing health care services (in-
cluding health professional education services) in the
area involved.
(c) USE OF FUNDS.—
(1) IN GENERAL.—Funds made available under
this section may be used—
(A) for planning a community rural health
network and the submission of the plan for the
network to the Secretary under section 203(c)
(subject to the limitation described in para-
graph (2));
(B) to provide assistance in conducting
community-based needs and prioritization, iden-
tifying existing regional health resources, and
developing networks, utilizing existing local pro-
viders and facilities where appropriate;
(C) to provide advice on obtaining the
proper balance of primary and secondary facili-
ties for the population served by the network;
(D) to provide assistance in coordinating
arrangements for tertiary care;
(E) to provide assistance in recruitment
and retention of health care professionals;
(F) to provide assistance in coordinating
the delivery of emergency services with the pro-
vision of other health care services in the area
served by the network;
(G) to provide assistance in coordinating
arrangements for mental health and substance
abuse treatment services; and
(H) to provide information regarding the
area or proposed network’s eligibility for Fed-
eral and State assistance for health care-related
activities, together with information on funds
available through private sources.
(2) LIMITATION ON AMOUNT AVAILABLE FOR
DEVELOPMENT OF NETWORK.—The amount of fi-
nancial assistance available to an entity for activities
described in paragraph (1) may not exceed $50,000
and may not be available for a period of time ex-
ceeding 1 year.
(d) USE OF RURAL HEALTH OFFICES.—In carrying
out this section with respect to entities in rural areas, the
Secretary shall make funds available to the entities
through the State offices of rural health or through appro-
priate entities designated by such offices.
(e) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $10,000,000 for each
of fiscal years 1997 through 2001 to carry out this sec-
tion. Amounts appropriated under this section shall be
available until expended.
SEC. 203. DEVELOPMENT GRANTS FOR NETWORKS.
(a) IN GENERAL.—The Secretary shall provide finan-
cial assistance to eligible entities for the purpose of provid-
ing for the development and implementation of community
rural health networks (as defined in section 204). In pro-
viding such assistance, the Secretary shall give priority to
eligible entities that will carry out such purpose in States
that have developed a plan under section 201.
(b) ELIGIBLE ENTITIES.—
(1) IN GENERAL.—An entity is eligible to re-
ceive financial assistance under this section only if
the entity meets the requirements of subparagraphs
(A) through (C) as follows:
(A) The entity—
(i) is based in a rural area; OR
(ii) is described in paragraph (2) or
(3) of section 202(b).
(4) The term ‘‘underserved rural area’’ means
a rural area designated—
(A) as a health professional shortage area
under section 332(a) of the Public Health Serv-
ice Act; or
(B) as a chronically underserved area
under section 201.
SEC. 205. FINANCING THROUGH TERMINATION OF CERTAIN
GRANT PROGRAMS.
Notwithstanding any other provision of law, no funds
are authorized to be appropriated to carry out the follow-
ing programs for fiscal year 1997 or any subsequent fiscal
year:
(A) The grant program for rural health
transition under section 4005(e) of the Omni-
bus Budget Reconciliation Act of 1987.
(B) The program for rural outreach grants
(which program was, for fiscal year 1995, car-
ried out by the Health Resources and Services
Administration with funds made available under
Public Law 103–333 for such grants).