SEC. 117. TEMPORARY FLOOR ON THE PRACTICE EXPENSE 
GEOGRAPHIC INDEX FOR SERVICES FUR-
NISHED IN RURAL AREAS OUTSIDE OF FRON-
TIER STATES UNDER THE MEDICARE PHYSI-
CIAN FEE SCHEDULE. 
Section 1848(e)(1) of the Social Security Act (42 
U.S.C. 1395w–4(e)(1)) is amended— 
(1) in subparagraph (A), by striking ‘‘and (I)’’ 
and inserting ‘‘(I), and (J)’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(J) FLOOR AT 1.0 ON PRACTICE EXPENSE 
GEOGRAPHIC INDEX FOR SERVICES FURNISHED 
IN
RURAL
AREAS
OUTSIDE
OF
FRONTIER 
STATES.—For purposes of payment for services 
furnished in a rural area (other than a rural 
area located in a State to which subparagraph 
(I) applies) on or after January 1, 2012, and 
before January 1, 2013, after calculating the 
practice expense index under subparagraph 
(A)(i), the Secretary shall increase any such 
index to 1.0 if such index would otherwise be 
less than 1.0. The preceding sentence shall not 
be applied in a budget neutral manner.’’. 
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SEC. 118. REVISIONS TO STANDARD FOR DESIGNATION OF 
SOLE COMMUNITY HOSPITALS. 
Section 1886(d)(5)(D)(iv) of the Social Security Act 
(42 U.S.C. 1395ww(d)(5)(D)(iv)) is amended by adding 
at the end the following new sentence: ‘‘Under such stand-
ard, the time required for an individual to travel to the 
nearest alternative source of care shall be measured over 
improved roads maintained by a local, State, or Federal 
Government entity for use by the general public which is 
the most expeditious and accessible route as designated 
by law enforcement for emergency vehicle travel.’’. 
SEC. 119. STATE OFFICES OF RURAL HEALTH. 
Section 338J(j)(1) of the Public Health Service Act 
(42 U.S.C. 254r(j)(1)) is amended by inserting ‘‘and 2012 
through 2013’’ before the period. 
SEC. 120. ENSURING PROPORTIONAL REPRESENTATION OF 
INTERESTS OF RURAL AREAS ON MEDPAC. 
(a) IN GENERAL.—Section 1805(c)(2) of the Social 
Security Act (42 U.S.C. 1395b–6(c)(2)) is amended— 
(1) in subparagraph (A), by inserting ‘‘ (con-
sistent with the requirements of subparagraph (E))’’ 
after ‘‘rural representatives’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(E) PROPORTIONAL REPRESENTATION OF 
INTERESTS OF RURAL AREAS.—In order to pro-
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vide a balance between urban and rural rep-
resentatives under subparagraph (A), the pro-
portion of members who represent the interests 
of health care providers and Medicare bene-
ficiaries located in rural areas shall be no less 
than the proportion of the total number of 
Medicare beneficiaries who reside in rural 
areas.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to appointments made to the 
Medicare Payment Advisory Commission after the date of 
the enactment of this Act. 
TITLE II—340B PROGRAM 
IMPROVEMENT 
SEC. 
201. 
EXTENSION 
OF 
DISCOUNTS 
TO 
INPATIENT 
DRUGS. 
(a) IN GENERAL.—Section 340B of the Public 
Health Service Act (42 U.S.C. 256b) is amended— 
(1) in subsection (a)— 
(A) in paragraphs (1), (2), and (5), by 
striking ‘‘covered outpatient drug’’ each place 
such term appears and inserting ‘‘covered 
drug’’; and 
(B) in paragraphs (1), (7), and (9), by 
striking ‘‘covered outpatient drugs’’ each place 
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such term appears and inserting ‘‘covered 
drugs’’; 
(2) in subsection (b)(2)(B) by striking ‘‘para-
graph (3)(A)’’ and inserting ‘‘paragraph (3)’’; and 
(3) in subsection (d), by striking ‘‘covered out-
patient drugs’’ each place such term appears and in-
serting ‘‘covered drugs’’. 
(b) MEDICAID CREDITS ON INPATIENT DRUGS.— 
Section 340B of the Public Health Service Act (42 U.S.C. 
256b) is amended by inserting after subsection (b) the fol-
lowing new subsection: 
‘‘(c) MEDICAID CREDITS ON INPATIENT DRUGS.— 
‘‘(1) IN GENERAL.—For each cost reporting pe-
riod, based on the most recently filed Medicare cost 
report under title XVIII of the Social Security Act 
and subject to paragraph (5), a hospital described in 
subparagraph (L), (M), (N), or (O) of subsection 
(a)(4) and enrolled to participate in the drug dis-
count program under this section shall provide to 
each State that has a plan for medical assistance 
under title XIX of such Act and that makes pay-
ment to such hospital for covered drugs provided to 
Medicaid recipients for inpatient use, a credit on the 
estimated annual purchases by such hospital of such 
covered drugs provided to such Medicaid recipients. 
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‘‘(2) AMOUNT OF CREDIT.— 
‘‘(A) IN GENERAL.—The credit described 
in paragraph (1), with respect to a hospital and 
cost reporting period described in such para-
graph shall be equal to— 
‘‘(i) the product of— 
‘‘(I) the sum of the annual credit 
amounts (described in subparagraph 
(B)) calculated under subparagraph 
(B)(i) for each dosage form and 
strength of each covered drug pur-
chased by the hospital during the cost 
reporting period; and 
‘‘(II) the estimated percentage of 
the purchases of covered drugs by the 
hospital during such period attrib-
utable to Medicaid recipients for inpa-
tient use, as determined in accordance 
with subparagraph (D); and 
‘‘(ii) subject to paragraph (3)(D), re-
duced by the amount by which the Med-
icaid inpatient reimbursement (as defined 
in subparagraph (E)(ii)) of the hospital for 
such period was reduced as a result of par-
ticipation in the drug discount program 
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under this section during such period by 
the hospital, as determined in accordance 
with subparagraph (E). 
‘‘(B) ANNUAL
CREDIT
AMOUNTS.—For 
purposes of subparagraph (A)(i)(I), an annual 
credit amount, with respect to a covered drug 
purchased by a hospital described in paragraph 
(1) during a cost reporting period of the hos-
pital— 
‘‘(i) is equal to the sum of the quar-
terly credit amounts calculated under sub-
paragraph (C)(i), for each of the 4 quar-
ters of the cost reporting period for such 
covered drug; and 
‘‘(ii) shall be calculated for each dos-
age form and strength of such covered 
drug. 
‘‘(C) QUARTERLY CREDIT AMOUNTS.—For 
purposes of subparagraph (B)(ii), a quarterly 
credit amount, with respect to a covered drug 
purchased by a hospital described in paragraph 
(1) during a quarter of the cost reporting pe-
riod of the hospital— 
‘‘(i) is equal to the product of— 
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‘‘(I) the total number of units of 
each dosage form and strength of 
such covered drug purchased by the 
hospital during such quarter; 
‘‘(II) the average manufacturer 
price of the covered drug (for the unit 
of the dosage form and strength in-
volved) during such quarter; and 
‘‘(III) half of the rebate percent-
age for the covered drug, as defined in 
subsection (a)(2); and 
‘‘(ii) shall be calculated for— 
‘‘(I) 
each 
dosage 
form 
and 
strength of the covered drug pur-
chased by the hospital; and 
‘‘(II) each of the 4 quarters of 
such cost reporting period. 
‘‘(D) PERCENTAGE OF DRUG PURCHASES 
ATTRIBUTABLE TO MEDICAID RECIPIENTS FOR 
IMPATIENT
USE.—For purposes of subpara-
graph (A)(i)(II), the estimated percentage of 
the drug purchases of the hospital attributable 
to Medicaid recipients for inpatient use shall be 
equal to the Medicaid inpatient drug charges as 
reported on the most recently filed Medicare 
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cost report of the hospital, divided by the total 
drug charges reported on the cost report. 
‘‘(E) CREDIT OFFSET.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A)(ii), the amount by which 
the Medicaid inpatient reimbursement of a 
hospital, with respect to a cost reporting 
period, is reduced as a result of the partici-
pation in the drug discount program under 
this section by the hospital shall be com-
puted as the difference between— 
‘‘(I) the Medicaid inpatient reim-
bursement that would have otherwise 
been payable to the hospital for the 
cost reporting period if the hospital 
did not participate in such drug dis-
count program; and 
‘‘(II) the actual Medicaid inpa-
tient reimbursement payable to the 
hospital for the cost reporting period. 
‘‘(ii) MEDICAID
INPATIENT
REIM-
BURSEMENT
DEFINED.—For purposes of 
this subsection, the term ‘Medicaid inpa-
tient reimbursement’ means the total pay-
ments received by the hospital under the 
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State plan under title XIX of the Social 
Security Act for providing inpatient serv-
ices to Medicaid recipients. 
‘‘(3) REQUIREMENTS.— 
‘‘(A) IN GENERAL.—A hospital shall not be 
required to provide a credit under paragraph 
(1) to a State unless, not later than 30 days 
after receiving the information described in sub-
paragraph (B), the State calculates in accord-
ance with paragraph (2) the amount of the 
credit owed by the hospital under paragraph (1) 
and provides the hospital with both the amount 
of such credit so owed and an explanation of 
how the State calculated such credit. 
‘‘(B) HOSPITAL PROVISION OF INFORMA-
TION.—Not later than 30 days after the date of 
the filing of the most recently filed Medicare 
cost report of a hospital described in paragraph 
(1), the hospital shall provide the State involved 
with the information described in subpara-
graphs (C)(i)(I) and (D) of paragraph (2). 
With respect to each covered drug purchased 
during the cost reporting period, the hospital 
shall provide the National Drug Code, date of 
purchase, and the number of units purchased. 
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Submission of such information shall not be re-
quired if a covered drug has not been assigned 
a National Drug Code at the time of purchase. 
‘‘(C) ACCESS
TO
AMP
AND
REBATE 
DATA.—The Secretary shall establish a system 
for giving States access to the information nec-
essary for them to calculate credits under para-
graph (2), with respect to covered drugs, in-
cluding the average manufacturer price and re-
bate percentage for such covered drugs. 
‘‘(D) 
CREDIT
OFFSET.—Paragraph 
(2)(A)(ii) shall be applied, with respect to a 
credit owed by a hospital under paragraph (1), 
only if, not later than 30 days after filing the 
most recent Medicare cost report, the hospital 
submits to the State involved— 
‘‘(i) a request for the State to apply 
such paragraph and to calculate the 
amount described in such paragraph in ac-
cordance with paragraph (2)(E); and 
‘‘(ii) the data needed by the State to 
determine the amount of the Medicaid in-
patient reimbursement described in para-
graph (2)(E)(i)(I) for such hospital. 
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‘‘(E) DISPUTES.—A State and hospital de-
scribed in paragraph (1) shall have access to 
the same State dispute resolution procedures 
and system applicable to Medicaid reimburse-
ment matters under title XIX of the Social Se-
curity Act. 
‘‘(4) PAYMENT
DEADLINE.—A hospital shall 
provide to a State the credits owed by such hospital 
under paragraph (1) not later than 60 days after 
the hospital receives the information described in 
paragraph (3)(A). 
‘‘(5) OPT
OUT.—A hospital shall not be re-
quired to provide a credit under paragraph (1) to a 
State if the hospital and State agree to an alter-
native arrangement. 
‘‘(6) OFFSET AGAINST MEDICAL ASSISTANCE.— 
Amounts received by a State under this subsection 
shall be considered to be a reduction in the amount 
expended under the State plan for medical assist-
ance for purposes of section 1903(a)(1) of the Social 
Security Act. 
‘‘(7) MEDICAID
RECIPIENT
DEFINED.—For 
purposes of this subsection, the term ‘Medicaid re-
cipient’ means, with respect to a State, an individual 
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who receives benefits under the State plan under 
title XIX of the Social Security Act.’’. 
(c) CONFORMING AMENDMENTS.—Section 1927 of 
the Social Security Act (42 U.S.C. 1396r–8) is amended— 
(1) in subsection (a)(5)— 
(A) in subparagraph (A), by striking ‘‘cov-
ered outpatient drugs’’ and inserting ‘‘covered 
drugs (as defined in section 340B(b)(2) of the 
Public Health Service Act)’’; and 
(B) by striking subparagraphs (D) and 
(E); and 
(2) in subsection (c)(1)(C)(i)— 
(A) 
by 
redesignating 
subclauses 
(II) 
through (VI) as subclauses (III) through (VII), 
respectively; and 
(B) by inserting after subclause (I) the fol-
lowing: 
‘‘(II) any prices charged for a 
covered drug, as defined in section 
340B(b)(2) of the Public Health Serv-
ice Act;’’. 
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