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in the otherwise applicable resident 
limit is provided under subclause (I), 
the Secretary shall first distribute the 
increase to programs of hospitals lo-
cated in rural areas or in urban areas 
that are not large urban areas (as de-
fined for purposes of subsection (d)) 
on a first-come-first-served basis (as 
determined by the Secretary) based on 
a demonstration that the hospital will 
fill the positions made available under 
this clause and not to exceed an in-
crease of 25 full-time equivalent posi-
tions with respect to any hospital. 
‘‘(V) APPLICATION OF LOCALITY 
ADJUSTED
NATIONAL
AVERAGE
PER 
RESIDENT AMOUNT.—With respect to 
additional residency positions in a 
hospital attributable to the increase 
provided under this clause, notwith-
standing any other provision of this 
subsection, the approved FTE resi-
dent amount is deemed to be equal to 
the locality adjusted national average
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per resident amount computed under 
subparagraph (E) for that hospital. 
‘‘(VI) CONSTRUCTION.—Nothing 
in this clause shall be construed as 
permitting the redistribution of reduc-
tions in residency positions attrib-
utable to voluntary reduction pro-
grams under paragraph (6) or as af-
fecting the ability of a hospital to es-
tablish new medical residency training 
programs under subparagraph (H). 
‘‘(iii) RESIDENT
LEVEL
AND
LIMIT 
DEFINED.—In this subparagraph: 
‘‘(I) 
RESIDENT
LEVEL.—The 
term ‘resident level’ means, with re-
spect to a hospital, the total number 
of full-time equivalent residents, be-
fore the application of weighting fac-
tors (as determined under this para-
graph), in the fields of allopathic and 
osteopathic medicine for the hospital. 
‘‘(II) OTHERWISE
APPLICABLE 
RESIDENT
LIMIT.—The term ‘other-
wise applicable resident limit’ means, 
with respect to a hospital, the limit
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otherwise applicable under subpara-
graphs (F)(i) and (H) on the resident 
level for the hospital determined with-
out regard to this subparagraph.’’. 
(b) CONFORMING AMENDMENT
TO IME.—Section 
1886(d)(5)(B)(v) (42 U.S.C. 1395ww(d)(5)(B)(v)) is 
amended by adding at the end the following: ‘‘The provi-
sions of subparagraph (I) of subsection (h)(4) shall apply 
with respect to the first sentece of this clause in the same 
manner as it applies with respect to subparagraph (F) of 
such subsection.’’. 
(c) REPORT
ON
EXTENSION
OF
APPLICATIONS 
UNDER REDISTRIBUTION PROGRAM.—Not later than July 
1, 2005, the Secretary shall submit to Congress a report 
containing recommendations regarding whether to extend 
the deadline for applications for an increase in resident 
limits under section 1886(h)(4)(I)(ii)(II) of the Social Se-
curity Act (as added by subsection (a)). 
SEC. 407. TWO-YEAR EXTENSION OF HOLD HARMLESS PRO-
VISIONS FOR SMALL RURAL HOSPITALS AND 
SOLE COMMUNITY HOSPITALS UNDER PRO-
SPECTIVE PAYMENT SYSTEM FOR HOSPITAL 
OUTPATIENT DEPARTMENT SERVICES. 
(a) HOLD HARMLESS PROVISIONS.—
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(1) IN GENERAL.—Section 1833(t)(7)(D)(i) (42 
U.S.C. 1395l(t)(7)(D)(i)) is amended—
(A) in the heading, by striking ‘‘SMALL’’ 
and inserting ‘‘CERTAIN’’; 
(B) by inserting ‘‘or a sole community hos-
pital (as defined in section 1886(d)(5)(D)(iii)) 
located in a rural area’’ after ‘‘100 beds’’; and 
(C) by striking ‘‘2004’’ and inserting 
‘‘2006’’. 
(2) EFFECTIVE DATE.—The amendment made 
by subsection (a)(2) shall apply with respect to pay-
ment for OPD services furnished on and after Janu-
ary 1, 2004. 
(b) STUDY; ADJUSTMENT.—
(1) STUDY.—The Secretary shall conduct a 
study to determine if, under the prospective payment 
system for hospital outpatient department services 
under section 1833(t) of the Social Security Act (42 
U.S.C. 1395l(t)), costs incurred by rural providers 
of services by ambulatory payment classification 
groups (APCs) exceed those costs incurred by urban 
providers of services. 
(2) ADJUSTMENT.—Insofar as the Secretary 
determines under paragraph (1) that costs incurred 
by rural providers exceed those costs incurred by
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urban providers of services, the Secretary shall pro-
vide for an appropriate adjustment under such sec-
tion 1833(t) to reflect those higher costs by January 
1, 2005. 
SEC. 408. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC 
AND FEDERALLY QUALIFIED HEALTH CEN-
TER SERVICES FROM THE PROSPECTIVE PAY-
MENT SYSTEM FOR SKILLED NURSING FA-
CILITIES. 
(a) IN GENERAL.—Section 1888(e)(2)(A) (42 U.S.C. 
1395yy(e)(2)(A)) is amended—
(1) in clause (i)(II), by striking ‘‘clauses (ii) 
and (iii)’’ and inserting ‘‘clauses (ii), (iii), and (iv)’’; 
and 
(2) by adding at the end the following new 
clause: 
‘‘(iv) EXCLUSION OF CERTAIN RURAL 
HEALTH CLINIC AND FEDERALLY QUALI-
FIED
HEALTH
CENTER
SERVICES.—Serv-
ices described in this clause are—
‘‘(I) rural health clinic services 
(as defined in paragraph (1) of sec-
tion 1861(aa)); and
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‘‘(II) Federally qualified health 
center services (as defined in para-
graph (3) of such section); 
that would be described in clause (ii) if 
such services were not furnished by an in-
dividual affiliated with a rural health clinic 
or a Federally qualified health center.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to services furnished on or after 
January 1, 2004. 
SEC. 409. RECOGNITION OF ATTENDING NURSE PRACTI-
TIONERS AS ATTENDING PHYSICIANS TO 
SERVE HOSPICE PATIENTS. 
(a) IN
GENERAL.—Section 1861(dd)(3)(B) (42 
U.S.C. 1395x(dd)(3)(B)) is amended by inserting ‘‘or 
nurse practitioner (as defined in subsection (aa)(5))’’ after 
‘‘the physician (as defined in subsection (r)(1))’’. 
(b) CLARIFICATION OF HOSPICE ROLE OF NURSE 
PRACTITIONERS.—Section 1814(a)(7)(A)(i)(I) (42 U.S.C. 
1395f(a)(7)(A)(i)(I)) is amended by inserting ‘‘(which for 
purposes of this subparagraph does not include a nurse 
practitioner)’’ after ‘‘attending physician (as defined in 
section 1861(dd)(3)(B))’’.
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SEC. 410. IMPROVEMENT IN PAYMENTS TO RETAIN EMER-
GENCY CAPACITY FOR AMBULANCE SERV-
ICES IN RURAL AREAS. 
Section 1834(l) (42 U.S.C. 1395m(l)) is amended—
(1) by redesignating paragraph (8), as added by 
section 221(a) of BIPA (114 Stat. 2763A–486), as 
paragraph (9); and 
(2) by adding at the end the following new 
paragraph: 
‘‘(10) ASSISTANCE
FOR
RURAL
PROVIDERS 
FURNISHING
SERVICES
IN
LOW
MEDICARE
POPU-
LATION DENSITY AREAS.—
‘‘(A) IN GENERAL.—In the case of ground 
ambulance services furnished on or after Janu-
ary 1, 2004, for which the transportation origi-
nates in a qualified rural area (as defined in 
subparagraph (B)), the Secretary shall provide 
for a percent increase in the base rate of the fee 
schedule for a trip established under this sub-
section. In establishing such percent increase, 
the Secretary shall estimate the average cost 
per trip for the base rate in the lowest quartile 
as compared to the average cost for the base 
rate for such services that is in the highest 
quartile of all rural county populations.
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‘‘(B) QUALIFIED RURAL AREA DEFINED.—
For purposes of subparagraph (A), the term 
‘qualified rural area’ is a rural area (as defined 
in section 1886(d)(2)(D)) with a population 
density of medicare beneficiaries residing in the 
area that is in the lowest quartile of all rural 
county populations.’’. 
SEC. 411. TWO-YEAR INCREASE FOR HOME HEALTH SERV-
ICES FURNISHED IN A RURAL AREA. 
(a) IN GENERAL.—In the case of home health serv-
ices furnished in a rural area (as defined in section 
1886(d)(2)(D) of the Social Security Act (42 U.S.C. 
1395ww(d)(2)(D))) during 2004 and 2005, the Secretary 
shall increase the payment amount otherwise made under 
section 1895 of such Act (42 U.S.C. 1395fff ) for such 
services by 5 percent. 
(b) WAIVING BUDGET NEUTRALITY.—The Secretary 
shall not reduce the standard prospective payment amount 
(or amounts) under section 1895 of the Social Security 
Act (42 U.S.C. 1395fff ) applicable to home health services 
furnished during a period to offset the increase in pay-
ments resulting from the application of subsection (a).
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SEC. 412. PROVIDING SAFE HARBOR FOR CERTAIN COL-
LABORATIVE EFFORTS THAT BENEFIT MEDI-
CALLY UNDERSERVED POPULATIONS. 
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C. 
1320a–7(b)(3)), as amended by section 101(b)(2), is 
amended—
(1) in subparagraph (F), by striking ‘‘and’’ 
after the semicolon at the end; 
(2) in subparagraph (G), by striking the period 
at the end and inserting ‘‘; and’’; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(H) any remuneration between a public 
or nonprofit private health center entity de-
scribed under clause (i) or (ii) of section 
1905(l)(2)(B) and any individual or entity pro-
viding goods, items, services, donations or 
loans, or a combination thereof, to such health 
center entity pursuant to a contract, lease, 
grant, loan, or other agreement, if such agree-
ment contributes to the ability of the health 
center entity to maintain or increase the avail-
ability, or enhance the quality, of services pro-
vided to a medically underserved population 
served by the health center entity.’’.
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(b) RULEMAKING
FOR EXCEPTION
FOR HEALTH 
CENTER ENTITY ARRANGEMENTS.—
(1) ESTABLISHMENT.—
(A) 
IN
GENERAL.—The 
Secretary 
of 
Health and Human Services (in this subsection 
referred to as the ‘‘Secretary’’) shall establish, 
on an expedited basis, standards relating to the 
exception described in section 1128B(b)(3)(H) 
of the Social Security Act, as added by sub-
section (a), for health center entity arrange-
ments to the antikickback penalties. 
(B) FACTORS
TO
CONSIDER.—The Sec-
retary shall consider the following factors, 
among others, in establishing standards relating 
to the exception for health center entity ar-
rangements under subparagraph (A): 
(i) Whether the arrangement between 
the health center entity and the other 
party results in savings of Federal grant 
funds or increased revenues to the health 
center entity. 
(ii) Whether the arrangement between 
the health center entity and the other 
party restricts or limits a patient’s freedom 
of choice.
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(iii) Whether the arrangement be-
tween the health center entity and the 
other party protects a health care profes-
sional’s independent medical judgment re-
garding medically appropriate treatment. 
The Secretary may also include other standards 
and criteria that are consistent with the intent 
of Congress in enacting the exception estab-
lished under this section. 
(2) INTERIM
FINAL
EFFECT.—No later than 
180 days after the date of enactment of this Act, the 
Secretary shall publish a rule in the Federal Reg-
ister consistent with the factors under paragraph 
(1)(B). Such rule shall be effective and final imme-
diately on an interim basis, subject to such change 
and revision, after public notice and opportunity (for 
a period of not more than 60 days) for public com-
ment, as is consistent with this subsection. 
SEC. 413. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN 
PAYMENTS FOR PHYSICIANS’ SERVICES. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study of differences in payment 
amounts under the physician fee schedule under section 
1848 of the Social Security Act (42 U.S.C. 1395w–4) for
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physicians’ services in different geographic areas. Such 
study shall include—
(1) an assessment of the validity of the geo-
graphic adjustment factors used for each component 
of the fee schedule; 
(2) an evaluation of the measures used for such 
adjustment, including the frequency of revisions; and 
(3) an evaluation of the methods used to deter-
mine professional liability insurance costs used in 
computing the malpractice component, including a 
review of increases in professional liability insurance 
premiums and variation in such increases by State 
and physician specialty and methods used to update 
the geographic cost of practice index and relative 
weights for the malpractice component. 
(b) REPORT.—Not later than 1 year after the date 
of the enactment of this Act, the Comptroller General shall 
submit to Congress a report on the study conducted under 
subsection (a). The report shall include recommendations 
regarding the use of more current data in computing geo-
graphic cost of practice indices as well as the use of data 
directly representative of physicians’ costs (rather than 
proxy measures of such costs).
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SEC. 414. TREATMENT OF MISSING COST REPORTING PERI-
ODS FOR SOLE COMMUNITY HOSPITALS. 
(a) IN GENERAL.—Section 1886(b)(3)(I) (42 U.S.C. 
1395ww(b)(3)(I)) is amended by adding at the end the 
following new clause: 
‘‘(iii) In no case shall a hospital be denied treatment 
as a sole community hospital or payment (on the basis 
of a target rate as such as a hospital) because data are 
unavailable for any cost reporting period due to changes 
in ownership, changes in fiscal intermediaries, or other ex-
traordinary circumstances, so long as data for at least one 
applicable base cost reporting period is available.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to cost reporting periods begin-
ning on or after January 1, 2004. 
SEC. 415. EXTENSION OF TELEMEDICINE DEMONSTRATION 
PROJECT. 
Section 4207 of Balanced Budget Act of 1997 (Pub-
lic Law 105–33) is amended—
(1) in subsection (a)(4), by striking ‘‘4-year’’ 
and inserting ‘‘8-year’’; and 
(2) 
in 
subsection 
(d)(3), 
by 
striking 
‘‘$30,000,000’’ and inserting ‘‘$60,000,000’’.