‘‘(B) For items and services that would have 
been paid under section 1833(h) if furnished by a 
provider or supplier, no cost sharing shall apply. 
‘‘(C) For all other items and services, the 
amount of cost sharing that would apply to the item 
or service under the methodology that would be used 
to determine payment for such item or service if pro-
vided by a physician, provider, or supplier, as the 
case may be.’’. 
(d) CONFORMING AMENDMENTS.—
(1) PART
A
PAYMENT.—Section 1814(b) (42 
U.S.C. 1395f(b)) is amended by inserting ‘‘other 
than inpatient hospital services furnished by a rural 
community hospital,’’ after ‘‘critical access hospital 
services,’’. 
(2) PART B PAYMENT.—
(A) IN
GENERAL.—Section 1833(a) (42 
U.S.C. 1395l(a)) is amended—
(i) in paragraph (2), in the matter be-
fore subparagraph (A), by striking ‘‘and 
(I)’’ and inserting ‘‘(I), and (K)’’; 
(ii) by striking ‘‘and’’ at the end of 
paragraph (8);
(iii) by striking the period at the end 
of paragraph (9) and inserting ‘‘; and’’; 
and 
(iv) by adding at the end the fol-
lowing: 
‘‘(10) in the case of outpatient services fur-
nished by a rural community hospital, the amounts 
described in section 1834(n).’’. 
(B) 
AMBULANCE
SERVICES.—Section 
1834(l)(8) (42 U.S.C. 1395m(l)(8)), as added 
by section 205(a) of the Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protec-
tion Act of 2000 (Appendix F, 114 Stat. 
2763A–463), as enacted into law by section 
1(a)(6) of Public Law 106–554, is amended—
(i) in the heading, by striking ‘‘CRIT-
ICAL
ACCESS
HOSPITALS’’ and inserting 
‘‘CERTAIN FACILITIES’’; 
(ii) by striking ‘‘or’’ at the end of sub-
paragraph (A); 
(iii) by redesignating subparagraph 
(B) as subparagraph (C); 
(iv) by inserting after subparagraph 
(A) the following new subparagraph:
‘‘(B) by a rural community hospital (as de-
fined in section 1861(ww)(1)), or’’; and 
(v) in subparagraph (C), as so redes-
ignated, by inserting ‘‘or a rural commu-
nity hospital’’ after ‘‘critical access hos-
pital’’. 
(3) TECHNICAL AMENDMENTS.—
(A) CONSULTATION
WITH
STATE
AGEN-
CIES.—Section 1863 (42 U.S.C. 1395z) is 
amended by striking ‘‘and (dd)(2)’’ and insert-
ing ‘‘(dd)(2), (mm)(1), and (ww)(1)’’. 
(B) 
PROVIDER
AGREEMENTS.—Section 
1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is 
amended by inserting ‘‘section 1834(n)(2),’’ 
after ‘‘section 1833(b),’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to items and services furnished on 
or after October 1, 2003. 
SEC. 3. REMOVING BARRIERS TO ESTABLISHMENT OF DIS-
TINCT PART UNITS BY RCH AND CAH FACILI-
TIES. 
(a) IN GENERAL.—Section 1886(d)(1)(B) (42 U.S.C. 
1395ww(d)(1)(B)) is amended by striking ‘‘a distinct part 
of the hospital (as defined by the Secretary)’’ in the mat-
ter following cause (v) and inserting ‘‘a distinct part (as
defined by the Secretary) of the hospital or of a critical 
access hospital or a rural community hospital’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to determinations with respect 
to distinct part unit status that are made on or after Octo-
ber 1, 2003. 
SEC. 4. IMPROVEMENTS TO MEDICARE CRITICAL ACCESS 
HOSPITAL (CAH) PROGRAM. 
(a) EXCLUSION
OF CERTAIN BEDS FROM BED 
COUNT.—Section 1820(c)(2) (42 U.S.C. 1395i–4(c)(2)) is 
amended by adding at the end the following: 
‘‘(E) EXCLUSION OF CERTAIN BEDS FROM 
BED
COUNT.—In determining the number of 
beds of a facility for purposes of applying the 
bed limitations referred to in subparagraph 
(B)(iii) and subsection (f), the Secretary shall 
not take into account any bed of a distinct part 
psychiatric or rehabilitation unit (described in 
the matter following clause (v) of section 
1886(d)(1)(B)) of the facility, except that the 
total number of beds that are not taken into ac-
count pursuant to this subparagraph with re-
spect to a facility shall not exceed 10.’’. 
(b) PAYMENTS TO HOME HEALTH AGENCIES OWNED 
AND OPERATED BY A CAH.—Section 1895(f) (42 U.S.C.
1395fff(f)), as added by section 2(b)(3), is further amend-
ed by inserting ‘‘or by a home health agency that is owned 
and operated by a critical access hospital (as defined in 
section 1861(mm)(1))’’ after ‘‘as defined in paragraph 
(2))’’. 
(c) PAYMENTS TO CAH-OWNED SNFS.—
(1) IN GENERAL.—Section 1888(e) (42 U.S.C. 
1395yy(e)) is amended—
(A) in paragraph (1), by striking ‘‘and 
(12)’’ and inserting ‘‘(12), and (13)’’; and 
(B) by adding at the end thereof the fol-
lowing: 
‘‘(13) EXEMPTION OF CAH FACILITIES FROM 
PPS.—In determining payments under this part for 
covered skilled nursing facility services furnished on 
or after October 1, 2003, by a skilled nursing facil-
ity that is a distinct part unit of a critical access 
hospital (as defined in section 1861(mm)(1)) or is 
owned and operated by a critical access hospital—
‘‘(A) the prospective payment system es-
tablished under this subsection shall not apply; 
and 
‘‘(B) payment shall be made on the basis 
of the reasonable costs incurred in furnishing 
such services as determined under section