II 119th CONGRESS 1st Session S. 502 IN THE SENATE OF THE UNITED STATES February 10, 2025 Mr. Durbin (for himself, Mr. Lankford , and Ms. Smith ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title XVIII of the Social Security Act to restore State authority to waive for certain facilities the 35–mile rule for designating critical access hospitals under the Medicare program, and for other purposes.

1. Short title This Act may be cited as the Rural Hospital Closure Relief Act of 2025 . 2. Restoring State authority to waive the 35–mile rule for certain Medicare critical access hospital designations (a) In general Section 1820 of the Social Security Act ( 42 U.S.C. 1395i–4 ) is amended— (1) in subsection (c)(2)— (A) in subparagraph (B)(i)— (i) in subclause (I), by striking or at the end; (ii) in subclause (II), by inserting or at the end; and (iii) by adding at the end the following new subclause: (III) subject to subparagraph (G), is a hospital described in subparagraph (F) and is certified, on or after the date of the enactment of the Rural Hospital Closure Relief Act of 2025 , and before the date that is 9 years after the date of enactment of this subclause, by the State as being a necessary provider of health care services to residents in the area; ; and (B) by adding at the end the following new subparagraphs: (F) Hospital described For purposes of subparagraph (B)(i)(III), a hospital described in this subparagraph is a hospital that— (i) is a sole community hospital (as defined in section 1886(d)(5)(D)(iii)), a medicare dependent, small rural hospital (as defined in section 1886(d)(5)(G)(iv)), a low-volume hospital that in 2021 receives a payment adjustment under section 1886(d)(12), or a subsection (d) hospital (as defined in section 1886(d)(1)(B)); (ii) is located in a rural area, as defined in section 1886(d)(2)(D), or a rural census tract of a metropolitan statistical area (as determined under the most recent modification of the Goldsmith Modification, originally published in the Federal Register on February 27, 1992 (57 Fed. Reg. 6725)); (iii) (I) is located— (aa) in a county that has a percentage of individuals with income at or below the Federal poverty level in 2023 or 2024 that is higher than the national or statewide average in that year; or (bb) in a health professional shortage area (as defined in section 332(a)(1)(A) of the Public Health Service Act); or (II) has a percentage of inpatient days of individuals entitled to benefits under part A of this title in 2023 or 2024 that is higher than the national or statewide average in that year; (iv) has attested to the Secretary that the hospital— (I) was operating as of the date of enactment of this subparagraph; and (II) had 2 consecutive years of negative operating margins preceding the date of certification described in subparagraph (B)(i)(III), as defined by the Secretary in the regulations or program instruction issued pursuant to section 2(b) of the Rural Hospital Closure Relief Act of 2025 ; and (v) submits to the Secretary, at such time and in such manner as the Secretary may require, an application for certification of the facility as a critical access hospital, including an attestation outlining— (I) the good governance qualifications and strategic plan for multi-year financial solvency of the hospital; and (II) the hospital’s commitment to open and maintain, for the duration of the hospital’s designation as a critical access hospital under this section, a new service line or expanded service capacity for a service that is in high demand or limited supply in the hospital’s service area (determined based on the hospital’s most recent community health needs assessment under section 501(r)(3) of the Internal Revenue Code of 1986 (or other comparable assessment)), such as obstetrics or behavioral health care services. (G) Limitation on certain designations (i) In general Subject to clauses (ii) and (iii), the Secretary may not under subsection (e) certify pursuant to a certification by a State under subparagraph (B)(i)(III)— (I) more than a total of 120 facilities as critical access hospitals; and (II) within any one State, more than 5 facilities as critical access hospitals. (ii) Process The Secretary shall follow the following process in carrying out clause (i) with respect to each year in which the Secretary determines that the limitation under clause (i)(I) has not been reached: (I) Initial assessment The Secretary shall conduct an initial assessment of the total number of hospitals described in paragraph (2)(F). (II) Initial allocation Of the total number of designations available under clause (i), the Secretary shall allocate 1 for a hospital in each State that the Secretary determines (based on the initial assessment under subclause (I)) has one or more hospitals described in paragraph (2)(F). (III) Remaining allocation Of the total number of designations available under clause (i), after application of subclause (II), the Secretary shall allocate the remaining number on a proportional basis based on the total number of hospitals described in paragraph (2)(F) in each State that are eligible (as determined based on the initial assessment under subclause (I)). (iii) Sunset Effective beginning on the date that is 9 years after the date of enactment of this subparagraph, the Secretary may not certify a hospital as a critical access hospital pursuant to a certification by a State under subparagraph (B)(i)(III). (H) Information submission requirements for hospitals certified pursuant to Rural Hospital Closure Relief Act (i) In general A critical access hospital that is certified under subsection (e) pursuant to a certification by a State under subparagraph (B)(i)(III) shall submit to the Secretary the following at a time, and in a manner, specified by the Secretary: (I) Reports Reports containing such information as the Secretary may specify with respect to items and services furnished as part of the new service line or expanded service capacity for a service as described in the attestation submitted by the critical access hospital under subparagraph (F)(v)(II). To the extent practicable, the Secretary shall align such reporting with other reporting requirements applicable to critical access hospitals under this subsection. (II) Notice If the critical access hospital materially changes the new service line or expanded capacity for a service as so described, notice of such changes along with a plan to satisfactorily maintain access to care (as determined by the Secretary). (ii) Revocation of certification for noncompliance If the Secretary determines that a critical access hospital described in clause (i) has failed to submit an annual report required under subclause (I) of such clause or a notice required under subclause (II) of such clause, the Secretary may, as the Secretary determines appropriate, revoke the certification of the critical access hospital under subsection (e). ; and (2) in subsection (e), by inserting , subject to subsection (c)(2)(G), after The Secretary shall . (b) Implementation Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall issue final regulations or program instruction to carry out subsection (a). (c) Clarification regarding facilities that meet distance or other criteria and application of other criteria Nothing in this section shall affect— (1) the application of criteria for designation as a critical access hospital described in subclause (I) or (II) of section 1820(c)(2)(B)(i) of the Social Security Act ( 42 U.S.C. 1395i–4(c)(2)(B)(i) ); or (2) the application of criteria for designation as a critical access hospital described in clauses (ii) through (v) of section 1820(c)(2)(B) of the Social Security Act ( 42 U.S.C. 1395i–4(c)(2)(B) ). (d) GAO study and report (1) Study The Comptroller General of the United States (in this section referred to as the Comptroller General ) shall conduct a study on the implementation of the amendments made by subsection (a). To the extent such data are available and reliable, such study shall include— (A) an analysis of— (i) the characteristics of facilities designated as critical access hospitals pursuant to section 1820(c)(2)(B)(i)(III) of the Social Security Act, as added by subsection (a); (ii) an analysis of the financial status and outlook for such facilities based on their designation as a critical access hospital pursuant to such section; and (iii) an analysis of any increase in expenditures under the Medicare program under title XVIII of the Social Security Act ( 42 U.S.C. 1395 et seq. ) as a result of such designation, relative to the expected baseline expenditures under the Medicare program if such facilities had not received such designation; and (B) an assessment of whether the authority to designate facilities as critical access hospitals pursuant to such section 1820(c)(2)(B)(i)(III) promotes access to care in rural areas. (2) Report Not later than 6 years after the date of the enactment of this Act, the Comptroller General shall submit to Congress a report containing the results of the study conducted under subsection (a), together with recommendations for such legislation and administrative action as the Comptroller General determines appropriate. 3. MedPAC study and report on payment systems for rural hospitals (a) Study The Medicare Payment Advisory Commission (in this section referred to as the Commission ) shall conduct a study, using data from 2018 through 2028, on payment systems for rural hospitals under the Medicare program under title XVIII of the Social Security Act ( 42 U.S.C. 1395 et seq. ). Such study shall include an analysis of— (1) facilities designated as critical access hospitals pursuant to section 1820(c)(2)(B)(i)(III) of the Social Security Act, as added by section 2(a); (2) features of payment systems for rural hospitals, including value-based payment systems, that would— (A) ensure financial sustainability for the Medicare program; and (B) preserve access to care for Medicare beneficiaries; and (3) if the Commission recommends any new payment system for rural hospitals under the Medicare program, to the extent feasible, the impacts of transition from existing payment systems to such new payment system. (b) Report Not later than 8 years after the date of enactment of this Act, the Commission shall submit to Congress a report on the study conducted under subsection (a), together with recommendations for such legislation and administrative action as the Commission determines appropriate. (c) Definition of rural hospital In this section, the term rural hospital means— (1) a critical access hospital (as defined in section 1861(mm)(1) of the Social Security Act ( 42 U.S.C. 1395x(mm)(1) )); (2) a subsection (d) hospital (as defined in section 1886(d)(1)(B) of the Social Security Act ( 42 U.S.C. 1395ww(d)(1)(B) )) that is located in a rural census tract of a metropolitan statistical area (as determined under the most recent modification of the Goldsmith Modification, originally published in the Federal Register on February 27, 1992 (57 Fed. Reg. 6725)); (3) a sole community hospital (as defined in section 1886(d)(5)(D)(iii)) of the Social Security Act ( 42 U.S.C. 1395ww(d)(5)(D)(iii) )); (4) a medicare dependent, small rural hospital (as defined in section 1886(d)(5)(G)(iv) of the Social Security Act ( 42 U.S.C. 1395ww(d)(5)(G)(iv) )); and (5) a low-volume hospital (as defined in section 1886(d)(12)(C)(i) of the Social Security Act ( 42 U.S.C. 1395ww(d)(12)(C)(i) )). 4. Sunset Not later than 9 years after the date of enactment of this Act, the Secretary shall establish a mechanism and provide guidance and technical assistance under which any facility that was designated as a critical access hospital pursuant to a certification by a State under section 1820(c)(2)(B)(i)(III) of the Social Security Act, as added by section 2(a), may transition within 1 year to one of the following payment models: (1) Such new model or models recommended by the Medicare Payment Advisory Commission in the report submitted under section 3. (2) The prospective payment model (or models) under which the facility received payment under title XVIII of the Social Security Act ( 42 U.S.C. 1395 et seq. ) prior to being so designated pursuant to such certification. (3) Payment as a rural emergency hospital under section 1834(x) of the Social Security Act ( 42 U.S.C. 1395m(x) ).