To provide for improvements in access to services in rural hospitals and critical access hospitals.

1. Adds SEC. __. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM at the end of subtitle A of title IV

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   In S. 1 · Reported to Senate

   (b) Report.--Not later than 24 months after the date of enactment of this Act, the Comptroller General of the United States shall submit to Congress a report on the study conducted under subsection (a) together with such recommendations for legislative and administrative action as the Comptroller General determines appropriate.

   Inserted: SEC. __. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.

   Inserted: (a) Establishment of Rural Community Hospital (RCH) Demonstration Program.--

   Inserted: (1) In general.--The Secretary shall establish a demonstration program to test the feasibility and advisability of the establishment of rural community hospitals that furnish rural community hospital services to medicare beneficiaries.

   Inserted: (2) Designation of rchs.--

   Inserted: (A) Application.--Each hospital that is located in a demonstration area described in subparagraph (C) that desires to participate in the demonstration program under this section shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may require.

   Inserted: (B) Designation.--The Secretary shall designate any hospital that is located in a demonstration area described in subparagraph (C), submits an application in accordance with subparagraph (A), and meets the other requirements of this section as a rural community hospital for purposes of the demonstration program.

   Inserted: (C) Demonstration areas.--There shall be four demonstration areas within this program. Two of these demonstration areas described in this subparagraph shall include Kansas and Nebraska.

   Inserted: (3) Duration.--The Secretary shall conduct the demonstration program under this section for a 5-year period.

   Inserted: (4) Implementation.--The Secretary shall implement the demonstration program not later than January 1, 2005, but may not implement the program before October 1, 2004.

   Inserted: (b) Payment.--

   Inserted: (1) Inpatient hospital services.--The amount of payment under the demonstration program for inpatient hospital services furnished in a rural community hospital, other than such services furnished in a psychiatric or rehabilitation unit of the hospital which is a distinct part, is, at the election of the hospital in the application referred to in subsection (a)(2)(A)--

   Inserted: (A) the reasonable costs of providing such services, without regard to the amount of the customary or other charge; or

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   Inserted: (B) the amount of payment provided for under the prospective payment system for inpatient hospital services under section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)).

   Inserted: (2) Outpatient services.--The amount of payment under the demonstration program for outpatient services furnished in a rural community hospital is, at the election of the hospital in the application referred to in subsection (a)(2)(A)--

   Inserted: (A) the reasonable costs of providing such services, without regard to the amount of the customary or other charge and any limitation under section 1861(v)(1)(U) of the Social Security Act (42 U.S.C. 1395x(v)(1)(U)); or

   Inserted: (B) the amount of payment provided for under the prospective payment system for covered OPD services under section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)).

   Inserted: (3) Home health services.--In determining payments under the demonstration program for home health services furnished by a qualified RCH-based home health agency (as defined in paragraph (2))--

   Inserted: (A) the agency may make a one-time election to waive application of the prospective payment system established under section 1895 of the Social Security Act (42 U.S.C. 1395fff) to such services furnished by the agency; and

   Inserted: (B) in the case of such an election, payment shall be made on the basis of the reasonable costs incurred in furnishing such services as determined under section 1861(v) of the Social Security Act (42 U.S.C. 1395x(v)), but without regard to the amount of the customary or other charges with respect to such services or the limitations established under paragraph (1)(L) of such section.

   Inserted: (4) Consolidated billing.--The Secretary shall permit consolidated billing under section 1842(b)(6)(E) of the Social Security Act (42 U.S.C. 1395u(b)(6)(E)).

   Inserted: (5) Exemption from 30 percent reduction in reimbursement for bad debt.--In determining the reasonable costs for rural community hospitals, section 1861(v)(1)(T) of the Social Security Act (42 U.S.C. 1395x(v)(1)(T)) shall not apply.

   Inserted: (6) Beneficiary cost-sharing for outpatient services.--The amounts of beneficiary cost-sharing for outpatient services furnished in a rural community hospital under the demonstration program shall be as follows:

   Inserted: (A) For items and services that would have been paid under section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) if provided by a hospital, the amount of cost-sharing determined under paragraph (8) of such section.

   Inserted: (B) For items and services that would have been paid under section 1833(h) of such Act (42 U.S.C. 1395l(h)) if furnished by a provider or supplier, no cost-sharing shall apply.

   Inserted: (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 provided by a physician, provider, or supplier, as the case may be.

   Inserted: (7) Return on equity.--

   Inserted: (A) In general.--Notwithstanding subparagraph (P)(i) and (S)(i) of section 1861(v)(1) of the Social Security Act (42 U.S.C. 1395x(v)(1)) and section 1886(g)(2) of such Act (42 U.S.C. 1395ww(g)(2)), in determining the reasonable costs of the services described in subclause (II) furnished by a rural community hospital for payment of a return on equity capital at a rate of return equal to 150 percent of the average specified in section 1861(v)(1)(P)(i) of such Act (42 U.S.C. 1395x(v)(1)(P)(i)).

   Inserted: (B) Services described.--The services referred to in subclause (I) are rural community hospital services.

   Inserted: (C) Disregard of proprietary provider status.--Payment under the demonstration program shall be made without regard to whether a provider is a proprietary provider.

   Inserted: (8) Removing barriers to establishment of distinct part units by rch facilities.--Notwithstanding section 1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)), the Secretary shall permit rural community hospitals to establish distinct part units for purposes of applying such section.

   Inserted: (c) Funding.--

   Inserted: (1) In general.--The Secretary shall provide for the transfer from the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary Insurance Trust Fund established under section 1841 of such Act (42 U.S.C. 1395t), in such proportion as the Secretary determines to be appropriate, of such funds as are necessary for the costs of carrying out the demonstration program under this section.

   Inserted: (2) Budget neutrality.--In conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.

   Inserted: (d) Waiver Authority.--The Secretary may waive such requirements of titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be necessary for the purpose of carrying out the demonstration program under this section.

   Inserted: (e) Report.--Not later than 6 months after the completion of the demonstration program under this section, the Secretary shall submit to Congress a report on such program, together with recommendations for such legislation and administrative action as the Secretary determines to be appropriate.

   Inserted: (f) Definitions.--In this section:

   Inserted: (1) Rural community hospital.--

   Inserted: (A) In general.--The term "rural community hospital" means a hospital (as defined in section 1861(e) of the Social Security Act (42 U.S.C. 1395x(e))) that--

   Inserted: (i) is located in a rural area (as defined in section 1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))) or treated as being so located pursuant to section 1886(d)(8)(E) of such Act (42 U.S.C. 1395ww(d)(8)(E));

   Inserted: (ii) subject to subparagraph (B), has less than 51 acute care inpatient beds, as reported in its most recent cost report;

   Inserted: (iii) makes available 24-hour emergency care services;

   Inserted: (iv) subject to subparagraph (C), has a provider agreement in effect with the Secretary and is open to the public as of January 1, 2003; and

   Inserted: (v) applies to the Secretary for such designation.

   Inserted: (B) Treatment of psychiatric and rehabilitation units.--For purposes of paragraph (1)(B), beds in a psychiatric or rehabilitation unit of the hospital which is a distinct part of the hospital shall not be counted.

   Inserted: (C) Types of hospitals that may participate.--Subparagraph (1)(D) shall not be construed to prohibit any of the following from qualifying as a rural community hospital:

   Inserted: (i) A replacement facility (as defined by the Secretary in regulations in effect on January 1, 2003) with the same service area (as defined by the Secretary in regulations in effect on such date).

   Inserted: (ii) A facility obtaining a new provider number pursuant to a change of ownership.

   Inserted: (iii) A facility which has a binding written agreement with an outside, unrelated party for the construction, reconstruction, lease, rental, or financing of a building as of January 1, 2003.

   Inserted: (D) Inclusion of cahs.--Nothing in this subsection shall be construed as prohibiting a critical access hospital from qualifying as a rural community hospital if the critical access hospital meets the conditions otherwise applicable to hospitals under section 1861(e) of the Social Security Act (42 U.S.C. 1395x(e)) and section 1866 of such Act (42 U.S.C. 1395cc).

   Inserted: (2) Qualified rch-based home health agency defined.--The term "qualified RCH-based home health agency" is a home health agency that is a provider-based entity (as defined in section 404 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Public Law 106-554; Appendix F, 114 Stat. 2763A-506)) of a rural community hospital that is located--

   Inserted: (A) in a county in which no main or branch office of another home health agency is located; or

   Inserted: (B) at least 35 miles from any main or branch office of another home health agency.

   Inserted: SEC. __. CRITICAL ACCESS HOSPITAL IMPROVEMENT DEMONSTRATION PROGRAM.

   Inserted: (a) Establishment of Critical Access Hospital Demonstration Program.--

   Inserted: (1) In general.--The Secretary shall establish a demonstration program to test various methods to improve the critical access hospital program under section 1820 of the Social Security Act (42 U.S.C. 1395i-4).

   Inserted: (2) Critical access hospital improvement.--In conducting the demonstration program under this section, the Secretary shall apply rules with respect to critical access hospitals participating in the program as follows:

   Inserted: (A) 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 subsections (c)(2)(B)(iii) and (f) of section 1820 of the Social Security Act (42 U.S.C. 1395i-4), 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 such Act (42 U.S.C. 1395ww(d)(1)(B))) of the facility, except that the total number of beds that are not taken into account pursuant to this subparagraph with respect to a facility shall not exceed 10.

   Inserted: (B) Exclusion from home health pps.--Notwithstanding section 1895 of the Social Security Act (42 U.S.C. 1395fff), in determining payments under the demonstration program for home health services furnished by a home health agency that is owned and operated by a critical access hospital participating in the demonstration program--

   Inserted: (i) the agency may make an election to waive application of the prospective payment system established under such section to such services furnished by the agency; and

   Inserted: (ii) in the case of such an election, payment shall be made on the basis of the reasonable costs incurred in furnishing such services as determined under section 1861(v), but without regard to the amount of the customary or other charges with respect to such services or the limitations established under paragraph (1)(L) of such section.

   Inserted: (C) Exemption of cah facilities from pps.--Notwithstanding section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)), in determining payments under this part for covered skilled nursing facility services furnished by a skilled nursing facility that is a distinct part unit of a critical access hospital participating in the demonstration program or is owned and operated by a critical access hospital participating in the demonstration program--

   Inserted: (i) the prospective payment system established under such section shall not apply; and

   Inserted: (ii) payment shall be made on the basis of the reasonable costs incurred in furnishing such services as determined under section 1861(v) of such Act (42 U.S.C. 1395x(v)), but without regard to the amount of the customary or other charges with respect to such services.

   Inserted: (D) Consolidated billing.--The Secretary shall permit consolidated billing under section 1842(b)(6)(E) of the Social Security Act (42 U.S.C. 1395u(b)(6)(E)).

   Inserted: (E) Exemption of certain distinct part psychiatric or rehabilitation units from cost limits.--Notwithstanding section 1886(b) of the Social Security Act (42 U.S.C. 1395ww(b)), in determining payments under the demonstration program for inpatient hospital services furnished by a distinct part psychiatric or rehabilitation unit (described in the matter following section 1886(d)(1)(B)(v) of such Act (42 U.S.C. 1395ww(d)(1)(B)(v))) of a critical access hospital participating in the demonstration program--

   Inserted: (i) the limits imposed under the preceding paragraphs of this subsection shall not apply; and

   Inserted: (ii) payment shall be made on the basis of the reasonable costs incurred in furnishing such services as determined under section 1861(v) of such Act (42 U.S.C. 1395x(v)), but without regard to the amount of the customary or other charges with respect to such services.

   Inserted: (F) Return on equity.--

   Inserted: (i) In general.--Notwithstanding subparagraph (P)(i) and (S)(i) of section 1861(v)(1) of the Social Security Act (42 U.S.C. 1395x(v)(1)) and section 1886(g)(2) of such Act (42 U.S.C. 1395ww(g)(2)), in determining the reasonable costs of the services described in subclause (II) furnished by a critical access hospital participating in the demonstration program for payment of a return on equity capital at a rate of return equal to 150 percent of the average specified in section 1861(v)(1)(P)(i) of such Act (42 U.S.C. 1395x(v)(1)(P)(i)).

   Inserted: (ii) Services described.--The services referred to in subclause (I) are inpatient critical access hospital services, outpatient critical access hospital services, extended care services, posthospital extended care services, home health services, ambulance services, and inpatient hospital services.

   Inserted: (iii) Disregard of proprietary provider status.--Payment under the demonstration program shall be made without regard to whether a provider is a proprietary provider.

   Inserted: (G) Removing barriers to establishment of distinct part units by cah facilities.--Notwithstanding section 1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)), the Secretary shall permit critical access hospitals participating in the demonstration program to establish distinct part units for purposes of applying such section.

   Inserted: (3) Participation of cahs.--

   Inserted: (A) Application.--Each critical access hospital that is located in a demonstration area described in subparagraph (C) that desires to participate in the demonstration program under this section shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may require.

   Inserted: (B) Participation.--The Secretary shall permit any critical access hospital that is located in a demonstration area described in subparagraph (C), submits an application in accordance with subparagraph (A), and meets the other requirements of this section to participate in the demonstration program.

   Inserted: (C) Demonstration areas.--There shall be four demonstration areas within this program. Two of these demonstration areas described in this subparagraph shall include Kansas and Nebraska.

   Inserted: (4) Duration.--The Secretary shall conduct the demonstration program under this section for a 5-year period.

   Inserted: (5) Implementation.--The Secretary shall implement the demonstration program not later than January 1, 2005, but may not implement the program before October 1, 2004.

   Inserted: (b) Funding.--

   Inserted: (1) In general.--The Secretary shall provide for the transfer from the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary Insurance Trust Fund established under section 1841 of such Act (42 U.S.C. 1395t), in such proportion as the Secretary determines to be appropriate, of such funds as are necessary for the costs of carrying out the demonstration program under this section.

   Inserted: (2) Budget neutrality.--In conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.

   Inserted: (c) Waiver Authority.--The Secretary may waive such requirements of titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be necessary for the purpose of carrying out the demonstration program under this section.

   Inserted: (d) Report.--Not later than 6 months after the completion of the demonstration program under this section, the Secretary shall submit to Congress a report on such program, together with recommendations for such legislation and administrative action as the Secretary determines to be appropriate.

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   At the end of subtitle A of title IV, add the following:

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