TITLE IV--RURAL PROVISIONS

Subtitle A--Provisions Relating to Part A Only

SEC. 405. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

(a) INCREASE IN PAYMENT AMOUNTS-

(1) IN GENERAL- Sections 1814(l), 1834(g)(1), and 1883(a)(3) (42 U.S.C. 1395f(l), 1395m(g)(1), and 1395tt(a)(3)) are each amended by inserting `equal to 101 percent of' before `the reasonable costs'.

(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall apply to payments for services furnished during cost reporting periods beginning on or after January 1, 2004.

(b) COVERAGE OF COSTS FOR CERTAIN EMERGENCY ROOM ON-CALL PROVIDERS-

(1) IN GENERAL- Section 1834(g)(5) (42 U.S.C. 1395m(g)(5)) is amended--

(A) in the heading--

(i) by inserting `CERTAIN' before `EMERGENCY'; and

(ii) by striking `PHYSICIANS' and inserting `PROVIDERS';

(B) by striking `emergency room physicians who are on-call (as defined by the Secretary)' and inserting `physicians, physician assistants, nurse practitioners, and clinical nurse specialists who are on-call (as defined by the Secretary) to provide emergency services'; and

(C) by striking `physicians' services' and inserting `services covered under this title'.

(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall apply with respect to costs incurred for services furnished on or after January 1, 2005.

(c) AUTHORIZATION OF PERIODIC INTERIM PAYMENT (PIP)-

(1) IN GENERAL- Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--

(A) in the matter before subparagraph (A), by inserting `, in the cases described in subparagraphs (A) through (D)' after `1986';

(B) by striking `and' at the end of subparagraph (C);

(C) by adding `and' at the end of subparagraph (D); and

(D) by inserting after subparagraph (D) the following new subparagraph:

`(E) inpatient critical access hospital services;'.

(2) DEVELOPMENT OF ALTERNATIVE TIMING METHODS OF PERIODIC INTERIM PAYMENTS- With respect to periodic interim payments to critical access hospitals for inpatient critical access hospital services under section 1815(e)(2)(E) of the Social Security Act, as added by paragraph (1), the Secretary shall develop alternative methods for the timing of such payments.

(3) AUTHORIZATION OF PIP- The amendments made by paragraph (1) shall apply to payments made on or after July 1, 2004.

(d) CONDITION FOR APPLICATION OF SPECIAL PROFESSIONAL SERVICE PAYMENT ADJUSTMENT-

(1) IN GENERAL- Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is amended by adding after and below subparagraph (B) the following:

`The Secretary may not require, as a condition for applying subparagraph (B) with respect to a critical access hospital, that each physician or other practitioner providing professional services in the hospital must assign billing rights with respect to such services, except that such subparagraph shall not apply to those physicians and practitioners who have not assigned such billing rights.'.

(2) EFFECTIVE DATE-

(A) IN GENERAL- Except as provided in subparagraph (B), the amendment made by paragraph (1) shall apply to cost reporting periods beginning on or after July 1, 2004.

(B) RULE OF APPLICATION- In the case of a critical access hospital that made an election under section 1834(g)(2) of the Social Security Act (42 U.S.C. 1395m(g)(2)) before November 1, 2003, the amendment made by paragraph (1) shall apply to cost reporting periods beginning on or after July 1, 2001.

(e) REVISION OF BED LIMITATION FOR HOSPITALS-

(1) IN GENERAL- Section 1820(c)(2)(B)(iii) (42 U.S.C. 1395i-4(c)(2)(B)(iii)) is amended by striking `15 (or, in the case of a facility under an agreement described in subsection (f), 25)' and inserting `25'.

(2) CONFORMING AMENDMENT- Section 1820(f) (42 U.S.C. 1395i-4(f)) is amended by striking `and the number of beds used at any time for acute care inpatient services does not exceed 15 beds'.

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to designations made before, on, or after January 1, 2004, but any election made pursuant to regulations promulgated to carry out such amendments shall only apply prospectively.

(f) PROVISIONS RELATING TO FLEX GRANTS-

(1) ADDITIONAL 4-YEAR PERIOD OF FUNDING- Section 1820(j) (42 U.S.C. 1395i-4(j)) is amended by inserting before the period at the end the following: `, and for making grants to all States under paragraphs (1) and (2) of subsection (g), $35,000,000 in each of fiscal years 2005 through 2008'.

(2) ADDITIONAL REQUIREMENTS AND ADMINISTRATION- Section 1820(g) (42 U.S.C. 1395i-4(g)) is amended by adding at the end the following new paragraphs:

`(4) ADDITIONAL REQUIREMENTS WITH RESPECT TO FLEX GRANTS- With respect to grants awarded under paragraph (1) or (2) from funds appropriated for fiscal year 2005 and subsequent fiscal years--

`(A) CONSULTATION WITH THE STATE HOSPITAL ASSOCIATION AND RURAL HOSPITALS ON THE MOST APPROPRIATE WAYS TO USE GRANTS- A State shall consult with the hospital association of such State and rural hospitals located in such State on the most appropriate ways to use the funds under such grant.

`(B) LIMITATION ON USE OF GRANT FUNDS FOR ADMINISTRATIVE EXPENSES- A State may not expend more than the lesser of--

`(i) 15 percent of the amount of the grant for administrative expenses; or

`(ii) the State's federally negotiated indirect rate for administering the grant.

`(5) USE OF FUNDS FOR FEDERAL ADMINISTRATIVE EXPENSES- Of the total amount appropriated for grants under paragraphs (1) and (2) for a fiscal year (beginning with fiscal year 2005), up to 5 percent of such amount shall be available to the Health Resources and Services Administration for purposes of administering such grants.'.

(g) AUTHORITY TO ESTABLISH PSYCHIATRIC AND REHABILITATION DISTINCT PART UNITS-

(1) IN GENERAL- Section 1820(c)(2) (42 U.S.C. 1395i-4(c)(2)) is amended by adding at the end the following:

`(E) AUTHORITY TO ESTABLISH PSYCHIATRIC AND REHABILITATION DISTINCT PART UNITS-

`(i) IN GENERAL- Subject to the succeeding provisions of this subparagraph, a critical access hospital may establish--

`(I) a psychiatric unit of the hospital that is a distinct part of the hospital; and

`(II) a rehabilitation unit of the hospital that is a distinct part of the hospital,

if the distinct part meets the requirements (including conditions of participation) that would otherwise apply to the distinct part if the distinct part were established by a subsection (d) hospital in accordance with the matter following clause (v) of section 1886(d)(1)(B), including any regulations adopted by the Secretary under such section.

`(ii) LIMITATION ON NUMBER OF BEDS- The total number of beds that may be established under clause (i) for a distinct part unit may not exceed 10.

`(iii) EXCLUSION OF BEDS FROM BED COUNT- In determining the number of beds of a critical access hospital 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 established under clause (i).

`(iv) EFFECT OF FAILURE TO MEET REQUIREMENTS- If a psychiatric or rehabilitation unit established under clause (i) does not meet the requirements described in such clause with respect to a cost reporting period, no payment may be made under this title to the hospital for services furnished in such unit during such period. Payment to the hospital for services furnished in the unit may resume only after the hospital has demonstrated to the Secretary that the unit meets such requirements.'.

(2) PAYMENT ON A PROSPECTIVE PAYMENT BASIS- Section 1814(l) (42 U.S.C. 1395f(l)) is amended--

(A) by striking `(l) The amount' and inserting `(l)(1) Except as provided in paragraph (2), the amount'; and

(B) by adding at the end the following new paragraph:

`(2) In the case of a distinct part psychiatric or rehabilitation unit of a critical access hospital described in section 1820(c)(2)(E), the amount of payment for inpatient critical access hospital services of such unit shall be equal to the amount of the payment that would otherwise be made if such services were inpatient hospital services of a distinct part psychiatric or rehabilitation unit, respectively, described in the matter following clause (v) of section 1886(d)(1)(B).'.

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply to cost reporting periods beginning on or after October 1, 2004.

(h) WAIVER AUTHORITY-

(1) IN GENERAL- Section 1820(c)(2)(B)(i)(II) (42 U.S.C. 1395i-4(c)(2)(B)(i)(II)) is amended by inserting `before January 1, 2006,' after `is certified'.

(2) GRANDFATHERING WAIVER AUTHORITY FOR CERTAIN FACILITIES- Section 1820(h) (42 U.S.C. 1395i-4(h)) is amended--

(A) in the heading preceding paragraph (1), by striking `OF CERTAIN FACILITIES' and inserting `PROVISIONS'; and

(B) by adding at the end the following new paragraph:

`(3) STATE AUTHORITY TO WAIVE 35-MILE RULE- In the case of a facility that was designated as a critical access hospital before January 1, 2006, and was certified by the State as being a necessary provider of health care services to residents in the area under subsection (c)(2)(B)(i)(II), as in effect before such date, the authority under such subsection with respect to any redesignation of such facility shall continue to apply notwithstanding the amendment made by section 405(h)(1) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.'.

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