RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.

SEC. 410A. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.(a) Establishment of Rural Community Hospital (RCH) Demonstration Program.—(1) In general.—The Secretary shall establish a demonstration program to test the feasibility and advisability of the establishment of rural community hospitals (as defined in subsection (f)(1)) to furnish covered inpatient hospital services (as defined in subsection (f)(2)) to medicare beneficiaries.(2) Demonstration areas.—The program shall be conducted in rural areas selected by the Secretary in States with low population densities, as determined by the Secretary.(3) Application.—Each rural community hospital that is located in a demonstration area selected under paragraph (2) 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.(4) Selection of hospitals.—The Secretary shall select from among rural community hospitals submitting applications under paragraph (3) not more than 15 of such hospitals to participate in the demonstration program under this section.(5) Duration.—The Secretary shall conduct the demonstration program under this section for a 5-year period.(6) Implementation.—The Secretary shall implement the demonstration program not later than January 1, 2005, but may not implement the program before October 1, 2004. (b) Payment.—(1) In general.—The amount of payment under the demonstration program for covered 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—(A) for discharges occurring in the first cost reporting period beginning on or after the implementation of the demonstration program, the reasonable costs of providing such services; and(B) for discharges occurring in a subsequent cost reporting period under the demonstration program, the lesser of—(i) the reasonable costs of providing such services in the cost reporting period involved; or(ii) the target amount (as defined in paragraph (2), applicable to the cost reporting period involved.(2) Target amount.—For purposes of paragraph (1)(B)(ii), the term “target amount” means, with respect to a rural community hospital for a particular 12-month cost reporting period—(A) in the case of the second such reporting period for which this subsection is in effect, the reasonable costs of providing such covered inpatient hospital services as determined under paragraph (1)(A), and(B) in the case of a later reporting period, the target amount for the preceding 12-month cost reporting period,increased by the applicable percentage increase (under clause (i) of section 1886(b)(3)(B) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B))) in the market basket percentage increase 117 STAT. 2273 (as defined in clause (iii) of such section) for that particular cost reporting period.(c) Funding.—(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) of such funds as are necessary for the costs of carrying out the demonstration program under this section.(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.(d) Waiver Authority.—The Secretary may waive such requirements of title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as may be necessary for the purpose of carrying out the demonstration program under this section.(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.(f) Definitions.—In this section:(1) Rural community hospital defined.—(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—(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));(ii) subject to paragraph (2), has fewer than 51 acute care inpatient beds, as reported in its most recent cost report; (iii) makes available 24-hour emergency care services; and(iv) is not eligible for designation, or has not been designated, as a critical access hospital under section 1820.(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.(2) Covered inpatient hospital services.—The term “covered inpatient hospital services” means inpatient hospital services, and includes extended care services furnished under an agreement under section 1883 of the Social Security Act (42 U.S.C. 1395tt).117 STAT. 2274