SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Hospital Payment Improvement and 
Equity Act of 2006''.

SEC. 2. APPEALS PROCESS FOR HOSPITAL WAGE INDEX CLASSIFICATION.

    (a) Establishment of Process.--
            (1) In general.--The Secretary shall establish not later 
        than January 1, 2007, by instruction or otherwise, a process 
        under which a hospital may appeal the wage index classification 
        otherwise applicable to the hospital and select another area 
        within the State (or, at the discretion of the Secretary, 
        within a contiguous State) to which to be reclassified.
            (2) Process requirements.--The process established under 
        paragraph (1) shall be consistent with the following:
                    (A) Such an appeal may be filed as soon as possible 
                after the date of the enactment of this Act but shall 
                be filed by not later than February 15, 2007.
                    (B) Such an appeal shall be heard by the Medicare 
                Geographic Reclassification Review Board.
                    (C) There shall be no further administrative or 
                judicial review of a decision of such Board.
            (3) Reclassification upon successful appeal.--
                    (A) Reclassification.--If the Medicare Geographic 
                Reclassification Review Board determines that the 
                hospital is a qualifying hospital (as defined in 
                subsection (c)), the hospital shall be reclassified to 
                the area selected under paragraph (1).
                    (B) Applicability.--A reclassification under 
                subparagraph (A) shall apply with respect to discharges 
                occurring during the 3-year period beginning with April 
                1, 2007.
            (4) Special rules.--
                    (A) In general.--Any qualifying hospital that is 
                within 3 miles driving distance, starting at the 
                hospital entrance and driving over improved roads, to 
                the nearest Metropolitan Statistical Area in which a 
                majority of the other qualifying hospitals located in 
                the same Metropolitan Statistical Area as the hospital 
                have been reclassified to (or if there is no majority, 
                the Metropolitan Statistical Area in which at least one 
                such other qualifying hospital has been reclassified to 
                (as determined appropriate by the Secretary of Health 
                and Human Services), the hospital shall be eligible to 
                select to be reclassified to such nearest Metropolitan 
                Statistical Area (or if no majority, to the area so 
                determined appropriate by the Secretary).
                    (B) Competitively disadvantaged hospital in a 
                single-hospital msa surrounded by rural counties.--
                            (i) In general.--If a hospital meets the 
                        requirements described in clause (ii)--
                                    (I) such hospital shall be deemed 
                                to be a qualifying hospital; and
                                    (II) such hospital shall be 
                                reclassified to the closest urban area 
                                which is part of a Combined Statistical 
                                Area located in the same State as the 
                                hospital.
                            (ii) Requirements.--The requirements 
                        described in this clause are the following:
                                    (I) The hospital is the only 
                                hospital in its urban area.
                                    (II) The hospital is in an urban 
                                area that is not adjacent to any other 
                                urban area.
                                    (III) The hospital is seeking 
                                reclassification to the closest urban 
                                area which is part of a Combined 
                                Statistical Area located in the same 
                                state as the hospital.
            (5) Inapplicability of certain provisions.--Except as the 
        Secretary may provide, the provisions of paragraphs (8) and 
        (10) of section 1886(d) of the Social Security Act (42 U.S.C. 
        1395ww(d)) shall not apply to an appeal under this section.
    (b) Application of Reclassification.--In the case of an appeal 
decided in favor of a qualifying hospital under subsection (a), the 
wage index reclassification shall not affect the wage index computation 
for any area or for any other hospital and shall not be effected in a 
budget neutral manner. The provisions of this section shall not affect 
payment for discharges occurring after the end of the 3-year-period 
referred to in subsection (a)(3)(B).
    (c) Qualifying Hospital Defined.--For purposes of this section, the 
term ``qualifying hospital'' means 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--
            (1) does not qualify for a change in wage index 
        classification under paragraph (8) or (10) of section 1886(d) 
        of such Act (42 U.S.C. 1395ww(d)) on the basis of requirements 
        relating to distance or commuting; and
            (2) meets such other criteria, such as quality, as the 
        Secretary may specify by instruction or otherwise.
The Secretary may modify the wage comparison guidelines promulgated 
under section 1886(d)(10)(D) of such Act (42 U.S.C. 1395ww(d)(10)(D)) 
in carrying out this section.
    (d) Wage Index Classification.--For purposes of this section, the 
term ``wage index classification'' means the geographic area in which 
the hospital is classified for purposes of determining for a fiscal 
year the factor used to adjust the DRG prospective payment rate under 
section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) for 
area differences in hospital wage levels that applies to such hospital 
under paragraph (3)(E) of such section.
    (e) Special Rule for Rehabilitation Hospitals and Rehabilitation 
Units.--
            (1) In general.--Effective for discharges occurring during 
        the 3-year period beginning with April 1, 2007, for purposes of 
        making payments under section 1886(j) of the Social Security 
        Act (42 U.S.C. 1395ww(j)) to a qualifying rehabilitation 
        facility, such facility shall be deemed to be located in the 
        area described in paragraph (3).
            (2) Qualifying rehabilitation facility defined.--For 
        purposes of this subsection, the term ``qualifying 
        rehabilitation facility'' means a rehabilitation hospital or a 
        rehabilitation unit that is located in a Metropolitan 
        Statistical Area in which all subsection (d) hospitals (as 
        defined in subsection (d)(1)(B) of section 1886 of the Social 
        Security Act (42 U.S.C. 1395ww)) that are not sole community 
        hospitals (as defined in subsection (d)(5)(D)(iii) of such 
        section) located in the area have been reclassified to another 
        Metropolitan Statistical Area.
            (3) Area described.--The area described in this paragraph 
        with respect to a qualifying rehabilitation facility is the 
        Metropolitan Statistical Area in which the majority of the 
        subsection (d) hospitals (as so defined) located in the same 
        Metropolitan Statistical Area as the qualifying rehabilitation 
        facility have been reclassified to (or if there is no majority, 
        the Metropolitan Statistical Area in which at least one such 
        subsection (d) hospital has been reclassified to (as determined 
        appropriate by the Secretary of Health and Human Services).
Hospital Payment Improvement and Equity Act of 2006 - Directs the Secretary of Health and Human Services to establish a process under which a hospital may appeal its wage index classification under title XVIII (Medicare) of the Social Security Act and select another area within the state (or, at the Secretary's discretion, within a contiguous state) to which to be reclassified.

Prescribes special rules for: (1) a competitively disadvantaged hospital in a single-hospital Metropolitan Statistical Area (MSA) surrounded by rural counties; and (2) rehabilitation hospitals and rehabilitation units.
A bill to provide for an appeals process for hospital wage index classification under the Medicare program, and for other purposes.