The Rural Emergency Hospital Designation Improvement Act aims to enhance the viability and service offerings of rural emergency hospitals (REHs) by amending titles XVIII and XIX of the Social Security Act. It expands eligibility for REH designation by extending the look-back period for previous hospital status and requires the Secretary to establish waivers for facilities operating similarly to REHs. These changes are designed to make the REH designation more accessible to rural healthcare providers. A key provision allows REHs to maintain distinct part units for specialized care, including inpatient psychiatric, rehabilitation, and obstetric services, enabling a more comprehensive range of offerings for rural communities. The bill also introduces a 5 percent add-on payment for diagnostic laboratory tests furnished by REHs starting in 2027, acknowledging their higher operational costs. Additionally, REHs would be authorized to use swing beds for extended care services, with payment based on reasonable costs. The legislation further integrates REHs into federal healthcare programs by deeming them Health Professional Shortage Areas for National Health Service Corps eligibility and making them eligible for Small Rural Hospital Improvement Program grants. It also ensures that REHs reverting to Critical Access Hospital status can regain their "necessary provider" designation if previously held. Finally, the Act mandates the inclusion of rural emergency hospital services under Medicaid , including services from distinct part nursing facility units within an REH, ensuring broader coverage and financial support.