Examines how the initial policy change affected rural and urban hospitals and investigates the likely impact of the FY2004 expansion and other possible future expansions. The authors conclude that rural hospitals are not disproportionately harmed by the post-acute-care transfer policy. An expanded policy may even benefit rural hospitals by recognizing their lower use of post-acute-care and readjusting DRG weights so that they are paid more appropriately when providing the full course of inpatient care.