(a) For purposes of the Medicare inpatient hospital prospective payment system (42 U.S.C. 1395ww), a prospective payment hospital located in an urban area may be reclassified as a rural hospital if it meets certain conditions. The Secretary will treat a hospital as being located in the rural area of the state in which the hospital is located if the hospital is located in an area designated as a rural area by state law or regulation, or the hospital is designated as a rural hospital by state law or regulation.(b) In accordance with §487.401, Texas Government Code, this division establishes the procedures under which the department will designate a hospital as a rural hospital in order for the hospital to qualify for federal funds under 42 CFR Part 412, "Prospective Payment Systems for Inpatient Hospital Services."