Rural Health Improvement Act of 1997

Rural Health Improvement Act of 1997 - Replaces the Essential Access Community Hospital Program (EACH) under Medicare, while continuing payment to designated EACHs, with the Medicare Rural Hospital Flexibility Program (MRHFP).

Declares that it is the purpose of MRHFP to: (1) ensure access to health care services for rural communities by allowing hospitals to be designated as critical access hospitals if they limit the scope of available inpatient acute care services; (2) provide more appropriate and flexible staffing and licensure standards; (3) enhance the financial security of critical access hospitals by requiring that they be reimbursed on a reasonable cost basis; and (4) promote linkages between critical access hospitals and broader programs supporting the development of and transition to integrated provider networks.

Authorizes States to establish such an MRHFP if they provide assurances that they have developed or are developing a State rural health care plan that: (1) provides for the creation of one or more rural health networks in the State; (2) promotes regionalization of rural health services in the State; (3) improves access to hospital and other health services for rural residents of the State; and (4) has designated or is designating rural nonprofit or public hospitals or facilities as critical access hospitals.

Authorizes the Secretary of Health and Human Services to award grants to applicant States for rural health care plans and rural emergency medical services. Authorizes appropriations.

Directs the Administrator of the Health Care Financing Administration to report to the Congress on the feasibility of establishing, and administrative requirements necessary to establish, an alternative for certain medical diagnoses to the 96-hour limitation for inpatient care in critical access hospitals.

Replaces requirements for rural primary care hospitals and services with requirements for critical access hospitals and services in order to allow all States to develop critical access hospitals for use under MRHFP.