; and (B) reduce expenditures under such title. (2) Site requirements (A) Urban and Rural The Secretary shall conduct the pilot projects under this section in both urban and rural areas. (B) Site in a small State The Secretary shall conduct at least 3 of the pilot projects in a State with a population of less than 1,000,000. (3) Definition of home health agency In this section, the term home health agency has the meaning given that term in section 1861(o) of the Social Security Act ( 42 U.S.C. 1395x(o) ). (b) Medicare beneficiaries within the scope of projects The Secretary shall specify the criteria for identifying those Medicare beneficiaries who shall be considered within the scope of the pilot projects under this section for purposes of the application of subsection (c) and for the assessment of the effectiveness of the home health agency in achieving the objectives of this section. Such criteria may provide for the inclusion in the projects of Medicare beneficiaries who begin receiving home health services under title XVIII of the Social Security Act after the date of the implementation of the projects. (c) Incentives (1) Performance targets The Secretary shall establish for each home health agency participating in a pilot project under this section a performance target using one of the following methodologies, as determined appropriate by the Secretary: (A) Adjusted historical performance target The Secretary shall establish for the agency— (i) a base expenditure amount equal to the average total payments made to the agency under parts A and B of title XVIII of the Social Security Act for Medicare beneficiaries determined to be within the scope of the pilot project in a base period determined by the Secretary