SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Hospital Outpatient Reform 
Act of 1997''.

SEC. 2. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

    (a) Ambulatory Surgical Center Procedures.--Section 
1833(i)(3)(B)(i)(II) of the Social Security Act (42 U.S.C. 
1395l(i)(3)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (b) Radiology Services and Diagnostic Procedures.--Section 
1833(n)(1)(B)(i)(II) of such Act (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is 
amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished during portions of cost reporting periods 
occurring on or after January 1, 1998.

SEC. 3. PROSPECTIVE PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT 
              SERVICES.

    (a) In General.--Section 1833 of the Social Security Act (42 U.S.C. 
1395l) is amended by adding at the end the following:
    ``(t) Prospective Payment System for Hospital Outpatient Department 
Services.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, with respect to hospital outpatient services 
        designated by the Secretary and furnished during years 
        beginning with January 1, 1998, the amount of payment made for 
        the services determined under this part shall be determined 
        under a prospective payment system established by the Secretary 
        in accordance with this subsection.
            ``(2) System requirements.--Under the system established by 
        the Secretary under this subsection, the Secretary shall--
                    ``(A) develop a classification system to reflect 
                the hospital outpatient services furnished under this 
                part;
                    ``(B) establish groups of procedures and visits so 
                that procedures and visits within each group are 
                comparable clinically and with respect to the use of 
                resources;
                    ``(C) using data from the most recent year 
                available, establish relative payment weights for 
                groups based on median hospital costs and shall 
                determine the frequency of utilization of each group;
                    ``(D) adjust the proportion, (as estimated by the 
                Secretary from time to time) of hospitals' costs which 
                are attributable to wages and wage-related costs, of 
                the fee schedule amounts applied under paragraph (3) 
                for area differences in hospital wage levels by the 
                factor (established by the Secretary under section 
                1886(d)(3)(E)) reflecting the relative hospital wage 
                level in the geographic classification area of the 
                hospital compared to the national average hospital wage 
                level;
                    ``(E) establish other adjustments as determined to 
                be necessary to ensure equitable payments, and 
                establish a reduced payment for the performance of 
                multiple procedures where the marginal cost of 
                providing a second procedure during a single visit may 
                be less than the individual cost of both procedures 
                combined; and
                    ``(F) identify and implement methodologies to 
                control for unnecessary increases in the volume of the 
                services subject to payment under this section, and 
                report to Congress on such methodologies before January 
                1, 1999.
            ``(3) Medicare payment amount.--Subject to the deductible 
        under section 1833(b), the amount of payment made under this 
        part for outpatient department services classified within a 
        group and provided in any year shall be equal to 80 percent of 
        the Medicare OPD fee schedule amount for the group and the 
        year, as determined under paragraph (5).
            ``(4) Computation of conversion factors.--
                    ``(A) Estimates of certain amounts.--The Secretary 
                shall estimate the total projected Medicare payments 
                that would have been made under this part to hospitals 
                for outpatient department services in 1998.
                    ``(B) Calculation of conversion factor.--
                            ``(i) For 1998.--On the basis of the 
                        weights and frequencies of utilization 
                        described in paragraph (2)(C), the Secretary 
                        shall establish a conversion factor for 
                        determining Medicare OPD fee schedule amounts 
                        for each group for 1998 in a manner so that, 
                        taking into account the products, for all the 
                        groups, of 80 percent of the Medicare OPD fee 
                        schedule amounts (taking into account 
                        appropriate adjustments described in paragraphs 
                        (2)(D) and (2)(E)), and the frequency of 
                        utilization for such group, the total projected 
                        Medicare payments under this part to hospitals 
                        under the system under this subsection for 
                        outpatient department services in 1998 shall 
                        equal the total projected Medicare payments 
                        estimated under subparagraph (A).
                            ``(ii) Subsequent years.--Before the 
                        beginning of each year after 1998, the 
                        Secretary shall determine the conversion factor 
                        for determining Medicare OPD fee schedule 
                        amounts for each group for that year. The 
                        conversion factor shall be equal to the 
                        conversion factor determined under this 
                        subparagraph for the previous year increased by 
                        the market basket percentage increase (as 
                        defined in section 1886(b)(3)(B)(iii)) for the 
                        fiscal year in which the year involved begins.
            ``(5) Calculation of Medicare opd fee schedule amounts.--
        The Secretary shall compute a Medicare OPD fee schedule amount 
        for each group for each year in an amount equal to the product 
        of--
                    ``(A) the conversion factor computed under 
                paragraph (4)(B) for the year, and
                    ``(B) the relative payment weights (determined 
                under paragraph (2)(C)) for such group for such year.
            ``(6) Periodic review and adjustments to group prices.--
                    ``(A) Periodic review.--The Secretary may 
                periodically review and revise the groups, the relative 
                payment weights, and the wage and other adjustments 
                described in paragraph (2) and take into account 
                changes in medical practice, volume, changes in 
                technology, the addition of new procedures, new cost 
                data, and other relevant information and factors.
                    ``(B) Budget neutrality for adjustment.--If the 
                Secretary makes adjustments under subparagraph (A), 
                then such adjustments for a year may not cause the 
                estimated amount of expenditures under this part for 
                the year to increase or decrease from the estimated 
                amount of expenditures under this part that would have 
                been made if such adjustments had not been made.''.
    (b) Coinsurance.--Section 1866(a)(2)(A)(ii) of such Act (42 U.S.C. 
1395cc(a)(2)(A)(ii)) is amended by adding at the end the following new 
sentence: ``In the case of items and services for which payment is made 
under part B under the prospective payment system established under 
section 1833(t), clause (ii) of the first sentence shall be applied by 
substituting for 20 percent of the reasonable charge, the 20 percent of 
the applicable Medicare OPD fee schedule amount under section 
1833(t)(5)).''.
    (c) Conforming Amendments.--
            (1) Section 1833(i)(3) of such Act (42 U.S.C. 13951(i)(3)) 
        is amended by adding at the end the following:
    ``(C) The previous provisions of this paragraph shall not apply to 
items and services for which the amount of payment is determined under 
subsection (t).''.
            (2) Section 1833(n) of such Act (42 U.S.C. 13951(n)) is 
        amended by adding at the end the following:
    ``(4) The previous provisions of this subsection shall not apply to 
items and services for which the amount of payment is determined under 
subsection (t).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services provided on or after January 1, 1998.
Medicare Hospital Outpatient Reform Act of 1997 - Amends part B (Supplementary Medical Insurance) of title XVIII (Medicare) of the Social Security Act to:  (1) eliminate formula-driven overpayments for certain outpatient hospital services; and (2) provide for a prospective payment system for hospital outpatient department services.
Medicare Hospital Outpatient Reform Act of 1997