II

106TH CONGRESS

1ST SESSION S. 1002

To amend title XVIII of the Social Security Act to provide for a prospective

payment system for services furnished by psychiatric hospitals under

the Medicare Program.

IN THE SENATE OF THE UNITED STATES

MAY 11, 1999

Mr. MACK (for himself and Mr. BREAUX) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To amend title XVIII of the Social Security Act to provide

for a prospective payment system for services furnished

by psychiatric hospitals under the Medicare Program.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Medicare Psychiatric

5 Hospital Prospective Payment System Act of 1999’’.

6 SEC. 2. MEDICARE PROSPECTIVE PAYMENT SYSTEM FOR

7 PSYCHIATRIC FACILITIES.

8 (a) ESTABLISHMENT OF PROSPECTIVE PAYMENT

9 SYSTEM.—Section 1886 of the Social Security Act (42
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1 U.S.C. 1395ww) is amended by adding at the end the fol2 lowing:

3 ‘‘(l) PROSPECTIVE PAYMENT SYSTEM FOR INPA4 TIENT PSYCHIATRIC SERVICES.—

5 ‘‘(1) AMOUNT OF PAYMENT.—

6 ‘‘(A) DURING TRANSITION PERIOD.—Not7 withstanding section 1814(b), but subject to the

8 provisions of section 1813, the amount of pay9 ment with respect to the operating and capital10 related costs of inpatient hospital services of a

11 psychiatric facility (as defined in paragraph

12 (7)(C)) for each day of services furnished in a

13 cost reporting period beginning on or after Oc14 tober 1, 2000, and before October 1, 2003, is

15 equal to the sum of—

16 ‘‘(i) the TEFRA percentage (as de17 fined in paragraph (7)(D)) of the facility18 specific per diem rate (determined under

19 paragraph (2)); and

20 ‘‘(ii) the PPS percentage (as defined

21 in paragraph (7)(B)) of the applicable

22 Federal per diem rate (determined under

23 paragraph (3)).

24 ‘‘(B) UNDER FULLY IMPLEMENTED SYS25 TEM.—Notwithstanding section 1814(b), but
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1 subject to the provisions of section 1813, the

2 amount of payment with respect to the oper3 ating and capital-related costs of inpatient hos4 pital services of a psychiatric facility for each

5 day of services furnished in a cost reporting pe6 riod beginning on or after October 1, 2003, is

7 equal to the applicable Federal per diem rate

8 determined under paragraph (3) for the facility

9 for the fiscal year in which the day of services

10 occurs.

11 ‘‘(C) NEW FACILITIES.—In the case of a

12 psychiatric facility that does not have a base

13 fiscal year (as defined in paragraph (7)(A)),

14 payment for the operating and capital-related

15 costs of inpatient hospital services shall be

16 made under this subsection using the applicable

17 Federal per diem rate.

18 ‘‘(2) DETERMINATION OF FACILITY-SPECIFIC

19 PER DIEM RATES.—

20 ‘‘(A) BASE YEAR.—The Secretary shall de21 termine, on a per diem basis, the allowable op22 erating and capital-related costs of inpatient

23 hospital services for each psychiatric facility for

24 its cost reporting period (if any) beginning in

25 the base fiscal year (as defined in paragraph
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1 (7)(A)), such costs determined as if subsection

2 (b)(8) did not apply.

3 ‘‘(B) UPDATING.—The Secretary shall up4 date the amount determined under subpara5 graph (A) for each cost reporting period after

6 the cost reporting period beginning in the base

7 fiscal year and before October 1, 2003, by a

8 factor equal to the market basket percentage

9 increase (as defined in subsection

10 (b)(3)(B)(iii)).

11 ‘‘(3) DETERMINATION OF FEDERAL PER DIEM

12 RATE.—

13 ‘‘(A) BASE YEAR.—The Secretary shall de14 termine, on a per diem basis, the allowable op15 erating and capital-related costs of inpatient

16 hospital services for each psychiatric facility for

17 its cost reporting period (if any) beginning in

18 the base fiscal year (as defined in paragraph

19 (7)(A)), such costs determined as if subsection

20 (b)(8) did not apply.

21 ‘‘(B) UPDATING TO FIRST FISCAL YEAR.—

22 The Secretary shall update the amount deter23 mined under subparagraph (A) for each cost re24 porting period up to the first cost reporting pe25 riod to which this subsection applies by a factor
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1 equal to the market basket percentage increase

2 (as defined in subsection (b)(3)(B)(iii)).

3 ‘‘(C) COMPUTATION OF STANDARDIZED

4 PER DIEM RATE.—The Secretary shall stand5 ardize the amount determined under subpara6 graph (B) for each facility by—

7 ‘‘(i) adjusting for variations among

8 facilities by area in the average facility

9 wage level per diem; and

10 ‘‘(ii) adjusting for variations in case

11 mix per diem among facilities (based on

12 the patient classification system estab13 lished by the Secretary under paragraph

14 (4)).

15 ‘‘(D) COMPUTATION OF WEIGHTED AVER16 AGE PER DIEM RATES.—

17 ‘‘(i) SEPARATE RATES FOR URBAN

18 AND RURAL AREAS.—Based on the stand19 ardized amounts determined under sub20 paragraph (C) for each facility, the Sec21 retary shall compute a separate weighted

22 average per diem rate—

23 ‘‘(I) for all psychiatric facilities

24 located in an urban area (as defined

25 in subsection (d)(2)(D)); and
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1 ‘‘(II) for all psychiatric facilities

2 located in a rural area (as defined in

3 subsection (d)(2)(D)).

4 ‘‘(ii) FOR HOSPITALS AND UNITS.—In

5 the areas referred to in clause (i), the Sec6 retary may compute a separate weighted

7 average per diem rate for—

8 ‘‘(I) psychiatric hospitals; and

9 ‘‘(II) psychiatric units described

10 in the matter following clause (v) of

11 subsection (d)(1)(B).

12 If the Secretary establishes separate aver13 age weighted per diem rates under this

14 clause, the Secretary shall also establish

15 separate average per diem rates for psy16 chiatric facilities in such categories that

17 are owned and operated by an agency or

18 instrumentality of Federal, State, or local

19 government and for psychiatric facilities

20 other than such facilities.

21 ‘‘(iii) WEIGHTED AVERAGE.—In com22 puting the weighted averages under clauses

23 (i) and (ii), the standardized per diem

24 amount for each facility shall be weighted

25 for each facility by the number of days of
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1 inpatient hospital services furnished during

2 its cost reporting period beginning in the

3 base fiscal year.

4 ‘‘(E) UPDATING.—The weighted average

5 per diem rates determined under subparagraph

6 (D) shall be updated for each fiscal year after

7 the first fiscal year to which this subsection ap8 plies by a factor equal to the market basket

9 percentage increase (as defined in subsection

10 (b)(3)(B)(iii)).

11 ‘‘(F) DETERMINATION OF FEDERAL PER

12 DIEM RATE.—

13 ‘‘(i) IN GENERAL.—The Secretary

14 shall compute for each psychiatric facility

15 for each fiscal year (beginning with fiscal

16 year 2001) a Federal per diem rate equal

17 to the applicable weighted average per

18 diem rate determined under subparagraph

19 (E), adjusted for—

20 ‘‘(I) variations among facilities

21 by area in the average facility wage

22 level per diem;

23 ‘‘(II) variations in case mix per

24 diem among facilities (based on the

25 patient classification system estab-
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1 lished by the Secretary under para2 graph (4)); and

3 ‘‘(III) variations among facilities

4 in the proportion of low-income pa5 tients served by the facility.

6 ‘‘(ii) OTHER ADJUSTMENTS.—In com7 puting Federal per diem rates under this

8 subparagraph, the Secretary may adjust

9 for outlier cases, the indirect costs of med10 ical education, and such other factors as

11 the Secretary determines to be appropriate.

12 ‘‘(iii) BUDGET NEUTRALITY.—The ad13 justments specified in clauses (i)(I),

14 (i)(III), and (ii) shall be implemented in a

15 manner that does not result in aggregate

16 payments under this subsection that are

17 greater or less than those aggregate pay18 ments that otherwise would have been

19 made if such adjustments did not apply.

20 ‘‘(4) ESTABLISHMENT OF PATIENT CLASSIFICA21 TION SYSTEM.—

22 ‘‘(A) IN GENERAL.—The Secretary shall

23 establish—

24 ‘‘(i) classes of patients of psychiatric

25 facilities (in this paragraph referred to as
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1 ‘case mix groups’), based on such factors

2 as the Secretary determines to be appro3 priate; and

4 ‘‘(ii) a method of classifying specific

5 patients in psychiatric facilities within

6 these groups.

7 ‘‘(B) WEIGHTING FACTORS.—For each

8 case mix group, the Secretary shall assign an

9 appropriate weighting factor that reflects the

10 relative facility resources used with respect to

11 patients classified within that group compared

12 to patients classified within other such groups.

13 ‘‘(5) DATA COLLECTION; UTILIZATION MONI14 TORING.—

15 ‘‘(A) DATA COLLECTION.—The Secretary

16 may require psychiatric facilities to submit such

17 data as is necessary to implement the system

18 established under this subsection.

19 ‘‘(B) UTILIZATION MONITORING.—The

20 Secretary shall monitor changes in the utiliza21 tion of inpatient hospital services furnished by

22 psychiatric facilities under the system estab23 lished under this subsection and report to the

24 appropriate committees of Congress on such

25 changes, together with recommendations for
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1 legislation (if any) that is needed to address un2 warranted changes in such utilization.

3 ‘‘(6) SPECIAL ADJUSTMENTS.—Notwith4 standing the preceding provisions of this subsection,

5 the Secretary shall reduce aggregate payment

6 amounts that would otherwise be payable under this

7 subsection for inpatient hospital services furnished

8 by a psychiatric facility during cost reporting periods

9 beginning in fiscal years 2001 and 2002 by such

10 uniform percentage as is necessary to assure that

11 payments under this subsection for such cost report12 ing periods are reduced by an amount that is equal

13 to the sum of—

14 ‘‘(A) the aggregate increase in payments

15 under this title during fiscal years 1999 and

16 2000, that is attributable to the operation of

17 subsection (b)(8); and

18 ‘‘(B) the aggregate increase in payments

19 under this title during fiscal years 2001 and

20 2002 that is attributable to the application of

21 the market basket percentage increase under

22 paragraphs (2)(B) and (3)(E) of this subsection

23 in lieu of the provisions of subclauses (VI) and

24 (VII) of subsection (b)(3)(B)(ii). Reductions

25 under this paragraph shall not affect computa-
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1 tion of the amounts payable under this sub2 section for cost reporting periods beginning in

3 fiscal years after fiscal year 2002.

4 ‘‘(7) DEFINITIONS.—For purposes of this sub5 section:

6 ‘‘(A) The term ‘base fiscal year’ means,

7 with respect to a hospital, the most recent fiscal

8 year ending before the date of enactment of this

9 subsection for which audited cost report data

10 are available.

11 ‘‘(B) The term ‘PPS percentage’ means—

12 ‘‘(i) with respect to cost reporting pe13 riods beginning on or after October 1,

14 2000, and before October 1, 2001, 25 per15 cent;

16 ‘‘(ii) with respect to cost reporting pe17 riods beginning on or after October 1,

18 2001, and before October 1, 2002, 50 per19 cent; and

20 ‘‘(iii) with respect to cost reporting

21 periods beginning on or after October 1,

22 2002, and before October 1, 2003, 75 per23 cent.

24 ‘‘(C) The term ‘psychiatric facility’

25 means—
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1 ‘‘(i) a psychiatric hospital; and

2 ‘‘(ii) a psychiatric unit described in

3 the matter following clause (v) of sub4 section (d)(1)(B).

5 ‘‘(D) The term ‘TEFRA percentage’

6 means—

7 ‘‘(i) with respect to cost reporting pe8 riods beginning on or after October 1,

9 2000, and before October 1, 2001, 75 per10 cent;

11 ‘‘(ii) with respect to cost reporting pe12 riods beginning on or after October 1,

13 2001, and before October 1, 2002, 50 per14 cent; and

15 ‘‘(iii) with respect to cost reporting

16 periods beginning on or after October 1,

17 2002, and before October 1, 2003, 25 per18 cent.’’.

19 (b) LIMIT ON REDUCTIONS UNDER BALANCED

20 BUDGET ACT.—Section 1886(b) of the Social Security Act

21 (42 U.S.C. 1395ww(b)) is amended by adding at the end

22 the following:

23 ‘‘(8) Notwithstanding the amendments made by

24 sections 4411, 4414, 4415, and 4416 of the Bal25 anced Budget Act of 1997, in the case of a psy-
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1 chiatric facility (as described in subsection

2 (l)(7(C)(ii)), the amount of payment for the oper3 ating costs of inpatient hospital services for cost re4 porting periods beginning on or after October 1,

5 1998, and before October 1, 2000, shall not be less

6 than 95 percent of the amount that would have been

7 paid for such costs if such amendments did not

8 apply.

9 (c) EFFECTIVE DATE.—The amendments made by

10 subsections (a) and (b) shall apply as if included in the

11 enactment of the Balanced Budget Act of 1997.

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