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106TH CONGRESS

1ST SESSION H. R. 1006

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 HOUSE OF REPRESENTATIVES

MARCH 4, 1999

Mr. MCCRERY (for himself, Mr. CARDIN, Mr. HOUGHTON, and Ms. DUNN)

introduced the following bill; which was referred to the Committee on

Ways and Means

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 operat3 ing 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.

10 ‘‘(3) DETERMINATION OF THE FEDERAL PER

11 DIEM RATE.—

12 ‘‘(A) BASE YEAR.—The Secretary shall de13 termine, on a per diem basis, the allowable op14 erating and capital-related costs of inpatient

15 hospital services for each psychiatric facility for

16 its cost reporting period (if any) beginning in

17 the base fiscal year (as defined in paragraph

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

19 (b)(8) did not apply.

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

21 The Secretary shall update the amount deter22 mined under subparagraph (A) for each cost re23 porting period up to the first cost reporting pe24 riod to which this subsection applies by a factor

25 equal to the market basket percentage increase.
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1 ‘‘(C) COMPUTATION OF STANDARDIZED

2 PER DIEM RATE.—The Secretary shall stand3 ardize the amount determined under subpara4 graph (B) for each facility by—

5 ‘‘(i) adjusting for variations among

6 facilities by area in the average facility

7 wage level per diem; and

8 ‘‘(ii) adjusting for variations in case

9 mix per diem among facilities (based on

10 the patient classification system estab11 lished by the Secretary under paragraph

12 (4)).

13 ‘‘(D) COMPUTATION OF WEIGHTED AVER14 AGE PER DIEM RATES.—

15 ‘‘(i) SEPARATE RATES FOR URBAN

16 AND RURAL AREAS.—Based on the stand17 ardized amounts determined under sub18 paragraph (C) for each facility, the Sec19 retary shall compute a separate weighted

20 average per diem rate—

21 ‘‘(I) for all psychiatric facilities

22 located in an urban area (as defined

23 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.—

5 Subject to paragraph (7)(C), in the areas

6 referred to in clause (i) the Secretary may

7 compute a separate weighted average per

8 diem rate for—

9 ‘‘(I) psychiatric hospitals; and

10 ‘‘(II) psychiatric units described

11 in the matter following clause (v) of

12 subsection (d)(1)(B).

13 If the Secretary establishes separate aver14 age weighted per diem rates under this

15 clause, the Secretary shall also establish

16 separate average per diem rates for facili17 ties in such categories that are owned and

18 operated by an agency or instrumentality

19 of Federal, State, or local government and

20 for facilities 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.

10 ‘‘(F) DETERMINATION OF FEDERAL PER

11 DIEM RATE.—

12 ‘‘(i) IN GENERAL.—The Secretary

13 shall compute for each psychiatric facility

14 for each fiscal year (beginning with fiscal

15 year 2001) a Federal per diem rate equal

16 to the applicable weighted average per

17 diem rate determined under subparagraph

18 (E), adjusted for—

19 ‘‘(I) variations among facilities

20 by area in the average facility wage

21 level per diem;

22 ‘‘(II) variations in case mix per

23 diem among facilities (based on the

24 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 the Federal per diem rates under

8 this subparagraph, the Secretary may ad9 just for outlier cases, the indirect costs of

10 medical education, and such other factors

11 as the Secretary determines to be appro12 priate.

13 ‘‘(iii) BUDGET NEUTRALITY.—The ad14 justments specified in clauses (i)(I),

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

16 manner that does not result in aggregate

17 payments under this subsection that are

18 greater or less than those aggregate pay19 ments that otherwise would have been

20 made if such adjustments did not apply.

21 ‘‘(4) ESTABLISHMENT OF PATIENT CLASSIFICA22 TION SYSTEM.—

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

24 establish—
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1 ‘‘(i) classes of patients of psychiatric

2 facilities (in this paragraph referred to as

3 ‘case mix groups’), based on such factors

4 as the Secretary determines to be appro5 priate; and

6 ‘‘(ii) a method of classifying specific

7 patients in psychiatric facilities within

8 these groups.

9 ‘‘(B) WEIGHTING FACTORS.—For each

10 case mix group, the Secretary shall assign an

11 appropriate weighting factor that reflects the

12 relative facility resources used with respect to

13 patients classified within that group compared

14 to patients classified within other such groups.

15 ‘‘(5) DATA COLLECTION; UTILIZATION MON16 ITORING.—

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

18 may require psychiatric facilities to submit such

19 data as is necessary to implement the system

20 established under this subsection.

21 ‘‘(B) UTILIZATION MONITORING.—The

22 Secretary shall monitor changes in the utiliza23 tion of inpatient hospital services furnished by

24 psychiatric facilities under the system estab25 lished under this subsection and report to the
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1 appropriate committees of Congress on such

2 changes, together with recommendations for

3 legislation (if any) that is needed to address un4 warranted changes in such utilization.

5 ‘‘(6) SPECIAL ADJUSTMENTS.—Notwithstand6 ing the preceding provisions of this subsection, the

7 Secretary shall reduce aggregate payment amounts

8 that would otherwise be payable under this sub9 section for inpatient hospital services furnished by a

10 psychiatric facility during cost reporting periods be11 ginning in fiscal years 2001 and 2002 by such uni12 form percentage as is necessary to assure that pay13 ments under this subsection for such cost reporting

14 periods are reduced by an amount that is equal to

15 the sum of—

16 ‘‘(A) the aggregate increase in payments

17 under this title during fiscal years 1999 and

18 2000, that is attributable to the operation of

19 subsection (b)(8); and

20 ‘‘(B) the aggregate increase in payments

21 under this title during fiscal years 2001 and

22 2002 that is attributable to the application of

23 the market basket percentage increase under

24 paragraphs (2)(B) and (3)(E) of this subsection
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1 in lieu of the provisions of subclauses (VI) and

2 (VII) of subsection (b)(3)(B)(ii).

3 Reductions under this paragraph shall not affect

4 computation of the amounts payable under this sub5 section for cost reporting periods beginning in fiscal

6 years after fiscal year 2002.

7 ‘‘(7) DEFINITIONS.—For purposes of this sub8 section:

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

10 with respect to a hospital, the most recent fiscal

11 year ending before the date of the enactment of

12 this subsection for which audited cost report

13 data are available.

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

15 ‘‘(i) with respect to cost reporting pe16 riods beginning on or after October 1,

17 2000, and before October 1, 2001, 25 per18 cent;

19 ‘‘(ii) with respect to cost reporting pe20 riods beginning on or after October 1,

21 2001, and before October 1, 2002, 50 per22 cent; and

23 ‘‘(iii) with respect to cost reporting

24 periods beginning on or after October 1,
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1 2002, and before October 1, 2003, 75 per2 cent.

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

4 means—

5 ‘‘(i) a psychiatric hospital; and

6 ‘‘(ii) a psychiatric unit described in

7 the matter following clause (v) of sub8 section (d)(1)(B).

9 ‘‘(D) The term ‘TEFRA percentage’

10 means—

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

13 2000, and before October 1, 2001, 75 per14 cent;

15 ‘‘(ii) with respect to cost reporting pe16 riods beginning on or after October 1,

17 2001, and before October 1, 2002, 50 per18 cent; and

19 ‘‘(iii) with respect to cost reporting

20 periods beginning on or after October 1,

21 2002, and before October 1, 2003, 25 per22 cent.’’.

23 (b) LIMIT ON REDUCTIONS UNDER BALANCED

24 BUDGET ACT.—Section 1886(b) of the Social Security Act
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1 (42 U.S.C. 1395ww(b)) is amended by adding at the end

2 the following:

3 ‘‘(8)(A) Notwithstanding the amendments made by

4 sections 4411, 4414, 4415, and 4416 of the Balanced

5 Budget Act of 1997, in the case of a psychiatric facility

6 (as defined in subparagraph (B)(ii)), the amount of pay7 ment for the operating costs of inpatient hospital services

8 for cost reporting periods beginning on or after October

9 1, 1998, and before October 1, 2000, shall not be less than

10 95 percent of the amount that would have been paid for

11 such costs if such amendments did not apply.

12 ‘‘(B) For purposes of this paragraph, the term ‘psy13 chiatric facility’ means—

14 ‘‘(i) a psychiatric hospital; and

15 ‘‘(ii) a psychiatric unit described in the matter

16 following clause (v) of subsection (d)(1)(B).’’.

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

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

19 enactment of the Balanced Budget Act of 1997.

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