II

106TH CONGRESS

1ST SESSION S. 1783

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

payment system for inpatient long-stay hospital services under the medicare program.

IN THE SENATE OF THE UNITED STATES

OCTOBER 25, 1999

Mr. COCHRAN 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 inpatient longstay hospital services 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 ‘‘Long-Stay Hospital

5 Payment Improvement Act of 1999’’.
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1 SEC. 2. ESTABLISHMENT OF MEDICARE PROSPECTIVE PAY2 MENT RATE SYSTEM FOR LONG-STAY HOS3 PITALS.

4 (a) IN GENERAL.—Section 1886 of the Social Secu5 rity Act (42 U.S.C. 1395ww) is amended by adding at the

6 end the following new subsection:

7 ‘‘(l) PROSPECTIVE PAYMENT FOR INPATIENT LONG8 STAY HOSPITAL SERVICES.—

9 ‘‘(1) PAYMENT.—

10 ‘‘(A) IN GENERAL.—Notwithstanding sec11 tions 1814(b), subsection (b), and section

12 1861(v), but subject to the provisions of section

13 1813, the amount of the payment with respect

14 to the operating costs and capital costs of inpa15 tient hospital services for inpatient hospital dis16 charges in a cost reporting period—

17 ‘‘(i) beginning on or after October 1,

18 2001, and before October 1, 2005, is equal

19 to the sum of the blended operating cost

20 component (described in paragraph (2)(A))

21 and the blended, capital-related cost com22 ponent (described in paragraph (2)(B)) for

23 the cost reporting period and discharges

24 occurring during the period; and

25 ‘‘(ii) beginning on or after October 1,

26 2005, is equal to the prospective payment
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1 rate established under paragraph (4) for

2 the discharge.

3 ‘‘(B) LONG-STAY HOSPITAL DEFINED.—

4 For purposes of this subsection, the term ‘long5 stay hospital’ means a hospital described in

6 subsection (d)(1)(B)(iv).

7 ‘‘(C) OPERATING AND CAPITAL COSTS DE8 FINED.—For purposes of this subsection—

9 ‘‘(i) the term ‘operating costs of inpa10 tient hospital services’ has the meaning

11 given such term in subsection (a)(4), and

12 ‘‘(ii) the term ‘capital-related costs of

13 inpatient hospital services’ has the mean14 ing given such term by the Secretary under

15 subsection (a)(4) as of September 30,

16 1987, and does not include return on eq17 uity capital.

18 ‘‘(2) TRANSITIONAL PAYMENTS.—

19 ‘‘(A) BLENDED OPERATING COST COMPO20 NENT.—

21 ‘‘(i) IN GENERAL.—The amount of

22 the blended operating cost component

23 under this subparagraph for a cost report24 ing period is equal to the sum of—
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1 ‘‘(I) the TEFRA operating cost

2 component percentage (as defined in

3 clause (ii)) of the amount that would

4 have been paid under part A with re5 spect to such costs if this subsection

6 did not apply for the period; and

7 ‘‘(II) the DRG operating cost

8 component percentage (as defined in

9 clause (ii)) of the applicable DRG per

10 discharge prospective operating cost

11 payment rate determined under clause

12 (iii) for discharges occurring during

13 such period.

14 ‘‘(ii) TEFRA AND DRG OPERATING

15 COST COMPONENT PERCENTAGES.—For

16 purposes of clause (i), for a cost reporting

17 period beginning—

18 ‘‘(I) on or after October 1, 2001,

19 and before October 1, 2002, the

20 TEFRA operating cost component

percentage is 662 21 ⁄3 percent and the

22 DRG operating cost component percentage is 331 23 ⁄3 percent;

24 ‘‘(II) on or after October 1,

25 2002, and before October 1, 2003, the
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1 TEFRA operating cost component

percentage is 331 2 ⁄3 percent and DRG

3 operating cost component percentage

is 662 4 ⁄3 percent; and

5 ‘‘(III) on or after October 1,

6 2003, and before October 1, 2005, the

7 TEFRA operating cost component

8 percentage is 0 percent and the DRG

9 operating cost component percentage

10 is 100 percent.

11 ‘‘(iii) APPLICABLE DRG PER DIS12 CHARGE PROSPECTIVE OPERATING COST

13 PAYMENT RATE.—For purposes of clause

14 (i)(II), the applicable DRG per discharge

15 prospective operating cost payment rate for

16 a discharge is equal to the DRG prospec17 tive payment rate established under para18 graph (4) for that discharge multiplied by

19 the operating cost ratio determined under

20 paragraph (4)(B)(i).

21 ‘‘(B) BLENDED CAPITAL-RELATED COST

22 COMPONENT.—

23 ‘‘(i) IN GENERAL.—The amount of

24 the blended capital-related cost component
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1 under this subparagraph for a cost report2 ing period is equal to the sum of—

3 ‘‘(I) the TEFRA capital-related

4 cost component percentage (as defined

5 in clause (ii)) of the amount that

6 would have been paid under part A

7 with respect to such costs if this sub8 section did not apply for the period;

9 and

10 ‘‘(II) the DRG capital-related

11 cost component percentage (as defined

12 in clause (ii)) of the applicable DRG

13 prospective capital payment rate de14 termined under clause (iii) for dis15 charges occurring during such period.

16 ‘‘(ii) TEFRA AND DRG CAPITAL-RE17 LATED COST COMPONENT PERCENTAGES

18 SPECIFIED.—For purposes of clause (i),

19 for a cost reporting period beginning—

20 ‘‘(I) on or after October 1, 2001,

21 and before October 1, 2002, the

22 TEFRA capital-related cost compo23 nent percentage is 80 percent and the

24 DRG capital-related cost component

25 percentage is 20 percent;
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1 ‘‘(II) on or after October 1,

2 2002, and before October 1, 2003, the

3 TEFRA capital-related cost compo4 nent percentage is 60 percent and the

5 DRG capital-related cost component

6 percentage is 40 percent;

7 ‘‘(III) on or after October 1,

8 2003, and before October 1, 2004, the

9 TEFRA capital-related cost compo10 nent percentage is 40 percent and the

11 DRG capital-related cost component

12 percentage is 60 percent; and

13 ‘‘(IV) on or after October 1,

14 2004, and before October 1, 2005, the

15 TEFRA capital-related cost compo16 nent percentage is 20 percent and the

17 DRG capital-related cost component

18 percentage is 80 percent.

19 ‘‘(iii) APPLICABLE DRG PER DIS20 CHARGE PROSPECTIVE CAPITAL COST PAY21 MENT RATE.—For purposes of clause

22 (i)(II), the applicable DRG per discharge

23 prospective capital cost payment rate for a

24 discharge is equal to the DRG prospective

25 payment rate established under paragraph
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1 (4) for that discharge multiplied by the

2 capital cost ratio determined under para3 graph (4)(B)(ii).

4 ‘‘(3) DIAGNOSIS-RELATED GROUPS; WEIGHTING

5 FACTORS.—

6 ‘‘(A) ESTABLISHMENT.—The Secretary

7 shall establish classes of inpatient discharges by

8 long-stay hospitals by using the diagnosis-re9 lated groups established pursuant to subsection

10 (d)(4)(A), except that for those diagnosis-re11 lated groups for which there are fewer than 25

12 inpatient discharges in any fiscal year used to

13 establish weighting factors under subparagraph

14 (B), the Secretary may combine such diagnosis15 related groups into one or more groups in a

16 manner which the Secretary deems to be appro17 priate.

18 ‘‘(B) WEIGHTING FACTORS.—For each

19 such diagnosis-related group, the Secretary

20 shall assign an appropriate weighting factor

21 which shall be derived from the relative hospital

22 operating and capital costs and resources used

23 with respect to patients classified within all

24 groups based on data from the 2 most recent
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1 fiscal years for which data are available to the

2 Secretary for long-stay hospitals.

3 ‘‘(C) ADJUSTMENTS.—The Secretary shall

4 annually adjust the classifications and

5 weighting factors established under this para6 graph as appropriate to reflect changes in treat7 ment patterns, technology, case mix, and other

8 factors which may affect the relative use of

9 long-stay hospital resources.

10 ‘‘(D) DATA COLLECTION.—The Secretary

11 may require long-stay hospitals to submit data

12 required to classify inpatient discharges accord13 ing to diagnosis-related groups and such other

14 patient assessment factors as the Secretary

15 deems necessary to establish and administer the

16 prospective payment system under this sub17 section.

18 ‘‘(4) DRG PROSPECTIVE PAYMENT RATE.—

19 ‘‘(A) IN GENERAL.—Subject to the suc20 ceeding provisions of this subsection, the pro21 spective payment rate described in this para22 graph for a hospital discharge classified within

23 a diagnosis-related group under paragraph (3)

24 is equal to the product of—
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1 ‘‘(i) the applicable single national

2 DRG prospective payment rate determined

3 under paragraph (5); and

4 ‘‘(ii) the weighting factor established

5 under paragraph (3)(B) for the diagnosis6 related group.

7 ‘‘(B) COMPUTATION OF OPERATING COST

8 AND CAPITAL RATIOS.—For purposes of para9 graph (2)(A)(iii) and (2)(B)(iii)—

10 ‘‘(i) the operating cost ratio is equal

11 to the proportion of the single national

12 DRG prospective payment rate under para13 graph (5)(A) that is attributable to oper14 ating costs of inpatient hospital services;

15 and

16 ‘‘(ii) the capital cost ratio is equal to

17 1 minus the operating cost ratio deter18 mined under clause (i).

19 ‘‘(C) AREA WAGE ADJUSTMENT.—The Sec20 retary shall adjust the proportion (as estimated

21 by the Secretary from time to time) of long-stay

22 hospitals’ costs which are attributable to wages

23 and wage-related costs of the DRG prospective

24 payment rate computed under subparagraph

25 (A) for area differences in wage levels by a fac-
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1 tor (established by the Secretary) reflecting the

2 relative hospital wage level in the geographic

3 area of the long-stay hospital compared to the

4 national average wage level for such long-stay

5 hospitals. The Secretary may use the area wage

6 adjustments applicable to a subsection (d) hos7 pital or may develop a distinct adjustment for

8 long-stay hospitals. Not later than October 1,

9 2001 (and at least every 12 months thereafter),

10 the Secretary shall update the factor under this

11 subparagraph on the basis of information avail12 able to the Secretary (and updated as appro13 priate) of the wages and wage-related costs in14 curred in furnishing long-stay hospital services.

15 Any adjustments or updates made under this

16 paragraph for a fiscal year shall be made in a

17 manner that assures that the aggregate pay18 ments under this subsection in the fiscal year

19 are not greater or less than those that would

20 have been made in the year without such ad21 justment.

22 ‘‘(D) OUTLIER PAYMENTS.—

23 ‘‘(i) IN GENERAL.—The Secretary

24 shall provide for an additional payment to

25 a long-stay hospital for patients in a diag-
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1 nosis-related group, based upon the patient

2 being classified as an outlier based on un3 usual costs or other factors specified by

4 the Secretary beyond cut off points estab5 lished by the Secretary.

6 ‘‘(ii) PAYMENTS BASED ON COST OF

7 CARE.—The amount of such additional

8 payment under clause (i) shall be deter9 mined by the Secretary and shall equal 80

10 percent of the cost of care beyond the cut

11 off points established pursuant to clause

12 (i).

13 ‘‘(iii) TOTAL PAYMENTS.—The total

14 amount of the additional payments made

15 under this subparagraph in a fiscal year

16 shall be projected by the Secretary to be

17 10 percent of the total payments projected

18 or estimated by the Secretary to be made

19 to long-stay hospitals based on the per dis20 charge prospective payment system under

21 this paragraph in that year.

22 ‘‘(E) DISPROPORTIONATE SHARE.—The

23 Secretary shall provide by regulation for an ad24 ditional payment under this paragraph to take

25 into account the special circumstances of long-
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1 stay hospitals that serve a significantly dis2 proportionate number of low-income patients in

3 a manner similar to that provided under sub4 section (d)(5)(F) except that a long-stay hos5 pital shall be considered to ‘serve a significantly

6 disproportionate number of low income patients’

7 for a cost reporting period if the hospital has

8 a disproportionate patient percentage (as de9 fined in clause (vi) of such subsection) for that

10 period which equals, or exceeds, 15 percent, re11 gardless of location or number of beds of the

12 hospital. The total amount of payments made

13 under this subparagraph in a fiscal year may

14 not exceed, stated as a percentage of the total

15 payments projected or estimated by the Sec16 retary to be made to long-stay hospitals based

17 on the per discharge prospective payment sys18 tem under this paragraph in that year, the per19 centage that payments made to subsection (d)

20 hospitals pursuant to subsection (d)(5)(F) rep21 resents of the total prospective payment rate

22 payments made to subsection (d) hospitals in

23 the most recent fiscal year for which the Sec24 retary has data.
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1 ‘‘(F) TRANSFERS.—The Secretary shall

2 provide by regulation for such other exceptions

3 and adjustments to payment amounts under

4 this paragraph for transfers in a manner simi5 lar to that provided under subparagraphs (I)

6 and (J) of subsection (d)(5) in relation to pay7 ments under subsection (d), except that the

8 provisions of subsection (d)(5)(J) shall apply to

9 all qualified discharges from a long-stay hos10 pital (as defined in clause (ii) of such sub11 section) without regard to whether the dis12 charge is classified as a diagnosis-related group

13 described in clause (iii) of such subsection and

14 only where, upon discharge, the individual re15 ceives the services expressed in such clause (ii),

16 for which payment is made under this title.

17 ‘‘(5) DETERMINATION OF SINGLE NATIONAL

18 DRG PROSPECTIVE PAYMENT RATE.—The Secretary

19 shall determine a single national DRG prospective

20 payment rate for each inpatient hospital discharge in

21 a fiscal year (beginning with fiscal year 2002) in22 volving inpatient hospital services of a long-stay hos23 pital in the United States for which payment may be

24 made under part A of this title. Such rate shall be

25 determined as follows:
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1 ‘‘(A) DETERMINATION OF BASE RATE AND

2 OPERATING COMPONENTS.—The Secretary shall

3 determine the average payments per discharge

4 under this title for operating costs and capital

5 costs of inpatient hospital services of long-stay

6 hospitals. The Secretary shall determine such

7 average using data from the most recent fiscal

8 year for which data are available to the Sec9 retary as of the date of the enactment of this

10 subsection. In applying this subparagraph, the

11 Secretary alternatively may use the standard12 ized payment amount described in subsection

13 (d)(1)(C), with appropriate compensating in14 creases to the weighting factors described in

15 paragraph (3)(B) and other appropriate adjust16 ments to effect budget neutrality under sub17 paragraph (C).

18 ‘‘(B) UPDATING COMPONENTS.—Subject to

19 subparagraph (C), the Secretary shall update

20 such rate to the year involved by an appropriate

21 increase factor, which is based on an appro22 priate percentage increase in a market basket

23 of goods and services comprising services for

24 which payment is made under this subsection,
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1 which may be the market basket percentage in2 crease described in subsection (b)(3)(B)(iii).

3 ‘‘(C) BUDGET NEUTRAL RATES.—For each

4 fiscal year, the Secretary shall provide for such

5 adjustment in such rate otherwise computed for

6 that fiscal year as may be necessary to assure

7 that—

8 ‘‘(i) the aggregate payment amounts

9 otherwise provided under this subsection

10 for that fiscal year for operating and cap11 ital costs of inpatient hospital services of

12 long-stay hospitals, taking into account

13 payment adjustments and additions made

14 under paragraph (4) and under subsequent

15 provisions of this subsection,

16 are not greater or less than—

17 ‘‘(ii) the payment amounts which

18 would have been payable for such services

19 for those same hospitals for that fiscal

20 year under part A had this subsection not

21 been enacted.

22 ‘‘(6) ADJUSTMENT.—The Secretary may pro23 vide such adjustments to the payment amounts

24 under this subsection as the Secretary deems appro-
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1 priate to take into account the unique circumstances

2 of long-stay hospitals located in Alaska and Hawaii.

3 ‘‘(7) PUBLICATION.—The Secretary shall pro4 vide for publication in the Federal Register, on or

5 before August 1 before each fiscal year (beginning

6 with fiscal year 2002), of the classification and

7 weighting factors for the diagnosis-related groups

8 under paragraph (3) for such fiscal year and a de9 scription of the methodology and data used in com10 puting the prospective payment rates under this sub11 section for that fiscal year.

12 ‘‘(8) LIMITATION ON REVIEW.—There shall be

13 no administrative or judicial review under section

14 1878 or otherwise of—

15 ‘‘(A) the establishment of diagnosis-related

16 groups, of the methodology for the classification

17 of discharges within such groups, and of the ap18 propriate weighting factors thereof under para19 graph (3); and

20 ‘‘(B) the establishment of the prospective

21 payment rates under paragraphs (4) and (5).’’.

22 (b) CONFORMING AMENDMENT.—Section 1886(b)(1)

23 of such Act (42 U.S.C. 1395ww(b)(1)) is amended in

24 paragraph (1), by striking ‘‘and other than a rehabilita25 tion facility described in subsection (j)(1)’’ and inserting
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1 ‘‘, a rehabilitation facility described in subsection (j)(1),

2 and a long-stay hospital described in subsection

3 (d)(1)(B)(iv),’’.

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

5 this section apply to cost reporting periods beginning on

6 or after October 1, 2001, except that the Secretary of

7 Health and Human Services may require the submission

8 of data under section 1886(l)(3)(D) of the Social Security

9 Act (as added by subsection (a)) on and after the date

10 of the enactment of this Act.

Æ