I

104TH CONGRESS

2D SESSION H. R. 3856

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

payment under the Medicare program for inpatient services of rehabilitation hospitals and units based on discharges classified by functionalrelated groups.

IN THE HOUSE OF REPRESENTATIVES

JULY 18, 1996

Mr. LOBIONDO (for himself, Mr. ZIMMER, Mr. SAXTON, and Mrs. ROUKEMA)

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 prospective payment under the Medicare program

for inpatient services of rehabilitation hospitals and units

based on discharges classified by functional-related

groups.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. PROSPECTIVE PAYMENT FOR INPATIENT RE2 HABILITATION HOSPITAL SERVICES BASED

3 ON DISCHARGES CLASSIFIED BY FUNC4 TIONAL-RELATED GROUPS.

5 (a) IN GENERAL.—Section 1886 of the Social Secu6 rity Act (42 U.S.C. 1395ww) is amended by adding at the

7 end the following new subsection:

8 ‘‘(j) PROSPECTIVE PAYMENT FOR INPATIENT REHA9 BILITATION SERVICES.—

10 ‘‘(1) IN GENERAL.—Notwithstanding section

11 1814(b), but subject to the provisions of section

12 1813, the amount of the payment with respect to the

13 operating and capital costs of inpatient hospital

14 services of a rehabilitation hospital or a rehabilita15 tion unit (in this subsection referred to as a ‘reha16 bilitation facility’) for a discharge is equal to the per

17 discharge payment rate established under this sub18 section.

19 ‘‘(2) FUNCTIONAL-RELATED GROUPS.—

20 ‘‘(A) ESTABLISHMENT.—The Secretary

21 shall establish—

22 ‘‘(i) classes of discharges of rehabilita23 tion facilities by functional-related groups

24 (each in this subsection referred to as a

25 ‘functional-related group’ or ‘FRG’), based

26 on impairment, age, and functional capa-
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1 bility of the discharged individual and such

2 other factors as the Secretary deems ap3 propriate, and

4 ‘‘(ii) a method of classifying specific

5 discharges from rehabilitation facilities

6 within these groups.

7 ‘‘(B) WEIGHTING FACTORS.—For each

8 functional-related group the Secretary shall as9 sign an appropriate weighting which reflects the

10 relative facility resources used with respect to

11 discharges classified within that group com12 pared to discharges classified within other

13 groups.

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

15 from time to time adjust the classifications and

16 weighting factors established under this para17 graph as appropriate to correct for forecast er18 rors and to reflect changes in treatment pat19 terns, technology, and other factors which may

20 affect the relative use of resources.

21 ‘‘(3) PAYMENT RATE.—

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

23 determine a prospective payment rate for each

24 rehabilitation facility discharge for which such

25 rehabilitation facility is entitled to receive pay-
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1 ment under this title. Subject to subparagraph

2 (B), such rate for discharges during a fiscal

3 year shall be based on the average payment per

4 discharge under this title for inpatient operat5 ing and capital costs of rehabilitation facilities

6 in fiscal year 1995 (as estimated by the Sec7 retary) adjusted—

8 ‘‘(i) by updating such per-discharge

9 amount to the fiscal year involved by the

10 applicable percentage increases provided

11 under subsection (b)(3)(B)(i) for each year

12 after fiscal year 1995 and up to the fiscal

13 year involved;

14 ‘‘(ii) by reducing such rates by a fac15 tor equal to the proportion of payments

16 under this subsection (as estimated by the

17 Secretary) based on FRG prospective pay18 ment amounts which are additional pay19 ments described in paragraph (4) (relating

20 to outlier and related payments) or para21 graph (7);

22 ‘‘(iii) for variations among rehabilita23 tion facilities by area under paragraph (6);

24 ‘‘(iv) by the weighting factors estab25 lished under paragraph (2)(B); and
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1 ‘‘(v) by such other factors as the Sec2 retary determines are necessary to properly

3 reflect variations in necessary costs of

4 treatment among rehabilitation facilities.

5 ‘‘(B) BUDGET NEUTRAL RATES.—The Sec6 retary shall establish the prospective payment

7 amounts under this subsection for discharges

8 during each of fiscal years 1998 through 2002

9 at levels such that, in the Secretary’s esti10 mation, the amount of total payments under

11 this subsection for each such fiscal year (includ12 ing any payment adjustments pursuant to para13 graph (7)) shall not exceed the amount of pay14 ments that would have been made under this

15 title during the fiscal year for operating and

16 capital costs of rehabilitation facilities had this

17 subsection not been enacted.

18 ‘‘(4) OUTLIER AND SPECIAL PAYMENTS.—

19 ‘‘(A) OUTLIERS.—

20 ‘‘(i) DAY OUTLIERS.—The Secretary

21 shall provide for an additional payment to

22 a rehabilitation facility for discharges in a

23 functional-related group, the lengths of

24 stay of which exceeded the mean length of

25 stay for discharges within that group by a
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1 fixed number of days or exceeds such mean

2 length of stay by some fixed number of de3 viations, whichever is the fewer number of

4 days.

5 ‘‘(ii) REQUESTING ADDITIONAL PAY6 MENTS.—For cases not included in clause

7 (i), a rehabilitation facility may request ad8 ditional payments in any case in which

9 charges, adjusted to cost, exceed a fixed

10 multiple of the applicable prospective pay11 ment rate, or exceed such other fixed dol12 lar amount, whichever is greater, or exceed

13 the prospective payment rate plus a fixed

14 dollar amount determined by the Sec15 retary.

16 ‘‘(iii) PAYMENT BASED ON MARGINAL

17 COST OF CARE.—The amount of such addi18 tional payment under clauses (i) and (ii)

19 shall be determined by the Secretary and

20 shall approximate the marginal cost of care

21 beyond the cutoff point applicable under

22 clause (i) or (ii).

23 ‘‘(iv) TOTAL PAYMENTS.—The total

24 amount of the additional payments made

25 under this subparagraph for discharges in
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1 a fiscal year may not be less than 5 per2 cent nor more than 6 percent of the total

3 payments projected or estimated to be

4 made based on FRG prospective payment

5 rates for discharges in that year.

6 ‘‘(B) ADJUSTMENT.—The Secretary may

7 provide for such adjustments to the payment

8 amounts under this subsection as the Secretary

9 deems appropriate to take into account the

10 unique circumstances of rehabilitation facilities

11 located in Alaska and Hawaii.

12 ‘‘(5) PUBLICATION.—The Secretary shall pro13 vide for publication in the Federal Register, on or

14 before September 1 before each fiscal year (begin15 ning with fiscal year 1998), of the classification and

16 weighting factors for FRGs under paragraph (2) for

17 such fiscal year and a description of the methodol18 ogy and data used in computing the prospective pay19 ment rates under this subsection for that fiscal year.

20 ‘‘(6) AREA WAGE ADJUSTMENT.—The Secretary

21 shall adjust the proportion (as estimated by the Sec22 retary from time to time) of rehabilitation facilities’

23 costs which are attributable to wages and wage-re24 lated costs, of the prospective payment rates com25 puted under paragraph (3) for area differences in
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1 wage levels by a factor (established by the Sec2 retary) reflecting the relative hospital wage level in

3 the geographic area of the rehabilitation facility

4 compared to the national average wage level for such

5 facilities. Not later than October 1, 1998 (and at

6 least every 12 months thereafter), the Secretary

7 shall update the factor under the preceding sentence

8 on the basis of a survey conducted by the Secretary

9 (and updated as appropriate) of the wages and

10 wage-related costs incurred in furnishing rehabilita11 tion services. Any adjustments or updates made

12 under this paragraph for a fiscal year shall be made

13 in a manner that assures that the aggregated pay14 ments under this subsection in the fiscal year are

15 not greater or less than those that would have been

16 made in the year without such adjustment.

17 ‘‘(7) ADDITIONAL ADJUSTMENTS.—The Sec18 retary shall provide by regulation for—

19 ‘‘(A) an additional payment to take into

20 account indirect costs of medical education and

21 the special circumstances of hospitals that serve

22 a significantly disproportionate number of low23 income patients in a manner similar to that

24 provided under subparagraphs (B) and (F), re25 spectively, of subsection (d)(5); and
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1 ‘‘(B) such other exceptions and adjust2 ments to payment amounts under this sub3 section in a manner similar to that provided

4 under subsection (d)(5)(I) in relation to pay5 ments under subsection (d).

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

7 no administrative or judicial review under section

8 1878 or otherwise of—

9 ‘‘(A) the establishment of FRGs, of the

10 methodology for the classification of discharges

11 within such groups, and of the appropriate

12 weighting factors thereof under paragraph (2),

13 and

14 (B) the establishment of the prospective

15 payment rates under paragraph (3).’’.

16 (b) CONFORMING AMENDMENTS.—Section 1886(b)

17 of such Act (42 U.S.C. 1395ww(b)) is amended—

18 (1) in paragraph (1), by inserting ‘‘and other

19 than a rehabilitation facility described in subsection

20 (j)(1)’’ after ‘‘subsection (d)(1)(B)’’, and

21 (2) in paragraph (3)(B)(i), by inserting ‘‘and

22 subsection (j)’’ after ‘‘For purposes of subsection

23 (d)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to cost reporting periods beginning

3 on or after October 1, 1997.

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