II 

108TH CONGRESS 

1ST SESSION S. 1926

To amend title XVIII of the Social Security Act to restore the medicare 

program, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 21, 2003

Ms. STABENOW (for herself, Mr. GRAHAM of Florida, Mrs. CLINTON, Mrs. 

MURRAY, Mr. LEAHY, Mr. DASCHLE, Mr. PRYOR, Mr. LEVIN, Mr. SCHUMER, and Ms. CANTWELL) 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 restore 

the medicare program, and for other purposes.

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; AMENDMENTS TO SOCIAL SECU4 RITY ACT; REFERENCES TO BIPA AND SEC5 RETARY; TABLE OF CONTENTS. 

6 (a) SHORT TITLE.—This Act may be cited as the 

7 ‘‘Support Our Health Care Providers Act of 2003’’. 

8 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex9 cept as otherwise specifically provided, whenever in divi-
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1 sion A of this Act an amendment is expressed in terms 

2 of an amendment to or repeal of a section or other provi3 sion, the reference shall be considered to be made to that 

4 section or other provision of the Social Security Act. 

5 (c) BIPA; SECRETARY.—In this Act: 

6 (1) BIPA.—The term ‘‘BIPA’’ means the 

7 Medicare, Medicaid, and SCHIP Benefits Improve8 ment and Protection Act of 2000, as enacted into 

9 law by section 1(a)(6) of Public Law 106–554. 

10 (2) SECRETARY.—The term ‘‘Secretary’’ means 

11 the Secretary of Health and Human Services. 

12 (d) TABLE OF CONTENTS.—The table of contents of 

13 this Act is as follows:

Sec. 1. Short title; table of contents. 

TITLE I—RURAL PROVISIONS 

Subtitle A—Provisions Relating to Part A Only 

Sec. 101. Equalizing urban and rural standardized payment amounts under the 

medicare inpatient hospital prospective payment system. 

Sec. 102. Enhanced disproportionate share hospital (DSH) treatment for rural 

hospitals and urban hospitals with fewer than 100 beds. 

Sec. 103. Adjustment to the medicare inpatient hospital prospective payment 

system wage index to revise the labor-related share of such 

index. 

Sec. 104. More frequent update in weights used in hospital market basket. 

Sec. 105. Improvements to critical access hospital program. 

Sec. 106. Medicare inpatient hospital payment adjustment for low-volume hospitals. 

Sec. 107. Treatment of missing cost reporting periods for sole community hospitals. 

Sec. 108. Recognition of attending nurse practitioners as attending physicians 

to serve hospice patients. 

Sec. 109. Rural hospice demonstration project. 

Sec. 110. Exclusion of certain rural health clinic and federally qualified health 

center services from the prospective payment system for skilled 

nursing facilities. 

Sec. 110A. Rural community hospital demonstration program. 

Subtitle B—Provisions Relating to Part B Only 
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Sec. 111. 2-year extension of hold harmless provisions for small rural hospitals 

and sole community hospitals under the prospective payment 

system for hospital outpatient department services. 

Sec. 112. Establishment of floor on work geographic adjustment. 

Sec. 113. Medicare incentive payment program improvements for physician 

scarcity. 

Sec. 114. Payment for rural and urban ambulance services. 

Sec. 115. Providing appropriate coverage of rural air ambulance services. 

Sec. 116. Treatment of certain clinical diagnostic laboratory tests furnished to 

hospital outpatients in certain rural areas. 

Sec. 117. Extension of telemedicine demonstration project. 

Sec. 118. Report on demonstration project permitting skilled nursing facilities 

to be originating telehealth sites; authority to implement. 

Subtitle C—Provisions Relating to Parts A and B 

Sec. 121. 1-year increase for home health services furnished in a rural area. 

Sec. 122. Redistribution of unused resident positions. 

Subtitle D—Other Provisions 

Sec. 131. Providing safe harbor for certain collaborative efforts that benefit 

medically underserved populations. 

Sec. 132. Office of rural health policy improvements. 

Sec. 133. MedPac study on rural hospital payment adjustments. 

Sec. 134. Frontier extended stay clinic demonstration project. 

TITLE II—PROVISIONS RELATING TO PART A 

Subtitle A—Inpatient Hospital Services 

Sec. 201. Revision of acute care hospital payment updates. 

Sec. 202. Revision of the indirect medical education (IME) adjustment percentage. 

Sec. 203. Recognition of new medical technologies under inpatient hospital prospective payment system. 

Sec. 204. Increase in Federal rate for hospitals in Puerto Rico. 

Sec. 205. Wage index adjustment reclassification reform. 

Sec. 206. Limitation on charges for inpatient hospital contract health services 

provided to Indians by medicare participating hospitals. 

Sec. 207. Clarifications to certain exceptions to medicare limits on physician referrals. 

Sec. 208. 1-time appeals process for hospital wage index classification. 

Subtitle B—Other Provisions 

Sec. 211. Payment for covered skilled nursing facility services. 

Sec. 212. Coverage of hospice consultation services. 

Sec. 213. Study on portable diagnostic ultrasound services for beneficiaries in 

skilled nursing facilities. 

TITLE III—PROVISIONS RELATING TO PART B 

Subtitle A—Provisions Relating to Physicians’ Services 

Sec. 301. Revision of updates for physicians’ services. 

Sec. 302. Treatment of physicians’ services furnished in Alaska. 
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Sec. 303. Inclusion of podiatrists, dentists, and optometrists under private contracting authority. 

Sec. 304. GAO study on access to physicians’ services. 

Sec. 305. Collaborative demonstration-based review of physician practice expense geographic adjustment data. 

Sec. 306. MedPac report on payment for physicians’ services. 

Subtitle B—Preventive Services 

Sec. 311. Coverage of an initial preventive physical examination. 

Sec. 312. Coverage of cardiovascular screening blood tests. 

Sec. 313. Coverage of diabetes screening tests. 

Sec. 314. Improved payment for certain mammography services. 

Subtitle C—Other Provisions 

Sec. 321. Hospital outpatient department (HOPD) payment reform. 

Sec. 322. Limitation of application of functional equivalence standard. 

Sec. 323. Payment for renal dialysis services. 

Sec. 324. 2-year moratorium on therapy caps; provisions relating to reports. 

Sec. 325. Waiver of part B late enrollment penalty for certain military retirees; 

special enrollment period. 

Sec. 326. Payment for services furnished in ambulatory surgical centers. 

Sec. 327. Payment for certain shoes and inserts under the fee schedule for 

orthotics and prosthetics.

Sec. 328. 5-year authorization of reimbursement for all medicare part B services furnished by certain Indian hospitals and clinics. 

Subtitle D—Additional Demonstrations, Studies, and Other Provisions 

Sec. 341. Demonstration project for coverage of certain prescription drugs and 

biologicals. 

Sec. 342. Extension of coverage of intravenous immune globulin (IVIG) for the 

treatment of primary immune deficiency diseases in the home. 

Sec. 343. MedPac study of coverage of surgical first assisting services of certified registered nurse first assistants. 

Sec. 344. MedPac study of payment for cardio-thoracic surgeons. 

Sec. 345. Studies relating to vision impairments. 

Sec. 346. Medicare health care quality demonstration programs. 

Sec. 347. MedPac study on direct access to physical therapy services. 

Sec. 348. Demonstration project for consumer-directed chronic outpatient services. 

Sec. 349. Medicare care management performance demonstration. 

Sec. 350. GAO study and report on the propagation of concierge care. 

Sec. 351. Demonstration of coverage of chiropractic services under medicare. 

TITLE IV—PROVISIONS RELATING TO PARTS A AND B 

Subtitle A—Home Health Services 

Sec. 401. Demonstration project to clarify the definition of homebound. 

Sec. 402. Demonstration project for medical adult day-care services. 

Sec. 403. Temporary suspension of oasis requirement for collection of data on 

non-medicare and non-medicaid patients. 

Sec. 404. MedPac study on medicare margins of home health agencies. 

Sec. 405. Coverage of religious nonmedical health care institution services furnished in the home. 
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Subtitle B—Graduate Medical Education 

Sec. 411. Exception to initial residency period for geriatric residency or fellowship programs.

Sec. 412. Treatment of volunteer supervision. 

Subtitle C—Chronic Care Improvement 

Sec. 421. Voluntary chronic care improvement under traditional fee-for-service. 

Sec. 422. Medicare advantage quality improvement programs. 

Sec. 423. Chronically ill medicare beneficiary research, data, demonstration 

strategy. 

Subtitle D—Other Provisions 

Sec. 431. Improvements in national and local coverage determination process to 

respond to changes in technology. 

Sec. 432. Extension of treatment of certain physician pathology services under 

medicare. 

Sec. 433. Payment for pancreatic islet cell investigational transplants for medicare beneficiaries in clinical trials. 

Sec. 434. Restoration of medicare trust funds. 

Sec. 435. Modifications to Medicare Payment Advisory Commission (MedPac). 

Sec. 436. Technical amendments. 

TITLE V—ADMINISTRATIVE IMPROVEMENTS, REGULATORY 

REDUCTION, AND CONTRACTING REFORM 

Sec. 500. Administrative improvements within the Centers for Medicare & Medicaid Services (CMS). 

Subtitle A—Regulatory Reform 

Sec. 501. Construction; definition of supplier. 

Sec. 502. Issuance of regulations. 

Sec. 503. Compliance with changes in regulations and policies. 

Sec. 504. Reports and studies relating to regulatory reform. 

Subtitle B—Contracting Reform 

Sec. 511. Increased flexibility in medicare administration. 

Sec. 512. Requirements for information security for medicare administrative 

contractors. 

Subtitle C—Education and Outreach 

Sec. 521. Provider education and technical assistance. 

Sec. 522. Small provider technical assistance demonstration program. 

Sec. 523. Medicare beneficiary ombudsman. 

Sec. 524. Beneficiary outreach demonstration program. 

Sec. 525. Inclusion of additional information in notices to beneficiaries about 

skilled nursing facility benefits. 

Sec. 526. Information on medicare-certified skilled nursing facilities in hospital 

discharge plans. 

Subtitle D—Appeals and Recovery 

Sec. 531. Transfer of responsibility for medicare appeals. 

Sec. 532. Process for expedited access to review. 
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Sec. 533. Revisions to medicare appeals process. 

Sec. 534. Prepayment review. 

Sec. 535. Recovery of overpayments. 

Sec. 536. Provider enrollment process; right of appeal. 

Sec. 537. Process for correction of minor errors and omissions without pursuing appeals process. 

Sec. 538. Prior determination process for certain items and services; advance 

beneficiary notices. 

Sec. 539. Appeals by providers when there is no other party available. 

Sec. 540. Revisions to appeals timeframes and amounts. 

Sec. 540A. Mediation process for local coverage determinations. 

Subtitle E—Miscellaneous Provisions 

Sec. 541. Policy development regarding evaluation and management (E & M) 

documentation guidelines. 

Sec. 542. Improvement in oversight of technology and coverage. 

Sec. 543. Treatment of hospitals for certain services under medicare secondary 

payor (MSP) provisions. 

Sec. 544. EMTALA improvements. 

Sec. 545. Emergency Medical Treatment and Labor Act (EMTALA) Technical 

Advisory Group. 

Sec. 546. Authorizing use of arrangements to provide core hospice services in 

certain circumstances. 

Sec. 547. Application of OSHA bloodborne pathogens standard to certain hospitals. 

Sec. 548. Bipa-related technical amendments and corrections. 

Sec. 549. Conforming authority to waive a program exclusion. 

Sec. 550. Treatment of certain dental claims. 

Sec. 551. Furnishing hospitals with information to compute DSH formula. 

Sec. 552. Revisions to reassignment provisions. 

Sec. 553. Other provisions. 

TITLE VI—MEDICAID AND MISCELLANEOUS PROVISIONS 

Subtitle A—Medicaid Provisions 

Sec. 601. Medicaid disproportionate share hospital (DSH) payments. 

Sec. 602. Clarification of inclusion of inpatient drug prices charged to certain 

public hospitals in the best price exemptions for the medicaid 

drug rebate program. 

Sec. 603. Extension of moratorium. 

Subtitle B—Miscellaneous Provisions 

Sec. 611. Federal reimbursement of emergency health services furnished to undocumented aliens. 

Sec. 612. Commission on Systemic Interoperability. 

Sec. 613. Research on outcomes of health care items and services. 

Sec. 614. Health care that works for all Americans: Citizens Health Care 

Working Group. 

Sec. 615. Funding start-up administrative costs for medicare reform. 

Sec. 616. Health care infrastructure improvement program.
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1 TITLE I—RURAL PROVISIONS 

2 Subtitle A—Provisions Relating to 

3 Part A Only 

4 SEC. 101. EQUALIZING URBAN AND RURAL STANDARDIZED 

5 PAYMENT AMOUNTS UNDER THE MEDICARE 

6 INPATIENT HOSPITAL PROSPECTIVE PAY7 MENT SYSTEM. 

8 (a) IN GENERAL.—Section 1886(d)(3)(A)(iv) (42 

9 U.S.C. 1395ww(d)(3)(A)(iv)) is amended—

10 (1) by striking ‘‘(iv) For discharges’’ and in11 serting ‘‘(iv)(I) Subject to subclause (II), for dis12 charges’’; and 

13 (2) by adding at the end the following new sub14 clause: 

15 ‘‘(II) For discharges occurring in a fiscal year 

16 (beginning with fiscal year 2004), the Secretary 

17 shall compute a standardized amount for hospitals 

18 located in any area within the United States and 

19 within each region equal to the standardized amount 

20 computed for the previous fiscal year under this sub21 paragraph for hospitals located in a large urban area 

22 (or, beginning with fiscal year 2005, for all hospitals 

23 in the previous fiscal year) increased by the applica24 ble percentage increase under subsection (b)(3)(B)(i) 

25 for the fiscal year involved.’’. 
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1 (b) CONFORMING AMENDMENTS.—

2 (1) COMPUTING DRG-SPECIFIC RATES.—Section 

3 1886(d)(3)(D) (42 U.S.C. 1395ww(d)(3)(D)) is 

4 amended—

5 (A) in the heading, by striking ‘‘IN DIF6 FERENT AREAS’’; 

7 (B) in the matter preceding clause (i), by 

8 striking ‘‘, each of’’; 

9 (C) in clause (i)—

10 (i) in the matter preceding subclause 

11 (I), by inserting ‘‘for fiscal years before fis12 cal year 2004,’’ before ‘‘for hospitals’’; and 

13 (ii) in subclause (II), by striking 

14 ‘‘and’’ after the semicolon at the end; 

15 (D) in clause (ii)—

16 (i) in the matter preceding subclause 

17 (I), by inserting ‘‘for fiscal years before fis18 cal year 2004,’’ before ‘‘for hospitals’’; and 

19 (ii) in subclause (II), by striking the 

20 period at the end and inserting ‘‘; and’’; 

21 and 

22 (E) by adding at the end the following new 

23 clause: 
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1 ‘‘(iii) for a fiscal year beginning after fiscal 

2 year 2003, for hospitals located in all areas, to 

3 the product of—

4 ‘‘(I) the applicable standardized 

5 amount (computed under subparagraph 

6 (A)), reduced under subparagraph (B), 

7 and adjusted or reduced under subpara8 graph (C) for the fiscal year; and 

9 ‘‘(II) the weighting factor (determined 

10 under paragraph (4)(B)) for that diag11 nosis-related group.’’. 

12 (2) TECHNICAL CONFORMING SUNSET.—Section 

13 1886(d)(3) (42 U.S.C. 1395ww(d)(3)) is amended—

14 (A) in the matter preceding subparagraph 

15 (A), by inserting ‘‘, for fiscal years before fiscal 

16 year 1997,’’ before ‘‘a regional adjusted DRG 

17 prospective payment rate’’; and 

18 (B) in subparagraph (D), in the matter 

19 preceding clause (i), by inserting ‘‘, for fiscal 

20 years before fiscal year 1997,’’ before ‘‘a re21 gional DRG prospective payment rate for each 

22 region,’’. 

23 (3) ADDITIONAL TECHNICAL AMENDMENT.—

24 Section 1886(d)(3)(A)(iii) (42 U.S.C. 
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1 1395ww(d)(3)(A)(iii)) is amended by striking ‘‘in an 

2 other urban area’’ and inserting ‘‘in an urban area’’. 

3 (c) EQUALIZING URBAN AND RURAL STANDARDIZED

4 PAYMENT AMOUNTS UNDER THE MEDICARE INPATIENT

5 HOSPITAL PROSPECTIVE PAYMENT SYSTEM FOR HOS6 PITALS IN PUERTO RICO.—

7 (1) IN GENERAL.—Section 1886(d)(9)(A) (42 

8 U.S.C. 1395ww(d)(9)(A)), as amended by section 

9 204, is amended—

10 (A) in clause (i), by striking ‘‘and’’ after 

11 the comma at the end; and 

12 (B) by striking clause (ii) and inserting the 

13 following new clause: 

14 ‘‘(ii) the applicable Federal percentage (speci15 fied in subparagraph (E)) of—

16 ‘‘(I) for discharges beginning in a fiscal 

17 year beginning on or after October 1, 1997, and 

18 before October 1, 2003, the discharge-weighted 

19 average of—

20 ‘‘(aa) the national adjusted DRG pro21 spective payment rate (determined under 

22 paragraph (3)(D)) for hospitals located in 

23 a large urban area, 

24 ‘‘(bb) such rate for hospitals located 

25 in other urban areas, and 
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1 ‘‘(cc) such rate for hospitals located in 

2 a rural area, 

3 for such discharges, adjusted in the manner 

4 provided in paragraph (3)(E) for different area 

5 wage levels; and 

6 ‘‘(II) for discharges in a fiscal year begin7 ning on or after October 1, 2003, the national 

8 DRG prospective payment rate determined 

9 under paragraph (3)(D)(iii) for hospitals lo10 cated in any area for such discharges, adjusted 

11 in the manner provided in paragraph (3)(E) for 

12 different area wage levels. 

13 As used in this section, the term ‘subsection (d) Puerto 

14 Rico hospital’ means a hospital that is located in Puerto 

15 Rico and that would be a subsection (d) hospital (as de16 fined in paragraph (1)(B)) if it were located in one of the 

17 50 States.’’. 

18 (2) APPLICATION OF PUERTO RICO STANDARD19 IZED AMOUNT BASED ON LARGE URBAN AREAS.—

20 Section 1886(d)(9)(C) (42 U.S.C. 1395ww(d)(9)(C)) 

21 is amended— 

22 (A) in clause (i)—

23 (i) by striking ‘‘(i) The Secretary’’ 

24 and inserting ‘‘(i)(I) For discharges in a 
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1 fiscal year after fiscal year 1988 and be2 fore fiscal year 2004, the Secretary’’; and 

3 (ii) by adding at the end the following 

4 new subclause: 

5 ‘‘(II) For discharges occurring in a fiscal year 

6 (beginning with fiscal year 2004), the Secretary 

7 shall compute an average standardized amount for 

8 hospitals located in any area of Puerto Rico that is 

9 equal to the average standardized amount computed 

10 under subclause (I) for fiscal year 2003 for hospitals 

11 in a large urban area (or, beginning with fiscal year 

12 2005, for all hospitals in the previous fiscal year) in13 creased by the applicable percentage increase under 

14 subsection (b)(3)(B) for the fiscal year involved.’’; 

15 (B) in clause (ii), by inserting ‘‘(or for fis16 cal year 2004 and thereafter, the average 

17 standardized amount)’’ after ‘‘each of the aver18 age standardized amounts’’; and 

19 (C) in clause (iii)(I), by striking ‘‘for hos20 pitals located in an urban or rural area, respec21 tively’’. 

22 (d) IMPLEMENTATION.—

23 (1) IN GENERAL.—The amendments made by 

24 subsections (a), (b), and (c)(1) of this section shall 

25 have no effect on the authority of the Secretary, 
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1 under subsection (b)(2) of section 402 of Public Law 

2 108–89, to delay implementation of the extension of 

3 provisions equalizing urban and rural standardized 

4 inpatient hospital payments under subsection (a) of 

5 such section 402.

6 (2) APPLICATION OF PUERTO RICO STANDARD7 IZED AMOUNT BASED ON LARGE URBAN AREAS.—

8 The authority of the Secretary referred to in para9 graph (1) shall apply with respect to the amend10 ments made by subsection (c)(2) of this section in 

11 the same manner as that authority applies with re12 spect to the extension of provisions equalizing urban 

13 and rural standardized inpatient hospital payments 

14 under subsection (a) of such section 402, except that 

15 any reference in subsection (b)(2)(A) of such section 

16 402 is deemed to be a reference to April 1, 2004. 

17 SEC. 102. ENHANCED DISPROPORTIONATE SHARE HOS18 PITAL (DSH) TREATMENT FOR RURAL HOS19 PITALS AND URBAN HOSPITALS WITH FEWER 

20 THAN 100 BEDS. 

21 (a) DOUBLING THE CAP.—Section 1886(d)(5)(F) 

22 (42 U.S.C. 1395ww(d)(5)(F)) is amended by adding at 

23 the end the following new clause: 

24 ‘‘(xiv)(I) In the case of discharges occurring on or 

25 after April 1, 2004, subject to subclause (II), there shall 
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1 be substituted for the disproportionate share adjustment 

2 percentage otherwise determined under clause (iv) (other 

3 than subclause (I)) or under clause (viii), (x), (xi), (xii), 

4 or (xiii), the disproportionate share adjustment percentage 

5 determined under clause (vii) (relating to large, urban hos6 pitals). 

7 ‘‘(II) Under subclause (I), the disproportionate share 

8 adjustment percentage shall not exceed 12 percent for a 

9 hospital that is not classified as a rural referral center 

10 under subparagraph (C).’’. 

11 (b) CONFORMING AMENDMENTS.—Section 1886(d) 

12 (42 U.S.C. 1395ww(d)) is amended—

13 (1) in paragraph (5)(F)—

14 (A) in each of subclauses (II), (III), (IV), 

15 (V), and (VI) of clause (iv), by inserting ‘‘sub16 ject to clause (xiv) and’’ before ‘‘for discharges 

17 occurring’’; 

18 (B) in clause (viii), by striking ‘‘The for19 mula’’ and inserting ‘‘Subject to clause (xiv), 

20 the formula’’; and 

21 (C) in each of clauses (x), (xi), (xii), and 

22 (xiii), by striking ‘‘For purposes’’ and inserting 

23 ‘‘Subject to clause (xiv), for purposes’’; and 

24 (2) in paragraph (2)(C)(iv)—
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1 (A) by striking ‘‘or’’ before ‘‘the enactment 

2 of section 303’’; and 

3 (B) by inserting before the period at the 

4 end the following: ‘‘, or the enactment of sec5 tion 402(a)(1) of the Medicare Provider Res6 toration Act of 2003’’. 

7 SEC. 103. ADJUSTMENT TO THE MEDICARE INPATIENT HOS8 PITAL PROSPECTIVE PAYMENT SYSTEM 

9 WAGE INDEX TO REVISE THE LABOR-RE10 LATED SHARE OF SUCH INDEX. 

11 (a) ADJUSTMENT.—

12 (1) IN GENERAL.—Section 1886(d)(3)(E) (42 

13 U.S.C. 1395ww(d)(3)(E)) is amended—

14 (A) by striking ‘‘WAGE LEVELS.—The Sec15 retary’’ and inserting ‘‘WAGE LEVELS.—

16 ‘‘(i) IN GENERAL.—Except as provided in 

17 clause (ii), the Secretary’’; and 

18 (B) by adding at the end the following new 

19 clause: 

20 ‘‘(ii) ALTERNATIVE PROPORTION TO BE

21 ADJUSTED BEGINNING IN FISCAL YEAR 2005.—

22 For discharges occurring on or after October 1, 

23 2004, the Secretary shall substitute ‘62 per24 cent’ for the proportion described in the first 

25 sentence of clause (i), unless the application of 
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1 this clause would result in lower payments to a 

2 hospital than would otherwise be made.’’. 

3 (2) WAIVING BUDGET NEUTRALITY.—Section 

4 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)), as 

5 amended by subsection (a), is amended by adding at 

6 the end of clause (i) the following new sentence: 

7 ‘‘The Secretary shall apply the previous sentence for 

8 any period as if the amendments made by section 

9 103(a)(1) of the Medicare Provider Restoration Act 

10 of 2003 had not been enacted.’’. 

11 (b) APPLICATION TO PUERTO RICO HOSPITALS.—

12 Section 1886(d)(9)(C)(iv) (42 U.S.C. 

13 1395ww(d)(9)(C)(iv)) is amended—

14 (1) by inserting ‘‘(I)’’ after ‘‘(iv)’’; 

15 (2) by striking ‘‘paragraph (3)(E)’’ and insert16 ing ‘‘paragraph (3)(E)(i)’’; and 

17 (3) by adding at the end the following new sub18 clause: 

19 ‘‘(II) For discharges occurring on or after Octo20 ber 1, 2004, the Secretary shall substitute ‘62 per21 cent’ for the proportion described in the first sen22 tence of clause (i), unless the application of this sub23 clause would result in lower payments to a hospital 

24 than would otherwise be made.’’. 
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1 SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN 

2 HOSPITAL MARKET BASKET. 

3 (a) MORE FREQUENT UPDATES IN WEIGHTS.—After 

4 revising the weights used in the hospital market basket 

5 under section 1886(b)(3)(B)(iii) of the Social Security Act 

6 (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the most cur7 rent data available, the Secretary shall establish a fre8 quency for revising such weights, including the labor 

9 share, in such market basket to reflect the most current 

10 data available more frequently than once every 5 years. 

11 (b) INCORPORATION OF EXPLANATION IN RULE12 MAKING.—The Secretary shall include in the publication 

13 of the final rule for payment for inpatient hospital services 

14 under section 1886(d) of the Social Security Act (42 

15 U.S.C. 1395ww(d)) for fiscal year 2006, an explanation 

16 of the reasons for, and options considered, in determining 

17 frequency established under subsection (a). 

18 SEC. 105. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL 

19 PROGRAM. 

20 (a) INCREASE IN PAYMENT AMOUNTS.—

21 (1) IN GENERAL.—Sections 1814(l), 

22 1834(g)(1), and 1883(a)(3) (42 U.S.C. 1395f(l), 

23 1395m(g)(1), and 1395tt(a)(3)) are each amended 

24 by inserting ‘‘equal to 101 percent of’’ before ‘‘the 

25 reasonable costs’’.
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1 (2) EFFECTIVE DATE.—The amendments made 

2 by paragraph (1) shall apply to payments for serv3 ices furnished during cost reporting periods begin4 ning on or after January 1, 2004. 

5 (b) COVERAGE OF COSTS FOR CERTAIN EMERGENCY

6 ROOM ON-CALL PROVIDERS.—

7 (1) IN GENERAL.—Section 1834(g)(5) (42 

8 U.S.C. 1395m(g)(5)) is amended—

9 (A) in the heading—

10 (i) by inserting ‘‘CERTAIN’’ before 

11 ‘‘EMERGENCY’’; and 

12 (ii) by striking ‘‘PHYSICIANS’’ and in13 serting ‘‘PROVIDERS’’; 

14 (B) by striking ‘‘emergency room physi15 cians who are on-call (as defined by the Sec16 retary)’’ and inserting ‘‘physicians, physician 

17 assistants, nurse practitioners, and clinical 

18 nurse specialists who are on-call (as defined by 

19 the Secretary) to provide emergency services’’; 

20 and 

21 (C) by striking ‘‘physicians’ services’’ and 

22 inserting ‘‘services covered under this title’’. 

23 (2) EFFECTIVE DATE.—The amendments made 

24 by paragraph (1) shall apply with respect to costs 
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1 incurred for services furnished on or after January 

2 1, 2005. 

3 (c) AUTHORIZATION OF PERIODIC INTERIM PAY4 MENT (PIP).—

5 (1) IN GENERAL.—Section 1815(e)(2) (42 

6 U.S.C. 1395g(e)(2)) is amended—

7 (A) in the matter before subparagraph (A), 

8 by inserting ‘‘, in the cases described in sub9 paragraphs (A) through (D)’’ after ‘‘1986’’; 

10 (B) by striking ‘‘and’’ at the end of sub11 paragraph (C); 

12 (C) by adding ‘‘and’’ at the end of sub13 paragraph (D); and 

14 (D) by inserting after subparagraph (D) 

15 the following new subparagraph: 

16 ‘‘(E) inpatient critical access hospital services;’’. 

17 (2) DEVELOPMENT OF ALTERNATIVE TIMING

18 METHODS OF PERIODIC INTERIM PAYMENTS.—With 

19 respect to periodic interim payments to critical ac20 cess hospitals for inpatient critical access hospital 

21 services under section 1815(e)(2)(E) of the Social 

22 Security Act, as added by paragraph (1), the Sec23 retary shall develop alternative methods for the tim24 ing of such payments. 
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1 (3) AUTHORIZATION OF PIP.—The amendments 

2 made by paragraph (1) shall apply to payments 

3 made on or after July 1, 2004. 

4 (d) CONDITION FOR APPLICATION OF SPECIAL PRO5 FESSIONAL SERVICE PAYMENT ADJUSTMENT.—

6 (1) IN GENERAL.—Section 1834(g)(2) (42 

7 U.S.C. 1395m(g)(2)) is amended by adding after 

8 and below subparagraph (B) the following: 

9 ‘‘The Secretary may not require, as a condition for 

10 applying subparagraph (B) with respect to a critical 

11 access hospital, that each physician or other practi12 tioner providing professional services in the hospital 

13 must assign billing rights with respect to such serv14 ices, except that such subparagraph shall not apply 

15 to those physicians and practitioners who have not 

16 assigned such billing rights.’’. 

17 (2) EFFECTIVE DATE.—

18 (A) IN GENERAL.—Except as provided in 

19 subparagraph (B), the amendment made by 

20 paragraph (1) shall apply to cost reporting peri21 ods beginning on or after July 1, 2004. 

22 (B) RULE OF APPLICATION.—In the case 

23 of a critical access hospital that made an elec24 tion under section 1834(g)(2) of the Social Se25 curity Act (42 U.S.C. 1395m(g)(2)) before No-
21

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1 vember 1, 2003, the amendment made by para2 graph (1) shall apply to cost reporting periods 

3 beginning on or after July 1, 2001. 

4 (e) REVISION OF BED LIMITATION FOR HOS5 PITALS.—

6 (1) IN GENERAL.—Section 1820(c)(2)(B)(iii) 

7 (42 U.S.C. 1395i–4(c)(2)(B)(iii)) is amended by 

8 striking ‘‘15 (or, in the case of a facility under an 

9 agreement described in subsection (f), 25)’’ and in10 serting ‘‘25’’. 

11 (2) CONFORMING AMENDMENT.—Section 

12 1820(f) (42 U.S.C. 1395i–4(f)) is amended by strik13 ing ‘‘and the number of beds used at any time for 

14 acute care inpatient services does not exceed 15 

15 beds’’. 

16 (3) EFFECTIVE DATE.—The amendments made 

17 by this subsection shall apply to designations made 

18 before, on, or after January 1, 2004, but any elec19 tion made pursuant to regulations promulgated to 

20 carry out such amendments shall only apply prospec21 tively. 

22 (f) PROVISIONS RELATING TO FLEX GRANTS.—

23 (1) ADDITIONAL 4-YEAR PERIOD OF FUND24 ING.—Section 1820(j) (42 U.S.C. 1395i–4(j)) is 

25 amended by inserting before the period at the end 
22

•S 1926 IS 

1 the following: ‘‘, and for making grants to all States 

2 under paragraphs (1) and (2) of subsection (g), 

3 $35,000,000 in each of fiscal years 2005 through 

4 2008’’. 

5 (2) ADDITIONAL REQUIREMENTS AND ADMINIS6 TRATION.—Section 1820(g) (42 U.S.C. 1395i–4(g)) 

7 is amended by adding at the end the following new 

8 paragraphs: 

9 ‘‘(4) ADDITIONAL REQUIREMENTS WITH RE10 SPECT TO FLEX GRANTS.—With respect to grants 

11 awarded under paragraph (1) or (2) from funds ap12 propriated for fiscal year 2005 and subsequent fiscal 

13 years—

14 ‘‘(A) CONSULTATION WITH THE STATE

15 HOSPITAL ASSOCIATION AND RURAL HOSPITALS

16 ON THE MOST APPROPRIATE WAYS TO USE

17 GRANTS.—A State shall consult with the hos18 pital association of such State and rural hos19 pitals located in such State on the most appro20 priate ways to use the funds under such grant. 

21 ‘‘(B) LIMITATION ON USE OF GRANT

22 FUNDS FOR ADMINISTRATIVE EXPENSES.—A 

23 State may not expend more than the lesser of—

24 ‘‘(i) 15 percent of the amount of the 

25 grant for administrative expenses; or
23

•S 1926 IS 

1 ‘‘(ii) the State’s federally negotiated 

2 indirect rate for administering the grant. 

3 ‘‘(5) USE OF FUNDS FOR FEDERAL ADMINIS4 TRATIVE EXPENSES.—Of the total amount appro5 priated for grants under paragraphs (1) and (2) for 

6 a fiscal year (beginning with fiscal year 2005), up 

7 to 5 percent of such amount shall be available to the 

8 Health Resources and Services Administration for 

9 purposes of administering such grants.’’. 

10 (g) AUTHORITY TO ESTABLISH PSYCHIATRIC AND

11 REHABILITATION DISTINCT PART UNITS.—

12 (1) IN GENERAL.—Section 1820(c)(2) (42 

13 U.S.C. 1395i–4(c)(2)) is amended by adding at the 

14 end the following:

15 ‘‘(E) AUTHORITY TO ESTABLISH PSY16 CHIATRIC AND REHABILITATION DISTINCT PART

17 UNITS.—

18 ‘‘(i) IN GENERAL.—Subject to the 

19 succeeding provisions of this subparagraph, 

20 a critical access hospital may establish—

21 ‘‘(I) a psychiatric unit of the hos22 pital that is a distinct part of the hos23 pital; and 
24

•S 1926 IS 

1 ‘‘(II) a rehabilitation unit of the 

2 hospital that is a distinct part of the 

3 hospital, 

4 if the distinct part meets the requirements 

5 (including conditions of participation) that 

6 would otherwise apply to the distinct part 

7 if the distinct part were established by a 

8 subsection (d) hospital in accordance with 

9 the matter following clause (v) of section 

10 1886(d)(1)(B), including any regulations 

11 adopted by the Secretary under such sec12 tion. 

13 ‘‘(ii) LIMITATION ON NUMBER OF

14 BEDS.—The total number of beds that 

15 may be established under clause (i) for a 

16 distinct part unit may not exceed 10. 

17 ‘‘(iii) EXCLUSION OF BEDS FROM BED

18 COUNT.—In determining the number of 

19 beds of a critical access hospital for pur20 poses of applying the bed limitations re21 ferred to in subparagraph (B)(iii) and sub22 section (f), the Secretary shall not take 

23 into account any bed established under 

24 clause (i). 
25

•S 1926 IS 

1 ‘‘(iv) EFFECT OF FAILURE TO MEET

2 REQUIREMENTS.—If a psychiatric or reha3 bilitation unit established under clause (i) 

4 does not meet the requirements described 

5 in such clause with respect to a cost re6 porting period, no payment may be made 

7 under this title to the hospital for services 

8 furnished in such unit during such period. 

9 Payment to the hospital for services fur10 nished in the unit may resume only after 

11 the hospital has demonstrated to the Sec12 retary that the unit meets such require13 ments.’’. 

14 (2) PAYMENT ON A PROSPECTIVE PAYMENT

15 BASIS.—Section 1814(l) (42 U.S.C. 1395f(l)) is 

16 amended—

17 (A) by striking ‘‘(l) The amount’’ and in18 serting ‘‘(l)(1) Except as provided in paragraph 

19 (2), the amount’’; and 

20 (B) by adding at the end the following new 

21 paragraph: 

22 ‘‘(2) In the case of a distinct part psychiatric or reha23 bilitation unit of a critical access hospital described in sec24 tion 1820(c)(2)(E), the amount of payment for inpatient 

25 critical access hospital services of such unit shall be equal 
26

•S 1926 IS 

1 to the amount of the payment that would otherwise be 

2 made if such services were inpatient hospital services of 

3 a distinct part psychiatric or rehabilitation unit, respec4 tively, described in the matter following clause (v) of sec5 tion 1886(d)(1)(B).’’.

6 (3) EFFECTIVE DATE.—The amendments made 

7 by this subsection shall apply to cost reporting peri8 ods beginning on or after October 1, 2004. 

9 (h) WAIVER AUTHORITY.—

10 (1) IN GENERAL.—Section 1820(c)(2)(B)(i)(II) 

11 (42 U.S.C. 1395i–4(c)(2)(B)(i)(II)) is amended by 

12 inserting ‘‘before January 1, 2006,’’ after ‘‘is cer13 tified’’. 

14 (2) GRANDFATHERING WAIVER AUTHORITY FOR

15 CERTAIN FACILITIES.—Section 1820(h) (42 U.S.C. 

16 1395i–4(h)) is amended—

17 (A) in the heading preceding paragraph 

18 (1), by striking ‘‘OF CERTAIN FACILITIES’’ and 

19 inserting ‘‘PROVISIONS’’; and 

20 (B) by adding at the end the following new 

21 paragraph: 

22 ‘‘(3) STATE AUTHORITY TO WAIVE 35-MILE

23 RULE.—In the case of a facility that was designated 

24 as a critical access hospital before January 1, 2006, 

25 and was certified by the State as being a necessary 
27

•S 1926 IS 

1 provider of health care services to residents in the 

2 area under subsection (c)(2)(B)(i)(II), as in effect 

3 before such date, the authority under such sub4 section with respect to any redesignation of such fa5 cility shall continue to apply notwithstanding the 

6 amendment made by section 105(h)(1) of the Medi7 care Provider Restoration Act of 2003.’’. 

8 SEC. 106. MEDICARE INPATIENT HOSPITAL PAYMENT AD9 JUSTMENT FOR LOW-VOLUME HOSPITALS. 

10 (a) IN GENERAL.—Section 1886(d) (42 U.S.C. 

11 1395ww(d)) is amended by adding at the end the following 

12 new paragraph: 

13 ‘‘(12) PAYMENT ADJUSTMENT FOR LOW-VOL14 UME HOSPITALS.—

15 ‘‘(A) IN GENERAL.—In addition to any 

16 payments calculated under this section for a 

17 subsection (d) hospital, for discharges occurring 

18 during a fiscal year (beginning with fiscal year 

19 2005), the Secretary shall provide for an addi20 tional payment amount to each low-volume hos21 pital (as defined in subparagraph (C)(i)) for 

22 discharges occurring during that fiscal year 

23 that is equal to the applicable percentage in24 crease (determined under subparagraph (B) for 

25 the hospital involved) in the amount paid to 
28

•S 1926 IS 

1 such hospital under this section for such dis2 charges (determined without regard to this 

3 paragraph).

4 ‘‘(B) APPLICABLE PERCENTAGE IN5 CREASE.—The Secretary shall determine an ap6 plicable percentage increase for purposes of 

7 subparagraph (A) as follows: 

8 ‘‘(i) The Secretary shall determine the 

9 empirical relationship for subsection (d) 

10 hospitals between the standardized cost11 per-case for such hospitals and the total 

12 number of discharges of such hospitals and 

13 the amount of the additional incremental 

14 costs (if any) that are associated with such 

15 number of discharges. 

16 ‘‘(ii) The applicable percentage in17 crease shall be determined based upon 

18 such relationship in a manner that reflects, 

19 based upon the number of such discharges 

20 for a subsection (d) hospital, such addi21 tional incremental costs. 

22 ‘‘(iii) In no case shall the applicable 

23 percentage increase exceed 25 percent. 

24 ‘‘(C) DEFINITIONS.—
29

•S 1926 IS 

1 ‘‘(i) LOW-VOLUME HOSPITAL.—For 

2 purposes of this paragraph, the term ‘low3 volume hospital’ means, for a fiscal year, a 

4 subsection (d) hospital (as defined in para5 graph (1)(B)) that the Secretary deter6 mines is located more than 25 road miles 

7 from another subsection (d) hospital and 

8 has less than 800 discharges during the 

9 fiscal year. 

10 ‘‘(ii) DISCHARGE.—For purposes of 

11 subparagraph (B) and clause (i), the term 

12 ‘discharge’ means an inpatient acute care 

13 discharge of an individual regardless of 

14 whether the individual is entitled to bene15 fits under part A.’’. 

16 (b) JUDICIAL REVIEW.—Section 1886(d)(7)(A) (42 

17 U.S.C. 1395ww(d)(7)(A)) is amended by inserting after 

18 ‘‘to subsection (e)(1)’’ the following: ‘‘or the determination 

19 of the applicable percentage increase under paragraph 

20 (12)(A)(ii)’’.

21 SEC. 107. TREATMENT OF MISSING COST REPORTING PERI22 ODS FOR SOLE COMMUNITY HOSPITALS. 

23 (a) IN GENERAL.—Section 1886(b)(3)(I) (42 U.S.C. 

24 1395ww(b)(3)(I)) is amended by adding at the end the 

25 following new clause: 
30

•S 1926 IS 

1 ‘‘(iii) In no case shall a hospital be denied treatment 

2 as a sole community hospital or payment (on the basis 

3 of a target rate as such as a hospital) because data are 

4 unavailable for any cost reporting period due to changes 

5 in ownership, changes in fiscal intermediaries, or other ex6 traordinary circumstances, so long as data for at least one 

7 applicable base cost reporting period is available.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 subsection (a) shall apply to cost reporting periods begin10 ning on or after January 1, 2004. 

11 SEC. 108. RECOGNITION OF ATTENDING NURSE PRACTI12 TIONERS AS ATTENDING PHYSICIANS TO 

13 SERVE HOSPICE PATIENTS. 

14 (a) IN GENERAL.—Section 1861(dd)(3)(B) (42 

15 U.S.C. 1395x(dd)(3)(B)) is amended by inserting ‘‘or 

16 nurse practitioner (as defined in subsection (aa)(5))’’ after 

17 ‘‘the physician (as defined in subsection (r)(1))’’. 

18 (b) CLARIFICATION OF HOSPICE ROLE OF NURSE

19 PRACTITIONERS.—Section 1814(a)(7)(A)(i)(I) (42 U.S.C. 

20 1395f(a)(7)(A)(i)(I)) is amended by inserting ‘‘(which for 

21 purposes of this subparagraph does not include a nurse 

22 practitioner)’’ after ‘‘attending physician (as defined in 

23 section 1861(dd)(3)(B))’’. 
31

•S 1926 IS 

1 SEC. 109. RURAL HOSPICE DEMONSTRATION PROJECT. 

2 (a) IN GENERAL.—The Secretary shall conduct a 

3 demonstration project for the delivery of hospice care to 

4 medicare beneficiaries in rural areas. Under the project 

5 medicare beneficiaries who are unable to receive hospice 

6 care in the facility for lack of an appropriate caregiver 

7 are provided such care in a facility of 20 or fewer beds 

8 which offers, within its walls, the full range of services 

9 provided by hospice programs under section 1861(dd) of 

10 the Social Security Act (42 U.S.C. 1395x(dd)). 

11 (b) SCOPE OF PROJECT.—The Secretary shall con12 duct the project under this section with respect to no more 

13 than 3 hospice programs over a period of not longer than 

14 5 years each. 

15 (c) COMPLIANCE WITH CONDITIONS.—Under the 

16 demonstration project—

17 (1) the hospice program shall comply with oth18 erwise applicable requirements, except that it shall 

19 not be required to offer services outside of the home 

20 or to meet the requirements of section 

21 1861(dd)(2)(A)(iii) of the Social Security Act; and 

22 (2) payments for hospice care shall be made at 

23 the rates otherwise applicable to such care under 

24 title XVIII of such Act. 

25 The Secretary may require the program to comply with 

26 such additional quality assurance standards for its provi-
32

•S 1926 IS 

1 sion of services in its facility as the Secretary deems ap2 propriate. 

3 (d) REPORT.—Upon completion of the project, the 

4 Secretary shall submit a report to Congress on the project 

5 and shall include in the report recommendations regarding 

6 extension of such project to hospice programs serving 

7 rural areas. 

8 SEC. 110. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC 

9 AND FEDERALLY QUALIFIED HEALTH CEN10 TER SERVICES FROM THE PROSPECTIVE PAY11 MENT SYSTEM FOR SKILLED NURSING FA12 CILITIES. 

13 (a) IN GENERAL.—Section 1888(e)(2)(A) (42 U.S.C. 

14 1395yy(e)(2)(A)) is amended—

15 (1) in clause (i)(II), by striking ‘‘clauses (ii) 

16 and (iii)’’ and inserting ‘‘clauses (ii), (iii), and (iv)’’; 

17 and 

18 (2) by adding at the end the following new 

19 clause: 

20 ‘‘(iv) EXCLUSION OF CERTAIN RURAL

21 HEALTH CLINIC AND FEDERALLY QUALI22 FIED HEALTH CENTER SERVICES.—Serv23 ices described in this clause are—
33

•S 1926 IS 

1 ‘‘(I) rural health clinic services 

2 (as defined in paragraph (1) of sec3 tion 1861(aa)); and

4 ‘‘(II) Federally qualified health 

5 center services (as defined in para6 graph (3) of such section); 

7 that would be described in clause (ii) if 

8 such services were furnished by an indi9 vidual not affiliated with a rural health 

10 clinic or a Federally qualified health cen11 ter.’’. 

12 (b) EFFECTIVE DATE.—The amendments made by 

13 subsection (a) shall apply to services furnished on or after 

14 January 1, 2005. 

15 SEC. 110A. RURAL COMMUNITY HOSPITAL DEMONSTRA16 TION PROGRAM. 

17 (a) ESTABLISHMENT OF RURAL COMMUNITY HOS18 PITAL (RCH) DEMONSTRATION PROGRAM.—

19 (1) IN GENERAL.—The Secretary shall establish 

20 a demonstration program to test the feasibility and 

21 advisability of the establishment of rural community 

22 hospitals (as defined in subsection (f)(1)) to furnish 

23 covered inpatient hospital services (as defined in 

24 subsection (f)(2)) to medicare beneficiaries. 
34

•S 1926 IS 

1 (2) DEMONSTRATION AREAS.—The program 

2 shall be conducted in rural areas selected by the Sec3 retary in States with low population densities, as de4 termined by the Secretary. 

5 (3) APPLICATION.—Each rural community hos6 pital that is located in a demonstration area selected 

7 under paragraph (2) that desires to participate in 

8 the demonstration program under this section shall 

9 submit an application to the Secretary at such time, 

10 in such manner, and containing such information as 

11 the Secretary may require. 

12 (4) SELECTION OF HOSPITALS.—The Secretary 

13 shall select from among rural community hospitals 

14 submitting applications under paragraph (3) not 

15 more than 15 of such hospitals to participate in the 

16 demonstration program under this section. 

17 (5) DURATION.—The Secretary shall conduct 

18 the demonstration program under this section for a 

19 5-year period. 

20 (6) IMPLEMENTATION.—The Secretary shall 

21 implement the demonstration program not later than 

22 January 1, 2005, but may not implement the pro23 gram before October 1, 2004. 

24 (b) PAYMENT.—
35

•S 1926 IS 

1 (1) IN GENERAL.—The amount of payment 

2 under the demonstration program for covered inpa3 tient hospital services furnished in a rural commu4 nity hospital, other than such services furnished in 

5 a psychiatric or rehabilitation unit of the hospital 

6 which is a distinct part, is—

7 (A) for discharges occurring in the first 

8 cost reporting period beginning on or after the 

9 implementation of the demonstration program, 

10 the reasonable costs of providing such services; 

11 and 

12 (B) for discharges occurring in a subse13 quent cost reporting period under the dem14 onstration program, the lesser of—

15 (i) the reasonable costs of providing 

16 such services in the cost reporting period 

17 involved; or 

18 (ii) the target amount (as defined in 

19 paragraph (2), applicable to the cost re20 porting period involved. 

21 (2) TARGET AMOUNT.—For purposes of para22 graph (1)(B)(ii), the term ‘‘target amount’’ means, 

23 with respect to a rural community hospital for a 

24 particular 12-month cost reporting period—
36

•S 1926 IS 

1 (A) in the case of the second such report2 ing period for which this subsection is in effect, 

3 the reasonable costs of providing such covered 

4 inpatient hospital services as determined under 

5 paragraph (1)(A), and 

6 (B) in the case of a later reporting period, 

7 the target amount for the preceding 12-month 

8 cost reporting period, 

9 increased by the applicable percentage increase 

10 (under clause (i) of section 1886(b)(3)(B) of the So11 cial Security Act (42 U.S.C. 1395ww(b)(3)(B))) in 

12 the market basket percentage increase (as defined in 

13 clause (iii) of such section) for that particular cost 

14 reporting period. 

15 (c) FUNDING.—

16 (1) IN GENERAL.—The Secretary shall provide 

17 for the transfer from the Federal Hospital Insurance 

18 Trust Fund under section 1817 of the Social Secu19 rity Act (42 U.S.C. 1395i) of such funds as are nec20 essary for the costs of carrying out the demonstra21 tion program under this section. 

22 (2) BUDGET NEUTRALITY.—In conducting the 

23 demonstration program under this section, the Sec24 retary shall ensure that the aggregate payments 

25 made by the Secretary do not exceed the amount 
37

•S 1926 IS 

1 which the Secretary would have paid if the dem2 onstration program under this section was not im3 plemented. 

4 (d) WAIVER AUTHORITY.—The Secretary may waive 

5 such requirements of title XVIII of the Social Security Act 

6 (42 U.S.C. 1395 et seq.) as may be necessary for the pur7 pose of carrying out the demonstration program under 

8 this section. 

9 (e) REPORT.—Not later than 6 months after the 

10 completion of the demonstration program under this sec11 tion, the Secretary shall submit to Congress a report on 

12 such program, together with recommendations for such 

13 legislation and administrative action as the Secretary de14 termines to be appropriate. 

15 (f) DEFINITIONS.—In this section: 

16 (1) RURAL COMMUNITY HOSPITAL DEFINED.—

17 (A) IN GENERAL.—The term ‘‘rural com18 munity hospital’’ means a hospital (as defined 

19 in section 1861(e) of the Social Security Act 

20 (42 U.S.C. 1395x(e))) that—

21 (i) is located in a rural area (as de22 fined in section 1886(d)(2)(D) of such Act 

23 (42 U.S.C. 1395ww(d)(2)(D))) or treated 

24 as being so located pursuant to section 
38

•S 1926 IS 

1 1886(d)(8)(E) of such Act (42 U.S.C. 

2 1395ww(d)(8)(E)); 

3 (ii) subject to paragraph (2), has 

4 fewer than 51 acute care inpatient beds, as 

5 reported in its most recent cost report;

6 (iii) makes available 24-hour emer7 gency care services; and 

8 (iv) is not eligible for designation, or 

9 has not been designated, as a critical ac10 cess hospital under section 1820. 

11 (B) TREATMENT OF PSYCHIATRIC AND RE12 HABILITATION UNITS.—For purposes of para13 graph (1)(B), beds in a psychiatric or rehabili14 tation unit of the hospital which is a distinct 

15 part of the hospital shall not be counted. 

16 (2) COVERED INPATIENT HOSPITAL SERV17 ICES.—The term ‘‘covered inpatient hospital serv18 ices’’ means inpatient hospital services, and includes 

19 extended care services furnished under an agreement 

20 under section 1883 of the Social Security Act (42 

21 U.S.C. 1395tt). 
39

•S 1926 IS 

1 Subtitle B—Provisions Relating to 

2 Part B Only 

3 SEC. 111. 2-YEAR EXTENSION OF HOLD HARMLESS PROVI4 SIONS FOR SMALL RURAL HOSPITALS AND 

5 SOLE COMMUNITY HOSPITALS UNDER THE 

6 PROSPECTIVE PAYMENT SYSTEM FOR HOS7 PITAL OUTPATIENT DEPARTMENT SERVICES. 

8 (a) HOLD HARMLESS PROVISIONS.—

9 (1) IN GENERAL.—Section 1833(t)(7)(D)(i) (42 

10 U.S.C. 1395l(t)(7)(D)(i)) is amended—

11 (A) in the heading, by striking ‘‘SMALL’’ 

12 and inserting ‘‘CERTAIN’’; 

13 (B) by inserting ‘‘or a sole community hos14 pital (as defined in section 1886(d)(5)(D)(iii)) 

15 located in a rural area’’ after ‘‘100 beds’’; and 

16 (C) by striking ‘‘2004’’ and inserting 

17 ‘‘2006’’. 

18 (2) EFFECTIVE DATE.—The amendment made 

19 by paragraph (1)(B) shall apply with respect to cost 

20 reporting periods beginning on and after January 1, 

21 2004. 

22 (b) STUDY; AUTHORIZATION OF ADJUSTMENT.—Sec23 tion 1833(t) (42 U.S.C. 1395l(t)) is amended—

24 (1) by redesignating paragraph (13) as para25 graph (16); and 
40

•S 1926 IS 

1 (2) by inserting after paragraph (12) the fol2 lowing new paragraph: 

3 ‘‘(13) AUTHORIZATION OF ADJUSTMENT FOR

4 RURAL HOSPITALS.—

5 ‘‘(A) STUDY.—The Secretary shall conduct 

6 a study to determine if, under the system under 

7 this subsection, costs incurred by hospitals lo8 cated in rural areas by ambulatory payment 

9 classification groups (APCs) exceed those costs 

10 incurred by hospitals located in urban areas. 

11 ‘‘(B) AUTHORIZATION OF ADJUSTMENT.—

12 Insofar as the Secretary determines under sub13 paragraph (A) that costs incurred by hospitals 

14 located in rural areas exceed those costs in15 curred by hospitals located in urban areas, the 

16 Secretary shall provide for an appropriate ad17 justment under paragraph (2)(E) to reflect 

18 those higher costs by January 1, 2006.’’. 

19 SEC. 112. ESTABLISHMENT OF FLOOR ON WORK GEO20 GRAPHIC ADJUSTMENT. 

21 Section 1848(e)(1) (42 U.S.C. 1395w–4(e)(1)) is 

22 amended—

23 (1) in subparagraph (A), by striking ‘‘subpara24 graphs (B) and (C)’’ and inserting ‘‘subparagraphs 

25 (B), (C), and (E)’’; and 
41

•S 1926 IS 

1 (2) by adding at the end the following new sub2 paragraph: 

3 ‘‘(E) FLOOR AT 1.0 ON WORK GEOGRAPHIC

4 INDEX.—After calculating the work geographic 

5 index in subparagraph (A)(iii), for purposes of 

6 payment for services furnished on or after Jan7 uary 1, 2004, and before January 1, 2007, the 

8 Secretary shall increase the work geographic 

9 index to 1.00 for any locality for which such 

10 work geographic index is less than 1.00.’’. 

11 SEC. 113. MEDICARE INCENTIVE PAYMENT PROGRAM IM12 PROVEMENTS FOR PHYSICIAN SCARCITY. 

13 (a) ADDITIONAL INCENTIVE PAYMENT FOR CERTAIN

14 PHYSICIAN SCARCITY AREAS.—Section 1833 (42 U.S.C. 

15 1395l) is amended by adding at the end the following new 

16 subsection: 

17 ‘‘(u) INCENTIVE PAYMENTS FOR PHYSICIAN SCAR18 CITY AREAS.—

19 ‘‘(1) IN GENERAL.—In the case of physicians’ 

20 services furnished on or after January 1, 2005, and 

21 before January 1, 2008—

22 ‘‘(A) by a primary care physician in a pri23 mary care scarcity county (identified under 

24 paragraph (4)); or 
42

•S 1926 IS 

1 ‘‘(B) by a physician who is not a primary 

2 care physician in a specialist care scarcity coun3 ty (as so identified), 

4 in addition to the amount of payment that would 

5 otherwise be made for such services under this part, 

6 there also shall be paid an amount equal to 5 per7 cent of the payment amount for the service under 

8 this part. 

9 ‘‘(2) DETERMINATION OF RATIOS OF PHYSI10 CIANS TO MEDICARE BENEFICIARIES IN AREA.—

11 Based upon available data, the Secretary shall estab12 lish for each county or equivalent area in the United 

13 States, the following: 

14 ‘‘(A) NUMBER OF PHYSICIANS PRACTICING

15 IN THE AREA.—The number of physicians who 

16 furnish physicians’ services in the active prac17 tice of medicine or osteopathy in that county or 

18 area, other than physicians whose practice is 

19 exclusively for the Federal Government, physi20 cians who are retired, or physicians who only 

21 provide administrative services. Of such num22 ber, the number of such physicians who are—

23 ‘‘(i) primary care physicians; or 

24 ‘‘(ii) physicians who are not primary 

25 care physicians. 
43

•S 1926 IS 

1 ‘‘(B) NUMBER OF MEDICARE BENE2 FICIARIES RESIDING IN THE AREA.—The num3 ber of individuals who are residing in the coun4 ty and are entitled to benefits under part A or 

5 enrolled under this part, or both (in this sub6 section referred to as ‘individuals’). 

7 ‘‘(C) DETERMINATION OF RATIOS.—

8 ‘‘(i) PRIMARY CARE RATIO.—The ratio 

9 (in this paragraph referred to as the ‘pri10 mary care ratio’) of the number of primary 

11 care physicians (determined under sub12 paragraph (A)(i)), to the number of indi13 viduals determined under subparagraph 

14 (B). 

15 ‘‘(ii) SPECIALIST CARE RATIO.—The 

16 ratio (in this paragraph referred to as the 

17 ‘specialist care ratio’) of the number of 

18 other physicians (determined under sub19 paragraph (A)(ii)), to the number of indi20 viduals determined under subparagraph 

21 (B). 

22 ‘‘(3) RANKING OF COUNTIES.—The Secretary 

23 shall rank each such county or area based separately 

24 on its primary care ratio and its specialist care ratio. 

25 ‘‘(4) IDENTIFICATION OF COUNTIES.—
44

•S 1926 IS 

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

2 identify—

3 ‘‘(i) those counties and areas (in this 

4 paragraph referred to as ‘primary care 

5 scarcity counties’) with the lowest primary 

6 care ratios that represent, if each such 

7 county or area were weighted by the num8 ber of individuals determined under para9 graph (2)(B), an aggregate total of 20 per10 cent of the total of the individuals deter11 mined under such paragraph; and 

12 ‘‘(ii) those counties and areas (in this 

13 subsection referred to as ‘specialist care 

14 scarcity counties’) with the lowest spe15 cialist care ratios that represent, if each 

16 such county or area were weighted by the 

17 number of individuals determined under 

18 paragraph (2)(B), an aggregate total of 20 

19 percent of the total of the individuals de20 termined under such paragraph. 

21 ‘‘(B) PERIODIC REVISIONS.—The Sec22 retary shall periodically revise the counties or 

23 areas identified in subparagraph (A) (but not 

24 less often than once every three years) unless 

25 the Secretary determines that there is no new 
45

•S 1926 IS 

1 data available on the number of physicians 

2 practicing in the county or area or the number 

3 of individuals residing in the county or area, as 

4 identified in paragraph (2). 

5 ‘‘(C) IDENTIFICATION OF COUNTIES

6 WHERE SERVICE IS FURNISHED.—For purposes 

7 of paying the additional amount specified in 

8 paragraph (1), if the Secretary uses the 5-digit 

9 postal ZIP Code where the service is furnished, 

10 the dominant county of the postal ZIP Code (as 

11 determined by the United States Postal Service, 

12 or otherwise) shall be used to determine wheth13 er the postal ZIP Code is in a scarcity county 

14 identified in subparagraph (A) or revised in 

15 subparagraph (B). 

16 ‘‘(D) JUDICIAL REVIEW.—There shall be 

17 no administrative or judicial review under sec18 tion 1869, 1878, or otherwise, respecting—

19 ‘‘(i) the identification of a county or 

20 area; 

21 ‘‘(ii) the assignment of a specialty of 

22 any physician under this paragraph; 

23 ‘‘(iii) the assignment of a physician to 

24 a county under paragraph (2); or 
46

•S 1926 IS 

1 ‘‘(iv) the assignment of a postal ZIP 

2 Code to a county or other area under this 

3 subsection. 

4 ‘‘(5) RURAL CENSUS TRACTS.—To the extent 

5 feasible, the Secretary shall treat a rural census 

6 tract of a metropolitan statistical area (as deter7 mined under the most recent modification of the 

8 Goldsmith Modification, originally published in the 

9 Federal Register on February 27, 1992 (57 Fed. 

10 Reg. 6725)), as an equivalent area for purposes of 

11 qualifying as a primary care scarcity county or spe12 cialist care scarcity county under this subsection. 

13 ‘‘(6) PHYSICIAN DEFINED.—For purposes of 

14 this paragraph, the term ‘physician’ means a physi15 cian described in section 1861(r)(1) and the term 

16 ‘primary care physician’ means a physician who is 

17 identified in the available data as a general practi18 tioner, family practice practitioner, general internist, 

19 or obstetrician or gynecologist. 

20 ‘‘(7) PUBLICATION OF LIST OF COUNTIES; 

21 POSTING ON WEBSITE.—With respect to a year for 

22 which a county or area is identified or revised under 

23 paragraph (4), the Secretary shall identify such 

24 counties or areas as part of the proposed and final 

25 rule to implement the physician fee schedule under 
47

•S 1926 IS 

1 section 1848 for the applicable year. The Secretary 

2 shall post the list of counties identified or revised 

3 under paragraph (4) on the Internet website of the 

4 Centers for Medicare & Medicaid Services.’’. 

5 (b) IMPROVEMENT TO MEDICARE INCENTIVE PAY6 MENT PROGRAM.—

7 (1) IN GENERAL.—Section 1833(m) (42 U.S.C. 

8 1395l(m)) is amended—

9 (A) by inserting ‘‘(1)’’ after ‘‘(m)’’; 

10 (B) in paragraph (1), as designated by 

11 subparagraph (A)—

12 (i) by inserting ‘‘in a year’’ after ‘‘In 

13 the case of physicians’ services furnished’’; 

14 and 

15 (ii) by inserting ‘‘as identified by the 

16 Secretary prior to the beginning of such 

17 year’’ after ‘‘as a health professional short18 age area’’; and 

19 (C) by adding at the end the following new 

20 paragraphs: 

21 ‘‘(2) For each health professional shortage area iden22 tified in paragraph (1) that consists of an entire county, 

23 the Secretary shall provide for the additional payment 

24 under paragraph (1) without any requirement on the phy25 sician to identify the health professional shortage area in-
48

•S 1926 IS 

1 volved. The Secretary may implement the previous sen2 tence using the method specified in subsection (u)(4)(C). 

3 ‘‘(3) The Secretary shall post on the Internet website 

4 of the Centers for Medicare & Medicaid Services a list of 

5 the health professional shortage areas identified in para6 graph (1) that consist of a partial county to facilitate the 

7 additional payment under paragraph (1) in such areas.

8 ‘‘(4) There shall be no administrative or judicial re9 view under section 1869, section 1878, or otherwise, re10 specting—

11 ‘‘(A) the identification of a county or area; 

12 ‘‘(B) the assignment of a specialty of any physi13 cian under this paragraph; 

14 ‘‘(C) the assignment of a physician to a county 

15 under this subsection; or 

16 ‘‘(D) the assignment of a postal zip code to a 

17 county or other area under this subsection.’’. 

18 (2) EFFECTIVE DATE.—The amendments made 

19 by paragraph (1) shall apply to physicians’ services 

20 furnished on or after January 1, 2005. 

21 (c) GAO STUDY OF GEOGRAPHIC DIFFERENCES IN

22 PAYMENTS FOR PHYSICIANS’ SERVICES.—

23 (1) STUDY.—The Comptroller General of the 

24 United States shall conduct a study of differences in 

25 payment amounts under the physician fee schedule 
49

•S 1926 IS 

1 under section 1848 of the Social Security Act (42 

2 U.S.C. 1395w–4) for physicians’ services in different 

3 geographic areas. Such study shall include—

4 (A) an assessment of the validity of the ge5 ographic adjustment factors used for each com6 ponent of the fee schedule; 

7 (B) an evaluation of the measures used for 

8 such adjustment, including the frequency of re9 visions; 

10 (C) an evaluation of the methods used to 

11 determine professional liability insurance costs 

12 used in computing the malpractice component, 

13 including a review of increases in professional 

14 liability insurance premiums and variation in 

15 such increases by State and physician specialty 

16 and methods used to update the geographic cost 

17 of practice index and relative weights for the 

18 malpractice component; and 

19 (D) an evaluation of the effect of the ad20 justment to the physician work geographic 

21 index under section 1848(e)(1)(E) of the Social 

22 Security Act, as added by section 112, on phy23 sician location and retention in areas affected 

24 by such adjustment, taking into account—
50

•S 1926 IS 

1 (i) differences in recruitment costs 

2 and retention rates for physicians, includ3 ing specialists, between large urban areas 

4 and other areas; and 

5 (ii) the mobility of physicians, includ6 ing specialists, over the last decade. 

7 (2) REPORT.—Not later than 1 year after the 

8 date of the enactment of this Act, the Comptroller 

9 General shall submit to Congress a report on the 

10 study conducted under paragraph (1). The report 

11 shall include recommendations regarding the use of 

12 more current data in computing geographic cost of 

13 practice indices as well as the use of data directly 

14 representative of physicians’ costs (rather than 

15 proxy measures of such costs). 

16 SEC. 114. PAYMENT FOR RURAL AND URBAN AMBULANCE 

17 SERVICES. 

18 (a) PHASE-IN PROVIDING FLOOR USING BLEND OF

19 FEE SCHEDULE AND REGIONAL FEE SCHEDULES.—Sec20 tion 1834(l) (42 U.S.C. 1395m(l)) is amended—

21 (1) in paragraph (2)(E), by inserting ‘‘con22 sistent with paragraph (11)’’ after ‘‘in an efficient 

23 and fair manner’’; and 
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•S 1926 IS 

1 (2) by redesignating paragraph (8), as added by 

2 section 221(a) of BIPA (114 Stat. 2763A–486), as 

3 paragraph (9); and 

4 (3) by adding at the end the following new 

5 paragraph: 

6 ‘‘(10) PHASE-IN PROVIDING FLOOR USING

7 BLEND OF FEE SCHEDULE AND REGIONAL FEE

8 SCHEDULES.—In carrying out the phase-in under 

9 paragraph (2)(E) for each level of ground service 

10 furnished in a year, the portion of the payment 

11 amount that is based on the fee schedule shall be the 

12 greater of the amount determined under such fee 

13 schedule (without regard to this paragraph) or the 

14 following blended rate of the fee schedule under 

15 paragraph (1) and of a regional fee schedule for the 

16 region involved: 

17 ‘‘(A) For 2004 (for services furnished on 

18 or after July 1, 2004), the blended rate shall be 

19 based 20 percent on the fee schedule under 

20 paragraph (1) and 80 percent on the regional 

21 fee schedule. 

22 ‘‘(B) For 2005, the blended rate shall be 

23 based 40 percent on the fee schedule under 

24 paragraph (1) and 60 percent on the regional 

25 fee schedule. 
52

•S 1926 IS 

1 ‘‘(C) For 2006, the blended rate shall be 

2 based 60 percent on the fee schedule under 

3 paragraph (1) and 40 percent on the regional 

4 fee schedule. 

5 ‘‘(D) For 2007, 2008, and 2009, the 

6 blended rate shall be based 80 percent on the 

7 fee schedule under paragraph (1) and 20 per8 cent on the regional fee schedule. 

9 ‘‘(E) For 2010 and each succeeding year, 

10 the blended rate shall be based 100 percent on 

11 the fee schedule under paragraph (1). 

12 For purposes of this paragraph, the Secretary shall 

13 establish a regional fee schedule for each of the nine 

14 census divisions (referred to in section 1886(d)(2)) 

15 using the methodology (used in establishing the fee 

16 schedule under paragraph (1)) to calculate a re17 gional conversion factor and a regional mileage pay18 ment rate and using the same payment adjustments 

19 and the same relative value units as used in the fee 

20 schedule under such paragraph.’’. 

21 (b) ADJUSTMENT IN PAYMENT FOR CERTAIN LONG

22 TRIPS.—Section 1834(l), as amended by subsection (a), 

23 is amended by adding at the end the following new para24 graph: 
53

•S 1926 IS 

1 ‘‘(11) ADJUSTMENT IN PAYMENT FOR CERTAIN

2 LONG TRIPS.—In the case of ground ambulance 

3 services furnished on or after July 1, 2004, and be4 fore January 1, 2009, regardless of where the trans5 portation originates, the fee schedule established 

6 under this subsection shall provide that, with respect 

7 to the payment rate for mileage for a trip above 50 

8 miles the per mile rate otherwise established shall be 

increased by 1 9 ⁄4 of the payment per mile otherwise 

10 applicable to miles in excess of 50 miles in such 

11 trip.’’.

12 (c) IMPROVEMENT IN PAYMENTS TO RETAIN EMER13 GENCY CAPACITY FOR AMBULANCE SERVICES IN RURAL

14 AREAS.—

15 (1) IN GENERAL.—Section 1834(l) (42 U.S.C. 

16 1395m(l)), as amended by subsections (a) and (b), 

17 is amended by adding at the end the following new 

18 paragraph: 

19 ‘‘(12) ASSISTANCE FOR RURAL PROVIDERS

20 FURNISHING SERVICES IN LOW POPULATION DEN21 SITY AREAS.—

22 ‘‘(A) IN GENERAL.—In the case of ground 

23 ambulance services furnished on or after July 

24 1, 2004, and before January 1, 2010, for which 

25 the transportation originates in a qualified 
54

•S 1926 IS 

1 rural area (identified under subparagraph 

2 (B)(iii)), the Secretary shall provide for a per3 cent increase in the base rate of the fee sched4 ule for a trip established under this subsection. 

5 In establishing such percent increase, the Sec6 retary shall estimate the average cost per trip 

7 for such services (not taking into account mile8 age) in the lowest quartile as compared to the 

9 average cost per trip for such services (not tak10 ing into account mileage) in the highest quartile 

11 of all rural county populations. 

12 ‘‘(B) IDENTIFICATION OF QUALIFIED

13 RURAL AREAS.—

14 ‘‘(i) DETERMINATION OF POPULATION

15 DENSITY IN AREA.—Based upon data from 

16 the United States decennial census for the 

17 year 2000, the Secretary shall determine, 

18 for each rural area, the population density 

19 for that area. 

20 ‘‘(ii) RANKING OF AREAS.—The Sec21 retary shall rank each such area based on 

22 such population density. 

23 ‘‘(iii) IDENTIFICATION OF QUALIFIED

24 RURAL AREAS.—The Secretary shall iden25 tify those areas (in subparagraph (A) re-
55

•S 1926 IS 

1 ferred to as ‘qualified rural areas’) with 

2 the lowest population densities that rep3 resent, if each such area were weighted by 

4 the population of such area (as used in 

5 computing such population densities), an 

6 aggregate total of 25 percent of the total 

7 of the population of all such areas. 

8 ‘‘(iv) RURAL AREA.—For purposes of 

9 this paragraph, the term ‘rural area’ has 

10 the meaning given such term in section 

11 1886(d)(2)(D). If feasible, the Secretary 

12 shall treat a rural census tract of a metro13 politan statistical area (as determined 

14 under the most recent modification of the 

15 Goldsmith Modification, originally pub16 lished in the Federal Register on February 

17 27, 1992 (57 Fed. Reg. 6725) as a rural 

18 area for purposes of this paragraph. 

19 ‘‘(v) JUDICIAL REVIEW.—There shall 

20 be no administrative or judicial review 

21 under section 1869, 1878, or otherwise, re22 specting the identification of an area under 

23 this subparagraph.’’. 

24 (2) USE OF DATA.—In order to promptly imple25 ment section 1834(l)(12) of the Social Security Act, 
56

•S 1926 IS 

1 as added by paragraph (1), the Secretary may use 

2 data furnished by the Comptroller General of the 

3 United States. 

4 (d) TEMPORARY INCREASE FOR GROUND AMBU5 LANCE SERVICES.—Section 1834(l) (42 U.S.C. 

6 1395m(l)), as amended by subsections (a), (b), and (c), 

7 is amended by adding at the end the following new para8 graph: 

9 ‘‘(13) TEMPORARY INCREASE FOR GROUND AM10 BULANCE SERVICES.—

11 ‘‘(A) IN GENERAL.—After computing the 

12 rates with respect to ground ambulance services 

13 under the other applicable provisions of this 

14 subsection, in the case of such services fur15 nished on or after July 1, 2004, and before 

16 January 1, 2007, for which the transportation 

17 originates in—

18 ‘‘(i) a rural area described in para19 graph (9) or in a rural census tract de20 scribed in such paragraph, the fee schedule 

21 established under this section shall provide 

22 that the rate for the service otherwise es23 tablished, after the application of any in24 crease under paragraphs (11) and (12), 

25 shall be increased by 2 percent; and 
57

•S 1926 IS 

1 ‘‘(ii) an area not described in clause 

2 (i), the fee schedule established under this 

3 subsection shall provide that the rate for 

4 the service otherwise established, after the 

5 application of any increase under para6 graph (11), shall be increased by 1 per7 cent. 

8 ‘‘(B) APPLICATION OF INCREASED PAY9 MENTS AFTER 2006.—The increased payments 

10 under subparagraph (A) shall not be taken into 

11 account in calculating payments for services 

12 furnished after the period specified in such sub13 paragraph.’’. 

14 (e) IMPLEMENTATION.—The Secretary may imple15 ment the amendments made by this section, and revise 

16 the conversion factor applicable under section 1834(l) of 

17 the Social Security Act (42 U.S.C. 1395m(l)) for purposes 

18 of implementing such amendments, on an interim final 

19 basis, or by program instruction. 

20 (f) GAO REPORT ON COSTS AND ACCESS.—Not later 

21 than December 31, 2005, the Comptroller General of the 

22 United States shall submit to Congress an initial report 

23 on how costs differ among the types of ambulance pro24 viders and on access, supply, and quality of ambulance 

25 services in those regions and States that have a reduction 
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•S 1926 IS 

1 in payment under the medicare ambulance fee schedule 

2 (under section 1834(l) of the Social Security Act, as 

3 amended by this Act). Not later than December 31, 2007, 

4 the Comptroller General shall submit to Congress a final 

5 report on such access and supply. 

6 (g) TECHNICAL AMENDMENTS.—(1) Section 221(c) 

7 of BIPA (114 Stat. 2763A–487) is amended by striking 

8 ‘‘subsection (b)(2)’’ and inserting ‘‘subsection (b)(3)’’. 

9 (2) Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is 

10 amended by moving subparagraph (U) 4 ems to the left.

11 SEC. 115. PROVIDING APPROPRIATE COVERAGE OF RURAL 

12 AIR AMBULANCE SERVICES. 

13 (a) COVERAGE.—Section 1834(l) (42 U.S.C. 

14 1395m(l)), as amended by subsections (a), (b), (c), and 

15 (d) of section 114, is amended by adding at the end the 

16 following new paragraph: 

17 ‘‘(14) PROVIDING APPROPRIATE COVERAGE OF

18 RURAL AIR AMBULANCE SERVICES.—

19 ‘‘(A) IN GENERAL.—The regulations de20 scribed in section 1861(s)(7) shall provide, to 

21 the extent that any ambulance services (wheth22 er ground or air) may be covered under such 

23 section, that a rural air ambulance service (as 

24 defined in subparagraph (C)) is reimbursed 
59

•S 1926 IS 

1 under this subsection at the air ambulance rate 

2 if the air ambulance service— 

3 ‘‘(i) is reasonable and necessary based 

4 on the health condition of the individual 

5 being transported at or immediately prior 

6 to the time of the transport; and 

7 ‘‘(ii) complies with equipment and 

8 crew requirements established by the Sec9 retary. 

10 ‘‘(B) SATISFACTION OF REQUIREMENT OF

11 MEDICALLY NECESSARY.—The requirement of 

12 subparagraph (A)(i) is deemed to be met for a 

13 rural air ambulance service if—

14 ‘‘(i) subject to subparagraph (D), 

15 such service is requested by a physician or 

16 other qualified medical personnel (as speci17 fied by the Secretary) who reasonably de18 termines or certifies that the individual’s 

19 condition is such that the time needed to 

20 transport the individual by land or the in21 stability of transportation by land poses a 

22 threat to the individual’s survival or seri23 ously endangers the individual’s health; or 

24 ‘‘(ii) such service is furnished pursu25 ant to a protocol that is established by a 
60

•S 1926 IS 

1 State or regional emergency medical serv2 ice (EMS) agency and recognized or ap3 proved by the Secretary under which the 

4 use of an air ambulance is recommended, 

5 if such agency does not have an ownership 

6 interest in the entity furnishing such serv7 ice. 

8 ‘‘(C) RURAL AIR AMBULANCE SERVICE DE9 FINED.—For purposes of this paragraph, the 

10 term ‘rural air ambulance service’ means fixed 

11 wing and rotary wing air ambulance service in 

12 which the point of pick up of the individual oc13 curs in a rural area (as defined in section 

14 1886(d)(2)(D)) or in a rural census tract of a 

15 metropolitan statistical area (as determined 

16 under the most recent modification of the Gold17 smith Modification, originally published in the 

18 Federal Register on February 27, 1992 (57 

19 Fed. Reg. 6725)). 

20 ‘‘(D) LIMITATION.—

21 ‘‘(i) IN GENERAL.—Subparagraph 

22 (B)(i) shall not apply if there is a financial 

23 or employment relationship between the 

24 person requesting the rural air ambulance 

25 service and the entity furnishing the ambu-
61

•S 1926 IS 

1 lance service, or an entity under common 

2 ownership with the entity furnishing the 

3 air ambulance service, or a financial rela4 tionship between an immediate family 

5 member of such requester and such an en6 tity. 

7 ‘‘(ii) EXCEPTION.—Where a hospital 

8 and the entity furnishing rural air ambu9 lance services are under common owner10 ship, clause (i) shall not apply to remu11 neration (through employment or other re12 lationship) by the hospital of the requester 

13 or immediate family member if the remu14 neration is for provider-based physician 

15 services furnished in a hospital (as de16 scribed in section 1887) which are reim17 bursed under part A and the amount of 

18 the remuneration is unrelated directly or 

19 indirectly to the provision of rural air am20 bulance services.’’. 

21 (b) CONFORMING AMENDMENT.—Section 1861(s)(7) 

22 (42 U.S.C. 1395x(s)(7)) is amended by inserting ‘‘, sub23 ject to section 1834(l)(14),’’ after ‘‘but’’. 
62

•S 1926 IS 

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

2 this subsection shall apply to services furnished on or after 

3 January 1, 2005.

4 SEC. 116. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC 

5 LABORATORY TESTS FURNISHED TO HOS6 PITAL OUTPATIENTS IN CERTAIN RURAL 

7 AREAS. 

8 (a) IN GENERAL.—Notwithstanding subsections (a), 

9 (b), and (h) of section 1833 of the Social Security Act 

10 (42 U.S.C. 1395l) and section 1834(d)(1) of such Act (42 

11 U.S.C. 1395m(d)(1)), in the case of a clinical diagnostic 

12 laboratory test covered under part B of title XVIII of such 

13 Act that is furnished during a cost reporting period de14 scribed in subsection (b) by a hospital with fewer than 

15 50 beds that is located in a qualified rural area (identified 

16 under paragraph (12)(B)(iii) of section 1834(l) of the So17 cial Security Act (42 U.S.C. 1395m(l)), as added by sec18 tion 114(c)) as part of outpatient services of the hospital, 

19 the amount of payment for such test shall be 100 percent 

20 of the reasonable costs of the hospital in furnishing such 

21 test. 

22 (b) APPLICATION.—A cost reporting period described 

23 in this subsection is a cost reporting period beginning dur24 ing the 2-year period beginning on July 1, 2004. 
63

•S 1926 IS 

1 (c) PROVISION AS PART OF OUTPATIENT HOSPITAL

2 SERVICES.—For purposes of subsection (a), in deter3 mining whether clinical diagnostic laboratory services are 

4 furnished as part of outpatient services of a hospital, the 

5 Secretary shall apply the same rules that are used to de6 termine whether clinical diagnostic laboratory services are 

7 furnished as an outpatient critical access hospital service 

8 under section 1834(g)(4) of the Social Security Act (42 

9 U.S.C. 1395m(g)(4)). 

10 SEC. 117. EXTENSION OF TELEMEDICINE DEMONSTRATION 

11 PROJECT. 

12 Section 4207 of the Balanced Budget Act of 1997 

13 (Public Law 105–33) is amended—

14 (1) in subsection (a)(4), by striking ‘‘4-year’’ 

15 and inserting ‘‘8-year’’; and

16 (2) in subsection (d)(3), by striking 

17 ‘‘$30,000,000’’ and inserting ‘‘$60,000,000’’. 

18 SEC. 118. REPORT ON DEMONSTRATION PROJECT PERMIT19 TING SKILLED NURSING FACILITIES TO BE 

20 ORIGINATING TELEHEALTH SITES; AUTHOR21 ITY TO IMPLEMENT. 

22 (a) EVALUATION.—The Secretary, acting through the 

23 Administrator of the Health Resources and Services Ad24 ministration in consultation with the Administrator of the 

25 Centers for Medicare & Medicaid Services, shall evaluate 
64

•S 1926 IS 

1 demonstration projects conducted by the Secretary under 

2 which skilled nursing facilities (as defined in section 

3 1819(a) of the Social Security Act (42 U.S.C. 1395i–3(a)) 

4 are treated as originating sites for telehealth services. 

5 (b) REPORT.—Not later than January 1, 2005, the 

6 Secretary shall submit to Congress a report on the evalua7 tion conducted under subsection (a). Such report shall in8 clude recommendations on mechanisms to ensure that per9 mitting a skilled nursing facility to serve as an originating 

10 site for the use of telehealth services or any other service 

11 delivered via a telecommunications system does not serve 

12 as a substitute for in-person visits furnished by a physi13 cian, or for in-person visits furnished by a physician as14 sistant, nurse practitioner or clinical nurse specialist, as 

15 is otherwise required by the Secretary. 

16 (c) AUTHORITY TO EXPAND ORIGINATING TELE17 HEALTH SITES TO INCLUDE SKILLED NURSING FACILI18 TIES.—Insofar as the Secretary concludes in the report 

19 required under subsection (b) that is advisable to permit 

20 a skilled nursing facility to be an originating site for tele21 health services under section 1834(m) of the Social Secu22 rity Act (42 U.S.C. 1395m(m)), and that the Secretary 

23 can establish the mechanisms to ensure such permission 

24 does not serve as a substitute for in-person visits furnished 

25 by a physician, or for in-person visits furnished by a physi-
65

•S 1926 IS 

1 cian assistant, nurse practitioner or clinical nurse spe2 cialist, the Secretary may deem a skilled nursing facility 

3 to be an originating site under paragraph (4)(C)(ii) of 

4 such section beginning on January 1, 2006. 

5 Subtitle C—Provisions Relating to 

6 Parts A and B 

7 SEC. 121. 1-YEAR INCREASE FOR HOME HEALTH SERVICES 

8 FURNISHED IN A RURAL AREA. 

9 (a) IN GENERAL.—With respect to episodes and vis10 its ending on or after April 1, 2004, and before April 1, 

11 2005, in the case of home health services furnished in a 

12 rural area (as defined in section 1886(d)(2)(D) of the So13 cial Security Act (42 U.S.C. 1395ww(d)(2)(D))), the Sec14 retary shall increase the payment amount otherwise made 

15 under section 1895 of such Act (42 U.S.C. 1395fff ) for 

16 such services by 5 percent. 

17 (b) WAIVING BUDGET NEUTRALITY.—The Secretary 

18 shall not reduce the standard prospective payment amount 

19 (or amounts) under section 1895 of the Social Security 

20 Act (42 U.S.C. 1395fff ) applicable to home health services 

21 furnished during a period to offset the increase in pay22 ments resulting from the application of subsection (a). 

23 (c) NO EFFECT ON SUBSEQUENT PERIODS.—The 

24 payment increase provided under subsection (a) for a pe25 riod under such subsection—
66

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1 (1) shall not apply to episodes and visits ending 

2 after such period; and 

3 (2) shall not be taken into account in calcu4 lating the payment amounts applicable for episodes 

5 and visits occurring after such period. 

6 SEC. 122. REDISTRIBUTION OF UNUSED RESIDENT POSI7 TIONS. 

8 (a) IN GENERAL.—Section 1886(h) (42 U.S.C. 

9 1395ww(h)(4)) is amended—

10 (1) in paragraph (4)(F)(i), by inserting ‘‘sub11 ject to paragraph (7),’’ after ‘‘October 1, 1997,’’; 

12 (2) in paragraph (4)(H)(i), by inserting ‘‘and 

13 subject to paragraph (7),’’ after ‘‘subparagraphs (F) 

14 and (G)’’; and 

15 (3) by adding at the end the following new 

16 paragraph: 

17 ‘‘(7) REDISTRIBUTION OF UNUSED RESIDENT

18 POSITIONS.—

19 ‘‘(A) REDUCTION IN LIMIT BASED ON UN20 USED POSITIONS.—

21 ‘‘(i) PROGRAMS SUBJECT TO REDUC22 TION.—

23 ‘‘(I) IN GENERAL.—Except as 

24 provided in subclause (II), if a hos25 pital’s reference resident level (speci-
67

•S 1926 IS 

1 fied in clause (ii)) is less than the oth2 erwise applicable resident limit (as de3 fined in subparagraph (C)(ii)), effec4 tive for portions of cost reporting pe5 riods occurring on or after July 1, 

6 2005, the otherwise applicable resi7 dent limit shall be reduced by 75 per8 cent of the difference between such 

9 otherwise applicable resident limit and 

10 such reference resident level. 

11 ‘‘(II) EXCEPTION FOR SMALL

12 RURAL HOSPITALS.—This subpara13 graph shall not apply to a hospital lo14 cated in a rural area (as defined in 

15 subsection (d)(2)(D)(ii)) with fewer 

16 than 250 acute care inpatient beds. 

17 ‘‘(ii) REFERENCE RESIDENT LEVEL.—

18 ‘‘(I) IN GENERAL.—Except as 

19 otherwise provided in subclauses (II) 

20 and (III), the reference resident level 

21 specified in this clause for a hospital 

22 is the resident level for the most re23 cent cost reporting period of the hos24 pital ending on or before September 

25 30, 2002, for which a cost report has 
68

•S 1926 IS 

1 been settled (or, if not, submitted 

2 (subject to audit)), as determined by 

3 the Secretary. 

4 ‘‘(II) USE OF MOST RECENT AC5 COUNTING PERIOD TO RECOGNIZE EX6 PANSION OF EXISTING PROGRAMS.—If 

7 a hospital submits a timely request to 

8 increase its resident level due to an 

9 expansion of an existing residency 

10 training program that is not reflected 

11 on the most recent settled cost report, 

12 after audit and subject to the discre13 tion of the Secretary, the reference 

14 resident level for such hospital is the 

15 resident level for the cost reporting 

16 period that includes July 1, 2003, as 

17 determined by the Secretary. 

18 ‘‘(III) EXPANSIONS UNDER

19 NEWLY APPROVED PROGRAMS.—Upon 

20 the timely request of a hospital, the 

21 Secretary shall adjust the reference 

22 resident level specified under sub23 clause (I) or (II) to include the num24 ber of medical residents that were ap25 proved in an application for a medical 
69

•S 1926 IS 

1 residency training program that was 

2 approved by an appropriate accred3 iting organization (as determined by 

4 the Secretary) before January 1, 

5 2002, but which was not in operation 

6 during the cost reporting period used 

7 under subclause (I) or (II), as the 

8 case may be, as determined by the 

9 Secretary. 

10 ‘‘(iii) AFFILIATION.—The provisions 

11 of clause (i) shall be applied to hospitals 

12 which are members of the same affiliated 

13 group (as defined by the Secretary under 

14 paragraph (4)(H)(ii)) as of July 1, 2003. 

15 ‘‘(B) REDISTRIBUTION.—

16 ‘‘(i) IN GENERAL.—The Secretary is 

17 authorized to increase the otherwise appli18 cable resident limit for each qualifying hos19 pital that submits a timely application 

20 under this subparagraph by such number 

21 as the Secretary may approve for portions 

22 of cost reporting periods occurring on or 

23 after July 1, 2005. The aggregate number 

24 of increases in the otherwise applicable 

25 resident limits under this subparagraph 
70

•S 1926 IS 

1 may not exceed the Secretary’s estimate of 

2 the aggregate reduction in such limits at3 tributable to subparagraph (A). 

4 ‘‘(ii) CONSIDERATIONS IN REDIS5 TRIBUTION.—In determining for which 

6 hospitals the increase in the otherwise ap7 plicable resident limit is provided under 

8 clause (i), the Secretary shall take into ac9 count the demonstrated likelihood of the 

10 hospital filling the positions within the first 

11 3 cost reporting periods beginning on or 

12 after July 1, 2005, made available under 

13 this subparagraph, as determined by the 

14 Secretary. 

15 ‘‘(iii) PRIORITY FOR RURAL AND

16 SMALL URBAN AREAS.—In determining for 

17 which hospitals and residency training pro18 grams an increase in the otherwise applica19 ble resident limit is provided under clause 

20 (i), the Secretary shall distribute the in21 crease to programs of hospitals located in 

22 the following priority order: 

23 ‘‘(I) First, to hospitals located in 

24 rural areas (as defined in subsection 

25 (d)(2)(D)(ii)). 
71

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1 ‘‘(II) Second, to hospitals located 

2 in urban areas that are not large 

3 urban areas (as defined for purposes 

4 of subsection (d)). 

5 ‘‘(III) Third, to other hospitals in 

6 a State if the residency training pro7 gram involved is in a specialty for 

8 which there are not other residency 

9 training programs in the State. 

10 Increases of residency limits within the 

11 same priority category under this clause 

12 shall be determined by the Secretary. 

13 ‘‘(iv) LIMITATION.—In no case shall 

14 more than 25 full-time equivalent addi15 tional residency positions be made available 

16 under this subparagraph with respect to 

17 any hospital. 

18 ‘‘(v) APPLICATION OF LOCALITY AD19 JUSTED NATIONAL AVERAGE PER RESI20 DENT AMOUNT.—With respect to addi21 tional residency positions in a hospital at22 tributable to the increase provided under 

23 this subparagraph, notwithstanding any 

24 other provision of this subsection, the ap25 proved FTE resident amount is deemed to 
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1 be equal to the locality adjusted national 

2 average per resident amount computed 

3 under paragraph (4)(E) for that hospital. 

4 ‘‘(vi) CONSTRUCTION.—Nothing in 

5 this subparagraph shall be construed as 

6 permitting the redistribution of reductions 

7 in residency positions attributable to vol8 untary reduction programs under para9 graph (6), under a demonstration project 

10 approved as of October 31, 2003, under 

11 the authority of section 402 of Public Law 

12 90–248, or as affecting the ability of a 

13 hospital to establish new medical residency 

14 training programs under paragraph 

15 (4)(H). 

16 ‘‘(C) RESIDENT LEVEL AND LIMIT DE17 FINED.—In this paragraph: 

18 ‘‘(i) RESIDENT LEVEL.—The term 

19 ‘resident level’ means, with respect to a 

20 hospital, the total number of full-time 

21 equivalent residents, before the application 

22 of weighting factors (as determined under 

23 paragraph (4)), in the fields of allopathic 

24 and osteopathic medicine for the hospital. 
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1 ‘‘(ii) OTHERWISE APPLICABLE RESI2 DENT LIMIT.—The term ‘otherwise appli3 cable resident limit’ means, with respect to 

4 a hospital, the limit otherwise applicable 

5 under subparagraphs (F)(i) and (H) of 

6 paragraph (4) on the resident level for the 

7 hospital determined without regard to this 

8 paragraph. 

9 ‘‘(D) JUDICIAL REVIEW.—There shall be 

10 no administrative or judicial review under sec11 tion 1869, 1878, or otherwise, with respect to 

12 determinations made under this paragraph.’’. 

13 (b) CONFORMING PROVISIONS.—(1) Section 

14 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is amend15 ed—

16 (A) in the second sentence of clause (ii), by 

17 striking ‘‘For discharges’’ and inserting ‘‘Subject to 

18 clause (ix), for discharges’’; and 

19 (B) in clause (v), by adding at the end the fol20 lowing: ‘‘The provisions of subsection (h)(7) shall 

21 apply with respect to the first sentence of this clause 

22 in the same manner as it applies with respect to 

23 subsection (h)(4)(F)(i).’’; and 

24 (C) by adding at the end the following new 

25 clause: 
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1 ‘‘(ix) For discharges occurring on or after July 

2 1, 2005, insofar as an additional payment amount 

3 under this subparagraph is attributable to resident 

4 positions redistributed to a hospital under subsection 

5 (h)(7)(B), in computing the indirect teaching adjust6 ment factor under clause (ii) the adjustment shall be 

7 computed in a manner as if ‘c’ were equal to 0.66 

8 with respect to such resident positions.’’. 

9 (2) Chapter 35 of title 44, United States Code, shall 

10 not apply with respect to applications under section 

11 1886(h)(7) of the Social Security Act, as added by sub12 section (a)(3). 

13 (c) REPORT ON EXTENSION OF APPLICATIONS

14 UNDER REDISTRIBUTION PROGRAM.—Not later than July 

15 1, 2005, the Secretary shall submit to Congress a report 

16 containing recommendations regarding whether to extend 

17 the deadline for applications for an increase in resident 

18 limits under section 1886(h)(4)(I)(ii)(II) of the Social Se19 curity Act (as added by subsection (a)). 
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1 Subtitle D—Other Provisions 

2 SEC. 131. PROVIDING SAFE HARBOR FOR CERTAIN COL3 LABORATIVE EFFORTS THAT BENEFIT MEDI4 CALLY UNDERSERVED POPULATIONS. 

5 (a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C. 

6 1320a–7(b)(3)), as amended by section 101(e)(2), is 

7 amended—

8 (1) in subparagraph (F), by striking ‘‘and’’ 

9 after the semicolon at the end; 

10 (2) in subparagraph (G), by striking the period 

11 at the end and inserting ‘‘; and’’; and 

12 (3) by adding at the end the following new sub13 paragraph: 

14 ‘‘(H) any remuneration between a health 

15 center entity described under clause (i) or (ii) 

16 of section 1905(l)(2)(B) and any individual or 

17 entity providing goods, items, services, dona18 tions, loans, or a combination thereof, to such 

19 health center entity pursuant to a contract, 

20 lease, grant, loan, or other agreement, if such 

21 agreement contributes to the ability of the 

22 health center entity to maintain or increase the 

23 availability, or enhance the quality, of services 

24 provided to a medically underserved population 

25 served by the health center entity.’’. 
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1 (b) RULEMAKING FOR EXCEPTION FOR HEALTH

2 CENTER ENTITY ARRANGEMENTS.—

3 (1) ESTABLISHMENT.—

4 (A) IN GENERAL.—The Secretary shall es5 tablish, on an expedited basis, standards relat6 ing to the exception described in section 

7 1128B(b)(3)(H) of the Social Security Act, as 

8 added by subsection (a), for health center entity 

9 arrangements to the antikickback penalties. 

10 (B) FACTORS TO CONSIDER.—The Sec11 retary shall consider the following factors, 

12 among others, in establishing standards relating 

13 to the exception for health center entity ar14 rangements under subparagraph (A): 

15 (i) Whether the arrangement between 

16 the health center entity and the other 

17 party results in savings of Federal grant 

18 funds or increased revenues to the health 

19 center entity. 

20 (ii) Whether the arrangement between 

21 the health center entity and the other 

22 party restricts or limits an individual’s 

23 freedom of choice. 

24 (iii) Whether the arrangement be25 tween the health center entity and the 
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1 other party protects a health care profes2 sional’s independent medical judgment re3 garding medically appropriate treatment. 

4 The Secretary may also include other standards 

5 and criteria that are consistent with the intent 

6 of Congress in enacting the exception estab7 lished under this section.

8 (2) DEADLINE.—Not later than 1 year after 

9 the date of the enactment of this Act the Secretary 

10 shall publish final regulations establishing the stand11 ards described in paragraph (1). 

12 SEC. 132. OFFICE OF RURAL HEALTH POLICY IMPROVE13 MENTS. 

14 Section 711(b) (42 U.S.C. 912(b)) is amended—

15 (1) in paragraph (3), by striking ‘‘and’’ after 

16 the comma at the end; 

17 (2) in paragraph (4), by striking the period at 

18 the end and inserting ‘‘, and’’; and 

19 (3) by inserting after paragraph (4) the fol20 lowing new paragraph: 

21 ‘‘(5) administer grants, cooperative agreements, 

22 and contracts to provide technical assistance and 

23 other activities as necessary to support activities re24 lated to improving health care in rural areas.’’. 
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1 SEC. 133. MEDPAC STUDY ON RURAL HOSPITAL PAYMENT 

2 ADJUSTMENTS. 

3 (a) IN GENERAL.—The Medicare Payment Advisory 

4 Commission shall conduct a study of the impact of sec5 tions 401 through 406, 411, 416, and 505. The Commis6 sion shall analyze the effect on total payments, growth in 

7 costs, capital spending, and such other payment effects 

8 under those sections. 

9 (b) REPORTS.—

10 (1) INTERIM REPORT.—Not later than 18 

11 months after the date of the enactment of this Act, 

12 the Commission shall submit to Congress an interim 

13 report on the matters studied under subsection (a) 

14 with respect only to changes to the critical access 

15 hospital provisions under section 105. 

16 (2) FINAL REPORT.—Not later than 3 years 

17 after the date of the enactment of this Act, the 

18 Commission shall submit to Congress a final report 

19 on all matters studied under subsection (a). 

20 SEC. 134. FRONTIER EXTENDED STAY CLINIC DEMONSTRA21 TION PROJECT. 

22 (a) AUTHORITY TO CONDUCT DEMONSTRATION

23 PROJECT.—The Secretary shall waive such provisions of 

24 the medicare program established under title XVIII of the 

25 Social Security Act (42 U.S.C. 1395 et seq.) as are nec26 essary to conduct a demonstration project under which 
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1 frontier extended stay clinics described in subsection (b) 

2 in isolated rural areas are treated as providers of items 

3 and services under the medicare program. 

4 (b) CLINICS DESCRIBED.—A frontier extended stay 

5 clinic is described in this subsection if the clinic—

6 (1) is located in a community where the closest 

7 short-term acute care hospital or critical access hos8 pital is at least 75 miles away from the community 

9 or is inaccessible by public road; and 

10 (2) is designed to address the needs of—

11 (A) seriously or critically ill or injured pa12 tients who, due to adverse weather conditions or 

13 other reasons, cannot be transferred quickly to 

14 acute care referral centers; or 

15 (B) patients who need monitoring and ob16 servation for a limited period of time. 

17 (c) SPECIFICATION OF CODES.—The Secretary shall 

18 determine the appropriate life-safety codes for such clinics 

19 that treat patients for needs referred to in subsection 

20 (b)(2). 

21 (d) FUNDING.—

22 (1) IN GENERAL.—Subject to paragraph (2), 

23 there are authorized to be appropriated, in appro24 priate part from the Federal Hospital Insurance 

25 Trust Fund and the Federal Supplementary Medical 
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1 Insurance Trust Fund, such sums as are necessary 

2 to conduct the demonstration project under this sec3 tion. 

4 (2) BUDGET NEUTRAL IMPLEMENTATION.—In 

5 conducting the demonstration project under this sec6 tion, the Secretary shall ensure that the aggregate 

7 payments made by the Secretary under the medicare 

8 program do not exceed the amount which the Sec9 retary would have paid under the medicare program 

10 if the demonstration project under this section was 

11 not implemented. 

12 (e) 3-YEAR PERIOD.—The Secretary shall conduct 

13 the demonstration under this section for a 3-year period. 

14 (f) REPORT.—Not later than the date that is 1 year 

15 after the date on which the demonstration project con16 cludes, the Secretary shall submit to Congress a report 

17 on the demonstration project, together with such rec18 ommendations for legislation or administrative action as 

19 the Secretary determines appropriate. 

20 (g) DEFINITIONS.—In this section, the terms ‘‘hos21 pital’’ and ‘‘critical access hospital’’ have the meanings 

22 given such terms in subsections (e) and (mm), respec23 tively, of section 1861 of the Social Security Act (42 

24 U.S.C. 1395x). 
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1 TITLE II—PROVISIONS 

2 RELATING TO PART A

3 Subtitle A—Inpatient Hospital 

4 Services 

5 SEC. 201. REVISION OF ACUTE CARE HOSPITAL PAYMENT 

6 UPDATES. 

7 (a) IN GENERAL.—Section 1886(b)(3)(B)(i) (42 

8 U.S.C. 1395ww(b)(3)(B)(i)) is amended—

9 (1) by striking ‘‘and’’ at the end of subclause 

10 (XVIII); 

11 (2) by striking subclause (XIX); and 

12 (3) by inserting after subclause (XVIII) the fol13 lowing new subclauses: 

14 ‘‘(XIX) for each of fiscal years 2004 through 

15 2007, subject to clause (vii), the market basket per16 centage increase for hospitals in all areas; and 

17 ‘‘(XX) for fiscal year 2008 and each subsequent 

18 fiscal year, the market basket percentage increase 

19 for hospitals in all areas.’’. 

20 (b) SUBMISSION OF HOSPITAL QUALITY DATA.—

21 Section 1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is 

22 amended by adding at the end the following new clause:

23 ‘‘(vii)(I) For purposes of clause (i)(XIX) for each of 

24 fiscal years 2005 through 2007, in a case of a subsection 

25 (d) hospital that does not submit data to the Secretary 
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1 in accordance with subclause (II) with respect to such a 

2 fiscal year, the applicable percentage increase under such 

3 clause for such fiscal year shall be reduced by 0.4 percent4 age points. Such reduction shall apply only with respect 

5 to the fiscal year involved, and the Secretary shall not take 

6 into account such reduction in computing the applicable 

7 percentage increase under clause (i)(XIX) for a subse8 quent fiscal year. 

9 ‘‘(II) Each subsection (d) hospital shall submit to the 

10 Secretary quality data (for a set of 10 indicators estab11 lished by the Secretary as of November 1, 2003) that re12 late to the quality of care furnished by the hospital in in13 patient settings in a form and manner, and at a time, 

14 specified by the Secretary for purposes of this clause, but 

15 with respect to fiscal year 2005, the Secretary shall pro16 vide for a 30-day grace period for the submission of data 

17 by a hospital.’’. 

18 (c) GAO STUDY AND REPORT ON APPROPRIATENESS

19 OF PAYMENTS UNDER THE PROSPECTIVE PAYMENT SYS20 TEM FOR INPATIENT HOSPITAL SERVICES.—

21 (1) STUDY.—The Comptroller General of the 

22 United States, using the most current data avail23 able, shall conduct a study to determine—

24 (A) the appropriate level and distribution 

25 of payments in relation to costs under the pro-
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1 spective payment system under section 1886 of 

2 the Social Security Act (42 U.S.C. 1395ww) for 

3 inpatient hospital services furnished by sub4 section (d) hospitals (as defined in subsection 

5 (d)(1)(B) of such section); and 

6 (B) whether there is a need to adjust such 

7 payments under such system to reflect legiti8 mate differences in costs across different geo9 graphic areas, kinds of hospitals, and types of 

10 cases. 

11 (2) REPORT.—Not later than 24 months after 

12 the date of the enactment of this Act, the Comp13 troller General of the United States shall submit to 

14 Congress a report on the study conducted under 

15 paragraph (1) together with such recommendations 

16 for legislative and administrative action as the 

17 Comptroller General determines appropriate. 

18 SEC. 202. REVISION OF THE INDIRECT MEDICAL EDU19 CATION (IME) ADJUSTMENT PERCENTAGE. 

20 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42 

21 U.S.C. 1395ww(d)(5)(B)(ii)) is amended—

22 (1) in subclause (VI), by striking ‘‘and’’ after 

23 the semicolon at the end; 

24 (2) in subclause (VII)—
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1 (A) by inserting ‘‘and before April 1, 

2 2004,’’ after ‘‘on or after October 1, 2002,’’; 

3 and 

4 (B) by striking the period at the end and 

5 inserting a semicolon; and 

6 (3) by adding at the end the following new sub7 clauses: 

8 ‘‘(VIII) on or after April 1, 2004, and be9 fore October 1, 2004, ‘c’ is equal to 1.47; 

10 ‘‘(IX) during fiscal year 2005, ‘c’ is equal 

11 to 1.42; 

12 ‘‘(X) during fiscal year 2006, ‘c’ is equal 

13 to 1.37; 

14 ‘‘(XI) during fiscal year 2007, ‘c’ is equal 

15 to 1.32; and 

16 ‘‘(XII) on or after October 1, 2007, ‘c’ is 

17 equal to 1.35.’’. 

18 (b) CONFORMING AMENDMENT RELATING TO DE19 TERMINATION OF STANDARDIZED AMOUNT.—Section 

20 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 

21 amended—

22 (1) by striking ‘‘1999 or’’ and inserting 

23 ‘‘1999,’’; and 

24 (2) by inserting ‘‘, or the Medicare Provider 

25 Restoration Act of 2003’’ after ‘‘2000’’. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to discharges occurring on or after 

3 April 1, 2004. 

4 SEC. 203. RECOGNITION OF NEW MEDICAL TECHNOLOGIES 

5 UNDER INPATIENT HOSPITAL PROSPECTIVE 

6 PAYMENT SYSTEM. 

7 (a) IMPROVING TIMELINESS OF DATA COLLEC8 TION.—Section 1886(d)(5)(K) (42 U.S.C. 

9 1395ww(d)(5)(K)) is amended by adding at the end the 

10 following new clause: 

11 ‘‘(vii) Under the mechanism under this subpara12 graph, the Secretary shall provide for the addition of new 

13 diagnosis and procedure codes in April 1 of each year, but 

14 the addition of such codes shall not require the Secretary 

15 to adjust the payment (or diagnosis-related group classi16 fication) under this subsection until the fiscal year that 

17 begins after such date.’’. 

18 (b) ELIGIBILITY STANDARD FOR TECHNOLOGY

19 OUTLIERS.—

20 (1) ADJUSTMENT OF THRESHOLD.—Section 

21 1886(d)(5)(K)(ii)(I) (42 U.S.C. 

22 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 

23 ‘‘(applying a threshold specified by the Secretary 

24 that is the lesser of 75 percent of the standardized 

25 amount (increased to reflect the difference between 
86

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1 cost and charges) or 75 percent of one standard de2 viation for the diagnosis-related group involved)’’ 

3 after ‘‘is inadequate’’. 

4 (2) PROCESS FOR PUBLIC INPUT.—Section 

5 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as 

6 amended by subsection (a), is amended—

7 (A) in clause (i), by adding at the end the 

8 following: ‘‘Such mechanism shall be modified 

9 to meet the requirements of clause (viii).’’; and 

10 (B) by adding at the end the following new 

11 clause: 

12 ‘‘(viii) The mechanism established pursuant to clause 

13 (i) shall be adjusted to provide, before publication of a 

14 proposed rule, for public input regarding whether a new 

15 service or technology represents an advance in medical 

16 technology that substantially improves the diagnosis or 

17 treatment of individuals entitled to benefits under part A 

18 as follows: 

19 ‘‘(I) The Secretary shall make public and peri20 odically update a list of all the services and tech21 nologies for which an application for additional pay22 ment under this subparagraph is pending. 

23 ‘‘(II) The Secretary shall accept comments, rec24 ommendations, and data from the public regarding 
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1 whether the service or technology represents a sub2 stantial improvement. 

3 ‘‘(III) The Secretary shall provide for a meeting 

4 at which organizations representing hospitals, physi5 cians, such individuals, manufacturers, and any 

6 other interested party may present comments, rec7 ommendations, and data to the clinical staff of the 

8 Centers for Medicare & Medicaid Services before 

9 publication of a notice of proposed rulemaking re10 garding whether service or technology represents a 

11 substantial improvement.’’. 

12 (c) PREFERENCE FOR USE OF DRG ADJUSTMENT.—

13 Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as 

14 amended by subsections (a) and (b), is amended by adding 

15 at the end the following new clause: 

16 ‘‘(ix) Before establishing any add-on payment under 

17 this subparagraph with respect to a new technology, the 

18 Secretary shall seek to identify one or more diagnosis-re19 lated groups associated with such technology, based on 

20 similar clinical or anatomical characteristics and the cost 

21 of the technology. Within such groups the Secretary shall 

22 assign an eligible new technology into a diagnosis-related 

23 group where the average costs of care most closely approx24 imate the costs of care of using the new technology. No 

25 add-on payment under this subparagraph shall be made 
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1 with respect to such new technology and this clause shall 

2 not affect the application of paragraph (4)(C)(iii).’’. 

3 (d) ESTABLISHMENT OF NEW FUNDING FOR HOS4 PITAL INPATIENT TECHNOLOGY.—

5 (1) IN GENERAL.—Section 

6 1886(d)(5)(K)(ii)(III) (42 U.S.C. 

7 1395ww(d)(5)(K)(ii)(III)) is amended by striking 

8 ‘‘subject to paragraph (4)(C)(iii),’’. 

9 (2) NOT BUDGET NEUTRAL.—There shall be no 

10 reduction or other adjustment in payments under 

11 section 1886 of the Social Security Act because an 

12 additional payment is provided under subsection 

13 (d)(5)(K)(ii)(III) of such section. 

14 (e) EFFECTIVE DATE.—

15 (1) IN GENERAL.—The Secretary shall imple16 ment the amendments made by this section so that 

17 they apply to classification for fiscal years beginning 

18 with fiscal year 2005. 

19 (2) RECONSIDERATIONS OF APPLICATIONS FOR

20 FISCAL YEAR 2004 THAT ARE DENIED.—In the case 

21 of an application for a classification of a medical 

22 service or technology as a new medical service or 

23 technology under section 1886(d)(5)(K) of the Social 

24 Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 

25 filed for fiscal year 2004 and that is denied—
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1 (A) the Secretary shall automatically re2 consider the application as an application for 

3 fiscal year 2005 under the amendments made 

4 by this section; and 

5 (B) the maximum time period otherwise 

6 permitted for such classification of the service 

7 or technology shall be extended by 12 months. 

8 SEC. 204. INCREASE IN FEDERAL RATE FOR HOSPITALS IN 

9 PUERTO RICO. 

10 Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is 

11 amended—

12 (1) in subparagraph (A)—

13 (A) in clause (i), by striking ‘‘for dis14 charges beginning on or after October 1, 1997, 

15 50 percent (and for discharges between October 

16 1, 1987, and September 30, 1997, 75 percent)’’ 

17 and inserting ‘‘the applicable Puerto Rico per18 centage (specified in subparagraph (E))’’; and 

19 (B) in clause (ii), by striking ‘‘for dis20 charges beginning in a fiscal year beginning on 

21 or after October 1, 1997, 50 percent (and for 

22 discharges between October 1, 1987, and Sep23 tember 30, 1997, 25 percent)’’ and inserting 

24 ‘‘the applicable Federal percentage (specified in 

25 subparagraph (E))’’; and 
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1 (2) by adding at the end the following new sub2 paragraph: 

3 ‘‘(E) For purposes of subparagraph (A), for dis4 charges occurring—

5 ‘‘(i) on or after October 1, 1987, and before Oc6 tober 1, 1997, the applicable Puerto Rico percentage 

7 is 75 percent and the applicable Federal percentage 

8 is 25 percent; 

9 ‘‘(ii) on or after October 1, 1997, and before 

10 April 1, 2004, the applicable Puerto Rico percentage 

11 is 50 percent and the applicable Federal percentage 

12 is 50 percent; 

13 ‘‘(iii) on or after April 1, 2004, and before Oc14 tober 1, 2004, the applicable Puerto Rico percentage 

15 is 37.5 percent and the applicable Federal percent16 age is 62.5 percent; and 

17 ‘‘(iv) on or after October 1, 2004, the applica18 ble Puerto Rico percentage is 25 percent and the ap19 plicable Federal percentage is 75 percent.’’. 

20 SEC. 205. WAGE INDEX ADJUSTMENT RECLASSIFICATION 

21 REFORM. 

22 (a) IN GENERAL.—Section 1886(d) (42 U.S.C. 

23 1395ww(d)), as amended by section 106, is amended by 

24 adding at the end the following new paragraph: 
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1 ‘‘(13)(A) In order to recognize commuting patterns 

2 among geographic areas, the Secretary shall establish a 

3 process through application or otherwise for an increase 

4 of the wage index applied under paragraph (3)(E) for sub5 section (d) hospitals located in a qualifying county de6 scribed in subparagraph (B) in the amount computed 

7 under subparagraph (D) based on out-migration of hos8 pital employees who reside in that county to any higher 

9 wage index area. 

10 ‘‘(B) The Secretary shall establish criteria for a 

11 qualifying county under this subparagraph based on the 

12 out-migration referred to in subparagraph (A) and dif13 ferences in the area wage indices. Under such criteria the 

14 Secretary shall, utilizing such data as the Secretary deter15 mines to be appropriate, establish—

16 ‘‘(i) a threshold percentage, established by the 

17 Secretary, of the weighted average of the area wage 

18 index or indices for the higher wage index areas in19 volved; 

20 ‘‘(ii) a threshold (of not less than 10 percent) 

21 for minimum out-migration to a higher wage index 

22 area or areas; and 

23 ‘‘(iii) a requirement that the average hourly 

24 wage of the hospitals in the qualifying county equals 

25 or exceeds the average hourly wage of all the hos-
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1 pitals in the area in which the qualifying county is 

2 located. 

3 ‘‘(C) For purposes of this paragraph, the term ‘high4 er wage index area’ means, with respect to a county, an 

5 area with a wage index that exceeds that of the county. 

6 ‘‘(D) The increase in the wage index under subpara7 graph (A) for a qualifying county shall be equal to the 

8 percentage of the hospital employees residing in the quali9 fying county who are employed in any higher wage index 

10 area multiplied by the sum of the products, for each higher 

11 wage index area of—

12 ‘‘(i) the difference between—

13 ‘‘(I) the wage index for such higher wage 

14 index area, and 

15 ‘‘(II) the wage index of the qualifying 

16 county; and 

17 ‘‘(ii) the number of hospital employees residing 

18 in the qualifying county who are employed in such 

19 higher wage index area divided by the total number 

20 of hospital employees residing in the qualifying 

21 county who are employed in any higher wage index 

22 area. 

23 ‘‘(E) The process under this paragraph may be based 

24 upon the process used by the Medicare Geographic Classi25 fication Review Board under paragraph (10). As the Sec-
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1 retary determines to be appropriate to carry out such 

2 process, the Secretary may require hospitals (including 

3 subsection (d) hospitals and other hospitals) and critical 

4 access hospitals, as required under section 1866(a)(1)(T), 

5 to submit data regarding the location of residence, or the 

6 Secretary may use data from other sources. 

7 ‘‘(F) A wage index increase under this paragraph 

8 shall be effective for a period of 3 fiscal years, except that 

9 the Secretary shall establish procedures under which a 

10 subsection (d) hospital may elect to waive the application 

11 of such wage index increase. 

12 ‘‘(G) A hospital in a county that has a wage index 

13 increase under this paragraph for a period and that has 

14 not waived the application of such an increase under sub15 paragraph (F) is not eligible for reclassification under 

16 paragraph (8) or (10) during that period. 

17 ‘‘(H) Any increase in a wage index under this para18 graph for a county shall not be taken into account for 

19 purposes of—

20 ‘‘(i) computing the wage index for portions of 

21 the wage index area (not including the county) in 

22 which the county is located; or 

23 ‘‘(ii) applying any budget neutrality adjustment 

24 with respect to such index under paragraph (8)(D). 
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1 ‘‘(I) The thresholds described in subparagraph (B), 

2 data on hospital employees used under this paragraph, 

3 and any determination of the Secretary under the process 

4 described in subparagraph (E) shall be final and shall not 

5 be subject to judicial review.’’. 

6 (b) CONFORMING AMENDMENTS.—Section 

7 1866(a)(1) (42 U.S.C. 1395cc(a)(1)) is amended—

8 (1) in subparagraph (R), by striking ‘‘and’’ at 

9 the end; 

10 (2) in subparagraph (S), by striking the period 

11 at the end and inserting ‘‘, and’’; and 

12 (3) by inserting after subparagraph (S) the fol13 lowing new subparagraph: 

14 ‘‘(T) in the case of hospitals and critical access 

15 hospitals, to furnish to the Secretary such data as 

16 the Secretary determines appropriate pursuant to 

17 subparagraph (E) of section 1886(d)(12) to carry 

18 out such section.’’.

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

20 this section shall first apply to the wage index for dis21 charges occurring on or after October 1, 2004. In initially 

22 implementing such amendments, the Secretary may mod23 ify the deadlines otherwise applicable under clauses (ii) 

24 and (iii)(I) of section 1886(d)(10)(C) of the Social Secu25 rity Act (42 U.S.C. 1395ww(d)(10)(C)), for submission of, 
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1 and actions on, applications relating to changes in hospital 

2 geographic reclassification. 

3 SEC. 206. LIMITATION ON CHARGES FOR INPATIENT HOS4 PITAL CONTRACT HEALTH SERVICES PRO5 VIDED TO INDIANS BY MEDICARE PARTICI6 PATING HOSPITALS. 

7 (a) IN GENERAL.—Section 1866(a)(1) (42 U.S.C. 

8 1395cc(a)(1)), as amended by section 205(b), is amend9 ed—

10 (1) in subparagraph (S), by striking ‘‘and’’ at 

11 the end; 

12 (2) in subparagraph (T), by striking the period 

13 and inserting ‘‘, and’’; and 

14 (3) by inserting after subparagraph (T) the fol15 lowing new subparagraph: 

16 ‘‘(U) in the case of hospitals which furnish 

17 inpatient hospital services for which payment 

18 may be made under this title, to be a partici19 pating provider of medical care both—

20 ‘‘(i) under the contract health services 

21 program funded by the Indian Health 

22 Service and operated by the Indian Health 

23 Service, an Indian tribe, or tribal organiza24 tion (as those terms are defined in section 

25 4 of the Indian Health Care Improvement 
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1 Act), with respect to items and services 

2 that are covered under such program and 

3 furnished to an individual eligible for such 

4 items and services under such program; 

5 and 

6 ‘‘(ii) under any program funded by 

7 the Indian Health Service and operated by 

8 an urban Indian organization with respect 

9 to the purchase of items and services for 

10 an eligible urban Indian (as those terms 

11 are defined in such section 4), 

12 in accordance with regulations promulgated by 

13 the Secretary regarding admission practices, 

14 payment methodology, and rates of payment 

15 (including the acceptance of no more than such 

16 payment rate as payment in full for such items 

17 and services.’’.

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply as of a date specified by the Sec20 retary of Health and Human Services (but in no case later 

21 than 1 year after the date of enactment of this Act) to 

22 medicare participation agreements in effect (or entered 

23 into) on or after such date. 
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1 (c) PROMULGATION OF REGULATIONS.—The Sec2 retary shall promulgate regulations to carry out the 

3 amendments made by subsection (a).

4 SEC. 207. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO 

5 MEDICARE LIMITS ON PHYSICIAN REFER6 RALS. 

7 (a) LIMITS ON PHYSICIAN REFERRALS.—

8 (1) OWNERSHIP AND INVESTMENT INTERESTS

9 IN WHOLE HOSPITALS.—

10 (A) IN GENERAL.—Section 1877(d)(3) (42 

11 U.S.C. 1395nn(d)(3)) is amended—

12 (i) by striking ‘‘, and’’ at the end of 

13 subparagraph (A) and inserting a semi14 colon; and 

15 (ii) by redesignating subparagraph 

16 (B) as subparagraph (C) and inserting 

17 after subparagraph (A) the following new 

18 subparagraph: 

19 ‘‘(B) effective for the 18-month period be20 ginning on the date of the enactment of the 

21 Medicare Provider Restoration Act of 2003, the 

22 hospital is not a specialty hospital (as defined 

23 in subsection (h)(7)); and’’. 
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1 (B) DEFINITION.—Section 1877(h) (42 

2 U.S.C. 1395nn(h)) is amended by adding at the 

3 end the following: 

4 ‘‘(7) SPECIALTY HOSPITAL.—

5 ‘‘(A) IN GENERAL.—For purposes of this 

6 section, except as provided in subparagraph 

7 (B), the term ‘specialty hospital’ means a sub8 section (d) hospital (as defined in section 

9 1886(d)(1)(B)) that is primarily or exclusively 

10 engaged in the care and treatment of one of the 

11 following categories: 

12 ‘‘(i) Patients with a cardiac condition. 

13 ‘‘(ii) Patients with an orthopedic con14 dition. 

15 ‘‘(iii) Patients receiving a surgical 

16 procedure. 

17 ‘‘(iv) Any other specialized category of 

18 services that the Secretary designates as 

19 inconsistent with the purpose of permitting 

20 physician ownership and investment inter21 ests in a hospital under this section. 

22 ‘‘(B) EXCEPTION.—For purposes of this 

23 section, the term ‘specialty hospital’ does not 

24 include any hospital—

25 ‘‘(i) determined by the Secretary—
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1 ‘‘(I) to be in operation before No2 vember 18, 2003; or 

3 ‘‘(II) under development as of 

4 such date; 

5 ‘‘(ii) for which the number of physi6 cian investors at any time on or after such 

7 date is no greater than the number of such 

8 investors as of such date; 

9 ‘‘(iii) for which the type of categories 

10 described in subparagraph (A) at any time 

11 on or after such date is no different than 

12 the type of such categories as of such date; 

13 ‘‘(iv) for which any increase in the 

14 number of beds occurs only in the facilities 

15 on the main campus of the hospital and 

16 does not exceed 50 percent of the number 

17 of beds in the hospital as of November 18, 

18 2003, or 5 beds, whichever is greater; and 

19 ‘‘(v) that meets such other require20 ments as the Secretary may specify.’’. 

21 (2) OWNERSHIP AND INVESTMENT INTERESTS

22 IN A RURAL PROVIDER.—Section 1877(d)(2) (42 

23 U.S.C. 1395nn(d)(2)) is amended to read as follows: 
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1 ‘‘(2) RURAL PROVIDERS.—In the case of des2 ignated health services furnished in a rural area (as 

3 defined in section 1886(d)(2)(D)) by an entity, if—

4 ‘‘(A) substantially all of the designated 

5 health services furnished by the entity are fur6 nished to individuals residing in such a rural 

7 area; and 

8 ‘‘(B) effective for the 18-month period be9 ginning on the date of the enactment of the 

10 Medicare Provider Restoration Act of 2003, the 

11 entity is not a specialty hospital (as defined in 

12 subsection (h)(7)).’’. 

13 (b) APPLICATION OF EXCEPTION FOR HOSPITALS

14 UNDER DEVELOPMENT.—For purposes of section 

15 1877(h)(7)(B)(i)(II) of the Social Security Act, as added 

16 by subsection (a)(1)(B), in determining whether a hospital 

17 is under development as of November 18, 2003, the Sec18 retary shall consider—

19 (1) whether architectural plans have been com20 pleted, funding has been received, zoning require21 ments have been met, and necessary approvals from 

22 appropriate State agencies have been received; and 

23 (2) any other evidence the Secretary determines 

24 would indicate whether a hospital is under develop25 ment as of such date. 
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1 (c) STUDIES.—

2 (1) MEDPAC STUDY.—The Medicare Payment 

3 Advisory Commission, in consultation with the 

4 Comptroller General of the United States, shall con5 duct a study to determine—

6 (A) any differences in the costs of health 

7 care services furnished to patients by physician8 owned specialty hospitals and the costs of such 

9 services furnished by local full-service commu10 nity hospitals within specific diagnosis-related 

11 groups; 

12 (B) the extent to which specialty hospitals, 

13 relative to local full-service community hos14 pitals, treat patients in certain diagnosis-related 

15 groups within a category, such as cardiology, 

16 and an analysis of the selection; 

17 (C) the financial impact of physician18 owned specialty hospitals on local full-service 

19 community hospitals; 

20 (D) how the current diagnosis-related 

21 group system should be updated to better re22 flect the cost of delivering care in a hospital 

23 setting; and
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1 (E) the proportions of payments received, 

2 by type of payer, between the specialty hospitals 

3 and local full-service community hospitals. 

4 (2) HHS STUDY.—The Secretary shall conduct 

5 a study of a representative sample of specialty hos6 pitals—

7 (A) to determine the percentage of patients 

8 admitted to physician-owned specialty hospitals 

9 who are referred by physicians with an owner10 ship interest; 

11 (B) to determine the referral patterns of 

12 physician owners, including the percentage of 

13 patients they referred to physician-owned spe14 cialty hospitals and the percentage of patients 

15 they referred to local full-service community 

16 hospitals for the same condition; 

17 (C) to compare the quality of care fur18 nished in physician-owned specialty hospitals 

19 and in local full-service community hospitals for 

20 similar conditions and patient satisfaction with 

21 such care; and 

22 (D) to assess the differences in uncompen23 sated care, as defined by the Secretary, between 

24 the specialty hospital and local full-service com-
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1 munity hospitals, and the relative value of any 

2 tax exemption available to such hospitals. 

3 (3) REPORTS.—Not later than 15 months after 

4 the date of the enactment of this Act, the Commis5 sion and the Secretary, respectively, shall each sub6 mit to Congress a report on the studies conducted 

7 under paragraphs (1) and (2), respectively, and shall 

8 include any recommendations for legislation or ad9 ministrative changes.

10 SEC. 208. 1-TIME APPEALS PROCESS FOR HOSPITAL WAGE 

11 INDEX CLASSIFICATION. 

12 (a) ESTABLISHMENT OF PROCESS.—

13 (1) IN GENERAL.—The Secretary shall establish 

14 not later than January 1, 2004, by instruction or 

15 otherwise a process under which a hospital may ap16 peal the wage index classification otherwise applica17 ble to the hospital and select another area within the 

18 State (or, at the discretion of the Secretary, within 

19 a contiguous State) to which to be reclassified. 

20 (2) PROCESS REQUIREMENTS.—The process es21 tablished under paragraph (1) shall be consistent 

22 with the following: 

23 (A) Such an appeal may be filed as soon 

24 as possible after the date of the enactment of 
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1 this Act but shall be filed by not later than 

2 February 15, 2004. 

3 (B) Such an appeal shall be heard by the 

4 Medicare Geographic Reclassification Review 

5 Board. 

6 (C) There shall be no further administra7 tive or judicial review of a decision of such 

8 Board. 

9 (3) RECLASSIFICATION UPON SUCCESSFUL AP10 PEAL.—If the Medicare Geographic Reclassification 

11 Review Board determines that the hospital is a 

12 qualifying hospital (as defined in subsection (c)), the 

13 hospital shall be reclassified to the area selected 

14 under paragraph (1). Such reclassification shall 

15 apply with respect to discharges occurring during 

16 the 3-year period beginning with April 1, 2004. 

17 (4) INAPPLICABILITY OF CERTAIN PROVI18 SIONS.—Except as the Secretary may provide, the 

19 provisions of paragraphs (8) and (10) of section 

20 1886(d) of the Social Security Act (42 U.S.C. 

21 1395ww(d)) shall not apply to an appeal under this 

22 section. 

23 (b) APPLICATION OF RECLASSIFICATION.—In the 

24 case of an appeal decided in favor of a qualifying hospital 

25 under subsection (a), the wage index reclassification shall 
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1 not affect the wage index computation for any area or for 

2 any other hospital and shall not be effected in a budget 

3 neutral manner. The provisions of this section shall not 

4 affect payment for discharges occurring after the end of 

5 the 3-year-period referred to in subsection (a). 

6 (c) QUALIFYING HOSPITAL DEFINED.—For purposes 

7 of this section, the term ‘‘qualifying hospital’’ means a 

8 subsection (d) hospital (as defined in section 

9 1886(d)(1)(B) of the Social Security Act, 42 U.S.C. 

10 1395ww(d)(1)(B)) that—

11 (1) does not qualify for a change in wage index 

12 classification under paragraph (8) or (10) of section 

13 1886(d) of the Social Security Act (42 U.S.C. 

14 1395ww(d)) on the basis of requirements relating to 

15 distance or commuting; and 

16 (2) meets such other criteria, such as quality, 

17 as the Secretary may specify by instruction or other18 wise. 

19 The Secretary may modify the wage comparison guidelines 

20 promulgated under section 1886(d)(10)(D) of such Act 

21 (42 U.S.C. 1395ww(d)(10)(D)) in carrying out this sec22 tion. 

23 (d) WAGE INDEX CLASSIFICATION.—For purposes of 

24 this section, the term ‘‘wage index classification’’ means 

25 the geographic area in which it is classified for purposes 
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1 of determining for a fiscal year the factor used to adjust 

2 the DRG prospective payment rate under section 1886(d) 

3 of the Social Security Act (42 U.S.C. 1395ww(d)) for area 

4 differences in hospital wage levels that applies to such hos5 pital under paragraph (3)(E) of such section. 

6 (e) LIMITATION ON EXPENDITURES.—The aggregate 

7 amount of additional expenditures resulting from the ap8 plication of this section shall not exceed $900,000,000.

9 (f) TRANSITIONAL EXTENSION.—Any reclassification 

10 of a county or other area made by Act of Congress for 

11 purposes of making payments under section 1886(d) of 

12 the Social Security Act (42 U.S.C. 1395ww(d)) that ex13 pired on September 30, 2003, shall be deemed to be in 

14 effect during the period beginning on January 1, 2004, 

15 and ending on September 30, 2004. 

16 Subtitle B—Other Provisions 

17 SEC. 211. PAYMENT FOR COVERED SKILLED NURSING FA18 CILITY SERVICES. 

19 (a) ADJUSTMENT TO RUGS FOR AIDS RESI20 DENTS.—Paragraph (12) of section 1888(e) (42 U.S.C. 

21 1395yy(e)) is amended to read as follows: 

22 ‘‘(12) ADJUSTMENT FOR RESIDENTS WITH

23 AIDS.—

24 ‘‘(A) IN GENERAL.—Subject to subpara25 graph (B), in the case of a resident of a skilled 
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1 nursing facility who is afflicted with acquired 

2 immune deficiency syndrome (AIDS), the per 

3 diem amount of payment otherwise applicable 

4 (determined without regard to any increase 

5 under section 101 of the Medicare, Medicaid, 

6 and SCHIP Balanced Budget Refinement Act 

7 of 1999, or under section 314(a) of Medicare, 

8 Medicaid, and SCHIP Benefits Improvement 

9 and Protection Act of 2000), shall be increased 

10 by 128 percent to reflect increased costs associ11 ated with such residents. 

12 ‘‘(B) SUNSET.—Subparagraph (A) shall 

13 not apply on and after such date as the Sec14 retary certifies that there is an appropriate ad15 justment in the case mix under paragraph 

16 (4)(G)(i) to compensate for the increased costs 

17 associated with residents described in such sub18 paragraph.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 paragraph (1) shall apply to services furnished on or after 

21 October 1, 2004. 
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1 SEC. 212. COVERAGE OF HOSPICE CONSULTATION SERV2 ICES. 

3 (a) COVERAGE OF HOSPICE CONSULTATION SERV4 ICES.—Section 1812(a) (42 U.S.C. 1395d(a)) is amend5 ed—

6 (1) by striking ‘‘and’’ at the end of paragraph 

7 (3); 

8 (2) by striking the period at the end of para9 graph (4) and inserting ‘‘; and’’; and 

10 (3) by inserting after paragraph (4) the fol11 lowing new paragraph: 

12 ‘‘(5) for individuals who are terminally ill, have 

13 not made an election under subsection (d)(1), and 

14 have not previously received services under this 

15 paragraph, services that are furnished by a physi16 cian (as defined in section 1861(r)(1)) who is either 

17 the medical director or an employee of a hospice pro18 gram and that—

19 ‘‘(A) consist of—

20 ‘‘(i) an evaluation of the individual’s 

21 need for pain and symptom management, 

22 including the individual’s need for hospice 

23 care; and 

24 ‘‘(ii) counseling the individual with re25 spect to hospice care and other care op26 tions; and 
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1 ‘‘(B) may include advising the individual 

2 regarding advanced care planning.’’.

3 (b) PAYMENT.—Section 1814(i) (42 U.S.C. 1395f(i)) 

4 is amended by adding at the end the following new para5 graph: 

6 ‘‘(4) The amount paid to a hospice program with re7 spect to the services under section 1812(a)(5) for which 

8 payment may be made under this part shall be equal to 

9 an amount established for an office or other outpatient 

10 visit for evaluation and management associated with pre11 senting problems of moderate severity and requiring med12 ical decisionmaking of low complexity under the fee sched13 ule established under section 1848(b), other than the por14 tion of such amount attributable to the practice expense 

15 component.’’. 

16 (c) CONFORMING AMENDMENT.—Section 

17 1861(dd)(2)(A)(i) (42 U.S.C. 1395x(dd)(2)(A)(i)) is 

18 amended by inserting before the comma at the end the 

19 following: ‘‘and services described in section 1812(a)(5)’’. 

20 (d) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to services provided by a hospice 

22 program on or after January 1, 2005. 
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1 SEC. 213. STUDY ON PORTABLE DIAGNOSTIC ULTRASOUND 

2 SERVICES FOR BENEFICIARIES IN SKILLED 

3 NURSING FACILITIES. 

4 (a) STUDY.—The Comptroller General of the United 

5 States shall conduct a study of portable diagnostic 

6 ultrasound services furnished to medicare beneficiaries in 

7 skilled nursing facilities. Such study shall consider the fol8 lowing: 

9 (1) TYPES OF EQUIPMENT; TRAINING.—The 

10 types of portable diagnostic ultrasound services fur11 nished to such beneficiaries, the types of portable 

12 ultrasound equipment used to furnish such services, 

13 and the technical skills, or training, or both, re14 quired for technicians to furnish such services. 

15 (2) CLINICAL APPROPRIATENESS.—The clinical 

16 appropriateness of transporting portable diagnostic 

17 ultrasound diagnostic and technicians to patients in 

18 skilled nursing facilities as opposed to transporting 

19 such patients to a hospital or other facility that fur20 nishes diagnostic ultrasound services. 

21 (3) FINANCIAL IMPACT.—The financial impact 

22 if Medicare were make a separate payment for port23 able ultrasound diagnostic services, including the im24 pact of separate payments—

25 (A) for transportation and technician serv26 ices for residents during a resident in a part A 
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1 stay, that would otherwise be paid for under the 

2 prospective payment system for covered skilled 

3 nursing facility services (under section 1888(e) 

4 of the Social Security Act (42 U.S.C. 

5 1395yy(e)); and 

6 (B) for such services for residents in a 

7 skilled nursing facility after a part A stay. 

8 (4) CREDENTIALING REQUIREMENTS.—Whether 

9 the Secretary should establish credentialing or other 

10 requirements for technicians that furnish diagnostic 

11 ultrasound services to medicare beneficiaries. 

12 (b) REPORT.—Not later than 2 years after the date 

13 of the enactment of this Act, the Comptroller General shall 

14 submit to Congress a report on the study conducted under 

15 subsection (a), and shall include any recommendations for 

16 legislation or administrative change as the Comptroller 

17 General determines appropriate.

18 TITLE III—PROVISIONS 

19 RELATING TO PART B 

20 Subtitle A—Provisions Relating to 

21 Physicians’ Services 

22 SEC. 301. REVISION OF UPDATES FOR PHYSICIANS’ SERV23 ICES. 

24 (a) UPDATE FOR 2004 AND 2005.—
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1 (1) IN GENERAL.—Section 1848(d) (42 U.S.C. 

2 1395w–4(d)) is amended by adding at the end the 

3 following new paragraph:

4 ‘‘(5) UPDATE FOR 2004 AND 2005.—The update 

5 to the single conversion factor established in para6 graph (1)(C) for each of 2004 and 2005 shall be not 

7 less than 1.5 percent.’’. 

8 (2) CONFORMING AMENDMENT.—Paragraph 

9 (4)(B) of such section is amended, in the matter be10 fore clause (i), by inserting ‘‘and paragraph (5)’’ 

11 after ‘‘subparagraph (D)’’. 

12 (3) NOT TREATED AS CHANGE IN LAW AND

13 REGULATION IN SUSTAINABLE GROWTH RATE DE14 TERMINATION.—The amendments made by this sub15 section shall not be treated as a change in law for 

16 purposes of applying section 1848(f)(2)(D) of the 

17 Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)). 

18 (b) USE OF 10-YEAR ROLLING AVERAGE IN COM19 PUTING GROSS DOMESTIC PRODUCT.—

20 (1) IN GENERAL.—Section 1848(f)(2)(C) (42 

21 U.S.C. 1395w–4(f)(2)(C)) is amended—

22 (A) by striking ‘‘projected’’ and inserting 

23 ‘‘annual average’’; and 

24 (B) by striking ‘‘from the previous applica25 ble period to the applicable period involved’’ 
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1 and inserting ‘‘during the 10-year period ending 

2 with the applicable period involved’’. 

3 (2) EFFECTIVE DATE.—The amendments made 

4 by paragraph (1) shall apply to computations of the 

5 sustainable growth rate for years beginning with 

6 2003. 

7 SEC. 302. TREATMENT OF PHYSICIANS’ SERVICES FUR8 NISHED IN ALASKA. 

9 Section 1848(e)(1) (42 U.S.C. 1395w–4(e)(1)), as 

10 amended by section 121, is amended—

11 (1) in subparagraph (A), by striking ‘‘subpara12 graphs (B), (C), (E), and (F)’’ and inserting ‘‘sub13 paragraphs (B), (C), (E), (F) and (G)’’; and 

14 (2) by adding at the end the following new sub15 paragraph: 

16 ‘‘(G) FLOOR FOR PRACTICE EXPENSE, 

17 MALPRACTICE, AND WORK GEOGRAPHIC INDI18 CES FOR SERVICES FURNISHED IN ALASKA.—

19 For purposes of payment for services furnished 

20 in Alaska on or after January 1, 2004, and be21 fore January 1, 2006, after calculating the 

22 practice expense, malpractice, and work geo23 graphic indices in clauses (i), (ii), and (iii) of 

24 subparagraph (A) and in subparagraph (B), the 

25 Secretary shall increase any such index to 1.67 
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1 if such index would otherwise be less than 

2 1.67.’’. 

3 SEC. 303. INCLUSION OF PODIATRISTS, DENTISTS, AND OP4 TOMETRISTS UNDER PRIVATE CONTRACTING 

5 AUTHORITY. 

6 Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(B)) is 

7 amended by striking ‘‘section 1861(r)(1)’’ and inserting 

8 ‘‘paragraphs (1), (2), (3), and (4) of section 1861(r)’’. 

9 SEC. 304. GAO STUDY ON ACCESS TO PHYSICIANS’ SERV10 ICES. 

11 (a) STUDY.—The Comptroller General of the United 

12 States shall conduct a study on access of medicare bene13 ficiaries to physicians’ services under the medicare pro14 gram. The study shall include—

15 (1) an assessment of the use by beneficiaries of 

16 such services through an analysis of claims sub17 mitted by physicians for such services under part B 

18 of the medicare program; 

19 (2) an examination of changes in the use by 

20 beneficiaries of physicians’ services over time; and 

21 (3) an examination of the extent to which phy22 sicians are not accepting new medicare beneficiaries 

23 as patients. 

24 (b) REPORT.—Not later than 18 months after the 

25 date of the enactment of this Act, the Comptroller General 
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1 shall submit to Congress a report on the study conducted 

2 under subsection (a). The report shall include a deter3 mination whether—

4 (1) data from claims submitted by physicians 

5 under part B of the medicare program indicate po6 tential access problems for medicare beneficiaries in 

7 certain geographic areas; and 

8 (2) access by medicare beneficiaries to physi9 cians’ services may have improved, remained con10 stant, or deteriorated over time. 

11 SEC. 305. COLLABORATIVE DEMONSTRATION-BASED RE12 VIEW OF PHYSICIAN PRACTICE EXPENSE GE13 OGRAPHIC ADJUSTMENT DATA. 

14 (a) IN GENERAL.—Not later than January 1, 2005, 

15 the Secretary shall, in collaboration with State and other 

16 appropriate organizations representing physicians, and 

17 other appropriate persons, review and consider alternative 

18 data sources than those currently used in establishing the 

19 geographic index for the practice expense component 

20 under the medicare physician fee schedule under section 

21 1848(e)(1)(A)(i) of the Social Security Act (42 U.S.C. 

22 1395w–4(e)(1)(A)(i)). 

23 (b) SITES.—The Secretary shall select two physician 

24 payment localities in which to carry out subsection (a). 

25 One locality shall include rural areas and at least one lo-
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1 cality shall be a statewide locality that includes both urban 

2 and rural areas. 

3 (c) REPORT AND RECOMMENDATIONS.—

4 (1) REPORT.—Not later than January 1, 2006, 

5 the Secretary shall submit to Congress a report on 

6 the review and consideration conducted under sub7 section (a). Such report shall include information on 

8 the alternative developed data sources considered by 

9 the Secretary under subsection (a), including the ac10 curacy and validity of the data as measures of the 

11 elements of the geographic index for practice ex12 penses under the medicare physician fee schedule as 

13 well as the feasibility of using such alternative data 

14 nationwide in lieu of current proxy data used in such 

15 index, and the estimated impacts of using such al16 ternative data. 

17 (2) RECOMMENDATIONS.—The report sub18 mitted under paragraph (1) shall contain rec19 ommendations on which data sources reviewed and 

20 considered under subsection (a) are appropriate for 

21 use in calculating the geographic index for practice 

22 expenses under the medicare physician fee schedule.
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1 SEC. 306. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS’

2 SERVICES. 

3 (a) PRACTICE EXPENSE COMPONENT.—Not later 

4 than 1 year after the date of the enactment of this Act, 

5 the Medicare Payment Advisory Commission shall submit 

6 to Congress a report on the effect of refinements to the 

7 practice expense component of payments for physicians’ 

8 services, after the transition to a full resource-based pay9 ment system in 2002, under section 1848 of the Social 

10 Security Act (42 U.S.C. 1395w–4). Such report shall ex11 amine the following matters by physician specialty: 

12 (1) The effect of such refinements on payment 

13 for physicians’ services. 

14 (2) The interaction of the practice expense com15 ponent with other components of and adjustments to 

16 payment for physicians’ services under such section. 

17 (3) The appropriateness of the amount of com18 pensation by reason of such refinements. 

19 (4) The effect of such refinements on access to 

20 care by medicare beneficiaries to physicians’ serv21 ices. 

22 (5) The effect of such refinements on physician 

23 participation under the medicare program. 

24 (b) VOLUME OF PHYSICIANS’ SERVICES.—Not later 

25 than 1 year after the date of the enactment of this Act, 

26 the Medicare Payment Advisory Commission shall submit 
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1 to Congress a report on the extent to which increases in 

2 the volume of physicians’ services under part B of the 

3 medicare program are a result of care that improves the 

4 health and well-being of medicare beneficiaries. The study 

5 shall include the following: 

6 (1) An analysis of recent and historic growth in 

7 the components that the Secretary includes under 

8 the sustainable growth rate (under section 1848(f) 

9 of the Social Security Act (42 U.S.C. 1395w–4(f))). 

10 (2) An examination of the relative growth of 

11 volume in physicians’ services between medicare 

12 beneficiaries and other populations. 

13 (3) An analysis of the degree to which new 

14 technology, including coverage determinations of the 

15 Centers for Medicare & Medicaid Services, has af16 fected the volume of physicians’ services. 

17 (4) An examination of the impact on volume of 

18 demographic changes. 

19 (5) An examination of shifts in the site of serv20 ice or services that influence the number and inten21 sity of services furnished in physicians’ offices and 

22 the extent to which changes in reimbursement rates 

23 to other providers have effected these changes. 

24 (6) An evaluation of the extent to which the 

25 Centers for Medicare & Medicaid Services takes into 
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1 account the impact of law and regulations on the 

2 sustainable growth rate. 

3 Subtitle B—Preventive Services 

4 SEC. 311. COVERAGE OF AN INITIAL PREVENTIVE PHYS5 ICAL EXAMINATION. 

6 (a) COVERAGE.—Section 1861(s)(2) (42 U.S.C. 

7 1395x(s)(2)) is amended—

8 (1) in subparagraph (U), by striking ‘‘and’’ at 

9 the end; 

10 (2) in subparagraph (V)(iii), by inserting ‘‘and’’ 

11 at the end; and 

12 (3) by adding at the end the following new sub13 paragraph: 

14 ‘‘(W) an initial preventive physical examination 

15 (as defined in subsection (ww));’’. 

16 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 

17 1395x) is amended by adding at the end the following new 

18 subsection: 

19 ‘‘Initial Preventive Physical Examination 

20 ‘‘(ww)(1) The term ‘initial preventive physical exam21 ination’ means physicians’ services consisting of a physical 

22 examination (including measurement of height, weight, 

23 and blood pressure, and an electrocardiogram) with the 

24 goal of health promotion and disease detection and in25 cludes education, counseling, and referral with respect to 
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1 screening and other preventive services described in para2 graph (2), but does not include clinical laboratory tests. 

3 ‘‘(2) The screening and other preventive services de4 scribed in this paragraph include the following: 

5 ‘‘(A) Pneumococcal, influenza, and hepatitis B 

6 vaccine and administration under subsection (s)(10). 

7 ‘‘(B) Screening mammography as defined in 

8 subsection (jj). 

9 ‘‘(C) Screening pap smear and screening pelvic 

10 exam as defined in subsection (nn). 

11 ‘‘(D) Prostate cancer screening tests as defined 

12 in subsection (oo). 

13 ‘‘(E) Colorectal cancer screening tests as de14 fined in subsection (pp). 

15 ‘‘(F) Diabetes outpatient self-management 

16 training services as defined in subsection (qq)(1). 

17 ‘‘(G) Bone mass measurement as defined in 

18 subsection (rr). 

19 ‘‘(H) Screening for glaucoma as defined in sub20 section (uu). 

21 ‘‘(I) Medical nutrition therapy services as de22 fined in subsection (vv). 

23 ‘‘(J) Cardiovascular screening blood tests as de24 fined in subsection (xx)(1). 
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1 ‘‘(K) Diabetes screening tests as defined in sub2 section (yy).’’. 

3 (c) PAYMENT AS PHYSICIANS’ SERVICES.—Section 

4 1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by in5 serting ‘‘(2)(W),’’ after ‘‘(2)(S),’’. 

6 (d) OTHER CONFORMING AMENDMENTS.—(1) Sec7 tion 1862(a) (42 U.S.C. 1395y(a)), as amended by section 

8 303(i)(3)(B), is amended—

9 (A) in paragraph (1)—

10 (i) by striking ‘‘and’’ at the end of sub11 paragraph (I); 

12 (ii) by striking the semicolon at the end of 

13 subparagraph (J) and inserting ‘‘, and’’; and

14 (iii) by adding at the end the following new 

15 subparagraph: 

16 ‘‘(K) in the case of an initial preventive physical 

17 examination, which is performed not later than 6 

18 months after the date the individual’s first coverage 

19 period begins under part B;’’; a 

20 (B) in paragraph (7), by striking ‘‘or (H)’’ and 

21 inserting ‘‘(H), or (K)’’. 

22 (2) Clauses (i) and (ii) of section 1861(s)(2)(K) (42 

23 U.S.C. 1395x(s)(2)(K)) are each amended by inserting 

24 ‘‘and services described in subsection (ww)(1)’’ after 

25 ‘‘services which would be physicians’ services’’. 
122

•S 1926 IS 

1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to services furnished on or after 

3 January 1, 2005, but only for individuals whose coverage 

4 period under part B begins on or after such date. 

5 SEC. 312. COVERAGE OF CARDIOVASCULAR SCREENING 

6 BLOOD TESTS. 

7 (a) COVERAGE.—Section 1861(s)(2) (42 U.S.C. 

8 1395x(s)(2)), as amended by section 311(a), is amended—

9 (1) in subparagraph (V)(iii), by striking ‘‘and’’ 

10 at the end; 

11 (2) in subparagraph (W), by inserting ‘‘and’’ at 

12 the end; and 

13 (3) by adding at the end the following new sub14 paragraph: 

15 ‘‘(X) cardiovascular screening blood tests (as 

16 defined in subsection (xx)(1));’’. 

17 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 

18 1395x) is amended by adding at the end the following new 

19 subsection: 

20 ‘‘Cardiovascular Screening Blood Test 

21 ‘‘(xx)(1) The term ‘cardiovascular screening blood 

22 test’ means a blood test for the early detection of cardio23 vascular disease (or abnormalities associated with an ele24 vated risk of cardiovascular disease) that tests for the fol25 lowing: 
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•S 1926 IS 

1 ‘‘(A) Cholesterol levels and other lipid or 

2 triglyceride levels. 

3 ‘‘(B) Such other indications associated with the 

4 presence of, or an elevated risk for, cardiovascular 

5 disease as the Secretary may approve for all individ6 uals (or for some individuals determined by the Sec7 retary to be at risk for cardiovascular disease), in8 cluding indications measured by noninvasive testing. 

9 The Secretary may not approve an indication under sub10 paragraph (B) for any individual unless a blood test for 

11 such is recommended by the United States Preventive 

12 Services Task Force. 

13 ‘‘(2) The Secretary shall establish standards, in con14 sultation with appropriate organizations, regarding the 

15 frequency for each type of cardiovascular screening blood 

16 tests, except that such frequency may not be more often 

17 than once every 2 years.’’.

18 (c) FREQUENCY.—Section 1862(a)(1) (42 U.S.C. 

19 1395y(a)(1)), as amended by section 311(d), is amend20 ed—

21 (1) by striking ‘‘and’’ at the end of subpara22 graph (K); 

23 (2) by striking the semicolon at the end of sub24 paragraph (L) and inserting ‘‘, and’’; and 
124

•S 1926 IS 

1 (3) by adding at the end the following new sub2 paragraph: 

3 ‘‘(M) in the case of cardiovascular screening 

4 blood tests (as defined in section 1861(xx)(1)), 

5 which are performed more frequently than is covered 

6 under section 1861(xx)(2);’’. 

7 (d) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to tests furnished on or after Janu9 ary 1, 2005. 

10 SEC. 313. COVERAGE OF DIABETES SCREENING TESTS. 

11 (a) COVERAGE.—Section 1861(s)(2) (42 U.S.C. 

12 1395x(s)(2)), as amended by section 312(a), is amended—

13 (1) in subparagraph (W), by striking ‘‘and’’ at 

14 the end; 

15 (2) in subparagraph (X), by adding ‘‘and’’ at 

16 the end; and 

17 (3) by adding at the end the following new sub18 paragraph: 

19 ‘‘(Y) diabetes screening tests (as defined in sub20 section (yy));’’. 

21 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 

22 1395x), as amended by section 312(b), is amended by add23 ing at the end the following new subsection: 
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•S 1926 IS 

1 ‘‘Diabetes Screening Tests 

2 ‘‘(yy)(1) The term ‘diabetes screening tests’ means 

3 testing furnished to an individual at risk for diabetes (as 

4 defined in paragraph (2)) for the purpose of early detec5 tion of diabetes, including—

6 ‘‘(A) a fasting plasma glucose test; and 

7 ‘‘(B) such other tests, and modifications to 

8 tests, as the Secretary determines appropriate, in 

9 consultation with appropriate organizations. 

10 ‘‘(2) For purposes of paragraph (1), the term ‘indi11 vidual at risk for diabetes’ means an individual who has 

12 any of the following risk factors for diabetes: 

13 ‘‘(A) Hypertension. 

14 ‘‘(B) Dyslipidemia. 

15 ‘‘(C) Obesity, defined as a body mass index 

greater than or equal to 30 kg/m2 16 . 

17 ‘‘(D) Previous identification of an elevated im18 paired fasting glucose. 

19 ‘‘(E) Previous identification of impaired glucose 

20 tolerance. 

21 ‘‘(F) A risk factor consisting of at least 2 of the 

22 following characteristics: 

23 ‘‘(i) Overweight, defined as a body mass 

index greater than 25, but less than 30, kg/m2 24 . 

25 ‘‘(ii) A family history of diabetes. 
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•S 1926 IS 

1 ‘‘(iii) A history of gestational diabetes 

2 mellitus or delivery of a baby weighing greater 

3 than 9 pounds. 

4 ‘‘(iv) 65 years of age or older.

5 ‘‘(3) The Secretary shall establish standards, in con6 sultation with appropriate organizations, regarding the 

7 frequency of diabetes screening tests, except that such fre8 quency may not be more often than twice within the 12-

9 month period following the date of the most recent diabe10 tes screening test of that individual.’’. 

11 (c) FREQUENCY.—Section 1862(a)(1) (42 U.S.C. 

12 1395y(a)(1)), as amended by section 312(c), is amend13 ed—

14 (1) by striking ‘‘and’’ at the end of subpara15 graph (L); 

16 (2) by striking the semicolon at the end of sub17 paragraph (M) and inserting ‘‘, and’’; and 

18 (3) by adding at the end the following new sub19 paragraph: 

20 ‘‘(N) in the case of a diabetes screening test (as 

21 defined in section 1861(yy)(1)), which is performed 

22 more frequently than is covered under section 

23 1861(yy)(3);’’. 
127

•S 1926 IS 

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

2 this section shall apply to tests furnished on or after Janu3 ary 1, 2005. 

4 SEC. 314. IMPROVED PAYMENT FOR CERTAIN MAMMOG5 RAPHY SERVICES. 

6 (a) EXCLUSION FROM OPD FEE SCHEDULE.—Sec7 tion 1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is 

8 amended by inserting before the period at the end the fol9 lowing: ‘‘and does not include screening mammography (as 

10 defined in section 1861(jj)) and diagnostic mammog11 raphy’’. 

12 (b) CONFORMING AMENDMENT.—Section 

13 1833(a)(2)(E)(i) (42 U.S.C. 1395l(a)(2)(E)(i)) is amend14 ed by inserting ‘‘and, for services furnished on or after 

15 January 1, 2005, diagnostic mammography’’ after 

16 ‘‘screening mammography’’. 

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

18 this section shall apply—

19 (1) in the case of screening mammography, to 

20 services furnished on or after the date of the enact21 ment of this Act; and 

22 (2) in the case of diagnostic mammography, to 

23 services furnished on or after January 1, 2005. 
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•S 1926 IS 

1 Subtitle C—Other Provisions 

2 SEC. 321. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) 

3 PAYMENT REFORM. 

4 (a) PAYMENT FOR DRUGS.—

5 (1) SPECIAL RULES FOR CERTAIN DRUGS AND

6 BIOLOGICALS.—Section 1833(t) (42 U.S.C. 

7 1395l(t)), as amended by section 111(b), is amended 

8 by inserting after paragraph (13) the following new 

9 paragraphs: 

10 ‘‘(14) DRUG APC PAYMENT RATES.—

11 ‘‘(A) IN GENERAL.—The amount of pay12 ment under this subsection for a specified cov13 ered outpatient drug (defined in subparagraph 

14 (B)) that is furnished as part of a covered OPD 

15 service (or group of services)—

16 ‘‘(i) in 2004, in the case of—

17 ‘‘(I) a sole source drug shall in 

18 no case be less than 88 percent, or ex19 ceed 95 percent, of the reference aver20 age wholesale price for the drug; 

21 ‘‘(II) an innovator multiple 

22 source drug shall in no case exceed 68 

23 percent of the reference average 

24 wholesale price for the drug; or 
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•S 1926 IS 

1 ‘‘(III) a noninnovator multiple 

2 source drug shall in no case exceed 46 

3 percent of the reference average 

4 wholesale price for the drug; 

5 ‘‘(ii) in 2005, in the case of—

6 ‘‘(I) a sole source drug shall in 

7 no case be less than 83 percent, or ex8 ceed 95 percent, of the reference aver9 age wholesale price for the drug; 

10 ‘‘(II) an innovator multiple 

11 source drug shall in no case exceed 68 

12 percent of the reference average 

13 wholesale price for the drug; or 

14 ‘‘(III) a noninnovator multiple 

15 source drug shall in no case exceed 46 

16 percent of the reference average 

17 wholesale price for the drug; or 

18 ‘‘(iii) in a subsequent year, shall be 

19 equal, subject to subparagraph (E)—

20 ‘‘(I) to the average acquisition 

21 cost for the drug for that year (which, 

22 at the option of the Secretary, may 

23 vary by hospital group (as defined by 

24 the Secretary based on volume of cov25 ered OPD services or other relevant 
130

•S 1926 IS 

1 characteristics)), as determined by the 

2 Secretary taking into account the hos3 pital acquisition cost survey data 

4 under subparagraph (D); or 

5 ‘‘(II) if hospital acquisition cost 

6 data are not available, the average 

7 price for the drug in the year estab8 lished under section 1842(o), section 

9 1847A, or section 1847B, as the case 

10 may be, as calculated and adjusted by 

11 the Secretary as necessary for pur12 poses of this paragraph. 

13 ‘‘(B) SPECIFIED COVERED OUTPATIENT

14 DRUG DEFINED.—

15 ‘‘(i) IN GENERAL.—In this paragraph, 

16 the term ‘specified covered outpatient 

17 drug’ means, subject to clause (ii), a cov18 ered outpatient drug (as defined in section 

19 1927(k)(2)) for which a separate ambula20 tory payment classification group (APC) 

21 has been established and that is—

22 ‘‘(I) a radiopharmaceutical; or 

23 ‘‘(II) a drug or biological for 

24 which payment was made under para25 graph (6) (relating to pass-through 
131

•S 1926 IS 

1 payments) on or before December 31, 

2 2002. 

3 ‘‘(ii) EXCEPTION.—Such term does 

4 not include—

5 ‘‘(I) a drug or biological for 

6 which payment is first made on or 

7 after January 1, 2003, under para8 graph (6); 

9 ‘‘(II) a drug or biological for 

10 which a temporary HCPCS code has 

11 not been assigned; or

12 ‘‘(III) during 2004 and 2005, an 

13 orphan drug (as designated by the 

14 Secretary). 

15 ‘‘(C) PAYMENT FOR DESIGNATED ORPHAN

16 DRUGS DURING 2004 AND 2005.—The amount of 

17 payment under this subsection for an orphan 

18 drug designated by the Secretary under sub19 paragraph (B)(ii)(III) that is furnished as part 

20 of a covered OPD service (or group of services) 

21 during 2004 and 2005 shall equal such amount 

22 as the Secretary may specify.

23 ‘‘(D) ACQUISITION COST SURVEY FOR HOS24 PITAL OUTPATIENT DRUGS.—
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•S 1926 IS 

1 ‘‘(i) ANNUAL GAO SURVEYS IN 2004

2 AND 2005.—

3 ‘‘(I) IN GENERAL.—The Comp4 troller General of the United States 

5 shall conduct a survey in each of 2004 

6 and 2005 to determine the hospital 

7 acquisition cost for each specified cov8 ered outpatient drug. Not later than 

9 April 1, 2005, the Comptroller Gen10 eral shall furnish data from such sur11 veys to the Secretary for use in set12 ting the payment rates under sub13 paragraph (A) for 2006. 

14 ‘‘(II) RECOMMENDATIONS.—

15 Upon the completion of such surveys, 

16 the Comptroller General shall rec17 ommend to the Secretary the fre18 quency and methodology of subse19 quent surveys to be conducted by the 

20 Secretary under clause (ii). 

21 ‘‘(ii) SUBSEQUENT SECRETARIAL SUR22 VEYS.—The Secretary, taking into account 

23 such recommendations, shall conduct peri24 odic subsequent surveys to determine the 

25 hospital acquisition cost for each specified 
133

•S 1926 IS 

1 covered outpatient drug for use in setting 

2 the payment rates under subparagraph 

3 (A).

4 ‘‘(iii) SURVEY REQUIREMENTS.—The 

5 surveys conducted under clauses (i) and 

6 (ii) shall have a large sample of hospitals 

7 that is sufficient to generate a statistically 

8 significant estimate of the average hospital 

9 acquisition cost for each specified covered 

10 outpatient drug. With respect to the sur11 veys conducted under clause (i), the Comp12 troller General shall report to Congress on 

13 the justification for the size of the sample 

14 used in order to assure the validity of such 

15 estimates. 

16 ‘‘(iv) DIFFERENTIATION IN COST.—In 

17 conducting surveys under clause (i), the 

18 Comptroller General shall determine and 

19 report to Congress if there is (and the ex20 tent of any) variation in hospital acquisi21 tion costs for drugs among hospitals based 

22 on the volume of covered OPD services 

23 performed by such hospitals or other rel24 evant characteristics of such hospitals (as 

25 defined by the Comptroller General). 
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•S 1926 IS 

1 ‘‘(v) COMMENT ON PROPOSED

2 RATES.—Not later than 30 days after the 

3 date the Secretary promulgated proposed 

4 rules setting forth the payment rates under 

5 subparagraph (A) for 2006, the Comp6 troller General shall evaluate such pro7 posed rates and submit to Congress a re8 port regarding the appropriateness of such 

9 rates based on the surveys the Comptroller 

10 General has conducted under clause (i).

11 ‘‘(E) ADJUSTMENT IN PAYMENT RATES

12 FOR OVERHEAD COSTS.—

13 ‘‘(i) MEDPAC REPORT ON DRUG APC

14 DESIGN.—The Medicare Payment Advisory 

15 Commission shall submit to the Secretary, 

16 not later than July 1, 2005, a report on 

17 adjustment of payment for ambulatory 

18 payment classifications for specified cov19 ered outpatient drugs to take into account 

20 overhead and related expenses, such as 

21 pharmacy services and handling costs. 

22 Such report shall include—

23 ‘‘(I) a description and analysis of 

24 the data available with regard to such 

25 expenses; 
135

•S 1926 IS 

1 ‘‘(II) a recommendation as to 

2 whether such a payment adjustment 

3 should be made; and 

4 ‘‘(III) if such adjustment should 

5 be made, a recommendation regarding 

6 the methodology for making such an 

7 adjustment. 

8 ‘‘(ii) ADJUSTMENT AUTHORIZED.—

9 The Secretary may adjust the weights for 

10 ambulatory payment classifications for 

11 specified covered outpatient drugs to take 

12 into account the recommendations con13 tained in the report submitted under 

14 clause (i). 

15 ‘‘(F) CLASSES OF DRUGS.—For purposes 

16 of this paragraph: 

17 ‘‘(i) SOLE SOURCE DRUGS.—The term 

18 ‘sole source drug’ means—

19 ‘‘(I) a biological product (as de20 fined under section 1861(t)(1)); or 

21 ‘‘(II) a single source drug (as de22 fined in section 1927(k)(7)(A)(iv)). 

23 ‘‘(ii) INNOVATOR MULTIPLE SOURCE

24 DRUGS.—The term ‘innovator multiple 
136

•S 1926 IS 

1 source drug’ has the meaning given such 

2 term in section 1927(k)(7)(A)(ii). 

3 ‘‘(iii) NONINNOVATOR MULTIPLE

4 SOURCE DRUGS.—The term ‘noninnovator 

5 multiple source drug’ has the meaning 

6 given such term in section 

7 1927(k)(7)(A)(iii). 

8 ‘‘(G) REFERENCE AVERAGE WHOLESALE

9 PRICE.—The term ‘reference average wholesale 

10 price’ means, with respect to a specified covered 

11 outpatient drug, the average wholesale price for 

12 the drug as determined under section 1842(o) 

13 as of May 1, 2003.

14 ‘‘(H) INAPPLICABILITY OF EXPENDITURES

15 IN DETERMINING CONVERSION, WEIGHTING, 

16 AND OTHER ADJUSTMENT FACTORS.—Addi17 tional expenditures resulting from this para18 graph shall not be taken into account in estab19 lishing the conversion, weighting, and other ad20 justment factors for 2004 and 2005 under 

21 paragraph (9), but shall be taken into account 

22 for subsequent years. 

23 ‘‘(15) PAYMENT FOR NEW DRUGS AND

24 BIOLOGICALS UNTIL HCPCS CODE ASSIGNED.—With 

25 respect to payment under this part for an outpatient 
137

•S 1926 IS 

1 drug or biological that is covered under this part 

2 and is furnished as part of covered OPD services for 

3 which a HCPCS code has not been assigned, the 

4 amount provided for payment for such drug or bio5 logical under this part shall be equal to 95 percent 

6 of the average wholesale price for the drug or bio7 logical.’’. 

8 (2) REDUCTION IN THRESHOLD FOR SEPARATE

9 APCS FOR DRUGS.—Section 1833(t)(16), as redesig10 nated section 111(b), is amended by adding at the 

11 end the following new subparagraph: 

12 ‘‘(B) THRESHOLD FOR ESTABLISHMENT

13 OF SEPARATE APCS FOR DRUGS.—The Sec14 retary shall reduce the threshold for the estab15 lishment of separate ambulatory payment clas16 sification groups (APCs) with respect to drugs 

17 or biologicals to $50 per administration for 

18 drugs and biologicals furnished in 2005 and 

19 2006.’’. 

20 (3) EXCLUSION OF SEPARATE DRUG APCS FROM

21 OUTLIER PAYMENTS.—Section 1833(t)(5) is amend22 ed by adding at the end the following new subpara23 graph: 

24 ‘‘(E) EXCLUSION OF SEPARATE DRUG AND

25 BIOLOGICAL APCS FROM OUTLIER PAYMENTS.—
138

•S 1926 IS 

1 No additional payment shall be made under 

2 subparagraph (A) in the case of ambulatory 

3 payment classification groups established sepa4 rately for drugs or biologicals.’’. 

5 (4) PAYMENT FOR PASS THROUGH DRUGS.—

6 Section 1833(t)(6)(D)(i) (42 U.S.C. 

7 1395l(t)(6)(D)(i)) is amended by inserting after 

8 ‘‘under section 1842(o)’’ the following: ‘‘(or if the 

9 drug or biological is covered under a competitive ac10 quisition contract under section 1847B, an amount 

11 determined by the Secretary equal to the average 

12 price for the drug or biological for all competitive 

13 acquisition areas and year established under such 

14 section as calculated and adjusted by the Secretary 

15 for purposes of this paragraph)’’. 

16 (5) CONFORMING AMENDMENT TO BUDGET

17 NEUTRALITY REQUIREMENT.—Section 1833(t)(9)(B) 

18 (42 U.S.C. 1395l(t)(9)(B)) is amended by adding at 

19 the end the following: ‘‘In determining adjustments 

20 under the preceding sentence for 2004 and 2005, 

21 the Secretary shall not take into account under this 

22 subparagraph or paragraph (2)(E) any expenditures 

23 that would not have been made but for the applica24 tion of paragraph (14).’’. 
139

•S 1926 IS 

1 (6) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to items and services 

3 furnished on or after January 1, 2004. 

4 (b) SPECIAL PAYMENT FOR BRACHYTHERAPY.—

5 (1) IN GENERAL.—Section 1833(t)(16), as re6 designated by section 111(b) and as amended by 

7 subsection (a)(2), is amended by adding at the end 

8 the following new subparagraph: 

9 ‘‘(C) PAYMENT FOR DEVICES OF

10 BRACHYTHERAPY AT CHARGES ADJUSTED TO

11 COST.—Notwithstanding the preceding provi12 sions of this subsection, for a device of 

13 brachytherapy consisting of a seed or seeds (or 

14 radioactive source) furnished on or after Janu15 ary 1, 2004, and before January 1, 2007, the 

16 payment basis for the device under this sub17 section shall be equal to the hospital’s charges 

18 for each device furnished, adjusted to cost. 

19 Charges for such devices shall not be included 

20 in determining any outlier payment under this 

21 subsection.’’. 

22 (2) SPECIFICATION OF GROUPS FOR

23 BRACHYTHERAPY DEVICES.—Section 1833(t)(2) (42 

24 U.S.C. 1395l(t)(2)) is amended—
140

•S 1926 IS 

1 (A) in subparagraph (F), by striking 

2 ‘‘and’’ at the end; 

3 (B) in subparagraph (G), by striking the 

4 period at the end and inserting ‘‘; and’’; and 

5 (C) by adding at the end the following new 

6 subparagraph: 

7 ‘‘(H) with respect to devices of 

8 brachytherapy consisting of a seed or seeds (or 

9 radioactive source), the Secretary shall create 

10 additional groups of covered OPD services that 

11 classify such devices separately from the other 

12 services (or group of services) paid for under 

13 this subsection in a manner reflecting the num14 ber, isotope, and radioactive intensity of such 

15 devices furnished, including separate groups for 

16 palladium-103 and iodine-125 devices.’’. 

17 (3) GAO REPORT.—The Comptroller General of 

18 the United States shall conduct a study to determine 

19 appropriate payment amounts under section 

20 1833(t)(16)(C) of the Social Security Act, as added 

21 by paragraph (1), for devices of brachytherapy. Not 

22 later than January 1, 2005, the Comptroller General 

23 shall submit to Congress and the Secretary a report 

24 on the study conducted under this paragraph, and 
141

•S 1926 IS 

1 shall include specific recommendations for appro2 priate payments for such devices. 

3 SEC. 322. LIMITATION OF APPLICATION OF FUNCTIONAL 

4 EQUIVALENCE STANDARD. 

5 Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amend6 ed by adding at the end the following new subparagraph: 

7 ‘‘(F) LIMITATION OF APPLICATION OF

8 FUNCTIONAL EQUIVALENCE STANDARD.—

9 ‘‘(i) IN GENERAL.—The Secretary 

10 may not publish regulations that apply a 

11 functional equivalence standard to a drug 

12 or biological under this paragraph. 

13 ‘‘(ii) APPLICATION.—Clause (i) shall 

14 apply to the application of a functional 

15 equivalence standard to a drug or biologi16 cal on or after the date of enactment of 

17 the Medicare Provider Restoration Act of 

18 2003 unless—

19 ‘‘(I) such application was being 

20 made to such drug or biological prior 

21 to such date of enactment; and 

22 ‘‘(II) the Secretary applies such 

23 standard to such drug or biological 

24 only for the purpose of determining 

25 eligibility of such drug or biological 
142

•S 1926 IS 

1 for additional payments under this 

2 paragraph and not for the purpose of 

3 any other payments under this title. 

4 ‘‘(iii) RULE OF CONSTRUCTION.—

5 Nothing in this subparagraph shall be con6 strued to effect the Secretary’s authority 

7 to deem a particular drug to be identical to 

8 another drug if the 2 products are phar9 maceutically equivalent and bioequivalent, 

10 as determined by the Commissioner of 

11 Food and Drugs.’’.

12 SEC. 323. PAYMENT FOR RENAL DIALYSIS SERVICES. 

13 (a) INCREASE IN RENAL DIALYSIS COMPOSITE RATE

14 FOR SERVICES FURNISHED.—The last sentence of section 

15 1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended—

16 (1) by striking ‘‘and’’ before ‘‘for such services’’ 

17 the second place it appears; 

18 (2) by inserting ‘‘and before January 1, 2005,’’ 

19 after ‘‘January 1, 2001,’’; and 

20 (3) by inserting before the period at the end the 

21 following: ‘‘, and for such services furnished on or 

22 after January 1, 2005, by 1.6 percent above such 

23 composite rate payment amounts for such services 

24 furnished on December 31, 2004’’. 
143

•S 1926 IS 

1 (b) RESTORING COMPOSITE RATE EXCEPTIONS FOR

2 PEDIATRIC FACILITIES.—

3 (1) IN GENERAL.—Section 422(a)(2) of BIPA 

4 is amended—

5 (A) in subparagraph (A), by striking ‘‘and 

6 (C)’’ and inserting ‘‘, (C), and (D)’’;

7 (B) in subparagraph (B), by striking ‘‘In 

8 the case’’ and inserting ‘‘Subject to subpara9 graph (D), in the case’’; and 

10 (C) by adding at the end the following new 

11 subparagraph: 

12 ‘‘(D) INAPPLICABILITY TO PEDIATRIC FA13 CILITIES.—Subparagraphs (A) and (B) shall 

14 not apply, as of October 1, 2002, to pediatric 

15 facilities that do not have an exception rate de16 scribed in subparagraph (C) in effect on such 

17 date. For purposes of this subparagraph, the 

18 term ‘pediatric facility’ means a renal facility at 

19 least 50 percent of whose patients are individ20 uals under 18 years of age.’’. 

21 (2) CONFORMING AMENDMENT.—The fourth 

22 sentence of section 1881(b)(7) (42 U.S.C. 

23 1395rr(b)(7)) is amended by striking ‘‘The Sec24 retary’’ and inserting ‘‘Subject to section 422(a)(2) 

25 of the Medicare, Medicaid, and SCHIP Benefits Im-
144

•S 1926 IS 

1 provement and Protection Act of 2000, the Sec2 retary’’. 

3 (c) INSPECTOR GENERAL STUDIES ON ESRD 

4 DRUGS.—

5 (1) IN GENERAL.—The Inspector General of 

6 the Department of Health and Human Services shall 

7 conduct two studies with respect to drugs and 

8 biologicals (including erythropoietin) furnished to 

9 end-stage renal disease patients under the medicare 

10 program which are separately billed by end stage 

11 renal disease facilities. 

12 (2) STUDIES ON ESRD DRUGS.—

13 (A) EXISTING DRUGS.—The first study 

14 under paragraph (1) shall be conducted with re15 spect to such drugs and biologicals for which a 

16 billing code exists prior to January 1, 2004. 

17 (B) NEW DRUGS.—The second study 

18 under paragraph (1) shall be conducted with re19 spect to such drugs and biologicals for which a 

20 billing code does not exist prior to January 1, 

21 2004. 

22 (3) MATTERS STUDIED.—Under each study 

23 conducted under paragraph (1), the Inspector Gen24 eral shall—
145

•S 1926 IS 

1 (A) determine the difference between the 

2 amount of payment made to end stage renal 

3 disease facilities under title XVIII of the Social 

4 Security Act for such drugs and biologicals and 

5 the acquisition costs of such facilities for such 

6 drugs and biologicals and which are separately 

7 billed by end stage renal disease facilities, and 

8 (B) estimate the rates of growth of ex9 penditures for such drugs and biologicals billed 

10 by such facilities. 

11 (4) REPORTS.—

12 (A) EXISTING ESRD DRUGS.—Not later 

13 than April 1, 2004, the Inspector General shall 

14 report to the Secretary on the study described 

15 in paragraph (2)(A). 

16 (B) NEW ESRD DRUGS.—Not later than 

17 April 1, 2006, the Inspector General shall re18 port to the Secretary on the study described in 

19 paragraph (2)(B). 

20 (d) BASIC CASE-MIX ADJUSTED COMPOSITE RATE

21 FOR RENAL DIALYSIS FACILITY SERVICES.—(1) Section 

22 1881(b) (42 U.S.C. 1395rr(b)) is amended by adding at 

23 the end the following new paragraphs: 

24 ‘‘(12)(A) In lieu of payment under paragraph (7) be25 ginning with services furnished on January 1, 2005, the 
146

•S 1926 IS 

1 Secretary shall establish a basic case-mix adjusted pro2 spective payment system for dialysis services furnished by 

3 providers of services and renal dialysis facilities in a year 

4 to individuals in a facility and to such individuals at home. 

5 The case-mix under such system shall be for a limited 

6 number of patient characteristics. 

7 ‘‘(B) The system described in subparagraph (A) shall 

8 include—

9 ‘‘(i) the services comprising the composite rate 

10 established under paragraph (7); and 

11 ‘‘(ii) the difference between payment amounts 

12 under this title for separately billed drugs and 

13 biologicals (including erythropoietin) and acquisition 

14 costs of such drugs and biologicals, as determined by 

15 the Inspector General reports to the Secretary as re16 quired by section 323(c) of the Medicare Provider 

17 Restoration Act of 2003—

18 ‘‘(I) beginning with 2005, for such drugs 

19 and biologicals for which a billing code exists 

20 prior to January 1, 2004; and 

21 ‘‘(II) beginning with 2007, for such drugs 

22 and biologicals for which a billing code does not 

23 exist prior to January 1, 2004, 

24 adjusted to 2005, or 2007, respectively, as deter25 mined to be appropriate by the Secretary. 
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1 ‘‘(C)(i) In applying subparagraph (B)(ii) for 2005, 

2 such payment amounts under this title shall be determined 

3 using the methodology specified in paragraph (13)(A)(i). 

4 ‘‘(ii) For 2006, the Secretary shall provide for 

5 an adjustment to the payments under clause (i) to 

6 reflect the difference between the payment amounts 

7 using the methodology under paragraph (13)(A)(i) 

8 and the payment amount determined using the 

9 methodology applied by the Secretary under para10 graph (13)(A)(iii) of such paragraph, as estimated 

11 by the Secretary. 

12 ‘‘(D) The Secretary shall adjust the payment rates 

13 under such system by a geographic index as the Secretary 

14 determines to be appropriate. If the Secretary applies a 

15 geographic index under this paragraph that differs from 

16 the index applied under paragraph (7) the Secretary shall 

17 phase-in the application of the index under this paragraph 

18 over a multiyear period. 

19 ‘‘(E)(i) Such system shall be designed to result in the 

20 same aggregate amount of expenditures for such services, 

21 as estimated by the Secretary, as would have been made 

22 for 2005 if this paragraph did not apply. 

23 ‘‘(ii) The adjustment made under subparagraph 

24 (B)(ii)(II) shall be done in a manner to result in the same 

25 aggregate amount of expenditures after such adjustment 
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1 as would otherwise have been made for such services for 

2 2006 or 2007, respectively, as estimated by the Secretary, 

3 if this paragraph did not apply. 

4 ‘‘(F) Beginning with 2006, the Secretary shall annu5 ally increase the basic case-mix adjusted payment amounts 

6 established under this paragraph, by an amount deter7 mined by—

8 ‘‘(i) applying the estimated growth in expendi9 tures for drugs and biologicals (including erythro10 poietin) that are separately billable to the component 

11 of the basic case-mix adjusted system described in 

12 subparagraph (B)(ii); and 

13 ‘‘(ii) converting the amount determined in 

14 clause (i) to an increase applicable to the basic case15 mix adjusted payment amounts established under 

16 subparagraph (B). 

17 Nothing in this paragraph shall be construed as providing 

18 for an update to the composite rate component of the basic 

19 case-mix adjusted system under subparagraph (B). 

20 ‘‘(G) There shall be no administrative or judicial re21 view under section 1869, section 1878, or otherwise, of 

22 the case-mix system, relative weights, payment amounts, 

23 the geographic adjustment factor, or the update for the 

24 system established under this paragraph, or the deter25 mination of the difference between medicare payment 
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•S 1926 IS 

1 amounts and acquisition costs for separately billed drugs 

2 and biologicals (including erythropoietin) under this para3 graph and paragraph (13). 

4 ‘‘(13)(A) The payment amounts under this title for 

5 separately billed drugs and biologicals furnished in a year, 

6 beginning with 2004, are as follows: 

7 ‘‘(i) For such drugs and biologicals (other than 

8 erythropoietin) furnished in 2004, the amount deter9 mined under section 1842(o)(1)(A)(v) for the drug 

10 or biological. 

11 ‘‘(ii) For such drugs and biologicals (including 

12 erythropoietin) furnished in 2005, the acquisition 

13 cost of the drug or biological, as determined by the 

14 Inspector General reports to the Secretary as re15 quired by section 323(c) of the Medicare Provider 

16 Restoration Act of 2003. Insofar as the Inspector 

17 General has not determined the acquisition cost with 

18 respect to a drug or biological, the Secretary shall 

19 determine the payment amount for such drug or bio20 logical. 

21 ‘‘(iii) For such drugs and biologicals (including 

22 erythropoietin) furnished in 2006 and subsequent 

23 years, such acquisition cost or the amount deter24 mined under section 1847A for the drug or biologi25 cal, as the Secretary may specify. 
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1 ‘‘(B)(i) Drugs and biologicals (including erythro2 poietin) which were separately billed under this subsection 

3 on the day before the date of the enactment of the Medi4 care Provider Restoration Act of 2003 shall continue to 

5 be separately billed on and after such date. 

6 ‘‘(ii) Nothing in this paragraph, section 1842(o), sec7 tion 1847A, or section 1847B shall be construed as requir8 ing or authorizing the bundling of payment for drugs and 

9 biologicals into the basic case-mix adjusted payment sys10 tem under this paragraph.’’. 

11 (2) Paragraph (7) of such section is amended in the 

12 first sentence by striking ‘‘The Secretary’’ and inserting 

13 ‘‘Subject to paragraph (12), the Secretary’’. 

14 (3) Paragraph (11)(B) of such section is amended by 

15 inserting ‘‘subject to paragraphs (12) and (13)’’ before 

16 ‘‘payment for such item’’. 

17 (e) DEMONSTRATION OF BUNDLED CASE-MIX AD18 JUSTED PAYMENT SYSTEM FOR ESRD SERVICES.—

19 (1) IN GENERAL.—The Secretary shall establish 

20 a demonstration project of the use of a fully case21 mix adjusted payment system for end stage renal 

22 disease services under section 1881 of the Social Se23 curity Act (42 U.S.C. 1395rr) for patient character24 istics identified in the report under subsection (f) 

25 that bundles into such payment rates amounts for—
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1 (A) drugs and biologicals (including eryth2 ropoietin) furnished to end-stage renal disease 

3 patients under the medicare program which are 

4 separately billed by end stage renal disease fa5 cilities (as of the date of the enactment of this 

6 Act); and 

7 (B) clinical laboratory tests related to such 

8 drugs and biologicals. 

9 (2) FACILITIES INCLUDED IN THE DEMONSTRA10 TION.—In conducting the demonstration under this 

11 subsection, the Secretary shall ensure the participa12 tion of a sufficient number of providers of dialysis 

13 services and renal dialysis facilities, but in no case 

14 to exceed 500. In selecting such providers and facili15 ties, the Secretary shall ensure that the following 

16 types of providers are included in the demonstration: 

17 (A) Urban providers and facilities. 

18 (B) Rural providers and facilities. 

19 (C) Not-for-profit providers and facilities. 

20 (D) For-profit providers and facilities. 

21 (E) Independent providers and facilities. 

22 (F) Specialty providers and facilities, in23 cluding pediatric providers and facilities and 

24 small providers and facilities. 
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1 (3) TEMPORARY ADD-ON PAYMENT FOR DIALY2 SIS SERVICES FURNISHED UNDER THE DEMONSTRA3 TION.—

4 (A) IN GENERAL.—During the period of 

5 the demonstration project, the Secretary shall 

6 increase payment rates that would otherwise 

7 apply under section 1881(b) of such Act (42 

8 U.S.C. 1395rr(b)) by 1.6 percent for dialysis 

9 services furnished in facilities in the demonstra10 tion site. 

11 (B) RULES OF CONSTRUCTION.—Nothing 

12 in this subsection shall be construed as—

13 (i) as an annual update under section 

14 1881(b) of the Social Security Act (42 

15 U.S.C. 1395rr(b)); 

16 (ii) as increasing the baseline for pay17 ments under such section; or 

18 (iii) requiring the budget neutral im19 plementation of the demonstration project 

20 under this subsection. 

21 (4) 3-YEAR PERIOD.—The Secretary shall con22 duct the demonstration under this subsection for the 

23 3-year period beginning on January 1, 2006. 

24 (5) USE OF ADVISORY BOARD.—
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•S 1926 IS 

1 (A) IN GENERAL.—In carrying out the 

2 demonstration under this subsection, the Sec3 retary shall establish an advisory board com4 prised of representatives described in subpara5 graph (B) to provide advice and recommenda6 tions with respect to the establishment and op7 eration of such demonstration. 

8 (B) REPRESENTATIVES.—Representatives 

9 referred to in subparagraph (A) include rep10 resentatives of the following: 

11 (i) Patient organizations. 

12 (ii) Individuals with expertise in end13 stage renal dialysis services, such as clini14 cians, economists, and researchers. 

15 (iii) The Medicare Payment Advisory 

16 Commission, established under section 

17 1805 of the Social Security Act (42 U.S.C. 

18 1395b–6). 

19 (iv) The National Institutes of 

20 Health. 

21 (v) Network organizations under sec22 tion 1881(c) of the Social Security Act (42 

23 U.S.C. 1395rr(c)). 

24 (vi) Medicare contractors to monitor 

25 quality of care. 
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•S 1926 IS 

1 (vii) Providers of services and renal 

2 dialysis facilities furnishing end-stage renal 

3 disease services. 

4 (C) TERMINATION OF ADVISORY PANEL.—

5 The advisory panel shall terminate on Decem6 ber 31, 2008. 

7 (6) AUTHORIZATION OF APPROPRIATIONS.—

8 There are authorized to be appropriated, in appro9 priate part from the Federal Hospital Insurance 

10 Trust Fund and the Federal Supplementary Medical 

11 Insurance Trust Fund, $5,000,000 in fiscal year 

12 2006 to conduct the demonstration under this sub13 section. 

14 (f) REPORT ON A BUNDLED PROSPECTIVE PAYMENT

15 SYSTEM FOR END STAGE RENAL DISEASE SERVICES.—

16 (1) REPORT.—

17 (A) IN GENERAL.—Not later than October 

18 1, 2005, the Secretary shall submit to Congress 

19 a report detailing the elements and features for 

20 the design and implementation of a bundled 

21 prospective payment system for services fur22 nished by end stage renal disease facilities in23 cluding, to the maximum extent feasible, bun24 dling of drugs, clinical laboratory tests, and 

25 other items that are separately billed by such 
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•S 1926 IS 

1 facilities. The report shall include a description 

2 of the methodology to be used for the establish3 ment of payment rates, including components of 

4 the new system described in paragraph (2). 

5 (B) RECOMMENDATIONS.—The Secretary 

6 shall include in such report recommendations 

7 on elements, features, and methodology for a 

8 bundled prospective payment system or other 

9 issues related to such system as the Secretary 

10 determines to be appropriate. 

11 (2) ELEMENTS AND FEATURES OF A BUNDLED

12 PROSPECTIVE PAYMENT SYSTEM.—The report re13 quired under paragraph (1) shall include the fol14 lowing elements and features of a bundled prospec15 tive payment system: 

16 (A) BUNDLE OF ITEMS AND SERVICES.—A 

17 description of the bundle of items and services 

18 to be included under the prospective payment 

19 system. 

20 (B) CASE MIX.—A description of the case21 mix adjustment to account for the relative re22 source use of different types of patients. 

23 (C) WAGE INDEX.—A description of an ad24 justment to account for geographic differences 

25 in wages. 
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•S 1926 IS 

1 (D) RURAL AREAS.—The appropriateness 

2 of establishing a specific payment adjustment to 

3 account for additional costs incurred by rural 

4 facilities. 

5 (E) OTHER ADJUSTMENTS.—Such other 

6 adjustments as may be necessary to reflect the 

7 variation in costs incurred by facilities in caring 

8 for patients with end stage renal disease. 

9 (F) UPDATE FRAMEWORK.—A method10 ology for appropriate updates under the pro11 spective payment system. 

12 (G) ADDITIONAL RECOMMENDATIONS.—

13 Such other matters as the Secretary determines 

14 to be appropriate. 

15 SEC. 324. 2-YEAR MORATORIUM ON THERAPY CAPS; PROVI16 SIONS RELATING TO REPORTS. 

17 (a) ADDITIONAL MORATORIUM ON THERAPY CAPS.—

18 (1) 2004 AND 2005.—Section 1833(g)(4) (42 

19 U.S.C. 1395l(g)(4)) is amended by striking ‘‘and 

20 2002’’ and inserting ‘‘2002, 2004, and 2005’’. 

21 (2) REMAINDER OF 2003.—For the period be22 ginning on the date of the enactment of this Act and 

23 ending of December 31, 2003, the Secretary shall 

24 not apply the provisions of paragraphs (1), (2), and 

25 (3) of section 1833(g) to expenses incurred with re-
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1 spect to services described in such paragraphs dur2 ing such period. Nothing in the preceding sentence 

3 shall be construed as affecting the application of 

4 such paragraphs by the Secretary before the date of 

5 the enactment of this Act. 

6 (b) PROMPT SUBMISSION OF OVERDUE REPORTS ON

7 PAYMENT AND UTILIZATION OF OUTPATIENT THERAPY

8 SERVICES.—Not later than March 31, 2004, the Secretary 

9 shall submit to Congress the reports required under sec10 tion 4541(d)(2) of the Balanced Budget Act of 1997 

11 (Public Law 105–33; 111 Stat. 457) (relating to alter12 natives to a single annual dollar cap on outpatient ther13 apy) and under section 221(d) of the Medicare, Medicaid, 

14 and SCHIP Balanced Budget Refinement Act of 1999 

15 (Appendix F, 113 Stat. 1501A–352), as enacted into law 

16 by section 1000(a)(6) of Public Law 106–113 (relating 

17 to utilization patterns for outpatient therapy). 

18 (c) GAO REPORT IDENTIFYING CONDITIONS AND

19 DISEASES JUSTIFYING WAIVER OF THERAPY CAP.—

20 (1) STUDY.—The Comptroller General of the 

21 United States shall identify conditions or diseases 

22 that may justify waiving the application of the ther23 apy caps under section 1833(g) of the Social Secu24 rity Act (42 U.S.C. 1395l(g)) with respect to such 

25 conditions or diseases. 
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•S 1926 IS 

1 (2) REPORT TO CONGRESS.—Not later than Oc2 tober 1, 2004, the Comptroller General shall submit 

3 to Congress a report on the conditions and diseases 

4 identified under paragraph (1), and shall include a 

5 recommendation of criteria, with respect to such 

6 conditions and disease, under which a waiver of the 

7 therapy caps would apply. 

8 SEC. 325. WAIVER OF PART B LATE ENROLLMENT PENALTY 

9 FOR CERTAIN MILITARY RETIREES; SPECIAL 

10 ENROLLMENT PERIOD. 

11 (a) WAIVER OF PENALTY.—

12 (1) IN GENERAL.—Section 1839(b) (42 U.S.C. 

13 1395r(b)) is amended by adding at the end the fol14 lowing new sentence: ‘‘No increase in the premium 

15 shall be effected for a month in the case of an indi16 vidual who enrolls under this part during 2001, 

17 2002, 2003, or 2004 and who demonstrates to the 

18 Secretary before December 31, 2004, that the indi19 vidual is a covered beneficiary (as defined in section 

20 1072(5) of title 10, United States Code). The Sec21 retary of Health and Human Services shall consult 

22 with the Secretary of Defense in identifying individ23 uals described in the previous sentence.’’. 

24 (2) EFFECTIVE DATE.—The amendment made 

25 by paragraph (1) shall apply to premiums for 
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•S 1926 IS 

1 months beginning with January 2004. The Secretary 

2 shall establish a method for providing rebates of pre3 mium penalties paid for months on or after January 

4 2004 for which a penalty does not apply under such 

5 amendment but for which a penalty was previously 

6 collected. 

7 (b) MEDICARE PART B SPECIAL ENROLLMENT PE8 RIOD.—

9 (1) IN GENERAL.—In the case of any individual 

10 who, as of the date of the enactment of this Act, is 

11 eligible to enroll but is not enrolled under part B of 

12 title XVIII of the Social Security Act and is a cov13 ered beneficiary (as defined in section 1072(5) of 

14 title 10, United States Code), the Secretary of 

15 Health and Human Services shall provide for a spe16 cial enrollment period during which the individual 

17 may enroll under such part. Such period shall begin 

18 as soon as possible after the date of the enactment 

19 of this Act and shall end on December 31, 2004. 

20 (2) COVERAGE PERIOD.—In the case of an indi21 vidual who enrolls during the special enrollment pe22 riod provided under paragraph (1), the coverage pe23 riod under part B of title XVIII of the Social Secu24 rity Act shall begin on the first day of the month 

25 following the month in which the individual enrolls. 
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•S 1926 IS 

1 SEC. 326. PAYMENT FOR SERVICES FURNISHED IN AMBULA2 TORY SURGICAL CENTERS. 

3 (a) REDUCTIONS IN PAYMENT UPDATES.—Section 

4 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended to 

5 read as follows: 

6 ‘‘(C)(i) Notwithstanding the second sentence of each 

7 of subparagraphs (A) and (B), except as otherwise speci8 fied in clauses (ii), (iii), and (iv), if the Secretary has not 

9 updated amounts established under such subparagraphs 

10 or under subparagraph (D), with respect to facility serv11 ices furnished during a fiscal year (beginning with fiscal 

12 year 1986 or a calendar year (beginning with 2006)), such 

13 amounts shall be increased by the percentage increase in 

14 the Consumer Price Index for all urban consumers (U.S. 

15 city average) as estimated by the Secretary for the 12-

16 month period ending with the midpoint of the year in17 volved. 

18 ‘‘(ii) In each of the fiscal years 1998 through 2002, 

19 the increase under this subparagraph shall be reduced 

20 (but not below zero) by 2.0 percentage points. 

21 ‘‘(iii) In fiscal year 2004, beginning with April 1, 

22 2004, the increase under this subparagraph shall be the 

23 Consumer Price Index for all urban consumers (U.S. city 

24 average) as estimated by the Secretary for the 12-month 

25 period ending with March 31, 2003, minus 3.0 percentage 

26 points. 
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•S 1926 IS 

1 ‘‘(iv) In fiscal year 2005, the last quarter of calendar 

2 year 2005, and each of calendar years 2006 through 2009, 

3 the increase under this subparagraph shall be 0 percent.’’. 

4 (b) REPEAL OF SURVEY REQUIREMENT AND IMPLE5 MENTATION OF NEW SYSTEM.—Section 1833(i)(2) (42 

6 U.S.C. 1395l(i)(2)) is amended—

7 (1) in subparagraph (A)—

8 (A) in the matter preceding clause (i), by 

9 striking ‘‘The’’ and inserting ‘‘For services fur10 nished prior to the implementation of the sys11 tem described in subparagraph (D), the’’; and 

12 (B) in clause (i), by striking ‘‘taken not 

13 later than January 1, 1995, and every 5 years 

14 thereafter,’’; and 

15 (2) by adding at the end the following new sub16 paragraph: 

17 ‘‘(D)(i) Taking into account the recommendations in 

18 the report under section 326(d) of Medicare Provider Res19 toration Act of 2003, the Secretary shall implement a re20 vised payment system for payment of surgical services fur21 nished in ambulatory surgical centers. 

22 ‘‘(ii) In the year the system described in clause (i) 

23 is implemented, such system shall be designed to result 

24 in the same aggregate amount of expenditures for such 
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•S 1926 IS 

1 services as would be made if this subparagraph did not 

2 apply, as estimated by the Secretary. 

3 ‘‘(iii) The Secretary shall implement the system de4 scribed in clause (i) for periods in a manner so that it 

5 is first effective beginning on or after January 1, 2006, 

6 and not later than January 1, 2008. 

7 ‘‘(iv) There shall be no administrative or judicial re8 view under section 1869, 1878, or otherwise, of the classi9 fication system, the relative weights, payment amounts, 

10 and the geographic adjustment factor, if any, under this 

11 subparagraph.’’. 

12 (c) CONFORMING AMENDMENT.—Section 1833(a)(1) 

13 (42 U.S.C. 1395l(a)(1)) is amended by adding the fol14 lowing new subparagraph: 

15 ‘‘(G) with respect to facility services fur16 nished in connection with a surgical procedure 

17 specified pursuant to subsection (i)(1)(A) and 

18 furnished to an individual in an ambulatory 

19 surgical center described in such subsection, for 

20 services furnished beginning with the implemen21 tation date of a revised payment system for 

22 such services in such facilities specified in sub23 section (i)(2)(D), the amounts paid shall be 80 

24 percent of the lesser of the actual charge for 
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•S 1926 IS 

1 the services or the amount determined by the 

2 Secretary under such revised payment system,’’. 

3 (d) GAO STUDY OF AMBULATORY SURGICAL CEN4 TER PAYMENTS.—

5 (1) STUDY.—

6 (A) IN GENERAL.—The Comptroller Gen7 eral of the United States shall conduct a study 

8 that compares the relative costs of procedures 

9 furnished in ambulatory surgical centers to the 

10 relative costs of procedures furnished in hos11 pital outpatient departments under section 

12 1833(t) of the Social Security Act (42 U.S.C. 

13 1395l(t)). The study shall also examine how ac14 curately ambulatory payment categories reflect 

15 procedures furnished in ambulatory surgical 

16 centers. 

17 (B) CONSIDERATION OF ASC DATA.—In 

18 conducting the study under paragraph (1), the 

19 Comptroller General shall consider data sub20 mitted by ambulatory surgical centers regarding 

21 the matters described in clauses (i) through (iii) 

22 of paragraph (2)(B). 

23 (2) REPORT AND RECOMMENDATIONS.—

24 (A) REPORT.—Not later than January 1, 

25 2005, the Comptroller General shall submit to 
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•S 1926 IS 

1 Congress a report on the study conducted under 

2 paragraph (1). 

3 (B) RECOMMENDATIONS.—The report sub4 mitted under subparagraph (A) shall include 

5 recommendations on the following matters: 

6 (i) The appropriateness of using the 

7 groups of covered services and relative 

8 weights established under the outpatient 

9 prospective payment system as the basis of 

10 payment for ambulatory surgical centers. 

11 (ii) If the relative weights under such 

12 hospital outpatient prospective payment 

13 system are appropriate for such purpose—

14 (I) whether the payment rates for 

15 ambulatory surgical centers should be 

16 based on a uniform percentage of the 

17 payment rates or weights under such 

18 outpatient system; or 

19 (II) whether the payment rates 

20 for ambulatory surgical centers should 

21 vary, or the weights should be revised, 

22 based on specific procedures or types 

23 of services (such as ophthalmology 

24 and pain management services). 
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•S 1926 IS 

1 (iii) Whether a geographic adjustment 

2 should be used for payment of services fur3 nished in ambulatory surgical centers, and 

4 if so, the labor and nonlabor shares of 

5 such payment. 

6 SEC. 327. PAYMENT FOR CERTAIN SHOES AND INSERTS 

7 UNDER THE FEE SCHEDULE FOR ORTHOTICS 

8 AND PROSTHETICS. 

9 (a) IN GENERAL.—Section 1833(o) (42 U.S.C. 

10 1395l(o)) is amended—

11 (1) in paragraph (1)(B), by striking ‘‘no more 

12 than the limits established under paragraph (2)’’ 

13 and inserting ‘‘no more than the amount of payment 

14 applicable under paragraph (2)’’; and 

15 (2) in paragraph (2), to read as follows: 

16 ‘‘(2)(A) Except as provided by the Secretary under 

17 subparagraphs (B) and (C), the amount of payment under 

18 this paragraph for custom molded shoes, extra-depth 

19 shoes, and inserts shall be the amount determined for such 

20 items by the Secretary under section 1834(h). 

21 ‘‘(B) The Secretary may establish payment amounts 

22 for shoes and inserts that are lower than the amount es23 tablished under section 1834(h) if the Secretary finds that 

24 shoes and inserts of an appropriate quality are readily 
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•S 1926 IS 

1 available at or below the amount established under such 

2 section. 

3 ‘‘(C) In accordance with procedures established by 

4 the Secretary, an individual entitled to benefits with re5 spect to shoes described in section 1861(s)(12) may sub6 stitute modification of such shoes instead of obtaining one 

7 (or more, as specified by the Secretary) pair of inserts 

8 (other than the original pair of inserts with respect to such 

9 shoes). In such case, the Secretary shall substitute, for 

10 the payment amount established under section 1834(h), 

11 a payment amount that the Secretary estimates will assure 

12 that there is no net increase in expenditures under this 

13 subsection as a result of this subparagraph.’’. 

14 (b) CONFORMING AMENDMENTS.—(1) Section 

15 1834(h)(4)(C) (42 U.S.C. 1395m(h)(4)(C)) is amended by 

16 inserting ‘‘(and includes shoes described in section 

17 1861(s)(12))’’ after ‘‘in section 1861(s)(9)’’. 

18 (2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is 

19 amended by striking subparagraph (C). 

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

21 this section shall apply to items furnished on or after Jan22 uary 1, 2005. 
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1 SEC. 329. 5-YEAR AUTHORIZATION OF REIMBURSEMENT 

2 FOR ALL MEDICARE PART B SERVICES FUR3 NISHED BY CERTAIN INDIAN HOSPITALS AND 

4 CLINICS. 

5 Section 1880(e)(1)(A) (42 U.S.C. 1395qq(e)(1)(A)) 

6 is amended by inserting ‘‘(and for items and services fur7 nished during the 5-year period beginning on January 1, 

8 2005, all items and services for which payment may be 

9 made under part B)’’ after ‘‘for services described in para10 graph (2)’’. 

11 Subtitle D—Additional Demonstra12 tions, Studies, and Other Provi13 sions

14 SEC. 341. DEMONSTRATION PROJECT FOR COVERAGE OF 

15 CERTAIN PRESCRIPTION DRUGS AND 

16 BIOLOGICALS. 

17 (a) DEMONSTRATION PROJECT.—The Secretary shall 

18 conduct a demonstration project under part B of title 

19 XVIII of the Social Security Act under which payment is 

20 made for drugs or biologicals that are prescribed as re21 placements for drugs and biologicals described in section 

22 1861(s)(2)(A) or 1861(s)(2)(Q) of such Act (42 U.S.C. 

23 1395x(s)(2)(A), 1395x(s)(2)(Q)), or both, for which pay24 ment is made under such part. Such project shall provide 

25 for cost-sharing applicable with respect to such drugs or 

26 biologicals.
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•S 1926 IS 

1 (b) DEMONSTRATION PROJECT SITES.—The project 

2 established under this section shall be conducted in sites 

3 selected by the Secretary. 

4 (c) DURATION.—The Secretary shall conduct the 

5 demonstration project for the 2-year period beginning on 

6 the date that is 90 days after the date of the enactment 

7 of this Act, but in no case may the project extend beyond 

8 December 31, 2005. 

9 (d) LIMITATION.—Under the demonstration project 

10 over the duration of the project, the Secretary may not 

11 provide—

12 (1) coverage for more than 50,000 patients; 

13 and 

14 (2) more than $500,000,000 in funding. 

15 (e) REPORT.—Not later than July 1, 2006, the Sec16 retary shall submit to Congress a report on the project. 

17 The report shall include an evaluation of patient access 

18 to care and patient outcomes under the project, as well 

19 as an analysis of the cost effectiveness of the project, in20 cluding an evaluation of the costs savings (if any) to the 

21 medicare program attributable to reduced physicians’ 

22 services and hospital outpatient departments services for 

23 administration of the biological.
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•S 1926 IS 

1 SEC. 342. EXTENSION OF COVERAGE OF INTRAVENOUS IM2 MUNE GLOBULIN (IVIG) FOR THE TREAT3 MENT OF PRIMARY IMMUNE DEFICIENCY DIS4 EASES IN THE HOME. 

5 (a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x), 

6 as amended by sections 611(a) and 612(a) is amended—

7 (1) in subsection (s)(2)—

8 (A) by striking ‘‘and’’ at the end of sub9 paragraph (X); 

10 (B) by adding ‘‘and’’ at the end of sub11 paragraph (Y); and 

12 (C) by adding at the end the following new 

13 subparagraph: 

14 ‘‘(Z) intravenous immune globulin for the 

15 treatment of primary immune deficiency dis16 eases in the home (as defined in subsection 

17 (zz));’’; and 

18 (2) by adding at the end the following new sub19 section: 

20 ‘‘Intravenous Immune Globulin 

21 ‘‘(zz) The term ‘intravenous immune globulin’ means 

22 an approved pooled plasma derivative for the treatment 

23 in the patient’s home of a patient with a diagnosed pri24 mary immune deficiency disease, but not including items 

25 or services related to the administration of the derivative, 
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1 if a physician determines administration of the derivative 

2 in the patient’s home is medically appropriate.’’. 

3 (b) PAYMENT AS A DRUG OR BIOLOGICAL.—Section 

4 1833(a)(1)(S) (42 U.S.C. 1395l(a)(1)(S)) is amended by 

5 inserting ‘‘(including intravenous immune globulin (as de6 fined in section 1861(zz)))’’ after ‘‘with respect to drugs 

7 and biologicals’’. 

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

9 this section shall apply to items furnished administered 

10 on or after January 1, 2004. 

11 SEC. 343. MEDPAC STUDY OF COVERAGE OF SURGICAL 

12 FIRST ASSISTING SERVICES OF CERTIFIED 

13 REGISTERED NURSE FIRST ASSISTANTS. 

14 (a) STUDY.—The Medicare Payment Advisory Com15 mission (in this section referred to as the ‘‘Commission’’) 

16 shall conduct a study on the feasibility and advisability 

17 of providing for payment under part B of title XVIII of 

18 the Social Security Act for surgical first assisting services 

19 furnished by a certified registered nurse first assistant to 

20 medicare beneficiaries. 

21 (b) REPORT.—Not later than January 1, 2005, the 

22 Commission shall submit to Congress a report on the 

23 study conducted under subsection (a) together with rec24 ommendations for such legislation or administrative action 

25 as the Commission determines to be appropriate. 
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•S 1926 IS 

1 (c) DEFINITIONS.—In this section: 

2 (1) SURGICAL FIRST ASSISTING SERVICES.—

3 The term ‘‘surgical first assisting services’’ means 

4 services consisting of first assisting a physician with 

5 surgery and related preoperative, intraoperative, and 

6 postoperative care (as determined by the Secretary) 

7 furnished by a certified registered nurse first assist8 ant (as defined in paragraph (2)) which the certified 

9 registered nurse first assistant is legally authorized 

10 to perform by the State in which the services are 

11 performed. 

12 (2) CERTIFIED REGISTERED NURSE FIRST AS13 SISTANT.—The term ‘‘certified registered nurse first 

14 assistant’’ means an individual who—

15 (A) is a registered nurse and is licensed to 

16 practice nursing in the State in which the surgical 

17 first assisting services are performed; 

18 (B) has completed a minimum of 2,000 hours 

19 of first assisting a physician with surgery and re20 lated preoperative, intraoperative, and postoperative 

21 care; and 

22 (C) is certified as a registered nurse first assist23 ant by an organization recognized by the Secretary. 
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1 SEC. 344. MEDPAC STUDY OF PAYMENT FOR CARDIO-THO2 RACIC SURGEONS. 

3 (a) STUDY.—The Medicare Payment Advisory Com4 mission (in this section referred to as the ‘‘Commission’’) 

5 shall conduct a study on the practice expense relative val6 ues established by the Secretary of Health and Human 

7 Services under the medicare physician fee schedule under 

8 section 1848 of the Social Security Act (42 U.S.C. 

9 1395w–4) for physicians in the specialties of thoracic and 

10 cardiac surgery to determine whether such values ade11 quately take into account the attendant costs that such 

12 physicians incur in providing clinical staff for patient care 

13 in hospitals. 

14 (b) REPORT.—Not later than January 1, 2005, the 

15 Commission shall submit to Congress a report on the 

16 study conducted under subsection (a) together with rec17 ommendations for such legislation or administrative action 

18 as the Commission determines to be appropriate. 

19 SEC. 345. STUDIES RELATING TO VISION IMPAIRMENTS. 

20 (a) COVERAGE OF OUTPATIENT VISION SERVICES

21 FURNISHED BY VISION REHABILITATION PROFESSIONALS

22 UNDER PART B.—

23 (1) STUDY.—The Secretary shall conduct a 

24 study to determine the feasibility and advisability of 

25 providing for payment for vision rehabilitation serv26 ices furnished by vision rehabilitation professionals. 
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1 (2) REPORT.—Not later than January 1, 2005, 

2 the Secretary shall submit to Congress a report on 

3 the study conducted under paragraph (1) together 

4 with recommendations for such legislation or admin5 istrative action as the Secretary determines to be ap6 propriate. 

7 (3) VISION REHABILITATION PROFESSIONAL

8 DEFINED.—In this subsection, the term ‘‘vision re9 habilitation professional’’ means an orientation and 

10 mobility specialist, a rehabilitation teacher, or a low 

11 vision therapist. 

12 (b) REPORT ON APPROPRIATENESS OF A DEM13 ONSTRATION PROJECT TO TEST FEASIBILITY OF USING

14 PPO NETWORKS TO REDUCE COSTS OF ACQUIRING EYE15 GLASSES FOR MEDICARE BENEFICIARIES AFTER CATA16 RACT SURGERY.—Not later than 1 year after the date of 

17 the enactment of this Act, the Secretary shall submit to 

18 Congress a report on the feasibility of establishing a two19 year demonstration project under which the Secretary en20 ters into arrangements with vision care preferred provider 

21 organization networks to furnish and pay for conventional 

22 eyeglasses subsequent to each cataract surgery with inser23 tion of an intraocular lens on behalf of Medicare bene24 ficiaries. In such report, the Secretary shall include an es25 timate of potential cost savings to the Medicare program 
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•S 1926 IS 

1 through the use of such networks, taking into consider2 ation quality of service and beneficiary access to services 

3 offered by vision care preferred provider organization net4 works. 

5 SEC. 346. MEDICARE HEALTH CARE QUALITY DEMONSTRA6 TION PROGRAMS. 

7 Title XVIII (42 U.S.C. 1395 et seq.) is amended by 

8 inserting after section 1866B the following new section: 

9 ‘‘SEC. 1866C. HEALTH CARE QUALITY DEMONSTRATION 

10 PROGRAM. 

11 ‘‘SEC. (a) DEFINITIONS.—In this section: 

12 ‘‘(1) BENEFICIARY.—The term ‘beneficiary’ 

13 means an individual who is entitled to benefits under 

14 part A and enrolled under part B, including any in15 dividual who is enrolled in a Medicare Advantage 

16 plan under part C. 

17 ‘‘(2) HEALTH CARE GROUP.—

18 ‘‘(A) IN GENERAL.—The term ‘health care 

19 group’ means—

20 ‘‘(i) a group of physicians that is or21 ganized at least in part for the purpose of 

22 providing physician’s services under this 

23 title; 

24 ‘‘(ii) an integrated health care delivery 

25 system that delivers care through coordi-
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1 nated hospitals, clinics, home health agen2 cies, ambulatory surgery centers, skilled 

3 nursing facilities, rehabilitation facilities 

4 and clinics, and employed, independent, or 

5 contracted physicians; or 

6 ‘‘(iii) an organization representing re7 gional coalitions of groups or systems de8 scribed in clause (i) or (ii). 

9 ‘‘(B) INCLUSION.—As the Secretary deter10 mines appropriate, a health care group may in11 clude a hospital or any other individual or enti12 ty furnishing items or services for which pay13 ment may be made under this title that is affili14 ated with the health care group under an ar15 rangement structured so that such hospital, in16 dividual, or entity participates in a demonstra17 tion project under this section. 

18 ‘‘(3) PHYSICIAN.—Except as otherwise provided 

19 for by the Secretary, the term ‘physician’ means any 

20 individual who furnishes services that may be paid 

21 for as physicians’ services under this title. 

22 ‘‘(b) DEMONSTRATION PROJECTS.—The Secretary 

23 shall establish a 5-year demonstration program under 

24 which the Secretary shall approve demonstration projects 
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1 that examine health delivery factors that encourage the 

2 delivery of improved quality in patient care, including—

3 ‘‘(1) the provision of incentives to improve the 

4 safety of care provided to beneficiaries; 

5 ‘‘(2) the appropriate use of best practice guide6 lines by providers and services by beneficiaries; 

7 ‘‘(3) reduced scientific uncertainty in the deliv8 ery of care through the examination of variations in 

9 the utilization and allocation of services, and out10 comes measurement and research; 

11 ‘‘(4) encourage shared decision making between 

12 providers and patients; 

13 ‘‘(5) the provision of incentives for improving 

14 the quality and safety of care and achieving the effi15 cient allocation of resources; 

16 ‘‘(6) the appropriate use of culturally and eth17 nically sensitive health care delivery; and 

18 ‘‘(7) the financial effects on the health care 

19 marketplace of altering the incentives for care deliv20 ery and changing the allocation of resources. 

21 ‘‘(c) ADMINISTRATION BY CONTRACT.—

22 ‘‘(1) IN GENERAL.—Except as otherwise pro23 vided in this section, the Secretary may administer 

24 the demonstration program established under this 

25 section in a manner that is similar to the manner in 
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1 which the demonstration program established under 

2 section 1866A is administered in accordance with 

3 section 1866B. 

4 ‘‘(2) ALTERNATIVE PAYMENT SYSTEMS.—A 

5 health care group that receives assistance under this 

6 section may, with respect to the demonstration 

7 project to be carried out with such assistance, in8 clude proposals for the use of alternative payment 

9 systems for items and services provided to bene10 ficiaries by the group that are designed to—

11 ‘‘(A) encourage the delivery of high quality 

12 care while accomplishing the objectives de13 scribed in subsection (b); and 

14 ‘‘(B) streamline documentation and report15 ing requirements otherwise required under this 

16 title. 

17 ‘‘(3) BENEFITS.—A health care group that re18 ceives assistance under this section may, with re19 spect to the demonstration project to be carried out 

20 with such assistance, include modifications to the 

21 package of benefits available under the original 

22 medicare fee-for-service program under parts A and 

23 B or the package of benefits available through a 

24 Medicare Advantage plan under part C. The criteria 

25 employed under the demonstration program under 
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•S 1926 IS 

1 this section to evaluate outcomes and determine best 

2 practice guidelines and incentives shall not be used 

3 as a basis for the denial of medicare benefits under 

4 the demonstration program to patients against their 

5 wishes (or if the patient is incompetent, against the 

6 wishes of the patient’s surrogate) on the basis of the 

7 patient’s age or expected length of life or of the pa8 tient’s present or predicted disability, degree of med9 ical dependency, or quality of life. 

10 ‘‘(d) ELIGIBILITY CRITERIA.—To be eligible to re11 ceive assistance under this section, an entity shall—

12 ‘‘(1) be a health care group; 

13 ‘‘(2) meet quality standards established by the 

14 Secretary, including—

15 ‘‘(A) the implementation of continuous 

16 quality improvement mechanisms that are 

17 aimed at integrating community-based support 

18 services, primary care, and referral care; 

19 ‘‘(B) the implementation of activities to in20 crease the delivery of effective care to bene21 ficiaries; 

22 ‘‘(C) encouraging patient participation in 

23 preference-based decisions; 
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1 ‘‘(D) the implementation of activities to 

2 encourage the coordination and integration of 

3 medical service delivery; and 

4 ‘‘(E) the implementation of activities to 

5 measure and document the financial impact on 

6 the health care marketplace of altering the in7 centives of health care delivery and changing 

8 the allocation of resources; and 

9 ‘‘(3) meet such other requirements as the Sec10 retary may establish. 

11 ‘‘(e) WAIVER AUTHORITY.—The Secretary may waive 

12 such requirements of titles XI and XVIII as may be nec13 essary to carry out the purposes of the demonstration pro14 gram established under this section. 

15 ‘‘(f) BUDGET NEUTRALITY.—With respect to the 5-

16 year period of the demonstration program under sub17 section (b), the aggregate expenditures under this title for 

18 such period shall not exceed the aggregate expenditures 

19 that would have been expended under this title if the pro20 gram established under this section had not been imple21 mented. 

22 ‘‘(g) NOTICE REQUIREMENTS.—In the case of an in23 dividual that receives health care items or services under 

24 a demonstration program carried out under this section, 

25 the Secretary shall ensure that such individual is notified 
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1 of any waivers of coverage or payment rules that are appli2 cable to such individual under this title as a result of the 

3 participation of the individual in such program. 

4 ‘‘(h) PARTICIPATION AND SUPPORT BY FEDERAL

5 AGENCIES.—In carrying out the demonstration program 

6 under this section, the Secretary may direct—

7 ‘‘(1) the Director of the National Institutes of 

8 Health to expand the efforts of the Institutes to 

9 evaluate current medical technologies and improve 

10 the foundation for evidence-based practice; 

11 ‘‘(2) the Administrator of the Agency for 

12 Healthcare Research and Quality to, where possible 

13 and appropriate, use the program under this section 

14 as a laboratory for the study of quality improvement 

15 strategies and to evaluate, monitor, and disseminate 

16 information relevant to such program; and 

17 ‘‘(3) the Administrator of the Centers for Medi18 care & Medicaid Services and the Administrator of 

19 the Center for Medicare Choices to support linkages 

20 of relevant medicare data to registry information 

21 from participating health care groups for the bene22 ficiary populations served by the participating 

23 groups, for analysis supporting the purposes of the 

24 demonstration program, consistent with the applica-
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•S 1926 IS 

1 ble provisions of the Health Insurance Portability 

2 and Accountability Act of 1996.’’. 

3 SEC. 347. MEDPAC STUDY ON DIRECT ACCESS TO PHYSICAL 

4 THERAPY SERVICES. 

5 (a) STUDY.—The Medicare Payment Advisory Com6 mission (in this section referred to as the ‘‘Commission’’) 

7 shall conduct a study on the feasibility and advisability 

8 of allowing medicare fee-for-service beneficiaries direct ac9 cess to outpatient physical therapy services and physical 

10 therapy services furnished as comprehensive rehabilitation 

11 facility services. 

12 (b) REPORT.—Not later than January 1, 2005, the 

13 Commission shall submit to Congress a report on the 

14 study conducted under subsection (a) together with rec15 ommendations for such legislation or administrative action 

16 as the Commission determines to be appropriate. 

17 (c) DIRECT ACCESS DEFINED.—The term ‘‘direct ac18 cess’’ means, with respect to outpatient physical therapy 

19 services and physical therapy services furnished as com20 prehensive outpatient rehabilitation facility services, cov21 erage of and payment for such services in accordance with 

22 the provisions of title XVIII of the Social Security Act, 

23 except that sections 1835(a)(2), 1861(p), and 1861(cc) of 

24 such Act (42 U.S.C. 1395n(a)(2), 1395x(p), and 

25 1395x(cc), respectively) shall be applied—
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•S 1926 IS 

1 (1) without regard to any requirement that—

2 (A) an individual be under the care of (or 

3 referred by) a physician; or 

4 (B) services be provided under the super5 vision of a physician; and 

6 (2) by allowing a physician or a qualified phys7 ical therapist to satisfy any requirement for—

8 (A) certification and recertification; and 

9 (B) establishment and periodic review of a 

10 plan of care.

11 SEC. 348. DEMONSTRATION PROJECT FOR CONSUMER-DI12 RECTED CHRONIC OUTPATIENT SERVICES. 

13 (a) ESTABLISHMENT.—

14 (1) IN GENERAL.—Subject to the succeeding 

15 provisions of this section, the Secretary shall estab16 lish demonstration projects (in this section referred 

17 to as ‘‘demonstration projects’’) under which the 

18 Secretary shall evaluate methods that improve the 

19 quality of care provided to individuals with chronic 

20 conditions and that reduce expenditures that would 

21 otherwise be made under the medicare program on 

22 behalf of such individuals for such chronic condi23 tions, such methods to include permitting those 

24 beneficiaries to direct their own health care needs 

25 and services. 
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•S 1926 IS 

1 (2) INDIVIDUALS WITH CHRONIC CONDITIONS

2 DEFINED.—In this section, the term ‘‘individuals 

3 with chronic conditions’’ means an individual enti4 tled to benefits under part A of title XVIII of the 

5 Social Security Act, and enrolled under part B of 

6 such title, but who is not enrolled under part C of 

7 such title who is diagnosed as having one or more 

8 chronic conditions (as defined by the Secretary), 

9 such as diabetes. 

10 (b) DESIGN OF PROJECTS.—

11 (1) EVALUATION BEFORE IMPLEMENTATION OF

12 PROJECT.—

13 (A) IN GENERAL.—In establishing the 

14 demonstration projects under this section, the 

15 Secretary shall evaluate best practices employed 

16 by group health plans and practices under State 

17 plans for medical assistance under the medicaid 

18 program under title XIX of the Social Security 

19 Act, as well as best practices in the private sec20 tor or other areas, of methods that permit pa21 tients to self-direct the provision of personal 

22 care services. The Secretary shall evaluate such 

23 practices for a 1-year period and, based on such 

24 evaluation, shall design the demonstration 

25 project. 
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•S 1926 IS 

1 (B) REQUIREMENT FOR ESTIMATE OF

2 BUDGET NEUTRAL COSTS.—As part of the eval3 uation under subparagraph (A), the Secretary 

4 shall evaluate the costs of furnishing care under 

5 the projects. The Secretary may not implement 

6 the demonstration projects under this section 

7 unless the Secretary determines that the costs 

8 of providing care to individuals with chronic 

9 conditions under the project will not exceed the 

10 costs, in the aggregate, of furnishing care to 

11 such individuals under title XVIII of the Social 

12 Security Act, that would otherwise be paid 

13 without regard to the demonstration projects 

14 for the period of the project. 

15 (2) SCOPE OF SERVICES.—The Secretary shall 

16 determine the appropriate scope of personal care 

17 services that would apply under the demonstration 

18 projects. 

19 (c) VOLUNTARY PARTICIPATION.—Participation of 

20 providers of services and suppliers, and of individuals with 

21 chronic conditions, in the demonstration projects shall be 

22 voluntary. 

23 (d) DEMONSTRATION PROJECT SITES.—Not later 

24 than 2 years after the date of the enactment of this Act, 

25 the Secretary shall conduct a demonstration project in at 
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•S 1926 IS 

1 least one area that the Secretary determines has a popu2 lation of individuals entitled to benefits under part A of 

3 title XVIII of the Social Security Act, and enrolled under 

4 part B of such title, with a rate of incidence of diabetes 

5 that significantly exceeds the national average rate of all 

6 areas. 

7 (e) EVALUATION AND REPORT.—

8 (1) EVALUATIONS.—The Secretary shall con9 duct evaluations of the clinical and cost effectiveness 

10 of the demonstration projects. 

11 (2) REPORTS.—Not later than 2 years after the 

12 commencement of the demonstration projects, and 

13 biannually thereafter, the Secretary shall submit to 

14 Congress a report on the evaluation, and shall in15 clude in the report the following: 

16 (A) An analysis of the patient outcomes 

17 and costs of furnishing care to the individuals 

18 with chronic conditions participating in the 

19 projects as compared to such outcomes and 

20 costs to other individuals for the same health 

21 conditions. 

22 (B) Evaluation of patient satisfaction 

23 under the demonstration projects. 

24 (C) Such recommendations regarding the 

25 extension, expansion, or termination of the 
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•S 1926 IS 

1 projects as the Secretary determines appro2 priate. 

3 (f) WAIVER AUTHORITY.—The Secretary shall waive 

4 compliance with the requirements of title XVIII of the So5 cial Security Act (42 U.S.C. 1395 et seq.) to such extent 

6 and for such period as the Secretary determines is nec7 essary to conduct demonstration projects. 

8 (g) AUTHORIZATION OF APPROPRIATIONS.—(1) Pay9 ments for the costs of carrying out the demonstration 

10 project under this section shall be made from the Federal 

11 Supplementary Medical Insurance Trust Fund under sec12 tion 1841 of such Act (42 U.S.C. 1395t). 

13 (2) There are authorized to be appropriated from 

14 such Trust Fund such sums as may be necessary for the 

15 Secretary to enter into contracts with appropriate organi16 zations for the deign, implementation, and evaluation of 

17 the demonstration project. 

18 (3) In no case may expenditures under this section 

19 exceed the aggregate expenditures that would otherwise 

20 have been made for the provision of personal care services.

21 SEC. 349. MEDICARE CARE MANAGEMENT PERFORMANCE 

22 DEMONSTRATION. 

23 (a) ESTABLISHMENT.—

24 (1) IN GENERAL.—The Secretary shall establish 

25 a pay-for-performance demonstration program with 
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1 physicians to meet the needs of eligible beneficiaries 

2 through the adoption and use of health information 

3 technology and evidence-based outcomes measures 

4 for—

5 (A) promoting continuity of care; 

6 (B) helping stabilize medical conditions; 

7 (C) preventing or minimizing acute exacer8 bations of chronic conditions; and 

9 (D) reducing adverse health outcomes, 

10 such as adverse drug interactions related to 

11 polypharmacy. 

12 (2) SITES.—The Secretary shall designate no 

13 more than 4 sites at which to conduct the dem14 onstration program under this section, of which—

15 (A) 2 shall be in an urban area; 

16 (B) 1 shall be in a rural area; and

17 (C) 1 shall be in a State with a medical 

18 school with a Department of Geriatrics that 

19 manages rural outreach sites and is capable of 

20 managing patients with multiple chronic condi21 tions, one of which is dementia. 

22 (3) DURATION.—The Secretary shall conduct 

23 the demonstration program under this section for a 

24 3-year period. 
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1 (4) CONSULTATION.—In carrying out the dem2 onstration program under this section, the Secretary 

3 shall consult with private sector and non-profit 

4 groups that are undertaking similar efforts to im5 prove quality and reduce avoidable hospitalizations 

6 for chronically ill patients. 

7 (b) PARTICIPATION.—

8 (1) IN GENERAL.—A physician who provides 

9 care for a minimum number of eligible beneficiaries 

10 (as specified by the Secretary) may participate in 

11 the demonstration program under this section if 

12 such physician agrees, to phase-in over the course of 

13 the 3-year demonstration period and with the assist14 ance provided under subsection (d)(2)—

15 (A) the use of health information tech16 nology to manage the clinical care of eligible 

17 beneficiaries consistent with paragraph (3); and 

18 (B) the electronic reporting of clinical 

19 quality and outcomes measures in accordance 

20 with requirements established by the Secretary 

21 under the demonstration program. 

22 (2) SPECIAL RULE.—In the case of the sites re23 ferred to in subparagraphs (B) and (C) of sub24 section (a)(2), a physician who provides care for a 

25 minimum number of beneficiaries with two or more 
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•S 1926 IS 

1 chronic conditions, including dementia (as specified 

2 by the Secretary), may participate in the program 

3 under this section if such physician agrees to the re4 quirements in subparagraphs (A) and (B) of para5 graph (1). 

6 (3) PRACTICE STANDARDS.—Each physician 

7 participating in the demonstration program under 

8 this section must demonstrate the ability—

9 (A) to assess each eligible beneficiary for 

10 conditions other than chronic conditions, such 

11 as impaired cognitive ability and co-morbidities, 

12 for the purposes of developing care manage13 ment requirements; 

14 (B) to serve as the primary contact of eli15 gible beneficiaries in accessing items and serv16 ices for which payment may be made under the 

17 medicare program; 

18 (C) to establish and maintain health care 

19 information system for such beneficiaries; 

20 (D) to promote continuity of care across 

21 providers and settings; 

22 (E) to use evidence-based guidelines and 

23 meet such clinical quality and outcome meas24 ures as the Secretary shall require; 
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•S 1926 IS 

1 (F) to promote self-care through the provi2 sion of patient education and support for pa3 tients or, where appropriate, family caregivers; 

4 (G) when appropriate, to refer such bene5 ficiaries to community service organizations; 

6 and 

7 (H) to meet such other complex care man8 agement requirements as the Secretary may 

9 specify. 

10 The guidelines and measures required under sub11 paragraph (E) shall be designed to take into account 

12 beneficiaries with multiple chronic conditions. 

13 (c) PAYMENT METHODOLOGY.—Under the dem14 onstration program under this section the Secretary shall 

15 pay a per beneficiary amount to each participating physi16 cian who meets or exceeds specific performance standards 

17 established by the Secretary with respect to the clinical 

18 quality and outcome measures reported under subsection 

19 (b)(1)(B). Such amount may vary based on different levels 

20 of performance or improvement. 

21 (d) ADMINISTRATION.—

22 (1) USE OF QUALITY IMPROVEMENT ORGANIZA23 TIONS.—The Secretary shall contract with quality 

24 improvement organizations or such other entities as 

25 the Secretary deems appropriate to enroll physicians 
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•S 1926 IS 

1 and evaluate their performance under the dem2 onstration program under this section. 

3 (2) TECHNICAL ASSISTANCE.—The Secretary 

4 shall require in such contracts that the contractor be 

5 responsible for technical assistance and education as 

6 needed to physicians enrolled in the demonstration 

7 program under this section for the purpose of aiding 

8 their adoption of health information technology, 

9 meeting practice standards, and implementing re10 quired clinical and outcomes measures. 

11 (e) FUNDING.—

12 (1) IN GENERAL.—The Secretary shall provide 

13 for the transfer from the Federal Supplementary 

14 Medical Insurance Trust Fund established under 

15 section 1841 of the Social Security Act (42 U.S.C. 

16 1395t) of such funds as are necessary for the costs 

17 of carrying out the demonstration program under 

18 this section. 

19 (2) BUDGET NEUTRALITY.—In conducting the 

20 demonstration program under this section, the Sec21 retary shall ensure that the aggregate payments 

22 made by the Secretary do not exceed the amount 

23 which the Secretary estimates would have been paid 

24 if the demonstration program under this section was 

25 not implemented. 
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1 (f) WAIVER AUTHORITY.—The Secretary may waive 

2 such requirements of titles XI and XVIII of the Social 

3 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as 

4 may be necessary for the purpose of carrying out the dem5 onstration program under this section. 

6 (g) REPORT.—Not later than 12 months after the 

7 date of completion of the demonstration program under 

8 this section, the Secretary shall submit to Congress a re9 port on such program, together with recommendations for 

10 such legislation and administrative action as the Secretary 

11 determines to be appropriate. 

12 (h) DEFINITIONS.—In this section: 

13 (1) ELIGIBLE BENEFICIARY.—The term ‘‘eligi14 ble beneficiary’’ means any individual who—

15 (A) is entitled to benefits under part A and 

16 enrolled for benefits under part B of title XVIII 

17 of the Social Security Act and is not enrolled in 

18 a plan under part C of such title; and 

19 (B) has one or more chronic medical condi20 tions specified by the Secretary (one of which 

21 may be cognitive impairment). 

22 (2) HEALTH INFORMATION TECHNOLOGY.—The 

23 term ‘‘health information technology’’ means email 

24 communication, clinical alerts and reminders, and 

25 other information technology that meets such 
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•S 1926 IS 

1 functionality, interoperability, and other standards 

2 as prescribed by the Secretary. 

3 SEC. 350. GAO STUDY AND REPORT ON THE PROPAGATION 

4 OF CONCIERGE CARE. 

5 (a) STUDY.—

6 (1) IN GENERAL.—The Comptroller General of 

7 the United States shall conduct a study on concierge 

8 care (as defined in paragraph (2)) to determine the 

9 extent to which such care—

10 (A) is used by medicare beneficiaries (as 

11 defined in section 1802(b)(5)(A) of the Social 

12 Security Act (42 U.S.C. 1395a(b)(5)(A))); and 

13 (B) has impacted upon the access of medi14 care beneficiaries (as so defined) to items and 

15 services for which reimbursement is provided 

16 under the medicare program under title XVIII 

17 of the Social Security Act (42 U.S.C. 1395 et 

18 seq.). 

19 (2) CONCIERGE CARE.—In this section, the 

20 term ‘‘concierge care’’ means an arrangement under 

21 which, as a prerequisite for the provision of a health 

22 care item or service to an individual, a physician, 

23 practitioner (as described in section 1842(b)(18)(C) 

24 of the Social Security Act (42 U.S.C. 

25 1395u(b)(18)(C))), or other individual—
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•S 1926 IS 

1 (A) charges a membership fee or another 

2 incidental fee to an individual desiring to re3 ceive the health care item or service from such 

4 physician, practitioner, or other individual; or 

5 (B) requires the individual desiring to re6 ceive the health care item or service from such 

7 physician, practitioner, or other individual to 

8 purchase an item or service. 

9 (b) REPORT.—Not later than the date that is 12 

10 months after the date of enactment of this Act, the Comp11 troller General of the United States shall submit to Con12 gress a report on the study conducted under subsection 

13 (a)(1) together with such recommendations for legislative 

14 or administrative action as the Comptroller General deter15 mines to be appropriate. 

16 SEC. 351. DEMONSTRATION OF COVERAGE OF CHIRO17 PRACTIC SERVICES UNDER MEDICARE. 

18 (a) DEFINITIONS.—In this section: 

19 (1) CHIROPRACTIC SERVICES.—The term 

20 ‘‘chiropractic services’’ has the meaning given that 

21 term by the Secretary for purposes of the dem22 onstration projects, but shall include, at a min23 imum—

24 (A) care for neuromusculoskeletal condi25 tions typical among eligible beneficiaries; and 
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•S 1926 IS 

1 (B) diagnostic and other services that a 

2 chiropractor is legally authorized to perform by 

3 the State or jurisdiction in which such treat4 ment is provided. 

5 (2) DEMONSTRATION PROJECT.—The term 

6 ‘‘demonstration project’’ means a demonstration 

7 project established by the Secretary under sub8 section (b)(1). 

9 (3) ELIGIBLE BENEFICIARY.—The term ‘‘eligi10 ble beneficiary’’ means an individual who is enrolled 

11 under part B of the medicare program. 

12 (4) MEDICARE PROGRAM.—The term ‘‘medicare 

13 program’’ means the health benefits program under 

14 title XVIII of the Social Security Act (42 U.S.C. 

15 1395 et seq.). 

16 (b) DEMONSTRATION OF COVERAGE OF CHIRO17 PRACTIC SERVICES UNDER MEDICARE.—

18 (1) ESTABLISHMENT.—The Secretary shall es19 tablish demonstration projects in accordance with 

20 the provisions of this section for the purpose of eval21 uating the feasibility and advisability of covering 

22 chiropractic services under the medicare program (in 

23 addition to the coverage provided for services con24 sisting of treatment by means of manual manipula25 tion of the spine to correct a subluxation described 
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•S 1926 IS 

1 in section 1861(r)(5) of the Social Security Act (42 

2 U.S.C. 1395x(r)(5))). 

3 (2) NO PHYSICIAN APPROVAL REQUIRED.—In 

4 establishing the demonstration projects, the Sec5 retary shall ensure that an eligible beneficiary who 

6 participates in a demonstration project, including an 

7 eligible beneficiary who is enrolled for coverage 

8 under a Medicare+Choice plan (or, on and after 

9 January 1, 2006, under a Medicare Advantage 

10 plan), is not required to receive approval from a 

11 physician or other health care provider in order to 

12 receive a chiropractic service under a demonstration 

13 project. 

14 (3) CONSULTATION.—In establishing the dem15 onstration projects, the Secretary shall consult with 

16 chiropractors, organizations representing chiroprac17 tors, eligible beneficiaries, and organizations rep18 resenting eligible beneficiaries. 

19 (4) PARTICIPATION.—Any eligible beneficiary 

20 may participate in the demonstration projects on a 

21 voluntary basis. 

22 (c) CONDUCT OF DEMONSTRATION PROJECTS.—

23 (1) DEMONSTRATION SITES.—
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1 (A) SELECTION OF DEMONSTRATION

2 SITES.—The Secretary shall conduct dem3 onstration projects at 4 demonstration sites. 

4 (B) GEOGRAPHIC DIVERSITY.—Of the sites 

5 described in subparagraph (A)—

6 (i) 2 shall be in rural areas; and 

7 (ii) 2 shall be in urban areas. 

8 (C) SITES LOCATED IN HPSAS.—At least 1 

9 site described in clause (i) of subparagraph (B) 

10 and at least 1 site described in clause (ii) of 

11 such subparagraph shall be located in an area 

12 that is designated under section 332(a)(1)(A) of 

13 the Public Health Service Act (42 U.S.C. 

14 254e(a)(1)(A)) as a health professional short15 age area. 

16 (2) IMPLEMENTATION; DURATION.—

17 (A) IMPLEMENTATION.—The Secretary 

18 shall not implement the demonstration projects 

19 before October 1, 2004. 

20 (B) DURATION.—The Secretary shall com21 plete the demonstration projects by the date 

22 that is 2 years after the date on which the first 

23 demonstration project is implemented. 

24 (d) EVALUATION AND REPORT.—
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1 (1) EVALUATION.—The Secretary shall conduct 

2 an evaluation of the demonstration projects—

3 (A) to determine whether eligible bene4 ficiaries who use chiropractic services use a 

5 lesser overall amount of items and services for 

6 which payment is made under the medicare pro7 gram than eligible beneficiaries who do not use 

8 such services; 

9 (B) to determine the cost of providing pay10 ment for chiropractic services under the medi11 care program; 

12 (C) to determine the satisfaction of eligible 

13 beneficiaries participating in the demonstration 

14 projects and the quality of care received by such 

15 beneficiaries; and 

16 (D) to evaluate such other matters as the 

17 Secretary determines is appropriate. 

18 (2) REPORT.—Not later than the date that is 

19 1 year after the date on which the demonstration 

20 projects conclude, the Secretary shall submit to Con21 gress a report on the evaluation conducted under 

22 paragraph (1) together with such recommendations 

23 for legislation or administrative action as the Sec24 retary determines is appropriate. 
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1 (e) WAIVER OF MEDICARE REQUIREMENTS.—The 

2 Secretary shall waive compliance with such requirements 

3 of the medicare program to the extent and for the period 

4 the Secretary finds necessary to conduct the demonstra5 tion projects. 

6 (f) FUNDING.—

7 (1) DEMONSTRATION PROJECTS.—

8 (A) IN GENERAL.—Subject to subpara9 graph (B) and paragraph (2), the Secretary 

10 shall provide for the transfer from the Federal 

11 Supplementary Insurance Trust Fund under 

12 section 1841 of the Social Security Act (42 

13 U.S.C. 1395t) of such funds as are necessary 

14 for the costs of carrying out the demonstration 

15 projects under this section. 

16 (B) LIMITATION.—In conducting the dem17 onstration projects under this section, the Sec18 retary shall ensure that the aggregate payments 

19 made by the Secretary under the medicare pro20 gram do not exceed the amount which the Sec21 retary would have paid under the medicare pro22 gram if the demonstration projects under this 

23 section were not implemented. 

24 (2) EVALUATION AND REPORT.—There are au25 thorized to be appropriated such sums as are nec-
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•S 1926 IS 

1 essary for the purpose of developing and submitting 

2 the report to Congress under subsection (d). 

3 TITLE IV—PROVISIONS 

4 RELATING TO PARTS A AND B 

5 Subtitle A—Home Health Services 

6 SEC. 401. DEMONSTRATION PROJECT TO CLARIFY THE 

7 DEFINITION OF HOMEBOUND. 

8 (a) DEMONSTRATION PROJECT.—Not later than 180 

9 days after the date of the enactment of this Act, the Sec10 retary shall conduct a 2-year demonstration project under 

11 part B of title XVIII of the Social Security Act under 

12 which medicare beneficiaries with chronic conditions de13 scribed in subsection (b) are deemed to be homebound for 

14 purposes of receiving home health services under the medi15 care program. 

16 (b) MEDICARE BENEFICIARY DESCRIBED.—For pur17 poses of subsection (a), a medicare beneficiary is eligible 

18 to be deemed to be homebound, without regard to the pur19 pose, frequency, or duration of absences from the home, 

20 if—

21 (1) the beneficiary has been certified by one 

22 physician as an individual who has a permanent and 

23 severe, disabling condition that is not expected to 

24 improve; 
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•S 1926 IS 

1 (2) the beneficiary is dependent upon assistance 

2 from another individual with at least 3 out of the 5 

3 activities of daily living for the rest of the bene4 ficiary’s life; 

5 (3) the beneficiary requires skilled nursing serv6 ices for the rest of the beneficiary’s life and the 

7 skilled nursing is more than medication manage8 ment; 

9 (4) an attendant is required to visit the bene10 ficiary on a daily basis to monitor and treat the 

11 beneficiary’s medical condition or to assist the bene12 ficiary with activities of daily living; 

13 (5) the beneficiary requires technological assist14 ance or the assistance of another person to leave the 

15 home; and 

16 (6) the beneficiary does not regularly work in a 

17 paid position full-time or part-time outside the 

18 home. 

19 (c) DEMONSTRATION PROJECT SITES.—The dem20 onstration project established under this section shall be 

21 conducted in 3 States selected by the Secretary to rep22 resent the Northeast, Midwest, and Western regions of the 

23 United States. 
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•S 1926 IS 

1 (d) LIMITATION ON NUMBER OF PARTICIPANTS.—

2 The aggregate number of such beneficiaries that may par3 ticipate in the project may not exceed 15,000. 

4 (e) DATA.—The Secretary shall collect such data on 

5 the demonstration project with respect to the provision of 

6 home health services to medicare beneficiaries that relates 

7 to quality of care, patient outcomes, and additional costs, 

8 if any, to the medicare program. 

9 (f) REPORT TO CONGRESS.—Not later than 1 year 

10 after the date of the completion of the demonstration 

11 project under this section, the Secretary shall submit to 

12 Congress a report on the project using the data collected 

13 under subsection (e). The report shall include the fol14 lowing: 

15 (1) An examination of whether the provision of 

16 home health services to medicare beneficiaries under 

17 the project has had any of the following effects: 

18 (A) Has adversely affected the provision of 

19 home health services under the medicare pro20 gram.

21 (B) Has directly caused an increase of ex22 penditures under the medicare program for the 

23 provision of such services that is directly attrib24 utable to such clarification. 
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1 (2) The specific data evidencing the amount of 

2 any increase in expenditures that is directly attrib3 utable to the demonstration project (expressed both 

4 in absolute dollar terms and as a percentage) above 

5 expenditures that would otherwise have been in6 curred for home health services under the medicare 

7 program. 

8 (3) Specific recommendations to exempt perma9 nently and severely disabled homebound beneficiaries 

10 from restrictions on the length, frequency, and pur11 pose of their absences from the home to qualify for 

12 home health services without incurring additional 

13 costs to the medicare program. 

14 (g) WAIVER AUTHORITY.—The Secretary shall waive 

15 compliance with the requirements of title XVIII of the So16 cial Security Act (42 U.S.C. 1395 et seq.) to such extent 

17 and for such period as the Secretary determines is nec18 essary to conduct demonstration projects. 

19 (h) CONSTRUCTION.—Nothing in this section shall be 

20 construed as waiving any applicable civil monetary pen21 alty, criminal penalty, or other remedy available to the 

22 Secretary under title XI or title XVIII of the Social Secu23 rity Act for acts prohibited under such titles, including 

24 penalties for false certifications for purposes of receipt of 

25 items or services under the medicare program. 
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•S 1926 IS 

1 (i) AUTHORIZATION OF APPROPRIATIONS.—Pay2 ments for the costs of carrying out the demonstration 

3 project under this section shall be made from the Federal 

4 Supplementary Medical Insurance Trust Fund under sec5 tion 1841 of such Act (42 U.S.C. 1395t). 

6 (j) DEFINITIONS.—In this section: 

7 (1) MEDICARE BENEFICIARY.—The term 

8 ‘‘medicare beneficiary’’ means an individual who is 

9 enrolled under part B of title XVIII of the Social 

10 Security Act. 

11 (2) HOME HEALTH SERVICES.—The term 

12 ‘‘home health services’’ has the meaning given such 

13 term in section 1861(m) of the Social Security Act 

14 (42 U.S.C. 1395x(m)). 

15 (3) ACTIVITIES OF DAILY LIVING DEFINED.—

16 The term ‘‘activities of daily living’’ means eating, 

17 toileting, transferring, bathing, and dressing. 

18 SEC. 402. DEMONSTRATION PROJECT FOR MEDICAL ADULT 

19 DAY-CARE SERVICES. 

20 (a) ESTABLISHMENT.—Subject to the succeeding 

21 provisions of this section, the Secretary shall establish a 

22 demonstration project (in this section referred to as the 

23 ‘‘demonstration project’’) under which the Secretary shall, 

24 as part of a plan of an episode of care for home health 

25 services established for a medicare beneficiary, permit a 
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•S 1926 IS 

1 home health agency, directly or under arrangements with 

2 a medical adult day-care facility, to provide medical adult 

3 day-care services as a substitute for a portion of home 

4 health services that would otherwise be provided in the 

5 beneficiary’s home. 

6 (b) PAYMENT.—

7 (1) IN GENERAL.—Subject to paragraph (2), 

8 the amount of payment for an episode of care for 

9 home health services, a portion of which consists of 

10 substitute medical adult day-care services, under the 

11 demonstration project shall be made at a rate equal 

12 to 95 percent of the amount that would otherwise 

13 apply for such home health services under section 

14 1895 of the Social Security Act (42 U.S.C. 1395fff). 

15 In no case may a home health agency, or a medical 

16 adult day-care facility under arrangements with a 

17 home health agency, separately charge a beneficiary 

18 for medical adult day-care services furnished under 

19 the plan of care. 

20 (2) ADJUSTMENT IN CASE OF OVERUTILIZA21 TION OF SUBSTITUTE ADULT DAY-CARE SERVICES

22 TO ENSURE BUDGET NEUTRALITY.—The Secretary 

23 shall monitor the expenditures under the demonstra24 tion project and under title XVIII of the Social Se25 curity Act for home health services. If the Secretary 
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•S 1926 IS 

1 estimates that the total expenditures under the dem2 onstration project and under such title XVIII for 

3 home health services for a period determined by the 

4 Secretary exceed expenditures that would have been 

5 made under such title XVIII for home health serv6 ices for such period if the demonstration project had 

7 not been conducted, the Secretary shall adjust the 

8 rate of payment to medical adult day-care facilities 

9 under paragraph (1) in order to eliminate such ex10 cess. 

11 (c) DEMONSTRATION PROJECT SITES.—The dem12 onstration project established under this section shall be 

13 conducted in not more than 5 sites in States selected by 

14 the Secretary that license or certify providers of services 

15 that furnish medical adult day-care services. 

16 (d) DURATION.—The Secretary shall conduct the 

17 demonstration project for a period of 3 years. 

18 (e) VOLUNTARY PARTICIPATION.—Participation of 

19 medicare beneficiaries in the demonstration project shall 

20 be voluntary. The total number of such beneficiaries that 

21 may participate in the project at any given time may not 

22 exceed 15,000. 

23 (f) PREFERENCE IN SELECTING AGENCIES.—In se24 lecting home health agencies to participate under the dem25 onstration project, the Secretary shall give preference to 
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•S 1926 IS 

1 those agencies that are currently licensed or certified 

2 through common ownership and control to furnish medical 

3 adult day-care services. 

4 (g) WAIVER AUTHORITY.—The Secretary may waive 

5 such requirements of title XVIII of the Social Security Act 

6 as may be necessary for the purposes of carrying out the 

7 demonstration project, other than waiving the requirement 

8 that an individual be homebound in order to be eligible 

9 for benefits for home health services. 

10 (h) EVALUATION AND REPORT.—The Secretary shall 

11 conduct an evaluation of the clinical and cost-effectiveness 

12 of the demonstration project. Not later than 6 months 

13 after the completion of the project, the Secretary shall 

14 submit to Congress a report on the evaluation, and shall 

15 include in the report the following:

16 (1) An analysis of the patient outcomes and 

17 costs of furnishing care to the medicare beneficiaries 

18 participating in the project as compared to such out19 comes and costs to beneficiaries receiving only home 

20 health services for the same health conditions. 

21 (2) Such recommendations regarding the exten22 sion, expansion, or termination of the project as the 

23 Secretary determines appropriate. 

24 (i) DEFINITIONS.—In this section: 
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•S 1926 IS 

1 (1) HOME HEALTH AGENCY.—The term ‘‘home 

2 health agency’’ has the meaning given such term in 

3 section 1861(o) of the Social Security Act (42 

4 U.S.C. 1395x(o)). 

5 (2) MEDICAL ADULT DAY-CARE FACILITY.—The 

6 term ‘‘medical adult day-care facility’’ means a facil7 ity that—

8 (A) has been licensed or certified by a 

9 State to furnish medical adult day-care services 

10 in the State for a continuous 2-year period; 

11 (B) is engaged in providing skilled nursing 

12 services and other therapeutic services directly 

13 or under arrangement with a home health agen14 cy; 

15 (C) is licensed and certified by the State in 

16 which it operates or meets such standards es17 tablished by the Secretary to assure quality of 

18 care and such other requirements as the Sec19 retary finds necessary in the interest of the 

20 health and safety of individuals who are fur21 nished services in the facility; and 

22 (D) provides medical adult day-care serv23 ices. 

24 (3) MEDICAL ADULT DAY-CARE SERVICES.—

25 The term ‘‘medical adult day-care services’’ means—
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•S 1926 IS 

1 (A) home health service items and services 

2 described in paragraphs (1) through (7) of sec3 tion 1861(m) furnished in a medical adult day4 care facility; 

5 (B) a program of supervised activities fur6 nished in a group setting in the facility that—

7 (i) meet such criteria as the Secretary 

8 determines appropriate; and 

9 (ii) is designed to promote physical 

10 and mental health of the individuals; and 

11 (C) such other services as the Secretary 

12 may specify. 

13 (4) MEDICARE BENEFICIARY.—The term 

14 ‘‘medicare beneficiary’’ means an individual entitled 

15 to benefits under part A of this title, enrolled under 

16 part B of this title, or both. 

17 SEC. 403. TEMPORARY SUSPENSION OF OASIS REQUIRE18 MENT FOR COLLECTION OF DATA ON NON19 MEDICARE AND NON-MEDICAID PATIENTS. 

20 (a) IN GENERAL.—During the period described in 

21 subsection (b), the Secretary may not require, under sec22 tion 4602(e) of the Balanced Budget Act of 1997 (Public 

23 Law 105–33; 111 Stat. 467) or otherwise under OASIS, 

24 a home health agency to gather or submit information that 

25 relates to an individual who is not eligible for benefits 
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•S 1926 IS 

1 under either title XVIII or title XIX of the Social Security 

2 Act (such information in this section referred to as ‘‘non3 medicare/medicaid OASIS information’’). 

4 (b) PERIOD OF SUSPENSION.—The period described 

5 in this subsection—

6 (1) begins on the date of the enactment of this 

7 Act; and 

8 (2) ends on the last day of the second month 

9 beginning after the date as of which the Secretary 

10 has published final regulations regarding the collec11 tion and use by the Centers for Medicare & Medicaid 

12 Services of non-medicare/medicaid OASIS informa13 tion following the submission of the report required 

14 under subsection (c). 

15 (c) REPORT.—

16 (1) STUDY.—The Secretary shall conduct a 

17 study on how non-medicare/medicaid OASIS infor18 mation is and can be used by large home health 

19 agencies. Such study shall examine—

20 (A) whether there are unique benefits from 

21 the analysis of such information that cannot be 

22 derived from other information available to, or 

23 collected by, such agencies; and 

24 (B) the value of collecting such informa25 tion by small home health agencies compared to 
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•S 1926 IS 

1 the administrative burden related to such collec2 tion. 

3 In conducting the study the Secretary shall obtain 

4 recommendations from quality assessment experts in 

5 the use of such information and the necessity of 

6 small, as well as large, home health agencies col7 lecting such information. 

8 (2) REPORT.—The Secretary shall submit to 

9 Congress a report on the study conducted under 

10 paragraph (1) by not later than 18 months after the 

11 date of the enactment of this Act. 

12 (d) CONSTRUCTION.—Nothing in this section shall be 

13 construed as preventing home health agencies from col14 lecting non-medicare/medicaid OASIS information for 

15 their own use. 

16 SEC. 404. MEDPAC STUDY ON MEDICARE MARGINS OF 

17 HOME HEALTH AGENCIES. 

18 (a) STUDY.—The Medicare Payment Advisory Com19 mission shall conduct a study of payment margins of home 

20 health agencies under the home health prospective pay21 ment system under section 1895 of the Social Security Act 

22 (42 U.S.C. 1395fff). Such study shall examine whether 

23 systematic differences in payment margins are related to 

24 differences in case mix (as measured by home health re25 source groups (HHRGs)) among such agencies. The study 
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•S 1926 IS 

1 shall use the partial or full-year cost reports filed by home 

2 health agencies. 

3 (b) REPORT.—Not later than 2 years after the date 

4 of the enactment of this Act, the Commission shall submit 

5 to Congress a report on the study under subsection (a).

6 SEC. 405. COVERAGE OF RELIGIOUS NONMEDICAL HEALTH 

7 CARE INSTITUTION SERVICES FURNISHED IN 

8 THE HOME. 

9 (a) IN GENERAL.—Section 1821(a) (42 U.S.C. 

10 1395i–5(a)) is amended—

11 (1) in the matter preceding paragraph (1), by 

12 inserting ‘‘and for home health services furnished an 

13 individual by a religious nonmedical health care in14 stitution’’ after ‘‘religious nonmedical health care in15 stitution’’; and 

16 (2) in paragraph (2)—

17 (A) by striking ‘‘or extended care services’’ 

18 and inserting ‘‘, extended care services, or home 

19 health services’’; and 

20 (B) by inserting ‘‘, or receiving services 

21 from a home health agency,’’ after ‘‘skilled 

22 nursing facility’’. 

23 (b) DEFINITION.—Section 1861 (42 U.S.C. 1395x), 

24 as amended by section 342, is amended by adding at the 

25 end the following new section: 
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•S 1926 IS 

1 ‘‘Extended Care in Religious Nonmedical Health Care 

2 Institutions 

3 ‘‘(aaa)(1) The term ‘home health agency’ also in4 cludes a religious nonmedical health care institution (as 

5 defined in subsection (ss)(1)), but only with respect to 

6 items and services ordinarily furnished by such an institu7 tion to individuals in their homes, and that are comparable 

8 to items and services furnished to individuals by a home 

9 health agency that is not religious nonmedical health care 

10 institution. 

11 ‘‘(2)(A) Subject to subparagraphs (B), payment may 

12 be made with respect to services provided by such an insti13 tution only to such extent and under such conditions, limi14 tations, and requirements (in addition to or in lieu of the 

15 conditions, limitations, and requirements otherwise appli16 cable) as may be provided in regulations consistent with 

17 section 1821. 

18 ‘‘(B) Notwithstanding any other provision of this 

19 title, payment may not be made under subparagraph 

20 (A)—

21 ‘‘(i) in a year insofar as such payments exceed 

22 $700,000; and 

23 ‘‘(ii) after December 31, 2006.’’. 
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1 Subtitle B—Graduate Medical 

2 Education 

3 SEC. 411. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR 

4 GERIATRIC RESIDENCY OR FELLOWSHIP 

5 PROGRAMS. 

6 (a) CLARIFICATION OF CONGRESSIONAL INTENT.—

7 Congress intended section 1886(h)(5)(F)(ii) of the Social 

8 Security Act (42 U.S.C. 1395ww(h)(5)(F)(ii)), as added 

9 by section 9202 of the Consolidated Omnibus Budget Rec10 onciliation Act of 1985 (Public Law 99–272), to provide 

11 an exception to the initial residency period for geriatric 

12 residency or fellowship programs such that, where a par13 ticular approved geriatric training program requires a 

14 resident to complete 2 years of training to initially become 

15 board eligible in the geriatric specialty, the 2 years spent 

16 in the geriatric training program are treated as part of 

17 the resident’s initial residency period, but are not counted 

18 against any limitation on the initial residency period. 

19 (b) INTERIM FINAL REGULATORY AUTHORITY AND

20 EFFECTIVE DATE.—The Secretary shall promulgate in21 terim final regulations consistent with the congressional 

22 intent expressed in this section after notice and pending 

23 opportunity for public comment to be effective for cost re24 porting periods beginning on or after October 1, 2003. 
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•S 1926 IS 

1 SEC. 412. TREATMENT OF VOLUNTEER SUPERVISION. 

2 (a) MORATORIUM ON CHANGES IN TREATMENT.—

3 During the 1-year period beginning on January 1, 2004, 

4 for purposes of applying subsections (d)(5)(B) and (h) of 

5 section 1886 of the Social Security Act (42 U.S.C. 

6 1395ww), the Secretary shall allow all hospitals to count 

7 residents in osteopathic and allopathic family practice pro8 grams in existence as of January 1, 2002, who are train9 ing at non-hospital sites, without regard to the financial 

10 arrangement between the hospital and the teaching physi11 cian practicing in the non-hospital site to which the resi12 dent has been assigned. 

13 (b) STUDY AND REPORT.—

14 (1) STUDY.—The Inspector General of the De15 partment of Health and Human Services shall con16 duct a study of the appropriateness of alternative 

17 payment methodologies under such sections for the 

18 costs of training residents in non-hospital settings. 

19 (2) REPORT.—Not later than 1 year after the 

20 date of the enactment of this Act, the Inspector 

21 General shall submit to Congress a report on the 

22 study conducted under paragraph (1), together with 

23 such recommendations as the Inspector General de24 termines appropriate.
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1 Subtitle C—Chronic Care 

2 Improvement 

3 SEC. 421. VOLUNTARY CHRONIC CARE IMPROVEMENT 

4 UNDER TRADITIONAL FEE-FOR-SERVICE. 

5 (a) IN GENERAL.—Title XVIII is amended by insert6 ing after section 1806 the following new section: 

7 ‘‘CHRONIC CARE IMPROVEMENT

8 ‘‘SEC. 1807. (a) IMPLEMENTATION OF CHRONIC

9 CARE IMPROVEMENT PROGRAMS.—

10 ‘‘(1) IN GENERAL.—The Secretary shall provide 

11 for the phased-in development, testing, evaluation, 

12 and implementation of chronic care improvement 

13 programs in accordance with this section. Each such 

14 program shall be designed to improve clinical quality 

15 and beneficiary satisfaction and achieve spending 

16 targets with respect to expenditures under this title 

17 for targeted beneficiaries with one or more threshold 

18 conditions. 

19 ‘‘(2) DEFINITIONS.—For purposes of this sec20 tion: 

21 ‘‘(A) CHRONIC CARE IMPROVEMENT PRO22 GRAM.—The term ‘chronic care improvement 

23 program’ means a program described in para24 graph (1) that is offered under an agreement 

25 under subsection (b) or (c). 
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•S 1926 IS 

1 ‘‘(B) CHRONIC CARE IMPROVEMENT ORGA2 NIZATION.—The term ‘chronic care improve3 ment organization’ means an entity that has 

4 entered into an agreement under subsection (b) 

5 or (c) to provide, directly or through contracts 

6 with subcontractors, a chronic care improve7 ment program under this section. Such an enti8 ty may be a disease management organization, 

9 health insurer, integrated delivery system, phy10 sician group practice, a consortium of such en11 tities, or any other legal entity that the Sec12 retary determines appropriate to carry out a 

13 chronic care improvement program under this 

14 section. 

15 ‘‘(C) CARE MANAGEMENT PLAN.—The 

16 term ‘care management plan’ means a plan es17 tablished under subsection (d) for a participant 

18 in a chronic care improvement program. 

19 ‘‘(D) THRESHOLD CONDITION.—The term 

20 ‘threshold condition’ means a chronic condition, 

21 such as congestive heart failure, diabetes, 

22 chronic obstructive pulmonary disease (COPD), 

23 or other diseases or conditions, as selected by 

24 the Secretary as appropriate for the establish25 ment of a chronic care improvement program. 
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•S 1926 IS 

1 ‘‘(E) TARGETED BENEFICIARY.—The term 

2 ‘targeted beneficiary’ means, with respect to a 

3 chronic care improvement program, an indi4 vidual who—

5 ‘‘(i) is entitled to benefits under part 

6 A and enrolled under part B, but not en7 rolled in a plan under part C; 

8 ‘‘(ii) has one or more threshold condi9 tions covered under such program; and 

10 ‘‘(iii) has been identified under sub11 section (d)(1) as a potential participant in 

12 such program. 

13 ‘‘(3) CONSTRUCTION.—Nothing in this section 

14 shall be construed as—

15 ‘‘(A) expanding the amount, duration, or 

16 scope of benefits under this title; 

17 ‘‘(B) providing an entitlement to partici18 pate in a chronic care improvement program 

19 under this section; 

20 ‘‘(C) providing for any hearing or appeal 

21 rights under section 1869, 1878, or otherwise, 

22 with respect to a chronic care improvement pro23 gram under this section; or 

24 ‘‘(D) providing benefits under a chronic 

25 care improvement program for which a claim 
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•S 1926 IS 

1 may be submitted to the Secretary by any pro2 vider of services or supplier (as defined in sec3 tion 1861(d)). 

4 ‘‘(b) DEVELOPMENTAL PHASE (PHASE I).—

5 ‘‘(1) IN GENERAL.—In carrying out this sec6 tion, the Secretary shall enter into agreements con7 sistent with subsection (f) with chronic care im8 provement organizations for the development, test9 ing, and evaluation of chronic care improvement pro10 grams using randomized controlled trials. The first 

11 such agreement shall be entered into not later than 

12 12 months after the date of the enactment of this 

13 section. 

14 ‘‘(2) AGREEMENT PERIOD.—The period of an 

15 agreement under this subsection shall be for 3 years. 

16 ‘‘(3) MINIMUM PARTICIPATION.—

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

18 enter into agreements under this subsection in 

19 a manner so that chronic care improvement 

20 programs offered under this section are offered 

21 in geographic areas that, in the aggregate, con22 sist of areas in which at least 10 percent of the 

23 aggregate number of medicare beneficiaries re24 side. 
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•S 1926 IS 

1 ‘‘(B) MEDICARE BENEFICIARY DEFINED.—

2 In this paragraph, the term ‘medicare bene3 ficiary’ means an individual who is entitled to 

4 benefits under part A, enrolled under part B, or 

5 both, and who resides in the United States. 

6 ‘‘(4) SITE SELECTION.—In selecting geographic 

7 areas in which agreements are entered into under 

8 this subsection, the Secretary shall ensure that each 

9 chronic care improvement program is conducted in a 

10 geographic area in which at least 10,000 targeted 

11 beneficiaries reside among other individuals entitled 

12 to benefits under part A, enrolled under part B, or 

13 both to serve as a control population. 

14 ‘‘(5) INDEPENDENT EVALUATIONS OF PHASE I

15 PROGRAMS.—The Secretary shall contract for an 

16 independent evaluation of the programs conducted 

17 under this subsection. Such evaluation shall be done 

18 by a contractor with knowledge of chronic care man19 agement programs and demonstrated experience in 

20 the evaluation of such programs. Each evaluation 

21 shall include an assessment of the following factors 

22 of the programs: 

23 ‘‘(A) Quality improvement measures, such 

24 as adherence to evidence-based guidelines and 

25 rehospitalization rates. 
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•S 1926 IS 

1 ‘‘(B) Beneficiary and provider satisfaction. 

2 ‘‘(C) Health outcomes. 

3 ‘‘(D) Financial outcomes, including any 

4 cost savings to the program under this title. 

5 ‘‘(c) EXPANDED IMPLEMENTATION PHASE (PHASE

6 II).—

7 ‘‘(1) IN GENERAL.—With respect to chronic 

8 care improvement programs conducted under sub9 section (b), if the Secretary finds that the results of 

10 the independent evaluation conducted under sub11 section (b)(6) indicate that the conditions specified 

12 in paragraph (2) have been met by a program (or 

13 components of such program), the Secretary shall 

14 enter into agreements consistent with subsection (f) 

15 to expand the implementation of the program (or 

16 components) to additional geographic areas not cov17 ered under the program as conducted under sub18 section (b), which may include the implementation of 

19 the program on a national basis. Such expansion 

20 shall begin not earlier than 2 years after the pro21 gram is implemented under subsection (b) and not 

22 later than 6 months after the date of completion of 

23 such program. 

24 ‘‘(2) CONDITIONS FOR EXPANSION OF PRO25 GRAMS.—The conditions specified in this paragraph 
222

•S 1926 IS 

1 are, with respect to a chronic care improvement pro2 gram conducted under subsection (b) for a threshold 

3 condition, that the program is expected to—

4 ‘‘(A) improve the clinical quality of care; 

5 ‘‘(B) improve beneficiary satisfaction; and

6 ‘‘(C) achieve targets for savings to the pro7 gram under this title specified by the Secretary 

8 in the agreement within a range determined to 

9 be appropriate by the Secretary, subject to the 

10 application of budget neutrality with respect to 

11 the program and not taking into account any 

12 payments by the organization under the agree13 ment under the program for risk under sub14 section (f)(3)(B). 

15 ‘‘(3) INDEPENDENT EVALUATIONS OF PHASE II

16 PROGRAMS.—The Secretary shall carry out evalua17 tions of programs expanded under this subsection as 

18 the Secretary determines appropriate. Such evalua19 tions shall be carried out in the similar manner as 

20 is provided under subsection (b)(5). 

21 ‘‘(d) IDENTIFICATION AND ENROLLMENT OF PRO22 SPECTIVE PROGRAM PARTICIPANTS.—

23 ‘‘(1) IDENTIFICATION OF PROSPECTIVE PRO24 GRAM PARTICIPANTS.—The Secretary shall establish 

25 a method for identifying targeted beneficiaries who 
223

•S 1926 IS 

1 may benefit from participation in a chronic care im2 provement program. 

3 ‘‘(2) INITIAL CONTACT BY SECRETARY.—The 

4 Secretary shall communicate with each targeted ben5 eficiary concerning participation in a chronic care 

6 improvement program. Such communication may be 

7 made by the Secretary and shall include information 

8 on the following: 

9 ‘‘(A) A description of the advantages to 

10 the beneficiary in participating in a program. 

11 ‘‘(B) Notification that the organization of12 fering a program may contact the beneficiary 

13 directly concerning such participation. 

14 ‘‘(C) Notification that participation in a 

15 program is voluntary. 

16 ‘‘(D) A description of the method for the 

17 beneficiary to participate or for declining to 

18 participate and the method for obtaining addi19 tional information concerning such participa20 tion. 

21 ‘‘(3) VOLUNTARY PARTICIPATION.—A targeted 

22 beneficiary may participate in a chronic care im23 provement program on a voluntary basis and may 

24 terminate participation at any time. 

25 ‘‘(e) CHRONIC CARE IMPROVEMENT PROGRAMS.—
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•S 1926 IS 

1 ‘‘(1) IN GENERAL.—Each chronic care improve2 ment program shall—

3 ‘‘(A) have a process to screen each tar4 geted beneficiary for conditions other than 

5 threshold conditions, such as impaired cognitive 

6 ability and co-morbidities, for the purposes of 

7 developing an individualized, goal-oriented care 

8 management plan under paragraph (2); 

9 ‘‘(B) provide each targeted beneficiary par10 ticipating in the program with such plan; and 

11 ‘‘(C) carry out such plan and other chronic 

12 care improvement activities in accordance with 

13 paragraph (3). 

14 ‘‘(2) ELEMENTS OF CARE MANAGEMENT

15 PLANS.—A care management plan for a targeted 

16 beneficiary shall be developed with the beneficiary 

17 and shall, to the extent appropriate, include the fol18 lowing: 

19 ‘‘(A) A designated point of contact respon20 sible for communications with the beneficiary 

21 and for facilitating communications with other 

22 health care providers under the plan. 

23 ‘‘(B) Self-care education for the bene24 ficiary (through approaches such as disease 

25 management or medical nutrition therapy) and 
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1 education for primary caregivers and family 

2 members. 

3 ‘‘(C) Education for physicians and other 

4 providers and collaboration to enhance commu5 nication of relevant clinical information. 

6 ‘‘(D) The use of monitoring technologies 

7 that enable patient guidance through the ex8 change of pertinent clinical information, such as 

9 vital signs, symptomatic information, and 

10 health self-assessment. 

11 ‘‘(E) The provision of information about 

12 hospice care, pain and palliative care, and end13 of-life care. 

14 ‘‘(3) CONDUCT OF PROGRAMS.—In carrying out 

15 paragraph (1)(C) with respect to a participant, the 

16 chronic care improvement organization shall—

17 ‘‘(A) guide the participant in managing the 

18 participant’s health (including all co19 morbidities, relevant health care services, and 

20 pharmaceutical needs) and in performing activi21 ties as specified under the elements of the care 

22 management plan of the participant; 

23 ‘‘(B) use decision-support tools such as evi24 dence-based practice guidelines or other criteria 

25 as determined by the Secretary; and 
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1 ‘‘(C) develop a clinical information data2 base to track and monitor each participant 

3 across settings and to evaluate outcomes. 

4 ‘‘(4) ADDITIONAL RESPONSIBILITIES.—

5 ‘‘(A) OUTCOMES REPORT.—Each chronic 

6 care improvement organization offering a 

7 chronic care improvement program shall mon8 itor and report to the Secretary, in a manner 

9 specified by the Secretary, on health care qual10 ity, cost, and outcomes. 

11 ‘‘(B) ADDITIONAL REQUIREMENTS.—Each 

12 such organization and program shall comply 

13 with such additional requirements as the Sec14 retary may specify. 

15 ‘‘(5) ACCREDITATION.—The Secretary may pro16 vide that chronic care improvement programs and 

17 chronic care improvement organizations that are ac18 credited by qualified organizations (as defined by the 

19 Secretary) may be deemed to meet such require20 ments under this section as the Secretary may speci21 fy. 

22 ‘‘(f) TERMS OF AGREEMENTS.—

23 ‘‘(1) TERMS AND CONDITIONS.—

24 ‘‘(A) IN GENERAL.—An agreement under 

25 this section with a chronic care improvement 
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•S 1926 IS 

1 organization shall contain such terms and con2 ditions as the Secretary may specify consistent 

3 with this section.

4 ‘‘(B) CLINICAL, QUALITY IMPROVEMENT, 

5 AND FINANCIAL REQUIREMENTS.—The Sec6 retary may not enter into an agreement with 

7 such an organization under this section for the 

8 operation of a chronic care improvement pro9 gram unless—

10 ‘‘(i) the program and organization 

11 meet the requirements of subsection (e) 

12 and such clinical, quality improvement, fi13 nancial, and other requirements as the 

14 Secretary deems to be appropriate for the 

15 targeted beneficiaries to be served; and 

16 ‘‘(ii) the organization demonstrates to 

17 the satisfaction of the Secretary that the 

18 organization is able to assume financial 

19 risk for performance under the agreement 

20 (as applied under paragraph (3)(B)) with 

21 respect to payments made to the organiza22 tion under such agreement through avail23 able reserves, reinsurance, withholds, or 

24 such other means as the Secretary deter25 mines appropriate. 
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1 ‘‘(2) MANNER OF PAYMENT.—Subject to para2 graph (3)(B), the payment under an agreement 

3 under—

4 ‘‘(A) subsection (b) shall be computed on 

5 a per-member per-month basis; or 

6 ‘‘(B) subsection (c) may be on a per-mem7 ber per-month basis or such other basis as the 

8 Secretary and organization may agree. 

9 ‘‘(3) APPLICATION OF PERFORMANCE STAND10 ARDS.—

11 ‘‘(A) SPECIFICATION OF PERFORMANCE

12 STANDARDS.—Each agreement under this sec13 tion with a chronic care improvement organiza14 tion shall specify performance standards for 

15 each of the factors specified in subsection 

16 (c)(2), including clinical quality and spending 

17 targets under this title, against which the per18 formance of the chronic care improvement orga19 nization under the agreement is measured. 

20 ‘‘(B) ADJUSTMENT OF PAYMENT BASED

21 ON PERFORMANCE.—

22 ‘‘(i) IN GENERAL.—Each such agree23 ment shall provide for adjustments in pay24 ment rates to an organization under the 

25 agreement insofar as the Secretary deter-
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1 mines that the organization failed to meet 

2 the performance standards specified in the 

3 agreement under subparagraph (A). 

4 ‘‘(ii) FINANCIAL RISK FOR PERFORM5 ANCE.—In the case of an agreement under 

6 subsection (b) or (c), the agreement shall 

7 provide for a full recovery for any amount 

8 by which the fees paid to the organization 

9 under the agreement exceed the estimated 

10 savings to the programs under this title at11 tributable to implementation of such agree12 ment. 

13 ‘‘(4) BUDGET NEUTRAL PAYMENT CONDI14 TION.—Under this section, the Secretary shall en15 sure that the aggregate sum of medicare program 

16 benefit expenditures for beneficiaries participating in 

17 chronic care improvement programs and funds paid 

18 to chronic care improvement organizations under 

19 this section, shall not exceed the medicare program 

20 benefit expenditures that the Secretary estimates 

21 would have been made for such targeted bene22 ficiaries in the absence of such programs. 

23 ‘‘(g) FUNDING.—(1) Subject to paragraph (2), there 

24 are appropriated to the Secretary, in appropriate part 

25 from the Federal Hospital Insurance Trust Fund and the 
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•S 1926 IS 

1 Federal Supplementary Medical Insurance Trust Fund, 

2 such sums as may be necessary to provide for agreements 

3 with chronic care improvement programs under this sec4 tion. 

5 ‘‘(2) In no case shall the funding under this section 

6 exceed $100,000,000 in aggregate increased expenditures 

7 under this title (after taking into account any savings at8 tributable to the operation of this section) over the 3-fis9 cal-year period beginning on October 1, 2003.’’. 

10 (b) REPORTS.—The Secretary shall submit to Con11 gress reports on the operation of section 1807 of the So12 cial Security Act, as added by subsection (a), as follows: 

13 (1) Not later than 2 years after the date of the 

14 implementation of such section, the Secretary shall 

15 submit to Congress an interim report on the scope 

16 of implementation of the programs under subsection 

17 (b) of such section, the design of the programs, and 

18 preliminary cost and quality findings with respect to 

19 those programs based on the following measures of 

20 the programs: 

21 (A) Quality improvement measures, such 

22 as adherence to evidence-based guidelines and 

23 rehospitalization rates. 

24 (B) Beneficiary and provider satisfaction. 

25 (C) Health outcomes. 
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1 (D) Financial outcomes. 

2 (2) Not later than 3 years and 6 months after 

3 the date of the implementation of such section the 

4 Secretary shall submit to Congress an update to the 

5 report required under paragraph (1) on the results 

6 of such programs. 

7 (3) The Secretary shall submit to Congress 2 

8 additional biennial reports on the chronic care im9 provement programs conducted under such section. 

10 The first such report shall be submitted not later 

11 than 2 years after the report is submitted under 

12 paragraph (2). Each such report shall include infor13 mation on—

14 (A) the scope of implementation (in terms 

15 of both regions and chronic conditions) of the 

16 chronic care improvement programs; 

17 (B) the design of the programs; and 

18 (C) the improvements in health outcomes 

19 and financial efficiencies that result from such 

20 implementation. 

21 SEC. 422. MEDICARE ADVANTAGE QUALITY IMPROVEMENT 

22 PROGRAMS. 

23 (a) IN GENERAL.—Section 1852(e) (42 U.S.C. 

24 1395w–22(e)) is amended—
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•S 1926 IS 

1 (1) in the heading, by striking ‘‘ASSURANCE’’ 

2 and inserting ‘‘IMPROVEMENT’’;

3 (2) by amending paragraphs (1) through (3) to 

4 read as follows: 

5 ‘‘(1) IN GENERAL.—Each MA organization 

6 shall have an ongoing quality improvement program 

7 for the purpose of improving the quality of care pro8 vided to enrollees in each MA plan offered by such 

9 organization (other than an MA private fee-for-serv10 ice plan or an MSA plan). 

11 ‘‘(2) CHRONIC CARE IMPROVEMENT PRO12 GRAMS.—As part of the quality improvement pro13 gram under paragraph (1), each MA organization 

14 shall have a chronic care improvement program. 

15 Each chronic care improvement program shall have 

16 a method for monitoring and identifying enrollees 

17 with multiple or sufficiently severe chronic condi18 tions that meet criteria established by the organiza19 tion for participation under the program. 

20 ‘‘(3) DATA.—

21 ‘‘(A) COLLECTION, ANALYSIS, AND RE22 PORTING.—

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in clauses (ii) and (iii) with respect 

25 to plans described in such clauses and sub-
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•S 1926 IS 

1 ject to subparagraph (B), as part of the 

2 quality improvement program under para3 graph (1), each MA organization shall pro4 vide for the collection, analysis, and report5 ing of data that permits the measurement 

6 of health outcomes and other indices of 

7 quality. 

8 ‘‘(ii) APPLICATION TO MA REGIONAL

9 PLANS.—The Secretary shall establish as 

10 appropriate by regulation requirements for 

11 the collection, analysis, and reporting of 

12 data that permits the measurement of 

13 health outcomes and other indices of qual14 ity for MA organizations with respect to 

15 MA regional plans. Such requirements may 

16 not exceed the requirements under this 

17 subparagraph with respect to MA local 

18 plans that are preferred provider organiza19 tion plans. 

20 ‘‘(iii) APPLICATION TO PREFERRED

21 PROVIDER ORGANIZATIONS.—Clause (i) 

22 shall apply to MA organizations with re23 spect to MA local plans that are preferred 

24 provider organization plans only insofar as 

25 services are furnished by providers or serv-
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1 ices, physicians, and other health care 

2 practitioners and suppliers that have con3 tracts with such organization to furnish 

4 services under such plans. 

5 ‘‘(iv) DEFINITION OF PREFERRED

6 PROVIDER ORGANIZATION PLAN.—In this 

7 subparagraph, the term ‘preferred provider 

8 organization plan’ means an MA plan 

9 that—

10 ‘‘(I) has a network of providers 

11 that have agreed to a contractually 

12 specified reimbursement for covered 

13 benefits with the organization offering 

14 the plan; 

15 ‘‘(II) provides for reimbursement 

16 for all covered benefits regardless of 

17 whether such benefits are provided 

18 within such network of providers; and 

19 ‘‘(III) is offered by an organiza20 tion that is not licensed or organized 

21 under State law as a health mainte22 nance organization. 

23 ‘‘(B) LIMITATIONS.—

24 ‘‘(i) TYPES OF DATA.—The Secretary 

25 shall not collect under subparagraph (A) 
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•S 1926 IS 

1 data on quality, outcomes, and beneficiary 

2 satisfaction to facilitate consumer choice 

3 and program administration other than the 

4 types of data that were collected by the 

5 Secretary as of November 1, 2003. 

6 ‘‘(ii) CHANGES IN TYPES OF DATA.—

7 Subject to subclause (iii), the Secretary 

8 may only change the types of data that are 

9 required to be submitted under subpara10 graph (A) after submitting to Congress a 

11 report on the reasons for such changes 

12 that was prepared in consultation with MA 

13 organizations and private accrediting bod14 ies. 

15 ‘‘(iii) CONSTRUCTION.—Nothing in 

16 the subsection shall be construed as re17 stricting the ability of the Secretary to 

18 carry out the duties under section 

19 1851(d)(4)(D).’’; 

20 (3) in paragraph (4)(B), by amending clause (i) 

21 to read as follows: 

22 ‘‘(i) Paragraphs (1) through (3) of 

23 this subsection (relating to quality im24 provement programs).’’; and 

25 (4) by striking paragraph (5). 
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1 (b) CONFORMING AMENDMENT.—Section 

2 1852(c)(1)(I) (42 U.S.C. 1395w–22(c)(1)(I)) is amended 

3 to read as follows: 

4 ‘‘(I) QUALITY IMPROVEMENT PROGRAM.—

5 A description of the organization’s quality im6 provement program under subsection (e).’’. 

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

8 this section shall apply with respect to contract years be9 ginning on and after January 1, 2006. 

10 SEC. 423. CHRONICALLY ILL MEDICARE BENEFICIARY RE11 SEARCH, DATA, DEMONSTRATION STRATEGY. 

12 (a) DEVELOPMENT OF PLAN.—Not later than 6 

13 months after the date of the enactment of this Act, the 

14 Secretary shall develop a plan to improve quality of care 

15 and reduce the cost of care for chronically ill medicare 

16 beneficiaries. 

17 (b) PLAN REQUIREMENTS.—The plan will utilize ex18 isting data and identify data gaps, develop research initia19 tives, and propose intervention demonstration programs to 

20 provide better health care for chronically ill medicare bene21 ficiaries. The plan shall—

22 (1) integrate existing data sets including, the 

23 Medicare Current Beneficiary Survey (MCBS), Min24 imum Data Set (MDS), Outcome and Assessment 
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•S 1926 IS 

1 Information Set (OASIS), data from Quality Im2 provement Organizations (QIO), and claims data; 

3 (2) identify any new data needs and a method4 ology to address new data needs; 

5 (3) plan for the collection of such data in a 

6 data warehouse; and

7 (4) develop a research agenda using such data. 

8 (c) CONSULTATION.—In developing the plan under 

9 this section, the Secretary shall consult with experts in 

10 the fields of care for the chronically ill (including clini11 cians). 

12 (d) IMPLEMENTATION.—Not later than 2 years after 

13 the date of the enactment of this Act, the Secretary shall 

14 implement the plan developed under this section. The Sec15 retary may contract with appropriate entities to imple16 ment such plan. 

17 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

18 are authorized to be appropriated to the Secretary such 

19 sums as may be necessary in fiscal years 2004 and 2005 

20 to carry out this section. 
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•S 1926 IS 

1 Subtitle D—Other Provisions 

2 SEC. 431. IMPROVEMENTS IN NATIONAL AND LOCAL COV3 ERAGE DETERMINATION PROCESS TO RE4 SPOND TO CHANGES IN TECHNOLOGY. 

5 (a) NATIONAL AND LOCAL COVERAGE DETERMINA6 TION PROCESS.—

7 (1) IN GENERAL.—Section 1862 (42 U.S.C. 

8 1395y), as amended by sections 948 and 950, is 

9 amended—

10 (A) in the third sentence of subsection (a), 

11 by inserting ‘‘consistent with subsection (l)’’ 

12 after ‘‘the Secretary shall ensure’’; and 

13 (B) by adding at the end the following new 

14 subsection: 

15 ‘‘(l) NATIONAL AND LOCAL COVERAGE DETERMINA16 TION PROCESS.—

17 ‘‘(1) FACTORS AND EVIDENCE USED IN MAKING

18 NATIONAL COVERAGE DETERMINATIONS.—The Sec19 retary shall make available to the public the factors 

20 considered in making national coverage determina21 tions of whether an item or service is reasonable and 

22 necessary. The Secretary shall develop guidance doc23 uments to carry out this paragraph in a manner 

24 similar to the development of guidance documents 
239

•S 1926 IS 

1 under section 701(h) of the Federal Food, Drug, 

2 and Cosmetic Act (21 U.S.C. 371(h)). 

3 ‘‘(2) TIMEFRAME FOR DECISIONS ON REQUESTS

4 FOR NATIONAL COVERAGE DETERMINATIONS.—In 

5 the case of a request for a national coverage deter6 mination that—

7 ‘‘(A) does not require a technology assess8 ment from an outside entity or deliberation 

9 from the Medicare Coverage Advisory Com10 mittee, the decision on the request shall be 

11 made not later than 6 months after the date of 

12 the request; or 

13 ‘‘(B) requires such an assessment or delib14 eration and in which a clinical trial is not re15 quested, the decision on the request shall be 

16 made not later than 9 months after the date of 

17 the request. 

18 ‘‘(3) PROCESS FOR PUBLIC COMMENT IN NA19 TIONAL COVERAGE DETERMINATIONS.—

20 ‘‘(A) PERIOD FOR PROPOSED DECISION.—

21 Not later than the end of the 6-month period 

22 (or 9-month period for requests described in 

23 paragraph (2)(B)) that begins on the date a re24 quest for a national coverage determination is 

25 made, the Secretary shall make a draft of pro-
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•S 1926 IS 

1 posed decision on the request available to the 

2 public through the Internet website of the Cen3 ters for Medicare & Medicaid Services or other 

4 appropriate means. 

5 ‘‘(B) 30-DAY PERIOD FOR PUBLIC COM6 MENT.—Beginning on the date the Secretary 

7 makes a draft of the proposed decision available 

8 under subparagraph (A), the Secretary shall 

9 provide a 30-day period for public comment on 

10 such draft. 

11 ‘‘(C) 60-DAY PERIOD FOR FINAL DECI12 SION.—Not later than 60 days after the conclu13 sion of the 30-day period referred to under sub14 paragraph (B), the Secretary shall—

15 ‘‘(i) make a final decision on the re16 quest; 

17 ‘‘(ii) include in such final decision 

18 summaries of the public comments received 

19 and responses to such comments; 

20 ‘‘(iii) make available to the public the 

21 clinical evidence and other data used in 

22 making such a decision when the decision 

23 differs from the recommendations of the 

24 Medicare Coverage Advisory Committee; 

25 and 
241

•S 1926 IS 

1 ‘‘(iv) in the case of a final decision 

2 under clause (i) to grant the request for 

3 the national coverage determination, the 

4 Secretary shall assign a temporary or per5 manent code (whether existing or unclassi6 fied) and implement the coding change.

7 ‘‘(4) CONSULTATION WITH OUTSIDE EXPERTS

8 IN CERTAIN NATIONAL COVERAGE DETERMINA9 TIONS.—With respect to a request for a national 

10 coverage determination for which there is not a re11 view by the Medicare Coverage Advisory Committee, 

12 the Secretary shall consult with appropriate outside 

13 clinical experts. 

14 ‘‘(5) LOCAL COVERAGE DETERMINATION PROC15 ESS.—

16 ‘‘(A) PLAN TO PROMOTE CONSISTENCY OF

17 COVERAGE DETERMINATIONS.—The Secretary 

18 shall develop a plan to evaluate new local cov19 erage determinations to determine which deter20 minations should be adopted nationally and to 

21 what extent greater consistency can be achieved 

22 among local coverage determinations. 

23 ‘‘(B) CONSULTATION.—The Secretary 

24 shall require the fiscal intermediaries or car25 riers providing services within the same area to 
242

•S 1926 IS 

1 consult on all new local coverage determinations 

2 within the area. 

3 ‘‘(C) DISSEMINATION OF INFORMATION.—

4 The Secretary should serve as a center to dis5 seminate information on local coverage deter6 minations among fiscal intermediaries and car7 riers to reduce duplication of effort. 

8 ‘‘(6) NATIONAL AND LOCAL COVERAGE DETER9 MINATION DEFINED.—For purposes of this sub10 section—

11 ‘‘(A) NATIONAL COVERAGE DETERMINA12 TION.—The term ‘national coverage determina13 tion’ means a determination by the Secretary 

14 with respect to whether or not a particular item 

15 or service is covered nationally under this title. 

16 ‘‘(B) LOCAL COVERAGE DETERMINA17 TION.—The term ‘local coverage determination’ 

18 has the meaning given that in section 

19 1869(f)(2)(B).’’. 

20 (2) EFFECTIVE DATE.—The amendments made 

21 by paragraph (1) shall apply to national coverage 

22 determinations as of January 1, 2004, and section 

23 1862(l)(5) of the Social Security Act, as added by 

24 such paragraph, shall apply to local coverage deter25 minations made on or after July 1, 2004. 
243

•S 1926 IS 

1 (b) MEDICARE COVERAGE OF ROUTINE COSTS ASSO2 CIATED WITH CERTAIN CLINICAL TRIALS OF CATEGORY

3 A DEVICES.—

4 (1) IN GENERAL.—Section 1862 (42 U.S.C. 

5 1395y), as amended by subsection (a), is amended 

6 by adding at the end the following new subsection: 

7 ‘‘(m) COVERAGE OF ROUTINE COSTS ASSOCIATED

8 WITH CERTAIN CLINICAL TRIALS OF CATEGORY A DE9 VICES.—

10 ‘‘(1) IN GENERAL.—In the case of an individual 

11 entitled to benefits under part A, or enrolled under 

12 part B, or both who participates in a category A 

13 clinical trial, the Secretary shall not exclude under 

14 subsection (a)(1) payment for coverage of routine 

15 costs of care (as defined by the Secretary) furnished 

16 to such individual in the trial. 

17 ‘‘(2) CATEGORY A CLINICAL TRIAL.—For pur18 poses of paragraph (1), a ‘category A clinical trial’ 

19 means a trial of a medical device if—

20 ‘‘(A) the trial is of an experimental/inves21 tigational (category A) medical device (as de22 fined in regulations under section 405.201(b) of 

23 title 42, Code of Federal Regulations (as in ef24 fect as of September 1, 2003)); 
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•S 1926 IS 

1 ‘‘(B) the trial meets criteria established by 

2 the Secretary to ensure that the trial conforms 

3 to appropriate scientific and ethical standards; 

4 and 

5 ‘‘(C) in the case of a trial initiated before 

6 January 1, 2010, the device involved in the trial 

7 has been determined by the Secretary to be in8 tended for use in the diagnosis, monitoring, or 

9 treatment of an immediately life-threatening 

10 disease or condition.’’. 

11 (2) EFFECTIVE DATE.—The amendment made 

12 by paragraph (1) shall apply to routine costs in13 curred on and after January 1, 2005, and, as of 

14 such date, section 411.15(o) of title 42, Code of 

15 Federal Regulations, is superseded to the extent in16 consistent with section 1862(m) of the Social Secu17 rity Act, as added by such paragraph. 

18 (3) RULE OF CONSTRUCTION.—Nothing in the 

19 amendment made by paragraph (1) shall be con20 strued as applying to, or affecting, coverage or pay21 ment for a nonexperimental/investigational (category 

22 B) device. 

23 (c) ISSUANCE OF TEMPORARY NATIONAL CODES.—

24 Not later than July 1, 2004, the Secretary shall imple25 ment revised procedures for the issuance of temporary na-
245

•S 1926 IS 

1 tional HCPCS codes under part B of title XVIII of the 

2 Social Security Act. 

3 SEC. 432. EXTENSION OF TREATMENT OF CERTAIN PHYSI4 CIAN PATHOLOGY SERVICES UNDER MEDI5 CARE. 

6 Section 542(c) of BIPA (114 Stat. 2763A–551) is 

7 amended by inserting ‘‘, and for services furnished during 

8 2005 and 2006’’ before the period at the end. 

9 SEC. 433. PAYMENT FOR PANCREATIC ISLET CELL INVES10 TIGATIONAL TRANSPLANTS FOR MEDICARE 

11 BENEFICIARIES IN CLINICAL TRIALS. 

12 (a) CLINICAL TRIAL.—

13 (1) IN GENERAL.—The Secretary, acting 

14 through the National Institute of Diabetes and Di15 gestive and Kidney Disorders, shall conduct a clin16 ical investigation of pancreatic islet cell transplan17 tation which includes medicare beneficiaries. 

18 (2) AUTHORIZATION OF APPROPRIATIONS.—

19 There are authorized to be appropriated to the Sec20 retary such sums as may be necessary to conduct 

21 the clinical investigation under paragraph (1). 

22 (b) MEDICARE PAYMENT.—Not earlier than October 

23 1, 2004, the Secretary shall pay for the routine costs as 

24 well as transplantation and appropriate related items and 

25 services (as described in subsection (c)) in the case of 
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•S 1926 IS 

1 medicare beneficiaries who are participating in a clinical 

2 trial described in subsection (a) as if such transplantation 

3 were covered under title XVIII of such Act and as would 

4 be paid under part A or part B of such title for such bene5 ficiary. 

6 (c) SCOPE OF PAYMENT.—For purposes of sub7 section (b): 

8 (1) The term ‘‘routine costs’’ means reasonable 

9 and necessary routine patient care costs (as defined 

10 in the Centers for Medicare & Medicaid Services 

11 Coverage Issues Manual, section 30–1), including 

12 immunosuppressive drugs and other followup care. 

13 (2) The term ‘‘transplantation and appropriate 

14 related items and services’’ means items and services 

15 related to the acquisition and delivery of the pan16 creatic islet cell transplantation, notwithstanding 

17 any national noncoverage determination contained in 

18 the Centers for Medicare & Medicaid Services Cov19 erage Issues Manual. 

20 (3) The term ‘‘medicare beneficiary’’ means an 

21 individual who is entitled to benefits under part A 

22 of title XVIII of the Social Security Act, or enrolled 

23 under part B of such title, or both. 

24 (d) CONSTRUCTION.—The provisions of this section 

25 shall not be construed—
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•S 1926 IS 

1 (1) to permit payment for partial pancreatic tis2 sue or islet cell transplantation under title XVIII of 

3 the Social Security Act other than payment as de4 scribed in subsection (b); or 

5 (2) as authorizing or requiring coverage or pay6 ment conveying—

7 (A) benefits under part A of such title to 

8 a beneficiary not entitled to such part A; or 

9 (B) benefits under part B of such title to 

10 a beneficiary not enrolled in such part B. 

11 SEC. 434. RESTORATION OF MEDICARE TRUST FUNDS. 

12 (a) DEFINITIONS.—In this section:

13 (1) CLERICAL ERROR.—The term ‘‘clerical 

14 error’’ means a failure that occurs on or after April 

15 15, 2001, to have transferred the correct amount 

16 from the general fund of the Treasury to a Trust 

17 Fund. 

18 (2) TRUST FUND.—The term ‘‘Trust Fund’’ 

19 means the Federal Hospital Insurance Trust Fund 

20 established under section 1817 of the Social Security 

21 Act (42 U.S.C. 1395i) and the Federal Supple22 mentary Medical Insurance Trust Fund established 

23 under section 1841 of such Act (42 U.S.C. 1395t). 

24 (b) CORRECTION OF TRUST FUND HOLDINGS.—
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•S 1926 IS 

1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall take the actions described in paragraph (2) 

3 with respect to the Trust Fund with the goal being 

4 that, after such actions are taken, the holdings of 

5 the Trust Fund will replicate, to the extent prac6 ticable in the judgment of the Secretary of the 

7 Treasury, in consultation with the Secretary, the 

8 holdings that would have been held by the Trust 

9 Fund if the clerical error involved had not occurred. 

10 (2) OBLIGATIONS ISSUED AND REDEEMED.—

11 The Secretary of the Treasury shall—

12 (A) issue to the Trust Fund obligations 

13 under chapter 31 of title 31, United States 

14 Code, that bear issue dates, interest rates, and 

15 maturity dates that are the same as those for 

16 the obligations that—

17 (i) would have been issued to the 

18 Trust Fund if the clerical error involved 

19 had not occurred; or 

20 (ii) were issued to the Trust Fund 

21 and were redeemed by reason of the cler22 ical error involved; and 

23 (B) redeem from the Trust Fund obliga24 tions that would have been redeemed from the 
249

•S 1926 IS 

1 Trust Fund if the clerical error involved had 

2 not occurred. 

3 (c) APPROPRIATION.—There is appropriated to the 

4 Trust Fund, out of any money in the Treasury not other5 wise appropriated, an amount determined by the Secretary 

6 of the Treasury, in consultation with the Secretary, to be 

7 equal to the interest income lost by the Trust Fund 

8 through the date on which the appropriation is being made 

9 as a result of the clerical error involved. 

10 (d) CONGRESSIONAL NOTICE.—In the case of a cler11 ical error that occurs after April 15, 2001, the Secretary 

12 of the Treasury, before taking action to correct the error 

13 under this section, shall notify the appropriate committees 

14 of Congress concerning such error and the actions to be 

15 taken under this section in response to such error. 

16 (e) DEADLINE.—With respect to the clerical error 

17 that occurred on April 15, 2001, not later than 120 days 

18 after the date of the enactment of this Act—

19 (1) the Secretary of the Treasury shall take the 

20 actions under subsection (b)(1); and 

21 (2) the appropriation under subsection (c) shall 

22 be made. 
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•S 1926 IS 

1 SEC. 435. MODIFICATIONS TO MEDICARE PAYMENT ADVI2 SORY COMMISSION (MEDPAC). 

3 (a) EXAMINATION OF BUDGET CONSEQUENCES.—

4 Section 1805(b) (42 U.S.C. 1395b–6(b)) is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(8) EXAMINATION OF BUDGET CON7 SEQUENCES.—Before making any recommendations, 

8 the Commission shall examine the budget con9 sequences of such recommendations, directly or 

10 through consultation with appropriate expert enti11 ties.’’. 

12 (b) CONSIDERATION OF EFFICIENT PROVISION OF

13 SERVICES.—Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b–

14 6(b)(2)(B)(i)) is amended by inserting ‘‘the efficient provi15 sion of’’ after ‘‘expenditures for’’. 

16 (c) APPLICATION OF DISCLOSURE REQUIRE17 MENTS.—

18 (1) IN GENERAL.—Section 1805(c)(2)(D) (42 

19 U.S.C. 1395b–6(c)(2)(D)) is amended by adding at 

20 the end the following: ‘‘Members of the Commission 

21 shall be treated as employees of Congress for pur22 poses of applying title I of the Ethics in Government 

23 Act of 1978 (Public Law 95–521).’’. 

24 (2) EFFECTIVE DATE.—The amendment made 

25 by paragraph (1) shall take effect on January 1, 

26 2004. 
251

•S 1926 IS 

1 (d) ADDITIONAL REPORTS.—

2 (1) DATA NEEDS AND SOURCES.—The Medicare 

3 Payment Advisory Commission shall conduct a 

4 study, and submit a report to Congress by not later 

5 than June 1, 2004, on the need for current data, 

6 and sources of current data available, to determine 

7 the solvency and financial circumstances of hospitals 

8 and other medicare providers of services. 

9 (2) USE OF TAX-RELATED RETURNS.—Using 

10 return information provided under Form 990 of the 

11 Internal Revenue Service, the Commission shall sub12 mit to Congress, by not later than June 1, 2004, a 

13 report on the following: 

14 (A) Investments, endowments, and fund15 raising of hospitals participating under the 

16 medicare program and related foundations. 

17 (B) Access to capital financing for private 

18 and for not-for-profit hospitals. 

19 (e) REPRESENTATION OF EXPERTS IN PRESCRIP20 TION DRUGS.— 

21 (1) IN GENERAL.—Section 1805(c)(2)(B) (42 

22 U.S.C. 1395b–6(c)(2)(B)) is amended by inserting 

23 ‘‘experts in the area of pharmaco-economics or pre24 scription drug benefit programs,’’ after ‘‘other 

25 health professionals,’’. 
252

•S 1926 IS 

1 (2) APPOINTMENT.—The Comptroller General 

2 of the United States shall ensure that the member3 ship of the Commission complies with the amend4 ment made by paragraph (1) with respect to ap5 pointments made on or after the date of the enact6 ment of this Act. 

7 SEC. 436. TECHNICAL AMENDMENTS. 

8 (a) PART A.—(1) Section 1814(a) (42 U.S.C. 

9 1395f(a)) is amended—

10 (A) by striking the seventh sentence, as added 

11 by section 322(a)(1) of BIPA (114 Stat. 2763A–

12 501); and 

13 (B) in paragraph (7)(A)—

14 (i) in clause (i), by inserting before the 

15 comma at the end the following: ‘‘based on the 

16 physician’s or medical director’s clinical judg17 ment regarding the normal course of the indi18 vidual’s illness’’; and 

19 (ii) in clause (ii), by inserting before the 

20 semicolon at the end the following: ‘‘based on 

21 such clinical judgment’’. 

22 (2) Section 1814(b) (42 U.S.C. 1395f(b)), in the 

23 matter preceding paragraph (1), is amended by inserting 

24 a comma after ‘‘1813’’. 
253

•S 1926 IS 

1 (3) Section 1815(e)(1)(B) (42 U.S.C. 

2 1395g(e)(1)(B)), in the matter preceding clause (i), is 

3 amended by striking ‘‘of hospital’’ and inserting ‘‘of a hos4 pital’’. 

5 (4) Section 1816(c)(2)(B)(ii) (42 U.S.C. 

6 1395h(c)(2)(B)(ii)) is amended—

7 (A) by striking ‘‘and’’ at the end of subclause 

8 (III); and 

9 (B) by striking the period at the end of sub10 clause (IV) and inserting ‘‘, and’’. 

11 (5) Section 1817(k)(3)(A) (42 U.S.C. 

12 1395i(k)(3)(A)) is amended—

13 (A) in clause (i)(I), by striking the comma at 

14 the end and inserting a semicolon; and 

15 (B) in clause (ii), by striking ‘‘the Medicare and 

16 medicaid programs’’ and inserting ‘‘the programs 

17 under this title and title XIX’’. 

18 (6) Section 1817(k)(6)(B) (42 U.S.C. 

19 1395i(k)(6)(B)) is amended by striking ‘‘Medicare pro20 gram under title XVIII’’ and inserting ‘‘program under 

21 this title’’. 

22 (7) Section 1818 (42 U.S.C. 1395i–2) is amended—

23 (A) in subsection (d)(6)(A) is amended by in24 serting ‘‘of such Code’’ after ‘‘3111(b)’’; and 
254

•S 1926 IS 

1 (B) in subsection (g)(2)(B) is amended by 

2 striking ‘‘subsection (b).’’ and inserting ‘‘subsection 

3 (b)’’. 

4 (8) Section 1819 (42 U.S.C. 1395i–3) is amended—

5 (A) in subsection (b)(4)(C)(i), by striking ‘‘at 

6 least at least’’ and inserting ‘‘at least’’; 

7 (B) in subsection (d)(1)(A), by striking ‘‘phys8 ical mental’’ and inserting ‘‘physical, mental’’; and 

9 (C) in subsection (f)(2)(B)(iii), by moving the 

10 last sentence 2 ems to the left. 

11 (9) Section 1886(b)(3)(I)(i)(I) (42 U.S.C. 

12 1395ww(b)(3)(I)(i)(I)) is amended by striking ‘‘the the’’ 

13 and inserting ‘‘the’’. 

14 (10) The heading of subsection (mm) of section 1861 

15 (42 U.S.C. 1395x) is amended to read as follows: 

16 ‘‘Critical Access Hospital; Critical Access Hospital 

17 Services’’. 

18 (11) Paragraphs (1) and (2) of section 1861(tt) (42 

19 U.S.C. 1395x(tt)) are each amended by striking ‘‘rural 

20 primary care’’ and inserting ‘‘critical access’’. 

21 (12) Section 1865(b)(3)(B) (42 U.S.C. 

22 1395bb(b)(3)(B)) is amended by striking ‘‘section 1819 

23 and 1861(j)’’ and inserting ‘‘sections 1819 and 1861(j)’’. 

24 (13) Section 1866(b)(2) (42 U.S.C. 1395cc(b)(2)) is 

25 amended by moving subparagraph (D) 2 ems to the left. 
255

•S 1926 IS 

1 (14) Section 1867 (42 U.S.C. 1395dd) is amended— 

2 (A) in the matter following clause (ii) of sub3 section (d)(1)(B), by striking ‘‘is is’’ and inserting 

4 ‘‘is’’; 

5 (B) in subsection (e)(1)(B), by striking ‘‘a 

6 pregnant women’’ and inserting ‘‘a pregnant 

7 woman’’; and 

8 (C) in subsection (e)(2), by striking ‘‘means 

9 hospital’’ and inserting ‘‘means a hospital’’. 

10 (15) Section 1886(g)(3)(B) (42 U.S.C. 

11 1395ww(g)(3)(B)) is amended by striking ‘‘(as defined in 

12 subsection (d)(5)(D)(iii)’’ and inserting ‘‘(as defined in 

13 subsection (d)(5)(D)(iii))’’. 

14 (b) PART B.—(1) Section 1833(h)(5)(D) (42 U.S.C. 

15 1395l(h)(5)(D)) is amended by striking ‘‘clinic,,’’ and in16 serting ‘‘clinic,’’. 

17 (2) Section 1833(t)(3)(C)(ii) (42 U.S.C. 

18 1395l(t)(3)(C)(ii)) is amended by striking ‘‘clause (iii)’’ 

19 and inserting ‘‘clause (iv)’’. 

20 (3) Section 1861(v)(1)(S)(ii)(III) (42 U.S.C. 

21 1395x(v)(1)(S)(ii)(III)) is amended by striking ‘‘(as de22 fined in section 1886(d)(5)(D)(iii)’’ and inserting ‘‘(as de23 fined in section 1886(d)(5)(D)(iii))’’. 
256

•S 1926 IS 

1 (4) Section 1834(b)(4)(D)(iv) (42 U.S.C. 

2 1395m(b)(4)(D)(iv)) is amended by striking ‘‘clauses (vi)’’ 

3 and inserting ‘‘clause (vi)’’. 

4 (5) Section 1834(m)(4)(C)(ii)(III) (42 U.S.C. 

5 1395m(m)(4)(C)(ii)(III)) is amended by striking 

6 ‘‘1861(aa)(s)’’ and inserting ‘‘1861(aa)(2)’’. 

7 (6) Section 1838(a)(1) (42 U.S.C. 1395q(a)(1)) is 

8 amended by inserting a comma after ‘‘1966’’. 

9 (7) The second sentence of section 1839(a)(4) (42 

10 U.S.C. 1395r(a)(4)) is amended by striking ‘‘which will’’ 

11 and inserting ‘‘will’’. 

12 (8) Section 1842(c)(2)(B)(ii) (42 U.S.C. 

13 1395u(c)(2)(B)(ii)) is amended—

14 (A) by striking ‘‘and’’ at the end of subclause 

15 (III); and 

16 (B) by striking the period at the end of sub17 clause (IV) and inserting ‘‘, and’’. 

18 (9) Section 1842(i)(2) (42 U.S.C. 1395u(i)(2)) is 

19 amended by striking ‘‘services, a physician’’ and inserting 

20 ‘‘services, to a physician’’. 

21 (10) Section 1848(i)(3)(A) (42 U.S.C. 1395w–

22 4(i)(3)(A)) is amended by striking ‘‘a comparable serv23 ices’’ and inserting ‘‘comparable services’’. 
257

•S 1926 IS 

1 (11) Section 1861(s)(2)(K)(i) (42 U.S.C. 

2 1395x(s)(2)(K)(i)) is amended by striking ‘‘; and but’’ and 

3 inserting ‘‘, but’’. 

4 (12) Section 1861(aa)(1)(B) (42 U.S.C. 

5 1395x(aa)(1)(B)) is amended by striking ‘‘,,’’ and insert6 ing a comma. 

7 (13) Section 128(b)(2) of BIPA (114 Stat. 2763A–

8 480) is amended by striking ‘‘Not later that’’ and insert9 ing ‘‘Not later than’’ each place it appears. 

10 (c) PARTS A AND B.—(1) Section 1812(a)(3) (42 

11 U.S.C. 1395d(a)(3)) is amended—

12 (A) by striking ‘‘for individuals not’’ and insert13 ing ‘‘in the case of individuals not’’; and

14 (B) by striking ‘‘for individuals so’’ and insert15 ing ‘‘in the case of individuals so’’. 

16 (2)(A) Section 1814(a) (42 U.S.C. 1395f(a)) is 

17 amended in the sixth sentence by striking ‘‘leave home,’’ 

18 and inserting ‘‘leave home and’’. 

19 (B) Section 1835(a) (42 U.S.C. 1395n(a)) is amend20 ed in the seventh sentence by striking ‘‘leave home,’’ and 

21 inserting ‘‘leave home and’’. 

22 (3) Section 1891(d)(1) (42 U.S.C. 1395bbb(d)(1)) is 

23 amended by striking ‘‘subsection (c)(2)(C)(I)’’ and insert24 ing ‘‘subsection (c)(2)(C)(i)(I)’’. 
258

•S 1926 IS 

1 (4) Section 1861(v) (42 U.S.C. 1395x(v)) is amended 

2 by moving paragraph (8) (including clauses (i) through 

3 (v) of such paragraph) 2 ems to the left. 

4 (5) Section 1866B(b)(7)(D) (42 U.S.C. 1395cc–

5 2(b)(7)(D)) is amended by striking ‘‘(c)(2)(A)(ii)’’ and in6 serting ‘‘(c)(2)(B)’’. 

7 (6) Section 1886(h)(3)(D)(ii)(III) (42 U.S.C. 

8 1395ww(h)(3)(D)(ii)(III)) is amended by striking ‘‘and’’ 

9 after the comma at the end. 

10 (7) Section 1893(a) (42 U.S.C. 1395ddd(a)) is 

11 amended by striking ‘‘Medicare program’’ and inserting 

12 ‘‘medicare program’’. 

13 (8) Section 1896(b)(4) (42 U.S.C. 1395ggg(b)(4)) is 

14 amended by striking ‘‘701(f)’’ and inserting ‘‘712(f)’’. 

15 (d) PART C.—(1) Section 1853 (42 U.S.C. 1395w–

16 23), as amended by section 307 of BIPA (114 Stat. 

17 2763A–558), is amended—

18 (A) in subsection (a)(3)(C)(ii), by striking 

19 ‘‘clause (iii)’’ and inserting ‘‘clause (iv)’’; 

20 (B) in subsection (a)(3)(C), by redesignating 

21 the clause (iii) added by such section 307 as clause 

22 (iv); and 

23 (C) in subsection (c)(5), by striking 

24 ‘‘(a)(3)(C)(iii)’’ and inserting ‘‘(a)(3)(C)(iv)’’. 

25 (2) Section 1876 (42 U.S.C. 1395mm) is amended—
259

•S 1926 IS 

1 (A) in subsection (c)(2)(B), by striking 

2 ‘‘signifcant’’ and inserting ‘‘significant’’; and 

3 (B) in subsection (j)(2), by striking ‘‘this 

4 setion’’ and inserting ‘‘this section’’. 

5 (e) MEDIGAP.—Section 1882 (42 U.S.C. 1395ss) is 

6 amended—

7 (1) in subsection (d)(3)(A)(i)(II), by striking 

8 ‘‘plan a medicare supplemental policy’’ and inserting 

9 ‘‘plan, a medicare supplemental policy’’; 

10 (2) in subsection (d)(3)(B)(iii)(II), by striking 

11 ‘‘to the best of the issuer or seller’s knowledge’’ and 

12 inserting ‘‘to the best of the issuer’s or seller’s 

13 knowledge’’; 

14 (3) in subsection (g)(2)(A), by striking ‘‘medi15 care supplement policies’’ and inserting ‘‘medicare 

16 supplemental policies’’; 

17 (4) in subsection (p)(2)(B), by striking ‘‘, and’’ 

18 and inserting ‘‘; and’’; and 

19 (5) in subsection (s)(3)(A)(iii), by striking ‘‘pre20 existing’’ and inserting ‘‘preexisting’’. 
260

•S 1926 IS 

1 TITLE V—ADMINISTRATIVE IM2 PROVEMENTS, REGULATORY 

3 REDUCTION, AND CON4 TRACTING REFORM 

5 SEC. 500. ADMINISTRATIVE IMPROVEMENTS WITHIN THE 

6 CENTERS FOR MEDICARE & MEDICAID SERV7 ICES (CMS). 

8 (a) COORDINATED ADMINISTRATION OF MEDICARE

9 PRESCRIPTION DRUG AND MEDICARE ADVANTAGE PRO10 GRAMS.—Title XVIII (42 U.S.C. 1395 et seq.), as amend11 ed by section 421, is amended by inserting after 1807 the 

12 following new section: 

13 ‘‘PROVISIONS RELATING TO ADMINISTRATION

14 ‘‘SEC. 1808. (a) COORDINATED ADMINISTRATION OF

15 MEDICARE PRESCRIPTION DRUG AND MEDICARE ADVAN16 TAGE PROGRAMS.—

17 ‘‘(1) IN GENERAL.—There is within the Centers 

18 for Medicare & Medicaid Services a center to carry 

19 out the duties described in paragraph (3). 

20 ‘‘(2) DIRECTOR.—Such center shall be headed 

21 by a director who shall report directly to the Admin22 istrator of the Centers for Medicare & Medicaid 

23 Services. 

24 ‘‘(3) DUTIES.—The duties described in this 

25 paragraph are the following: 
261

•S 1926 IS 

1 ‘‘(A) The administration of parts C and D. 

2 ‘‘(B) The provision of notice and informa3 tion under section 1804. 

4 ‘‘(C) Such other duties as the Secretary 

5 may specify. 

6 ‘‘(4) DEADLINE.—The Secretary shall ensure 

7 that the center is carrying out the duties described 

8 in paragraph (3) by not later than January 1, 

9 2008.’’. 

10 (b) MANAGEMENT STAFF FOR THE CENTERS FOR

11 MEDICARE & MEDICAID SERVICES.—Such section is fur12 ther amended by adding at the end the following new sub13 section:

14 ‘‘(b) EMPLOYMENT OF MANAGEMENT STAFF.—

15 ‘‘(1) IN GENERAL.—The Secretary may employ, 

16 within the Centers for Medicare & Medicaid Serv17 ices, such individuals as management staff as the 

18 Secretary determines to be appropriate. With respect 

19 to the administration of parts C and D, such indi20 viduals shall include individuals with private sector 

21 expertise in negotiations with health benefits plans. 

22 ‘‘(2) ELIGIBILITY.—To be eligible for employ23 ment under paragraph (1) an individual shall be re24 quired to have demonstrated, by their education and 

25 experience (either in the public or private sector), 
262

•S 1926 IS 

1 superior expertise in at least one of the following 

2 areas: 

3 ‘‘(A) The review, negotiation, and administra4 tion of health care contracts. 

5 ‘‘(B) The design of health care benefit plans. 

6 ‘‘(C) Actuarial sciences. 

7 ‘‘(D) Compliance with health plan contracts. 

8 ‘‘(E) Consumer education and decision making. 

9 ‘‘(F) Any other area specified by the Secretary 

10 that requires specialized management or other ex11 pertise.

12 ‘‘(3) RATES OF PAYMENT.—

13 ‘‘(A) PERFORMANCE-RELATED PAY.—Sub14 ject to subparagraph (B), the Secretary shall 

15 establish the rate of pay for an individual em16 ployed under paragraph (1). Such rate shall 

17 take into account expertise, experience, and per18 formance. 

19 ‘‘(B) LIMITATION.—In no case may the 

20 rate of compensation determined under sub21 paragraph (A) exceed the highest rate of basic 

22 pay for the Senior Executive Service under sec23 tion 5382(b) of title 5, United States Code.’’. 

24 (c) REQUIREMENT FOR DEDICATED ACTUARY FOR

25 PRIVATE HEALTH PLANS.—Section 1117(b) (42 U.S.C. 
263

•S 1926 IS 

1 1317(b)) is amended by adding at the end the following 

2 new paragraph: 

3 ‘‘(3) In the office of the Chief Actuary there shall 

4 be an actuary whose duties relate exclusively to the pro5 grams under parts C and D of title XVIII and related 

6 provisions of such title.’’.

7 (d) INCREASE IN GRADE TO EXECUTIVE LEVEL III 

8 FOR THE ADMINISTRATOR OF THE CENTERS FOR MEDI9 CARE & MEDICAID SERVICES.—

10 (1) IN GENERAL.—Section 5314 of title 5, 

11 United States Code, is amended by adding at the 

12 end the following: 

13 ‘‘Administrator of the Centers for Medicare & 

14 Medicaid Services.’’. 

15 (2) CONFORMING AMENDMENT.—Section 5315 

16 of such title is amended by striking ‘‘Administrator 

17 of the Health Care Financing Administration.’’. 

18 (3) EFFECTIVE DATE.—The amendments made 

19 by this subsection take effect on January 1, 2004. 

20 (e) CONFORMING AMENDMENTS RELATING TO

21 HEALTH CARE FINANCING ADMINISTRATION.—

22 (1) AMENDMENTS TO THE SOCIAL SECURITY

23 ACT.—The Social Security Act is amended—

24 (A) in section 1117 (42 U.S.C. 1317)—

25 (i) in the heading to read as follows: 
264

•S 1926 IS 

1 ‘‘APPOINTMENT OF THE ADMINISTRATOR AND CHIEF AC2 TUARY OF THE CENTERS FOR MEDICARE & MED3 ICAID SERVICES’’; 

4 (ii) in subsection (a), by striking 

5 ‘‘Health Care Financing Administration’’ 

6 and inserting ‘‘Centers for Medicare & 

7 Medicaid Services’’; and 

8 (iii) in subsection (b)(1)—

9 (I) by striking ‘‘Health Care Fi10 nancing Administration’’ and insert11 ing ‘‘Centers for Medicare & Medicaid 

12 Services’’; and 

13 (II) by striking ‘‘Administration’’ 

14 and inserting ‘‘Centers’’; 

15 (B) in section 1140(a) (42 U.S.C. 1320b–

16 10(a))—

17 (i) in paragraph (1), by striking 

18 ‘‘Health Care Financing Administration’’ 

19 both places it appears in the 

20 matter following subparagraph (B) and insert21 ing ‘‘Centers for Medicare & Medicaid Serv22 ices’’; 

23 (ii) in paragraph (1)(A)— 

24 (I) by striking ‘‘Health Care Fi25 nancing Administration’’ and insert-
265

•S 1926 IS 

1 ing ‘‘Centers for Medicare & Medicaid 

2 Services’’; and 

3 (II) by striking ‘‘HCFA’’ and in4 serting ‘‘CMS’’; and 

5 (iii) in paragraph (1)(B), by striking 

6 ‘‘Health Care Financing Administration’’ 

7 both places it appears and inserting ‘‘Cen8 ters for Medicare & Medicaid Services’’; 

9 (C) in section 1142(b)(3) (42 U.S.C. 

10 1320b–12(b)(3)), by striking ‘‘Health Care Fi11 nancing Administration’’ and inserting ‘‘Cen12 ters for Medicare & Medicaid Services’’; 

13 (D) in section 1817(b) (42 U.S.C. 

14 1395i(b))—

15 (i) by striking ‘‘Health Care Financ16 ing Administration’’, both in the fifth sen17 tence of the matter preceding paragraph 

18 (1) and in the second sentence of the 

19 matter following paragraph (4), and inserting 

20 ‘‘Centers for Medicare & Medicaid Services’’; 

21 and 

22 (ii) by striking ‘‘Chief Actuarial Offi23 cer’’ in the second sentence of the 

24 matter following paragraph (4) and inserting 

25 ‘‘Chief Actuary’’; 
266

•S 1926 IS 

1 (E) in section 1841(b) (42 U.S.C. 

2 1395t(b))—

3 (i) by striking ‘‘Health Care Financ4 ing Administration’’, both in the fifth sen5 tence of the matter preceding paragraph 

6 (1) and in the second sentence of the 

7 matter following paragraph (4), and inserting 

8 ‘‘Centers for Medicare & Medicaid Services’’; 

9 and 

10 (ii) by striking ‘‘Chief Actuarial Offi11 cer’’ in the second sentence of the 

12 matter following paragraph (4) and inserting 

13 ‘‘Chief Actuary’’; 

14 (F) in section 1852(a)(5) (42 U.S.C. 

15 1395w–22(a)(5)), by striking ‘‘Health Care Fi16 nancing Administration’’ in the 

17 matter following subparagraph (B) and insert18 ing ‘‘Centers for Medicare & Medicaid Serv19 ices’’; 

20 (G) in section 1853 (42 U.S.C. 1395w–

21 23)—

22 (i) in subsection (b)(4), by striking 

23 ‘‘Health Care Financing Administration’’ 

24 in the first sentence and inserting ‘‘Cen-
267

•S 1926 IS 

1 ters for Medicare & Medicaid Services’’; 

2 and 

3 (ii) in subsection (c)(7), by striking 

4 ‘‘Health Care Financing Administration’’ 

5 in the last sentence and inserting ‘‘Centers 

6 for Medicare & Medicaid Services’’; 

7 (H) in section 1854(a)(5)(A) (42 U.S.C. 

8 1395w–24(a)(5)(A)), by striking ‘‘Health Care 

9 Financing Administration’’and inserting ‘‘Cen10 ters for Medicare & Medicaid Services’’;

11 (I) in section 1857(d)(4)(A)(ii) (42 U.S.C. 

12 1395w–27(d)(4)(A)(ii)), by striking ‘‘Health 

13 Care Financing Administration’’ and inserting 

14 ‘‘Secretary’’; 

15 (J) in section 1862(b)(5)(A)(ii) (42 U.S.C. 

16 1395y(b)(5)(A)(ii)), by striking ‘‘Health Care 

17 Financing Administration’’ and inserting ‘‘Cen18 ters for Medicare & Medicaid Services’’; 

19 (K) in section 1927(e)(4) (42 U.S.C. 

20 1396r–8(e)(4)), by striking ‘‘HCFA’’ and in21 serting ‘‘The Secretary’’; 

22 (L) in section 1927(f)(2) (42 U.S.C. 

23 1396r–8(f)(2)), by striking ‘‘HCFA’’ and in24 serting ‘‘The Secretary’’; and 
268

•S 1926 IS 

1 (M) in section 2104(g)(3) (42 U.S.C. 

2 1397dd(g)(3)) by inserting ‘‘or CMS Form 64 

3 or CMS Form 21, as the case may be,’’ after 

4 ‘‘HCFA Form 64 or HCFA Form 21’’ 

5 (2) AMENDMENTS TO THE PUBLIC HEALTH

6 SERVICE ACT.—The Public Health Service Act is 

7 amended—

8 (A) in section 501(d)(18) (42 U.S.C. 

9 290aa(d)(18)), by striking ‘‘Health Care Fi10 nancing Administration’’ and inserting ‘‘Cen11 ters for Medicare & Medicaid Services’’; 

12 (B) in section 507(b)(6) (42 U.S.C. 

13 290bb(b)(6)), by striking ‘‘Health Care Financ14 ing Administration’’ and inserting ‘‘Centers for 

15 Medicare & Medicaid Services’’; 

16 (C) in section 916 (42 U.S.C. 299b–5)—

17 (i) in subsection (b)(2), by striking 

18 ‘‘Health Care Financing Administration’’ 

19 and inserting ‘‘Centers for Medicare & 

20 Medicaid Services’’; and 

21 (ii) in subsection (c)(2), by striking 

22 ‘‘Health Care Financing Administration’’ 

23 and inserting ‘‘Centers for Medicare & 

24 Medicaid Services’’; 
269

•S 1926 IS 

1 (D) in section 921(c)(3)(A) (42 U.S.C. 

2 299c(c)(3)(A)), by striking ‘‘Health Care Fi3 nancing Administration’’ and inserting ‘‘Cen4 ters for Medicare & Medicaid Services’’; 

5 (E) in section 1318(a)(2) (42 U.S.C. 

6 300e–17(a)(2)), by striking ‘‘Health Care Fi7 nancing Administration’’ and inserting ‘‘Cen8 ters for Medicare & Medicaid Services’’; 

9 (F) in section 2102(a)(7) (42 U.S.C. 

10 300aa–2(a)(7)), by striking ‘‘Health Care Fi11 nancing Administration’’ and inserting ‘‘Cen12 ters for Medicare & Medicaid Services’’; and 

13 (G) in section 2675(a) (42 U.S.C. 300ff–

14 75(a)), by striking ‘‘Health Care Financing Ad15 ministration’’ in the first sentence and inserting 

16 ‘‘Centers for Medicare & Medicaid Services’’. 

17 (3) AMENDMENTS TO THE INTERNAL REVENUE

18 CODE OF 1986.—Section 6103(l)(12) of the Internal 

19 Revenue Code of 1986 is amended—

20 (A) in subparagraph (B), by striking 

21 ‘‘Health Care Financing Administration’’ in the 

22 matter preceding clause (i) and inserting ‘‘Cen23 ters for Medicare & Medicaid Services’’; and 

24 (B) in subparagraph (C)—
270

•S 1926 IS 

1 (i) by striking ‘‘HEALTH CARE FI2 NANCING ADMINISTRATION’’ in the heading 

3 and inserting ‘‘CENTERS FOR MEDICARE &

4 MEDICAID SERVICES’’; and 

5 (ii) by striking ‘‘Health Care Financ6 ing Administration’’ in the matter pre7 ceding clause (i) and inserting ‘‘Centers 

8 for Medicare & Medicaid Services’’. 

9 (4) AMENDMENTS TO TITLE 10, UNITED STATES

10 CODE.—Title 10, United States Code, is amended—

11 (A) in section 1086(d)(4), by striking ‘‘ad12 ministrator of the Health Care Financing Ad13 ministration’’ in the last sentence and inserting 

14 ‘‘Administrator of the Centers for Medicare & 

15 Medicaid Services’’; and 

16 (B) in section 1095(k)(2), by striking 

17 ‘‘Health Care Financing Administration’’ in the 

18 second sentence and inserting ‘‘Centers for 

19 Medicare & Medicaid Services’’. 

20 (5) AMENDMENTS TO THE ALZHEIMER’S DIS21 EASE AND RELATED DEMENTIAS SERVICES RE22 SEARCH ACT OF 1992.—The Alzheimer’s Disease and 

23 Related Dementias Research Act of 1992 (42 U.S.C. 

24 11271 et seq.) is amended—
271

•S 1926 IS 

1 (A) in the heading of subpart 3 of part D 

2 to read as follows: 

3 ‘‘Subpart 3—Responsibilities of the Centers for Medicare 

4 & Medicaid Services’’; 

5 (B) in section 937 (42 U.S.C. 11271)—

6 (i) in subsection (a), by striking ‘‘Na7 tional Health Care Financing Administra8 tion’’ and inserting ‘‘Centers for Medicare 

9 & Medicaid Services’’; 

10 (ii) in subsection (b)(1), by striking 

11 ‘‘Health Care Financing Administration’’ 

12 and inserting ‘‘Centers for Medicare & 

13 Medicaid Services’’; 

14 (iii) in subsection (b)(2), by striking 

15 ‘‘Health Care Financing Administration’’ 

16 and inserting ‘‘Centers for Medicare & 

17 Medicaid Services’’; and 

18 (iv) in subsection (c), by striking 

19 ‘‘Health Care Financing Administration’’ 

20 and inserting ‘‘Centers for Medicare & 

21 Medicaid Services’’; and 

22 (C) in section 938 (42 U.S.C. 11272), by 

23 striking ‘‘Health Care Financing Administra24 tion’’ and inserting ‘‘Centers for Medicare & 

25 Medicaid Services’’. 
272

•S 1926 IS 

1 (6) MISCELLANEOUS AMENDMENTS.—

2 (A) REHABILITATION ACT OF 1973.—Sec3 tion 202(b)(8) of the Rehabilitation Act of 

4 1973 (29 U.S.C. 762(b)(8)) is amended by 

5 striking ‘‘Health Care Financing Administra6 tion’’ and inserting ‘‘Centers for Medicare & 

7 Medicaid Services’’. 

8 (B) INDIAN HEALTH CARE IMPROVEMENT

9 ACT.—Section 405(d)(1) of the Indian Health 

10 Care Improvement Act (25 U.S.C. 1645(d)(1)) 

11 is amended by striking ‘‘Health Care Financing 

12 Administration’’ in the matter preceding sub13 paragraph (A) and inserting ‘‘Centers for Medi14 care & Medicaid Services’’. 

15 (C) INDIVIDUALS WITH DISABILITIES EDU16 CATION ACT.—Section 644(b)(5) of the Individ17 uals with Disabilities Education Act (20 U.S.C. 

18 1444(b)(5)) is amended by striking ‘‘Health 

19 Care Financing Administration’’ and inserting 

20 ‘‘Centers for Medicare & Medicaid Services’’. 

21 (D) THE HOME HEALTH CARE AND ALZ22 HEIMER’S DISEASE AMENDMENTS OF 1990.—

23 Section 302(a)(9) of the Home Health Care 

24 and Alzheimer’s Disease Amendments of 1990 

25 (42 U.S.C. 242q–1(a)(9)) is amended by strik-
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1 ing ‘‘Health Care Financing Administration’’ 

2 and inserting ‘‘Centers for Medicare & Medicaid 

3 Services’’. 

4 (E) THE CHILDREN’S HEALTH ACT OF

5 2000.—Section 2503(a) of the Children’s Health 

6 Act of 2000 (42 U.S.C. 247b–3a(a)) is amend7 ed by striking ‘‘Health Care Financing Admin8 istration’’ and inserting ‘‘Centers for Medicare 

9 & Medicaid Services’’. 

10 (F) THE NATIONAL INSTITUTES OF

11 HEALTH REVITALIZATION ACT OF 1993.—Sec12 tion 1909 of the National Institutes of Health 

13 Revitalization Act of 1993 (42 U.S.C. 299a 

14 note) is amended by striking ‘‘Health Care Fi15 nancing Administration’’ and inserting ‘‘Cen16 ters for Medicare & Medicaid Services’’. 

17 (G) THE OMNIBUS BUDGET RECONCILI18 ATION ACT OF 1990.—Section 4359(d) of the 

19 Omnibus Budget Reconciliation Act of 1990 

20 (42 U.S.C. 1395b–3(d)) is amended by striking 

21 ‘‘Health Care Financing Administration’’ and 

22 inserting ‘‘Centers for Medicare & Medicaid 

23 Services’’. 

24 (H) THE MEDICARE, MEDICAID, AND

25 SCHIP BENEFITS IMPROVEMENT AND PROTEC-
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1 TION ACT OF 2000.—Section 104(d)(4) of the 

2 Medicare, Medicaid, and SCHIP Benefits Im3 provement and Protection Act of 2000 (42 

4 U.S.C. 1395m note) is amended by striking 

5 ‘‘Health Care Financing Administration’’ and 

6 inserting ‘‘Health Care’’. 

7 (7) ADDITIONAL AMENDMENT.—Section 403 of 

8 the Act entitled, ‘‘An Act to authorize certain appro9 priations for the territories of the United States, to 

10 amend certain Acts relating thereto, and for other 

11 purposes’’, enacted October 15, 1977 (48 U.S.C. 

12 1574–1; 48 U.S.C. 1421q–1), is amended by strik13 ing ‘‘Health Care Financing Administration’’ and in14 serting ‘‘Centers for Medicare & Medicaid Services’’. 

15 Subtitle A—Regulatory Reform 

16 SEC. 501. CONSTRUCTION; DEFINITION OF SUPPLIER. 

17 (a) CONSTRUCTION.—Nothing in this title shall be 

18 construed—

19 (1) to compromise or affect existing legal rem20 edies for addressing fraud or abuse, whether it be 

21 criminal prosecution, civil enforcement, or adminis22 trative remedies, including under sections 3729 

23 through 3733 of title 31, United States Code (com24 monly known as the ‘‘False Claims Act’’); or 
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1 (2) to prevent or impede the Department of 

2 Health and Human Services in any way from its on3 going efforts to eliminate waste, fraud, and abuse in 

4 the medicare program. 

5 Furthermore, the consolidation of medicare administrative 

6 contracting set forth in this division does not constitute 

7 consolidation of the Federal Hospital Insurance Trust 

8 Fund and the Federal Supplementary Medical Insurance 

9 Trust Fund or reflect any position on that issue. 

10 (b) DEFINITION OF SUPPLIER.—Section 1861 (42 

11 U.S.C. 1395x) is amended by inserting after subsection 

12 (c) the following new subsection: 

13 ‘‘Supplier 

14 ‘‘(d) The term ‘supplier’ means, unless the context 

15 otherwise requires, a physician or other practitioner, a fa16 cility, or other entity (other than a provider of services) 

17 that furnishes items or services under this title.’’. 

18 SEC. 502. ISSUANCE OF REGULATIONS. 

19 (a) REGULAR TIMELINE FOR PUBLICATION OF

20 FINAL RULES.—

21 (1) IN GENERAL.—Section 1871(a) (42 U.S.C. 

22 1395hh(a)) is amended by adding at the end the fol23 lowing new paragraph: 

24 ‘‘(3)(A) The Secretary, in consultation with the Di25 rector of the Office of Management and Budget, shall es-
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1 tablish and publish a regular timeline for the publication 

2 of final regulations based on the previous publication of 

3 a proposed regulation or an interim final regulation. 

4 ‘‘(B) Such timeline may vary among different regula5 tions based on differences in the complexity of the regula6 tion, the number and scope of comments received, and 

7 other relevant factors, but shall not be longer than 3 years 

8 except under exceptional circumstances. If the Secretary 

9 intends to vary such timeline with respect to the publica10 tion of a final regulation, the Secretary shall cause to have 

11 published in the Federal Register notice of the different 

12 timeline by not later than the timeline previously estab13 lished with respect to such regulation. Such notice shall 

14 include a brief explanation of the justification for such 

15 variation. 

16 ‘‘(C) In the case of interim final regulations, upon 

17 the expiration of the regular timeline established under 

18 this paragraph for the publication of a final regulation 

19 after opportunity for public comment, the interim final 

20 regulation shall not continue in effect unless the Secretary 

21 publishes (at the end of the regular timeline and, if appli22 cable, at the end of each succeeding 1-year period) a notice 

23 of continuation of the regulation that includes an expla24 nation of why the regular timeline (and any subsequent 

25 1-year extension) was not complied with. If such a notice 
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1 is published, the regular timeline (or such timeline as pre2 viously extended under this paragraph) for publication of 

3 the final regulation shall be treated as having been ex4 tended for 1 additional year.

5 ‘‘(D) The Secretary shall annually submit to Con6 gress a report that describes the instances in which the 

7 Secretary failed to publish a final regulation within the 

8 applicable regular timeline under this paragraph and that 

9 provides an explanation for such failures.’’. 

10 (2) EFFECTIVE DATE.—The amendment made 

11 by paragraph (1) shall take effect on the date of the 

12 enactment of this Act. The Secretary shall provide 

13 for an appropriate transition to take into account 

14 the backlog of previously published interim final reg15 ulations. 

16 (b) LIMITATIONS ON NEW MATTER IN FINAL REGU17 LATIONS.—

18 (1) IN GENERAL.—Section 1871(a) (42 U.S.C. 

19 1395hh(a)), as amended by subsection (a), is 

20 amended by adding at the end the following new 

21 paragraph: 

22 ‘‘(4) If the Secretary publishes a final regulation that 

23 includes a provision that is not a logical outgrowth of a 

24 previously published notice of proposed rulemaking or in25 terim final rule, such provision shall be treated as a pro-
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1 posed regulation and shall not take effect until there is 

2 the further opportunity for public comment and a publica3 tion of the provision again as a final regulation.’’. 

4 (2) EFFECTIVE DATE.—The amendment made 

5 by paragraph (1) shall apply to final regulations 

6 published on or after the date of the enactment of 

7 this Act. 

8 SEC. 503. COMPLIANCE WITH CHANGES IN REGULATIONS 

9 AND POLICIES. 

10 (a) NO RETROACTIVE APPLICATION OF SUB11 STANTIVE CHANGES.—

12 (1) IN GENERAL.—Section 1871 (42 U.S.C. 

13 1395hh), as amended by section 502(a), is amended 

14 by adding at the end the following new subsection: 

15 ‘‘(e)(1)(A) A substantive change in regulations, man16 ual instructions, interpretative rules, statements of policy, 

17 or guidelines of general applicability under this title shall 

18 not be applied (by extrapolation or otherwise) retroactively 

19 to items and services furnished before the effective date 

20 of the change, unless the Secretary determines that—

21 ‘‘(i) such retroactive application is necessary to 

22 comply with statutory requirements; or 

23 ‘‘(ii) failure to apply the change retroactively 

24 would be contrary to the public interest.’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply to substantive changes 

3 issued on or after the date of the enactment of this 

4 Act. 

5 (b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE

6 CHANGES AFTER NOTICE.—

7 (1) IN GENERAL.—Section 1871(e)(1), as 

8 added by subsection (a), is amended by adding at 

9 the end the following: 

10 ‘‘(B)(i) Except as provided in clause (ii), a sub11 stantive change referred to in subparagraph (A) shall not 

12 become effective before the end of the 30-day period that 

13 begins on the date that the Secretary has issued or pub14 lished, as the case may be, the substantive change. 

15 ‘‘(ii) The Secretary may provide for such a sub16 stantive change to take effect on a date that precedes the 

17 end of the 30-day period under clause (i) if the Secretary 

18 finds that waiver of such 30-day period is necessary to 

19 comply with statutory requirements or that the application 

20 of such 30-day period is contrary to the public interest. 

21 If the Secretary provides for an earlier effective date pur22 suant to this clause, the Secretary shall include in the 

23 issuance or publication of the substantive change a finding 

24 described in the first sentence, and a brief statement of 

25 the reasons for such finding. 
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1 ‘‘(C) No action shall be taken against a provider of 

2 services or supplier with respect to noncompliance with 

3 such a substantive change for items and services furnished 

4 before the effective date of such a change.’’. 

5 (2) EFFECTIVE DATE.—The amendment made 

6 by paragraph (1) shall apply to compliance actions 

7 undertaken on or after the date of the enactment of 

8 this Act. 

9 (c) RELIANCE ON GUIDANCE.—

10 (1) IN GENERAL.—Section 1871(e), as added 

11 by subsection (a), is further amended by adding at 

12 the end the following new paragraph: 

13 ‘‘(2)(A) If—

14 ‘‘(i) a provider of services or supplier follows 

15 the written guidance (which may be transmitted 

16 electronically) provided by the Secretary or by a 

17 medicare contractor (as defined in section 1889(g)) 

18 acting within the scope of the contractor’s contract 

19 authority, with respect to the furnishing of items or 

20 services and submission of a claim for benefits for 

21 such items or services with respect to such provider 

22 or supplier; 

23 ‘‘(ii) the Secretary determines that the provider 

24 of services or supplier has accurately presented the 
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1 circumstances relating to such items, services, and 

2 claim to the contractor in writing; and 

3 ‘‘(iii) the guidance was in error; 

4 the provider of services or supplier shall not be subject 

5 to any penalty or interest under this title or the provisions 

6 of title XI insofar as they relate to this title (including 

7 interest under a repayment plan under section 1893 or 

8 otherwise) relating to the provision of such items or serv9 ice or such claim if the provider of services or supplier 

10 reasonably relied on such guidance. 

11 ‘‘(B) Subparagraph (A) shall not be construed as pre12 venting the recoupment or repayment (without any addi13 tional penalty) relating to an overpayment insofar as the 

14 overpayment was solely the result of a clerical or technical 

15 operational error.’’. 

16 (2) EFFECTIVE DATE.—The amendment made 

17 by paragraph (1) shall take effect on the date of the 

18 enactment of this Act and shall only apply to a pen19 alty or interest imposed with respect to guidance 

20 provided on or after July 24, 2003. 

21 SEC. 504. REPORTS AND STUDIES RELATING TO REGU22 LATORY REFORM. 

23 (a) GAO STUDY ON ADVISORY OPINION AUTHOR24 ITY.—
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1 (1) STUDY.—The Comptroller General of the 

2 United States shall conduct a study to determine the 

3 feasibility and appropriateness of establishing in the 

4 Secretary authority to provide legally binding advi5 sory opinions on appropriate interpretation and ap6 plication of regulations to carry out the medicare 

7 program under title XVIII of the Social Security 

8 Act. Such study shall examine the appropriate time9 frame for issuing such advisory opinions, as well as 

10 the need for additional staff and funding to provide 

11 such opinions. 

12 (2) REPORT.—The Comptroller General shall 

13 submit to Congress a report on the study conducted 

14 under paragraph (1) by not later than 1 year after 

15 the date of the enactment of this Act. 

16 (b) REPORT ON LEGAL AND REGULATORY INCON17 SISTENCIES.—Section 1871 (42 U.S.C. 1395hh), as 

18 amended by section 503(a)(1), is amended by adding at 

19 the end the following new subsection: 

20 ‘‘(f)(1) Not later than 2 years after the date of the 

21 enactment of this subsection, and every 3 years thereafter, 

22 the Secretary shall submit to Congress a report with re23 spect to the administration of this title and areas of incon24 sistency or conflict among the various provisions under 

25 law and regulation. 
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1 ‘‘(2) In preparing a report under paragraph (1), the 

2 Secretary shall collect—

3 ‘‘(A) information from individuals entitled to 

4 benefits under part A or enrolled under part B, or 

5 both, providers of services, and suppliers and from 

6 the Medicare Beneficiary Ombudsman with respect 

7 to such areas of inconsistency and conflict; and 

8 ‘‘(B) information from medicare contractors 

9 that tracks the nature of written and telephone in10 quiries. 

11 ‘‘(3) A report under paragraph (1) shall include a de12 scription of efforts by the Secretary to reduce such incon13 sistency or conflicts, and recommendations for legislation 

14 or administrative action that the Secretary determines ap15 propriate to further reduce such inconsistency or con16 flicts.’’. 

17 Subtitle B—Contracting Reform 

18 SEC. 511. INCREASED FLEXIBILITY IN MEDICARE ADMINIS19 TRATION. 

20 (a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE

21 ADMINISTRATION.—

22 (1) IN GENERAL.—Title XVIII is amended by 

23 inserting after section 1874 the following new sec24 tion: 
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1 ‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE

2 CONTRACTORS

3 ‘‘SEC. 1874A. (a) AUTHORITY.—

4 ‘‘(1) AUTHORITY TO ENTER INTO CON5 TRACTS.—The Secretary may enter into contracts 

6 with any eligible entity to serve as a medicare ad7 ministrative contractor with respect to the perform8 ance of any or all of the functions described in para9 graph (4) or parts of those functions (or, to the ex10 tent provided in a contract, to secure performance 

11 thereof by other entities). 

12 ‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is 

13 eligible to enter into a contract with respect to the 

14 performance of a particular function described in 

15 paragraph (4) only if—

16 ‘‘(A) the entity has demonstrated capa17 bility to carry out such function; 

18 ‘‘(B) the entity complies with such conflict 

19 of interest standards as are generally applicable 

20 to Federal acquisition and procurement; 

21 ‘‘(C) the entity has sufficient assets to fi22 nancially support the performance of such func23 tion; and 

24 ‘‘(D) the entity meets such other require25 ments as the Secretary may impose. 
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1 ‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR

2 DEFINED.—For purposes of this title and title XI—

3 ‘‘(A) IN GENERAL.—The term ‘medicare 

4 administrative contractor’ means an agency, or5 ganization, or other person with a contract 

6 under this section. 

7 ‘‘(B) APPROPRIATE MEDICARE ADMINIS8 TRATIVE CONTRACTOR.—With respect to the 

9 performance of a particular function in relation 

10 to an individual entitled to benefits under part 

11 A or enrolled under part B, or both, a specific 

12 provider of services or supplier (or class of such 

13 providers of services or suppliers), the ‘appro14 priate’ medicare administrative contractor is the 

15 medicare administrative contractor that has a 

16 contract under this section with respect to the 

17 performance of that function in relation to that 

18 individual, provider of services or supplier or 

19 class of provider of services or supplier. 

20 ‘‘(4) FUNCTIONS DESCRIBED.—The functions 

21 referred to in paragraphs (1) and (2) are payment 

22 functions (including the function of developing local 

23 coverage determinations, as defined in section 

24 1869(f)(2)(B)), provider services functions, and 

25 functions relating to services furnished to individuals 
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•S 1926 IS 

1 entitled to benefits under part A or enrolled under 

2 part B, or both, as follows: 

3 ‘‘(A) DETERMINATION OF PAYMENT

4 AMOUNTS.—Determining (subject to the provi5 sions of section 1878 and to such review by the 

6 Secretary as may be provided for by the con7 tracts) the amount of the payments required 

8 pursuant to this title to be made to providers 

9 of services, suppliers and individuals. 

10 ‘‘(B) MAKING PAYMENTS.—Making pay11 ments described in subparagraph (A) (including 

12 receipt, disbursement, and accounting for funds 

13 in making such payments). 

14 ‘‘(C) BENEFICIARY EDUCATION AND AS15 SISTANCE.—Providing education and outreach 

16 to individuals entitled to benefits under part A 

17 or enrolled under part B, or both, and pro18 viding assistance to those individuals with spe19 cific issues, concerns, or problems. 

20 ‘‘(D) PROVIDER CONSULTATIVE SERV21 ICES.—Providing consultative services to insti22 tutions, agencies, and other persons to enable 

23 them to establish and maintain fiscal records 

24 necessary for purposes of this title and other-
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1 wise to qualify as providers of services or sup2 pliers.

3 ‘‘(E) COMMUNICATION WITH PRO4 VIDERS.—Communicating to providers of serv5 ices and suppliers any information or instruc6 tions furnished to the medicare administrative 

7 contractor by the Secretary, and facilitating 

8 communication between such providers and sup9 pliers and the Secretary. 

10 ‘‘(F) PROVIDER EDUCATION AND TECH11 NICAL ASSISTANCE.—Performing the functions 

12 relating to provider education, training, and 

13 technical assistance. 

14 ‘‘(G) ADDITIONAL FUNCTIONS.—Per15 forming such other functions, including (subject 

16 to paragraph (5)) functions under the Medicare 

17 Integrity Program under section 1893, as are 

18 necessary to carry out the purposes of this title.

19 ‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—

20 ‘‘(A) NONDUPLICATION OF DUTIES.—In 

21 entering into contracts under this section, the 

22 Secretary shall assure that functions of medi23 care administrative contractors in carrying out 

24 activities under parts A and B do not duplicate 

25 activities carried out under a contract entered 
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1 into under the Medicare Integrity Program 

2 under section 1893. The previous sentence shall 

3 not apply with respect to the activity described 

4 in section 1893(b)(5) (relating to prior author5 ization of certain items of durable medical 

6 equipment under section 1834(a)(15)). 

7 ‘‘(B) CONSTRUCTION.—An entity shall not 

8 be treated as a medicare administrative con9 tractor merely by reason of having entered into 

10 a contract with the Secretary under section 

11 1893. 

12 ‘‘(6) APPLICATION OF FEDERAL ACQUISITION

13 REGULATION.—Except to the extent inconsistent 

14 with a specific requirement of this section, the Fed15 eral Acquisition Regulation applies to contracts 

16 under this section.

17 ‘‘(b) CONTRACTING REQUIREMENTS.—

18 ‘‘(1) USE OF COMPETITIVE PROCEDURES.—

19 ‘‘(A) IN GENERAL.—Except as provided in 

20 laws with general applicability to Federal acqui21 sition and procurement or in subparagraph (B), 

22 the Secretary shall use competitive procedures 

23 when entering into contracts with medicare ad24 ministrative contractors under this section, tak-
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1 ing into account performance quality as well as 

2 price and other factors. 

3 ‘‘(B) RENEWAL OF CONTRACTS.—The Sec4 retary may renew a contract with a medicare 

5 administrative contractor under this section 

6 from term to term without regard to section 5 

7 of title 41, United States Code, or any other 

8 provision of law requiring competition, if the 

9 medicare administrative contractor has met or 

10 exceeded the performance requirements applica11 ble with respect to the contract and contractor, 

12 except that the Secretary shall provide for the 

13 application of competitive procedures under 

14 such a contract not less frequently than once 

15 every 5 years. 

16 ‘‘(C) TRANSFER OF FUNCTIONS.—The 

17 Secretary may transfer functions among medi18 care administrative contractors consistent with 

19 the provisions of this paragraph. The Secretary 

20 shall ensure that performance quality is consid21 ered in such transfers. The Secretary shall pro22 vide public notice (whether in the Federal Reg23 ister or otherwise) of any such transfer (includ24 ing a description of the functions so trans25 ferred, a description of the providers of services 
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•S 1926 IS 

1 and suppliers affected by such transfer, and 

2 contact information for the contractors in3 volved). 

4 ‘‘(D) INCENTIVES FOR QUALITY.—The 

5 Secretary shall provide incentives for medicare 

6 administrative contractors to provide quality 

7 service and to promote efficiency. 

8 ‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No 

9 contract under this section shall be entered into with 

10 any medicare administrative contractor unless the 

11 Secretary finds that such medicare administrative 

12 contractor will perform its obligations under the con13 tract efficiently and effectively and will meet such 

14 requirements as to financial responsibility, legal au15 thority, quality of services provided, and other mat16 ters as the Secretary finds pertinent. 

17 ‘‘(3) PERFORMANCE REQUIREMENTS.—

18 ‘‘(A) DEVELOPMENT OF SPECIFIC PER19 FORMANCE REQUIREMENTS.—

20 ‘‘(i) IN GENERAL.—The Secretary 

21 shall develop contract performance require22 ments to carry out the specific require23 ments applicable under this title to a func24 tion described in subsection (a)(4) and 

25 shall develop standards for measuring the 
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1 extent to which a contractor has met such 

2 requirements. 

3 ‘‘(ii) CONSULTATION.—In developing 

4 such performance requirements and stand5 ards for measurement, the Secretary shall 

6 consult with providers of services, organi7 zations representative of beneficiaries 

8 under this title, and organizations and 

9 agencies performing functions necessary to 

10 carry out the purposes of this section with 

11 respect to such performance requirements. 

12 ‘‘(iii) PUBLICATION OF STANDARDS.—

13 The Secretary shall make such perform14 ance requirements and measurement 

15 standards available to the public. 

16 ‘‘(B) CONSIDERATIONS.—The Secretary 

17 shall include, as one of the standards developed 

18 under subparagraph (A), provider and bene19 ficiary satisfaction levels.

20 ‘‘(C) INCLUSION IN CONTRACTS.—All con21 tractor performance requirements shall be set 

22 forth in the contract between the Secretary and 

23 the appropriate medicare administrative con24 tractor. Such performance requirements—
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1 ‘‘(i) shall reflect the performance re2 quirements published under subparagraph 

3 (A), but may include additional perform4 ance requirements; 

5 ‘‘(ii) shall be used for evaluating con6 tractor performance under the contract; 

7 and 

8 ‘‘(iii) shall be consistent with the writ9 ten statement of work provided under the 

10 contract. 

11 ‘‘(4) INFORMATION REQUIREMENTS.—The Sec12 retary shall not enter into a contract with a medi13 care administrative contractor under this section un14 less the contractor agrees—

15 ‘‘(A) to furnish to the Secretary such time16 ly information and reports as the Secretary may 

17 find necessary in performing his functions 

18 under this title; and 

19 ‘‘(B) to maintain such records and afford 

20 such access thereto as the Secretary finds nec21 essary to assure the correctness and verification 

22 of the information and reports under subpara23 graph (A) and otherwise to carry out the pur24 poses of this title. 
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1 ‘‘(5) SURETY BOND.—A contract with a medi2 care administrative contractor under this section 

3 may require the medicare administrative contractor, 

4 and any of its officers or employees certifying pay5 ments or disbursing funds pursuant to the contract, 

6 or otherwise participating in carrying out the con7 tract, to give surety bond to the United States in 

8 such amount as the Secretary may deem appro9 priate.

10 ‘‘(c) TERMS AND CONDITIONS.—

11 ‘‘(1) IN GENERAL.—A contract with any medi12 care administrative contractor under this section 

13 may contain such terms and conditions as the Sec14 retary finds necessary or appropriate and may pro15 vide for advances of funds to the medicare adminis16 trative contractor for the making of payments by it 

17 under subsection (a)(4)(B). 

18 ‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN

19 DATA COLLECTION.—The Secretary may not require, 

20 as a condition of entering into, or renewing, a con21 tract under this section, that the medicare adminis22 trative contractor match data obtained other than in 

23 its activities under this title with data used in the 

24 administration of this title for purposes of identi-
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1 fying situations in which the provisions of section 

2 1862(b) may apply. 

3 ‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD4 MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—

5 ‘‘(1) CERTIFYING OFFICER.—No individual des6 ignated pursuant to a contract under this section as 

7 a certifying officer shall, in the absence of the reck8 less disregard of the individual’s obligations or the 

9 intent by that individual to defraud the United 

10 States, be liable with respect to any payments cer11 tified by the individual under this section. 

12 ‘‘(2) DISBURSING OFFICER.—No disbursing of13 ficer shall, in the absence of the reckless disregard 

14 of the officer’s obligations or the intent by that offi15 cer to defraud the United States, be liable with re16 spect to any payment by such officer under this sec17 tion if it was based upon an authorization (which 

18 meets the applicable requirements for such internal 

19 controls established by the Comptroller General of 

20 the United States) of a certifying officer designated 

21 as provided in paragraph (1) of this subsection. 

22 ‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE

23 CONTRACTOR.—

24 ‘‘(A) IN GENERAL.—No medicare adminis25 trative contractor shall be liable to the United 
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1 States for a payment by a certifying or dis2 bursing officer unless, in connection with such 

3 payment, the medicare administrative con4 tractor acted with reckless disregard of its obli5 gations under its medicare administrative con6 tract or with intent to defraud the United 

7 States. 

8 ‘‘(B) RELATIONSHIP TO FALSE CLAIMS

9 ACT.—Nothing in this subsection shall be con10 strued to limit liability for conduct that would 

11 constitute a violation of sections 3729 through 

12 3731 of title 31, United States Code. 

13 ‘‘(4) INDEMNIFICATION BY SECRETARY.—

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graphs (B) and (D), in the case of a medicare 

16 administrative contractor (or a person who is a 

17 director, officer, or employee of such a con18 tractor or who is engaged by the contractor to 

19 participate directly in the claims administration 

20 process) who is made a party to any judicial or 

21 administrative proceeding arising from or relat22 ing directly to the claims administration process 

23 under this title, the Secretary may, to the ex24 tent the Secretary determines to be appropriate 

25 and as specified in the contract with the con-
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1 tractor, indemnify the contractor and such per2 sons. 

3 ‘‘(B) CONDITIONS.—The Secretary may 

4 not provide indemnification under subparagraph 

5 (A) insofar as the liability for such costs arises 

6 directly from conduct that is determined by the 

7 judicial proceeding or by the Secretary to be 

8 criminal in nature, fraudulent, or grossly neg9 ligent. If indemnification is provided by the Sec10 retary with respect to a contractor before a de11 termination that such costs arose directly from 

12 such conduct, the contractor shall reimburse the 

13 Secretary for costs of indemnification. 

14 ‘‘(C) SCOPE OF INDEMNIFICATION.—In15 demnification by the Secretary under subpara16 graph (A) may include payment of judgments, 

17 settlements (subject to subparagraph (D)), 

18 awards, and costs (including reasonable legal 

19 expenses). 

20 ‘‘(D) WRITTEN APPROVAL FOR SETTLE21 MENTS OR COMPROMISES.—A contractor or 

22 other person described in subparagraph (A) 

23 may not propose to negotiate a settlement or 

24 compromise of a proceeding described in such 

25 subparagraph without the prior written ap-
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1 proval of the Secretary to negotiate such settle2 ment or compromise. Any indemnification under 

3 subparagraph (A) with respect to amounts paid 

4 under a settlement or compromise of a pro5 ceeding described in such subparagraph are 

6 conditioned upon prior written approval by the 

7 Secretary of the final settlement or compromise. 

8 ‘‘(E) CONSTRUCTION.—Nothing in this 

9 paragraph shall be construed—

10 ‘‘(i) to change any common law immu11 nity that may be available to a medicare 

12 administrative contractor or person de13 scribed in subparagraph (A); or 

14 ‘‘(ii) to permit the payment of costs 

15 not otherwise allowable, reasonable, or allo16 cable under the Federal Acquisition Regu17 lation.’’. 

18 (2) CONSIDERATION OF INCORPORATION OF

19 CURRENT LAW STANDARDS.—In developing contract 

20 performance requirements under section 1874A(b) 

21 of the Social Security Act, as inserted by paragraph 

22 (1), the Secretary shall consider inclusion of the per23 formance standards described in sections 1816(f)(2) 

24 of such Act (relating to timely processing of recon25 siderations and applications for exemptions) and sec-
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1 tion 1842(b)(2)(B) of such Act (relating to timely 

2 review of determinations and fair hearing requests), 

3 as such sections were in effect before the date of the 

4 enactment of this Act. 

5 (b) CONFORMING AMENDMENTS TO SECTION 1816 

6 (RELATING TO FISCAL INTERMEDIARIES).—Section 1816 

7 (42 U.S.C. 1395h) is amended as follows: 

8 (1) The heading is amended to read as follows: 

9 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF

10 PART A’’. 

11 (2) Subsection (a) is amended to read as fol12 lows: 

13 ‘‘(a) The administration of this part shall be con14 ducted through contracts with medicare administrative 

15 contractors under section 1874A.’’. 

16 (3) Subsection (b) is repealed. 

17 (4) Subsection (c) is amended—

18 (A) by striking paragraph (1); and 

19 (B) in each of paragraphs (2)(A) and 

20 (3)(A), by striking ‘‘agreement under this sec21 tion’’ and inserting ‘‘contract under section 

22 1874A that provides for making payments 

23 under this part’’.

24 (5) Subsections (d) through (i) are repealed. 

25 (6) Subsections (j) and (k) are each amended—
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1 (A) by striking ‘‘An agreement with an 

2 agency or organization under this section’’ and 

3 inserting ‘‘A contract with a medicare adminis4 trative contractor under section 1874A with re5 spect to the administration of this part’’; and 

6 (B) by striking ‘‘such agency or organiza7 tion’’ and inserting ‘‘such medicare administra8 tive contractor’’ each place it appears. 

9 (7) Subsection (l) is repealed. 

10 (c) CONFORMING AMENDMENTS TO SECTION 1842 

11 (RELATING TO CARRIERS).—Section 1842 (42 U.S.C. 

12 1395u) is amended as follows: 

13 (1) The heading is amended to read as follows: 

14 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF

15 PART B’’. 

16 (2) Subsection (a) is amended to read as fol17 lows: 

18 ‘‘(a) The administration of this part shall be con19 ducted through contracts with medicare administrative 

20 contractors under section 1874A.’’. 

21 (3) Subsection (b) is amended—

22 (A) by striking paragraph (1); 

23 (B) in paragraph (2)—

24 (i) by striking subparagraphs (A) and 

25 (B); 
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1 (ii) in subparagraph (C), by striking 

2 ‘‘carriers’’ and inserting ‘‘medicare admin3 istrative contractors’’; and 

4 (iii) by striking subparagraphs (D) 

5 and (E); 

6 (C) in paragraph (3)—

7 (i) in the matter before subparagraph 

8 (A), by striking ‘‘Each such contract shall 

9 provide that the carrier’’ and inserting 

10 ‘‘The Secretary’’; 

11 (ii) by striking ‘‘will’’ the first place it 

12 appears in each of subparagraphs (A), (B), 

13 (F), (G), (H), and (L) and inserting 

14 ‘‘shall’’; 

15 (iii) in subparagraph (B), in the mat16 ter before clause (i), by striking ‘‘to the 

17 policyholders and subscribers of the car18 rier’’ and inserting ‘‘to the policyholders 

19 and subscribers of the medicare adminis20 trative contractor’’; 

21 (iv) by striking subparagraphs (C), 

22 (D), and (E); 

23 (v) in subparagraph (H)—

24 (I) by striking ‘‘if it makes deter25 minations or payments with respect to 
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1 physicians’ services,’’ in the matter 

2 preceding clause (i); and 

3 (II) by striking ‘‘carrier’’ and in4 serting ‘‘medicare administrative con5 tractor’’ in clause (i); 

6 (vi) by striking subparagraph (I); 

7 (vii) in subparagraph (L), by striking 

8 the semicolon and inserting a period; 

9 (viii) in the first sentence, after sub10 paragraph (L), by striking ‘‘and shall con11 tain’’ and all that follows through the pe12 riod; and 

13 (ix) in the seventh sentence, by insert14 ing ‘‘medicare administrative contractor,’’ 

15 after ‘‘carrier,’’; 

16 (D) by striking paragraph (5); 

17 (E) in paragraph (6)(D)(iv), by striking 

18 ‘‘carrier’’ and inserting ‘‘medicare administra19 tive contractor’’; and 

20 (F) in paragraph (7), by striking ‘‘the car21 rier’’ and inserting ‘‘the Secretary’’ each place 

22 it appears. 

23 (4) Subsection (c) is amended—

24 (A) by striking paragraph (1); 
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1 (B) in paragraph (2)(A), by striking ‘‘con2 tract under this section which provides for the 

3 disbursement of funds, as described in sub4 section (a)(1)(B),’’ and inserting ‘‘contract 

5 under section 1874A that provides for making 

6 payments under this part’’; 

7 (C) in paragraph (3)(A), by striking ‘‘sub8 section (a)(1)(B)’’ and inserting ‘‘section 

9 1874A(a)(3)(B)’’; 

10 (D) in paragraph (4), in the matter pre11 ceding subparagraph (A), by striking ‘‘carrier’’ 

12 and inserting ‘‘medicare administrative con13 tractor’’; and 

14 (E) by striking paragraphs (5) and (6). 

15 (5) Subsections (d), (e), and (f) are repealed. 

16 (6) Subsection (g) is amended by striking ‘‘car17 rier or carriers’’ and inserting ‘‘medicare administra18 tive contractor or contractors’’. 

19 (7) Subsection (h) is amended—

20 (A) in paragraph (2)—

21 (i) by striking ‘‘Each carrier having 

22 an agreement with the Secretary under 

23 subsection (a)’’ and inserting ‘‘The Sec24 retary’’; and 
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1 (ii) by striking ‘‘Each such carrier’’ 

2 and inserting ‘‘The Secretary’’; 

3 (B) in paragraph (3)(A)—

4 (i) by striking ‘‘a carrier having an 

5 agreement with the Secretary under sub6 section (a)’’ and inserting ‘‘medicare ad7 ministrative contractor having a contract 

8 under section 1874A that provides for 

9 making payments under this part’’; and 

10 (ii) by striking ‘‘such carrier’’ and in11 serting ‘‘such contractor’’; 

12 (C) in paragraph (3)(B)—

13 (i) by striking ‘‘a carrier’’ and insert14 ing ‘‘a medicare administrative contractor’’ 

15 each place it appears; and 

16 (ii) by striking ‘‘the carrier’’ and in17 serting ‘‘the contractor’’ each place it ap18 pears; and 

19 (D) in paragraphs (5)(A) and (5)(B)(iii), 

20 by striking ‘‘carriers’’ and inserting ‘‘medicare 

21 administrative contractors’’ each place it ap22 pears. 

23 (8) Subsection (l) is amended—
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1 (A) in paragraph (1)(A)(iii), by striking 

2 ‘‘carrier’’ and inserting ‘‘medicare administra3 tive contractor’’; and

4 (B) in paragraph (2), by striking ‘‘carrier’’ 

5 and inserting ‘‘medicare administrative con6 tractor’’. 

7 (9) Subsection (p)(3)(A) is amended by striking 

8 ‘‘carrier’’ and inserting ‘‘medicare administrative 

9 contractor’’. 

10 (10) Subsection (q)(1)(A) is amended by strik11 ing ‘‘carrier’’. 

12 (d) EFFECTIVE DATE; TRANSITION RULE.—

13 (1) EFFECTIVE DATE.—

14 (A) IN GENERAL.—Except as otherwise 

15 provided in this subsection, the amendments 

16 made by this section shall take effect on Octo17 ber 1, 2005, and the Secretary is authorized to 

18 take such steps before such date as may be nec19 essary to implement such amendments on a 

20 timely basis. 

21 (B) CONSTRUCTION FOR CURRENT CON22 TRACTS.—Such amendments shall not apply to 

23 contracts in effect before the date specified 

24 under subparagraph (A) that continue to retain 

25 the terms and conditions in effect on such date 
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1 (except as otherwise provided under this Act, 

2 other than under this section) until such date 

3 as the contract is let out for competitive bid4 ding under such amendments. 

5 (C) DEADLINE FOR COMPETITIVE BID6 DING.—The Secretary shall provide for the let7 ting by competitive bidding of all contracts for 

8 functions of medicare administrative contrac9 tors for annual contract periods that begin on 

10 or after October 1, 2011. 

11 (2) GENERAL TRANSITION RULES.—

12 (A) AUTHORITY TO CONTINUE TO ENTER

13 INTO NEW AGREEMENTS AND CONTRACTS AND

14 WAIVER OF PROVIDER NOMINATION PROVISIONS

15 DURING TRANSITION.—Prior to October 1, 

16 2005, the Secretary may, consistent with sub17 paragraph (B), continue to enter into agree18 ments under section 1816 and contracts under 

19 section 1842 of the Social Security Act (42 

20 U.S.C. 1395h, 1395u). The Secretary may 

21 enter into new agreements under section 1816 

22 prior to October 1, 2005, without regard to any 

23 of the provider nomination provisions of such 

24 section. 
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•S 1926 IS 

1 (B) APPROPRIATE TRANSITION.—The Sec2 retary shall take such steps as are necessary to 

3 provide for an appropriate transition from 

4 agreements under section 1816 and contracts 

5 under section 1842 of the Social Security Act 

6 (42 U.S.C. 1395h, 1395u) to contracts under 

7 section 1874A, as added by subsection (a)(1).

8 (3) AUTHORIZING CONTINUATION OF MIP

9 FUNCTIONS UNDER CURRENT CONTRACTS AND

10 AGREEMENTS AND UNDER TRANSITION CON11 TRACTS.—Notwithstanding the amendments made 

12 by this section, the provisions contained in the ex13 ception in section 1893(d)(2) of the Social Security 

14 Act (42 U.S.C. 1395ddd(d)(2)) shall continue to 

15 apply during the period that begins on the date of 

16 the enactment of this Act and ends on October 1, 

17 2011, and any reference in such provisions to an 

18 agreement or contract shall be deemed to include a 

19 contract under section 1874A of such Act, as in20 serted by subsection (a)(1), that continues the activi21 ties referred to in such provisions. 

22 (e) REFERENCES.—On and after the effective date 

23 provided under subsection (d)(1), any reference to a fiscal 

24 intermediary or carrier under title XI or XVIII of the So25 cial Security Act (or any regulation, manual instruction, 
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•S 1926 IS 

1 interpretative rule, statement of policy, or guideline issued 

2 to carry out such titles) shall be deemed a reference to 

3 a medicare administrative contractor (as provided under 

4 section 1874A of the Social Security Act). 

5 (f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO6 POSAL.—Not later than 6 months after the date of the 

7 enactment of this Act, the Secretary shall submit to the 

8 appropriate committees of Congress a legislative proposal 

9 providing for such technical and conforming amendments 

10 in the law as are required by the provisions of this section.

11 (g) REPORTS ON IMPLEMENTATION.—

12 (1) PLAN FOR IMPLEMENTATION.—By not later 

13 than October 1, 2004, the Secretary shall submit a 

14 report to Congress and the Comptroller General of 

15 the United States that describes the plan for imple16 mentation of the amendments made by this section. 

17 The Comptroller General shall conduct an evaluation 

18 of such plan and shall submit to Congress, not later 

19 than 6 months after the date the report is received, 

20 a report on such evaluation and shall include in such 

21 report such recommendations as the Comptroller 

22 General deems appropriate. 

23 (2) STATUS OF IMPLEMENTATION.—The Sec24 retary shall submit a report to Congress not later 

25 than October 1, 2008, that describes the status of 
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•S 1926 IS 

1 implementation of such amendments and that in2 cludes a description of the following: 

3 (A) The number of contracts that have 

4 been competitively bid as of such date. 

5 (B) The distribution of functions among 

6 contracts and contractors. 

7 (C) A timeline for complete transition to 

8 full competition. 

9 (D) A detailed description of how the Sec10 retary has modified oversight and management 

11 of medicare contractors to adapt to full com12 petition. 

13 SEC. 512. REQUIREMENTS FOR INFORMATION SECURITY 

14 FOR MEDICARE ADMINISTRATIVE CONTRAC15 TORS. 

16 (a) IN GENERAL.—Section 1874A, as added by sec17 tion 511(a)(1), is amended by adding at the end the fol18 lowing new subsection: 

19 ‘‘(e) REQUIREMENTS FOR INFORMATION SECU20 RITY.—

21 ‘‘(1) DEVELOPMENT OF INFORMATION SECU22 RITY PROGRAM.—A medicare administrative con23 tractor that performs the functions referred to in 

24 subparagraphs (A) and (B) of subsection (a)(4) (re25 lating to determining and making payments) shall 
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•S 1926 IS 

1 implement a contractor-wide information security 

2 program to provide information security for the op3 eration and assets of the contractor with respect to 

4 such functions under this title. An information secu5 rity program under this paragraph shall meet the 

6 requirements for information security programs im7 posed on Federal agencies under paragraphs (1) 

8 through (8) of section 3544(b) of title 44, United 

9 States Code (other than the requirements under 

10 paragraphs (2)(D)(i), (5)(A), and (5)(B) of such 

11 section). 

12 ‘‘(2) INDEPENDENT AUDITS.—

13 ‘‘(A) PERFORMANCE OF ANNUAL EVALUA14 TIONS.—Each year a medicare administrative 

15 contractor that performs the functions referred 

16 to in subparagraphs (A) and (B) of subsection 

17 (a)(4) (relating to determining and making pay18 ments) shall undergo an evaluation of the infor19 mation security of the contractor with respect 

20 to such functions under this title. The evalua21 tion shall—

22 ‘‘(i) be performed by an entity that 

23 meets such requirements for independence 

24 as the Inspector General of the Depart-
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•S 1926 IS 

1 ment of Health and Human Services may 

2 establish; and 

3 ‘‘(ii) test the effectiveness of informa4 tion security control techniques of an ap5 propriate subset of the contractor’s infor6 mation systems (as defined in section 

7 3502(8) of title 44, United States Code) 

8 relating to such functions under this title 

9 and an assessment of compliance with the 

10 requirements of this subsection and related 

11 information security policies, procedures, 

12 standards and guidelines, including policies 

13 and procedures as may be prescribed by 

14 the Director of the Office of Management 

15 and Budget and applicable information se16 curity standards promulgated under sec17 tion 11331 of title 40, United States Code. 

18 ‘‘(B) DEADLINE FOR INITIAL EVALUA19 TION.—

20 ‘‘(i) NEW CONTRACTORS.—In the case 

21 of a medicare administrative contractor 

22 covered by this subsection that has not 

23 previously performed the functions referred 

24 to in subparagraphs (A) and (B) of sub25 section (a)(4) (relating to determining and 
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•S 1926 IS 

1 making payments) as a fiscal intermediary 

2 or carrier under section 1816 or 1842, the 

3 first independent evaluation conducted 

4 pursuant to subparagraph (A) shall be 

5 completed prior to commencing such func6 tions. 

7 ‘‘(ii) OTHER CONTRACTORS.—In the 

8 case of a medicare administrative con9 tractor covered by this subsection that is 

10 not described in clause (i), the first inde11 pendent evaluation conducted pursuant to 

12 subparagraph (A) shall be completed with13 in 1 year after the date the contractor 

14 commences functions referred to in clause 

15 (i) under this section. 

16 ‘‘(C) REPORTS ON EVALUATIONS.—

17 ‘‘(i) TO THE DEPARTMENT OF

18 HEALTH AND HUMAN SERVICES.—The re19 sults of independent evaluations under sub20 paragraph (A) shall be submitted promptly 

21 to the Inspector General of the Depart22 ment of Health and Human Services and 

23 to the Secretary. 

24 ‘‘(ii) TO CONGRESS.—The Inspector 

25 General of the Department of Health and 
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•S 1926 IS 

1 Human Services shall submit to Congress 

2 annual reports on the results of such eval3 uations, including assessments of the scope 

4 and sufficiency of such evaluations. 

5 ‘‘(iii) AGENCY REPORTING.—The Sec6 retary shall address the results of such 

7 evaluations in reports required under sec8 tion 3544(c) of title 44, United States 

9 Code.’’. 

10 (b) APPLICATION OF REQUIREMENTS TO FISCAL

11 INTERMEDIARIES AND CARRIERS.—

12 (1) IN GENERAL.—The provisions of section 

13 1874A(e)(2) of the Social Security Act (other than 

14 subparagraph (B)), as added by subsection (a), shall 

15 apply to each fiscal intermediary under section 1816 

16 of the Social Security Act (42 U.S.C. 1395h) and 

17 each carrier under section 1842 of such Act (42 

18 U.S.C. 1395u) in the same manner as they apply to 

19 medicare administrative contractors under such pro20 visions. 

21 (2) DEADLINE FOR INITIAL EVALUATION.—In 

22 the case of such a fiscal intermediary or carrier with 

23 an agreement or contract under such respective sec24 tion in effect as of the date of the enactment of this 

25 Act, the first evaluation under section 
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•S 1926 IS 

1 1874A(e)(2)(A) of the Social Security Act (as added 

2 by subsection (a)), pursuant to paragraph (1), shall 

3 be completed (and a report on the evaluation sub4 mitted to the Secretary) by not later than 1 year 

5 after such date. 

6 Subtitle C—Education and 

7 Outreach 

8 SEC. 521. PROVIDER EDUCATION AND TECHNICAL ASSIST9 ANCE. 

10 (a) COORDINATION OF EDUCATION FUNDING.—

11 (1) IN GENERAL.—Title XVIII is amended by 

12 inserting after section 1888 the following new sec13 tion: 

14 ‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

15 ‘‘SEC. 1889. (a) COORDINATION OF EDUCATION

16 FUNDING.—The Secretary shall coordinate the edu17 cational activities provided through medicare contractors 

18 (as defined in subsection (g), including under section 

19 1893) in order to maximize the effectiveness of Federal 

20 education efforts for providers of services and suppliers.’’. 

21 (2) EFFECTIVE DATE.—The amendment made 

22 by paragraph (1) shall take effect on the date of the 

23 enactment of this Act. 

24 (3) REPORT.—Not later than October 1, 2004, 

25 the Secretary shall submit to Congress a report that 

26 includes a description and evaluation of the steps 
314

•S 1926 IS 

1 taken to coordinate the funding of provider edu2 cation under section 1889(a) of the Social Security 

3 Act, as added by paragraph (1). 

4 (b) INCENTIVES TO IMPROVE CONTRACTOR PER5 FORMANCE.—

6 (1) IN GENERAL.—Section 1874A, as added by 

7 section 511(a)(1) and as amended by section 512(a), 

8 is amended by adding at the end the following new 

9 subsection: 

10 ‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER11 FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—

12 The Secretary shall use specific claims payment error 

13 rates or similar methodology of medicare administrative 

14 contractors in the processing or reviewing of medicare 

15 claims in order to give such contractors an incentive to 

16 implement effective education and outreach programs for 

17 providers of services and suppliers.’’. 

18 (2) APPLICATION TO FISCAL INTERMEDIARIES

19 AND CARRIERS.—The provisions of section 1874A(f) 

20 of the Social Security Act, as added by paragraph 

21 (1), shall apply to each fiscal intermediary under 

22 section 1816 of the Social Security Act (42 U.S.C. 

23 1395h) and each carrier under section 1842 of such 

24 Act (42 U.S.C. 1395u) in the same manner as they 
315

•S 1926 IS 

1 apply to medicare administrative contractors under 

2 such provisions. 

3 (3) GAO REPORT ON ADEQUACY OF METHOD4 OLOGY.—Not later than October 1, 2004, the Comp5 troller General of the United States shall submit to 

6 Congress and to the Secretary a report on the ade7 quacy of the methodology under section 1874A(f) of 

8 the Social Security Act, as added by paragraph (1), 

9 and shall include in the report such recommenda10 tions as the Comptroller General determines appro11 priate with respect to the methodology. 

12 (4) REPORT ON USE OF METHODOLOGY IN AS13 SESSING CONTRACTOR PERFORMANCE.—Not later 

14 than October 1, 2004, the Secretary shall submit to 

15 Congress a report that describes how the Secretary 

16 intends to use such methodology in assessing medi17 care contractor performance in implementing effec18 tive education and outreach programs, including 

19 whether to use such methodology as a basis for per20 formance bonuses. The report shall include an anal21 ysis of the sources of identified errors and potential 

22 changes in systems of contractors and rules of the 

23 Secretary that could reduce claims error rates. 
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•S 1926 IS 

1 (c) PROVISION OF ACCESS TO AND PROMPT RE2 SPONSES FROM MEDICARE ADMINISTRATIVE CONTRAC3 TORS.—

4 (1) IN GENERAL.—Section 1874A, as added by 

5 section 511(a)(1) and as amended by section 512(a) 

6 and subsection (b), is further amended by adding at 

7 the end the following new subsection: 

8 ‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PRO9 VIDERS OF SERVICES AND SUPPLIERS.—

10 ‘‘(1) COMMUNICATION STRATEGY.—The Sec11 retary shall develop a strategy for communications 

12 with individuals entitled to benefits under part A or 

13 enrolled under part B, or both, and with providers 

14 of services and suppliers under this title. 

15 ‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 

16 medicare administrative contractor shall, for those 

17 providers of services and suppliers which submit 

18 claims to the contractor for claims processing and 

19 for those individuals entitled to benefits under part 

20 A or enrolled under part B, or both, with respect to 

21 whom claims are submitted for claims processing, 

22 provide general written responses (which may be 

23 through electronic transmission) in a clear, concise, 

24 and accurate manner to inquiries of providers of 

25 services, suppliers, and individuals entitled to bene-
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•S 1926 IS 

1 fits under part A or enrolled under part B, or both, 

2 concerning the programs under this title within 45 

3 business days of the date of receipt of such inquiries. 

4 ‘‘(3) RESPONSE TO TOLL-FREE LINES.—The 

5 Secretary shall ensure that each medicare adminis6 trative contractor shall provide, for those providers 

7 of services and suppliers which submit claims to the 

8 contractor for claims processing and for those indi9 viduals entitled to benefits under part A or enrolled 

10 under part B, or both, with respect to whom claims 

11 are submitted for claims processing, a toll-free tele12 phone number at which such individuals, providers 

13 of services, and suppliers may obtain information re14 garding billing, coding, claims, coverage, and other 

15 appropriate information under this title. 

16 ‘‘(4) MONITORING OF CONTRACTOR RE17 SPONSES.—

18 ‘‘(A) IN GENERAL.—Each medicare admin19 istrative contractor shall, consistent with stand20 ards developed by the Secretary under subpara21 graph (B)—

22 ‘‘(i) maintain a system for identifying 

23 who provides the information referred to in 

24 paragraphs (2) and (3); and 
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•S 1926 IS 

1 ‘‘(ii) monitor the accuracy, consist2 ency, and timeliness of the information so 

3 provided. 

4 ‘‘(B) DEVELOPMENT OF STANDARDS.—

5 ‘‘(i) IN GENERAL.—The Secretary 

6 shall establish and make public standards 

7 to monitor the accuracy, consistency, and 

8 timeliness of the information provided in 

9 response to written and telephone inquiries 

10 under this subsection. Such standards shall 

11 be consistent with the performance require12 ments established under subsection (b)(3). 

13 ‘‘(ii) EVALUATION.—In conducting 

14 evaluations of individual medicare adminis15 trative contractors, the Secretary shall 

16 take into account the results of the moni17 toring conducted under subparagraph (A) 

18 taking into account as performance re19 quirements the standards established 

20 under clause (i). The Secretary shall, in 

21 consultation with organizations rep22 resenting providers of services, suppliers, 

23 and individuals entitled to benefits under 

24 part A or enrolled under part B, or both, 

25 establish standards relating to the accu-
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•S 1926 IS 

1 racy, consistency, and timeliness of the in2 formation so provided. 

3 ‘‘(C) DIRECT MONITORING.—Nothing in 

4 this paragraph shall be construed as preventing 

5 the Secretary from directly monitoring the ac6 curacy, consistency, and timeliness of the infor7 mation so provided. 

8 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.—

9 There are authorized to be appropriated such sums 

10 as are necessary to carry out this subsection.’’.

11 (2) EFFECTIVE DATE.—The amendment made 

12 by paragraph (1) shall take effect October 1, 2004. 

13 (3) APPLICATION TO FISCAL INTERMEDIARIES

14 AND CARRIERS.—The provisions of section 1874A(g) 

15 of the Social Security Act, as added by paragraph 

16 (1), shall apply to each fiscal intermediary under 

17 section 1816 of the Social Security Act (42 U.S.C. 

18 1395h) and each carrier under section 1842 of such 

19 Act (42 U.S.C. 1395u) in the same manner as they 

20 apply to medicare administrative contractors under 

21 such provisions. 

22 (d) IMPROVED PROVIDER EDUCATION AND TRAIN23 ING.—
320

•S 1926 IS 

1 (1) IN GENERAL.—Section 1889, as added by 

2 subsection (a), is amended by adding at the end the 

3 following new subsections: 

4 ‘‘(b) ENHANCED EDUCATION AND TRAINING.—

5 ‘‘(1) ADDITIONAL RESOURCES.—There are au6 thorized to be appropriated to the Secretary (in ap7 propriate part from the Federal Hospital Insurance 

8 Trust Fund and the Federal Supplementary Medical 

9 Insurance Trust Fund) such sums as may be nec10 essary for fiscal years beginning with fiscal year 

11 2005. 

12 ‘‘(2) USE.—The funds made available under 

13 paragraph (1) shall be used to increase the conduct 

14 by medicare contractors of education and training of 

15 providers of services and suppliers regarding billing, 

16 coding, and other appropriate items and may also be 

17 used to improve the accuracy, consistency, and time18 liness of contractor responses. 

19 ‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI20 TIES FOR SMALL PROVIDERS OR SUPPLIERS.—

21 ‘‘(1) IN GENERAL.—Insofar as a medicare con22 tractor conducts education and training activities, it 

23 shall tailor such activities to meet the special needs 

24 of small providers of services or suppliers (as defined 

25 in paragraph (2)). Such education and training ac-
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•S 1926 IS 

1 tivities for small providers of services and suppliers 

2 may include the provision of technical assistance 

3 (such as review of billing systems and internal con4 trols to determine program compliance and to sug5 gest more efficient and effective means of achieving 

6 such compliance). 

7 ‘‘(2) SMALL PROVIDER OF SERVICES OR SUP8 PLIER.—In this subsection, the term ‘small provider 

9 of services or supplier’ means—

10 ‘‘(A) a provider of services with fewer than 

11 25 full-time-equivalent employees; or 

12 ‘‘(B) a supplier with fewer than 10 full13 time-equivalent employees.’’. 

14 (2) EFFECTIVE DATE.—The amendment made 

15 by paragraph (1) shall take effect on October 1, 

16 2004.

17 (e) REQUIREMENT TO MAINTAIN INTERNET

18 WEBSITES.—

19 (1) IN GENERAL.—Section 1889, as added by 

20 subsection (a) and as amended by subsection (d), is 

21 further amended by adding at the end the following 

22 new subsection: 

23 ‘‘(d) INTERNET WEBSITES; FAQS.—The Secretary, 

24 and each medicare contractor insofar as it provides serv-
322

•S 1926 IS 

1 ices (including claims processing) for providers of services 

2 or suppliers, shall maintain an Internet website which—

3 ‘‘(1) provides answers in an easily accessible 

4 format to frequently asked questions, and 

5 ‘‘(2) includes other published materials of the 

6 contractor, 

7 that relate to providers of services and suppliers under the 

8 programs under this title (and title XI insofar as it relates 

9 to such programs).’’. 

10 (2) EFFECTIVE DATE.—The amendment made 

11 by paragraph (1) shall take effect on October 1, 

12 2004. 

13 (f) ADDITIONAL PROVIDER EDUCATION PROVI14 SIONS.—

15 (1) IN GENERAL.—Section 1889, as added by 

16 subsection (a) and as amended by subsections (d) 

17 and (e), is further amended by adding at the end the 

18 following new subsections: 

19 ‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDU20 CATION PROGRAM ACTIVITIES.—A medicare contractor 

21 may not use a record of attendance at (or failure to at22 tend) educational activities or other information gathered 

23 during an educational program conducted under this sec24 tion or otherwise by the Secretary to select or track pro-
323

•S 1926 IS 

1 viders of services or suppliers for the purpose of con2 ducting any type of audit or prepayment review. 

3 ‘‘(f) CONSTRUCTION.—Nothing in this section or sec4 tion 1893(g) shall be construed as providing for disclosure 

5 by a medicare contractor—

6 ‘‘(1) of the screens used for identifying claims 

7 that will be subject to medical review; or 

8 ‘‘(2) of information that would compromise 

9 pending law enforcement activities or reveal findings 

10 of law enforcement-related audits. 

11 ‘‘(g) DEFINITIONS.—For purposes of this section, the 

12 term ‘medicare contractor’ includes the following: 

13 ‘‘(1) A medicare administrative contractor with 

14 a contract under section 1874A, including a fiscal 

15 intermediary with a contract under section 1816 and 

16 a carrier with a contract under section 1842. 

17 ‘‘(2) An eligible entity with a contract under 

18 section 1893. 

19 Such term does not include, with respect to activities of 

20 a specific provider of services or supplier an entity that 

21 has no authority under this title or title IX with respect 

22 to such activities and such provider of services or sup23 plier.’’. 
324

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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall take effect on the date of the 

3 enactment of this Act. 

4 SEC. 522. SMALL PROVIDER TECHNICAL ASSISTANCE DEM5 ONSTRATION PROGRAM. 

6 (a) ESTABLISHMENT.—

7 (1) IN GENERAL.—The Secretary shall establish 

8 a demonstration program (in this section referred to 

9 as the ‘‘demonstration program’’) under which tech10 nical assistance described in paragraph (2) is made 

11 available, upon request and on a voluntary basis, to 

12 small providers of services or suppliers in order to 

13 improve compliance with the applicable requirements 

14 of the programs under the medicare program under 

15 title XVIII of the Social Security Act (including pro16 visions of title XI of such Act insofar as they relate 

17 to such title and are not administered by the Office 

18 of the Inspector General of the Department of 

19 Health and Human Services). 

20 (2) FORMS OF TECHNICAL ASSISTANCE.—The 

21 technical assistance described in this paragraph is—

22 (A) evaluation and recommendations re23 garding billing and related systems; and 
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•S 1926 IS 

1 (B) information and assistance regarding 

2 policies and procedures under the medicare pro3 gram, including coding and reimbursement. 

4 (3) SMALL PROVIDERS OF SERVICES OR SUP5 PLIERS.—In this section, the term ‘‘small providers 

6 of services or suppliers’’ means—

7 (A) a provider of services with fewer than 

8 25 full-time-equivalent employees; or 

9 (B) a supplier with fewer than 10 full10 time-equivalent employees. 

11 (b) QUALIFICATION OF CONTRACTORS.—In con12 ducting the demonstration program, the Secretary shall 

13 enter into contracts with qualified organizations (such as 

14 peer review organizations or entities described in section 

15 1889(g)(2) of the Social Security Act, as inserted by sec16 tion 521(f)(1)) with appropriate expertise with billing sys17 tems of the full range of providers of services and sup18 pliers to provide the technical assistance. In awarding such 

19 contracts, the Secretary shall consider any prior investiga20 tions of the entity’s work by the Inspector General of the 

21 Department of Health and Human Services or the Comp22 troller General of the United States. 

23 (c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The 

24 technical assistance provided under the demonstration 

25 program shall include a direct and in-person examination 
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•S 1926 IS 

1 of billing systems and internal controls of small providers 

2 of services or suppliers to determine program compliance 

3 and to suggest more efficient or effective means of achiev4 ing such compliance. 

5 (d) GAO EVALUATION.—Not later than 2 years after 

6 the date the demonstration program is first implemented, 

7 the Comptroller General, in consultation with the Inspec8 tor General of the Department of Health and Human 

9 Services, shall conduct an evaluation of the demonstration 

10 program. The evaluation shall include a determination of 

11 whether claims error rates are reduced for small providers 

12 of services or suppliers who participated in the program 

13 and the extent of improper payments made as a result 

14 of the demonstration program. The Comptroller General 

15 shall submit a report to the Secretary and the Congress 

16 on such evaluation and shall include in such report rec17 ommendations regarding the continuation or extension of 

18 the demonstration program. 

19 (e) FINANCIAL PARTICIPATION BY PROVIDERS.—The 

20 provision of technical assistance to a small provider of 

21 services or supplier under the demonstration program is 

22 conditioned upon the small provider of services or supplier 

23 paying an amount estimated (and disclosed in advance of 

24 a provider’s or supplier’s participation in the program) to 
327

•S 1926 IS 

1 be equal to 25 percent of the cost of the technical assist2 ance. 

3 (f) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated, from amounts not oth5 erwise appropriated in the Treasury, such sums as may 

6 be necessary to carry out this section. 

7 SEC. 523. MEDICARE BENEFICIARY OMBUDSMAN. 

8 (a) IN GENERAL.—Section 1808, as added and 

9 amended by section 500, is amended by adding at the end 

10 the following new subsection: 

11 ‘‘(c) MEDICARE BENEFICIARY OMBUDSMAN.—

12 ‘‘(1) IN GENERAL.—The Secretary shall appoint 

13 within the Department of Health and Human Serv14 ices a Medicare Beneficiary Ombudsman who shall 

15 have expertise and experience in the fields of health 

16 care and education of (and assistance to) individuals 

17 entitled to benefits under this title. 

18 ‘‘(2) DUTIES.—The Medicare Beneficiary Om19 budsman shall—

20 ‘‘(A) receive complaints, grievances, and 

21 requests for information submitted by individ22 uals entitled to benefits under part A or en23 rolled under part B, or both, with respect to 

24 any aspect of the medicare program; 
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•S 1926 IS 

1 ‘‘(B) provide assistance with respect to 

2 complaints, grievances, and requests referred to 

3 in subparagraph (A), including—

4 ‘‘(i) assistance in collecting relevant 

5 information for such individuals, to seek 

6 an appeal of a decision or determination 

7 made by a fiscal intermediary, carrier, MA 

8 organization, or the Secretary; 

9 ‘‘(ii) assistance to such individuals 

10 with any problems arising from 

11 disenrollment from an MA plan under part 

12 C; and 

13 ‘‘(iii) assistance to such individuals in 

14 presenting information under section 

15 1839(i)(4)(C) (relating to income-related 

16 premium adjustment); and 

17 ‘‘(C) submit annual reports to Congress 

18 and the Secretary that describe the activities of 

19 the Office and that include such recommenda20 tions for improvement in the administration of 

21 this title as the Ombudsman determines appro22 priate. 

23 The Ombudsman shall not serve as an advocate for 

24 any increases in payments or new coverage of serv-
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•S 1926 IS 

1 ices, but may identify issues and problems in pay2 ment or coverage policies. 

3 ‘‘(3) WORKING WITH HEALTH INSURANCE

4 COUNSELING PROGRAMS.—To the extent possible, 

5 the Ombudsman shall work with health insurance 

6 counseling programs (receiving funding under sec7 tion 4360 of the Omnibus Budget Reconciliation Act 

8 of 1990) to facilitate the provision of information to 

9 individuals entitled to benefits under part A or en10 rolled under part B, or both regarding MA plans 

11 and changes to those plans. Nothing in this para12 graph shall preclude further collaboration between 

13 the Ombudsman and such programs.’’. 

14 (b) DEADLINE FOR APPOINTMENT.—By not later 

15 than 1 year after the date of the enactment of this Act, 

16 the Secretary shall appoint the Medicare Beneficiary Om17 budsman under section 1808(c) of the Social Security Act, 

18 as added by subsection (a). 

19 (c) FUNDING.—There are authorized to be appro20 priated to the Secretary (in appropriate part from the 

21 Federal Hospital Insurance Trust Fund, established 

22 under section 1817 of the Social Security Act (42 U.S.C. 

23 1395i), and the Federal Supplementary Medical Insurance 

24 Trust Fund, established under section 1841 of such Act 

25 (42 U.S.C. 1395t)) to carry out section 1808(c) of such 
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•S 1926 IS 

1 Act (relating to the Medicare Beneficiary Ombudsman), 

2 as added by subsection (a), such sums as are necessary 

3 for fiscal year 2004 and each succeeding fiscal year. 

4 (d) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–

5 MEDICARE).—

6 (1) PHONE TRIAGE SYSTEM; LISTING IN MEDI7 CARE HANDBOOK INSTEAD OF OTHER TOLL-FREE

8 NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–

9 2(b)) is amended by adding at the end the following: 

10 ‘‘The Secretary shall provide, through the toll-free 

11 telephone number 1–800–MEDICARE, for a means 

12 by which individuals seeking information about, or 

13 assistance with, such programs who phone such toll14 free number are transferred (without charge) to ap15 propriate entities for the provision of such informa16 tion or assistance. Such toll-free number shall be the 

17 toll-free number listed for general information and 

18 assistance in the annual notice under subsection (a) 

19 instead of the listing of numbers of individual con20 tractors.’’. 

21 (2) MONITORING ACCURACY.—

22 (A) STUDY.—The Comptroller General of 

23 the United States shall conduct a study to mon24 itor the accuracy and consistency of information 

25 provided to individuals entitled to benefits 
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•S 1926 IS 

1 under part A or enrolled under part B, or both, 

2 through the toll-free telephone number 1–800–

3 MEDICARE, including an assessment of 

4 whether the information provided is sufficient 

5 to answer questions of such individuals. In con6 ducting the study, the Comptroller General 

7 shall examine the education and training of the 

8 individuals providing information through such 

9 number. 

10 (B) REPORT.—Not later than 1 year after 

11 the date of the enactment of this Act, the 

12 Comptroller General shall submit to Congress a 

13 report on the study conducted under subpara14 graph (A). 

15 SEC. 524. BENEFICIARY OUTREACH DEMONSTRATION PRO16 GRAM. 

17 (a) IN GENERAL.—The Secretary shall establish a 

18 demonstration program (in this section referred to as the 

19 ‘‘demonstration program’’) under which medicare special20 ists employed by the Department of Health and Human 

21 Services provide advice and assistance to individuals enti22 tled to benefits under part A of title XVIII of the Social 

23 Security Act, or enrolled under part B of such title, or 

24 both, regarding the medicare program at the location of 

25 existing local offices of the Social Security Administration. 
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•S 1926 IS 

1 (b) LOCATIONS.—

2 (1) IN GENERAL.—The demonstration program 

3 shall be conducted in at least 6 offices or areas. 

4 Subject to paragraph (2), in selecting such offices 

5 and areas, the Secretary shall provide preference for 

6 offices with a high volume of visits by individuals re7 ferred to in subsection (a). 

8 (2) ASSISTANCE FOR RURAL BENEFICIARIES.—

9 The Secretary shall provide for the selection of at 

10 least 2 rural areas to participate in the demonstra11 tion program. In conducting the demonstration pro12 gram in such rural areas, the Secretary shall provide 

13 for medicare specialists to travel among local offices 

14 in a rural area on a scheduled basis. 

15 (c) DURATION.—The demonstration program shall be 

16 conducted over a 3-year period. 

17 (d) EVALUATION AND REPORT.—

18 (1) EVALUATION.—The Secretary shall provide 

19 for an evaluation of the demonstration program. 

20 Such evaluation shall include an analysis of—

21 (A) utilization of, and satisfaction of those 

22 individuals referred to in subsection (a) with, 

23 the assistance provided under the program; and 

24 (B) the cost-effectiveness of providing ben25 eficiary assistance through out-stationing medi-
333

•S 1926 IS 

1 care specialists at local offices of the Social Se2 curity Administration. 

3 (2) REPORT.—The Secretary shall submit to 

4 Congress a report on such evaluation and shall in5 clude in such report recommendations regarding the 

6 feasibility of permanently out-stationing medicare 

7 specialists at local offices of the Social Security Ad8 ministration. 

9 SEC. 525. INCLUSION OF ADDITIONAL INFORMATION IN NO10 TICES TO BENEFICIARIES ABOUT SKILLED 

11 NURSING FACILITY BENEFITS. 

12 (a) IN GENERAL.—The Secretary shall provide that 

13 in medicare beneficiary notices provided (under section 

14 1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a)) 

15 with respect to the provision of post-hospital extended care 

16 services under part A of title XVIII of the Social Security 

17 Act, there shall be included information on the number 

18 of days of coverage of such services remaining under such 

19 part for the medicare beneficiary and spell of illness in20 volved. 

21 (b) EFFECTIVE DATE.—Subsection (a) shall apply to 

22 notices provided during calendar quarters beginning more 

23 than 6 months after the date of the enactment of this Act. 
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•S 1926 IS 

1 SEC. 526. INFORMATION ON MEDICARE-CERTIFIED 

2 SKILLED NURSING FACILITIES IN HOSPITAL 

3 DISCHARGE PLANS. 

4 (a) AVAILABILITY OF DATA.—The Secretary shall 

5 publicly provide information that enables hospital dis6 charge planners, medicare beneficiaries, and the public to 

7 identify skilled nursing facilities that are participating in 

8 the medicare program. 

9 (b) INCLUSION OF INFORMATION IN CERTAIN HOS10 PITAL DISCHARGE PLANS.—

11 (1) IN GENERAL.—Section 1861(ee)(2)(D) (42 

12 U.S.C. 1395x(ee)(2)(D)) is amended—

13 (A) by striking ‘‘hospice services’’ and in14 serting ‘‘hospice care and post-hospital ex15 tended care services’’; and 

16 (B) by inserting before the period at the 

17 end the following: ‘‘and, in the case of individ18 uals who are likely to need post-hospital ex19 tended care services, the availability of such 

20 services through facilities that participate in the 

21 program under this title and that serve the area 

22 in which the patient resides’’. 

23 (2) EFFECTIVE DATE.—The amendments made 

24 by paragraph (1) shall apply to discharge plans 

25 made on or after such date as the Secretary shall 

26 specify, but not later than 6 months after the date 
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•S 1926 IS 

1 the Secretary provides for availability of information 

2 under subsection (a). 

3 Subtitle D—Appeals and Recovery 

4 SEC. 531. TRANSFER OF RESPONSIBILITY FOR MEDICARE 

5 APPEALS. 

6 (a) TRANSITION PLAN.—

7 (1) IN GENERAL.—Not later than April 1, 

8 2004, the Commissioner of Social Security and the 

9 Secretary shall develop and transmit to Congress 

10 and the Comptroller General of the United States a 

11 plan under which the functions of administrative law 

12 judges responsible for hearing cases under title 

13 XVIII of the Social Security Act (and related provi14 sions in title XI of such Act) are transferred from 

15 the responsibility of the Commissioner and the So16 cial Security Administration to the Secretary and 

17 the Department of Health and Human Services. 

18 (2) CONTENTS.—The plan shall include infor19 mation on the following: 

20 (A) WORKLOAD.—The number of such ad21 ministrative law judges and support staff re22 quired now and in the future to hear and decide 

23 such cases in a timely manner, taking into ac24 count the current and anticipated claims vol-
336

•S 1926 IS 

1 ume, appeals, number of beneficiaries, and stat2 utory changes. 

3 (B) COST PROJECTIONS AND FINANC4 ING.—Funding levels required for fiscal year 

5 2005 and subsequent fiscal years to carry out 

6 the functions transferred under the plan. 

7 (C) TRANSITION TIMETABLE.—A timetable 

8 for the transition. 

9 (D) REGULATIONS.—The establishment of 

10 specific regulations to govern the appeals proc11 ess. 

12 (E) CASE TRACKING.—The development of 

13 a unified case tracking system that will facili14 tate the maintenance and transfer of case spe15 cific data across both the fee-for-service and 

16 managed care components of the medicare pro17 gram. 

18 (F) FEASIBILITY OF PRECEDENTIAL AU19 THORITY.—The feasibility of developing a proc20 ess to give decisions of the Departmental Ap21 peals Board in the Department of Health and 

22 Human Services addressing broad legal issues 

23 binding, precedential authority. 

24 (G) ACCESS TO ADMINISTRATIVE LAW

25 JUDGES.—The feasibility of—
337

•S 1926 IS 

1 (i) filing appeals with administrative 

2 law judges electronically; and 

3 (ii) conducting hearings using tele- or 

4 video-conference technologies. 

5 (H) INDEPENDENCE OF ADMINISTRATIVE

6 LAW JUDGES.—The steps that should be taken 

7 to ensure the independence of administrative 

8 law judges consistent with the requirements of 

9 subsection (b)(2). 

10 (I) GEOGRAPHIC DISTRIBUTION.—The 

11 steps that should be taken to provide for an ap12 propriate geographic distribution of administra13 tive law judges throughout the United States to 

14 carry out subsection (b)(3). 

15 (J) HIRING.—The steps that should be 

16 taken to hire administrative law judges (and 

17 support staff) to carry out subsection (b)(4). 

18 (K) PERFORMANCE STANDARDS.—The ap19 propriateness of establishing performance 

20 standards for administrative law judges with re21 spect to timelines for decisions in cases under 

22 title XVIII of the Social Security Act taking 

23 into account requirements under subsection 

24 (b)(2) for the independence of such judges and 
338

•S 1926 IS 

1 consistent with the applicable provisions of title 

2 5, United States Code relating to impartiality. 

3 (L) SHARED RESOURCES.—The steps that 

4 should be taken to carry out subsection (b)(6) 

5 (relating to the arrangements with the Commis6 sioner of Social Security to share office space, 

7 support staff, and other resources, with appro8 priate reimbursement). 

9 (M) TRAINING.—The training that should 

10 be provided to administrative law judges with 

11 respect to laws and regulations under title 

12 XVIII of the Social Security Act. 

13 (3) ADDITIONAL INFORMATION.—The plan may 

14 also include recommendations for further congres15 sional action, including modifications to the require16 ments and deadlines established under section 1869 

17 of the Social Security Act (42 U.S.C. 1395ff) (as 

18 amended by this Act).

19 (4) GAO EVALUATION.—The Comptroller Gen20 eral of the United States shall evaluate the plan 

21 and, not later than the date that is 6 months after 

22 the date on which the plan is received by the Comp23 troller General, shall submit to Congress a report on 

24 such evaluation. 

25 (b) TRANSFER OF ADJUDICATION AUTHORITY.—
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•S 1926 IS 

1 (1) IN GENERAL.—Not earlier than July 1, 

2 2005, and not later than October 1, 2005, the Com3 missioner of Social Security and the Secretary shall 

4 implement the transition plan under subsection (a) 

5 and transfer the administrative law judge functions 

6 described in such subsection from the Social Secu7 rity Administration to the Secretary.

8 (2) ASSURING INDEPENDENCE OF JUDGES.—

9 The Secretary shall assure the independence of ad10 ministrative law judges performing the administra11 tive law judge functions transferred under para12 graph (1) from the Centers for Medicare & Medicaid 

13 Services and its contractors. In order to assure such 

14 independence, the Secretary shall place such judges 

15 in an administrative office that is organizationally 

16 and functionally separate from such Centers. Such 

17 judges shall report to, and be under the general su18 pervision of, the Secretary, but shall not report to, 

19 or be subject to supervision by, another officer of the 

20 Department of Health and Human Services. 

21 (3) GEOGRAPHIC DISTRIBUTION.—The Sec22 retary shall provide for an appropriate geographic 

23 distribution of administrative law judges performing 

24 the administrative law judge functions transferred 
340

•S 1926 IS 

1 under paragraph (1) throughout the United States 

2 to ensure timely access to such judges. 

3 (4) HIRING AUTHORITY.—Subject to the 

4 amounts provided in advance in appropriations Acts, 

5 the Secretary shall have authority to hire adminis6 trative law judges to hear such cases, taking into 

7 consideration those judges with expertise in handling 

8 medicare appeals and in a manner consistent with 

9 paragraph (3), and to hire support staff for such 

10 judges. 

11 (5) FINANCING.—Amounts payable under law 

12 to the Commissioner for administrative law judges 

13 performing the administrative law judge functions 

14 transferred under paragraph (1) from the Federal 

15 Hospital Insurance Trust Fund and the Federal 

16 Supplementary Medical Insurance Trust Fund shall 

17 become payable to the Secretary for the functions so 

18 transferred. 

19 (6) SHARED RESOURCES.—The Secretary shall 

20 enter into such arrangements with the Commissioner 

21 as may be appropriate with respect to transferred 

22 functions of administrative law judges to share office 

23 space, support staff, and other resources, with ap24 propriate reimbursement from the Trust Funds de25 scribed in paragraph (5). 
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•S 1926 IS 

1 (c) INCREASED FINANCIAL SUPPORT.—In addition to 

2 any amounts otherwise appropriated, to ensure timely ac3 tion on appeals before administrative law judges and the 

4 Departmental Appeals Board consistent with section 1869 

5 of the Social Security Act (42 U.S.C. 1395ff) (as amended 

6 by this Act), there are authorized to be appropriated (in 

7 appropriate part from the Federal Hospital Insurance 

8 Trust Fund, established under section 1817 of the Social 

9 Security Act (42 U.S.C. 1395i), and the Federal Supple10 mentary Medical Insurance Trust Fund, established under 

11 section 1841 of such Act (42 U.S.C. 1395t)) to the Sec12 retary such sums as are necessary for fiscal year 2005 

13 and each subsequent fiscal year to—

14 (1) increase the number of administrative law 

15 judges (and their staffs) under subsection (b)(4); 

16 (2) improve education and training opportuni17 ties for administrative law judges (and their staffs); 

18 and 

19 (3) increase the staff of the Departmental Ap20 peals Board. 

21 (d) CONFORMING AMENDMENT.—Section 

22 1869(f)(2)(A)(i) (42 U.S.C. 1395ff(f)(2)(A)(i)) is amend23 ed by striking ‘‘of the Social Security Administration’’. 

24 SEC. 532. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 

25 (a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—
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•S 1926 IS 

1 (1) IN GENERAL.—Section 1869(b) (42 U.S.C. 

2 1395ff(b)) is amended—

3 (A) in paragraph (1)(A), by inserting ‘‘, 

4 subject to paragraph (2),’’ before ‘‘to judicial 

5 review of the Secretary’s final decision’’; and 

6 (B) by adding at the end the following new 

7 paragraph: 

8 ‘‘(2) EXPEDITED ACCESS TO JUDICIAL RE9 VIEW.—

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

11 establish a process under which a provider of 

12 services or supplier that furnishes an item or 

13 service or an individual entitled to benefits 

14 under part A or enrolled under part B, or both, 

15 who has filed an appeal under paragraph (1) 

16 (other than an appeal filed under paragraph 

17 (1)(F)(i)) may obtain access to judicial review 

18 when a review entity (described in subpara19 graph (D)), on its own motion or at the request 

20 of the appellant, determines that the Depart21 mental Appeals Board does not have the au22 thority to decide the question of law or regula23 tion relevant to the matters in controversy and 

24 that there is no material issue of fact in dis25 pute. The appellant may make such request 
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•S 1926 IS 

1 only once with respect to a question of law or 

2 regulation for a specific matter in dispute in a 

3 case of an appeal. 

4 ‘‘(B) PROMPT DETERMINATIONS.—If, after 

5 or coincident with appropriately filing a request 

6 for an administrative hearing, the appellant re7 quests a determination by the appropriate re8 view entity that the Departmental Appeals 

9 Board does not have the authority to decide the 

10 question of law or regulations relevant to the 

11 matters in controversy and that there is no ma12 terial issue of fact in dispute, and if such re13 quest is accompanied by the documents and 

14 materials as the appropriate review entity shall 

15 require for purposes of making such determina16 tion, such review entity shall make a determina17 tion on the request in writing within 60 days 

18 after the date such review entity receives the re19 quest and such accompanying documents and 

20 materials. Such a determination by such review 

21 entity shall be considered a final decision and 

22 not subject to review by the Secretary. 

23 ‘‘(C) ACCESS TO JUDICIAL REVIEW.—

24 ‘‘(i) IN GENERAL.—If the appropriate 

25 review entity—
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•S 1926 IS 

1 ‘‘(I) determines that there are no 

2 material issues of fact in dispute and 

3 that the only issues to be adjudicated 

4 are ones of law or regulation that the 

5 Departmental Appeals Board does not 

6 have authority to decide; or

7 ‘‘(II) fails to make such deter8 mination within the period provided 

9 under subparagraph (B), 

10 then the appellant may bring a civil action 

11 as described in this subparagraph. 

12 ‘‘(ii) DEADLINE FOR FILING.—Such 

13 action shall be filed, in the case described 

14 in—

15 ‘‘(I) clause (i)(I), within 60 days 

16 of the date of the determination de17 scribed in such clause; or 

18 ‘‘(II) clause (i)(II), within 60 

19 days of the end of the period provided 

20 under subparagraph (B) for the deter21 mination. 

22 ‘‘(iii) VENUE.—Such action shall be 

23 brought in the district court of the United 

24 States for the judicial district in which the 

25 appellant is located (or, in the case of an 
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•S 1926 IS 

1 action brought jointly by more than one 

2 applicant, the judicial district in which the 

3 greatest number of applicants are located) 

4 or in the District Court for the District of 

5 Columbia. 

6 ‘‘(iv) INTEREST ON ANY AMOUNTS IN

7 CONTROVERSY.—Where a provider of serv8 ices or supplier is granted judicial review 

9 pursuant to this paragraph, the amount in 

10 controversy (if any) shall be subject to an11 nual interest beginning on the first day of 

12 the first month beginning after the 60-day 

13 period as determined pursuant to clause 

14 (ii) and equal to the rate of interest on ob15 ligations issued for purchase by the Fed16 eral Supplementary Medical Insurance 

17 Trust Fund for the month in which the 

18 civil action authorized under this para19 graph is commenced, to be awarded by the 

20 reviewing court in favor of the prevailing 

21 party. No interest awarded pursuant to the 

22 preceding sentence shall be deemed income 

23 or cost for the purposes of determining re24 imbursement due providers of services or 

25 suppliers under this title. 
346

•S 1926 IS 

1 ‘‘(D) REVIEW ENTITY DEFINED.—For pur2 poses of this subsection, the term ‘review entity’ 

3 means an entity of up to three reviewers who 

4 are administrative law judges or members of 

5 the Departmental Appeals Board selected for 

6 purposes of making determinations under this 

7 paragraph.’’. 

8 (2) CONFORMING AMENDMENT.—Section 

9 1869(b)(1)(F)(ii) (42 U.S.C. 1395ff(b)(1)(F)(ii)) is 

10 amended to read as follows: 

11 ‘‘(ii) REFERENCE TO EXPEDITED AC12 CESS TO JUDICIAL REVIEW.—For the pro13 vision relating to expedited access to judi14 cial review, see paragraph (2).’’.

15 (b) APPLICATION TO PROVIDER AGREEMENT DETER16 MINATIONS.—Section 1866(h)(1) (42 U.S.C. 

17 1395cc(h)(1)) is amended—

18 (1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and 

19 (2) by adding at the end the following new sub20 paragraph: 

21 ‘‘(B) An institution or agency described in subpara22 graph (A) that has filed for a hearing under subparagraph 

23 (A) shall have expedited access to judicial review under 

24 this subparagraph in the same manner as providers of 

25 services, suppliers, and individuals entitled to benefits 
347

•S 1926 IS 

1 under part A or enrolled under part B, or both, may ob2 tain expedited access to judicial review under the process 

3 established under section 1869(b)(2). Nothing in this sub4 paragraph shall be construed to affect the application of 

5 any remedy imposed under section 1819 during the pend6 ency of an appeal under this subparagraph.’’. 

7 (c) EXPEDITED REVIEW OF CERTAIN PROVIDER

8 AGREEMENT DETERMINATIONS.—

9 (1) TERMINATION AND CERTAIN OTHER IMME10 DIATE REMEDIES.—Section 1866(h)(1) (42 U.S.C. 

11 1395cc(h)(1)), as amended by subsection (b), is 

12 amended by adding at the end the following new 

13 subparagraph: 

14 ‘‘(C)(i) The Secretary shall develop and implement a 

15 process to expedite proceedings under this subsection in 

16 which—

17 ‘‘(I) the remedy of termination of participation 

18 has been imposed; 

19 ‘‘(II) a remedy described in clause (i) or (iii) of 

20 section 1819(h)(2)(B) has been imposed, but only if 

21 such remedy has been imposed on an immediate 

22 basis; or 

23 ‘‘(III) a determination has been made as to a 

24 finding of substandard quality of care that results in 
348

•S 1926 IS 

1 the loss of approval of a skilled nursing facility’s 

2 nurse aide training program. 

3 ‘‘(ii) Under such process under clause (i), priority 

4 shall be provided in cases of termination described in 

5 clause (i)(I). 

6 ‘‘(iii) Nothing in this subparagraph shall be con7 strued to affect the application of any remedy imposed 

8 under section 1819 during the pendency of an appeal 

9 under this subparagraph.’’.

10 (2) WAIVER OF DISAPPROVAL OF NURSE-AIDE

11 TRAINING PROGRAMS.—Sections 1819(f)(2) and sec12 tion 1919(f)(2) (42 U.S.C. 1395i–3(f)(2) and 

13 1396r(f)(2)) are each amended—

14 (A) in subparagraph (B)(iii), by striking 

15 ‘‘subparagraph (C)’’ and inserting ‘‘subpara16 graphs (C) and (D)’’; and 

17 (B) by adding at the end the following new 

18 subparagraph: 

19 ‘‘(D) WAIVER OF DISAPPROVAL OF NURSE20 AIDE TRAINING PROGRAMS.—Upon application 

21 of a nursing facility, the Secretary may waive 

22 the application of subparagraph (B)(iii)(I)(c) if 

23 the imposition of the civil monetary penalty was 

24 not related to the quality of care provided to 

25 residents of the facility. Nothing in this sub-
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•S 1926 IS 

1 paragraph shall be construed as eliminating any 

2 requirement upon a facility to pay a civil mone3 tary penalty described in the preceding sen4 tence.’’. 

5 (3) INCREASED FINANCIAL SUPPORT.—In addi6 tion to any amounts otherwise appropriated, to re7 duce by 50 percent the average time for administra8 tive determinations on appeals under section 

9 1866(h) of the Social Security Act (42 U.S.C. 

10 1395cc(h)), there are authorized to be appropriated 

11 (in appropriate part from the Federal Hospital In12 surance Trust Fund, established under section 1817 

13 of the Social Security Act (42 U.S.C. 1395i), and 

14 the Federal Supplementary Medical Insurance Trust 

15 Fund, established under section 1841 of such Act 

16 (42 U.S.C. 1395t)) to the Secretary such additional 

17 sums for fiscal year 2004 and each subsequent fiscal 

18 year as may be necessary. The purposes for which 

19 such amounts are available include increasing the 

20 number of administrative law judges (and their 

21 staffs) and the appellate level staff at the Depart22 mental Appeals Board of the Department of Health 

23 and Human Services and educating such judges and 

24 staffs on long-term care issues. 
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•S 1926 IS 

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

2 this section shall apply to appeals filed on or after October 

3 1, 2004. 

4 SEC. 533. REVISIONS TO MEDICARE APPEALS PROCESS. 

5 (a) REQUIRING FULL AND EARLY PRESENTATION OF

6 EVIDENCE.—

7 (1) IN GENERAL.—Section 1869(b) (42 U.S.C. 

8 1395ff(b)), as amended by section 532(a), is further 

9 amended by adding at the end the following new 

10 paragraph: 

11 ‘‘(3) REQUIRING FULL AND EARLY PRESEN12 TATION OF EVIDENCE BY PROVIDERS.—A provider 

13 of services or supplier may not introduce evidence in 

14 any appeal under this section that was not presented 

15 at the reconsideration conducted by the qualified 

16 independent contractor under subsection (c), unless 

17 there is good cause which precluded the introduction 

18 of such evidence at or before that reconsideration.’’. 

19 (2) EFFECTIVE DATE.—The amendment made 

20 by paragraph (1) shall take effect on October 1, 

21 2004. 

22 (b) USE OF PATIENTS’ MEDICAL RECORDS.—Section 

23 1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)) is amend24 ed by inserting ‘‘(including the medical records of the indi25 vidual involved)’’ after ‘‘clinical experience’’. 
351

•S 1926 IS 

1 (c) NOTICE REQUIREMENTS FOR MEDICARE AP2 PEALS.— 

3 (1) INITIAL DETERMINATIONS AND REDETER4 MINATIONS.—Section 1869(a) (42 U.S.C. 1395ff(a)) 

5 is amended by adding at the end the following new 

6 paragraphs: 

7 ‘‘(4) REQUIREMENTS OF NOTICE OF DETER8 MINATIONS.—With respect to an initial determina9 tion insofar as it results in a denial of a claim for 

10 benefits—

11 ‘‘(A) the written notice on the determina12 tion shall include—

13 ‘‘(i) the reasons for the determination, 

14 including whether a local medical review 

15 policy or a local coverage determination 

16 was used; 

17 ‘‘(ii) the procedures for obtaining ad18 ditional information concerning the deter19 mination, including the information de20 scribed in subparagraph (B); and 

21 ‘‘(iii) notification of the right to seek 

22 a redetermination or otherwise appeal the 

23 determination and instructions on how to 

24 initiate such a redetermination under this 

25 section; 
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•S 1926 IS 

1 ‘‘(B) such written notice shall be provided 

2 in printed form and written in a manner cal3 culated to be understood by the individual enti4 tled to benefits under part A or enrolled under 

5 part B, or both; and 

6 ‘‘(C) the individual provided such written 

7 notice may obtain, upon request, information on 

8 the specific provision of the policy, manual, or 

9 regulation used in making the redetermination. 

10 ‘‘(5) REQUIREMENTS OF NOTICE OF REDETER11 MINATIONS.—With respect to a redetermination in12 sofar as it results in a denial of a claim for bene13 fits—

14 ‘‘(A) the written notice on the redeter15 mination shall include—

16 ‘‘(i) the specific reasons for the rede17 termination; 

18 ‘‘(ii) as appropriate, a summary of the 

19 clinical or scientific evidence used in mak20 ing the redetermination; 

21 ‘‘(iii) a description of the procedures 

22 for obtaining additional information con23 cerning the redetermination; and 

24 ‘‘(iv) notification of the right to ap25 peal the redetermination and instructions 
353

•S 1926 IS 

1 on how to initiate such an appeal under 

2 this section; 

3 ‘‘(B) such written notice shall be provided 

4 in printed form and written in a manner cal5 culated to be understood by the individual enti6 tled to benefits under part A or enrolled under 

7 part B, or both; and 

8 ‘‘(C) the individual provided such written 

9 notice may obtain, upon request, information on 

10 the specific provision of the policy, manual, or 

11 regulation used in making the redetermina12 tion.’’. 

13 (2) RECONSIDERATIONS.—Section 

14 1869(c)(3)(E) (42 U.S.C. 1395ff(c)(3)(E)) is 

15 amended—

16 (A) by inserting ‘‘be written in a manner 

17 calculated to be understood by the individual 

18 entitled to benefits under part A or enrolled 

19 under part B, or both, and shall include (to the 

20 extent appropriate)’’ after ‘‘in writing,’’; and 

21 (B) by inserting ‘‘and a notification of the 

22 right to appeal such determination and instruc23 tions on how to initiate such appeal under this 

24 section’’ after ‘‘such decision,’’. 
354

•S 1926 IS 

1 (3) APPEALS.—Section 1869(d) (42 U.S.C. 

2 1395ff(d)) is amended—

3 (A) in the heading, by inserting ‘‘; NO4 TICE’’ after ‘‘SECRETARY’’; and 

5 (B) by adding at the end the following new 

6 paragraph: 

7 ‘‘(4) NOTICE.—Notice of the decision of an ad8 ministrative law judge shall be in writing in a man9 ner calculated to be understood by the individual en10 titled to benefits under part A or enrolled under part 

11 B, or both, and shall include—

12 ‘‘(A) the specific reasons for the deter13 mination (including, to the extent appropriate, 

14 a summary of the clinical or scientific evidence 

15 used in making the determination); 

16 ‘‘(B) the procedures for obtaining addi17 tional information concerning the decision; and 

18 ‘‘(C) notification of the right to appeal the 

19 decision and instructions on how to initiate 

20 such an appeal under this section.’’. 

21 (4) SUBMISSION OF RECORD FOR APPEAL.—

22 Section 1869(c)(3)(J)(i) (42 U.S.C. 

23 1395ff(c)(3)(J)(i)) is amended by striking ‘‘prepare’’ 

24 and inserting ‘‘submit’’ and by striking ‘‘with re-
355

•S 1926 IS 

1 spect to’’ and all that follows through ‘‘and relevant 

2 policies’’. 

3 (d) QUALIFIED INDEPENDENT CONTRACTORS.—

4 (1) ELIGIBILITY REQUIREMENTS OF QUALIFIED

5 INDEPENDENT CONTRACTORS.—Section 1869(c)(3) 

6 (42 U.S.C. 1395ff(c)(3)) is amended—

7 (A) in subparagraph (A), by striking ‘‘suf8 ficient training and expertise in medical science 

9 and legal matters’’ and inserting ‘‘sufficient 

10 medical, legal, and other expertise (including 

11 knowledge of the program under this title) and 

12 sufficient staffing’’; and 

13 (B) by adding at the end the following new 

14 subparagraph: 

15 ‘‘(K) INDEPENDENCE REQUIREMENTS.—

16 ‘‘(i) IN GENERAL.—Subject to clause 

17 (ii), a qualified independent contractor 

18 shall not conduct any activities in a case 

19 unless the entity—

20 ‘‘(I) is not a related party (as de21 fined in subsection (g)(5)); 

22 ‘‘(II) does not have a material fa23 milial, financial, or professional rela24 tionship with such a party in relation 

25 to such case; and 
356

•S 1926 IS 

1 ‘‘(III) does not otherwise have a 

2 conflict of interest with such a party. 

3 ‘‘(ii) EXCEPTION FOR REASONABLE

4 COMPENSATION.—Nothing in clause (i) 

5 shall be construed to prohibit receipt by a 

6 qualified independent contractor of com7 pensation from the Secretary for the con8 duct of activities under this section if the 

9 compensation is provided consistent with 

10 clause (iii). 

11 ‘‘(iii) LIMITATIONS ON ENTITY COM12 PENSATION.—Compensation provided by 

13 the Secretary to a qualified independent 

14 contractor in connection with reviews 

15 under this section shall not be contingent 

16 on any decision rendered by the contractor 

17 or by any reviewing professional.’’. 

18 (2) ELIGIBILITY REQUIREMENTS FOR REVIEW19 ERS.—Section 1869 (42 U.S.C. 1395ff) is amend20 ed—

21 (A) by amending subsection (c)(3)(D) to 

22 read as follows: 

23 ‘‘(D) QUALIFICATIONS FOR REVIEWERS.—

24 The requirements of subsection (g) shall be met 
357

•S 1926 IS 

1 (relating to qualifications of reviewing profes2 sionals).’’; and 

3 (B) by adding at the end the following new 

4 subsection: 

5 ‘‘(g) QUALIFICATIONS OF REVIEWERS.—

6 ‘‘(1) IN GENERAL.—In reviewing determina7 tions under this section, a qualified independent con8 tractor shall assure that—

9 ‘‘(A) each individual conducting a review 

10 shall meet the qualifications of paragraph (2); 

11 ‘‘(B) compensation provided by the con12 tractor to each such reviewer is consistent with 

13 paragraph (3); and 

14 ‘‘(C) in the case of a review by a panel de15 scribed in subsection (c)(3)(B) composed of 

16 physicians or other health care professionals 

17 (each in this subsection referred to as a ‘review18 ing professional’), a reviewing professional 

19 meets the qualifications described in paragraph 

20 (4) and, where a claim is regarding the fur21 nishing of treatment by a physician (allopathic 

22 or osteopathic) or the provision of items or 

23 services by a physician (allopathic or osteo24 pathic), a reviewing professional shall be a phy25 sician (allopathic or osteopathic). 
358

•S 1926 IS 

1 ‘‘(2) INDEPENDENCE.—

2 ‘‘(A) IN GENERAL.—Subject to subpara3 graph (B), each individual conducting a review 

4 in a case shall—

5 ‘‘(i) not be a related party (as defined 

6 in paragraph (5)); 

7 ‘‘(ii) not have a material familial, fi8 nancial, or professional relationship with 

9 such a party in the case under review; and 

10 ‘‘(iii) not otherwise have a conflict of 

11 interest with such a party. 

12 ‘‘(B) EXCEPTION.—Nothing in subpara13 graph (A) shall be construed to—

14 ‘‘(i) prohibit an individual, solely on 

15 the basis of a participation agreement with 

16 a fiscal intermediary, carrier, or other con17 tractor, from serving as a reviewing profes18 sional if—

19 ‘‘(I) the individual is not involved 

20 in the provision of items or services in 

21 the case under review; 

22 ‘‘(II) the fact of such an agree23 ment is disclosed to the Secretary and 

24 the individual entitled to benefits 

25 under part A or enrolled under part 
359

•S 1926 IS 

1 B, or both, or such individual’s au2 thorized representative, and neither 

3 party objects; and 

4 ‘‘(III) the individual is not an 

5 employee of the intermediary, carrier, 

6 or contractor and does not provide 

7 services exclusively or primarily to or 

8 on behalf of such intermediary, car9 rier, or contractor;

10 ‘‘(ii) prohibit an individual who has 

11 staff privileges at the institution where the 

12 treatment involved takes place from serv13 ing as a reviewer merely on the basis of 

14 having such staff privileges if the existence 

15 of such privileges is disclosed to the Sec16 retary and such individual (or authorized 

17 representative), and neither party objects; 

18 or 

19 ‘‘(iii) prohibit receipt of compensation 

20 by a reviewing professional from a con21 tractor if the compensation is provided 

22 consistent with paragraph (3). 

23 For purposes of this paragraph, the term ‘par24 ticipation agreement’ means an agreement re25 lating to the provision of health care services by 
360

•S 1926 IS 

1 the individual and does not include the provi2 sion of services as a reviewer under this sub3 section. 

4 ‘‘(3) LIMITATIONS ON REVIEWER COMPENSA5 TION.—Compensation provided by a qualified inde6 pendent contractor to a reviewer in connection with 

7 a review under this section shall not be contingent 

8 on the decision rendered by the reviewer. 

9 ‘‘(4) LICENSURE AND EXPERTISE.—Each re10 viewing professional shall be—

11 ‘‘(A) a physician (allopathic or osteopathic) 

12 who is appropriately credentialed or licensed in 

13 one or more States to deliver health care serv14 ices and has medical expertise in the field of 

15 practice that is appropriate for the items or 

16 services at issue; or 

17 ‘‘(B) a health care professional who is le18 gally authorized in one or more States (in ac19 cordance with State law or the State regulatory 

20 mechanism provided by State law) to furnish 

21 the health care items or services at issue and 

22 has medical expertise in the field of practice 

23 that is appropriate for such items or services. 

24 ‘‘(5) RELATED PARTY DEFINED.—For purposes 

25 of this section, the term ‘related party’ means, with 
361

•S 1926 IS 

1 respect to a case under this title involving a specific 

2 individual entitled to benefits under part A or en3 rolled under part B, or both, any of the following: 

4 ‘‘(A) The Secretary, the medicare adminis5 trative contractor involved, or any fiduciary, of6 ficer, director, or employee of the Department 

7 of Health and Human Services, or of such con8 tractor. 

9 ‘‘(B) The individual (or authorized rep10 resentative). 

11 ‘‘(C) The health care professional that pro12 vides the items or services involved in the case. 

13 ‘‘(D) The institution at which the items or 

14 services (or treatment) involved in the case are 

15 provided. 

16 ‘‘(E) The manufacturer of any drug or 

17 other item that is included in the items or serv18 ices involved in the case. 

19 ‘‘(F) Any other party determined under 

20 any regulations to have a substantial interest in 

21 the case involved.’’. 

22 (3) REDUCING MINIMUM NUMBER OF QUALI23 FIED INDEPENDENT CONTRACTORS.—Section 

24 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is amended by 

25 striking ‘‘not fewer than 12 qualified independent 
362

•S 1926 IS 

1 contractors under this subsection’’ and inserting 

2 ‘‘with a sufficient number of qualified independent 

3 contractors (but not fewer than 4 such contractors) 

4 to conduct reconsiderations consistent with the time5 frames applicable under this subsection’’. 

6 (4) EFFECTIVE DATE.—The amendments made 

7 by paragraphs (1) and (2) shall be effective as if in8 cluded in the enactment of the respective provisions 

9 of subtitle C of title V of BIPA (114 Stat. 2763A–

10 534). 

11 (5) TRANSITION.—In applying section 1869(g) 

12 of the Social Security Act (as added by paragraph 

13 (2)), any reference to a medicare administrative con14 tractor shall be deemed to include a reference to a 

15 fiscal intermediary under section 1816 of the Social 

16 Security Act (42 U.S.C. 1395h) and a carrier under 

17 section 1842 of such Act (42 U.S.C. 1395u).

18 SEC. 534. PREPAYMENT REVIEW. 

19 (a) IN GENERAL.—Section 1874A, as added by sec20 tion 511(a)(1) and as amended by sections 912(b), 

21 921(b)(1), and 921(c)(1), is further amended by adding 

22 at the end the following new subsection: 

23 ‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—

24 ‘‘(1) CONDUCT OF RANDOM PREPAYMENT RE25 VIEW.—
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•S 1926 IS 

1 ‘‘(A) IN GENERAL.—A medicare adminis2 trative contractor may conduct random prepay3 ment review only to develop a contractor-wide 

4 or program-wide claims payment error rates or 

5 under such additional circumstances as may be 

6 provided under regulations, developed in con7 sultation with providers of services and sup8 pliers. 

9 ‘‘(B) USE OF STANDARD PROTOCOLS

10 WHEN CONDUCTING PREPAYMENT REVIEWS.—

11 When a medicare administrative contractor con12 ducts a random prepayment review, the con13 tractor may conduct such review only in accord14 ance with a standard protocol for random pre15 payment audits developed by the Secretary. 

16 ‘‘(C) CONSTRUCTION.—Nothing in this 

17 paragraph shall be construed as preventing the 

18 denial of payments for claims actually reviewed 

19 under a random prepayment review. 

20 ‘‘(D) RANDOM PREPAYMENT REVIEW.—

21 For purposes of this subsection, the term ‘ran22 dom prepayment review’ means a demand for 

23 the production of records or documentation ab24 sent cause with respect to a claim. 
364

•S 1926 IS 

1 ‘‘(2) LIMITATIONS ON NON-RANDOM PREPAY2 MENT REVIEW.—

3 ‘‘(A) LIMITATIONS ON INITIATION OF NON4 RANDOM PREPAYMENT REVIEW.—A medicare 

5 administrative contractor may not initiate non6 random prepayment review of a provider of 

7 services or supplier based on the initial identi8 fication by that provider of services or supplier 

9 of an improper billing practice unless there is 

10 a likelihood of sustained or high level of pay11 ment error under section 1893(f)(3)(A). 

12 ‘‘(B) TERMINATION OF NON-RANDOM PRE13 PAYMENT REVIEW.—The Secretary shall issue 

14 regulations relating to the termination, includ15 ing termination dates, of non-random prepay16 ment review. Such regulations may vary such a 

17 termination date based upon the differences in 

18 the circumstances triggering prepayment re19 view.’’. 

20 (b) EFFECTIVE DATE.—

21 (1) IN GENERAL.—Except as provided in this 

22 subsection, the amendment made by subsection (a) 

23 shall take effect 1 year after the date of the enact24 ment of this Act. 
365

•S 1926 IS 

1 (2) DEADLINE FOR PROMULGATION OF CER2 TAIN REGULATIONS.—The Secretary shall first issue 

3 regulations under section 1874A(h) of the Social Se4 curity Act, as added by subsection (a), by not later 

5 than 1 year after the date of the enactment of this 

6 Act. 

7 (3) APPLICATION OF STANDARD PROTOCOLS

8 FOR RANDOM PREPAYMENT REVIEW.—Section 

9 1874A(h)(1)(B) of the Social Security Act, as added 

10 by subsection (a), shall apply to random prepayment 

11 reviews conducted on or after such date (not later 

12 than 1 year after the date of the enactment of this 

13 Act) as the Secretary shall specify. 

14 (c) APPLICATION TO FISCAL INTERMEDIARIES AND

15 CARRIERS.—The provisions of section 1874A(h) of the So16 cial Security Act, as added by subsection (a), shall apply 

17 to each fiscal intermediary under section 1816 of the So18 cial Security Act (42 U.S.C. 1395h) and each carrier 

19 under section 1842 of such Act (42 U.S.C. 1395u) in the 

20 same manner as they apply to medicare administrative 

21 contractors under such provisions. 

22 SEC. 535. RECOVERY OF OVERPAYMENTS. 

23 (a) IN GENERAL.—Section 1893 (42 U.S.C. 

24 1395ddd) is amended by adding at the end the following 

25 new subsection: 
366

•S 1926 IS 

1 ‘‘(f) RECOVERY OF OVERPAYMENTS.—

2 ‘‘(1) USE OF REPAYMENT PLANS.—

3 ‘‘(A) IN GENERAL.—If the repayment, 

4 within 30 days by a provider of services or sup5 plier, of an overpayment under this title would 

6 constitute a hardship (as described in subpara7 graph (B)), subject to subparagraph (C), upon 

8 request of the provider of services or supplier 

9 the Secretary shall enter into a plan with the 

10 provider of services or supplier for the repay11 ment (through offset or otherwise) of such over12 payment over a period of at least 6 months but 

13 not longer than 3 years (or not longer than 5 

14 years in the case of extreme hardship, as deter15 mined by the Secretary). Interest shall accrue 

16 on the balance through the period of repay17 ment. Such plan shall meet terms and condi18 tions determined to be appropriate by the Sec19 retary. 

20 ‘‘(B) HARDSHIP.—

21 ‘‘(i) IN GENERAL.—For purposes of 

22 subparagraph (A), the repayment of an 

23 overpayment (or overpayments) within 30 

24 days is deemed to constitute a hardship 

25 if—
367

•S 1926 IS 

1 ‘‘(I) in the case of a provider of 

2 services that files cost reports, the ag3 gregate amount of the overpayments 

4 exceeds 10 percent of the amount paid 

5 under this title to the provider of 

6 services for the cost reporting period 

7 covered by the most recently sub8 mitted cost report; or 

9 ‘‘(II) in the case of another pro10 vider of services or supplier, the ag11 gregate amount of the overpayments 

12 exceeds 10 percent of the amount paid 

13 under this title to the provider of 

14 services or supplier for the previous 

15 calendar year. 

16 ‘‘(ii) RULE OF APPLICATION.—The 

17 Secretary shall establish rules for the ap18 plication of this subparagraph in the case 

19 of a provider of services or supplier that 

20 was not paid under this title during the 

21 previous year or was paid under this title 

22 only during a portion of that year. 

23 ‘‘(iii) TREATMENT OF PREVIOUS

24 OVERPAYMENTS.—If a provider of services 

25 or supplier has entered into a repayment 
368

•S 1926 IS 

1 plan under subparagraph (A) with respect 

2 to a specific overpayment amount, such 

3 payment amount under the repayment plan 

4 shall not be taken into account under 

5 clause (i) with respect to subsequent over6 payment amounts. 

7 ‘‘(C) EXCEPTIONS.—Subparagraph (A) 

8 shall not apply if—

9 ‘‘(i) the Secretary has reason to sus10 pect that the provider of services or sup11 plier may file for bankruptcy or otherwise 

12 cease to do business or discontinue partici13 pation in the program under this title; or 

14 ‘‘(ii) there is an indication of fraud or 

15 abuse committed against the program. 

16 ‘‘(D) IMMEDIATE COLLECTION IF VIOLA17 TION OF REPAYMENT PLAN.—If a provider of 

18 services or supplier fails to make a payment in 

19 accordance with a repayment plan under this 

20 paragraph, the Secretary may immediately seek 

21 to offset or otherwise recover the total balance 

22 outstanding (including applicable interest) 

23 under the repayment plan. 

24 ‘‘(E) RELATION TO NO FAULT PROVI25 SION.—Nothing in this paragraph shall be con-
369

•S 1926 IS 

1 strued as affecting the application of section 

2 1870(c) (relating to no adjustment in the cases 

3 of certain overpayments). 

4 ‘‘(2) LIMITATION ON RECOUPMENT.—

5 ‘‘(A) IN GENERAL.—In the case of a pro6 vider of services or supplier that is determined 

7 to have received an overpayment under this title 

8 and that seeks a reconsideration by a qualified 

9 independent contractor on such determination 

10 under section 1869(b)(1), the Secretary may 

11 not take any action (or authorize any other per12 son, including any medicare contractor, as de13 fined in subparagraph (C)) to recoup the over14 payment until the date the decision on the re15 consideration has been rendered. If the provi16 sions of section 1869(b)(1) (providing for such 

17 a reconsideration by a qualified independent 

18 contractor) are not in effect, in applying the 

19 previous sentence any reference to such a recon20 sideration shall be treated as a reference to a 

21 redetermination by the fiscal intermediary or 

22 carrier involved. 

23 ‘‘(B) COLLECTION WITH INTEREST.—Inso24 far as the determination on such appeal is 

25 against the provider of services or supplier, in-
370

•S 1926 IS 

1 terest on the overpayment shall accrue on and 

2 after the date of the original notice of overpay3 ment. Insofar as such determination against the 

4 provider of services or supplier is later reversed, 

5 the Secretary shall provide for repayment of the 

6 amount recouped plus interest at the same rate 

7 as would apply under the previous sentence for 

8 the period in which the amount was recouped. 

9 ‘‘(C) MEDICARE CONTRACTOR DEFINED.—

10 For purposes of this subsection, the term ‘medi11 care contractor’ has the meaning given such 

12 term in section 1889(g). 

13 ‘‘(3) LIMITATION ON USE OF EXTRAPO14 LATION.—A medicare contractor may not use ex15 trapolation to determine overpayment amounts to be 

16 recovered by recoupment, offset, or otherwise unless 

17 the Secretary determines that—

18 ‘‘(A) there is a sustained or high level of 

19 payment error; or 

20 ‘‘(B) documented educational intervention 

21 has failed to correct the payment error. 

22 There shall be no administrative or judicial review under 

23 section 1869, section 1878, or otherwise, of determina24 tions by the Secretary of sustained or high levels of pay25 ment errors under this paragraph. 
371

•S 1926 IS 

1 ‘‘(4) PROVISION OF SUPPORTING DOCUMENTA2 TION.—In the case of a provider of services or sup3 plier with respect to which amounts were previously 

4 overpaid, a medicare contractor may request the 

5 periodic production of records or supporting docu6 mentation for a limited sample of submitted claims 

7 to ensure that the previous practice is not con8 tinuing. 

9 ‘‘(5) CONSENT SETTLEMENT REFORMS.—

10 ‘‘(A) IN GENERAL.—The Secretary may 

11 use a consent settlement (as defined in sub12 paragraph (D)) to settle a projected overpay13 ment. 

14 ‘‘(B) OPPORTUNITY TO SUBMIT ADDI15 TIONAL INFORMATION BEFORE CONSENT SET16 TLEMENT OFFER.—Before offering a provider 

17 of services or supplier a consent settlement, the 

18 Secretary shall—

19 ‘‘(i) communicate to the provider of 

20 services or supplier—

21 ‘‘(I) that, based on a review of 

22 the medical records requested by the 

23 Secretary, a preliminary evaluation of 

24 those records indicates that there 

25 would be an overpayment; 
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•S 1926 IS 

1 ‘‘(II) the nature of the problems 

2 identified in such evaluation; and 

3 ‘‘(III) the steps that the provider 

4 of services or supplier should take to 

5 address the problems; and 

6 ‘‘(ii) provide for a 45-day period dur7 ing which the provider of services or sup8 plier may furnish additional information 

9 concerning the medical records for the 

10 claims that had been reviewed. 

11 ‘‘(C) CONSENT SETTLEMENT OFFER.—The 

12 Secretary shall review any additional informa13 tion furnished by the provider of services or 

14 supplier under subparagraph (B)(ii). Taking 

15 into consideration such information, the Sec16 retary shall determine if there still appears to 

17 be an overpayment. If so, the Secretary—

18 ‘‘(i) shall provide notice of such deter19 mination to the provider of services or sup20 plier, including an explanation of the rea21 son for such determination; and 

22 ‘‘(ii) in order to resolve the overpay23 ment, may offer the provider of services or 

24 supplier—
373

•S 1926 IS 

1 ‘‘(I) the opportunity for a statis2 tically valid random sample; or 

3 ‘‘(II) a consent settlement. 

4 The opportunity provided under clause (ii)(I) 

5 does not waive any appeal rights with respect to 

6 the alleged overpayment involved. 

7 ‘‘(D) CONSENT SETTLEMENT DEFINED.—

8 For purposes of this paragraph, the term ‘con9 sent settlement’ means an agreement between 

10 the Secretary and a provider of services or sup11 plier whereby both parties agree to settle a pro12 jected overpayment based on less than a statis13 tically valid sample of claims and the provider 

14 of services or supplier agrees not to appeal the 

15 claims involved. 

16 ‘‘(6) NOTICE OF OVER-UTILIZATION OF

17 CODES.—The Secretary shall establish, in consulta18 tion with organizations representing the classes of 

19 providers of services and suppliers, a process under 

20 which the Secretary provides for notice to classes of 

21 providers of services and suppliers served by the con22 tractor in cases in which the contractor has identi23 fied that particular billing codes may be overutilized 

24 by that class of providers of services or suppliers 
374

•S 1926 IS 

1 under the programs under this title (or provisions of 

2 title XI insofar as they relate to such programs). 

3 ‘‘(7) PAYMENT AUDITS.—

4 ‘‘(A) WRITTEN NOTICE FOR POST-PAY5 MENT AUDITS.—Subject to subparagraph (C), if 

6 a medicare contractor decides to conduct a 

7 post-payment audit of a provider of services or 

8 supplier under this title, the contractor shall 

9 provide the provider of services or supplier with 

10 written notice (which may be in electronic form) 

11 of the intent to conduct such an audit. 

12 ‘‘(B) EXPLANATION OF FINDINGS FOR ALL

13 AUDITS.—Subject to subparagraph (C), if a 

14 medicare contractor audits a provider of serv15 ices or supplier under this title, the contractor 

16 shall—

17 ‘‘(i) give the provider of services or 

18 supplier a full review and explanation of 

19 the findings of the audit in a manner that 

20 is understandable to the provider of serv21 ices or supplier and permits the develop22 ment of an appropriate corrective action 

23 plan; 

24 ‘‘(ii) inform the provider of services or 

25 supplier of the appeal rights under this 
375

•S 1926 IS 

1 title as well as consent settlement options 

2 (which are at the discretion of the Sec3 retary); 

4 ‘‘(iii) give the provider of services or 

5 supplier an opportunity to provide addi6 tional information to the contractor; and 

7 ‘‘(iv) take into account information 

8 provided, on a timely basis, by the provider 

9 of services or supplier under clause (iii). 

10 ‘‘(C) EXCEPTION.—Subparagraphs (A) 

11 and (B) shall not apply if the provision of no12 tice or findings would compromise pending law 

13 enforcement activities, whether civil or criminal, 

14 or reveal findings of law enforcement-related 

15 audits. 

16 ‘‘(8) STANDARD METHODOLOGY FOR PROBE

17 SAMPLING.—The Secretary shall establish a stand18 ard methodology for medicare contractors to use in 

19 selecting a sample of claims for review in the case 

20 of an abnormal billing pattern.’’. 

21 (b) EFFECTIVE DATES AND DEADLINES.—

22 (1) USE OF REPAYMENT PLANS.—Section 

23 1893(f)(1) of the Social Security Act, as added by 

24 subsection (a), shall apply to requests for repayment 
376

•S 1926 IS 

1 plans made after the date of the enactment of this 

2 Act. 

3 (2) LIMITATION ON RECOUPMENT.—Section 

4 1893(f)(2) of the Social Security Act, as added by 

5 subsection (a), shall apply to actions taken after the 

6 date of the enactment of this Act. 

7 (3) USE OF EXTRAPOLATION.—Section 

8 1893(f)(3) of the Social Security Act, as added by 

9 subsection (a), shall apply to statistically valid ran10 dom samples initiated after the date that is 1 year 

11 after the date of the enactment of this Act. 

12 (4) PROVISION OF SUPPORTING DOCUMENTA13 TION.—Section 1893(f)(4) of the Social Security 

14 Act, as added by subsection (a), shall take effect on 

15 the date of the enactment of this Act. 

16 (5) CONSENT SETTLEMENT.—Section 

17 1893(f)(5) of the Social Security Act, as added by 

18 subsection (a), shall apply to consent settlements en19 tered into after the date of the enactment of this 

20 Act. 

21 (6) NOTICE OF OVERUTILIZATION.—Not later 

22 than 1 year after the date of the enactment of this 

23 Act, the Secretary shall first establish the process 

24 for notice of overutilization of billing codes under 
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1 section 1893A(f)(6) of the Social Security Act, as 

2 added by subsection (a). 

3 (7) PAYMENT AUDITS.—Section 1893A(f)(7) of 

4 the Social Security Act, as added by subsection (a), 

5 shall apply to audits initiated after the date of the 

6 enactment of this Act. 

7 (8) STANDARD FOR ABNORMAL BILLING PAT8 TERNS.—Not later than 1 year after the date of the 

9 enactment of this Act, the Secretary shall first es10 tablish a standard methodology for selection of sam11 ple claims for abnormal billing patterns under sec12 tion 1893(f)(8) of the Social Security Act, as added 

13 by subsection (a). 

14 SEC. 536. PROVIDER ENROLLMENT PROCESS; RIGHT OF AP15 PEAL. 

16 (a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc) 

17 is amended—

18 (1) by adding at the end of the heading the fol19 lowing: ‘‘; ENROLLMENT PROCESSES’’; and 

20 (2) by adding at the end the following new sub21 section: 

22 ‘‘(j) ENROLLMENT PROCESS FOR PROVIDERS OF

23 SERVICES AND SUPPLIERS.—

24 ‘‘(1) ENROLLMENT PROCESS.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall 

2 establish by regulation a process for the enroll3 ment of providers of services and suppliers 

4 under this title. 

5 ‘‘(B) DEADLINES.—The Secretary shall es6 tablish by regulation procedures under which 

7 there are deadlines for actions on applications 

8 for enrollment (and, if applicable, renewal of 

9 enrollment). The Secretary shall monitor the 

10 performance of medicare administrative con11 tractors in meeting the deadlines established 

12 under this subparagraph. 

13 ‘‘(C) CONSULTATION BEFORE CHANGING

14 PROVIDER ENROLLMENT FORMS.—The Sec15 retary shall consult with providers of services 

16 and suppliers before making changes in the pro17 vider enrollment forms required of such pro18 viders and suppliers to be eligible to submit 

19 claims for which payment may be made under 

20 this title. 

21 ‘‘(2) HEARING RIGHTS IN CASES OF DENIAL OR

22 NON-RENEWAL.—A provider of services or supplier 

23 whose application to enroll (or, if applicable, to 

24 renew enrollment) under this title is denied may 

25 have a hearing and judicial review of such denial 
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1 under the procedures that apply under subsection 

2 (h)(1)(A) to a provider of services that is dissatisfied 

3 with a determination by the Secretary.’’. 

4 (b) EFFECTIVE DATES.—

5 (1) ENROLLMENT PROCESS.—The Secretary 

6 shall provide for the establishment of the enrollment 

7 process under section 1866(j)(1) of the Social Secu8 rity Act, as added by subsection (a)(2), within 6 

9 months after the date of the enactment of this Act. 

10 (2) CONSULTATION.—Section 1866(j)(1)(C) of 

11 the Social Security Act, as added by subsection 

12 (a)(2), shall apply with respect to changes in pro13 vider enrollment forms made on or after January 1, 

14 2004. 

15 (3) HEARING RIGHTS.—Section 1866(j)(2) of 

16 the Social Security Act, as added by subsection 

17 (a)(2), shall apply to denials occurring on or after 

18 such date (not later than 1 year after the date of 

19 the enactment of this Act) as the Secretary specifies. 

20 SEC. 537. PROCESS FOR CORRECTION OF MINOR ERRORS 

21 AND OMISSIONS WITHOUT PURSUING AP22 PEALS PROCESS. 

23 (a) CLAIMS.—The Secretary shall develop, in con24 sultation with appropriate medicare contractors (as de25 fined in section 1889(g) of the Social Security Act, as in-
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1 serted by section 301(a)(1)) and representatives of pro2 viders of services and suppliers, a process whereby, in the 

3 case of minor errors or omissions (as defined by the Sec4 retary) that are detected in the submission of claims under 

5 the programs under title XVIII of such Act, a provider 

6 of services or supplier is given an opportunity to correct 

7 such an error or omission without the need to initiate an 

8 appeal. Such process shall include the ability to resubmit 

9 corrected claims. 

10 (b) DEADLINE.—Not later than 1 year after the date 

11 of the enactment of this Act, the Secretary shall first de12 velop the process under subsection (a). 

13 SEC. 538. PRIOR DETERMINATION PROCESS FOR CERTAIN 

14 ITEMS AND SERVICES; ADVANCE BENE15 FICIARY NOTICES. 

16 (a) IN GENERAL.—Section 1869 (42 U.S.C. 

17 1395ff(b)), as amended by section 533(d)(2)(B), is fur18 ther amended by adding at the end the following new sub19 section: 

20 ‘‘(h) PRIOR DETERMINATION PROCESS FOR CERTAIN

21 ITEMS AND SERVICES.—

22 ‘‘(1) ESTABLISHMENT OF PROCESS.—

23 ‘‘(A) IN GENERAL.—With respect to a 

24 medicare administrative contractor that has a 

25 contract under section 1874A that provides for 
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1 making payments under this title with respect 

2 to physicians’ services (as defined in section 

3 1848(j)(3)), the Secretary shall establish a 

4 prior determination process that meets the re5 quirements of this subsection and that shall be 

6 applied by such contractor in the case of eligible 

7 requesters. 

8 ‘‘(B) ELIGIBLE REQUESTER.—For pur9 poses of this subsection, each of the following 

10 shall be an eligible requester: 

11 ‘‘(i) A participating physician, but 

12 only with respect to physicians’ services to 

13 be furnished to an individual who is enti14 tled to benefits under this title and who 

15 has consented to the physician making the 

16 request under this subsection for those 

17 physicians’ services. 

18 ‘‘(ii) An individual entitled to benefits 

19 under this title, but only with respect to a 

20 physicians’ service for which the individual 

21 receives, from a physician, an advance ben22 eficiary notice under section 1879(a). 

23 ‘‘(2) SECRETARIAL FLEXIBILITY.—The Sec24 retary shall establish by regulation reasonable limits 

25 on the physicians’ services for which a prior deter-
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1 mination of coverage may be requested under this 

2 subsection. In establishing such limits, the Secretary 

3 may consider the dollar amount involved with re4 spect to the physicians’ service, administrative costs 

5 and burdens, and other relevant factors. 

6 ‘‘(3) REQUEST FOR PRIOR DETERMINATION.—

7 ‘‘(A) IN GENERAL.—Subject to paragraph 

8 (2), under the process established under this 

9 subsection an eligible requester may submit to 

10 the contractor a request for a determination, 

11 before the furnishing of a physicians’ service, as 

12 to whether the physicians’ service is covered 

13 under this title consistent with the applicable 

14 requirements of section 1862(a)(1)(A) (relating 

15 to medical necessity). 

16 ‘‘(B) ACCOMPANYING DOCUMENTATION.—

17 The Secretary may require that the request be 

18 accompanied by a description of the physicians’ 

19 service, supporting documentation relating to 

20 the medical necessity for the physicians’ service, 

21 and any other appropriate documentation. In 

22 the case of a request submitted by an eligible 

23 requester who is described in paragraph 

24 (1)(B)(ii), the Secretary may require that the 
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1 request also be accompanied by a copy of the 

2 advance beneficiary notice involved. 

3 ‘‘(4) RESPONSE TO REQUEST.—

4 ‘‘(A) IN GENERAL.—Under such process, 

5 the contractor shall provide the eligible re6 quester with written notice of a determination 

7 as to whether—

8 ‘‘(i) the physicians’ service is so cov9 ered; 

10 ‘‘(ii) the physicians’ service is not so 

11 covered; or 

12 ‘‘(iii) the contractor lacks sufficient 

13 information to make a coverage determina14 tion with respect to the physicians’ service. 

15 ‘‘(B) CONTENTS OF NOTICE FOR CERTAIN

16 DETERMINATIONS.—

17 ‘‘(i) NONCOVERAGE.—If the con18 tractor makes the determination described 

19 in subparagraph (A)(ii), the contractor 

20 shall include in the notice a brief expla21 nation of the basis for the determination, 

22 including on what national or local cov23 erage or noncoverage determination (if 

24 any) the determination is based, and a de-
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1 scription of any applicable rights under 

2 subsection (a). 

3 ‘‘(ii) INSUFFICIENT INFORMATION.—

4 If the contractor makes the determination 

5 described in subparagraph (A)(iii), the 

6 contractor shall include in the notice a de7 scription of the additional information re8 quired to make the coverage determination.

9 ‘‘(C) DEADLINE TO RESPOND.—Such no10 tice shall be provided within the same time pe11 riod as the time period applicable to the con12 tractor providing notice of initial determinations 

13 on a claim for benefits under subsection 

14 (a)(2)(A). 

15 ‘‘(D) INFORMING BENEFICIARY IN CASE OF

16 PHYSICIAN REQUEST.—In the case of a request 

17 by a participating physician under paragraph 

18 (1)(B)(i), the process shall provide that the in19 dividual to whom the physicians’ service is pro20 posed to be furnished shall be informed of any 

21 determination described in subparagraph (A)(ii) 

22 (relating to a determination of non-coverage) 

23 and the right (referred to in paragraph (6)(B)) 

24 to obtain the physicians’ service and have a 

25 claim submitted for the physicians’ service. 
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1 ‘‘(5) BINDING NATURE OF POSITIVE DETER2 MINATION.—If the contractor makes the determina3 tion described in paragraph (4)(A)(i), such deter4 mination shall be binding on the contractor in the 

5 absence of fraud or evidence of misrepresentation of 

6 facts presented to the contractor. 

7 ‘‘(6) LIMITATION ON FURTHER REVIEW.—

8 ‘‘(A) IN GENERAL.—Contractor determina9 tions described in paragraph (4)(A)(ii) or 

10 (4)(A)(iii) (relating to pre-service claims) are 

11 not subject to further administrative appeal or 

12 judicial review under this section or otherwise. 

13 ‘‘(B) DECISION NOT TO SEEK PRIOR DE14 TERMINATION OR NEGATIVE DETERMINATION

15 DOES NOT IMPACT RIGHT TO OBTAIN SERVICES, 

16 SEEK REIMBURSEMENT, OR APPEAL RIGHTS.—

17 Nothing in this subsection shall be construed as 

18 affecting the right of an individual who—

19 ‘‘(i) decides not to seek a prior deter20 mination under this subsection with re21 spect to physicians’ services; or 

22 ‘‘(ii) seeks such a determination and 

23 has received a determination described in 

24 paragraph (4)(A)(ii), 
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1 from receiving (and submitting a claim for) 

2 such physicians’ services and from obtaining 

3 administrative or judicial review respecting such 

4 claim under the other applicable provisions of 

5 this section. Failure to seek a prior determina6 tion under this subsection with respect to physi7 cians’ service shall not be taken into account in 

8 such administrative or judicial review. 

9 ‘‘(C) NO PRIOR DETERMINATION AFTER

10 RECEIPT OF SERVICES.—Once an individual is 

11 provided physicians’ services, there shall be no 

12 prior determination under this subsection with 

13 respect to such physicians’ services.’’. 

14 (b) EFFECTIVE DATE; SUNSET; TRANSITION.—

15 (1) EFFECTIVE DATE.—The Secretary shall es16 tablish the prior determination process under the 

17 amendment made by subsection (a) in such a man18 ner as to provide for the acceptance of requests for 

19 determinations under such process filed not later 

20 than 18 months after the date of the enactment of 

21 this Act. 

22 (2) SUNSET.—Such prior determination process 

23 shall not apply to requests filed after the end of the 

24 5-year period beginning on the first date on which 
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1 requests for determinations under such process are 

2 accepted. 

3 (3) TRANSITION.—During the period in which 

4 the amendment made by subsection (a) has become 

5 effective but contracts are not provided under sec6 tion 1874A of the Social Security Act with medicare 

7 administrative contractors, any reference in section 

8 1869(g) of such Act (as added by such amendment) 

9 to such a contractor is deemed a reference to a fiscal 

10 intermediary or carrier with an agreement under 

11 section 1816, or contract under section 1842, re12 spectively, of such Act. 

13 (4) LIMITATION ON APPLICATION TO SGR.—For 

14 purposes of applying section 1848(f)(2)(D) of the 

15 Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)), 

16 the amendment made by subsection (a) shall not be 

17 considered to be a change in law or regulation. 

18 (c) PROVISIONS RELATING TO ADVANCE BENE19 FICIARY NOTICES; REPORT ON PRIOR DETERMINATION

20 PROCESS.—

21 (1) DATA COLLECTION.—The Secretary shall 

22 establish a process for the collection of information 

23 on the instances in which an advance beneficiary no24 tice (as defined in paragraph (5)) has been provided 

25 and on instances in which a beneficiary indicates on 
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1 such a notice that the beneficiary does not intend to 

2 seek to have the item or service that is the subject 

3 of the notice furnished. 

4 (2) OUTREACH AND EDUCATION.—The Sec5 retary shall establish a program of outreach and 

6 education for beneficiaries and providers of services 

7 and other persons on the appropriate use of advance 

8 beneficiary notices and coverage policies under the 

9 medicare program. 

10 (3) GAO REPORT ON USE OF ADVANCE BENE11 FICIARY NOTICES.—Not later than 18 months after 

12 the date on which section 1869(h) of the Social Se13 curity Act (as added by subsection (a)) takes effect, 

14 the Comptroller General of the United States shall 

15 submit to Congress a report on the use of advance 

16 beneficiary notices under title XVIII of such Act. 

17 Such report shall include information concerning the 

18 providers of services and other persons that have 

19 provided such notices and the response of bene20 ficiaries to such notices. 

21 (4) GAO REPORT ON USE OF PRIOR DETER22 MINATION PROCESS.—Not later than 36 months 

23 after the date on which section 1869(h) of the Social 

24 Security Act (as added by subsection (a)) takes ef25 fect, the Comptroller General of the United States 
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1 shall submit to Congress a report on the use of the 

2 prior determination process under such section. Such 

3 report shall include—

4 (A) information concerning—

5 (i) the number and types of proce6 dures for which a prior determination has 

7 been sought; 

8 (ii) determinations made under the 

9 process; 

10 (iii) the percentage of beneficiaries 

11 prevailing; 

12 (iv) in those cases in which the bene13 ficiaries do not prevail, the reasons why 

14 such beneficiaries did not prevail; and

15 (v) changes in receipt of services re16 sulting from the application of such proc17 ess; 

18 (B) an evaluation of whether the process 

19 was useful for physicians (and other suppliers) 

20 and beneficiaries, whether it was timely, and 

21 whether the amount of information required 

22 was burdensome to physicians and beneficiaries; 

23 and 

24 (C) recommendations for improvements or 

25 continuation of such process. 
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1 (5) ADVANCE BENEFICIARY NOTICE DE2 FINED.—In this subsection, the term ‘‘advance bene3 ficiary notice’’ means a written notice provided 

4 under section 1879(a) of the Social Security Act (42 

5 U.S.C. 1395pp(a)) to an individual entitled to bene6 fits under part A or enrolled under part B of title 

7 XVIII of such Act before items or services are fur8 nished under such part in cases where a provider of 

9 services or other person that would furnish the item 

10 or service believes that payment will not be made for 

11 some or all of such items or services under such 

12 title. 

13 SEC. 539. APPEALS BY PROVIDERS WHEN THERE IS NO 

14 OTHER PARTY AVAILABLE. 

15 (a) IN GENERAL.—Section 1870 (42 U.S.C. 1395gg) 

16 is amended by adding at the end the following new sub17 section: 

18 ‘‘(h) Notwithstanding subsection (f) or any other pro19 vision of law, the Secretary shall permit a provider of serv20 ices or supplier to appeal any determination of the Sec21 retary under this title relating to services rendered under 

22 this title to an individual who subsequently dies if there 

23 is no other party available to appeal such determination.’’. 

24 (b) EFFECTIVE DATE.—The amendment made by 

25 subsection (a) shall take effect on the date of the enact-
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1 ment of this Act and shall apply to items and services fur2 nished on or after such date. 

3 SEC. 540. REVISIONS TO APPEALS TIMEFRAMES AND 

4 AMOUNTS. 

5 (a) TIMEFRAMES.—Section 1869 (42 U.S.C. 1395ff) 

6 is amended—

7 (1) in subsection (a)(3)(C)(ii), by striking ‘‘30-

8 day period’’ each place it appears and inserting ‘‘60-

9 day period’’; and 

10 (2) in subsection (c)(3)(C)(i), by striking ‘‘30-

11 day period’’ and inserting ‘‘60-day period’’. 

12 (b) AMOUNTS.—

13 (1) IN GENERAL.—Section 1869(b)(1)(E) (42 

14 U.S.C. 1395ff(b)(1)(E)) is amended by adding at 

15 the end the following new clause: 

16 ‘‘(iii) ADJUSTMENT OF DOLLAR

17 AMOUNTS.—For requests for hearings or 

18 judicial review made in a year after 2004, 

19 the dollar amounts specified in clause (i) 

20 shall be equal to such dollar amounts in21 creased by the percentage increase in the 

22 medical care component of the consumer 

23 price index for all urban consumers (U.S. 

24 city average) for July 2003 to the July 

25 preceding the year involved. Any amount 
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1 determined under the previous sentence 

2 that is not a multiple of $10 shall be 

3 rounded to the nearest multiple of $10.’’. 

4 (2) CONFORMING AMENDMENTS.—(A) Section 

5 1852(g)(5) (42 U.S.C. 1395w–22(g)(5)) is amended 

6 by adding at the end the following: ‘‘The provisions 

7 of section 1869(b)(1)(E)(iii) shall apply with respect 

8 to dollar amounts specified in the first 2 sentences 

9 of this paragraph in the same manner as they apply 

10 to the dollar amounts specified in section 

11 1869(b)(1)(E)(i).’’. 

12 (B) Section 1876(b)(5)(B) (42 U.S.C. 

13 1395mm(b)(5)(B)) is amended by adding at the end 

14 the following: ‘‘The provisions of section 

15 1869(b)(1)(E)(iii) shall apply with respect to dollar 

16 amounts specified in the first 2 sentences of this 

17 subparagraph in the same manner as they apply to 

18 the dollar amounts specified in section 

19 1869(b)(1)(E)(i).’’.

20 SEC. 540A. MEDIATION PROCESS FOR LOCAL COVERAGE 

21 DETERMINATIONS. 

22 (a) IN GENERAL.—Section 1869 (42 U.S.C. 1395ff), 

23 as amended by section 538(a), is amended by adding at 

24 the end the following new subsection: 
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1 ‘‘(i) MEDIATION PROCESS FOR LOCAL COVERAGE

2 DETERMINATIONS.—

3 ‘‘(1) ESTABLISHMENT OF PROCESS.—The Sec4 retary shall establish a mediation process under this 

5 subsection through the use of a physician trained in 

6 mediation and employed by the Centers for Medicare 

7 & Medicaid Services. 

8 ‘‘(2) RESPONSIBILITY OF MEDIATOR.—Under 

9 the process established in paragraph (1), such a me10 diator shall mediate in disputes between groups rep11 resenting providers of services, suppliers (as defined 

12 in section 1861(d)), and the medical director for a 

13 medicare administrative contractor whenever the re14 gional administrator (as defined by the Secretary) 

15 involved determines that there was a systematic pat16 tern and a large volume of complaints from such 

17 groups regarding decisions of such director or there 

18 is a complaint from the co-chair of the advisory com19 mittee for that contractor to such regional adminis20 trator regarding such dispute.’’. 

21 (b) INCLUSION IN MAC CONTRACTS.—Section 

22 1874A(b)(3)(A)(i), as added by section 511(a)(1), is 

23 amended by adding at the end the following: ‘‘Such re24 quirements shall include specific performance duties ex25 pected of a medical director of a medicare administrative 
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1 contractor, including requirements relating to professional 

2 relations and the availability of such director to conduct 

3 medical determination activities within the jurisdiction of 

4 such a contractor.’’. 

5 Subtitle E—Miscellaneous 

6 Provisions 

7 SEC. 541. POLICY DEVELOPMENT REGARDING EVALUATION 

8 AND MANAGEMENT (E & M) DOCUMENTATION 

9 GUIDELINES. 

10 (a) IN GENERAL.—The Secretary may not implement 

11 any new or modified documentation guidelines (which for 

12 purposes of this section includes clinical examples) for 

13 evaluation and management physician services under the 

14 title XVIII of the Social Security Act on or after the date 

15 of the enactment of this Act unless the Secretary—

16 (1) has developed the guidelines in collaboration 

17 with practicing physicians (including both generalists 

18 and specialists) and provided for an assessment of 

19 the proposed guidelines by the physician community;

20 (2) has established a plan that contains specific 

21 goals, including a schedule, for improving the use of 

22 such guidelines; 

23 (3) has conducted appropriate and representa24 tive pilot projects under subsection (b) to test such 

25 guidelines; 
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1 (4) finds, based on reports submitted under 

2 subsection (b)(5) with respect to pilot projects con3 ducted for such or related guidelines, that the objec4 tives described in subsection (c) will be met in the 

5 implementation of such guidelines; and 

6 (5) has established, and is implementing, a pro7 gram to educate physicians on the use of such guide8 lines and that includes appropriate outreach. 

9 The Secretary shall make changes to the manner in which 

10 existing evaluation and management documentation guide11 lines are implemented to reduce paperwork burdens on 

12 physicians. 

13 (b) PILOT PROJECTS TO TEST MODIFIED OR NEW

14 EVALUATION AND MANAGEMENT DOCUMENTATION

15 GUIDELINES.—

16 (1) IN GENERAL.—With respect to proposed 

17 new or modified documentation guidelines referred 

18 to in subsection (a), the Secretary shall conduct 

19 under this subsection appropriate and representative 

20 pilot projects to test the proposed guidelines. 

21 (2) LENGTH AND CONSULTATION.—Each pilot 

22 project under this subsection shall—

23 (A) be voluntary; 

24 (B) be of sufficient length as determined 

25 by the Secretary (but in no case to exceed 1 
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1 year) to allow for preparatory physician and 

2 medicare contractor education, analysis, and 

3 use and assessment of potential evaluation and 

4 management guidelines; and 

5 (C) be conducted, in development and 

6 throughout the planning and operational stages 

7 of the project, in consultation with practicing 

8 physicians (including both generalists and spe9 cialists). 

10 (3) RANGE OF PILOT PROJECTS.—Of the pilot 

11 projects conducted under this subsection with re12 spect to proposed new or modified documentation 

13 guidelines—

14 (A) at least one shall focus on a peer re15 view method by physicians (not employed by a 

16 medicare contractor) which evaluates medical 

17 record information for claims submitted by phy18 sicians identified as statistical outliers relative 

19 to codes used for billing purposes for such serv20 ices; 

21 (B) at least one shall focus on an alter22 native method to detailed guidelines based on 

23 physician documentation of face to face encoun24 ter time with a patient; 
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1 (C) at least one shall be conducted for 

2 services furnished in a rural area and at least 

3 one for services furnished outside such an area; 

4 and 

5 (D) at least one shall be conducted in a 

6 setting where physicians bill under physicians’ 

7 services in teaching settings and at least one 

8 shall be conducted in a setting other than a 

9 teaching setting. 

10 (4) STUDY OF IMPACT.—Each pilot project 

11 shall examine the effect of the proposed guidelines 

12 on—

13 (A) different types of physician practices, 

14 including those with fewer than 10 full-time15 equivalent employees (including physicians); 

16 and 

17 (B) the costs of physician compliance, in18 cluding education, implementation, auditing, 

19 and monitoring. 

20 (5) REPORT ON PILOT PROJECTS.—Not later 

21 than 6 months after the date of completion of pilot 

22 projects carried out under this subsection with re23 spect to a proposed guideline described in paragraph 

24 (1), the Secretary shall submit to Congress a report 

25 on the pilot projects. Each such report shall include 
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1 a finding by the Secretary of whether the objectives 

2 described in subsection (c) will be met in the imple3 mentation of such proposed guideline.

4 (c) OBJECTIVES FOR EVALUATION AND MANAGE5 MENT GUIDELINES.—The objectives for modified evalua6 tion and management documentation guidelines developed 

7 by the Secretary shall be to—

8 (1) identify clinically relevant documentation 

9 needed to code accurately and assess coding levels 

10 accurately; 

11 (2) decrease the level of non-clinically pertinent 

12 and burdensome documentation time and content in 

13 the physician’s medical record; 

14 (3) increase accuracy by reviewers; and 

15 (4) educate both physicians and reviewers. 

16 (d) STUDY OF SIMPLER, ALTERNATIVE SYSTEMS OF

17 DOCUMENTATION FOR PHYSICIAN CLAIMS.—

18 (1) STUDY.—The Secretary shall carry out a 

19 study of the matters described in paragraph (2). 

20 (2) MATTERS DESCRIBED.—The matters re21 ferred to in paragraph (1) are—

22 (A) the development of a simpler, alter23 native system of requirements for documenta24 tion accompanying claims for evaluation and 

25 management physician services for which pay-
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1 ment is made under title XVIII of the Social 

2 Security Act; and 

3 (B) consideration of systems other than 

4 current coding and documentation requirements 

5 for payment for such physician services. 

6 (3) CONSULTATION WITH PRACTICING PHYSI7 CIANS.—In designing and carrying out the study 

8 under paragraph (1), the Secretary shall consult 

9 with practicing physicians, including physicians who 

10 are part of group practices and including both gen11 eralists and specialists. 

12 (4) APPLICATION OF HIPAA UNIFORM CODING

13 REQUIREMENTS.—In developing an alternative sys14 tem under paragraph (2), the Secretary shall con15 sider requirements of administrative simplification 

16 under part C of title XI of the Social Security Act. 

17 (5) REPORT TO CONGRESS.—(A) Not later than 

18 October 1, 2005, the Secretary shall submit to Con19 gress a report on the results of the study conducted 

20 under paragraph (1).

21 (B) The Medicare Payment Advisory Commis22 sion shall conduct an analysis of the results of the 

23 study included in the report under subparagraph (A) 

24 and shall submit a report on such analysis to Con25 gress. 
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1 (e) STUDY ON APPROPRIATE CODING OF CERTAIN

2 EXTENDED OFFICE VISITS.—The Secretary shall conduct 

3 a study of the appropriateness of coding in cases of ex4 tended office visits in which there is no diagnosis made. 

5 Not later than October 1, 2005, the Secretary shall submit 

6 a report to Congress on such study and shall include rec7 ommendations on how to code appropriately for such visits 

8 in a manner that takes into account the amount of time 

9 the physician spent with the patient. 

10 (f) DEFINITIONS.—In this section—

11 (1) the term ‘‘rural area’’ has the meaning 

12 given that term in section 1886(d)(2)(D) of the So13 cial Security Act (42 U.S.C. 1395ww(d)(2)(D)); and 

14 (2) the term ‘‘teaching settings’’ are those set15 tings described in section 415.150 of title 42, Code 

16 of Federal Regulations. 

17 SEC. 542. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY 

18 AND COVERAGE. 

19 (a) COUNCIL FOR TECHNOLOGY AND INNOVATION.—

20 Section 1868 (42 U.S.C. 1395ee), as amended by section 

21 521(a), is amended by adding at the end the following new 

22 subsection: 

23 ‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVA24 TION.—
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1 ‘‘(1) ESTABLISHMENT.—The Secretary shall es2 tablish a Council for Technology and Innovation 

3 within the Centers for Medicare & Medicaid Services 

4 (in this section referred to as ‘CMS’). 

5 ‘‘(2) COMPOSITION.—The Council shall be com6 posed of senior CMS staff and clinicians and shall 

7 be chaired by the Executive Coordinator for Tech8 nology and Innovation (appointed or designated 

9 under paragraph (4)). 

10 ‘‘(3) DUTIES.—The Council shall coordinate the 

11 activities of coverage, coding, and payment processes 

12 under this title with respect to new technologies and 

13 procedures, including new drug therapies, and shall 

14 coordinate the exchange of information on new tech15 nologies between CMS and other entities that make 

16 similar decisions. 

17 ‘‘(4) EXECUTIVE COORDINATOR FOR TECH18 NOLOGY AND INNOVATION.—The Secretary shall ap19 point (or designate) a noncareer appointee (as de20 fined in section 3132(a)(7) of title 5, United States 

21 Code) who shall serve as the Executive Coordinator 

22 for Technology and Innovation. Such executive coor23 dinator shall report to the Administrator of CMS, 

24 shall chair the Council, shall oversee the execution of 

25 its duties, and shall serve as a single point of con-
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1 tact for outside groups and entities regarding the 

2 coverage, coding, and payment processes under this 

3 title.’’. 

4 (b) METHODS FOR DETERMINING PAYMENT BASIS

5 FOR NEW LAB TESTS.—Section 1833(h) (42 U.S.C. 

6 1395l(h)) is amended by adding at the end the following: 

7 ‘‘(8)(A) The Secretary shall establish by regulation 

8 procedures for determining the basis for, and amount of, 

9 payment under this subsection for any clinical diagnostic 

10 laboratory test with respect to which a new or substan11 tially revised HCPCS code is assigned on or after January 

12 1, 2005 (in this paragraph referred to as ‘new tests’). 

13 ‘‘(B) Determinations under subparagraph (A) shall 

14 be made only after the Secretary—

15 ‘‘(i) makes available to the public (through an 

16 Internet website and other appropriate mechanisms) 

17 a list that includes any such test for which establish18 ment of a payment amount under this subsection is 

19 being considered for a year; 

20 ‘‘(ii) on the same day such list is made avail21 able, causes to have published in the Federal Reg22 ister notice of a meeting to receive comments and 

23 recommendations (and data on which recommenda24 tions are based) from the public on the appropriate 
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1 basis under this subsection for establishing payment 

2 amounts for the tests on such list; 

3 ‘‘(iii) not less than 30 days after publication of 

4 such notice convenes a meeting, that includes rep5 resentatives of officials of the Centers for Medicare 

6 & Medicaid Services involved in determining pay7 ment amounts, to receive such comments and rec8 ommendations (and data on which the recommenda9 tions are based); 

10 ‘‘(iv) taking into account the comments and rec11 ommendations (and accompanying data) received at 

12 such meeting, develops and makes available to the 

13 public (through an Internet website and other appro14 priate mechanisms) a list of proposed determinations 

15 with respect to the appropriate basis for establishing 

16 a payment amount under this subsection for each 

17 such code, together with an explanation of the rea18 sons for each such determination, the data on which 

19 the determinations are based, and a request for pub20 lic written comments on the proposed determination; 

21 and 

22 ‘‘(v) taking into account the comments received 

23 during the public comment period, develops and 

24 makes available to the public (through an Internet 

25 website and other appropriate mechanisms) a list of 
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1 final determinations of the payment amounts for 

2 such tests under this subsection, together with the 

3 rationale for each such determination, the data on 

4 which the determinations are based, and responses 

5 to comments and suggestions received from the pub6 lic. 

7 ‘‘(C) Under the procedures established pursuant to 

8 subparagraph (A), the Secretary shall—

9 ‘‘(i) set forth the criteria for making determina10 tions under subparagraph (A); and 

11 ‘‘(ii) make available to the public the data 

12 (other than proprietary data) considered in making 

13 such determinations. 

14 ‘‘(D) The Secretary may convene such further public 

15 meetings to receive public comments on payment amounts 

16 for new tests under this subsection as the Secretary deems 

17 appropriate. 

18 ‘‘(E) For purposes of this paragraph: 

19 ‘‘(i) The term ‘HCPCS’ refers to the Health 

20 Care Procedure Coding System. 

21 ‘‘(ii) A code shall be considered to be ‘substan22 tially revised’ if there is a substantive change to the 

23 definition of the test or procedure to which the code 

24 applies (such as a new analyte or a new methodology 

25 for measuring an existing analyte-specific test).’’. 
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1 (c) GAO STUDY ON IMPROVEMENTS IN EXTERNAL

2 DATA COLLECTION FOR USE IN THE MEDICARE INPA3 TIENT PAYMENT SYSTEM.—

4 (1) STUDY.—The Comptroller General of the 

5 United States shall conduct a study that analyzes 

6 which external data can be collected in a shorter 

7 timeframe by the Centers for Medicare & Medicaid 

8 Services for use in computing payments for inpatient 

9 hospital services. The study may include an evalua10 tion of the feasibility and appropriateness of using 

11 quarterly samples or special surveys or any other 

12 methods. The study shall include an analysis of 

13 whether other executive agencies, such as the Bu14 reau of Labor Statistics in the Department of Com15 merce, are best suited to collect this information. 

16 (2) REPORT.—By not later than October 1, 

17 2004, the Comptroller General shall submit a report 

18 to Congress on the study under paragraph (1). 

19 SEC. 543. TREATMENT OF HOSPITALS FOR CERTAIN SERV20 ICES UNDER MEDICARE SECONDARY PAYOR 

21 (MSP) PROVISIONS. 

22 (a) IN GENERAL.—The Secretary shall not require 

23 a hospital (including a critical access hospital) to ask ques24 tions (or obtain information) relating to the application 

25 of section 1862(b) of the Social Security Act (relating to 
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1 medicare secondary payor provisions) in the case of ref2 erence laboratory services described in subsection (b), if 

3 the Secretary does not impose such requirement in the 

4 case of such services furnished by an independent labora5 tory. 

6 (b) REFERENCE LABORATORY SERVICES DE7 SCRIBED.—Reference laboratory services described in this 

8 subsection are clinical laboratory diagnostic tests (or the 

9 interpretation of such tests, or both) furnished without a 

10 face-to-face encounter between the individual entitled to 

11 benefits under part A or enrolled under part B, or both, 

12 and the hospital involved and in which the hospital sub13 mits a claim only for such test or interpretation. 

14 SEC. 544. EMTALA IMPROVEMENTS. 

15 (a) PAYMENT FOR EMTALA-MANDATED SCREEN16 ING AND STABILIZATION SERVICES.—

17 (1) IN GENERAL.—Section 1862 (42 U.S.C. 

18 1395y) is amended by inserting after subsection (c) 

19 the following new subsection: 

20 ‘‘(d) For purposes of subsection (a)(1)(A), in the case 

21 of any item or service that is required to be provided pur22 suant to section 1867 to an individual who is entitled to 

23 benefits under this title, determinations as to whether the 

24 item or service is reasonable and necessary shall be made 

25 on the basis of the information available to the treating 
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1 physician or practitioner (including the patient’s pre2 senting symptoms or complaint) at the time the item or 

3 service was ordered or furnished by the physician or prac4 titioner (and not on the patient’s principal diagnosis). 

5 When making such determinations with respect to such 

6 an item or service, the Secretary shall not consider the 

7 frequency with which the item or service was provided to 

8 the patient before or after the time of the admission or 

9 visit.’’. 

10 (2) EFFECTIVE DATE.—The amendment made 

11 by paragraph (1) shall apply to items and services 

12 furnished on or after January 1, 2004. 

13 (b) NOTIFICATION OF PROVIDERS WHEN EMTALA 

14 INVESTIGATION CLOSED.—Section 1867(d) (42 U.S.C. 42 

15 U.S.C. 1395dd(d)) is amended by adding at the end the 

16 following new paragraph: 

17 ‘‘(4) NOTICE UPON CLOSING AN INVESTIGA18 TION.—The Secretary shall establish a procedure to 

19 notify hospitals and physicians when an investigation 

20 under this section is closed.’’. 

21 (c) PRIOR REVIEW BY PEER REVIEW ORGANIZA22 TIONS IN EMTALA CASES INVOLVING TERMINATION OF

23 PARTICIPATION.—

24 (1) IN GENERAL.—Section 1867(d)(3) (42 

25 U.S.C. 1395dd(d)(3)) is amended—
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1 (A) in the first sentence, by inserting ‘‘or 

2 in terminating a hospital’s participation under 

3 this title’’ after ‘‘in imposing sanctions under 

4 paragraph (1)’’; and 

5 (B) by adding at the end the following new 

6 sentences: ‘‘Except in the case in which a delay 

7 would jeopardize the health or safety of individ8 uals, the Secretary shall also request such a re9 view before making a compliance determination 

10 as part of the process of terminating a hos11 pital’s participation under this title for viola12 tions related to the appropriateness of a med13 ical screening examination, stabilizing treat14 ment, or an appropriate transfer as required by 

15 this section, and shall provide a period of 5 

16 days for such review. The Secretary shall pro17 vide a copy of the organization’s report to the 

18 hospital or physician consistent with confiden19 tiality requirements imposed on the organiza20 tion under such part B.’’. 

21 (2) EFFECTIVE DATE.—The amendments made 

22 by paragraph (1) shall apply to terminations of par23 ticipation initiated on or after the date of the enact24 ment of this Act. 
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•S 1926 IS 

1 SEC. 545. EMERGENCY MEDICAL TREATMENT AND LABOR 

2 ACT (EMTALA) TECHNICAL ADVISORY GROUP. 

3 (a) ESTABLISHMENT.—The Secretary shall establish 

4 a Technical Advisory Group (in this section referred to 

5 as the ‘‘Advisory Group’’) to review issues related to the 

6 Emergency Medical Treatment and Labor Act 

7 (EMTALA) and its implementation. In this section, the 

8 term ‘‘EMTALA’’ refers to the provisions of section 1867 

9 of the Social Security Act (42 U.S.C. 1395dd). 

10 (b) MEMBERSHIP.—The Advisory Group shall be 

11 composed of 19 members, including the Administrator of 

12 the Centers for Medicare & Medicaid Services and the In13 spector General of the Department of Health and Human 

14 Services and of which—

15 (1) 4 shall be representatives of hospitals, in16 cluding at least one public hospital, that have experi17 ence with the application of EMTALA and at least 

18 2 of which have not been cited for EMTALA viola19 tions; 

20 (2) 7 shall be practicing physicians drawn from 

21 the fields of emergency medicine, cardiology or 

22 cardiothoracic surgery, orthopedic surgery, neuro23 surgery, pediatrics or a pediatric subspecialty, ob24 stetrics-gynecology, and psychiatry, with not more 

25 than one physician from any particular field; 

26 (3) 2 shall represent patients; 
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1 (4) 2 shall be staff involved in EMTALA inves2 tigations from different regional offices of the Cen3 ters for Medicare & Medicaid Services; and 

4 (5) 1 shall be from a State survey office in5 volved in EMTALA investigations and 1 shall be 

6 from a peer review organization, both of whom shall 

7 be from areas other than the regions represented 

8 under paragraph (4). 

9 In selecting members described in paragraphs (1) through 

10 (3), the Secretary shall consider qualified individuals nom11 inated by organizations representing providers and pa12 tients. 

13 (c) GENERAL RESPONSIBILITIES.—The Advisory 

14 Group—

15 (1) shall review EMTALA regulations; 

16 (2) may provide advice and recommendations to 

17 the Secretary with respect to those regulations and 

18 their application to hospitals and physicians; 

19 (3) shall solicit comments and recommendations 

20 from hospitals, physicians, and the public regarding 

21 the implementation of such regulations; and 

22 (4) may disseminate information on the applica23 tion of such regulations to hospitals, physicians, and 

24 the public. 

25 (d) ADMINISTRATIVE MATTERS.—
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1 (1) CHAIRPERSON.—The members of the Advi2 sory Group shall elect a member to serve as chair3 person of the Advisory Group for the life of the Ad4 visory Group. 

5 (2) MEETINGS.—The Advisory Group shall first 

6 meet at the direction of the Secretary. The Advisory 

7 Group shall then meet twice per year and at such 

8 other times as the Advisory Group may provide. 

9 (e) TERMINATION.—The Advisory Group shall termi10 nate 30 months after the date of its first meeting. 

11 (f) WAIVER OF ADMINISTRATIVE LIMITATION.—The 

12 Secretary shall establish the Advisory Group notwith13 standing any limitation that may apply to the number of 

14 advisory committees that may be established (within the 

15 Department of Health and Human Services or otherwise). 

16 SEC. 546. AUTHORIZING USE OF ARRANGEMENTS TO PRO17 VIDE CORE HOSPICE SERVICES IN CERTAIN 

18 CIRCUMSTANCES. 

19 (a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C. 

20 1395x(dd)(5)) is amended by adding at the end the fol21 lowing: 

22 ‘‘(D) In extraordinary, exigent, or other non-routine 

23 circumstances, such as unanticipated periods of high pa24 tient loads, staffing shortages due to illness or other 

25 events, or temporary travel of a patient outside a hospice 
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1 program’s service area, a hospice program may enter into 

2 arrangements with another hospice program for the provi3 sion by that other program of services described in para4 graph (2)(A)(ii)(I). The provisions of paragraph 

5 (2)(A)(ii)(II) shall apply with respect to the services pro6 vided under such arrangements. 

7 ‘‘(E) A hospice program may provide services de8 scribed in paragraph (1)(A) other than directly by the pro9 gram if the services are highly specialized services of a 

10 registered professional nurse and are provided non-rou11 tinely and so infrequently so that the provision of such 

12 services directly would be impracticable and prohibitively 

13 expensive.’’. 

14 (b) CONFORMING PAYMENT PROVISION.—Section 

15 1814(i) (42 U.S.C. 1395f(i)), as amended by section 

16 212(b), is amended by adding at the end the following new 

17 paragraph: 

18 ‘‘(5) In the case of hospice care provided by a hospice 

19 program under arrangements under section 

20 1861(dd)(5)(D) made by another hospice program, the 

21 hospice program that made the arrangements shall bill 

22 and be paid for the hospice care.’’. 

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

24 this section shall apply to hospice care provided on or after 

25 the date of the enactment of this Act. 
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1 SEC. 547. APPLICATION OF OSHA BLOODBORNE PATHO2 GENS STANDARD TO CERTAIN HOSPITALS. 

3 (a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc), 

4 as amended by section 206, is amended—

5 (1) in subsection (a)(1)—

6 (A) in subparagraph (T), by striking 

7 ‘‘and’’ at the end; 

8 (B) in subparagraph (U), by striking the 

9 period at the end and inserting ‘‘, and’’; and 

10 (C) by inserting after subparagraph (U) 

11 the following new subparagraph: 

12 ‘‘(V) in the case of hospitals that are not other13 wise subject to the Occupational Safety and Health 

14 Act of 1970 (or a State occupational safety and 

15 health plan that is approved under 18(b) of such 

16 Act), to comply with the Bloodborne Pathogens 

17 standard under section 1910.1030 of title 29 of the 

18 Code of Federal Regulations (or as subsequently re19 designated).’’; and 

20 (2) by adding at the end of subsection (b) the 

21 following new paragraph: 

22 ‘‘(4)(A) A hospital that fails to comply with the re23 quirement of subsection (a)(1)(V) (relating to the 

24 Bloodborne Pathogens standard) is subject to a civil 

25 money penalty in an amount described in subparagraph 
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•S 1926 IS 

1 (B), but is not subject to termination of an agreement 

2 under this section. 

3 ‘‘(B) The amount referred to in subparagraph (A) is 

4 an amount that is similar to the amount of civil penalties 

5 that may be imposed under section 17 of the Occupational 

6 Safety and Health Act of 1970 for a violation of the 

7 Bloodborne Pathogens standard referred to in subsection 

8 (a)(1)(U) by a hospital that is subject to the provisions 

9 of such Act. 

10 ‘‘(C) A civil money penalty under this paragraph shall 

11 be imposed and collected in the same manner as civil 

12 money penalties under subsection (a) of section 1128A are 

13 imposed and collected under that section.’’. 

14 (b) EFFECTIVE DATE.—The amendments made by 

15 this subsection (a) shall apply to hospitals as of July 1, 

16 2004.

17 SEC. 548. BIPA-RELATED TECHNICAL AMENDMENTS AND 

18 CORRECTIONS. 

19 (a) TECHNICAL AMENDMENTS RELATING TO ADVI20 SORY COMMITTEE UNDER BIPA SECTION 522.—(1) Sub21 section (i) of section 1114 (42 U.S.C. 1314)—

22 (A) is transferred to section 1862 and added at 

23 the end of such section; and 

24 (B) is redesignated as subsection (j). 

25 (2) Section 1862 (42 U.S.C. 1395y) is amended—
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•S 1926 IS 

1 (A) in the last sentence of subsection (a), by 

2 striking ‘‘established under section 1114(f)’’; and 

3 (B) in subsection (j), as so transferred and re4 designated—

5 (i) by striking ‘‘under subsection (f)’’; and 

6 (ii) by striking ‘‘section 1862(a)(1)’’ and 

7 inserting ‘‘subsection (a)(1)’’. 

8 (b) TERMINOLOGY CORRECTIONS.—(1) Section 

9 1869(c)(3)(I)(ii) (42 U.S.C. 1395ff(c)(3)(I)(ii)) is amend10 ed—

11 (A) in subclause (III), by striking ‘‘policy’’ and 

12 inserting ‘‘determination’’; and 

13 (B) in subclause (IV), by striking ‘‘medical re14 view policies’’ and inserting ‘‘coverage determina15 tions’’. 

16 (2) Section 1852(a)(2)(C) (42 U.S.C. 1395w–

17 22(a)(2)(C)) is amended by striking ‘‘policy’’ and ‘‘POL18 ICY’’ and inserting ‘‘determination’’ each place it appears 

19 and ‘‘DETERMINATION’’, respectively. 

20 (c) REFERENCE CORRECTIONS.—Section 1869(f)(4) 

21 (42 U.S.C. 1395ff(f)(4)) is amended—

22 (1) in subparagraph (A)(iv), by striking ‘‘sub23 clause (I), (II), or (III)’’ and inserting ‘‘clause (i), 

24 (ii), or (iii)’’; 
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•S 1926 IS 

1 (2) in subparagraph (B), by striking ‘‘clause 

2 (i)(IV)’’ and ‘‘clause (i)(III)’’ and inserting ‘‘sub3 paragraph (A)(iv)’’ and ‘‘subparagraph (A)(iii)’’, re4 spectively; and 

5 (3) in subparagraph (C), by striking ‘‘clause 

6 (i)’’, ‘‘subclause (IV)’’ and ‘‘subparagraph (A)’’ and 

7 inserting ‘‘subparagraph (A)’’, ‘‘clause (iv)’’ and 

8 ‘‘paragraph (1)(A)’’, respectively each place it ap9 pears. 

10 (d) OTHER CORRECTIONS.—Effective as if included 

11 in the enactment of section 221(c) of BIPA, section 

12 1154(e) (42 U.S.C. 1320c–3(e)) is amended by striking 

13 paragraph (5). 

14 (e) EFFECTIVE DATE.—Except as otherwise pro15 vided, the amendments made by this section shall be effec16 tive as if included in the enactment of BIPA. 

17 SEC. 549. CONFORMING AUTHORITY TO WAIVE A PROGRAM 

18 EXCLUSION. 

19 The first sentence of section 1128(c)(3)(B) (42 

20 U.S.C. 1320a–7(c)(3)(B)) is amended to read as follows: 

21 ‘‘Subject to subparagraph (G), in the case of an exclusion 

22 under subsection (a), the minimum period of exclusion 

23 shall be not less than five years, except that, upon the 

24 request of the administrator of a Federal health care pro25 gram (as defined in section 1128B(f)) who determines 
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•S 1926 IS 

1 that the exclusion would impose a hardship on individuals 

2 entitled to benefits under part A of title XVIII or enrolled 

3 under part B of such title, or both, the Secretary may, 

4 after consulting with the Inspector General of the Depart5 ment of Health and Human Services, waive the exclusion 

6 under subsection (a)(1), (a)(3), or (a)(4) with respect to 

7 that program in the case of an individual or entity that 

8 is the sole community physician or sole source of essential 

9 specialized services in a community.’’. 

10 SEC. 550. TREATMENT OF CERTAIN DENTAL CLAIMS. 

11 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) 

12 is amended by adding at the end, after the subsection 

13 transferred and redesignated by section 548(a), the fol14 lowing new subsection: 

15 ‘‘(k)(1) Subject to paragraph (2), a group health plan 

16 (as defined in subsection (a)(1)(A)(v)) providing supple17 mental or secondary coverage to individuals also entitled 

18 to services under this title shall not require a medicare 

19 claims determination under this title for dental benefits 

20 specifically excluded under subsection (a)(12) as a condi21 tion of making a claims determination for such benefits 

22 under the group health plan. 

23 ‘‘(2) A group health plan may require a claims deter24 mination under this title in cases involving or appearing 

25 to involve inpatient dental hospital services or dental serv-
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•S 1926 IS 

1 ices expressly covered under this title pursuant to actions 

2 taken by the Secretary.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall take effect on the date that is 60 days 

5 after the date of the enactment of this Act. 

6 SEC. 551. FURNISHING HOSPITALS WITH INFORMATION TO 

7 COMPUTE DSH FORMULA. 

8 Beginning not later than 1 year after the date of the 

9 enactment of this Act, the Secretary shall arrange to fur10 nish to subsection (d) hospitals (as defined in section 

11 1886(d)(1)(B) of the Social Security Act, 42 U.S.C. 

12 1395ww(d)(1)(B)) the data necessary for such hospitals 

13 to compute the number of patient days used in computing 

14 the disproportionate patient percentage under such section 

15 for that hospital for the current cost reporting year. Such 

16 data shall also be furnished to other hospitals which would 

17 qualify for additional payments under part A of title 

18 XVIII of the Social Security Act on the basis of such data. 

19 SEC. 552. REVISIONS TO REASSIGNMENT PROVISIONS. 

20 (a) IN GENERAL.—Section 1842(b)(6)(A) (42 U.S.C. 

21 1395u(b)(6)(A)) is amended by striking ‘‘or (ii) (where 

22 the service was provided in a hospital, critical access hos23 pital, clinic, or other facility) to the facility in which the 

24 service was provided if there is a contractual arrangement 

25 between such physician or other person and such facility 
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•S 1926 IS 

1 under which such facility submits the bill for such serv2 ice,’’ and inserting ‘‘or (ii) where the service was provided 

3 under a contractual arrangement between such physician 

4 or other person and an entity, to the entity if, under the 

5 contractual arrangement, the entity submits the bill for 

6 the service and the contractual arrangement meets such 

7 program integrity and other safeguards as the Secretary 

8 may determine to be appropriate,’’. 

9 (b) CONFORMING AMENDMENT.—The second sen10 tence of section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is 

11 amended by striking ‘‘except to an employer or facility as 

12 described in clause (A)’’ and inserting ‘‘except to an em13 ployer or entity as described in subparagraph (A)’’.

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

15 this section shall apply to payments made on or after the 

16 date of the enactment of this Act.

17 SEC. 553. OTHER PROVISIONS. 

18 (a) GAO REPORTS ON THE PHYSICIAN COMPENSA19 TION.—

20 (1) SUSTAINABLE GROWTH RATE AND UP21 DATES.—Not later than 6 months after the date of 

22 the enactment of this Act, the Comptroller General 

23 of the United States shall submit to Congress a re24 port on the appropriateness of the updates in the 

25 conversion factor under subsection (d)(3) of section 
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•S 1926 IS 

1 1848 of the Social Security Act (42 U.S.C. 1395w–

2 4), including the appropriateness of the sustainable 

3 growth rate formula under subsection (f) of such 

4 section for 2002 and succeeding years. Such report 

5 shall examine the stability and predictability of such 

6 updates and rate and alternatives for the use of such 

7 rate in the updates. 

8 (2) PHYSICIAN COMPENSATION GENERALLY.—

9 Not later than 12 months after the date of the en10 actment of this Act, the Comptroller General shall 

11 submit to Congress a report on all aspects of physi12 cian compensation for services furnished under title 

13 XVIII of the Social Security Act, and how those as14 pects interact and the effect on appropriate com15 pensation for physician services. Such report shall 

16 review alternatives for the physician fee schedule 

17 under section 1848 of such title (42 U.S.C. 1395w–

18 4). 

19 (b) ANNUAL PUBLICATION OF LIST OF NATIONAL

20 COVERAGE DETERMINATIONS.—The Secretary shall pro21 vide, in an appropriate annual publication available to the 

22 public, a list of national coverage determinations made 

23 under title XVIII of the Social Security Act in the pre24 vious year and information on how to get more informa25 tion with respect to such determinations. 
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•S 1926 IS 

1 (c) GAO REPORT ON FLEXIBILITY IN APPLYING

2 HOME HEALTH CONDITIONS OF PARTICIPATION TO PA3 TIENTS WHO ARE NOT MEDICARE BENEFICIARIES.—Not 

4 later than 6 months after the date of the enactment of 

5 this Act, the Comptroller General of the United States 

6 shall submit to Congress a report on the implications if 

7 there were flexibility in the application of the medicare 

8 conditions of participation for home health agencies with 

9 respect to groups or types of patients who are not medi10 care beneficiaries. The report shall include an analysis of 

11 the potential impact of such flexible application on clinical 

12 operations and the recipients of such services and an anal13 ysis of methods for monitoring the quality of care provided 

14 to such recipients. 

15 (d) OIG REPORT ON NOTICES RELATING TO USE OF

16 HOSPITAL LIFETIME RESERVE DAYS.—Not later than 1 

17 year after the date of the enactment of this Act, the In18 spector General of the Department of Health and Human 

19 Services shall submit a report to Congress on—

20 (1) the extent to which hospitals provide notice 

21 to medicare beneficiaries in accordance with applica22 ble requirements before they use the 60 lifetime re23 serve days described in section 1812(a)(1) of the So24 cial Security Act (42 U.S.C. 1395d(a)(1)); and 
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1 (2) the appropriateness and feasibility of hos2 pitals providing a notice to such beneficiaries before 

3 they completely exhaust such lifetime reserve days. 

4 TITLE VI—MEDICAID AND 

5 MISCELLANEOUS PROVISIONS 

6 Subtitle A—Medicaid Provisions

7 SEC. 601. MEDICAID DISPROPORTIONATE SHARE HOSPITAL 

8 (DSH) PAYMENTS.

9 (a) TEMPORARY INCREASE.—Section 1923(f)(3) (42 

10 U.S.C. 1396r–4(f)(3)) is amended—

11 (1) in subparagraph (A), by striking ‘‘subpara12 graph (B)’’ and inserting ‘‘subparagraphs (B) and 

13 (C)’’; and 

14 (2) by adding at the end the following new sub15 paragraphs: 

16 ‘‘(C) SPECIAL, TEMPORARY INCREASE IN

17 ALLOTMENTS ON A ONE-TIME, NON-CUMU18 LATIVE BASIS.—The DSH allotment for any 

19 State (other than a State with a DSH allot20 ment determined under paragraph (5))—

21 ‘‘(i) for fiscal year 2004 is equal to 

22 116 percent of the DSH allotment for the 

23 State for fiscal year 2003 under this para24 graph, notwithstanding subparagraph (B); 

25 and 
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1 ‘‘(ii) for each succeeding fiscal year is 

2 equal to the DSH allotment for the State 

3 for fiscal year 2004 or, in the case of fiscal 

4 years beginning with the fiscal year speci5 fied in subparagraph (D) for that State, 

6 the DSH allotment for the State for the 

7 previous fiscal year increased by the per8 centage change in the consumer price 

9 index for all urban consumers (all items; 

10 U.S. city average), for the previous fiscal 

11 year. 

12 ‘‘(D) FISCAL YEAR SPECIFIED.—For pur13 poses of subparagraph (C)(ii), the fiscal year 

14 specified in this subparagraph for a State is the 

15 first fiscal year for which the Secretary esti16 mates that the DSH allotment for that State 

17 will equal (or no longer exceed) the DSH allot18 ment for that State under the law as in effect 

19 before the date of the enactment of this sub20 paragraph.’’.

21 (b) INCREASE IN FLOOR FOR TREATMENT AS A LOW

22 DSH STATE.—Section 1923(f)(5) (42 U.S.C. 1396r–

23 4(f)(5)) is amended to read as follows: 

24 ‘‘(5) SPECIAL RULE FOR LOW DSH STATES.—In 

25 the case of a State in which the total expenditures 
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1 under the State plan (including Federal and State 

2 shares) for disproportionate share hospital adjust3 ments under this section for fiscal year 2000, as re4 ported to the Administrator of the Centers for Medi5 care & Medicaid Services as of August 31, 2003, is 

6 greater than 0 but less than 3 percent of the State’s 

7 total amount of expenditures under the State plan 

8 for medical assistance during the fiscal year, the 

9 DSH allotment for the State with respect to—

10 ‘‘(A) fiscal year 2004 shall be the DSH al11 lotment for the State for fiscal year 2003 in12 creased by 16 percent;

13 ‘‘(B) each succeeding fiscal year before fis14 cal year 2009 shall be the DSH allotment for 

15 the State for the previous fiscal year increased 

16 by 16 percent; and 

17 ‘‘(C) fiscal year 2009 and any subsequent 

18 fiscal year, shall be the DSH allotment for the 

19 State for the previous year subject to an in20 crease for inflation as provided in paragraph 

21 (3)(A).’’.

22 (c) ALLOTMENT ADJUSTMENT.—Section 1923(f) (42 

23 U.S.C. 1396r–4(f)) is amended—
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•S 1926 IS 

1 (1) in paragraph (3)(A), by striking ‘‘The 

2 DSH’’ and inserting ‘‘Except as provided in para3 graph (6), the DSH’’; 

4 (2) by redesignating paragraph (6) as para5 graph (7); and 

6 (3) by inserting after paragraph (5) the fol7 lowing: 

8 ‘‘(6) ALLOTMENT ADJUSTMENT.—Only with re9 spect to fiscal year 2004 or 2005, if a statewide 

10 waiver under section 1115 is revoked or terminated 

11 before the end of either such fiscal year and there 

12 is no DSH allotment for the State, the Secretary 

13 shall—

14 ‘‘(A) permit the State whose waiver was 

15 revoked or terminated to submit an amendment 

16 to its State plan that would describe the meth17 odology to be used by the State (after the effec18 tive date of such revocation or termination) to 

19 identify and make payments to disproportionate 

20 share hospitals, including children’s hospitals 

21 and institutions for mental diseases or other 

22 mental health facilities (other than State-owned 

23 institutions or facilities), on the basis of the 

24 proportion of patients served by such hospitals 
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•S 1926 IS 

1 that are low-income patients with special needs; 

2 and 

3 ‘‘(B) provide for purposes of this sub4 section for computation of an appropriate DSH 

5 allotment for the State for fiscal year 2004 or 

6 2005 (or both) that would not exceed the 

7 amount allowed under paragraph (3)(B)(ii) and 

8 that does not result in greater expenditures 

9 under this title than would have been made if 

10 such waiver had not been revoked or termi11 nated. 

12 In determining the amount of an appropriate DSH 

13 allotment under subparagraph (B) for a State, the 

14 Secretary shall take into account the level of DSH 

15 expenditures for the State for the fiscal year pre16 ceding the fiscal year in which the waiver com17 menced.’’. 

18 (d) INCREASED REPORTING AND OTHER REQUIRE19 MENTS TO ENSURE THE APPROPRIATE USE OF MED20 ICAID DSH PAYMENT ADJUSTMENTS.—Section 1923 (42 

21 U.S.C. 1396r–4) is amended by adding at the end the fol22 lowing new subsection: 

23 ‘‘(j) ANNUAL REPORTS AND OTHER REQUIREMENTS

24 REGARDING PAYMENT ADJUSTMENTS.—With respect to 

25 fiscal year 2004 and each fiscal year thereafter, the Sec-
427

•S 1926 IS 

1 retary shall require a State, as a condition of receiving 

2 a payment under section 1903(a)(1) with respect to a pay3 ment adjustment made under this section, to do the fol4 lowing: 

5 ‘‘(1) REPORT.—The State shall submit an an6 nual report that includes the following: 

7 ‘‘(A) An identification of each dispropor8 tionate share hospital that received a payment 

9 adjustment under this section for the preceding 

10 fiscal year and the amount of the payment ad11 justment made to such hospital for the pre12 ceding fiscal year. 

13 ‘‘(B) Such other information as the Sec14 retary determines necessary to ensure the ap15 propriateness of the payment adjustments made 

16 under this section for the preceding fiscal year. 

17 ‘‘(2) INDEPENDENT CERTIFIED AUDIT.—The 

18 State shall annually submit to the Secretary an inde19 pendent certified audit that verifies each of the fol20 lowing: 

21 ‘‘(A) The extent to which hospitals in the 

22 State have reduced their uncompensated care 

23 costs to reflect the total amount of claimed ex24 penditures made under this section. 
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•S 1926 IS 

1 ‘‘(B) Payments under this section to hos2 pitals that comply with the requirements of sub3 section (g). 

4 ‘‘(C) Only the uncompensated care costs of 

5 providing inpatient hospital and outpatient hos6 pital services to individuals described in para7 graph (1)(A) of such subsection are included in 

8 the calculation of the hospital-specific limits 

9 under such subsection. 

10 ‘‘(D) The State included all payments 

11 under this title, including supplemental pay12 ments, in the calculation of such hospital-spe13 cific limits. 

14 ‘‘(E) The State has separately documented 

15 and retained a record of all of its costs under 

16 this title, claimed expenditures under this title, 

17 uninsured costs in determining payment adjust18 ments under this section, and any payments 

19 made on behalf of the uninsured from payment 

20 adjustments under this section.’’.

21 (e) CLARIFICATION REGARDING NON-REGULATION

22 OF TRANSFERS.—

23 (1) IN GENERAL.—Nothing in section 1903(w) 

24 of the Social Security Act (42 U.S.C. 1396b(w)) 

25 shall be construed by the Secretary as prohibiting a 
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•S 1926 IS 

1 State’s use of funds as the non-Federal share of ex2 penditures under title XIX of such Act where such 

3 funds are transferred from or certified by a publicly4 owned regional medical center located in another 

5 State and described in paragraph (2), so long as the 

6 Secretary determines that such use of funds is prop7 er and in the interest of the program under title 

8 XIX. 

9 (2) CENTER DESCRIBED.—A center described 

10 in this paragraph is a publicly-owned regional med11 ical center that—

12 (A) provides level 1 trauma and burn care 

13 services; 

14 (B) provides level 3 neonatal care services; 

15 (C) is obligated to serve all patients, re16 gardless of State of origin; 

17 (D) is located within a Standard Metro18 politan Statistical Area (SMSA) that includes 

19 at least 3 States, including the States described 

20 in paragraph (1); 

21 (E) serves as a tertiary care provider for 

22 patients residing within a 125 mile radius; and

23 (F) meets the criteria for a dispropor24 tionate share hospital under section 1923 of 
430

•S 1926 IS 

1 such Act in at least one State other than the 

2 one in which the center is located. 

3 (3) EFFECTIVE PERIOD.—This subsection shall 

4 apply through December 31, 2005. 

5 SEC. 602. CLARIFICATION OF INCLUSION OF INPATIENT 

6 DRUG PRICES CHARGED TO CERTAIN PUBLIC 

7 HOSPITALS IN THE BEST PRICE EXEMPTIONS 

8 FOR THE MEDICAID DRUG REBATE PRO9 GRAM. 

10 (a) IN GENERAL.—Section 1927(c)(1)(C)(i)(I) (42 

11 U.S.C. 1396r–8(c)(1)(C)(i)(I)) is amended by inserting 

12 before the semicolon the following: ‘‘(including inpatient 

13 prices charged to hospitals described in section 

14 340B(a)(4)(L) of the Public Health Service Act)’’. 

15 (b) ANTI-DIVERSION PROTECTION.—Section 

16 1927(c)(1)(C) (42 U.S.C. 1396r–8(c)(1)(C)) is amended 

17 by adding at the end the following: 

18 ‘‘(iii) APPLICATION OF AUDITING AND

19 RECORDKEEPING REQUIREMENTS.—With 

20 respect to a covered entity described in 

21 section 340B(a)(4)(L) of the Public Health 

22 Service Act, any drug purchased for inpa23 tient use shall be subject to the auditing 

24 and recordkeeping requirements described 
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•S 1926 IS 

1 in section 340B(a)(5)(C) of the Public 

2 Health Service Act.’’. 

3 SEC. 603. EXTENSION OF MORATORIUM. 

4 (a) IN GENERAL.—Section 6408(a)(3) of the Omni5 bus Budget Reconciliation Act of 1989, as amended by 

6 section 13642 of the Omnibus Budget Reconciliation Act 

7 of 1993 and section 4758 of the Balanced Budget Act of 

8 1997, is amended—

9 (1) by striking ‘‘until December 31, 2002’’, and 

10 (2) by striking ‘‘Kent Community Hospital 

11 Complex in Michigan or.’’

12 (b) EFFECTIVE DATES.—

13 (1) PERMANENT EXTENSION.—The amendment 

14 made by subsection (a)(1) shall take effect as if in15 cluded in the amendment made by section 4758 of 

16 the Balanced Budget Act of 1997. 

17 (2) MODIFICATION.—The amendment made by 

18 subsection (a)(2) shall take effect on the date of en19 actment of this Act. 

20 Subtitle B—Miscellaneous 

21 Provisions 

22 SEC. 611. FEDERAL REIMBURSEMENT OF EMERGENCY 

23 HEALTH SERVICES FURNISHED TO UNDOCU24 MENTED ALIENS. 

25 (a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.—
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•S 1926 IS 

1 (1) IN GENERAL.—Out of any funds in the 

2 Treasury not otherwise appropriated, there are ap3 propriated to the Secretary $250,000,000 for each 

4 of fiscal years 2005 through 2008 for the purpose 

5 of making allotments under this section for pay6 ments to eligible providers in States described in 

7 paragraph (1) or (2) of subsection (b). 

8 (2) AVAILABILITY.—Funds appropriated under 

9 paragraph (1) shall remain available until expended. 

10 (b) STATE ALLOTMENTS.—

11 (1) BASED ON PERCENTAGE OF UNDOCU12 MENTED ALIENS.—

13 (A) IN GENERAL.—Out of the amount ap14 propriated under subsection (a) for a fiscal 

15 year, the Secretary shall use $167,000,000 of 

16 such amount to make allotments for such fiscal 

17 year in accordance with subparagraph (B). 

18 (B) FORMULA.—The amount of the allot19 ment for payments to eligible providers in each 

20 State for a fiscal year shall be equal to the 

21 product of—

22 (i) the total amount available for al23 lotments under this paragraph for the fis24 cal year; and 
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•S 1926 IS 

1 (ii) the percentage of undocumented 

2 aliens residing in the State as compared to 

3 the total number of such aliens residing in 

4 all States, as determined by the Statistics 

5 Division of the Immigration and Natu6 ralization Service, as of January 2003, 

7 based on the 2000 decennial census. 

8 (2) BASED ON NUMBER OF UNDOCUMENTED

9 ALIEN APPREHENSION STATES.—

10 (A) IN GENERAL.—Out of the amount ap11 propriated under subsection (a) for a fiscal 

12 year, the Secretary shall use $83,000,000 of 

13 such amount to make allotments, in addition to 

14 amounts allotted under paragraph (1), for such 

15 fiscal year for each of the 6 States with the 

16 highest number of undocumented alien appre17 hensions for such fiscal year. 

18 (B) DETERMINATION OF ALLOTMENTS.—

19 The amount of the allotment for each State de20 scribed in subparagraph (A) for a fiscal year 

21 shall be equal to the product of—

22 (i) the total amount available for al23 lotments under this paragraph for the fis24 cal year; and 
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•S 1926 IS 

1 (ii) the percentage of undocumented 

2 alien apprehensions in the State in that 

3 fiscal year as compared to the total of such 

4 apprehensions for all such States for the 

5 preceding fiscal year. 

6 (C) DATA.—For purposes of this para7 graph, the highest number of undocumented 

8 alien apprehensions for a fiscal year shall be 

9 based on the apprehension rates for the 4-con10 secutive-quarter period ending before the begin11 ning of the fiscal year for which information is 

12 available for undocumented aliens in such 

13 States, as reported by the Department of 

14 Homeland Security. 

15 (c) USE OF FUNDS.—

16 (1) AUTHORITY TO MAKE PAYMENTS.—From 

17 the allotments made for a State under subsection (b) 

18 for a fiscal year, the Secretary shall pay the amount 

19 (subject to the total amount available from such al20 lotments) determined under paragraph (2) directly 

21 to eligible providers located in the State for the pro22 vision of eligible services to aliens described in para23 graph (5) to the extent that the eligible provider was 

24 not otherwise reimbursed (through insurance or oth25 erwise) for such services during that fiscal year. 
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•S 1926 IS 

1 (2) DETERMINATION OF PAYMENT AMOUNTS.—

2 (A) IN GENERAL.—Subject to subpara3 graph (B), the payment amount determined 

4 under this paragraph shall be an amount deter5 mined by the Secretary that is equal to the less6 er of—

7 (i) the amount that the provider dem8 onstrates was incurred for the provision of 

9 such services; or 

10 (ii) amounts determined under a 

11 methodology established by the Secretary 

12 for purposes of this subsection. 

13 (B) PRO-RATA REDUCTION.—If the 

14 amount of funds allotted to a State under sub15 section (b) for a fiscal year is insufficient to en16 sure that each eligible provider in that State re17 ceives the amount of payment calculated under 

18 subparagraph (A), the Secretary shall reduce 

19 that amount of payment with respect to each el20 igible provider to ensure that the entire amount 

21 allotted to the State for that fiscal year is paid 

22 to such eligible providers. 

23 (3) METHODOLOGY.—In establishing a method24 ology under paragraph (2)(A)(ii), the Secretary—
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•S 1926 IS 

1 (A) may establish different methodologies 

2 for types of eligible providers; 

3 (B) may base payments for hospital serv4 ices on estimated hospital charges, adjusted to 

5 estimated cost, through the application of hos6 pital-specific cost-to-charge ratios; 

7 (C) shall provide for the election by a hos8 pital to receive either payments to the hospital 

9 for—

10 (i) hospital and physician services; or 

11 (ii) hospital services and for a portion 

12 of the on-call payments made by the hos13 pital to physicians; and 

14 (D) shall make quarterly payments under 

15 this section to eligible providers. 

16 If a hospital makes the election under subparagraph 

17 (C)(i), the hospital shall pass on payments for serv18 ices of a physician to the physician and may not 

19 charge any administrative or other fee with respect 

20 to such payments. 

21 (4) LIMITATION ON USE OF FUNDS.—Payments 

22 made to eligible providers in a State from allotments 

23 made under subsection (b) for a fiscal year may only 

24 be used for costs incurred in providing eligible serv25 ices to aliens described in paragraph (5). 
437

•S 1926 IS 

1 (5) ALIENS DESCRIBED.—For purposes of 

2 paragraphs (1) and (2), aliens described in this 

3 paragraph are any of the following: 

4 (A) Undocumented aliens. 

5 (B) Aliens who have been paroled into the 

6 United States at a United States port of entry 

7 for the purpose of receiving eligible services. 

8 (C) Mexican citizens permitted to enter the 

9 United States for not more than 72 hours 

10 under the authority of a biometric machine 

11 readable border crossing identification card 

12 (also referred to as a ‘‘laser visa’’) issued in ac13 cordance with the requirements of regulations 

14 prescribed under section 101(a)(6) of the Immi15 gration and Nationality Act (8 U.S.C. 

16 1101(a)(6)). 

17 (d) APPLICATIONS; ADVANCE PAYMENTS.—

18 (1) DEADLINE FOR ESTABLISHMENT OF APPLI19 CATION PROCESS.—

20 (A) IN GENERAL.—Not later than Sep21 tember 1, 2004, the Secretary shall establish a 

22 process under which eligible providers located in 

23 a State may request payments under subsection 

24 (c). 
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•S 1926 IS 

1 (B) INCLUSION OF MEASURES TO COMBAT

2 FRAUD AND ABUSE.—The Secretary shall in3 clude in the process established under subpara4 graph (A) measures to ensure that inappro5 priate, excessive, or fraudulent payments are 

6 not made from the allotments determined under 

7 subsection (b), including certification by the eli8 gible provider of the veracity of the payment re9 quest. 

10 (2) ADVANCE PAYMENT; RETROSPECTIVE AD11 JUSTMENT.—The process established under para12 graph (1) may provide for making payments under 

13 this section for each quarter of a fiscal year on the 

14 basis of advance estimates of expenditures submitted 

15 by applicants for such payments and such other in16 vestigation as the Secretary may find necessary, and 

17 for making reductions or increases in the payments 

18 as necessary to adjust for any overpayment or un19 derpayment for prior quarters of such fiscal year. 

20 (e) DEFINITIONS.—In this section: 

21 (1) ELIGIBLE PROVIDER.—The term ‘‘eligible 

22 provider’’ means a hospital, physician, or provider of 

23 ambulance services (including an Indian Health 

24 Service facility whether operated by the Indian 
439

•S 1926 IS 

1 Health Service or by an Indian tribe or tribal orga2 nization). 

3 (2) ELIGIBLE SERVICES.—The term ‘‘eligible 

4 services’’ means health care services required by the 

5 application of section 1867 of the Social Security 

6 Act (42 U.S.C. 1395dd), and related hospital inpa7 tient and outpatient services and ambulance services 

8 (as defined by the Secretary). 

9 (3) HOSPITAL.—The term ‘‘hospital’’ has the 

10 meaning given such term in section 1861(e) of the 

11 Social Security Act (42 U.S.C. 1395x(e)), except 

12 that such term shall include a critical access hospital 

13 (as defined in section 1861(mm)(1) of such Act (42 

14 U.S.C. 1395x(mm)(1)). 

15 (4) PHYSICIAN.—The term ‘‘physician’’ has the 

16 meaning given that term in section 1861(r) of the 

17 Social Security Act (42 U.S.C. 1395x(r)). 

18 (5) INDIAN TRIBE; TRIBAL ORGANIZATION.—

19 The terms ‘‘Indian tribe’’ and ‘‘tribal organization’’ 

20 have the meanings given such terms in section 4 of 

21 the Indian Health Care Improvement Act (25 U.S.C. 

22 1603). 

23 (6) STATE.—The term ‘‘State’’ means the 50 

24 States and the District of Columbia.
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•S 1926 IS 

1 SEC. 612. COMMISSION ON SYSTEMIC INTEROPERABILITY. 

2 (a) ESTABLISHMENT.—The Secretary shall establish 

3 a commission to be known as the ‘‘Commission on Sys4 temic Interoperability’’ (in this section referred to as the 

5 ‘‘Commission’’). 

6 (b) DUTIES.—

7 (1) IN GENERAL.—The Commission shall de8 velop a comprehensive strategy for the adoption and 

9 implementation of health care information tech10 nology standards, that includes a timeline and 

11 prioritization for such adoption and implementation. 

12 (2) CONSIDERATIONS.—In developing the com13 prehensive health care information technology strat14 egy under paragraph (1), the Commission shall con15 sider—

16 (A) the costs and benefits of the stand17 ards, both financial impact and quality improve18 ment; 

19 (B) the current demand on industry re20 sources to implement this Act and other elec21 tronic standards, including HIPAA standards; 

22 and 

23 (C) the most cost-effective and efficient 

24 means for industry to implement the standards. 

25 (3) NONINTERFERENCE.—In carrying out this 

26 section, the Commission shall not interfere with any 
441

•S 1926 IS 

1 standards development of adoption processes under2 way in the private or public sector and shall not rep3 licate activities related to such standards or the na4 tional health information infrastructure underway 

5 within the Department of Health and Human Serv6 ices. 

7 (4) REPORT.—Not later than October 31, 

8 2005, the Commission shall submit to the Secretary 

9 and to Congress a report describing the strategy de10 veloped under paragraph (1), including an analysis 

11 of the matters considered under paragraph (2). 

12 (c) MEMBERSHIP.—

13 (1) NUMBER AND APPOINTMENT.—The Com14 mission shall be composed of 11 members appointed 

15 as follows: 

16 (A) The President shall appoint 3 mem17 bers, one of whom the President shall designate 

18 as Chairperson. 

19 (B) The Majority Leader of the Senate 

20 shall appoint 2 members. 

21 (C) The Minority Leader of the Senate 

22 shall appoint 2 members. 

23 (D) The Speaker of the House of Rep24 resentatives shall appoint 2 members. 
442

•S 1926 IS 

1 (E) The Minority Leader of the House of 

2 Representatives shall appoint 2 members. 

3 (2) QUALIFICATIONS.—The membership of the 

4 Commission shall include individuals with national 

5 recognition for their expertise in health finance and 

6 economics, health plans and integrated delivery sys7 tems, reimbursement of health facilities, practicing 

8 physicians, practicing pharmacists, and other pro9 viders of health services, health care technology and 

10 information systems, and other related fields, who 

11 provide a mix of different professionals, broad geo12 graphic representation, and a balance between urban 

13 and rural representatives. 

14 (d) TERMS.—Each member shall be appointed for the 

15 life of the Commission.

16 (e) COMPENSATION.—

17 (1) RATES OF PAY.—Members shall each be 

18 paid at a rate not to exceed the daily equivalent of 

19 the rate of basic pay for level IV of the Executive 

20 Schedule for each day (including travel time) during 

21 which they are engaged in the actual performance of 

22 duties vested in the Commission. 

23 (2) PROHIBITION OF COMPENSATION OF FED24 ERAL EMPLOYEES.—Members of the Commission 

25 who are full-time officers or employees of the United 
443

•S 1926 IS 

1 States or Members of Congress may not receive ad2 ditional pay, allowances, or benefits by reason of 

3 their service on the Commission. 

4 (3) TRAVEL EXPENSES.—Each member shall 

5 receive travel expenses, including per diem in lieu of 

6 subsistence, in accordance with applicable provisions 

7 under subchapter I of chapter 57 of title 5, United 

8 States Code. 

9 (f) QUORUM.—A majority of the members of the 

10 Commission shall constitute a quorum but a lesser number 

11 may hold hearings. 

12 (g) DIRECTOR AND STAFF OF COMMISSION; EX13 PERTS AND CONSULTANTS.—

14 (1) DIRECTOR.—The Commission shall have a 

15 Director who shall be appointed by the Chairperson. 

16 The Director shall be paid at a rate not to exceed 

17 the rate of basic pay for level IV of the Executive 

18 Schedule. 

19 (2) STAFF.—With the approval of the Commis20 sion, the Director may appoint and fix the pay of 

21 such additional personnel as the Director considers 

22 appropriate. 

23 (3) APPLICABILITY OF CERTAIN CIVIL SERVICE

24 LAWS.—The Director and staff of the Commission 

25 may be appointed without regard to the provisions 
444

•S 1926 IS 

1 of title 5, United States Code, governing appoint2 ments in the competitive service, and may be paid 

3 without regard to the provisions of chapter 51 and 

4 subchapter III of chapter 53 of that title relating to 

5 classification and General Schedule pay rates, except 

6 that an individual so appointed may not receive pay 

7 in excess of level IV of the Executive Schedule. 

8 (4) EXPERTS AND CONSULTANTS.—With the 

9 approval of the Commission, the Director may pro10 cure temporary and intermittent services under sec11 tion 3109(b) of title 5, United States Code. 

12 (5) STAFF OF FEDERAL AGENCIES.—Upon re13 quest of the Chairperson, the head of any Federal 

14 department or agency may detail, on a reimbursable 

15 basis, any of the personnel of that department or 

16 agency to the Commission to assist it in carrying out 

17 its duties under this Act. 

18 (h) POWERS OF COMMISSION.—

19 (1) HEARINGS AND SESSIONS.—The Commis20 sion may, for the purpose of carrying out this Act, 

21 hold hearings, sit and act at times and places, take 

22 testimony, and receive evidence as the Commission 

23 considers appropriate. 

24 (2) POWERS OF MEMBERS AND AGENTS.—Any 

25 member or agent of the Commission may, if author-
445

•S 1926 IS 

1 ized by the Commission, take any action which the 

2 Commission is authorized to take by this section.

3 (3) OBTAINING OFFICIAL DATA.—The Commis4 sion may secure directly from any department or 

5 agency of the United States information necessary 

6 to enable it to carry out this Act. Upon request of 

7 the Chairperson of the Commission, the head of that 

8 department or agency shall furnish that information 

9 to the Commission. 

10 (4) GIFTS, BEQUESTS, AND DEVISES.—The 

11 Commission may accept, use, and dispose of gifts, 

12 bequests, or devises of services or property, both real 

13 and personal, for the purpose of aiding or facili14 tating the work of the Commission. Gifts, bequests, 

15 or devises of money and proceeds from sales of other 

16 property received as gifts, bequests, or devises shall 

17 be deposited in the Treasury and shall be available 

18 for disbursement upon order of the Commission. For 

19 purposes of Federal income, estate, and gift taxes, 

20 property accepted under this subsection shall be con21 sidered as a gift, bequest, or devise to the United 

22 States. 

23 (5) MAILS.—The Commission may use the 

24 United States mails in the same manner and under 
446

•S 1926 IS 

1 the same conditions as other departments and agen2 cies of the United States. 

3 (6) ADMINISTRATIVE SUPPORT SERVICES.—

4 Upon the request of the Commission, the Adminis5 trator of General Services shall provide to the Com6 mission, on a reimbursable basis, the administrative 

7 support services necessary for the Commission to 

8 carry out its responsibilities under this Act. 

9 (7) CONTRACT AUTHORITY.—The Commission 

10 may enter into contracts or make other arrange11 ments, as may be necessary for the conduct of the 

12 work of the Commission (without regard to section 

13 3709 of the Revised Statutes (41 U.S.C. 5)). 

14 (i) TERMINATION.—The Commission shall terminate 

15 on 30 days after submitting its report pursuant to sub16 section (b)(3). 

17 (j) AUTHORIZATION OF APPROPRIATIONS.—There is 

18 authorized to be appropriated such sums as may be nec19 essary to carry out this section. 

20 SEC. 613. RESEARCH ON OUTCOMES OF HEALTH CARE 

21 ITEMS AND SERVICES. 

22 (a) RESEARCH, DEMONSTRATIONS, AND EVALUA23 TIONS.—

24 (1) IMPROVEMENT OF EFFECTIVENESS AND EF25 FICIENCY.—
447

•S 1926 IS 

1 (A) IN GENERAL.—To improve the quality, 

2 effectiveness, and efficiency of health care deliv3 ered pursuant to the programs established 

4 under titles XVIII, XIX, and XXI of the Social 

5 Security Act, the Secretary acting through the 

6 Director of the Agency for Healthcare Research 

7 and Quality (in this section referred to as the 

8 ‘‘Director’’), shall conduct and support research 

9 to meet the priorities and requests for scientific 

10 evidence and information identified by such pro11 grams with respect to—

12 (i) the outcomes, comparative clinical 

13 effectiveness, and appropriateness of health 

14 care items and services (including prescrip15 tion drugs); and 

16 (ii) strategies for improving the effi17 ciency and effectiveness of such programs, 

18 including the ways in which such items 

19 and services are organized, managed, and 

20 delivered under such programs. 

21 (B) SPECIFICATION.—To respond to prior22 ities and information requests in subparagraph 

23 (A), the Secretary may conduct or support, by 

24 grant, contract, or interagency agreement, re25 search, demonstrations, evaluations, technology 
448

•S 1926 IS 

1 assessments, or other activities, including the 

2 provision of technical assistance, scientific ex3 pertise, or methodological assistance. 

4 (2) PRIORITIES.—

5 (A) IN GENERAL.—The Secretary shall es6 tablish a process to develop priorities that will 

7 guide the research, demonstrations, and evalua8 tion activities undertaken pursuant to this sec9 tion. 

10 (B) INITIAL LIST.—Not later than 6 

11 months after the date of the enactment of this 

12 Act, the Secretary shall establish an initial list 

13 of priorities for research related to health care 

14 items and services (including prescription 

15 drugs). 

16 (C) PROCESS.—In carrying out subpara17 graph (A), the Secretary—

18 (i) shall ensure that there is broad 

19 and ongoing consultation with relevant 

20 stakeholders in identifying the highest pri21 orities for research, demonstrations, and 

22 evaluations to support and improve the 

23 programs established under titles XVIII, 

24 XIX, and XXI of the Social Security Act; 
449

•S 1926 IS 

1 (ii) may include health care items and 

2 services which impose a high cost on such 

3 programs, as well as those which may be 

4 underutilized or overutilized and which 

5 may significantly improve the prevention, 

6 treatment, or cure of diseases and condi7 tions (including chronic conditions) which 

8 impose high direct or indirect costs on pa9 tients or society; and 

10 (iii) shall ensure that the research and 

11 activities undertaken pursuant to this sec12 tion are responsive to the specified prior13 ities and are conducted in a timely man14 ner. 

15 (3) EVALUATION AND SYNTHESIS OF SCI16 ENTIFIC EVIDENCE.—

17 (A) IN GENERAL.—The Secretary shall—

18 (i) evaluate and synthesize available 

19 scientific evidence related to health care 

20 items and services (including prescription 

21 drugs) identified as priorities in accordance 

22 with paragraph (2) with respect to the 

23 comparative clinical effectiveness, out24 comes, appropriateness, and provision of 
450

•S 1926 IS 

1 such items and services (including pre2 scription drugs); 

3 (ii) identify issues for which existing 

4 scientific evidence is insufficient with re5 spect to such health care items and serv6 ices (including prescription drugs); 

7 (iii) disseminate to prescription drug 

8 plans and MA–PD plans under part D of 

9 title XVIII of the Social Security Act, 

10 other health plans, and the public the find11 ings made under clauses (i) and (ii); and 

12 (iv) work in voluntary collaboration 

13 with public and private sector entities to 

14 facilitate the development of new scientific 

15 knowledge regarding health care items and 

16 services (including prescription drugs). 

17 (B) INITIAL RESEARCH.—The Secretary 

18 shall complete the evaluation and synthesis of 

19 the initial research required by the priority list 

20 developed under paragraph (2)(B) not later 

21 than 18 months after the development of such 

22 list. 

23 (C) DISSEMINATION.—

24 (i) IN GENERAL.—To enhance patient 

25 safety and the quality of health care, the 
451

•S 1926 IS 

1 Secretary shall make available and dis2 seminate in appropriate formats to pre3 scription drugs plans under part D, and 

4 MA–PD plans under part C, of title XVIII 

5 of the Social Security Act, other health 

6 plans, and the public the evaluations and 

7 syntheses prepared pursuant to subpara8 graph (A) and the findings of research 

9 conducted pursuant to paragraph (1). In 

10 carrying out this clause the Secretary, in 

11 order to facilitate the availability of such 

12 evaluations and syntheses or findings at 

13 every decision point in the health care sys14 tem, shall—

15 (I) present such evaluations and 

16 syntheses or findings in a form that is 

17 easily understood by the individuals 

18 receiving health care items and serv19 ices (including prescription drugs) 

20 under such plans and periodically as21 sess that the requirements of this sub22 clause have been met; and 

23 (II) provide such evaluations and 

24 syntheses or findings and other rel25 evant information through easily ac-
452

•S 1926 IS 

1 cessible and searchable electronic 

2 mechanisms, and in hard copy for3 mats as appropriate. 

4 (ii) RULE OF CONSTRUCTION.—Noth5 ing in this section shall be construed as—

6 (I) affecting the authority of the 

7 Secretary or the Commissioner of 

8 Food and Drugs under the Federal 

9 Food, Drug, and Cosmetic Act or the 

10 Public Health Service Act; or 

11 (II) conferring any authority re12 ferred to in subclause (I) to the Direc13 tor. 

14 (D) ACCOUNTABILITY.—In carrying out 

15 this paragraph, the Secretary shall implement 

16 activities in a manner that—

17 (i) makes publicly available all sci18 entific evidence relied upon and the meth19 odologies employed, provided such evidence 

20 and method are not protected from public 

21 disclosure by section 1905 of title 18, 

22 United States Code, or other applicable 

23 law so that the results of the research, 

24 analyses, or syntheses can be evaluated or 

25 replicated; and 
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1 (ii) ensures that any information 

2 needs and unresolved issues identified in 

3 subparagraph (A)(ii) are taken into ac4 count in priority-setting for future research 

5 conducted by the Secretary. 

6 (4) CONFIDENTIALITY.—

7 (A) IN GENERAL.—In making use of ad8 ministrative, clinical, and program data and in9 formation developed or collected with respect to 

10 the programs established under titles XVIII, 

11 XIX, and XXI of the Social Security Act, for 

12 purposes of carrying out the requirements of 

13 this section or the activities authorized under 

14 title IX of the Public Health Service Act (42 

15 U.S.C. 299 et seq.), such data and information 

16 shall be protected in accordance with the con17 fidentiality requirements of title IX of the Pub18 lic Health Service Act. 

19 (B) RULE OF CONSTRUCTION.—Nothing in 

20 this section shall be construed to require or per21 mit the disclosure of data provided to the Sec22 retary that is otherwise protected from disclo23 sure under the Federal Food, Drug, and Cos24 metic Act, section 1905 of title 18, United 

25 States Code, or other applicable law. 
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1 (5) EVALUATIONS.—The Secretary shall con2 duct and support evaluations of the activities carried 

3 out under this section to determine the extent to 

4 which such activities have had an effect on outcomes 

5 and utilization of health care items and services. 

6 (6) IMPROVING INFORMATION AVAILABLE TO

7 HEALTH CARE PROVIDERS, PATIENTS, AND POLICY8 MAKERS.—Not later than 18 months after the date 

9 of enactment of this Act, the Secretary shall identify 

10 options that could be undertaken in voluntary col11 laboration with private and public entities (as appro12 priate) for the—

13 (A) provision of more timely information 

14 through the programs established under titles 

15 XVIII, XIX, and XXI of the Social Security 

16 Act, regarding the outcomes and quality of pa17 tient care, including clinical and patient-re18 ported outcomes, especially with respect to 

19 interventions and conditions for which clinical 

20 trials would not be feasible or raise ethical con21 cerns that are difficult to address; 

22 (B) acceleration of the adoption of innova23 tion and quality improvement under such pro24 grams; and 
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1 (C) development of management tools for 

2 the programs established under titles XIX and 

3 XXI of the Social Security Act, and with re4 spect to the programs established under such ti5 tles, assess the feasibility of using administra6 tive or claims data, to—

7 (i) improve oversight by State offi8 cials; 

9 (ii) support Federal and State initia10 tives to improve the quality, safety, and ef11 ficiency of services provided under such 

12 programs; and 

13 (iii) provide a basis for estimating the 

14 fiscal and coverage impact of Federal or 

15 State program and policy changes. 

16 (b) RECOMMENDATIONS.—

17 (1) DISCLAIMER.—In carrying out this section, 

18 the Director shall—

19 (A) not mandate national standards of 

20 clinical practice or quality health care stand21 ards; and 

22 (B) include in any recommendations result23 ing from projects funded and published by the 

24 Director, a corresponding reference to the pro25 hibition described in subparagraph (A). 
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1 (2) REQUIREMENT FOR IMPLEMENTATION.—

2 Research, evaluation, and communication activities 

3 performed pursuant to this section shall reflect the 

4 principle that clinicians and patients should have the 

5 best available evidence upon which to make choices 

6 in health care items and services, in providers, and 

7 in health care delivery systems, recognizing that pa8 tient subpopulations and patient and physician pref9 erences may vary. 

10 (3) RULE OF CONSTRUCTION.—Nothing in this 

11 section shall be construed to provide the Director 

12 with authority to mandate a national standard or re13 quire a specific approach to quality measurement 

14 and reporting. 

15 (c) RESEARCH WITH RESPECT TO DISSEMINA16 TION.—The Secretary, acting through the Director, may 

17 conduct or support research with respect to improving 

18 methods of disseminating information in accordance with 

19 subsection (a)(3)(C). 

20 (d) LIMITATION ON CMS.—The Administrator of the 

21 Centers for Medicare & Medicaid Services may not use 

22 data obtained in accordance with this section to withhold 

23 coverage of a prescription drug. 

24 (e) AUTHORIZATION OF APPROPRIATIONS.—There is 

25 authorized to be appropriated to carry out this section, 
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•S 1926 IS 

1 $50,000,000 for fiscal year 2004, and such sums as may 

2 be necessary for each fiscal year thereafter.

3 SEC. 614. HEALTH CARE THAT WORKS FOR ALL AMERI4 CANS: CITIZENS HEALTH CARE WORKING 

5 GROUP. 

6 (a) FINDINGS.—Congress finds the following:

7 (1) In order to improve the health care system, 

8 the American public must engage in an informed na9 tional public debate to make choices about the serv10 ices they want covered, what health care coverage 

11 they want, and how they are willing to pay for cov12 erage. 

13 (2) More than a trillion dollars annually is 

14 spent on the health care system, yet—

15 (A) 41,000,000 Americans are uninsured; 

16 (B) insured individuals do not always have 

17 access to essential, effective services to improve 

18 and maintain their health; and 

19 (C) employers, who cover over 170,000,000 

20 Americans, find providing coverage increasingly 

21 difficult because of rising costs and double digit 

22 premium increases. 

23 (3) Despite increases in medical care spending 

24 that are greater than the rate of inflation, popu25 lation growth, and Gross Domestic Product growth, 
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1 there has not been a commensurate improvement in 

2 our health status as a nation. 

3 (4) Health care costs for even just 1 member 

4 of a family can be catastrophic, resulting in medical 

5 bills potentially harming the economic stability of 

6 the entire family. 

7 (5) Common life occurrences can jeopardize the 

8 ability of a family to retain private coverage or jeop9 ardize access to public coverage. 

10 (6) Innovations in health care access, coverage, 

11 and quality of care, including the use of technology, 

12 have often come from States, local communities, and 

13 private sector organizations, but more creative poli14 cies could tap this potential. 

15 (7) Despite our Nation’s wealth, the health care 

16 system does not provide coverage to all Americans 

17 who want it. 

18 (b) PURPOSES.—The purposes of this section are— 

19 (1) to provide for a nationwide public debate 

20 about improving the health care system to provide 

21 every American with the ability to obtain quality, af22 fordable health care coverage; and 

23 (2) to provide for a vote by Congress on the 

24 recommendations that result from the debate. 
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1 (c) ESTABLISHMENT.—The Secretary, acting 

2 through the Agency for Healthcare Research and Quality, 

3 shall establish an entity to be known as the Citizens’ 

4 Health Care Working Group (referred to in this section 

5 as the ‘‘Working Group’’). 

6 (d) MEMBERSHIP.—

7 (1) NUMBER AND APPOINTMENT.—The Work8 ing Group shall be composed of 15 members. One 

9 member shall be the Secretary. The Comptroller 

10 General of the United States shall appoint 14 mem11 bers. 

12 (2) QUALIFICATIONS.—

13 (A) IN GENERAL.—The membership of the 

14 Working Group shall include—

15 (i) consumers of health services that 

16 represent those individuals who have not 

17 had insurance within 2 years of appoint18 ment, that have had chronic illnesses, in19 cluding mental illness, are disabled, and 

20 those who receive insurance coverage 

21 through medicare and medicaid; and 

22 (ii) individuals with expertise in fi23 nancing and paying for benefits and access 

24 to care, business and labor perspectives, 

25 and providers of health care. 
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1 The membership shall reflect a broad geo2 graphic representation and a balance between 

3 urban and rural representatives. 

4 (B) PROHIBITED APPOINTMENTS.—Mem5 bers of the Working Group shall not include 

6 Members of Congress or other elected govern7 ment officials (Federal, State, or local). Individ8 uals appointed to the Working Group shall not 

9 be paid employees or representatives of associa10 tions or advocacy organizations involved in the 

11 health care system. 

12 (e) PERIOD OF APPOINTMENT.—Members of the 

13 Working Group shall be appointed for a life of the Work14 ing Group. Any vacancies shall not affect the power and 

15 duties of the Working Group but shall be filled in the same 

16 manner as the original appointment. 

17 (f) DESIGNATION OF THE CHAIRPERSON.—Not later 

18 than 15 days after the date on which all members of the 

19 Working Group have been appointed under subsection 

20 (d)(1), the Comptroller General shall designate the chair21 person of the Working Group. 

22 (g) SUBCOMMITTEES.—The Working Group may es23 tablish subcommittees if doing so increases the efficiency 

24 of the Working Group in completing its tasks. 

25 (h) DUTIES.—
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1 (1) HEARINGS.—Not later than 90 days after 

2 the date of the designation of the chairperson under 

3 subsection (f), the Working Group shall hold hear4 ings to examine—

5 (A) the capacity of the public and private 

6 health care systems to expand coverage options; 

7 (B) the cost of health care and the effec8 tiveness of care provided at all stages of dis9 ease; 

10 (C) innovative State strategies used to ex11 pand health care coverage and lower health care 

12 costs; 

13 (D) local community solutions to accessing 

14 health care coverage; 

15 (E) efforts to enroll individuals currently 

16 eligible for public or private health care cov17 erage; 

18 (F) the role of evidence-based medical 

19 practices that can be documented as restoring, 

20 maintaining, or improving a patient’s health, 

21 and the use of technology in supporting pro22 viders in improving quality of care and lowering 

23 costs; and 

24 (G) strategies to assist purchasers of 

25 health care, including consumers, to become 
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•S 1926 IS 

1 more aware of the impact of costs, and to lower 

2 the costs of health care. 

3 (2) ADDITIONAL HEARINGS.—The Working 

4 Group may hold additional hearings on subjects 

5 other than those listed in paragraph (1) so long as 

6 such hearings are determined to be necessary by the 

7 Working Group in carrying out the purposes of this 

8 section. Such additional hearings do not have to be 

9 completed within the time period specified in para10 graph (1) but shall not delay the other activities of 

11 the Working Group under this section. 

12 (3) THE HEALTH REPORT TO THE AMERICAN

13 PEOPLE.—Not later than 90 days after the hearings 

14 described in paragraphs (1) and (2) are completed, 

15 the Working Group shall prepare and make available 

16 to health care consumers through the Internet and 

17 other appropriate public channels, a report to be en18 titled, ‘‘The Health Report to the American People’’. 

19 Such report shall be understandable to the general 

20 public and include—

21 (A) a summary of—

22 (i) health care and related services 

23 that may be used by individuals through24 out their life span; 
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1 (ii) the cost of health care services 

2 and their medical effectiveness in providing 

3 better quality of care for different age 

4 groups; 

5 (iii) the source of coverage and pay6 ment, including reimbursement, for health 

7 care services; 

8 (iv) the reasons people are uninsured 

9 or underinsured and the cost to taxpayers, 

10 purchasers of health services, and commu11 nities when Americans are uninsured or 

12 underinsured; 

13 (v) the impact on health care out14 comes and costs when individuals are 

15 treated in all stages of disease; 

16 (vi) health care cost containment 

17 strategies; and 

18 (vii) information on health care needs 

19 that need to be addressed; 

20 (B) examples of community strategies to 

21 provide health care coverage or access; 

22 (C) information on geographic-specific 

23 issues relating to health care; 

24 (D) information concerning the cost of 

25 care in different settings, including institu-
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•S 1926 IS 

1 tional-based care and home and community2 based care; 

3 (E) a summary of ways to finance health 

4 care coverage; and 

5 (F) the role of technology in providing fu6 ture health care including ways to support the 

7 information needs of patients and providers. 

8 (4) COMMUNITY MEETINGS.—

9 (A) IN GENERAL.—Not later than 1 year 

10 after the date on which all the members of the 

11 Working Group have been appointed under sub12 section (d)(1) and appropriations are first made 

13 available to carry out this section, the Working 

14 Group shall initiate health care community 

15 meetings throughout the United States (in this 

16 paragraph referred to as ‘‘community meet17 ings’’). Such community meetings may be geo18 graphically or regionally based and shall be 

19 completed within 180 days after the initiation 

20 of the first meeting. 

21 (B) NUMBER OF MEETINGS.—The Work22 ing Group shall hold a sufficient number of 

23 community meetings in order to receive infor24 mation that reflects—
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•S 1926 IS 

1 (i) the geographic differences through2 out the United States; 

3 (ii) diverse populations; and 

4 (iii) a balance among urban and rural 

5 populations. 

6 (C) MEETING REQUIREMENTS.—

7 (i) FACILITATOR.—A State health of8 ficer may be the facilitator at the commu9 nity meetings. 

10 (ii) ATTENDANCE.—At least 1 mem11 ber of the Working Group shall attend and 

12 serve as chair of each community meeting. 

13 Other members may participate through 

14 interactive technology. 

15 (iii) TOPICS.—The community meet16 ings shall, at a minimum, address the fol17 lowing questions: 

18 (I) What health care benefits and 

19 services should be provided? 

20 (II) How does the American pub21 lic want health care delivered? 

22 (III) How should health care cov23 erage be financed? 

24 (IV) What trade-offs are the 

25 American public willing to make in ei-
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•S 1926 IS 

1 ther benefits or financing to ensure 

2 access to affordable, high quality 

3 health care coverage and services? 

4 (iv) INTERACTIVE TECHNOLOGY.—

5 The Working Group may encourage public 

6 participation in community meetings 

7 through interactive technology and other 

8 means as determined appropriate by the 

9 Working Group. 

10 (D) INTERIM REQUIREMENTS.—Not later 

11 than 180 days after the date of completion of 

12 the community meetings, the Working Group 

13 shall prepare and make available to the public 

14 through the Internet and other appropriate 

15 public channels, an interim set of recommenda16 tions on health care coverage and ways to im17 prove and strengthen the health care system 

18 based on the information and preferences ex19 pressed at the community meetings. There shall 

20 be a 90-day public comment period on such rec21 ommendations. 

22 (i) RECOMMENDATIONS.—Not later than 120 days 

23 after the expiration of the public comment period de24 scribed in subsection (h)(4)(D), the Working Group shall 
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•S 1926 IS 

1 submit to Congress and the President a final set of rec2 ommendations. 

3 (j) ADMINISTRATION.—

4 (1) EXECUTIVE DIRECTOR.—There shall be an 

5 Executive Director of the Working Group who shall 

6 be appointed by the chairperson of the Working 

7 Group in consultation with the members of the 

8 Working Group. 

9 (2) COMPENSATION.—While serving on the 

10 business of the Working Group (including travel 

11 time), a member of the Working Group shall be enti12 tled to compensation at the per diem equivalent of 

13 the rate provided for level IV of the Executive 

14 Schedule under section 5315 of title 5, United 

15 States Code, and while so serving away from home 

16 and the member’s regular place of business, a mem17 ber may be allowed travel expenses, as authorized 

18 by the chairperson of the Working Group. For pur19 poses of pay and employment benefits, rights, and 

20 privileges, all personnel of the Working Group shall 

21 be treated as if they were employees of the Senate. 

22 (3) INFORMATION FROM FEDERAL AGENCIES.—

23 The Working Group may secure directly from any 

24 Federal department or agency such information as 

25 the Working Group considers necessary to carry out 
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•S 1926 IS 

1 this section. Upon request of the Working Group, 

2 the head of such department or agency shall furnish 

3 such information. 

4 (4) POSTAL SERVICES.—The Working Group 

5 may use the United States mails in the same man6 ner and under the same conditions as other depart7 ments and agencies of the Federal Government. 

8 (k) DETAIL.—Not more than 10 Federal Government 

9 employees employed by the Department of Labor and 10 

10 Federal Government employees employed by the Depart11 ment of Health and Human Services may be detailed to 

12 the Working Group under this section without further re13 imbursement. Any detail of an employee shall be without 

14 interruption or loss of civil service status or privilege. 

15 (l) TEMPORARY AND INTERMITTENT SERVICES.—

16 The chairperson of the Working Group may procure tem17 porary and intermittent services under section 3109(b) of 

18 title 5, United States Code, at rates for individuals which 

19 do not exceed the daily equivalent of the annual rate of 

20 basic pay prescribed for level V of the Executive Schedule 

21 under section 5316 of such title. 

22 (m) ANNUAL REPORT.—Not later than 1 year after 

23 the date of enactment of this Act, and annually thereafter 

24 during the existence of the Working Group, the Working 

25 Group shall report to Congress and make public a detailed 
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•S 1926 IS 

1 description of the expenditures of the Working Group used 

2 to carry out its duties under this section. 

3 (n) SUNSET OF WORKING GROUP.—The Working 

4 Group shall terminate on the date that is 2 years after 

5 the date on which all the members of the Working Group 

6 have been appointed under subsection (d)(1) and appro7 priations are first made available to carry out this section. 

8 (o) ADMINISTRATION REVIEW AND COMMENTS.—

9 Not later than 45 days after receiving the final rec10 ommendations of the Working Group under subsection (i), 

11 the President shall submit a report to Congress which 

12 shall contain—

13 (1) additional views and comments on such rec14 ommendations; and 

15 (2) recommendations for such legislation and 

16 administrative actions as the President considers ap17 propriate. 

18 (p) REQUIRED CONGRESSIONAL ACTION.—Not later 

19 than 45 days after receiving the report submitted by the 

20 President under subsection (o), each committee of juris21 diction of Congress, the Committee on Finance of the Sen22 ate, the Committee on Health, Education, Labor, and 

23 Pensions of the Senate, the Committee on Ways and 

24 Means of the House of Representatives, the Committee on 

25 Energy and Commerce of the House of Representatives, 
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•S 1926 IS 

1 Committee on Education and the Workforce of the House 

2 of Representatives, shall hold at least 1 hearing on such 

3 report and on the final recommendations of the Working 

4 Group submitted under subsection (i). 

5 (q) AUTHORIZATION OF APPROPRIATIONS.—

6 (1) IN GENERAL.—There are authorized to be 

7 appropriated to carry out this section, other than 

8 subsection (h)(3), $3,000,000 for each of fiscal years 

9 2005 and 2006. 

10 (2) HEALTH REPORT TO THE AMERICAN PEO11 PLE.—There are authorized to be appropriated for 

12 the preparation and dissemination of the Health Re13 port to the American People described in subsection 

14 (h)(3), such sums as may be necessary for the fiscal 

15 year in which the report is required to be submitted.

16 SEC. 615. FUNDING START-UP ADMINISTRATIVE COSTS FOR 

17 MEDICARE REFORM. 

18 (a) IN GENERAL.—There are appropriated to carry 

19 out this Act (including the amendments made by this Act), 

20 to be transferred from the Federal Hospital Insurance 

21 Trust Fund and the Federal Supplementary Medical In22 surance Trust Fund—

23 (1) not to exceed $1,000,000,000 for the Cen24 ters for Medicare & Medicaid Services; and 
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•S 1926 IS 

1 (2) not to exceed $500,000,000 for the Social 

2 Security Administration. 

3 (b) AVAILABILITY.—Amounts provided under sub4 section (a) shall remain available until September 30, 

5 2005. 

6 (c) APPLICATION.—From amounts provided under 

7 subsection (a)(2), the Social Security Administration may 

8 reimburse the Internal Revenue Service for expenses in 

9 carrying out this Act (and the amendments made by this 

10 Act). 

11 (d) TRANSFER.—The President may transfer 

12 amounts provided under subsection (a) between the Cen13 ters for Medicare & Medicaid Services and the Social Secu14 rity Administration. Notice of such transfers shall be 

15 transmitted within 15 days to the authorizing committees 

16 of the House of Representatives and of the Senate.

17 SEC. 616. HEALTH CARE INFRASTRUCTURE IMPROVEMENT 

18 PROGRAM. 

19 Title XVIII is amended by adding at the end the fol20 lowing new section: 

21 ‘‘HEALTH CARE INFRASTRUCTURE IMPROVEMENT

22 PROGRAM

23 ‘‘SEC. 1897. (a) ESTABLISHMENT.—The Secretary 

24 shall establish a loan program that provides loans to quali25 fying hospitals for payment of the capital costs of projects 

26 described in subsection (d). 
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•S 1926 IS 

1 ‘‘(b) APPLICATION.—No loan may be provided under 

2 this section to a qualifying hospital except pursuant to an 

3 application that is submitted and approved in a time, man4 ner, and form specified by the Secretary. A loan under 

5 this section shall be on such terms and conditions and 

6 meet such requirements as the Secretary determines ap7 propriate. 

8 ‘‘(c) SELECTION CRITERIA.—

9 ‘‘(1) IN GENERAL.—The Secretary shall estab10 lish criteria for selecting among qualifying hospitals 

11 that apply for a loan under this section. Such cri12 teria shall consider the extent to which the project 

13 for which loan is sought is nationally or regionally 

14 significant, in terms of expanding or improving the 

15 health care infrastructure of the United States or 

16 the region or in terms of the medical benefit that the 

17 project will have. 

18 ‘‘(2) QUALIFYING HOSPITAL DEFINED.—For 

19 purposes of this section, the term ‘qualifying hos20 pital’ means a hospital that—

21 ‘‘(A) is engaged in research in the causes, 

22 prevention, and treatment of cancer; and 

23 ‘‘(B) is designated as a cancer center for 

24 the National Cancer Institute or is designated 
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•S 1926 IS 

1 by the State as the official cancer institute of 

2 the State. 

3 ‘‘(d) PROJECTS.—A project described in this sub4 section is a project of a qualifying hospital that is designed 

5 to improve the health care infrastructure of the hospital, 

6 including construction, renovation, or other capital im7 provements. 

8 ‘‘(e) STATE AND LOCAL PERMITS.—The provision of 

9 a loan under this section with respect to a project shall 

10 not—

11 ‘‘(1) relieve any recipient of the loan of any ob12 ligation to obtain any required State or local permit 

13 or approval with respect to the project; 

14 ‘‘(2) limit the right of any unit of State or local 

15 government to approve or regulate any rate of re16 turn on private equity invested in the project; or 

17 ‘‘(3) otherwise supersede any State or local law 

18 (including any regulation) applicable to the construc19 tion or operation of the project. 

20 ‘‘(f) FORGIVENESS OF INDEBTEDNESS.—The Sec21 retary may forgive a loan provided to a qualifying hospital 

22 under this section under terms and conditions that are 

23 analogous to the loan forgiveness provision for student 

24 loans under part D of title IV of the Higher Education 

25 Act of 1965 (20 U.S.C. 1087a et seq.), except that the 
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•S 1926 IS 

1 Secretary shall condition such forgiveness on the establish2 ment by the hospital of—

3 ‘‘(A) an outreach program for cancer pre4 vention, early diagnosis, and treatment that 

5 provides services to a substantial majority of 

6 the residents of a State or region, including 

7 residents of rural areas; 

8 ‘‘(B) an outreach program for cancer pre9 vention, early diagnosis, and treatment that 

10 provides services to multiple Indian tribes; and 

11 ‘‘(C)(i) unique research resources (such as 

12 population databases); or 

13 ‘‘(ii) an affiliation with an entity that has 

14 unique research resources. 

15 ‘‘(g) FUNDING.—

16 ‘‘(1) IN GENERAL.—There are appropriated, 

17 out of amounts in the Treasury not otherwise appro18 priated, to carry out this section, $200,000,000, to 

19 remain available during the period beginning on July 

20 1, 2004, and ending on September 30, 2008. 

21 ‘‘(2) ADMINISTRATIVE COSTS.—From funds 

22 made available under paragraph (1), the Secretary 

23 may use, for the administration of this section, not 

24 more than $2,000,000 for each of fiscal years 2004 

25 through 2008. 
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•S 1926 IS 

1 ‘‘(3) AVAILABILITY.—Amounts appropriated 

2 under this section shall be available for obligation on 

3 July 1, 2004. 

4 ‘‘(h) REPORT TO CONGRESS.—Not later than 4 years 

5 after the date of the enactment of this section, the Sec6 retary shall submit to Congress a report on the projects 

7 for which loans are provided under this section and a rec8 ommendation as to whether the Congress should authorize 

9 the Secretary to continue loans under this section beyond 

10 fiscal year 2008.’’.

Æ