I

105TH CONGRESS

1ST SESSION H. R. 582

To amend title XVIII of the Social Security Act to correct beneficiary overcharges for hospital outpatient department services and to provide for

prospective payment for such services and to eliminate the formuladriven overpayments for certain hospital outpatient services.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 4, 1997

Mr. STARK (for himself and Mr. COYNE) introduced the following bill; which

was referred to the Committee on Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined

by the Speaker, in each case for consideration of such provisions as fall

within the jurisdiction of the committee concerned

A BILL

To amend title XVIII of the Social Security Act to correct

beneficiary overcharges for hospital outpatient department services and to provide for prospective payment

for such services and to eliminate the formula-driven

overpayments for certain hospital outpatient services.

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

3 SECTION 1. SHORT TITLE.

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

5 Outpatient Reform Act of 1997’’.
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1 SEC. 2. ELIMINATION OF FORMULA-DRIVEN OVERPAY2 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

3 SERVICES.

4 (a) AMBULATORY SURGICAL CENTER PROCE5 DURES.—Section 1833(i)(3)(B)(i)(II) of the Social Secu6 rity Act (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended—

7 (1) by striking ‘‘of 80 percent’’; and

8 (2) by striking the period at the end and insert9 ing the following: ‘‘, less the amount a provider may

10 charge as described in clause (ii) of section

11 1866(a)(2)(A).’’.

12 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE13 DURES.—Section 1833(n)(1)(B)(i)(II) of such Act (42

14 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended—

15 (1) by striking ‘‘of 80 percent’’; and

16 (2) by striking the period at the end and insert17 ing the following: ‘‘, less the amount a provider may

18 charge as described in clause (ii) of section

19 1866(a)(2)(A).’’.

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

21 this section shall apply to services furnished during por22 tions of cost reporting periods occurring on or after Janu23 ary 1, 1998.
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1 SEC. 3. PROSPECTIVE PAYMENT FOR HOSPITAL OUT2 PATIENT DEPARTMENT SERVICES.

3 (a) IN GENERAL.—Section 1833 of the Social Secu4 rity Act (42 U.S.C. 1395l) is amended by adding at the

5 end the following:

6 ‘‘(t) PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL

7 OUTPATIENT DEPARTMENT SERVICES.—

8 ‘‘(1) IN GENERAL.—Notwithstanding any other

9 provision of this title, with respect to hospital out10 patient services designated by the Secretary and fur11 nished during years beginning with January 1,

12 1998, the amount of payment made for the services

13 determined under this part shall be determined

14 under a prospective payment system established by

15 the Secretary in accordance with this subsection.

16 ‘‘(2) SYSTEM REQUIREMENTS.—Under the sys17 tem established by the Secretary under this sub18 section, the Secretary shall—

19 ‘‘(A) develop a classification system to re20 flect the hospital outpatient services furnished

21 under this part;

22 ‘‘(B) establish groups of procedures and

23 visits so that procedures and visits within each

24 group are comparable clinically and with re25 spect to the use of resources;
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1 ‘‘(C) using data from the most recent year

2 available, establish relative payment weights for

3 groups based on median hospital costs and shall

4 determine the frequency of utilization of each

5 group;

6 ‘‘(D) adjust the proportion, (as estimated

7 by the Secretary from time to time) of hos8 pitals’ costs which are attributable to wages

9 and wage-related costs, of the fee schedule

10 amounts applied under paragraph (3) for area

11 differences in hospital wage levels by the factor

12 (established by the Secretary under section

13 1886(d)(3)(E)) reflecting the relative hospital

14 wage level in the geographic classification area

15 of the hospital compared to the national aver16 age hospital wage level;

17 ‘‘(E) establish other adjustments as deter18 mined to be necessary to ensure equitable pay19 ments, and establish a reduced payment for the

20 performance of multiple procedures where the

21 marginal cost of providing a second procedure

22 during a single visit may be less than the indi23 vidual cost of both procedures combined; and
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1 ‘‘(F) identify and implement methodologies

2 to control for unnecessary increases in the vol3 ume of the services subject to payment under

4 this section, and report to Congress on such

5 methodologies before January 1, 1999.

6 ‘‘(3) MEDICARE PAYMENT AMOUNT.—Subject

7 to the deductible under section 1833(b), the amount

8 of payment made under this part for outpatient de9 partment services classified within a group and pro10 vided in any year shall be equal to 80 percent of the

11 Medicare OPD fee schedule amount for the group

12 and the year, as determined under paragraph (5).

13 ‘‘(4) COMPUTATION OF CONVERSION FAC14 TORS.—

15 ‘‘(A) ESTIMATES OF CERTAIN AMOUNTS.—

16 The Secretary shall estimate the total projected

17 Medicare payments that would have been made

18 under this part to hospitals for outpatient de19 partment services in 1998.

20 ‘‘(B) CALCULATION OF CONVERSION FAC21 TOR.—

22 ‘‘(i) FOR 1998.—On the basis of the

23 weights and frequencies of utilization de24 scribed in paragraph (2)(C), the Secretary
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1 shall establish a conversion factor for de2 termining Medicare OPD fee schedule

3 amounts for each group for 1998 in a

4 manner so that, taking into account the

5 products, for all the groups, of 80 percent

6 of the Medicare OPD fee schedule amounts

7 (taking into account appropriate adjust8 ments described in paragraphs (2)(D) and

9 (2)(E)), and the frequency of utilization

10 for such group, the total projected Medi11 care payments under this part to hospitals

12 under the system under this subsection for

13 outpatient department services in 1998

14 shall equal the total projected Medicare

15 payments estimated under subparagraph

16 (A).

17 ‘‘(ii) SUBSEQUENT YEARS.—Before

18 the beginning of each year after 1998, the

19 Secretary shall determine the conversion

20 factor for determining Medicare OPD fee

21 schedule amounts for each group for that

22 year. The conversion factor shall be equal

23 to the conversion factor determined under

24 this subparagraph for the previous year in25 creased by the market basket percentage
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1 increase (as defined in section

2 1886(b)(3)(B)(iii)) for the fiscal year in

3 which the year involved begins.

4 ‘‘(5) CALCULATION OF MEDICARE OPD FEE

5 SCHEDULE AMOUNTS.—The Secretary shall compute

6 a Medicare OPD fee schedule amount for each

7 group for each year in an amount equal to the prod8 uct of—

9 ‘‘(A) the conversion factor computed under

10 paragraph (4)(B) for the year, and

11 ‘‘(B) the relative payment weights (deter12 mined under paragraph (2)(C)) for such group

13 for such year.

14 ‘‘(6) PERIODIC REVIEW AND ADJUSTMENTS TO

15 GROUP PRICES.—

16 ‘‘(A) PERIODIC REVIEW.—The Secretary

17 may periodically review and revise the groups,

18 the relative payment weights, and the wage and

19 other adjustments described in paragraph (2)

20 and take into account changes in medical prac21 tice, volume, changes in technology, the addi22 tion of new procedures, new cost data, and

23 other relevant information and factors.

24 ‘‘(B) BUDGET NEUTRALITY FOR ADJUST25 MENT.—If the Secretary makes adjustments
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1 under subparagraph (A), then such adjustments

2 for a year may not cause the estimated amount

3 of expenditures under this part for the year to

4 increase or decrease from the estimated amount

5 of expenditures under this part that would have

6 been made if such adjustments had not been

7 made.’’.

8 (b) COINSURANCE.—Section 1866(a)(2)(A)(ii) of

9 such Act (42 U.S.C. 1395cc(a)(2)(A)(ii)) is amended by

10 adding at the end the following new sentence: ‘‘In the case

11 of items and services for which payment is made under

12 part B under the prospective payment system established

13 under section 1833(t), clause (ii) of the first sentence shall

14 be applied by substituting for 20 percent of the reasonable

15 charge, the 20 percent of the applicable Medicare OPD

16 fee schedule amount under section 1833(t)(5)).’’.

17 (c) CONFORMING AMENDMENTS.—

18 (1) Section 1833(i)(3) of such Act (42 U.S.C.

19 13951(i)(3)) is amended by adding at the end the

20 following:

21 ‘‘(C) The previous provisions of this paragraph shall

22 not apply to items and services for which the amount of

23 payment is determined under subsection (t).’’.
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1 (2) Section 1833(n) of such Act (42 U.S.C.

2 13951(n)) is amended by adding at the end the fol3 lowing:

4 ‘‘(4) The previous provisions of this subsection shall

5 not apply to items and services for which the amount of

6 payment is determined under subsection (t).’’.

7 (d) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to services provided on or after

9 January 1, 1998.

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