I 

108TH CONGRESS 

1ST SESSION H. R. 941

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

coverage of new medical technology under the Medicare Program, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 26, 2003

Mr. RAMSTAD (for himself, Ms. ESHOO, Mr. PITTS, Mr. CRANE, Mr. CAMP, 

and Ms. DUNN) introduced the following bill; which was referred to the 

Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, 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 provide 

for the expeditious coverage of new medical technology 

under 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; REFERENCES; TABLE OF CON4 TENTS. 

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

6 ‘‘Medicare Innovation Responsiveness Act of 2003’’. 
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1 (b) REFERENCES.—Except as otherwise specified, 

2 whenever in this Act an amendment or repeal is expressed 

3 in terms of an amendment to or repeal of a section or 

4 other provision, the references shall be considered to be 

5 made to that section or other provision of the Social Secu6 rity Act. 

7 (c) TABLE OF CONTENTS.—The table of contents for 

8 this Act is as follows:

Sec. 1. Short title; references; table of contents. 

TITLE I—PROVISIONS RELATING TO COVERAGE 

Sec. 101. Deadlines for implementing national coverage, coding, and payment 

determinations. 

Sec. 102. Council for Technology and Innovation. 

Sec. 103. Improvements to the medicare coverage determination appeals process. 

Sec. 104. Medicare coverage of routine costs associated with certain clinical 

trials. 

TITLE II—PROVISIONS RELATING TO CODING 

Sec. 201. Improvements to the HCPCS coding assignment, inpatient coding assignment, and DRG assignment processes. 

Sec. 202. Process for adoption of ICD–10–PCS as data standard. 

TITLE III—PROVISIONS RELATING TO PAYMENT 

Sec. 301. Use of internal and external data for annual adjustments to hospital 

payment systems. 

Sec. 302. Limitation on use of foreign payer data in determining medicare payment amounts. 

Sec. 303. Recognition of new medical technologies under inpatient hospital 

PPS. 

Sec. 304. Preservation of local medical review process under medicare administrative contractor reforms. 

Sec. 305. Inherent reasonableness.
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1 TITLE I—PROVISIONS RELATING 

2 TO COVERAGE 

3 SEC. 101. DEADLINES FOR IMPLEMENTING NATIONAL COV4 ERAGE, CODING, AND PAYMENT DETERMINA5 TIONS. 

6 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) 

7 is amended by inserting after subsection (c) the following 

8 new subsection: 

9 ‘‘(d)(1)(A)(i) Subject to the succeeding provisions of 

10 this paragraph, upon receipt of a request for a national 

11 coverage determination from an interested party, the Sec12 retary shall make and implement (if applicable) the na13 tional coverage determination for that new technology 

14 within the following time frames: 

15 ‘‘(I) In the case of a national coverage deter16 mination that does not require a technology assess17 ment described in subparagraph (D), not later than 

18 the end of the 6-month period that begins on the 

19 date a request for the national coverage determina20 tion has been received by the Secretary, notwith21 standing the receipt by the Secretary of new evi22 dence (if any) during such period. 

23 ‘‘(II) In the case of a national coverage deter24 mination that requires such a technology assess25 ment, not later than the end of the 12-month period 
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1 that begins on the date a request for the national 

2 coverage determination has been received by the Sec3 retary. 

4 ‘‘(ii) In this subparagraph—

5 ‘‘(I) the term ‘implement’ includes determining 

6 what code, if any, is assigned to the particular item 

7 or service; determining the amount of payment to be 

8 made under this title for the item or service; assign9 ing the item or service, and codes for the item or 

10 service, to appropriate payment groups; incor11 porating the coverage, coding, and payment deter12 minations into the information processing systems of 

13 the Secretary and fiscal intermediaries and carriers; 

14 and taking such other steps as are necessary to 

15 make payments for the item or service no later than 

16 the end of the applicable period described in clause 

17 (i); and 

18 ‘‘(II) the term ‘interested party’ means individ19 uals entitled to benefits under part A, or enrolled 

20 under part B, or both, who are in need of the items 

21 or services that are the subject of the coverage de22 termination, providers of services, physicians, practi23 tioners, suppliers, and manufacturers of such items 

24 or services.
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1 ‘‘(B) In making a national coverage determination 

2 under this subsection, the Secretary shall take one of the 

3 following actions: 

4 ‘‘(i) Issue a national coverage determination, 

5 with or without limitations. 

6 ‘‘(ii) Issue a national noncoverage determina7 tion. 

8 ‘‘(iii) Issue a determination that no national 

9 coverage or noncoverage determination is appro10 priate as of the end of such period with respect to 

11 national coverage of such items or services. 

12 ‘‘(C) If the Secretary fails to take an action under 

13 subparagraph (B) within the applicable period under sub14 paragraph (A)(i), the Secretary shall issue a notice that 

15 includes the following information: 

16 ‘‘(i) A statement that the Secretary cannot 

17 make and (if applicable) implement (as defined in 

18 subparagraph (A)(ii)(I)) a national coverage deter19 mination within the applicable time period. 

20 ‘‘(ii) The identification of substantive issues 

21 outstanding. 

22 ‘‘(iii) A statement of what is required, including 

23 the process involved, to resolve those issues. 

24 ‘‘(iv) The date by which the Secretary will make 

25 a national coverage determination under subpara-
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1 graph (B) and (if applicable) implement the national 

2 coverage determination. 

3 ‘‘(D)(i) A technology assessment referred to in sub4 paragraph (A) is a formal, written technology assessment, 

5 conducted by an entity or organization other than the Cen6 ters for Medicare & Medicaid Services (in this subpara7 graph referred to as the ‘CMS’), or review by an advisory 

8 committee appointed to advise the Administrator of the 

9 CMS on matters relating to the interpretation, applica10 tion, or implementation of subsection (a), that the Admin11 istrator reasonably finds, in a written notice issued before 

12 the end of the 6-month period specified in subparagraph 

13 (A)(i), that such an assessment or review is necessary for 

14 the Administrator to make the national coverage deter15 mination. 

16 ‘‘(ii) Such technology assessment or review shall only 

17 be considered necessary if the CMS lacks adequate exper18 tise to evaluate the matter itself. 

19 ‘‘(E) In making a national coverage determination 

20 under subparagraph (B), the Secretary shall include all 

21 the information described in subparagraphs (C) and (D) 

22 of paragraph (2), and in the case of the implementation 

23 of the national coverage determination, applicable codes 

24 and payment amounts for the new item or service. 
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1 ‘‘(2) In making a national coverage determination (as 

2 defined in section 1869(f)(1)(B)) the Secretary shall en3 sure that—

4 ‘‘(A) the public is afforded notice and oppor5 tunity to comment prior to implementation by the 

6 Secretary of the determination; 

7 ‘‘(B) meetings of advisory committees estab8 lished under section 1114(f) with respect to the de9 termination are made on the record; 

10 ‘‘(C) in making the determination, the Sec11 retary has considered applicable information (includ12 ing clinical experience and medical, technical, and 

13 scientific evidence) with respect to the subject mat14 ter of the determination; 

15 ‘‘(D) in issuing the determination, provide a 

16 clear statement of the basis for the determination 

17 (including responses to comments received from the 

18 public) and the assumptions underlying that basis; 

19 and 

20 ‘‘(E) make available to the public the data 

21 (other than proprietary data) considered in making 

22 the determination.’’. 

23 (b) CONFORMING AMENDMENT.—Subsection (a) of 

24 such section is amended by striking the third sentence. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall take effect on the date of the enactment 

3 of this Act, and apply to requests for national coverage 

4 determinations made on or after the date that is 90 days 

5 after such effective date. 

6 SEC. 102. COUNCIL FOR TECHNOLOGY AND INNOVATION. 

7 Section 1868 (42 U.S.C. 1395ee) is amended—

8 (1) by adding at the end of the heading the fol9 lowing: ‘‘; COUNCIL FOR TECHNOLOGY AND 

10 INNOVATION’’; 

11 (2) by inserting ‘‘PRACTICING PHYSICIANS AD12 VISORY COUNCIL.—(1)’’ after ‘‘(a)’’; 

13 (3) in paragraph (1), as so redesignated under 

14 paragraph (2), by striking ‘‘in this section’’ and in15 serting ‘‘in this subsection’’; 

16 (4) by redesignating subsections (b) and (c) as 

17 paragraphs (2) and (3), respectively; and 

18 (5) by adding at the end the following new sub19 section: 

20 ‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVA21 TION.—

22 ‘‘(1) ESTABLISHMENT.—The Secretary shall es23 tablish a Council for Technology and Innovation 

24 within the Centers for Medicare & Medicaid Services 

25 (in this section referred to as ‘CMS’). 
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1 ‘‘(2) COMPOSITION.—The Council shall be com2 posed of senior CMS staff and clinicians and shall 

3 be chaired by the Executive Coordinator for Tech4 nology and Innovation (appointed or designated 

5 under paragraph (4)). 

6 ‘‘(3) DUTIES.—The Council shall coordinate the 

7 activities of coverage, coding, and payment processes 

8 with respect to new technologies and procedures, in9 cluding new drug therapies, under this title in order 

10 to expedite patient access to new technologies and 

11 therapies. 

12 ‘‘(4) EXECUTIVE COORDINATOR FOR TECH13 NOLOGY AND INNOVATION.—The Secretary shall ap14 point (or designate) a noncareer appointee (as de15 fined in section 3132(a)(7) of title 5, United States 

16 Code) who shall serve as the Executive Coordinator 

17 for Technology and Innovation. Such executive coor18 dinator shall report to the Administrator of CMS, 

19 shall chair the Council, shall oversee the execution of 

20 its duties, shall serve as a single point of contact for 

21 outside groups and entities regarding the coverage, 

22 coding, and payment processes under this title, and 

23 shall prepare reports to Congress required under 

24 section 1869(f)(7).’’. 
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1 SEC. 103. IMPROVEMENTS TO THE MEDICARE COVERAGE 

2 DETERMINATION APPEALS PROCESS. 

3 (a) IN GENERAL.—Section 1869(f) (42 U.S.C. 

4 1395ff(f)) is amended—

5 (1) in paragraph (1)(A)(iii)—

6 (A) in subclause (I)—

7 (i) by inserting ‘‘(in all forms, includ8 ing written and oral depositions, interrog9 atories, and requests for admission)’’ after 

10 ‘‘discovery’’; and 

11 (ii) by inserting ‘‘and shall determine 

12 when any new evidence not previously con13 sidered by the Centers for Medicare and 

14 Medicaid Services (hereafter in this sub15 section referred to as ‘CMS’) is material 

16 and should first be considered by CMS’’ 

17 after ‘‘determination’’ the second place it 

18 appears; and 

19 (B) by redesignating subclauses (II) and 

20 (III) as subclauses (III) and (IV), respectively, 

21 and inserting after subclause (I) the following: 

22 ‘‘(II) shall determine when a 

23 complaint has become moot;’’; 

24 (2) in paragraph (1)(A)(v), by adding at the 

25 end the following: ‘‘Such a decision shall be imple26 mented not later than 30 days after receipt of the 
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1 decision, and any request for a stay of such imple2 mentation pending further appeal or reconsideration 

3 shall be supported by evidence demonstrating a ma4 terial risk of irreparable harm.’’; 

5 (3) in paragraph (2)(A)(i)—

6 (A) in subclause (I)—

7 (i) by inserting ‘‘(in all forms, includ8 ing but not limited to, written and oral 

9 depositions, interrogatories, and requests 

10 for admission)’’ after ‘‘discovery’’; and 

11 (ii) by inserting ‘‘and shall determine 

12 when any new evidence not previously con13 sidered by CMS material and should first 

14 be considered by CMS’’ after ‘‘determina15 tion’’ the second place it appears; and 

16 (B) by redesignating subclauses (II) and 

17 (III) as subclauses (III) and (IV), respectively, 

18 and inserting after subclause (I) the following: 

19 ‘‘(II) shall determine when a 

20 complaint has become moot;’’; 

21 (4) by adding at the end of paragraph (2)(A) 

22 the following: 

23 ‘‘(v) Any request for a stay of a deci24 sion pending further appeal or reconsider25 ation shall be supported by evidence dem-
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1 onstrating a material risk of irreparable 

2 harm.’’; 

3 (5) in paragraph (5)—

4 (A) by inserting ‘‘(or the heirs or assignees 

5 of such individuals)’’ after ‘‘individuals’’; and 

6 (B) by adding at the end the following: 

7 ‘‘For purposes of the preceding sentence, indi8 viduals ‘in need of an item or service’ include 

9 individuals for whom a claim for the item or 

10 service is denied prior to appeal, without regard 

11 to whether or not such individual obtains such 

12 item or service after such denial).’’; and 

13 (6) by adding at the end the following: 

14 ‘‘(9) PROMULGATION OF REGULATIONS.—The 

15 Departmental Appeals Board (and any successor en16 tity) shall have the exclusive authority to promulgate 

17 regulations interpreting this subsection. Such regula18 tions shall not be subject to review by the Secretary 

19 or the Office of Management and Budget, but are 

20 instead deemed to be subject to the review process 

21 established by sections 801 through 808 of title 5, 

22 United States Code. No regulations shall be issued 

23 to interpret this subsection unless such regulations 

24 are issued by the Departmental Appeals Board.’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall apply to any local or national coverage 

3 determination made on or after January 1, 2004. 

4 SEC. 104. MEDICARE COVERAGE OF ROUTINE COSTS ASSO5 CIATED WITH CERTAIN CLINICAL TRIALS. 

6 (a) IN GENERAL.—With respect to the coverage of 

7 routine costs of care for beneficiaries participating in a 

8 qualifying clinical trial, as set forth on the date of the en9 actment of this Act in National Coverage Determination 

10 30-1 of the Medicare Coverage Issues Manual, the Sec11 retary shall deem clinical trials conducted in accordance 

12 with an investigational device exemption approved under 

13 section 520(g) of the Federal Food, Drug, and Cosmetic 

14 Act (42 U.S.C. 360j(g)) to be automatically qualified for 

15 such coverage. 

16 (b) RULE OF CONSTRUCTION.—Nothing in this sec17 tion shall be construed as authorizing or requiring the Sec18 retary to modify the regulations set forth on the date of 

19 the enactment of this Act at subpart B of part 405 of 

20 title 42, Code of Federal Regulations, or subpart A of part 

21 411 of such title, relating to coverage of, and payment 

22 for, a medical device that is the subject of an investiga23 tional device exemption by the Food and Drug Adminis24 tration (except as may be necessary to implement sub25 section (a)). 
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1 (c) EFFECTIVE DATE.—This section shall apply to 

2 clinical trials begun before, on, or after the date of the 

3 enactment of this Act and to items and services furnished 

4 on or after such date. 

5 TITLE II—PROVISIONS 

6 RELATING TO CODING 

7 SEC. 201. IMPROVEMENTS TO THE HCPCS CODING ASSIGN8 MENT, INPATIENT CODING ASSIGNMENT, AND 

9 DRG ASSIGNMENT PROCESSES. 

10 (a) INPATIENT PPS.—Section 1886(d)(5)(K) (42 

11 U.S.C. 1395ww(d)(5)(K)) is amended by adding at the 

12 end the following new clause: 

13 ‘‘(vii)(I) The Secretary shall by regu14 lation establish a process that provides for 

15 the assignment of inpatient hospital codes 

16 (as defined in clause (iii)) for new medical 

17 services and related technologies as of 

18 April 1 of each year (beginning with 

19 2003). 

20 ‘‘(II) Such process shall provide for 

21 the opportunity to apply for the assign22 ment of an inpatient hospital code to items 

23 that are the subject of an application sub24 mitted for investigation under section
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1 520(g) of the Federal Food, Drug and 

2 Cosmetic Act (21 U.S.C. 360j(g)). 

3 ‘‘(III) The assignment of codes as of 

4 the date specified in subclause (I) shall not 

5 require the Secretary to adjust the pay6 ment (or diagnosis-related group classifica7 tion) under this subsection until the first 

8 fiscal year that begins after such date.’’. 

9 (b) HCPCS LEVEL II CODES.—

10 (1) PROCESS FOR ASSIGNMENT OF CODES FOR

11 NEW TECHNOLOGIES.—The Secretary of Health and 

12 Human Services (in this section referred to as the 

13 ‘‘Secretary’’) shall by regulation establish a process 

14 that provides for the assignment of HCPCS Level II 

15 codes each calendar quarter for new medical services 

16 and technologies. Such process shall ensure that 

17 codes are assigned and implemented no later than 

18 180 days after a formal application for such a code 

19 is received. 

20 (2) ELIMINATION OF MINIMUM PERIOD OF MAR21 KETING EXPERIENCE REQUIREMENT.—The Sec22 retary may not condition consideration or approval 

23 of an application for a HCPCS Level II code on hav24 ing a minimum period of marketing experience with 
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1 the item or product that is the subject of the appli2 cation. 

3 (3) DEFINITION.—In this subsection, the term 

4 ‘‘HCPCS Level II codes’’ means the level II alpha5 numeric codes under the Healthcare Common Proce6 dure Coding System (HCPCS). 

7 (c) PROCEDURES FOR ISSUANCE OF TEMPORARY NA8 TIONAL HCPCS CODES.—Not later than December 31, 

9 2003, the Secretary shall implement revised procedures 

10 for the issuance of temporary national HCPCS codes for 

11 use in the submission of claims for items and services 

12 under Part B of title XVIII of the Social Security Act. 

13 Such procedures shall provide for—

14 (1) the issuance of a determination with respect 

15 to a temporary national HCPCS coding request 

16 within 90 days of receipt of a request from any in17 terested party; 

18 (2) the implementation of any codes subject to 

19 a positive determination under paragraph (1) not 

20 later than 180 days after receipt of the submission 

21 of the original coding request; 

22 (3) upon the receipt of a request from a fiscal 

23 intermediary with an agreement under section 1816 

24 of the Social Security Act (42 U.S.C. 1395h) or a 

25 carrier with a contract under section 1842 of such 
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1 Act (42 U.S.C. 1395u), the automatic issuance of 

2 temporary national HCPCS codes for any item or 

3 service that is the subject of a local medical review 

4 policy issued by such intermediary or carrier with re5 spect to whether such item or service is covered 

6 under title XVIII of such Act in a geographic area 

7 served by such intermediary or carrier; and 

8 (4) the public posting of, and opportunity for 

9 public comment on, pending coding requests. 

10 SEC. 202. PROCESS FOR ADOPTION OF ICD–10–PCS AS DATA 

11 STANDARD. 

12 Section 1172(f) (42 U.S.C. 1320d–1(f)) is amended 

13 by inserting after the first sentence the following: ‘‘Not14 withstanding the preceding sentence, if the National Com15 mittee on Vital and Health Statistics has not made a rec16 ommendation to the Secretary before April 1, 2003, with 

17 respect to the adoption of the International Classification 

18 of Diseases, 10th Revision, Procedure Coding System 

19 (‘ICD–10–PCS’) as a standard under this part for the re20 porting of inpatient hospital services, the Secretary may 

21 adopt ICD–10–PCS as such a standard on or after such 

22 date without receiving such a recommendation.’’.
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1 TITLE III—PROVISIONS 

2 RELATING TO PAYMENT 

3 SEC. 301. USE OF INTERNAL AND EXTERNAL DATA FOR AN4 NUAL ADJUSTMENTS TO HOSPITAL PAYMENT 

5 SYSTEMS. 

6 (a) INPATIENT HOSPITAL PPS.—Section 1886(d)(4) 

7 (42 U.S.C. 1395ww(d)(4)) is amended by adding at the 

8 end the following new subparagraphs: 

9 ‘‘(D)(i) In determining annual adjustments under 

10 subparagraph (C), the Secretary may not—

11 ‘‘(I) decline to use internal data if the data re12 flect a representative sample of cases; or 

13 ‘‘(II) establish a minimum period of time (such 

14 as one year) from which such data must be drawn. 

15 ‘‘(ii) The Secretary shall establish a reasonable dead16 line for the submission of a request for adjustment based 

17 on internal data to be used in making the adjustments 

18 required by subparagraph (C). In no event may the dead19 line established under this clause be more than 8 months 

20 before the first day of the payment update period for 

21 which the adjustment or adjustments to which the data 

22 relate would be effective. 

23 ‘‘(E)(i) Subject to the succeeding provisions of this 

24 subparagraph, in determining the adjustments under sub-
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1 paragraph (C), the Secretary shall utilize external data if 

2 such data are based on a representative sample of cases. 

3 ‘‘(ii) In determining the adjustments under subpara4 graph (C), the Secretary may not—

5 ‘‘(I) decline to use external data submitted for 

6 consideration under the process established under 

7 clause (iv) if such data enable the Secretary to iden8 tify or refine internal data for use in making such 

9 an adjustment and such data are based on a rep10 resentative sample of cases; or 

11 ‘‘(II) establish a minimum period of time (such 

12 as one year) from which such data must be drawn. 

13 ‘‘(iii) Nothing in this clause shall be construed as re14 quiring the Secretary to identify all claims submitted 

15 under the payment system established under this sub16 section involving the use of a medical technology before 

17 the Secretary may make the adjustments under subpara18 graph (C) with respect to such technology; or as author19 izing the Secretary to defer action on such an adjustment 

20 until all such claims are identifiable. 

21 ‘‘(iv) The Secretary shall establish a process for the 

22 submission of external data by interested parties. Such 

23 process shall include reasonable deadline for the submis24 sion of external data to be used in making the adjustments 

25 required by subparagraph (C). In no event may the dead-
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1 line established under this subclause be more than 10 

2 months before the first day of the payment update period 

3 for which the adjustment or adjustments to which the data 

4 relate would be effective. 

5 ‘‘(F) For purposes of subparagraphs (D) and (E)—

6 ‘‘(i) the term ‘external data’ means data from 

7 sources other than data collected by the Secretary in 

8 the administration of the program established under 

9 this title; 

10 ‘‘(ii) the term ‘interested party’ means individ11 uals entitled to benefits under part A, or enrolled 

12 under part B, or both, who are in need of the items 

13 or services that are the subject of the coverage de14 termination, providers of services, physicians, practi15 tioners, suppliers, and manufacturers of such items 

16 or services; and 

17 ‘‘(iii) the term ‘internal data’ means data that 

18 is collected by the Secretary in the administration of 

19 the program established under this title.’’. 

20 (b) OUTPATIENT HOSPITAL PPS.—Section 

21 1833(t)(9) (42 U.S.C. 1395l(t)(9)) is amended by adding 

22 at the end the following new subparagraphs: 

23 ‘‘(D) USE OF INTERNAL DATA COLLECTED

24 BY THE SECRETARY.—
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1 ‘‘(i) IN GENERAL.—In determining 

2 annual adjustments under subparagraph 

3 (A), the Secretary may not use internal 

4 data that does not—

5 ‘‘(I) reflect a representative sam6 ple of cases that include the specific 

7 procedure that is subject to such ad8 justment; and 

9 ‘‘(II) accurately reflect the costs 

10 of providing the item or service, based 

11 on all forms of information that is 

12 available to the Secretary. 

13 ‘‘(ii) DEADLINE FOR SUPPLYING IN14 TERNAL DATA.—The Secretary shall estab15 lish a reasonable deadline for the submis16 sion of a request for adjustment based on 

17 internal data to be used in making the ad18 justments required by subparagraph (A). 

19 In no event may the deadline established 

20 under this paragraph be more than 8 

21 months before the first day of the payment 

22 update period for which the adjustment or 

23 adjustments to which the data relate would 

24 be effective. 

25 ‘‘(E) EXTERNAL DATA.—
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1 ‘‘(i) IN GENERAL.—Subject to the 

2 succeeding provisions of this subparagraph, 

3 in determining the adjustments under sub4 paragraph (A), the Secretary shall utilize 

5 external data submitted for consideration 

6 under the process established under clause 

7 (iv) if such data are based on a representa8 tive sample of cases. 

9 ‘‘(ii) EXTERNAL DATA FACILITATING

10 THE USE OF INTERNAL DATA.—In deter11 mining the adjustments under subpara12 graph (A), the Secretary may not—

13 ‘‘(I) decline to use external data 

14 if such data enable the Secretary to 

15 identify or refine data so collected for 

16 use in making such an adjustment 

17 and such data are based on a rep18 resentative sample of cases; or 

19 ‘‘(II) establish a minimum period 

20 of time (such as one year) from which 

21 such data must be drawn. 

22 ‘‘(iii) CLARIFICATION.—Nothing in 

23 this subparagraph shall be construed as re24 quiring the Secretary to identify all claims 

25 submitted under the payment system es-
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1 tablished under this subsection involving 

2 the use of a medical technology before the 

3 Secretary may make the adjustments 

4 under this subparagraph with respect to 

5 such technology; or as authorizing the Sec6 retary to defer action on such an adjust7 ment until all such claims are identifiable. 

8 ‘‘(iv) DEADLINE FOR SUPPLYING EX9 TERNAL DATA.—The Secretary shall estab10 lish a process for the submission of exter11 nal data by interested parties. Such proc12 ess shall include a reasonable deadline for 

13 the submission of external data to be used 

14 in making the adjustments required by 

15 subparagraph (A). In no event may the 

16 deadline established under this subclause 

17 be more than 10 months before the first 

18 day of the payment update period for 

19 which the adjustment or adjustments to 

20 which the data relate would be effective. 

21 ‘‘(F) DEFINITIONS.—For purposes of sub22 paragraphs (D) and (E)—

23 ‘‘(i) the term ‘external data’ means 

24 data from sources other than data col25 lected by the Secretary in the administra-
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1 tion of the program established under this 

2 title; 

3 ‘‘(ii) the term ‘interested party’ means 

4 individuals entitled to benefits under part 

5 A, or enrolled under part B, or both, who 

6 are in need of the items or services that 

7 are the subject of the coverage determina8 tion, providers of services, physicians, 

9 practitioners, suppliers, and manufacturers 

10 of such items or services; and 

11 ‘‘(iii) the term ‘internal data’ means 

12 data that is collected by the Secretary in 

13 the administration of the program estab14 lished under this title.’’. 

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

16 this section shall apply with respect to items and services 

17 furnished on or after October 1, 2003. 

18 SEC. 302. LIMITATION ON USE OF FOREIGN PAYER DATA IN 

19 DETERMINING MEDICARE PAYMENT 

20 AMOUNTS. 

21 (a) IN GENERAL.—Notwithstanding any other provi22 sion of law, the Secretary of Health and Human Services 

23 may not, in determining the amount to be paid for any 

24 item or service for which payment is made under title 

25 XVIII of the Social Security Act (42 U.S.C. 1395b et seq.) 
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1 that is furnished in the United States, take into account 

2 or utilize (or authorize an administrative contractor to 

3 take into account or utilize) any data or information on 

4 the amount that is paid by any payer for the same (or 

5 a similar) item or service provided outside the United 

6 States. 

7 (b) DEFINITIONS.—For purposes of this section—

8 (1) the term ‘‘administrative contractor’’ means 

9 an entity with an contract under section 1816 of the 

10 Social Security Act (42 U.S.C. 1395h), section 1842 

11 of such Act (42 U.S.C. 1395u), or any other provi12 sion of such title to determine the amount to be paid 

13 for any item or service provided under such title or 

14 to make payments for such services; and 

15 (2) the term ‘‘United States’’ has the meaning 

16 given to such term in section 1862(a)(4) of the So17 cial Security Act (42 U.S.C. 1395y(a)(4)). 

18 SEC. 303. RECOGNITION OF NEW MEDICAL TECHNOLOGIES 

19 UNDER INPATIENT HOSPITAL PPS. 

20 (a) ELIGIBILITY STANDARD.—

21 (1) MINIMUM PERIOD FOR RECOGNITION OF

22 NEW TECHNOLOGIES.—Section 1886(d)(5)(K)(vi) 

23 (42 U.S.C. 1395ww(d)(5)(K)(vi)) is amended—

24 (A) by inserting ‘‘(I)’’ after ‘‘(vi)’’; and 
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1 (B) by adding at the end the following new 

2 subclause: 

3 ‘‘(II) Under such criteria, a service or technology may 

4 not be denied treatment as a new service or technology 

5 on the basis that the service or technology has been on 

6 the market or available for a period of not less than 2 

7 years and not more than 3 years unless during the entire 

8 period—

9 ‘‘(aa) the service or technology is available for 

10 use as a service or technology cleared for marketing 

11 under section 510(k) of the Federal Food, Drug, 

12 and Cosmetic Act or approved for market under sec13 tion 515 of such Act; and 

14 ‘‘(bb) a code facilitating data collection is in ef15 fect with respect to the service or technology. 

16 For purposes of the preceding sentence, a ‘code facilitating 

17 data collection’ means, with respect to a service or tech18 nology, a code under the ICD–9–CM coding system (or 

19 a successor coding system) that enables the collection of 

20 data on the costs of the service or technology in a signifi21 cant sample of specific discharges in which the service or 

22 technology is used.’’. 

23 (2) ADJUSTMENT OF THRESHOLD.—Section 

24 1886(d)(5)(K)(ii)(I) (42 U.S.C. 

25 1395ww(d)(5)(K)(ii)(I)) is amended by inserting
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1 ‘‘(applying a threshold computed by the Secretary 

2 that is the lesser of 50 percent of the national aver3 age standardized amount for operating costs of inpa4 tient hospital services for all hospitals and all diag5 nosis-related groups or one standard deviation for 

6 the diagnosis-related group involved)’’ after ‘‘is inad7 equate’’. 

8 (3) CRITERIA FOR SUBSTANTIAL IMPROVE9 MENT.—Section 1886(d)(5)(K)(vi) (42 U.S.C. 

10 1395ww(d)(5)(K)(vi)), as amended by paragraph 

11 (1), is further amended by adding at the end the fol12 lowing subclause: 

13 ‘‘(III) The Secretary shall by regulation provide for 

14 further clarification of the criteria applied to determine 

15 whether a new service or technology represents an advance 

16 in medical technology that substantially improves the diag17 nosis or treatment of beneficiaries. Under such criteria, 

18 in determining whether a new service or technology rep19 resents an advance in medical technology that substan20 tially improves the diagnosis or treatment of beneficiaries, 

21 the Secretary shall deem a service or technology as meet22 ing such requirement if the service or technology is a drug 

23 or biological that is designated under section 506 or 526 

24 of the Federal Food, Drug, and Cosmetic Act, approved 

25 under section 314.510 or 601.41 of title 21, Code of Fed-
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1 eral Regulations, or designated for priority review when 

2 the marketing application for such drug or biological was 

3 filed or is a medical device for which an exemption has 

4 been granted under section 520(m) of such Act, or for 

5 which priority review has been provided under section 

6 515(d)(5) of such Act. Nothing in the preceding sentence 

7 shall be construed as limiting the application of section 

8 1862(a)(1) to a new service or technology described in 

9 such sentence or as limiting the authority of the Secretary 

10 to make determinations under such section with respect 

11 to such a service or technology.’’. 

12 (b) PREFERENCE FOR USE OF DRG ADJUST13 MENT.—Section 1886(d)(5)(K) (42 U.S.C. 

14 1395ww(d)(5)(K)), as amended by section 201, is further 

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

16 ‘‘(viii) Before establishing any additional payment 

17 under this subparagraph with respect to a new technology, 

18 the Secretary shall seek to identify one or more diagnosis19 related 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. In 

25 such case, whether the DRG prospective payment rate 
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1 that would otherwise be made under this subsection is in2 adequate for purposes of clause (ii)(I) shall be determined 

3 with respect to the diagnosis-related group to which it is 

4 assigned under this clause, and any additional expendi5 tures resulting from such assignment shall be taken into 

6 account in making the determination required by para7 graph (4)(C)(iii) (and not in the application of any annual 

8 limit on aggregate payments under this subparagraph).’’. 

9 (c) IMPROVEMENT IN PAYMENT FOR NEW TECH10 NOLOGY.—Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 

11 1395ww(d)(5)(K)(ii)(III)) is amended by inserting after 

12 ‘‘the estimated average cost of such service or technology’’ 

13 the following: ‘‘(based on the marginal rate applied to 

14 costs under subparagraph (A))’’. 

15 (d) REQUIRED MODIFICATIONS TO MECHANISM.—

16 The last sentence of section 1886(d)(5)(K)(i) (42 U.S.C. 

17 1395ww(d)(5)(K)(i)) is amended to read as follows: ‘‘The 

18 mechanism established pursuant to this clause (as it be19 came effective on October 9, 2001) shall be modified to 

20 meet the requirements of subclauses (II) and (III) of 

21 clause (vi), clauses (vii) and (viii), and the parenthetical 

22 expressions in subclauses (I) and (III) of clause (iii) that 

23 were added after such date.’’. 

24 (e) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The Secretary shall imple2 ment the amendments made by this section by regu3 lations issued on an interim, final basis if the Sec4 retary determines that the issuance of regulations on 

5 such basis is necessary to ensure that such amend6 ments will apply to classifications for (and payments 

7 for discharges occurring in) fiscal years beginning 

8 with fiscal year 2004. 

9 (2) RECONSIDERATIONS OF APPLICATIONS FOR

10 FISCAL YEARS 2003 AND 2004 THAT ARE DENIED.—

11 In the case of an application for a classification of 

12 a medical service or technology as a new medical 

13 service or technology under section 1886(d)(5)(K) of 

14 the Social Security Act (42 U.S.C. 

15 1395ww(d)(5)(K)) that was filed for fiscal year 

16 2003 or fiscal year 2004 and that is denied—

17 (A) the Secretary shall automatically re18 consider the application as an application for 

19 fiscal year 2005 under the amendments made 

20 by this section; and 

21 (B) the maximum time period otherwise 

22 permitted for such classification of the service 

23 or technology shall be extended by 12 months. 
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1 SEC. 304. PRESERVATION OF LOCAL MEDICAL REVIEW 

2 PROCESS UNDER MEDICARE ADMINISTRA3 TIVE CONTRACTOR REFORMS. 

4 (a) PART A.—Section 1816(c) (42 U.S.C. 1395h(c)) 

5 is amended by adding at the end the following: 

6 ‘‘(4) An agreement with any agency or organization 

7 under this section to perform the function of making local 

8 coverage determinations (as defined in section 

9 1869(f)(2)(B)), making determinations of payment 

10 amounts, or making both such types of determinations, 

11 shall provide that such contractor or entity shall—

12 ‘‘(A) designate at least one different individual 

13 to serve as medical director for every two States (or 

14 portions thereof) for which such agency or organiza15 tion performs such function or functions; 

16 ‘‘(B) utilize such medical director in the per17 formance of such function or functions; and 

18 ‘‘(C) appoint an advisory committee with re19 spect to each such State (or portion thereof) to pro20 vide a formal mechanism for physicians in the State 

21 to be informed of, and participate in, the develop22 ment of local coverage determinations in an advisory 

23 capacity.’’. 

24 (b) PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) 

25 is amended by adding at the end the following:
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1 ‘‘(7) Any contract with a carrier under this section 

2 to perform the function of making local coverage deter3 minations (as defined in section 1869(f)(2)(B)), making 

4 determinations of payment amounts, or making both such 

5 types of determinations, shall provide that such carrier 

6 shall—

7 ‘‘(A) designate at least one different individual 

8 to serve as medical director for every two States (or 

9 portions thereof) for which such carrier performs 

10 such function or functions; 

11 ‘‘(B) utilize such medical director in the per12 formance of such function or functions; and 

13 ‘‘(C) appoint an advisory committee with re14 spect to each such State (or portion thereof) to pro15 vide a formal mechanism for physicians in the State 

16 to be informed of, and participate in, the develop17 ment of local coverage determinations in an advisory 

18 capacity.’’. 

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

20 this section shall apply to agreements and contracts en21 tered into or renewed on or after the date of the enactment 

22 of this Act. 
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1 SEC. 305. INHERENT REASONABLENESS. 

2 (a) IN GENERAL.—Section 1842(b)(8)(A) (42 U.S.C. 

3 1395u(b)(8)(A)) is amended by adding at the end the fol4 lowing: 

5 ‘‘(iii) The Secretary shall ensure adequate notice to 

6 the public with respect to any determination under this 

7 paragraph, including—

8 ‘‘(I) before conducting any survey to evaluate 

9 the factors in subclause (I) or (II) of clause (i), pub10 lication of a notice explaining, and soliciting public 

11 comment on, the proposed methodology and design 

12 of such survey, 

13 ‘‘(II) publication of any proposed determina14 tion, together with an explanation of the results of 

15 any survey and any other relevant factors taken into 

16 account in making the determination, information on 

17 how the public may obtain survey data, and an op18 portunity for public comment on the proposed deter19 mination, and 

20 ‘‘(III) publication of a notice of a final deter21 mination under this paragraph. 

22 ‘‘(iv) The requirements of clause (iii) shall apply to 

23 any determination that is made by—

24 ‘‘(I) two or more carriers, acting concurrently, 

25 or in concert, with respect to the same particular 

26 item or service, or 
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1 ‘‘(II) any regional carrier designated by the 

2 Secretary under section 1834(a)(12) of this part or 

3 under section 4554(a)(1)(B) of the Balanced Budget 

4 Act of 1997.’’. 

5 (b) APPEALS.—Section 1869(f) (42 U.S.C. 1395ff(f)) 

6 is amended—

7 (1) in the matter preceding paragraph (1), by 

8 inserting ‘‘AND INHERENT REASONABLENESS DE9 TERMINATIONS’’ after ‘‘REVIEW OF COVERAGE DE10 TERMINATIONS’’; 

11 (2) in paragraph (1)—

12 (A) in the heading, by inserting ‘‘; NA13 TIONAL INHERENT REASONABLENESS DETER14 MINATIONS’’ after ‘‘NATIONAL COVERAGE DE15 TERMINATIONS’’; 

16 (B) in the matter preceding clause (i) of 

17 subparagraph (A) by inserting ‘‘or national in18 herent reasonableness determination’’ after 

19 ‘‘any national coverage determination’’; and 

20 (C) by adding at the end the following: 

21 ‘‘(C) DEFINITION OF NATIONAL INHERENT

22 REASONABLENESS DETERMINATION.—For pur23 poses of this section, the term ‘national inher24 ent reasonableness determination’ means a de-
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1 termination by the Secretary in accordance with 

2 section 1842(b)(8).’’; 

3 (3) in paragraph (2)—

4 (A) in the heading, by inserting ‘‘; LOCAL

5 INHERENT REASONABLENESS DETERMINA6 TIONS’’ after ‘‘LOCAL COVERAGE DETERMINA7 TIONS’’; 

8 (B) in the matter preceding clause (i) of 

9 subparagraph (A), by inserting ‘‘or local inher10 ent reasonableness determination’’ after ‘‘any 

11 local coverage determination’’; and 

12 (C) by adding at the end the following: 

13 ‘‘(C) DEFINITION OF LOCAL INHERENT

14 REASONABLENESS DETERMINATION.—For pur15 poses of this section, the term ‘local inherent 

16 reasonableness determination’ means a deter17 mination by a carrier in accordance with section 

18 1842(b)(8).’’; and 

19 (4) in paragraph (5)—

20 (A) by striking ‘‘coverage determination’’ 

21 the first place it appears; 

22 (B) by inserting ‘‘and any national or local 

23 inherent reasonableness determination’’ after 

24 ‘‘local coverage determination’’; and 
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1 (C) striking ‘‘of the coverage determina2 tion’’ and inserting ‘‘of the determination’’.

Æ