I
107TH CONGRESS
2D SESSION
H. R. 5246
To amend title XVIII of the Social Security Act to reform payments to
rural and other health care providers under the Medicare Program,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 26, 2002
Mr. LATHAM introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Energy
and Commerce, for a period to be subsequently determined by the Speak-
er, in each case for consideration of such provisions as fall within the ju-
risdiction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to reform
payments to rural and other health care providers under
the Medicare Program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU-
RITY ACT; REFERENCES TO BIPA AND SEC-
RETARY; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Rural Equity Medicare Act of 2002’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
Act an amendment is expressed in terms of an amendment
to or repeal of a section or other provision, the reference
shall be considered to be made to that section or other
provision of the Social Security Act.
(c) BIPA; SECRETARY.—In this Act:
(1) BIPA.—The term ‘‘BIPA’’ means the
Medicare, Medicaid, and SCHIP Benefits Improve-
ment and Protection Act of 2000, as enacted into
law by section 1(a)(6) of Public Law 106–554.
(2) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(d) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; references to BIPA and
Secretary; table of contents.
TITLE I—RURAL HEALTH CARE IMPROVEMENTS
Sec. 101. Reference to full market basket increase for sole community hos-
pitals.
Sec. 102. Enhanced disproportionate share hospital (DSH) treatment for rural
hospitals and urban hospitals with fewer than 100 beds.
Sec. 103. 2-year phased-in increase in the standardized amount in rural and
small urban areas to achieve a single, uniform standardized
amount.
Sec. 104. More frequent update in weights used in hospital market basket.
Sec. 105. Improvements to critical access hospital program.
Sec. 106. Extension of temporary increase for home health services furnished
in a rural area.
Sec. 107. Reference to 10 percent increase in payment for hospice care fur-
nished in a frontier area and rural hospice demonstration
project.
Sec. 108. Reference to priority for hospitals located in rural or small urban
areas in redistribution of unused graduate medical education
residencies.
Sec. 109. GAO study of geographic differences in payments for physicians’
services.
Sec. 110. Providing safe harbor for certain collaborative efforts that benefit
medically underserved populations.
Sec. 111. Relief for certain non-teaching hospitals.
TITLE II—PROVISIONS RELATING TO PART A
Subtitle A—Inpatient Hospital Services
Sec. 201. Revision of acute care hospital payment updates.
Sec. 202. 2-year increase in level of adjustment for indirect costs of medical
education (IME).
Sec. 203. Recognition of new medical technologies under inpatient hospital
PPS.
Sec. 204. Phase-in of Federal rate for hospitals in Puerto Rico.
Sec. 205. Reference to provision relating to enhanced disproportionate share
hospital (DSH) payments for rural hospitals and urban hos-
pitals with fewer than 100 beds.
Sec. 206. Reference to provision relating to 2-year phased-in increase in the
standardized amount in rural and small urban areas to achieve
a single, uniform standardized amount.
Sec. 207. Reference to provision for more frequent updates in the weights used
in hospital market basket.
Sec. 208. Reference to provision making improvements to critical access hos-
pital program.
Sec. 209. GAO study on improving the hospital wage index.
Subtitle B—Skilled Nursing Facility Services
Sec. 211. Payment for covered skilled nursing facility services.
Subtitle C—Hospice
Sec. 221. Coverage of hospice consultation services.
Sec. 222. 10 percent increase in payment for hospice care furnished in a fron-
tier area.
Sec. 223. Rural hospice demonstration project.
Subtitle D—Other Provisions
Sec. 231. Demonstration project for use of recovery audit contractors for part
A services.
TITLE III—PROVISIONS RELATING TO PART B
Subtitle A—Physicians’ Services
Sec. 301. Revision of updates for physicians’ services.
Sec. 302. Studies on access to physicians’ services.
Sec. 303. MedPAC report on payment for physicians’ services.
Sec. 304. 1-year extension of treatment of certain physician pathology services
under medicare.
Sec. 305. Physician fee schedule wage index revision.
Subtitle B—Other Services
Sec. 311. Competitive acquisition of certain items and services.
Sec. 312. Payment for ambulance services.
Sec. 313. 2-year extension of moratorium on therapy caps; provisions relating
to reports.
Sec. 314. Coverage of an initial preventive physical examination.
Sec. 315. Renal dialysis services.
Sec. 316. Improved payment for certain mammography services.
Sec. 317. Waiver of part B late enrollment penalty for certain military retirees;
special enrollment period.
Sec. 318. Coverage of cholesterol and blood lipid screening.
TITLE IV—PROVISIONS RELATING TO PARTS A AND B
Subtitle A—Home Health Services
Sec. 401. Elimination of 15 percent reduction in payment rates under the pro-
spective payment system.
Sec. 402. Update in home health services.
Sec. 403. OASIS Task Force; suspension of certain OASIS data collection re-
quirements pending Task Force submittal of report.
Sec. 404. MedPAC study on medicare margins of home health agencies.
Sec. 405. Clarification of treatment of occasional absences in determining
whether an individual is confined to the home.
Subtitle B—Direct Graduate Medical Education
Sec. 411. Extension of update limitation on high cost programs.
Sec. 412. Redistribution of unused resident positions.
Subtitle C—Other Provisions
Sec. 421. Modifications to Medicare Payment Advisory Commission (MedPAC).
Sec. 422. Demonstration project for disease management for certain medicare
beneficiaries with diabetes.
Sec. 423. Demonstration project for medical adult day care services.
Sec. 424. Publication on final written guidance concerning prohibitions against
discrimination by national origin with respect to health care
services.
TITLE I—RURAL HEALTH CARE
IMPROVEMENTS
SEC. 101. REFERENCE TO FULL MARKET BASKET INCREASE
FOR SOLE COMMUNITY HOSPITALS.
For provision eliminating any reduction from full
market basket in the update for inpatient hospital services
for sole community hospitals, see section 201.
SEC. 102. ENHANCED DISPROPORTIONATE SHARE HOS-
PITAL (DSH) TREATMENT FOR RURAL HOS-
PITALS AND URBAN HOSPITALS WITH FEWER
THAN 100 BEDS.
(a) BLENDING OF PAYMENT AMOUNTS.—
(1) IN GENERAL.—Section 1886(d)(5)(F) (42
U.S.C. 1395ww(d)(5)(F)) is amended by adding at
the end the following new clause:
‘‘(xiv)(I) In the case of discharges in a fiscal year
beginning on or after October 1, 2002, subject to sub-
clause (II), there shall be substituted for the dispropor-
tionate share adjustment percentage otherwise determined
under clause (iv) (other than subclause (I)) or under
clause (viii), (x), (xi), (xii), or (xiii), the old blend propor-
tion (specified under subclause (III)) of the dispropor-
tionate share adjustment percentage otherwise determined
under the respective clause and 100 percent minus such
old blend proportion of the disproportionate share adjust-
ment percentage determined under clause (vii) (relating
to large, urban hospitals).
‘‘(II) Under subclause (I), the disproportionate share
adjustment percentage shall not exceed 10 percent for a
hospital that is not classified as a rural referral center
under subparagraph (C).
‘‘(III) For purposes of subclause (I), the old blend
proportion for fiscal year 2003 is 80 percent, for each sub-
sequent year (through 2006) is the old blend proportion
under this subclause for the previous year minus 20 per-
centage points, and for each year beginning with 2007 is
0 percent.’’.
(2) 
CONFORMING
AMENDMENTS.—Section
1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is
amended—
(A) in each of subclauses (II), (III), (IV),
(V), and (VI) of clause (iv), by inserting ‘‘sub-
ject to clause (xiv) and’’ before ‘‘for discharges
occurring’’;
(B) in clause (viii), by striking ‘‘The for-
mula’’ and inserting ‘‘Subject to clause (xiv),
the formula’’; and
(C) in each of clauses (x), (xi), (xii), and
(xiii), by striking ‘‘For purposes’’ and inserting
‘‘Subject to clause (xiv), for purposes’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to discharges occur-
ring on or after October 1, 2002.
SEC. 103. 2-YEAR PHASED-IN INCREASE IN THE STANDARD-
IZED AMOUNT IN RURAL AND SMALL URBAN
AREAS TO ACHIEVE A SINGLE, UNIFORM
STANDARDIZED AMOUNT.
Section 
1886(d)(3)(A)(iv) 
(42 
U.S.C.
1395ww(d)(3)(A)(iv)) is amended—
(1) by striking ‘‘(iv) For discharges’’ and in-
serting ‘‘(iv)(I) Subject to the succeeding provisions
of this clause, for discharges’’; and
(2) by adding at the end the following new sub-
clauses:
‘‘(II) For discharges occurring during fiscal
year 2003, the average standardized amount for hos-
pitals located other than in a large urban area shall
be increased by 1⁄2 of the difference between the av-
erage standardized amount determined under sub-
clause (I) for hospitals located in large urban areas
for such fiscal year and such amount determined
(without regard to this subclause) for other hospitals
for such fiscal year.
‘‘(III) For discharges occurring in a fiscal year
beginning with fiscal year 2004, the Secretary shall
compute an average standardized amount for hos-
pitals located in any area within the United States
and within each region equal to the average stand-
ardized amount computed for the previous fiscal
year under this subparagraph for hospitals located
in a large urban area (or, beginning with fiscal year
2005, for hospitals located in any area) increased by
the applicable percentage increase under subsection
(b)(3)(B)(i).’’.
SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN
HOSPITAL MARKET BASKET.
(a) MORE FREQUENT UPDATES IN WEIGHTS.—After
revising the weights used in the hospital market basket
under section 1886(b)(3)(B)(iii) of the Social Security Act
(42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the most cur-
rent data available, the Secretary shall establish a fre-
quency for revising such weights in such market basket
to reflect the most current data available more frequently
than once every 5 years.
(b) REPORT.—Not later than October 1, 2003, the
Secretary shall submit a report to Congress on the fre-
quency established under subsection (a), including an ex-
planation of the reasons for, and options considered, in
determining such frequency.
SEC. 105. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL
PROGRAM.
(a) REINSTATEMENT OF PERIODIC INTERIM PAY-
MENT
(PIP).—Section 
1815(e)(2) 
(42 
U.S.C.
1395g(e)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (C);
(2) by adding ‘‘and’’ at the end of subpara-
graph (D); and
(3) by inserting after subparagraph (D) the fol-
lowing new subparagraph:
‘‘(E) inpatient critical access hospital services;’’.
(b) CONDITION FOR APPLICATION OF SPECIAL PHY-
SICIAN PAYMENT ADJUSTMENT.—Section 1834(g)(2) (42
U.S.C. 1395m(g)(2)) is amended by adding after and
below subparagraph (B) the following:
‘‘The Secretary may not require, as a condition for
applying subparagraph (B) with respect to a critical
access hospital, that each physician providing profes-
sional services in the hospital must assign billing
rights with respect to such services, except that such
subparagraph shall not apply to those physicians
who have not assigned such billing rights.’’.
(c) FLEXIBILITY
IN BED LIMITATION
FOR HOS-
PITALS.—Section 1820 (42 U.S.C. 1395i–4) is amended—
(1) in subsection (c)(2)(B)(iii), by inserting
‘‘subject to paragraph (3)’’ after ‘‘(iii) provides’’;
(2) by adding at the end of subsection (c) the
following new paragraph:
‘‘(3) INCREASE IN MAXIMUM NUMBER OF BEDS
FOR HOSPITALS WITH STRONG SEASONAL CENSUS
FLUCTUATIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (C), in the case of a hospital that dem-
onstrates that it meets the standards estab-
lished under subparagraph (B) and has not
made the election described in subsection
(f)(2)(A), the bed limitations otherwise applica-
ble under paragraph (2)(B)(iii) and subsection
(f) shall be increased by 5 beds.
‘‘(B) STANDARDS.—The Secretary shall
specify standards for determining whether a
critical access hospital has sufficiently strong
seasonal variations in patient admissions to jus-
tify the increase in bed limitation provided
under subparagraph (A).’’; and
(3) in subsection (f)—
(A) by inserting ‘‘(1)’’ after ‘‘(f)’’; and
(B) by adding at the end the following new
paragraph:
‘‘(2)(A) A hospital may elect to treat the reference
in paragraph (1) to ‘15 beds’ as a reference to ‘25 beds’,
but only if no more than 10 beds in the hospital are at
any time used for non-acute care services. A hospital that
makes such an election is not eligible for the increase pro-
vided under subsection (c)(3)(A).
‘‘(B) The limitations in numbers of beds under the
first sentence of paragraph (1) are subject to adjustment
under subsection (c)(3).’’.
(d) 5-YEAR EXTENSION
OF
THE AUTHORIZATION
FOR APPROPRIATIONS FOR GRANT PROGRAM.—Section
1820(j) (42 U.S.C. 1395i–4(j)) is amended by striking
‘‘through 2002’’ and inserting ‘‘through 2007’’.
(e) PROHIBITION OF RETROACTIVE RECOUPMENT.—
The Secretary shall not recoup (or otherwise seek to re-
cover) overpayments made for outpatient critical access
hospital services under part B of title XVIII of the Social
Security Act, for services furnished in cost reporting peri-
ods that began before October 1, 2002, insofar as such
overpayments are attributable to payment being based on
80 percent of reasonable costs (instead of 100 percent of
reasonable costs minus 20 percent of charges).
(f) EFFECTIVE DATES.—
(1) REINSTATEMENT
OF
PIP.—The amend-
ments made by subsection (a) shall apply to pay-
ments made on or after January 1, 2003.
(2) PHYSICIAN PAYMENT ADJUSTMENT CONDI-
TION.—The amendment made by subsection (b)
shall be effective as if included in the enactment of
section 403(d) of the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999
(113 Stat. 1501A–371).
(3) FLEXIBILITY
IN
BED
LIMITATION.—The
amendments made by subsection (c) shall apply to
designations made on or after January 1, 2003, but
shall not apply to critical access hospitals that were
designated as of such date.
SEC. 106. EXTENSION OF TEMPORARY INCREASE FOR
HOME HEALTH SERVICES FURNISHED IN A
RURAL AREA.
(a) IN GENERAL.—Section 508(a) of BIPA (114
Stat. 2763A–533) is amended—
(1) by striking ‘‘24-MONTH INCREASE BEGIN-
NING APRIL 1, 2001’’ and inserting ‘‘IN GENERAL’’;
and
(2) by striking ‘‘April 1, 2003’’ and inserting
‘‘January 1, 2005’’.
(b) CONFORMING AMENDMENT.—Section 547(c)(2)
of BIPA (114 Stat. 2763A–553) is amended by striking
‘‘the period beginning on April 1, 2001, and ending on
September 30, 2002,’’ and inserting ‘‘a period under such
section’’.
SEC. 107. REFERENCE TO 10 PERCENT INCREASE IN PAY-
MENT FOR HOSPICE CARE FURNISHED IN A
FRONTIER AREA AND RURAL HOSPICE DEM-
ONSTRATION PROJECT.
For—
(1) provision of 10 percent increase in payment
for hospice care furnished in a frontier area, see sec-
tion 222; and
(2) provision of a rural hospice demonstration
project, see section 223.
SEC. 108. REFERENCE TO PRIORITY FOR HOSPITALS LO-
CATED IN RURAL OR SMALL URBAN AREAS IN
REDISTRIBUTION 
OF 
UNUSED 
GRADUATE
MEDICAL EDUCATION RESIDENCIES.
For provision providing priority for hospitals located
in rural or small urban areas in redistribution of unused
graduate medical education residencies, see section 412.
SEC. 109. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN
PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study of differences in payment
amounts under the physician fee schedule under section
1848 of the Social Security Act (42 U.S.C. 1395w–4) for
physicians’ services in different geographic areas. Such
study shall include—
(1) an assessment of the validity of the geo-
graphic adjustment factors used for each component
of the fee schedule;
(2) an evaluation of the measures used for such
adjustment, including the frequency of revisions; and
(3) an evaluation of the methods used to deter-
mine professional liability insurance costs used in
computing the malpractice component, including a
review of increases in professional liability insurance
premiums and variation in such increases by State
and physician specialty and methods used to update
the geographic cost of practice index and relative
weights for the malpractice component.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Comptroller General shall
submit to Congress a report on the study conducted under
subsection (a). The report shall include recommendations
regarding the use of more current data in computing geo-
graphic cost of practice indices as well as the use of data
directly representative of physicians’ costs (rather than
proxy measures of such costs).
SEC. 110. PROVIDING SAFE HARBOR FOR CERTAIN COL-
LABORATIVE EFFORTS THAT BENEFIT MEDI-
CALLY UNDERSERVED POPULATIONS.
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.
1320a–7(b)(3)), as amended by section 101(b)(2), is
amended—
(1) in subparagraph (F), by striking ‘‘and’’
after the semicolon at the end;
(2) in subparagraph (G), by striking the period
at the end and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(H) any remuneration between a public
or nonprofit private health center entity de-
scribed under clause (i) or (ii) of section
1905(l)(2)(B) and any individual or entity pro-
viding goods, items, services, donations or
loans, or a combination thereof, to such health
center entity pursuant to a contract, lease,
grant, loan, or other agreement, if such agree-
ment contributes to the ability of the health
center entity to maintain or increase the avail-
ability, or enhance the quality, of services pro-
vided to a medically underserved population
served by the health center entity.’’.