‘‘(iii) meets such additional conditions as the
Secretary may specify to ensure (I) the health and
safety of individuals being furnished such services,
(II) the effective or efficient furnishing of such serv-
ices, and (III) the compliance of such entity with the
criteria described in such section.’’.
SEC. 4. RE-ENROLLMENT OF PROVIDERS OF CMHC PAR-
TIAL HOSPITALIZATION SERVICES.
(a) IN GENERAL.—With respect to each community
mental health center that furnishes partial hospitalization
services for which payment is made under title XVIII of
the Social Security Act, the Secretary of Health and
Human Services shall provide for periodic re-certification
to ensure that the provision of such services complies with
section 1913(c) of the Public Health Service Act.
(b) DEADLINE FOR FIRST RE-CERTIFICATION.—The
first re-certification under subsection (a) shall be com-
pleted not later than 1 year after the date of the enact-
ment of this Act.
SEC. 5. PROSPECTIVE PAYMENT SYSTEM FOR PARTIAL
HOSPITALIZATION SERVICES.
(a) ESTABLISHMENT OF SYSTEM.—Section 1833 of
the Social Security Act (42 U.S.C. 1395l) is amended by
inserting after subsection (o) the following:
‘‘(p)(1) The Secretary may establish by regulation a
prospective payment system for partial hospitalization
services provided by a community mental health center or
by a hospital to its outpatients. The system shall provide
for appropriate payment levels for efficient centers and
take into account payment levels for similar services fur-
nished by other efficient entities.
‘‘(2) A prospective payment system established pur-
suant to paragraph (1) shall provide for payment amounts
for—
‘‘(A) the first year in which such system ap-
plies, at a level so that, as estimated by the Sec-
retary, the total aggregate payments under this part
(including payments attributable to deductibles and
coinsurance) are equal to the total aggregate pay-
ments that would have otherwise been made under
this part if such system had not been implemented;
and
‘‘(B) each subsequent year, in an amount equal
to the payment amount provided for under this
paragraph for the preceding year updated by the
percentage increase in the consumer price index for
all urban consumers (all items; United States city
average) for the 12-month period ending with Sep-
tember of that preceding year.’’.
(b) COINSURANCE.—Section 1866(a)(2)(A) of such
Act (42 U.S.C. 1395cc(a)(2)(A)) is amended by adding
at the end the following: ‘‘In the case of services described
in section 1832(a)(2)(J), clause (ii) of the first sentence
of this subparagraph shall be applied by substituting the
payment basis established under section 1833(p) for the
reasonable charges.’’.
(c) 
CONFORMING
AMENDMENTS.—(1) 
Section
1832(a)(2) of such Act (42 U.S.C. 1395k(a)(2)) is amend-
ed—
(A) in subparagraph (B), by striking ‘‘or sub-
paragraph (I)’’ and inserting ‘‘, (I), or (J)’’; and
(B) in subparagraph (J), by striking ‘‘provided
by a community mental health center (as described
in section 1861(ff)(2)(B))’’.
(2) Section 1833(a) of such Act (42 U.S.C. 1395l(a))
is amended—
(A) in paragraph (2) preceding subparagraph
(A), by striking ‘‘(H), and (I)’’ and inserting ‘‘(H),
(I), and (J)’’;
(B) by striking ‘‘and’’ at the end of paragraph
(8);
(C) by striking the period at the end of para-
graph (9) and inserting ‘‘; and’’; and
(D) by adding at the end the following new
paragraph:
‘‘(10) in the case of partial hospitalization serv-
ices, 80 percent of the payment basis under the pro-
spective payment system established under section
1833(p).’’.
(d) EFFECTIVE DATE.—The amendments made by
subsections (b) and (c) apply to services furnished on or
after January 1 of the first year that begins at least 6
months after the date on which regulations are issued
under section 1833(p) of such Act (42 U.S.C. 1395l(p))
as inserted by subsection (a).
SEC. 6. DEMONSTRATION FOR IMPROVED PARTIAL HOS-
PITALIZATION SERVICES.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall implement a demonstration
project (in this section referred to as the ‘‘project’’)
under part B of title XVIII of the Social Security
Act under which community mental health centers
may offer expanded partial hospitalization services
(described in paragraph (2)) for purposes of provid-
ing for a full continuum of ambulatory behavioral
health care services.
(2) ADDITIONAL
MENTAL
HEALTH
SERVICES
DESCRIBED.—For purposes of paragraph (1), the
expanded partial hospitalization services are out-
patient mental health services and such other mental
health services as the Secretary determines appro-
priate which are not partial hospitalization services
as defined in section 1861(ff)(1) of such Act (42
U.S.C. 1395x(ff)(1)).
(b) SELECTION OF CENTERS.—For purposes of im-
plementing such project, the Secretary shall select for par-
ticipation in the project community mental health centers
that serve populations in 3 different States, 1 of which
predominantly serves rural populations.
(c) CAPITATED PAYMENT.—Under this project, pay-
ment for expanded partial hospitalization services shall be
made on a capitated basis.
(d) WAIVER AUTHORITY.—The Secretary may waive
such provisions of title XVIII of the Social Security Act
as the Secretary deems necessary to conduct the project
established under this section.
(e) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall evaluate
the project. Such evaluation shall include an exam-
ination of—