140
section shall not be treated as a determina-
tion for purposes of section 1869 of the So-
cial Security Act. 
(6) DEFINITIONS.—For purposes of this sub-
section: 
(A) ELIGIBLE
PROFESSIONAL; 
COVERED 
PROFESSIONAL
SERVICES.—The terms ‘‘eligible 
professional’’ and ‘‘covered professional services’’ 
have the meanings given such terms in section 
1848(k)(3) of the Social Security Act, as added 
by subsection (b). 
(B) PHYSICIAN
REPORTING
SYSTEM.—The 
term ‘‘physician reporting system’’ means the 
system established under section 1848(k) of the 
Social Security Act, as added by subsection (b). 
(C) REPORTING
PERIOD.—The term ‘‘re-
porting period’’ means the period beginning on 
July 1, 2007, and ending on December 31, 2007. 
(D) SECRETARY.—The term ‘‘Secretary’’ 
means the Secretary of Health and Human Serv-
ices. 
(d) PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE 
FUND.—Section 1848 of the Social Security Act, as amend-
ed by subsection (b), is further amended by adding at the 
end the following new subsection:
141
‘‘(l) PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE 
FUND.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish under this subsection a Physician Assistance 
and Quality Initiative Fund (in this subsection re-
ferred to as the ‘Fund’) which shall be available to the 
Secretary for physician payment and quality im-
provement initiatives, which may include application 
of an adjustment to the update of the conversion fac-
tor under subsection (d). 
‘‘(2) FUNDING.—
‘‘(A) AMOUNT AVAILABLE.—There shall be 
available to the Fund for expenditures an 
amount equal to $1,350,000,000. 
‘‘(B) TIMELY
OBLIGATION
OF
ALL
AVAIL-
ABLE FUNDS FOR SERVICES FURNISHED DURING 
2008.—The Secretary shall provide for expendi-
tures from the Fund in a manner designed to 
provide (to the maximum extent feasible) for the 
obligation of the entire amount specified in sub-
paragraph (A) for payment with respect to phy-
sicians’ services furnished during 2008. 
‘‘(C) PAYMENT
FROM
TRUST
FUND.—The 
amount specified in subparagraph (A) shall be 
available to the Fund, as expenditures are made
142
from the Fund, from the Federal Supplementary 
Medical Insurance Trust Fund under section 
1841. 
‘‘(D) FUNDING
LIMITATION.—Amounts in 
the Fund shall be available in advance of appro-
priations in accordance with subparagraph (B) 
but only if the total amount obligated from the 
Fund does not exceed the amount available to the 
Fund under subparagraph (A). The Secretary 
may obligate funds from the Fund only if the 
Secretary determines (and the Chief Actuary of 
the Centers for Medicare & Medicaid Services 
and the appropriate budget officer certify) that 
there are available in the Fund sufficient 
amounts to cover all such obligations incurred 
consistent with the previous sentence. 
‘‘(E) CONSTRUCTION.—In the case that ex-
penditures from the Fund are applied to, or oth-
erwise affect, a conversion factor under sub-
section (d) for a year, the conversion factor 
under such subsection shall be computed for a 
subsequent year as if such application or effect 
had never occurred.’’. 
(e) IMPLEMENTATION.—For purposes of implementing 
the provisions of, and amendments made by, this section,
143
the Secretary of Health and Human Services shall provide 
for the transfer, from the Federal Supplementary Medical 
Insurance Trust Fund established under section 1841 of the 
Social Security Act (42 U.S.C. 1395t), of $60,000,000 to 
the Centers for Medicare & Medicaid Services Program 
Management Account for the period of fiscal years 2007, 
2008, and 2009. 
SEC. 102. EXTENSION OF FLOOR ON MEDICARE WORK GEO-
GRAPHIC ADJUSTMENT. 
Section 1848(e)(1)(E) of the Social Security Act (42 
U.S.C. 1395w–4(e)(1)(E)) is amended by striking ‘‘before 
January 1, 2007’’ and inserting ‘‘before January 1, 2008’’. 
SEC. 103. UPDATE TO THE COMPOSITE RATE COMPONENT 
OF THE BASIC CASE-MIX ADJUSTED PROSPEC-
TIVE PAYMENT SYSTEM FOR DIALYSIS SERV-
ICES. 
(a) IN GENERAL.—Section 1881(b)(12)(G) of the So-
cial Security Act (42 U.S.C. 1395rr(b)(12)(G)) is amended 
to read as follows: 
‘‘(G) The Secretary shall increase the amount of the 
composite rate component of the basic case-mix adjusted 
system under subparagraph (B) for dialysis services—
‘‘(i) furnished on or after January 1, 2006, and 
before April 1, 2007, by 1.6 percent above the amount
144
of such composite rate component for such services 
furnished on December 31, 2005; and 
‘‘(ii) furnished on or after April 1, 2007, by 1.6 
percent above the amount of such composite rate com-
ponent for such services furnished on March 31, 
2007.’’. 
(b) GAO REPORT ON HOME DIALYSIS PAYMENT.—Not 
later than January 1, 2009, the Comptroller General of the 
United States shall submit to Congress a report on the costs 
for home hemodialysis treatment and patient training for 
both home hemodialysis and peritoneal dialysis. Such re-
port shall also include recommendations for a payment 
methodology for payment under section 1881 of the Social 
Security Act (42 U.S.C. 1395rr) that measures, and is 
based on, the costs of providing such services and takes into 
account the case mix of patients. 
SEC. 104. EXTENSION OF TREATMENT OF CERTAIN PHYSI-
CIAN PATHOLOGY SERVICES UNDER MEDI-
CARE. 
Section 542(c) of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (as en-
acted into law by section 1(a)(6) of Public Law 106–554), 
as amended by section 732 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public
145
Law 108–173), is amended by striking ‘‘and 2006’’ and in-
serting ‘‘, 2006, and 2007’’. 
SEC. 105. EXTENSION OF MEDICARE REASONABLE COSTS 
PAYMENTS FOR CERTAIN CLINICAL DIAG-
NOSTIC LABORATORY TESTS FURNISHED TO 
HOSPITAL 
PATIENTS 
IN 
CERTAIN 
RURAL 
AREAS. 
Effective as if included in the enactment of section 416 
of the Medicare Prescription Drug, Improvement, and Mod-
ernization Act of 2003 (42 U.S.C. 1395l–4), subsection (b) 
of such section is amended by striking ‘‘2-year period’’ and 
inserting ‘‘3-year period’’. 
SEC. 106. HOSPITAL MEDICARE REPORTS AND CLARIFICA-
TIONS. 
(a) CORRECTION
OF MID-YEAR RECLASSIFICATION 
EXPIRATION.—Notwithstanding any other provision of law, 
in the case of a subsection (d) hospital (as defined for pur-
poses of section 1886 of the Social Security Act (42 U.S.C. 
1395ww)) with respect to which a reclassification of its 
wage index for purposes of such section would (but for this 
subsection) expire on March 31, 2007, such reclassification 
of such hospital shall be extended through September 30, 
2007. The previous sentence shall not be effected in a budg-
et-neutral manner.
146
(b) REVISION OF THE MEDICARE WAGE INDEX CLAS-
SIFICATION SYSTEM.—
(1) MEDPAC REPORT.—
(A) IN GENERAL.—The Medicare Payment 
Advisory Commission shall submit to Congress, 
by not later than June 30, 2007, a report on its 
study of the wage index classification system ap-
plied under Medicare prospective payment sys-
tems, including under section 1886(d)(3)(E) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395ww(d)(3)(E)). Such report shall include any 
alternatives the Commission recommends to the 
method to compute the wage index under such 
section. 
(B) FUNDING.—Out of any funds in the 
Treasury not otherwise appropriated, there are 
appropriated to the Medicare Payment Advisory 
Commission, $2,000,000 for fiscal year 2007 to 
carry out this paragraph. 
(2) PROPOSAL TO REVISE THE HOSPITAL WAGE 
INDEX CLASSIFICATION SYSTEM.— The Secretary of 
Health and Human Services, taking into account the 
recommendations described in the report under para-
graph (1), shall include in the proposed rule pub-
lished under section 1886(e)(5)(A) of the Social Secu-
147
rity Act (42 U.S.C. 1395ww(e)(5)(A)) for fiscal year 
2009 one or more proposals to revise the wage index 
adjustment applied under section 1886(d)(3)(E) of 
such Act (42 U.S.C. 1395ww(d)(3)(E)) for purposes of 
the Medicare prospective payment system for inpa-
tient hospital services. Such proposal (or proposals) 
shall consider each of the following: 
(A) Problems associated with the definition 
of labor markets for purposes of such wage index 
adjustment. 
(B) The modification or elimination of geo-
graphic reclassifications and other adjustments. 
(C) The use of Bureau of Labor Statistics 
data, or other data or methodologies, to calculate 
relative wages for each geographic area involved. 
(D) Minimizing variations in wage index 
adjustments between and within Metropolitan 
Statistical Areas and Statewide rural areas. 
(E) The feasibility of applying all compo-
nents of the proposal to other settings, including 
home health agencies and skilled nursing facili-
ties. 
(F) Methods to minimize the volatility of 
wage index adjustments, while maintaining the
148
principle of budget neutrality in applying such 
adjustments. 
(G) The effect that the implementation of 
the proposal would have on health care providers 
and on each region of the country. 
(H) Methods for implementing the proposal, 
including methods to phase-in such implementa-
tion. 
(I) Issues relating to occupational mix, such 
as staffing practices and any evidence on the ef-
fect on quality of care and patient safety and 
any recommendations for alternative calcula-
tions. 
(c) ELIMINATION OF UNNECESSARY REPORT.—Section 
1886 of the Social Security Act (42 U.S.C. 1395ww) is 
amended—
(1) in subsection (d)(4)(C), by striking clause 
(iv); and 
(2) in subsection (e), by striking paragraph (3). 
SEC. 107. PAYMENT FOR BRACHYTHERAPY. 
(a) 
EXTENSION
OF
PAYMENT
RULE.—Section 
1833(t)(16)(C) of the Social Security Act (42 U.S.C. 
1395l(t)(16)(C)) is amended by striking ‘‘January 1, 2007’’ 
and inserting ‘‘January 1, 2008’’.
149
(b) 
ESTABLISHMENT
OF
SEPARATE
PAYMENT 
GROUPS.—
(1) IN GENERAL.—Section 1833(t)(2)(H) of such 
Act (42 U.S.C. 1395l(t)(2)(H)) is amended by insert-
ing ‘‘and for stranded and non-stranded devices fur-
nished on or after July 1, 2007’’ before the period at 
the end. 
(2) IMPLEMENTATION.—The Secretary of Health 
and Human Services may implement the amendment 
made by paragraph (1) by program instruction or 
otherwise. 
SEC. 108. PAYMENT PROCESS UNDER THE COMPETITIVE AC-
QUISITION PROGRAM (CAP). 
(a) IN GENERAL.—Section 1847B(a)(3) of the Social 
Security Act (42 U.S.C. 1395w-3b(a)(3)) is amended—
(1) in subparagraph (A)(iii), by striking ‘‘and 
biologicals’’ and all that follows and inserting ‘‘and 
biologicals shall be made only to such contractor upon 
receipt of a claim for a drug or biological supplied 
by the contractor for administration to a bene-
ficiary.’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(D) POST-PAYMENT
REVIEW
PROCESS.—
The Secretary shall establish (by program in-
150
struction or otherwise) a post-payment review 
process (which may include the use of statistical 
sampling) to assure that payment is made for a 
drug or biological under this section only if the 
drug or biological has been administered to a 
beneficiary. The Secretary shall recoup, offset, or 
collect any overpayments determined by the Sec-
retary under such process.’’. 
(b) CONSTRUCTION.—Nothing in this section shall be 
construed as—
(1) requiring the conduct of any additional com-
petition under subsection (b)(1) of section 1847B of 
the Social Security Act (42 U.S.C. 1395w-3b); or 
(2) requiring any additional process for elections 
by physicians under subsection (a)(1)(A)(ii) of such 
section or additional selection by a selecting physi-
cian of a contractor under subsection (a)(5) of such 
section. 
(c) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to payment for drugs and biologicals 
supplied under section 1847B of the Social Security Act 
(42 U.S.C. 1395w-3b)—
(1) on or after April 1, 2007; and 
(2) on or after July 1, 2006, and before April 1, 
2007, for claims that are unpaid as of April 1, 2007.