414
(1) in subparagraph (I), by inserting before the
period at the end the following: ‘‘and providing the
Secretary on a continuing basis with a surety bond
in a form specified by the Secretary and in an
amount that is not less than $50,000’’, and
(2) by adding after and below subparagraph (I)
the following:
‘‘The Secretary may waive the requirement of a bond
under subparagraph (I) in the case of a facility that pro-
vides a comparable surety bond under State law.’’.
(e) APPLICATION TO REHABILITATION AGENCIES.—
Section 1861(p) (42 U.S.C. 1395x(p)) is amended—
(1) in paragraph (4)(A)(v), by inserting after
‘‘as the Secretary may find necessary,’’ the follow-
ing: ‘‘and provides the Secretary, to the extent re-
quired by the Secretary, on a continuing basis with
a surety bond in a form specified by the Secretary
and in an amount that is not less than $50,000’’,
and
(2) by adding at the end the following: ‘‘The
Secretary may waive the requirement of a bond
under paragraph (4)(A)(v) in the case of a clinic or
agency that provides a comparable surety bond
under State law.’’.
415
(f) EFFECTIVE DATES.—(1) The amendment made
by subsection (a) shall apply to suppliers of durable medi-
cal equipment with respect to such equipment furnished
on or after January 1, 1998.
(2) The amendments made by subsection (b) shall
apply to home health agencies with respect to services fur-
nished on or after such date. The Secretary of Health and
Human Services shall modify participation agreements
under section 1866(a)(1) of the Social Security Act with
respect to home health agencies to provide for implementa-
tion of such amendments on a timely basis.
(3) The amendments made by subsections (c)
through (e) shall take effect on the date of the enactment
of this Act and may be applied with respect to items and
services furnished on or after the date specified in para-
graph (1).
SEC. 4308. PROVISION OF CERTAIN IDENTIFICATION NUM-
BERS.
(a) REQUIREMENTS TO DISCLOSE EMPLOYER IDEN-
TIFICATION NUMBERS (EINS) AND SOCIAL SECURITY AC-
COUNT
NUMBERS
(SSNS).—Section 1124(a)(1) (42
U.S.C. 1320a–3(a)(1)) is amended by inserting before the
period at the end the following: ‘‘and supply the Secretary
with the both the employer identification number (as-
signed pursuant to section 6109 of the Internal Revenue
416
Code of 1986) and social security account number (as-
signed under section 205(c)(2)(B)) of the disclosing en-
tity, each person with an ownership or control interest (as
defined in subsection (a)(3)), and any subcontractor in
which the entity directly or indirectly has a 5 percent or
more ownership interest. Use of the social security account
number under this section shall be limited to identity ver-
ification and identity matching purposes only. The social
security account number shall not be disclosed to any per-
son or entity other than the Secretary, the Social Security
Administration, or the Secretary of the Treasury, In ob-
taining the social security account numbers of the disclos-
ing entity and other persons described in this section, the
Secretary shall comply with section 7 of the Privacy Act
of 1974 (5 U.S.C. 552a note)’’.
(b) OTHER MEDICARE PROVIDERS.—Section 1124A
(42 U.S.C. 1320a–3a) is amended—
(1) in subsection (a)—
(A) by striking ‘‘and’’ at the end of para-
graph (1);
(B) by striking the period at the end of
paragraph (2) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
paragraph:
417
‘‘(3) including the employer identification num-
ber (assigned pursuant to section 6109 of the Inter-
nal Revenue Code of 1986) and social security ac-
count number (assigned under section 205(c)(2)(B))
of the disclosing part B provider and any person,
managing employee, or other entity identified or de-
scribed under paragraph (1) or (2).’’; and
(2) in subsection (c) by inserting ‘‘(or, for pur-
poses of subsection (a)(3), any entity receiving pay-
ment)’’ after ‘‘on an assignment-related basis’’.
(c) VERIFICATION BY SOCIAL SECURITY ADMINIS-
TRATION (SSA).—Section 1124A (42 U.S.C. 1320a–3a)
is amended—
(1) by redesignating subsection (c) as sub-
section (d); and
(2) by inserting after subsection (b) the follow-
ing new subsection:
‘‘(c) VERIFICATION.—
‘‘(1) TRANSMITTAL
BY
HHS.—The Secretary
shall transmit—
‘‘(A) to the Commissioner of Social Secu-
rity information concerning each social security
account 
number 
(assigned 
under 
section
205(c)(2)(B)), and
418
‘‘(B) to the Secretary of the Treasury in-
formation concerning each employer identifica-
tion number (assigned pursuant to section 6109
of the Internal Revenue Code of 1986),
supplied to the Secretary pursuant to subsection
(a)(3) or section 1124(c) to the extent necessary for
verification of such information in accordance with
paragraph (2).
‘‘(2) VERIFICATION.—The Commissioner of So-
cial Security and the Secretary of the Treasury shall
verify the accuracy of, or correct, the information
supplied by the Secretary to such official pursuant
to paragraph (1), and shall report such verifications
or corrections to the Secretary.
‘‘(3) FEES FOR VERIFICATION.—The Secretary
shall reimburse the Commissioner and Secretary of
the Treasury, at a rate negotiated between the Sec-
retary and such official, for the costs incurred by
such official in performing the verification and cor-
rection services described in this subsection.’’.
(d) REPORT.—Before this subsection shall be effec-
tive, the Secretary of Health and Human Services shall
submit to Congress a report on steps the Secretary has
taken to assure the confidentiality of social security ac-
count numbers that will be provided to the Secretary
419
under the amendments made by this section. If Congress
determines that the Secretary has not taken adequate
steps to assure the confidentiality of social security ac-
count numbers to be provided to the Secretary under the
amendments made by this section, the amendments made
by this section shall not take effect.
(e) EFFECTIVE DATES.—Subject to subsection (d)—
(1) the amendment made by subsection (a)
shall apply to the application of conditions of partici-
pation, and entering into and renewal of contracts
and agreements, occurring more than 90 days after
the date of submission of the report under sub-
section (d); and
(2) the amendments made by subsection (b)
shall apply to payment for items and services fur-
nished more than 90 days after the date of submis-
sion of such report.
SEC. 4309. ADVISORY OPINIONS REGARDING CERTAIN PHY-
SICIAN SELF-REFERRAL PROVISIONS.
Section 1877(g) (42 U.S.C. 1395nn(g)) is amended
by adding at the end the following new paragraph:
‘‘(6) ADVISORY OPINIONS.—
‘‘(A) IN
GENERAL.—The Secretary shall
issue written advisory opinions concerning
whether a referral relating to designated health
420
services (other than clinical laboratory services)
is prohibited under this section.
‘‘(B) BINDING
AS
TO
SECRETARY
AND
PARTIES INVOLVED.—Each advisory opinion is-
sued by the Secretary shall be binding as to the
Secretary and the party or parties requesting
the opinion.
‘‘(C) APPLICATION
OF
CERTAIN
PROCE-
DURES.—The Secretary shall, to the extent
practicable, apply the regulations promulgated
under section 1128D(b)(5) to the issuance of
advisory opinions under this paragraph.
‘‘(D) 
APPLICABILITY.—This 
paragraph
shall apply to requests for advisory opinions
made during the period described in section
1128D(b)(6).’’.
SEC. 4310. NONDISCRIMINATION IN POST-HOSPITAL RE-
FERRAL TO HOME HEALTH AGENCIES.
(a) NOTIFICATION
OF
AVAILABILITY
OF
HOME
HEALTH AGENCIES AS PART OF DISCHARGE PLANNING
PROCESS.—Section 1861(ee)(2) (42 U.S.C. 1395x(ee)(2))
is amended—
(1) in subparagraph (D), by inserting before
the period the following: ‘‘, including the availability
of home health services through individuals and enti-
421
ties that participate in the program under this title
and that serve the area in which the patient resides
and that request to be listed by the hospital as avail-
able’’; and
(2) by adding at the end the following:
‘‘(H) Consistent with section 1802, the dis-
charge plan shall—
‘‘(i) not specify or otherwise limit the
qualified provider which may provide post-hos-
pital home health services, and
‘‘(ii) identify (in a form and manner speci-
fied by the Secretary) any home health agency
(to whom the individual is referred) in which
the hospital has a disclosable financial interest
(as specified by the Secretary consistent with
section 1866(a)(1)(R)) or which has such an in-
terest in the hospital.’’.
(b) MAINTENANCE AND DISCLOSURE OF INFORMA-
TION ON POST-HOSPITAL HOME HEALTH AGENCIES.—
Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)) is amend-
ed—
(1) by striking ‘‘and’’ at the end of subpara-
graph (Q),
(2) by striking the period at the end of sub-
paragraph (R), and
422
(3) by adding at the end the following:
‘‘(S) in the case of a hospital that has a finan-
cial interest (as specified by the Secretary in regula-
tions) in a home health agency, or in which such an
agency has such a financial interest, or in which an-
other entity has such a financial interest (directly or
indirectly) with such hospital and such an agency, to
maintain and disclose to the Secretary (in a form
and manner specified by the Secretary) information
on—
‘‘(i) the nature of such financial interest,
‘‘(ii) the number of individuals who were
discharged from the hospital and who were
identified as requiring home health services,
and
‘‘(iii) the percentage of such individuals
who received such services from such provider
(or another such provider).’’.
(c) DISCLOSURE
OF INFORMATION
TO
THE PUB-
LIC.—Title XI is amended by inserting after section 1145
the following new section:
‘‘PUBLIC
DISCLOSURE
OF
CERTAIN
INFORMATION
ON
HOSPITAL
FINANCIAL
INTEREST
AND
REFERRAL
PATTERNS
‘‘SEC. 1146. The Secretary shall make available to
the public, in a form and manner specified by the Sec-
423
retary, information disclosed to the Secretary pursuant to
section 1866(a)(1)(R).’’.
(d) EFFECTIVE DATES.—
(1) The amendments made by subsection (a)
shall apply to discharges occurring on or after 90
days after the date of the enactment of this Act.
(2) The Secretary of Health and Human Serv-
ices shall issue regulations by not later than 1 year
after the date of the enactment of this Act to carry
out the amendments made by subsections (b) and
(c) and such amendments shall take effect as of
such date (on or after the issuance of such regula-
tions) as the Secretary specifies in such regulations.
SEC. 4311. OTHER FRAUD AND ABUSE RELATED PROVI-
SIONS.
(a) 
REFERENCE
CORRECTION.—(1) 
Section
1128D(b)(2)(D) (42 U.S.C. 1320a–7d(b)(2)(D)), as
added by section 205 of the Health Insurance Portability
and Accountability Act of 1996, is amended by striking
‘‘1128B(b)’’ and inserting ‘‘1128A(b)’’.
(2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a–
7e(g)(3)(C)) is amended by striking ‘‘Veterans’ Adminis-
tration’’ and inserting ‘‘Department of Veterans Affairs’’.
(b) LANGUAGE IN DEFINITION OF CONVICTION.—
Section 1128E(g)(5) (42 U.S.C. 1320a–7e(g)(5)), as in-
424
serted by section 221(a) of the Health Insurance Port-
ability and Accountability Act of 1996, is amended by
striking ‘‘paragraph (4)’’ and inserting ‘‘paragraphs (1)
through (4)’’.
(c) IMPLEMENTATION
OF
EXCLUSIONS.—Section
1128 (42 U.S.C. 1320a–7) is amended—
(1) in subsection (a), by striking ‘‘any program
under title XVIII and shall direct that the following
individuals and entities be excluded from participa-
tion in any State health care program (as defined in
subsection (h))’’ and inserting ‘‘any Federal health
care program (as defined in section 1128B(f))’’; and
(2) in subsection (b), by striking ‘‘any program
under title XVIII and may direct that the following
individuals and entities be excluded from participa-
tion in any State health care program’’ and inserting
‘‘any Federal health care program (as defined in
section 1128B(f))’’.
(d) SANCTIONS FOR FAILURE TO REPORT.—Section
1128E(b) (42 U.S.C. 1320a–7e(b)), as inserted by section
221(a) of the Health Insurance Portability and Account-
ability Act of 1996, is amended by adding at the end the
following:
‘‘(6) SANCTIONS FOR FAILURE TO REPORT.—
425
‘‘(A) HEALTH
PLANS.—Any health plan
that fails to report information on an adverse
action required to be reported under this sub-
section shall be subject to a civil money penalty
of not more than $25,000 for each such adverse
action not reported. Such penalty shall be im-
posed and collected in the same manner as civil
money penalties under subsection (a) of section
1128A are imposed and collected under that
section.
‘‘(B) 
GOVERNMENTAL
AGENCIES.—The
Secretary shall provide for a publication of a
public report that identifies those Government
agencies that have failed to report information
on adverse actions as required to be reported
under this subsection.’’.
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendments made by this section
shall be effective as if included in the enactment of
the Health Insurance Portability and Accountability
Act of 1996.
(2) FEDERAL HEALTH PROGRAM.—The amend-
ments made by subsection (c) shall take effect on
the date of the enactment of this Act.
426
(3) SANCTION FOR FAILURE TO REPORT.—The
amendment made by subsection (d) shall apply to
failures occurring on or after the date of the enact-
ment of this Act.
Subtitle E—Prospective Payment
Systems
CHAPTER 2—PAYMENT UNDER PART B
Subchapter A—Payment for Hospital
Outpatient Department Services
SEC. 4411. ELIMINATION OF FORMULA-DRIVEN OVERPAY-
MENTS (FDO) FOR CERTAIN OUTPATIENT
HOSPITAL SERVICES.
(a) ELIMINATION OF FDO FOR AMBULATORY SUR-
GICAL
CENTER
PROCEDURES.—Section
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is
amended—
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end and insert-
ing the following: ‘‘, less the amount a provider may
charge as described in clause (ii) of section
1866(a)(2)(A).’’.
(b) ELIMINATION OF FDO FOR RADIOLOGY SERV-
ICES
AND
DIAGNOSTIC
PROCEDURES.—Section
1833(n)(1)(B)(i) (42 U.S.C. 1395l(n)(1)(B)(i)) is amend-
ed—
427
(1) by striking ‘‘of 80 percent’’, and
(2) by inserting before the period at the end the
following: ‘‘, less the amount a provider may charge
as described in clause (ii) of section 1866(a)(2)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished during por-
tions of cost reporting periods occurring on or after Octo-
ber 1, 1997.
SEC. 4412. EXTENSION OF REDUCTIONS IN PAYMENTS FOR
COSTS OF HOSPITAL OUTPATIENT SERVICES.
(a) REDUCTION IN PAYMENTS FOR CAPITAL-RELAT-
ED
COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.
1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through
1998’’ and inserting ‘‘through 1999 and during fiscal year
2000 before January 1, 2000’’.
(b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—
Section 
1861(v)(1)(S)(ii)(II) 
(42 
U.S.C.
1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through
1998’’ and inserting ‘‘through 1999 and during fiscal year
2000 before January 1, 2000’’.
SEC. 4413. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL
OUTPATIENT DEPARTMENT SERVICES.
(a) IN GENERAL.—Section 1833 (42 U.S.C. 1395l)
is amended by adding at the end the following:
428
‘‘(t) PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL
OUTPATIENT DEPARTMENT SERVICES.—
‘‘(1) IN
GENERAL.—With respect to hospital
outpatient services designated by the Secretary (in
this section referred to as ‘covered OPD services’)
and furnished during a year beginning with 1999,
the amount of payment under this part shall be de-
termined under a prospective payment system estab-
lished by the Secretary in accordance with this sub-
section.
‘‘(2) SYSTEM REQUIREMENTS.—Under the pay-
ment system—
‘‘(A) the Secretary shall develop a classi-
fication system for covered OPD services;
‘‘(B) the Secretary may establish groups of
covered OPD services, within the classification
system described in subparagraph (A), so that
services classified within each group are com-
parable clinically and with respect to the use of
resources;
‘‘(C) the Secretary shall, using data on
claims from 1996 and using data from the most
recent available cost reports, establish relative
payment weights for covered OPD services (and
any groups of such services described in sub-
429
paragraph (B)) based on median hospital costs
and shall determine projections of the frequency
of utilization of each such service (or group of
services) in 1999;
‘‘(D) the Secretary shall determine a wage
adjustment factor to adjust the portion of pay-
ment and coinsurance attributable to labor-re-
lated costs for relative differences in labor and
labor-related costs across geographic regions in
a budget neutral manner;
‘‘(E) the Secretary shall establish other ad-
justments, in a budget neutral manner, as de-
termined to be necessary to ensure equitable
payments, such as outlier adjustments, adjust-
ments to account for variations in coinsurance
payments for procedures with similar resource
costs, or adjustments for certain classes of hos-
pitals; and
‘‘(F) the Secretary shall develop a method
for controlling unnecessary increases in the vol-
ume of covered OPD services.
‘‘(3) CALCULATION OF BASE AMOUNTS.—
‘‘(A) AGGREGATE AMOUNTS THAT WOULD
BE
PAYABLE
IF
DEDUCTIBLES
WERE
DIS-
REGARDED.—The Secretary shall estimate the
430
total amounts that would be payable from the
Trust Fund under this part for covered OPD
services in 1999, determined without regard to
this subsection, as though the deductible under
section 1833(b) did not apply, and as though
the 
coinsurance 
described 
in 
section
1866(a)(2)(A)(ii) (as in effect before the date
of the enactment of this subsection) continued
to apply.
‘‘(B) 
UNADJUSTED
COPAYMENT
AMOUNT.—
‘‘(i) IN
GENERAL.—For purposes of
this subsection, subject to clause (ii), the
‘unadjusted copayment amount’ applicable
to a covered OPD service (or group of such
services) is 20 percent of national median
of the charges for the service (or services
within the group) furnished during 1996,
updated to 1999 using the Secretary’s esti-
mate of charge growth during the period.
‘‘(ii) ADJUSTED TO BE 20 PERCENT
WHEN FULLY PHASED IN.—If the pre-de-
ductible payment percentage for a covered
OPD service (or group of such services)
furnished in a year would be equal to or
431
exceed 80 percent, then the unadjusted co-
payment amount shall be 25 percent of
amount determined under subparagraph
(D)(i).
‘‘(iii) RULES FOR NEW SERVICES.—
The Secretary shall establish rules for es-
tablishment of an unadjusted copayment
amount for a covered OPD service not fur-
nished during 1996, based upon its classi-
fication within a group of such services.
‘‘(C) CALCULATION OF CONVERSION FAC-
TORS.—
‘‘(I) IN
GENERAL.—The Sec-
retary shall establish a 1999 conver-
sion factor for determining the medi-
care pre-deductible OPD fee payment
amounts for each covered OPD serv-
ice (or group of such services) fur-
nished in 1999. Such conversion fac-
tor shall be established on the basis of
the weights and frequencies described
in paragraph (2)(C) and in a manner
such that the sum for all services and
groups of the products (described in
subclause (II) for each such service or
432
group) equals the total projected
amount described in subparagraph
(A).
‘‘(II) 
PRODUCT
DESCRIBED.—The
product described in this subclause, for a
service or group, is the product of the med-
icare pre-deductible OPD fee payment
amounts (taking into account appropriate
adjustments 
described 
in 
paragraphs
(2)(D) and (2)(E)) and the frequencies for
such service or group.
‘‘(ii) SUBSEQUENT
YEARS.—Subject
to paragraph (8)(B), the Secretary shall
establish a conversion factor for covered
OPD services furnished in subsequent
years in an amount equal to the conversion
factor established under this subparagraph
and applicable to such services furnished in
the previous year increased by the OPD
payment increase factor specified under
clause (iii) for the year involved.
‘‘(iii) OPD PAYMENT INCREASE FAC-
TOR.—For purposes of this subparagraph,
the ‘OPD payment increase factor’ for
433
services furnished in a year is equal to the
sum of—
‘‘(I) market basket percentage in-
crease 
(applicable 
under 
section
1886(b)(3)(B)(iii) to hospital dis-
charges occurring during the fiscal
year ending in such year, and
‘‘(II) in the case of a covered
OPD service (or group of such serv-
ices) furnished in a year in which the
pre-deductible 
payment 
percentage
would not exceed 80 percent, 3.5 per-
centage points, but in no case greater
than such number of percentage
points as will result in the pre-deduct-
ible payment percentage exceeding 80
percent.
In applying the previous sentence for years
beginning with 2000, the Secretary may
substitute for the market basket percent-
age increase under subclause (I) an annual
percentage increase that is computed and
applied with respect to covered OPD serv-
ices furnished in a year in the same man-
ner as the market basket percentage in-
434
crease is determined and applied to inpa-
tient hospital services for discharges occur-
ring in a fiscal year.
‘‘(D) PRE-DEDUCTIBLE
PAYMENT
PER-
CENTAGE.—The pre-deductible payment per-
centage for a covered OPD service (or group of
such services) furnished in a year is equal to
the ratio of—
‘‘(i) the conversion factor established
under subparagraph (C) for the year, mul-
tiplied by the weighting factor established
under paragraph (2)(C) for the service (or
group), to
‘‘(ii) the sum of the amount deter-
mined under clause (i) and the unadjusted
copayment amount determined under sub-
paragraph (B) for such service or group.
‘‘(E) CALCULATION
OF
MEDICARE
OPD
FEE
SCHEDULE
AMOUNTS.—The 
Secretary
shall compute a medicare OPD fee schedule
amount for each covered OPD service (or group
of such services) furnished in a year, in an
amount equal to the product of—
‘‘(i) the conversion factor computed
under subparagraph (C) for the year, and
435
‘‘(ii) the relative payment weight (de-
termined under paragraph (2)(C)) for the
service or group.
‘‘(4) 
MEDICARE
PAYMENT
AMOUNT.—The
amount of payment made from the Trust Fund
under this part for a covered OPD service (and such
services classified within a group) furnished in a
year is determined as follows:
‘‘(A) FEE
SCHEDULE
AND
COPAYMENT
AMOUNT.—Add (i) the medicare OPD fee
schedule amount (computed under paragraph
(3)(E)) for the service or group and year, and
(ii) the unadjusted copayment amount (deter-
mined under paragraph (3)(B)) for the service
or group.
‘‘(B) SUBTRACT
APPLICABLE
DEDUCT-
IBLE.—Reduce the adjusted sum by the amount
of the deductible under section 1833(b), to the
extent applicable.
‘‘(C) APPLY PAYMENT PROPORTION TO RE-
MAINDER.—Multiply the amount so determined
under subparagraph (B) by the pre-deductible
payment percentage (as determined under para-
graph (3)(D)) for the service or group and year
involved.
436
‘‘(D) 
LABOR-RELATED
ADJUSTMENT.—
The amount of payment is the product deter-
mined under subparagraph (C) with the labor-
related portion of such product adjusted for rel-
ative differences in the cost of labor and other
factors determined by the Secretary, as com-
puted under paragraph (2)(D).
‘‘(5) COPAYMENT AMOUNT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the copayment amount
under this subsection is determined as follows:
‘‘(i) 
UNADJUSTED
COPAYMENT.—
Compute the amount by which the amount
described in paragraph (4)(B) exceeds the
amount of payment determined under
paragraph (4)(C).
‘‘(ii) LABOR ADJUSTMENT.—The co-
payment amount is the difference deter-
mined under clause (i) with the labor-relat-
ed portion of such difference adjusted for
relative differences in the cost of labor and
other factors determined by the Secretary,
as computed under paragraphs (2)(D).
The adjustment under this clause shall be
made in a manner that does not result in
437
any change in the aggregate copayments
made in any year if the adjustment had
not been made.
‘‘(B) ELECTION TO OFFER REDUCED CO-
PAYMENT AMOUNT.—The Secretary shall estab-
lish a procedure under which a hospital, before
the beginning of a year (beginning with 1999),
may elect to reduce the copayment amount oth-
erwise established under subparagraph (A) for
some or all covered OPD services to an amount
that is not less than 25 percent of the medicare
OPD fee schedule amount (computed under
paragraph (3)(E)) for the service involved, ad-
justed for relative differences in the cost of
labor and other factors determined by the Sec-
retary, as computed under subparagraphs (D)
and (E) of paragraph (2). Under such proce-
dures, such reduced copayment amount may
not be further reduced or increased during the
year involved and the hospital may disseminate
information on the reduction of copayment
amount effected under this subparagraph.
‘‘(C) NO
IMPACT
ON
DEDUCTIBLES.—
Nothing in this paragraph shall be construed as
438
affecting a hospital’s authority to waive the
charging of a deductible under section 1833(b).
‘‘(6) PERIODIC
REVIEW
AND
ADJUSTMENTS
COMPONENTS OF PROSPECTIVE PAYMENT SYSTEM.—
‘‘(A) PERIODIC
REVIEW.—The Secretary
may periodically review and revise the groups,
the relative payment weights, and the wage and
other adjustments described in paragraph (2) to
take into account changes in medical practice,
changes in technology, the addition of new serv-
ices, new cost data, and other relevant informa-
tion and factors.
‘‘(B) 
BUDGET
NEUTRALITY
ADJUST-
MENT.—If the Secretary makes adjustments
under subparagraph (A), then the adjustments
for a year may not cause the estimated amount
of expenditures under this part for the year to
increase or decrease from the estimated amount
of expenditures under this part that would have
been made if the adjustments had not been
made.
‘‘(C) UPDATE FACTOR.—If the Secretary
determines under methodologies described in
subparagraph (2)(F) that the volume of services
paid for under this subsection increased beyond
439
amounts established through those methodolo-
gies, the Secretary may appropriately adjust the
update to the conversion factor otherwise appli-
cable in a subsequent year.
‘‘(7) SPECIAL
RULE
FOR
AMBULANCE
SERV-
ICES.—The Secretary shall pay for hospital out-
patient services that are ambulance services on the
basis described in the matter in subsection (a)(1)
preceding subparagraph (A).
‘‘(8) SPECIAL
RULES
FOR
CERTAIN
HOS-
PITALS.—In the case of hospitals described in sec-
tion 1886(d)(1)(B)(v)—
‘‘(A) the system under this subsection shall
not apply to covered OPD services furnished be-
fore January 1, 2000; and
‘‘(B) the Secretary may establish a sepa-
rate conversion factor for such services in a
manner that specifically takes into account the
unique costs incurred by such hospitals by vir-
tue of their patient population and service in-
tensity.
‘‘(9) LIMITATION ON REVIEW.—There shall be
no administrative or judicial review under section
1869, 1878, or otherwise of—
440
‘‘(A) the development of the classification
system under paragraph (2), including the es-
tablishment of groups and relative payment
weights for covered OPD services, of wage ad-
justment factors, other adjustments, and meth-
ods described in paragraph (2)(F);
‘‘(B) the calculation of base amounts
under paragraph (3);
‘‘(C) periodic adjustments made under
paragraph (6); and
‘‘(D) the establishment of a separate con-
version factor under paragraph (8)(B).’’.
(b) COINSURANCE.—Section 1866(a)(2)(A)(ii) (42
U.S.C. 1395cc(a)(2)(A)(ii)) is amended by adding at the
end the following: ‘‘In the case of items and services for
which payment is made under part B under the prospec-
tive payment system established under section 1833(t),
clause (ii) of the first sentence shall be applied by sub-
stituting for 20 percent of the reasonable charge, the ap-
plicable copayment amount established under section
1833(t)(5).’’.
(c) TREATMENT
OF REDUCTION
IN COPAYMENT
AMOUNT.—Section 1128A(i)(6) (42 U.S.C. 1320a–
7a(i)(6)) is amended—
441
(1) by striking ‘‘or’’ at the end of subparagraph
(B),
(2) by striking the period at the end of sub-
paragraph (C) and inserting ‘‘; or’’, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(D) a reduction in the copayment amount
for 
covered 
OPD 
services 
under 
section
1833(t)(5)(B).’’.
(d) CONFORMING AMENDMENTS.—
(1) APPROVED ASC PROCEDURES PERFORMED
IN HOSPITAL OUTPATIENT DEPARTMENTS.—
(A)(i) Section 1833(i)(3)(A) (42 U.S.C.
13951(i)(3)(A)) is amended—
(I) by inserting ‘‘before January 1,
1999,’’ after ‘‘furnished’’, and
(II) by striking ‘‘in a cost reporting
period’’.
(ii) The amendment made by clause (i)
shall apply to services furnished on or after
January 1, 1999.
(B) 
Section 
1833(a)(4) 
(42 
U.S.C.
13951(a)(4)) is amended by inserting ‘‘or sub-
section (t)’’ before the semicolon.
442
(2) RADIOLOGY AND OTHER DIAGNOSTIC PRO-
CEDURES.—
(A) Section 1833(n)(1)(A) (42 U.S.C.
1395l(n)(1)(A)) is amended by inserting ‘‘and
before January 1, 1999,’’ after ‘‘October 1,
1988,’’ and after ‘‘October 1, 1989,’’.
(B) Section 1833(a)(2)(E) (42 U.S.C.
1395l(a)(2)(E)) is amended by inserting ‘‘or,
for services or procedures performed on or after
January 1, 1999, (t)’’ before the semicolon.
(3) OTHER
HOSPITAL
OUTPATIENT
SERV-
ICES.—Section 
–1833(a)(2)(B) 
(42 
U.S.C.
1395l(a)(2)(B)) is amended—
(A) in clause (i), by inserting ‘‘furnished
before January 1, 1999,’’ after ‘‘(i)’’,
(B) in clause (ii), by inserting ‘‘before Jan-
uary 1, 1999,’’ after ‘‘furnished’’,
(C) by redesignating clause (iii) as clause
(iv),and
(D) by inserting after clause (ii), the fol-
lowing new clause:
‘‘(iii) if such services are furnished on
or after January 1, 1999, the amount de-
termined under subsection (t), or’’.
443
Subchapter B—Rehabilitation Services
SEC. 4421. REHABILITATION AGENCIES AND SERVICES.
(a) PAYMENT BASED ON FEE SCHEDULE.—
(1) 
SPECIAL
PAYMENT
RULES.—Section
1833(a) (42 U.S.C. 1395l(a)) is amended—
(A) in paragraph (2) in the matter before
subparagraph (A), by inserting ‘‘(C),’’ before
‘‘(D)’’;
(B) in paragraph (6), by striking ‘‘and’’ at
the end;
(C) in paragraph (7), by striking the pe-
riod at the end and inserting ‘‘; and’’;
(D) by adding at the end the following new
paragraph:
‘‘(8) in the case of services described in section
1832(a)(2)(C) (that are not described in section
1832(a)(2)(B)), the amounts described in section
1834(k).’’.
(2) 
PAYMENT
RATES.—Section 
1834 
(42
U.S.C. 1395m) is amended by adding at the end the
following new subsection:
‘‘(k) PAYMENT FOR OUTPATIENT THERAPY SERV-
ICES.—
‘‘(1) IN GENERAL.—With respect to outpatient
physical therapy services (which includes outpatient
444
speech-language pathology services) and outpatient
occupational therapy services for which payment is
determined under this subsection, the payment basis
shall be—
‘‘(A) for services furnished during 1998,
the amount determined under paragraph (2); or
‘‘(B) for services furnished during a subse-
quent year, 80 percent of the lesser of—
‘‘(i) the actual charge for the services,
or
‘‘(ii) 
the 
applicable 
fee 
schedule
amount (as defined in paragraph (3)) for
the services.
‘‘(2) PAYMENT IN 1998 BASED UPON CHARGES
OR
ADJUSTED
REASONABLE
COSTS.—The amount
under this paragraph for services is the lesser of—
‘‘(A) the charges imposed for the services,
or
‘‘(B) the adjusted reasonable costs (as de-
fined in paragraph (4)) for the services,
less 20 percent of the amount of the charges im-
posed for such services.
‘‘(3) APPLICABLE FEE SCHEDULE AMOUNT.—
In this paragraph, the term ‘applicable fee schedule
amount’ means, with respect to services furnished in
445
a year, the fee schedule amount established under
section 1848 for such services furnished during the
year or, if there is no such fee schedule amount es-
tablished for such services, for such comparable
services as the Secretary specifies.
‘‘(4) ADJUSTED REASONABLE COSTS.—In para-
graph (2), the term ‘adjusted reasonable costs’
means reasonable costs determined reduced by—
‘‘(A) 5.8 percent of the reasonable costs
for operating costs, and
‘‘(B) 10 percent of the reasonable costs for
capital costs.
‘‘(5) UNIFORM CODING.—For claims for serv-
ices submitted on or after April 1, 1998, for which
the amount of payment is determined under this
subsection, the claim shall include a code (or codes)
under a uniform coding system specified by the Sec-
retary that identifies the services furnished.
‘‘(6) RESTRAINT ON BILLING.—The provisions
of 
subparagraphs 
(A) 
and 
(B) 
of 
section
1842(b)(18) shall apply to therapy services for
which payment is made under this subsection in the
same manner as they apply to services provided by
a practitioner described in section 1842(b)(18)(C).’’.
446
(b) APPLICATION OF STANDARDS TO OUTPATIENT
OCCUPATIONAL AND PHYSICAL THERAPY SERVICES PRO-
VIDED AS AN INCIDENT TO A PHYSICIAN’S PROFESSIONAL
SERVICES.—Section 1862(a), as amended by section
4401(b), (42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(16);
(2) by striking the period at the end of para-
graph (17) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (17) the fol-
lowing:
‘‘(18) in the case of outpatient occupational
therapy services or outpatient physical therapy serv-
ices furnished as an incident to a physician’s profes-
sional 
services 
(as 
described 
in 
section
1861(s)(2)(A)), that do not meet the standards and
conditions under the second sentence of section
1861(g) or 1861(p) as such standards and condi-
tions would apply to such therapy services if fur-
nished by a therapist.’’.
(c) APPLYING FINANCIAL LIMITATION TO ALL RE-
HABILITATION SERVICES.—Section 1833(g) (42 U.S.C.
1395l(g)) is amended—
(1) in the first sentence, by striking ‘‘services
described in the second sentence of section 1861(p)’’
447
and inserting ‘‘physical therapy services of the type
described in section 1861(p) (regardless of who fur-
nishes the services or whether the services may be
covered as physicians’ services so long as the serv-
ices are furnished other than in a hospital setting)’’,
and
(2) in the second sentence, by striking ‘‘out-
patient occupational therapy services which are de-
scribed in the second sentence of section 1861(p)
through the operation of section 1861(g)’’ and in-
serting ‘‘occupational therapy services (of the type
that are described in section 1861(p) through the
operation of section 1861(g)), regardless of who fur-
nishes the services or whether the services may be
covered as physicians’ services so long as the serv-
ices are furnished other than in a hospital setting’’.
(d) EFFECTIVE DATE.—The amendments made by
this section apply to services furnished on or after Janu-
ary 1, 1998; except that the amendments made by sub-
section (c) apply to services furnished on or after January
1, 1999.
SEC. 4422. COMPREHENSIVE OUTPATIENT REHABILITA-
TION FACILITIES (CORF).
(a) PAYMENT BASED ON FEE SCHEDULE.—
448
(1) 
SPECIAL
PAYMENT
RULES.—Section
1833(a) (42 U.S.C. 1395l(a)), as amended by sec-
tion 4421(a), is amended—
(A) in paragraph (3), by striking ‘‘sub-
paragraphs (D) and (E) of section 1832(a)(2)’’
and inserting ‘‘section 1832(a)(2)(E)’’;
(B) in paragraph (7), by striking ‘‘and’’ at
the end;
(C) in paragraph (8), by striking the pe-
riod at the end and inserting ‘‘; and’’;
(D) by adding at the end the following new
paragraph:
‘‘(9) in the case of services described in section
1832(a)(2)(E), the amounts described in section
1834(k).’’.
(2) PAYMENT
RATES.—Section 1834(k) (42
U.S.C. 1395m(k)), as added by section 4421(a), is
amended—
(A) in the heading, by inserting ‘‘AND
COMPREHENSIVE
OUTPATIENT
REHABILITA-
TION FACILITY SERVICES’’ after ‘‘THERAPY
SERVICES’’; and
(B) in paragraph (1), by inserting ‘‘and
with respect to comprehensive outpatient reha-
449
bilitation facility services’’ after ‘‘occupational
therapy services’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to services furnished on or after
January 1, 1998, and to portions of cost reporting periods
occurring on or after such date.
Subchapter C—Ambulance Services
SEC. 4431. PAYMENTS FOR AMBULANCE SERVICES.
(a) INTERIM REDUCTIONS.—
(1) PAYMENTS DETERMINED ON REASONABLE
COST
BASIS.—Section 
1861(v)(1) 
(42 
U.S.C.
1395x(v)(1)) is amended by adding at the end the
following new subparagraph:
‘‘(U) In determining the reasonable cost of am-
bulance services (as described in subsection (s)(7))
provided during a fiscal year (beginning with fiscal
year 1998 and ending with fiscal year 2002), the
Secretary shall not recognize the costs per trip in ex-
cess of costs recognized as reasonable for ambulance
services provided on a per trip basis during the pre-
vious fiscal year after application of this subpara-
graph, increased by the percentage increase in the
consumer price index for all urban consumers (U.S.
city average) as estimated by the Secretary for the
12-month period ending with the midpoint of the fis-
450
cal year involved reduced (in the case of each of fis-
cal years 1998 and 1999) by 1 percentage point.’’.
(2) PAYMENTS DETERMINED ON REASONABLE
CHARGE
BASIS.—Section 
1842(b) 
(42 
U.S.C.
1395u(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(19) For purposes of section 1833(a)(1), the reason-
able charge for ambulance services (as described in section
1861(s)(7)) provided during a fiscal year (beginning with
fiscal year 1998 and ending with fiscal year 2002) may
not exceed the reasonable charge for such services pro-
vided during the previous fiscal year after the application
of this subparagraph, increased by the percentage increase
in the consumer price index for all urban consumers (U.S.
city average) as estimated by the Secretary for the 12-
month period ending with the midpoint of the year in-
volved reduced (in the case of each of fiscal years 1998
and 1999) by 1 percentage point.’’.
(b) ESTABLISHMENT OF PROSPECTIVE FEE SCHED-
ULE.—
(1) PAYMENT
IN
ACCORDANCE
WITH
FEE
SCHEDULE.—Section 
1833(a)(1) 
(42 
U.S.C.
1395l(a)(1)), as amended by section 4619(b)(1), is
amended—
451
(A) by striking ‘‘and (P)’’ and inserting
‘‘(P)’’; and
(B) by striking the semicolon at the end
and inserting the following: ‘‘, and (Q) with re-
spect to ambulance service, the amounts paid
shall be 80 percent of the lesser of the actual
charge for the services or the amount deter-
mined by a fee schedule established by the Sec-
retary under section 1834(l);’’.
(2) ESTABLISHMENT
OF
SCHEDULE.—Section
1834 (42 U.S.C. 1395m), as amended by section
4421(a)(2), is amended by adding at the end the fol-
lowing new subsection:
‘‘(l) ESTABLISHMENT OF FEE SCHEDULE FOR AM-
BULANCE SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a fee schedule for payment for ambulance serv-
ices under this part through a negotiated rulemaking
process described in title 5, United States Code, and
in accordance with the requirements of this sub-
section.
‘‘(2) CONSIDERATIONS.—In establishing such
fee schedule the Secretary shall—
452
‘‘(A) establish mechanisms to control in-
creases in expenditures for ambulance services
under this part;
‘‘(B) establish definitions for ambulance
services which link payments to the type of
services provided;
‘‘(C) consider appropriate regional and
operational differences;
‘‘(D) consider adjustments to payment
rates to account for inflation and other relevant
factors; and
‘‘(E) phase in the application of the pay-
ment rates under the fee schedule in an effi-
cient and fair manner.
‘‘(3) SAVINGS.—In establishing such fee sched-
ule the Secretary shall—
‘‘(A) ensure that the aggregate amount of
payments made for ambulance services under
this part during 2000 does not exceed the ag-
gregate amount of payments which would have
been made for such services under this part
during such year if the amendments made by
section 4431 of the Balanced Budget Act of
1997 had not been made; and
453
‘‘(B) set the payment amounts provided
under the fee schedule for services furnished in
2001 and each subsequent year at amounts
equal to the payment amounts under the fee
schedule for service furnished during the pre-
vious year, increased by the percentage increase
in the consumer price index for all urban con-
sumers (U.S. city average) for the 12-month
period ending with June of the previous year.
‘‘(4) CONSULTATION.—In establishing the fee
schedule for ambulance services under this sub-
section, the Secretary shall consult with various na-
tional organizations representing individuals and en-
tities who furnish and regulate ambulance services
and share with such organizations relevant data in
establishing such schedule.
‘‘(5) LIMITATION ON REVIEW.—There shall be
no administrative or judicial review under section
1869 or otherwise of the amounts established under
the fee schedule for ambulance services under this
subsection, including matters described in paragraph
(2).
‘‘(6) RESTRAINT ON BILLING.—The provisions
of 
subparagraphs 
(A) 
and 
(B) 
of 
section
1842(b)(18) shall apply to ambulance services for
454
which payment is made under this subsection in the
same manner as they apply to services provided by
a practitioner described in section 1842(b)(18)(C).’’.
(3) EFFECTIVE DATE.—The amendments made
by this section apply to ambulance services furnished
on or after January 1, 2000.
(c) AUTHORIZING PAYMENT FOR PARAMEDIC INTER-
CEPT SERVICE PROVIDERS IN RURAL COMMUNITIES.—In
promulgating regulations to carry out section 1861(s)(7)
of the Social Security Act (42 U.S.C. 1395x(s)(7)) with
respect to the coverage of ambulance service, the Secretary
of Health and Human Services may include coverage of
advanced life support services (in this subsection referred
to as ‘‘ALS intercept services’’) provided by a paramedic
intercept service provider in a rural area if the following
conditions are met:
(1) The ALS intercept services are provided
under a contract with one or more volunteer ambu-
lance services and are medically necessary based on
the health condition of the individual being trans-
ported.
(2) The volunteer ambulance service involved—
(A) is certified as qualified to provide am-
bulance service for purposes of such section,
455
(B) provides only basic life support serv-
ices at the time of the intercept, and
(C) is prohibited by State law from billing
for any services.
(3) The entity supplying the ALS intercept
services—
(A) is certified as qualified to provide such
services under the medicare program under title
XVIII of the Social Security Act, and
(B) bills all recipients who receive ALS
intercept services from the entity, regardless of
whether or not such recipients are medicare
beneficiaries.
SEC. 4432. DEMONSTRATION OF COVERAGE OF AMBU-
LANCE 
SERVICES 
UNDER 
MEDICARE
THROUGH 
CONTRACTS 
WITH 
UNITS 
OF
LOCAL GOVERNMENT.
(a) DEMONSTRATION PROJECT CONTRACTS
WITH
LOCAL GOVERNMENTS.—The Secretary of Health and
Human Services shall establish up to 3 demonstration
projects under which, at the request of a county or parish,
the Secretary enters into a contract with the county or
parish under which—
(1) the county or parish furnishes (or arranges
for the furnishing) of ambulance services for which
456
payment may be made under part B of title XVIII
of the Social Security Act for individuals residing in
the county or parish who are enrolled under such
part, except that the county or parish may not enter
into the contract unless the contract covers at least
80 percent of the individuals residing in the county
or parish who are enrolled under such part;
(2) any individual or entity furnishing ambu-
lance services under the contract meets the require-
ments otherwise applicable to individuals and enti-
ties furnishing such services under such part; and
(3) for each month during which the contract is
in effect, the Secretary makes a capitated payment
to the county or parish in accordance with sub-
section (b).
The projects may extend over a period of not to exceed
3 years each.
(b) AMOUNT OF PAYMENT.—
(1) IN GENERAL.—The amount of the monthly
payment made for months occurring during a cal-
endar year to a county or parish under a demonstra-
tion project contract under subsection (a) shall be
equal to the product of—
457
(A) the Secretary’s estimate of the number
of individuals covered under the contract for the
month; and
(B) 1⁄12 of the capitated payment rate for
the year established under paragraph (2).
(2) CAPITATED PAYMENT RATE DEFINED.—In
this subsection, the ‘‘capitated payment rate’’ appli-
cable to a contract under this subsection for a cal-
endar year is equal to 95 percent of—
(A) for the first calendar year for which
the contract is in effect, the average annual per
capita payment made under part B of title
XVIII of the Social Security Act with respect to
ambulance services furnished to such individ-
uals during the 3 most recent calendar years
for which data on the amount of such payment
is available; and
(B) for a subsequent year, the amount pro-
vided under this paragraph for the previous
year increased by the percentage increase in the
consumer price index for all urban consumers
(U.S. city average) for the 12-month period
ending with June of the previous year.
(c) OTHER TERMS OF CONTRACT.—The Secretary
and the county or parish may include in a contract under
458
this section such other terms as the parties consider ap-
propriate, including—
(1) covering individuals residing in additional
counties or parishes (under arrangements entered
into between such counties or parishes and the coun-
ty or parish involved);
(2) permitting the county or parish to transport
individuals to non-hospital providers if such provid-
ers are able to furnish quality services at a lower
cost than hospital providers; or
(3) implementing such other innovations as the
county or parish may propose to improve the quality
of ambulance services and control the costs of such
services.
(d) CONTRACT PAYMENTS IN LIEU OF OTHER BENE-
FITS.—Payments under a contract to a county or parish
under this section shall be instead of the amounts which
(in the absence of the contract) would otherwise be pay-
able under part B of title XVIII of the Social Security
Act for the services covered under the contract which are
furnished to individuals who reside in the county or parish.
(e) REPORT
ON EFFECTS
OF CAPITATED CON-
TRACTS.—
(1) STUDY.—The Secretary shall evaluate the
demonstration projects conducted under this section.
459
Such evaluation shall include an analysis of the
quality and cost-effectiveness of ambulance services
furnished under the projects.
(2) REPORT.—Not later than January 1, 2000,
the Secretary shall submit a report to Congress on
the study conducted under paragraph (1), and shall
include in the report such recommendations as the
Secretary considers appropriate, including rec-
ommendations regarding modifications to the meth-
odology used to determine the amount of payments
made under such contracts and extending or expand-
ing such projects.
CHAPTER 3—PAYMENT UNDER PARTS A
AND B
SEC. 4441. PROSPECTIVE PAYMENT FOR HOME HEALTH
SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 4011, is amended by adding
at the end the following new section:
‘‘PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES
‘‘SEC. 1895. (a) IN GENERAL.—Notwithstanding sec-
tion 1861(v), the Secretary shall provide, for cost report-
ing periods beginning on or after October 1, 1999, for pay-
ments for home health services in accordance with a pro-
spective payment system established by the Secretary
under this section.
460
‘‘(b) SYSTEM OF PROSPECTIVE PAYMENT FOR HOME
HEALTH SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish under this subsection a prospective payment sys-
tem for payment for all costs of home health serv-
ices. Under the system under this subsection all
services covered and paid on a reasonable cost basis
under the medicare home health benefit as of the
date of the enactment of the this section, including
medical supplies, shall be paid for on the basis of a
prospective payment amount determined under this
subsection and applicable to the services involved. In
implementing the system, the Secretary may provide
for a transition (of not longer than 4 years) during
which a portion of such payment is based on agency-
specific costs, but only if such transition does not re-
sult in aggregate payments under this title that ex-
ceed the aggregate payments that would be made if
such a transition did not occur.
‘‘(2) UNIT OF PAYMENT.—In defining a pro-
spective payment amount under the system under
this subsection, the Secretary shall consider an ap-
propriate unit of service and the number, type, and
duration of visits provided within that unit, potential
changes in the mix of services provided within that
461
unit and their cost, and a general system design that
provides for continued access to quality services.
‘‘(3) PAYMENT BASIS.—
‘‘(A) INITIAL BASIS.—
‘‘(i) IN GENERAL.—Under such sys-
tem the Secretary shall provide for com-
putation of a standard prospective pay-
ment amount (or amounts). Such amount
(or amounts) shall initially be based on the
most current audited cost report data
available to the Secretary and shall be
computed in a manner so that the total
amounts payable under the system for fis-
cal year 2000 shall be equal to the total
amount that would have been made if the
system had not been in effect but if the re-
duction in limits described in clause (ii)
had been in effect. Such amount shall be
standardized in a manner that eliminates
the effect of variations in relative case mix
and wage levels among different home
health agencies in a budget neutral manner
consistent with the case mix and wage level
adjustments provided under paragraph
(4)(A). Under the system, the Secretary
462
may recognize regional differences or dif-
ferences based upon whether or not the
services or agency are in an urbanized
area.
‘‘(ii) REDUCTION.—The reduction de-
scribed in this clause is a reduction by 15
percent in the cost limits and per bene-
ficiary 
limits 
described 
in 
section
1861(v)(1)(L), as those limits are in effect
on September 30, 1999.
‘‘(B) ANNUAL UPDATE.—
‘‘(i) IN GENERAL.—The standard pro-
spective payment amount (or amounts)
shall be adjusted for each fiscal year (be-
ginning with fiscal year 2001) in a pro-
spective manner specified by the Secretary
by the home health market basket percent-
age increase applicable to the fiscal year
involved.
‘‘(ii) HOME HEALTH MARKET BASKET
PERCENTAGE INCREASE.—For purposes of
this subsection, the term ‘home health
market basket percentage increase’ means,
with respect to a fiscal year, a percentage
(estimated by the Secretary before the be-
463
ginning of the fiscal year) determined and
applied with respect to the mix of goods
and services included in home health serv-
ices in the same manner as the market
basket percentage increase under section
1886(b)(3)(B)(iii) is determined and ap-
plied to the mix of goods and services com-
prising inpatient hospital services for the
fiscal year.
‘‘(C) ADJUSTMENT
FOR
OUTLIERS.—The
Secretary shall reduce the standard prospective
payment amount (or amounts) under this para-
graph applicable to home health services fur-
nished during a period by such proportion as
will result in an aggregate reduction in pay-
ments for the period equal to the aggregate in-
crease in payments resulting from the applica-
tion of paragraph (5) (relating to outliers).
‘‘(4) PAYMENT COMPUTATION.—
‘‘(A) IN GENERAL.—The payment amount
for a unit of home health services shall be the
applicable 
standard 
prospective 
payment
amount adjusted as follows:
‘‘(i) CASE
MIX
ADJUSTMENT.—The
amount shall be adjusted by an appro-
464
priate case mix adjustment factor (estab-
lished under subparagraph (B)).
‘‘(ii) AREA WAGE ADJUSTMENT.—The
portion of such amount that the Secretary
estimates to be attributable to wages and
wage-related costs shall be adjusted for ge-
ographic differences in such costs by an
area wage adjustment factor (established
under subparagraph (C)) for the area in
which the services are furnished or such
other area as the Secretary may specify.
‘‘(B) ESTABLISHMENT OF CASE MIX AD-
JUSTMENT FACTORS.—The Secretary shall es-
tablish appropriate case mix adjustment factors
for home health services in a manner that ex-
plains a significant amount of the variation in
cost among different units of services.
‘‘(C) ESTABLISHMENT OF AREA WAGE AD-
JUSTMENT FACTORS.—The Secretary shall es-
tablish area wage adjustment factors that re-
flect the relative level of wages and wage-related
costs applicable to the furnishing of home
health services in a geographic area compared
to the national average applicable level. Such
465
factors may be the factors used by the Sec-
retary for purposes of section 1886(d)(3)(E).
‘‘(5) OUTLIERS.—The Secretary may provide
for an addition or adjustment to the payment
amount otherwise made in the case of outliers be-
cause of unusual variations in the type or amount of
medically necessary care. The total amount of the
additional payments or payment adjustments made
under this paragraph with respect to a fiscal year
may not exceed 5 percent of the total payments pro-
jected or estimated to be made based on the prospec-
tive payment system under this subsection in that
year.
‘‘(6) PRORATION
OF
PROSPECTIVE
PAYMENT
AMOUNTS.—If a beneficiary elects to transfer to, or
receive services from, another home health agency
within the period covered by the prospective payment
amount, the payment shall be prorated between the
home health agencies involved.
‘‘(c) REQUIREMENTS
FOR
PAYMENT
INFORMA-
TION.—With respect to home health services furnished on
or after October 1, 1998, no claim for such a service may
be paid under this title unless—
‘‘(1) the claim has the unique identifier (pro-
vided under section 1842(r)) for the physician who
466
prescribed the services or made the certification de-
scribed in section 1814(a)(2) or 1835(a)(2)(A); and
‘‘(2) in the case of a service visit described in
paragraph (1), (2), (3), or (4) of section 1861(m),
the claim has information (coded in an appropriate
manner) on the length of time of the service visit,
as measured in 15 minute increments.
‘‘(d) LIMITATION ON REVIEW.—There shall be no ad-
ministrative or judicial review under section 1869, 1878,
or otherwise of—
‘‘(1) the establishment of a transition period
under subsection (b)(1);
‘‘(2) the definition and application of payment
units under subsection (b)(2);
‘‘(3) the computation of initial standard pro-
spective 
payment 
amounts 
under 
subsection
(b)(3)(A) (including the reduction described in
clause (ii) of such subsection);
‘‘(4) the adjustment for outliers under sub-
section (b)(3)(C);
‘‘(5) case mix and area wage adjustments under
subsection (b)(4);
‘‘(6) any adjustments for outliers under sub-
section (b)(5); and
467
‘‘(7) the amounts or types of exceptions or ad-
justments under subsection (b)(7).’’.
(b) ELIMINATION OF PERIODIC INTERIM PAYMENTS
FOR HOME HEALTH AGENCIES.—Section 1815(e)(2) (42
U.S.C. 1395g(e)(2)) is amended—
(1) by inserting ‘‘and’’ at the end of subpara-
graph (C),
(2) by striking subparagraph (D), and
(3) by redesignating subparagraph (E) as sub-
paragraph (D).
(c) CONFORMING AMENDMENTS.—
(1) 
PAYMENTS
UNDER
PART
A.—Section
1814(b) (42 U.S.C. 1395f(b)) is amended in the
matter preceding paragraph (1) by striking ‘‘and
1886’’ and inserting ‘‘1886, and 1895’’.
(2) TREATMENT OF ITEMS AND SERVICES PAID
UNDER PART B.—
(A) PAYMENTS UNDER PART B.—Section
1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amend-
ed—
(i) by amending subparagraph (A) to
read as follows:
‘‘(A) with respect to home health services
(other than a covered osteoporosis drug) (as de-
fined in section 1861(kk)), the amount deter-
468
mined under the prospective payment system
under section 1895;’’;
(ii) by striking ‘‘and’’ at the end of
subparagraph (E);
(iii) by adding ‘‘and’’ at the end of
subparagraph (F); and
(iv) by adding at the end the following
new subparagraph:
‘‘(G) with respect to items and services de-
scribed in section 1861(s)(10)(A), the lesser
of—
‘‘(i) the reasonable cost of such serv-
ices, as determined under section 1861(v),
or
‘‘(ii) the customary charges with re-
spect to such services,
or, if such services are furnished by a public
provider of services, or by another provider
which demonstrates to the satisfaction of the
Secretary that a significant portion of its pa-
tients are low-income (and requests that pay-
ment be made under this provision), free of
charge or at nominal charges to the public, the
amount determined in accordance with section
1814(b)(2);’’.
469
(B) REQUIRING PAYMENT FOR ALL ITEMS
AND SERVICES TO BE MADE TO AGENCY.—
(i) IN GENERAL.—The first sentence
of 
section 
1842(b)(6) 
(42 
U.S.C.
1395u(b)(6)), as amended by section
4401(b)(2), is amended—
(I) by striking ‘‘and (E)’’ and in-
serting ‘‘(E)’’; and
(II) by striking the period at the
end and inserting the following: ‘‘,
and (F) in the case of home health
services furnished to an individual
who (at the time the item or service is
furnished) is under a plan of care of
a home health agency, payment shall
be made to the agency (without re-
gard to whether or not the item or
service was furnished by the agency,
by others under arrangement with
them made by the agency, or when
any other contracting or consulting
arrangement, or otherwise).’’.
(ii) CONFORMING AMENDMENT.—Sec-
tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)),
as amended by section 4401(b), is amend-
470
ed by striking ‘‘and section 1842(b)(6)(E)’’
and inserting ‘‘, section 1842(b)(6)(E),
and section 1842(b)(6)(F)’’.
(C) EXCLUSIONS FROM COVERAGE.—Sec-
tion 1862(a) (42 U.S.C. 1395y(a)), as amended
by sections 4401(b) and 4421(b), is amended—
(i) by striking ‘‘or’’ at the end of
paragraph (17);
(ii) by striking the period at the end
of paragraph (18) and inserting ‘‘; or’’;
and
(iii) inserting after paragraph (18) the
following new paragraph:
‘‘(19) where such expenses are for home health
services furnished to an individual who is under a
plan of care of the home health agency if the claim
for payment for such services is not submitted by
the agency.’’.
(d) EFFECTIVE DATE.—Except as otherwise pro-
vided, the amendments made by this section shall apply
to cost reporting periods beginning on or after October
1, 1999.
471
Subtitle G—Provisions Relating to
Part B Only
CHAPTER 1—PHYSICIANS’ SERVICES
SEC. 4601. ESTABLISHMENT OF SINGLE CONVERSION FAC-
TOR FOR 1998.
(a) IN GENERAL.—Section 1848(d)(1) (42 U.S.C.
1395w–4(d)(1)) is amended—
(1) by redesignating subparagraph (C) as sub-
paragraph (D), and
(2) by inserting after subparagraph (B) the fol-
lowing:
‘‘(C) SPECIAL RULES FOR 1998.—The sin-
gle conversion factor for 1998 under this sub-
section shall be the conversion factor for pri-
mary care services for 1997, increased by the
Secretary’s estimate of the weighted average of
the three separate updates that would otherwise
occur were it not for the enactment of chapter
1 of subtitle G of title X of the Balanced Budg-
et Act of 1997.’’.
(b) CONFORMING AMENDMENTS.—Section 1848 (42
U.S.C. 1395w–4) is amended—
(1) by striking ‘‘(or factors)’’ each place it ap-
pears in subsection (d)(1)(A) and (d)(1)(D)(ii) (as
redesignated by subsection (a)(1)),
472
(2) in subsection (d)(1)(A), by striking ‘‘or up-
dates’’,
(3) in subsection (d)(1)(D) (as redesignated by
subsection (a)(1)), by striking ‘‘(or updates)’’ each
place it appears, and
(4) in subsection (i)(1)(C), by striking ‘‘conver-
sion factors’’ and inserting ‘‘the conversion factor’’.
SEC. 4602. ESTABLISHING UPDATE TO CONVERSION FAC-
TOR TO MATCH SPENDING UNDER SUSTAIN-
ABLE GROWTH RATE.
(a) UPDATE.—
(1) IN
GENERAL.—Section 1848(d)(3) (42
U.S.C. 1395w–4(d)(3)) is amended to read as fol-
lows:
‘‘(3) UPDATE.—
‘‘(A) IN GENERAL.—Unless otherwise pro-
vided by law, subject to subparagraph (D) and
the budget-neutrality factor determined by the
Secretary under subsection (c)(2)(B)(ii), the
update to the single conversion factor estab-
lished in paragraph (1)(C) for a year beginning
with 1999 is equal to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI (as de-
473
fined in section 1842(i)(3)) for the year
(divided by 100), and
‘‘(ii) 1 plus the Secretary’s estimate of
the update adjustment factor for the year
(divided by 100),
minus 1 and multiplied by 100.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—For
purposes of subparagraph (A)(ii), the ‘update
adjustment factor’ for a year is equal to the
quotient (as estimated by the Secretary) of—
‘‘(i) the difference between (I) the
sum of the allowed expenditures for physi-
cians’ services (as determined under sub-
paragraph (C)) during the period begin-
ning July 1, 1997, and ending on June 30
of the year involved, and (II) the sum of
the amount of actual expenditures for phy-
sicians’ services furnished during the pe-
riod beginning July 1, 1997, and ending
on June 30 of the preceding year; divided
by
‘‘(ii) the actual expenditures for physi-
cians’ services for the 12-month period
ending on June 30 of the preceding year,
increased by the sustainable growth rate
474
under subsection (f) for the fiscal year
which begins during such 12-month period.
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—For purposes of this paragraph,
the allowed expenditures for physicians’ services
for the 12-month period ending with June 30
of—
‘‘(i) 1997 is equal to the actual ex-
penditures for physicians’ services fur-
nished during such 12-month period, as es-
timated by the Secretary; or
‘‘(ii) a subsequent year is equal to the
allowed expenditures for physicians’ serv-
ices for the previous year, increased by the
sustainable growth rate under subsection
(f) for the fiscal year which begins during
such 12-month period.
‘‘(D) RESTRICTION
ON
VARIATION
FROM
MEDICARE ECONOMIC INDEX.—Notwithstanding
the amount of the update adjustment factor de-
termined under subparagraph (B) for a year,
the update in the conversion factor under this
paragraph for the year may not be—
475
‘‘(i) greater than 100 times the fol-
lowing amount: (1.03 + (MEI percentage/
100)) -1; or
‘‘(ii) less than 100 times the following
amount: (0.93 + (MEI percentage/100))
-1,
where ‘MEI percentage’ means the Secretary’s
estimate of the percentage increase in the MEI
(as defined in section 1842(i)(3)) for the year
involved.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to the update for years
beginning with 1999.
(b) ELIMINATION OF REPORT.—Section 1848(d) (42
U.S.C. 1395w–4(d)) is amended by striking paragraph
(2).
SEC. 4603. REPLACEMENT OF VOLUME PERFORMANCE
STANDARD 
WITH 
SUSTAINABLE 
GROWTH
RATE.
(a) IN
GENERAL.—Section 1848(f) (42 U.S.C.
1395w–4(f)) is amended by striking paragraphs (2)
through (5) and inserting the following:
‘‘(2) SPECIFICATION OF GROWTH RATE.—The
sustainable growth rate for all physicians’ services
476
for a fiscal year (beginning with fiscal year 1998)
shall be equal to the product of—
‘‘(A) 1 plus the Secretary’s estimate of the
weighted average percentage increase (divided
by 100) in the fees for all physicians’ services
in the fiscal year involved,
‘‘(B) 1 plus the Secretary’s estimate of the
percentage change (divided by 100) in the aver-
age number of individuals enrolled under this
part (other than MedicarePlus plan enrollees)
from the previous fiscal year to the fiscal year
involved,
‘‘(C) 1 plus the Secretary’s estimate of the
projected percentage growth in real gross do-
mestic product per capita (divided by 100) from
the previous fiscal year to the fiscal year in-
volved, and
‘‘(D) 1 plus the Secretary’s estimate of the
percentage change (divided by 100) in expendi-
tures for all physicians’ services in the fiscal
year (compared with the previous fiscal year)
which will result from changes in law and regu-
lations, determined without taking into account
estimated changes in expenditures due to
changes in the volume and intensity of physi-
477
cians’ services resulting from changes in the up-
date to the conversion factor under subsection
(d)(3),
minus 1 and multiplied by 100.
‘‘(3) DEFINITIONS.—In this subsection:
‘‘(A) SERVICES INCLUDED IN PHYSICIANS’
SERVICES.—The term ‘physicians’ services’ in-
cludes other items and services (such as clinical
diagnostic laboratory tests and radiology serv-
ices), specified by the Secretary, that are com-
monly performed or furnished by a physician or
in a physician’s office, but does not include
services furnished to a MedicarePlus plan en-
rollee.
‘‘(B) MEDICAREPLUS PLAN ENROLLEE.—
The term ‘MedicarePlus plan enrollee’ means,
with respect to a fiscal year, an individual en-
rolled under this part who has elected to receive
benefits under this title for the fiscal year
through a MedicarePlus plan offered under part
C, and also includes an individual who is receiv-
ing benefits under this part through enrollment
with an eligible organization with a risk-sharing
contract under section 1876.’’.
478
(b) CONFORMING AMENDMENTS.—Section 1848(f)
(42 U.S.C. 1395w–4(f)) is amended—
(1) in the heading, by striking ‘‘VOLUME PER-
FORMANCE STANDARD RATES OF INCREASE’’ and
inserting ‘‘SUSTAINABLE GROWTH RATE’’; and
(2) in paragraph (1)—
(A) in the heading, by striking ‘‘VOLUME
PERFORMANCE
STANDARD
RATES
OF
IN-
CREASE’’ and inserting ‘‘SUSTAINABLE GROWTH
RATE’’,
(B) by striking subparagraphs (A) and
(B); and
(C) in paragraph (1)(C)—
(i) in the heading, by striking ‘‘PER-
FORMANCE
STANDARD
RATES
OF
IN-
CREASE’’ and inserting ‘‘SUSTAINABLE
GROWTH RATE’’;
(ii) in the first sentence, by striking
‘‘with 1991), the performance standard
rates of increase’’ and all that follows
through the first period and inserting
‘‘with 1999), the sustainable growth rate
for the fiscal year beginning in that year.’’;
and
479
(iii) in the second sentence, by strik-
ing ‘‘January 1, 1990, the performance
standard rate of increase under subpara-
graph (D) for fiscal year 1990’’ and insert-
ing ‘‘January 1, 1999, the sustainable
growth rate for fiscal year 1999’’.
SEC. 4604. PAYMENT RULES FOR ANESTHESIA SERVICES.
(a) IN GENERAL.—Section 1848(d)(1) (42 U.S.C.
1395w–4(d)(1)), as amended by section 4601, is amend-
ed—
(A) in subparagraph (C), striking ‘‘The
single’’ and inserting ‘‘Except as provided in
subparagraph (D), the single’’;
(B) by redesignating subparagraph (D) as
subparagraph (E); and
(C) by inserting after subparagraph (C)
the following new subparagraph:
‘‘(D) SPECIAL
RULES
FOR
ANESTHESIA
SERVICES.—The separate conversion factor for
anesthesia services for a year shall be equal to
46 percent of the single conversion factor estab-
lished for other physicians’ services, except as
adjusted for changes in work, practice expense,
or malpractice relative value units. ’’.
480
(b) CLASSIFICATION OF ANESTHESIA SERVICES.—
The first sentence of section 1848(j)(1) (42 U.S.C.
1395w–4(j)(1)) is amended—
(1) by striking ‘‘and including anesthesia serv-
ices’’; and
(2) by inserting before the period the following:
‘‘(including anesthesia services)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
January 1, 1998.
SEC. 4605. IMPLEMENTATION OF RESOURCE-BASED PHYSI-
CIAN PRACTICE EXPENSE.
(a) 1-YEAR DELAY IN IMPLEMENTATION.—Section
1848(c) (42 U.S.C. 1395w–4(c)) is amended—
(1) in paragraph (2)(C)(ii), in the matter before
subclause (I) and after subclause (II), by striking
‘‘1998’’ and inserting ‘‘1999’’ each place it appears;
and
(2) in paragraph (3)(C)(ii), by striking ‘‘1998’’
and inserting ‘‘1999’’.
(b) PHASED-IN IMPLEMENTATION.—
(1) IN
GENERAL.—Section 1848(c)(2)(C)(ii)
(42 U.S.C. 1395w–4(c)(2)(C)(ii)) is further amend-
ed—
481
(A) by striking the comma at the end of
clause (ii) and inserting a period and the follow-
ing:
‘‘For 1999, such number of units shall be
determined based 75 percent on such prod-
uct and based 25 percent on the relative
practice expense resources involved in fur-
nishing the service. For 2000, such num-
ber of units shall be determined based 50
percent on such product and based 50 per-
cent on such relative practice expense re-
sources. For 2001, such number of units
shall be determined based 25 percent on
such product and based 75 percent on such
relative practice expense resources. For a
subsequent year, such number of units
shall be determined based entirely on such
relative practice expense resources.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1848(c)(3)(C)(ii) (42 U.S.C. 1395w–4(c)(3)(C)(ii)),
as amended by subsection (a)(2), is amended by
striking ‘‘1999’’ and inserting ‘‘2002’’.
(c) REQUIREMENTS
FOR DEVELOPING NEW RE-
SOURCE-BASED PRACTICE EXPENSE RELATIVE VALUE
UNITS.—
482
(1) DEVELOPMENT.—For purposes of section
1848(c)(2)(C) of the Social Security Act, the Sec-
retary of Health and Human Services shall develop
new resource-based relative value units. In develop-
ing such units the Secretary shall—
(A) utilize, to the maximum extent prac-
ticable, generally accepted accounting principles
and standards which (i) recognize all staff,
equipment, supplies, and expenses, not just
those which can be tied to specific procedures,
and (ii) use actual data on equipment utiliza-
tion and other key assumptions, such as the
proportion of costs which are direct versus indi-
rect;
(B) study whether hospital cost reduction
efforts and changing practice patterns may
have increased physician practice costs under
part B of the medicare program;
(C) consider potential adverse effects on
patient access under the medicare program; and
(D) consult with organizations represent-
ing physicians regarding methodology and data
to be used, including data for impact projec-
tions, in order to ensure that sufficient input
483
has been received by the affected physician
community.
(2) REPORT.—The Secretary shall transmit a
report by March 1, 1998, on the development of re-
source-based relative value units under paragraph
(1) to the Committee on Ways and Means and the
Committee on Commerce of the House of Represent-
atives and the Committee on Finance of the Senate.
The report shall include a presentation of data to be
used in developing the value units and an expla-
nation of the methodology.
(3) NOTICE OF PROPOSED RULEMAKING.—The
Secretary shall publish a notice of proposed rule-
making with the new resource-based relative value
units on or before May 1, 1998, and shall allow for
a 90-day public comment period.
(4) ITEMS INCLUDED.—The proposed new rule
shall include the following:
(A) Detailed impact projections which com-
pare new proposed payment amounts on data
on actual physician practice expenses.
(B) Impact projections for specialties and
subspecialties, geographic payment localities,
urban versus rural localities, and academic ver-
sus nonacademic medical staffs.
484
(C) Impact projections on access to care
for medicare patients and physician employ-
ment of clinical and administrative staff.
SEC. 4606. DISSEMINATION OF INFORMATION ON HIGH PER
DISCHARGE RELATIVE VALUES FOR IN-HOS-
PITAL PHYSICIANS’ SERVICES.
(a) DETERMINATION
AND
NOTICE
CONCERNING
HOSPITAL-SPECIFIC PER DISCHARGE RELATIVE VAL-
UES.—
(1) IN GENERAL.—For 1999 and 2001 the Sec-
retary of Health and Human Services shall deter-
mine for each hospital—
(A) the hospital-specific per discharge rel-
ative value under subsection (b); and
(B) whether the hospital-specific relative
value is projected to be excessive (as determined
based on such value represented as a percent-
age of the median of hospital-specific per dis-
charge relative values determined under sub-
section (b)).
(2) NOTICE
TO
MEDICAL
STAFFS
AND
CAR-
RIERS.—The Secretary shall notify the medical exec-
utive committee of each hospital identifies under
paragraph (1)(B) as having an excessive hospital-
specific relative value, of the determinations made
485
with respect to the medical staff under paragraph
(1).
(b) DETERMINATION
OF HOSPITAL-SPECIFIC PER
DISCHARGE RELATIVE VALUES.—
(1) IN GENERAL.—For purposes of this section,
the hospital-specific per discharge relative value for
the medical staff of a hospital (other than a teaching
hospital) for a year, shall be equal to the average
per discharge relative value (as determined under
section 1848(c)(2) of the Social Security Act) for
physicians’ services furnished to inpatients of the
hospital by the hospital’s medical staff (excluding in-
terns and residents) during the second year preced-
ing that calendar year, adjusted for variations in
case-mix and disproportionate share status among
hospitals (as determined by the Secretary under
paragraph (3)).
(2) SPECIAL
RULE
FOR
TEACHING
HOS-
PITALS.—The hospital-specific relative value pro-
jected for a teaching hospital in a year shall be equal
to the sum of—
(A) the average per discharge relative
value (as determined under section 1848(c)(2)
of such Act) for physicians’ services furnished
to inpatients of the hospital by the hospital’s
486
medical staff (excluding interns and residents)
during the second year preceding that calendar
year, and
(B) the equivalent per discharge relative
value (as determined under such section) for
physicians’ services furnished to inpatients of
the hospital by interns and residents of the hos-
pital during the second year preceding that cal-
endar year, adjusted for variations in case-mix,
disproportionate share status, and teaching sta-
tus among hospitals (as determined by the Sec-
retary under paragraph (3)).
The Secretary shall determine the equivalent relative
value unit per discharge for interns and residents
based on the best available data and may make such
adjustment in the aggregate.
(3) ADJUSTMENT
FOR
TEACHING
AND
DIS-
PROPORTIONATE SHARE HOSPITALS.—The Secretary
shall adjust the allowable per discharge relative val-
ues otherwise determined under this subsection to
take into account the needs of teaching hospitals
and hospitals receiving additional payments under
subparagraphs (F) and (G) of section 1886(d)(5) of
the Social Security Act. The adjustment for teaching
487
status or disproportionate share shall not be less
than zero.
(c) DEFINITIONS.—For purposes of this section:
(1) HOSPITAL.—The term ‘‘hospital’’ means a
subsection (d) hospital as defined in section 1886(d)
of the Social Security Act (42 U.S.C. 1395ww(d)).
(2) MEDICAL STAFF.—An individual furnishing
a physician’s service is considered to be on the medi-
cal staff of a hospital—
(A) if (in accordance with requirements for
hospitals established by the Joint Commission
on Accreditation of Health Organizations)—
(i) the individual is subject to bylaws,
rules, and regulations established by the
hospital to provide a framework for the
self-governance of medical staff activities,
(ii) subject to the bylaws, rules, and
regulations, the individual has clinical
privileges granted by the hospital’s govern-
ing body, and
(iii) under the clinical privileges, the
individual may provide physicians’’ services
independently within the scope of the indi-
vidual’s clinical privileges, or
488
(B) if the physician provides at least one
service to an individual entitled to benefits
under this title in that hospital.
(3) PHYSICIANS’ SERVICES.—The term ‘‘physi-
cians’’ services’’ means the services described in sec-
tion 1848(j)(3) of the Social Security Act (42 U.S.C.
1395w–4(j)(3)).
(4) RURAL
AREA; URBAN
AREA.—The terms
‘‘rural area’’ and ‘‘urban area’’ have the meaning
given those terms under section 1886(d)(2)(D) of
such Act (42 U.S.C. 1395ww(d)(2)(D)).
(5) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(6) TEACHING HOSPITAL.—The term ‘‘teaching
hospital’’ means a hospital which has a teaching pro-
gram approved as specified in section 1861(b)(6) of
the Social Security Act (42 U.S.C. 1395x(b)(6)).
SEC. 4607. NO X-RAY REQUIRED FOR CHIROPRACTIC SERV-
ICES.
(a) IN GENERAL.—Section 1861(r)(5) (42 U.S.C.
1395x(r)(5)) is amended by striking ‘‘demonstrated by X-
ray to exist’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after
January 1, 1998.
489
(c) UTILIZATION GUIDELINES.—The Secretary of
Health and Human Services shall develop and implement
utilization guidelines relating to the coverage of chiroprac-
tic services under part B of title XVIII of the Social Secu-
rity Act in cases in which a subluxation has not been dem-
onstrated by X-ray to exist.
SEC. 4608. TEMPORARY COVERAGE RESTORATION FOR
PORTABLE 
ELECTROCARDIOGRAM 
TRANS-
PORTATION.
(a) IN GENERAL.—Effective for electrocardiogram
tests performed during 1998, the Secretary of Health and
Human Services shall restore separate payment, under
part B of title XVIII of the Social Security Act, for the
transportation of electrocardiogram equipment (HCPCS
code R0076) based upon the status code and relative value
units established for such service as of December 31,
1996.
(b) REPORT.—By not later than July 1, 1998, the
Comptroller General shall submit to Congress a report on
the appropriateness of continuing such payment.
CHAPTER 2—OTHER PAYMENT
PROVISIONS
SEC. 4611. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.
(a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS
OF DURABLE MEDICAL EQUIPMENT.—
490
(1) 
FREEZE
IN
UPDATE
FOR
COVERED
ITEMS.—Section 
1834(a)(14) 
(42 
U.S.C.
1395m(a)(14)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (A);
(B) in subparagraph (B)—
(i) by striking ‘‘a subsequent year’’
and inserting ‘‘1993, 1994, 1995, 1996,
and 1997’’, and
(ii) by striking the period at the end
and inserting a semicolon; and
(C) by adding at the end the following:
‘‘(C) for each of the years 1998 through
2002, 0 percentage points; and
‘‘(D) for a subsequent year, the percentage
increase in the consumer price index for all
urban consumers (U.S. urban average) for the
12-month period ending with June of the pre-
vious year.’’.
(2) UPDATE FOR ORTHOTICS AND PROSTHET-
ICS.—Section 
1834(h)(4)(A) 
(42 
U.S.C.
1395m(h)(4)(A)) is amended—
(A) by striking ‘‘, and’’ at the end of
clause (iii) and inserting a semicolon;
491
(B) in clause (iv), by striking ‘‘a subse-
quent year’’ and inserting ‘‘1996 and 1997’’,
and
(C) by adding at the end the following new
clauses:
‘‘(v) for each of the years 1998
through 2002, 1 percent, and
‘‘(vi) for a subsequent year, the per-
centage increase in the consumer price
index for all urban consumers (United
States city average) for the 12-month pe-
riod ending with June of the previous
year;’’.
(c) PAYMENT FREEZE FOR PARENTERAL AND EN-
TERAL NUTRIENTS, SUPPLIES, AND EQUIPMENT.—In de-
termining the amount of payment under part B of title
XVIII of the Social Security Act with respect to parenteral
and enteral nutrients, supplies, and equipment during
each of the years 1998 through 2002, the charges deter-
mined to be reasonable with respect to such nutrients,
supplies, and equipment may not exceed the charges deter-
mined to be reasonable with respect to such nutrients,
supplies, and equipment during 1995.
606
of Health and Human Services with re-
spect to the substance of any evaluation
under section 413(j), and to cooperate with
the conduct of any such evaluation.
‘‘(C) LIMITATIONS ON USE OF FUNDS.—
Section 403(a)(5)(C) shall apply to funds pro-
vided to Indian tribes under this paragraph in
the same manner in which such section applies
to funds provided under section 403(a)(5).’’.
(d) FUNDS RECEIVED FROM GRANTS TO BE DIS-
REGARDED IN APPLYING DURATIONAL LIMIT ON ASSIST-
ANCE.—Section 408(a)(7) of such Act (42 U.S.C.
608(a)(7)) is amended by adding at the end the following:
‘‘(G) INAPPLICABILITY
TO
WELFARE-TO-
WORK GRANTS AND ASSISTANCE.—For purposes
of subparagraph (A) of this paragraph, a grant
made under section 403(a)(5) shall not be con-
sidered a grant made under section 403, and
assistance from funds provided under section
403(a)(5) shall not be considered assistance.’’.
(e) EVALUATIONS.—Section 413 of such Act (42
U.S.C. 613) is amended by adding at the end the follow-
ing:
‘‘(j) EVALUATION
OF
WELFARE-TO-WORK
PRO-
GRAMS.—The Secretary—