386
are each amended by inserting ‘‘or section 1834(d)(1)’’
after ‘‘subsection (h)(1)’’.
(2) 
Section 
1833(h)(1)(A) 
(42 
U.S.C.
1395l(h)(1)(A)) is amended by striking ‘‘The Secretary’’
and inserting ‘‘Subject to paragraphs (1) and (4)(A) of
section 1834(d), the Secretary’’.
(3) Clauses (i) and (ii) of section 1848(a)(2)(A) (42
U.S.C. 1395w–4(a)(2)(A)) are each amended by inserting
after ‘‘a service’’ the following: ‘‘(other than a colorectal
cancer screening test consisting of a screening colonoscopy
provided to an individual at high risk for colorectal cancer
or a screening flexible sigmoidoscopy)’’.
(4) Section 1862(a) (42 U.S.C. 1395y(a)), as amend-
ed by section 4103(c), is amended—
(A) in paragraph (1)—
(i) in subparagraph (F), by striking ‘‘and’’
at the end,
(ii) in subparagraph (G), by striking the
semicolon at the end and inserting ‘‘, and’’, and
(iii) by adding at the end the following new
subparagraph:
‘‘(H) in the case of colorectal cancer screening
tests, which are performed more frequently than is
covered under section 1834(d);’’; and
387
(B) in paragraph (7), by striking ‘‘or (G)’’ and
inserting ‘‘(G), or (H)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after January 1, 1998.
SEC. 4105. DIABETES SCREENING TESTS.
(a) COVERAGE
OF DIABETES OUTPATIENT SELF-
MANAGEMENT TRAINING SERVICES.—
(1) IN
GENERAL.—Section 1861 (42 U.S.C.
1395x), as amended by sections 4103(a) and
4104(a), is amended—
(A) in subsection (s)(2)—
(i) by striking ‘‘and’’ at the end of
subparagraph (Q);
(ii) by adding ‘‘and’’ at the end of
subparagraph (R); and
(iii) by adding at the end the follow-
ing new subparagraph:
‘‘(S) diabetes outpatient self-management train-
ing services (as defined in subsection (qq)); and’’;
and
(B) by adding at the end the following new
subsection:
388
‘‘Diabetes Outpatient Self-Management Training Services
‘‘(qq)(1) The term ‘diabetes outpatient self-manage-
ment training services’ means educational and training
services furnished to an individual with diabetes by a cer-
tified provider (as described in paragraph (2)(A)) in an
outpatient setting by an individual or entity who meets
the quality standards described in paragraph (2)(B), but
only if the physician who is managing the individual’s dia-
betic condition certifies that such services are needed
under a comprehensive plan of care related to the individ-
ual’s diabetic condition to provide the individual with nec-
essary skills and knowledge (including skills related to the
self-administration of injectable drugs) to participate in
the management of the individual’s condition.
‘‘(2) In paragraph (1)—
‘‘(A) a ‘certified provider’ is a physician, or
other individual or entity designated by the Sec-
retary, that, in addition to providing diabetes out-
patient self-management training services, provides
other items or services for which payment may be
made under this title; and
‘‘(B) a physician, or such other individual or
entity, meets the quality standards described in this
paragraph if the physician, or individual or entity,
meets quality standards established by the Sec-
389
retary, except that the physician or other individual
or entity shall be deemed to have met such stand-
ards if the physician or other individual or entity
meets applicable standards originally established by
the National Diabetes Advisory Board and subse-
quently revised by organizations who participated in
the establishment of standards by such Board, or is
recognized by an organization that represents indi-
viduals (including individuals under this title) with
diabetes as meeting standards for furnishing the
services.’’.
(2) PAYMENT UNDER PHYSICIAN FEE SCHED-
ULE.—Section 1848(j)(3)(42 U.S.C. 1395w–4(j)(3))
as amended in sections 4102 and 4103, is amended
by inserting ‘‘(2)(S),’’ before ‘‘(3),’’.
(3) CONSULTATION
WITH
ORGANIZATIONS
IN
ESTABLISHING
PAYMENT
AMOUNTS
FOR
SERVICES
PROVIDED BY PHYSICIANS.—In establishing payment
amounts under section 1848 of the Social Security
Act for physicians’ services consisting of diabetes
outpatient self-management training services, the
Secretary of Health and Human Services shall con-
sult with appropriate organizations, including such
organizations representing individuals or medicare
beneficiaries with diabetes, in determining the rel-
390
ative 
value 
for 
such 
services 
under 
section
1848(c)(2) of such Act.
(b) BLOOD-TESTING STRIPS FOR INDIVIDUALS WITH
DIABETES.—
(1) INCLUDING STRIPS AND MONITORS AS DU-
RABLE MEDICAL EQUIPMENT.—The first sentence of
section 1861(n) (42 U.S.C. 1395x(n)) is amended by
inserting before the semicolon the following: ‘‘, and
includes blood-testing strips and blood glucose mon-
itors for individuals with diabetes without regard to
whether the individual has Type I or Type II diabe-
tes or to the individual’s use of insulin (as deter-
mined under standards established by the Secretary
in consultation with the appropriate organizations)’’.
(2) 10 PERCENT REDUCTION IN PAYMENTS FOR
TESTING
STRIPS.—Section 1834(a)(2)(B)(iv) (42
U.S.C. 1395m(a)(2)(B)(iv)) is amended by adding
before the period the following: ‘‘(reduced by 10 per-
cent, in the case of a blood glucose testing strip fur-
nished after 1997 for an individual with diabetes)’’.
(c) ESTABLISHMENT OF OUTCOME MEASURES FOR
BENEFICIARIES WITH DIABETES.—
(1) IN GENERAL.—The Secretary of Health and
Human Services, in consultation with appropriate
organizations, shall establish outcome measures, in-
392
(B) by striking the period at the end of
paragraph (14) and inserting ‘‘; and’’,
(C) by redesignating paragraphs (15) and
(16) as paragraphs (16) and (17), respectively,
and
(D) by inserting after paragraph (14) the
following new paragraph:
‘‘(15) bone mass measurement (as defined in
subsection (rr)).’’; and
(2) by inserting after subsection (qq) the follow-
ing new subsection:
‘‘Bone Mass Measurement
‘‘(rr)(1) The term ‘bone mass measurement’ means
a radiologic or radioisotopic procedure or other procedure
approved by the Food and Drug Administration performed
on a qualified individual (as defined in paragraph (2)) for
the purpose of identifying bone mass or detecting bone
loss or determining bone quality, and includes a physi-
cian’s interpretation of the results of the procedure.
‘‘(2) For purposes of this subsection, the term ‘quali-
fied individual’ means an individual who is (in accordance
with regulations prescribed by the Secretary)—
‘‘(A) an estrogen-deficient woman at clinical
risk for osteoporosis;
‘‘(B) an individual with vertebral abnormalities;
393
‘‘(C) 
an 
individual 
receiving 
long-term
glucocorticoid steroid therapy;
‘‘(D) 
an 
individual 
with 
primary
hyperparathyroidism; or
‘‘(E) an individual being monitored to assess
the response to or efficacy of an approved
osteoporosis drug therapy.
‘‘(3) The Secretary shall establish such standards re-
garding the frequency with which a qualified individual
shall be eligible to be provided benefits for bone mass
measurement under this title.’’.
(b) PAYMENT UNDER PHYSICIAN FEE SCHEDULE.—
Section 1848(j)(3) (42 U.S.C. 1395w–4(j)(3)), as amend-
ed by sections 4102, 4103, and 4105, is amended—
(1) by striking ‘‘(4) and (14)’’ and inserting
‘‘(4), (14)’’ and
(2) 
by 
inserting 
‘‘ 
and 
(15)’’ 
after
‘‘1861(nn)(2))’’.
(c) CONFORMING AMENDMENTS.—Sections 1864(a),
1902(a)(9)(C), and 1915(a)(1)(B)(ii)(I) (42 U.S.C.
1395aa(a), 1396a(a)(9)(C), and 1396n(a)(1)(B)(ii)(I))
are amended by striking ‘‘paragraphs (15) and (16)’’ each
place it appears and inserting ‘‘paragraphs (16) and
(17)’’.
394
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to bone mass measurements per-
formed on or after July 1, 1998.
SEC. 4107. VACCINES OUTREACH EXPANSION.
(a) EXTENSION OF INFLUENZA AND PNEUMOCOCCAL
VACCINATION CAMPAIGN.—In order to increase utilization
of pneumococcal and influenza vaccines in medicare bene-
ficiaries, the Influenza and Pneumococcal Vaccination
Campaign carried out by the Health Care Financing Ad-
ministration in conjunction with the Centers for Disease
Control and Prevention and the National Coalition for
Adult Immunization, is extended until the end of fiscal
year 2002.
(b) APPROPRIATION.—There are hereby appropriated
for each of fiscal years 1998 through 2002, $8,000,000
to the Campaign described in subsection (a). Of the
amount of such appropriation in each fiscal year, 60 per-
cent of such appropriation shall be payable from the Fed-
eral Hospital Insurance Trust Fund, and 40 percent shall
be payable from the Federal Supplementary Medical In-
surance Trust Fund under title XVIII of the Social Secu-
rity Act (42 U.S.C. 1395i, 1395t).
SEC. 4108. STUDY ON PREVENTIVE BENEFITS.
(a) STUDY.—The Secretary of Health and Human
Services shall request the National Academy of Sciences,
395
in conjunction with the United States Preventive Services
Task Force, to analyze the expansion or modification of
preventive benefits provided to medicare beneficiaries
under title XVIII of the Social Security Act. The analysis
shall consider both the short term and long term benefits,
and costs to the medicare program, of such expansion or
modification,
(b) REPORT.—
(1) INITIAL REPORT.—Not later than 2 years
after the date of the enactment of this Act, the Sec-
retary shall submit a report on the findings of the
analysis conducted under subsection (a) to the Com-
mittee on Ways and Means and the Committee on
Commerce of the House of Representatives and the
Committee on Finance of the Senate.
(2) CONTENTS.—Such report shall include spe-
cific findings with respect to coverage of the follow-
ing preventive benefits:
(A) Nutrition therapy, including parenteral
and enteral nutrition.
(B) Skin cancer screening.
(C) Medically necessary dental care.
(D) Routine patient care costs for bene-
ficiaries enrolled in approved clinical trial pro-
grams.
396
(E) Elimination of time limitation for cov-
erage of immunosuppressive drugs for trans-
plant patients.
(3) FUNDING.—From funds appropriated to the
Department of Health and Human Services for fis-
cal years 1998 and 1999, the Secretary shall provide
for such funding as may be necessary for the con-
duct of the analysis by the National Academy of
Sciences under this section.
Subtitle C—Rural Initiatives
SEC. 4206. INFORMATICS, TELEMEDICINE, AND EDUCATION
DEMONSTRATION PROJECT.
(a) PURPOSE AND AUTHORIZATION.—
(1) IN
GENERAL.—Not later than 9 months
after the date of enactment of this section, the Sec-
retary of Health and Human Services shall provide
for a demonstration project described in paragraph
(2).
(2) DESCRIPTION OF PROJECT.—
(A) IN
GENERAL.—The demonstration
project described in this paragraph is a single
demonstration project to use eligible health care
provider telemedicine networks to apply high-
capacity computing and advanced networks to
improve primary care (and prevent health care
397
complications) to medicare beneficiaries with di-
abetes mellitus who are residents of medically
underserved rural areas or residents of medi-
cally underserved inner-city areas.
(B) 
MEDICALLY
UNDERSERVED
DE-
FINED.—As used in this paragraph, the term
‘‘medically underserved’’ has the meaning given
such term in section 330(b)(3) of the Public
Health Service Act (42 U.S.C. 254b(b)(3)).
(3) WAIVER.—The Secretary shall waive such
provisions of title XVIII of the Social Security Act
as may be necessary to provide for payment for serv-
ices under the project in accordance with subsection
(d).
(4) DURATION OF PROJECT.—The project shall
be conducted over a 4-year period.
(b) OBJECTIVES OF PROJECT.—The objectives of the
project include the following:
(1) Improving patient access to and compliance
with appropriate care guidelines for individuals with
diabetes mellitus through direct telecommunications
link with information networks in order to improve
patient quality-of-life and reduce overall health care
costs.
398
(2) Developing a curriculum to train, and pro-
viding standards for credentialing and licensure of,
health professionals (particularly primary care
health 
professionals) 
in 
the 
use 
of 
medical
informatics and telecommunications.
(3) Demonstrating the application of advanced
technologies, such as video-conferencing from a pa-
tient’s home, remote monitoring of a patient’s medi-
cal condition, interventional informatics, and apply-
ing individualized, automated care guidelines, to as-
sist primary care providers in assisting patients with
diabetes in a home setting.
(4) Application of medical informatics to resi-
dents with limited English language skills.
(5) Developing standards in the application of
telemedicine and medical informatics.
(6) Developing a model for the cost-effective de-
livery of primary and related care both in a managed
care environment and in a fee-for-service environ-
ment.
(c) ELIGIBLE HEALTH CARE PROVIDER TELEMEDI-
CINE NETWORK DEFINED.—For purposes of this section,
the term ‘‘eligible health care provider telemedicine net-
work’’ means a consortium that includes at least one ter-
tiary care hospital (but no more than 2 such hospitals),
399
at least one medical school, no more than 4 facilities in
rural or urban areas, and at least one regional tele-
communications provider and that meets the following re-
quirements:
(1) The consortium is located in an area with
one of the highest concentrations of medical schools
and tertiary care facilities in the United States and
has appropriate arrangements (within or outside the
consortium) with such schools and facilities, univer-
sities, and telecommunications providers, in order to
conduct the project.
(2) The consortium submits to the Secretary an
application at such time, in such manner, and con-
taining such information as the Secretary may re-
quire, including a description of the use to which the
consortium would apply any amounts received under
the project and the source and amount of non-Fed-
eral funds used in the project.
(3) The consortium guarantees that it will be
responsible for payment for all costs of the project
that are not paid under this section and that the
maximum amount of payment that may be made to
the consortium under this section shall not exceed
the amount specified in subsection (d)(3).
(d) COVERAGE AS MEDICARE PART B SERVICES.—
400
(1) IN
GENERAL.—Subject to the succeeding
provisions of this subsection, services related to the
treatment or management of (including prevention
of complications from) diabetes for medicare bene-
ficiaries furnished under the project shall be consid-
ered to be services covered under part B of title
XVIII of the Social Security Act.
(2) PAYMENTS.—
(A) IN GENERAL.—Subject to paragraph
(3), payment for such services shall be made at
a rate of 50 percent of the costs that are rea-
sonable and related to the provision of such
services. In computing such costs, the Secretary
shall include costs described in subparagraph
(B), but may not include costs described in sub-
paragraph (C).
(B) COSTS THAT MAY BE INCLUDED.—The
costs described in this subparagraph are the
permissible costs (as recognized by the Sec-
retary) for the following:
(i) The acquisition of telemedicine
equipment for use in patients’ homes (but
only in the case of patients located in
medically underserved areas).
401
(ii) 
Curriculum 
development 
and
training of health professionals in medical
informatics and telemedicine.
(iii) Payment of telecommunications
costs (including salaries and maintenance
of equipment), including costs of tele-
communications between patients’ homes
and the eligible network and between the
network and other entities under the ar-
rangements described in subsection (c)(1).
(iv) Payments to practitioners and
providers under the medicare programs.
(C) COSTS NOT INCLUDED.—The costs de-
scribed in this subparagraph are costs for any
of the following:
(i) The purchase or installation of
transmission equipment (other than such
equipment used by health professionals to
deliver medical informatics services under
the project).
(ii) The establishment or operation of
a telecommunications common carrier net-
work.
(iii) Construction (except for minor
renovations related to the installation of
402
reimbursable equipment) or the acquisition
or building of real property.
(3) LIMITATION.—The total amount of the pay-
ments that may be made under this section shall not
exceed $30,000,000.
(4) 
LIMITATION
ON
COST-SHARING.—The
project may not impose cost sharing on a medicare
beneficiary for the receipt of services under the
project in excess of 20 percent of the recognized
costs of the project attributable to such services.
(e) REPORTS.—The Secretary shall submit to the
Committees on Ways and Means and Commerce of the
House of Representatives and the Committee on Finance
of the Senate interim reports on the project and a final
report on the project within 6 months after the conclusion
of the project. The final report shall include an evaluation
of the impact of the use of telemedicine and medical
informatics on improving access of medicare beneficiaries
to health care services, on reducing the costs of such serv-
ices, and on improving the quality of life of such bene-
ficiaries.
(f) DEFINITIONS.—For purposes of this section:
(1) INTERVENTIONAL INFORMATICS.—The term
‘‘interventional informatics’’ means using informa-
403
tion technology and virtual reality technology to in-
tervene in patient care.
(2) MEDICAL INFORMATICS.—The term ‘‘medi-
cal informatics’’ means the storage, retrieval, and
use of biomedical and related information for prob-
lem solving and decision-making through computing
and communications technologies.
(3) PROJECT.—The term ‘‘project’’ means the
demonstration project under this section.
Subtitle D—Anti-Fraud and Abuse
Provisions
SEC. 4301. PERMANENT EXCLUSION FOR THOSE CON-
VICTED 
OF 
HEALTH 
CARE 
RELATED
CRIMES.
Section 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is
amended—
(1) in subparagraph (A), by inserting ‘‘or in the
case described in subparagraph (G)’’ after ‘‘sub-
section (b)(12)’’;
(2) in subparagraphs (B) and (D), by striking
‘‘In the case’’ and inserting ‘‘Subject to subpara-
graph (G), in the case’’; and
(3) by adding at the end the following new sub-
paragraph:
404
‘‘(G) In the case of an exclusion of an individual
under subsection (a) based on a conviction occurring on
or after the date of the enactment of this subparagraph,
if the individual has (before, on, or after such date and
before the date of the conviction for which the exclusion
is imposed) been convicted—
‘‘(i) on one previous occasion of one or more of-
fenses for which an exclusion may be effected under
such subsection, the period of the exclusion shall be
not less than 10 years, or
‘‘(ii) on 2 or more previous occasions of one or
more offenses for which an exclusion may be effected
under such subsection, the period of the exclusion
shall be permanent.’’.
SEC. 4302. AUTHORITY TO REFUSE TO ENTER INTO MEDI-
CARE AGREEMENTS WITH INDIVIDUALS OR
ENTITIES CONVICTED OF FELONIES.
(a) MEDICARE PART A.—Section 1866(b)(2) (42
U.S.C. 1395cc(b)(2)) is amended—
(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 after subparagraph (C) the fol-
lowing new subparagraph:
405
‘‘(D) has ascertained that the provider has
been convicted of a felony under Federal or
State law for an offense which the Secretary de-
termines is inconsistent with the best interests
of program beneficiaries.’’.
(b) MEDICARE PART B.—Section 1842 (42 U.S.C.
1395u) is amended by adding after subsection (r) the fol-
lowing new subsection:
‘‘(s) The Secretary may refuse to enter into an agree-
ment with a physician or supplier under subsection (h)
or may terminate or refuse to renew such agreement, in
the event that such physician or supplier has been con-
victed of a felony under Federal or State law for an of-
fense which the Secretary determines is inconsistent with
the best interests of program beneficiaries.’’.
(c) MEDICAID.—Section 1902(a)(23) (42 U.S.C.
1396(a)) is amended—
(1) by relocating the matter that precedes ‘‘pro-
vide that, (A)’’ immediately before the semicolon;
(2) by inserting a semicolon after ‘‘1915’’;
(3) by striking the comma after ‘‘Guam’’ and
inserting a semicolon; and
(4) by inserting before the semicolon at the end
the following: ‘‘and except that this provision does
not require a State to provide medical assistance for
406
such services furnished by a person or entity con-
victed of a felony under Federal or State law for an
offense which the State agency determines is incon-
sistent with the best interests of beneficiaries under
the State plan’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act and apply to the entry and renewal of contracts
on or after such date.
SEC. 4303. INCLUSION OF TOLL-FREE NUMBER TO REPORT
MEDICARE WASTE, FRAUD, AND ABUSE IN EX-
PLANATION OF BENEFITS FORMS.
(a) IN GENERAL.—Section 1842(h)(7) (42 U.S.C.
1395u(h)(7)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D),
(2) by striking the period at the end of sub-
paragraph (E), and
(3) by adding at the end the following new sub-
paragraph:
‘‘(E) a toll-free telephone number maintained
by the Inspector General in the Department of
Health and Human Services for the receipt of com-
plaints and information about waste, fraud, and
407
abuse in the provision or billing of services under
this title.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to explanations of benefits pro-
vided on or after such date (not later than January 1,
1999) as the Secretary of Health and Human Services
shall provide.
SEC. 4304. LIABILITY OF MEDICARE CARRIERS AND FISCAL
INTERMEDIARIES FOR CLAIMS SUBMITTED
BY EXCLUDED PROVIDERS.
(a) REIMBURSEMENT
TO
THE
SECRETARY
FOR
AMOUNTS PAID TO EXCLUDED PROVIDERS.—
(1) 
REQUIREMENTS
FOR
FISCAL
INTERMEDIARIES.—
(A) IN
GENERAL.—Section 1816 (42
U.S.C. 1395h) is amended by adding at the end
the following new subsection:
‘‘(m) An agreement with an agency or organization
under this section shall require that such agency or orga-
nization reimburse the Secretary for any amounts paid by
the agency or organization for a service under this title
which is furnished, directed, or prescribed by an individual
or entity during any period for which the individual or
entity is excluded pursuant to section 1128, 1128A, or
1156, from participation in the program under this title,
408
if the amounts are paid after the Secretary notifies the
agency or organization of the exclusion.’’.
(B) 
CONFORMING
AMENDMENT.—Sub-
section (i) of such section is amended by adding
at the end the following new paragraph:
‘‘(4) Nothing in this subsection shall be construed to
prohibit reimbursement by an agency or organization
under subsection (m).’’.
(2) REQUIREMENTS
FOR
CARRIERS.—Section
1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (I); and
(B) by inserting after subparagraph (I) the
following new subparagraph:
‘‘(J) will reimburse the Secretary for any
amounts paid by the carrier for an item or service
under this part which is furnished, directed, or pre-
scribed by an individual or entity during any period
for which the individual or entity is excluded pursu-
ant to section 1128, 1128A, or 1156, from partici-
pation in the program under this title, if the
amounts are paid after the Secretary notifies the
carrier of the exclusion, and’’.
(3) 
MEDICAID
PROVISION.—Section
1902(a)(39) (42 U.S.C. 1396a(a)(39)) is amended
409
by inserting before the semicolon at the end the fol-
lowing: ‘‘, and provide further for reimbursement to
the Secretary of any payments made under the plan
or any item or service furnished, directed, or pre-
scribed by the excluded individual or entity during
such period, after the Secretary notifies the State of
such exclusion’’.
(b) CONFORMING REPEAL OF MANDATORY PAYMENT
RULE.—Paragraph (2) of section 1862(e) (42 U.S.C.
1395y(e)) is amended to read as follows:
‘‘(2) No individual or entity may bill (or collect any
amount from) any individual for any item or service for
which payment is denied under paragraph (1). No person
is liable for payment of any amounts billed for such an
item or service in violation of the previous sentence.’’.
(c) EFFECTIVE DATES.—The amendments made by
this section shall apply to contracts and agreements en-
tered into, renewed, or extended after the date of the en-
actment of this Act, but only with respect to claims sub-
mitted on or after the later of January 1, 1998, or the
date such entry, renewal, or extension becomes effective.
SEC. 4305. EXCLUSION OF ENTITY CONTROLLED BY FAMILY
MEMBER OF A SANCTIONED INDIVIDUAL.
(a) IN GENERAL.—Section 1128 (42 U.S.C. 1320a–
7) is amended—
410
(1) in subsection (b)(8)(A)—
(A) by striking ‘‘or’’ at the end of clause
(i), and
(B) by striking the dash at the end of
clause (ii) and inserting ‘‘; or’’, and
(C) by inserting after clause (ii) the follow-
ing:
‘‘(iii) who was described in clause (i) but
is no longer so described because of a transfer
of ownership or control interest, in anticipation
of (or following) a conviction, assessment, or ex-
clusion described in subparagraph (B) against
the person, to an immediate family member (as
defined in subsection (j)(1)) or a member of the
household of the person (as defined in sub-
section (j)(2)) who continues to maintain an in-
terest described in such clause—’’; and
(2) by adding after subsection (i) the following
new subsection:
‘‘(j) DEFINITION OF IMMEDIATE FAMILY MEMBER
AND MEMBER OF HOUSEHOLD.—For purposes of sub-
section (b)(8)(A)(iii):
‘‘(1) The term ‘immediate family member’
means, with respect to a person—
‘‘(A) the husband or wife of the person;
411
‘‘(B) the natural or adoptive parent, child,
or sibling of the person;
‘‘(C) the stepparent, stepchild, stepbrother,
or stepsister of the person;
‘‘(D) the father-, mother-, daughter-,
son-, brother-, or sister-in-law of the person;
‘‘(E) the grandparent or grandchild of the
person; and
‘‘(F) the spouse of a grandparent or
grandchild of the person.
‘‘(2) The term ‘member of the household’
means, with respect to an person, any individual
sharing a common abode as part of a single family
unit with the person, including domestic employees
and others who live together as a family unit, but
not including a roomer or boarder.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect on the date that is 45 days
after the date of the enactment of this Act.
SEC. 4306. IMPOSITION OF CIVIL MONEY PENALTIES.
(a) CIVIL MONEY PENALTIES FOR PERSONS THAT
CONTRACT
WITH
EXCLUDED
INDIVIDUALS.—Section
1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(4);
412
(2) by adding ‘‘or’’ at the end of paragraph (5);
and
(3) by adding after paragraph (5) the following
new paragraph:
‘‘(6) arranges or contracts (by employment or
otherwise) with an individual or entity that the per-
son knows or should know is excluded from partici-
pation in a Federal health care program (as defined
in section 1128B(f)), for the provision of items or
services for which payment may be made under such
a program;’’.
(b) EFFECTIVE DATES.—The amendments made by
subsection (a) shall apply to arrangements and contracts
entered into after the date of the enactment of this Act.
SEC. 4307. DISCLOSURE OF INFORMATION AND SURETY
BONDS.
(a) DISCLOSURE
OF INFORMATION
AND SURETY
BOND REQUIREMENT FOR SUPPLIERS OF DURABLE MED-
ICAL
EQUIPMENT.—Section 
1834(a) 
(42 
U.S.C.
1395m(a)) is amended by inserting after paragraph (15)
the following new paragraph:
‘‘(16) CONDITIONS FOR ISSUANCE OF PROVIDER
NUMBER.—The Secretary shall not provide for the
issuance (or renewal) of a provider number for a
supplier of durable medical equipment, for purposes
413
of payment under this part for durable medical
equipment furnished by the supplier, unless the sup-
plier provides the Secretary on a continuing basis
with—
‘‘(A)(i) full and complete information as to
the identity of each person with an ownership
or control interest (as defined in section
1124(a)(3)) in the supplier or in any sub-
contractor (as defined by the Secretary in regu-
lations) in which the supplier directly or indi-
rectly has a 5 percent or more ownership inter-
est, and
‘‘(ii) to the extent determined to be feasible
under regulations of the Secretary, the name of
any disclosing entity (as defined in section
1124(a)(2)) with respect to which a person with
such an ownership or control interest in the
supplier is a person with such an ownership or
control interest in the disclosing entity; and
‘‘(B) a surety bond in a form specified by
the Secretary and in an amount that is not less
than $50,000.
The Secretary may waive the requirement of a bond
under subparagraph (B) in the case of a supplier
414
that provides a comparable surety bond under State
law.’’.
(b) SURETY
BOND
REQUIREMENT
FOR
HOME
HEALTH AGENCIES.—
(1) IN GENERAL.—Section 1861(o) (42 U.S.C.
1395x(o)) is amended—
(A) in paragraph (7), by inserting ‘‘and in-
cluding 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,’’ after ‘‘financial security of the
program’’, and
(B) by adding at the end the following:
‘‘The Secretary may waive the requirement of a
bond under paragraph (7) in the case of an
agency or organization that provides a com-
parable surety bond under State law.’’.
(2) 
CONFORMING
AMENDMENTS.—Section
1861(v)(1)(H) 
(42 
U.S.C. 
1395x(v)(1)(H)) 
is
amended—
(A) in clause (i), by striking ‘‘the financial
security requirement’’ and inserting ‘‘the finan-
cial security and surety bond requirements’’;
and
415
(B) in clause (ii), by striking ‘‘the financial
security requirement described in subsection
(o)(7) applies’’ and inserting ‘‘the financial se-
curity and surety bond requirements described
in subsection (o)(7) apply’’.
(3) REFERENCE TO CURRENT DISCLOSURE RE-
QUIREMENT.—For provision of current law requiring
home health agencies to disclose information on
ownership and control interests, see section 1124 of
the Social Security Act.
(c) AUTHORIZING APPLICATION OF DISCLOSURE AND
SURETY BOND REQUIREMENTS TO AMBULANCE SERV-
ICES AND CERTAIN CLINICS.—Section 1834(a)(16) (42
U.S.C. 1395m(a)(16)), as added by subsection (a), is
amended by adding at the end the following: ‘‘The Sec-
retary, in the Secretary’s discretion, may impose the re-
quirements of the previous sentence with respect to some
or all classes of suppliers of ambulance services described
in section 1861(s)(7) and clinics that furnish medical and
other health services (other than physicians’ services)
under this part.’’.
(d) APPLICATION TO COMPREHENSIVE OUTPATIENT
REHABILITATION
FACILITIES
(CORFS).—Section
1861(cc)(2) (42 U.S.C. 1395x(cc)(2)) is amended—
416
(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.’’.
417
(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
418
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:
419
‘‘(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
420
‘‘(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
421
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
422
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-
423
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
424
(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-
425
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-
426
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.—
427
‘‘(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.
428
(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—
429
(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:
430
‘‘(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-
431
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
432
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
433
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
434
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
435
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-
436
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
437
‘‘(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.
438
‘‘(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
439
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
440
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
441
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—
442
‘‘(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—
443
(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.
444
(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’’.
445
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
446
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
447
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).’’.
448
(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)’’
449
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.—
450
(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-
451
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-
452
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—
453
(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—
454
‘‘(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
455
‘‘(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
456
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,
457
(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
458
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—
459
(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
460
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.
461
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.
462
‘‘(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
463
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
464
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-
465
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-
466
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
467
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
468
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
469
‘‘(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-
470
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);’’.
471
(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-
472
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.
473
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)),
474
(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-
475
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
476
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—
477
‘‘(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
478
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-
479
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.’’.
480
(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
481
(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. ’’.
482
(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—
483
(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.—
484
(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
485
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.
486
(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
487
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
488
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
489
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
490
(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.
491
(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.—
492
(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;
493
(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.
494
SEC. 4612. OXYGEN AND OXYGEN EQUIPMENT.
Section 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C))
is amended—
(1) by striking ‘‘and’’ at the end of clause (iii);
(2) in clause (iv)—
(A) by striking ‘‘a subsequent year’’ and
inserting ‘‘1993, 1994, 1995, 1996, and 1997’’,
and
(B) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new
clauses:
‘‘(v) in each of the years 1998
through 2002, is 80 percent of the national
limited monthly payment rate computed
under subparagraph (B) for the item for
the year; and
‘‘(vi) in a subsequent year, is the na-
tional limited monthly payment rate com-
puted under subparagraph (B) for the item
for the year.’’.
SEC. 4613. REDUCTION IN UPDATES TO PAYMENT AMOUNTS
FOR CLINICAL DIAGNOSTIC LABORATORY
TESTS.
(a) 
CHANGE
IN
UPDATE.—Section
1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV))
495
is amended by inserting ‘‘and 1998 through 2002’’ after
‘‘1995’’.
(b) LOWERING CAP ON PAYMENT AMOUNTS.—Sec-
tion 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amend-
ed—
(1) in clause (vi), by striking ‘‘and’’ at the end;
(2) in clause (vii)—
(A) by inserting ‘‘and before January 1,
1998,’’ after ‘‘1995,’’, and
(B) by striking the period at the end and
inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(viii) after December 31, 1997, is equal to 72
percent of such median.’’.
SEC. 4614. SIMPLIFICATION IN ADMINISTRATION OF LAB-
ORATORY TESTS.
(a) SELECTION OF REGIONAL CARRIERS.—
(1) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the
‘‘Secretary’’) shall—
(A) divide the United States into no more
than 5 regions, and
(B) designate a single carrier for each such
region,
496
for the purpose of payment of claims under part B
of title XVIII of the Social Security Act with respect
to clinical diagnostic laboratory tests (other than for
tests performed in physician offices) furnished on or
after such date (not later than January 1, 1999) as
the Secretary specifies.
(2) DESIGNATION.—In designating such car-
riers, the Secretary shall consider, among other cri-
teria—
(A) a carrier’s timeliness, quality, and ex-
perience in claims processing, and
(B) a carrier’s capacity to conduct elec-
tronic data interchange with laboratories and
data matches with other carriers.
(3) SINGLE DATA RESOURCE.—The Secretary
may select one of the designated carriers to serve as
a central statistical resource for all claims informa-
tion relating to such clinical diagnostic laboratory
tests handled by all the designated carriers under
such part.
(4) ALLOCATION OF CLAIMS.—The allocation of
claims for clinical diagnostic laboratory tests to par-
ticular designated carriers shall be based on whether
a carrier serves the geographic area where the lab-
497
oratory specimen was collected or other method
specified by the Secretary.
(b) ADOPTION OF UNIFORM POLICIES FOR CLINICAL
LABORATORY TESTS.—
(1) IN GENERAL.—Not later than July 1, 1998,
the Secretary shall first adopt, consistent with para-
graph (2), uniform coverage, administration, and
payment policies for clinical diagnostic laboratory
tests under part B of title XVIII of the Social Secu-
rity Act, using a negotiated rulemaking process
under subchapter III of chapter 5 of title 5, United
States Code.
(2) CONSIDERATIONS IN DESIGN OF UNIFORM
POLICIES.—The policies under paragraph (1) shall
be designed to promote uniformity and program in-
tegrity and reduce administrative burdens with re-
spect to clinical diagnostic laboratory tests payable
under such part in connection with the following:
(A) Beneficiary information required to be
submitted with each claim or order for labora-
tory tests.
(B) Physicians’ obligations regarding docu-
mentation requirements and recordkeeping.
(C) Procedures for filing claims and for
providing remittances by electronic media.
498
(D) The documentation of medical neces-
sity.
(E) Limitation on frequency of coverage
for the same tests performed on the same indi-
vidual.
(3) CHANGES
IN
CARRIER
REQUIREMENTS
PENDING ADOPTION OF UNIFORM POLICY.—During
the period that begins on the date of the enactment
of this Act and ends on the date the Secretary first
implements uniform policies pursuant to regulations
promulgated under this subsection, a carrier under
such part may implement changes relating to re-
quirements for the submission of a claim for clinical
diagnostic laboratory tests.
(4) USE
OF
INTERIM
REGIONAL
POLICIES.—
After the date the Secretary first implements such
uniform policies, the Secretary shall permit any car-
rier to develop and implement interim policies of the
type described in paragraph (1), in accordance with
guidelines established by the Secretary, in cases in
which a uniform national policy has not been estab-
lished under this subsection and there is a dem-
onstrated need for a policy to respond to aberrant
utilization or provision of unnecessary services. Ex-
cept as the Secretary specifically permits, no policy
499
shall be implemented under this paragraph for a pe-
riod of longer than 2 years.
(5) INTERIM
NATIONAL
POLICIES.—After the
date the Secretary first designates regional carriers
under subsection (a), the Secretary shall establish a
process under which designated carriers can collec-
tively develop and implement interim national stand-
ards of the type described in paragraph (1). No such
policy shall be implemented under this paragraph for
a period of longer than 2 years.
(6) BIENNIAL
REVIEW
PROCESS.—Not less
often than once every 2 years, the Secretary shall
solicit and review comments regarding changes in
the uniform policies established under this sub-
section. As part of such biennial review process, the
Secretary shall specifically review and consider
whether to incorporate or supersede interim, re-
gional, or national policies developed under para-
graph (4) or (5). Based upon such review, the Sec-
retary may provide for appropriate changes in the
uniform policies previously adopted under this sub-
section.
(7) NOTICE.— Before a carrier implements a
change or policy under paragraph (3), (4), or (5),
the carrier shall provide for advance notice to inter-
500
ested parties and a 45-day period in which such par-
ties may submit comments on the proposed change.
(c) INCLUSION OF LABORATORY REPRESENTATIVE
ON CARRIER ADVISORY COMMITTEES.—The Secretary
shall direct that any advisory committee established by
such a carrier, to advise with respect to coverage, adminis-
tration or payment policies under part B of title XVIII
of the Social Security Act, shall include an individual to
represent the interest and views of independent clinical
laboratories and such other laboratories as the Secretary
deems appropriate. Such individual shall be selected by
such committee from among nominations submitted by na-
tional and local organizations that represent independent
clinical laboratories.
SEC. 4615. UPDATES FOR AMBULATORY SURGICAL SERV-
ICES.
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is
amended by striking all that follows ‘‘shall be increased’’
and inserting the following: ‘‘as follows:
‘‘(i) For fiscal years 1996 and 1997, 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 involved.
501
‘‘(ii) For each of fiscal years 1998 through
2002 by such percentage increase minus 2.0 percent-
age points.
‘‘(iii) For each succeeding fiscal year by such
percentage increase.’’.
SEC. 
4616. 
REIMBURSEMENT 
FOR 
DRUGS 
AND
BIOLOGICALS.
(a) IN GENERAL.—Section 1842 (42 U.S.C. 1395u)
is amended by inserting after subsection (n) the following
new subsection:
‘‘(o) If a physician’s, supplier’s, or any other person’s
bill or request for payment for services includes a charge
for a drug or biological for which payment may be made
under this part and the drug or biological is not paid on
a cost or prospective payment basis as otherwise provided
in this part, the amount payable for the drug or biological
is equal to 95 percent of the average wholesale price.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to drugs and biologicals furnished on
or after January 1, 1998.
SEC. 4617. COVERAGE OF ORAL ANTI-NAUSEA DRUGS
UNDER CHEMOTHERAPEUTIC REGIMEN.
(a) IN GENERAL.—Section 1861(s)(2) (42 U.S.C.
1395x(s)(2)), as amended, is amended by inserting after
subparagraph (S) the following new subparagraph:
502
‘‘(T) an oral drug (which is approved by the
Federal Food and Drug Administration) prescribed
for use as an acute anti-emetic used as part of an
anticancer chemotherapeutic regimen if the drug is
administered by a physician (or as prescribed by a
physician)—
‘‘(i) for use immediately before, imme-
diately after, or at the time of the administra-
tion of the anticancer chemotherapeutic agent;
and
‘‘(ii) as a full replacement for the anti-
emetic therapy which would otherwise be ad-
ministered intravenously.’’.
(b) PAYMENT LEVELS.—Section 1834 (42 U.S.C.
1395m), as amended by sections 4421(a)(2) and
4431(b)(2), is amended by adding at the end the following
new subsection:
‘‘(m) SPECIAL RULES
FOR PAYMENT
FOR ORAL
ANTI-NAUSEA DRUGS.—
‘‘(1) LIMITATION
ON
PER
DOSE
PAYMENT
BASIS.—Subject to paragraph (2), the per dose pay-
ment basis under this part for oral anti-nausea
drugs (as defined in paragraph (3)) administered
during a year shall not exceed 90 percent of the av-
erage per dose payment basis for the equivalent in-
503
travenous anti-emetics administered during the year,
as computed based on the payment basis applied
during 1996.
‘‘(2) AGGREGATE LIMIT.—The Secretary shall
make such adjustment in the coverage of, or pay-
ment basis for, oral anti-nausea drugs so that cov-
erage of such drugs under this part does not result
in any increase in aggregate payments per capita
under this part above the levels of such payments
per capita that would otherwise have been made if
there were no coverage for such drugs under this
part.
‘‘(3) ORAL
ANTI-NAUSEA
DRUGS
DEFINED.—
For purposes of this subsection, the term ‘oral anti-
nausea drugs’ means drugs for which coverage is
provided under this part pursuant to section
1861(s)(2)(P).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after January 1, 1998.
SEC. 4618. RURAL HEALTH CLINIC SERVICES.
(a) PER-VISIT PAYMENT LIMITS
FOR PROVIDER-
BASED CLINICS.—
(1) EXTENSION OF LIMIT.—
504
(A) IN GENERAL.—The matter in section
1833(f) (42 U.S.C. 1395l(f)) preceding para-
graph (1) is amended by striking ‘‘independent
rural health clinics’’ and inserting ‘‘rural health
clinics (other than such clinics in rural hospitals
with less than 50 beds)’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) applies to services
furnished after 1997.
(2) 
TECHNICAL
CLARIFICATION.—Section
1833(f)(1) (42 U.S.C. 1395l(f)(1)) is amended by
inserting ‘‘per visit’’ after ‘‘$46’’.
(b) ASSURANCE OF QUALITY SERVICES.—
(1) IN
GENERAL.—Subparagraph (I) of the
first sentence of section 1861(aa)(2) (42 U.S.C.
1395x(aa)(2)) is amended to read as follows:
‘‘(I) has a quality assessment and perform-
ance improvement program, and appropriate
procedures for review of utilization of clinic
services, as the Secretary may specify,’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on January 1,
1998.
(c) WAIVER OF CERTAIN STAFFING REQUIREMENTS
LIMITED TO CLINICS IN PROGRAM.—
505
(1) IN GENERAL.—Section 1861(aa)(7)(B) (42
U.S.C. 1395x(aa)(7)(B)) is amended by inserting
before the period at the end the following: ‘‘, or if
the facility has not yet been determined to meet the
requirements (including subparagraph (J) of the
first sentence of paragraph (2)) of a rural health
clinic’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies to waiver requests made
after 1997.
(d) REFINEMENT
OF SHORTAGE AREA REQUIRE-
MENTS.—
(1) DESIGNATION REVIEWED TRIENNIALLY.—
Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is
amended in the second sentence, in the matter in
clause (i) preceding subclause (I)—
(A) by striking ‘‘and that is designated’’
and inserting ‘‘and that, within the previous
three-year period, has been designated’’; and
(B) by striking ‘‘or that is designated’’ and
inserting ‘‘or designated’’.
(2) AREA MUST HAVE SHORTAGE OF HEALTH
CARE
PRACTITIONERS.—Section 1861(aa)(2) (42
U.S.C. 1395x(aa)(2)), as amended by paragraph (1),
506
is further amended in the second sentence, in the
matter in clause (i) preceding subclause (I)—
(A) by striking the comma after ‘‘personal
health services’’; and
(B) by inserting ‘‘and in which there are
insufficient numbers of needed health care prac-
titioners (as determined by the Secretary),’’
after ‘‘Bureau of the Census)’’.
(3) PREVIOUSLY QUALIFYING CLINICS GRAND-
FATHERED ONLY TO PREVENT SHORTAGE.—Section
1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended in
the third sentence by inserting before the period ‘‘if
it is determined, in accordance with criteria estab-
lished by the Secretary in regulations, to be essential
to the delivery of primary care services that would
otherwise be unavailable in the geographic area
served by the clinic’’.
(4) EFFECTIVE DATES; IMPLEMENTING REGU-
LATIONS.—
(A) IN
GENERAL.—Except as otherwise
provided, the amendments made by the preced-
ing paragraphs take effect on January 1 of the
first calendar year beginning at least one month
after enactment of this Act.
507
(B) CURRENT RURAL HEALTH CLINICS.—
The amendments made by the preceding para-
graphs take effect, with respect to entities that
are rural health clinics under title XVIII of the
Social Security Act on the date of enactment of
this Act, on January 1 of the second calendar
year following the calendar year specified in
subparagraph (A).
(C) GRANDFATHERED CLINICS.—
(i) IN
GENERAL.—The amendment
made by paragraph (3) shall take effect on
the effective date of regulations issued by
the Secretary under clause (ii).
(ii) REGULATIONS.—The Secretary
shall issue final regulations implementing
paragraph (3) that shall take effect no
later than January 1 of the third calendar
year beginning at least one month after en-
actment of this Act.
SEC. 4619. INCREASED MEDICARE REIMBURSEMENT FOR
NURSE 
PRACTITIONERS 
AND 
CLINICAL
NURSE SPECIALISTS.
(a) REMOVAL OF RESTRICTIONS ON SETTINGS.—
508
(1) IN
GENERAL.—Clause (ii) of section
1861(s)(2)(K) 
(42 
U.S.C. 
1395x(s)(2)(K)) 
is
amended to read as follows:
‘‘(ii) services which would be physicians’ serv-
ices if furnished by a physician (as defined in sub-
section (r)(1)) and which are performed by a nurse
practitioner or clinical nurse specialist (as defined in
subsection (aa)(5)) working in collaboration (as de-
fined in subsection (aa)(6)) with a physician (as de-
fined in subsection (r)(1)) which the nurse practi-
tioner or clinical nurse specialist is legally authorized
to perform by the State in which the services are
performed, and such services and supplies furnished
as an incident to such services as would be covered
under subparagraph (A) if furnished incident to a
physician’s professional service, but only if no facil-
ity or other provider charges or is paid any amounts
with respect to the furnishing of such services;’’.
(2) CONFORMING AMENDMENTS.—(A) Section
1861(s)(2)(K) 
of 
such 
Act 
(42 
U.S.C.
1395x(s)(2)(K)) is further amended—
(i) in clause (i), by inserting ‘‘and such
services and supplies furnished as incident to
such services as would be covered under sub-
paragraph (A) if furnished incident to a physi-
509
cian’s professional service; and’’ after ‘‘are per-
formed,’’; and
(ii) by striking clauses (iii) and (iv).
(B) 
Section 
1861(b)(4) 
(42 
U.S.C.
1395x(b)(4)) is amended by striking ‘‘clauses (i) or
(iii) of subsection (s)(2)(K)’’ and inserting ‘‘sub-
section (s)(2)(K)’’.
(C) 
Section 
1862(a)(14) 
(42 
U.S.C.
1395y(a)(14)) is amended by striking ‘‘section
1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)’’ and insert-
ing ‘‘section 1861(s)(2)(K)’’.
(D) 
Section 
1866(a)(1)(H) 
(42 
U.S.C.
1395cc(a)(1)(H)) is amended by striking ‘‘section
1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)’’ and insert-
ing ‘‘section 1861(s)(2)(K)’’.
(E) 
Section 
1888(e)(2)(A)(ii) 
(42 
U.S.C.
1395yy(e)(2)(A)(ii)), as added by section 10401(a),
is amended by striking ‘‘through (iii)’’ and inserting
‘‘and (ii)’’.
(b) INCREASED PAYMENT.—
(1) FEE SCHEDULE AMOUNT.—Clause (O) of
section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is
amended to read as follows: ‘‘(O) with respect to
services described in section 1861(s)(2)(K)(ii) (relat-
ing to nurse practitioner or clinical nurse specialist
510
services), the amounts paid shall be equal to 80 per-
cent of (i) the lesser of the actual charge or 85 per-
cent of the fee schedule amount provided under sec-
tion 1848, or (ii) in the case of services as an assist-
ant at surgery, the lesser of the actual charge or 85
percent of the amount that would otherwise be rec-
ognized if performed by a physician who is serving
as an assistant at surgery; and’’.
(2) CONFORMING AMENDMENTS.—(A) Section
1833(r) (42 U.S.C. 1395l(r)) is amended—
(i) in paragraph (1), by striking ‘‘section
1861(s)(2)(K)(iii) (relating to nurse practi-
tioner or clinical nurse specialist services pro-
vided in a rural area)’’ and inserting ‘‘section
1861(s)(2)(K)(ii) (relating to nurse practitioner
or clinical nurse specialist services)’’;
(ii) by striking paragraph (2);
(iii) in paragraph (3), by striking ‘‘section
1861(s)(2)(K)(iii)’’ 
and 
inserting 
‘‘section
1861(s)(2)(K)(ii)’’; and
(iv) by redesignating paragraph (3) as
paragraph (2).
(B) 
Section 
1842(b)(12)(A) 
(42 
U.S.C.
1395u(b)(12)(A)) is amended, in the matter preced-
ing clause (i), by striking ‘‘clauses (i), (ii), or (iv) of
511
section 1861(s)(2)(K) (relating to a physician assist-
ants and nurse practitioners)’’ and inserting ‘‘sec-
tion 1861(s)(2)(K)(i) (relating to physician assist-
ants)’’.
(c) DIRECT PAYMENT FOR NURSE PRACTITIONERS
AND CLINICAL NURSE SPECIALISTS.—
(1) IN
GENERAL.—Section 1832(a)(2)(B)(iv)
(42 U.S.C. 1395k(a)(2)(B)(iv)) is amended by strik-
ing ‘‘provided in a rural area (as defined in section
1886(d)(2)(D))’’ and inserting ‘‘but only if no facil-
ity or other provider charges or is paid any amounts
with respect to the furnishing of such services’’.
(2) 
CONFORMING
AMENDMENT.—Section
1842(b)(6)(C) 
(42 
U.S.C. 
1395u(b)(6)(C)) 
is
amended—
(A) by striking ‘‘clauses (i), (ii), or (iv)’’
and inserting ‘‘clause (i)’’; and
(B) by striking ‘‘or nurse practitioner’’.
(d) DEFINITION OF CLINICAL NURSE SPECIALIST
CLARIFIED.—Section 
1861(aa)(5) 
(42 
U.S.C.
1395x(aa)(5)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(5)’’;
(2) by striking ‘‘The term ‘physician assist-
ant’ ’’ and all that follows through ‘‘who performs’’
and inserting ‘‘The term ‘physician assistant’ and
512
the term ‘nurse practitioner’ mean, for purposes of
this title, a physician assistant or nurse practitioner
who performs’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(B) The term ‘clinical nurse specialist’ means, for
purposes of this title, an individual who—
‘‘(i) is a registered nurse and is licensed to
practice nursing in the State in which the clinical
nurse specialist services are performed; and
‘‘(ii) holds a master’s degree in a defined clini-
cal area of nursing from an accredited educational
institution.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to services furnished
and supplies provided on and after January 1, 1998.
SEC. 4620. INCREASED MEDICARE REIMBURSEMENT FOR
PHYSICIAN ASSISTANTS.
(a) REMOVAL OF RESTRICTION ON SETTINGS.—Sec-
tion 1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is
amended—
(1) by striking ‘‘(I) in a hospital’’ and all that
follows through ‘‘shortage area,’’, and
(2) by adding at the end the following: ‘‘but
only if no facility or other provider charges or is
513
paid any amounts with respect to the furnishing of
such services,’’.
(b) INCREASED PAYMENT.—Paragraph (12) of sec-
tion 1842(b) (42 U.S.C. 1395u(b)), as amended by section
4619(b)(2)(B), is amended to read as follows:
‘‘(12) With respect to services described in section
1861(s)(2)(K)(i)—
‘‘(A) payment under this part may only be
made on an assignment-related basis; and
‘‘(B) the amounts paid under this part shall be
equal to 80 percent of (i) the lesser of the actual
charge or 85 percent of the fee schedule amount
provided under section 1848 for the same service
provided by a physician who is not a specialist; or
(ii) in the case of services as an assistant at surgery,
the lesser of the actual charge or 85 percent of the
amount that would otherwise be recognized if per-
formed by a physician who is serving as an assistant
at surgery.’’.
(c) REMOVAL
OF RESTRICTION
ON EMPLOYMENT
RELATIONSHIP.—Section 
1842(b)(6) 
(42 
U.S.C.
1395u(b)(6)) is amended by adding at the end the follow-
ing new sentence: ‘‘For purposes of clause (C) of the first
sentence of this paragraph, an employment relationship
may include any independent contractor arrangement, and
514
employer status shall be determined in accordance with
the law of the State in which the services described in such
clause are performed.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to services furnished
and supplies provided on and after January 1, 1998.
SEC. 4621. RENAL DIALYSIS-RELATED SERVICES.
(a) AUDITING OF COST REPORTS.—The Secretary
shall audit a sample of cost reports of renal dialysis pro-
viders for 1995 and for each third year thereafter.
(b) IMPLEMENTATION OF QUALITY STANDARDS.—
The Secretary of Health and Human Services shall de-
velop and implement, by not later than January 1, 1999,
a method to measure and report quality of renal dialysis
services provided under the medicare program under title
XVIII of the Social Security Act in order to reduce pay-
ments for inappropriate or low quality care.
SEC. 4622. PAYMENT FOR COCHLEAR IMPLANTS AS CUS-
TOMIZED DURABLE MEDICAL EQUIPMENT.
(a) IN GENERAL.—Section 1834(h)(1)(E) (42 U.S.C.
1395m(h)(1)(E)) is amended by adding at the end the fol-
lowing: ‘‘Payment for cochlear implants shall be made in
accordance with subsection (a)(4), and, in applying such
subsection to cochlear implants, carriers shall take into
consideration technological innovations and data on
515
charges to the extent that such charges reflect such inno-
vations.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to implants implanted on or after
January 1, 1998.
CHAPTER 3—PART B PREMIUM
SEC. 4631. PART B PREMIUM.
(a) IN GENERAL.—The first, second and third sen-
tences of section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are
amended to read as follows: ‘‘The Secretary, during Sep-
tember of each year, shall determine and promulgate a
monthly premium rate for the succeeding calendar year.
That monthly premium rate shall be equal to 50 percent
of the monthly actuarial rate for enrollees age 65 and over,
determined according to paragraph (1), for that succeed-
ing calendar year.’’.
(b) CONFORMING AND TECHNICAL AMENDMENTS.—
(1) SECTION 1839.—Section 1839 (42 U.S.C.
1395r) is amended—
(A) in subsection (a)(2), by striking ‘‘(b)
and (e)’’ and inserting ‘‘(b), (c), and (f)’’,
(B) in the last sentence of subsection
(a)(3)—
(i) by inserting ‘‘rate’’ after ‘‘pre-
mium’’, and
516
(ii) by striking ‘‘and the derivation of
the dollar amounts specified in this para-
graph’’,
(C) by striking subsection (e), and
(D) by redesignating subsection (g) as sub-
section (e) and inserting that subsection after
subsection (d).
(2) SECTION 1844.—Subparagraphs (A)(i) and
(B)(i) 
of 
section 
1844(a)(1) 
(42 
U.S.C.
1395w(a)(1)) are each amended by striking ‘‘or
1839(e), as the case may be’’.
Subtitle H—Provisions Relating to
Parts A and B
CHAPTER 1—PROVISIONS RELATING TO
MEDICARE SECONDARY PAYER
SEC. 4701. PERMANENT EXTENSION AND REVISION OF CER-
TAIN SECONDARY PAYER PROVISIONS.
(a) APPLICATION
TO DISABLED INDIVIDUALS
IN
LARGE GROUP HEALTH PLANS.—
(1) IN GENERAL.—Section 1862(b)(1)(B) (42
U.S.C. 1395y(b)(1)(B)) is amended—
(A) in clause (i), by striking ‘‘clause (iv)’’
and inserting ‘‘clause (iii)’’,
(B) by striking clause (iii), and
517
(C) by redesignating clause (iv) as clause
(iii).
(2) CONFORMING
AMENDMENTS.—Paragraphs
(1) through (3) of section 1837(i) (42 U.S.C.
1395p(i)) and the second sentence of section
1839(b) (42 U.S.C. 1395r(b)) are each amended by
striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears
and inserting ‘‘1862(b)(1)(B)(iii)’’.
(b) INDIVIDUALS WITH END STAGE RENAL DIS-
EASE.—
(1) IN GENERAL.—Section 1862(b)(1)(C) (42
U.S.C. 1395y(b)(1)(C)) is amended—
(A) in the first sentence, by striking ‘‘12-
month’’ each place it appears and inserting
‘‘30-month’’, and
(B) by striking the second sentence.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to items and services
furnished on or after the date of the enactment of
this Act and with respect to periods beginning on or
after the date that is 18 months prior to such date.
(c) IRS-SSA-HCFA DATA MATCH.—
(1) 
SOCIAL
SECURITY
ACT.—Section
1862(b)(5)(C) 
(42 
U.S.C. 
1395y(b)(5)(C)) 
is
amended by striking clause (iii).
518
(2) 
INTERNAL
REVENUE
CODE.—Section
6103(l)(12) of the Internal Revenue Code of 1986 is
amended by striking subparagraph (F).
SEC. 4702. CLARIFICATION OF TIME AND FILING LIMITA-
TIONS.
(a) EXTENSION OF CLAIMS FILING PERIOD.—Sec-
tion 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amend-
ed by adding at the end the following new clause:
‘‘(v) CLAIMS-FILING
PERIOD.—Not-
withstanding any other time limits that
may exist for filing a claim under an em-
ployer group health plan, the United
States may seek to recover conditional pay-
ments in accordance with this subpara-
graph where the request for payment is
submitted to the entity required or respon-
sible under this subsection to pay with re-
spect to the item or service (or any portion
thereof) under a primary plan within the
3-year period beginning on the date on
which the item or service was furnished.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to items and services furnished after
1990. The previous sentence shall not be construed as per-
mitting any waiver of the 3-year-period requirement (im-
519
posed by such amendment) in the case of items and serv-
ices furnished more than 3 years before the date of the
enactment of this Act.
SEC. 4703. PERMITTING RECOVERY AGAINST THIRD PARTY
ADMINISTRATORS.
(a) PERMITTING RECOVERY AGAINST THIRD PARTY
ADMINISTRATORS
OF
PRIMARY
PLANS.—Section
1862(b)(2)(B)(ii) (42 U.S.C. 1395y(b)(2)(B)(ii)) is
amended—
(1) by striking ‘‘under this subsection to pay’’
and inserting ‘‘(directly, as a third-party adminis-
trator, or otherwise) to make payment’’, and
(2) by adding at the end the following: ‘‘The
United States may not recover from a third-party
administrator under this clause in cases where the
third-party administrator would not be able to re-
cover the amount at issue from the employer or
group health plan for whom it provides administra-
tive services due to the insolvency or bankruptcy of
the employer or plan.’’.
(b) CLARIFICATION OF BENEFICIARY LIABILITY.—
Section 1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended
by adding at the end the following new subparagraph:
‘‘(F) LIMITATION ON BENEFICIARY LIABIL-
ITY.—An individual who is entitled to benefits
520
under this title and is furnished an item or
service for which such benefits are incorrectly
paid is not liable for repayment of such benefits
under this paragraph unless payment of such
benefits was made to the individual.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section apply to items and services furnished on or
after the date of the enactment of this Act.
CHAPTER 2—HOME HEALTH SERVICES
SEC. 4711. RECAPTURING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR HOME HEALTH SERVICES.
(a) BASING UPDATES TO PER VISIT COST LIMITS ON
LIMITS FOR FISCAL YEAR 1993.—Section 1861(v)(1)(L)
(42 U.S.C. 1395x(v)(1)(L)) is amended by adding at the
end the following:
‘‘(iv) In establishing limits under this subparagraph
for cost reporting periods beginning after September 30,
1997, the Secretary shall not take into account any
changes in the home health market basket, as determined
by the Secretary, with respect to cost reporting periods
which began on or after July 1, 1994, and before July
1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMEND-
MENT.—The Secretary of Health and Human Services
521
shall not consider the amendment made by subsection (a)
in making any exemptions and exceptions pursuant to sec-
tion 1861(v)(1)(L)(ii) of the Social Security Act (42
U.S.C. 1395x(v)(1)(L)(ii)).
SEC. 4712. INTERIM PAYMENTS FOR HOME HEALTH SERV-
ICES.
(a) 
REDUCTIONS
IN
COST
LIMITS.—Section
1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amend-
ed—
(1) by moving the indentation of subclauses (I)
through (III) 2-ems to the left;
(2) in subclause (I), by inserting ‘‘of the mean
of the labor-related and nonlabor per visit costs for
freestanding home health agencies’’ before the
comma at the end;
(3) in subclause (II), by striking ‘‘, or’’ and in-
serting ‘‘of such mean,’’;
(4) in subclause (III)—
(A) by inserting ‘‘and before October 1,
1997,’’ after ‘‘July 1, 1987,’’, and
(B) by striking the comma at the end and
inserting ‘‘of such mean, or’’; and
(5) by striking the matter following subclause
(III) and inserting the following:
522
‘‘(IV) October 1, 1997, 105 percent of the me-
dian of the labor-related and nonlabor per visit costs
for freestanding home health agencies.’’.
(b) DELAY IN UPDATES.—Section 1861(v)(1)(L)(iii)
(42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by inserting
‘‘, or on or after July 1, 1997, and before October 1,
1997’’ after ‘‘July 1, 1996’’.
(c) 
ADDITIONS
TO
COST
LIMITS.—Section
1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)), as amended by
section 4711(a), is amended by inserting adding at the
end the following new clauses:
‘‘(v) For services furnished by home health agencies
for cost reporting periods beginning on or after October
1, 1997, the Secretary shall provide for an interim system
of limits. Payment shall not exceed the costs determined
under the preceding provisions of this subparagraph or,
if lower, the product of—
‘‘(I) an agency-specific per beneficiary annual
limitation calculated based 75 percent on the reason-
able costs (including nonroutine medical supplies)
for the agency’s 12-month cost reporting period end-
ing during 1994, and based 25 percent on the stand-
ardized regional average of such costs for the agen-
cy’s region for cost reporting periods ending during
523
1994, such costs updated by the home health market
basket index; and
‘‘(II) the agency’s unduplicated census count of
patients (entitled to benefits under this title) for the
cost reporting period subject to the limitation.
‘‘(vi) For services furnished by home health agencies
for cost reporting periods beginning on or after October
1, 1997, the following rules apply:
‘‘(I) For new providers and those providers
without a 12-month cost reporting period ending in
calendar year 1994, the per beneficiary limitation
shall be equal to the median of these limits (or the
Secretary’s best estimates thereof) applied to other
home health agencies as determined by the Sec-
retary. A home health agency that has altered its
corporate structure or name shall not be considered
a new provider for this purpose.
‘‘(II) For beneficiaries who use services fur-
nished by more than one home health agency, the
per beneficiary limitations shall be prorated among
the agencies.’’.
(d) DEVELOPMENT
OF CASE MIX SYSTEM.—The
Secretary of Health and Human Services shall expand re-
search on a prospective payment system for home health
agencies under the medicare program that ties prospective
524
payments to a unit of service, including an intensive effort
to develop a reliable case mix adjuster that explains a sig-
nificant amount of the variances in costs.
(e) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—
Effective for cost reporting periods beginning on or after
October 1, 1997, the Secretary of Health and Human
Services may require all home health agencies to submit
additional information that the Secretary considers nec-
essary for the development of a reliable case mix system.
SEC. 4713. CLARIFICATION OF PART-TIME OR INTERMIT-
TENT NURSING CARE.
(a) IN GENERAL.—Section 1861(m) (42 U.S.C.
1395x(m)) is amended by adding at the end the following:
‘‘For purposes of paragraphs (1) and (4), the term ‘part-
time or intermittent services’ means skilled nursing and
home health aide services furnished any number of days
per week as long as they are furnished (combined) less
than 8 hours each day and 28 or fewer hours each week
(or, subject to review on a case-by-case basis as to the
need for care, less than 8 hours each day and 35 or fewer
hours per week). For purposes of sections 1814(a)(2)(C)
and 1835(a)(2)(A), ‘intermittent’ means skilled nursing
care that is either provided or needed on fewer than 7
days each week, or less than 8 hours of each day for peri-
ods of 21 days or less (with extensions in exceptional cir-
525
cumstances when the need for additional care is finite and
predictable).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after Oc-
tober 1, 1997.
SEC. 4714. STUDY ON DEFINITION OF HOMEBOUND.
(a) STUDY.—The Secretary of Health and Human
Services shall conduct a study of the criteria that should
be applied, and the method of applying such criteria, in
the determination of whether an individual is homebound
for purposes of qualifying for receipt of benefits for home
health services under the medicare program. Such criteria
shall include the extent and circumstances under which
a person may be absent from the home but nonetheless
qualify.
(b) REPORT.—Not later than October 1, 1998, the
Secretary shall submit a report to the Congress on the
study conducted under subsection (a). The report shall in-
clude specific recommendations on such criteria and meth-
ods.
SEC. 4715. PAYMENT BASED ON LOCATION WHERE HOME
HEALTH SERVICE IS FURNISHED.
(a) CONDITIONS OF PARTICIPATION.—Section 1891
(42 U.S.C. 1395bbb) is amended by adding at the end
the following:
526
‘‘(g) PAYMENT ON BASIS OF LOCATION OF SERV-
ICE.—A home health agency shall submit claims for pay-
ment for home health services under this title only on the
basis of the geographic location at which the service is fur-
nished, as determined by the Secretary.’’.
(b) WAGE ADJUSTMENT.—Section 1861(v)(1)(L)(iii)
(42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking
‘‘agency is located’’ and inserting ‘‘service is furnished’’.
(c) EFFECTIVE DATE.—The amendments made by
this section apply to cost reporting periods beginning on
or after October 1, 1997.
SEC. 4716. NORMATIVE STANDARDS FOR HOME HEALTH
CLAIMS DENIALS,
(a) IN GENERAL.—Section 1862(a)(1) (42 U.S.C.
1395y(a)(1)), as amended by section 4103(c), is amend-
ed—
(1) by striking ‘‘and’’ at the end of subpara-
graph (G),
(2) by striking the semicolon at the end of sub-
paragraph (H) and inserting ‘‘, and’’, and
(3) by inserting after subparagraph (H) the fol-
lowing new subparagraph:
‘‘(I) the frequency and duration of home health
services which are in excess of normative guidelines
that the Secretary shall establish by regulation;’’.
527
(b) NOTIFICATION.—The Secretary of Health and
Human Services may establish a process for notifying a
physician in cases in which the number of home health
service visits furnished under the medicare program pur-
suant to a prescription or certification of the physician sig-
nificantly exceeds such threshold (or thresholds) as the
Secretary specifies. The Secretary may adjust such thresh-
old to reflect demonstrated differences in the need for
home health services among different beneficiaries.
(c) EFFECTIVE DATE.—The amendments made by
this section apply to services furnished on or after October
1, 1997.
SEC. 4717. NO HOME HEALTH BENEFITS BASED SOLELY ON
DRAWING BLOOD.
(a) IN
GENERAL.—Sections 1814(a)(2)(C) and
1835(a)(2)(A) 
(42 
U.S.C. 
1395f(a)(2)(C),
1395n(a)(2)(A)) are each amended by inserting ‘‘(other
than solely venipuncture for the purpose of obtaining a
blood sample)’’ after ‘‘skilled nursing care’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to home health services furnished
after the 6–month period beginning after the date of en-
actment of this Act.
528
SEC. 4718. MAKING PART B PRIMARY PAYOR FOR CERTAIN
HOME HEALTH SERVICES.
(a) IN
GENERAL.—Section 1833(d) (42 U.S.C.
1395l(d)) is amended—
(1) by striking ‘‘(d) No’’ and inserting ‘‘(d)(1)
Subject to paragraph (2), no’’, and
(2) by adding at the end the following new
paragraph:
‘‘(2) Payment shall be made under this part (rather
than under part A), for an individual entitled to benefits
under part A, for home health services, other than the first
100 visits of post-hospital home health services furnished
to an individual.’’.
(b) POST-HOSPITAL HOME HEALTH SERVICES.—
Section 1861 (42 U.S.C. 1395x) is amended by adding
at the end the following:
‘‘(ss) POST-HOSPITAL HOME HEALTH SERVICES.—
The term ‘post-hospital home health services’ means home
health services furnished to an individual under a plan of
treatment established when the individual was an inpa-
tient of a hospital or rural primary care hospital for not
less than 3 consecutive days before discharge, or during
a covered post-hospital extended care stay, if home health
services are initiated for the individual within 30 days
after discharge from the hospital, rural primary care hos-
pital or extended care facility.’’.
529
(c) PAYMENTS UNDER PART B.—Subparagraph (A)
of section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended
to read as follows:
‘‘(A) with respect to home health services
(other than a covered osteoporosis drug (as de-
fined in section 1861(kk)), and to items and
services described in section 1861(s)(10)(A),
the 
amounts 
determined 
under 
section
1861(v)(1)(L) or section 1893, or, if the serv-
ices are furnished by a public provider of serv-
ices, or by another provider which demonstrates
to the satisfaction of the Secretary that a sig-
nificant portion of its patients are low-income
(and requests that payment be made under this
provision), free of charge, or at nominal charges
to the public, the amount determined in accord-
ance with section 1814(b)(2);’’.
(d) PHASE-IN OF ADDITIONAL PART B COSTS IN
DETERMINATION OF PART B MONTHLY PREMIUM.—Sec-
tion 1839(a) (42 U.S.C. 1395r(a)) is amended—
(1) in paragraph (3) in last the sentence in-
serted by section 4631(a) of this title, by inserting
‘‘(except as provided in paragraph (5)(B))’’ before
the period, and
(2) by adding after paragraph (4) the following:
530
‘‘(5)(A) The Secretary shall, at the time of determin-
ing the monthly actuarial rate under paragraph (1) for
1998 through 2003, shall determine a transitional month-
ly actuarial rate for enrollees age 65 and over in the same
manner as such rate is determined under paragraph (1),
except that there shall be excluded from such determina-
tion an estimate of any benefits and administrative costs
attributable to home health services for which payment
would have been made under part A during the year but
for paragraph (2) of section 1833(d).
‘‘(B) The monthly premium for each individual en-
rolled under this part for each month for a year (beginning
with 1998 and ending with 2003) shall be equal to 50
percent of the monthly actuarial rate determined under
subparagraph (A) increased by the following proportion of
the difference between such premium and the monthly pre-
mium otherwise determined under paragraph (3) (without
regard to this paragraph):
‘‘(i) For a month in 1998, 1⁄7.
‘‘(ii) For a month in 1999, 2⁄7.
‘‘(iii) For a month in 2000, 3⁄7.
‘‘(iv) For a month in 2001, 4⁄7.
‘‘(v) For a month in 2002, 5⁄7.
‘‘(vi) For a month in 2003, 6⁄7.’’.
531
(e) MAINTAINING
APPEAL
RIGHTS
FOR
HOME
HEALTH SERVICES.—Section 1869(b)(2)(B) (42 U.S.C.
1395ff(b)(2)(B)) is amended by inserting ‘‘(or $100 in the
case of home health services)’’ after ‘‘$500’’.
(f) REPORT.—Not later than October 1, 1999, the
Secretary of Health and Human Services shall submit a
report to the Committees on Commerce and Ways and
Means of the House of Representatives and the Committee
on Finance of the Senate on the impact on home health
utilization and admissions to hospitals and skilled nursing
facilities of the amendment made by subsection (b). The
Secretary shall further reexamine and submit a report to
such Committees on this impact 1 year after the full im-
plementation of the prospective payment system for home
health services into the medicare program, effected under
the amendments made by section 4441.
(g) EFFECTIVE DATE.—The amendments made by
this section apply to services furnished on or after October
1, 1997.
532
CHAPTER 3—BABY BOOM GENERATION
MEDICARE COMMISSION
SEC. 4721. BIPARTISAN COMMISSION ON THE EFFECT OF
THE BABY BOOM GENERATION ON THE MEDI-
CARE PROGRAM.
(a) ESTABLISHMENT.—There is established a com-
mission to be known as the Bipartisan Commission on the
Effect of the Baby Boom Generation on the Medicare Pro-
gram (in this section referred to as the ‘‘Commission’’).
(b) DUTIES.—
(1) IN GENERAL.—The Commission shall—
(A) examine the financial impact on the
medicare program of the significant increase in
the number of medicare eligible individuals
which will occur beginning approximately dur-
ing 2010 and lasting for approximately 25
years, and
(B) make specific recommendations to the
Congress respecting a comprehensive approach
to preserve the medicare program for the period
during which such individuals are eligible for
medicare.
(2) 
CONSIDERATIONS
IN
MAKING
REC-
OMMENDATIONS.—In making its recommendations,
the Commission shall consider the following:
533
(A) The amount and sources of Federal
funds to finance the medicare program, includ-
ing the potential use of innovative financing
methods.
(B) Methods used by other nations to re-
spond to comparable demographic patterns in
eligibility for health care benefits for elderly
and disabled individuals.
(C) Modifying age-based eligibility to cor-
respond to changes in age-based eligibility
under the OASDI program.
(D) Trends in employment-related health
care for retirees, including the use of medical
savings accounts and similar financing devices.
(E) The role medicare should play in ad-
dressing the needs of persons with chronic ill-
ness.
(c) MEMBERSHIP.—
(1) APPOINTMENT.—The Commission shall be
composed of 15 voting members as follows:
(A) The Majority Leader of the Senate
shall appoint, after consultation with the minor-
ity leader of the Senate, 6 members, of whom
not more than 4 may be of the same political
party.
534
(B) The Speaker of the House of Rep-
resentatives shall appoint, after consultation
with the minority leader of the House of Rep-
resentatives, 6 members, of whom not more
than 4 may be of the same political party.
(C) The 3 ex officio members of the Board
of Trustees of the Federal Hospital Insurance
Trust Fund and of the Federal Supplementary
Medical Insurance Trust Fund who are Cabinet
level officials.
(2) CHAIRMAN AND VICE CHAIRMAN.—As the
first item of business at the Commission’s first
meeting (described in paragraph (5)(B)), the Com-
mission shall elect a Chairman and Vice Chairman
from among its members. The individuals elected as
Chairman and Vice Chairman may not be of the
same political party and may not have been ap-
pointed to the Commission by the same appointing
authority.
(3) VACANCIES.—Any vacancy in the member-
ship of the Commission shall be filled in the manner
in which the original appointment was made and
shall not affect the power of the remaining members
to execute the duties of the Commission.
535
(4) QUORUM.—A quorum shall consist of 8
members of the Commission, except that 4 members
may conduct a hearing under subsection (f).
(5) MEETINGS.—
(A) The Commission shall meet at the call
of its Chairman or a majority of its members.
(B) The Commission shall hold its first
meeting not later than February 1, 1998.
(6) COMPENSATION AND REIMBURSEMENT OF
EXPENSES.—Members of the Commission are not
entitled to receive compensation for service on the
Commission. Members may be reimbursed for travel,
subsistence, and other necessary expenses incurred
in carrying out the duties of the Commission.
(d) ADVISORY PANEL.—
(1) IN GENERAL.—The Chairman, in consulta-
tion with the Vice Chairman, may establish a panel
(in this section referred to as the ‘‘Advisory Panel’’)
consisting of health care experts, consumers, provid-
ers, and others to advise and assist the members of
the Commission in carrying out the duties described
in subsection (b). The panel shall have only those
powers that the Chairman, in consultation with the
Vice Chairman, determines are necessary and appro-
536
priate to assist the Commission in carrying out such
duties.
(2) COMPENSATION.—Members of the Advisory
Panel are not entitled to receive compensation for
service on the Advisory Panel. Subject to the ap-
proval of the chairman of the Commission, members
may be reimbursed for travel, subsistence, and other
necessary expenses incurred in carrying out the du-
ties of the Advisory Panel.
(e) STAFF AND CONSULTANTS.—
(1) STAFF.—The Commission may appoint and
determine the compensation of such staff as may be
necessary to carry out the duties of the Commission.
Such appointments and compensation may be made
without regard to the provisions of title 5, United
States Code, that govern appointments in the com-
petitive services, and the provisions of chapter 51
and subchapter III of chapter 53 of such title that
relate to classifications and the General Schedule
pay rates.
(2) CONSULTANTS.—The Commission may pro-
cure such temporary and intermittent services of
consultants under section 3109(b) of title 5, United
States Code, as the Commission determines to be
necessary to carry out the duties of the Commission.
537
(f) POWERS.—
(1) HEARINGS
AND
OTHER
ACTIVITIES.—For
the purpose of carrying out its duties, the Commis-
sion may hold such hearings and undertake such
other activities as the Commission determines to be
necessary to carry out its duties.
(2) STUDIES BY GAO.—Upon the request of the
Commission, the Comptroller General shall conduct
such studies or investigations as the Commission de-
termines to be necessary to carry out its duties.
(3) COST
ESTIMATES
BY
CONGRESSIONAL
BUDGET OFFICE.—
(A) Upon the request of the Commission,
the Director of the Congressional Budget Office
shall provide to the Commission such cost esti-
mates as the Commission determines to be nec-
essary to carry out its duties.
(B) The Commission shall reimburse the
Director of the Congressional Budget Office for
expenses relating to the employment in the of-
fice of the Director of such additional staff as
may be necessary for the Director to comply
with requests by the Commission under sub-
paragraph (A).
538
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon
the request of the Commission, the head of any Fed-
eral agency is authorized to detail, without reim-
bursement, any of the personnel of such agency to
the Commission to assist the Commission in carry-
ing out its duties. Any such detail shall not interrupt
or otherwise affect the civil service status or privi-
leges of the Federal employee.
(5) TECHNICAL
ASSISTANCE.—Upon the re-
quest of the Commission, the head of a Federal
agency shall provide such technical assistance to the
Commission as the Commission determines to be
necessary to carry out its duties.
(6) USE OF MAILS.—The Commission may use
the United States mails in the same manner and
under the same conditions as Federal agencies and
shall, for purposes of the frank, be considered a
commission of Congress as described in section 3215
of title 39, United States Code.
(7) OBTAINING
INFORMATION.—The Commis-
sion may secure directly from any Federal agency
information necessary to enable it to carry out its
duties, if the information may be disclosed under
section 552 of title 5, United States Code. Upon re-
quest of the Chairman of the Commission, the head
539
of such agency shall furnish such information to the
Commission.
(8) ADMINISTRATIVE
SUPPORT
SERVICES.—
Upon the request of the Commission, the Adminis-
trator of General Services shall provide to the Com-
mission on a reimbursable basis such administrative
support services as the Commission may request.
(9) PRINTING.—For purposes of costs relating
to printing and binding, including the cost of per-
sonnel detailed from the Government Printing Of-
fice, the Commission shall be deemed to be a com-
mittee of the Congress.
(g) REPORT.—Not later than May 1, 1999, the Com-
mission shall submit to Congress a report containing its
findings and recommendations regarding how to protect
and preserve the medicare program in a financially solvent
manner until 2030 (or, if later, throughout the period of
projected solvency of the Federal Old-Age and Survivors
Insurance Trust Fund). The report shall include detailed
recommendations for appropriate legislative initiatives re-
specting how to accomplish this objective.
(h) TERMINATION.—The Commission shall terminate
30 days after the date of submission of the report required
in subsection (g).
540
(i) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $1,500,000 to carry out
this section. 60 percent of such appropriation shall be pay-
able from the Federal Hospital Insurance Trust Fund,
and 40 percent of such appropriation shall be payable
from the Federal Supplementary Medical Insurance Trust
Fund under title XVIII of the Social Security Act (42
U.S.C. 1395i, 1395t).
CHAPTER 4—PROVISIONS RELATING TO
DIRECT GRADUATE MEDICAL EDUCATION
SEC. 4731. LIMITATION ON PAYMENT BASED ON NUMBER
OF RESIDENTS AND IMPLEMENTATION OF
ROLLING AVERAGE FTE COUNT.
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is
amended by adding after subparagraph (E) the following:
‘‘(F) LIMITATION
ON
NUMBER
OF
RESI-
DENTS
FOR
CERTAIN
FISCAL
YEARS.—Such
rules shall provide that for purposes of a cost
reporting period beginning on or after October
1, 1997, the total number of full-time equiva-
lent residents before application of weighting
factors (as determined under this paragraph)
with respect to a hospital’s approved medical
residency training program may not exceed the
number of full-time equivalent residents with
541
respect to the hospital’s most recent cost re-
porting period ending on or before December
31, 1996.
‘‘(G) COUNTING INTERNS AND RESIDENTS
FOR FY 1998 AND SUBSEQUENT YEARS.—
‘‘(i) FY 1998.—For the hospital’s first
cost reporting period beginning during fis-
cal year 1998, subject to the limit de-
scribed in subparagraph (F), the total
number of full-time equivalent residents,
for determining the hospital’s graduate
medical education payment, shall equal the
average of the full-time equivalent resident
counts for the cost reporting period and
the preceding cost reporting period.
‘‘(ii) SUBSEQUENT YEARS.—For each
subsequent cost reporting period, subject
to the limit described in subparagraph (F),
the total number of full-time equivalent
residents, for determining the hospital’s
graduate medical education payment, shall
equal the average of the actual full-time
equivalent resident counts for the cost re-
porting period and preceding two cost re-
porting periods.
542
‘‘(iii) ADJUSTMENT FOR SHORT PERI-
ODS.—If a hospital’s cost reporting period
beginning on or after October 1, 1997, is
not equal to twelve months, the Secretary
shall make appropriate modifications to en-
sure that the average full-time equivalent
resident counts pursuant to clause (ii) are
based on the equivalent of full 12-month
cost reporting periods.
‘‘(iv) EXCLUSION
OF
RESIDENTS
IN
DENTISTRY.—Residents in an approved
medical residency training program in den-
tistry shall not be counted for purposes of
this 
subparagraph 
and 
subparagraph
(F).’’.
SEC. 4732. PHASED-IN LIMITATION ON HOSPITAL OVER-
HEAD AND SUPERVISORY PHYSICIAN COMPO-
NENT 
OF 
DIRECT 
MEDICAL 
EDUCATION
COSTS.
(a) IN GENERAL.—Section 1886(h)(3) (42 U.S.C.
1395ww(h)(3)) is amended—
(1) in subparagraph (B), by inserting ‘‘subject
to subparagraph (D),’’ after ‘‘subparagraph (A)’’,
and
(2) by adding at the end the following:
543
‘‘(D) PHASED-IN
LIMITATION
ON
HOS-
PITAL OVERHEAD AND SUPERVISORY PHYSICIAN
COMPONENT.—
‘‘(i) IN GENERAL.—In the case of a
hospital for which the overhead GME
amount (as defined in clause (ii)) for the
base period exceeds an amount equal to
the 75th percentile of the overhead GME
amounts in such period for all hospitals
(weighted to reflect the full-time equivalent
resident counts for all approved medical
residency training programs), subject to
clause (iv), the hospital’s approved FTE
resident amount (for periods beginning on
or after October 1, 1997) shall be reduced
from the amount otherwise applicable (as
previously reduced under this subpara-
graph) by an overhead reduction amount.
The overhead reduction amount is equal to
the lesser of—
‘‘(I) 20 percent of the reference
reduction amount (described in clause
(iii)) for the period, or
‘‘(II) 15 percent of the hospital’s
overhead GME amount for the period
544
(as otherwise determined before the
reduction provided under this sub-
paragraph for the period involved).
‘‘(ii) OVERHEAD GME AMOUNT.—For
purposes of this subparagraph, the term
‘overhead GME amount’ means, for a hos-
pital for a period, the product of—
‘‘(I) the percentage of the hos-
pital’s approved FTE resident amount
for the base period that is not attrib-
utable to resident salaries and fringe
benefits, and
‘‘(II) the hospital’s approved
FTE resident amount for the period
involved.
‘‘(iii) 
REFERENCE
REDUCTION
AMOUNT.—
‘‘(I) 
IN
GENERAL.—The 
ref-
erence reduction amount described in
this clause for a hospital for a cost re-
porting period is the base difference
(described in subclause (II)) updated,
in a compounded manner for each pe-
riod from the base period to the pe-
riod involved, by the update applied
545
for such period to the hospital’s ap-
proved FTE resident amount.
‘‘(II) BASE
DIFFERENCE.—The
base difference described in this sub-
clause for a hospital is the amount by
which the hospital’s overhead GME
amount in the base period exceeded
the 75th percentile of such amounts
(as described in clause (i)).
‘‘(iv) MAXIMUM REDUCTION TO 75TH
PERCENTILE.—In no case shall the reduc-
tion under this subparagraph effected for a
hospital for a period (below the amount
that would otherwise apply for the period
if this subparagraph did not apply for any
period) exceed the reference reduction
amount for the hospital for the period.
‘‘(v) BASE PERIOD.—For purposes of
this subparagraph, the term ‘base period’
means the cost reporting period beginning
in fiscal year 1984 or the period used to
establish the hospital’s approved FTE resi-
dent amount for hospitals that did not
have approved residency training programs
in fiscal year 1984.
546
‘‘(vi) RULES FOR HOSPITALS INITIAT-
ING
RESIDENCY
TRAINING
PROGRAMS.—
The Secretary shall establish rules for the
application of this subparagraph in the
case of a hospital that initiates medical
residency training programs during or
after the base period.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to per resident payment
amounts attributable to periods beginning on or after Oc-
tober 1, 1997.
SEC. 4733. PERMITTING PAYMENT TO NON-HOSPITAL PRO-
VIDERS.
(a) IN
GENERAL.— Section 1886 (42 U.S.C.
1395ww) is amended by adding at the end the following:
‘‘(k) PAYMENT TO NON-HOSPITAL PROVIDERS.—
‘‘(1) REPORT.—The Secretary shall submit to
Congress, not later than 18 months after the date
of the enactment of this subsection, a proposal for
payment to qualified non-hospital providers for their
direct costs of medical education, if those costs are
incurred in the operation of an approved medical
residency training program described in subsection
(h). Such proposal shall specify the amounts, form,
and manner in which such payments will be made
547
and the portion of such payments that will be made
from each of the trust funds under this title.
‘‘(2) EFFECTIVENESS.—Except as otherwise
provided in law, the Secretary may implement such
proposal for residency years beginning not earlier
than 6 months after the date of submittal of the re-
port under paragraph (1).
‘‘(3) QUALIFIED NON-HOSPITAL PROVIDERS.—
For purposes of this subsection, the term ‘qualified
non-hospital provider’ means—
‘‘(A) a Federally qualified health center, as
defined in section 1861(aa)(4);
‘‘(B) a rural health clinic, as defined in
section 1861(aa)(2); and
‘‘(C) such other providers (other than hos-
pitals) as the Secretary determines to be appro-
priate.’’.
(b) PROHIBITION ON DOUBLE PAYMENTS; BUDGET
NEUTRALITY ADJUSTMENT.—Section 1886(h)(3)(B) (42
U.S.C. 1395ww(h)(3)(B)) is amended by adding at the
end the following:
‘‘The Secretary shall reduce the aggregate ap-
proved amount to the extent payment is made
under subsection (k) for residents included in
the hospital’s count of full-time equivalent resi-
548
dents and, in the case of residents not included
in any such count, the Secretary shall provide
for such a reduction in aggregate approved
amounts under this subsection as will assure
that the application of subsection (k) does not
result in any increase in expenditures under
this title in excess of those that would have oc-
curred if subsection (k) were not applicable.’’.
SEC. 4734. INCENTIVE PAYMENTS UNDER PLANS FOR VOL-
UNTARY REDUCTION IN NUMBER OF RESI-
DENTS.
Section 1886(h) (42 U.S.C. 1395ww(h)) is further
amended by adding at the end the following new para-
graph:
‘‘(6) INCENTIVE PAYMENT UNDER PLANS FOR
VOLUNTARY
REDUCTION
IN
NUMBER
OF
RESI-
DENTS.—
‘‘(A) IN GENERAL.—In the case of a vol-
untary residency reduction plan for which an
application is approved under subparagraph
(B), the qualifying entity submitting the plan
shall be paid an applicable hold harmless per-
centage (as specified in subparagraph (E)) of
the sum of—
‘‘(i) amount (if any) by which—
549
‘‘(I) the amount of payment
which would have been made under
this subsection if there had been a 5
percent reduction in the number of
full-time equivalent residents in the
approved medical education training
programs of the qualifying entity as of
June 30, 1997, exceeds
‘‘(II) the amount of payment
which is made under this subsection,
taking into account the reduction in
such number effected under the re-
duction plan; and
‘‘(ii) the amount of the reduction in
payment under 1886(d)(5)(B) (for hos-
pitals participating in the qualifying entity)
that is attributable to the reduction in
number of residents effected under the
plan below 95 percent of the number of
full-time equivalent residents in such pro-
grams of such entity as of June 30, 1997.
‘‘(B) 
APPROVAL
OF
PLAN
APPLICA-
TIONS.—The Secretary may not approve the ap-
plication of an qualifying entity unless—
550
‘‘(i) the application is submitted in a
form and manner specified by the Sec-
retary and by not later than March 1,
2000,
‘‘(ii) the application provides for the
operation of a plan for the reduction in the
number of full-time equivalent residents in
the approved medical residency training
programs of the entity consistent with the
requirements of subparagraph (D);
‘‘(iii) the entity elects in the applica-
tion whether such reduction will occur
over—
‘‘(I) a period of not longer than
5 residency training years, or
‘‘(II) a period of 6 residency
training years,
except that a qualifying entity described in
subparagraph (C)(i)(III) may not make the
election described in subclause (II); and
‘‘(iv) the Secretary determines that
the application and the entity and such
plan meet such other requirements as the
Secretary specifies in regulations.
‘‘(C) QUALIFYING ENTITY.—
551
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, any of the following may
be a qualifying entity:
‘‘(I) Individual hospitals operat-
ing one or more approved medical
residency training programs.
‘‘(II) Subject to clause (ii), two
or more hospitals that operate such
programs and apply for treatment
under this paragraph as a single
qualifying entity.
‘‘(III) Subject to clause (iii), a
qualifying consortium (as described in
section 4735 of the Balanced Budget
Act of 1997).
‘‘(ii) ADDITIONAL REQUIREMENT FOR
JOINT PROGRAMS.—In the case of an ap-
plication by a qualifying entity described in
clause (i)(II), the Secretary may not ap-
prove the application unless the application
represents that the qualifying entity ei-
ther—
‘‘(I) in the case of an entity that
meets the requirements of clause (v)
of subparagraph (D) will not reduce
552
the number of full-time equivalent
residents in primary care during the
period of the plan, or
‘‘(II) in the case of another en-
tity will not reduce the proportion of
its residents in primary care (to the
total number of residents) below such
proportion as in effect as of the appli-
cable time described in subparagraph
(D)(vi).
‘‘(iii) ADDITIONAL REQUIREMENT FOR
CONSORTIA.—In the case of an application
by a qualifying entity described in clause
(i)(III), the Secretary may not approve the
application unless the application rep-
resents that the qualifying entity will not
reduce the proportion of its residents in
primary care (to the total number of resi-
dents) below such proportion as in effect
as of the applicable time described in sub-
paragraph (D)(vi).
‘‘(D) RESIDENCY
REDUCTION
REQUIRE-
MENTS.—
‘‘(i) INDIVIDUAL
HOSPITAL
APPLI-
CANTS.—In the case of a qualifying entity
553
described in subparagraph (C)(i)(I), the
number of full-time equivalent residents in
all the approved medical residency training
programs operated by or through the en-
tity shall be reduced as follows:
‘‘(I) If base number of residents
exceeds 750 residents, by a number
equal to at least 20 percent of such
base number.
‘‘(II) Subject to subclause (IV),
if base number of residents exceeds
500, but is less than 750, residents,
by 150 residents.
‘‘(III) Subject to subclause (IV),
if base number of residents does not
exceed 500 residents, by a number
equal to at least 25 percent of such
base number.
‘‘(IV) In the case of a qualifying
entity which is described in clause (v)
and which elects treatment under this
subclause, by a number equal to at
least 20 percent of such base number.
‘‘(ii) JOINT APPLICANTS.—In the case
of a qualifying entity described in subpara-
554
graph (C)(i)(II), the number of full-time
equivalent residents in all the approved
medical residency training programs oper-
ated by or through the entity shall be re-
duced as follows:
‘‘(I) Subject to subclause (II), by
a number equal to at least 25 percent
of such base number.
‘‘(II) In the case of a qualifying
entity which is described in clause (v)
and which elects treatment under this
subclause, by a number equal to at
least 20 percent of such base number.
‘‘(iii) CONSORTIA.—In the case of a
qualifying entity described in subparagraph
(C)(i)(III), the number of full-time equiva-
lent residents in all the approved medical
residency training programs operated by or
through the entity shall be reduced by a
number equal to at least 20 percent of
such base number.
‘‘(iv) MANNER OF REDUCTION.—The
reductions specified under the preceding
provisions of this subparagraph for a quali-
fying entity shall be below the base number
555
of residents for that entity and shall be
fully effective not later than—
‘‘(I) the 5th residency training
year in which the application under
subparagraph (B) is effective, in the
case of an entity making the election
described in subparagraph (B)(iii)(I),
or
‘‘(II) the 6th such residency
training year, in the case of an entity
making the election described in sub-
paragraph (B)(iii)(II).
‘‘(v) ENTITIES PROVIDING ASSURANCE
OF MAINTENANCE OF PRIMARY CARE RESI-
DENTS.—An entity is described in this
clause if—
‘‘(I) the base number of residents
for the entity is less than 750;
‘‘(II) the number of full-time
equivalent residents in primary care
included in the base number of resi-
dents for the entity is at least 10 per-
cent of such base number; and
‘‘(III) the entity represents in its
application under subparagraph (B)
556
that there will be no reduction under
the plan in the number of full-time
equivalent residents in primary care.
If a qualifying entity fails to comply with
the representation described in subclause
(III), the entity shall be subject to repay-
ment of all amounts paid under this para-
graph, in accordance with procedures es-
tablished to carry out subparagraph (F).
‘‘(vi) BASE
NUMBER
OF
RESIDENTS
DEFINED.—For purposes of this para-
graph, the term ‘base number of residents’
means, with respect to a qualifying entity
operating 
approved 
medical 
residency
training programs, the number of full-time
equivalent residents in such programs (be-
fore application of weighting factors) of
the entity as of the most recent cost re-
porting period ending before June 30,
1997, or, if less, for any subsequent cost
reporting period that ends before the date
the entity makes application under this
paragraph.
‘‘(E) APPLICABLE HOLD HARMLESS PER-
CENTAGE.—
557
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the ‘applicable hold
harmless percentage’ is the percentages
specified in clause (ii) or clause (iii), as
elected by the qualifying entity in the ap-
plication submitted under subparagraph
(B).
‘‘(ii) 5-YEAR
REDUCTION
PLAN.—In
the case of an entity making the election
described in subparagraph (B)(iii)(I), the
percentages specified in this clause are, for
the—
‘‘(I) first and second residency
training years in which the reduction
plan is in effect, 100 percent,
‘‘(II) third such year, 75 percent,
‘‘(III) fourth such year, 50 per-
cent, and
‘‘(IV) fifth such year, 25 percent.
‘‘(iii) 6-YEAR
REDUCTION
PLAN.—In
the case of an entity making the election
described in subparagraph (B)(iii)(II), the
percentages specified in this clause are, for
the—
558
‘‘(I) first residency training year
in which the reduction plan is in ef-
fect, 100 percent,
‘‘(II) second such year, 95 per-
cent,
‘‘(III) third such year, 85 per-
cent,
‘‘(IV) fourth such year, 70 per-
cent,
‘‘(V) fifth such year, 50 percent,
and
‘‘(VI) sixth such year, 25 per-
cent.
‘‘(F) PENALTY FOR INCREASE IN NUMBER
OF
RESIDENTS
IN
SUBSEQUENT
YEARS.—If
payments are made under this paragraph to a
qualifying entity, if the entity (or any hospital
operating as part of the entity) increases the
number of full-time equivalent residents above
the number of such residents permitted under
the reduction plan as of the completion of the
plan, then, as specified by the Secretary, the
entity is liable for repayment to the Secretary
of the total amounts paid under this paragraph
to the entity.
559
‘‘(G) TREATMENT
OF
ROTATING
RESI-
DENTS.—In applying this paragraph, the Sec-
retary shall establish rules regarding the count-
ing of residents who are assigned to institutions
the medical residency training programs in
which are not covered under approved applica-
tions under this paragraph.’’.
(b) RELATION TO DEMONSTRATION PROJECTS AND
AUTHORITY.—
(1) Section 1886(h)(6) of the Social Security
Act, added by subsection (a), shall not apply to any
residency training program with respect to which a
demonstration project described in paragraph (3)
has been approved by the Health Care Financing
Administration as of May 27, 1997. The Secretary
of Health and Human Services shall take such ac-
tions as may be necessary to assure that (in the
manner described in subparagraph (A) of such sec-
tion) in no case shall payments be made under such
a project with respect to the first 5 percent reduc-
tion in the base number of full-time equivalent resi-
dents otherwise used under the project.
(2) Effective May 27, 1997, the Secretary of
Health and Human Services is not authorized to ap-
prove any demonstration project described in para-
560
graph (3) for any residency training year beginning
before July 1, 2006.
(3) A demonstration project described in this
paragraph is a project that provides for additional
payments under title XVIII of the Social Security
Act in connection with reduction in the number of
residents in a medical residency training program.
(c) INTERIM, FINAL REGULATIONS.—In order to
carry out the amendment made by subsection (a) in a
timely manner, the Secretary of Health and Human Serv-
ices may first promulgate regulations, that take effect on
an interim basis, after notice and pending opportunity for
public comment, by not later than 6 months after the date
of the enactment of this Act.
SEC. 4735. DEMONSTRATION PROJECT ON USE OF CONSOR-
TIA.
(a) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the Sec-
retary) shall establish a demonstration project under
which, instead of making payments to teaching hospitals
pursuant to section 1886(h) of the Social Security Act,
the Secretary shall make payments under this section to
each consortium that meets the requirements of subsection
(b).
561
(b) QUALIFYING CONSORTIA.—For purposes of sub-
section (a), a consortium meets the requirements of this
subsection if the consortium is in compliance with the fol-
lowing:
(1) The consortium consists of an approved
medical residency training program in a teaching
hospital and one or more of the following entities:
(A) A school of allopathic medicine or os-
teopathic medicine.
(B) Another teaching hospital, which may
be a children’s hospital.
(C) Another approved medical residency
training program.
(D) A Federally qualified health center.
(E) A medical group practice.
(F) A managed care entity.
(G) An entity furnishing outpatient serv-
ices.
(I) Such other entity as the Secretary de-
termines to be appropriate.
(2) The members of the consortium have agreed
to participate in the programs of graduate medical
education that are operated by the entities in the
consortium.
562
(3) With respect to the receipt by the consor-
tium of payments made pursuant to this section, the
members of the consortium have agreed on a method
for allocating the payments among the members.
(4) The consortium meets such additional re-
quirements as the Secretary may establish.
(c) AMOUNT AND SOURCE OF PAYMENT.—The total
of payments to a qualifying consortium for a fiscal year
pursuant to subsection (a) shall not exceed the amount
that would have been paid under section 1886(h) of the
Social Security Act for the teaching hospital (or hospitals)
in the consortium. Such payments shall be made in such
proportion from each of the trust funds established under
title XVIII of such Act as the Secretary specifies.
SEC. 4736. RECOMMENDATIONS ON LONG-TERM PAYMENT
POLICIES REGARDING FINANCING TEACHING
HOSPITALS AND GRADUATE MEDICAL EDU-
CATION.
(a) IN GENERAL.—The Medicare Payment Advisory
Commission (established under section 1805 of the Social
Security Act and in this section referred to as the ‘‘Com-
mission’’) shall examine and develop recommendations on
whether and to what extent medicare payment policies and
other Federal policies regarding teaching hospitals and
graduate medical education should be reformed. Such rec-
563
ommendations shall include recommendations regarding
each of the following:
(1) The financing of graduate medical edu-
cation, including consideration of alternative broad-
based sources of funding for such education and
models for the distribution of payments under any
all-payer financing mechanism.
(2) The financing of teaching hospitals, includ-
ing consideration of the difficulties encountered by
such hospitals as competition among health care en-
tities increases. Matters considered under this para-
graph shall include consideration of the effects on
teaching hospitals of the method of financing used
for the MedicarePlus program under part C of title
XVIII of the Social Security Act.
(3) Possible methodologies for making pay-
ments for graduate medical education and the selec-
tion of entities to receive such payments. Matters
considered under this paragraph shall include—
(A) issues regarding children’s hospitals
and approved medical residency training pro-
grams in pediatrics, and
(B) whether and to what extent payments
are being made (or should be made) for train-
ing in the various nonphysician health profes-
564
sions, including social workers and psycholo-
gists.
(4) Federal policies regarding international
medical graduates.
(5) The dependence of schools of medicine on
service-generated income.
(6) Whether and to what extent the needs of
the United States regarding the supply of physi-
cians, in the aggregate and in different specialties,
will change during the 10-year period beginning on
October 1, 1997, and whether and to what extent
any such changes will have significant financial ef-
fects on teaching hospitals.
(7) Methods for promoting an appropriate num-
ber, mix, and geographical distribution of health
professionals.
(c) CONSULTATION.—In conducting the study under
subsection (a), the Commission shall consult with the
Council on Graduate Medical Education and individuals
with expertise in the area of graduate medical education,
including—
(1) deans from allopathic and osteopathic
schools of medicine;
(2) chief executive officers (or equivalent ad-
ministrative heads) from academic health centers,
565
integrated health care systems, approved medical
residency training programs, and teaching hospitals
that sponsor approved medical residency training
programs;
(3) chairs of departments or divisions from
allopathic and osteopathic schools of medicine,
schools of dentistry, and approved medical residency
training programs in oral surgery;
(4) individuals with leadership experience from
representative fields of non-physician health profes-
sionals;
(5) individuals with substantial experience in
the study of issues regarding the composition of the
health care workforce of the United States; and
(6) individuals with expertise on the financing
of health care.
(d) REPORT.—Not later than 2 years after the date
of the enactment of this Act, the Commission shall submit
to the Congress a report providing its recommendations
under this section and the reasons and justifications for
such recommendations.
566
SEC. 4737. MEDICARE SPECIAL REIMBURSEMENT RULE
FOR CERTAIN COMBINED RESIDENCY PRO-
GRAMS.
(a) IN GENERAL.—Section 1886(h)(5)(G) (42 U.S.C.
1395ww(h)(5)(G)) is amended—
(1) in clause (i), by striking ‘‘and (iii)’’ and in-
serting ‘‘, (iii), and (iv)’’; and
(2) by adding at the end the following:
‘‘(iv) SPECIAL
RULE
FOR
CERTAIN
COMBINED RESIDENCY PROGRAMS.—(I) In
the case of a resident enrolled in a com-
bined medical residency training program
in which all of the individual programs
(that are combined) are for training a pri-
mary care resident (as defined in subpara-
graph (H)), the period of board eligibility
shall be the minimum number of years of
formal training required to satisfy the re-
quirements for initial board eligibility in
the longest of the individual programs plus
one additional year.
‘‘(II) A resident enrolled in a com-
bined medical residency training program
that includes an obstetrics and gynecology
program shall qualify for the period of
board eligibility under subclause (I) if the
567
other programs such resident combines
with such obstetrics and gynecology pro-
gram are for training a primary care resi-
dent.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to combined medical residency pro-
grams for residency years beginning on or after July 1,
1998.
CHAPTER 5—OTHER PROVISIONS
SEC. 4741. CENTERS OF EXCELLENCE.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1888 the following:
‘‘CENTERS OF EXCELLENCE
‘‘SEC. 1889. (a) IN GENERAL.—The Secretary shall
use a competitive process to contract with specific hos-
pitals or other entities for furnishing services related to
surgical procedures, and for furnishing services (unrelated
to surgical procedures) to hospital inpatients that the Sec-
retary determines to be appropriate. The services may in-
clude any services covered under this title that the Sec-
retary determines to be appropriate, including post-hos-
pital services.
‘‘(b) QUALITY STANDARDS.—
‘‘(1) IN
GENERAL.—Only entities that meet
quality standards established by the Secretary shall
be eligible to contract under this section. Contract-
568
ing entities shall implement a quality improvement
plan approved by the Secretary.
‘‘(2) PARTICIPATION
DECISION
BASED
ON
QUALITY.—Subject to subsection (c), the Secretary
shall consider quality as the primary factor in select-
ing hospitals or other entities to enter into contracts
under this section.
‘‘(c) PAYMENT.—Payment under this section shall be
made on the basis of negotiated all-inclusive rates. The
amount of payment made by the Secretary to an entity
under this title for services covered under a contract shall
not exceed the aggregate amount of the payments that the
Secretary would have otherwise made for the services.
‘‘(d) CONTRACT PERIOD.—A contract period shall be
3 years (subject to renewal), so long as the entity contin-
ues to meet quality and other contractual standards.
‘‘(e) INCENTIVES FOR USE OF CENTERS.—Entities
under a contract under this section may furnish additional
services (at no cost to an individual entitled to benefits
under this title) or waive cost-sharing, subject to the ap-
proval of the Secretary.
‘‘(f) LIMIT ON NUMBER OF CENTERS.—The Sec-
retary shall limit the number of centers in a geographic
area to the number needed to meet projected demand for
contracted services.’’.
569
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after Oc-
tober 1, 1997.
SEC. 4742. MEDICARE PART B SPECIAL ENROLLMENT PE-
RIOD AND WAIVER OF PART B LATE ENROLL-
MENT 
PENALTY 
AND 
MEDIGAP 
SPECIAL
OPEN ENROLLMENT PERIOD FOR CERTAIN
MILITARY RETIREES AND DEPENDENTS.
(a) MEDICARE PART B SPECIAL ENROLLMENT PE-
RIOD; WAIVER OF PART B PENALTY FOR LATE ENROLL-
MENT.—
(1) IN GENERAL.—In the case of any eligible
individual (as defined in subsection (c)), the Sec-
retary of Health and Human Services shall provide
for a special enrollment period during which the in-
dividual may enroll under part B of title XVIII of
the Social Security Act. Such period shall be for a
period of 6 months and shall begin with the first
month that begins at least 45 days after the date of
the enactment of this Act.
(2) COVERAGE PERIOD.—In the case of an eli-
gible individual who enrolls during the special enroll-
ment period provided under paragraph (1), the cov-
erage period under part B of title XVIII of the So-
cial Security Act shall begin on the first day of the
570
month following the month in which the individual
enrolls.
(3) WAIVER
OF
PART
B
LATE
ENROLLMENT
PENALTY.—In the case of an eligible individual who
enrolls during the special enrollment period provided
under paragraph (1), there shall be no increase pur-
suant to section 1839(b) of the Social Security Act
in the monthly premium under part B of title XVIII
of such Act.
(b) MEDIGAP SPECIAL OPEN ENROLLMENT PE-
RIOD.—Notwithstanding any other provision of law, an is-
suer of a medicare supplemental policy (as defined in sec-
tion 1882(g) of the Social Security Act)—
(1) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy that
has a benefit package classified as ‘‘A’’, ‘‘B’’, ‘‘C’’,
or ‘‘F’’ under the standards established under sec-
tion 1882(p)(2) of the Social Security Act (42
U.S.C. 1395rr(p)(2)); and
(2) may not discriminate in the pricing of the
policy on the basis of the individual’s health status,
medical condition (including both physical and men-
tal illnesses), claims experience, receipt of health
care, medical history, genetic information, evidence
571
of insurability (including conditions arising out of
acts of domestic violence), or disability;
in the case of an eligible individual who seeks to enroll
(and is enrolled) during the 6-month period described in
subsection (a)(1).
(c) ELIGIBLE INDIVIDUAL DEFINED.—In this sec-
tion, the term ‘‘eligible individual’’ means an individual—
(1) who, as of the date of the enactment of this
Act, has attained 65 years of age and was eligible
to enroll under part B of title XVIII of the Social
Security Act, and
(2) who at the time the individual first satisfied
paragraph (1) or (2) of section 1836 of the Social
Security Act—
(A) was a covered beneficiary (as defined
in section 1072(5) of title 10, United States
Code), and
(B) did not elect to enroll (or to be deemed
enrolled) under section 1837 of the Social Secu-
rity Act during the individual’s initial enroll-
ment period.
The Secretary of Health and Human Services shall con-
sult with the Secretary of Defense in the identification of
eligible individuals.
572
SEC. 4743. COMPETITIVE BIDDING FOR CERTAIN ITEMS
AND SERVICES.
(a) ESTABLISHMENT
OF
DEMONSTRATION.—Not
later than 1 year after the date of the enactment of this
Act, the Secretary of Health and Human Services shall
establish and operate over a 2-year period a demonstration
project in 2 geographic regions selected by the Secretary
under which (notwithstanding any provision of title XVIII
of the Social Security Act to the contrary) the amount
of payment made under the medicare program for a se-
lected item or service furnished in the region shall be equal
to the price determined pursuant to a competitive bidding
process which meets the requirements of subsection (b).
(b) REQUIREMENTS
FOR COMPETITIVE BIDDING
PROCESS.—The competitive bidding process used under
the demonstration project under this section shall meet
such requirements as the Secretary may impose to ensure
the cost-effective delivery to medicare beneficiaries in the
project region of items and services of high quality.
(c) DETERMINATION OF SELECTED ITEMS OR SERV-
ICES.—The Secretary shall select items and services to be
subject to the demonstration project under this section if
the Secretary determines that the use of competitive bid-
ding with respect to the item or service under the project
will be appropriate and cost-effective. In determining the
items or services to be selected, the Secretary shall consult
573
with an advisory taskforce which includes representatives
of providers and suppliers of items and services (including
small business providers and suppliers) in each geographic
region in which the project will be effective.
Subtitle I—Medical Liability
Reform
CHAPTER 1—GENERAL PROVISIONS
SEC. 4801. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This subtitle governs any
health care liability action brought in any State or Federal
court, except that this subtitle shall not apply to an action
for damages arising from a vaccine-related injury or death
to the extent that title XXI of the Public Health Service
Act applies to the action.
(b) PREEMPTION.—This subtitle shall preempt any
State or applicable Federal law to the extent such law is
inconsistent with the limitations contained in this subtitle.
This subtitle shall not preempt any State or applicable
Federal law that provides for defenses or places limita-
tions on a person’s liability in addition to those contained
in this subtitle or otherwise imposes greater restrictions
than those provided in this subtitle.
574
(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (b) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
chapter 97 of title 28, United States Code;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
(d) AMOUNT
IN CONTROVERSY.—In an action to
which this subtitle applies and which is brought under sec-
tion 1332 of title 28, United States Code, the amount of
noneconomic damages or punitive damages, and attorneys’
fees or costs, shall not be included in determining whether
the matter in controversy exceeds the sum or value of
$50,000.
575
(e) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this subtitle shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of section 1331 or 1337 of
title 28, United States Code.
SEC. 4802. DEFINITIONS.
As used in this subtitle:
(1) ACTUAL DAMAGES.—The term ‘‘actual dam-
ages’’ means damages awarded to pay for economic
loss.
(2) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means a system established
under Federal or State law that provides for the res-
olution of health care liability claims in a manner
other than through health care liability actions.
(3) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and any person on whose behalf such an action is
brought. If such action is brought through or on be-
half of an estate, the term includes the claimant’s
decedent. If such action is brought through or on be-
half of a minor or incompetent, the term includes
the claimant’s legal guardian.
576
(4) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established,
except that such measure or degree of proof is more
than that required under preponderance of the evi-
dence but less than that required for proof beyond
a reasonable doubt.
(5) COLLATERAL
SOURCE
PAYMENTS.—The
term ‘‘collateral source payments’’ means any
amount paid or reasonably likely to be paid in the
future to or on behalf of a claimant, or any service,
product, or other benefit provided or reasonably like-
ly to be provided in the future to or on behalf of a
claimant, as a result of an injury or wrongful death,
pursuant to—
(A) any State or Federal health, sickness,
income-disability, accident or workers’ com-
pensation Act;
(B) any health, sickness, income-disability,
or accident insurance that provides health bene-
fits or income-disability coverage;
(C) any contract or agreement of any
group, organization, partnership, or corporation
577
to provide, pay for, or reimburse the cost of
medical, hospital, dental, or income disability
benefits; and
(D) any other publicly or privately funded
program.
(6) DEVICE.—The term ‘‘device’’ has the same
meaning given such term in section 201(h) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
321(h)).
(7) DRUG.—The term ‘‘drug’’ has the same
meaning given such term in section 201(g)(1) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
321(g)(1)).
(8) ECONOMIC
LOSS.—The term ‘‘economic
loss’’ means any pecuniary loss resulting from harm
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs,
and loss of business or employment opportunities),
to the extent recovery for such loss is allowed under
applicable State or Federal law.
(9) HARM.—The term ‘‘harm’’ means—
(A) any physical injury, illness, or death of
the claimant, or
578
(B) any mental anguish or emotional in-
jury to the claimant caused by or causing the
claimant physical injury or illness.
(10) HEALTH
CARE
LIABILITY
ACTION.—The
term ‘‘health care liability action’’ means a civil ac-
tion brought in a State or Federal court against a
health care provider, an entity which is obligated to
provide or pay for health benefits under any health
plan (including any person or entity acting under a
contract or arrangement to provide or administer
any health benefit), or the manufacturer, distributor,
supplier, marketer, promoter, or seller of a medical
product, in which the claimant alleges a health care
liability claim.
(11) HEALTH
CARE
LIABILITY
CLAIM.—The
term ‘‘health care liability claim’’ means a claim in
which the claimant alleges that harm was caused by
the provision of (or the failure to provide) health
care services or the use of a medical product, re-
gardless of the theory of liability on which the claim
is based.
(12) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any individual, organi-
zation, or institution that is engaged in the delivery
of health care services in a State and that is re-