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distributed among different types of institutions and
the different areas of the State.
(b) DISTRIBUTION
RULES.—The distribution of
funds to hospitals and other health care facilities from the
account must conform to the following principles:
(1) The disbursement of funds must be consist-
ent with achievement of the national and program
goals (specified in section 701(b)) within the State
health security program and the distribution of
funds from the account must be conditioned upon
the receipt of such reports as the Board may require
in order to monitor compliance with such goals.
(2) The distribution of funds from the account
must take into account the potentially higher costs
of placing health professional students in clinical
education programs in health professional shortage
areas.
Subtitle B—Payments by States to
Providers
SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY-
BASED SERVICES FOR OPERATING EXPENSES
ON 
THE 
BASIS 
OF 
APPROVED 
GLOBAL
BUDGETS.
(a) DIRECT PAYMENT UNDER GLOBAL BUDGET.—
Payment for operating expenses for institutional and facil-
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ity-based care, including hospital services and nursing fa-
cility services, under State health security programs shall
be made directly to each institution or facility by each
State health security program under an annual prospec-
tive global budget approved under the program. Such a
budget shall include payment for outpatient care and non-
facility-based care that is furnished by or through the fa-
cility. In the case of a hospital that is wholly owned (or
controlled) by a comprehensive health service organization
that is paid under section 614 on the basis of a global
budget, the global budget of the organization shall include
the budget for the hospital.
(b) ANNUAL NEGOTIATIONS; BUDGET APPROVAL.—
(1) IN GENERAL.—The prospective global budg-
et for an institution or facility shall be developed
through annual negotiations between the State
health security program and the institution or facil-
ity and be based on a nationally uniform system of
cost accounting established under standards of the
Board.
(2) CONSIDERATIONS.—In developing a budget
through negotiations, there shall be taken into
account at least the following:
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(A) With respect to inpatient hospital serv-
ices, the number, and classification by diag-
nosis-related group, of discharges.
(B) An institution’s or facility’s past ex-
penditures.
(C) The extent to which debt service for
capital expenditures has been included in the
proposed operating budget.
(D) Change in the consumer price index
and other price indices.
(E) The cost of reasonable compensation
to health care practitioners.
(F) The compensation level of the institu-
tion’s or facility’s workforce.
(G) The extent to which the institution or
facility is providing health care services to meet
the needs of residents in the area served by the
institution or facility, including the institution’s
or facility’s occupancy level.
(H) The institution’s or facility’s previous
financial and clinical performance, based on uti-
lization and outcomes data provided under this
Act.
(I) The type of institution or facility, in-
cluding whether the institution or facility is
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part of a clinical education program or serves
a health professional education, research or
other training purpose.
(J) Technological advances or changes.
(K) Costs of the institution or facility asso-
ciated with meeting Federal and State regula-
tions.
(L) The costs associated with necessary
public outreach activities.
(M) In the case of a for-profit facility, a
reasonable rate of return on equity capital,
independent of those operating expenses nec-
essary to fulfill the objectives of this Act.
(N) Incentives to facilities that maintain
costs below previous reasonable budgeted levels
without reducing the care provided.
(O) With respect to facilities that provide
mental health services and substance abuse
treatment services, any additional costs involved
in the treatment of dually diagnosed individ-
uals.
The portion of such a budget that relates to expendi-
tures for health professional education shall be con-
sistent with the State health security budget for
such expenditures.
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(3) PROVISION OF REQUIRED INFORMATION; DI-
AGNOSIS-RELATED GROUP.—No budget for an insti-
tution or facility for a year may be approved unless
the institution or facility has submitted on a timely
basis to the State health security program such in-
formation as the program or the Board shall specify,
including in the case of hospitals information on dis-
charges classified by diagnosis-related group.
(c) ADJUSTMENTS IN APPROVED BUDGETS.—
(1) ADJUSTMENTS TO GLOBAL BUDGETS THAT
CONTRACT WITH COMPREHENSIVE HEALTH SERVICE
ORGANIZATIONS.—Each State health security pro-
gram shall develop an administrative mechanism for
reducing operating funds to institutions or facilities
in proportion to payments made to such institutions
or facilities for services contracted for by a com-
prehensive health service organization.
(2) AMENDMENTS.—In accordance with stand-
ards established by the Board, an operating and
capital budget approved under this section for a year
may be amended before, during, or after the year if
there is a substantial change in any of the factors
relevant to budget approval.
(d) DONATIONS PERMISSIBLE.—The States health
security programs may permit institutions and facilities
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to raise funds from private sources to pay for newly con-
structed facilities, major renovations, and equipment. The
expenditure of such funds, whether for operating or cap-
ital expenditures, does not obligate the State health secu-
rity program to provide for continued support for such ex-
penditures unless included in an approved global budget.
SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS
BASED ON PROSPECTIVE FEE SCHEDULE.
(a) FEE FOR SERVICE.—
(1) IN
GENERAL.—Every independent health
care practitioner is entitled to be paid, for the provi-
sion of covered health services under the State
health security program, a fee for each billable cov-
ered service.
(2) GLOBAL FEE PAYMENT METHODOLOGIES.—
The Board shall establish models and encourage
State health security programs to implement alter-
native payment methodologies that incorporate glob-
al fees for related services (such as all outpatient
procedures for treatment of a condition) or for a
basic group of services (such as primary care serv-
ices) furnished to an individual over a period of
time, in order to encourage continuity and efficiency
in the provision of services. Such methodologies shall
be designed to ensure a high quality of care.