797
Subtitle F, Part 2
(b) 
CONFORMING
AMENDMENT.—Section
1888 (42 U.S.C. 1395yy) is amended in the
heading by inserting ‘‘AND CERTAIN ANCILLARY’’
after ‘‘SERVICE’’.
SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGE-
MENT OF COVERED NON-ROUTINE SERVICES.
(a) IN GENERAL.—Title XVIII is amended
by inserting after section 1888 the following
new section:
‘‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT
OF
COVERED
NON-ROUTINE
SERVICES
OF
SKILLED NURSING FACILITIES
‘‘SEC. 1888A. (a) DEFINITIONS.—For pur-
poses of this section:
‘‘(1) COVERED NON-ROUTINE SERVICES.—
The term ‘covered non-routine services’
means post-hospital extended care serv-
ices consisting of any of the following:
‘‘(A) 
Physical 
or 
occupational
therapy or speech-language pathol-
ogy services, or respiratory therapy.
‘‘(B) Prescription drugs.
‘‘(C) Complex medical equipment.
‘‘(D) Intravenous therapy and so-
lutions (including enteral and paren-
798
Subtitle F, Part 2
teral nutrients, supplies, and equip-
ment).
‘‘(E) Radiation therapy.
‘‘(F) Diagnostic services, includ-
ing laboratory, radiology (including
computerized 
tomography 
services
and 
imaging 
services), 
and 
pul-
monary services.
‘‘(2) SNF MARKET BASKET PERCENTAGE
INCREASE.—The term ‘SNF market basket
percentage increase’ for a fiscal year
means a percentage equal to the percent-
age increase in routine service cost limits
for the year under section 1888(a).
‘‘(3) STAY.—The term ‘stay’ means,
with respect to an individual who is a
resident of a skilled nursing facility, a pe-
riod of continuous days during which the
facility provides extended care services
for which payment may be made under
this title to the individual during the in-
dividual’s spell of illness.
‘‘(b) NEW PAYMENT METHOD FOR COVERED
NON-ROUTINE SERVICES.—
799
Subtitle F, Part 2
‘‘(1) IN
GENERAL.—Subject to sub-
section (c), a skilled nursing facility shall
receive interim payments under this title
for covered non-routine services fur-
nished to an individual during a cost re-
porting period beginning during a fiscal
year (after fiscal year 1996) in an amount
equal to the reasonable cost of providing
such services in accordance with section
1861(v). The Secretary may adjust such
payments if the Secretary determines (on
the basis of such estimated information
as the Secretary considers appropriate)
that payments to the facility under this
paragraph for a cost reporting period
would substantially exceed the cost re-
porting period limit determined under
subsection (c)(1)(B).
‘‘(2) RESPONSIBILITY OF SKILLED NURS-
ING FACILITY TO MANAGE BILLINGS.—
‘‘(A) CLARIFICATION
RELATING
TO
PART A BILLING.—In the case of a cov-
ered non-routine service furnished to
an individual who (at the time the
service is furnished) is a resident of a
800
Subtitle F, Part 2
skilled nursing facility who is entitled
to coverage under section 1812(a)(2)
for such service, the skilled nursing
facility shall submit a claim for pay-
ment under this title for such service
under part A (without regard to
whether or not the item or service
was furnished by the facility, by oth-
ers under arrangement with them
made by the facility, under any other
contracting or consulting arrange-
ment, or otherwise).
‘‘(B) PART B BILLING.—In the case
of a covered non-routine service fur-
nished to an individual who (at the
time the service is furnished) is a
resident of a skilled nursing facility
who is not entitled to coverage under
section 1812(a)(2) for such service but
is entitled to coverage under part B
for such service, the skilled nursing
facility shall submit a claim for pay-
ment under this title for such service
under part B (without regard to
whether or not the item or service
801
Subtitle F, Part 2
was furnished by the facility, by oth-
ers under arrangement with them
made by the facility, under any other
contracting or consulting arrange-
ment, or otherwise).
‘‘(C) 
MAINTAINING
RECORDS
ON
SERVICES
FURNISHED
TO
RESIDENTS.—
Each skilled nursing facility receiv-
ing payments for extended care serv-
ices under this title shall document
on the facility’s cost report all cov-
ered non-routine services furnished
to all residents of the facility to
whom the facility provided extended
care services for which payment was
made under part A during a fiscal
year (beginning with fiscal year 1996)
(without regard to whether or not the
services were furnished by the facil-
ity, by others under arrangement
with them made by the facility, under
any other contracting or consulting
arrangement, or otherwise).
‘‘(c) RECONCILIATION OF AMOUNTS.—
802
Subtitle F, Part 2
‘‘(1) LIMIT
BASED
ON
PER
STAY
LIMIT
AND NUMBER OF STAYS.—
‘‘(A) IN
GENERAL.—If a skilled
nursing facility has received aggre-
gate payments under subsection (b)
for covered non-routine services dur-
ing a cost reporting period beginning
during a fiscal year in excess of an
amount equal to the cost reporting
period limit determined under sub-
paragraph (B), the Secretary shall re-
duce the payments made to the facil-
ity with respect to such services for
cost reporting periods beginning dur-
ing the following fiscal year in an
amount equal to such excess. The Sec-
retary shall reduce payments under
this subparagraph at such times and
in such manner during a fiscal year
as the Secretary finds necessary to
meet the requirement of this subpara-
graph.
‘‘(B) 
COST
REPORTING
PERIOD
LIMIT.—The 
cost 
reporting 
period
limit determined under this subpara-
803
Subtitle F, Part 2
graph is an amount equal to the prod-
uct of—
‘‘(i) the per stay limit applica-
ble to the facility under sub-
section (d) for the period; and
‘‘(ii) the number of stays be-
ginning during the period for
which payment was made to the
facility for such services.
‘‘(C) PROSPECTIVE
REDUCTION
IN
PAYMENTS.—In addition to the process
for reducing payments described in
subparagraph (A), the Secretary may
reduce payments made to a facility
under this section during a cost re-
porting period if the Secretary deter-
mines (on the basis of such estimated
information as the Secretary consid-
ers appropriate) that payments to the
facility under this section for the pe-
riod will substantially exceed the cost
reporting period limit for the period
determined under this paragraph.
‘‘(2) INCENTIVE PAYMENTS.—
804
Subtitle F, Part 2
‘‘(A) IN
GENERAL.—If a skilled
nursing facility has received aggre-
gate payments under subsection (b)
for covered non-routine services dur-
ing a cost reporting period beginning
during a fiscal year in an amount
that is less than the amount deter-
mined under paragraph (1)(B), the
Secretary shall pay the skilled nurs-
ing facility in the following fiscal
year an incentive payment equal to
50 percent of the difference between
such amounts, except that the incen-
tive payment may not exceed 5 per-
cent of the aggregate payments made
to the facility under subsection (b)
for the previous fiscal year (without
regard to subparagraph (B)).
‘‘(B) INSTALLMENT
INCENTIVE
PAY-
MENTS.—The Secretary may make in-
stallment payments during a fiscal
year to a skilled nursing facility
based on the estimated incentive pay-
ment that the facility would be eligi-
805
Subtitle F, Part 2
ble to receive with respect to such fis-
cal year.
‘‘(d) DETERMINATION OF FACILITY PER STAY
LIMIT.—
‘‘(1) LIMIT FOR FISCAL YEAR 1997.—
‘‘(A) IN GENERAL.—Except as pro-
vided in subparagraph (B), the Sec-
retary shall establish separate per
stay limits for hospital-based and
freestanding skilled nursing facilities
for the 12-month cost reporting pe-
riod beginning during fiscal year 1997
that are equal to the sum of—
‘‘(i) 50 percent of the facility-
specific stay amount for the facil-
ity (as determined under sub-
section (e)) for the last 12-month
cost reporting period ending on
or before September 30, 1994, in-
creased (in a compounded man-
ner) by the SNF market basket
percentage 
increase 
for 
fiscal
years 1995 through 1997; and
‘‘(ii) 50 percent of the average
of 
all 
facility-specific 
stay
806
Subtitle F, Part 2
amounts for all hospital-based fa-
cilities or all freestanding facili-
ties (whichever is applicable) dur-
ing the cost reporting period de-
scribed in clause (i), increased (in
a compounded manner) by the
SNF market basket percentage in-
crease 
for 
fiscal 
years 
1995
through 1997.
‘‘(B) FACILITIES
NOT
HAVING
1994
COST REPORTING PERIOD.—In the case
of a skilled nursing facility for which
payments were not made under this
title for covered non-routine services
for the last 12-month cost reporting
period ending on or before September
30, 1994, the per stay limit for the 12-
month cost reporting period begin-
ning during fiscal year 1997 shall be
twice the amount determined under
subparagraph (A)(ii).
‘‘(2) LIMIT
FOR
SUBSEQUENT
FISCAL
YEARS.—The per stay limit for a skilled
nursing facility for a 12-month cost re-
porting period beginning during a fiscal
807
Subtitle F, Part 2
year after fiscal year 1997 is equal to the
per stay limit established under this sub-
section for the 12-month cost reporting
period beginning during the previous fis-
cal year, increased by the SNF market
basket percentage increase for such sub-
sequent fiscal year minus 2 percentage
points.
‘‘(3) REBASING OF AMOUNTS.—
‘‘(A) IN
GENERAL.—The Secretary
shall provide for an update to the fa-
cility-specific amounts used to deter-
mine the per stay limits under this
subsection for cost reporting periods
beginning on or after October 1, 1999,
and every 2 years thereafter.
‘‘(B) TREATMENT OF FACILITIES NOT
HAVING REBASED COST REPORTING PERI-
ODS.—Paragraph (1)(B) shall apply
with respect to a skilled nursing facil-
ity for which payments were not
made under this title for covered non-
routine services for the 12-month cost
reporting period used by the Sec-
retary 
to 
update 
facility-specific
808
Subtitle F, Part 2
amounts under subparagraph (A) in
the same manner as such paragraph
applies with respect to a facility for
which 
payments 
were 
not 
made
under this title for covered non-rou-
tine services for the last 12-month
cost reporting period ending on or
before September 30, 1994.
‘‘(e) DETERMINATION OF FACILITY-SPECIFIC
STAY
AMOUNTS.—The 
‘facility-specific 
stay
amount’ for a skilled nursing facility for a cost
reporting period is the sum of—
‘‘(1) the average amount of payments
made to the facility under part A during
the period which are attributable to cov-
ered non-routine services furnished dur-
ing a stay (as determined on a per diem
basis); and
‘‘(2) the Secretary’s best estimate of
the average amount of payments made
under part B during the period for cov-
ered non-routine services furnished to all
residents of the facility to whom the facil-
ity provided extended care services for
which payment was made under part A
809
Subtitle F, Part 2
during the period (without regard to
whether or not the services were fur-
nished by the facility, by others under ar-
rangement with them made by the facil-
ity, under any other contracting or con-
sulting arrangement, or otherwise), as es-
timated by the Secretary.
‘‘(f) 
INTENSIVE
NURSING
OR
THERAPY
NEEDS.—
‘‘(1) IN
GENERAL.—In applying sub-
section (b) to covered non-routine serv-
ices furnished during a stay beginning
during a cost reporting period beginning
during a fiscal year (beginning with fiscal
years after fiscal year 1997) to a resident
of a skilled nursing facility who requires
intensive nursing or therapy services, the
per stay limit for such resident shall be
the per stay limit developed under para-
graph (2) instead of the per stay limit de-
termined under subsection (d)(1)(A).
‘‘(2) PER
STAY
LIMIT
FOR
INTENSIVE
NEED RESIDENTS.—Not later than June 30,
1997, the Secretary, after consultation
with the Medicare Payment Review Com-
810
Subtitle F, Part 2
mission and skilled nursing facility ex-
perts, shall develop and publish a per
stay limit for residents of a skilled nurs-
ing facility who require intensive nursing
or therapy services.
‘‘(3) BUDGET
NEUTRALITY.—The Sec-
retary shall adjust payments under sub-
section (b) in a manner that ensures that
total payments for covered non-routine
services under this section are not great-
er or less than total payments for such
services would have been but for the ap-
plication of paragraph (1).
‘‘(g) 
SPECIAL
TREATMENT
FOR
SMALL
SKILLED
NURSING
FACILITIES.—This section
shall not apply with respect to a skilled nurs-
ing facility for which payment is made for
routine service costs during a cost reporting
period on the basis of prospective payments
under section 1888(d).
‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIM-
ITS.—
‘‘(1) IN GENERAL.—The Secretary may
make exceptions and adjustments to the
cost reporting limits applicable to a
811
Subtitle F, Part 2
skilled nursing facility under subsection
(c)(1)(B) for a cost reporting period, ex-
cept that the total amount of any addi-
tional payments made under this section
for covered non-routine services during
the cost reporting period as a result of
such exceptions and adjustments may not
exceed 5 percent of the aggregate pay-
ments made to all skilled nursing facili-
ties for covered non-routine services dur-
ing the cost reporting period (determined
without regard to this paragraph).
‘‘(2) BUDGET
NEUTRALITY.—The Sec-
retary shall adjust payments under sub-
section (b) in a manner that ensures that
total payments for covered non-routine
services under this section are not great-
er or less than total payments for such
services would have been but for the ap-
plication of paragraph (1).
‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—
Before furnishing a covered non-routine serv-
ice consisting of an X-ray service for which
payment may be made under part A or part
B to a resident, a skilled nursing facility shall
812
Subtitle F, Part 2
consider whether furnishing the service
through a provider of portable X-ray service
services would be appropriate, taking into ac-
count the cost effectiveness of the service and
the convenience to the resident.’’.
(b) 
CONFORMING
AMENDMENT.—Section
1814(b) (42 U.S.C. 1395f(b)) is amended in the
matter preceding paragraph (1) by striking
‘‘1813 and 1886’’ and inserting ‘‘1813, 1886,
1888, and 1888A’’.
SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.
(a) MAINTAINING SAVINGS RESULTING FROM
TEMPORARY FREEZE ON PAYMENT INCREASES.—
(1) BASING UPDATES TO PER DIEM COST
LIMITS ON LIMITS FOR FISCAL YEAR 1993.—
(A) IN
GENERAL.—The last sen-
tence of section 1888(a) (42 U.S.C.
1395yy(a)) is amended by adding at
the end the following: ‘‘(except that
such updates may not take into ac-
count any changes in the routine
service costs of skilled nursing facili-
ties occurring during cost reporting
periods which began during fiscal
year 1994 or fiscal year 1995).’’.
813
Subtitle F, Part 2
(B) 
NO
EXCEPTIONS
PERMITTED
BASED ON AMENDMENT.—The Secretary
of Health and Human Services shall
not consider the amendment made by
subparagraph (A) in making any ad-
justments pursuant to section 1888(c)
of the Social Security Act.
(2) PAYMENTS DETERMINED ON PROSPEC-
TIVE BASIS.—Any change made by the Sec-
retary of Health and Human Services in
the amount of any prospective payment
paid to a skilled nursing facility under
section 1888(d) of the Social Security Act
for cost reporting periods beginning on
or after October 1, 1995, may not take
into account any changes in the costs of
services occurring during cost reporting
periods which began during fiscal year
1994 or fiscal year 1995.
(b) ESTABLISHMENT OF SCHEDULE FOR MAK-
ING ADJUSTMENTS TO LIMITS.—Section 1888(c)
(42 U.S.C. 1395yy(c)) is amended by striking
the period at the end of the second sentence
and inserting ‘‘, and may only make adjust-
ments under this subsection with respect to a
814
Subtitle F, Part 2
facility which applies for an adjustment dur-
ing an annual application period established
by the Secretary.’’.
(c) LIMITATION ON AGGREGATE INCREASE IN
PAYMENTS RESULTING FROM ADJUSTMENTS TO
LIMITS.—Section 1888(c) (42 U.S.C. 1395yy(c))
is amended—
(1) by striking ‘‘(c) The Secretary’’
and inserting ‘‘(c)(1) Subject to paragraph
(2), the Secretary’’; and
(2) by adding at the end the following
new paragraph:
‘‘(2) The Secretary may not make any ad-
justments under this subsection in the limits
set forth in subsection (a) for a cost reporting
period beginning during a fiscal year to the
extent that the total amount of the additional
payments made under this title as a result of
such adjustments is greater than an amount
equal to—
‘‘(A) for cost reporting periods begin-
ning during fiscal year 1997, the total
amount of the additional payments made
under this title as a result of adjustments
under this subsection for cost reporting
815
Subtitle F, Part 2
periods beginning during fiscal year 1996
increased by the SNF market basket per-
centage increase (as defined in section
1888A(e)(3)) for fiscal year 1997; and
‘‘(B) for cost reporting periods begin-
ning during a subsequent fiscal year, the
amount determined under this paragraph
for the previous fiscal year increased by
the SNF market basket percentage in-
crease for such subsequent fiscal year.’’.
(d) IMPOSITION OF LIMITS FOR ALL COST RE-
PORTING PERIODS.—Section 1888(a) (42 U.S.C.
1395yy(a)) is amended in the matter preced-
ing paragraph (1) by inserting after ‘‘extended
care services’’ the following: ‘‘(for any cost re-
porting period for which payment is made
under this title to the skilled nursing facility
for such services)’’.
SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RE-
LATED COSTS.
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)),
as amended by section 15506, is amended by
adding at the end the following new subpara-
graph:
816
Subtitle F, Part 2
‘‘(U) Such regulations shall provide that,
in determining the amount of the payments
that may be made under this title with re-
spect to all the capital-related costs of skilled
nursing facilities, the Secretary shall reduce
the amounts of such payments otherwise es-
tablished under this title by 15 percent for
payments attributable to portions of cost re-
porting periods occurring during fiscal years
1996 through 2002.’’.
SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID
FOR UNDER PART B.
(a) REQUIRING PAYMENT FOR ALL ITEMS AND
SERVICES TO BE MADE TO FACILITY.—
(1) IN GENERAL.—The first sentence of
section 1842(b)(6) (42 U.S.C. 1395u(b)(6))
is amended—
(A) by striking ‘‘and (D)’’ and in-
serting ‘‘(D)’’; and
(B) by striking the period at the
end and inserting the following: ‘‘,
and (E) in the case of an item or serv-
ice furnished to an individual who (at
the time the item or service is fur-
nished) is a resident of a skilled nurs-
817
Subtitle F, Part 2
ing facility, payment shall be made to
the facility (without regard to wheth-
er or not the item or service was fur-
nished by the facility, by others
under arrangement with them made
by the facility, or otherwise).’’.
(2) EXCLUSION FOR ITEMS AND SERVICES
NOT BILLED BY FACILITY.—Section 1862(a)
(42 U.S.C. 1395y(a)) is amended—
(A) by striking ‘‘or’’ at the end of
paragraph (14);
(B) by striking the period at the
end of paragraph (15) and inserting ‘‘;
or’’; and
(C) by inserting after paragraph
(15) the following new paragraph:
‘‘(16) where such expenses are for
covered non-routine services (as defined
in section 1888A(a)(1)) (other than a port-
able X-ray or portable electrocardiogram
treated as a physician’s service for pur-
poses of section 1848(j)(3)) furnished to
an individual who is a resident of a
skilled nursing facility and for which the
818
Subtitle F, Part 2
claim for payment under this title is not
submitted by the facility.’’.
(3) CONFORMING AMENDMENT.—Section
1832(a)(1) 
(42 
U.S.C. 
1395k(a)(1)) 
is
amended by striking ‘‘(2);’’ and inserting
‘‘(2) and section 1842(b)(6)(E);’’.
(b) REDUCTION IN PAYMENTS FOR ITEMS AND
SERVICES FURNISHED BY OR UNDER ARRANGE-
MENTS WITH FACILITIES.—Section 1861(v)(1) (42
U.S.C. 1395x(v)(1)), as amended by sections
15506 and 15524, is amended by adding at the
end the following new subparagraph:
‘‘(V) In the case of an item or service fur-
nished by a skilled nursing facility (or by oth-
ers under arrangement with them made by a
skilled nursing facility) for which payment is
made under part B in an amount determined
in accordance with section 1833(a)(2)(B), the
Secretary shall reduce the reasonable cost for
such item or service otherwise determined
under clause (i)(I) of such section by 5.8 per-
cent for payments attributable to portions of
cost reporting periods occurring during fiscal
years 1996 through 2002.’’.
819
Subtitle F, Part 2
SEC. 15526. CERTIFICATION OF FACILITIES MEETING RE-
VISED NURSING HOME REFORM STANDARDS.
(a) IN
GENERAL.—Section 1819(a)(3) (42
U.S.C. 1395i–3(a)(3)) is amended to read as fol-
lows:
‘‘(3)(A) is certified by the Secretary as
meeting the standards established under
subsection (b), or (B) is a State-certified
facility (as defined in subsection (c)).’’.
(b) 
REQUIREMENTS
DESCRIBED.—Section
1819 (42 U.S.C. 1395i–3) is amended by strik-
ing subsections (b) through (i) and inserting
the following:
‘‘(b) STANDARDS FOR AND CERTIFICATION OF
FACILITIES.—
‘‘(1) STANDARDS FOR FACILITIES.—
‘‘(A) IN
GENERAL.—The Secretary
shall provide for the establishment
and maintenance of standards con-
sistent with the contents described in
subparagraph (B) for skilled nursing
facilities which furnish services for
which payment may be made under
this title.
‘‘(B) CONTENTS
OF
STANDARDS.—
The standards established for facili-
820
Subtitle F, Part 2
ties under this paragraph shall con-
tain provisions relating to the follow-
ing items:
‘‘(i) The treatment of resident
medical records.
‘‘(ii) Policies, procedures, and
bylaws for operation.
‘‘(iii) Quality assurance sys-
tems.
‘‘(iv) Resident assessment pro-
cedures, including care planning
and outcome evaluation.
‘‘(v) The assurance of a safe
and adequate physical plant for
the facility.
‘‘(vi) Qualifications for staff
sufficient to provide adequate
care.
‘‘(vii) Utilization review.
‘‘(viii) The protection and en-
forcement of resident rights de-
scribed in subparagraph (C).
‘‘(C) RESIDENT RIGHTS DESCRIBED.—
The resident rights described in this
821
Subtitle F, Part 2
subparagraph are the rights of resi-
dents to the following:
‘‘(i) To exercise the individ-
ual’s rights as a resident of the fa-
cility and as a citizen or resident
of the United States.
‘‘(ii) 
To 
receive 
notice 
of
rights and services.
‘‘(iii) To be protected against
the misuse of resident funds.
‘‘(iv) To be provided privacy
and confidentiality.
‘‘(v) To voice grievances.
‘‘(vi) To examine the results of
inspections 
under 
the 
certifi-
cation program.
‘‘(vii) To refuse to perform
services for the facility.
‘‘(viii) To be provided privacy
in communications and to receive
mail.
‘‘(ix) To have the facility pro-
vide immediate access to any resi-
dent by any representative of the
certification program, the resi-
822
Subtitle F, Part 2
dent’s individual physician, the
State long term care ombudsman,
and any person the resident has
designated as a visitor.
‘‘(x) To retain and use per-
sonal property.
‘‘(xi) To be free from abuse, in-
cluding verbal, sexual, physical
and mental abuse, corporal pun-
ishment, and involuntary seclu-
sion.
‘‘(xii) To be provided with
prior written notice of a pending
transfer or discharge.
‘‘(D) REQUIRING
NOTICE
AND
COM-
MENT.—The standards established for
facilities under this paragraph may
only take effect after the Secretary
has provided the public with notice
and an opportunity for comment.
‘‘(2) CERTIFICATION PROGRAM.—
‘‘(A) IN
GENERAL.—The Secretary
shall provide for the establishment
and operation of a program consist-
ent with the requirements of subpara-
823
Subtitle F, Part 2
graph (B) for the certification of
skilled nursing facilities which meet
the standards established under para-
graph (1) and the decertification of
facilities which fail to meet such
standards.
‘‘(B) 
REQUIREMENTS
FOR
PRO-
GRAM.—In addition to any other re-
quirements the Secretary may im-
pose, in establishing and operating
the certification program under sub-
paragraph (A), the Secretary shall en-
sure the following:
‘‘(i) The Secretary shall en-
sure public access (as defined by
the Secretary) to the certification
program’s evaluations of partici-
pating facilities, including compli-
ance records and enforcement ac-
tions and other reports by the
Secretary regarding the owner-
ship, compliance histories, and
services provided by certified fa-
cilities.
824
Subtitle F, Part 2
‘‘(ii) Not less often than every
4 years, the Secretary shall audit
its expenditures under the pro-
gram, through an entity des-
ignated by the Secretary which is
not affiliated with the program,
as designated by the Secretary.
‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—
‘‘(1) AUTHORITY.—In addition to any
other authority, where the Secretary de-
termines that a nursing facility which is
certified for participation under this title
plan no longer substantially meets the re-
quirements for such a facility under this
title and further determines that the fa-
cility’s deficiencies—
‘‘(A) immediately jeopardize the
health and safety of its residents, the
Secretary shall at least provide for
the termination of the facility’s cer-
tification for participation under this
title, or
‘‘(B) do not immediately jeopard-
ize the health and safety of its resi-
dents, the Secretary may, in lieu of
825
Subtitle F, Part 2
providing for terminating the facili-
ty’s 
certification 
for 
participation
under the plan, provide lesser sanc-
tions including one that provides that
no payment will be made under this
title with respect to any individual
admitted to such facility after a date
specified by the Secretary.
‘‘(2) NOTICE.—The Secretary shall not
make such a decision with respect to a fa-
cility until the facility has had a reason-
able opportunity, following the initial de-
termination that it no longer substan-
tially meets the requirements for such a
facility under the plan, to correct its defi-
ciencies, and, following this period, has
been given reasonable notice and oppor-
tunity for a hearing.
‘‘(3) EFFECTIVENESS.—The Secretary’s
decision to deny payment may be made
effective only after such notice to the
public and to the facility as may be pro-
vided for by the Secretary, and its effec-
tiveness shall terminate (A) when the
Secretary finds that the facility is in sub-
826
Subtitle F, Part 2
stantial compliance (or is making good
faith efforts to achieve substantial com-
pliance) with the requirements for such a
facility under this title, or (B) in the case
described in paragraph (1)(B), with the
end of the eleventh month following the
month such decision is made effective,
whichever occurs first. If a facility to
which clause (B) of the previous sentence
applies still fails to substantially meet the
provisions of the respective section on
the date specified in such clause, the Sec-
retary shall terminate such facility’s cer-
tification for participation under this
title effective with the first day of the
first month following the month specified
in such clause.
‘‘(c) STATE-CERTIFIED FACILITY DEFINED.—
In subsection (a), a ‘State-certified facility’
means a facility licensed or certified as a
skilled nursing facility by the State in which
it is located, or a facility which otherwise
meets the requirements applicable to provid-
ers of nursing facility services under the State
827
Subtitle F, Part 2
plan under title XIX or the MediGrant pro-
gram under title XXI.’’.
(c) CONFORMING AMENDMENTS.—(1) Section
1861(v)(1)(E) (42 U.S.C. 1395x(v)(1)(E)) is
amended by striking the second sentence.
(2) Section 1864 (42 U.S.C. 1395aa) is
amended by striking subsection (d).
(3) 
Section 
1866(f)(1) 
(42 
U.S.C.
1395cc(f)(1)) 
is 
amended 
by 
striking
‘‘1819(c)(2)(E),’’.
(4) Section 1883(f) (42 U.S.C. 1395tt(f)) is
amended—
(A) in the second sentence, by strik-
ing ‘‘such a hospital’’ and inserting ‘‘a
hospital which enters into an agreement
with the Secretary under this section’’;
and
(B) by striking the first sentence.
(d) EFFECTIVE
DATE.—The amendments
made by this section shall apply with respect
to cost reporting periods beginning on or
after October 1, 1995.
SEC. 15527. MEDICAL REVIEW PROCESS.
In order to ensure that medicare bene-
ficiaries are furnished appropriate extended
828
Subtitle F, Part 2
care services, the Secretary of Health and
Human Services shall establish and imple-
ment a thorough medical review process to
examine the effects of the amendments made
by this part on the quality of extended care
services furnished to medicare beneficiaries.
In developing such a medical review process,
the Secretary shall place a particular empha-
sis on the quality of non-routine covered serv-
ices for which payment is made under section
1888A of the Social Security Act.
SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COM-
MISSION.
Not later than October 1, 1997, the Medi-
care Payment Review Commission shall sub-
mit to Congress a report on the system under
which payment is made under the medicare
program for extended care services furnished
by skilled nursing facilities, and shall include
in the report the following:
(1) An analysis of the effect of the
methodology established under section
1888A of the Social Security Act (as
added by section 15522) on the payments
829
Subtitle F, Part 2
for, and the quality of, extended care
services under the medicare program.
(2) An analysis of the advisability of
determining the amount of payment for
covered non-routine services of facilities
(as described in such section) on the
basis of the amounts paid for such serv-
ices when furnished by suppliers under
part B of the medicare program.
(3) An analysis of the desirability of
maintaining separate limits for hospital-
based and freestanding facilities in the
costs of extended care services recog-
nized as reasonable under the medicare
program.
(4) An analysis of the quality of serv-
ices furnished by skilled nursing facili-
ties.
(5) An analysis of the adequacy of the
process and standards used to provide
exceptions to the limits described in
paragraph (3).
SEC. 15529. EFFECTIVE DATE.
Except as otherwise provided in this sub-
chapter, the amendments made by this sub-
830
Subtitle G, Part 1
chapter shall apply to services furnished dur-
ing cost reporting periods (or portions of cost
reporting periods) beginning on or after Octo-
ber 1, 1996.
Subtitle G—Provisions Relating to
Medicare Part B
PART 1—PAYMENT REFORMS
SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) REPLACEMENT
OF VOLUME PERFORM-
ANCE STANDARD WITH SUSTAINABLE GROWTH
RATE.—Section 1848(f)(2) (42 U.S.C. 1395w–
4(f)(2)) is amended to read as follows:
‘‘(f) SUSTAINABLE GROWTH RATE.—
‘‘(1) SPECIFICATION OF GROWTH RATE.—
‘‘(A) FISCAL
YEAR 1996.—The sus-
tainable growth rate for all physi-
cians’ services for fiscal year 1996
shall be equal to the product of—
‘‘(i) 1 plus the Secretary’s esti-
mate of the percentage change in
the medicare economic index for
1996 (described in the fourth sen-
tence of section 1842(b)(3)) (di-
vided by 100),
831
Subtitle G, Part 1
‘‘(ii) 1 plus the Secretary’s es-
timate of the percentage change
(divided by 100) in the average
number of individuals enrolled
under this part (other than pri-
vate plan enrollees) from fiscal
year 1995 to fiscal year 1996,
‘‘(iii) 1 plus the Secretary’s es-
timate of the projected percent-
age growth in real gross domestic
product per capita (divided by
100) from fiscal year 1995 to fiscal
year 
1996, 
plus 
percentage
points, and
‘‘(iv) 1 plus the Secretary’s es-
timate of the percentage change
(divided by 100) in expenditures
for all physicians’ services in fis-
cal year 1996 (compared with fis-
cal year 1995) which will result
from changes in law, determined
without taking into account esti-
mated changes in expenditures
due to changes in the volume and
intensity of physicians’ services
833
Subtitle G, Part 1
‘‘(iii) 1 plus the Secretary’s es-
timate of the projected percent-
age growth in real gross domestic
product per capita (divided by
100) from the previous fiscal year
to the fiscal year involved, plus 2
percentage points, and
‘‘(iv) 1 plus the Secretary’s es-
timate of the percentage change
(divided by 100) in expenditures
for all physicians’ services in the
fiscal year (compared with the
previous fiscal year) which will
result from changes in law (in-
cluding changes made by the Sec-
retary in response to section
1895), determined without taking
into account estimated changes in
expenditures due to changes in
the volume and intensity of physi-
cians’ services or changes in ex-
penditures 
resulting 
from
changes in the update to the con-
version factor under subsection
(d)(3),
834
Subtitle G, Part 1
minus 1 and multiplied by 100.’’.
‘‘(2) EXCLUSION OF SERVICES FURNISHED
TO PRIVATE PLAN ENROLLEES.—In this sub-
section, the term ‘physicians’ services’
with respect to a fiscal year does not in-
clude services furnished to an individual
enrolled under this part who has elected
to receive benefits under this title for the
fiscal year through a MedicarePlus prod-
uct offered under part C or through en-
rollment with an eligible organization
with a risk-sharing contract under sec-
tion 1876.’’.
(b) ESTABLISHING UPDATE TO CONVERSION
FACTOR TO MATCH SPENDING UNDER SUSTAIN-
ABLE GROWTH RATE.—
(1) IN
GENERAL.—Section 1848(d) (42
U.S.C. 1395w–4(d)(3)) is amended—
(A) by striking paragraph (2);
(B) by amending paragraph (3) to
read as follows:
‘‘(3) UPDATE.—
‘‘(A) IN GENERAL.—Subject to sub-
paragraph (E), for purposes of this
section the update for a year (begin-
835
Subtitle G, Part 1
ning with 1997) is equal to the prod-
uct of—
‘‘(i) 1 plus the Secretary’s esti-
mate of the percentage increase
in the medicare economic index
(described in the fourth sentence
of section 1842(b)(3)) for the year
(divided by 100), and
‘‘(ii) 1 plus the Secretary’s es-
timate of the update adjustment
factor for the year (divided by
100),
minus 1 and multiplied by 100.
‘‘(B) 
UPDATE
ADJUSTMENT
FAC-
TOR.—The ‘update adjustment factor’
for a year is equal to the quotient of—
‘‘(i) the difference between (I)
the sum of the allowed expendi-
tures for physicians’ services fur-
nished during each of the years
1995 through the year involved
and (II) the sum of the amount of
actual expenditures for physi-
cians’ services furnished during
836
Subtitle G, Part 1
each of the years 1995 through
the previous year; divided by
‘‘(ii) the Secretary’s estimate
of allowed expenditures for physi-
cians’ services furnished during
the year.
‘‘(C) DETERMINATION
OF
ALLOWED
EXPENDITURES.—For purposes of sub-
paragraph (B), allowed expenditures
for physicians’ services shall be deter-
mined as follows (as estimated by the
Secretary):
‘‘(i) In the case of allowed ex-
penditures for 1995, such expendi-
tures shall be equal to actual ex-
penditures for services furnished
during the 12-month period end-
ing with June of 1995.
‘‘(ii) In the case of allowed ex-
penditures for 1996 and each sub-
sequent year, such expenditures
shall be equal to allowed expendi-
tures for the previous year, in-
creased by the sustainable growth
rate under subsection (f) for the
837
Subtitle G, Part 1
fiscal year which begins during
the year.
‘‘(D) DETERMINATION OF ACTUAL EX-
PENDITURES.—For purposes of sub-
paragraph (B), the amount of actual
expenditures for physicians’ services
furnished during a year shall be
equal to the amount of expenditures
for such services during the 12-month
period ending with June of the pre-
vious year.
‘‘(E) RESTRICTION
ON
VARIATION
FROM MEDICARE ECONOMIC INDEX.—Not-
withstanding the amount of the up-
date adjustment factor determined
under subparagraph (B) for a year,
the update in the conversion factor
under this paragraph for the year
may not be—
‘‘(i) greater than 103 percent
of 1 plus the Secretary’s estimate
of the percentage increase in the
medicare 
economic 
index 
(de-
scribed in the fourth sentence of
838
Subtitle G, Part 1
section 1842(b)(3)) for the year
(divided by 100); or
‘‘(ii) except as required to
carry out section 1895, less than
93 percent of 1 plus the Sec-
retary’s estimate of the percent-
age increase in the medicare eco-
nomic index (described in the
fourth 
sentence 
of 
section
1842(b)(3)) for the year (divided
by 100).’’; and
(C) by adding at the end the fol-
lowing new paragraph:
‘‘(4) REPORTING REQUIREMENTS.—
‘‘(A) IN GENERAL.—Not later than
November 1 of each year (beginning
with 1996), the Secretary shall trans-
mit to the Congress a report that de-
scribes the update in the conversion
factor for physicians’ services (as de-
fined in subsection (f)(3)(A)) in the
following year.
‘‘(B) 
COMMISSION
REVIEW.—The
Medicare Payment Review Commis-
sion shall review the report submit-
839
Subtitle G, Part 1
ted under subparagraph (A) for a
year and shall submit to the Con-
gress, by not later than December 1 of
the year, a report containing its anal-
ysis of the conversion factor for the
following year.’’.
(2) EFFECTIVE DATE.—The amendments
made by this subsection shall apply to
physicians’ services furnished on or after
January 1, 1997.
(c) ESTABLISHMENT OF SINGLE CONVERSION
FACTOR FOR 1996.—
(1) IN GENERAL.—Section 1848(d)(1) (42
U.S.C. 1395w–4(d)(1)) is amended—
(A) 
by 
redesignating 
subpara-
graph (C) as subparagraph (D); and
(B) by inserting after subpara-
graph (B) the following new subpara-
graph:
‘‘(C) SPECIAL RULE FOR 1996.—For
1996, the conversion factor under this
subsection shall be $34.60 for all phy-
sicians’ services.’’.
840
Subtitle G, Part 1
(2) 
CONFORMING
AMENDMENTS.—Sec-
tion 1848 (42 U.S.C. 1395w–4) is amend-
ed—
(A) by striking ‘‘(or factors)’’ each
place 
it 
appears 
in 
subsection
(d)(1)(A) and (d)(1)(C)(ii);
(B) in subsection (d)(1)(A), by
striking ‘‘or updates’’;
(C) in subsection (d)(1)(C)(ii), by
striking ‘‘(or updates)’’; and
(D) in subsection (i)(1)(C), by
striking ‘‘conversion factors’’ and in-
serting ‘‘the conversion factor’’.
SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAY-
MENTS FOR CERTAIN OUTPATIENT HOSPITAL
SERVICES.
(a) AMBULATORY SURGICAL CENTER PROCE-
DURES.—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 inserting the following: ‘‘, less the
amount a provider may charge as de-
scribed 
in 
clause 
(ii) 
of 
section
1866(a)(2)(A).’’.
841
Subtitle G, Part 1
(b) RADIOLOGY SERVICES AND DIAGNOSTIC
PROCEDURES.—Section 1833(n)(1)(B)(i)(II) (42
U.S.C. 1395l(n)(1)(B)(i)(II)) is amended—
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end
and inserting the following: ‘‘, less the
amount a provider may charge as de-
scribed 
in 
clause 
(ii) 
of 
section
1866(a)(2)(A).’’.
(c) EFFECTIVE
DATE.—The amendments
made by this section shall apply to services
furnished during portions of cost reporting
periods occurring on or after October 1, 1995.
SEC. 
15603. 
REDUCTION 
IN 
UPDATES 
TO 
PAYMENT
AMOUNTS FOR DURABLE MEDICAL EQUIP-
MENT.
(a) IN GENERAL.—
(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
subparagraph (A);
(B) in subparagraph (B)—
842
Subtitle G, Part 1
(i) by striking ‘‘a subsequent
year’’ and inserting ‘‘1993, 1994,
and 1995’’, and
(ii) by striking the period at
the end and inserting ‘‘; and’’; and
(C) by adding at the end the fol-
lowing:
‘‘(C) for each of the years 1996
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 PROS-
THETICS.—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);
(B) by redesignating clause (iv) as
clause (v); and
(C) by inserting after clause (iii)
the following new clause:
843
Subtitle G, Part 1
‘‘(iv) for each of the years 1996
through 2002, 1 percent, and’’.
(b) OXYGEN AND OXYGEN EQUIPMENT.—Sec-
tion 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, and
1995’’, 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 1996, is 80 percent of
the national limited monthly pay-
ment rate computed under sub-
paragraph (B) for the item for the
year; and
‘‘(vi) in a subsequent year, is
the national limited monthly pay-
ment rate computed under sub-
paragraph (B) for the item for the
year.’’.
844
Subtitle G, Part 1
SEC. 
15604. 
REDUCTION 
IN 
UPDATES 
TO 
PAYMENT
AMOUNTS FOR CLINICAL DIAGNOSTIC LAB-
ORATORY TESTS.
(a) 
CHANGE
IN
UPDATE.—Section
1833(h)(2)(A)(ii)(IV) 
(42 
U.S.C.
1395l(h)(2)(A)(ii)(IV)) 
is 
amended 
striking
‘‘1994 and 1995’’ and inserting ‘‘1994 through
2002’’.
(b) LOWERING CAP ON PAYMENT AMOUNTS.—
Section 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B))
is amended—
(1) in clause (vi), by striking ‘‘and’’ at
the end;
(2) in clause (vii)—
(A) by inserting ‘‘and before Janu-
ary 1, 1997,’’ 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, 1996, is
equal to 65 percent of such median.’’.
SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR
COSTS OF HOSPITAL OUTPATIENT SERVICES.
(a) REDUCTION IN PAYMENTS FOR CAPITAL-
RELATED
COSTS.—Section 1861(v)(1)(S)(ii)(I)
845
Subtitle G, Part 1
(42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is amended by
striking 
‘‘through 
1998’’ 
and 
inserting
‘‘through 2002’’.
(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 2002’’.
SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR-
GICAL CENTER SERVICES.
The Secretary of Health and Human Serv-
ices shall not provide for any inflation update
in the payment amounts under subpara-
graphs (A) and (B) of section 1833(i)(2) of the
Social Security Act for any of the fiscal years
1996 through 2002.
SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.
(a) COVERAGE
UNDER
PART
B.—Section
1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended—
(1) by striking ‘‘and’’ at the end of
subparagraph (I);
(2) by striking the period at the end
of subparagraph (J) and inserting ‘‘; and’’;
and
(3) by adding at the end the following
new subparagraph:
846
Subtitle G, Part 1
‘‘(K) rural emergency access care
hospital services (as defined in sec-
tion 1861(oo)(2)).’’.
(b) PAYMENT BASED ON PAYMENT FOR OUT-
PATIENT RURAL PRIMARY CARE HOSPITAL SERV-
ICES.—
(1) IN GENERAL.—Section 1833(a)(6) (42
U.S.C. 1395l(a)(6)) is amended by striking
‘‘services,’’ and inserting ‘‘services and
rural emergency access care hospital
services,’’.
(2) 
PAYMENT
METHODOLOGY
DE-
SCRIBED.—Section 
1834(g) 
(42 
U.S.C.
1395m(g)) is amended—
(A) in the heading, by striking
‘‘SERVICES’’ and inserting ‘‘SERVICES
AND RURAL EMERGENCY ACCESS CARE
HOSPITAL SERVICES’’; and
(B) by adding at the end the fol-
lowing new sentence: ‘‘The amount of
payment for rural emergency access
care hospital services provided dur-
ing a year shall be determined using
the 
applicable 
method 
provided
under this subsection for determining
847
Subtitle G, Part 1
payment for outpatient rural primary
care hospital services during the
year.’’.
(c) EFFECTIVE
DATE.—The amendments
made by this section shall apply to services
furnished on or after October 1, 1995.
SEC. 15608. ENSURING PAYMENT FOR PHYSICIAN AND
NURSE FOR JOINTLY FURNISHED ANESTHE-
SIA SERVICES.
(a) PAYMENT FOR JOINTLY FURNISHED SIN-
GLE CASE.—
(1) PAYMENT
TO
PHYSICIAN.—Section
1848(a)(4) (42 U.S.C. 1395w–4(a)(4)) is
amended by adding at the end the follow-
ing new subparagraph:
‘‘(C) PAYMENT FOR SINGLE CASE.—
Notwithstanding 
section
1862(a)(1)(A), with respect to physi-
cians’ services consisting of the fur-
nishing of anesthesia services for a
single case that are furnished jointly
with a certified registered nurse an-
esthetist, if the carrier determines
that the use of both the physician and
the nurse anesthetist to furnish the
848
Subtitle G, Part 1
anesthesia service was not medically
necessary, the fee schedule amount
for the physicians’ services shall be
equal to 50 percent (or 55 percent, in
the case of services furnished during
1996 or 1997) of the fee schedule
amount applicable under this section
for 
anesthesia 
services 
personally
performed by the physician alone
(without 
regard 
to 
this 
subpara-
graph). Nothing in this subparagraph
may be construed to affect the appli-
cation of any provision of law regard-
ing balance billing.’’.
(2) 
PAYMENT
TO
CRNA.—Section
1833(l)(4)(B) (42 U.S.C. 1395l(l)(4)(B)) is
amended by adding at the end the follow-
ing new clause:
‘‘(iv) 
Notwithstanding 
section
1862(a)(1)(A), in the case of services of a cer-
tified registered nurse anesthetist consisting
of the furnishing of anesthesia services for a
single case that are furnished jointly with a
physician, if the carrier determines that the
use of both the physician and the nurse anes-
849
Subtitle G, Part 1
thetist to furnish the anesthesia service was
not medically necessary, the fee schedule
amount for the services furnished by the cer-
tified registered nurse anesthetist shall be
equal to 50 percent (or 40 percent, in the case
of services furnished during 1996 or 1997) of
the fee schedule amount applicable under sec-
tion 1848 for anesthesia services personally
performed by the physician alone (without re-
gard to this clause).’’.
(b) EFFECTIVE
DATE.—The amendments
made by subsections (a) shall apply to serv-
ices furnished on or after July 1, 1996.
SEC. 15609. STATEWIDE FEE SCHEDULE AREA FOR PHYSI-
CIANS’ SERVICES.
(a) IN GENERAL.—Notwithstanding section
1848(j)(2) of the Social Security Act, in the
case of the State of Wisconsin, the Secretary
of Health and Human Services shall treat the
State as a single fee schedule area for pur-
poses of determining the fee schedule amount
(as referred to in section 1848(a) of such Act)
for physicians’ services (as defined in section
1848(j)(3) of such Act) under part B of the
medicare program.
850
Subtitle G, Part 2
(b) 
BUDGET-NEUTRALITY.—Notwithstand-
ing any provision of part B of title XVIII of the
Social Security Act, the Secretary shall carry
out subsection (a) in a manner that ensures
that total payments for physicians’ services
(as so defined) furnished by physicians in Wis-
consin during a year are not greater or less
than total payments for such services would
have been but for this section.
(c) CONSTRUCTION.—Nothing in this sec-
tion shall be construed as limiting the avail-
ability (to the Secretary, the appropriate
agency or organization with a contract under
section 1842 of such Act, or physicians in the
State of Wisconsin) of otherwise applicable
administrative procedures for modifying the
fee schedule area or areas in the State after
implementation of subsection (a).
(d) EFFECTIVE DATE.—This section shall
apply with respect to physicians’ services fur-
nished on or after January 1, 1997.
PART 2—PART B PREMIUM
SEC. 15611. EXTENSION OF PART B PREMIUM.
(a) IN
GENERAL.—Section 1839(e)(1) (42
U.S.C. 1395r(e)(1)) is amended—
851
Subtitle G, Part 2
(1) in subparagraph (A)—
(A) by striking ‘‘and prior to Jan-
uary 1999’’, and
(B) by inserting ‘‘(or, if higher, the
percent described in subparagraph
(C))’’ after ‘‘50 percent’’; and
(2) by adding at the end the following
new subparagraph:
‘‘(C) For purposes of subparagraph (A),
the percent described in this subparagraph is
the ratio (expressed as a percentage) of the
monthly premium established under this sec-
tion for months in 1995 to the monthly actuar-
ial rate for enrollees age 65 and over applica-
ble to such months (as specified in the most
recent report of the Board of Trustees of the
Federal Supplementary Medical Insurance
Trust Fund published prior to the date of the
enactment of the Medicare Preservation Act
of 1995).’’.
(b) EFFECTIVE
DATE.—The amendments
made by subsection (a) apply to premiums for
months beginning with January 1996.
852
Subtitle G, Part 2
SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE
SUBSIDY.
(a) IN GENERAL.—Section 1839 (42 U.S.C.
1395r) is amended by adding at the end the
following:
‘‘(h)(1) Notwithstanding the previous sub-
sections of this section, in the case of an indi-
vidual whose modified adjusted gross income
for a taxable year ending with or within a cal-
endar year exceeds the threshold amount de-
scribed in paragraph (6)(B), the Secretary
shall increase the amount of the monthly pre-
mium for months in the calendar year by an
amount equal to the difference between—
‘‘(A) 200 percent of the monthly actu-
arial rate for enrollees age 65 and over as
determined under subsection (a)(1) for
that calendar year; and
‘‘(B) the total of the monthly pre-
miums paid by the individual under this
section (determined without regard to
subsection (b)) during such calendar
year.
‘‘(2) In the case of an individual described
in paragraph (1) whose modified adjusted
gross exceeds the threshold amount by less
853
Subtitle G, Part 2
than $25,000, the amount of the increase in
the monthly premium applicable under para-
graph (1) shall be an amount which bears the
same ratio to the amount of the increase de-
scribed in paragraph (1) (determined without
regard to this paragraph) as such excess
bears to $25,000. In the case of a joint return
filed under section 6013 of the Internal Reve-
nue Code of 1986 by spouses both of whom are
enrolled under this part, the previous sen-
tence shall be applied by substituting ‘$50,000’
for ‘$25,000’. The preceding provisions of this
paragraph shall not apply to any individual
whose threshold amount is zero.
‘‘(3) The Secretary shall make an initial
determination of the amount of increase in
the monthly premium applicable under para-
graph (1) for a taxable year ending with or
within a calendar year for purposes of this
subsection as follows:
‘‘(A) Not later than October 1 of the
year preceding the year, the Secretary
shall provide notice to each individual
who the Secretary finds (on the basis of
the individual’s actual adjusted gross in-
854
Subtitle G, Part 2
come for the most recent taxable year for
which such information is available or
other information provided to the Sec-
retary by the Secretary of the Treasury)
will be subject to an increase under this
subsection that the individual will be
subject to such an increase, and shall in-
clude in such notice the Secretary’s esti-
mate of the individual’s increase in the
monthly premium applicable under para-
graph (1) for the year.
‘‘(B) If, during the 30-day period be-
ginning on the date notice is provided to
an individual under subparagraph (A),
the individual provides the Secretary
with information on the individual’s an-
ticipated increase in the monthly pre-
mium for the year, the amount initially
determined by the Secretary under this
paragraph with respect to the individual
shall be based on the information pro-
vided by the individual.
‘‘(C) If an individual does not provide
the Secretary with information under
subparagraph (B), the amount initially
855
Subtitle G, Part 2
determined by the Secretary under this
paragraph with respect to the individual
shall be the amount included in the no-
tice provided to the individual under sub-
paragraph (A).
‘‘(4)(A) If the Secretary determines (on the
basis of final information provided by the Sec-
retary of the Treasury) that the amount of an
individual’s actual increase in the monthly
premium applicable under paragraph (1) for
a taxable year ending with or within a cal-
endar year is less than or greater than the
amount initially determined by the Secretary
under paragraph (3), the Secretary shall in-
crease or decrease the amount of the individ-
ual’s monthly premium under this section (as
the case may be) for months during the fol-
lowing calendar year by an amount equal to
1⁄12 of the difference between—
‘‘(i) the total amount of all monthly
premiums paid by the individual under
this section during the previous calendar
year; and
‘‘(ii) the total amount of all such pre-
miums which would have been paid by
856
Subtitle G, Part 2
the individual during the previous cal-
endar year if the amount of the individ-
ual’s increase in the monthly premium
applicable under paragraph (1) initially
determined under paragraph (3) were
equal to the actual amount of the individ-
ual’s increase in the monthly premium
determined under this paragraph.
‘‘(B) In the case of an individual who is
not enrolled under this part for any calendar
year for which the individual’s monthly pre-
mium under this section for months during
the year would be increased pursuant to sub-
paragraph (A) if the individual were enrolled
under this part for the year, the Secretary
may take such steps as the Secretary consid-
ers appropriate to recover from the individ-
ual the total amount by which the individual’s
monthly premium for months during the year
would have been increased under subpara-
graph (A) if the individual were enrolled
under this part for the year.
‘‘(5) The Secretary shall not obtain (or be
provided) any income-related information
that is not necessary for the determination of
857
Subtitle G, Part 2
the increase in the monthly premium applica-
ble under paragraph (1), including (in the
case of an individual described in paragraph
(1) and not described in paragraph (2)) any in-
formation other than the fact that the individ-
ual is described in paragraph (1).
‘‘(6) In this subsection, the following defi-
nitions apply:
‘‘(A) The term ‘modified adjusted
gross income’ means, with respect to an
individual for a taxable year, the individ-
ual’s adjusted gross income under the In-
ternal Revenue Code of 1986—
‘‘(i) determined without regard to
sections 135, 911, 931, and 933 of such
Code, and
‘‘(ii) increased by the amount of
interest received or accrued by the
individual during the taxable year
which is exempt from tax under such
Code.
‘‘(B) The term ‘threshold amount’
means—
‘‘(i) except as otherwise provided
in this paragraph, $75,000,
858
Subtitle G, Part 2
‘‘(ii) $125,000, in the case of a joint
return, and
‘‘(iii) zero in the case of a tax-
payer who—
‘‘(I) is married at the close of
the taxable year but does not file
a joint return for such year, and
‘‘(II) does not live apart from
his spouse at all times during the
taxable year.’’.
(b) 
CONFORMING
AMENDMENT.—Section
1839(f) (42 U.S.C. 1395r(f)) is amended by
striking ‘‘if an individual’’ and inserting the
following: ‘‘if an individual (other than an in-
dividual subject to an increase in the monthly
premium under this section pursuant to sub-
section (h))’’.
(c) REPORTING
REQUIREMENTS
FOR
SEC-
RETARY
OF
THE TREASURY.—Notwithstanding
section 6103 of the Internal Revenue Code of
1986, the Secretary of the Treasury shall pro-
vide, at the request of the Secretary of Health
and Human Services, such information (at
such times and in such form as the Secretary
of Health and Human Services may require)
859
Subtitle G, Part 3
as is necessary for the Secretary of Health
and Human Services to carry out section
1839(h) of the Social Security Act (as added by
subsection (a)).
(d) EFFECTIVE
DATE.—The amendments
made by subsections (a) and (b) shall apply to
the monthly premium under section 1839 of
the Social Security Act for months beginning
with January 1997.
PART 3—BILLING AND ADMINISTRATION OF
LABORATORY SERVICES
SEC. 15621. RESTRICTIONS ON DIRECT BILLING FOR LAB-
ORATORY SERVICES.
(a) REQUIREMENT
FOR DIRECT BILLING.—
Section 1833(h) (42 U.S.C. 1395l(h)) is amend-
ed by adding at the end the following new
paragraph:
‘‘(7)(A) Effective for services furnished on
or October 1, 1996, as a condition for coverage
and payment under this part of clinical lab-
oratory diagnostic tests performed by an indi-
vidual or entity, the individual or entity per-
forming such a test (whether or not under
this part) shall not present or cause to be pre-
sented a claim, bill, or demand for payment to
860
Subtitle G, Part 3
any person, other than the individual receiv-
ing such services or the health plan des-
ignated by such person, except that the Sec-
retary may by regulation establish appro-
priate exceptions to the requirement of this
subparagraph.
‘‘(B)(i) Any person that furnishes clinical
laboratory services for which payment is
made under paragraph (1)(D)(i) or paragraph
(2)(D)(i) that knowingly violates subpara-
graph (A) is subject to a civil money penalty
of not more than $10,000 for each such viola-
tion. The provisions of section 1128A (other
than subsections (a) and (b)) shall apply to a
civil money penalty under this paragraph in
the same manner as such provisions apply
with respect to a penalty or proceeding under
section 1128A(a).
‘‘(ii)(I) Any individual or entity that the
Secretary determines has repeatedly violated
subparagraph (A) may be excluded from par-
ticipation in any Federal health care pro-
gram. The provisions of section 1128A (other
than subsections (a) and (b)) shall apply to an
exclusion under this paragraph in the same
861
Subtitle G, Part 3
manner as such provisions apply with respect
to a penalty or proceeding under section
1128A(a).
‘‘(II) The provisions of section 1128(e) of
the Social Security Act shall apply to any ex-
clusion under clause (iii)(I) in the same man-
ner as such provisions apply to a proceeding
under section 1128.
‘‘(C) For purposes of this paragraph, the
following definitions shall apply:
‘‘(i) The term ‘Federal health care
program’ means—
‘‘(I) the program under this title;
‘‘(II) a State plan under title XIX
or XXI; or
‘‘(III) a program receiving funds
under title V or from an allotment to
a State under such title.
‘‘(ii) The term ‘health plan’ means any
hospital or medical service policy or cer-
tificate, hospital or medical service plan
contract, or health maintenance organi-
zation contract offered by an insurer, ex-
cept that such term does not include any
of the following:
862
Subtitle G, Part 3
‘‘(I) Coverage only for accident,
dental, vision, disability income, or
long-term care insurance, or any com-
bination thereof.
‘‘(II) 
Medicare 
supplemental
health insurance.
‘‘(III) Coverage issued as a supple-
ment to liability insurance.
‘‘(IV) Liability insurance, includ-
ing general liability insurance and
automobile liability insurance.
‘‘(V) Worker’s compensation or
similar insurance.
‘‘(VI) 
Automobile 
medical-pay-
ment insurance.
‘‘(VII) Coverage for a specified
disease or illness.
‘‘(VIII) A hospital or fixed indem-
nity policy.’’.
(b) LOOK BACK PROVISIONS TO ASSURE SAV-
INGS.—
(1) IN GENERAL.—Section 1833(h)(4)(B)
(42 U.S.C. 1395l(h)(4)(B)), as amended by
section 15604(b), is amended—
863
Subtitle G, Part 3
(A) in clause (vii), by striking
‘‘and’’ at the end;
(B) in clause (viii)—
(i) by inserting ‘‘and before
January 1, 2000,’’ after ‘‘1996,’’,
and
(ii) by striking the period at
the end and inserting ‘‘, and’’; and
(C) by adding at the end the fol-
lowing new clause:
‘‘(ix) after December 31, 1999, is equal
to such percentage of such median as the
Secretary establishes under paragraph
(8)(B), or, if the Secretary does not act
under paragraph (8)(B), is equal to 65
percent of such median.’’.
(2) PROCESS FOR REDUCTIONS.—Section
1833(h) (42 U.S.C. 1395l(h)), as amended
by subsection (a), is amended by adding
at the end the following new paragraph:
‘‘(8)(A) On July 31, 1999, the Secretary
shall estimate—
‘‘(i) the amount of expenditures under
this section for clinical diagnostic labora-
tory tests which will be made in the pe-
864
Subtitle G, Part 3
riod from January 1, 1997, through Sep-
tember 30, 2002, and
‘‘(ii) 
the 
amount 
of 
expenditures
which would have been made under this
section for clinical diagnostic laboratory
tests in the period from January 1, 1997,
through September 30, 2002, if paragraph
(7) had not been enacted.
‘‘(B) If the amount estimated under sub-
paragraph (A)(i) is greater than 97 percent of
the amount estimated under subparagraph
(A)(ii), the Secretary shall establish a limita-
tion amount under paragraph (4)(B)(ix) such
that, when such limitation amount is consid-
ered, the amount estimated under subpara-
graph (A)(i) is 97 percent of the amount esti-
mated under subparagraph (A)(ii).
‘‘(C) The Director of the Congressional
Budget Office (hereafter in this subparagraph
referred to as the ‘Director’) shall—
‘‘(i) 
independently 
estimate 
the
amounts specified in subparagraph (A)
and compute any limitation amount re-
quired under subparagraph (B), and
865
Subtitle G, Part 3
‘‘(ii) submit a report on such esti-
mates and computation to Congress not
later than August 31, 1999.
The Secretary shall provide the Director with
such data as the Director reasonably requires
to prepare such estimates and computation.’’.
SEC. 15622. ADMINISTRATIVE SIMPLIFICATION.
(a) IN GENERAL.—Not later than 1 year
after the date of the enactment of this Act, the
Secretary of Health and Human Services (in
accordance with the process described in sub-
section (b)) shall adopt uniform coverage, ad-
ministration, and payment policies for clini-
cal diagnostic laboratory tests under part B of
the medicare program.
(b) PROCESS FOR ADOPTION OF POLICIES.—
The Secretary shall adopt uniform policies
under subsection (a) in accordance with the
following process:
(1) The Secretary shall select from
carriers with whom the Secretary has a
contract under part B during 1995 15
medical directors, who will meet and de-
velop recommendations for such uniform
policies. The medical directors selected
866
Subtitle G, Part 3
shall represent various geographic areas
and have a varied range of experience in
relevant medical fields, including pathol-
ogy and clinical laboratory practice.
(2) The medical directors selected
under paragraph (1) shall consult with
independent experts in each major dis-
cipline of clinical laboratory medicine,
including clinical laboratory personnel,
bioanalysts, pathologists, and practicing
physicians. The medical directors shall
also solicit comments from other individ-
uals and groups who wish to participate,
including consumers and other affected
parties. This process shall be conducted
as a negotiated rulemaking under title 5,
United States Code.
(3) Under the negotiated rulemaking,
the recommendations for uniform poli-
cies shall be designed to simplify and re-
duce unnecessary administrative burdens
in connection with the following:
(A) Beneficiary information re-
quired to be submitted with each
claim.
867
Subtitle G, Part 3
(B) 
Physicians’ 
obligations 
re-
garding documentation requirements
and recordkeeping,
(C) Procedures for filing claims
and for providing remittances by
electronic media.
(D) The performance of post-pay-
ment review of test claims.
(E) The prohibition of the docu-
mentation of medical necessity except
when determined to be appropriate
after identification of aberrant utili-
zation pattern through focused medi-
cal review.
(F) Beneficiary responsibility for
payment.
(4) During the pendency of the adop-
tion by the Secretary of the uniform poli-
cies, fiscal intermediaries and carriers
under the medicare program may not im-
plement any new requirement relating to
the submission of a claim for clinical di-
agnostic laboratory tests retroactive to
January 1, 1995, and carriers may not ini-
tiate any new coverage, administrative,
868
Subtitle G, Part 3
or payment policy unless the policy pro-
motes the goal of administrative sim-
plification of requirements imposed on
clinical laboratories in accordance with
the Secretary’s promulgation of the nego-
tiated rulemaking.
(5) Not later than 6 months after the
date of the enactment of this Act, the
medical directors shall submit their rec-
ommendations to the Secretary, and the
Secretary shall publish the recommenda-
tions and solicit public comment using
negotiated 
rulemaking 
in 
accordance
with title 5, United States Code. The Sec-
retary shall publish final uniform policies
for coverage, administration, and pay-
ment of claims for clinical diagnostic lab-
oratory tests, effective after the expira-
tion of the 180-day period which begins
on the date of publication.
(6) After the publication of the final
uniform policies, the Secretary shall im-
plement identical uniform documentation
and processing policies for all clinical di-
agnostic laboratory tests paid under the
869
Subtitle G, Part 3
medicare 
program 
through 
fiscal
intermediaries or carriers.
(c) OPTIONAL SELECTION
OF SINGLE CAR-
RIER.—Effective for claims submitted after the
expiration of the 90-day period which begins
on the date of the enactment of this Act, an
independent laboratory may select a single
carrier for the processing of all of its claims
for payment under part B of the medicare
program, without regard to the location
where the laboratory or the patient or pro-
vider involved resides or conducts business.
Such election of a single carrier shall be made
by the clinical laboratory and an agreement
made between the carrier and the laboratory
shall be forwarded to the Secretary of Health
and Human Services. Nothing in this sub-
section shall be construed to require a labora-
tory to select a single carrier under this sub-
section.