H. R. 1—227
with such technology, based on similar clinical or anatomical
characteristics and the cost of the technology. Within such groups
the Secretary shall assign an eligible new technology into a diag-
nosis-related group where the average costs of care most closely
approximate the costs of care of using the new technology. No
add-on payment under this subparagraph shall be made with
respect to such new technology and this clause shall not affect
the application of paragraph (4)(C)(iii).’’.
(d) ESTABLISHMENT OF NEW FUNDING FOR HOSPITAL INPATIENT
TECHNOLOGY.—
(1) IN GENERAL.—Section 1886(d)(5)(K)(ii)(III) (42 U.S.C.
1395ww(d)(5)(K)(ii)(III)) is amended by striking ‘‘subject to
paragraph (4)(C)(iii),’’.
(2) NOT BUDGET NEUTRAL.—There shall be no reduction
or other adjustment in payments under section 1886 of the
Social Security Act because an additional payment is provided
under subsection (d)(5)(K)(ii)(III) of such section.
(e) EFFECTIVE DATE.—
(1) IN
GENERAL.—The Secretary shall implement the
amendments made by this section so that they apply to classi-
fication for fiscal years beginning with fiscal year 2005.
(2) RECONSIDERATIONS OF APPLICATIONS FOR FISCAL YEAR
2004 THAT ARE DENIED.—In the case of an application for a
classification of a medical service or technology as a new med-
ical service or technology under section 1886(d)(5)(K) of the
Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was filed
for fiscal year 2004 and that is denied—
(A) the Secretary shall automatically reconsider the
application as an application for fiscal year 2005 under
the amendments made by this section; and
(B) the maximum time period otherwise permitted for
such classification of the service or technology shall be
extended by 12 months.
SEC. 504. INCREASE IN FEDERAL RATE FOR HOSPITALS IN PUERTO
RICO.
Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended—
(1) in subparagraph (A)—
(A) in clause (i), by striking ‘‘for discharges beginning
on or after October 1, 1997, 50 percent (and for discharges
between October 1, 1987, and September 30, 1997, 75 per-
cent)’’ and inserting ‘‘the applicable Puerto Rico percentage
(specified in subparagraph (E))’’; and
(B) in clause (ii), by striking ‘‘for discharges beginning
in a fiscal year beginning on or after October 1, 1997,
50 percent (and for discharges between October 1, 1987,
and September 30, 1997, 25 percent)’’ and inserting ‘‘the
applicable Federal percentage (specified in subparagraph
(E))’’; and
(2) by adding at the end the following new subparagraph:
‘‘(E) For purposes of subparagraph (A), for discharges
occurring—
‘‘(i) on or after October 1, 1987, and before October 1,
1997, the applicable Puerto Rico percentage is 75 percent and
the applicable Federal percentage is 25 percent;
H. R. 1—228
‘‘(ii) on or after October 1, 1997, and before April 1, 2004,
the applicable Puerto Rico percentage is 50 percent and the
applicable Federal percentage is 50 percent;
‘‘(iii) on or after April 1, 2004, and before October 1, 2004,
the applicable Puerto Rico percentage is 37.5 percent and the
applicable Federal percentage is 62.5 percent; and
‘‘(iv) on or after October 1, 2004, the applicable Puerto
Rico percentage is 25 percent and the applicable Federal
percentage is 75 percent.’’.
SEC. 505. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM.
(a) IN GENERAL.—Section 1886(d) (42 U.S.C. 1395ww(d)), as
amended by section 406, is amended by adding at the end the
following new paragraph:
‘‘(13)(A) In order to recognize commuting patterns among
geographic areas, the Secretary shall establish a process through
application or otherwise for an increase of the wage index applied
under paragraph (3)(E) for subsection (d) hospitals located in a
qualifying county described in subparagraph (B) in the amount
computed under subparagraph (D) based on out-migration of hos-
pital employees who reside in that county to any higher wage
index area.
‘‘(B) The Secretary shall establish criteria for a qualifying
county under this subparagraph based on the out-migration referred
to in subparagraph (A) and differences in the area wage indices.
Under such criteria the Secretary shall, utilizing such data as
the Secretary determines to be appropriate, establish—
‘‘(i) a threshold percentage, established by the Secretary,
of the weighted average of the area wage index or indices
for the higher wage index areas involved;
‘‘(ii) a threshold (of not less than 10 percent) for minimum
out-migration to a higher wage index area or areas; and
‘‘(iii) a requirement that the average hourly wage of the
hospitals in the qualifying county equals or exceeds the average
hourly wage of all the hospitals in the area in which the
qualifying county is located.
‘‘(C) For purposes of this paragraph, the term ‘higher wage
index area’ means, with respect to a county, an area with a wage
index that exceeds that of the county.
‘‘(D) The increase in the wage index under subparagraph (A)
for a qualifying county shall be equal to the percentage of the
hospital employees residing in the qualifying county who are
employed in any higher wage index area multiplied by the sum
of the products, for each higher wage index area of—
‘‘(i) the difference between—
‘‘(I) the wage index for such higher wage index area,
and
‘‘(II) the wage index of the qualifying county; and
‘‘(ii) the number of hospital employees residing in the quali-
fying county who are employed in such higher wage index
area divided by the total number of hospital employees residing
in the qualifying county who are employed in any higher wage
index area.
‘‘(E) The process under this paragraph may be based upon
the process used by the Medicare Geographic Classification Review
Board under paragraph (10). As the Secretary determines to be
appropriate to carry out such process, the Secretary may require
H. R. 1—229
hospitals (including subsection (d) hospitals and other hospitals)
and critical access hospitals, as required under section 1866(a)(1)(T),
to submit data regarding the location of residence, or the Secretary
may use data from other sources.
‘‘(F) A wage index increase under this paragraph shall be
effective for a period of 3 fiscal years, except that the Secretary
shall establish procedures under which a subsection (d) hospital
may elect to waive the application of such wage index increase.
‘‘(G) A hospital in a county that has a wage index increase
under this paragraph for a period and that has not waived the
application of such an increase under subparagraph (F) is not
eligible for reclassification under paragraph (8) or (10) during that
period.
‘‘(H) Any increase in a wage index under this paragraph for
a county shall not be taken into account for purposes of—
‘‘(i) computing the wage index for portions of the wage
index area (not including the county) in which the county
is located; or
‘‘(ii) applying any budget neutrality adjustment with
respect to such index under paragraph (8)(D).
‘‘(I) The thresholds described in subparagraph (B), data on
hospital employees used under this paragraph, and any determina-
tion of the Secretary under the process described in subparagraph
(E) shall be final and shall not be subject to judicial review.’’.
(b) CONFORMING AMENDMENTS.—Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended—
(1) in subparagraph (R), by striking ‘‘and’’ at the end;
(2) in subparagraph (S), by striking the period at the end
and inserting ‘‘, and’’; and
(3) by inserting after subparagraph (S) the following new
subparagraph:
‘‘(T) in the case of hospitals and critical access hospitals,
to furnish to the Secretary such data as the Secretary deter-
mines appropriate pursuant to subparagraph (E) of section
1886(d)(12) to carry out such section.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall first apply to the wage index for discharges occurring on
or after October 1, 2004. In initially implementing such amend-
ments, the Secretary may modify the deadlines otherwise applicable
under clauses (ii) and (iii)(I) of section 1886(d)(10)(C) of the Social
Security Act (42 U.S.C. 1395ww(d)(10)(C)), for submission of, and
actions on, applications relating to changes in hospital geographic
reclassification.
SEC. 506. LIMITATION ON CHARGES FOR INPATIENT HOSPITAL CON-
TRACT HEALTH SERVICES PROVIDED TO INDIANS BY
MEDICARE PARTICIPATING HOSPITALS.
(a) IN GENERAL.—Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)),
as amended by section 505(b), is amended—
(1) in subparagraph (S), by striking ‘‘and’’ at the end;
(2) in subparagraph (T), by striking the period and inserting
‘‘, and’’; and
(3) by inserting after subparagraph (T) the following new
subparagraph:
‘‘(U) in the case of hospitals which furnish inpatient hos-
pital services for which payment may be made under this
title, to be a participating provider of medical care both—
H. R. 1—230
‘‘(i) under the contract health services program funded
by the Indian Health Service and operated by the Indian
Health Service, an Indian tribe, or tribal organization (as
those terms are defined in section 4 of the Indian Health
Care Improvement Act), with respect to items and services
that are covered under such program and furnished to
an individual eligible for such items and services under
such program; and
‘‘(ii) under any program funded by the Indian Health
Service and operated by an urban Indian organization with
respect to the purchase of items and services for an eligible
urban Indian (as those terms are defined in such section
4),
in accordance with regulations promulgated by the Secretary
regarding admission practices, payment methodology, and rates
of payment (including the acceptance of no more than such
payment rate as payment in full for such items and services.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply as of a date specified by the Secretary of Health and
Human Services (but in no case later than 1 year after the date
of enactment of this Act) to medicare participation agreements
in effect (or entered into) on or after such date.
(c) PROMULGATION
OF
REGULATIONS.—The Secretary shall
promulgate regulations to carry out the amendments made by sub-
section (a).
SEC. 507. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE
LIMITS ON PHYSICIAN REFERRALS.
(a) LIMITS ON PHYSICIAN REFERRALS.—
(1) OWNERSHIP AND INVESTMENT INTERESTS IN WHOLE HOS-
PITALS.—
(A) 
IN
GENERAL.—Section 
1877(d)(3) 
(42 
U.S.C.
1395nn(d)(3)) is amended—
(i) by striking ‘‘, and’’ at the end of subparagraph
(A) and inserting a semicolon; and
(ii) by redesignating subparagraph (B) as subpara-
graph (C) and inserting after subparagraph (A) the
following new subparagraph:
‘‘(B) effective for the 18-month period beginning on
the date of the enactment of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, the
hospital is not a specialty hospital (as defined in subsection
(h)(7)); and’’.
(B) DEFINITION.—Section 1877(h) (42 U.S.C. 1395nn(h))
is amended by adding at the end the following:
‘‘(7) SPECIALTY HOSPITAL.—
‘‘(A) IN GENERAL.—For purposes of this section, except
as provided in subparagraph (B), the term ‘specialty hos-
pital’ means a subsection (d) hospital (as defined in section
1886(d)(1)(B)) that is primarily or exclusively engaged in
the care and treatment of one of the following categories:
‘‘(i) Patients with a cardiac condition.
‘‘(ii) Patients with an orthopedic condition.
‘‘(iii) Patients receiving a surgical procedure.