550
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
551
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-
552
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
553
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)
554
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.—
555
‘‘(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—
556
‘‘(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.
557
‘‘(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-
558
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).
559
(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.