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CHAPTER 3—GRADUATE MEDICAL
EDUCATION PAYMENTS
Subchapter A—Direct Medical Education
SEC. 5441. LIMITATION ON NUMBER OF RESIDENTS AND
ROLLING AVERAGE FTE COUNT.
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is
amended by adding after subparagraph (E) the following:
‘‘(F) LIMITATION
ON
NUMBER
OF
RESI-
DENTS IN ALLOPATHIC AND OSTEOPATHIC MEDI-
CINE.—Except as provided in subparagraph (H),
such rules shall provide that for purposes of a
cost reporting period beginning on or after Octo-
ber 1, 1997, the total number of full-time equiva-
lent residents before application of weighting fac-
tors (as determined under this paragraph) with
respect to a hospital’s approved medical resi-
dency training program in the fields of
allopathic medicine and osteopathic medicine
may not exceed the number of full-time equiva-
lent residents with respect to such programs for
the hospital’s most recent cost reporting period
ending on or before December 31, 1996.
‘‘(G) COUNTING INTERNS AND RESIDENTS
FOR 1998 AND SUBSEQUENT YEARS.—
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‘‘(i) IN GENERAL.—For cost reporting
periods beginning on or after October 1,
1997, subject to the limit described in sub-
paragraph (F) and except as provided in
subparagraph (H), the total number of full-
time equivalent residents for determining a
hospital’s graduate medical education pay-
ment shall equal the average of the full-time
equivalent resident counts for the cost re-
porting period and the preceding two cost
reporting periods.
‘‘(ii) ADJUSTMENT FOR SHORT PERI-
ODS.—If any cost reporting period begin-
ning on or after October 1, 1997, is not
equal to twelve months, the Secretary shall
make appropriate modifications to ensure
that the average full-time equivalent resi-
dent counts pursuant to clause (ii) are
based on the equivalent of full twelve-month
cost reporting periods.
‘‘(iii) TRANSITION RULE FOR 1998.—In
the case of a hospital’s first cost reporting
period beginning on or after October 1,
1997, clause (i) shall be applied by using
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the average for such period and the preced-
ing cost reporting period.
‘‘(H) SPECIAL
RULES
FOR
NEW
FACILI-
TIES.—
‘‘(i) IN GENERAL.—If a hospital is an
applicable facility under clause (iii) for any
year with respect to any approved medical
residency training program described in
subsection (h)—
‘‘(I) subject to the applicable an-
nual limit under clause (ii), the Sec-
retary may provide an additional
amount of full-time equivalent resi-
dents which may be taken into account
with respect to such program under
subparagraph (F) for cost reporting
periods beginning during such year,
and
‘‘(II) the averaging rules under
subparagraph (G) shall not apply for
such year.
‘‘(ii) APPLICABLE ANNUAL LIMIT.—The
total of additional full-time equivalent resi-
dents which the Secretary may authorize
under clause (i) for all applicable facilities
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for any year shall not exceed the amount
which would result in the number of full-
time equivalent residents with respect to ap-
proved medical residency training programs
in the fields of allopathic and osteopathic
medicine for all hospitals exceeding such
number for the preceding year. In allocating
such additional residents, the Secretary
shall give special consideration to facilities
that meet the needs of underserved rural
areas.
‘‘(iii) 
APPLICABLE
FACILITY.—For
purposes of this subparagraph, a hospital
shall be treated as an applicable facility
with respect to an approved medical resi-
dency training program only during the
first 5 years during which such program is
in existence. A hospital shall not be treated
as such a facility if the 5-year period de-
scribed in the preceding sentence ended on
or before December 31, 1996.
‘‘(iv) COORDINATION
WITH
LIMIT.—
For purposes of applying subparagraph (F),
the number of full-time equivalent residents
of an applicable facility with respect to any
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approved medical residency training pro-
gram in the fields of allopathic and osteo-
pathic medicine for the facility’s most re-
cent cost reporting period ending on or be-
fore December 31, 1996, shall be increased
by the number of such residents allocated to
such facility under clause (i).’’.
SEC. 5442. PERMITTING PAYMENT TO NONHOSPITAL PRO-
VIDERS.
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww)
is amended by adding at the end the following:
‘‘(j) PAYMENT TO NONHOSPITAL PROVIDERS.—
‘‘(1) IN GENERAL.—For cost reporting periods
beginning on or after October 1, 1997, the Secretary
may establish rules for payment to qualified nonhos-
pital providers for their direct costs of medical edu-
cation, if those costs are incurred in the operation of
an approved medical residency training program de-
scribed in subsection (h). Such rules shall specify the
amounts, form, and manner in which payments will
be made and the portion of such payments that will
be made from each of the trust funds under this title.
‘‘(2) QUALIFIED NONHOSPITAL PROVIDERS.—For
purposes of this subsection, the term ‘qualified non-
hospital providers’ means—
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‘‘(A) a federally qualified health center, as
defined in section 1861(aa)(4);
‘‘(B) a rural health clinic, as defined in sec-
tion 1861(aa)(2); and
‘‘(C) such other providers (other than hos-
pitals) as the Secretary determines to be appro-
priate.’’.
(b) PROHIBITION
ON DOUBLE PAYMENTS.—Section
1886(h)(3)(B) (42 U.S.C. 1395ww(h)(3)(B)) is amended by
adding at the end the following:
‘‘The Secretary shall reduce the aggregate approved
amount to the extent payment is made under sub-
section (j) for residents included in the hospital’s
count of full-time equivalent residents.’’.
SEC. 5443. MEDICARE SPECIAL REIMBURSEMENT RULE FOR
PRIMARY CARE COMBINED RESIDENCY PRO-
GRAMS.
(a) IN GENERAL.—Section 1886(h)(5)(G) of the Social
Security Act (42 U.S.C. 1395ww(h)(5)(G)) is amended—
(1) in clause (i), by striking ‘‘and (iii)’’ and in-
serting ‘‘, (iii), and (iv)’’; and
(2) by adding at the end the following:
‘‘(iv) SPECIAL
RULE
FOR
PRIMARY
CARE COMBINED RESIDENCY PROGRAMS.—
(I) In the case of a resident enrolled in a
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combined medical residency training pro-
gram in which all of the individual pro-
grams (that are combined) are for training
a primary care resident (as defined in sub-
paragraph (H)), the period of board eligi-
bility shall be the minimum number of
years of formal training required to satisfy
the requirements for initial board eligibility
in the longest of the individual programs
plus one additional year.
‘‘(II) A resident enrolled in a combined
medical residency training program that
includes an obstetrics and gynecology pro-
gram qualifies for the period of board eligi-
bility under subclause (I) if the other pro-
grams such resident combines with such ob-
stetrics and gynecology program are for
training a primary care resident.’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) apply to combined medical residency training
programs in effect on or after January 1, 1998.
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Subchapter B—Indirect Medical Education
SEC. 5446. INDIRECT GRADUATE MEDICAL EDUCATION PAY-
MENTS.
(a) MULTIYEAR TRANSITION REGARDING PERCENT-
AGES.—
(1) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as
follows:
‘‘(ii) For purposes of clause (i)(II), the in-
direct teaching adjustment factor is equal to
c × (((1+r) to the nth power) ¥ 1), where ‘r’
is the ratio of the hospital’s full-time equivalent
interns and residents to beds and ‘n’ equals .405.
For discharges occurring—
‘‘(I) on or after May 1, 1986, and be-
fore October 1, 1997, ‘c’ is equal to 1.89;
‘‘(II) during fiscal year 1998, ‘c’ is
equal to 1.72;
‘‘(III) during fiscal year 1999, ‘c’ is
equal to 1.6;
‘‘(IV) during fiscal year 2000, ‘c’ is
equal to 1.47; and
‘‘(V) on or after October 1, 2000, ‘c’ is
equal to 1.35.’’.
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(2) 
NO
RESTANDARDIZATION
OF
PAYMENT
AMOUNTS
REQUIRED.—Section 1886(d)(2)(C)(i) (42
U.S.C. 1395ww(d)(2)(C)(i)) is amended by adding at
the end the following: ‘‘except that the Secretary shall
not take into account any reduction in the amount of
additional payments under paragraph (5)(B)(ii) re-
sulting from the amendment made by section
5446(a)(1) of the Balanced Budget Act of 1997,’’.
(b) LIMITATION.—
(1) IN
GENERAL.—Section 1886(d)(5)(B) (42
U.S.C. 1395ww(d)(5)(B)) is amended by adding after
clause (iv) the following:
‘‘(v) In determining the adjustment with re-
spect to a hospital for discharges occurring on or
after October 1, 1997, the total number of full-
time equivalent interns and residents in either a
hospital or nonhospital setting may not exceed
the number of such full-time equivalent interns
and residents in the hospital with respect to the
hospital’s most recent cost reporting period end-
ing on or before December 31, 1996.
‘‘(vi) For purposes of clause (ii)—
‘‘(I) ‘r’ may not exceed the ratio of the
number of interns and residents as deter-
mined under clause (v) with respect to the
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hospital for its most recent cost reporting
period ending on or before December 31,
1996, to the hospital’s available beds (as de-
fined by the Secretary) during that cost re-
porting period, and
‘‘(II) for the hospital’s cost reporting
periods beginning on or after October 1,
1997, subject to the limits described in
clauses (iv) and (v), the total number of
full-time equivalent residents for payment
purposes shall equal the average of the ac-
tual full-time equivalent resident count for
the cost reporting period and the preceding
two cost reporting periods.
In the case of the first cost reporting period be-
ginning on or after October 1, 1997, subclause
(II) shall be applied by using the average for
such period and the preceding cost reporting pe-
riod.
‘‘(vii)(I) If a hospital is an applicable facil-
ity under subclause (III) for any year with re-
spect to any approved medical residency train-
ing program described in subsection (h)—
‘‘(aa) subject to the applicable annual
limit under subclause (II), the Secretary
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may provide an additional amount of full-
time equivalent interns and residents which
may be taken into account with respect to
such program under clauses (v) and (vi) for
cost reporting periods beginning during
such year, and
‘‘(bb) the averaging rules under clause
(vi)(II) shall not apply for such year.
‘‘(II) The total of additional full-time equiv-
alent interns and residents which the Secretary
may authorize under subclause (I) for all appli-
cable facilities for any year shall not exceed the
amount which would result in the number of
full-time equivalent interns or residents for all
hospitals exceeding such number for the preced-
ing year. In allocating such additional residents,
the Secretary shall give special consideration to
facilities that meet the needs of underserved rural
areas.
‘‘(III) For purposes of this clause, a hos-
pital shall be treated as an applicable facility
with respect to an approved medical residency
training program only during the first 5 years
during which such program is in existence. A
hospital shall not be treated as such a facility if
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the 5-year period described in the preceding sen-
tence ended on or before December 31, 1996.
‘‘(IV) For purposes of applying clause (v),
the number of full-time equivalent residents of an
applicable facility with respect to any approved
medical residency training program for the fa-
cility’s most recent cost reporting period ending
on or before December 31, 1996, shall be in-
creased by the number of such residents allocated
to such facility under subclause (I).
‘‘(viii) If any cost reporting period beginning on
or after October 1, 1997, is not equal to twelve
months, the Secretary shall make appropriate modi-
fications to ensure that the average full-time equiva-
lent residency count pursuant to subclause (II) of
clause (vi) is based on the equivalent of full twelve-
month cost reporting periods.’’.
(2) PAYMENT FOR INTERNS AND RESIDENTS PRO-
VIDING
OFF-SITE
SERVICES.—Section
1886(d)(5)(B)(iv) (42 U.S.C. 1395ww(d)(5)(B)(iv)) is
amended to read as follows:
‘‘(iv) Effective for discharges occurring on or
after October 1, 1997, all the time spent by an intern
or resident in patient care activities under an ap-
proved medical residency training program at an en-
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tity in a nonhospital setting shall be counted towards
the determination of full-time equivalency if the hos-
pital incurs all, or substantially all, of the costs for
the training program in that setting.’’.
Subchapter C—Graduate Medical Education
Payments for Managed Care Enrollees
SEC. 5451. DIRECT AND INDIRECT MEDICAL EDUCATION
PAYMENTS TO HOSPITALS FOR MANAGED
CARE ENROLLEES.
(a) PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF
GRADUATE MEDICAL EDUCATION.—Section 1886(h)(3) (42
U.S.C. 1395ww(h)(3)) is amended by adding after subpara-
graph (C) the following:
‘‘(D) PAYMENT FOR MEDICARE CHOICE EN-
ROLLEES.—
‘‘(i) IN GENERAL.—For portions of cost
reporting periods occurring on or after Jan-
uary 1, 1998, the Secretary shall provide
for an additional payment amount under
this subsection for services furnished to in-
dividuals who are enrolled under a risk-
sharing contract with an eligible organiza-
tion under section 1876 and who are enti-
tled to part A or with a Medicare Choice or-
ganization under part C. The amount of