term care diagnosis related groups (LTC–DRGs) in 
effect at the time. 
‘‘(4) PERCENTAGE OF MEDICARE PATIENT DIS-
CHARGES.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), for each long-term care hospital, the 
proportion of discharges from the long-term 
care diagnosis related groups (LTC–DRGs) de-
termined under paragraph (2), or other patient 
classification categories designated pursuant to 
paragraph (3) if applicable, in a cost reporting 
year must be a percentage, as determined by 
the Secretary, that is not less than 50 percent 
and not greater than 75 percent. 
‘‘(B) TRANSITION PERIOD.—The Secretary 
shall provide for a three-year transition period 
beginning on October 1, 2007, for hospitals 
that were certified as long-term care hospitals 
before such date. The applicable proportion of 
cases in the first year of the transition period 
shall be not less than 50 percent. 
‘‘(5) NONCOMPLIANCE.—If a long-term care 
hospital in a cost reporting year does not discharge 
more than the applicable proportion of cases speci-
fied in paragraph (4), then the hospital must dem-
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onstrate in a period of five out of six consecutive 
months at the end of the hospital’s next cost report-
ing year that it meets the applicable proportion of 
cases in paragraph (4). If the hospital cannot make 
such a demonstration, then the hospital shall be paid 
for all cases after the hospital’s next cost reporting 
year as a subsection (d) hospital under subsection 
(d).’’. 
(c) NEGOTIATED RULEMAKING TO DEVELOP LTCH 
FACILITY AND PATIENT CRITERIA.—The Secretary shall 
promulgate regulations to carry out the amendments made 
by this section on an expedited basis and using a nego-
tiated rulemaking process under subchapter III of chapter 
5 of title 5, United States Code. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to discharges occurring on or after 
October 1, 2007. 
SEC. 4. LTCH QUALITY IMPROVEMENT INITIATIVE. 
(a) STUDY TO ESTABLISH QUALITY MEASURES.— 
The Secretary shall conduct a study (in this section re-
ferred to as the ‘‘study’’) to determine appropriate quality 
measures for Medicare patients receiving care in LTCHs. 
(b) REPORT.—Not later than October 1, 2007, the 
Secretary shall submit to Congress a report on the results 
of the study. 
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(c) SELECTION OF QUALITY MEASURES.—Subject to 
subsection (e), the Secretary shall choose 3 quality meas-
ures from the study to be reported by LTCHs. 
(d) REQUIREMENT FOR SUBMISSION OF DATA.— 
(1) IN GENERAL.—LTCHs must collect data on 
the three quality measures chosen under subsection 
(c) and submit all required quality data to the Sec-
retary. 
(2) FAILURE TO SUBMIT DATA.—Any LTCH 
which does not submit the required quality data 
under paragraph (1) to the Secretary in any fiscal 
year shall have the applicable LTCH market basket 
under section 1886 reduced by not more than 0.4 
percent for such year. 
(e) EXPANSION OF QUALITY MEASURES.—The Sec-
retary may expand the number of quality indicators re-
quired to be reported by LTCHs under the study. If the 
Secretary adds other measures, the measures shall reflect 
consensus among the affected parties. The Secretary may 
replace any measures in appropriate cases, such as where 
all hospitals are effectively in compliance or where meas-
ures have been shown not to represent the best clinical 
practice. 
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(f) AVAILABILITY OF DATA TO PUBLIC.—The Sec-
retary shall establish procedures for making the quality 
data submitted under this section available to the public. 
SEC. 5. CONFORMING LTCH PPS UPDATES TO THE INPA-
TIENT PPS. 
(a) REQUIRING ANNUAL UPDATES OF BASE RATES 
AND
WAGE
INDICES
AND
ANNUAL
UPDATES
AND 
REWEIGHTING OF LTC–DRGS.—The second sentence of 
section 307(b) of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 is 
amended by inserting before the period at the end the fol-
lowing: ‘‘, and shall provide (consistent with updating and 
reweighting provided for subsection (d) hospitals under 
paragraphs (2)(B)(ii), (3)(D)(iii), and (3)(E) of section 
1886(d) of the Social Security Act) for an annual update 
under such system in payment rates, in the wage indices 
(in a budget neutral manner), in the classification and 
reweighting (in a budget neutral manner) of the diagnosis- 
related groups applied under such system’’. Pursuant to 
the amendment made by the preceeding sentence, the Sec-
retary shall provide annual updates to the LTCH base 
rate, 
as 
is 
specified 
for 
the 
IPPS 
at 
section 
1886(d)(2)(B)(ii) of the Social Security Act (42 U.S.C. 
1395ww(d)(2)(B)(ii)). The Secretary shall annually up-
date and reweight the LTC–DRGs under section 307(b) 
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of the Medicare, Medicaid, and SCHIP Benefits Improve-
ment and Protection Act of 2000 or an alternative patient 
classification system in a budget neutral manner, con-
sistent with such updating and reweighting applied under 
section 1886(d)(3)(D)(iii) of the Social Security Act (42 
U.S.C. 1395ww(d)(3)(D)(iii)). The Secretary shall annu-
ally update wage levels for LTCHs in a budget neutral 
manner, consistent with such annual updating applied 
under section 1886(d)(3)(E) of the Social Security Act 
(42 U.S.C. 1395ww(d)(3)(E)). 
(b) ELIMINATION
OF ONE-TIME BUDGET NEU-
TRALITY ADJUSTMENT.—The Secretary shall not make a 
one-time prospective adjustment to the LTCH PPS rates 
under section 412.523(d)(3) of title 42, Code of Federal 
Regulations, or otherwise conduct any budget neutrality 
adjustment to address such rates during the transition pe-
riod specified in section 412.533 of such title from cost- 
based payment to the prospective payment system for 
LTCHs. 
(c) NO APPLICATION
OF 25 PERCENT PATIENT 
THRESHOLD PAYMENT ADJUSTMENT TO FREESTANDING 
LTCHS.—The Secretary shall not extend the 25 percent 
(or applicable percentage) patient threshold payment ad-
justment under section 412.534 of title 42, Code of Fed-
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eral Regulations, or any similar provision, to freestanding 
LTCHs. 
Æ 
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