373 
paid under this paragraph for a quality bonus 
payment 
period 
is 
projected 
to 
exceed 
$200,000,000, the Secretary shall reduce, in a 
uniform manner, the applicable percentage oth-
erwise applied under subparagraph (D) for serv-
ices furnished during the period to eliminate any 
such projected excess. 
‘‘(3) APPLICATION.— 
‘‘(A) 
IMPLEMENTATION.—Notwithstanding 
any other provision of law, the Secretary may 
implement by program instruction or otherwise 
this subsection. 
‘‘(B) LIMITATIONS ON REVIEW.— 
‘‘(i) IN GENERAL.—There shall be no 
administrative or judicial review under sec-
tion 1869 or 1878 or otherwise of— 
‘‘(I) the determination of perform-
ance measures and standards under 
this subsection; 
‘‘(II) the determination of success-
ful reporting, including a determina-
tion of composite scores; and 
‘‘(III) the determination of the 
quality 
incentive 
payments 
made 
under this subsection. 
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‘‘(ii) 
TREATMENT
OF
DETERMINA-
TIONS.—A determination under this sub-
paragraph shall not be treated as a deter-
mination for purposes of section 1869. 
‘‘(4) TECHNICAL
ASSISTANCE.—The Secretary 
shall identify or establish an appropriately skilled 
group or organization, such as the ESRD Networks, 
to provide technical assistance to consistently low-per-
forming facilities or providers that are in the bottom 
quintile. 
‘‘(5) PUBLIC REPORTING.— 
‘‘(A) ANNUAL NOTICE.—The Secretary shall 
provide an annual written notification to each 
individual who is receiving renal dialysis serv-
ices from a provider of services or renal dialysis 
facility that— 
‘‘(i) informs such individual of the 
composite scores described in subparagraph 
(A) and other relevant quality measures 
with respect to providers of services or renal 
dialysis facilities in the local area; 
‘‘(ii) compares such scores and meas-
ures to the average local and national scores 
and measures; and 
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‘‘(iii) provides information on how to 
access additional information on quality of 
such services furnished and options for al-
ternative providers and facilities. 
‘‘(B) CERTIFICATES.—The Secretary shall 
provide certificates to facilities and providers 
who provide services to individuals with end- 
stage renal disease under this title to display in 
patient areas. The certificate shall indicate the 
composite score obtained by the facility or pro-
vider under the quality initiative. 
‘‘(C) WEB-BASED QUALITY LIST.—The Sec-
retary shall establish a web-based list of facilities 
and providers who furnish renal dialysis services 
under this section that indicates their composite 
score of each provider and facility. 
‘‘(6) RECOMMENDATIONS
FOR
REPORTING
AND 
QUALITY INCENTIVE INTITIATIVE FOR PHYSICIANS.— 
The Secretary shall develop recommendations for ap-
plying quality incentive payments under this sub-
section to physicians who receive the monthly 
capitated payment under this title. Such rec-
ommendations shall include the following: 
‘‘(A) Recommendations to include pediatric 
specific measures for physicians with at least 50 
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percent of their patients with end stage renal 
disease being individuals under 18 years of age. 
‘‘(B) Recommendations on how to structure 
quality incentive payments for physicians who 
demonstrate improvements in quality or who at-
tain quality standards, as specified by the Sec-
retary. 
‘‘(7) REPORTS.— 
‘‘(A) INITIAL REPORT.—Not later than Jan-
uary 1, 2013, the Secretary shall submit to Con-
gress a report on the implementation of the bun-
dled payment system under subsection (b)(14) 
and the quality initiative under this subsection. 
Such report shall include the following informa-
tion: 
‘‘(i) A comparison of the aggregate 
payments under subsection (b)(14) for items 
and services to the cost of such items and 
services. 
‘‘(ii) The changes in utilization rates 
for erythropoietin stimulating agents. 
‘‘(iii) The mode of administering such 
agents, including information on the pro-
portion of such individuals receiving such 
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agents 
intravenously 
as 
compared 
to 
subcutaneously. 
‘‘(iv) The frequency of dialysis. 
‘‘(v) Other differences in practice pat-
terns, such as the adoption of new tech-
nology, different modes of practice, and 
variations in use of drugs other than drugs 
described in clause (iii). 
‘‘(vi) The performance of facilities and 
providers under paragraph (2). 
‘‘(vii) Other recommendations for legis-
lative and administrative actions deter-
mined appropriate by the Secretary. 
‘‘(B) SUBSEQUENT
REPORT.—Not later 
than January 1, 2015, the Secretary shall sub-
mit to Congress a report that contains the infor-
mation described in each of clauses (ii) through 
(vii) of subparagraph (A) and a comparison of 
the results of the payment system under sub-
section (b)(14) for renal dialysis services fur-
nished during the 2-year period beginning on 
January 1, 2013, and the results of such pay-
ment system for such services furnished during 
the previous two-year period.’’. 
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SEC. 638. MEDPAC REPORT ON ESRD BUNDLING SYSTEM. 
Not later than March 1, 2012, the Medicare Payment 
Advisory Commission (established under section 1805 of the 
Social Security Act) shall submit to Congress a report on 
the implementation of the payment system under section 
1881(b)(14) of the Social Security Act (as added by section 
7) for renal dialysis services and related services (defined 
in subparagraph (B) of such section). Such report shall in-
clude, with respect to such payment system for such services, 
an analysis of each of the following: 
(1) An analysis of the overall adequacy of pay-
ment under such system for all such services. 
(2) An analysis that compares the adequacy of 
payment under such system for services furnished 
by— 
(A) a provider of services or renal dialysis 
facility 
that 
is 
described 
in 
section 
1881(b)(13)(C)(iv) of the Social Security Act; 
(B) a provider of services or renal dialysis 
facility not described in such section; 
(C) a hospital-based facility; 
(D) a freestanding renal dialysis facility; 
(E) a renal dialysis facility located in an 
urban area; and 
(F) a renal dialysis facility located in a 
rural area. 
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(3) An analysis of the financial status of pro-
viders of such services and renal dialysis facilities, in-
cluding access to capital, return on equity, and re-
turn on capital. 
(4) An analysis of the adequacy of payment 
under such method and the adequacy of the quality 
improvement payments under section 1881(i) of the 
Social Security Act in ensuring that payments for 
such services under the Medicare program are con-
sistent with costs for such services. 
(5) Recommendations, if appropriate, for modi-
fications to such payment system. 
SEC. 639. OIG STUDY AND REPORT ON ERYTHROPOIETIN. 
(a) STUDY.—The Inspector General of the Department 
of Health and Human Services shall conduct a study on 
the following: 
(1) The dosing guidelines, standards, protocols, 
and alogorithms for erythropoietin stimulating agents 
recommended or used by providers of services and 
renal dialysis facilities that are described in section 
1881(b)(13)(C)(iv) of the Social Security Act and 
providers and facilities that are not described in such 
section. 
(2) The extent to which such guidelines, stand-
ards, protocols, and algorithms are consistent with the 
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labeling of the Food and Drug Administration for 
such agents. 
(3) The extent to which physicians sign standing 
orders for such agents that are consistent with such 
guidelines, standards, protocols, and algorithms rec-
ommended or used by the provider or facility in-
volved. 
(4) The extent to which the prescribing decisions 
of physicians, with respect to such agents, are inde-
pendent of— 
(A) such relevant guidelines, standards, pro-
tocols, and algorithms; or 
(B) recommendations of an anemia man-
agement nurse or other appropriate employee of 
the provider or facility involved. 
(5) The role of medical directors of providers of 
services and renal dialysis facilities and the financial 
relationships between such providers and facilities 
and the physicians hired as medical directors of such 
providers and facilities, respectively. 
(b) REPORT.—Not later than January 1, 2009, the In-
spector General of the Department of Health and Human 
Services shall submit to Congress a report on the study con-
ducted under subsection (a), together with such rec-
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ommendations as the Inspector General determines appro-
priate. 
Subtitle D—Miscellaneous 
SEC. 651. LIMITATION ON EXCEPTION TO THE PROHIBITION 
ON CERTAIN PHYSICIAN REFERRALS FOR 
HOSPITALS. 
(a) IN GENERAL.—Section 1877 of the Social Security 
Act (42 U.S.C. 1395) is amended— 
(1) in subsection (d)(2)— 
(A) in subparagraph (A), by striking ‘‘and’’ 
at the end; 
(B) in subparagraph (B), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) if the entity is a hospital, the hospital 
meets the requirements of paragraph (3)(D).’’; 
(2) in subsection (d)(3)— 
(A) in subparagraph (B), by striking ‘‘and’’ 
at the end; 
(B) in subparagraph (C), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subparagraph: 
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‘‘(D) the hospital meets the requirements de-
scribed in subsection (i)(1) not later than 18 
months after the date of the enactment of this 
subparagraph.’’; and 
(3) by adding at the end the following new sub-
section: 
‘‘(i) REQUIREMENTS FOR HOSPITALS TO QUALIFY FOR 
HOSPITAL EXCEPTION
TO OWNERSHIP
OR INVESTMENT 
PROHIBITION.— 
‘‘(1) REQUIREMENTS DESCRIBED.—For purposes 
of paragraphs subsection (d)(3)(D), the requirements 
described in this paragraph for a hospital are as fol-
lows: 
‘‘(A) PROVIDER AGREEMENT.—The hospital 
had a provider agreement under section 1866 in 
effect on July 24, 2007. 
‘‘(B) PROHIBITION OF EXPANSION OF FA-
CILITY
CAPACITY.—The number of operating 
rooms and beds of the hospital at any time on 
or after the date of the enactment of this sub-
section are no greater than the number of oper-
ating rooms and beds as of such date. 
‘‘(C) PREVENTING
CONFLICTS
OF
INTER-
EST.— 
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383 
‘‘(i) The hospital submits to the Sec-
retary an annual report containing a de-
tailed description of— 
‘‘(I) the identity of each physician 
owner and any other owners of the hos-
pital; and 
‘‘(II) the nature and extent of all 
ownership interests in the hospital. 
‘‘(ii) The hospital has procedures in 
place to require that any referring physi-
cian owner discloses to the patient being re-
ferred, by a time that permits the patient to 
make a meaningful decision regarding the 
receipt of care, as determined by the Sec-
retary— 
‘‘(I) the ownership interest of such 
referring physician in the hospital; 
and 
‘‘(II) if applicable, any such own-
ership interest of the treating physi-
cian. 
‘‘(iii) The hospital does not condition 
any physician ownership interests either di-
rectly or indirectly on the physician owner 
making or influencing referrals to the hos-
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384 
pital or otherwise generating business for 
the hospital. 
‘‘(D) ENSURING BONA FIDE INVESTMENT.— 
‘‘(i) Physician owners in the aggregate 
do not own more than 40 percent of the 
total value of the investment interests held 
in the hospital or in an entity whose assets 
include the hospital. 
‘‘(ii) The investment interest of any in-
dividual physician owner does not exceed 2 
percent of the total value of the investment 
interests held in the hospital or in an entity 
whose assets include the hospital. 
‘‘(iii) Any ownership or investment in-
terests that the hospital offers to a physician 
owner are not offered on more favorable 
terms than the terms offered to a person 
who is not a physician owner. 
‘‘(iv) The hospital does not directly or 
indirectly provide loans or financing for 
any physician owner investments in the 
hospital. 
‘‘(v) The hospital does not directly or 
indirectly guarantee a loan, make a pay-
ment toward a loan, or otherwise subsidize 
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a loan, for any individual physician owner 
or group of physician owners that is related 
to acquiring any ownership interest in the 
hospital. 
‘‘(vi) Investment returns are distrib-
uted to investors in the hospital in an 
amount that is directly proportional to the 
investment of capital by the physician 
owner in the hospital. 
‘‘(vii) Physician owners do not receive, 
directly or indirectly, any guaranteed re-
ceipt of or right to purchase other business 
interests related to the hospital, including 
the purchase or lease of any property under 
the control of other investors in the hospital 
or located near the premises of the hospital. 
‘‘(viii) The hospital does not offer a 
physician owner the opportunity to pur-
chase or lease any property under the con-
trol of the hospital or any other investor in 
the hospital on more favorable terms than 
the terms offered to an individual who is 
not a physician owner. 
‘‘(E) PATIENT SAFETY.— 
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‘‘(i) Insofar as the hospital admits a 
patient and does not have any physician 
available on the premises to provide services 
during all hours in which the hospital is 
providing services to such patient, before 
admitting the patient— 
‘‘(I) the hospital discloses such 
fact to a patient; and 
‘‘(II) following such disclosure, the 
hospital receives from the patient a 
signed acknowledgment that the pa-
tient understands such fact. 
‘‘(ii) The hospital has the capacity 
to— 
‘‘(I) provide assessment and ini-
tial treatment for patients; and 
‘‘(II) refer and transfer patients 
to hospitals with the capability to treat 
the needs of the patient involved. 
‘‘(2) 
PUBLICATION
OF
INFORMATION
RE-
PORTED.—The Secretary shall publish, and update on 
an annual basis, the information submitted by hos-
pitals under paragraph (1)(C)(i) on the public Inter-
net website of the Centers for Medicare & Medicaid 
Services. 
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387 
‘‘(3) COLLECTION OF OWNERSHIP AND INVEST-
MENT INFORMATION.—For purposes of clauses (i) and 
(ii) of paragraph (1)(D), the Secretary shall collect 
physician ownership and investment information for 
each hospital as it existed on the date of the enact-
ment of this subsection. 
‘‘(4) PHYSICIAN OWNER DEFINED.—For purposes 
of this subsection, the term ‘physician owner’ means 
a physician (or an immediate family member of such 
physician) with a direct or an indirect ownership in-
terest in the hospital.’’. 
(b) ENFORCEMENT.— 
(1) ENSURING COMPLIANCE.—The Secretary of 
Health and Human Services shall establish policies 
and procedures to ensure compliance with the require-
ments described in such section 1877(i)(1) of the So-
cial Security Act, as added by subsection (a)(3), be-
ginning on the date such requirements first apply. 
Such policies and procedures may include unan-
nounced site reviews of hospitals. 
(2) AUDITS.—Beginning not later than 18 
months after the date of the enactment of this Act, the 
Secretary of Health and Human Services shall con-
duct audits to determine if hospitals violate the re-
quirements referred to in paragraph (1). 
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388 
TITLE VII—PROVISIONS RELAT-
ING TO MEDICARE PARTS A 
AND B 
SEC. 701. HOME HEALTH PAYMENT UPDATE FOR 2008. 
Section 1895(b)(3)(B)(ii) of the Social Security Act 
(42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended— 
(1) in subclause (IV) at the end, by striking 
‘‘and’’; 
(2) by redesignating subclause (V) as subclause 
(VII); and 
(3) by inserting after subclause (IV) the fol-
lowing new subclauses: 
‘‘(V) 2007, subject to clause (v), 
the home health market basket percent-
age increase; 
‘‘(VI) 2008, subject to clause (v), 0 
percent; and’’. 
SEC. 702. 2-YEAR EXTENSION OF TEMPORARY MEDICARE 
PAYMENT 
INCREASE 
FOR 
HOME 
HEALTH 
SERVICES FURNISHED IN A RURAL AREA. 
Section 421 of the Medicare Prescription Drug, Im-
provement, and Modernization Act of 2003 (Public Law 
108–173; 117 Stat. 2283; 42 U.S.C. 1395fff note), as 
amended by section 5201(b) of the Deficit Reduction Act 
of 2005, is amended— 
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(1) in the heading, by striking ‘‘ONE-YEAR’’ 
and inserting ‘‘TEMPORARY’’; and 
(2) in subsection (a), by striking ‘‘and episodes 
and visits beginning on or after January 1, 2006, 
and before January 1, 2007’’ and inserting ‘‘episodes 
and visits beginning on or after January 1, 2006, 
and before January 1, 2007, and episodes and visits 
beginning on or after January 1, 2008, and before 
January 1, 2010’’. 
SEC. 703. EXTENSION OF MEDICARE SECONDARY PAYER 
FOR BENEFICIARIES WITH END STAGE RENAL 
DISEASE FOR LARGE GROUP PLANS. 
(a) IN GENERAL.—Section 1862(b)(1)(C) of the Social 
Security Act (42 U.S.C. 1395y(b)(1)(C)) is amended— 
(1) by redesignating clauses (i) and (ii) as sub-
clauses (I) and (II), respectively, and indenting ac-
cordingly; 
(2) by amending the text preceding subclause (I), 
as so redesignated, to read as follows: 
‘‘(C) INDIVIDUALS WITH END STAGE RENAL 
DISEASE.— 
‘‘(i) IN
GENERAL.—A group health 
plan 
(as 
defined 
in 
subparagraph 
(A)(v))—’’; 
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(3) in the matter following subclause (II), as so 
redesignated— 
(A) by striking ‘‘clause (i)’’ and inserting 
‘‘subclause (I)’’; 
(B) by striking ‘‘clause (ii)’’ and inserting 
‘‘subclause (II)’’; 
(C) by striking ‘‘clauses (i) and (ii)’’ and 
inserting ‘‘subclauses (I) and (II)’’; and 
(D) in the last sentence, by striking ‘‘Effec-
tive for items’’ and inserting ‘‘Subject to clause 
(ii), effective for items’’; and 
(4) by adding at the end the following new 
clause: 
‘‘(ii) SPECIAL
RULE
FOR
LARGE 
GROUP PLANS.—In applying clause (i) to a 
large group health plan (as defined in sub-
paragraph (B)(iii)). effective for items and 
services furnished on or after January 1, 
2008, (with respect to periods beginning on 
or after the date that is 30 months prior to 
January 1, 2008), subclauses (I) and (II) of 
such clause shall be applied by substituting 
‘42-month’ for ‘12-month’ each place it ap-
pears.’’. 
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391 
SEC. 704. PLAN FOR MEDICARE PAYMENT ADJUSTMENTS 
FOR NEVER EVENTS. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall develop a plan (in this section referred to 
as the ‘‘never events plan’’) to implement, beginning in fis-
cal year 2010, a policy to reduce or eliminate payments 
under title XVIII of the Social Security Act for never events. 
(b) NEVER EVENT DEFINED.—For purposes of this sec-
tion, the term ‘‘never event’’ means an event involving the 
delivery of (or failure to deliver) physicians’ services, inpa-
tient or outpatient hospital services, or facility services fur-
nished in an ambulatory surgical facility in which there 
is an error in medical care that is clearly identifiable, usu-
ally preventable, and serious in consequences to patients, 
and that indicates a deficiency in the safety and process 
controls of the services furnished with respect to the physi-
cian, hospital, or ambulatory surgical center involved. 
(c) PLAN DETAILS.— 
(1) DEFINING NEVER EVENTS.—With respect to 
criteria for identifying never events under the never 
events plan, the Secretary should consider whether the 
event meets the following characteristics: 
(A) CLEARLY IDENTIFIABLE.—The event is 
clearly identifiable and measurable and feasible 
to include in a reporting system for never events. 
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(B) USUALLY PREVENTABLE.—The event is 
usually preventable taking into consideration 
that, because of the complexity of medical care, 
certain medical events are not always avoidable. 
(C) SERIOUS.—The event is serious and 
could result in death or loss of a body part, dis-
ability, or more than transient loss of a body 
function. 
(D) DEFICIENCY IN SAFETY AND PROCESS 
CONTROLS.—The event is indicative of a problem 
in safety systems and process controls used by 
the physician, hospital, or ambulatory surgical 
center involved and is indicative of the reli-
ability of the quality of services provided by the 
physician, hospital, or ambulatory surgical cen-
ter, respectively. 
(2) IDENTIFICATION
AND
PAYMENT
ISSUES.— 
With respect to policies under the never events plan 
for identifying and reducing (or eliminating) pay-
ment for never events, the Secretary shall consider— 
(A) mechanisms used by hospitals and phy-
sicians in reporting and coding of services that 
would reliably identify never events; and 
(B) modifications in billing and payment 
mechanisms that would enable the Secretary to 
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efficiently and accurately reduce or eliminate 
payments for never events. 
(3) PRIORITIES.—Under the never events plan 
the Secretary shall identify priorities regarding the 
services to focus on and, among those, the never events 
for which payments should be reduced or eliminated. 
(4) CONSULTATION.—In developing the never 
events plan, the Secretary shall consult with affected 
parties that are relevant to payment reductions in re-
sponse to never events. 
(d) CONGRESSIONAL REPORT.—By not later than 
June 1, 2008, the Secretary shall submit a report to Con-
gress on the never events plan developed under this sub-
section and shall include in the report recommendations on 
specific methods for implementation of the plan on a timely 
basis. 
SEC. 705. REINSTATEMENT OF RESIDENCY SLOTS. 
(a) IN GENERAL.—Section 1886(h) of the Social Secu-
rity Act (42 U.S.C. 1395ww(h)) is amended— 
(1) in paragraph (4)(H), by adding at the end 
the following new clause: 
‘‘(v) INCREASE
IN
RESIDENT
LIMIT 
DUE TO CLOSURE OF OTHER HOSPITALS.— 
If one or more hospitals with approved 
medical residency training programs, which 
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394 
are located within the same metropolitan 
division of the core based statistical area as 
of January 1, 2001, closed, the Secretary 
shall increase by not more than 10
(sub-
ject to the limitation set forth in the last 
sentence of this clause) the otherwise appli-
cable resident limit under subparagraph (F) 
for each hospital within the same metropoli-
tan division of the core based statistical 
area that meets all the following criteria: 
‘‘(I) The hospital is described in 
subsection (d)(5)(F)(i). 
‘‘(II) The hospital instituted a 
medical residency training program in 
internal medicine that was accredited 
by the American Osteopathic Associa-
tion on or after January 1, 2004. 
‘‘(III) The hospital had a provider 
number and a resident limit as of Jan-
uary 1, 2000, and remained open as of 
October 1, 2007. 
‘‘(IV) The hospital did not receive 
an increase in its resident limit under 
paragraph (7)(B). 
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In no event may the resident limit for any 
hospital be increased above 50 through ap-
plication of this clause and in no event may 
the total of the residency positions added by 
this clause for all hospitals exceed 10.’’; and 
(2) in paragraph (7)— 
(A) by redesignating subparagraph (D) as 
subparagraph (E); and 
(B) by inserting after subparagraph (C) the 
following new subparagraph: 
‘‘(D) ADJUSTMENT
BASED
ON
SETTLED 
COST REPORT.—In the case of a hospital with a 
dual accredited osteopathic and allopathic fam-
ily practice program for which— 
‘‘(i) the otherwise applicable resident 
limit was reduced under subparagraph 
(A)(i)(I); and 
‘‘(ii) such reduction was based on a 
reference resident level that was determined 
using a cost report and where a revised or 
corrected notice of program reimbursement 
was issued between September 1, 2006 and 
September 15, 2006, whether as a result of 
an appeal or otherwise, and the reference 
resident level under such settled cost report 
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is higher than the level used for the reduc-
tion under subparagraph (A)(i)(I); 
the Secretary shall apply subparagraph (A)(i)(I) 
using the higher resident reference level and 
make any necessary adjustments to such reduc-
tion. Any such necessary adjustments shall be ef-
fective for portions of cost reporting periods oc-
curring on or after July 1, 2005.’’. 
(b) EFFECTIVE DATES.—The amendment made by 
paragraph (1) shall be effective for cost reporting periods 
beginning on or after October 1, 2007, and the amendments 
made by paragraph (2) shall take effect as if included in 
the enactment of section 422 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108–173). 
TITLE VIII—MEDICAID 
Subtitle A—Protecting Existing 
Coverage 
SEC. 801. MODERNIZING TRANSITIONAL MEDICAID. 
(a) TWO-YEAR EXTENSION.— 
(1) IN
GENERAL.—Sections 1902(e)(1)(B) and 
1925(f) of the Social Security Act (42 U.S.C. 
1396a(e)(1)(B), 1396r–6(f)) are each amended by 
striking ‘‘September 30, 2003’’ and inserting ‘‘Sep-
tember 30, 2009’’. 
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