H. R. 2491—355
‘‘(H) The existence or nonexistence of any potential
financial benefit to a health care professional or provider
which may vary based on their decisions of—
‘‘(i) whether to order a health care item or service;
or
‘‘(ii) whether to arrange for a referral of health
care items or services to a particular practitioner or
provider.
‘‘(I) Any other factors the Secretary deems appropriate
in the interest of preventing fraud and abuse in Federal
health care programs (as so defined).
‘‘(b) INTERPRETIVE RULINGS.—
‘‘(1) IN GENERAL.—
‘‘(A) REQUEST FOR INTERPRETIVE RULING.—Any person
may present, at any time, a request to the Inspector Gen-
eral for a statement of the Inspector General’s current
interpretation of the meaning of a specific aspect of the
application of sections 1128A and 1128B (in this section
referred to as an ‘interpretive ruling’).
‘‘(B) ISSUANCE AND EFFECT OF INTERPRETIVE RULING.—
‘‘(i) IN
GENERAL.—If appropriate, the Inspector
General shall in consultation with the Attorney Gen-
eral, issue an interpretive ruling not later than 90
days after receiving a request described in subpara-
graph (A). Interpretive rulings shall not have the force
of law and shall be treated as an interpretive rule
within the meaning of section 553(b) of title 5, United
States Code. All interpretive rulings issued pursuant
to this clause shall be published in the Federal Register
or otherwise made available for public inspection.
‘‘(ii) REASONS FOR DENIAL.—If the Inspector Gen-
eral does not issue an interpretive ruling in response
to a request described in subparagraph (A), the Inspec-
tor General shall notify the requesting party of such
decision not later than 60 days after receiving such
a request and shall identify the reasons for such deci-
sion.
‘‘(2) CRITERIA FOR INTERPRETIVE RULINGS.—
‘‘(A) IN
GENERAL.—In determining whether to issue
an interpretive ruling under paragraph (1)(B), the Inspector
General may consider—
‘‘(i) whether and to what extent the request identi-
fies an ambiguity within the language of the statute,
the existing safe harbors, or previous interpretive rul-
ings; and
‘‘(ii) whether the subject of the requested interpre-
tive ruling can be adequately addressed by interpreta-
tion of the language of the statute, the existing safe
harbor rules, or previous interpretive rulings, or
whether the request would require a substantive ruling
(as defined in section 552 of title 5, United States
Code) not authorized under this subsection.
‘‘(B) NO RULINGS ON FACTUAL ISSUES.—The Inspector
General shall not give an interpretive ruling on any factual
issue, including the intent of the parties or the fair market
value of particular leased space or equipment.
‘‘(c) SPECIAL FRAUD ALERTS.—
H. R. 2491—356
‘‘(1) IN GENERAL.—
‘‘(A) REQUEST FOR SPECIAL FRAUD ALERTS.—Any person
may present, at any time, a request to the Inspector Gen-
eral for a notice which informs the public of practices
which the Inspector General considers to be suspect or
of particular concern under the medicare program or a
State health care program, as defined in section 1128(h)
(in this subsection referred to as a ‘special fraud alert’).
‘‘(B) ISSUANCE
AND
PUBLICATION
OF
SPECIAL
FRAUD
ALERTS.—Upon receipt of a request described in subpara-
graph (A), the Inspector General shall investigate the sub-
ject matter of the request to determine whether a special
fraud alert should be issued. If appropriate, the Inspector
General shall issue a special fraud alert in response to
the request. All special fraud alerts issued pursuant to
this subparagraph shall be published in the Federal Reg-
ister.
‘‘(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—In determining
whether to issue a special fraud alert upon a request described
in paragraph (1), the Inspector General may consider—
‘‘(A) whether and to what extent the practices that
would be identified in the special fraud alert may result
in any of the consequences described in subsection (a)(2);
and
‘‘(B) the volume and frequency of the conduct that
would be identified in the special fraud alert.’’.
CHAPTER 2—REVISIONS TO CURRENT SANCTIONS FOR
FRAUD AND ABUSE
SEC. 8111. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDI-
CARE AND STATE HEALTH CARE PROGRAMS.
(a) INDIVIDUAL CONVICTED OF FELONY RELATING TO HEALTH
CARE FRAUD.—
(1) IN GENERAL.—Section 1128(a) (42 U.S.C. 1320a–7(a))
is amended by adding at the end the following new paragraph:
‘‘(3) FELONY
CONVICTION
RELATING
TO
HEALTH
CARE
FRAUD.—Any individual or entity that has been convicted after
the date of the enactment of the Medicare Preservation Act
of 1995, under Federal or State law, in connection with the
delivery of a health care item or service or with respect to
any act or omission in a health care program (other than
those specifically described in paragraph (1)) operated by or
financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a felony
relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct.’’.
(2) CONFORMING
AMENDMENT.—Paragraph (1) of section
1128(b) (42 U.S.C. 1320a–7(b)) is amended to read as follows:
‘‘(1) CONVICTION RELATING TO FRAUD.—Any individual or
entity that has been convicted after the date of the enactment
of the Medicare Preservation Act of 1995, under Federal or
State law—
‘‘(A) of a criminal offense consisting of a misdemeanor
relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct—
H. R. 2491—357
‘‘(i) in connection with the delivery of a health
care item or service, or
‘‘(ii) with respect to any act or omission in a health
care program (other than those specifically described
in subsection (a)(1)) operated by or financed in whole
or in part by any Federal, State, or local government
agency; or
‘‘(B) of a criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other
financial misconduct with respect to any act or omission
in a program (other than a health care program) operated
by or financed in whole or in part by any Federal, State,
or local government agency.’’.
(b) INDIVIDUAL CONVICTED
OF FELONY RELATING
TO CON-
TROLLED SUBSTANCE.—
(1) IN GENERAL.—Section 1128(a) (42 U.S.C. 1320a–7(a)),
as amended by subsection (a), is amended by adding at the
end the following new paragraph:
‘‘(4) FELONY CONVICTION RELATING TO CONTROLLED SUB-
STANCE.—Any individual or entity that has been convicted after
the date of the enactment of the Medicare Preservation Act
of 1995, under Federal or State law, of a criminal offense
consisting of a felony relating to the unlawful manufacture,
distribution, prescription, or dispensing of a controlled sub-
stance.’’.
(2) CONFORMING
AMENDMENT.—Section 1128(b)(3) (42
U.S.C. 1320a–7(b)(3)) is amended—
(A) in the heading, by striking ‘‘CONVICTION’’ and
inserting ‘‘MISDEMEANOR CONVICTION’’; and
(B) by striking ‘‘criminal offense’’ and inserting ‘‘crimi-
nal offense consisting of a misdemeanor’’.
SEC. 8112. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR
CERTAIN INDIVIDUALS AND ENTITIES SUBJECT TO
PERMISSIVE EXCLUSION FROM MEDICARE AND STATE
HEALTH CARE PROGRAMS.
Section 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is amended by add-
ing at the end the following new subparagraphs:
‘‘(D) In the case of an exclusion of an individual or entity
under paragraph (1), (2), or (3) of subsection (b), the period of
the exclusion shall be 3 years, unless the Secretary determines
in accordance with published regulations that a shorter period
is appropriate because of mitigating circumstances or that a longer
period is appropriate because of aggravating circumstances.
‘‘(E) In the case of an exclusion of an individual or entity
under subsection (b)(4) or (b)(5), the period of the exclusion shall
not be less than the period during which the individual’s or entity’s
license to provide health care is revoked, suspended, or surrendered,
or the individual or the entity is excluded or suspended from a
Federal or State health care program.
‘‘(F) In the case of an exclusion of an individual or entity
under subsection (b)(6)(B), the period of the exclusion shall be
not less than 1 year.’’.
SEC. 8113. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP
OR CONTROL INTEREST IN SANCTIONED ENTITIES.
Section 1128(b) (42 U.S.C. 1320a–7(b)) is amended by adding
at the end the following new paragraph:
H. R. 2491—358
‘‘(15) INDIVIDUALS CONTROLLING A SANCTIONED ENTITY.—
(A) Any individual—
‘‘(i) who has a direct or indirect ownership or control
interest in a sanctioned entity and who knows or should
know (as defined in section 1128A(i)(6)) of the action con-
stituting the basis for the conviction or exclusion described
in subparagraph (B); or
‘‘(ii) who is an officer or managing employee (as defined
in section 1126(b)) of such an entity.
‘‘(B) For purposes of subparagraph (A), the term ‘sanctioned
entity’ means an entity—
‘‘(i) that has been convicted of any offense described
in subsection (a) or in paragraph (1), (2), or (3) of this
subsection; or
‘‘(ii) that has been excluded from participation under
a program under title XVIII or under a State health care
program.’’.
SEC. 8114. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR
FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS.
(a) MINIMUM PERIOD OF EXCLUSION FOR PRACTITIONERS AND
PERSONS FAILING TO MEET STATUTORY OBLIGATIONS.—
(1) IN GENERAL.—The second sentence of section 1156(b)(1)
(42 U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may pre-
scribe)’’ and inserting ‘‘may prescribe, except that such period
may not be less than 1 year)’’.
(2) CONFORMING
AMENDMENT.—Section 1156(b)(2) (42
U.S.C. 1320c–5(b)(2)) is amended by striking ‘‘shall remain’’
and inserting ‘‘shall (subject to the minimum period specified
in the second sentence of paragraph (1)) remain’’.
(b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDITION FOR IMPOSI-
TION OF SANCTION.—Section 1156(b)(1) (42 U.S.C. 1320c–5(b)(1))
is amended—
(1) in the second sentence, by striking ‘‘and determines’’
and all that follows through ‘‘such obligations,’’; and
(2) by striking the third sentence.
SEC. 8115. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH
MAINTENANCE ORGANIZATIONS.
(a) APPLICATION OF INTERMEDIATE SANCTIONS FOR ANY PRO-
GRAM VIOLATIONS.—
(1) 
IN
GENERAL.—Section 
1876(i)(1) 
(42 
U.S.C.
1395mm(i)(1)) is amended by striking ‘‘the Secretary may termi-
nate’’ and all that follows and inserting ‘‘in accordance with
procedures established under paragraph (9), the Secretary may
at any time terminate any such contract or may impose the
intermediate sanctions described in paragraph (6)(B) or (6)(C)
(whichever is applicable) on the eligible organization if the
Secretary determines that the organization—
‘‘(A) has failed substantially to carry out the contract;
‘‘(B) is carrying out the contract in a manner substan-
tially inconsistent with the efficient and effective adminis-
tration of this section; or
‘‘(C) no longer substantially meets the applicable condi-
tions of subsections (b), (c), (e), and (f).’’.
(2) OTHER INTERMEDIATE SANCTIONS FOR MISCELLANEOUS
PROGRAM
VIOLATIONS.—Section 
1876(i)(6) 
(42 
U.S.C.
H. R. 2491—359
1395mm(i)(6)) is amended by adding at the end the following
new subparagraph:
‘‘(C) In the case of an eligible organization for which the Sec-
retary makes a determination under paragraph (1) the basis of
which is not described in subparagraph (A), the Secretary may
apply the following intermediate sanctions:
‘‘(i) Civil money penalties of not more than $25,000 for
each determination under paragraph (1) if the deficiency that
is the basis of the determination has directly adversely affected
(or has the substantial likelihood of adversely affecting) an
individual covered under the organization’s contract.
‘‘(ii) Civil money penalties of not more than $10,000 for
each week beginning after the initiation of procedures by the
Secretary under paragraph (9) during which the deficiency
that is the basis of a determination under paragraph (1) exists.
‘‘(iii) Suspension of enrollment of individuals under this
section after the date the Secretary notifies the organization
of a determination under paragraph (1) and until the Secretary
is satisfied that the deficiency that is the basis for the deter-
mination has been corrected and is not likely to recur.’’.
(3) PROCEDURES FOR IMPOSING SANCTIONS.—Section 1876(i)
(42 U.S.C. 1395mm(i)) is amended by adding at the end the
following new paragraph:
‘‘(9) The Secretary may terminate a contract with an eligible
organization under this section or may impose the intermediate
sanctions described in paragraph (6) on the organization in accord-
ance with formal investigation and compliance procedures estab-
lished by the Secretary under which—
‘‘(A) the Secretary first provides the organization with the
reasonable opportunity to develop and implement a corrective
action plan to correct the deficiencies that were the basis of
the Secretary’s determination under paragraph (1) and the
organization fails to develop or implement such a plan;
‘‘(B) in deciding whether to impose sanctions, the Secretary
considers aggravating factors such as whether an organization
has a history of deficiencies or has not taken action to correct
deficiencies the Secretary has brought to the organization’s
attention;
‘‘(C) there are no unreasonable or unnecessary delays
between the finding of a deficiency and the imposition of sanc-
tions; and
‘‘(D) the Secretary provides the organization with reason-
able notice and opportunity for hearing (including the right
to appeal an initial decision) before imposing any sanction
or terminating the contract.’’.
(4) CONFORMING AMENDMENTS.—Section 1876(i)(6)(B) (42
U.S.C. 1395mm(i)(6)(B)) is amended by striking the second
sentence.
(b) AGREEMENTS WITH PEER REVIEW ORGANIZATIONS.—Section
1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by striking
‘‘an agreement’’ and inserting ‘‘a written agreement’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply with respect to contract years beginning on or after
January 1, 1996.
H. R. 2491—360
SEC. 8116. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES
FOR DISCOUNTING AND MANAGED CARE ARRANGE-
MENTS.
(a) IN
GENERAL.—Section 1128B(b)(3) (42 U.S.C. 1320a–
7b(b)(3)) is amended—
(1) by striking ‘‘and’’ at the end of subparagraph (D);
(2) by striking the period at the end of subparagraph (E)
and inserting ‘‘; and’’; and
(3) by adding at the end the following new subparagraph:
‘‘(F) any remuneration between an organization and an
individual or entity providing items or services, or a combina-
tion thereof, pursuant to a written agreement between the
organization and the individual or entity if the organization
is a MedicarePlus organization under part C of title XVIII
or if the written agreement places the individual or entity
at substantial financial risk for the cost or utilization of the
items or services, or a combination thereof, which the individual
or entity is obligated to provide, whether through a withhold,
capitation, incentive pool, per diem payment, or any other
similar risk arrangement which places the individual or entity
at substantial financial risk.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to written agreements entered into on or after January
1, 1996.
SEC. 8117. PENALTIES FOR THE FRAUDULENT CONVERSION OF ASSETS
IN ORDER TO OBTAIN STATE HEALTH CARE PROGRAM
BENEFITS.
Section 1128B(a) (42 U.S.C. 1320a–7b(a)) is amended by strik-
ing ‘‘or’’ at the end of paragraph (4), by inserting ‘‘or’’ at the
end of paragraph (5), and by inserting after paragraph (5) the
following new paragraph:
‘‘(6) knowingly and willfully converts assets, by transfer
(including any transfer in trust), aiding in such a transfer,
or otherwise, in order for an individual to become eligible
for benefits under a State health care program,’’.
SEC. 8118. EFFECTIVE DATE.
Except as otherwise provided, the amendments made by this
chapter shall take effect January 1, 1996.
CHAPTER 3—ADMINISTRATIVE AND MISCELLANEOUS
PROVISIONS
SEC. 8121. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE
DATA COLLECTION PROGRAM.
(a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.), as amended
by sections 8101 and 8105, is amended by inserting after section
1128D the following new section:
‘‘HEALTH CARE FRAUD AND ABUSE DATA COLLECTION PROGRAM
‘‘SEC. 1128E. (a) GENERAL PURPOSE.—Not later than January
1, 1996, the Secretary shall establish a national health care fraud
and abuse data collection program for the reporting of final adverse
actions (not including settlements in which no findings of liability
have been made) against health care providers, suppliers, or
H. R. 2491—361
practitioners as required by subsection (b), with access as set forth
in subsection (c).
‘‘(b) REPORTING OF INFORMATION.—
‘‘(1) IN GENERAL.—Each Government agency and health
plan shall report any final adverse action (not including settle-
ments in which no findings of liability have been made) taken
against a health care provider, supplier, or practitioner.
‘‘(2) INFORMATION TO BE REPORTED.—The information to
be reported under paragraph (1) includes:
‘‘(A) The name and TIN (as defined in section
7701(a)(41) of the Internal Revenue Code of 1986) of any
health care provider, supplier, or practitioner who is the
subject of a final adverse action.
‘‘(B) The name (if known) of any health care entity
with which a health care provider, supplier, or practitioner
is affiliated or associated.
‘‘(C) The nature of the final adverse action and whether
such action is on appeal.
‘‘(D) A description of the acts or omissions and injuries
upon which the final adverse action was based, and such
other information as the Secretary determines by regula-
tion is required for appropriate interpretation of informa-
tion reported under this section.
‘‘(3) CONFIDENTIALITY.—In determining what information
is required, the Secretary shall include procedures to assure
that the privacy of individuals receiving health care services
is appropriately protected.
‘‘(4) TIMING
AND
FORM
OF
REPORTING.—The information
required to be reported under this subsection shall be reported
regularly (but not less often than monthly) and in such form
and manner as the Secretary prescribes. Such information shall
first be required to be reported on a date specified by the
Secretary.
‘‘(5) TO WHOM REPORTED.—The information required to be
reported under this subsection shall be reported to the Sec-
retary.
‘‘(c) DISCLOSURE AND CORRECTION OF INFORMATION.—
‘‘(1) DISCLOSURE.—With respect to the information about
final adverse actions (not including settlements in which no
findings of liability have been made) reported to the Secretary
under this section respecting a health care provider, supplier,
or practitioner, the Secretary shall, by regulation, provide for—
‘‘(A) disclosure of the information, upon request, to
the health care provider, supplier, or licensed practitioner,
and
‘‘(B) procedures in the case of disputed accuracy of
the information.
‘‘(2) CORRECTIONS.—Each Government agency and health
plan shall report corrections of information already reported
about any final adverse action taken against a health care
provider, supplier, or practitioner, in such form and manner
that the Secretary prescribes by regulation.
‘‘(d) ACCESS TO REPORTED INFORMATION.—
‘‘(1) AVAILABILITY.—The information in this database shall
be available to Federal and State government agencies and
health plans pursuant to procedures that the Secretary shall
provide by regulation.
H. R. 2491—362
‘‘(2) FEES FOR DISCLOSURE.—The Secretary may establish
or approve reasonable fees for the disclosure of information
in this database (other than with respect to requests by Federal
agencies). The amount of such a fee shall be sufficient to
recover the full costs of operating the database. Such fees
shall be available to the Secretary or, in the Secretary’s discre-
tion to the agency designated under this section to cover such
costs.
‘‘(e) PROTECTION FROM LIABILITY FOR REPORTING.—No person
or entity, including the agency designated by the Secretary in
subsection (b)(5) shall be held liable in any civil action with respect
to any report made as required by this section, without knowledge
of the falsity of the information contained in the report.
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For purposes of this
section:
‘‘(1) FINAL ADVERSE ACTION.—
‘‘(A) IN
GENERAL.—The term ‘final adverse action’
includes:
‘‘(i) Civil judgments against a health care provider,
supplier, or practitioner in Federal or State court
related to the delivery of a health care item or service.
‘‘(ii) Federal or State criminal convictions related
to the delivery of a health care item or service.
‘‘(iii) Actions by Federal or State agencies respon-
sible for the licensing and certification of health care
providers, 
suppliers, 
and 
licensed 
health 
care
practitioners, including—
‘‘(I) formal or official actions, such as revoca-
tion or suspension of a license (and the length
of any such suspension), reprimand, censure or
probation,
‘‘(II) any other loss of license or the right to
apply for, or renew, a license of the provider, sup-
plier, or practitioner, whether by operation of law,
voluntary surrender, non-renewability, or other-
wise, or
‘‘(III) any other negative action or finding by
such Federal or State agency that is publicly avail-
able information.
‘‘(iv) Exclusion from participation in Federal or
State health care programs.
‘‘(v) Any other adjudicated actions or decisions that
the Secretary shall establish by regulation.
‘‘(B) EXCEPTION.—The term does not include any action
with respect to a malpractice claim.
‘‘(2) PRACTITIONER.—The terms ‘licensed health care practi-
tioner’, ‘licensed practitioner’, and ‘practitioner’ mean, with
respect to a State, an individual who is licensed or otherwise
authorized by the State to provide health care services (or
any individual who, without authority holds himself or herself
out to be so licensed or authorized).
‘‘(3) GOVERNMENT AGENCY.—The term ‘Government agency’
shall include:
‘‘(A) The Department of Justice.
‘‘(B) The Department of Health and Human Services.
‘‘(C) Any other Federal agency that either administers
or provides payment for the delivery of health care services,
H. R. 2491—363
including, but not limited to the Department of Defense
and the Veterans’ Administration.
‘‘(D) State law enforcement agencies.
‘‘(E) State MediGrant fraud control units.
‘‘(F) Federal or State agencies responsible for the
licensing and certification of health care providers and
licensed health care practitioners.
‘‘(4) HEALTH PLAN.—The term ‘health plan’ has the meaning
given such term by section 1128C(c).
‘‘(5) DETERMINATION OF CONVICTION.—For purposes of para-
graph (1), the existence of a conviction shall be determined
under paragraph (4) of section 1128(i).’’.
(b) IMPROVED PREVENTION IN ISSUANCE OF MEDICARE PROVIDER
NUMBERS.—Section 1842(r) (42 U.S.C. 1395u(r)) is amended by
adding at the end the following new sentence: ‘‘Under such system,
the Secretary may impose appropriate fees on such physicians to
cover the costs of investigation and recertification activities with
respect to the issuance of the identifiers.’’.
CHAPTER 4—CIVIL MONETARY PENALTIES
SEC. 8131. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.
(a) GENERAL CIVIL MONETARY PENALTIES.—Section 1128A (42
U.S.C. 1320a–7a) is amended as follows:
(1) In the third sentence of subsection (a), by striking
‘‘programs under title XVIII’’ and inserting ‘‘Federal health
care programs (as defined in section 1128B(f)(1))’’.
(2) In subsection (f)—
(A) by redesignating paragraph (3) as paragraph (4);
and
(B) by inserting after paragraph (2) the following new
paragraph:
‘‘(3) With respect to amounts recovered arising out of a
claim under a Federal health care program (as defined in
section 1128B(f)), the portion of such amounts as is determined
to have been paid by the program shall be repaid to the pro-
gram, and the portion of such amounts attributable to the
amounts recovered under this section by reason of the amend-
ments made by the Medicare Preservation Act of 1995 (as
estimated by the Secretary) shall be deposited into the Federal
Hospital 
Insurance 
Trust 
Fund 
pursuant 
to 
section
1817(k)(2)(C).’’.
(3) In subsection (i)—
(A) in paragraph (2), by striking ‘‘title V, XVIII, XIX,
or XX of this Act’’ and inserting ‘‘a Federal health care
program (as defined in section 1128B(f))’’,
(B) in paragraph (4), by striking ‘‘a health insurance
or medical services program under title XVIII or XIX of
this Act’’ and inserting ‘‘a Federal health care program
(as so defined)’’, and
(C) in paragraph (5), by striking ‘‘title V, XVIII, XIX,
or XX’’ and inserting ‘‘a Federal health care program (as
so defined)’’.
(4) By adding at the end the following new subsection:
‘‘(m)(1) For purposes of this section, with respect to a Federal
health care program not contained in this Act, references to the
Secretary in this section shall be deemed to be references to the
H. R. 2491—364
Secretary or Administrator of the department or agency with juris-
diction over such program and references to the Inspector General
of the Department of Health and Human Services in this section
shall be deemed to be references to the Inspector General of the
applicable department or agency.
‘‘(2)(A) The Secretary and Administrator of the departments
and agencies referred to in paragraph (1) may include in any
action pursuant to this section, claims within the jurisdiction of
other Federal departments or agencies as long as the following
conditions are satisfied:
‘‘(i) The case involves primarily claims submitted to the
Federal health care programs of the department or agency
initiating the action.
‘‘(ii) The Secretary or Administrator of the department
or agency initiating the action gives notice and an opportunity
to participate in the investigation to the Inspector General
of the department or agency with primary jurisdiction over
the Federal health care programs to which the claims were
submitted.
‘‘(B) If the conditions specified in subparagraph (A) are fulfilled,
the Inspector General of the department or agency initiating the
action is authorized to exercise all powers granted under the Inspec-
tor General Act of 1978 with respect to the claims submitted to
the other departments or agencies to the same manner and extent
as provided in that Act with respect to claims submitted to such
departments or agencies.’’.
(b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP OR CONTROL
INTEREST IN PARTICIPATING ENTITY.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph (1)(D);
(2) by striking ‘‘, or’’ at the end of paragraph (2) and
inserting a semicolon;
(3) by striking the semicolon at the end of paragraph (3)
and inserting ‘‘; or’’; and
(4) by inserting after paragraph (3) the following new para-
graph:
‘‘(4) in the case of a person who is not an organization,
agency, or other entity, is excluded from participating in a
program under title XVIII or a State health care program
in accordance with this subsection or under section 1128 and
who, at the time of a violation of this subsection—
‘‘(i) retains a direct or indirect ownership or control
interest in an entity that is participating in a program
under title XVIII or a State health care program, and
who knows or should know of the action constituting the
basis for the exclusion; or
‘‘(ii) is an officer or managing employee (as defined
in section 1126(b)) of such an entity;’’.
(c) MODIFICATIONS OF AMOUNTS OF PENALTIES AND ASSESS-
MENTS.—Section 1128A(a) (42 U.S.C. 1320a–7a(a)), as amended by
subsection (b), is amended in the matter following paragraph (4)—
(1) by striking ‘‘$2,000’’ and inserting ‘‘$10,000’’;
(2) by inserting ‘‘; in cases under paragraph (4), $10,000
for each day the prohibited relationship occurs’’ after ‘‘false
or misleading information was given’’; and
(3) by striking ‘‘twice the amount’’ and inserting ‘‘3 times
the amount’’.
H. R. 2491—365
(d) CLAIM FOR ITEM OR SERVICE BASED ON INCORRECT CODING
OR MEDICALLY UNNECESSARY SERVICES.—Section 1128A(a)(1) (42
U.S.C. 1320a–7a(a)(1)) is amended—
(1) in subparagraph (A) by striking ‘‘claimed,’’ and inserting
‘‘claimed, including any person who engages in a pattern or
practice of presenting or causing to be presented a claim for
an item or service that is based on a code that the person
knows or should know will result in a greater payment to
the person than the code the person knows or should know
is applicable to the item or service actually provided,’’;
(2) in subparagraph (C), by striking ‘‘or’’ at the end;
(3) in subparagraph (D), by striking ‘‘; or’’ and inserting
‘‘, or’’; and
(4) by inserting after subparagraph (D) the following new
subparagraph:
‘‘(E) is for a medical or other item or service that
a person knows or should know is not medically necessary;
or’’.
(e) SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAIL-
URE TO COMPLY WITH STATUTORY OBLIGATIONS.—Section 1156(b)(3)
(42 U.S.C. 1320c–5(b)(3)) is amended by striking ‘‘the actual or
estimated cost’’ and inserting ‘‘up to $10,000 for each instance’’.
(f) PROCEDURAL PROVISIONS.—Section 1876(i)(6) (42 U.S.C.
1395mm(i)(6)), as amended by section 8115(a)(2), is amended by
adding at the end the following new subparagraph:
‘‘(D) The provisions of section 1128A (other than subsections
(a) and (b)) shall apply to a civil money penalty under subparagraph
(B)(i) or (C)(i) in the same manner as such provisions apply to
a civil money penalty or proceeding under section 1128A(a).’’.
(g) PROHIBITION AGAINST OFFERING INDUCEMENTS TO INDIVID-
UALS ENROLLED UNDER PROGRAMS OR PLANS.—
(1) OFFER OF REMUNERATION.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)) is amended—
(A) by striking ‘‘or’’ at the end of paragraph (1)(D);
(B) by striking ‘‘, or’’ at the end of paragraph (2)
and inserting a semicolon;
(C) by striking the semicolon at the end of paragraph
(3) and inserting ‘‘; or’’; and
(D) by inserting after paragraph (3) the following new
paragraph:
‘‘(4) offers to or transfers remuneration to any individual
eligible for benefits under title XVIII of this Act, or under
a State health care program (as defined in section 1128(h))
that such person knows or should know is likely to influence
such individual to order or receive from a particular provider,
practitioner, or supplier any item or service for which payment
may be made, in whole or in part, under title XVIII, or a
State health care program (as so defined);’’.
(2) REMUNERATION DEFINED.—Section 1128A(i) (42 U.S.C.
1320a–7a(i)) is amended by adding the following new para-
graph:
‘‘(6) The term ‘remuneration’ includes the waiver of coinsur-
ance and deductible amounts (or any part thereof), and trans-
fers of items or services for free or for other than fair market
value. The term ‘remuneration’ does not include—
‘‘(A) the waiver of coinsurance and deductible amounts
by a person, if—
H. R. 2491—366
‘‘(i) the waiver is not offered as part of any
advertisement or solicitation;
‘‘(ii) the person does not routinely waive coinsur-
ance or deductible amounts; and
‘‘(iii) the person—
‘‘(I) waives the coinsurance and deductible
amounts after determining in good faith that the
individual is in financial need;
‘‘(II) fails to collect coinsurance or deductible
amounts after making reasonable collection efforts;
or
‘‘(III) provides for any permissible waiver as
specified in section 1128B(b)(3) or in regulations
issued by the Secretary;
‘‘(B) 
differentials 
in 
coinsurance 
and 
deductible
amounts as part of a benefit plan design as long as the
differentials have been disclosed in writing to all bene-
ficiaries, third party payers, and providers, to whom claims
are presented and as long as the differentials meet the
standards as defined in regulations promulgated by the
Secretary not later than 180 days after the date of the
enactment of the Medicare Preservation Act of 1995; or
‘‘(C) incentives given to individuals to promote the
delivery of preventive care as determined by the Secretary
in regulations so promulgated.’’.
(h) EFFECTIVE DATE.—The amendments made by this section
shall take effect January 1, 1996.
SEC. 8132. CLARIFICATION OF LEVEL OF INTENT REQUIRED FOR
IMPOSITION OF SANCTIONS.
(a) CLARIFICATION OF LEVEL OF KNOWLEDGE REQUIRED FOR
IMPOSITION OF CIVIL MONETARY PENALTIES.—
(1) IN GENERAL.—Section 1128A(a) (42 U.S.C. 1320a–7a(a))
is amended—
(A) in paragraphs (1) and (2), by inserting ‘‘knowingly’’
before ‘‘presents’’ each place it appears; and
(B) in paragraph (3), by striking ‘‘gives’’ and inserting
‘‘knowingly gives or causes to be given’’.
(2) DEFINITION OF STANDARD.—Section 1128A(i) (42 U.S.C.
1320a–7a(i)) is amended by adding at the end the following
new paragraph:
‘‘(6) The term ‘should know’ means that a person, with
respect to information—
‘‘(A) acts in deliberate ignorance of the truth or falsity
of the information; or
‘‘(B) acts in reckless disregard of the truth or falsity
of the information,
and no proof of specific intent to defraud is required.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to acts or omissions occurring on or after January
1, 1996.
SEC. 8133. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH
SERVICES.
(a) IN GENERAL.—Section 1128A(b) (42 U.S.C. 1320a–7a(b)) is
amended by adding at the end the following new paragraph:
‘‘(3)(A) Any physician who executes a document described in
subparagraph (B) with respect to an individual knowing that all
H. R. 2491—367
of the requirements referred to in such subparagraph are not met
with respect to the individual shall be subject to a civil monetary
penalty of not more than the greater of—
‘‘(i) $5,000, or
‘‘(ii) three times the amount of the payments under title
XVIII for home health services which are made pursuant to
such certification.
‘‘(B) A document described in this subparagraph is any docu-
ment that certifies, for purposes of title XVIII, that an individual
meets the requirements of section 1814(a)(2)(C) or 1835(a)(2)(A)
in the case of home health services furnished to the individual.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to certifications made on or after the date of the enact-
ment of this Act.
CHAPTER 5—AMENDMENTS TO CRIMINAL LAW
SEC. 8141. HEALTH CARE FRAUD.
(a) IN GENERAL.—
(1) FINES
AND
IMPRISONMENT
FOR
HEALTH
CARE
FRAUD
VIOLATIONS.—Chapter 63 of title 18, United States Code, is
amended by adding at the end the following new section:
‘‘§ 1347. Health care fraud
‘‘(a) Whoever knowingly and willfully executes, or attempts
to execute, a scheme or artifice—
‘‘(1) to defraud any Federal health care program, in connec-
tion with the delivery of or payment for health care benefits,
items, or services; or
‘‘(2) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property
owned by, or under the custody or control of, any Federal
health care program in connection with the delivery of or pay-
ment for health care benefits, items, or services;
shall be fined under this title or imprisoned not more than 10
years, or both. If the violation results in serious bodily injury
(as defined in section 1365(g)(3) of this title), such person may
be imprisoned for any term of years.
‘‘(b) For purposes of this section, the term ‘Federal health
care program’ has the same meaning given such term in section
1128B(f) of the Social Security Act.’’.
(2) CLERICAL AMENDMENT.—The table of sections at the
beginning of chapter 63 of title 18, United States Code, is
amended by adding at the end the following:
‘‘1347. Health care fraud.’’.
(b) CRIMINAL FINES DEPOSITED IN FEDERAL HOSPITAL INSUR-
ANCE TRUST FUND.—The Secretary of the Treasury shall deposit
into the Federal Hospital Insurance Trust Fund pursuant to section
1817(k)(2)(C) of the Social Security Act, as added by section 8101(b),
an amount equal to the criminal fines imposed under section 1347
of title 18, United States Code (relating to health care fraud).
SEC. 8142. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.
(a) IN GENERAL.—Section 982(a) of title 18, United States Code,
is amended by adding after paragraph (5) the following new para-
graph:
H. R. 2491—368
‘‘(6)(A) The court, in imposing sentence on a person convicted
of a Federal health care offense, shall order the person to forfeit
property, real or personal, that constitutes or is derived, directly
or indirectly, from gross proceeds traceable to the commission of
the offense.
‘‘(B) For purposes of this paragraph, the term ‘Federal health
care offense’ means a violation of, or a criminal conspiracy to
violate—
‘‘(i) section 1347 of this title;
‘‘(ii) section 1128B of the Social Security Act; and
‘‘(iii) sections 287, 371, 664, 666, 669, 1001, 1027, 1341,
1343, 1920, or 1954 of this title if the violation or conspiracy
relates to health care fraud.’’.
(b) CONFORMING AMENDMENT.—Section 982(b)(1)(A) of title 18,
United States Code, is amended by inserting ‘‘or (a)(6)’’ after ‘‘(a)(1)’’.
(c) PROPERTY FORFEITED DEPOSITED
IN FEDERAL HOSPITAL
INSURANCE TRUST FUND.—
(1) IN GENERAL.—After the payment of the costs of asset
forfeiture has been made, and notwithstanding any other provi-
sion of law, the Secretary of the Treasury shall deposit into
the Federal Hospital Insurance Trust Fund pursuant to section
1817(k)(2)(C) of the Social Security Act, as added by section
8101(b), an amount equal to the net amount realized from
the forfeiture of property by reason of a Federal health care
offense pursuant to section 982(a)(6) of title 18, United States
Code.
(2) COSTS OF ASSET FORFEITURE.—For purposes of para-
graph (1), the term ‘‘payment of the costs of asset forfeiture’’
means—
(A) the payment, at the discretion of the Attorney
General, of any expenses necessary to seize, detain, inven-
tory, safeguard, maintain, advertise, sell, or dispose of prop-
erty under seizure, detention, or forfeited, or of any other
necessary expenses incident to the seizure, detention, for-
feiture, or disposal of such property, including payment
for—
(i) contract services,
(ii) the employment of outside contractors to oper-
ate and manage properties or provide other specialized
services necessary to dispose of such properties in an
effort to maximize the return from such properties;
and
(iii) reimbursement of any Federal, State, or local
agency for any expenditures made to perform the func-
tions described in this subparagraph;
(B) at the discretion of the Attorney General, the pay-
ment of awards for information or assistance leading to
a civil or criminal forfeiture involving any Federal agency
participating in the Health Care Fraud and Abuse Control
Account;
(C) the compromise and payment of valid liens and
mortgages against property that has been forfeited, subject
to the discretion of the Attorney General to determine
the validity of any such lien or mortgage and the amount
of payment to be made, and the employment of attorneys
and other personnel skilled in State real estate law as
necessary;
H. R. 2491—369
(D) payment authorized in connection with remission
or mitigation procedures relating to property forfeited; and
(E) the payment of State and local property taxes on
forfeited real property that accrued between the date of
the violation giving rise to the forfeiture and the date
of the forfeiture order.
SEC. 8143. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE
OFFENSES.
(a) IN GENERAL.—Section 1345(a)(1) of title 18, United States
Code, is amended—
(1) by striking ‘‘or’’ at the end of subparagraph (A);
(2) by inserting ‘‘or’’ at the end of subparagraph (B); and
(3) by adding at the end the following new subparagraph:
‘‘(C) committing or about to commit a Federal health
care offense (as defined in section 982(a)(6)(B) of this
title);’’.
(b) FREEZING OF ASSETS.—Section 1345(a)(2) of title 18, United
States Code, is amended by inserting ‘‘or a Federal health care
offense (as defined in section 982(a)(6)(B))’’ after ‘‘title)’’.
SEC. 8144. FALSE STATEMENTS.
(a) IN GENERAL.—Chapter 47 of title 18, United States Code,
is amended by adding at the end the following new section:
‘‘§ 1033. False statements relating to health care matters
‘‘(a) Whoever, in any matter involving a Federal health care
program, knowingly and willfully—
‘‘(1) falsifies, conceals, or covers up by any trick, scheme,
or device a material fact, or
‘‘(2) makes any materially false, fictitious, or fraudulent
statement or representation, or makes or uses any materially
false writing or document knowing the same to contain any
materially false, fictitious, or fraudulent statement or entry,
shall be fined under this title or imprisoned not more than 5
years, or both.
‘‘(b) For purposes of this section, the term ‘Federal health
care program’ has the same meaning given such term in section
1128B(f) of the Social Security Act.’’.
(b) CLERICAL AMENDMENT.—The table of sections at the begin-
ning of chapter 47 of title 18, United States Code, is amended
by adding at the end the following:
‘‘1033. False statements relating to health care matters.’’.
SEC. 8145. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF FEDERAL
HEALTH CARE OFFENSES.
(a) IN GENERAL.—Chapter 73 of title 18, United States Code,
is amended by adding at the end the following new section:
‘‘§ 1518. Obstruction of criminal investigations of Federal
health care offenses
‘‘(a) Whoever willfully prevents, obstructs, misleads, delays or
attempts to prevent, obstruct, mislead, or delay the communication
of information or records relating to a Federal health care offense
to a criminal investigator shall be fined under this title or impris-
oned not more than 5 years, or both.
H. R. 2491—370
‘‘(b) As used in this section the term ‘Federal health care
offense’ has the same meaning given such term in section
982(a)(6)(B) of this title.
‘‘(c) As used in this section the term ‘criminal investigator’
means any individual duly authorized by a department, agency,
or armed force of the United States to conduct or engage in inves-
tigations for prosecutions for violations of health care offenses.’’.
(b) CLERICAL AMENDMENT.—The table of sections at the begin-
ning of chapter 73 of title 18, United States Code, is amended
by adding at the end the following:
‘‘1518. Obstruction of Criminal Investigations of Federal Health Care Offenses.’’.
SEC. 8146. THEFT OR EMBEZZLEMENT.
(a) IN GENERAL.—Chapter 31 of title 18, United States Code,
is amended by adding at the end the following new section:
‘‘§ 669. Theft or embezzlement in connection with health care
‘‘(a) Whoever willfully embezzles, steals, or otherwise willfully
and unlawfully converts to the use of any person other than the
rightful owner, or intentionally misapplies any of the moneys, funds,
securities, premiums, credits, property, or other assets of a Federal
health care program, shall be fined under this title or imprisoned
not more than 10 years, or both.
‘‘(b) As used in this section the term ‘Federal health care
program’ has the same meaning given such term in section 1128B(f)
of the Social Security Act.’’.
(b) CLERICAL AMENDMENT.—The table of sections at the begin-
ning of chapter 31 of title 18, United States Code, is amended
by adding at the end the following:
‘‘669. Theft or Embezzlement in Connection with Health Care.’’.
SEC. 8147. LAUNDERING OF MONETARY INSTRUMENTS.
Section 1956(c)(7) of title 18, United States Code, is amended
by adding at the end the following new subparagraph:
‘‘(F) Any act or activity constituting an offense involv-
ing a Federal health care offense as that term is defined
in section 982(a)(6)(B) of this title.’’.
SEC. 8148. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.
(a) IN GENERAL.—Chapter 233 of title 18, United States Code,
is amended by adding after section 3485 the following new section:
‘‘§ 3486. Authorized investigative demand procedures
‘‘(a)(1)(A) In any investigation relating to functions set forth
in paragraph (2), the Attorney General or designee may issue in
writing and cause to be served a subpoena compelling production
of any records (including any books, papers, documents, electronic
media, or other objects or tangible things), which may be relevant
to an authorized law enforcement inquiry, that a person or legal
entity may possess or have care, custody, or control.
‘‘(B) A custodian of records may be required to give testimony
concerning the production and authentication of such records.
‘‘(C) The production of records may be required from any place
in any State or in any territory or other place subject to the
jurisdiction of the United States at any designated place; except
that such production shall not be required more than 500 miles
distant from the place where the subpoena is served.
H. R. 2491—371
‘‘(D) Witnesses summoned under this section shall be paid
the same fees and mileage that are paid witnesses in the courts
of the United States.
‘‘(E) A subpoena requiring the production of records shall
describe the objects required to be produced and prescribe a return
date within a reasonable period of time within which the objects
can be assembled and made available.
‘‘(2) Investigative demands utilizing an administrative subpoena
are authorized for any investigation with respect to any act or
activity constituting or involving health care fraud, including a
scheme or artifice—
‘‘(A) to defraud any Federal health care program, in connec-
tion with the delivery of or payment for health care benefits,
items, or services; or
‘‘(B) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property
owned by, or under the custody or control of, any Federal
health care program in connection with the delivery of or pay-
ment for health care benefits, items, or services.
‘‘(b)(1) A subpoena issued under this section may be served
by any person designated in the subpoena to serve it.
‘‘(2) Service upon a natural person may be made by personal
delivery of the subpoena to such person.
‘‘(3) Service may be made upon a domestic or foreign association
which is subject to suit under a common name, by delivering the
subpoena to an officer, to a managing or general agent, or to
any other agent authorized by appointment or by law to receive
service of process.
‘‘(4) The affidavit of the person serving the subpoena entered
on a true copy thereof by the person serving it shall be proof
of service.
‘‘(c)(1) In the case of contumacy by or refusal to obey a subpoena
issued to any person, the Attorney General may invoke the aid
of any court of the United States within the jurisdiction of which
the investigation is carried on or of which the subpoenaed person
is an inhabitant, or in which such person carries on business
or may be found, to compel compliance with the subpoena.
‘‘(2) The court may issue an order requiring the subpoenaed
person to appear before the Attorney General to produce records,
if so ordered, or to give testimony required under subsection
(a)(1)(B).
‘‘(3) Any failure to obey the order of the court may be punished
by the court as a contempt thereof.
‘‘(4) All process in any such case may be served in any judicial
district in which such person may be found.
‘‘(d) Notwithstanding any Federal, State, or local law, any per-
son, including officers, agents, and employees, receiving a subpoena
under this section, who complies in good faith with the subpoena
and thus produces the materials sought, shall not be liable in
any court of any State or the United States to any customer or
other person for such production or for nondisclosure of that produc-
tion to the customer.
‘‘(e)(1) Health information about an individual that is disclosed
under this section may not be used in, or disclosed to any person
for use in, any administrative, civil, or criminal action or investiga-
tion directed against the individual who is the subject of the
information unless the action or investigation arises out of and
H. R. 2491—372
is directly related to receipt of health care or payment for health
care or action involving a fraudulent claim related to health; or
if authorized by an appropriate order of a court of competent juris-
diction, granted after application showing good cause therefor.
‘‘(2) In assessing good cause, the court shall weigh the public
interest and the need for disclosure against the injury to the patient,
to the physician-patient relationship, and to the treatment services.
‘‘(3) Upon the granting of such order, the court, in determining
the extent to which any disclosure of all or any part of any record
is necessary, shall impose appropriate safeguards against unauthor-
ized disclosure.
‘‘(f) As used in this section the term ‘Federal health care pro-
gram’ has the same meaning given such term in section 1128B(f)
of the Social Security Act.’’.
(b) CLERICAL AMENDMENT.—The table of sections for chapter
223 of title 18, United States Code, is amended by inserting after
the item relating to section 3405 the following new item:
‘‘3486. Authorized investigative demand procedures’’.
(c) CONFORMING AMENDMENT.—Section 1510(b)(3)(B) of title
18, United States Code, is amended by inserting ‘‘or a Department
of Justice subpoena (issued under section 3486),’’ after ‘‘subpoena’’.
CHAPTER 6—STATE HEALTH CARE FRAUD CONTROL
UNITS
SEC. 8151. STATE HEALTH CARE FRAUD CONTROL UNITS.
(a) EXTENSION
OF CONCURRENT AUTHORITY TO INVESTIGATE
AND PROSECUTE FRAUD IN OTHER FEDERAL PROGRAMS.—Paragraph
(3) of section 2134(b), as added by section 7001 of this Act, is
amended—
(1) by inserting ‘‘(A)’’ after ‘‘in connection with’’; and
(2) by striking ‘‘plan.’’ and inserting ‘‘plan; and (B) upon
the approval of the relevant Federal agency and the chief
executive officer of the State or such officer’s designee, any
aspect of the provision of health care services and activities
of providers of such services under any Federal health care
program (as defined in section 1128B(f)(1)).’’.
(b) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE
PATIENT ABUSE IN NON-MEDIGRANT BOARD AND CARE FACILITIES.—
Paragraph (4) of section 2134(b), as added by section 7001 of this
Act, is amended to read as follows:
‘‘(4)(A) The entity has—
‘‘(i) procedures for reviewing complaints of abuse or
neglect of patients in health care facilities which receive
payments under the MediGrant plan funded under this
title;
‘‘(ii) at the option of the entity, procedures for reviewing
complaints of abuse or neglect of patients residing in board
and care facilities; and
‘‘(iii) where appropriate, procedures for acting upon
such complaints under the criminal laws of the State or
for referring such complaints to other State agencies for
action.
‘‘(B) For purposes of this paragraph, the term ‘board and
care facility’ means a residential setting which receives pay-
H. R. 2491—373
ment from or on behalf of two or more unrelated adults who
reside in such facility, and for whom one or both of the following
is provided:
‘‘(i) Nursing care services provided by, or under the
supervision of, a registered nurse, licensed practical nurse,
or licensed nursing assistant.
‘‘(ii) Personal care services that assist residents with
the activities of daily living, including personal hygiene,
dressing, bathing, eating, toileting, ambulation, transfer,
positioning, self-medication, body care, travel to medical
services, essential shopping, meal preparation, laundry,
and housework.’’.
Subtitle C—Regulatory Relief
SEC. 8201. REPEAL OF PHYSICIAN OWNERSHIP REFERRAL PROHIBI-
TIONS BASED ON COMPENSATION ARRANGEMENTS.
(a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C. 1395nn(a)(2))
is amended by striking ‘‘is—’’ and all that follows through ‘‘equity,’’
and inserting the following: ‘‘is (except as provided in subsection
(c)) an ownership or investment interest in the entity through
equity,’’.
(b) CONFORMING
AMENDMENTS.—Section 1877 (42 U.S.C.
1395nn) is amended as follows:
(1) In subsection (b)—
(A) in the heading, by striking ‘‘TO BOTH OWNERSHIP
AND
COMPENSATION
ARRANGEMENT
PROHIBITIONS’’ and
inserting ‘‘WHERE FINANCIAL RELATIONSHIP EXISTS’’; and
(B) by redesignating paragraph (4) as paragraph (7).
(2) In subsection (c)—
(A) by amending the heading to read as follows:
‘‘EXCEPTION FOR OWNERSHIP OR INVESTMENT INTEREST IN
PUBLICLY TRADED SECURITIES AND MUTUAL FUNDS’’; and
(B) in the matter preceding paragraph (1), by striking
‘‘subsection (a)(2)(A)’’ and inserting ‘‘subsection (a)(2)’’.
(3) In subsection (d)—
(A) by striking the matter preceding paragraph (1);
(B) in paragraph (3), by striking ‘‘paragraph (1)’’ and
inserting ‘‘paragraph (4)’’; and
(C) by redesignating paragraphs (1), (2), and (3) as
paragraphs (4), (5), and (6), and by transferring and insert-
ing such paragraphs after paragraph (3) of subsection (b).
(4) By striking subsection (e).
(5) In subsection (f)(2)—
(A) in the matter preceding paragraph (1), by striking
‘‘ownership, investment, and compensation’’ and inserting
‘‘ownership and investment’’;
(B) in paragraph (2), by striking ‘‘subsection (a)(2)(A)’’
and all that follows through ‘‘subsection (a)(2)(B)),’’ and
inserting ‘‘subsection (a)(2),’’; and
(C) in paragraph (2), by striking ‘‘or who have such
a compensation relationship with the entity’’.
(6) In subsection (h)—
(A) by striking paragraphs (1), (2), and (3);
(B) in paragraph (4)(A), by striking clauses (iv) and
(vi);
H. R. 2491—374
(C) in paragraph (4)(B), by striking ‘‘RULES.—’’ and
all that follows through ‘‘(ii) FACULTY’’ and inserting ‘‘RULES
FOR FACULTY’’; and
(D) by adding at the end of paragraph (4) the following
new subparagraph:
‘‘(C) MEMBER OF A GROUP.—A physician is a ‘member’
of a group if the physician is an owner or a bona fide
employee, or both, of the group.’’.
SEC. 8202. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT
TO OWNERSHIP REFERRAL PROHIBITION.
(a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6))
is amended by striking subparagraphs (B) through (K) and inserting
the following:
‘‘(B) Parenteral and enteral nutrients, equipment, and
supplies.
‘‘(C) Radiology services, including magnetic resonance
imaging, computerized tomography, and ultrasound serv-
ices.
‘‘(D) Outpatient physical or occupational therapy serv-
ices.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended
in the matter preceding subparagraph (A) by striking ‘‘services’’
and all that follows through ‘‘supplies)—’’ and inserting ‘‘serv-
ices—’’.
(2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is
amended—
(A) by striking ‘‘, a request by a radiologist for diag-
nostic radiology services, and a request by a radiation
oncologist for radiation therapy,’’ and inserting ‘‘and a
request by a radiologist for magnetic resonance imaging
or for computerized tomography’’, and
(B) by striking ‘‘radiologist, or radiation oncologist’’
and inserting ‘‘or radiologist’’.
SEC. 8203. DELAY IN IMPLEMENTATION OF 1993 OWNERSHIP REFER-
RAL CHANGES UNTIL PROMULGATION OF REGULATIONS.
(a) IN GENERAL.—Section 13562(b) of OBRA–1993 (42 U.S.C.
1395nn note) is amended—
(1) in paragraph (1), by striking ‘‘paragraph (2)’’ and insert-
ing ‘‘paragraphs (2) and (3)’’; and
(2) by adding at the end the following new paragraph:
‘‘(3) PROMULGATION
OF
REGULATIONS.—Notwithstanding
paragraphs (1) and (2), the amendments made by this section
shall not apply to any referrals made before the effective date
of final regulations promulgated by the Secretary of Health
and Human Services to carry out such amendments.’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall take effect as if included in the enactment of OBRA–
1993.
SEC. 8204. EXCEPTIONS TO OWNERSHIP REFERRAL PROHIBITIONS.
(a) REVISIONS TO EXCEPTION FOR IN-OFFICE ANCILLARY SERV-
ICES.—
(1) REPEAL
OF
SITE-OF-SERVICE
REQUIREMENT.—Section
1877 (42 U.S.C. 1395nn) is amended—
H. R. 2491—375
(A) by amending subparagraph (A) of subsection (b)(2)
to read as follows:
‘‘(A) that are furnished personally by the referring
physician, personally by a physician who is a member
of the same group practice as the referring physician, or
personally by individuals who are under the general super-
vision of the physician or of another physician in the group
practice, and’’, and
(B) by adding at the end of subsection (h) the following
new paragraph:
‘‘(7) GENERAL SUPERVISION.—An individual is considered
to be under the ‘general supervision’ of a physician if the
physician (or group practice of which the physician is a member)
is legally responsible for the services performed by the individ-
ual and for ensuring that the individual meets licensure and
certification requirements, if any, applicable under other provi-
sions of law, regardless of whether or not the physician is
physically present when the individual furnishes an item or
service.’’.
(2) CLARIFICATION OF TREATMENT OF PHYSICIAN OWNERS
OF
GROUP
PRACTICE.—Section 
1877(b)(2)(B) 
(42 
U.S.C.
1395nn(b)(2)(B)) is amended by striking ‘‘physician or such
group practice’’ and inserting ‘‘physician, such group practice,
or the physician owners of such group practice’’.
(3) CONFORMING
AMENDMENT.—Section 1877(b)(2) (42
U.S.C. 1395nn(b)(2)) is amended by amending the heading to
read as follows: ‘‘ANCILLARY SERVICES FURNISHED PERSONALLY
OR THROUGH GROUP PRACTICE.—’’.
(b) CLARIFICATION OF EXCEPTION FOR SERVICES FURNISHED IN
A RURAL AREA.—Paragraph (5) of section 1877(b) (42 U.S.C.
1395nn(b)), as transferred by section 8201(b)(3)(C), is amended
by striking ‘‘substantially all’’ and inserting ‘‘not less than 75 per-
cent’’.
(c) REVISION
OF EXCEPTION
FOR CERTAIN MANAGED CARE
ARRANGEMENTS.—Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is
amended—
(1) in the heading by inserting ‘‘MANAGED CARE ARRANGE-
MENTS’’ after ‘‘PREPAID PLANS’’;
(2) in the matter preceding subparagraph (A), by striking
‘‘organization—’’ and inserting ‘‘organization, directly or
through contractual arrangements with other entities, to
individuals enrolled with the organization—’’;
(3) in subparagraph (A), by inserting ‘‘or part C’’ after
‘‘section 1876’’;
(4) by striking ‘‘or’’ at the end of subparagraph (C);
(5) by striking the period at the end of subparagraph (D)
and inserting a comma; and
(6) by adding at the end the following new subparagraphs:
‘‘(E) with a contract with a State to provide services
under the State plan under title XIX (in accordance with
section 1903(m)) or a State MediGrant plan under title
XXI; or
‘‘(F) which is a MedicarePlus organization under part
C or which provides or arranges for the provision of health
care items or services pursuant to a written agreement
between the organization and an individual or entity if
the written agreement places the individual or entity at
H. R. 2491—378
(2) by inserting after paragraph (8) the following new para-
graph:
‘‘(9) SERVICES FURNISHED IN A COMPREHENSIVE OUTPATIENT
REHABILITATION FACILITY.—In the case of a designated health
service furnished in a comprehensive outpatient rehabilitation
facility (as defined in section 1861(cc)(2)).’’.
(j) DEFINITION OF REFERRAL.—Section 1877(h)(5)(A) (42 U.S.C.
1395nn(h)(5)(A)) is amended—
(1) by striking ‘‘an item or service’’ and inserting ‘‘a des-
ignated health service’’, and
(2) by striking ‘‘the item or service’’ and inserting ‘‘the
designated health service’’.
SEC. 8205. EFFECTIVE DATE.
Except as provided in section 8203(b), the amendments made
by this subtitle shall apply to referrals made on or after the date
of the enactment of this Act, regardless of whether or not regula-
tions are promulgated to carry out such amendments.
Subtitle D—Modification in Payment Poli-
cies Regarding Graduate Medical Edu-
cation
SEC. 8301. INDIRECT MEDICAL EDUCATION PAYMENTS.
(a) MULTIYEAR TRANSITION REGARDING PERCENTAGES; 6.7 FOR
1996 TO 5.0 FOR 2001 AND AFTERWARDS.—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 indirect 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 on or after—
‘‘(I) May 1, 1986, and before October 1, 1995, ‘c’ is
equal to 1.89;
‘‘(II) October 1, 1995, and before October 1, 1996, ‘c’
is equal to 1.654;
‘‘(III) October 1, 1996, and before October 1, 1998,
‘c’ is equal to 1.481;
‘‘(IV) October 1, 1998, and before October 1, 1999,
‘c’ is equal to 1.383;
‘‘(V) October 1, 1999, and before October 1, 2000, ‘c’
is equal to 1.309; and
‘‘(VI) October 1, 2000, ‘c’ is equal to 1.235.’’.
(b) NO RESTANDARDIZATION OF PAYMENT AMOUNTS REQUIRED.—
Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended
by striking ‘‘of 1985’’ and inserting ‘‘of 1985, but not taking into
account the amendments made by section 8301(a) of Medicare
Preservation Act of 1995’’.
SEC. 8302. DIRECT GRADUATE MEDICAL EDUCATION.
(a) WEIGHTING FACTORS FOR RESIDENTS.—
(1) IN
GENERAL.—Section 1886(h)(4)(C)(iv) (42 U.S.C.
1395ww(h)(4)(C)(iv)) is amended by striking ‘‘.50’’ and inserting
‘‘0.25’’.
H. R. 2491—379
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply with respect to cost reporting periods beginning
on or after October 1, 1997.
(b) LIMITATION ON AGGREGATE NUMBER OF FULL-TIME RESI-
DENTS.—
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by
adding at the end the following new subparagraph:
‘‘(F) ADJUSTMENTS FOR CERTAIN FISCAL YEARS IN PAY-
MENTS
FOR
PROGRAMS
IN
ALLOPATHIC
AND
OSTEOPATHIC
MEDICINE.—
‘‘(i) IN GENERAL.—With respect to a cost reporting
period, the Secretary shall in accordance with clause
(ii) adjust the payments for approved medical residency
training programs in the fields of allopathic medicine
and osteopathic medicine if, in the fiscal year in which
such cost reporting period begins, the number of full-
time-equivalent residents determined under this para-
graph with respect to all such programs exceeds the
number of full-time-equivalent residents determined
with respect to all such programs as of August 1,
1995.
‘‘(ii) ADJUSTMENT DESCRIBED.—Adjustments under
clause (i) shall be made with respect to cost reporting
periods such that the total amount of payments under
this subsection for the fiscal year involved does not
exceed the amount that would have been paid under
this subsection for such year if the number of full-
time-equivalent residents determined under clause (i)
for the year had not exceeded the number of full-
time-equivalent residents with respect to all such pro-
grams as of August 1, 1995.
‘‘(iii) HOLD HARMLESS.—The Secretary may provide
that approved medical residency training programs
that reduced or did not expand the number of full-
time-equivalent residents determined under this para-
graph for a cost reporting period shall not be subject
to the adjustment described in clause (i).
‘‘(iv) EFFECTIVE DATE.—The adjustment described
in clause (i) shall apply with respect to cost reporting
periods beginning on or after October 1, 1995, and
on or before September 30, 2002.’’.
Subtitle E—Provisions Relating to
Part A
CHAPTER 1—GENERAL PROVISIONS RELATING TO PART
A
SEC. 8401. PPS HOSPITAL PAYMENT UPDATE.
Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is
amended by striking subclauses (XI), (XII), and (XIII) and inserting
the following new subclauses:
‘‘(XI) for fiscal year 1996 for hospitals in all areas, the
market basket percentage increase minus 2.5 percentage points,
H. R. 2491—380
‘‘(XII) for fiscal years 1997 through 2002 for hospitals in
all areas, the market basket percentage increase minus 2.0
percentage points, and
‘‘(XIII) for fiscal year 2003 and each subsequent fiscal year
for hospitals in all areas, the market basket percentage
increase.’’.
SEC. 8402. PPS-EXEMPT HOSPITAL PAYMENTS.
(a) UPDATE.—
(1) IN
GENERAL.—Section 1886(b)(3)(B)(ii) (42 U.S.C.
1395ww(b)(3)(B)(ii)) is amended—
(A) in subclause (V)—
(i) by striking ‘‘1997’’ and inserting ‘‘1995’’, and
(ii) by striking ‘‘and’’ at the end,
(B) by redesignating subclause (VI) as subclause (VII);
and
(C) by inserting after subclause (V), the following
subclause:
‘‘(VI) except as provided in clause (vi), for fiscal years
1996 through 2002, the market basket percentage increase
minus the applicable reduction (as defined in clause (vii)(II));
and’’.
(2) SPECIAL
RULES
FOR
CERTAIN
HOSPITALS.—Section
1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is amended by adding
at the end the following new clause:
‘‘(vi) For purposes of clause (ii)(VI), the ‘applicable percentage
increase’ for a hospital—
‘‘(I) for a fiscal year for which the hospital’s update adjust-
ment percentage (as defined in clause (vii)(I)) is at least 10
percent, is the market basket percentage increase, and
‘‘(II) for which 150 percent of the hospital’s allowable
operating costs of inpatient hospital services recognized under
this title for the most recent cost reporting period for which
information is available is less than the hospital’s target
amount (as determined under subparagraph (A)) for such cost
reporting period, is 0 percent.’’.
(3) 
DEFINITIONS.—Section 
1886(b)(3)(B) 
(42 
U.S.C.
1395ww(b)(3)(B)), as amended by paragraph (2), is amended
by adding at the end the following new clause:
‘‘(vii) For purposes of clauses (ii)(VI) and (vi)—
‘‘(I) a hospital’s ‘update adjustment percentage’ for a fiscal
year is the percentage by which the hospital’s allowable operat-
ing costs of inpatient hospital services recognized under this
title for the most recent cost reporting period for which informa-
tion is available exceeds the hospital’s target amount (as deter-
mined under subparagraph (A)) for such cost reporting period,
and
‘‘(II) the ‘applicable reduction’ with respect to a hospital
for a fiscal year is 2.5 percentage points, reduced by 0.25
percentage point for each percentage point (if any) the hospital’s
update adjustment percentage for the fiscal year is less than
10 percentage points.’’.
(3) EFFECT OF PAYMENT REDUCTION ON EXCEPTIONS AND
ADJUSTMENTS.—Section 
1886(b)(4)(A)(ii) 
(42 
U.S.C.
1395ww(b)(4)(A)(ii)) 
is 
amended 
by 
striking 
‘‘paragraph
(3)(B)(ii)(V)’’ and inserting ‘‘subclause (V) or (VI) of paragraph
(3)(B)(ii)’’.
H. R. 2491—381
(b) TARGET AMOUNTS
FOR REHABILITATION HOSPITALS
AND
LONG-TERM
CARE
HOSPITALS.—Section 1886(b)(3) (42 U.S.C.
1395ww(b)(3)) is amended—
(1) in subparagraph (A), in the matter preceding clause
(i), by striking ‘‘and (E)’’ and inserting ‘‘(E), (F), and (G)’’;
and
(2) by adding at the end the following new subparagraphs:
‘‘(F) In the case of a rehabilitation hospital (or unit thereof)
(as described in clause (ii) of subsection (d)(1)(B)), for cost reporting
periods beginning on or after October 1, 1995—
‘‘(i) in the case of a hospital which first receives payments
under this section before October 1, 1995, the target amount
determined under subparagraph (A) for such hospital or unit
for a cost reporting period beginning during a fiscal year shall
not be less than 50 percent of the national mean of the target
amounts determined under this paragraph for all such hospitals
for cost reporting periods beginning during such fiscal year
(determined without regard to this subparagraph); and
‘‘(ii) in the case of a hospital which first receives payments
under this section on or after October 1, 1995, such target
amount may not be greater than 130 percent of the national
mean of the target amounts for such hospitals (and units
thereof) for cost reporting periods beginning during fiscal year
1991.
‘‘(G) In the case of a hospital which has an average inpatient
length of stay of greater than 25 days (as described in clause
(iv) of subsection (d)(1)(B)), for cost reporting periods beginning
on or after October 1, 1995—
‘‘(i) in the case of a hospital which first receives payments
under this section as a hospital that is not a subsection (d)
hospital or a subsection (d) Puerto Rico hospital before October
1, 1995, the target amount determined under subparagraph
(A) for such hospital for a cost reporting period beginning
during a fiscal year shall not be less than 50 percent of the
national mean of the target amounts determined under such
subparagraph for all such hospitals for cost reporting periods
beginning during such fiscal year (determined without regard
to this subparagraph); and
‘‘(ii) in the case of any other hospital which first receives
payment under this section as a hospital described in clause
(i) on or after October 1, 1995, such target amount may not
be greater than 130 percent (or, if the Secretary determines
it is appropriate, such alternative percentage based on case-
mix and DRG category) of such national mean of the target
amounts for such hospitals for cost reporting periods beginning
during fiscal year 1991.’’.
(c) REBASING FOR CERTAIN LONG-TERM CARE HOSPITALS.—
(1) 
IN
GENERAL.—Section 
1886(b)(3) 
(42 
U.S.C.
1395ww(b)(3)), as amended by subsection (b), is amended—
(A) in subparagraph (A) in the matter preceding clause
(i), by striking ‘‘and (G)’’ and inserting ‘‘(G), and (H)’’;
(B) in subparagraph (B)(ii), by striking ‘‘(A) and (E)’’
and inserting ‘‘(A), (E), and (G)’’; and
(C) by adding at the end the following new subpara-
graph:
‘‘(H)(i) In the case of a qualified long-term care hospital (as
defined in clause (ii)), the term ‘target amount’ means—
H. R. 2491—382
‘‘(I) with respect to the first 12-month cost reporting period
in which this subparagraph is applied to the hospital, the
allowable operating costs of inpatient hospital services (as
defined in subsection (a)(4)) recognized under this title for
the hospital for the 12-month cost reporting period beginning
during fiscal year 1994; or
‘‘(II) with respect to a later cost reporting period, the target
amount for the preceding cost reporting period, increased by
the applicable percentage increase under subparagraph (B)(ii)
for that later cost reporting period.
‘‘(ii) In clause (i), a ‘qualified long-term care hospital’ means,
with respect to a cost reporting period, a hospital described in
clause (iv) of subsection (d)(1)(B) during fiscal year 1995 for which
the hospital’s allowable operating costs of inpatient hospital services
recognized under this title for each of the two most recent previous
12-month cost reporting periods exceeded 115 percent of the hos-
pital’s target amount determined under this paragraph for such
cost reporting periods, if the hospital has a disproportionate patient
percentage during such cost reporting period (as determined by
the Secretary under subsection (d)(5)(F)(vi) as if the hospital were
a subsection (d) hospital) of at least 70 percent.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to discharges occurring during cost reporting
periods beginning on or after October 1, 1995.
(d) TREATMENT
OF
CERTAIN
LONG-TERM
CARE
HOSPITALS
LOCATED WITHIN OTHER HOSPITALS.—
(1) 
IN
GENERAL.—Section 
1886(d)(1)(B) 
(42 
U.S.C.
1395ww(d)(1)(B)) is amended in the matter following clause
(v) by striking the period and inserting the following: ‘‘, or
a hospital classified by the Secretary as a long-term care hos-
pital on or before September 30, 1995, and located in the
same building as, or on the same campus as, another hospital.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to discharges occurring on or after October
1, 1995.
(e) CAPITAL PAYMENTS FOR PPS-EXEMPT HOSPITALS.—Section
1886(g) (42 U.S.C. 1395ww(g)) is amended by adding at the end
the following new paragraph:
‘‘(4) In determining the amount of the payments that may
be made under this title with respect to all the capital-related
costs of inpatient hospital services furnished during fiscal years
1996 through 2002 of a hospital which is not a subsection (d)
hospital or a subsection (d) Puerto Rico hospital, the Secretary
shall reduce the amounts of such payments otherwise determined
under this title by 10 percent.’’.
SEC. 8403. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENT
ADJUSTMENTS.
(a) 
IN
GENERAL.—Section 
1886(d)(5)(F) 
(42 
U.S.C.
1395ww(d)(5)(F)) is amended—
(1) in clause (ii), by striking ‘‘The amount’’ and inserting
‘‘Subject to clause (ix), the amount’’; and
(2) by adding at the end the following new clause:
‘‘(ix) In the case of discharges occurring on or after October
1, 1995, the additional payment amount otherwise determined
under clause (ii) shall be reduced as follows:
H. R. 2491—384
‘‘(I) is a hospital that may otherwise receive pay-
ments under this subsection,
‘‘(II) is not a public hospital, and
‘‘(III) incurs capital-related tax costs for the fiscal
year.
‘‘(iii)(I) In the case of a hospital that first incurs capital-
related tax costs in a fiscal year after fiscal year 1992
because of a change from nonproprietary to proprietary
status or because the hospital commenced operation after
such fiscal year, the first fiscal year for which the hospital
shall be eligible for such adjustment is the second full
fiscal year following the fiscal year in which the hospital
first incurs such costs.
‘‘(II) In the case of a hospital that first incurs capital-
related tax costs in a fiscal year after fiscal year 1992
because of a change in State or local tax laws, the first
fiscal year for which the hospital shall be eligible for such
adjustment is the fourth full fiscal year following the fiscal
year in which the hospital first incurs such costs.
‘‘(iv) The per discharge adjustment under this clause
shall be equal to the hospital-specific capital-related tax
costs per discharge of a hospital for fiscal year 1992 (or,
in the case of a hospital that first incurs capital-related
tax costs for a fiscal year after fiscal year 1992, for the
first full fiscal year for which such costs are incurred),
updated to the fiscal year to which the adjustment applies.
Such per discharge adjustment shall be added to the Fed-
eral capital rate, after such rate has been adjusted as
described in 42 CFR 412.312 (as in effect on the date
of the enactment of the Medicare Preservation Act of 1995),
and before such rate is multiplied by the applicable Federal
rate percentage.
‘‘(v) For purposes of this subparagraph, capital-related
tax costs include—
‘‘(I) the costs of taxes on land and depreciable
assets owned by a hospital and used for patient care,
‘‘(II) payments in lieu of such taxes (made by hos-
pitals that are exempt from taxation), and
‘‘(III) the costs of taxes paid by a hospital as lessee
of land, buildings, or fixed equipment from a lessor
that is unrelated to the hospital under the terms of
a lease that requires the lessee to pay all expenses
(including mortgage, interest, and amortization) and
leaves the lessor with an amount free of all claims
(sometimes referred to as a ‘net net net’ or ‘triple
net’ lease).
In determining the adjustment required under clause (i),
the Secretary shall not take into account any capital-related
tax costs of a hospital to the extent that such costs are
based on tax rates and assessments that exceed those
for similar commercial properties.
‘‘(vi) The system shall provide that the Federal capital
rate for any fiscal year after September 30, 1995, shall
be reduced by a percentage sufficient to ensure that the
adjustments required to be paid under clause (i) for a
fiscal year neither increase nor decrease the total amount
H. R. 2491—385
that would have been paid under this system but for the
payment of such adjustments for such fiscal year.’’.
(d) REVISION OF EXCEPTIONS PROCESS UNDER PROSPECTIVE PAY-
MENT SYSTEM FOR CERTAIN PROJECTS.—
(1) 
IN
GENERAL.—Section 
1886(g)(1) 
(42 
U.S.C.
1395ww(g)(1)), as amended by subsection (c), is amended—
(A) by redesignating subparagraph (D) as subpara-
graph (E), and
(B) by inserting after subparagraph (C) the following
subparagraph:
‘‘(D) The exceptions under the system provided by the Secretary
under subparagraph (B)(iii) shall include the provision of exception
payments under the special exceptions process provided under 42
CFR 412.348(g) (as in effect on September 1, 1995), except that
the Secretary shall revise such process as follows:
‘‘(i) A hospital with at least 100 beds which is located
in an urban area shall be eligible under such process without
regard to its disproportionate patient percentage under sub-
section (d)(5)(F) or whether it qualifies for additional payment
amounts under such subsection.
‘‘(ii) The minimum payment level for qualifying hospitals
shall be 85 percent.
‘‘(iii) A hospital shall be considered to meet the requirement
that it completes the project involved no later than the end
of the hospital’s last cost reporting period beginning after Octo-
ber 1, 2001, if—
‘‘(I) the hospital has obtained a certificate of need
for the project approved by the State or a local planning
authority by September 1, 1995, and
‘‘(II) by September 1, 1995, the hospital has expended
on the project at least $750,000 or 10 percent of the esti-
mated cost of the project.
‘‘(iv) Offsetting amounts, as described in 42 CFR
412.348(g)(8)(ii), shall apply except that subparagraph (B) of
such section shall be revised to require that the additional
payment that would otherwise be payable for the cost reporting
period shall be reduced by the amount (if any) by which the
hospital’s current year medicare capital payments (excluding,
if applicable, 75 percent of the hospital’s capital-related dis-
proportionate share payments) exceeds its medicare capital
costs for such year.’’.
(2) LIMIT
TO
ADDITIONAL
PAYMENTS.—The amendment
made by paragraph (1) shall not result in aggregate additional
payments under the special exception process described in sec-
tion 1886(b)(1)(D) for fiscal years 1996 through 2000 in excess
of an amount equal to the sum of $50,000,000 per year more
than would have been paid in such fiscal years if such amend-
ment had not been enacted.
(3) CONFORMING
AMENDMENT.—Section 1886(g)(1)(B)(iii)
(42 U.S.C. 1395ww(g)(1)(B)(iii)) is amended by striking ‘‘may
provide’’ and inserting ‘‘shall provide (in accordance with
subparagraph (D)’’.
SEC. 8405. REDUCTION IN PAYMENTS TO HOSPITALS FOR ENROLLEES’
BAD DEBTS.
(a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is
amended by adding at the end the following new subparagraph:
H. R. 2491—386
‘‘(T)(i) In determining such reasonable costs for hospitals, the
amount of bad debts otherwise treated as allowable costs which
are attributable to the deductibles and coinsurance amounts under
this title shall be reduced by—
‘‘(I) 75 percent for cost reporting periods beginning during
fiscal year 1996,
‘‘(II) 60 percent for cost reporting periods beginning during
fiscal year 1997, and
‘‘(III) 50 percent for subsequent cost reporting periods.
‘‘(ii) Clause (i) shall not apply with respect to bad debt of
a hospital described in section 1886(d)(1)(B)(iv) if the debt is attrib-
utable to uncollectable deductible and coinsurance payments owed
by individuals enrolled in a State plan under title XIX or under
the MediGrant program under title XXI.’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to hospital cost reporting periods beginning on or after
October 1, 1995.
SEC. 8406. INCREASE IN UPDATE FOR CERTAIN HOSPITALS WITH A
HIGH PROPORTION OF MEDICARE PATIENTS.
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by
subsections (b) and (c)(1) of section 8402, is amended by adding
at the end the following new subparagraph:
‘‘(I)(i) For purposes of subsection (d), in the case of a medicare-
dependent hospital described in clause (ii), the applicable percentage
increase otherwise determined under subparagraph (B)(i) shall be
increased by—
‘‘(I) 0.5 percentage points for discharges occurring during
cost reporting periods beginning during fiscal year 1996, and
‘‘(II) 0.3 percentage points for discharges occurring during
cost reporting periods beginning during fiscal year 1997.
‘‘(ii) A hospital described in this clause with respect to a cost
reporting period is a subsection (d) hospital meeting the following
requirements:
‘‘(I) Not less than 60 percent of the hospital’s inpatient
days during the most recent cost reporting period for which
data is available were attributable to inpatients entitled to
benefits under part A.
‘‘(II) The hospital does not receive any additional payment
amount under subsection (d)(5)(F) (relating to payments for
hospitals serving a disproportionate number of low-income
patients) with respect to discharges occurring during the fiscal
year.
‘‘(III) The hospital does not receive any additional payment
amount under subsection (d)(5)(B) (relating to payment for
the indirect costs of medical education) or subsection (h) (relat-
ing to payment for direct medical education costs).
‘‘(IV) In the case of a hospital located in a rural area,
the hospital has more than 100 beds.’’.
H. R. 2491—387
CHAPTER 2—PAYMENTS TO SKILLED NURSING
FACILITIES
Subchapter A—Prospective Payment System
SEC. 8410. PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING
FACILITIES.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by adding
the following new section after section 1888:
‘‘PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING FACILITIES
‘‘SEC. 1889. (a) ESTABLISHMENT OF SYSTEM.—Notwithstanding
any other provision of this title, the Secretary shall establish a
prospective payment system under which fixed payments for epi-
sodes of care shall be made, instead of payments determined under
section 1861(v), section 1888, or section 1888A, to skilled nursing
facilities for all extended care services furnished during the benefit
period established under section 1812(a)(2). Such payments shall
constitute payment for capital costs and all routine and non-routine
service costs covered under this title that are furnished to individ-
uals who are inpatients of skilled nursing facilities during such
benefit period, except for physicians’ services. The payment amounts
shall vary depending on case-mix, patient acuity, and such other
factors as the Secretary determines are appropriate. The prospective
payment system shall apply for cost reporting periods (or portions
of cost reporting periods) beginning on or after October 1, 1997.
‘‘(b) 90 PERCENT OF LEVELS OTHERWISE IN EFFECT.—The Sec-
retary shall establish the prospective payment amounts under sub-
section (a) at levels such that, in the Secretary’s estimation, the
amount of total payments under this title shall not exceed 90
percent of the amount of payments that would have been made
under this title for all routine and non-routine services and capital
expenditures if this section had not been enacted.
‘‘(c) ADJUSTMENT
IN RATES TO TAKE INTO ACCOUNT BENE-
FICIARY COST-SHARING.—The Secretary shall reduce the prospective
payment rates established under this section to take into account
the beneficiary coinsurance amount required under section
1813(a)(3).’’.
Subchapter B—Interim Payment System
SEC. 8411. PAYMENTS FOR ROUTINE SERVICE COSTS.
(a) CLARIFICATION OF DEFINITION OF ROUTINE SERVICE COSTS.—
Section 1888 (42 U.S.C. 1395yy) is amended by adding at the
end the following new subsection:
‘‘(e) For purposes of this section, the ‘routine service costs’
of a skilled nursing facility are all costs which are attributable
to nursing services, room and board, administrative costs, other
overhead costs, and all other ancillary services (including supplies
and equipment), excluding costs attributable to covered non-routine
services subject to payment amounts under section 1888A.’’.
(b) CONFORMING AMENDMENT.—Section 1888 (42 U.S.C. 1395yy)
is amended in the heading by inserting ‘‘AND CERTAIN ANCILLARY’’
after ‘‘SERVICE’’.
H. R. 2491—388
SEC. 8412. COST-EFFECTIVE MANAGEMENT OF COVERED NON-ROU-
TINE SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et seq.) is amend-
ed by inserting after section 1888 the following new section:
‘‘COST-EFFECTIVE MANAGEMENT OF COVERED NON-ROUTINE SERVICES
OF SKILLED NURSING FACILITIES
‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of this section:
‘‘(1) COVERED NON-ROUTINE SERVICES.—The term ‘covered
non-routine services’ means post-hospital extended care services
consisting of any of the following:
‘‘(A) Physical or occupational therapy or speech-lan-
guage pathology services, or respiratory therapy, including
supplies and support services directly related to such serv-
ices and therapy.
‘‘(B) Prescription drugs.
‘‘(C) Complex medical equipment.
‘‘(D) Intravenous therapy and solutions (including
enteral and parenteral nutrients, supplies, and equipment).
‘‘(E) Radiation therapy.
‘‘(F) Diagnostic services, including laboratory, radiology
(including computerized tomography services and imaging
services), and pulmonary services.
‘‘(2) SNF MARKET
BASKET
PERCENTAGE
INCREASE.—The
term ‘SNF market basket percentage increase’ for a fiscal year
means a percentage equal to input price changes in routine
service costs for the year under section 1888(a).
‘‘(3) STAY.—The term ‘stay’ means, with respect to an
individual who is a resident of a skilled nursing facility, a
period of continuous days during which the facility provides
extended care services for which payment may be made under
this title for the individual during the individual’s spell of
illness.
‘‘(b) NEW PAYMENT METHOD FOR COVERED NON-ROUTINE SERV-
ICES BEGINNING IN FISCAL YEAR 1996.—
‘‘(1) IN GENERAL.—The payment method established under
this section shall apply with respect to covered non-routine
services furnished during cost reporting periods (or portions
of cost reporting periods) beginning on or after October 1,
1995.
‘‘(2) INTERIM PAYMENTS.—Subject to subsection (c), a skilled
nursing facility shall receive interim payments under this title
for covered non-routine services furnished to an individual dur-
ing cost reporting periods (or portions of cost reporting periods)
described in paragraph (1) in an amount equal to the reasonable
cost of providing such services in accordance with section
1861(v). The Secretary may adjust such payments if the Sec-
retary determines (on the basis of such estimated information
as the Secretary considers appropriate) that payments to the
facility under this paragraph for a cost reporting period would
substantially exceed the cost reporting period amount deter-
mined under subsection (c)(2).
‘‘(3) RESPONSIBILITY OF SKILLED NURSING FACILITY TO MAN-
AGE BILLINGS.—
‘‘(A) CLARIFICATION
RELATING
TO
PART
A
BILLING.—
In the case of a covered non-routine service furnished to
H. R. 2491—390
‘‘(2) COST REPORTING PERIOD AMOUNT.—The cost reporting
period amount determined under this subparagraph is an
amount equal to the product of—
‘‘(A) the per stay amount applicable to the facility
under subsection (d) for the period; and
‘‘(B) the number of stays beginning during the period
for which payment was made to the facility for such serv-
ices.
‘‘(3) PROSPECTIVE
REDUCTION
IN
PAYMENTS.—In addition
to the process for reducing payments described in paragraph
(1), the Secretary may reduce payments made to a facility
under this section during a cost reporting period if the Secretary
determines (on the basis of such estimated information as the
Secretary considers appropriate) that payments to the facility
under this section for the period will substantially exceed the
cost reporting period amount for the period determined under
this paragraph.
‘‘(d) DETERMINATION OF FACILITY PER STAY AMOUNT.—
‘‘(1) AMOUNT FOR FISCAL YEAR 1996.—
‘‘(A) IN GENERAL.—
‘‘(i) 
ESTABLISHMENT.—Except 
as 
provided 
in
subparagraph (B) and clause (ii), the Secretary shall
establish a per stay amount for each nursing facility
for the 12-month cost reporting period beginning dur-
ing fiscal year 1996 that is the facility-specific stay
amount for the facility (as determined under subsection
(e)) for the last 12-month cost reporting period ending
on or before December 31, 1994, increased (in a
compounded manner) by the SNF market basket
percentage increase (as defined in subsection (a)(2))
for each fiscal year through fiscal year 1996.
‘‘(ii) ADJUSTMENT IF IMPLEMENTATION DELAYED.—
If the amount under clause (i) is not established prior
to the cost reporting period described in clause (i),
the Secretary shall adjust such amount for stays after
such amount is established in such a manner so as
to recover any amounts in excess of the amounts which
would have been paid for stays before such date if
the amount had been in effect for such stays.
‘‘(B) FACILITIES
NOT
HAVING
1994
COST
REPORTING
PERIOD.—In the case of a skilled nursing facility for which
payments were not made under this title for covered non-
routine services for the last 12-month cost reporting period
ending on or before December 31, 1994, the per stay amount
for the 12-month cost reporting period beginning during
fiscal year 1996 shall be the average of all per stay amounts
determined under subparagraph (A).
‘‘(2) AMOUNT FOR FISCAL YEAR 1997 AND SUBSEQUENT FISCAL
YEARS.—The per stay amount for a skilled nursing facility
for a 12-month cost reporting period beginning during a fiscal
year after 1996 is equal to the per stay amount established
under this subsection for the 12-month cost reporting period
beginning during the preceding fiscal year (without regard to
any adjustment under paragraph (1)(A)(ii)), increased by the
SNF market basket percentage increase for such subsequent
fiscal year minus 2.0 percentage points.
H. R. 2491—391
‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY AMOUNTS.—
The ‘facility-specific stay amount’ for a skilled nursing facility for
a cost reporting period is—
‘‘(1) the sum of—
‘‘(A) the amount of payments made to the facility under
part A during the period which are attributable to covered
non-routine services furnished during a stay; and
‘‘(B) the Secretary’s best estimate of the amount of
payments made under part B during the period for covered
non-routine services furnished to all residents of the facility
to whom the facility provided extended care services for
which payment was made under part A during the period
(without regard to whether or not the services were fur-
nished by the facility, by others under arrangement with
them made by the facility under any other contracting
or consulting arrangement, or otherwise), as estimated by
the Secretary; divided by
‘‘(2) the average number of days per stay for all residents
of the skilled nursing facility receiving extended care services
furnished during the benefit period established under section
1812(a)(2).
‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—
‘‘(1) IN GENERAL.—In applying subsection (b) to covered
non-routine services furnished during a stay beginning during
a cost reporting period to a resident of a skilled nursing facility
who requires intensive nursing or therapy services, the per
stay amount for such resident shall be the per stay amount
developed under paragraph (2) instead of the per stay amount
determined under subsection (d)(1)(A).
‘‘(2) PER STAY AMOUNT FOR INTENSIVE NEED RESIDENTS.—
Upon the implementation of the payment method established
under this section, the Secretary, after consultation with the
Medicare Payment Review Commission and skilled nursing
facility experts, shall develop and publish a per stay amount
for residents of a skilled nursing facility who require intensive
nursing or therapy services..
‘‘(3) BUDGET NEUTRALITY.—The Secretary shall adjust pay-
ments under subsection (b) in a manner that ensures that
total payments for covered non-routine services under this sec-
tion are not greater or less than total payments for such services
would have been but for the application of paragraph (1).
‘‘(g) EXCEPTIONS AND ADJUSTMENTS TO AMOUNTS.—
‘‘(1) IN GENERAL.—The Secretary may make exceptions and
adjustments to the cost reporting period amounts applicable
to a skilled nursing facility under subsection (c)(2) for a cost
reporting period, except that the total amount of any additional
payments made under this section for covered non-routine serv-
ices during the cost reporting period as a result of such excep-
tions and adjustments may not exceed 5 percent of the aggre-
gate payments made to all skilled nursing facilities for covered
non-routine services during the cost reporting period (deter-
mined without regard to this paragraph).
‘‘(2) BUDGET NEUTRALITY.—The Secretary shall adjust pay-
ments under subsection (b) in a manner that ensures that
total payments for covered non-routine services under this sec-
tion are not greater or less than total payments for such services
would have been but for the application of paragraph (1).
H. R. 2491—392
‘‘(h) SPECIAL TREATMENT FOR MEDICARE LOW VOLUME SKILLED
NURSING FACILITIES.—The Secretary shall determine an appro-
priate manner in which to apply this section, taking into account
the purposes of this section, to non-routine costs of a skilled nursing
facility for which payment is made for routine service costs during
a cost reporting period on the basis of prospective payments under
section 1888(d).
‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before furnishing a
covered non-routine service consisting of an X-ray service for which
payment may be made under part A or part B to a resident,
a skilled nursing facility shall consider whether furnishing the
service through a provider of portable X-ray services would be
appropriate, taking into account the cost effectiveness of the service
and the convenience to the resident.
‘‘(j) MAINTAINING
SAVINGS
FROM
PAYMENT
SYSTEM.—The
prospective payment system established under section 1889 shall
reflect the payment methodology established under this section
for covered non-routine services.’’.
(b) CONFORMING
AMENDMENT.—Section 1814(b) (42 U.S.C.
1395f(b)) is amended in the matter preceding paragraph (1) by
striking ‘‘1813 and 1886’’ and inserting ‘‘1813, 1886, 1888, 1888A,
and 1889’’.
SEC. 8413. PAYMENTS FOR ROUTINE SERVICE COSTS.
(a) MAINTAINING SAVINGS RESULTING FROM TEMPORARY FREEZE
ON PAYMENT INCREASES.—
(1) BASING UPDATES TO PER DIEM COST LIMITS ON LIMITS
FOR FISCAL YEAR 1993.—
(A) IN GENERAL.—The last sentence of section 1888(a)
(42 U.S.C. 1395yy(a)) is amended by adding at the end
the following: ‘‘(except that such updates may not take
into account any changes in the routine service costs of
skilled nursing facilities occurring during cost reporting
periods which began during fiscal year 1994 or fiscal year
1995)’’.
(B) NO
EXCEPTIONS
PERMITTED
BASED
ON
AMEND-
MENT.—The Secretary of Health and Human Services shall
not consider the amendment made by subparagraph (A)
in making any adjustments pursuant to section 1888(c)
of the Social Security Act.
(2) PAYMENTS TO LOW MEDICARE VOLUME SKILLED NURSING
FACILITIES.—Any change made by the Secretary of Health and
Human Services in the amount of any prospective payment
paid to a skilled nursing facility under section 1888(d) of the
Social Security Act for cost reporting periods beginning on
or after October 1, 1995, may not take into account any changes
in the costs of services occurring during cost reporting periods
which began during fiscal year 1994 or fiscal year 1995.
(b) BASING 1996 LIMITS
ON NEW DEFINITION
OF ROUTINE
COSTS.—The Secretary of Health and Human Services shall take
into account the new definition of routine service costs under section
1888(e) of the Social Security Act, as added by section 8411, in
determining the routine per diem cost limits under section 1888(a)
for fiscal year 1996 and each fiscal year thereafter.
(c) ESTABLISHMENT OF SCHEDULE FOR MAKING ADJUSTMENTS
TO LIMITS.—Section 1888(c) (42 U.S.C. 1395yy(c)) is amended by
striking the period at the end of the second sentence and inserting
H. R. 2491—393
‘‘, and may only make adjustments under this subsection with
respect to a facility which applies for an adjustment during an
annual application period established by the Secretary.’’.
(d) LIMITATION TO EXCEPTIONS PROCESS OF THE SECRETARY.—
Section 1888(c) (42 U.S.C. 1395yy(c)) is amended—
(1) by striking ‘‘(c) The Secretary’’ and inserting ‘‘(c)(1)
Subject to paragraph (2), the Secretary’’; and
(2) by adding at the end the following new paragraph:
‘‘(2) The Secretary may not make any adjustments under this
subsection in the limits set forth in subsection (a) for a cost report-
ing period beginning during a fiscal year to the extent that the
total amount of the additional payments made under this title
as a result of such adjustments is greater than an amount equal
to—
‘‘(A) for cost reporting periods beginning during fiscal year
1996, the total amount of the additional payments made under
this title as a result of adjustments under this subsection
for cost reporting periods beginning during fiscal year 1994
increased (on a compounded basis) by the SNF market basket
percentage increase (as defined in section 1888A(a)(2)) for each
fiscal year; and
‘‘(B) for cost reporting periods beginning during a subse-
quent fiscal year, the amount determined under this paragraph
for the preceding fiscal year, increased by the SNF market
basket percentage increase (as defined in section 1888A(a)(2))
for each fiscal year.’’.
(e) MAINTAINING
SAVINGS
FROM
PAYMENT
SYSTEM.—The
prospective payment system established under section 1889 of the
Social Security Act, as added by section 8410, shall reflect the
routine per diem cost limits under section 1888(a) of such Act.
SEC. 8414. REDUCTIONS IN PAYMENT FOR CAPITAL-RELATED COSTS.
(a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)),
as amended by section 8405(a), is amended by adding at the end
the following new subparagraph:
‘‘(U) Such regulations shall provide that, in determining the
amount of the payments that may be made under this title with
respect to all the capital-related costs of skilled nursing facilities,
the Secretary shall reduce the amounts of such payments otherwise
established under this title by 10 percent for payments attributable
to portions of cost reporting periods occurring beginning in fiscal
years 1996 through 2002.’’.
(b) MAINTAINING SAVINGS RESULTING FROM 10 PERCENT CAP-
ITAL REDUCTION.—The prospective payment system established
under section 1889 of the Social Security Act, as added by section
8410 of this Act, shall reflect the 10 percent reduction in payments
for capital-related costs of skilled nursing facilities as such reduction
is in effect under section 1861(v)(1)(U) of the Social Security Act,
as added by subsection (a).
SEC. 8415. TREATMENT OF ITEMS AND SERVICES PAID FOR UNDER
PART B.
(a) REQUIRING PAYMENT FOR ALL ITEMS AND SERVICES TO BE
MADE TO FACILITY.—
(1) IN GENERAL.—The first sentence of section 1842(b)(6)
(42 U.S.C. 1395u(b)(6)) is amended—
(A) by striking ‘‘and (D)’’ and inserting ‘‘(D)’’; and
H. R. 2491—394
(B) by striking the period at the end and inserting
the following: ‘‘, and (E) in the case of an item or service
(other than a portable X-ray or portable electrocardiogram
treated as a physician’s service for purposes of section
1848(j)(3)) furnished to an individual who (at the time
the item or service is furnished) is a resident of a skilled
nursing facility, payment shall be made to the facility
(without regard to whether or not the item or service
was furnished by the facility, by others under arrangement
with them made by the facility, under any other contracting
or consulting arrangement, or otherwise), except that this
subparagraph shall not preclude a physician (as defined
in section 1861(r)(1)) from receiving payment for physician’s
services provided to a resident of a skilled nursing facility
if such services are not covered non-routine services (as
defined in section 1888A(a)(1)) or services for which routine
service costs (as defined in section 1888(e)) are deter-
mined.’’.
(2) EXCLUSION FOR ITEMS AND SERVICES NOT BILLED BY
FACILITY.—Section 1862(a) (42 U.S.C. 1395y(a)) is amended—
(A) by striking ‘‘or’’ at the end of paragraph (14);
(B) by striking the period at the end of paragraph
(15) and inserting ‘‘; or’’; and
(C) by inserting after paragraph (15) the following
new paragraph:
‘‘(16) where such expenses are for covered non-routine serv-
ices (as defined in section 1888A(a)(1)) (other than a portable
X-ray or portable electrocardiogram treated as a physician’s
service for purposes of section 1848(j)(3)) furnished to an
individual who is a resident of a skilled nursing facility and
for which the claim for payment under this title is not submitted
by the facility.’’.
(3) CONFORMING
AMENDMENT.—Section 1832(a)(1) (42
U.S.C. 1395k(a)(1)) is amended by striking ‘‘(2);’’ and inserting
‘‘(2) and section 1842(b)(6)(E);’’.
(b) REDUCTION IN PAYMENTS FOR ITEMS AND SERVICES FUR-
NISHED BY OR UNDER ARRANGEMENTS WITH FACILITIES.—Section
1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by section 8405(a)
and section 8414(a), is amended by adding at the end the following
new subparagraph:
‘‘(V) In the case of an item or service furnished by a skilled
nursing facility (or by others under arrangement with them made
by a skilled nursing facility or under any other contracting or
consulting arrangement or otherwise) for which payment is made
under part B in an amount determined in accordance with section
1833(a)(2)(B), the Secretary shall reduce the reasonable cost for
such item or service otherwise determined under clause (i)(I) of
such section by 5.8 percent for payments attributable to portions
of cost reporting periods occurring during fiscal years 1996 through
2002.’’.
SEC. 8416. MEDICAL REVIEW PROCESS.
In order to ensure that medicare beneficiaries are furnished
appropriate extended care services, the Secretary of Health and
Human Services shall establish and implement a thorough medical
review process to examine the effects of the amendments made
by this subchapter on the quality of extended care services furnished
H. R. 2491—395
to medicare beneficiaries. In developing such a medical review
process, the Secretary shall place a particular emphasis on the
quality of non-routine covered services for which payment is made
under section 1888A of the Social Security Act.
SEC. 8417. REPORT BY MEDICARE PAYMENT REVIEW COMMISSION.
Not later than October 1, 1997, the Medicare Payment Review
Commission shall submit to Congress a report on the system under
which payment is made under the medicare program for extended
care services furnished by skilled nursing facilities, and shall
include in the report the following:
(1) An analysis of the effect of the methodology established
under section 1888A of the Social Security Act (as added by
section 8412) on the payments for, and the quality of, extended
care services under the medicare program.
(2) An analysis of the advisability of determining the
amount of payment for covered non-routine services of facilities
(as described in such section) on the basis of the amounts
paid for such services when furnished by suppliers under part
B of the medicare program.
(3) An analysis of the desirability of maintaining separate
routine cost-limits for hospital-based and freestanding facilities
in the costs of extended care services recognized as reasonable
under the medicare program.
(4) An analysis of the quality of services furnished by
skilled nursing facilities.
(5) An analysis of the adequacy of the process and stand-
ards used to provide exceptions to the limits described in para-
graph (3).
(6) An analysis of the effect of the prospective payment
methodology established under section 1889 of the Social Secu-
rity Act (as added by section 8410) on the payments for, and
the quality of, extended care services under the medicare pro-
gram, including an evaluation of the baseline used in establish-
ing a system for payment for extended care services furnished
by skilled nursing facilities.
SEC. 8418. EFFECTIVE DATE.
Except as otherwise provided in this subchapter, the amend-
ments made by this subchapter shall apply to services furnished
during cost reporting periods (or portions of cost reporting periods)
beginning on or after October 1, 1995.
CHAPTER 3—OTHER PROVISIONS RELATING TO PART A
SEC. 8421. PAYMENTS FOR HOSPICE SERVICES.
Section 1814(i)(1)(C)(ii) (42 U.S.C. 1395f(i)(1)(C)(ii)) is amended
by striking subclauses (IV), (V), and (VI), and inserting the following
subclauses:
‘‘(IV) for fiscal years 1996 through 2002, the market basket
percentage increase for the fiscal year minus 2.0 percentage
points; and
‘‘(V) for a subsequent fiscal year, the market basket
percentage increase for the fiscal year.’’.
H. R. 2491—396
SEC. 8422. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH.
Effective as if included in the enactment of OBRA–1989, section
6011(d) of such Act (as amended by section 13505 of OBRA–1993)
is amended by striking ‘‘and shall expire September 30, 1994’’.
Subtitle F—Provisions Relating to Part B
CHAPTER 1—PAYMENT REFORMS
SEC. 8501. PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) ESTABLISHING UPDATE TO CONVERSION FACTOR TO MATCH
SPENDING UNDER SUSTAINABLE GROWTH RATE.—
(1) UPDATE.—
(A) IN GENERAL.—Section 1848(d)(3) (42 U.S.C. 1395w–
4(d)(3)) is amended to read as follows:
‘‘(3) UPDATE.—
‘‘(A) IN GENERAL.—Unless Congress otherwise provides,
subject to subparagraph (E), for purposes of this section
the update for a year (beginning with 1997) is equal to
the product of—
‘‘(i) 1 plus the Secretary’s estimate of the percent-
age increase in the medicare economic index (described
in the fourth sentence of section 1842(b)(3)) for the
year (divided by 100), and
‘‘(ii) 1 plus the Secretary’s estimate of the update
adjustment factor for the year (divided by 100),
minus 1 and multiplied by 100.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—The ‘update adjust-
ment factor’ for a year is equal to the quotient of—
‘‘(i) the difference between (I) the sum of the
allowed expenditures for physicians’ services furnished
during each of the years 1995 through the year
involved and (II) the sum of the amount of actual
expenditures for physicians’ services furnished during
each of the years 1995 through the previous year;
divided by
‘‘(ii) the Secretary’s estimate of allowed expendi-
tures for physicians’ services furnished during the year.
‘‘(C) DETERMINATION OF ALLOWED EXPENDITURES.—For
purposes of subparagraph (B), allowed expenditures for
physicians’ services shall be determined as follows (as esti-
mated by the Secretary):
‘‘(i) In the case of allowed expenditures for 1995,
such expenditures shall be equal to actual expenditures
for services furnished during the 12-month period end-
ing with June 30, 1995.
‘‘(ii) In the case of allowed expenditures for 1996
and each subsequent year, such expenditures shall be
equal to allowed expenditures for the previous year,
increased by the sustainable growth rate under sub-
section (f) for the fiscal year which begins during the
year.
‘‘(D) DETERMINATION OF ACTUAL EXPENDITURES.—For
purposes of subparagraph (B), the amount of actual
expenditures for physicians’ services furnished during a
year shall be equal to the amount of expenditures for
H. R. 2491—397
such services during the 12-month period ending with June
of the previous year.
‘‘(E) RESTRICTION ON VARIATION FROM MEDICARE ECO-
NOMIC INDEX.—Notwithstanding the amount of the update
adjustment factor determined under subparagraph (B) for
a year, the update in the conversion factor under this
paragraph for the year may not be—
‘‘(i) greater than 103 percent of 1 plus the Sec-
retary’s estimate of the percentage increase in the
medicare economic index (described in the fourth sen-
tence of section 1842(b)(3)) for the year (divided by
100), minus 1 and multiplied by 100; or
‘‘(ii) less than 93 percent of 1 plus the Secretary’s
estimate of the percentage increase in the medicare
economic index (described in the fourth sentence of
section 1842(b)(3)) for the year (divided by 100), minus
1 and multiplied by 100.’’.
(B) EFFECTIVE
DATE.—The amendments made by
subparagraph (A) shall apply to physicians’ services fur-
nished on or after January 1, 1997.
(2) CONFORMING AMENDMENTS.—(A) Section 1848(d)(2)(A)
(42 U.S.C. 1395w–4(d)(2)(A)) is amended—
(i) in the matter preceding clause (i)—
(I) by striking ‘‘(or updates) in the conversion factor
(or factors)’’ and inserting ‘‘in the conversion factor’’;
(II) by striking ‘‘(beginning with 1991)’’ and insert-
ing ‘‘(beginning with 1996)’’; and
(III) by striking the second sentence;
(ii) by amending clause (ii) to read as follows:
‘‘(ii) such factors as enter into the calculation of
the update adjustment factor as described in paragraph
(3)(B); and’’;
(iii) by amending clause (iii) to read as follows:
‘‘(iii) access to services.’’;
(iv) by striking clauses (iv), (v), and (vi); and
(v) by striking the last sentence.
(B) Section 1848(d)(2)(B) (42 U.S.C. 1395w–4(d)(2)(B)) is
amended—
(i) by striking ‘‘and’’ at the end of clause (iii);
(ii) by striking the period at the end of clause (iv)
and inserting ‘‘; and’’; and
(iii) by adding at the end the following new clause:
‘‘(v) changes in volume or intensity of services.’’.
(C) Section 1848(d)(2) (42 U.S.C. 1395w4–(d)(2)) is further
amended—
(i) by striking subparagraphs (C), (D), and (E);
(ii) by redesignating subparagraph (F) as subparagraph
(C); and
(iii) in subparagraph (C), as redesignated, by striking
‘‘(or updates) in the conversion factor (or factors)’’ and
inserting ‘‘in the conversion factor’’.
(b) REPLACEMENT OF VOLUME PERFORMANCE STANDARD WITH
SUSTAINABLE GROWTH RATE.—
(1) IN GENERAL.—Section 1848(f) (42 U.S.C. 1395w–4(f))
is amended by striking paragraphs (2) through (5) and inserting
the following:
‘‘(2) SPECIFICATION OF GROWTH RATE.—
H. R. 2491—398
‘‘(A) FISCAL YEAR 1996.—The sustainable growth rate
for all physicians’ services for fiscal year 1996 shall be
equal to the product of—
‘‘(i) 1 plus the Secretary’s estimate of the percent-
age change in the medicare economic index for 1996
(described in the fourth sentence of section 1842(b)(3))
(divided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of the percent-
age change (divided by 100) in the average number
of individuals enrolled under this part (other than
private plan enrollees) from fiscal year 1995 to fiscal
year 1996,
‘‘(iii) 1 plus the Secretary’s estimate of the pro-
jected percentage growth in real gross domestic product
per capita (divided by 100) from fiscal year 1995 to
fiscal year 1996, plus 2 percentage points, and
‘‘(iv) 1 plus the Secretary’s estimate of the percent-
age change (divided by 100) in expenditures for all
physicians’ services in fiscal year 1996 (compared with
fiscal year 1995) which will result from changes in
law (including the Medicare Preservation Act of 1995),
determined without taking into account estimated
changes in expenditures due to changes in the volume
and intensity of physicians’ services or changes in
expenditures resulting from changes in the update to
the conversion factor under subsection (d),
minus 1 and multiplied by 100.
‘‘(B) SUBSEQUENT
FISCAL
YEARS.—The sustainable
growth rate for all physicians’ services for fiscal year 1997
and each subsequent fiscal year shall be equal to the prod-
uct of—
‘‘(i) 1 plus the Secretary’s estimate of the percent-
age change in the medicare economic index for the
fiscal year involved (described in the fourth sentence
of section 1842(b)(3)) (divided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of the percent-
age change (divided by 100) in the average number
of individuals enrolled under this part (other than
private plan enrollees) from the previous fiscal year
to the fiscal year involved,
‘‘(iii) 1 plus the Secretary’s estimate of the pro-
jected percentage growth in real gross domestic product
per capita (divided by 100) from the previous fiscal
year to the fiscal year involved, plus 2 percentage
points, and
‘‘(iv) 1 plus the Secretary’s estimate of the percent-
age change (divided by 100) in expenditures for all
physicians’ services in the fiscal year (compared with
the previous fiscal year) which will result from changes
in law (including changes made by the Secretary in
response to section 1895), determined without taking
into account estimated changes in expenditures due
to changes in the volume and intensity of physicians’
services or changes in expenditures resulting from
changes in the update to the conversion factor under
subsection (d)(3),
minus 1 and multiplied by 100.
H. R. 2491—399
‘‘(3) DEFINITIONS.—In this subsection:
‘‘(A) SERVICES
INCLUDED
IN
PHYSICIANS’ SERVICES.—
The term ‘physicians’ services’ includes other items and
services (such as clinical diagnostic laboratory tests and
radiology services), specified by the Secretary, that are
commonly performed or furnished by a physician or in
a physician’s office, but does not include services furnished
to a private plan enrollee.
‘‘(B) PRIVATE PLAN ENROLLEE.—The term ‘private plan
enrollee’ means, with respect to a fiscal year, an individual
enrolled under this part who has elected to receive benefits
under this title for the fiscal year through a MedicarePlus
plan offered under part C or through enrollment with an
eligible organization with a risk-sharing contract under
section 1876.’’.
(2) CONFORMING AMENDMENTS.—Section 1848(f) (42 U.S.C.
1395w–4(f)) is amended—
(A) in the heading, by striking ‘‘VOLUME PERFORMANCE
STANDARD RATES OF INCREASE’’ and inserting ‘‘SUSTAIN-
ABLE GROWTH RATE’’;
(B) in paragraph (1)—
(i) in the heading, by striking ‘‘VOLUME PERFORM-
ANCE
STANDARD
RATES
OF
INCREASE’’ and inserting
‘‘SUSTAINABLE GROWTH RATE’’;
(ii) in subparagraph (A), in the matter preceding
clause (i), by striking ‘‘performance standard rates of
increase’’ and inserting ‘‘sustainable growth rate’’; and
(iii) in subparagraph (A), by striking ‘‘HMO enroll-
ees’’ each place such term appears and inserting ‘‘pri-
vate plan enrollees’’;
(C) in subparagraph (B), by striking ‘‘performance
standard rates of increase’’ and inserting ‘‘sustainable
growth rate’’; and
(D) in subparagraph (C)—
(i) in the heading, by striking ‘‘PERFORMANCE
STANDARD RATES OF INCREASE’’ and inserting ‘‘SUSTAIN-
ABLE GROWTH RATE’’;
(ii) in the first sentence, by striking ‘‘with 1991),
the performance standard rates of increase’’ and all
that follows through the first period and inserting
‘‘with 1997), the sustainable growth rate for the fiscal
year beginning in that year.’’; and
(iii) in the second sentence, by striking ‘‘January
1, 1990, the performance standard rate of increase
under subparagraph (D) for fiscal year 1990’’ and
inserting ‘‘January 1, 1997, the sustainable growth
rate for fiscal year 1997’’.
(c) ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 1996.—
(1) IN
GENERAL.—Section 1848(d)(1) (42 U.S.C. 1395w–
4(d)(1)) is amended—
(A) by redesignating subparagraph (C) as subpara-
graph (D); and
(B) by inserting after subparagraph (B) the following
new subparagraph:
‘‘(C) SPECIAL RULE FOR 1996.—For 1996, the conversion
factor under this subsection shall be $35.42 for all physi-
cians’ services.’’.
H. R. 2491—402
(c) PAYMENT FREEZE FOR PARENTERAL AND ENTERAL NUTRI-
ENTS, SUPPLIES, AND EQUIPMENT.—In determining the amount of
payment under part B of title XVIII of the Social Security Act
with respect to parenteral and enteral nutrients, supplies, and
equipment during each of the years 1996 through 2002, the charges
determined to be reasonable with respect to such nutrients, sup-
plies, and equipment may not exceed the charges determined to
be reasonable with respect to such nutrients, supplies, and equip-
ment during 1993.
SEC. 8506. UPDATES FOR AMBULATORY SURGICAL SERVICES.
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended—
(1) by striking ‘‘1996’’ and inserting ‘‘2003’’; and
(2) by inserting before the first sentence the following new
sentence: ‘‘Notwithstanding the second sentence of subpara-
graph (A) or the second sentence of subparagraph (B), the
Secretary shall not update amounts established under such
subparagraphs for fiscal years 1996 through 2002.’’
SEC. 8507. PAYMENTS FOR AMBULANCE SERVICES.
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by sec-
tion 8405(a), section 8414(a), and section 8415(b), is amended by
adding at the end the following new subparagraph:
‘‘(W) In determining the reasonable cost or charge of ambu-
lance services for fiscal years 1996 through 2002, the Secretary
shall not recognize any costs in excess of costs recognized
as reasonable for fiscal year 1995.’’.
SEC. 8508. ENSURING PAYMENT FOR PHYSICIAN AND NURSE FOR
JOINTLY FURNISHED ANESTHESIA SERVICES.
(a) PAYMENT FOR JOINTLY FURNISHED SINGLE CASE.—
(1) PAYMENT TO PHYSICIAN.—Section 1848(a)(4) (42 U.S.C.
1395w–4(a)(4)) is amended by adding at the end the following
new subparagraph:
‘‘(C) PAYMENT FOR SINGLE CASE.—Notwithstanding sec-
tion 1862(a)(1)(A), with respect to physicians’ services
consisting of the furnishing of anesthesia services for a
single case that are furnished jointly with a certified reg-
istered nurse anesthetist, if the carrier determines that
the use of both the physician and the nurse anesthetist
to furnish the anesthesia service was not medically nec-
essary, the fee schedule amount for the physicians’ services
shall be equal to 50 percent (or 55 percent, in the case
of services furnished during 1996 or 1997) of the fee sched-
ule amount applicable under this section for anesthesia
services personally performed by the physician alone (with-
out regard to this subparagraph). Nothing in this subpara-
graph may be construed to affect the application of any
provision of law regarding balance billing.’’.
(2) PAYMENT
TO
CRNA.—Section 1833(l)(4)(B) (42 U.S.C.
1395l(l)(4)(B)) is amended by adding at the end the following
new clause:
‘‘(iv) Notwithstanding section 1862(a)(1)(A), in the case of serv-
ices of a certified registered nurse anesthetist consisting of the
furnishing of anesthesia services for a single case that are furnished
jointly with a physician, if the carrier determines that the use
of both the physician and the nurse anesthetist to furnish the
anesthesia service was not medically necessary, the fee schedule
H. R. 2491—403
amount for the services furnished by the certified registered nurse
anesthetist shall be equal to 50 percent (or 40 percent, in the
case of services furnished during 1996 or 1997) of the fee schedule
amount applicable under section 1848 for anesthesia services
personally performed by the physician alone (without regard to
this clause).’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply to services furnished on or after July 1, 1996.
CHAPTER 2—PART B PREMIUM
SEC. 8511. PROMOTING SOLVENCY OF PART A TRUST FUND THROUGH
PART B PREMIUM.
(a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) is
amended—
(1) in subparagraph (A), by striking ‘‘1999’’ and inserting
‘‘2003’’, and
(2) by adding at the end the following new subparagraph:
‘‘(C)(i) For each month beginning with January 1996 through
December 2002, the amount of the monthly premium under this
part shall be increased by an amount equal to 13 percent of the
monthly actuarial rate for enrollees age 65 and over, as determined
under subsection (a)(1) and applicable to such month.
‘‘(ii) The Secretary shall transfer amounts received pursuant
to clause (i) to the Federal Hospital Insurance Trust Fund.
‘‘(iii) In applying section 1844(a), amounts attributable to clause
(i) shall not be counted in determining the dollar amount of the
premium per enrollee under paragraph (1)(A) or (1)(B).’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) apply to premiums for months beginning with January 1996.
SEC. 8512. INCOME-RELATED REDUCTION IN MEDICARE SUBSIDY.
(a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r) is amended
by adding at the end the following:
‘‘(h)(1) Notwithstanding the previous subsections of this section,
in the case of an individual whose modified adjusted gross income
for a taxable year ending with or within a calendar year (as initially
determined by the Secretary in accordance with paragraph (3))
exceeds the threshold amount described in paragraph (5)(B), the
Secretary shall increase the amount of the monthly premium for
months in the calendar year by an amount equal to the difference
between—
‘‘(A) 200 percent of the monthly actuarial rate for enrollees
age 65 and over as determined under subsection (a)(1) for
that calendar year; and
‘‘(B) the total of the monthly premiums paid by the individ-
ual under this section (determined without regard to subsection
(b)) during such calendar year.
‘‘(2) In the case of an individual described in paragraph (1)
whose modified adjusted gross income exceeds the threshold amount
by less than $50,000, the amount of the increase in the monthly
premium applicable under paragraph (1) shall be an amount which
bears the same ratio to the amount of the increase described in
paragraph (1) (determined without regard to this paragraph) as
such excess bears to $50,000. In the case of a joint return filed
under section 6013 of the Internal Revenue Code of 1986 by spouses
both of whom are enrolled under this part, the previous sentence
H. R. 2491—404
shall be applied by substituting ‘$60,000’ for ‘$50,000’. The preced-
ing provisions of this paragraph shall not apply to any individual
whose threshold amount is zero.
‘‘(3) The Secretary shall make an initial determination of the
amount of an individual’s modified adjusted gross income for a
taxable year ending with or within a calendar year for purposes
of this subsection as follows:
‘‘(A) Not later than September 1 of the year preceding
the year, the Secretary shall provide notice to each individual
whom the Secretary finds (on the basis of the individual’s
actual modified adjusted gross income for the most recent tax-
able year for which such information is available or other
information provided to the Secretary by the Secretary of the
Treasury) will be subject to an increase under this subsection
that the individual will be subject to such an increase, and
shall include in such notice the Secretary’s estimate of the
individual’s modified adjusted gross income for the year.
‘‘(B) If, during the 30-day period beginning on the date
notice is provided to an individual under subparagraph (A),
the individual provides the Secretary with information on the
individual’s anticipated modified adjusted gross income for the
year, the amount initially determined by the Secretary under
this paragraph with respect to the individual shall be based
on the information provided by the individual.
‘‘(C) If an individual does not provide the Secretary with
information under subparagraph (B), the amount initially deter-
mined by the Secretary under this paragraph with respect
to the individual shall be the amount included in the notice
provided to the individual under subparagraph (A).
‘‘(4)(A) If the Secretary determines (on the basis of final
information provided by the Secretary of the Treasury) that the
amount of an individual’s actual modified adjusted gross income
for a taxable year ending with or within a calendar year is less
than or greater than the amount initially determined by the Sec-
retary under paragraph (3), the Secretary shall increase or decrease
the amount of the individual’s monthly premium under this section
(as the case may be) for months during the following calendar
year by an amount equal to 1⁄12 of the difference between—
‘‘(i) the total amount of all monthly premiums paid by
the individual under this section during the previous calendar
year; and
‘‘(ii) the total amount of all such premiums which would
have been paid by the individual during the previous calendar
year if the amount of the individual’s modified adjusted gross
income initially determined under paragraph (3) were equal
to the actual amount of the individual’s modified adjusted gross
income determined under this paragraph.
‘‘(B)(i) In the case of an individual for whom the amount initially
determined by the Secretary under paragraph (3) is based on
information provided by the individual under subparagraph (B)
of such paragraph, if the Secretary determines under subparagraph
(A) that the amount of the individual’s actual modified adjusted
gross income for a taxable year is greater than the amount initially
determined under paragraph (3), the Secretary shall increase the
amount otherwise determined for the year under subparagraph
(A) by interest in an amount equal to the sum of the amounts
H. R. 2491—405
determined under clause (ii) for each of the months described in
clause (ii).
‘‘(ii) Interest shall be computed for any month in an amount
determined by applying the underpayment rate established under
section 6621 of the Internal Revenue Code of 1986 (compounded
daily) to any portion of the difference between the amount initially
determined under paragraph (3) and the amount determined under
subparagraph (A) for the period beginning on the first day of the
month beginning after the individual provided information to the
Secretary under subparagraph (B) of paragraph (3) and ending
30 days before the first month for which the individual’s monthly
premium is increased under this paragraph.
‘‘(iii) Interest shall not be imposed under this subparagraph
if the amount of the individual’s modified adjusted gross income
provided by the individual under subparagraph (B) of paragraph
(3) was not less than the individual’s modified adjusted gross income
determined on the basis of information shown on the return of
tax imposed by chapter 1 of the Internal Revenue Code of 1986
for the taxable year involved.
‘‘(C) In the case of an individual who is not enrolled under
this part for any calendar year for which the individual’s monthly
premium under this section for months during the year would
be increased pursuant to subparagraph (A) if the individual were
enrolled under this part for the year, the Secretary may take
such steps as the Secretary considers appropriate to recover from
the individual the total amount by which the individual’s monthly
premium for months during the year would have been increased
under subparagraph (A) if the individual were enrolled under this
part for the year.
‘‘(D) In the case of a deceased individual for whom the amount
of the monthly premium under this section for months in a year
would have been decreased pursuant to subparagraph (A) if the
individual were not deceased, the Secretary shall make a payment
to the individual’s surviving spouse (or, in the case of an individual
who does not have a surviving spouse, to the individual’s estate)
in an amount equal to the difference between—
‘‘(i) the total amount by which the individual’s premium
would have been decreased for all months during the year
pursuant to subparagraph (A); and
‘‘(ii) the amount (if any) by which the individual’s premium
was decreased for months during the year pursuant to subpara-
graph (A).
‘‘(5) In this subsection, the following definitions apply:
‘‘(A) The term ‘modified adjusted gross income’ means
adjusted gross income (as defined in section 62 of the Internal
Revenue Code of 1986)—
‘‘(i) determined without regard to sections 135, 911,
931, and 933 of such Code, and
‘‘(ii) increased by the amount of interest received or
accrued by the taxpayer during the taxable year which
is exempt from tax under such Code.
‘‘(B) The term ‘threshold amount’ means—
‘‘(i) except as otherwise provided in this paragraph,
$60,000,
‘‘(ii) $90,000, in the case of a joint return (as defined
in section 7701(a)(38) of such Code), and
‘‘(iii) zero in the case of a taxpayer who—
H. R. 2491—406
‘‘(I) is married at the close of the taxable year
but does not file a joint return (as so defined) for
such year, and
‘‘(II) does not live apart from his spouse at all
times during the taxable year.
‘‘(6)(A) The Secretary shall transfer amounts received pursuant
to this subsection to the Federal Hospital Insurance Trust Fund.
‘‘(B) In applying section 1844(a), amounts attributable to clause
(i) shall not be counted in determining the dollar amount of the
premium per enrollee under paragraph (1)(A) or (1)(B).’’.
(b) CONFORMING AMENDMENTS.—(1) Section 1839 (42 U.S.C.
1395r) is amended—
(A) in subsection (a)(2), by inserting ‘‘or section 1839A’’
after ‘‘subsections (b) and (e)’’;
(B) in subsection (a)(3) of section 1839(a), by inserting
‘‘or section 1839A’’ after ‘‘subsection (e)’’;
(C) in subsection (b), inserting ‘‘(and as increased under
section 1839A)’’ after ‘‘subsection (a) or (e)’’; and
(D) in subsection (f), by striking ‘‘if an individual’’ and
inserting the following: ‘‘if an individual (other than an individ-
ual subject to an increase in the monthly premium under
this section pursuant to subsection (h))’’.
(2) Section 1840(c) (42 U.S.C. 1395r(c)) is amended by inserting
‘‘or an individual determines that the estimate of modified adjusted
gross income used in determining whether the individual is subject
to an increase in the monthly premium under section 1839 pursuant
to subsection (h) of such section (or in determining the amount
of such increase) is too low and results in a portion of the premium
not being deducted,’’ before ‘‘he may’’.
(c) REPORTING REQUIREMENTS FOR SECRETARY OF THE TREAS-
URY.—
(1) IN
GENERAL.—Subsection (l) of section 6103 of the
Internal Revenue Code of 1986 (relating to confidentiality and
disclosure of returns and return information) is amended by
adding at the end the following new paragraph:
‘‘(15) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT
INCOME-RELATED REDUCTION IN MEDICARE PART B PREMIUM.—
‘‘(A) IN GENERAL.—The Secretary may, upon written
request from the Secretary of Health and Human Services,
disclose to officers and employees of the Health Care
Financing Administration return information with respect
to a taxpayer who is required to pay a monthly premium
under section 1839 of the Social Security Act. Such return
information shall be limited to—
‘‘(i) taxpayer identity information with respect to
such taxpayer,
‘‘(ii) the filing status of such taxpayer,
‘‘(iii) the adjusted gross income of such taxpayer,
‘‘(iv) the amounts excluded from such taxpayer’s
gross income under sections 135 and 911,
‘‘(v) the interest received or accrued during the
taxable year which is exempt from the tax imposed
by chapter 1 to the extent such information is available,
and
‘‘(vi) the amounts excluded from such taxpayer’s
gross income by sections 931 and 933 to the extent
such information is available.
H. R. 2491—407
‘‘(B) RESTRICTION
ON
USE
OF
DISCLOSED
INFORMA-
TION.—Return information disclosed under subparagraph
(A) may be used by officers and employees of the Health
Care Financing Administration only for the purposes of,
and to the extent necessary in, establishing the appropriate
monthly premium under section 1839 of the Social Security
Act.’’
(2) CONFORMING AMENDMENT.—Paragraphs (3)(A) and (4)
of section 6103(p) of such Code are each amended by striking
‘‘or (14)’’ each place it appears and inserting ‘‘(14), or (15)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by subsections
(a) and (b) shall apply to the monthly premium under section
1839 of the Social Security Act for months beginning with
January 1997.
(2) INFORMATION
FOR
PRIOR
YEARS.—The Secretary of
Health and Human Services may request information under
section 6013(l)(15) of the Social Security Act (as added by
subsection (c)) for taxable years beginning after December 31,
1993.
Subtitle G—Provisions Relating to Parts A
and B
CHAPTER 1—PAYMENTS FOR HOME HEALTH SERVICES
SEC. 8601. PAYMENT FOR HOME HEALTH SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395x et seq.), as
amended by section 8102, is amended by adding at the end the
following new section:
‘‘PAYMENT FOR HOME HEALTH SERVICES
‘‘SEC. 1894. (a) IN GENERAL.—
‘‘(1) PER VISIT PAYMENTS.—Subject to subsection (c), the
Secretary shall make per visit payments beginning with fiscal
year 1997 to a home health agency in accordance with this
section for each type of home health service described in para-
graph (2) furnished to an individual who at the time the service
is furnished is under a plan of care by the home health agency
under this title (without regard to whether or not the item
or service was furnished by the agency or by others under
arrangement with them made by the agency, under any other
contracting or consulting arrangement, or otherwise).
‘‘(2) TYPES OF SERVICES.—The types of home health services
described in this paragraph are the following:
‘‘(A) Part-time or intermittent nursing care provided
by or under the supervision of a registered professional
nurse.
‘‘(B) Physical therapy.
‘‘(C) Occupational therapy.
‘‘(D) Speech-language pathology services.
‘‘(E) Medical social services under the direction of a
physician.
‘‘(F) To the extent permitted in regulations, part-time
or intermittent services of a home health aide who has
H. R. 2491—408
successfully completed a training program approved by the
Secretary.
‘‘(b) ESTABLISHMENT OF PER VISIT RATE FOR EACH TYPE OF
SERVICE.—
‘‘(1) IN GENERAL.—The Secretary shall, subject to paragraph
(3), establish a per visit payment rate for a home health agency
in an area (which shall be the same area used to determine
the area wage index applicable to hospitals under section
1886(d)(3)(E)) for each type of home health service described
in subsection (a)(2). Such rate shall be equal to the national
per visit payment rate determined under paragraph (2) for
each such type, except that the labor-related portion of such
rate shall be adjusted by the area wage index applicable under
section 1886(d)(3)(E) for the area in which the agency is located
(as determined without regard to any reclassification of the
area under section 1886(d)(8)(B) or a decision of the Medicare
Geographic Classification Review Board or the Secretary under
section 1886(d)(10) for cost reporting periods beginning after
October 1, 1995).
‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—The national per
visit payment rate for each type of service described in sub-
section (a)(2)—
‘‘(A) for fiscal year 1997, is an amount equal to the
national average amount paid per visit under this title
to home health agencies for such type of service during
the most recent 12-month cost reporting period ending
on or before June 30, 1994; and
‘‘(B) for each subsequent fiscal year, is an amount
equal to the national per visit payment rate in effect for
the preceding fiscal year, increased by the home health
market basket percentage increase for such subsequent
fiscal year minus 2.0 percentage points.
‘‘(3) REBASING OF RATES.—The Secretary shall adjust the
national per visit payment rates under this subsection for cost
reporting periods beginning on or after October 1, 1999, and
every 5 years thereafter, to reflect the most recent available
data.
‘‘(4) 
HOME
HEALTH
MARKET
BASKET
PERCENTAGE
INCREASE.—For purposes of this subsection, the term ‘home
health market basket percentage increase’ means, with respect
to a fiscal year, a percentage (estimated by the Secretary before
the beginning of the fiscal year) determined and applied with
respect to the types of home health services described in sub-
section (a)(2) in the same manner as the market basket percent-
age increase under section 1886(b)(3)(B)(iii) is determined and
applied to inpatient hospital services for the fiscal year.
‘‘(c) PER EPISODE LIMIT.—
‘‘(1) AGGREGATE LIMIT.—
‘‘(A) IN GENERAL.—Except as provided in paragraph
(2), a home health agency may not receive aggregate per
visit payments under subsection (a) for a fiscal year in
excess of an amount equal to the sum of the following
products determined for each case-mix category for which
the agency receives payments:
‘‘(i) The number of episodes of each such case-
mix category during the fiscal year; multiplied by
H. R. 2491—409
‘‘(ii) the per episode limit determined for such case-
mix category for such fiscal year.
‘‘(B) ESTABLISHMENT OF PER EPISODE LIMITS.—
‘‘(i) IN GENERAL.—The per episode limit for a fiscal
year for any case-mix category for the area in which
a home health agency is located (which shall be the
same area used to determine the area wage index
applicable to hospitals under section 1886(d)(3)(E)) is
equal to—
‘‘(I) the mean number of visits for each type
of home health service described in subsection
(a)(2) furnished during an episode of such case-
mix category in such area during fiscal year 1994,
adjusted by the case-mix adjustment factor deter-
mined in clause (ii) for the fiscal year involved;
multiplied by
‘‘(II) the per visit payment rate established
under subsection (b) for such type of home health
service for the fiscal year for which the determina-
tion is being made.
‘‘(ii) CASE-MIX ADJUSTMENT FACTOR.—For purposes
of clause (i), the case-mix adjustment factor for a year
for—
‘‘(I) each of fiscal years 1997 through 2000
is the factor determined by the Secretary to assure
that aggregate payments for home health services
under this section during the year will not exceed
the payment for such services during the previous
year as a result of changes in the number and
type of home health visits within case-mix cat-
egories over the previous year; and
‘‘(II) each subsequent fiscal year, is the factor
determined by the Secretary necessary to remove
the effects of case-mix increases due to reporting
improvements instead of real changes in patients’
resource usage.
‘‘(iii) REBASING OF PER EPISODE LIMITS.—Beginning
with fiscal year 1999 and every 5 years thereafter,
the Secretary shall revise the mean number of home
health visits determined under clause (i)(I) for each
type of home health service visit described in sub-
section (a)(2) furnished during an episode in a case-
mix category to reflect the most recently available data
on the number of visits.
‘‘(iv) DETERMINATION OF AREA.—In the case of an
area which the Secretary determines has an insuffi-
cient number of home health agencies to establish an
appropriate per episode limit, the Secretary may estab-
lish an area other than the area used to determine
the area wage under section 1886(d)(3)(E)) for purposes
of establishing an appropriate per episode limit.
‘‘(C) CASE-MIX CATEGORY.—For purposes of this para-
graph, the term ‘case-mix category’ means each of the
18 case-mix categories established under the Home Health
Agency Prospective Payment Demonstration Project con-
ducted by the Health Care Financing Administration. The
H. R. 2491—410
Secretary may develop an alternate methodology for deter-
mining case-mix categories.
‘‘(D) EPISODE.—
‘‘(i) IN GENERAL.—For purposes of this paragraph,
the term ‘episode’ means the continuous 120-day period
that—
‘‘(I) begins on the date of an individual’s first
visit for a type of home health service described
in subsection (a)(2) for a case-mix category, and
‘‘(II) is immediately preceded by a 60-day
period in which the individual did not receive visits
for a type of home health service described in
subsection (a)(2).
‘‘(ii) TREATMENT
OF
EPISODES
SPANNING
COST
REPORTING PERIODS.—The Secretary shall provide for
such rules as the Secretary considers appropriate
regarding the treatment of episodes under this para-
graph which begin during a cost reporting period and
end in a subsequent cost reporting period.
‘‘(E) EXEMPTIONS AND EXCEPTIONS.—The Secretary may
provide for exemptions and exceptions to the limits estab-
lished under this paragraph for a fiscal year as the Sec-
retary deems appropriate, to the extent such exemptions
and exceptions do not result in greater payments under
this section than the exemptions and exceptions provided
under section 1861(v)(1)(L)(ii) in fiscal year 1994, increased
by the home health market basket percentage increase
for the fiscal year involved (as defined in subsection (b)(4)).
‘‘(2) RECONCILIATION OF AMOUNTS.—
‘‘(A) PAYMENTS
IN
EXCESS
OF
LIMITS.—Subject to
subparagraph (B), if a home health agency has received
aggregate per visit payments under subsection (a) for a
fiscal year in excess of the amount determined under para-
graph (1) with respect to such home health agency for
such fiscal year, the Secretary shall reduce payments under
this section to the home health agency in the following
fiscal year in such manner as the Secretary considers
appropriate (including on an installment basis) to recapture
the amount of such excess.
‘‘(B) EXCEPTION FOR HOME HEALTH SERVICES FURNISHED
OVER A PERIOD GREATER THAN 165 DAYS.—
‘‘(i) IN GENERAL.—For purposes of subparagraph
(A), the amount of aggregate per visit payments deter-
mined under subsection (a) shall not include payments
for home health visits furnished to an individual on
or after a continuous period of more than 165 days
after an individual begins an episode described in sub-
section (c)(1)(D) (if such period is not interrupted by
the beginning of a new episode).
‘‘(ii) REQUIREMENT OF CERTIFICATION.—Clause (i)
shall not apply if the agency has not obtained a physi-
cian’s certification with respect to the individual requir-
ing such visits that includes a statement that the
individual requires such continued visits, the reason
for the need for such visits, and a description of such
services furnished during such visits.
‘‘(C) SHARE OF SAVINGS.—
H. R. 2491—411
‘‘(i) BONUS PAYMENTS.—If a home health agency
has received aggregate per visit payments under sub-
section (a) for a fiscal year in an amount less than
the amount determined under paragraph (1) with
respect to such home health agency for such fiscal
year, the Secretary shall pay such home health agency
a bonus payment equal to 50 percent of the difference
between such amounts in the following fiscal year,
except that the bonus payment may not exceed 5 per-
cent of the aggregate per visit payments made to the
agency for the year.
‘‘(ii) INSTALLMENT
BONUS
PAYMENTS.—The Sec-
retary may make installment payments during a fiscal
year to a home health agency based on the estimated
bonus payment that the agency would be eligible to
receive with respect to such fiscal year.
‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary shall implement
a medical review process (with a particular emphasis on fiscal
years 1997 and 1998) for the system of payments described in
this section that shall provide an assessment of the pattern of
care furnished to individuals receiving home health services for
which payments are made under this section to ensure that such
individuals receive appropriate home health services. Such review
process shall focus on low-cost episodes (as defined by the Secretary
under section (e)(3)(C)) and cases described in subsection (c)(2)(B)
and shall require recertification by intermediaries at 60 and 165
days into an episode described in subsection (c)(1)(D).
‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIRCUMVENTION OF
LIMITS.—
‘‘(1) IN GENERAL.—The Secretary shall provide for appro-
priate adjustments to payments to home health agencies under
this section to ensure that agencies do not circumvent the
purpose of this section by—
‘‘(A) discharging patients to another home health
agency or similar provider;
‘‘(B) altering corporate structure or name to avoid being
subject to this section or for the purpose of increasing
payments under this title; or
‘‘(C) undertaking other actions considered unnecessary
for effective patient care and intended to achieve maximum
payments under this title.
‘‘(2) TRACKING OF PATIENTS THAT SWITCH HOME HEALTH
AGENCIES DURING EPISODE.—
‘‘(A) DEVELOPMENT OF SYSTEM.—The Secretary shall
develop a system that tracks home health patients that
receive home health services described in subsection (a)(2)
from more than 1 home health agency during an episode
described in subsection (c)(1)(D).
‘‘(B) ADJUSTMENT OF PAYMENTS.—The Secretary shall
adjust payments under this section to each home health
agency that furnishes an individual with a type of home
health service described in subsection (a)(2) to ensure that
aggregate payments on behalf of such individual during
such episode do not exceed the amount that would be
paid under this section if the individual received such
services from a single home health agency.
‘‘(3) LOW-COST CASES.—
H. R. 2491—412
‘‘(A) IN
GENERAL.—The Secretary shall develop and
implement a system designed to adjust payments to a
home health agency for a fiscal year to eliminate any
increase in growth of the percentage distribution of low-
cost episodes for which home health services are furnished
by the agency over such percentage distribution determined
for the agency under subparagraph (B).
‘‘(B) DISTRIBUTION.—The Secretary shall profile each
home health agency to determine the distribution of all
episodes by length of stay for each agency during the
agency’s first 12-month cost reporting period beginning
during fiscal year 1994.
‘‘(C) LOW-COST EPISODE.—For purposes of this para-
graph, the Secretary shall define a low-cost episode in
a manner that provides that a home health agency has
an incentive to be cost efficient in delivering home health
services and that the volume of such services does not
increase as a result of factors other than patient needs.
‘‘(f) SPECIAL RULE FOR CHRISTIAN SCIENCE PROVIDERS.—
‘‘(1) PAYMENT PERMITTED FOR SERVICES.—Notwithstanding
any other provision of this title, payment shall be made under
this title for home health services furnished by Christian
Science providers who meet applicable requirements of the
First Church of Christ, Scientist, Boston, Massachusetts, and
are certified for purposes of this title under criteria established
by the Secretary, in accordance with a payment methodology
established by the Secretary.
‘‘(2) EFFECTIVE DATE.—Paragraph (1) shall apply to services
furnished during cost reporting periods which begin after the
earlier of—
‘‘(A) the date on which the Secretary establishes the
payment 
methodology 
and 
the 
certification 
criteria
described in paragraph (1), or
‘‘(B) July 1, 1996.
‘‘(g) REPORT
BY MEDICARE PAYMENT REVIEW COMMISSION.—
During the first 3 years in which payments are made under this
section, the Medicare Payment Review Commission shall annually
submit a report to Congress on the effectiveness of the payment
methodology established under this section that shall include rec-
ommendations regarding the following:
‘‘(1) Case-mix and volume increases.
‘‘(2) Quality monitoring of home health agency practices.
‘‘(3) Whether a capitated payment for home care patients
receiving care during a continuous period exceeding 165 days
is warranted.
‘‘(4) Whether public providers of service are adequately
reimbursed.
‘‘(5) On the adequacy of the exemptions and exceptions
to the limits provided under subsection (c)(1)(E).
‘‘(6) The appropriateness of the methods provided under
this section to adjust the per episode limits and annual payment
updates to reflect changes in the mix of services, number of
visits, and assignment to case categories to reflect changing
patterns of home health care.
‘‘(7) The geographic areas used to determine the per episode
limits.’’.
H. R. 2491—413
(b) PAYMENT FOR PROSTHETICS AND ORTHOTICS UNDER PART
A.—Section 1814(k) (42 U.S.C. 1395f(k)) is amended—
(1) by inserting ‘‘and prosthetics and orthotics’’ after ‘‘dura-
ble medical equipment’’; and
(2) 
by 
inserting 
‘‘and 
1834(h), 
respectively’’ 
after
‘‘1834(a)(1)’’.
(c) CONFORMING AMENDMENTS.—
(1) PAYMENTS UNDER PART A.—Section 1814(b) (42 U.S.C.
1395f(b)), as amended by section 8412(b), is amended in the
matter preceding paragraph (1) by striking ‘‘1888 and 1888A’’
and inserting ‘‘1888, 1888A, and 1894’’.
(2) TREATMENT OF ITEMS AND SERVICES PAID UNDER PART
B.—
(A) PAYMENTS UNDER PART B.—Section 1833(a)(2) (42
U.S.C. 1395l(a)(2)) is amended—
(i) by amending subparagraph (A) to read as fol-
lows:
‘‘(A) with respect to home health services—
‘‘(i) that are a type of home health service described
in section 1894(a)(2), and which are furnished to an
individual who (at the time the item or service is
furnished) is under a plan of care of a home health
agency, the amount determined under section 1894;
‘‘(ii) that are not described in clause (i) (other
than a covered osteoporosis drug) (as defined in section
1861(kk)), the lesser of—
‘‘(I) the reasonable cost of such services, as
determined under section 1861(v), or
‘‘(II) the customary charges with respect to
such services;’’.
(ii) by striking ‘‘and’’ at the end of subparagraph
(E);
(iii) by adding ‘‘and’’ at the end of subparagraph
(F); and
(iv) by adding at the end the following new
subparagraph:
‘‘(G) with respect to items and services described in
section 1861(s)(10)(A), the lesser of—
‘‘(i) the reasonable cost of such services, as deter-
mined under section 1861(v), or
‘‘(ii) the customary charges with respect to such
services,
or, if such services are furnished by a public provider
of services, or by another provider which demonstrates
to the satisfaction of the Secretary that a significant portion
of its patients are low-income (and requests that payment
be made under this provision), free of charge or at nominal
charges to the public, the amount determined in accordance
with section 1814(b)(2);’’.
(B) REQUIRING PAYMENT FOR ALL ITEMS AND SERVICES
TO BE MADE TO AGENCY.—
(i) IN
GENERAL.—The first sentence of section
1842(b)(6) (42 U.S.C. 1395u(b)(6)), as amended by sec-
tion 8415(a)(1), is amended—
(I) by striking ‘‘and (E)’’ and inserting ‘‘(E)’’;
and
H. R. 2491—414
(II) by striking the period at the end and
inserting the following: ‘‘, and (F) in the case of
types of home health services described in section
1894(a)(2) furnished to an individual who (at the
time the item or service is furnished) is under
a plan of care of a home health agency, payment
shall be made to the agency (without regard to
whether or not the item or service was furnished
by the agency, by others under arrangement with
them made by the agency, or when any other
contracting or consulting arrangement, or other-
wise).’’.
(ii) CONFORMING AMENDMENT.—Section 1832(a)(1)
(42 U.S.C. 1395k(a)(1)) is amended by striking ‘‘(2);’’
and inserting ‘‘(2) and section 1842(b)(6)(F);’’.
(C) EXCLUSIONS FROM COVERAGE.—Section 1862(a) (42
U.S.C. 1395y(a)), as amended by section 8415(a)(2), is
amended—
(i) by striking ‘‘or’’ at the end of paragraph (15);
(ii) by striking the period at the end of paragraph
(16) and inserting ‘‘or’’; and
(iii) by adding at the end the following new para-
graph:
‘‘(17) where such expenses are for home health services
furnished to an individual who is under a plan of care of
the home health agency if the claim for payment for such
services is not submitted by the agency.’’.
(3) SUNSET
OF
REASONABLE
COST
LIMITATIONS.—Section
1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by adding
at the end the following new clause:
‘‘(iv) This subparagraph shall apply only to services furnished
by home health agencies during cost reporting periods ending on
or before September 30, 1996.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to cost reporting periods beginning on or after October
1, 1996.
SEC. 8602. MAINTAINING SAVINGS RESULTING FROM TEMPORARY
FREEZE ON PAYMENT INCREASES FOR HOME HEALTH
SERVICES.
(a) BASING UPDATES
TO PER VISIT COST LIMITS
ON LIMITS
FOR
FISCAL
YEAR
1993.—Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by adding at the end the following
sentence: ‘‘In establishing limits under this subparagraph, the Sec-
retary may not take into account any changes in the costs of
the provision of services furnished by home health agencies with
respect to cost reporting periods which began on or after July
1, 1994, and before July 1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMENDMENT.—The
Secretary of Health and Human Services shall not consider the
amendment made by subsection (a) in making any exemptions
and exceptions pursuant to section 1861(v)(1)(L)(ii) of the Social
Security Act.
H. R. 2491—415
SEC. 8603. EXTENSION OF WAIVER OF PRESUMPTION OF LACK OF
KNOWLEDGE OF EXCLUSION FROM COVERAGE FOR
HOME HEALTH AGENCIES.
Section 9305(g)(3) of OBRA–1986, as amended by section 426(d)
of the Medicare Catastrophic Coverage Act of 1988 and section
4207(b)(3) of the OBRA–1990 (as renumbered by section 160(d)(4)
of the Social Security Act Amendments of 1994), is amended by
striking ‘‘December 31, 1995’’ and inserting ‘‘September 30, 1996.’’.
SEC. 8604. EXTENSION OF PERIOD OF HOME HEALTH AGENCY CERTIFI-
CATION.
Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A)) is amended—
(1) by striking ‘‘15 months’’ and inserting ‘‘36 months’’;
and
(2) by striking the second sentence and inserting the follow-
ing: ‘‘The Secretary shall establish a frequency for surveys
of home health agencies within this 36-month interval commen-
surate with the need to assure the delivery of quality home
health services.’’.
PART 2—MEDICARE SECONDARY PAYER
IMPROVEMENTS
SEC. 8611. EXTENSION AND EXPANSION OF EXISTING REQUIREMENTS.
(a) DATA MATCH.—
(1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is
amended by striking clause (iii).
(2) Section 6103(l)(12) of the Internal Revenue Code of
1986 is amended by striking subparagraph (F).
(b) APPLICATION TO DISABLED INDIVIDUALS IN LARGE GROUP
HEALTH PLANS.—
(1) 
IN
GENERAL.—Section 
1862(b)(1)(B) 
(42 
U.S.C.
1395y(b)(1)(B)) is amended—
(A) in clause (i), by striking ‘‘clause (iv)’’ and inserting
‘‘clause (iii)’’,
(B) by striking clause (iii), and
(C) by redesignating clause (iv) as clause (iii).
(2) CONFORMING AMENDMENTS.—Paragraphs (1) through (3)
of section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence
of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by
striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears and inserting
‘‘1862(b)(1)(B)(iii)’’.
(c) INDIVIDUALS WITH END STAGE RENAL DISEASE.—Section
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—
(1) in the last sentence by striking ‘‘October 1, 1998’’ and
inserting ‘‘the date of the enactment of the Medicare Preserva-
tion Act of 1995’’; and
(2) by adding at the end the following new sentence: ‘‘Effec-
tive for items and services furnished on or after the date
of the enactment of the Medicare Preservation Act of 1995,
(with respect to periods beginning on or after the date that
is 18 months prior to such date), clauses (i) and (ii) shall
be applied by substituting ‘30-month’ for ‘12-month’ each place
it appears.’’.
H. R. 2491—416
SEC. 8612. IMPROVEMENTS IN RECOVERY OF PAYMENTS.
(a) PERMITTING RECOVERY AGAINST THIRD PARTY ADMINISTRA-
TORS
OF
PRIMARY
PLANS.—Section 1862(b)(2)(B)(ii) (42 U.S.C.
1395y(b)(2)(B)(ii)) is amended—
(1) by striking ‘‘under this subsection to pay’’ and inserting
‘‘(directly, as a third-party administrator, or otherwise) to make
payment’’, and
(2) by adding at the end the following: ‘‘The United States
may not recover from a third-party administrator under this
clause in cases where the third-party administrator would not
be able to recover the amount at issue from the employer
or group health plan for whom it provides administrative serv-
ices due to the insolvency or bankruptcy of the employer or
plan.’’.
(b) 
EXTENSION
OF
CLAIMS
FILING
PERIOD.—Section
1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by adding at
the end the following new clause:
‘‘(v) CLAIMS-FILING PERIOD.—Notwithstanding any
other time limits that may exist for filing a claim
under an employer group health plan, the United
States may seek to recover conditional payments in
accordance with this subparagraph where the request
for payment is submitted to the entity required or
responsible under this subsection to pay with respect
to the item or service (or any portion thereof) under
a primary plan within the 3-year period beginning
on the date on which the item or service was fur-
nished.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to items and services furnished on or after the date
of the enactment of this Act.
CHAPTER 3—OTHER ITEMS AND SERVICES UNDER
PARTS A AND B
SEC. 8621. MEDICARE COVERAGE OF CERTAIN ANTI-CANCER DRUG
TREATMENTS.
(a) COVERAGE
OF CERTAIN SELF-ADMINISTERED ANTICANCER
DRUGS.—Section 1861(s)(2)(Q) (42 U.S.C. 1395x(s)(2)(Q)) is amend-
ed—
(1) by striking ‘‘(Q)’’ and inserting ‘‘(Q)(i)’’;
(2) by striking the semicolon at the end and inserting
‘‘, and’’; and
(3) by adding at the end the following:
‘‘(ii) an oral drug (which is approved by the Federal Food
and Drug Administration) prescribed for use as an anticancer
nonsteroidal antiestrogen for the treatment of breast cancer, but
only if the manufacturer of such drug has in effect a rebate agree-
ment with the Secretary with respect to such drug which has
substantially similar terms and conditions to the terms and condi-
tions for such agreements under section 1927 (as such section
is in effect on the date of the enactment of this clause);’’.
(b) UNIFORM COVERAGE OF ANTICANCER DRUGS IN ALL SET-
TINGS.—Section 1861(t)(2)(A) (42 U.S.C. 1395x(t)(2)(A)) is amended
by inserting ‘‘(including a nonsteroidal antiestrogen regimen)’’ after
‘‘regimen’’.
H. R. 2491—417
(c) CONFORMING
AMENDMENT.—Section 1834(j)(5)(F)(iv) (42
U.S.C. 1395m(j)(5)(F)(iv)) is amended by striking ‘‘prescribed for
use’’ and all that follows through ‘‘1861(s)(2)(Q))’’ and inserting
‘‘described in section 1861(s)(2)(Q)’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to drugs furnished on or after January 1, 1996.
SEC. 8622. ADMINISTRATIVE PROVISIONS.
(a) INDIAN HEALTH SERVICE FACILITIES.—Nothing in this Act
shall be construed to change the status under title XVIII of the
Social Security Act (42 U.S.C. 1395 et seq.) of—
(1) a federally qualified health center (as defined in section
1861(aa)(4) of such Act) which is an outpatient health program
or facility operated by a tribe or tribal organization under
the Indian Self-Determination Act or by an urban Indian
organization receiving funds under title V of the Indian Health
Care Improvement Act; or
(2) hospitals or skilled nursing facilities of the Indian
Health Service, whether operated by such Service or by an
Indian tribe or tribal organization (as those terms are defined
in section 4 of the Indian Health Care Improvement Act),
that are eligible for payments under title XVIII of the Social
Security Act, in accordance with section 1880 of such Act (42
U.S.C. 1395qq).
(b) CONFORMING AMENDMENT TO CERTIFICATION OF CHRISTIAN
SCIENCE PROVIDERS.—
(1) HOSPITALS.—Section 1861(e) (42 U.S.C. 1395x(e)) is
amended in the sixth sentence by striking ‘‘the First Church
of Christ, Scientist, Boston, Massachusetts,’’ and inserting ‘‘the
Commission for Accreditation of Christian Science Nursing
Organizations/Facilities, Inc.,’’.
(2) SKILLED
NURSING
FACILITIES.—Section 1861(y)(1) (42
U.S.C. 1395x(y)(1)) is amended by striking ‘‘the First Church
of Christ, Scientist, Boston, Massachusetts,’’ and inserting ‘‘the
Commission for Accreditation of Christian Science Nursing
Organizations/Facilities, Inc.,’’.
(3) GENERAL PROVISIONS.—
(A) UNIFORM REPORTING SYSTEMS.—Section 1122(h) (42
U.S.C. 1320a–1(h)) is amended by striking ‘‘the First
Church of Christ, Scientist, Boston, Massachusetts’’ and
inserting ‘‘the Commission for Accreditation of Christian
Science Nursing Organizations/Facilities, Inc.’’.
(B) PEER REVIEW.—Section 1162 (42 U.S.C. 1320c–11)
is amended by striking ‘‘the First Church of Christ, Sci-
entist, Boston, Massachusetts’’ and inserting ‘‘the Commis-
sion for Accreditation of Christian Science Nursing
Organizations/Facilities, Inc.’’.
(4) EFFECTIVE DATE.—The amendments made by this sub-
section shall take effect on January 1, 1997.
CHAPTER 4—FAILSAFE
SEC. 8631. FAILSAFE BUDGET MECHANISM.
(a) IN GENERAL.—Title XVIII, as amended by sections 8102(a)
and 8601(a), is amended by adding at the end the following new
section:
H. R. 2491—418
‘‘FAILSAFE BUDGET MECHANISM
‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT ADJUSTMENTS TO
ACHIEVE MEDICARE BUDGET TARGETS.—
‘‘(1) IN GENERAL.—If the Secretary determines under sub-
section (e)(3)(C) before a fiscal year (beginning with fiscal year
1998) that—
‘‘(A) the fee-for-service expenditures (as defined in sub-
section (f)) for all sectors of medicare services (as defined
in subsection (b)) for the fiscal year, will exceed
‘‘(B) the sum of the allotments specified under sub-
section (c)(2) for such fiscal year (taking into account any
adjustment in the allotment under subsection (g) for that
fiscal year) for all sectors,
then, notwithstanding any other provision of this title, there
shall be an adjustment (consistent with subsection (d)) in
applicable payment rates or payments for items and services
included in each excess spending sector in the fiscal year.
In this section, the term ‘aggregate excess spending’ means,
for a fiscal year, the amount by which the amount described
in subparagraph (A) (for the fiscal year) exceeds the amount
described in subparagraph (B) for such year.
‘‘(2) EXCESS SPENDING SECTOR.—In this section, the term
‘excess spending sector’ means, for a fiscal year, a sector of
medicare services for which the Secretary determines under
subsection (e)(3)(C)—
‘‘(A) the fee-for-service expenditures (as defined in sub-
section (f)) for the fiscal year, will exceed
‘‘(B) the allotment specified under subsection (c)(2) for
such fiscal year (taking into account any adjustment in
the allotment under subsection (g) for that fiscal year).
In this section, the term ‘excess spending’ means, for a fiscal
year with respect to such a sector, the amount by which the
amount described in subparagraph (A) (for the fiscal year and
sector) exceeds the amount described in subparagraph (B) for
such year and sector.
‘‘(b) SECTORS OF MEDICARE SERVICES DESCRIBED.—
‘‘(1) IN GENERAL.—For purposes of this section, items and
services included under each of the following subparagraphs
shall be considered to be a separate ‘sector’ of medicare services:
‘‘(A) Inpatient hospital services.
‘‘(B) Home health services.
‘‘(C) Extended care services (for inpatients of skilled
nursing facilities).
‘‘(D) Hospice care.
‘‘(E) Physicians’ services (including services and sup-
plies described in section 1861(s)(2)(A)) and services of
other health care professionals (including certified reg-
istered nurse anesthetists, nurse practitioners, physician
assistants, and clinical psychologists) for which separate
payment is made under this title.
‘‘(F) Outpatient hospital services and ambulatory facil-
ity services.
‘‘(G) Durable medical equipment and supplies, includ-
ing prosthetic devices and orthotics.
‘‘(H) Diagnostic tests (including clinical laboratory serv-
ices and x-ray services).
H. R. 2491—419
‘‘(I) Other items and services.
‘‘(2) CLASSIFICATION
OF
ITEMS
AND
SERVICES.—The Sec-
retary shall classify each type of items and services covered
and paid for separately under this title into one of the sectors
specified in paragraph (1). After publication of such classifica-
tion under subsection (e)(1), the Secretary is not authorized
to make substantive changes in such classification.
‘‘(c) ALLOTMENT.—
‘‘(1) ALLOTMENTS FOR EACH SECTOR.—For purposes of this
section, subject to subsection (g)(1), the allotment for a sector
of medicare services for a fiscal year is equal to the product
of—
‘‘(A) the total allotment for the fiscal year established
under paragraph (2), and
‘‘(B) the allotment proportion (specified under para-
graph (3)) for the sector and fiscal year involved.
‘‘(2) TOTAL ALLOTMENT.—
‘‘(A) IN GENERAL.—For purposes of this section, the
total allotment for a fiscal year is equal to—
‘‘(i) the medicare benefit budget for the fiscal year
(as specified under subparagraph (B)), reduced by
‘‘(ii) the amount of payments the Secretary esti-
mates will be made in the fiscal year under the
MedicarePlus program under part C.
In making the estimate under clause (ii), the Secretary
shall take into account estimated enrollment and demo-
graphic profile of individuals electing MedicarePlus prod-
ucts.
‘‘(B) MEDICARE BENEFIT BUDGET.—For purposes of this
subsection, subject to subparagraph (C), the ‘medicare bene-
fit budget’—
‘‘(i) for fiscal year 1996 is $194.2 billion;
‘‘(ii) for fiscal year 1997 is $206.3 billion;
‘‘(iii) for fiscal year 1998 is $217.8 billion;
‘‘(iv) for fiscal year 1999 is $229.2 billion;
‘‘(v) for fiscal year 2000 is $247.2 billion;
‘‘(vi) for fiscal year 2001 is $266.4 billion;
‘‘(vii) for fiscal year 2002 is $289.0 billion; and
‘‘(viii) for a subsequent fiscal year is equal to the
medicare benefit budget under this subparagraph for
the preceding fiscal year multiplied by the product
of (I) 1.05, and (II) 1 plus the annual percentage
increase in the average number of medicare bene-
ficiaries from the previous fiscal year to the fiscal
year involved.
‘‘(3) MEDICARE ALLOTMENT PROPORTION DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this section and
with respect to a sector of medicare services for a fiscal
year, the term ‘medicare allotment proportion’ means the
ratio of—
‘‘(i) the baseline-projected medicare expenditures
(as determined under subparagraph (B)) for the sector
for the fiscal year, to
‘‘(ii) the sum of such baseline expenditures for
all such sectors for the fiscal year.
H. R. 2491—420
‘‘(B) BASELINE-PROJECTED MEDICARE EXPENDITURES.—
In this paragraph, the ‘baseline, projected medicare
expenditures’ for a sector of medicare services—
‘‘(i) for fiscal year 1996 is equal to fee-for-service
expenditures for such sector during fiscal year 1995,
increased by the baseline annual growth rate for such
sector of medicare services for fiscal year 1996 (as
specified in table in subparagraph (C)); and
‘‘(ii) for a subsequent fiscal year is equal to the
baseline-projected medicare expenditures under this
subparagraph for the sector for the previous fiscal year
increased by the baseline annual growth rate for such
sector for the fiscal year involved (as specified in such
table).
‘‘(C) BASELINE ANNUAL GROWTH RATES.—The following
table specifies the baseline annual growth rates for each
of the sectors for different fiscal years:
‘‘For the following
sector—
Baseline annual growth rates for fiscal year—
1996
1997
1998
1999
2000
2001
2002
and
there-
after
(A) Inpatient hos-
pital services ........
5.7%
5.6%
6.0%
6.1%
5.7%
5.5%
5.2%
(B) Home health
services .................
17.2%
15.1%
11.7%
9.1%
8.4%
8.1%
7.9%
(C) Extended care
services .................
19.7%
12.3%
9.3%
8.7%
8.6%
8.4%
8.0%
(D) Hospice care ..
32.0%
24.0%
18.0%
15.0%
12.0%
10.0%
9.0%
(E) Physicians’
services .................
12.4%
9.7%
8.7%
9.0%
9.3%
9.6%
10.1%
(F) Outpatient
hospital services ..
14.7%
13.9%
14.5%
15.0%
14.1%
13.9%
14.0%
(G) Durable medi-
cal equipment and
supplies ................
16.1%
15.5%
13.7%
12.4%
13.2%
13.9%
14.5%
(H) Diagnostic
tests ......................
13.1%
11.3%
11.0%
11.4%
11.4%
11.5%
11.9%
(I) Other items
and services .........
11.2%
10.2%
10.9%
12.0%
11.6%
11.6%
11.8%
‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—
‘‘(1) PAYMENT REDUCTIONS.—
‘‘(A) IN GENERAL.—Subject to the succeeding provisions
of this subsection, the Secretary shall apply a payment
reduction for each excess spending sector for a fiscal year
in such a manner as to—
‘‘(i) make a change in payment rates (to the maxi-
mum extent practicable) at the time payment rates
are otherwise changed or subject to change for that
fiscal year; and
‘‘(ii) provide for the full appropriate adjustment
so that the fee-for-service expenditures for the sector
for the fiscal year will be reduced by 1331⁄3 percent
H. R. 2491—421
of the amount of the sector reduction target for that
sector.
‘‘(B) SECTOR
REDUCTION
TARGET.—In paragraph (1),
the ‘sector reduction target’ for an excess spending sector
for a fiscal year is equal to the product of—
‘‘(i) the amount of the excess spending for such
sector and year (as defined in subsection (a)(2)); and
‘‘(ii) the ratio of—
‘‘(I) the aggregate excess spending for the year
(as defined in subsection (a)(1)), to
‘‘(II) the sum of the amounts of the excess
spending for all excess spending sectors.
‘‘(2) TAKING INTO ACCOUNT VOLUME AND CASH FLOW.—In
providing for an adjustment in payments under this subsection
for a sector for a fiscal year, the Secretary shall take into
account (in a manner consistent with actuarial projections)—
‘‘(A) the impact of such an adjustment on the volume
or type of services provided in such sector (and other sec-
tors), and
‘‘(B) the fact that an adjustment may apply to items
and services furnished in a fiscal year (payment for which
may occur in a subsequent fiscal year),
in a manner that is consistent with assuring that total fee-
for-services expenditures for each sector for the fiscal year
will not exceed the allotment under subsection (c)(1) for such
sector for such year.
‘‘(3) PROPORTIONALITY OF REDUCTIONS WITHIN A SECTOR.—
In making adjustments under this subsection in payment for
items and services included within a sector of medicare services
for a fiscal year, the Secretary shall provide for such an adjust-
ment that results (to the maximum extent feasible) in the
same percentage reductions in aggregate Federal payments
under parts A and B for the different classes of items and
services included within the sector for the fiscal year.
‘‘(4) APPLICATION TO PAYMENTS MADE BASED ON PROSPEC-
TIVE PAYMENT RATES DETERMINED ON A FISCAL YEAR BASIS.—
‘‘(A) IN
GENERAL.—In applying subsection (a) with
respect to items and services for which payment is made
under part A or B on the basis of rates that are established
on a prospective basis for (and in advance of) a fiscal
year, the Secretary shall provide for the payment adjust-
ment under such subsection through an appropriate reduc-
tion in such rates established for items and services fur-
nished (or, in the case of payment for operating costs
of inpatient hospital services of subsection (d) hospitals
and subsection (d) Puerto Rico hospitals (as defined in
paragraphs (1)(B) and (9)(A) of section 1886(d)), discharges
occurring) during such year.
‘‘(B) DESCRIPTION OF APPLICATION TO SPECIFIC SERV-
ICES.—The payment adjustment described in subparagraph
(A) applies for a fiscal year to at least the following:
‘‘(i) UPDATE FACTOR FOR PAYMENT FOR OPERATING
COSTS OF INPATIENT HOSPITAL SERVICES OF PPS HOS-
PITALS.—To the computation of the applicable percent-
age increase specified in section 1886(d)(3)(B)(i) for
discharges occurring in the fiscal year.
H. R. 2491—422
‘‘(ii) HOME HEALTH SERVICES.—To the extent pay-
ment amounts for home health services are based on
per visit payment rates under section 1894, to the
computation of the increase in the national per visit
payment rates established for the year under section
1894(b)(2)(B).
‘‘(iii) HOSPICE CARE.—To the update of payment
rates for hospice care under section 1814(i) for services
furnished during the fiscal year.
‘‘(iv) UPDATE FACTOR FOR PAYMENT OF OPERATING
COSTS OF INPATIENT HOSPITAL SERVICES OF PPS-EXEMPT
HOSPITALS.—To the computation of the target amount
under section 1886(b)(3) for discharges occurring dur-
ing the fiscal year.
‘‘(v) COVERED NON-ROUTINE SERVICES OF SKILLED
NURSING FACILITIES.—To the computation of the facility
per stay limits for the year under section 1888A(d)
for covered non-routine services of a skilled nursing
facility (as described in such section).
‘‘(5) APPLICATION TO PAYMENTS MADE BASED ON PROSPEC-
TIVE PAYMENT RATES DETERMINED ON A CALENDAR YEAR BASIS.—
‘‘(A) IN
GENERAL.—In applying subsection (a) for a
fiscal year with respect to items and services for which
payment is made under part A or B on the basis of rates
that are established on a prospective basis for (and in
advance of) a calendar year, the Secretary shall provide
for the payment adjustment under such subsection through
an appropriate reduction in such rates established for items
and services furnished at any time during such calendar
year as follows:
‘‘(i) For fiscal year 1997, the reduction shall be
made for payment rates during calendar year 1997
in a manner so as to achieve the necessary payment
reductions for such fiscal year for items and services
furnished during the first 3 quarters of calendar year
1997.
‘‘(ii) For a subsequent fiscal year, the reduction
shall be made for payment rates during the calendar
year in which the fiscal year ends in a manner so
as to achieve the necessary payment reductions for
such fiscal year for items and services furnished during
the first 3 quarters of the calendar year, but also
taking into account the payment reductions made in
the first quarter of the fiscal year resulting from pay-
ment reductions made under this paragraph for the
previous calendar year.
‘‘(iii) Payment rate reductions effected under this
subparagraph for a calendar year and applicable to
the last 3 quarters of the fiscal year in which the
calendar year ends shall continue to apply during the
first quarter of the succeeding fiscal year.
‘‘(B) APPLICATION
IN
SPECIFIC
CASES.—The payment
adjustment described in subparagraph (A) applies for a
fiscal year to at least the following:
‘‘(i) UPDATE
IN
CONVERSION
FACTOR
FOR
PHYSI-
CIANS’ SERVICES.—To the computation of the conversion
factor under subsection (d) of section 1848 used in
H. R. 2491—423
the fee schedule established under subsection (b) of
such section, for items and services furnished during
the calendar year in which the fiscal year ends.
‘‘(ii) PAYMENT
RATES
FOR
OTHER
HEALTH
CARE
PROFESSIONALS.—To the computation of payments for
professional services, furnished during the calendar
year in which the fiscal year ends, of certified reg-
istered nurse anesthetists under section 1833(l), nurse
midwives, physician assistants, nurse practitioners and
clinical nurse specialists under section 1833(r), clinical
psychologists, clinical social workers, physical or
occupational therapists, and any other health profes-
sionals for which payment rates are based (in whole
or in part) on payments for physicians’ services.
‘‘(iii) UPDATE IN LAB FEE SCHEDULE.—To the com-
putation of the fee schedule amount under section
1833(h)(2) for clinical diagnostic laboratory services
furnished during the calendar year in which the fiscal
year ends.
‘‘(iv) UPDATE IN REASONABLE CHARGES FOR VAC-
CINES.—To the computation of the reasonable charge
for vaccines described in section 1861(s)(10) for vac-
cines furnished during the calendar year in which the
fiscal year ends.
‘‘(v) 
DURABLE
MEDICAL
EQUIPMENT-RELATED
ITEMS.—To the computation of the payment basis
under section 1834(a)(1)(B) for covered items described
in section 1834(a)(13), for items furnished during the
calendar year in which the fiscal year ends.
‘‘(vi) RADIOLOGIST SERVICES.—To the computation
of conversion factors for radiologist services under sec-
tion 1834(b), for services furnished during the calendar
year in which the fiscal year ends.
‘‘(vii) SCREENING MAMMOGRAPHY.—To the computa-
tion of payment rates for screening mammography
under section 1834(c)(1)(C)(ii), for screening mammog-
raphy performed during the calendar year in which
the fiscal year ends.
‘‘(viii) PROSTHETICS AND ORTHOTICS.—To the com-
putation of the amount to be recognized under section
1834(h) for payment for prosthetic devices and orthotics
and prosthetics, for items furnished during the cal-
endar year in which the fiscal year ends.
‘‘(ix) SURGICAL DRESSINGS.—To the computation of
the payment amount referred to in section 1834(i)(1)(B)
for surgical dressings, for items furnished during the
calendar year in which the fiscal year ends.
‘‘(x) PARENTERAL AND ENTERAL NUTRITION.—To the
computation of reasonable charge screens for payment
for parenteral and enteral nutrition under section
1834(h), for nutrients furnished during the calendar
year in which the fiscal year ends.
‘‘(xi) AMBULANCE SERVICES.—To the computation
of limits on reasonable charges for ambulance services,
for services furnished during the calendar year in
which the fiscal year ends.
H. R. 2491—424
‘‘(6) APPLICATION TO PAYMENTS MADE BASED ON COSTS DUR-
ING A COST REPORTING PERIOD.—
‘‘(A) IN
GENERAL.—In applying subsection (a) for a
fiscal year with respect to items and services for which
payment is made under part A or B on the basis of costs
incurred for items and services in a cost reporting period,
the Secretary shall provide for the payment adjustment
under such subsection for a fiscal year through an appro-
priate proportional reduction in the payment for costs for
such items and services incurred at any time during each
cost reporting period any part of which occurs during the
fiscal year involved, but only (for each such cost reporting
period) in the same proportion as the fraction of the cost
reporting period that occurs during the fiscal year involved.
‘‘(B) APPLICATION
IN
SPECIFIC
CASES.—The payment
adjustment described in subparagraph (A) applies for a
fiscal year to at least the following:
‘‘(i) CAPITAL-RELATED
COSTS
OF
HOSPITAL
SERV-
ICES.—To the computation of payment amounts for
inpatient and outpatient hospital services under sec-
tions 1886(g) and 1861(v) for portions of cost reporting
periods occurring during the fiscal year.
‘‘(ii) OPERATING
COSTS
FOR
PPS-EXEMPT
HOS-
PITALS.—To the computation of payment amounts
under section 1886(b) for operating costs of inpatient
hospital services of PPS-exempt hospitals for portions
of cost reporting periods occurring during the fiscal
year.
‘‘(iii) DIRECT GRADUATE MEDICAL EDUCATION.—To
the computation of payment amounts under section
1886(h) for reasonable costs of direct graduate medical
education costs for portions of cost reporting periods
occurring during the fiscal year.
‘‘(iv) INPATIENT
RURAL
PRIMARY
CARE
HOSPITAL
SERVICES.—To the computation of payment amounts
under section 1814(j) for inpatient rural primary care
hospital services for portions of cost reporting periods
occurring during the fiscal year.
‘‘(v) EXTENDED CARE SERVICES OF A SKILLED NURS-
ING
FACILITY.—To 
the 
computation 
of 
payment
amounts under section 1861(v) for post-hospital
extended care services of a skilled nursing facility
(other than covered non-routine services subject to sec-
tion 1888A) for portions of cost reporting periods occur-
ring during the fiscal year.
‘‘(vi) REASONABLE COST CONTRACTS.—To the com-
putation 
of 
payment 
amounts 
under 
section
1833(a)(1)(A) for organizations for portions of cost
reporting periods occurring during the fiscal year.
‘‘(vii) HOME HEALTH SERVICES.—Subject to para-
graph (4)(B)(ii), for payment amounts for home health
services, for portions of cost reporting periods occurring
during such fiscal year.
‘‘(7) OTHER.—In applying subsection (a) for a fiscal year
with respect to items and services for which payment is made
under part A or B on a basis not described in a previous
paragraph of this subsection, the Secretary shall provide for
H. R. 2491—425
the payment adjustment under such subsection through an
appropriate proportional reduction in the payments (or payment
bases for items and services furnished) during the fiscal year.
‘‘(8) ADJUSTMENT OF PAYMENT LIMITS.—The Secretary shall
provide for such proportional adjustment in any limits on pay-
ment established under part A or B for items and services
within a sector as may be appropriate based on (and in order
to properly carry out) the adjustment to the amount of payment
under this subsection in the sector.
‘‘(9) REFERENCES TO PAYMENT RATES.—Except as the Sec-
retary may provide, any reference in this title (other than
this section) to a payment rate is deemed a reference to such
a rate as adjusted under this subsection.
‘‘(e) PUBLICATION OF DETERMINATIONS; JUDICIAL REVIEW.—
‘‘(1) ONE-TIME PUBLICATION OF SECTORS AND GENERAL PAY-
MENT ADJUSTMENT METHODOLOGY.—Not later than October 1,
1996, the Secretary shall publish in the Federal Register the
classification of medicare items and services into the sectors
of medicare services under subsection (b) and the general meth-
odology to be used in applying payment adjustments to the
different classes of items and services within the sectors.
‘‘(2) INCLUSION OF INFORMATION IN PRESIDENT’S BUDGET.—
‘‘(A) IN GENERAL.—With respect to fiscal years begin-
ning with fiscal year 1999, the President shall include
in the budget submitted under section 1105 of title 31,
United States Code, information on—
‘‘(i) the fee-for-service expenditures, within each
sector, for the second previous fiscal year, and how
such expenditures compare to the adjusted sector allot-
ment for that sector for that fiscal year; and
‘‘(ii) actual annual growth rates for fee-for-service
expenditures in the different sectors in the second pre-
vious fiscal year.
‘‘(B) RECOMMENDATIONS
REGARDING
GROWTH
FAC-
TORS.—The President may include in such budget for a
fiscal year (beginning with fiscal year 1998) recommenda-
tions regarding percentages that should be applied (for
one or more fiscal years beginning with that fiscal year)
instead of the baseline annual growth rates under sub-
section (c)(3)(C). Such recommendations shall take into
account medically appropriate practice patterns.
‘‘(3) 
DETERMINATIONS
CONCERNING
PAYMENT
ADJUST-
MENTS.—
‘‘(A) RECOMMENDATIONS OF COMMISSION.—By not later
than March 1 of each year (beginning with 1997), the
Medicare Payment Review Commission shall submit to the
Secretary and the Congress a report that analyzes the
previous operation (if any) of this section and that includes
recommendations concerning the manner in which this sec-
tion should be applied for the following fiscal year.
‘‘(B) PRELIMINARY
NOTICE
BY
SECRETARY.—Not later
than May 15 preceding the beginning of each fiscal year
(beginning with fiscal year 1998), the Secretary shall pub-
lish in the Federal Register a notice containing the Sec-
retary’s preliminary determination, for each sector of medi-
care services, concerning the following:
H. R. 2491—426
‘‘(i) The projected allotment under subsection (c)
for such sector for the fiscal year.
‘‘(ii) Whether there will be a payment adjustment
for items and services included in such sector for the
fiscal year under subsection (a).
‘‘(iii) If there will be such an adjustment, the size
of such adjustment and the methodology to be used
in making such a payment adjustment for classes of
items and services included in such sector.
‘‘(iv) Beginning with fiscal year 1999, the fee-for-
service expenditures for such sector for the second
preceding fiscal year.
Such notice shall include an explanation of the basis for
such determination. Determinations under this subpara-
graph and subparagraph (C) shall be based on the best
data available at the time of such determinations.
‘‘(C) FINAL DETERMINATION.—Not later than September
1 preceding the beginning of each fiscal year (beginning
with fiscal year 1998), the Secretary shall publish in the
Federal Register a final determination, for each sector of
medicare services, concerning the matters described in
subparagraph (B) and an explanation of the reasons for
any differences between such determination and the
preliminary determination for such fiscal year published
under subparagraph (B).
‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDICIAL REVIEW.—
There shall be no administrative or judicial review under sec-
tion 1878 or otherwise of—
‘‘(A) the classification of items and services among
the sectors of medicare services under subsection (b),
‘‘(B) the determination of the amounts of allotments
for the different sectors of medicare services under sub-
section (c),
‘‘(C) the determination of the amount (or method of
application) of any payment adjustment under subsection
(d), or
‘‘(D) any adjustment in an allotment effected under
subsection (g).
‘‘(f) FEE-FOR-SERVICE EXPENDITURES DEFINED.—In this section,
the term ‘fee-for-service expenditures’, for items and services within
a sector of medicare services in a fiscal year, means amounts
payable for such items and services which are furnished during
the fiscal year, and—
‘‘(1) includes types of expenses otherwise reimbursable
under parts A and B (including administrative costs incurred
by organizations described in sections 1816 and 1842) with
respect to such items and services, and
‘‘(2) does not include amounts paid under part C.
‘‘(g) LOOK-BACK ADJUSTMENT
IN ALLOTMENTS TO REFLECT
ACTUAL EXPENDITURES.—
‘‘(1) DETERMINATIONS.—
‘‘(A) IN GENERAL.—If the Secretary estimates under
subsection (e)(3)(B) with respect to a particular fiscal year
(beginning with fiscal year 1998) that—
‘‘(i) the fee-for-service expenditures for all sectors
of medicare services for the second preceding fiscal
year, exceeded
H. R. 2491—429
‘‘(iii) improves access to hospital and other health
services for rural residents of the State;
‘‘(B) has developed the rural health care plan described
in subparagraph (A) in consultation with the hospital
association of the State, rural hospitals located in the State,
and the State Office of Rural Health (or, in the case of
a State in the process of developing such plan, that assures
the Secretary that the State will consult with its State
hospital association, rural hospitals located in the State,
and the State Office of Rural Health in developing such
plan);
‘‘(2) assurances that the State has designated (consistent
with the rural health care plan described in paragraph (1)(A)),
or is in the process of so designating, rural nonprofit or public
hospitals or facilities located in the State as critical access
hospitals; and
‘‘(3) such other information and assurances as the Secretary
may require.
‘‘(c) 
MEDICARE
RURAL
HOSPITAL
FLEXIBILITY
PROGRAM
DESCRIBED.—
‘‘(1) IN GENERAL.—A State that has submitted an applica-
tion in accordance with subsection (b), may establish a medicare
rural hospital flexibility program that provides that—
‘‘(A) the State shall develop at least one rural health
network (as defined in subsection (d)) in the State; and
‘‘(B) at least one facility in the State shall be designated
as a critical access hospital in accordance with paragraph
(2).
‘‘(2) STATE DESIGNATION OF FACILITIES.—
‘‘(A) IN GENERAL.—A State may designate one or more
facilities as a critical access hospital in accordance with
subparagraph (B).
‘‘(B) CRITERIA FOR DESIGNATION AS CRITICAL ACCESS
HOSPITAL.—A State may designate a facility as a critical
access hospital if the facility—
‘‘(i) is located in a county (or equivalent unit of
local government) in a rural area (as defined in section
1886(d)(2)(D)) that—
‘‘(I) is located more than a 35-mile drive from
a hospital, or another facility described in this
subsection, or
‘‘(II) is certified by the State as being a nec-
essary provider of health care services to residents
in the area;
‘‘(ii) makes available 24-hour emergency care serv-
ices that a State determines are necessary for ensuring
access to emergency care services in each area served
by a critical access hospital;
‘‘(iii) provides not more than 6 acute care inpatient
beds (meeting such standards as the Secretary may
establish) for providing inpatient care for a period not
to exceed 72 hours (unless a longer period is required
because transfer to a hospital is precluded because
of inclement weather or other emergency conditions),
except that a peer review organization or equivalent
entity may, on request, waive the 72-hour restriction
on a case-by-case basis;
H. R. 2491—430
‘‘(iv) meets such staffing requirements as would
apply under section 1861(e) to a hospital located in
a rural area, except that—
‘‘(I) the facility need not meet hospital stand-
ards relating to the number of hours during a
day, or days during a week, in which the facility
must be open and fully staffed, except insofar as
the facility is required to make available emer-
gency care services as determined under clause
(ii) and must have nursing services available on
a 24-hour basis, but need not otherwise staff the
facility except when an inpatient is present,
‘‘(II) the facility may provide any services
otherwise required to be provided by a full-time,
on-site dietitian, pharmacist, laboratory techni-
cian, medical technologist, and radiological tech-
nologist on a part-time, off-site basis under
arrangements as defined in section 1861(w)(1), and
‘‘(III) the inpatient care described in clause
(iii) may be provided by a physician’s assistant,
nurse practitioner, or clinical nurse specialist sub-
ject to the oversight of a physician who need not
be present in the facility; and
‘‘(v) meets the requirements of subparagraph (I)
of paragraph (2) of section 1861(aa).
‘‘(d) RURAL HEALTH NETWORK DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this section, the term
‘rural health network’ means, with respect to a State, an
organization consisting of—
‘‘(A) at least 1 facility that the State has designated
or plans to designate as a critical access hospital, and
‘‘(B) at least 1 hospital that furnishes acute care serv-
ices.
‘‘(2) AGREEMENTS.—
‘‘(A) IN GENERAL.—Each critical access hospital that
is a member of a rural health network shall have an
agreement with respect to each item described in subpara-
graph (B) with at least 1 hospital that is a member of
the network.
‘‘(B) ITEMS DESCRIBED.—The items described in this
subparagraph are the following:
‘‘(i) Patient referral and transfer.
‘‘(ii) The development and use of communications
systems including (where feasible)—
‘‘(I) telemetry systems, and
‘‘(II) systems for electronic sharing of patient
data.
‘‘(iii) The provision of emergency and non-emer-
gency transportation among the facility and the hos-
pital.
‘‘(C) CREDENTIALING AND QUALITY ASSURANCE.—Each
critical access hospital that is a member of a rural health
network shall have an agreement with respect to
credentialing and quality assurance with at least 1—
‘‘(i) hospital that is a member of the network;
‘‘(ii) peer review organization or equivalent entity;
or
H. R. 2491—431
‘‘(iii) other appropriate and qualified entity identi-
fied in the State rural health care plan.
‘‘(e) CERTIFICATION BY THE SECRETARY.—The Secretary shall
certify a facility as a critical access hospital if the facility—
‘‘(1) is located in a State that has established a medicare
rural hospital flexibility program in accordance with subsection
(c);
‘‘(2) is designated as a critical access hospital by the State
in which it is located; and
‘‘(3) meets such other criteria as the Secretary may require.
‘‘(f) PERMITTING MAINTENANCE OF SWING BEDS.—Nothing in
this section shall be construed to prohibit a State from designating
or the Secretary from certifying a facility as a critical access hospital
solely because, at the time the facility applies to the State for
designation as a critical access hospital, there is in effect an agree-
ment between the facility and the Secretary under section 1883
under which the facility’s inpatient hospital facilities are used for
the furnishing of extended care services, except that the number
of beds used for the furnishing of such services may not exceed
12 beds (minus the number of inpatient beds used for providing
inpatient care in the facility pursuant to subsection (c)(2)(B)(iii)).
For purposes of the previous sentence, the number of beds of the
facility used for the furnishing of extended care services shall
not include any beds of a unit of the facility that is licensed
as a distinct-part skilled nursing facility at the time the facility
applies to the State for designation as a critical access hospital.
‘‘(g) WAIVER OF CONFLICTING PART A PROVISIONS.—The Sec-
retary is authorized to waive such provisions of this part and
part C as are necessary to conduct the program established under
this section.’’.
(b) PART A AMENDMENTS RELATING TO RURAL PRIMARY CARE
HOSPITALS AND CRITICAL ACCESS HOSPITALS.—
(1) DEFINITIONS.—Section 1861(mm) (42 U.S.C. 1395x(mm))
is amended to read as follows:
‘‘CRITICAL ACCESS HOSPITAL; CRITICAL ACCESS HOSPITAL SERVICES
‘‘(mm)(1) The term ‘critical access hospital’ means a facility
certified by the Secretary as a critical access hospital under section
1820(e).
‘‘(2) The term ‘inpatient critical access hospital services’ means
items and services, furnished to an inpatient of a critical access
hospital by such facility, that would be inpatient hospital services
if furnished to an inpatient of a hospital by a hospital.’’.
(2) COVERAGE AND PAYMENT.—(A) Section 1812(a)(1) (42
U.S.C. 1395d(a)(1)) is amended by striking ‘‘or inpatient rural
primary care hospital services’’ and inserting ‘‘or inpatient criti-
cal access hospital services’’.
(B) Sections 1813(a) and section 1813(b)(3)(A) (42 U.S.C.
1395e(a), 1395e(b)(3)(A)) are each amended by striking
‘‘inpatient rural primary care hospital services’’ each place it
appears, and inserting ‘‘inpatient critical access hospital serv-
ices’’.
(C) Section 1813(b)(3)(B) (42 U.S.C. 1395e(b)(3)(B)) is
amended by striking ‘‘inpatient rural primary care hospital
services’’ and inserting ‘‘inpatient critical access hospital serv-
ices’’.
(D) Section 1814 (42 U.S.C. 1395f) is amended—
H. R. 2491—432
(i) in subsection (a)(8) by striking ‘‘rural primary care
hospital’’ each place it appears and inserting ‘‘critical access
hospital’’; and
(ii) in subsection (b), by striking ‘‘other than a rural
primary care hospital providing inpatient rural primary
care hospital services,’’ and inserting ‘‘other than a critical
access hospital providing inpatient critical access hospital
services,’’; and
(iii) by amending subsection (l) to read as follows:
‘‘(l) PAYMENT FOR INPATIENT CRITICAL ACCESS HOSPITAL SERV-
ICES.—The amount of payment under this part for inpatient critical
access hospital services is the reasonable costs of the critical access
hospital in providing such services.’’.
(3) TREATMENT OF CRITICAL ACCESS HOSPITALS AS PROVID-
ERS
OF
SERVICES.—(A) Section 1861(u) (42 U.S.C. 1395x(u))
is amended by striking ‘‘rural primary care hospital’’ and insert-
ing ‘‘critical access hospital’’.
(B) The first sentence of section 1864(a) (42 U.S.C.
1395aa(a)) is amended by striking ‘‘a rural primary care hos-
pital’’ and inserting ‘‘a critical access hospital’’.
(4) CONFORMING AMENDMENTS.—(A) Section 1128A(b)(1) (42
U.S.C. 1320a–7a(b)(1)) is amended by striking ‘‘rural primary
care hospital’’ each place it appears and inserting ‘‘critical
access hospital’’.
(B) Section 1128B(c) (42 U.S.C. 1320a–7b(c)) is amended
by striking ‘‘rural primary care hospital’’ and inserting ‘‘critical
access hospital’’.
(C) Section 1134 (42 U.S.C. 1320b–4) is amended by strik-
ing ‘‘rural primary care hospitals’’ each place it appears and
inserting ‘‘critical access hospitals’’.
(D) Section 1138(a)(1) (42 U.S.C. 1320b–8(a)(1)) is
amended—
(i) in the matter preceding subparagraph (A), by strik-
ing ‘‘rural primary care hospital’’ and inserting ‘‘critical
access hospital’’; and
(ii) in the matter preceding clause (i) of subparagraph
(A), by striking ‘‘rural primary care hospital’’ and inserting
‘‘critical access hospital’’.
(E) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is
amended by striking ‘‘rural primary care hospital’’ and inserting
‘‘critical access hospital’’.
(F) Section 1833 (42 U.S.C. 1395l) is amended—
(i) in subsection (h)(5)(A)(iii), by striking ‘‘rural primary
care hospital’’ and inserting ‘‘critical access hospital’’;
(ii) in subsection (i)(1)(A), by striking ‘‘rural primary
care hospital’’ and inserting ‘‘critical access hospital’’;
(iii) in subsection (i)(3)(A), by striking ‘‘rural primary
care hospital services’’ and inserting ‘‘critical access hos-
pital services’’;
(iv) in subsection (l)(5)(A), by striking ‘‘rural primary
care hospital’’ each place it appears and inserting ‘‘critical
access hospital’’; and
(v) in subsection (l)(5)(B), by striking ‘‘rural primary
care hospital’’ each place it appears and inserting ‘‘critical
access hospital’’.
H. R. 2491—433
(G) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by
striking ‘‘rural primary care hospital’’ each place it appears
and inserting ‘‘critical access hospital’’.
(H) Section 1842(b)(6)(A)(ii) (42 U.S.C. 1395u(b)(6)(A)(ii))
is amended by striking ‘‘rural primary care hospital’’ and insert-
ing ‘‘critical access hospital’’.
(I) Section 1861 (42 U.S.C. 1395x) is amended—
(i) in subsection (a)—
(I) in paragraph (1), by striking ‘‘inpatient rural
primary care hospital services’’ and inserting ‘‘inpatient
critical access hospital services’’; and
(II) in paragraph (2), by striking ‘‘rural primary
care hospital’’ and inserting ‘‘critical access hospital’’;
(ii) in the last sentence of subsection (e), by striking
‘‘rural primary care hospital’’ and inserting ‘‘critical access
hospital’’;
(iii) in subsection (v)(1)(S)(ii)(III), by striking ‘‘rural
primary care hospital’’ and inserting ‘‘critical access hos-
pital’’;
(iv) in subsection (w)(1), by striking ‘‘rural primary
care hospital’’ and inserting ‘‘critical access hospital’’; and
(v) in subsection (w)(2), by striking ‘‘rural primary
care hospital’’ each place it appears and inserting ‘‘critical
access hospital’’.
(J) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended
by striking ‘‘rural primary care hospital’’ each place it appears
and inserting ‘‘critical access hospital’’.
(K) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended—
(i) in subparagraph (F)(ii), by striking ‘‘rural primary
care hospitals’’ and inserting ‘‘critical access hospitals’’;
(ii) in subparagraph (H), in the matter preceding clause
(i), by striking ‘‘rural primary care hospitals’’ and ‘‘rural
primary care hospital services’’ and inserting ‘‘critical
access hospitals’’ and ‘‘critical access hospital services’’,
respectively;
(iii) in subparagraph (I), in the matter preceding clause
(i), by striking ‘‘rural primary care hospital’’ and inserting
‘‘critical access hospital’’; and
(iv) in subparagraph (N)—
(I) in the matter preceding clause (i), by striking
‘‘rural primary care hospitals’’ and inserting ‘‘critical
access hospitals’’, and
(II) in clause (i), by striking ‘‘rural primary care
hospital’’ and inserting ‘‘critical access hospital’’.
(L) Section 1866(a)(3) (42 U.S.C. 1395cc(a)(3)) is amended—
(i) by striking ‘‘rural primary care hospital’’ each place
it appears in subparagraphs (A) and (B) and inserting
‘‘critical access hospital’’; and
(ii) in subparagraph (C)(ii)(II), by striking ‘‘rural pri-
mary care hospitals’’ each place it appears and inserting
‘‘critical access hospitals’’.
(M) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended
by striking ‘‘rural primary care hospital’’ and inserting ‘‘critical
access hospital’’.
(c) PAYMENT CONTINUED
TO DESIGNATED EACHS.—Section
1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is amended—