100
(b) ADJUSTMENT FOR CASE MIX CHANGES.—
(1) IN
GENERAL.—Section 1833(t)(3)(C) (42
U.S.C. 1395l(t)(3)(C)) is amended—
(A) by redesignating clause (iii) as clause
(iv); and
(B) by inserting after clause (ii) the fol-
lowing new clause:
‘‘(iii) ADJUSTMENT FOR SERVICE MIX
CHANGES.—Insofar as the Secretary deter-
mines that the adjustments for service mix
under paragraph (2) for a previous year
(or estimates that such adjustments for a
future year) did (or are likely to) result in
a change in aggregate payments under this
subsection during the year that are a re-
sult of changes in the coding or classifica-
tion of covered OPD services that do not
reflect real changes in service mix, the Sec-
retary may adjust the conversion factor
computed under this subparagraph for
subsequent years so as to eliminate the ef-
fect of such coding or classification
changes.’’.
101
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall take effect as if included in
the enactment of BBA.
SEC. 402. CLARIFYING PROCESS AND STANDARDS FOR DE-
TERMINING ELIGIBILITY OF DEVICES FOR
PASS-THROUGH PAYMENTS UNDER HOSPITAL
OUTPATIENT PPS.
(a) IN GENERAL.—Section 1833(t)(6) (42 U.S.C.
1395l(t)(6)) is amended—
(1) by redesignating subparagraphs (C) and
(D) as subparagraphs (D) and (E), respectively; and
(2) by striking subparagraph (B) and inserting
the following new subparagraphs:
‘‘(B) USE
OF
CATEGORIES
IN
DETER-
MINING ELIGIBILITY OF A DEVICE FOR PASS-
THROUGH
PAYMENTS.—The following provi-
sions apply for purposes of determining whether
a medical device qualifies for additional pay-
ments under clause (ii) or (iv) of subparagraph
(A):
‘‘(i) ESTABLISHMENT OF INITIAL CAT-
EGORIES.—The Secretary shall initially es-
tablish under this clause categories of med-
ical devices based on type of device by
April 1, 2001. Such categories shall be es-
102
tablished in a manner such that each med-
ical device that meets the requirements of
clause (ii) or (iv) of subparagraph (A) as
of as of January 1, 2001, is included in
such a category and no such device is in-
cluded in more than one category. For pur-
poses of the preceding sentence, whether a
medical device meets such requirements as
of such date shall be determined on the
basis of the program memoranda issued
before such date or if the Secretary deter-
mines the medical device would have been
included in the program memoranda but
for the requirement of subparagraph
(A)(iv)(I). The categories may be estab-
lished under this clause by program memo-
randum or otherwise, after consultation
with groups representing hospitals, manu-
facturers of medical devices, and other af-
fected parties.
‘‘(ii) ESTABLISHING
CRITERIA
FOR
ADDITIONAL CATEGORIES.—
‘‘(I) IN
GENERAL.—The Sec-
retary shall establish criteria that will
be used for creation of additional cat-
103
egories (other than those established
under clause (i)) through rulemaking
(which may include use of an interim
final rule with comment period).
‘‘(II) 
STANDARD.—Such 
cat-
egories shall be established under this
clause in a manner such that no med-
ical device is described by more than
one category. Such criteria shall in-
clude a test of whether the average
cost of devices that would be included
in a category and are in use at the
time the category is established is not
insignificant, as described in subpara-
graph (A)(iv)(II).
‘‘(III) DEADLINE.—Criteria shall
first be established under this clause
by July 1, 2001. The Secretary may
establish in compelling circumstances
categories under this clause before the
date such criteria are established.
‘‘(IV) ADDING
CATEGORIES.—
The Secretary shall promptly establish
a new category of medical devices
under this clause for any medical de-
104
vice that meets the requirements of
subparagraph (A)(iv) and for which
none of the categories in effect (or
that were previously in effect) is ap-
propriate.
‘‘(iii) PERIOD FOR WHICH CATEGORY
IS IN EFFECT.—A category of medical de-
vices established under clause (i) or clause
(ii) shall be in effect for a period of at
least 2 years, but not more than 3 years,
that begins—
‘‘(I) in the case of a category es-
tablished under clause (i), on the first
date on which payment was made
under this paragraph for any device
described by such category (including
payments made during the period be-
fore April 1, 2001); and
‘‘(II) in the case of any other
category, on the first date on which
payment is made under this para-
graph for any medical device that is
described by such category.
‘‘(iv) REQUIREMENTS
TREATED
AS
MET.—A medical device shall be treated as
105
meeting the requirements of subparagraph
(A)(iv) if—
‘‘(I) the device is described by a
category established and in effect
under clause (i); or
‘‘(II) the device is described by a
category established and in effect
under clause (ii) and an application
under section 515 of the Federal
Food, Drug, and Cosmetic Act has
been approved with respect to the de-
vice, or the device has been cleared for
market under section 510(k) of such
Act, or the device is exempt from the
requirements of section 510(k) of
such Act pursuant to subsection (l) or
(m) of section 510 of such Act or sec-
tion 520(g) of such Act.
Nothing in this clause shall be construed
as requiring an application or prior ap-
proval (other than that described in sub-
clause (II)) in order for a covered device to
qualify for payment under this paragraph.
‘‘(C) LIMITED PERIOD OF PAYMENT.—
106
‘‘(i) DRUGS AND BIOLOGICALS.—The
payment under this paragraph with respect
to a drug or biological shall only apply dur-
ing a period of at least 2 years, but not
more than 3 years, that begins—
‘‘(I) on the first date this sub-
section is implemented in the case of
a drug or biological described in
clause (i), (ii), or (iii) of subparagraph
(A) and in the case of a drug or bio-
logical described in subparagraph
(A)(iv) and for which payment under
this part is made as an outpatient
hospital service before such first date;
or
‘‘(II) in the case of a drug or bio-
logical described in subparagraph
(A)(iv) not described in subclause (I),
on the first date on which payment is
made under this part for the drug or
biological as an outpatient hospital
service.
‘‘(ii) MEDICAL
DEVICES.—Payment
shall be made under this paragraph with
107
respect to a medical device only if such
device—
‘‘(I) is described by a category of
medical devices established and in ef-
fect under subparagraph (B); and
‘‘(II) is provided as part of a
service (or group of services) paid for
under this subsection and provided
during the period for which such cat-
egory is in effect under such subpara-
graph.’’.
(b) CONFORMING AMENDMENTS.—Section 1833(t)
(42 U.S.C. 1395l(t)) is further amended—
(1) in paragraph (6)(A)(iv)(II), by striking ‘‘the
cost of the device, drug, or biological’’ and inserting
‘‘the cost of the drug or biological or the average
cost of the category of devices’’;
(2) in paragraph (6)(D) (as redesignated by
subsection 
(a)(1)), 
by 
striking 
‘‘subparagraph
(D)(iii)’’ in the matter preceding clause (i) and in-
serting ‘‘subparagraph (E)(iii)’’; and
(3) in paragraph (12)(E), by striking ‘‘addi-
tional payments (consistent with paragraph (6)(B))’’
and inserting ‘‘additional payments, the determina-
tion and deletion of initial and new categories (con-
108
sistent with subparagraphs (B) and (C) of para-
graph (6))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section take effect on the date of the enactment of
this Act.
(d) TRANSITION.—
(1) IN GENERAL.—In the case of a medical de-
vice provided as part of a service (or group of serv-
ices) furnished during the period before initial cat-
egories are implemented under subparagraph (B)(i)
of section 1833(t)(6) of the Social Security Act (as
amended by subsection (a)), payment shall be made
for such device under such section in accordance
with the provisions in effect before the date of the
enactment of this Act, except that, beginning on the
date that is 30 days after the date of the enactment
of this Act, payment shall also be made for such a
device that is not included in a program memo-
randum described in such subparagraph if the Sec-
retary of Health and Human Services determines
that the device is likely to be described by such an
initial category or would have been included in such
program memoranda but for the requirement of sub-
paragraph (A)(iv)(I) of that section.
109
(2) APPLICATION OF CURRENT PROCESS.—Not-
withstanding any other provision of law, the Sec-
retary shall continue to accept applications with re-
spect to medical devices under the process estab-
lished pursuant to paragraph (6) of section 1833(t)
of the Social Security Act (as in effect on the day
before the date of the enactment of this Act)
through December 1, 2000, and any device—
(A) with respect to which an application
was submitted (pursuant to such process) on or
before such date; and
(B) that meets the requirements of clause
(ii) or (iv) of subparagraph (A) of such para-
graph (as determined pursuant to such proc-
ess),
shall be treated as a device with respect to which an
initial category is required to be established under
subparagraph (B)(i) of such paragraph (as amended
by subsection (a)(2)).
SEC. 403. APPLICATION OF OPD PPS TRANSITIONAL COR-
RIDOR PAYMENTS TO CERTAIN HOSPITALS
THAT DID NOT SUBMIT A 1996 COST REPORT.
(a) IN GENERAL.—Section 1833(t)(7)(F)(ii)(I) (42
U.S.C. 1395l(t)(7)(F)(ii)(I)) is amended by inserting ‘‘(or
in the case of a hospital that did not submit a cost report
110
for such period, during the first subsequent cost reporting
period ending before 2001 for which the hospital sub-
mitted a cost report)’’ after ‘‘1996’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the enact-
ment of BBRA.
SEC. 404. APPLICATION OF RULES FOR DETERMINING PRO-
VIDER-BASED STATUS FOR CERTAIN ENTI-
TIES.
(a) GRANDFATHER.—Notwithstanding any other pro-
vision of law, for purposes of making determinations of
provider-based status under title XVIII of the Social Secu-
rity Act on or after October 1, 2000, any facility or organi-
zation that is treated as provider-based in relation to a
hospital or critical access hospital under such title as of
October 1, 2000—
(1) shall continue to be treated as provider-
based in relation to such hospital or critical access
hospital under such title during the 2-year period
beginning on October 1, 2000; and
(2) the requirements, limitations, and exclu-
sions specified in paragraphs (d), (e), (f), and (h) of
section 413.65 of title 42, Code of Federal Regula-
tions shall not apply to such facility or organization
111
in relation to such hospital or critical access hospital
until after the end of such 2-year period.
(b) TEMPORARY CRITERIA.—For purposes of title
XVIII of the Social Security Act—
(1) a facility or organization for which a deter-
mination of provider-based status in relation to a
hospital or critical access hospital is requested on or
after October 1, 2000, and before October 1, 2002,
may not be treated as not having provider-based sta-
tus in relation to such a hospital for any period be-
fore a determination is made with respect to such
status pursuant to such request; and
(2) in making a determination with respect to
such status for any facility or organization in rela-
tionship to such a hospital on or after October 1,
2000, the following rules apply:
(A) The facility or organization shall be
treated as satisfying any requirements and
standards for geographic location in relation to
such a hospital if the facility or organization—
(i) satisfies the requirements of sec-
tion 413.65(d)(7) of title 42, Code of Fed-
eral Regulations; or
112
(ii) is located not more than 35 miles
from the main campus of the hospital or
critical access hospital.
(B) The facility or organization shall be
treated as satisfying any of the requirements
and standards for geographic location in rela-
tion to such a hospital if the facility or organi-
zation is owned and operated by a hospital or
critical access hospital that—
(i) is owned or operated by a unit of
State or local government, is a public or
private nonprofit corporation that is for-
mally granted governmental powers by a
unit of State or local government, or is a
private hospital that has a contract with a
State or local government that includes the
operation of clinics located off the main
campus of the hospital to assure access in
a well-defined service area to health care
services for low-income individuals who are
not entitled to benefits under title XVIII
(or medical assistance under a State plan
under title XIX) of such Act; and
(ii) has a disproportionate share ad-
justment percentage (as determined under
113
section 1886(d)(5)(F) of such Act (42
U.S.C. 1395ww(d)(5)(F))) greater than
11.75 percent or is described in clause
(i)(II) of such section.
(c) DEFINITIONS.—For purposes of this section, the
terms ‘‘hospital’’ and ‘‘critical access hospital’’ have the
meanings given such terms in subsections (e) and
(mm)(1), respectively, of section 1861 of the Social Secu-
rity Act (42 U.S.C. 1395x).
SEC. 405. TREATMENT OF CHILDREN’S HOSPITALS UNDER
PROSPECTIVE PAYMENT SYSTEM.
(a) IN
GENERAL.—Section 1833(t) (42 U.S.C.
1395l(t)) is amended—
(1) in the heading of paragraph (7)(D)(ii), by
inserting ‘‘AND CHILDREN’S HOSPITALS’’ after ‘‘CAN-
CER HOSPITALS’’; and
(2) in paragraphs (7)(D)(ii) and (11), by strik-
ing 
‘‘section 
1886(d)(1)(B)(v)’’ 
and 
inserting
‘‘clause (iii) or (v) of section 1886(d)(1)(B)’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply as if included in the enactment of
section 202 of BBRA (113 Stat. 1501A–342).
114
SEC. 
406. 
INCLUSION 
OF 
TEMPERATURE 
MONITORED
CRYOABLATION 
IN 
TRANSITIONAL 
PASS-
THROUGH FOR CERTAIN MEDICAL DEVICES,
DRUGS, AND BIOLOGICALS UNDER OPD PPS.
(a) IN GENERAL.—Section 1833(t)(6)(A)(ii) (42
U.S.C. 1395l(t)(6)(A)(ii)) is amended by inserting ‘‘or
temperature monitored cryoablation’’ after ‘‘device of
brachytherapy’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to devices furnished on or after
April 1, 2001.
Subtitle B—Provisions Relating to
Physicians’ Services
SEC. 411. GAO STUDIES RELATING TO PHYSICIANS’ SERV-
ICES.
(a) STUDY OF SPECIALIST PHYSICIANS’ SERVICES
FURNISHED
IN PHYSICIANS’ OFFICES
AND HOSPITAL
OUTPATIENT DEPARTMENT SERVICES.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study to examine the
appropriateness of furnishing in physicians’ offices
specialist physicians’ services (such as gastro-
intestinal endoscopic physicians’ services) which are
ordinarily furnished in hospital outpatient depart-
ments. In conducting this study, the Comptroller
General shall—
115
(A) review available scientific and clinical
evidence about the safety of performing proce-
dures in physicians’ offices and hospital out-
patient departments;
(B) assess whether resource-based practice
expense relative values established by the Sec-
retary of Health and Human Services under the
medicare physician fee schedule under section
1848 of the Social Security Act (42 U.S.C.
1395w–4) for such specialist physicians’ serv-
ices furnished in physicians’ offices and hospital
outpatient departments create an incentive to
furnish such services in physicians’ offices in-
stead of hospital outpatient departments; and
(C) assess the implications for access to
care for medicare beneficiaries if the medicare
program were not to cover such services in phy-
sicians’ offices.
(2) REPORT.—Not later than July 1, 2001, the
Comptroller General shall submit to Congress a re-
port on such study and include such recommenda-
tions as the Comptroller General determines to be
appropriate.
(b) STUDY OF THE RESOURCE-BASED PRACTICE EX-
PENSE SYSTEM.—
116
(1) STUDY.—The Comptroller General of the
United States shall conduct a study on the refine-
ments to the practice expense relative value units
during the transition to a resource-based practice ex-
pense system for physician payments under the
medicare program under title XVIII of the Social
Security Act. Such study shall examine how the Sec-
retary of Health and Human Services has accepted
and used the practice expense data submitted under
section 212 of BBRA (113 Stat. 1501A–350).
(2) REPORT.—Not later than July 1, 2001, the
Comptroller General shall submit to Congress a re-
port on the study conducted under paragraph (1) to-
gether with recommendations regarding—
(A) improvements in the process for ac-
ceptance and use of practice expense data
under section 212 of BBRA;
(B) any change or adjustment that is ap-
propriate to ensure full access to a spectrum of
care for beneficiaries under the medicare pro-
gram; and
(C) the appropriateness of payments to
physicians.
117
SEC. 412. PHYSICIAN GROUP PRACTICE DEMONSTRATION.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1866 the following new sections:
‘‘DEMONSTRATION OF APPLICATION OF PHYSICIAN
VOLUME INCREASES TO GROUP PRACTICES
‘‘SEC. 1866A. (a) DEMONSTRATION PROGRAM AU-
THORIZED.—
‘‘(1) IN GENERAL.—The Secretary shall con-
duct demonstration projects to test and, if proven ef-
fective, expand the use of incentives to health care
groups participating in the program under this title
that—
‘‘(A) encourage coordination of the care
furnished to individuals under the programs
under parts A and B by institutional and other
providers, practitioners, and suppliers of health
care items and services;
‘‘(B) encourage investment in administra-
tive structures and processes to ensure efficient
service delivery; and
‘‘(C) reward physicians for improving
health outcomes.
Such projects shall focus on the efficiencies of fur-
nishing health care in a group-practice setting as
compared to the efficiencies of furnishing health care
in other health care delivery systems.
118
‘‘(2) ADMINISTRATION BY CONTRACT.—Except
as otherwise specifically provided, the Secretary may
administer the program under this section in accord-
ance with section 1866B.
‘‘(3) DEFINITIONS.—For purposes of this sec-
tion, terms have the following meanings:
‘‘(A) PHYSICIAN.—Except as the Secretary
may otherwise provide, the term ‘physician’
means any individual who furnishes services
which may be paid for as physicians’ services
under this title.
‘‘(B) HEALTH
CARE
GROUP.—The term
‘health care group’ means a group of physicians
(as defined in subparagraph (A)) organized at
least in part for the purpose of providing physi-
cians’ services under this title. As the Secretary
finds appropriate, a health care group may in-
clude a hospital and any other individual or en-
tity furnishing items or services for which pay-
ment may be made under this title that is affili-
ated with the health care group under an ar-
rangement structured so that such individual or
entity participates in a demonstration under
this section and will share in any bonus earned
under subsection (d).
119
‘‘(b) ELIGIBILITY CRITERIA.—
‘‘(1) IN GENERAL.—The Secretary is authorized
to establish criteria for health care groups eligible to
participate in a demonstration under this section, in-
cluding criteria relating to numbers of health care
professionals in, and of patients served by, the
group, scope of services provided, and quality of
care.
‘‘(2) PAYMENT METHOD.—A health care group
participating in the demonstration under this section
shall agree with respect to services furnished to
beneficiaries within the scope of the demonstration
(as determined under subsection (c))—
‘‘(A) to be paid on a fee-for-service basis;
and
‘‘(B) that payment with respect to all such
services furnished by members of the health
care group to such beneficiaries shall (where de-
termined appropriate by the Secretary) be made
to a single entity.
‘‘(3) DATA REPORTING.—A health care group
participating in a demonstration under this section
shall report to the Secretary such data, at such
times and in such format as the Secretary requires,
120
for purposes of monitoring and evaluation of the
demonstration under this section.
‘‘(c) PATIENTS WITHIN SCOPE
OF DEMONSTRA-
TION.—
‘‘(1) IN GENERAL.—The Secretary shall specify,
in accordance with this subsection, the criteria for
identifying those patients of a health care group who
shall be considered within the scope of the dem-
onstration under this section for purposes of applica-
tion of subsection (d) and for assessment of the ef-
fectiveness of the group in achieving the objectives
of this section.
‘‘(2) OTHER CRITERIA.—The Secretary may es-
tablish additional criteria for inclusion of bene-
ficiaries within a demonstration under this section,
which may include frequency of contact with physi-
cians in the group or other factors or criteria that
the Secretary finds to be appropriate.
‘‘(3) NOTICE REQUIREMENTS.—In the case of
each beneficiary determined to be within the scope
of a demonstration under this section with respect to
a specific health care group, the Secretary shall en-
sure that such beneficiary is notified of the incen-
tives, and of any waivers of coverage or payment
121
rules, applicable to such group under such dem-
onstration.
‘‘(d) INCENTIVES.—
‘‘(1) PERFORMANCE
TARGET.—The Secretary
shall establish for each health care group partici-
pating in a demonstration under this section—
‘‘(A) a base expenditure amount, equal to
the average total payments under parts A and
B for patients served by the health care group
on a fee-for-service basis in a base period deter-
mined by the Secretary; and
‘‘(B) an annual per capita expenditure tar-
get for patients determined to be within the
scope of the demonstration, reflecting the base
expenditure amount adjusted for risk and ex-
pected growth rates.
‘‘(2) INCENTIVE BONUS.—The Secretary shall
pay to each participating health care group (subject
to paragraph (4)) a bonus for each year under the
demonstration equal to a portion of the medicare
savings realized for such year relative to the per-
formance target.
‘‘(3) ADDITIONAL
BONUS
FOR
PROCESS
AND
OUTCOME
IMPROVEMENTS.—At such time as the
Secretary has established appropriate criteria based
122
on evidence the Secretary determines to be suffi-
cient, the Secretary shall also pay to a participating
health care group (subject to paragraph (4)) an ad-
ditional bonus for a year, equal to such portion as
the Secretary may designate of the saving to the
program under this title resulting from process im-
provements made by and patient outcome improve-
ments attributable to activities of the group.
‘‘(4) LIMITATION.—The Secretary shall limit
bonus payments under this section as necessary to
ensure that the aggregate expenditures under this
title (inclusive of bonus payments) with respect to
patients within the scope of the demonstration do
not exceed the amount which the Secretary esti-
mates would be expended if the demonstration
projects under this section were not implemented.
‘‘PROVISIONS FOR ADMINISTRATION OF DEMONSTRATION
PROGRAM
‘‘SEC. 1866B. (a) GENERAL ADMINISTRATIVE AU-
THORITY.—
‘‘(1) BENEFICIARY
ELIGIBILITY.—Except as
otherwise provided by the Secretary, an individual
shall only be eligible to receive benefits under the
program under section 1866A (in this section re-
ferred to as the ‘demonstration program’) if such
individual—
123
‘‘(A) is enrolled in under the program
under part B and entitled to benefits under
part A; and
‘‘(B) is not enrolled in a Medicare+Choice
plan under part C, an eligible organization
under a contract under section 1876 (or a simi-
lar organization operating under a demonstra-
tion project authority), an organization with an
agreement under section 1833(a)(1)(A), or a
PACE program under section 1894.
‘‘(2) SECRETARY’S DISCRETION AS TO SCOPE
OF PROGRAM.—The Secretary may limit the imple-
mentation of the demonstration program to—
‘‘(A) a geographic area (or areas) that the
Secretary designates for purposes of the pro-
gram, based upon such criteria as the Secretary
finds appropriate;
‘‘(B) a subgroup (or subgroups) of bene-
ficiaries or individuals and entities furnishing
items or services (otherwise eligible to partici-
pate in the program), selected on the basis of
the number of such participants that the Sec-
retary finds consistent with the effective and ef-
ficient implementation of the program;
124
‘‘(C) an element (or elements) of the pro-
gram that the Secretary determines to be suit-
able for implementation; or
‘‘(D) any combination of any of the limits
described in subparagraphs (A) through (C).
‘‘(3) VOLUNTARY
RECEIPT
OF
ITEMS
AND
SERVICES.—Items and services shall be furnished to
an individual under the demonstration program only
at the individual’s election.
‘‘(4) AGREEMENTS.—The Secretary is author-
ized to enter into agreements with individuals and
entities to furnish health care items and services to
beneficiaries under the demonstration program.
‘‘(5) PROGRAM
STANDARDS
AND
CRITERIA.—
The Secretary shall establish performance standards
for the demonstration program including, as applica-
ble, standards for quality of health care items and
services, cost-effectiveness, beneficiary satisfaction,
and such other factors as the Secretary finds appro-
priate. The eligibility of individuals or entities for
the initial award, continuation, and renewal of
agreements to provide health care items and services
under the program shall be conditioned, at a min-
imum, on performance that meets or exceeds such
standards.
125
‘‘(6) ADMINISTRATIVE REVIEW OF DECISIONS
AFFECTING
INDIVIDUALS
AND
ENTITIES
FUR-
NISHING
SERVICES.—An individual or entity fur-
nishing services under the demonstration program
shall be entitled to a review by the program adminis-
trator (or, if the Secretary has not contracted with
a program administrator, by the Secretary) of a de-
cision not to enter into, or to terminate, or not to
renew, an agreement with the entity to provide
health care items or services under the program.
‘‘(7) SECRETARY’S REVIEW OF MARKETING MA-
TERIALS.—An agreement with an individual or enti-
ty furnishing services under the demonstration pro-
gram shall require the individual or entity to guar-
antee that it will not distribute materials that mar-
ket items or services under the program without the
Secretary’s prior review and approval.
‘‘(8) PAYMENT IN FULL.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), an individual or entity re-
ceiving payment from the Secretary under a
contract or agreement under the demonstration
program shall agree to accept such payment as
payment in full, and such payment shall be in
lieu of any payments to which the individual or
126
entity would otherwise be entitled under this
title.
‘‘(B) COLLECTION OF DEDUCTIBLES AND
COINSURANCE.—Such individual or entity may
collect any applicable deductible or coinsurance
amount from a beneficiary.
‘‘(b) CONTRACTS FOR PROGRAM ADMINISTRATION.—
‘‘(1) IN GENERAL.—The Secretary may admin-
ister the demonstration program through a contract
with a program administrator in accordance with the
provisions of this subsection.
‘‘(2) SCOPE OF PROGRAM ADMINISTRATOR CON-
TRACTS.—The Secretary may enter into such con-
tracts for a limited geographic area, or on a regional
or national basis.
‘‘(3) ELIGIBLE CONTRACTORS.—The Secretary
may contract for the administration of the program
with—
‘‘(A) an entity that, under a contract
under section 1816 or 1842, determines the
amount of and makes payments for health care
items and services furnished under this title; or
‘‘(B) any other entity with substantial ex-
perience in managing the type of program con-
cerned.
127
‘‘(4) CONTRACT AWARD, DURATION, AND RE-
NEWAL.—
‘‘(A) IN GENERAL.—A contract under this
subsection shall be for an initial term of up to
three years, renewable for additional terms of
up to three years.
‘‘(B) NONCOMPETITIVE
AWARD
AND
RE-
NEWAL FOR ENTITIES ADMINISTERING PART A
OR
PART
B
PAYMENTS.—The Secretary may
enter or renew a contract under this subsection
with an entity described in paragraph (3)(A)
without regard to the requirements of section 5
of title 41, United States Code.
‘‘(5) APPLICABILITY OF FEDERAL ACQUISITION
REGULATION.—The Federal Acquisition Regulation
shall apply to program administration contracts
under this subsection.
‘‘(6) PERFORMANCE
STANDARDS.—The Sec-
retary shall establish performance standards for the
program administrator including, as applicable,
standards for the quality and cost-effectiveness of
the program administered, and such other factors as
the Secretary finds appropriate. The eligibility of en-
tities for the initial award, continuation, and renewal
of program administration contracts shall be condi-
128
tioned, at a minimum, on performance that meets or
exceeds such standards.
‘‘(7) 
FUNCTIONS
OF
PROGRAM
ADMINIS-
TRATOR.—A program administrator shall perform
any or all of the following functions, as specified by
the Secretary:
‘‘(A) AGREEMENTS WITH ENTITIES FUR-
NISHING
HEALTH
CARE
ITEMS
AND
SERV-
ICES.—Determine the qualifications of entities
seeking to enter or renew agreements to provide
services under the demonstration program, and
as appropriate enter or renew (or refuse to
enter or renew) such agreements on behalf of
the Secretary.
‘‘(B) 
ESTABLISHMENT
OF
PAYMENT
RATES.—Negotiate or otherwise establish, sub-
ject to the Secretary’s approval, payment rates
for covered health care items and services.
‘‘(C) PAYMENT OF CLAIMS OR FEES.—Ad-
minister payments for health care items or serv-
ices furnished under the program.
‘‘(D) PAYMENT OF BONUSES.—Using such
guidelines as the Secretary shall establish, and
subject to the approval of the Secretary, make
bonus payments as described in subsection
129
(c)(2)(A)(ii) to entities furnishing items or serv-
ices for which payment may be made under the
program.
‘‘(E) OVERSIGHT.—Monitor the compli-
ance of individuals and entities with agreements
under the program with the conditions of par-
ticipation.
‘‘(F) ADMINISTRATIVE REVIEW.—Conduct
reviews of adverse determinations specified in
subsection (a)(6).
‘‘(G) REVIEW
OF
MARKETING
MATE-
RIALS.—Conduct a review of marketing mate-
rials proposed by an entity furnishing services
under the program.
‘‘(H) ADDITIONAL
FUNCTIONS.—Perform
such other functions as the Secretary may
specify.
‘‘(8) LIMITATION
OF
LIABILITY.—The provi-
sions of section 1157(b) shall apply with respect to
activities of contractors and their officers, employ-
ees, and agents under a contract under this sub-
section.
‘‘(9) INFORMATION SHARING.—Notwithstanding
section 1106 and section 552a of title 5, United
States Code, the Secretary is authorized to disclose
130
to an entity with a program administration contract
under this subsection such information (including
medical information) on individuals receiving health
care items and services under the program as the
entity may require to carry out its responsibilities
under the contract.
‘‘(c) RULES
APPLICABLE
TO
BOTH
PROGRAM
AGREEMENTS
AND
PROGRAM
ADMINISTRATION
CON-
TRACTS.—
‘‘(1) RECORDS, REPORTS, AND AUDITS.—The
Secretary is authorized to require entities with
agreements to provide health care items or services
under the demonstration program, and entities with
program administration contracts under subsection
(b), to maintain adequate records, to afford the Sec-
retary access to such records (including for audit
purposes), and to furnish such reports and other
materials (including audited financial statements
and performance data) as the Secretary may require
for purposes of implementation, oversight, and eval-
uation of the program and of individuals’ and enti-
ties’ effectiveness in performance of such agreements
or contracts.
‘‘(2) BONUSES.—Notwithstanding any other
provision of law, but subject to subparagraph
131
(B)(ii), the Secretary may make bonus payments
under the demonstration program from the Federal
Health Insurance Trust Fund and the Federal Sup-
plementary Medical Insurance Trust Fund in
amounts that do not exceed the amounts authorized
under the program in accordance with the following:
‘‘(A) PAYMENTS
TO
PROGRAM
ADMINIS-
TRATORS.—The Secretary may make bonus
payments under the program to program ad-
ministrators.
‘‘(B) PAYMENTS TO ENTITIES FURNISHING
SERVICES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make bonus pay-
ments to individuals or entities furnishing
items or services for which payment may
be made under the demonstration pro-
gram, or may authorize the program ad-
ministrator to make such bonus payments
in accordance with such guidelines as the
Secretary shall establish and subject to the
Secretary’s approval.
‘‘(ii) LIMITATIONS.—The Secretary
may condition such payments on the
achievement of such standards related to
132
efficiency, improvement in processes or
outcomes of care, or such other factors as
the Secretary determines to be appropriate.
‘‘(3) ANTIDISCRIMINATION
LIMITATION.—The
Secretary shall not enter into an agreement with an
entity to provide health care items or services under
the demonstration program, or with an entity to ad-
minister the program, unless such entity guarantees
that it will not deny, limit, or condition the coverage
or provision of benefits under the program, for indi-
viduals eligible to be enrolled under such program,
based on any health status-related factor described
in section 2702(a)(1) of the Public Health Service
Act.
‘‘(d) LIMITATIONS ON JUDICIAL REVIEW.—The fol-
lowing actions and determinations with respect to the
demonstration program shall not be subject to review by
a judicial or administrative tribunal:
‘‘(1) Limiting the implementation of the pro-
gram under subsection (a)(2).
‘‘(2) Establishment of program participation
standards under subsection (a)(5) or the denial or
termination of, or refusal to renew, an agreement
with an entity to provide health care items and serv-
ices under the program.
133
‘‘(3) Establishment of program administration
contract performance standards under subsection
(b)(6), the refusal to renew a program administra-
tion contract, or the noncompetitive award or re-
newal of a program administration contract under
subsection (b)(4)(B).
‘‘(5) Establishment of payment rates, through
negotiation or otherwise, under a program agree-
ment or a program administration contract.
‘‘(6) A determination with respect to the pro-
gram (where specifically authorized by the program
authority or by subsection (c)(2))—
‘‘(A) as to whether cost savings have been
achieved, and the amount of savings; or
‘‘(B) as to whether, to whom, and in what
amounts bonuses will be paid.
‘‘(e) APPLICATION LIMITED TO PARTS A AND B.—
None of the provisions of this section or of the demonstra-
tion program shall apply to the programs under part C.
‘‘(f) REPORTS TO CONGRESS.—Not later than two
years after the date of the enactment of this section, and
biennially thereafter for six years, the Secretary shall re-
port to Congress on the use of authorities under the dem-
onstration program. Each report shall address the impact
134
of the use of those authorities on expenditures, access, and
quality under the programs under this title.’’.
(b) GAO REPORT.—Not later than 2 years after the
date on which the demonstration project under section
1866A of the Social Security Act, as added by subsection
(a), is implemented, the Comptroller General of the United
States shall submit to Congress a report on such dem-
onstration project. The report shall include such rec-
ommendations with respect to changes to the demonstra-
tion project that the Comptroller General determines ap-
propriate.
SEC. 413. STUDY ON ENROLLMENT PROCEDURES FOR
GROUPS THAT RETAIN INDEPENDENT CON-
TRACTOR PHYSICIANS.
(a) IN GENERAL.—The Comptroller General of the
United States shall conduct a study of the current medi-
care enrollment process for groups that retain independent
contractor physicians with particular emphasis on hos-
pital-based physicians, such as emergency department
staffing groups. In conducting the evaluation, the Comp-
troller General shall consult with groups that retain inde-
pendent contractor physicians and shall—
(1) review the issuance of individual medicare
provider numbers and the possible medicare program
integrity vulnerabilities of the current process;
135
(2) review direct and indirect costs associated
with the current process incurred by the medicare
program and groups that retain independent con-
tractor physicians;
(3) assess the effect on program integrity by
the enrollment of groups that retain independent
contractor hospital-based physicians; and
(4) develop suggested procedures for the enroll-
ment of these groups.
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the Comptroller General shall
submit to Congress a report on the study conducted under
subsection (a).
Subtitle C—Other Services
SEC. 421. 1-YEAR EXTENSION OF MORATORIUM ON THER-
APY CAPS; REPORT ON STANDARDS FOR SU-
PERVISION OF PHYSICAL THERAPY ASSIST-
ANTS.
(a) IN GENERAL.—Section 1833(g)(4) (42 U.S.C.
1395l(g)(4)) is amended by striking ‘‘2000 and 2001.’’
and inserting ‘‘2000, 2001, and 2002.’’.
(b) CONFORMING AMENDMENT TO CONTINUE FO-
CUSED MEDICAL REVIEWS OF CLAIMS DURING MORATO-
RIUM PERIOD.—Section 221(a)(2) of BBRA (113 Stat.
136
1501A–351) is amended by striking ‘‘(under the amend-
ment made by paragraph (1)(B))’’.
(c) STUDY ON STANDARDS FOR SUPERVISION OF
PHYSICAL THERAPIST ASSISTANTS.—
(1) STUDY.—The Secretary of Health and
Human Services shall conduct a study of the
implications—
(A) of eliminating the ‘‘in the room’’ su-
pervision requirement for medicare payment for
services of physical therapy assistants who are
supervised by physical therapists; and
(B) of such requirement on the cap im-
posed under section 1833(g) of the Social Secu-
rity Act (42 U.S.C. 1395l(g)) on physical ther-
apy services.
(2) REPORT.—Not later than 18 months after
the date of the enactment of this Act, the Secretary
shall submit to Congress a report on the study con-
ducted under paragraph (1).
SEC. 422. UPDATE IN RENAL DIALYSIS COMPOSITE RATE.
(a) UPDATE.—
(1) IN GENERAL.—The last sentence of section
1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by
striking ‘‘for such services furnished on or after
January 1, 2001, by 1.2 percent’’ and inserting ‘‘for
137
such services furnished on or after January 1, 2001,
by 2.4 percent’’.
(2) PROHIBITION ON EXEMPTIONS.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary of Health and Human
Services may not provide for an exception under
section 1881(b)(7) of the Social Security Act
(42 U.S.C. 1395rr(b)(7)) on or after December
31, 2000.
(B) SPECIAL RULES FOR 2000.—
(i) IN GENERAL.—Any exemption rate
under such section 1881(b)(7) in effect on
December 31, 2000, shall continue in ef-
fect so long as such rate is greater than
the composite rate as updated by the
amendment made by paragraph (1).
(ii) RESUBMISSION
OF
CERTAIN
AP-
PLICATIONS.—In the case of an application
for an exemption rate under such section
that was filed by a facility during 2000
that was not approved by the Secretary of
Health and Human Services, the facility
may submit an application for an exemp-
tion rate for that year by not later than
July 1, 2001.
138
(b) DEVELOPMENT OF ESRD MARKET BASKET.—
(1) DEVELOPMENT.—The Secretary of Health
and Human Services shall collect data and develop
an ESRD market basket whereby the Secretary can
estimate, before the beginning of a year, the percent-
age by which the costs for the year of the mix of
labor and nonlabor goods and services included in
the ESRD composite rate under section 1881(b)(7)
of the Social Security Act (42 U.S.C. 1395rr(b)(7))
will exceed the costs of such mix of goods and serv-
ices for the preceding year. In developing such index,
the Secretary may take into account measures of
changes in—
(A) technology used in furnishing dialysis
services;
(B) the manner or method of furnishing
dialysis services; and
(C) the amounts by which the payments
under such section for all services billed by a
facility for a year exceed the aggregate allow-
able audited costs of such services for such fa-
cility for such year.
(2) REPORT.—The Secretary of Health and
Human Services shall submit to Congress a report
on the index developed under paragraph (1) no later
139
than July 1, 2002, and shall include in the report
recommendations on the appropriateness of an an-
nual or periodic update mechanism for renal dialysis
services under the medicare program under title
XVIII of the Social Security Act based on such
index.
(c) INCLUSION OF ADDITIONAL SERVICES IN COM-
POSITE RATE.—
(1) DEVELOPMENT.—The Secretary of Health
and Human Services shall develop a system which
includes, to the maximum extent feasible, in the
composite rate used for payment under section
1881(b)(7) of the Social Security Act (42 U.S.C.
1395rr(b)(7)), payment for clinical diagnostic lab-
oratory tests and drugs (including drugs paid under
section 1881(b)(11)(B) of such Act (42 U.S.C.
1395rr(b)(11)(B)) that are routinely used in fur-
nishing dialysis services to medicare beneficiaries but
which are currently separately billable by renal dialy-
sis facilities.
(2) REPORT.—The Secretary shall include, as
part of the report submitted under subsection (b)(2),
a report on the system developed under paragraph
(1) and recommendations on the appropriateness of
140
incorporating the system into medicare payment for
renal dialysis services.
(d) GAO STUDY ON ACCESS TO SERVICES.—
(1) STUDY.—The Comptroller General of the
United States shall study access of medicare bene-
ficiaries to renal dialysis services. Such study shall
include whether there is a sufficient supply of facili-
ties to furnish needed renal dialysis services, whether
medicare payment levels are appropriate, taking into
account audited costs of facilities for all services fur-
nished, to ensure continued access to such services,
and improvements in access (and quality of care)
that may result in the increased use of long nightly
and short daily hemodialysis modalities.
(2) REPORT.—Not later than January 1, 2003,
the Comptroller General shall submit to Congress a
report on the study conducted under paragraph (1).
SEC. 423. PAYMENT FOR AMBULANCE SERVICES.
(a) RESTORATION
OF FULL CPI INCREASE
FOR
2001.—Section 1834(l)(3) (42 U.S.C. 1395m(l)(3)) is
amended by striking ‘‘reduced in the case of 2001 and
2002’’ each place it appears and inserting ‘‘reduced in the
case of 2002’’.
(b) MILEAGE
PAYMENTS.—Section 1834(l)(2)(E)
(42 U.S.C. 1395m(l)(2)(E)) is amended by inserting be-
141
fore the period at the end the following: ‘‘, except that,
beginning on the date on which the Secretary implements
such fee schedule, such phase-in shall provide for full pay-
ment of any national mileage rate for ambulance services
provided by suppliers that are paid by carriers in any of
the 50 States where payment by a carrier for such services
for all such suppliers in such State did not, prior to the
implementation of the fee schedule, include a separate
amount for all mileage within the county from which the
beneficiary is transported’’.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after the
date on which the Secretary of Health and Human Serv-
ices implements the fee schedule under section 1834(l) of
the Social Security Act (42 U.S.C. 1395m(l)).
SEC. 424. AMBULATORY SURGICAL CENTERS.
(a) DELAY IN IMPLEMENTATION OF PROSPECTIVE
PAYMENT SYSTEM.—The Secretary of Health and Human
Services may not implement a revised prospective payment
system for services of ambulatory surgical facilities under
section 1833(i) of the Social Security Act (42 U.S.C.
1395l(i)) before January 1, 2002.
(b) EXTENDING PHASE-IN TO 4 YEARS.—Section
226 of the BBRA (113 Stat. 1501A–354) is amended by
142
striking paragraphs (1) and (2) and inserting the fol-
lowing:
‘‘(1) in the first year of its implementation,
only a proportion (specified by the Secretary and not
to exceed 1⁄4) of the payment for such services shall
be made in accordance with such system and the re-
mainder shall be made in accordance with current
regulations; and
‘‘(2) in each of the following 2 years a propor-
tion (specified by the Secretary and not to exceed
1⁄2, and 3⁄4, respectively) of the payment for such
services shall be made under such system and the
remainder shall be made in accordance with current
regulations.’’.
(c) DEADLINE FOR USE OF 1999 OR LATER COST
SURVEYS.—Section 226 of BBRA (113 Stat. 1501A–354)
is amended by adding at the end the following:
‘‘By not later than January 1, 2003, the Secretary shall
incorporate data from a 1999 medicare cost survey or a
subsequent cost survey for purposes of implementing or
revising such system.’’.
SEC. 425. FULL UPDATE FOR DURABLE MEDICAL EQUIP-
MENT.
(a) IN GENERAL.—Section 1834(a)(14) (42 U.S.C.
1395m(a)(14)) is amended—
144
SEC. 426. FULL UPDATE FOR ORTHOTICS AND PROS-
THETICS.
Section 1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A))
is amended—
(1) by redesignating clause (vi) as clause (viii);
(2) in clause (v)—
(A) by striking ‘‘through 2002’’ and insert-
ing ‘‘through 2000’’; and
(B) by striking ‘‘and’’ at the end; and
(3) by inserting after clause (v) the following
new clause:
‘‘(vi) for 2001, the percentage in-
crease in the consumer price index for all
urban consumers (U.S. city average) for
the 12-month period ending with June
2000;
‘‘(vii) for 2002, 1 percent; and’’.
SEC. 427. ESTABLISHMENT OF SPECIAL PAYMENT PROVI-
SIONS 
AND 
REQUIREMENTS 
FOR 
PROS-
THETICS AND CERTAIN CUSTOM FABRICATED
ORTHOTIC ITEMS.
(a) IN GENERAL.—Section 1834(h)(1) (42 U.S.C.
1395m(h)(1)) is amended by adding at the end the fol-
lowing:
145
‘‘(F) SPECIAL PAYMENT RULES FOR CER-
TAIN PROSTHETICS AND CUSTOM FABRICATED
ORTHOTICS.—
‘‘(i) IN GENERAL.—No payment shall
be made under this subsection for an item
of custom fabricated orthotics described in
clause (ii) or for an item of prosthetics un-
less such item is—
‘‘(I) furnished by a qualified
practitioner; and
‘‘(II) fabricated by a qualified
practitioner or a qualified supplier at
a facility that meets such criteria as
the Secretary determines appropriate.
‘‘(ii) DESCRIPTION OF CUSTOM FAB-
RICATED ITEM.—
‘‘(I) IN GENERAL.—An item de-
scribed in this clause is an item of
custom fabricated orthotics that re-
quires education, training, and experi-
ence to custom fabricate and that is
included in a list established by the
Secretary in subclause (II). Such an
item does not include shoes and shoe
inserts.
146
‘‘(II) LIST OF ITEMS.—The Sec-
retary, in consultation with appro-
priate experts in orthotics (including
national organizations representing
manufacturers of orthotics), shall es-
tablish and update as appropriate a
list of items to which this subpara-
graph applies. No item may be in-
cluded in such list unless the item is
individually fabricated for the patient
over a positive model of the patient.
‘‘(iii) QUALIFIED PRACTITIONER DE-
FINED.—In this subparagraph, the term
‘qualified practitioner’ means a physician
or other individual who—
‘‘(I) is a qualified physical thera-
pist or a qualified occupational thera-
pist;
‘‘(II) in the case of a State that
provides for the licensing of orthotics
and 
prosthetics, 
is 
licensed 
in
orthotics or prosthetics by the State
in which the item is supplied; or
‘‘(III) in the case of a State that
does not provide for the licensing of
147
orthotics and prosthetics, is specifi-
cally trained and educated to provide
or manage the provision of prosthetics
and custom-designed or fabricated
orthotics, and is certified by the
American Board for Certification in
Orthotics and Prosthetics, Inc. or by
the Board for Orthotist/Prosthetist
Certification, or is credentialed and
approved by a program that the Sec-
retary determines, in consultation
with appropriate experts in orthotics
and prosthetics, has training and edu-
cation standards that are necessary to
provide such prosthetics and orthotics.
‘‘(iv) 
QUALIFIED
SUPPLIER
DE-
FINED.—In this subparagraph, the term
‘qualified supplier’ means any entity that
is accredited by the American Board for
Certification in Orthotics and Prosthetics,
Inc. or by the Board for Orthotist/Pros-
thetist Certification, or accredited and ap-
proved by a program that the Secretary
determines has accreditation and approval
148
standards that are essentially equivalent to
those of such Board.’’.
(b) EFFECTIVE DATE.—Not later than 1 year after
the date of the enactment of this Act, the Secretary of
Health and Human Services shall promulgate revised reg-
ulations to carry out the amendment made by subsection
(a) using a negotiated rulemaking process under sub-
chapter III of chapter 5 of title 5, United States Code.
(c) GAO STUDY AND REPORT.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study on HCFA Rul-
ing 96–1, issued on September 1, 1996, with respect
to distinguishing orthotics from durable medical
equipment under the medicare program under title
XVIII of the Social Security Act. The study shall as-
sess the following matters:
(A) The compliance of the Secretary of
Health and Human Services with the Adminis-
trative Procedures Act (under chapter 5 of title
5, United States Code) in making such ruling.
(B) The potential impact of such ruling on
the health care furnished to medicare bene-
ficiaries under the medicare program, especially
those beneficiaries with degenerative musculo-
skeletal conditions.