730
Subtitle E, Part 1
‘‘(B) the percentage that applies
to the hospital for purposes of section
2221(b), except that such percentage
shall be adjusted in accordance with
the methodology of section 2221(b)(1)
to the extent determined by the Sec-
retary to be necessary with respect to
a sum that equals 100 percent.
‘‘Subpart 3—Amount Relating to Direct Costs
of Graduate Medical Education
‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI-
RECT COSTS.
‘‘(a) IN GENERAL.—For purposes of section
2211(a)(2), the amount determined under this
section for a teaching hospital for a fiscal
year is the sum of—
‘‘(1) the amount determined under
subsection (b) (relating to the General Di-
rect-Costs Medical Education Account);
and
‘‘(2) the amount determined under
subsection (c) (relating to the Medicare
Direct-Costs Medical Education Account).
‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—
731
Subtitle E, Part 1
‘‘(1) IN GENERAL.—For purposes of sub-
section (a)(1), the amount determined
under this subsection for a teaching hos-
pital for a fiscal year is the product of—
‘‘(A) the amount in the General
Direct-Costs Medical Education Ac-
count on the applicable date under
section 2201(d) (once the appropria-
tion under such section is made); and
‘‘(B) the percentage determined
for the hospital under paragraph (2).
‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of
paragraph (1)(B), the percentage de-
termined under this paragraph for a
teaching hospital is the mean average
of the respective percentages deter-
mined under subparagraph (B) for
each fiscal year of the applicable pe-
riod (as defined in section 2221(b)(2)),
adjusted by the Secretary (upward or
downward, as the case may be) on a
pro rata basis to the extent necessary
to ensure that the sum of the percent-
ages determined under this subpara-
732
Subtitle E, Part 1
graph for all teaching hospitals is
equal to 100 percent. The preceding
sentence is subject to sections 2232
through 2234.
‘‘(B) RESPECTIVE
DETERMINATIONS
FOR
FISCAL
YEARS
OF
APPLICABLE
PE-
RIOD.—For purposes of subparagraph
(A), the percentage determined under
this subparagraph for a teaching hos-
pital for a fiscal year of the applica-
ble period is the percentage con-
stituted by the ratio of—
‘‘(i) the total amount of pay-
ments received by the hospital
under section 1886(h) for cost re-
porting periods beginning during
the fiscal year involved; to
‘‘(ii) the sum of the respective
amounts determined under clause
(i) for the fiscal year for all teach-
ing hospitals.
‘‘(3) AVAILABILITY OF DATA.—If a teach-
ing hospital received the payments speci-
fied in paragraph (2)(B)(i) during the ap-
plicable period but a complete set of the
733
Subtitle E, Part 1
relevant data is not available to the Sec-
retary for purposes of determining an
amount under such paragraph for the fis-
cal year involved, the Secretary shall for
purposes of such paragraph make an esti-
mate on the basis of such data as are
available to the Secretary for the applica-
ble period.
‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—
‘‘(1) IN GENERAL.—For purposes of sub-
section (a)(2), the amount determined
under this subsection for a teaching hos-
pital for a fiscal year is the product of—
‘‘(A) the amount in the Medicare
Direct-Costs Medical Education Ac-
count on the applicable date under
section 2201(d) (once the appropria-
tion under such section is made); and
‘‘(B) the percentage determined
for the hospital under paragraph (2).
‘‘(2) HOSPITAL-SPECIFIC
PERCENTAGE.—
For purposes of paragraph (1)(B), the
percentage determined under this sub-
section for a teaching hospital for a fiscal
734
Subtitle E, Part 1
year is the percentage constituted by the
ratio of—
‘‘(A) the estimate made by the
Secretary for the hospital for the fis-
cal year under section 1886(j)(2)(B); to
‘‘(B) the sum of the respective es-
timates referred to in subparagraph
(A) for all teaching hospitals.
‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING
DETERMINATION 
OF 
HOSPITAL-SPECIFIC
PERCENTAGE.
‘‘(a) SPECIAL
RULE
REGARDING
FISCAL
YEARS 1995 AND 1996.—
‘‘(1) IN
GENERAL.—In the case of a
teaching hospital whose first payments
under 1886(h) were for cost reporting pe-
riod beginning in fiscal year 1995 or in
fiscal year 1996 (referred to in this sub-
section individually as a ‘first payment
year’), the percentage determined under
paragraph (2) for the hospital is deemed
to be the percentage applicable under
section 2231(b)(2) to the hospital, except
that the percentage under paragraph (2)
shall be adjusted in accordance with sec-
735
Subtitle E, Part 1
tion 2231(b)(2)(A) to the extent deter-
mined by the Secretary to be necessary
with respect to a sum that equals 100 per-
cent.
‘‘(2) DETERMINATION OF PERCENTAGE.—
For purposes of paragraph (1), the per-
centage determined under this paragraph
for a teaching hospital is the percentage
constituted by the ratio of the amount de-
termined under subparagraph (A) to the
amount determined under subparagraph
(B), as follows:
‘‘(A)(i) If the first payment year
for the hospital is fiscal year 1995, the
amount determined under this sub-
paragraph is the total amount of pay-
ments received by the hospital under
section 1886(h) for cost reporting pe-
riods beginning in fiscal year 1995.
‘‘(ii) If the first payment year for
the hospital is fiscal year 1996, the
amount determined under this sub-
paragraph is an amount equal to an
estimate by the Secretary of the total
amount of payments that would have
736
Subtitle E, Part 1
been paid to the hospital under sec-
tion 1886(h) for cost reporting periods
beginning in fiscal year 1995 if such
section, as in effect for fiscal year
1996, had applied to the hospital for
fiscal year 1995.
‘‘(B)(i) If the first payment year
for the hospital is fiscal year 1995, the
amount determined under this sub-
paragraph is the aggregate total of
the payments received by teaching
hospitals under section 1886(h) for
cost reporting periods beginning in
fiscal year 1995.
‘‘(ii) If the first payment year for
the hospital is fiscal year 1996—
‘‘(I) the Secretary shall make
an estimate in accordance with
subparagraph (A)(ii) for all teach-
ing hospitals; and
‘‘(II) the amount determined
under this subparagraph is the
sum of the estimates made by the
Secretary under subclause (I).
‘‘(b) NEW TEACHING HOSPITALS.—
737
Subtitle E, Part 1
‘‘(1) IN
GENERAL.—In the case of a
teaching hospital that did not receive
payments under section 1886(h) for any
of the fiscal years 1992 through 1996, the
percentage determined under paragraph
(3) for the hospital is deemed to be the
percentage 
applicable 
under 
section
2231(b)(2) to the hospital, except that the
percentage under paragraph (3) shall be
adjusted 
in 
accordance 
with 
section
2231(b)(2)(A) to the extent determined by
the Secretary to be necessary with re-
spect to a sum that equals 100 percent.
This subsection does not apply to a teach-
ing hospital described in the preceding
sentence if the hospital is in a State for
which a demonstration project under sec-
tion 1814(b)(3) is in effect.
‘‘(2) DESIGNATED FISCAL YEAR REGARD-
ING
DATA.—The 
determination 
under
paragraph (3) of a percentage for a teach-
ing hospital described in paragraph (1)
shall be made for the most recent fiscal
year for which the Secretary has suffi-
cient data to make the determination (re-
738
Subtitle E, Part 1
ferred to in this subsection as the ‘des-
ignated fiscal year’).
‘‘(3) DETERMINATION OF PERCENTAGE.—
For purposes of paragraph (1), the per-
centage determined under this paragraph
for the teaching hospital involved is the
percentage constituted by the ratio of the
amount determined under subparagraph
(A) to the amount determined under sub-
paragraph (B), as follows:
‘‘(A) 
The 
amount 
determined
under 
this 
subparagraph 
is 
an
amount equal to an estimate by the
Secretary of the total amount of pay-
ments that would have been paid to
the hospital under section 1886(h) for
the designated fiscal year if such sec-
tion, as in effect for the first fiscal
year for which payments pursuant to
this subsection are to be made to the
hospital, had applied to the hospital
for cost reporting periods beginning
in the designated fiscal year.
‘‘(B) The Secretary shall make an
estimate in accordance with subpara-
739
Subtitle E, Part 1
graph (A) for all teaching hospitals.
The amount determined under this
subparagraph is the sum of the esti-
mates made by the Secretary under
the preceding sentence.
‘‘(c) CONSOLIDATIONS AND MERGERS.—In the
case of two or more teaching hospitals that
have each received payments pursuant to sec-
tion 2231 for one or more fiscal years and that
undergo a consolidation or merger, the per-
centage applicable to the resulting teaching
hospital for purposes of section 2231(b) is the
sum of the respective percentages that would
have applied pursuant to such section if the
hospitals had not undergone the consolida-
tion or merger.
‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO
CONSORTIA OF PROVIDERS.
‘‘(a) IN GENERAL.—In lieu of making pay-
ments to teaching hospitals pursuant to sec-
tion 2231, the Secretary may make payments
under this section to consortia that meet the
requirements of subsection (b).
‘‘(b) QUALIFYING
CONSORTIUM.—For pur-
poses of subsection (a), a consortium meets
740
Subtitle E, Part 1
the requirements of this subsection if the con-
sortium is in compliance with the following:
‘‘(1) The consortium consists of an ap-
proved medical residency training pro-
gram, a teaching hospital, and one or
more of the following entities:
‘‘(A) Schools of medicine or osteo-
pathic medicine.
‘‘(B) Other teaching hospitals (or
the 
approved 
medical 
residency
training programs of the hospitals).
‘‘(C) Community health centers
(under section 330 of the Public
Health Service Act), migrant health
centers (under section 329 of such
Act), or facilities described in section
340 of such Act.
‘‘(D) Medical group practices.
‘‘(E) Managed care entities.
‘‘(F) 
Entities 
furnishing 
out-
patient services.
‘‘(G) Such other entities as the
Secretary determines to be appro-
priate.
742
Subtitle E, Part 1
‘‘(2) an amount determined in accord-
ance with the methodology that applies
pursuant to paragraph (2) of such sec-
tion, except that the estimate used for
purposes of subsection (c)(2)(A) of such
section shall be the estimate made for the
consortium under section 1886(j)(2)(C)(ii).
‘‘(d) LIMITATION ON AGGREGATE TOTAL OF
PAYMENTS TO CONSORTIA.—The aggregate total
of the amounts paid under subsection (c)(2) to
qualifying consortia for a fiscal year may not
exceed the sum of—
‘‘(1) 
the 
aggregate 
total 
of 
the
amounts that would have been paid
under section 2231(c) for the fiscal year
to the teaching hospitals of the consortia
if the hospitals had not been participants
in the consortia; and
‘‘(2) an amount equal to 1 percent of
the amount that applies under paragraph
(1)(A) of such section for the fiscal year
(relating to the Medicare Direct-Costs
Medical Education Account).
‘‘(e) DEFINITION.—For purposes of this
title, the term ‘qualifying consortium’ means
743
Subtitle E, Part 1
a consortium that meets the requirements of
subsection (b).
‘‘SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS RE-
GARDING TEACHING HOSPITALS IN CERTAIN
STATES.
‘‘(a) IN GENERAL.—In the case of a teaching
hospital in a State for which a demonstration
project under section 1814(b)(3) is in effect,
this section applies in lieu of section 2231. For
purposes of section 2211(a)(2), the amount de-
termined for a teaching hospital for a fiscal
year is the product of—
‘‘(1) the amount in the General Direct-
Costs Medical Education Account on the
applicable date under section 2201(d)
(once the appropriation under such sec-
tion is made); and
‘‘(2) the percentage determined under
subsection (b) for the hospital.
‘‘(b) DETERMINATION OF PERCENTAGE.—For
purposes of subsection (a)(2):
‘‘(1) The Secretary shall make an esti-
mate of the total amount of payments
that would have been received under sec-
tion 1886(h) by the hospital involved with
744
Subtitle E, Part 1
respect to each of the fiscal years of the
applicable period if such section (as in ef-
fect for such fiscal years) had applied to
the hospital for such years.
‘‘(2) 
The 
percentage 
determined
under this subsection for the hospital for
a fiscal year is a mean average percent-
age determined for the hospital in ac-
cordance with the methodology of section
2231(b)(2)(A), except that the estimate
made by the Secretary under paragraph
(1) of this subsection for a fiscal year of
the applicable period is deemed to be the
amount that applies for purposes of sec-
tion 2231(b)(2)(B)(i) for such year.
‘‘(c) RULE REGARDING PAYMENTS FROM CER-
TAIN AMOUNTS.—In the case of a teaching hos-
pital in a State for which a demonstration
project under section 1814(b)(3) is in effect,
this section does not provide any payment to
the hospital from amounts transferred to the
Fund under section 1886(j).
745
Subtitle E, Part 1
‘‘Subpart 4—General Provisions
‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.
‘‘(a) COLLECTION OF DATA ON ACCURACY OF
ESTIMATES.—The Secretary shall collect data
on whether the estimates made by the Sec-
retary under section 1886(j) for a fiscal year
were substantially accurate.
‘‘(b) ADJUSTMENTS.—If the Secretary deter-
mines under subsection (a) that an estimate
for a fiscal year was not substantially accu-
rate, the Secretary shall, for the first fiscal
year beginning after the Secretary makes the
determination—
‘‘(1) make adjustments accordingly in
transfers to the Fund under section
1886(j); and
‘‘(2) make adjustments accordingly in
the amount of payments to teaching hos-
pitals pursuant to 2231(c) (or, as applica-
ble, to qualifying consortia pursuant to
section 2233(c)(2)).’’.
746
Subtitle E, Part 2
PART 2—AMENDMENTS TO MEDICARE PROGRAM
SEC. 15411. TRANSFERS TO TEACHING HOSPITAL AND
GRADUATE 
MEDICAL 
EDUCATION 
TRUST
FUND.
Section 1886 (42 U.S.C. 1395ww) is amend-
ed—
(1) in subsection (d)(5)(B), in the mat-
ter preceding clause (i), by striking ‘‘The
Secretary shall provide’’ and inserting
the following: ‘‘For discharges occurring
on or before September 30, 1996, the Sec-
retary shall provide’’;
(2) in subsection (h)—
(A) in paragraph (1), in the first
sentence, by striking ‘‘the Secretary
shall provide’’ and inserting ‘‘the Sec-
retary shall, subject to paragraph (6),
provide’’; and
(B) by adding at the end the fol-
lowing paragraph:
‘‘(6) LIMITATION.—
‘‘(A) IN
GENERAL.—The authority
to make payments under this sub-
section applies only with respect to
cost reporting periods ending on or
747
Subtitle E, Part 2
before September 30, 1996, except as
provided in subparagraph (B).
‘‘(B) RULE REGARDING PORTION OF
LAST COST REPORTING PERIOD.—In the
case of a cost reporting period that
extends beyond September 30, 1996,
payments under this subsection shall
be made with respect to such portion
of the period as has lapsed as of such
date.
‘‘(C) RULE OF CONSTRUCTION.—This
paragraph may not be construed as
authorizing any payment under sec-
tion 1861(v) with respect to graduate
medical education.’’; and
(3) by adding at the end the following
subsection:
‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND
GRADUATE MEDICAL EDUCATION TRUST FUND.—
‘‘(1) INDIRECT COSTS OF MEDICAL EDU-
CATION.—
‘‘(A) IN GENERAL.—From the Fed-
eral Hospital Insurance Trust Fund,
the Secretary shall, for fiscal year
1997 and each subsequent fiscal year,
748
Subtitle E, Part 2
transfer to the Indirect-Costs Medical
Education Account (under section
2201) an amount determined by the
Secretary in accordance with sub-
paragraph (B).
‘‘(B) 
DETERMINATION
OF
AMOUNTS.—The Secretary shall make
an estimate for the fiscal year in-
volved of the nationwide total of the
amounts that would have been paid
under subsection (d)(5)(B) to hos-
pitals during the fiscal year if such
payments had not been terminated
for discharges occurring after Sep-
tember 30, 1996. For purposes of sub-
paragraph (A), the amount deter-
mined under this subparagraph for
the fiscal year is the estimate made
by the Secretary under the preceding
sentence.
‘‘(2) DIRECT
COSTS
OF
MEDICAL
EDU-
CATION.—
‘‘(A) IN GENERAL.—From the Fed-
eral Hospital Insurance Trust Fund
and the Federal Supplementary Medi-
750
Subtitle E, Part 2
ber 30, 1996. For purposes of subpara-
graph (A)(i), the amount determined
under this subparagraph for the fis-
cal year is the sum of all estimates
made by the Secretary under the pre-
ceding sentence.
‘‘(C) ESTIMATES
REGARDING
QUALI-
FYING
CONSORTIA.—If the Secretary
elects to authorize one or more quali-
fying consortia for purposes of sec-
tion 2233(a), the Secretary shall carry
out the following:
‘‘(i) The Secretary shall estab-
lish a methodology for making
payments to qualifying consortia
with respect to the reasonable di-
rect costs of such consortia in
carrying out programs of grad-
uate 
medical 
education. 
The
methodology shall be the meth-
odology established in subsection
(h), modified to the extent nec-
essary to take into account the
participation in such programs of
entities other than hospitals.
751
Subtitle E, Part 2
‘‘(ii) For each qualifying con-
sortium, the Secretary shall make
an estimate for the fiscal year in-
volved of the amount that would
have been paid to the consortium
during the fiscal year if, using the
methodology 
under 
clause 
(i),
payments had been made to the
consortium for the fiscal year as
reimbursements with respect to
cost reporting periods. For pur-
poses of subparagraph (A)(ii), the
amount determined under this
clause for the fiscal year is the
sum of all estimates made by the
Secretary under the preceding
sentence.
‘‘(D) 
ALLOCATION
BETWEEN
FUNDS.—In providing for a transfer
under subparagraph (A) for a fiscal
year, the Secretary shall provide for
an allocation of the amounts involved
between part A and part B (and the
trust funds established under the re-
spective parts) as reasonably reflects
752
Subtitle E, Part 2
the proportion of direct graduate
medical education costs of hospitals
associated with the provision of serv-
ices under each respective part.
‘‘(3) APPLICABILITY OF CERTAIN AMEND-
MENTS.—Amendments made to subsection
(d)(5)(B) and subsection (h) that are effec-
tive on or after October 1, 1996, apply
only for purposes of estimates under
paragraphs (1) and (2) and for purposes
of determining the amount of payments
under 2211. Such amendments do not re-
quire any adjustment to amounts paid
under subsection (d)(5)(B) or (h) with re-
spect to fiscal year 1996 or any prior fis-
cal year.
‘‘(4) RELATIONSHIP
TO
CERTAIN
DEM-
ONSTRATION
PROJECTS.—In the case of a
State for which a demonstration project
under section 1814(b)(3) is in effect, the
Secretary, in making determinations of
the rates of increase under such section,
shall include all amounts transferred
under this subsection. Such amounts
shall be so included to the same extent
753
Subtitle E, Part 2
and in the same manner as amounts de-
termined under subsections (d)(5)(B) and
(h) were included in such determination
under the provisions of this title in effect
on September 30, 1996.’’.
SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD-
ING GRADUATE MEDICAL EDUCATION.
(a) INDIRECT COSTS OF MEDICAL EDUCATION;
APPLICABLE PERCENTAGE.—
(1) MODIFICATION
REGARDING
5.6
PER-
CENT.—Section 1886(d)(5)(B)(ii) (42 U.S.C.
1395ww(d)(5)(B)(ii)) is amended—
(A) by striking ‘‘on or after Octo-
ber 1, 1988,’’ and inserting ‘‘on or
after October 1, 1999,’’; and
(B) by striking ‘‘1.89’’ and insert-
ing ‘‘1.38’’.
(2) SPECIAL
RULE
REGARDING
FISCAL
YEARS
1996
THROUGH
1998; MODIFICATION
REGARDING
PERCENT.—Section
1886(d)(5)(B)(ii), as amended by para-
graph (1), is amended by adding at the
end the following: ‘‘In the case of dis-
charges occurring on or after October 1,
1995, and before October 1, 1999, the pre-
754
Subtitle E, Part 2
ceding sentence applies to the same ex-
tent and in the same manner as the sen-
tence applies to discharges occurring on
or after October 1, 1999, except that the
term ‘1.38’ is deemed to be ‘1.48’.’’.
(b) 
DIRECT
COSTS
OF
MEDICAL
EDU-
CATION.—
(1) LIMITATION
ON
NUMBER
OF
FULL-
TIME-EQUIVALENT
RESIDENTS.—Section
1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is
amended by adding at the end the follow-
ing new subparagraph:
‘‘(F) LIMITATION
ON
NUMBER
OF
RESIDENTS
FOR
CERTAIN
FISCAL
YEARS.—Such rules shall provide that
for purposes of a cost reporting pe-
riod beginning on or after October 1,
1995, and on or before September 30,
2002, the number of full-time-equiva-
lent residents determined under this
paragraph with respect to an ap-
proved medical residency training
program may not exceed the number
of full-time-equivalent residents with
respect to the program as of August 1,
755
Subtitle E, Part 2
1995 (except that this subparagraph
does not apply to any nonphysician
teaching program that is approved
for purposes of section 1861(b)(6) and
that, under paragraph (5)(A), is an ap-
proved medical residency training
program).’’.
(2) EXCLUSION OF RESIDENTS AFTER INI-
TIAL
RESIDENCY
PERIOD.—Section
1886(h)(4)(C) (42 U.S.C. 1395ww(h)(4)(C))
is amended to read as follows:
‘‘(C) WEIGHTING FACTORS FOR RESI-
DENTS.—Effective for cost reporting
periods beginning on or after October
1, 1997, such rules shall provide that,
in the calculation of the number of
full-time-equivalent residents in an
approved 
residency 
program, 
the
weighting factor for a resident who is
in the initial residency period (as de-
fined in paragraph (5)(F)) is 1.0 and
the weighting factor for a resident
who has completed such period is 0.0.
(In the case of cost reporting periods
beginning before October 1, 1997, the
756
Subtitle E, Part 2
weighting factors that apply in such
calculation are the weighting factors
that were applicable under this sub-
paragraph on the day before the date
of the enactment of the Medicare
Preservation Act of 1995.)’’.
(3) REDUCTIONS IN PAYMENTS FOR ALIEN
RESIDENTS.—Section 1886(h)(4) (42 U.S.C.
1395ww(h)(4)), as amended by paragraph
(1), is amended by adding at the end the
following new subparagraph:
‘‘(G) SPECIAL
RULES
FOR
ALIEN
RESIDENTS.—In the case of individuals
who are not citizens or nationals of
the United States and who are not
citizens of Canada, in the calculation
of the number of full-time-equivalent
residents in an approved medical
residency 
program, 
the 
following
rules shall apply with respect to such
individuals who are residents in the
program:
‘‘(i) For a cost reporting pe-
riod beginning during fiscal year
1996, for each such individual the
757
Subtitle E, Part 2
Secretary shall apply a weighting
factor of .75.
‘‘(ii) For a cost reporting pe-
riod beginning during fiscal year
1997, for each such individual the
Secretary shall apply a weighting
factor of .50.
‘‘(iii) For a cost reporting pe-
riod beginning during fiscal year
1998, for each such individual the
Secretary shall apply a weighting
factor of .25.
‘‘(iv) For a cost reporting pe-
riod beginning during fiscal year
1999 or any subsequent fiscal
year, such individuals shall be ex-
cluded from the calculation of the
number 
of 
full-time-equivalent
residents in an approved medical
residency 
program 
under 
this
paragraph.’’.
(4) EFFECTIVE
DATE.—Except as pro-
vided otherwise in this subsection (or in
the 
amendments 
made 
by 
this 
sub-
section), the amendments made by this
758
Subtitle E, Part 3
subsection apply to hospital cost report-
ing periods beginning on or after October
1, 1995.
PART 3—REFORM OF FEDERAL POLICIES RE-
GARDING TEACHING HOSPITALS AND GRAD-
UATE MEDICAL EDUCATION
SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR
RECOMMENDING POLICIES.
Title XXII of the Social Security Act, as
added by section 15401, is amended by adding
at the end the following part:
‘‘PART C—OTHER MATTERS
‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING
OF TEACHING HOSPITALS AND GRADUATE
MEDICAL EDUCATION.
‘‘(a) ESTABLISHMENT.—The Chair of the
Medicare Payment Review Commission under
section 1806 shall establish a temporary advi-
sory panel to be known as the Advisory Panel
on Financing for Teaching Hospitals and
Graduate Medical Education (in this section
referred to as the ‘Panel’).
‘‘(b) DUTIES.—The Panel shall develop rec-
ommendations on whether and to what extent
Federal policies regarding teaching hospitals
759
Subtitle E, Part 3
and graduate medical education should be re-
formed, including recommendations regard-
ing the following:
‘‘(1) The financing of graduate medi-
cal education, including consideration of
alternative broad-based sources of fund-
ing for such education.
‘‘(2) The financing of teaching hos-
pitals, including consideration of the dif-
ficulties encountered by such hospitals as
competition among health care entities
increases. Matters considered under this
paragraph shall include consideration of
the effects on teaching hospitals of the
method 
of 
financing 
used 
for 
the
MedicarePlus program under part C of
title XVIII.
‘‘(3) The methodology for making pay-
ments for graduate medical education,
and the selection of entities to receive
the payments. Matters considered under
this paragraph shall include the follow-
ing:
‘‘(A) The methodology under part
B for making payments from the
760
Subtitle E, Part 3
Fund, including the use of data from
the fiscal years 1992 through 1994,
and including the methodology that
applies with respect to consolidations
and mergers of participants in the
program under such part and with
respect to the inclusion of additional
participants in the program.
‘‘(B) Issues regarding children’s
hospitals, and approved medical resi-
dency training programs in pediat-
rics.
‘‘(C) Whether and to what extent
payments are being made (or should
be made) for graduate training in the
various nonphysician health profes-
sions.
‘‘(4) Federal policies regarding inter-
national medical graduates.
‘‘(5) The dependence of schools of
medicine on service-generated income.
‘‘(6) The effects of the amendments
made by section 15412 of the Medicare
Preservation Act of 1995, including ad-
verse effects on teaching hospitals that
761
Subtitle E, Part 3
result from modifications in policies re-
garding international medical graduates.
‘‘(7) Whether and to what extent the
needs of the United States regarding the
supply of physicians will change during
the 10-year beginning on October 1, 1995,
and whether and to what extent any such
changes will have significant financial ef-
fects on teaching hospitals.
‘‘(8) The appropriate number and mix
of residents.
‘‘(c) COMPOSITION.—Not later than three
months after being designated as the initial
chairman of the Medicare Payment Review
Commission, the chairman of the Commission
shall appoint to the Panel 19 individuals who
are not members of the Commission, who are
not officers or employees of the United States,
and who possess expertise on matters on
which the Panel is to make recommendations
under subsection (b). Such individuals shall
include the following:
‘‘(1) Deans from allopathic and osteo-
pathic schools of medicine.
762
Subtitle E, Part 3
‘‘(2) Chief executive officers (or equiv-
alent administrative heads) from aca-
demic health centers, integrated health
care systems, and approved medical resi-
dency training programs.
‘‘(3) Chairs of departments or divi-
sions from allopathic and osteopathic
schools of medicine, schools of dentistry,
and approved medical residency training
programs in oral surgery.
‘‘(4) Individuals with leadership expe-
rience from each of the fields of ad-
vanced practice nursing, physician assist-
ants, and podiatric medicine.
‘‘(5) Individuals with substantial ex-
perience in the study of issues regarding
the 
composition 
of 
the 
health 
care
workforce of the United States.
‘‘(6) Individuals with expertise on the
financing of health care.
‘‘(7) Representatives from health in-
surance organizations and health plan or-
ganizations.
‘‘(d) RELATIONSHIP OF PANEL TO MEDICARE
PAYMENT REVIEW COMMISSION.—From amounts
763
Subtitle E, Part 3
appropriated under subsection (n), the Medi-
care Payment Review Commission shall pro-
vide for the Panel such staff and administra-
tive support (including quarters for the
Panel) as may be necessary for the Panel to
carry out the duties under subsection (b).
‘‘(e) CHAIR.—The Panel shall designate a
member of the Panel to serve as the Chair of
the Panel.
‘‘(f) MEETINGS.—The Panel shall meet at
the call of the Chair or a majority of the mem-
bers, except that the first meeting of the
Panel shall be held not later than three
months after the date on which appointments
under subsection (c) are completed.
‘‘(g) TERMS.—The term of a member of the
Panel is the duration of the Panel.
‘‘(h) VACANCIES.—
‘‘(1) IN
GENERAL.—A vacancy in the
membership of the Panel does not affect
the power of the remaining members to
carry out the duties under subsection (b).
A vacancy in the membership of the
Panel shall be filled in the manner in
764
Subtitle E, Part 3
which the original appointment was
made.
‘‘(2) INCOMPLETE TERM.—If a member
of the Panel does not serve the full term
applicable to the member, the individual
appointed to fill the resulting vacancy
shall be appointed for the remainder of
the term of the predecessor of the indi-
vidual.
‘‘(i) COMPENSATION; REIMBURSEMENT OF EX-
PENSES.—
‘‘(1) COMPENSATION.—Members of the
Panel shall receive compensation for
each day (including traveltime) engaged
in carrying out the duties of the Commit-
tee. Such compensation may not be in an
amount in excess of the daily equivalent
of the annual maximum rate of basic pay
payable under the General Schedule
(under title 5, United States Code) for po-
sitions above GS–15.
‘‘(2) REIMBURSEMENT.—Members of the
Panel may, in accordance with chapter 57
of title 5, United States Code, be reim-
bursed for travel, subsistence, and other
765
Subtitle E, Part 3
necessary expenses incurred in carrying
out the duties of the Panel.
‘‘(j) CONSULTANTS.—The Panel may pro-
cure such temporary and intermittent serv-
ices of consultants under section 3109(b) of
title 5, United States Code, as the Panel may
determine to be useful in carrying out the du-
ties under subsection (b). The Panel may not
procure services under this subsection at any
rate in excess of the daily equivalent of the
maximum annual rate of basic pay payable
under the General Schedule for positions
above GS–15. Consultants under this sub-
section may, in accordance with chapter 57 of
title 5, United States Code, be reimbursed for
travel, subsistence, and other necessary ex-
penses incurred for activities carried out on
behalf of the Panel pursuant to subsection (b).
‘‘(k) POWERS.—
‘‘(1) IN GENERAL.—For the purpose of
carrying out the duties of the Panel
under subsection (b), the Panel may hold
such hearings, sit and act at such times
and places, take such testimony, and re-
766
Subtitle E, Part 3
ceive such evidence as the Panel consid-
ers appropriate.
‘‘(2) 
OBTAINING
OFFICIAL
INFORMA-
TION.—Upon the request of the Panel, the
heads of Federal agencies shall furnish
directly to the Panel information nec-
essary for the Panel to carry out the du-
ties under subsection (b).≤
‘‘(3) USE
OF
MAILS.—The Panel may
use the United States mails in the same
manner and under the same conditions
as Federal agencies.
‘‘(l) REPORTS.—
‘‘(1) FIRST INTERIM REPORT.—Not later
than one year after the date of the enact-
ment of the Medicare Preservation Act of
1995, the Panel shall submit to the Con-
gress 
a 
report 
providing 
the 
rec-
ommendations of the Panel regarding the
matters 
specified 
in 
paragraphs 
(1)
through (4) of subsection (b).
‘‘(2) 
SECOND
INTERIM
REPORT.—Not
later than 2 years after the date of enact-
ment specified in paragraph (1), the
Panel shall submit to the Congress a re-
767
Subtitle E, Part 3
port providing the recommendations of
the Panel regarding the matters specified
in paragraphs (5) and (6) of subsection
(b).
‘‘(3) FINAL REPORT.—Not later than 3
years after the date of enactment speci-
fied in paragraph (1), the Panel shall sub-
mit to the Congress a final report provid-
ing the recommendations of the Panel
under subsection (b).
‘‘(m) DURATION.—The Panel terminates
upon the expiration of the 180-day period be-
ginning on the date on which the final report
under subsection (l)(3) is submitted to the
Congress.
‘‘(n) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) IN
GENERAL.—Subject to para-
graph (2), for the purpose of carrying out
this section, there are authorized to be
appropriated such sums as may be nec-
essary for each of the fiscal years 1996
through 2000.
‘‘(2) LIMITATION.—The authorization of
appropriations established in paragraph
(1) is effective only with respect to appro-
768
Subtitle F, Part 1
priations made from allocations under
section 302(b) of the Congressional Budg-
et Act of 1974—
‘‘(A) for the Subcommittee on
Labor, Health and Human Services,
and Education, Committee on Appro-
priations of the House of Representa-
tives, in the case of any bill, resolu-
tion, or amendment considered in the
House; and
‘‘(B) for the Subcommittee on
Labor, Health and Human Services,
and Education, Committee on Appro-
priations of the Senate, in the case of
any bill, resolution, or amendment
considered in the Senate.’’.
Subtitle F—Provisions Relating to
Medicare Part A
PART 1—HOSPITALS
Subpart A—General Provisions Relating to Hospitals
SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS
HOSPITALS.
Section 
1886(b)(3)(B)(i) 
(42 
U.S.C.
1395ww(b)(3)(B)(i)) is amended by striking
769
Subtitle F, Part 1
subclauses (XI), (XII), and (XIII) and inserting
the following:
‘‘(XI) for fiscal year 1996, the market
basket percentage increase minus 2.5 per-
centage points for hospitals in all areas,
‘‘(XII) for each of the fiscal years 1997
through 2002, the market basket percent-
age increase minus 2.0 percentage points
for hospitals in all areas, and
‘‘(XIII) for fiscal year 2003 and each
subsequent fiscal year, the market basket
percentage increase for hospitals in all
areas.’’.
SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE
PAYMENT ADJUSTMENTS.
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
770
Subtitle F, Part 1
payment amount otherwise determined under
clause (ii) shall be reduced as follows:
‘‘(I) For discharges occurring on or
after October 1, 1995, and on or before
September 30, 1996, by 17 percent.
‘‘(II) For discharges occurring on or
after October 1, 1996, and on or before
September 30, 1997, by 15 percent.
‘‘(III) For discharges occurring on or
after October 1, 1997, and on or before
September 30, 1998, by 20 percent.
‘‘(IV) For discharges occurring on or
after October 1, 1998, and on or before
September 30, 1999, by 20 percent.
‘‘(V) For discharges occurring on or
after October 1, 1999, and on or before
September 30, 2000, by 25 percent.
‘‘(VI) For discharges occurring on or
after October 1, 2000, and on or before
September 30, 2001, by 30 percent.
‘‘(VII) For discharges occurring on or
after October 1, 2001, by 30 percent.’’.
771
Subtitle F, Part 1
SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR
INPATIENT HOSPITAL SERVICES.
(a) REDUCTION IN PAYMENTS FOR PPS HOS-
PITALS.—
(1) CONTINUATION OF CURRENT REDUC-
TIONS.—Section 1886(g)(1)(A) (42 U.S.C.
1395ww(g)(1)(A)) is amended in the sec-
ond sentence—
(A) by striking ‘‘through 1995’’
and inserting ‘‘through 2002’’; and
(B) by inserting after ‘‘reduction’’
the following: ‘‘(or a 15 percent reduc-
tion in the case of payments during
fiscal years 1996 through 2002)’’.
(2) 
REDUCTION
IN
BASE
PAYMENT
RATES.—Section 1886(g)(1)(A) (42 U.S.C.
1395ww(g)(1)(A)) is amended by adding at
the end the following new sentence: ‘‘In
addition to the reduction described in
the preceding sentence, for discharges
occurring after September 30, 1995, the
Secretary shall reduce by 7.47 percent
the unadjusted standard Federal capital
payment rate (as described in 42 CFR
412.308(c), as in effect on the date of the
enactment of the Medicare Preservation
772
Subtitle F, Part 1
Act of 1995) and shall reduce by 8.27 per-
cent the unadjusted hospital-specific rate
(as described in 42 CFR 412.328(e)(1), as
in effect on such date of enactment).’’.
(b) REDUCTION IN PAYMENTS FOR PPS-EX-
EMPT HOSPITALS.—Section 1886(g) (42 U.S.C.
1395ww(g)) is amended by adding at the end
the following new paragraph:
‘‘(4)(A) Except as provided in subpara-
graph (B), 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 sub-
section (d) Puerto Rico hospital, the Secretary
shall reduce the amounts of such payments
otherwise determined under this title by 15
percent.
‘‘(B) Subparagraph (A) shall not apply to
payments with respect to the capital-related
costs of any hospital that is a sole community
hospital (as defined in subsection (d)(5)(D)(iii)
or a rural primary care hospital (as defined
in section 1861(mm)(1)).’’.
773
Subtitle F, Part 1
(c) HOSPITAL-SPECIFIC
ADJUSTMENT
FOR
CAPITAL-RELATED
TAX
COSTS.—Section
1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amend-
ed—
(1) by redesignating subparagraph
(C) as subparagraph (D), and
(2) by inserting after subparagraph
(B) the following:
‘‘(C)(i) For discharges occurring
after September 30, 1995, such system
shall provide for an adjustment in an
amount equal to the amount deter-
mined under clause (iv) for capital-re-
lated tax costs for each hospital that
is eligible for such adjustment.
‘‘(ii) Subject to clause (iii), a hos-
pital is eligible for an adjustment
under this subparagraph, with re-
spect to discharges occurring in a fis-
cal year, if the hospital—
‘‘(I) is a hospital that may oth-
erwise receive payments under
this subsection,
‘‘(II) is not a public hospital,
and
774
Subtitle F, Part 1
‘‘(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.
775
Subtitle F, Part 1
‘‘(iv) The per discharge adjust-
ment 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-re-
lated tax costs for a fiscal year after
fiscal year 1992, for the first full fiscal
year for which such costs are in-
curred), updated to the fiscal year to
which the adjustment applies. Such
per discharge adjustment shall be
added to the Federal capital rate,
after such rate has been adjusted as
described in 42 CFR 412.312 (as in ef-
fect on the date of the enactment of
the Medicare Preservation Act of
1995), and before such rate is multi-
plied by the applicable Federal rate
percentage.
‘‘(v) For purposes of this subpara-
graph, capital-related tax costs in-
clude—
‘‘(I) the costs of taxes on land
and depreciable assets owned by
776
Subtitle F, Part 1
a hospital (or related organiza-
tion) and used for patient care,
‘‘(II) payments in lieu of such
taxes (made by hospitals that are
exempt from taxation), and
‘‘(III) the costs of taxes paid
by a hospital (or related organiza-
tion) as lessee of land, buildings,
or fixed equipment from a lessor
that is unrelated to the hospital
(or related organization) under
the terms of a lease that requires
the lessee to pay all expenses (in-
cluding mortgage, interest, and
amortization) and leaves the les-
sor with an amount free of all
claims (sometimes referred to as a
‘net net net’ or ‘triple net’ lease).
In determining the adjustment re-
quired under clause (i), the Secretary
shall not take into account any cap-
ital-related tax costs of a hospital to
the extent that such costs are based
on tax rates and assessments that ex-
777
Subtitle F, Part 1
ceed 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 suf-
ficient to ensure that the adjustments
required to be paid under clause (i)
for a fiscal year neither increase nor
decrease the total amount 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 PAYMENT SYSTEM FOR CER-
TAIN PROJECTS.—
(1) IN GENERAL.—Section 1886(g)(1) (42
U.S.C. 1395ww(g)(1)), as amended by sub-
section (c), is amended—
(1) by redesignating subparagraph
(D) as subparagraph (E), and
(2) by inserting after subparagraph
(C) the following:
‘‘(D) The exceptions under the system pro-
vided by the Secretary under subparagraph
778
Subtitle F, Part 1
(B)(iii) shall include the provision of excep-
tion 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 fol-
lows:
‘‘(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 subsection (d)(5)(F) or
whether it qualifies for additional pay-
ment 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 October 1, 2001, if—
‘‘(I) the hospital has obtained a
certificate of need for the project ap-
proved by the State or a local plan-
ning authority, and
779
Subtitle F, Part 1
‘‘(II) by September 1, 1995, the
hospital has expended on the project
at least $750,000 or 10 percent of the
estimated cost of the project.
‘‘(iv) The amount of the exception
payment made shall not be reduced by
any offsetting amounts.’’.
(2) CONFORMING AMENDMENT.—Section
1886(g)(1)(B) (42 U.S.C. 1395ww(g)(1)(B))
is amended by striking ‘‘may provide’’
and inserting ‘‘shall provide (in accord-
ance with subparagraph (D)’’.
SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT
MEDICAL EDUCATION.
For provisions modifying medicare pay-
ment policies regarding graduate medical
education, see part 2 of subtitle E.
SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.
(a) UPDATES.—Section 1886(b)(3)(B)(ii)(V)
(42 U.S.C. 1395ww(b)(3)(B)(ii)(V)) is amended
by striking ‘‘through 1997’’ and inserting
‘‘through 2002’’.
(b) REBASING
FOR
CERTAIN
LONG-TERM
CARE HOSPITALS.—
780
Subtitle F, Part 1
(1) IN GENERAL.—Section 1886(b)(3) (42
U.S.C. 1395ww(b)(3)) is amended—
(A) in subparagraph (A), by strik-
ing ‘‘and (E)’’ and inserting ‘‘(E), and
(F)’’;
(B) in subparagraph (B)(ii), by
striking ‘‘(A) and (E)’’ and inserting
‘‘(A), (E), and (F)’’; and
(C) by adding at the end the fol-
lowing new subparagraph:
‘‘(F)(i) In the case of a qualified long-term
care hospital (as defined in clause (ii)), the
term ‘target amount’ means—
‘‘(I) with respect to the first 12-month
cost reporting period in which this sub-
paragraph is applied to the hospital, the
allowable operating costs of inpatient
hospital services (as defined in sub-
section (a)(4)) recognized under this title
for the hospital for the 12-month cost re-
porting period beginning during fiscal
year 1991; or
‘‘(II) with respect to a later cost re-
porting period, the target amount for the
preceding cost reporting period, increase
781
Subtitle F, Part 1
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 re-
porting period, a hospital described in clause
(iv) of subsection (d)(1)(B) during fiscal year
1995 for which the hospital’s allowable oper-
ating costs of inpatient hospital services rec-
ognized under this title for each of the two
most recent previous 12-month cost reporting
periods exceeded the hospital’s target amount
determined under this paragraph for such
cost reporting periods, if the hospital—
‘‘(I) 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 25 percent, or
‘‘(II) is located in a State for which no
payment is made under the State plan
under title XIX for days of inpatient hos-
pital services furnished to any individual
in excess of the limit on the number of
782
Subtitle F, Part 1
days of such services furnished to the in-
dividual for which payment may be made
under this title.’’.
(2) EFFECTIVE DATE.—The amendment
made by paragraph (1) shall apply to dis-
charges occurring during cost reporting
periods beginning on or after October 1,
1995.
(c) TREATMENT OF CERTAIN UNITS 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 strik-
ing the period and inserting the follow-
ing: ‘‘, or a long-term care unit of the hos-
pital if such unit was not treated as a
subsection (d) hospital with respect to
discharges occurring on or before Sep-
tember 30, 1995.’’.
(2) STUDY BY REVIEW COMMISSION.—Not
later than 12 months after the date a ma-
jority of the members of the Medicare
Payment Review Commission are first ap-
pointed, the Commission shall submit a
report 
to 
Congress 
containing 
rec-
783
Subtitle F, Part 1
ommendations for appropriate revisions
in the treatment of distinct units of hos-
pitals for purposes of section 1886 of the
Social Security Act.
SEC. 15506. 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:
‘‘(T) In determining such reasonable costs
for hospitals, the amount of bad debts other-
wise treated as allowable costs which are at-
tributable to the deductibles and coinsurance
amounts under this title shall be reduced by—
‘‘(i) 75 percent for cost reporting peri-
ods beginning during fiscal year 1996,
‘‘(ii) 60 percent for cost reporting pe-
riods beginning during fiscal year 1997,
and
‘‘(iii) 50 percent for subsequent cost
reporting periods.
(b) EFFECTIVE
DATE.—The amendment
made by subsection (a) shall apply to hospital
cost reporting periods beginning on or after
October 1, 1995.
784
Subtitle F, Part 1
SEC. 15507. 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 Sep-
tember 30, 1994’’.
SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION
OF CHRISTIAN SCIENCE PROVIDERS.
(a) HOSPITALS.—Section 1861(e) (42 U.S.C.
1395x(e)) is amended in the sixth sentence by
inserting after ‘‘Massachusetts,’’ the following:
‘‘or by the Commission for Accreditation of
Christian Science Nursing Organizations/Fa-
cilities, Inc.,’’.
(b) SKILLED NURSING FACILITIES.—Section
1861(y)(1) is amended by inserting after ‘‘Mas-
sachusetts,’’ the following: ‘‘or by the Commis-
sion for Accreditation of Christian Science
Nursing Organizations/Facilities, Inc.,’’.
Subpart B—Provisions Relating to Rural Hospitals
SEC. 15511. SOLE COMMUNITY HOSPITALS.
(a) UPDATE.—Section 1886(b)(3)(B)(iv) (42
U.S.C. 1395ww(b)(3)(B)(iv)) is amended—
(A) in subclause (III), by striking
‘‘and’’ at the end; and
785
Subtitle F, Part 1
(B) by striking subclause (IV) and in-
serting the following:
‘‘(IV) for each of the fiscal years 1996
through 2000, the market basket percent-
age increase minus 1 percentage points,
and
‘‘(V) for fiscal year 2001 and each sub-
sequent fiscal year, the applicable per-
centage increase under clause (i).’’.
(b) STUDY OF IMPACT OF SOLE COMMUNITY
HOSPITAL DESIGNATIONS.—
(1) STUDY.—The Medicare Payment
Review 
Commission 
shall 
conduct 
a
study of the impact of the designation of
hospitals as sole community hospitals
under the medicare program on the de-
livery of health care services to individ-
uals in rural areas, and shall include in
the study an analysis of the characteris-
tics of the hospitals designated as such
sole community hospitals under the pro-
gram.
(2) REPORT.—Not later than 12 months
after the date a majority of the members
of the Commission are first appointed,
786
Subtitle F, Part 1
the Commission shall submit to Congress
a report on the study conducted under
paragraph (1).
SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND
RPC HOSPITALS.
Paragraphs (1)(A) and (2)(A) of section
1820(i) (42 U.S.C. 1395i–4(i)) are each amended
by striking the semicolon at the end and in-
serting the following: ‘‘, or in a State which
the Secretary finds would receive a grant
under such subsection during a fiscal year if
funds were appropriated for grants under
such subsection for the fiscal year;’’.
SEC. 15513. RURAL EMERGENCY ACCESS CARE HOSPITALS.
(a) ESTABLISHMENT OF PROGRAM.—
(1) IN
GENERAL.—Section 1861 (42
U.S.C. 1395x) is amended by adding at the
end the following new subsection:
‘‘Rural Emergency Access Care Hospital;
Rural Emergency Access Care Hospital
Services
‘‘(oo)(1) The term ‘rural emergency access
care hospital’ means, for a fiscal year, a facil-
ity with respect to which the Secretary finds
the following:
787
Subtitle F, Part 1
‘‘(A) The facility is located in a rural
area (as defined in section 1886(d)(2)(D)).
‘‘(B) The facility was a hospital under
this title at any time during the 5-year
period that ends on the date of the enact-
ment of this subsection.
‘‘(C) The facility is in danger of clos-
ing due to low inpatient utilization rates
and negative operating losses, and the
closure of the facility would limit the ac-
cess of individuals residing in the facili-
ty’s service area to emergency services.
‘‘(D) The facility has entered into (or
plans to enter into) an agreement with a
hospital with a participation agreement
in effect under section 1866(a), and under
such agreement the hospital shall accept
patients transferred to the hospital from
the facility and receive data from and
transmit data to the facility.
‘‘(E) There is a practitioner who is
qualified to provide advanced cardiac life
support services (as determined by the
State in which the facility is located) on-
site at the facility on a 24-hour basis.
788
Subtitle F, Part 1
‘‘(F) A physician is available on-call to
provide emergency medical services on a
24-hour basis.
‘‘(G) The facility is a member of a
community rural health network under
section 104 of the Rural Health Develop-
ment Act.
‘‘(H) The facility meets such staffing
requirements as would apply under sec-
tion 1861(e) to a hospital located in a
rural area, except that—
‘‘(i) the facility need not meet hos-
pital standards relating to the num-
ber of hours during a day, or days
during a week, in which the facility
must be open, except insofar as the
facility is required to provide emer-
gency care on a 24-hour basis under
subparagraphs (E) and (F); and
‘‘(ii) the facility may provide any
services otherwise required to be pro-
vided by a full-time, on-site dietician,
pharmacist, 
laboratory 
technician,
medical technologist, or radiological
789
Subtitle F, Part 1
technologist on a part-time, off-site
basis.
‘‘(I) The facility meets the require-
ments applicable to clinics and facilities
under subparagraphs (C) through (J) of
paragraph (2) of section 1861(aa) and of
clauses (ii) and (iv) of the second sen-
tence of such paragraph (or, in the case
of the requirements of subparagraph (E),
(F), or (J) of such paragraph, would meet
the requirements if any reference in such
subparagraph to a ‘nurse practitioner’ or
to ‘nurse practitioners’ was deemed to be
a reference to a ‘nurse practitioner or
nurse’ 
or 
to 
‘nurse 
practitioners 
or
nurses’); 
except 
that 
in 
determining
whether a facility meets the require-
ments of this subparagraph, subpara-
graphs (E) and (F) of that paragraph
shall be applied as if any reference to a
‘physician’ is a reference to a physician
as defined in section 1861(r)(1).
‘‘(2) The term ‘rural emergency access
care hospital services’ means the following
790
Subtitle F, Part 1
services provided by a rural emergency ac-
cess care hospital:
‘‘(A) An appropriate medical screen-
ing examination (as described in section
1867(a)).
‘‘(B) Necessary stabilizing examina-
tion and treatment services for an emer-
gency medical condition and labor (as de-
scribed in section 1867(b)).
‘‘(3) The term ‘inpatient rural emergency
access care hospital services’ means services
described in paragraph (2), furnished to an in-
dividual over a continuous period not to ex-
ceed 24 hours (except that such services may
be furnished over a longer period in the case
of an individual who is unable to leave the
hospital because of inclement weather) that
would be inpatient hospital services if fur-
nished to an inpatient of a hospital by a hos-
pital.’’.
(2) REQUIRING
RURAL
EMERGENCY
AC-
CESS
CARE
HOSPITALS
TO
MEET
HOSPITAL
ANTI-DUMPING
REQUIREMENTS.—Section
1867(e)(5) 
(42 
U.S.C. 
1395dd(e)(5)) 
is
amended by striking ‘‘1861(mm)(1))’’ and
791
Subtitle F, Part 1
inserting ‘‘1861(mm)(1)) and a rural emer-
gency access care hospital (as defined in
section 1861(oo)(1))’’.
(b) COVERAGE OF AND PAYMENT FOR SERV-
ICES UNDER PART A.—
(1) COVERAGE.—Section 1812(a)(1) (42
U.S.C. 1395d(a)(1)) is amended by striking
‘‘or inpatient rural primary care hospital
services’’ and inserting ‘‘inpatient rural
primary care hospital services, or inpa-
tient rural emergency access care hos-
pital services’’.
(2) APPLICATION
OF
DEDUCTIBLE
AND
COINSURANCE.—(A) Sections 1813(a) and
1813(b)(3)(A) 
(42 
U.S.C. 
1395e(a),
1395e(b)(3)(A)) are each amended by
striking ‘‘services or inpatient rural pri-
mary care hospital services’’ each place it
appears and inserting ‘‘services, inpatient
rural primary care hospital services, or
inpatient rural emergency access care
hospital services’’.
(B) Section 1813(b)(3)(B) (42 U.S.C.
1395e(b)(3)(B)) is amended by inserting ‘‘,
inpatient rural emergency access care
792
Subtitle F, Part 1
hospital services,’’ after ‘‘inpatient rural
primary care hospital services’’.
(3) PAYMENT
BASED
ON
REASONABLE
COSTS.—Section 1814 (42 U.S.C. 1395f) is
amended by adding at the end the follow-
ing new subsection:
‘‘Payment for Inpatient Rural Emergency
Access Care Hospital Services
‘‘(m) The amount of payment under this
part for inpatient rural primary care hospital
services shall be equal to the reasonable cost
of such services (as determined under section
1861(v)), less the amount the hospital may
charge as described in clause (ii) of section
1866(a)(2)(A), but in no case may the payment
for such services exceed 80 percent of such
reasonable cost.’’.
(4) APPLICATION OF SPELL OF ILLNESS.—
Section 1861(a) (42 U.S.C. 1395x(a)) is
amended—
(A) in paragraph (1), by inserting
‘‘, inpatient rural emergency access
care hospital services,’’ after ‘‘inpa-
tient rural primary care hospital
services’’; and
793
Subtitle F, Part 1
(B) in paragraph (2), by striking
‘‘hospital or rural primary care hos-
pital’’ and inserting ‘‘hospital, rural
primary care hospital, or rural emer-
gency access care hospital’’.
(c) REFERENCE
TO
PAYMENT
PROVISIONS
UNDER PART B.—For provisions relating to
payment for inpatient rural emergency access
care hospital services under part B, see sec-
tion 15607.
(d) EFFECTIVE
DATE.—The amendments
made by this section shall apply to fiscal
years beginning on or after October 1, 1995.
SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CEN-
TERS.
(a) PROHIBITING DENIAL OF REQUEST FOR
RECLASSIFICATION ON BASIS OF COMPARABILITY
OF WAGES.—
(1) 
IN
GENERAL.—Section
1886(d)(10)(D) 
(42 
U.S.C.
1395ww(d)(10)(D)) is amended—
(A) by redesignating clause (iii) as
clause (iv); and
(B) by inserting after clause (ii)
the following new clause:
794
Subtitle F, Part 1
‘‘(iii) Under the guidelines published by
the Secretary under clause (i), in the case of
a hospital which is classified by the Secretary
as a rural referral center under paragraph
(5)(C), the Board may not reject the applica-
tion of the hospital under this paragraph on
the basis of any comparison between the aver-
age hourly wage of the hospital and the aver-
age hourly wage of hospitals in the area in
which it is located.’’.
(2) EFFECTIVE DATE.—Notwithstanding
section 1886(d)(10)(C)(ii) of the Social Se-
curity Act, a hospital may submit an ap-
plication to the Medicare Geographic
Classification Review Board during the
30-day period beginning on the date of
the enactment of this Act requesting a
change in its classification for purposes
of determining the area wage index ap-
plicable to the hospital under section
1886(d)(3)(D) of such Act for fiscal year
1997, if the hospital would be eligible for
such a change in its classification under
the 
standards 
described 
in 
section
1886(d)(10)(D) (as amended by paragraph
795
Subtitle F, Part 1
(1)) but for its failure to meet the dead-
line 
for 
applications 
under 
section
1886(d)(10)(C)(ii).
(b) CONTINUING TREATMENT OF PREVIOUSLY
DESIGNATED CENTERS.—Any hospital classified
as a rural referral center by the Secretary of
Health and Human Services under section
1886(d)(5)(C) of the Social Security Act for fis-
cal year 1994 shall be classified as such a
rural referral center for fiscal year 1996 and
each subsequent fiscal year.
SEC. 15515. FLOOR ON AREA WAGE INDEX.
(a) IN GENERAL.—For purposes of section
1886(d)(3)(E) of the Social Security Act for dis-
charges occurring on or after October 1, 1995,
the area wage index applicable under such
section to any hospital which is not located in
a 
rural 
area 
(as 
defined 
in 
section
1886(d)(2)(D) of such Act) may not be less than
the average of the area wage indices applica-
ble under such section to hospitals located in
rural areas in the State in which the hospital
is located.
(b) BUDGET-NEUTRALITY
IN
IMPLEMENTA-
TION.—The Secretary of Health and Human
796
Subtitle F, Part 2
Services shall make any adjustments required
under subsection (a) in a manner which
assures that the aggregate payments made
under section 1886(d) of the Social Security
Act in a fiscal year for the operating costs of
inpatient hospital services are not greater or
less than those which would have been made
in the year if this section did not apply.
PART 2—PAYMENTS TO SKILLED NURSING
FACILITIES
SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.
(a) CLARIFICATION OF DEFINITION OF ROU-
TINE 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 ‘rou-
tine 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 an-
cillary services (including supplies and equip-
ment), excluding costs attributable to covered
non-routine services subject to payment lim-
its under section 1888A.’’.