H. R. 2015—146
(b) 
LANGUAGE
IN
DEFINITION
OF
CONVICTION.—Section
1128E(g)(5) (42 U.S.C. 1320a–7e(g)(5)), as inserted by section 221(a)
of the Health Insurance Portability and Accountability Act of 1996,
is amended by striking ‘‘paragraph (4)’’ and inserting ‘‘paragraphs
(1) through (4)’’.
(c) IMPLEMENTATION OF EXCLUSIONS.—Section 1128 (42 U.S.C.
1320a–7) is amended—
(1) in subsection (a), by striking ‘‘any program under title
XVIII and shall direct that the following individuals and enti-
ties be excluded from participation in any State health care
program (as defined in subsection (h))’’ and inserting ‘‘any
Federal health care program (as defined in section 1128B(f))’’;
and
(2) in subsection (b), by striking ‘‘any program under title
XVIII and may direct that the following individuals and entities
be excluded from participation in any State health care pro-
gram’’ and inserting ‘‘any Federal health care program (as
defined in section 1128B(f))’’.
(d) SANCTIONS FOR FAILURE TO REPORT.—Section 1128E(b) (42
U.S.C. 1320a–7e(b)), as inserted by section 221(a) of the Health
Insurance Portability and Accountability Act of 1996, is amended
by adding at the end the following:
‘‘(6) SANCTIONS FOR FAILURE TO REPORT.—
‘‘(A) HEALTH
PLANS.—Any health plan that fails to
report information on an adverse action required to be
reported under this subsection shall be subject to a civil
money penalty of not more than $25,000 for each such
adverse action not reported. Such penalty shall be imposed
and collected in the same manner as civil money penalties
under subsection (a) of section 1128A are imposed and
collected under that section.
‘‘(B) GOVERNMENTAL AGENCIES.—The Secretary shall
provide for a publication of a public report that identifies
those Government agencies that have failed to report
information on adverse actions as required to be reported
under this subsection.’’.
(e) CLARIFICATION OF TREATMENT OF CERTAIN WAIVERS AND
PAYMENTS OF PREMIUMS.—Section 1128A(i)(6) (42 U.S.C. 1320a–
7a(i)(6)) is amended—
(1) in subparagraph (A)(iii)—
(A) in subclause (I), by adding ‘‘or’’ at the end;
(B) in subclause (II), by striking ‘‘or’’ at the end; and
(C) by striking subclause (III);
(2) by redesignating subparagraphs (B) and (C) as subpara-
graphs (C) and (D); and
(3) by inserting after subparagraph (A) the following:
‘‘(B) any permissible waiver as specified in section
1128B(b)(3) or in regulations issued by the Secretary;’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in this subsection,
the amendments made by this section shall be effective as
if included in the enactment of the Health Insurance Portability
and Accountability Act of 1996.
(2) FEDERAL HEALTH PROGRAM.—The amendments made
by subsection (c) shall take effect on the date of the enactment
of this Act.
H. R. 2015—147
(3) SANCTION FOR FAILURE TO REPORT.—The amendment
made by subsection (d) shall apply to failures occurring on
or after the date of the enactment of this Act.
Subtitle E—Provisions Relating to Part A
Only
CHAPTER 1—PAYMENT OF PPS HOSPITALS
SEC. 4401. PPS HOSPITAL PAYMENT UPDATE.
(a) 
IN
GENERAL.—Section 
1886(b)(3)(B)(i) 
(42 
U.S.C.
1395ww(b)(3)(B)(i)) is amended—
(1) by striking ‘‘and’’ at the end of subclause (XII), and
(2) by striking subclause (XIII) and inserting the following:
‘‘(XIII) for fiscal year 1998, 0 percent,
‘‘(XIV) for fiscal year 1999, the market basket percentage
increase minus 1.9 percentage points for hospitals in all areas,
‘‘(XV) for fiscal year 2000, the market basket percentage
increase minus 1.8 percentage points for hospitals in all areas,
‘‘(XVI) for each of fiscal years 2001 and 2002, the market
basket percentage increase minus 1.1 percentage point for hos-
pitals in all areas, and
‘‘(XVII) for fiscal year 2003 and each subsequent fiscal
year, the market basket percentage increase for hospitals in
all areas.’’.
(b) TEMPORARY RELIEF FOR CERTAIN NON-TEACHING, NON-DSH
HOSPITALS.—
(1) IN GENERAL.—In the case of a hospital described in
paragraph (2) for its cost reporting period—
(A) beginning in fiscal year 1998 the amount of pay-
ment made to the hospital under section 1886(d) of the
Social Security Act for discharges occurring during such
fiscal year only shall be increased as though the applicable
percentage increase (otherwise applicable to discharges
occurring 
during 
fiscal 
year 
1998 
under 
section
1886(b)(3)(B)(i)(XIII) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B)(i)(XIII))) had been increased by 0.5
percentage points; and
(B) beginning in fiscal year 1999 the amount of pay-
ment made to the hospital under section 1886(d) of the
Social Security Act for discharges occurring during such
fiscal year only shall be increased as though the applicable
percentage increase (otherwise applicable to discharges
occurring 
during 
fiscal 
year 
1999 
under 
section
1886(b)(3)(B)(i)(XIII) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B)(i)(XIII))) had been increased by 0.3
percentage points.
Subparagraph (A) shall not apply in computing the increase
under subparagraph (B) and neither subparagraph shall affect
payment for discharges for any hospital occurring during a
fiscal year after fiscal year 1999. Payment increases under
this subsection for discharges occurring during a fiscal year
are subject to settlement after the close of the fiscal year.
(2) HOSPITALS COVERED.—A hospital described in this para-
graph for a cost reporting period is a hospital—
(A) that is described in paragraph (3) for such period;
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(B) that is located in a State in which the amount
of the aggregate payments under section 1886(d) of such
Act for hospitals located in the State and described in
paragraph (3) for their cost reporting periods beginning
during fiscal year 1995 is less than the aggregate allowable
operating costs of inpatient hospital services (as defined
in section 1886(a)(4) of such Act) for all such hospitals
in such State with respect to such cost reporting periods;
and
(C) with respect to which the payments under section
1886(d) of such Act (42 U.S.C. 1395ww(d)) for discharges
occurring in the cost reporting period involved, as estimated
by the Secretary, is less than the allowable operating costs
of inpatient hospital services (as defined in section
1886(a)(4) of such Act (42 U.S.C. 1395ww(a)(4)) for such
hospital for such period, as estimated by the Secretary.
(3) NON-TEACHING, NON-DSH HOSPITALS
DESCRIBED.—A
hospital described in this paragraph for a cost reporting period
is a subsection (d) hospital (as defined in section 1886(d)(1)(B)
of such Act (42 U.S.C. 1395ww(d)(1)(B))) that—
(A) is not receiving any additional payment amount
described in section 1886(d)(5)(F) of such Act (42 U.S.C.
1395ww(d)(5)(F)) for discharges occurring during the
period;
(B) is not receiving any additional payment under sec-
tion 1886(d)(5)(B) of such Act (42 U.S.C. 1395ww(d)(5)(B))
or a payment under section 1886(h) of such Act (42 U.S.C.
1395ww(h)) for discharges occurring during the period; and
(C) does not qualify for payment under section
1886(d)(5)(G) of such Act (42 U.S.C. 1395ww(d)(5)(G)) for
the period.
SEC. 4402. MAINTAINING SAVINGS FROM TEMPORARY REDUCTION IN
CAPITAL PAYMENTS FOR PPS HOSPITALS.
Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended
by adding at the end the following: ‘‘In addition to the reduction
described in the preceding sentence, for discharges occurring on
or after October 1, 1997, the Secretary shall apply the budget
neutrality adjustment factor used to determine the Federal capital
payment rate in effect on September 30, 1995 (as described in
section 412.352 of title 42 of the Code of Federal Regulations),
to (i) the unadjusted standard Federal capital payment rate (as
described in section 412.308(c) of that title, as in effect on September
30, 1997), and (ii) the unadjusted hospital-specific rate (as described
in section 412.328(e)(1) of that title, as in effect on September
30, 1997), and, for discharges occurring on or after October 1,
1997, and before September 30, 2002, reduce the rates described
in clauses (i) and (ii) by 2.1 percent.’’.
SEC. 4403. DISPROPORTIONATE SHARE.
(a) 
IN
GENERAL.—Section 
1886(d)(5)(F) 
(42 
U.S.C.
1395ww(d)(5)(F)) is amended—
(1) in clause (i) by inserting ‘‘and before October 1, 1997’’
after ‘‘May 1, 1986’’;
(2) in clause (ii), by striking ‘‘The amount’’ and inserting
‘‘Subject to clause (ix), the amount’’; and
(3) by adding at the end the following new clause:
‘‘(ix) In the case of discharges occurring—
H. R. 2015—149
‘‘(I) during fiscal year 1998, the additional payment amount
otherwise determined under clause (ii) shall be reduced by
1 percent;
‘‘(II) during fiscal year 1999, such additional payment
amount shall be reduced by 2 percent;
‘‘(III) during fiscal year 2000, such additional payment
amount shall be reduced by 3 percent;
‘‘(IV) during fiscal year 2001, such additional payment
amount shall be reduced by 4 percent;
‘‘(V) during fiscal year 2002, such additional payment
amount shall be reduced by 5 percent; and
‘‘(VI) during fiscal year 2003 and each subsequent fiscal
year, such additional payment amount shall be reduced by
0 percent.’’.
(b) REPORT ON NEW PAYMENT FORMULA.—
(1) REPORT.—Not later than 1 year after the date of the
enactment of this Act, the Secretary of Health and Human
Services shall submit to the Committee on Ways and Means
of the House of Representatives and the Committee on Finance
of the Senate a report that contains a formula for determining
additional payment amounts to hospitals under section
1886(d)(5)(F) 
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1395ww(d)(5)(F)).
(2) FACTORS IN DETERMINATION OF FORMULA.—In determin-
ing such formula the Secretary shall—
(A) establish a single threshold for costs incurred by
hospitals in serving low-income patients, and
(B) consider the costs described in paragraph (3).
(3) The costs described in this paragraph are as follows:
(A) The costs incurred by the hospital during a period
(as determined by the Secretary) of furnishing hospital
services to individuals who are entitled to benefits under
part A of title XVIII of the Social Security Act and who
receive supplemental security income benefits under title
XVI of such Act (excluding any supplementation of those
benefits by a State under section 1616 of such Act (42
U.S.C. 1382e)).
(B) The costs incurred by the hospital during a period
(as so determined) of furnishing hospital services to individ-
uals who receive medical assistance under the State plan
under title XIX of such Act and are not entitled to benefits
under part A of title XVIII of such Act (including individ-
uals enrolled in a managed care organization (as defined
in 
section 
1903(m)(1)(A) 
of 
such 
Act 
(42 
U.S.C.
1396b(m)(1)(A)) or any other managed care plan under
such title and individuals who receive medical assistance
under such title pursuant to a waiver approved by the
Secretary under section 1115 of such Act (42 U.S.C. 1315)).
(c) DATA COLLECTION.—In developing the formula described
in subsection (b), the Secretary of Health and Human Services
may require any subsection (d) hospital (as defined in section
1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)))
receiving additional payments by reason of section 1886(d)(5)(F)
of such Act (42 U.S.C. 1395ww(d)(5)(F)) to submit to the Secretary
any information that the Secretary determines is necessary to
develop such formula.
H. R. 2015—150
SEC. 4404. MEDICARE CAPITAL ASSET SALES PRICE EQUAL TO BOOK
VALUE.
(a) 
IN
GENERAL.—Section 
1861(v)(1)(O) 
(42 
U.S.C.
1395x(v)(1)(O)) is amended—
(1) in clause (i)—
(A) by striking ‘‘and (if applicable) a return on equity
capital’’;
(B) by striking ‘‘hospital or skilled nursing facility’’
and inserting ‘‘provider of services’’;
(C) by striking ‘‘clause (iv)’’ and inserting ‘‘clause (iii)’’;
and
(D) by striking ‘‘the lesser of the allowable acquisition
cost’’ and all that follows and inserting ‘‘the historical cost
of the asset, as recognized under this title, less depreciation
allowed, to the owner of record as of the date of enactment
of the Balanced Budget Act of 1997 (or, in the case of
an asset not in existence as of that date, the first owner
of record of the asset after that date).’’;
(2) by striking clause (ii); and
(3) by redesignating clauses (iii) and (iv) as clauses (ii)
and (iii), respectively.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) apply to changes of ownership that occur after the third month
beginning after the date of enactment of this section.
SEC. 4405. ELIMINATION OF IME AND DSH PAYMENTS ATTRIBUTABLE
TO OUTLIER PAYMENTS.
(a) INDIRECT MEDICAL EDUCATION.—Section 1886(d)(5)(B)(i)(I)
(42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is amended by inserting ‘‘, for
cases qualifying for additional payment under subparagraph (A)(i),’’
before ‘‘the amount paid to the hospital under subparagraph (A)’’.
(b) 
DISPROPORTIONATE
SHARE
ADJUSTMENTS.—Section
1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is amended by
inserting ‘‘, for cases qualifying for additional payment under
subparagraph (A)(i),’’ before ‘‘the amount paid to the hospital under
subparagraph (A)’’.
(c) COST
OUTLIER
PAYMENTS.—Section 1886(d)(5)(A)(ii) (42
U.S.C. 1395ww(d)(5)(A)(ii)) is amended by striking ‘‘exceed the
applicable DRG prospective payment rate’’ and inserting ‘‘exceed
the sum of the applicable DRG prospective payment rate plus
any amounts payable under subparagraphs (B) and (F)’’.
(d) EFFECTIVE DATE.—The amendments made by this section
apply to discharges occurring after September 30, 1997.
SEC. 4406. INCREASE BASE PAYMENT RATE TO PUERTO RICO HOS-
PITALS.
Section 1886(d)(9)(A) (42 U.S.C. 1395ww(d)(9)(A)) is amended—
(1) in the matter preceding clause (i), by striking ‘‘in a
fiscal year beginning on or after October 1, 1987,’’,
(2) in clause (i), by striking ‘‘75 percent’’ and inserting,
‘‘for discharges beginning on or after October 1, 1997, 50 percent
(and for discharges between October 1, 1987, and September
30, 1997, 75 percent)’’, and
(3) in clause (ii), by striking ‘‘25 percent’’ and inserting,
‘‘for discharges beginning in a fiscal year beginning on or after
October 1, 1997, 50 percent (and for discharges between October
1, 1987 and September 30, 1997, 25 percent)’’.
H. R. 2015—151
SEC. 4407. CERTAIN HOSPITAL DISCHARGES TO POST ACUTE CARE.
Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended—
(1) in subparagraph (I)(ii) by inserting ‘‘not taking in
account the effect of subparagraph (J),’’ after ‘‘in a fiscal
year, ’’; and
(2) by adding at the end the following new subparagraph:
‘‘(J)(i) The Secretary shall treat the term ‘transfer case’ (as
defined in subparagraph (I)(ii)) as including the case of a qualified
discharge (as defined in clause (ii)), which is classified within a
diagnosis-related group described in clause (iii), and which occurs
on or after October 1, 1998. In the case of a qualified discharge
for which a substantial portion of the costs of care are incurred
in the early days of the inpatient stay (as defined by the Secretary),
in no case may the payment amount otherwise provided under
this subsection exceed an amount equal to the sum of—
‘‘(I) 50 percent of the amount of payment under this sub-
section for transfer cases (as established under subparagraph
(I)(i)), and
‘‘(II) 50 percent of the amount of payment which would
have been made under this subsection with respect to the
qualified discharge if no transfer were involved.
‘‘(ii) For purposes of clause (i), subject to clause (iii), the term
‘qualified discharge’ means a discharge classified with a diagnosis-
related group (described in clause (iii)) of an individual from a
subsection (d) hospital, if upon such discharge the individual—
‘‘(I) is admitted as an inpatient to a hospital or hospital
unit that is not a subsection (d) hospital for the provision
of inpatient hospital services;
‘‘(II) is admitted to a skilled nursing facility;
‘‘(III) is provided home health services from a home health
agency, if such services relate to the condition or diagnosis
for which such individual received inpatient hospital services
from the subsection (d) hospital, and if such services are pro-
vided within an appropriate period (as determined by the Sec-
retary); or
‘‘(IV) for discharges occurring on or after October 1, 2000,
the individual receives post discharge services described in
clause (iv)(I).
‘‘(iii) Subject to clause (iv), a diagnosis-related group described
in this clause is—
‘‘(I) 1 of 10 diagnosis-related groups selected by the Sec-
retary based upon a high volume of discharges classified within
such groups and a disproportionate use of post discharge serv-
ices described in clause (ii); and
‘‘(II) a diagnosis-related group specified by the Secretary
under clause (iv)(II).
‘‘(iv) The Secretary shall include in the proposed rule published
under subsection (e)(5)(A) for fiscal year 2001, a description of
the effect of this subparagraph. The Secretary may include in
the proposed rule (and in the final rule published under paragraph
(6)) for fiscal year 2001 or a subsequent fiscal year, a description
of—
‘‘(I) post-discharge services not described in subclauses (I),
(II), and (III) of clause (ii), the receipt of which results in
a qualified discharge; and
‘‘(II) diagnosis-related groups described in clause (iii)(I) in
addition to the 10 selected under such clause.’’.
H. R. 2015—152
SEC. 4408. RECLASSIFICATION OF CERTAIN COUNTIES AS LARGE
URBAN AREAS UNDER MEDICARE PROGRAM.
(a) IN GENERAL.—For purposes of section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)), the large urban area of Char-
lotte-Gastonia-Rock Hill-North Carolina-South Carolina may be
deemed to include Stanly County, North Carolina.
(b) EFFECTIVE DATE.—This section shall apply with respect
to discharges occurring on or after October 1, 1997.
SEC. 4409. GEOGRAPHIC RECLASSIFICATION FOR CERTAIN DIS-
PROPORTIONATELY LARGE HOSPITALS.
(a) NEW GUIDELINES FOR RECLASSIFICATION.—Notwithstanding
the guidelines published under section 1886(d)(10)(D)(i)(I) of the
Social Security Act (42 U.S.C. 1395ww(d)(10)(D)(i)(I)), the Secretary
of Health and Human Services shall publish and use alternative
guidelines under which a hospital described in subsection (b) quali-
fies for geographic reclassification under such section for a fiscal
year beginning with fiscal year 1998.
(b) HOSPITALS COVERED.—A hospital described in this sub-
section is a hospital that demonstrates that—
(1) the average hourly wage paid by the hospital is not
less than 108 percent of the average hourly wage paid by
all other hospitals located in the Metropolitan Statistical Area
(or the New England County Metropolitan Area) in which the
hospital is located;
(2) not less than 40 percent of the adjusted uninflated
wages paid by all hospitals located in such Area is attributable
to wages paid by the hospital; and
(3) the hospital submitted an application requesting
reclassification for purposes of wage index under section
1886(d)(10)(C) of such Act (42 U.S.C. 1395ww(d)(10)(C)) in each
of fiscal years 1992 through 1997 and that such request was
approved for each of such fiscal years.
SEC. 4410. FLOOR ON AREA WAGE INDEX.
(a) IN GENERAL.—For purposes of section 1886(d)(3)(E) of the
Social Security Act (42 U.S.C. 1395ww(d)(3)(E)) for discharges occur-
ring on or after October 1, 1997, 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 (42 U.S.C.
1395ww(d)(2)(D)) may not be less than the area wage index
applicable under such section to hospitals located in rural areas
in the State in which the hospital is located.
(b) IMPLEMENTATION.—The Secretary of Health and Human
Services shall adjust the area wage index referred to in subsection
(a) for hospitals not described in such subsection in a manner
which assures that the aggregate payments made under section
1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) 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.
(c) EXCLUSION OF CERTAIN WAGES.—In the case of a hospital
that is owned by a municipality and that was reclassified as an
urban hospital under section 1886(d)(10) of the Social Security
Act for fiscal year 1996, in calculating the hospital’s average hourly
wage for purposes of geographic reclassification under such section
for fiscal year 1998, the Secretary of Health and Human Services
H. R. 2015—153
shall exclude the general service wages and hours of personnel
associated with a skilled nursing facility that is owned by the
hospital of the same municipality and that is physically separated
from the hospital to the extent that such wages and hours of
such personnel are not shared with the hospital and are separately
documented. A hospital that applied for and was denied reclassifica-
tion as an urban hospital for fiscal year 1998, but that would
have received reclassification had the exclusion required by this
section been applied to it, shall be reclassified as an urban hospital
for fiscal year 1998.
CHAPTER 2—PAYMENT OF PPS-EXEMPT HOSPITALS
Subchapter A—General Payment Provisions
SEC. 4411. PAYMENT UPDATE.
(a) 
IN
GENERAL.—Section 
1886(b)(3)(B) 
(42 
U.S.C.
1395ww(b)(3)(B)) is amended—
(1) in clause (ii)—
(A) by striking ‘‘and’’ at the end of subclause (V),
(B) by redesignating subclause (VI) as subclause (VIII);
and
(C) by inserting after subclause (V), the following sub-
clauses:
‘‘(VI) for fiscal year 1998, is 0 percent;
‘‘(VII) for fiscal years 1999 through 2002, is the applicable
update factor specified under clause (vi) for the fiscal year;
and’’; and
(2) by adding at the end the following new clause:
‘‘(vi) For purposes of clause (ii)(VII) for a fiscal year, if a
hospital’s allowable operating costs of inpatient hospital services
recognized under this title for the most recent cost reporting period
for which information is available—
‘‘(I) is equal to, or exceeds, 110 percent of the hospital’s
target amount (as determined under subparagraph (A)) for
such cost reporting period, the applicable update factor specified
under this clause is the market basket percentage;
‘‘(II) exceeds 100 percent, but is less than 110 percent,
of such target amount for the hospital, the applicable update
factor specified under this clause is 0 percent or, if greater,
the market basket percentage minus 0.25 percentage points
for each percentage point by which such allowable operating
costs (expressed as a percentage of such target amount) is
less than 110 percent of such target amount;
‘‘(III) is equal to, or less than 100 percent, but exceeds
2⁄3 of such target amount for the hospital, the applicable update
factor specified under this clause is 0 percent or, if greater,
the market basket percentage minus 2.5 percentage points;
or
‘‘(IV) does not exceed 2⁄3 of such target amount for the
hospital, the applicable update factor specified under this clause
is 0 percent.’’.
(b) NO EFFECT OF PAYMENT REDUCTION ON EXCEPTIONS AND
ADJUSTMENTS.—Section 
1886(b)(4)(A)(ii) 
(42 
U.S.C.
1395ww(b)(4)(A)(ii)) is amended by adding at the end the following
new sentence: ‘‘In making such reductions, the Secretary shall
treat the applicable update factor described in paragraph (3)(B)(vi)
H. R. 2015—154
for a fiscal year as being equal to the market basket percentage
for that year.’’.
SEC. 4412. REDUCTIONS TO CAPITAL PAYMENTS FOR CERTAIN PPS-
EXEMPT HOSPITALS AND UNITS.
Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding
at the end the following new paragraph:
‘‘(4) In determining the amount of the payments that are attrib-
utable to portions of cost reporting periods occurring during fiscal
years 1998 through 2002 and that may be made under this title
with respect to capital-related costs of inpatient hospital services
of a hospital which is described in clause (i), (ii), or (iv) of subsection
(d)(1)(B) or a unit described in the matter after clause (v) of such
subsection, the Secretary shall reduce the amounts of such pay-
ments otherwise determined under this title by 15 percent.’’.
SEC. 4413. REBASING.
(a) OPTION OF REBASING FOR HOSPITALS IN OPERATION BEFORE
1990.—Section 1886(b)(3)(42 U.S.C. 1395ww(b)(3)) is amended—
(1) in subparagraph (A) by striking ‘‘subparagraphs (C),
(D), and (E)’’ and inserting ‘‘subparagraph (C) and succeeding
subparagraphs’’, and
(2) by adding at the end the following new subparagraph:
‘‘(F)(i) In the case of a hospital (or unit described in the matter
following clause (v) of subsection (d)(1)(B)) that received payment
under this subsection for inpatient hospital services furnished dur-
ing cost reporting periods beginning before October 1, 1990, that
is within a class of hospital described in clause (iii), and that
elects (in a form and manner determined by the Secretary) this
subparagraph to apply to the hospital, the target amount for the
hospital’s 12-month cost reporting period beginning during fiscal
year 1998 is equal to the average described in clause (ii).
‘‘(ii) The average described in this clause for a hospital or
unit shall be determined by the Secretary as follows:
‘‘(I) The Secretary shall determine the allowable operating
costs for inpatient hospital services for the hospital or unit
for each of the 5 cost reporting periods for which the Secretary
has the most recent settled cost reports as of the date of
the enactment of this subparagraph.
‘‘(II) The Secretary shall increase the amount determined
under subclause (I) for each cost reporting period by the
applicable percentage increase under subparagraph (B)(ii) for
each subsequent cost reporting period up to the cost reporting
period described in clause (i).
‘‘(III) The Secretary shall identify among such 5 cost report-
ing periods the cost reporting periods for which the amount
determined under subclause (II) is the highest, and the lowest.
‘‘(IV) The Secretary shall compute the averages of the
amounts determined under subclause (II) for the 3 cost report-
ing periods not identified under subclause (III).
‘‘(iii) For purposes of this subparagraph, each of the following
shall be treated as a separate class of hospital:
‘‘(I) Hospitals described in clause (i) of subsection (d)(1)(B)
and psychiatric units described in the matter following clause
(v) of such subsection.
‘‘(II) Hospitals described in clause (ii) of such subsection
and rehabilitation units described in the matter following clause
(v) of such subsection.
H. R. 2015—155
‘‘(III) Hospitals described in clause (iii) of such subsection.
‘‘(IV) Hospitals described in clause (iv) of such subsection.
‘‘(V) Hospitals described in clause (v) of such subsection.’’.
(b) CERTAIN LONG-TERM CARE HOSPITALS.—Section 1886(b)(3)
(42 U.S.C. 1395ww(b)(3)), as amended by subsection (a), is amended
by adding at the end the following new subparagraph:
‘‘(G)(i) In the case of a qualified long-term care hospital (as
defined in clause (ii)) that elects (in a form and manner determined
by the Secretary) this subparagraph to apply to the hospital, the
target amount for the hospital’s 12-month cost reporting period
beginning during fiscal year 1998 is equal to the allowable operating
costs of inpatient hospital services (as defined in subsection (a)(4))
recognized under this title for the hospital for the 12-month cost
reporting period beginning during fiscal year 1996, increased by
the applicable percentage increase for the cost reporting period
beginning during fiscal year 1997.
‘‘(ii) In clause (i), a ‘qualified long-term care hospital’ means,
with respect to a cost reporting period, a hospital described in
clause (iv) of subsection (d)(1)(B) during each of the 2 cost reporting
periods for which the Secretary has the most recent settled cost
reports as of the date of the enactment of this subparagraph for
each of which—
‘‘(I) the hospital’s allowable operating costs of inpatient
hospital services recognized under this title exceeded 115 per-
cent of the hospital’s target amount, and
‘‘(II) the hospital would have a disproportionate patient
percentage of at least 70 percent (as determined by the Sec-
retary under subsection (d)(5)(F)(vi)) if the hospital were a
subsection (d) hospital.’’.
SEC. 4414. CAP ON TEFRA LIMITS.
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by
section 4413, is amended by adding at the end the following new
subparagraph:
‘‘(H)(i) In the case of a hospital or unit that is within a class
of hospital described in clause (iv), the Secretary shall estimate
the 75th percentile of the target amounts for such hospitals within
such class for cost reporting periods ending during fiscal year 1996.
‘‘(ii) The Secretary shall update the amount determined under
clause (i), for each cost reporting period after the cost reporting
period described in such clause and up to the first cost reporting
period beginning on or after October 1, 1997, by a factor equal
to the market basket percentage increase.
‘‘(iii) For cost reporting periods beginning during each of fiscal
years 1999 through 2002, the Secretary shall update such amount
by a factor equal to the market basket percentage increase.
‘‘(iv) For purposes of this subparagraph, each of the following
shall be treated as a separate class of hospital:
‘‘(I) Hospitals described in clause (i) of subsection (d)(1)(B)
and psychiatric units described in the matter following clause
(v) of such subsection.
‘‘(II) Hospitals described in clause (ii) of such subsection
and rehabilitation units described in the matter following clause
(v) of such subsection.
‘‘(III) Hospitals described in clause (iv) of such subsection.’’.
H. R. 2015—157
(1) by redesignating subparagraph (B) as subparagraph
(C)
(2) in subparagraph (C), as so redesignated—
(A) by striking ‘‘greater than the target amount’’ and
inserting ‘‘greater than 110 percent of the target amount’’,
and
(B) by striking ‘‘exceed the target amount’’ and insert-
ing ‘‘exceed 110 percent of the target amount’’, and
(3) by inserting after subparagraph (A), the following new
subparagraph:
‘‘(B) are greater than the target amount but do not exceed
110 percent of the target amount, the amount of the payment
with respect to those operating costs payable under part A
on a per discharge basis shall equal the target amount; or’’.
(d) REPORT.—Not later than October 1, 1999, the Secretary
of Health and Human Services shall submit to the Committee
on Ways and Means of the House of Representatives and the
Committee on Finance of the Senate a report that describes the
effect of the amendments to section 1886(b)(1) of the Social Security
Act (42 U.S.C. 1395ww(b)(1)), made under this section, on psy-
chiatric hospitals (as defined in section 1886(d)(1)(B)(i) of such
Act (42 U.S.C. 1395ww(d)(1)(B)(i)) that have approved medical resi-
dency training programs under title XVIII of such Act (42 U.S.C.
1395 et seq.)).
(e) EFFECTIVE DATE.—The amendments made by subsections
(a) and (c) shall apply with respect to cost reporting periods begin-
ning on or after October 1, 1997.
SEC. 4416. CHANGE IN PAYMENT AND TARGET AMOUNT FOR NEW
PROVIDERS.
Section 1886(b) (42 U.S.C. 1395ww(b)) is amended—
(1) by adding at the end the following new paragraph:
‘‘(7)(A) Notwithstanding paragraph (1), in the case of a hospital
or unit that is within a class of hospital described in subparagraph
(B) which first receives payments under this section on or after
October 1, 1997—
‘‘(i) for each of the first 2 cost reporting periods for which
the hospital has a settled cost report, the amount of the pay-
ment with respect to operating costs described in paragraph
(1) under part A on a per discharge or per admission basis
(as the case may be) is equal to the lesser of—
‘‘(I) the amount of operating costs for such respective
period, or
‘‘(II) 110 percent of the national median of the target
amount for hospitals in the same class as the hospital
for cost reporting periods ending during fiscal year 1996,
updated by the hospital market basket increase percentage
to the fiscal year in which the hospital first received pay-
ments under this section, as adjusted under subparagraph
(C); and
‘‘(ii) for purposes of computing the target amount for the
subsequent cost reporting period, the target amount for the
preceding cost reporting period is equal to the amount deter-
mined under clause (i) for such preceding period.
‘‘(B) For purposes of this paragraph, each of the following
shall be treated as a separate class of hospital:
H. R. 2015—158
‘‘(i) Hospitals described in clause (i) of subsection (d)(1)(B)
and psychiatric units described in the matter following clause
(v) of such subsection.
‘‘(ii) Hospitals described in clause (ii) of such subsection
and rehabilitation units described in the matter following clause
(v) of such subsection.
‘‘(iii) Hospitals described in clause (iv) of such subsection.
‘‘(C) In applying subparagraph (A)(i)(II) in the case of a hospital
or unit, the Secretary shall provide for an appropriate adjustment
to the labor-related portion of the amount determined under such
subparagraph to take into account differences between average
wage-related costs in the area of the hospital and the national
average of such costs within the same class of hospital.’’; and
(2) in paragraph (3)(A), as amended in sections 4413 and
4414, by inserting ‘‘and in paragraph (7)(A)(ii),’’ before ‘‘for
purposes of’’.
SEC. 4417. TREATMENT OF CERTAIN LONG-TERM CARE HOSPITALS.
(a) 
IN
GENERAL.—(1) 
Section 
1886(d)(1)(B) 
(42 
U.S.C.
1395ww(d)(1)(B)) is amended by adding at the end the following
new sentence: ‘‘A hospital that was classified by the Secretary
on or before September 30, 1995, as a hospital described in clause
(iv) shall continue to be so classified notwithstanding that it is
located in the same building as, or on the same campus as, another
hospital.’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph (1)
shall apply to discharges occurring on or after October 1, 1995.
(b) CERTAIN LONG-TERM CARE HOSPITALS THAT TREAT CANCER
PATIENTS.—(1) 
Section 
1886(d)(1)(B)(iv) 
(42 
U.S.C.
1395ww(d)(1)(B)(iv)) is amended—
(A) by inserting ‘‘(I)’’ after ‘‘(iv)’’; and
(B) by adding at the end the following:
‘‘(II) a hospital that first received payment under this sub-
section in 1986 which has an average inpatient length of stay
(as determined by the Secretary) of greater than 20 days and
that has 80 percent or more of its annual medicare inpatient
discharges with a principal diagnosis that reflects a finding
of neoplastic disease in the 12-month cost reporting period
ending in fiscal year 1997, or’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph (1)
shall apply to cost reporting periods beginning on or after the
date of the enactment of this Act.
SEC. 4418. TREATMENT OF CERTAIN CANCER HOSPITALS.
(a) IN GENERAL.—Section 1886(d)(1) (42 U.S.C. 1395ww(d)(1))
is amended—
(1) in subparagraph (B)(v)—
(A) by inserting ‘‘(I)’’ after ‘‘(v)’’;
(B) by striking the semicolon at the end and inserting
‘‘, or’’; and
(C) by adding at the end the following:
‘‘(II) a hospital that was recognized as a comprehensive
cancer center or clinical cancer research center by the National
Cancer Institute of the National Institutes of Health as of
April 20, 1983, that is located in a State which, as of December
19, 1989, was not operating a demonstration project under
section 1814(b), that applied and was denied, on or before
December 31, 1990, for classification as a hospital involved
H. R. 2015—159
extensively in treatment for or research on cancer under this
clause (as in effect on the day before the date of the enactment
of this subclause), that as of the date of the enactment of
this subclause, is licensed for less than 50 acute care beds,
and that demonstrates for the 4–year period ending on Decem-
ber 31, 1996, that at least 50 percent of its total discharges
have a principal finding of neoplastic disease, as defined in
subparagraph (E);’’ and
(2) by adding at the end the following:
‘‘(E) For purposes of subparagraph (B)(v)(II) only, the term
‘principal finding of neoplastic disease’ means the condition estab-
lished after study to be chiefly responsible for occasioning the
admission of a patient to a hospital, except that only discharges
with ICD–9–CM principal diagnosis codes of 140 through 239,
V58.0, V58.1, V66.1, V66.2, or 990 will be considered to reflect
such a principal diagnosis.’’.
(b) PAYMENT.—
(1) APPLICATION TO COST REPORTING PERIODS.—Any classi-
fication by reason of section 1886(d)(1)(B)(v)(II) of the Social
Security Act (42 U.S.C. 1395ww(d)(1)(B)(v)(II)) (as added by
subsection (a)) shall apply to all cost reporting periods begin-
ning on or after January 1, 1991.
(2) BASE YEAR.—Notwithstanding the provisions of section
1886(b)(3)(E) of such Act (42 U.S.C. 1395ww(b)(3)(E)) or other
provisions to the contrary, the base cost reporting period for
purposes of determining the target amount for any hospital
classified by reason of section 1886(d)(1)(B)(v)(II) of such Act
shall be either—
(A) the hospital’s cost reporting period beginning dur-
ing fiscal year 1990, or
(B) pursuant to an election under 1886(b)(3)(G) of such
Act (42 U.S.C. 1395ww(b)(3)(G)), as added in section
4413(b), the period provided for under such section.
(3) DEADLINE FOR PAYMENTS.—Any payments owed to a
hospital by reason of this subsection shall be made expedi-
tiously, but in no event later than 1 year after the date of
the enactment of this Act.
SEC. 4419. ELIMINATION OF EXEMPTIONS FOR CERTAIN HOSPITALS.
(a) REDUCTION OF EXEMPTIONS.—
(1) IN
GENERAL.—Section 1886(b)(4)(A)(i) (42 U.S.C.
1395ww(b)(4)(A)(i)) is amended in the first sentence by striking
‘‘The Secretary shall provide for an exemption from, or an
exception and adjustment to, ’’ and inserting ‘‘The Secretary
shall provide for an exception and adjustment to (and in the
case of a hospital or unit described in subsection (d)(1)(B)(iii),
may provide an exemption from)’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall apply to hospitals or units that first qualify as a
hospital or unit described in section 1886(d)(1)(B) (42 U.S.C.
1395ww(d)(1)(B)) for cost reporting periods beginning on or
after October 1, 1997.
(b) REPORT
ON EXCEPTIONS.—The Secretary of Health and
Human Services shall publish annually in the Federal Register
a report describing the total amount of payments made to hospitals
by reason of section 1886(b)(4) of the Social Security Act (42 U.S.C.
H. R. 2015—160
1395ww(b)(4)), as amended by subsection (a), ending during the
previous fiscal year.
Subchapter B—Prospective Payment System for PPS-
Exempt Hospitals
SEC. 4421. PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION
HOSPITAL SERVICES.
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww) is amended
by adding at the end the following new subsection:
‘‘(j) PROSPECTIVE PAYMENT
FOR INPATIENT REHABILITATION
SERVICES.—
‘‘(1) PAYMENT DURING TRANSITION PERIOD.—
‘‘(A) IN
GENERAL.—Notwithstanding section 1814(b),
but subject to the provisions of section 1813, the amount
of the payment with respect to the operating and capital
costs of inpatient hospital services of a rehabilitation hos-
pital or a rehabilitation unit (in this subsection referred
to as a ‘rehabilitation facility’), in a cost reporting period
beginning on or after October 1, 2000, and before October
1, 2002, is equal to the sum of—
‘‘(i) the TEFRA percentage (as defined in subpara-
graph (C)) of the amount that would have been paid
under part A with respect to such costs if this sub-
section did not apply, and
‘‘(ii) the prospective payment percentage (as
defined in subparagraph (C)) of the product of (I) the
per unit payment rate established under this sub-
section for the fiscal year in which the payment unit
of service occurs, and (II) the number of such payment
units occurring in the cost reporting period.
‘‘(B) FULLY
IMPLEMENTED
SYSTEM.—Notwithstanding
section 1814(b), but subject to the provisions of section
1813, the amount of the payment with respect to the operat-
ing and capital costs of inpatient hospital services of a
rehabilitation facility for a payment unit in a cost reporting
period beginning on or after October 1, 2002, is equal
to the per unit payment rate established under this sub-
section for the fiscal year in which the payment unit of
service occurs.
‘‘(C) TEFRA AND PROSPECTIVE PAYMENT PERCENTAGES
SPECIFIED.—For purposes of subparagraph (A), for a cost
reporting period beginning—
‘‘(i) on or after October 1, 2000, and before October
1, 2001, the ‘TEFRA percentage’ is 662⁄3 percent and
the ‘prospective payment percentage’ is 331⁄3 percent;
and
‘‘(ii) on or after October 1, 2001, and before October
1, 2002, the ‘TEFRA percentage’ is 331⁄3 percent and
the ‘prospective payment percentage’ is 662⁄3 percent.
‘‘(D) PAYMENT UNIT.—For purposes of this subsection,
the term ‘payment unit’ means a discharge, day of inpatient
hospital services, or other unit of payment defined by the
Secretary.
‘‘(2) PATIENT CASE MIX GROUPS.—
‘‘(A) ESTABLISHMENT.—The Secretary shall establish—
H. R. 2015—161
‘‘(i) classes of patients of rehabilitation facilities
(each in this subsection referred to as a ‘case mix
group’), based on such factors as the Secretary deems
appropriate, which may include impairment, age,
related prior hospitalization, comorbidities, and func-
tional capability of the patient; and
‘‘(ii) a method of classifying specific patients in
rehabilitation facilities within these groups.
‘‘(B) WEIGHTING FACTORS.—For each case mix group
the Secretary shall assign an appropriate weighting which
reflects the relative facility resources used with respect
to patients classified within that group compared to
patients classified within other groups.
‘‘(C) ADJUSTMENTS FOR CASE MIX.—
‘‘(i) IN GENERAL.—The Secretary shall from time
to time adjust the classifications and weighting factors
established under this paragraph as appropriate to
reflect changes in treatment patterns, technology, case
mix, number of payment units for which payment is
made under this title, and other factors which may
affect the relative use of resources. Such adjustments
shall be made in a manner so that changes in aggregate
payments under the classification system are a result
of real changes and are not a result of changes in
coding that are unrelated to real changes in case mix.
‘‘(ii) ADJUSTMENT.—Insofar as the Secretary deter-
mines that such adjustments for a previous fiscal year
(or estimates that such adjustments for a future fiscal
year) did (or are likely to) result in a change in aggre-
gate payments under the classification system during
the fiscal year that are a result of changes in the
coding or classification of patients that do not reflect
real changes in case mix, the Secretary shall adjust
the per payment unit payment rate for subsequent
years so as to eliminate the effect of such coding or
classification changes.
‘‘(D) DATA COLLECTION.—The Secretary is authorized
to require rehabilitation facilities that provide inpatient
hospital services to submit such data as the Secretary
deems necessary to establish and administer the prospec-
tive payment system under this subsection.
‘‘(3) PAYMENT RATE.—
‘‘(A) IN
GENERAL.—The Secretary shall determine a
prospective payment rate for each payment unit for which
such rehabilitation facility is entitled to receive payment
under this title. Subject to subparagraph (B), such rate
for payment units occurring during a fiscal year shall be
based on the average payment per payment unit under
this title for inpatient operating and capital costs of
rehabilitation facilities using the most recent data available
(as estimated by the Secretary as of the date of establish-
ment of the system) adjusted—
‘‘(i) by updating such per-payment-unit amount to
the fiscal year involved by the weighted average of
the applicable percentage increases provided under
subsection (b)(3)(B)(ii) (for cost reporting periods begin-
ning during the fiscal year) covering the period from
H. R. 2015—162
the midpoint of the period for such data through the
midpoint of fiscal year 2000 and by an increase factor
(described in subparagraph (C)) specified by the Sec-
retary for subsequent fiscal years up to the fiscal year
involved;
‘‘(ii) by reducing such rates by a factor equal to
the proportion of payments under this subsection (as
estimated by the Secretary) based on prospective pay-
ment 
amounts 
which 
are 
additional 
payments
described in paragraph (4) (relating to outlier and
related payments);
‘‘(iii) for variations among rehabilitation facilities
by area under paragraph (6);
‘‘(iv) by the weighting factors established under
paragraph (2)(B); and
‘‘(v) by such other factors as the Secretary deter-
mines are necessary to properly reflect variations in
necessary costs of treatment among rehabilitation
facilities.
‘‘(B) BUDGET
NEUTRAL
RATES.—The Secretary shall
establish the prospective payment amounts under this sub-
section for payment units during fiscal years 2001 and
2002 at levels such that, in the Secretary’s estimation,
the amount of total payments under this subsection for
such fiscal years (including any payment adjustments
pursuant to paragraphs (4) and (6)) shall be equal to 98
percent of the amount of payments that would have been
made under this title during the fiscal years for operating
and capital costs of rehabilitation facilities had this sub-
section not been enacted. In establishing such payment
amounts, the Secretary shall consider the effects of the
prospective payment system established under this sub-
section on the total number of payment units from
rehabilitation facilities and other factors described in
subparagraph (A).
‘‘(C) INCREASE FACTOR.—For purposes of this subsection
for payment units in each fiscal year (beginning with fiscal
year 2001), the Secretary shall establish an increase factor.
Such factor shall be based on an appropriate percentage
increase in a market basket of goods and services compris-
ing services for which payment is made under this sub-
section, which may be the market basket percentage
increase described in subsection (b)(3)(B)(iii).
‘‘(4) OUTLIER AND SPECIAL PAYMENTS.—
‘‘(A) OUTLIERS.—
‘‘(i) IN GENERAL.—The Secretary may provide for
an additional payment to a rehabilitation facility for
patients in a case mix group, based upon the patient
being classified as an outlier based on an unusual
length of stay, costs, or other factors specified by the
Secretary.
‘‘(ii) PAYMENT BASED ON MARGINAL COST OF CARE.—
The amount of such additional payment under clause
(i) shall be determined by the Secretary and shall
approximate the marginal cost of care beyond the cutoff
point applicable under clause (i).
H. R. 2015—163
‘‘(iii) TOTAL PAYMENTS.—The total amount of the
additional payments made under this subparagraph
for payment units in a fiscal year may not exceed
5 percent of the total payments projected or estimated
to be made based on prospective payment rates for
payment units in that year.
‘‘(B) ADJUSTMENT.—The Secretary may provide for such
adjustments to the payment amounts under this subsection
as the Secretary deems appropriate to take into account
the unique circumstances of rehabilitation facilities located
in Alaska and Hawaii.
‘‘(5) PUBLICATION.—The Secretary shall provide for publica-
tion in the Federal Register, on or before August 1 before
each fiscal year (beginning with fiscal year 2001), of the classi-
fication and weighting factors for case mix groups under para-
graph (2) for such fiscal year and a description of the methodol-
ogy and data used in computing the prospective payment rates
under this subsection for that fiscal year.
‘‘(6) AREA WAGE ADJUSTMENT.—The Secretary shall adjust
the proportion (as estimated by the Secretary from time to
time) of rehabilitation facilities’ costs which are attributable
to wages and wage-related costs, of the prospective payment
rates computed under paragraph (3) for area differences in
wage levels by a factor (established by the Secretary) reflecting
the relative hospital wage level in the geographic area of the
rehabilitation facility compared to the national average wage
level for such facilities. Not later than October 1, 2001 (and
at least every 36 months thereafter), the Secretary shall update
the factor under the preceding sentence on the basis of informa-
tion available to the Secretary (and updated as appropriate)
of the wages and wage-related costs incurred in furnishing
rehabilitation services. Any adjustments or updates made under
this paragraph for a fiscal year shall be made in a manner
that assures that the aggregated payments under this sub-
section in the fiscal year are not greater or less than those
that would have been made in the year without such adjust-
ment.
‘‘(7) LIMITATION ON REVIEW.—There shall be no administra-
tive or judicial review under section 1869, 1878, or otherwise
of the establishment of—
‘‘(A) case mix groups, of the methodology for the classi-
fication of patients within such groups, and of the appro-
priate weighting factors thereof under paragraph (2),
‘‘(B) the prospective payment rates under paragraph
(3),
‘‘(C) outlier and special payments under paragraph
(4), and
‘‘(D) area wage adjustments under paragraph (6).’’.
(b) CONFORMING AMENDMENTS.—Section 1886(b) (42 U.S.C.
1395ww(b)) is amended—
(1) in paragraph (1), by inserting ‘‘and other than a
rehabilitation facility described in subsection (j)(1)’’ after ‘‘sub-
section (d)(1)(B)’’, and
(2) in paragraph (3)(B)(i), by inserting ‘‘and subsection (j)’’
after ‘‘For purposes of subsection (d)’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to cost reporting periods beginning on or after October
H. R. 2015—164
1, 2000, except that the Secretary of Health and Human Services
may require the submission of data under section 1886(j)(2)(D)
of the Social Security Act (as added by subsection (a)) on and
after the date of the enactment of this section.
SEC. 4422. DEVELOPMENT OF PROPOSAL ON PAYMENTS FOR LONG-
TERM CARE HOSPITALS.
(a) IN GENERAL.—
(1) LEGISLATIVE PROPOSAL.—The Secretary of Health and
Human Services shall develop a legislative proposal for
establishing a case-mix adjusted prospective payment system
for payment of long-term care hospitals described in section
1886(d)(1)(B)(iv) of the Social Security Act (42 U.S.C.
1395ww(d)(1)(B)(iv)) under the medicare program. Such system
shall include an adequate patient classification system that
reflects the differences in patient resource use and costs among
such hospitals.
(2) COLLECTION OF DATA AND EVALUATION.—In developing
the legislative proposal described in paragraph (1), the Sec-
retary—
(A) may require such long-term care hospitals to sub-
mit such information to the Secretary as the Secretary
may require to develop the proposal; and
(B) shall consider several payment methodologies,
including the feasibility of expanding the current diagnosis-
related groups and prospective payment system established
under section 1886(d) of the Social Security Act to apply
to payments under the medicare program to long-term
care hospitals.
(b) REPORT.—Not later than October 1, 1999, the Secretary
shall submit to the appropriate committees of Congress a report
that includes the legislative proposal developed under subsection
(a)(1).
CHAPTER 3—PAYMENT FOR SKILLED NURSING
FACILITIES
SEC. 4431. EXTENSION OF COST LIMITS.
The last sentence of section 1888(a) (42 U.S.C. 1395yy(a)) is
amended by striking ‘‘subsection’’ the last place it appears and
all that follows and inserting ‘‘subsection, except that the limits
effective for cost reporting periods beginning on or after October
1, 1997, shall be based on the limits effective for cost reporting
periods beginning on or after October 1, 1996.’’.
SEC. 4432. PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY
SERVICES.
(a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy) is amended
by adding at the end the following new subsection:
‘‘(e) PROSPECTIVE PAYMENT.—
‘‘(1) PAYMENT
PROVISION.—Notwithstanding any other
provision of this title, subject to paragraph (7), the amount
of the payment for all costs (as defined in paragraph (2)(B))
of covered skilled nursing facility services (as defined in para-
graph (2)(A)) for each day of such services furnished—
‘‘(A) in a cost reporting period during the transition
period (as defined in paragraph (2)(E)), is equal to the
sum of—
H. R. 2015—165
‘‘(i) the non-Federal percentage of the facility-spe-
cific per diem rate (computed under paragraph (3)),
and
‘‘(ii) the Federal percentage of the adjusted Federal
per diem rate (determined under paragraph (4))
applicable to the facility; and
‘‘(B) after the transition period is equal to the adjusted
Federal per diem rate applicable to the facility.
‘‘(2) DEFINITIONS.—For purposes of this subsection:
‘‘(A) COVERED SKILLED NURSING FACILITY SERVICES.—
‘‘(i) IN GENERAL.—The term ‘covered skilled nurs-
ing facility services’—
‘‘(I) means post-hospital extended care services
as defined in section 1861(i) for which benefits
are provided under part A; and
‘‘(II) includes all items and services (other than
services described in clause (ii)) for which payment
may be made under part B and which are fur-
nished to an individual who is a resident of a
skilled nursing facility during the period in which
the individual is provided covered post-hospital
extended care services.
‘‘(ii) SERVICES
EXCLUDED.—Services described in
this clause are physicians’ services, services described
by clauses (i) through (iii) of section 1861(s)(2)(K), cer-
tified nurse-midwife services, qualified psychologist
services, services of a certified registered nurse anes-
thetist, items and services described in subparagraphs
(F) and (O) of section 1861(s)(2), and, only with respect
to services furnished during 1998, the transportation
costs of electrocardiogram equipment for electrocardio-
gram test services (HCPCS Code R0076). Services
described in this clause do not include any physical,
occupational, or speech-language therapy services
regardless of whether or not the services are furnished
by, or under the supervision of, a physician or other
health care professional.
‘‘(B) ALL COSTS.—The term ‘all costs’ means routine
service costs, ancillary costs, and capital-related costs of
covered skilled nursing facility services, but does not
include costs associated with approved educational activi-
ties.
‘‘(C) NON-FEDERAL
PERCENTAGE; FEDERAL
PERCENT-
AGE.—For—
‘‘(i) the first cost reporting period (as defined in
subparagraph (D)) of a facility, the ‘non-Federal
percentage’ is 75 percent and the ‘Federal percentage’
is 25 percent;
‘‘(ii) the next cost reporting period of such facility,
the ‘non-Federal percentage’ is 50 percent and the ‘Fed-
eral percentage’ is 50 percent; and
‘‘(iii) the subsequent cost reporting period of such
facility, the ‘non-Federal percentage’ is 25 percent and
the ‘Federal percentage’ is 75 percent.
H. R. 2015—166
‘‘(D) FIRST COST REPORTING PERIOD.—The term ‘first
cost reporting period’ means, with respect to a skilled nurs-
ing facility, the first cost reporting period of the facility
beginning on or after July 1, 1998.
‘‘(E) TRANSITION PERIOD.—
‘‘(i) IN
GENERAL.—The term ‘transition period’
means, with respect to a skilled nursing facility, the
3 cost reporting periods of the facility beginning with
the first cost reporting period.
‘‘(ii) TREATMENT OF NEW SKILLED NURSING FACILI-
TIES.—In the case of a skilled nursing facility that
first received payment for services under this title
on or after October 1, 1995, payment for such services
shall be made under this subsection as if all services
were furnished after the transition period.
‘‘(3) DETERMINATION
OF
FACILITY
SPECIFIC
PER
DIEM
RATES.—The Secretary shall determine a facility-specific per
diem rate for each skilled nursing facility not described in
paragraph (2)(E)(ii) for a cost reporting period as follows:
‘‘(A) DETERMINING
BASE
PAYMENTS.—The Secretary
shall determine, on a per diem basis, the total of—
‘‘(i) the allowable costs of extended care services
for the facility for cost reporting periods beginning
in fiscal year 1995, including costs associated with
facilities described in subsection (d), with appropriate
adjustments (as determined by the Secretary) to non-
settled cost reports, and
‘‘(ii) an estimate of the amounts that would be
payable under part B (disregarding any applicable
deductibles, coinsurance, and copayments) for covered
skilled nursing facility services described in paragraph
(2)(A)(i)(II) furnished during such period to an individ-
ual who is a resident of the facility, regardless of
whether or not the payment was made to the facility
or to another entity.
In making appropriate adjustments under clause (i), the
Secretary shall take into account exceptions and shall take
into account exemptions but, with respect to exemptions,
only to the extent that routine costs do not exceed 150
percent of the routine cost limits otherwise applicable but
for the exemption.
‘‘(B) UPDATE TO FIRST COST REPORTING PERIOD.—
‘‘(i) IN GENERAL.—Subject to clause (ii), the Sec-
retary shall update the amount determined under
subparagraph (A), for each cost reporting period after
the cost reporting period described in subparagraph
(A)(i) and up to the first cost reporting period by a
factor equal to the skilled nursing facility market bas-
ket percentage increase minus 1 percentage point.
‘‘(ii) CERTAIN DEMONSTRATION PROJECTS.—In the
case of a facility participating in the Nursing Home
Case-Mix and Quality Demonstration (RUGS–III),
there shall be substituted for the amount described
in clause (i) the RUGS–III rate received by the facility
for 1997.
H. R. 2015—167
‘‘(C) 
UPDATING
TO
APPLICABLE
COST
REPORTING
PERIOD.—The Secretary shall update the amount deter-
mined under subparagraph (B) for each cost reporting
period beginning with the first cost reporting period and
up to and including the cost reporting period involved
by a factor equal to the facility-specific update factor.
‘‘(D) FACILITY-SPECIFIC UPDATE FACTOR.—For purposes
of this paragraph, the ‘facility-specific update factor’ for
cost reporting periods beginning during—
‘‘(i) during each of fiscal years 1998 and 1999,
is equal to the skilled nursing facility market basket
percentage increase for such fiscal year minus 1
percentage point, and
‘‘(ii) during each subsequent fiscal year is equal
to the skilled nursing facility market basket percentage
increase for such fiscal year.
‘‘(4) FEDERAL PER DIEM RATE.—
‘‘(A) DETERMINATION
OF
HISTORICAL
PER
DIEM
FOR
FACILITIES.—For each skilled nursing facility that received
payments for post-hospital extended care services during
a cost reporting period beginning in fiscal year 1995 and
that was subject to (and not exempted from) the per diem
limits referred to in paragraph (1) or (2) of subsection
(a) (and facilities described in subsection (d)), the Secretary
shall estimate, on a per diem basis for such cost reporting
period, the total of—
‘‘(i) the allowable costs of extended care services
(excluding exceptions payments) for the facility for cost
reporting periods beginning in 1995 with appropriate
adjustments (as determined by the Secretary) to non-
settled cost reports, and
‘‘(ii) an estimate of the amounts that would be
payable under part B (disregarding any applicable
deductibles, coinsurance, and copayments) for covered
skilled nursing facility services described in paragraph
(2)(A)(i)(II) furnished during such period to an individ-
ual who is a resident of the facility, regardless of
whether or not the payment was made to the facility
or to another entity.
‘‘(B) UPDATE
TO
FIRST
FISCAL
YEAR.—The Secretary
shall update the amount determined under subparagraph
(A), for each cost reporting period after the cost reporting
period described in subparagraph (A)(i) and up to the first
cost reporting period by a factor equal to the skilled nursing
facility market basket percentage increase reduced (on an
annualized basis) by 1 percentage point.
‘‘(C) COMPUTATION OF STANDARDIZED PER DIEM RATE.—
The Secretary shall standardize the amount updated under
subparagraph (B) for each facility by—
‘‘(i) adjusting for variations among facilities by
area in the average facility wage level per diem, and
‘‘(ii) adjusting for variations in case mix per diem
among facilities.
‘‘(D) COMPUTATION OF WEIGHTED AVERAGE PER DIEM
RATES.—
‘‘(i) ALL FACILITIES.—The Secretary shall compute
a weighted average per diem rate for all facilities by
H. R. 2015—168
computing an average of the standardized amounts
computed under subparagraph (C), weighted for each
facility by the number of days of extended care services
furnished during the cost reporting period referred to
in subparagraph (A).
‘‘(ii) FREESTANDING
FACILITIES.—The Secretary
shall compute a weighted average per diem rate for
freestanding facilities by computing an average of the
standardized amounts computed under subparagraph
(C) only for such facilities , weighted for each facility
by the number of days of extended care services fur-
nished during the cost reporting period referred to
in subparagraph (A).
‘‘(iii) SEPARATE COMPUTATION.—The Secretary may
compute and apply such averages separately for facili-
ties located in urban and rural areas (as defined in
section 1886(d)(2)(D)).
‘‘(E) UPDATING.—
‘‘(i) INITIAL PERIOD.—For the initial period begin-
ning on July 1, 1998, and ending on September 30,
1999, the Secretary shall compute for skilled nursing
facilities an unadjusted federal per diem rate equal
to the average of the weighted average per diem rates
computed under clauses (i) and (ii) of subparagraph
(D), increased by skilled nursing facility market basket
percentage change for such period minus 1 percentage
point.
‘‘(ii) SUBSEQUENT
FISCAL
YEARS.—The Secretary
shall compute an unadjusted federal per diem rate
equal to the federal per diem rate computed under
this subparagraph—
‘‘(I) for fiscal year 2000, the rate computed
for the initial period described in clause (i),
increased by the skilled nursing facility market
basket percentage change for the initial period
minus 1 percentage point;
‘‘(II) for each of fiscal years 2001 and 2002,
the rate computed for the previous fiscal year
increased by the skilled nursing facility market
basket percentage change for the fiscal year
involved minus 1 percentage point; and
‘‘(III) for each subsequent fiscal year, the rate
computed for the previous fiscal year increased
by the skilled nursing facility market basket
percentage change for the fiscal year involved.
‘‘(F) ADJUSTMENT FOR CASE MIX CREEP.—Insofar as the
Secretary determines that the adjustments under subpara-
graph (G)(i) for a previous fiscal year (or estimates that
such adjustments for a future fiscal year) did (or are likely
to) result in a change in aggregate payments under this
subsection during the fiscal year that are a result of
changes in the coding or classification of residents that
do not reflect real changes in case mix, the Secretary
may adjust unadjusted Federal per diem rates for subse-
quent fiscal years so as to eliminate the effect of such
coding or classification changes.