I
107TH CONGRESS
1ST SESSION
H. R. 2973
To amend title XVIII of the Social Security Act to provide for the expeditious
coverage of new medical technology under the Medicare Program and
to establish an Office of Technology and Innovation within the Centers
for Medicare & Medicaid Services.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 2, 2001
Mr. RAMSTAD (for himself and Mrs. THURMAN) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Energy and Commerce, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of
such provisions as fall within the juridiction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to provide
for the expeditious coverage of new medical technology
under the Medicare Program and to establish an Office
of Technology and Innovation within the Centers for
Medicare & Medicaid Services.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—The amendments made by this
Act may be cited as the ‘‘Medicare Innovation Responsive-
ness Act of 2001’’.
(b) REFERENCES.—Except as otherwise specified,
whenever in this Act an amendment or repeal is expressed
in terms of an amendment to or repeal of a section or
other provision, the references shall be considered to be
made to that section or other provision of the Social Secu-
rity Act.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; references; table of contents.
Sec. 2. Deadlines for implementing national coverage, coding, and payment de-
terminations.
Sec. 3. Office of Technology and Innovation.
Sec. 4. Annual adjustments to Medicare payment systems for changes in tech-
nology and medical practice using internal and external data.
Sec. 5. Recognition of new medical technologies under inpatient hospital PPS.
Sec. 6. Improvements to the HCPCS coding assignment, inpatient coding as-
signment, and drg assignment processes.
Sec. 7. Improving inherent reasonableness.
SEC. 2. DEADLINES FOR IMPLEMENTING NATIONAL COV-
ERAGE, CODING, AND PAYMENT DETERMINA-
TIONS.
(a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y)
is amended by inserting after subsection (c) the following
new subsection:
‘‘(d)(1) In making a national coverage determination
(as defined in paragraph (1)(B) of section 1869(f)) the
Secretary shall ensure that—
‘‘(A) the public is afforded notice and oppor-
tunity to comment prior to implementation by the
Secretary of the determination;
‘‘(B) meetings of advisory committees estab-
lished under section 1114(f) with respect to the de-
termination are made on the record;
‘‘(C) in making the determination, the Sec-
retary has considered applicable information (includ-
ing clinical experience and medical, technical, and
scientific evidence) with respect to the subject mat-
ter of the determination;
‘‘(D) in issuing the determination, provide a
clear statement of the basis for the determination
(including responses to comments received from the
public), the assumptions underlying that basis; and
‘‘(E) make available to the public the data
(other than proprietary data) considered in making
the determination.
‘‘(2)(A) Subject to the succeeding provisions of this
paragraph, in making a national coverage determination,
upon receipt of a request for the national coverage deter-
mination from an interested party, the Secretary shall
make the national coverage determination under subpara-
graph (B) and implement (if applicable) the determination
pursuant to subparagraph (C) for that new technology
within the following timeframes:
‘‘(i) In the case of a national coverage deter-
mination that does not require a technology assess-
ment described in subparagraph (E), not later than
the end of the 6-month period that begins on the
date a request for the national coverage determina-
tion has been received by the Secretary, notwith-
standing the receipt by the Secretary of new evi-
dence (if any) during such period.
‘‘(ii) In the case of a national coverage deter-
mination that requires such a technology assess-
ment, not later than the end of the 12-month period
that begins on the date a request for the national
coverage determination has been received by the Sec-
retary.
In this subparagraph, the term ‘interested party’ means
individuals entitled to benefits under part A, or enrolled
under part B, or both, who are in need of the items or
services that are the subject of the coverage determination,
providers of services, physicians, practitioners, suppliers,
and manufacturers of such items or services.
‘‘(B) In making a national coverage determination
under this subsection, the Secretary shall take one of the
following actions:
‘‘(i) Issue a national coverage determination,
with or without limitations.
‘‘(ii) Issue a national noncoverage determina-
tion.
‘‘(iii) Issue a determination that no national
coverage or noncoverage determination is appro-
priate as of the end of such period with respect to
national coverage of such items or services.
‘‘(C) With respect to the implementation a national
coverage determination made under subparagraph (B)(i),
the Secretary shall—
‘‘(i) determine what code, if any, is assigned to
the particular item or service;
‘‘(ii) determine the amount of payment to be
made under this title for the item or service;
‘‘(iii) in the case of inpatient hospital services
for which payment is made under section 1886(d),
assign the item or service, and codes for the item or
service, to appropriate diagnosis related groups;
‘‘(iv) incorporate the coverage, coding, and pay-
ment determinations into the information processing
systems of the Secretary and fiscal intermediaries
and carriers; and
‘‘(v) take such other steps as are necessary to
make payments for the item or service no later than
the end of the applicable period described in sub-
paragraph (A).
‘‘(D) If the Secretary fails to take an action under
subparagraph (B) within the applicable period under sub-
paragraph (A), the Secretary shall issue a notice that in-
cludes the following information:
‘‘(i) A statement that a national coverage deter-
mination under subparagraph (B) cannot be made
and (if applicable) implemented under subparagraph
(C) within the applicable time period.
‘‘(ii) The identification of substantive issues
outstanding.
‘‘(iii) A statement of what is required, including
the process involved, to resolve those issues.
‘‘(iv) The date by which the Secretary will make
a national coverage determination under subpara-
graph (B) and (if applicable) implement the national
coverage determination under subparagraph (C).
‘‘(E)(i) A technology assessment referred to in sub-
paragraph (A) is a formal, written technology assessment,
conducted by an entity or organization other than the Cen-
ters for Medicare & Medicaid Services (in this subpara-
graph referred to as the ‘CMS’), or review by an advisory
committee appointed to advise the Administrator of the
CMS on matters relating to the interpretation, applica-
tion, or implementation of subsection (a), that the Admin-
istrator reasonably finds, in a written notice issued before
the end of the 6-month period specified in subparagraph
(A)(i), that such an assessment or review is necessary for
the Administrator to make the national coverage deter-
mination.
‘‘(ii) Such technology assessment or review shall only
be considered necessary if the CMS lacks adequate exper-
tise to evaluate the matter itself.
‘‘(F) In making a national coverage determination
under subparagraph (B), the Secretary shall include all
the information described in subparagraphs (C) and (D)
of paragraph (1), and in the case of the implementation
of the national coverage determination, applicable codes
and payment amounts for the new item or service.’’.
(b) CONFORMING AMENDMENT.—Subsection (a) of
such section is amended by striking the third sentence.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act, and apply to requests for national coverage
determinations made on or after the date that is 90 days
after such effective date.
SEC. 3. OFFICE OF TECHNOLOGY AND INNOVATION.
(a) ESTABLISHMENT.—Not later than 90 days after
the date of enactment of this Act, the Secretary of Health
and Human Services shall establish an Office of Tech-
nology and Innovation in the Centers for Medicare & Med-
icaid Services.
(b) DIRECTOR.—The Office of Technology and Inno-
vation shall be headed by a Director appointed by the Sec-
retary. The Director shall be in direct line of authority
to the Administrator of the Centers for Medicare & Med-
icaid Services. The Director shall be a noncareer appointee
in the Senior Executive Service (as defined in section
3132(a)(7) of title 5, United States Code).
(c) DUTIES.—The duties of the Director are as fol-
lows:
(1) PROMOTING
ACCESS
TO
NEW
TECH-
NOLOGIES.—The Director shall promote access by
medicare beneficiaries to new medical technologies
and innovations.
(2) IMPROVEMENT AND OVERSIGHT OF IMPLE-
MENTATION OF COVERAGE DETERMINATIONS.—The
Director shall—
(A) improve collaboration and coordination
between officials responsible for the coverage,
coding, and payment processes in order to fa-
cilitate timely access to new items and services
for beneficiaries;
(B) monitor the decisionmaking of the Sec-
retary on coverage, coding, and payment for
new items or services;
(C) INFORMATION CENTER.—The Director
shall serve as a source of information for inter-
ested parties regarding the Secretary’s activities
concerning new items or services, including as-
sisting such parties in securing determinations,
and the implementation of determinations, re-
specting coverage, coding, and payment under
title XVIII of the Social Security Act, including
implementation of the steps described in section
1869(f)(4)(A) 
of 
such 
Act 
(42 
U.S.C.
1395ff(f)(4)(A)).
(D) PREPARATION OF REPORTS TO CON-
GRESS.—The Director shall prepare reports to
Congress required under section 1869(f)(7) of
such Act (42 U.S.C. 1395ff(f)(7)), and shall
make such reports available to the public.
SEC. 4. ANNUAL ADJUSTMENTS TO MEDICARE PAYMENT
SYSTEMS FOR CHANGES IN TECHNOLOGY
AND MEDICAL PRACTICE USING INTERNAL
AND EXTERNAL DATA.
(a) INPATIENT PPS.—Section 1886(d)(4) (42 U.S.C.
1395ww(d)(4)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(D)(i)(I) In determining annual adjustments under
subparagraph (C), the Secretary may not decline to use
data held by the Secretary in the administration of the
program established under this title if the data reflect a
representative sample of cases or may not establish a uni-
form period of time (such as one year) from which such
data must be drawn.
‘‘(II) The Secretary shall establish a reasonable dead-
line for the submission of a request for adjustment based
on data held by the Secretary to be used in making the
adjustments required by subparagraph (C). In no event
may the deadline established under this paragraph be
more than 8 months before the first day of the payment
update period for which the adjustment or adjustments
to which the data relate would be effective.
‘‘(ii)(I) Subject to the succeeding provisions of this
clause, in determining the adjustments under subpara-
graph (C), the Secretary shall utilize data other than data
held by the Secretary in the administration of the program
established under this title if such other data are based
on a representative sample of cases.
‘‘(II) In determining the adjustments under subpara-
graph (C), the Secretary may not decline to use data other
than data held by the Secretary if such other data enable
the Secretary to identify or refine data held by the Sec-
retary for use in making such an adjustment and such
data are based on a representative sample of cases; or may
not establish a uniform period of time (such as one year)
from which such data must be drawn.
‘‘(III) Nothing in this clause shall be construed as
requiring the Secretary to identify all claims submitted
under the payment system established under this sub-
section involving the use of a medical technology before
the Secretary may make the adjustments under this sub-
paragraph with respect to such technology; or as author-
izing the Secretary to defer action on such an adjustment
until all such claims are identifiable.
‘‘(IV) The Secretary shall establish a reasonable
deadline for the submission of data other than data held
by the Secretary to be used in making the adjustments
required by subparagraph (C). In no event may the dead-
line established under this subclause be more than 10
months before the first day of the payment update period
for which the adjustment or adjustments to which the data
relate would be effective.
‘‘(V) For purposes of this clause, the term ‘sufficient
external data’ means data that can reasonably be provided
by the sponsor of the application for additional payment,
or that is derived from an investigation conducted under
section 520(g) of the Federal Food, Drug, and Cosmetic
Act.’’.
(b) PHYSICIAN FEE SCHEDULE.—Section 1848(c)(2)
(42 U.S.C. 1395w–4(c)(2)) is amended by adding at the
end the following new subparagraph:
‘‘(H) USE OF DATA.—
‘‘(i) INTERNAL DATA HELD BY THE
SECRETARY.—
‘‘(I) IN
GENERAL.—In deter-
mining annual adjustments under
subparagraph (B)(ii), the Secretary
may not decline to use data held by
the Secretary in the administration of
the program established under this
title if the data reflect a representa-
tive sample of cases or may not estab-
lish a uniform period of time (such as
one year) from which such data must
be drawn.
‘‘(II) DEADLINE FOR SUPPLYING
INTERNAL
DATA.—The 
Secretary
shall establish a reasonable deadline
for the submission of a request for ad-
justment based on data held by the
Secretary to be used in making the
adjustments required by subparagraph
(B)(ii). In no event may the deadline
established under this paragraph be
more than 8 months before the first
day of the payment update period for
which the adjustment or adjustments
to which the data relate would be ef-
fective.
‘‘(ii) EXTERNAL DATA.—
‘‘(I) IN
GENERAL.—Subject to
the succeeding provisions of this
clause, in determining the adjust-
ments under subparagraph (B)(ii), the
Secretary shall utilize data other than
data held by the Secretary in the ad-
ministration of the program estab-
lished under this title if such other
data are based on a representative
sample of cases.
‘‘(II) EXTERNAL
DATA
FACILI-
TATING
THE
USE
OF
INTERNAL
DATA.—In determining the adjust-
ments under subparagraph (B)(ii), the
Secretary may not decline to use data
other than data held by the Secretary
if such other data enable the Sec-
retary to identify or refine data held
by the Secretary for use in making
such an adjustment and such data are
based on a representative sample of
cases; or may not establish a uniform
period of time (such as one year) from
which such data must be drawn.
‘‘(III) CLARIFICATION.—Nothing
in this clause shall be construed as re-
quiring the Secretary to identify all
claims submitted under the payment
system established under this section
involving the use of a medical tech-
nology before the Secretary may make
the adjustments under this subpara-
graph with respect to such technology;
or as authorizing the Secretary to
defer action on such an adjustment
until all such claims are identifiable.
‘‘(IV) DEADLINE FOR SUPPLYING
EXTERNAL
DATA.—The 
Secretary
shall establish a reasonable deadline
for the submission of data other than
data held by the Secretary to be used
in making the adjustments required
by subparagraph (B)(ii). In no event
may the deadline established under
this subclause be more than 10
months before the first day of the
payment update period for which the
adjustment or adjustments to which
the data relate would be effective.
‘‘(V) DEFINITION.—For purposes
of this clause, the term ‘sufficient ex-
ternal data’ means data that can rea-
sonably be provided by the sponsor of
the application for additional pay-
ment, or that is derived from an in-
vestigation conducted under section
520(g) of the Federal Food, Drug,
and Cosmetic Act.’’.
(c) AMBULATORY SURGICAL CENTER PAYMENTS.—
Section 1833(i)(2) (42 U.S.C. 1395l(i)(2)) is amended by
adding at the end the following new subparagraphs:
‘‘(D) The Secretary shall review not less often than
annually and revise the updates under subparagraphs (A)
and (B) to take into account changes in medical practice,
changes in technology, the addition of new services, new
cost data, and other relevant information and factors.
‘‘(E)(i)(I) In revising the updates under subpara-
graph (D), the Secretary may not decline to use data held
by the Secretary in the administration of the program es-
tablished under this title if the data reflect a representa-
tive sample of cases or may not establish a uniform period
of time (such as one year) from which such data must
be drawn.
‘‘(II) The Secretary shall establish a reasonable dead-
line for the submission of a request for revised updates
based on data held by the Secretary to be used in making
the revised updates under subparagraph (D). In no event
may the deadline established under this paragraph be
more than 8 months before the first day of the payment
update period for which the adjustment or adjustments
to which the data relate would be effective.
‘‘(ii)(I) Subject to the succeeding provisions of this
clause, in determining the revised updates under subpara-
graph (D), the Secretary shall utilize data other than data
held by the Secretary in the administration of the program
established under this title if such other data are based
on a representative sample of cases.
‘‘(II) In determining the revised updates under sub-
paragraph (D), the Secretary may not decline to use data
other than data held by the Secretary if such other data
enable the Secretary to identify or refine data held by the
Secretary for use in making such an adjustment and such
data are based on a representative sample of cases; or may
not establish a uniform period of time (such as one year)
from which such data must be drawn.
‘‘(III) Nothing in this clause shall be construed as
requiring the Secretary to identify all claims submitted
under the payment system established under this para-
graph involving the use of a medical technology before the
Secretary may make the revised adjustments under sub-
paragraph (D) with respect to such technology; or as au-
thorizing the Secretary to defer action on such a revised
update until all such claims are identifiable.
‘‘(IV) The Secretary shall establish a reasonable
deadline for the submission of data other than data held
by the Secretary to be used in making the revised updates
required by subparagraph (D). In no event may the dead-
line established under this subclause be more than 10
months before the first day of the payment update period
for which the adjustment or adjustments to which the data
relate would be effective.
‘‘(V) For purposes of this clause, the term ‘sufficient
external data’ means data that can reasonably be provided
by the sponsor of the application for additional payment,
or that is derived from an investigation conducted under
section 520(g) of the Federal Food, Drug, and Cosmetic
Act.’’.
(d) OUTPATIENT
PPS.—Section 1833(t)(9) (42
U.S.C. 1395l(t)(9)) is amended by adding at the end the
following new subparagraph:
‘‘(D) USE OF DATA.—
‘‘(i) INTERNAL DATA HELD BY THE
SECRETARY.—
‘‘(I) IN
GENERAL.—In deter-
mining annual adjustments under
subparagraph (A), the Secretary may
not decline to use data held by the
Secretary in the administration of the
program established under this title if
the data reflect a representative sam-
ple of cases or may not establish a
uniform period of time (such as one
year) from which such data must be
drawn.
‘‘(II) DEADLINE FOR SUPPLYING
INTERNAL
DATA.—The 
Secretary
shall establish a reasonable deadline
for the submission of a request for ad-
justment based on data held by the
Secretary to be used in making the
adjustments required by subparagraph
(A). In no event may the deadline es-
tablished under this paragraph be
more than 8 months before the first
day of the payment update period for
which the adjustment or adjustments
to which the data relate would be ef-
fective.
‘‘(ii) EXTERNAL DATA.—
‘‘(I) IN
GENERAL.—Subject to
the succeeding provisions of this
clause, in determining the adjust-
ments under subparagraph (A), the
Secretary shall utilize data other than
data held by the Secretary in the ad-
ministration of the program estab-
lished under this title if such other
data are based on a representative
sample of cases.
‘‘(II) EXTERNAL
DATA
FACILI-
TATING
THE
USE
OF
INTERNAL
DATA.—In determining the adjust-
ments under subparagraph (A), the
Secretary may not decline to use data
other than data held by the Secretary
if such other data enable the Sec-
retary to identify or refine data held
by the Secretary for use in making
such an adjustment and such data are
based on a representative sample of
cases; or may not establish a uniform
period of time (such as one year) from
which such data must be drawn.
‘‘(III) CLARIFICATION.—Nothing
in this clause shall be construed as re-
quiring the Secretary to identify all
claims submitted under the payment
system established under this sub-
section involving the use of a medical
technology before the Secretary may
make the adjustments under this sub-
paragraph with respect to such tech-
nology; or as authorizing the Sec-
retary to defer action on such an ad-
justment until all such claims are
identifiable.
‘‘(IV) DEADLINE FOR SUPPLYING
EXTERNAL
DATA.—The 
Secretary
shall establish a reasonable deadline
for the submission of data other than
data held by the Secretary to be used
in making the adjustments required
by subparagraph (A). In no event may
the deadline established under this
subclause be more than 10 months be-
fore the first day of the payment up-
date period for which the adjustment
or adjustments to which the data re-
late would be effective.
‘‘(V) DEFINITION.—For purposes
of this clause, the term ‘sufficient ex-
ternal data’ means data that can rea-
sonably be provided by the sponsor of
the application for additional pay-
ment, or that is derived from an in-
vestigation conducted under section
520(g) of the Federal Food, Drug,
and Cosmetic Act.’’.
(e) EFFECTIVE DATES.—The amendments made by
this section shall apply with respect to items and services
furnished on or after October 1, 2002.
SEC. 5. RECOGNITION OF NEW MEDICAL TECHNOLOGIES
UNDER INPATIENT HOSPITAL PPS.
Subparagraphs (K) and (L) of section 1886(d)(5)
(42 U.S.C. 1395ww(d)(5)) are amended to read as follows:
‘‘(K)(i) The Secretary shall by regulation
establish a mechanism under which new medical
services and technologies are incorporated into
the payment system established under this sub-
section. Such mechanism shall—
‘‘(I) meet the requirements of this
subparagraph and subparagraph (L); and
‘‘(II) apply to all discharges occurring
on or after October 1, 2002.
The Secretary may establish such mechanism
by interim final regulation (in the publications
required by subsection (e)(5) for a fiscal year or
otherwise).
‘‘(ii) The Secretary—
‘‘(I) shall accept an application for in-
corporation of a new medical service or
technology into such system that is sub-
mitted on or after the date on which a re-
quest is made for assignment of an inpa-
tient hospital code (as defined in clause
(viii)(I)) for the service or technology;
‘‘(II) shall permit an applicant to sub-
mit a separate application with respect to
each diagnosis-related group established
under paragraph (4) that the applicant be-
lieves (based on principal and secondary
diagnoses and other variables used to as-
sign specific hospital discharges to such
groups) will involve the use of such service
or technology or to include all such groups
in a single, consolidated application;
‘‘(III) shall identify all such groups
(established under paragraph (4)) that the
Secretary determines (based on principal
and secondary diagnoses and other vari-
ables used to assign specific hospital dis-
charges to such groups) will involve the use
of such service or technology and, if any
groups so identified are groups other than
those included in such application, shall
notify the applicant and invite the appli-
cant to revise, expand, or resubmit the ap-
plication (or a portion thereof) to include
information with respect to such group or
groups; and
‘‘(IV) shall make a separate deter-
mination under clause (iii), with respect to
such service or technology, for each diag-
nosis-related group identified by the Sec-
retary under subclause (III) for which an
application has been submitted, at such
time after receipt of such application as
will ensure that the service or technology is
incorporated into such system not later
than 8 months (in the case of an applica-
tion supported by sufficient internal data
(as 
determined 
under 
paragraph
(4)(D)(i))) or 10 months (in the case of an
application supported by sufficient external
data 
(as 
defined 
in 
paragraph
(4)(D)(ii)(V))) after the deadline estab-
lished for receipt of such applications.
‘‘(iii) After identifying diagnosis-related
groups under clause (ii)(III), the Secretary
shall determine, with respect to each such
group for which an application has been re-
ceived, whether payment shall be made under
such system, with respect to discharges involv-
ing such service or technology that would be
classified within such group, based on—
‘‘(I) in the case of a group with re-
spect to which the requirements of clause
(v) are met, such diagnosis-related group;
or
‘‘(II) in the case of a group with re-
spect to which the requirements of clause
(v) are not met, a new-technology group
established under subparagraph (L).
‘‘(iv) In making the determination de-
scribed in clause (iii), the Secretary shall
compare—
‘‘(I) the estimated average cost in-
curred (determined by the Secretary taking
into account data submitted in support of
an application) for discharges of patients
receiving care involving a new medical
service or technology who were (or would
have been) classified within a diagnosis-re-
lated group (based on principal and sec-
ondary diagnoses and variables used to as-
sign specific hospital discharges to such
group), with
‘‘(II) the discharge-weighted average
of the national DRG prospective payment
rates established under paragraph (3) for
hospitals located in large urban and other
areas (described in subparagraph (A)(iv) of
such subparagraph) for such diagnosis-re-
lated group.
‘‘(v) The Secretary shall provide that pay-
ment for discharges of patients with the same
diagnoses and variables that are used to classify
specific hospital discharges to a diagnosis-re-
lated group established under paragraph (4)
and involving a new medical service or tech-
nology will be based on the diagnosis-related
group if—
‘‘(I) the discharge-weighted average
national DRG prospective payment rate
determined under clause (iv)(II) for such
group equals or exceeds 90 percent of the
estimated average cost determined under
clause (iv)(I); and
‘‘(II) the amount (if any) by which
the estimated average cost determined
under clause (iv)(I) exceeds the discharge-
weighted average national DRG prospec-
tive payment rate determined under clause
(iv)(II) for such group is not greater than
$2,500.
‘‘(vi) The Secretary shall provide that, if
the requirements of subclause (I) and (II) of
clause (v) are not met with respect to a diag-
nosis-related group established under paragraph
(4) and discharges involving a service or tech-
nology that would (but for this subparagraph)
be classified within such group—
‘‘(I) payment for such discharges will
be based on a new-technology group estab-
lished under subparagraph (L); and
‘‘(II) such discharges will be classified
within a group established under subpara-
graph (L) for which the rates established
under such subparagraph meet the require-
ments of subparagraph (K)(v) (determined
by applying the methodology specified in
subparagraph (K)(iv) to such rates).
‘‘(vii) The Secretary shall—
‘‘(I) treat a medical service or tech-
nology as ‘new’ for purposes of this sub-
paragraph for the 3-year period beginning
on the date on which an inpatient hospital
code is assigned with respect to the service
or technology (and, in the case of a service
or technology for which such a code was
assigned before the date of the enactment
of this paragraph, for any portion of such
period that occurs on or after the effective
date of this subparagraph);
‘‘(II) determine payment for such
service or technology on the basis described
in clause (v) or (vi), as the case may be,
during such period (or portion thereof);
and
‘‘(III) provide for the collection of
data with respect to the costs incurred
during such period (or portion thereof)
with respect to such service or technology
for use in making adjustments under para-
graph (4)(C) and in determining the ap-
propriate diagnosis-related group to which
discharges involving such service or tech-
nology will be classified after such period.
‘‘(viii) 
For 
purposes 
of 
this
subparagraph—
‘‘(I) the term ‘inpatient hospital code’
means any code that is used with respect
to inpatient hospital services for which
payment may be made under this sub-
section and includes an alphanumeric code
issued under the International Classifica-
tion of Diseases, 9th Revision, Clinical
Modification (‘ICD–9–CM’) and its subse-
quent revisions; and
‘‘(II) the term ‘new medical service or
technology’ means a medical service or
technology that, when compared with exist-
ing medical services and technologies, sub-
stantially improves the diagnosis or treat-
ment provided to individuals entitled to
benefits under this title.
‘‘(L)(i) Before the beginning of each fiscal
year (beginning with fiscal year 2003), the Sec-
retary shall establish new-technology groups
into which discharges involving a new medical
service or technology will be classified as pro-
vided in subparagraph (K)(vi).
‘‘(ii) Such groups shall, using the applica-
ble standardized amounts under this subsection
and appropriate weighting factors, produce pro-
spective payment rates that reflect such cost co-
horts as the Secretary determines will be nec-
essary to assure that a new-technology group
described in subparagraph (K)(vi)(II) will be
available during such fiscal year to assign dis-
charges involving a new service or technology
for which no diagnosis-related group established
under paragraph (4) satisfies the requirements
of subclauses (I) and (II) of subparagraph
(K)(v).
‘‘(iii) The prospective payment rates estab-
lished under clause (ii) shall be adjusted in the
same manner as national DRG prospective pay-
ment rates determined under paragraph (3).’’.
SEC. 6. IMPROVEMENTS TO THE HCPCS CODING ASSIGN-
MENT, INPATIENT CODING ASSIGNMENT, AND
DRG ASSIGNMENT PROCESSES.
(a) INPATIENT PPS.—Section 1886(d)(5)(K) (42
U.S.C. 1395ww(d)(5)(K)) is amended by adding at the
end the following new clauses:
‘‘(vii) The Secretary shall by regulation establish a
process that provides for the assignment of inpatient hos-
pital codes (as defined in clause (iii)) each calendar quar-
ter for new medical services and technologies. Such proc-
ess shall—
‘‘(I) ensure that new codes are assigned and
implemented no later than 180 days after a request
is received; and
‘‘(II) provide for the opportunity to apply for
the assignment of an inpatient hospital code under
subclause (I) to items that are the subject of an ap-
plication submitted for investigation under section
520(g) of the Federal Food, Drug and Cosmetic Act
(21 U.S.C. 360j(g).
The assignment of any inpatient hospital code shall affect
a weighting factor described in paragraph (4)(B) only at
the time of an adjustment under paragraph (4)(C)(i).’’.
(b) HCPCS LEVEL II CODES.—
(1) PROCESS FOR ASSIGNMENT OF CODES FOR
NEW TECHNOLOGIES.—The Secretary shall by regu-
lation establish a process that provides for the as-
signment of HCPCS Level II codes each calendar
quarter for new medical services and technologies.
Such process shall ensure that codes are assigned
and implemented no later than 180 days after a for-
mal application for such a code is received.
(2) DEFINITION.—In this subsection, the term
‘‘HCPCS Level II codes’’ means the level II alpha-
numeric codes under the Health Care Financing Ad-
ministration Common Procedure Coding System
(HCPCS).
(c) PERMANENT RETENTION OF HCPCS LEVEL III
CODES.—Section 532(a) of the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000
(114 Stat. 2763A–547), as enacted into law by section
1(a)(6) of Public Law 106–554, is amended by striking
‘‘through December 31, 2003,’’.
(d) EFFECTIVE DATE.—The amendments made sub-
sections (a) and (b) shall apply with respect to applica-
tions for new ICD–9–CM codes received on or after Octo-
ber 1, 2002.
SEC. 7. IMPROVING INHERENT REASONABLENESS.
(a) IN GENERAL.—Section 1842(b)(8) (42 U.S.C.
1395u(b)(8)) is amended—
(1) in subparagraph (A)(i), by inserting ‘‘and
valid data’’ after ‘‘factors’’ each place it appears;
(2) in subparagraph (A)(ii)—
(A) by striking ‘‘apply factors that would’’;
(B) by striking ‘‘during any year’’; and
(C) by striking ‘‘from such payment during
the preceding year’’ and inserting in lieu there-
of, ‘‘over any 5-consecutive-year period’’;
(3) in subparagraph (B)—