464
priate case mix adjustment factor (estab-
lished under subparagraph (B)).
‘‘(ii) AREA WAGE ADJUSTMENT.—The
portion of such amount that the Secretary
estimates to be attributable to wages and
wage-related costs shall be adjusted for ge-
ographic differences in such costs by an
area wage adjustment factor (established
under subparagraph (C)) for the area in
which the services are furnished or such
other area as the Secretary may specify.
‘‘(B) ESTABLISHMENT OF CASE MIX AD-
JUSTMENT FACTORS.—The Secretary shall es-
tablish appropriate case mix adjustment factors
for home health services in a manner that ex-
plains a significant amount of the variation in
cost among different units of services.
‘‘(C) ESTABLISHMENT OF AREA WAGE AD-
JUSTMENT FACTORS.—The Secretary shall es-
tablish area wage adjustment factors that re-
flect the relative level of wages and wage-related
costs applicable to the furnishing of home
health services in a geographic area compared
to the national average applicable level. Such
465
factors may be the factors used by the Sec-
retary for purposes of section 1886(d)(3)(E).
‘‘(5) OUTLIERS.—The Secretary may provide
for an addition or adjustment to the payment
amount otherwise made in the case of outliers be-
cause of unusual variations in the type or amount of
medically necessary care. The total amount of the
additional payments or payment adjustments made
under this paragraph with respect to a fiscal year
may not exceed 5 percent of the total payments pro-
jected or estimated to be made based on the prospec-
tive payment system under this subsection in that
year.
‘‘(6) PRORATION
OF
PROSPECTIVE
PAYMENT
AMOUNTS.—If a beneficiary elects to transfer to, or
receive services from, another home health agency
within the period covered by the prospective payment
amount, the payment shall be prorated between the
home health agencies involved.
‘‘(c) REQUIREMENTS
FOR
PAYMENT
INFORMA-
TION.—With respect to home health services furnished on
or after October 1, 1998, no claim for such a service may
be paid under this title unless—
‘‘(1) the claim has the unique identifier (pro-
vided under section 1842(r)) for the physician who
466
prescribed the services or made the certification de-
scribed in section 1814(a)(2) or 1835(a)(2)(A); and
‘‘(2) in the case of a service visit described in
paragraph (1), (2), (3), or (4) of section 1861(m),
the claim has information (coded in an appropriate
manner) on the length of time of the service visit,
as measured in 15 minute increments.
‘‘(d) LIMITATION ON REVIEW.—There shall be no ad-
ministrative or judicial review under section 1869, 1878,
or otherwise of—
‘‘(1) the establishment of a transition period
under subsection (b)(1);
‘‘(2) the definition and application of payment
units under subsection (b)(2);
‘‘(3) the computation of initial standard pro-
spective 
payment 
amounts 
under 
subsection
(b)(3)(A) (including the reduction described in
clause (ii) of such subsection);
‘‘(4) the adjustment for outliers under sub-
section (b)(3)(C);
‘‘(5) case mix and area wage adjustments under
subsection (b)(4);
‘‘(6) any adjustments for outliers under sub-
section (b)(5); and
467
‘‘(7) the amounts or types of exceptions or ad-
justments under subsection (b)(7).’’.
(b) ELIMINATION OF PERIODIC INTERIM PAYMENTS
FOR HOME HEALTH AGENCIES.—Section 1815(e)(2) (42
U.S.C. 1395g(e)(2)) is amended—
(1) by inserting ‘‘and’’ at the end of subpara-
graph (C),
(2) by striking subparagraph (D), and
(3) by redesignating subparagraph (E) as sub-
paragraph (D).
(c) CONFORMING AMENDMENTS.—
(1) 
PAYMENTS
UNDER
PART
A.—Section
1814(b) (42 U.S.C. 1395f(b)) is amended in the
matter preceding paragraph (1) by striking ‘‘and
1886’’ and inserting ‘‘1886, and 1895’’.
(2) TREATMENT OF ITEMS AND SERVICES PAID
UNDER PART B.—
(A) PAYMENTS UNDER PART B.—Section
1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amend-
ed—
(i) by amending subparagraph (A) to
read as follows:
‘‘(A) with respect to home health services
(other than a covered osteoporosis drug) (as de-
fined in section 1861(kk)), the amount deter-
468
mined under the prospective payment system
under section 1895;’’;
(ii) by striking ‘‘and’’ at the end of
subparagraph (E);
(iii) by adding ‘‘and’’ at the end of
subparagraph (F); and
(iv) by adding at the end the following
new subparagraph:
‘‘(G) with respect to items and services de-
scribed in section 1861(s)(10)(A), the lesser
of—
‘‘(i) the reasonable cost of such serv-
ices, as determined under section 1861(v),
or
‘‘(ii) the customary charges with re-
spect to such services,
or, if such services are furnished by a public
provider of services, or by another provider
which demonstrates to the satisfaction of the
Secretary that a significant portion of its pa-
tients are low-income (and requests that pay-
ment be made under this provision), free of
charge or at nominal charges to the public, the
amount determined in accordance with section
1814(b)(2);’’.
469
(B) REQUIRING PAYMENT FOR ALL ITEMS
AND SERVICES TO BE MADE TO AGENCY.—
(i) IN GENERAL.—The first sentence
of 
section 
1842(b)(6) 
(42 
U.S.C.
1395u(b)(6)), as amended by section
4401(b)(2), is amended—
(I) by striking ‘‘and (E)’’ and in-
serting ‘‘(E)’’; and
(II) by striking the period at the
end and inserting the following: ‘‘,
and (F) in the case of home health
services furnished to an individual
who (at the time the item or service is
furnished) is under a plan of care of
a home health agency, payment shall
be made to the agency (without re-
gard to whether or not the item or
service was furnished by the agency,
by others under arrangement with
them made by the agency, or when
any other contracting or consulting
arrangement, or otherwise).’’.
(ii) CONFORMING AMENDMENT.—Sec-
tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)),
as amended by section 4401(b), is amend-
470
ed by striking ‘‘and section 1842(b)(6)(E)’’
and inserting ‘‘, section 1842(b)(6)(E),
and section 1842(b)(6)(F)’’.
(C) EXCLUSIONS FROM COVERAGE.—Sec-
tion 1862(a) (42 U.S.C. 1395y(a)), as amended
by sections 4401(b) and 4421(b), is amended—
(i) by striking ‘‘or’’ at the end of
paragraph (17);
(ii) by striking the period at the end
of paragraph (18) and inserting ‘‘; or’’;
and
(iii) inserting after paragraph (18) the
following new paragraph:
‘‘(19) where such expenses are for home health
services furnished to an individual who is under a
plan of care of the home health agency if the claim
for payment for such services is not submitted by
the agency.’’.
(d) EFFECTIVE DATE.—Except as otherwise pro-
vided, the amendments made by this section shall apply
to cost reporting periods beginning on or after October
1, 1999.
471
Subtitle G—Provisions Relating to
Part B Only
CHAPTER 1—PHYSICIANS’ SERVICES
SEC. 4601. ESTABLISHMENT OF SINGLE CONVERSION FAC-
TOR FOR 1998.
(a) IN GENERAL.—Section 1848(d)(1) (42 U.S.C.
1395w–4(d)(1)) is amended—
(1) by redesignating subparagraph (C) as sub-
paragraph (D), and
(2) by inserting after subparagraph (B) the fol-
lowing:
‘‘(C) SPECIAL RULES FOR 1998.—The sin-
gle conversion factor for 1998 under this sub-
section shall be the conversion factor for pri-
mary care services for 1997, increased by the
Secretary’s estimate of the weighted average of
the three separate updates that would otherwise
occur were it not for the enactment of chapter
1 of subtitle G of title X of the Balanced Budg-
et Act of 1997.’’.
(b) CONFORMING AMENDMENTS.—Section 1848 (42
U.S.C. 1395w–4) is amended—
(1) by striking ‘‘(or factors)’’ each place it ap-
pears in subsection (d)(1)(A) and (d)(1)(D)(ii) (as
redesignated by subsection (a)(1)),
472
(2) in subsection (d)(1)(A), by striking ‘‘or up-
dates’’,
(3) in subsection (d)(1)(D) (as redesignated by
subsection (a)(1)), by striking ‘‘(or updates)’’ each
place it appears, and
(4) in subsection (i)(1)(C), by striking ‘‘conver-
sion factors’’ and inserting ‘‘the conversion factor’’.
SEC. 4602. ESTABLISHING UPDATE TO CONVERSION FAC-
TOR TO MATCH SPENDING UNDER SUSTAIN-
ABLE GROWTH RATE.
(a) UPDATE.—
(1) IN
GENERAL.—Section 1848(d)(3) (42
U.S.C. 1395w–4(d)(3)) is amended to read as fol-
lows:
‘‘(3) UPDATE.—
‘‘(A) IN GENERAL.—Unless otherwise pro-
vided by law, subject to subparagraph (D) and
the budget-neutrality factor determined by the
Secretary under subsection (c)(2)(B)(ii), the
update to the single conversion factor estab-
lished in paragraph (1)(C) for a year beginning
with 1999 is equal to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI (as de-
473
fined in section 1842(i)(3)) for the year
(divided by 100), and
‘‘(ii) 1 plus the Secretary’s estimate of
the update adjustment factor for the year
(divided by 100),
minus 1 and multiplied by 100.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—For
purposes of subparagraph (A)(ii), the ‘update
adjustment factor’ for a year is equal to the
quotient (as estimated by the Secretary) of—
‘‘(i) the difference between (I) the
sum of the allowed expenditures for physi-
cians’ services (as determined under sub-
paragraph (C)) during the period begin-
ning July 1, 1997, and ending on June 30
of the year involved, and (II) the sum of
the amount of actual expenditures for phy-
sicians’ services furnished during the pe-
riod beginning July 1, 1997, and ending
on June 30 of the preceding year; divided
by
‘‘(ii) the actual expenditures for physi-
cians’ services for the 12-month period
ending on June 30 of the preceding year,
increased by the sustainable growth rate
474
under subsection (f) for the fiscal year
which begins during such 12-month period.
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—For purposes of this paragraph,
the allowed expenditures for physicians’ services
for the 12-month period ending with June 30
of—
‘‘(i) 1997 is equal to the actual ex-
penditures for physicians’ services fur-
nished during such 12-month period, as es-
timated by the Secretary; or
‘‘(ii) a subsequent year is equal to the
allowed expenditures for physicians’ serv-
ices for the previous year, increased by the
sustainable growth rate under subsection
(f) for the fiscal year which begins during
such 12-month period.
‘‘(D) RESTRICTION
ON
VARIATION
FROM
MEDICARE ECONOMIC INDEX.—Notwithstanding
the amount of the update adjustment factor de-
termined under subparagraph (B) for a year,
the update in the conversion factor under this
paragraph for the year may not be—
475
‘‘(i) greater than 100 times the fol-
lowing amount: (1.03 + (MEI percentage/
100)) -1; or
‘‘(ii) less than 100 times the following
amount: (0.93 + (MEI percentage/100))
-1,
where ‘MEI percentage’ means the Secretary’s
estimate of the percentage increase in the MEI
(as defined in section 1842(i)(3)) for the year
involved.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to the update for years
beginning with 1999.
(b) ELIMINATION OF REPORT.—Section 1848(d) (42
U.S.C. 1395w–4(d)) is amended by striking paragraph
(2).
SEC. 4603. REPLACEMENT OF VOLUME PERFORMANCE
STANDARD 
WITH 
SUSTAINABLE 
GROWTH
RATE.
(a) IN
GENERAL.—Section 1848(f) (42 U.S.C.
1395w–4(f)) is amended by striking paragraphs (2)
through (5) and inserting the following:
‘‘(2) SPECIFICATION OF GROWTH RATE.—The
sustainable growth rate for all physicians’ services
476
for a fiscal year (beginning with fiscal year 1998)
shall be equal to the product of—
‘‘(A) 1 plus the Secretary’s estimate of the
weighted average percentage increase (divided
by 100) in the fees for all physicians’ services
in the fiscal year involved,
‘‘(B) 1 plus the Secretary’s estimate of the
percentage change (divided by 100) in the aver-
age number of individuals enrolled under this
part (other than MedicarePlus plan enrollees)
from the previous fiscal year to the fiscal year
involved,
‘‘(C) 1 plus the Secretary’s estimate of the
projected percentage growth in real gross do-
mestic product per capita (divided by 100) from
the previous fiscal year to the fiscal year in-
volved, and
‘‘(D) 1 plus the Secretary’s estimate of the
percentage change (divided by 100) in expendi-
tures for all physicians’ services in the fiscal
year (compared with the previous fiscal year)
which will result from changes in law and regu-
lations, determined without taking into account
estimated changes in expenditures due to
changes in the volume and intensity of physi-
477
cians’ services resulting from changes in the up-
date to the conversion factor under subsection
(d)(3),
minus 1 and multiplied by 100.
‘‘(3) DEFINITIONS.—In this subsection:
‘‘(A) SERVICES INCLUDED IN PHYSICIANS’
SERVICES.—The term ‘physicians’ services’ in-
cludes other items and services (such as clinical
diagnostic laboratory tests and radiology serv-
ices), specified by the Secretary, that are com-
monly performed or furnished by a physician or
in a physician’s office, but does not include
services furnished to a MedicarePlus plan en-
rollee.
‘‘(B) MEDICAREPLUS PLAN ENROLLEE.—
The term ‘MedicarePlus plan enrollee’ means,
with respect to a fiscal year, an individual en-
rolled under this part who has elected to receive
benefits under this title for the fiscal year
through a MedicarePlus plan offered under part
C, and also includes an individual who is receiv-
ing benefits under this part through enrollment
with an eligible organization with a risk-sharing
contract under section 1876.’’.
478
(b) CONFORMING AMENDMENTS.—Section 1848(f)
(42 U.S.C. 1395w–4(f)) is amended—
(1) in the heading, by striking ‘‘VOLUME PER-
FORMANCE STANDARD RATES OF INCREASE’’ and
inserting ‘‘SUSTAINABLE GROWTH RATE’’; and
(2) in paragraph (1)—
(A) in the heading, by striking ‘‘VOLUME
PERFORMANCE
STANDARD
RATES
OF
IN-
CREASE’’ and inserting ‘‘SUSTAINABLE GROWTH
RATE’’,
(B) by striking subparagraphs (A) and
(B); and
(C) in paragraph (1)(C)—
(i) in the heading, by striking ‘‘PER-
FORMANCE
STANDARD
RATES
OF
IN-
CREASE’’ and inserting ‘‘SUSTAINABLE
GROWTH RATE’’;
(ii) in the first sentence, by striking
‘‘with 1991), the performance standard
rates of increase’’ and all that follows
through the first period and inserting
‘‘with 1999), the sustainable growth rate
for the fiscal year beginning in that year.’’;
and
479
(iii) in the second sentence, by strik-
ing ‘‘January 1, 1990, the performance
standard rate of increase under subpara-
graph (D) for fiscal year 1990’’ and insert-
ing ‘‘January 1, 1999, the sustainable
growth rate for fiscal year 1999’’.
SEC. 4604. PAYMENT RULES FOR ANESTHESIA SERVICES.
(a) IN GENERAL.—Section 1848(d)(1) (42 U.S.C.
1395w–4(d)(1)), as amended by section 4601, is amend-
ed—
(A) in subparagraph (C), striking ‘‘The
single’’ and inserting ‘‘Except as provided in
subparagraph (D), the single’’;
(B) by redesignating subparagraph (D) as
subparagraph (E); and
(C) by inserting after subparagraph (C)
the following new subparagraph:
‘‘(D) SPECIAL
RULES
FOR
ANESTHESIA
SERVICES.—The separate conversion factor for
anesthesia services for a year shall be equal to
46 percent of the single conversion factor estab-
lished for other physicians’ services, except as
adjusted for changes in work, practice expense,
or malpractice relative value units. ’’.
480
(b) CLASSIFICATION OF ANESTHESIA SERVICES.—
The first sentence of section 1848(j)(1) (42 U.S.C.
1395w–4(j)(1)) is amended—
(1) by striking ‘‘and including anesthesia serv-
ices’’; and
(2) by inserting before the period the following:
‘‘(including anesthesia services)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
January 1, 1998.
SEC. 4605. IMPLEMENTATION OF RESOURCE-BASED PHYSI-
CIAN PRACTICE EXPENSE.
(a) 1-YEAR DELAY IN IMPLEMENTATION.—Section
1848(c) (42 U.S.C. 1395w–4(c)) is amended—
(1) in paragraph (2)(C)(ii), in the matter before
subclause (I) and after subclause (II), by striking
‘‘1998’’ and inserting ‘‘1999’’ each place it appears;
and
(2) in paragraph (3)(C)(ii), by striking ‘‘1998’’
and inserting ‘‘1999’’.
(b) PHASED-IN IMPLEMENTATION.—
(1) IN
GENERAL.—Section 1848(c)(2)(C)(ii)
(42 U.S.C. 1395w–4(c)(2)(C)(ii)) is further amend-
ed—
481
(A) by striking the comma at the end of
clause (ii) and inserting a period and the follow-
ing:
‘‘For 1999, such number of units shall be
determined based 75 percent on such prod-
uct and based 25 percent on the relative
practice expense resources involved in fur-
nishing the service. For 2000, such num-
ber of units shall be determined based 50
percent on such product and based 50 per-
cent on such relative practice expense re-
sources. For 2001, such number of units
shall be determined based 25 percent on
such product and based 75 percent on such
relative practice expense resources. For a
subsequent year, such number of units
shall be determined based entirely on such
relative practice expense resources.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1848(c)(3)(C)(ii) (42 U.S.C. 1395w–4(c)(3)(C)(ii)),
as amended by subsection (a)(2), is amended by
striking ‘‘1999’’ and inserting ‘‘2002’’.
(c) REQUIREMENTS
FOR DEVELOPING NEW RE-
SOURCE-BASED PRACTICE EXPENSE RELATIVE VALUE
UNITS.—
482
(1) DEVELOPMENT.—For purposes of section
1848(c)(2)(C) of the Social Security Act, the Sec-
retary of Health and Human Services shall develop
new resource-based relative value units. In develop-
ing such units the Secretary shall—
(A) utilize, to the maximum extent prac-
ticable, generally accepted accounting principles
and standards which (i) recognize all staff,
equipment, supplies, and expenses, not just
those which can be tied to specific procedures,
and (ii) use actual data on equipment utiliza-
tion and other key assumptions, such as the
proportion of costs which are direct versus indi-
rect;
(B) study whether hospital cost reduction
efforts and changing practice patterns may
have increased physician practice costs under
part B of the medicare program;
(C) consider potential adverse effects on
patient access under the medicare program; and
(D) consult with organizations represent-
ing physicians regarding methodology and data
to be used, including data for impact projec-
tions, in order to ensure that sufficient input
483
has been received by the affected physician
community.
(2) REPORT.—The Secretary shall transmit a
report by March 1, 1998, on the development of re-
source-based relative value units under paragraph
(1) to the Committee on Ways and Means and the
Committee on Commerce of the House of Represent-
atives and the Committee on Finance of the Senate.
The report shall include a presentation of data to be
used in developing the value units and an expla-
nation of the methodology.
(3) NOTICE OF PROPOSED RULEMAKING.—The
Secretary shall publish a notice of proposed rule-
making with the new resource-based relative value
units on or before May 1, 1998, and shall allow for
a 90-day public comment period.
(4) ITEMS INCLUDED.—The proposed new rule
shall include the following:
(A) Detailed impact projections which com-
pare new proposed payment amounts on data
on actual physician practice expenses.
(B) Impact projections for specialties and
subspecialties, geographic payment localities,
urban versus rural localities, and academic ver-
sus nonacademic medical staffs.
484
(C) Impact projections on access to care
for medicare patients and physician employ-
ment of clinical and administrative staff.
SEC. 4606. DISSEMINATION OF INFORMATION ON HIGH PER
DISCHARGE RELATIVE VALUES FOR IN-HOS-
PITAL PHYSICIANS’ SERVICES.
(a) DETERMINATION
AND
NOTICE
CONCERNING
HOSPITAL-SPECIFIC PER DISCHARGE RELATIVE VAL-
UES.—
(1) IN GENERAL.—For 1999 and 2001 the Sec-
retary of Health and Human Services shall deter-
mine for each hospital—
(A) the hospital-specific per discharge rel-
ative value under subsection (b); and
(B) whether the hospital-specific relative
value is projected to be excessive (as determined
based on such value represented as a percent-
age of the median of hospital-specific per dis-
charge relative values determined under sub-
section (b)).
(2) NOTICE
TO
MEDICAL
STAFFS
AND
CAR-
RIERS.—The Secretary shall notify the medical exec-
utive committee of each hospital identifies under
paragraph (1)(B) as having an excessive hospital-
specific relative value, of the determinations made
485
with respect to the medical staff under paragraph
(1).
(b) DETERMINATION
OF HOSPITAL-SPECIFIC PER
DISCHARGE RELATIVE VALUES.—
(1) IN GENERAL.—For purposes of this section,
the hospital-specific per discharge relative value for
the medical staff of a hospital (other than a teaching
hospital) for a year, shall be equal to the average
per discharge relative value (as determined under
section 1848(c)(2) of the Social Security Act) for
physicians’ services furnished to inpatients of the
hospital by the hospital’s medical staff (excluding in-
terns and residents) during the second year preced-
ing that calendar year, adjusted for variations in
case-mix and disproportionate share status among
hospitals (as determined by the Secretary under
paragraph (3)).
(2) SPECIAL
RULE
FOR
TEACHING
HOS-
PITALS.—The hospital-specific relative value pro-
jected for a teaching hospital in a year shall be equal
to the sum of—
(A) the average per discharge relative
value (as determined under section 1848(c)(2)
of such Act) for physicians’ services furnished
to inpatients of the hospital by the hospital’s
486
medical staff (excluding interns and residents)
during the second year preceding that calendar
year, and
(B) the equivalent per discharge relative
value (as determined under such section) for
physicians’ services furnished to inpatients of
the hospital by interns and residents of the hos-
pital during the second year preceding that cal-
endar year, adjusted for variations in case-mix,
disproportionate share status, and teaching sta-
tus among hospitals (as determined by the Sec-
retary under paragraph (3)).
The Secretary shall determine the equivalent relative
value unit per discharge for interns and residents
based on the best available data and may make such
adjustment in the aggregate.
(3) ADJUSTMENT
FOR
TEACHING
AND
DIS-
PROPORTIONATE SHARE HOSPITALS.—The Secretary
shall adjust the allowable per discharge relative val-
ues otherwise determined under this subsection to
take into account the needs of teaching hospitals
and hospitals receiving additional payments under
subparagraphs (F) and (G) of section 1886(d)(5) of
the Social Security Act. The adjustment for teaching
487
status or disproportionate share shall not be less
than zero.
(c) DEFINITIONS.—For purposes of this section:
(1) HOSPITAL.—The term ‘‘hospital’’ means a
subsection (d) hospital as defined in section 1886(d)
of the Social Security Act (42 U.S.C. 1395ww(d)).
(2) MEDICAL STAFF.—An individual furnishing
a physician’s service is considered to be on the medi-
cal staff of a hospital—
(A) if (in accordance with requirements for
hospitals established by the Joint Commission
on Accreditation of Health Organizations)—
(i) the individual is subject to bylaws,
rules, and regulations established by the
hospital to provide a framework for the
self-governance of medical staff activities,
(ii) subject to the bylaws, rules, and
regulations, the individual has clinical
privileges granted by the hospital’s govern-
ing body, and
(iii) under the clinical privileges, the
individual may provide physicians’’ services
independently within the scope of the indi-
vidual’s clinical privileges, or
488
(B) if the physician provides at least one
service to an individual entitled to benefits
under this title in that hospital.
(3) PHYSICIANS’ SERVICES.—The term ‘‘physi-
cians’’ services’’ means the services described in sec-
tion 1848(j)(3) of the Social Security Act (42 U.S.C.
1395w–4(j)(3)).
(4) RURAL
AREA; URBAN
AREA.—The terms
‘‘rural area’’ and ‘‘urban area’’ have the meaning
given those terms under section 1886(d)(2)(D) of
such Act (42 U.S.C. 1395ww(d)(2)(D)).
(5) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(6) TEACHING HOSPITAL.—The term ‘‘teaching
hospital’’ means a hospital which has a teaching pro-
gram approved as specified in section 1861(b)(6) of
the Social Security Act (42 U.S.C. 1395x(b)(6)).
SEC. 4607. NO X-RAY REQUIRED FOR CHIROPRACTIC SERV-
ICES.
(a) IN GENERAL.—Section 1861(r)(5) (42 U.S.C.
1395x(r)(5)) is amended by striking ‘‘demonstrated by X-
ray to exist’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) applies to services furnished on or after
January 1, 1998.
489
(c) UTILIZATION GUIDELINES.—The Secretary of
Health and Human Services shall develop and implement
utilization guidelines relating to the coverage of chiroprac-
tic services under part B of title XVIII of the Social Secu-
rity Act in cases in which a subluxation has not been dem-
onstrated by X-ray to exist.
SEC. 4608. TEMPORARY COVERAGE RESTORATION FOR
PORTABLE 
ELECTROCARDIOGRAM 
TRANS-
PORTATION.
(a) IN GENERAL.—Effective for electrocardiogram
tests performed during 1998, the Secretary of Health and
Human Services shall restore separate payment, under
part B of title XVIII of the Social Security Act, for the
transportation of electrocardiogram equipment (HCPCS
code R0076) based upon the status code and relative value
units established for such service as of December 31,
1996.
(b) REPORT.—By not later than July 1, 1998, the
Comptroller General shall submit to Congress a report on
the appropriateness of continuing such payment.
CHAPTER 2—OTHER PAYMENT
PROVISIONS
SEC. 4611. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.
(a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS
OF DURABLE MEDICAL EQUIPMENT.—
490
(1) 
FREEZE
IN
UPDATE
FOR
COVERED
ITEMS.—Section 
1834(a)(14) 
(42 
U.S.C.
1395m(a)(14)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (A);
(B) in subparagraph (B)—
(i) by striking ‘‘a subsequent year’’
and inserting ‘‘1993, 1994, 1995, 1996,
and 1997’’, and
(ii) by striking the period at the end
and inserting a semicolon; and
(C) by adding at the end the following:
‘‘(C) for each of the years 1998 through
2002, 0 percentage points; and
‘‘(D) for a subsequent year, the percentage
increase in the consumer price index for all
urban consumers (U.S. urban average) for the
12-month period ending with June of the pre-
vious year.’’.
(2) UPDATE FOR ORTHOTICS AND PROSTHET-
ICS.—Section 
1834(h)(4)(A) 
(42 
U.S.C.
1395m(h)(4)(A)) is amended—
(A) by striking ‘‘, and’’ at the end of
clause (iii) and inserting a semicolon;
491
(B) in clause (iv), by striking ‘‘a subse-
quent year’’ and inserting ‘‘1996 and 1997’’,
and
(C) by adding at the end the following new
clauses:
‘‘(v) for each of the years 1998
through 2002, 1 percent, and
‘‘(vi) for a subsequent year, the per-
centage increase in the consumer price
index for all urban consumers (United
States city average) for the 12-month pe-
riod ending with June of the previous
year;’’.
(c) PAYMENT FREEZE FOR PARENTERAL AND EN-
TERAL NUTRIENTS, SUPPLIES, AND EQUIPMENT.—In de-
termining the amount of payment under part B of title
XVIII of the Social Security Act with respect to parenteral
and enteral nutrients, supplies, and equipment during
each of the years 1998 through 2002, the charges deter-
mined to be reasonable with respect to such nutrients,
supplies, and equipment may not exceed the charges deter-
mined to be reasonable with respect to such nutrients,
supplies, and equipment during 1995.
492
SEC. 4612. OXYGEN AND OXYGEN EQUIPMENT.
Section 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C))
is amended—
(1) by striking ‘‘and’’ at the end of clause (iii);
(2) in clause (iv)—
(A) by striking ‘‘a subsequent year’’ and
inserting ‘‘1993, 1994, 1995, 1996, and 1997’’,
and
(B) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new
clauses:
‘‘(v) in each of the years 1998
through 2002, is 80 percent of the national
limited monthly payment rate computed
under subparagraph (B) for the item for
the year; and
‘‘(vi) in a subsequent year, is the na-
tional limited monthly payment rate com-
puted under subparagraph (B) for the item
for the year.’’.
SEC. 4613. REDUCTION IN UPDATES TO PAYMENT AMOUNTS
FOR CLINICAL DIAGNOSTIC LABORATORY
TESTS.
(a) 
CHANGE
IN
UPDATE.—Section
1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV))
493
is amended by inserting ‘‘and 1998 through 2002’’ after
‘‘1995’’.
(b) LOWERING CAP ON PAYMENT AMOUNTS.—Sec-
tion 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amend-
ed—
(1) in clause (vi), by striking ‘‘and’’ at the end;
(2) in clause (vii)—
(A) by inserting ‘‘and before January 1,
1998,’’ after ‘‘1995,’’, and
(B) by striking the period at the end and
inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(viii) after December 31, 1997, is equal to 72
percent of such median.’’.
SEC. 4614. SIMPLIFICATION IN ADMINISTRATION OF LAB-
ORATORY TESTS.
(a) SELECTION OF REGIONAL CARRIERS.—
(1) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the
‘‘Secretary’’) shall—
(A) divide the United States into no more
than 5 regions, and
(B) designate a single carrier for each such
region,
494
for the purpose of payment of claims under part B
of title XVIII of the Social Security Act with respect
to clinical diagnostic laboratory tests (other than for
tests performed in physician offices) furnished on or
after such date (not later than January 1, 1999) as
the Secretary specifies.
(2) DESIGNATION.—In designating such car-
riers, the Secretary shall consider, among other cri-
teria—
(A) a carrier’s timeliness, quality, and ex-
perience in claims processing, and
(B) a carrier’s capacity to conduct elec-
tronic data interchange with laboratories and
data matches with other carriers.
(3) SINGLE DATA RESOURCE.—The Secretary
may select one of the designated carriers to serve as
a central statistical resource for all claims informa-
tion relating to such clinical diagnostic laboratory
tests handled by all the designated carriers under
such part.
(4) ALLOCATION OF CLAIMS.—The allocation of
claims for clinical diagnostic laboratory tests to par-
ticular designated carriers shall be based on whether
a carrier serves the geographic area where the lab-
495
oratory specimen was collected or other method
specified by the Secretary.
(b) ADOPTION OF UNIFORM POLICIES FOR CLINICAL
LABORATORY TESTS.—
(1) IN GENERAL.—Not later than July 1, 1998,
the Secretary shall first adopt, consistent with para-
graph (2), uniform coverage, administration, and
payment policies for clinical diagnostic laboratory
tests under part B of title XVIII of the Social Secu-
rity Act, using a negotiated rulemaking process
under subchapter III of chapter 5 of title 5, United
States Code.
(2) CONSIDERATIONS IN DESIGN OF UNIFORM
POLICIES.—The policies under paragraph (1) shall
be designed to promote uniformity and program in-
tegrity and reduce administrative burdens with re-
spect to clinical diagnostic laboratory tests payable
under such part in connection with the following:
(A) Beneficiary information required to be
submitted with each claim or order for labora-
tory tests.
(B) Physicians’ obligations regarding docu-
mentation requirements and recordkeeping.
(C) Procedures for filing claims and for
providing remittances by electronic media.
496
(D) The documentation of medical neces-
sity.
(E) Limitation on frequency of coverage
for the same tests performed on the same indi-
vidual.
(3) CHANGES
IN
CARRIER
REQUIREMENTS
PENDING ADOPTION OF UNIFORM POLICY.—During
the period that begins on the date of the enactment
of this Act and ends on the date the Secretary first
implements uniform policies pursuant to regulations
promulgated under this subsection, a carrier under
such part may implement changes relating to re-
quirements for the submission of a claim for clinical
diagnostic laboratory tests.
(4) USE
OF
INTERIM
REGIONAL
POLICIES.—
After the date the Secretary first implements such
uniform policies, the Secretary shall permit any car-
rier to develop and implement interim policies of the
type described in paragraph (1), in accordance with
guidelines established by the Secretary, in cases in
which a uniform national policy has not been estab-
lished under this subsection and there is a dem-
onstrated need for a policy to respond to aberrant
utilization or provision of unnecessary services. Ex-
cept as the Secretary specifically permits, no policy
497
shall be implemented under this paragraph for a pe-
riod of longer than 2 years.
(5) INTERIM
NATIONAL
POLICIES.—After the
date the Secretary first designates regional carriers
under subsection (a), the Secretary shall establish a
process under which designated carriers can collec-
tively develop and implement interim national stand-
ards of the type described in paragraph (1). No such
policy shall be implemented under this paragraph for
a period of longer than 2 years.
(6) BIENNIAL
REVIEW
PROCESS.—Not less
often than once every 2 years, the Secretary shall
solicit and review comments regarding changes in
the uniform policies established under this sub-
section. As part of such biennial review process, the
Secretary shall specifically review and consider
whether to incorporate or supersede interim, re-
gional, or national policies developed under para-
graph (4) or (5). Based upon such review, the Sec-
retary may provide for appropriate changes in the
uniform policies previously adopted under this sub-
section.
(7) NOTICE.— Before a carrier implements a
change or policy under paragraph (3), (4), or (5),
the carrier shall provide for advance notice to inter-
498
ested parties and a 45-day period in which such par-
ties may submit comments on the proposed change.
(c) INCLUSION OF LABORATORY REPRESENTATIVE
ON CARRIER ADVISORY COMMITTEES.—The Secretary
shall direct that any advisory committee established by
such a carrier, to advise with respect to coverage, adminis-
tration or payment policies under part B of title XVIII
of the Social Security Act, shall include an individual to
represent the interest and views of independent clinical
laboratories and such other laboratories as the Secretary
deems appropriate. Such individual shall be selected by
such committee from among nominations submitted by na-
tional and local organizations that represent independent
clinical laboratories.
SEC. 4615. UPDATES FOR AMBULATORY SURGICAL SERV-
ICES.
Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is
amended by striking all that follows ‘‘shall be increased’’
and inserting the following: ‘‘as follows:
‘‘(i) For fiscal years 1996 and 1997, by the
percentage increase in the consumer price index for
all urban consumers (U.S. city average) as estimated
by the Secretary for the 12-month period ending
with the midpoint of the year involved.
499
‘‘(ii) For each of fiscal years 1998 through
2002 by such percentage increase minus 2.0 percent-
age points.
‘‘(iii) For each succeeding fiscal year by such
percentage increase.’’.
SEC. 
4616. 
REIMBURSEMENT 
FOR 
DRUGS 
AND
BIOLOGICALS.
(a) IN GENERAL.—Section 1842 (42 U.S.C. 1395u)
is amended by inserting after subsection (n) the following
new subsection:
‘‘(o) If a physician’s, supplier’s, or any other person’s
bill or request for payment for services includes a charge
for a drug or biological for which payment may be made
under this part and the drug or biological is not paid on
a cost or prospective payment basis as otherwise provided
in this part, the amount payable for the drug or biological
is equal to 95 percent of the average wholesale price.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to drugs and biologicals furnished on
or after January 1, 1998.
SEC. 4617. COVERAGE OF ORAL ANTI-NAUSEA DRUGS
UNDER CHEMOTHERAPEUTIC REGIMEN.
(a) IN GENERAL.—Section 1861(s)(2) (42 U.S.C.
1395x(s)(2)), as amended, is amended by inserting after
subparagraph (S) the following new subparagraph:
500
‘‘(T) an oral drug (which is approved by the
Federal Food and Drug Administration) prescribed
for use as an acute anti-emetic used as part of an
anticancer chemotherapeutic regimen if the drug is
administered by a physician (or as prescribed by a
physician)—
‘‘(i) for use immediately before, at, or
within 48 hours after the time of the adminis-
tration of the anticancer chemotherapeutic
agent; and
‘‘(ii) as a full replacement for the anti-
emetic therapy which would otherwise be ad-
ministered intravenously.’’.
(b) PAYMENT LEVELS.—Section 1834 (42 U.S.C.
1395m), as amended by sections 4421(a)(2) and
4431(b)(2), is amended by adding at the end the following
new subsection:
‘‘(m) SPECIAL RULES
FOR PAYMENT
FOR ORAL
ANTI-NAUSEA DRUGS.—
‘‘(1) LIMITATION
ON
PER
DOSE
PAYMENT
BASIS.—Subject to paragraph (2), the per dose pay-
ment basis under this part for oral anti-nausea
drugs (as defined in paragraph (3)) administered
during a year shall not exceed 90 percent of the av-
erage per dose payment basis for the equivalent in-
501
travenous anti-emetics administered during the year,
as computed based on the payment basis applied
during 1996.
‘‘(2) AGGREGATE LIMIT.—The Secretary shall
make such adjustment in the coverage of, or pay-
ment basis for, oral anti-nausea drugs so that cov-
erage of such drugs under this part does not result
in any increase in aggregate payments per capita
under this part above the levels of such payments
per capita that would otherwise have been made if
there were no coverage for such drugs under this
part.
‘‘(3) ORAL
ANTI-NAUSEA
DRUGS
DEFINED.—
For purposes of this subsection, the term ‘oral anti-
nausea drugs’ means drugs for which coverage is
provided under this part pursuant to section
1861(s)(2)(P).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to items and services furnished on
or after January 1, 1998.
SEC. 4618. RURAL HEALTH CLINIC SERVICES.
(a) PER-VISIT PAYMENT LIMITS
FOR PROVIDER-
BASED CLINICS.—
(1) EXTENSION OF LIMIT.—
502
(A) IN GENERAL.—The matter in section
1833(f) (42 U.S.C. 1395l(f)) preceding para-
graph (1) is amended by striking ‘‘independent
rural health clinics’’ and inserting ‘‘rural health
clinics (other than such clinics in rural hospitals
with less than 50 beds)’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) applies to services
furnished after 1997.
(2) 
TECHNICAL
CLARIFICATION.—Section
1833(f)(1) (42 U.S.C. 1395l(f)(1)) is amended by
inserting ‘‘per visit’’ after ‘‘$46’’.
(b) ASSURANCE OF QUALITY SERVICES.—
(1) IN
GENERAL.—Subparagraph (I) of the
first sentence of section 1861(aa)(2) (42 U.S.C.
1395x(aa)(2)) is amended to read as follows:
‘‘(I) has a quality assessment and perform-
ance improvement program, and appropriate
procedures for review of utilization of clinic
services, as the Secretary may specify,’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on January 1,
1998.
(c) WAIVER OF CERTAIN STAFFING REQUIREMENTS
LIMITED TO CLINICS IN PROGRAM.—
503
(1) IN GENERAL.—Section 1861(aa)(7)(B) (42
U.S.C. 1395x(aa)(7)(B)) is amended by inserting
before the period at the end the following: ‘‘, or if
the facility has not yet been determined to meet the
requirements (including subparagraph (J) of the
first sentence of paragraph (2)) of a rural health
clinic’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies to waiver requests made
after 1997.
(d) REFINEMENT
OF SHORTAGE AREA REQUIRE-
MENTS.—
(1) DESIGNATION REVIEWED TRIENNIALLY.—
Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is
amended in the second sentence, in the matter in
clause (i) preceding subclause (I)—
(A) by striking ‘‘and that is designated’’
and inserting ‘‘and that, within the previous
three-year period, has been designated’’; and
(B) by striking ‘‘or that is designated’’ and
inserting ‘‘or designated’’.
(2) AREA MUST HAVE SHORTAGE OF HEALTH
CARE
PRACTITIONERS.—Section 1861(aa)(2) (42
U.S.C. 1395x(aa)(2)), as amended by paragraph (1),
504
is further amended in the second sentence, in the
matter in clause (i) preceding subclause (I)—
(A) by striking the comma after ‘‘personal
health services’’; and
(B) by inserting ‘‘and in which there are
insufficient numbers of needed health care prac-
titioners (as determined by the Secretary),’’
after ‘‘Bureau of the Census)’’.
(3) PREVIOUSLY QUALIFYING CLINICS GRAND-
FATHERED ONLY TO PREVENT SHORTAGE.—Section
1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended in
the third sentence by inserting before the period ‘‘if
it is determined, in accordance with criteria estab-
lished by the Secretary in regulations, to be essential
to the delivery of primary care services that would
otherwise be unavailable in the geographic area
served by the clinic’’.
(4) EFFECTIVE DATES; IMPLEMENTING REGU-
LATIONS.—
(A) IN
GENERAL.—Except as otherwise
provided, the amendments made by the preced-
ing paragraphs take effect on January 1 of the
first calendar year beginning at least one month
after enactment of this Act.
505
(B) CURRENT RURAL HEALTH CLINICS.—
The amendments made by the preceding para-
graphs take effect, with respect to entities that
are rural health clinics under title XVIII of the
Social Security Act on the date of enactment of
this Act, on January 1 of the second calendar
year following the calendar year specified in
subparagraph (A).
(C) GRANDFATHERED CLINICS.—
(i) IN
GENERAL.—The amendment
made by paragraph (3) shall take effect on
the effective date of regulations issued by
the Secretary under clause (ii).
(ii) REGULATIONS.—The Secretary
shall issue final regulations implementing
paragraph (3) that shall take effect no
later than January 1 of the third calendar
year beginning at least one month after en-
actment of this Act.
SEC. 4619. INCREASED MEDICARE REIMBURSEMENT FOR
NURSE 
PRACTITIONERS 
AND 
CLINICAL
NURSE SPECIALISTS.
(a) REMOVAL OF RESTRICTIONS ON SETTINGS.—
506
(1) IN
GENERAL.—Clause (ii) of section
1861(s)(2)(K) 
(42 
U.S.C. 
1395x(s)(2)(K)) 
is
amended to read as follows:
‘‘(ii) services which would be physicians’ serv-
ices if furnished by a physician (as defined in sub-
section (r)(1)) and which are performed by a nurse
practitioner or clinical nurse specialist (as defined in
subsection (aa)(5)) working in collaboration (as de-
fined in subsection (aa)(6)) with a physician (as de-
fined in subsection (r)(1)) which the nurse practi-
tioner or clinical nurse specialist is legally authorized
to perform by the State in which the services are
performed, and such services and supplies furnished
as an incident to such services as would be covered
under subparagraph (A) if furnished incident to a
physician’s professional service, but only if no facil-
ity or other provider charges or is paid any amounts
with respect to the furnishing of such services;’’.
(2) CONFORMING AMENDMENTS.—(A) Section
1861(s)(2)(K) 
of 
such 
Act 
(42 
U.S.C.
1395x(s)(2)(K)) is further amended—
(i) in clause (i), by inserting ‘‘and such
services and supplies furnished as incident to
such services as would be covered under sub-
paragraph (A) if furnished incident to a physi-
507
cian’s professional service; and’’ after ‘‘are per-
formed,’’; and
(ii) by striking clauses (iii) and (iv).
(B) 
Section 
1861(b)(4) 
(42 
U.S.C.
1395x(b)(4)) is amended by striking ‘‘clauses (i) or
(iii) of subsection (s)(2)(K)’’ and inserting ‘‘sub-
section (s)(2)(K)’’.
(C) 
Section 
1862(a)(14) 
(42 
U.S.C.
1395y(a)(14)) is amended by striking ‘‘section
1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)’’ and insert-
ing ‘‘section 1861(s)(2)(K)’’.
(D) 
Section 
1866(a)(1)(H) 
(42 
U.S.C.
1395cc(a)(1)(H)) is amended by striking ‘‘section
1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)’’ and insert-
ing ‘‘section 1861(s)(2)(K)’’.
(E) 
Section 
1888(e)(2)(A)(ii) 
(42 
U.S.C.
1395yy(e)(2)(A)(ii)), as added by section 10401(a),
is amended by striking ‘‘through (iii)’’ and inserting
‘‘and (ii)’’.
(b) INCREASED PAYMENT.—
(1) FEE SCHEDULE AMOUNT.—Clause (O) of
section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is
amended to read as follows: ‘‘(O) with respect to
services described in section 1861(s)(2)(K)(ii) (relat-
ing to nurse practitioner or clinical nurse specialist
508
services), the amounts paid shall be equal to 80 per-
cent of (i) the lesser of the actual charge or 85 per-
cent of the fee schedule amount provided under sec-
tion 1848, or (ii) in the case of services as an assist-
ant at surgery, the lesser of the actual charge or 85
percent of the amount that would otherwise be rec-
ognized if performed by a physician who is serving
as an assistant at surgery; and’’.
(2) CONFORMING AMENDMENTS.—(A) Section
1833(r) (42 U.S.C. 1395l(r)) is amended—
(i) in paragraph (1), by striking ‘‘section
1861(s)(2)(K)(iii) (relating to nurse practi-
tioner or clinical nurse specialist services pro-
vided in a rural area)’’ and inserting ‘‘section
1861(s)(2)(K)(ii) (relating to nurse practitioner
or clinical nurse specialist services)’’;
(ii) by striking paragraph (2);
(iii) in paragraph (3), by striking ‘‘section
1861(s)(2)(K)(iii)’’ 
and 
inserting 
‘‘section
1861(s)(2)(K)(ii)’’; and
(iv) by redesignating paragraph (3) as
paragraph (2).
(B) 
Section 
1842(b)(12)(A) 
(42 
U.S.C.
1395u(b)(12)(A)) is amended, in the matter preced-
ing clause (i), by striking ‘‘clauses (i), (ii), or (iv) of
672
other arrangement or a related plan or arrange-
ment (nor covered on the basis of such present
or former employment);
does not exceed 15 percent of the total number of
individuals who are covered under the plan or ar-
rangement and who are present or former employees
who are or were covered under the plan or arrange-
ment pursuant to a collective bargaining agreement
with a participating employer. The requirements of
the preceding provisions of this clause shall be treat-
ed as satisfied if, as of the end of the preceding plan
year, such covered individuals are comprised solely
of individuals who were covered individuals under
the plan or other arrangement as of the date of the
enactment of the Expansion of Portability and
Health Insurance Coverage Act of 1997 and, as of
the end of the preceding plan year, the number of
such covered individuals does not exceed 25 percent
of the total number of present and former employees
enrolled under the plan or other arrangement.
‘‘(iii) The employee organization or other entity
sponsoring the plan or other arrangement certifies
to the Secretary each year, in a form and manner
which shall be prescribed in regulations of the Sec-