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applied with respect to items and services furnished
on or after the date specified in paragraph (1).
SEC. 5212. PROVISION OF CERTAIN IDENTIFICATION NUM-
BERS.
(a) REQUIREMENTS TO DISCLOSE EMPLOYER IDENTI-
FICATION NUMBERS (EINS) AND SOCIAL SECURITY AC-
COUNT NUMBERS (SSNS).—Section 1124(a)(1) (42 U.S.C.
1320a–3(a)(1)) is amended by inserting before the period
at the end the following: ‘‘and supply the Secretary with
the both the employer identification number (assigned pur-
suant to section 6109 of the Internal Revenue Code of 1986)
and social security account number (assigned under section
205(c)(2)(B)) of the disclosing entity, each person with an
ownership or control interest (as defined in subsection
(a)(3)), and any subcontractor in which the entity directly
or indirectly has a 5 percent or more ownership interest’’.
(b) OTHER MEDICARE PROVIDERS.—Section 1124A
(42 U.S.C. 1320a–3a) is amended—
(1) in subsection (a)—
(A) in paragraph (1), by striking ‘‘and’’ at
the end;
(B) in paragraph (2), by striking the period
at the end and inserting ‘‘; and’’; and
(C) by adding at the end the following:
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‘‘(3) including the employer identification num-
ber (assigned pursuant to section 6109 of the Internal
Revenue Code of 1986) and social security account
number (assigned under section 205(c)(2)(B)) of the
disclosing part B provider and any person, managing
employee, or other entity identified or described under
paragraph (1) or (2).’’; and
(2) in subsection (c)(1), by inserting ‘‘(or, for
purposes of subsection (a)(3), any entity receiving
payment)’’ after ‘‘on an assignment-related basis’’.
(c) VERIFICATION BY SOCIAL SECURITY ADMINISTRA-
TION (SSA).—Section 1124A (42 U.S.C. 1320a–3a), as
amended by subsection (b), is amended—
(1) by redesignating subsection (c) as subsection
(d); and
(2) by inserting after subsection (b) the follow-
ing:
‘‘(c) VERIFICATION.—
‘‘(1) TRANSMITTAL
BY
HHS.—The Secretary
shall transmit—
‘‘(A) to the Commissioner of Social Security
information concerning each social security ac-
count 
number 
(assigned 
under 
section
205(c)(2)(B)), and
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‘‘(B) to the Secretary of the Treasury infor-
mation concerning each employer identification
number (assigned pursuant to section 6109 of the
Internal Revenue Code of 1986),
supplied to the Secretary pursuant to subsection
(a)(3) or section 1124(c) to the extent necessary for
verification of such information in accordance with
paragraph (2).
‘‘(2) VERIFICATION.—The Commissioner of So-
cial Security and the Secretary of the Treasury shall
verify the accuracy of, or correct, the information
supplied by the Secretary to such official pursuant to
paragraph (1), and shall report such verifications or
corrections to the Secretary.
‘‘(3) FEES
FOR
VERIFICATION.—The Secretary
shall reimburse the Commissioner and Secretary of
the Treasury, at a rate negotiated between the Sec-
retary and such official, for the costs incurred by such
official in performing the verification and correction
services described in this subsection.’’.
(d) REPORT.—The Secretary of Health and Human
Services shall submit to Congress a report on steps the Sec-
retary has taken to assure the confidentiality of social secu-
rity account numbers that will be provided to the Secretary
under the amendments made by this section.
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(e) EFFECTIVE DATES.—
(1) DISCLOSURE REQUIREMENTS.—The amend-
ment made by subsection (a) shall apply to the appli-
cation of conditions of participation, and entering
into and renewal of contracts and agreements, occur-
ring more than 90 days after the date of submission
of the report under subsection (d).
(2) OTHER PROVIDERS.—The amendments made
by subsection (b) shall apply to payment for items
and services furnished more than 90 days after the
date of submission of such report.
SEC. 5213. APPLICATION OF CERTAIN PROVISIONS OF THE
BANKRUPTCY CODE.
(a) RESTRICTED
APPLICABILITY
OF
BANKRUPTCY
STAY, DISCHARGE, AND PREFERENTIAL TRANSFER PROVI-
SIONS TO MEDICARE AND MEDICAID DEBTS.—Part A of
title XI (42 U.S.C. 1301 et seq.) is amended by inserting
after section 1143 the following:
‘‘APPLICATION OF CERTAIN PROVISIONS OF THE
BANKRUPTCY CODE
‘‘SEC. 1144. (a) MEDICARE AND MEDICAID-RELATED
ACTIONS NOT STAYED BY BANKRUPTCY PROCEEDINGS.—
The commencement or continuation of any action against
a debtor under this title or title XVIII or XIX (other than
an action with respect to health care services for the debtor
under title XVIII), including any action or proceeding to
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exclude or suspend the debtor from program participation,
assess civil money penalties, recoup or set off overpayments,
or deny or suspend payment of claims shall not be subject
to the provisions of section 362(a) of title 11, United States
Code.
‘‘(b) CERTAIN MEDICARE- AND MEDICAID-RELATED
DEBT NOT DISCHARGEABLE
IN BANKRUPTCY.—A debt
owed to the United States or to a State for an overpayment
under title XVIII or XIX (other than an overpayment for
health care services for the debtor under title XVIII) result-
ing from the fraudulent actions of the debtor, or for a pen-
alty, fine, or assessment under this title or title XVIII or
XIX, shall not be dischargeable under any provision of title
11, United States Code.
‘‘(c) REPAYMENT OF CERTAIN DEBTS CONSIDERED
FINAL.—Payments made to repay a debt to the United
States or to a State with respect to items or services pro-
vided, or claims for payment made, under title XVIII or
XIX (including repayment of an overpayment (other than
an overpayment for health care services for the debtor under
title XVIII) resulting from the fraudulent actions of the
debtor), or to pay a penalty, fine, or assessment under this
title or title XVIII or XIX, shall be considered final and
not preferential transfers under section 547 of title 11,
United States Code.’’.
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(b) MEDICARE RULES APPLICABLE TO BANKRUPTCY
PROCEEDINGS.—Title XVIII (42 U.S.C. 1395 et seq.) is
amended by adding at the end the following:
‘‘APPLICATION OF PROVISIONS OF THE BANKRUPTCY CODE
‘‘SEC. 1894. (a) USE OF MEDICARE STANDARDS AND
PROCEDURES.—Notwithstanding any provision of title 11,
United States Code, or any other provision of law, in the
case of claims by a debtor in bankruptcy for payment under
this title, the determination of whether the claim is allow-
able and of the amount payable, shall be made in accord-
ance with the provisions of this title and title XI and imple-
menting regulations.
‘‘(b) NOTICE TO CREDITOR OF BANKRUPTCY PETI-
TIONER.—In the case of a debt owed to the United States
with respect to items or services provided, or claims for pay-
ment made, under this title (including a debt arising from
an overpayment or a penalty, fine, or assessment under title
XI or this title), the notices to the creditor of bankruptcy
petitions, proceedings, and relief required under title 11,
United States Code (including under section 342 of that
title and section 2002(j) of the Federal Rules of Bankruptcy
Procedure), shall be given to the Secretary. Provision of
such notice to a fiscal agent of the Secretary shall not be
considered to satisfy this requirement.
‘‘(c) TURNOVER OF PROPERTY TO THE BANKRUPTCY
ESTATE.—For purposes of section 542(b) of title 11, United
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States Code, a claim for payment under this title shall not
be considered to be a matured debt payable to the estate
of a debtor until such claim has been allowed by the Sec-
retary in accordance with procedures under this title.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to bankruptcy petitions filed after the
date of the enactment of this Act.
SEC. 5214. REPLACEMENT OF REASONABLE CHARGE METH-
ODOLOGY BY FEE SCHEDULES.
(a) IN GENERAL.—Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)) is amended in the matter preceding subpara-
graph (A) by striking ‘‘the reasonable charges for the serv-
ices’’ and inserting ‘‘the lesser of the actual charges for the
services and the amounts determined by the applicable fee
schedules developed by the Secretary for the particular serv-
ices’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is
amended—
(A) in subparagraph (A), by striking ‘‘rea-
sonable charges for’’ and inserting ‘‘payment
bases otherwise applicable to’’;
(B) in subparagraph (B), by striking ‘‘rea-
sonable charges’’ and inserting ‘‘fee schedule
amounts’’; and
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(C) by inserting after subparagraph (F) the
following: ‘‘(G) with respect to services described
in clause (i) or (ii) of section 1861(s)(2)(K) (re-
lating to physician assistants and nurse practi-
tioners), the amounts paid shall be 80 percent of
the lesser of the actual charge for the services and
the applicable amount determined under sub-
clause (I) or (II) of section 1842(b)(12)(A)(ii),’’.
(2) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is
amended—
(A) in subparagraph (B), in the matter pre-
ceding clause (i), by striking ‘‘(C), (D),’’ and in-
serting ‘‘(D)’’; and
(B) by striking subparagraph (C).
(3) Section 1833(l) (42 U.S.C. 1395l(l)) is
amended—
(A) in paragraph (3)—
(i) by striking subparagraph (B); and
(ii) by striking ‘‘(3)(A)’’ and inserting
‘‘(3)’’; and
(B) by striking paragraph (6).
(4) 
Section 
1834(a)(10)(B) 
(42 
U.S.C.
1395m(a)(10)(B)) is amended by striking ‘‘para-
graphs (8) and (9)’’ and all that follows through ‘‘sec-
tion 1848(i)(3).’’ and inserting ‘‘section 1842(b)(8) to
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covered items and suppliers of such items and pay-
ments under this subsection as such provisions would
otherwise apply to physicians’ services and physi-
cians.’’.
(5) 
Section 
1834(g)(1)(A)(ii) 
(42 
U.S.C.
1395m(g)(1)(A)(ii)) is amended in the heading by
striking 
‘‘REASONABLE
CHARGES
FOR
PROFES-
SIONAL’’ and inserting ‘‘PROFESSIONAL’’.
(6) Section 1842(a) (42 U.S.C. 1395u(a)) is
amended—
(A) in the matter preceding paragraph (1),
by striking ‘‘reasonable charge’’ and inserting
‘‘fee schedule’’; and
(B) in paragraph (1)(A), by striking ‘‘rea-
sonable charge’’ and inserting ‘‘other’’.
(7) Section 1842(b)(3) (42 U.S.C. 1395u(b)(3))
is amended—
(A) in subparagraph (B)—
(i) in the matter preceding clause (i),
by striking ‘‘where payment’’ and all that
follows through ‘‘made—’’ and inserting
‘‘where payment under this part for a serv-
ice is on a basis other than a cost basis,
such payment will (except as otherwise pro-
vided in section 1870(f)) be made—’’; and
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(ii) by striking clause (ii)(I) and in-
serting the following: ‘‘(I) the amount deter-
mined by the applicable payment basis
under this part is the full charge for the
service,’’; and
(B) by striking the second, third, fourth,
fifth, sixth, eighth, and ninth sentences.
(8) Section 1842(b)(4) (42 U.S.C. 1395u(b)(4))
is amended to read as follows:
‘‘(4) In the case of an enteral or parenteral pump that
is furnished on a rental basis during a period of medical
need—
‘‘(A) monthly rental payments shall not be made
under this part for more than 15 months during that
period, and
‘‘(B) after monthly rental payments have been
made for 15 months during that period, payment
under this part shall be made for maintenance and
servicing of the pump in amounts that the Secretary
determines to be reasonable and necessary to ensure
the proper operation of the pump.’’.
(9) Section 6112(b) (42 U.S.C. 1395m note; Pub-
lic Law 101–239) of OBRA—1989 is repealed.
(10) Section 1842(b)(7) (42 U.S.C. 1395u(b)(7))
is amended—
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(A) in subparagraph (D)(i), in the matter
preceding subclause (I), by striking ‘‘, to the ex-
tent that such payment is otherwise allowed
under this paragraph,’’;
(B) in subparagraph (D)(ii), by striking
‘‘subparagraph’’ and inserting ‘‘paragraph’’;
(C) by striking ‘‘(7)(A) In the case of’’ and
all that follows through subparagraph (C);
(D) by striking ‘‘(D)(i)’’ and inserting
‘‘(7)(A)’’;
(E) by redesignating clauses (ii) and (iii)
as subparagraphs (B) and (C), respectively; and
(F) by redesignating subclauses (I), (II),
and (III) of subparagraph (A) (as redesignated
by subparagraph (D) of this paragraph) as
clauses (i), (ii), and (iii), respectively.
(11) Section 1842(b)(9) (42 U.S.C. 1395u(b)(9))
is repealed.
(12) 
Section 
1842(b)(10) 
(42 
U.S.C.
1395u(b)(10)) is repealed.
(13) 
Section 
1842(b)(11) 
(42 
U.S.C.
1395u(b)(11)) is amended—
(A) by striking subparagraphs (B) through
(D);
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(B) by striking ‘‘(11)(A)’’ and inserting
‘‘(11)’’; and
(C) by redesignating clauses (i) and (ii) as
subparagraphs (A) and (B), respectively.
(14) Section 1842(b)(12)(A)(ii) (42 U.S.C.
1395u(b)(12)(A)(ii)) is amended—
(A) in the matter preceding subclause (I),
by striking ‘‘prevailing charges determined
under paragraph (3)’’ and inserting ‘‘the
amounts 
determined 
under 
section
1833(a)(1)(G)’’; and
(B) in subclause (II), by striking ‘‘prevail-
ing charge rate’’ and all that follows up to the
period and inserting ‘‘fee schedule amount speci-
fied in section 1848 for such services performed
by physicians’’.
(15) Paragraphs (14) through (17) of section
1842(b) (42 U.S.C. 1395u(b)) are repealed.
(16) Section 1842(b) (42 U.S.C. 1395u(b)) is
amended—
(A) in paragraph (18)(A), by striking ‘‘rea-
sonable charge or’’; and
(B) by redesignating paragraph (18) as
paragraph (14).
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(17) Section 1842(j)(1) (42 U.S.C. 1395u(j)) is
amended to read as follows:
‘‘(j)(1) See subsections (k), (l), (m), (n), and (p) as
to the cases in which sanctions may be applied under para-
graph (2).’’.
(18) Section 1842(j)(4) (42 U.S.C. 1395u(j)(4))
is amended by striking ‘‘under paragraph (1)’’.
(19) 
Section 
1842(n)(1)(A) 
(42 
U.S.C.
1395u(n)(1)(A)) is amended by striking ‘‘reasonable
charge (or other applicable limit)’’ and inserting
‘‘other applicable limit’’.
(20) Section 1842(q) (42 U.S.C. 1395u(q)) is
amended—
(A) by striking paragraph (1)(B); and
(B) by striking ‘‘(q)(1)(A)’’ and inserting
‘‘(q)(1)’’.
(21) Section 1845(b)(1) (42 U.S.C. 1395w–
1(b)(1)) is amended by striking ‘‘adjustments to the
reasonable charge levels for physicians’ services recog-
nized under section 1842(b) and’’.
(22) Section 1848(i)(3) (42 U.S.C. 1395w–
4(i)(3)) is repealed.
(23) 
Section 
1866(a)(2)(A)(ii) 
(42 
U.S.C.
1395cc(a)(2)(A)(ii)) is amended by striking ‘‘reason-
able charges’’ and all that follows through ‘‘provider)’’
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and inserting ‘‘amount customarily charged for the
items and services by the provider’’.
(24) 
Section 
1881(b)(3)(A) 
(42 
U.S.C.
1395rr(b)(3)(A)) is amended by striking ‘‘a reason-
able charge’’ and all that follows through ‘‘section
1848)’’ and inserting ‘‘the basis described in section
1848’’.
(25) Section 9340 of OBRA—1986 (42 U.S.C.
1395u note; Public Law 99-509) is repealed.
(c) EFFECTIVE DATES.—The amendments made by
this section to the extent such amendments substitute fee
schedules for reasonable charges, shall apply to particular
services as of the date specified by the Secretary of Health
and Human Services.
(d) INITIAL BUDGET NEUTRALITY.—The Secretary, in
developing a fee schedule for particular services (under the
amendments made by this section), shall set amounts for
the first year period to which the fee schedule applies at
a level so that the total payments under title XVIII of the
Social Security Act (42 U.S.C. 1395 et seq.) for those serv-
ices for that year period shall be approximately equal to
the estimated total payments if those amendments had not
been made.
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SEC. 5215. APPLICATION OF INHERENT REASONABLENESS
TO ALL PART B SERVICES OTHER THAN PHY-
SICIANS’ SERVICES.
(a) IN GENERAL.—Section 1842(b)(8) (42 U.S.C.
1395u(b)(8)) is amended to read as follows:
‘‘(8) The Secretary shall describe by regulation the fac-
tors to be used in determining the cases (of particular items
or services) in which the application of this part (other than
to physicians’ services paid under section 1848) results in
the determination of an amount that, because of its being
grossly excessive or grossly deficient, is not inherently rea-
sonable, and provide in those cases for the factors to be con-
sidered in establishing an amount that is realistic and equi-
table.’’.
(b) CONFORMING AMENDMENT.—Section 1834(a)(10)
(42 U.S.C. 1395m(a)(10)(B)) is amended—
(1) by striking subparagraph (B); and
(2) by redesignating subparagraph (C) as sub-
paragraph (B).
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 5216. REQUIREMENT TO FURNISH DIAGNOSTIC INFOR-
MATION.
(a) INCLUSION OF NON-PHYSICIAN PRACTITIONERS IN
REQUIREMENT TO PROVIDE DIAGNOSTIC CODES FOR PHY-
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SICIAN SERVICES.—Paragraphs (1) and (2) of section
1842(p) (42 U.S.C. 1395u(p)) are each amended by insert-
ing ‘‘or practitioner specified in subsection (b)(18)(C)’’
after ‘‘by a physician’’.
(b) REQUIREMENT TO PROVIDE DIAGNOSTIC INFOR-
MATION WHEN ORDERING CERTAIN ITEMS OR SERVICES
FURNISHED BY ANOTHER ENTITY.—Section 1842(p) (42
U.S.C. 1395u(p)), is amended by adding at the end the fol-
lowing:
‘‘(4) In the case of an item or service defined in para-
graph (3), (6), (8), or (9) of subsection 1861(s) ordered by
a physician or a practitioner specified in subsection
(b)(18)(C), but furnished by another entity, if the Secretary
(or fiscal agent of the Secretary) requires the entity furnish-
ing the item or service to provide diagnostic or other medi-
cal information for payment to be made to the entity, the
physician or practitioner shall provide that information to
the entity at the time that the item or service is ordered
by the physician or practitioner.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to items and services furnished on or
after January 1, 1998.
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SEC. 5217. REPORT BY GAO ON OPERATION OF FRAUD AND
ABUSE CONTROL PROGRAM.
Section 1817(k)(6) (42 U.S.C. 1395i(k)(6)) is amended
by inserting ‘‘June 1, 1998, and’’ after ‘‘Not later than’’.
SEC. 5218. COMPETITIVE BIDDING.
(a) GENERAL RULE.—Part B of title XVIII (42 U.S.C.
1395j et seq.) is amended by inserting after section 1846
the following:
‘‘SEC. 1847. COMPETITIVE ACQUISITION OF ITEMS AND
SERVICES.
‘‘(a) ESTABLISHMENT OF BIDDING AREAS.—
‘‘(1) IN GENERAL.—The Secretary shall establish
competitive acquisition areas for contract award pur-
poses for the furnishing under this part after 1997 of
the items and services described in subsection (c). The
Secretary may establish different competitive acquisi-
tion areas under this subsection for different classes of
items and services.
‘‘(2) CRITERIA FOR ESTABLISHMENT.—The com-
petitive acquisition areas established under para-
graph (1) shall be chosen based on the availability
and accessibility of entities able to furnish items and
services, and the probable savings to be realized by the
use of competitive bidding in the furnishing of items
and services in the area.
‘‘(b) AWARDING OF CONTRACTS IN AREAS.—
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‘‘(1) IN GENERAL.—The Secretary shall conduct
a competition among individuals and entities supply-
ing items and services described in subsection (c) for
each competitive acquisition area established under
subsection (a) for each class of items and services.
‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—
The Secretary may not award a contract to any en-
tity under the competition conducted pursuant to
paragraph (1) to furnish an item or service unless the
Secretary finds that the entity meets quality stand-
ards specified by the Secretary, and subject to para-
graph (3), that the total amounts to be paid under the
contract are expected to be less than the total amounts
that would otherwise be paid.
‘‘(3) LIMIT ON AMOUNT OF PAYMENT.—The Sec-
retary may not under a contract awarded under this
section provide for payment for an item or service in
an amount in excess of the applicable fee schedule
under this part for similar or related items or serv-
ices. The preceding sentence shall not apply if the
Secretary determines that an amount in excess of
such amount is warranted by reason of technological
innovation, quality improvement, or similar reasons,
except that the total amount paid under the contract
shall not exceed the limit under paragraph (2).
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‘‘(4) CONTENTS OF CONTRACT.—A contract en-
tered into with an entity under the competition con-
ducted pursuant to paragraph (1) is subject to terms
and conditions that the Secretary may specify.
‘‘(5) LIMIT ON NUMBER OF CONTRACTORS.—The
Secretary may limit the number of contractors in a
competitive acquisition area to the number needed to
meet projected demand for items and services covered
under the contracts.
‘‘(c) SERVICES DESCRIBED.—The items and services to
which this section applies are all items and services covered
under this part (except for physician services as defined by
1861(r)) that the Secretary may specify.’’.
(b) ITEMS AND SERVICES TO BE FURNISHED ONLY
THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)
(42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14),
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (15) the follow-
ing:
‘‘(16) where the expenses are for an item or serv-
ice furnished in a competitive acquisition area (as es-
tablished by the Secretary under section 1847(a)) by
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an entity other than an entity with which the Sec-
retary has entered into a contract under section
1847(b) for the furnishing of such an item or service
in that area, unless the Secretary finds that the ex-
penses were incurred in a case of urgent need, or in
other circumstances specified by the Secretary.’’.
(c) EFFECTIVE DATE.—The amendments made by sub-
sections (a) and (b) apply to items and services furnished
after December 31, 1997.
SEC. 5219. IMPROVING INFORMATION TO MEDICARE BENE-
FICIARIES.
(a) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—Section 1804 of
the Social Security Act (42 U.S.C. 1395b–2) is amended
by adding at the end the following new subsection:
‘‘(c)(1) The Secretary shall provide a statement which
explains the benefits provided under this title with respect
to each item or service for which payment may be made
under this title which is furnished to an individual, without
regard to whether or not a deductible or coinsurance may
be imposed against the individual with respect to such item
or service.
‘‘(2) Each explanation of benefits provided under
paragraph (1) shall include—
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‘‘(A) a statement which indicates that because er-
rors do occur and because medicare fraud, waste and
abuse is a significant problem, beneficiaries should
carefully check the statement for accuracy and report
any errors or questionable charges by calling the toll-
free phone number described in subparagraph (C);
‘‘(B) a statement of the beneficiary’s right to re-
quest an itemized bill (as provided in section
1128A(n)); and
‘‘(C) a toll-free telephone number for reporting
errors, questionable charges or other acts that would
constitute medicare fraud, waste, or abuse, which may
be the same number as described in subsection (b).’’.
(b) REQUEST FOR ITEMIZED BILL FOR MEDICARE
ITEMS AND SERVICES.—
(1) IN GENERAL.—Section 1128A of the Social
Security Act (42 U.S.C. 1320a–7a) is amended by
adding at the end the following new subsection:
‘‘(m) WRITTEN REQUEST FOR ITEMIZED BILL.—
‘‘(1) IN GENERAL.—A beneficiary may submit a
written request for an itemized bill for medical or
other items or services provided to such beneficiary by
any person (including an organization, agency, or
other entity) that receives payment under title XVIII
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for providing such items or services to such bene-
ficiary.
‘‘(2) 30-DAY PERIOD TO RECEIVE BILL.—
‘‘(A) IN GENERAL.—Not later than 30 days
after the date on which a request under para-
graph (1) has been received, a person described
in such paragraph shall furnish an itemized bill
describing each medical or other item or service
provided to the beneficiary requesting the item-
ized bill.
‘‘(B) PENALTY.—Whoever knowingly fails to
furnish an itemized bill in accordance with sub-
paragraph (A) shall be subject to a civil fine of
not more than $100 for each such failure.
‘‘(3) REVIEW OF ITEMIZED BILL.—
‘‘(A) IN GENERAL.—Not later than 90 days
after the receipt of an itemized bill furnished
under paragraph (1), a beneficiary may submit
a written request for a review of the itemized bill
to the appropriate fiscal intermediary or carrier
with a contract under section 1816 or 1842.
‘‘(B) SPECIFIC
ALLEGATIONS.—A request
for a review of the itemized bill shall identify—
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‘‘(i) specific medical or other items or
services that the beneficiary believes were
not provided as claimed, or
‘‘(ii) any other billing irregularity (in-
cluding duplicate billing).
‘‘(4) FINDINGS
OF
FISCAL
INTERMEDIARY
OR
CARRIER.—Each fiscal intermediary or carrier with
a contract under section 1816 or 1842 shall, with re-
spect to each written request submitted to the fiscal
intermediary or carrier under paragraph (3), deter-
mine whether the itemized bill identifies specific med-
ical or other items or services that were not provided
as claimed or any other billing irregularity (includ-
ing duplicate billing) that has resulted in unnecessary
payments under the title XVIII.
‘‘(5) RECOVERY
OF
AMOUNTS.—The Secretary
shall require fiscal intermediaries and carriers to take
all appropriate measures to recover amounts unneces-
sarily paid under title XVIII with respect to a bill
described in paragraph (4).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to medical or other items
or services provided on or after January 1, 1998.
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SEC. 5220. PROHIBITING UNNECESSARY AND WASTEFUL
MEDICARE PAYMENTS FOR CERTAIN ITEMS.
Section 1861(v) of the Social Security Act is amended
by adding at the end the following new paragraph:
‘‘(8) ITEMS
UNRELATED
TO
PATIENT
CARE.—
Reasonable costs do not include costs for the follow-
ing—
‘‘(i) entertainment;
‘‘(ii) gifts or donations;
‘‘(iii) costs for fines and penalties resulting
from violations of Federal, State, or local laws;
and
‘‘(iv) education expenses for spouses or other
dependents of providers of services, their employ-
ees or contractors.’’.
SEC. 5221. REDUCING EXCESSIVE BILLINGS AND UTILIZA-
TION FOR CERTAIN ITEMS.
Section 1834(a)(15) of the Social Security Act (42
U.S.C. 1395m(a)(15)) is amended by striking ‘‘Secretary
may’’ both places it appears and inserting ‘‘Secretary
shall’’.
SEC. 5222. IMPROVING INFORMATION TO MEDICARE BENE-
FICIARIES.
(a) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—Section 1804 of
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the Social Security Act (42 U.S.C. 1395b–2) is amended
by adding at the end the following new subsection:
‘‘(c)(1) The Secretary shall provide a statement which
explains the benefits provided under this title with respect
to each item or service for which payment may be made
under this title which is furnished to an individual, without
regard to whether or not a deductible or coinsurance may
be imposed against the individual with respect to such item
or service.
‘‘(2) Each explanation of benefits provided under
paragraph (1) shall include—
‘‘(A) a statement which indicates that because er-
rors do occur and because medicare fraud, waste and
abuse is a significant problem, beneficiaries should
carefully check the statement for accuracy and report
any errors or questionable charges by calling the toll-
free phone number described in subparagraph (C);
‘‘(B) a statement of the beneficiary’s right to re-
quest an itemized bill (as provided in section
1128A(n)); and
‘‘(C) a toll-free telephone number for reporting
errors, questionable charges or other acts that would
constitute medicare fraud, waste, or abuse, which may
be the same number as described in subsection (b).’’.
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(b) REQUEST FOR ITEMIZED BILL FOR MEDICARE
ITEMS AND SERVICES.—
(1) IN GENERAL.—Section 1128A of the Social
Security Act (42 U.S.C. 1320a–7a) is amended by
adding at the end the following new subsection:
‘‘(m) WRITTEN REQUEST FOR ITEMIZED BILL.—
‘‘(1) IN GENERAL.—A beneficiary may submit a
written request for an itemized bill for medical or
other items or services provided to such beneficiary by
any person (including an organization, agency, or
other entity) that receives payment under title XVIII
for providing such items or services to such bene-
ficiary.
‘‘(2) 30-DAY PERIOD TO RECEIVE BILL.—
‘‘(A) IN GENERAL.—Not later than 30 days
after the date on which a request under para-
graph (1) has been received, a person described
in such paragraph shall furnish an itemized bill
describing each medical or other item or service
provided to the beneficiary requesting the item-
ized bill.
‘‘(B) PENALTY.—Whoever knowingly fails to
furnish an itemized bill in accordance with sub-
paragraph (A) shall be subject to a civil fine of
not more than $100 for each such failure.
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‘‘(3) REVIEW OF ITEMIZED BILL.—
‘‘(A) IN GENERAL.—Not later than 90 days
after the receipt of an itemized bill furnished
under paragraph (1), a beneficiary may submit
a written request for a review of the itemized bill
to the appropriate fiscal intermediary or carrier
with a contract under section 1816 or 1842.
‘‘(B) SPECIFIC
ALLEGATIONS.—A request
for a review of the itemized bill shall identify—
‘‘(i) specific medical or other items or
services that the beneficiary believes were
not provided as claimed, or
‘‘(ii) any other billing irregularity (in-
cluding duplicate billing).
‘‘(4) FINDINGS
OF
FISCAL
INTERMEDIARY
OR
CARRIER.—Each fiscal intermediary or carrier with
a contract under section 1816 or 1842 shall, with re-
spect to each written request submitted to the fiscal
intermediary or carrier under paragraph (3), deter-
mine whether the itemized bill identifies specific med-
ical or other items or services that were not provided
as claimed or any other billing irregularity (includ-
ing duplicate billing) that has resulted in unnecessary
payments under the title XVIII.
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‘‘(5) RECOVERY
OF
AMOUNTS.—The Secretary
shall require fiscal intermediaries and carriers to take
all appropriate measures to recover amounts unneces-
sarily paid under title XVIII with respect to a bill
described in paragraph (4).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to medical or other items
or services provided on or after January 1, 1998.
SEC. 5223. PROHIBITING UNNECESSARY AND WASTEFUL
MEDICARE PAYMENTS FOR CERTAIN ITEMS.
Notwithstanding any other provision of law, including
any regulation or payment policy, the following categories
of charges shall not be reimbursable under title XVIII of
the Social Security Act:
(1) Entertainment costs, including the costs of
tickets to sporting and other entertainment events.
(2) Gifts or donations.
(3) Personal use of motor vehicles.
(4) Costs for fines and penalties resulting from
violations of Federal, State, or local laws.
(5) Tuition or other education fees for spouses or
dependents of providers of services, their employees, or
contractors.
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SEC. 5224. REDUCING EXCESSIVE BILLINGS AND UTILIZA-
TION FOR CERTAIN ITEMS.
Section 1834(a)(15) of the Social Security Act (42
U.S.C. 1395m(a)(15)) is amended by striking ‘‘Secretary
may’’ both places it appears and inserting ‘‘Secretary
shall’’.
SEC. 5225. IMPROVED CARRIER AUTHORITY TO REDUCE EX-
CESSIVE MEDICARE PAYMENTS.
Section 1834(i) of the Social Security Act (42 U.S.C.
1395m(i)) is amended by adding at the end the following
new paragraph:
‘‘(3) 
GROSSLEY
EXCESSIVE
PAYMENT
AMOUNTS.—Notwithstanding paragraph (1), the Sec-
retary may apply the provisions of section 1842(b)(8)
to payments under this subsection.’’.
SEC. 5226. ITEMIZATION OF SURGICAL DRESSING BILLS
SUBMITTED BY HOME HEALTH AGENCIES.
Section 1834(i)(2) (42 U.S.C. 1395m(i)(2)) is amend-
ed to read as follows:
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply to surgical dressings that are furnished as an
incident to a physician’s professional service.’’.
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CHAPTER 3—CLARIFICATIONS AND
TECHNICAL CHANGES
SEC. 5231. OTHER FRAUD AND ABUSE RELATED PROVI-
SIONS.
(a) 
REFERENCE
CORRECTION.—(1) 
Section
1128D(b)(2)(D) (42 U.S.C. 1320a–7d(b)(2)(D)), as added
by section 205 of the Health Insurance Portability and Ac-
countability Act of 1996, is amended by striking
‘‘1128B(b)’’ and inserting ‘‘1128A(b)’’.
(2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a–
7e(g)(3)(C)) is amended by striking ‘‘Veterans’ Administra-
tion’’ and inserting ‘‘Department of Veterans Affairs’’.
(b) LANGUAGE IN DEFINITION OF CONVICTION.—Sec-
tion 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 ‘‘para-
graph (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 entities be excluded from participa-
tion 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
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(2) in subsection (b), by striking ‘‘any program
under title XVIII and may direct that the following
individuals and entities be excluded from participa-
tion in any State health care program’’ and inserting
‘‘any Federal health care program (as defined in sec-
tion 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 Account-
ability 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 sub-
section 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 im-
posed and collected in the same manner as civil
money penalties under subsection (a) of section
1128A are imposed and collected under that sec-
tion.
‘‘(B) GOVERNMENTAL AGENCIES.—The Sec-
retary shall provide for a publication of a public
report that identifies those Government agencies
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that have failed to report information on adverse
actions as required to be reported under this sub-
section.’’.
(e) CLARIFICATION OF TREATMENT OF CERTAIN WAIV-
ERS AND PAYMENTS OF PREMIUMS.—
(1) Section 1128A(i)(6) (42 U.S.C. 1320a–
7a(i)(6)) is amended—
(A) in subparagraph (A)(iii)—
(i) in subclause (I), by adding ‘‘or’’ at
the end;
(ii) in subclause (II), by striking ‘‘or’’
at the end; and
(iii) by striking subclause (III);
(B) by redesignating subparagraphs (B)
and (C) as subparagraphs (C) and (D); and
(C) 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;’’.
(2) Section 1128A(i)(6) (42 U.S.C. 1320a–
7a(i)(6)), is amended—
(A) in subparagraph (C), as redesignated
by paragraph (1), by striking ‘‘or’’ at the end;
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(B) in subparagraph (D), as so redesig-
nated, by striking the period at the end and in-
serting ‘‘; or’’; and
(C) by adding at the end the following:
‘‘(D) the waiver of deductible and coinsur-
ance amounts pursuant to medicare supple-
mental policies under section 1882(t).’’.
(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 amend-
ments made by subsection (c) shall take effect on the
date of the enactment of this Act.
(3) SANCTION FOR FAILURE TO REPORT.—The
amendment made by subsection (d) shall apply to
failures occurring on or after the date of the enact-
ment of this Act.
(4) CLARIFICATION.—The amendments made by
subsection (e)(2) shall take effect on the date of the en-
actment of this Act.
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Subtitle E—Prospective Payment
Systems
CHAPTER 1—PROVISIONS RELATING TO
PART A
SEC. 5301. PROSPECTIVE PAYMENT FOR INPATIENT REHA-
BILITATION HOSPITAL SERVICES.
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww)
is amended by adding at the end the following new sub-
section:
‘‘(j) PROSPECTIVE PAYMENT FOR INPATIENT REHA-
BILITATION SERVICES.—
‘‘(1) PAYMENT DURING TRANSITION PERIOD.—
‘‘(A) IN
GENERAL.—Notwithstanding sec-
tion 1814(b), but subject to the provisions of sec-
tion 1813, the amount of the payment with re-
spect to the operating and capital costs of inpa-
tient hospital services of a rehabilitation hospital
or a rehabilitation unit (in this subsection re-
ferred to as a ‘rehabilitation facility’), in a cost
reporting period beginning on or after October 1,
2000, and before October 1, 2003, is equal to the
sum of—
‘‘(i) the TEFRA percentage (as defined
in subparagraph (C)) of the amount that
would have been paid under part A of this
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title with respect to such costs if this sub-
section did not apply, and
‘‘(ii) the prospective payment percent-
age (as defined in subparagraph (C)) of the
product of (I) the per unit payment rate es-
tablished under this subsection for the fiscal
year in which the payment unit of service
occurs, and (II) the number of such pay-
ment units occurring in the cost reporting
period.
‘‘(B) FULLY IMPLEMENTED SYSTEM.—Not-
withstanding section 1814(b), but subject to the
provisions of section 1813, the amount of the
payment with respect to the operating and cap-
ital costs of inpatient hospital services of a reha-
bilitation facility for a payment unit in a cost
reporting period beginning on or after October 1,
2003, is equal to the per unit payment rate es-
tablished under this subsection for the fiscal year
in which the payment unit of service occurs.
‘‘(C) TEFRA AND PROSPECTIVE PAYMENT
PERCENTAGES SPECIFIED.—For purposes of sub-
paragraph (A), for a cost reporting period begin-
ning—
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‘‘(i) on or after October 1, 2000, and
before October 1, 2001, the ‘TEFRA percent-
age’ is 75 percent and the ‘prospective pay-
ment percentage’ is 25 percent;
‘‘(ii) on or after October 1, 2001, and
before October 1, 2002, the ‘TEFRA percent-
age’ is 50 percent and the ‘prospective pay-
ment percentage’ is 50 percent; and
‘‘(iii) on or after October 1, 2002, and
before October 1, 2003, the ‘TEFRA percent-
age’ is 25 percent and the ‘prospective pay-
ment percentage’ is 75 percent.
‘‘(D) PAYMENT UNIT.—For purposes of this
subsection, the term ‘payment unit’ means a dis-
charge, 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—
‘‘(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
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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 appro-
priate weighting which reflects the relative facil-
ity resources used with respect to patients classi-
fied within that group compared to patients clas-
sified 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 pay-
ment 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
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result of changes in coding that are unre-
lated to real changes in case mix.
‘‘(ii) ADJUSTMENT.—Insofar as the
Secretary determines 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
aggregate payments under the classification
system during the fiscal year that are a re-
sult of changes in the coding or classifica-
tion of patients that do not reflect real
changes in case mix, the Secretary shall ad-
just the per payment unit payment rate for
subsequent years so as to discount 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 es-
tablish and administer the prospective payment
system under this subsection.
‘‘(3) PAYMENT RATE.—
‘‘(A) IN GENERAL.—The Secretary shall de-
termine a prospective payment rate for each
payment unit for which such rehabilitation facil-
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ity is entitled to receive payment under this title.
Subject to subparagraph (B), such rate for pay-
ment 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 establishment of the
system) adjusted—
‘‘(i) by updating such per-payment-
unit amount to the fiscal year involved by
the weighted average of the applicable per-
centage increases provided under subsection
(b)(3)(B)(ii) (for cost reporting periods be-
ginning during the fiscal year) covering the
period from the midpoint of the period for
such data through the midpoint of fiscal
year 2000 and by an increase factor (de-
scribed in subparagraph (C)) specified by
the Secretary 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 Sec-
retary) based on prospective payment
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amounts which are additional payments de-
scribed in paragraph (4) (relating to outlier
and related payments) or paragraph (7);
‘‘(iii) for variations among rehabilita-
tion facilities by area under paragraph (6);
‘‘(iv) by the weighting factors estab-
lished under paragraph (2)(B); and
‘‘(v) by such other factors as the Sec-
retary determines are necessary to properly
reflect variations in necessary costs of treat-
ment among rehabilitation facilities.
‘‘(B) BUDGET NEUTRAL RATES.—The Sec-
retary shall establish the prospective payment
amounts under this subsection for payment units
during fiscal years 2001 through 2004 at levels
such that, in the Secretary’s estimation, the
amount of total payments under this subsection
for such fiscal years (including any payment ad-
justments pursuant to paragraph (7)) shall be
equal to 99 percent of the amount of payments
that would have been made under this title dur-
ing 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
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the effects of the prospective payment system es-
tablished under this subsection on the total num-
ber of payment units from rehabilitation facili-
ties 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 Sec-
retary shall establish an increase factor. Such
factor shall be based on an appropriate percent-
age increase in a market basket of goods and
services comprising services for which payment
is made under this subsection, 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 re-
habilitation 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 speci-
fied by the Secretary.
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‘‘(ii) PAYMENT
BASED
ON
MARGINAL
COST OF CARE.—The amount of such addi-
tional payment under clause (i) shall be de-
termined by the Secretary and shall approx-
imate the marginal cost of care beyond the
cutoff point applicable under clause (i).
‘‘(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 publication in the Federal Register, on or before
September 1 before each fiscal year (beginning with
fiscal year 2001, of the classification and weighting
factors for case mix groups under paragraph (2) for
such fiscal year and a description of the methodology
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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 Sec-
retary from time to time) of rehabilitation facilities’
costs which are attributable to wages and wage-relat-
ed costs, of the prospective payment rates computed
under paragraph (3) for area differences in wage lev-
els 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 there-
after), the Secretary shall update the factor under the
preceding sentence on the basis of a survey conducted
by 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 subsection in the fiscal year are
not greater or less than those that would have been
made in the year without such adjustment.
‘‘(7) ADDITIONAL ADJUSTMENTS.—The Secretary
may provide by regulation for—
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‘‘(A) an additional payment to take into ac-
count indirect costs of medical education and the
special circumstances of hospitals that serve a
significantly disproportionate number of low-in-
come patients in a manner similar to that pro-
vided under subparagraphs (B) and (F), respec-
tively, of subsection (d)(5); and
‘‘(B) such other exceptions and adjustments
to payment amounts under this subsection in a
manner similar to that provided under sub-
section (d)(5)(I) in relation to payments under
subsection (d).
‘‘(8) LIMITATION ON REVIEW.—There shall be no
administrative or judicial review under section 1869,
1878, or otherwise of the establishment of—
‘‘(A) case mix groups, of the methodology
for the classification of patients within such
groups, and of the appropriate weighting factors
thereof under paragraph (2),
‘‘(B) the prospective payment rates under
paragraph (3),
‘‘(C) outlier and special payments under
paragraph (4),
‘‘(D) area wage adjustments under para-
graph (6), and
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‘‘(E) additional adjustments under para-
graph (7).’’.
(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 ‘‘subsection (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 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 enact-
ment of this section.
SEC. 5302. STUDY AND REPORT ON PAYMENTS FOR LONG-
TERM CARE HOSPITALS.
(a) STUDY.—The Secretary of Health and Human
Services shall—
(1) collect data to develop, establish, administer
and evaluate a case-mix adjusted prospective payment
system 
for 
hospitals 
described 
in 
section
1886(d)(1)(B)(iv) (42 U.S.C. 1395ww(d)(1)(B)(iv));
and
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(2) develop a legislative proposal for establishing
and administering such a payment system that in-
cludes an adequate patient classification system that
reflects the differences in patient resource use and
costs among such hospitals.
(b) REPORT.—Not later than October 1, 1999, the Sec-
retary of Health and Human Services shall submit the pro-
posal described in subsection (a)(2) to the appropriate com-
mittees of Congress.
CHAPTER 2—PROVISIONS RELATING TO
PART B
Subchapter A—Payment for Hospital
Outpatient Department Services
SEC. 5311. ELIMINATION OF FORMULA-DRIVEN OVERPAY-
MENTS (FDO) FOR CERTAIN OUTPATIENT
HOSPITAL SERVICES.
(a) ELIMINATION OF FDO FOR AMBULATORY SUR-
GICAL
CENTER
PROCEDURES.—Section
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is
amended—
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end and insert-
ing the following: ‘‘, less the amount a provider may
charge as described in clause (ii) of section
1866(a)(2)(A).’’.
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(b) ELIMINATION OF FDO FOR RADIOLOGY SERVICES
AND DIAGNOSTIC PROCEDURES.—Section 1833(n)(1)(B)(i)
(42 U.S.C. 1395l(n)(1)(B)(i)) is amended—
(1) by striking ‘‘of 80 percent’’, and
(2) by inserting before the period at the end the
following: ‘‘, less the amount a provider may charge
as described in clause (ii) of section 1866(a)(2)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished during portions of
cost reporting periods occurring on or after October 1, 1997.
SEC. 5312. EXTENSION OF REDUCTIONS IN PAYMENTS FOR
COSTS OF HOSPITAL OUTPATIENT SERVICES.
(a) REDUCTION IN PAYMENTS FOR CAPITAL-RELATED
COSTS.—Section 
1861(v)(1)(S)(ii)(I) 
(42 
U.S.C.
1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through
1998’’ and inserting ‘‘through 1999 and during fiscal year
2000 before January 1, 2000’’.
(b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—
Section 
1861(v)(1)(S)(ii)(II) 
(42 
U.S.C.
1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through
1998’’ and inserting ‘‘through 1999 and during fiscal year
2000 before January 1, 2000’’.
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SEC. 5313. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL
OUTPATIENT DEPARTMENT SERVICES.
(a) IN GENERAL.—Section 1833 (42 U.S.C. 1395l) is
amended by adding at the end the following:
‘‘(t) PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL
OUTPATIENT DEPARTMENT SERVICES.—
‘‘(1) IN GENERAL.—With respect to hospital out-
patient services designated by the Secretary (in this
section referred to as ‘covered OPD services’) and fur-
nished during a year beginning with 1999, the
amount of payment under this part shall be deter-
mined under a prospective payment system estab-
lished by the Secretary in accordance with this sub-
section.
‘‘(2) SYSTEM REQUIREMENTS.—Under the pay-
ment system—
‘‘(A) the Secretary shall develop a classifica-
tion system for covered OPD services;
‘‘(B) the Secretary may establish groups of
covered OPD services, within the classification
system described in subparagraph (A), so that
services classified within each group are com-
parable clinically and with respect to the use of
resources;
‘‘(C) the Secretary shall, using data on
claims from 1997 and using data from the most
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recent available cost reports, establish relative
payment weights for covered OPD services (and
any groups of such services described in subpara-
graph (B)) based on median hospital costs and
shall determine projections of the frequency of
utilization of each such service (or group of serv-
ices) in 1999;
‘‘(D) the Secretary shall determine a wage
adjustment factor to adjust the portion of pay-
ment and coinsurance attributable to labor-relat-
ed costs for relative differences in labor and
labor-related costs across geographic regions in a
budget neutral manner;
‘‘(E) the Secretary shall establish other ad-
justments as determined to be necessary to ensure
equitable payments, such as outlier adjustments
or adjustments for certain classes of hospitals;
and
‘‘(F) the Secretary shall develop a method
for controlling unnecessary increases in the vol-
ume of covered OPD services.
‘‘(3) CALCULATION OF BASE AMOUNTS.—
‘‘(A) AGGREGATE
AMOUNTS
THAT
WOULD
BE
PAYABLE
IF
DEDUCTIBLES
WERE
DIS-
REGARDED.—The Secretary shall estimate the
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total amounts that would be payable from the
Trust Fund under this part for covered OPD
services in 1999, determined without regard to
this subsection, as though the deductible under
section 1833(b) did not apply, and as though the
coinsurance 
described 
in 
section
1866(a)(2)(A)(ii) (as in effect before the date of
the enactment of this subsection) continued to
apply.
‘‘(B) UNADJUSTED COPAYMENT AMOUNT.—
‘‘(i) IN
GENERAL.—For purposes of
this subsection, subject to clause (ii), the
‘unadjusted copayment amount’ applicable
to a covered OPD service (or group of such
services) is 20 percent of the national me-
dian of the charges for the service (or serv-
ices within the group) furnished during
1997, updated to 1999 using the Secretary’s
estimate of charge growth during the period.
‘‘(ii) 
ADJUSTMENTS
WHEN
FULLY
PHASED IN.—If the pre-deductible payment
percentage for a covered OPD service (or
group of such services) furnished in a year
would be equal to or exceed 80 percent, then
the unadjusted copayment amount shall be
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25 percent of amount determined under sub-
paragraph (D)(i).
‘‘(iii) RULES
FOR
NEW
SERVICES.—
The Secretary shall establish rules for estab-
lishment 
of 
an 
unadjusted 
copayment
amount for a covered OPD service not fur-
nished during 1997, based upon its classi-
fication within a group of such services.
‘‘(C) CALCULATION
OF
CONVERSION
FAC-
TORS.—
‘‘(i) FOR 1999.—
‘‘(I) IN GENERAL.—The Secretary
shall establish a 1999 conversion factor
for determining the medicare pre-de-
ductible OPD fee payment amounts for
each covered OPD service (or group of
such services) furnished in 1999. Such
conversion factor shall be established—
‘‘(aa) on the basis of the
weights and frequencies described
in paragraph (2)(C), and
‘‘(bb) in such manner that
the sum of the products deter-
mined under subclause (II) for
each service or group equals the
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total project amount described in
subparagraph (A).
‘‘(II) PRODUCT.—The Secretary
shall determine for each service or
group the product of the medicare pre-
deductible OPD fee payment amount
(taking into account appropriate ad-
justments 
described 
in 
paragraphs
(2)(D) and (2)(E)) and the frequencies
for such service or group.
‘‘(ii) SUBSEQUENT YEARS.—Subject to
paragraph (8)(B), the Secretary shall estab-
lish a conversion factor for covered OPD
services furnished in subsequent years in an
amount equal to the conversion factor estab-
lished under this subparagraph and appli-
cable to such services furnished in the pre-
vious year increased by the OPD payment
increase factor specified under clause (iii)
for the year involved.
‘‘(iii) OPD PAYMENT INCREASE FAC-
TOR.—For purposes of this subparagraph,
the ‘OPD payment increase factor’ for serv-
ices furnished in a year is equal to the sum
of—
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‘‘(I) the market basket percentage
increase 
applicable 
under 
section
1886(b)(3)(B)(iii) 
to 
hospital 
dis-
charges occurring during the fiscal
year ending in such year, plus
‘‘(II) in the case of a covered OPD
service (or group of such services) fur-
nished in a year in which the pre-de-
ductible payment percentage would not
exceed 80 percent, 3.5 percentage
points.
In applying the previous sentence for years
beginning with 2000, the Secretary may
substitute for the market basket percentage
increase under subclause (I) an annual per-
centage increase that is computed and ap-
plied with respect to covered OPD services
furnished in a year in the same manner as
the market basket percentage increase is de-
termined and applied to inpatient hospital
services for discharges occurring in a fiscal
year.
‘‘(D) PRE-DEDUCTIBLE PAYMENT PERCENT-
AGE.—The pre-deductible payment percentage
for a covered OPD service (or group of such serv-
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ices) furnished in a year is equal to the ratio
of—
‘‘(i) the conversion factor established
under subparagraph (C) for the year, multi-
plied by the weighting factor established
under paragraph (2)(C) for the service (or
group), to
‘‘(ii) the sum of the amount determined
under clause (i) and the unadjusted copay-
ment amount determined under subpara-
graph (B) for such service or group.
‘‘(E) CALCULATION OF MEDICARE OPD FEE
SCHEDULE AMOUNTS.—The Secretary shall com-
pute a medicare OPD fee schedule amount for
each covered OPD service (or group of such serv-
ices) furnished in a year, in an amount equal to
the product of—
‘‘(i) the conversion factor computed
under subparagraph (C) for the year, and
‘‘(ii) the relative payment weight (de-
termined under paragraph (2)(C)) for the
service or group.
‘‘(4) 
MEDICARE
PAYMENT
AMOUNT.—The
amount of payment made from the Trust Fund under
this part for a covered OPD service (and such services
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classified within a group) furnished in a year is de-
termined as follows:
‘‘(A) FEE
SCHEDULE
AND
COPAYMENT
AMOUNT.—Add (i) the medicare OPD fee sched-
ule amount (computed under paragraph (3)(E))
for the service or group and year, and (ii) the
unadjusted 
copayment 
amount 
(determined
under paragraph (3)(B)) for the service or
group.
‘‘(B) 
SUBTRACT
APPLICABLE
DEDUCT-
IBLE.—Reduce the sum under subparagraph (A)
by the amount of the deductible under section
1833(b), to the extent applicable.
‘‘(C) APPLY PAYMENT PROPORTION TO RE-
MAINDER.—Multiply the amount determined
under subparagraph (B) by the pre-deductible
payment percentage (as determined under para-
graph (3)(D)) for the service or group and year
involved.
‘‘(D) LABOR-RELATED
ADJUSTMENT.—The
amount of payment is the product determined
under subparagraph (C) with the labor-related
portion of such product adjusted for relative dif-
ferences in the cost of labor and other factors de-
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termined by the Secretary, as computed under
paragraph (2)(D).
‘‘(5) COPAYMENT AMOUNT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the copayment amount under
this subsection is determined as follows:
‘‘(i) UNADJUSTED COPAYMENT.—Com-
pute the amount by which the amount de-
scribed in paragraph (4)(B) exceeds the
amount of payment determined under para-
graph (4)(C).
‘‘(ii) LABOR
ADJUSTMENT.—The co-
payment amount is the difference deter-
mined under clause (i) with the labor-relat-
ed portion of such difference adjusted for
relative differences in the cost of labor and
other factors determined by the Secretary,
as computed under paragraphs (2)(D). The
adjustment under this clause shall be made
in a manner that does not result in any
change in the aggregate copayments made
in any year if the adjustment had not been
made.
‘‘(B) ELECTION TO OFFER REDUCED COPAY-
MENT AMOUNT.—The Secretary shall establish a
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procedure under which a hospital, before the be-
ginning of a year (beginning with 1999), may
elect to reduce the copayment amount otherwise
established under subparagraph (A) for some or
all covered OPD services to an amount that is
not less than 25 percent of the medicare OPD fee
schedule amount (computed under paragraph
(3)(E)) for the service involved, adjusted for rel-
ative differences in the cost of labor and other
factors determined by the Secretary, as computed
under subparagraphs (D) and (E) of paragraph
(2). Under such procedures, such reduced copay-
ment amount may not be further reduced or in-
creased during the year involved and the hospital
may disseminate information on the reduction of
copayment amount effected under this subpara-
graph.
‘‘(C) NO IMPACT ON DEDUCTIBLES.—Noth-
ing in this paragraph shall be construed as af-
fecting a hospital’s authority to waive the charg-
ing of a deductible under section 1833(b).
‘‘(6) PERIODIC REVIEW AND ADJUSTMENTS COM-
PONENTS OF PROSPECTIVE PAYMENT SYSTEM.—
‘‘(A) PERIODIC
REVIEW.—The Secretary
may periodically review and revise the groups,
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the relative payment weights, and the wage and
other adjustments described in paragraph (2) to
take into account changes in medical practice,
changes in technology, the addition of new serv-
ices, new cost data, and other relevant informa-
tion and factors.
‘‘(B) BUDGET NEUTRALITY ADJUSTMENT.—
If the Secretary makes adjustments under sub-
paragraph (A), then the adjustments for a year
may not cause the estimated amount of expendi-
tures under this part for the year to increase or
decrease from the estimated amount of expendi-
tures under this part that would have been made
if the adjustments had not been made.
‘‘(C) UPDATE FACTOR.—If the Secretary de-
termines under methodologies described in sub-
paragraph (2)(F) that the volume of services
paid for under this subsection increased beyond
amounts established through those methodologies,
the Secretary may appropriately adjust the up-
date to the conversion factor otherwise applicable
in a subsequent year.
‘‘(7) SPECIAL
RULE
FOR
AMBULANCE
SERV-
ICES.—The Secretary shall pay for hospital out-
patient services that are ambulance services on the
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basis described in the matter in subsection (a)(1) pre-
ceding subparagraph (A).
‘‘(8) 
SPECIAL
RULES
FOR
CERTAIN
HOS-
PITALS.—In the case of hospitals described in section
1886(d)(1)(B)(v)—
‘‘(A) the system under this subsection shall
not apply to covered OPD services furnished be-
fore January 1, 2000; and
‘‘(B) the Secretary may establish a separate
conversion factor for such services in a manner
that specifically takes into account the unique
costs incurred by such hospitals by virtue of
their patient population and service intensity.
‘‘(9) LIMITATION ON REVIEW.—There shall be no
administrative or judicial review under section 1869,
1878, or otherwise of—
‘‘(A) the development of the classification
system under paragraph (2), including the estab-
lishment of groups and relative payment weights
for covered OPD services, of wage adjustment
factors, other adjustments, and methods described
in paragraph (2)(F);
‘‘(B) the calculation of base amounts under
paragraph (3);
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‘‘(C) periodic adjustments made under
paragraph (6); and
‘‘(D) the establishment of a separate conver-
sion factor under paragraph (8)(B).’’.
(b) COINSURANCE.—Section 1866(a)(2)(A)(ii) (42
U.S.C. 1395cc(a)(2)(A)(ii)) is amended by adding at the
end the following: ‘‘In the case of items and services for
which payment is made under part B under the prospective
payment system established under section 1833(t), clause
(ii) of the first sentence shall be applied by substituting for
20 percent of the reasonable charge, the applicable copay-
ment amount established under section 1833(t)(5).’’.
(c) TREATMENT
OF
REDUCTION
IN
COPAYMENT
AMOUNT.—Section 1128A(i)(6) (42 U.S.C. 1320a–7a(i)(6))
is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(B),
(2) by striking the period at the end of subpara-
graph (C) and inserting ‘‘; or’’, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(D) a reduction in the copayment amount for
covered OPD services under section 1833(t)(5)(B).’’.
(d) CONFORMING AMENDMENTS.—
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(1) APPROVED ASC PROCEDURES PERFORMED IN
HOSPITAL OUTPATIENT DEPARTMENTS.—
(A)(i) Section 1833(i)(3)(A) (42 U.S.C.
1395l(i)(3)(A)) is amended—
(I) by inserting ‘‘before January 1,
1999’’ after ‘‘furnished’’, and
(II) by striking ‘‘in a cost reporting
period’’.
(ii) The amendment made by clause (i)
shall apply to services furnished on or after Jan-
uary 1, 1999.
(B) 
Section 
1833(a)(4) 
(42 
U.S.C.
1395l(a)(4)) is amended by inserting ‘‘or sub-
section (t)’’ before the semicolon.
(2) RADIOLOGY AND OTHER DIAGNOSTIC PROCE-
DURES.—
(A) Section 1833(n)(1)(A) (42 U.S.C.
1395l(n)(1)(A)) is amended by inserting ‘‘and
before January 1, 1999’’ after ‘‘October 1, 1988,’’
and after ‘‘October 1, 1989,’’.
(B) Section 1833(a)(2)(E) (42 U.S.C.
1395l(a)(2)(E)) is amended by inserting ‘‘or , for
services or procedures performed on or after Jan-
uary 1, 1999, subsection (t)’’ before the semi-
colon.
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(3) OTHER HOSPITAL OUTPATIENT SERVICES.—
Section 1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is
amended—
(A) in clause (i), by inserting ‘‘furnished
before January 1, 1999,’’ after ‘‘(i)’’,
(B) in clause (ii), by inserting ‘‘before Jan-
uary 1, 1999,’’ after ‘‘furnished’’,
(C) by redesignating clause (iii) as clause
(iv), and
(D) by inserting after clause (ii), the follow-
ing new clause:
‘‘(iii) if such services are furnished on
or after January 1, 1999, the amount deter-
mined under subsection (t), or’’.
Subchapter B—Ambulance Services
SEC. 5321. PAYMENTS FOR AMBULANCE SERVICES.
(a) INTERIM REDUCTIONS.—
(1) PAYMENTS
DETERMINED
ON
REASONABLE
COST
BASIS.—Section 
1861(v)(1) 
(42 
U.S.C.
1395x(v)(1)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(V) In determining the reasonable cost of
ambulance services (as described in subsection
(s)(7)) provided during a fiscal year (beginning
with fiscal year 1998 and ending with fiscal
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year 2002), the Secretary shall not recognize any
costs in excess of costs recognized as reasonable
for ambulance services provided during the pre-
vious fiscal year (after application of this sub-
paragraph), increased by the percentage increase
in the consumer price index for all urban con-
sumers (U.S. city average) as estimated by the
Secretary for the 12-month period ending with
the midpoint of the fiscal year involved reduced
in the case of fiscal year 1998 by 1.0 percentage
point.’’.
(2) PAYMENTS
DETERMINED
ON
REASONABLE
CHARGE
BASIS.—Section 
1842(b) 
(42 
U.S.C.
1395u(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(19) For purposes of section 1833(a)(1), the reason-
able charge for ambulance services (as described in section
1861(s)(7)) provided during a fiscal year (beginning with
fiscal year 1998 and ending with fiscal year 2002) may
not exceed the reasonable charge for such services provided
during the previous fiscal year (after application of this
paragraph), increased 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 pe-
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riod ending with the midpoint of the year involved reduced
in the case of fiscal year 1998 by 1.0 percentage point.’’.
(b) ESTABLISHMENT OF PROSPECTIVE FEE SCHED-
ULE.—
(1) PAYMENT IN ACCORDANCE WITH FEE SCHED-
ULE.—Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is
amended—
(A) by striking ‘‘and (P)’’ and inserting
‘‘(P)’’; and
(B) by striking the semicolon at the end and
inserting the following: ‘‘, and (Q) with respect
to ambulance service, the amounts paid shall be
80 percent of the lesser of the actual charge for
the services or the amount determined by a fee
schedule established by the Secretary under sec-
tion 1834(k);’’.
(2) ESTABLISHMENT
OF
SCHEDULE.—Section
1834 (42 U.S.C. 1395m) is amended by adding at the
end the following new subsection:
‘‘(k) ESTABLISHMENT OF FEE SCHEDULE FOR AMBU-
LANCE SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall establish
a fee schedule for payment for ambulance services
under this part through a negotiated rulemaking
process described in title 5, United States Code, and
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in accordance with the requirements of this sub-
section.
‘‘(2) CONSIDERATIONS.—In establishing such fee
schedule, the Secretary shall—
‘‘(A) establish mechanisms to control in-
creases in expenditures for ambulance services
under this part;
‘‘(B) establish definitions for ambulance
services which link payments to the type of serv-
ices provided;
‘‘(C) consider appropriate regional and
operational differences;
‘‘(D) consider adjustments to payment rates
to account for inflation and other relevant fac-
tors; and
‘‘(E) phase in the application of the pay-
ment rates under the fee schedule in an efficient
and fair manner.
‘‘(3) SAVINGS.—In establishing such fee schedule,
the Secretary shall—
‘‘(A) ensure that the aggregate amount of
payments made for ambulance services under
this part during 1999 does not exceed the aggre-
gate amount of payments which would have been
made for such services under this part during
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such year if the amendments made by section
5321 of the Balanced Budget Act of 1997 had not
been made; and
‘‘(B) set the payment amounts provided
under the fee schedule for services furnished in
2000 and each subsequent year at amounts equal
to the payment amounts under the fee schedule
for service furnished during the previous year,
increased by the percentage increase in the
consumer price index for all urban consumers
(U.S. city average) for the 12-month period end-
ing with June of the previous year reduced (but
not below zero) by 1.0 percentage points.
‘‘(4) CONSULTATION.—In establishing the fee
schedule for ambulance services under this subsection,
the Secretary shall consult with various national or-
ganizations representing individuals and entities who
furnish and regulate ambulance services and share
with such organizations relevant data in establishing
such schedule.
‘‘(5) LIMITATION ON REVIEW.—There shall be no
administrative or judicial review under section 1869
or otherwise of the amounts established under the fee
schedule for ambulance services under this subsection,
including matters described in paragraph (2).
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‘‘(6) RESTRAINT ON BILLING.—The provisions of
subparagraphs (A) and (B) of section 1842(b)(18)
shall apply to ambulance services for which payment
is made under this subsection in the same manner as
they apply to services provided by a practitioner de-
scribed in section 1842(b)(18)(C).’’.
(3) EFFECTIVE DATE.—The amendments made
by this section apply to ambulance services furnished
on or after January 1, 1999.
(c) AUTHORIZING PAYMENT FOR PARAMEDIC INTER-
CEPT SERVICE PROVIDERS IN RURAL COMMUNITIES.—In
promulgating regulations to carry out section 1861(s)(7) of
the Social Security Act (42 U.S.C. 1395x(s)(7)) with respect
to the coverage of ambulance service, the Secretary of Health
and Human Services may include coverage of advanced life
support services (in this subsection referred to as ‘‘ALS
intercept services’’) provided by a paramedic intercept serv-
ice provider in a rural area if the following conditions are
met:
(1) The ALS intercept services are provided
under a contract with one or more volunteer ambu-
lance services and are medically necessary based on
the health condition of the individual being trans-
ported.
(2) The volunteer ambulance service involved—
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(A) is certified as qualified to provide am-
bulance service for purposes of such section,
(B) provides only basic life support services
at the time of the intercept, and
(C) is prohibited by State law from billing
for any services.
(3) The entity supplying the ALS intercept serv-
ices—
(A) is certified as qualified to provide such
services under the medicare program under title
XVIII of the Social Security Act, and
(B) bills all recipients who receive ALS
intercept services from the entity, regardless of
whether or not such recipients are medicare
beneficiaries.
CHAPTER 3—PROVISIONS RELATING TO
PARTS A AND B
Subchapter A—Payments to Skilled Nursing
Facilities
SEC. 5331. 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 ‘‘sub-
section, except that the limits effective for cost reporting pe-
riods beginning on or after October 1, 1997, shall be based
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on the limits effective for cost reporting periods beginning
on or after October 1, 1996.’’.
SEC. 5332. 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 sub-
section:
‘‘(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 de-
fined in paragraph (2)(B)) of covered skilled nursing
facility services (as defined in paragraph (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—
‘‘(i) the non-Federal percentage of the
facility-specific per diem rate (computed
under paragraph (3)), and
‘‘(ii) the Federal percentage of the ad-
justed Federal per diem rate (determined
under paragraph (4)) applicable to the fa-
cility; and
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‘‘(B) after the transition period is equal to
the adjusted Federal per diem rate applicable to
the facility.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section:
‘‘(A) COVERED SKILLED NURSING FACILITY
SERVICES.—
‘‘(i) IN GENERAL.—The term ‘covered
skilled nursing 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 serv-
ices (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 resi-
dent of a skilled nursing facility dur-
ing the period in which the individual
is provided covered post-hospital ex-
tended care services.
‘‘(ii) SERVICES
EXCLUDED.—Services
described in this clause are physicians’ serv-
ices, services described by clauses (i)
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through (iii) of section 1861(s)(2)(K), cer-
tified nurse-midwife services, qualified psy-
chologist services, services of a certified reg-
istered nurse anesthetist, items and services
described in subparagraphs in (F) and (O)
of section 1861(s)(2), and, only with respect
to services furnished during 1998, the trans-
portation costs of electrocardiogram equip-
ment for electrocardiogram tests 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 su-
pervision 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 fa-
cility services, but does not include costs associ-
ated with approved educational activities.
‘‘(C) NON-FEDERAL PERCENTAGE; FEDERAL
PERCENTAGE.—For—
‘‘(i) the first cost reporting period (as
defined in subparagraph (D)) of a facility,
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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 ‘Federal percentage’ is
50 percent; and
‘‘(iii) the subsequent cost reporting pe-
riod of such facility, the ‘non-Federal per-
centage’ is 25 percent and the ‘Federal per-
centage’ is 75 percent.
‘‘(D) FIRST COST REPORTING PERIOD.—The
term ‘first cost reporting period’ means, with re-
spect to a skilled nursing facility, the first cost
reporting period of the facility beginning on or
after July 1, 1998.
‘‘(E) TRANSITION PERIOD.—
‘‘(i) IN GENERAL.—The term ‘transi-
tion 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
FACILITIES.—In the case of a
skilled nursing facility that does not have a
settled cost report for a cost reporting pe-
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riod before July 1, 1998, 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 facil-
ity-specific per diem rate for each skilled nursing fa-
cility 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 pe-
riods beginning in 1995 with appropriate
adjustments (as determined by the Sec-
retary) to non-settled cost reports, and
‘‘(ii) an estimate of the amounts that
would be payable under part B (disregard-
ing 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 individual who is a resident of the fa-
cility, regardless of whether or not the pay-
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ment was made to the facility or to another
entity.
‘‘(B) UPDATE TO COST REPORTING PERIODS
THROUGH 1998.—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 bas-
ket percentage increase.
‘‘(C) UPDATING TO APPLICABLE COST RE-
PORTING PERIOD.—The Secretary shall further
update such amount for each cost reporting pe-
riod beginning with the first cost reporting pe-
riod and up to and including the cost reporting
period involved by a factor equal to the skilled
nursing facility market basket percentage in-
crease.
‘‘(D) 
CERTAIN
DEMONSTRATION
PROJECTS.—In the case of a facility participat-
ing in the Nursing Home Case-Mix and Quality
Demonstration (RUGS–III), the Secretary shall
determine the facility specific per diem rate for
any year after 1997 by computing the base pe-
riod payments by using the RUGS–III rate re-
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ceived by the facility for 1997, increased by a
factor equal to the skilled nursing facility market
basket percentage increase.
‘‘(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 pe-
riod 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 sub-
section (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) subject to subparagraph (I), the
allowable costs of extended care services for
the facility for cost reporting periods begin-
ning in 1995 with appropriate adjustments
(as determined by the Secretary) to non-set-
tled cost reports, and
‘‘(ii) an estimate of the amounts that
would be payable under part B (disregard-
ing any applicable deductibles, coinsurance
and copayments) for covered skilled nursing
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facility services described in paragraph
(2)(A)(i)(II) furnished during such period
to an individual who is a resident of the fa-
cility, regardless of whether or not the pay-
ment was made to the facility or to another
entity.
‘‘(B) UPDATE TO COST REPORTING PERIODS
THROUGH 1998.—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 bas-
ket 
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 fa-
cility by area in the average facility wage
level per diem, and
‘‘(ii) adjusting for variations in case
mix per diem among facilities.
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‘‘(D) COMPUTATION OF WEIGHTED AVERAGE
PER DIEM RATE.—The Secretary shall compute a
weighted average per diem rate by computing an
average of the standardized amounts computed
under subparagraph (C), weighted for each facil-
ity by the number of days of extended care serv-
ices furnished during the cost reporting period
referred to in subparagraph (A). The Secretary
may compute and apply such average separately
for facilities located in urban and rural areas
(as defined in section 1886(d)(2)(D)).
‘‘(E) UPDATING.—
‘‘(i) FISCAL
YEAR
1999.—For fiscal
year 1999, the Secretary shall compute for
each skilled nursing facility an unadjusted
Federal per diem rate equal to the weighted
average per diem rate computed under sub-
paragraph (D) and applicable to the facil-
ity increased by skilled nursing facility
market basket percentage change for the fis-
cal year involved.
‘‘(ii) SUBSEQUENT
FISCAL
YEARS.—
For each subsequent fiscal year the Sec-
retary shall compute for each skilled nurs-
ing facility an unadjusted Federal per diem
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rate equal to the Federal per diem rate com-
puted under this subparagraph for the pre-
vious fiscal year and applicable to the facil-
ity increased by the skilled nursing facility
market basket percentage change for the fis-
cal year involved.
‘‘(F) ADJUSTMENT FOR CASE MIX CREEP.—
Insofar as the Secretary determines that such ad-
justments under subparagraph (G)(i) for a pre-
vious fiscal year (or estimates that such adjust-
ments 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 classi-
fication of residents that do not reflect real
changes in case mix, the Secretary may adjust
unadjusted Federal per diem rates for subsequent
years so as to discount the effect of such coding
or classification changes.
‘‘(G) APPLICATION
TO
SPECIFIC
FACILI-
TIES.—The Secretary shall compute for each
skilled nursing facility for each fiscal year (be-
ginning with fiscal year 1998) an adjusted Fed-
eral per diem rate equal to the unadjusted Fed-
eral per diem rate determined under subpara-
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graph (E), as adjusted under subparagraph (F),
and as further adjusted as follows:
‘‘(i) ADJUSTMENT FOR CASE MIX.—The
Secretary shall provide for an appropriate
adjustment to account for case mix. Such
adjustment shall be based on a resident clas-
sification system, established by the Sec-
retary, that accounts for the relative re-
source utilization of different patient types.
The case mix adjustment shall be based on
resident assessment data and other data
that the Secretary considers appropriate.
‘‘(ii) ADJUSTMENT
FOR
GEOGRAPHIC
VARIATIONS
IN
LABOR
COSTS.—The Sec-
retary shall adjust the portion of such per
diem rate attributable to wages and wage-
related costs for the area in which the facil-
ity is located compared to the national av-
erage of such costs using an appropriate
wage index as determined by the Secretary.
Such adjustment shall be done in a manner
that does not result in aggregate payments
under this subsection that are greater or less
than those that would otherwise be made if
such adjustment had not been made.
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‘‘(H) PUBLICATION
OF
INFORMATION
ON
PER DIEM RATES.—The Secretary shall provide
for publication in the Federal Register, before the
July 1 preceding each fiscal year (beginning
with fiscal year 1999), of—
‘‘(i) the unadjusted Federal per diem
rates to be applied to days of covered skilled
nursing facility services furnished during
the fiscal year,
‘‘(ii) the case mix classification system
to be applied under subparagraph (G)(i)
with respect to such services during the fis-
cal year, and
‘‘(iii) the factors to be applied in mak-
ing the area wage adjustment under sub-
paragraph (G)(ii) with respect to such serv-
ices.
‘‘(I) EXCLUSION OF EXCEPTION PAYMENTS
FROM
DETERMINATION
OF
HISTORICAL
PER
DIEM.—In determining allowable costs under
subparagraph (A)(i), the Secretary shall not take
into account any payments described in sub-
section (c).
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‘‘(5) SKILLED NURSING FACILITY MARKET BAS-
KET INDEX AND PERCENTAGE.—For purposes of this
subsection:
‘‘(A) SKILLED NURSING FACILITY MARKET
BASKET INDEX.—The Secretary shall establish a
skilled nursing facility market basket index that
reflects changes over time in the prices of an ap-
propriate mix of goods and services included in
covered skilled nursing facility services.
‘‘(B) SKILLED NURSING FACILITY MARKET
BASKET PERCENTAGE.—The term ‘skilled nurs-
ing facility market basket percentage’ means, for
a fiscal year or other annual period and as cal-
culated by the Secretary, the percentage change
in the skilled nursing facility market basket
index (established under subparagraph (A)) from
the midpoint of the prior fiscal year (or period)
to the midpoint of the fiscal year (or other pe-
riod) involved.
‘‘(6) SUBMISSION
OF
RESIDENT
ASSESSMENT
DATA.—A skilled nursing facility shall provide the
Secretary, in a manner and within the timeframes
prescribed by the Secretary, the resident assessment
data necessary to develop and implement the rates
under this subsection. For purposes of meeting such
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requirement, a skilled nursing facility may submit
the resident assessment data required under section
1819(b)(3), using the standard instrument designated
by the State under section 1819(e)(5).
‘‘(7) TRANSITION
FOR
MEDICARE
SWING
BED
HOSPITALS.—
‘‘(A) IN GENERAL.—The Secretary shall de-
termine an appropriate manner in which to
apply this subsection to the facilities described in
subparagraph (B), taking into account the pur-
poses of this subsection, and shall provide that at
the end of the transition period (as defined in
paragraph (2)(E)) such facilities shall be paid
only under this subsection. Payment shall not be
made under this subsection to such facilities for
cost reporting periods beginning before such date
(not earlier than July 1, 1999) as the Secretary
specifies.
‘‘(B) FACILITIES
DESCRIBED.—The facili-
ties described in this subparagraph are facilities
that have in effect an agreement described in sec-
tion 1883, for which payment is made for the
furnishing of extended care services on a reason-
able cost basis under section 1814(l) (as in effect
on and after such date).
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‘‘(8) LIMITATION ON REVIEW.—There shall be no
administrative or judicial review under section 1869,
1878, or otherwise of—
‘‘(A) the establishment of Federal per diem
rates under paragraph (4), including the com-
putation of the standardized per diem rates
under paragraph (4)(C), adjustments and correc-
tions for case mix under paragraphs (4)(F) and
(4)(G)(i), and adjustments for variations in
labor-related costs under paragraph (4)(G)(ii);
and
‘‘(B) the establishment of transitional
amounts under paragraph (7).’’.
(b) CONSOLIDATED BILLING.—
(1) FOR
SNF
SERVICES.—Section 1862(a) (42
U.S.C. 1395y(a)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (15),
(B) by striking the period at the end of
paragraph (16) and inserting ‘‘; or’’, and
(C) by inserting after paragraph (16) the
following new paragraph:
‘‘(17) which are covered skilled nursing facility
services described in section 1888(e)(2)(A)(i)(II) and
which are furnished to an individual who is a resi-
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dent of a skilled nursing facility by an entity other
than the skilled nursing facility, unless the services
are furnished under arrangements (as defined in sec-
tion 1861(w)(1)) with the entity made by the skilled
nursing facility, or such services are furnished by a
physician described in section 1861(r)(1).’’.
(2) REQUIRING PAYMENT FOR ALL PART B ITEMS
AND SERVICES TO BE MADE TO FACILITY.—The first
sentence of section 1842(b)(6) (42 U.S.C. 1395u(b)(6))
is amended—
(A) by striking ‘‘and (D)’’ and inserting
‘‘(D)’’; and
(B) by striking the period at the end and
inserting the following: ‘‘, and (E) in the case of
an item or service (other than services described
in section 1888(e)(2)(A)(ii)) furnished to an in-
dividual who (at the time the item or service is
furnished) is a resident of a skilled nursing facil-
ity, payment shall be made to the facility (with-
out regard to whether or not the item or service
was furnished by the facility, by others under ar-
rangement with them made by the facility, under
any other contracting or consulting arrange-
ment, or otherwise).’’.
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(3) PAYMENT
RULES.—Section 1888(e) (42
U.S.C. 1395yy(e)), as added by subsection (a), is
amended by adding at the end the following:
‘‘(9) PAYMENT FOR CERTAIN SERVICES.—
‘‘(A) IN GENERAL.—In the case of an item
or service furnished by a skilled nursing facility
(or by others under arrangement with them
made by a skilled nursing facility or under any
other contracting or consulting arrangement or
otherwise) for which payment would otherwise
(but for this paragraph) be made under part B
in an amount determined in accordance with
section 1833(a)(2)(B), the amount of the pay-
ment under such part shall be based on the part
B methodology applicable to the item or service,
except that for items and services that would be
included in a facility’s cost report if not for this
section, the facility may continue to use a cost
report for reimbursement purposes until the pro-
spective payment system established under this
section is implemented.
‘‘(B) THERAPY
AND
PATHOLOGY
SERV-
ICES.—Payment for physical therapy, occupa-
tional therapy, respiratory therapy, and speech
language pathology services shall reflect new sal-
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ary equivalency guidelines calculated pursuant
to section 1861(v)(5) when finalized through the
regulatory process.
‘‘(10) REQUIRED CODING.—No payment may be
made under part B for items and services (other than
services described in paragraph (2)(A)(ii)) furnished
to an individual who is a resident of a skilled nurs-
ing facility unless the claim for such payment in-
cludes a code (or codes) under a uniform coding sys-
tem specified by the Secretary that identifies the
items or services delivered.’’.
(4) CONFORMING AMENDMENTS.—
(A) Section 1819(b)(3)(C)(i) (42 U.S.C.
1395i–3(b)(3)(C)(i)) is amended by striking
‘‘Such’’ and inserting ‘‘Subject to the timeframes
prescribed by the Secretary under section
1888(t)(6), such’’.
(B) 
Section 
1832(a)(1) 
(42 
U.S.C.
1395k(a)(1)) is amended by striking ‘‘(2);’’ and
inserting ‘‘(2) and section 1842(b)(6)(E);’’.
(C) Section 1833(a)(2)(B) (42 U.S.C.
1395l(a)(2)(B)) is amended by inserting ‘‘or sec-
tion 1888(e)(9)’’ after ‘‘section 1886’’.
(D) Section 1861(h) (42 U.S.C 1395x(h)) is
amended—
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(i) in the opening paragraph, by strik-
ing ‘‘paragraphs (3) and (6)’’ and inserting
‘‘paragraphs (3), (6), and (7)’’, and
(ii) in paragraph (7), after ‘‘skilled
nursing facilities’’, by inserting ‘‘, or by
others under arrangements with them made
by the facility’’.
(E) Section 1866(a)(1)(H) (42 U.S.C.
1395cc(a)(1)(H)) is amended—
(i) by redesignating clauses (i) and (ii)
as subclauses (I) and (II) respectively,
(ii) by inserting ‘‘(i)’’ after ‘‘(H)’’, and
(iii) by adding after clause (i), as so
redesignated, the following new clause:
‘‘(ii) in the case of skilled nursing facilities
which provide covered skilled nursing facility serv-
ices—
‘‘(I) that are furnished to an individual
who is a resident of the skilled nursing facility,
and
‘‘(II) for which the individual is entitled to
have payment made under this title,
to have items and services (other than services de-
scribed in section 1888(e)(2)(A)(ii)) furnished by the
skilled nursing facility or otherwise under arrange-
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ments (as defined in section 1861(w)(1)) made by the
skilled nursing facility,’’.
(c) MEDICAL REVIEW PROCESS.—In order to ensure
that medicare beneficiaries are furnished appropriate serv-
ices in skilled nursing facilities, the Secretary of Health and
Human Services shall establish and implement a thorough
medical review process to examine the effects of the amend-
ments made by this section on the quality of covered skilled
nursing facility services furnished to medicare beneficiaries.
In developing such a medical review process, the Secretary
shall place a particular emphasis on the quality of non-
routine covered services and physicians’ services for which
payment is made under title XVIII of the Social Security
Act for which payment is made under section 1848 of such
Act.
(d) EFFECTIVE DATE.—The amendments made by this
section are effective for cost reporting periods beginning on
or after July 1, 1998; except that the amendments made
by subsection (b) shall apply to items and services furnished
on or after July 1, 1998.
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Subchapter B—Home Health Services and
Benefits
PART I—PAYMENTS FOR HOME HEALTH
SERVICES
SEC. 5341. RECAPTURING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR HOME HEALTH SERVICES.
(a) BASING UPDATES TO PER VISIT COST LIMITS ON
LIMITS FOR FISCAL YEAR 1993.—Section 1861(v)(1)(L)
(42 U.S.C. 1395x(v)(1)(L)) is amended by adding at the
end the following:
‘‘(iv) In establishing limits under this subparagraph
for cost reporting periods beginning after September 30,
1997, the Secretary shall not take into account any changes
in the home health market basket, as determined by the Sec-
retary, with respect to cost reporting periods which began
on or after July 1, 1994, and before July 1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMEND-
MENT.—The Secretary of Health and Human Services shall
not consider the amendment made by subsection (a) in mak-
ing any exemptions and exceptions pursuant to section
1861(v)(1)(L)(ii) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(ii)).
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SEC. 5342. INTERIM PAYMENTS FOR HOME HEALTH SERV-
ICES.
(a) 
REDUCTIONS
IN
COST
LIMITS.—Section
1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amend-
ed—
(1) by moving the indentation of subclauses (I)
through (III) 2-ems to the left;
(2) in subclause (I), by inserting ‘‘of the mean
of the labor-related and nonlabor per visit costs for
freestanding home health agencies’’ before the comma
at the end;
(3) in subclause (II), by striking ‘‘, or’’ and in-
serting ‘‘of such mean,’’;
(4) in subclause (III)—
(A) by inserting ‘‘and before October 1,
1997,’’ after ‘‘July 1, 1987’’, and
(B) by striking the period at the end and
inserting ‘‘of such mean, or’’; and
(5) by striking the matter following subclause
(III) and inserting the following:
‘‘(IV) October 1, 1997, 105 percent of the median
of the labor-related and nonlabor per visit costs for
freestanding home health agencies.’’.
(b) DELAY IN UPDATES.—Section 1861(v)(1)(L)(iii)
(42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by inserting ‘‘,
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or on or after July 1, 1997, and before October 1, 1997’’
after ‘‘July 1, 1996’’.
(c) 
ADDITIONS
TO
COST
LIMITS.—Section
1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)), as amended by
section 5341(a), is amended by adding at the end the follow-
ing:
‘‘(v) For services furnished by home health agencies for
cost reporting periods beginning on or after October 1,
1997, the Secretary shall provide for an interim system of
limits. Payment shall be the lower of—
‘‘(I) costs determined under the preceding provi-
sions of this subparagraph, or
‘‘(II) an agency-specific per beneficiary annual
limitation calculated from the agency’s 12-month cost
reporting period ending on or after January 1, 1994,
and on or before December 31, 1994, based on reason-
able costs (including nonroutine medical supplies),
updated by the home health market basket index.
The per beneficiary limitation in subclause (II) shall be
multiplied by the agency’s unduplicated census count of pa-
tients (entitled to benefits under this title) for the cost re-
porting period subject to the limitation to determine the ag-
gregate agency-specific per beneficiary limitation.
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‘‘(vi) For services furnished by home health agencies
for cost reporting periods beginning on or after October 1,
1997, the following rules apply:
‘‘(I) For new providers and those providers with-
out a 12-month cost reporting period ending in cal-
endar year 1994, the per beneficiary limitation shall
be equal to the median of these limits (or the Sec-
retary’s best estimates thereof) applied to other home
health agencies as determined by the Secretary. A
home health agency that has altered its corporate
structure or name shall not be considered a new pro-
vider for this purpose.
‘‘(II) For beneficiaries who use services furnished
by more than one home health agency, the per bene-
ficiary limitations shall be prorated among the agen-
cies.’’.
(d) DEVELOPMENT OF CASE MIX SYSTEM.—The Sec-
retary of Health and Human Services shall expand research
on a prospective payment system for home health agencies
under the medicare program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.) that ties prospective
payments to a unit of service, including an intensive effort
to develop a reliable case mix adjuster that explains a sig-
nificant amount of the variances in costs.
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(e) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—
Effective for cost reporting periods beginning on or after
October 1, 1997, the Secretary of Health and Human Serv-
ices may require all home health agencies to submit addi-
tional information that the Secretary considers necessary
for the development of a reliable case mix system.
SEC. 5343. PROSPECTIVE PAYMENT FOR HOME HEALTH
SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 5011, is amended by adding
at the end the following new section:
‘‘PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES
‘‘SEC. 1895. (a) IN GENERAL.—Notwithstanding sec-
tion 1861(v), the Secretary shall provide, for cost reporting
periods beginning on or after October 1, 1999, for payments
for home health services in accordance with a prospective
payment system established by the Secretary under this sec-
tion.
‘‘(b) SYSTEM OF PROSPECTIVE PAYMENT FOR HOME
HEALTH SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall establish
under this subsection a prospective payment system
for payment for all costs of home health services.
Under the system under this subsection all services
covered and paid on a reasonable cost basis under the
medicare home health benefit as of the date of the en-
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actment of the this section, including medical sup-
plies, shall be paid for on the basis of a prospective
payment amount determined under this subsection
and applicable to the services involved. In implement-
ing the system, the Secretary may provide for a tran-
sition (of not longer than 4 years) during which a
portion of such payment is based on agency-specific
costs, but only if such transition does not result in ag-
gregate payments under this title that exceed the ag-
gregate payments that would be made if such a tran-
sition did not occur.
‘‘(2) UNIT OF PAYMENT.—In defining a prospec-
tive payment amount under the system under this
subsection, the Secretary shall consider an appro-
priate unit of service and the number, type, and du-
ration of visits provided within that unit, potential
changes in the mix of services provided within that
unit and their cost, and a general system design that
provides for continued access to quality services.
‘‘(3) PAYMENT BASIS.—
‘‘(A) INITIAL BASIS.—
‘‘(i) IN GENERAL.—Under such system
the Secretary shall provide for computation
of a standard prospective payment amount
(or amounts). Such amount (or amounts)
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shall initially be based on the most current
audited cost report data available to the
Secretary and shall be computed in a man-
ner so that the total amounts payable under
the system for fiscal year 2000 shall be
equal to the total amount that would have
been made if the system had not been in ef-
fect but if the reduction in limits described
in clause (ii) had been in effect. Such
amount shall be standardized in a manner
that eliminates the effect of variations in
relative case mix and wage levels among
different home health agencies in a budget
neutral manner consistent with the case
mix and wage level adjustments provided
under paragraph (4)(A). Under the system,
the Secretary may recognize regional dif-
ferences or differences based upon whether
or not the services or agency are in an ur-
banized area.
‘‘(ii) REDUCTION.—The reduction de-
scribed in this clause is a reduction by 15
percent in the cost limits and per bene-
ficiary 
limits 
described 
in 
section
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1861(v)(1)(L), as those limits are in effect
on September 30, 1999.
‘‘(B) ANNUAL UPDATE.—
‘‘(i) IN GENERAL.—The standard pro-
spective payment amount (or amounts)
shall be adjusted for each fiscal year (begin-
ning with fiscal year 2001) in a prospective
manner specified by the Secretary by the
home health market basket percentage in-
crease applicable to the fiscal year involved.
‘‘(ii) HOME HEALTH MARKET BASKET
PERCENTAGE
INCREASE.—For purposes of
this subsection, the term ‘home health mar-
ket basket percentage increase’ means, with
respect to a fiscal year, a percentage (esti-
mated by the Secretary before the beginning
of the fiscal year) determined and applied
with respect to the mix of goods and services
included in home health services in the
same manner as the market basket percent-
age 
increase 
under 
section
1886(b)(3)(B)(iii) is determined and ap-
plied to the mix of goods and services com-
prising inpatient hospital services for the
fiscal year.
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‘‘(C) ADJUSTMENT
FOR
OUTLIERS.—The
Secretary shall reduce the standard prospective
payment amount (or amounts) under this para-
graph applicable to home health services fur-
nished during a period by such proportion as
will result in an aggregate reduction in pay-
ments for the period equal to the aggregate in-
crease in payments resulting from the applica-
tion of paragraph (5) (relating to outliers).
‘‘(4) PAYMENT COMPUTATION.—
‘‘(A) IN GENERAL.—The payment amount
for a unit of home health services shall be the ap-
plicable standard prospective payment amount
adjusted as follows:
‘‘(i) CASE
MIX
ADJUSTMENT.—The
amount shall be adjusted by an appropriate
case mix adjustment factor (established
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 geo-
graphic differences in such costs by an area
wage adjustment factor (established under
subparagraph (C)) for the area in which the
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services are furnished or such other area as
the Secretary may specify.
‘‘(B) ESTABLISHMENT
OF
CASE
MIX
AD-
JUSTMENT FACTORS.—The Secretary shall estab-
lish appropriate case mix adjustment factors for
home health services in a manner that explains
a significant amount of the variation in cost
among different units of services.
‘‘(C) ESTABLISHMENT OF AREA WAGE AD-
JUSTMENT FACTORS.—The Secretary shall estab-
lish area wage adjustment factors that reflect the
relative level of wages and wage-related costs ap-
plicable to the furnishing of home health services
in a geographic area compared to the national
average applicable level. Such factors may be the
factors used by the Secretary for purposes of sec-
tion 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 because of un-
usual 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 ex-
ceed 5 percent of the total payments projected or esti-
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mated to be made based on the prospective 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 INFORMATION.—
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 for the
physician who prescribed the services or made the cer-
tification 
described 
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—
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‘‘(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 subsection
(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
‘‘(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.—
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(1) PAYMENTS UNDER PART A.—Section 1814(b)
(42 U.S.C. 1395f(b)) is amended in the matter pre-
ceding paragraph (1) by striking ‘‘and 1886’’ and in-
serting ‘‘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 amended—
(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-
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 services,
as determined under section 1861(v), or
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‘‘(ii) the customary charges with re-
spect to such services,
or, if such services are furnished by a public pro-
vider of services, or by another provider which
demonstrates to the satisfaction of the Secretary
that a significant portion of its patients are low-
income (and requests that payment be made
under this provision), free of charge or at nomi-
nal charges to the public, the amount determined
in accordance with section 1814(b)(2);’’.
(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 5332(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
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agency (without regard to whether or
not the item or service was furnished
by the agency, by others under ar-
rangement with them made by the
agency, or when any other contracting
or consulting arrangement, or other-
wise).’’.
(ii) CONFORMING
AMENDMENT.—Sec-
tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)) (as
amended 
by 
section 
5332(b)(4)(B)) 
is
amended 
by 
striking 
‘‘section
1842(b)(6)(E);’’ and inserting ‘‘subpara-
graphs (E) and (F) of section 1842(b)(6);’’.
(C) EXCLUSIONS FROM COVERAGE.—Section
1862(a) (42 U.S.C. 1395y(a)), as amended by
section 5332(b)(1), is amended—
(i) by striking ‘‘or’’ at the end of para-
graph (16);
(ii) by striking the period at the end of
paragraph (17) and inserting ‘‘or’’; and
(iii) by inserting after paragraph (17)
the following:
‘‘(18) 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
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for payment for such services is not submitted by the
agency.’’.
(d) EFFECTIVE DATE.—Except as otherwise provided,
the amendments made by this section shall apply to cost
reporting periods beginning on or after October 1, 1999.
(e) CONTINGENCY.—If the Secretary of Health and
Human Services for any reason does not establish and im-
plement the prospective payment system for home health
services described in section 1895(b) of the Social Security
Act (as added by subsection (a)) for cost reporting periods
described in subsection (d), for such cost reporting periods
the Secretary shall provide for a reduction by 15 percent
in the cost limits and per beneficiary limits described in
section 1861(v)(1)(L) of such Act, as those limits would oth-
erwise be in effect on September 30, 1999.
SEC. 5344. PAYMENT BASED ON LOCATION WHERE HOME
HEALTH SERVICE IS FURNISHED.
(a) CONDITIONS
OF PARTICIPATION.—Section 1891
(42 U.S.C. 1395bbb) is amended by adding at the end the
following:
‘‘(g) PAYMENT ON BASIS OF LOCATION OF SERVICE.—
A home health agency shall submit claims for payment for
home health services under this title only on the basis of
the geographic location at which the service is furnished,
as determined by the Secretary.’’.
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(b) WAGE ADJUSTMENT.—Section 1861(v)(1)(L)(iii)
(42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking
‘‘agency is located’’ and inserting ‘‘service is furnished’’.
(c) EFFECTIVE DATE.—The amendments made by this
section apply to cost reporting periods beginning on or after
October 1, 1997.
PART II—HOME HEALTH BENEFITS
SEC. 5361. MODIFICATION OF PART A HOME HEALTH BENE-
FIT FOR INDIVIDUALS ENROLLED UNDER
PART B.
(a) IN GENERAL.—Section 1812 (42 U.S.C. 1395d) is
amended—
(1) in subsection (a)(3), by striking ‘‘home health
services’’ and inserting ‘‘for individuals not enrolled
in part B, home health services, and for individuals
so enrolled, part A home health services (as defined in
subsection (g))’’;
(2) by redesignating subsection (g) as subsection
(h); and
(3) by inserting after subsection (f) the following
new subsection:
‘‘(g)(1) For purposes of this section, the term ‘part A
home health services’ means—
‘‘(A) for services furnished during each year be-
ginning with 1998 and ending with 2003, home
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health services subject to the transition reduction ap-
plied under paragraph (2)(C) for services furnished
during the year, and
‘‘(B) for services furnished on or after January
1, 2004, post-institutional home health services for up
to 100 visits during a home health spell of illness.
‘‘(2) For purposes of paragraph (1)(A), the Secretary
shall specify, before the beginning of each year beginning
with 1998 and ending with 2003, a transition reduction
in the home health services benefit under this part as fol-
lows:
‘‘(A) The Secretary first shall estimate the
amount of payments that would have been made
under this part for home health services furnished
during the year if—
‘‘(i) part A home health services were all
home health services, and
‘‘(ii) part A home health services were lim-
ited to services described in paragraph (1)(B).
‘‘(B)(i) The Secretary next shall compute a
transfer reduction amount equal to the appropriate
proportion (specified under clause (ii)) of the amount
by which the amount estimated under subparagraph
(A)(i) for the year exceeds the amount estimated
under subparagraph (A)(ii) for the year.
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‘‘(ii) For purposes of clause (i), the ‘appropriate
proportion’ is equal to—
‘‘(I) 1⁄7 for 1998,
‘‘(II) 2⁄7 for 1999,
‘‘(III) 3⁄7 for 2000,
‘‘(IV) 4⁄7 for 2001,
‘‘(V) 5⁄7 for 2002, and
‘‘(VI) 6⁄7 for 2003.
‘‘(C) The Secretary shall establish a transition
reduction by specifying such a visit limit (during a
home health spell of illness) or such a post-institu-
tional limitation on home health services furnished
under this part during the year as the Secretary esti-
mates will result in a reduction in the amount of
payments that would otherwise be made under this
part for home health services furnished during the
year equal to the transfer amount computed under
subparagraph (B)(i) for the year.
‘‘(3) Payment under this part for home health services
furnished an individual enrolled under part B—
‘‘(A) during a year beginning with 1998 and
ending with 2003, may not be made for services that
are not within the visit limit or other limitation spec-
ified by the Secretary under the transition reduction
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under paragraph (3)(C) for services furnished during
the year; or
‘‘(B) on or after January 1, 2004, may not be
made for home health services that are not post-insti-
tutional home health services or for post-institutional
furnished to the individual after such services have
been furnished to the individual for a total of 100 vis-
its during a home health spell of illness.’’.
(b) POST-INSTITUTIONAL HOME HEALTH SERVICES
DEFINED.—Section 1861 (42 U.S.C. 1395x), as amended
by sections 5102(a) and 5103(a), is amended by adding at
the end the following:
‘‘Post-Institutional Home Health Services; Home Health
Spell of Illness
‘‘(qq)(1) The term ‘post-institutional home health serv-
ices’ means home health services furnished to an individ-
ual—
‘‘(A) after discharge from a hospital or rural
primary care hospital in which the individual was
an inpatient for not less than 3 consecutive days be-
fore such discharge if such home health services were
initiated within 14 days after the date of such dis-
charge; or
‘‘(B) after discharge from a skilled nursing facil-
ity in which the individual was provided post-hos-
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pital extended care services if such home health serv-
ices were initiated within 14 days after the date of
such discharge.
‘‘(2) The term ‘home health spell of illness’ with respect
to any individual means a period of consecutive days—
‘‘(A) beginning with the first day (not included
in a previous home health spell of illness) (i) on
which such individual is furnished post-institutional
home health services, and (ii) which occurs in a
month for which the individual is entitled to benefits
under part A, and
‘‘(B) ending with the close of the first period of
60 consecutive days thereafter on each of which the
individual is neither an inpatient of a hospital or
rural primary care hospital nor an inpatient of a fa-
cility described in section 1819(a)(1) or subsection
(y)(1) nor provided home health services.’’.
(c) MAINTAINING APPEAL RIGHTS FOR HOME HEALTH
SERVICES.—Section 
1869(b)(2)(B) 
(42 
U.S.C.
1395ff(b)(2)(B)) is amended by inserting ‘‘(or $100 in the
case of home health services)’’ after ‘‘$500’’.
(d) 
MAINTAINING
SEAMLESS
ADMINISTRATION
THROUGH FISCAL INTERMEDIARIES.—Section 1842(b)(2)
(42 U.S.C. 1395u(b)(2)) is amended by adding at the end
the following:
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‘‘(E) With respect to the payment of claims for home
health services under this part that, but for the amendments
made by section 5361, would be payable under part A in-
stead of under this part, the Secretary shall continue ad-
ministration of such claims through fiscal intermediaries
under section 1816.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section apply to services furnished on or after January 1,
1998. For the purpose of applying such amendments, any
home health spell of illness that began, but did not end,
before such date shall be considered to have begun as of such
date.
SEC. 5362. IMPOSITION OF $5 COPAYMENT FOR PART B
HOME HEALTH SERVICES.
(a) IN GENERAL.—Section 1833(a)(2)(A) (42 U.S.C.
1395l(a)(2)(A)) (as amended by section 5343(c)(2)) is
amended by striking ‘‘1895’’ and inserting ‘‘1895, less a
copayment amount equal to $5 per visit, not to exceed a
total annual copayment amount equal to the inpatient hos-
pital deductible determined under section 1813 for the cal-
endar year in which such service is furnished’’.
(b) PROVIDER CHARGES.—Section 1866(a)(2)(A)(i)
(42 U.S.C. 1395cc(a)(2)(A)(i)) is amended—
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(1) by striking ‘‘deduction or coinsurance’’ and
inserting ‘‘deduction, coinsurance, or copayment’’;
and
(2) by striking ‘‘section 1833(b)’’ and inserting
‘‘subsection (a)(2)(A) or (b) of section 1833’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to services furnished on or after October
1, 1997.
SEC. 5363. CLARIFICATION OF PART-TIME OR INTERMIT-
TENT NURSING CARE.
(a) IN
GENERAL.—Section 1861(m) (42 U.S.C.
1395x(m)) is amended by adding at the end the following:
‘‘For purposes of paragraphs (1) and (4), the term ‘part-
time or intermittent services’ means skilled nursing and
home health aide services furnished any number of days per
week as long as they are furnished (combined) less than 8
hours each day and 28 or fewer hours each week (or, subject
to review on a case-by-case basis as to the need for care,
less than 8 hours each day and 35 or fewer hours per week).
For purposes of sections 1814(a)(2)(C) and 1835(a)(2)(A),
‘intermittent’ means skilled nursing care that is either pro-
vided or needed on fewer than 7 days each week, or less
than 8 hours of each day for periods of 21 days or less (with
extensions in exceptional circumstances when the need for
additional care is finite and predictable).’’.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) applies to services furnished on or after October
1, 1997.
SEC. 5364. STUDY ON DEFINITION OF HOMEBOUND.
(a) STUDY.—The Secretary of Health and Human
Services shall conduct a study of the criteria that should
be applied, and the method of applying such criteria, in
the determination of whether an individual is homebound
for purposes of qualifying for receipt of benefits for home
health services under the medicare program. Such criteria
shall include the extent and circumstances under which a
person may be absent from the home but nonetheless qualify.
(b) REPORT.—Not later than October 1, 1998, the Sec-
retary shall submit a report to the Congress on the study
conducted under subsection (a). The report shall include
specific recommendations on such criteria and methods.
SEC. 5365. NORMATIVE STANDARDS FOR HOME HEALTH
CLAIMS DENIALS.
(a) IN GENERAL.—Section 1862(a)(1) (42 U.S.C.
1395y(a)(1)), as amended by section 5102(c), is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (F),
(2) by striking the semicolon at the end of sub-
paragraph (G) and inserting ‘‘, and’’, and
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(3) by inserting after subparagraph (G) the fol-
lowing new subparagraph:
‘‘(H) the frequency and duration of home health
services which are in excess of normative guidelines
that the Secretary shall establish by regulation;’’.
(b) NOTIFICATION.—The Secretary of Health and
Human Services may establish a process for notifying a
physician in cases in which the number of home health serv-
ice visits furnished under the medicare program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
pursuant to a prescription or certification of the physician
significantly exceeds such threshold (or thresholds) as the
Secretary specifies. The Secretary may adjust such thresh-
old to reflect demonstrated differences in the need for home
health services among different beneficiaries.
(c) EFFECTIVE DATE.—The amendments made by this
section apply to services furnished on or after October 1,
1997.
SEC. 5366. INCLUSION OF COST OF SERVICE IN EXPLA-
NATION OF MEDICARE BENEFITS.
(a) IN GENERAL.—Section 1842(h)(7) of the Social Se-
curity Act (42 U.S.C. 1395u(h)(7)) is amended—
(1) in subparagraph (C), by striking ‘‘and’’ at
the end;
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(2) in subparagraph (D), by striking the period
at the end and inserting ‘‘, and’’; and
(3) by adding at the end the following:
‘‘(E) in the case of home health services fur-
nished to an individual enrolled under this part, the
total amount that the home health agency or other
provider of such services billed for such services.’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) apply to explanation of benefits provided on and
after October 1, 1997.
Subtitle F—Provisions Relating to
Part A
CHAPTER 1—PAYMENT OF PPS HOSPITALS
SEC. 5401. 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) in subclause (XII)—
(A) by inserting ‘‘and the period beginning
on October 1, 1997, and ending on December 31,
1997,’’ after ‘‘fiscal year 1997,’’; and
(B) by striking ‘‘and’’ at the end; and
(2) by striking subclause (XIII) and inserting
the following:
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‘‘(XIII) for calendar year 1998 for hospitals in
all areas, the market basket percentage increase minus
2.5 percentage points,
‘‘(XIV) for calendar year 1999 for hospitals in
all areas, the market basket percentage increase minus
1.3 percentage points,
‘‘(XV) for calendar years 2000 through 2002 for
hospitals in all areas, the market basket percentage
increase minus 1.0 percentage points, and
‘‘(XVI) for calendar year 2003 and each subse-
quent calendar year for hospitals in all areas, the
market basket percentage increase.’’.
(b) RULE
OF CONSTRUCTION.—Section 1886 (42
U.S.C. 1395ww) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) PPS CALENDAR
YEAR
PAYMENTS.—Notwith-
standing any other provision of this title, any updates or
payment amounts determined under this section shall on
and after December 31, 1998, take effect and be applied on
a calendar year basis. With respect to any cost reporting
periods that relate to any such updates or payment
amounts, the Secretary shall revise such cost reporting peri-
ods to ensure that on and after December 31, 1998, such
cost reporting periods relate to updates and payment
amounts made under this section on a calendar year basis
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in the same manner as such cost reporting periods applied
to updates and payment amounts under this section on the
day before the date of enactment of this subsection.’’.
SEC. 5402. CAPITAL PAYMENTS FOR PPS HOSPITALS.
(a) MAINTAINING SAVINGS FROM TEMPORARY REDUC-
TION IN PPS CAPITAL RATES.—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 Oc-
tober 1, 1997, the Secretary shall apply the budget neutral-
ity 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 Regula-
tions), to (i) the unadjusted standard Federal capital pay-
ment 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).’’.
(b) SYSTEM EXCEPTION PAYMENTS
FOR TRANSI-
TIONAL CAPITAL.—
(1) IN GENERAL.—Section 1886(g)(l) (42 U.S.C.
1395ww(g)(1)) is amended—
(A) by redesignating subparagraph (C) as
subparagraph (F), and
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(B) by inserting after subparagraph (B) the
following:
‘‘(C) The exceptions under the system pro-
vided by the Secretary under subparagraph
(B)(iii) shall include the provision of exception
payments under the special exceptions process
provided under section 412.348(g) of title 42,
Code of Federal Regulations (as in effect on Sep-
tember 1, 1995), except that the Secretary shall
revise such process, effective for discharges occur-
ring after September 30, 1997, as follows:
‘‘(i) Eligible hospital requirements, as
described in section 412.348(g)(1) of title
42, Code of Federal Regulations, shall apply
except that subparagraph (ii) shall be re-
vised to require that hospitals located in an
urban area with at least 300 beds shall be
eligible under such process and that such a
hospital shall be eligible without regard to
its 
disproportionate 
patient 
percentage
under subsection (d)(5)(F) or whether it
qualifies for additional payment amounts
under such subsection.
‘‘(ii) Project size requirements, as de-
scribed in section 412.348(g)(5) of title 42,
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be revised to require that the additional
payment that would otherwise be payable
for the cost reporting period shall be re-
duced by the amount (if any) by which the
hospital’s current year medicare capital
payments (excluding, if applicable, 75 per-
cent of the hospital’s capital-related dis-
proportionate share payments) exceeds its
medicare capital costs for such year.
‘‘(D)(i) The Secretary shall reduce the Fed-
eral capital and hospital rates up to $50,000,000
for a calendar year to ensure that the applica-
tion of subparagraph (C) does not result in an
increase in the total amount that would have
been paid under this subsection in the fiscal year
if such subparagraph did not apply.
‘‘(ii) Payments made pursuant to the appli-
cation of subparagraph (C) shall not be consid-
ered for purposes of calculating total estimated
payments under section 412.348(h), title 42,
Code of Federal Regulations.
‘‘(E) The Secretary shall provide for publi-
cation in the Federal Register each year (begin-
ning with 1999) of a description of the distribu-
tional impact of the application of subparagraph
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(C) on hospitals which receive, and do not re-
ceive, an exception payment under such subpara-
graph.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1886(g)(1)(B)(iii) (42 U.S.C. 1395ww(g)(1)(B)(iii))
is amended by striking ‘‘may provide’’ and inserting
‘‘shall provide (in accordance with subparagraph
(C))’’.
CHAPTER 2—PAYMENT OF PPS EXEMPT
HOSPITALS
SEC. 5421. PAYMENT UPDATE.
(a) IN
GENERAL.—Section 1886(b)(3)(B)(ii) (42
U.S.C. 1395ww(b)(3)(B)(ii)) is amended—
(1) by striking ‘‘and’’ at the end of subclause
(V);
(2) by redesignating subclause (VI) as subclause
(VIII); and
(3) by inserting after subclause (V), the following
subclauses:
‘‘(VI) 
for 
fiscal 
years 
1998
through 2001, is 0 percent;
‘‘(VII) for fiscal year 2002, is the
market 
basket 
percentage 
increase
minus 3.0 percentage points, and’’.
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(b) NO EFFECT OF PAYMENT REDUCTION ON EXCEP-
TIONS 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 de-
scribed in paragraph (3)(B)(vi) for a fiscal year as being
equal to the market basket percentage for that year.’’.
SEC. 5422. REDUCTIONS TO CAPITAL PAYMENTS FOR CER-
TAIN 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 attributable to portions of cost reporting periods occur-
ring 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 de-
scribed 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
payments otherwise determined under this title by 15 per-
cent.’’.
SEC. 5423. CAP ON TEFRA LIMITS.
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)) is
amended—
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(1) in subparagraph (A) by striking ‘‘subpara-
graphs (C), (D), and (E)’’ and inserting ‘‘subpara-
graph (C) and succeeding subparagraphs’’, and
(2) by adding at the end the following:
‘‘(F)(i) Except as provided in clause (ii), in the case
of a hospital or unit that is within a class of hospital de-
scribed in clause (iii), for cost reporting periods beginning
on or after October 1, 1997, and before October 1, 2002,
such target amount may not be greater than the 75th per-
centile of the target amounts for such hospitals within such
class for cost reporting periods beginning during that fiscal
year (determined without regard to clause (ii)).
‘‘(ii) In the case of a hospital or unit—
‘‘(I) that is within a class of hospital described
in clause (iii); and
‘‘(II) whose operating costs of inpatient hospital
services recognized under this title for the most recent
cost reporting period for which information is avail-
able are less than the target amount for the hospital
or unit under clause (i) (determined without regard
to this clause) for its cost reporting period beginning
on or after October 1, 1997, and before October 1,
1998,
clause (i) shall be applied for cost reporting periods begin-
ning on or after October 1, 1997, and before October 1,
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2002, by substituting for the dollar limit on the target
amounts established under such clause for such period a dol-
lar limit that is equal to the greater of 90 percent of such
dollar limit or the operating costs of the hospital or unit
determined under subclause (II).
‘‘(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 sub-
section (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.’’.
SEC. 5424. CHANGE IN BONUS AND RELIEF PAYMENTS.
(a) 
CHANGE
IN
BONUS
PAYMENT.—Section
1886(b)(1)(A) (42 U.S.C. 1395ww(b)(1)(A)) is amended by
striking all that follows ‘‘plus—’’ and inserting the follow-
ing:
‘‘(i) in the case of a hospital with a
target amount that is less than 135 percent
of the median of the target amounts for hos-
pitals in the same class of hospital, the less-
er of 40 percent of the amount by which the
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target amount exceeds the amount of the op-
erating costs or 4 percent of the target
amount;
‘‘(ii) in the case of a hospital with a
target amount that equals or exceeds 135 of
such median but is less than 150 percent of
such median, the lesser of 30 percent of the
amount by which the target amount exceeds
the amount of the operating costs or 3 per-
cent of the target amount; and
‘‘(iii) in the case of a hospital with a
target amount that equals or exceeds 150 of
such median, the lesser of 20 percent of the
amount by which the target amount exceeds
the amount of the operating costs or 2 per-
cent of the target amount; or’’.
(b) 
CHANGE
IN
RELIEF
PAYMENTS.—Section
1886(b)(1) (42 U.S.C. 1395ww(b)(1)) is amended—
(1) in subparagraph (B)—
(A) by striking ‘‘greater than the target
amount’’ and inserting ‘‘greater than 110 per-
cent of the target amount’’,
(B) by striking ‘‘exceed the target amount’’
and inserting ‘‘exceed 110 percent of the target
amount’’,
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(C) by striking ‘‘10 percent’’ and inserting
‘‘20 percent’’, and
(D) by redesignating such subparagraph as
subparagraph (C); and
(2) by inserting after subparagraph (A) the fol-
lowing 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 operat-
ing costs payable under part A on a per discharge
basis shall equal the target amount; or’’.
SEC. 5425. TARGET AMOUNTS FOR REHABILITATION HOS-
PITALS, LONG-TERM CARE HOSPITALS, AND
PSYCHIATRIC HOSPITALS.
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)) is
amended—
(1) in subparagraph (A), in the matter preceding
clause (i), by striking ‘‘and (E)’’ and inserting ‘‘(E),
(F), and (G)’’; and
(2) by adding at the end the following new sub-
paragraphs:
‘‘(F) In the case of a rehabilitation hospital (or unit
thereof) (as described in clause (ii) of subsection (d)(1)(B)),
for cost reporting periods beginning on or after October 1,
1997—
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‘‘(i) in the case of a hospital which first receives
payments under this section before October 1, 1997,
the target amount determined under subparagraph
(A) for such hospital or unit for a cost reporting pe-
riod beginning during a fiscal year shall not be less
than 50 percent of the national mean of the target
amounts determined under such subparagraph for all
such hospitals for cost reporting periods beginning
during such fiscal year (determined without regard to
this subparagraph); and
‘‘(ii) in the case of a hospital which first receives
payments under this section on or after October 1,
1997, such target amount may not be greater than
110 percent of the national mean of the target
amounts for such hospitals (and units thereof) for cost
reporting periods beginning during fiscal year 1991.
‘‘(G) In the case of a hospital which has an average
inpatient length of stay of greater than 25 days (as de-
scribed in clause (iv) of subsection (d)(1)(B)), for cost re-
porting periods beginning on or after October 1, 1997—
‘‘(i) in the case of a hospital which first receives
payments under this section as a hospital that is not
a subsection (d) hospital or a subsection (d) Puerto
Rico hospital before October 1, 1997, the target
amount determined under subparagraph (A) for such
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hospital for a cost reporting period beginning during
a fiscal year shall not be less than 50 percent of the
national mean of the target amounts determined
under such subparagraph for all such hospitals for
cost reporting periods beginning during such fiscal
year (determined without regard to this subpara-
graph); and
‘‘(ii) in the case of any other hospital which first
receives payment under this section on or after Octo-
ber 1, 1997, such target amount may not be greater
than 110 percent of such national mean of the target
amounts for such hospitals for cost reporting periods
beginning during fiscal year 1991.
‘‘(H) In the case of a psychiatric hospital (as defined
in section 1861(f)), for cost reporting periods beginning on
or after October 1, 1997—
‘‘(i) in the case of a hospital which first receives
payments under this section before October 1, 1997,
the target amount determined under subparagraph
(A) for such hospital for a cost reporting period be-
ginning during a fiscal year shall not be less than 50
percent of the national mean of the target amounts
determined under such subparagraph for all such hos-
pitals for cost reporting periods beginning during
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such fiscal year (determined without regard to this
subparagraph); and
‘‘(ii) in the case of any other hospital which first
receives payment under this section on or after Octo-
ber 1, 1997, such target amount may not be greater
than 110 percent of such national mean of the target
amounts for such hospitals for cost reporting periods
beginning during fiscal year 1991.’’.
SEC. 5426. TREATMENT OF CERTAIN LONG-TERM CARE HOS-
PITALS LOCATED WITHIN OTHER HOSPITALS.
(a) IN GENERAL.—Section 1886(d)(1)(B) (42 U.S.C.
1395ww(d)(1)(B)) is amended by adding at the end the fol-
lowing 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.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to discharges occurring on or after
October 1, 1995.
SEC. 5426A. REBASING.
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as
amended by section 5423, is amended by adding at the end
the following:
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‘‘(G)(i) In the case of a hospital (or unit de-
scribed in the matter following clause (v) of sub-
section (d)(1)(B)) that received payment under
this subsection for inpatient hospital services fur-
nished before January 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 hos-
pital services for the hospital or unit for
each of the 5 cost reporting periods for
which the Secretary has the most recent set-
tled cost reports as of the date of the enact-
ment of this subparagraph.
‘‘(II) The Secretary shall increase the
amount determined under subclause (I) for
each cost reporting period by the applicable
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percentage increase under subparagraph
(B)(ii) for each subsequent cost reporting
period up to the cost reporting period de-
scribed in clause (i).
‘‘(III) The Secretary shall identify
among such 5 cost reporting periods the cost
reporting periods for which the amount de-
termined 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 reporting peri-
ods not identified under subclause (III).
‘‘(iii) For purposes of this subparagraph,
each of the following shall be treated as a sepa-
rate 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.
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‘‘(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.’’.
SEC. 5427. ELIMINATION OF EXEMPTIONS; REPORT ON EX-
CEPTIONS AND ADJUSTMENTS.
(a) ELIMINATION OF EXEMPTIONS.—
(1) IN GENERAL.—Section 1886(b)(4)(A)(i) (42
U.S.C. 1395ww(b)(4)(A)(i)) is amended by striking
‘‘exemption from, or an exception and adjustment to,’’
and inserting ‘‘an exception and adjustment to’’ each
place it appears.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to hospitals that first
qualify as a hospital described in clause (i), (ii), or
(iv) 
of 
section 
1886(d)(1)(B) 
(42 
U.S.C.
1395ww(d)(1)(B)) on or after October 1, 1997.
(b) REPORT.—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 Secu-
rity Act (42 U.S.C. 1395ww(b)(4)), as amended by sub-
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section (a), for cost reporting periods ending during the pre-
vious fiscal year.
SEC. 5428. TECHNICAL CORRECTION RELATING TO SUB-
SECTION (d) 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)’’; and
(B) by striking the semicolon at the end and
inserting ‘‘, or’’; and
(C) by adding at the end the following:
‘‘(II) a hospital that—
‘‘(aa) 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, or is
able to demonstrate, for any six-month period,
that at least 50 percent of its total discharges
have a principal diagnosis that reflects a finding
of neoplastic disease, as defined in subparagraph
(E);
‘‘(bb) applied on or before December 31,
1990, for classification as a hospital involved ex-
tensively in treatment for or research on cancer
under this clause (as in effect on the day before
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the date of the enactment of this subclause), but
was not approved for such classification; and
‘‘(cc) is located in a State which, as of De-
cember 19, 1989, was not operating a demonstra-
tion project under section 1814(b);’’; and
(2) by adding at the end the following:
‘‘(E) For purposes of subparagraph (B)(v)(II)(aa), the
term ‘principal diagnosis that reflects a finding of neo-
plastic disease’ means the condition established 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 re-
flect such a principal diagnosis.’’.
(b) PAYMENTS.—Any classification by reason of sec-
tion 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 beginning on
or after January 1, 1991. Any payments owed to a hospital
as a result of such section (as so amended) shall be made
expeditiously, but in no event later than 1 year after the
date of enactment of this Act.
SEC. 5429. CERTAIN CANCER HOSPITALS.
(a) IN GENERAL.—Section 1886(d)(1) (42 U.S.C.
1395ww(d)(1)), as amended by section 5428, is amended—
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(1) in subparagraph (B)(v), by striking the
semicolon at the end of subclause (II)(cc) and insert-
ing the following: ‘‘, or’’, and by adding at the end
the following:
‘‘(III) a hospital—
‘‘(aa) that was classified under subsection
(iv) beginning on or before December 31, 1990,
and through December 31, 1995; and
‘‘(bb) throughout the period described in
item (aa) and currently has greater than 49 per-
cent of its total patient discharges with a prin-
cipal diagnosis that reflects a finding of neo-
plastic disease;’’; and
(2) by adding at the end the following:
‘‘(F) In the case of a hospital that is classified under
subparagraph (B)(v)(III), no rebasing is permitted by such
hospital and such hospital shall use the base period in effect
at the time of such hospital’s December 31, 1995, cost re-
port.’’.
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CHAPTER 3—GRADUATE MEDICAL
EDUCATION PAYMENTS
Subchapter A—Direct Medical Education
SEC. 5441. LIMITATION ON NUMBER OF RESIDENTS AND
ROLLING AVERAGE FTE COUNT.
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is
amended by adding after subparagraph (E) the following:
‘‘(F) LIMITATION
ON
NUMBER
OF
RESI-
DENTS IN ALLOPATHIC AND OSTEOPATHIC MEDI-
CINE.—Except as provided in subparagraph (H),
such rules shall provide that for purposes of a
cost reporting period beginning on or after Octo-
ber 1, 1997, the total number of full-time equiva-
lent residents before application of weighting fac-
tors (as determined under this paragraph) with
respect to a hospital’s approved medical resi-
dency training program in the fields of
allopathic medicine and osteopathic medicine
may not exceed the number of full-time equiva-
lent residents with respect to such programs for
the hospital’s most recent cost reporting period
ending on or before December 31, 1996.
‘‘(G) COUNTING INTERNS AND RESIDENTS
FOR 1998 AND SUBSEQUENT YEARS.—
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‘‘(i) IN GENERAL.—For cost reporting
periods beginning on or after October 1,
1997, subject to the limit described in sub-
paragraph (F) and except as provided in
subparagraph (H), the total number of full-
time equivalent residents for determining a
hospital’s graduate medical education pay-
ment shall equal the average of the full-time
equivalent resident counts for the cost re-
porting period and the preceding two cost
reporting periods.
‘‘(ii) ADJUSTMENT FOR SHORT PERI-
ODS.—If any cost reporting period begin-
ning on or after October 1, 1997, is not
equal to twelve months, the Secretary shall
make appropriate modifications to ensure
that the average full-time equivalent resi-
dent counts pursuant to clause (ii) are
based on the equivalent of full twelve-month
cost reporting periods.
‘‘(iii) TRANSITION RULE FOR 1998.—In
the case of a hospital’s first cost reporting
period beginning on or after October 1,
1997, clause (i) shall be applied by using
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the average for such period and the preced-
ing cost reporting period.
‘‘(H) SPECIAL
RULES
FOR
NEW
FACILI-
TIES.—
‘‘(i) IN GENERAL.—If a hospital is an
applicable facility under clause (iii) for any
year with respect to any approved medical
residency training program described in
subsection (h)—
‘‘(I) subject to the applicable an-
nual limit under clause (ii), the Sec-
retary may provide an additional
amount of full-time equivalent resi-
dents which may be taken into account
with respect to such program under
subparagraph (F) for cost reporting
periods beginning during such year,
and
‘‘(II) the averaging rules under
subparagraph (G) shall not apply for
such year.
‘‘(ii) APPLICABLE ANNUAL LIMIT.—The
total of additional full-time equivalent resi-
dents which the Secretary may authorize
under clause (i) for all applicable facilities
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for any year shall not exceed the amount
which would result in the number of full-
time equivalent residents with respect to ap-
proved medical residency training programs
in the fields of allopathic and osteopathic
medicine for all hospitals exceeding such
number for the preceding year. In allocating
such additional residents, the Secretary
shall give special consideration to facilities
that meet the needs of underserved rural
areas.
‘‘(iii) 
APPLICABLE
FACILITY.—For
purposes of this subparagraph, a hospital
shall be treated as an applicable facility
with respect to an approved medical resi-
dency training program only during the
first 5 years during which such program is
in existence. A hospital shall not be treated
as such a facility if the 5-year period de-
scribed in the preceding sentence ended on
or before December 31, 1996.
‘‘(iv) COORDINATION
WITH
LIMIT.—
For purposes of applying subparagraph (F),
the number of full-time equivalent residents
of an applicable facility with respect to any
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approved medical residency training pro-
gram in the fields of allopathic and osteo-
pathic medicine for the facility’s most re-
cent cost reporting period ending on or be-
fore December 31, 1996, shall be increased
by the number of such residents allocated to
such facility under clause (i).’’.
SEC. 5442. PERMITTING PAYMENT TO NONHOSPITAL PRO-
VIDERS.
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww)
is amended by adding at the end the following:
‘‘(j) PAYMENT TO NONHOSPITAL PROVIDERS.—
‘‘(1) IN GENERAL.—For cost reporting periods
beginning on or after October 1, 1997, the Secretary
may establish rules for payment to qualified nonhos-
pital providers for their direct costs of medical edu-
cation, if those costs are incurred in the operation of
an approved medical residency training program de-
scribed in subsection (h). Such rules shall specify the
amounts, form, and manner in which payments will
be made and the portion of such payments that will
be made from each of the trust funds under this title.
‘‘(2) QUALIFIED NONHOSPITAL PROVIDERS.—For
purposes of this subsection, the term ‘qualified non-
hospital providers’ means—
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‘‘(A) a federally qualified health center, as
defined in section 1861(aa)(4);
‘‘(B) a rural health clinic, as defined in sec-
tion 1861(aa)(2); and
‘‘(C) such other providers (other than hos-
pitals) as the Secretary determines to be appro-
priate.’’.
(b) PROHIBITION
ON DOUBLE PAYMENTS.—Section
1886(h)(3)(B) (42 U.S.C. 1395ww(h)(3)(B)) is amended by
adding at the end the following:
‘‘The Secretary shall reduce the aggregate approved
amount to the extent payment is made under sub-
section (j) for residents included in the hospital’s
count of full-time equivalent residents.’’.
SEC. 5443. MEDICARE SPECIAL REIMBURSEMENT RULE FOR
PRIMARY CARE COMBINED RESIDENCY PRO-
GRAMS.
(a) IN GENERAL.—Section 1886(h)(5)(G) of the Social
Security Act (42 U.S.C. 1395ww(h)(5)(G)) is amended—
(1) in clause (i), by striking ‘‘and (iii)’’ and in-
serting ‘‘, (iii), and (iv)’’; and
(2) by adding at the end the following:
‘‘(iv) SPECIAL
RULE
FOR
PRIMARY
CARE COMBINED RESIDENCY PROGRAMS.—
(I) In the case of a resident enrolled in a
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combined medical residency training pro-
gram in which all of the individual pro-
grams (that are combined) are for training
a primary care resident (as defined in sub-
paragraph (H)), the period of board eligi-
bility shall be the minimum number of
years of formal training required to satisfy
the requirements for initial board eligibility
in the longest of the individual programs
plus one additional year.
‘‘(II) A resident enrolled in a combined
medical residency training program that
includes an obstetrics and gynecology pro-
gram qualifies for the period of board eligi-
bility under subclause (I) if the other pro-
grams such resident combines with such ob-
stetrics and gynecology program are for
training a primary care resident.’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) apply to combined medical residency training
programs in effect on or after January 1, 1998.
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Subchapter B—Indirect Medical Education
SEC. 5446. INDIRECT GRADUATE MEDICAL EDUCATION PAY-
MENTS.
(a) MULTIYEAR TRANSITION REGARDING PERCENT-
AGES.—
(1) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as
follows:
‘‘(ii) For purposes of clause (i)(II), the in-
direct teaching adjustment factor is equal to
c × (((1+r) to the nth power) ¥ 1), where ‘r’
is the ratio of the hospital’s full-time equivalent
interns and residents to beds and ‘n’ equals .405.
For discharges occurring—
‘‘(I) on or after May 1, 1986, and be-
fore October 1, 1997, ‘c’ is equal to 1.89;
‘‘(II) during fiscal year 1998, ‘c’ is
equal to 1.72;
‘‘(III) during fiscal year 1999, ‘c’ is
equal to 1.6;
‘‘(IV) during fiscal year 2000, ‘c’ is
equal to 1.47; and
‘‘(V) on or after October 1, 2000, ‘c’ is
equal to 1.35.’’.
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(2) 
NO
RESTANDARDIZATION
OF
PAYMENT
AMOUNTS
REQUIRED.—Section 1886(d)(2)(C)(i) (42
U.S.C. 1395ww(d)(2)(C)(i)) is amended by adding at
the end the following: ‘‘except that the Secretary shall
not take into account any reduction in the amount of
additional payments under paragraph (5)(B)(ii) re-
sulting from the amendment made by section
5446(a)(1) of the Balanced Budget Act of 1997,’’.
(b) LIMITATION.—
(1) IN
GENERAL.—Section 1886(d)(5)(B) (42
U.S.C. 1395ww(d)(5)(B)) is amended by adding after
clause (iv) the following:
‘‘(v) In determining the adjustment with re-
spect to a hospital for discharges occurring on or
after October 1, 1997, the total number of full-
time equivalent interns and residents in either a
hospital or nonhospital setting may not exceed
the number of such full-time equivalent interns
and residents in the hospital with respect to the
hospital’s most recent cost reporting period end-
ing on or before December 31, 1996.
‘‘(vi) For purposes of clause (ii)—
‘‘(I) ‘r’ may not exceed the ratio of the
number of interns and residents as deter-
mined under clause (v) with respect to the
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hospital for its most recent cost reporting
period ending on or before December 31,
1996, to the hospital’s available beds (as de-
fined by the Secretary) during that cost re-
porting period, and
‘‘(II) for the hospital’s cost reporting
periods beginning on or after October 1,
1997, subject to the limits described in
clauses (iv) and (v), the total number of
full-time equivalent residents for payment
purposes shall equal the average of the ac-
tual full-time equivalent resident count for
the cost reporting period and the preceding
two cost reporting periods.
In the case of the first cost reporting period be-
ginning on or after October 1, 1997, subclause
(II) shall be applied by using the average for
such period and the preceding cost reporting pe-
riod.
‘‘(vii)(I) If a hospital is an applicable facil-
ity under subclause (III) for any year with re-
spect to any approved medical residency train-
ing program described in subsection (h)—
‘‘(aa) subject to the applicable annual
limit under subclause (II), the Secretary
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may provide an additional amount of full-
time equivalent interns and residents which
may be taken into account with respect to
such program under clauses (v) and (vi) for
cost reporting periods beginning during
such year, and
‘‘(bb) the averaging rules under clause
(vi)(II) shall not apply for such year.
‘‘(II) The total of additional full-time equiv-
alent interns and residents which the Secretary
may authorize under subclause (I) for all appli-
cable facilities for any year shall not exceed the
amount which would result in the number of
full-time equivalent interns or residents for all
hospitals exceeding such number for the preced-
ing year. In allocating such additional residents,
the Secretary shall give special consideration to
facilities that meet the needs of underserved rural
areas.
‘‘(III) For purposes of this clause, a hos-
pital shall be treated as an applicable facility
with respect to an approved medical residency
training program only during the first 5 years
during which such program is in existence. A
hospital shall not be treated as such a facility if
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the 5-year period described in the preceding sen-
tence ended on or before December 31, 1996.
‘‘(IV) For purposes of applying clause (v),
the number of full-time equivalent residents of an
applicable facility with respect to any approved
medical residency training program for the fa-
cility’s most recent cost reporting period ending
on or before December 31, 1996, shall be in-
creased by the number of such residents allocated
to such facility under subclause (I).
‘‘(viii) If any cost reporting period beginning on
or after October 1, 1997, is not equal to twelve
months, the Secretary shall make appropriate modi-
fications to ensure that the average full-time equiva-
lent residency count pursuant to subclause (II) of
clause (vi) is based on the equivalent of full twelve-
month cost reporting periods.’’.
(2) PAYMENT FOR INTERNS AND RESIDENTS PRO-
VIDING
OFF-SITE
SERVICES.—Section
1886(d)(5)(B)(iv) (42 U.S.C. 1395ww(d)(5)(B)(iv)) is
amended to read as follows:
‘‘(iv) Effective for discharges occurring on or
after October 1, 1997, all the time spent by an intern
or resident in patient care activities under an ap-
proved medical residency training program at an en-
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tity in a nonhospital setting shall be counted towards
the determination of full-time equivalency if the hos-
pital incurs all, or substantially all, of the costs for
the training program in that setting.’’.
Subchapter C—Graduate Medical Education
Payments for Managed Care Enrollees
SEC. 5451. DIRECT AND INDIRECT MEDICAL EDUCATION
PAYMENTS TO HOSPITALS FOR MANAGED
CARE ENROLLEES.
(a) PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF
GRADUATE MEDICAL EDUCATION.—Section 1886(h)(3) (42
U.S.C. 1395ww(h)(3)) is amended by adding after subpara-
graph (C) the following:
‘‘(D) PAYMENT FOR MEDICARE CHOICE EN-
ROLLEES.—
‘‘(i) IN GENERAL.—For portions of cost
reporting periods occurring on or after Jan-
uary 1, 1998, the Secretary shall provide
for an additional payment amount under
this subsection for services furnished to in-
dividuals who are enrolled under a risk-
sharing contract with an eligible organiza-
tion under section 1876 and who are enti-
tled to part A or with a Medicare Choice or-
ganization under part C. The amount of
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such a payment shall equal the applicable
percentage of the product of—
‘‘(I) 
the 
aggregate 
approved
amount (as defined in subparagraph
(B)) for that period; and
‘‘(II) the fraction of the total
number of inpatient-bed days (as es-
tablished by the Secretary) during the
period which are attributable to such
enrolled individuals.
‘‘(ii) APPLICABLE
PERCENTAGE.—For
purposes of clause (i), the applicable per-
centage is—
‘‘(I) 25 percent in 1998,
‘‘(II) 50 percent in 1999,
‘‘(III) 75 percent in 2000, and
‘‘(IV) 100 percent in 2001 and
subsequent years.
‘‘(iii) SPECIAL RULE FOR HOSPITALS
UNDER
REIMBURSEMENT
SYSTEM.—The
Secretary shall establish rules for the appli-
cation of this subparagraph to a hospital
reimbursed under a reimbursement system
authorized under section 1814(b)(3) in the
same manner as it would apply to the hos-
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pital if it were not reimbursed under such
section.’’.
(b) PAYMENT TO HOSPITALS OF INDIRECT MEDICAL
EDUCATION
COSTS.—Section 
1886(d) 
(42 
U.S.C.
1395ww(d)) is amended by adding at the end the following:
‘‘(11) ADDITIONAL
PAYMENTS
FOR
MANAGED
CARE SAVINGS.—
‘‘(A) IN GENERAL.—For portions of cost re-
porting periods occurring on or after January 1,
1998, the Secretary shall provide for an addi-
tional payment amount for each applicable dis-
charge of any subsection (d) hospital (or any
hospital reimbursed under a reimbursement sys-
tem authorized under section 1814(b)(3)) that
has an approved medical residency training pro-
gram.
‘‘(B) APPLICABLE
DISCHARGE.—For pur-
poses of this paragraph, the term ‘applicable dis-
charge’ means the discharge of any individual
who is enrolled under a risk-sharing contract
with an eligible organization under section 1876
and who is entitled to benefits under part A or
any individual who is enrolled with a Medicare
Choice organization under part C.
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‘‘(C) DETERMINATION
OF
AMOUNT.—The
amount of the payment under this paragraph
with respect to any applicable discharge shall be
equal to the applicable percentage (as defined in
subsection (h)(3)(D)(ii)) of the estimated average
per discharge amount that would otherwise have
been paid under paragraph (1)(A) if the individ-
uals had not been enrolled as described in sub-
paragraph (B).’’.
SEC. 5452. DEMONSTRATION PROJECT ON USE OF CONSOR-
TIA.
(a) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall establish a demonstration project under
which, instead of making payments to teaching hospitals
pursuant to section 1886(h) of the Social Security Act, the
Secretary shall make payments under this section to each
consortium that meets the requirements of subsection (b).
(b) QUALIFYING CONSORTIA.—For purposes of sub-
section (a), a consortium meets the requirements of this sub-
section if the consortium is in compliance with the follow-
ing:
(1) The consortium consists of an approved med-
ical residency training program in a teaching hos-
pital and one or more of the following entities:
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(A) A school of allopathic medicine or osteo-
pathic medicine.
(B) Another teaching hospital, which may
be a children’s hospital.
(C) Another approved medical residency
training program.
(D) A federally qualified health center.
(E) A medical group practice.
(F) A managed care entity.
(G) An entity furnishing outpatient serv-
ices.
(I) Such other entity as the Secretary deter-
mines to be appropriate.
(2) The members of the consortium have agreed
to participate in the programs of graduate medical
education that are operated by the entities in the con-
sortium.
(3) With respect to the receipt by the consortium
of payments made pursuant to this section, the mem-
bers of the consortium have agreed on a method for
allocating the payments among the members.
(4) The consortium meets such additional re-
quirements as the Secretary may establish.
(c) AMOUNT AND SOURCE OF PAYMENT.—The total of
payments to a qualifying consortium for a fiscal year pur-
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suant to subsection (a) shall not exceed the amount that
would have been paid under section 1886(h) of the Social
Security Act for the teaching hospital (or hospitals) in the
consortium. Such payments shall be made in such propor-
tion from each of the trust funds established under title
XVIII of such Act as the Secretary specifies.
CHAPTER 4—OTHER HOSPITAL PAYMENTS
SEC. 5461. DISPROPORTIONATE SHARE PAYMENTS TO HOS-
PITALS FOR MANAGED CARE AND MEDICARE
CHOICE ENROLLEES.
Section 1886(d) (42 U.S.C. 1395ww(d)) (as amended
by section 5451) is amended by adding at the end the fol-
lowing:
‘‘(12) ADDITIONAL
PAYMENTS
FOR
MANAGED
CARE AND MEDICARE CHOICE SAVINGS.—
‘‘(A) IN GENERAL.—For portions of cost re-
porting periods occurring on or after January 1,
1998, the Secretary shall provide for an addi-
tional payment amount for each applicable dis-
charge of—
(i) any subsection (d) hospital that is
a disproportionate share hospital (as de-
scribed in paragraph (5)(F)(i)); or
(ii) any hospital reimbursed under a
reimbursement system authorized under sec-
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tion 1814(b)(3)) if such hospital would
qualify as a disproportionate share hospital
were it not so reimbursed.
‘‘(B) APPLICABLE
DISCHARGE.—For pur-
poses of this paragraph, the term ‘applicable dis-
charge’ means the discharge of any individual
who is enrolled under a risk-sharing contract
with an eligible organization under section 1876
and who is entitled to benefits under part A or
any individual who is enrolled with a Medicare
Choice organization under part C.
‘‘(C) DETERMINATION
OF
AMOUNT.—The
amount of the payment under this paragraph
with respect to any applicable discharge shall be
equal to the applicable percentage (as defined in
subsection (h)(3)(D)(ii)) of the estimated average
per discharge amount that would otherwise have
been paid under paragraph (1)(A) if the individ-
uals had not been enrolled as described in sub-
paragraph (B).’’.
SEC. 5462. REFORM OF DISPROPORTIONATE SHARE PAY-
MENTS TO HOSPITALS SERVING VULNERABLE
POPULATIONS.
(a) IN GENERAL.—Section 1886(d)(5)(F) of the Social
Security Act (42 U.S.C. 1395ww(d)(5)(F)) is amended—
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(1) in clause (i), by inserting ‘‘and before De-
cember 31, 1998,’’ after ‘‘May, 1, 1986,’’;
(2) in clause (ii), by striking ‘‘The amount’’ and
inserting ‘‘Subject to clauses (ix) and (x), the
amount’’; and
(3) by adding at the end the following:
‘‘(ix) In the case of discharges occurring on or
after October 1, 1997, and before December 31, 1998,
the additional payment amount otherwise determined
under clause (ii) shall be reduced by 4 percent.
‘‘(x)(I) In the case of discharges occurring dur-
ing calendar years 1999 and succeeding calendar
years, the additional payment amount shall be deter-
mined in accordance with the formula established
under subclause (II).
‘‘(II) Not later than January 1, 1999, the Sec-
retary shall establish a formula for determining addi-
tional payment amounts under this subparagraph. In
determining such formula the Secretary shall—
‘‘(aa) establish a single threshold for costs
incurred by hospitals in serving low-income pa-
tients,
‘‘(bb) consider the costs described in sub-
clause (III), and
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‘‘(cc) ensure that such formula complies
with the requirement described in subclause (IV).
‘‘(III) The costs described in this subclause are
as follows:
‘‘(aa) The costs incurred by the hospital
during a period (as determined by the Secretary)
of furnishing inpatient and outpatient hospital
services to individuals who are entitled to bene-
fits under part A of this title and are entitled to
supplemental security income benefits under title
XVI (excluding any supplementation of those
benefits by a State under section 1616).
‘‘(bb) The costs incurred by the hospital
during a period (as so determined) of furnishing
inpatient and outpatient hospital services to in-
dividuals who are eligible for medical assistance
under the State plan under title XIX and are
not entitled to benefits under part A of this title
(including individuals enrolled in a health
maintenance organization (as defined in section
1903(m)(1)(A)) or any other managed care plan
under such title, individuals who are eligible for
medical assistance under such title pursuant to
a waiver approved by the Secretary under sec-
tion 1115, and individuals who are eligible for
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medical assistance under the State plan under
title XIX (regardless of whether the State has
provided reimbursement for any such assistance
provided under such title)).
‘‘(cc) The costs incurred by the hospital dur-
ing a period (as so determined) of furnishing in-
patient and outpatient hospital services to indi-
viduals who are not described in item (aa) or
(bb) and who do not have health insurance cov-
erage (or any other source of third party pay-
ment for such services) and for which the hos-
pital did not receive compensation.
‘‘(IV)(aa) The requirement described in this sub-
clause is that for each calendar year for which the
formula established under this clause applies, the ad-
ditional payment amount determined for such cal-
endar year under such formula shall not exceed an
amount equal to the additional payment amount
that, in the absence of such formula, would have been
determined under this subparagraph, reduced by the
applicable percentage for such calendar year.
‘‘(bb) For purposes of subclause (aa), the appli-
cable percentage for—
‘‘(AA) calendar year 1999 is 8 percent;
‘‘(BB) calendar year 2000 is 12 percent;
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‘‘(CC) calendar year 2001 is 16 percent;
‘‘(DD) calendar year 2002 is 20 percent;
‘‘(EE) calendar year 2003 and subsequent
calendar years, is 0 percent’’.
(b) DATA COLLECTION.—
(1) IN
GENERAL.—In developing the formula
under section 1886(g)(5)(F)(x) of the Social Security
Act (42 U.S.C. 1395ww(g)(5)(F)(x)), as added by sub-
section (a), and in implementing the provisions of
and amendments made by this section, the Secretary
of Health and Human Services may require any sub-
section 
(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 that Act (42 U.S.C.
1395ww(d)(5)(F)) (as amended by subsection (a) of
this section) to submit to the Secretary any informa-
tion that the Secretary determines is necessary to im-
plement the provisions of and amendments made by
this section.
(2) FAILURE TO COMPLY.—Any subsection (d)
hospital (as so defined) that fails to submit to the
Secretary of Health and Human Services any infor-
mation requested under paragraph (1), shall be
deemed ineligible for an additional payment amount
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under section 1886(d)(5)(F) of the Social Security
Act (42 U.S.C. 1395ww(d)(5)(F)) (as amended by
subsection (a) of this section).
(c) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to discharges occurring on and after
October 1, 1997.
SEC. 5463. 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 re-
turn 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 insert-
ing ‘‘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).’’;
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(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 sub-
section (a) apply to changes of ownership that occur after
the third month beginning after the date of enactment of
this section.
SEC. 5464. ELIMINATION OF IME AND DSH PAYMENTS AT-
TRIBUTABLE 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.—Sec-
tion 
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 subpara-
graph (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 prospec-
tive payment rate’’ and inserting ‘‘exceed the sum of the
applicable DRG prospective payment rate plus any
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amounts payable under subparagraphs (B) and (F) of sub-
section (d)(5)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section apply to discharges occurring after September 30,
1997.
SEC. 5465. TREATMENT OF TRANSFER CASES.
(a) TRANSFERS TO PPS EXEMPT HOSPITALS AND
SKILLED NURSING FACILITIES.—Section 1886(d)(5)(I) (42
U.S.C. 1395ww(d)(5)(I)) is amended by adding at the end
the following new clause:
‘‘(iii) In carrying out this subparagraph, the Secretary
shall treat the term ‘transfer case’ as including the case of
an individual who, immediately upon discharge from, and
pursuant to the discharge planning process (as defined in
section 1861(ee)) of, a subsection (d) hospital—
‘‘(I) is admitted as an inpatient to a hospital or
hospital unit that is not a subsection (d) hospital for
the receipt of inpatient hospital services; or
‘‘(II) is admitted to a skilled nursing facility or
facility described in section 1861(y)(1) for the receipt
of extended care services.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply with respect to discharges occurring
on or after October 1, 1997.
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SEC. 5466. REDUCTIONS IN PAYMENTS FOR ENROLLEE BAD
DEBT.
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amend-
ed by adding at the end the following new subparagraph:
‘‘(T) In determining such reasonable costs for hos-
pitals, the amount of bad debts otherwise treated as allow-
able costs which are attributable to the deductibles and coin-
surance amounts under this title shall be reduced—
‘‘(i) for cost reporting periods beginning on or
after October 1, 1997 and on or before December 31,
1998, by 25 percent of such amount otherwise allow-
able,
‘‘(ii) for cost reporting periods beginning during
calendar year 1999, by 40 percent of such amount
otherwise allowable, and
‘‘(iii) for cost reporting periods beginning during
a subsequent calendar year, by 50 percent of such
amount otherwise allowable.’’.
SEC. 5467. 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 occurring on or after Octo-
ber 1, 1997, the area wage index applicable under such sec-
tion 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 average of the
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area wage indices 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 indices referred
to in subsection (a) for hospitals not described in such sub-
section in a manner which assures that the aggregate pay-
ments made under section 1886(d) of the Social Security
Act (42 U.S.C. 1395ww(d)) in a fiscal year for the operat-
ing 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 calculat-
ing the hospital’s average hourly wage for purposes of geo-
graphic reclassification under such section for fiscal year
1998, the Secretary of Health and Human Services shall
exclude the general service wages and hours of personnel as-
sociated 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
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and was denied reclassification as an urban hospital for
fiscal year 1998, but that would have received reclassifica-
tion had the exclusion required by this section been applied
to it, shall be reclassified as an urban hospital for fiscal
year 1998.
SEC. 5468. INCREASE BASE PAYMENT RATE TO PUERTO
RICO HOSPITALS.
Section 1886(d)(9)(A) (42 U.S.C. 1395ww(d)(9)(A)) is
amended—
(1) in the matter preceding clause (i), by strik-
ing ‘‘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 Octo-
ber 1, 1997, 50 percent (and for discharges between
October 1, 1987, and September 30, 1997, 75 per-
cent)’’, 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 Sep-
tember 30, 1997, 25 percent)’’.
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SEC. 5469. PERMANENT EXTENSION OF HEMOPHILIA PASS-
THROUGH.
Effective October 1, 1997, section 6011(d) of OBRA–
1989 (as amended by section 13505 of OBRA–1993) is
amended by striking ‘‘and shall expire September 30,
1994’’.
SEC. 5470. COVERAGE OF SERVICES IN RELIGIOUS NON-
MEDICAL 
HEALTH 
CARE 
INSTITUTIONS
UNDER THE MEDICARE AND MEDICAID PRO-
GRAMS.
(a) MEDICARE COVERAGE.—
(1) IN GENERAL.—Section 1861 of the Social Se-
curity Act (42 U.S.C. 1395x) (as amended by section
5361) is amended—
(1) in the sixth sentence of subsection (e)—
(A) by striking ‘‘includes’’ and all that fol-
lows up to ‘‘but only’’ and inserting ‘‘includes a
religious nonmedical health care institution (as
defined in subsection (rr)(1)),’’, and
(B) by inserting ‘‘consistent with section
1821’’ before the period;
(2) in subsection (y)—
(A) by amending the heading to read as fol-
lows:
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‘‘Extended Care in Religious Nonmedical Health Care
Institutions’’,
(B) in paragraph (1), by striking ‘‘in-
cludes’’ and all that follows up to ‘‘but only’’ and
inserting ‘‘includes a religious nonmedical health
care institution (as defined in subsection
(rr)(1)),’’, and
(C) by inserting ‘‘consistent with section
1821’’ before the period; and
(3) by adding at the end the following:
‘‘Religious Nonmedical Health Care Institution
‘‘(rr)(1) The term ‘religious nonmedical health care in-
stitution’ means an institution that—
‘‘(A) is described in subsection (c)(3) of sec-
tion 501 of the Internal Revenue Code of 1986
and is exempt from taxes under subsection (a) of
such section;
‘‘(B) is lawfully operated under all applica-
ble Federal, State, and local laws and regula-
tions;
‘‘(C) provides only nonmedical nursing
items and services exclusively to patients who
choose to rely solely upon a religious method of
healing and for whom the acceptance of medical
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health services would be inconsistent with their
religious beliefs;
‘‘(D) provides such nonmedical items and
services exclusively through nonmedical nursing
personnel who are experienced in caring for the
physical needs of such patients;
‘‘(E) provides such nonmedical items and
services to inpatients on a 24-hour basis;
‘‘(F) on the basis of its religious beliefs, does
not provide through its personnel or otherwise
medical items and services (including any medi-
cal screening, examination, diagnosis, prognosis,
treatment, or the administration of drugs) for its
patients;
‘‘(G) is not a part of, or owned by, or under
common ownership with, or affiliated through
ownership with, a health care facility that pro-
vides medical services;
‘‘(H) has in effect a utilization review plan
which—
‘‘(i) provides for the review of admis-
sions to the institution, of the duration of
stays therein, of cases of continuous ex-
tended duration, and of the items and serv-
ices furnished by the institution,
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‘‘(ii) requires that such reviews be
made by an appropriate committee of the
institution that includes the individuals re-
sponsible for overall administration and for
supervision of nursing personnel at the in-
stitution,
‘‘(iii) provides that records be main-
tained of the meetings, decisions, and ac-
tions of such committee, and
‘‘(iv) meets such other requirements as
the Secretary finds necessary to establish an
effective utilization review plan;
‘‘(I) provides the Secretary with such infor-
mation as the Secretary may require to imple-
ment section 1821, to monitor quality of care,
and to provide for coverage determinations; and
‘‘(J) meets such other requirements as the
Secretary finds necessary in the interest of the
health and safety of individuals who are fur-
nished services in the institution.
‘‘(2) If the Secretary finds that the accreditation of an
institution by a State, regional, or national agency or asso-
ciation provides reasonable assurances that any or all of
the requirements of paragraph (1) are met or exceeded, the
Secretary shall, to the extent the Secretary deems it appro-
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priate, treat such institution as meeting the condition or
conditions with respect to which the Secretary made such
finding.
‘‘(3)(A)(i) In administering this subsection and section
1821, the Secretary shall not require any patient of a reli-
gious nonmedical health care institution to undergo any
medical screening, examination, diagnosis, prognosis, or
treatment or to accept any other medical health care service,
if such patient (or legal representative of the patient) objects
thereto on religious grounds.
‘‘(ii) Clause (i) shall not be construed as preventing
the Secretary from requiring under section 1821(a)(2) the
provision of sufficient information regarding an individ-
ual’s condition as a condition for receipt of benefits under
part A for services provided in such an institution.
‘‘(B)(i) In administering this subsection and section
1821, the Secretary shall not subject a religious nonmedical
health care institution to any medical supervision, regula-
tion, or control, insofar as such supervision, regulation, or
control would be contrary to the religious beliefs observed
by the institution.
‘‘(ii) Clause (i) shall not be construed as preventing
the Secretary from reviewing items and services billed by
the institution to the extent the Secretary determines such
review to be necessary to determine whether such items and
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services were not covered under part A, are excessive, or
are fraudulent.’’.
(2) CONDITIONS OF COVERAGE.—Part A of title
XVIII of the Social Security Act is amended by add-
ing at the end the following new section:
‘‘CONDITIONS FOR COVERAGE OF RELIGIOUS NONMEDICAL
HEALTH CARE INSTITUTIONAL SERVICES
‘‘SEC. 1821. (a) IN GENERAL.—Subject to subsections
(c) and (d), payment under this part may be made for in-
patient hospital services or post-hospital extended care serv-
ices furnished an individual in a religious nonmedical
health care institution only if—
‘‘(1) the individual has an election in effect for
such benefits under subsection (b); and
‘‘(2) the individual has a condition such that the
individual would qualify for benefits under this part
for inpatient hospital services or extended care serv-
ices, respectively, if the individual were an inpatient
or resident in a hospital or skilled nursing facility
that was not such an institution.
‘‘(b) ELECTION.—
‘‘(1) IN GENERAL.—An individual may make an
election under this subsection in a form and manner
specified by the Secretary consistent with this sub-
section. Unless otherwise provided, such an election
shall take effect immediately upon its execution. Such
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‘‘(4) LIMITATION ON SUBSEQUENT ELECTIONS.—
Once an individual’s election under this subsection
has been made and revoked twice—
‘‘(A) the next election may not become effec-
tive until the date that is 1 year after the date
of most recent previous revocation, and
‘‘(B) any succeeding election may not be-
come effective until the date that is 5 years after
the date of the most recent previous revocation.
‘‘(5) EXCEPTED
MEDICAL
TREATMENT.—For
purposes of this subsection:
‘‘(A) EXCEPTED
MEDICAL
TREATMENT.—
The term ‘excepted medical treatment’ means
medical care or treatment (including medical
and other health services)—
‘‘(i) for the setting of fractured bones,
‘‘(ii) received involuntarily, or
‘‘(iii) required under Federal or State
law or law of a political subdivision of a
State.
‘‘(B) 
NON-EXCEPTED
MEDICAL
TREAT-
MENT.—The term ‘nonexcepted medical treat-
ment’ means medical care or treatment (includ-
ing medical and other health services) other than
excepted medical treatment.
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‘‘(c) MONITORING AND SAFEGUARD AGAINST EXCES-
SIVE EXPENDITURES.—
‘‘(1) ESTIMATE OF EXPENDITURES.—Before the
beginning of each fiscal year (beginning with fiscal
year 2000), the Secretary shall estimate the level of
expenditures under this part for services described in
subsection (a)for that fiscal year.
‘‘(2) ADJUSTMENT IN PAYMENTS.—
‘‘(A) PROPORTIONAL ADJUSTMENT.—If the
Secretary determines that the level estimated
under paragraph (1) for a fiscal year will exceed
the trigger level (as defined in subparagraph
(C)) for that fiscal year, the Secretary shall, sub-
ject to subparagraph (B), provide for such a pro-
portional reduction in payment amounts under
this part for services described in subsection (a)
for the fiscal year involved as will assure that
such level (taking into account any adjustment
under subparagraph (B)) does not exceed the
trigger level for that fiscal year.
‘‘(B) 
ALTERNATIVE
ADJUSTMENTS.—The
Secretary may, instead of making some or all of
the reduction described in subparagraph (A), im-
pose such other conditions or limitations with re-
spect to the coverage of covered services (includ-
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ing limitations on new elections of coverage and
new facilities) as may be appropriate to reduce
the level of expenditures described in paragraph
(1) to the trigger level.
‘‘(C) TRIGGER LEVEL.—For purposes of this
subsection, subject to adjustment under para-
graph (3)(B), the ‘trigger level’ for—
‘‘(i) fiscal year 1998, is $20,000,000,
or
‘‘(ii) a succeeding fiscal year is the
amount specified under this subparagraph
for the previous fiscal year increased by the
percentage increase in the consumer price
index for all urban consumers (all items;
United States city average) for the 12-
month period ending with July preceding
the beginning of the fiscal year.
‘‘(D) PROHIBITION OF ADMINISTRATIVE AND
JUDICIAL REVIEW.—There shall be no adminis-
trative or judicial review under section 1869,
1878, or otherwise of the estimation of expendi-
tures under subparagraph (A) or the application
of reduction amounts under subparagraph (B).
‘‘(E) EFFECT ON BILLING.—Notwithstand-
ing any other provision of this title, in the case
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of a reduction in payment provided under this
subsection for services of a religious nonmedical
health care institution provided to an individ-
ual, the amount that the institution is otherwise
permitted to charge the individual for such serv-
ices is increased by the amount of such reduc-
tion.
‘‘(3) MONITORING EXPENDITURE LEVEL.—
‘‘(A) IN
GENERAL.—The Secretary shall
monitor the expenditure level described in para-
graph (2)(A) for each fiscal year (beginning with
fiscal year 1999).
‘‘(B) ADJUSTMENT IN TRIGGER LEVEL.—If
the Secretary determines that such level for a fis-
cal year exceeded, or was less than, the trigger
level for that fiscal year, then the trigger level for
the succeeding fiscal year shall be reduced, or in-
creased, respectively, by the amount of such ex-
cess or deficit.
‘‘(d) SUNSET.—If the Secretary determines that the
level of expenditures described in subsection (c)(1) for 3 con-
secutive fiscal years (with the first such year being not ear-
lier than fiscal year 2002) exceeds the trigger level for such
expenditures for such years (as determined under subsection
(c)(2)), benefits shall be paid under this part for services
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described in subsection (a) and furnished on or after the
first January 1 that occurs after such 3 consecutive years
only with respect to an individual who has an election in
effect under subsection (b) as of such January 1 and only
during the duration of such election.
‘‘(e) ANNUAL REPORT.—At the beginning of each fiscal
year (beginning with fiscal year 1999), the Secretary shall
submit to the Committees on Ways and Means of the House
of Representatives and the Committee on Finance of the
Senate an annual report on coverage and expenditures for
services described in subsection (a) under this part and
under State plans under title XIX. Such report shall in-
clude—
‘‘(1) level of expenditures described in subsection
(c)(1) for the previous fiscal year and estimated for
the fiscal year involved;
‘‘(2) trends in such level; and
‘‘(3) facts and circumstances of any significant
change in such level from the level in previous fiscal
years.’’.
(b) MEDICAID.—
(1) The third sentence of section 1902(a) of such
Act (42 U.S.C. 1396a(a)) is amended by striking all
that follows ‘‘shall not apply’’ and inserting ‘‘to a re-
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ligious nonmedical health care institution (as defined
in section 1861(rr)(1)).’’.
(2) Section 1908(e)(1) of such Act (42 U.S.C.
1396g–1(e)(1)) is amended by striking all that follows
‘‘does not include’’ and inserting ‘‘a religious non-
medical health care institution (as defined in section
1861(rr)(1)).’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 1122(h) of such Act (42 U.S.C.
1320a–1(h)) is amended by striking all that follows
‘‘shall not apply to’’ and inserting ‘‘a religious non-
medical health care institution (as defined in section
1861(rr)(1)).’’.
(2) Section 1162 of such Act (42 U.S.C. 1320c–
11) is amended—
(A) by amending the heading to read as fol-
lows:
‘‘EXEMPTIONS FOR RELIGIOUS NONMEDICAL HEALTH CARE
INSTITUTIONS’’; and
(B) by striking all that follows ‘‘shall not
apply with respect to a’’ and inserting ‘‘religious
nonmedical health care institution (as defined in
section 1861(rr)(1)).’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
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Act and shall apply to items and services furnished on or
after such date. By not later than July 1, 1998, the Sec-
retary of Health and Human Services shall first issue regu-
lations to carry out such amendments. Such regulations
may be issued so they are effective on an interim basis
pending notice and opportunity for public comment. For
periods before the effective date of such regulations, such reg-
ulations shall recognize elections entered into in good faith
in order to comply with the requirements of section 1821(b)
of the Social Security Act.
CHAPTER 5—PAYMENTS FOR HOSPICE
SERVICES
SEC. 5481. PAYMENT FOR HOME HOSPICE CARE BASED ON
LOCATION WHERE CARE IS FURNISHED.
(a) IN GENERAL.—Section 1814(i)(2) (42 U.S.C.
1395f(i)(2)) is amended by adding at the end the following:
‘‘(D) A hospice program shall submit claims for pay-
ment for hospice care furnished in an individual’s home
under this title only on the basis of the geographic location
at which the service is furnished, as determined by the Sec-
retary.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) applies to cost reporting periods beginning on
or after October 1, 1997.
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SEC. 5482. HOSPICE CARE BENEFITS PERIODS.
(a) RESTRUCTURING OF BENEFIT PERIOD.—Section
1812 (42 U.S.C. 1395d) is amended in subsections (a)(4)
and (d)(1), by striking ‘‘, a subsequent period of 30 days,
and a subsequent extension period’’ and inserting ‘‘and an
unlimited number of subsequent periods of 60 days each’’.
(b) CONFORMING AMENDMENTS.—(1) Section 1812 (42
U.S.C. 1395d) is amended in subsection (d)(2)(B) by strik-
ing ‘‘90- or 30-day period or a subsequent extension period’’
and inserting ‘‘90-day period or a subsequent 60-day pe-
riod’’.
(2) Section 1814(a)(7)(A) (42 U.S.C. 1395f(a)(7)(A))
is amended—
(A) in clause (i), by inserting ‘‘and’’ at the end;
(B) in clause (ii)—
(i) by striking ‘‘30-day’’ and inserting ‘‘60-
day’’; and
(ii) by striking ‘‘, and’’ at the end and in-
serting a period; and
(C) by striking clause (iii).
SEC. 5483. OTHER ITEMS AND SERVICES INCLUDED IN HOS-
PICE CARE.
Section 1861(dd)(1) (42 U.S.C. 1395x(dd)(1)) is
amended—
(1) in subparagraph (G), by striking ‘‘and’’ at
the end;
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(2) in subparagraph (H), by striking the period
at the end and inserting ‘‘, and’’; and
(3) by inserting after subparagraph (H) the fol-
lowing:
‘‘(I) any other item or service which is specified
in the plan and for which payment may otherwise be
made under this title.’’.
SEC. 5484. CONTRACTING WITH INDEPENDENT PHYSICIANS
OR PHYSICIAN GROUPS FOR HOSPICE CARE
SERVICES PERMITTED.
Section 1861(dd)(2) (42 U.S.C. 1395x(dd)(2)) is
amended—
(1) in subparagraph (A)(ii)(I), by striking
‘‘(F),’’; and
(2) in subparagraph (B)(i), by inserting ‘‘or, in
the case of a physician described in subclause (I),
under contract with’’ after ‘‘employed by’’.
SEC. 5485. WAIVER OF CERTAIN STAFFING REQUIREMENTS
FOR HOSPICE CARE PROGRAMS IN NON-UR-
BANIZED AREAS.
Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is
amended—
(1) in subparagraph (B), by inserting ‘‘or (C)’’
after ‘‘subparagraph (A)’’ each place it appears; and
(2) by adding at the end the following:
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‘‘(C) The Secretary may waive the requirements of
paragraph clauses (i) and (ii) of paragraph (2)(A) for an
agency or organization with respect to the services described
in paragraph (1)(B) and, with respect to dietary counsel-
ing, paragraph (1)(H), if such agency or organization—
‘‘(i) is located in an area which is not an urban-
ized area (as defined by the Bureau of the Census),
and
‘‘(ii) demonstrates to the satisfaction of the Sec-
retary that the agency or organization has been un-
able, despite diligent efforts, to recruit appropriate
personnel.’’.
SEC. 5486. LIMITATION ON LIABILITY OF BENEFICIARIES
FOR CERTAIN HOSPICE COVERAGE DENIALS.
Section 1879 (42 U.S.C. 1395pp) is amended—
(1) in subsection (a), in the matter following
paragraph (2), by inserting ‘‘and except as provided
in subsection (i),’’ after ‘‘to the extent permitted by
this title,’’;
(2) in subsection (g)—
(A) by redesignating paragraphs (1) and
(2) as subparagraphs (A) and (B), respectively,
and 
indenting 
such 
subparagraphs 
appro-
priately;
(B) by striking ‘‘is,’’ and inserting ‘‘is—’’;
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(C) by making the remaining text of sub-
section (g) (as amended) that follows ‘‘is—’’ a
new paragraph (1) and indenting that para-
graph appropriately;
(D) by striking the period at the end and
inserting ‘‘; and’’; and
(E) by adding at the end the following:
‘‘(2) with respect to the provision of hospice care
to an individual, a determination that the individual
is not terminally ill.’’; and
(3) by adding at the end the following:
‘‘(i) In any case involving a coverage denial with re-
spect to hospice care described in subsection (g)(2), only the
individual that received such care shall, notwithstanding
such determination, be indemnified for any payments that
the individual made to a provider or other person for such
care that would, but for such denial, otherwise be paid to
the individual under part A or B of this title.’’.
SEC. 5487. EXTENDING THE PERIOD FOR PHYSICIAN CER-
TIFICATION OF AN INDIVIDUAL’S TERMINAL
ILLNESS.
Section 1814(a)(7)(A)(i) (42 U.S.C. 1395f(a)(7)(A)(i))
is amended, in the matter following subclause (II), by strik-
ing ‘‘, not later than 2 days after hospice care is initiated
(or, if each certify verbally not later than 2 days after hos-
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pice care is initiated, not later than 8 days after such care
is initiated)’’ and inserting ‘‘at the beginning of the pe-
riod’’.
SEC. 5488. EFFECTIVE DATE.
Except as otherwise provided in this chapter, the
amendments made by this chapter apply to benefits pro-
vided on or after the date of the enactment of this chapter,
regardless of whether or not an individual has made an
election under section 1812(d) of the Social Security Act
(42 U.S.C. 1395d(d)) before such date.
Subtitle G—Provisions Relating to
Part B Only
CHAPTER 1—PAYMENTS FOR PHYSICIANS
AND OTHER HEALTH CARE PROVIDERS
SEC. 5501. 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 to read as follows:
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN GENERAL.—The conversion factor
for each year shall be the conversion factor estab-
lished under this subsection for the previous
year, adjusted by the update established under
paragraph (3) for the year involved.
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‘‘(B) SPECIAL RULE FOR 1998.—The single
conversion factor for 1998 shall be the conversion
factor for primary care services for 1997, in-
creased by the Secretary’s estimate of the weight-
ed average of the 3 separate updates that would
otherwise occur but for the enactment of chapter
1 of subtitle G of title V of the Balanced Budget
Act of 1997.
‘‘(C) PUBLICATION.—The Secretary shall,
during the last 15 days of October of each year,
publish the conversion factor which will apply to
physicians’ services for the following year and
the update determined under paragraph (3) for
such year.’’.
(b) CONFORMING AMENDMENT.—Section 1848(i)(1)(C)
(42 U.S.C. 1395w–4(i)(1)(C)) is amended by striking ‘‘con-
version factors’’ and inserting ‘‘the conversion factor’’.
SEC. 5502. 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 follows:
‘‘(3) UPDATE.—
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‘‘(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 up-
date to the single conversion factor established in
paragraph (1)(B) 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-
fined in section 1842(i)(3)) for the year (di-
vided 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 physicians’
services (as determined under subparagraph
(C)) for the period beginning July 1, 1997,
and ending on June 30 of the year involved,
and (II) the amount of actual expenditures
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for physicians’ services furnished during the
period 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 end-
ing on June 30 of the preceding year, in-
creased by the sustainable growth rate
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 expend-
itures for physicians’ services furnished dur-
ing such 12-month period, as estimated by
the Secretary; or
‘‘(ii) a subsequent year is equal to the
allowed expenditures for physicians’ services
for the previous year, increased by the sus-
tainable growth rate under subsection (f) for
the fiscal year which begins during such 12-
month period.
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‘‘(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 para-
graph for the year may not be—
‘‘(i) greater than 100 times the follow-
ing 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 es-
timate of the percentage increase in the MEI (as
defined in section 1842(i)(3)) for the year in-
volved.’’.
(b) ELIMINATION OF REPORT.—Section 1848(d) (42
U.S.C. 1395w–4(d)) is amended by striking paragraph (2).
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to the update for years beginning with
1999.
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SEC. 5503. 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 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 Medicare Choice 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 domes-
tic product per capita (divided by 100) from the
previous fiscal year to the fiscal year involved,
and
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‘‘(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 physicians’ serv-
ices resulting from changes in the update 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 serv-
ices furnished to a Medicare Choice plan en-
rollee.
‘‘(B) MEDICARE CHOICE PLAN ENROLLEE.—
The term ‘Medicare Choice plan enrollee’ means,
with respect to a fiscal year, an individual en-
rolled under this part who has elected to receive