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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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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