285
‘‘(4) LIMITATION.—This subsection does not
apply to a teaching hospital described in paragraph
(1) if the hospital is in a State for which a dem-
onstration project under section 1814(b)(3) is in ef-
fect.
‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case
of two or more teaching hospitals that have each received
payments pursuant to section 2231 for one or more fiscal
years and that undergo a consolidation or merger, the per-
centage applicable to the resulting teaching hospital for
purposes of section 2231(b) is the sum of the respective
percentages that would have applied pursuant to such sec-
tion if the hospitals had not undergone the consolidation
or merger.
‘‘SEC. 2233. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO
CONSORTIA OF PROVIDERS.
‘‘(a) IN GENERAL.—In lieu of making payments to
teaching hospitals pursuant to section 2231, the Secretary
may make payments under this section to consortia that
meet the requirements of subsection (b).
‘‘(b) QUALIFYING CONSORTIUM.—For purposes of
subsection (a), a consortium meets the requirements of
this subsection if the consortium is in compliance with the
following:
286
‘‘(1) The consortium consists of an approved
medical residency training program and one or more
of the following entities:
‘‘(A) Schools of allopathic medicine or os-
teopathic medicine.
‘‘(B) Teaching hospitals.
‘‘(C) Other approved medical residency
training programs.
‘‘(D) Federally qualified health centers.
‘‘(E) Medical group practices.
‘‘(F) Managed care entities.
‘‘(G) Entities furnishing outpatient serv-
ices.
‘‘(H) Such other entities as the Secretary
determines 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 consortium.
‘‘(3) With respect to the receipt by the consor-
tium of payments made pursuant to this section, the
members 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.
287
‘‘(c) PAYMENTS FROM ACCOUNTS.—
‘‘(1) IN GENERAL.—Subject to subsection (d),
the total of payments to a qualifying consortium for
a fiscal year pursuant to subsection (a) shall be the
sum of—
‘‘(1) the aggregate amount determined for the
teaching hospitals of the consortium pursuant to
paragraph (1) of section 2231(a); and
‘‘(2) an amount determined in accordance with
the methodology that applies pursuant to paragraph
(2) of such section, except that the estimate used for
purposes of subsection (c)(2)(A) of such section shall
be the estimate made for the consortium under sec-
tion 1886(j)(2)(C)(ii).
‘‘(d) LIMITATION ON AGGREGATE TOTAL OF PAY-
MENTS
TO CONSORTIA.—The aggregate total of the
amounts paid under subsection (c)(2) to qualifying consor-
tia for a fiscal year may not exceed the sum of—
‘‘(1) the aggregate total of the amounts that
would have been paid under section 2231(c) for the
fiscal year to the teaching hospitals of the consortia
if the hospitals had not been participants in the con-
sortia; and
‘‘(2) an amount equal to 1 percent of the
amount that applies under section 2231(c)(1)(A) for
288
the fiscal year (relating to the Medicare Direct-Costs
Medical Education Account).
‘‘(e) DEFINITION.—For purposes of this title, the
term ‘qualifying consortium’ means a consortium that
meets the requirements of subsection (b).
‘‘SEC. 2234. DIRECT COSTS; ALTERNATIVE PAYMENTS RE-
GARDING TEACHING HOSPITALS IN CERTAIN
STATES.
‘‘(a) IN GENERAL.—In the case of a teaching hospital
in a State for which a demonstration project under section
1814(b)(3) is in effect, this section applies in lieu of sec-
tion 2231. For purposes of section 2211(a)(2), the amount
determined for a teaching hospital for a fiscal year is the
product of—
‘‘(1) the amount in the General Direct-Costs
Medical Education Account on the applicable date
under section 2201(d) (once the appropriation under
such section is made); and
‘‘(2) the percentage determined under sub-
section (b) for the hospital.
‘‘(b) DETERMINATION OF PERCENTAGE.—For pur-
poses of subsection (a)(2):
‘‘(1) The Secretary shall make an estimate of
the total amount of payments that would have been
received under section 1886(h) by the hospital in-
289
volved with respect to each of the fiscal years of the
applicable period if such section (as in effect for
such fiscal years) had applied to the hospital for
such years.
‘‘(2) The percentage determined under this sub-
section for the hospital for a fiscal year is a mean
average percentage determined for the hospital in
accordance 
with 
the 
methodology 
of 
section
2231(b)(2)(A), except that the estimate made by the
Secretary under paragraph (1) of this subsection for
a fiscal year of the applicable period is deemed to be
the amount that applies for purposes of section
2231(b)(2)(B)(i) for such year.
‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN
AMOUNTS.—In the case of a teaching hospital described
in subsection (a), this section does not authorize any pay-
ment to the hospital from amounts transferred to the
Fund under section 1886(j).
‘‘Subpart 4—General Provisions
‘‘SEC. 2241. ADJUSTMENTS IN PAYMENT AMOUNTS.
‘‘(a) COLLECTION OF DATA ON ACCURACY OF ESTI-
MATES.—The Secretary shall collect data on whether the
estimates made by the Secretary under section 1886(j) for
a fiscal year were substantially accurate.
290
‘‘(b) ADJUSTMENTS.—If the Secretary determines
under subsection (a) that an estimate for a fiscal year was
not substantially accurate, the Secretary shall, for the first
fiscal year beginning after the Secretary makes the deter-
mination—
‘‘(1) make adjustments accordingly in transfers
to the Fund under section 1886(j); and
‘‘(2) make adjustments accordingly in the
amount of payments to teaching hospitals pursuant
to 2231(c) (or, as applicable, to qualifying consortia
pursuant to section 2233(c)(2)).’’.
PART 2—AMENDMENTS TO MEDICARE PROGRAM
SEC. 15411. TRANSFERS TO TEACHING HOSPITAL AND
GRADUATE 
MEDICAL 
EDUCATION 
TRUST
FUND.
Section 1886 (42 U.S.C. 1395ww) is amended—
(1) in subsection (d)(5)(B), in the matter pre-
ceding clause (i), by striking ‘‘The Secretary shall
provide’’ and inserting the following: ‘‘For dis-
charges occurring on or before September 30, 1996,
the Secretary shall provide’’;
(2) in subsection (h)—
(A) in paragraph (1), in the first sentence,
by striking ‘‘the Secretary shall provide’’ and
291
inserting ‘‘the Secretary shall, subject to para-
graph (6), provide’’; and
(B) by adding at the end the following
paragraph:
‘‘(6) LIMITATION.—
‘‘(A) IN
GENERAL.—The authority to
make payments under this subsection applies
only with respect to cost reporting periods end-
ing on or before September 30, 1996, except as
provided in subparagraph (B).
‘‘(B) RULE REGARDING PORTION OF LAST
COST
REPORTING
PERIOD.—In the case of a
cost reporting period that extends beyond Sep-
tember 30, 1996, payments under this sub-
section shall be made with respect to such por-
tion of the period as has lapsed as of such date.
‘‘(C) 
RULE
OF
CONSTRUCTION.—This
paragraph may not be construed as authorizing
any payment under section 1861(v) with re-
spect to graduate medical education.’’; and
(3) by adding at the end the following sub-
section:
‘‘(j) TRANSFERS
TO
TEACHING
HOSPITAL
AND
GRADUATE MEDICAL EDUCATION TRUST FUND.—
292
‘‘(1) INDIRECT
COSTS
OF
MEDICAL
EDU-
CATION.—
‘‘(A) IN
GENERAL.—From the Federal
Hospital Insurance Trust Fund, the Secretary
shall, for fiscal year 1997 and each subsequent
fiscal year, transfer to the Indirect-Costs Medi-
cal Education Account (under section 2201) an
amount determined by the Secretary in accord-
ance with subparagraph (B).
‘‘(B) DETERMINATION OF AMOUNTS.—The
Secretary shall make an estimate for the fiscal
year involved of the nationwide total of the
amounts that would have been paid under sub-
section (d)(5)(B) to hospitals during the fiscal
year if such payments had not been terminated
for discharges occurring after September 30,
1996. For purposes of subparagraph (A), the
amount determined under this subparagraph
for the fiscal year is the estimate made by the
Secretary under the preceding sentence.
‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—
‘‘(A) IN
GENERAL.—From the Federal
Hospital Insurance Trust Fund and the Fed-
eral Supplementary Medical Insurance Trust
Fund, the Secretary shall, for fiscal year 1997
293
and each subsequent fiscal year, transfer to the
Medicare Direct-Costs Medical Education Ac-
count (under section 2201) the sum of—
‘‘(i) an amount determined by the
Secretary in accordance with subparagraph
(B); and
‘‘(ii) as applicable, an amount deter-
mined by the Secretary in accordance with
subparagraph (C)(ii).
‘‘(B) DETERMINATION OF AMOUNTS.—For
each hospital (other than a hospital that is a
member of a qualifying consortium referred to
in subparagraph (C)), the Secretary shall make
an estimate for the fiscal year involved of the
amount that would have been paid under sub-
section (h) to the hospital during the fiscal year
if such payments had not been terminated for
cost reporting periods ending on or before Sep-
tember 30, 1996. For purposes of subparagraph
(A)(i), the amount determined under this sub-
paragraph for the fiscal year is the sum of all
estimates made by the Secretary under the pre-
ceding sentence.
‘‘(C) ESTIMATES REGARDING QUALIFYING
CONSORTIA.—If the Secretary elects to author-
294
ize one or more qualifying consortia for pur-
poses of section 2233(a), the Secretary shall
carry out the following:
‘‘(i) The Secretary shall establish a
methodology for making payments to quali-
fying consortia with respect to the reason-
able direct costs of such consortia in carry-
ing out programs of graduate medical edu-
cation. The methodology shall be the meth-
odology established in subsection (h),
modified to the extent necessary to take
into account the participation in such pro-
grams of entities other than hospitals.
‘‘(ii) For each qualifying consortium,
the Secretary shall make an estimate for
the fiscal year involved of the amount that
would have been paid to the consortium
during the fiscal year if, using the meth-
odology under clause (i), payments had
been made to the consortium for the fiscal
year as reimbursements with respect to
cost reporting periods. For purposes of
subparagraph (A)(ii), the amount deter-
mined under this clause for the fiscal year
295
is the sum of all estimates made by the
Secretary under the preceding sentence.
‘‘(D) ALLOCATION BETWEEN FUNDS.—In
providing for a transfer under subparagraph
(A) for a fiscal year, the Secretary shall provide
for an allocation of the amounts involved be-
tween part A and part B (and the trust funds
established under the respective parts) as rea-
sonably reflects the proportion of direct grad-
uate medical education costs of hospitals associ-
ated with the provision of services under each
respective part.
‘‘(3) APPLICABILITY
OF
CERTAIN
AMEND-
MENTS.—Amendments made to subsection (d)(5)(B)
and subsection (h) that are effective on or after Oc-
tober 1, 1996, apply only for purposes of estimates
under paragraphs (1) and (2) and for purposes of
determining the amount of payments under 2211.
Such amendments do not require any adjustment to
amounts paid under subsection (d)(5)(B) or (h) with
respect to fiscal year 1996 or any prior fiscal year.
‘‘(4) RELATIONSHIP TO CERTAIN DEMONSTRA-
TION PROJECTS.—In the case of a State for which
a demonstration project under section 1814(b)(3) is
in effect, the Secretary, in making determinations of
296
the rates of increase under such section, shall in-
clude all amounts transferred under this subsection.
Such amounts shall be so included to the same ex-
tent and in the same manner as amounts determined
under subsections (d)(5)(B) and (h) were included in
such determination under the provisions of this title
in effect on September 30, 1996.’’.
SEC. 15412. MODIFICATION IN PAYMENT POLICIES REGARD-
ING GRADUATE MEDICAL EDUCATION.
(a) INDIRECT COSTS OF MEDICAL EDUCATION; AP-
PLICABLE PERCENTAGE.—
(1) MODIFICATION REGARDING 5.6 PERCENT.—
Section 
1886(d)(5)(B)(ii) 
(42 
U.S.C.
1395ww(d)(5)(B)(ii)) is amended—
(A) by striking ‘‘on or after October 1,
1988,’’ and inserting ‘‘on or after October 1,
1999,’’; and
(B) by striking ‘‘1.89’’ and inserting
‘‘1.38’’.
(2) SPECIAL RULE REGARDING FISCAL YEARS
1996
THROUGH
1998; MODIFICATION
REGARDING
PERCENT.—Section 1886(d)(5)(B)(ii), as amended
by paragraph (1), is amended by adding at the end
the following: ‘‘In the case of discharges occurring
on or after October 1, 1995, and before October 1,
297
1999, the preceding sentence applies to the same ex-
tent and in the same manner as the sentence applies
to discharges occurring on or after October 1, 1999,
except that the term ‘1.38’ is deemed to be ‘1.48’.’’.
(3) CONFORMING
AMENDMENT
RELATING
TO
DETERMINATION
OF
STANDARDIZED
AMOUNTS.—
Section 
1886(d)(2)(C)(i) 
(42 
U.S.C.
1395ww(d)(2)(C)(i)) is amended by striking ‘‘1985’’
and inserting the following: ‘‘1985, but (for dis-
charges occurring after September 30, 1995) not
taking into account any reductions in such costs re-
sulting from the amendments made by section
15412(a) of the Medicare Preservation Act of
1995’’.
(b) DIRECT COSTS OF MEDICAL EDUCATION.—
(1) LIMITATION
ON
NUMBER
OF
FULL-TIME-
EQUIVALENT
RESIDENTS.—Section 1886(h)(4) (42
U.S.C. 1395ww(h)(4)) is amended by adding at the
end the following new subparagraph:
‘‘(F) LIMITATION
ON
NUMBER
OF
RESI-
DENTS FOR CERTAIN FISCAL YEARS.—
‘‘(i) IN
GENERAL.—Such rules shall
provide that for purposes of a cost report-
ing period beginning on or after October 1,
1995, and on or before September 30,
298
2002, the number of full-time-equivalent
residents determined under this paragraph
with respect to an approved medical resi-
dency training program may not exceed
the number of full-time-equivalent resi-
dents with respect to the program as of
August 1, 1995 (except that this subpara-
graph applies only to approved medical
residency training programs in the fields of
allopathic medicine and osteopathic medi-
cine).
‘‘(ii) DISPOSITION OF UNUSED RESI-
DENCY POSITIONS.—In the case of a cost
reporting period to which the limitation
under clause (i) applies, if for such a pe-
riod the number of full-time-equivalent
residents determined under this paragraph
with respect to an approved medical resi-
dency training program is less than the
maximum number applicable to the pro-
gram under such clause, the Secretary may
authorize for one or more other approved
medical residency training programs offset-
ting increases in the respective maximum
numbers that otherwise would be applica-
299
ble under such clause to the programs. In
authorizing such increases with respect to
a cost reporting period, the Secretary shall
ensure that the national total of the re-
spective maximum numbers determined
under such clause with respect to approved
medical residency training programs is not
exceeded.’’.
(2) EXCLUSION OF RESIDENTS AFTER INITIAL
RESIDENCY
PERIOD.—Section 1886(h)(4)(C) (42
U.S.C. 1395ww(h)(4)(C)) is amended to read as fol-
lows:
‘‘(C) WEIGHTING
FACTORS
FOR
RESI-
DENTS.—Effective for cost reporting periods
beginning on or after October 1, 1997, such
rules shall provide that, in the calculation of the
number of full-time-equivalent residents in an
approved residency program, the weighting fac-
tor for a resident who is in the initial residency
period (as defined in paragraph (5)(F)) is 1.0
and the weighting factor for a resident who has
completed such period is 0.0. (In the case of
cost reporting periods beginning before October
1, 1997, the weighting factors that apply in
such calculation are the weighting factors that
300
were applicable under this subparagraph on the
day before the date of the enactment of the
Medicare Preservation Act of 1995.)’’.
(3) REDUCTIONS
IN
PAYMENTS
FOR
ALIEN
RESIDENTS.—Section 
1886(h)(4) 
(42 
U.S.C.
1395ww(h)(4)), as amended by paragraph (1), is
amended by adding at the end the following new
subparagraph:
‘‘(G) SPECIAL
RULES
FOR
ALIEN
RESI-
DENTS.—In the case of individuals who are not
citizens or nationals of the United States, aliens
lawfully admitted to the United States for per-
manent residence, aliens admitted to the United
States as refugees, or citizens of Canada, in the
calculation of the number of full-time-equivalent
residents in an approved medical residency pro-
gram, the following rules shall apply with re-
spect to such individuals who are residents in
the program:
‘‘(i) For a cost reporting period begin-
ning during fiscal year 1996, for each such
individual the Secretary shall apply a
weighting factor of .75.
‘‘(ii) For a cost reporting period be-
ginning during fiscal year 1997, for each
301
such individual the Secretary shall apply a
weighting factor of .50.
‘‘(iii) For a cost reporting period be-
ginning during fiscal year 1998 or any
subsequent fiscal year, for each such indi-
vidual 
the 
Secretary 
shall 
apply 
a
weighting factor of .25.’’.
(4) EFFECTIVE DATE.—Except as provided oth-
erwise in this subsection (or in the amendments
made by this subsection), the amendments made by
this subsection apply to hospital cost reporting peri-
ods beginning on or after October 1, 1995.
PART 3—REFORM OF FEDERAL POLICIES RE-
GARDING TEACHING HOSPITALS AND GRAD-
UATE MEDICAL EDUCATION
SEC. 15421. ESTABLISHMENT OF ADVISORY PANEL FOR
RECOMMENDING POLICIES.
Title XXII of the Social Security Act, as added by
section 15401, is amended by adding at the end the follow-
ing part:
302
‘‘PART C—OTHER MATTERS
‘‘SEC. 2251. ADVISORY PANEL ON REFORM IN FINANCING
OF TEACHING HOSPITALS AND GRADUATE
MEDICAL EDUCATION.
‘‘(a) ESTABLISHMENT.—The Chair of the Medicare
Payment Review Commission under section 1806 shall es-
tablish a temporary advisory panel to be known as the Ad-
visory Panel on Financing for Teaching Hospitals and
Graduate Medical Education (in this section referred to
as the ‘Panel’).
‘‘(b) DUTIES.—The Panel shall develop recommenda-
tions on whether and to what extent Federal policies re-
garding teaching hospitals and graduate medical edu-
cation should be reformed, including recommendations re-
garding the following:
‘‘(1) The financing of graduate medical edu-
cation, including consideration of alternative broad-
based sources of funding for such education.
‘‘(2) The financing of teaching hospitals, in-
cluding consideration of the difficulties encountered
by such hospitals as competition among health care
entities increases. Matters considered under this
paragraph shall include consideration of the effects
on teaching hospitals of the method of financing
303
used for the MedicarePlus program under part C of
title XVIII.
‘‘(3) The methodology for making payments for
graduate medical education, and the selection of en-
tities to receive the payments. Matters considered
under this paragraph shall include the following:
‘‘(A) The methodology under part B for
making payments from the Fund, including the
use of data from the fiscal years 1992 through
1994, and including the methodology that ap-
plies with respect to consolidations and mergers
of participants in the program under such part
and with respect to the inclusion of additional
participants in the program.
‘‘(B) Issues regarding children’s hospitals,
and approved medical residency training pro-
grams in pediatrics.
‘‘(C) Whether and to what extent pay-
ments are being made (or should be made) for
graduate training in the various nonphysician
health professions.
‘‘(4) Federal policies regarding international
medical graduates.
‘‘(5) The dependence of schools of medicine on
service-generated income.
304
‘‘(6) The effects of the amendments made by
section 15412 of the Medicare Preservation Act of
1995, including adverse effects on teaching hospitals
that result from modifications in policies regarding
international medical graduates.
‘‘(7) Whether and to what extent the needs of
the United States regarding the supply of physicians
will change during the 10-year period beginning on
October 1, 1995, and whether and to what extent
any such changes will have significant financial ef-
fects on teaching hospitals.
‘‘(8) The appropriate number and mix of resi-
dents.
‘‘(c) COMPOSITION.—Not later than three months
after being designated as the initial chair of the Medicare
Payment Review Commission, the Chair of the Commis-
sion shall appoint to the Panel 19 individuals who are not
members of the Commission, who are not officers or em-
ployees of the United States, and who possess expertise
on matters on which the Panel is to make recommenda-
tions under subsection (b). Such individuals shall include
the following:
‘‘(1) Deans from allopathic and osteopathic
schools of medicine.
305
‘‘(2) Chief executive officers (or equivalent ad-
ministrative heads) from academic health centers,
integrated health care systems, approved medical
residency training programs, and teaching hospitals
that sponsor approved medical residency training
programs.
‘‘(3) Chairs of departments or divisions from
allopathic and osteopathic schools of medicine,
schools of dentistry, and approved medical residency
training programs in oral surgery.
‘‘(4) Individuals with leadership experience
from each of the fields of advanced practice nursing,
physician assistants, and podiatric medicine.
‘‘(5) Individuals with substantial experience in
the study of issues regarding the composition of the
health care workforce of the United States.
‘‘(6) Individuals with expertise on the financing
of health care.
‘‘(7) Representatives from health insurance or-
ganizations and health plan organizations.
‘‘(d) RELATIONSHIP OF PANEL TO MEDICARE PAY-
MENT
REVIEW
COMMISSION.—From amounts appro-
priated under subsection (n), the Medicare Payment Re-
view Commission shall provide for the Panel such staff
and administrative support (including quarters for the
306
Panel) as may be necessary for the Panel to carry out
the duties under subsection (b).
‘‘(e) CHAIR.—The Panel shall designate a member of
the Panel to serve as the Chair of the Panel.
‘‘(f) MEETINGS.—The Panel shall meet at the call of
the Chair or a majority of the members, except that the
first meeting of the Panel shall be held not later than
three months after the date on which appointments under
subsection (c) are completed.
‘‘(g) TERMS.—The term of a member of the Panel
is the duration of the Panel.
‘‘(h) VACANCIES.—
‘‘(1) IN GENERAL.—A vacancy in the member-
ship of the Panel does not affect the power of the
remaining members to carry out the duties under
subsection (b). A vacancy in the membership of the
Panel shall be filled in the manner in which the
original appointment was made.
‘‘(2) INCOMPLETE TERM.—If a member of the
Panel does not serve the full term applicable to the
member, the individual appointed to fill the resulting
vacancy shall be appointed for the remainder of the
term of the predecessor of the individual.
‘‘(i) COMPENSATION; REIMBURSEMENT
OF
EX-
PENSES.—
307
‘‘(1) COMPENSATION.—Members of the Panel
shall receive compensation for each day (including
traveltime) engaged in carrying out the duties of the
Committee. Such compensation may not be in an
amount in excess of the daily equivalent of the an-
nual maximum rate of basic pay payable under the
General Schedule (under title 5, United States
Code) for positions above GS–15.
‘‘(2) REIMBURSEMENT.—Members of the Panel
may, in accordance with chapter 57 of title 5, Unit-
ed States Code, be reimbursed for travel, subsist-
ence, and other necessary expenses incurred in car-
rying out the duties of the Panel.
‘‘(j) CONSULTANTS.—The Panel may procure such
temporary and intermittent services of consultants under
section 3109(b) of title 5, United States Code, as the
Panel may determine to be useful in carrying out the du-
ties under subsection (b). The Panel may not procure serv-
ices under this subsection at any rate in excess of the daily
equivalent of the maximum annual rate of basic pay pay-
able under the General Schedule for positions above GS–
15. Consultants under this subsection may, in accordance
with chapter 57 of title 5, United States Code, be reim-
bursed for travel, subsistence, and other necessary ex-
308
penses incurred for activities carried out on behalf of the
Panel pursuant to subsection (b).
‘‘(k) POWERS.—
‘‘(1) IN GENERAL.—For the purpose of carry-
ing out the duties of the Panel under subsection (b),
the Panel may hold such hearings, sit and act at
such times and places, take such testimony, and re-
ceive such evidence as the Panel considers appro-
priate.
‘‘(2) OBTAINING
OFFICIAL
INFORMATION.—
Upon the request of the Panel, the heads of Federal
agencies shall furnish directly to the Panel informa-
tion necessary for the Panel to carry out the duties
under subsection (b).±
‘‘(3) USE OF MAILS.—The Panel may use the
United States mails in the same manner and under
the same conditions as Federal agencies.
‘‘(l) REPORTS.—
‘‘(1) FIRST INTERIM REPORT.—Not later than
one year after the date of the enactment of the Med-
icare Preservation Act of 1995, the Panel shall sub-
mit to the Congress a report providing the rec-
ommendations of the Panel regarding the matters
specified in paragraphs (1) through (4) of subsection
(b).
309
‘‘(2) SECOND
INTERIM
REPORT.—Not later
than 2 years after the date of enactment specified
in paragraph (1), the Panel shall submit to the Con-
gress a report providing the recommendations of the
Panel regarding the matters specified in paragraphs
(5) and (6) of subsection (b).
‘‘(3) FINAL REPORT.—Not later than 3 years
after the date of enactment specified in paragraph
(1), the Panel shall submit to the Congress a final
report providing the recommendations of the Panel
under subsection (b).
‘‘(m) DURATION.—The Panel terminates upon the
expiration of the 180-day period beginning on the date on
which the final report under subsection (l)(3) is submitted
to the Congress.
‘‘(n) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
for the purpose of carrying out this section, there
are authorized to be appropriated such sums as may
be necessary for each of the fiscal years 1996
through 1999.
‘‘(2) LIMITATION.—The authorization of appro-
priations established in paragraph (1) is effective
only with respect to appropriations made from allo-
310
cations under section 302(b) of the Congressional
Budget Act of 1974—
‘‘(A) for the Subcommittee on Labor,
Health and Human Services, and Education,
Committee on Appropriations of the House of
Representatives, in the case of any bill, resolu-
tion, or amendment considered in the House;
and
‘‘(B) for the Subcommittee on Labor,
Health and Human Services, and Education,
Committee on Appropriations of the Senate, in
the case of any bill, resolution, or amendment
considered in the Senate.’’.
Subtitle F—Provisions Relating to
Medicare Part A
PART 1—HOSPITALS
Subpart A—General Provisions Relating to Hospitals
SEC. 15501. REDUCTIONS IN INFLATION UPDATES FOR PPS
HOSPITALS.
Section 
1886(b)(3)(B)(i) 
(42 
U.S.C.
1395ww(b)(3)(B)(i)) is amended by striking subclauses
(XI), (XII), and (XIII) and inserting the following:
‘‘(XI) for fiscal year 1996, the market basket
percentage increase minus 2.5 percentage points for
hospitals in all areas,
311
‘‘(XII) for each of the fiscal years 1997 through
2002, the market basket percentage increase minus
2.0 percentage points for hospitals in all areas, and
‘‘(XIII) for fiscal year 2003 and each subse-
quent fiscal year, the market basket percentage in-
crease for hospitals in all areas.’’.
SEC. 15502. REDUCTIONS IN DISPROPORTIONATE SHARE
PAYMENT ADJUSTMENTS.
(a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended—
(1) in clause (ii), by striking ‘‘The amount’’
and inserting ‘‘Subject to clause (ix), the amount’’;
and
(2) by adding at the end the following new
clause:
‘‘(ix) In the case of discharges occurring on or after
October 1, 1995, the additional payment amount other-
wise determined under clause (ii) shall be reduced as fol-
lows:
‘‘(I) For discharges occurring on or after Octo-
ber 1, 1995, and on or before September 30, 1996,
by 20 percent.
‘‘(II) For discharges occurring on or after Octo-
ber 1, 1996, and on or before September 30, 1997,
by 25 percent.
312
‘‘(III) For discharges occurring on or after Oc-
tober 1, 1997, by 30 percent.’’.
(b) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION
OF
STANDARDIZED AMOUNTS.—Section
1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is
amended by striking the period at the end and inserting
the following: ‘‘, and the Secretary shall not take into ac-
count any reductions in the amount of such additional
payments resulting from the amendments made by section
15502(a) of the Medicare Preservation Act of 1995.’’.
SEC. 15503. PAYMENTS FOR CAPITAL-RELATED COSTS FOR
INPATIENT HOSPITAL SERVICES.
(a) REDUCTION
IN
PAYMENTS
FOR
PPS HOS-
PITALS.—
(1) 
CONTINUATION
OF
CURRENT
REDUC-
TIONS.—Section 
1886(g)(1)(A) 
(42 
U.S.C.
1395ww(g)(1)(A)) is amended in the second sen-
tence—
(A) by striking ‘‘through 1995’’ and insert-
ing ‘‘through 2002’’; and
(B) by inserting after ‘‘10 percent reduc-
tion’’ the following: ‘‘(or a 15 percent reduction
in the case of payments during fiscal years
1996 through 2002)’’.
313
(2) REDUCTION IN BASE PAYMENT RATES.—
Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))
is amended by adding at the end the following new
sentence: ‘‘In addition to the reduction described in
the preceding sentence, for discharges occurring
after September 30, 1995, the Secretary shall reduce
by 7.47 percent the unadjusted standard Federal
capital payment rate (as described in 42 CFR
412.308(c), as in effect on the date of the enactment
of the Medicare Preservation Act of 1995) and shall
reduce by 8.27 percent the unadjusted hospital-spe-
cific rate (as described in 42 CFR 412.328(e)(1),
as in effect on such date of enactment).’’.
(b) REDUCTION IN PAYMENTS FOR PPS-EXEMPT
HOSPITALS.—Section 1886(g) (42 U.S.C. 1395ww(g)) is
amended by adding at the end the following new para-
graph:
‘‘(4)(A) Except as provided in subparagraph (B), in
determining the amount of the payments that may be
made under this title with respect to all the capital-related
costs of inpatient hospital services furnished during fiscal
years 1996 through 2002 of a hospital which is not a sub-
section (d) hospital or a subsection (d) Puerto Rico hos-
pital, the Secretary shall reduce the amounts of such pay-
ments otherwise determined under this title by 15 percent.
314
‘‘(B) Subparagraph (A) shall not apply to payments
with respect to the capital-related costs of any hospital
that is a sole community hospital (as defined in subsection
(d)(5)(D)(iii) or a rural primary care hospital (as defined
in section 1861(mm)(1)).’’.
(c) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL-
RELATED TAX COSTS.—Section 1886(g)(1) (42 U.S.C.
1395ww(g)(1)) is amended—
(1) by redesignating subparagraph (C) as sub-
paragraph (D), and
(2) by inserting after subparagraph (B) the fol-
lowing:
‘‘(C)(i) For discharges occurring after September 30,
1995, such system shall provide for an adjustment in an
amount equal to the amount determined under clause (iv)
for capital-related tax costs for each hospital that is eligi-
ble for such adjustment.
‘‘(ii) Subject to clause (iii), a hospital is eligible for
an adjustment under this subparagraph, with respect to
discharges occurring in a fiscal year, if the hospital—
‘‘(I) is a hospital that may otherwise receive
payments under this subsection,
‘‘(II) is not a public hospital, and
‘‘(III) incurs capital-related tax costs for the
fiscal year.
315
‘‘(iii)(I) In the case of a hospital that first incurs cap-
ital-related tax costs in a fiscal year after fiscal year 1992
because of a change from nonproprietary to proprietary
status or because the hospital commenced operation after
such fiscal year, the first fiscal year for which the hospital
shall be eligible for such adjustment is the second full fis-
cal year following the fiscal year in which the hospital first
incurs such costs.
‘‘(II) In the case of a hospital that first incurs cap-
ital-related tax costs in a fiscal year after fiscal year 1992
because of a change in State or local tax laws, the first
fiscal year for which the hospital shall be eligible for such
adjustment is the fourth full fiscal year following the fiscal
year in which the hospital first incurs such costs.
‘‘(iv) The per discharge adjustment under this clause
shall be equal to the hospital-specific capital-related tax
costs per discharge of a hospital for fiscal year 1992 (or,
in the case of a hospital that first incurs capital-related
tax costs for a fiscal year after fiscal year 1992, for the
first full fiscal year for which such costs are incurred),
updated to the fiscal year to which the adjustment applies.
Such per discharge adjustment shall be added to the Fed-
eral capital rate, after such rate has been adjusted as de-
scribed in 42 CFR 412.312 (as in effect on the date of
the enactment of the Medicare Preservation Act of 1995),
316
and before such rate is multiplied by the applicable Fed-
eral rate percentage.
‘‘(v) For purposes of this subparagraph, capital-relat-
ed tax costs include—
‘‘(I) the costs of taxes on land and depreciable
assets owned by a hospital (or related organization)
and used for patient care,
‘‘(II) payments in lieu of such taxes (made by
hospitals that are exempt from taxation), and
‘‘(III) the costs of taxes paid by a hospital (or
related organization) as lessee of land, buildings, or
fixed equipment from a lessor that is unrelated to
the hospital (or related organization) under the
terms of a lease that requires the lessee to pay all
expenses (including mortgage, interest, and amorti-
zation) and leaves the lessor with an amount free of
all claims (sometimes referred to as a ‘net net net’
or ‘triple net’ lease).
In determining the adjustment required under clause (i),
the Secretary shall not take into account any capital-relat-
ed tax costs of a hospital to the extent that such costs
are based on tax rates and assessments that exceed those
for similar commercial properties.
‘‘(vi) The system shall provide that the Federal cap-
ital rate for any fiscal year after September 30, 1995,
317
shall be reduced by a percentage sufficient to ensure that
the adjustments required to be paid under clause (i) for
a fiscal year neither increase nor decrease the total
amount that would have been paid under this system but
for the payment of such adjustments for such fiscal year.’’.
(d) REVISION
OF EXCEPTIONS PROCESS UNDER
PROSPECTIVE
PAYMENT
SYSTEM
FOR
CERTAIN
PROJECTS.—
(1) IN
GENERAL.—Section 1886(g)(1) (42
U.S.C. 1395ww(g)(1)), as amended by subsection
(c), is amended—
(A) by redesignating subparagraph (D) as
subparagraph (E), and
(B) by inserting after subparagraph (C)
the following:
‘‘(D) The exceptions under the system provided by
the Secretary under subparagraph (B)(iii) shall include
the provision of exception payments under the special ex-
ceptions process provided under 42 CFR 412.348(g) (as
in effect on September 1, 1995), except that the Secretary
shall revise such process as follows:
‘‘(i) A hospital with at least 100 beds which is
located in an urban area shall be eligible under such
process without regard to its disproportionate pa-
tient percentage under subsection (d)(5)(F) or
318
whether it qualifies for additional payment amounts
under such subsection.
‘‘(ii) The minimum payment level for qualifying
hospitals shall be 85 percent.
‘‘(iii) A hospital shall be considered to meet the
requirement that it completes the project involved no
later than the end of the hospital’s last cost report-
ing period beginning after October 1, 2001, if—
‘‘(I) the hospital has obtained a certificate
of need for the project approved by the State or
a local planning authority, and
‘‘(II) by September 1, 1995, the hospital
has expended on the project at least $750,000
or 10 percent of the estimated cost of the
project.
‘‘(iv) The amount of the exception payment
made shall not be reduced by any offsetting
amounts.’’.
(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
(D))’’.
319
SEC. 15504. REDUCTION IN ADJUSTMENT FOR INDIRECT
MEDICAL EDUCATION.
For provisions modifying medicare payment policies
regarding graduate medical education, see part 2 of sub-
title E.
SEC. 15505. TREATMENT OF PPS-EXEMPT HOSPITALS.
(a) UPDATES.—Section 1886(b)(3)(B)(ii)(V) (42
U.S.C. 1395ww(b)(3)(B)(ii)(V)) is amended by striking
‘‘thorugh 1997’’ and inserting ‘‘through 2002’’.
(b) REBASING FOR CERTAIN LONG-TERM CARE HOS-
PITALS.—
(1) IN
GENERAL.—Section 1886(b)(3) (42
U.S.C. 1395ww(b)(3)) is amended—
(A) in subparagraph (A), by striking ‘‘and
(E)’’ and inserting ‘‘(E), and (F)’’;
(B) in subparagraph (B)(ii), by striking
‘‘(A) and (E)’’ and inserting ‘‘(A), (E), and
(F)’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(F)(i) In the case of a qualified long-term care hos-
pital (as defined in clause (ii)), the term ‘target amount’
means—
‘‘(I) with respect to the first 12-month cost re-
porting period in which this subparagraph is applied
to the hospital, the allowable operating costs of inpa-
320
tient hospital services (as defined in subsection
(a)(4)) recognized under this title for the hospital
for the 12-month cost reporting period beginning
during fiscal year 1991; or
‘‘(II) with respect to a later cost reporting pe-
riod, the target amount for the preceding cost re-
porting period, increase by the applicable percentage
increase under subparagraph (B)(ii) for that later
cost reporting period.
‘‘(ii) In clause (i), a ‘qualified long-term care hospital’
means, with respect to a cost reporting period, a hospital
described in clause (iv) of subsection (d)(1)(B) during fis-
cal year 1995 for which the hospital’s allowable operating
costs of inpatient hospital services recognized under this
title for each of the two most recent previous 12-month
cost reporting periods exceeded the hospital’s target
amount determined under this paragraph for such cost re-
porting periods, if the hospital—
‘‘(I) has a disproportionate patient percentage
during such cost reporting period (as determined by
the Secretary under subsection (d)(5)(F)(vi) as if
the hospital were a subsection (d) hospital) of at
least 25 percent, or
‘‘(II) is located in a State for which no payment
is made under the State plan under title XIX for
321
days of inpatient hospital services furnished to any
individual in excess of the limit on the number of
days of such services furnished to the individual for
which payment may be made under this title.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to discharges occurring
during cost reporting periods beginning on or after
October 1, 1995.
(c) TREATMENT
OF CERTAIN LONG-TERM CARE
HOSPITALS LOCATED WITHIN OTHER HOSPITALS.—
(1) IN GENERAL.—Section 1886(d)(1)(B) (42
U.S.C. 1395ww(d)(1)(B)) is amended in the matter
following clause (v) by striking the period and in-
serting the following: ‘‘, or a hospital classified by
the Secretary as a long-term care hospital on or be-
fore September 30, 1995, and located in the same
building as, or on the same campus as, another hos-
pital.’’.
(2) STUDY BY REVIEW COMMISSION.—Not later
than 12 months after the date a majority of the
members of the Medicare Payment Review Commis-
sion are first appointed, the Commission shall sub-
mit a report to Congress containing recommenda-
tions for appropriate revisions in the treatment of
long-term care hospitals located in the same building
322
as or on the same campus as another hospital for
purposes of section 1886 of the Social Security Act.
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to discharges occurring
on or after October 1, 1995.
(d) STUDY OF PROSPECTIVE PAYMENT SYSTEM FOR
REHABILITATION HOSPITALS AND UNITS.—
(1) IN GENERAL.—After consultation with the
Prospective Payment Assessment Commission, pro-
viders of rehabilitation services, and other appro-
priate parties, the Secretary of Health and Human
Services shall submit to Congress, by not later than
June 1, 1996, a report on the advisability and fea-
sibility of providing for payment based on a prospec-
tive payment system for inpatient services of reha-
bilitation hospitals and units under the medicare
program.
(2) ITEMS INCLUDED.—The report shall include
the following:
(A) The available and preferred systems of
classifying rehabilitation patients relative to du-
ration and intensity of inpatient services, in-
cluding the use of functional-related groups
(FRGs).
323
(B) The means of calculating medicare
program payments to reflect such patient re-
quirements.
(C) Other appropriate adjustments which
should be made, such as for geographic vari-
ations in wages and other costs and outliers.
(D) A timetable under which such a sys-
tem might be introduced.
(E) Whether such a system should be ap-
plied to other types of providers of inpatient re-
habilitation services.
SEC. 15506. REDUCTION IN PAYMENTS TO HOSPITALS FOR
ENROLLEES’ BAD DEBTS.
(a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.
1395x(v)(1)) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(T)(i) 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
coinsurance amounts under this title shall be reduced by—
‘‘(I) 75 percent for cost reporting periods begin-
ning during fiscal year 1996,
‘‘(II) 60 percent for cost reporting periods be-
ginning during fiscal year 1997, and
324
‘‘(III) 50 percent for subsequent cost reporting
periods.
‘‘(ii) Clause (i) shall not apply with respect to bad
debt of a hospital described in section 1886(d)(1)(B)(iv)
if the debt is attributable to uncollectable deductible and
coinsurance payments owed by individuals enrolled in a
State plan under title XIX or under the MediGrant pro-
gram under title XXI.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to hospital cost reporting peri-
ods beginning on or after October 1, 1995.
SEC. 15507. PERMANENT EXTENSION OF HEMOPHILIA PASS-
THROUGH.
Effective as if included in the enactment of OBRA–
1989, section 6011(d) of such Act (as amended by section
13505 of OBRA–1993) is amended by striking ‘‘and shall
expire September 30, 1994’’.
SEC. 15508. CONFORMING AMENDMENT TO CERTIFICATION
OF CHRISTIAN SCIENCE PROVIDERS.
(a) 
HOSPITALS.—Section 
1861(e) 
(42 
U.S.C.
1395x(e)) is amended in the sixth sentence by inserting
after ‘‘Massachusetts,’’ the following: ‘‘or by the Commis-
sion for Accreditation of Christian Science Nursing Orga-
nizations/Facilities, Inc.,’’.
325
(b) 
SKILLED
NURSING
FACILITIES.—Section
1861(y)(1) is amended by inserting after ‘‘Massachu-
setts,’’ the following: ‘‘or by the Commission for Accredita-
tion of Christian Science Nursing Organizations/Facilities,
Inc.,’’.
Subpart B—Provisions Relating to Rural Hospitals
SEC. 15511. SOLE COMMUNITY HOSPITALS.
(a) UPDATE.—Section 1886(b)(3)(B)(iv) (42 U.S.C.
1395ww(b)(3)(B)(iv)) is amended—
(A) in subclause (III), by striking ‘‘and’’ at
the end; and
(B) by striking subclause (IV) and insert-
ing the following:
‘‘(IV) for each of the fiscal years 1996 through
2000, the market basket percentage increase minus
1 percentage points, and
‘‘(V) for fiscal year 2001 and each subsequent
fiscal year, the applicable percentage increase under
clause (i).’’.
(b) STUDY OF IMPACT OF SOLE COMMUNITY HOS-
PITAL DESIGNATIONS.—
(1) STUDY.—The Medicare Payment Review
Commission shall conduct a study of the impact of
the designation of hospitals as sole community hos-
pitals under the medicare program on the delivery of
326
health care services to individuals in rural areas, and
shall include in the study an analysis of the charac-
teristics of the hospitals designated as such sole
community hospitals under the program.
(2) REPORT.—Not later than 12 months after
the date a majority of the members of the Commis-
sion are first appointed, the Commission shall sub-
mit to Congress a report on the study conducted
under paragraph (1).
SEC. 15512. CLARIFICATION OF TREATMENT OF EAC AND
RPC HOSPITALS.
Paragraphs (1)(A)(i) and (2)(A)(i) of section 1820(i)
(42 U.S.C. 1395i–4(i)) are each amended by striking the
semicolon at the end and inserting the following: ‘‘, or in
a State which the Secretary finds would receive a grant
under such subsection during a fiscal year if funds were
appropriated for grants under such subsection for the fis-
cal year;’’.
SEC. 15513. ESTABLISHMENT OF RURAL EMERGENCY AC-
CESS CARE HOSPITALS.
(a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x)
is amended by adding at the end the following new sub-
section:
327
‘‘Rural Emergency Access Care Hospital; Rural
Emergency Access Care Hospital Services
‘‘(oo)(1) The term ‘rural emergency access care hos-
pital’ means, for a fiscal year, a facility with respect to
which the Secretary finds the following:
‘‘(A) The facility is located in a rural area (as
defined in section 1886(d)(2)(D)).
‘‘(B) The facility was a hospital under this title
at any time during the 5-year period that ends on
the date of the enactment of this subsection.
‘‘(C) The facility is in danger of closing due to
low inpatient utilization rates and operating losses,
and the closure of the facility would limit the access
to emergency services of individuals residing in the
facility’s service area.
‘‘(D) The facility has entered into (or plans to
enter into) an agreement with a hospital with a par-
ticipation agreement in effect under section 1866(a),
and under such agreement the hospital shall accept
patients transferred to the hospital from the facility
and receive data from and transmit data to the facil-
ity.
‘‘(E) There is a practitioner who is qualified to
provide advanced cardiac life support services (as de-
328
termined by the State in which the facility is lo-
cated) on-site at the facility on a 24-hour basis.
‘‘(F) A physician is available on-call to provide
emergency medical services on a 24-hour basis.
‘‘(G) The facility meets such staffing require-
ments as would apply under section 1861(e) to a
hospital located in a rural area, except that—
‘‘(i) the facility need not meet hospital
standards relating to the number of hours dur-
ing a day, or days during a week, in which the
facility must be open, except insofar as the fa-
cility is required to provide emergency care on
a 24-hour basis under subparagraphs (E) and
(F); and
‘‘(ii) the facility may provide any services
otherwise required to be provided by a full-time,
on-site dietitian, pharmacist, laboratory techni-
cian, medical technologist, or radiological tech-
nologist on a part-time, off-site basis.
‘‘(H) The facility meets the requirements appli-
cable to clinics and facilities under subparagraphs
(C) through (J) of paragraph (2) of section
1861(aa) and of clauses (ii) and (iv) of the second
sentence of such paragraph (or, in the case of the
requirements of subparagraph (E), (F), or (J) of
329
such paragraph, would meet the requirements if any
reference in such subparagraph to a ‘nurse practi-
tioner’ or to ‘nurse practitioners’ were deemed to be
a reference to a ‘nurse practitioner or nurse’ or to
‘nurse practitioners or nurses’); except that in deter-
mining whether a facility meets the requirements of
this subparagraph, subparagraphs (E) and (F) of
that paragraph shall be applied as if any reference
to a ‘physician’ is a reference to a physician as de-
fined in section 1861(r)(1).
‘‘(2) The term ‘rural emergency access care hospital
services’ means the following services provided by a rural
emergency access care hospital and furnished to an indi-
vidual over a continuous period not to exceed 24 hours
(except that such services may be furnished over a longer
period in the case of an individual who is unable to leave
the hospital because of inclement weather):
‘‘(A) An appropriate medical screening exam-
ination (as described in section 1867(a)).
‘‘(B) Necessary stabilizing examination and
treatment services for an emergency medical condi-
tion and labor (as described in section 1867(b)).’’.
(b) REQUIRING RURAL EMERGENCY ACCESS CARE
HOSPITALS TO MEET HOSPITAL ANTI-DUMPING RE-
QUIREMENTS.—Section 
1867(e)(5) 
(42 
U.S.C.
330
1395dd(e)(5)) is amended by striking ‘‘1861(mm)(1))’’
and inserting ‘‘1861(mm)(1)) and a rural emergency ac-
cess care hospital (as defined in section 1861(oo)(1))’’.
(c) REFERENCE TO PAYMENT PROVISIONS UNDER
PART B.—For provisions relating to payment for rural
emergency access care hospital services under part B, see
section 15607.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to fiscal years beginning on or
after October 1, 1995.
SEC. 15514. CLASSIFICATION OF RURAL REFERRAL CEN-
TERS.
(a) PROHIBITING DENIAL OF REQUEST FOR RECLAS-
SIFICATION ON BASIS OF COMPARABILITY OF WAGES.—
(1) IN GENERAL.—Section 1886(d)(10)(D) (42
U.S.C. 1395ww(d)(10)(D)) is amended—
(A) by redesignating clause (iii) as clause
(iv); and
(B) by inserting after clause (ii) the follow-
ing new clause:
‘‘(iii) Under the guidelines published by the Secretary
under clause (i), in the case of a hospital which is classi-
fied by the Secretary as a rural referral center under para-
graph (5)(C), the Board may not reject the application
of the hospital under this paragraph on the basis of any
331
comparison between the average hourly wage of the hos-
pital and the average hourly wage of hospitals in the area
in which it is located.’’.
(2) EFFECTIVE
DATE.—Notwithstanding sec-
tion 1886(d)(10)(C)(ii) of the Social Security Act, a
hospital may submit an application to the Medicare
Geographic Classification Review Board during the
30-day period beginning on the date of the enact-
ment of this Act requesting a change in its classi-
fication for purposes of determining the area wage
index applicable to the hospital under section
1886(d)(3)(D) of such Act for fiscal year 1997, if
the hospital would be eligible for such a change in
its classification under the standards described in
section 1886(d)(10)(D) (as amended by paragraph
(1)) but for its failure to meet the deadline for appli-
cations under section 1886(d)(10)(C)(ii).
(b) CONTINUING TREATMENT OF PREVIOUSLY DES-
IGNATED CENTERS.—Any hospital classified as a rural re-
ferral center by the Secretary of Health and Human Serv-
ices under section 1886(d)(5)(C) of the Social Security
Act for fiscal year 1994 shall be classified as such a rural
referral center for fiscal year 1996 and each subsequent
fiscal year.
332
SEC. 15515. FLOOR ON AREA WAGE INDEX.
(a) 
IN
GENERAL.—For 
purposes 
of 
section
1886(d)(3)(E) of the Social Security Act for discharges
occurring on or after October 1, 1995, the area wage index
applicable under such section to any hospital which is not
located in a rural area (as defined in section
1886(d)(2)(D) of such Act) may not be less than the aver-
age of the area wage indices applicable under such section
to hospitals located in rural areas in the State in which
the hospital is located.
(b) BUDGET-NEUTRALITY
IN IMPLEMENTATION.—
The Secretary of Health and Human Services shall adjust
the area wage indices referred to in subsection (a) for hos-
pitals not described in such subsection in a manner which
assures that the aggregate payments made under section
1886(d) of the Social Security Act in a fiscal year for the
operating costs of inpatient hospital services are not great-
er or less than those which would have been made in the
year if this section did not apply.
PART 2—PAYMENTS TO SKILLED NURSING
FACILITIES
SEC. 15521. PAYMENTS FOR ROUTINE SERVICE COSTS.
(a) CLARIFICATION
OF DEFINITION
OF ROUTINE
SERVICE COSTS.—Section 1888 (42 U.S.C. 1395yy) is
amended by adding at the end the following new sub-
section:
333
‘‘(e) For purposes of this section, the ‘routine service
costs’ of a skilled nursing facility are all costs which are
attributable to nursing services, room and board, adminis-
trative costs, other overhead costs, and all other ancillary
services (including supplies and equipment), excluding
costs attributable to covered non-routine services subject
to payment limits under section 1888A.’’.
(b) CONFORMING AMENDMENT.—Section 1888 (42
U.S.C. 1395yy) is amended in the heading by inserting
‘‘AND CERTAIN ANCILLARY’’ after ‘‘SERVICE’’.
SEC. 15522. INCENTIVES FOR COST EFFECTIVE MANAGE-
MENT OF COVERED NON-ROUTINE SERVICES.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1888 the following new section:
‘‘INCENTIVES
FOR
COST-EFFECTIVE
MANAGEMENT
OF
COVERED
NON-ROUTINE
SERVICES
OF
SKILLED
NURSING FACILITIES
‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of
this section:
‘‘(1) COVERED NON-ROUTINE SERVICES.—The
term ‘covered non-routine services’ means post-hos-
pital extended care services consisting of any of the
following:
‘‘(A) Physical or occupational therapy or
speech-language pathology services, or res-
334
piratory therapy, including supplies and support
services incident to such services and therapy.
‘‘(B) Prescription drugs.
‘‘(C) Complex medical equipment.
‘‘(D) Intravenous therapy and solutions
(including enteral and parenteral nutrients,
supplies, and equipment).
‘‘(E) Radiation therapy.
‘‘(F) Diagnostic services, including labora-
tory, radiology (including computerized tomog-
raphy services and imaging services), and pul-
monary services.
‘‘(2) SNF MARKET BASKET PERCENTAGE IN-
CREASE.—The term ‘SNF market basket percentage
increase’ for a fiscal year means a percentage equal
to the percentage increase in routine service cost
limits for the year under section 1888(a).
‘‘(3) STAY.—The term ‘stay’ means, with re-
spect to an individual who is a resident of a skilled
nursing facility, a period of continuous days during
which the facility provides extended care services for
which payment may be made under this title with
respect to the individual during the individual’s spell
of illness.
335
‘‘(b) NEW PAYMENT METHOD FOR COVERED NON-
ROUTINE SERVICES.—
‘‘(1) IN GENERAL.—Subject to subsection (c), a
skilled nursing facility shall receive interim pay-
ments under this title for covered non-routine serv-
ices furnished to an individual during a cost report-
ing period beginning during a fiscal year (after fiscal
year 1996) in an amount equal to the reasonable
cost of providing such services in accordance with
section 1861(v). The Secretary may adjust such pay-
ments if the Secretary determines (on the basis of
such estimated information as the Secretary consid-
ers appropriate) that payments to the facility under
this paragraph for a cost reporting period would
substantially exceed the cost reporting period limit
determined under subsection (c)(1)(B).
‘‘(2) RESPONSIBILITY
OF
SKILLED
NURSING
FACILITY TO MANAGE BILLINGS.—
‘‘(A) CLARIFICATION RELATING TO PART A
BILLING.—In the case of a covered non-routine
service furnished to an individual who (at the
time the service is furnished) is a resident of a
skilled nursing facility who is entitled to cov-
erage under section 1812(a)(2) for such service,
the skilled nursing facility shall submit a claim
336
for payment under this title for such service
under part A (without regard to whether or not
the item or service was furnished by the facility,
by others under arrangement with them made
by the facility, under any other contracting or
consulting arrangement, or otherwise).
‘‘(B) PART B BILLING.—In the case of a
covered non-routine service (other than a port-
able X-ray or portable electrocardiogram treat-
ed as a physician’s service for purposes of sec-
tion 1848(j)(3)) furnished to an individual who
(at the time the service is furnished) is a resi-
dent of a skilled nursing facility who is not enti-
tled to coverage under section 1812(a)(2) for
such service but is entitled to coverage under
part B for such service, the skilled nursing fa-
cility shall submit a claim for payment under
this title for such service under part B (without
regard to whether or not the item or service
was furnished by the facility, by others under
arrangement with them made by the facility,
under any other contracting or consulting ar-
rangement, or otherwise).
‘‘(C) MAINTAINING RECORDS ON SERVICES
FURNISHED TO RESIDENTS.—Each skilled nurs-
337
ing facility receiving payments for extended
care services under this title shall document on
the facility’s cost report all covered non-routine
services furnished to all residents of the facility
to whom the facility provided extended care
services for which payment was made under
part A during a fiscal year (beginning with fis-
cal year 1996) (without regard to whether or
not the services were furnished by the facility,
by others under arrangement with them made
by the facility, under any other contracting or
consulting arrangement, or otherwise).
‘‘(c) RECONCILIATION OF AMOUNTS.—
‘‘(1) LIMIT BASED ON PER STAY LIMIT AND
NUMBER OF STAYS.—
‘‘(A) IN GENERAL.—If a skilled nursing fa-
cility has received aggregate payments under
subsection (b) for covered non-routine services
during a cost reporting period beginning during
a fiscal year in excess of an amount equal to
the cost reporting period limit determined
under subparagraph (B), the Secretary shall re-
duce the payments made to the facility with re-
spect to such services for cost reporting periods
beginning during the following fiscal year in an
338
amount equal to such excess. The Secretary
shall reduce payments under this subparagraph
at such times and in such manner during a fis-
cal year as the Secretary finds necessary to
meet the requirement of this subparagraph.
‘‘(B) COST REPORTING PERIOD LIMIT.—
The cost reporting period limit determined
under this subparagraph is an amount equal to
the product of—
‘‘(i) the per stay limit applicable to
the facility under subsection (d) for the pe-
riod; and
‘‘(ii) the number of stays beginning
during the period for which payment was
made to the facility for such services.
‘‘(C) PROSPECTIVE
REDUCTION
IN
PAY-
MENTS.—In addition to the process for reduc-
ing payments described in subparagraph (A),
the Secretary may reduce payments made to a
facility under this section during a cost report-
ing period if the Secretary determines (on the
basis of such estimated information as the Sec-
retary considers appropriate) that payments to
the facility under this section for the period will
substantially exceed the cost reporting period
339
limit for the period determined under this para-
graph.
‘‘(2) INCENTIVE PAYMENTS.—
‘‘(A) IN GENERAL.—If a skilled nursing fa-
cility has received aggregate payments under
subsection (b) for covered non-routine services
during a cost reporting period beginning during
a fiscal year in an amount that is less than the
amount determined under paragraph (1)(B),
the Secretary shall pay the skilled nursing facil-
ity in the following fiscal year an incentive pay-
ment equal to 50 percent of the difference be-
tween such amounts, except that the incentive
payment may not exceed 5 percent of the aggre-
gate payments made to the facility under sub-
section (b) for the previous fiscal year (without
regard to subparagraph (B)).
‘‘(B) 
INSTALLMENT
INCENTIVE
PAY-
MENTS.—The Secretary may make installment
payments during a fiscal year to a skilled nurs-
ing facility based on the estimated incentive
payment that the facility would be eligible to re-
ceive with respect to such fiscal year.
‘‘(d) DETERMINATION
OF
FACILITY
PER
STAY
LIMIT.—
340
‘‘(1) LIMIT FOR FISCAL YEAR 1997.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the Secretary shall establish
separate per stay limits for hospital-based and
freestanding skilled nursing facilities for the 12-
month cost reporting period beginning during
fiscal year 1997 that are equal to the sum of—
‘‘(i) 50 percent of the facility-specific
stay amount for the facility (as determined
under subsection (e)) for the last 12-month
cost reporting period ending on or before
September 30, 1994, increased (in a
compounded manner) by the SNF market
basket percentage increase for fiscal years
1995 through 1997; and
‘‘(ii) 50 percent of the average of all
facility-specific stay amounts for all hos-
pital-based facilities or all freestanding fa-
cilities (whichever is applicable) during the
cost reporting period described in clause
(i), increased (in a compounded manner)
by the SNF market basket percentage in-
crease for fiscal years 1995 through 1997.
‘‘(B) FACILITIES NOT HAVING 1994 COST
REPORTING PERIOD.—In the case of a skilled
341
nursing facility for which payments were not
made under this title for covered non-routine
services for the last 12-month cost reporting pe-
riod ending on or before September 30, 1994,
the per stay limit for the 12-month cost report-
ing period beginning during fiscal year 1997
shall be twice the amount determined under
subparagraph (A)(ii).
‘‘(2) LIMIT FOR SUBSEQUENT FISCAL YEARS.—
The per stay limit for a skilled nursing facility for
a 12-month cost reporting period beginning during
a fiscal year after fiscal year 1997 is equal to the
per stay limit established under this subsection for
the 12-month cost reporting period beginning during
the previous fiscal year, increased by the SNF mar-
ket basket percentage increase for such subsequent
fiscal year minus 2 percentage points.
‘‘(3) REBASING OF AMOUNTS.—
‘‘(A) IN
GENERAL.—The Secretary shall
provide for an update to the facility-specific
amounts used to determine the per stay limits
under this subsection for cost reporting periods
beginning on or after October 1, 1999, and
every 2 years thereafter.
342
‘‘(B) TREATMENT
OF
FACILITIES
NOT
HAVING REBASED COST REPORTING PERIODS.—
Paragraph (1)(B) shall apply with respect to a
skilled nursing facility for which payments were
not made under this title for covered non-rou-
tine services for the 12-month cost reporting
period used by the Secretary to update facility-
specific amounts under subparagraph (A) in the
same manner as such paragraph applies with
respect to a facility for which payments were
not made under this title for covered non-rou-
tine services for the last 12-month cost report-
ing period ending on or before September 30,
1994.
‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY
AMOUNTS.—The ‘facility-specific stay amount’ for a
skilled nursing facility for a cost reporting period is the
sum of—
‘‘(1) the average amount of payments made to
the facility under part A during the period which are
attributable to covered non-routine services fur-
nished during a stay; and
‘‘(2) the Secretary’s best estimate of the aver-
age amount of payments made under part B during
the period for covered non-routine services furnished
343
to all residents of the facility to whom the facility
provided extended care services for which payment
was made under part A during the period (without
regard to whether or not the services were furnished
by the facility, by others under arrangement with
them made by the facility, under any other contract-
ing or consulting arrangement, or otherwise), as es-
timated by the Secretary.
‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—
‘‘(1) IN GENERAL.—In applying subsection (b)
to covered non-routine services furnished during a
stay beginning during a cost reporting period begin-
ning during a fiscal year to a resident of a skilled
nursing facility who requires intensive nursing or
therapy services, the per stay limit determined for
the fiscal year under the methodology for such resi-
dent shall be the per stay limit developed under
paragraph (2) instead of the per stay limit deter-
mined under subsection (d)(1)(A).
‘‘(2) PER
STAY
LIMIT
FOR
INTENSIVE
NEED
RESIDENTS.—Not later than June 30, 1996, the
Secretary, after consultation with the Medicare Pay-
ment Review Commission and skilled nursing facility
experts, shall develop and publish a methodology for
determining on an annual basis a per stay limit for
344
residents of a skilled nursing facility who require in-
tensive nursing or therapy services.
‘‘(3) BUDGET
NEUTRALITY.—The Secretary
shall adjust payments under subsection (b) in a
manner that ensures that total payments for covered
non-routine services under this section are not great-
er or less than total payments for such services
would have been but for the application of para-
graph (1).
‘‘(g) SPECIAL TREATMENT
FOR MEDICARE LOW
VOLUME SKILLED NURSING FACILITIES.—This section
shall not apply with respect to a skilled nursing facility
for which payment is made for routine service costs during
a cost reporting period on the basis of prospective pay-
ments under section 1888(d).
‘‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIMITS.—
‘‘(1) IN GENERAL.—The Secretary may make
exceptions and adjustments to the cost reporting
limits applicable to a skilled nursing facility under
subsection (c)(1)(B) for a cost reporting period, ex-
cept that the total amount of any additional pay-
ments made under this section for covered non-rou-
tine services during the cost reporting period as a
result of such exceptions and adjustments may not
exceed 5 percent of the aggregate payments made to
345
all skilled nursing facilities for covered non-routine
services during the cost reporting period (determined
without regard to this paragraph).
‘‘(2) BUDGET
NEUTRALITY.—The Secretary
shall adjust payments under subsection (b) in a
manner that ensures that total payments for covered
non-routine services under this section are not great-
er or less than total payments for such services
would have been but for the application of para-
graph (1).
‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before
furnishing a covered non-routine service consisting of an
X-ray service for which payment may be made under part
A or part B to a resident, a skilled nursing facility shall
consider whether furnishing the service through a provider
of portable X-ray service services would be appropriate,
taking into account the cost effectiveness of the service
and the convenience to the resident.’’.
(b) CONFORMING AMENDMENT.—Section 1814(b)
(42 U.S.C. 1395f(b)) is amended in the matter preceding
paragraph (1) by striking ‘‘1813 and 1886’’ and inserting
‘‘1813, 1886, 1888, and 1888A’’.
SEC. 15523. PAYMENTS FOR ROUTINE SERVICE COSTS.
(a) MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES.—
346
(1) BASING UPDATES TO PER DIEM COST LIM-
ITS ON LIMITS FOR FISCAL YEAR 1993.—
(A) IN
GENERAL.—The last sentence of
section 1888(a) (42 U.S.C. 1395yy(a)) is
amended by inserting before the period at the
end the following: ‘‘(except that such updates
may not take into account any changes in the
routine service costs of skilled nursing facilities
occurring during cost reporting periods which
began during fiscal year 1994 or fiscal year
1995)’’.
(B) NO
EXCEPTIONS
PERMITTED
BASED
ON AMENDMENT.—The Secretary of Health and
Human Services shall not consider the amend-
ment made by subparagraph (A) in making any
adjustments pursuant to section 1888(c) of the
Social Security Act.
(2) PAYMENTS DETERMINED ON PROSPECTIVE
BASIS.—Any change made by the Secretary of
Health and Human Services in the amount of any
prospective payment paid to a skilled nursing facility
under section 1888(d) of the Social Security Act for
cost reporting periods beginning on or after October
1, 1995, may not take into account any changes in
the costs of services occurring during cost reporting
347
periods which began during fiscal year 1994 or fiscal
year 1995.
(b) ESTABLISHMENT OF SCHEDULE FOR MAKING
ADJUSTMENTS TO LIMITS.—Section 1888(c) (42 U.S.C.
1395yy(c)) is amended by striking the period at the end
of the second sentence and inserting ‘‘, and may only make
adjustments under this subsection with respect to a facil-
ity which applies for an adjustment during an annual ap-
plication period established by the Secretary.’’.
(c) LIMITATION ON AGGREGATE INCREASE IN PAY-
MENTS RESULTING FROM ADJUSTMENTS TO LIMITS.—
Section 1888(c) (42 U.S.C. 1395yy(c)) is amended—
(1) by striking ‘‘(c) The Secretary’’ and insert-
ing ‘‘(c)(1) Subject to paragraph (2), the Sec-
retary’’; and
(2) by adding at the end the following new
paragraph:
‘‘(2) The Secretary may not make any adjustments
under this subsection in the limits set forth in subsection
(a) for a cost reporting period beginning during a fiscal
year to the extent that the total amount of the additional
payments made under this title as a result of such adjust-
ments is greater than an amount equal to—
‘‘(A) for cost reporting periods beginning dur-
ing fiscal year 1997, the total amount of the addi-
348
tional payments made under this title as a result of
adjustments under this subsection for cost reporting
periods beginning during fiscal year 1996 increased
by the SNF market basket percentage increase (as
defined in section 1888A(e)(3)) for fiscal year 1997;
and
‘‘(B) for cost reporting periods beginning dur-
ing a subsequent fiscal year, the amount determined
under this paragraph for the previous fiscal year in-
creased by the SNF market basket percentage in-
crease for such subsequent fiscal year.’’.
(d) IMPOSITION OF LIMITS FOR ALL COST REPORT-
ING PERIODS.—Section 1888(a) (42 U.S.C. 1395yy(a)) is
amended in the matter preceding paragraph (1) by insert-
ing after ‘‘extended care services’’ the following: ‘‘(for any
cost reporting period for which payment is made under
this title to the skilled nursing facility for such services)’’.
SEC. 15524. REDUCTIONS IN PAYMENT FOR CAPITAL-RE-
LATED COSTS.
Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as
amended by section 15506, is amended by adding at the
end the following new subparagraph:
‘‘(U) Such regulations shall provide that, in deter-
mining the amount of the payments that may be made
under this title with respect to all the capital-related costs
349
of skilled nursing facilities, the Secretary shall reduce the
amounts of such payments otherwise established under
this title by 15 percent for payments attributable to por-
tions of cost reporting periods occurring during fiscal
years 1996 through 2002.’’.
SEC. 15525. TREATMENT OF ITEMS AND SERVICES PAID
FOR UNDER PART B.
(a) REQUIRING PAYMENT
FOR ALL ITEMS
AND
SERVICES TO BE MADE TO FACILITY.—
(1) IN GENERAL.—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 physicians’
services and other than a portable X-ray or
portable electrocardiogram treated as a physi-
cian’s 
service 
for 
purposes 
of 
section
1848(j)(3)) furnished to an individual who (at
the time the item or service is furnished) is a
resident of a skilled nursing facility, payment
shall be made to the facility (without regard to
whether or not the item or service was fur-
nished by the facility, by others under arrange-
350
ment with them made by the facility, or other-
wise).’’.
(2) EXCLUSION FOR ITEMS AND SERVICES NOT
BILLED BY FACILITY.—Section 1862(a) (42 U.S.C.
1395y(a)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (14);
(B) by striking the period at the end of
paragraph (15) and inserting ‘‘; or’’; and
(C) by inserting after paragraph (15) the
following new paragraph:
‘‘(16) where such expenses are for covered non-
routine services (as defined in section 1888A(a)(1))
(other than a portable X-ray or portable electro-
cardiogram treated as a physician’s service for pur-
poses of section 1848(j)(3)) furnished to an individ-
ual who is a resident of a skilled nursing facility and
for which the claim for payment under this title is
not submitted by the facility.’’.
(3) 
CONFORMING
AMENDMENT.—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);’’.
(b) REDUCTION IN PAYMENTS FOR ITEMS AND SERV-
ICES FURNISHED BY OR UNDER ARRANGEMENTS WITH
351
FACILITIES.—Section 
1861(v)(1) 
(42 
U.S.C.
1395x(v)(1)), as amended by sections 15506 and 15524,
is amended by adding at the end the following new sub-
paragraph:
‘‘(V) 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) for which
payment is made under part B in an amount determined
in accordance with section 1833(a)(2)(B), the Secretary
shall reduce the reasonable cost for such item or service
otherwise determined under clause (i)(I) of such section
by 5.8 percent for payments attributable to portions of
cost reporting periods occurring during fiscal years 1996
through 2002.’’.
SEC. 15526. CERTIFICATION OF FACILITIES MEETING RE-
VISED NURSING HOME REFORM STANDARDS.
(a) IN GENERAL.—Section 1819(a)(3) (42 U.S.C.
1395i–3(a)(3)) is amended to read as follows:
‘‘(3)(A) is certified by the Secretary as meeting
the standards established under subsection (b), or
(B) is a State-certified facility (as defined in sub-
section (d)).’’.
(b) REQUIREMENTS DESCRIBED.—Section 1819 (42
U.S.C. 1395i–3) is amended by striking subsections (b)
through (i) and inserting the following:
352
‘‘(b) STANDARDS FOR AND CERTIFICATION OF FA-
CILITIES.—
‘‘(1) STANDARDS FOR FACILITIES.—
‘‘(A) IN
GENERAL.—The Secretary shall
provide for the establishment and maintenance
of standards consistent with the contents de-
scribed in subparagraph (B) for skilled nursing
facilities which furnish services for which pay-
ment may be made under this title.
‘‘(B) CONTENTS
OF
STANDARDS.—The
standards established for facilities under this
paragraph shall contain provisions relating to
the following items:
‘‘(i) The treatment of resident medical
records.
‘‘(ii) Policies, procedures, and bylaws
for operation.
‘‘(iii) Quality assurance systems.
‘‘(iv) Resident assessment procedures,
including care planning and outcome eval-
uation.
‘‘(v) The assurance of a safe and ade-
quate physical plant for the facility.
‘‘(vi) Qualifications for staff sufficient
to provide adequate care.
353
‘‘(vii) Utilization review.
‘‘(viii) The protection and enforce-
ment of resident rights described in sub-
paragraph (C).
‘‘(C) RESIDENT RIGHTS DESCRIBED.—The
resident rights described in this subparagraph
are the rights of residents to the following:
‘‘(i) To exercise the individual’s rights
as a resident of the facility and as a citizen
or resident of the United States.
‘‘(ii) To receive notice of rights and
services.
‘‘(iii) To be protected against the mis-
use of resident funds.
‘‘(iv) To be provided privacy and con-
fidentiality.
‘‘(v) To voice grievances.
‘‘(vi) To examine the results of inspec-
tions under the certification program.
‘‘(vii) To refuse to perform services
for the facility.
‘‘(viii) To be provided privacy in com-
munications and to receive mail.
‘‘(ix) To have the facility provide im-
mediate access to any resident by any rep-
354
resentative of the certification program,
the resident’s individual physician, the
State long term care ombudsman, and any
person the resident has designated as a
visitor.
‘‘(x) To retain and use personal prop-
erty.
‘‘(xi) To be free from abuse, including
verbal, sexual, physical and mental abuse,
corporal punishment, and involuntary se-
clusion.
‘‘(xii) To be provided with prior writ-
ten notice of a pending transfer or dis-
charge.
‘‘(D) 
REQUIRING
NOTICE
AND
COM-
MENT.—The standards established for facilities
under this paragraph may only take effect after
the Secretary has provided the public with no-
tice and an opportunity for comment.
‘‘(2) CERTIFICATION PROGRAM.—
‘‘(A) IN
GENERAL.—The Secretary shall
provide for the establishment and operation of
a program consistent with the requirements of
subparagraph (B) for the certification of skilled
nursing facilities which meet the standards es-
355
tablished under paragraph (1) and the decerti-
fication of facilities which fail to meet such
standards.
‘‘(B) REQUIREMENTS FOR PROGRAM.—In
addition to any other requirements the Sec-
retary may impose, in establishing and operat-
ing the certification program under subpara-
graph (A), the Secretary shall ensure the fol-
lowing:
‘‘(i) The Secretary shall ensure public
access (as defined by the Secretary) to the
certification program’s evaluations of par-
ticipating facilities, including compliance
records and enforcement actions and other
reports by the Secretary regarding the
ownership, compliance histories, and serv-
ices provided by certified facilities.
‘‘(ii) Not less often than every 4
years, the Secretary shall audit its expendi-
tures under the program, through an en-
tity designated by the Secretary which is
not affiliated with the program, as des-
ignated by the Secretary.
‘‘(c) INTERMEDIATE SANCTION AUTHORITY.—
356
‘‘(1) AUTHORITY.—In addition to any other au-
thority, where the Secretary determines that a nurs-
ing facility which is certified for participation under
this title (whether certified by the Secretary as
meeting the standards established under subsection
(b) or a State-ceritified facility) no longer or does
not substantially meet the requirements for such a
facility under this title as specified under subsection
(b) and further determines that the facility’s defi-
ciencies—
‘‘(A) immediately jeopardize the health and
safety of its residents, the Secretary shall at
least provide for the termination of the facility’s
certification for participation under this title, or
‘‘(B) do not immediately jeopardize the
health and safety of its residents, the Secretary
may, in lieu of providing for terminating the fa-
cility’s certification for participation under the
plan, provide lesser sanctions including one that
provides that no payment will be made under
this title with respect to any individual admit-
ted to such facility after a date specified by the
Secretary.
‘‘(2) NOTICE.—The Secretary shall not make
such a decision with respect to a facility until the fa-
357
cility has had a reasonable opportunity, following the
initial determination that it no longer or does not
substantially meet the requirements for such a facil-
ity under this title, to correct its deficiencies, and,
following this period, has been given reasonable no-
tice and opportunity for a hearing.
‘‘(3) EFFECTIVENESS.—The Secretary’s deci-
sion to deny payment may be made effective only
after such notice to the public and to the facility as
may be provided for by the Secretary, and its effec-
tiveness shall terminate (A) when the Secretary
finds that the facility is in substantial compliance
(or is making good faith efforts to achieve substan-
tial compliance) with the requirements for such a fa-
cility under this title, or (B) in the case described
in paragraph (1)(B), with the end of the eleventh
month following the month such decision is made ef-
fective, whichever occurs first. If a facility to which
clause (B) of the previous sentence applies still fails
to substantially meet the provisions of the respective
section on the date specified in such clause, the Sec-
retary shall terminate such facility’s certification for
participation under this title effective with the first
day of the first month following the month specified
in such clause.
358
‘‘(d) STATE-CERTIFIED
FACILITY
DEFINED.—In
subsection (a), a ‘State-certified facility’ means a facility
licensed or certified as a skilled nursing facility by the
State in which it is located, or a facility which otherwise
meets the requirements applicable to providers of nursing
facility services under the State plan under title XIX or
the MediGrant program under title XXI.’’.
(c) 
CONFORMING
AMENDMENTS.—(1) 
Section
1861(v)(1)(E) (42 U.S.C. 1395x(v)(1)(E)) is amended by
striking the second sentence.
(2) Section 1864 (42 U.S.C. 1395aa) is amended by
striking subsection (d).
(3) Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is
amended by striking ‘‘1819(c)(2)(E),’’.
(4) Section 1883(f) (42 U.S.C. 1395tt(f)) is amend-
ed—
(A) in the second sentence, by striking ‘‘such a
hospital’’ and inserting ‘‘a hospital which enters into
an agreement with the Secretary under this section’’;
and
(B) by striking the first sentence.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to cost reporting peri-
ods beginning on or after October 1, 1995.
359
SEC. 15527. MEDICAL REVIEW PROCESS.
In order to ensure that medicare beneficiaries are
furnished appropriate extended care services, the Sec-
retary of Health and Human Services shall establish and
implement a thorough medical review process to examine
the effects of the amendments made by this part on the
quality of extended care 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 for which payment
is made under section 1888A of the Social Security Act.
SEC. 15528. REPORT BY MEDICARE PAYMENT REVIEW COM-
MISSION.
Not later than October 1, 1997, the Medicare Pay-
ment Review Commission shall submit to Congress a re-
port on the system under which payment is made under
the medicare program for extended care services furnished
by skilled nursing facilities, and shall include in the report
the following:
(1) An analysis of the effect of the methodology
established under section 1888A of the Social Secu-
rity Act (as added by section 15522) on the pay-
ments for, and the quality of, extended care services
under the medicare program.
(2) An analysis of the advisability of determin-
ing the amount of payment for covered non-routine
360
services of facilities (as described in such section) on
the basis of the amounts paid for such services when
furnished by suppliers under part B of the medicare
program.
(3) An analysis of the desirability of maintain-
ing separate limits for hospital-based and freestand-
ing facilities in the costs of extended care services
recognized as reasonable under the medicare pro-
gram.
(4) An analysis of the quality of services fur-
nished by skilled nursing facilities.
(5) An analysis of the adequacy of the process
and standards used to provide exceptions to the lim-
its described in paragraph (3).
SEC. 15529. EFFECTIVE DATE.
Except as otherwise provided in this part, the amend-
ments made by this part shall apply to services furnished
during cost reporting periods (or portions of cost reporting
periods) beginning on or after October 1, 1996.
361
PART 3—CLARIFICATION OF CREDITS TO PART A
TRUST FUND
SEC. 15531. CLARIFICATION OF AMOUNT OF TAXES CRED-
ITED TO FEDERAL HOSPITAL INSURANCE
TRUST FUND.
Section 121(e)(1)(B) of the Social Security Amend-
ments of 1983 (Public Law 98–21) is amended by adding
at the end the following: ‘‘The Secretary of the Treasury
shall carry out this subparagraph without regard to any
amendments to this subsection or to section 86 of the In-
ternal Revenue Code of 1986 which take effect on or after
January 1, 1994.’’.
Subtitle G—Provisions Relating to
Medicare Part B
PART 1—PAYMENT REFORMS
SEC. 15601. PAYMENTS FOR PHYSICIANS’ SERVICES.
(a) REPLACEMENT
OF
VOLUME
PERFORMANCE
STANDARD WITH SUSTAINABLE GROWTH RATE.—Section
1848(f) (42 U.S.C. 1395w–4(f)) is amended to read as
follows:
‘‘(f) SUSTAINABLE GROWTH RATE.—
‘‘(1) SPECIFICATION OF GROWTH RATE.—
‘‘(A) FISCAL YEAR 1996.—The sustainable
growth rate for all physicians’ services for fiscal
year 1996 shall be equal to the product of—
362
‘‘(i) 1 plus the Secretary’s estimate of
the percentage change in the medicare eco-
nomic index for 1996 (described in the
fourth sentence of section 1842(b)(3)) (di-
vided by 100),
‘‘(ii) 1 plus the Secretary’s estimate of
the percentage change (divided by 100) in
the average number of individuals enrolled
under this part (other than private plan
enrollees) from fiscal year 1995 to fiscal
year 1996,
‘‘(iii) 1 plus the Secretary’s estimate
of the projected percentage growth in real
gross domestic product per capita (divided
by 100) from fiscal year 1995 to fiscal
year 1996, plus 2 percentage points, and
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage change (divided by 100)
in expenditures for all physicians’ services
in fiscal year 1996 (compared with fiscal
year 1995) which will result from changes
in law, determined without taking into ac-
count estimated changes in expenditures
due to changes in the volume and intensity
of physicians’ services or changes in ex-
364
‘‘(iv) 1 plus the Secretary’s estimate
of the percentage change (divided by 100)
in expenditures for all physicians’ services
in the fiscal year (compared with the pre-
vious fiscal year) which will result from
changes in law (including changes made by
the Secretary in response to section 1895),
determined without taking into account es-
timated changes in expenditures due to
changes in the volume and intensity of
physicians’ services or changes in expendi-
tures resulting from changes in the update
to the conversion factor under subsection
(d)(3),
minus 1 and multiplied by 100.
‘‘(2) EXCLUSION OF SERVICES FURNISHED TO
PRIVATE PLAN ENROLLEES.—In this subsection, the
term ‘physicians’ services’ with respect to a fiscal
year does not include services furnished to an indi-
vidual enrolled under this part who has elected to re-
ceive benefits under this title for the fiscal year
through a MedicarePlus product offered under part
C or through enrollment with an eligible organiza-
tion with a risk-sharing contract under section
1876.’’.
365
(b) ESTABLISHING UPDATE TO CONVERSION FAC-
TOR
TO
MATCH
SPENDING
UNDER
SUSTAINABLE
GROWTH RATE.—
(1) IN GENERAL.—Section 1848(d) (42 U.S.C.
1395w–4(d)) is amended—
(A) by striking paragraph (2);
(B) by amending paragraph (3) to read as
follows:
‘‘(3) UPDATE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (E), for purposes of this section the up-
date for a year (beginning with 1997) is equal
to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the medicare
economic index (described in the fourth
sentence of section 1842(b)(3)) for the
year (divided by 100), and
‘‘(ii) 1 plus the Secretary’s estimate of
the update adjustment factor for the year
(divided by 100),
minus 1 and multiplied by 100.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—The
‘update adjustment factor’ for a year is equal to
the quotient of—
366
‘‘(i) the difference between (I) the
sum of the allowed expenditures for physi-
cians’ services furnished during each of the
years 1995 through the year involved and
(II) the sum of the amount of actual ex-
penditures for physicians’ services fur-
nished during each of the years 1995
through the previous year; divided by
‘‘(ii) the Secretary’s estimate of al-
lowed expenditures for physicians’ services
furnished during the year.
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—For purposes of subparagraph
(B), allowed expenditures for physicians’ serv-
ices shall be determined as follows (as esti-
mated by the Secretary):
‘‘(i) In the case of allowed expendi-
tures for 1995, such expenditures shall be
equal to actual expenditures for services
furnished during the 12-month period end-
ing with June of 1995.
‘‘(ii) In the case of allowed expendi-
tures for 1996 and each subsequent year,
such expenditures shall be equal to allowed
expenditures for the previous year, in-
367
creased by the sustainable growth rate
under subsection (f) for the fiscal year
which begins during the year.
‘‘(D) DETERMINATION
OF
ACTUAL
EX-
PENDITURES.—For purposes of subparagraph
(B), the amount of actual expenditures for phy-
sicians’ services furnished during a year shall
be equal to the amount of expenditures for such
services during the 12-month period ending
with June of the previous year.
‘‘(E) RESTRICTION
ON
VARIATION
FROM
MEDICARE ECONOMIC INDEX.—
‘‘(i) IN
GENERAL.—Notwithstanding
the amount of the update adjustment fac-
tor determined under subparagraph (B)
for a year, the update in the conversion
factor under this paragraph for the year
may not be—
‘‘(I) greater than 103 percent of
1 plus the Secretary’s estimate of the
percentage increase in the medicare
economic index (described in the
fourth sentence of section 1842(b)(3))
for the year (divided by 100); or
368
‘‘(II) less than the applicable per-
centage limit of 1 plus the Secretary’s
estimate of the percentage increase in
the medicare economic index (de-
scribed in the fourth sentence of sec-
tion 1842(b)(3)) for the year (divided
by 100).
‘‘(ii) 
APPLICABLE
PERCENTAGE
LIMIT.—In clause (i)(II), the ‘applicable
percentage limit’ for a year is—
‘‘(I) for 1997, 93 percent;
‘‘(II) for 1998, 92.25 percent;
and
‘‘(III) for 1999 and each suc-
ceeding year, 92 percent.’’; and
(C) by adding at the end the following new
paragraph:
‘‘(4) REPORTING REQUIREMENTS.—
‘‘(A) IN
GENERAL.—Not later than No-
vember 1 of each year (beginning with 1996),
the Secretary shall transmit to the Congress a
report that describes the update in the conver-
sion factor for physicians’ services (as defined
in subsection (f)(3)(A)) in the following year.
369
‘‘(B) COMMISSION REVIEW.—The Medicare
Payment Review Commission shall review the
report submitted under subparagraph (A) for a
year and shall submit to the Congress, by not
later than December 1 of the year, a report
containing its analysis of the conversion factor
for the following year.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to physicians’ services
furnished on or after January 1, 1996.
(c) ESTABLISHMENT OF SINGLE CONVERSION FAC-
TOR FOR 1996.—
(1) IN
GENERAL.—Section 1848(d)(1) (42
U.S.C. 1395w–4(d)(1)) is amended—
(A) by redesignating subparagraph (C) as
subparagraph (D); and
(B) by inserting after subparagraph (B)
the following new subparagraph:
‘‘(C) SPECIAL
RULE
FOR
1996.—For
1996, the conversion factor under this sub-
section shall be $35.42 for all physicians’ serv-
ices.’’.
(2) CONFORMING AMENDMENTS.—Section 1848
(42 U.S.C. 1395w–4), as amended by paragraph (1),
is amended—
370
(A) by striking ‘‘(or factors)’’ each place it
appears 
in 
subsection 
(d)(1)(A) 
and
(d)(1)(D)(ii);
(B) in subsection (d)(1)(A), by striking ‘‘or
updates’’;
(C) in subsection (d)(1)(D)(ii), by striking
‘‘(or updates)’’; and
(D) in subsection (i)(1)(C), by striking
‘‘conversion factors’’ and inserting ‘‘the conver-
sion factor’’.
SEC. 15602. ELIMINATION OF FORMULA-DRIVEN OVERPAY-
MENTS FOR CERTAIN OUTPATIENT HOSPITAL
SERVICES.
(a) 
AMBULATORY
SURGICAL
CENTER
PROCE-
DURES.—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).’’.
(b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE-
DURES.—Section 
1833(n)(1)(B)(i)(II) 
(42 
U.S.C.
1395l(n)(1)(B)(i)(II)) is amended—
(1) by striking ‘‘of 80 percent’’; and
371
(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).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished during por-
tions of cost reporting periods occurring on or after Octo-
ber 1, 1995.
SEC. 15603. PAYMENTS FOR DURABLE MEDICAL EQUIP-
MENT.
(a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS
OF DURABLE MEDICAL EQUIPMENT.—
(1) 
FREEZE
IN
UPDATE
FOR
COVERED
ITEMS.—Section 
1834(a)(14) 
(42 
U.S.C.
1395m(a)(14)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (A);
(B) in subparagraph (B)—
(i) by striking ‘‘a subsequent year’’
and inserting ‘‘1993, 1994, and 1995’’,
and
(ii) by striking the period at the end
and inserting a semicolon; and
(C) by adding at the end the following:
372
‘‘(C) for each of the years 1996 through
2002, 0 percentage points; and
‘‘(D) for a subsequent year, the percentage
increase in the consumer price index for all
urban consumers (U.S. urban average) for the
12-month period ending with June of the pre-
vious year.’’.
(2) UPDATE FOR ORTHOTICS AND PROSTHET-
ICS.—Section 
1834(h)(4)(A) 
(42 
U.S.C.
1395m(h)(4)(A)) is amended—
(A) by striking ‘‘and’’ at the end of clause
(iii);
(B) by redesignating clause (iv) as clause
(v); and
(C) by inserting after clause (iii) the fol-
lowing new clause:
‘‘(iv) for each of the years 1996
through 2002, 1 percent, and’’.
(b) OXYGEN
AND OXYGEN EQUIPMENT.—Section
1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended—
(1) by striking ‘‘and’’ at the end of clause (iii);
(2) in clause (iv)—
(A) by striking ‘‘a subsequent year’’ and
inserting ‘‘1993, 1994, and 1995’’, and
373
(B) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new
clauses:
‘‘(v) in 1996, is 80 percent of the na-
tional limited monthly payment rate com-
puted under subparagraph (B) for the item
for the year; and
‘‘(vi) in a subsequent year, is the na-
tional limited monthly payment rate com-
puted under subparagraph (B) for the item
for the year.’’.
(c) PAYMENT FOR UPGRADED DURABLE MEDICAL
EQUIPMENT.—Section 1834(a) (42 U.S.C. 1395m(a)) is
amended by inserting after paragraph (15) the following
new paragraph:
‘‘(16) PAYMENT
FOR
CERTAIN
UPGRADED
ITEMS.—
‘‘(A) INDIVIDUAL’S RIGHT TO CHOOSE UP-
GRADED
ITEM.—Notwithstanding any other
provision of this title, effective on the date on
which the Secretary issues regulations under
subparagraph (C), payment may be made under
this part for an upgraded item of durable medi-
cal equipment in the same manner as payment
374
may be made for a standard item of durable
medical equipment.
‘‘(B) PAYMENTS
TO
SUPPLIER.—In the
case of the purchase or rental of an upgraded
item under subparagraph (A)—
‘‘(i) the supplier shall receive payment
under this subsection with respect to such
item as if such item were a standard item;
and
‘‘(ii) the individual purchasing or
renting the item shall pay the supplier an
amount equal to the difference between the
supplier’s charge and the amount under
clause (i).
In no event may the supplier’s charge for an
upgraded item exceed the applicable fee sched-
ule amount (if any) for such item.
‘‘(C) 
CONSUMER
PROTECTION
SAFE-
GUARDS.—The Secretary shall issue regulations
providing for consumer protection standards
with respect to the furnishing of upgraded
equipment under subparagraph (A). Such regu-
lations shall provide for—
‘‘(i) full disclosure by the supplier of
the availability and price of standard items
375
and proof of receipt of such disclosure in-
formation by the beneficiary before the fur-
nishing of the upgraded item;
‘‘(ii) conditions of participation for
suppliers of upgraded items, including con-
ditions relating to billing procedures;
‘‘(iii) sanctions (including exclusion)
of suppliers who are determined to have
engaged in coercive or abusive practices;
and
‘‘(iv) such other safeguards as the
Secretary determines are necessary.’’.
(d) PAYMENT FREEZE FOR PARENTERAL AND EN-
TERAL NUTRIENTS, SUPPLIES, AND EQUIPMENT.—In de-
termining the amount of payment under part B of title
XVIII of the Social Security Act with respect to parenteral
and enteral nutrients, supplies, and equipment during
each of the years 1996 through 2002, the charges deter-
mined to be reasonable with respect to such nutrients,
supplies, and equipment may not exceed the charges deter-
mined to be reasonable with respect to such nutrients,
supplies, and equipment during 1993.
376
SEC. 
15604. 
REDUCTION 
IN 
UPDATES 
TO 
PAYMENT
AMOUNTS FOR CLINICAL DIAGNOSTIC LAB-
ORATORY TESTS.
(a) 
CHANGE
IN
UPDATE.—Section
1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV))
is amended by striking ‘‘1994 and 1995’’ and inserting
‘‘1994 through 2002’’.
(b) LOWERING CAP ON PAYMENT AMOUNTS.—Sec-
tion 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amend-
ed—
(1) in clause (vi), by striking ‘‘and’’ at the end;
(2) in clause (vii)—
(A) by inserting ‘‘and before January 1,
1997,’’ after ‘‘1995,’’, and
(B) by striking the period at the end and
inserting ‘‘, and’’; and
(3) by adding at the end the following new
clause:
‘‘(viii) after December 31, 1996, is equal to 65
percent of such median.’’.
SEC. 15605. EXTENSION OF REDUCTIONS IN PAYMENTS FOR
COSTS OF HOSPITAL OUTPATIENT SERVICES.
(a) REDUCTION IN PAYMENTS FOR CAPITAL-RELAT-
ED
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 2002’’.
377
(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 2002’’.
SEC. 15606. FREEZE IN PAYMENTS FOR AMBULATORY SUR-
GICAL CENTER SERVICES.
The Secretary of Health and Human Services shall
not provide for any inflation update in the payment
amounts under subparagraphs (A) and (B) of section
1833(i)(2) of the Social Security Act for any of the fiscal
years 1996 through 2002.
SEC. 15607. RURAL EMERGENCY ACCESS CARE HOSPITALS.
(a) COVERAGE UNDER PART B.—Section 1832(a)(2)
(42 U.S.C. 1395k(a)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (I);
(2) by striking the period at the end of sub-
paragraph (J) and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(K) rural emergency access care hospital
services (as defined in section 1861(oo)(2)).’’.
(b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT
RURAL PRIMARY CARE HOSPITAL SERVICES.—
378
(1) IN
GENERAL.—Section 1833(a)(6) (42
U.S.C. 1395l(a)(6)) is amended by striking ‘‘serv-
ices,’’ and inserting ‘‘services and rural emergency
access care hospital services,’’.
(2) PAYMENT
METHODOLOGY
DESCRIBED.—
Section 1834(g) (42 U.S.C. 1395m(g)) is amend-
ed—
(A) in the heading, by striking ‘‘SERV-
ICES’’ and inserting ‘‘SERVICES
AND RURAL
EMERGENCY ACCESS CARE HOSPITAL SERV-
ICES’’; and
(B) by adding at the end the following new
sentence: ‘‘The amount of payment for rural
emergency access care hospital services provided
during a year shall be determined using the ap-
plicable method provided under this subsection
for determining payment for outpatient rural
primary care hospital services during the
year.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
October 1, 1995.
379
SEC. 15608. ENSURING PAYMENT FOR PHYSICIAN AND
NURSE FOR JOINTLY FURNISHED ANESTHE-
SIA SERVICES.
(a) PAYMENT
FOR JOINTLY FURNISHED SINGLE
CASE.—
(1) 
PAYMENT
TO
PHYSICIAN.—Section
1848(a)(4) (42 U.S.C. 1395w–4(a)(4)) is amended
by adding at the end the following new subpara-
graph:
‘‘(C) PAYMENT FOR SINGLE CASE.—Not-
withstanding section 1862(a)(1)(A), with re-
spect to physicians’ services consisting of the
furnishing of anesthesia services for a single
case that are furnished jointly with a certified
registered nurse anesthetist, if the carrier de-
termines that the use of both the physician and
the nurse anesthetist to furnish the anesthesia
service was not medically necessary, the fee
schedule amount for the physicians’ services
shall be equal to 50 percent (or 55 percent, in
the case of services furnished during 1996 or
1997) of the fee schedule amount applicable
under this section for anesthesia services per-
sonally performed by the physician alone (with-
out regard to this subparagraph). Nothing in
this subparagraph may be construed to affect
380
the application of any provision of law regard-
ing balance billing.’’.
(2) PAYMENT TO CRNA.—Section 1833(l)(4)(B)
(42 U.S.C. 1395l(l)(4)(B)) is amended by adding at
the end the following new clause:
‘‘(iv) Notwithstanding section 1862(a)(1)(A), in the
case of services of a certified registered nurse anesthetist
consisting of the furnishing of anesthesia services for a
single case that are furnished jointly with a physician, if
the carrier determines that the use of both the physician
and the nurse anesthetist to furnish the anesthesia service
was not medically necessary, the fee schedule amount for
the services furnished by the certified registered nurse an-
esthetist shall be equal to 50 percent (or 40 percent, in
the case of services furnished during 1996 or 1997) of
the fee schedule amount applicable under section 1848 for
anesthesia services personally performed by the physician
alone (without regard to this clause).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsections (a) shall apply to services furnished on or after
July 1, 1996.
SEC. 15609. STATEWIDE FEE SCHEDULE AREA FOR PHYSI-
CIANS’ SERVICES.
(a) 
IN
GENERAL.—Notwithstanding 
section
1848(j)(2) of the Social Security Act, in the case of the
381
State of Wisconsin, the Secretary of Health and Human
Services shall treat the State as a single fee schedule area
for purposes of determining the fee schedule amount (as
referred to in section 1848(a) of such Act) for physicians’
services (as defined in section 1848(j)(3) of such Act)
under part B of the medicare program.
(b) BUDGET-NEUTRALITY.—Notwithstanding any
provision of part B of title XVIII of the Social Security
Act, the Secretary shall carry out subsection (a) in a man-
ner that ensures that total payments for physicians’ serv-
ices (as so defined) furnished by physicians in Wisconsin
during a year are not greater or less than total payments
for such services would have been but for this section.
(c) CONSTRUCTION.—Nothing in this section shall be
construed as limiting the availability (to the Secretary, the
appropriate agency or organization with a contract under
section 1842 of such Act, or physicians in the State of
Wisconsin) of otherwise applicable administrative proce-
dures for modifying the fee schedule area or areas in the
State after implementation of subsection (a).
(d) EFFECTIVE DATE.—This section shall apply with
respect to physicians’ services furnished on or after Janu-
ary 1, 1997.
382
SEC. 15609A. ESTABLISHMENT OF FEE SCHEDULE FOR AM-
BULANCE SERVICES.
(a) PAYMENT IN ACCORDANCE WITH FEE SCHED-
ULE.—Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is
amended—
(1) by striking ‘‘and (P)’’ and inserting ‘‘(P)’’;
and
(2) by striking the semicolon at the end and in-
serting the following: ‘‘, and (Q) with respect to am-
bulance service, the amounts paid shall be 80 per-
cent of the lesser of the actual charge for the serv-
ices or the amount determined by a fee schedule es-
tablished by the Secretary for the purposes of this
subparagraph (in accordance with section 15608(b)
of the Medicare Preservation Act);’’.
(b) REQUIREMENTS FOR ESTABLISHMENT OF FEE
SCHEDULE.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall establish the fee schedule for
ambulance services under section 1833(a)(1)(Q) of
the Social Security Act (as added by subsection (a))
through a negotiated rulemaking process described
in title 5, United States Code, and in accordance
with the requirements of this subsection.
383
(2) CONSIDERATIONS.—In establishing the fee
schedule for ambulance services, the Secretary
shall—
(A) establish mechanisms to control in-
creases in expenditures for ambulance services
under part B of the medicare program which
fairly reflect the changing nature of the ambu-
lance service industry;
(B) establish definitions for ambulance
services which promote efficiency and link pay-
ments (including fees for assessment and treat-
ment services) to the type of service provided;
(C) take into account regional differences
which affect cost and productivity, including
differences in the costs of resources and the
costs of uncompensated care;
(D) apply dynamic adjustments to pay-
ment rates to account for inflation, demo-
graphic changes in the population of medicare
beneficiaries, and changes in the number of
providers of ambulance services participating in
the medicare program; and
(E) phase in the application of the pay-
ment rates under the fee schedule in an effi-
cient and fair manner.
384
(3) SAVINGS.—In establishing the fee schedule
for ambulance services, the Secretary shall—
(A) ensure that the aggregate amount of
payments made for ambulance services under
part B of the medicare program during 1998
does not exceed the aggregate amount of pay-
ments which would have been made for such
services under part B of the program during
1998 if the amendments made by this section
were not in effect; and
(B) set the payment amounts provided
under the fee schedule for services furnished in
1999 and each subsequent year at amounts
equal to the payment amounts under the fee
schedule for service furnished during the pre-
vious year, increased by the percentage increase
in the consumer price index for all urban con-
sumers (U.S. city average) for the 12-month
period ending with June of the previous year.
(4) CONSULTATION.—In establishing the fee
schedule for ambulance services, the Secretary shall
consult regularly with the American Ambulance As-
sociation, the National Association of State Medical
Directors, and other national organizations rep-
resenting individuals and entities who furnish or reg-
385
ulate ambulance services, and shall share with such
associations and organizations the data and data
analysis used in establishing the fee schedule, includ-
ing data on variations in payments for ambulance
services under part B of the medicare program for
years prior to 1998 among geographic areas and
types of ambulance service providers.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) and the fee schedule described in subsection
(b) shall apply to ambulance services furnished on or after
January 1, 1998.
SEC. 15609B. STANDARDS FOR PHYSICAL THERAPY SERV-
ICES FURNISHED BY PHYSICIANS.
(a) APPLICATION OF STANDARDS FOR OTHER PRO-
VIDERS OF PHYSICAL THERAPY SERVICES TO SERVICES
FURNISHED
BY
PHYSICIANS.—Section 1862(a) (42
U.S.C. 1395y(a)), as amended by section 15525(a)(2), is
amended
(1) by striking ‘‘or’’ at the end of paragraph
(15);
(2) by striking the period at the end of para-
graph (16) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (16) the fol-
lowing new paragraph:
386
‘‘(17) in the case of physicians’ services under
section 1848(j)(3) consisting of outpatient physical
therapy services or outpatient occupational therapy
services, which are furnished by a physician who
does not meet the requirements applicable under sec-
tion 1861(p) to a clinic or rehabilitation agency fur-
nishing such services.’’.
(b) CONFORMING AMENDMENT.—Section 1848(j)(3)
(42 U.S.C. 1395w–4(j)(3)) is amended by inserting ‘‘(sub-
ject to section 1862(a)(17))’’ after ‘‘(2)(D)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to services furnished on or after
January 1, 1996.
PART 2—PART B PREMIUM
SEC. 15611. EXTENSION OF PART B PREMIUM.
(a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C.
1395r(e)(1)) is amended—
(1) in subparagraph (A)—
(A) by striking ‘‘and prior to January
1999’’, and
(B) by inserting ‘‘(or, if higher, the per-
cent described in subparagraph (C))’’ after ‘‘50
percent’’; and
(2) by adding at the end the following new sub-
paragraph:
387
‘‘(C) For purposes of subparagraph (A), the percent
described in this subparagraph is the ratio (expressed as
a percentage) of the monthly premium established under
this section for months in 1995 to the monthly actuarial
rate for enrollees age 65 and over applicable to such
months (as specified in the most recent report of the
Board of Trustees of the Federal Supplementary Medical
Insurance Trust Fund published prior to the date of the
enactment of the Medicare Preservation Act of 1995).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to premiums for months beginning
with January 1996.
SEC. 15612. INCOME-RELATED REDUCTION IN MEDICARE
SUBSIDY.
(a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r)
is amended by adding at the end the following:
‘‘(h)(1) Notwithstanding the previous subsections of
this section, in the case of an individual whose modified
adjusted gross income for a taxable year ending with or
within a calendar year (as initially determined by the Sec-
retary in accordance with paragraph (3)) exceeds the
threshold amount described in paragraph (5)(B), the Sec-
retary shall increase the amount of the monthly premium
for months in the calendar year by an amount equal to
the difference between—
388
‘‘(A) 200 percent of the monthly actuarial rate
for enrollees age 65 and over as determined under
subsection (a)(1) for that calendar year; and
‘‘(B) the total of the monthly premiums paid by
the individual under this section (determined without
regard to subsection (b)) during such calendar year.
‘‘(2) In the case of an individual described in para-
graph (1) whose modified adjusted gross income exceeds
the threshold amount by less than $25,000, the amount
of the increase in the monthly premium applicable under
paragraph (1) shall be an amount which bears the same
ratio to the amount of the increase described in paragraph
(1) (determined without regard to this paragraph) as such
excess bears to $25,000. In the case of a joint return filed
under section 6013 of the Internal Revenue Code of 1986
by spouses both of whom are enrolled under this part, the
previous sentence shall be applied by substituting
‘$50,000’ for ‘$25,000’. The preceding provisions of this
paragraph shall not apply to any individual whose thresh-
old amount is zero.
‘‘(3) The Secretary shall make an initial determina-
tion of the amount of an individual’s modified adjusted
gross income for a taxable year ending with or within a
calendar year for purposes of this subsection as follows:
389
‘‘(A) Not later than October 1 of the year pre-
ceding the year, the Secretary shall provide notice to
each individual whom the Secretary finds (on the
basis of the individual’s actual modified adjusted
gross income for the most recent taxable year for
which such information is available or other informa-
tion provided to the Secretary by the Secretary of
the Treasury) will be subject to an increase under
this subsection that the individual will be subject to
such an increase, and shall include in such notice
the Secretary’s estimate of the individual’s modified
adjusted gross income for the year.
‘‘(B) If, during the 30-day period beginning on
the date notice is provided to an individual under
subparagraph (A), the individual provides the Sec-
retary with information on the individual’s antici-
pated modified adjusted gross income for the year,
the amount initially determined by the Secretary
under this paragraph with respect to the individual
shall be based on the information provided by the
individual.
‘‘(C) If an individual does not provide the Sec-
retary with information under subparagraph (B), the
amount initially determined by the Secretary under
this paragraph with respect to the individual shall be
390
the amount included in the notice provided to the in-
dividual under subparagraph (A).
‘‘(4)(A) If the Secretary determines (on the basis of
final information provided by the Secretary of the Treas-
ury) that the amount of an individual’s actual modified
adjusted gross income for a taxable year ending with or
within a calendar year is less than or greater than the
amount initially determined by the Secretary under para-
graph (3), the Secretary shall increase or decrease the
amount of the individual’s monthly premium under this
section (as the case may be) for months during the follow-
ing calendar year by an amount equal to 1⁄12 of the dif-
ference between—
‘‘(i) the total amount of all monthly premiums
paid by the individual under this section during the
previous calendar year; and
‘‘(ii) the total amount of all such premiums
which would have been paid by the individual during
the previous calendar year if the amount of the indi-
vidual’s modified adjusted gross income initially de-
termined under paragraph (3) were equal to the ac-
tual amount of the individual’s modified adjusted
gross income determined under this paragraph.
‘‘(B) In the case of an individual who is not enrolled
under this part for any calendar year for which the indi-
391
vidual’s monthly premium under this section for months
during the year would be increased pursuant to subpara-
graph (A) if the individual were enrolled under this part
for the year, the Secretary may take such steps as the
Secretary considers appropriate to recover from the indi-
vidual the total amount by which the individual’s monthly
premium for months during the year would have been in-
creased under subparagraph (A) if the individual were en-
rolled under this part for the year.
‘‘(C) In the case of a deceased individual for whom
the amount of the monthly premium under this section
for months in a year would have been decreased pursuant
to subparagraph (A) if the individual were not deceased,
the Secretary shall make a payment to the individual’s
surviving spouse (or, in the case of an individual who does
not have a surviving spouse, to the individual’s estate) in
an amount equal to the difference between—
‘‘(i) the total amount by which the individual’s
premium would have been decreased for all months
during the year pursuant to subparagraph (A); and
‘‘(ii) the amount (if any) by which the individ-
ual’s premium was decreased for months during the
year pursuant to subparagraph (A).
‘‘(5) In this subsection, the following definitions
apply:
392
‘‘(A) The term ‘modified adjusted gross income’
means adjusted gross income (as defined in section
62 of the Internal Revenue Code of 1986)—
‘‘(i) determined without regard to sections
135, 911, 931, and 933 of such Code, and
‘‘(ii) increased by the amount of interest
received or accrued by the taxpayer during the
taxable year which is exempt from tax under
such Code.
‘‘(B) The term ‘threshold amount’ means—
‘‘(i) except as otherwise provided in this
paragraph, $75,000,
‘‘(ii) $125,000, in the case of a joint re-
turn (as defined in section 7701(a)(38) of such
Code), and
‘‘(iii) zero in the case of a taxpayer who—
‘‘(I) is married at the close of the tax-
able year but does not file a joint return
(as so defined) for such year, and
‘‘(II) does not live apart from his
spouse at all times during the taxable
year.’’.
(b) CONFORMING
AMENDMENT.—Section 1839(f)
(42 U.S.C. 1395r(f)) is amended by striking ‘‘if an indi-
vidual’’ and inserting the following: ‘‘if an individual
393
(other than an individual subject to an increase in the
monthly premium under this section pursuant to sub-
section (h))’’.
(c) REPORTING REQUIREMENTS FOR SECRETARY OF
THE TREASURY.—
(1) IN
GENERAL.—Subsection (l) of section
6103 of the Internal Revenue Code of 1986 (relating
to confidentiality and disclosure of returns and re-
turn information) is amended by adding at the end
the following new paragraph:
‘‘(15) DISCLOSURE OF RETURN INFORMATION
TO
CARRY
OUT
INCOME-RELATED
REDUCTION
IN
MEDICARE PART B PREMIUM.—
‘‘(A) IN
GENERAL.—The Secretary may,
upon written request from the Secretary of
Health and Human Services, disclose to officers
and employees of the Health Care Financing
Administration return information with respect
to a taxpayer who is required to pay a monthly
premium under section 1839 of the Social Secu-
rity Act. Such return information shall be lim-
ited to—
‘‘(i) taxpayer identity information
with respect to such taxpayer,
394
‘‘(ii) the filing status of such tax-
payer,
‘‘(iii) the adjusted gross income of
such taxpayer,
‘‘(iv) the amounts excluded from such
taxpayer’s gross income under sections 135
and 911,
‘‘(v) the interest received or accrued
during the taxable year which is exempt
from the tax imposed by chapter 1 to the
extent such information is available, and
‘‘(vi) the amounts excluded from such
taxpayer’s gross income by sections 931
and 933 to the extent such information is
available.
‘‘(B) RESTRICTION ON USE OF DISCLOSED
INFORMATION.—Return information disclosed
under subparagraph (A) may be used by offi-
cers and employees of the Health Care Financ-
ing Administration only for the purposes of,
and to the extent necessary in, establishing the
appropriate monthly premium under section
1839 of the Social Security Act.’’
(2) CONFORMING
AMENDMENT.—Paragraphs
(3)(A) and (4) of section 6103(p) of such Code are
395
each amended by striking ‘‘or (14)’’ each place it ap-
pears and inserting ‘‘(14), or (15)’’.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to the monthly pre-
mium under section 1839 of the Social Security Act for
months beginning with January 1997.
PART 3—ADMINISTRATION AND BILLING OF
LABORATORY SERVICES
SEC. 15621. ADMINISTRATIVE SIMPLIFICATION FOR LAB-
ORATORY SERVICES.
(a) IN GENERAL.—Not later than 1 year after the
date of the enactment of this Act, the Secretary of Health
and Human Services (in accordance with the process de-
scribed in subsection (b)) shall adopt uniform coverage,
administration, and payment policies for clinical diag-
nostic laboratory tests under part B of the medicare pro-
gram.
(b) PROCESS
FOR ADOPTION
OF POLICIES.—The
Secretary shall adopt uniform policies under subsection
(a) in accordance with the following process:
(1) The Secretary shall select from carriers
with whom the Secretary has a contract under part
B during 1995 15 medical directors, who will meet
and develop recommendations for such uniform poli-
cies. The medical directors selected shall represent
396
various geographic areas and have a varied range of
experience in relevant medical fields, including pa-
thology and clinical laboratory practice.
(2) The medical directors selected under para-
graph (1) shall consult with independent experts in
each major discipline of clinical laboratory medicine,
including clinical laboratory personnel, bioanalysts,
pathologists, and practicing physicians. The medical
directors shall also solicit comments from other indi-
viduals and groups who wish to participate, includ-
ing consumers and other affected parties. This proc-
ess shall be conducted as a negotiated rulemaking
under title 5, United States Code.
(3) Under the negotiated rulemaking, the rec-
ommendations for uniform policies shall be designed
to simplify and reduce unnecessary administrative
burdens in connection with the following:
(A) Beneficiary information required to be
submitted with each claim.
(B) Physicians’ obligations regarding docu-
mentation requirements and recordkeeping.
(C) Procedures for filing claims and for
providing remittances by electronic media.
(D) The performance of post-payment re-
view of test claims.
397
(E) The prohibition of the documentation
of medical necessity except when determined to
be appropriate after identification of aberrant
utilization pattern through focused medical re-
view.
(F) Beneficiary responsibility for payment.
(4) During the pendency of the adoption by the
Secretary 
of 
the 
uniform 
policies, 
fiscal
intermediaries and carriers under the medicare pro-
gram may not implement any new requirement relat-
ing to the submission of a claim for clinical diag-
nostic laboratory tests retroactive to January 1,
1995, and carriers may not initiate any new cov-
erage, administrative, or payment policy unless the
policy promotes the goal of administrative simplifica-
tion of requirements imposed on clinical laboratories
in accordance with the Secretary’s promulgation of
the negotiated rulemaking.
(5) Not later than 6 months after the date of
the enactment of this Act, the medical directors shall
submit their recommendations to the Secretary, and
the Secretary shall publish the recommendations and
solicit public comment using negotiated rulemaking
in accordance with title 5, United States Code. The
Secretary shall publish final uniform policies for cov-
398
erage, administration, and payment of claims for
clinical diagnostic laboratory tests, effective after the
expiration of the 180-day period which begins on the
date of publication.
(6) After the publication of the final uniform
policies, the Secretary shall implement identical uni-
form documentation and processing policies for all
clinical diagnostic laboratory tests paid under the
medicare program through fiscal intermediaries or
carriers.
(c) OPTIONAL SELECTION OF SINGLE CARRIER.—Ef-
fective for claims submitted after the expiration of the 90-
day period which begins on the date of the enactment of
this Act, an independent laboratory may select a single
carrier for the processing of all of its claims for payment
under part B of the medicare program, without regard to
the location where the laboratory or the patient or pro-
vider involved resides or conducts business. Such election
of a single carrier shall be made by the clinical laboratory
and an agreement made between the carrier and the lab-
oratory shall be forwarded to the Secretary of Health and
Human Services. Nothing in this subsection shall be con-
strued to require a laboratory to select a single carrier
under this subsection.
399
SEC. 15622. RESTRICTIONS ON DIRECT BILLING FOR LAB-
ORATORY SERVICES.
(a) REQUIREMENT FOR DIRECT BILLING.—Section
1833(h) (42 U.S.C. 1395l(h)) is amended by adding at
the end the following new paragraph:
‘‘(7)(A) Effective for services furnished on or October
1, 1996, an individual or entity that performs clinical lab-
oratory diagnostic tests shall not present or cause to be
presented a claim, bill, or demand for payment to any per-
son, other than the individual receiving such services or
the health plan designated by such person, except that (i)
in the case of a test performed by one laboratory at the
request of another laboratory, which meets the require-
ments of clause (i), (ii), or (iii) of paragraph (5)(A), pay-
ment may be made to the requesting laboratory, and (ii)
the Secretary may by regulation establish appropriate ex-
ceptions to the requirement of this subparagraph.
‘‘(B)(i) Any person that collects any amounts that
were billed in violation of paragraph (7)(A) above shall
be liable for such amounts to the person from whom such
amounts were collected.
‘‘(ii) Any person that furnishes clinical laboratory
services for which payment is made under paragraph
(1)(D)(i) or paragraph (2)(D)(i) that knowingly violates
subparagraph (A) is subject to a civil money penalty of
not more than $10,000 for each such violation. The provi-
400
sions of section 1128A (other than subsections (a) and
(b)) shall apply to a civil money penalty under this para-
graph in the same manner as such provisions apply with
respect to a penalty or proceeding under section 1128A(a).
‘‘(iii)(I) Any individual or entity that the Secretary
determines has repeatedly violated subparagraph (A) may
be excluded from participation in any Federal health care
program. The provisions of section 1128A (other than
subsections (a) and (b)) shall apply to an exclusion under
this paragraph in the same manner as such provisions
apply with respect to a penalty or proceeding under section
1128A(a).
‘‘(II) The provisions of section 1128(e) of the Social
Security Act shall apply to any exclusion under clause
(iii)(I) in the same manner as such provisions apply to
a proceeding under section 1128.
‘‘(iv) If the Secretary finds, after a reasonable notice
and opportunity for a hearing, that a laboratory which
holds a certificate pursuant to section 353 of the Public
Health Service Act has on a repeated basis violated sub-
paragraph (A), the Secretary may suspend, revoke, or
limit such certification in accordance with the procedures
established in section 353(k) of Public Health Service Act.
‘‘(C) For purposes of this paragraph, the following
definitions shall apply:
401
‘‘(i) The term ‘Federal health care program’
means—
‘‘(I) any plan or program that provides
health benefits, whether directly, through insur-
ance, or otherwise, which is funded, in whole or
in part, by the United States Government; or
‘‘(II) any State health care program, as
defined in section 1128(h).
‘‘(ii) The term ‘health plan’ means any hospital
or medical service policy or certificate, hospital or
medical service plan contract, or health maintenance
organization contract offered by an insurer, except
that such term does not include any of the following:
‘‘(I) Coverage only for accident, dental, vi-
sion, disability income, or long-term care insur-
ance, or any combination thereof.
‘‘(II) Medicare supplemental health insur-
ance.
‘‘(III) Coverage issued as a supplement to
liability insurance.
‘‘(IV) Liability insurance, including general
liability insurance and automobile liability in-
surance.
‘‘(V) Worker’s compensation or similar in-
surance.
402
‘‘(VI) Automobile medical-payment insur-
ance.
‘‘(VII) Coverage for a specified disease or
illness.
‘‘(VIII) A hospital or fixed indemnity pol-
icy.
(b) LOOK BACK PROVISIONS TO ASSURE SAVINGS.—
(1) IN GENERAL.—Section 1833(h)(4)(B) (42
U.S.C. 1395l(h)(4)(B)), as amended by section
15604(b), is amended—
(A) in clause (vii), by striking ‘‘and’’ at the
end;
(B) in clause (viii)—
(i) by inserting ‘‘and before January
1, 2000,’’ after ‘‘1996,’’, and
(ii) by striking the period at the end
and inserting ‘‘, and’’; and
(C) by adding at the end the following new
clause:
‘‘(ix) after December 31, 1999, is equal to such
percentage of such median as the Secretary estab-
lishes under paragraph (8)(B), or, if the Secretary
does not act under paragraph (8)(B), is equal to 65
percent of such median.’’.
403
(2) 
PROCESS
FOR
REDUCTIONS.—Section
1833(h) (42 U.S.C. 1395l(h)), as amended by sub-
section (a), is amended by adding at the end the fol-
lowing new paragraph:
‘‘(8)(A) On July 31, 1999, the Secretary shall esti-
mate—
‘‘(i) the amount of expenditures under this sec-
tion for clinical diagnostic laboratory tests which will
be made in the period from January 1, 1997,
through September 30, 2002, and
‘‘(ii) the amount of expenditures which would
have been made under this section for clinical diag-
nostic laboratory tests in the period from January 1,
1997, through September 30, 2002, if paragraph (7)
had not been enacted.
‘‘(B) If the amount estimated under subparagraph
(A)(i) is greater than 97 percent of the amount estimated
under subparagraph (A)(ii), the Secretary shall establish
a limitation amount under paragraph (4)(B)(ix) such that,
when such limitation amount is considered, the amount
estimated under subparagraph (A)(i) is 97 percent of the
amount estimated under subparagraph (A)(ii).
‘‘(C) The Director of the Congressional Budget Office
(hereafter in this subparagraph referred to as the ‘Direc-
tor’) shall—
404
‘‘(i) independently estimate the amounts speci-
fied in subparagraph (A) and compute any limitation
amount required under subparagraph (B), and
‘‘(ii) submit a report on such estimates and
computation to Congress not later than August 31,
1999.
The Secretary shall provide the Director with such data
as the Director reasonably requires to prepare such esti-
mates and computation.’’.
PART 4—QUALITY STANDARDS FOR DURABLE
MEDICAL EQUIPMENT
SEC. 15631. RECOMMENDATIONS FOR QUALITY STANDARDS
FOR DURABLE MEDICARE EQUIPMENT.
(a) APPOINTMENT
OF
TASK
FORCE
BY
SEC-
RETARY.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall establish a broadly based task
force to develop recommendations for quality stand-
ards for durable medical equipment under part B of
the medicare program.
(2) COMPOSITION.—The task force shall include
individuals selected by the Secretary from represent-
atives of suppliers of items of durable medical equip-
ment under part B, consumers, and other users of
such equipment. In appointing members, the Sec-
405
retary shall assure representation from various geo-
graphic regions of the United States.
(3) NO COMPENSATION FOR SERVICE.—Mem-
bers of the task force shall not receive any com-
pensation for service on the task force.
(4) TERMINATION.—The task force shall termi-
nate 30 days after it submits the report described in
subsection (b).
(b) REPORT.—Not later than 1 year after the date
of the enactment of this Act, the task force established
under subsection (a) shall submit to the Secretary its rec-
ommendations for quality standards for durable medicare
equipment under part B of the medicare program.
Subtitle H—Provisions Relating to
Medicare Parts A and B
PART 1—PAYMENTS FOR HOME HEALTH
SERVICES
SEC. 15701. PAYMENT FOR HOME HEALTH SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 15106, is amended by adding
at the end the following new section:
‘‘PAYMENT FOR HOME HEALTH SERVICES
‘‘SEC. 1894. (a) IN GENERAL.—
‘‘(1) PER
VISIT
PAYMENTS.—Subject to sub-
section (c), the Secretary shall make per visit pay-
ments beginning with fiscal year 1997 to a home
406
health agency in accordance with this section for
each type of home health service described in para-
graph (2) furnished to an individual who at the time
the service is furnished is under a plan of care by
the home health agency under this title (without re-
gard to whether or not the item or service was fur-
nished by the agency or by others under arrange-
ment with them made by the agency, or otherwise).
‘‘(2) TYPES OF SERVICES.—The types of home
health services described in this paragraph are the
following:
‘‘(A) Part-time or intermittent nursing
care provided by or under the supervision of a
registered professional nurse.
‘‘(B) Physical therapy.
‘‘(C) Occupational therapy.
‘‘(D) Speech-language pathology services.
‘‘(E) Medical social services under the di-
rection of a physician.
‘‘(F) To the extent permitted in regula-
tions, part-time or intermittent services of a
home health aide who has successfully com-
pleted a training program approved by the Sec-
retary.
407
‘‘(b) ESTABLISHMENT
OF PER VISIT RATE
FOR
EACH TYPE OF SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall, sub-
ject to paragraph (3), establish a per visit payment
rate for a home health agency in an area for each
type of home health service described in subsection
(a)(2). Such rate shall be equal to the national per
visit payment rate determined under paragraph (2)
for each such type, except that the labor-related por-
tion of such rate shall be adjusted by the area wage
index applicable under section 1886(d)(3)(E) for the
area in which the agency is located (as determined
without regard to any reclassification of the area
under section 1886(d)(8)(B) or a decision of the
Medicare Geographic Classification Review Board or
the Secretary under section 1886(d)(10) for cost re-
porting periods beginning after October 1, 1995).
‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—
The national per visit payment rate for each type of
service described in subsection (a)(2)—
‘‘(A) for fiscal year 1997, is an amount
equal to the national average amount paid per
visit under this title to home health agencies for
such type of service during the most recent 12-
month cost reporting period ending on or before
408
June 30, 1994, increased (in a compounded
manner) by the home health market basket per-
centage increase for fiscal years 1995, 1996,
and 1997; and
‘‘(B) for each subsequent fiscal year, is an
amount equal to the national per visit payment
rate in effect for the preceding fiscal year, in-
creased by the home health market basket per-
centage increase for such subsequent fiscal year
minus 2 percentage points.
‘‘(3) REBASING
OF
RATES.—The Secretary
shall provide for an update to the national per visit
payment rates under this subsection for cost report-
ing periods beginning not later than the first day of
the fifth fiscal year which begins after fiscal year
1997, and not later than every 5 years thereafter, to
reflect the most recent available data.
‘‘(4) HOME
HEALTH
MARKET
BASKET
PER-
CENTAGE
INCREASE.—For purposes of this sub-
section, the term ‘home health market basket per-
centage increase’ means, with respect to a fiscal
year, a percentage (estimated by the Secretary be-
fore the beginning of the fiscal year) determined and
applied with respect to the types of home health
services described in subsection (a)(2) in the same
409
manner as the market basket percentage increase
under section 1886(b)(3)(B)(iii) is determined and
applied to inpatient hospital services for the fiscal
year.
‘‘(c) PER EPISODE LIMIT.—
‘‘(1) AGGREGATE LIMIT.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), a home health agency may not
receive aggregate per visit payments under sub-
section (a) for a fiscal year in excess of an
amount equal to the sum of the following prod-
ucts determined for each case-mix category for
which the agency receives payments:
‘‘(i) The number of episodes of each
case-mix category during the fiscal year;
multiplied by
‘‘(ii) the per episode limit determined
for such case-mix category for such fiscal
year.
‘‘(B) ESTABLISHMENT
OF
PER
EPISODE
LIMITS.—
‘‘(i) IN
GENERAL.—The per episode
limit for a fiscal year for any case-mix cat-
egory for the area in which a home health
agency is located is equal to—
410
‘‘(I) the mean number of visits
for each type of home health service
described in subsection (a)(2) fur-
nished during an episode of such case-
mix category in such area during fis-
cal year 1994, adjusted by the case-
mix adjustment factor determined in
clause (ii) for the fiscal year involved;
multiplied by
‘‘(II) the per visit payment rate
established under subsection (b) for
such type of home health service for
the fiscal year for which the deter-
mination is being made.
‘‘(ii) CASE
MIX
ADJUSTMENT
FAC-
TOR.—For purposes of clause (i), the case-
mix adjustment factor for a year is the
factor determined by the Secretary to as-
sure that aggregate payments for home
health services under this section during
the year will not exceed the payment for
such services during the previous year as a
result of changes in the number and type
of home health visits within case-mix cat-
egories over the previous year.
411
‘‘(iii) REBASING
OF
PER
EPISODE
AMOUNTS.—Beginning with fiscal year
1999 and every 2 years thereafter, the Sec-
retary shall revise the mean number of
home health visits determined under clause
(i)(I) for each type of home health service
visit described in subsection (a)(2) fur-
nished during an episode in a case-mix cat-
egory to reflect the most recently available
data on the number of visits.
‘‘(iv) DETERMINATION
OF
APPLICA-
BLE AREA.—For purposes of determining
per episode limits under this subpara-
graph, the area in which a home health
agency is considered to be located shall be
such area as the Secretary finds appro-
priate for purposes of this subparagraph.
‘‘(C) CASE-MIX CATEGORY.—For purposes
of this paragraph, the term ‘case-mix category’
means each of the 18 case-mix categories estab-
lished under the Phase II Home Health Agency
Prospective Payment Demonstration Project
conducted by the Health Care Financing Ad-
ministration. The Secretary may develop an al-
412
ternate methodology for determining case-mix
categories.
‘‘(D) EPISODE.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, the term ‘episode’ means
the continuous 120-day period that—
‘‘(I) begins on the date of an in-
dividual’s first visit for a type of home
health service described in subsection
(a)(2) for a case-mix category, and
‘‘(II) is immediately preceded by
a 60-day period in which the individ-
ual did not receive visits for a type of
home health service described in sub-
section (a)(2).
‘‘(ii) TREATMENT OF EPISODES SPAN-
NING
COST
REPORTING
PERIODS.—The
Secretary shall provide for such rules as
the Secretary considers appropriate regard-
ing the treatment of episodes under this
paragraph which begin during a cost re-
porting period and end in a subsequent
cost reporting period.
‘‘(E) EXEMPTIONS
AND
EXCEPTIONS.—
The Secretary may provide for exemptions and
413
exceptions to the limits established under this
paragraph for a fiscal year as the Secretary
deems appropriate, to the extent such exemp-
tions and exceptions do not result in greater
payments under this section than the exemp-
tions and exceptions provided under section
1861(v)(1)(L)(ii) in fiscal year 1994, increased
by the home health market basket percentage
increase for the fiscal year involved (as defined
in subsection (b)(4)).
‘‘(2) RECONCILIATION OF AMOUNTS.—
‘‘(A) OVERPAYMENTS
TO
HOME
HEALTH
AGENCIES.—Subject to subparagraph (B), if a
home health agency has received aggregate per
visit payments under subsection (a) for a fiscal
year in excess of the amount determined under
paragraph (1) with respect to such home health
agency for such fiscal year, the Secretary shall
reduce payments under this section to the home
health agency in the following fiscal year in
such manner as the Secretary considers appro-
priate (including on an installment basis) to re-
capture the amount of such excess.
414
‘‘(B) EXCEPTION
FOR
HOME
HEALTH
SERVICES FURNISHED OVER A PERIOD GREAT-
ER THAN 165 DAYS.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the amount of aggre-
gate per visit payments determined under
subsection (a) shall not include payments
for home health visits furnished to an indi-
vidual on or after a continuous period of
more than 165 days after an individual be-
gins an episode described in subsection
(c)(1)(D) (if such period is not interrupted
by the beginning of a new episode).
‘‘(ii) 
REQUIREMENT
OF
CERTIFI-
CATION.—Clause (i) shall not apply if the
agency has not obtained a physician’s cer-
tification with respect to the individual re-
quiring such visits that includes a state-
ment that the individual requires such con-
tinued visits, the reason for the need for
such visits, and a description of such serv-
ices furnished during such visits.
‘‘(C) SHARE OF SAVINGS.—
‘‘(i) BONUS
PAYMENTS.—If a home
health agency has received aggregate per
415
visit payments under subsection (a) for a
fiscal year in an amount less than the
amount determined under paragraph (1)
with respect to such home health agency
for such fiscal year, the Secretary shall pay
such home health agency a bonus payment
equal to 50 percent of the difference be-
tween such amounts in the following fiscal
year, except that the bonus payment may
not exceed 5 percent of the aggregate per
visit payments made to the agency for the
year.
‘‘(ii) 
INSTALLMENT
BONUS
PAY-
MENTS.—The Secretary may make install-
ment payments during a fiscal year to a
home health agency based on the estimated
bonus payment that the agency would be
eligible to receive with respect to such fis-
cal year.
‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary
shall implement a medical review process (with a particu-
lar emphasis on fiscal years 1997 and 1998) for the sys-
tem of payments described in this section that shall pro-
vide an assessment of the pattern of care furnished to in-
dividuals receiving home health services for which pay-
416
ments are made under this section to ensure that such
individuals receive appropriate home health services. Such
review process shall focus on low-cost cases described in
subsection (e)(3) and cases described in subsection
(c)(2)(B) 
and 
shall 
require 
recertification 
by
intermediaries at 30, 60, 90, 120, and 165 days into an
episode described in subsection (c)(1)(D).
‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIR-
CUMVENTION OF LIMITS.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for appropriate adjustments to payments to home
health agencies under this section to ensure that
agencies do not circumvent the purpose of this sec-
tion by—
‘‘(A) discharging patients to another home
health agency or similar provider;
‘‘(B) altering corporate structure or name
to avoid being subject to this section or for the
purpose of increasing payments under this title;
or
‘‘(C) undertaking other actions considered
unnecessary for effective patient care and in-
tended to achieve maximum payments under
this title.
417
‘‘(2) TRACKING
OF
PATIENTS
THAT
SWITCH
HOME HEALTH AGENCIES DURING EPISODE.—
‘‘(A) DEVELOPMENT
OF
SYSTEM.—The
Secretary shall develop a system that tracks
home health patients that receive home health
services described in subsection (a)(2) from
more than 1 home health agency during an epi-
sode described in subsection (c)(1)(D).
‘‘(B) ADJUSTMENT
OF
PAYMENTS.—The
Secretary shall adjust payments under this sec-
tion to each home health agency that furnishes
an individual with a type of home health service
described in subsection (a)(2) to ensure that
aggregate payments on behalf of such individual
during such episode do not exceed the amount
that would be paid under this section if the in-
dividual received such services from a single
home health agency.
‘‘(3) LOW-COST
CASES.—The Secretary shall
develop a system designed to adjust payments to a
home health agency for a fiscal year to eliminate any
increase in growth of the percentage of low-cost epi-
sodes for which home health services are furnished
by the agency over such percentage determined for
the agency for the 12-month cost reporting period
418
ending on June 30, 1994. The Secretary shall define
a low-cost episode in a manner that provides that a
home health agency has an incentive to be cost effi-
cient in delivering home health services and that the
volume of such services does not increase as a result
of factors other than patient needs.
‘‘(f) REPORT BY MEDICARE PAYMENT REVIEW COM-
MISSION.—During the first 3 years in which payments are
made under this section, the Medicare Payment Review
Commission shall annually submit a report to Congress
on the effectiveness of the payment methodology estab-
lished under this section that shall include recommenda-
tions regarding the following:
‘‘(1) Case-mix and volume increases.
‘‘(2) Quality monitoring of home health agency
practices.
‘‘(3) Whether a capitated payment for home
care patients receiving care during a continuous pe-
riod exceeding 165 days is warranted.
‘‘(4) Whether public providers of service are
adequately reimbursed.
‘‘(5) The adequacy of the exemptions and ex-
ceptions to the limits provided under subsection
(c)(1)(E).
419
‘‘(6) The appropriateness of the methods pro-
vided under this section to adjust the per episode
limits and annual payment updates to reflect
changes in the mix of services, number of visits, and
assignment to case categories to reflect changing
patterns of home health care.
‘‘(7) The geographic areas used to determine
the per episode limits.
‘‘(g) NO EFFECT ON NON-MEDICARE SERVICES.—
Nothing in this section may be construed to affect the pro-
vision of or payment for home health services for which
payment is not made under this title.’’.
(b) PAYMENT FOR PROSTHETICS AND ORTHOTICS
UNDER PART A.—Section 1814(k) (42 U.S.C. 1395f(k))
is amended—
(1) by inserting ‘‘and prosthetics and orthotics’’
after ‘‘durable medical equipment’’; and
(2) by inserting ‘‘and 1834(h), respectively’’
after ‘‘1834(a)(1)’’.
(c) CONFORMING AMENDMENTS.—
(1) 
PAYMENTS
UNDER
PART
A.—Section
1814(b) (42 U.S.C. 1395f(b)), as amended by sec-
tion 15522(b), is amended in the matter preceding
paragraph (1) by striking ‘‘1888 and 1888A’’ and
inserting ‘‘1888, 1888A, and 1894’’.
420
(2) TREATMENT OF ITEMS AND SERVICES PAID
UNDER PART B.—
(A) PAYMENTS UNDER PART B.—Section
1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amend-
ed—
(i) by amending subparagraph (A) to
read as follows:
‘‘(A) with respect to home health serv-
ices—
‘‘(i) that are a type of home health
service described in section 1894(a)(2),
and which are furnished to an individual
who (at the time the item or service is fur-
nished) is under a plan of care of a home
health agency, the amount determined
under section 1894; or
‘‘(ii) that are not described in clause
(i) (other than a covered osteoporosis
drug) (as defined in section 1861(kk)), the
lesser of—
‘‘(I) the reasonable cost of such
services, as determined under section
1861(v), or
‘‘(II) the customary charges with
respect to such services;’’.
421
(ii) by striking ‘‘and’’ at the end of
subparagraph (E);
(iii) by adding ‘‘and’’ at the end of
subparagraph (F); and
(iv) by adding at the end the following
new subparagraph:
‘‘(G) with respect to items and services de-
scribed in section 1861(s)(10)(A), the lesser
of—
‘‘(i) the reasonable cost of such serv-
ices, as determined under section 1861(v),
or
‘‘(ii) the customary charges with re-
spect to such services,
or, if such services are furnished by a public
provider of services, or by another provider
which demonstrates to the satisfaction of the
Secretary that a significant portion of its pa-
tients are low-income (and requests that pay-
ment be made under this provision), free of
charge or at nominal charges to the public, the
amount determined in accordance with section
1814(b)(2);’’.
(B) REQUIRING PAYMENT FOR ALL ITEMS
AND SERVICES TO BE MADE TO AGENCY.—
422
(i) IN GENERAL.—The first sentence
of 
section 
1842(b)(6) 
(42 
U.S.C.
1395u(b)(6)), as amended by section
15525(a)(1), 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 types of home
health services described in section
1894(a)(2) furnished to an individual
who (at the time the item or service is
furnished) is under a plan of care of
a home health agency, payment shall
be made to the agency (without re-
gard to whether or not the item or
service was furnished by the agency,
by others under arrangement with
them made by the agency, or other-
wise).’’.
(ii) CONFORMING AMENDMENT.—Sec-
tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)),
as amended by section 15525(a)(3), is
amended 
by 
striking 
‘‘section
1842(b)(6)(E);’’ and inserting ‘‘subpara-
423
graphs 
(E) 
and 
(F) 
of 
section
1842(b)(6);’’.
(C) EXCLUSIONS FROM COVERAGE.—Sec-
tion 1862(a) (42 U.S.C. 1395y(a)), as amended
by section 15525(a)(2) and section 15609B(a),
is amended—
(i) by striking ‘‘or’’ at the end of
paragraph (16);
(ii) by striking the period at the end
of paragraph (17) and inserting ‘‘; or’’;
and
(iii) by adding at the end the follow-
ing new paragraph:
‘‘(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
for payment for such services is not submitted by
the agency.’’.
(3) SUNSET
OF
REASONABLE
COST
LIMITA-
TIONS.—Section 
1861(v)(1)(L) 
(42 
U.S.C.
1395x(v)(1)(L)) is amended by adding at the end
the following new clause:
‘‘(iv) This subparagraph shall apply only to services
furnished by home health agencies during cost reporting
periods ending on or before September 30, 1996.’’.
424
(d) LIMITATION ON PART A COVERAGE.—
(1) IN
GENERAL.—Section 1812(a)(3) (42
U.S.C. 1395d(a)(3)) is amended by striking the
semicolon and inserting ‘‘for up to 165 days during
any spell of illness;’’.
(2) 
CONFORMING
AMENDMENT.—Section
1812(b) (42 U.S.C. 1395d(b)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (2),
(B) by striking the period at the end of
paragraph (3) and inserting ‘‘; or’’, and
(C) by adding at the end the following new
paragraph:
‘‘(4) home health services furnished to the indi-
vidual during such spell after such services have
been furnished to the individual for 165 days during
such spell.’’.
(3) EXCLUSION OF ADDITIONAL PART B COSTS
FROM DETERMINATION OF PART B MONTHLY PRE-
MIUM.—Section 1839(a) (42 U.S.C. 1395r(a)) is
amended—
(A) in the second sentence of paragraph
(1), by striking ‘‘enrollees.’’ and inserting ‘‘en-
rollees (except as provided in paragraph (5)).’’;
and
457
shall be deemed a reference to the date on
which the President submits the legislative
proposal under paragraph (1).
‘‘(h) LOOK-BACK ADJUSTMENT IN ALLOTMENTS TO
REFLECT ACTUAL EXPENDITURES.—
‘‘(1) IN GENERAL.—If the Secretary determines
under subsection (e)(3)(B) with respect to a particu-
lar fiscal year (beginning with fiscal year 1999) that
the fee-for-service expenditures for a sector of medi-
care services for the second preceding fiscal year—
‘‘(A) exceeded the adjusted allotment for
such sector for such year (as defined in para-
graph (2)), then the allotment for the sector for
the particular fiscal year shall be reduced by
1331⁄3 percent of the amount of such excess, or
‘‘(B) was less than the adjusted allotment
for such sector for such year, then the allot-
ment for the sector for the particular fiscal year
shall be increased by the amount of such defi-
cit.
‘‘(2) ADJUSTED ALLOTMENT.—The adjusted al-
lotment under this paragraph for a sector for a fis-
cal year is—
‘‘(A) the amount that would be computed
as the allotment under subsection (c) for the
469
the data elements that existed before the
modification. Any modification to a code
set under this paragraph shall be imple-
mented in a manner that minimizes the
disruption and cost of complying with such
modification.
‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—
‘‘(1) IN GENERAL.—If a person desires to con-
duct any of the information transactions described
in subsection (b)(1) with a health plan as a standard
transaction, the health plan shall conduct such
standard transaction in a timely manner and the in-
formation transmitted or received in connection with
such transaction shall be in the form of standard
data elements of medicare information.
‘‘(2) SATISFACTION
OF
REQUIREMENTS.—A
health plan may satisfy the requirement imposed on
such plan under paragraph (1) by directly transmit-
ting standard data elements of medicare information
or submitting nonstandard data elements to a medi-
care information network service for processing into
standard data elements and transmission.
‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE-
QUIREMENTS.—Not later than 24 months after the
date on which standards are adopted under sub-