H. R. 1—218
SEC. 418. REPORT ON DEMONSTRATION PROJECT PERMITTING
SKILLED NURSING FACILITIES TO BE ORIGINATING
TELEHEALTH SITES; AUTHORITY TO IMPLEMENT.
(a) EVALUATION.—The Secretary, acting through the Adminis-
trator of the Health Resources and Services Administration in con-
sultation with the Administrator of the Centers for Medicare &
Medicaid Services, shall evaluate demonstration projects conducted
by the Secretary under which skilled nursing facilities (as defined
in section 1819(a) of the Social Security Act (42 U.S.C. 1395i–
3(a)) are treated as originating sites for telehealth services.
(b) REPORT.—Not later than January 1, 2005, the Secretary
shall submit to Congress a report on the evaluation conducted
under subsection (a). Such report shall include recommendations
on mechanisms to ensure that permitting a skilled nursing facility
to serve as an originating site for the use of telehealth services
or any other service delivered via a telecommunications system
does not serve as a substitute for in-person visits furnished by
a physician, or for in-person visits furnished by a physician assist-
ant, nurse practitioner or clinical nurse specialist, as is otherwise
required by the Secretary.
(c) AUTHORITY TO EXPAND ORIGINATING TELEHEALTH SITES TO
INCLUDE SKILLED NURSING FACILITIES.—Insofar as the Secretary
concludes in the report required under subsection (b) that it is
advisable to permit a skilled nursing facility to be an originating
site for telehealth services under section 1834(m) of the Social
Security Act (42 U.S.C. 1395m(m)), and that the Secretary can
establish the mechanisms to ensure such permission does not serve
as a substitute for in-person visits furnished by a physician, or
for in-person visits furnished by a physician assistant, nurse practi-
tioner or clinical nurse specialist, the Secretary may deem a skilled
nursing facility to be an originating site under paragraph (4)(C)(ii)
of such section beginning on January 1, 2006.
Subtitle C—Provisions Relating to Parts A
and B
SEC. 421. ONE-YEAR INCREASE FOR HOME HEALTH SERVICES FUR-
NISHED IN A RURAL AREA.
(a) IN GENERAL.—With respect to episodes and visits ending
on or after April 1, 2004, and before April 1, 2005, in the case
of home health services furnished in a rural area (as defined in
section 1886(d)(2)(D) of the Social Security Act (42 U.S.C.
1395ww(d)(2)(D))), the Secretary shall increase the payment amount
otherwise made under section 1895 of such Act (42 U.S.C. 1395fff )
for such services by 5 percent.
(b) WAIVING BUDGET NEUTRALITY.—The Secretary shall not
reduce the standard prospective payment amount (or amounts)
under section 1895 of the Social Security Act (42 U.S.C. 1395fff )
applicable to home health services furnished during a period to
offset the increase in payments resulting from the application of
subsection (a).
(c) NO
EFFECT
ON
SUBSEQUENT
PERIODS.—The payment
increase provided under subsection (a) for a period under such
subsection—
H. R. 1—219
(1) shall not apply to episodes and visits ending after
such period; and
(2) shall not be taken into account in calculating the pay-
ment amounts applicable for episodes and visits occurring after
such period.
SEC. 422. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.
(a) IN GENERAL.—Section 1886(h) (42 U.S.C. 1395ww(h)(4)) is
amended—
(1) in paragraph (4)(F)(i), by inserting ‘‘subject to paragraph
(7),’’ after ‘‘October 1, 1997,’’;
(2) in paragraph (4)(H)(i), by inserting ‘‘and subject to
paragraph (7)’’ after ‘‘subparagraphs (F) and (G)’’; and
(3) by adding at the end the following new paragraph:
‘‘(7) REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.—
‘‘(A) REDUCTION
IN
LIMIT
BASED
ON
UNUSED
POSI-
TIONS.—
‘‘(i) PROGRAMS SUBJECT TO REDUCTION.—
‘‘(I) IN GENERAL.—Except as provided in sub-
clause (II), if a hospital’s reference resident level
(specified in clause (ii)) is less than the otherwise
applicable resident limit (as defined in subpara-
graph (C)(ii)), effective for portions of cost reporting
periods occurring on or after July 1, 2005, the
otherwise applicable resident limit shall be
reduced by 75 percent of the difference between
such otherwise applicable resident limit and such
reference resident level.
‘‘(II) EXCEPTION
FOR
SMALL
RURAL
HOS-
PITALS.—This subparagraph shall not apply to a
hospital located in a rural area (as defined in
subsection (d)(2)(D)(ii)) with fewer than 250 acute
care inpatient beds.
‘‘(ii) REFERENCE RESIDENT LEVEL.—
‘‘(I) IN
GENERAL.—Except as otherwise pro-
vided in subclauses (II) and (III), the reference
resident level specified in this clause for a hospital
is the resident level for the most recent cost
reporting period of the hospital ending on or before
September 30, 2002, for which a cost report has
been settled (or, if not, submitted (subject to
audit)), as determined by the Secretary.
‘‘(II) USE OF MOST RECENT ACCOUNTING PERIOD
TO
RECOGNIZE
EXPANSION
OF
EXISTING
PRO-
GRAMS.—If a hospital submits a timely request
to increase its resident level due to an expansion
of an existing residency training program that is
not reflected on the most recent settled cost report,
after audit and subject to the discretion of the
Secretary, the reference resident level for such
hospital is the resident level for the cost reporting
period that includes July 1, 2003, as determined
by the Secretary.
‘‘(III) EXPANSIONS
UNDER
NEWLY
APPROVED
PROGRAMS.—Upon the timely request of a hospital,
the Secretary shall adjust the reference resident
level specified under subclause (I) or (II) to include
H. R. 1—220
the number of medical residents that were
approved in an application for a medical residency
training program that was approved by an appro-
priate accrediting organization (as determined by
the Secretary) before January 1, 2002, but which
was not in operation during the cost reporting
period used under subclause (I) or (II), as the
case may be, as determined by the Secretary.
‘‘(iii) AFFILIATION.—The provisions of clause (i)
shall be applied to hospitals which are members of
the same affiliated group (as defined by the Secretary
under paragraph (4)(H)(ii)) as of July 1, 2003.
‘‘(B) REDISTRIBUTION.—
‘‘(i) IN GENERAL.—The Secretary is authorized to
increase the otherwise applicable resident limit for
each qualifying hospital that submits a timely applica-
tion under this subparagraph by such number as the
Secretary may approve for portions of cost reporting
periods occurring on or after July 1, 2005. The aggre-
gate number of increases in the otherwise applicable
resident limits under this subparagraph may not
exceed the Secretary’s estimate of the aggregate reduc-
tion in such limits attributable to subparagraph (A).
‘‘(ii) 
CONSIDERATIONS
IN
REDISTRIBUTION.—In
determining for which hospitals the increase in the
otherwise applicable resident limit is provided under
clause (i), the Secretary shall take into account the
demonstrated likelihood of the hospital filling the posi-
tions within the first 3 cost reporting periods beginning
on or after July 1, 2005, made available under this
subparagraph, as determined by the Secretary.
‘‘(iii) PRIORITY
FOR
RURAL
AND
SMALL
URBAN
AREAS.—In determining for which hospitals and resi-
dency training programs an increase in the otherwise
applicable resident limit is provided under clause (i),
the Secretary shall distribute the increase to programs
of hospitals located in the following priority order:
‘‘(I) First, to hospitals located in rural areas
(as defined in subsection (d)(2)(D)(ii)).
‘‘(II) Second, to hospitals located in urban
areas that are not large urban areas (as defined
for purposes of subsection (d)).
‘‘(III) Third, to other hospitals in a State if
the residency training program involved is in a
specialty for which there are not other residency
training programs in the State.
Increases of residency limits within the same priority
category under this clause shall be determined by the
Secretary.
‘‘(iv) LIMITATION.—In no case shall more than 25
full-time equivalent additional residency positions be
made available under this subparagraph with respect
to any hospital.
‘‘(v) APPLICATION OF LOCALITY ADJUSTED NATIONAL
AVERAGE PER RESIDENT AMOUNT.—With respect to addi-
tional residency positions in a hospital attributable
H. R. 1—221
to the increase provided under this subparagraph, not-
withstanding any other provision of this subsection,
the approved FTE resident amount is deemed to be
equal to the locality adjusted national average per
resident amount computed under paragraph (4)(E) for
that hospital.
‘‘(vi) CONSTRUCTION.—Nothing in this subpara-
graph shall be construed as permitting the redistribu-
tion of reductions in residency positions attributable
to voluntary reduction programs under paragraph (6),
under a demonstration project approved as of October
31, 2003, under the authority of section 402 of Public
Law 90–248, or as affecting the ability of a hospital
to establish new medical residency training programs
under paragraph (4)(H).
‘‘(C) RESIDENT
LEVEL
AND
LIMIT
DEFINED.—In this
paragraph:
‘‘(i) RESIDENT
LEVEL.—The term ‘resident level’
means, with respect to a hospital, the total number
of full-time equivalent residents, before the application
of weighting factors (as determined under paragraph
(4)), in the fields of allopathic and osteopathic medicine
for the hospital.
‘‘(ii) OTHERWISE APPLICABLE RESIDENT LIMIT.—The
term ‘otherwise applicable resident limit’ means, with
respect to a hospital, the limit otherwise applicable
under subparagraphs (F)(i) and (H) of paragraph (4)
on the resident level for the hospital determined with-
out regard to this paragraph.
‘‘(D) JUDICIAL REVIEW.—There shall be no administra-
tive or judicial review under section 1869, 1878, or other-
wise, with respect to determinations made under this para-
graph.’’.
(b) CONFORMING PROVISIONS.—(1) Section 1886(d)(5)(B) (42
U.S.C. 1395ww(d)(5)(B)) is amended—
(A) in the second sentence of clause (ii), by striking ‘‘For
discharges’’ and inserting ‘‘Subject to clause (ix), for discharges’’;
(B) in clause (v), by adding at the end the following: ‘‘The
provisions of subsection (h)(7) shall apply with respect to the
first sentence of this clause in the same manner as it applies
with respect to subsection (h)(4)(F)(i).’’; and
(C) by adding at the end the following new clause:
‘‘(ix) For discharges occurring on or after July 1, 2005,
insofar as an additional payment amount under this subpara-
graph is attributable to resident positions redistributed to a
hospital under subsection (h)(7)(B), in computing the indirect
teaching adjustment factor under clause (ii) the adjustment
shall be computed in a manner as if ‘c’ were equal to 0.66
with respect to such resident positions.’’.
(2) Chapter 35 of title 44, United States Code, shall not apply
with respect to applications under section 1886(h)(7) of the Social
Security Act, as added by subsection (a)(3).
(c) REPORT ON EXTENSION OF APPLICATIONS UNDER REDISTRIBU-
TION PROGRAM.—Not later than July 1, 2005, the Secretary shall
submit to Congress a report containing recommendations regarding
whether to extend the deadline for applications for an increase
H. R. 1—222
in resident limits under section 1886(h)(4)(I)(ii)(II) of the Social
Security Act (as added by subsection (a)).
Subtitle D—Other Provisions
SEC. 431. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE
EFFORTS THAT BENEFIT MEDICALLY UNDERSERVED
POPULATIONS.
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C. 1320a–7(b)(3)),
as amended by section 101(e)(2), is amended—
(1) in subparagraph (F), by striking ‘‘and’’ after the semi-
colon at the end;
(2) in subparagraph (G), by striking the period at the
end and inserting ‘‘; and’’; and
(3) by adding at the end the following new subparagraph:
‘‘(H) any remuneration between a health center entity
described under clause (i) or (ii) of section 1905(l)(2)(B)
and any individual or entity providing goods, items, serv-
ices, donations, loans, or a combination thereof, to such
health center entity pursuant to a contract, lease, grant,
loan, or other agreement, if such agreement contributes
to the ability of the health center entity to maintain or
increase the availability, or enhance the quality, of services
provided to a medically underserved population served by
the health center entity.’’.
(b) RULEMAKING FOR EXCEPTION FOR HEALTH CENTER ENTITY
ARRANGEMENTS.—
(1) ESTABLISHMENT.—
(A) IN
GENERAL.—The Secretary shall establish, on
an expedited basis, standards relating to the exception
described in section 1128B(b)(3)(H) of the Social Security
Act, as added by subsection (a), for health center entity
arrangements to the antikickback penalties.
(B) FACTORS TO CONSIDER.—The Secretary shall con-
sider the following factors, among others, in establishing
standards relating to the exception for health center entity
arrangements under subparagraph (A):
(i) Whether the arrangement between the health
center entity and the other party results in savings
of Federal grant funds or increased revenues to the
health center entity.
(ii) Whether the arrangement between the health
center entity and the other party restricts or limits
an individual’s freedom of choice.
(iii) Whether the arrangement between the health
center entity and the other party protects a health
care professional’s independent medical judgment
regarding medically appropriate treatment.
The Secretary may also include other standards and cri-
teria that are consistent with the intent of Congress in
enacting the exception established under this section.
(2) DEADLINE.—Not later than 1 year after the date of
the enactment of this Act the Secretary shall publish final
regulations establishing the standards described in paragraph
(1).
H. R. 1—223
SEC. 432. OFFICE OF RURAL HEALTH POLICY IMPROVEMENTS.
Section 711(b) (42 U.S.C. 912(b)) is amended—
(1) in paragraph (3), by striking ‘‘and’’ after the comma
at the end;
(2) in paragraph (4), by striking the period at the end
and inserting ‘‘, and’’; and
(3) by inserting after paragraph (4) the following new para-
graph:
‘‘(5) administer grants, cooperative agreements, and con-
tracts to provide technical assistance and other activities as
necessary to support activities related to improving health care
in rural areas.’’.
SEC. 433. MEDPAC STUDY ON RURAL HOSPITAL PAYMENT ADJUST-
MENTS.
(a) IN GENERAL.—The Medicare Payment Advisory Commission
shall conduct a study of the impact of sections 401 through 406,
411, 416, and 505. The Commission shall analyze the effect on
total payments, growth in costs, capital spending, and such other
payment effects under those sections.
(b) REPORTS.—
(1) INTERIM REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Commission shall submit
to Congress an interim report on the matters studied under
subsection (a) with respect only to changes to the critical access
hospital provisions under section 405.
(2) FINAL REPORT.—Not later than 3 years after the date
of the enactment of this Act, the Commission shall submit
to Congress a final report on all matters studied under sub-
section (a).
SEC. 434. FRONTIER EXTENDED STAY CLINIC DEMONSTRATION
PROJECT.
(a) AUTHORITY TO CONDUCT DEMONSTRATION PROJECT.—The
Secretary shall waive such provisions of the medicare program
established under title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) as are necessary to conduct a demonstration project
under which frontier extended stay clinics described in subsection
(b) in isolated rural areas are treated as providers of items and
services under the medicare program.
(b) CLINICS DESCRIBED.—A frontier extended stay clinic is
described in this subsection if the clinic—
(1) is located in a community where the closest short-
term acute care hospital or critical access hospital is at least
75 miles away from the community or is inaccessible by public
road; and
(2) is designed to address the needs of—
(A) seriously or critically ill or injured patients who,
due to adverse weather conditions or other reasons, cannot
be transferred quickly to acute care referral centers; or
(B) patients who need monitoring and observation for
a limited period of time.
(c) SPECIFICATION OF CODES.—The Secretary shall determine
the appropriate life-safety codes for such clinics that treat patients
for needs referred to in subsection (b)(2).
(d) FUNDING.—
H. R. 1—224
(1) IN
GENERAL.—Subject to paragraph (2), there are
authorized to be appropriated, in appropriate part from the
Federal Hospital Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund, such sums as are
necessary to conduct the demonstration project under this sec-
tion.
(2) BUDGET NEUTRAL IMPLEMENTATION.—In conducting the
demonstration project under this section, the Secretary shall
ensure that the aggregate payments made by the Secretary
under the medicare program do not exceed the amount which
the Secretary would have paid under the medicare program
if the demonstration project under this section was not imple-
mented.
(e) THREE-YEAR PERIOD.—The Secretary shall conduct the dem-
onstration under this section for a 3-year period.
(f) REPORT.—Not later than the date that is 1 year after the
date on which the demonstration project concludes, the Secretary
shall submit to Congress a report on the demonstration project,
together with such recommendations for legislation or administra-
tive action as the Secretary determines appropriate.
(g) DEFINITIONS.—In this section, the terms ‘‘hospital’’ and ‘‘crit-
ical access hospital’’ have the meanings given such terms in sub-
sections (e) and (mm), respectively, of section 1861 of the Social
Security Act (42 U.S.C. 1395x).
TITLE V—PROVISIONS RELATING TO
PART A
Subtitle A—Inpatient Hospital Services
SEC. 501. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.
(a) 
IN
GENERAL.—Section 
1886(b)(3)(B)(i) 
(42 
U.S.C.
1395ww(b)(3)(B)(i)) is amended—
(1) by striking ‘‘and’’ at the end of subclause (XVIII);
(2) by striking subclause (XIX); and
(3) by inserting after subclause (XVIII) the following new
subclauses:
‘‘(XIX) for each of fiscal years 2004 through 2007, subject
to clause (vii), the market basket percentage increase for hos-
pitals in all areas; and
‘‘(XX) for fiscal year 2008 and each subsequent fiscal year,
the market basket percentage increase for hospitals in all
areas.’’.
(b) 
SUBMISSION
OF
HOSPITAL
QUALITY
DATA.—Section
1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is amended by adding
at the end the following new clause:
‘‘(vii)(I) For purposes of clause (i)(XIX) for each of fiscal years
2005 through 2007, in a case of a subsection (d) hospital that
does not submit data to the Secretary in accordance with subclause
(II) with respect to such a fiscal year, the applicable percentage
increase under such clause for such fiscal year shall be reduced
by 0.4 percentage points. Such reduction shall apply only with
respect to the fiscal year involved, and the Secretary shall not
take into account such reduction in computing the applicable
H. R. 1—225
percentage increase under clause (i)(XIX) for a subsequent fiscal
year.
‘‘(II) Each subsection (d) hospital shall submit to the Secretary
quality data (for a set of 10 indicators established by the Secretary
as of November 1, 2003) that relate to the quality of care furnished
by the hospital in inpatient settings in a form and manner, and
at a time, specified by the Secretary for purposes of this clause,
but with respect to fiscal year 2005, the Secretary shall provide
for a 30-day grace period for the submission of data by a hospital.’’.
(c) GAO STUDY AND REPORT ON APPROPRIATENESS OF PAYMENTS
UNDER THE PROSPECTIVE PAYMENT SYSTEM FOR INPATIENT HOS-
PITAL SERVICES.—
(1) STUDY.—The Comptroller General of the United States,
using the most current data available, shall conduct a study
to determine—
(A) the appropriate level and distribution of payments
in relation to costs under the prospective payment system
under section 1886 of the Social Security Act (42 U.S.C.
1395ww) for inpatient hospital services furnished by sub-
section (d) hospitals (as defined in subsection (d)(1)(B) of
such section); and
(B) whether there is a need to adjust such payments
under such system to reflect legitimate differences in costs
across different geographic areas, kinds of hospitals, and
types of cases.
(2) REPORT.—Not later than 24 months after the date of
the enactment of this Act, the Comptroller General of the
United States shall submit to Congress a report on the study
conducted under paragraph (1) together with such recommenda-
tions for legislative and administrative action as the Comp-
troller General determines appropriate.
SEC. 502. REVISION OF THE INDIRECT MEDICAL EDUCATION (IME)
ADJUSTMENT PERCENTAGE.
(a) 
IN
GENERAL.—Section 
1886(d)(5)(B)(ii) 
(42 
U.S.C.
1395ww(d)(5)(B)(ii)) is amended—
(1) in subclause (VI), by striking ‘‘and’’ after the semicolon
at the end;
(2) in subclause (VII)—
(A) by inserting ‘‘and before April 1, 2004,’’ after ‘‘on
or after October 1, 2002,’’; and
(B) by striking the period at the end and inserting
a semicolon; and
(3) by adding at the end the following new subclauses:
‘‘(VIII) on or after April 1, 2004, and before October
1, 2004, ‘c’ is equal to 1.47;
‘‘(IX) during fiscal year 2005, ‘c’ is equal to 1.42;
‘‘(X) during fiscal year 2006, ‘c’ is equal to 1.37;
‘‘(XI) during fiscal year 2007, ‘c’ is equal to 1.32; and
‘‘(XII) on or after October 1, 2007, ‘c’ is equal to 1.35.’’.
(b) CONFORMING AMENDMENT RELATING TO DETERMINATION OF
STANDARDIZED
AMOUNT.—Section 
1886(d)(2)(C)(i) 
(42 
U.S.C.
1395ww(d)(2)(C)(i)) is amended—
(1) by striking ‘‘1999 or’’ and inserting ‘‘1999,’’; and
(2) by inserting ‘‘, or the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003’’ after ‘‘2000’’.
H. R. 1—226
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to discharges occurring on or after April 1, 2004.
SEC. 503. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER
INPATIENT HOSPITAL PROSPECTIVE PAYMENT SYSTEM.
(a) IMPROVING
TIMELINESS
OF
DATA
COLLECTION.—Section
1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by adding
at the end the following new clause:
‘‘(vii) Under the mechanism under this subparagraph, the Sec-
retary shall provide for the addition of new diagnosis and procedure
codes in April 1 of each year, but the addition of such codes
shall not require the Secretary to adjust the payment (or diagnosis-
related group classification) under this subsection until the fiscal
year that begins after such date.’’.
(b) ELIGIBILITY STANDARD FOR TECHNOLOGY OUTLIERS.—
(1) 
ADJUSTMENT
OF
THRESHOLD.—Section
1886(d)(5)(K)(ii)(I) (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended
by inserting ‘‘(applying a threshold specified by the Secretary
that is the lesser of 75 percent of the standardized amount
(increased to reflect the difference between cost and charges)
or 75 percent of one standard deviation for the diagnosis-
related group involved)’’ after ‘‘is inadequate’’.
(2) PROCESS FOR PUBLIC INPUT.—Section 1886(d)(5)(K) (42
U.S.C. 1395ww(d)(5)(K)), as amended by subsection (a), is
amended—
(A) in clause (i), by adding at the end the following:
‘‘Such mechanism shall be modified to meet the require-
ments of clause (viii).’’; and
(B) by adding at the end the following new clause:
‘‘(viii) The mechanism established pursuant to clause (i) shall
be adjusted to provide, before publication of a proposed rule, for
public input regarding whether a new service or technology rep-
resents an advance in medical technology that substantially
improves the diagnosis or treatment of individuals entitled to bene-
fits under part A as follows:
‘‘(I) The Secretary shall make public and periodically
update a list of all the services and technologies for which
an application for additional payment under this subparagraph
is pending.
‘‘(II) The Secretary shall accept comments, recommenda-
tions, and data from the public regarding whether the service
or technology represents a substantial improvement.
‘‘(III) The Secretary shall provide for a meeting at which
organizations representing hospitals, physicians, such individ-
uals, manufacturers, and any other interested party may
present comments, recommendations, and data to the clinical
staff of the Centers for Medicare & Medicaid Services before
publication of a notice of proposed rulemaking regarding
whether service or technology represents a substantial improve-
ment.’’.
(c) PREFERENCE
FOR
USE
OF
DRG ADJUSTMENT.—Section
1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as amended by sub-
sections (a) and (b), is amended by adding at the end the following
new clause:
‘‘(ix) Before establishing any add-on payment under this
subparagraph with respect to a new technology, the Secretary shall
seek to identify one or more diagnosis-related groups associated