476
HR 2015 EAS
(B) by striking ‘‘(11)(A)’’ and inserting
‘‘(11)’’; and
(C) by redesignating clauses (i) and (ii) as
subparagraphs (A) and (B), respectively.
(14) Section 1842(b)(12)(A)(ii) (42 U.S.C.
1395u(b)(12)(A)(ii)) is amended—
(A) in the matter preceding subclause (I),
by striking ‘‘prevailing charges determined
under paragraph (3)’’ and inserting ‘‘the
amounts 
determined 
under 
section
1833(a)(1)(G)’’; and
(B) in subclause (II), by striking ‘‘prevail-
ing charge rate’’ and all that follows up to the
period and inserting ‘‘fee schedule amount speci-
fied in section 1848 for such services performed
by physicians’’.
(15) Paragraphs (14) through (17) of section
1842(b) (42 U.S.C. 1395u(b)) are repealed.
(16) Section 1842(b) (42 U.S.C. 1395u(b)) is
amended—
(A) in paragraph (18)(A), by striking ‘‘rea-
sonable charge or’’; and
(B) by redesignating paragraph (18) as
paragraph (14).
477
HR 2015 EAS
(17) Section 1842(j)(1) (42 U.S.C. 1395u(j)) is
amended to read as follows:
‘‘(j)(1) See subsections (k), (l), (m), (n), and (p) as
to the cases in which sanctions may be applied under para-
graph (2).’’.
(18) Section 1842(j)(4) (42 U.S.C. 1395u(j)(4))
is amended by striking ‘‘under paragraph (1)’’.
(19) 
Section 
1842(n)(1)(A) 
(42 
U.S.C.
1395u(n)(1)(A)) is amended by striking ‘‘reasonable
charge (or other applicable limit)’’ and inserting
‘‘other applicable limit’’.
(20) Section 1842(q) (42 U.S.C. 1395u(q)) is
amended—
(A) by striking paragraph (1)(B); and
(B) by striking ‘‘(q)(1)(A)’’ and inserting
‘‘(q)(1)’’.
(21) Section 1845(b)(1) (42 U.S.C. 1395w–
1(b)(1)) is amended by striking ‘‘adjustments to the
reasonable charge levels for physicians’ services recog-
nized under section 1842(b) and’’.
(22) Section 1848(i)(3) (42 U.S.C. 1395w–
4(i)(3)) is repealed.
(23) 
Section 
1866(a)(2)(A)(ii) 
(42 
U.S.C.
1395cc(a)(2)(A)(ii)) is amended by striking ‘‘reason-
able charges’’ and all that follows through ‘‘provider)’’
478
HR 2015 EAS
and inserting ‘‘amount customarily charged for the
items and services by the provider’’.
(24) 
Section 
1881(b)(3)(A) 
(42 
U.S.C.
1395rr(b)(3)(A)) is amended by striking ‘‘a reason-
able charge’’ and all that follows through ‘‘section
1848)’’ and inserting ‘‘the basis described in section
1848’’.
(25) Section 9340 of OBRA—1986 (42 U.S.C.
1395u note; Public Law 99-509) is repealed.
(c) EFFECTIVE DATES.—The amendments made by
this section to the extent such amendments substitute fee
schedules for reasonable charges, shall apply to particular
services as of the date specified by the Secretary of Health
and Human Services.
(d) INITIAL BUDGET NEUTRALITY.—The Secretary, in
developing a fee schedule for particular services (under the
amendments made by this section), shall set amounts for
the first year period to which the fee schedule applies at
a level so that the total payments under title XVIII of the
Social Security Act (42 U.S.C. 1395 et seq.) for those serv-
ices for that year period shall be approximately equal to
the estimated total payments if those amendments had not
been made.
479
HR 2015 EAS
SEC. 5215. APPLICATION OF INHERENT REASONABLENESS
TO ALL PART B SERVICES OTHER THAN PHY-
SICIANS’ SERVICES.
(a) IN GENERAL.—Section 1842(b)(8) (42 U.S.C.
1395u(b)(8)) is amended to read as follows:
‘‘(8) The Secretary shall describe by regulation the fac-
tors to be used in determining the cases (of particular items
or services) in which the application of this part (other than
to physicians’ services paid under section 1848) results in
the determination of an amount that, because of its being
grossly excessive or grossly deficient, is not inherently rea-
sonable, and provide in those cases for the factors to be con-
sidered in establishing an amount that is realistic and equi-
table.’’.
(b) CONFORMING AMENDMENT.—Section 1834(a)(10)
(42 U.S.C. 1395m(a)(10)(B)) is amended—
(1) by striking subparagraph (B); and
(2) by redesignating subparagraph (C) as sub-
paragraph (B).
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect on the date of the enactment of this
Act.
SEC. 5216. REQUIREMENT TO FURNISH DIAGNOSTIC INFOR-
MATION.
(a) INCLUSION OF NON-PHYSICIAN PRACTITIONERS IN
REQUIREMENT TO PROVIDE DIAGNOSTIC CODES FOR PHY-
480
HR 2015 EAS
SICIAN SERVICES.—Paragraphs (1) and (2) of section
1842(p) (42 U.S.C. 1395u(p)) are each amended by insert-
ing ‘‘or practitioner specified in subsection (b)(18)(C)’’
after ‘‘by a physician’’.
(b) REQUIREMENT TO PROVIDE DIAGNOSTIC INFOR-
MATION WHEN ORDERING CERTAIN ITEMS OR SERVICES
FURNISHED BY ANOTHER ENTITY.—Section 1842(p) (42
U.S.C. 1395u(p)), is amended by adding at the end the fol-
lowing:
‘‘(4) In the case of an item or service defined in para-
graph (3), (6), (8), or (9) of subsection 1861(s) ordered by
a physician or a practitioner specified in subsection
(b)(18)(C), but furnished by another entity, if the Secretary
(or fiscal agent of the Secretary) requires the entity furnish-
ing the item or service to provide diagnostic or other medi-
cal information for payment to be made to the entity, the
physician or practitioner shall provide that information to
the entity at the time that the item or service is ordered
by the physician or practitioner.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to items and services furnished on or
after January 1, 1998.
482
HR 2015 EAS
‘‘(1) IN GENERAL.—The Secretary shall conduct
a competition among individuals and entities supply-
ing items and services described in subsection (c) for
each competitive acquisition area established under
subsection (a) for each class of items and services.
‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—
The Secretary may not award a contract to any en-
tity under the competition conducted pursuant to
paragraph (1) to furnish an item or service unless the
Secretary finds that the entity meets quality stand-
ards specified by the Secretary, and subject to para-
graph (3), that the total amounts to be paid under the
contract are expected to be less than the total amounts
that would otherwise be paid.
‘‘(3) LIMIT ON AMOUNT OF PAYMENT.—The Sec-
retary may not under a contract awarded under this
section provide for payment for an item or service in
an amount in excess of the applicable fee schedule
under this part for similar or related items or serv-
ices. The preceding sentence shall not apply if the
Secretary determines that an amount in excess of
such amount is warranted by reason of technological
innovation, quality improvement, or similar reasons,
except that the total amount paid under the contract
shall not exceed the limit under paragraph (2).
483
HR 2015 EAS
‘‘(4) CONTENTS OF CONTRACT.—A contract en-
tered into with an entity under the competition con-
ducted pursuant to paragraph (1) is subject to terms
and conditions that the Secretary may specify.
‘‘(5) LIMIT ON NUMBER OF CONTRACTORS.—The
Secretary may limit the number of contractors in a
competitive acquisition area to the number needed to
meet projected demand for items and services covered
under the contracts.
‘‘(c) SERVICES DESCRIBED.—The items and services to
which this section applies are all items and services covered
under this part (except for physician services as defined by
1861(r)) that the Secretary may specify.’’.
(b) ITEMS AND SERVICES TO BE FURNISHED ONLY
THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)
(42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(14),
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (15) the follow-
ing:
‘‘(16) where the expenses are for an item or serv-
ice furnished in a competitive acquisition area (as es-
tablished by the Secretary under section 1847(a)) by
484
HR 2015 EAS
an entity other than an entity with which the Sec-
retary has entered into a contract under section
1847(b) for the furnishing of such an item or service
in that area, unless the Secretary finds that the ex-
penses were incurred in a case of urgent need, or in
other circumstances specified by the Secretary.’’.
(c) EFFECTIVE DATE.—The amendments made by sub-
sections (a) and (b) apply to items and services furnished
after December 31, 1997.
SEC. 5219. IMPROVING INFORMATION TO MEDICARE BENE-
FICIARIES.
(a) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—Section 1804 of
the Social Security Act (42 U.S.C. 1395b–2) is amended
by adding at the end the following new subsection:
‘‘(c)(1) The Secretary shall provide a statement which
explains the benefits provided under this title with respect
to each item or service for which payment may be made
under this title which is furnished to an individual, without
regard to whether or not a deductible or coinsurance may
be imposed against the individual with respect to such item
or service.
‘‘(2) Each explanation of benefits provided under
paragraph (1) shall include—
485
HR 2015 EAS
‘‘(A) a statement which indicates that because er-
rors do occur and because medicare fraud, waste and
abuse is a significant problem, beneficiaries should
carefully check the statement for accuracy and report
any errors or questionable charges by calling the toll-
free phone number described in subparagraph (C);
‘‘(B) a statement of the beneficiary’s right to re-
quest an itemized bill (as provided in section
1128A(n)); and
‘‘(C) a toll-free telephone number for reporting
errors, questionable charges or other acts that would
constitute medicare fraud, waste, or abuse, which may
be the same number as described in subsection (b).’’.
(b) REQUEST FOR ITEMIZED BILL FOR MEDICARE
ITEMS AND SERVICES.—
(1) IN GENERAL.—Section 1128A of the Social
Security Act (42 U.S.C. 1320a–7a) is amended by
adding at the end the following new subsection:
‘‘(m) WRITTEN REQUEST FOR ITEMIZED BILL.—
‘‘(1) IN GENERAL.—A beneficiary may submit a
written request for an itemized bill for medical or
other items or services provided to such beneficiary by
any person (including an organization, agency, or
other entity) that receives payment under title XVIII
486
HR 2015 EAS
for providing such items or services to such bene-
ficiary.
‘‘(2) 30-DAY PERIOD TO RECEIVE BILL.—
‘‘(A) IN GENERAL.—Not later than 30 days
after the date on which a request under para-
graph (1) has been received, a person described
in such paragraph shall furnish an itemized bill
describing each medical or other item or service
provided to the beneficiary requesting the item-
ized bill.
‘‘(B) PENALTY.—Whoever knowingly fails to
furnish an itemized bill in accordance with sub-
paragraph (A) shall be subject to a civil fine of
not more than $100 for each such failure.
‘‘(3) REVIEW OF ITEMIZED BILL.—
‘‘(A) IN GENERAL.—Not later than 90 days
after the receipt of an itemized bill furnished
under paragraph (1), a beneficiary may submit
a written request for a review of the itemized bill
to the appropriate fiscal intermediary or carrier
with a contract under section 1816 or 1842.
‘‘(B) SPECIFIC
ALLEGATIONS.—A request
for a review of the itemized bill shall identify—
487
HR 2015 EAS
‘‘(i) specific medical or other items or
services that the beneficiary believes were
not provided as claimed, or
‘‘(ii) any other billing irregularity (in-
cluding duplicate billing).
‘‘(4) FINDINGS
OF
FISCAL
INTERMEDIARY
OR
CARRIER.—Each fiscal intermediary or carrier with
a contract under section 1816 or 1842 shall, with re-
spect to each written request submitted to the fiscal
intermediary or carrier under paragraph (3), deter-
mine whether the itemized bill identifies specific med-
ical or other items or services that were not provided
as claimed or any other billing irregularity (includ-
ing duplicate billing) that has resulted in unnecessary
payments under the title XVIII.
‘‘(5) RECOVERY
OF
AMOUNTS.—The Secretary
shall require fiscal intermediaries and carriers to take
all appropriate measures to recover amounts unneces-
sarily paid under title XVIII with respect to a bill
described in paragraph (4).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to medical or other items
or services provided on or after January 1, 1998.
488
HR 2015 EAS
SEC. 5220. PROHIBITING UNNECESSARY AND WASTEFUL
MEDICARE PAYMENTS FOR CERTAIN ITEMS.
Section 1861(v) of the Social Security Act is amended
by adding at the end the following new paragraph:
‘‘(8) ITEMS
UNRELATED
TO
PATIENT
CARE.—
Reasonable costs do not include costs for the follow-
ing—
‘‘(i) entertainment;
‘‘(ii) gifts or donations;
‘‘(iii) costs for fines and penalties resulting
from violations of Federal, State, or local laws;
and
‘‘(iv) education expenses for spouses or other
dependents of providers of services, their employ-
ees or contractors.’’.
SEC. 5221. REDUCING EXCESSIVE BILLINGS AND UTILIZA-
TION FOR CERTAIN ITEMS.
Section 1834(a)(15) of the Social Security Act (42
U.S.C. 1395m(a)(15)) is amended by striking ‘‘Secretary
may’’ both places it appears and inserting ‘‘Secretary
shall’’.
SEC. 5222. IMPROVING INFORMATION TO MEDICARE BENE-
FICIARIES.
(a) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—Section 1804 of
489
HR 2015 EAS
the Social Security Act (42 U.S.C. 1395b–2) is amended
by adding at the end the following new subsection:
‘‘(c)(1) The Secretary shall provide a statement which
explains the benefits provided under this title with respect
to each item or service for which payment may be made
under this title which is furnished to an individual, without
regard to whether or not a deductible or coinsurance may
be imposed against the individual with respect to such item
or service.
‘‘(2) Each explanation of benefits provided under
paragraph (1) shall include—
‘‘(A) a statement which indicates that because er-
rors do occur and because medicare fraud, waste and
abuse is a significant problem, beneficiaries should
carefully check the statement for accuracy and report
any errors or questionable charges by calling the toll-
free phone number described in subparagraph (C);
‘‘(B) a statement of the beneficiary’s right to re-
quest an itemized bill (as provided in section
1128A(n)); and
‘‘(C) a toll-free telephone number for reporting
errors, questionable charges or other acts that would
constitute medicare fraud, waste, or abuse, which may
be the same number as described in subsection (b).’’.
490
HR 2015 EAS
(b) REQUEST FOR ITEMIZED BILL FOR MEDICARE
ITEMS AND SERVICES.—
(1) IN GENERAL.—Section 1128A of the Social
Security Act (42 U.S.C. 1320a–7a) is amended by
adding at the end the following new subsection:
‘‘(m) WRITTEN REQUEST FOR ITEMIZED BILL.—
‘‘(1) IN GENERAL.—A beneficiary may submit a
written request for an itemized bill for medical or
other items or services provided to such beneficiary by
any person (including an organization, agency, or
other entity) that receives payment under title XVIII
for providing such items or services to such bene-
ficiary.
‘‘(2) 30-DAY PERIOD TO RECEIVE BILL.—
‘‘(A) IN GENERAL.—Not later than 30 days
after the date on which a request under para-
graph (1) has been received, a person described
in such paragraph shall furnish an itemized bill
describing each medical or other item or service
provided to the beneficiary requesting the item-
ized bill.
‘‘(B) PENALTY.—Whoever knowingly fails to
furnish an itemized bill in accordance with sub-
paragraph (A) shall be subject to a civil fine of
not more than $100 for each such failure.
491
HR 2015 EAS
‘‘(3) REVIEW OF ITEMIZED BILL.—
‘‘(A) IN GENERAL.—Not later than 90 days
after the receipt of an itemized bill furnished
under paragraph (1), a beneficiary may submit
a written request for a review of the itemized bill
to the appropriate fiscal intermediary or carrier
with a contract under section 1816 or 1842.
‘‘(B) SPECIFIC
ALLEGATIONS.—A request
for a review of the itemized bill shall identify—
‘‘(i) specific medical or other items or
services that the beneficiary believes were
not provided as claimed, or
‘‘(ii) any other billing irregularity (in-
cluding duplicate billing).
‘‘(4) FINDINGS
OF
FISCAL
INTERMEDIARY
OR
CARRIER.—Each fiscal intermediary or carrier with
a contract under section 1816 or 1842 shall, with re-
spect to each written request submitted to the fiscal
intermediary or carrier under paragraph (3), deter-
mine whether the itemized bill identifies specific med-
ical or other items or services that were not provided
as claimed or any other billing irregularity (includ-
ing duplicate billing) that has resulted in unnecessary
payments under the title XVIII.
492
HR 2015 EAS
‘‘(5) RECOVERY
OF
AMOUNTS.—The Secretary
shall require fiscal intermediaries and carriers to take
all appropriate measures to recover amounts unneces-
sarily paid under title XVIII with respect to a bill
described in paragraph (4).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to medical or other items
or services provided on or after January 1, 1998.
SEC. 5223. PROHIBITING UNNECESSARY AND WASTEFUL
MEDICARE PAYMENTS FOR CERTAIN ITEMS.
Notwithstanding any other provision of law, including
any regulation or payment policy, the following categories
of charges shall not be reimbursable under title XVIII of
the Social Security Act:
(1) Entertainment costs, including the costs of
tickets to sporting and other entertainment events.
(2) Gifts or donations.
(3) Personal use of motor vehicles.
(4) Costs for fines and penalties resulting from
violations of Federal, State, or local laws.
(5) Tuition or other education fees for spouses or
dependents of providers of services, their employees, or
contractors.
493
HR 2015 EAS
SEC. 5224. REDUCING EXCESSIVE BILLINGS AND UTILIZA-
TION FOR CERTAIN ITEMS.
Section 1834(a)(15) of the Social Security Act (42
U.S.C. 1395m(a)(15)) is amended by striking ‘‘Secretary
may’’ both places it appears and inserting ‘‘Secretary
shall’’.
SEC. 5225. IMPROVED CARRIER AUTHORITY TO REDUCE EX-
CESSIVE MEDICARE PAYMENTS.
Section 1834(i) of the Social Security Act (42 U.S.C.
1395m(i)) is amended by adding at the end the following
new paragraph:
‘‘(3) 
GROSSLEY
EXCESSIVE
PAYMENT
AMOUNTS.—Notwithstanding paragraph (1), the Sec-
retary may apply the provisions of section 1842(b)(8)
to payments under this subsection.’’.
SEC. 5226. ITEMIZATION OF SURGICAL DRESSING BILLS
SUBMITTED BY HOME HEALTH AGENCIES.
Section 1834(i)(2) (42 U.S.C. 1395m(i)(2)) is amend-
ed to read as follows:
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply to surgical dressings that are furnished as an
incident to a physician’s professional service.’’.
494
HR 2015 EAS
CHAPTER 3—CLARIFICATIONS AND
TECHNICAL CHANGES
SEC. 5231. OTHER FRAUD AND ABUSE RELATED PROVI-
SIONS.
(a) 
REFERENCE
CORRECTION.—(1) 
Section
1128D(b)(2)(D) (42 U.S.C. 1320a–7d(b)(2)(D)), as added
by section 205 of the Health Insurance Portability and Ac-
countability Act of 1996, is amended by striking
‘‘1128B(b)’’ and inserting ‘‘1128A(b)’’.
(2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a–
7e(g)(3)(C)) is amended by striking ‘‘Veterans’ Administra-
tion’’ and inserting ‘‘Department of Veterans Affairs’’.
(b) LANGUAGE IN DEFINITION OF CONVICTION.—Sec-
tion 1128E(g)(5) (42 U.S.C. 1320a–7e(g)(5)), as inserted
by section 221(a) of the Health Insurance Portability and
Accountability Act of 1996, is amended by striking ‘‘para-
graph (4)’’ and inserting ‘‘paragraphs (1) through (4)’’.
(c) IMPLEMENTATION OF EXCLUSIONS.—Section 1128
(42 U.S.C. 1320a–7) is amended—
(1) in subsection (a), by striking ‘‘any program
under title XVIII and shall direct that the following
individuals and entities be excluded from participa-
tion in any State health care program (as defined in
subsection (h))’’ and inserting ‘‘any Federal health
care program (as defined in section 1128B(f))’’; and
495
HR 2015 EAS
(2) in subsection (b), by striking ‘‘any program
under title XVIII and may direct that the following
individuals and entities be excluded from participa-
tion in any State health care program’’ and inserting
‘‘any Federal health care program (as defined in sec-
tion 1128B(f))’’.
(d) SANCTIONS FOR FAILURE TO REPORT.—Section
1128E(b) (42 U.S.C. 1320a–7e(b)), as inserted by section
221(a) of the Health Insurance Portability and Account-
ability Act of 1996, is amended by adding at the end the
following:
‘‘(6) SANCTIONS FOR FAILURE TO REPORT.—
‘‘(A) HEALTH
PLANS.—Any health plan
that fails to report information on an adverse
action required to be reported under this sub-
section shall be subject to a civil money penalty
of not more than $25,000 for each such adverse
action not reported. Such penalty shall be im-
posed and collected in the same manner as civil
money penalties under subsection (a) of section
1128A are imposed and collected under that sec-
tion.
‘‘(B) GOVERNMENTAL AGENCIES.—The Sec-
retary shall provide for a publication of a public
report that identifies those Government agencies
496
HR 2015 EAS
that have failed to report information on adverse
actions as required to be reported under this sub-
section.’’.
(e) CLARIFICATION OF TREATMENT OF CERTAIN WAIV-
ERS AND PAYMENTS OF PREMIUMS.—
(1) Section 1128A(i)(6) (42 U.S.C. 1320a–
7a(i)(6)) is amended—
(A) in subparagraph (A)(iii)—
(i) in subclause (I), by adding ‘‘or’’ at
the end;
(ii) in subclause (II), by striking ‘‘or’’
at the end; and
(iii) by striking subclause (III);
(B) by redesignating subparagraphs (B)
and (C) as subparagraphs (C) and (D); and
(C) by inserting after subparagraph (A) the
following:
‘‘(B) any permissible waiver as specified in
section 1128B(b)(3) or in regulations issued by
the Secretary;’’.
(2) Section 1128A(i)(6) (42 U.S.C. 1320a–
7a(i)(6)), is amended—
(A) in subparagraph (C), as redesignated
by paragraph (1), by striking ‘‘or’’ at the end;
497
HR 2015 EAS
(B) in subparagraph (D), as so redesig-
nated, by striking the period at the end and in-
serting ‘‘; or’’; and
(C) by adding at the end the following:
‘‘(D) the waiver of deductible and coinsur-
ance amounts pursuant to medicare supple-
mental policies under section 1882(t).’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendments made by this section shall
be effective as if included in the enactment of the
Health Insurance Portability and Accountability Act
of 1996.
(2) FEDERAL HEALTH PROGRAM.—The amend-
ments made by subsection (c) shall take effect on the
date of the enactment of this Act.
(3) SANCTION FOR FAILURE TO REPORT.—The
amendment made by subsection (d) shall apply to
failures occurring on or after the date of the enact-
ment of this Act.
(4) CLARIFICATION.—The amendments made by
subsection (e)(2) shall take effect on the date of the en-
actment of this Act.
498
HR 2015 EAS
Subtitle E—Prospective Payment
Systems
CHAPTER 1—PROVISIONS RELATING TO
PART A
SEC. 5301. PROSPECTIVE PAYMENT FOR INPATIENT REHA-
BILITATION HOSPITAL SERVICES.
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww)
is amended by adding at the end the following new sub-
section:
‘‘(j) PROSPECTIVE PAYMENT FOR INPATIENT REHA-
BILITATION SERVICES.—
‘‘(1) PAYMENT DURING TRANSITION PERIOD.—
‘‘(A) IN
GENERAL.—Notwithstanding sec-
tion 1814(b), but subject to the provisions of sec-
tion 1813, the amount of the payment with re-
spect to the operating and capital costs of inpa-
tient hospital services of a rehabilitation hospital
or a rehabilitation unit (in this subsection re-
ferred to as a ‘rehabilitation facility’), in a cost
reporting period beginning on or after October 1,
2000, and before October 1, 2003, is equal to the
sum of—
‘‘(i) the TEFRA percentage (as defined
in subparagraph (C)) of the amount that
would have been paid under part A of this
499
HR 2015 EAS
title with respect to such costs if this sub-
section did not apply, and
‘‘(ii) the prospective payment percent-
age (as defined in subparagraph (C)) of the
product of (I) the per unit payment rate es-
tablished under this subsection for the fiscal
year in which the payment unit of service
occurs, and (II) the number of such pay-
ment units occurring in the cost reporting
period.
‘‘(B) FULLY IMPLEMENTED SYSTEM.—Not-
withstanding section 1814(b), but subject to the
provisions of section 1813, the amount of the
payment with respect to the operating and cap-
ital costs of inpatient hospital services of a reha-
bilitation facility for a payment unit in a cost
reporting period beginning on or after October 1,
2003, is equal to the per unit payment rate es-
tablished under this subsection for the fiscal year
in which the payment unit of service occurs.
‘‘(C) TEFRA AND PROSPECTIVE PAYMENT
PERCENTAGES SPECIFIED.—For purposes of sub-
paragraph (A), for a cost reporting period begin-
ning—
500
HR 2015 EAS
‘‘(i) on or after October 1, 2000, and
before October 1, 2001, the ‘TEFRA percent-
age’ is 75 percent and the ‘prospective pay-
ment percentage’ is 25 percent;
‘‘(ii) on or after October 1, 2001, and
before October 1, 2002, the ‘TEFRA percent-
age’ is 50 percent and the ‘prospective pay-
ment percentage’ is 50 percent; and
‘‘(iii) on or after October 1, 2002, and
before October 1, 2003, the ‘TEFRA percent-
age’ is 25 percent and the ‘prospective pay-
ment percentage’ is 75 percent.
‘‘(D) PAYMENT UNIT.—For purposes of this
subsection, the term ‘payment unit’ means a dis-
charge, day of inpatient hospital services, or
other unit of payment defined by the Secretary.
‘‘(2) PATIENT CASE MIX GROUPS.—
‘‘(A) ESTABLISHMENT.—The Secretary shall
establish—
‘‘(i) classes of patients of rehabilitation
facilities (each in this subsection referred to
as a ‘case mix group’), based on such factors
as the Secretary deems appropriate, which
may include impairment, age, related prior
501
HR 2015 EAS
hospitalization, comorbidities, and func-
tional capability of the patient; and
‘‘(ii) a method of classifying specific
patients in rehabilitation facilities within
these groups.
‘‘(B) WEIGHTING FACTORS.—For each case
mix group the Secretary shall assign an appro-
priate weighting which reflects the relative facil-
ity resources used with respect to patients classi-
fied within that group compared to patients clas-
sified within other groups.
‘‘(C) ADJUSTMENTS FOR CASE MIX.—
‘‘(i) IN GENERAL.—The Secretary shall
from time to time adjust the classifications
and weighting factors established under this
paragraph as appropriate to reflect changes
in treatment patterns, technology, case mix,
number of payment units for which pay-
ment is made under this title, and other
factors which may affect the relative use of
resources. Such adjustments shall be made
in a manner so that changes in aggregate
payments under the classification system
are a result of real changes and are not a
502
HR 2015 EAS
result of changes in coding that are unre-
lated to real changes in case mix.
‘‘(ii) ADJUSTMENT.—Insofar as the
Secretary determines that such adjustments
for a previous fiscal year (or estimates that
such adjustments for a future fiscal year)
did (or are likely to) result in a change in
aggregate payments under the classification
system during the fiscal year that are a re-
sult of changes in the coding or classifica-
tion of patients that do not reflect real
changes in case mix, the Secretary shall ad-
just the per payment unit payment rate for
subsequent years so as to discount the effect
of such coding or classification changes.
‘‘(D) DATA COLLECTION.—The Secretary is
authorized to require rehabilitation facilities that
provide inpatient hospital services to submit
such data as the Secretary deems necessary to es-
tablish and administer the prospective payment
system under this subsection.
‘‘(3) PAYMENT RATE.—
‘‘(A) IN GENERAL.—The Secretary shall de-
termine a prospective payment rate for each
payment unit for which such rehabilitation facil-
503
HR 2015 EAS
ity is entitled to receive payment under this title.
Subject to subparagraph (B), such rate for pay-
ment units occurring during a fiscal year shall
be based on the average payment per payment
unit under this title for inpatient operating and
capital costs of rehabilitation facilities using the
most recent data available (as estimated by the
Secretary as of the date of establishment of the
system) adjusted—
‘‘(i) by updating such per-payment-
unit amount to the fiscal year involved by
the weighted average of the applicable per-
centage increases provided under subsection
(b)(3)(B)(ii) (for cost reporting periods be-
ginning during the fiscal year) covering the
period from the midpoint of the period for
such data through the midpoint of fiscal
year 2000 and by an increase factor (de-
scribed in subparagraph (C)) specified by
the Secretary for subsequent fiscal years up
to the fiscal year involved;
‘‘(ii) by reducing such rates by a factor
equal to the proportion of payments under
this subsection (as estimated by the Sec-
retary) based on prospective payment
504
HR 2015 EAS
amounts which are additional payments de-
scribed in paragraph (4) (relating to outlier
and related payments) or paragraph (7);
‘‘(iii) for variations among rehabilita-
tion facilities by area under paragraph (6);
‘‘(iv) by the weighting factors estab-
lished under paragraph (2)(B); and
‘‘(v) by such other factors as the Sec-
retary determines are necessary to properly
reflect variations in necessary costs of treat-
ment among rehabilitation facilities.
‘‘(B) BUDGET NEUTRAL RATES.—The Sec-
retary shall establish the prospective payment
amounts under this subsection for payment units
during fiscal years 2001 through 2004 at levels
such that, in the Secretary’s estimation, the
amount of total payments under this subsection
for such fiscal years (including any payment ad-
justments pursuant to paragraph (7)) shall be
equal to 99 percent of the amount of payments
that would have been made under this title dur-
ing the fiscal years for operating and capital
costs of rehabilitation facilities had this sub-
section not been enacted. In establishing such
payment amounts, the Secretary shall consider
505
HR 2015 EAS
the effects of the prospective payment system es-
tablished under this subsection on the total num-
ber of payment units from rehabilitation facili-
ties and other factors described in subparagraph
(A).
‘‘(C) INCREASE FACTOR.—For purposes of
this subsection for payment units in each fiscal
year (beginning with fiscal year 2001), the Sec-
retary shall establish an increase factor. Such
factor shall be based on an appropriate percent-
age increase in a market basket of goods and
services comprising services for which payment
is made under this subsection, which may be the
market basket percentage increase described in
subsection (b)(3)(B)(iii).
‘‘(4) OUTLIER AND SPECIAL PAYMENTS.—
‘‘(A) OUTLIERS.—
‘‘(i) IN GENERAL.—The Secretary may
provide for an additional payment to a re-
habilitation facility for patients in a case
mix group, based upon the patient being
classified as an outlier based on an unusual
length of stay, costs, or other factors speci-
fied by the Secretary.
506
HR 2015 EAS
‘‘(ii) PAYMENT
BASED
ON
MARGINAL
COST OF CARE.—The amount of such addi-
tional payment under clause (i) shall be de-
termined by the Secretary and shall approx-
imate the marginal cost of care beyond the
cutoff point applicable under clause (i).
‘‘(iii) TOTAL
PAYMENTS.—The total
amount of the additional payments made
under this subparagraph for payment units
in a fiscal year may not exceed 5 percent
of the total payments projected or estimated
to be made based on prospective payment
rates for payment units in that year.
‘‘(B) ADJUSTMENT.—The Secretary may
provide for such adjustments to the payment
amounts under this subsection as the Secretary
deems appropriate to take into account the
unique circumstances of rehabilitation facilities
located in Alaska and Hawaii.
‘‘(5) PUBLICATION.—The Secretary shall provide
for publication in the Federal Register, on or before
September 1 before each fiscal year (beginning with
fiscal year 2001, of the classification and weighting
factors for case mix groups under paragraph (2) for
such fiscal year and a description of the methodology
507
HR 2015 EAS
and data used in computing the prospective payment
rates under this subsection for that fiscal year.
‘‘(6) AREA WAGE ADJUSTMENT.—The Secretary
shall adjust the proportion (as estimated by the Sec-
retary from time to time) of rehabilitation facilities’
costs which are attributable to wages and wage-relat-
ed costs, of the prospective payment rates computed
under paragraph (3) for area differences in wage lev-
els by a factor (established by the Secretary) reflecting
the relative hospital wage level in the geographic area
of the rehabilitation facility compared to the national
average wage level for such facilities. Not later than
October 1, 2001 (and at least every 36 months there-
after), the Secretary shall update the factor under the
preceding sentence on the basis of a survey conducted
by the Secretary (and updated as appropriate) of the
wages and wage-related costs incurred in furnishing
rehabilitation services. Any adjustments or updates
made under this paragraph for a fiscal year shall be
made in a manner that assures that the aggregated
payments under this subsection in the fiscal year are
not greater or less than those that would have been
made in the year without such adjustment.
‘‘(7) ADDITIONAL ADJUSTMENTS.—The Secretary
may provide by regulation for—
552
HR 2015 EAS
ments (as defined in section 1861(w)(1)) made by the
skilled nursing facility,’’.
(c) MEDICAL REVIEW PROCESS.—In order to ensure
that medicare beneficiaries are furnished appropriate serv-
ices in skilled nursing facilities, the Secretary of Health and
Human Services shall establish and implement a thorough
medical review process to examine the effects of the amend-
ments made by this section on the quality of covered skilled
nursing facility services furnished to medicare beneficiaries.
In developing such a medical review process, the Secretary
shall place a particular emphasis on the quality of non-
routine covered services and physicians’ services for which
payment is made under title XVIII of the Social Security
Act for which payment is made under section 1848 of such
Act.
(d) EFFECTIVE DATE.—The amendments made by this
section are effective for cost reporting periods beginning on
or after July 1, 1998; except that the amendments made
by subsection (b) shall apply to items and services furnished
on or after July 1, 1998.