IIB
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106TH CONGRESS
1ST SESSION
H. R. 3075
IN THE SENATE OF THE UNITED STATES
NOVEMBER 8, 1999
Received
NOVEMBER 19, 1999
Read twice and referred to the Committee on Finance
AN ACT
To amend titles XVIII, XIX, and XXI of the Social Security
Act to make corrections and refinements in the Medicare,
Medicaid, and State children’s health insurance pro-
grams, as revised by the Balanced Budget Act of 1997.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU-
RITY ACT; REFERENCES TO BBA; TABLE OF
CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare, Medicaid, and SCHIP Balanced Budget Re-
finement Act of 1999’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence shall be considered to be made to that section or
other provision of the Social Security Act.
(c) REFERENCES TO BALANCED BUDGET ACT OF
1997.—In this Act, the term ‘‘BBA’’ means the Balanced
Budget Act of 1997 (Public Law 105–33).
(d) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; references to BBA;
table of contents.
TITLE I—PROVISIONS RELATING TO PART A
Subtitle A—PPS Hospitals
Sec. 101. One-year delay in transition for indirect medical education (IME)
percentage adjustment.
Sec. 102. Decrease in reductions for disproportionate share hospitals; data col-
lection requirements.
Subtitle B—PPS Exempt Hospitals
Sec. 111. Wage adjustment of percentile cap for PPS-exempt hospitals.
Sec. 112. Enhanced payments for long-term care and psychiatric hospitals until
development of prospective payment systems for those hos-
pitals.
Sec. 113. Per discharge prospective payment system for long-term care hos-
pitals.
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Sec. 114. Per diem prospective payment system for psychiatric hospitals.
Sec. 115. Refinement of prospective payment system for inpatient rehabilitation
services.
Subtitle C—Adjustments to PPS Payments for Skilled Nursing Facilities
Sec. 121. Temporary increase in payment for certain high cost patients.
Sec. 122. Market basket increase.
Sec. 123. Authorizing facilities to elect immediate transition to Federal rate.
Sec. 124. Part A pass-through payment for certain ambulance services, pros-
theses, and chemotherapy drugs.
Sec. 125. Provision for part B add-ons for facilities participating in the
NHCMQ demonstration project.
Sec. 126. Special consideration for facilities serving specialized patient popu-
lations.
Sec. 127. MedPAC study on special payment for facilities located in Hawaii
and Alaska.
Subtitle D—Other
Sec. 131. Part A BBA technical corrections.
TITLE II—PROVISIONS RELATING TO PART B
Subtitle A—Adjustments to Physician Payment Updates
Sec. 201. Modification of update adjustment factor provisions to reduce update
oscillations and require estimate revisions.
Sec. 202. Use of data collected by organizations and entities in determining
practice expense relative values.
Sec. 203. GAO study on resources required to provide safe and effective out-
patient cancer therapy.
Subtitle B—Hospital Outpatient Services
Sec. 211. Outlier adjustment and transitional pass-through for certain medical
devices, drugs, and biologicals.
Sec. 212. Establishing a transitional corridor for application of OPD PPS.
Sec. 213. Delay in application of prospective payment system to cancer center
hospitals.
Sec. 214. Limitation on outpatient hospital copayment for a procedure to the
hospital deductible amount.
Subtitle C—Other
Sec. 221. Application of separate caps to physical and speech therapy services.
Sec. 222. Transitional outlier payments for therapy services for certain high
acuity patients.
Sec. 223. Update in renal dialysis composite rate.
Sec. 224. Temporary update in durable medical equipment and oxygen rates.
Sec. 225. Requirement for new proposed rulemaking for implementation of in-
herent reasonableness policy.
Sec. 226. Increase in reimbursement for pap smears.
Sec. 227. Refinement of ambulance services demonstration project.
Sec. 228. Phase-in of PPS for ambulatory surgical centers.
Sec. 229. Extension of Medicare benefits for immunosuppressive drugs.
Sec. 230. Additional studies.
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TITLE III—PROVISIONS RELATING TO PARTS A AND B
Subtitle A—Home Health Services
Sec. 301. Adjustment to reflect administrative costs not included in the interim
payment system.
Sec. 302. Delay in application of 15 percent reduction in payment rates for
home health services until 1 year after implementation of pro-
spective payment system.
Sec. 303. Clarification of surety bond requirements.
Sec. 304. Technical amendment clarifying applicable market basket increase for
PPS.
Subtitle B—Direct Graduate Medical Education
Sec. 311. Use of national average payment methodology in computing direct
graduate medical education (DGME) payments.
Sec. 312. Initial residency period for child neurology residency training pro-
grams.
Subtitle C—Other
Sec. 321. GAO study on geographic reclassification.
Sec. 322. MedPAC study on Medicare payment for non-physician health profes-
sional clinical training in hospitals.
TITLE IV—RURAL PROVIDER PROVISIONS
Sec. 401. Permitting reclassification of certain urban hospitals as rural hos-
pitals.
Sec. 402. Update of standards applied for geographic reclassification for certain
hospitals.
Sec. 403. Improvements in the critical access hospital (CAH) program.
Sec. 404. Five-year extension of Medicare dependent hospital (MDH) program.
Sec. 405. Rebasing for certain sole community hospitals.
Sec. 406. Increased flexibility in providing graduate physician training in rural
areas.
Sec. 407. Elimination of certain restrictions with respect to hospital swing bed
program.
Sec. 408. Grant program for rural hospital transition to prospective payment.
Sec. 409. MedPAC study of rural providers.
Sec. 410. Expansion of access to paramedic intercept services in rural areas.
TITLE V—PROVISIONS RELATING TO PART C
(MEDICARE+CHOICE PROGRAM)
Subtitle A—Medicare+Choice
Sec. 501. Phase-in of new risk adjustment methodology.
Sec. 502. Encouraging offering of Medicare+Choice plans in areas without
plans.
Sec. 503. Modification of 5-year re-entry rule for contract terminations.
Sec. 504. Continued computation and publication of AAPCC data.
Sec. 505. Changes in Medicare+Choice enrollment rules.
Sec. 506. Allowing variation in premium waivers within a service area if
Medicare+Choice payment rates vary within the area.
Sec. 507. Delay in deadline for submission of adjusted community rates and re-
lated information.
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Sec. 508. Two-year extension of Medicare cost contracts.
Sec. 509. Medicare+Choice nursing and allied health professional education
payments.
Sec. 510. Reduction in adjustment in national per capita Medicare+Choice
growth percentage for 2002.
Sec. 511. Deeming of Medicare+Choice organization to meet requirements.
Sec. 512. Miscellaneous changes and studies.
Sec. 513. MedPAC report on Medicare MSA (medical savings account) plans.
Sec. 514. Clarification of nonapplicability of certain provisions of discharge
planning process to Medicare+Choice plans.
Subtitle B—Managed Care Demonstration Projects
Sec. 521. Extension of social health maintenance organization demonstration
(SHMO) project authority.
Sec. 522. Extension of Medicare community nursing organization demonstra-
tion project.
Sec. 523. Medicare+Choice competitive bidding demonstration project.
Sec. 524. Extension of Medicare municipal health services demonstration
projects.
Sec. 525. Medicare coordinated care demonstration project.
TITLE VI—MEDICAID
Sec. 601. Making Medicaid DSH transition rule permanent.
Sec. 602. Increase in DSH allotment for certain States and the District of Co-
lumbia.
Sec. 603. New prospective payment system for Federally-qualified health cen-
ters and rural health clinics.
Sec. 604. Parity in reimbursement for certain utilization and quality control
services.
TITLE VII—STATE CHILDREN’S HEALTH INSURANCE PROGRAM
(SCHIP)
Sec. 701. Stabilizing the SCHIP allotment formula.
Sec. 702. Increased allotments for territories under the State children’s health
insurance program.
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TITLE I—PROVISIONS RELATING
TO PART A
Subtitle A—PPS Hospitals
SEC. 101. ONE-YEAR DELAY IN TRANSITION FOR INDIRECT
MEDICAL EDUCATION (IME) PERCENTAGE
ADJUSTMENT.
(a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42
U.S.C. 1395ww(d)(5)(B)(ii)), as amended by section
4621(a)(1) of BBA, is amended—
(1) in subclause (IV), by inserting ‘‘and 2001’’
after ‘‘2000’’; and
(2) by striking ‘‘2000’’ in subclause (V) and in-
serting ‘‘2001’’.
(b) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION
OF
STANDARDIZED
AMOUNT.—Section
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)), as
amended by section 4621(a)(2) of BBA, is amended by
inserting ‘‘or any additional payments under such para-
graph resulting from the amendment made by section
101(a) of Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999’’ after ‘‘Balanced Budget
Act of 1997’’.
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SEC. 102. DECREASE IN REDUCTIONS FOR DISPROPOR-
TIONATE SHARE HOSPITALS; DATA COLLEC-
TION REQUIREMENTS.
(a) IN GENERAL.—Section 1886(d)(5)(F)(ix) (42
U.S.C. 1395ww(d)(5)(F)(ix)), as added by section 4403(a)
of BBA, is amended—
(1) in subclause (III), by striking ‘‘during fiscal
year 2000’’ and inserting ‘‘during each of fiscal
years 2000 and 2001’’;
(2) by striking subclause (IV);
(3) by redesignating subclauses (V) and (VI)
and subclauses (IV) and (V), respectively; and
(4) in subclause (IV), as so redesignated, by
striking ‘‘reduced by 5 percent’’ and inserting ‘‘re-
duced by 4 percent’’.
(b) DATA COLLECTION.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall require any subsection (d)
hospital (as defined in section 1886(d)(1)(B) of the
Social Security Act (42 U.S.C. 1395ww(d)(1)(B)) to
submit to the Secretary, in the cost reports sub-
mitted to the Secretary by such hospital for dis-
charges occurring during a fiscal year, data on the
costs incurred by the hospital for providing inpatient
and outpatient hospital services for which the hos-
pital is not compensated, including non-Medicare
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bad debt, charity care, and charges for Medicaid an
indigent care.
(2) EFFECTIVE DATE.—The Secretary shall re-
quire the submission of the data described in para-
graph (1) in cost reports for cost reporting periods
beginning on or after the date of the enactment of
this Act.
Subtitle B—PPS-Exempt Hospitals
SEC. 111. WAGE ADJUSTMENT OF PERCENTILE CAP FOR
PPS-EXEMPT HOSPITALS.
(a) IN GENERAL.—Section 1886(b)(3)(H) (42 U.S.C.
1395ww(b)(3)(H)), as amended by section 4414 of BBA,
is amended—
(1) in clause (i), by inserting ‘‘, as adjusted
under clause (iii)’’ before the period;
(2) in clause (ii), by striking ‘‘clause (i)’’ and
‘‘such clause’’ and inserting ‘‘subclause (I)’’ and
‘‘such subclause’’ respectively;
(3) by striking ‘‘(H)(i)’’ and inserting ‘‘(ii)(I)’’;
(4) by redesignating clauses (ii) and (iii) as
subclauses (II) and (III);
(5) by inserting after clause (ii), as so redesig-
nated, the following new clause:
‘‘(iii) In applying clause (ii)(I) in the case of a hos-
pital or unit, the Secretary shall provide for an appro-
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priate adjustment to the labor-related portion of the
amount determined under such subparagraph to take into
account differences between average wage-related costs in
the area of the hospital and the national average of such
costs within the same class of hospital.’’; and
(6) by inserting before clause (ii), as so redesig-
nated, the following new clause:
‘‘(H)(i) In the case of a hospital or unit that is within
a class of hospital described in clause (iv), for a cost re-
porting period beginning during fiscal years 1998 through
2002, the target amount for such a hospital or unit may
not exceed the amount as updated up to or for such cost
reporting period under clause (ii).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to cost reporting periods beginning
on or after October 1, 1999.
SEC. 112. ENHANCED PAYMENTS FOR LONG-TERM CARE
AND PSYCHIATRIC HOSPITALS UNTIL DEVEL-
OPMENT OF PROSPECTIVE PAYMENT SYS-
TEMS FOR THOSE HOSPITALS.
Section 1886(b)(2) (42 U.S.C. 1395ww(b)(2)), as
added by section 4415(b) of BBA, is amended—
(1) in subparagraph (A), by striking ‘‘In addi-
tion to’’ and inserting ‘‘Except as provided in sub-
paragraph (E), in addition to’’; and
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(2) by adding at the end the following new sub-
paragraph:
‘‘(E)(i) In the case of an eligible hospital that is a
hospital or unit that is within a class of hospital described
in clause (ii) with a 12-month cost reporting period begin-
ning before the enactment of this subparagraph, in deter-
mining the amount of the increase under subparagraph
(A), the Secretary shall substitute for the percentage of
the target amount applicable under subparagraph
(A)(ii)—
‘‘(I) for a cost reporting period beginning on or
after October 1, 2000, and before September 30,
2001, 1.5 percent; and
‘‘(II) for a cost reporting period beginning on
or after October 1, 2001, and before September 30,
2002, 2 percent.
‘‘(ii) For purposes of clause (i), each of the fol-
lowing shall be treated as a separate class of hos-
pital:
‘‘(I) Hospitals described in clause (i) of
subsection (d)(1)(B) and psychiatric units de-
scribed in the matter following clause (v) of
such subsection.
‘‘(II) Hospitals described in clause (iv) of
such subsection.’’.
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SEC. 113. PER DISCHARGE PROSPECTIVE PAYMENT SYS-
TEM FOR LONG-TERM CARE HOSPITALS.
(a) DEVELOPMENT OF SYSTEM.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall develop a per discharge pro-
spective payment system for payment for inpatient
hospital services of long-term care hospitals de-
scribed in section 1886(d)(1)(B)(iv) of the Social Se-
curity Act (42 U.S.C. 1395ww(d)(1)(B)(iv)) under
the Medicare program. Such system shall include an
adequate patient classification system that is based
on diagnosis-related groups (DRGs) and that re-
flects the differences in patient resource use and
costs, and shall maintain budget neutrality.
(2) COLLECTION OF DATA AND EVALUATION.—
In developing the system described in paragraph (1),
the Secretary may require such long-term care hos-
pitals to submit such information to the Secretary as
the Secretary may require to develop the system.
(b) REPORT.—Not later than October 1, 2001, the
Secretary shall submit to the appropriate committees of
Congress a report that includes a description of the system
developed under subsection (a)(1).
(c) IMPLEMENTATION
OF PROSPECTIVE PAYMENT
SYSTEM.—Notwithstanding section 1886(b)(3) of the So-
cial Security Act (42 U.S.C. 1395ww(b)(3)), the Secretary
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shall provide, for cost reporting periods beginning on or
after October 1, 2002, for payments for inpatient hospital
services furnished by long-term care hospitals under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
in accordance with the system described in subsection (a).
SEC. 114. PER DIEM PROSPECTIVE PAYMENT SYSTEM FOR
PSYCHIATRIC HOSPITALS.
(a) DEVELOPMENT OF SYSTEM.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall develop a per diem prospective
payment system for payment for inpatient hospital
services of psychiatric hospitals and units (as de-
fined in paragraph (3)) under the Medicare pro-
gram. Such system shall include an adequate patient
classification system that reflects the differences in
patient resource use and costs among such hospitals
and shall maintain budget neutrality.
(2) COLLECTION OF DATA AND EVALUATION.—
In developing the system described in paragraph (1),
the Secretary may require such psychiatric hospitals
and units to submit such information to the Sec-
retary as the Secretary may require to develop the
system.
(3) DEFINITION.—In this section, the term
‘‘psychiatric hospitals and units’’ means a psy-
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chiatric hospital described in clause (i) of section
1886(d)(1)(B) of the Social Security Act (42 U.S.C.
1395ww(d)(1)(B)) and psychiatric units described in
the matter following clause (v) of such section.
(b) REPORT.—Not later than October 1, 2001, the
Secretary shall submit to the appropriate committees of
Congress a report that includes a description of the system
developed under subsection (a)(1).
(c) IMPLEMENTATION
OF PROSPECTIVE PAYMENT
SYSTEM.—Notwithstanding section 1886(b)(3) of the So-
cial Security Act (42 U.S.C. 1395ww(b)(3)), the Secretary
shall provide, for cost reporting periods beginning on or
after October 1, 2002, for payments for inpatient hospital
services furnished by psychiatric hospitals and units under
title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.) in accordance with the prospective payment sys-
tem established by the Secretary under this section in a
budget neutral manner.
SEC. 115. REFINEMENT OF PROSPECTIVE PAYMENT SYS-
TEM FOR INPATIENT REHABILITATION SERV-
ICES.
(a) ELECTION TO APPLY FULL PROSPECTIVE PAY-
MENT RATE WITHOUT PHASE-IN.—
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(1) IN
GENERAL.—Paragraph (1) of section
1886(j) (42 U.S.C. 1395ww(j)), as added by section
4421(a) of BBA, is amended—
(A) in subparagraph (C), by inserting
‘‘subject to subparagraph (E),’’ after ‘‘subpara-
graph (A),’’; and
(B) by adding at the end the following new
subparagraph:
‘‘(E) ELECTION TO APPLY FULL PROSPEC-
TIVE PAYMENT SYSTEM.—A rehabilitation facil-
ity may elect for either or both cost reporting
periods described in subparagraph (C) to have
the TEFRA percentage and prospective pay-
ment percentage set at 0 percent and 100 per-
cent, respectively, for the facility.’’.
(2) BUDGET NEUTRALITY IN APPLICATION.—
Paragraph (3)(B) of such section is amended by in-
serting ‘‘and taking into account the election per-
mitted under paragraph (1)(E)’’ after ‘‘in the Sec-
retary’s estimation’’.
(3) CASE
MIX
CREEP
ADJUSTMENT.—Paragraph
(2)(C) of such section is amended by adding at the end
the following new clauses:
‘‘(iii) EXAMINATION OF CHANGES IN
CASE MIX.—The Secretary, upon obtaining
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substantially complete data from fiscal
year 2001, shall analyze the extent to
which the changes in case mix during that
fiscal year are attributable to changes in
coding and classification and do not reflect
real changes in case mix.
‘‘(iv) INITIAL ADJUSTMENT OF RATES
IN FISCAL YEAR 2004.—Based on the anal-
ysis performed under clause (iii) in deter-
mining the amount of case mix change due
merely to changes in coding or classifica-
tion, the Secretary shall adjust the pro-
spective payment amounts for fiscal year
2004 by 150 percent of the Secretary’s es-
timate of the percentage adjustment to the
prospective payment rate under this para-
graph that would have achieved budget
neutrality in fiscal year 2001 if it had ap-
plied in setting the rates for that fiscal
year.
‘‘(v) FINAL ADJUSTMENT OF RATES
IN FISCAL YEAR 2005.—In the case that
the adjustment under clause (iv) resulted
in—
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‘‘(I) a percentage decrease in
rates, the Secretary shall increase the
prospective payment amounts for fis-
cal year 2005 by a percentage equal
to 1⁄3 of such percentage decrease; or
‘‘(II) a percentage increase in
rates, the Secretary shall decrease the
prospective payment amounts for fis-
cal year 2005 by a percentage equal
to 1⁄3 of such percentage increase.’’.
(b) USE OF DISCHARGE AS PAYMENT UNIT.—
(1) IN GENERAL.—Paragraph (1)(D) of such
section is amended by striking ‘‘, day of inpatient
hospital services, or other unit of payment defined
by the Secretary’’.
(2) CONFORMING AMENDMENT TO CLASSIFICA-
TION.—Paragraph (2)(A) of such section is amended
by amending clause (i) of to read as follows:
‘‘(i) classes of patient discharges of
rehabilitation facilities by functional-re-
lated groups (each in this subsection re-
ferred to as a ‘case mix group’), based on
impairment, age, comorbidities, and func-
tional capability of the patient and such
other factors as the Secretary deems ap-
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propriate to improve the explanatory power
of functional independence measure-func-
tion related groups; and’’.
(3) CONSTRUCTION
RELATING
TO
TRANSFER
AUTHORITY.—Paragraph (1) of such section, as
amended by subsection (a)(1), is further amended by
adding at the end the following new subparagraph:
‘‘(F) CONSTRUCTION RELATING TO TRANS-
FER AUTHORITY.—Nothing in this subsection
shall be construed as preventing the Secretary
from providing for an adjustment to payments
to take into account the early transfer of a pa-
tient from a rehabilitation facility to another
site of care.’’.
(c) STUDY ON IMPACT OF IMPLEMENTATION OF PRO-
SPECTIVE PAYMENT SYSTEM.—
(1) STUDY.—The Secretary of Health and
Human Services shall conduct a study of the impact
on utilization and beneficiary access to services of
the implementation of the Medicare prospective pay-
ment system for inpatient hospital services or reha-
bilitation facilities under section 1886(j) of the So-
cial Security Act (as added by section 4421(a) of
BBA).
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(2) REPORT.—Not later than 3 years after the
date such system is first implemented, the Secretary
shall submit to Congress a report on such study.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) are effective as if included in the
enactment of section 4421(a) of BBA.
Subtitle C—Adjustments to PPS
Payments for Skilled Nursing
Facilities
SEC. 121. TEMPORARY INCREASE IN PAYMENT FOR CER-
TAIN HIGH COST PATIENTS.
(a) ADJUSTMENT
FOR MEDICALLY COMPLEX PA-
TIENTS UNTIL ESTABLISHMENT OF REFINED CASE-MIX
ADJUSTMENT.—For purposes of computing payments for
covered skilled nursing facility services under paragraph
(1) of section 1888(e) of the Social Security Act (42
U.S.C. 1395yy(e)), as added by section 4432(a) of BBA,
for such services furnished on or after April 1, 2000, and
before October 1, 2000, the Secretary of Health and
Human Services shall increase by 10 percent the adjusted
Federal per diem rate otherwise determined under para-
graph (4) of such section (but for this section) for covered
skilled nursing facility services for RUG–III groups de-
scribed in subsection (b) furnished to an individual during
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the period in which such individual is classified in such
a RUG–III category.
(b) GROUPS DESCRIBED.—The RUG–III groups for
which the adjustment described in subsection (a) applies
are SE3, SE2, SE1, SSC, SSB, SSA, CC2, CC1, CB2,
CB1, CA2, and CA1, as specified in Tables 3 and 4 of
the final rule published in the Federal Register by the
Health Care Financing Administration on July 30, 1999
(64 Fed. Reg. 41684).
SEC. 122. MARKET BASKET INCREASE.
Section 
1888(e)(4)(E)(ii) 
(42 
U.S.C.
1395yy(e)(4)(E)(ii)) is amended—
(1) by redesignating subclause (III) as sub-
clause (IV); and
(2) by striking subclause (II) and inserting
after subclause (I) the following:
‘‘(II) for fiscal year 2001, the
rate computed for fiscal year 2000
(determined without regard to section
121 of the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement
Act of 1999) increased by the skilled
nursing facility market basket per-
centage change for the fiscal year in-
volved plus 0.8 percentage point;
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‘‘(III) for fiscal year 2002, the
rate computed for the previous fiscal
year increased by the skilled nursing
facility 
market 
basket 
percentage
change for the fiscal year involved
minus 1 percentage point; and’’.
SEC. 123. AUTHORIZING FACILITIES TO ELECT IMMEDIATE
TRANSITION TO FEDERAL RATE.
(a) IN
GENERAL.—Section 1888(e) (42 U.S.C.
1395yy(e)), as added by section 4432(a) of BBA, is
amended—
(1) in paragraph (1), in the matter preceding
subparagraph (A), by striking ‘‘paragraph (7)’’ and
inserting ‘‘paragraphs (7) and (11)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(11) PERMITTING
FACILITIES
TO
WAIVE
3-
YEAR
TRANSITION.—Notwithstanding 
paragraph
(1)(A), a facility may elect to have the amount of
the payment for all costs of covered skilled nursing
facility services for each day of such services fur-
nished in cost reporting periods beginning after the
date of such election determined pursuant to sub-
paragraph (B) of paragraph (1).’’.
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(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to elections made more than 60
days after the date of the enactment of this Act.
SEC. 124. PART A PASS-THROUGH PAYMENT FOR CERTAIN
AMBULANCE SERVICES, PROSTHESES, AND
CHEMOTHERAPY DRUGS.
(a) IN
GENERAL.—Section 1888(e) (42 U.S.C.
1395yy(e)), as added by section 4432(a) of BBA, is
amended—
(1) in paragraph (2)(A)(i)(II), by striking
‘‘services described in clause (ii)’’ and inserting
‘‘items and services described in clauses (ii) and
(iii)’’;
(2) by adding at the end of paragraph (2)(A)
the following new clause:
‘‘(iii) EXCLUSION OF CERTAIN ADDI-
TIONAL
ITEMS.—Items described in this
clause are the following:
‘‘(I) Ambulance services fur-
nished to an individual in conjunction
with renal dialysis services described
in section 1861(s)(2)(F).
‘‘(II) Chemotherapy items (iden-
tified as of July 1, 1999, by HCPCS
codes J9000–J9020; J9040–J9151;
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J9170–J9185; J9200–J9201; J9206–
J9208; J9211; J9230–J9245; and
J9265–J9600 (and as subsequently
modified by the Secretary)).
‘‘(III) Chemotherapy administra-
tion services (identified as of July 1,
1999, by HCPCS codes 36260–
36262; 36489; 36530–36535; 36640;
36823; and 96405–96542 (and as
subsequently modified by the Sec-
retary)).
‘‘(IV) 
Radioisotope 
services
(identified as of July 1, 1999, by
HCPCS codes 79030–79440 (and as
subsequently modified by the Sec-
retary)).
‘‘(V) Customized prosthetic de-
vices (commonly known as artificial
limbs or components or artifical
limbs) under the following HCPCS
codes (as of July 1, 1999 (and as sub-
sequently modified by the Secretary))
if delivered to an inpatient for use
during the stay in the skilled nursing
facility and intended to be used by the
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individual after discharge from the fa-
cility: L5050–L5340; L5500–L5610;
L5613–L5986; 
L5988; 
L6050–
L6370; 
L6400–L6880; 
L6920–
L7274; and L7362–7366.’’; and
(3) by adding at the end of paragraph (9) the
following: ‘‘In the case of an item or service de-
scribed in clause (iii) of paragraph (2)(A) that would
be payable under part A but for the exclusion of
such item or service under such clause, payment
shall be made for the item or service, in an amount
otherwise determined under part B of this title for
such item or service, from the Federal Hospital In-
surance Trust Fund under section 1817 (rather
than from the Federal Supplementary Medical In-
surance Trust Fund under section 1841).’’.
(b) CONFORMING FOR BUDGET NEUTRALITY BEGIN-
NING WITH FISCAL YEAR 2001.—Section 1888(e)(4)(G)
(42 U.S.C. 1395yy(e)(4)(G)) is amended by adding at the
end the following new clause:
‘‘(iii) ADJUSTMENT
FOR
EXCLUSION
OF
CERTAIN
ADDITIONAL
ITEMS.—The
Secretary shall provide for an appropriate
proportional reduction in payments so that
beginning with fiscal year 2001, the aggre-
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gate amount of such reductions is equal to
the aggregate increase in payments attrib-
utable to the exclusion effected under
clause (iii) of paragraph (2)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to payments made for items fur-
nished on or after April 1, 2000.
SEC. 125. PROVISION FOR PART B ADD-ONS FOR FACILI-
TIES PARTICIPATING IN THE NHCMQ DEM-
ONSTRATION PROJECT.
(a) IN GENERAL.—Section 1888(e)(3) (42 U.S.C.
1395yy(e)(3)), as added by section 4432(a) of BBA, is
amended—
(1) in subparagraph (A)—
(A) in clause (i), by inserting ‘‘or, in the
case of a facility participating in the Nursing
Home Case-Mix and Quality Demonstration
(RUGS–III), the RUGS–III rate received by
the facility during the cost reporting period be-
ginning in 1997’’ after ‘‘to non-settled cost re-
ports’’; and
(B) in clause (ii), by striking ‘‘furnished
during such period’’ and inserting ‘‘furnished
during the applicable cost reporting period de-
scribed in clause (i)’’; and
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(2) by amending subparagraph (B) to read as
follows:
‘‘(B) UPDATE TO FIRST COST REPORTING
PERIOD.—The Secretary shall update the
amount determined under subparagraph (A),
for each cost reporting period after the applica-
ble cost reporting period described in subpara-
graph (A)(i) and up to the first cost reporting
period by a factor equal to the skilled nursing
facility market basket percentage increase
minus 1 percentage point (except that for the
cost reporting period beginning in fiscal year
2001, the factor shall be equal to such market
basket percentage plus 0.8 percentage point).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall be effective as if included in the enact-
ment of section 4432(a) of BBA.
SEC. 126. SPECIAL CONSIDERATION FOR FACILITIES SERV-
ING SPECIALIZED PATIENT POPULATIONS.
(a) IN
GENERAL.—Section 1888(e) (42 U.S.C.
1395yy(e)), as amended by section 123(a)(1), is further
amended—
(1) in paragraph (1), by striking ‘‘subject to
paragraphs (7) and (11)’’ and inserting ‘‘subject to
paragraphs (7), (11), and (12)’’; and
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(2) by adding at the end the following new
paragraph:
‘‘(12) PAYMENT
RULE
FOR
CERTAIN
FACILI-
TIES.—
‘‘(A) IN GENERAL.—In the case of a quali-
fied acute skilled nursing facility described in
subparagraph (B), the per diem amount of pay-
ment shall be determined by applying the non-
Federal percentage and Federal percentage
specified in paragraph (2)(C)(ii).
‘‘(B) FACILITY DESCRIBED.—For purposes
of subparagraph (A), a qualified acute skilled
nursing facility is a facility that—
‘‘(i) was certified by the Secretary as
a skilled nursing facility eligible to furnish
services under this title before July 1,
1992;
‘‘(ii) is a hospital-based facility; and
‘‘(iii) for the cost reporting period be-
ginning in fiscal year 1998, the facility had
more than 60 percent of total patient days
comprised of patients who are described in
subparagraph (C).
‘‘(C) DESCRIPTION
OF
PATIENTS.—For
purposes of subparagraph (B), a patient de-
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scribed in this subparagraph is an individual
who—
‘‘(i) is entitled to benefits under part
A; and
‘‘(ii) is immuno-compromised sec-
ondary to an infectious disease, with spe-
cific diagnoses as specified by the Sec-
retary.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply for the period beginning on the
date on which after the date of the enactment of this Act
the first cost reporting period of the facility begins and
ending on September 30, 2001, and applies to skilled
nursing facilities furnishing covered skilled nursing facility
services on the date of the enactment of this Act for which
payment is made under title XVIII of the Social Security
Act.
(c) REPORT TO CONGRESS.—By not later than 1 year
after the date of the enactment of this Act, the Secretary
of Health and Human Services shall assess the resource
use of patients of skilled nursing facilities furnishing serv-
ices under the Medicare program who are immuno-com-
promised secondary to an infectious disease, with specific
diagnoses as specified by the Secretary (under paragraph
(12)(C), as added by subsection (a), of section 1888(e)
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of the Social Security Act (42 U.S.C. 1395yy(e))) to deter-
mine whether any permanent adjustments are needed to
the RUGs to take into account the resource uses and costs
of these patients.
SEC. 127. MEDPAC STUDY ON SPECIAL PAYMENT FOR FA-
CILITIES LOCATED IN HAWAII AND ALASKA.
(a) IN GENERAL.—The Medicare Payment Advisory
Commission shall conduct a study on skilled nursing facili-
ties furnishing covered skilled nursing facility services (as
defined in section 1888(e)(2)(A) of the Social Security Act
(42 U.S.C. 1395yy(e)(2)(A)) to determine the need for an
additional payment amount under section 1888(e)(4)(G)
of such Act (42 U.S.C. 1395yy(e)(4)(G)) to take into ac-
count the unique circumstances of skilled nursing facilities
located in Alaska and Hawaii.
(b) REPORT.—By not later than 18 months after the
date of the enactment of this Act, the Medicare Payment
Advisory Commission shall submit a report to Congress
on the study conducted under subsection (a).
Subtitle D—Other
SEC. 131. PART A BBA TECHNICAL CORRECTIONS.
(a) SECTION 4201.—Section 1820(c)(2)(B)(i) (42
U.S.C. 1395i–4(c)(2)(B)(i)), as amended by section
4201(a) of BBA, is amended by striking ‘‘and is located
in a county (or equivalent unit of local government) in a
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rural area (as defined in section 1886(d)(2)(D)) that’’ and
inserting ‘‘that is located in a county (or equivalent unit
of local government) in a rural area (as defined in section
1886(d)(2)(D)), and that’’.
(b) SECTION 4204.—(1) Section 1886(d)(5)(G) (42
U.S.C. 1395ww(d)(5)(G)), as amended by section
4204(a)(1) of BBA, is amended—
(A) in clause (i), by striking ‘‘or beginning on
or after October 1, 1997, and before October 1,
2001,’’ and inserting ‘‘or discharges on or after Oc-
tober 1, 1997, and before October 1, 2001,’’; and
(B) in clause (ii)(II), by striking ‘‘or beginning
on or after October 1, 1997, and before October 1,
2001,’’ and inserting ‘‘or discharges on or after Oc-
tober 1, 1997, and before October 1, 2001,’’.
(2) 
Section 
1886(b)(3)(D) 
(42 
U.S.C.
1395ww(b)(3)(D)), as amended by section 4204(a)(2) of
BBA, is amended in the matter preceding clause (i) by
striking ‘‘and for cost reporting periods beginning on or
after October 1, 1997, and before October 1, 2001,’’ and
inserting ‘‘and for discharges beginning on or after Octo-
ber 1, 1997, and before October 1, 2001,’’.
(c) SECTION 4319.—Section 1847(b)(2) (42 U.S.C.
1395w–3(b)(2)), as added by section 4319 of BBA, is
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amended by inserting ‘‘and’’ after ‘‘specified by the Sec-
retary’’.
(d) SECTION 4401.—Section 4401(b)(1)(B) of BBA
(42 U.S.C. 1395ww note) is amended by striking ‘‘section
1886(b)(3)(B)(i)(XIII) of the Social Security Act (42
U.S.C. 1395ww(b)(3)(B)(i)(XIII))’’ and inserting ‘‘section
1886(b)(3)(B)(i)(XIV) of the Social Security Act (42
U.S.C. 1395ww(b)(3)(B)(i)(XIV))’’.
(e) SECTION 4402.—The last sentence of section
1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)), as added by
section 4402 of BBA, is amended by striking ‘‘September
30, 2002,’’ and inserting ‘‘October 1, 2002,’’.
(f) SECTION 4419.—The first sentence of section
1886(b)(4)(A)(i) (42 U.S.C. 1395ww(b)(4)(A)(i)), as
amended by section 4419(a)(1) of BBA, by striking ‘‘or
unit’’.
(g) SECTION 4442.—Section 4442(b) of BBA (42
U.S.C. 1395f note) is amended by striking ‘‘applies to cost
reporting periods beginning’’ and inserting ‘‘applies to
items and services furnished’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the enact-
ment of BBA.
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TITLE II—PROVISIONS
RELATING TO PART B
Subtitle A—Adjustments to
Physician Payment Updates
SEC. 201. MODIFICATION OF UPDATE ADJUSTMENT FAC-
TOR PROVISIONS TO REDUCE UPDATE OSCIL-
LATIONS 
AND 
REQUIRE 
ESTIMATE 
REVI-
SIONS.
(a) UPDATE ADJUSTMENT FACTOR.—
(1) IN GENERAL.—Section 1848(d) (42 U.S.C.
1395w–4(d)) is amended—
(A) in paragraph (3)—
(i) in the heading, by inserting ‘‘FOR
1999 AND 2000’’ after ‘‘UPDATE’’;
(ii) in subparagraph (A), by striking
‘‘a year beginning with 1999’’ and insert-
ing ‘‘1999 and 2000’’; and
(iii) in subparagraph (C), by inserting
‘‘and paragraph (4)’’ after ‘‘For purposes
of this paragraph’’; and
(B) by adding at the end the following new
paragraph:
‘‘(4) UPDATE
FOR
YEARS
BEGINNING
WITH
2001.—
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‘‘(A) IN GENERAL.—Unless otherwise pro-
vided by law, subject to the budget-neutrality
factor determined by the Secretary under sub-
section (c)(2)(B)(ii) and subject to adjustment
under subparagraph (F), the update to the sin-
gle conversion factor established in paragraph
(1)(C) for a year beginning with 2001 is equal
to the product of—
‘‘(i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI (as de-
fined in section 1842(i)(3)) for the year
(divided by 100); and
‘‘(ii) 1 plus the Secretary’s estimate of
the update adjustment factor under sub-
paragraph (B) for the year.
‘‘(B) UPDATE ADJUSTMENT FACTOR.—For
purposes of subparagraph (A)(ii), subject to
subparagraph (D), the ‘update adjustment fac-
tor’ for a year is equal (as estimated by the
Secretary) to the sum of the following:
‘‘(i) PRIOR YEAR ADJUSTMENT COM-
PONENT.—An amount determined by—
‘‘(I) computing the difference
(which may be positive or negative)
between the amount of the allowed ex-
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penditures for physicians’ services for
the prior year (as determined under
subparagraph (C)) and the amount of
the actual expenditures for such serv-
ices for that year;
‘‘(II) dividing that difference by
the amount of the actual expenditures
for such services for that year; and
‘‘(III) multiplying that quotient
by 0.75.
‘‘(ii) CUMULATIVE ADJUSTMENT COM-
PONENT.—An amount determined by—
‘‘(I) computing the difference
(which may be positive or negative)
between the amount of the allowed ex-
penditures for physicians’ services (as
determined under subparagraph (C))
from April 1, 1996, through the end
of the prior year and the amount of
the actual expenditures for such serv-
ices during that period;
‘‘(II) dividing that difference by
actual expenditures for such services
for the prior year as increased by the
sustainable growth rate under sub-
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section (f) for the year for which the
update adjustment factor is to be de-
termined; and
‘‘(III) multiplying that quotient
by 0.33.
‘‘(C) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—For purposes of this paragraph:
‘‘(i) PERIOD UP TO APRIL 1, 1999.—
The allowed expenditures for physicians’
services for a period before April 1, 1999,
shall be the amount of the allowed expendi-
tures for such period as determined under
paragraph (3)(C).
‘‘(ii) TRANSITION TO CALENDAR YEAR
ALLOWED
EXPENDITURES.—Subject 
to
subparagraph (E), the allowed expendi-
tures for—
‘‘(I) the 9-month period begin-
ning April 1, 1999, shall be the Sec-
retary’s estimate of the amount of the
allowed expenditures that would be
permitted under paragraph (3)(C) for
such period; and
‘‘(II) the year of 1999, shall be
the 
Secretary’s 
estimate 
of 
the
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amount of the allowed expenditures
that would be permitted under para-
graph (3)(C) for such year.
‘‘(iii) YEARS BEGINNING WITH 2000.—
The allowed expenditures for a year (be-
ginning with 2000) is equal to the allowed
expenditures for physicians’ services for
the previous year, increased by the sustain-
able growth rate under subsection (f) for
the year involved.
‘‘(D) RESTRICTION ON UPDATE ADJUST-
MENT FACTOR.—The update adjustment factor
determined under subparagraph (B) for a year
may not be less than ¥0.07 or greater than
0.03.
‘‘(E) RECALCULATION
OF
ALLOWED
EX-
PENDITURES FOR UPDATES BEGINNING WITH
2001.—For purposes of determining the update
adjustment factor for a year beginning with
2001, the Secretary shall recompute the allowed
expenditures for previous periods beginning on
or after April 1, 1999, consistent with sub-
section (f)(3).
‘‘(F) TRANSITIONAL
ADJUSTMENT
DE-
SIGNED
TO
PROVIDE
FOR
BUDGET
NEU-
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TRALITY.—Under this subparagraph the Sec-
retary shall provide for an adjustment to the
update under subparagraph (A)—
‘‘(i) for each of 2001, 2002, 2003,
and 2004, of ¥0.2 percent; and
‘‘(ii) for 2005 of +0.8 percent.’’.
(2) PUBLICATION CHANGE.—
(A) IN GENERAL.—Section 1848(d)(1)(E)
(42 U.S.C. 1395w–4(d)(1)(E)) is amended to
read as follows:
‘‘(E) PUBLICATION
AND
DISSEMINATION
OF INFORMATION.—The Secretary shall—
‘‘(i) cause to have published in the
Federal Register not later than November
1 of each year (beginning with 2000) the
conversion factor which will apply to physi-
cians’ services for the succeeding year, the
update determined under paragraph (4)
for such succeeding year, and the allowed
expenditures under such paragraph for
such succeeding year; and
‘‘(ii) make available to the Medicare
Payment Advisory Commission and the
public by March 1 of each year (beginning
with 2000) an estimate of the sustainable
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growth rate and of the conversion factor
which will apply to physicians’ services for
the succeeding year and data used in mak-
ing such estimate.’’.
(B) MEDPAC REVIEW
OF
CONVERSION
FACTOR
ESTIMATES.—Section 1805(b)(1)(D)
(42 U.S.C. 1395b–6(b)(1)(D)) is amended by
inserting ‘‘and including a review of the esti-
mate of the conversion factor submitted under
section 1848(d)(1)(E)(ii)’’ before the period at
the end.
(C) ONE-TIME PUBLICATION OF INFORMA-
TION
ON
TRANSITION.—The 
Secretary 
of
Health and Human Services shall cause to have
published in the Federal Register, not later
than 90 days after the date of the enactment of
this section, the Secretary’s determination,
based upon the best available data, of—
(i) the allowed expenditures under
subclauses 
(I) 
and 
(II) 
of 
section
1848(d)(4)(C)(ii) of the Social Security
Act, as added by subsection (a)(1)(B), for
the 9-month period beginning on April 1,
1999, and for 1999;
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(ii) the estimated actual expenditures
described in section 1848(d) of such Act
for 1999; and
(iii) the sustainable growth rate under
section 1848(f) of such Act (42 U.S.C.
1395w–4(f)) for 2000.
(3) CONFORMING AMENDMENTS.—
(A) Section 1848 (42 U.S.C. 1395w–4) is
amended—
(i) in subsection (d)(1)(A), by insert-
ing ‘‘(for years before 2001) and, for years
beginning with 2001, multiplied by the up-
date (established under paragraph (4)) for
the year involved’’ after ‘‘for the year in-
volved’’; and
(ii) in subsection (f)(2)(D), by insert-
ing ‘‘or (d)(4)(B), as the case may be’’
after ‘‘(d)(3)(B)’’.
(B) 
Section 
1833(l)(4)(A)(i)(VII) 
(42
U.S.C. 1395l(l)(4)(A)(i)(VII)) is amended by
striking ‘‘1848(d)(3)’’ and inserting ‘‘1848(d)’’.
(b) SUSTAINABLE GROWTH RATES.—Section 1848(f)
(42 U.S.C. 1395w–4(f)) is amended—
(1) by amending paragraph (1) to read as fol-
lows:
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‘‘(1) PUBLICATION.—The Secretary shall cause
to have published in the Federal Register not later
than—
‘‘(A) November 1, 2000, the sustainable
growth rate for 2000 and 2001; and
‘‘(B) November 1 of each succeeding year
the sustainable growth rate for such succeeding
year and each of the preceding 2 years.’’;
(2) in paragraph (2)—
(A) in the matter before subparagraph (A),
by striking ‘‘fiscal year 1998)’’ and inserting
‘‘fiscal year 1998 and ending with fiscal year
2000) and a year beginning with 2000’’; and
(B) in subparagraphs (A) through (D), by
striking ‘‘fiscal year’’ and inserting ‘‘applicable
period’’ each place it appears;
(3) in paragraph (3), by adding at the end the
following new subparagraph:
‘‘(C) APPLICABLE PERIOD.—The term ‘ap-
plicable period’ means—
‘‘(i) a fiscal year, in the case of fiscal
year 1998, fiscal year 1999, and fiscal year
2000; or
‘‘(ii) a calendar year with respect to a
year beginning with 2000,
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as the case may be.’’;
(4) by redesignating paragraph (3) as para-
graph (4); and
(5) by inserting after paragraph (2) the fol-
lowing new paragraph:
‘‘(3) DATA TO BE USED.—For purposes of de-
termining the update adjustment factor under sub-
section (d)(4)(B) for a year beginning with 2001,
the sustainable growth rates taken into consideration
in the determination under paragraph (2) shall be
determined as follows:
‘‘(A) FOR 2001.—For purposes of such cal-
culations for 2001, the sustainable growth rates
for fiscal year 2000 and the years 2000 and
2001 shall be determined on the basis of the
best data available to the Secretary as of Sep-
tember 1, 2000.
‘‘(B) FOR 2002.—For purposes of such cal-
culations for 2002, the sustainable growth rates
for fiscal year 2000 and for years 2000, 2001,
and 2002 shall be determined on the basis of
the best data available to the Secretary as of
September 1, 2001.
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‘‘(C) FOR 2003 AND SUCCEEDING YEARS.—
For purposes of such calculations for a year
after 2002—
‘‘(i) the sustainable growth rates for
that year and the preceding 2 years shall
be determined on the basis of the best data
available to the Secretary as of September
1 of the year preceding the year for which
the calculation is made; and
‘‘(ii) the sustainable growth rate for
any year before a year described in clause
(i) shall be the rate as most recently deter-
mined for that year under this subsection.
Nothing in this paragraph shall be construed as af-
fecting the sustainable growth rates established for
fiscal year 1998 or fiscal year 1999.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall be effective in determining the conversion
factor under section 1848(d) of the Social Security Act
(42 U.S.C. 1395w–4(d)) for years beginning with 2001
and shall not apply to or affect any update (or any update
adjustment factor) for any year before 2001.
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SEC. 202. USE OF DATA COLLECTED BY ORGANIZATIONS
AND ENTITIES IN DETERMINING PRACTICE
EXPENSE RELATIVE VALUES.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall establish by regulation (after notice
and opportunity for public comment) a process (including
data collection standards) under which the Secretary will
accept for use and will use, to the maximum extent prac-
ticable consistent with sound data practices, data collected
or developed by entities and organizations (other than the
Department of Health and Human Services) to supple-
ment the data normally collected by that department in
determining the practice expense component under section
1848(c)(2)(C)(ii) of the Social Security Act (42 U.S.C.
1395w–4(c)(2)(C)(ii)) for purposes of determining relative
values for payment for physicians’ services under the fee
schedule under section 1848 of such Act (42 U.S.C.
1395w–4). The Secretary shall first promulgate such regu-
lation on an interim final basis in a manner that permits
the submission and use of data in the computation of prac-
tice expense relative value units for payment rates for
2001.
(b) PUBLICATION OF INFORMATION.—The Secretary
shall include, in the publication of the estimated and final
updates under section 1848(c) of such Act (42 U.S.C.
1395w–4(c)) for payments for 2001 and for 2002, a de-
HR 3075 RFS1S
scription of the process established under subsection (a)
for the use of external data in making adjustments in rel-
ative value units and the extent to which the Secretary
has used such external data in making such adjustments
for each such year, particularly in cases in which the data
otherwise used are inadequate because they are not based
upon a large enough sample size to be statistically reliable.
SEC. 203. GAO STUDY ON RESOURCES REQUIRED TO PRO-
VIDE SAFE AND EFFECTIVE OUTPATIENT
CANCER THERAPY.
(a) STUDY .—The Comptroller General of the United
States shall conduct a nationwide study to determine the
physician and non-physician clinical resources necessary to
provide safe outpatient cancer therapy services and the ap-
propriate payment rates for such services under the Medi-
care program. In making such determination, the Comp-
troller General shall—
(1) determine the adequacy of practice expense
relative value units associated with the utilization of
those clinical resources;
(2) determine the adequacy of work units in the
practice expense formula; and
(3) assess various standards to assure the pro-
vision of safe outpatient cancer therapy services.
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(b) REPORT TO CONGRESS.—The Comptroller Gen-
eral shall submit to Congress a report on the study con-
ducted under subsection (a). The report shall include rec-
ommendations regarding practice expense adjustments to
the payment methodology under part B of the Medicare
program, including the development and inclusion of ade-
quate work units to assure the adequacy of payment
amounts for safe outpatient cancer therapy services. The
study shall also include an estimate of the cost of imple-
menting such recommendations.
Subtitle B—Hospital Outpatient
Services
SEC. 211. OUTLIER ADJUSTMENT AND TRANSITIONAL PASS-
THROUGH FOR CERTAIN MEDICAL DEVICES,
DRUGS, AND BIOLOGICALS.
(a) OUTLIER ADJUSTMENT.—Section 1833(t) (42
U.S.C. 1395l(t)), as added by section 4523(a) of BBA,
is amended—
(1) by redesignating paragraphs (5) through
(9) as paragraphs (7) through (11), respectively;
and
(2) by inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) OUTLIER ADJUSTMENT.—
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‘‘(A) IN
GENERAL.—The Secretary shall
provide for an additional payment for each cov-
ered OPD service (or group of services) for
which a hospital’s charges, adjusted to cost,
exceed—
‘‘(i) a fixed multiple of the sum of—
‘‘(I) 
the 
applicable 
Medicare
OPD fee schedule amount determined
under paragraph (3)(D), as adjusted
under paragraph (4)(A) (other than
for adjustments under this paragraph
or paragraph (6)); and
‘‘(II) 
any 
transitional 
pass-
through payment under paragraph
(6); and
‘‘(ii) at the option of the Secretary,
such fixed dollar amount as the Secretary
may establish.
‘‘(B) AMOUNT
OF
ADJUSTMENT.—The
amount of the additional payment under sub-
paragraph (A) shall be determined by the Sec-
retary and shall approximate the marginal cost
of care beyond the applicable cutoff point under
such subparagraph.
HR 3075 RFS1S
‘‘(C) LIMIT ON AGGREGATE OUTLIER AD-
JUSTMENTS.—
‘‘(i) IN GENERAL.—The total of the
additional payments made under this para-
graph for covered OPD services furnished
in a year (as projected or estimated by the
Secretary before the beginning of the year)
may not exceed the applicable percentage
(specified in clause (ii)) of the total pro-
gram payments projected or estimated to
be made under this subsection for all cov-
ered OPD services furnished in that year.
If this paragraph is first applied to less
than a full year, the previous sentence
shall apply only to the portion of such
year.
‘‘(ii) APPLICABLE PERCENTAGE.—For
purposes of clause (i), the term ‘applicable
percentage’ means a percentage specified
by the Secretary up to (but not to ex-
ceed)—
‘‘(I) for a year (or portion of a
year) before 2004, 2.5 percent; and
‘‘(II) for 2004 and thereafter,
3.0 percent.’’.
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(b) TRANSITIONAL PASS-THROUGH FOR ADDITIONAL
COSTS OF INNOVATIVE MEDICAL DEVICES, DRUGS, AND
BIOLOGICALS.—Such section is further amended by in-
serting after paragraph (5) the following new paragraph:
‘‘(6) TRANSITIONAL PASS-THROUGH FOR ADDI-
TIONAL COSTS OF INNOVATIVE MEDICAL DEVICES,
DRUGS, AND BIOLOGICALS.—
‘‘(A) IN
GENERAL.—The Secretary shall
provide for an additional payment under this
paragraph for any of the following that are pro-
vided as part of a covered OPD service (or
group of services):
‘‘(i) CURRENT
ORPHAN
DRUGS.—A
drug or biological that is used for a rare
disease or condition with respect to which
the drug or biological has been designated
as an orphan drug under section 526 of
the Federal Food, Drug and Cosmetic Act
if payment for the drug or biological as an
outpatient hospital service under this part
was being made on the first date that the
system under this subsection is imple-
mented.
‘‘(ii) CURRENT
CANCER
THERAPY
DRUGS AND BIOLOGICALS.—A drug or bio-