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requirement, a skilled nursing facility may submit
the resident assessment data required under section
1819(b)(3), using the standard instrument designated
by the State under section 1819(e)(5).
‘‘(7) TRANSITION
FOR
MEDICARE
SWING
BED
HOSPITALS.—
‘‘(A) IN GENERAL.—The Secretary shall de-
termine an appropriate manner in which to
apply this subsection to the facilities described in
subparagraph (B), taking into account the pur-
poses of this subsection, and shall provide that at
the end of the transition period (as defined in
paragraph (2)(E)) such facilities shall be paid
only under this subsection. Payment shall not be
made under this subsection to such facilities for
cost reporting periods beginning before such date
(not earlier than July 1, 1999) as the Secretary
specifies.
‘‘(B) FACILITIES
DESCRIBED.—The facili-
ties described in this subparagraph are facilities
that have in effect an agreement described in sec-
tion 1883, for which payment is made for the
furnishing of extended care services on a reason-
able cost basis under section 1814(l) (as in effect
on and after such date).
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‘‘(8) LIMITATION ON REVIEW.—There shall be no
administrative or judicial review under section 1869,
1878, or otherwise of—
‘‘(A) the establishment of Federal per diem
rates under paragraph (4), including the com-
putation of the standardized per diem rates
under paragraph (4)(C), adjustments and correc-
tions for case mix under paragraphs (4)(F) and
(4)(G)(i), and adjustments for variations in
labor-related costs under paragraph (4)(G)(ii);
and
‘‘(B) the establishment of transitional
amounts under paragraph (7).’’.
(b) CONSOLIDATED BILLING.—
(1) FOR
SNF
SERVICES.—Section 1862(a) (42
U.S.C. 1395y(a)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (15),
(B) by striking the period at the end of
paragraph (16) and inserting ‘‘; or’’, and
(C) by inserting after paragraph (16) the
following new paragraph:
‘‘(17) which are covered skilled nursing facility
services described in section 1888(e)(2)(A)(i)(II) and
which are furnished to an individual who is a resi-
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dent of a skilled nursing facility by an entity other
than the skilled nursing facility, unless the services
are furnished under arrangements (as defined in sec-
tion 1861(w)(1)) with the entity made by the skilled
nursing facility, or such services are furnished by a
physician described in section 1861(r)(1).’’.
(2) REQUIRING PAYMENT FOR ALL PART B ITEMS
AND SERVICES TO BE MADE TO FACILITY.—The first
sentence of section 1842(b)(6) (42 U.S.C. 1395u(b)(6))
is amended—
(A) by striking ‘‘and (D)’’ and inserting
‘‘(D)’’; and
(B) by striking the period at the end and
inserting the following: ‘‘, and (E) in the case of
an item or service (other than services described
in section 1888(e)(2)(A)(ii)) furnished to an in-
dividual who (at the time the item or service is
furnished) is a resident of a skilled nursing facil-
ity, payment shall be made to the facility (with-
out regard to whether or not the item or service
was furnished by the facility, by others under ar-
rangement with them made by the facility, under
any other contracting or consulting arrange-
ment, or otherwise).’’.
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(3) PAYMENT
RULES.—Section 1888(e) (42
U.S.C. 1395yy(e)), as added by subsection (a), is
amended by adding at the end the following:
‘‘(9) PAYMENT FOR CERTAIN SERVICES.—
‘‘(A) IN GENERAL.—In the case of an item
or service furnished by a skilled nursing facility
(or by others under arrangement with them
made by a skilled nursing facility or under any
other contracting or consulting arrangement or
otherwise) for which payment would otherwise
(but for this paragraph) be made under part B
in an amount determined in accordance with
section 1833(a)(2)(B), the amount of the pay-
ment under such part shall be based on the part
B methodology applicable to the item or service,
except that for items and services that would be
included in a facility’s cost report if not for this
section, the facility may continue to use a cost
report for reimbursement purposes until the pro-
spective payment system established under this
section is implemented.
‘‘(B) THERAPY
AND
PATHOLOGY
SERV-
ICES.—Payment for physical therapy, occupa-
tional therapy, respiratory therapy, and speech
language pathology services shall reflect new sal-
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ary equivalency guidelines calculated pursuant
to section 1861(v)(5) when finalized through the
regulatory process.
‘‘(10) REQUIRED CODING.—No payment may be
made under part B for items and services (other than
services described in paragraph (2)(A)(ii)) furnished
to an individual who is a resident of a skilled nurs-
ing facility unless the claim for such payment in-
cludes a code (or codes) under a uniform coding sys-
tem specified by the Secretary that identifies the
items or services delivered.’’.
(4) CONFORMING AMENDMENTS.—
(A) Section 1819(b)(3)(C)(i) (42 U.S.C.
1395i–3(b)(3)(C)(i)) is amended by striking
‘‘Such’’ and inserting ‘‘Subject to the timeframes
prescribed by the Secretary under section
1888(t)(6), such’’.
(B) 
Section 
1832(a)(1) 
(42 
U.S.C.
1395k(a)(1)) is amended by striking ‘‘(2);’’ and
inserting ‘‘(2) and section 1842(b)(6)(E);’’.
(C) Section 1833(a)(2)(B) (42 U.S.C.
1395l(a)(2)(B)) is amended by inserting ‘‘or sec-
tion 1888(e)(9)’’ after ‘‘section 1886’’.
(D) Section 1861(h) (42 U.S.C 1395x(h)) is
amended—
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(i) in the opening paragraph, by strik-
ing ‘‘paragraphs (3) and (6)’’ and inserting
‘‘paragraphs (3), (6), and (7)’’, and
(ii) in paragraph (7), after ‘‘skilled
nursing facilities’’, by inserting ‘‘, or by
others under arrangements with them made
by the facility’’.
(E) Section 1866(a)(1)(H) (42 U.S.C.
1395cc(a)(1)(H)) is amended—
(i) by redesignating clauses (i) and (ii)
as subclauses (I) and (II) respectively,
(ii) by inserting ‘‘(i)’’ after ‘‘(H)’’, and
(iii) by adding after clause (i), as so
redesignated, the following new clause:
‘‘(ii) in the case of skilled nursing facilities
which provide covered skilled nursing facility serv-
ices—
‘‘(I) that are furnished to an individual
who is a resident of the skilled nursing facility,
and
‘‘(II) for which the individual is entitled to
have payment made under this title,
to have items and services (other than services de-
scribed in section 1888(e)(2)(A)(ii)) furnished by the
skilled nursing facility or otherwise under arrange-
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Subchapter B—Home Health Services and
Benefits
PART I—PAYMENTS FOR HOME HEALTH
SERVICES
SEC. 5341. RECAPTURING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR HOME HEALTH SERVICES.
(a) BASING UPDATES TO PER VISIT COST LIMITS ON
LIMITS FOR FISCAL YEAR 1993.—Section 1861(v)(1)(L)
(42 U.S.C. 1395x(v)(1)(L)) is amended by adding at the
end the following:
‘‘(iv) In establishing limits under this subparagraph
for cost reporting periods beginning after September 30,
1997, the Secretary shall not take into account any changes
in the home health market basket, as determined by the Sec-
retary, with respect to cost reporting periods which began
on or after July 1, 1994, and before July 1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMEND-
MENT.—The Secretary of Health and Human Services shall
not consider the amendment made by subsection (a) in mak-
ing any exemptions and exceptions pursuant to section
1861(v)(1)(L)(ii) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(ii)).
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SEC. 5342. INTERIM PAYMENTS FOR HOME HEALTH SERV-
ICES.
(a) 
REDUCTIONS
IN
COST
LIMITS.—Section
1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amend-
ed—
(1) by moving the indentation of subclauses (I)
through (III) 2-ems to the left;
(2) in subclause (I), by inserting ‘‘of the mean
of the labor-related and nonlabor per visit costs for
freestanding home health agencies’’ before the comma
at the end;
(3) in subclause (II), by striking ‘‘, or’’ and in-
serting ‘‘of such mean,’’;
(4) in subclause (III)—
(A) by inserting ‘‘and before October 1,
1997,’’ after ‘‘July 1, 1987’’, and
(B) by striking the period at the end and
inserting ‘‘of such mean, or’’; and
(5) by striking the matter following subclause
(III) and inserting the following:
‘‘(IV) October 1, 1997, 105 percent of the median
of the labor-related and nonlabor per visit costs for
freestanding home health agencies.’’.
(b) DELAY IN UPDATES.—Section 1861(v)(1)(L)(iii)
(42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by inserting ‘‘,
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or on or after July 1, 1997, and before October 1, 1997’’
after ‘‘July 1, 1996’’.
(c) 
ADDITIONS
TO
COST
LIMITS.—Section
1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)), as amended by
section 5341(a), is amended by adding at the end the follow-
ing:
‘‘(v) For services furnished by home health agencies for
cost reporting periods beginning on or after October 1,
1997, the Secretary shall provide for an interim system of
limits. Payment shall be the lower of—
‘‘(I) costs determined under the preceding provi-
sions of this subparagraph, or
‘‘(II) an agency-specific per beneficiary annual
limitation calculated from the agency’s 12-month cost
reporting period ending on or after January 1, 1994,
and on or before December 31, 1994, based on reason-
able costs (including nonroutine medical supplies),
updated by the home health market basket index.
The per beneficiary limitation in subclause (II) shall be
multiplied by the agency’s unduplicated census count of pa-
tients (entitled to benefits under this title) for the cost re-
porting period subject to the limitation to determine the ag-
gregate agency-specific per beneficiary limitation.
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‘‘(vi) For services furnished by home health agencies
for cost reporting periods beginning on or after October 1,
1997, the following rules apply:
‘‘(I) For new providers and those providers with-
out a 12-month cost reporting period ending in cal-
endar year 1994, the per beneficiary limitation shall
be equal to the median of these limits (or the Sec-
retary’s best estimates thereof) applied to other home
health agencies as determined by the Secretary. A
home health agency that has altered its corporate
structure or name shall not be considered a new pro-
vider for this purpose.
‘‘(II) For beneficiaries who use services furnished
by more than one home health agency, the per bene-
ficiary limitations shall be prorated among the agen-
cies.’’.
(d) DEVELOPMENT OF CASE MIX SYSTEM.—The Sec-
retary of Health and Human Services shall expand research
on a prospective payment system for home health agencies
under the medicare program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.) that ties prospective
payments to a unit of service, including an intensive effort
to develop a reliable case mix adjuster that explains a sig-
nificant amount of the variances in costs.
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(e) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—
Effective for cost reporting periods beginning on or after
October 1, 1997, the Secretary of Health and Human Serv-
ices may require all home health agencies to submit addi-
tional information that the Secretary considers necessary
for the development of a reliable case mix system.
SEC. 5343. PROSPECTIVE PAYMENT FOR HOME HEALTH
SERVICES.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 5011, is amended by adding
at the end the following new section:
‘‘PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES
‘‘SEC. 1895. (a) IN GENERAL.—Notwithstanding sec-
tion 1861(v), the Secretary shall provide, for cost reporting
periods beginning on or after October 1, 1999, for payments
for home health services in accordance with a prospective
payment system established by the Secretary under this sec-
tion.
‘‘(b) SYSTEM OF PROSPECTIVE PAYMENT FOR HOME
HEALTH SERVICES.—
‘‘(1) IN GENERAL.—The Secretary shall establish
under this subsection a prospective payment system
for payment for all costs of home health services.
Under the system under this subsection all services
covered and paid on a reasonable cost basis under the
medicare home health benefit as of the date of the en-
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actment of the this section, including medical sup-
plies, shall be paid for on the basis of a prospective
payment amount determined under this subsection
and applicable to the services involved. In implement-
ing the system, the Secretary may provide for a tran-
sition (of not longer than 4 years) during which a
portion of such payment is based on agency-specific
costs, but only if such transition does not result in ag-
gregate payments under this title that exceed the ag-
gregate payments that would be made if such a tran-
sition did not occur.
‘‘(2) UNIT OF PAYMENT.—In defining a prospec-
tive payment amount under the system under this
subsection, the Secretary shall consider an appro-
priate unit of service and the number, type, and du-
ration of visits provided within that unit, potential
changes in the mix of services provided within that
unit and their cost, and a general system design that
provides for continued access to quality services.
‘‘(3) PAYMENT BASIS.—
‘‘(A) INITIAL BASIS.—
‘‘(i) IN GENERAL.—Under such system
the Secretary shall provide for computation
of a standard prospective payment amount
(or amounts). Such amount (or amounts)
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shall initially be based on the most current
audited cost report data available to the
Secretary and shall be computed in a man-
ner so that the total amounts payable under
the system for fiscal year 2000 shall be
equal to the total amount that would have
been made if the system had not been in ef-
fect but if the reduction in limits described
in clause (ii) had been in effect. Such
amount shall be standardized in a manner
that eliminates the effect of variations in
relative case mix and wage levels among
different home health agencies in a budget
neutral manner consistent with the case
mix and wage level adjustments provided
under paragraph (4)(A). Under the system,
the Secretary may recognize regional dif-
ferences or differences based upon whether
or not the services or agency are in an ur-
banized area.
‘‘(ii) REDUCTION.—The reduction de-
scribed in this clause is a reduction by 15
percent in the cost limits and per bene-
ficiary 
limits 
described 
in 
section
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1861(v)(1)(L), as those limits are in effect
on September 30, 1999.
‘‘(B) ANNUAL UPDATE.—
‘‘(i) IN GENERAL.—The standard pro-
spective payment amount (or amounts)
shall be adjusted for each fiscal year (begin-
ning with fiscal year 2001) in a prospective
manner specified by the Secretary by the
home health market basket percentage in-
crease applicable to the fiscal year involved.
‘‘(ii) HOME HEALTH MARKET BASKET
PERCENTAGE
INCREASE.—For purposes of
this subsection, the term ‘home health mar-
ket basket percentage increase’ means, with
respect to a fiscal year, a percentage (esti-
mated by the Secretary before the beginning
of the fiscal year) determined and applied
with respect to the mix of goods and services
included in home health services in the
same manner as the market basket percent-
age 
increase 
under 
section
1886(b)(3)(B)(iii) is determined and ap-
plied to the mix of goods and services com-
prising inpatient hospital services for the
fiscal year.
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‘‘(C) ADJUSTMENT
FOR
OUTLIERS.—The
Secretary shall reduce the standard prospective
payment amount (or amounts) under this para-
graph applicable to home health services fur-
nished during a period by such proportion as
will result in an aggregate reduction in pay-
ments for the period equal to the aggregate in-
crease in payments resulting from the applica-
tion of paragraph (5) (relating to outliers).
‘‘(4) PAYMENT COMPUTATION.—
‘‘(A) IN GENERAL.—The payment amount
for a unit of home health services shall be the ap-
plicable standard prospective payment amount
adjusted as follows:
‘‘(i) CASE
MIX
ADJUSTMENT.—The
amount shall be adjusted by an appropriate
case mix adjustment factor (established
under subparagraph (B)).
‘‘(ii) AREA WAGE ADJUSTMENT.—The
portion of such amount that the Secretary
estimates to be attributable to wages and
wage-related costs shall be adjusted for geo-
graphic differences in such costs by an area
wage adjustment factor (established under
subparagraph (C)) for the area in which the
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services are furnished or such other area as
the Secretary may specify.
‘‘(B) ESTABLISHMENT
OF
CASE
MIX
AD-
JUSTMENT FACTORS.—The Secretary shall estab-
lish appropriate case mix adjustment factors for
home health services in a manner that explains
a significant amount of the variation in cost
among different units of services.
‘‘(C) ESTABLISHMENT OF AREA WAGE AD-
JUSTMENT FACTORS.—The Secretary shall estab-
lish area wage adjustment factors that reflect the
relative level of wages and wage-related costs ap-
plicable to the furnishing of home health services
in a geographic area compared to the national
average applicable level. Such factors may be the
factors used by the Secretary for purposes of sec-
tion 1886(d)(3)(E).
‘‘(5) OUTLIERS.—The Secretary may provide for
an addition or adjustment to the payment amount
otherwise made in the case of outliers because of un-
usual variations in the type or amount of medically
necessary care. The total amount of the additional
payments or payment adjustments made under this
paragraph with respect to a fiscal year may not ex-
ceed 5 percent of the total payments projected or esti-
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mated to be made based on the prospective payment
system under this subsection in that year.
‘‘(6) PRORATION
OF
PROSPECTIVE
PAYMENT
AMOUNTS.—If a beneficiary elects to transfer to, or
receive services from, another home health agency
within the period covered by the prospective payment
amount, the payment shall be prorated between the
home health agencies involved.
‘‘(c) REQUIREMENTS FOR PAYMENT INFORMATION.—
With respect to home health services furnished on or after
October 1, 1998, no claim for such a service may be paid
under this title unless—
‘‘(1) the claim has the unique identifier for the
physician who prescribed the services or made the cer-
tification 
described 
in 
section 
1814(a)(2) 
or
1835(a)(2)(A); and
‘‘(2) in the case of a service visit described in
paragraph (1), (2), (3), or (4) of section 1861(m), the
claim has information (coded in an appropriate
manner) on the length of time of the service visit, as
measured in 15 minute increments.
‘‘(d) LIMITATION ON REVIEW.—There shall be no ad-
ministrative or judicial review under section 1869, 1878,
or otherwise of—
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‘‘(1) the establishment of a transition period
under subsection (b)(1);
‘‘(2) the definition and application of payment
units under subsection (b)(2);
‘‘(3) the computation of initial standard pro-
spective payment amounts under subsection (b)(3)(A)
(including the reduction described in clause (ii) of
such subsection);
‘‘(4) the adjustment for outliers under subsection
(b)(3)(C);
‘‘(5) case mix and area wage adjustments under
subsection (b)(4);
‘‘(6) any adjustments for outliers under sub-
section (b)(5); and
‘‘(7) the amounts or types of exceptions or ad-
justments under subsection (b)(7).’’.
(b) ELIMINATION OF PERIODIC INTERIM PAYMENTS
FOR HOME HEALTH AGENCIES.—Section 1815(e)(2) (42
U.S.C. 1395g(e)(2)) is amended—
(1) by inserting ‘‘and’’ at the end of subpara-
graph (C),
(2) by striking subparagraph (D), and
(3) by redesignating subparagraph (E) as sub-
paragraph (D).
(c) CONFORMING AMENDMENTS.—