I
106TH CONGRESS
1ST SESSION
H. R. 3426
To amend titles XVIII, XIX, and XXI of the Social Security Act to make
corrections and refinements in the Medicare, Medicaid, and State chil-
dren’s health insurance programs, as revised by the Balanced Budget
Act of 1997.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 17, 1999
Mr. THOMAS introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Com-
merce, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
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,
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
Act an amendment is expressed in terms of an amendment
to or repeal of a section or other provision, the reference
shall be considered to be made to that section or other
provision of the Social Security Act.
(c) REFERENCES TO THE BALANCED BUDGET ACT
OF 1997.—In this Act, the term ‘‘BBA’’ means the Bal-
anced 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—Adjustments to PPS Payments for Skilled Nursing Facilities
Sec. 101. Temporary increase in payment for certain high cost patients.
Sec. 102. Authorizing facilities to elect immediate transition to Federal rate.
Sec. 103. Part A pass-through payment for certain ambulance services, pros-
theses, and chemotherapy drugs.
Sec. 104. Provision for part B add-ons for facilities participating in the
NHCMQ demonstration project.
Sec. 105. Special consideration for facilities serving specialized patient popu-
lations.
Sec. 106. MedPAC study on special payment for facilities located in Hawaii
and Alaska.
Sec. 107. Study and report regarding State licensure and certification stand-
ards and respiratory therapy competency examinations.
Subtitle B—PPS Hospitals
Sec. 111. Modification in transition for indirect medical education (IME) per-
centage adjustment.
Sec. 112. Decrease in reductions for disproportionate share hospitals; data col-
lection requirements.
Subtitle C—PPS-Exempt Hospitals
Sec. 121. Wage adjustment of percentile cap for PPS-exempt hospitals.
Sec. 122. Enhanced payments for long-term care and psychiatric hospitals until
development of prospective payment systems for those hos-
pitals.
Sec. 123. Per discharge prospective payment system for long-term care hos-
pitals.
Sec. 124. Per diem prospective payment system for psychiatric hospitals.
Sec. 125. Refinement of prospective payment system for inpatient rehabilitation
services.
Subtitle D—Hospice Care
Sec. 131. Temporary increase in payment for hospice care.
Sec. 132. Study and report to Congress regarding modification of the payment
rates for hospice care.
Subtitle E—Other Provisions
Sec. 141. MedPAC study on medicare payment for nonphysician health profes-
sional clinical training in hospitals.
Subtitle F—Transitional Provisions
Sec. 151. Exception to CMI qualifier for one year.
Sec. 152. Reclassification of certain counties and other areas for purposes of
reimbursement under the medicare program.
Sec. 153. Wage index correction.
Sec. 154. Calculation and application of wage index floor for a certain area.
Sec. 155. Special rule for certain skilled nursing facilities.
TITLE II—PROVISIONS RELATING TO PART B
Subtitle A—Hospital Outpatient Services
Sec. 201. Outlier adjustment and transitional pass-through for certain medical
devices, drugs, and biologicals.
Sec. 202. Establishing a transitional corridor for application of OPD PPS.
Sec. 203. Study and report to Congress regarding the special treatment of rural
and cancer hospitals in prospective payment system for hos-
pital outpatient department services.
Sec. 204. Limitation on outpatient hospital copayment for a procedure to the
hospital deductible amount.
Subtitle B—Physician Services
Sec. 211. Modification of update adjustment factor provisions to reduce update
oscillations and require estimate revisions.
Sec. 212. Use of data collected by organizations and entities in determining
practice expense relative values.
Sec. 213. GAO study on resources required to provide safe and effective out-
patient cancer therapy.
Subtitle C—Other Services
Sec. 221. Revision of provisions relating to therapy services.
Sec. 222. Update in renal dialysis composite rate.
Sec. 223. Implementation of the inherent reasonableness (IR) authority.
Sec. 224. Increase in reimbursement for pap smears.
Sec. 225. Refinement of ambulance services demonstration project.
Sec. 226. Phase-in of PPS for ambulatory surgical centers.
Sec. 227. Extension of medicare benefits for immunosuppressive drugs.
Sec. 228. Temporary increase in payment rates for durable medical equipment
and oxygen.
Sec. 229. Studies and reports.
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; GAO report on costs of compliance with
OASIS data collection requirements.
Sec. 302. Delay in application of 15 percent reduction in payment rates for
home health services until one year after implementation of
prospective payment system.
Sec. 303. Increase in per beneficiary limits.
Sec. 304. Clarification of surety bond requirements.
Sec. 305. Refinement of home health agency consolidated billing.
Sec. 306. Technical amendment clarifying applicable market basket increase for
PPS.
Sec. 307. Study and report to Congress regarding the exemption of rural agen-
cies and populations from inclusion in the home health prospec-
tive payment system.
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—Technical Corrections
Sec. 321. BBA technical corrections.
TITLE IV—RURAL PROVIDER PROVISIONS
Subtitle A—Rural Hospitals
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. 5-year extension of medicare dependent hospital (MDH) program.
Sec. 405. Rebasing for certain sole community hospitals.
Sec. 406. One year sole community hospital payment increase.
Sec. 407. Increased flexibility in providing graduate physician training in rural
and other areas.
Sec. 408. Elimination of certain restrictions with respect to hospital swing bed
program.
Sec. 409. Grant program for rural hospital transition to prospective payment.
Sec. 410. GAO study on geographic reclassification.
Subtitle B—Other Rural Provisions
Sec. 411. MedPAC study of rural providers.
Sec. 412. Expansion of access to paramedic intercept services in rural areas.
Sec. 413. Promoting prompt implementation of informatics, telemedicine, and
education demonstration project.
TITLE 
V—PROVISIONS 
RELATING 
TO 
PART 
C
(MEDICARE+CHOICE PROGRAM) AND OTHER MEDICARE MAN-
AGED CARE PROVISIONS
Subtitle A—Provisions To Accommodate and Protect Medicare Beneficiaries
Sec. 501. Changes in Medicare+Choice enrollment rules.
Sec. 502. Change in effective date of elections and changes of elections of
Medicare+Choice plans.
Sec. 503. 2-year extension of medicare cost contracts.
Subtitle B—Provisions To Facilitate Implementation of the Medicare+Choice
Program
Sec. 511. Phase-in of new risk adjustment methodology; studies and reports on
risk adjustment.
Sec. 512. Encouraging offering of Medicare+Choice plans in areas without
plans.
Sec. 513. Modification of 5-year re-entry rule for contract terminations.
Sec. 514. Continued computation and publication of medicare original fee-for-
service expenditures on a county-specific basis.
Sec. 515. Flexibility to tailor benefits under Medicare+Choice plans.
Sec. 516. Delay in deadline for submission of adjusted community rates.
Sec. 517. Reduction in adjustment in national per capita Medicare+Choice
growth percentage for 2002.
Sec. 518. Deeming of Medicare+Choice organization to meet requirements.
Sec. 519. Timing of Medicare+Choice health information fairs.
Sec. 520. Quality assurance requirements for preferred provider organization
plans.
Sec. 521. Clarification of nonapplicability of certain provisions of discharge
planning process to Medicare+Choice plans.
Sec. 522. User fee for Medicare+Choice organizations based on number of en-
rolled beneficiaries.
Sec. 523. Clarification regarding the ability of a religious fraternal benefit soci-
ety to operate any Medicare+Choice plan.
Sec. 524. Rules regarding physician referrals for Medicare+Choice program.
Subtitle C—Demonstration Projects and Special Medicare Populations
Sec. 531. Extension of social health maintenance organization demonstration
(SHMO) project authority.
Sec. 532. Extension of medicare community nursing organization demonstra-
tion project.
Sec. 533. Medicare+Choice competitive bidding demonstration project.
Sec. 534. Extension of medicare municipal health services demonstration
projects.
Sec. 535. Medicare coordinated care demonstration project.
Sec. 536. Medigap protections for PACE program enrollees.
Subtitle D—Medicare+Choice Nursing and Allied Health Professional
Education Payments
Sec. 541. Medicare+Choice nursing and allied health professional education
payments.
Subtitle E—Studies and Reports
Sec. 551. Report on accounting for VA and DOD expenditures for medicare
beneficiaries.
Sec. 552. Medicare Payment Advisory Commission studies and reports.
Sec. 553. GAO studies, audits, and reports.
TITLE VI—MEDICAID
Sec. 601. Increase in DSH allotment for certain States and the District of Co-
lumbia.
Sec. 602. Removal of fiscal year limitation on certain transitional administra-
tive costs assistance.
Sec. 603. Modification of the phase-out of payment for Federally-qualified
health center services and rural health clinic services based on
reasonable costs.
Sec. 604. Parity in reimbursement for certain utilization and quality control
services; elimination of duplicative requirements for external
quality review of medicaid managed care organizations.
Sec. 605. Inapplicability of enhanced match under the State children’s health
insurance program to medicaid DSH payments.
Sec. 606. Optional deferment of the effective date for outpatient drug agree-
ments.
Sec. 607. Making medicaid DSH transition rule permanent.
Sec. 608. Medicaid technical corrections.
TITLE VII—STATE CHILDREN’S HEALTH INSURANCE PROGRAM
(SCHIP)
Sec. 701. Stabilizing the State children’s health insurance program allotment
formula.
Sec. 702. Increased allotments for territories under the State children’s health
insurance program.
Sec. 703. Improved data collection and evaluations of the State children’s
health insurance program.
Sec. 704. References to SCHIP and State children’s health insurance program.
Sec. 705. SCHIP technical corrections.
TITLE I—PROVISIONS RELATING
TO PART A
Subtitle A—Adjustments to PPS
Payments for Skilled Nursing
Facilities
SEC. 101. 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)) for such services furnished on or after
April 1, 2000, and before the date described in subsection
(c), the Secretary of Health and Human Services shall in-
crease by 20 percent the adjusted Federal per diem rate
otherwise determined under paragraph (4) of such section
(but for this section) for covered skilled nursing facility
services for RUG–III groups described in subsection (b)
furnished to an individual during 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, CA1, RHC, RMC, and RMB 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).
(c) DATE DESCRIBED.—For purposes of subsection
(a), the date described in this subsection is the later of—
(1) October 1, 2000; or
(2) the date on which the Secretary implements
a refined case mix classification system under sec-
tion 1888(e)(4)(G)(i) of the Social Security Act (42
U.S.C. 1395yy(e)(4)(G)(i)) to better account for
medically complex patients.
(d) INCREASE FOR FISCAL YEARS 2001 AND 2002.—
(1) IN GENERAL.—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)) for covered
skilled nursing facility services furnished during fis-
cal years 2001 and 2002, the Secretary of Health
and Human Services shall increase by 4.0 percent
for each such fiscal year the adjusted Federal per
diem rate otherwise determined under paragraph (4)
of such section (but for this section).
(2) ADDITIONAL
PAYMENT
NOT
BUILT
INTO
THE BASE.—The Secretary of Health and Human
Services shall not include any additional payment
made under this subsection in updating the Federal
per diem rate under section 1888(e)(4) of that Act
(42 U.S.C. 1395yy(e)(4)).
SEC. 102. AUTHORIZING FACILITIES TO ELECT IMMEDIATE
TRANSITION TO FEDERAL RATE.
(a) IN
GENERAL.—Section 1888(e) (42 U.S.C.
1395yy(e)) 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 no earlier
than 30 days before the date of such election deter-
mined pursuant to paragraph (1)(B).’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to elections made on or after
December 15, 1999, except that no election shall be effec-
tive under such amendments for a cost reporting period
beginning before January 1, 2000.
SEC. 103. 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)) 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 AND SERVICES.—Items and
services described in this clause are the fol-
lowing:
‘‘(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;
J9170–J9185; J9200–J9201; J9206–
J9208; J9211; J9230–J9245; and
J9265–J9600 (and as subsequently
modified by the Secretary)) and any
additional chemotherapy items identi-
fied 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)) and any additional chemo-
therapy administration services identi-
fied by the Secretary.
‘‘(IV) 
Radioisotope 
services
(identified as of July 1, 1999, by
HCPCS codes 79030–79440 (and as
subsequently modified by the Sec-
retary)) and any additional radioiso-
tope services identified by the Sec-
retary.
‘‘(V) Customized prosthetic de-
vices (commonly known as artificial
limbs or components of artificial
limbs) under the following HCPCS
codes (as of July 1, 1999 (and as sub-
sequently modified by the Secretary)),
and any additional customized pros-
thetic devices identified by the Sec-
retary, if delivered to an inpatient for
use during the stay in the skilled
nursing facility and intended to be
used by the individual after discharge
from 
the 
facility: 
L5050–L5340;
L5500–L5611; 
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.—
(1) IN GENERAL.—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
AND
SERVICES.—The Secretary shall provide
for an appropriate proportional reduction
in payments so that beginning with fiscal
year 2001, the aggregate amount of such
reductions is equal to the aggregate in-
crease in payments attributable to the ex-
clusion effected under clause (iii) of para-
graph (2)(A).’’.
(2) 
CONFORMING
AMENDMENT.—Section
1888(e)(8)(A) 
(42 
U.S.C. 
1395yy(e)(8)(A)) 
is
amended by striking ‘‘and adjustments for variations
in labor-related costs under paragraph (4)(G)(ii)’’
and inserting ‘‘adjustments for variations in labor-
related costs under paragraph (4)(G)(ii), and adjust-
ments under paragraph (4)(G)(iii)’’.
(c) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to payments made for items and
services furnished on or after April 1, 2000.
SEC. 104. 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)) 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
(2) by striking subparagraph (B) and inserting
the following new subparagraph:
‘‘(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 1.0 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. 105. 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 102(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
(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-
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 the first cost reporting period of the facility
begins after the date of the enactment of this Act 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.—Not later than March
1, 2001, the Secretary of Health and Human Services
shall assess the resource use of patients of skilled nursing
facilities furnishing services under the medicare program
who are immuno-compromised secondary to an infectious
disease, with specific diagnoses as specified by the Sec-
retary (under paragraph (12)(C), as added by subsection
(a), of section 1888(e) of the Social Security Act (42
U.S.C. 1395yy(e))) to determine whether any permanent
adjustments are needed to the RUGs to take into account
the resource uses and costs of these patients.
SEC. 106. 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 of 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.—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).
SEC. 107. STUDY AND REPORT REGARDING STATE LICEN-
SURE AND CERTIFICATION STANDARDS AND
RESPIRATORY THERAPY COMPETENCY EX-
AMINATIONS.
(a) STUDY.—The Secretary of Health and Human
Services shall conduct a study that—
(1) identifies variations in State licensure and
certification standards for health care providers (in-
cluding nursing and allied health professionals) and
other individuals providing respiratory therapy in
skilled nursing facilities;
(2) examines State requirements relating to res-
piratory therapy competency examinations for such
providers and individuals; and
(3) determines whether regular respiratory
therapy competency examinations or certifications
should be required under the medicare program
under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) for such providers and individ-
uals.
(b) REPORT.—Not later than 18 months after the
date of enactment of this Act, the Secretary of Health and
Human Services shall submit to Congress a report on the
results of the study conducted under this section, together
with any recommendations for legislation that the Sec-
retary determines to be appropriate as a result of such
study.
Subtitle B—PPS Hospitals
SEC. 111. MODIFICATION 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)) is amended—
(1) in subclause (IV), by striking ‘‘and’’ at the
end;
(2) by redesignating subclause (V) as subclause
(VI);
(3) by inserting after subclause (IV) the fol-
lowing new subclause:
‘‘(V) during fiscal year 2001, ‘c’ is
equal to 1.54; and’’; and
(4) in subclause (VI), as so redesignated, by
striking ‘‘2000’’ and inserting ‘‘2001’’.
(b) SPECIAL PAYMENTS TO MAINTAIN 6.5 PERCENT
IME PAYMENT FOR FISCAL YEAR 2000.—
(1) ADDITIONAL
PAYMENT.—In addition to
payments made to each subsection (d) hospital (as
defined in section 1886(d)(1)(B) of the Social Secu-
rity Act (42 U.S.C. 1395ww(d)(1)(B)) under section
1886(d)(5)(B) 
of 
such 
Act 
(42 
U.S.C.
1395ww(d)(5)(B))) which receives payment for the
direct costs of medical education for discharges oc-
curring in fiscal year 2000, the Secretary of Health
and Human Services shall make one or more pay-
ments to each such hospital in an amount which, as
estimated by the Secretary, is equal in the aggregate
to the difference between the amount of payments to
the hospital under such section for such discharges
and the amount of payments that would have been
paid under such section for such discharges if ‘‘c’’
in clause (ii)(IV) of such section equalled 1.6 rather
than 1.47. Additional payments made under this
subsection shall be made applying the same struc-
ture as applies to payments made under section
1886(d)(5)(B) of such Act.
(2) NO EFFECT ON OTHER PAYMENTS OR DE-
TERMINATIONS.—In making such additional pay-
ments, the Secretary shall not change payments, de-
terminations, or budget neutrality adjustments made
for such period under section 1886(d) of such Act
(42 U.S.C. 1395ww(d)).
(c) CONFORMING AMENDMENT RELATING TO DE-
TERMINATION
OF
STANDARDIZED
AMOUNT.—Section
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended by inserting ‘‘or any additional payments under
such paragraph resulting from the application of section
111 of the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999’’ after ‘‘Balanced Budget
Act of 1997’’.
SEC. 112. 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)) 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) as
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
bad debt, charity care, and charges for medicaid and
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 October 1, 2001.
Subtitle C—PPS-Exempt Hospitals
SEC. 121. 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)) 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-
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. 122. 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)) 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
(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 following
shall be treated as a separate class of hospital:
‘‘(I) Hospitals described in clause (i) of sub-
section (d)(1)(B) and psychiatric units described in
the matter following clause (v) of such subsection.
‘‘(II) Hospitals described in clause (iv) of such
subsection.’’.
SEC. 123. 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
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. 124. 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-
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. 125. REFINEMENT OF PROSPECTIVE PAYMENT SYS-
TEM FOR INPATIENT REHABILITATION SERV-
ICES.
(a) USE OF DISCHARGE AS PAYMENT UNIT.—
(1) IN GENERAL.—Section 1886(j)(1)(D) (42
U.S.C. 1395ww(j)(1)(D)) is amended by striking ‘‘,
day of inpatient hospital services, or other unit of
payment defined by the Secretary’’.
(2) CONFORMING AMENDMENT TO CLASSIFICA-
TION.—Section 
1886(j)(2)(A)(i) 
(42 
U.S.C.
1395ww(j)(2)(A)(i)) is amended 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-
propriate to improve the explanatory power
of functional independence measure-func-
tion related groups; and’’.
(3) CONSTRUCTION
RELATING
TO
TRANSFER
AUTHORITY.—Section 
1886(j)(1) 
(42 
U.S.C.
1395ww(j)(1)) is amended by adding at the end the
following new subparagraph:
‘‘(E) 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.’’.
(b) STUDY
ON IMPACT
OF IMPLEMENTATION
OF
PROSPECTIVE 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 (42 U.S.C. 1395ww(j)).
(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.
(c) EFFECTIVE DATE.—The amendments made by
subsection (a) are effective as if included in the enactment
of section 4421(a) of BBA.
Subtitle D—Hospice Care
SEC. 131. TEMPORARY INCREASE IN PAYMENT FOR HOS-
PICE CARE.
(a) INCREASE FOR FISCAL YEARS 2001 AND 2002.—
For purposes of payments under section 1814(i)(1)(C) of
the Social Security Act (42 U.S.C. 1395f(i)(1)(C)) for
hospice care furnished during fiscal years 2001 and 2002,
the Secretary of Health and Human Services shall in-
crease the payment rate in effect (but for this section)
for—
(1) fiscal year 2001, by 0.5 percent, and
(2) fiscal year 2002, by 0.75 percent.
(b) ADDITIONAL PAYMENT NOT BUILT INTO THE
BASE.—The Secretary of Health and Human Services
shall not include any additional payment made under this
subsection (a) in updating the payment rate, as increased
by the applicable market basket percentage increase for
the fiscal year involved under section 1814(i)(1)(C)(ii) of
that Act (42 U.S.C. 1395f(i)(1)(C)(ii)).
SEC. 132. STUDY AND REPORT TO CONGRESS REGARDING
MODIFICATION OF THE PAYMENT RATES FOR
HOSPICE CARE.
(a) STUDY.—The Comptroller General of the United
States shall conduct a study to determine the feasibility
and advisability of updating the payment rates and the
cap amount determined with respect to a fiscal year under
section 1814(i) of the Social Security Act (42 U.S.C.
1395f(i)) for routine home care and other services in-
cluded in hospice care. Such study shall examine the cost
factors used to determine such rates and such amount and
shall evaluate whether such factors should be modified,
eliminated, or supplemented with additional cost factors.
(b) REPORT.—Not later than one year after the date
of enactment of this Act, the Comptroller General of the
United States shall submit to Congress a report on the
study conducted under subsection (a), together with any
recommendations for legislation that the Comptroller Gen-
eral determines to be appropriate as a result of such
study.
Subtitle E—Other Provisions
SEC. 141. MEDPAC STUDY ON MEDICARE PAYMENT FOR
NONPHYSICIAN 
HEALTH 
PROFESSIONAL
CLINICAL TRAINING IN HOSPITALS.
(a) IN GENERAL.—The Medicare Payment Advisory
Commission shall conduct a study of medicare payment
policy with respect to professional clinical training of dif-
ferent classes of nonphysician health care professionals
(such as nurses, nurse practitioners, allied health profes-
sionals, physician assistants, and psychologists) and the
basis for any differences in treatment among such classes.
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Commission shall
submit a report to Congress on the study conducted under
subsection (a).
Subtitle F—Transitional Provisions
SEC. 151. EXCEPTION TO CMI QUALIFIER FOR ONE YEAR.
Notwithstanding any other provision of law, for pur-
poses of fiscal year 2000, the Northwest Mississippi Re-
gional Medical Center located in Clarksdale, Mississippi
shall be deemed to have satisfied the case mix index cri-
teria under section 1886(d)(5)(C)(ii) of the Social Secu-
rity Act (42 U.S.C. 1395ww(d)(5)(C)(ii)) for classification
as a rural referral center.
SEC. 152. RECLASSIFICATION OF CERTAIN COUNTIES AND
AREAS FOR PURPOSES OF REIMBURSEMENT
UNDER THE MEDICARE PROGRAM.
(a) FISCAL YEAR 2000.—Notwithstanding any other
provision of law, effective for discharges occurring during
fiscal year 2000, for purposes of making payments under
(b) FISCAL YEAR 2001.—Notwithstanding any other
provision of law, effective for discharges occurring during
fiscal year 2001, for purposes of making payments under
section 1886(d) of the Social Security Act (42 U.S.C.
1395ww(d))—
(1) Iredell County, North Carolina is deemed to
be located in the Charlotte-Gastonia-Rock Hill,
North Carolina-South Carolina Metropolitan Statis-
tical Area;
(2) the large urban area of New York, New
York is deemed to include Orange County, New
York;
(3) Lake County, Indiana, and Lee County, Illi-
nois, are deemed to be located in the Chicago, Illi-
nois Metropolitan Statistical Area;
(4) Hamilton-Middletown, Ohio, is deemed to
be located in the Cincinnati, Ohio-Kentucky-Indiana
Metropolitan Statistical Area;
(5) Brazoria County, Texas, is deemed to be lo-
cated in the Houston, Texas Metropolitan Statistical
Area; and
(6) Chittenden County, Vermont is deemed to
be located in the Boston-Worcester-Lawrence-Low-
ell-Brockton, Massachusetts-New Hampshire Metro-
politan Statistical Area.
For purposes of that section, any reclassification under
this subsection shall be treated as a decision of the Medi-
care Geographic Classification Review Board under para-
graph (10) of that section.
SEC. 153. WAGE INDEX CORRECTION.
Notwithstanding any other provision of section
1886(d) of the Social Security Act (42 U.S.C.
1395ww(d)), the Secretary of Health and Human Services
shall calculate and apply the Hattiesburg, Mississippi Met-
ropolitan Statistical Area wage index under that section
for discharges occurring during fiscal year 2000 using fis-
cal year 1996 wage and hour data for Wesley Medical
Center for purposes of payment under that section for that
fiscal year. Such recalculation shall not affect the wage
index for any other area.
SEC. 154. CALCULATION AND APPLICATION OF WAGE
INDEX FLOOR FOR A CERTAIN AREA.
(a) FISCAL YEAR 2000.—Notwithstanding any other
provision of section 1886(d) of the Social Security Act (42
U.S.C. 1395ww(d)), for discharges occurring during fiscal
year 2000, the Secretary of Health and Human Services
shall calculate and apply the wage index for the Allentown-
Bethlehem-Easton Metropolitan Statistical Area under
that section as if the Lehigh Valley Hospital were classi-
fied in such area for purposes of payment under that sec-
tion for such fiscal year. Such recalculation shall not affect
the wage index for any other area.
(b) FISCAL YEAR 2001.—Notwithstanding any other
provision of section 1886(d) of the Social Security Act (42
U.S.C. 1395ww(d)), in calculating and applying the wage
indices under that section for discharges occurring during
fiscal year 2001, Lehigh Valley Hospital shall be treated
as being classified in the Allentown-Bethlehem-Easton
Metropolitan Statistical Area.
SEC. 155. SPECIAL RULE FOR CERTAIN SKILLED NURSING
FACILITIES.
(a) IN GENERAL.—Notwithstanding any provision of
section 1888(e) of the Social Security Act (42 U.S.C.
1395yy(e)), for the cost reporting period beginning in fis-
cal year 2000 and for the cost reporting period beginning
in fiscal year 2001, if a skilled nursing facility which
meets the criteria described in subsection (b) elects to be
paid in accordance with subsection (c), the Secretary of
Health and Human Services shall establish a per diem
payment amount for such facility according to the method-
ology described in subsection (c) for such cost reporting
periods in lieu of the payment amount that would other-
wise be established for such facility under section
1888(e)(1) of such Act (42 U.S.C. 1395yy(e)(1)).
(b) FACILITY ELIGIBILITY CRITERIA.—For purposes
of this subsection, a skilled nursing facility is one—
(1) that began participation in the Medicare
program under title XVIII of the Social Security Act
before January 1, 1995;
(2) for which at least 80 percent of the total in-
patient days of the facility in the cost reporting pe-
riod beginning in fiscal year 1998 were comprised of
individuals entitled to benefits under such title; and
(3) that is located in Baldwin or Mobile Coun-
ty, Alabama.
(c) DETERMINATION OF PER DIEM AMOUNT.—For
purposes of subsection (a), the per diem payment amount
shall be equal to 100 percent of the amount determined
under section 1888(e)(3) of the Social Security Act (42
U.S.C. 1395yy(e)(3)) except that, in determining such
amount, the Secretary shall—
(1) substitute the allowable costs of the facility
for the cost reporting period beginning in fiscal year
1998 for those allowable costs of the cost reporting
period beginning in fiscal year 1995; and
(2) exclude the update to the first cost report-
ing period (from fiscal year 1995 to fiscal year
1998) described in section 1888(e)(3)(B)(i) of such
Act (42 U.S.C. 1395yy(e)(3)(B)(i)).
TITLE II—PROVISIONS
RELATING TO PART B
Subtitle A—Hospital Outpatient
Services
SEC. 201. 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)) 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.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (D), the Secretary shall provide for an
additional payment for each covered OPD serv-
ice (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.
‘‘(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 estimated by the Secretary
before the beginning of the year) may not
exceed the applicable percentage (specified
in clause (ii)) of the total program pay-
ments estimated to be made under this
subsection for all covered 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.
‘‘(D) TRANSITIONAL AUTHORITY.—In ap-
plying subparagraph (A) for covered OPD serv-
ices furnished before January 1, 2002, the Sec-
retary may—
‘‘(i) apply such subparagraph to a bill
for such services related to an outpatient
encounter (rather than for a specific serv-
ice or group of services) using OPD fee
schedule amounts and transitional pass-
through payments covered under the bill;
and
‘‘(ii) use an appropriate cost-to-charge
ratio for the hospital involved (as deter-
mined by the Secretary), rather than for
specific departments within the hospital.’’.
(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
AND
BRACHYTHERAPY.—A drug or biological
that is used in cancer therapy, including
(but not limited to) a chemotherapeutic
agent, an antiemetic, a hematopoietic
growth factor, a colony stimulating factor,
a 
biological 
response 
modifier, 
a
bisphosphonate, 
and 
a 
device 
of
brachytherapy, if payment for such drug,
biological, or device as an outpatient hos-
pital service under this part was being
made on such first date.
‘‘(iii) 
CURRENT
RADIOPHARMA-
CEUTICAL DRUGS AND BIOLOGICAL PROD-
UCTS.—A radiopharmaceutical drug or bio-
logical product used in diagnostic, moni-
toring, and therapeutic nuclear medicine
procedures if payment for the drug or bio-
logical as an outpatient hospital service
under this part was being made on such
first date.
‘‘(iv) NEW MEDICAL DEVICES, DRUGS,
AND
BIOLOGICALS.—A medical device,
drug, or biological not described in clause
(i), (ii), or (iii) if—
‘‘(I) payment for the device,
drug, or biological as an outpatient
hospital service under this part was
not being made as of December 31,
1996; and
‘‘(II) the cost of the device, drug,
or biological is not insignificant in re-
lation to the OPD fee schedule
amount (as calculated under para-
graph (3)(D)) payable for the service
(or group of services) involved.
‘‘(B) LIMITED PERIOD OF PAYMENT.—The
payment under this paragraph with respect to
a medical device, drug, or biological shall only
apply during a period of at least 2 years, but
not more than 3 years, that begins—
‘‘(i) on the first date this subsection is
implemented in the case of a drug, biologi-
cal, or device described in clause (i), (ii), or
(iii) of subparagraph (A) and in the case
of a device, drug, or biological described in
subparagraph (A)(iv) and for which pay-
ment under this part is made as an out-
patient hospital service before such first
date; or
‘‘(ii) in the case of a device, drug, or
biological 
described 
in 
subparagraph
(A)(iv) not described in clause (i), on the
first date on which payment is made under
this part for the device, drug, or biological
as an outpatient hospital service.
‘‘(C) 
AMOUNT
OF
ADDITIONAL
PAY-
MENT.—Subject to subparagraph (D)(iii), the
amount of the payment under this paragraph
with respect to a device, drug, or biological pro-
vided as part of a covered OPD service is—
‘‘(i) in the case of a drug or biological,
the amount by which the amount deter-
mined under section 1842(o) for the drug
or biological exceeds the portion of the oth-
erwise applicable medicare OPD fee sched-
ule that the Secretary determines is associ-
ated with the drug or biological; or
‘‘(ii) in the case of a medical device,
the amount by which the hospital’s charges
for the device, adjusted to cost, exceeds the
portion of the otherwise applicable medi-
care OPD fee schedule that the Secretary
determines is associated with the device.
‘‘(D) LIMIT ON AGGREGATE ANNUAL AD-
JUSTMENT.—
‘‘(i) IN GENERAL.—The total of the
additional payments made under this para-
graph for covered OPD services furnished
in a year (as estimated by the Secretary
before the beginning of the year) may not
exceed the applicable percentage (specified
in clause (ii)) of the total program pay-
ments estimated to be made under this
subsection for all covered 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—
‘‘(I) for a year (or portion of a
year) before 2004, 2.5 percent; and
‘‘(II) for 2004 and thereafter, a
percentage specified by the Secretary
up to (but not to exceed) 2.0 percent.
‘‘(iii) UNIFORM PROSPECTIVE REDUC-
TION IF AGGREGATE LIMIT PROJECTED TO
BE EXCEEDED.—If the Secretary estimates
before the beginning of a year that the
amount of the additional payments under
this paragraph for the year (or portion
thereof) as determined under clause (i)
without regard to this clause will exceed
the limit established under such clause, the
Secretary shall reduce pro rata the amount
of each of the additional payments under
this paragraph for that year (or portion
thereof) in order to ensure that the aggre-
gate additional payments under this para-
graph (as so estimated) do not exceed such
limit.’’.
(c) APPLICATION
OF NEW ADJUSTMENTS
ON
A
BUDGET NEUTRAL BASIS.—Section 1833(t)(2)(E) (42
U.S.C. 1395l(t)(2)(E)) is amended by striking ‘‘other ad-
justments, in a budget neutral manner, as determined to
be necessary to ensure equitable payments, such as outlier
adjustments or’’ and inserting ‘‘, in a budget neutral man-
ner, outlier adjustments under paragraph (5) and transi-
tional pass-through payments under paragraph (6) and
other adjustments as determined to be necessary to ensure
equitable payments, such as’’.
(d) LIMITATION ON JUDICIAL REVIEW FOR NEW AD-
JUSTMENTS.—Section 1833(t)(11), as redesignated by
subsection (a)(1), is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (C);
(2) by striking the period at the end of sub-
paragraph (D) and inserting ‘‘; and’’; and
(3) by adding at the end the following:
‘‘(E) the determination of the fixed mul-
tiple, or a fixed dollar cutoff amount, the mar-
ginal cost of care, or applicable percentage
under paragraph (5) or the determination of in-
significance of cost, the duration of the addi-
tional payments (consistent with paragraph
(6)(B)), the portion of the medicare OPD fee
schedule amount associated with particular de-
vices, drugs, or biologicals, and the application
of any pro rata reduction under paragraph
(6).’’.
(e) INCLUSION OF CERTAIN IMPLANTABLE ITEMS
UNDER SYSTEM.—
(1) IN GENERAL.—Section 1833(t) (42 U.S.C.
1395l(t)) is amended—
(A) in paragraph (1)(B)(ii), by striking
‘‘clause (iii)’’ and inserting ‘‘clause (iv)’’ and by
striking ‘‘but’’;
(B) by redesignating clause (iii) of para-
graph (1)(B) as clause (iv) and inserting after
clause (ii) of such paragraph the following new
clause:
‘‘(iii) includes implantable items de-
scribed in paragraph (3), (6), or (8) of sec-
tion 1861(s); but’’; and
(C) in paragraph (2)(B), by inserting after
‘‘resources’’ the following: ‘‘and so that an
implantable item is classified to the group that
includes the service to which the item relates’’.
(2) CONFORMING
AMENDMENT.—(A) Section
1834(a)(13) (42 U.S.C. 1395m(a)(13)) is amended
by 
striking 
‘‘1861(m)(5))’’ 
and 
inserting
‘‘1861(m)(5), but not including implantable items
for which payment may be made under section
1833(t)’’.
(B) 
Section 
1834(h)(4)(B) 
(42 
U.S.C.
1395m(h)(4)(B)) is amended by inserting before the
semicolon the following: ‘‘and does not include an
implantable item for which payment may be made
under section 1833(t)’’.
(f) AUTHORIZING PAYMENT WEIGHTS BASED
ON
MEAN
HOSPITAL
COSTS.—Section 1833(t)(2)(C) (42
U.S.C. 1395l(t)(2)(C)) is amended by inserting ‘‘(or, at
the election of the Secretary, mean)’’ after ‘‘median’’.
(g) LIMITING VARIATION OF COSTS OF SERVICES
CLASSIFIED WITH
A GROUP.—Section 1833(t)(2) (42
U.S.C. 1395l(t)(2)) is amended by adding at the end the
following new flush sentence:
‘‘For purposes of subparagraph (B), items and serv-
ices within a group shall not be treated as ‘com-
parable with respect to the use of resources’ if the
highest median cost (or mean cost, if elected by the
Secretary under subparagraph (C)) for an item or
service within the group is more than 2 times great-
er than the lowest median cost (or mean cost, if so
elected) for an item or service within the group; ex-
cept that the Secretary may make exceptions in un-
usual cases, such as low volume items and services,
but may not make such an exception in the case of
a drug or biological that has been designated as an
orphan drug under section 526 of the Federal Food,
Drug and Cosmetic Act.’’.
(h) ANNUAL REVIEW OF OPD PPS COMPONENTS.—
(1) IN
GENERAL.—Section 1833(t)(8)(A) (42
U.S.C. 1395l(t)(8)(A)), as redesignated by sub-
section (a), is amended—
(A) by striking ‘‘may periodically review’’
and inserting ‘‘shall review not less often than
annually’’; and
(B) by adding at the end the following:
‘‘The Secretary shall consult with an expert
outside advisory panel composed of an appro-
priate selection of representatives of providers
to review (and advise the Secretary concerning)
the clinical integrity of the groups and weights.
Such panel may use data collected or developed
by entities and organizations (other than the
Department of Health and Human Services) in
conducting such review.’’.
(2) EFFECTIVE
DATES.—The Secretary of
Health and Human Services shall first conduct the
annual review under the amendment made by para-
graph (1)(A) in 2001 for application in 2002 and
the amendment made by paragraph (1)(B) takes ef-
fect on the date of the enactment of this Act.
(i) NO IMPACT ON COPAYMENT.—Section 1833(t)(7)
(42 U.S.C. 1395l(t)(7)), as redesignated by subsection (a),
is amended by adding at the end the following new sub-
paragraph:
‘‘(D) COMPUTATION
IGNORING
OUTLIER
AND
PASS-THROUGH
ADJUSTMENTS.—The co-
payment amount shall be computed under sub-
paragraph (A) as if the adjustments under
paragraphs (5) and (6) (and any adjustment
made under paragraph (2)(E) in relation to
such adjustments) had not occurred.’’.
(j) TECHNICAL CORRECTION IN REFERENCE RELAT-
ING TO HOSPITAL-BASED AMBULANCE SERVICES.—Sec-
tion 1833(t)(9) (42 U.S.C. 1395l(t)(9)), as redesignated
by subsection (a), is amended by striking ‘‘the matter in
subsection (a)(1) preceding subparagraph (A)’’ and insert-
ing ‘‘section 1861(v)(1)(U)’’.
(k) EXTENSION OF PAYMENT PROVISIONS OF SEC-
TION 4522 OF BBA UNTIL IMPLEMENTATION OF PPS.—
Section 1861(v)(1)(S)(ii) (42 U.S.C. 1395x(v)(1)(S)(ii)) is
amended in subclauses (I) and (II) by striking ‘‘and dur-
ing fiscal year 2000 before January 1, 2000’’ and insert-
ing ‘‘and until the first date that the prospective payment
system under section 1833(t) is implemented’’ each place
it appears.
(l) CONGRESSIONAL INTENTION REGARDING BASE
AMOUNTS IN APPLYING THE HOPD PPS.—With respect
to determining the amount of copayments described in
paragraph (3)(A)(ii) of section 1833(t) of the Social Secu-
rity Act, as added by section 4523(a) of BBA, Congress
finds that such amount should be determined without re-
gard to such section, in a budget neutral manner with re-
spect to aggregate payments to hospitals, and that the
Secretary of Health and Human Services has the author-
ity to determine such amount without regard to such sec-
tion.
(m) EFFECTIVE DATE.—Except as provided in this
section, the amendments made by this section shall be ef-
fective as if included in the enactment of BBA.
(n) STUDY OF DELIVERY OF INTRAVENOUS IMMUNE
GLOBULIN (IVIG) OUTSIDE HOSPITALS AND PHYSICIANS’
OFFICES.—
(1) STUDY.—The Secretary of Health and
Human Services shall conduct a study of the extent
to which intravenous immune globulin (IVIG) could
be delivered and reimbursed under the medicare pro-
gram outside of a hospital or physician’s office. In
conducting the study, the Secretary shall—
(A) consider the sites of service that other
payors, including Medicare+Choice plans, use
for these drugs and biologicals;
(B) determine whether covering the deliv-
ery of these drugs and biologicals in a medicare
patient’s home raises any additional safety and
health concerns for the patient;
(C) determine whether covering the deliv-
ery of these drugs and biologicals in a patient’s
home can reduce overall spending under the
medicare program; and
(D) determine whether changing the site of
setting for these services would affect bene-
ficiary access to care.
(2) REPORT.—The Secretary shall submit a re-
port on such study to the Committees on Ways and
Means and Commerce of the House of Representa-
tives and the Committee on Finance of the Senate
within 18 months after the date of the enactment of
this Act. The Secretary shall include in the report
recommendations regarding the appropriate manner
and settings under which the medicare program
should pay for these drugs and biologicals delivered
outside of a hospital or physician’s office.
SEC. 202. ESTABLISHING A TRANSITIONAL CORRIDOR FOR
APPLICATION OF OPD PPS.
(a) IN
GENERAL.—Section 1833(t) (42 U.S.C.
1395l(t)), as amended by section 201(a), is further
amended—
(1) in paragraph (4), in the matter before sub-
paragraph (A), by inserting ‘‘, subject to paragraph
(7),’’ after ‘‘is determined’’; and
(2) by redesignating paragraphs (7) through
(11) as paragraphs (8) through (12), respectively;
and
(3) by inserting after paragraph (6), as inserted
by section 201(b), the following new paragraph:
‘‘(7) TRANSITIONAL ADJUSTMENT TO LIMIT DE-
CLINE IN PAYMENT.—
‘‘(A) BEFORE 2002.—Subject to subpara-
graph (D), for covered OPD services furnished
before January 1, 2002, for which the PPS
amount (as defined in subparagraph (E)) is—
‘‘(i) at least 90 percent, but less than
100 percent, of the pre-BBA amount (as
defined in subparagraph (F)), the amount
of payment under this subsection shall be
increased by 80 percent of the amount of
such difference;
‘‘(ii) at least 80 percent, but less than
90 percent, of the pre-BBA amount, the
amount of payment under this subsection
shall be increased by the amount by which
(I) the product of 0.71 and the pre-BBA
amount, exceeds (II) the product of 0.70
and the PPS amount;
‘‘(iii) at least 70 percent, but less
than 80 percent, of the pre-BBA amount,
the amount of payment under this sub-
section shall be increased by the amount
by which (I) the product of 0.63 and the
pre-BBA amount, exceeds (II) the product
of 0.60 and the PPS amount; or
‘‘(iv) less than 70 percent of the pre-
BBA amount, the amount of payment
under this subsection shall be increased by
21 percent of the pre-BBA amount.
‘‘(B) 2002.—Subject to subparagraph (D),
for covered OPD services furnished during
2002, for which the PPS amount is—
‘‘(i) at least 90 percent, but less than
100 percent, of the pre-BBA amount, the
amount of payment under this subsection
shall be increased by 70 percent of the
amount of such difference;
‘‘(ii) at least 80 percent, but less than
90 percent, of the pre-BBA amount, the
amount of payment under this subsection
shall be increased by the amount by which
(I) the product of 0.61 and the pre-BBA
amount, exceeds (II) the product of 0.60
and the PPS amount; or
‘‘(iii) less than 80 percent of the pre-
BBA amount, the amount of payment
under this subsection shall be increased by
13 percent of the pre-BBA amount.
‘‘(C) 2003.—Subject to subparagraph (D),
for covered OPD services furnished during
2003, for which the PPS amount is—
‘‘(i) at least 90 percent, but less than
100 percent, of the pre-BBA amount, the
amount of payment under this subsection
shall be increased by 60 percent of the
amount of such difference; or
‘‘(ii) less than 90 percent of the pre-
BBA amount, the amount of payment
under this subsection shall be increased by
6 percent of the pre-BBA amount.
‘‘(D) HOLD HARMLESS PROVISIONS.—
‘‘(i) TEMPORARY
TREATMENT
FOR
SMALL RURAL HOSPITALS.—In the case of
a hospital located in a rural area and that
has not more than 100 beds, for covered
OPD services furnished before January 1,
2004, for which the PPS amount is less
than the pre-BBA amount, the amount of
payment under this subsection shall be in-
creased by the amount of such difference.
‘‘(ii) PERMANENT
TREATMENT
FOR
CANCER HOSPITALS.—In the case of a hos-
pital described in section 1886(d)(1)(B)(v),
for covered OPD services for which the
PPS amount is less than the pre-BBA
amount, the amount of payment under this
subsection shall be increased by the
amount of such difference.
‘‘(E) PPS AMOUNT
DEFINED.—In this
paragraph, the term ‘PPS amount’ means, with
respect to covered OPD services, the amount
payable under this title for such services (deter-
mined without regard to this paragraph), in-
cluding amounts payable as copayment under
paragraph 
(8), 
coinsurance 
under 
section
188
2000), the Secretary shall provide for an additional
payment amount for any hospital that receives pay-
ments for the costs of approved educational activities
for nurse and allied health professional training
under section 1861(v)(1).
‘‘(2) PAYMENT AMOUNT.—The additional pay-
ment amount under this subsection for each hospital
for portions of cost reporting periods occurring in a
year shall be an amount specified by the Secretary
in a manner consistent with the following:
‘‘(A) DETERMINATION OF MANAGED CARE
ENROLLEE
PAYMENT
RATIO
FOR
GRADUATE
MEDICAL
EDUCATION
PAYMENTS.—The Sec-
retary shall estimate the ratio of payments for
all hospitals for portions of cost reporting peri-
ods occurring in the year under subsection
(h)(3)(D) to total direct graduate medical edu-
cation payments estimated for such portions of
periods under subsection (h)(3).
‘‘(B) APPLICATION
TO
FEE-FOR-SERVICE
NURSING
AND
ALLIED
HEALTH
EDUCATION
PAYMENTS.—Such ratio shall be applied to the
Secretary’s estimate of total payments for nurs-
ing and allied health education determined
under section 1861(v) for portions of cost re-