(bb)the totalpercentage of the nonelderly insured population for such precedingyear (as estimated by the Secretary); exceeds(II)5 percentagepoints.(4)Medicarepayment amount.The amount of paymentmade from the Trust Fund under this part for a covered OPD service(and such services classified within a group) furnished in a yearis determined, subject to paragraph (7) as follows:(A)Fee schedule adjustments.The medicareOPD fee schedule amount (computed under paragraph (3)(D)) for theservice or group and year is adjusted for relative differences inthe cost of labor and other factors determined by the Secretary, ascomputed under paragraphs (2)(D) and (2)(E).(B)Subtract applicable deductible.Reducethe adjusted amount determined under subparagraph (A) by the amountof the deductible under section 1833(b), to the extent applicable.(C)Apply payment proportion to remainder.The amount of payment is the amount so determined under subparagraph(B) multiplied by the predeductible payment percentage (asdetermined under paragraph (3)(E)) for the service or group and yearinvolved, plus the amount of any reduction in the copayment amountattributable to paragraph (8)(C).(5)Outlieradjustment.(A)In general.Subject to subparagraph(D), the Secretary shall provide for an additional payment for eachcovered OPD service (or group of services) for which a hospitalscharges, adjusted to cost, exceed(i)a fixed multipleof the sum of(I)the applicablemedicare OPD fee schedule amount determined under paragraph (3)(D),as adjusted under paragraph (4)(A) (other than for adjustments underthis paragraph or paragraph (6)); and(II)any transitionalpass-through payment under paragraph (6); and(ii)at the optionof the Secretary, such fixed dollar amount as the Secretary may establish.(B)Amount of adjustment.The amount ofthe additional payment under subparagraph (A) shall be determinedby the Secretary and shall approximate the marginal cost of care beyondthe applicable cutoff point under such subparagraph.(C)Limit on aggregate outlier adjustments.(i)Ingeneral.The total of the additionalpayments made under this paragraph for covered OPD services furnishedin a year (as estimated by the Secretary before the beginning of theyear) may not exceed the applicable percentage (specified in clause(ii)) of the total program payments estimated to be made under thissubsection for all covered OPD services furnished in that year. Ifthis paragraph is first applied to less than a full year, the previoussentence shall apply only to the portion of such year.(ii)Applicablepercentage.For purposes of clause (i),the term applicable percentage means a percentage specifiedby the Secretary up to (but not to exceed)(I)for a year(or portion of a year) before 2004, 2.5 percent; and(II)for 2004and thereafter, 3.0 percent.(D)Transitional authority.In applyingsubparagraph (A) for covered OPD services furnished before January1, 2002, the Secretary may(i)apply such subparagraphto a bill for such services related to an outpatient encounter (ratherthan for a specific service or group of services) using OPD fee scheduleamounts and transitional passthrough payments covered underthe bill; and(ii)use an appropriatecost-to-charge ratio for the hospital involved (as determined by theSecretary), rather than for specific departments within the hospital.(E)Exclusion of separate drug and biological apcs from outlier payments.No additional payment shall be made under subparagraph (A) inthe case of ambulatory payment classification groups established separatelyfor drugs or biologicals.(6)Transitionalpassthrough for additional costs of innovative medical devices,drugs, and biologicals.(A)In general.The Secretary shall providefor an additional payment under this paragraph for any of the followingthat are provided as part of a covered OPD service (or group of services):(i)Currentorphan drugs.A drug or biological thatis used for a rare disease or condition with respect to which thedrug or biological has been designated as an orphan drug under section526 of the Federal Food, Drug and Cosmetic Act if payment for thedrug or biological as an outpatient hospital service under this partwas being made on the first date that the system under this subsectionis implemented.(ii)Currentcancer 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 hematopoieticgrowth factor, a colony stimulating factor, a biological responsemodifier, a bisphosphonate, and a device of brachytherapy or temperaturemonitored cryoablation, if payment for such drug, biological, or deviceas an outpatient hospital service under this part was being made onsuch first date.(iii)Current radiopharmaceutical drugs and biological products.A radiopharmaceutical drug or biological product used in diagnostic,monitoring, and therapeutic nuclear medicine procedures if paymentfor the drug or biological as an outpatient hospital service underthis part was being made on such first date.(iv)Newmedical devices, drugs, and biologicals.A medical device, drug, or biological not described in clause (i),(ii), or (iii) if(I)paymentfor the device, drug, or biological as an outpatient hospital serviceunder this part was not being made as of December 31, 1996; and(II)the costof the drug or biological or the average cost of the category of devicesis not insignificant in relation to the OPD fee schedule amount (ascalculated under paragraph (3)(D)) payable for the service (or groupof services) involved.(B)Use of categories in determining eligibility of a device for passthroughpayments.The following provisions applyfor purposes of determining whether a medical device qualifies foradditional payments under clause (ii) or (iv) of subparagraph (A):(i)Establishmentof initial categories.(I)In general.The Secretary shall initiallyestablish under this clause categories of medical devices based ontype of device by April 1, 2001. Such categories shall be establishedin a manner such that each medical device that meets the requirementsof clause (ii) or (iv) of subparagraph (A) as of January 1, 2001,is included in such a category and no such device is included in morethan one category. For purposes of the preceding sentence, whethera medical device meets such requirements as of such date shall bedetermined on the basis of the program memoranda issued before suchdate.(II)Authorization of implementation other than through regulations.The categories may be established under this clause by programmemorandum or otherwise, after consultation with groups representinghospitals, manufacturers of medical devices, and other affected parties.(ii)Establishingcriteria for additional categories.(I)In general.The Secretary shall establishcriteria that will be used for creation of additional categories (otherthan those established under clause (i)) through rulemaking (whichmay include use of an interim final rule with comment period).(II)Standard.Such categories shall beestablished under this clause in a manner such that no medical deviceis described by more than one category. Such criteria shall includea test of whether the average cost of devices that would be includedin a category and are in use at the time the category is establishedis not insignificant, as described in subparagraph (A)(iv)(II).(III)Deadline.Criteria shall first be establishedunder this clause by July 1, 2001. The Secretary may establish incompelling circumstances categories under this clause before the datesuch criteria are established.(IV)Adding categories.The Secretary shallpromptly establish a new category of medical devices under this clausefor any medical device that meets the requirements of subparagraph(A)(iv) and for which none of the categories in effect (or that werepreviously in effect) is appropriate.(iii)Period for which category is in effect.A category of medical devices established under clause (i) or (ii)shall be in effect for a period of at least 2 years, but not morethan 3 years, that begins(I)in thecase of a category established under clause (i), on the first dateon which payment was made under this paragraph for any device describedby such category (including payments made during the period beforeApril 1, 2001); and(II)in thecase of any other category, on the first date on which payment ismade under this paragraph for any medical device that is describedby such category.(iv)Requirementstreated as met.A medical device shallbe treated as meeting the requirements of subparagraph (A)(iv), regardlessof whether the device meets the requirement of subclause (I) of suchsubparagraph, if(I)the deviceis described by a category established and in effect under clause(i); or(II)the deviceis described by a category established and in effect under clause(ii) and an application under section 515 of the Federal Food, Drug,and Cosmetic Act has been approved with respect to the device, orthe device has been cleared for market under section 510(k) of suchAct, or the device is exempt from the requirements of section 510(k)of such Act pursuant to subsection (l) or (m) of section 510 of suchAct or section 520(g) of such Act.Nothing in this clause shall be construed as requiring an applicationor prior approval (other than that described in subclause (II)) inorder for a covered device described by a category to qualify forpayment under this paragraph.(C)Limited period of payment.(i)Drugsand biologicals.Subject to subparagraph(G), the payment under this paragraph with respect to a drug or biologicalshall only apply during a period of at least 2 years, but not morethan 3 years, that begins[114](I)on the firstdate this subsection is implemented in the case of a drug or biologicaldescribed in clause (i), (ii), or (iii) of subparagraph (A) and inthe case of a drug or biological described in subparagraph (A)(iv)and for which payment under this part is made as an outpatient hospitalservice before such first date; or(II)in thecase of a drug or biological described in subparagraph (A)(iv) notdescribed in subclause (I), on the first date on which payment ismade under this part for the drug or biological as an outpatient hospitalservice.(ii)Medicaldevices.Payment shall be made underthis paragraph with respect to a medical device only if such device(I)is describedby a category of medical devices established and in effect under subparagraph(B); and(II)is providedas part of a service (or group of services) paid for under this subsectionand provided during the period for which such category is in effectunder such subparagraph.(D)Amount of additional payment.Subjectto subparagraph (E)(iii), the amount of the payment under this paragraphwith respect to a device, drug, or biological provided as part ofa covered OPD service is(i)subject to subparagraph(H), in the case of a drug or biological, the amount by which theamount determined under section 1842(o) (or if the drug or biologicalis covered under a competitive acquisition contract under section 1847B, an amount determinedby the Secretary equal to the average price for the drug or biologicalfor all competitive acquisition areas and year established under suchsection as calculated and adjusted by the Secretary for purposes ofthis paragraph) for the drug or biological exceeds the portion ofthe otherwise applicable medicare OPD fee schedule that the Secretarydetermines is associated with the drug or biological; or[115](ii)in the caseof a medical device, the amount by which the hospitals chargesfor the device, adjusted to cost, exceeds the portion of the otherwiseapplicable medicare OPD fee schedule that the Secretary determinesis associated with the device.(E)Limit on aggregate annual adjustment.(i)Ingeneral.[116]The total of the additional paymentsmade under this paragraph for covered OPD services furnished in ayear (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 payments estimated to be made under this subsectionfor all covered OPD services furnished in that year. If this paragraphis first applied to less than a full year, the previous sentence shallapply only to the portion of such year. This clause shall not applyfor 2018.(ii)Applicablepercentage.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 2004and thereafter, a percentage specified by the Secretary up to (butnot to exceed) 2.0 percent.(iii)