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[CITE: 42USC1395ww]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
        SUBCHAPTER XVIII--HEALTH INSURANCE FOR AGED AND DISABLED
 
                    Part D--Miscellaneous Provisions
 
Sec. 1395ww. Payments to hospitals for inpatient hospital 
        services
        

(a) Determination of costs for inpatient hospital services; limitations; 
        exemptions; ``operating costs of inpatient hospital services'' 
        defined

    (1)(A)(i) The Secretary, in determining the amount of the payments 
that may be made under this subchapter with respect to operating costs 
of inpatient hospital services (as defined in paragraph (4)) shall not 
recognize as reasonable (in the efficient delivery of health services) 
costs for the provision of such services by a hospital for a cost 
reporting period to the extent such costs exceed the applicable 
percentage (as determined under clause (ii)) of the average of such 
costs for all hospitals in the same grouping as such hospital for 
comparable time periods.
    (ii) For purposes of clause (i), the applicable percentage for 
hospital cost reporting periods beginning--
        (I) on or after October 1, 1982, and before October 1, 1983, is 
    120 percent;
        (II) on or after October 1, 1983, and before October 1, 1984, is 
    115 percent; and
        (III) on or after October 1, 1984, is 110 percent.

    (B)(i) For purposes of subparagraph (A) the Secretary shall 
establish case mix indexes for all short-term hospitals, and shall set 
limits for each hospital based upon the general mix of types of medical 
cases with respect to which such hospital provides services for which 
payment may be made under this subchapter.
    (ii) The Secretary shall set such limits for a cost reporting period 
of a hospital--
        (I) by updating available data for a previous period to the 
    immediate preceding cost reporting period by the estimated average 
    rate of change of hospital costs industry-wide, and
        (II) by projecting for the cost reporting period by the 
    applicable percentage increase (as defined in subsection (b)(3)(B) 
    of this section).

    (C) The limitation established under subparagraph (A) for any 
hospital shall in no event be lower than the allowable operating costs 
of inpatient hospital services (as defined in paragraph (4)) recognized 
under this subchapter for such hospital for such hospital's last cost 
reporting period prior to the hospital's first cost reporting period for 
which this section is in effect.
    (D) Subparagraph (A) shall not apply to cost reporting periods 
beginning on or after October 1, 1983.
    (2) The Secretary shall provide for such exemptions from, and 
exceptions and adjustments to, the limitation established under 
paragraph (1)(A) as he deems appropriate, including those which he deems 
necessary to take into account--
        (A) the special needs of sole community hospitals, of new 
    hospitals, of risk based health maintenance organizations, and of 
    hospitals which provide atypical services or essential community 
    services, and to take into account extraordinary circumstances 
    beyond the hospital's control, medical and paramedical education 
    costs, significantly fluctuating population in the service area of 
    the hospital, and unusual labor costs,
        (B) the special needs of psychiatric hospitals and of public or 
    other hospitals that serve a significantly disproportionate number 
    of patients who have low income or are entitled to benefits under 
    part A of this subchapter, and
        (C) a decrease in the inpatient hospital services that a 
    hospital provides and that are customarily provided directly by 
    similar hospitals which results in a significant distortion in the 
    operating costs of inpatient hospital services.

    (3) The limitation established under paragraph (1)(A) shall not 
apply with respect to any hospital which--
        (A) is located outside of a standard metropolitan statistical 
    area, and
        (B)(i) has less than 50 beds, and
        (ii) was in operation and had less than 50 beds on September 3, 
    1982.

    (4) For purposes of this section, the term ``operating costs of 
inpatient hospital services'' includes all routine operating costs, 
ancillary service operating costs, and special care unit operating costs 
with respect to inpatient hospital services as such costs are determined 
on an average per admission or per discharge basis (as determined by the 
Secretary), and includes the costs of all services for which payment may 
be made under this subchapter that are provided by the hospital (or by 
an entity wholly owned or operated by the hospital) to the patient 
during the 3 days (or, in the case of a hospital that is not a 
subsection (d) hospital, during the 1 day) immediately preceding the 
date of the patient's admission if such services are diagnostic services 
(including clinical diagnostic laboratory tests) or are other services 
related to the admission (as defined by the Secretary). Such term does 
not include costs of approved educational activities, a return on equity 
capital, other capital-related costs (as defined by the Secretary for 
periods before October 1, 1987), or costs with respect to administering 
blood clotting factors to individuals with hemophilia.

(b) Computation of payment; definitions; exemptions; adjustments

    (1) Notwithstanding section 1395f(b) of this title but subject to 
the provisions of section 1395e of this title, if the operating costs of 
inpatient hospital services (as defined in subsection (a)(4) of this 
section) of a hospital (other than a subsection (d) hospital, as defined 
in subsection (d)(1)(B) of this section and other than a rehabilitation 
facility described in subsection (j)(1) of this section) for a cost 
reporting period subject to this paragraph--
        (A) are less than or equal to the target amount (as defined in 
    paragraph (3)) for that hospital for that period, the amount of the 
    payment with respect to such operating costs payable under part A of 
    this subchapter on a per discharge or per admission basis (as the 
    case may be) shall be equal to the amount of such operating costs, 
    plus--
            (i) 15 percent of the amount by which the target amount 
        exceeds the amount of the operating costs, or
            (ii) 2 percent of the target amount,

    whichever is less;
        (B) are greater than the target amount but do not exceed 110 
    percent of the target amount, the amount of the payment with respect 
    to those operating costs payable under part A of this subchapter on 
    a per discharge basis shall equal the target amount; or
        (C) are greater than 110 percent of the target amount, the 
    amount of the payment with respect to such operating costs payable 
    under part A of this subchapter on a per discharge or per admission 
    basis (as the case may be) shall be equal to (i) the target amount, 
    plus (ii) in the case of cost reporting periods beginning on or 
    after October 1, 1991, an additional amount equal to 50 percent of 
    the amount by which the operating costs exceed 110 percent of the 
    target amount (except that such additional amount may not exceed 10 
    percent of the target amount) after any exceptions or adjustments 
    are made to such target amount for the cost reporting period;

plus the amount, if any, provided under paragraph (2), except that in no 
case may the amount payable under this subchapter (other than on the 
basis of a DRG prospective payment rate determined under subsection (d) 
of this section) with respect to operating costs of inpatient hospital 
services exceed the maximum amount payable with respect to such costs 
pursuant to subsection (a) of this section.
    (2)(A) Except as provided in subparagraph (E), in addition to the 
payment computed under paragraph (1), in the case of an eligible 
hospital (described in subparagraph (B)) for a cost reporting period 
beginning on or after October 1, 1997, the amount of payment on a per 
discharge basis under paragraph (1) shall be increased by the lesser 
of--
        (i) 50 percent of the amount by which the operating costs are 
    less than the expected costs (as defined in subparagraph (D)) for 
    the period; or
        (ii) 1 percent of the target amount for the period.

    (B) For purposes of this paragraph, an ``eligible hospital'' means 
with respect to a cost reporting period, a hospital--
        (i) that has received payments under this subsection for at 
    least 3 full cost reporting periods before that cost reporting 
    period, and
        (ii) whose operating costs for the period are less than the 
    least of its target amount, its trended costs (as defined in 
    subparagraph (C)), or its expected costs (as defined in subparagraph 
    (D)) for the period.

    (C) For purposes of subparagraph (B)(ii), the term ``trended costs'' 
means for a hospital cost reporting period ending in a fiscal year--
        (i) in the case of a hospital for which its cost reporting 
    period ending in fiscal year 1996 was its third or subsequent full 
    cost reporting period for which it receives payments under this 
    subsection, the lesser of the operating costs or target amount for 
    that hospital for its cost reporting period ending in fiscal year 
    1996, or
        (ii) in the case of any other hospital, the operating costs for 
    that hospital for its third full cost reporting period for which it 
    receives payments under this subsection,

increased (in a compounded manner) for each succeeding fiscal year 
(through the fiscal year involved) by the market basket percentage 
increase for the fiscal year.
    (D) For purposes of this paragraph, the term ``expected costs'', 
with respect to the cost reporting period ending in a fiscal year, means 
the lesser of the operating costs of inpatient hospital services or 
target amount per discharge for the previous cost reporting period 
updated by the market basket percentage increase (as defined in 
paragraph (3)(B)(iii)) for the fiscal year.
    (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 beginning before November 29, 1999, in 
determining 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 subsection (d)(1)(B) of 
    this section and psychiatric units described in the matter following 
    clause (v) of such subsection.
        (II) Hospitals described in clause (iv) of such subsection.

    (3)(A) Except as provided in subparagraph (C) and succeeding 
subparagraphs, and in paragraph (7)(A)(ii), for purposes of this 
subsection, the term ``target amount'' means, with respect to a hospital 
for a particular 12-month cost reporting period--
        (i) in the case of the first such reporting period for which 
    this subsection is in effect, the allowable operating costs of 
    inpatient hospital services (as defined in subsection (a)(4) of this 
    section) recognized under this subchapter for such hospital for the 
    preceding 12-month cost reporting period, and
        (ii) in the case of a later reporting period, the target amount 
    for the preceding 12-month cost reporting period,

increased by the applicable percentage increase under subparagraph (B) 
for that particular cost reporting period.
    (B)(i) For purposes of subsection (d) of this section and subsection 
(j) of this section for discharges occurring during a fiscal year, the 
``applicable percentage increase'' shall be--
        (I) for fiscal year 1986, \1/2\ percent,
        (II) for fiscal year 1987, 1.15 percent,
        (III) for fiscal year 1988, 3.0 percent for hospitals located in 
    a rural area, 1.5 percent for hospitals located in a large urban 
    area (as defined in subsection (d)(2)(D) of this section), and 1.0 
    percent for hospitals located in other urban areas,
        (IV) for fiscal year 1989, the market basket percentage increase 
    minus 1.5 percent for hospitals located in a rural area, the market 
    basket percentage increase minus 2.0 percentage points for hospitals 
    located in a large urban area, and the market basket percentage 
    increase minus 2.5 percentage points for hospitals located in other 
    urban areas,
        (V) for fiscal year 1990, the market basket percentage increase 
    plus 4.22 percentage points for hospitals located in a rural area, 
    the market basket percentage increase plus 0.12 percentage points 
    for hospitals located in a large urban area, and the market basket 
    percentage increase minus 0.53 percentage points for hospitals 
    located in other urban areas,
        (VI) for fiscal year 1991, the market basket percentage increase 
    minus 2.0 percentage points for hospitals in a large urban or other 
    urban area, and the market basket percentage increase minus 0.7 
    percentage point for hospitals located in a rural area,
        (VII) for fiscal year 1992, the market basket percentage 
    increase minus 1.6 percentage points for hospitals in a large urban 
    or other urban area, and the market basket percentage increase minus 
    0.6 percentage point for hospitals located in a rural area,
        (VIII) for fiscal year 1993, the market basket percentage 
    increase minus 1.55 percentage point for hospitals in a large urban 
    or other urban area, and the market basket percentage increase minus 
    0.55 \1\ for hospitals located in a rural area,
---------------------------------------------------------------------------
    \1\ So in original. Probably should be followed by ``percentage 
point''.
---------------------------------------------------------------------------
        (IX) for fiscal year 1994, the market basket percentage increase 
    minus 2.5 percentage points for hospitals located in a large urban 
    or other urban area, and the market basket percentage increase minus 
    1.0 percentage point for hospitals located in a rural area,
        (X) for fiscal year 1995, the market basket percentage increase 
    minus 2.5 percentage points for hospitals located in a large urban 
    or other urban area, and such percentage increase for hospitals 
    located in a rural area as will provide for the average standardized 
    amount determined under subsection (d)(3)(A) of this section for 
    hospitals located in a rural area being equal to such average 
    standardized amount for hospitals located in an urban area (other 
    than a large urban area),
        (XI) for fiscal year 1996, the market basket percentage increase 
    minus 2.0 percentage points for hospitals in all areas,
        (XII) for fiscal year 1997, the market basket percentage 
    increase minus 0.5 percentage point for hospitals in all areas,
        (XIII) for fiscal year 1998, 0 percent,
        (XIV) for fiscal year 1999, the market basket percentage 
    increase minus 1.9 percentage points for hospitals in all areas,
        (XV) for fiscal year 2000, the market basket percentage increase 
    minus 1.8 percentage points for hospitals in all areas,
        (XVI) for fiscal year 2001, the market basket percentage 
    increase minus 1.1 percentage points for hospitals (other than sole 
    community hospitals) in all areas, and the market basket percentage 
    increase for sole community hospitals,
        (XVII) for fiscal year 2002, the market basket percentage 
    increase minus 1.1 percentage points for hospitals in all areas, and
        (XVIII) for fiscal year 2003 and each subsequent fiscal year, 
    the market basket percentage increase for hospitals in all areas.

    (ii) For purposes of subparagraphs (A) and (E), the ``applicable 
percentage increase'' for 12-month cost reporting periods beginning 
during--
        (I) fiscal year 1986, is 0.5 percent,
        (II) fiscal year 1987, is 1.15 percent,
        (III) fiscal year 1988, is the market basket percentage increase 
    minus 2.0 percentage points,
        (IV) a subsequent fiscal year ending on or before September 30, 
    1993, is the market basket percentage increase,
        (V) fiscal years 1994 through 1997, is the market basket 
    percentage increase minus the applicable reduction (as defined in 
    clause (v)(II)), or in the case of a hospital for a fiscal year for 
    which the hospital's update adjustment percentage (as defined in 
    clause (v)(I)) is at least 10 percent, the market basket percentage 
    increase,
        (VI) for fiscal year 1998, is 0 percent,
        (VII) for fiscal years 1999 through 2002, is the applicable 
    update factor specified under clause (vi) for the fiscal year, and
        (VIII) subsequent fiscal years is the market basket percentage 
    increase.

    (iii) For purposes of this subparagraph, the term ``market basket 
percentage increase'' means, with respect to cost reporting periods and 
discharges occurring in a fiscal year, the percentage, estimated by the 
Secretary before the beginning of the period or fiscal year, by which 
the cost of the mix of goods and services (including personnel costs but 
excluding nonoperating costs) comprising routine, ancillary, and special 
care unit inpatient hospital services, based on an index of 
appropriately weighted indicators of changes in wages and prices which 
are representative of the mix of goods and services included in such 
inpatient hospital services, for the period or fiscal year will exceed 
the cost of such mix of goods and services for the preceding 12-month 
cost reporting period or fiscal year.
    (iv) For purposes of subparagraphs (C) and (D), the ``applicable 
percentage increase'' is--
        (I) for 12-month cost reporting periods beginning during fiscal 
    years 1986 through 1993, the applicable percentage increase 
    specified in clause (ii),
        (II) for fiscal year 1994, the market basket percentage increase 
    minus 2.3 percentage points (adjusted to exclude any portion of a 
    cost reporting period beginning during fiscal year 1993 for which 
    the applicable percentage increase is determined under subparagraph 
    (I)),
        (III) for fiscal year 1995, the market basket percentage 
    increase minus 2.2 percentage points, and
        (IV) for fiscal year 1996 and each subsequent fiscal year, the 
    applicable percentage increase under clause (i).

    (v) For purposes of clause (ii)(V)--
        (I) a hospital's ``update adjustment percentage'' for a fiscal 
    year is the percentage by which the hospital's allowable operating 
    costs of inpatient hospital services recognized under this 
    subchapter for the cost reporting period beginning in fiscal year 
    1990 exceeds the hospital's target amount (as determined under 
    subparagraph (A)) for such cost reporting period, increased for each 
    fiscal year (beginning with fiscal year 1994) by the sum of any of 
    the hospital's applicable reductions under subclause (V) for 
    previous fiscal years; and
        (II) the ``applicable reduction'' with respect to a hospital for 
    a fiscal year is the lesser of 1 percentage point or the percentage 
    point difference between 10 percent and the hospital's update 
    adjustment percentage for the fiscal year.

    (vi) For purposes of clause (ii)(VII) for a fiscal year, if a 
hospital's allowable operating costs of inpatient hospital services 
recognized under this subchapter for the most recent cost reporting 
period for which information is available--
        (I) is equal to, or exceeds, 110 percent of the hospital's 
    target amount (as determined under subparagraph (A)) for such cost 
    reporting period, the applicable update factor specified under this 
    clause is the market basket percentage;
        (II) exceeds 100 percent, but is less than 110 percent, of such 
    target amount for the hospital, the applicable update factor 
    specified under this clause is 0 percent or, if greater, the market 
    basket percentage minus 0.25 percentage points for each percentage 
    point by which such allowable operating costs (expressed as a 
    percentage of such target amount) is less than 110 percent of such 
    target amount;
        (III) is equal to, or less than 100 percent, but exceeds \2/3\ 
    of such target amount for the hospital, the applicable update factor 
    specified under this clause is 0 percent or, if greater, the market 
    basket percentage minus 2.5 percentage points; or
        (IV) does not exceed \2/3\ of such target amount for the 
    hospital, the applicable update factor specified under this clause 
    is 0 percent.

    (C) In the case of a hospital that is a sole community hospital (as 
defined in subsection (d)(5)(D)(iii) of this section), subject to 
subparagraph (I), the term ``target amount'' means--
        (i) with respect to the first 12-month cost reporting period in 
    which this subparagraph is applied to the hospital--
            (I) the allowable operating costs of inpatient hospital 
        services (as defined in subsection (a)(4) of this section) 
        recognized under this subchapter for the hospital for the 12-
        month cost reporting period (in this subparagraph referred to as 
        the ``base cost reporting period'') preceding the first cost 
        reporting period for which this subsection was in effect with 
        respect to such hospital, increased (in a compounded manner) 
        by--
            (II) the applicable percentage increases applied to such 
        hospital under this paragraph for cost reporting periods after 
        the base cost reporting period and up to and including such 
        first 12-month cost reporting period,

        (ii) with respect to a later cost reporting period beginning 
    before fiscal year 1994, the target amount for the preceding 12-
    month cost reporting period, increased by the applicable percentage 
    increase under subparagraph (B)(iv) for discharges occurring in the 
    fiscal year in which that later cost reporting period begins,
        (iii) with respect to discharges occurring in fiscal year 1994, 
    the target amount for the cost reporting period beginning in fiscal 
    year 1993 increased by the applicable percentage increase under 
    subparagraph (B)(iv), or
        (iv) with respect to discharges occurring in fiscal year 1995 
    and each subsequent fiscal year, the target amount for the preceding 
    year increased by the applicable percentage increase under 
    subparagraph (B)(iv).

There shall be substituted for the base cost reporting period described 
in clause (i) a hospital's cost reporting period (if any) beginning 
during fiscal year 1987 if such substitution results in an increase in 
the target amount for the hospital.
    (D) For cost reporting periods ending on or before September 30, 
1994, and for discharges beginning on or after October 1, 1997, and 
before October 1, 2006, in the case of a hospital that is a medicare-
dependent, small rural hospital (as defined in subsection (d)(5)(G) of 
this section), the term ``target amount'' means--
        (i) with respect to the first 12-month cost reporting period in 
    which this subparagraph is applied to the hospital--
            (I) the allowable operating costs of inpatient hospital 
        services (as defined in subsection (a)(4) of this section) 
        recognized under this subchapter for the hospital for the 12-
        month cost reporting period (in this subparagraph referred to as 
        the ``base cost reporting period'') preceding the first cost 
        reporting period for which this subsection was in effect with 
        respect to such hospital, increased (in a compounded manner) 
        by--
            (II) the applicable percentage increases applied to such 
        hospital under this paragraph for cost reporting periods after 
        the base cost reporting period and up to and including such 
        first 12-month cost reporting period, or

        (ii) with respect to a later cost reporting period beginning 
    before fiscal year 1994, the target amount for the preceding 12-
    month cost reporting period, increased by the applicable percentage 
    increase under subparagraph (B)(iv) for discharges occurring in the 
    fiscal year in which that later cost reporting period begins,
        (iii) with respect to discharges occurring in fiscal year 1994, 
    the target amount for the cost reporting period beginning in fiscal 
    year 1993 increased by the applicable percentage increase under 
    subparagraph (B)(iv), and
        (iv) with respect to discharges occurring during fiscal year 
    1998 through fiscal year 2005, the target amount for the preceding 
    year increased by the applicable percentage increase under 
    subparagraph (B)(iv).

There shall be substituted for the base cost reporting period described 
in clause (i) a hospital's cost reporting period (if any) beginning 
during fiscal year 1987 if such substitution results in an increase in 
the target amount for the hospital.
    (E) In the case of a hospital described in clause (v) of subsection 
(d)(1)(B) of this section, the term ``target amount'' means--
        (i) with respect to the first 12-month cost reporting period in 
    which this subparagraph is applied to the hospital--
            (I) the allowable operating costs of inpatient hospital 
        services (as defined in subsection (a)(4) of this section) 
        recognized under this subchapter for the hospital for the 12-
        month cost reporting period (in this subparagraph referred to as 
        the ``base cost reporting period'') preceding the first cost 
        reporting period for which this subsection was in effect with 
        respect to such hospital, increased (in a compounded manner) 
        by--
            (II) the sum of the applicable percentage increases applied 
        to such hospital under this paragraph for cost reporting periods 
        after the base cost reporting period and up to and including 
        such first 12-month cost reporting period, or

        (ii) with respect to a later cost reporting period, the target 
    amount for the preceding 12-month cost reporting period, increased 
    by the applicable percentage increase under subparagraph (B)(ii) for 
    that later cost reporting period.

There shall be substituted for the base cost reporting period described 
in clause (i) a hospital's cost reporting period (if any) beginning 
during fiscal year 1987 if such substitution results in an increase in 
the target amount for the hospital.
    (F)(i) In the case of a hospital (or unit described in the matter 
following clause (v) of subsection (d)(1)(B) of this section) that 
received payment under this subsection for inpatient hospital services 
furnished during cost reporting periods beginning before October 1, 
1990, that is within a class of hospital described in clause (iii), and 
that elects (in a form and manner determined by the Secretary) this 
subparagraph to apply to the hospital, the target amount for the 
hospital's 12-month cost reporting period beginning during fiscal year 
1998 is equal to the average described in clause (ii).
    (ii) The average described in this clause for a hospital or unit 
shall be determined by the Secretary as follows:
        (I) The Secretary shall determine the allowable operating costs 
    for inpatient hospital services for the hospital or unit for each of 
    the 5 cost reporting periods for which the Secretary has the most 
    recent settled cost reports as of August 5, 1997.
        (II) The Secretary shall increase the amount determined under 
    subclause (I) for each cost reporting period by the applicable 
    percentage increase under subparagraph (B)(ii) for each subsequent 
    cost reporting period up to the cost reporting period described in 
    clause (i).
        (III) The Secretary shall identify among such 5 cost reporting 
    periods the cost reporting periods for which the amount determined 
    under subclause (II) is the highest, and the lowest.
        (IV) The Secretary shall compute the averages of the amounts 
    determined under subclause (II) for the 3 cost reporting periods not 
    identified under subclause (III).

    (iii) For purposes of this subparagraph, each of the following shall 
be treated as a separate class of hospital:
        (I) Hospitals described in clause (i) of subsection (d)(1)(B) of 
    this section and psychiatric units described in the matter following 
    clause (v) of such subsection.
        (II) Hospitals described in clause (ii) of such subsection and 
    rehabilitation units described in the matter following clause (v) of 
    such subsection.
        (III) Hospitals described in clause (iii) of such subsection.
        (IV) Hospitals described in clause (iv) of such subsection.
        (V) Hospitals described in clause (v) of such subsection.

    (G)(i) In the case of a qualified long-term care hospital (as 
defined in clause (ii)) that elects (in a form and manner determined by 
the Secretary) this subparagraph to apply to the hospital, the target 
amount for the hospital's 12-month cost reporting period beginning 
during fiscal year 1998 is equal to the allowable operating costs of 
inpatient hospital services (as defined in subsection (a)(4) of this 
section) recognized under this subchapter for the hospital for the 12-
month cost reporting period beginning during fiscal year 1996, increased 
by the applicable percentage increase for the cost reporting period 
beginning during fiscal year 1997.
    (ii) In clause (i), a ``qualified long-term care hospital'' means, 
with respect to a cost reporting period, a hospital described in clause 
(iv) of subsection (d)(1)(B) of this section during each of the 2 cost 
reporting periods for which the Secretary has the most recent settled 
cost reports as of August 5, 1997, for each of which--
        (I) the hospital's allowable operating costs of inpatient 
    hospital services recognized under this subchapter exceeded 115 
    percent of the hospital's target amount, and
        (II) the hospital would have a disproportionate patient 
    percentage of at least 70 percent (as determined by the Secretary 
    under subsection (d)(5)(F)(vi) of this section) if the hospital were 
    a subsection (d) hospital.

    (H)(i) In the case of a hospital or unit that is within a class of 
hospital described in clause (iv), for a cost reporting 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).
    (ii)(I) In the case of a hospital or unit that is within a class of 
hospital described in clause (iv), the Secretary shall estimate the 75th 
percentile of the target amounts for such hospitals within such class 
for cost reporting periods ending during fiscal year 1996, as adjusted 
under clause (iii).
    (II) The Secretary shall update the amount determined under 
subclause (I), for each cost reporting period after the cost reporting 
period described in such subclause and up to the first cost reporting 
period beginning on or after October 1, 1997, by a factor equal to the 
market basket percentage increase.
    (III) For cost reporting periods beginning during each of fiscal 
years 1999 through 2002, the Secretary shall update such amount by a 
factor equal to the market basket percentage increase.
    (iii) In applying clause (ii)(I) in the case of a hospital or unit, 
the Secretary shall provide for an appropriate 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.
    (iv) For purposes of this subparagraph, each of the following shall 
be treated as a separate class of hospital:
        (I) Hospitals described in clause (i) of subsection (d)(1)(B) of 
    this section and psychiatric units described in the matter following 
    clause (v) of such subsection.
        (II) Hospitals described in clause (ii) of such subsection and 
    rehabilitation units described in the matter following clause (v) of 
    such subsection.
        (III) Hospitals described in clause (iv) of such subsection.

    (I)(i) For cost reporting periods beginning on or after October 1, 
2000, in the case of a sole community hospital that for its cost 
reporting period beginning during 1999 is paid on the basis of the 
target amount applicable to the hospital under subparagraph (C) and that 
elects (in a form and manner determined by the Secretary) this 
subparagraph to apply to the hospital, there shall be substituted for 
such target amount--
        (I) with respect to discharges occurring in fiscal year 2001, 75 
    percent of the target amount otherwise applicable to the hospital 
    under subparagraph (C) (referred to in this clause as the 
    ``subparagraph (C) target amount'') and 25 percent of the rebased 
    target amount (as defined in clause (ii));
        (II) with respect to discharges occurring in fiscal year 2002, 
    50 percent of the subparagraph (C) target amount and 50 percent of 
    the rebased target amount;
        (III) with respect to discharges occurring in fiscal year 2003, 
    25 percent of the subparagraph (C) target amount and 75 percent of 
    the rebased target amount; and
        (IV) with respect to discharges occurring after fiscal year 
    2003, 100 percent of the rebased target amount.

    (ii) For purposes of this subparagraph, the ``rebased target 
amount'' has the meaning given the term ``target amount'' in 
subparagraph (C) except that--
        (I) there shall be substituted for the base cost reporting 
    period the 12-month cost reporting period beginning during fiscal 
    year 1996;
        (II) any reference in subparagraph (C)(i) to the ``first cost 
    reporting period'' described in such subparagraph is deemed a 
    reference to the first cost reporting period beginning on or after 
    October 1, 2000; and
        (III) applicable increase percentage shall only be applied under 
    subparagraph (C)(iv) for discharges occurring in fiscal years 
    beginning with fiscal year 2002.

    (4)(A)(i) The Secretary shall provide for an exception and 
adjustment to (and in the case of a hospital described in subsection 
(d)(1)(B)(iii) of this section, may provide an exemption from) the 
method under this subsection for determining the amount of payment to a 
hospital where events beyond the hospital's control or extraordinary 
circumstances, including changes in the case mix of such hospital, 
create a distortion in the increase in costs for a cost reporting period 
(including any distortion in the costs for the base period against which 
such increase is measured). The Secretary may provide for such other 
exemptions from, and exceptions and adjustments to, such method as the 
Secretary deems appropriate, including the assignment of a new base 
period which is more representative, as determined by the Secretary, of 
the reasonable and necessary cost of inpatient services and including 
those which he deems necessary to take into account a decrease in the 
inpatient hospital services that a hospital provides and that are 
customarily provided directly by similar hospitals which results in a 
significant distortion in the operating costs of inpatient hospital 
services. The Secretary shall announce a decision on any request for an 
exemption, exception, or adjustment under this paragraph not later than 
180 days after receiving a completed application from the intermediary 
for such exemption, exception, or adjustment, and shall include in such 
decision a detailed explanation of the grounds on which such request was 
approved or denied.
    (ii) The payment reductions under paragraph (3)(B)(ii)(V) shall not 
be considered by the Secretary in making adjustments pursuant to clause 
(i). In making such reductions, the Secretary shall treat the applicable 
update factor described in paragraph (3)(B)(vi) for a fiscal year as 
being equal to the market basket percentage for that year.
    (B) In determining under subparagraph (A) whether to assign a new 
base period which is more representative of the reasonable and necessary 
cost to a hospital of providing inpatient services, the Secretary shall 
take into consideration--
        (i) changes in applicable technologies and medical practices, or 
    differences in the severity of illness among patients, that increase 
    the hospital's costs;
        (ii) whether increases in wages and wage-related costs for 
    hospitals located in the geographic area in which the hospital is 
    located exceed the average of the increases in such costs paid by 
    hospitals in the United States; and
        (iii) such other factors as the Secretary considers appropriate 
    in determining increases in the hospital's costs of providing 
    inpatient services.

    (C) Paragraph (1) shall not apply to payment of hospitals which is 
otherwise determined under paragraph (3) of section 1395f(b) of this 
title.
    (5) In the case of any hospital having any cost reporting period of 
other than a 12-month period, the Secretary shall determine the 12-month 
period which shall be used for purposes of this section.
    (6) In the case of any hospital which becomes subject to the taxes 
under section 3111 of the Internal Revenue Code of 1986, with respect to 
any or all of its employees, for part or all of a cost reporting period, 
and was not subject to such taxes with respect to any or all of its 
employees for all or part of the 12-month base cost reporting period 
referred to in subsection (b)(3)(A)(i) of this section, the Secretary 
shall provide for an adjustment by increasing the base period amount 
described in such subsection for such hospital by an amount equal to the 
amount of such taxes which would have been paid or accrued by such 
hospital for such base period if such hospital had been subject to such 
taxes for all of such base period with respect to all its employees, 
minus the amount of any such taxes actually paid or accrued for such 
base period.
    (7)(A) Notwithstanding paragraph (1), in the case of a hospital or 
unit that is within a class of hospital described in subparagraph (B) 
which first receives payments under this section on or after October 1, 
1997--
        (i) for each of the first 2 cost reporting periods for which the 
    hospital has a settled cost report, the amount of the payment with 
    respect to operating costs described in paragraph (1) under part A 
    of this subchapter on a per discharge or per admission basis (as the 
    case may be) is equal to the lesser of--
            (I) the amount of operating costs for such respective 
        period, or
            (II) 110 percent of the national median (as estimated by the 
        Secretary) of the target amount for hospitals in the same class 
        as the hospital for cost reporting periods ending during fiscal 
        year 1996, updated by the hospital market basket increase 
        percentage to the fiscal year in which the hospital first 
        received payments under this section, as adjusted under 
        subparagraph (C); and

        (ii) for purposes of computing the target amount for the 
    subsequent cost reporting period, the target amount for the 
    preceding cost reporting period is equal to the amount determined 
    under clause (i) for such preceding period.

    (B) For purposes of this paragraph, each of the following shall be 
treated as a separate class of hospital:
        (i) Hospitals described in clause (i) of subsection (d)(1)(B) of 
    this section and psychiatric units described in the matter following 
    clause (v) of such subsection.
        (ii) Hospitals described in clause (ii) of such subsection and 
    rehabilitation units described in the matter following clause (v) of 
    such subsection.
        (iii) Hospitals described in clause (iv) of such subsection.

    (C) In applying subparagraph (A)(i)(II) in the case of a hospital or 
unit, the Secretary shall provide for an appropriate 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.

(c) Payment in accordance with State hospital reimbursement control 
        system; amount of payment; discontinuance of payments

    (1) The Secretary may provide, in his discretion, that payment with 
respect to services provided by a hospital in a State may be made in 
accordance with a hospital reimbursement control system in a State, 
rather than in accordance with the other provisions of this title, if 
the chief executive officer of the State requests such treatment and 
if--
        (A) the Secretary determines that the system, if approved under 
    this subsection, will apply (i) to substantially all non-Federal 
    acute care hospitals (as defined by the Secretary) in the State and 
    (ii) to the review of at least 75 percent of all revenues or 
    expenses in the State for inpatient hospital services and of 
    revenues or expenses for inpatient hospital services provided under 
    the State's plan approved under subchapter XIX of this chapter;
        (B) the Secretary has been provided satisfactory assurances as 
    to the equitable treatment under the system of all entities 
    (including Federal and State programs) that pay hospitals for 
    inpatient hospital services, of hospital employees, and of hospital 
    patients;
        (C) the Secretary has been provided satisfactory assurances that 
    under the system, over 36-month periods (the first such period 
    beginning with the first month in which this subsection applies to 
    that system in the State), the amount of payments made under this 
    subchapter under such system will not exceed the amount of payments 
    which would otherwise have been made under this subchapter not using 
    such system;
        (D) the Secretary determines that the system will not preclude 
    an eligible organization (as defined in section 1395mm(b) of this 
    title) from negotiating directly with hospitals with respect to the 
    organization's rate of payment for inpatient hospital services; and
        (E) the Secretary determines that the system requires hospitals 
    to meet the requirement of section 1395cc(a)(1)(G) of this title and 
    the system provides for the exclusion of certain costs in accordance 
    with section 1395y(a)(14) of this title (except for such waivers 
    thereof as the Secretary provides by regulation).

The Secretary cannot deny the application of a State under this 
subsection on the ground that the State's hospital reimbursement control 
system is based on a payment methodology other than on the basis of a 
diagnosis-related group or on the ground that the amount of payments 
made under this subchapter under such system must be less than the 
amount of payments which would otherwise have been made under this 
subchapter not using such system. If the Secretary determines that the 
conditions described in subparagraph (C) are based on maintaining 
payment amounts at no more than a specified percentage increase above 
the payment amounts in a base period, the State has the option of 
applying such test (for inpatient hospital services under part A of this 
subchapter) on an aggregate payment basis or on the basis of the amount 
of payment per inpatient discharge or admission. If the Secretary 
determines that the conditions described in subparagraph (C) are based 
on maintaining aggregate payment amounts below a national average 
percentage increase in total payments under part A of this subchapter 
for inpatient hospital services, the Secretary cannot deny the 
application of a State under this subsection on the ground that the 
State's rate of increase in such payments for such services must be less 
than such national average rate of increase.
    (2) In determining under paragraph (1)(C) the amount of payment 
which would otherwise have been made under this subchapter for a State, 
the Secretary may provide for appropriate adjustment of such amount to 
take into account previous reductions effected in the amount of payments 
made under this subchapter in the State due to the operation of the 
hospital reimbursement control system in the State if the system has 
resulted in an aggregate rate of increase in operating costs of 
inpatient hospital services (as defined in subsection (a)(4) of this 
section) under this subchapter for hospitals in the State which is less 
than the aggregate rate of increase in such costs under this subchapter 
for hospitals in the United States.
    (3) The Secretary shall discontinue payments under a system 
described in paragraph (1) if the Secretary--
        (A) determines that the system no longer meets the requirements 
    of subparagraphs (A), (D), and (E) of paragraph (1) and, if 
    applicable, the requirements of paragraph (5), or
        (B) has reason to believe that the assurances described in 
    subparagraph (B) or (C) of paragraph (1) (or, if applicable, in 
    paragraph (5)) are not being (or will not be) met.

    (4) The Secretary shall approve the request of a State under 
paragraph (1) with respect to a hospital reimbursement control system 
if--
        (A) the requirements of subparagraphs (A), (B), (C), (D), and 
    (E) of paragraph (1) have been met with respect to the system, and
        (B) with respect to that system a waiver of certain requirements 
    of this subchapter has been approved on or before (and which is in 
    effect as of) April 20, 1983, pursuant to section 1395b-1(a) of this 
    title or section 222(a) of the Social Security Amendments of 1972.

With respect to a State system described in this paragraph, the 
Secretary shall judge the effectiveness of such system on the basis of 
its rate of increase or inflation in inpatient hospital payments for 
individuals under this subchapter, as compared to the national rate of 
increase or inflation for such payments, with the State retaining the 
option to have the test applied on the basis of the aggregate payments 
under the State system as compared to aggregate payments which would 
have been made under the national system since October 1, 1984, to the 
most recent date for which annual data are available.
    (5) The Secretary shall approve the request of a State under 
paragraph (1) with respect to a hospital reimbursement control system 
if--
        (A) the requirements of subparagraphs (A), (B), (C), (D), and 
    (E) of paragraph (1) have been met with respect to the system;
        (B) the Secretary determines that the system--
            (i) is operated directly by the State or by an entity 
        designated pursuant to State law,
            (ii) provides for payment of hospitals covered under the 
        system under a methodology (which sets forth exceptions and 
        adjustments, as well as any method for changes in the 
        methodology) by which rates or amounts to be paid for hospital 
        services during a specified period are established under the 
        system prior to the defined rate period, and
            (iii) hospitals covered under the system will make such 
        reports (in lieu of cost and other reports, identified by the 
        Secretary, otherwise required under this subchapter) as the 
        Secretary may require in order to properly monitor assurances 
        provided under this subsection;

        (C) the State has provided the Secretary with satisfactory 
    assurances that operation of the system will not result in any 
    change in hospital admission practices which result in--
            (i) a significant reduction in the proportion of patients 
        (receiving hospital services covered under the system) who have 
        no third-party coverage and who are unable to pay for hospital 
        services,
            (ii) a significant reduction in the proportion of 
        individuals admitted to hospitals for inpatient hospital 
        services for which payment is (or is likely to be) less than the 
        anticipated charges for or costs of such services,
            (iii) the refusal to admit patients who would be expected to 
        require unusually costly or prolonged treatment for reasons 
        other than those related to the appropriateness of the care 
        available at the hospital, or
            (iv) the refusal to provide emergency services to any person 
        who is in need of emergency services if the hospital provides 
        such services;

        (D) any change by the State in the system which has the effect 
    of materially reducing payments to hospitals can only take effect 
    upon 60 days notice to the Secretary and to the hospitals the 
    payment to which is likely to be materially affected by the change; 
    and
        (E) the State has provided the Secretary with satisfactory 
    assurances that in the development of the system the State has 
    consulted with local governmental officials concerning the impact of 
    the system on public hospitals.

The Secretary shall respond to requests of States under this paragraph 
within 60 days of the date the request is submitted to the Secretary.
    (6) If the Secretary determines that the assurances described in 
paragraph (1)(C) have not been met with respect to any 36-month period, 
the Secretary may reduce payments under this subchapter to hospitals 
under the system in an amount equal to the amount by which the payment 
under this subchapter under such system for such period exceeded the 
amount of payments which would otherwise have been made under this 
subchapter not using such system.
    (7) In the case of a State which made a request under paragraph (5) 
before December 31, 1984, for the approval of a State hospital 
reimbursement control system and which request was approved--
        (A) in applying paragraphs (1)(C) and (6), a reference to a 
    ``36-month period'' is deemed a reference to a ``48-month period'', 
    and
        (B) in order to allow the State the opportunity to provide the 
    assurances described in paragraph (1)(C) for a 48-month period, the 
    Secretary may not discontinue payments under the system, under the 
    authority of paragraph (3)(A) because the Secretary has reason to 
    believe that such assurances are not being (or will not be) met, 
    before July 1, 1986.

(d) Inpatient hospital service payments on basis of prospective rates; 
        Medicare Geographical Classification Review Board

    (1)(A) Notwithstanding section 1395f(b) of this title but subject to 
the provisions of section 1395e of this title, the amount of the payment 
with respect to the operating costs of inpatient hospital services (as 
defined in subsection (a)(4) of this section) of a subsection (d) 
hospital (as defined in subparagraph (B)) for inpatient hospital 
discharges in a cost reporting period or in a fiscal year--
        (i) beginning on or after October 1, 1983, and before October 1, 
    1984, is equal to the sum of--
            (I) the target percentage (as defined in subparagraph (C)) 
        of the hospital's target amount for the cost reporting period 
        (as defined in subsection (b)(3)(A) of this section, but 
        determined without the application of subsection (a) of this 
        section), and
            (II) the DRG percentage (as defined in subparagraph (C)) of 
        the regional adjusted DRG prospective payment rate determined 
        under paragraph (2) for such discharges;

        (ii) beginning on or after October 1, 1984, and before October 
    1, 1987, is equal to the sum of--
            (I) the target percentage (as defined in subparagraph (C)) 
        of the hospital's target amount for the cost reporting period 
        (as defined in subsection (b)(3)(A) of this section, but 
        determined without the application of subsection (a) of this 
        section), and
            (II) the DRG percentage (as defined in subparagraph (C)) of 
        the applicable combined adjusted DRG prospective payment rate 
        determined under subparagraph (D) for such discharges; or

        (iii) beginning on or after April 1, 1988, is equal to--
            (I) the national adjusted DRG prospective payment rate 
        determined under paragraph (3) for such discharges, or
            (II) for discharges occurring during a fiscal year ending on 
        or before September 30, 1996, the sum of 85 percent of the 
        national adjusted DRG prospective payment rate determined under 
        paragraph (3) for such discharges and 15 percent of the regional 
        adjusted DRG prospective payment rate determined under such 
        paragraph, but only if the average standardized amount 
        (described in clause (i)(I) or clause (ii)(I) of paragraph 
        (3)(D)) for hospitals within the region of, and in the same 
        large urban or other area (or, for discharges occurring during a 
        fiscal year ending on or before September 30, 1994, the same 
        large urban or other area) as, the hospital is greater than the 
        average standardized amount (described in the respective clause) 
        for hospitals within the United States in that type of area for 
        discharges occurring during such fiscal year.

    (B) As used in this section, the term ``subsection (d) hospital'' 
means a hospital located in one of the fifty States or the District of 
Columbia other than--
        (i) a psychiatric hospital (as defined in section 1395x(f) of 
    this title),
        (ii) a rehabilitation hospital (as defined by the Secretary),
        (iii) a hospital whose inpatients are predominantly individuals 
    under 18 years of age,
        (iv)(I) a hospital which has an average inpatient length of stay 
    (as determined by the Secretary) of greater than 25 days, or
        (II) a hospital that first received payment under this 
    subsection in 1986 which has an average inpatient length of stay (as 
    determined by the Secretary) of greater than 20 days and that has 80 
    percent or more of its annual medicare inpatient discharges with a 
    principal diagnosis that reflects a finding of neoplastic disease in 
    the 12-month cost reporting period ending in fiscal year 1997, or
        (v)(I) a hospital that the Secretary has classified, at any time 
    on or before December 31, 1990,\2\ (or, in the case of a hospital 
    that, as of December 19, 1989, is located in a State operating a 
    demonstration project under section 1395f(b) of this title, on or 
    before December 31, 1991) for purposes of applying exceptions and 
    adjustments to payment amounts under this subsection, as a hospital 
    involved extensively in treatment for or research on cancer, or
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    \2\ So in original. The comma probably should not appear.
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        (II) a hospital that was recognized as a comprehensive cancer 
    center or clinical cancer research center by the National Cancer 
    Institute of the National Institutes of Health as of April 20, 1983, 
    that is located in a State which, as of December 19, 1989, was not 
    operating a demonstration project under section 1395f(b) of this 
    title, that applied and was denied, on or before December 31, 1990, 
    for classification as a hospital involved extensively in treatment 
    for or research on cancer under this clause (as in effect on the day 
    before August 5, 1997), that as of August 5, 1997, is licensed for 
    less than 50 acute care beds, and that demonstrates for the 4-year 
    period ending on December 31, 1996, that at least 50 percent of its 
    total discharges have a principal finding of neoplastic disease, as 
    defined in subparagraph (E);

and, in accordance with regulations of the Secretary, does not include a 
psychiatric or rehabilitation unit of the hospital which is a distinct 
part of the hospital (as defined by the Secretary). A hospital that was 
classified by the Secretary on or before September 30, 1995, as a 
hospital described in clause (iv) shall continue to be so classified 
notwithstanding that it is located in the same building as, or on the 
same campus as, another hospital.
    (C) For purposes of this subsection, for cost reporting periods 
beginning--
        (i) on or after October 1, 1983, and before October 1, 1984, the 
    ``target percentage'' is 75 percent and the ``DRG percentage'' is 25 
    percent;
        (ii) on or after October 1, 1984, and before October 1, 1985, 
    the ``target percentage'' is 50 percent and the ``DRG percentage'' 
    is 50 percent;
        (iii) on or after October 1, 1985, and before October 1, 1986, 
    the ``target percentage'' is 45 percent and the ``DRG percentage'' 
    is 55 percent; and
        (iv) on or after October 1, 1986, and before October 1, 1987, 
    the ``target percentage'' is 25 percent and the ``DRG percentage'' 
    is 75 percent.

    (D) For purposes of subparagraph (A)(ii)(II), the ``applicable 
combined adjusted DRG prospective payment rate'' for discharges 
occurring--
        (i) on or after October 1, 1984, and before October 1, 1986, is 
    a combined rate consisting of 25 percent of the national adjusted 
    DRG prospective payment rate, and 75 percent of the regional 
    adjusted DRG prospective payment rate, determined under paragraph 
    (3) for such discharges; and
        (ii) on or after October 1, 1986, and before October 1, 1987, is 
    a combined rate consisting of 50 percent of the national adjusted 
    DRG prospective payment rate, and 50 percent of the regional 
    adjusted DRG prospective payment rate, determined under paragraph 
    (3) for such discharges.

    (E) For purposes of subparagraph (B)(v)(II) only, the term 
``principal finding of neoplastic disease'' means the condition 
established after study to be chiefly responsible for occasioning the 
admission of a patient to a hospital, except that only discharges with 
ICD-9-CM principal diagnosis codes of 140 through 239, V58.0, V58.1, 
V66.1, V66.2, or 990 will be considered to reflect such a principal 
diagnosis.
    (2) The Secretary shall determine a national adjusted DRG 
prospective payment rate, for each inpatient hospital discharge in 
fiscal year 1984 involving inpatient hospital services of a subsection 
(d) hospital in the United States, and shall determine a regional 
adjusted DRG prospective payment rate for such discharges in each 
region, for which payment may be made under part A of this subchapter. 
Each such rate shall be determined for hospitals located in urban or 
rural areas within the United States or within each such region, 
respectively, as follows:
        (A) The Secretary shall determine the allowable operating costs 
    per discharge of inpatient hospital services for the hospital for 
    the most recent cost reporting period for which data are available.
        (B) The Secretary shall update each amount determined under 
    subparagraph (A) for fiscal year 1984 by--
            (i) updating for fiscal year 1983 by the estimated average 
        rate of change of hospital costs industry-wide between the cost 
        reporting period used under such subparagraph and fiscal year 
        1983 and the most recent case-mix data available, and
            (ii) projecting for fiscal year 1984 by the applicable 
        percentage increase (as defined in subsection (b)(3)(B) of this 
        section) for fiscal year 1984.

        (C) The Secretary shall standardize the amount updated under 
    subparagraph (B) for each hospital by--
            (i) excluding an estimate of indirect medical education 
        costs (taking into account, for discharges occurring after 
        September 30, 1986, the amendments made by section 9104(a) of 
        the Medicare and Medicaid Budget Reconciliation Amendments of 
        1985), except that the Secretary shall not take into account any 
        reduction in the amount of additional payments under paragraph 
        (5)(B)(ii) resulting from the amendment made by section 
        4621(a)(1) of the Balanced Budget Act of 1997 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,
            (ii) adjusting for variations among hospitals by area in the 
        average hospital wage level,
            (iii) adjusting for variations in case mix among hospitals, 
        and
            (iv) for discharges occurring on or after October 1, 1986, 
        excluding an estimate of the additional payments to certain 
        hospitals to be made under paragraph (5)(F), except that the 
        Secretary shall not exclude additional payments under such 
        paragraph made as a result of the enactment of section 6003(c) 
        of the Omnibus Budget Reconciliation Act of 1989 or the 
        enactment of section 4002(b) of the Omnibus Budget 
        Reconciliation Act of 1990.

        (D) The Secretary shall compute an average of the standardized 
    amounts determined under subparagraph (C) for the United States and 
    for each region--
            (i) for all subsection (d) hospitals located in an urban 
        area within the United States or that region, respectively, and
            (ii) for all subsection (d) hospitals located in a rural 
        area within the United States or that region, respectively.

    For purposes of this subsection, the term ``region'' means one of 
    the nine census divisions, comprising the fifty States and the 
    District of Columbia, established by the Bureau of the Census for 
    statistical and reporting purposes; the term ``urban area'' means an 
    area within a Metropolitan Statistical Area (as defined by the 
    Office of Management and Budget) or within such similar area as the 
    Secretary has recognized under subsection (a) of this section by 
    regulation; the term ``large urban area'' means, with respect to a 
    fiscal year, such an urban area which the Secretary determines (in 
    the publications described in subsection (e)(5) of this section 
    before the fiscal year) has a population of more than 1,000,000 (as 
    determined by the Secretary based on the most recent available 
    population data published by the Bureau of the Census); and the term 
    ``rural area'' means any area outside such an area or similar area. 
    A hospital located in a Metropolitan Statistical Area shall be 
    deemed to be located in the region in which the largest number of 
    the hospitals in the same Metropolitan Statistical Area are located, 
    or, at the option of the Secretary, the region in which the majority 
    of the inpatient discharges (with respect to which payments are made 
    under this subchapter) from hospitals in the same Metropolitan 
    Statistical Area are made.
        (E) The Secretary shall reduce each of the average standardized 
    amounts determined under subparagraph (D) by a proportion equal to 
    the proportion (estimated by the Secretary) of the amount of 
    payments under this subsection based on DRG prospective payment 
    rates which are additional payments described in paragraph (5)(A) 
    (relating to outlier payments).
        (F) The Secretary shall adjust each of such average standardized 
    amounts as may be required under subsection (e)(1)(B) of this 
    section for that fiscal year.
        (G) For each discharge classified within a diagnosis-related 
    group, the Secretary shall establish a national DRG prospective 
    payment rate and shall establish a regional DRG prospective payment 
    rate for each region, each of which is equal--
            (i) for hospitals located in an urban area in the United 
        States or that region (respectively), to the product of--
                (I) the average standardized amount (computed under 
            subparagraph (D), reduced under subparagraph (E), and 
            adjusted under subparagraph (F)) for hospitals located in an 
            urban area in the United States or that region, and
                (II) the weighting factor (determined under paragraph 
            (4)(B)) for that diagnosis-related group; and

            (ii) for hospitals located in a rural area in the United 
        States or that region (respectively), to the product of--
                (I) the average standardized amount (computed under 
            subparagraph (D), reduced under subparagraph (E), and 
            adjusted under subparagraph (F)) for hospitals located in a 
            rural area in the United States or that region, and
                (II) the weighting factor (determined under paragraph 
            (4)(B)) for that diagnosis-related group.

        (H) The Secretary shall adjust the proportion, (as estimated by 
    the Secretary from time to time) of hospitals' costs which are 
    attributable to wages and wage-related costs, of the national and 
    regional DRG prospective payment rates computed under subparagraph 
    (G) for area differences in hospital wage levels by a factor 
    (established by the Secretary) reflecting the relative hospital wage 
    level in the geographic area of the hospital compared to the 
    national average hospital wage level.

    (3) The Secretary shall determine a national adjusted DRG 
prospective payment rate, for each inpatient hospital discharge in a 
fiscal year after fiscal year 1984 involving inpatient hospital services 
of a subsection (d) hospital in the United States, and shall determine a 
regional adjusted DRG prospective payment rate for such discharges in 
each region for which payment may be made under part A of this 
subchapter. Each such rate shall be determined for hospitals located in 
large urban, other urban, or rural areas within the United States and 
within each such region, respectively, as follows:
        (A)(i) For discharges occurring in a fiscal year beginning 
    before October 1, 1987, the Secretary shall compute an average 
    standardized amount for hospitals located in an urban area and for 
    hospitals located in a rural area within the United States and for 
    hospitals located in an urban area and for hospitals located in a 
    rural area within each region, equal to the respective average 
    standardized amount computed for the previous fiscal year under 
    paragraph (2)(D) or under this subparagraph, increased for the 
    fiscal year involved by the applicable percentage increase under 
    subsection (b)(3)(B) of this section. With respect to discharges 
    occurring on or after October 1, 1987, the Secretary shall compute 
    urban and rural averages on the basis of discharge weighting rather 
    than hospital weighting, making appropriate adjustments to ensure 
    that computation on such basis does not result in total payments 
    under this section that are greater or less than the total payments 
    that would have been made under this section but for this sentence, 
    and making appropriate changes in the manner of determining the 
    reductions under subparagraph (C)(ii).
        (ii) For discharges occurring in a fiscal year beginning on or 
    after October 1, 1987, and ending on or before September 30, 1994, 
    the Secretary shall compute an average standardized amount for 
    hospitals located in a large urban area, for hospitals located in a 
    rural area, and for hospitals located in other urban areas, within 
    the United States and within each region, equal to the respective 
    average standardized amount computed for the previous fiscal year 
    under this subparagraph increased by the applicable percentage 
    increase under subsection (b)(3)(B)(i) of this section with respect 
    to hospitals located in the respective areas for the fiscal year 
    involved.
        (iii) For discharges occurring in the fiscal year beginning on 
    October 1, 1994, the average standardized amount for hospitals 
    located in a rural area shall be equal to the average standardized 
    amount for hospitals located in an other \3\ urban area. For 
    discharges occurring on or after October 1, 1994, the Secretary 
    shall adjust the ratio of the labor portion to non-labor portion of 
    each average standardized amount to equal such ratio for the 
    national average of all standardized amounts.
---------------------------------------------------------------------------
    \3\ So in original. Probably should be ``another''.
---------------------------------------------------------------------------
        (iv) For discharges occurring in a fiscal year beginning on or 
    after October 1, 1995, the Secretary shall compute an average 
    standardized amount for hospitals located in a large urban area and 
    for hospitals located in other areas within the United States and 
    within each region equal to the respective average standardized 
    amount computed for the previous fiscal year under this subparagraph 
    increased by the applicable percentage increase under subsection 
    (b)(3)(B)(i) of this section with respect to hospitals located in 
    the respective areas for the fiscal year involved.
        (v) Average standardized amounts computed under this paragraph 
    shall be adjusted to reflect the most recent case-mix data 
    available.
        (B) The Secretary shall reduce each of the average standardized 
    amounts determined under subparagraph (A) by a factor equal to the 
    proportion of payments under this subsection (as estimated by the 
    Secretary) based on DRG prospective payment amounts which are 
    additional payments described in paragraph (5)(A) (relating to 
    outlier payments).
        (C)(i) For discharges occurring in fiscal year 1985, the 
    Secretary shall adjust each of such average standardized amounts as 
    may be required under subsection (e)(1)(B) of this section for that 
    fiscal year.
        (ii) For discharges occurring after September 30, 1986, the 
    Secretary shall further reduce each of the average standardized 
    amounts (in a proportion which takes into account the differing 
    effects of the standardization effected under paragraph (2)(C)(i)) 
    so as to provide for a reduction in the total of the payments 
    (attributable to this paragraph) made for discharges occurring on or 
    after October 1, 1986, of an amount equal to the estimated reduction 
    in the payment amounts under paragraph (5)(B) that would have 
    resulted from the enactment of the amendments made by section 9104 
    of the Medicare and Medicaid Budget Reconciliation Amendments of 
    1985 and by section 4003(a)(1) of the Omnibus Budget Reconciliation 
    Act of 1987 if the factor described in clause (ii)(II) of paragraph 
    (5)(B) (determined without regard to amendments made by the Omnibus 
    Budget Reconciliation Act of 1990) were applied for discharges 
    occurring on or after such date instead of the factor described in 
    clause (ii) of that paragraph.
        (D) For each discharge classified within a diagnosis-related 
    group, the Secretary shall establish for the fiscal year a national 
    DRG prospective payment rate and shall establish a regional DRG 
    prospective payment rate for each region, each of which is equal--
            (i) for hospitals located in a large urban area in the 
        United States or that region (respectively), to the product of--
                (I) the average standardized amount (computed under 
            subparagraph (A), reduced under subparagraph (B), and 
            adjusted or reduced under subparagraph (C)) for the fiscal 
            year for hospitals located in such a large urban area in the 
            United States or that region, and
                (II) the weighting factor (determined under paragraph 
            (4)(B)) for that diagnosis-related group; and

            (ii) for hospitals located in other areas in the United 
        States or that region (respectively), to the product of--
                (I) the average standardized amount (computed under 
            subparagraph (A), reduced under subparagraph (B), and 
            adjusted or reduced under subparagraph (C)) for the fiscal 
            year for hospitals located in other areas in the United 
            States or that region, and
                (II) the weighting factor (determined under paragraph 
            (4)(B)) for that diagnosis-related group.

        (E) The Secretary shall adjust the proportion, (as estimated by 
    the Secretary from time to time) of hospitals' costs which are 
    attributable to wages and wage-related costs, of the DRG prospective 
    payment rates computed under subparagraph (D) for area differences 
    in hospital wage levels by a factor (established by the Secretary) 
    reflecting the relative hospital wage level in the geographic area 
    of the hospital compared to the national average hospital wage 
    level. Not later than October 1, 1990, and October 1, 1993 (and at 
    least every 12 months thereafter), the Secretary shall update the 
    factor under the preceding sentence on the basis of a survey 
    conducted by the Secretary (and updated as appropriate) of the wages 
    and wage-related costs of subsection (d) hospitals in the United 
    States. To the extent determined feasible by the Secretary, such 
    survey shall measure the earnings and paid hours of employment by 
    occupational category and shall exclude data with respect to the 
    wages and wage-related costs incurred in furnishing skilled nursing 
    facility services. Any adjustments or updates made under this 
    subparagraph for a fiscal year (beginning with fiscal year 1991) 
    shall be made in a manner that assures that the aggregate payments 
    under this subsection in the fiscal year are not greater or less 
    than those that would have been made in the year without such 
    adjustment.

    (4)(A) The Secretary shall establish a classification of inpatient 
hospital discharges by diagnosis-related groups and a methodology for 
classifying specific hospital discharges within these groups.
    (B) For each such diagnosis-related group the Secretary shall assign 
an appropriate weighting factor which reflects the relative hospital 
resources used with respect to discharges classified within that group 
compared to discharges classified within other groups.
    (C)(i) The Secretary shall adjust the classifications and weighting 
factors established under subparagraphs (A) and (B), for discharges in 
fiscal year 1988 and at least annually thereafter, to reflect changes in 
treatment patterns, technology, and other factors which may change the 
relative use of hospital resources.
    (ii) For discharges in fiscal year 1990, the Secretary shall reduce 
the weighting factor for each diagnosis-related group by 1.22 percent.
    (iii) Any such adjustment under clause (i) for discharges in a 
fiscal year (beginning with fiscal year 1991) shall be made in a manner 
that assures that the aggregate payments under this subsection for 
discharges in the fiscal year are not greater or less than those that 
would have been made for discharges in the year without such adjustment.
    (iv) The Secretary shall include recommendations with respect to 
adjustments to weighting factors under clause (i) in the annual report 
to Congress required under subsection (e)(3)(B) \4\ of this section.
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    \4\ See References in Text note below.
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    (5)(A)(i) For discharges occurring during fiscal years ending on or 
before September 30, 1997, the Secretary shall provide for an additional 
payment for a subsection (d) hospital for any discharge in a diagnosis-
related group, the length of stay of which exceeds the mean length of 
stay for discharges within that group by a fixed number of days, or 
exceeds such mean length of stay by some fixed number of standard 
deviations, whichever is the fewer number of days.
    (ii) For cases which are not included in clause (i), a subsection 
(d) hospital may request additional payments in any case where charges, 
adjusted to cost, exceed a fixed multiple of the applicable DRG 
prospective payment rate, or exceed such other fixed dollar amount, 
whichever is greater, or, for discharges in fiscal years beginning on or 
after October 1, 1994, exceed the sum of the applicable DRG prospective 
payment rate plus any amounts payable under subparagraphs (B) and (F) 
plus a fixed dollar amount determined by the Secretary.
    (iii) The amount of such additional payment under clauses (i) and 
(ii) shall be determined by the Secretary and shall (except as payments 
under clause (i) are required to be reduced to take into account the 
requirements of clause (v)) approximate the marginal cost of care beyond 
the cutoff point applicable under clause (i) or (ii).
    (iv) The total amount of the additional payments made under this 
subparagraph for discharges in a fiscal year may not be less than 5 
percent nor more than 6 percent of the total payments projected or 
estimated to be made based on DRG prospective payment rates for 
discharges in that year.
    (v) The Secretary shall provide that--
        (I) the day outlier percentage for fiscal year 1995 shall be 75 
    percent of the day outlier percentage for fiscal year 1994;
        (II) the day outlier percentage for fiscal year 1996 shall be 50 
    percent of the day outlier percentage for fiscal year 1994; and
        (III) the day outlier percentage for fiscal year 1997 shall be 
    25 percent of the day outlier percentage for fiscal year 1994.

    (vi) For purposes of this subparagraph, the term ``day outlier 
percentage'' means, for a fiscal year, the percentage of the total 
additional payments made by the Secretary under this subparagraph for 
discharges in that fiscal year which are additional payments under 
clause (i).
    (B) The Secretary shall provide for an additional payment amount for 
subsection (d) hospitals with indirect costs of medical education, in an 
amount computed in the same manner as the adjustment for such costs 
under regulations (in effect as of January 1, 1983) under subsection 
(a)(2) of this section, except as follows:
        (i) The amount of such additional payment shall be determined by 
    multiplying (I) the sum of the amount determined under paragraph 
    (1)(A)(ii)(II) (or, if applicable, the amount determined under 
    paragraph (1)(A)(iii)) and, for cases qualifying for additional 
    payment under subparagraph (A)(i), the amount paid to the hospital 
    under subparagraph (A), by (II) the indirect teaching adjustment 
    factor described in clause (ii).
        (ii) For purposes of clause (i)(II), the indirect teaching 
    adjustment factor is equal to c  x  (((1+r) to the nth power) -1), 
    where ``r'' is the ratio of the hospital's full-time equivalent 
    interns and residents to beds and ``n'' equals .405. For discharges 
    occurring--
            (I) on or after October 1, 1988, and before October 1, 1997, 
        ``c'' is equal to 1.89;
            (II) during fiscal year 1998, ``c'' is equal to 1.72;
            (III) during fiscal year 1999, ``c'' is equal to 1.6;
            (IV) during fiscal year 2000, ``c'' is equal to 1.47;
            (V) during fiscal year 2001, ``c'' is equal to 1.54; and
            (VI) on or after October 1, 2001, ``c'' is equal to 1.35.

        (iii) In determining such adjustment the Secretary shall not 
    distinguish between those interns and residents who are employees of 
    a hospital and those interns and residents who furnish services to a 
    hospital but are not employees of such hospital.
        (iv) Effective for discharges occurring on or after October 1, 
    1997, all the time spent by an intern or resident in patient care 
    activities under an approved medical residency training program at 
    an entity in a nonhospital setting shall be counted towards the 
    determination of full-time equivalency if the hospital incurs all, 
    or substantially all, of the costs for the training program in that 
    setting.
        (v) In determining the adjustment with respect to a hospital for 
    discharges occurring on or after October 1, 1997, the total number 
    of full-time equivalent interns and residents in the fields of 
    allopathic and osteopathic medicine in either a hospital or 
    nonhospital setting may not exceed the number (or, 130 percent of 
    such number in the case of a hospital located in a rural area) of 
    such full-time equivalent interns and residents in the hospital with 
    respect to the hospital's most recent cost reporting period ending 
    on or before December 31, 1996. Rules similar to the rules of 
    subsection (h)(4)(F)(ii) of this section shall apply for purposes of 
    this clause.
        (vi) For purposes of clause (ii)--
            (I) ``r'' may not exceed the ratio of the number of interns 
        and residents, subject to the limit under clause (v), with 
        respect to the hospital for its most recent cost reporting 
        period to the hospital's available beds (as defined by the 
        Secretary) during that cost reporting period, and
            (II) for the hospital's cost reporting periods beginning on 
        or after October 1, 1997, subject to the limits described in 
        clauses (iv) and (v), the total number of full-time equivalent 
        residents for payment purposes shall equal the average of the 
        actual full-time equivalent resident count for the cost 
        reporting period and the preceding two cost reporting periods.

    In the case of the first cost reporting period beginning on or after 
    October 1, 1997, subclause (II) shall be applied by using the 
    average for such period and the preceding cost reporting period.
        (vii) If any cost reporting period beginning on or after October 
    1, 1997, is not equal to twelve months, the Secretary shall make 
    appropriate modifications to ensure that the average full-time 
    equivalent residency count pursuant to subclause (II) of clause (vi) 
    is based on the equivalent of full twelve-month cost reporting 
    periods.
        (viii) Rules similar to the rules of subsection (h)(4)(H) shall 
    apply for purposes of clauses (v) and (vi).

    (C)(i) The Secretary shall provide for such exceptions and 
adjustments to the payment amounts established under this subsection 
(other than under paragraph (9)) as the Secretary deems appropriate to 
take into account the special needs of regional and national referral 
centers (including those hospitals of 275 or more beds located in rural 
areas). A hospital which is classified as a rural hospital may appeal to 
the Secretary to be classified as a rural referral center under this 
clause on the basis of criteria (established by the Secretary) which 
shall allow the hospital to demonstrate that it should be so 
reclassified by reason of certain of its operating characteristics being 
similar to those of a typical urban hospital located in the same census 
region and which shall not require a rural osteopathic hospital to have 
more than 3,000 discharges in a year in order to be classified as a 
rural referral center. Such characteristics may include wages, scope of 
services, service area, and the mix of medical specialties. The 
Secretary shall publish the criteria not later than August 17, 1984, for 
implementation by October 1, 1984. An appeal allowed under this clause 
must be submitted to the Secretary (in such form and manner as the 
Secretary may prescribe) during the quarter before the first quarter of 
the hospital's cost reporting period (or, in the case of a cost 
reporting period beginning during October 1984, during the first quarter 
of that period), and the Secretary must make a final determination with 
respect to such appeal within 60 days after the date the appeal was 
submitted. Any payment adjustments necessitated by a reclassification 
based upon the appeal shall be effective at the beginning of such cost 
reporting period.
    (ii) The Secretary shall provide, under clause (i), for the 
classification of a rural hospital as a regional referral center if the 
hospital has a case mix index equal to or greater than the median case 
mix index for hospitals (other than hospitals with approved teaching 
programs) located in an urban area in the same region (as defined in 
paragraph (2)(D)), has at least 5,000 discharges a year or, if less, the 
median number of discharges in urban hospitals in the region in which 
the hospital is located (or, in the case of a rural osteopathic 
hospital, meets the criterion established by the Secretary under clause 
(i) with respect to the annual number of discharges for such hospitals), 
and meets any other criteria established by the Secretary under clause 
(i).
    (D)(i) For any cost reporting period beginning on or after April 1, 
1990, with respect to a subsection (d) hospital which is a sole 
community hospital, payment under paragraph (1)(A) shall be--
        (I) an amount based on 100 percent of the hospital's target 
    amount for the cost reporting period, as defined in subsection 
    (b)(3)(C) of this section, or
        (II) the amount determined under paragraph (1)(A)(iii),

whichever results in greater payment to the hospital.
    (ii) In the case of a sole community hospital that experiences, in a 
cost reporting period compared to the previous cost reporting period, a 
decrease of more than 5 percent in its total number of inpatient cases 
due to circumstances beyond its control, the Secretary shall provide for 
such adjustment to the payment amounts under this subsection (other than 
under paragraph (9)) as may be necessary to fully compensate the 
hospital for the fixed costs it incurs in the period in providing 
inpatient hospital services, including the reasonable cost of 
maintaining necessary core staff and services.
    (iii) For purposes of this subchapter, the term ``sole community 
hospital'' means any hospital--
        (I) that the Secretary determines is located more than 35 road 
    miles from another hospital,
        (II) that, by reason of factors such as the time required for an 
    individual to travel to the nearest alternative source of 
    appropriate inpatient care (in accordance with standards promulgated 
    by the Secretary), location, weather conditions, travel conditions, 
    or absence of other like hospitals (as determined by the Secretary), 
    is the sole source of inpatient hospital services reasonably 
    available to individuals in a geographic area who are entitled to 
    benefits under part A of this subchapter, or
        (III) that is located in a rural area and designated by the 
    Secretary as an essential access community hospital under section 
    1395i-4(i)(1) of this title as in effect on September 30, 1997.

    (iv) The Secretary shall promulgate a standard for determining 
whether a hospital meets the criteria for classification as a sole 
community hospital under clause (iii)(II) because of the time required 
for an individual to travel to the nearest alternative source of 
appropriate inpatient care.
    (v) If the Secretary determines that, in the case of a hospital 
located in a rural area and designated by the Secretary as an essential 
access community hospital under section 1395i-4(i)(1) of this title as 
in effect on September 30, 1997, the hospital has incurred increases in 
reasonable costs during a cost reporting period as a result of becoming 
a member of a rural health network (as defined in section 1395i-4(d) of 
this title) in the State in which it is located, and in incurring such 
increases, the hospital will increase its costs for subsequent cost 
reporting periods, the Secretary shall increase the hospital's target 
amount under subsection (b)(3)(C) of this section to account for such 
incurred increases.
    (E)(i) The Secretary shall estimate the amount of reimbursement made 
for services described in section 1395y(a)(14) of this title with 
respect to which payment was made under part B of this subchapter in the 
base reporting periods referred to in paragraph (2)(A) and with respect 
to which payment is no longer being made.
    (ii) The Secretary shall provide for an adjustment to the payment 
for subsection (d) hospitals in each fiscal year so as appropriately to 
reflect the net amount described in clause (i).
    (F)(i) For discharges occurring on or after May 1, 1986, and before 
October 1, 1997, the Secretary shall provide, in accordance with this 
subparagraph, for an additional payment amount for each subsection (d) 
hospital which--
        (I) serves a significantly disproportionate number of low-income 
    patients (as defined in clause (v)), or
        (II) is located in an urban area, has 100 or more beds, and can 
    demonstrate that its net inpatient care revenues (excluding any of 
    such revenues attributable to this subchapter or State plans 
    approved under subchapter XIX of this chapter), during the cost 
    reporting period in which the discharges occur, for indigent care 
    from State and local government sources exceed 30 percent of its 
    total of such net inpatient care revenues during the period.

    (ii) Subject to clause (ix), the amount of such payment for each 
discharge shall be determined by multiplying (I) the sum of the amount 
determined under paragraph (1)(A)(ii)(II) (or, if applicable, the amount 
determined under paragraph (1)(A)(iii)) and, for cases qualifying for 
additional payment under subparagraph (A)(i), the amount paid to the 
hospital under subparagraph (A) for that discharge, by (II) the 
disproportionate share adjustment percentage established under clause 
(iii) or (iv) for the cost reporting period in which the discharge 
occurs.
    (iii) The disproportionate share adjustment percentage for a cost 
reporting period for a hospital described in clause (i)(II) is equal to 
35 percent.
    (iv) The disproportionate share adjustment percentage for a cost 
reporting period for a hospital that is not described in clause (i)(II) 
and that--
        (I) is located in an urban area and has 100 or more beds or is 
    described in the second sentence of clause (v), is equal to the 
    percent determined in accordance with the applicable formula 
    described in clause (vii);
        (II) is located in an urban area and has less than 100 beds, is 
    equal to 5 percent;
        (III) is located in a rural area and is not described in 
    subclause (IV) or (V) or in the second sentence of clause (v), is 
    equal to 4 percent;
        (IV) is located in a rural area, is classified as a rural 
    referral center under subparagraph (C), and is classified as a sole 
    community hospital under subparagraph (D), is equal to 10 percent 
    or, if greater, the percent determined in accordance with the 
    applicable formula described in clause (viii);
        (V) is located in a rural area, is classified as a rural 
    referral center under subparagraph (C), and is not classified as a 
    sole community hospital under subparagraph (D), is equal to the 
    percent determined in accordance with the applicable formula 
    described in clause (viii); or
        (VI) is located in a rural area, is classified as a sole 
    community hospital under subparagraph (D), and is not classified as 
    a rural referral center under subparagraph (C), is 10 percent.

    (v) In this subparagraph, a hospital ``serves a significantly 
disproportionate number of low income patients'' for a cost reporting 
period if the hospital has a disproportionate patient percentage (as 
defined in clause (vi)) for that period which equals, or exceeds--
        (I) 15 percent, if the hospital is located in an urban area and 
    has 100 or more beds,
        (II) 30 percent, if the hospital is located in a rural area and 
    has more than 100 beds, or is located in a rural area and is 
    classified as a sole community hospital under subparagraph (D),
        (III) 40 percent, if the hospital is located in an urban area 
    and has less than 100 beds, or
        (IV) 45 percent, if the hospital is located in a rural area and 
    is not described in subclause (II).

A hospital located in a rural area and with 500 or more beds also 
``serves a significantly disproportionate number of low income 
patients'' for a cost reporting period if the hospital has a 
disproportionate patient percentage (as defined in clause (vi)) for that 
period which equals or exceeds a percentage specified by the Secretary.
    (vi) In this subparagraph, the term ``disproportionate patient 
percentage'' means, with respect to a cost reporting period of a 
hospital, the sum of--
        (I) the fraction (expressed as a percentage), the numerator of 
    which is the number of such hospital's patient days for such period 
    which were made up of patients who (for such days) were entitled to 
    benefits under part A of this subchapter and were entitled to 
    supplementary security income benefits (excluding any State 
    supplementation) under subchapter XVI of this chapter, and the 
    denominator of which is the number of such hospital's patient days 
    for such fiscal year which were made up of patients who (for such 
    days) were entitled to benefits under part A of this subchapter, and
        (II) the fraction (expressed as a percentage), the numerator of 
    which is the number of the hospital's patient days for such period 
    which consist of patients who (for such days) were eligible for 
    medical assistance under a State plan approved under subchapter XIX 
    of this chapter, but who were not entitled to benefits under part A 
    of this subchapter, and the denominator of which is the total number 
    of the hospital's patient days for such period.

    (vii) The formula used to determine the disproportionate share 
adjustment percentage for a cost reporting period for a hospital 
described in clause (iv)(I) is--
        (I) in the case of such a hospital with a disproportionate 
    patient percentage (as defined in clause (vi)) greater than 20.2--
            (a) for discharges occurring on or after April 1, 1990, and 
        on or before December 31, 1990, (P-20.2)(.65) + 5.62,
            (b) for discharges occurring on or after January 1, 1991, 
        and on or before September 30, 1993, (P-20.2)(.7) + 5.62,
            (c) for discharges occurring on or after October 1, 1993, 
        and on or before September 30, 1994, (P-20.2)(.8) + 5.88, and
            (d) for discharges occurring on or after October 1, 1994, 
        (P-20.2)(.825) + 5.88; or

        (II) in the case of any other such hospital--
            (a) for discharges occurring on or after April 1, 1990, and 
        on or before December 31, 1990, (P-15)(.6) + 2.5,
            (b) for discharges occurring on or after January 1, 1991, 
        and on or before September 30, 1993, (P-15)(.6) + 2.5,\5\
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    \5\ So in original. Probably should be followed by ``and''.
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            (c) for discharges occurring on or after October 1, 1993, 
        (P-15)(.65) + 2.5,

where ``P'' is the hospital's disproportionate patient percentage (as 
defined in clause (vi)).
    (viii) The formula used to determine the disproportionate share 
adjustment percentage for a cost reporting period for a hospital 
described in clause (iv)(IV) or (iv)(V) is the percentage determined in 
accordance with the following formula: (P-30)(.6)+4.0, where ``P'' is 
the hospital's disproportionate patient percentage (as defined in clause 
(vi)).
    (ix) In the case of discharges occurring--
        (I) during fiscal year 1998, the additional payment amount 
    otherwise determined under clause (ii) shall be reduced by 1 
    percent;
        (II) during fiscal year 1999, such additional payment amount 
    shall be reduced by 2 percent;
        (III) during each of fiscal years 2000 and 2001, such additional 
    payment amount shall be reduced by 3 percent;
        (IV) during fiscal year 2002, such additional payment amount 
    shall be reduced by 4 percent; and
        (V) during fiscal year 2003 and each subsequent fiscal year, 
    such additional payment amount shall be reduced by 0 percent.

    (G)(i) For any cost reporting period beginning on or after April 1, 
1990, and before October 1, 1994, or discharges occurring on or after 
October 1, 1997, and before October 1, 2006, in the case of a subsection 
(d) hospital which is a medicare-dependent, small rural hospital, 
payment under paragraph (1)(A) shall be equal to the sum of the amount 
determined under clause (ii) and the amount determined under paragraph 
(1)(A)(iii).
    (ii) The amount determined under this clause is--
        (I) for discharges occurring during the 36-month period 
    beginning with the first day of the cost reporting period that 
    begins on or after April 1, 1990, the amount by which the hospital's 
    target amount for the cost reporting period (as defined in 
    subsection (b)(3)(D) of this section) exceeds the amount determined 
    under paragraph (1)(A)(iii); and
        (II) for discharges occurring during any subsequent cost 
    reporting period (or portion thereof) and before October 1, 1994, or 
    discharges occurring on or after October 1, 1997, and before October 
    1, 2006, 50 percent of the amount by which the hospital's target 
    amount for the cost reporting period (as defined in subsection 
    (b)(3)(D) of this section) exceeds the amount determined under 
    paragraph (1)(A)(iii).

    (iii) In the case of a medicare dependent, small rural hospital that 
experiences, in a cost reporting period compared to the previous cost 
reporting period, a decrease of more than 5 percent in its total number 
of inpatient cases due to circumstances beyond its control, the 
Secretary shall provide for such adjustment to the payment amounts under 
this subsection (other than under paragraph (9)) as may be necessary to 
fully compensate the hospital for the fixed costs it incurs in the 
period in providing inpatient hospital services, including the 
reasonable cost of maintaining necessary core staff and services.
    (iv) The term ``medicare-dependent, small rural hospital'' means, 
with respect to any cost reporting period to which clause (i) applies, 
any hospital--
        (I) located in a rural area,
        (II) that has not more than 100 beds,
        (III) that is not classified as a sole community hospital under 
    subparagraph (D), and
        (IV) for which not less than 60 percent of its inpatient days or 
    discharges during the cost reporting period beginning in fiscal year 
    1987 were attributable to inpatients entitled to benefits under part 
    A of this subchapter.

    (H) The Secretary may provide for such adjustments to the payment 
amounts under this subsection as the Secretary deems appropriate to take 
into account the unique circumstances of hospitals located in Alaska and 
Hawaii.
    (I)(i) The Secretary shall provide by regulation for such other 
exceptions and adjustments to such payment amounts under this subsection 
as the Secretary deems appropriate.
    (ii) In making adjustments under clause (i) for transfer cases (as 
defined by the Secretary) in a fiscal year, not taking in account the 
effect of subparagraph (J), the Secretary may make adjustments to each 
of the average standardized amounts determined under paragraph (3) to 
assure that the aggregate payments made under this subsection for such 
fiscal year are not greater or lesser than those that would have 
otherwise been made in such fiscal year.
    (J)(i) The Secretary shall treat the term ``transfer case'' (as 
defined in subparagraph (I)(ii)) as including the case of a qualified 
discharge (as defined in clause (ii)), which is classified within a 
diagnosis-related group described in clause (iii), and which occurs on 
or after October 1, 1998. In the case of a qualified discharge for which 
a substantial portion of the costs of care are incurred in the early 
days of the inpatient stay (as defined by the Secretary), in no case may 
the payment amount otherwise provided under this subsection exceed an 
amount equal to the sum of--
        (I) 50 percent of the amount of payment under this subsection 
    for transfer cases (as established under subparagraph (I)(i)), and
        (II) 50 percent of the amount of payment which would have been 
    made under this subsection with respect to the qualified discharge 
    if no transfer were involved.

    (ii) For purposes of clause (i), subject to clause (iii), the term 
``qualified discharge'' means a discharge classified with a diagnosis-
related group (described in clause (iii)) of an individual from a 
subsection (d) hospital, if upon such discharge the individual--
        (I) is admitted as an inpatient to a hospital or hospital unit 
    that is not a subsection (d) hospital for the provision of inpatient 
    hospital services;
        (II) is admitted to a skilled nursing facility;
        (III) is provided home health services from a home health 
    agency, if such services relate to the condition or diagnosis for 
    which such individual received inpatient hospital services from the 
    subsection (d) hospital, and if such services are provided within an 
    appropriate period (as determined by the Secretary); or
        (IV) for discharges occurring on or after October 1, 2000, the 
    individual receives post discharge services described in clause 
    (iv)(I).

    (iii) Subject to clause (iv), a diagnosis-related group described in 
this clause is--
        (I) 1 of 10 diagnosis-related groups selected by the Secretary 
    based upon a high volume of discharges classified within such groups 
    and a disproportionate use of post discharge services described in 
    clause (ii); and
        (II) a diagnosis-related group specified by the Secretary under 
    clause (iv)(II).

    (iv) The Secretary shall include in the proposed rule published 
under subsection (e)(5)(A) of this section for fiscal year 2001, a 
description of the effect of this subparagraph. The Secretary may 
include in the proposed rule (and in the final rule published under 
paragraph (6)) for fiscal year 2001 or a subsequent fiscal year, a 
description of--
        (I) post-discharge services not described in subclauses (I), 
    (II), and (III) of clause (ii), the receipt of which results in a 
    qualified discharge; and
        (II) diagnosis-related groups described in clause (iii)(I) in 
    addition to the 10 selected under such clause.

    (6) The Secretary shall provide for publication in the Federal 
Register, on or before the August 1 before each fiscal year (beginning 
with fiscal year 1984), of a description of the methodology and data 
used in computing the adjusted DRG prospective payment rates under this 
subsection, including any adjustments required under subsection 
(e)(1)(B) of this section.
    (7) There shall be no administrative or judicial review under 
section 1395oo of this title or otherwise of--
        (A) the determination of the requirement, or the proportional 
    amount, of any adjustment effected pursuant to subsection (e)(1) of 
    this section, and
        (B) the establishment of diagnosis-related groups, of the 
    methodology for the classification of discharges within such groups, 
    and of the appropriate weighting factors thereof under paragraph 
    (4).

    (8)(A) In the case of any hospital which is located in an area which 
is, at any time after April 20, 1983, reclassified from an urban to a 
rural area, payments to such hospital for the first two cost reporting 
periods for which such reclassification is effective shall be made as 
follows:
        (i) For the first such cost reporting period, payment shall be 
    equal to the amount payable to such hospital for such reporting 
    period on the basis of the rural classification, plus an amount 
    equal to two-thirds of the amount (if any) by which--
            (I) the amount which would have been payable to such 
        hospital for such reporting period on the basis of an urban 
        classification, exceeds
            (II) the amount payable to such hospital for such reporting 
        period on the basis of the rural classification.

        (ii) For the second such cost reporting period, payment shall be 
    equal to the amount payable to such hospital for such reporting 
    period on the basis of the rural classification, plus an amount 
    equal to one-third of the amount (if any) by which--
            (I) the amount which would have been payable to such 
        hospital for such reporting period on the basis of an urban 
        classification, exceeds
            (II) the amount payable to such hospital for such reporting 
        period on the basis of the rural classification.

    (B)(i) For purposes of this subsection, the Secretary shall treat a 
hospital located in a rural county adjacent to one or more urban areas 
as being located in the urban metropolitan statistical area to which the 
greatest number of workers in the county commute, if the rural county 
would otherwise be considered part of an urban area, under the standards 
for designating Metropolitan Statistical Areas (and for designating New 
England County Metropolitan Areas) described in clause (ii), if the 
commuting rates used in determining outlying counties (or, for New 
England, similar recognized areas) were determined on the basis of the 
aggregate number of resident workers who commute to (and, if applicable 
under the standards, from) the central county or counties of all 
contiguous Metropolitan Statistical Areas (or New England County 
Metropolitan Areas).
    (ii) The standards described in this clause for cost reporting 
periods beginning in a fiscal year--
        (I) before fiscal year 2003, are the standards published in the 
    Federal Register on January 3, 1980, or, at the election of the 
    hospital with respect to fiscal years 2001 and 2002, standards so 
    published on March 30, 1990; and
        (II) after fiscal year 2002, are the standards published in the 
    Federal Register by the Director of the Office of Management and 
    Budget based on the most recent available decennial population data.

Subparagraphs (C) and (D) shall not apply with respect to the 
application of subclause (I).
    (C)(i) If the application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or the Secretary under 
paragraph (10), by treating hospitals located in a rural county or 
counties as being located in an urban area, or by treating hospitals 
located in one urban area as being located in another urban area--
        (I) reduces the wage index for that urban area (as applied under 
    this subsection) by 1 percentage point or less, the Secretary, in 
    calculating such wage index under this subsection, shall exclude 
    those hospitals so treated, or
        (II) reduces the wage index for that urban area by more than 1 
    percentage point (as applied under this subsection), the Secretary 
    shall calculate and apply such wage index under this subsection 
    separately to hospitals located in such urban area (excluding all 
    the hospitals so treated) and to the hospitals so treated (as if 
    such hospitals were located in such urban area).

    (ii) If the application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or the Secretary under 
paragraph (10), by treating hospitals located in a rural county or 
counties as not being located in the rural area in a State, reduces the 
wage index for that rural area (as applied under this subsection), the 
Secretary shall calculate and apply such wage index under this 
subsection as if the hospitals so treated had not been excluded from 
calculation of the wage index for that rural area.
    (iii) The application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or the Secretary under 
paragraph (10) may not result in the reduction of any county's wage 
index to a level below the wage index for rural areas in the State in 
which the county is located.
    (iv) The application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or of the Secretary 
under paragraph (10) may not result in a reduction in an urban area's 
wage index if--
        (I) the urban area has a wage index below the wage index for 
    rural areas in the State in which it is located; or
        (II) the urban area is located in a State that is composed of a 
    single urban area.

    (v) This subparagraph shall apply with respect to discharges 
occurring in a fiscal year only if the Secretary uses a method for 
making adjustments to the DRG prospective payment rate for area 
differences in hospital wage levels under paragraph (3)(E) for the 
fiscal year that is based on the use of Metropolitan Statistical Area 
classifications.
    (D) The Secretary shall make a proportional adjustment in the 
standardized amounts determined under paragraph (3) to assure that the 
provisions of subparagraphs (B) and (C) or a decision of the Medicare 
Geographic Classification Review Board or the Secretary under paragraph 
(10) do not result in aggregate payments under this section that are 
greater or less than those that would otherwise be made.
    (E)(i) For purposes of this subsection, not later than 60 days after 
the receipt of an application (in a form and manner determined by the 
Secretary) from a subsection (d) hospital described in clause (ii), the 
Secretary shall treat the hospital as being located in the rural area 
(as defined in paragraph (2)(D)) of the State in which the hospital is 
located.
    (ii) For purposes of clause (i), a subsection (d) hospital described 
in this clause is a subsection (d) hospital that is located in an urban 
area (as defined in paragraph (2)(D)) and satisfies any of the following 
criteria:
        (I) The hospital is located in a rural census tract of a 
    metropolitan statistical area (as determined under the most recent 
    modification of the Goldsmith Modification, originally published in 
    the Federal Register on February 27, 1992 (57 Fed. Reg. 6725)).
        (II) The hospital is located in an area designated by any law or 
    regulation of such State as a rural area (or is designated by such 
    State as a rural hospital).
        (III) The hospital would qualify as a rural, regional, or 
    national referral center under paragraph (5)(C) or as a sole 
    community hospital under paragraph (5)(D) if the hospital were 
    located in a rural area.
        (IV) The hospital meets such other criteria as the Secretary may 
    specify.

    (9)(A) Notwithstanding section 1395f(b) of this title but subject to 
the provisions of section 1395e of this title, the amount of the payment 
with respect to the operating costs of inpatient hospital services of a 
subsection (d) Puerto Rico hospital for inpatient hospital discharges is 
equal to the sum of--
        (i) for discharges beginning on or after October 1, 1997, 50 
    percent (and for discharges between October 1, 1987, and September 
    30, 1997, 75 percent) of the Puerto Rico adjusted DRG prospective 
    payment rate (determined under subparagraph (B) or (C)) for such 
    discharges, and
        (ii) for discharges beginning in a fiscal year beginning on or 
    after October 1, 1997, 50 percent (and for discharges between 
    October 1, 1987, and September 30, 1997, 25 percent) of the 
    discharge-weighted average of--
            (I) the national adjusted DRG prospective payment rate 
        (determined under paragraph (3)(D)) for hospitals located in a 
        large urban area,
            (II) such rate for hospitals located in other urban areas, 
        and
            (III) such rate for hospitals located in a rural area,

    for such discharges, adjusted in the manner provided in paragraph 
    (3)(E) for different area wage levels. As used in this section, the 
    term ``subsection (d) Puerto Rico hospital'' means a hospital that 
    is located in Puerto Rico and that would be a subsection (d) 
    hospital (as defined in paragraph (1)(B)) if it were located in one 
    of the fifty States.

    (B) The Secretary shall determine a Puerto Rico adjusted DRG 
prospective payment rate, for each inpatient hospital discharge in 
fiscal year 1988 involving inpatient hospital services of a subsection 
(d) Puerto Rico hospital for which payment may be made under part A of 
this subchapter. Such rate shall be determined for such hospitals 
located in urban or rural areas within Puerto Rico, as follows:
        (i) The Secretary shall determine the target amount (as defined 
    in subsection (b)(3)(A) of this section) for the hospital for the 
    cost reporting period beginning in fiscal year 1987 and increase 
    such amount by prorating the applicable percentage increase (as 
    defined in subsection (b)(3)(B) of this section) to update the 
    amount to the midpoint in fiscal year 1988.
        (ii) The Secretary shall standardize the amount determined under 
    clause (i) for each hospital by--
            (I) excluding an estimate of indirect medical education 
        costs,
            (II) adjusting for variations among hospitals by area in the 
        average hospital wage level,
            (III) adjusting for variations in case mix among hospitals, 
        and
            (IV) excluding an estimate of the additional payments to 
        certain subsection (d) Puerto Rico hospitals to be made under 
        subparagraph (D)(iii) (relating to disproportionate share 
        payments).

        (iii) The Secretary shall compute a discharge weighted average 
    of the standardized amounts determined under clause (ii) for all 
    hospitals located in an urban area and for all hospitals located in 
    a rural area (as such terms are defined in paragraph (2)(D)).
        (iv) The Secretary shall reduce the average standardized amount 
    by a proportion equal to the proportion (estimated by the Secretary) 
    of the amount of payments under this paragraph which are additional 
    payments described in subparagraph (D)(i) (relating to outlier 
    payments).
        (v) For each discharge classified within a diagnosis-related 
    group for hospitals located in an urban or rural area, respectively, 
    the Secretary shall establish a Puerto Rico DRG prospective payment 
    rate equal to the product of--
            (I) the average standardized amount (computed under clause 
        (iii) and reduced under clause (iv)) for hospitals located in an 
        urban or rural area, respectively, and
            (II) the weighting factor (determined under paragraph 
        (4)(B)) for that diagnosis-related group.

        (vi) The Secretary shall adjust the proportion (as estimated by 
    the Secretary from time to time) of hospitals' costs which are 
    attributable to wages and wage-related costs, of the Puerto Rico DRG 
    prospective payment rate computed under clause (v) for area 
    differences in hospital wage levels by a factor (established by the 
    Secretary) reflecting the relative hospital wage level in the 
    geographic area of the hospital compared to the Puerto Rican average 
    hospital wage level.

    (C) The Secretary shall determine a Puerto Rico adjusted DRG 
prospective payment rate, for each inpatient hospital discharge after 
fiscal year 1988 involving inpatient hospital services of a subsection 
(d) Puerto Rico hospital for which payment may be made under part A of 
this subchapter. Such rate shall be determined for hospitals located in 
urban or rural areas within Puerto Rico as follows:
        (i) The Secretary shall compute an average standardized amount 
    for hospitals located in an urban area and for hospitals located in 
    a rural area equal to the respective average standardized amount 
    computed for the previous fiscal year under subparagraph (B)(iii) or 
    under this clause, increased for fiscal year 1989 by the applicable 
    percentage increase under subsection (b)(3)(B) of this section, and 
    adjusted for subsequent fiscal years in accordance with the final 
    determination of the Secretary under subsection (e)(4) of this 
    section, and adjusted to reflect the most recent case-mix data 
    available.
        (ii) The Secretary shall reduce each of the average standardized 
    amounts by a proportion equal to the proportion (estimated by the 
    Secretary) of the amount of payments under this paragraph which are 
    additional payments described in subparagraph (D)(i) (relating to 
    outlier payments).
        (iii) For each discharge classified within a diagnosis-related 
    group for hospitals located in an urban or rural area, respectively, 
    the Secretary shall establish a Puerto Rico DRG prospective payment 
    rate equal to the product of--
            (I) the average standardized amount (computed under clause 
        (i) and reduced under clause (ii)) for hospitals located in an 
        urban or rural area, respectively, and
            (II) the weighting factor (determined under paragraph 
        (4)(B)) for that diagnosis-related group.

        (iv) The Secretary shall adjust the proportion (as estimated by 
    the Secretary from time to time) of hospitals' costs which are 
    attributable to wages and wage-related costs, of the Puerto Rico DRG 
    prospective payment rate computed under clause (iii) for area 
    differences in hospital wage levels by a factor (established by the 
    Secretary) reflecting the relative hospital wage level in the 
    geographic area of the hospital compared to the Puerto Rico average 
    hospital wage level. The second and third sentences of paragraph 
    (3)(E) shall apply to subsection (d) Puerto Rico hospitals under 
    this clause in the same manner as they apply to subsection (d) 
    hospitals under such paragraph and, for purposes of this clause, any 
    reference in such paragraph to a subsection (d) hospital is deemed a 
    reference to a subsection (d) Puerto Rico hospital.

    (D) The following provisions of paragraph (5) shall apply to 
subsection (d) Puerto Rico hospitals receiving payment under this 
paragraph in the same manner and to the extent as they apply to 
subsection (d) hospitals receiving payment under this subsection:
        (i) Subparagraph (A) (relating to outlier payments).
        (ii) Subparagraph (B) (relating to payments for indirect medical 
    education costs), except that for this purpose the sum of the amount 
    determined under subparagraph (A) of this paragraph and the amount 
    paid to the hospital under clause (i) of this subparagraph shall be 
    substituted for the sum referred to in paragraph (5)(B)(i)(I).
        (iii) Subparagraph (F) (relating to disproportionate share 
    payments), except that for this purpose the sum described in clause 
    (ii) of this subparagraph shall be substituted for the sum referred 
    to in paragraph (5)(F)(ii)(I).
        (iv) Subparagraph (H) (relating to exceptions and adjustments).

    (10)(A) There is hereby established the Medicare Geographic 
Classification Review Board (hereinafter in this paragraph referred to 
as the ``Board'').
    (B)(i) The Board shall be composed of 5 members appointed by the 
Secretary without regard to the provisions of title 5, governing 
appointments in the competitive service. Two of such members shall be 
representative of subsection (d) hospitals located in a rural area under 
paragraph (2)(D). At least 1 member shall be knowledgeable in the field 
of analyzing costs with respect to the provision of inpatient hospital 
services.
    (ii) The Secretary shall make initial appointments to the Board as 
provided in this paragraph within 180 days after December 19, 1989.
    (C)(i) The Board shall consider the application of any subsection 
(d) hospital requesting that the Secretary change the hospital's 
geographic classification for purposes of determining for a fiscal 
year--
        (I) the hospital's average standardized amount under paragraph 
    (2)(D), or
        (II) the factor used to adjust the DRG prospective payment rate 
    for area differences in hospital wage levels that applies to such 
    hospital under paragraph (3)(E).

    (ii) A hospital requesting a change in geographic classification 
under clause (i) for a fiscal year shall submit its application to the 
Board not later than the first day of the 13-month period ending on 
September 30 of the preceding fiscal year.
    (iii)(I) The Board shall render a decision on an application 
submitted under clause (i) not later than 180 days after the deadline 
referred to in clause (ii).
    (II) Appeal of decisions of the Board shall be subject to the 
provisions of section 557b \6\ of title 5. The Secretary shall issue a 
decision on such an appeal not later than 90 days after the date on 
which the appeal is filed. The decision of the Secretary shall be final 
and shall not be subject to judicial review.
---------------------------------------------------------------------------
    \6\ So in original. Probably should be section ``557(b)''.
---------------------------------------------------------------------------
    (D)(i) The Secretary shall publish guidelines to be utilized by the 
Board in rendering decisions on applications submitted under this 
paragraph, and shall include in such guidelines the following:
        (I) Guidelines for comparing wages, taking into account (to the 
    extent the Secretary determines appropriate) occupational mix, in 
    the area in which the hospital is classified and the area in which 
    the hospital is applying to be classified.
        (II) Guidelines for determining whether the county in which the 
    hospital is located should be treated as being a part of a 
    particular Metropolitan Statistical Area.
        (III) Guidelines for considering information provided by an 
    applicant with respect to the effects of the hospital's geographic 
    classification on access to inpatient hospital services by medicare 
    beneficiaries.
        (IV) Guidelines for considering the appropriateness of the 
    criteria used to define New England County Metropolitan Areas.

    (ii) Notwithstanding clause (i), if the Secretary uses a method for 
making adjustments to the DRG prospective payment rate for area 
differences in hospital wage levels under paragraph (3)(E) that is not 
based on the use of Metropolitan Statistical Area classifications, the 
Secretary may revise the guidelines published under clause (i) to the 
extent such guidelines are used to determine the appropriateness of the 
geographic area in which the hospital is determined to be located for 
purposes of making such adjustments.
    (iii) Under the guidelines published by the Secretary under clause 
(i), in the case of a hospital which has ever been classified by the 
Secretary as a rural referral center under paragraph (5)(C), the Board 
may not reject the application of the hospital under this paragraph on 
the basis of any comparison between the average hourly wage of the 
hospital and the average hourly wage of hospitals in the area in which 
it is located.
    (iv) The Secretary shall publish the guidelines described in clause 
(i) by July 1, 1990.
    (E)(i) The Board shall have full power and authority to make rules 
and establish procedures, not inconsistent with the provisions of this 
subchapter or regulations of the Secretary, which are necessary or 
appropriate to carry out the provisions of this paragraph. In the course 
of any hearing the Board may administer oaths and affirmations. The 
provisions of subsections (d) and (e) of section 405 of this title with 
respect to subpenas shall apply to the Board to the same extent as such 
provisions apply to the Secretary with respect to subchapter II of this 
chapter.
    (ii) The Board is authorized to engage such technical assistance and 
to receive such information as may be required to carry out its 
functions, and the Secretary shall, in addition, make available to the 
Board such secretarial, clerical, and other assistance as the Board may 
require to carry out its functions.
    (F)(i) Each member of the Board who is not an officer or employee of 
the Federal Government shall be compensated at a rate equal to the daily 
equivalent of the annual rate of basic pay prescribed for grade GS-18 of 
the General Schedule under section 5332 of title 5 for each day 
(including travel time) during which such member is engaged in the 
performance of the duties of the Board. Each member of the Board who is 
an officer or employee of the United States shall serve without 
compensation in addition to that received for service as an officer or 
employee of the United States.
    (ii) Members of the Board shall be allowed travel expenses, 
including per diem in lieu of subsistence, at rates authorized for 
employees of agencies under subchapter I of chapter 57 of title 5, while 
away from their homes or regular places of business in the performance 
of services for the Board.
    (11) Additional payments for managed care enrollees.--
        (A) In general.--For portions of cost reporting periods 
    occurring on or after January 1, 1998, the Secretary shall provide 
    for an additional payment amount for each applicable discharge of 
    any subsection (d) hospital that has an approved medical residency 
    training program.
        (B) Applicable discharge.--For purposes of this paragraph, the 
    term ``applicable discharge'' means the discharge of any individual 
    who is enrolled under a risk-sharing contract with an eligible 
    organization under section 1395mm of this title and who is entitled 
    to benefits under part A of this subchapter or any individual who is 
    enrolled with a Medicare+
    Choice organization under part C of this subchapter.
        (C) Determination of amount.--The amount of the payment under 
    this paragraph with respect to any applicable discharge shall be 
    equal to the applicable percentage (as defined in subsection 
    (h)(3)(D)(ii) of this section) of the estimated average per 
    discharge amount that would otherwise have been paid under paragraph 
    (5)(B) if the individuals had not been enrolled as described in 
    subparagraph (B).
        (D) Special rule for hospitals under reimbursement system.--The 
    Secretary shall establish rules for the application of this 
    paragraph to a hospital reimbursed under a reimbursement system 
    authorized under section 1395f(b)(3) of this title in the same 
    manner as it would apply to the hospital if it were not reimbursed 
    under such section.

(e) Proportional adjustments in applicable percentage increases

    (1)(A) For cost reporting periods of hospitals beginning in fiscal 
year 1984 or fiscal year 1985, the Secretary shall provide for such 
proportional adjustment in the applicable percentage increase (otherwise 
applicable to the periods under subsection (b)(3)(B) of this section) as 
may be necessary to assure that--
        (i) the aggregate payment amounts otherwise provided under 
    subsection (d)(1)(A)(i)(I) of this section for that fiscal year for 
    operating costs of inpatient hospital services of hospitals 
    (excluding payments made under section 1395cc(a)(1)(F) of this 
    title),

are not greater or less than--
        (ii) the target percentage (as defined in subsection (d)(1)(C) 
    of this section) of the payment amounts which would have been 
    payable for such services for those same hospitals for that fiscal 
    year under this section under the law as in effect before April 20, 
    1983 (excluding payments made under section 1395cc(a)(1)(F) of this 
    title);

except that the adjustment made under this subparagraph shall apply only 
to subsection (d) hospitals and shall not apply for purposes of making 
computations under subsection (d)(2)(B)(ii) of this section or 
subsection (d)(3)(A) of this section.
    (B) For discharges occurring in fiscal year 1984 or fiscal year 
1985, the Secretary shall provide under subsections (d)(2)(F) and 
(d)(3)(C) of this section for such equal proportional adjustment in each 
of the average standardized amounts otherwise computed for that fiscal 
year as may be necessary to assure that--
        (i) the aggregate payment amounts otherwise provided under 
    subsection (d)(1)(A)(i)(II) and (d)(5) of this section for that 
    fiscal year for operating costs of inpatient hospital services of 
    hospitals (excluding payments made under section 1395cc(a)(1)(F) of 
    this title),

are not greater or less than--
        (ii) the DRG percentage (as defined in subsection (d)(1)(C) of 
    this section) of the payment amounts which would have been payable 
    for such services for those same hospitals for that fiscal year 
    under this section under the law as in effect before April 20, 1983 
    (excluding payments made under section 1395cc(a)(1)(F) of this 
    title).

    (C) For discharges occurring in fiscal year 1988, the Secretary 
shall provide for such equal proportional adjustment in each of the 
average standardized amounts otherwise computed under subsection (d)(3) 
of this section for that fiscal year as may be necessary to assure 
that--
        (i) the aggregate payment amounts otherwise provided under 
    subsections (d)(1)(A)(iii), (d)(5), and (d)(9) of this section for 
    that fiscal year for operating costs of inpatient hospital services 
    of subsection (d) hospitals and subsection (d) Puerto Rico 
    hospitals,

are not greater or less than--
        (ii) the payment amounts that would have been payable for such 
    services for those same hospitals for that fiscal year but for the 
    enactment of the amendments made by section 9304 of the Omnibus 
    Budget Reconciliation Act of 1986.

    (2) Repealed. Pub. L. 105-33, title IV, Sec. 4022(b)(1)(A)(i), Aug. 
5, 1997, 111 Stat. 354.
    (3) The Secretary, not later than April 1, 1987, for fiscal year 
1988 and not later than March 1 before the beginning of each fiscal year 
(beginning with fiscal year 1989), shall report to the Congress the 
Secretary's initial estimate of the percentage change that the Secretary 
will recommend under paragraph (4) with respect to that fiscal year.
    (4)(A) Taking into consideration the recommendations of the 
Commission, the Secretary shall recommend for each fiscal year 
(beginning with fiscal year 1988) an appropriate change factor for 
inpatient hospital services for discharges in that fiscal year which 
will take into account amounts necessary for the efficient and effective 
delivery of medically appropriate and necessary care of high quality. 
The appropriate change factor may be different for all large urban 
subsection (d) hospitals, other urban subsection (d) hospitals, urban 
subsection (d) Puerto Rico hospitals, rural subsection (d) hospitals, 
and rural subsection (d) Puerto Rico hospitals, and all other hospitals 
and units not paid under subsection (d) of this section, and may vary 
among such other hospitals and units.
    (B) In addition to the recommendation made under subparagraph (A), 
the Secretary shall, taking into consideration the recommendations of 
the Commission under paragraph (2)(B), recommend for each fiscal year 
(beginning with fiscal year 1992) other appropriate changes in each 
existing reimbursement policy under this subchapter under which payments 
to an institution are based upon prospectively determined rates.
    (5) The Secretary shall cause to have published in the Federal 
Register, not later than--
        (A) the April 1 before each fiscal year (beginning with fiscal 
    year 1986), the Secretary's proposed recommendations under paragraph 
    (4) for that fiscal year for public comment, and
        (B) the August 1 before such fiscal year after such 
    consideration of public comment on the proposal as is feasible in 
    the time available, the Secretary's final recommendations under such 
    paragraph for that year.

The Secretary shall include in the publication referred to in 
subparagraph (A) for a fiscal year the report of the Commission's 
recommendations submitted under paragraph (3) for that fiscal year. To 
the extent that the Secretary's recommendations under paragraph (4) 
differ from the Commission's recommendations for that fiscal year, the 
Secretary shall include in the publication referred to in subparagraph 
(A) an explanation of the Secretary's grounds for not following the 
Commission's recommendations.

(f) Reporting of costs of hospitals receiving payments on basis of 
        prospective rates

    (1)(A) The Secretary shall maintain a system for the reporting of 
costs of hospitals receiving payments computed under subsection (d) of 
this section.
    (B)(i) Subject to clause (ii), the Secretary shall place into effect 
a standardized electronic cost reporting format for hospitals under this 
subchapter.
    (ii) The Secretary may delay or waive the implementation of such 
format in particular instances where such implementation would result in 
financial hardship (in particular with respect to hospitals with a small 
percentage of inpatients entitled to benefits under this subchapter).
    (2) If the Secretary determines, based upon information supplied by 
a utilization and quality control peer review organization under part B 
of subchapter XI of this chapter, that a hospital, in order to 
circumvent the payment method established under subsection (b) or (d) of 
this section, has taken an action that results in the admission of 
individuals entitled to benefits under part A unnecessarily, unnecessary 
multiple admissions of the same such individuals, or other inappropriate 
medical or other practices with respect to such individuals, the 
Secretary may--
        (A) deny payment (in whole or in part) under part A of this 
    subchapter with respect to inpatient hospital services provided with 
    respect to such an unnecessary admission (or subsequent admission of 
    the same individual), or
        (B) require the hospital to take other corrective action 
    necessary to prevent or correct the inappropriate practice.

    (3) The provisions of subsections (c) through (g) of section 1320a-7 
of this title shall apply to determinations made under paragraph (2) in 
the same manner as they apply to exclusions effected under section 
1320a-7(b)(13) of this title.

(g) Prospective payment for capital-related costs; return on equity 
        capital for hospitals

    (1)(A) Notwithstanding section 1395x(v) of this title, instead of 
any amounts that are otherwise payable under this subchapter with 
respect to the reasonable costs of subsection (d) hospitals and 
subsection (d) Puerto Rico hospitals for capital-related costs of 
inpatient hospital services, the Secretary shall, for hospital cost 
reporting periods beginning on or after October 1, 1991, provide for 
payments for such costs in accordance with a prospective payment system 
established by the Secretary. Aggregate payments made under subsection 
(d) of this section and this subsection during fiscal years 1992 through 
1995 shall be reduced in a manner that results in a reduction (as 
estimated by the Secretary) in the amount of such payments equal to a 10 
percent reduction in the amount of payments attributable to capital-
related costs that would otherwise have been made during such fiscal 
year had the amount of such payments been based on reasonable costs (as 
defined in section 1395x(v) of this title). For discharges occurring 
after September 30, 1993, the Secretary shall reduce by 7.4 percent the 
unadjusted standard Federal capital payment rate (as described in 42 CFR 
412.308(c), as in effect on August 10, 1993) and shall (for hospital 
cost reporting periods beginning on or after October 1, 1993) 
redetermine which payment methodology is applied to the hospital under 
such system to take into account such reduction. In addition to the 
reduction described in the preceding sentence, for discharges occurring 
on or after October 1, 1997, the Secretary shall apply the budget 
neutrality adjustment factor used to determine the Federal capital 
payment rate in effect on September 30, 1995 (as described in section 
412.352 of title 42 of the Code of Federal Regulations), to (i) the 
unadjusted standard Federal capital payment rate (as described in 
section 412.308(c) of that title, as in effect on September 30, 1997), 
and (ii) the unadjusted hospital-specific rate (as described in section 
412.328(e)(1) of that title, as in effect on September 30, 1997), and, 
for discharges occurring on or after October 1, 1997, and before October 
1, 2002, reduce the rates described in clauses (i) and (ii) by 2.1 
percent.
    (B) Such system--
        (i) shall provide for (I) a payment on a per discharge basis, 
    and (II) an appropriate weighting of such payment amount as relates 
    to the classification of the discharge;
        (ii) may provide for an adjustment to take into account 
    variations in the relative costs of capital and construction for the 
    different types of facilities or areas in which they are located;
        (iii) may provide for such exceptions (including appropriate 
    exceptions to reflect capital obligations) as the Secretary 
    determines to be appropriate, and
        (iv) may provide for suitable adjustment to reflect hospital 
    occupancy rate.

    (C) In this paragraph, the term ``capital-related costs'' has the 
meaning given such term by the Secretary under subsection (a)(4) of this 
section as of September 30, 1987, and does not include a return on 
equity capital.
    (2)(A) The Secretary shall provide that the amount which is 
allowable, with respect to reasonable costs of inpatient hospital 
services for which payment may be made under this subchapter, for a 
return on equity capital for hospitals shall, for cost reporting periods 
beginning on or after April 20, 1983, be equal to amounts otherwise 
allowable under regulations in effect on March 1, 1983, except that the 
rate of return to be recognized shall be equal to the applicable 
percentage (described in subparagraph (B)) of the average of the rates 
of interest, for each of the months any part of which is included in the 
reporting period, on obligations issued for purchase by the Federal 
Hospital Insurance Trust Fund.
    (B) In this paragraph, the ``applicable percentage'' is--
        (i) 75 percent, for cost reporting periods beginning during 
    fiscal year 1987,
        (ii) 50 percent, for cost reporting periods beginning during 
    fiscal year 1988,
        (iii) 25 percent, for cost reporting periods beginning during 
    fiscal year 1989, and
        (iv) 0 percent, for cost reporting periods beginning on or after 
    October 1, 1989.

    (3)(A) Except as provided in subparagraph (B), in determining the 
amount of the payments that may be made under this subchapter with 
respect to all the capital-related costs of inpatient hospital services 
of a subsection (d) hospital and a subsection (d) Puerto Rico hospital, 
the Secretary shall reduce the amounts of such payments otherwise 
established under this subchapter by--
        (i) 3.5 percent for payments attributable to portions of cost 
    reporting periods occurring during fiscal year 1987,
        (ii) 7 percent for payments attributable to portions of cost 
    reporting periods or discharges (as the case may be) occurring 
    during fiscal year 1988 on or after October 1, 1987, and before 
    January 1, 1988,
        (iii) 12 percent for payments attributable to portions of cost 
    reporting periods or discharges (as the case may be) in fiscal year 
    1988, occurring on or after January 1, 1988,
        (iv) 15 percent for payments attributable to portions of cost 
    reporting periods or discharges (as the case may be) occurring 
    during fiscal year 1989, and
        (v) 15 percent for payments attributable to portions of cost 
    reporting periods or discharges (as the case may be) occurring 
    during the period beginning January 1, 1990, and ending September 
    30, 1991.

    (B) Subparagraph (A) shall not apply to payments with respect to the 
capital-related costs of any hospital that is a sole community hospital 
(as defined in subsection (d)(5)(D)(iii) of this section \7\ or a 
critical access hospital (as defined in section 1395x(mm)(1) of this 
title).
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    \7\ So in original. Probably should be followed by a closing 
parenthesis.
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    (4) In determining the amount of the payments that are attributable 
to portions of cost reporting periods occurring during fiscal years 1998 
through 2002 and that may be made under this subchapter with respect to 
capital-related costs of inpatient hospital services of a hospital which 
is described in clause (i), (ii), or (iv) of subsection (d)(1)(B) of 
this section or a unit described in the matter after clause (v) of such 
subsection, the Secretary shall reduce the amounts of such payments 
otherwise determined under this subchapter by 15 percent.

(h) Payments for direct graduate medical education costs

              (1) Substitution of special payment rules

        Notwithstanding section 1395x(v) of this title, instead of any 
    amounts that are otherwise payable under this subchapter with 
    respect to the reasonable costs of hospitals for direct graduate 
    medical education costs, the Secretary shall provide for payments 
    for such costs in accordance with paragraph (3) of this subsection. 
    In providing for such payments, the Secretary shall provide for an 
    allocation of such payments between part A and part B of this 
    subchapter (and the trust funds established under the respective 
    parts) as reasonably reflects the proportion of direct graduate 
    medical education costs of hospitals associated with the provision 
    of services under each respective part.

    (2) Determination of hospital-specific approved FTE resident 
                                   amounts

        The Secretary shall determine, for each hospital with an 
    approved medical residency training program, an approved FTE 
    resident amount for each cost reporting period beginning on or after 
    July 1, 1985, as follows:

        (A) Determining allowable average cost per FTE resident in a 
                hospital's base period

            The Secretary shall determine, for the hospital's cost 
        reporting period that began during fiscal year 1984, the average 
        amount recognized as reasonable under this subchapter for direct 
        graduate medical education costs of the hospital for each full-
        time-equivalent resident.

        (B) Updating to the first cost reporting period

            (i) In general

                The Secretary shall update each average amount 
            determined under subparagraph (A) by the percentage increase 
            in the consumer price index during the 12-month cost 
            reporting period described in such subparagraph.
            (ii) Exception

                The Secretary shall not perform an update under clause 
            (i) in the case of a hospital if the hospital's reporting 
            period, described in subparagraph (A), began on or after 
            July 1, 1984, and before October 1, 1984.

        (C) Amount for first cost reporting period

            For the first cost reporting period of the hospital 
        beginning on or after July 1, 1985, the approved FTE resident 
        amount for the hospital is equal to the amount determined under 
        subparagraph (B) increased by 1 percent.

        (D) Amount for subsequent cost reporting periods

            (i) In general

                Except as provided in a subsequent clause, for each 
            subsequent cost reporting period, the approved FTE resident 
            amount for the hospital is equal to the approved FTE 
            resident amount determined under this paragraph for the 
            previous cost reporting period updated, through the midpoint 
            of the period, by projecting the estimated percentage change 
            in the consumer price index during the 12-month period 
            ending at that midpoint, with appropriate adjustments to 
            reflect previous under- or over-estimations under this 
            subparagraph in the projected percentage change in the 
            consumer price index.
            (ii) Freeze in update for fiscal years 1994 and 1995

                For cost reporting periods beginning during fiscal year 
            1994 or fiscal year 1995, the approved FTE resident amount 
            for a hospital shall not be updated under clause (i) for a 
            resident who is not a primary care resident (as defined in 
            paragraph (5)(H)) or a resident enrolled in an approved 
            medical residency training program in obstetrics and 
            gynecology.
            (iii) Floor in fiscal year 2001 at 70 percent of 
                    locality adjusted national average per 
                    resident amount

                The approved FTE resident amount for a hospital for the 
            cost reporting period beginning during fiscal year 2001 
            shall not be less than 70 percent of the locality adjusted 
            national average per resident amount computed under 
            subparagraph (E) for the hospital and period.
            (iv) Adjustment in rate of increase for hospitals 
                    with FTE approved amount above 140 percent 
                    of locality adjusted national average per 
                    resident amount

                (I) Freeze for fiscal years 2001 and 2002

                    For a cost reporting period beginning during fiscal 
                year 2001 or fiscal year 2002, if the approved FTE 
                resident amount for a hospital for the preceding cost 
                reporting period exceeds 140 percent of the locality 
                adjusted national average per resident amount computed 
                under subparagraph (E) for that hospital and period, 
                subject to subclause (III), the approved FTE resident 
                amount for the period involved shall be the same as the 
                approved FTE resident amount for the hospital for such 
                preceding cost reporting period.
                (II) 2 percent decrease in update for fiscal 
                        years 2003, 2004, and 2005

                    For a cost reporting period beginning during fiscal 
                year 2003, fiscal year 2004, or fiscal year 2005, if the 
                approved FTE resident amount for a hospital for the 
                preceding cost reporting period exceeds 140 percent of 
                the locality adjusted national average per resident 
                amount computed under subparagraph (E) for that hospital 
                and preceding period, the approved FTE resident amount 
                for the period involved shall be updated in the manner 
                described in subparagraph (D)(i) except that, subject to 
                subclause (III), the consumer price index applied for a 
                12-month period shall be reduced (but not below zero) by 
                2 percentage points.
                (III) No adjustment below 140 percent

                    In no case shall subclause (I) or (II) reduce an 
                approved FTE resident amount for a hospital for a cost 
                reporting period below 140 percent of the locality 
                adjusted national average per resident amount computed 
                under subparagraph (E) for such hospital and period.

        (E) Determination of locality adjusted national average per 
                resident amount

            The Secretary shall determine a locality adjusted national 
        average per resident amount with respect to a cost reporting 
        period of a hospital beginning during a fiscal year as follows:
            (i) Determining hospital single per resident amount

                The Secretary shall compute for each hospital operating 
            an approved graduate medical education program a single per 
            resident amount equal to the average (weighted by number of 
            full-time equivalent residents, as determined under 
            paragraph (4)) of the primary care per resident amount and 
            the non-primary care per resident amount computed under 
            paragraph (2) for cost reporting periods ending during 
            fiscal year 1997.
            (ii) Standardizing per resident amounts

                The Secretary shall compute a standardized per resident 
            amount for each such hospital by dividing the single per 
            resident amount computed under clause (i) by an average of 
            the 3 geographic index values (weighted by the national 
            average weight for each of the work, practice expense, and 
            malpractice components) as applied under section 1395w-4(e) 
            of this title for 1999 for the fee schedule area in which 
            the hospital is located.
            (iii) Computing of weighted average

                The Secretary shall compute the average of the 
            standardized per resident amounts computed under clause (ii) 
            for such hospitals, with the amount for each hospital 
            weighted by the average number of full-time equivalent 
            residents at such hospital (as determined under paragraph 
            (4)).
            (iv) Computing national average per resident amount

                The Secretary shall compute the national average per 
            resident amount, for a hospital's cost reporting period that 
            begins during fiscal year 2001, equal to the weighted 
            average computed under clause (iii) increased by the 
            estimated percentage increase in the consumer price index 
            for all urban consumers during the period beginning with the 
            month that represents the midpoint of the cost reporting 
            periods described in clause (i) and ending with the midpoint 
            of the hospital's cost reporting period that begins during 
            fiscal year 2001.
            (v) Adjusting for locality

                The Secretary shall compute the product of--
                    (I) the national average per resident amount 
                computed under clause (iv) for the hospital, and
                    (II) the geographic index value average (described 
                and applied under clause (ii)) for the fee schedule area 
                in which the hospital is located.
            (vi) Computing locality adjusted amount

                The locality adjusted national per resident amount for a 
            hospital for--
                    (I) the cost reporting period beginning during 
                fiscal year 2001 is the product computed under clause 
                (v); or
                    (II) each subsequent cost reporting period is equal 
                to the locality adjusted national per resident amount 
                for the hospital for the previous cost reporting period 
                (as determined under this clause) updated, through the 
                midpoint of the period, by projecting the estimated 
                percentage change in the consumer price index for all 
                urban consumers during the 12-month period ending at 
                that midpoint.

        (F) Treatment of certain hospitals

            In the case of a hospital that did not have an approved 
        medical residency training program or was not participating in 
        the program under this subchapter for a cost reporting period 
        beginning during fiscal year 1984, the Secretary shall, for the 
        first such period for which it has such a residency training 
        program and is participating under this subchapter, provide for 
        such approved FTE resident amount as the Secretary determines to 
        be appropriate, based on approved FTE resident amounts for 
        comparable programs.

              (3) Hospital payment amount per resident

        (A) In general

            The payment amount, for a hospital cost reporting period 
        beginning on or after July 1, 1985, is equal to the product of--
                (i) the aggregate approved amount (as defined in 
            subparagraph (B)) for that period, and
                (ii) the hospital's medicare patient load (as defined in 
            subparagraph (C)) for that period.

        (B) Aggregate approved amount

            As used in subparagraph (A), the term ``aggregate approved 
        amount'' means, for a hospital cost reporting period, the 
        product of--
                (i) the hospital's approved FTE resident amount 
            (determined under paragraph (2)) for that period, and
                (ii) the weighted average number of full-time-equivalent 
            residents (as determined under paragraph (4)) in the 
            hospital's approved medical residency training programs in 
            that period.

        The Secretary shall reduce the aggregate approved amount to the 
        extent payment is made under subsection (k) of this section for 
        residents included in the hospital's count of full-time 
        equivalent residents.

        (C) Medicare patient load

            As used in subparagraph (A), the term ``medicare patient 
        load'' means, with respect to a hospital's cost reporting 
        period, the fraction of the total number of inpatient-bed-days 
        (as established by the Secretary) during the period which are 
        attributable to patients with respect to whom payment may be 
        made under part A of this subchapter.

        (D) Payment for managed care enrollees

            (i) In general

                For portions of cost reporting periods occurring on or 
            after January 1, 1998, the Secretary shall provide for an 
            additional payment amount under this subsection for services 
            furnished to individuals who are enrolled under a risk-
            sharing contract with an eligible organization under section 
            1395mm of this title and who are entitled to part A of this 
            subchapter or with a Medicare+Choice organization under part 
            C of this subchapter. The amount of such a payment shall 
            equal, subject to clause (iii), the applicable percentage of 
            the product of--
                    (I) the aggregate approved amount (as defined in 
                subparagraph (B)) for that period; and
                    (II) the fraction of the total number of inpatient-
                bed days (as established by the Secretary) during the 
                period which are attributable to such enrolled 
                individuals.
            (ii) Applicable percentage

                For purposes of clause (i), the applicable percentage 
            is--
                    (I) 20 percent in 1998,
                    (II) 40 percent in 1999,
                    (III) 60 percent in 2000, and \8\
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    \8\ So in original. The word ``and'' probably should not appear.
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                    (IV) 80 percent in 2001, and
                    (V) 100 percent in 2002 and subsequent years.
            (iii) Proportional reduction for nursing and allied 
                    health education

                The Secretary shall estimate a proportional adjustment 
            in payments to all hospitals determined under clauses (i) 
            and (ii) for portions of cost reporting periods beginning in 
            a year (beginning with 2000) such that the proportional 
            adjustment reduces payments in an amount for such year equal 
            to the total additional payment amounts for nursing and 
            allied health education determined under subsection (l) of 
            this section for portions of cost reporting periods 
            occurring in that year.
            (iv) Special rule for hospitals under reimbursement 
                    system

                The Secretary shall establish rules for the application 
            of this subparagraph to a hospital reimbursed under a 
            reimbursement system authorized under section 1395f(b)(3) of 
            this title in the same manner as it would apply to the 
            hospital if it were not reimbursed under such section.

         (4) Determination of full-time-equivalent residents

        (A) Rules

            The Secretary shall establish rules consistent with this 
        paragraph for the computation of the number of full-time-
        equivalent residents in an approved medical residency training 
        program.

        (B) Adjustment for part-year or part-time residents

            Such rules shall take into account individuals who serve as 
        residents for only a portion of a period with a hospital or 
        simultaneously with more than one hospital.

        (C) Weighting factors for certain residents

            Subject to subparagraph (D), such rules shall provide, in 
        calculating the number of full-time-equivalent residents in an 
        approved residency program--
                (i) before July 1, 1986, for each resident the weighting 
            factor is 1.00,
                (ii) on or after July 1, 1986, for a resident who is in 
            the resident's initial residency period (as defined in 
            paragraph (5)(F)), the weighting factor is 1.00,
                (iii) on or after July 1, 1986, and before July 1, 1987, 
            for a resident who is not in the resident's initial 
            residency period (as defined in paragraph (5)(F)), the 
            weighting factor is .75, and
                (iv) on or after July 1, 1987, for a resident who is not 
            in the resident's initial residency period (as defined in 
            paragraph (5)(F)), the weighting factor is .50.

        (D) Foreign medical graduates required to pass FMGEMS 
                examination

            (i) In general

                Except as provided in clause (ii), such rules shall 
            provide that, in the case of an individual who is a foreign 
            medical graduate (as defined in paragraph (5)(D)), the 
            individual shall not be counted as a resident on or after 
            July 1, 1986, unless--
                    (I) the individual has passed the FMGEMS examination 
                (as defined in paragraph (5)(E)), or
                    (II) the individual has previously received 
                certification from, or has previously passed the 
                examination of, the Educational Commission for Foreign 
                Medical Graduates.
            (ii) Transition for current FMGS

                On or after July 1, 1986, but before July 1, 1987, in 
            the case of a foreign medical graduate who--
                    (I) has served as a resident before July 1, 1986, 
                and is serving as a resident after that date, but
                    (II) has not passed the FMGEMS examination or a 
                previous examination of the Educational Commission for 
                Foreign Medical Graduates before July 1, 1986,

          the individual shall be counted as a resident at a rate equal 
            to one-half of the rate at which the individual would 
            otherwise be counted.

        (E) Counting time spent in outpatient settings

            Such rules shall provide that only time spent in activities 
        relating to patient care shall be counted and that all the time 
        so spent by a resident under an approved medical residency 
        training program shall be counted towards the determination of 
        full-time equivalency, without regard to the setting in which 
        the activities are performed, if the hospital incurs all, or 
        substantially all, of the costs for the training program in that 
        setting.

        (F) Limitation on number of residents in allopathic and 
                osteopathic medicine

            (i) In general

                Such rules shall provide that for purposes of a cost 
            reporting period beginning on or after October 1, 1997, the 
            total number of full-time equivalent residents before 
            application of weighting factors (as determined under this 
            paragraph) with respect to a hospital's approved medical 
            residency training program in the fields of allopathic 
            medicine and osteopathic medicine may not exceed the number 
            (or, 130 percent of such number in the case of a hospital 
            located in a rural area) of such full-time equivalent 
            residents for the hospital's most recent cost reporting 
            period ending on or before December 31, 1996.
            (ii) Counting primary care residents on certain 
                    approved leaves of absence in base year FTE 
                    count

                (I) In general

                    In determining the number of such full-time 
                equivalent residents for a hospital's most recent cost 
                reporting period ending on or before December 31, 1996, 
                for purposes of clause (i), the Secretary shall count an 
                individual to the extent that the individual would have 
                been counted as a primary care resident for such period 
                but for the fact that the individual, as determined by 
                the Secretary, was on maternity or disability leave or a 
                similar approved leave of absence.
                (II) Limitation to 3 FTE residents for any 
                        hospital

                    The total number of individuals counted under 
                subclause (I) for a hospital may not exceed 3 full-time 
                equivalent residents.

        (G) Counting interns and residents for FY 1998 and subsequent 
                years

            (i) In general

                For cost reporting periods beginning during fiscal years 
            beginning on or after October 1, 1997, subject to the limit 
            described in subparagraph (F), the total number of full-time 
            equivalent residents for determining a hospital's graduate 
            medical education payment shall equal the average of the 
            actual full-time equivalent resident counts for the cost 
            reporting period and the preceding two cost reporting 
            periods.
            (ii) Adjustment for short periods

                If any cost reporting period beginning on or after 
            October 1, 1997, is not equal to twelve months, the 
            Secretary shall make appropriate modifications to ensure 
            that the average full-time equivalent resident counts 
            pursuant to clause (i) are based on the equivalent of full 
            twelve-month cost reporting periods.
            (iii) Transition rule for 1998

                In the case of a hospital's first cost reporting period 
            beginning on or after October 1, 1997, clause (i) shall be 
            applied by using the average for such period and the 
            preceding cost reporting period.

        (H) Special rules for application of subparagraphs (F) and (G)

            (i) New facilities

                The Secretary shall, consistent with the principles of 
            subparagraphs (F) and (G), prescribe rules for the 
            application of such subparagraphs in the case of medical 
            residency training programs established on or after January 
            1, 1995. In promulgating such rules for purposes of 
            subparagraph (F), the Secretary shall give special 
            consideration to facilities that meet the needs of 
            underserved rural areas.
            (ii) Aggregation

                The Secretary may prescribe rules which allow 
            institutions which are members of the same affiliated group 
            (as defined by the Secretary) to elect to apply the 
            limitation of subparagraph (F) on an aggregate basis.
            (iii) Data collection

                The Secretary may require any entity that operates a 
            medical residency training program and to which 
            subparagraphs (F) and (G) apply to submit to the Secretary 
            such additional information as the Secretary considers 
            necessary to carry out such subparagraphs.
            (iv) Nonrural hospitals operating training programs 
                    in rural areas

                In the case of a hospital that is not located in a rural 
            area but establishes separately accredited approved medical 
            residency training programs (or rural tracks) in an \9\ 
            rural area or has an accredited training program with an 
            integrated rural track, the Secretary shall adjust the 
            limitation under subparagraph (F) in an appropriate manner 
            insofar as it applies to such programs in such rural areas 
            in order to encourage the training of physicians in rural 
            areas.
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    \9\ So in original. Probably should be ``a''.
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                  (5) Definitions and special rules

        As used in this subsection:

        (A) Approved medical residency training program

            The term ``approved medical residency training program'' 
        means a residency or other postgraduate medical training program 
        participation in which may be counted toward certification in a 
        specialty or subspecialty and includes formal postgraduate 
        training programs in geriatric medicine approved by the 
        Secretary.

        (B) Consumer price index

            The term ``consumer price index'' refers to the Consumer 
        Price Index for All Urban Consumers (United States city 
        average), as published by the Secretary of Commerce.

        (C) Direct graduate medical education costs

            The term ``direct graduate medical education costs'' means 
        direct costs of approved educational activities for approved 
        medical residency training programs.

        (D) Foreign medical graduate

            The term ``foreign medical graduate'' means a resident who 
        is not a graduate of--
                (i) a school of medicine accredited by the Liaison 
            Committee on Medical Education of the American Medical 
            Association and the Association of American Medical Colleges 
            (or approved by such Committee as meeting the standards 
            necessary for such accreditation),
                (ii) a school of osteopathy accredited by the American 
            Osteopathic Association, or approved by such Association as 
            meeting the standards necessary for such accreditation, or
                (iii) a school of dentistry or podiatry which is 
            accredited (or meets the standards for accreditation) by an 
            organization recognized by the Secretary for such purpose.

        (E) FMGEMS examination

            The term ``FMGEMS examination'' means parts I and II of the 
        Foreign Medical Graduate Examination in the Medical Sciences or 
        any successor examination recognized by the Secretary for this 
        purpose.

        (F) Initial residency period

            The term ``initial residency period'' means the period of 
        board eligibility, except that--
                (i) except as provided in clause (ii), in no case shall 
            the initial period of residency exceed an aggregate period 
            of formal training of more than five years for any 
            individual, and
                (ii) a period, of not more than two years, during which 
            an individual is in a geriatric residency or fellowship 
            program or a preventive medicine residency or fellowship 
            program which meets such criteria as the Secretary may 
            establish, shall be treated as part of the initial residency 
            period, but shall not be counted against any limitation on 
            the initial residency period.

        Subject to subparagraph (G)(v), the initial residency period 
        shall be determined, with respect to a resident, as of the time 
        the resident enters the residency training program.

        (G) Period of board eligibility

            (i) General rule

                Subject to clauses (ii), (iii), (iv), and (v), the term 
            ``period of board eligibility'' means, for a resident, the 
            minimum number of years of formal training necessary to 
            satisfy the requirements for initial board eligibility in 
            the particular specialty for which the resident is training.
            (ii) Application of 1985-1986 directory

                Except as provided in clause (iii), the period of board 
            eligibility shall be such period specified in the 1985-1986 
            Directory of Residency Training Programs published by the 
            Accreditation Council on Graduate Medical Education.
            (iii) Changes in period of board eligibility

                On or after July 1, 1989, if the Accreditation Council 
            on Graduate Medical Education, in its Directory of Residency 
            Training Programs--
                    (I) increases the minimum number of years of formal 
                training necessary to satisfy the requirements for a 
                specialty, above the period specified in its 1985-1986 
                Directory, the Secretary may increase the period of 
                board eligibility for that specialty, but not to exceed 
                the period of board eligibility specified in that later 
                Directory, or
                    (II) decreases the minimum number of years of formal 
                training necessary to satisfy the requirements for a 
                specialty, below the period specified in its 1985-1986 
                Directory, the Secretary may decrease the period of 
                board eligibility for that specialty, but not below the 
                period of board eligibility specified in that later 
                Directory.
            (iv) Special rule for certain primary care combined 
                    residency programs

                (I) In the case of a resident enrolled in a combined 
            medical residency training program in which all of the 
            individual programs (that are combined) are for training a 
            primary care resident (as defined in subparagraph (H)), the 
            period of board eligibility shall be the minimum number of 
            years of formal training required to satisfy the 
            requirements for initial board eligibility in the longest of 
            the individual programs plus one additional year.
                (II) A resident enrolled in a combined medical residency 
            training program that includes an obstetrics and gynecology 
            program shall qualify for the period of board eligibility 
            under subclause (I) if the other programs such resident 
            combines with such obstetrics and gynecology program are for 
            training a primary care resident.
            (v) Child neurology training programs

                In the case of a resident enrolled in a child neurology 
            residency training program, the period of board eligibility 
            and the initial residency period shall be the period of 
            board eligibility for pediatrics plus 2 years.

        (H) Primary care resident

            The term ``primary care resident'' means a resident enrolled 
        in an approved medical residency training program in family 
        medicine, general internal medicine, general pediatrics, 
        preventive medicine, geriatric medicine, or osteopathic general 
        practice.

        (I) Resident

            The term ``resident'' includes an intern or other 
        participant in an approved medical residency training program.

        (J) Adjustments for certain family practice residency programs

            (i) In general

                In the case of an approved medical residency training 
            program (meeting the requirements of clause (ii)) of a 
            hospital which received funds from the United States, a 
            State, or a political subdivision of a State or an 
            instrumentality of such a State or political subdivision 
            (other than payments under this subchapter or a State plan 
            under subchapter XIX of this chapter) for the program during 
            the cost reporting period that began during fiscal year 
            1984, the Secretary shall--
                    (I) provide for an average amount under paragraph 
                (2)(A) that takes into account the Secretary's estimate 
                of the amount that would have been recognized as 
                reasonable under this subchapter if the hospital had not 
                received such funds, and
                    (II) reduce the payment amount otherwise provided 
                under this subsection in an amount equal to the 
                proportion of such program funds received during the 
                cost reporting period involved that is allocable to this 
                subchapter.
            (ii) Additional requirements

                A hospital's approved medical residency program meets 
            the requirements of this clause if--
                    (I) the program is limited to training for family 
                and community medicine;
                    (II) the program is the only approved medical 
                residency program of the hospital; and
                    (III) the average amount determined under paragraph 
                (2)(A) for the hospital (as determined without regard to 
                the increase in such amount described in clause (i)(I)) 
                does not exceed $10,000.

    (6) Incentive payment under plans for voluntary reduction in 
                             number of residents

        (A) In general

            In the case of a voluntary residency reduction plan for 
        which an application is approved under subparagraph (B), subject 
        to subparagraph (F), each hospital which is part of the 
        qualifying entity submitting the plan shall be paid an 
        applicable hold harmless percentage (as specified in 
        subparagraph (E)) of the sum of--
                (i) the amount (if any) by which--
                    (I) the amount of payment which would have been made 
                under this subsection if there had been a 5-percent 
                reduction in the number of full-time equivalent 
                residents in the approved medical education training 
                programs of the hospital as of June 30, 1997, exceeds
                    (II) the amount of payment which is made under this 
                subsection, taking into account the reduction in such 
                number effected under the reduction plan; and

                (ii) the amount of the reduction in payment under 
            subsection (d)(5)(B) of this section for the hospital that 
            is attributable to the reduction in number of residents 
            effected under the plan below 95 percent of the number of 
            full-time equivalent residents in such programs of the 
            hospital as of June 30, 1997.

        The determination of the amounts under clauses (i) and (ii) for 
        any year shall be made on the basis of the provisions of this 
        subchapter in effect on the application deadline date for the 
        first calendar year to which the reduction plan applies.

        (B) Approval of plan applications

            The Secretary may not approve the application of an 
        qualifying entity unless--
                (i) the application is submitted in a form and manner 
            specified by the Secretary and by not later than November 1, 
            1999,\10\
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    \10\ So in original. The comma probably should be a semicolon.
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                (ii) the application provides for the operation of a 
            plan for the reduction in the number of full-time equivalent 
            residents in the approved medical residency training 
            programs of the entity consistent with the requirements of 
            subparagraph (D);
                (iii) the entity elects in the application the period of 
            residency training years (not greater than 5) over which the 
            reduction will occur;
                (iv) the entity will not reduce the proportion of its 
            residents in primary care (to the total number of residents) 
            below such proportion as in effect as of the applicable time 
            described in subparagraph (D)(v); and
                (v) the Secretary determines that the application and 
            the entity and such plan meet such other requirements as the 
            Secretary specifies in regulations.

        (C) Qualifying entity

            For purposes of this paragraph, any of the following may be 
        a qualifying entity:
                (i) Individual hospitals operating one or more approved 
            medical residency training programs.
                (ii) Two or more hospitals that operate such programs 
            and apply for treatment under this paragraph as a single 
            qualifying entity.
                (iii) A qualifying consortium (as described in section 
            4628 of the Balanced Budget Act of 1997).

        (D) Residency reduction requirements

            (i) Individual hospital applicants

                In the case of a qualifying entity described in 
            subparagraph (C)(i), the number of full-time equivalent 
            residents in all the approved medical residency training 
            programs operated by or through the entity shall be reduced 
            as follows:
                    (I) If the base number of residents exceeds 750 
                residents, by a number equal to at least 20 percent of 
                such base number.
                    (II) Subject to subclause (IV), if the base number 
                of residents exceeds 600 but is less than 750 residents, 
                by 150 residents.
                    (III) Subject to subclause (IV), if the base number 
                of residents does not exceed 600 residents, by a number 
                equal to at least 25 percent of such base number.
                    (IV) In the case of a qualifying entity which is 
                described in clause (v) and which elects treatment under 
                this subclause, by a number equal to at least 20 percent 
                of the base number.
            (ii) Joint applicants

                In the case of a qualifying entity described in 
            subparagraph (C)(ii), the number of full-time equivalent 
            residents in the aggregate for all the approved medical 
            residency training programs operated by or through the 
            entity shall be reduced as follows:
                    (I) Subject to subclause (II), by a number equal to 
                at least 25 percent of the base number.
                    (II) In the case of such a qualifying entity which 
                is described in clause (v) and which elects treatment 
                under this subclause, by a number equal to at least 20 
                percent of the base number.
            (iii) Consortia

                In the case of a qualifying entity described in 
            subparagraph (C)(iii), the number of full-time equivalent 
            residents in the aggregate for all the approved medical 
            residency training programs operated by or through the 
            entity shall be reduced by a number equal to at least 20 
            percent of the base number.
            (iv) Manner of reduction

                The reductions specified under the preceding provisions 
            of this subparagraph for a qualifying entity shall be below 
            the base number of residents for that entity and shall be 
            fully effective not later than the 5th residency training 
            year in which the application under subparagraph (B) is 
            effective.
            (v) Entities providing assurance of increase in 
                    primary care residents

                An entity is described in this clause if--
                    (I) the base number of residents for the entity is 
                less than 750 or the entity is described in subparagraph 
                (C)(ii); and
                    (II) the entity represents in its application under 
                subparagraph (B) that it will increase the number of 
                full-time equivalent residents in primary care by at 
                least 20 percent (from such number included in the base 
                number of residents) by not later than the 5th residency 
                training year in which the application under 
                subparagraph (B) is effective.

          If a qualifying entity fails to comply with the representation 
            described in subclause (II) by the end of such 5th residency 
            training year, the entity shall be subject to repayment of 
            all amounts paid under this paragraph, in accordance with 
            procedures established to carry out subparagraph (F).
            (vi) ``Base number of residents'' defined

                For purposes of this paragraph, the term ``base number 
            of residents'' means, with respect to a qualifying entity 
            (or its participating hospitals) operating approved medical 
            residency training programs, the number of full-time 
            equivalent residents in such programs (before application of 
            weighting factors) of the entity as of the most recent 
            residency training year ending before June 30, 1997, or, if 
            less, for any subsequent residency training year that ends 
            before the date the entity makes application under this 
            paragraph.

        (E) Applicable hold harmless percentage

            For purposes of subparagraph (A), the ``applicable hold 
        harmless percentage'' for the--
                (i) first and second residency training years in which 
            the reduction plan is in effect, 100 percent,
                (ii) third such year, 75 percent,
                (iii) fourth such year, 50 percent, and
                (iv) fifth such year, 25 percent.

        (F) Penalty for noncompliance

            (i) In general

                No payment may be made under this paragraph to a 
            hospital for a residency training year if the hospital has 
            failed to reduce the number of full-time equivalent 
            residents (in the manner required under subparagraph (D)) to 
            the number agreed to by the Secretary and the qualifying 
            entity in approving the application under this paragraph 
            with respect to such year.
            (ii) Increase in number of residents in subsequent 
                    years

                If payments are made under this paragraph to a hospital, 
            and if the hospital increases the number of full-time 
            equivalent residents above the number of such residents 
            permitted under the reduction plan as of the completion of 
            the plan, then, as specified by the Secretary, the entity is 
            liable for repayment to the Secretary of the total amounts 
            paid under this paragraph to the entity.

        (G) Treatment of rotating residents

            In applying this paragraph, the Secretary shall establish 
        rules regarding the counting of residents who are assigned to 
        institutions the medical residency training programs in which 
        are not covered under approved applications under this 
        paragraph.

(i) Avoiding duplicative payments to hospitals participating in rural 
        demonstration programs

    The Secretary shall reduce any payment amounts otherwise determined 
under this section to the extent necessary to avoid duplication of any 
payment made under section 4005(e) of the Omnibus Budget Reconciliation 
Act of 1987.

(j) Prospective payment for inpatient rehabilitation services

                (1) Payment during transition period

        (A) In general

            Notwithstanding section 1395f(b) of this title, but subject 
        to the provisions of section 1395e of this title, the amount of 
        the payment with respect to the operating and capital costs of 
        inpatient hospital services of a rehabilitation hospital or a 
        rehabilitation unit (in this subsection referred to as a 
        ``rehabilitation facility''), in a cost reporting period 
        beginning on or after October 1, 2000, and before October 1, 
        2002, is equal to the sum of--
                (i) the TEFRA percentage (as defined in subparagraph 
            (C)) of the amount that would have been paid under part A of 
            this subchapter with respect to such costs if this 
            subsection did not apply, and
                (ii) the prospective payment percentage (as defined in 
            subparagraph (C)) of the product of (I) the per unit payment 
            rate established under this subsection for the fiscal year 
            in which the payment unit of service occurs, and (II) the 
            number of such payment units occurring in the cost reporting 
            period.

        (B) Fully implemented system

            Notwithstanding section 1395f(b) of this title, but subject 
        to the provisions of section 1395e of this title, the amount of 
        the payment with respect to the operating and capital costs of 
        inpatient hospital services of a rehabilitation facility for a 
        payment unit in a cost reporting period beginning on or after 
        October 1, 2002, is equal to the per unit payment rate 
        established under this subsection for the fiscal year in which 
        the payment unit of service occurs.

        (C) TEFRA and prospective payment percentages specified

            For purposes of subparagraph (A), for a cost reporting 
        period beginning--
                (i) on or after October 1, 2000, and before October 1, 
            2001, the ``TEFRA percentage'' is 66\2/3\ percent and the 
            ``prospective payment percentage'' is 33\1/3\ percent; and
                (ii) on or after October 1, 2001, and before October 1, 
            2002, the ``TEFRA percentage'' is 33\1/3\ percent and the 
            ``prospective payment percentage'' is 66\2/3\ percent.

        (D) Payment unit

            For purposes of this subsection, the term ``payment unit'' 
        means a discharge.

        (E) Construction relating to transfer 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 patient from a 
        rehabilitation facility to another site of care.

                     (2) Patient case mix groups

        (A) Establishment

            The Secretary shall establish--
                (i) classes of patient discharges of rehabilitation 
            facilities by functional-related groups (each in this 
            subsection referred to as a ``case mix group''), based on 
            impairment, age, comorbidities, and functional capability of 
            the patient and such other factors as the Secretary deems 
            appropriate to improve the explanatory power of functional 
            independence measure-function related groups; and
                (ii) a method of classifying specific patients in 
            rehabilitation facilities within these groups.

        (B) Weighting factors

            For each case mix group the Secretary shall assign an 
        appropriate weighting which reflects the relative facility 
        resources used with respect to patients classified within that 
        group compared to patients classified within other groups.

        (C) Adjustments for case mix

            (i) In general

                The Secretary shall from time to time adjust the 
            classifications and weighting factors established under this 
            paragraph as appropriate to reflect changes in treatment 
            patterns, technology, case mix, number of payment units for 
            which payment is made under this subchapter, and other 
            factors which may affect the relative use of resources. Such 
            adjustments shall be made in a manner so that changes in 
            aggregate payments under the classification system are a 
            result of real changes and are not a result of changes in 
            coding that are unrelated to real changes in case mix.
            (ii) Adjustment

                Insofar as the Secretary determines that such 
            adjustments for a previous fiscal year (or estimates that 
            such adjustments for a future fiscal year) did (or are 
            likely to) result in a change in aggregate payments under 
            the classification system during the fiscal year that are a 
            result of changes in the coding or classification of 
            patients that do not reflect real changes in case mix, the 
            Secretary shall adjust the per payment unit payment rate for 
            subsequent years so as to eliminate the effect of such 
            coding or classification changes.

        (D) Data collection

            The Secretary is authorized to require rehabilitation 
        facilities that provide inpatient hospital services to submit 
        such data as the Secretary deems necessary to establish and 
        administer the prospective payment system under this subsection.

                          (3) Payment rate

        (A) In general

            The Secretary shall determine a prospective payment rate for 
        each payment unit for which such rehabilitation facility is 
        entitled to receive payment under this subchapter. Subject to 
        subparagraph (B), such rate for payment units occurring during a 
        fiscal year shall be based on the average payment per payment 
        unit under this subchapter for inpatient operating and capital 
        costs of rehabilitation facilities using the most recent data 
        available (as estimated by the Secretary as of the date of 
        establishment of the system) adjusted--
                (i) by updating such per-payment-unit amount to the 
            fiscal year involved by the weighted average of the 
            applicable percentage increases provided under subsection 
            (b)(3)(B)(ii) of this section (for cost reporting periods 
            beginning during the fiscal year) covering the period from 
            the midpoint of the period for such data through the 
            midpoint of fiscal year 2000 and by an increase factor 
            (described in subparagraph (C)) specified by the Secretary 
            for subsequent fiscal years up to the fiscal year involved;
                (ii) by reducing such rates by a factor equal to the 
            proportion of payments under this subsection (as estimated 
            by the Secretary) based on prospective payment amounts which 
            are additional payments described in paragraph (4) (relating 
            to outlier and related payments);
                (iii) for variations among rehabilitation facilities by 
            area under paragraph (6);
                (iv) by the weighting factors established under 
            paragraph (2)(B); and
                (v) by such other factors as the Secretary determines 
            are necessary to properly reflect variations in necessary 
            costs of treatment among rehabilitation facilities.

        (B) Budget neutral rates

            The Secretary shall establish the prospective payment 
        amounts under this subsection for payment units during fiscal 
        years 2001 and 2002 at levels such that, in the Secretary's 
        estimation, the amount of total payments under this subsection 
        for such fiscal years (including any payment adjustments 
        pursuant to paragraphs (4) and (6)) shall be equal to 98 percent 
        of the amount of payments that would have been made under this 
        subchapter during the fiscal years for operating and capital 
        costs of rehabilitation facilities had this subsection not been 
        enacted. In establishing such payment amounts, the Secretary 
        shall consider the effects of the prospective payment system 
        established under this subsection on the total number of payment 
        units from rehabilitation facilities and other factors described 
        in subparagraph (A).

        (C) Increase factor

            For purposes of this subsection for payment units in each 
        fiscal year (beginning with fiscal year 2001), the Secretary 
        shall establish an increase factor. Such factor shall be based 
        on an appropriate percentage increase in a market basket of 
        goods and services comprising services for which payment is made 
        under this subsection, which may be the market basket percentage 
        increase described in subsection (b)(3)(B)(iii) of this section.

                  (4) Outlier and special payments

        (A) Outliers

            (i) In general

                The Secretary may provide for an additional payment to a 
            rehabilitation facility for patients in a case mix group, 
            based upon the patient being classified as an outlier based 
            on an unusual length of stay, costs, or other factors 
            specified by the Secretary.
            (ii) Payment based on marginal cost of care

                The amount of such additional payment under clause (i) 
            shall be determined by the Secretary and shall approximate 
            the marginal cost of care beyond the cutoff point applicable 
            under clause (i).
            (iii) Total payments

                The total amount of the additional payments made under 
            this subparagraph for payment units in a fiscal year may not 
            exceed 5 percent of the total payments projected or 
            estimated to be made based on prospective payment rates for 
            payment units in that year.

        (B) Adjustment

            The Secretary may provide for such adjustments to the 
        payment amounts under this subsection as the Secretary deems 
        appropriate to take into account the unique circumstances of 
        rehabilitation facilities located in Alaska and Hawaii.

                           (5) Publication

        The Secretary shall provide for publication in the Federal 
    Register, on or before August 1 before each fiscal year (beginning 
    with fiscal year 2001), of the classification and weighting factors 
    for case mix groups under paragraph (2) for such fiscal year and a 
    description of the methodology and data used in computing the 
    prospective payment rates under this subsection for that fiscal 
    year.

                      (6) Area wage adjustment

        The Secretary shall adjust the proportion (as estimated by the 
    Secretary from time to time) of rehabilitation facilities' costs 
    which are attributable to wages and wage-related costs, of the 
    prospective payment rates computed under paragraph (3) for area 
    differences in wage levels by a factor (established by the 
    Secretary) reflecting the relative hospital wage level in the 
    geographic area of the rehabilitation facility compared to the 
    national average wage level for such facilities. Not later than 
    October 1, 2001 (and at least every 36 months thereafter), the 
    Secretary shall update the factor under the preceding sentence on 
    the basis of information available to the Secretary (and updated as 
    appropriate) of the wages and wage-related costs incurred in 
    furnishing rehabilitation services. Any adjustments or updates made 
    under this paragraph for a fiscal year shall be made in a manner 
    that assures that the aggregated payments under this subsection in 
    the fiscal year are not greater or less than those that would have 
    been made in the year without such adjustment.

                      (7) Limitation on review

        There shall be no administrative or judicial review under 
    section 1395ff of this title, 1395oo of this title, or otherwise of 
    the establishment of--
            (A) case mix groups, of the methodology for the 
        classification of patients within such groups, and of the 
        appropriate weighting factors thereof under paragraph (2),
            (B) the prospective payment rates under paragraph (3),
            (C) outlier and special payments under paragraph (4), and
            (D) area wage adjustments under paragraph (6).

(k) Payment to nonhospital providers

                           (1) In general

        For cost reporting periods beginning on or after October 1, 
    1997, the Secretary may establish rules for payment to qualified 
    nonhospital providers for their direct costs of medical education, 
    if those costs are incurred in the operation of an approved medical 
    residency training program described in subsection (h) of this 
    section. Such rules shall specify the amounts, form, and manner in 
    which such payments will be made and the portion of such payments 
    that will be made from each of the trust funds under this 
    subchapter.

                 (2) Qualified nonhospital providers

        For purposes of this subsection, the term ``qualified 
    nonhospital providers'' means--
            (A) a Federally \11\ qualified health center, as defined in 
        section 1395x(aa)(4) of this title;
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    \11\ So in original. Probably should not be capitalized.
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            (B) a rural health clinic, as defined in section 
        1395x(aa)(2) of this title;
            (C) Medicare+Choice organizations; and
            (D) such other providers (other than hospitals) as the 
        Secretary determines to be appropriate.

(l) Payment for nursing and allied health education for managed care 
        enrollees

                           (1) In general

        For portions of cost reporting periods occurring in a year 
    (beginning with 2000), the Secretary shall provide for an additional 
    payment amount for any hospital that receives payments for the costs 
    of approved educational activities for nurse and allied health 
    professional training under section 1395x(v)(1) of this title.

                         (2) Payment amount

        The additional payment 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 Secretary shall estimate the ratio of payments for all 
        hospitals for portions of cost reporting periods occurring in 
        the year under subsection (h)(3)(D) of this section to total 
        direct graduate medical education payments estimated for such 
        portions of periods under subsection (h)(3) of this section.

        (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 nursing and allied health education 
        determined under section 1395x(v) of this title for portions of 
        cost reporting periods occurring in the year to determine a 
        total amount of additional payments for nursing and allied 
        health education to be distributed to hospitals under this 
        subsection for portions of cost reporting periods occurring in 
        the year; except that in no case shall such total amount exceed 
        $60,000,000 in any year.

        (C) Application to hospital

            The amount of payment under this subsection to a hospital 
        for portions of cost reporting periods occurring in a year is 
        equal to the total amount of payments determined under 
        subparagraph (B) for the year multiplied by the Secretary's 
        estimate of the ratio of the amount of payments made under 
        section 1395x(v) of this title to the hospital for nursing and 
        allied health education activities for the hospital's cost 
        reporting period ending in the second preceding fiscal year to 
        the total of such amounts for all hospitals for such cost 
        reporting periods.

(Aug. 14, 1935, ch. 531, title XVIII, Sec. 1886, as added and amended 
Pub. L. 97-248, title I, Secs. 101(a)(1), 110, Sept. 3, 1982, 96 Stat. 
331, 339; Pub. L. 97-448, title III, Sec. 309(b)(13)-(15), Jan. 12, 
1983, 96 Stat. 2409; Pub. L. 98-21, title VI, Sec. 601(a)(1), (2), (b), 
(c), (d)(2), (e), Apr. 20, 1983, 97 Stat. 149, 150, 152; Pub. L. 98-369, 
div. B, title III, Secs. 2307(b)(1), 2310(a), 2311(a)-(c), 2312(a), (b), 
2313(a), (b), (d), 2315(a)-(c), 2354(b)(42)-(44), July 18, 1984, 98 
Stat. 1073, 1075-1080, 1102; Pub. L. 98-617, Sec. 3(b)(9), Nov. 8, 1984, 
98 Stat. 3296; Pub. L. 99-272, title IX, Secs. 9101(b), (c), 9102(a)-
(c), 9104(a), (b), 9105(a)-(c), 9106(a), 9107(a), 9109(a), 9111(a), 
9127(a), 9202(a), Apr. 7, 1986, 100 Stat. 153-155, 157-162, 170, 171; 
Pub. L. 99-349, title II, Sec. 206, July 2, 1986, 100 Stat. 749; Pub. L. 
99-509, title IX, Secs. 9302(a)(1), (2), (b)(1), (c), (d)(1)(A), (e), 
9303, 9304(a)-(c), 9306(a)-(c), 9307(c)(1), 9314(a), 9320(g), 
9321(e)(2), Oct. 21, 1986, 100 Stat. 1982-1985, 1988, 1995, 2005, 2015, 
2018; Pub. L. 99-514, Sec. 2, title XVIII, Sec. 1895(b)(1)(A)-(C), 
(2)(A)-(C), (3), (9), Oct. 22, 1986, 100 Stat. 2095, 2931-2933; Pub. L. 
100-93, Sec. 8(c)(4), Aug. 18, 1987, 101 Stat. 693; Pub. L. 100-203, 
title IV, Secs. 4002(a)-(f)(1), 4003(a)-(c), 4004(a), 4005(a)(1), 
(c)(1), (d)(1)(A), 4006(a)-(b)(2), 4007(b)(1), 4009(d)(1), (j)(1)-
(6)(B), 4083(b)(1), Dec. 22, 1987, 101 Stat. 1330-42 to 1330-44, 1330-
46, 1330-47, 1330-49, 1330-52, 1330-53, 1330-57 to 1330-59, 1330-129, as 
amended Pub. L. 100-360, title IV, Sec. 411(b)(1)(E), (3), (4)(C)(i), 
(5)(B), (6)(B), (8)(B), July 1, 1988, 102 Stat. 769, 770, 772; Pub. L. 
100-360, title IV, Sec. 411(b)(1)(A)-(D), (F)-(H)(i), (4)(A), (B), 
(5)(A), July 1, 1988, 102 Stat. 768-770; Pub. L. 100-485, title VI, 
Sec. 608(d)(18)(A), (B), Oct. 13, 1988, 102 Stat. 2418; Pub. L. 100-647, 
title I, Sec. 1018(r)(1), title VIII, Secs. 8401, 8403(a), Nov. 10, 
1988, 102 Stat. 3586, 3798; Pub. L. 101-234, title III, Sec. 301(b)(3), 
(c)(3), Dec. 13, 1989, 103 Stat. 1985, 1986; Pub. L. 101-239, title VI, 
Secs. 6002, 6003(a)(1), (b)-(c)(3), (e)(1), (2)(B)-(E), (f), (g)(2), 
(4)-(h)(4), (6), 6004(a)(1), (2), (b)(1), 6011(a), 6015(a), 6022, Dec. 
19, 1989, 103 Stat. 2140-2144, 2151, 2154-2157, 2159-2161, 2164, 2167; 
Pub. L. 101-403, title I, Sec. 115(b)(1), Oct. 1, 1990, 104 Stat. 870; 
Pub. L. 101-508, title IV, Secs. 4001, 4002(a)(1), (b)(1)-(4), (c)(1), 
(2), (e)(1), (g)(1), (2), (h)(1)(A), (2)(B), 4003(a), 4005(a)(1), 
(c)(1)(B), (2), 4008(f)(1), (m)(2)(A), Nov. 5, 1990, 104 Stat. 1388-31 
to 1388-38, 1388-40, 1388-42, 1388-45, 1388-53; Pub. L. 103-66, title 
XIII, Secs. 13501(a), (b)(1), (c), (e)(1), (f), 13502, 13506, 13563(a), 
(b)(1), (c)(1), Aug. 10, 1993, 107 Stat. 572, 574, 575, 577, 579, 605; 
Pub. L. 103-432, title I, Secs. 101(a)(1), (b), (c), 102(b)(1)(B), 105, 
108-110(a), (c), 153(a), Oct. 31, 1994, 108 Stat. 4400-4402, 4405, 4407, 
4408, 4437; Pub. L. 105-33, title IV, Secs. 4022(b)(1)(A), 4201(c)(1), 
(4), 4202(a), 4204(a)(1), (2), 4401(a), 4402, 4403(a), 4405(a)-(c), 
4406, 4407, 4411-4415(c), 4416, 4417(a)(1), (b)(1), 4418(a), 4419(a)(1), 
4421(a), (b), 4621-4626(a), 4627(a), 4644(a)(1), (b)(1), (c)(1), Aug. 5, 
1997, 111 Stat. 354, 373-375, 397, 398, 400, 401, 403-410, 413, 475-480, 
483, 488; Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, 
Secs. 111(a), (c), 112(a), 121(a), 122, 125(a), title III, Secs. 311, 
312(a), 321(b), (e), (f), (h), (k)(15)-(17), title IV, Secs. 401(a), 
402(a), 404(a), (b)(1), 405-407(a)(2), (b)(1), (2), (c)(1), title V, 
Sec. 541], Nov. 29, 1999, 113 Stat. 1536, 1501A-329 to 1501A-332, 1501A-
362 to 150A-366, 1501A-368, 1501A-369, 1501A-372 to 1501A-374, 1501A-
391.)

                       References in Text

    Parts A and B of this subchapter, referred to in text, are 
classified to sections 1395c et seq. and 1395j et seq., respectively, of 
this title.
    The Internal Revenue Code of 1986, referred to in subsec. (b)(6), is 
classified generally to Title 26, Internal Revenue Code.
    Section 222(a) of the Social Security Amendments of 1972, referred 
to in subsec. (c)(4)(B), is section 222(a) of Pub. L. 92-603, Oct. 30, 
1972, 86 Stat. 1329, which is set out as a note under section 1395b-1 of 
this title.
    Section 9104(a) of the Medicare and Medicaid Budget Reconciliation 
Amendments of 1985, referred to in subsec. (d)(2)(C)(i), is section 
9104(a) of Pub. L. 99-272, which amended subsec. (d)(5)(B) of this 
section.
    Section 4621(a)(1) of the Balanced Budget Act of 1997, referred to 
in subsec. (d)(2)(C)(i), is section 4621(a)(1) of Pub. L. 105-33, which 
amended subsec. (d)(5)(B)(ii) of this section.
    Section 111 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act of 1999, referred to in subsec. (d)(2)(C)(i), is section 
1000(a)(6) [title I, Sec. 111] of Pub. L. 106-113, which amended this 
section and enacted provisions set out as a note under this section.
    Section 6003(c) of the Omnibus Budget Reconciliation Act of 1989, 
referred to in subsec. (d)(2)(C)(iv), is section 6003(c) of Pub. L. 101-
239, which amended this section and enacted provisions set out below.
    Section 4002(b) of the Omnibus Budget Reconciliation Act of 1990, 
referred to in subsec. (d)(2)(C)(iv), is section 4002(b) of Pub. L. 101-
508, which amended this section and enacted provisions set out below.
    Section 9104 of the Medicare and Medicaid Budget Reconciliation 
Amendments of 1985, referred to in subsec. (d)(3)(C)(ii), is section 
9104 of Pub. L. 99-272, which amended subsec. (d)(2)(C)(i), (3)(C), 
(D)(i)(I), (ii)(I), and (5)(B) of this section.
    Section 4003(a)(1) of the Omnibus Budget Reconciliation Act of 1987, 
referred to in subsec. (d)(3)(C)(ii), is section 4003(a)(1) of Pub. L. 
100-203, which amended subsec. (d)(5)(B)(ii) of this section.
    The Omnibus Budget Reconciliation Act of 1990, referred to in 
subsec. (d)(3)(C)(ii), is Pub. L. 101-508, Nov. 5, 1990, 104 Stat. 1388. 
For complete classification of this Act to the Code, see Tables.
    Subsec. (e)(3)(B) of this section, referred to in subsec. 
(d)(4)(C)(iv), was redesignated subsec. (e)(3) of this section by 
section 4022(b)(1)(A)(ii) of Pub. L. 105-33.
    The provisions of title 5 governing appointments in the competitive 
service, referred to in subsec. (d)(10)(B)(i), are classified generally 
to section 3301 et seq. of Title 5, Government Organization and 
Employees.
    Part C of this subchapter, referred to in subsecs. (d)(11)(B) and 
(h)(3)(D)(i), is classified to section 1395w-21 et seq. of this title.
    Section 9304 of the Omnibus Budget Reconciliation Act of 1986, 
referred to in subsec. (e)(1)(C)(ii), is section 9304 of Pub. L. 99-509, 
which enacted subsecs. (d)(9) and (e)(1)(C) of this section and amended 
subsec. (d)(5)(C)(i)(I), (ii) of this section.
    Part B of subchapter XI of this chapter, referred to in subsec. 
(f)(2), is classified to section 1320c et seq. of this title.
    Section 4628 of the Balanced Budget Act of 1997, referred to in 
subsec. (h)(6)(C)(iii), is section 4628 of Pub. L. 105-33, which is set 
out as a note below.
    Section 4005(e) of the Omnibus Budget Reconciliation Act of 1987, 
referred to in subsec. (i), is section 4005(e) of Pub. L. 100-203, which 
is set out below.


                               Amendments

    1999--Subsec. (b)(1). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 321(k)(15)(A)], inserted a comma after ``paragraph (2)'' in 
concluding provisions.
    Subsec. (b)(2)(A). Pub. L. 106-113, Sec. 1000(a)(6) [title I, 
Sec. 122(1)], substituted ``Except as provided in subparagraph (E), in 
addition to'' for ``In addition to''.
    Subsec. (b)(2)(E). Pub. L. 106-113, Sec. 1000(a)(6) [title I, 
Sec. 122(2)], added subpar. (E).
    Subsec. (b)(3)(B)(i)(XVI) to (XVIII). Pub. L. 106-113, 
Sec. 1000(a)(6) [title IV, Sec. 406], added subcls. (XVI) and (XVII), 
redesignated former subcl. (XVII) as (XVIII), and struck out former 
subcl. (XVI) which read as follows: ``for each of fiscal years 2001 and 
2002, the market basket percentage increase minus 1.1 percentage point 
for hospitals in all areas, and''.
    Subsec. (b)(3)(B)(ii)(VI). Pub. L. 106-113, Sec. 1000(a)(6) [title 
III, Sec. 321(k)(15)(B)(i)], substituted comma for semicolon at end.
    Subsec. (b)(3)(B)(ii)(VII). Pub. L. 106-113, Sec. 1000(a)(6) [title 
III, Sec. 321(k)(15)(B)(ii)], substituted ``year,'' for ``year;''.
    Subsec. (b)(3)(C). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 405(1)], inserted ``subject to subparagraph (I),'' before ``the 
term `target amount' means'' in introductory provisions.
    Subsec. (b)(3)(D). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 404(b)(1)(A)], substituted ``and before October 1, 2006,'' for 
``and before October 1, 2001,'' in introductory provisions.
    Pub. L. 106-113, Sec. 1000(a)(6) [title III, Sec. 321(b)(2)], 
substituted ``and for discharges beginning on or after October 1, 1997, 
and before October 1, 2001,'' for ``and for cost reporting periods 
beginning on or after October 1, 1997, and before October 1, 2001,'' in 
introductory provisions.
    Subsec. (b)(3)(D)(iv). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 404(b)(1)(B)], substituted ``fiscal year 2005'' for ``fiscal year 
2000''.
    Subsec. (b)(3)(H)(i) to (iii). Pub. L. 106-113, Sec. 1000(a)(6) 
[title I, Sec. 121(a)], added cl. (i), redesignated former cl. (i) as 
subcl. (I) of cl. (ii) and inserted ``, as adjusted under clause (iii)'' 
after ``fiscal year 1996'', redesignated former cl. (ii) as subcl. (II) 
of cl. (ii) and substituted ``subclause (I)'' for ``clause (i)'' and 
``such subclause'' for ``such clause'', added cl. (iii), and 
redesignated former cl. (iii) as subcl. (III) of cl. (ii).
    Subsec. (b)(3)(I). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 405(2)], added subpar. (I).
    Subsec. (b)(4)(A)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 321(f)], struck out ``or unit'' after ``(and in the case of a 
hospital''.
    Subsec. (b)(7)(A)(i)(II). Pub. L. 106-113, Sec. 1000(a)(6) [title 
III, Sec. 321(h)], inserted ``(as estimated by the Secretary)'' after 
``median''.
    Subsec. (d)(2)(C)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title I, 
Sec. 111(c)], inserted ``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''.
    Subsec. (d)(5)(B)(ii)(V), (VI). Pub. L. 106-113, Sec. 1000(a)(6) 
[title I, Sec. 111(a)], added subcl. (V), redesignated former subcl. (V) 
as (VI), and substituted ``2001'' for ``2000'' in subcl. (VI).
    Subsec. (d)(5)(B)(v). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 407(b)(2)], inserted ``(or, 130 percent of such number in the case 
of a hospital located in a rural area)'' after ``may not exceed the 
number''.
    Pub. L. 106-113, Sec. 1000(a)(6) [title IV, Sec. 407(a)(2)], 
inserted at end ``Rules similar to the rules of subsection (h)(4)(F)(ii) 
of this section shall apply for purposes of this clause.''
    Subsec. (d)(5)(F)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 321(k)(16)], inserted a comma after ``1986'' in introductory 
provisions.
    Subsec. (d)(5)(F)(ix)(III). Pub. L. 106-113, Sec. 1000(a)(6) [title 
I, Sec. 112(a)(1)], substituted ``during each of fiscal years 2000 and 
2001'' for ``during fiscal year 2000''.
    Subsec. (d)(5)(F)(ix)(IV). Pub. L. 106-113, Sec. 1000(a)(6) [title 
I, Sec. 112(a)(2)-(4)], redesignated subcl. (V) as (IV), substituted 
``reduced by 4 percent'' for ``reduced by 5 percent'', and struck out 
former subcl. (IV) which read as follows: ``during fiscal year 2001, 
such additional payment amount shall be reduced by 4 percent;''.
    Subsec. (d)(5)(F)(ix)(V), (VI). Pub. L. 106-113, Sec. 1000(a)(6) 
[title I, Sec. 112(a)(3)], redesignated subcl. (VI) as (V). Former 
subcl. (V) redesignated (IV).
    Subsec. (d)(5)(G)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 404(a)(1)], substituted ``October 1, 2006,'' for ``October 1, 
2001,''.
    Pub. L. 106-113, Sec. 1000(a)(6) [title III, Sec. 321(b)(1)(A)], 
substituted ``or discharges occurring on or after October 1, 1997, and 
before October 1, 2001,'' for ``or beginning on or after October 1, 
1997, and before October 1, 2001,''.
    Subsec. (d)(5)(G)(ii)(II). Pub. L. 106-113, Sec. 1000(a)(6) [title 
IV, Sec. 404(a)(2)], substituted ``October 1, 2006,'' for ``October 1, 
2001,''.
    Pub. L. 106-113, Sec. 1000(a)(6) [title III, Sec. 321(b)(1)(B)], 
substituted ``or discharges occurring on or after October 1, 1997, and 
before October 1, 2001,'' for ``or beginning on or after October 1, 
1997, and before October 1, 2001,''.
    Subsec. (d)(8)(B). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 402(a)], designated existing provisions as cl. (i), substituted 
``described in clause (ii)'' for ``published in the Federal Register on 
January 3, 1980'', and added cl. (ii).
    Subsec. (d)(8)(E). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 401(a)], added subpar. (E).
    Subsec. (d)(9)(A)(ii). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 321(k)(17)], inserted a comma after ``1987'' in introductory 
provisions.
    Subsec. (g)(1)(A). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 321(e)], substituted ``October 1, 2002,'' for ``September 30, 
2002,'' in last sentence.
    Subsec. (h)(2)(D)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 311(a)(1), (b)(1)], inserted heading and substituted ``a subsequent 
clause'' for ``clause (ii)'' and ``the approved FTE resident amount 
determined'' for ``the amount determined''.
    Subsec. (h)(2)(D)(ii). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 311(b)(2)], inserted heading and realigned margins.
    Subsec. (h)(2)(D)(iii), (iv). Pub. L. 106-113, Sec. 1000(a)(6) 
[title III, Sec. 311(a)(2)], added cls. (iii) and (iv).
    Subsec. (h)(2)(E), (F). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 311(a)(3), (4)], added subpar. (E) and redesignated former subpar. 
(E) as (F).
    Subsec. (h)(3)(D)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 541(b)(1)], inserted ``, subject to clause (iii),'' after ``shall 
equal'' in introductory provisions.
    Subsec. (h)(3)(D)(iii), (iv). Pub. L. 106-113, Sec. 1000(a)(6) 
[title V, Sec. 541(b)(2), (3)], added cl. (iii) and redesignated former 
cl. (iii) as (iv).
    Subsec. (h)(4)(F). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 407(a)(1)], designated existing provisions as cl. (i), inserted 
heading, realigned margins, and added cl. (ii).
    Subsec. (h)(4)(F)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 407(b)(1)], inserted ``(or, 130 percent of such number in the case 
of a hospital located in a rural area)'' after ``may not exceed the 
number''.
    Subsec. (h)(4)(H)(iv). Pub. L. 106-113, Sec. 1000(a)(6) [title IV, 
Sec. 407(c)(1)], added cl. (iv).
    Subsec. (h)(5)(F). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 312(a)(1)], substituted ``Subject to subparagraph (G)(v), the 
initial residency period'' for ``The initial residency period'' in 
concluding provisions.
    Subsec. (h)(5)(G)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 312(a)(2)(A)], substituted ``(iv), and (v)'' for ``and (iv)''.
    Subsec. (h)(5)(G)(v). Pub. L. 106-113, Sec. 1000(a)(6) [title III, 
Sec. 312(a)(2)(B)], added cl. (v).
    Subsec. (j)(1)(D). Pub. L. 106-113, Sec. 1000(a)(6) [title I, 
Sec. 125(a)(1)], struck out ``, day of inpatient hospital services, or 
other unit of payment defined by the Secretary'' before period at end.
    Subsec. (j)(1)(E). Pub. L. 106-113, Sec. 1000(a)(6) [title I, 
Sec. 125(a)(3)], added subpar. (E).
    Subsec. (j)(2)(A)(i). Pub. L. 106-113, Sec. 1000(a)(6) [title I, 
Sec. 125(a)(2)], amended cl. (i) generally. Prior to amendment, cl. (i) 
read as follows: ``classes of patients of rehabilitation facilities 
(each in this subsection referred to as a `case mix group'), based on 
such factors as the Secretary deems appropriate, which may include 
impairment, age, related prior hospitalization, comorbidities, and 
functional capability of the patient; and''.
    Subsec. (l). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 541(a)], added subsec. (l).
    1997--Subsec. (b)(1). Pub. L. 105-33, Sec. 4421(b)(1), inserted 
``and other than a rehabilitation facility described in subsection 
(j)(1) of this section'' after ``subsection (d)(1)(B) of this section'' 
in introductory provisions.
    Pub. L. 105-33, Sec. 4415(b)(1), inserted ``plus the amount, if any, 
provided under paragraph (2)'' before ``except that in no case'' in 
concluding provisions.
    Subsec. (b)(1)(A). Pub. L. 105-33, Sec. 4415(a), added cls. (i) and 
(ii) and concluding provisions and struck out former cls. (i) and (ii) 
and former concluding provisions which read as follows:
        ``(i) 50 percent of the amount by which the target amount 
    exceeds the amount of the operating costs, or
        ``(ii) 5 percent of the target amount,
whichever is less; or''.
    Subsec. (b)(1)(B). Pub. L. 105-33, Sec. 4415(c)(3), added subpar. 
(B). Former subpar. (B) redesignated (C).
    Subsec. (b)(1)(C). Pub. L. 105-33, Sec. 4415(c)(1), (2), 
redesignated subpar. (B) as (C) and substituted ``greater than 110 
percent of the target amount'' for ``greater than the target amount'' 
and ``exceed 110 percent of the target amount'' for ``exceed the target 
amount''.
    Subsec. (b)(2). Pub. L. 105-33, Sec. 4415(b)(2), added par. (2).
    Subsec. (b)(3)(A). Pub. L. 105-33, Secs. 4413(a)(1), 4416(2), in 
introductory provisions, substituted ``subparagraph (C) and succeeding 
subparagraph,'' for ``subparagraphs (C), (D), and (E),'' and inserted 
``and in paragraph (7)(A)(ii),'' before ``for purposes of this 
subsection''.
    Subsec. (b)(3)(B)(i). Pub. L. 105-33, Sec. 4421(b)(2), inserted 
``and subsection (j) of this section'' after ``For purposes of 
subsection (d) of this section'' in introductory provisions.
    Subsec. (b)(3)(B)(i)(XIII) to (XVII). Pub. L. 105-33, Sec. 4401(a), 
added subcls. (XIII) to (XVII) and struck out former subcl. (XIII) which 
read as follows: ``for fiscal year 1998 and each subsequent fiscal year, 
the market basket percentage increase for hospitals in all areas.''
    Subsec. (b)(3)(B)(ii)(VI) to (VIII). Pub. L. 105-33, 
Sec. 4411(a)(1), added subcls. (VI) and (VII) and redesignated former 
subcl. (VI) as (VIII).
    Subsec. (b)(3)(B)(vi). Pub. L. 105-33, Sec. 4411(a)(2), added cl. 
(vi).
    Subsec. (b)(3)(D). Pub. L. 105-33, Sec. 4204(a)(2)(A), substituted 
``September 30, 1994, and for cost reporting periods beginning on or 
after October 1, 1997, and before October 1, 2001,'' for ``September 30, 
1994,'' in introductory provisions.
    Subsec. (b)(3)(D)(iv). Pub. L. 105-33, Sec. 4204(a)(2)(B)-(D), added 
cl. (iv).
    Subsec. (b)(3)(F), (G). Pub. L. 105-33, Sec. 4413(a)(2), (b), added 
subpars. (F) and (G).
    Subsec. (b)(3)(H). Pub. L. 105-33, Sec. 4414, added subpar. (H).
    Subsec. (b)(4)(A)(i). Pub. L. 105-33, Sec. 4419(a)(1), in first 
sentence, substituted ``The Secretary shall provide for an exception and 
adjustment to (and in the case of a hospital or unit described in 
subsection (d)(1)(B)(iii) of this section, may provide an exemption 
from)'' for ``The Secretary shall provide for an exemption from, or an 
exception and adjustment to,''.
    Subsec. (b)(4)(A)(ii). Pub. L. 105-33, Sec. 4411(b), inserted at end 
``In making such reductions, the Secretary shall treat the applicable 
update factor described in paragraph (3)(B)(vi) for a fiscal year as 
being equal to the market basket percentage for that year.''
    Subsec. (b)(7). Pub. L. 105-33, Sec. 4416(1), added par. (7).
    Subsec. (d)(1)(B). Pub. L. 105-33, Sec. 4417(a)(1), inserted at end 
``A hospital that was classified by the Secretary on or before September 
30, 1995, as a hospital described in clause (iv) shall continue to be so 
classified notwithstanding that it is located in the same building as, 
or on the same campus as, another hospital.''
    Subsec. (d)(1)(B)(iv). Pub. L. 105-33, Sec. 4417(b)(1), designated 
existing provisions as subcl. (I) and added subcl. (II).
    Subsec. (d)(1)(B)(v). Pub. L. 105-33, Sec. 4418(a)(1), designated 
existing provisions as subcl. (I), substituted ``, or'' for semicolon at 
end, and added subcl. (II).
    Subsec. (d)(1)(E). Pub. L. 105-33, Sec. 4418(a)(2), added subpar. 
(E).
    Subsec. (d)(2)(C)(i). Pub. L. 105-33, Sec. 4621(a)(2), inserted at 
end ``except that the Secretary shall not take into account any 
reduction in the amount of additional payments under paragraph 
(5)(B)(ii) resulting from the amendment made by section 4621(a)(1) of 
the Balanced Budget Act of 1997,''.
    Subsec. (d)(5)(A)(ii). Pub. L. 105-33, Sec. 4405(c), substituted 
``exceed the sum of the applicable DRG prospective payment rate plus any 
amounts payable under subparagraphs (B) and (F)'' for ``exceed the 
applicable DRG prospective payment rate''.
    Subsec. (d)(5)(B)(i)(I). Pub. L. 105-33, Sec. 4405(a), inserted ``, 
for cases qualifying for additional payment under subparagraph (A)(i),'' 
before ``the amount paid to the hospital''.
    Subsec. (d)(5)(B)(ii). Pub. L. 105-33, Sec. 4621(a)(1), amended cl. 
(ii) generally. Prior to amendment, cl. (ii) read as follows: ``For 
purposes of clause (i)(II), the indirect teaching adjustment factor for 
discharges occurring on or after October 1, 1988, is equal to 1.89  x  
(((1 + r) to the nth power) -1), where `r' is the ratio of the 
hospital's full-time equivalent interns and residents to beds and `n' 
equals .405.''
    Subsec. (d)(5)(B)(iv). Pub. L. 105-33, Sec. 4621(b)(2), amended cl. 
(iv) generally. Prior to amendment, cl. (iv) read as follows: ``In 
determining such adjustment, the Secretary shall continue to count 
interns and residents assigned to outpatient services of the hospital or 
providing services at any entity receiving a grant under section 254c of 
this title that is under the ownership or control of the hospital (if 
the hospital incurs all, or substantially all, of the costs of the 
services furnished by such interns and residents) as part of the 
calculation of the full-time-equivalent number of interns and 
residents.''
    Subsec. (d)(5)(B)(v) to (viii). Pub. L. 105-33, Sec. 4621(b)(1), 
added cls. (v) to (viii).
    Subsec. (d)(5)(D)(iii)(III). Pub. L. 105-33, Sec. 4201(c)(4)(A), 
inserted ``as in effect on September 30, 1997'' before period at end.
    Subsec. (d)(5)(D)(v). Pub. L. 105-33, Sec. 4201(c)(4)(B), inserted 
``as in effect on September 30, 1997'' after ``section 1395i-4(i)(1) of 
this title'' and substituted ``(as defined in section 1395i-4(d) of this 
title)'' for ``(as defined in section 1395i-4(g) of this title)''.
    Subsec. (d)(5)(F)(i). Pub. L. 105-33, Sec. 4403(a)(1), inserted 
``and before October 1, 1997'' after ``May 1, 1986'' in introductory 
provisions.
    Subsec. (d)(5)(F)(ii). Pub. L. 105-33, Sec. 4403(a)(2), substituted 
``Subject to clause (ix), the amount'' for ``The amount''.
    Subsec. (d)(5)(F)(ii)(I). Pub. L. 105-33, Sec. 4405(b), inserted ``, 
for cases qualifying for additional payment under subparagraph (A)(i),'' 
before ``the amount paid to the hospital''.
    Subsec. (d)(5)(F)(ix). Pub. L. 105-33, Sec. 4403(a)(3), added cl. 
(ix).
    Subsec. (d)(5)(G)(i), (ii)(II). Pub. L. 105-33, Sec. 4204(a)(1), 
substituted ``October 1, 1994, or beginning on or after October 1, 1997, 
and before October 1, 2001,'' for ``October 1, 1994,''.
    Subsec. (d)(5)(I)(ii). Pub. L. 105-33, Sec. 4407(1), inserted ``not 
taking in account the effect of subparagraph (J),'' after ``in a fiscal 
year,''.
    Subsec. (d)(5)(J). Pub. L. 105-33, Sec. 4407(2), added subpar. (J).
    Subsec. (d)(6). Pub. L. 105-33, Sec. 4644(a)(1), substituted 
``August 1'' for ``September 1''.
    Subsec. (d)(9)(A). Pub. L. 105-33, Sec. 4406(1), struck out ``in a 
fiscal year beginning on or after October 1, 1987,'' after ``inpatient 
hospital discharges'' in introductory provisions.
    Subsec. (d)(9)(A)(i). Pub. L. 105-33, Sec. 4406(2), substituted 
``for discharges beginning on or after October 1, 1997, 50 percent (and 
for discharges between October 1, 1987, and September 30, 1997, 75 
percent)'' for ``75 percent''.
    Subsec. (d)(9)(A)(ii). Pub. L. 105-33, Sec. 4406(3), substituted 
``for discharges beginning in a fiscal year beginning on or after 
October 1, 1997, 50 percent (and for discharges between October 1, 1987 
and September 30, 1997, 25 percent)'' for ``25 percent''.
    Subsec. (d)(10)(C)(ii). Pub. L. 105-33, Sec. 4644(c)(1), substituted 
``the first day of the 13-month period ending on September 30 of the 
preceding fiscal year.'' for ``the first day of the preceding fiscal 
year.''
    Subsec. (d)(10)(D)(iii), (iv). Pub. L. 105-33, Sec. 4202(a), added 
cl. (iii) and redesignated former cl. (iii) as (iv).
    Subsec. (d)(11). Pub. L. 105-33, Sec. 4622, added par. (11).
    Subsec. (e)(2). Pub. L. 105-33, Sec. 4022(b)(1)(A)(i), struck out 
par. (2) which related to appointment, composition, and responsibilities 
of the Prospective Payment Assessment Commission.
    Subsec. (e)(3). Pub. L. 105-33, Sec. 4022(b)(1)(A)(ii), redesignated 
subpar. (B) as par. (3) and struck out subpar. (A) which read as 
follows: ``The Commission, not later than the March 1 before the 
beginning of each fiscal year (beginning with fiscal year 1986), shall 
report its recommendations to Congress on an appropriate change factor 
which should be used for inpatient hospital services for discharges in 
that fiscal year, together with its general recommendations under 
paragraph (2)(B) regarding the effectiveness and quality of health care 
delivery systems in the United States.''
    Subsec. (e)(5)(A). Pub. L. 105-33, Sec. 4644(b)(1)(A), substituted 
``April 1'' for ``May 1''.
    Subsec. (e)(5)(B). Pub. L. 105-33, Sec. 4644(b)(1)(B), substituted 
``August 1'' for ``September 1''.
    Subsec. (e)(6). Pub. L. 105-33, Sec. 4022(b)(1)(A)(i), struck out 
par. (6) which related to appointments, membership, responsibilities, 
compensation, access to records and information, audits, and 
appropriations concerning the Prospective Payment Assessment Commission.
    Subsec. (g)(1)(A). Pub. L. 105-33, Sec. 4402, inserted at end ``In 
addition to the reduction described in the preceding sentence, for 
discharges occurring on or after October 1, 1997, the Secretary shall 
apply the budget neutrality adjustment factor used to determine the 
Federal capital payment rate in effect on September 30, 1995 (as 
described in section 412.352 of title 42 of the Code of Federal 
Regulations), to (i) the unadjusted standard Federal capital payment 
rate (as described in section 412.308(c) of that title, as in effect on 
September 30, 1997), and (ii) the unadjusted hospital-specific rate (as 
described in section 412.328(e)(1) of that title, as in effect on 
September 30, 1997), and, for discharges occurring on or after October 
1, 1997, and before September 30, 2002, reduce the rates described in 
clauses (i) and (ii) by 2.1 percent.''
    Subsec. (g)(3)(B). Pub. L. 105-33, Sec. 4201(c)(1), substituted 
``critical access'' for ``rural primary care''.
    Subsec. (g)(4). Pub. L. 105-33, Sec. 4412, added par. (4).
    Subsec. (h)(3)(B). Pub. L. 105-33, Sec. 4625(b), inserted concluding 
provisions.
    Subsec. (h)(3)(D). Pub. L. 105-33, Sec. 4624, added subpar. (D).
    Subsec. (h)(4)(F) to (H). Pub. L. 105-33, Sec. 4623, added subpars. 
(F) to (H).
    Subsec. (h)(5)(G). Pub. L. 105-33, Sec. 4627(a), substituted 
``Subject to clauses (ii), (iii), and (iv)'' for ``Subject to clauses 
(ii) and (iii)'' in cl. (i) and added cl. (iv).
    Subsec. (h)(6). Pub. L. 105-33, Sec. 4626(a), added par. (6).
    Subsec. (j). Pub. L. 105-33, Sec. 4421(a), added subsec. (j).
    Subsec. (k). Pub. L. 105-33, Sec. 4625(a), added subsec. (k).
    1994--Subsec. (a)(4). Pub. L. 103-432, Sec. 110(a), inserted ``(or, 
in the case of a hospital that is not a subsection (d) hospital, during 
the 1 day)'' after ``3 days''.
    Subsec. (b)(3)(B)(iv)(II). Pub. L. 103-432, Sec. 105(b), substituted 
``(adjusted to exclude any portion of a cost reporting period beginning 
during fiscal year 1993 for which the applicable percentage increase is 
determined under subparagraph (I))'' for ``(taking into account any 
portion of the 12-month cost reporting period beginning during fiscal 
year 1993 that occurred during fiscal year 1994)''.
    Subsec. (b)(3)(D). Pub. L. 103-432, Sec. 105(a)(2), substituted 
``September 30, 1994'' for ``March 31, 1993'' in introductory 
provisions.
    Subsec. (d)(3)(A)(iii). Pub. L. 103-432, Sec. 101(c), inserted at 
end ``For discharges occurring on or after October 1, 1994, the 
Secretary shall adjust the ratio of the labor portion to non-labor 
portion of each average standardized amount to equal such ratio for the 
national average of all standardized amounts.''
    Subsec. (d)(5)(B)(ii). Pub. L. 103-432, Sec. 110(c), substituted 
``October 1, 1988'' for ``May 1, 1986''.
    Subsec. (d)(5)(D)(iii)(III). Pub. L. 103-432, Sec. 102(b)(1)(B)(i), 
substituted ``that is located in a rural area and designated'' for 
``that is designated''.
    Subsec. (d)(5)(D)(v). Pub. L. 103-432, Sec. 102(b)(1)(B)(ii), 
substituted ``in the case of a hospital located in a rural area and 
designated'' for ``in the case of a hospital designated''.
    Subsec. (d)(5)(G)(ii)(I). Pub. L. 103-432, Sec. 105(a)(1), 
substituted ``the 36-month period beginning with the first day of the 
cost reporting period that begins'' for ``the first 3 12-month cost 
reporting periods that begin''.
    Subsec. (d)(5)(I). Pub. L. 103-432, Sec. 109, designated existing 
provisions as cl. (i) and added cl. (ii).
    Subsec. (d)(8)(C)(iv). Pub. L. 103-432, Sec. 101(b)(1)(A), 
substituted ``paragraph (10)'' for ``paragraph (1)''.
    Subsec. (d)(8)(C)(v). Pub. L. 103-432, Sec. 101(b)(1)(B), added cl. 
(v).
    Subsec. (d)(10)(C)(i)(II). Pub. L. 103-432, Sec. 101(b)(2)(A), 
substituted ``the factor used to adjust the DRG prospective payment rate 
for area differences in hospital wage levels that applies'' for ``the 
area wage index applicable''.
    Subsec. (d)(10)(D)(i)(I). Pub. L. 103-432, Sec. 101(a)(1), inserted 
``(to the extent the Secretary determines appropriate)'' after ``taking 
into account''.
    Subsec. (d)(10)(D)(ii), (iii). Pub. L. 103-432, Sec. 101(b)(2)(B), 
added cl. (ii) and redesignated former cl. (ii) as (iii).
    Subsec. (e)(6)(B). Pub. L. 103-432, Sec. 108, substituted ``health 
facility management, reimbursement of health facilities or other 
providers of services which reflect the scope of the Commission's 
responsibilities'' for ``hospital reimbursement, hospital financial 
management''.
    Subsec. (h)(5)(E). Pub. L. 103-432, Sec. 153(a), inserted ``or any 
successor examination'' after ``Medical Sciences''.
    1993--Subsec. (b)(3)(B)(i)(IX). Pub. L. 103-66, Sec. 13501(a)(1)(A), 
substituted ``percentage increase minus 2.5 percentage points for 
hospitals'' for ``percentage increase for hospitals'' and ``percentage 
increase minus 1.0 percentage point'' for ``percentage increase plus 1.5 
percentage points''.
    Subsec. (b)(3)(B)(i)(X). Pub. L. 103-66, Sec. 13501(a)(1)(B), 
substituted ``percentage increase minus 2.5 percentage points for 
hospitals'' for ``percentage increase for hospitals'' and struck out 
``and'' at end.
    Subsec. (b)(3)(B)(i)(XI). Pub. L. 103-66, Sec. 13501(a)(1)(C), 
struck out ``and each subsequent fiscal year'' after ``1996'', inserted 
``minus 2.0 percentage points'' after ``percentage increase'', and 
substituted a comma for period at end.
    Subsec. (b)(3)(B)(i)(XII), (XIII). Pub. L. 103-66, 
Sec. 13501(a)(1)(D), added subcls. (XII) and (XIII).
    Subsec. (b)(3)(B)(ii). Pub. L. 103-66, Sec. 13501(a)(2)(B)(i), 
struck out ``, (C), (D),'' after ``subparagraphs (A)''.
    Subsec. (b)(3)(B)(ii)(III) to (VI). Pub. L. 103-66, 
Sec. 13502(a)(1), struck out ``and'' at end of subcl. (III), in subcl. 
(IV), substituted ``a subsequent fiscal year ending on or before 
September 30, 1993,'' for ``subsequent fiscal years'' and a comma for 
the period at end, and added subcls. (V) and (VI).
    Subsec. (b)(3)(B)(iv). Pub. L. 103-66, Sec. 13501(a)(2)(A), added 
cl. (iv).
    Subsec. (b)(3)(B)(v). Pub. L. 103-66, Sec. 13502(a)(2), added cl. 
(v).
    Subsec. (b)(3)(C)(i)(II). Pub. L. 103-66, Sec. 13501(a)(2)(B)(ii), 
struck out ``or'' at end.
    Subsec. (b)(3)(C)(ii). Pub. L. 103-66, Sec. 13501(a)(2)(B)(iii), 
substituted ``period beginning before fiscal year 1994, the target'' for 
``period, the target'', ``subparagraph (B)(iv)'' for ``subparagraph 
(B)(ii)'', and a comma for period at end.
    Subsec. (b)(3)(C)(iii), (iv). Pub. L. 103-66, 
Sec. 13501(a)(2)(B)(iv), added cls. (iii) and (iv).
    Subsec. (b)(3)(D)(ii). Pub. L. 103-66, Sec. 13501(a)(2)(B)(v), 
substituted ``period beginning before fiscal year 1994, the target'' for 
``period, the target'', ``subparagraph (B)(iv)'' for ``subparagraph 
(B)(ii)'', and ``, and'' for period at end.
    Subsec. (b)(3)(D)(iii). Pub. L. 103-66, Sec. 13501(a)(2)(B)(vi), 
added cl. (iii).
    Subsec. (b)(4)(A). Pub. L. 103-66, Sec. 13502(b), designated 
existing provisions as cl. (i) and added cl. (ii).
    Subsec. (d)(1)(A)(iii). Pub. L. 103-66, Sec. 13501(f), amended cl. 
(iii) generally. Prior to amendment, cl. (iii) read as follows: 
``beginning on or after April 1, 1988, and ending on September 30, 
1993,, the sum of (I) 85 percent of the national adjusted DRG 
prospective payment rate determined under paragraph (3) for such 
discharges, and (II) 15 percent of the regional adjusted DRG prospective 
payment rate determined under such paragraph.''
    Subsec. (d)(5)(A)(i). Pub. L. 103-66, Sec. 13501(c)(1), substituted 
``For discharges occurring during fiscal years ending on or before 
September 30, 1997, the Secretary'' for ``The Secretary''.
    Subsec. (d)(5)(A)(ii). Pub. L. 103-66, Sec. 13501(c)(2), substituted 
``, or, for discharges in fiscal years beginning on or after October 1, 
1994, exceed the applicable DRG prospective payment rate plus a fixed 
dollar amount determined by the Secretary.'' for period at end.
    Subsec. (d)(5)(A)(iii). Pub. L. 103-66, Sec. 13501(c)(3), 
substituted ``shall (except as payments under clause (i) are required to 
be reduced to take into account the requirements of clause (v)) 
approximate'' for ``shall approximate''.
    Subsec. (d)(5)(A)(v), (vi). Pub. L. 103-66, Sec. 13501(c)(4), added 
cls. (v) and (vi).
    Subsec. (d)(5)(B)(iv). Pub. L. 103-66, Sec. 13506, inserted ``or 
providing services at any entity receiving a grant under section 254c of 
this title that is under the ownership or control of the hospital (if 
the hospital incurs all, or substantially all, of the costs of the 
services furnished by such interns and residents)'' after ``the 
hospital''.
    Subsec. (d)(5)(G)(i). Pub. L. 103-66, Sec. 13501(e)(1)(A), which 
directed amendment of subsec. (d)(5)(G) in clause (i) in the matter 
preceding subclause (I), by striking ``ending on or before March 31, 
1993,'' and all that follows and inserting ``before October 1, 1994, in 
the case of a subsection (d) hospital which is a medicare-dependent, 
small rural hospital, payment under paragraph (1)(A) shall be equal to 
the sum of the amount determined under clause (ii) and the amount 
determined under paragraph (1)(A)(iii).'', was executed by substituting 
the new language for ``ending on or before March 31, 1993, with respect 
to a subsection (d) hospital which is a medicare-dependent, small rural 
hospital, payment under paragraph (1)(A) shall be--
        ``(I) an amount based on 100 percent of the hospital's target 
    amount for the cost reporting period, as defined in subsection 
    (b)(3)(D) of this section, or
        ``(II) the amount determined under paragraph (1)(A)(iii),
whichever results in the greater payment to the hospital.'' to reflect 
the probable intent of Congress.
    Subsec. (d)(5)(G)(ii) to (iv). Pub. L. 103-66, Sec. 13501(e)(1)(B), 
(C), added cl. (ii) and redesignated former cls. (ii) and (iii) as (iii) 
and (iv), respectively.
    Subsec. (d)(8)(C)(iv). Pub. L. 103-66, Sec. 13501(b)(1), added cl. 
(iv).
    Subsec. (g)(1)(A). Pub. L. 103-66, Sec. 13501(a)(3), inserted at end 
``For discharges occurring after September 30, 1993, the Secretary shall 
reduce by 7.4 percent the unadjusted standard Federal capital payment 
rate (as described in 42 CFR 412.308(c), as in effect on August 10, 
1993) and shall (for hospital cost reporting periods beginning on or 
after October 1, 1993) redetermine which payment methodology is applied 
to the hospital under such system to take into account such reduction.''
    Subsec. (h)(2)(D). Pub. L. 103-66, Sec. 13563(a)(1), designated 
existing provisions as cl. (i), substituted ``Except as provided in 
clause (ii), for each'' for ``For each'', and added cl. (ii).
    Subsec. (h)(5)(F). Pub. L. 103-66, Sec. 13563(b)(1)(A), struck out 
``plus one year'' after ``board eligibility'' in introductory 
provisions.
    Subsec. (h)(5)(F)(ii). Pub. L. 103-66, Sec. 13563(b)(1)(B), inserted 
``or a preventive medicine residency or fellowship program'' after 
``fellowship program''.
    Subsec. (h)(5)(H), (I). Pub. L. 103-66, Sec. 13563(a)(2), added 
subpar. (H) and redesignated former subpar. (H) as (I).
    Subsec. (h)(5)(J). Pub. L. 103-66, Sec. 13563(c)(1), added subpar. 
(J).
    1990--Subsec. (a)(4). Pub. L. 101-508, Sec. 4003(a), struck out 
period at end of first sentence and inserted ``, and includes the costs 
of all services for which payment may be made under this subchapter that 
are provided by the hospital (or by an entity wholly owned or operated 
by the hospital) to the patient during the 3 days immediately preceding 
the date of the patient's admission if such services are diagnostic 
services (including clinical diagnostic laboratory tests) or are other 
services related to the admission (as defined by the Secretary).''
    Subsec. (b)(1)(B)(ii). Pub. L. 101-508, Sec. 4005(a)(1), added cl. 
(ii) and struck out former cl. (ii) which read as follows: ``in the case 
of cost reporting periods beginning on or after October 1, 1982, and 
before October 1, 1984, 25 percent of the amount by which the amount of 
the operating costs exceeds the target amount;''.
    Subsec. (b)(3)(B)(i)(V). Pub. L. 101-508, Sec. 4002(a)(1)(A), struck 
out ``and'' after semicolon at end.
    Subsec. (b)(3)(B)(i)(VI). Pub. L. 101-508, Sec. 4002(c)(1)(A), 
substituted ``in a large urban or other urban area, and the market 
basket percentage increase minus 0.7 percentage point for hospitals 
located in a rural area'' for ``in all areas''.
    Pub. L. 101-508, Sec. 4002(a)(1)(C), added subcl. (VI). Former 
subcl. (VI) redesignated (IX).
    Pub. L. 101-508, Sec. 4002(a)(1)(B)(i), substituted ``1994'' for 
``1991''.
    Subsec. (b)(3)(B)(i)(VII). Pub. L. 101-508, Sec. 4002(c)(1)(B), 
substituted ``in a large urban or other urban area, and the market 
basket percentage increase minus 0.6 percentage point for hospitals 
located in a rural area'' for ``in all areas''.
    Pub. L. 101-508, Sec. 4002(a)(1)(C), added subcl. (VII).
    Subsec. (b)(3)(B)(i)(VIII). Pub. L. 101-508, Sec. 4002(c)(1)(C), 
substituted ``in a large urban or other urban area, and the market 
basket percentage increase minus 0.55 for hospitals located in a rural 
area,'' for ``in all areas, and''.
    Pub. L. 101-508, Sec. 4002(a)(1)(C), added subcl. (VIII).
    Subsec. (b)(3)(B)(i)(IX). Pub. L. 101-508, Sec. 4002(c)(1)(E), added 
subcl. (IX). Former subcl. (IX) redesignated (XI).
    Pub. L. 101-508, Sec. 4002(c)(1)(D)(i), substituted ``1996'' for 
``1994''.
    Pub. L. 101-508, Sec. 4002(a)(1)(B)(ii), redesignated subcl. (VI) as 
(IX).
    Subsec. (b)(3)(B)(i)(X). Pub. L. 101-508, Sec. 4002(c)(1)(E), added 
subcl. (X).
    Subsec. (b)(3)(B)(i)(XI). Pub. L. 101-508, Sec. 4002(c)(1)(D)(ii), 
redesignated subcl. (IX) as (XI).
    Subsec. (b)(3)(B)(ii). Pub. L. 101-508, Sec. 4002(c)(2)(A)(i), 
substituted ``(A), (C), (D), and (E),'' for ``(A) and (E),'' in 
introductory provisions.
    Subsec. (b)(3)(C)(ii), (D)(ii). Pub. L. 101-508, 
Sec. 4002(c)(2)(A)(ii), substituted ``subparagraph (B)(ii)'' for 
``subparagraph (B)(i)''.
    Subsec. (b)(4)(A). Pub. L. 101-508, Sec. 4005(c)(1)(B), inserted at 
end ``The Secretary shall announce a decision on any request for an 
exemption, exception, or adjustment under this paragraph not later than 
180 days after receiving a completed application from the intermediary 
for such exemption, exception, or adjustment, and shall include in such 
decision a detailed explanation of the grounds on which such request was 
approved or denied.''
    Subsec. (b)(4)(B), (C). Pub. L. 101-508, Sec. 4005(c)(2), added 
subpar. (B) and redesignated former subpar. (B) as (C).
    Subsec. (c)(4). Pub. L. 101-508, Sec. 4008(f)(1), substituted 
``payments under the State system as compared to aggregate payments 
which would have been made under the national system since'' for ``rate 
of increase from'' in last sentence.
    Subsec. (d)(1)(A)(iii). Pub. L. 101-508, Sec. 4002(e)(1), 
substituted ``beginning on or after April 1, 1988, and ending on 
September 30, 1993,'' for ``beginning on or after October 1, 1987, is 
equal to the national adjusted DRG prospective payment rate determined 
under paragraph (3) for such discharges, or, if the average standardized 
amount (described in clause (i)(I) or clause (ii)(I) of paragraph 
(3)(D)) for hospitals within the region of, and in the same rural, large 
urban, or other urban area as, the hospital is greater than the average 
standardized amount (described in the respective clause) for hospitals 
within the United States in that type of area for discharges occurring 
during the period beginning on April 1, 1988, and ending on October 20, 
1990''.
    Pub. L. 101-508, Sec. 4002(c)(2)(B)(i), substituted ``large urban or 
other area'' for ``rural, large urban, or other urban area'' in text of 
cl. (iii)(II) as amended by Pub. L. 103-66, Sec. 13501(f). See 1993 
Amendment note above.
    Pub. L. 101-403 substituted ``October 20, 1990'' for ``September 30, 
1990''.
    Subsec. (d)(2)(C)(iv). Pub. L. 101-508, Sec. 4002(b)(4)(B), 
substituted ``1989 or the enactment of section 4002(b) of the Omnibus 
Budget Reconciliation Act of 1990.'' for ``1989.''
    Pub. L. 101-508, Sec. 4002(b)(4)(A), struck out period at end and 
inserted ``, except that the Secretary shall not exclude additional 
payments under such paragraph made as a result of the enactment of 
section 6003(c) of the Omnibus Budget Reconciliation Act of 1989.''
    Pub. L. 101-508, Sec. 4002(b)(3)(A), struck out ``and before October 
1, 1995,'' after ``October 1, 1986,''.
    Subsec. (d)(3)(A)(ii). Pub. L. 101-508, Sec. 4002(c)(2)(B)(ii)(I), 
substituted ``and ending on or before September 30, 1994, the 
Secretary'' for ``the Secretary''.
    Subsec. (d)(3)(A)(iii) to (v). Pub. L. 101-508, 
Sec. 4002(c)(2)(B)(ii)(II), (III), added cls. (iii) and (iv) and 
redesignated former cl. (iii) as (v).
    Subsec. (d)(3)(B). Pub. L. 101-508, Sec. 4002(c)(2)(B)(iii), 
substituted ``by a factor equal to the proportion of payments under this 
subsection (as estimated by the Secretary) based on DRG prospective 
payment amounts which are additional payments described in paragraph 
(5)(A) (relating to outlier payments).'' for ``for hospitals located in 
an urban area and for hospitals located in a rural area by a proportion 
equal to the proportion (estimated by the Secretary) of the amount of 
payments under this subsection based on DRG prospective payment amounts 
which are additional payments described in paragraph (5)(A) (relating to 
outlier payments) for hospitals located in such respective area.''
    Subsec. (d)(3)(C)(ii). Pub. L. 101-508, Sec. 4002(b)(3)(B)(B), 
substituted ``occurring on or after October 1, 1986,'' through the end 
of cl. (ii) for ``occurring--'' and subcls. (I) and (II) which read as 
follows:
    ``(I) on or after October 1, 1986, and before October 1, 1995, of an 
amount equal to the estimated reduction in the payment amounts under 
paragraph (5)(B) that would have resulted from the enactment of the 
amendments made by section 9104 of the Medicare and Medicaid Budget 
Reconciliation Amendments of 1985 and by section 4003(a)(1) of the 
Omnibus Budget Reconciliation Act of 1987 if the factor described in 
clause (ii)(II) of paragraph (5)(B) were applied for discharges 
occurring during such period instead of the factor described in clause 
(ii)(I) of that paragraph, and
    ``(II) on or after October 1, 1995, of an amount equal to the 
estimated reduction in the payment amounts under paragraph (5)(B) for 
those discharges that has resulted from the enactment of the amendments 
made by section 9104 of the Medicare and Medicaid Budget Reconciliation 
Amendments of 1985 and by section 4003(a)(1) of the Omnibus Budget 
Reconciliation Act of 1987.''
    Subsec. (d)(3)(D)(i). Pub. L. 101-508, Sec. 4002(c)(2)(B)(iv)(I), 
which directed amendment of cl. (i) by substituting ``a large urban 
area'' for ``an urban area (or,'' and all that follows through 
``area),'' was executed by making the substitution for ``an urban area 
(or, for discharges occurring on or after April 1, 1988, in a large 
urban area or other urban area)'' to reflect the probable intent of 
Congress.
    Subsec. (d)(3)(D)(i)(I). Pub. L. 101-508, 
Sec. 4002(c)(2)(B)(iv)(II), substituted ``a large urban area'' for ``an 
urban area''.
    Subsec. (d)(3)(D)(ii). Pub. L. 101-508, Sec. 4002(c)(2)(B)(v), 
substituted ``other areas'' for ``a rural area'' in introductory 
provisions and in subcl. (I).
    Subsec. (d)(4)(D). Pub. L. 101-508, Sec. 4002(g)(2)(A), struck out 
subpar. (D) which read as follows: ``The Commission (established under 
subsection (e)(2) of this section) shall consult with and make 
recommendations to the Secretary with respect to the need for 
adjustments under subparagraph (C), based upon its evaluation of 
scientific evidence with respect to new practices, including the use of 
new technologies and treatment modalities. The Commission shall report 
to the Congress with respect to its evaluation of any adjustments made 
by the Secretary under subparagraph (C).''
    Subsec. (d)(5)(B)(ii). Pub. L. 101-508, Sec. 4002(b)(3)(B)(A), 
amended cl. (ii) generally. Prior to amendment, cl. (ii) read as 
follows: ``For purposes of clause (i)(II), the indirect teaching 
adjustment factor for discharges occurring--
        ``(I) on or after May 1, 1986, and before October 1, 1995, is 
    equal to 1.89 x ((1+r)<SUP>.405</SUP>-1), or
        ``(II) on or after October 1, 1995, is equal to 
    1.43 x ((1+r)<SUP>.5795</SUP>-1),
where `r' is the ratio of the hospital's full-time equivalent interns 
and residents to beds.''
    Subsec. (d)(5)(D)(iii). Pub. L. 101-508, Sec. 4008(m)(2)(A), 
substituted ``For purposes of this subchapter, the term'' for ``The 
term'' at beginning.
    Subsec. (d)(5)(F)(i). Pub. L. 101-508, Sec. 4002(b)(3)(A), struck 
out ``and before October 1, 1995,'' after ``May 1, 1986,''.
    Subsec. (d)(5)(F)(iii). Pub. L. 101-508, Sec. 4002(b)(2), 
substituted ``35 percent'' for ``30 percent''.
    Subsec. (d)(5)(F)(vii)(I). Pub. L. 101-508, Sec. 4002(b)(1)(A), 
substituted ``greater than 20.2--'' and subdivs. (a) to (d) for 
``greater than 20.2, (P-20.2)(.65)+5.62, or''.
    Subsec. (d)(5)(F)(vii)(II). Pub. L. 101-508, Sec. 4002(b)(1)(B), 
substituted ``hospital--'' and subdivs. (a) to (c) for ``hospital, 
(P-15)(.6)+2.5,''.
    Subsec. (d)(8)(C)(i). Pub. L. 101-508, Sec. 4002(h)(1)(A)(i), 
substituted ``area, or by treating hospitals located in one urban area 
as being located in another urban area--'' for ``area--''.
    Subsec. (d)(8)(C)(i)(II). Pub. L. 101-508, Sec. 4002(h)(1)(A)(ii), 
amended subcl. (II) generally. Prior to amendment, subcl. (II) read as 
follows: ``reduces the wage index for that urban area by more than 1 
percentage point (as applied under this subsection), the Secretary shall 
calculate and apply such wage index under this subsection separately to 
hospitals located in such urban area (excluding all the hospitals so 
treated) and to the hospitals so treated (as if each affected rural 
county were a separate urban area).''
    Subsec. (d)(8)(C)(ii) to (iv). Pub. L. 101-508, 
Sec. 4002(h)(1)(A)(iii), (iv), redesignated cls. (iii) and (iv) as (ii) 
and (iii), respectively, and struck out former cl. (ii) which read as 
follows: ``If the application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or the Secretary under 
paragraph (10), by reclassifying a county from a rural to an urban area 
or by reclassifying an urban county from one urban area to another urban 
area--
        ``(I) reduces the wage index for the urban area within which the 
    county or counties is reclassified by 1 percentage point or less (as 
    applied under this subsection), the Secretary, in calculating such 
    wage index under this subsection, shall exclude those counties so 
    reclassified, or
        ``(II) reduces the wage index for the urban area within which 
    the county or counties is reclassified by more than 1 percentage 
    point (as applied under this subsection), the Secretary shall 
    calculate and apply such wage index under this subsection separately 
    to hospitals located in such urban area (excluding all the hospitals 
    so reclassified) and to hospitals located in the counties so 
    reclassified (as if each affected county were a separate area).''
    Subsec. (d)(8)(D). Pub. L. 101-508, Sec. 4002(c)(2)(B)(vi), struck 
out ``for hospitals located in an urban area'' after ``determined under 
paragraph (3)'' and struck out at end ``The Secretary shall make such 
adjustment in payments under this section to hospitals located in rural 
areas as are necessary to assure that the aggregate of payments to rural 
hospitals not affected by subparagraphs (B) and (C) or a decision of the 
Medicare Geographic Classification Review Board or the Secretary under 
paragraph (10) are not changed as a result of the application of 
subparagraphs (B) and (C) or a decision of the Medicare Geographic 
Classification Review Board or the Secretary under paragraph (10).''
    Subsec. (d)(10)(A). Pub. L. 101-508, Sec. 4002(h)(2)(B)(i), 
substituted ``Geographic'' for ``Geographical''.
    Subsec. (d)(10)(B)(i). Pub. L. 101-508, Sec. 4002(h)(2)(B)(ii), 
substituted ``representative'' for ``representatives'' and struck out 
``1 member shall be a member of the Prospective Payment Assessment 
Commission, and at least'' after ``At least''.
    Subsec. (d)(10)(B)(ii). Pub. L. 101-508, Sec. 4002(h)(2)(B)(iii), 
substituted ``initial'' for ``all''.
    Subsec. (d)(10)(C)(iii)(II). Pub. L. 101-508, 
Sec. 4002(h)(2)(B)(iv), substituted ``Appeal of decisions of the Board 
shall be subject to the provisions of section 557b of title 5'' for ``A 
decision of the Board shall be final unless the unsuccessful applicant 
appeals such decision to the Secretary by not later than 15 days after 
the Board renders its decision. The Secretary in considering the appeal 
of an applicant shall receive no new evidence but shall consider the 
record as a whole as such record appeared before the Board'' and 
substituted ``after the date on which'' for ``after''.
    Subsec. (e)(2). Pub. L. 101-508, Sec. 4002(g)(1), designated 
existing provisions as subpar. (A) and added subpars. (B) and (C).
    Subsec. (e)(2)(A). Pub. L. 101-508, Sec. 4002(g)(2)(B), substituted 
``The Commission'' for ``In addition to carrying out its functions under 
subsection (d)(4)(D) of this section, the Commission''.
    Subsec. (e)(3)(A). Pub. L. 101-508, Sec. 4002(g)(2)(C), substituted 
``Congress'' for ``the Secretary'' and inserted before period at end ``, 
together with its general recommendations under paragraph (2)(B) 
regarding the effectiveness and quality of health care delivery systems 
in the United States''.
    Subsec. (e)(4). Pub. L. 101-508, Sec. 4002(g)(2)(D), designated 
existing provisions as subpar. (A) and added subpar. (B).
    Subsec. (e)(5). Pub. L. 101-508, Sec. 4002(g)(2)(E), substituted 
``recommendations'' for ``recommendation'' in subpars. (A) and (B) and 
inserted at end ``To the extent that the Secretary's recommendations 
under paragraph (4) differ from the Commission's recommendations for 
that fiscal year, the Secretary shall include in the publication 
referred to in subparagraph (A) an explanation of the Secretary's 
grounds for not following the Commission's recommendations.''
    Subsec. (e)(6)(G). Pub. L. 101-508, Sec. 4002(g)(2)(F), redesignated 
cls. (ii) and (iii) as (i) and (ii), respectively, and struck out former 
cl. (i) which read as follows: ``The Office shall report annually to the 
Congress on the functioning and progress of the Commission and on the 
status of the assessment of medical procedures and services by the 
Commission.''
    Subsec. (g)(1)(A). Pub. L. 101-508, Sec. 4001(b), inserted at end 
``Aggregate payments made under subsection (d) of this section and this 
subsection during fiscal years 1992 through 1995 shall be reduced in a 
manner that results in a reduction (as estimated by the Secretary) in 
the amount of such payments equal to a 10 percent reduction in the 
amount of payments attributable to capital-related costs that would 
otherwise have been made during such fiscal year had the amount of such 
payments been based on reasonable costs (as defined in section 1395x(v) 
of this title).''
    Subsec. (g)(3)(A)(v). Pub. L. 101-508, Sec. 4001(a), substituted 
``September 30, 1991'' for ``September 30, 1990''.
    Subsec. (g)(3)(B). Pub. L. 101-508, Sec. 4001(c), substituted 
``subsection (d)(5)(D)(iii) of this section or a rural primary care 
hospital (as defined in section 1395x(mm)(1) of this title)'' for 
``subsection (d)(5)(D)(iii) of this section)''.
    1989--Subsec. (a)(4). Pub. L. 101-239, Sec. 6011(a), struck out 
``or,'' after ``equity capital,'' and substituted ``October 1, 1987), or 
costs with respect to administering blood clotting factors to 
individuals with hemophilia'' for ``October 1, 1987)''.
    Subsec. (b)(3)(A). Pub. L. 101-239, Sec. 6004(b)(1)(A), substituted 
``(C), (D), and (E)'' for ``(C) and (D)'' in introductory provisions.
    Pub. L. 101-239, Sec. 6003(f)(2)(i), substituted ``subparagraphs (C) 
and (D)'' for ``subparagraph (C)'' in introductory provisions.
    Pub. L. 101-239, Sec. 6003(e)(1)(B)(i), substituted ``(A) Except as 
provided in subparagraph (C), for purposes of this subsection'' for 
``(A) For purposes of this subsection'' in introductory provisions.
    Subsec. (b)(3)(B)(i)(V), (VI). Pub. L. 101-239, Sec. 6003(a)(1), 
added subcl. (V), redesignated former subcl. (V) as (VI), and 
substituted ``fiscal year 1991'' for ``fiscal year 1990'' in subcl. 
(VI).
    Subsec. (b)(3)(B)(ii). Pub. L. 101-239, Sec. 6004(b)(1)(B), 
substituted ``For purposes of subparagraphs (A) and (E)'' for ``For 
purposes of subparagraph (A)'' in introductory provisions.
    Subsec. (b)(3)(C). Pub. L. 101-239, Sec. 6003(e)(1)(B)(ii), added 
subpar. (C).
    Subsec. (b)(3)(D). Pub. L. 101-239, Sec. 6003(f)(2)(ii), added 
subpar. (D).
    Subsec. (b)(3)(E). Pub. L. 101-239, Sec. 6004(b)(1)(C), added 
subpar. (E).
    Subsec. (b)(4)(A). Pub. L. 101-239, Sec. 6015(a), substituted 
``deems appropriate, including the assignment of a new base period which 
is more representative, as determined by the Secretary, of the 
reasonable and necessary cost of inpatient services and'' for ``deems 
appropriate,''.
    Subsec. (c)(4). Pub. L. 101-239, Sec. 6022, substituted ``the 
aggregate rate of increase from October 1, 1984, to the most recent date 
for which annual data are available'' for ``the aggregate payment or 
payments per inpatient admission or discharge during the three cost 
reporting periods beginning on or after October 1, 1983, after which 
such test, at the option of the Secretary, shall no longer apply, and 
such State systems shall be treated in the same manner as under other 
waivers'' in second sentence.
    Subsec. (d)(1)(B)(v). Pub. L. 101-239, Sec. 6004(a)(1), added cl. 
(v).
    Subsec. (d)(3)(E). Pub. L. 101-239, Sec. 6003(h)(6), substituted 
``October 1, 1990, and October 1, 1993 (and at least every 12 months 
thereafter)'' for ``October 1, 1990 (and at least every 36 months 
thereafter)'' and inserted at end ``Any adjustments or updates made 
under this subparagraph for a fiscal year (beginning with fiscal year 
1991) shall be made in a manner that assures that the aggregate payments 
under this subsection in the fiscal year are not greater or less than 
those that would have been made in the year without such adjustment.''
    Subsec. (d)(4)(C). Pub. L. 101-239, Sec. 6003(b), designated 
existing provisions as cl. (i) and added cls. (ii) to (iv).
    Subsec. (d)(5)(C). Pub. L. 101-239, Sec. 6003(e)(1)(A)(i), (ii), 
(iv), (2)(B), redesignated former cl. (i)(I) as cl. (i), redesignated 
former cl. (i)(II) as cl. (ii) and substituted ``clause (i)'' for 
``subclause (I)'' in three places, and redesignated former cls. (ii), 
(iii), and (iv) as subpars. (D), (I), and (H), respectively.
    Subsec. (d)(5)(D). Pub. L. 101-239, Sec. 6003(e)(1)(A)(iv), amended 
former subpar. (C)(ii) generally, redesignating it as subpar. (D) and 
substituting cls. (i) to (iv) relating to payments to sole community 
hospitals for cost reporting periods beginning on or after Apr. 1, 1990, 
for former single paragraph relating to payments to such hospitals for 
cost reporting periods beginning on or after Oct. 1, 1984.
    Subsec. (d)(5)(D)(iii)(III). Pub. L. 101-239, Sec. 6003(g)(2)(A), 
added subcl. (III).
    Subsec. (d)(5)(D)(v). Pub. L. 101-239, Sec. 6003(g)(2)(B), added cl. 
(v).
    Subsec. (d)(5)(E). Pub. L. 101-239, Sec. 6003(e)(1)(A)(iii), 
redesignated subpar. (D) as (E).
    Subsec. (d)(5)(F)(iii). Pub. L. 101-239, Sec. 6003(c)(3), 
substituted ``30 percent'' for ``25 percent''.
    Subsec. (d)(5)(F)(iv)(I). Pub. L. 101-239, Sec. 6003(c)(1)(A), 
substituted ``the applicable formula described in clause (vii)'' for 
``the following formula: (P-15)(.5)+2.5, where `P' is the hospital's 
disproportionate patient percentage (as defined in clause (vi))''.
    Subsec. (d)(5)(F)(iv)(III). Pub. L. 101-239, Sec. 6003(c)(2)(A)(ii), 
inserted ``in subclause (IV) or (V) or'' after ``described''.
    Subsec. (d)(5)(F)(iv)(IV) to (VI). Pub. L. 101-239, 
Sec. 6003(c)(2)(A)(i), (iii), (iv), added subcls. (IV) to (VI).
    Subsec. (d)(5)(F)(v)(II) to (IV). Pub. L. 101-239, 
Sec. 6003(c)(2)(B), added subcl. (II), redesignated former subcls. (II) 
and (III) as (III) and (IV), respectively, and substituted ``area and is 
not described in subclause (II)'' for ``area'' in subcl. (IV).
    Subsec. (d)(5)(F)(vii). Pub. L. 101-239, Sec. 6003(c)(1)(B), added 
cl. (vii).
    Subsec. (d)(5)(F)(viii). Pub. L. 101-239, Sec. 6003(c)(2)(C), added 
cl. (viii).
    Subsec. (d)(5)(G). Pub. L. 101-239, Sec. 6003(f)(1), added subpar. 
(G).
    Subsec. (d)(5)(H). Pub. L. 101-239, Sec. 6003(e)(1)(A)(i), 
redesignated subpar. (C)(iv) as subpar. (H).
    Subsec. (d)(5)(I). Pub. L. 101-239, Sec. 6004(a)(2), struck out 
``(including exceptions and adjustments that may be appropriate with 
respect to hospitals involved extensively in treatment for and research 
on cancer)'' after ``deems appropriate''.
    Pub. L. 101-239, Sec. 6003(e)(1)(A)(ii), redesignated subpar. 
(C)(iii) as subpar. (I).
    Subsec. (d)(8)(C). Pub. L. 101-239, Sec. 6003(h)(3), amended subpar. 
(C) generally. Prior to amendment, subpar. (C) read as follows:
    ``(i) If the application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or the Secretary under 
paragraph (10),, [sic] by treating hospitals located in a rural county 
or counties as being located in an urban area, reduces the wage index 
for that urban area (as applied under this subsection), the Secretary 
shall calculate and apply such wage index under this subsection 
separately to hospitals located in such urban area (excluding all the 
hospitals so treated) and to the hospitals so treated (as if each 
affected rural county were a separate urban area). If the application of 
subparagraph (B) or a decision of the Medicare Geographic Classification 
Review Board or the Secretary under paragraph (10),, [sic] by treating 
the hospitals located in a rural county or counties as not being located 
in the rural area in a State, reduces the wage index for that rural area 
(as applied under this subsection), the Secretary shall calculate and 
apply such wage index under this subsection as if the hospitals so 
treated had not been excluded from calculation of the wage index for 
that rural area.
    ``(ii) Clause (i) shall only apply to discharges occurring on or 
after October 1, 1989, and before October 1, 1991.''
    Subsec. (d)(8)(C)(i). Pub. L. 101-239, Sec. 6003(h)(2), substituted 
``subparagraph (B) or a decision of the Medicare Geographic 
Classification Review Board or the Secretary under paragraph (10),'' for 
``subparagraph (B)'' in two places.
    Subsec. (d)(8)(C)(iv). Pub. L. 101-239, Sec. 6003(h)(4), added cl. 
(iv).
    Subsec. (d)(8)(D). Pub. L. 101-239, Sec. 6003(h)(2)(B), substituted 
``(B) and (C) or a decision of the Medicare Geographic Classification 
Review Board or the Secretary under paragraph (10)'' for ``(B) and (C)'' 
in three places.
    Subsec. (d)(9)(B)(ii)(IV). Pub. L. 101-239, Sec. 6003(e)(2)(C), 
substituted ``subparagraph (D)(iii)'' for ``subparagraph (D)(v)''.
    Subsec. (d)(9)(D)(iii). Pub. L. 101-239, Sec. 6003(e)(2)(D)(ii), 
redesignated cl. (v) as (iii). Former cl. (iii) redesignated (iv).
    Subsec. (d)(9)(D)(iv). Pub. L. 101-239, Sec. 6003(e)(2)(D)(i), (ii), 
redesignated former cl. (iii) as (iv), substituted ``Subparagraph (H)'' 
for ``Subparagraph (C)(iii)'', and struck out former cl. (iv) which read 
as follows: ``Subparagraph (E) (relating to payments for costs of 
certified registered nurse anesthetists).''
    Subsec. (d)(9)(D)(v). Pub. L. 101-239, Sec. 6003(e)(2)(D)(iii), 
redesignated cl. (v) as (iii).
    Subsec. (d)(10). Pub. L. 101-239, Sec. 6003(h)(1), added par. (10).
    Subsec. (g)(3)(A)(iv). Pub. L. 101-234, Sec. 301(b)(3), (c)(3), 
amended cl. (iv) identically, substituting ``(as the case may be)'' for 
``(as the case may) be''.
    Subsec. (g)(3)(A)(v). Pub. L. 101-239, Sec. 6002, added cl. (v).
    Subsec. (g)(3)(B). Pub. L. 101-239, Sec. 6003(e)(2)(E), substituted 
``subsection (d)(5)(D)(iii)'' for ``subsection (d)(5)(C)(ii)''.
    Subsec. (i). Pub. L. 101-239, Sec. 6003(g)(4), added subsec. (i).
    1988--Subsec. (b)(3)(B)(i)(III). Pub. L. 100-485, 
Sec. 608(d)(18)(A), substituted ``for hospitals'' for ``for for 
hospitals'' before ``located in other urban areas''.
    Pub. L. 100-360, Sec. 411(b)(1)(A), substituted ``for hospitals 
located in other urban areas'' for ``other hospitals''.
    Subsec. (b)(3)(B)(i)(IV). Pub. L. 100-485, Sec. 608(d)(18)(A), 
substituted ``for hospitals'' for ``for for hospitals'' before ``located 
in other urban areas''.
    Pub. L. 100-360, Sec. 411(b)(1)(A), (B), substituted ``percentage 
points'' for ``percent'' in three places and ``for hospitals located in 
other urban areas'' for ``other hospitals''.
    Subsec. (b)(3)(B)(i)(V). Pub. L. 100-360, Sec. 411(b)(1)(C), 
inserted ``increase'' after ``market basket percentage''.
    Subsec. (d)(1)(A)(iii). Pub. L. 100-360, Sec. 411(b)(1)(G), 
substituted ``if the average standardized amount (described in clause 
(i)(I) or clause (ii)(I) of paragraph (3)(D)) for hospitals within the 
region of, and in the same rural, large urban, or other urban area as, 
the hospital is greater than the average standardized amount (described 
in the respective clause) for hospitals within the United States in that 
type of area'' for ``if greater''.
    Subsec. (d)(2)(C)(i). Pub. L. 100-647, Sec. 1018(r)(1), struck out 
Pub. L. 99-514, Sec. 1895(b)(1), (2). Previously, Pub. L. 99-509, 
Sec. 9307(c)(1)(A), struck out Pub. L. 99-514, Sec. 1895(b)(1)(A). See 
1986 Amendment note below.
    Subsec. (d)(2)(C)(iv). Pub. L. 100-647, Sec. 8401, substituted 
``1995'' for ``1990''.
    Pub. L. 100-647, Sec. 1018(r)(1), struck out Pub. L. 99-514, 
Sec. 1895(b)(1), (2). Previously, Pub. L. 99-509, Sec. 9307(c)(1)(B)(i), 
as amended by Pub. L. 100-203, Sec. 4009(j)(6)(A), struck out Pub. L. 
99-514, Sec. 1895(b)(2)(A). See 1986 Amendment note below.
    Subsec. (d)(2)(D). Pub. L. 100-360, Sec. 411(b)(1)(D), substituted 
``the publications described in subsection (e)(5) of this section'' for 
``the publication described in subsection (e)(5)(B) of this section'' in 
second sentence.
    Pub. L. 100-360, Sec. 411(b)(1)(H)(i), struck out at end ``For 
purposes of payment under this subsection, a hospital is considered to 
be located in an urban area or large urban area, respectively, if the 
hospital is paid under this subsection at the rate for hospitals located 
in such an area.''
    Subsec. (d)(3)(A). Pub. L. 100-647, Sec. 1018(r)(1), struck out Pub. 
L. 99-514, Sec. 1895(b)(1), (2). Previously, Pub. L. 99-509, 
Sec. 9307(c)(1)(A), struck out Pub. L. 99-514, Sec. 1895(b)(1)(B). See 
1986 Amendment note below.
    Subsec. (d)(3)(A)(i). Pub. L. 100-360, Sec. 411(b)(1)(E)(i), as 
added by Pub. L. 100-485, Sec. 608(d)(18)(B), substituted ``occurring'' 
for ``occuring'' in first sentence.
    Pub. L. 100-360, Sec. 411(b)(1)(E)(ii), formerly Sec. 411(b)(1)(E), 
as redesignated by Pub. L. 100-485, Sec. 608(d)(18)(B), made technical 
correction to Pub. L. 100-203, Sec. 4002(c)(1)(B)(iii), see 1987 
Amendment note below.
    Subsec. (d)(3)(A)(ii). Pub. L. 100-360, Sec. 411(b)(1)(F), 
substituted ``in other urban areas'' for ``in urban areas''.
    Subsec. (d)(3)(C)(ii). Pub. L. 100-647, Sec. 1018(r)(1), struck out 
Pub. L. 99-514, Sec. 1895(b)(1), (2). Previously, Pub. L. 99-509, 
Sec. 9307(c)(1)(A), struck out Pub. L. 99-514, Sec. 1895(b)(1)(C). See 
1986 Amendment note below.
    Subsec. (d)(3)(C)(ii)(I), (II). Pub. L. 100-647, Sec. 8401, 
substituted ``1995'' for ``1990''.
    Subsec. (d)(3)(C)(iii). Pub. L. 100-647, Sec. 1018(r)(1), struck out 
Pub. L. 99-514, Sec. 1895(b)(1), (2). Previously, Pub. L. 99-509, 
Sec. 9307(c)(1)(B)(i), as amended by Pub. L. 100-203, 
Sec. 4009(j)(6)(A), struck out Pub. L. 99-514, Sec. 1895(b)(2)(B). See 
1986 Amendment note below.
    Subsec. (d)(5)(B)(ii)(I), (II). Pub. L. 100-647, Sec. 8401, 
substituted ``1995'' for ``1990''.
    Subsec. (d)(5)(F)(i). Pub. L. 100-647, Sec. 8401, substituted 
``1995'' for ``1990''.
    Subsec. (d)(5)(F)(vi)(I). Pub. L. 100-647, Sec. 1018(r)(1), struck 
out Pub. L. 99-514, Sec. 1895(b)(1), (2). See 1986 Amendment note below.
    Subsec. (d)(8). Pub. L. 100-360, Sec. 411(b)(4)(C)(i), made 
technical correction to directory language of Pub. L. 100-203, 
Sec. 4005(a)(1)(D), see 1987 Amendment note below.
    Subsec. (d)(8)(B). Pub. L. 100-360, Sec. 411(b)(4)(A)(i), 
substituted ``For purposes of this subsection, the Secretary'' for ``The 
Secretary''.
    Pub. L. 100-360, Sec. 411(b)(4)(A)(ii), substituted ``the rural 
county would otherwise be considered part of an urban area, under the 
standards for designating Metropolitan Statistical Areas (and for 
designating New England County Metropolitan Areas) published in the 
Federal Register on January 3, 1980, if the commuting rates used in 
determining outlying counties (or, for New England, similar recognized 
areas) were determined on the basis of the aggregate number of resident 
workers who commute to (and, if applicable under the standards, from) 
the central county or counties of all contiguous Metropolitan 
Statistical Areas (or New England County Metropolitan Areas).'' for ``--
        ``(i) the rural county would otherwise be considered part of an 
    urban area but for the fact that the rural county does not meet the 
    standard relating to the rate of commutation between the rural 
    county and the central county or counties of any adjacent urban 
    area; and
        ``(ii) either (I) the number of residents of the rural county 
    who commute for employment to the central county or counties of any 
    adjacent urban area is equal to at least 15 percent of the number of 
    residents of the rural county who are employed, or (II) the sum of 
    the number of residents of the rural county who commute for 
    employment to the central county or counties of any adjacent urban 
    area and the number of residents of any adjacent urban area who 
    commute for employment to the rural county is at least equal to 20 
    percent of the number of residents of the rural county who are 
    employed.''
    Subsec. (d)(8)(C). Pub. L. 100-647, Sec. 8403(a)(2), added subpar. 
(C). Former subpar. (C) redesignated (D).
    Pub. L. 100-360, Sec. 411(b)(4)(B), substituted ``standardized 
amounts'' for ``standardized amount''.
    Subsec. (d)(8)(D). Pub. L. 100-647, Sec. 8403(a)(1), redesignated 
former subpar. (C) as (D) and substituted ``subparagraphs (B) and (C)'' 
for ``subparagraph (B)'' wherever appearing.
    Subsec. (d)(9)(C)(iv). Pub. L. 100-360, Sec. 411(b)(3), added Pub. 
L. 100-203, Sec. 4004(a)(2), see 1987 Amendment note below.
    Subsec. (e)(6)(B). Pub. L. 100-360, Sec. 411(b)(8)(B), amended Pub. 
L. 100-203, Sec. 4009(d)(1), see 1987 Amendment note below.
    Subsec. (f)(1)(A). Pub. L. 100-360, Sec. 411(b)(6)(B), added Pub. L. 
100-203, Sec. 4007(b)(1)(A), (B), see 1987 Amendment note below.
    Subsec. (f)(1)(B). Pub. L. 100-360, Sec. 411(b)(6)(B), added Pub. L. 
100-203, Sec. 4007(b)(1)(C), see 1987 Amendment note below.
    Subsec. (g)(3)(A)(ii) to (iv). Pub. L. 100-360, Sec. 411(b)(5)(B), 
made technical amendment to Pub. L. 100-203, Sec. 4006(a), see 1987 
Amendment note below.
    Subsec. (g)(3)(A)(iv). Pub. L. 100-360, Sec. 411(b)(5)(A), inserted 
``for payments attributable'' after ``15 percent''.
    1987--Subsec. (a)(4). Pub. L. 100-203, Sec. 4009(j)(1), inserted a 
comma after ``educational activities''.
    Pub. L. 100-203, Sec. 4006(b)(2)(A), substituted ``other capital-
related costs (as defined by the Secretary for periods before October 1, 
1987)'' for ``with respect to costs incurred in cost reporting periods 
beginning prior to October 1 of 1987 (or of such later year as the 
Secretary may, in his discretion, select), other capital-related costs, 
as defined by the Secretary''.
    Subsec. (b)(3)(B)(i). Pub. L. 100-203, Sec. 4002(e)(1), struck out 
``subparagraph (A) for 12-month cost reporting periods beginning during 
a fiscal year and for purposes of'' after ``For purposes of''.
    Subsec. (b)(3)(B)(i)(II). Pub. L. 100-203, Sec. 4002(a), struck out 
``and for fiscal year 1988, the market basket percentage increase (as 
defined in clause (ii)) minus 2.0 percentage points, and'' after ``1.15 
percent,''.
    Subsec. (b)(3)(B)(i)(III) to (V). Pub. L. 100-203, Sec. 4002(a), 
added subcls. (III) to (V) and struck out former subcl. (III) which read 
``for fiscal year 1989 and subsequent fiscal years, the percentage 
determined by the Secretary pursuant to subsection (e)(4) of this 
section.''
    Subsec. (b)(3)(B)(ii), (iii). Pub. L. 100-203, Sec. 4002(e)(2), (3), 
added cl. (ii), redesignated former cl. (ii) as (iii), and substituted 
``For purposes of this subparagraph'' for ``For purposes of clause 
(i)''.
    Subsec. (d)(1)(A)(iii). Pub. L. 100-203, Sec. 4002(d), inserted 
before period at end ``, or, if greater for discharges occurring during 
the period beginning on April 1, 1988, and ending on September 30, 1990, 
the sum of (I) 85 percent of the national adjusted DRG prospective 
payment rate determined under paragraph (3) for such discharges, and 
(II) 15 percent of the regional adjusted DRG prospective payment rate 
determined under such paragraph''.
    Subsec. (d)(2)(C)(iv). Pub. L. 100-203, Sec. 4009(j)(6)(A), made 
technical amendment to Pub. L. 99-509, Sec. 9307(c)(1)(B). See 1986 
Amendment note below.
    Pub. L. 100-203, Sec. 4003(c), substituted ``1990'' for ``1989''.
    Subsec. (d)(2)(D). Pub. L. 100-203, Sec. 4002(f)(1)(A), inserted 
sentence at end providing that hospital is considered located in urban 
area or large urban area, respectively, if it is paid under this 
subsection at rate for hospitals located in such area.
    Pub. L. 100-203, Sec. 4002(b), in second sentence inserted 
definition of ``large urban area''.
    Subsec. (d)(3). Pub. L. 100-203, Sec. 4002(c)(1)(A), substituted 
``large urban, other urban, or rural areas'' for ``urban or rural 
areas'' in second sentence.
    Subsec. (d)(3)(A)(i). Pub. L. 100-203, Sec. 4002(c)(1)(B), (C), as 
amended by Pub. L. 100-360, Sec. 411(b)(1)(E)(ii), designated existing 
provisions as cl. (i), substituted ``For discharges occuring [sic] in a 
fiscal year beginning before October 1, 1987, the Secretary'' for ``The 
Secretary'' and ``the fiscal year involved'' for ``each of fiscal years 
1985, 1986, 1987, and 1988'', struck out ``, and adjusted for subsequent 
fiscal years in accordance with the final determination of the Secretary 
under subsection (e)(4) of this section, and adjusted to reflect the 
most recent case-mix data available'', and added cls. (ii) and (iii).
    Subsec. (d)(3)(C)(ii). Pub. L. 100-203, Sec. 4003(c), substituted 
``1990'' for ``1989'' in subcls. (I) and (II).
    Pub. L. 100-203, Sec. 4003(a)(2), inserted ``and by section 
4003(a)(1) of the Omnibus Budget Reconciliation Act of 1987'' after 
``Amendments of 1985'' in subcls. (I) and (II).
    Subsec. (d)(3)(C)(iii). Pub. L. 100-203, Sec. 4009(j)(6)(A), made 
technical amendment to Pub. L. 99-509, Sec. 9307(c)(1)(B). See 1986 
Amendment note below.
    Subsec. (d)(3)(D)(i). Pub. L. 100-203, Sec. 4002(c)(1)(D), inserted 
``(or, for discharges occurring on or after April 1, 1988, in a large 
urban area or other urban area)'' after first reference to ``urban 
area'', and in subcl. (I) inserted ``such'' before ``an urban area''.
    Subsec. (d)(3)(E). Pub. L. 100-203, Sec. 4004(a)(1), formerly 
Sec. 4004(a), as redesignated by Pub. L. 100-360, Sec. 411(b)(3), 
inserted at end ``Not later than October 1, 1990 (and at least every 36 
months thereafter), the Secretary shall update the factor under the 
preceding sentence on the basis of a survey conducted by the Secretary 
(and updated as appropriate) of the wages and wage-related costs of 
subsection (d) hospitals in the United States. To the extent determined 
feasible by the Secretary, such survey shall measure the earnings and 
paid hours of employment by occupational category and shall exclude data 
with respect to the wages and wage-related costs incurred in furnishing 
skilled nursing facility services.''
    Subsec. (d)(5)(B)(ii). Pub. L. 100-203, Sec. 4003(c), substituted 
``1990'' for ``1989'' in subcls. (I) and (II).
    Pub. L. 100-203, Sec. 4003(a)(1), substituted ``1.89'' for ``2'' in 
subcl. (I) and ``1.43'' for ``1.5'' in subcl. (II).
    Subsec. (d)(5)(C)(i)(I). Pub. L. 100-203, Sec. 4005(d)(1)(A), 
substituted ``275'' for ``500''.
    Subsec. (d)(5)(C)(i)(II). Pub. L. 100-203, Sec. 4009(j)(2), inserted 
``index'' after ``case mix'' in two places.
    Subsec. (d)(5)(C)(ii). Pub. L. 100-203, Sec. 4005(c)(1), substituted 
``1990'' for ``1988'' in second sentence and inserted after second 
sentence ``A subsection (d) hospital that meets the criteria for 
classification as a sole community hospital and otherwise qualifies for 
the adjustment authorized by the preceding sentence may qualify for such 
an adjustment without regard to the formula by which payments are 
determined for the hospital under paragraph (1)(A).''
    Subsec. (d)(5)(F)(i). Pub. L. 100-203, Sec. 4003(c), substituted 
``1990'' for ``1989''.
    Subsec. (d)(5)(F)(i)(II). Pub. L. 100-203, Sec. 4009(j)(3)(A), 
substituted ``such net inpatient care revenues'' for second reference to 
``such revenues''.
    Subsec. (d)(5)(F)(iii). Pub. L. 100-203, Sec. 4003(b)(1), 
substituted ``25 percent'' for ``15 percent''.
    Subsec. (d)(5)(F)(iv)(I). Pub. L. 100-203, Sec. 4009(j)(3)(B), 
substituted ``clause (v)'' for ``subclause (III)''.
    Pub. L. 100-203, Sec. 4003(b)(2), struck out ``the lesser of 15 
percent, or'' after ``is equal to''.
    Subsec. (d)(5)(F)(vi)(I). Pub. L. 100-203, Sec. 4009(j)(6)(A), made 
technical amendment to Pub. L. 99-509, Sec. 9307(c)(1)(B)(ii). See 1986 
Amendment note below.
    Subsec. (d)(8). Pub. L. 100-203, Sec. 4005(a)(1), as amended by Pub. 
L. 100-360, Sec. 411(b)(4)(C)(i), designated existing provisions as 
subpar. (A), redesignated former subpar. (A) and cls. (i) and (ii) as 
cl. (i) and subcls. (I) and (II), respectively, redesignated former 
subpar. (B) and cls. (i) and (ii) as cl. (ii) and subcl. (I) and (II), 
respectively, and added subpars. (B) and (C).
    Subsec. (d)(9)(A)(ii). Pub. L. 100-203, Sec. 4002(c)(2), substituted 
``a large urban area,'' for ``an urban area, and'' in subcl. (I), added 
subcl. (II), and redesignated former subcl. (II) as (III).
    Subsec. (d)(9)(B). Pub. L. 100-203, Sec. 4009(j)(4), realigned 
margin of introductory provisions.
    Subsec. (d)(9)(C)(iv). Pub. L. 100-203, Sec. 4004(a)(2), as added by 
Pub. L. 100-360, Sec. 411(b)(3), inserted at end ``The second and third 
sentences of paragraph (3)(E) shall apply to subsection (d) Puerto Rico 
hospitals under this clause in the same manner as they apply to 
subsection (d) hospitals under such paragraph and, for purposes of this 
clause, any reference in such paragraph to a subsection (d) hospital is 
deemed a reference to a subsection (d) Puerto Rico hospital.''
    Subsec. (e)(3)(B). Pub. L. 100-203, Sec. 4002(f)(1)(B), struck out 
``or determine'' after ``recommend''.
    Subsec. (e)(4). Pub. L. 100-203, Sec. 4002(f)(1)(C), substituted 
``for each fiscal year (beginning with fiscal year 1988)'' for ``for 
fiscal year 1988'', struck out ``and shall determine for each subsequent 
fiscal year the percentage change which will apply for purposes of this 
section as the applicable percentage increase (otherwise described in 
subsection (b)(3)(B) of this section) for discharges in that fiscal 
year, and'' after ``in that fiscal year'', and amended last sentence 
generally. Prior to amendment, last sentence read as follows: ``The 
percentage change shall be the same for all subsection (d) hospitals and 
subsection (d) Puerto Rico hospitals, but may be different from that for 
other hospitals (and units not included as such hospitals) and may vary 
among such other hospitals and units.''
    Subsec. (e)(5). Pub. L. 100-203, Sec. 4009(j)(6)(B), amended Pub. L. 
99-509, Sec. 9302(a)(2)(C). See 1986 Amendment note below.
    Pub. L. 100-203, Sec. 4002(f)(1)(D), struck out ``or determination'' 
after ``recommendation'' in subpars. (A) and (B).
    Subsec. (e)(6)(B). Pub. L. 100-203, Sec. 4009(d)(1), as amended by 
Pub. L. 100-360, Sec. 411(b)(8)(B), substituted ``include individuals 
with national recognition for their expertise in health economics, 
hospital reimbursement, hospital financial management, and other related 
fields, who provide a mix of different professionals, broad geographic 
representation, and a balance between urban and rural representatives'' 
for ``provide expertise and experience in the provision and financing of 
health care'', and struck out last sentence which required Director to 
seek nominations from wide range of groups, including specified types of 
national organizations.
    Subsec. (e)(6)(D). Pub. L. 100-203, Sec. 4083(b)(1), inserted at end 
``For purposes of pay (other than pay of members of the Commission) and 
employment benefits, rights, and privileges, all personnel of the 
Commission shall be treated as if they were employees of the United 
States Senate.''
    Subsec. (f)(1)(A). Pub. L. 100-203, Sec. 4007(b)(1)(A), (B), as 
added by Pub. L. 100-360, Sec. 411(b)(6)(B), inserted subpar. (A) 
designation and struck out ``, for a period ending not earlier than 
September 30, 1988,'' after ``shall maintain''.
    Subsec. (f)(1)(B). Pub. L. 100-203, Sec. 4007(b)(1)(C), as added by 
Pub. L. 100-360, Sec. 411(b)(6)(B), added subpar. (B).
    Subsec. (f)(3). Pub. L. 100-93 amended par. (3) generally. Prior to 
amendment, par. (3) read as follows: ``The provisions of paragraphs (2), 
(3), and (4) of section 1395y(d) of this title shall apply to 
determinations under paragraph (2) of this subsection in the same manner 
as they apply to determinations made under section 1395y(d)(1) of this 
title.''
    Subsec. (g)(1). Pub. L. 100-203, Sec. 4006(b)(1), amended par. (1) 
generally. Prior to amendment, par. (1) read as follows: ``If the 
Congress does not enact legislation, after April 20, 1983, and before 
October 1, 1987, respecting the payment under this subchapter for 
capital-related costs for inpatient hospital services, no payment may be 
made under this subchapter for capital-related costs of capital 
expenditures (as defined in section 1320a-1(g) of this title and except 
as provided in section 1320a-1(j) of this title) for inpatient hospital 
services in a State, which expenditures are obligated after September 
30, 1987, unless the State has an agreement with the Secretary under 
section 1320a-1(b) of this title and under the agreement the State has 
recommended approval of the capital expenditures.''
    Subsec. (g)(3)(A)(ii) to (iv). Pub. L. 100-203, Sec. 4006(a), as 
amended by Pub. L. 100-360, Sec. 411(b)(5)(B), substituted ``on or after 
October 1, 1987, and before January 1, 1988,'' for ``, and'', at end of 
cl. (ii), added cls. (iii) and (iv), and struck out former cl. (iii) 
which read as follows: ``10 percent for payments attributable to 
portions of cost reporting periods or discharges (as the case may be) 
occurring during fiscal year 1989.''
    Subsec. (g)(3)(C). Pub. L. 100-203, Sec. 4006(b)(2)(B), struck out 
subpar. (C) which read as follows: ``If the Secretary provides, under 
subsection (a)(4) of this section, for the inclusion of other capital-
related costs in operating costs of inpatient hospital services, the 
Secretary shall provide--
        ``(i) notwithstanding any other provision of this subchapter, 
    for the continuation of payment under the reasonable cost 
    methodology described in section 1395x(v)(1) of this title with 
    respect to capital-related costs of any hospital that is such a sole 
    community hospital for cost reporting periods beginning before 
    October 1, 1990, and
        ``(ii) in the design of such payment system that the aggregate 
    payment amounts under this subchapter for such other capital-related 
    costs for payments attributable to portions of cost reporting 
    periods occurring during fiscal year 1988 and fiscal year 1989 shall 
    approximate the aggregate payment amount under this subchapter that 
    would have been made (taking into account the provisions of 
    subparagraphs (A) and (B)) during that fiscal year but for the 
    inclusion of such costs by the Secretary.''
    Subsec. (h)(4)(C). Pub. L. 100-203, Sec. 4009(j)(5), substituted 
``subparagraph (D)'' for ``subparagraph (E)''.
    1986--Subsec. (a)(4). Pub. L. 99-509, Sec. 9320(g)(1), struck out 
``, costs of anesthesia services provided by a certified registered 
nurse anesthetist,'' after ``approved educational activities''.
    Pub. L. 99-509, Sec. 9303(c), substituted ``October 1 of 1987 (or of 
such later year as the Secretary may, in his discretion, select)'' for 
``October 1, 1987''.
    Pub. L. 99-349 substituted ``1987'' for ``1986''.
    Pub. L. 99-272, Sec. 9107(a)(2), inserted ``a return on equity 
capital,'' after ``anesthetist,'' and ``other'' before ``capital-related 
costs''.
    Subsec. (b)(3)(B). Pub. L. 99-272, Sec. 9101(b), amended subpar. (B) 
generally. Prior to amendment, subpar. (B) read as follows: ``For 
purposes of subparagraph (A) and subsection (d) of this section and 
except as provided in subsection (e) of this section, the `applicable 
percentage increase' for any 12-month cost reporting period or fiscal 
year shall be equal to one-quarter of 1 percentage point plus the 
percentage, estimated by the Secretary before the beginning of the 
period or year, by which the cost of the mix of goods and services 
(including personnel costs but excluding non-operating costs) comprising 
routine, ancillary, and special care unit inpatient hospital services, 
based on an index of appropriately weighted indicators of changes in 
wages and prices which are representative of the mix of goods and 
services included in such inpatient hospital services, for such cost 
reporting period or fiscal year will exceed the cost of such mix of 
goods and services for the preceding 12-month cost reporting period or 
fiscal year. In determining a percentage change under subsection (e)(4) 
of this section with respect to discharges occurring in any cost 
reporting period or fiscal year beginning on or after October 1, 1985, 
and before October 1, 1986, the Secretary may not establish a percentage 
increase which exceeds the applicable percentage increase otherwise 
determined for that period or fiscal year under the preceding 
sentence.''
    Subsec. (b)(3)(B)(i)(II). Pub. L. 99-509, Sec. 9302(a)(1), amended 
subcl. (II) generally. Prior to amendment, subcl. (II) read as follows: 
``for fiscal years 1987 and 1988, a percentage determined by the 
Secretary pursuant to subsection (e)(4) of this section, but not to 
exceed the market basket percentage increase (as defined in clause 
(ii)), and''.
    Subsec. (b)(6). Pub. L. 99-514, Sec. 2, substituted ``Internal 
Revenue Code of 1986'' for ``Internal Revenue Code of 1954''.
    Subsec. (c)(7). Pub. L. 99-272, Sec. 9109(a), added par. (7).
    Subsec. (d)(1)(A). Pub. L. 99-272, Sec. 9102(a), substituted 
``1987'' for ``1986'' in cls. (ii) and (iii).
    Subsec. (d)(1)(C). Pub. L. 99-272, Sec. 9102(b), struck out ``, or 
discharges occurring'' after ``periods beginning'' in introductory 
provision, and ``and'' after ``percent;'' in cl. (ii), added cl. (iii), 
redesignated former cl. (iii) as (iv), and in cl. (iv) substituted ``on 
or after October 1, 1986, and before October 1, 1987'' for ``on or after 
October 1, 1985, and before October 1, 1986''.
    Subsec. (d)(1)(D). Pub. L. 99-272, Sec. 9102(c), struck out ``cost 
reporting periods beginning, or'' before ``discharges occurring'' in 
introductory provision, in cl. (i) substituted ``1986'' for ``1985'', 
and in cl. (ii) substituted ``1986'' and ``1987'' for ``1985'' and 
``1986'', respectively.
    Subsec. (d)(2)(C)(i). Pub. L. 99-509, Sec. 9307(c)(1)(A), struck out 
Pub. L. 99-514, Sec. 1895(b)(1)(A), which had directed the striking out 
of ``(taking into account, for discharges occurring after September 30, 
1986, the amendments made by section 9104(a) of the Medicare and 
Medicaid Budget Reconciliation Amendments of 1985)'' after ``medical 
education costs''.
    Pub. L. 99-272, Sec. 9104(b)(1), inserted ``(taking into account, 
for discharges occurring after September 30, 1986, the amendments made 
by section 9104(a) of the Medicare and Medicaid Budget Reconciliation 
Amendments of 1985)'' after ``medical education costs''.
    Subsec. (d)(2)(C)(iv). Pub. L. 99-509, Sec. 9306(c), substituted 
``1989'' for ``1988''.
    Pub. L. 99-509, Sec. 9307(c)(1)(B)(i), as amended by Pub. L. 100-
203, Sec. 4009(j)(6)(A), struck out Pub. L. 99-514, Sec. 1895(b)(2)(A), 
which had directed that cl. (iv) was to be struck out.
    Pub. L. 99-272, Sec. 9105(b), added cl. (iv).
    Subsec. (d)(3)(A). Pub. L. 99-509, Sec. 9302(a)(2)(A), (c), 
substituted ``1986, 1987, and 1988'' for ``and 1986'' and inserted 
provisions relating to the computation of urban and rural averages with 
respect to discharges occurring on or after October 1, 1987.
    Pub. L. 99-509, Sec. 9307(c)(1)(A), struck out Pub. L. 99-514, 
Sec. 1895(b)(1)(B), which had directed insertion of ``If the formula 
under paragraph (5)(B) for determining payments for the indirect costs 
of medical education is changed for any fiscal year, the Secretary shall 
readjust the standardized amounts previously determined for each 
hospital to take into account the changes in that formula.''
    Pub. L. 99-272, Sec. 9101(c)(1), substituted ``for each of fiscal 
years 1985 and 1986'' for ``for fiscal year 1985''.
    Subsec. (d)(3)(B). Pub. L. 99-509, Sec. 9302(b)(1), inserted ``for 
hospitals located in an urban area and for hospitals located in a rural 
area'' after ``subparagraph (A)'', and inserted before the period ``for 
hospitals located in such respective area''.
    Subsec. (d)(3)(C). Pub. L. 99-272, Sec. 9104(b)(2), designated 
existing provision as cl. (i), substituted ``For discharges occurring in 
fiscal year 1985, the Secretary'' for ``The Secretary'', and added cl. 
(ii).
    Subsec. (d)(3)(C)(ii). Pub. L. 99-509, Sec. 9306(c), substituted 
``1989'' for ``1988'' in subcls. (I) and (II).
    Pub. L. 99-509, Sec. 9307(c)(1)(A), struck out Pub. L. 99-514, 
Sec. 1895(b)(1)(C), which had directed a general amendment of cl. (ii) 
to read as follows: ``The Secretary shall further reduce each of the 
average standardized amounts by a proportion equal to the proportion 
(estimated by the Secretary) of the amount of payments under this 
subsection based on DRG prospective payment amounts which is the 
difference between--
        ``(I) the sum of the additional payment amounts under paragraph 
    (5)(B) (relating to indirect costs of medical education) if the 
    indirect teaching adjustment factor were equal to 1.159r (as `r' is 
    defined in paragraph (5)(B)(ii)), and
        ``(II) that sum using the factor specified in paragraph 
    (5)(B)(ii)(II).''
    Subsec. (d)(3)(C)(iii). Pub. L. 99-509, Sec. 9307(c)(1)(B)(i), as 
amended by Pub. L. 100-203, Sec. 4009(j)(6)(A), struck out Pub. L. 99-
514, Sec. 1895(b)(2)(B), which had added cl. (iii) reading as follows: 
``The Secretary shall further reduce each of the average standardized 
amounts by reducing the standardized amount for each hospital (as 
previously determined without regard to this clause) by a proportion 
equal to the proportion (established by the Secretary) of the amount of 
payments under this subsection based on DRG prospective payment amounts 
which are additional payments described in paragraph (5)(F) (relating to 
disproportionate share payments) for subsection (d) hospitals.''
    Subsec. (d)(3)(D)(i)(I), (ii)(I). Pub. L. 99-272, Sec. 9104(b)(3), 
inserted ``or reduced'' after ``(B), and adjusted''.
    Subsec. (d)(4)(C). Pub. L. 99-509, Sec. 9302(e)(1), substituted ``in 
fiscal year 1988 and at least annually'' for ``in fiscal year 1986 and 
at least every four fiscal years''.
    Subsec. (d)(5)(B). Pub. L. 99-272, Sec. 9104(a), amended subpar. (B) 
generally. Prior to amendment, subpar. (B) read as follows: ``The 
Secretary shall provide for an additional payment amount for subsection 
(d) hospitals with indirect costs of medical education, in an amount 
computed in the same manner as the adjustment for such costs under 
regulations (in effect as of January 1, 1983) under subsection (a)(2) of 
this section, except that in the computation under this subparagraph the 
Secretary shall use an educational adjustment factor equal to twice the 
factor provided under such regulations. In determining such adjustment 
the Secretary shall not distinguish between those interns and residents 
who are employees of a hospital and those interns and residents who 
furnish services to a hospital but are not employees of such hospital.''
    Subsec. (d)(5)(B)(ii). Pub. L. 99-509, Sec. 9306(c), substituted 
``1989'' for ``1988'' in subcls. (I) and (II).
    Subsec. (d)(5)(C)(i). Pub. L. 99-509, Sec. 9302(d)(1)(A), designated 
existing provisions as subcl. (I) and added subcl. (II).
    Pub. L. 99-272, Sec. 9106(a), inserted ``and which shall not require 
a rural osteopathic hospital to have more than 3,000 discharges in a 
year in order to be classified as a rural referral center'' before the 
period in second sentence.
    Pub. L. 99-272, Sec. 9105(c), struck out ``, and of public or other 
hospitals that serve a significantly disproportionate number of patients 
who have low income or are entitled to benefits under part A of this 
subchapter'' after ``in rural areas)''.
    Subsec. (d)(5)(C)(i)(I). Pub. L. 99-509, Sec. 9304(b)(1), inserted 
``(other than under paragraph (9))'' after ``established under this 
subsection'' in first sentence.
    Subsec. (d)(5)(C)(ii). Pub. L. 99-509, Sec. 9304(b)(2), inserted 
``(other than under paragraph (9))'' after ``this subsection'' in second 
and third sentences.
    Pub. L. 99-509, Sec. 9302(e)(4), substituted ``1988'' for ``1986''.
    Pub. L. 99-272, Sec. 9111(a), inserted provision authorizing the 
Secretary to adjust amount of payments to sole community hospitals that 
realize a significant increase in operating costs in a cost reporting 
period attributable to addition of new inpatient facilities or services.
    Subsec. (d)(5)(E). Pub. L. 99-509, Sec. 9320(g)(2), struck out 
subpar. (E) which read as follows: ``The Secretary shall provide for an 
additional payment amount for any subsection (d) hospital equal to the 
reasonable costs incurred by such hospital for anesthesia services 
provided by a certified registered nurse anesthetist. Payment under this 
subparagraph shall be the only payment made to such hospital with 
respect to such services.''
    Subsec. (d)(5)(F). Pub. L. 99-272, Sec. 9105(a), added subpar. (F).
    Subsec. (d)(5)(F)(i). Pub. L. 99-509, Sec. 9306(c), substituted 
``1989'' for ``1988''.
    Subsec. (d)(5)(F)(iv)(I). Pub. L. 99-509, Sec. 9306(b)(1), inserted 
``or is described in the second sentence of subclause (III)'' after 
``100 or more beds''.
    Subsec. (d)(5)(F)(iv)(III). Pub. L. 99-509, Sec. 9306(b)(2), 
inserted ``and is not described in the second sentence of clause (v)'' 
after ``rural area''.
    Subsec. (d)(5)(F)(v). Pub. L. 99-509, Sec. 9306(a), inserted at end 
``A hospital located in a rural area and with 500 or more beds also 
`serves a significantly disproportionate number of low income patients' 
for a cost reporting period if the hospital has a disproportionate 
patient percentage (as defined in clause (vi)) for that period which 
equals or exceeds a percentage specified by the Secretary.''
    Subsec. (d)(5)(F)(vi)(I). Pub. L. 99-514, Sec. 1895(b)(2)(A), 
formerly Sec. 1895(b)(2)(C), as amended by Pub. L. 99-509, 
Sec. 9307(c)(1)(B)(ii), as amended by Pub. L. 100-203, 
Sec. 4009(j)(6)(A), which directed the substitution of ``supplemental'' 
for ``supplementary'' and ``period'' for ``fiscal year'', was repealed 
by Pub. L. 100-647, Sec. 1018(r)(1).
    Subsec. (d)(9). Pub. L. 99-509, Sec. 9304(a), added par. (9).
    Subsec. (e)(1)(C). Pub. L. 99-509, Sec. 9304(c), added subpar. (C).
    Subsec. (e)(3). Pub. L. 99-509, Sec. 9302(e)(3), designated existing 
provisions as subpar. (A) and added subpar. (B).
    Pub. L. 99-272, Sec. 9101(c)(2), struck out ``(instead of the 
applicable percentage increase described in subsection (b)(3)(B) of this 
section)'' after ``should be used''.
    Subsec. (e)(3)(A). Pub. L. 99-509, Sec. 9321(e)(2)(A), substituted 
``March'' for ``April''.
    Subsec. (e)(4). Pub. L. 99-509, Sec. 9302(a)(2)(B), (e)(2), 
substituted ``recommend for fiscal year 1988 an appropriate change 
factor for inpatient hospital services for discharges in that fiscal 
year and shall determine for each subsequent fiscal year'' for 
``determine for each fiscal year (beginning with fiscal year 1987) and 
inserted at end ``The percentage change shall be the same for all 
subsection (d) hospitals and subsection (d) Puerto Rico hospitals, but 
may be different from that for other hospitals (and units not included 
as such hospitals) and may vary among such other hospitals and units.''
    Pub. L. 99-272, Sec. 9101(c)(3), substituted ``fiscal year 1987'' 
for ``fiscal year 1986''.
    Subsec. (e)(5). Pub. L. 99-509, Sec. 9302(a)(2)(C), as amended by 
Pub. L. 100-203, Sec. 4009(j)(6)(B), inserted ``recommendation or'' 
before ``determination'' in subpars. (A) and (B).
    Subsec. (e)(5)(A). Pub. L. 99-509, Sec. 9321(e)(2)(B), substituted 
``May'' for ``June''.
    Subsec. (e)(6)(A). Pub. L. 99-272, Sec. 9127(a), substituted ``17 
individuals'' for ``15 individuals''.
    Subsec. (g)(1). Pub. L. 99-349 substituted ``1987'' for ``1986'' in 
two places.
    Subsec. (g)(2). Pub. L. 99-272, Sec. 9107(a)(1), designated existing 
provision as subpar. (A), inserted ``the applicable percentage 
(described in subparagraph (B)) of'', and added subpar. (B).
    Subsec. (g)(2)(B). Pub. L. 99-514, Sec. 1895(b)(3), realigned 
margins of subpar. (B).
    Subsec. (g)(3). Pub. L. 99-509, Sec. 9303(a), added par. (3).
    Subsec. (g)(3)(A). Pub. L. 99-509, Sec. 9303(b), inserted ``and a 
subsection (d) Puerto Rico hospital'' after ``subsection (d) hospital''.
    Subsec. (h). Pub. L. 99-272, Sec. 9202(a), added subsec. (h).
    Subsec. (h)(2)(C). Pub. L. 99-514, Sec. 1895(b)(9)(A), substituted 
``subparagraph (B)'' for ``paragraph (B)''.
    Subsec. (h)(4)(D). Pub. L. 99-514, Sec. 1895(b)(9)(B), (C), 
redesignated subpar. (E) as (D) and in cl. (ii) inserted ``but before 
July 1, 1987,''.
    Subsec. (h)(4)(E). Pub. L. 99-509, Sec. 9314(a), added subpar. (E).
    Pub. L. 99-514, Sec. 1895(b)(9)(C), redesignated former subpar. (E) 
as (D).
    Subsec. (h)(5)(B). Pub. L. 99-514, Sec. 1895(b)(9)(D), substituted 
``The'' for ``As used in this paragraph, the''.
    1984--Subsec. (a)(2)(B). Pub. L. 98-369, Sec. 2354(b)(42), 
substituted ``disproportionate'' for ``disportionate''.
    Subsec. (a)(4). Pub. L. 98-369, Sec. 2312(b), temporarily inserted 
``, costs of anesthesia services provided by a certified registered 
nurse anesthetist'' after ``approved educational activities''. See 
Effective and Termination Dates of 1984 Amendments note below.
    Subsec. (b)(3)(A)(ii). Pub. L. 98-369, Sec. 2354(b)(43), inserted 
``of'' after ``in the case''.
    Subsec. (b)(3)(B). Pub. L. 8-369, Sec. 2310(a), substituted ``one-
quarter of 1 percentage point'' for ``1 percentage point'' and inserted 
provision that in determining the percentage change under subsec. (e) of 
this section with respect to discharges occurring in any cost reporting 
period or fiscal year beginning on or after Oct. 1, 1985, and before 
Oct. 1, 1986, the Secretary may not establish a percentage increase 
which exceeds the applicable percentage increase otherwise determined 
for that period or fiscal year under the preceding sentence.
    Subsec. (c)(4)(A). Pub. L. 98-369, Sec. 2315(a), substituted ``(D), 
and (E)'' for ``and (D)''.
    Subsec. (d)(2)(D). Pub. L. 98-369, Sec. 2315(b), struck out 
``Standard'' before ``Metropolitan'' in provision following cl. (ii).
    Pub. L. 98-369, Sec. 2311(b), inserted provision for determining the 
region a hospital located in a Metropolitan Statistical Area would be 
deemed to be located.
    Subsec. (d)(3)(D)(i)(I). Pub. L. 8-369, Sec. 2354(b)(44), 
substituted ``(C))'' for ``(C),''.
    Subsec. (d)(5)(B). Pub. L. 98-369, Sec. 2307(b)(1), inserted 
provision that in determining such adjustment the Secretary not 
distinguish between those interns and residents who are employees of a 
hospital and those who furnish services to a hospital but are not 
employees of such hospital.
    Subsec. (d)(5)(C)(i). Pub. L. 98-617 substituted ``August 17, 1984'' 
for ``30 days after July 18, 1984'' before ``for implementation by''.
    Pub. L. 98-369, Sec. 2311(a), inserted provisions permitting a 
hospital classified as a rural hospital to appeal to the Secretary for 
reclassification as a rural referral center on the basis of criteria 
established and published by the Secretary and requiring the Secretary 
to make a final determination with respect to such appeal within 60 days 
after the date the appeal was submitted.
    Subsec. (d)(5)(E). Pub. L. 98-369, Sec. 2312(a), temporarily added 
subpar. (E). See Effective and Termination Dates of 1984 Amendments note 
below.
    Subsec. (d)(8). Pub. L. 8-369, Sec. 2311(c), added par. (8).
    Subsec. (e)(2). Pub. L. 98-369, Sec. 2313(a), inserted ``(without 
regard to the provisions of title 5 governing appointments in the 
competitive service)'' after ``appointed by the Director''.
    Subsec. (e)(5). Pub. L. 98-369, Sec. 2315(c)(1), struck out ``for 
public comment'' after ``have published'' in provisions preceding 
subpar. (A).
    Subsec. (e)(5)(A). Pub. L. 98-369, Sec. 2315(c)(2), inserted ``for 
public comment'' after ``that fiscal year''.
    Subsec. (e)(6)(C). Pub. L. 98-369, Sec. 2313(b)(3), inserted 
provision that section 10(a)(1) of the Federal Advisory Committee Act 
not apply to any portion of a Commission meeting if the Commission, by 
majority vote, determines such portion of such meeting should be closed.
    Subsec. (e)(6)(C)(i). Pub. L. 98-369, Sec. 2313(b)(1), amended cl. 
(i) generally, substituting provision authorizing the Commission to 
employ and fix the compensation of an Executive Director, subject to the 
approval of the Director of the Office, and such other personnel, not to 
exceed 25, as necessary, without regard to the provisions of title 5 
governing appointment in the competitive service, for provision 
authorizing the Commission to employ and fix the compensation of such 
personnel, not to exceed 25, as may be necessary to carry out its 
duties.
    Subsec. (e)(6)(C)(iii). Pub. L. 98-369, Sec. 2313(b)(2), inserted 
``(without regard to section 5 of title 41)'' after ``Commission''.
    Subsec. (e)(6)(D). Pub. L. 98-369, Sec. 2313(b)(4), inserted 
provision relating to payment of physician comparability allowance in 
the same manner as provided under section 5948 of title 5 and providing 
that for such purpose subsec. (i) of such section apply to the 
Commission in the same manner as it applies to the Tennessee Valley 
Authority.
    Subsec. (e)(6)(J). Pub. L. 98-369, Sec. 2313(d), added subpar. (J).
    1983--Subsec. (a)(1)(D). Pub. L. 98-21, Sec. 601(a)(1), added 
subpar. (D).
    Subsec. (a)(4). Pub. L. 98-21, Sec. 601(a)(2), inserted provision 
that term ``operating costs of inpatient hospital services'' does not 
include costs of approved educational activities, or, with respect to 
costs incurred in cost reporting periods beginning prior to Oct. 1, 
1986, capital-related costs, as defined by the Secretary.
    Pub. L. 97-448, Sec. 309(b)(13), substituted ``as such costs are 
determined'' for ``and such costs are determined''.
    Subsec. (b)(1). Pub. L. 98-21, Sec. 601(b)(1), (2), in provisions 
preceding subpar. (A), substituted ``Notwithstanding section 1395f(b) of 
this title but subject to the provisions of section 1395e of this 
title'' for ``Notwithstanding sections 1395f(b) of this title, but 
subject to the provisions of sections 1395e of this title'' and inserted 
``(other than a subsection (d) hospital, as defined in subsection 
(d)(1)(B) of this section)''.
    Pub. L. 98-21, Sec. 601(b)(3), inserted ``(other than on the basis 
of a DRG prospective payment rate determined under subsection (d) of 
this section)'' in provisions following subpar. (B).
    Pub. L. 97-448, Sec. 309(b)(14), substituted ``section 1395f(b)'' 
for ``sections 1395f(b)'' in provisions preceding subpar. (A).
    Subsec. (b)(2). Pub. L. 98-21, Sec. 601(b)(4), struck out par. (2) 
which provided that par. (1) would not apply to cost reporting periods 
of hospitals beginning on or after Oct. 1, 1985.
    Subsec. (b)(3)(B). Pub. L. 98-21, Sec. 601(b)(5)-(8), inserted ``and 
subsection (d) of this section and except as provided in subsection (e) 
of this section'' after ``subparagraph (A)'', inserted ``or fiscal 
year'' after ``cost reporting period'' each place it appears, inserted 
``before the beginning of the period or year'' after ``estimated by the 
Secretary'', and substituted ``will exceed'' for ``exceeds''.
    Subsec. (b)(6). Pub. L. 98-21, Sec. 601(b)(9), added par. (6) and 
repealed a prior par. (6) which directed the Secretary to provide for an 
adjustment under this paragraph in the amount of payment otherwise 
provided a hospital under this subsection in the case of a hospital 
which, as of Aug. 15, 1982, was subject to FICA taxes and which was not 
subject to such taxes for part or all of a cost reporting period 
beginning on or after Oct. 1, 1982, that in making such adjustment for a 
cost reporting period the Secretary was to estimate the amount of the 
operating costs of inpatient hospital services that would have resulted 
if the hospital was subject to the FICA taxes during that period, that 
in making such estimate the Secretary was to reduce the amount of such 
FICA taxes that would have been paid (but not below zero) by the amount 
of costs which the hospital demonstrated to the satisfaction of the 
Secretary were incurred in the period for pensions, health, and other 
fringe benefits for employees (and former employees and family members) 
comparable to, and in lieu of, the benefits provided under subchapter II 
of this chapter and this subchapter, that if a hospital's operating 
costs of inpatient hospital services estimated under subparagraph (B) 
was greater than the hospital's operating costs of inpatient hospital 
services determined without regard to this paragraph for a cost 
reporting period, then the Secretary was to reduce the amount otherwise 
paid the hospital (respecting operating costs of inpatient hospital 
services) under this title (taking into account any limitation under 
subsection (a) of this section) for the period by the amount by which 
(i) the amount that would have been paid the hospital if (I) the amount 
of the operating costs of inpatient hospital services estimated under 
subparagraph (B) were treated as the amount of the operating costs of 
inpatient hospital services and (II) subsection (a) of this section did 
not apply to the determination, exceeded (ii) the amount that would 
otherwise have been paid the hospital if subsection (a) of this section 
(and this paragraph) did not apply, except that, in making such 
determination for cost reporting periods beginning on or after Oct. 1, 
1984, clause (ii) of paragraph (1)(B) was to continue to apply.
    Subsec. (b)(6)(C). Pub. L. 97-448, Sec. 309(b)(15), substituted 
``under this subchapter (taking into account any limitation under 
subsection (a) of this section)'' for ``under this subsection'' in 
provisions preceding cl. (i).
    Subsec. (c)(1). Pub. L. 98-21, Sec. 601(c)(1), added subpars. (D) 
and (E) and provisions following subpar. (E).
    Subsec. (c)(3)(A). Pub. L. 98-21, Sec. 601(c)(2)(A), substituted 
``meets the requirements of subparagraphs (A), (D), and (E) of paragraph 
(1) and, if applicable, the requirements of paragraph (5),'' for ``meets 
the requirement of paragraph (1)(A)''.
    Subsec. (c)(3)(B). Pub. L. 98-21, Sec. 601(c)(2)(B), inserted ``(or, 
if applicable, in paragraph (5))''.
    Subsec. (c)(4) to (6). Pub. L. 98-21, Sec. 601(c)(3), added pars. 
(4) to (6).
    Subsec. (d). Pub. L. 98-21, Sec. 601(d)(2), (e), added subsec. (d) 
and redesignated former subsec. (d), relating to the elimination of 
lesser-of-cost-or-charges provisions, as subsec. (j) of section 1814 of 
act Aug. 14, 1935, which is classified to subsec. (j) of section 1395f 
of this title.
    Subsecs. (e) to (g). Pub. L. 98-21, Sec. 601(e), added subsecs. (e) 
to (g).
    1982--Subsec. (d). Pub. L. 97-248, Sec. 110, added subsec. (d).


                    Effective Date of 1999 Amendment

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 121(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-330, provided that: ``The 
amendments made by subsection (a) [amending this section] apply to cost 
reporting periods beginning on or after October 1, 1999.''
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 125(c)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-333, provided that: ``The 
amendments made by subsection (a) [amending this section] are effective 
as if included in the enactment of section 4421(a) of BBA [the Balanced 
Budget Act of 1997, Pub. L. 105-33].''
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title III, Sec. 312(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-365, provided that: ``The 
amendments made by subsection (a) [amending this section] apply on and 
after July 1, 2000, to residency programs that began before, on, or 
after the date of the enactment of this Act [Nov. 29, 1999].''
    Amendment by section 1000(a)(6) [title III, Sec. 321(b), (e), (f), 
(h), (k)(15)-(17)] of Pub. L. 106-113 effective as if included in the 
enactment of the Balanced Budget Act of 1997, Pub. L. 105-33, except as 
otherwise provided, see section 1000(a)(6) [title III, Sec. 321(m)] of 
Pub. L. 106-113, set out as a note under section 1395d of this title.
    Amendment by section 1000(a)(6) [title IV, Sec. 401(a)] of Pub. L. 
106-113 effective Jan. 1, 2000, see section 1000(a)(6) [title IV, 
Sec. 401(c)] of Pub. L. 106-113, set out as a note under section 1395i-4 
of this title.
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title IV, Sec. 402(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-370, provided that: ``The 
amendments made by subsection (a) [amending this section] apply with 
respect to discharges occurring during cost reporting periods beginning 
on or after October 1, 1999.''
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title IV, Sec. 407(a)(3)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-373, provided that:
    ``(A) DGME.--The amendments made by paragraph (1) [amending this 
section] apply to cost reporting periods that begin on or after the date 
of the enactment of this Act [Nov. 29, 1999].
    ``(B) IME.--The amendment made by paragraph (2) [amending this 
section] applies to discharges occurring in cost reporting periods that 
begin on or after such date of enactment.''
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title IV, Sec. 407(b)(3)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-374, provided that:
    ``(A) DGME.--The amendment made by paragraph (1) [amending this 
section] applies to cost reporting periods beginning on or after April 
1, 2000.
    ``(B) IME.--The amendment made by paragraph (2) [amending this 
section] applies to discharges occurring on or after April 1, 2000.''
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title IV, Sec. 407(c)(2)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-374, provided that: ``The amendment 
made by paragraph (1) [amending this section] applies with respect to--
        ``(A) payments to hospitals under section 1886(h) of the Social 
    Security Act (42 U.S.C. 1395ww(h)) for cost reporting periods 
    beginning on or after April 1, 2000; and
        ``(B) payments to hospitals under section 1886(d)(5)(B)(v) of 
    such Act (42 U.S.C. 1395ww(d)(5)(B)(v)) for discharges occurring on 
    or after April 1, 2000.''


                    Effective Date of 1997 Amendment

    Amendment by section 4022(b) of Pub. L. 105-33 effective Nov. 1, 
1997, the date of termination of the Prospective Payment Assessment 
Commission and the Physician Payment Review Commission, see section 
4022(c)(2) of Pub. L. 105-33, set out as an Effective Date; Transition; 
Transfer of Functions note under section 1395b-6 of this title.
    Amendment by section 4201(c)(1), (4) of Pub. L. 105-33 applicable to 
services furnished on or after Oct. 1, 1997, see section 4201(d) of Pub. 
L. 105-33, set out as a note under section 1395f of this title.
    Section 4204(b) of Pub. L. 105-33 provided that: ``The amendments 
made by subsection (a) [amending this section and provisions set out as 
a note below] shall apply with respect to discharges occurring on or 
after October 1, 1997.''
    Section 4405(d) of Pub. L. 105-33 provided that: ``The amendments 
made by this section [amending this section] apply to discharges 
occurring after September 30, 1997.''
    Section 4415(e) of Pub. L. 105-33 provided that: ``The amendments 
made by subsections (a) and (c) [amending this section] shall apply with 
respect to cost reporting periods beginning on or after October 1, 
1997.''
    Section 4417(a)(2) of Pub. L. 105-33 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to discharges 
occurring on or after October 1, 1995.''
    Section 4417(b)(2) of Pub. L. 105-33 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to cost 
reporting periods beginning on or after the date of the enactment of 
this Act [Aug. 5, 1997].''
    Section 4419(a)(2) of Pub. L. 105-33 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to hospitals 
or units that first qualify as a hospital or unit described in section 
1886(d)(1)(B) (42 U.S.C. 1395ww(d)(1)(B)) for cost reporting periods 
beginning on or after October 1, 1997.''
    Section 4421(c) of Pub. L. 105-33 provided that: ``The amendments 
made by this section [amending this section] shall apply to cost 
reporting periods beginning on or after October 1, 2000, except that the 
Secretary of Health and Human Services may require the submission of 
data under section 1886(j)(2)(D) of the Social Security Act [subsec. 
(j)(2)(D) of this section] (as added by subsection (a)) on and after the 
date of the enactment of this section [Aug. 5, 1997].''
    Section 4627(b) of Pub. L. 105-33 provided that: ``The amendments 
made by subsection (a) [amending this section] apply to combined medical 
residency training programs in effect for residency years beginning on 
or after July 1, 1997.''


                    Effective Date of 1994 Amendment

    Section 101(a)(2) of Pub. L. 103-432 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect as if 
included in the enactment of OBRA-1989 [Pub. L. 101-239].''
    Section 153(b) of Pub. L. 103-432 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply as if 
included in the enactment of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (Public Law 99-272).''


                    Effective Date of 1993 Amendment

    Section 13501(b)(3) of Pub. L. 103-66 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to discharges 
occurring on or after October 1, 1991.''
    Section 13563(b)(2) of Pub. L. 103-66 provided that: ``The 
amendments made by paragraphs (1)(A) and (1)(B) [amending this section] 
shall take effect on July 1, 1995, and the date of the enactment of this 
Act [Aug. 10, 1993], respectively.''
    Section 13563(c)(2) of Pub. L. 103-66 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to payments 
under section 1886(h) of the Social Security Act [subsec. (h) of this 
section] for cost reporting periods beginning on or after October 1, 
1992.''


                    Effective Date of 1990 Amendment

    Section 4002(a)(2) of Pub. L. 101-508 provided that: ``The 
amendments made by paragraph (1) [amending this section] shall apply to 
payments for discharges occurring on or after January 1, 1991.''
    Section 4002(b)(5) of Pub. L. 101-508 provided that: ``The 
amendments made by paragraphs (1), (3), and (4)(B) [amending this 
section] shall apply to discharges occurring on or after January 1, 
1991, the amendment made by paragraph (2) [amending this section] shall 
apply to discharges occurring on or after October 1, 1991, and the 
amendment made by paragraph (4)(A) [amending this section] shall take 
effect as if included in the enactment of the Omnibus Budget 
Reconciliation Act of 1989 [Pub. L. 101-239].''
    Section 4002(c)(3) of Pub. L. 101-508 provided that: ``The 
amendments made by paragraph (1) and paragraph (2)(A) [amending this 
section] shall apply to payments for discharges occurring on or after 
January 1, 1991, and the amendments made by paragraph (2)(B) [amending 
this section] shall take effect October 1, 1994.''
    Section 4002(e)(4)[(3)] of Pub. L. 101-508 provided that: ``The 
amendment made by paragraph (1) [amending this section] shall apply to 
discharges occurring on or after October 1, 1990.''
    Section 4002(g)(5) of Pub. L. 101-508 provided that: ``The 
amendments made by this subsection [amending this section and section 
1395w-1 of this title] shall take effect on the date of the enactment of 
this Act [Nov. 5, 1990].''
    Section 4002(h)(1)(B) of Pub. L. 101-508 provided that: ``The 
amendments made by subparagraph (A) [amending this section] shall apply 
to discharges occurring on or after January 1, 1991.''
    Section 4003(b) of Pub. L. 101-508 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply--
        ``(1) in the case of any services provided during the day 
    immediately preceding the date of a patient's admission (without 
    regard to whether the services are related to the admission), to 
    services furnished on or after the date of the enactment of this Act 
    [Nov. 5, 1990] and before October 1, 1991;
        ``(2) in the case of diagnostic services (including clinical 
    diagnostic laboratory tests), to services furnished on or after 
    January 1, 1991; and
        ``(3) in the case of any other services, to services furnished 
    on or after October 1, 1991.''
    Section 4005(a)(2) of Pub. L. 101-508 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to cost 
reporting periods beginning on or after October 1, 1991.''
    Section 4005(c)(4) of Pub. L. 101-508 provided that: ``The 
amendments made by paragraph (1) [amending this section and section 
1395h of this title] shall take effect on the date of the enactment of 
this Act [Nov. 5, 1990], and the amendments made by paragraph (2) 
[amending this section] shall take effect as if included in the 
enactment of the Omnibus Budget Reconciliation Act of 1989 [Pub. L. 101-
239].''
    Section 4008(f)(2) of Pub. L. 101-508 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect as if 
included in the enactment of the Omnibus Budget Reconciliation Act of 
1989 [Pub. L. 101-239].''


                    Effective Date of 1989 Amendment

    Section 6003(a)(2) of Pub. L. 101-239 provided that: ``The 
amendments made by paragraph (1) [amending this section] shall apply to 
payments for discharges occurring on or after January 1, 1990.''
    Section 6003(c)(4) of Pub. L. 101-239 provided that: ``The 
amendments made by this subsection [amending this section] shall apply 
with respect to discharges occurring on or after April 1, 1990.''
    Section 6003(h)(7) of Pub. L. 101-239 provided that: ``The 
amendments made by paragraphs (3) and (4) [amending this section] shall 
apply to discharges occurring on or after April 1, 1990.''
    Section 6004(a)(3) of Pub. L. 101-239 provided that: ``The 
amendments made by this subsection [amending this section] shall apply 
with respect to cost reporting periods beginning on or after October 1, 
1989, except that--
        ``(A) in the case of a hospital classified by the Secretary of 
    Health and Human Services as a hospital involved extensively in 
    treatment for or research on cancer under section 1886(d)(5)(I) of 
    the Social Security Act [subsec. (d)(5)(I) of this section] (as 
    redesignated by section 6003(e)(1)(A)) after the date of the 
    enactment of this Act [Dec. 19, 1989], such amendments shall apply 
    with respect to cost reporting periods beginning on or after the 
    date of such classification,
        ``(B) in the case of a hospital that is not described in 
    subparagraph (A), such amendments shall apply with respect to 
    portions of cost reporting periods or discharges occurring during 
    and after fiscal year 1987 for purposes of section 1886(g) of the 
    Social Security Act [subsec. (g) of this section], and
        ``(C) such amendments shall take effect 30 days after the date 
    of the enactment of this Act for purposes of determining the 
    eligibility of a hospital to receive periodic interim payments under 
    section 1815(e)(2) of the Social Security Act [section 1395g(e)(2) 
    of this title].''
    Section 6004(b)(2) of Pub. L. 101-239 provided that: ``The 
amendments made by paragraph (1) [amending this section] shall apply 
with respect to cost reporting periods beginning on or after April 1, 
1989.''
    Section 6011(d) of Pub. L. 101-239, as amended by Pub. L. 103-66, 
title XIII, Sec. 13505, Aug. 10, 1993, 107 Stat. 579; Pub. L. 105-33, 
title IV, Sec. 4452, Aug. 5, 1997, 111 Stat. 425, provided that: ``The 
amendments made by subsection (a) [amending this section] shall apply 
with respect to items furnished 6 months after the date of enactment of 
this Act [Dec. 19, 1989] and on or before September 30, 1994, and on or 
after October 1, 1997.''
    [Section 13505 of Pub. L. 103-66 provided in part that the amendment 
made by that section to section 6011(d) of Pub. L. 101-239, set out 
above, is effective as if included in the enactment of Pub. L. 101-239.]
    Section 6015(c) of Pub. L. 101-239 provided that: ``The amendment 
made by subsection (a) [amending this section] shall become effective 
with respect to cost reporting periods beginning on or after April 1, 
1990.''


                    Effective Date of 1988 Amendments

    Amendment by section 1018(r)(1) of Pub. L. 100-647 effective, except 
as otherwise provided, as if included in the provision of the Tax Reform 
Act of 1986, Pub. L. 99-514, to which such amendment relates, see 
section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of 
Title 26, Internal Revenue Code.
    Amendment by Pub. L. 100-485 effective as if included in the 
enactment of the Medicare Catastrophic Coverage Act of 1988, Pub. L. 
100-360, see section 608(g)(1) of Pub. L. 100-485, set out as a note 
under section 704 of this title.
    Except as specifically provided in section 411 of Pub. L. 100-360, 
amendment by Pub. L. 100-360, as it relates to a provision in the 
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, effective as 
if included in the enactment of that provision in Pub. L. 100-203, see 
section 411(a) of Pub. L. 100-360, set out as a Reference to OBRA; 
Effective Date note under section 106 of Title 1, General Provisions.


                    Effective Date of 1987 Amendments

    Section 4002(g) of Pub. L. 100-203, as amended by Pub. L. 100-360, 
title IV, Sec. 411(b)(1)(I), July 1, 1988, 102 Stat. 769, provided that:
    ``(1) PPS hospitals, drg portion of payment.--In the case of a 
subsection (d) hospital (as defined in paragraph (6))--
        ``(A) the amendments made by subsections (a) and (c) [amending 
    this section] shall apply to payments made under section 
    1886(d)(1)(A)(iii) of the Social Security Act [subsec. 
    (d)(1)(A)(iii) of this section] on the basis of discharges occurring 
    on or after April 1, 1988, and
        ``(B) for discharges occurring on or after October 1, 1988, the 
    applicable percentage increase (described in section 1886(b)(3)(B) 
    of such Act [subsec. (b)(3)(B) of this section]) for discharges 
    occurring during fiscal year 1987 is deemed to have been such 
    percentage increase as amended by subsection (a).
    ``(2) PPS sole community hospitals, hospital specific portion of 
payment.--In the case of a subsection (d) hospital which receives 
payments made under section 1886(d)(1)(A) of the Social Security Act 
[subsec. (d)(1)(A) of this section] because it is a sole community 
hospital--
        ``(A) the amendment made by subsections (a) and (c) [amending 
    this section] shall apply to payments under section 
    1886(d)(1)(A)(ii)(I) of the Social Security Act made on the basis of 
    discharges occurring during a cost reporting period of a hospital, 
    for the hospital's cost reporting period beginning on or after 
    October 1, 1987;
        ``(B) notwithstanding subparagraph (A), for cost reporting 
    period beginning during fiscal year 1988, the applicable percentage 
    increase (as defined in section 1886(b)(3)(B) of such Act [subsec. 
    (b)(3)(B) of this section]) for the--
            ``(i) first 51 days of the cost reporting period shall be 0 
        percent,
            ``(ii) next 132 days of such period shall be 2.7 percent, 
        and
            ``(iii) remainder of such period of the cost reporting 
        period shall be the applicable percentage increase (as so 
        defined, as amended by subsection (a)); and
        ``(C) for cost reporting periods beginning on or after October 
    1, 1988, the applicable percentage increase (as so defined) with 
    respect to the previous cost reporting period shall be deemed to 
    have been the applicable percentage increase (as so defined, as 
    amended by subsection (a)).
    ``(3) PPS-exempt hospitals.--In the case of a hospital that is not a 
subsection (d) hospital--
        ``(A) the amendments made by subsection (e) [amending this 
    section] shall apply to cost reporting periods beginning on or after 
    October 1, 1987;
        ``(B) notwithstanding subparagraph (A), for the hospital's cost 
    reporting period beginning during fiscal year 1988, payment under 
    title XVIII of the Social Security Act [this subchapter] shall be 
    made as though the applicable percentage increase described in 
    section 1886(b)(3)(B) of such Act [subsec. (b)(3)(B) of this 
    section] were equal to the product of 2.7 percent and the ratio of 
    315 to 366; and
        ``(C) for cost reporting periods beginning on or after October 
    1, 1988, the applicable percentage increase (as so defined) with 
    respect to the cost reporting period beginning during fiscal year 
    1988 shall be deemed to have been 2.7 percent.
    ``(4) Definition, regional floor, and technical and conforming 
amendments.--The amendments made by subsections (b) and (d) and 
paragraphs (1) and (2) of subsection (f) [amending this section and 
provisions set out as a note below] shall take effect on the date of the 
enactment of this Act [Dec. 22, 1987].
    ``(5) Transition for large urban area rates.--In computing the 
average standardized amount for hospitals located in a large urban area 
or other urban area under section 1886(d)(3)(A)(ii) of the Social 
Security Act [subsec. (d)(3)(A)(ii) of this section] (as amended by 
subsection (c)) for fiscal year 1988, the reference to `the respective 
average standardized amount computed for the previous fiscal year under 
this subparagraph' is deemed a reference to the average standardized 
amount computed for hospitals located in an urban area for the 51-day 
period beginning on October 1, 1987.
    ``(6) Definition.--In this subsection, the term `subsection (d) 
hospital' has the meaning given such term in section 1886(d)(1)(B) of 
the Social Security Act [subsec. (d)(1)(B) of this section].''
    Section 4003(e) of Pub. L. 100-203 provided that: ``The amendments 
made by this section [amending this section] shall apply to payments for 
discharges occurring on or after October 1, 1988.''
    Section 4005(a)(3) of Pub. L. 100-203, as amended by Pub. L. 100-
360, title IV, Sec. 411(b)(4)(C)(ii), July 1, 1988, 102 Stat. 770, 
provided that: ``This subsection [amending this section] shall apply to 
discharges occurring on or after October 1, 1988.''
    Section 4005(c)(2)(A) of Pub. L. 100-203 provided that: ``The 
amendments made by paragraph (1) [amending this section] shall apply to 
cost reporting periods beginning on or after October 1, 1987[.]''
    Section 4005(d)(1)(B) of Pub. L. 100-203 provided that: ``The 
amendment made by subparagraph (A) [amending this section] shall apply 
to discharges occurring on or after April 1, 1988.''
    Section 4006(b)(3) of Pub. L. 100-203 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall take effect on 
October 1, 1987. The amendments made by paragraph (2) [amending this 
section] shall apply to cost reporting periods beginning on or after 
October 1, 1987.''
    Section 4007(b)(2) of Pub. L. 100-203, as amended by Pub. L. 100-
360, title IV, Sec. 411(b)(6)(B), July 1, 1988, 102 Stat. 770, provided 
that: ``The amendment made by paragraph (1)(C) [amending this section] 
shall apply to hospital cost reporting periods beginning on or after 
October 1, 1989.''
    Section 4009(d)(2) of Pub. L. 100-203 provided that: ``The 
amendments made by paragraph (1) [amending this section] shall apply to 
appointments made after the date of the enactment of this Act [Dec. 22, 
1987].''
    Section 4009(j)(6) of Pub. L. 100-203 provided that the amendment 
made by that section is effective as if included in the enactment of 
Pub. L. 99-509.
    Section 4083(b)(2) of Pub. L. 100-203 provided that: ``The 
amendments made by paragraph (1) [amending this section] shall take 
effect on the date of the enactment of this Act [Dec. 22, 1987].''
    Amendment by Pub. L. 100-93 effective at end of fourteen-day period 
beginning Aug. 18, 1987, and inapplicable to administrative proceedings 
commenced before end of such period, see section 15(a) of Pub. L. 100-
93, set out as a note under section 1320a-7 of this title.


                    Effective Date of 1986 Amendments

    Section 1895(b)(1)(D) of Pub. L. 99-514, which provided for 
applicability of amendments to this section by section 1895(b)(1) of 
Pub. L. 99-514 to discharges occurring on or after Oct. 1, 1986, with 
certain exceptions, was repealed by Pub. L. 99-509, title IX, 
Sec. 9307(c)(1)(A), Oct. 21, 1986, 100 Stat. 1995, and by Pub. L. 100-
647, title I, Sec. 1018(r)(1), Nov. 10, 1988, 102 Stat. 3586.
    Section 1895(b)(2)(B), formerly Sec. 1895(b)(2)(D), of Pub. L. 99-
514, as amended by Pub. L. 99-509, title IX, Sec. 9307(c)(1)(B)(iii), as 
amended by Pub. L. 100-203, title IV, Sec. 4009(j)(6)(A), Dec. 22, 1987, 
101 Stat. 1330-59, which provided for applicability of amendments to 
this section by section 1895(b)(2)(A) of Pub. L. 99-514 to discharges 
occurring on or after May 1, 1986, was repealed by Pub. L. 100-647, 
title I, Sec. 1018(r)(1), Nov. 10, 1988, 102 Stat. 3586.
    Amendment by section 1895(b)(3), (9) of Pub. L. 99-514 effective, 
except as otherwise provided, as if included in enactment of the 
Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. 99-272, 
see section 1895(e) of Pub. L. 99-514, set out as a note under section 
162 of Title 26, Internal Revenue Code.
    Section 9302(a)(3) of Pub. L. 99-509 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to cost 
reporting periods beginning on or after October 1, 1986 and, for 
purposes of section 1886(d) of the Social Security Act [subsec. (d) of 
this section], for cost reporting periods beginning and discharges 
occurring on or after October 1, 1986.''
    Section 9302(b)(2) of Pub. L. 99-509 provided that: ``The amendments 
made by paragraph (1) [amending this section] shall apply to discharges 
occurring on or after October 1, 1986.''
    Section 9302(d)(1)(B) of Pub. L. 99-509 provided that:
    ``(i) Subject to clause (ii), the amendments made by subparagraph 
(A) [amending this section] shall apply to payments for discharges 
occurring on or after October 1, 1986.
    ``(ii) An appeal for classification of a rural hospital as a 
regional referral center, pursuant to the amendments made by 
subparagraph (A), which is filed before January 1, 1987, and which is 
approved shall be effective with respect to discharges occurring on or 
after October 1, 1986.''
    Section 9303(b) of Pub. L. 99-509 provided that the amendment made 
by such section 9303(b) is effective for cost reporting periods 
beginning and discharges occurring (as the case may be) on or after Oct. 
1, 1987.
    Section 9304(d) of Pub. L. 99-509 provided that: ``The amendments 
made by this section [amending this section] shall apply to discharges 
occurring on or after October 1, 1987.''
    Section 9306(d) of Pub. L. 99-509 provided that: ``The amendments 
made by subsections (a) and (b) [amending this section] shall apply to 
discharges occurring on or after October 1, 1986.''
    Section 9307(c)(1) of Pub. L. 99-509 provided that the amendment 
made by such section 9307(c)(1) is effective as if included in the 
enactment of the Tax Reform Act of 1986 (Pub. L. 99-514), if H.Con.Res. 
395, 99th Congress, 2d Session, is not adopted. H.Con.Res. 395 was not 
adopted.
    Section 9314(b) of Pub. L. 99-509 provided that: ``The amendments 
made by subsection (a) [amending this section] shall apply to payments 
for approved residency training programs as of July 1, 1987.''
    Amendment by section 9320(g) of Pub. L. 99-509 applicable to 
services furnished on or after Jan. 1, 1989, with exceptions for 
hospitals located in rural areas which meet certain requirements related 
to certified registered nurse anesthetists, see section 9320(i), (k) of 
Pub. L. 99-509, as amended, set out as notes under section 1395k of this 
title.
    Section 9321(e)(3)(B) of Pub. L. 99-509 provided that: ``The 
amendments made by paragraph (2) [amending this section] shall take 
effect beginning with fiscal year 1989.''
    Section 9101(d) of Pub. L. 99-272 provided that: ``The amendment 
made by subsection (a) [amending section 5(c) of Pub. L. 99-107, set out 
below] shall take effect on March 15, 1986, and the amendments made by 
subsection (c) [amending this section] shall take effect on the date of 
the enactment of this Act [Apr. 7, 1986].''
    Section 9101(e) of Pub. L. 99-272 provided that:
    ``(1) PPS hospitals, drg portion of payment.--In the case of a 
subsection (d) hospital (as defined in paragraph (4))--
        ``(A) the amendment made by subsection (b) [amending this 
    section] shall apply to payments made under section 1886(d)(1)(A) of 
    such Act [subsec. (d)(1)(A) of this section] made on the basis of 
    discharges occurring on or after May 1, 1986; and
        ``(B) for discharges occurring on or after October 1, 1986, the 
    applicable percentage increase (described in section 1886(b)(3)(B) 
    [subsec. (b)(3)(B) of this section]) for discharges occurring during 
    fiscal year 1986 shall be deemed to have been \1/2\ percent.
    ``(2) PPS hospitals, hospital specific portion of payment.--In the 
case of a subsection (d) hospital--
        ``(A) the amendment made by subsection (b) [amending this 
    section] shall apply to payments under section 1886(d)(1)(A) of the 
    Social Security Act [subsec. (d)(1)(A) of this section] made on the 
    basis of discharges occurring during a cost reporting period of a 
    hospital, for the hospital's cost reporting periods beginning on or 
    after October 1, 1985;
        ``(B) notwithstanding subparagraph (A), for the cost reporting 
    period beginning during fiscal year 1986, the applicable percentage 
    increase (as defined in section 1886(b)(3)(B) of such Act [subsec. 
    (b)(3)(B) of this section]) for the--
            ``(i) first 7 months of the cost reporting period shall be 0 
        percent, and
            ``(ii) for the remaining 5 months of the cost reporting 
        period shall be \1/2\ percent; and
        ``(C) for cost reporting periods beginning on or after October 
    1, 1986, the applicable percentage increase (as so defined) with 
    respect to the previous cost reporting period shall be deemed to 
    have been \1/2\ percent.
    ``(3) PPS-exempt hospitals.--In the case of a hospital that is not a 
subsection (d) hospital--
        ``(A) the amendment made by subsection (b) [amending this 
    section] shall apply to cost reporting periods beginning on or after 
    October 1, 1985;
        ``(B) notwithstanding subparagraph (A), for the hospital's cost 
    reporting period beginning during fiscal year 1986, payment under 
    title XVIII of the Social Security Act [this subchapter] shall be 
    made as though the applicable percentage increase described in 
    section 1886(b)(3)(B) [subsec. (b)(3)(B) of this section] were equal 
    to \5/24\ of 1 percent; and
        ``(C) for cost reporting periods beginning on or after October 
    1, 1986, the applicable percentage increase (as so defined) with 
    respect to the cost reporting period beginning during fiscal year 
    1986 shall be deemed to have been \1/2\ percent.
    ``(4) Definition.--In this subsection, the term `subsection (d) 
hospital' has the meaning given such term in section 1886(d)(1)(B) of 
the Social Security Act [subsec. (d)(1)(B) of this section].''
    Section 9102(d) of Pub. L. 99-272 provided that:
    ``(1) Delay in final transition.--The amendment made by subsection 
(a) [amending this section] shall take effect on the date of the 
enactment of this Act [Apr. 7, 1986].''
    ``(2) Change in hospital specific percentage.--The amendments made 
by subsection (b) [amending this section] shall apply--
        ``(A) to cost reporting periods beginning on or after October 1, 
    1985, but
        ``(B) notwithstanding subparagraph (A), for a hospital's cost 
    reporting period beginning during fiscal year 1986, for purposes of 
    section 1886(d)(1)(A) of the Social Security Act [subsec. (d)(1)(A) 
    of this section]--
            ``(i) during the first 7 months of the period the `target 
        percentage' is 50 percent and the `DRG percentage' is 50 
        percent, and
            ``(ii) during the remaining 5 months of the period the 
        `target percentage' is 45 percent and the `DRG percentage' is 55 
        percent.
    ``(3) Change in blended rate.--The amendments made by subsection (c) 
[amending this section] shall apply to discharges occurring on or after 
May 1, 1986.
    ``(4) Exception.--
        ``(A) Notwithstanding any other provision of this subsection, 
    the amendments made by this section [amending this section] shall 
    not apply to payments with respect to the operating costs of 
    inpatient hospital services (as defined in section 1886(a)(4) of the 
    Social Security Act [subsec. (a)(4) of this section]) of a 
    subsection (d) hospital (as defined in section 1886(d)(1)(B) of such 
    Act [subsec. (d)(1)(B) of this section]) located in the State of 
    Oregon.
        ``(B) Notwithstanding any other provision of law, for a cost 
    reporting period beginning during fiscal year 1986 of a subsection 
    (d) hospital to which the amendments made by this section [amending 
    this section] do not apply, for purposes of section 1886(d)(1)(A) of 
    of [sic] Social Security Act [subsec. (d)(1)(A) of this section]--
            ``(i) during the first 7 months of the period the `target 
        percentage' is 50 percent and the `DRG percentage' is 50 
        percent, and
            ``(ii) during the remaining 5 months of the period the 
        `target percentage' is 25 percent and the `DRG percentage' is 75 
        percent.
        ``(C) Notwithstanding any other provision of law, for purposes 
    of section 1886(d)(1)(D) of such Act [subsec. (d)(1)(D) of this 
    section], the applicable combined adjusted DRG prospective payment 
    rate for a subsection (d) hospital to which the amendments made by 
    this section [amending this section] do not apply is, for discharges 
    occurring on or after October 1, 1985, and before May 1, 1986, a 
    combined rate consisting of 25 percent of the national adjusted DRG 
    prospective payment rate and 75 percent of the regional adjusted DRG 
    prospective payment rate for such discharges.''
    Section 9104(c) of Pub. L. 99-272 provided that:
    ``(1) Except as provided in paragraph (2), the amendments made by 
this section [amending this section] shall apply to discharges occurring 
on or after May 1, 1986.
    ``(2) The amendments made by this section shall not first be applied 
to discharges occurring as of a date unless, for discharges occurring on 
that date, the amendments made by section 9105 [amending this section] 
are also being applied.''
    Section 9105(e) of Pub. L. 99-272 provided that: ``The amendments 
made by this section [amending this section] shall apply to discharges 
occurring on or after May 1, 1986.''
    Section 9106(b) of Pub. L. 99-272 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to cost 
reporting periods beginning on or after January 1, 1986.''
    Section 9107(c)(1) of Pub. L. 99-272 provided that: ``The amendments 
made by subsection (a) [amending this section] shall apply to hospital 
cost reporting periods beginning on or after October 1, 1986.''
    Section 9109(b) of Pub. L. 99-272 provided that: ``The amendment 
made by subsection (a) [amending this section] shall take effect on the 
date of the enactment of this Act [Apr. 7, 1986].''
    Section 9111(b) of Pub. L. 99-272 provided that: ``The amendment 
made by this section [amending this section] shall apply to payments for 
cost reporting periods beginning on or after October 1, 1983, and before 
October 1, 1989.''
    Section 9202(b) of Pub. L. 99-272 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to hospital 
cost reporting periods beginning on or after July 1, 1985.''


           Effective and Termination Dates of 1984 Amendments

    Amendment by Pub. L. 98-617 effective as if originally included in 
the Deficit Reduction Act of 1984, Pub. L. 98-369, see section 3(c) of 
Pub. L. 98-617, set out as a note under section 1395f of this title.
    Section 2307(b)(2) of Pub. L. 98-369 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to cost 
reporting periods beginning on or after October 1, 1984.''
    Section 2310(b) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section] shall apply to cost 
reporting periods beginning in, and discharges occurring in, fiscal year 
1985 and thereafter.''
    Section 2311(d) of Pub. L. 98-369 provided that:
    ``(1) Except as provided in paragraph (2), the amendments made by 
subsections (b) and (c) [amending this section] shall be effective with 
respect to cost reporting periods beginning on or after October 1, 1983, 
and the amendment made by subsection (a) [amending this section] shall 
be effective with respect to cost reporting periods beginning on or 
after October 1, 1984.
    ``(2) The amendment made by subsection (b) [amending this section] 
shall not apply so as to reduce any payment under section 1886(d) of the 
Social Security Act [subsec. (d) of this section] to a hospital the 
region of which is deemed to be changed pursuant to such amendment for 
discharges occurring in any cost reporting period beginning before 
October 1, 1984.''
    Section 2312(c) of Pub. L. 98-369, as amended by Pub. L. 99-509, 
title IX, Sec. 9320(a), Oct. 21, 1986, 100 Stat. 2013; Pub. L. 100-360, 
title IV, Sec. 411(p), July 1, 1988, as added by Pub. L. 100-485, title 
VI, Sec. 608(d)(29), Oct. 13, 1988, 102 Stat. 2424, provided that: ``The 
amendments made by subsections (a) and (b) [amending this section] shall 
apply to cost reporting periods beginning on or after October 1, 1984, 
and before January 1, 1989. In the case of a cost reporting period that 
begins before January 1, 1989, but ends after such date, additional 
payments under the amendment made by subsection (a) shall be 
proportionately reduced to reflect the portion of the period occurring 
after such date.''
    Amendment by section 2313(a), (b), (d) of Pub. L. 98-369 effective 
July 18, 1984, see section 2313(e) of Pub. L. 98-369, set out as an 
Effective Date of 1984 Amendment note under section 1395y of this title.
    Section 2315(g) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section and sections 1395i-2 and 
1395cc of this title and enacting and amending provisions set out as 
notes under this section] shall be effective as though they had been 
included in the enactment of the Social Security Amendments of 1983 
(Public Law 98-21).''
    Amendment by section 2354(b)(42)-(44) of Pub. L. 98-369 effective 
July 18, 1984, but not to be construed as changing or affecting any 
right, liability, status, or interpretation which existed (under the 
provisions of law involved) before that date, see section 2354(e)(1) of 
Pub. L. 98-369, set out as an Effective Date of 1984 Amendment note 
under section 1320a-1 of this title.


                    Effective Date of 1983 Amendments

    Section 601(b)(9) of Pub. L. 98-21 provided that the repeal of 
subsec. (b)(6) of this section is effective with respect to cost 
reporting periods beginning on or after October 1, 1982, and that the 
enactment of a new subsec. (b)(6) of this section is effective with 
respect to cost reporting periods beginning on or after October 1, 1983.
    Section 604 of title VI of Pub. L. 98-21, as amended by Pub. L. 98-
369, div. B, title III, Sec. 2315(f)(1), July 18, 1984, 98 Stat. 1080, 
provided that:
    ``(a)(1) Except as provided in section 602(l) [amending section 
1395cc of this title] and in paragraph (2), the amendments made by the 
preceding provisions of this title [amending this section and sections 
1320c-2, 1395f, 1395n, 1395x, 1395y, 1395cc, 1395mm, 1395oo, 1395rr, and 
1395xx of this title] apply to items and services furnished by or under 
arrangements with a hospital beginning with its first cost reporting 
period that begins on or after October 1, 1983. A change in a hospital's 
cost reporting period that has been made after November 1982 shall be 
recognized for purposes of this section only if the Secretary finds good 
cause for that change.
    ``(2) Section 1866(a)(1)(F) of the Social Security Act [section 
1395cc(a)(1)(F) of this title] (as added by section 602(f)(1)(C) of this 
title), section 1862(a)(14) [section 1395y(a)(14) of this title] (as 
added by section 602(e)(3) of this title) and sections 1886(a)(1)(G) and 
(H) of such Act [probably should be section 1866(a)(1)(G) and (H) which 
is classified to section 1395cc(a)(1)(G) and (H) of this title] (as 
added by section 602(f)(1)(C) of this title) take effect on October 1, 
1983.
    ``(b) The Secretary shall make an appropriate reduction in the 
payment amount under section 1886(d) of the Social Security Act [subsec. 
(d) of this section] (as amended by this title) for any discharge, if 
the admission has occurred before a hospital's first cost reporting 
period that begins after September 1983, to take into account amounts 
payable under title XVIII of that Act [this subchapter] (as in effect 
before the date of the enactment of this Act [Apr. 20, 1983]) for items 
and services furnished before that period.
    ``(c)(1) The Secretary shall cause to be published in the Federal 
Register a notice of the interim final DRG prospective payment rates 
established under subsection (d) of section 1886 of the Social Security 
Act [subsec. (d) of this section] (as amended by this title) no later 
than September 1, 1983, and allow for a period of public comment 
thereon. Payment on the basis of prospective rates shall become 
effective on October 1, 1983, without the necessity for consideration of 
comments received, but the Secretary shall, by notice published in the 
Federal Register, affirm or modify the amounts by December 31, 1983, 
after considering those comments.
    ``(2) A modification under paragraph (1) that reduces a prospective 
payment rate shall apply only to discharges occurring after 30 days 
after the date the notice of the modification is published in the 
Federal Register.
    ``(3) Rules to implement the amendments made by this title [amending 
this section and sections 1320a-1, 1320c-2, 1395f, 1395i-2, 1395n, 
1395r, 1395v, 1395w, 1395x, 1395y, 1395cc, 1395mm, 1395oo, 1395rr, and 
1395xx of this title, enacting provisions set out as notes under 
sections 1395r and 1395x of this title, and amending provisions set out 
as a note under section 1395x of this title] shall be established in 
accordance with the procedure described in this subsection.''
    Amendment by Pub. L. 97-448 effective as if originally included as a 
part of this section as this section was added by the Tax Equity and 
Fiscal Responsibility Act of 1982, Pub. L. 97-248, see section 309(c)(2) 
of Pub. L. 97-448, set out as a note under section 426-1 of this title.


                             Effective Date

    Section 101(b)(1) of Pub. L. 97-248 provided that: ``The amendments 
made by subsection (a) [enacting this section and amending section 1395x 
of this title] shall apply to cost reporting periods beginning on or 
after October 1, 1982.''


                               Regulations

    Section 4003(c) of Pub. L. 101-508 provided that: ``The Secretary of 
Health and Human Services shall issue such regulations (on an interim or 
other basis) as may be necessary to implement this section [amending 
this section and enacting provisions set out as a note above].''
    Section 2315(f)(2) of Pub. L. 98-369 provided that: 
``Notwithstanding section 604(c) of the Social Security Amendments of 
1983 [section 604(c) of Pub. L. 98-21, set out above], the Secretary of 
Health and Human Services shall cause to be published in the Federal 
Register proposed regulations to carry out subsection (c) of section 
1886 of the Social Security Act [subsec. (c) of this section] not later 
than July 1, 1984, and allow for a period of 45 days for public comment 
thereon. After consideration of the comments received, the Secretary 
shall cause to be published in the Federal Register final regulations to 
carry out such subsection not later than October 1, 1984.''
    Section 101(b)(2)(A) of Pub. L. 97-248 provided that: ``The 
Secretary of Health and Human Services shall first issue such final 
regulations (whether on an interim or other basis) before October 1, 
1982, as may be necessary to implement such amendments [amendments by 
section 101(a) of Pub. L. 97-248, enacting this section and amending 
section 1395x of this title] on a timely basis. If such regulations are 
promulgated on an interim final basis, the Secretary shall take such 
steps as may be necessary to provide opportunity for public comment, and 
appropriate revision based thereon, so as to provide that such 
regulations are not on an interim basis later than March 31, 1983.''

                          Transfer of Functions

    Prospective Payment Assessment Commission (ProPAC) was terminated 
and its assets and staff transferred to the Medicare Payment Advisory 
Commission (MedPAC) by section 4022(c)(2), (3) of Pub. L. 105-33, set 
out as a note under section 1395b-6 of this title. Section 4022(c)(2), 
(3) further provided that MedPAC was to be responsible for preparation 
and submission of reports required by law to be submitted by ProPAC, and 
that, for that purpose, any reference in law to ProPAC was to be deemed, 
after the appointment of MedPAC, to refer to MedPAC.


  Special Payments To Maintain 6.5 Percent IME Payment for Fiscal Year 
                                  2000

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 111(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-329, provided that:
    ``(1) Additional payment.--In addition to payments made to each 
subsection (d) hospital (as defined in section 1886(d)(1)(B) of the 
Social Security 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 
occurring in fiscal year 2000, the Secretary of Health and Human 
Services shall make one or more payments 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 
structure as applies to payments made under section 1886(d)(5)(B) of 
such Act.
    ``(2) No effect on other payments or determinations.--In making such 
additional payments, the Secretary shall not change payments, 
determinations, or budget neutrality adjustments made for such period 
under section 1886(d) of such Act (42 U.S.C. 1395ww(d)).''


                             Data Collection

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 112(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-330, provided that:
    ``(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 submitted to the Secretary by such 
hospital for discharges occurring during a fiscal year, data on the 
costs incurred by the hospital for providing inpatient and outpatient 
hospital services for which the hospital is not compensated, including 
non-medicare bad debt, charity care, and charges for medicaid and 
indigent care.
    ``(2) Effective date.--The Secretary shall require the submission of 
the data described in paragraph (1) in cost reports for cost reporting 
periods beginning on or after October 1, 2001.''


  Per Discharge Prospective Payment System for Long-Term Care Hospitals

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 123], Nov. 
29, 1999, 113 Stat. 1536, 1501A-331, provided that:
    ``(a) Development of System.--
        ``(1) In general.--The Secretary of Health and Human Services 
    shall develop a per discharge prospective payment system for payment 
    for inpatient hospital services of long-term care hospitals 
    described in section 1886(d)(1)(B)(iv) of the Social Security 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 reflects 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 hospitals 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 Social 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).''


      Per Diem Prospective Payment System for Psychiatric Hospitals

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 124], Nov. 
29, 1999, 113 Stat. 1536, 1501A-332, provided that:
    ``(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 
    defined in paragraph (3)) under the medicare program. 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 
    Secretary as the Secretary may require to develop the system.
        ``(3) Definition.--In this section, the term `psychiatric 
    hospitals and units' means a psychiatric 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 Social 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 system established by the Secretary under this 
section in a budget neutral manner.''


     Study on Impact of Implementation of Prospective Payment System

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 125(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-333, provided that:
    ``(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 payment 
system for inpatient hospital services or rehabilitation facilities 
under section 1886(j) of the Social 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.''


 MedPAC Study on Medicare Payment for Nonphysician Health Professional 
                     Clinical Training in Hospitals

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title I, Sec. 141], Nov. 
29, 1999, 113 Stat. 1536, 1501A-334, provided that:
    ``(a) In General.--The Medicare Payment Advisory Commission shall 
conduct a study of medicare payment policy with respect to professional 
clinical training of different classes of nonphysician health care 
professionals (such as nurses, nurse practitioners, allied health 
professionals, 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 [Nov. 29, 1999], the Commission shall submit a 
report to Congress on the study conducted under subsection (a).''


Not Counting Against Numerical Limitation Certain Interns and Residents 
    Transferred from a VA Residency Program That Loses Accreditation

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title IV, Sec. 407(d)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-374, provided that:
    ``(1) In general.--Any applicable resident described in paragraph 
(2) shall not be taken into account in applying any limitation regarding 
the number of residents or interns for which payment may be made under 
section 1886 of the Social Security Act (42 U.S.C. 1395ww).
    ``(2) Applicable resident described.--An applicable resident 
described in this paragraph is a resident or intern who--
        ``(A) participated in graduate medical education at a facility 
    of the Department of Veterans Affairs;
        ``(B) was subsequently transferred on or after January 1, 1997, 
    and before July 31, 1998, to a hospital that was not a Department of 
    Veterans Affairs facility; and
        ``(C) was transferred because the approved medical residency 
    program in which the resident or intern participated would lose 
    accreditation by the Accreditation Council on Graduate Medical 
    Education if such program continued to train residents at the 
    Department of Veterans Affairs facility.
    ``(3) Effective date.--
        ``(A) In general.--Paragraph (1) applies as if included in the 
    enactment of BBA [the Balanced Budget Act of 1997, Pub. L. 105-33].
        ``(B) Retroactive payments.--If the Secretary of Health and 
    Human Services determines that a hospital operating an approved 
    medical residency program is owed payments as a result of enactment 
    of this subsection, the Secretary shall make such payments not later 
    than 60 days after the date of the enactment of this Act [Nov. 29, 
    1999].''


                GAO Study on Geographic Reclassification

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title IV, Sec. 410], Nov. 
29, 1999, 113 Stat. 1536, 1501A-376, provided that:
    ``(a) In General.--The Comptroller General of the United States 
shall conduct a study of the current laws and regulations for geographic 
reclassification of hospitals to determine whether such reclassification 
is appropriate for purposes of applying wage indices under the medicare 
program and whether such reclassification results in more accurate 
payments for all hospitals. Such study shall examine data on the number 
of hospitals that are reclassified and their reclassified status in 
determining payments under the medicare program. The study shall 
evaluate--
        ``(1) the magnitude of the effect of geographic reclassification 
    on rural hospitals that are not reclassified;
        ``(2) whether the current thresholds used in geographic 
    reclassification reclassify hospitals to the appropriate labor 
    markets;
        ``(3) the effect of eliminating geographic reclassification 
    through use of the occupational mix data;
        ``(4) the group reclassification policy;
        ``(5) changes in the number of reclassifications and the 
    compositions of the groups;
        ``(6) the effect of State-specific budget neutrality compared to 
    national budget neutrality; and
        ``(7) whether there are sufficient controls over the 
    intermediary evaluation of the wage data reported by hospitals.
    ``(b) Report.--Not later than 18 months after the date of the 
enactment of this Act [Nov. 29, 1999], the Comptroller General of the 
United States shall submit to Congress a report on the study conducted 
under subsection (a).''


          Continuing Treatment of Previously Designated Centers

    Section 4202(b) of Pub. L. 105-33 provided that:
    ``(1) In general.--Any hospital classified as a rural referral 
center by the Secretary of Health and Human Services under section 
1886(d)(5)(C) of the Social Security Act [subsec. (d)(5)(C) of this 
section] for fiscal year 1991 shall be classified as such a rural 
referral center for fiscal year 1998 and each subsequent fiscal year.
    ``(2) Budget neutrality.--The provisions of section 1886(d)(8)(D) of 
the Social Security Act [subsec. (d)(8)(D) of this section] shall apply 
to reclassifications made pursuant to paragraph (1) in the same manner 
as such provisions apply to a reclassification under section 1886(d)(10) 
of such Act [subsec. (d)(10) of this section].''


     Hospital Geographic Reclassification Permitted for Purposes of 
               Disproportionate Share Payment Adjustments

    Section 4203 of Pub. L. 105-33 provided that:
    ``(a) In General.--For the period described in subsection (c), the 
Medicare Geographic Classification Review Board shall consider the 
application under section 1886(d)(10)(C)(i) of the Social Security Act 
(42 U.S.C. 1395ww(d)(10)(C)(i)) of a hospital described in 1886(d)(1)(B) 
of such Act (42 U.S.C. 1395ww(d)(1)(B)) to change the hospital's 
geographic classification for purposes of determining for a fiscal year 
eligibility for and amount of additional payment amounts under section 
1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F)).
    ``(b) Applicable Guidelines.--The Medicare Geographic Classification 
Review Board shall apply the guidelines established for reclassification 
under subclause (I) of section 1886(d)(10)(C)(i) of such Act to 
reclassification by reason of subsection (a) until the Secretary of 
Health and Human Services promulgates separate guidelines for such 
reclassification.
    ``(c) Period Described.--The period described in this subsection is 
the period beginning on the date of the enactment of this Act [Aug. 5, 
1997] and ending 30 months after such date.''


      Temporary Relief for Certain Non-Teaching, Non-DSH Hospitals

    Pub. L. 105-33, title IV, Sec. 4401(b), Aug. 5, 1997, 111 Stat. 397, 
as amended by Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title III, 
Sec. 321(d)], Nov. 29, 1999, 113 Stat. 1536, 1501A-366, provided that:
    ``(1) In general.--In the case of a hospital described in paragraph 
(2) for its cost reporting period--
        ``(A) beginning in fiscal year 1998 the amount of payment made 
    to the hospital under section 1886(d) of the Social Security Act 
    [subsec. (d) of this section] for discharges occurring during such 
    fiscal year only shall be increased as though the applicable 
    percentage increase (otherwise applicable to discharges occurring 
    during fiscal year 1998 under section 1886(b)(3)(B)(i)(XIII) of the 
    Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XIII))) had been 
    increased by 0.5 percentage points; and
        ``(B) beginning in fiscal year 1999 the amount of payment made 
    to the hospital under section 1886(d) of the Social Security Act for 
    discharges occurring during such fiscal year only shall be increased 
    as though the applicable percentage increase (otherwise applicable 
    to discharges occurring during fiscal year 1999 under section 
    1886(b)(3)(B)(i)(XIV) of the Social Security Act (42 U.S.C. 
    1395ww(b)(3)(B)(i)(XIV))) had been increased by 0.3 percentage 
    points.
Subparagraph (A) shall not apply in computing the increase under 
subparagraph (B) and neither subparagraph shall affect payment for 
discharges for any hospital occurring during a fiscal year after fiscal 
year 1999. Payment increases under this subsection for discharges 
occurring during a fiscal year are subject to settlement after the close 
of the fiscal year.
    ``(2) Hospitals covered.--A hospital described in this paragraph for 
a cost reporting period is a hospital--
        ``(A) that is described in paragraph (3) for such period;
        ``(B) that is located in a State in which the amount of the 
    aggregate payments under section 1886(d) of such Act [subsec. (d) of 
    this section] for hospitals located in the State and described in 
    paragraph (3) for their cost reporting periods beginning during 
    fiscal year 1995 is less than the aggregate allowable operating 
    costs of inpatient hospital services (as defined in section 
    1886(a)(4) of such Act) for all such hospitals in such State with 
    respect to such cost reporting periods; and
        ``(C) with respect to which the payments under section 1886(d) 
    of such Act (42 U.S.C. 1395ww(d)) for discharges occurring in the 
    cost reporting period involved, as estimated by the Secretary, is 
    less than the allowable operating costs of inpatient hospital 
    services (as defined in section 1886(a)(4) of such Act (42 U.S.C. 
    1395ww(a)(4))[)] for such hospital for such period, as estimated by 
    the Secretary.
    ``(3) Non-teaching, non-DSH hospitals described.--A hospital 
described in this paragraph for a cost reporting period is a subsection 
(d) hospital (as defined in section 1886(d)(1)(B) of such Act (42 U.S.C. 
1395ww(d)(1)(B))) that--
        ``(A) is not receiving any additional payment amount described 
    in section 1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F)) for 
    discharges occurring during the period;
        ``(B) is not receiving any additional payment under section 
    1886(d)(5)(B) of such Act (42 U.S.C. 1395ww(d)(5)(B)) or a payment 
    under section 1886(h) of such Act (42 U.S.C. 1395ww(h)) for 
    discharges occurring during the period; and
        ``(C) does not qualify for payment under section 1886(d)(5)(G) 
    of such Act (42 U.S.C. 1395ww(d)(5)(G)) for the period.''


             Formula for Additional Payment Amounts; Report

    Section 4403(b), (c) of Pub. L. 105-33 provided that:
    ``(b) Report on New Payment Formula.--
        ``(1) Report.--Not later than 1 year after the date of the 
    enactment of this Act [Aug. 5, 1997], the Secretary of Health and 
    Human Services shall submit to the Committee on Ways and Means of 
    the House of Representatives and the Committee on Finance of the 
    Senate a report that contains a formula for determining additional 
    payment amounts to hospitals under section 1886(d)(5)(F) of the 
    Social Security Act (42 U.S.C. 1395ww(d)(5)(F)).
        ``(2) Factors in Determination of Formula.--In determining such 
    formula the Secretary shall--
            ``(A) establish a single threshold for costs incurred by 
        hospitals in serving low-income patients, and
            ``(B) consider the costs described in paragraph (3).
        ``(3) The costs described in this paragraph are as follows:
            ``(A) The costs incurred by the hospital during a period (as 
        determined by the Secretary) of furnishing hospital services to 
        individuals who are entitled to benefits under part A of title 
        XVIII of the Social Security Act [part A of this subchapter] and 
        who receive supplemental security income benefits under title 
        XVI of such Act [subchapter XVI of this chapter] (excluding any 
        supplementation of those benefits by a State under section 1616 
        of such Act (42 U.S.C. 1382e)).
            ``(B) The costs incurred by the hospital during a period (as 
        so determined) of furnishing hospital services to individuals 
        who receive medical assistance under the State plan under title 
        XIX of such Act [subchapter XIX of this chapter] and are not 
        entitled to benefits under part A of title XVIII of such Act 
        [part A of this subchapter] (including individuals enrolled in a 
        managed care organization (as defined in section 1903(m)(1)(A) 
        of such Act (42 U.S.C. 1396b(m)(1)(A)) or any other managed care 
        plan under such title and individuals who receive medical 
        assistance under such title pursuant to a waiver approved by the 
        Secretary under section 1115 of such Act (42 U.S.C. 1315)).
    ``(c) Data Collection.--In developing the formula described in 
subsection (b), the Secretary of Health and Human Services may 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))) receiving additional 
payments by reason of section 1886(d)(5)(F) of such Act (42 U.S.C. 
1395ww(d)(5)(F)) to submit to the Secretary any information that the 
Secretary determines is necessary to develop such formula.''


    Geographic Reclassification for Certain Disproportionately Large 
                                Hospitals

    Section 4409 of Pub. L. 105-33 provided that:
    ``(a) New Guidelines for Reclassification.--Notwithstanding the 
guidelines published under section 1886(d)(10)(D)(i)(I) of the Social 
Security Act (42 U.S.C. 1395ww(d)(10)(D)(i)(I)), the Secretary of Health 
and Human Services shall publish and use alternative guidelines under 
which a hospital described in subsection (b) qualifies for geographic 
reclassification under such section for a fiscal year beginning with 
fiscal year 1998.
    ``(b) Hospitals Covered.--A hospital described in this subsection is 
a hospital that demonstrates that--
        ``(1) the average hourly wage paid by the hospital is not less 
    than 108 percent of the average hourly wage paid by all other 
    hospitals located in the Metropolitan Statistical Area (or the New 
    England County Metropolitan Area) in which the hospital is located;
        ``(2) not less than 40 percent of the adjusted uninflated wages 
    paid by all hospitals located in such Area is attributable to wages 
    paid by the hospital; and
        ``(3) the hospital submitted an application requesting 
    reclassification for purposes of wage index under section 
    1886(d)(10)(C) of such Act (42 U.S.C. 1395ww(d)(10)(C)) in each of 
    fiscal years 1992 through 1997 and that such request was approved 
    for each of such fiscal years.''


                        Floor on Area Wage Index

    Section 4410 of Pub. L. 105-33 provided that:
    ``(a) In General.--For purposes of section 1886(d)(3)(E) of the 
Social Security Act (42 U.S.C. 1395ww(d)(3)(E)) for discharges occurring 
on or after October 1, 1997, the area wage index applicable under such 
section to any hospital which is not located in a rural area (as defined 
in section 1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))[)] may 
not be less than the area wage index applicable under such section to 
hospitals located in rural areas in the State in which the hospital is 
located.
    ``(b) Implementation.--The Secretary of Health and Human Services 
shall adjust the area wage index referred to in subsection (a) for 
hospitals not described in such subsection in a manner which assures 
that the aggregate payments made under section 1886(d) of the Social 
Security Act (42 U.S.C. 1395ww(d)) in a fiscal year for the operating 
costs of inpatient hospital services are not greater or less than those 
which would have been made in the year if this section did not apply.
    ``(c) Exclusion of Certain Wages.--In the case of a hospital that is 
owned by a municipality and that was reclassified as an urban hospital 
under section 1886(d)(10) of the Social Security Act [subsec. (d)(10) of 
this section] for fiscal year 1996, in calculating the hospital's 
average hourly wage for purposes of geographic reclassification under 
such section for fiscal year 1998, the Secretary of Health and Human 
Services shall exclude the general service wages and hours of personnel 
associated with a skilled nursing facility that is owned by the hospital 
of the same municipality and that is physically separated from the 
hospital to the extent that such wages and hours of such personnel are 
not shared with the hospital and are separately documented. A hospital 
that applied for and was denied reclassification as an urban hospital 
for fiscal year 1998, but that would have received reclassification had 
the exclusion required by this section been applied to it, shall be 
reclassified as an urban hospital for fiscal year 1998.''


    Report on Effect of Amendments by Pub. L. 105-33, Sec. 4415, on 
                          Psychiatric Hospitals

    Section 4415(d) of Pub. L. 105-33 provided that: ``Not later than 
October 1, 1999, the Secretary of Health and Human Services shall submit 
to the Committee on Ways and Means of the House of Representatives and 
the Committee on Finance of the Senate a report that describes the 
effect of the amendments to section 1886(b)(1) of the Social Security 
Act (42 U.S.C. 1395ww(b)(1)), made under this section, on psychiatric 
hospitals (as defined in section 1886(d)(1)(B)(i) of such Act (42 U.S.C. 
1395ww(d)(1)(B)(i)) that have approved medical residency training 
programs under title XVIII of such Act (42 U.S.C. 1395 et seq.)).''


             Treatment of Certain Cancer Hospitals; Payment

    Section 4418(b) of Pub. L. 105-33 provided that:
    ``(1) Application to cost reporting periods.--Any classification by 
reason of section 1886(d)(1)(B)(v)(II) of the Social Security Act (42 
U.S.C. 1395ww(d)(1)(B)(v)(II)) (as added by subsection (a)) shall apply 
to all cost reporting periods beginning on or after January 1, 1991.
    ``(2) Base year.--Notwithstanding the provisions of section 
1886(b)(3)(E) of such Act (42 U.S.C. 1395ww(b)(3)(E)) or other 
provisions to the contrary, the base cost reporting period for purposes 
of determining the target amount for any hospital classified by reason 
of section 1886(d)(1)(B)(v)(II) of such Act shall be either--
        ``(A) the hospital's cost reporting period beginning during 
    fiscal year 1990, or
        ``(B) pursuant to an election under 1886(b)(3)(G) of such Act 
    (42 U.S.C. 1395ww(b)(3)(G)), as added in section 4413(b), the period 
    provided for under such section.
    ``(3) Deadline for payments.--Any payments owed to a hospital by 
reason of this subsection shall be made expeditiously, but in no event 
later than 1 year after the date of the enactment of this Act [Aug. 5, 
1997].''


                          Report on Exceptions

    Section 4419(b) of Pub. L. 105-33 provided that: ``The Secretary of 
Health and Human Services shall publish annually in the Federal Register 
a report describing the total amount of payments made to hospitals by 
reason of section 1886(b)(4) of the Social Security Act (42 U.S.C. 
1395ww(b)(4)), as amended by subsection (a), ending during the previous 
fiscal year.''


    Development of Proposal on Payments for Long-Term Care Hospitals

    Section 4422 of Pub. L. 105-33 provided that:
    ``(a) In General.--
        ``(1) Legislative proposal.--The Secretary of Health and Human 
    Services shall develop a legislative proposal for establishing a 
    case-mix adjusted prospective payment system for payment of long-
    term care hospitals described in section 1886(d)(1)(B)(iv) of the 
    Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(iv)) under the 
    medicare program. Such system shall include an adequate patient 
    classification system that reflects the differences in patient 
    resource use and costs among such hospitals.
        ``(2) Collection of data and evaluation.--In developing the 
    legislative proposal described in paragraph (1), the Secretary--
            ``(A) may require such long-term care hospitals to submit 
        such information to the Secretary as the Secretary may require 
        to develop the proposal; and
            ``(B) shall consider several payment methodologies, 
        including the feasibility of expanding the current diagnosis-
        related groups and prospective payment system established under 
        section 1886(d) of the Social Security Act [subsec. (d) of this 
        section] to apply to payments under the medicare program to 
        long-term care hospitals.
    ``(b) Report.--Not later than October 1, 1999, the Secretary shall 
submit to the appropriate committees of Congress a report that includes 
the legislative proposal developed under subsection (a)(1).''


 Dissemination of Information on High Per Discharge Relative Values for 
                    In-Hospital Physicians' Services

    Section 4506 of title IV of Pub. L. 105-33 provided that:
    ``(a) Determination and Notice Concerning Hospital-Specific Per 
Discharge Relative Values.--
        ``(1) In general.--For 1999 and 2001 the Secretary of Health and 
    Human Services shall determine for each hospital--
            ``(A) the hospital-specific per discharge relative value 
        under subsection (b); and
            ``(B) whether the hospital-specific relative value is 
        projected to be excessive (as determined based on such value 
        represented as a percentage of the median of hospital-specific 
        per discharge relative values determined under subsection (b)).
        ``(2) Notice to subset of medical staffs; evaluation of 
    responses.--The Secretary shall notify the medical executive 
    committee of a subset of the hospitals identified under paragraph 
    (1)(B) as having an excessive hospital-specific relative value, of 
    the determinations made with respect to the medical staff under 
    paragraph (1). The Secretary shall evaluate the responses of the 
    hospitals so notified with the responses of other hospitals so 
    identified that were not so notified.
    ``(b) Determination of Hospital-Specific Per Discharge Relative 
Values.--
        ``(1) In general.--For purposes of this section, the hospital-
    specific per discharge relative value for the medical staff of a 
    hospital (other than a teaching hospital) for a year shall be equal 
    to the average per discharge relative value (as determined under 
    section 1848(c)(2) of the Social Security Act (42 U.S.C. 1395w-
    4(c)(2))[)] for physicians' services furnished to inpatients of the 
    hospital by the hospital's medical staff (excluding interns and 
    residents) during the second year preceding that calendar year, 
    adjusted for variations in case-mix among hospitals and 
    disproportionate share status and teaching status among hospitals 
    (as determined by the Secretary under paragraph (3)).
        ``(2) Special rule for teaching hospitals.--The hospital-
    specific relative value projected for a teaching hospital in a year 
    shall be equal to the sum of--
            ``(A) the average per discharge relative value (as 
        determined under section 1848(c)(2) of such Act [section 1395w-
        4(c)(2) of this title]) for physicians' services furnished to 
        inpatients of the hospital by the hospital's medical staff 
        (excluding interns and residents) during the second year 
        preceding that calendar year, and
            ``(B) the equivalent per discharge relative value (as 
        determined under such section) for physicians' services 
        furnished to inpatients of the hospital by interns and residents 
        of the hospital during the second year preceding that calendar 
        year, adjusted for variations in case-mix among hospitals, and 
        in disproportionate share status and teaching status among 
        hospitals (as determined by the Secretary under paragraph (3)).
    The Secretary shall determine the equivalent relative value unit per 
    discharge for interns and residents based on the best available data 
    and may make such adjustment in the aggregate.
        ``(3) Adjustment for teaching and disproportionate share 
    hospitals.--The Secretary shall adjust the allowable per discharge 
    relative values otherwise determined under this subsection to take 
    into account the needs of teaching hospitals and hospitals receiving 
    additional payments under subparagraphs (F) and (G) of section 
    1886(d)(5) of the Social Security Act (42 U.S.C. 1395ww(d)(5)). The 
    adjustment for teaching status or disproportionate share shall not 
    be less than zero.
    ``(c) Definitions.--For purposes of this section:
        ``(1) Hospital.--The term `hospital' means a subsection (d) 
    hospital as defined in section 1886(d) of the Social Security Act 
    (42 U.S.C. 1395ww(d)).
        ``(2) Medical staff.--An individual furnishing a physician's 
    service is considered to be on the medical staff of a hospital--
            ``(A) if (in accordance with requirements for hospitals 
        established by the Joint Commission on Accreditation of Health 
        Organizations)--
                ``(i) the individual is subject to bylaws, rules, and 
            regulations established by the hospital to provide a 
            framework for the self-governance of medical staff 
            activities,
                ``(ii) subject to the bylaws, rules, and regulations, 
            the individual has clinical privileges granted by the 
            hospital's governing body, and
                ``(iii) under the clinical privileges, the individual 
            may provide physicians' services independently within the 
            scope of the individual's clinical privileges, or
            ``(B) if the physician provides at least one service to an 
        individual entitled to benefits under this title in that 
        hospital.
        ``(3) Physicians' services.--The term `physicians' services' 
    means the services described in section 1848(j)(3) of the Social 
    Security Act (42 U.S.C. 1395w-4(j)(3)).
        ``(4) Rural area; urban area.--The terms `rural area' and `urban 
    area' have the meaning given those terms under section 1886(d)(2)(D) 
    of such Act (42 U.S.C. 1395ww(d)(2)(D)).
        ``(5) Secretary.--The term `Secretary' means the Secretary of 
    Health and Human Services.
        ``(6) Teaching hospital.--The term `teaching hospital' means a 
    hospital which has a teaching program approved as specified in 
    section 1861(b)(6) of the Social Security Act (42 U.S.C. 
    1395x(b)(6)).''


  Incentive Payments Under Plans for Voluntary Reduction in Number of 
Residents; Relation to Demonstration Projects and Authority; Regulations

    Section 4626(b), (c) of Pub. L. 105-33 provided that:
    ``(b) Relation to Demonstration Projects and Authority.--
        ``(1) Section 1886(h)(6) of the Social Security Act [subsec. 
    (h)(6) of this section], added by subsection (a), other than 
    subparagraph (F)(ii) thereof, shall not apply to any residency 
    training program with respect to which a demonstration project 
    described in paragraph (3) has been approved by the Health Care 
    Financing Administration as of May 27, 1997.
        ``(2) Effective May 27, 1997, the Secretary of Health and Human 
    Services is not authorized to approve any demonstration project 
    described in paragraph (3) for any residency training year beginning 
    before July 1, 2006.
        ``(3) A demonstration project described in this paragraph is a 
    project that primarily provides for additional payments under title 
    XVIII of the Social Security Act [this subchapter] in connection 
    with a reduction in the number of residents in a medical residency 
    training program.
    ``(c) Interim, Final Regulations.--In order to carry out the 
amendment made by subsection (a) in a timely manner, the Secretary of 
Health and Human Services may first promulgate regulations, that take 
effect on an interim basis, after notice and pending opportunity for 
public comment, by not later than 6 months after the date of the 
enactment of this Act [Aug. 5, 1997].''


                Demonstration Project on Use of Consortia

    Section 4628 of Pub. L. 105-33 provided that:
    ``(a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the `Secretary') shall establish a 
demonstration project under which, instead of making payments to 
teaching hospitals pursuant to section 1886(h) of the Social Security 
Act [subsec. (h) of this section], the Secretary shall make payments 
under this section to each consortium that meets the requirements of 
subsection (b) and that applies to be included under the project.
    ``(b) Qualifying Consortia.--For purposes of subsection (a), a 
consortium meets the requirements of this subsection if the consortium 
is in compliance with the following:
        ``(1) The consortium consists of a teaching hospital with one or 
    more approved medical residency training programs and one or more of 
    the following entities:
            ``(A) A school of allopathic medicine or osteopathic 
        medicine.
            ``(B) Another teaching hospital, which may be a children's 
        hospital.
            ``(C) A Federally qualified health center.
            ``(D) A medical group practice.
            ``(E) A managed care entity.
            ``(F) An entity furnishing outpatient services.
            ``(G) Such other entity as the Secretary determines to be 
        appropriate.
        ``(2) The members of the consortium have agreed to participate 
    in the programs of graduate medical education that are operated by 
    the entities in the consortium.
        ``(3) With respect to the receipt by the consortium of payments 
    made pursuant to this section, the members of the consortium have 
    agreed on a method for allocating the payments among the members.
        ``(4) The consortium meets such additional requirements as the 
    Secretary may establish.
    ``(c) Amount and Source of Payment.--The total of payments to a 
qualifying consortium for a fiscal year pursuant to subsection (a) shall 
not exceed the amount that would have been paid under section 1886(h) or 
(k) of the Social Security Act [subsecs. (h), (k) of this section] for 
the teaching hospital (or hospitals) in the consortium. Such payments 
shall be made in such proportion from each of the trust funds 
established under title XVIII of such Act [this subchapter] as the 
Secretary specifies.''


 Recommendations on Long-Term Policies Regarding Teaching Hospitals and 
                       Graduate Medical Education

    Section 4629 of Pub. L. 105-33 provided that:
    ``(a) In General.--The Medicare Payment Advisory Commission 
(established under section 1805 of the Social Security Act [section 
1395b-6 of this title] and in this section referred to as the 
`Commission') shall examine and develop recommendations on whether and 
to what extent medicare payment policies and other Federal policies 
regarding teaching hospitals and graduate medical education should be 
changed. Such recommendations shall include recommendations regarding 
each of the following:
        ``(1) Possible methodologies for making payments for graduate 
    medical education and the selection of entities to receive such 
    payments. Matters considered under this paragraph shall include--
            ``(A) issues regarding children's hospitals and approved 
        medical residency training programs in pediatrics, and
            ``(B) whether and to what extent payments are being made (or 
        should be made) for training in the nursing and other allied 
        health professions.
        ``(2) Federal policies regarding international medical 
    graduates.
        ``(3) The dependence of schools of medicine on service-generated 
    income.
        ``(4) Whether and to what extent the needs of the United States 
    regarding the supply of physicians, in the aggregate and in 
    different specialties, will change during the 10-year period 
    beginning on October 1, 1997, and whether and to what extent any 
    such changes will have significant financial effects on teaching 
    hospitals.
        ``(5) Methods for promoting an appropriate number, mix, and 
    geographical distribution of health professionals.
    ``(b) Consultation.--In conducting the study under subsection (a), 
the Commission shall consult with the Council on Graduate Medical 
Education and individuals with expertise in the area of graduate medical 
education, including--
        ``(1) deans from allopathic and osteopathic schools of medicine;
        ``(2) chief executive officers (or equivalent administrative 
    heads) from academic health centers, integrated health care systems, 
    approved medical residency training programs, and teaching hospitals 
    that sponsor approved medical residency training programs;
        ``(3) chairs of departments or divisions from allopathic and 
    osteopathic schools of medicine, schools of dentistry, and approved 
    medical residency training programs in oral surgery;
        ``(4) individuals with leadership experience from representative 
    fields of non-physician health professionals;
        ``(5) individuals with substantial experience in the study of 
    issues regarding the composition of the health care workforce of the 
    United States; and
        ``(6) individuals with expertise in health care payment 
    policies.
    ``(c) Report.--Not later than 2 years after the date of the 
enactment of this Act [Aug. 5, 1997], the Commission shall submit to the 
Congress a report providing its recommendations under this section and 
the reasons and justifications for such recommendations.''


   Study of Hospital Overhead and Supervisory Physician Components of 
                     Direct Medical Education Costs

    Section 4630 of Pub. L. 105-33 provided that:
    ``(a) In General.--The Secretary of Health and Human Services shall 
conduct a study with respect to--
        ``(1) variations among hospitals in the hospital overhead and 
    supervisory physician components of their direct medical education 
    costs taken into account under section 1886(h) of the Social 
    Security Act [subsec. (h) of this section], and
        ``(2) the reasons for such variations.
    ``(b) Report.--Not later than 1 year after the date of the enactment 
of this Act [Aug. 5, 1997], the Secretary shall report the results of 
the study conducted under subsection (a) to the appropriate committees 
of Congress, including recommendations for legislation reducing 
variations described in subsection (a) that the Secretary finds 
inappropriate.''


  DRG Prospective Payment Rate Methodology; Transition Rule for Fiscal 
                                Year 1998

    Section 4644(a)(2) of Pub. L. 105-33 provided that: ``With respect 
to the publication in the Federal Register of the DRG prospective 
payment rate methodology under such section for fiscal year 1998, the 
term `60 days' in section 801(a)(3)(A) and section 802(a) of title 5, 
United States Code, is deemed to be a reference to `30 days'.''


     Hospital Payment Updates; Transition Rule for Fiscal Year 1998

    Section 4644(b)(2) of Pub. L. 105-33 provided that: ``With respect 
to the publication in the Federal Register of the appropriate change 
factor for inpatient hospital services for discharges in fiscal year 
1998 under section 1886(e)(5)(B) (42 U.S.C. 1395ww(e)(5)(B)), the term 
`60 days' in section 801(a)(3)(A) and section 802(a) of title 5, United 
States Code, is deemed to be a reference to `30 days'.''


Geographical Reclassification; Special Rule for Applications Received in 
                            Fiscal Year 1997

    Section 4644(c)(2) of Pub. L. 105-33 provided that: ``In the case of 
an application for a change in geographic classification under such 
section [subsec. (d)(10)(C)(ii) of this section] for fiscal year 1999, 
the Secretary of Health and Human Services shall shorten the deadlines 
under such section so as to permit completion of a final decision by the 
Secretary by June 15, 1998.''


    No Standardized Amount Adjustments for Fiscal Years 1992 or 1993

    Section 13501(b)(2) of Pub. L. 103-66 provided that: ``The Secretary 
of Health and Human Services shall not revise the fiscal year 1992 or 
fiscal year 1993 standardized amounts pursuant to subsections (d)(3)(B) 
and (d)(8)(D) of section 1886 of the Social Security Act [subsec. 
(d)(3)(B) and (d)(8)(D) of this section] to account for the amendment 
made by paragraph (1) [amending this section].''


  Extension of Regional Referral Center Classifications Through Fiscal 
                       Year 1994; Reclassification

    Section 13501(d) of Pub. L. 103-66 provided that:
    ``(1) Extension of classification through fiscal year 1994.--Any 
hospital that is classified as a regional referral center under section 
1886(d)(5)(C) of the Social Security Act [subsec. (d)(5)(C) of this 
section] as of September 30, 1992, shall continue to be so classified 
for cost reporting periods beginning during fiscal year 1993 or fiscal 
year 1994, unless the area in which the hospital is located is 
redesignated as a Metropolitan Statistical Area by the Office of 
Management and Budget for such a fiscal year.
    ``(2) Permitting hospitals to decline reclassification.--If any 
hospital fails to qualify as a rural referral center under section 
1886(d)(5)(C) of the Social Security Act as a result of a decision by 
the Medicare Geographic Classification Review Board under section 
1886(d)(10) of such Act to reclassify the hospital as being located in 
an urban area for fiscal year 1993 or fiscal year 1994, the Secretary of 
Health and Human Services shall--
        ``(A) notify such hospital of such failure to qualify,
        ``(B) provide an opportunity for such hospital to decline such 
    reclassification, and
        ``(C) if the hospital--
            ``(i) declines such reclassification, administer the Social 
        Security Act [this chapter] (other than section 1886(d)(8)(D)) 
        for such fiscal year as if the decision by the Review Board had 
        not occurred, or
            ``(ii) fails to decline such reclassification, administer 
        the Social Security Act without regard to paragraph (1).
    ``(3) Requiring lump-sum retroactive payment for hospitals losing 
classification.--
        ``(A) In general.--In the case of a hospital described in 
    paragraph (1), the Secretary of Health and Human Services shall make 
    a lump-sum payment to the hospital equal to the difference between 
    the aggregate payment made to the hospital under section 1886 of 
    such Act (excluding outlier payments under subsection (d)(5)(A) of 
    such section) during the period of applicability described in 
    subparagraph (B) and the aggregate payment that would have been made 
    to the hospital under such section if, during the period of 
    applicability, the hospital was classified a regional referral 
    center under section 1886(d)(5)(C) of such Act.
        ``(B) Period of applicability.--In subparagraph (A), the `period 
    of applicability' is the period that begins on October 1, 1992, and 
    ends on the date of the enactment of this Act [Aug. 10, 1993].''


 Hospitals Declining Urban Area Reclassifications; Retroactive Payments

    Pub. L. 103-66, title XIII, Sec. 13501(e)(2), (3), Aug. 10, 1993, 
107 Stat. 576, as amended by Pub. L. 105-33, title IV, Sec. 4204(a)(3), 
Aug. 5, 1997, 111 Stat. 376; Pub. L. 106-113, div. B, Sec. 1000(a)(6) 
[title IV, Sec. 404(b)(2)], Nov. 29, 1999, 113 Stat. 1536, 1501A-372, 
provided that:
    ``(2) Permitting hospitals to decline reclassification.--If any 
hospital fails to qualify as a medicare-dependent, small rural hospital 
under section 1886(d)(5)(G)(i) of the Social Security Act [subsec. 
(d)(5)(G)(i) of this section] as a result of a decision by the Medicare 
Geographic Classification Review Board under section 1886(d)(10) of such 
Act to reclassify the hospital as being located in an urban area for 
fiscal year 1993, fiscal year 1994, fiscal year 1998, fiscal year 1999, 
or fiscal year 2000 through fiscal year 2005, the Secretary of Health 
and Human Services shall--
        ``(A) notify such hospital of such failure to qualify,
        ``(B) provide an opportunity for such hospital to decline such 
    reclassification, and
        ``(C) if the hospital declines such reclassification, administer 
    the Social Security Act [this chapter] (other than section 
    1886(d)(8)(D)) for such fiscal year as if the decision by the Review 
    Board had not occurred.
    ``(3) Requiring lump-sum retroactive payment.--
        ``(A) In general.--In the case of a hospital treated as a 
    medicare-dependent, small rural hospital under section 1886(d)(5)(G) 
    of the Social Security Act, the Secretary of Health and Human 
    Services shall make a lump-sum payment to the hospital equal to the 
    difference between the aggregate payment made to the hospital under 
    section 1886 of such Act (excluding outlier payments under 
    subsection (d)(5)(A) of such section) during the period of 
    applicability described in subparagraph (B) and the aggregate 
    payment that would have been made to the hospital under such section 
    if, during the period of applicability, section 1886(d)(5)(G) of 
    such Act had been applied as if the amendments made by paragraph (1) 
    [amending this section] had been in effect.
        ``(B) Period of applicability.--In subparagraph (A), the `period 
    of applicability' is, with respect to a hospital, the period that 
    begins on the first day of the hospital's first 12-month cost 
    reporting period that begins after April 1, 1992, and ends on the 
    date of the enactment of this Act [Aug. 10, 1993].''


Adjustment in GME Base-Year Costs of Federal Insurance Contributions Act

    Section 13563(d) of Pub. L. 103-66 provided that:
    ``(1) In general.--In determining the amount of payment to be made 
under section 1886(h) of the Social Security Act [subsec. (h) of this 
section] in the case of a hospital described in paragraph (2) for cost 
reporting periods beginning on or after October 1, 1992, the Secretary 
of Health and Human Services shall redetermine the approved FTE resident 
amount to reflect the amount that would have been paid the hospital if, 
during the hospital's base cost reporting period, the hospital had been 
liable for FICA taxes or for contributions to the retirement system of a 
State, a political subdivision of a State, or an instrumentality of such 
a State or political subdivision with respect to interns and residents 
in its medical residency training program.
    ``(2) Hospitals affected.--A hospital described in this paragraph is 
a hospital that did not pay FICA taxes with respect to interns and 
residents in its medical residency training program during the 
hospital's base cost reporting period, but is required to pay FICA taxes 
or make contributions to a retirement system described in paragraph (1) 
with respect to such interns and residents because of the amendments 
made by section 11332(b) of OBRA-1990 [Pub. L. 101-508, amending section 
3121 of Title 26, Internal Revenue Code].
    ``(3) Definitions.--In this subsection:
        ``(A) The `base cost reporting period' for a hospital is the 
    hospital's cost reporting period that began during fiscal year 1984.
        ``(B) The term `FICA taxes' means, with respect to a hospital, 
    the taxes under section 3111 of the Internal Revenue Code of 1986 
    [26 U.S.C. 3111].''


  Determination of Area Wage Index for Discharges Occurring January 1, 
                         1991 to October 1, 1993

    Section 4002(d)(1) of Pub. L. 101-508 provided that:
    ``(A) For purposes of section 1886(d)(3)(E) of the Social Security 
Act [subsec. (d)(3)(E) of this section] for discharges occurring on or 
after January 1, 1991, and before October 1, 1993, the Secretary of 
Health and Human Services shall apply an area wage index determined 
using the survey of the 1988 wages and wage-related costs of hospitals 
in the United States conducted under such section.
    ``(B) The Secretary shall apply the wage index described in 
subparagraph (A) without regard to a previous survey of wages and wage-
related costs.''


 Study and Report on Relationship Between Non-Wage-Related Input Prices 
                and Adjusted Average Standardized Amounts

    Section 4002(e)(2) of Pub. L. 101-508 directed Secretary of Health 
and Human Services to collect sufficient data on the input prices 
associated with the non-wage-related portion of the adjusted average 
standardized amounts established under subsec. (d)(3) of this section to 
identify extent to which variations in such amounts among hospitals 
located in different geographic areas are attributable to differences in 
such prices, and, not later than June 1, 1993, submit a report to 
Congress analyzing such data, with such report to include 
recommendations regarding a methodology for adjusting such average 
standardized amounts to reflect such variations.


  Deadline for Submission of Applications to Geographic Classification 
                              Review Board

    Section 4002(h)(2)(A) of Pub. L. 101-508 provided that: ``For 
purposes of determining whether a hospital requesting a change in 
geographic classification for fiscal year 1992 under section 1886(d)(10) 
of the Social Security Act [subsec. (d)(10) of this section] has met the 
deadline described in subparagraph (C)(ii) of such section, an 
application submitted under such subparagraph shall be considered to 
have been submitted by the first day of the preceding fiscal year if it 
is submitted within 60 days of the date of publication of the guidelines 
described in subparagraph (D)(i) of such section.''


                  Payments for Medical Education Costs

    Section 4004 of Pub. L. 101-508 provided that:
    ``(a) Hospital Graduate Medical Education Recoupment.--
        ``(1) In general.--The Secretary of Health and Human Services 
    may not, before October 1, 1991, recoup payments from a hospital 
    because of alleged overpayments to such hospital under part A of 
    title XVIII of the Social Security Act [part A of this subchapter] 
    due to a determination that the amount of payments made for graduate 
    medical education programs exceeds the amount allowable under 
    section 1886(h) [subsec. (h) of this section].
        ``(2) Cap on annual amount of recoupment.--With respect to 
    overpayments to a hospital described in paragraph (1), the Secretary 
    may not recoup more than 25 percent of the amount of such 
    overpayments from the hospital during a fiscal year.
        ``(3) Effective date.--Paragraphs (1) and (2) shall take effect 
    October 1, 1990.
    ``(b) University Hospital Nursing Education.--
        ``(1) In general.--The reasonable costs incurred by a hospital 
    (or by an educational institution related to the hospital by common 
    ownership or control) during a cost reporting period for clinical 
    training (as defined by the Secretary) conducted on the premises of 
    the hospital under approved nursing and allied health education 
    programs that are not operated by the hospital shall be allowable as 
    reasonable costs under part A of title XVIII of the Social Security 
    Act and reimbursed under such part on a pass-through basis.
        ``(2) Conditions for reimbursement.--The reasonable costs 
    incurred by a hospital during a cost reporting period shall be 
    reimbursable pursuant to paragraph (1) only if--
            ``(A) the hospital claimed and was reimbursed for such costs 
        during the most recent cost reporting period that ended on or 
        before October 1, 1989;
            ``(B) the proportion of the hospital's total allowable costs 
        that is attributable to the clinical training costs of the 
        approved program, and allowable under (b)(1) during the cost 
        reporting period does not exceed the proportion of total 
        allowable costs that were attributable to the clinical training 
        costs during the cost reporting period described in subparagraph 
        (A);
            ``(C) the hospital receives a benefit for the support it 
        furnishes to such program through the provision of clinical 
        services by nursing or allied health students participating in 
        such program; and
            ``(D) the costs incurred by the hospital for such program do 
        not exceed the costs that would be incurred by the hospital if 
        it operated the program itself.
        ``(3) Prohibition against recoupment of costs by secretary.--
            ``(A) In general.--The Secretary of Health and Human 
        Services may not recoup payments from (or otherwise reduce or 
        adjust payments under part A of title XVIII of the Social 
        Security Act to) a hospital because of alleged overpayments to 
        such hospital under such title due to a determination that costs 
        which were reported by the hospital on its medicare cost reports 
        for cost reporting periods beginning on or after October 1, 
        1983, and before October 1, 1990, relating to approved nursing 
        and allied health education programs did not meet the 
        requirements for allowable nursing and allied health education 
        costs (as developed by the Secretary pursuant to section 1861(v) 
        of such Act [section 1395x(v) of this title]).
            ``(B) Refund of amounts recouped.--If, prior to the date of 
        the enactment of this Act [Nov. 5, 1990], the Secretary has 
        recouped payments from (or otherwise reduced or adjusted 
        payments under part A of title XVIII of the Social Security Act 
        to) a hospital because of overpayments described in subparagraph 
        (A), the Secretary shall refund the amount recouped, reduced, or 
        adjusted from the hospital.
        ``(4) Special audit to determine costs.--In determining the 
    amount of costs incurred by, claimed by, and reimbursed to, a 
    hospital for purposes of this subsection, the Secretary shall 
    conduct a special audit (or use such other appropriate mechanism) to 
    ensure the accuracy of such past claims and payments.
        ``(5) Effective date.--Except as provided in paragraph (3), the 
    provisions of this subsection shall apply to cost reporting periods 
    beginning on or after October 1, 1990.''
    Section 4159 of Pub. L. 101-508 provided that:
    ``(a) Hospital Graduate Medical Education Recoupment.--
        ``(1) In general.--The Secretary of Health and Human Services 
    may not, before October 1, 1991, recoup payments from a hospital 
    because of alleged overpayments to such hospital under part B of 
    title XVIII of the Social Security Act [part B of this subchapter] 
    due to a determination that the amount of payments made for graduate 
    medical education programs exceeds the amount allowable under 
    section 1886(h) [subsec. (h) of this section].
        ``(2) Cap on annual amount of recoupment.--With respect to 
    overpayments to a hospital described in paragraph (1), the Secretary 
    may not recoup more than 25 percent of the amount of such 
    overpayments from the hospital during a fiscal year.
        ``(3) Effective date.--Paragraphs (1) and (2) shall take effect 
    October 1, 1990.
    ``(b) University Hospital Nursing Education.--
        ``(1) In general.--The reasonable costs incurred by a hospital 
    (or by an educational institution related to the hospital by common 
    ownership or control) during a cost reporting period for clinical 
    training (as defined by the Secretary) conducted on the premises of 
    the hospital under approved nursing and allied health education 
    programs that are not operated by the hospital shall be allowable as 
    reasonable costs under part B of title XVIII of the Social Security 
    Act and reimbursed under such part on a pass-through basis.
        ``(2) Conditions for reimbursement.--The reasonable costs 
    incurred by a hospital during a cost reporting period shall be 
    reimbursable pursuant to paragraph (1) only if--
            ``(A) the hospital claimed and was reimbursed for such costs 
        during the most recent cost reporting period that ended on or 
        before October 1, 1989;
            ``(B) the proportion of the hospital's total allowable costs 
        that is attributable to the clinical training costs of the 
        approved program, and allowable under (b)(1) during the cost 
        reporting period does not exceed the proportion of total 
        allowable costs that were attributable to clinical training 
        costs during the cost reporting period described in subparagraph 
        (A);
            ``(C) the hospital receives a benefit for the support it 
        furnishes to such program through the provision of clinical 
        services by nursing or allied health students participating in 
        such program; and
            ``(D) the costs incurred by the hospital for such program do 
        not exceed the costs that would be incurred by the hospital if 
        it operated the program itself.
        ``(3) Prohibition against recoupment of costs by secretary.--
            ``(A) In general.--The Secretary of Health and Human 
        Services may not recoup payments from (or otherwise reduce or 
        adjust payments under part B of title XVIII of the Social 
        Security Act to) a hospital because of alleged overpayments to 
        such hospital under such title due to a determination that costs 
        which were reported by the hospital on its medicare cost reports 
        for cost reporting periods beginning on or after October 1, 
        1983, and before October 1, 1990, relating to approved nursing 
        and allied health education programs did not meet the 
        requirements for allowable nursing and allied health education 
        costs (as developed by the Secretary pursuant to section 1861(v) 
        of such Act [section 1395x(v) of this title]).
            ``(B) Refund of amounts recouped.--If, prior to the date of 
        the enactment of this Act [Nov. 5, 1990], the Secretary has 
        recouped payments from (or otherwise reduced or adjusted 
        payments under part B of title XVIII of the Social Security Act 
        to) a hospital because of overpayments described in subparagraph 
        (A), the Secretary shall refund the amount recouped, reduced, or 
        adjusted from the hospital.
        ``(4) Special audit to determine costs.--In determining the 
    amount of costs incurred by, claimed by, and reimbursed to, a 
    hospital for purposes of this subsection, the Secretary shall 
    conduct a special audit (or use such other appropriate mechanism) to 
    ensure the accuracy of such past claims and payments.
        ``(5) Effective Date.--Except as provided in paragraph (3), the 
    provisions of this subsection shall apply to cost reporting periods 
    beginning on or after October 1, 1990.''


 Development of National Prospective Payment Rates for Current Non-PPS 
                                Hospitals

    Section 4005(b) of Pub. L. 101-508 provided that:
    ``(1) Development of proposal.--The Secretary of Health and Human 
Services shall develop a proposal to modify the current system under 
which hospitals that are not subsection (d) hospitals (as defined in 
section 1886(d)(1)(B) of the Social Security Act [subsec. (d)(1)(B) of 
this section]) receive payment for the operating and capital-related 
costs of inpatient hospital services under part A [part A of this 
subchapter] of the medicare program or a proposal to replace such system 
with a system under which such payments would be made on the basis of 
nationally-determined average standardized amounts. In developing any 
proposal under this paragraph to replace the current system with a 
prospective payment system, the Secretary shall--
        ``(A) take into consideration the need to provide for 
    appropriate limits on increases in expenditures under the medicare 
    program;
        ``(B) provide for adjustments to prospectively determined rates 
    to account for changes in a hospital's case mix, severity of illness 
    of patients, volume of cases, and the development of new 
    technologies and standards of medical practice;
        ``(C) take into consideration the need to increase the payment 
    otherwise made under such system in the case of services provided to 
    patients whose length of stay or costs of treatment greatly exceed 
    the length of stay or cost of treatment provided for under the 
    applicable prospectively determined payment rate;
        ``(D) take into consideration the need to adjust payments under 
    the system to take into account factors such as a disproportionate 
    share of low-income patients, costs related to graduate medical 
    education programs, differences in wages and wage-related costs 
    among hospitals located in various geographic areas, and other 
    factors the Secretary considers appropriate; and
        ``(E) provide for the appropriate allocation of operating and 
    capital-related costs of hospitals not subject to the new 
    prospective payment system and distinct units of such hospitals that 
    would be paid under such system.
    ``(2) Reports.--(A) By not later than April 1, 1992, the Secretary 
shall submit the proposal developed under paragraph (1) to the Committee 
on Finance of the Senate and the Committee on Ways and Means of the 
House of Representatives.
    ``(B) By not later than June 1, 1992, the Prospective Payment 
Assessment Commission shall submit an analysis of and comments on the 
proposal developed under paragraph (1) to the Committee on Finance of 
the Senate and the Committee on Ways and Means of the House of 
Representatives.''


                Guidance to Intermediaries and Hospitals

    Section 4005(c)(3) of Pub. L. 101-508 provided that: ``The 
Administrator of the Health Care Financing Administration shall provide 
guidance to agencies and organizations performing functions pursuant to 
section 1816 of the Social Security Act [section 1395h of this title] 
and to hospitals that are not subsection (d) hospitals (as defined in 
section 1886(d)(1)(B) of such Act [subsec. (d)(1)(B) of this section]) 
to assist such agencies, organizations, and hospitals in filing complete 
applications with the Administrator for exemptions, exceptions, and 
adjustments under section 1886(b)(4)(A) of such Act.''


Freeze in Payments Under Part A of This Subchapter Through December 31, 
                                  1990

    Section 4007 of Pub. L. 101-508 provided that:
    ``(a) In General.--Notwithstanding any other provision of law, for 
purposes of determining the amount of payment for items or services 
under part A of title XVIII of the Social Security Act [part A of this 
subchapter] (including payments under section 1886 of such Act [this 
section] attributable to or allocated under such part) during the period 
described in subsection (b):
        ``(1) The market basket percentage increase (described in 
    section 1886(b)(3)(B)(iii) of the Social Security Act) shall be 
    deemed to be 0 for discharges occurring during such period.
        ``(2) The percentage increase or decrease in the medical care 
    expenditure category of the consumer price index applicable under 
    section 1814(i)(2)(B) of such Act [section 1395f(i)(2)(B) of this 
    title] shall be deemed to be 0.
        ``(3) The area wage index applicable to a subsection (d) 
    hospital under section 1886(d)(3)(E) of such Act shall be deemed to 
    be the area wage index applicable to such hospital as of September 
    30, 1990.
        ``(4) The percentage change in the consumer price index 
    applicable under section 1886(h)(2)(D) of such Act shall be deemed 
    to be 0.
    ``(b) Description of Period.--The period referred to in subsection 
(a) is the period beginning on October 21, 1990, and ending on December 
31, 1990.''


     Review of Hospital Regulations With Respect to Rural Hospitals

    Section 4008(l) of Pub. L. 101-508 provided that:
    ``(1) In general.--The Secretary of Health and Human Services shall 
review the requirements applicable under title XVIII of the Social 
Security Act [this subchapter] to determine which requirements could be 
made less administratively and economically burdensome (without 
diminishing the quality of care) for hospitals defined in section 
1886(d)(1)(B) of such Act [subsec. (d)(1)(B) of this section] that are 
located in a rural area (as defined in section 1886(d)(2)(D) of such 
Act). Such review shall specifically include standards related to 
staffing requirements.
    ``(2) Report.--The Secretary of Health and Human Services shall 
report to Congress by April 1, 1992, on the results of the review 
conducted under subsection (a), and include conclusions on which 
regulations, if any, should be modified with respect to hospitals 
described in subsection (a).''


  Prohibition on Cost Savings Policies Before Beginning of Fiscal Year

    Section 4207(b)(1), formerly 4027(b)(1), of Pub. L. 101-508, as 
renumbered and amended by Pub. L. 103-432, title I, Sec. 160(d)(4), 
(5)(C), Oct. 31, 1994, 108 Stat. 4444, provided that: ``Notwithstanding 
any other provision of law, the Secretary of Health and Human Services 
may not issue any proposed or final regulation, instruction, or other 
policy which is estimated by the Secretary to result in a net reduction 
in expenditures under title XVIII of the Social Security Act [this 
subchapter] in a fiscal year (beginning with fiscal year 1991 and ending 
with fiscal year 1993, or, if later, the last fiscal year for which 
there is a maximum deficit amount specified under section 601(a)(1) of 
the Congressional Budget and Impoundment Control Act of 1974 [2 U.S.C. 
665(a)(1)]) of more than $50,000,000, except as follows:
        ``(A) The Secretary may issue such a proposed regulation, 
    instruction, or other policy with respect to the fiscal year before 
    the May 15 preceding the beginning of the fiscal year.
        ``(B) The Secretary may issue such a final regulation, 
    instruction, or other policy with respect to the fiscal year on or 
    after October 15 of the fiscal year.
        ``(C) The Secretary may, at any time, issue such a proposed or 
    final regulation, instruction, or other policy with respect to the 
    fiscal year if required to implement specific provisions under 
    statute.''


                  Prohibition of Payment Cycle Changes

    Section 4207(b)(2), formerly 4027(b)(2), of Pub. L. 101-508, as 
renumbered by Pub. L. 103-432, title I, Sec. 160(d)(4), Oct. 31, 1994, 
108 Stat. 4444, provided that: ``Notwithstanding any other provision of 
law, the Secretary of Health and Human Services is not authorized to 
issue, after the date of the enactment of this Act [Nov. 5, 1990], any 
final regulation, instruction, or other policy change which is primarily 
intended to have the effect of slowing down or speeding up claims 
processing, or delaying payment of claims, under title XVIII of the 
Social Security Act [this subchapter].''


                      Extension of Area Wage Index

    Section 115(a) of Pub. L. 101-403 provided that: ``For purposes of 
determining the amount of payment made to a hospital under part A of 
title XVIII of the Social Security Act [part A of this subchapter] for 
the operating costs of inpatient hospital services for discharges 
occurring on or after October 1, 1990, and on or before October 20, 
1990, the Secretary of Health and Human Services, in adjusting such 
amount under section 1886(d)(3)(E) of such Act [subsec. (d)(3)(E) of 
this section] to reflect the relative hospital wage level in the 
geographic area of the hospital compared to the national average 
hospital wage index, shall apply the area wage index applicable to such 
hospital as of September 30, 1990.''


Adjustments Resulting From Extensions of Regional Floor on Standardized 
                                 Amounts

    Section 115(b)(2) of Pub. L. 101-403 provided that: ``The Secretary 
of Health and Human Services shall make any adjustments resulting from 
the amendment made by paragraph (1) [amending this section] in the 
amount of the payments made to hospitals under section 1886(d) of the 
Social Security Act [subsec. (d) of this section] in a fiscal year for 
the operating costs of inpatient hospital services in a manner that 
ensures that the aggregate payments under such section are not greater 
or less than those that would have been made in the year without such 
adjustments.''


           Indexing of Future Applicable Percentage Increases

    Section 6003(a)(3) of Pub. L. 101-239 provided that: ``For 
discharges occurring on or after October 1, 1990, the applicable 
percentage increase (described in section 1886(b)(3)(B) of the Social 
Security Act [subsec. (b)(3)(B) of this section]) for discharges 
occurring during fiscal year 1990 is deemed to have been such percentage 
increase as amended by paragraph (1).''


  Continuation of Sole Community Hospital Designation for Current Sole 
                           Community Hospitals

    Section 6003(e)(3) of Pub. L. 101-239 provided that: ``Any hospital 
classified as a sole community hospital under section 1886(d)(5)(C)(ii) 
of the Social Security Act [subsec. (d)(5)(C)(ii) of this section] on 
the date of the enactment of this Act [Dec. 19, 1989] that will no 
longer be classified as a sole community hospital after such date as a 
result of the amendments made by paragraph (1) [amending this section] 
shall continue to be classified as a sole community hospital for 
purposes of section 1886(d)(5)(D) of such Act [subsec. (d)(5)(D) of this 
section].''


Additional Payment Resulting From Corrections of Erroneously Determined 
                               Wage Index

    Section 6003(h)(5) of Pub. L. 101-239 provided that:
    ``(A) In general.--If the Secretary of Health and Human Services 
(hereinafter referred to as the `Secretary') discovers an error with 
respect to the determination, adjustment, or computation of the area 
wage index described in section 1886(d)(3)(E) of the Social Security Act 
[subsec. (d)(3)(E) of this section] and subsequently corrects such 
error, the Secretary shall make an additional payment under title XVIII 
of such Act [this subchapter] to a hospital affected by such error for 
inpatient hospital discharges occurring during the period when the 
erroneously determined, adjusted, or computed wage index was in effect.
    ``(B) Conditions for additional payment.--A hospital is eligible for 
an additional payment under subparagraph (A) only if--
        ``(i) the error resulted from the submission of erroneous data, 
    except that a hospital is not eligible for such additional payment 
    if it submitted such erroneous data;
        ``(ii) the error was made with respect to the survey of the 1984 
    wages and wage-related costs of hospitals in the United States 
    conducted under section 1886(d)(3)(E) of the Social Security Act; 
    and
        ``(iii) the correction of the error resulted in an adjustment to 
    the area wage index of not less than 3 percentage points.
    ``(C) Period of applicability.--A hospital may not receive an 
additional payment under subparagraph (A) for discharges occurring after 
October 1, 1990.''


 Legislative Proposal Eliminating Separate Average Standardized Amounts

    Pub. L. 101-239, title VI, Sec. 6003(i), Dec. 19, 1989, 103 Stat. 
2158, directed Secretary of Health and Human Services to design a 
legislative proposal eliminating the system of determining separate 
average standardized amounts for subsection (d) hospitals classified as 
being located in large urban, other urban, or rural areas, prior to 
repeal by Pub. L. 105-362, title VI, Sec. 601(b)(4), Nov. 10, 1998, 112 
Stat. 3286.


Determination and Recommendations of Payments for Costs of Administering 
          Blood Clotting Factors to Individuals With Hemophilia

    Section 6011(b), (c) of Pub. L. 101-239 provided that:
    ``(b) Determining Payment Amount.--The Secretary of Health and Human 
Services shall determine the amount of payment made to hospitals under 
part A of title XVIII of the Social Security Act [part A of this 
subchapter] for the costs of administering blood clotting factors to 
individuals with hemophilia by multiplying a predetermined price per 
unit of blood clotting factor (determined in consultation with the 
Prospective Payment Assessment Commission) by the number of units 
provided to the individual.
    ``(c) Recommendations on Payments.--The Prospective Payment 
Assessment Commission and the Health Care Financing Administration shall 
develop recommendations with respect to payments to hospitals under part 
A of title XVIII of the Social Security Act for the costs of 
administering blood clotting factors to individuals with hemophilia, and 
shall submit such recommendations to Congress not later than 18 months 
after the date of enactment of this Act [Dec. 19, 1989].''


 Publication of Instructions Relating to Exceptions and Adjustments in 
                             Target Amounts

    Section 6015(b) of Pub. L. 101-239 provided that: ``By not later 
than 180 days after the date of enactment of this Act [Dec. 19, 1989], 
the Secretary of Health and Human Services shall publish instructions 
specifying the application process to be used in providing exceptions 
and adjustments under section 1886(b)(4)(A) of the Social Security Act 
[subsec. (b)(4)(A) of this section].''


    Delay in Recoupment of Certain Nursing and Allied Education Costs

    Section 6205(b) of Pub. L. 101-239 provided that:
    ``(1) The Secretary of Health and Human Services (in this subsection 
referred to as the `Secretary') shall not, before October 1, 1990, 
recoup from, or otherwise reduce or adjust payments under title XVIII of 
the Social Security Act [this subchapter] to, hospitals because of 
alleged overpayments to such hospitals under such title due to a 
determination that costs which were reported by a hospital on its 
medicare cost reports relating to approved nursing and allied health 
education programs were allowable costs and are included in the 
definition of `operating costs of inpatient hospital services' pursuant 
to section 1886(a)(4) of such Act [subsec. (a)(4) of this section], so 
that no pass-through of such costs was permitted under that section.
    ``(2)(A) Before July 1, 1990, the Secretary shall issue regulations 
respecting payment of costs described in paragraph (1).
    ``(B) In issuing such regulations--
        ``(i) the Secretary shall allow a comment period of not less 
    than 60 days,
        ``(ii) the Secretary shall consult with the Prospective Payment 
    Assessment Commission, and
        ``(iii) any final rule shall not be effective prior to October 
    1, 1990, or 30 days after publication of the final rule in the 
    Federal Register, whichever is later.
    ``(C) Such regulations shall specify--
        ``(i) the relationship required between an approved nursing or 
    allied health education program and a hospital for the program's 
    costs to be attributed to the hospital;
        ``(ii) the types of costs related to nursing or allied health 
    education programs that are allowable by medicare;
        ``(iii) the distinction between costs of approved educational 
    activities as recognized under section 1886(a)(3) of the Social 
    Security Act [subsec. (a)(3) of this section] and educational costs 
    treated as operating costs of inpatient hospital services; and
        ``(iv) the treatment of other funding sources for the program.''


            Inner-City Hospital Triage Demonstration Project

    Section 6217 of Pub. L. 101-239, as amended by Pub. L. 101-508, 
title IV, Sec. 4207(k)(5), formerly Sec. 4027(k)(5), Nov. 5, 1990, 104 
Stat. 1388-125, renumbered Pub. L. 103-432, title I, Sec. 160(d)(4), 
Oct. 31, 1994, 108 Stat. 4444, provided that:
    ``(a) Establishment.--The Secretary of Health and Human Services 
shall establish a demonstration project in a public hospital that is 
located in a large urban area and that has established a triage system, 
under which the Secretary shall make payments out of the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund (in such proportions as the Secretary determines to 
be appropriate in a year) for 3 years to reimburse the hospital for the 
reasonable costs of operating the system, including costs--
        ``(1) to train hospital personnel to operate and participate in 
    the system; and
        ``(2) to provide services to patients who might otherwise be 
    denied appropriate and prompt care.
    ``(b) Limitations on Payment.--(1) The Secretary may not make 
payment under the demonstration project established under subsection (a) 
for costs that the Secretary determines are not reasonable.
    ``(2) The amount of payment made under the demonstration project 
during a single year may not exceed $500,000.''


Transition Adjustments to Target Amounts for Inpatient Hospital Services

    Section 101(c)(2)(B) of title I of Pub. L. 101-234 provided that: 
``The Secretary of Health and Human Services shall make an appropriate 
adjustment to the target amount established under section 1886(b)(3)(A) 
of the Social Security Act [subsec. (b)(3)(A) of this section] in the 
case of inpatient hospital services provided to an inpatient whose stay 
began before January 1, 1990, in order to take into account the target 
amount that would have applied but for the amendments made by this title 
[see Tables for classification].''


            Election of Personnel Policy for ProPAC Employees

    Section 8405 of Pub. L. 100-647 provided that: ``With respect to 
employees of the Prospective Payment Assessment Commission hired before 
December 22, 1987, such employees shall have the option to elect within 
60 days of the date of enactment of this Act [Nov. 10, 1988] to be 
covered under either the personnel policy in effect with respect to such 
employees before December 22, 1987, or under the employees coverage 
provided under the last sentence of section 1886(e)(6)(D) of the Social 
Security Act [subsec. (e)(6)(D) of this section].''


         Adjustments in Payments for Inpatient Hospital Services

    Section 104(c) of Pub. L. 100-360, as amended by Pub. L. 100-485, 
title VI, Sec. 608(d)(3)(C)-(E), Oct. 13, 1988, 102 Stat. 2413; Pub. L. 
101-234, title I, Sec. 101(c)(1), (2)(A), Dec. 13, 1989, 103 Stat. 1980, 
provided that:
    ``(1) PPS hospitals.--In adjusting DRG prospective payment rates 
under section 1886(d) of the Social Security Act [subsec. (d) of this 
section], outlier cutoff points under section 1886(d)(5)(A) of such Act, 
and weighting factors under section 1886(d)(4) of such Act for 
discharges occurring on or after October 1, 1988, and before January 1, 
1990, the Secretary of Health and Human Services shall, to the extent 
appropriate, take into consideration the reductions in payments to 
hospitals by (or on behalf of) medicare beneficiaries resulting from the 
elimination of a day limitation on medicare inpatient hospital services 
(under the amendments made by section 101 [amending section 1395d of 
this title]).
    ``(2) PPS-exempt hospitals.--In adjusting target amounts under 
section 1886(b)(3) of the Social Security Act [subsec. (b)(3) of this 
section] for portions of cost reporting periods occurring on or after 
January 1, 1989, and before January 1, 1990, the Secretary shall, on a 
hospital-specific basis, take into consideration the reductions in 
payments to hospitals by (or on behalf of) medicare beneficiaries 
resulting from the elimination of a day limitation on medicare inpatient 
hospital services (under the amendments made by section 101 [amending 
section 1395d of this title]), without regard to whether such a hospital 
is paid on the basis described in subparagraph (A) or (B) of section 
1886(b)(1) of such Act, without regard to whether any of such 
beneficiaries exhausted medicare inpatient hospital insurance benefits 
before January 1, 1989.''
    [Amendment of section 104(c) of Pub. L. 100-360, set out above, by 
section 101(c)(1), (2)(A) of Pub. L. 101-234 effective as if included in 
enactment of Pub. L. 100-360, see section 101(d) of Pub. L. 101-234, set 
out as a note under section 1395c of this title].


                              ProPAC Study

    Section 203(c)(2) of Pub. L. 100-360 directed Prospective Payment 
Assessment Commission to conduct a study, and make recommendations to 
Congress and Secretary of Health and Human Services by not later than 
Mar. 1, 1991, concerning appropriate adjustment to payment amounts 
provided under subsec. (d) of this section for inpatient hospital 
services to account for reduced costs to hospitals resulting from 
amendments made by section 203 of Pub. L. 100-360, amending sections 
1320c-3, 1395h, 1395k to 1395n, 1395w-2, 1395x, 1395z, and 1395aa of 
this title, prior to repeal by Pub. L. 101-234, title II, Sec. 201(a), 
Dec. 13, 1989, 103 Stat. 1981.


                      Clinic Hospital Wage Indices

    Section 4004(b) of Pub. L. 100-203 provided that: ``In calculating 
the wage index under section 1886(d) of the Social Security Act [subsec. 
(d) of this section] for purposes of making payment adjustments after 
September 30, 1988, as required under paragraphs (2)(H) and (3)(E) of 
such section, in the case of any institution which received the waiver 
specified in section 602(k) of the Social Security Amendments of 1983 
[section 602(k) of Pub. L. 98-21, set out as a note under section 1395y 
of this title], the Secretary of Health and Human Services shall include 
wage costs paid to related organization employees directly involved in 
the delivery and administration of care provided by the related 
organization to hospital inpatients. For purposes of the preceding 
sentence, the term `wage costs' does not include costs of overhead or 
home office administrative salaries or any costs that are not incurred 
in the hospital's Metropolitan Statistical Area.''


        Limitation on Amounts Paid in Fiscal Years 1988 and 1989

    Section 4005(c)(2)(B) of Pub. L. 100-203 provided that: ``The 
Secretary of Health and Human Services shall take appropriate steps to 
ensure that the total amount paid in a fiscal year under title XVIII of 
the Social Security Act [this subchapter] by reason of the amendment 
made by paragraph (1)(B) [amending this section] does not exceed 
$5,000,000 in the case of fiscal year 1988 and $10,000,000 for fiscal 
year 1989.''


  Study of Criteria for Classification of Hospitals as Rural Referral 
                             Centers; Report

    Section 4005(d)(2) of Pub. L. 100-203 directed Secretary of Health 
and Human Services to provide for a study of the criteria used for the 
classification of hospitals as rural referral centers, and report to 
Congress, by not later than Mar. 1, 1989, on the study and on 
recommendations for the criteria that should be applied for the 
classification of hospitals as rural referral centers for cost reporting 
periods beginning on or after Oct. 1, 1989.


             Grant Program for Rural Health Care Transition

    Section 4005(e) of Pub. L. 100-203, as amended by Pub. L. 101-239, 
title VI, Sec. 6003(g)(1)(B)(i), Dec. 19, 1989, 103 Stat. 2150; Pub. L. 
103-432, title I, Sec. 103(a)(1), (b), (c), Oct. 31, 1994, 108 Stat. 
4404, 4405, provided that:
    ``(1) The Administrator of the Health Care Financing Administration, 
in consultation with the Assistant Secretary for Health (or a designee), 
shall establish a program of grants to assist eligible small rural 
hospitals and their communities in the planning and implementation of 
projects to modify the type and extent of services such hospitals 
provide in order to adjust for one or more of the following factors:
        ``(A) Changes in clinical practice patterns.
        ``(B) Changes in service populations.
        ``(C) Declining demand for acute-care inpatient hospital 
    capacity.
        ``(D) Declining ability to provide appropriate staffing for 
    inpatient hospitals.
        ``(E) Increasing demand for ambulatory and emergency services.
        ``(F) Increasing demand for appropriate integration of community 
    health services.
        ``(G) The need for adequate access (including appropriate 
    transportation) to emergency care and inpatient care in areas in 
    which a significant number of underutilized hospital beds are being 
    eliminated.
        ``(H) The Administrator shall submit a final report on the 
    program to the Congress not later than 180 days after all projects 
    receiving a grant under the program are completed.
Each demonstration project under this subsection shall demonstrate 
methods of strengthening the financial and managerial capability of the 
hospital involved to provide necessary services. Such methods may 
include programs of cooperation with other health care providers, of 
diversification in services furnished (including the provision of home 
health services), of physician recruitment, and of improved management 
systems. Grants under this paragraph may be used to provide instruction 
and consultation (and such other services as the Administrator 
determines appropriate) via telecommunications to physicians in such 
rural areas (within the meaning of section 1886(d)(2)(D) of the Social 
Security Act [subsec. (d)(2)(D) of this section]) as are designated 
either class 1 or class 2 health manpower shortage areas under section 
332(a)(1)(A) of the Public Health Service Act [section 254e(a)(1)(A) of 
this title].
    ``(2) For purposes of this subsection, the term `eligible small 
rural hospital' means any rural primary care hospital designated by the 
Secretary under section 1820(i)(2) of the Social Security Act [section 
1395i-4(i)(2) of this title], or any non-Federal, short-term general 
acute care hospital that--
        ``(A) is located in a rural area (as determined in accordance 
    with subsection (d)),
        ``(B) has less than 100 beds, and
        ``(C) is not for profit.
    ``(3)(A) Any eligible small rural hospital that desires to modify 
the type or extent of health care services that it provides in order to 
adjust for one or more of the factors specified in paragraph (1) may 
submit an application to the Administrator and a copy of such 
application to the Governor of the State in which it is located. The 
application shall specify the nature of the project proposed by the 
hospital, the data and information on which the project is based, and a 
timetable (of not more than 24 months) for completion of the project. 
The application shall be submitted on or before a date specified by the 
Administrator and shall be in such form as the Administrator may 
require.
    ``(B) The Governor shall transmit to the Administrator, within a 
reasonable time after receiving a copy of an application pursuant to 
subparagraph (A), any comments with respect to the application that the 
Governor deems appropriate.
    ``(C) The Governor of a State may designate an appropriate State 
agency to receive and comment on applications submitted under 
subparagraph (A).
    ``(4) A hospital shall be considered to be located in a rural area 
for purposes of this subsection if it is treated as being located in a 
rural area for purposes of section 1886(d)(3)(D) of the Social Security 
Act [subsec. (d)(3)(D) of this section].
    ``(5) In determining which hospitals making application under 
paragraph (3) will receive grants under this subsection, the 
Administrator shall take into account--
        ``(A) any comments received under paragraph (3)(B) with respect 
    to a proposed project;
        ``(B) the effect that the project will have on--
            ``(i) reducing expenditures from the Federal Hospital 
        Insurance Trust Fund,
            ``(ii) improving the access of medicare beneficiaries to 
        health care of a reasonable quality;
        ``(C) the extent to which the proposal of the hospital, using 
    appropriate data, demonstrates an understanding of--
            ``(i) the primary market or service area of the hospital, 
        and
            ``(ii) the health care needs of the elderly and disabled 
        that are not currently being met by providers in such market or 
        area, and
        ``(D) the degree of coordination that may be expected between 
    the proposed project and--
            ``(i) other local or regional health care providers, and
            ``(ii) community and government leaders,
as evidenced by the availability of support for the project (in cash or 
in kind) and other relevant factors.
    ``(6) A grant to a hospital under this subsection may not exceed 
$50,000 a year and may not exceed a term of 3 years.
    ``(7)(A) Except as provided in subparagraphs (B) and (C), a hospital 
receiving a grant under this subsection may use the grant for any of 
expenses incurred in planning and implementing the project with respect 
to which the grant is made.
    ``(B) A hospital receiving a grant under this subsection for a 
project may not use the grant to retire debt incurred with respect to 
any capital expenditure made prior to the date on which the project is 
initiated.
    ``(C) Not more than one-third of any grant made under this 
subsection may be expended for capital-related costs (as defined by the 
Secretary for purposes of section 1886(a)(4) of the Social Security Act 
[subsec. (a)(4) of this section]) of the project, except that this 
limitation shall not apply with respect to a grant used for the purposes 
described in subparagraph (D).
    ``(D) A hospital may use a grant received under this subsection to 
develop a plan for converting itself to a rural primary care hospital 
(as described in section 1820 of the Social Security Act [section 1395i-
4 of this title]) or to develop a rural health network (as defined in 
section 1820(g) of such Act) in the State in which it is located if the 
State is receiving a grant under section 1820(a)(1).
    ``(8)(A) A hospital receiving a grant under this section [amending 
this section and section 1395tt of this title and enacting provisions 
set out as notes under this section and section 1395tt of this title] 
shall furnish the Administrator with such information as the 
Administrator may require to evaluate the project with respect to which 
the grant is made and to ensure that the grant is expended for the 
purposes for which it was made.
    ``(B) The Administrator shall report to the Congress at least once 
every 12 months on the program of grants established under this 
subsection. The report shall assess the functioning and status of the 
program, shall evaluate the progress made toward achieving the purposes 
of the program, and shall include any recommendations the Secretary may 
deem appropriate with respect to the program. In preparing the report, 
the Secretary shall solicit and include the comments and recommendations 
of private and public entities with an interest in rural health care.
    ``(C) The Administrator shall submit a final report on the program 
to the Congress not later than 180 days after all projects receiving a 
grant under the program are completed.
    ``(9) For purposes of carrying out the program of grants under this 
subsection, there are authorized to be appropriated from the Federal 
Hospital Insurance Trust Fund $15,000,000 for fiscal year 1989, 
$25,000,000 for each of the fiscal years 1990, 1991, and 1992 and 
$30,000,000 for each of fiscal years 1993 through 1997.''
    [Section 103(a)(2) of Pub. L. 103-432 provided that: ``The amendment 
made by paragraph (1) [amending section 4005(e)(2) of Pub. L. 100-203, 
set out above] shall apply to grants made on or after October 1, 
1994.'']
    [Pub. L. 103-432, Sec. 103(c), which directed amendment of section 
4008(e)(8)(B) of Pub. L. 100-203, was executed by amending section 
4005(e)(8)(B) of Pub. L. 100-203, set out above, to reflect the probable 
intent of Congress.]
    [Section 6003(g)(1)(B)(ii) of Pub. L. 101-239 provided that: ``The 
amendments made by clause (i) [amending section 4005(e) of Pub. L. 100-
203, set out above] shall apply with respect to applications for grants 
under the Rural Health Care Transition Grant Program described in 
section 4005(e) of the Omnibus Budget Reconciliation Act of 1987 [Pub. 
L. 100-203] submitted on or after October 1, 1989, except that the 
amendments made by subclauses (V) and (VII) of such clause shall take 
effect on the date of the enactment of this Act [Dec. 19, 1989].'']


                     Reporting Hospital Information

    Section 4007 of Pub. L. 100-203, as amended by Pub. L. 100-360, 
title IV, Sec. 411(b)(6), July 1, 1988, 102 Stat. 770; Pub. L. 100-485, 
title VI, Sec. 608(d)(18)(D), Oct. 13, 1988, 102 Stat. 2419, provided 
that:
    ``(a) Development of Data Base.--The Secretary of Health and Human 
Services (in this section referred to as the `Secretary') shall develop 
and place into effect not later than June 1, 1989, a data base of the 
operating costs of inpatient hospital services with respect to all 
hospitals under title XVIII of the Social Security Act [42 U.S.C. 1395 
et seq.], which data base shall be updated at least once every quarter 
(and maintained for the 12-month period preceding any such update). The 
data base under this subsection may include data from preliminary cost 
reports (but the Secretary shall make available an updated analysis of 
the differences between preliminary and settled cost reports).
    ``(b) [Amended subsec. (f) of this section and enacted provisions 
set out as an Effective Date of 1987 Amendment note above.]
    ``(c) Demonstration Project.--
        ``(1) The Secretary of Health and Human Services shall provide 
    for a demonstration project to develop, and determine the costs and 
    benefits of establishing a uniform system for the reporting by 
    medicare participating hospitals of balance sheet and information 
    described in paragraph (2). In conducting the project, the Secretary 
    shall require hospitals in at least 2 States, one of which maintains 
    a uniform hospital reporting system, to report such information 
    based on standard information established by the Secretary.
        ``(2) The information described in this paragraph is as follows:
            ``(A) Hospital discharges (classified by class of primary 
        payer).
            ``(B) Patient days (classified by class of primary payer).
            ``(C) Licensed beds, staffed beds, and occupancy.
            ``(D) Inpatient charges and revenues (classified by class of 
        primary payer).
            ``(E) Outpatient charges and revenues (classified by class 
        of primary payer).
            ``(F) Inpatient and outpatient hospital expenses (by cost-
        center classified for operating and capital).
            ``(G) Reasonable costs.
            ``(H) Other income.
            ``(I) Bad debt and charity care.
            ``(J) Capital acquisitions.
            ``(K) Capital assets.
    The Secretary shall develop a definition of `outpatient visit' for 
    purposes of reporting hospital information.
        ``(3) The Secretary shall develop the system under subsection 
    (c) in a manner so as--
            ``(A) to facilitate the submittal of the information in the 
        report in an electronic form, and
            ``(B) to be compatible with the needs of the medicare 
        prospective payment system.
        ``(4) The Secretary shall prepare and submit, to the Prospective 
    Payment Assessment Commission, the Comptroller General, the 
    Committee on Ways and Means of the House of Representatives, and the 
    Committee on Finance of the Senate, by not later than 45 days after 
    the end of each calendar quarter, data collected under the system.
        ``(5) In paragraph (2):
            ``(A) The term `bad debt and charity care' has such meaning 
        as the Secretary establishes.
            ``(B) The term `class' means, with respect to payers at 
        least, the programs under this title XVIII of the Social 
        Security Act [this subchapter], a State plan approved under 
        title XIX of such Act [subchapter XIX of this chapter], other 
        third party-payers, and other persons (including self-paying 
        individuals).
        ``(6) The Secretary shall set aside at least a total of 
    $3,000,000 for fiscal years 1988, 1989, and 1990 from existing 
    research funds or from operations funds to develop the format, 
    according to paragraph (1) and for data collection and analysis, but 
    total funds shall not exceed $15,000,000.
        ``(7) The Comptroller General shall analyze the adequacy of the 
    existing system for reporting of hospital information and the costs 
    and benefits of data reporting under the demonstration system and 
    will recommend improvements in hospital data collection and in 
    analysis and display of data in support of policy making.
    ``(d) Consultation.--The Secretary shall consult representatives of 
the hospital industry in carrying out the provisions of this section.''


                  Hospital Outlier Payments and Policy

    Section 4008(d) of Pub. L. 100-203, as amended by Pub. L. 100-360, 
title IV, Sec. 411(b)(7), July 1, 1988, 102 Stat. 771, provided that:
    ``(1) Increase in outlier payments for burn center drgs.--
        ``(A) In general.--For discharges classified in diagnosis-
    related groups relating to burn cases and occurring on or after 
    April 1, 1988, and before October 1, 1989, the marginal cost of care 
    permitted by the Secretary of Health and Human Services under 
    section 1886(d)(5)(A)(iii) of the Social Security Act [subsec. 
    (d)(5)(A)(iii) of this section] shall be 90 percent of the 
    appropriate per diem cost of care or 90 percent of the cost for cost 
    outliers.
        ``(B) Budget neutrality.--Subparagraph (A) shall be implemented 
    in a manner that ensures that total payments under section 1886(d) 
    of the Social Security Act are not increased or decreased by reason 
    of the adjustments required by such subparagraph.
    ``(2) Limitation on changes in outlier regulations.--
        ``(A) In general.--Notwithstanding any other provision of law, 
    except as required to implement specific provisions required under 
    statute, the Secretary of Health and Human Services is not 
    authorized to issue in final form, after the date of the enactment 
    of this Act [Dec. 22, 1987] and before September 1, 1988, any final 
    regulation which changes the method of payment for outlier cases 
    under section 1886(d)(5)(A) of the Social Security Act [subsec. 
    (d)(5)(A) of this section].
        ``(B) Propac report.--The chairman of the Prospective Payment 
    Assessment Commission shall report to the Congress and the Secretary 
    of Health and Human Services, by not later than June 1, 1988, on the 
    method of payment for outlier cases under such section and providing 
    more adequate and appropriate payments with respect to burn outlier 
    cases.
    ``(3) Report on outlier payments.--The Secretary of Health and Human 
Services shall include in the annual report submitted to the Congress 
pursuant to section 1875(b) of the Social Security Act [section 
1395ll(b) of this title] a comparison with respect to hospitals located 
in an urban area and hospitals located in a rural area in the amount of 
reductions under section 1886(d)(3)(B) of the Social Security Act 
[subsec. (d)(3)(B) of this section] and additional payments under 
section 1886(d)(5)(A) of such Act.''


                       ProPAC Studies and Reports

    Section 4009(h) of Pub. L. 100-203 provided that:
    ``(1) Propac reports on study of drg rates for hospitals in rural 
and urban areas.--The Prospective Payment Assessment Commission shall 
evaluate the study conducted by the Secretary of Health and Human 
Services pursuant to section 603(a)(2)(C)(i) of the Social Security 
Amendments of 1983 [section 603(a)(2)(C)(i) of Pub. L. 98-21, set out 
below] (relating to the feasibility, impact, and desirability of 
eliminating or phasing out separate urban and rural DRG prospective 
payment rates) and report its conclusions and recommendations to the 
Congress not later than March 1, 1988.
    ``(2) Propac report on separate urban payment rates.--The 
Prospective Payment Assessment Commission shall evaluate the 
desirability of maintaining separate DRG prospective payment rates for 
hospitals located in large urban areas (as defined in section 
1886(d)(2)(D)) of the Social Security Act [subsec. (d)(2)(D) of this 
section]) and in other urban areas, and shall report to Congress on such 
evaluation not later than January 1, 1989.
    ``(3) Report on adjustment for non-labor costs.--The Prospective 
Payment Assessment Commission shall perform an analysis to determine the 
feasibility and appropriateness of adjusting the non-wage-related 
portion of the adjusted average standardized amounts under section 
1886(d)(3) of the Social Security Act [subsec. (d)(3) of this section] 
based on area differences in hospitals' costs (other than wage-related 
costs) and input prices. The Commission shall report to the Congress on 
such analysis by not later than October 1, 1989.''


               Special Rule for Urban Areas in New England

    Section 4009(i) of Pub. L. 100-203, as amended by Pub. L. 100-360, 
title IV, Sec. 411(b)(8)(C), July 1, 1988, 102 Stat. 772, provided that: 
``In the case of urban areas in New England, the Secretary of Health and 
Human Services shall apply the second sentence of section 1886(d)(2)(D) 
of the Social Security Act [subsec. (d)(2)(D) of this section], as 
amended by section 4002(b) of this subtitle, as though 970,000 were 
substituted for 1,000,000.''


          Rural Health Medical Education Demonstration Project

    Section 4038 of Pub. L. 100-203, as amended by Pub. L. 101-239, 
title VI, Sec. 6216, Dec. 19, 1989, 103 Stat. 2253, provided that:
    ``(a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the `Secretary') shall enter into agreements 
with 10 sponsoring hospitals submitting applications under this 
subsection to conduct demonstration projects to assist resident 
physicians in developing field clinical experience in rural areas.
    ``(b) Nature of Project.--Under a demonstration project conducted 
under subsection (a), a sponsoring hospital entering into an agreement 
with the Secretary under such subsection shall enter into arrangements 
with a small rural hospital to provide to such rural hospital, for a 
period of one to three months of training, physicians (in such number as 
the agreement under subsection (a) may provide) who have completed one 
year of residency training.
    ``(c) Selection.--(1) In selecting from among applications submitted 
under subsection (a), the Secretary shall ensure that four small rural 
hospitals located in different counties participate in the demonstration 
project and that--
        ``(A) two of such hospitals are located in rural counties of 
    more than 2,700 square miles (one of which is east of the 
    Mississippi River and one of which is west of such river); and
        ``(B) two of such hospitals are located in rural counties with 
    (as determined by the Secretary) a severe shortage of physicians 
    (one of which is east of the Mississippi River and one of which is 
    west of such river).
    ``(2) The provisions of paragraph (1) shall not apply with respect 
to applications submitted as a result of amendments made by section 6216 
of the Omnibus Budget Reconciliation Act of 1989 [Pub. L. 101-239, 
amending this note].
    ``(d) Clarification of Payment.--For purposes of section 1886 of the 
Social Security Act [this section]--
        ``(1) with respect to subsection (d)(5)(B) of such section, any 
    resident physician participating in the project under subsection (a) 
    for any part of a year shall be treated as if he or she were working 
    at the appropriate sponsoring hospital with an agreement under 
    subsection (a) on September 1 of such year (and shall not be treated 
    as if working at the small rural hospital); and
        ``(2) with respect to subsection (h) of such section, the 
    payment amount permitted under such subsection for a sponsoring 
    hospital with an agreement under subsection (a) shall be increased 
    (for the duration of the project only) by an amount equal to the 
    amount of any direct graduate medical education costs (as defined in 
    paragraph (5) of such subsection (h)) incurred by such hospital in 
    supervising the education and training activities under a project 
    under subsection (a).
    ``(e) Duration of Project.--Each demonstration project under 
subsection (a) shall be commenced not later than six months after the 
date of enactment of this Act [Dec. 22, 1987] (or the date of the 
enactment of the Omnibus Budget Reconciliation Act of 1989 [Dec. 19, 
1989], in the case of a project conducted as a result of the amendments 
made by section 6216 of such Act [Pub. L. 101-239, amending this note]) 
and shall be conducted for a period of three years.
    ``(f) Definition.--In this section, the term `sponsoring hospital' 
means a hospital that receives payments under sections 1886(d)(5)(B) and 
1886(h) of the Social Security Act [subsecs. (d)(5)(B) and (h) of this 
section].''


   Prohibition on Policy by Secretary of Health and Human Services To 
        Reduce Expenditures in Fiscal Years 1989, 1990, and 1991

    Section 4039(d) of Pub. L. 100-203, as amended by Pub. L. 100-360, 
title IV, Sec. 426(e), July 1, 1988, 102 Stat. 814; Pub. L. 101-239, 
title VI, Sec. 6207(b), Dec. 19, 1989, 103 Stat. 2245, provided that: 
``Notwithstanding any other provision of law, except as required to 
implement specific provisions required under statute, the Secretary of 
Health and Human Services is not authorized to issue in final form, 
after the date of the enactment of this Act [Dec. 22, 1987] and before 
October 15, 1990, any regulation, instruction, or other policy which is 
estimated by the Secretary to result in a net reduction in expenditures 
under title XVIII of the Social Security Act [this subchapter] in fiscal 
year 1989 or in fiscal year 1990 or in fiscal year 1991 of more than 
$50,000,000.''


 Temporary Extension of Payment Policies for Inpatient Hospital Services

    Pub. L. 100-119, title I, Sec. 107(a)(1), Sept. 29, 1987, 101 Stat. 
782, as amended by Pub. L. 100-203, title IV, Sec. 4002(f)(2), Dec. 22, 
1987, 101 Stat. 1330-45, provided that: ``Notwithstanding any other 
provision of law, with respect to payment for inpatient hospital 
services under section 1886 of the Social Security Act [this section]:
        ``(A) Temporary freeze in pps hospital rates.--For purposes of 
    subsection (d) of such section for discharges occurring during the 
    period beginning on October 1, 1987, and ending on November 20, 1987 
    (in this paragraph referred to as the `extension period'), the 
    applicable percentage increase under subsection (b)(3)(B) of such 
    section with respect to fiscal year 1988 is deemed to be 0 percent.
        ``(B) Temporary freeze in payment basis.--
            ``(i) Extension of blended drg rate.--For purposes of 
        subsection (d)(1) of such section, the `applicable combined 
        adjusted DRG prospective payment rate' for discharges 
        occurring--
                ``(I) during the extension period is the rate specified 
            in subsection (d)(1)(D)(ii) of such section, or
                ``(II) after such period is the national adjusted 
            prospective payment rate determined under subsection (d)(3) 
            of such section.
            ``(ii) Extension of hospital-specific payment.--For the 
        first 51 days of a hospital cost reporting period beginning 
        during fiscal year 1988, payment shall be made under clause (ii) 
        (rather than clause (iii)) of subsection (d)(1)(A) of such 
        section (subject to clause (i) of this subparagraph), the target 
        percentage and DRG percentage shall be those specified in 
        subsection (d)(1)(C)(iv) of such section, and the applicable 
        percentage increase in a hospital's target amount shall be 
        deemed to be 0 percent.
        ``(C) Temporary freeze in amounts of payment for capital.--For 
    payments attributable to portions of cost reporting periods 
    occurring during the extension period, the percent specified in 
    subsection (g)(3)(A)(ii) of such section is deemed to be 3.5 
    percent.
        ``(D) Temporary freeze in return on equity reductions.--For the 
    first 51 days of a cost reporting period beginning during fiscal 
    year 1988, subsection (g)(2) of such section shall be applied as 
    though the applicable percentage were 75 percent.
        ``(E) Temporary freeze in payments rates for pps-exempt 
    hospitals.--For purposes of payment under subsection (b) of such 
    section for cost reporting periods beginning during fiscal year 
    1988, with respect to the first 51 days of such a period the 
    applicable percentage increase under paragraph (3)(B) of such 
    subsection is deemed to be 0 percent.''
    [Section 4002(f)(2) of Pub. L. 100-203 provided that the amendment 
of section 107(a)(1) of Pub. L. 100-119, set out above, by section 
4002(f)(2) of Pub. L. 100-203 is effective as of Sept. 29, 1987.]


  Freezing Certain Changes in Medicare Payment Regulations and Policies

    Pub. L. 100-119, title I, Sec. 107(b), Sept. 29, 1987, 101 Stat. 
783, provided that:
    ``(1) In general.--Notwithstanding any other provision of law, the 
Secretary of Health and Human Services is not authorized to issue after 
September 18, 1987, and before November 21, 1987--
        ``(A) any final regulation that changes the policy with respect 
    to payment under title XVIII of the Social Security Act [this 
    subchapter] to providers of service for reasonable costs relating to 
    unrecovered costs associated with unpaid deductible and coinsurance 
    amounts incurred under such title;
        ``(B) any final regulation, instruction, or other policy change 
    which is primarily intended to have the effect of slowing down 
    claims processing, or delaying payment of claims, under such title; 
    or
        ``(C) any final regulation that changes the policy under such 
    title with respect to payment for a return on equity capital for 
    outpatient hospital services.
The final regulation of the Health Care Financing Administration 
published on September 1, 1987 (52 Federal Register 32920) and relating 
to changes to the return on equity capital provisions for outpatient 
hospital services is void and of no effect.
    ``(2) Other cost savings policies.--Notwithstanding any other 
provision of law, except as required to implement specific provisions 
required under statute, the Secretary of Health and Human Services is 
not authorized to issue in final form, after September 18, 1987, and 
before November 21, 1987, any regulation, instruction, or other policy 
which is estimated by the Secretary to result in a net reduction in 
expenditures under title XVIII of the Social Security Act in fiscal year 
1988 of more than $50,000,000. Any regulation, instruction, or policy 
which is issued in violation of this paragraph is void and of no effect.
    ``(3) Exception.--Paragraphs (1) and (2) shall not be construed to 
apply to any regulation, instruction, or policy required to implement 
the amendment made by section 9311(a) of the Omnibus Budget 
Reconciliation Act of 1986 [section 9311(a) of Pub. L. 99-509, which 
amended section 1395g of this title] (relating to periodic interim 
payments).''


         Maintaining Current Outlier Policy in Fiscal Year 1987

    Section 9302(b)(3) of Pub. L. 99-509 provided that: ``For payments 
made under section 1886(d) of the Social Security Act [subsec. (d) of 
this section] for discharges occurring in fiscal year 1987--
        ``(A) the proportions under paragraph (3)(B) for hospitals 
    located in urban and rural areas shall be established at such levels 
    as produce the same total dollar reduction under such paragraph as 
    if this section had not been enacted; and
        ``(B) the thresholds and standards used for making additional 
    payments under paragraph (5) of such section shall be the same as 
    those in effect as of October 1, 1986.''


          Extension of Regional Referral Center Classification

    Section 6003(d) of Pub. L. 101-239 provided that: ``Any hospital 
that is classified as a regional referral center under section 
1886(d)(5)(C) of the Social Security Act [subsec. (d)(5)(C) of this 
section] as of September 30, 1989, including a hospital so classified as 
a result of section 9302(d)(2) of the Omnibus Budget Reconciliation Act 
of 1986 [Pub. L. 99-509, set out below], shall continue to be classified 
as a regional referral center for cost reporting periods beginning on or 
after October 1, 1989, and before October 1, 1992.''
    Section 9302(d)(2) of Pub. L. 99-509 provided that: ``Any hospital 
that is classified as a regional referral center under section 
1886(d)(5)(C)(i) of the Social Security Act [subsec. (d)(5)(C)(i) of 
this section] on the date of the enactment of this Act [Oct. 21, 1986] 
shall continue to be classified as a regional referral center for cost 
reporting periods beginning on or after October 1, 1986, and before 
October 1, 1989.''


                      Budget-Neutral Implementation

    Section 9302(d)(3) of Pub. L. 99-509 provided that: ``Paragraph (2) 
[set out as a note above] and the amendment made by paragraph (1)(A) 
[amending this section] shall be implemented in a manner that ensures 
that total payments under section 1886 of the Social Security Act [this 
section] are not increased or decreased by reason of the classifications 
required by such paragraph or amendment.''


                        Promulgation of New Rate

    Section 9302(f) of Pub. L. 99-509 provided that: ``The Secretary of 
Health and Human Services shall provide, within 30 days after the date 
of the enactment of this Act [Oct. 21, 1986], for the publication of the 
payments rates that will apply under section 1886 of the Social Security 
Act [this section], for discharges occurring on or after October 1, 
1986, taking into account the amendments made by this section [amending 
this section], without regard to the provisions of chapter 5 of title 5, 
United States Code.''


                   Miscellaneous Accounting Provision

    Section 9307(d) of Pub. L. 99-509, as amended by Pub. L. 100-203, 
title IV, Sec. 4008(e), Dec. 22, 1987, 101 Stat. 1330-56, provided that: 
``Notwithstanding any other provision of law, for purposes of section 
1886(d)(1)(A) of the Social Security Act [subsec. (d)(1)(A) of this 
section], in the case of a hospital that--
        ``(1) had a cost reporting period beginning on September 28, 29, 
    or 30 of 1985,
        ``(2) is located in a State in which inpatient hospital services 
    were paid in fiscal year 1985 pursuant to a Statewide demonstration 
    project under section 402 of the Social Security Amendments of 1967 
    [section 402 of Pub. L. 90-248, enacting section 1395b-1 of this 
    title and amending section 1395ll of this title] and section 222 of 
    the Social Security Amendments of 1972 [section 222 of Pub. L. 92-
    603, amending sections 1395b-1 and 1395ll of this title and enacting 
    provisions set out as a note under section 1395b-1 of this title], 
    and
        ``(3) elects, by notice to the Secretary of Health and Human 
    Services by not later than April 1, 1988, to have this subsection 
    apply,
during the first 7 months of such cost reporting period the `target 
percentage' shall be 75 percent and the `DRG percentage' shall be 25 
percent, and during the remaining 5 months of such period the `target 
percentage' and the `DRG percentage' shall each be 50 percent.''
    [Section 4008(e) of Pub. L. 100-203 provided that the amendment of 
section 9307(d) of Pub. L. 99-509, set out above, by section 4008(e) of 
Pub. L. 100-203 is effective as if included in the enactment of Pub. L. 
99-509.]


                Treatment of Capital-Related Regulations

    Section 9321(c) of Pub. L. 99-509, as amended by Pub. L. 100-119, 
title I, Sec. 107(a)(2), Sept. 29, 1987, 101 Stat. 783; Pub. L. 100-203, 
title IV, Sec. 4009(j)(6)(D), (F), Dec. 22, 1987, 101 Stat. 1330-59, 
provided that:
    ``(1) Prohibition of issuance of final regulations on capital-
related costs as part of payment for operating costs before november 21, 
1987.--Notwithstanding any other provision of law (except as provided in 
paragraph (3)), the Secretary of Health and Human Services may not 
issue, in final form, after September 1, 1986, and before November 21, 
1987, any regulation that changes the methodology for computing the 
amount of payment for capital-related costs (as defined in paragraph 
(4)) for inpatient hospital services under part A of title XVIII of the 
Social Security Act [part A of this subchapter]. Any regulation 
published in violation of the previous sentence is void and of no 
effect.
    ``(2) Not including capital-related regulations in budget 
baseline.--Any reference in law to a regulation issued in final form or 
proposed by the Health Care Financing Administration pursuant to 
sections 1886(b)(3)(B), 1886(d)(3)(A), and 1886(e)(4) of the Social 
Security Act [subsecs. (b)(3)(B), (d)(3)(A), and (e)(4) of this section] 
shall not include any regulation issued or proposed with respect to 
capital-related costs (as defined in paragraph (4)).
    ``(3) Exception.--Paragraph (1) shall not apply to any regulation 
issued for the sole purpose of implementing section 1861(v)(1)(O) and 
1886(g)(2) of the Social Security Act [section 1395x(v)(1)(O) of this 
title and subsec. (g)(2) of this section] and section 1886(g)(3)(A) and 
(B) of the Social Security Act [subsec. (g)(3)(A) and (B) of this 
section] (as amended by section 9303(a) of this Act).
    ``(4) Capital-related costs defined.--In this subsection, the term 
`capital-related costs' means those capital-related costs that are 
specifically excluded, under the second sentence of section 1886(a)(4) 
of the Social Security Act [subsec. (a)(4) of this section], from the 
term `operating costs of inpatient hospital services' (as defined in 
that section) for cost reporting periods beginning prior to October 1, 
1987.''


     Limitation on Authority To Issue Certain Final Regulations and 
            Instructions Relating to Hospitals or Physicians

    Section 9321(d) of Pub. L. 99-509 provided that: ``Notwithstanding 
any other provision of law, except as required to implement specific 
provisions required under statute and except as provided under 
subsection (c) [set out above] with respect to a regulation described in 
that subsection, the Secretary of Health and Human Services is not 
authorized to issue in final form after the date of the enactment of 
this Act [Oct. 21, 1986] and before September 1, 1987, any regulation, 
instruction, or other policy which is estimated by the Secretary to 
result in a net reduction in expenditures under title XVIII of the 
Social Security Act [this subchapter] in fiscal year 1988 of more than 
$50,000,000, and which relates to hospitals or physicians.''


Study of Methodology for Area Wage Adjustment for Central Cities; Report 
                               to Congress

    Section 9103(b) of Pub. L. 99-272 provided that:
    ``(1) The Secretary of Health and Human Services, in consultation 
with the Prospective Payment Assessment Commission, shall collect 
information and shall develop one or more methodologies to permit the 
adjustment of the wage indices used for purposes of sections 
1886(d)(2)(C)(ii), 1886(d)(2)(H), and 1886(d)(3)(E) of the Social 
Security Act [subsec. (d)(2)(C)(ii), (H), and (3)(E) of this section], 
in order to more accurately reflect hospital labor markets, by taking 
into account variations in wages and wage-related costs between the 
central city portion of urban areas and other parts of urban areas.
    ``(2) The Secretary shall report to Congress on the information 
collected and the methodologies developed under paragraph (1) not later 
than May 1, 1987. The report shall include a recommendation as to the 
feasibility and desirability of implementing such methodologies.''


  Continuation of Medicare Reimbursement Waivers for Certain Hospitals 
     Participating in Regional Hospital Reimbursement Demonstrations

    Section 9108 of Pub. L. 99-272 provided that:
    ``(a) Continuation of Waivers.--A hospital reimbursement control 
system which, on January 1, 1985, was carrying out a demonstration under 
a contract which had been approved by the Secretary of Health and Human 
Services pursuant to section 222(a) of the Social Security Amendments of 
1972 [section 222(a) of Pub. L. 92-603, set out as a note under section 
1395b-1 of this title], or under section 402 of the Social Security 
Amendments of 1967 (as amended by section 222(b) of the Social Security 
Amendments of 1972) [section 1395b-1 of this title], shall be deemed to 
meet the requirements of section 1886(c)(1)(A) of the Social Security 
Act [subsec. (c)(1)(A) of this section] if such system applies--
        ``(1) to substantially all non-Federal acute care hospitals (as 
    defined by the Secretary) in the geographic area served by such 
    system on January 1, 1985, and
        ``(2) to the review of at least 75 percent of--
            ``(A) all revenues or expenses in such geographic area for 
        inpatient hospital services, and
            ``(B) revenues or expenses in such geographic area for 
        inpatient hospital services provided under the State's plan 
        approved under title XIX [subchapter XIX of this chapter].
    ``(b) Approval.--In the case of a hospital cost control system 
described in subsection (a), the requirements of section 1886(c) of the 
Social Security Act [subsec. (c) of this section] which apply to States 
shall instead apply to such system and, for such purposes, any reference 
to a State is deemed a reference to such system.
    ``(c) Effective Date.--This section shall become effective on the 
date of the enactment of this Act [Apr. 7, 1986].''


           Information on Impact of PPS Payments on Hospitals

    Section 9114 of Pub. L. 99-272 provided that:
    ``(a) Disclosure of Information.--The Secretary of Health and Human 
Services shall make available to the Prospective Payment Assessment 
Commission, the Congressional Budget Office, the Comptroller General, 
and the Congressional Research Service the most current information on 
the payments being made under section 1886 of the Social Security Act 
[this section] to individual hospitals. Such information shall be made 
available in a manner that permits examination of the impact of such 
section on hospitals.
    ``(b) Confidentiality.--Information disclosed under subsection (a) 
shall be treated as confidential and shall not be subject to further 
disclosure in a manner that permits the identification of individual 
hospitals.''


       Special Rules for Implementation of Hospital Reimbursement

    Section 9115 of Pub. L. 99-272 provided that:
    ``(a) Waiver of Paperwork Reduction.--Chapter 35 of title 44, United 
States Code, shall not apply to information required for purposes of 
carrying out this subpart and implementing the amendments made by this 
subpart [subpart A (Secs. 9101-9115) of part 1 of subtitle A of title IX 
of Pub. L. 99-272, see Tables for classification].
    ``(b) Use of Interim Final Regulations.--The Secretary of Health and 
Human Services shall issue such regulations (on an interim or other 
basis) as may be necessary to implement this subpart and the amendments 
made by this subpart.''


  Appointment of Additional Members to Prospective Payment Assessment 
                               Commission

    Section 9127(b) of Pub. L. 99-272, as amended by Pub. L. 99-514, 
title XVIII, Sec. 1895(b)(8), Oct. 22, 1986, 100 Stat. 2933, provided 
that: ``The Director of the Congressional Office of Technology 
Assessment shall appoint the two additional members of the Prospective 
Payment Assessment Commission, as required by the amendment made by 
subsection (a) [amending this section], no later than 60 days after the 
date of the enactment of this Act [Apr. 7, 1986], for terms of three 
years, except that the Director may provide initially for such terms as 
will insure that (on a continuing basis) the terms of no more than eight 
members will expire in any one year.''


 Studies by Secretary; GAO Study; Report on Uniformity of Approved FTE 
   Resident Amounts; Study on Foreign Medical Graduates; Establishing 
            Physician Identifier System; Paperwork Reduction

    Section 9202(c)-(h) of Pub. L. 99-272, as amended by Pub. L. 100-
203, title IV, Sec. 4085(f), Dec. 22, 1987, 101 Stat. 1330-131; Pub. L. 
101-508, title IV, Sec. 4118(i)(2), Nov. 5, 1990, 104 Stat. 1388-70, 
provided that:
    ``(c) Studies by Secretary.--(1) The Secretary of Health and Human 
Services shall conduct a study with respect to approved educational 
activities relating to nursing and other health professions for which 
reimbursement is made to hospitals under title XVIII of the Social 
Security Act [this subchapter]. The study shall address--
        ``(A) the types and numbers of such programs, and number of 
    students supported or trained under each program;
        ``(B) the fiscal and administrative relationships between the 
    hospitals involved and the schools with which the programs and 
    students are affiliated; and
        ``(C) the types and amounts of expenses of such programs for 
    which reimbursement is made, and the financial and other 
    contributions which accrue to the hospital as a consequence of 
    having such programs.
The Secretary shall report the results of such study to the Committee on 
Finance of the Senate and the Committees on Ways and Means and Energy 
and Commerce of the House of Representatives prior to December 31, 1987.
    ``(2) The Secretary shall conduct a separate study of the 
advisability of continuing or terminating the exception under section 
1886(h)(5)(F)(ii) of the Social Security Act [subsec. (h)(5)(F)(ii) of 
this section] for geriatric residencies and fellowships, and of 
expanding such exception to cover other educational activities, 
particularly those which are necessary to meet the projected health care 
needs of Medicare beneficiaries. Such study shall also examine the 
adequacy of the supply of faculty in the field of geriatrics. The 
Secretary shall report the results of such study to the committees 
described in paragraph (1) prior to July 1, 1990.
    ``(d) GAO Study.--(1) The Comptroller General shall conduct a study 
of the variation in the amounts of payments made under title XVIII of 
the Social Security Act [this subchapter] with respect to patients in 
different teaching hospital settings and in the amounts of such payments 
which are made with respect to patients who are treated in teaching and 
nonteaching hospital settings. Such study shall identify the components 
of such payments (including payments with respect to inpatient hospital 
services, physicians' services, and capital costs, and, in the case of 
teaching hospital patients, payments with respect to direct and indirect 
teaching costs) and shall account, to the extent feasible, for any 
variations in the amounts of the payment components between teaching and 
nonteaching settings and among different teaching settings.
    ``(2) In carrying out such study, the Comptroller General may 
utilize a sample of hospital patients and any other data sources which 
he deems appropriate, and shall, to the extent feasible, control for 
differences in severity of illness levels, area wage levels, levels of 
physician reasonable charges for like services and procedures, and for 
other factors which could affect the comparability of patients and of 
payments between teaching and nonteaching settings and among teaching 
settings. The information obtained in the study shall be coordinated 
with the information obtained in conducting the study of teaching 
physicians' services under section 2307(c) of the Deficit Reduction Act 
of 1984 [section 2307(c) of Pub. L. 98-369, set out as a note under 
section 1395u of this title].
    ``(3) The Comptroller General shall report the results of the study 
to the committees described in subsection (c)(1) prior to December 31, 
1987.
    ``(e) Report on Uniformity of Approved FTE Resident Amounts.--The 
Secretary of Health and Human Services shall report to the committees 
described in subsection (c)(1), not later than December 31, 1987, on 
whether section 1886(h) of the Social Security Act [subsec. (h) of this 
section] should be revised to provide for greater uniformity in the 
approved FTE resident amounts established under paragraph (2) of that 
section, and, if so, how such revisions should be implemented.
    ``(f) Study on Foreign Medical Graduates.--The Secretary of Health 
and Human Services shall study, and report to the committees described 
in subsection (c)(1), not later than December 31, 1987, respecting the 
use of physicians who are foreign medical graduates (within the meaning 
of section 1886(h)(5)(D) of the Social Security Act [subsec. (h)(5)(D) 
of this section]) in the provision of health care services (particularly 
inpatient and outpatient hospital services) to medicare beneficiaries. 
Such study shall evaluate--
        ``(1) the types of services provided;
        ``(2) the cost of providing such services, relative to the cost 
    of other physicians providing the services or other approaches to 
    providing the services;
        ``(3) any deficiencies in the quality of the services provided, 
    and methods of assuring the quality of such services; and
        ``(4) the impact on costs of and access to services if medicare 
    payment for hospitals' costs of graduate medical education of 
    foreign medical graduates were phased out.
    ``[(g) Repealed. Pub. L. 101-508, title IV, Sec. 4118(i)(2), Nov. 5, 
1990, 104 Stat. 1388-70.]
    ``(h) Paperwork Reduction.--Chapter 35 of title 44, United States 
Code, shall not apply to information required for purposes of carrying 
out this section and the amendments made by this section [amending this 
section and section 1395x of this title and enacting notes set out under 
this section and section 1395x of this title].''


            Special Treatment of States Formerly Under Waiver

    Section 9202(j) of Pub. L. 99-272, as amended by Pub. L. 99-514, 
title XVIII, Sec. 1895(b)(10), Oct. 22, 1986, 100 Stat. 2933, provided 
that: ``In the case of a hospital in a State that has had a waiver 
approved under section 1886(c) of the Social Security Act [subsec. (c) 
of this section] or section 402 of the Social Security Amendments of 
1967 [section 1395b-1 of this title], for cost reporting periods 
beginning on or after January 1, 1986, if the waiver is terminated--
        ``(1) the Secretary of Health and Human Services shall permit 
    the hospital to change the method by which it allocates 
    administrative and general costs to the direct medical education 
    cost centers to the method specified in the medicare cost report;
        ``(2) the Secretary may make appropriate adjustments in the 
    regional adjusted DRG prospective payment rate (for the region in 
    which the State is located), based on the assumption that all 
    teaching hospitals in the State use the medicare cost report; and
        ``(3) the Secretary shall adjust the hospital-specific portion 
    of payment under section 1886(d) of such Act [subsec. (d) of this 
    section] for any such hospital that actually chooses to use the 
    medicare cost report.
The Secretary shall implement this subsection based on the best 
available data.''


 Moratorium on Laboratory Payment Demonstrations; Cooperation in Study; 
                           Report to Congress

    Section 9204 of Pub. L. 99-272, as amended by Pub. L. 99-509, title 
IX, Sec. 9339(e), Oct. 21, 1986, 100 Stat. 2037; Pub. L. 100-203, title 
IV, Sec. 4085(c), Dec. 22, 1987, 101 Stat. 1330-130; Pub. L. 100-647, 
title VIII, Sec. 8426, Nov. 10, 1988, 102 Stat. 3803, provided that:
    ``(a) Moratorium.--Prior to January 1, 1990, the Secretary of Health 
and Human Services shall not conduct any demonstration projects relating 
to competitive bidding as a method of purchasing laboratory services 
under title XVIII of the Social Security Act [this subchapter]. The 
Secretary may contract for the design of, and site selection for, such 
demonstration projects.
    ``(b) Cooperation in Study.--The Secretary of Health and Human 
Services and the Comptroller General shall assist representatives of 
clinical laboratories in the industry's conduct of a study to determine 
whether methods exist which are better than competitive bidding for 
purposes of utilizing competitive market forces in setting payment 
levels for laboratory services under title XVIII of the Social Security 
Act [this subchapter]. If such a study is conducted by the clinical 
laboratory industry, the Secretary and the Comptroller General shall 
comment on such study and submit such comments and the study to the 
Senate Committee on Finance and the House Committees on Ways and Means 
and Energy and Commerce.''


  Medicare Hospital and Physician Payment Provisions; Extension Period

    Pub. L. 99-107, Sec. 5, Sept. 30, 1985, 99 Stat. 479, as amended by 
Pub. L. 99-155, Sec. 2(d), Nov. 14, 1985, 99 Stat. 814; Pub. L. 99-181, 
Sec. 4, Dec. 13, 1985, 99 Stat. 1172; Pub. L. 99-189, Sec. 4, Dec. 18, 
1985, 99 Stat. 1184; Pub. L. 99-201, Sec. 2, Dec. 23, 1985, 99 Stat. 
1665; Pub. L. 99-272, title IX, Secs. 9101(a), 9301(a), Apr. 7, 1986, 
100 Stat. 153, 184, provided that:
    ``(a) Maintaining Existing Hospital Payment Rates.--Notwithstanding 
any other provision of law, the amount of payment under section 1886 of 
the Social Security Act [this section] for inpatient hospital services 
for discharges occurring (and cost reporting periods beginning) during 
the extension period (as defined in subsection (c)) shall be determined 
on the same basis as the amount of payment for such services for a 
discharge occurring on (or the cost reporting period beginning 
immediately on or before) September 30, 1985.
    ``(b) Maintaining Existing Payment Rates for Physicians' Services.--
Notwithstanding any other provision of law, the amount of payment under 
part B of title XVIII of the Social Security Act [part B of this 
subchapter] for physicians' services which are furnished during the 
extension period (as defined in subsection (c)) shall be determined on 
the same basis as the amount of payment for such services furnished on 
September 30, 1985, and the 15-month period, referred to in section 
1842(j)(1) of such Act [section 1395u(j)(1) of this title], shall be 
deemed to include the extension period.
    ``(c) Extension Period Defined.--
        ``(1) Hospital payments.--For purposes of subsection (a), the 
    term `extension period' means the period beginning on October 1, 
    1985, and ending on April 30, 1986.
        ``(2) Physician payments.--For purposes of subsection (b), the 
    term `extension period' means the period beginning on October 1, 
    1985, and ending on April 30, 1986.''
    [Amendment of section 5 of Pub. L. 99-107, set out above, by section 
9101(a) of Pub. l. 99-272 effective Mar. 15, 1986, see section 9101(d) 
of Pub. L. 99-272, set out above.]


Definition of Hospital Serving Significantly Disproportionate Number of 
Low-Income Patients or Patients Entitled to Hospital Insurance Benefits 
                  for Aged and Disabled; Identification

    Section 2315(h) of Pub. L. 98-369 provided that: ``The Secretary of 
Health and Human Services shall, prior to December 31, 1984--
        ``(1) develop and publish a definition of `hospitals that serve 
    a significantly disproportionate number of patients who have low 
    income or are entitled to benefits under part A' of title XVIII of 
    the Social Security Act [part A of this subchapter] for purposes of 
    section 1886(d)(5)(C)(i) of that Act [subsec. (d)(5)(C)(i) of this 
    section], and
        ``(2) identify those hospitals which meet such definition, and 
    make such identity available to the Committee on Ways and Means of 
    the House of Representatives and the Committee on Finance of the 
    Senate.''


     Prospective Payment Wage Index; Studies and Reports to Congress

    Section 2316 of Pub. L. 98-369, as amended by Pub. L. 99-272, title 
IX, Sec. 9103(a)(1), Apr. 7, 1986, 100 Stat. 156, provided that:
    ``(a) The Secretary of Health and Human Services, in consultation 
with the Secretary of Labor, shall conduct a study to develop an 
appropriate index for purposes of adjusting payment amounts under 
section 1886(d) of the Social Security Act [subsec. (d) of this section] 
to reflect area differences in average hospital wage levels, as required 
under paragraphs (2)(H) and (3)(E) of such section [subsec. (d)(2)(H) 
and (3)(E) of this section], taking into account wage differences of 
full time and part time workers. The Secretary of Health and Human 
Services shall report the results of such study to the Congress not 
later than 30 days after the date of the enactment of this Act [July 18, 
1984], including any changes which the Secretary determines to be 
necessary to provide for an appropriate index.
    ``(b) The Secretary shall adjust the payment amounts for hospitals 
for discharges occurring on or after May 1, 1986, to reflect the changes 
the Secretary has promulgated in final regulations (on September 3, 
1985) relating to the hospital wage index under section 1886(d)(3)(E) of 
the Social Security Act [subsec. (d)(3)(E) of this section]. For 
discharges occurring after September 30, 1986, the Secretary shall 
provide for such periodic adjustments in the appropriate wage index used 
under that section as may be necessary, taking into account changes in 
the wage levels and relative proportions of full-time and part-time 
workers.
    ``(c) The Secretary shall conduct a study and report to the Congress 
on proposed criteria under which, in the case of a hospital that 
demonstrates to the Secretary in a current fiscal year that the 
adjustment being made under paragraph (2)(H) or (3)(E) of section 
1886(d) of the Social Security Act [subsec. (d)(2)(H) or (3)(E) of this 
section] for that hospital's discharges in that fiscal year does not 
accurately reflect the wage levels in the labor market serving the 
hospital, the Secretary, to the extent he deems appropriate, would 
modify such adjustment for that hospital for discharges in the 
subsequent fiscal year to take into account a difference in payment 
amounts in that current fiscal year to the hospital that resulted from 
such inaccuracy.''
    [Section 9103(a)(2) of Pub. L. 99-272 provided that: ``The amendment 
made by paragraph (1) [amending this note] shall be effective as if it 
had been included in the Deficit Reduction Act of 1984 [Pub. L. 98-
369].'']


 Different Treatment of Capital-Projects-Related Costs Before and After 
 Implementation of System for Including Such Costs Under Prospectively 
                         Determined Payment Rate

    Section 601(a)(3) of Pub. L. 98-21 provided that: ``It is the intent 
of Congress that, in considering the implementation of a system for 
including capital-related costs under a prospectively determined payment 
rate for inpatient hospital services, costs related to capital projects 
for which expenditures are obligated on or after the effective date of 
the implementation of such a system, may or may not be distinguished and 
treated differently from costs of projects for which expenditures were 
obligated before such date.''


         New England Hospitals; Classification as Urban or Rural

    Section 601(g) of Pub. L. 98-21 provided that: ``In determining 
whether a hospital is in an urban or rural area for purposes of section 
1886(d) of the Social Security Act [subsec. (d) of this section], the 
Secretary of Health and Human Services shall classify any hospital 
located in New England as being located in an urban area if such 
hospital was classified as being located in an urban area under the 
Standard Metropolitan Statistical Area system of classification in 
effect in 1979.''


Reports, Experiments, and Demonstration Projects Related to Inclusion in 
   Prospective Payment Amounts of Inpatient Hospital Service Capital-
                              Related Costs

    Section 603(a) of title VI of Pub. L. 98-21, as amended by Pub. L. 
98-369, div. B, title III, Sec. 2317, July 18, 1984, 98 Stat. 1081; Pub. 
L. 99-509, title IX, Sec. 9305(i)(1), Oct. 21, 1986, 100 Stat. 1993; 
Pub. L. 104-66, title I, Sec. 1061(d), Dec. 21, 1995, 109 Stat. 720, 
directed Secretary of Health and Human Services to report to Congress 
within 18 months after Apr. 20, 1983, on legislation by which capital-
related costs associated with inpatient hospital services could be 
included within the prospective payment amounts computed under subsec. 
(d) of this section, further provided that the Secretary was to study 
and report to Congress on reimbursement of sole community hospitals 
based on variations in occupancy, on coordination of an information 
transfer between parts A and B of this subchapter, on treatment of 
uncompensated care costs and adjustments appropriate for large rural 
teaching hospitals, and on advisability of having hospitals make cost-
of-care information to certain patients, and further provided that the 
Secretary was to study and report to Congress on a method for including 
hospitals outside the 50 States and the District of Columbia under a 
prospective payment system.


  Inapplicability of Coordination of Federal Information Policy to the 
                        Collection of Information

    Section 101(b)(2)(B) of Pub. L. 97-248, as amended by Pub. L. 97-
448, title III, Sec. 309(a)(1), Jan. 12, 1983, 96 Stat. 2408, provided 
that: ``Chapter 35 of title 44, United States Code, shall not apply, 
until January 1, 1984, to collection of information and information 
collection requests which the Secretary of Health and Human Services 
determines to be necessary to carry out the amendments made by this 
section [amendments by section 101(a) of Pub. L. 97-248, enacting this 
section and amending section 1395x of this title].''

                  Section Referred to in Other Sections

    This section is referred to in sections 256b, 256e, 1320a-7, 1320a-
7a, 1395d, 1395e, 1395f, 1395g, 1395h, 1395i-4, 1395l, 1395n, 1395w-21, 
1395w-23, 1395x, 1395y, 1395cc, 1395mm, 1395nn, 1395oo, 1395rr, 1395tt, 
1395xx, 1395yy, 1395eee, 1395fff, 1395ggg, 1396r-4, 1397ee of this 
title; title 5 section 8904; title 8 sections 1182, 1369; title 10 
section 1101; title 26 section 119.
