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1 the aggregate, with cost centers similar in terms of size

2 and scale of operation, prevailing wage levels, nature, ex3 tent, and appropriate volume of the services furnished, and 4 other factors which have a substantial impact on hospital

5 costs. The Secretary shall provide procedures for appropriate

6 exceptions.

(2) The systems of reimbursement shall not permit 8 payment for costs which exceed 120 percent of the average 9 cost incurred by other institutions or agencies in the same

10 class, unless an exception has been allowed.

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(3) The Secretary shall, as classification and reimburse

12 ment systems methods are developed, but not later than two

13 years from enactment, submit appropriate legislative recom

14 mendations to the Congress.

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(d) The provisions of section 1861 (aa) (2), (3), 16 and (4) of the Social Security Act, 17

(1) shall apply for informational purposes for services furnished by a hospital before October 1, 1979,

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(2) shall be effective for fiscal years beginning

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(e) Notwithstanding any other provision of this Act,

23 where the Secretary has entered into a contract with a State,

24 as authorized under section 222 of Public Law 92-603 or

25 section 1533 (d) of the Public Health Service Act, to estab

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1 lish a reimbursement system for hospitals, hospital reim2 bursement in that State under titles XVIII and XIX shall

3 be based on that State system, if the Secretary finds that

(1) the State has mandated the reimbursement

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system and it applies to all hospitals in the State which have provider agreements under title XVIII or title

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XIX;

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(2) the system applies to all revenue sources for hospital services in the State;

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(3) all hospitals in the State with which there is a provider agreement conform to the accounting and uni

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form reporting requirements of section 1861 (aa) (1)
(A), and furnishes any appropriate reports that the
Secretary may require; and,

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(4) (A) based upon an annual evaluation of the

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1861 (aa) for the fiscal year following an annual evaluation are estimated to be less than payments would

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be under section 1861 (aa) or, (B) where a State that is unable to satisfy requirements of subparagraph (A) demonstrates to the satisfaction of the Secretary that total reimbursable inpatient hospital costs in the

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State are lower than would otherwise be payable under

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title XVIII and title XIX.

3. If the Secretary finds that any of the above conditions 4 in a State which previously met them have not been met 5 for a year the Secretary shall, after due notice, reimburse 6 hospitals in that State according to the provisions of this

7 Act unless he finds that unusual, justifiable and non

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8 recurring circumstances led to the failure to comply.

(f) (1) Section 1866 (a) (1) of the Social Security 10 Act is amended by inserting ", and” in place of the period 11 at the end of subparagraph (C), and by adding a subpara12 graph: “(D) not to increase amounts due from any indi13 vidual, organization, or agency in order to offset reductions 14 made under section 1861 (aa) in the amount paid, or ex

15 pected to be paid, under title XVIII.”.

16 (2) Section 1902 (a) (27) of the Social Security Act is 17 amended by deleting "and” at the end of subparagraph 18 (A), by inserting“, and” in place of the semicolon at the 19 end of subparagraph (B) and by adding a new subpara20 graph:

“(C) not to increase aniounts due from any individual 22 organization, or agency in order to offset reductions made 23 under section 1902 (a) (13) (D) in the amount paid, or ex24 pected to be paid under title XIX;"

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1.

(h) Section 1902 (a) (13) (D) is amended to read as

2 follows:

3.

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“(D) for payment of the reasonable cost of inpatient hospital services provided under the plan, applying the methods specified in section 1861 (v) and section

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1861 (aa), which are consistent with section 1122;

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and”.

8 PAYMENTS TO PROMOTE CLOSING AND CONVERSION OF

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UNDERUTILIZED FACILITIES

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SEC. 3. (a) Part A of title XI of the Social Security 11 Act is amended by adding at the end the following new

12; section:

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"PAYMENTS TO PROMOTE CLOSING AND CONVERSION OF

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UNDERUTILIZED FACILITIES

15 "SEC. 1132. (a) (1) (A) Before the end of the third 16 full month following the month in which this section is en17 acted, the Secretary shall establish a Hospital Transitional 18 Allowance Board (referred to in this section as the 'Board'). 19

The Board shall have five members, appointed by the Sec20 retary without regard to the provisions of title 5, United 21 States Code, governing appointments in the competitive 22 service, who are knowledgeable about hospital planning and 23 hospital operations. 24 "(B) Members of the Board shall be appointed for 25 three-year terms, except some initial members shall be ap

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1 pointed for shorter terms to permit staggered terms of office.

“(C) Members shall be entitled to per diem compen3 sation at rates fixed by the Secretary, but not more than

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4 the current per diem equivalent at the time the service in5 volved is rendered for grade GS-18 in section 5332 of title

6 5, United States Code.

7 “(D) The Secretary shall provide technical, secretarial, 8 clerical, and other assistance as the Board may need.

.“ (2) The Board shall receive, and act upon applications 10 by hospitals certified for participation (other than as 'emer11 gency hospitals’) under titles XVIII and XIX for transi

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“(1) The term 'transitional allowance' means an amount

15 which

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"(A) shall, solely by reason of this section, be included in a hospital's reasonable cost for purposes of calculating payments under the programs authorized by

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titles V, XVIII, and XIX, of this Act; and

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"(B) in accordance with this section, it is established by the Secretary for a hospital in recognition of a reimbursement detriment (as defined in paragraph (3)) experienced because of a qualified facility conversion (as defined in paragraph (2)'). “(2) . The term 'qualified facility conversion' means

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