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1 fare shall establish a system of procedural terminology, in

2 cluding definitions of the terms. The system shall be de3 veloped by the Health Care Financing Administration with

4 the advice of other large health care purchasers, representa

5 tives of professional groups and other interested parties. 6 In developing the system, the Health Care Financing 7 Administration shall consider among other things, the 8 experience of third parties in using existing terminology 9 systems in terms of: implications for administrative and 10 program costs; simplicity and lack of ambiguity; and the 11 degree of acceptance and use.


(b) Upon development of a proposed system of proce13 dural terminology and its approval by the Secretary of 14 Health, Education, and Welfare, it shall be published in

15 the Federal Register. Interested parties shall have not less

16 than six months in which to comment on the proposed sys

17 tem and to recommend relative values to the Secretary for 18 the procedures and services designated by the terms. Com19 ments and proposals shall be supported by information and 20 documentation specified by the Secretary. 21 (c) The good faith preparation of a relative value sched22 ule or its submission to the Secretary by an association of


23 health practitioners solely in response to a request of the

24 Secretary as authorized under this section shall not in itself

25 be considered a violation of any consent decree by which


1 an association has waived its right to make recommendations 2 concerning fees: Provided, That the proposed relative value 3 schedule shall not be disclosed to anyone other than those 4 persons actually preparing it or their counsel until it is made 5 public by the Secretary.


(d) The Health Care Financing Administration shall

7 review materials submitted under this section and shall

8 recommend that the Secretary. adopt a specific terminology

9 system and its relative values for use by carriers in calculat

10 ing reasonable charges under title XVIII of the Social

11 Security Act, but only after: 12

(1) Interested parties have been given an oppor13 tunity to comment and any comments have been

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(2) Statistical analyses have been conducted assessing the economic impact of the relative values on the physicians in various specialties, geographic areas and types of practice, and on the potential liability of the




program established by part B of title XVIII of the

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(3) It has been determined that the proposed terminology and related definitions are unambiguous, prac



tical, and easy to evaluate in actual clinical situations


and that the unit values assigned generally reflect the

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relative time and effort required to perform various


procedures and services.


(4) That the use of the proposed system will en


hance the administration of the Federal health care


financing programs.

6 (e) A system of terminology, definitions, and their 7 relative values, as approved by the Secretary, shall be pe8 riodically reviewed by him and may be modified. An ap9 proved system (as amended by any modification of the 10 Secretary) may subsequently be used by any organization

or person for purposes other than those of this Act. Nothing 12 in this section shall be considered to bar the Secretary from 13 adopting a uniform system of procedural terminology in


14 situations where a relative value schedule has not been

15 approved.




17 SEC. 20. (a) Section 1861 of the Social Security Act 18 is amended by adding after subsection (aa) (as added by 19 section 10 (b) of this Act) the following:

"Hospital Providers of Extended Care Services 21 “ (bb) (1) (A) Any hospital (other than a hospital 22 which has in effect a waiver of the requirement imposed by 23 subsection (e) (5)) which has an agreement under section 24 1866 may (subject to paragraph (2) ) enter into an agree25 ment with the Secretary under which its inpatient hospital


1 facilities may be used for the furnishing of services of the 2 type which, if furnished by a skilled nursing facility, would 3 constitute post-hospital extended care services. 4 “(B) (i) Notwithstanding any other provision of this 5 title, payment to any hospital for services furnished under


an agreement entered into under this subsection shall be

7 based upon the reasonable cost of the services as determined


8 under this subparagraph.

“(ü) The reasonable cost of the services will consist of 10 the reasonable cost of routine services and ancillary services. 11 The reasonable cost of routine services furnished during any


12 calendar year by a hospital under an agreement under this 13 · subsection shall equal the product of the number of patient14 days during the year for which the services were furnished 15 and the average reasonable cost per patient-day. The aver

age reasonable cost per patient-day shall be established as 17 the average rate per patient-day paid for routine services 18 during the previous calendar year under title XIX to skilled 19 nursing facilities located in the State in which the hospital is 20 located and which have agreements entered into under sec


tion 1902a (28). The reasonable cost of ancillary services

22 shall be determined in the same manner as the reasonable

23 cost of ancillary services provided for inpatient hospital

24 services.





“(2) (A) The Secretary shall not enter into an agreement under this subsection with any hospital unless

“(i) for a period specified by the Secretary (not less than twelve months) which immediately precedes the date the agreement is entered into, the hospital has had an average daily occupancy rate of less than 60






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“ (ii) the hospital is located in a rural area and has

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' (iii) the hospital has been granted a certificate


of need for the provision of long-term care services from the agency of the State (which has been desig

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of the Public Health Service Act) in which the hospital

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" (3) An agreement with a hospital entered into under

18 this section shall, except as otherwise provided under reg

19 ulations of the Secretary, be of the same duration and

20 subject to termination on the same conditions as are agree

21 ments with skilled nursing facilities under section 1866,

22 unless the hospital fails to satisfy the requirements defined

23 in paragraph (2) (A) of this subsection and shall, where not

24 inconsistent with any provision of this subsection, impose 25 the same duties, responsibilities, conditions, and limitations,

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