P.L. 108-173

SEC. 433.-Continued

shall analyze the effect on total payments, growth in costs, capital spending, and such other payment effects under those sections.

(b) REPORTS.—

(1) INTERIM REPORT.-Not later than 18 months after the date of the enactment of this Act, the Commission shall submit to Congress an interim report on the matters studied under subsection (a) with respect only to changes to the critical access hospital provisions under section 405.

(2) FINAL REPORT.-Not later than 3 years after the date of the enactment of this Act, the Commission shall submit to Congress a final report on all matters studied under subsection (a).

SEC. 434. [42 U.S.C. 1395x note] FRONTIER EXTENDED STAY CLINIC DEMONSTRATION PROJECT.

(a) AUTHORITY TO CONDUCT DEMONSTRATION PROJECT.-The Secretary shall waive such provisions of the medicare program established under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as are necessary to conduct a demonstration project under which frontier extended stay clinics described in subsection (b) in isolated rural areas are treated as providers of items and services under the medicare program.

(b) CLINICS Described.—A frontier extended stay clinic is described in this subsection if the clinic

(1) is located in a community where the closest short-term acute care hospital or critical access hospital is at least 75 miles away from the community or is inaccessible by public road; and

(2) is designed to address the needs of

(A) seriously or critically ill or injured patients who, due to adverse weather conditions or other reasons, cannot be transferred quickly to acute care referral centers; or

(B) patients who need monitoring and observation for a limited period of time.

(c) SPECIFICATION OF CODES.-The Secretary shall determine the appropriate lifesafety codes for such clinics that treat patients for needs referred to in subsection (b)(2).

(d) FUNDING.—

(1) IN GENERAL.-Subject to paragraph (2), there are authorized to be appropriated, in appropriate part from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, such sums as are necessary to conduct the demonstration project under this section.

(2) BUDGET NEUTRAL IMPLEMENTATION.-In conducting the demonstration project under this section, the Secretary shall ensure that the aggregate payments made by the Secretary under the medicare program do not exceed the amount which the Secretary would have paid under the medicare program if the demonstration project under this section was not implemented.

(e) THREE-YEAR PERIOD.-The Secretary shall conduct the demonstration under this section for a 3-year period.

(f) REPORT.-Not later than the date that is 1 year after the date on which the demonstration project concludes, the Secretary shall submit to Congress a report on the demonstration project, together with such recommendations for legislation or administrative action as the Secretary determines appropriate.

(g) DEFINITIONS.-In this section, the terms "hospital" and "critical access hospital" have the meanings given such terms in subsections (e) and (mm), respectively.

TITLE V-PROVISIONS RELATING TO PART A

Subtitle A-Inpatient Hospital Services

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SEC. 503. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT HOSPITAL PROSPECTIVE PAYMENT SYSTEM.

P.L. 108-173

SEC. 503. Continued

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(d) ***

(2) [42 U.S.C. 1395ww note] NOT BUDGET NEUTRAL.-There shall be no reduction or other adjustment in payments under section 1886 of the Social Security Act because an additional payment is provided under subsection (d)(5)(K)(ii)(III) of such section.

(e) [42 U.S.C. 1395ww note] EFFECTIVE DATE.—

(1) IN GENERAL.-The Secretary shall implement the amendments made by this section so that they apply to classification for fiscal years beginning with fiscal year 2005.

(2) RECONSIDERATIONS OF APPLICATIONS FOR FISCAL YEAR 2004 THAT ARE DENIED. In the case of an application for a classification of a medical service or technology as a new medical service or technology under section_1886(d)(5)K) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was filed for fiscal year 2004 and that is denied

(A) the Secretary shall automatically reconsider the application as an application for fiscal year 2005 under the amendments made by this section; and

(B) the maximum time period otherwise permitted for such classification of the service or technology shall be extended by 12 months.

SEC. 508. [42 U.S.C. 1395ww note] ONE-TIME APPEALS PROCESS FOR HOSPITAL WAGE INDEX CLASSIFICATION.

(a) ESTABLISHMENT OF PROCESS.

(1) IN GENERAL.-The Secretary shall establish not later than January 1, 2004, by instruction or otherwise a process under which a hospital may appeal the wage index classification otherwise applicable to the hospital and select another area within the State (or, at the discretion of the Secretary, within a contiguous State) to which to be reclassified.

(2) PROCESS REQUIREMENTS.—The process established under paragraph (1) shall be consistent with the following:

(A) Such an appeal may be filed as soon as possible after the date of the enactment of this Act but shall be filed by not later than February 15, 2004. (B) Such an appeal shall be heard by the Medicare Geographic Reclassification Review Board.

(C) There shall be no further administrative or judicial review of a decision of such Board.

(3) RECLASSIFICATION UPON SUCCESSFUL APPEAL.-If the Medicare Geographic Reclassification Review Board determines that the hospital is a qualifying hospital (as defined in subsection (c)), the hospital shall be reclassified to the area selected under paragraph (1). Such reclassification shall apply with respect to discharges occurring during the 3-year period beginning with April 1, 2004.

(4) INAPPLICABILITY OF CERTAIN PROVISIONS.-Except as the Secretary may provide, the provisions of paragraphs (8) and (10) of section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) shall not apply to an appeal under this section.

(b) APPLICATION OF RECLASSIFICATION.-In the case of an appeal decided in favor of a qualifying hospital under subsection (a), the wage index reclassification shall not affect the wage index computation for any area or for any other hospital and shall not be effected in a budget neutral manner. The provisions of this section shall not affect payment for discharges occurring after the end of the 3-year-period referred to in subsection (a).

(c) QUALIFYING HOSPITAL DEFINED. For purposes of this section, the term “qualifying hospital" means a subsection (d) hospital (as defined in section 1886(d)(1)B) of the Social Security Act, 42 U.S.C. 1395ww(d)(1)(B)) that—

(1) does not qualify for a change in wage index classification under paragraph (8) or (10) of section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) on the basis of requirements relating to distance or commuting; and

P.L. 108-173

SEC. 508.-Continued

(2) meets such other criteria, such as quality, as the Secretary may specify
by instruction or otherwise

The Secretary may modify the wage comparison guidelines promulgated under sec-
tion 1886(d)(10)(D) of such Act (42 U.S.C. 1395ww(d)(10)(D)) in carrying out this
section.

(d) WAGE INDEX CLASSIFICATION.-For purposes of this section, the term "wage
index classification" means the geographic area in which it is classified for purposes
of determining for a fiscal year the factor used to adjust the DRG prospective pay-
ment rate under section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d))
for area differences in hospital wage levels that applies to such hospital under para-
graph (3)(E) of such section.

(e) LIMITATION ON EXPENDITURES.-The aggregate amount of additional expendi-
tures resulting from the application of this section shall not exceed $900,000,000.
(f) TRANSITIONAL EXTENSION.-Any reclassification of a county or other area made
by Act of Congress for purposes of making payments under section 1886(d) of the
Social Security Act (42 U.S.C. 1395ww(d)) that expired on September 30, 2003, shall
be deemed to be in effect during the period beginning on January 1, 2004, and end-
ing on September 30, 2004.

SEC. 605. [42 U.S.C. 1395w-4 note] COLLABORATIVE DEMONSTRATION-
BASED REVIEW OF PHYSICIAN PRACTICE EXPENSE GEOGRAPHIC AD-
JUSTMENT DATA.

(a) IN GENERAL.-Not later than January 1, 2005, the Secretary shall, in collabo-
ration with State and other appropriate organizations representing physicians, and
other appropriate persons, review and consider alternative data sources than those
currently used in establishing the geographic index for the practice expense compo-
nent under the medicare physician fee schedule under section 1848(e)(1)(A)(i) of the
Social Security Act (42 U.S.C. 1395w-4(e)(1)(A)(i)).

(b) SITES.-The Secretary shall select two physician payment localities in which
to carry out subsection (a). One locality shall include rural areas and at least one
locality shall be a statewide locality that includes both urban and rural areas. (c)
Report and Recommendations.-

(1) REPORT.-Not later than January 1, 2006, the Secretary shall submit to
Congress a report on the review and consideration conducted under subsection
(a). Such report shall include information on the alternative developed data
sources considered by the Secretary under subsection (a), including the accuracy
and validity of the data as measures of the elements of the geographic index
for practice expenses under the medicare physician fee schedule as well as the
feasibility of using such alternative data nationwide in lieu of current proxy
data used in such index, and the estimated impacts of using such alternative
data.

(2) RECOMMENDATIONS.—The report submitted under paragraph (1) shall con-
tain recommendations on which data sources reviewed and considered under
subsection (a) are appropriate for use in calculating the geographic index for
practice expenses under the medicare physician fee schedule.

(c) [42 U.S.C. 1395rr note] INSPECTOR GENERAL STUDIES ON ESRD DRUGS.—
(1) IN GENERAL.-The Inspector General of the Department of Health and
Human Services shall conduct two studies with respect to drugs and biologicals
(including erythropoietin) furnished to end-stage renal disease patients under
the medicare program which are separately billed by end stage renal disease
facilities. (2) STUDIES ON ESRD DRUGS.-

(A) EXISTING DRUGS.-The first study under paragraph (1) shall be con-
ducted with respect to such drugs and biologicals for which a billing code
exists prior to January 1, 2004.

(B) NEW DRUGS.—The second study under paragraph (1) shall be con-
ducted with respect to such drugs and biologicals for which a billing code
does not exist prior to January 1, 2004.

(3) MATTERS STUDIED.—Under each study conducted under paragraph (1), the
Inspector General shall—

(A) determine the difference between the amount of payment made to end
stage renal disease facilities under title XVIII of the Social Security Act for
such drugs and biologicals and the acquisition costs of such facilities for
such drugs and biologicals and which are separately billed by end stage
renal disease facilities, and

(B) estimate the rates of growth of expenditures for such drugs and
biologicals billed by such facilities.

(4) REPORTS.-

(A) EXISTING ESRD DRUGS.-Not later than April 1, 2004, the Inspector
General shall report to the Secretary on the study described in paragraph
(2)(A).

(B) NEW ESRD DRUGS.-Not later than April 1, 2006, the Inspector Gen-
eral shall report to the Secretary on the study described in paragraph
(2)(B).

(e) [42 U.S.C. 1395rr note] DEMONSTRATION OF BUNDLED CASE-MIX ADJUSTED
PAYMENT SYSTEM FOR ESRD SERVICES.

-

(1) IN GENERAL.-The Secretary shall establish a demonstration project of the
use of a fully case-mix adjusted payment system for end stage renal disease
services under section 1881 of the Social Security Act (42 U.S.C. 1395rr) for pa-
tient characteristics identified in the report under subsection (f) that bundles
into such payment rates amounts for-

(A) drugs and biologicals (including erythropoietin) furnished to end stage
renal disease patients under the medicare program which are separately
billed by end stage renal disease facilities (as of the date of the enactment
of this Act); and

(B) clinical laboratory tests related to such drugs and biologicals.
(2) FACILITIES INCLUDED IN THE DEMONSTRATION.-In conducting the dem-
onstration under this subsection, the Secretary shall ensure the participation of
a sufficient number of providers of dialysis services and renal dialysis facilities,
but in no case to exceed 500. In selecting such providers and facilities, the Sec-
retary shall ensure that the following types of providers are included in the
demonstration:

(A) Urban providers and facilities.
(B) Rural providers and facilities.

(C) Not-for-profit providers and facilities.

(D) For-profit providers and facilities.

(E) Independent providers and facilities.

(F) Specialty providers and facilities, including pediatric providers and fa-
cilities and small providers and facilities.

(3) TEMPORARY ADD-ON PAYMENT FOR DIALYSIS SERVICES FURNISHED UNDER
THE DEMONSTRATION.-

P.L. 108-173

SEC. 623.-Continued

(A) IN GENERAL.-During the period of the demonstration project, the Sec-
retary shall increase payment rates that would otherwise apply under sec-
tion 1881(b) of such Act (42 U.S.C. 1395rr(b)) by 1.6 percent for dialysis
services furnished in facilities in the demonstration site.

(B) RULES OF CONSTRUCTION.-Nothing in this subsection shall be con-
strued as-

(i) as an annual update under section 1881(b) of the Social Security
Act (42 U.S.C. 1395rr(b));

(ii) as increasing the baseline for payments under such section; or
(iii) requiring the budget neutral implementation of the demonstra-
tion project under this subsection.

(4) 3-YEAR PERIOD.-The Secretary shall conduct the demonstration under this
subsection for the 3-year period beginning on January 1, 2006.

(5) USE OF ADVISORY BOARD.—

(A) IN GENERAL.-In carrying out the demonstration under this sub-
section, he Secretary shall establish an advisory board comprised of rep-
resentatives described in subparagraph (B) to provide advice and rec-
ommendations with respect to the establishment and operation of such
demonstration.

(B) REPRESENTATIVES.-Representatives referred to in subparagraph (A)
include representatives of the following:

(i) Patient organizations.

(ii) Individuals with expertise in end stage renal dialysis services,
such as clinicians, economists, and researchers.

(iii) The Medicare Payment Advisory Commission, established under
section 1805 of the Social Security Act (42 U.S.C. 1395b-6).

(iv) The National Institutes of Health.

(v) Network organizations under section 1881(c) of the Social Security
Act (42 U.S.C. 1395rr(c)).

(vi) Medicare contractors to monitor quality of care.

(vii) Providers of services and renal dialysis facilities furnishing end
stage renal disease services.

(C) TERMINATION OF ADVISORY PANEL.-The advisory panel shall termi-
nate on December 31, 2008.

(6) AUTHORIZATION OF APPROPRIATIONS.-There are authorized to be appro-
priated, in appropriate part from the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance Trust Fund, $5,000,000 in
fiscal year 2006 to conduct the demonstration under this subsection.

(f) [42 U.S.C. 1395rr note] REPORT ON A BUNDLED PROSPECTIVE PAYMENT SYSTEM
FOR END STAGE RENAL DISEASE SERVICES.—

(1) REPORT.-

(A) IN GENERAL.-Not later than October 1, 2005, the Secretary shall sub-
mit to Congress a report detailing the elements and features for the design
and implementation of a bundled prospective payment system for services
furnished by end stage renal disease facilities including, to the maximum
extent feasible, bundling of drugs, clinical laboratory tests, nd other items
that are separately billed by such facilities. The report shall include a de-
scription of the methodology to be used for the establishment of payment
rates, including components of the new system described in paragraph (2).
(B) RECOMMENDATIONS.-The Secretary shall include in such report rec-
ommendations on elements, features, and methodology for a bundled pro-
spective payment system or other issues related to such system as the Sec-
retary determines to be appropriate.

(2) ELEMENTS AND FEATURES OF A BUNDLED PROSPECTIVE PAYMENT SYSTEM.—
The report required under paragraph (1) shall include the following elements
and features of a bundled prospective payment system:

(A) BUNDLE OF ITEMS AND SERVICES.-A description of the bundle of items
and services to be included under the prospective payment system.

(B) CASE MIX.-A description of the case-mix adjustment to account for

the relative resource use of different types of patients.

(C) WAGE INDEX.-A description of an adjustment to account for geo-
graphic differences in wages.