BASIC HOSPITAL PROSPECTIVE PAYMENT RATES.

SEC. 4002. BASIC HOSPITAL PROSPECTIVE PAYMENT RATES. (a) Basic Update Factor for PPS Hospitals.— Clause (i) of section 1886(b)(3)(B) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended by striking “and for fiscal year 1988” in subclause (II) and all that follows through the end of such clause and inserting after such subclause the following: “(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)), and 1.0 percent for other hospitals, “(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 percent for hospitals located in a large urban area, and the market basket percentage increase minus 2.5 percent for other hospitals, and “(V) for fiscal year 1990 and each subsequent fiscal year, the market basket percentage for hospitals in all areas.”. 101 STAT. 1330–43 (b) Large Urban Area Defined.— The second sentence of section 1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))16b16bCopy read “(42 U.S.C. 1395www(d)(2)(D))”. is amended by inserting after “under subsection (a) by regulation;” the following: “the term ‘large urban area’ means, with respect to a fiscal year, such an urban area which the Secretary determines (in the publication described in subsection (e)(5)(B) 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);”. (c) Adjustment for Hospitals in Large Urban Areas or in Rural Areas.— (1) In general.— Section 1886(d)(3) of such Act (42 U.S.C. 1395ww(d)(3)) is amended— (A) in the matter before subparagraph (A), by striking “urban or rural areas” and inserting “large urban, other urban, or rural areas”; (B) in first sentence of subparagraph (A)— (i) by striking “The Secretary” and inserting “(i) For discharges occuring in a fiscal year beginning before October 1, 1987, the Secretary”, (ii) by striking “each of fiscal years 1985, 1986, 1987, and 1988” and inserting “the fiscal year involved”, and (iii) by striking “, and adjusted for subsequent fiscal years in accordance with the final determination of the Secretary under subsection (e)(4), and adjusted to reflect the most recent case-mix data available,”; (C) by adding at the end of subparagraph (A) the following new clauses: “(ii) For discharges occurring in a fiscal year beginning on or after October 1, 1987, 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 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) with respect to hospitals located in the respective areas for the fiscal year involved. “(iii) Average standardized amounts computed under this paragraph shall be adjusted to reflect the most recent case-mix data available.”; and (D) in subparagraph (D)— (i) by striking “urban and rural hospitals” in the heading and inserting “hospitals in different areas”, (ii) in clause (i), by inserting “(or, for discharges occurring on or after April 1, 1988, in a large urban area or other urban area)” after “urban area” the first place it appears, and (iii) in clause (i), by inserting “such” before “an urban area” the second place it appears. (2) Conforming amendments.— Section 1886(d)(9)(A) of such Act (42 U.S.C. 1395ww(d)(9)(A)) is amended— (A) in clause (ii)(I), by striking “an urban area, and” and inserting “a large urban area,”; 101 STAT. 1330–44 (B) by redesignating subclause (II) of clause (ii) as subclause (III); and (C) by inserting after subclause (I) of clause (ii) the following new subclause: “(II) such rate for hospitals located in other urban areas, and”. (d) Establishment of Regional Floor.— Section 1886(d)(1)(A)(iii) of such Act (42 U.S.C. 1395ww(d)(1)(A)(iii)) is amended by inserting before the period at the end the following: “, 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”. (e) Update for PPS-Exempt Hospitals.— Section 1886(b)(3)(B) of such Act (42 U.S.C. 1395ww(b)(3)(B)) is amended— (1) in clause (i), by striking “subparagraph (A) for 12-month cost reporting periods beginning during a fiscal year and for purposes of”, (2) in clause (ii), by striking “(ii) For purposes of clause (i)” and inserting “(iii) For purposes of this subparagraph”, and (3) by inserting after clause (i) the following new clause: “(ii) For purposes of subparagraph (A), 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, and “(IV) subsequent fiscal years is the market basket percentage increase.”. (f) Related Conforming and Technical Amendments.— (1) Section 1886 of such Act (42 U.S.C. 1395ww) is further amended— (A) by adding at the end of subsection (d)(2)(D) the following new sentence: “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.”; (B) in subsection (e)(3)(B), by striking “or determine”; (C) in subsection (e)(4)— (i) by striking “for fiscal year 1988” and inserting “for each fiscal year (beginning with fiscal year 1988)”, (ii) by striking “and shall determine for each subsequent fiscal year” and all that follows through “fiscal year, and”, and (iii) by amending the last sentence to read as follows: “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), and may vary among such other hospitals and units.”; and (D) in paragraph (5), by striking “or determination” each place it appears. 101 STAT. 1330–45 (2) Subsection (a)(1)(B)(ii) of section 107 of the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (Public Law 100–119) is amended, effective as of the date of the enactment of such Act, by inserting “, 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” before the period at the end. (g) Effective Dates.— (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) shall apply to payments made under section 1886(a)(1)(A)(iii) of the Social Security Act 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(d)(3)(B) of such Act)1717Copy read “Act))”. 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 because it is a sole community hospital— (A) the amendment made by subsections (a) and (c) 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(d)(3)(B) of such Act) 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) 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 shall be made as though the applicable percentage increase de-101 STAT. 1330–46scribed in section 1886(b)(3)(B) of such Act 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 (0 shall take effect on the date of the enactment of this Act. (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 (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)(10)(B) of the Social Security Act.