BONUS AND RELIEF PAYMENTS.

SEC. 4415. BONUS AND RELIEF PAYMENTS. (a) Change in Bonus Payment.—Section 1886(b)(1) (42 U.S.C. 1395ww(b)(D) is amended in subparagraph (A) by striking all that follows “plus—” and inserting the following: “(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) Continuous Improvement Bonus Payments.—Section 1886(b) (42 U.S.C. 1395ww(b)) is amended— (1) in paragraph (1), by inserting “plus the amount, if any, provided under paragraph (2)” before “except that in no case”; and (2) by inserting after paragraph (1), the following new paragraph: “(2)(A) 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.”. (c) Change in Relief Payments.—Section 1886(b)(1) (42 U.S.C. 1395ww(b)(1)), as amended in subsections (a) and (b), is further amended—111 STAT. 407 (1) by redesignating subparagraph (B) as subparagraph (C) (2) in subparagraph (C), as so redesignated— (A) by striking “greater than the target amount” and inserting “greater than 110 percent of the target amount”, and (B) by striking “exceed the target amount” and inserting “exceed 110 percent of the target amount”, and (3) by inserting after subparagraph (A), the following new subparagraph: “(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 on a per discharge basis shall equal the target amount; or”, (d) Report.—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.)). (e) Effective Date.—The amendments made by subsections (a) and (c) shall apply with respect to cost reporting periods beginning on or after October 1, 1997.