PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES.

SEC. 4523. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES. (a) In General.—Section 1833 (42 U.S.C. 13951) is amended by adding at the end the following: “(t) Prospective Payment System for Hospital Outpatient Department Services.— “(1) Amount of payment.— “(A) In general.—With respect to covered OPD services (as defined in subparagraph (B)) furnished during a year beginning with 1999, the amount of payment under this part shall be determined under a prospective payment system established by the Secretary in accordance with this subsection. “(B) Definition of covered opd services.—For purposes of this subsection, the term ‘covered OPD services’— “(i) means hospital outpatient services designated by the Secretary; “(ii) subject to clause (iii), includes inpatient hospital services designated by the Secretary that are covered under this part and furnished to a hospital inpatient who (I) is entitled to benefits under part A but has exhausted benefits for inpatient hospital services during a spell of illness, or (II) is not so entitled; but “(iii) does not include any therapy services described in subsection (a)(8) or ambulance services, for which payment is made under a fee schedule described in section 1834(k) or section 1834(1). “(2) System requirements.—Under the payment system— “(A) the Secretary shall develop a classification system for covered OPD services; “(B) the Secretary may establish groups of covered OPD services, within the classification system described in subparagraph (A), so that services classified within each group are comparable clinically and with respect to the use of resources; “(C) the Secretary shall, using data on claims from 1996 and using data from the most recent available cost reports, establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on median hospital costs and shall determine projections of the frequency of utilization of each such service (or group of services) in 1999; “(D) the Secretary shall determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner; “(E) the Secretary shall establish other adjustments, in a budget neutral manner, as determined to be necessary to ensure equitable payments, such as outlier adjustments or adjustments for certain classes of hospitals; and111 STAT. 446 “(F) the Secretary shall develop a method for controlling unnecessary increases in the volume of covered OPD services. “(3) Calculation of base amounts.— “(A) Aggregate amounts that would be payable if deductibles were disregarded.—The Secretary shall estimate the sum of— “(i) the total amounts that would be payable from the Trust Fund under this part for covered OPD services in 1999, determined without regard to this subsection, as though the deductible under section 1833(b) did not apply, and “(ii) the total amounts of copayments estimated to be paid under this subsection by beneficiaries to hospitals for covered OPD services in 1999, as though the deductible under section 1833(b) did not apply. “(B) Unadjusted copayment amount.— “(i) In general.—For purposes of this subsection, subject to clause (ii), the ‘unadjusted copayment amount’ applicable to a covered OPD service (or group of such services) is 20 percent of the national median of the charges for the service (or services within the group) furnished during 1996, updated to 1999 using the Secretary’s estimate of charge growth during the period. “(ii) Adjusted to be 20 percent when fully phased in.—If the pre-deductible payment percentage for a covered OPD service (or group of such services) furnished in a year would be equal to or exceed 80 percent, then the unadjusted copayment amount shall be 20 percent of amount determined under subparagraph (D). “(iii) Rules for new services.—The Secretary shall establish rules for establishment of an unadjusted copayment amount for a covered OPD service not furnished during 1996, based upon its classification within a group of such services. “(C) Calculation of conversion factors.— “(i) For 1999.— “(I) In general.—The Secretary shall establish a 1999 conversion factor for determining the medicare OPD fee schedule amounts for each covered OPD service (or group of such services) furnished in 1999. Such conversion factor shall be established on the basis of the weights and frequencies described in paragraph (2)(C) and in such a manner that the sum for all services and groups of the products (described in subclause (II) for each such service or group) equals the total projected amount described in subparagraph (A). “(II) Product described.—The Secretary shall determine for each service or group the product of the medicare OPD fee schedule amounts (taking into account appropriate adjustments described in paragraphs (2)(D) and (2)(E)) and the estimated frequencies for such service or group.111 STAT. 447 “(ii) Subsequent years.—Subject to paragraph (8)(B), the Secretary shall establish a conversion factor for covered OPD services furnished in subsequent years in an amount equal to the conversion factor established under this subparagraph and applicable to such services furnished in the previous year increased by the OPD fee schedule increase factor specified under clause (iii) for the year involved. “(iii) Opd fee schedule increase factor.—For purposes of this subparagraph, the ‘OPD fee schedule increase factor’ for services furnished in a year is equal to the market basket percentage increase applicable under section 1886(b)(3)(B)(iii) to hospital discharges occurring during the fiscal year ending in such year, reduced by 1 percentage point for such factor for services furnished in each of 2000, 2001, and 2002. In applying the previous sentence for years beginning with 2000, the Secretary may substitute for the market basket percentage increase an annual percentage increase that is computed and applied with respect to covered OPD services furnished in a year in the same manner as the market basket percentage increase is determined and applied to inpatient hospital services for discharges occurring in a fiscal year. “(D) Calculation of medicare opd fee schedule amounts.—The Secretary shall compute a medicare OPD fee schedule amount for each covered OPD service (or group of such services) furnished in a year, in an amount equal to the product of— “(i) the conversion factor computed under subparagraph (C) for the year, and “(ii) the relative payment weight (determined under paragraph (2)(C)) for the service or group. “(E) Pre-deductible payment percentage.—The predeductible payment percentage for a covered OPD service (or group of such services) furnished in a year is equal to the ratio of— “(i) the medicare OPD fee schedule amount established under subparagraph (D) for the year, minus the unadjusted copayment amount determined under subparagraph (B) for the service or group, to “(ii) the medicare OPD fee schedule amount determined under subparagraph (D) for the year for such service or group. “(4) Medicare payment amount.—The amount of payment made from the Trust Fund under this part for a covered OPD service (and such services classified within a group) furnished in a year is determined as follows: “(A) Fee schedule adjustments.—The medicare OPD fee schedule amount (computed under paragraph (3)(D)) for the service or group and year is adjusted for relative differences in the cost of labor and other factors determined by the Secretary, as computed under paragraphs (2)(D) and (2)(E). “(B) Subtract applicable deductible.—Reduce the adjusted amount determined under subparagraph (A) by 111 STAT. 448the amount of the deductible under section 1833(b), to the extent applicable. “(C) Apply payment proportion to remainder.—The amount of payment is the amount so determined under subparagraph (B) multiplied by the pre-deductible payment percentage (as determined under paragraph (3)(E)) for the service or group and year involved. “(5) Copayment amount.— “(A) In general.—Except as provided in subparagraph (B), the copayment amount under this subsection is the amount by which the amount described in paragraph (4)(B) exceeds the amount of payment determined under paragraph (4)(C). “(B) Election to offer reduced copayment amount.—The Secretary shall establish a procedure under which a hospital, before the beginning of a year (beginning with 1999), may elect to reduce the copayment amount otherwise established under subparagraph (A) for some or all covered OPD services to an amount that is not less than 20 percent of the medicare OPD fee schedule amount (computed under paragraph (3)(D)) for the service involved. Under such procedures, such reduced copayment amount may not be further reduced or increased during the year involved and the hospital may disseminate information on the reduction of copayment amount effected under this subparagraph. “(C) No impact on deductibles.—Nothing in this paragraph shall be construed as affecting a hospital’s authority to waive the charging of a deductible under section 1833(b). “(6) Periodic review and adjustments components of prospective payment system.— “(A) Periodic review.—The Secretary may periodically review and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. “(B) Budget neutrality adjustment.—If the Secretary makes adjustments under subparagraph (A), then the adjustments for a year may not cause the estimated amount of expenditures under this part for the year to increase or decrease from the estimated amount of expenditures under this part that would have been made if the adjustments had not been made. “(C) Update factor.—If the Secretary determines under methodologies described in paragraph (2)(F) that the volume of services paid for under this subsection increased beyond amounts established through those methodologies, the Secretary may appropriately adjust the update to the conversion factor otherwise applicable in a subsequent year. “(7) Special rule for ambulance services.—The Secretary shall pay for hospital outpatient services that are ambulance services on the basis described in the matter in subsection (a)(1) preceding subparagraph (A), or, if applicable, the fee schedule established under section 1834(1).111 STAT. 449 “(8) Special rules for certain hospitals.—In the case of hospitals described in section 1886(d)(1)(B)(v)— “(A) the system under this subsection shall not apply to covered OPD services furnished before January 1, 2000; and “(B) the Secretary may establish a separate conversion factor for such services in a manner that specifically takes into account the unique costs incurred by such hospitals by virtue of their patient population and service intensity. “(9) Limitation on review.—There shall be no administrative or judicial review under section 1869, 1878, or otherwise of— “(A) the development of the classification system under paragraph (2), including the establishment of groups and relative payment weights for covered OPD services, of wage adjustment factors, other adjustments, and methods described in paragraph (2)(F); “(B) the calculation of base amounts under paragraph (3); “(C) periodic adjustments made under paragraph (6); and “(D) the establishment of a separate conversion factor under paragraph (8)(B).”. (b) Coinsurance.—Section 1866(a)(2)(A)(ii) (42 U.S.C. 1395cc(a)(2)(A)(ii)) is amended by adding at the end the following: “In the case of items and services for which payment is made under part B under the prospective payment system established under section 1833(t), clause (ii) of the first sentence shall be applied by substituting for 20 percent of the reasonable charge, the applicable copayment amount established under section 1833(t)(5).”. (c) Treatment of Reduction in Copayment Amount.—Section U28A(i)(6) (42 U.S.C. 1320a–7a(i)(6)) is amended— (1) by striking “or” at the end of subparagraph (B), (2) by striking the period at the end of subparagraph (C) and inserting “; or”, and (3) by adding at the end the following new subparagraph: “(D) a reduction in the copayment amount for covered OPD services under section 1833(t)(5)(B).”. (d) Conforming Amendments.— (1) Approved asc procedures performed in hospital outpatient departments.— (A)(i) Section 1833(i)(3)(A) (42 U.S.C. 13951(i)(3)(A)) is amended— (I) by inserting “before January 1, 1999,” after “furnished”, and (II) by striking “in a cost reporting period”. (ii) The amendment made by clause (i) shall apply to services furnished on or after January 1, 1999. (B) Section 1833(a)(4) (42 U.S.C. 13951(a)(4)) is amended by inserting “or subsection (t)” before the semicolon. (2) Radiology and other diagnostic procedures.— (A) Section 1833(n)(1)(A) (42 U.S.C. 13951(n)(1)(A)) is amended by inserting “and before January 1, 1999,” after “October 1, 1988,” and after “October 1, 1989,”.111 STAT. 450 (B) Section 1833(a)(2)(E) (42 U.S.C. 13951(a)(2)(E)) is amended by inserting “or, for services or procedures performed on or after January 1, 1999, subsection (t)” before the semicolon. (3) Other hospital outpatient services.—Section 1833(a)(2)(B) (42 U.S.C. 13951(a)(2)(B)) is amended— (A) in clause (i), by inserting “furnished before January 1, 1999,” after “(i)”, (B) in clause (ii), by inserting “before January 1, 1999,” after “furnished”, (C) by redesignating clause (iii) as clause (iv), and (D) by inserting after clause (ii), the following new clause: “(iii) if such services are furnished on or after January 1, 1999, the amount determined under subsection (t), or”.