INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY REDUCTION IN NUMBER OF RESIDENTS.

SEC. 4626. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY REDUCTION IN NUMBER OF RESIDENTS. (a) In General.—Section 1886(h) (42 U.S.C. 1395ww(h)) is amended by adding at the end the following new paragraph: “(6) Incentive Payment under plans for voluntary reduction in number of residents.— “(A) In general.—In the case of a voluntary residency reduction plan for which an application is approved under subparagraph (B), subject to subparagraph (F), each hospital which is part of the qualifying entity submitting the plan shall be paid an applicable hold harmless percentage (as specified in subparagraph (E)) of the sum of— “(i) the amount (if any) by which— “(I) the amount of payment which would have been made under this subsection if there had been a 5-percent reduction in the number of full-time equivalent residents in the approved medical education training programs of the hospital as of June 30, 1997, exceeds “(II) the amount of payment which is made under this subsection, taking into account the reduction in such number effected under the reduction plan; and “(ii) the amount of the reduction in payment under subsection (d)(5)(B) for the hospital that is attributable to the reduction in number of residents effected under the plan below 95 percent of the number of full-time equivalent residents in such programs of the hospital as of June 30, 1997. The determination of the amounts under clauses (i) and (ii) for any year shall be made on the basis of the provisions of this title in effect on the application deadline date for the first calendar year to which the reduction plan applies. “(B) Approval of plan applications.—The Secretary may not approve the application of an qualifying entity unless— “(i) the application is submitted in a form and manner specified by the Secretary and by not later than November 1, 1999, “(ii) the application provides for the operation of a plan for the reduction in the number of full-time equivalent residents in the approved medical residency training programs of the entity consistent with the requirements of subparagraph (D); “(iii) the entity elects in the application the period of residency training years (not greater than 5) over which the reduction will occur; “(iv) the entity will not reduce the proportion of its residents in primary care (to the total number of residents) below such proportion as in effect as of the applicable time described in subparagraph (D)(v); and “(v) the Secretary determines that the application and the entity and such plan meet such other requirements as the Secretary specifies in regulations. “(C) Qualifying entity.—For purposes of this paragraph, any of the following may be a qualifying entity:111 STAT. 481 “(i) Individual hospitals operating one or more approved medical residency training programs. “(ii) Two or more hospitals that operate such programs and apply for treatment under this paragraph as a single qualifying entity. “(iii) A qualifying consortium (as described in section 4628 of the Balanced Budget Act of 1997). “(D) Residency reduction requirements.— “(i) Individual hospital applicants.—In the case of a qualifying entity described in subparagraph (C)(i), the number of full-time equivalent residents in all the approved medical residency training programs operated by or through the entity shall be reduced as follows: “(I) If the base number of residents exceeds 750 residents, by a number equal to at least 20 percent of such base number. “(II) Subject to subclause (IV), if the base number of residents exceeds 600 but is less than 750 residents, by 150 residents. “(III) Subject to subclause (IV), if the base number of residents does not exceed 600 residents, by a number equal to at least 25 percent of such base number. “(IV) In the case of a qualifying entity which is described in clause (v) and which elects treatment under this subclause, by a number equal to at least 20 percent of the base number. “(ii) Joint applicants.—In the case of a qualifying entity described in subparagraph (C)(ii), the number of full-time equivalent residents in the aggregate for all the approved medical residency training programs operated by or through the entity shall be reduced as follows: “(I) Subject to subclause (II), by a number equal to at least 25 percent of the base number. “(II) In the case of such a qualifying entity which is described in clause (v) and which elects treatment under this subclause, by a number equal to at least 20 percent of the base number. “(iii) Consortia.—In the case of a qualifying entity described in subparagraph (C)(iii), the number of fulltime equivalent residents in the aggregate for all the approved medical residency training programs operated by or through the entity shall be reduced by a number equal to at least 20 percent of the base number. “(iv) Manner of reduction.—The reductions specified under the preceding provisions of this subparagraph for a qualifying entity shall be below the base number of residents for that entity and shall be fully effective not later than the 5th residency training year in which the application under subparagraph (B) is effective. “(v) Entities providing assurance of increase in primary care residents.—An entity is described in this clause if—111 STAT. 482 “(I) the base number of residents for the entity is less than 750 or the entity is described in subparagraph (C)(ii); and “(II) the entity represents in its application under subparagraph (B) that it will increase the number of full-time equivalent residents in primary care by at least 20 percent (from such number included in the base number of residents) by not later than the 5th residency training year in which the application under subparagraph (B) is effective. If a qualifying entity fails to comply with the representation described in subclause (II) by the end of such 5th residency training year, the entity shall be subject to repayment of all amounts paid under this paragraph, in accordance with procedures established to carry out subparagraph (F). “(vi) Base Number of residents defined.—For purposes of this paragraph, the term ‘base number of residents’ means, with respect to a qualifying entity (or its participating hospitals) operating approved medical residency training programs, the number of full-time equivalent residents in such programs (before application of weighting factors) of the entity as of the most recent residency training year ending before June 30, 1997, or, if less, for any subsequent residency training year that ends before the date the entity makes application under this paragraph. “(E) Applicable hold harmless percentage.—For purposes of subparagraph (A), the ‘applicable hold harmless percentage’ for the— “(i) first and second residency training years in which the reduction plan is in effect, 100 percent, “(ii) third such year, 75 percent, “(iii) fourth such year, 50 percent, and “(iv) fifth such year, 25 percent. “(F) Penalty for noncompllance.— “(i) In general.—No payment may be made under this paragraph to a hospital for a residency training year if the hospital has failed to reduce the number of full-time equivalent residents (in the manner required under subparagraph (D)) to the number agreed to by the Secretary and the qualifying entity in approving the application under this paragraph with respect to such year. “(ii) Increase in number of residents in subsequent years.—If payments are made under this paragraph to a hospital, and if the hospital increases the number of full-time equivalent residents above the number of such residents permitted under the reduction plan as of the completion of the plan, then, as specified by the Secretary, the entity is liable for repayment to the Secretary of the total amounts paid under this paragraph to the entity.111 STAT. 483 “(G) Treatment of rotating residents.—In applying this paragraph, the Secretary shall establish rules regarding the counting of residents who are assigned to institutions the medical residency training programs in which are not covered under approved applications under this paragraph.”. (b) Relation to Demonstration Projects and Authority.— (1) Section 1886(h)(6) of the Social Security Act, added by subsection (a), other than subparagraph (F)(ii) thereof, shall not apply to any residency training program with respect to which a demonstration project described in paragraph (3) has been approved by the Health Care Financing Administration as of May 27, 1997. (2) Effective May 27, 1997, the Secretary of Health and Human Services is not authorized to approve any demonstration project described in paragraph (3) for any residency training year beginning before July 1, 2006. (3) A demonstration project described in this paragraph is a project that primarily provides for additional payments under title XVIII of the Social Security Act in connection with a reduction in the number of residents in a medical residency training program. (c) Interim, Final Regulations.—In order to carry out the amendment made by subsection (a) in a timely manner, the Secretary of Health and Human Services may first promulgate regulations, that take effect on an interim basis, after notice and pending opportunity for public comment, by not later than 6 months after the date of the enactment of this Act.