HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT REFORM.

SEC. 621. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT REFORM.(a) Payment for Drugs.—(1) Special rules for certain drugs and biologicals.—Section 1833(t) (42 U.S.C. 1395l(t)), as amended by section 411(b), is amended by inserting after paragraph (13) the following new paragraphs:“(14) Drug apc payment rates.—“(A) In general.—The amount of payment under this subsection for a specified covered outpatient drug (defined in subparagraph (B)) that is furnished as part of a covered OPD service (or group of services)—“(i) in 2004, in the case of—“(I) a sole source drug shall in no case be less than 88 percent, or exceed 95 percent, of the reference average wholesale price for the drug;“(II) an innovator multiple source drug shall in no case exceed 68 percent of the reference average wholesale price for the drug; or“(III) a noninnovator multiple source drug shall in no case exceed 46 percent of the reference average wholesale price for the drug;“(ii) in 2005, in the case of—“(I) a sole source drug shall in no case be less than 83 percent, or exceed 95 percent, of the reference average wholesale price for the drug;“(II) an innovator multiple source drug shall in no case exceed 68 percent of the reference average wholesale price for the drug; or“(III) a noninnovator multiple source drug shall in no case exceed 46 percent of the reference average wholesale price for the drug; or“(iii) in a subsequent year, shall be equal, subject to subparagraph (E)—“(I) to the average acquisition cost for the drug for that year (which, at the option of the Secretary, may vary by hospital group (as defined by the Secretary based on volume of covered OPD services or other relevant characteristics)), as determined by the Secretary taking into account the hospital acquisition cost survey data under subparagraph (D); or“(II) if hospital acquisition cost data are not available, the average price for the drug in the year established under section 1842(o), section 1847A, or section 1847B, as the case may be, as calculated and adjusted by the Secretary as necessary for purposes of this paragraph.“(B) Specified covered outpatient drug defined.—“(i) In general.—In this paragraph, the term ‘specified covered outpatient drug’ means, subject to clause (ii), a covered outpatient drug (as defined in section 1927(k)(2)) for which a separate ambulatory 117 STAT. 2308 payment classification group (APC) has been established and that is—“(I) a radiopharmaceutical; or“(II) a drug or biological for which payment was made under paragraph (6) (relating to pass-through payments) on or before December 31, 2002.“(ii) Exception.—Such term does not include—“(I) a drug or biological for which payment is first made on or after January 1, 2003, under paragraph (6);“(II) a drug or biological for which a temporary HCPCS code has not been assigned; or“(III) during 2004 and 2005, an orphan drug (as designated by the Secretary).“(C) Payment for designated orphan drugs during 2004 and 2005.—The amount of payment under this subsection for an orphan drug designated by the Secretary under subparagraph (B)(ii)(III) that is furnished as part of a covered OPD service (or group of services) during 2004 and 2005 shall equal such amount as the Secretary may specify.“(D) Acquisition cost survey for hospital outpatient drugs.—“(i) Annual gao surveys in 2004 and 2005.—“(I) In general.—The Comptroller General of the United States shall conduct a survey in each of 2004 and 2005 to determine the hospital acquisition cost for each specified covered outpatient drug. Not later than April 1, 2005, the Comptroller General shall furnish data from such surveys to the Secretary for use in setting the payment rates under subparagraph (A) for 2006.“(II) Recommendations.—Upon the completion of such surveys, the Comptroller General shall recommend to the Secretary the frequency and methodology of subsequent surveys to be conducted by the Secretary under clause (ii).“(ii) Subsequent secretarial surveys.—The Secretary, taking into account such recommendations, shall conduct periodic subsequent surveys to determine the hospital acquisition cost for each specified covered outpatient drug for use in setting the payment rates under subparagraph (A).“(iii) Survey requirements.—The surveys conducted under clauses (i) and (ii) shall have a large sample of hospitals that is sufficient to generate a statistically significant estimate of the average hospital acquisition cost for each specified covered outpatient drug. With respect to the surveys conducted under clause (i), the Comptroller General shall report to Congress on the justification for the size of the sample used in order to assure the validity of such estimates.“(iv) Differentiation in cost.—In conducting surveys under clause (i), the Comptroller General shall determine and report to Congress if there is (and the extent of any) variation in hospital acquisition costs 117 STAT. 2309 for drugs among hospitals based on the volume of covered OPD services performed by such hospitals or other relevant characteristics of such hospitals (as defined by the Comptroller General).“(v) Comment on proposed rates.—Not later than 30 days after the date the Secretary promulgated proposed rules setting forth the payment rates under subparagraph (A) for 2006, the Comptroller General shall evaluate such proposed rates and submit to Congress a report regarding the appropriateness of such rates based on the surveys the Comptroller General has conducted under clause (i).“(E) Adjustment in payment rates for overhead costs.—“(i) Medpac report on drug apc design.—The Medicare Payment Advisory Commission shall submit to the Secretary, not later than July 1, 2005, a report on adjustment of payment for ambulatory payment classifications for specified covered outpatient drugs to take into account overhead and related expenses, such as pharmacy services and handling costs. Such report shall include—“(I) a description and analysis of the data available with regard to such expenses;“(II) a recommendation as to whether such a payment adjustment should be made; and“(III) if such adjustment should be made, a recommendation regarding the methodology for making such an adjustment.“(ii) Adjustment authorized.—The Secretary may adjust the weights for ambulatory payment classifications for specified covered outpatient drugs to take into account the recommendations contained in the report submitted under clause (i).“(F) Classes of drugs.—For purposes of this paragraph: “(i) Sole source drugs.—The term ‘sole source drug’ means—“(I) a biological product (as defined under section 1861(t)(1)); or“(II) a single source drug (as defined in section 1927(k)(7)(A)(iv)).“(ii) Innovator multiple source drugs.—The term ‘innovator multiple source drug’ has the meaning given such term in section 1927(k)(7)(A)(ii).“(iii) Noninnovator multiple source drugs.—The term ‘noninnovator multiple source drug’ has the meaning given such term in section 1927(k)(7)(A)(iii).“(G) Reference average wholesale price.—The term ‘reference average wholesale price’ means, with respect to a specified covered outpatient drug, the average wholesale price for the drug as determined under section 1842(o) as of May 1, 2003.“(H) Inapplicability of expenditures in determining conversion, weighting, and other adjustment factors.—Additional expenditures resulting from this paragraph shall not be taken into account in establishing 117 STAT. 2310 the conversion, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.“(15) Payment for new drugs and biologicals until hcpcs code assigned.—With respect to payment under this part for an outpatient drug or biological that is covered under this part and is furnished as part of covered OPD services for which a HCPCS code has not been assigned, the amount provided for payment for such drug or biological under this part shall be equal to 95 percent of the average wholesale price for the drug or biological.”.(2) Reduction in threshold for separate apcs for drugs.—Section 1833(t)(16), as redesignated section 411(b), is amended by adding at the end the following new subparagraph:“(B) Threshold for establishment of separate apcs for drugs.—The Secretary shall reduce the threshold for the establishment of separate ambulatory payment classification groups (APCs) with respect to drugs or biologicals to $50 per administration for drugs and biologicals furnished in 2005 and 2006.”.(3) Exclusion of separate drug apcs from outlier payments.—Section 1833(t)(5) is amended by adding at the end the following new subparagraph:“(E) Exclusion of separate drug and biological apcs from outlier payments.—No additional payment shall be made under subparagraph (A) in the case of ambulatory payment classification groups established separately for drugs or biologicals.”.(4) Payment for pass through drugs.—Section 1833(t)(6)(D)(i) (42 U.S.C. 1395l(t)(6)(D)(i)) is amended by inserting after “under section 1842(o)” the following: “(or if the drug or biological is covered under a competitive acquisition contract under section 1847B, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary for purposes of this paragraph)”.(5) Conforming amendment to budget neutrality requirement.—Section 1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B)) is amended by adding at the end the following: “In determining adjustments under the preceding sentence for 2004 and 2005, the Secretary shall not take into account under this subparagraph or paragraph (2)(E) any expenditures that would not have been made but for the application of paragraph (14).”. (6) Effective date.—The amendments made by this subsection shall apply to items and services furnished on or after January 1, 2004.(b) Special Payment for Brachytherapy.—(1) In general.—Section 1833(t)(16), as redesignated by section 411(b) and as amended by subsection (a)(2), is amended by adding at the end the following new subparagraph:“(C) Payment for devices of brachytherapy at charges adjusted to cost.—Notwithstanding the preceding provisions of this subsection, for a device of brachytherapy consisting of a seed or seeds (or radioactive source) furnished on or after January 1, 2004, and before January 1, 2007, the payment basis for the device under 117 STAT. 2311 this subsection shall be equal to the hospital’s charges for each device furnished, adjusted to cost. Charges for such devices shall not be included in determining any outlier payment under this subsection.”.(2) Specification of groups for brachytherapy devices.—Section 1833(t)(2) (42 U.S.C. 1395l(t)(2)) is amended—(A) in subparagraph (F), by striking “and” at the end;(B) in subparagraph (G), by striking the period at the end and inserting “; and”; and(C) by adding at the end the following new subparagraph: “(H) with respect to devices of brachytherapy consisting of a seed or seeds (or radioactive source), the Secretary shall create additional groups of covered OPD services that classify such devices separately from the other services (or group of services) paid for under this subsection in a manner reflecting the number, isotope, and radioactive intensity of such devices furnished, including separate groups for palladium-103 and iodine-125 devices.”.(3) GAO report.—The Comptroller General of the United States shall conduct a study to determine appropriate payment amounts under section 1833(t)(16)(C) of the Social Security Act, as added by paragraph (1), for devices of brachytherapy. Not later than January 1, 2005, the Comptroller General shall submit to Congress and the Secretary a report on the study conducted under this paragraph, and shall include specific recommendations for appropriate payments for such devices.