CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE LIMITS ON PHYSICIAN REFERRALS.

SEC. 507. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE LIMITS ON PHYSICIAN REFERRALS.(a) Limits on Physician Referrals.—(1) Ownership and investment interests in whole hospitals.—(A) In general.—Section 1877(d)(3) (42 U.S.C. 1395nn(d)(3)) is amended—(i) by striking “, and” at the end of subparagraph (A) and inserting a semicolon; and(ii) by redesignating subparagraph (B) as subparagraph (C) and inserting after subparagraph (A) the following new subparagraph:“(B) effective for the 18-month period beginning on the date of the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the hospital is not a specialty hospital (as defined in subsection (h)(7)); and”.(B) Definition.—Section 1877(h) (42 U.S.C. 1395nn(h)) is amended by adding at the end the following:“(7) Specialty hospital.—“(A) In general.—For purposes of this section, except as provided in subparagraph (B), the term ‘specialty hospital’ means a subsection (d) hospital (as defined in section 1886(d)(1)(B)) that is primarily or exclusively engaged in the care and treatment of one of the following categories:“(i) Patients with a cardiac condition. “(ii) Patients with an orthopedic condition. “(iii) Patients receiving a surgical procedure.117 STAT. 2296“(iv) Any other specialized category of services that the Secretary designates as inconsistent with the purpose of permitting physician ownership and investment interests in a hospital under this section.“(B) Exception.—For purposes of this section, the term ‘specialty hospital’ does not include any hospital—“(i) determined by the Secretary—“(I) to be in operation before November 18, 2003; or“(II) under development as of such date;“(ii) for which the number of physician investors at any time on or after such date is no greater than the number of such investors as of such date; “(iii) for which the type of categories described in subparagraph (A) at any time on or after such date is no different than the type of such categories as of such date;“(iv) for which any increase in the number of beds occurs only in the facilities on the main campus of the hospital and does not exceed 50 percent of the number of beds in the hospital as of November 18, 2003, or 5 beds, whichever is greater; and “(v) that meets such other requirements as the Secretary may specify.”.(2) Ownership and investment interests in a rural provider.—Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended to read as follows:“(2) Rural providers.—In the case of designated health services furnished in a rural area (as defined in section 1886(d)(2)(D)) by an entity, if—“(A) substantially all of the designated health services furnished by the entity are furnished to individuals residing in such a rural area; and“(B) effective for the 18-month period beginning on the date of the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the entity is not a specialty hospital (as defined in subsection (h)(7)).”.(b) Application of Exception for Hospitals Under Development.—For purposes of section 1877(h)(7)(B)(i)(II) of the Social Security Act, as added by subsection (a)(1)(B), in determining whether a hospital is under development as of November 18, 2003, the Secretary shall consider—(1) whether architectural plans have been completed, funding has been received, zoning requirements have been met, and necessary approvals from appropriate State agencies have been received; and (2) any other evidence the Secretary determines would indicate whether a hospital is under development as of such date.(c) Studies.—(1) MedPAC study.—The Medicare Payment Advisory Commission, in consultation with the Comptroller General of the United States, shall conduct a study to determine—(A) any differences in the costs of health care services furnished to patients by physician-owned specialty hospitals and the costs of such services furnished by local 117 STAT. 2297 full-service community hospitals within specific diagnosis-related groups;(B) the extent to which specialty hospitals, relative to local full-service community hospitals, treat patients in certain diagnosis-related groups within a category, such as cardiology, and an analysis of the selection;(C) the financial impact of physician-owned specialty hospitals on local full-service community hospitals; (D) how the current diagnosis-related group system should be updated to better reflect the cost of delivering care in a hospital setting; and(E) the proportions of payments received, by type of payer, between the specialty hospitals and local full-service community hospitals.(2) HHS study.—The Secretary shall conduct a study of a representative sample of specialty hospitals—(A) to determine the percentage of patients admitted to physician-owned specialty hospitals who are referred by physicians with an ownership interest;(B) to determine the referral patterns of physician owners, including the percentage of patients they referred to physician-owned specialty hospitals and the percentage of patients they referred to local full-service community hospitals for the same condition; (C) to compare the quality of care furnished in physician-owned specialty hospitals and in local full-service community hospitals for similar conditions and patient satisfaction with such care; and(D) to assess the differences in uncompensated care, as defined by the Secretary, between the specialty hospital and local full-service community hospitals, and the relative value of any tax exemption available to such hospitals.(3) Reports.—Not later than 15 months after the date of the enactment of this Act, the Commission and the Secretary, respectively, shall each submit to Congress a report on the studies conducted under paragraphs (1) and (2), respectively, and shall include any recommendations for legislation or administrative changes.