Hospital Fair Competition Act of 2005 - Amends title XVIII (Medicare) of the Social Security Act with respect to hospital payments. Provides for the use of estimated costs rather than average charges in establishing weighting factors for diagnosis-related groups under the inpatient hospital prospective payment system.
Revises requirements for exceptions to the prohibition against certain physician self-referrals to specialty hospitals in which a physician has invested.
Exempts from the limitation on such referrals, and any liability for criminal penalties, specified arrangements between hospitals and physicians.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1002 Introduced in Senate (IS)]
109th CONGRESS
1st Session
S. 1002
To amend title XVIII of the Social Security Act to make improvements in
payments to hospitals under the medicare program, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 11, 2005
Mr. Grassley (for himself and Mr. Baucus) introduced the following
bill; which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend title XVIII of the Social Security Act to make improvements in
payments to hospitals under the medicare program, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Hospital Fair Competition Act of
2005''.
SEC. 2. HOSPITAL PAYMENT IMPROVEMENTS.
(a) Use of Estimated Costs Rather Than Average Charges in
Establishing Weighting Factors for Diagnosis-Related Groups Under the
Inpatient Hospital Prospective Payment System.--
(1) In general.--Section 1886(d)(4)(B) of the Social
Security Act (42 U.S.C. 1395ww(d)(4)(B)) is amended--
(A) by inserting ``(i)'' after ``(B)''; and
(B) by adding at the end the following new clause:
``(ii) For fiscal years beginning after fiscal year 2006, in
establishing the weighting factors under clause (i), the Secretary
shall ensure (to the extent feasible) that such factors reflect the
estimated costs of furnishing care in each diagnosis-related group.''.
(2) No requirement for annual adjustment for changes in
costs.--Section 1886(d)(4)(C)(i) of the Social Security Act (42
U.S.C. 1395ww(d)(4)(C)(i)) is amended by adding at the end the
following new sentence: ``Notwithstanding the preceding
sentence, the Secretary may adjust the weighting factors
established under subparagraph (B) less frequently than
annually (but in no case less frequently than once every 5
years) in carrying out the requirement under clause (ii) of
such subparagraph.''.
(b) Calculation of Weighting Factors at Hospital Level Under the
Inpatient Hospital Prospective Payment System.--Section 1886(d)(4)(B)
of the Social Security Act (42 U.S.C. 1395ww(d)(4)(B)), as amended by
subsection (a)(1), is amended by adding at the end the following new
clause:
``(iii) For fiscal years beginning after fiscal year 2006, in
establishing the weighting factors under clause (i), the Secretary
shall calculate such factors at a hospital level and then aggregate
such factors to a national level.''.
(c) Adjustment of Weighting Factors for Diagnosis-Related Groups
Under the Inpatient Hospital Prospective Payment System To Finance
High-Cost Outlier Cases and To Account for Changes in the Distribution
of Such Cases.--
(1) PPS hospitals.--
(A) In general.--Section 1886(d)(3)(B) of the
Social Security Act (42 U.S.C. 1395ww(d)(3)(B)) is
amended to read as follows:
``(B) Reducing for value of outlier payments.--
``(i) Reduction of average standardized amounts.--
The Secretary shall, for discharges occurring before
fiscal year 2007, reduce each of the average
standardized amounts determined under subparagraph (A)
by a factor equal to the proportion of payments under
this subsection (as estimated by the Secretary) based
on DRG prospective payment amounts which are additional
payments described in paragraph (5)(A) (relating to
outlier payments).
``(ii) Reduction of weighting factors.--The
Secretary shall, for discharges occurring after fiscal
year 2006, reduce each of the weighting factors
determined under paragraph (4)(B) by a factor equal to
the proportion of payments in the diagnosis-related
group under this subsection (as estimated by the
Secretary) based on DRG prospective payment amounts
which are additional payments described in paragraph
(5)(A) (relating to outlier payments).''.
(B) Annual adjustment to account for projected
changes in the distribution of outlier payments within
diagnosis-related groups.--Section 1886(d)(4)(C)(i) of
the Social Security Act (42 U.S.C. 1395ww(d)(4)(C)(i)),
as amended by subsection (a)(2), is amended by
inserting ``, including, for discharges occurring after
fiscal year 2006, projected changes in the distribution
of additional payments described in paragraph (5)(A)
within diagnosis-related groups'' before the period at
the end of the first sentence.
(C) Conforming amendments.--Section 1886(d)(3)(D)
of the Social Security Act (42 U.S.C. 1395ww(d)(3)(D))
is amended--
(i) in clauses (i)(I), (ii)(I), and
(iii)(I), by striking ``reduced under
subparagraph (B)'' and inserting ``reduced
under subparagraph (B)(i)''; and
(ii) in clause (iii)(II), by inserting ``,
and, in the case of a fiscal year beginning
after 2006, reduced under subparagraph
(B)(ii)'' before the period at the end.
(2) Puerto rico hospitals.--
(A) Computing puerto rico drg-specific rates.--
Section 1886(d)(9)(C)(ii) of the Social Security Act
(42 U.S.C. 1395ww(d)(9)(C)(ii)) is amended--
(i) by inserting ``, for discharges
occurring before fiscal year 2007,'' after
``The Secretary shall''; and
(ii) by striking ``fiscal year 2004 and
thereafter'' and inserting ``fiscal years 2004,
2005, and 2006''.
(B) Conforming amendments.--Section
1886(d)(9)(C)(iii)(II) of the Social Security Act (42
U.S.C. 1395ww(d)(9)(C)(iii)(II)) is amended by
inserting ``and reduced under paragraph (3)(B)(ii)''
after ``paragraph (4)(B)''.
(d) Ensuring That Diagnostic-Related Groups Appropriately Capture
the Difference in Severity of Illness of Patients.--Section
1886(d)(4)(A) of the Social Security Act (42 U.S.C. 1395ww(d)(4)(A)) is
amended by adding at the end the following new sentence: ``In
establishing the classification of inpatient discharges by diagnosis-
related groups under the preceding sentence, the Secretary shall ensure
that such groups appropriately capture the difference in severity of
illness of patients.''.
(e) Phase-In of Changes to the Inpatient Hospital Prospective
Payment System.--Section 1886(d) of the Social Security Act (42 U.S.C.
1395ww(d)) is amended by adding at the end the following new paragraph:
``(14) Notwithstanding the preceding provisions of this subsection,
the Secretary shall phase in the application of the amendments made by
subsections (a), (b), (c), and (d) of section 2 of the Hospital Fair
Competition Act of 2005 over a 3-fiscal year period beginning with
fiscal year 2007. In implementing the phase-in under the preceding
sentence, the Secretary shall take into account the negative impact
that the phase-in may have on certain hospitals.''.
SEC. 3. PROHIBITION ON CERTAIN PHYSICIAN SELF REFERRALS.
(a) Prohibition.--Section 1877(d) of the Social Security Act (42
U.S.C. 1395nn(d)) is amended in each of paragraphs (2)(B) and (3)(B) by
striking ``effective for the 18-month period beginning on the date of
enactment of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003'' and inserting ``on and after December 8,
2003''.
(b) Revisions to the Requirements to Qualify for the Exception to
the Definition of Specialty Hospital.--Section 1877(h)(7)(B) of the
Social Security Act (42 U.S.C. 1395nn(h)(7)(B)) is amended--
(1) by redesignating clauses (iii), (iv), and (v) as
clauses (vi), (vii), and (viii), respectively;
(2) by inserting after clause (ii) the following new
clauses:
``(iii) for which the percent of investment
in the hospital by physician investors at any
time on or after June 8, 2005, is no greater
than the percent of such investment by
physician investors as of such date;
``(iv) for which the percent of investment
in the hospital by any physician investor at
any time on or after June 8, 2005, is no
greater than the percent of such investment by
such physician as of such date;
``(v) for which the number of operating
rooms at the hospital at any time on or after
June 8, 2005, is no greater than the number of
such rooms as of such date;''; and
(3) by striking clause (vii), as so redesignated, and
inserting the following:
``(vii) for which--
``(I) during the period beginning
on December 8, 2003, and ending on June
7, 2005, 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
``(II) the number of beds at the
hospital at any time on or after June
8, 2005, is no greater than the number
of such beds as of such date; and''.
(c) Effective Date.--The amendments made by this section shall take
effect on June 8, 2005.
SEC. 4. PERMISSIBLE COORDINATED CARE INCENTIVE ARRANGEMENTS BETWEEN
HOSPITALS AND PHYSICIANS.
(a) Establishment of Requirements for Arrangements and Exemption
From Imposition of Civil Monetary Penalties.--Section 1128A of the
Social Security Act (42 U.S.C. 1320a-7a) is amended by adding at the
end the following new subsection:
``(o) Arrangements Between Hospitals and Physicians.--
``(1) In general.--Subsection (b) shall not apply to an
arrangement that meets the requirements under paragraph (2).
``(2) Requirements.--
``(A) Establishment.--The Secretary shall establish
requirements for arrangements between hospitals or
critical access hospitals and physicians in which
physicians share in the savings experienced by the
hospital or critical access hospital by reason of cost-
reduction efforts that involve the physicians.
``(B) Protections.--In establishing the
requirements under subparagraph (A), the Secretary
shall ensure that--
``(i) the quality of care provided to
individuals is protected under the arrangement;
and
``(ii) financial incentives that could
affect physician referrals are minimized.
``(C) Monitor.--The Secretary shall establish
procedures to monitor arrangements described in
subparagraph (A) to ensure that such agreements meet
the requirements under such subparagraph.''.
(b) Exemption From Criminal Penalties.--Section 1128B(b)(3) of the
Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is amended--
(1) in subparagraph (G), by striking ``and'' at the end;
(2) in subparagraph (H), as added by section 237(d) of the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Public Law 108-173; 117 Stat. 2213)--
(A) by moving such subparagraph 2 ems to the left;
and
(B) by striking the period at the end and inserting
a semicolon;
(3) by redesignating subparagraph (H), as added by section
431(a) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2287),
as subparagraph (I);
(4) in subparagraph (I), as so redesignated--
(A) by moving such subparagraph 2 ems to the left;
and
(B) by striking the period at the end and inserting
``; and''; and
(5) by adding at the end the following new subparagraph:
``(J) an arrangement that meets the requirements
established under section 1128A(o).''.
(c) Exemption From Limitation on Certain Physician Referrals.--
Section 1877(e) of the Social Security Act (42 U.S.C. 1395nn(e)) is
amended by adding at the end the following new paragraph:
``(9) Arrangements between hospitals and physicians.--An
arrangement that meets the requirements established under
section 1128A(o).''.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S4946-4947)
Read twice and referred to the Committee on Finance.
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