[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 823 Introduced in Senate (IS)]






108th CONGRESS
  1st Session
                                 S. 823

  To amend title XVIII of the Social Security Act to provide for the 
   expeditious coverage of new medical technology under the medicare 
                    program, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 8, 2003

 Mr. Santorum (for himself and Mrs. Lincoln, Mr. Jeffords, Mr. Kyl, Mr. 
        Coleman, and Mrs. Clinton) introduced the following bill; which 
        was read twice and referred to the Committee on FinanceYYYYYYYY

_______________________________________________________________________

                                 A BILL


 
  To amend title XVIII of the Social Security Act to provide for the 
   expeditious coverage of new medical technology 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; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Innovation Responsiveness Act of 2003''.
    (b) References.--Except as otherwise specified, whenever in this 
Act an amendment or repeal is expressed in terms of an amendment to or 
repeal of a section or other provision, the references shall be 
considered to be made to that section or other provision of the Social 
Security Act.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; references; table of contents.
                TITLE I--PROVISIONS RELATING TO COVERAGE

Sec. 101. Deadlines for implementing national coverage, coding, and 
                            payment determinations.
Sec. 102. Council for Technology and Innovation.
Sec. 103. Improvements to the medicare coverage determination appeals 
                            process.
Sec. 104. Medicare coverage of routine costs associated with certain 
                            clinical trials.
                TITLE II--PROVISIONS RELATING TO CODING

Sec. 201. Improvements to the HCPCS coding assignment, inpatient coding 
                            assignment, and DRG assignment processes.
Sec. 202. Process for adoption of ICD-10-PCS as data standard.
               TITLE III--PROVISIONS RELATING TO PAYMENT

Sec. 301. Use of internal and external data for annual adjustments to 
                            hospital payment systems.
Sec. 302. Limitation on use of foreign payer data in determining 
                            medicare payment amounts.
Sec. 303. Recognition of new medical technologies under inpatient 
                            hospital PPS.
Sec. 304. Preservation of local medical review process under medicare 
                            administrative contractor reforms.
Sec. 305. Inherent reasonableness.

                TITLE I--PROVISIONS RELATING TO COVERAGE

 SEC. 101. DEADLINES FOR IMPLEMENTING NATIONAL COVERAGE, CODING, AND 
              PAYMENT DETERMINATIONS.

    (a) In General.--Section 1862 (42 U.S.C. 1395y) is amended by 
inserting after subsection (c) the following new subsection:
    ``(d)(1)(A)(i) Subject to the succeeding provisions of this 
paragraph, upon receipt of a request for a national coverage 
determination from an interested party, the Secretary shall make and 
implement (if applicable) the national coverage determination for that 
new technology within the following time frames:
            ``(I) In the case of a national coverage determination that 
        does not require a technology assessment described in 
        subparagraph (D), not later than the end of the 6-month period 
        that begins on the date a request for the national coverage 
        determination has been received by the Secretary, 
        notwithstanding the receipt by the Secretary of new evidence 
        (if any) during such period.
            ``(II) In the case of a national coverage determination 
        that requires such a technology assessment, not later than the 
        end of the 12-month period that begins on the date a request 
        for the national coverage determination has been received by 
        the Secretary.
    ``(ii) In this subparagraph--
            ``(I) the term `implement' includes determining what code, 
        if any, is assigned to the particular item or service; 
        determining the amount of payment to be made under this title 
        for the item or service; assigning the item or service, and 
        codes for the item or service, to appropriate payment groups; 
        incorporating the coverage, coding, and payment determinations 
        into the information processing systems of the Secretary and 
        fiscal intermediaries and carriers; and taking such other steps 
        as are necessary to make payments for the item or service no 
        later than the end of the applicable period described in clause 
        (i); and
            ``(II) the term `interested party' means individuals 
        entitled to benefits under part A, or enrolled under part B, or 
        both, who are in need of the items or services that are the 
        subject of the coverage determination, providers of services, 
        physicians, practitioners, suppliers, and manufacturers of such 
        items or services.
    ``(B) In making a national coverage determination under this 
subsection, the Secretary shall take one of the following actions:
            ``(i) Issue a national coverage determination, with or 
        without limitations.
            ``(ii) Issue a national noncoverage determination.
            ``(iii) Issue a determination that no national coverage or 
        noncoverage determination is appropriate as of the end of such 
        period with respect to national coverage of such items or 
        services.
    ``(C) If the Secretary fails to take an action under subparagraph 
(B) within the applicable period under subparagraph (A)(i), the 
Secretary shall issue a notice that includes the following information:
            ``(i) A statement that the Secretary cannot make and (if 
        applicable) implement (as defined in subparagraph (A)(ii)(I)) a 
        national coverage determination within the applicable time 
        period.
            ``(ii) The identification of substantive issues 
        outstanding.
            ``(iii) A statement of what is required, including the 
        process involved, to resolve those issues.
            ``(iv) The date by which the Secretary will make a national 
        coverage determination under subparagraph (B) and (if 
        applicable) implement the national coverage determination.
    ``(D)(i) A technology assessment referred to in subparagraph (A) is 
a formal, written technology assessment, conducted by an entity or 
organization other than the Centers for Medicare & Medicaid Services 
(in this subparagraph referred to as the `CMS'), or review by an 
advisory committee appointed to advise the Administrator of the CMS on 
matters relating to the interpretation, application, or implementation 
of subsection (a), that the Administrator reasonably finds, in a 
written notice issued before the end of the 6-month period specified in 
subparagraph (A)(i), that such an assessment or review is necessary for 
the Administrator to make the national coverage determination.
    ``(ii) Such technology assessment or review shall only be 
considered necessary if the CMS lacks adequate expertise to evaluate 
the matter itself.
    ``(E) In making a national coverage determination under 
subparagraph (B), the Secretary shall include all the information 
described in subparagraphs (C) and (D) of paragraph (2), and in the 
case of the implementation of the national coverage determination, 
applicable codes and payment amounts for the new item or service.
    ``(2) In making a national coverage determination (as defined in 
section 1869(f)(1)(B)) the Secretary shall ensure that--
            ``(A) the public is afforded notice and opportunity to 
        comment prior to implementation by the Secretary of the 
        determination;
            ``(B) meetings of advisory committees established under 
        section 1114(f) with respect to the determination are made on 
        the record;
            ``(C) in making the determination, the Secretary has 
        considered applicable information (including clinical 
        experience and medical, technical, and scientific evidence) 
        with respect to the subject matter of the determination;
            ``(D) in issuing the determination, provide a clear 
        statement of the basis for the determination (including 
        responses to comments received from the public) and the 
        assumptions underlying that basis; and
            ``(E) make available to the public the data (other than 
        proprietary data) considered in making the determination.''.
    (b) Conforming Amendment.--Subsection (a) of such section is 
amended by striking the third sentence.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, and apply to requests 
for national coverage determinations made on or after the date that is 
90 days after such effective date.

SEC. 102. COUNCIL FOR TECHNOLOGY AND INNOVATION.

    Section 1868 (42 U.S.C. 1395ee) is amended--
            (1) by adding at the end of the heading the following: ``; 
        COUNCIL FOR TECHNOLOGY AND INNOVATION'';
            (2) by inserting ``Practicing physicians advisory 
        council.--(1)'' after ``(a)'';
            (3) in paragraph (1), as so redesignated under paragraph 
        (2), by striking ``in this section'' and inserting ``in this 
        subsection'';
            (4) by redesignating subsections (b) and (c) as paragraphs 
        (2) and (3), respectively; and
            (5) by adding at the end the following new subsection:
    ``(c) Council for Technology and Innovation.--
            ``(1) Establishment.--The Secretary shall establish a 
        Council for Technology and Innovation within the Centers for 
        Medicare & Medicaid Services (in this section referred to as 
        `CMS').
            ``(2) Composition.--The Council shall be composed of senior 
        CMS staff and clinicians and shall be chaired by the Executive 
        Coordinator for Technology and Innovation (appointed or 
        designated under paragraph (4)).
            ``(3) Duties.--The Council shall coordinate the activities 
        of coverage, coding, and payment processes with respect to new 
        technologies and procedures, including new drug therapies, 
        under this title in order to expedite patient access to new 
        technologies and therapies.
            ``(4) Executive coordinator for technology and 
        innovation.--The Secretary shall appoint (or designate) a 
        noncareer appointee (as defined in section 3132(a)(7) of title 
        5, United States Code) who shall serve as the Executive 
        Coordinator for Technology and Innovation. Such executive 
        coordinator shall report to the Administrator of CMS, shall 
        chair the Council, shall oversee the execution of its duties, 
        shall serve as a single point of contact for outside groups and 
        entities regarding the coverage, coding, and payment processes 
        under this title, and shall prepare reports to Congress 
        required under section 1869(f)(7).''.

SEC. 103. IMPROVEMENTS TO THE MEDICARE COVERAGE DETERMINATION APPEALS 
              PROCESS.

    (a) In General.--Section 1869(f) (42 U.S.C. 1395ff(f)) is amended--
            (1) in paragraph (1)(A)(iii)--
                    (A) in subclause (I)--
                            (i) by inserting ``(in all forms, including 
                        written and oral depositions, interrogatories, 
                        and requests for admission)'' after 
                        ``discovery''; and
                            (ii) by inserting ``and shall determine 
                        when any new evidence not previously considered 
                        by the Centers for Medicare & Medicaid Services 
                        (hereafter in this subsection referred to as 
                        `CMS') is material and should first be 
                        considered by CMS'' after ``determination'' the 
                        second place it appears; and
                    (B) by redesignating subclauses (II) and (III) as 
                subclauses (III) and (IV), respectively, and inserting 
                after subclause (I) the following:
                                    ``(II) shall determine when a 
                                complaint has become moot;'';
            (2) in paragraph (1)(A)(v), by adding at the end the 
        following: ``Such a decision shall be implemented not later 
        than 30 days after receipt of the decision, and any request for 
        a stay of such implementation pending further appeal or 
        reconsideration shall be supported by evidence demonstrating a 
        material risk of irreparable harm.'';
            (3) in paragraph (2)(A)(i)--
                    (A) in subclause (I)--
                            (i) by inserting ``(in all forms, including 
                        but not limited to, written and 
oral depositions, interrogatories, and requests for admission)'' after 
``discovery''; and
                            (ii) by inserting ``and shall determine 
                        when any new evidence not previously considered 
                        by CMS material and should first be considered 
                        by CMS'' after ``determination'' the second 
                        place it appears; and
                    (B) by redesignating subclauses (II) and (III) as 
                subclauses (III) and (IV), respectively, and inserting 
                after subclause (I) the following:
                                    ``(II) shall determine when a 
                                complaint has become moot;'';
            (4) by adding at the end of paragraph (2)(A) the following:
                            ``(v) Any request for a stay of a decision 
                        pending further appeal or reconsideration shall 
                        be supported by evidence demonstrating a 
                        material risk of irreparable harm.'';
            (5) in paragraph (5)--
                    (A) by inserting ``(or the heirs or assignees of 
                such individuals)'' after ``individuals''; and
                    (B) by adding at the end the following: ``For 
                purposes of the preceding sentence, individuals `in 
                need of an item or service' include individuals for 
                whom a claim for the item or service is denied prior to 
                appeal, without regard to whether or not such 
                individual obtains such item or service after such 
                denial.''; and
            (6) by adding at the end the following:
            ``(9) Promulgation of regulations.--The Departmental 
        Appeals Board (and any successor entity) shall have the 
        exclusive authority to promulgate regulations interpreting this 
        subsection. Such regulations shall not be subject to review by 
        the Secretary or the Office of Management and Budget, but are 
        instead deemed to be subject to the review process established 
        by sections 801 through 808 of title 5, United States Code. No 
        regulations shall be issued to interpret this subsection unless 
        such regulations are issued by the Departmental Appeals 
        Board.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to any local or national coverage determination made on or after 
January 1, 2004.

SEC. 104. MEDICARE COVERAGE OF ROUTINE COSTS ASSOCIATED WITH CERTAIN 
              CLINICAL TRIALS.

    (a) In General.--With respect to the coverage of routine costs of 
care for beneficiaries participating in a qualifying clinical trial, as 
set forth on the date of the enactment of this Act in National Coverage 
Determination 30-1 of the Medicare Coverage Issues Manual, the 
Secretary shall deem clinical trials conducted in accordance with an 
investigational device exemption approved under section 520(g) of the 
Federal Food, Drug, and Cosmetic Act (42 U.S.C. 360j(g)) to be 
automatically qualified for such coverage.
    (b) Rule of Construction.--Nothing in this section shall be 
construed as authorizing or requiring the Secretary to modify the 
regulations set forth on the date of the enactment of this Act at 
subpart B of part 405 of title 42, Code of Federal Regulations, or 
subpart A of part 411 of such title, relating to coverage of, and 
payment for, a medical device that is the subject of an investigational 
device exemption by the Food and Drug Administration (except as may be 
necessary to implement subsection (a)).
    (c) Effective Date.--This section shall apply to clinical trials 
begun before, on, or after the date of the enactment of this Act and to 
items and services furnished on or after such date.

                TITLE II--PROVISIONS RELATING TO CODING

SEC. 201. IMPROVEMENTS TO THE HCPCS CODING ASSIGNMENT, INPATIENT CODING 
              ASSIGNMENT, AND DRG ASSIGNMENT PROCESSES.

    (a) Inpatient PPS.--Section 1886(d)(5)(K) (42 U.S.C. 
1395ww(d)(5)(K)) is amended by adding at the end the following new 
clause:
                            ``(vii)(I) The Secretary shall by 
                        regulation establish a process that provides 
                        for the assignment of inpatient hospital codes 
                        (as defined in clause (iii)) for new medical 
                        services and related technologies as of April 1 
                        of each year (beginning with 2003).
                            ``(II) Such process shall provide for the 
                        opportunity to apply for the assignment of an 
                        inpatient hospital code to items that are the 
                        subject of an application submitted for 
                        investigation under section  520(g) of the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360j(g)).
                            ``(III) The assignment of codes as of the 
                        date specified in subclause (I) shall not 
                        require the Secretary to adjust the payment (or 
                        diagnosis-related group classification) under 
                        this subsection until the first fiscal year 
                        that begins after such date.''.
    (b) HCPCS Level II Codes.--
            (1) Process for assignment of codes for new technologies.--
        The Secretary of Health and Human Services (in this section 
        referred to as the ``Secretary'') shall by regulation establish 
        a process that provides for the assignment of HCPCS Level II 
        codes each calendar quarter for new medical services and 
        technologies. Such process shall ensure that codes are assigned 
        and implemented no later than 180 days after a formal 
        application for such a code is received.
            (2) Elimination of minimum period of marketing experience 
        requirement.--The Secretary may not condition consideration or 
        approval of an application for a HCPCS Level II code on having 
        a minimum period of marketing experience with the item or 
        product that is the subject of the application.
            (3) Definition.--In this subsection, the term ``HCPCS Level 
        II codes'' means the level II alphanumeric codes under the 
        Healthcare Common Procedure Coding System (HCPCS).
    (c) Procedures for Issuance of Temporary National HCPCS Codes.--Not 
later than December 31, 2003, the Secretary shall implement revised 
procedures for the issuance of temporary national HCPCS codes for use 
in the submission of claims for items and services under Part B of 
title XVIII of the Social Security Act. Such procedures shall provide 
for--
            (1) the issuance of a determination with respect to a 
        temporary national HCPCS coding request within 90 days of 
        receipt of a request from any interested party;
            (2) the implementation of any codes subject to a positive 
        determination under paragraph (1) not later than 180 days after 
        receipt of the submission of the original coding request;
            (3) upon the receipt of a request from a fiscal 
        intermediary with an agreement under section 1816 of the Social 
        Security Act (42 U.S.C. 1395h) or a carrier with a contract 
        under section 1842 of such Act (42 U.S.C. 1395u), the automatic 
        issuance of temporary national HCPCS codes for any item or 
        service that is the subject of a local medical review policy 
        issued by such intermediary or carrier with respect to whether 
        such item or service is covered under title XVIII of such Act 
        in a geographic area served by such intermediary or carrier; 
        and
            (4) the public posting of, and opportunity for public 
        comment on, pending coding requests.

SEC. 202. PROCESS FOR ADOPTION OF ICD-10-PCS AS DATA STANDARD.

    Section 1172(f) (42 U.S.C. 1320d-1(f)) is amended by inserting 
after the first sentence the following: ``Notwithstanding the preceding 
sentence, if the National Committee on Vital and Health Statistics has 
not made a recommendation to the Secretary before April 1, 2003, with 
respect to the adoption of the International Classification of 
Diseases, 10th Revision, Procedure Coding System (`ICD-10-PCS') as a 
standard under this part for the reporting of inpatient hospital 
services, the Secretary may adopt ICD-10-PCS as such a standard on or 
after such date without receiving such a recommendation.''.

               TITLE III--PROVISIONS RELATING TO PAYMENT

SEC. 301. USE OF INTERNAL AND EXTERNAL DATA FOR ANNUAL ADJUSTMENTS TO 
              HOSPITAL PAYMENT SYSTEMS.

    (a) Inpatient Hospital PPS.--Section 1886(d)(4) (42 U.S.C. 
1395ww(d)(4)) is amended by adding at the end the following new 
subparagraphs:
    ``(D)(i) In determining annual adjustments under subparagraph (C), 
the Secretary may not--
            ``(I) decline to use internal data if the data reflect a 
        representative sample of cases; or
            ``(II) establish a minimum period of time (such as one 
        year) from which such data must be drawn.
    ``(ii) The Secretary shall establish a reasonable deadline for the 
submission of a request for adjustment based on internal data to be 
used in making the adjustments required by subparagraph (C). In no 
event may the deadline established under this clause be more than 8 
months before the first day of the payment update period for which the 
adjustment or adjustments to which the data relate would be effective.
    ``(E)(i) Subject to the succeeding provisions of this subparagraph, 
in determining the adjustments under subparagraph (C), the Secretary 
shall utilize external data if such data are based on a representative 
sample of cases.
    ``(ii) In determining the adjustments under subparagraph (C), the 
Secretary may not--
            ``(I) decline to use external data submitted for 
        consideration under the process established under clause (iv) 
        if such data enable the Secretary to identify or refine 
        internal data for use in making such an adjustment and such 
        data are based on a representative sample of cases; or
            ``(II) establish a minimum period of time (such as one 
        year) from which such data must be drawn.
    ``(iii) Nothing in this clause shall be construed as requiring the 
Secretary to identify all claims submitted under the payment system 
established under this subsection involving the use of a medical 
technology before the Secretary may make the adjustments under 
subparagraph (C) with respect to such technology; or as authorizing the 
Secretary to defer action on such an adjustment until all such claims 
are identifiable.
    ``(iv) The Secretary shall establish a process for the submission 
of external data by interested parties. Such process shall include 
reasonable deadline for the submission of external data to be used in 
making the adjustments required by subparagraph (C). In no event may 
the deadline established under this subclause be more than 10 months 
before the first day of the payment update period for which the 
adjustment or adjustments to which the data relate would be effective.
    ``(F) For purposes of subparagraphs (D) and (E)--
            ``(i) the term `external data' means data from sources 
        other than data collected by the Secretary in the 
        administration of the program established under this title;
            ``(ii) the term `interested party' means individuals 
        entitled to benefits under part A, or enrolled under part B, or 
        both, who are in need of the items or services that are the 
        subject of the coverage determination, providers of services, 
        physicians, practitioners, suppliers, and manufacturers of such 
        items or services; and
            ``(iii) the term `internal data' means data that is 
        collected by the Secretary in the administration of the program 
        established under this title.''.
    (b) Outpatient Hospital PPS.--Section 1833(t)(9) (42 U.S.C. 
1395l(t)(9)) is amended by adding at the end the following new 
subparagraphs:
                    ``(D) Use of internal data collected by the 
                secretary.--
                            ``(i) In general.--In determining annual 
                        adjustments under subparagraph (A), the 
                        Secretary may not use internal data that does 
                        not--
                                    ``(I) reflect a representative 
                                sample of cases that include the 
                                specific procedure that is subject to 
                                such adjustment; and
                                    ``(II) accurately reflect the costs 
                                of providing the item or service, based 
                                on all forms of information that is 
                                available to the Secretary.
                            ``(ii) Deadline for supplying internal 
                        data.--The Secretary shall establish a 
                        reasonable deadline for the submission of a 
                        request for adjustment based on internal data 
                        to be used in making the adjustments required 
                        by subparagraph (A). In no event may the 
                        deadline established under this paragraph be 
                        more than 8 months before the first day of the 
                        payment update period for which the adjustment 
                        or adjustments to which the data relate would 
                        be effective.
                    ``(E) External data.--
                            ``(i) In general.--Subject to the 
                        succeeding provisions of this subparagraph, in 
                        determining the adjustments under subparagraph 
                        (A), the Secretary shall utilize external data 
                        submitted for consideration under the process 
                        established under clause (iv) if such data are 
                        based on a representative sample of cases.
                            ``(ii) External data facilitating the use 
                        of internal data.--In determining the 
                        adjustments under subparagraph (A), the 
                        Secretary may not--
                                    ``(I) decline to use external data 
                                if such data enable the Secretary to 
                                identify or refine data so collected 
                                for use in making such an adjustment 
                                and such data are based on a 
                                representative sample of cases; or
                                    ``(II) establish a minimum period 
                                of time (such as one year) from which 
                                such data must be drawn.
                            ``(iii) Clarification.--Nothing in this 
                        subparagraph shall be construed as requiring 
                        the Secretary to identify all claims submitted 
                        under the payment system established under this 
                        subsection involving the use of a medical 
                        technology before the Secretary may make the 
                        adjustments under this subparagraph with 
                        respect to such technology; or as authorizing 
                        the Secretary to defer action on such an 
                        adjustment until all such claims are 
                        identifiable.
                            ``(iv) Deadline for supplying external 
                        data.--The Secretary shall establish a process 
                        for the submission of external data by 
                        interested parties. Such process shall include 
                        a reasonable deadline for the submission of 
                        external data to be used in making the 
                        adjustments required by subparagraph (A). In no 
                        event may the deadline established under this 
                        subclause be more than 10 months before the 
                        first day of the payment update period for 
                        which the adjustment or adjustments to which 
                        the data relate would be effective.
                    ``(F) Definitions.--For purposes of subparagraphs 
                (D) and (E)--
                            ``(i) the term `external data' means data 
                        from sources other than data collected by the 
                        Secretary in the administration of the program 
                        established under this title;
                            ``(ii) the term `interested party' means 
                        individuals entitled to benefits under part A, 
                        or enrolled under part B, or both, who are in 
                        need of the items or services that are the 
                        subject of the coverage determination, 
                        providers of services, physicians, 
                        practitioners, suppliers, and manufacturers of 
                        such items or services; and
                            ``(iii) the term `internal data' means data 
                        that is collected by the Secretary in the 
                        administration of the program established under 
                        this title.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to items and services furnished on or after October 
1, 2003.

SEC. 302. LIMITATION ON USE OF FOREIGN PAYER DATA IN DETERMINING 
              MEDICARE PAYMENT AMOUNTS.

    (a) In General.--Notwithstanding any other provision of law, the 
Secretary of Health and Human Services may not, in determining the 
amount to be paid for any item or service for which payment is made 
under title XVIII of the Social Security Act (42 U.S.C. 1395b et seq.) 
that is furnished in the United States, take into account or utilize 
(or authorize an administrative contractor to take into account or 
utilize) any data or information on the amount that is paid by any 
payer for the same (or a similar) item or service provided outside the 
United States.
    (b) Definitions.--For purposes of this section--
            (1) the term ``administrative contractor'' means an entity 
        with a contract under section 1816 of the Social Security Act 
        (42 U.S.C. 1395h), section 1842 of such Act (42 U.S.C. 1395u), 
        or any other provision of such title to determine the amount to 
        be paid for any item or service provided under such title or to 
        make payments for such services; and
            (2) the term ``United States'' has the meaning given to 
        such term in section 1862(a)(4) of the Social Security Act (42 
        U.S.C. 1395y(a)(4)).

SEC. 303. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT 
              HOSPITAL PPS.

    (a) Eligibility Standard.--
            (1) Minimum period for recognition of new technologies.--
        Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
        amended--
                    (A) by inserting ``(I)'' after ``(vi)''; and
                    (B) by adding at the end the following new 
                subclause:
    ``(II) Under such criteria, a service or technology may not be 
denied treatment as a new service or technology on the basis that the 
service or technology has been on the market or available for a period 
of not less than 2 years and not more than 3 years unless during the 
entire period--
            ``(aa) the service or technology is available for use as a 
        service or technology cleared for marketing under section 
        510(k) of the Federal Food, Drug, and Cosmetic Act or approved 
        for market under section 515 of such Act; and
            ``(bb) a code facilitating data collection is in effect 
        with respect to the service or technology.
For purposes of the preceding sentence, a `code facilitating data 
collection' means, with respect to a service or technology, a code 
under the ICD-9-CM coding system (or a successor coding system) that 
enables the collection of data on the costs of the service or 
technology in a significant sample of specific discharges in which the 
service or technology is used.''.
            (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
        (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting  
``(applying a threshold computed by the Secretary that is the lesser of 
50 percent of the national average standardized amount for operating 
costs of inpatient hospital services for all hospitals and all 
diagnosis-related groups or one standard deviation for the diagnosis-
related group involved)'' after ``is inadequate''.
            (3) Criteria for substantial improvement.--Section 
        1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
        by paragraph (1), is further amended by adding at the end the 
        following subclause:
    ``(III) The Secretary shall by regulation provide for further 
clarification of the criteria applied to determine whether a new 
service or technology represents an advance in medical technology that 
substantially improves the diagnosis or treatment of beneficiaries. 
Under such criteria, in determining whether a new service or technology 
represents an advance in medical technology that substantially improves 
the diagnosis or treatment of beneficiaries, the Secretary shall deem a 
service or technology as meeting such requirement if the service or 
technology is a drug or biological that is designated under section 506 
or 526 of the Federal Food, Drug, and Cosmetic Act, approved under 
section 314.510 or 601.41 of title 21, Code of Federal Regulations, or 
designated for priority review when the marketing application for such 
drug or biological was filed or is a medical device for which an 
exemption has been granted under section 520(m) of such Act, or for 
which priority review has been provided under section 515(d)(5) of such 
Act. Nothing in the preceding sentence shall be construed as limiting 
the application of section 1862(a)(1) to a new service or technology 
described in such sentence or as limiting the authority of the 
Secretary to make determinations under such section with respect to 
such a service or technology.''.
    (b) Preference for Use of DRG Adjustment.--Section 1886(d)(5)(K) 
(42 U.S.C. 1395ww(d)(5)(K)), as amended by section 201, is further 
amended by adding at the end the following new clause:
    ``(viii) Before establishing any additional payment under this 
subparagraph with respect to a new technology, the Secretary shall seek 
to identify one or more diagnosis-related groups associated with such 
technology, based on similar clinical or anatomical characteristics and 
the cost of the technology. Within such groups the Secretary shall 
assign an eligible new technology into a diagnosis-related group where 
the average costs of care most closely approximate the costs of care of 
using the new technology. In such case, whether the DRG prospective 
payment rate that would otherwise be made under this subsection is 
inadequate for purposes of clause (ii)(I) shall be determined with 
respect to the diagnosis-related group to which it is assigned under 
this clause, and any additional expenditures resulting from such 
assignment shall be taken into account in making the determination 
required by paragraph (4)(C)(iii) (and not in the application of any 
annual limit on aggregate payments under this subparagraph).''.
    (c) Improvement in Payment for New Technology.--Section 
1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) is amended 
by inserting after ``the estimated average cost of such service or 
technology'' the following: ``(based on the marginal rate applied to 
costs under subparagraph (A))''.
    (d) Required Modifications to Mechanism.--The last sentence of 
section 1886(d)(5)(K)(i) (42 U.S.C. 1395ww(d)(5)(K)(i)) is amended to 
read as follows: ``The mechanism established pursuant to this clause 
(as it became effective on October 9, 2001) shall be modified to meet 
the requirements of subclauses (II) and (III) of clause (vi), clauses 
(vii) and (viii), and the parenthetical expressions in subclauses (I) 
and (III) of clause (iii) that were added after such date.''.
    (e) Effective Date.--
            (1) In general.--The Secretary shall implement the 
        amendments made by this section by regulations issued on an 
        interim, final basis if the Secretary determines that the 
        issuance of regulations on such basis is necessary to ensure 
        that such amendments will apply to classifications for (and 
        payments for discharges occurring in) fiscal years beginning 
        with fiscal year 2004.
            (2) Reconsiderations of applications for fiscal years 2003 
        and 2004 that are denied.--In the case of an application for a 
        classification of a medical service or technology as a new 
        medical service or technology under section 1886(d)(5)(K) of 
        the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
        filed for fiscal year 2003 or fiscal year 2004 and that is 
        denied--
                    (A) the Secretary shall automatically reconsider 
                the application as an application for fiscal year 2005 
                under the amendments made by this section; and
                    (B) the maximum time period otherwise permitted for 
                such classification of the service or technology shall 
                be extended by 12 months.

SEC. 304. PRESERVATION OF LOCAL MEDICAL REVIEW PROCESS UNDER MEDICARE 
              ADMINISTRATIVE CONTRACTOR REFORMS.

    (a) Part A.--Section 1816(c) (42 U.S.C. 1395h(c)) is amended by 
adding at the end the following:
    ``(4) An agreement with any agency or organization under this 
section to perform the function of making local coverage determinations 
(as defined in section 1869(f)(2)(B)), making determinations of payment 
amounts, or making both such types of determinations, shall provide 
that such contractor or entity shall--
            ``(A) designate at least one different individual to serve 
        as medical director for every two States (or portions thereof) 
        for which such agency or organization performs such function or 
        functions;
            ``(B) utilize such medical director in the performance of 
        such function or functions; and
            ``(C) appoint an advisory committee with respect to each 
        such State (or portion thereof) to provide a formal mechanism 
        for physicians in the State to be informed of, and participate 
        in, the development of local coverage determinations in an 
        advisory capacity.''.
    (b) Part B.--Section 1842(c) (42 U.S.C. 1395u(c)) is amended by 
adding at the end the following:
    ``(7) Any contract with a carrier under this section to perform the 
function of making local coverage determinations (as defined in 
section 1869(f)(2)(B)), making determinations of payment amounts, or 
making both such types of determinations, shall provide that such 
carrier shall--
            ``(A) designate at least one different individual to serve 
        as medical director for every two States (or portions thereof) 
        for which such carrier performs such function or functions;
            ``(B) utilize such medical director in the performance of 
        such function or functions; and
            ``(C) appoint an advisory committee with respect to each 
        such State (or portion thereof) to provide a formal mechanism 
        for physicians in the State to be informed of, and participate 
        in, the development of local coverage determinations in an 
        advisory capacity.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to agreements and contracts entered into or renewed on or after 
the date of the enactment of this Act.

SEC. 305. INHERENT REASONABLENESS.

    (a) In General.--Section 1842(b)(8)(A) (42 U.S.C. 1395u(b)(8)(A)) 
is amended by adding at the end the following:
    ``(iii) The Secretary shall ensure adequate notice to the public 
with respect to any determination under this paragraph, including--
            ``(I) before conducting any survey to evaluate the factors 
        in subclause (I) or (II) of clause (i), publication of a notice 
        explaining, and soliciting public comment on, the proposed 
        methodology and design of such survey,
            ``(II) publication of any proposed determination, together 
        with an explanation of the results of any survey and any other 
        relevant factors taken into account in making the 
        determination, information on how the public may obtain survey 
        data, and an opportunity for public comment on the proposed 
        determination, and
            ``(III) publication of a notice of a final determination 
        under this paragraph.
    ``(iv) The requirements of clause (iii) shall apply to any 
determination that is made by--
            ``(I) two or more carriers, acting concurrently, or in 
        concert, with respect to the same particular item or service, 
        or
            ``(II) any regional carrier designated by the Secretary 
        under section 1834(a)(12) of this part or under section 
        4554(a)(1)(B) of the Balanced Budget Act of 1997.''.
    (b) Appeals.--Section 1869(f) (42 U.S.C. 1395ff(f)) is amended--
            (1) in the matter preceding paragraph (1), by inserting 
        ``and Inherent Reasonableness Determinations'' after ``Review 
        of Coverage Determinations'';
            (2) in paragraph (1)--
                    (A) in the heading, by inserting ``; national 
                inherent reasonableness determinations'' after 
                ``National coverage determinations'';
                    (B) in the matter preceding clause (i) of 
                subparagraph (A) by inserting ``or national inherent 
                reasonableness determination'' after ``any national 
                coverage determination''; and
                    (C) by adding at the end the following:
                    ``(C) Definition of national inherent 
                reasonableness determination.--For purposes of this 
                section, the term `national inherent reasonableness 
                determination' means a determination by the Secretary 
                in accordance with section 1842(b)(8).'';
            (3) in paragraph (2)--
                    (A) in the heading, by inserting ``; local inherent 
                reasonableness determinations'' after ``Local coverage 
                determinations'';
                    (B) in the matter preceding clause (i) of 
                subparagraph (A), by inserting ``or local inherent 
                reasonableness determination'' after ``any local 
                coverage determination''; and
                    (C) by adding at the end the following:
                    ``(C) Definition of local inherent reasonableness 
                determination.--For purposes of this section, the term 
                `local inherent reasonableness determination' means a 
                determination by a carrier in accordance with section 
                1842(b)(8).''; and
            (4) in paragraph (5)--
                    (A) by striking ``coverage determination'' the 
                first place it appears;
                    (B) by inserting ``and any national or local 
                inherent reasonableness determination'' after ``local 
                coverage determination''; and
                    (C) by striking ``of the coverage determination'' 
                and inserting ``of the determination''.
                                 <all>