[Congressional Record Volume 140, Number 131 (Monday, September 19, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 19, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BRYAN (for himself and Mr. Gorton):
  S. 2439. A bill to save lives, prevent injuries, and protect property 
through improved State and local fire safety and prevention education, 
and for other purposes; to the Committee on Commerce, Science, and 
Transportation.


                fire safety and prevention education act

 Mr. BRYAN. Mr. President, the terrible fires raging in my 
State and across the West are a grim reminder that we must do all we 
can to educate Americans--persuade them--to do all they can to prevent 
fire. Fire kills 5,000 and injures 29,000 Americans annually leading to 
economic loss estimated at $10 billion a year, with more than $1 
billion a year in health care costs.
  With this important challenge and responsibility in mind, I am 
honored today to join my distinguished colleague from the State of 
Washington, Mr. Gorton, to introduce the Fire Prevention Education Act 
of 1994.
  Education is, without question, our most cost-effective weapon in the 
fight against accidental fires. This legislation will provide modest 
but important incentives for State and local fire officials to educate 
those Americans most vulnerable to fire--the very old, the very poor 
and the very young.
  The program would be administered by the U.S. Fire Administration and 
would provide grants to States over 3 years for the purpose of 
encouraging State and local programs generating fire data and public 
education. Because the accurate collection and analysis of fire data is 
crucial to determining the focus of education programs, the first year 
to the program would provide modest grants to States implementing the 
recently revised National Fire Incident Reporting System [NFIRS].
  I am also pleased to say that Representative Steny Hoyer, chairman of 
the Congressional Fire Service Caucus, is introducing this same measure 
today in the House.
  With the prompt passage of this legislation, we will see a much-
needed reduction in the number of deaths, severe and costly injuries, 
and property loss caused each year by fire.
                                 ______

      By Mr. PRYOR:
  S. 2440. A bill entitled ``Prospective Payment System for Nursing 
Facilities''; to the Committee on Finance.


   the prospective payment system for nursing facilities act of 1994

 Mr. PRYOR. Mr. President, today I am introducing a bill which 
would establish a prospective payment system for skilled nursing 
facilities under Medicare. This proposal has been developed by 
representatives of the provider community and represents a serious 
attempt to launch discussions on this issue. I believe many aspects of 
the proposal outlined in this legislation warrant a thorough 
discussion.
  In 1983 Congress passed legislation that revolutionized the hospital 
payment system under Medicare. The legislation created the prospective 
payment system [PPS]. The prospective payment system was first 
developed as a cost-containment effort for Medicare hospital costs. It 
did this by changing Medicare payments for inpatient care in hospitals 
from a retrospective cost system to a prospective payment system. This 
prospective system bases payment on a predetermined rate for each type 
of patient that is treated by using diagnostic related groupings 
[DRG's].
  Since the implementation of the prospective payment system in many 
hospitals, the Health Care Financing Administration [HCFA] has been 
charged with ascertaining whether this payment method can be applied to 
other systems, such as rehabilitation hospitals and skilled nursing 
facilities.
  At the present time, the Health Care Financing Administration [HCFA] 
is in the midst of a demonstration project to study a prospective 
payment system for skilled nursing facilities. I am introducing this 
bill to further the discussion on the appropriateness of, and most 
advisable method for prospectively reimbursing skilled nursing care, 
and on the consequences of establishing this type of reimbursement 
system for nursing homes. I look forward to hearing comments from my 
colleagues, interest groups, and other interested parties.
  I ask unanimous consent that the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2440

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 100. SHORT TITLE.

       This Chapter may be cited as the Prospective Payment System 
     for Nursing Facilities and shall apply to the payment for 
     services of nursing facilities under federally-funded long 
     term care programs.

     SEC. 101. DEFINITIONS.

       (a) For purposes of this Chapter:
       (1) ``Acuity payment'' refers to a fixed amount that will 
     be added to the facility-specific prices for certain resident 
     classes designated by the Secretary as requiring heavy care.
       (2) ``Administrative Procedure Act'' refers to 5 U.S.C. 
     Sec. 551 et seq.
       (3) ``Aggregated resident invoice'' refers to a compilation 
     of the per resident invoices of a nursing facility which 
     contain the number of resident days for each resident and the 
     resident class of each resident at the nursing facility 
     during a particular month.
       (4) ``Allowable costs'' refer to costs which HCFA has 
     determined to be necessary for a nursing facility to incur 
     according to the Provider Reimbursement Manual (hereinafeter 
     ``HCFA-Pub. 15'').
       (5) ``Base year'' refers to the most recent cost reporting 
     period (consisting of a period which is 12 months in length, 
     except for facilities with new owners, in which case the 
     period is not less than four (4) months nor more than 
     thirteen (13) months) for which cost date of nursing 
     facilities is available to be used for the determination of a 
     prospective rate.
       (6) ``Case mix weight'' is the total case mix score of a 
     facility calculated by multiplying the resident days in each 
     resident class by the relative weight assigned to each 
     resident class, and summing the resulting products across all 
     resident classes.
       (7) ``Complex medical equipment'' refers to items such as 
     ventilators, intermittent positive pressure breathing (IPPB) 
     machines, nebulizers, suction pumps, continuous positive 
     airway pressure (CPAP) devices, and bead beds such as air 
     fluidized beds.
       (8) ``Distinct part nursing facility'' refers to an 
     institution which has a distinct part that is certified under 
     Title XVIII of the Social Security Act and meets the 
     requirements of Sec. 201.1 of the Skilled Nursing Facility 
     Manual published by HCFA (hereinafter ``HCFA-Pub. 12'').
       (9) ``Efficiency incentive'' refers to a payment made to a 
     nursing facility in recognition of incurring costs below a 
     pre-specified level.
       (10) ``Fixed equipment'' refers to equipment which meets 
     the definition of building equipment in Sec. 104.3 of HCFA-
     Pub. 15. Fixed equipment includes, but is not limited to, 
     attachments to buildings such as wiring, electrical fixtures, 
     plumbing, elevators, heating systems, and air conditioning 
     systems.
       (11) ``Geographic ceiling'' refers to a limitation on 
     payments in any given cost center for nursing facilities in 
     one of no fewer than eight (8) geographic regions, further 
     subdivided into rural and urban areas, as designated by the 
     Secretary.
       (12) ``Heavy care'' refers to an exceptionally high level 
     of care which the Secretary has determined is required for 
     residents in certain resident classes.
       (13) ``HCFA'' refers to the Health Care Financing 
     Administration of the Department of Health and Human 
     Services.
       (14) ``Index[ed] forward'' refers to an adjustment made to 
     a per diem rate to account for cost increases due to 
     inflation or other factors during an intervening period 
     following the base year and projecting such cost increases 
     for a future period in which the rate applies. Indexing 
     forward under this Chapter shall be determined from the mid-
     point of the base year to the mid-point of the rate year.
       (15) ``Marshall Swift segmented cost method'' refers to an 
     appraisal method published by the Marshall Swift Valuation 
     Service.
       (16) ``Minimum Data Set (hereinafter ``MDS'')'' refers to a 
     resident assessment instrument, currently recognized by HCFA, 
     in addition to any extensions to MDS, such as MDS+, as well 
     as any extensions to accommodate subacute care which contain 
     an appropriate core of assessment items with definitions and 
     coding categories needed to comprehensively assess a nursing 
     facility resident.
       (17) ``Mayor movable equipment'' refers to equipment which 
     meets the definition of major movable equipment in Sec. 104.4 
     of HCFA-Pub. 15. Major movable equipment includes, but is not 
     limited to, accounting machines, beds, wheelchairs, desks, 
     vehicles, and X-ray machines.
       (18) ``Nursing facility'' refers to an institution which 
     meets the requirements of a ``skilled nursing facility'' 
     under Section 1819(a) of Title XVIIII of the Social Security 
     Act and a ``nursing facility'' under Section 1919(a) of Title 
     XIX of the Social Security Act.
       (19) ``Per bed limit'' refers to a per bed ceiling on the 
     fair asset value of a nursing facility for one of the 
     geographic regions designated by the Secretary.
       (20) ``Per diem rate'' refers to a rate of payment for the 
     costs of covered services for a resident day.
       (21) ``Relative weight'' is the index of the value of the 
     resources required for a given resident class relative to the 
     value of resources of either a base resident class or the 
     average of all the resident classes.
       (22) ``R.S. Means Index'' refers to the index of the R.S. 
     Means Company, Inc., specific to commercial/industrial 
     institutionalized nursing facilities, which is based upon a 
     survey of prices of common building materials and wage rates 
     for nursing facility construction.
       (23) ``Rebase'' refers to the process of updating nursing 
     facility cost data for a subsequent rate year using a more 
     recent base year.
       (24) ``Rental rate'' refers to a percentage that will be 
     multiplied by the fair asset value of property to determine 
     the total annual rental payment in lieu of property costs.
       (25) ``Resident classification system'' refers to a system 
     which categorizes residents into different resident classes 
     according to similarity of their assessed condition and 
     required services.
       (26) ``Resident day'' refers to the period of services for 
     one resident, regardless of payment source, for one 
     continuous 24 hours of services. The day of admission of the 
     resident constitutes a resident day but the day of discharge 
     does not constitute a resident day. Bed hold days are not to 
     be considered resident days, and bed hold day revenues are 
     not to be offset.
       (27) ``Resources Utilization Groups, Version III 
     (hereinafter ``RUG-III'')'' refers to a category-based 
     resident classification system used to classify nursing 
     facility residents into mutually exclusive RUG-III groups. 
     Residents in each RUG-III group utilize similar quantities 
     and patterns of resources.
       (28) ``Secretary'' refers to the Secretary of the 
     Department of Health and Human Services.

     SEC. 102. PAYMENT OBJECTIVES.

       (a) Payment rates under the Prospective Payment System For 
     Nursing Facilities shall reflect the following objectives:
       (1) To maintain an equitable and fair balance between cost 
     containment and quality of care in nursing facilities.
       (2) To encourage nursing facilities to admit residents 
     without regard to their source of payment.
       (3) To provide an incentive to nursing facilities to admit 
     and provide care to persons in need of comparatively greater 
     care.
       (4) To maintain administrative simplicity, for both nursing 
     facilities and the Secretary.
       (5) To encourage investment in buildings and improvements 
     to nursing facilities (capital formation) as necessary to 
     maintain quality and access.

     SEC. 103. POWERS AND DUTIES OF THE SECRETARY.

       (a) The Secretary shall establish by regulation, in 
     accordance with the Administrative Procedure Act, all rules 
     and regulations necessary for the implementation of this 
     Chapter. The rates determined under this Chapter shall 
     reflect the objectives in Section 102 of this Chapter.
       (b) The Secretary may require that each nursing facility 
     file such data, statistics, schedules, or information as 
     required to enable the Secretary to implement this Chapter.

     SEC. 104. RELATIONSHIP TO TITLE XVIII OF THE SOCIAL SECURITY 
                   ACT.

       (a) No provision in this Chapter shall replace, or 
     otherwise affect, the skilled nursing facility benefit under 
     Title XVIII of the Social Security Act.
       (b) The provisions of HCFA-Pub. 15 shall apply to the 
     determination of allowable costs under this Chapter except to 
     the extent that they conflict with any other provision in 
     this Chapter.

     SEC. 105. ESTABLISHMENT OF RESIDENT CLASSIFICATION SYSTEM.

       (a)(1) The Secretary shall establish a resident 
     classification system which shall group residents into 
     classes according to similarity of their assessed condition 
     and required services.
       (2) The resident classification system shall be modelled 
     after the RUG-III system and all updated versions of that 
     system.
       (3) The resident classification system shall be reflective 
     of the necessary professional and paraprofessional nursing 
     staff time and costs required to address the care needs of 
     nursing facility residents.
       (b)(1) The Secretary shall assign a relative weight for 
     each resident class based on the relative value of the 
     resources required for each resident class. The assignment of 
     relative weights for resident classes shall be performed for 
     each geographic region as determined in accordance with 
     subsection (c) of this section.
       (2) In assigning the relative weights of the resident 
     classes in a geographic region, the Secretary shall utilize 
     information derived from the most recent MDSs of all of the 
     nursing facilities in a geographic region.
       (3) The relative weights of the resident classes in each 
     geographic region shall be recalibrated every three (3) years 
     based on any changes in the cost or amount of resources 
     required for the care of a resident in the resident class.
       (c)(1) The Secretary shall designate no fewer than eight 
     (8) geographic regions for the total United States. Within 
     each geographic region, the Secretary shall take appropriate 
     account of variations in cost between urban and rural areas.
       (2) There shall be no peer grouping of nursing facilities 
     (e.g., based on whether the nursing facilities are hospital-
     based or not) other than peer-grouping by geographic region.

     SEC. 106. COST CENTERS FOR NURSING FACILITY PAYMENT.

       (a) Consistent with the objectives established in Section 
     102 of this Chapter, the Secretary shall determine payment 
     rates for nursing facilities using the following cost/service 
     groupings:
       (1) Nursing service costs.--The nursing service cost center 
     shall include salaries and wages for the Director of Nursing, 
     Quality Assurance Nurses, registered nurses, licensed 
     practical nurses, nurse aides (including wages related to 
     initial and on-going nurse aide training and other on-going 
     or periodic training costs incurred by nursing personnel), 
     contract nursing, fringe benefits and payroll taxes 
     associated therewith, medical records, and nursing supplies.
       (2) Administrative and general costs.--The administrative 
     and general cost center shall include all expenses (including 
     salaries, benefits, and other costs) related to 
     administration, plant operation, maintenance and repair, 
     housekeeping, dietary (excluding raw food), central services 
     and supply (excluding medical supplies), laundry, and social 
     services.
       (3) Fee-for-service ancillary services.--Ancillary services 
     to be paid on a fee-for-service basis shall include physical 
     therapy, occupational therapy, speech therapy, respiratory 
     therapy, hyperalimentation, and complex medical equipment 
     (CME). These fee-for-service ancillary service payments under 
     Part A of Title XVIII of the Social Security Act shall not 
     affect the reimbursement of ancillary services under Part B 
     of Title XVIII of the Social Security Act.
       (4) Selected ancillary services and other costs.--The cost 
     center for selected ancillary services and other costs shall 
     include drugs, raw food, medical supplies, IV therapy, X-ray 
     services, laboratory services, property tax, property 
     insurance, minor equipment, and all other costs not included 
     in the other four cost/service groupings.
       (5) Property Costs.--The property cost center shall include 
     depreciation on the building(s) and fixed equipment, major 
     movable equipment, motor vehicle(s), land improvements, 
     amortization of leasehold improvements, lease acquisition 
     costs, and capital leases; interest on capital indebtedness; 
     mortgage interest; lease costs; and, equipment rental 
     expense.
       (b) Nursing facilities shall be paid a prospective, 
     facility-specific, per diem rate based on the sum of the per 
     diem rates established for the nursing service, 
     administrative and general, and property cost centers as 
     determined in accordance with Sections 108, 109, and 112 of 
     this Chapter.
       (c) Nursing facilities shall be paid a facility-specific 
     prospective rate for each unit of the fee-for-service 
     ancillary services as determined in accordance with Section 
     110 of this Chapter.
       (d) Nursing facilities shall be reimbursed for selected 
     ancillary services and other costs on a retrospective basis 
     in accordance with Section 111 of this Chapter.

     SEC. 107. RESIDENT ASSESSMENT.

       (a) The nursing facility shall perform a resident 
     assessment in accordance with Section 1819(b)(3) of Title 
     XVIII of the Social Security Act within fourteen (14) days of 
     admission of the resident and at such other times as required 
     by that section.
       (b) The resident assessment shall be used to determine the 
     resident class of each resident in the nursing facility for 
     purposes of determining the per diem rate for the nursing 
     service cost center in accordance with Section 108.

     SEC. 108. THE PER DIEM RATE FOR NURSING SERVICE COSTS.

       (a)(1) The nursing service cost center rate shall be 
     calculated using a prospective, facility-specific per diem 
     rate based on the nursing facility's case-mix weight and 
     nursing service costs during the base year.
       (2) The case-mix weight of a nursing facility shall be 
     obtained by multiplying the number of resident days in each 
     resident class at a nursing facility during the base year by 
     the relative weight assigned to each resident class in the 
     appropriate geographic region. Once this calculation is 
     performed for each resident class in the nursing facility, 
     the sum of these products shall constitute the case-mix 
     weight for the nursing facility.
       (3) A facility nursing unit value for the nursing facility 
     for the base year shall be obtained by dividing the nursing 
     service costs for the base year, which shall be indexed 
     forward from the midpoint of the base period to the midpoint 
     of the rate period using the DRI McGraw-Hill HCFA Nursing 
     Home Without Capital Market Basket, by the case-mix weight of 
     the nursing facility for the base year.
       (4) A facility-specific nursing services price for each 
     resident class shall be obtained by multiplying the lower of 
     the indexed facility unit value of the nursing facility 
     during the base year or the geographic ceiling, as determined 
     in accordance with subsection (b) of this section, by the 
     relative weight of the resident class.
       (5) The Secretary shall designate certain resident classes 
     as requiring heavy care. An acuity payment of three (3) 
     percent of the facility-specific nursing services price shall 
     be added on to the facility-specific price for each resident 
     class which the Secretary has designated as requiring heavy 
     care. The acuity payment is intended to provide an incentive 
     to nursing facilities to admit residents requiring heavy 
     care.
       (6) The per diem rate for the nursing service cost center 
     for each resident in a resident class shall constitute the 
     facility-specific price, plus the acuity payment where 
     appropriate.
       (7) The per diem rate for the nursing service cost center, 
     including the facility-specific price and the acuity payment, 
     shall be rebased annually.
       (8) To determine the payment amount to a nursing facility 
     for the nursing service cost center, the Secretary shall 
     multiply the per diem rate (including the acuity payment) for 
     a resident class by the number of resident days for each 
     resident class based on aggregated resident invoices which 
     each nursing facility shall submit on a monthly basis.
       (b)(1) The facility unit value identified in subsection 
     (a)(3) of this section shall be subjected to geographic 
     ceilings established for the geographic regions designated by 
     the Secretary in Section 105(c).
       (2) The geographic ceiling shall be determined by first 
     creating an array of indexed facility unit values in a 
     geographic region from lowest to highest. Based on this 
     array, the Secretary shall identify a fixed proportion 
     between the indexed facility unit value of the nursing 
     facility which contained the medianth resident day in the 
     array (except as provided in subsection (b)(4) of this 
     section) and the indexed facility unit value of the nursing 
     facility which contained the 95th percentile resident day in 
     that array during the first year of operation of the 
     Prospective Payment System For Nursing Facilities. The fixed 
     proportion (e.g., 1.1 times the median or 110% of the median) 
     shall remain the same in subsequent years.
       (3) To obtain the geographic ceiling on the indexed 
     facility unit value for nursing facilities in a geographic 
     region in each subsequent year, the fixed proportion 
     identified pursuant to subsection (b)(2) of this section 
     shall be multiplied by the indexed facility unit value of the 
     nursing facility which contained the medianth resident day in 
     the array of facility unit values for the geographic region 
     during the base year.
       (4) The secretary shall exclude low volume and new nursing 
     facilities, as defined in subsections (a) and (b) of Section 
     113, respectively, for purposes of determining the geographic 
     ceiling for the nursing service cost center.
       (c) The Secretary shall establish by regulation, in 
     accordance with the Administrative Procedure Act, procedures 
     for allowing exceptions to the geographic ceiling imposed on 
     the nursing service cost center. The procedure shall permit 
     exceptions based on the following factors:
       (1) Local supply and/or labor shortages which substantially 
     increase costs to specific nursing facilities.
       (2) Higher per resident day usage of contract nursing 
     personnel, if utilization of contract nursing personnel is 
     warranted by local circumstances, and the provider has taken 
     all reasonable measures to minimize contract personnel 
     expenses.
       (3) Extraordinarily low proportion of distinct part nursing 
     facilities in a geographic region resulting in a geographic 
     ceiling which unfairly restricts the reimbursement of 
     distinct part facilities.
       (4) Regulatory changes that increase costs to only a subset 
     of the nursing facility industry.
       (5) The offering of a new institutional health service or 
     treatment program by a nursing facility (in order to account 
     for initial start-up costs).
       (6) Disproportionate usage of part-time employees, where 
     adequate numbers of full-time employees cannot reasonably be 
     obtained.
       (7) Other cost producing factors, to be specified by the 
     Secretary in regulations promulgated pursuant to the 
     Administrative Procedure Act, that are specific to a subset 
     of facilities in a geographic region (except case-mix 
     variation).

     SEC. 109. THE PER DIEM RATE FOR ADMINISTRATIVE AND GENERAL 
                   COSTS.

       (a)(1) Payment relative to the administrative and general 
     cost center shall be a facility-specific, prospective, per 
     diem rate.
       (2) The Secretary shall assign a per diem rate to a nursing 
     facility by applying two standards which shall be calculated 
     as follows:
       (A) Standard A shall be derived for each geographic region 
     by first creating an array of indexed nursing facility 
     administrative and general per diem costs from lowest to 
     highest. The Secretary shall then identify a fixed proportion 
     by dividing the indexed administrative and general per diem 
     costs of the nursing facility which contained the medianth 
     resident day of the array (except as provided in subsection 
     (a)(4) of this section) into the indexed administrative and 
     general per diem costs of the nursing facility which 
     contained the 75th percentile resident day in that array. 
     Standard A for each base year shall constitute the product of 
     this fixed proportion (e.g., 1.1 times the median or 110% of 
     the median) and the administrative and general indexed per 
     diem costs of the nursing facility which contained the 
     medianth resident day in the array of such costs during the 
     base year.
       (B) Standard B shall be derived using the same calculation 
     as in subsection (A) except that the fixed proportion shall 
     use the indexed administrative and general costs of the 
     nursing facility containing the 85th percentile, rather than 
     the 75th percentile, resident day in the array of such costs.
       (3) The Secretary shall use the geographic regions 
     identified in Section 105(c) for purposes of determining 
     Standard A and Standard B.
       (4) The Secretary shall exclude low volume and new nursing 
     facilities, as defined in subsections (a) and (b) of Section 
     113, respectively, for purposes of determining Standard A and 
     Standard B.
       (5) To determine a nursing facility's per diem rate for the 
     administrative and general cost center, Standard A and 
     Standard B shall be applied to a nursing facility's 
     administrative and general per diem costs, indexed forward 
     using the DRI McCraw-Hill HCFA Nursing Home Without Capital 
     Market Basket, as follows:
       (A) The nursing facilities having indexed costs which fall 
     below the median shall be assigned a rate equal to their 
     individual indexed costs plus an ``efficiency incentive'' 
     equal to one half of the difference between the median and 
     Standard A.
       (B) The nursing facilities having indexed costs which fall 
     below Standard A but at or above the median shall be assigned 
     a per diem rate equal to their individual indexed costs plus 
     an ``efficiency incentive'' equal to one-half of the 
     difference between the nursing facility's indexed costs and 
     Standard A.
       (C) The nursing facilities having indexed costs which fall 
     between Standard A and Standard B shall be assigned a rate 
     equal to Standard A plus one-half of the difference between 
     the nursing facility's indexed costs and Standard A.
       (D) The nursing facilities having indexed costs which 
     exceed Standard B shall be assigned a rate as if their costs 
     equaled Standard B. These nursing facilities shall be 
     assigned a per diem rate equal to Standard A plus one half of 
     the difference between Standard A and Standard B.
       (E) For purposes of subsections (A)--(D) of section (a)(5) 
     of this section, the median represents the indexed 
     administrative and general per diem costs of the nursing 
     facility which contained the medianth resident day in the 
     array of such costs during the base year in the geographic 
     region.
       (b) Rebasing of the payment rates for administrative and 
     general costs shall occur no less frequently than once a 
     year.

     SEC. 110. PAYMENT FOR FEE-FOR-SERVICE ANCILLARY SERVICES.

       (a) Payment for each ancillary service enumerated in 
     Section 106(a)(3), such as physical therapy, shall be 
     calculated and paid on a prospective fee-for-service basis.
       (b) The Secretary shall identify the fee for each of the 
     fee-for-service ancillary services for a particular nursing 
     facility by dividing the nursing facility's actual costs, 
     including overhead allocated through the cost finding 
     process, of providing each particular service, indexed 
     forward using the DRI McGraw-Hill HCFA Nursing Home Without 
     Capital Market Basket, by the units of the particular service 
     provided by the nursing facility during the cost year.
       (c) The fee for each of the fee-for-service ancillary 
     services shall be calculated at least once a year for each 
     facility and ancillary service.

     SEC. 111. REIMBURSEMENT OF SELECTED ANCILLARY SERVICES AND 
                   OTHER COSTS.

       (a) Reimbursement of selected ancillary services and other 
     costs identified in Section 106(a)(4), such as drugs and 
     medical supplies, shall be reimbursed on a retrospective 
     basis as pass-through costs, including overhead allocated 
     through the cost-finding process.
       (b) The Secretary shall set charge-based interim rates for 
     selected ancillary services and other costs for each nursing 
     facility providing such services. Any overpayments or 
     underpayments resulting from the differences between the 
     interim and final settlement rates shall either refunded by 
     the nursing facility or paid to the nursing facility 
     following submission of a timely-filed Medicare cost report.

     SEC. 112. THE PER DIEM RATE FOR PROPERTY COSTS.

       (a)(1) The basis for payment within the property cost 
     center for nursing facilities shall be calculated and paid on 
     a prospective (except as provided for newly constructed 
     facilities in subsection (d)(2) of this section), facility-
     specific, per resident day rate based on the fair asset value 
     of the property.
       (2)(A) The fair asset value of the property shall 
     constitute the sum of the market value of the land (including 
     site preparation costs), a reconstruction cost appraised 
     value for the building(s) and fixed equipment, and the 
     product of the number of beds in the nursing facility and a 
     per bed allowance for major movable equipment.
       (B) The land, building(s) and fixed equipment which are 
     included in determining the fair asset value must be used in 
     connection with the care of residents.
       (C) Appraisals for the building(s) and fixed equipment 
     shall be performed using the Marshall-Swift segmented cost 
     method. A nursing facility shall be appraised every four 
     years.
       (D) The Secretary shall utilize an annual allowance of 
     $3,500 per bed for major movable equipment for a nursing 
     facility. The Secretary shall review the annual allowance for 
     major movable equipment every five (5) years to determine its 
     accuracy.
       (E) If a nursing facility has commenced a renovation to a 
     building and fixed equipment between appraisals the cost of 
     which constitutes at least five (5) percent of the total 
     value of the existing building and the fixed equipment, it 
     may submit documentation as to the cost of the renovation 
     during the previous year. The Secretary shall add the 
     reasonable costs of the major renovation for the previous 
     year to the fair asset value of the facility. This new asset 
     value is to be the base for the indexing until the next full 
     appraisal.
       (F) The value of the assets is determined through 
     appraisals, indexing, and the application of allowances, and 
     is, therefore, unaffected by sales transactions, refinancing, 
     or other changes in financing. Accordingly, the concept of 
     recapture of depreciation is inapplicable to facilities whose 
     payment is established under this chapter.
       (3) The value of the land, building(s), and fixed equipment 
     shall be indexed annually between reappraisals as follows:
       (A) The land shall be indexed using Consumer Price Index 
     Urban.
       (B) The building(s) and fixed equipment shall be indexed 
     annually using the R.S. Means Index.
       (4) The annual allowance for major movable equipment shall 
     be indexed annually using the hospital equipment index of the 
     Marshall Swift Valuation Service.
       (5) The Secretary shall adjust the indexes used for the 
     land, building(s) and fixed equipment, and major movable 
     equipment for the different geographic regions.
       (b)(1) The Secretary shall establish a per bed limit on the 
     fair asset value of a nursing facility for each geographic 
     region, as designated in Section 105(c). The per bed limit 
     shall be equal to the average indexed costs incurred by all 
     recently constructed nursing facilities in the geographic 
     region which have been designed and constructed in an 
     efficient manner.
       (2) The per bed limit on the fair asset value shall be 
     indexed annually using the R. S. Means Index.
       (3) The per bed limit shall be recalculated every five (5) 
     years.
       (c) The total annual rental shall constitute the product of 
     the lower of the indexed fair asset value or the indexed per 
     bed limit and a rental rate which shall be based on the 
     average yield for twenty (20) year United States Treasury 
     Bonds during the prior year plus a risk premium of three (3) 
     percentage points.
       (d)(1) The per resident day rental shall be obtained by 
     dividing the total annual rental by ninety (90) percent of 
     the annual licensed bed days. The per resident day rental 
     shall constitute the per diem rate attributable to the 
     property cost center.
       (2) The per resident day rental rate for newly-constructed 
     facilities during their first year of operation shall be 
     based on the total annual rental divided by the greater of 
     fifty (50) percent of available resident days or actual 
     annualized resident days up to ninety (90) percent of annual 
     licensed bed days during their first year of operation.
       (e) Facilities in operation prior to the effective date of 
     this Chapter shall receive the per resident day rental or 
     actual costs, as determined in accordance with HCFA-Pub. 15, 
     whichever is greater, except that a nursing facility shall be 
     reimbursed the per resident day rental:
       (1) Commencing with the date upon which the nursing 
     facility changes ownership; or
       (2) After the nursing facility has accepted the per 
     resident day rental; or
       (3) After renegotiation of the lease for the land and/or 
     building(s) not including the exercise of optional extensions 
     specifically included in the original lease agreement or 
     valid extensions thereof.

     SEC. 112. MID-YEAR RATE ADJUSTMENTS.

       (a)(1) The Secretary shall establish by regulation, in 
     accordance with the Administrative Procedure Act, a procedure 
     for granting mid-year rate adjustments for the nursing 
     service, administrative and general, and fee-for-service 
     ancillary services cost centers.
       (2) The mid-year rate adjustment procedure shall require 
     the Secretary to grant adjustments on an industry-wide basis, 
     without the need for nursing facilities to apply for such 
     adjustments, based on the following circumstances:
       (A) Statutory or regulatory changes affecting nursing 
     facilities (e.g., new staffing standards or expanded 
     services); or
       (B) Changes to the federal minimum wage; or
       (C) General labor shortages with high regional wage 
     impacts; or
       (3) The mid-year rate adjustment procedure shall permit 
     specific facilities or groups of facilities to apply for an 
     adjustment based on the following factors:
       (A) Local labor shortages; or
       (B) Regulatory changes that apply to only a subset of the 
     nursing facility industry; or
       (C) Economic conditions created by natural disasters or 
     other events outside of the control of the provider.
       (D) Other cost producing factors, except case-mix 
     variation, to be specified by the Secretary in regulations 
     promulgated pursuant to the Administrative Procedure Act.
       (4)(A) A nursing facility which applies for a mid-year rate 
     adjustment pursuant to subsection (a)(3) of this section 
     shall be required to show that the adjustment will result in 
     a greater than two (2) percent deviation in the per diem rate 
     for any individual cost service center or a deviation of 
     greater than $5,000 in the total projected and indexed costs 
     for the rate year, whichever is less.
       (B) A nursing facility application for a mid-year rate 
     adjustment must be accompanied by recent cost experience data 
     and/or budget projections.

     SEC. 113. EXCEPTION TO PAYMENT METHODS FOR NEW AND LOW VOLUME 
                   NURSING FACILITIES.

       (a) A low volume nursing facility shall constitute a 
     nursing facility having fewer than 2,500 Medicare Part A 
     resident days per year.
       (b) A new nursing facility shall constitute a newly 
     constructed, licensed, and certified nursing facility and/or 
     a nursing facility that is in its first three years of 
     operation as a Medicare Part A provider. A nursing facility 
     that has operated for more than three years but has a change 
     of ownership shall not constitute a new facility.
       (c) Low volume nursing facilities shall have the option of 
     submitting a cost report to receive retrospective payment for 
     all of the cost centers, other than the property cost center, 
     or accepting a per diem rate which shall be based on the sum 
     of:
       (1) The median indexed resident day facility unit value for 
     the appropriate geographic region for the nursing service 
     cost center during the base year as identified in Section 
     108(b)(2); and
       (2) The median indexed resident day administrative and 
     general per diem costs of all nursing facilities in the 
     appropriate geographic region as identified in Section 
     109(a)(5)(E); and
       (3) The median indexed resident day costs per unit of 
     service for fee-for-service ancillary services which shall be 
     obtained using the cost information from the nursing 
     facilities in the appropriate geographic region during the 
     base year, excluding low volume and new nursing facilities, 
     and which shall be based on an array of such costs from 
     lowest to highest; and
       (4) the median indexed resident day per diem costs for 
     selected ancillary services and other costs which shall be 
     obtained using information from the nursing facilities in the 
     appropriate geographic region during the base year, excluding 
     low volume and new nursing facilities, and which shall be 
     based on an array of such costs from lowest to highest.
       (d) New nursing facilities shall have the option of being 
     paid on a retrospective cost pass-through basis for all cost 
     centers, or in accordance with Section 113(c) (1) through 
     (4)--Low Volume Providers.

     SEC. 114. APPEAL PROCEDURES.

       (a)(1) Any person or legal entity aggrieved by a decision 
     of the Secretary under this Chapter, and which results in an 
     amount in controversy of $10,000 or more, shall have the 
     right to appeal such decision directly to the Provider 
     Reimbursement Review Board (hereinafter ``the Board'') 
     authorized under Section 1878 of Title XVIII of the Social 
     Security Act.
       (2) The $10,000 amount in controversy shall be computed in 
     accordance with 42 C.F.R. Sec. 405.1839.
       (b) Hearings before the Board under this Chapter, and any 
     appeals thereto, shall follow the procedures under Section 
     1878 of Title XVIII of the Social Security Act and the 
     regulations contained in 42 C.F.R. Sec. Sec. 405.1841-1889, 
     except to the extent that they conflict with, or are 
     inapplicable on account of, any other provision of this 
     Chapter.
                                 ______

      By Mr. HEFLIN:
  S. 2441. A bill to provide for an independent review of the 
implementation of the national implementation plan for modernization of 
the National Weather Service at specific sites, and for other purposes; 
to the Committee on Commerce, Science, and Transportation.


                WEATHER SERVICE MODERNIZATION REVIEW ACT

 Mr. HEFLIN. Mr. President, today I am introducing the Weather 
Service Modernization Review Act of 1994, a bill that is critical to 
the safety of my constituents in north Alabama and to other Americans 
living in areas prone to sudden, severe weather. The urgency of 
adopting this measure is best highlighted by the Palm Sunday tornadoes 
which, just this last March, claimed dozens of lives in northeast 
Alabama, a tragedy that is all too common in the Tennessee Valley area 
of Alabama.
  As I am sure my colleagues are aware, the National Weather Service 
[NWS] is currently implementing a comprehensive modernization of its 
capabilities, facilities and services across the country. The 
centerpiece of the National Service's modernization plan is the next 
generation weather radar, otherwise known as NEXRAD. The Weather 
Service contends this NEXRAD technology is superior to existing radar 
systems. Therefore, they have planned for the closing of many Weather 
Service offices and limiting the number of NEXRAD systems. While 
efficiency and streamlining are important for a new system, it is a 
matter of grave concern that a reduction in the number of radars could 
potentially create gaps in the current severe weather warning network.
  For example, the current plan calls for the National Weather Service 
to decommission the existing Huntsville Doppler radar and to close the 
weather service office, with responsibility for weather forecasting in 
north Alabama being transferred to a site more than 100 miles away. 
Despite assurances from the Weather Service that their plan will 
adequately cover north Alabama, serious concerns remain that the severe 
weather warning needs of north Alabama cannot possibly be satisfied by 
a radar that is located so far away. In addition, a study released 
earlier this year by Florida State University professor Peter Ray based 
on National Weather Service tornado data, population, and location of 
proposed NEXRAD units, identified eight areas of weak coverage in the 
NEXRAD network including north Alabama. Therefore, I feel it is 
absolutely essential that Congress provide a mechanism for independent 
review of the implementation of the National Weather Service's 
modernization plans in specific geographic areas.
  The Weather Service Modernization Review Act will effectively create 
a mechanism for communities and geographic areas adversely affected by 
the National Weather Service Modernization Plan to ask that an 
independent, scientific evaluation be conducted over a sufficient 
period of time to determine whether or not the current NWS plan is 
adequate for that specific area. Specifically, the Secretary of 
Commerce and the Modernization Transition Team--a committee comprised 
of experts on atmospheric science--will determine which geographic 
locations will be reviewed by the National Academy of Sciences. The 
academy's conclusions will then be transmitted to the Congress by the 
Secretary of Commerce along with his recommendations for addressing the 
findings of the National Academy of Sciences. I believe this proposal 
is a fair way for every community to be heard and for the interests of 
all parties to be evaluated in a fair and independent manner.
  My colleague from north Alabama. Congressman Bud Cramer, has 
introduced similar legislation in the House which has already been 
marked up by the Subcommittee on Space of the Committee on Science, 
Space, and Technology. It is my hope that these bills can be voted on 
before the end of this legislative session. The safety of citizens 
throughout the Nation who live in areas prone to sudden, severe weather 
depends on this. I urge my colleagues to join with me in passing the 
Weather Service Modernization Act.

                          ____________________