[Congressional Record Volume 144, Number 140 (Thursday, October 8, 1998)]
[Senate]
[Pages S11974-S11976]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BREAUX (for himself and Mr. Mack):
  S. 2582. A bill to amend title XVIII of the Social Security Act to 
provide for a prospective payment system for services furnished by 
psychiatric hospitals under the Medicare Program; to the Committee on 
Finance.


  Medicare Psychiatric Hospital Prospective Payment System Act of 1998

 Mr. BREAUX. Mr. President, today my colleague Connie Mack and 
I are introducing legislation that would improve Medicare inpatient 
psychiatric care by reforming how Medicare pays for services provided 
in free-standing psychiatric hospitals and distinct-part psychiatric 
units of general hospitals. The Medicare Psychiatric Hospital 
Prospective Payment System Act of 1998 would establish over time a 
prospective payment system (PPS) for these providers. Currently 
psychiatric hospitals and units are exempt from PPS. Their costs are 
reimbursed under provisions in the 1982 Tax Equity and Fiscal 
Responsibility Act, or TEFRA.
  The Balanced Budget Act (BBA) of 1997 made significant changes to the 
TEFRA payment system by reducing incentive payments and imposing a 
limit on what Medicare will pay for services provided in psychiatric 
facilities, regardless of a facility's costs. The result is that many 
of these providers will be hit hard by deep and sudden cuts, with no 
transition period to adjust to the changes. I believe that moving 
psychiatric hospitals to a prospective payment system will ensure that 
these changes do not reduce patient access to psychiatric care.
  Our legislation proposes to transition psychiatric inpatient 
hospitals to a prospective payment system--a system that will be more 
efficient, allow for better planning, and lead to improved patient 
care. This legislation also addresses the short-term viability of many 
of these facilities to enable patients to continue receiving the 
specialized care these providers offer. For that reason, our 
legislation includes immediate financial relief to those psychiatric 
facilities hardest hit by the BBA: twenty-five percent of facilities in 
the first year, about thirteen percent in year two, and approximately 
ten percent in year three. The relief will then be paid back when a 
prospective payment is implemented in year four to ensure that this 
bill is budget neutral by the end of year five. Specifically, the 
Breaux-Mack bill would limit an individual facility's payment 
reductions to no more than five percent in the first year, seven and 
one-half percent in the second year, and ten percent in year three. 
After the third year, a PPS based on per diems would be phased in. In 
the first two years of the new PPS, the per-diem rates would be 
adjusted downward to pay back the savings lost to the Medicare program 
as a result of the ``hold harmless'' provisions of the bill. 
Consequently, our bill is budget-neutral over five years, yet it 
provides some measure of relief to those Medicare providers most 
severely affected by the BBA and guarantees that beneficiaries will not 
lose vital services. But perhaps the most important feature of our bill 
is that it moves the last of the TEFRA providers--psychiatric 
facilities--out of a cost-based payment system and into a

[[Page S11975]]

system where they will be paid prospectively, like most other Medicare 
providers.
  I urge my colleagues to join me in co-sponsoring this important piece 
of legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2582

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Psychiatric 
     Hospital Prospective Payment System Act of 1998''.

     SEC. 2. MEDICARE PROSPECTIVE PAYMENT SYSTEM FOR PSYCHIATRIC 
                   FACILITIES.

       (a) Establishment of Prospective Payment System.--Section 
     1886 of the Social Security Act (42 U.S.C. 1395ww) is amended 
     by adding at the end the following:
       ``(l) Prospective Payment System for Inpatient Psychiatric 
     Services.--
       ``(1) Amount of payment.--
       ``(A) During transition period.--Notwithstanding section 
     1814(b), but subject to the provisions of section 1813, the 
     amount of payment with respect to the operating and capital-
     related costs of inpatient hospital services of a psychiatric 
     facility (as defined in paragraph (7)(C)) for each day of 
     services furnished in a cost reporting period beginning on or 
     after October 1, 2000, and before October 1, 2003, is equal 
     to the sum of--
       ``(i) the TEFRA percentage (as defined in paragraph (7)(D)) 
     of the facility-specific per diem rate (determined under 
     paragraph (2)); and
       ``(ii) the PPS percentage (as defined in paragraph (7)(B)) 
     of the applicable Federal per diem rate (determined under 
     paragraph (3)).
       ``(B) Under fully implemented system.--Notwithstanding 
     section 1814(b), but subject to the provisions of section 
     1813, the amount of payment with respect to the operating and 
     capital-related costs of inpatient hospital services of a 
     psychiatric facility for each day of services furnished in a 
     cost reporting period beginning on or after October 1, 2003, 
     is equal to the applicable Federal per diem rate determined 
     under paragraph (3) for the facility for the fiscal year in 
     which the day of services occurs.
       ``(C) New facilities.--In the case of a psychiatric 
     facility that does not have a base fiscal year (as defined in 
     paragraph (7)(A)), payment for the operating and capital-
     related costs of inpatient hospital services shall be made 
     under this subsection using the applicable Federal per diem 
     rate.
       ``(2) Determination of facility-specific per diem rates.--
       ``(A) Base year.--The Secretary shall determine, on a per 
     diem basis, the allowable operating and capital-related costs 
     of inpatient hospital services for each psychiatric facility 
     for its cost reporting period (if any) beginning in the base 
     fiscal year (as defined in paragraph (7)(A)), such costs 
     determined as if subsection (b)(8) did not apply.
       ``(B) Updating.--The Secretary shall update the amount 
     determined under subparagraph (A) for each cost reporting 
     period after the cost reporting period beginning in the base 
     fiscal year and before October 1, 2003, by a factor equal to 
     the market basket percentage increase.
       ``(3) Determination of the federal per diem rate.--
       ``(A) Base year.--The Secretary shall determine, on a per 
     diem basis, the allowable operating and capital-related costs 
     of inpatient hospital services for each psychiatric facility 
     for its cost reporting period (if any) beginning in the base 
     fiscal year (as defined in paragraph (7)(A)), such costs 
     determined as if subsection (b)(8) did not apply.
       ``(B) Updating to first fiscal year.--The Secretary shall 
     update the amount determined under subparagraph (A) for each 
     cost reporting period up to the first cost reporting period 
     to which this subsection applies by a factor equal to the 
     market basket percentage increase.
       ``(C) Computation of standardized per diem rate.--The 
     Secretary shall standardize the amount determined under 
     subparagraph (B) for each facility by--
       ``(i) adjusting for variations among facilities by area in 
     the average facility wage level per diem; and
       ``(ii) adjusting for variations in case mix per diem among 
     facilities (based on the patient classification system 
     established by the Secretary under paragraph (4)).
       ``(D) Computation of weighted average per diem rates.--
       ``(i) Separate rates for urban and rural areas.--Based on 
     the standardized amounts determined under subparagraph (C) 
     for each facility, the Secretary shall compute a separate 
     weighted average per diem rate--

       ``(I) for all psychiatric facilities located in an urban 
     area (as defined in subsection (d)(2)(D)); and
       ``(II) for all psychiatric facilities located in a rural 
     area (as defined in subsection (d)(2)(D)).

       ``(ii) For hospitals and units.--Subject to paragraph 
     (7)(C), in the areas referred to in clause (i) the Secretary 
     may compute a separate weighted average per diem rate for--

       ``(I) psychiatric hospitals; and
       ``(II) psychiatric units described in the matter following 
     clause (v) of subsection (d)(1)(B).

     If the Secretary establishes separate average weighted per 
     diem rates under this clause, the Secretary shall also 
     establish separate average per diem rates for facilities in 
     such categories that are owned and operated by an agency or 
     instrumentality of Federal, State, or local government and 
     for facilities other than such facilities.
       ``(iii) Weighted average.--In computing the weighted 
     averages under clauses (i) and (ii), the standardized per 
     diem amount for each facility shall be weighted for each 
     facility by the number of days of inpatient hospital services 
     furnished during its cost reporting period beginning in the 
     base fiscal year.
       ``(E) Updating.--The weighted average per diem rates 
     determined under subparagraph (D) shall be updated for each 
     fiscal year after the first fiscal year to which this 
     subsection applies by a factor equal to the market basket 
     percentage increase.
       ``(F) Determination of federal per diem rate.--
       ``(i) In general.--The Secretary shall compute for each 
     psychiatric facility for each fiscal year (beginning with 
     fiscal year 2001) a Federal per diem rate equal to the 
     applicable weighted average per diem rate determined under 
     subparagraph (E), adjusted for--

       ``(I) variations among facilities by area in the average 
     facility wage level per diem;
       ``(II) variations in case mix per diem among facilities 
     (based on the patient classification system established by 
     the Secretary under paragraph (4)); and
       ``(III) variations among facilities in the proportion of 
     low-income patients served by the facility.

       ``(ii) Other adjustments.--In computing the Federal per 
     diem rates under this subparagraph, the Secretary may adjust 
     for outlier cases, the indirect costs of medical education, 
     and such other factors as the Secretary determines to be 
     appropriate.
       ``(iii) Budget neutrality.--The adjustments specified in 
     clauses (i)(I), (i)(III), and (ii) shall be implemented in a 
     manner that does not result in aggregate payments under this 
     subsection that are greater or less than those aggregate 
     payments that otherwise would have been made if such 
     adjustments did not apply.
       ``(4) Establishment of patient classification system.--
       ``(A) In general.--The Secretary shall establish--
       ``(i) classes of patients of psychiatric facilities (in 
     this paragraph referred to as `case mix groups'), based on 
     such factors as the Secretary determines to be appropriate; 
     and
       ``(ii) a method of classifying specific patients in 
     psychiatric facilities within these groups.
       ``(B) Weighting factors.--For each case mix group, the 
     Secretary shall assign an appropriate weighting factor that 
     reflects the relative facility resources used with respect to 
     patients classified within that group compared to patients 
     classified within other such groups.
       ``(5) Data collection; utilization monitoring.--
       ``(A) Data collection.--The Secretary may require 
     psychiatric facilities to submit such data as is necessary to 
     implement the system established under this subsection.
       ``(B) Utilization monitoring.--The Secretary shall monitor 
     changes in the utilization of inpatient hospital services 
     furnished by psychiatric facilities under the system 
     established under this subsection and report to the 
     appropriate committees of Congress on such changes, together 
     with recommendations for legislation (if any) that is needed 
     to address unwarranted changes in such utilization.
       ``(6) Special adjustments.--Notwithstanding the preceding 
     provisions of this subsection, the Secretary shall reduce 
     aggregate payment amounts that would otherwise be payable 
     under this subsection for inpatient hospital services 
     furnished by a psychiatric facility during cost reporting 
     periods beginning in fiscal years 2001 and 2002 by such 
     uniform percentage as is necessary to assure that payments 
     under this subsection for such cost reporting periods are 
     reduced by an amount that is equal to the sum of--
       ``(A) the aggregate increase in payments under this title 
     during fiscal years 1998, 1999, and 2000, that is 
     attributable to the operation of subsection (b)(8); and
       ``(B) the aggregate increase in payments under this title 
     during fiscal years 2001 and 2002 that is attributable to the 
     application of the market basket percentage increase under 
     paragraphs (2)(B) and (3)(E) of this subsection in lieu of 
     the provisions of subclauses (VI) and (VII) of subsection 
     (b)(3)(B)(ii).

     Reductions under this paragraph shall not affect computation 
     of the amounts payable under this subsection for cost 
     reporting periods beginning in fiscal years after fiscal year 
     2002.
       ``(7) Definitions.--For purposes of this subsection:
       ``(A) The term `base fiscal year' means, with respect to a 
     hospital, the most recent fiscal year ending before the date 
     of the enactment of this subsection for which audited cost 
     report data are available.
       ``(B) The term `PPS percentage' means--
       ``(i) with respect to cost reporting periods beginning on 
     or after October 1, 2000, and before October 1, 2001, 25 
     percent;
       ``(ii) with respect to cost reporting periods beginning on 
     or after October 1, 2001, and before October 1, 2002, 50 
     percent; and

[[Page S11976]]

       ``(iii) with respect to cost reporting periods beginning on 
     or after October 1, 2002, and before October 1, 2003, 75 
     percent.
       ``(C) The term `psychiatric facility' means--
       ``(i) a psychiatric hospital; and
       ``(ii) a psychiatric unit described in the matter following 
     clause (v) of subsection (d)(1)(B).
       ``(D) The term `TEFRA percentage' means--
       ``(i) with respect to cost reporting periods beginning on 
     or after October 1, 2000, and before October 1, 2001, 75 
     percent;
       ``(ii) with respect to cost reporting periods beginning on 
     or after October 1, 2001, and before October 1, 2002, 50 
     percent; and
       ``(iii) with respect to cost reporting periods beginning on 
     or after October 1, 2002, and before October 1, 2003, 25 
     percent.''.
       (b) Limit on Reductions Under Balanced Budget Act.--Section 
     1886(b) of the Social Security Act (42 U.S.C. 1395ww(b)) is 
     amended by adding at the end the following:
       ``(8)(A) Notwithstanding the amendments made by sections 
     4411, 4414, 4415, and 4416 of the Balanced Budget Act of 
     1997, in the case of a psychiatric facility (as defined in 
     subparagraph (B)(ii)), the amount of payment for the 
     operating costs of inpatient hospital services for cost 
     reporting periods beginning on or after October 1, 1997, and 
     before October 1, 2000, shall not be less than the applicable 
     percentage (as defined in subparagraph (B)(i)) of the amount 
     that would have been paid for such costs if such amendments 
     did not apply.
       ``(B) For purposes of this paragraph:
       ``(i) The term `applicable percentage' means--
       ``(I) 95 percent for cost reporting periods beginning on or 
     after October 1, 1997, and before October 1, 1998;
       ``(II) 92.5 percent for cost reporting periods beginning on 
     or after October 1, 1998, and before October 1, 1999; and
       ``(III) 90 percent for cost reporting periods beginning on 
     or after October 1, 1999, and before October 1, 2000.
       ``(ii) The term `psychiatric facility' means--
       ``(I) a psychiatric hospital; and
       ``(II) a psychiatric unit described in the matter following 
     clause (v) of subsection (d)(1)(B).''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply as if included in the enactment of the 
     Balanced Budget Act of 1997.

 Mr. MACK. Mr. President, today, I am pleased to join my 
colleague John Breaux in sponsoring the Medicare Psychiatric Hospital 
Prospective Payment System Act of 1998. This legislation maintains the 
integrity and availability of Medicare inpatient psychiatric care by 
changing how Medicare currently pays for services provided to 
beneficiaries in free standing psychiatric hospitals and distinct-part 
psychiatric units of general hospitals. This bill eases the transition 
of psychiatric facilities to a prospective payment system (PPS) while 
phasing in substantial cuts in payments to these providers as required 
by the Balanced Budget Act of 1997.
  Currently, psychiatric hospitals and units are exempt from PPS. This 
bill is budget neutral over five years, and ensures that until PPS is 
established, inpatient psychiatric care will not be compromised or 
disrupted because of major budget reductions. Finally, this legislation 
prevents the type of dislocations we now face in the Home Health Care 
industry.
  The purpose of this bill is to give psychiatric facilities a period 
of adjustment to the mandates of BBA while not jeopardizing patient 
care. It provides for a transition period that will help providers 
adjust to a prospective payment system that will be installed in three 
years. At the end of this time period psychiatric facilities will be 
paid on a prospective payment basis like other hospital providers in 
the Medicare program. Psychiatric hospital managers understand that the 
financial limitations imposed by BBA on their facilities must be met, 
and this bill smooths out the requirements for accomplishing this in 
such a way that the integrity of patient care is maintained. I urge my 
colleagues to join me in co-sponsoring this important piece of 
legislation.
                                 ______