[Congressional Record Volume 145, Number 67 (Tuesday, May 11, 1999)]
[Senate]
[Pages S5045-S5047]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MACK (for himself and Mr. Breaux):
  S. 1002. 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 1999

  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 1999.
  This legislation will ensure the continuance of available impatient 
psychiatric care by reforming how Medicare pays for services in free-
standing psychiatric hospitals and psychiatric units of general 
hospitals. It will establish a prospective payment system (PPS) 
Currently psychiatric hospitals are the only institutional providers of 
care under Medicare not scheduled to move to a PPS system.
  The Balanced Budget Act of 1997 (BBA) made major changes in the way 
psychiatric hospitals are paid. It reduced incentive payments and 
imposed a limit on what will be paid. The result of this was that many 
of these providers were hit by a big cut in the first year with no 
transition period to adjust to the reductions. It is important that 
these cuts not be continued because patient care may be put at risk. A 
recent study found that 84% of psychiatric hospitals had payment 
reductions due to BBA. The average margin went from minus 3% to 
negative 8.7%.
  This legislation proposes to transition psychiatric inpatient 
providers to a PPS which will allow these institutions to be able to 
plan and adjust for the future and insure their ability to provide 
quality care. The proposal also provides a measure of financial relief 
by limiting payment reductions to no more than 5% in the next two 
years. This relief will then be paid back in a few years under PPS. 
After the third year, PPS will be in effect and per diem rates can be 
adjusted downward by the Secretary of Health and Human Services to pay 
back savings temporarily lost through the limitation of initial payment 
reductions. The goal is for the bill to be budget neutral over five 
years and fully comply with the BBA.
  The most important feature of this legislation is that it moves 
psychiatric facilities out of a cost based system and into a system 
where they will be paid prospectively, like most other Medicare 
Providers, and can manage their finances effectively to provide high 
quality psychiatric care.
  I urge my colleagues to join me in co-sponsoring this important piece 
of legislation.
  Mr. President, I ask unanimous consent that a copy of the legislation 
be printed in the Record.

[[Page S5046]]

  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1002

       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 1999''.

     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 (as defined in 
     subsection (b)(3)(B)(iii)).
       ``(3) Determination of 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 (as defined in subsection 
     (b)(3)(B)(iii)).
       ``(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.--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 psychiatric 
     facilities in such categories that are owned and operated by 
     an agency or instrumentality of Federal, State, or local 
     government and for psychiatric 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 (as defined in subsection 
     (b)(3)(B)(iii)).
       ``(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 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 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 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
       ``(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

[[Page S5047]]

       ``(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) 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 described in 
     subsection (l)(7(C)(ii)), the amount of payment for the 
     operating costs of inpatient hospital services for cost 
     reporting periods beginning on or after October 1, 1998, and 
     before October 1, 2000, shall not be less than 95 percent of 
     the amount that would have been paid for such costs if such 
     amendments did not apply.
       (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.
                                 ______