[Congressional Record Volume 148, Number 67 (Wednesday, May 22, 2002)]
[Senate]
[Pages S4716-S4720]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. Bingaman (for himself and Ms. Snowe):
  S. 2547. A bill to amend title XVIII of the Social Security Act to 
provide for fair payments under the Medicare hospital outpatient 
department prospective payment system; to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, I rise today with Senator Snowe to 
introduce legislation entitled the ``Medicare Hospital Outpatient 
Department Fair Payment Act of 2002'' to improve Medicare payments for 
hospital outpatient department services.
  According to the Medicare Payment Advisory Commission, or MedPAC, in 
its report to Congress this past March. ``We estimate that the 
aggregate Medicare margin for outpatient services

[[Page S4717]]

will be -16.3 percent in 2002. Unfortunately, while the Medicare 
outpatient prospective payment system, or OPPS, was created to give 
providers incentives to deliver quality outpatient care and services in 
an efficient manner, OPPS reimbursement rates have been set at a level 
substantially below what is costs hospitals to care for Medicare 
patients. That is an unsustainable burden for our Nation's hospitals.
  This problem is especially acute in rural areas. According to the 
Medicare Payment Advisory Commission's June 2001 report entitled 
``Report to Congress: Medicare in Rural America,'' outpatient costs 
represent 21.8 percent of total Medicare costs in rural hospitals 
compared to 16.1 percent in urban hospitals. As MedPAC concludes, 
``Given their greater reliance on Medicare and on outpatient services 
within Medicare, rural hospitals have more at stake than their urban 
counterparts in the move to the outpatient PPS.''
  In addition, Medicare's payment policy of paying less than cost 
creates inappropriate incentives for providers to provide services in 
the setting that receives the most favorable payment rather than the 
one best suited for the patient. Medicare policy should seek, as best 
as possible, to pay appropriate amounts to ensure access to care for 
Medicare beneficiaries in appropriate settings, whether in inpatient 
hospitals, outpatient care, ambulatory surgical centers, or physician 
offices.
  To provide just one example, the following are the current payment 
rates for mammography in either a outpatient hospital setting of a 
physician's office: for unilateral diagnostic mammography, the OPPS 
payment is $30.54 compared to $38.01 in a physician's office; for 
bilateral diagnostic mammography, the OPPS payment is again $30.54 
compared to an even higher $46.06 in a physician's office; for 
unilateral digital mammography, OPPS payment just increased to $75.00 
compared to $71.31 in a physician's office; and finally, for bilateral 
digital mammography, the OPPS payment is $75.00 compared to $88.33 in a 
physician's office.
  Why does Medicare pay between 24 percent to 54 percent more for a 
diagnostic mammography in a physician's office than in an outpatient 
hospital setting? Such disparities are unjustified and they are even 
worse for other Medicare services.
  To address these problems, the ``Medicare Hospital Outpatient Fair 
Payment Act of 2002'' would: increase extremely underfunded emergency 
room and clinic ambulatory payment classifications, or APC, payment 
rates in the OPPS system by 10 percent and require an increase in 
overall outpatient department payments to be adjusted to 90 percent of 
overall costs, from the current 84 percent; and improve and extend 
transitional corridor or ``hold harmless'' payments to rural hospitals, 
cancer hospitals, and children's hospitals, and extend the transitional 
payments to designated eye and ear speciality hospitals.
  The first provision would increase funding overall through the 
outpatient hospital system from 84 percent of cost to 90 percent of 
cost, still 10 percent less than the hospitals spend in delivering 
necessary outpatient care, with special focus and priority on payments 
for emergency room and clinic payments, prevention services, cancer 
services, and to reduce the disparity between payments in outpatient 
and alternative settings.
  The extension of the transitional corridors or hold harmless payments 
to rural, cancer, and children's hospitals addresses the particular 
problems those hospitals are facing with the OPPS system and adds 
designated eye and ear speciality hospitals. With regard to rural 
hospitals, MedPAC recommended that due to the higher unit costs and a 
greater percentage of care delivered in rural outpatient settings in 
its June 2001 report entitled ``Report to the Congress: Medicare in 
Rural America,'' that the data ``supports the need for the existing 
hold-harmless policy'' for rural hospitals.
  Without the transitional corridor payments to rural hospitals, rural 
hospitals would be expected to be significant losers, according to 
MedPAC data. As MedPAC states, ``Small rural hospitals were protected 
to more negatively affected, with those under 50 beds, about 50 percent 
of rural hospitals, losing 8.5 percent and those with 50-99 beds losing 
2.7 percent.'' Even with the transitional corridor and hold-harmless 
payments, rural hospitals are still projected to have negative margins 
of 13.7 percent with respect to outpatient care.
  The legislation also addresses problems created by the Balanced 
Budget Refinement Act of 1999, or BBRA, which established temporary 
additional Medicare payments, or transitional pass-through payments, 
for certain innovative medical devices, drugs, and biologics. By 
establishing the pass-through payments, Congress ensured Medicare 
beneficiaries would have access to the latest medical technologies. 
These pass-through payments were capped at 2.5 percent of total 
outpatient payments prior to 2004, and the Centers for Medicare and 
Medicaid Services, or CMS, is required by law to make a proportional 
reduction for all pass-through payments if that cap is exceeded.
  In March 2002, CMS announced a reduction in pass-through payments of 
63.6 percent. This reduction means that a pass-through payment of 
$1,000 is reduced to just $364. Again, hospitals cannot continue to 
provide needed services to beneficiaries with reductions of such a 
magnitude.
  To prevent an event greater reduction in pass-through payments, CMS 
``folded-in'' a significant portion of costs of these new technologies 
into the base APCs. However, because the law requires that these 
changes are made in a budget-neutral manner, this resulted in a 
substantial reduction in payments for standard outpatient services that 
do not rely upon high-tech medical devices. In 2002, incorporating 75 
percent of device costs into the APCs led to a budget-neutrality 
adjustment of -7.2 percent, causing the substantial reduction in the 
OPPS fee schedule amounts.
  As MedPAC notes, ``If pass-through items are overused and overpaid, 
APCs that include these technologies will be relatively overpaid while 
APCs that do not will be underpaid. This process also will have 
inappropriate distributional effects among hospitals if some hospitals 
provide more services that use pass-through technologies than others.'' 
For example, rural hospitals tend to provide a greater proportion of 
more basic Services, emergency care services, and fewer services that 
require advanced technology, according to MedPAC. These are the 
services particularly hard hit by the budget neutrality provision, and 
yet, they are certainly not any less expensive than they were last 
year.
  To address these problems with Medicare's pass-through payment 
system, the bill would: limit the pro-rata reduction in pass-through to 
20 percent; and limit the budget neutrality adjustment to no more than 
2.0 percent annually.
  For New Mexico, the importance of this legislation cannot be 
overstated. In 2000, New Mexico had over 3.1 million outpatient visits 
by Medicare beneficiaries for important health concerns. This includes 
essential services such as diagnostic tests, clinic visits, emergency 
care treatment, chemotherapy, and surgery. In addition, according to 
estimates from the American Hospital Association, the impact of this 
legislation to New Mexico hospitals would be an increase in Medicare 
payments between $48 and $59 million over the next five years.
  For an industry attemtping to survive cuts to payments from the 
private sector, Medicare and Medicaid, while also dealing with the 
Nation's highest percentage of uninsured patients in the country. This 
legislation is both timely and necessary. It is unjustifiable for 
Medicare to continue to pay just 84 percent of the cost of care of 
Medicare beneficiaries.
  The bottom line is that this bipartisan legislation will ensure our 
nation's hospitals a more rationale, fair, and equitable payment system 
for services delivered to Medicare beneficiaries in an outpatient 
setting.
  I ask unanimous consent for the text of the bill and a copy of a 
letter to support from AHA to be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2457

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

[[Page S4718]]

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Hospital Outpatient Department Fair Payment Act of 2002''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Ensuring adequate OPD fee schedule amounts for clinic and 
              emergency visits.
Sec. 3. Limitation of pro rata reductions to pass-through payments.
Sec. 4. Clarifying application of OPD fee schedule increase factor.
Sec. 5. Limitation on budget neutrality adjustment for annual revisions 
              to system components.
Sec. 6. Outlier payments.
Sec. 7. Adjustment to limit decline in payment.
Sec. 8. Special increase in certain relative payment weights.
Sec. 9. Permanent extension of provider-based status.

     SEC. 2. ENSURING ADEQUATE OPD FEE SCHEDULE AMOUNTS FOR CLINIC 
                   AND EMERGENCY VISITS.

       (a) In General.--Section 1833(t) of the Social Security Act 
     (42 U.S.C. 1395l(t)) is amended--
       (1) in paragraph (3)(C)(ii)--
       (A) by striking ``paragraph (8)(B)'' and inserting 
     ``paragraphs (11)(B) and (13)(A)(i)''; and
       (B) by striking ``clause (iii)'' and inserting ``clause 
     (iv)'';
       (2) in paragraph (3)(C)(iii), by inserting ``, paragraph 
     (11)(B), or paragraph (13)(B)'' after ``this subparagraph'';
       (3) in paragraph (3)(D)--
       (A) in clause (i), by striking ``conversion factor computed 
     under subparagraph (C) for the year'' and inserting 
     ``applicable conversion factor computed under subparagraph 
     (C), paragraph (11)(B), or paragraph (13)(B) for the year (or 
     portion thereof)''; and
       (B) in clause (ii), by inserting ``, paragraph (9)(A), or 
     paragraph (13)(C)'' after ``paragraph (2)(C)'';
       (4) in paragraph (9), by striking subparagraph (B) and 
     inserting the following new subparagraph:
       ``(B) Budget neutrality adjustment.--
       ``(i) In general.--If the Secretary makes revisions under 
     subparagraph (A), then the revisions for a year may not cause 
     the estimated amount of expenditures under this part for the 
     year to increase or decrease from the estimated amount of 
     expenditures under this part (including expenditures 
     attributable to the special rules specified in paragraph 
     (13)) that would have been made if the revisions had not been 
     made.
       ``(ii) Exemption from reduction.--The relative payment 
     weights determined under paragraph (13)(C) and the conversion 
     factor computed under paragraph (13)(B) shall not be reduced 
     by any budget neutrality adjustment made pursuant to this 
     subparagraph.''; and
       (5) by redesignating paragraph (13) as paragraph (14) and 
     by inserting after paragraph (12) the following new 
     paragraph:
       ``(13) Special rules for calculating medicare opd fee 
     schedule amount for clinic and emergency visits.--
       ``(A) In general.--In computing the medicare OPD fee 
     schedule amount under paragraph (3)(D) for covered OPD 
     services that are furnished on or after April 1, 2002, and 
     classified within a group established or revised under 
     paragraph (2)(B) or (9)(A), respectively, for clinic or 
     emergency visits (as described in subparagraph (D)), the 
     Secretary shall--
       ``(i) substitute for the conversion factor calculated under 
     paragraph (3)(C) the conversion factor calculated under 
     subparagraph (B); and
       ``(ii) substitute for the relative payment weight 
     established or revised under paragraph (2)(C) or (9)(A), 
     respectively, the relative payment weight determined under 
     subparagraph (C) for such group.
       ``(B) Calculation of conversion factor.--For purposes of 
     subparagraph (A)(i), the conversion factor calculated under 
     this subparagraph is--
       ``(i) for services furnished on or after April 1, 2002, and 
     before January 1, 2003, an amount equal to 112.82 percent of 
     the conversion factor specified for such period in the final 
     rule published on March 1, 2002 (67 Fed. Reg. 9556 et seq.; 
     entitled `Medicare Program; Correction of Certain Calendar 
     Year 2002 Payment Rates Under the Hospital Outpatient 
     Prospective Payment System and the Pro Rata Reduction on 
     Transitional Pass-Through Payments; Correction of Technical 
     and Typographical Errors') and not taking into account any 
     subsequent amendments to such final rule; and
       ``(ii) for services furnished in a year beginning after 
     December 31, 2002, the conversion factor computed under this 
     subparagraph for the previous year (or in the case of 2003, 
     for the previous 9 months) increased by the OPD fee schedule 
     increase factor specified under paragraph (3)(C)(iv) for the 
     year involved.
       ``(C) Determination of relative payment weights.--For 
     purposes of subparagraph (A)(ii), the relative payment weight 
     determined under this subparagraph for a covered OPD service 
     that is classified within such a group is--
       ``(i) for services furnished on or after April 1, 2002, and 
     before January 1, 2003, the relative payment weight specified 
     for such group for such period in Addendum A of the final 
     rule published on March 1, 2002 (67 Fed. Reg. 9556 et seq.; 
     entitled `Medicare Program; Correction of Certain Calendar 
     Year 2002 Payment Rates Under the Hospital Outpatient 
     Prospective Payment System and the Pro Rata Reduction on 
     Transitional Pass-Through Payments; Correction of Technical 
     and Typographical Errors') and not taking into account any 
     subsequent amendments to such final rule; and
       ``(ii) for services furnished in a year beginning on or 
     after January 1, 2003--

       ``(I) for ambulatory patient classification group 0601 
     (relating to mid-level clinic visits), or a successor to such 
     group, the relative payment weight specified for such group 
     in the final rule referred to in clause (i); and
       ``(II) other ambulatory patient classification groups 
     described in subparagraph (D), the relative payment weight 
     established or revised under paragraph (2)(C) or (9)(A), 
     respectively, for such group for such year (but without 
     regard to any budget neutrality adjustment under paragraph 
     (9)(B)).

       ``(D) Groups for clinic and emergency visits.--For purposes 
     of this paragraph, the groups established or revised under 
     paragraph (2)(B) or (9)(A), respectively, for clinic and 
     emergency visits are ambulatory patient classification groups 
     0600, 0601, 0602, 0610, 0611, and 0612 as defined for 
     purposes of the final rule referred to in subparagraph (C)(i) 
     (and any successors to such groups).''.
       (b) Limitation on Secretarial Authority.--Notwithstanding 
     section 1833(t) of the Social Security Act (42 U.S.C. 
     1395l(t)), the Secretary of Health and Human Services may not 
     make any adjustment under--
       (1) paragraph (2)(F), (3)(C)(iii), (9)(B), or (9)(C) of 
     section 1833(t) of the Social Security Act (42 U.S.C. 
     1395l(t)); or
       (2) any other provision of such section;
     to ensure that the amendments made by subsection (a) do not 
     cause the estimated amount of expenditures under part B of 
     title XVIII of such Act (42 U.S.C. 1395j et seq.) to exceed 
     the estimated amount of expenditures that would have been 
     made under such part but for such amendments.
       (c) Periodic Lump-Sum Retroactive Payments.--The Secretary 
     of Health and Human Services shall, not later than 60 days 
     after the date of enactment of this Act (and at least every 
     90 days thereafter until the amendments made by subsection 
     (a) are implemented)--
       (1) estimate, for each hospital furnishing services for 
     which payment may be made under section 1833(t) of the Social 
     Security Act (42 U.S.C. 1395l(t)) on or after April 1, 2002--
       (A) the total amount of additional payments under such 
     section that would have been made to such hospital as of the 
     date of such estimate if such amendments had been implemented 
     as of such date; and
       (B) the total amount of additional payments under such 
     section that have actually been made to such hospital as of 
     the date of such estimate (including any amounts paid 
     pursuant to this subsection); and
       (2) make a lump-sum payment to such hospital equal to the 
     amount by which the amount estimated under paragraph (1)(A) 
     exceeds the amount estimated under paragraph (1)(B).

     SEC. 3. LIMITATION OF PRO RATA REDUCTIONS TO PASS-THROUGH 
                   PAYMENTS.

       (a) In General.--Section 1833(t)(6)(E) of the Social 
     Security Act (42 U.S.C. 1395l(t)(6)(E)) is amended--
       (1) in clause (i), by striking ``The total'' and inserting 
     ``Subject to clause (iv), the total'';
       (2) in clause (iii), by striking ``If the Secretary'' and 
     inserting ``Subject to clause (iv), if the Secretary''; and
       (3) by adding at the end the following new clause:
       ``(iv) Limitation on pro rata reductions.--Notwithstanding 
     clauses (i), (ii), and (iii), the Secretary may not reduce 
     the additional payments that would otherwise be made under 
     this paragraph (but for this subparagraph) for items and 
     services furnished on or after April 1, 2002, by a percentage 
     that exceeds 20.0 percent.''.
       (b) Periodic Lump-Sum Retroactive Payments.--The Secretary 
     of Health and Human Services shall, not later than 60 days 
     after the date of enactment of this Act (and at least every 
     90 days thereafter until clause (iv) of section 1833(t)(6)(E) 
     of the Social Security Act (as added by subsection (a)(3)) is 
     implemented)--
       (1) estimate, for each hospital furnishing services for 
     which payment may be made under section 1833(t) of the Social 
     Security Act (42 U.S.C. 1395l(t)) on or after April 1, 2002--
       (A) the total amount of additional payments under paragraph 
     (6) of such section that would have been made to such 
     hospital as of the date of such estimate if such clause had 
     been implemented as of such date; and
       (B) the total amount of additional payments under such 
     paragraph that have actually been made to such hospital as of 
     the date of such estimate (including any amounts paid 
     pursuant to this subsection); and
       (2) make a lump-sum payment to such hospital equal to the 
     amount by which the amount estimated under paragraph (1)(A) 
     exceeds the amount estimated under paragraph (1)(B).

     SEC. 4. CLARIFYING APPLICATION OF OPD FEE SCHEDULE INCREASE 
                   FACTOR.

       Section 1833(t)(3)(C)(iv) of the Social Security Act (42 
     U.S.C. 1395l(t)(3)(C)(iv)) is amended by adding at the end 
     the following new sentence: ``Effective for years beginning

[[Page S4719]]

     with 2002, the OPD fee schedule increase factor for a year 
     shall take effect on January 1 of such year, and nothing in 
     this subsection shall be construed as authorizing the 
     Secretary to delay the date on which such increase factor 
     takes effect by reason of any delay in implementing the 
     revisions authorized by paragraph (9)(A) for such year or for 
     any other reason.''.

     SEC. 5. LIMITATION ON BUDGET NEUTRALITY ADJUSTMENT FOR ANNUAL 
                   REVISIONS TO SYSTEM COMPONENTS.

       Section 1833(t)(9)(B) of the Social Security Act (42 U.S.C. 
     1395l(t)(9)(B)), as amended by section 2(a)(4), is amended--
       (1) in clause (i), by striking ``If the Secretary'' and 
     inserting ``Subject to clause (iii), if the Secretary''; and
       (2) by adding at the end the following new clause:
       ``(iii) Limitation on adjustment.--For years after 2001, 
     the budget neutrality adjustment under this subparagraph may 
     not reduce the payments that would otherwise be made under 
     this part but for this subparagraph by more than 2.0 
     percent.''.

     SEC. 6. OUTLIER PAYMENTS.

       Section 1833(t)(5) of the Social Security Act (42 U.S.C. 
     1395l(t)(5)) is amended--
       (1) in subparagraph (C)--
       (A) in clause (i), by striking ``exceed the applicable'' 
     and inserting ``exceed a percentage specified by the 
     Secretary that is not less than the applicable minimum 
     percentage or greater than the applicable maximum''; and
       (B) by striking clause (ii) and inserting the following new 
     clause:
       ``(ii) Applicable percentages.--For purposes of clause 
     (i)--

       ``(I) the term `applicable minimum percentage' for a year 
     means zero percent for years before 2003 and 2.0 percent for 
     years after 2002; and
       ``(II) the term `applicable maximum percentage' for a year 
     means 2.5 percent for years before 2003 and 3.0 percent for 
     years after 2002.''; and

       (2) in subparagraph (D)--
       (A) in the heading, by striking ``Transitional authority'' 
     and inserting ``Flexibility''; and
       (B) in the matter preceding clause (i), by striking ``for 
     covered OPD services furnished before January 1, 2002,''.

     SEC. 7. ADJUSTMENT TO LIMIT DECLINE IN PAYMENT.

       Section 1833(t)(7) of the Social Security Act (42 U.S.C. 
     1395l(t)(7)) is amended--
       (1) in the heading, by striking ``Transitional adjustment'' 
     and inserting ``Adjustment'';
       (2) in subparagraph (A)--
       (A) in the heading, by striking ``Before 2002'' and 
     inserting ``In general'';
       (B) in the matter preceding clause (i)--
       (i) by striking ``subparagraph (D)'' and inserting 
     ``subparagraph (B)'';
       (ii) by striking ``furnished before January 1, 2002,''; and
       (iii) by striking ``subparagraph (E)'' and inserting 
     ``subparagraph (C)''; and
       (C) in clause (i), by striking ``subparagraph (F)'' and 
     inserting ``subparagraph (D)'';
       (3) by striking subparagraph (D) and inserting the 
     following new subparagraph:
       ``(D) Hold harmless provisions.--
       ``(i) Cancer, children's, and small rural hospitals.--In 
     the case of a hospital that is described in clause (iii) or 
     (v) of section 1886(d)(1)(B) or is located in a rural area 
     and has not more than 100 beds, for covered OPD services--

       ``(I) that are furnished on or after the date on which 
     payment is first made under this subsection; and
       ``(II) for which the PPS amount is less than the pre-BBA 
     amount (or for services furnished on or after January 1, 
     2002, is less than the greater of the pre-BBA amount or the 
     reasonable costs incurred in furnishing such services),

     the amount of payment under this subsection shall be 
     increased by the amount of such difference.
       ``(ii) Eye and ear hospitals.--In the case of a hospital or 
     unit described in subsection (i)(4), for covered OPD 
     services--

       ``(I) that are furnished on or after January 1, 2002; and
       ``(II) for which the PPS amount is less than the greater of 
     the base year amount (which for purposes of this subparagraph 
     shall be determined in the same manner as the pre-BBA amount 
     under subparagraph (D), except that clause (ii)(I) of such 
     subparagraph shall be applied by substituting `2001' for 
     `1996') or the reasonable costs incurred in furnishing such 
     services,

     the amount of payment under this subsection shall be 
     increased by the amount of such difference.'';
       (4) in subparagraph (F)(ii)(I), by striking ``subparagraph 
     (E)'' and inserting ``subparagraph (C)''; and
       (5) by striking subparagraphs (B) and (C) and redesignating 
     subparagraphs (D), (E), (F), (G), (H), and (I) as 
     subparagraphs (B), (C), (D), (E), (F), and (G), respectively.

     SEC. 8. SPECIAL INCREASE IN CERTAIN RELATIVE PAYMENT WEIGHTS.

       Section 1833(t) of the Social Security Act (42 U.S.C. 
     1395l(t)) is amended--
       (1) in paragraph (3)(D)(ii), as amended by section 
     2(a)(3)(B), by striking ``or paragraph (13)(C)'' and 
     inserting ``paragraph (13)(C), or paragraph (14)'';
       (2) in paragraph (9)(B)(i), as amended by section 2(a)(4), 
     by inserting ``determined without regard to expenditures made 
     by reason of the adjustments required by paragraph (14)'' 
     after ``paragraph (13)'';
       (3) in paragraph (12)(C), by striking ``paragraph (6)'' and 
     inserting ``paragraph (9) (including adjustments authorized 
     by paragraph (14))''; and
       (4) by redesignating paragraph (14) (as redesignated by 
     section 2(a)(5)) as paragraph (15) and by inserting after 
     paragraph (13) the following new paragraph:
       ``(14) Requirement to increase relative payment weights in 
     certain circumstances.--
       ``(A) In general.--Notwithstanding the methodologies 
     specified for determining relative payment weights described 
     in paragraphs (2)(C) and (9)(A), for years beginning with 
     2002, the Secretary shall, as part of the revisions required 
     by paragraph (9)(A), increase the relative payment weight for 
     any group established or revised under paragraph (2)(C) or 
     (9)(A), respectively, above the weight that would otherwise 
     apply to such group under this subsection if the Secretary 
     determines that such an increase is necessary to ensure that 
     the medicare OPD fee schedule amount for the group for the 
     year is not less than 90 percent of the median costs for 
     services classified within the group.
       ``(B) Priorities.--For purposes of providing for increases 
     under subparagraph (A), the Secretary shall give priority 
     first to preventive services, second to cancer services, 
     third to services for which the medicare OPD fee schedule 
     amount that would otherwise apply is less the payment level 
     under this title for such services in other settings, and 
     fourth to other services.
       ``(C) Data.--The Secretary may base increases under 
     subparagraph (A) on data from any source and is not limited 
     to data appropriate for estimating the costs incurred by 
     hospitals in furnishing such services.
       ``(D) Aggregate expenditures.--Notwithstanding the 
     application of the percentage specified under subparagraph 
     (A), the Secretary shall provide for increases under such 
     subparagraph for each year so that the estimated amount of 
     additional expenditures attributable to adjustments under 
     such subparagraph is not less than $1,000,000,000 in such 
     year.''.

     SEC. 9. PERMANENT EXTENSION OF PROVIDER-BASED STATUS.

       Paragraphs (1) and (2) of section 404(a) of the Medicare, 
     Medicaid, and SCHIP Benefits Improvement and Protection Act 
     of 2000 (113 Stat. 2763A-506), as enacted into law by section 
     1(a)(6) of Public Law 106-554, are each amended by striking 
     ``until October 1, 2002''.
                                  ____



                                American Hospital Association,

                                     Washington, DC, May 22, 2002.
     Hon. Jeff Bingaman,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Bingaman: On behalf of our nearly 5,000 
     hospital, health care system, network and other health care 
     provider members, the American Hospital Association is 
     writing to express our strong support for the Medicare 
     Hospital Outpatient Fair Payment Act of 2002 that you have 
     introduced with Sen. Olympia Snowe (R-ME). We believe this 
     bill is an essential component to ensuring that America's 
     Medicare patients receive emergency care and outpatient 
     services, and have equal access to the newest medical 
     technologies.
       As hospital care continues to shift to the outpatient 
     setting, it is imperative that Congress begins to address the 
     complex operational issues and payment inequities created by 
     the outpatient prospective payment system (OPPS). While the 
     OPPS was created to give providers incentives to deliver 
     quality care in an efficient manner, outpatient payment rates 
     were set at a level substantially below the costs hospitals 
     incur caring for Medicare patients. Medicare currently pays 
     hospitals only 84 cents for every dollar of outpatient care 
     provided.
       Your comprehensive legislation would address problems in 
     the OPPS by extending and enhancing provisions that ensure 
     patient care is not disrupted as hospitals transition into 
     OPPS. We applaud your leadership on this important issue and 
     support swift enactment of this legislation. We look forward 
     to working with you further on this issue.
           Sincerely,
                                                     Rick Pollack,
                                         Executive Vice President.

  Ms. SNOWE. Mr. President, I am pleased to join with my colleague and 
good friend Senator Bingaman to introduce the Medicare Hospital 
Outpatient Fair Payment Act of 2002. We are introducing this bill 
because of the critical importance of outpatient health care services 
and the devastating impact that the substantial reduction in Medicare 
payments for outpatient services will have on the delivery of care. Our 
legislation will increase payment rates for outpatient care to adequate 
levels to ensure appropriate access to outpatient care for our Nation's 
seniors. In addition, since the implementation of the new outpatient 
prospective payment system in August 2000, it has become evident that 
changes are needed, and this legislation proposes important reforms 
that will make the system work better for Medicare and for our Nation's 
seniors.
  Our Nation's seniors rely upon outpatient care delivered through the 
Medicare program. This is the result of trends in medical care that 
will continue to place a greater emphasis on

[[Page S4720]]

the outpatient setting. According to Medpac, the number of outpatient 
visits increased 73 percent during the 1990s and nearly 5 percent in 
2001 alone. New technologies and advances in medicine have made it 
possible for more and more care to be provided on an outpatient basis, 
which eliminates the need for an overnight hospital stay. This reduces 
the cost of care and gets the patient home sooner where recovery can 
begin. This trend will continue and underscores the importance of 
having an appropriate Medicare payment system for outpatient care.

  Without these vitally needed changes in the Medicare outpatient 
payment system, our medical care infrastructure will suffer and patient 
care will be harmed. This March, the Medicare Payment Advisory 
Commission, Medpac, estimated that the aggregate margin for outpatient 
services would be minus 16.3 percent in 2002.
  Congress created temporary additional payments, or transitional 
``pass-through'' payments, for certain innovative medical devices, 
drugs and biologicals in the Balanced Budget Refinement Act, BBRA, of 
1999. By establishing the pass-through pool, Congress ensured Medicare 
beneficiaries would have access to the latest medical technologies. 
These pass-through payments were capped at 2.5 percent of total 
outpatient payments prior to 2004, and the Centers for Medicare & 
Medicaid Services, CMS, is required by law to make a proportional 
reduction for all pass-through payments if that cap is exceeded. In 
March 2002, CMS announced a dramatic reduction in pass-through payments 
of 63.6 percent.
  CMS took steps to avoid even greater reductions in the pass through 
payments by incorporating 75 percent of the device costs into the base 
ambulatory payment classifications, APC, amounts. Due to a 
Congressionally-mandated requirement, CMS was required to make this 
adjustment on a budget neutral basis, with no recognition for the 
impact of this shift in payment. As a result, Medicare payments were 
shifted from low-tech services to high-tech services. In addition, 
incorporating 75 percent of device costs into the APCs led to a budget-
neutrality adjustment of minus 7.2 percent, causing a substantial 
reduction in the OPPS fee schedule amounts for 2002.
  These shifts in payments that resulted from actions Congress took in 
the BBRA are greater than intended when it was first enacted. It is 
clear that corrections to the system are needed. Ironically, if these 
problems with outpatient payments are not corrected, hospitals will be 
forced to admit patients into the hospital for treatment that could 
have been provided more efficiently on an outpatient basis.
  To address these problems, we are introducing the Medicare Hospital 
Outpatient Fair Payment Act of 2002. This comprehensive legislation 
would address problems within the current Medicare hospital outpatient 
payment system. Specifically, it would address the problems outlined 
here by; increasing extremely underfunded emergency room and clinic 
ambulatory payment classifications, APC, rates by 10 percent and 
requiring an increase in overall outpatient payments to 90 percent of 
overall costs, still 10 percent less than hospitals spend in delivering 
necessary outpatient care, but an improvement on the current payment of 
just 84 percent of costs; limiting the pro rata reduction in pass-
through payments to 20 percent; and limiting the budget neutrality 
adjustment to no more than 2.0 percent.
  Furthermore, the bill improves and extends transitional corridor 
payments to rural hospitals, cancer hospitals, and children's 
hospitals, and extends the provision to designated eye and ear 
specialty hospitals.
  We believe these changes are necessary if we are to preserve the 
quality of care in the outpatient setting that seniors deserve. Our 
Nation's seniors rely upon the health care services provided in the 
outpatient setting and we invite our colleagues on both sides of the 
aisle to join us in this effort.
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