[Senate Report 108-388]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 774
108th Congress                                                   Report
                                 SENATE
 2nd Session                                                    108-388

======================================================================



 
 CHILDREN'S HOSPITALS EDUCATIONAL EQUITY AND RESEARCH ACT OR THE CHEER 
                                  ACT

                                _______
                                

                October 7, 2004.--Ordered to be printed

                                _______
                                

    Mr. Gregg, from the Committee on Health, Education, Labor, and 
                   Pensions, submitted the following

                              R E P O R T

                         [To accompany S. 2526]

    The Committee on Health, Education, Labor, and Pensions, to 
which was referred the bill (S. 2526) to reauthorize the 
Children's Hospitals Graduate Medical Education Program, having 
considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill (as amended) do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and need for legislation.................................1
 II. Summary..........................................................2
III. History of legislation and votes in committee....................2
 IV. Explanation of bill and committee views..........................2
  V. Cost estimate....................................................2
 VI. Regulatory impact statement......................................5
VII. Impact of law to the legislative branch..........................5
VIII.Section-by-section analysis......................................5

 IX. Changes in existing law..........................................6

                    Purpose and Need for Legislation

    First enacted as part of The Healthcare Research and 
Quality Act of 1999 (P.L. 106-129), the Children's Hospitals 
Education and Research Act of 1999 authorized the Children's 
Hospitals Graduate Medical Education (CHGME) program for 2 
years. The program was reauthorized for an additional 5 years 
as part of the Children's Health Act of 2000 (P.L. 106-310).
    Graduate medical education is funded through Medicare 
payments to full service teaching hospitals. Prior to the 
enactment of this program, the independent children's teaching 
hospitals did not have a similar program to fund resident 
training programs for physicians. Congress recognized this 
inequity and the financial disadvantage it was placing on 
children's hospitals.
    The Children's Hospitals Education Equity and Research Act 
of 2004 extends the authorization of the Children's Hospitals 
Graduate Medical Education Program to FY 2010 and provides 
independent children's hospitals with Federal assistance 
similar to that provided to other teaching hospitals through 
Medicare.

                              II. Summary

    S. 2526 reauthorizes the Children's Hospitals Graduate 
Medical Education Program from 2006 to 2010 and increases the 
authorization level in FY 2006 to $330 million. In years FY 
2007 to FY 2010 the legislation authorizes such sums as are 
necessary. The bill also makes technical changes to the 
underlying statue including reversing an oversight in the 
Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 with regard to resident physician allotments.

           III. History of Legislation and Votes in Committee

    On June 16, 2004, Senator Bond, for himself and Senators 
Kennedy, DeWine, and Murray, introduced S. 2526 to reauthorize 
the Children's Hospitals Graduate Medical Education Program.
    On September 22, 2004, the committee held an executive 
session and considered an amendment in the nature of a 
substitute to S. 2526 offered by Senators Bond and DeWine. The 
committee approved S. 2526, as amended, by unanimous voice 
vote.

              IV. Explanation of Bill and Committee Views

    S. 2526 as amended reauthorizes the Children's Hospitals 
Graduate Medical Education Program for 5 years through 2010 and 
authorizes $330 million to fund residency programs in 
children's hospitals in FY 2006 and such sums as are necessary 
in FY 2007 through FY 2010.
    The committee made a few small technical changes to the 
program and includes one provision necessary to reflect 
Congressional intent by clarifying that the provision for 
redistribution of unused residency positions included in the 
Medicare Modernization Act (P.L. 108-173) does not apply to the 
CHGME program. The committee does not believe the original 
provision was appropriately applied to the CHGME program. The 
CHGME program is separate and distinct from the Medicare-
financed GME programs. In addition, pediatrics is experiencing 
significant shortages in many pediatric subspecialties.
    The committee believes that children's hospitals should 
have more time to grow their programs, as well as to have the 
opportunity to redistribute any unused resident slots within 
the CHGME program.
    The committee also clarifies that beds or bassinets 
assigned to healthy newborn infants should not be counted when 
determining the number of beds for the purposes of Indirect 
Medical Education Payments. The committee is concerned that 
including beds and bassinets of healthy newborns has the effect 
of depressing their pediatric patient case mix intensity, 
relative to their actual patient care and teaching programs.
    The committee corrects an unintended error in the 
underlying statute to allow direct medical education payments 
under CHGME to be adjusted by the current area wage index 
adjustment, for discharges in the preceding year. The statute 
now provides for no area wage index adjustment beyond fiscal 
year 2000. The committee also corrects other small technical 
errors in the statute.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 7, 2004.
Hon. Judd Gregg,
Chairman, Committee on Health, Education, Labor, and Pensions, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2526, the Children's 
Hospital Education Equity and Research Act.
    If you wish further detains on this estimate, we will be 
pleased to provide them. The CBO staff contact is Margaret 
Nowak.
            Sincerely,
                                     Douglas Holtz-Eakin, Director.
    Enclosure.

S. 2526.--Children's Hospitals Educational Equity and Research Act

    Summary: S. 2526 would amend the Public Health Service Act 
to authorize payments through 2010 to children's hospitals that 
operate graduate medical education programs. Separate payments 
would be made to the hospitals for both direct expenses and 
indirect expenses related to graduate medical education. The 
bill also would alter the factors used in determining the 
amount of payment for indirect expenses.
    CBO estimates that implementing S. 2526 would cost $248 
million in 2006 and $1.3 billion over the 2006-2009 period, 
assuming the appropriation of the necessary amounts. Enacting 
the legislation would not affect direct spending or receipts.
    S. 2526 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2526 is shown in the following table. 
The costs of this legislation fall within budget function 550 
(health).

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2004    2005    2006    2007    2008    2009
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law:
    Budget Authority/Authorization Level \1\....................     303     309       0       0       0       0
    Estimated Outlays...........................................     303     308      77       0       0       0
Proposed Changes:
    Estimated Authorization Level...............................       0       0     330     326     342     348
    Estimated Outlays...........................................       0       0     248     334     340     346
Spending Under S. 2526:
    Estimated Authorization Level...............................     303     309     330     336     342     348
    Estimated Outlays...........................................     303     308     325     334     340     346
----------------------------------------------------------------------------------------------------------------
\1\ The 2004 level is the amount appropriated for that year for the program of payments to children's hospitals
  that operate graduate medical education programs. The amount shown for 2005 is a baseline projection that
  assumes an increase for anticipated inflation.

    Basis of estimate: The program of payments to children's 
hospitals that operate graduate medical education programs is 
authorized through 2005. That program provides two sets of 
payments to children's hospitals that operate graduate medical 
education programs. Payments for the ``direct'' costs of such 
programs are related to the cost to the hospital of operating 
the graduate medical education program. Payments for 
``indirect'' costs associated with operating a graduate medical 
education program are intended to compensate for patient-care 
costs that are expected to be higher in teaching hospitals than 
in nonteaching hospitals.
    S. 2526 would authorize funding through 2010 for those 
payments to children's hospitals that operate graduate medical 
education programs. The bill would authorize the appropriation 
of specific amounts for 2006. For subsequent years, CBO 
estimated authorization levels by adjusting 2006 levels for 
anticipated inflation. For this estimate, CBO assumes that S. 
2526 will be enacted this fall and that the authorized and 
estimated amounts will be appropriated for each year.
    The bill would authorize appropriation of $110 million in 
2006, and such sums as necessary in 2007 through 2010, for 
payments toward the direct costs of operating graduate medical 
education programs in children's hospitals. Those funds would 
be allocated across eligible hospitals based on a formula that 
would take into account the number of medical residents and the 
average cost per resident in 1997 of the hospital's graduate 
medical education program.
    The bill also would authorize appropriation of $220 million 
in 2006, and such sums as necessary in 2007 through 2010, for 
payments toward the indirect costs of operating graduate 
medical education programs in children's hospitals. Those funds 
would be allocated across eligible hospitals based on a formula 
that would take into account the number of discharges, the 
relative costliness of those cases as measured by a case-mix 
index, and the ratio of the number of medical residents to the 
number of beds (excluding beds for healthy newborns) in each 
hospital. Under current law, the allocation formula used the 
number of residents rather than the ratio of residents to beds.
    Based on historical spending patterns for the graduate 
medical education programs, CBO estimates the bill would cost 
$248 million in 2006 and $1.3 billion over the 2006-2009 
period, assuming appropriation of the authorized amounts.
    Intergovernmental and private-sector impact: S. 2526 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Costs: Margaret Nowak; Impact 
on State, Local, and Tribal Governments: Leo Lex; Impact on the 
Private Sector: Peter Richmond.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    VI. Regulatory Impact Statement

    The committee has determined that there will be de minimus 
changes in the regulatory burden imposed by the bill.

              VII. Impact of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act (CAA) requires a description of the 
application of this bill to the legislative branch. This bill 
does not amend any act that applies to the legislative branch.

                   VIII. Section-by-Section Analysis


Section 1. Short title

    Section 1 provides the short title of the bill, the 
``Children's Hospitals Educational Equity and Research Act'' or 
the ``CHEER Act.''

Section 2. Reauthorization of Children's Hospitals Graduate Medical 
        Education Program

    a. Amends Section 340E of the Public Health Service Act to 
extend the authorization of the CHGME program from fiscal year 
2006 through fiscal year 2010.
    b. Provides that the redistribution of unused residency 
positions provision in the Medicare Modernization Act (P.L. 
108-173) shall not apply to the CHGME program. It also provides 
that the direct medical education payments under CHGME be 
adjusted by the hospitals current area wage adjustment, as 
applied under Medicare for discharges occurring in the 
preceding fiscal year.
    c. Clarifies that indirect medical education payments under 
CHGME reflect the ratio of the number of full-time equivalent 
residents to beds rather than simply the number of full-time 
equivalent residents. It defines beds to exclude beds or 
bassinets assigned to healthy newborn infants.
    d. Corrects a technical error in the underlying statute.
    e. Provides authorization of appropriations for direct 
medical education (DME) payments and indirect medical education 
(IME) payments under CHGME through fiscal year 2010, providing 
$110,000,000 for DME and $220,000,000 for IME for fiscal year 
2006 and such sums as may be necessary for remaining fiscal 
years.
    f. Deletes a repeated sentence in the underlying statute.

Section 3. Sense of the Senate

    Section 3 recognizes the importance of perinatal hospitals 
in both treating seriously ill newborns and training the 
providers who are essential to their care, as well as to the 
care of healthy mothers and babies.

                      IX. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *



     Subpart IX--Support of Graduate Medical Education Programs in 
                          Children's Hospitals


SEC. 340E. [256E] PROGRAM OF PAYMENTS TO CHILDREN'S HOSPITALS THAT 
                    OPERATE GRADUATE MEDICAL EDUCATION PROGRAMS.

    (a) Payments.--The Secretary shall make two payments under 
this section to each children's hospital for each of fiscal 
years 2000 through [2005] 2010, one for the direct expenses and 
the other for indirect expenses associated with operating 
approved graduate medical residency training programs. The 
Secretary shall promulgate regulations pursuant to the 
rulemaking requirements of title 5, United States Code, which 
shall govern payments made under this subpart.

           *       *       *       *       *       *       *

    (c) Amount of Payment for Direct Graduate Medical 
Education.--
    (1) In General.-- * * *

           *       *       *       *       *       *       *

                  (B) the average number of full-time 
                equivalent residents in the hospital's graduate 
                approved medical residency training programs 
                (as determined under section 1886(h)(4) of the 
                Social Security Act but without giving effect 
                to section 1886(h)(7) of such Act) during the 
                fiscal year.

           *       *       *       *       *       *       *

                  (E) Application to individual hospitals.--The 
                Secretary shall compute for each such hospital 
                that is a children's hospital a per resident 
                amount--
                          (i) * * *

           *       *       *       *       *       *       *

                          (ii) by multiplying the wage-related 
                        portion by the factor [described in 
                        subparagraph (C)(ii)] applied under 
                        section 1886(d)(3)(E) of the Social 
                        Security Act for discharges occurring 
                        during the preceding fiscal year for 
                        the hospitals area; and

           *       *       *       *       *       *       *

    (d) Amount of Payment for Indirect Medical Education.--
          (1) In general.-- * * *

           *       *       *       *       *       *       *

                  (A) take into account variations in case mix 
                among children's hospitals and the ratio of the 
                number of full-time equivalent residents in the 
                hospitals' approved graduate medical residency 
                training programs to beds (excluding beds or 
                bassinets assigned to healthy newborn infants); 
                and

           *       *       *       *       *       *       *

    (e) Making of Payments.--
          (1) Interim payments.-- * * *

           *       *       *       *       *       *       *

          (2) Withholding.--[The Secretary shall withhold up to 
        25 percent from each interim installment for direct and 
        indirect graduate medical education paid under 
        paragraph (1).] The Secretary shall withhold up to 25 
        percent from each interim installment for direct and 
        indirect graduate medical education paid under 
        paragraph (1) as necessary to ensure a hospital will 
        not be overpaid on an interim basis.
          (3) Reconciliation.--Prior to the end of each fiscal 
        year, the Secretary shall determine any changes to the 
        number of residents reported by a hospital in the 
        application of the hospital for the current fiscal year 
        to determine the final amount payable to the hospital 
        for the current fiscal year for both direct expense and 
        indirect expense amounts. Based on such determination, 
        the Secretary shall recoup any overpayments [made to 
        pay] made and pay any balance due to the extent 
        possible. The final amount so determined shall be 
        considered a final intermediary determination for the 
        purposes of section 1878 of the Social Security Act and 
        shall be subject to administrative and judicial review 
        under that section in the same manner as the amount of 
        payment under section 1186(d) of such Act is subject to 
        review under such section.
    (f) Authorization of Appropriations.--
          (1) Direct Graduate Medical Education.--
                  (A) In General.--There are hereby authorized 
                to be appropriated, out of any money in the 
                Treasury not otherwise appropriated, for 
                payments under subsection (b)(1)(A)--
                        (i)* * *

           *       *       *       *       *       *       *

                          (ii) for fiscal year 2001, 
                        $95,000,000; [and]
                          (iii) for each of the fiscal years 
                        2002 through 2005, such sums as may be 
                        necessary[.];
                          (iv) for fiscal year 2006, 
                        $110,000,000; and
                          (v) for each of fiscal years 2007 
                        through 2010, such sums as may be 
                        necessary

           *       *       *       *       *       *       *

          (2) Indirect Medical Education.--[There are hereby 
        authorized] There are authorized to be appropriated, 
        out of any money in the Treasury not otherwise 
        appropriated, for payments under subsection [(b)(1)(A)] 
        (b)(1)(B)--
                  (A) for fiscal year 2000, $190,000,000;
                  (B) for fiscal year 2001, $190,000,000; [and]
                  (C) for each of the fiscal years 2002 through 
                2005, such sums as may be necessary[.];
                  (D) for fiscal year 2006, $220,000,000; and
                  (E) for each of fiscal years 2007 through 
                2010, such sums as may be necessary.

                                  
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