42 USC 1395l - Payment of benefits

(a) Amounts 
Except as provided in section 1395mm of this title, and subject to the succeeding provisions of this section, there shall be paid from the Federal Supplementary Medical Insurance Trust Fund, in the case of each individual who is covered under the insurance program established by this part and incurs expenses for services with respect to which benefits are payable under this part, amounts equal to
(1) in the case of services described in section 1395k (a)(1) of this title80 percent of the reasonable charges for the services; except that
(A)  an organization which provides medical and other health services (or arranges for their availability) on a prepayment basis (and either is sponsored by a union or employer, or does not provide, or arrange for the provision of, any inpatient hospital services) may elect to be paid 80 percent of the reasonable cost of services for which payment may be made under this part on behalf of individuals enrolled in such organization in lieu of 80 percent of the reasonable charges for such services if the organization undertakes to charge such individuals no more than 20 percent of such reasonable cost plus any amounts payable by them as a result of subsection (b) of this section,
(B)  with respect to items and services described in section 1395x (s)(10)(A) of this title, the amounts paid shall be 100 percent of the reasonable charges for such items and services,

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(C)  with respect to expenses incurred for those physicians services for which payment may be made under this part that are described in section 1395y (a)(4) of this title, the amounts paid shall be subject to such limitations as may be prescribed by regulations,
(D)  with respect to clinical diagnostic laboratory tests for which payment is made under this part (i) on the basis of a fee schedule under subsection (h)(1) of this section or section 1395m (d)(1) of this title, the amount paid shall be equal to 80 percent (or 100 percent, in the case of such tests for which payment is made on an assignment-related basis) of the lesser of the amount determined under such fee schedule, the limitation amount for that test determined under subsection (h)(4)(B) of this section, or the amount of the charges billed for the tests,
(ii)  on the basis of a negotiated rate established under subsection (h)(6) of this section, the amount paid shall be equal to 100 percent of such negotiated rate, or
(iii)  on the basis of a rate established under a demonstration project under section 1395w–3 (e) of this title, the amount paid shall be equal to 100 percent of such rate,
(E)  with respect to services furnished to individuals who have been determined to have end stage renal disease, the amounts paid shall be determined subject to the provisions of section 1395rr of this title,
(F)  with respect to clinical social worker services under section 1395x (s)(2)(N) of this title, the amounts paid shall be 80 percent of the lesser of
(i)  the actual charge for the services or
(ii)  75 percent of the amount determined for payment of a psychologist under clause (L), (G) with respect to facility services furnished in connection with a surgical procedure specified pursuant to subsection (i)(1)(A) of this section and furnished to an individual in an ambulatory surgical center described in such subsection, for services furnished beginning with the implementation date of a revised payment system for such services in such facilities specified in subsection (i)(2)(D) of this section, the amounts paid shall be 80 percent of the lesser of the actual charge for the services or the amount determined by the Secretary under such revised payment system,
(H)  with respect to services of a certified registered nurse anesthetist under section 1395x (s)(11) of this title, the amounts paid shall be 80 percent of the least of the actual charge, the prevailing charge that would be recognized (or, for services furnished on or after January 1, 1992, the fee schedule amount provided under section 1395w–4 of this title) if the services had been performed by an anesthesiologist, or the fee schedule for such services established by the Secretary in accordance with subsection (l) of this section,
(I)  with respect to covered items (described in section 1395m (a)(13) of this title), the amounts paid shall be the amounts described in section 1395m (a)(1) of this title, and[1]

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(J)  with respect to expenses incurred for radiologist services (as defined in section 1395m (b)(6) of this title), subject to section 1395w–4 of this title, the amounts paid shall be 80 percent of the lesser of the actual charge for the services or the amount provided under the fee schedule established under section 1395m (b) of this title,
(K)  with respect to certified nurse-midwife services under section 1395x (s)(2)(L) of this title, the amounts paid shall be 80 percent of the lesser of the actual charge for the services or the amount determined by a fee schedule established by the Secretary for the purposes of this subparagraph (but in no event shall such fee schedule exceed 65 percent of the prevailing charge that would be allowed for the same service performed by a physician, or, for services furnished on or after January 1, 1992, 65 percent of the fee schedule amount provided under section 1395w–4 of this title for the same service performed by a physician),
(L)  with respect to qualified psychologist services under section 1395x (s)(2)(M) of this title, the amounts paid shall be 80 percent of the lesser of the actual charge for the services or the amount determined by a fee schedule established by the Secretary for the purposes of this subparagraph,
(M)  with respect to prosthetic devices and orthotics and prosthetics (as defined in section 1395m (h)(4) of this title), the amounts paid shall be the amounts described in section 1395m (h)(1) of this title,
(N)  with respect to expenses incurred for physicians services (as defined in section 1395w–4 (j)(3) of this title), the amounts paid shall be 80 percent of the payment basis determined under section 1395w–4 (a)(1) of this title,
(O)  with respect to services described in section 1395x (s)(2)(K) of this title (relating to services furnished by physician assistants, nurse practitioners, or clinic nurse specialists), the amounts paid shall be equal to 80 percent of
(i)  the lesser of the actual charge or 85 percent of the fee schedule amount provided under section 1395w–4 of this title, or
(ii)  in the case of services as an assistant at surgery, the lesser of the actual charge or 85 percent of the amount that would otherwise be recognized if performed by a physician who is serving as an assistant at surgery,
(P)  with respect to surgical dressings, the amounts paid shall be the amounts determined under section 1395m (i) of this title,
(Q)  with respect to items or services for which fee schedules are established pursuant to section 1395u (s) of this title, the amounts paid shall be 80 percent of the lesser of the actual charge or the fee schedule established in such section,
(R)  with respect to ambulance services,
(i)  the amounts paid shall be 80 percent of the lesser of the actual charge for the services or the amount determined by a fee schedule established by the Secretary under section 1395m (l) of this title and
(ii)  with respect to ambulance services described in section 1395m (l)(8) of this title, the amounts paid shall be the amounts determined under section 1395m (g) of this title for outpatient critical access hospital services,
(S)  with respect to drugs and biologicals (including intravenous immune globulin (as defined in section 1395x (zz) of this title)) not paid on a cost or prospective payment basis as otherwise provided in this part (other than items and services described in subparagraph (B)), the amounts paid shall be 80 percent of the lesser of the actual charge or the payment amount established in section 1395u (o) of this title (or, if applicable, under section 1395w–3, 1395w–3a, or 1395w–3b of this title),
(T)  with respect to medical nutrition therapy services (as defined in section 1395x (vv) of this title), the amount paid shall be 80 percent of the lesser of the actual charge for the services or 85 percent of the amount determined under the fee schedule established under section 1395w–4 (b) of this title for the same services if furnished by a physician,
(U)  with respect to facility fees described in section 1395m (m)(2)(B) of this title, the amounts paid shall be 80 percent of the lesser of the actual charge or the amounts specified in such section, and
(V)  notwithstanding subparagraphs (I) (relating to durable medical equipment), (M) (relating to prosthetic devices and orthotics and prosthetics), and (Q) (relating to 1395u(s) items), with respect to competitively priced items and services (described in section 1395w–3 (a)(2) of this title) that are furnished in a competitive area, the amounts paid shall be the amounts described in section 1395w–3 (b)(5) of this title;
(2) in the case of services described in section 1395k (a)(2) of this title (except those services described in subparagraphs (C), (D), (E), (F), (G), (H), and (I) of such section and unless otherwise specified in section 1395rr of this title)
(A) with respect to home health services (other than a covered osteoporosis drug) (as defined in section 1395x (kk) of this title), the amount determined under the prospective payment system under section 1395fff of this title;
(B) with respect to other items and services (except those described in subparagraph (C), (D), or (E) of this paragraph and except as may be provided in section 1395ww of this title or section 1395yy (e)(9) of this title)
(i) furnished before January 1, 1999, the lesser of
(I) the reasonable cost of such services, as determined under section 1395x (v) of this title, or
(II) the customary charges with respect to such services,

less the amount a provider may charge as described in clause (ii) of section 1395cc (a)(2)(A) of this title, but in no case may the payment for such other services exceed 80 percent of such reasonable cost, or

(ii) if such services are furnished before January 1, 1999, by a public provider of services, or by another provider which demonstrates to the satisfaction of the Secretary that a significant portion of its patients are low-income (and requests that payment be made under this clause), free of charge or at nominal charges to the public, 80 percent of the amount determined in accordance with section 1395f (b)(2) of this title, or
(iii) if such services are furnished on or after January 1, 1999, the amount determined under subsection (t) of this section, or
(iv) if (and for so long as) the conditions described in section 1395f (b)(3) of this title are met, the amounts determined under the reimbursement system described in such section;
(C) with respect to services described in the second sentence of section 1395x (p) of this title, 80 percent of the reasonable charges for such services;
(D) with respect to clinical diagnostic laboratory tests for which payment is made under this part (i) on the basis of a fee schedule determined under subsection (h)(1) of this section or section 1395m (d)(1) of this title, the amount paid shall be equal to 80 percent (or 100 percent, in the case of such tests for which payment is made on an assignment-related basis or to a provider having an agreement under section 1395cc of this title) of the lesser of the amount determined under such fee schedule, the limitation amount for that test determined under subsection (h)(4)(B) of this section, or the amount of the charges billed for the tests, or (ii) on the basis of a negotiated rate established under subsection (h)(6) of this section, the amount paid shall be equal to 100 percent of such negotiated rate for such tests;
(E) with respect to
(i) outpatient hospital radiology services (including diagnostic and therapeutic radiology, nuclear medicine and CAT scan procedures, magnetic resonance imaging, and ultrasound and other imaging services, but excluding screening mammography and, for services furnished on or after January 1, 2005, diagnostic mammography), and
(ii) effective for procedures performed on or after October 1, 1989, diagnostic procedures (as defined by the Secretary) described in section 1395x (s)(3) of this title (other than diagnostic x-ray tests and diagnostic laboratory tests),

the amount determined under subsection (n) of this section or, for services or procedures performed on or after January 1, 1999, subsection (t) of this section;

(F) with respect to a covered osteoporosis drug (as defined in section 1395x (kk) of this title) furnished by a home health agency, 80 percent of the reasonable cost of such service, as determined under section 1395x (v) of this title; and
(G) with respect to items and services described in section 1395x (s)(10)(A) of this title, the lesser of
(i) the reasonable cost of such services, as determined under section 1395x (v) of this title, or
(ii) the customary charges with respect to such services, or, if such services are furnished by a public provider of services, or by another provider which demonstrates to the satisfaction of the Secretary that a significant portion of its patients are low-income (and requests that payment be made under this provision), free of charge or at nominal charges to the public, the amount determined in accordance with section 1395f (b)(2) of this title;
(3) in the case of services described in section 1395k (a)(2)(D) of this title
(A) except as provided in subparagraph (B), the costs which are reasonable and related to the cost of furnishing such services or which are based on such other tests of reasonableness as the Secretary may prescribe in regulations, including those authorized under section 1395x (v)(1)(A) of this title, less the amount a provider may charge as described in clause (ii) of section 1395cc (a)(2)(A) of this title, but in no case may the payment for such services (other than for items and services described in section 1395x (s)(10)(A) of this title) exceed 80 percent of such costs; or
(B) with respect to the services described in clause (ii) of section 1395k (a)(2)(D) of this title that are furnished to an individual enrolled with a MA plan under part C of this subchapter pursuant to a written agreement described in section 1395w–23 (a)(4) of this title, the amount (if any) by which
(i) the amount of payment that would have otherwise been provided under subparagraph (A) (calculated as if 100 percent were substituted for 80 percent in such subparagraph) for such services if the individual had not been so enrolled; exceeds
(ii) the amount of the payments received under such written agreement for such services (not including any financial incentives provided for in such agreement such as risk pool payments, bonuses, or withholds),

less the amount the federally qualified health center may charge as described in section 1395w–27 (e)(3)(B) of this title;

(4) in the case of facility services described in section 1395k (a)(2)(F) of this title, and outpatient hospital facility services furnished in connection with surgical procedures specified by the Secretary pursuant to subsection (i)(1)(A) of this section, the applicable amount as determined under paragraph (2) or (3) of subsection (i) of this section or subsection (t) of this section;
(5) in the case of covered items (described in section 1395m (a)(13) of this title) the amounts described in section 1395m (a)(1) of this title;
(6) in the case of outpatient critical access hospital services, the amounts described in section 1395m (g) of this title;
(7) in the case of prosthetic devices and orthotics and prosthetics (as described in section 1395m (h)(4) of this title), the amounts described in section 1395m (h) of this title;
(8) in the case of
(A) outpatient physical therapy services (which includes outpatient speech-language pathology services) and outpatient occupational therapy services furnished
(i) by a rehabilitation agency, public health agency, clinic, comprehensive outpatient rehabilitation facility, or skilled nursing facility,
(ii) by a home health agency to an individual who is not homebound, or
(iii) by another entity under an arrangement with an entity described in clause (i) or (ii); and
(B) outpatient physical therapy services (which includes outpatient speech-language pathology services) and outpatient occupational therapy services furnished
(i) by a hospital to an outpatient or to a hospital inpatient who is entitled to benefits under part A of this subchapter but has exhausted benefits for inpatient hospital services during a spell of illness or is not so entitled to benefits under part A of this subchapter, or
(ii) by another entity under an arrangement with a hospital described in clause (i),

the amounts described in section 1395m (k) of this title; and

(9) in the case of services described in section 1395k (a)(2)(E) of this title that are not described in paragraph (8), the amounts described in section 1395m (k) of this title.
(b) Deductible provision 
Before applying subsection (a) of this section with respect to expenses incurred by an individual during any calendar year, the total amount of the expenses incurred by such individual during such year (which would, except for this subsection, constitute incurred expenses from which benefits payable under subsection (a) of this section are determinable) shall be reduced by a deductible of $75 for calendar years before 1991, $100 for 1991 through 2004, $110 for 2005, and for a subsequent year the amount of such deductible for the previous year increased by the annual percentage increase in the monthly actuarial rate under section 1395r (a)(1) of this title ending with such subsequent year (rounded to the nearest $1); except that
(1)  such total amount shall not include expenses incurred for items and services described in section 1395x (s)(10)(A) of this title,
(2)  such deductible shall not apply with respect to home health services (other than a covered osteoporosis drug (as defined in section 1395x (kk) of this title)),
(3)  such deductible shall not apply with respect to clinical diagnostic laboratory tests for which payment is made under this part (A) under subsection (a)(1)(D)(i) or (a)(2)(D)(i) of this section on an assignment-related basis, or to a provider having an agreement under section 1395cc of this title, or
(B)  on the basis of a negotiated rate determined under subsection (h)(6) of this section,
(4)  such deductible shall not apply to Federally qualified health center services,
(5)  such deductible shall not apply with respect to screening mammography (as described in section 1395x (jj) of this title),
(6)  such deductible shall not apply with respect to screening pap smear and screening pelvic exam (as described in section 1395x (nn) of this title). The total amount of the expenses incurred by an individual as determined under the preceding sentence shall, after the reduction specified in such sentence, be further reduced by an amount equal to the expenses incurred for the first three pints of whole blood (or equivalent quantities of packed red blood cells, as defined under regulations) furnished to the individual during the calendar year, except that such deductible for such blood shall in accordance with regulations be appropriately reduced to the extent that there has been a replacement of such blood (or equivalent quantities of packed red blood cells, as so defined); and for such purposes blood (or equivalent quantities of packed red blood cells, as so defined) furnished such individual shall be deemed replaced when the institution or other person furnishing such blood (or such equivalent quantities of packed red blood cells, as so defined) is given one pint of blood for each pint of blood (or equivalent quantities of packed red blood cells, as so defined) furnished such individual with respect to which a deduction is made under this sentence. The deductible under the previous sentence for blood or blood cells furnished an individual in a year shall be reduced to the extent that a deductible has been imposed under section 1395e (a)(2) of this title to blood or blood cells furnished the individual in the year,
(7)  such deductible shall not apply with respect to ultrasound screening for abdominal aortic aneurysm (as defined in section 1395x (bbb) of this title), and
(8)  such deductible shall not apply with respect to colorectal cancer screening tests (as described in section 1395x (pp)(1) of this title).
(c) Mental disorders 
Notwithstanding any other provision of this part, with respect to expenses incurred in any calendar year in connection with the treatment of mental, psychoneurotic, and personality disorders of an individual who is not an inpatient of a hospital at the time such expenses are incurred, there shall be considered as incurred expenses for purposes of subsections (a) and (b) of this section only 621/2 percent of such expenses. For purposes of this subsection, the term treatment does not include brief office visits (as defined by the Secretary) for the sole purpose of monitoring or changing drug prescriptions used in the treatment of such disorders or partial hospitalization services that are not directly provided by a physician.
(d) Nonduplication of payments 
No payment may be made under this part with respect to any services furnished an individual to the extent that such individual is entitled (or would be entitled except for section 1395e of this title) to have payment made with respect to such services under part A of this subchapter.
(e) Information for determination of amounts due 
No payment shall be made to any provider of services or other person under this part unless there has been furnished such information as may be necessary in order to determine the amounts due such provider or other person under this part for the period with respect to which the amounts are being paid or for any prior period.
(f) Maximum rate of payment per visit for independent rural health clinics 
In establishing limits under subsection (a) of this section on payment for rural health clinic services provided by rural health clinics (other than such clinics in hospitals with less than 50 beds), the Secretary shall establish such limit, for services provided
(1) in 1988, after March 31, at $46 per visit, and
(2) in a subsequent year, at the limit established under this subsection for the previous year increased by the percentage increase in the MEI (as defined in section 1395u (i)(3) of this title) applicable to primary care services (as defined in section 1395u (i)(4) of this title) furnished as of the first day of that year.
(g) Physical therapy services 

(1) Subject to paragraphs (4) and (5), in the case of physical therapy services of the type described in section 1395x (p) of this title, but not described in subsection (a)(8)(B) of this section, and physical therapy services of such type which are furnished by a physician or as incident to physicians services, with respect to expenses incurred in any calendar year, no more than the amount specified in paragraph (2) for the year shall be considered as incurred expenses for purposes of subsections (a) and (b) of this section.
(2) The amount specified in this paragraph
(A) for 1999, 2000, and 2001, is $1,500, and
(B) for a subsequent year is the amount specified in this paragraph for the preceding year increased by the percentage increase in the MEI (as defined in section 1395u (i)(3) of this title) for such subsequent year;

except that if an increase under subparagraph (B) for a year is not a multiple of $10, it shall be rounded to the nearest multiple of $10.

(3) Subject to paragraphs (4) and (5), in the case of occupational therapy services (of the type that are described in section 1395x (p) of this title (but not described in subsection (a)(8)(B) of this section) through the operation of section 1395x (g) of this title and of such type which are furnished by a physician or as incident to physicians services), with respect to expenses incurred in any calendar year, no more than the amount specified in paragraph (2) for the year shall be considered as incurred expenses for purposes of subsections (a) and (b) of this section.
(4) This subsection shall not apply to expenses incurred with respect to services furnished during 2000, 2001, 2002, 2004, and 2005.
(5) With respect to expenses incurred during the period beginning on January 1, 2006, and ending on June 30, 2008, for services, the Secretary shall implement a process under which an individual enrolled under this part may, upon request of the individual or a person on behalf of the individual, obtain an exception from the uniform dollar limitation specified in paragraph (2), for services described in paragraphs (1) and (3) if the provision of such services is determined to be medically necessary. Under such process, if the Secretary does not make a decision on such a request for an exception within 10 business days of the date of the Secretarys receipt of the request, the Secretary shall be deemed to have found the services to be medically necessary.
(h) Fee schedules for clinical diagnostic laboratory tests; percentage of prevailing charge level; nominal fee for samples; adjustments; recipients of payments; negotiated payment rate 

(1) 
(A) Subject to section 1395m (d)(1) of this title, the Secretary shall establish fee schedules for clinical diagnostic laboratory tests (including prostate cancer screening tests under section 1395x (oo) of this title consisting of prostate-specific antigen blood tests) for which payment is made under this part, other than such tests performed by a provider of services for an inpatient of such provider.
(B) In the case of clinical diagnostic laboratory tests performed by a physician or by a laboratory (other than tests performed by a qualified hospital laboratory (as defined in subparagraph (D)) for outpatients of such hospital), the fee schedules established under subparagraph (A) shall be established on a regional, statewide, or carrier service area basis (as the Secretary may determine to be appropriate) for tests furnished on or after July 1, 1984.
(C) In the case of clinical diagnostic laboratory tests performed by a qualified hospital laboratory (as defined in subparagraph (D)) for outpatients of such hospital, the fee schedules established under subparagraph (A) shall be established on a regional, statewide, or carrier service area basis (as the Secretary may determine to be appropriate) for tests furnished on or after July 1, 1984.
(D) In this subsection, the term qualified hospital laboratory means a hospital laboratory, in a sole community hospital (as defined in section 1395ww (d)(5)(D)(iii) of this title), which provides some clinical diagnostic laboratory tests 24 hours a day in order to serve a hospital emergency room which is available to provide services 24 hours a day and 7 days a week.
(2) 
(A) 
(i) Except as provided in paragraph (4), the Secretary shall set the fee schedules at 60 percent (or, in the case of a test performed by a qualified hospital laboratory (as defined in paragraph (1)(D)) for outpatients of such hospital, 62 percent) of the prevailing charge level determined pursuant to the third and fourth sentences of section 1395u (b)(3) of this title for similar clinical diagnostic laboratory tests for the applicable region, State, or area for the 12-month period beginning July 1, 1984, adjusted annually (to become effective on January 1 of each year) by a percentage increase or decrease equal to the percentage increase or decrease in the Consumer Price Index for All Urban Consumers (United States city average), and subject to such other adjustments as the Secretary determines are justified by technological changes.
(ii) Notwithstanding clause (i)
(I) any change in the fee schedules which would have become effective under this subsection for tests furnished on or after January 1, 1988, shall not be effective for tests furnished during the 3-month period beginning on January 1, 1988,
(II) the Secretary shall not adjust the fee schedules under clause (i) to take into account any increase in the consumer price index for 1988,
(III) the annual adjustment in the fee schedules determined under clause (i) for each of the years 1991, 1992, and 1993 shall be 2 percent, and
(IV) the annual adjustment in the fee schedules determined under clause (i) for each of the years 1994 and 1995, 1998 through 2002, and 2004 through 2008 shall be 0 percent.
(iii) In establishing fee schedules under clause (i) with respect to automated tests and tests (other than cytopathology tests) which before July 1, 1984, the Secretary made subject to a limit based on lowest charge levels under the sixth sentence of section 1395u (b)(3) of this title performed after March 31, 1988, the Secretary shall reduce by 8.3 percent the fee schedules otherwise established for 1988, and such reduced fee schedules shall serve as the base for 1989 and subsequent years.
(B) The Secretary may make further adjustments or exceptions to the fee schedules to assure adequate reimbursement of
(i)  emergency laboratory tests needed for the provision of bona fide emergency services, and
(ii)  certain low volume high-cost tests where highly sophisticated equipment or extremely skilled personnel are necessary to assure quality.
(3) In addition to the amounts provided under the fee schedules, the Secretary shall provide for and establish
(A)  a nominal fee to cover the appropriate costs in collecting the sample on which a clinical diagnostic laboratory test was performed and for which payment is made under this part, except that not more than one such fee may be provided under this paragraph with respect to samples collected in the same encounter, and
(B)  a fee to cover the transportation and personnel expenses for trained personnel to travel to the location of an individual to collect the sample, except that such a fee may be provided only with respect to an individual who is homebound or an inpatient in an inpatient facility (other than a hospital). In establishing a fee to cover the transportation and personnel expenses for trained personnel to travel to the location of an individual to collect a sample, the Secretary shall provide a method for computing the fee based on the number of miles traveled and the personnel costs associated with the collection of each individual sample, but the Secretary shall only be required to apply such method in the case of tests furnished during the period beginning on April 1, 1989, and ending on December 31, 1990, by a laboratory that establishes to the satisfaction of the Secretary (based on data for the 12-month period ending June 30, 1988) that
(i)  the laboratory is dependent upon payments under this subchapter for at least 80 percent of its collected revenues for clinical diagnostic laboratory tests,
(ii)  at least 85 percent of its gross revenues for such tests are attributable to tests performed with respect to individuals who are homebound or who are residents in a nursing facility, and
(iii)  the laboratory provided such tests for residents in nursing facilities representing at least 20 percent of the number of such facilities in the State in which the laboratory is located.
(4) 
(A) In establishing any fee schedule under this subsection, the Secretary may provide for an adjustment to take into account, with respect to the portion of the expenses of clinical diagnostic laboratory tests attributable to wages, the relative difference between a regions or local areas wage rates and the wage rate presumed in the data on which the schedule is based.
(B) For purposes of subsections (a)(1)(D)(i) and (a)(2)(D)(i) of this section, the limitation amount for a clinical diagnostic laboratory test performed
(i) on or after July 1, 1986, and before April 1, 1988, is equal to 115 percent of the median of all the fee schedules established for that test for that laboratory setting under paragraph (1),
(ii) after March 31, 1988, and before January 1, 1990, is equal to the median of all the fee schedules established for that test for that laboratory setting under paragraph (1),
(iii) after December 31, 1989, and before January 1, 1991, is equal to 93 percent of the median of all the fee schedules established for that test for that laboratory setting under paragraph (1),
(iv) after December 31, 1990, and before January 1, 1994, is equal to 88 percent of such median,
(v) after December 31, 1993, and before January 1, 1995, is equal to 84 percent of such median,
(vi) after December 31, 1994, and before January 1, 1996, is equal to 80 percent of such median,
(vii) after December 31, 1995, and before January 1, 1998, is equal to 76 percent of such median, and
(viii) after December 31, 1997, is equal to 74 percent of such median (or 100 percent of such median in the case of a clinical diagnostic laboratory test performed on or after January 1, 2001, that the Secretary determines is a new test for which no limitation amount has previously been established under this subparagraph).
(5) 
(A) In the case of a bill or request for payment for a clinical diagnostic laboratory test for which payment may otherwise be made under this part on an assignment-related basis or under a provider agreement under section 1395cc of this title, payment may be made only to the person or entity which performed or supervised the performance of such test; except that
(i) if a physician performed or supervised the performance of such test, payment may be made to another physician with whom he shares his practice,
(ii) in the case of a test performed at the request of a laboratory by another laboratory, payment may be made to the referring laboratory but only if
(I) the referring laboratory is located in, or is part of, a rural hospital,
(II) the referring laboratory is wholly owned by the entity performing such test, the referring laboratory wholly owns the entity performing such test, or both the referring laboratory and the entity performing such test are wholly-owned by a third entity, or
(III) not more than 30 percent of the clinical diagnostic laboratory tests for which such referring laboratory (but not including a laboratory described in subclause (II)),[2] receives requests for testing during the year in which the test is performed[2] are performed by another laboratory, and
(iii) in the case of a clinical diagnostic laboratory test provided under an arrangement (as defined in section 1395x (w)(1) of this title) made by a hospital, critical access hospital, or skilled nursing facility, payment shall be made to the hospital or skilled nursing facility.
(B) In the case of such a bill or request for payment for a clinical diagnostic laboratory test for which payment may otherwise be made under this part, and which is not described in subparagraph (A), payment may be made to the beneficiary only on the basis of the itemized bill of the person or entity which performed or supervised the performance of the test.
(C) Payment for a clinical diagnostic laboratory test, including a test performed in a physicians office but excluding a test performed by a rural health clinic may only be made on an assignment-related basis or to a provider of services with an agreement in effect under section 1395cc of this title.
(D) A person may not bill for a clinical diagnostic laboratory test, including a test performed in a physicians office but excluding a test performed by a rural health clinic, other than on an assignment-related basis. If a person knowingly and willfully and on a repeated basis bills for a clinical diagnostic laboratory test in violation of the previous sentence, the Secretary may apply sanctions against the person in the same manner as the Secretary may apply sanctions against a physician in accordance with paragraph (2) of section 1395u (j) of this title in the same manner such paragraphs apply[3] with respect to a physician. Paragraph (4) of such section shall apply in this subparagraph in the same manner as such paragraph applies to such section.
(6) In the case of any diagnostic laboratory test payment for which is not made on the basis of a fee schedule under paragraph (1), the Secretary may establish a payment rate which is acceptable to the person or entity performing the test and which would be considered the full charge for such tests. Such negotiated rate shall be limited to an amount not in excess of the total payment that would have been made for the services in the absence of such rate.
(7) Notwithstanding paragraphs (1) and (4), the Secretary shall establish a national minimum payment amount under this subsection for a diagnostic or screening pap smear laboratory test (including all cervical cancer screening technologies that have been approved by the Food and Drug Administration as a primary screening method for detection of cervical cancer) equal to $14.60 for tests furnished in 2000. For such tests furnished in subsequent years, such national minimum payment amount shall be adjusted annually as provided in paragraph (2).
(8) 
(A) The Secretary shall establish by regulation procedures for determining the basis for, and amount of, payment under this subsection for any clinical diagnostic laboratory test with respect to which a new or substantially revised HCPCS code is assigned on or after January 1, 2005 (in this paragraph referred to as new tests).
(B) Determinations under subparagraph (A) shall be made only after the Secretary
(i) makes available to the public (through an Internet website and other appropriate mechanisms) a list that includes any such test for which establishment of a payment amount under this subsection is being considered for a year;
(ii) on the same day such list is made available, causes to have published in the Federal Register notice of a meeting to receive comments and recommendations (and data on which recommendations are based) from the public on the appropriate basis under this subsection for establishing payment amounts for the tests on such list;
(iii) not less than 30 days after publication of such notice convenes a meeting, that includes representatives of officials of the Centers for Medicare & Medicaid Services involved in determining payment amounts, to receive such comments and recommendations (and data on which the recommendations are based);
(iv) taking into account the comments and recommendations (and accompanying data) received at such meeting, develops and makes available to the public (through an Internet website and other appropriate mechanisms) a list of proposed determinations with respect to the appropriate basis for establishing a payment amount under this subsection for each such code, together with an explanation of the reasons for each such determination, the data on which the determinations are based, and a request for public written comments on the proposed determination; and
(v) taking into account the comments received during the public comment period, develops and makes available to the public (through an Internet website and other appropriate mechanisms) a list of final determinations of the payment amounts for such tests under this subsection, together with the rationale for each such determination, the data on which the determinations are based, and responses to comments and suggestions received from the public.
(C) Under the procedures established pursuant to subparagraph (A), the Secretary shall
(i) set forth the criteria for making determinations under subparagraph (A); and
(ii) make available to the public the data (other than proprietary data) considered in making such determinations.
(D) The Secretary may convene such further public meetings to receive public comments on payment amounts for new tests under this subsection as the Secretary deems appropriate.
(E) For purposes of this paragraph:
(i) The term HCPCS refers to the Health Care Procedure Coding System.
(ii) A code shall be considered to be substantially revised if there is a substantive change to the definition of the test or procedure to which the code applies (such as a new analyte or a new methodology for measuring an existing analyte-specific test).
(9) Notwithstanding any other provision in this part, in the case of any diagnostic laboratory test for HbA1c that is labeled by the Food and Drug Administration for home use and is furnished on or after April 1, 2008, the payment rate for such test shall be the payment rate established under this part for a glycated hemoglobin test (identified as of October 1, 2007, by HCPCS code 83036 (and any succeeding codes)).
(i) Outpatient surgery 

(1) The Secretary shall, in consultation with appropriate medical organizations
(A) specify those surgical procedures which are appropriately (when considered in terms of the proper utilization of hospital inpatient facilities) performed on an inpatient basis in a hospital but which also can be performed safely on an ambulatory basis in an ambulatory surgical center (meeting the standards specified under section 1395k (a)(2)(F)(i) of this title), critical access hospital, or hospital outpatient department, and
(B) specify those surgical procedures which are appropriately (when considered in terms of the proper utilization of hospital inpatient facilities) performed on an inpatient basis in a hospital but which also can be performed safely on an ambulatory basis in a physicians office.

The lists of procedures established under subparagraphs (A) and (B) shall be reviewed and updated not less often than every 2 years, in consultation with appropriate trade and professional organizations.

(2) 
(A) For services furnished prior to the implementation of the system described in subparagraph (D), subject to subparagraph (E), the amount of payment to be made for facility services furnished in connection with a surgical procedure specified pursuant to paragraph (1)(A) and furnished to an individual in an ambulatory surgical center described in such paragraph shall be equal to 80 percent of a standard overhead amount established by the Secretary (with respect to each such procedure) on the basis of the Secretarys estimate of a fair fee which
(i) takes into account the costs incurred by such centers, or classes of centers, generally in providing services furnished in connection with the performance of such procedure, as determined in accordance with a survey (based upon a representative sample of procedures and facilities) of the actual audited costs incurred by such centers in providing such services,
(ii) takes such costs into account in such a manner as will assure that the performance of the procedure in such a center will result in substantially less amounts paid under this subchapter than would have been paid if the procedure had been performed on an inpatient basis in a hospital, and
(iii) in the case of insertion of an intraocular lens during or subsequent to cataract surgery includes payment which is reasonable and related to the cost of acquiring the class of lens involved.

Each amount so established shall be reviewed and updated not later than July 1, 1987, and annually thereafter to take account of varying conditions in different areas.

(B) The amount of payment to be made under this part for facility services furnished, in connection with a surgical procedure specified pursuant to paragraph (1)(B), in a physicians office shall be equal to 80 percent of a standard overhead amount established by the Secretary (with respect to each such procedure) on the basis of the Secretarys estimate of a fair fee which
(i) takes into account additional costs, not usually included in the professional fee, incurred by physicians in securing, maintaining, and staffing the facilities and ancillary services appropriate for the performance of such procedure in the physicians office, and
(ii) takes such items into account in such a manner which will assure that the performance of such procedure in the physicians office will result in substantially less amounts paid under this subchapter than would have been paid if the services had been furnished on an inpatient basis in a hospital.

Each amount so established shall be reviewed and updated not later than July 1, 1987, and annually thereafter to take account of varying conditions in different areas.

(C) 
(i) Notwithstanding the second sentence of each of subparagraphs (A) and (B), except as otherwise specified in clauses (ii), (iii), and (iv), if the Secretary has not updated amounts established under such subparagraphs or under subparagraph (D), with respect to facility services furnished during a fiscal year (beginning with fiscal year 1986 or a calendar year (beginning with 2006)), such amounts shall be increased by the percentage increase in the Consumer Price Index for all urban consumers (U.S. city average) as estimated by the Secretary for the 12-month period ending with the midpoint of the year involved.
(ii) In each of the fiscal years 1998 through 2002, the increase under this subparagraph shall be reduced (but not below zero) by 2.0 percentage points.
(iii) In fiscal year 2004, beginning with April 1, 2004, the increase under this subparagraph shall be the Consumer Price Index for all urban consumers (U.S. city average) as estimated by the Secretary for the 12-month period ending with March 31, 2003, minus 3.0 percentage points.
(iv) In fiscal year 2005, the last quarter of calendar year 2005, and each of calendar years 2006 through 2009, the increase under this subparagraph shall be 0 percent.
(D) 
(i) Taking into account the recommendations in the report under section 626(d) of Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Secretary shall implement a revised payment system for payment of surgical services furnished in ambulatory surgical centers.
(ii) In the year the system described in clause (i) is implemented, such system shall be designed to result in the same aggregate amount of expenditures for such services as would be made if this subparagraph did not apply, as estimated by the Secretary and taking into account reduced expenditures that would apply if subparagraph (E) were to continue to apply, as estimated by the Secretary.
(iii) The Secretary shall implement the system described in clause (i) for periods in a manner so that it is first effective beginning on or after January 1, 2006, and not later than January 1, 2008.
(iv) There shall be no administrative or judicial review under section 1395ff, 1395oo of this title, or otherwise, of the classification system, the relative weights, payment amounts, and the geographic adjustment factor, if any, under this subparagraph.
(E) With respect to surgical procedures furnished on or after January 1, 2007, and before the effective date of the implementation of a revised payment system under subparagraph (D), if
(i) the standard overhead amount under subparagraph (A) for a facility service for such procedure, without the application of any geographic adjustment, exceeds
(ii) the Medicare OPD fee schedule amount established under the prospective payment system for hospital outpatient department services under paragraph (3)(D) of subsection (t) for such service for such year, determined without regard to geographic adjustment under paragraph (2)(D) of such subsection,

the Secretary shall substitute under subparagraph (A) the amount described in clause (ii) for the standard overhead amount for such service referred to in clause (i).

(3) 
(A) The aggregate amount of the payments to be made under this part for outpatient hospital facility services or critical access hospital services furnished before January 1, 1999, in connection with surgical procedures specified under paragraph (1)(A) shall be equal to the lesser of
(i) the amount determined with respect to such services under subsection (a)(2)(B) of this section; or
(ii) the blend amount (described in subparagraph (B)).
(B) 
(i) The blend amount for a cost reporting period is the sum of
(I) the cost proportion (as defined in clause (ii)(I)) of the amount described in subparagraph (A)(i), and
(II) the ASC proportion (as defined in clause (ii)(II)) of the standard overhead amount payable with respect to the same surgical procedure as if it were provided in an ambulatory surgical center in the same area, as determined under paragraph (2)(A), less the amount a provider may charge as described in clause (ii) of section 1395cc (a)(2)(A) of this title.
(ii) Subject to paragraph (4), in this paragraph:
(I) The term cost proportion means 75 percent for cost reporting periods beginning in fiscal year 1988, 50 percent for portions of cost reporting periods beginning on or after October 1, 1988, and ending on or before December 31, 1990, and 42 percent for portions of cost reporting periods beginning on or after January 1, 1991.
(II) The term ASC proportion means 25 percent for cost reporting periods beginning in fiscal year 1988, 50 percent for portions of cost reporting periods beginning on or after October 1, 1988, and ending on or before December 31, 1990, and 58 percent for portions of cost reporting periods beginning on or after January 1, 1991.
(4) 
(A) In the case of a hospital that
(i) makes application to the Secretary and demonstrates that it specializes in eye services or eye and ear services (as determined by the Secretary),
(ii) receives more than 30 percent of its total revenues from outpatient services, and
(iii) on October 1, 1987
(I) was an eye specialty hospital or an eye and ear specialty hospital, or
(II) was operated as an eye or eye and ear unit (as defined in subparagraph (B)) of a general acute care hospital which, on the date of the application described in clause (i), operates less than 20 percent of the beds that the hospital operated on October 1, 1987, and has sold or otherwise disposed of a substantial portion of the hospitals other acute care operations,

the cost proportion and ASC proportion in effect under subclauses (I) and (II) of paragraph (3)(B)(ii) for cost reporting periods beginning in fiscal year 1988 shall remain in effect for cost reporting periods beginning on or after October 1, 1988, and before January 1, 1995.

(B) For purposes of this[4] subparagraph (A)(iii)(II), the term eye or eye and ear unit means a physically separate or distinct unit containing separate surgical suites devoted solely to eye or eye and ear services.
(5) 
(A) The Secretary is authorized to provide by regulations that in the case of a surgical procedure, specified by the Secretary pursuant to paragraph (1)(A), performed in an ambulatory surgical center described in such paragraph, there shall be paid (in lieu of any amounts otherwise payable under this part) with respect to the facility services furnished by such center and with respect to all related services (including physicians services, laboratory, X-ray, and diagnostic services) a single all-inclusive fee established pursuant to subparagraph (B), if all parties furnishing all such services agree to accept such fee (to be divided among the parties involved in such manner as they shall have previously agreed upon) as full payment for the services furnished.
(B) In implementing this paragraph, the Secretary shall establish with respect to each surgical procedure specified pursuant to paragraph (1)(A) the amount of the all-inclusive fee for such procedure, taking into account such factors as may be appropriate. The amount so established with respect to any surgical procedure shall be reviewed periodically and may be adjusted by the Secretary, when appropriate, to take account of varying conditions in different areas.
(6) Any person, including a facility having an agreement under section 1395k (a)(2)(F)(i) of this title, who knowingly and willfully presents, or causes to be presented, a bill or request for payment, for an intraocular lens inserted during or subsequent to cataract surgery for which payment may be made under paragraph (2)(A)(iii), is subject to a civil money penalty of not to exceed $2,000. The provisions of section 1320a–7a of this title (other than subsections (a) and (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1320a–7a (a) of this title.
(j) Accrual of interest on balance of excess or deficit not paid 
Whenever a final determination is made that the amount of payment made under this part either to a provider of services or to another person pursuant to an assignment under section 1395u (b)(3)(B)(ii) of this title was in excess of or less than the amount of payment that is due, and payment of such excess or deficit is not made (or effected by offset) within 30 days of the date of the determination, interest shall accrue on the balance of such excess or deficit not paid or offset (to the extent that the balance is owed by or owing to the provider) at a rate determined in accordance with the regulations of the Secretary of the Treasury applicable to charges for late payments.
(k) Hepatitis B vaccine 
With respect to services described in section 1395x (s)(10)(B) of this title, the Secretary may provide, instead of the amount of payment otherwise provided under this part, for payment of such an amount or amounts as reasonably reflects the general cost of efficiently providing such services.
(l) Fee schedule for services of certified registered nurse anesthetists 

(1) 
(A) The Secretary shall establish a fee schedule for services of certified registered nurse anesthetists under section 1395x (s)(11) of this title.
(B) In establishing the fee schedule under this paragraph the Secretary may utilize a system of time units, a system of base and time units, or any appropriate methodology.
(C) The provisions of this subsection shall not apply to certain services furnished in certain hospitals in rural areas under the provisions of section 9320(k) of the Omnibus Budget Reconciliation Act of 1986, as amended by section 6132 of the Omnibus Budget Reconciliation Act of 1989.
(2) Except as provided in paragraph (3), the fee schedule established under paragraph (1) shall be initially based on audited data from cost reporting periods ending in fiscal year 1985 and such other data as the Secretary determines necessary.
(3) 
(A) In establishing the initial fee schedule for those services, the Secretary shall adjust the fee schedule to the extent necessary to ensure that the estimated total amount which will be paid under this subchapter for those services plus applicable coinsurance in 1989 will equal the estimated total amount which would be paid under this subchapter for those services in 1989 if the services were included as inpatient hospital services and payment for such services was made under part A of this subchapter in the same manner as payment was made in fiscal year 1987, adjusted to take into account changes in prices and technology relating to the administration of anesthesia.
(B) The Secretary shall also reduce the prevailing charge of physicians for medical direction of a certified registered nurse anesthetist, or the fee schedule for services of certified registered nurse anesthetists, or both, to the extent necessary to ensure that the estimated total amount which will be paid under this subchapter plus applicable coinsurance for such medical direction and such services in 1989 and 1990 will not exceed the estimated total amount which would have been paid plus applicable coinsurance but for the enactment of the amendments made by section 9320 of the Omnibus Budget Reconciliation Act of 1986. A reduced prevailing charge under this subparagraph shall become the prevailing charge but for subsequent years for purposes of applying the economic index under the fourth sentence of section 1395u (b)(3) of this title.
(4) 
(A) Except as provided in subparagraphs (C) and (D), in determining the amount paid under the fee schedule under this subsection for services furnished on or after January 1, 1991, by a certified registered nurse anesthetist who is not medically directed
(i) the conversion factor shall be
(I) for services furnished in 1991, $15.50,
(II) for services furnished in 1992, $15.75,
(III) for services furnished in 1993, $16.00,
(IV) for services furnished in 1994, $16.25,
(V) for services furnished in 1995, $16.50,
(VI) for services furnished in 1996, $16.75, and
(VII) for services furnished in calendar years after 1996, the previous years conversion factor increased by the update determined under section 1395w–4 (d) of this title for physician anesthesia services for that year;
(ii) the payment areas to be used shall be the fee schedule areas used under section 1395w–4 of this title (or, in the case of services furnished during 1991, the localities used under section 1395u (b) of this title) for purposes of computing payments for physicians services that are anesthesia services;
(iii) the geographic adjustment factors to be applied to the conversion factor under clause (i) for services in a fee schedule area or locality is[5]
(I) in the case of services furnished in 1991, the geographic work index value and the geographic practice cost index value specified in section 1395u (q)(1)(B) of this title for physicians services that are anesthesia services furnished in the area or locality, and
(II) in the case of services furnished after 1991, the geographic work index value, the geographic practice cost index value, and the geographic malpractice index value used for determining payments for physicians services that are anesthesia services under section 1395w–4 of this title, with 70 percent of the conversion factor treated as attributable to work and 30 percent as attributable to overhead for services furnished in 1991 (and the portions attributable to work, practice expenses, and malpractice expenses in 1992 and thereafter being the same as is applied under section 1395w–4 of this title).
(B) 
(i) Except as provided in clause (ii) and subparagraph (D), in determining the amount paid under the fee schedule under this subsection for services furnished on or after January 1, 1991, and before January 1, 1994, by a certified registered nurse anesthetist who is medically directed, the Secretary shall apply the same methodology specified in subparagraph (A).
(ii) The conversion factor used under clause (i) shall be
(I) for services furnished in 1991, $10.50,
(II) for services furnished in 1992, $10.75, and
(III) for services furnished in 1993, $11.00.
(iii) In the case of services of a certified registered nurse anesthetist who is medically directed or medically supervised by a physician which are furnished on or after January 1, 1994, the fee schedule amount shall be one-half of the amount described in section 1395w–4 (a)(5)(B) of this title with respect to the physician.
(C) Notwithstanding subclauses (I) through (V) of subparagraph (A)(i)
(i) in the case of a 1990 conversion factor that is greater than $16.50, the conversion factor for a calendar year after 1990 and before 1996 shall be the 1990 conversion factor reduced by the product of the last digit of the calendar year and one-fifth of the amount by which the 1990 conversion factor exceeds $16.50; and
(ii) in the case of a 1990 conversion factor that is greater than $15.49 but less than $16.51, the conversion factor for a calendar year after 1990 and before 1996 shall be the greater of
(I) the 1990 conversion factor, or
(II) the conversion factor specified in subparagraph (A)(i) for the year involved.
(D) Notwithstanding subparagraph (C), in no case may the conversion factor used to determine payment for services in a fee schedule area or locality under this subsection, as adjusted by the adjustment factors specified in subparagraphs[6] (A)(iii), exceed the conversion factor used to determine the amount paid for physicians services that are anesthesia services in the area or locality.
(5) 
(A) Payment for the services of a certified registered nurse anesthetist (for which payment may otherwise be made under this part) may be made on the basis of a claim or request for payment presented by the certified registered nurse anesthetist furnishing such services, or by a hospital, critical access hospital, physician, group practice, or ambulatory surgical center with which the certified registered nurse anesthetist furnishing such services has an employment or contractual relationship that provides for payment to be made under this part for such services to such hospital, critical access hospital, physician, group practice, or ambulatory surgical center.
(B) No hospital or critical access hospital that presents a claim or request for payment for services of a certified nurse anesthetist under this part may treat any uncollected coinsurance amount imposed under this part with respect to such services as a bad debt of such hospital or critical access hospital for purposes of this subchapter.
(6) If an adjustment under paragraph (3)(B) results in a reduction in the reasonable charge for a physicians service and a nonparticipating physician furnishes the service to an individual entitled to benefits under this part after the effective date of the reduction, the physicians actual charge is subject to a limit under section 1395u (j)(1)(D) of this title.
(m) Incentive payments for physicians’ services furnished in underserved areas 

(1) In the case of physicians services furnished in a year to an individual, who is covered under the insurance program established by this part and who incurs expenses for such services, in an area that is designated (under section 254e (a)(1)(A) of this title) as a health professional shortage area as identified by the Secretary prior to the beginning of such year, in addition to the amount otherwise paid under this part, there also shall be paid to the physician (or to an employer or facility in the cases described in clause (A) of section 1395u (b)(6) of this title) (on a monthly or quarterly basis) from the Federal Supplementary Medical Insurance Trust Fund an amount equal to 10 percent of the payment amount for the service under this part.
(2) For each health professional shortage area identified in paragraph (1) that consists of an entire county, the Secretary shall provide for the additional payment under paragraph (1) without any requirement on the physician to identify the health professional shortage area involved. The Secretary may implement the previous sentence using the method specified in subsection (u)(4)(C) of this section.
(3) The Secretary shall post on the Internet website of the Centers for Medicare & Medicaid Services a list of the health professional shortage areas identified in paragraph (1) that consist of a partial county to facilitate the additional payment under paragraph (1) in such areas.
(4) There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, respecting
(A) the identification of a county or area;
(B) the assignment of a specialty of any physician under this paragraph;
(C) the assignment of a physician to a county under this subsection; or
(D) the assignment of a postal ZIP Code to a county or other area under this subsection.
(n) Payments to hospital outpatient departments for radiology; amount; definitions 

(1) 
(A) [7] The aggregate amount of the payments to be made for all or part of a cost reporting period for services described in subsection (a)(2)(E)(i) of this section furnished under this part on or after October 1, 1988, and before January 1, 1999, and for services described in subsection (a)(2)(E)(ii) of this section furnished under this part on or after October 1, 1989, and before January 1, 1999, shall be equal to the lesser of
(i) the amount determined with respect to such services under subsection (a)(2)(B) of this section, or
(ii) the blend amount for radiology services and diagnostic procedures determined in accordance with subparagraph (B).
(B) 
(i) The blend amount for radiology services and diagnostic procedures for a cost reporting period is the sum of
(I) the cost proportion (as defined in clause (ii)) of the amount described in subparagraph (A)(i); and
(II) the charge proportion (as defined in clause (ii)(II)) of 62 percent (for services described in subsection (a)(2)(E)(i) of this section), or (for procedures described in subsection (a)(2)(E)(ii) of this section), 42 percent or such other percent established by the Secretary (or carriers acting pursuant to guidelines issued by the Secretary) based on prevailing charges established with actual charge data, of the prevailing charge or (for services described in subsection (a)(2)(E)(i) of this section furnished on or after April 1, 1989 and for services described in subsection (a)(2)(E)(ii) of this section furnished on or after January 1, 1992) the fee schedule amount established for participating physicians for the same services as if they were furnished in a physicians office in the same locality as determined under section 1395u (b) of this title (or, in the case of services furnished on or after January 1, 1992, under section 1395w–4 of this title), less the amount a provider may charge as described in clause (ii) of section 1395cc (a)(2)(A) of this title.
(ii) In this subparagraph:
(I) The term cost proportion means 50 percent, except that such term means 65 percent in the case of outpatient radiology services for portions of cost reporting periods which occur in fiscal year 1989 and in the case of diagnostic procedures described in subsection (a)(2)(E)(ii) of this section for portions of cost reporting periods which occur in fiscal year 1990, and such term means 42 percent in the case of outpatient radiology services for portions of cost reporting periods beginning on or after January 1, 1991.
(II) The term charge proportion means 100 percent minus the cost proportion.
(o) Limitation on benefit for payment for therapeutic shoes for individuals with severe diabetic foot disease 

(1) In the case of shoes described in section 1395x (s)(12) of this title
(A) no payment may be made under this part, with respect to any individual for any year, for the furnishing of
(i) more than one pair of custom molded shoes (including inserts provided with such shoes) and 2 additional pairs of inserts for such shoes, or
(ii) more than one pair of extra-depth shoes (not including inserts provided with such shoes) and 3 pairs of inserts for such shoes, and
(B) with respect to expenses incurred in any calendar year, no more than the amount of payment applicable under paragraph (2) shall be considered as incurred expenses for purposes of subsections (a) and (b) of this section.

Payment for shoes (or inserts) under this part shall be considered to include payment for any expenses for the fitting of such shoes (or inserts).

(2) 
(A) Except as provided by the Secretary under subparagraphs (B) and (C), the amount of payment under this paragraph for custom molded shoes, extra-depth shoes, and inserts shall be the amount determined for such items by the Secretary under section 1395m (h) of this title.
(B) The Secretary may establish payment amounts for shoes and inserts that are lower than the amount established under section 1395m (h) of this title if the Secretary finds that shoes and inserts of an appropriate quality are readily available at or below the amount established under such section.
(C) In accordance with procedures established by the Secretary, an individual entitled to benefits with respect to shoes described in section 1395x (s)(12) of this title may substitute modification of such shoes instead of obtaining one (or more, as specified by the Secretary) pair of inserts (other than the original pair of inserts with respect to such shoes). In such case, the Secretary shall substitute, for the payment amount established under section 1395m (h) of this title, a payment amount that the Secretary estimates will assure that there is no net increase in expenditures under this subsection as a result of this subparagraph.
(3) In this subchapter, the term shoes includes, except for purposes of subparagraphs (A)(ii) and (B) of paragraph (2), inserts for extra-depth shoes.
(p) Repealed. Pub. L. 103–432, title I, § 123(b)(2)(A)(ii), Oct. 31, 1994, 108 Stat. 4411 
(q) Requests for payment to include information on referring physician 

(1) Each request for payment, or bill submitted, for an item or service furnished by an entity for which payment may be made under this part and for which the entity knows or has reason to believe there has been a referral by a referring physician (within the meaning of section 1395nn of this title) shall include the name and unique physician identification number for the referring physician.
(2) 
(A) In the case of a request for payment for an item or service furnished by an entity under this part on an assignment-related basis and for which information is required to be provided under paragraph (1) but not included, payment may be denied under this part.
(B) In the case of a request for payment for an item or service furnished by an entity under this part not submitted on an assignment-related basis and for which information is required to be provided under paragraph (1) but not included
(i) if the entity knowingly and willfully fails to provide such information promptly upon request of the Secretary or a carrier, the entity may be subject to a civil money penalty in an amount not to exceed $2,000, and
(ii) if the entity knowingly, willfully, and in repeated cases fails, after being notified by the Secretary of the obligations and requirements of this subsection to provide the information required under paragraph (1), the entity may be subject to exclusion from participation in the programs under this chapter for a period not to exceed 5 years, in accordance with the procedures of subsections (c), (f), and (g) of section 1320a–7 of this title.

The provisions of section 1320a–7a of this title (other than subsections (a) and (b)) shall apply to civil money penalties under clause (i) in the same manner as they apply to a penalty or proceeding under section 1320a–7a (a) of this title.

(r) Cap on prevailing charge; billing on assignment-related basis 

(1) With respect to services described in section 1395x (s)(2)(K)(ii) of this title (relating to nurse practitioner or clinical nurse specialist services), payment may be made on the basis of a claim or request for payment presented by the nurse practitioner or clinical nurse specialist furnishing such services, or by a hospital, critical access hospital, skilled nursing facility or nursing facility (as defined in section 1396r (a) of this title), physician, group practice, or ambulatory surgical center with which the nurse practitioner or clinical nurse specialist has an employment or contractual relationship that provides for payment to be made under this part for such services to such hospital, physician, group practice, or ambulatory surgical center.
(2) No hospital or critical access hospital that presents a claim or request for payment under this part for services described in section 1395x (s)(2)(K)(ii) of this title may treat any uncollected coinsurance amount imposed under this part with respect to such services as a bad debt of such hospital for purposes of this subchapter.
(s) Other prepaid organizations 
The Secretary may not provide for payment under subsection (a)(1)(A) of this section with respect to an organization unless the organization provides assurances satisfactory to the Secretary that the organization meets the requirement of section 1395cc (f) of this title (relating to maintaining written policies and procedures respecting advance directives).
(t) Prospective payment system for hospital outpatient department services 

(1) Amount of payment 

(A) In general 
With respect to covered OPD services (as defined in subparagraph (B)) furnished during a year beginning with 1999, the amount of payment under this part shall be determined under a prospective payment system established by the Secretary in accordance with this subsection.
(B) Definition of covered OPD services 
For purposes of this subsection, the term covered OPD services
(i) means hospital outpatient services designated by the Secretary;
(ii) subject to clause (iv), includes inpatient hospital services designated by the Secretary that are covered under this part and furnished to a hospital inpatient who
(I)  is entitled to benefits under part A of this subchapter but has exhausted benefits for inpatient hospital services during a spell of illness, or
(II)  is not so entitled;
(iii) includes implantable items described in paragraph (3), (6), or (8) of section 1395x (s) of this title; but
(iv) does not include any therapy services described in subsection (a)(8) of this section or ambulance services, for which payment is made under a fee schedule described in section 1395m (k) of this title or section 1395m (l) of this title and does not include screening mammography (as defined in section 1395x (jj) of this title) and diagnostic mammography.
(2) System requirements 
Under the payment system
(A) the Secretary shall develop a classification system for covered OPD services;
(B) the Secretary may establish groups of covered OPD services, within the classification system described in subparagraph (A), so that services classified within each group are comparable clinically and with respect to the use of resources and so that an implantable item is classified to the group that includes the service to which the item relates;
(C) the Secretary shall, using data on claims from 1996 and using data from the most recent available cost reports, establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on median (or, at the election of the Secretary, mean) hospital costs and shall determine projections of the frequency of utilization of each such service (or group of services) in 1999;
(D) the Secretary shall determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner;
(E) the Secretary shall establish, in a budget neutral manner, outlier adjustments under paragraph (5) and transitional pass-through payments under paragraph (6) and other adjustments as determined to be necessary to ensure equitable payments, such as adjustments for certain classes of hospitals;
(F) the Secretary shall develop a method for controlling unnecessary increases in the volume of covered OPD services;
(G) the Secretary shall create additional groups of covered OPD services that classify separately those procedures that utilize contrast agents from those that do not; and
(H) with respect to devices of brachytherapy consisting of a seed or seeds (or radioactive source), the Secretary shall create additional groups of covered OPD services that classify such devices separately from the other services (or group of services) paid for under this subsection in a manner reflecting the number, isotope, and radioactive intensity of such devices furnished, including separate groups for palladium-103 and iodine-125 devices and for stranded and non-stranded devices furnished on or after July 1, 2007.

For purposes of subparagraph (B), items and services within a group shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary under subparagraph (C)) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the group; except that the Secretary may make exceptions in unusual cases, such as low volume items and services, but may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 360bb of title 21.

(3) Calculation of base amounts 

(A) Aggregate amounts that would be payable if deductibles were disregarded 
The Secretary shall estimate the sum of
(i) the total amounts that would be payable from the Trust Fund under this part for covered OPD services in 1999, determined without regard to this subsection, as though the deductible under subsection (b) of this section did not apply, and
(ii) the total amounts of copayments estimated to be paid under this subsection by beneficiaries to hospitals for covered OPD services in 1999, as though the deductible under subsection (b) of this section did not apply.
(B) Unadjusted copayment amount 

(i) In general For purposes of this subsection, subject to clause (ii), the unadjusted copayment amount applicable to a covered OPD service (or group of such services) is 20 percent of the national median of the charges for the service (or services within the group) furnished during 1996, updated to 1999 using the Secretarys estimate of charge growth during the period.
(ii) Adjusted to be 20 percent when fully phased in If the pre-deductible payment percentage for a covered OPD service (or group of such services) furnished in a year would be equal to or exceed 80 percent, then the unadjusted copayment amount shall be 20 percent of amount determined under subparagraph (D).
(iii) Rules for new services The Secretary shall establish rules for establishment of an unadjusted copayment amount for a covered OPD service not furnished during 1996, based upon its classification within a group of such services.
(C) Calculation of conversion factors 

(i) For 1999
(I) In general The Secretary shall establish a 1999 conversion factor for determining the medicare OPD fee schedule amounts for each covered OPD service (or group of such services) furnished in 1999. Such conversion factor shall be established on the basis of the weights and frequencies described in paragraph (2)(C) and in such a manner that the sum for all services and groups of the products (described in subclause (II) for each such service or group) equals the total projected amount described in subparagraph (A).
(II) Product described The Secretary shall determine for each service or group the product of the medicare OPD fee schedule amounts (taking into account appropriate adjustments described in paragraphs (2)(D) and (2)(E)) and the estimated frequencies for such service or group.
(ii) Subsequent years Subject to paragraph (8)(B), the Secretary shall establish a conversion factor for covered OPD services furnished in subsequent years in an amount equal to the conversion factor established under this subparagraph and applicable to such services furnished in the previous year increased by the OPD fee schedule increase factor specified under clause (iv) for the year involved.
(iii) Adjustment for service mix changes Insofar as the Secretary determines that the adjustments for service mix under paragraph (2) for a previous year (or estimates that such adjustments for a future year) did (or are likely to) result in a change in aggregate payments under this subsection during the year that are a result of changes in the coding or classification of covered OPD services that do not reflect real changes in service mix, the Secretary may adjust the conversion factor computed under this subparagraph for subsequent years so as to eliminate the effect of such coding or classification changes.
(iv) OPD fee schedule increase factor For purposes of this subparagraph, the OPD fee schedule increase factor for services furnished in a year is equal to the market basket percentage increase applicable under section 1395ww (b)(3)(B)(iii) of this title to hospital discharges occurring during the fiscal year ending in such year, reduced by 1 percentage point for such factor for services furnished in each of 2000 and 2002. In applying the previous sentence for years beginning with 2000, the Secretary may substitute for the market basket percentage increase an annual percentage increase that is computed and applied with respect to covered OPD services furnished in a year in the same manner as the market basket percentage increase is determined and applied to inpatient hospital services for discharges occurring in a fiscal year.
(D) Calculation of medicare OPD fee schedule amounts 
The Secretary shall compute a medicare OPD fee schedule amount for each covered OPD service (or group of such services) furnished in a year, in an amount equal to the product of
(i) the conversion factor computed under subparagraph (C) for the year, and
(ii) the relative payment weight (determined under paragraph (2)(C)) for the service or group.
(E) Pre-deductible payment percentage 
The pre-deductible payment percentage for a covered OPD service (or group of such services) furnished in a year is equal to the ratio of
(i) the medicare OPD fee schedule amount established under subparagraph (D) for the year, minus the unadjusted copayment amount determined under subparagraph (B) for the service or group, to
(ii) the medicare OPD fee schedule amount determined under subparagraph (D) for the year for such service or group.
(4) Medicare payment amount 
The amount of payment made from the Trust Fund under this part for a covered OPD service (and such services classified within a group) furnished in a year is determined, subject to paragraph (7), as follows:
(A) Fee schedule adjustments 
The medicare OPD fee schedule amount (computed under paragraph (3)(D)) for the service or group and year is adjusted for relative differences in the cost of labor and other factors determined by the Secretary, as computed under paragraphs (2)(D) and (2)(E).
(B) Subtract applicable deductible 
Reduce the adjusted amount determined under subparagraph (A) by the amount of the deductible under subsection (b) of this section, to the extent applicable.
(C) Apply payment proportion to remainder 
The amount of payment is the amount so determined under subparagraph (B) multiplied by the pre-deductible payment percentage (as determined under paragraph (3)(E)) for the service or group and year involved, plus the amount of any reduction in the copayment amount attributable to paragraph (8)(C).
(5) Outlier adjustment 

(A) In general 
Subject to subparagraph (D), the Secretary shall provide for an additional payment for each covered OPD service (or group of services) for which a hospitals charges, adjusted to cost, exceed
(i) a fixed multiple of the sum of
(I) the applicable medicare OPD fee schedule amount determined under paragraph (3)(D), as adjusted under paragraph (4)(A) (other than for adjustments under this paragraph or paragraph (6)); and
(II) any transitional pass-through payment under paragraph (6); and
(ii) at the option of the Secretary, such fixed dollar amount as the Secretary may establish.
(B) Amount of adjustment 
The amount of the additional payment under subparagraph (A) shall be determined by the Secretary and shall approximate the marginal cost of care beyond the applicable cutoff point under such subparagraph.
(C) Limit on aggregate outlier adjustments 

(i) In general The total of the additional payments made under this paragraph for covered OPD services furnished in a year (as estimated by the Secretary before the beginning of the year) may not exceed the applicable percentage (specified in clause (ii)) of the total program payments estimated to be made under this subsection for all covered OPD services furnished in that year. If this paragraph is first applied to less than a full year, the previous sentence shall apply only to the portion of such year.
(ii) Applicable percentage For purposes of clause (i), the term applicable percentage means a percentage specified by the Secretary up to (but not to exceed)
(I) for a year (or portion of a year) before 2004, 2.5 percent; and
(II) for 2004 and thereafter, 3.0 percent.
(D) Transitional authority 
In applying subparagraph (A) for covered OPD services furnished before January 1, 2002, the Secretary may
(i) apply such subparagraph to a bill for such services related to an outpatient encounter (rather than for a specific service or group of services) using OPD fee schedule amounts and transitional pass-through payments covered under the bill; and
(ii) use an appropriate cost-to-charge ratio for the hospital involved (as determined by the Secretary), rather than for specific departments within the hospital.
(E) Exclusion of separate drug and biological APCS from outlier payments 
No additional payment shall be made under subparagraph (A) in the case of ambulatory payment classification groups established separately for drugs or biologicals.
(6) Transitional pass-through for additional costs of innovative medical devices, drugs, and biologicals 

(A) In general 
The Secretary shall provide for an additional payment under this paragraph for any of the following that are provided as part of a covered OPD service (or group of services):
(i) Current orphan drugs A drug or biological that is used for a rare disease or condition with respect to which the drug or biological has been designated as an orphan drug under section 360bb of title 21 if payment for the drug or biological as an outpatient hospital service under this part was being made on the first date that the system under this subsection is implemented.
(ii) Current cancer therapy drugs and biologicals and brachytherapy A drug or biological that is used in cancer therapy, including (but not limited to) a chemotherapeutic agent, an antiemetic, a hematopoietic growth factor, a colony stimulating factor, a biological response modifier, a bisphosphonate, and a device of brachytherapy or temperature monitored cryoablation, if payment for such drug, biological, or device as an outpatient hospital service under this part was being made on such first date.
(iii) Current radiopharmaceutical drugs and biological products A radiopharmaceutical drug or biological product used in diagnostic, monitoring, and therapeutic nuclear medicine procedures if payment for the drug or biological as an outpatient hospital service under this part was being made on such first date.
(iv) New medical devices, drugs, and biologicals A medical device, drug, or biological not described in clause (i), (ii), or (iii) if
(I) payment for the device, drug, or biological as an outpatient hospital service under this part was not being made as of December 31, 1996; and
(II) the cost of the drug or biological or the average cost of the category of devices is not insignificant in relation to the OPD fee schedule amount (as calculated under paragraph (3)(D)) payable for the service (or group of services) involved.
(B) Use of categories in determining eligibility of a device for pass-through payments 
The following provisions apply for purposes of determining whether a medical device qualifies for additional payments under clause (ii) or (iv) of subparagraph (A):
(i) Establishment of initial categories
(I) In general The Secretary shall initially establish under this clause categories of medical devices based on type of device by April 1, 2001. Such categories shall be established in a manner such that each medical device that meets the requirements of clause (ii) or (iv) of subparagraph (A) as of January 1, 2001, is included in such a category and no such device is included in more than one category. For purposes of the preceding sentence, whether a medical device meets such requirements as of such date shall be determined on the basis of the program memoranda issued before such date.
(II) Authorization of implementation other than through regulations The categories may be established under this clause by program memorandum or otherwise, after consultation with groups representing hospitals, manufacturers of medical devices, and other affected parties.
(ii) Establishing criteria for additional categories
(I) In general The Secretary shall establish criteria that will be used for creation of additional categories (other than those established under clause (i)) through rulemaking (which may include use of an interim final rule with comment period).
(II) Standard Such categories shall be established under this clause in a manner such that no medical device is described by more than one category. Such criteria shall include a test of whether the average cost of devices that would be included in a category and are in use at the time the category is established is not insignificant, as described in subparagraph (A)(iv)(II).
(III) Deadline Criteria shall first be established under this clause by July 1, 2001. The Secretary may establish in compelling circumstances categories under this clause before the date such criteria are established.
(IV) Adding categories The Secretary shall promptly establish a new category of medical devices under this clause for any medical device that meets the requirements of subparagraph (A)(iv) and for which none of the categories in effect (or that were previously in effect) is appropriate.
(iii) Period for which category is in effect A category of medical devices established under clause (i) or (ii) shall be in effect for a period of at least 2 years, but not more than 3 years, that begins
(I) in the case of a category established under clause (i), on the first date on which payment was made under this paragraph for any device described by such category (including payments made during the period before April 1, 2001); and
(II) in the case of any other category, on the first date on which payment is made under this paragraph for any medical device that is described by such category.
(iv) Requirements treated as met A medical device shall be treated as meeting the requirements of subparagraph (A)(iv), regardless of whether the device meets the requirement of subclause (I) of such subparagraph, if
(I) the device is described by a category established and in effect under clause (i); or
(II) the device is described by a category established and in effect under clause (ii) and an application under section 360e of title 21 has been approved with respect to the device, or the device has been cleared for market under section 360 (k) of title 21, or the device is exempt from the requirements of section 360 (k) of title 21 pursuant to subsection (l) or (m) of section 360 of title 21 or section 360j (g) of title 21.

Nothing in this clause shall be construed as requiring an application or prior approval (other than that described in subclause (II)) in order for a covered device described by a category to qualify for payment under this paragraph.

(C) Limited period of payment 

(i) Drugs and biologicals The payment under this paragraph with respect to a drug or biological shall only apply during a period of at least 2 years, but not more than 3 years, that begins
(I) on the first date this subsection is implemented in the case of a drug or biological described in clause (i), (ii), or (iii) of subparagraph (A) and in the case of a drug or biological described in subparagraph (A)(iv) and for which payment under this part is made as an outpatient hospital service before such first date; or
(II) in the case of a drug or biological described in subparagraph (A)(iv) not described in subclause (I), on the first date on which payment is made under this part for the drug or biological as an outpatient hospital service.
(ii) Medical devices Payment shall be made under this paragraph with respect to a medical device only if such device
(I) is described by a category of medical devices established and in effect under subparagraph (B); and
(II) is provided as part of a service (or group of services) paid for under this subsection and provided during the period for which such category is in effect under such subparagraph.
(D) Amount of additional payment 
Subject to subparagraph (E)(iii), the amount of the payment under this paragraph with respect to a device, drug, or biological provided as part of a covered OPD service is
(i) in the case of a drug or biological, the amount by which the amount determined under section 1395u (o) of this title (or if the drug or biological is covered under a competitive acquisition contract under section 1395w–3b of this title, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary for purposes of this paragraph) for the drug or biological exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the drug or biological; or
(ii) in the case of a medical device, the amount by which the hospitals charges for the device, adjusted to cost, exceeds the portion of the otherwise applicable medicare OPD fee schedule that the Secretary determines is associated with the device.
(E) Limit on aggregate annual adjustment 

(i) In general The total of the additional payments made under this paragraph for covered OPD services furnished in a year (as estimated by the Secretary before the beginning of the year) may not exceed the applicable percentage (specified in clause (ii)) of the total program payments estimated to be made under this subsection for all covered OPD services furnished in that year. If this paragraph is first applied to less than a full year, the previous sentence shall apply only to the portion of such year.
(ii) Applicable percentage For purposes of clause (i), the term applicable percentage means
(I) for a year (or portion of a year) before 2004, 2.5 percent; and
(II) for 2004 and thereafter, a percentage specified by the Secretary up to (but not to exceed) 2.0 percent.
(iii) Uniform prospective reduction if aggregate limit projected to be exceeded If the Secretary estimates before the beginning of a year that the amount of the additional payments under this paragraph for the year (or portion thereof) as determined under clause (i) without regard to this clause will exceed the limit established under such clause, the Secretary shall reduce pro rata the amount of each of the additional payments under this paragraph for that year (or portion thereof) in order to ensure that the aggregate additional payments under this paragraph (as so estimated) do not exceed such limit.
(F) Limitation of application of functional equivalence standard 

(i) In general The Secretary may not publish regulations that apply a functional equivalence standard to a drug or biological under this paragraph.
(ii) Application Clause (i) shall apply to the application of a functional equivalence standard to a drug or biological on or after December 8, 2003, unless
(I) such application was being made to such drug or biological prior to December 8, 2003; and
(II) the Secretary applies such standard to such drug or biological only for the purpose of determining eligibility of such drug or biological for additional payments under this paragraph and not for the purpose of any other payments under this subchapter.
(iii) Rule of construction Nothing in this subparagraph shall be construed to effect the Secretarys authority to deem a particular drug to be identical to another drug if the 2 products are pharmaceutically equivalent and bioequivalent, as determined by the Commissioner of Food and Drugs.
(7) Transitional adjustment to limit decline in payment 

(A) Before 2002 
Subject to subparagraph (D), for covered OPD services furnished before January 1, 2002, for which the PPS amount (as defined in subparagraph (E)) is
(i) at least 90 percent, but less than 100 percent, of the pre-BBA amount (as defined in subparagraph (F)), the amount of payment under this subsection shall be increased by 80 percent of the amount of such difference;
(ii) at least 80 percent, but less than 90 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by the amount by which
(I)  the product of 0.71 and the pre-BBA amount, exceeds
(II)  the product of 0.70 and the PPS amount;
(iii) at least 70 percent, but less than 80 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by the amount by which
(I)  the product of 0.63 and the pre-BBA amount, exceeds
(II)  the product of 0.60 and the PPS amount; or
(iv) less than 70 percent of the pre-BBA amount, the amount of payment under this subsection shall be increased by 21 percent of the pre-BBA amount.
(B) 2002 
Subject to subparagraph (D), for covered OPD services furnished during 2002, for which the PPS amount is
(i) at least 90 percent, but less than 100 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by 70 percent of the amount of such difference;
(ii) at least 80 percent, but less than 90 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by the amount by which
(I)  the product of 0.61 and the pre-BBA amount, exceeds
(II)  the product of 0.60 and the PPS amount; or
(iii) less than 80 percent of the pre-BBA amount, the amount of payment under this subsection shall be increased by 13 percent of the pre-BBA amount.
(C) 2003 
Subject to subparagraph (D), for covered OPD services furnished during 2003, for which the PPS amount is
(i) at least 90 percent, but less than 100 percent, of the pre-BBA amount, the amount of payment under this subsection shall be increased by 60 percent of the amount of such difference; or
(ii) less than 90 percent of the pre-BBA amount, the amount of payment under this subsection shall be increased by 6 percent of the pre-BBA amount.
(D) Hold harmless provisions 

(i) Temporary treatment for certain rural hospitals
(I) In the case of a hospital located in a rural area and that has not more than 100 beds or a sole community hospital (as defined in section 1395ww (d)(5)(D)(iii) of this title) located in a rural area, for covered OPD services furnished before January 1, 2006, for which the PPS amount is less than the pre-BBA amount, the amount of payment under this subsection shall be increased by the amount of such difference.
(II) In the case of a hospital located in a rural area and that has not more than 100 beds and that is not a sole community hospital (as defined in section 1395ww (d)(5)(D)(iii) of this title), for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, for which the PPS amount is less than the pre-BBA amount, the amount of payment under this subsection shall be increased by the applicable percentage of the amount of such difference. For purposes of the previous sentence, with respect to covered OPD services furnished during 2006, 2007, or 2008, the applicable percentage shall be 95 percent, 90 percent, and 85 percent, respectively.
(ii) Permanent treatment for cancer hospitals and childrens hospitals In the case of a hospital described in clause (iii) or (v) of section 1395ww (d)(1)(B) of this title, for covered OPD services for which the PPS amount is less than the pre-BBA amount, the amount of payment under this subsection shall be increased by the amount of such difference.
(E) PPS amount defined 
In this paragraph, the term PPS amount means, with respect to covered OPD services, the amount payable under this subchapter for such services (determined without regard to this paragraph), including amounts payable as copayment under paragraph (8), coinsurance under section 1395cc (a)(2)(A)(ii) of this title, and the deductible under subsection (b) of this section.
(F) Pre-BBA amount defined 

(i) In general In this paragraph, the pre-BBA amount means, with respect to covered OPD services furnished by a hospital in a year, an amount equal to the product of the reasonable cost of the hospital for such services for the portions of the hospitals cost reporting period (or periods) occurring in the year and the base OPD payment-to-cost ratio for the hospital (as defined in clause (ii)).
(ii) Base payment-to-cost ratio defined For purposes of this subparagraph, the base payment-to-cost ratio for a hospital means the ratio of
(I) the hospitals reimbursement under this part for covered OPD services furnished during the cost reporting period ending in 1996 (or in the case of a hospital that did not submit a cost report for such period, during the first subsequent cost reporting period ending before 2001 for which the hospital submitted a cost report), including any reimbursement for such services through cost-sharing described in subparagraph (E), to
(II) the reasonable cost of such services for such period.

The Secretary shall determine such ratios as if the amendments made by section 4521 of the Balanced Budget Act of 1997 were in effect in 1996.

(G) Interim payments 
The Secretary shall make payments under this paragraph to hospitals on an interim basis, subject to retrospective adjustments based on settled cost reports.
(H) No effect on copayments 
Nothing in this paragraph shall be construed to affect the unadjusted copayment amount described in paragraph (3)(B) or the copayment amount under paragraph (8).
(I) Application without regard to budget neutrality 
The additional payments made under this paragraph
(i) shall not be considered an adjustment under paragraph (2)(E); and
(ii) shall not be implemented in a budget neutral manner.
(8) Copayment amount 

(A) In general 
Except as provided in subparagraphs (B) and (C), the copayment amount under this subsection is the amount by which the amount described in paragraph (4)(B) exceeds the amount of payment determined under paragraph (4)(C).
(B) Election to offer reduced copayment amount 
The Secretary shall establish a procedure under which a hospital, before the beginning of a year (beginning with 1999), may elect to reduce the copayment amount otherwise established under subparagraph (A) for some or all covered OPD services to an amount that is not less than 20 percent of the medicare OPD fee schedule amount (computed under paragraph (3)(D)) for the service involved. Under such procedures, such reduced copayment amount may not be further reduced or increased during the year involved and the hospital may disseminate information on the reduction of copayment amount effected under this subparagraph.
(C) Limitation on copayment amount 

(i) To inpatient hospital deductible amount In no case shall the copayment amount for a procedure performed in a year exceed the amount of the inpatient hospital deductible established under section 1395e (b) of this title for that year.
(ii) To specified percentage The Secretary shall reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed the following percentage:
(I) For procedures performed in 2001, on or after April 1, 2001, 57 percent.
(II) For procedures performed in 2002 or 2003, 55 percent.
(III) For procedures performed in 2004, 50 percent.
(IV) For procedures performed in 2005, 45 percent.
(V) For procedures performed in 2006 and thereafter, 40 percent.
(D) No impact on deductibles 
Nothing in this paragraph shall be construed as affecting a hospitals authority to waive the charging of a deductible under subsection (b) of this section.
(E) Computation ignoring outlier and pass-through adjustments 
The copayment amount shall be computed under subparagraph (A) as if the adjustments under paragraphs (5) and (6) (and any adjustment made under paragraph (2)(E) in relation to such adjustments) had not occurred.
(9) Periodic review and adjustments components of prospective payment system 

(A) Periodic review 
The Secretary shall review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. The Secretary shall consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the groups and weights. Such panel may use data collected or developed by entities and organizations (other than the Department of Health and Human Services) in conducting such review.
(B) Budget neutrality adjustment 
If the Secretary makes adjustments under subparagraph (A), then the adjustments 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 that would have been made if the adjustments had not been made. In determining adjustments under the preceding sentence for 2004 and 2005, the Secretary shall not take into account under this subparagraph or paragraph (2)(E) any expenditures that would not have been made but for the application of paragraph (14).
(C) Update factor 
If the Secretary determines under methodologies described in paragraph (2)(F) that the volume of services paid for under this subsection increased beyond amounts established through those methodologies, the Secretary may appropriately adjust the update to the conversion factor otherwise applicable in a subsequent year.
(10) Special rule for ambulance services 
The Secretary shall pay for hospital outpatient services that are ambulance services on the basis described in section 1395x (v)(1)(U) of this title, or, if applicable, the fee schedule established under section 1395m (l) of this title.
(11) Special rules for certain hospitals 
In the case of hospitals described in clause (iii) or (v) of section 1395ww (d)(1)(B) of this title
(A) the system under this subsection shall not apply to covered OPD services furnished before January 1, 2000; and
(B) the Secretary may establish a separate conversion factor for such services in a manner that specifically takes into account the unique costs incurred by such hospitals by virtue of their patient population and service intensity.
(12) Limitation on review 
There shall be no administrative or judicial review under section 1395ff of this title, 1395oo of this title, or otherwise of
(A) the development of the classification system under paragraph (2), including the establishment of groups and relative payment weights for covered OPD services, of wage adjustment factors, other adjustments, and methods described in paragraph (2)(F);
(B) the calculation of base amounts under paragraph (3);
(C) periodic adjustments made under paragraph (6);
(D) the establishment of a separate conversion factor under paragraph (8)(B); and
(E) the determination of the fixed multiple, or a fixed dollar cutoff amount, the marginal cost of care, or applicable percentage under paragraph (5) or the determination of insignificance of cost, the duration of the additional payments, the determination and deletion of initial and new categories (consistent with subparagraphs (B) and (C) of paragraph (6)), the portion of the medicare OPD fee schedule amount associated with particular devices, drugs, or biologicals, and the application of any pro rata reduction under paragraph (6).
(13) Authorization of adjustment for rural hospitals 

(A) Study 
The Secretary shall conduct a study to determine if, under the system under this subsection, costs incurred by hospitals located in rural areas by ambulatory payment classification groups (APCs) exceed those costs incurred by hospitals located in urban areas.
(B) Authorization of adjustment 
Insofar as the Secretary determines under subparagraph (A) that costs incurred by hospitals located in rural areas exceed those costs incurred by hospitals located in urban areas, the Secretary shall provide for an appropriate adjustment under paragraph (2)(E) to reflect those higher costs by January 1, 2006.
(14) Drug APC payment rates 

(A) In general 
The amount of payment under this subsection for a specified covered outpatient drug (defined in subparagraph (B)) that is furnished as part of a covered OPD service (or group of services)
(i) in 2004, in the case of
(I) a sole source drug shall in no case be less than 88 percent, or exceed 95 percent, of the reference average wholesale price for the drug;
(II) an innovator multiple source drug shall in no case exceed 68 percent of the reference average wholesale price for the drug; or
(III) a noninnovator multiple source drug shall in no case exceed 46 percent of the reference average wholesale price for the drug;
(ii) in 2005, in the case of
(I) a sole source drug shall in no case be less than 83 percent, or exceed 95 percent, of the reference average wholesale price for the drug;
(II) an innovator multiple source drug shall in no case exceed 68 percent of the reference average wholesale price for the drug; or
(III) a noninnovator multiple source drug shall in no case exceed 46 percent of the reference average wholesale price for the drug; or
(iii) in a subsequent year, shall be equal, subject to subparagraph (E)
(I) to the average acquisition cost for the drug for that year (which, at the option of the Secretary, may vary by hospital group (as defined by the Secretary based on volume of covered OPD services or other relevant characteristics)), as determined by the Secretary taking into account the hospital acquisition cost survey data under subparagraph (D); or
(II) if hospital acquisition cost data are not available, the average price for the drug in the year established under section 1395u (o) of this title, section 1395w–3a of this title, or section 1395w–3b of this title, as the case may be, as calculated and adjusted by the Secretary as necessary for purposes of this paragraph.
(B) Specified covered outpatient drug defined 

(i) In general In this paragraph, the term specified covered outpatient drug means, subject to clause (ii), a covered outpatient drug (as defined in section 1396r–8 (k)(2) of this title) for which a separate ambulatory payment classification group (APC) has been established and that is
(I) a radiopharmaceutical; or
(II) a drug or biological for which payment was made under paragraph (6) (relating to pass-through payments) on or before December 31, 2002.
(ii) Exception Such term does not include
(I) a drug or biological for which payment is first made on or after January 1, 2003, under paragraph (6);
(II) a drug or biological for which a temporary HCPCS code has not been assigned; or
(III) during 2004 and 2005, an orphan drug (as designated by the Secretary).
(C) Payment for designated orphan drugs during 2004 and 2005 
The amount of payment under this subsection for an orphan drug designated by the Secretary under subparagraph (B)(ii)(III) that is furnished as part of a covered OPD service (or group of services) during 2004 and 2005 shall equal such amount as the Secretary may specify.
(D) Acquisition cost survey for hospital outpatient drugs 

(i) Annual GAO surveys in 2004 and 2005
(I) In general The Comptroller General of the United States shall conduct a survey in each of 2004 and 2005 to determine the hospital acquisition cost for each specified covered outpatient drug. Not later than April 1, 2005, the Comptroller General shall furnish data from such surveys to the Secretary for use in setting the payment rates under subparagraph (A) for 2006.
(II) Recommendations Upon the completion of such surveys, the Comptroller General shall recommend to the Secretary the frequency and methodology of subsequent surveys to be conducted by the Secretary under clause (ii).
(ii) Subsequent secretarial surveys The Secretary, taking into account such recommendations, shall conduct periodic subsequent surveys to determine the hospital acquisition cost for each specified covered outpatient drug for use in setting the payment rates under subparagraph (A).
(iii) Survey requirements The surveys conducted under clauses (i) and (ii) shall have a large sample of hospitals that is sufficient to generate a statistically significant estimate of the average hospital acquisition cost for each specified covered outpatient drug. With respect to the surveys conducted under clause (i), the Comptroller General shall report to Congress on the justification for the size of the sample used in order to assure the validity of such estimates.
(iv) Differentiation in cost In conducting surveys under clause (i), the Comptroller General shall determine and report to Congress if there is (and the extent of any) variation in hospital acquisition costs for drugs among hospitals based on the volume of covered OPD services performed by such hospitals or other relevant characteristics of such hospitals (as defined by the Comptroller General).
(v) Comment on proposed rates Not later than 30 days after the date the Secretary promulgated proposed rules setting forth the payment rates under subparagraph (A) for 2006, the Comptroller General shall evaluate such proposed rates and submit to Congress a report regarding the appropriateness of such rates based on the surveys the Comptroller General has conducted under clause (i).
(E) Adjustment in payment rates for overhead costs 

(i) MedPAC report on drug APC design The Medicare Payment Advisory Commission shall submit to the Secretary, not later than July 1, 2005, a report on adjustment of payment for ambulatory payment classifications for specified covered outpatient drugs to take into account overhead and related expenses, such as pharmacy services and handling costs. Such report shall include
(I) a description and analysis of the data available with regard to such expenses;
(II) a recommendation as to whether such a payment adjustment should be made; and
(III) if such adjustment should be made, a recommendation regarding the methodology for making such an adjustment.
(ii) Adjustment authorized The Secretary may adjust the weights for ambulatory payment classifications for specified covered outpatient drugs to take into account the recommendations contained in the report submitted under clause (i).
(F) Classes of drugs 
For purposes of this paragraph:
(i) Sole source drugs The term sole source drug means
(I) a biological product (as defined under section 1395x (t)(1) of this title); or
(II) a single source drug (as defined in section 1396r–8 (k)(7)(A)(iv) of this title).
(ii) Innovator multiple source drugs The term innovator multiple source drug has the meaning given such term in section 1396r–8 (k)(7)(A)(ii) of this title.
(iii) Noninnovator multiple source drugs The term noninnovator multiple source drug has the meaning given such term in section 1396r–8 (k)(7)(A)(iii) of this title.
(G) Reference average wholesale price 
The term reference average wholesale price means, with respect to a specified covered outpatient drug, the average wholesale price for the drug as determined under section 1395u (o) of this title as of May 1, 2003.
(H) Inapplicability of expenditures in determining conversion, weighting, and other adjustment factors 
Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.
(15) Payment for new drugs and biologicals until HCPCS code assigned 
With respect to payment under this part for an outpatient drug or biological that is covered under this part and is furnished as part of covered OPD services for which a HCPCS code has not been assigned, the amount provided for payment for such drug or biological under this part shall be equal to 95 percent of the average wholesale price for the drug or biological.
(16) Miscellaneous provisions 

(A) Application of reclassification of certain hospitals 
If a hospital is being treated as being located in a rural area under section 1395ww (d)(8)(E) of this title, that hospital shall be treated under this subsection as being located in that rural area.
(B) Threshold for establishment of separate APCS for drugs 
The Secretary shall reduce the threshold for the establishment of separate ambulatory payment classification groups (APCs) with respect to drugs or biologicals to $50 per administration for drugs and biologicals furnished in 2005 and 2006.
(C) Payment for devices of brachytherapy and therapeutic radiopharmaceuticals at charges adjusted to cost 
Notwithstanding the preceding provisions of this subsection, for a device of brachytherapy consisting of a seed or seeds (or radioactive source) furnished on or after January 1, 2004, and before July 1, 2008, and for therapeutic radiopharmaceuticals furnished on or after January 1, 2008, and before July 1, 2008, the payment basis for the device or therapeutic radiopharmaceutical under this subsection shall be equal to the hospitals charges for each device or therapeutic radiopharmaceutical furnished, adjusted to cost. Charges for such devices or therapeutic radiopharmaceuticals shall not be included in determining any outlier payment under this subsection.
(u) Incentive payments for physician scarcity areas 

(1) In general 
In the case of physicians services furnished on or after January 1, 2005, and before July 1, 2008
(A) by a primary care physician in a primary care scarcity county (identified under paragraph (4)); or
(B) by a physician who is not a primary care physician in a specialist care scarcity county (as so identified),

in addition to the amount of payment that would otherwise be made for such services under this part, there also shall be paid an amount equal to 5 percent of the payment amount for the service under this part.

(2) Determination of ratios of physicians to medicare beneficiaries in area 
Based upon available data, the Secretary shall establish for each county or equivalent area in the United States, the following:
(A) Number of physicians practicing in the area 
The number of physicians who furnish physicians services in the active practice of medicine or osteopathy in that county or area, other than physicians whose practice is exclusively for the Federal Government, physicians who are retired, or physicians who only provide administrative services. Of such number, the number of such physicians who are
(i) primary care physicians; or
(ii) physicians who are not primary care physicians.
(B) Number of medicare beneficiaries residing in the area 
The number of individuals who are residing in the county and are entitled to benefits under part A of this subchapter or enrolled under this part, or both (in this subsection referred to as individuals).
(C) Determination of ratios 

(i) Primary care ratio The ratio (in this paragraph referred to as the primary care ratio) of the number of primary care physicians (determined under subparagraph (A)(i)), to the number of individuals determined under subparagraph (B).
(ii) Specialist care ratio The ratio (in this paragraph referred to as the specialist care ratio) of the number of other physicians (determined under subparagraph (A)(ii)), to the number of individuals determined under subparagraph (B).
(3) Ranking of counties 
The Secretary shall rank each such county or area based separately on its primary care ratio and its specialist care ratio.
(4) Identification of counties 

(A) In general 
The Secretary shall identify
(i) those counties and areas (in this paragraph referred to as primary care scarcity counties) with the lowest primary care ratios that represent, if each such county or area were weighted by the number of individuals determined under paragraph (2)(B), an aggregate total of 20 percent of the total of the individuals determined under such paragraph; and
(ii) those counties and areas (in this subsection referred to as specialist care scarcity counties) with the lowest specialist care ratios that represent, if each such county or area were weighted by the number of individuals determined under paragraph (2)(B), an aggregate total of 20 percent of the total of the individuals determined under such paragraph.
(B) Periodic revisions 
The Secretary shall periodically revise the counties or areas identified in subparagraph (A) (but not less often than once every three years) unless the Secretary determines that there is no new data available on the number of physicians practicing in the county or area or the number of individuals residing in the county or area, as identified in paragraph (2).
(C) Identification of counties where service is furnished 
For purposes of paying the additional amount specified in paragraph (1), if the Secretary uses the 5-digit postal ZIP Code where the service is furnished, the dominant county of the postal ZIP Code (as determined by the United States Postal Service, or otherwise) shall be used to determine whether the postal ZIP Code is in a scarcity county identified in subparagraph (A) or revised in subparagraph (B).
(D) Special rule 
With respect to physicians services furnished on or after January 1, 2008, and before July 1, 2008, for purposes of this subsection, the Secretary shall use the primary care scarcity counties and the specialty care scarcity counties (as identified under the preceding provisions of this paragraph) that the Secretary was using under this subsection with respect to physicians services furnished on December 31, 2007.
(E) Judicial review 
There shall be no administrative or judicial review under section 1395ff, 1395oo of this title, or otherwise, respecting
(i) the identification of a county or area;
(ii) the assignment of a specialty of any physician under this paragraph;
(iii) the assignment of a physician to a county under paragraph (2); or
(iv) the assignment of a postal ZIP Code to a county or other area under this subsection.
(5) Rural census tracts 
To the extent feasible, the Secretary shall treat a rural census tract of a metropolitan statistical area (as determined under the most recent modification of the Goldsmith Modification, originally published in the Federal Register on February 27, 1992 (57 Fed. Reg. 6725)), as an equivalent area for purposes of qualifying as a primary care scarcity county or specialist care scarcity county under this subsection.
(6) Physician defined 
For purposes of this paragraph, the term physician means a physician described in section 1395x (r)(1) of this title and the term primary care physician means a physician who is identified in the available data as a general practitioner, family practice practitioner, general internist, or obstetrician or gynecologist.
(7) Publication of list of counties; posting on website 
With respect to a year for which a county or area is identified or revised under paragraph (4), the Secretary shall identify such counties or areas as part of the proposed and final rule to implement the physician fee schedule under section 1395w–4 of this title for the applicable year. The Secretary shall post the list of counties identified or revised under paragraph (4) on the Internet website of the Centers for Medicare & Medicaid Services.
[1] So in original. The word “and” probably should not appear.
[2] So in original. The comma after “subclause (II))” probably should follow “is performed”.
[3] So in original. Probably should be “such paragraph applies”.
[4] So in original. The word “this” probably should not appear.
[5] So in original. Probably should be “are—”.
[6] So in original. Probably should be “subparagraph”.
[7] So in original. No par. (2) has been enacted.