article: SECTION 1. PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION HOSPITAL SERVICES BASED ON DISCHARGES CLASSIFIED BY FUNCTIONAL- RELATED GROUPS. (a) In General.--Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended by adding at the end the following new subsection: ``(j) Prospective Payment for Inpatient Rehabilitation Services.-- ``(1) In general.--Notwithstanding section 1814(b), but subject to the provisions of section 1813, the amount of the payment with respect to the operating and capital costs of inpatient hospital services of a rehabilitation hospital or a rehabilitation unit (in this subsection referred to as a `rehabilitation facility') for a discharge is equal to the per discharge payment rate established under this subsection. ``(2) Functional-related groups.-- ``(A) Establishment.--The Secretary shall establish-- ``(i) classes of discharges of rehabilitation facilities by functional-related groups (each in this subsection referred to as a `functional-related group' or `FRG'), based on impairment, age, and functional capability of the discharged individual and such other factors as the Secretary deems appropriate, and ``(ii) a method of classifying specific discharges from rehabilitation facilities within these groups. ``(B) Weighting factors.--For each functional- related group the Secretary shall assign an appropriate weighting which reflects the relative facility resources used with respect to discharges classified within that group compared to discharges classified within other groups. ``(C) Adjustments.--The Secretary shall from time to time adjust the classifications and weighting factors established under this paragraph as appropriate to correct for forecast errors and to reflect changes in treatment patterns, technology, and other factors which may affect the relative use of resources. ``(3) Payment rate.-- ``(A) In general.--The Secretary shall determine a prospective payment rate for each rehabilitation facility discharge for which such rehabilitation facility is entitled to receive payment under this title. Subject to subparagraph (B), such rate for discharges during a fiscal year shall be based on the average payment per discharge under this title for inpatient operating and capital costs of rehabilitation facilities in fiscal year 1995 (as estimated by the Secretary) adjusted-- ``(i) by updating such per-discharge amount to the fiscal year involved by the applicable percentage increases provided under subsection (b)(3)(B)(i) for each year after fiscal year 1995 and up to the fiscal year involved; ``(ii) by reducing such rates by a factor equal to the proportion of payments under this subsection (as estimated by the Secretary) based on FRG prospective payment amounts which are additional payments described in paragraph (4) (relating to outlier and related payments) or paragraph (7); ``(iii) for variations among rehabilitation facilities by area under paragraph (6); ``(iv) by the weighting factors established under paragraph (2)(B); and ``(v) by such other factors as the Secretary determines are necessary to properly reflect variations in necessary costs of treatment among rehabilitation facilities. ``(B) Budget neutral rates.--The Secretary shall establish the prospective payment amounts under this subsection for discharges during each of fiscal years 1998 through 2002 at levels such that, in the Secretary's estimation, the amount of total payments under this subsection for each such fiscal year (including any payment adjustments pursuant to paragraph (7)) shall not exceed the amount of payments that would have been made under this title during the fiscal year for operating and capital costs of rehabilitation facilities had this subsection not been enacted. ``(4) Outlier and special payments.-- ``(A) Outliers.-- ``(i) Day outliers.--The Secretary shall provide for an additional payment to a rehabilitation facility for discharges in a functional-related group, the lengths of stay of which exceeded the mean length of stay for discharges within that group by a fixed number of days or exceeds such mean length of stay by some fixed number of deviations, whichever is the fewer number of days. ``(ii) Requesting additional payments.--For cases not included in clause (i), a rehabilitation facility may request additional payments in any case in which charges, adjusted to cost, exceed a fixed multiple of the applicable prospective payment rate, or exceed such other fixed dollar amount, whichever is greater, or exceed the prospective payment rate plus a fixed dollar amount determined by the Secretary. ``(iii) Payment based on marginal cost of care.--The amount of such additional payment under clauses (i) and (ii) shall be determined by the Secretary and shall approximate the marginal cost of care beyond the cutoff point applicable under clause (i) or (ii). ``(iv) Total payments.--The total amount of the additional payments made under this subparagraph for discharges in a fiscal year may not be less than 5 percent nor more than 6 percent of the total payments projected or estimated to be made based on FRG prospective payment rates for discharges in that year. ``(B) Adjustment.--The Secretary may provide for such adjustments to the payment amounts under this subsection as the Secretary deems appropriate to take into account the unique circumstances of rehabilitation facilities located in Alaska and Hawaii. ``(5) Publication.--The Secretary shall provide for publication in the Federal Register, on or before September 1 before each fiscal year (beginning with fiscal year 1998), of the classification and weighting factors for FRGs under paragraph (2) for such fiscal year and a description of the methodology and data used in computing the prospective payment rates under this subsection for that fiscal year. ``(6) Area wage adjustment.--The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of rehabilitation facilities' costs which are attributable to wages and wage-related costs, of the prospective payment rates computed under paragraph (3) for area differences in wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the rehabilitation facility compared to the national average wage level for such facilities. Not later than October 1, 1998 (and at least every 12 months thereafter), the Secretary shall update the factor under the preceding sentence on the basis of a survey conducted by the Secretary (and updated as appropriate) of the wages and wage-related costs incurred in furnishing rehabilitation services. Any adjustments or updates made under this paragraph for a fiscal year shall be made in a manner that assures that the aggregated payments under this subsection in the fiscal year are not greater or less than those that would have been made in the year without such adjustment. ``(7) Additional adjustments.--The Secretary shall provide by regulation for-- ``(A) an additional payment to take into account indirect costs of medical education and the special circumstances of hospitals that serve a significantly disproportionate number of low-income patients in a manner similar to that provided under subparagraphs (B) and (F), respectively, of subsection (d)(5); and ``(B) such other exceptions and adjustments to payment amounts under this subsection in a manner similar to that provided under subsection (d)(5)(I) in relation to payments under subsection (d). ``(8) Limitation on review.--There shall be no administrative or judicial review under section 1878 or otherwise of-- ``(A) the establishment of FRGs, of the methodology for the classification of discharges within such groups, and of the appropriate weighting factors thereof under paragraph (2), and (B) the establishment of the prospective payment rates under paragraph (3).''. (b) Conforming Amendments.--Section 1886(b) of such Act (42 U.S.C. 1395ww(b)) is amended-- (1) in paragraph (1), by inserting ``and other than a rehabilitation facility described in subsection (j)(1)'' after ``subsection (d)(1)(B)'', and (2) in paragraph (3)(B)(i), by inserting ``and subsection (j)'' after ``For purposes of subsection (d)''. (c) Effective Date.--The amendments made by this section shall apply to cost reporting periods beginning on or after October 1, 1997.
summary: Amends title XVIII (Medicare) of the Social Security Act to provide for prospective payment under Medicare for inpatient rehabilitation hospital services and units based on discharges classified by functional-related groups.