SubtitleC

Note: this is a hand enrollment pursuant to Public Law 105-32.

H.R.2015

One Hundred Fifth Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Tuesday, the
seventh day of January, one thousand nine hundred and ninety-seven

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An Act

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Subtitle C–Rural Initiatives

• Sec. 4201. Medicare rural hospital
  flexibility program.

• Sec. 4202. Prohibiting denial of request by
  rural referral centers for reclassification on basis of
  comparability of wages.

• Sec. 4203. Hospital geographic
  reclassification permitted for purposes of disproportionate share
  payment adjustments.

• Sec. 4204. Medicare-dependent, small rural
  hospital payment extension.

• Sec. 4205. Rural health clinic
  services.

• Sec. 4206. Medicare reimbursement for
  telehealth services.

• Sec. 4207. Informatics, telemedicine, and
  education demonstration project.

SEC. 4201. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.

(a) Medicare Rural Hospital Flexibility Program.–Section 1820 (42
U.S.C. 1395i-4) is amended to read as follows:

~ medicare rural hospital flexibility
program ~

Sec. 1820. (a) Establishment.–Any State that submits an
application in accordance with subsection (b) may establish a
medicare rural hospital flexibility program described in subsection
(c).

(b) Application.–A State may establish a medicare rural hospital
flexibility program described in subsection (c) if the State submits
to the Secretary at such time and in such form as the Secretary may
require an application containing– (1) assurances that the State–
(A) has developed, or is in the process of developing, a State rural
health care plan that– (i) provides for the creation of 1 or more
rural health networks (as defined in subsection (d)) in the State;
(ii) promotes regionalization of rural health services in the State;
and (iii) improves access to hospital and other health services for
rural residents of the State; and (B) has developed the rural health
care plan described in subparagraph (A) in consultation with the
hospital association of the State, rural hospitals located in the
State, and the State Office of Rural Health (or, in the case of a
State in the process of developing such plan, that assures the
Secretary that the State will consult with its State hospital
association, rural hospitals located in the State, and the State
Office of Rural Health in developing such plan); (2) assurances that
the State has designated (consistent with the rural health care plan
described in paragraph (1)(A)), or is in the process of so
designating, rural nonprofit or public hospitals or facilities
located in the State as critical access hospitals; and (3) such other
information and assurances as the Secretary may require.

(c) Medicare Rural Hospital Flexibility Program Described.– (1)
In general.–A State that has submitted an application in accordance
with subsection (b), may establish a medicare rural hospital
flexibility program that provides that– (A) the State shall develop
at least 1 rural health network (as defined in subsection (d)) in the
State; and (B) at least 1 facility in the State shall be designated
as a critical access hospital in accordance with paragraph (2).

(2) State designation of facilities.– (A) In general.–A State
may designate 1 or more facilities as a critical access hospital in
accordance with subparagraph (B).

(B) Criteria for designation as critical access hospital.–A State
may designate a facility as a critical access hospital if the
facility– (i) is a nonprofit or public hospital and is located in a
county (or equivalent unit of local government) in a rural area (as
defined in section 1886(d)(2)(D)) that–

(I) is located more than a 35-mile drive (or, in the case of
mountainous terrain or in areas with only secondary roads available,
a 15-mile drive) from a hospital, or another facility described in
this subsection; or (II) is certified by the State as being a
necessary provider of health care services to residents in the area;

(ii) makes available 24-hour emergency care services that a State
determines are necessary for ensuring access to emergency care
services in each area served by a critical access hospital; (iii)
provides not more than 15 (or, in the case of a facility under an
agreement described in subsection (f), 25) acute care inpatient beds
(meeting such standards as the Secretary may establish) for providing
inpatient care for a period not to exceed 96 hours (unless a longer
period is required because transfer to a hospital is precluded
because of inclement weather or other emergency conditions), except
that a peer review organization or equivalent entity may, on request,
waive the 96-hour restriction on a case-by-case basis; (iv) meets
such staffing requirements as would apply under section 1861(e) to a
hospital located in a rural area, except that–

(I) the facility need not meet hospital standards relating to the
number of hours during a day, or days during a week, in which the
facility must be open and fully staffed, except insofar as the
facility is required to make available emergency care services as
determined under clause (ii) and must have nursing services available
on a 24-hour basis, but need not otherwise staff the facility except
when an inpatient is present; (II) the facility may provide any
services otherwise required to be provided by a full-time, on site
dietitian, pharmacist, laboratory technician, medical technologist,
and radiological technologist on a part-time, off site basis under
arrangements as defined in section 1861(w)(1); and (III) the
inpatient care described in clause (iii) may be provided by a
physician assistant, nurse practitioner, or clinical nurse specialist
subject to the oversight of a physician who need not be present in
the facility; and

(v) meets the requirements of section 1861(aa)(2)(I).

(d) Definition of Rural Health Network.– (1) In general.–In this
section, the term ‘rural health network’ means, with respect to a
State, an organization consisting of– (A) at least 1 facility that
the State has designated or plans to designate as a critical access
hospital; and (B) at least 1 hospital that furnishes acute care
services.

(2) Agreements.– (A) In general.–Each critical access hospital
that is a member of a rural health network shall have an agreement
with respect to each item described in subparagraph (B) with at least
1 hospital that is a member of the network.

(B) Items described.–The items described in this subparagraph are
the following: (i) Patient referral and transfer.

(ii) The development and use of communications systems including
(where feasible)–(I) telemetry systems; and (II) systems for
electronic sharing of patient data.

(iii) The provision of emergency and non-emergency transportation
among the facility and the hospital.

(C) Credentialing and quality assurance.–Each critical access
hospital that is a member of a rural health network shall have an
agreement with respect to credentialing and quality assurance with at
least– (i) 1 hospital that is a member of the network; (ii) 1 peer
review organization or equivalent entity; or (iii) 1 other
appropriate and qualified entity identified in the State rural health
care plan.

(e) Certification by the Secretary.–The Secretary shall certify a
facility as a critical access hospital if the facility– (1) is
located in a State that has established a medicare rural hospital
flexibility program in accordance with subsection (c); (2) is
designated as a critical access hospital by the State in which it is
located; and (3) meets such other criteria as the Secretary may
require.

(f) Permitting Maintenance of Swing Beds.–Nothing in this section
shall be construed to prohibit a State from designating or the
Secretary from certifying a facility as a critical access hospital
solely because, at the time the facility applies to the State for
designation as a critical access hospital, there is in effect an
agreement between the facility and the Secretary under section 1883
under which the facility’s inpatient hospital facilities are used for
the provision of extended care services, so long as the total number
of beds that may be used at any time for the furnishing of either
such services or acute care inpatient services does not exceed 25
beds and the number of beds used at any time for acute care inpatient
services does not exceed 15 beds. For purposes of the previous
sentence, any bed of a unit of the facility that is licensed as a
distinct-part skilled nursing facility at the time the facility
applies to the State for designation as a critical access hospital
shall not be counted.

(g) Grants.– (1) Medicare rural hospital flexibility
program.–The Secretary may award grants to States that have
submitted applications in accordance with subsection (b) for– (A)
engaging in activities relating to planning and implementing a rural
health care plan; (B) engaging in activities relating to planning and
implementing rural health networks; and (C) designating facilities as
critical access hospitals.

(2) Rural emergency medical services.– (A) In general.–The
Secretary may award grants to States that have submitted applications
in accordance with subparagraph (B) for the establishment or
expansion of a program for the provision of rural emergency medical
services.

(B) Application.–An application is in accordance with this
subparagraph if the State submits to the Secretary at such time and
in such form as the Secretary may require an application containing
the assurances described in subparagraphs (A)(ii), (A)(iii), and (B)
of subsection (b)(1) and paragraph (3) of that subsection.

(h) Grandfathering of Certain Facilities.– (1) In general.–Any
medical assistance facility operating in Montana and any rural
primary care hospital designated by the Secretary under this section
prior to the date of the enactment of the Balanced Budget Act of 1997
shall be deemed to have been certified by the Secretary under
subsection (e) as a critical access hospital if such facility or
hospital is otherwise eligible to be designated by the State as a
critical access hospital under subsection (c).

(2) Continuation of medical assistance facility and rural primary
care hospital terms.–Notwithstanding any other provision of this
title, with respect to any medical assistance facility or rural
primary care hospital described in paragraph (1), any reference in
this title to a ‘critical access hospital’ shall be deemed to be a
reference to a ‘medical assistance facility’ or ‘rural primary care
hospital’.

(i) Waiver of Conflicting Part A Provisions.–The Secretary is
authorized to waive such provisions of this part and part D as are
necessary to conduct the program established under this section.

(j) Authorization of Appropriations.–There are authorized to be
appropriated from the Federal Hospital Insurance Trust Fund for
making grants to all States under subsection (g), $25,000,000 in each
of the fiscal years 1998 through 2002.”.

(b) Report on Alternative to 96-Hour Rule.–Not later than June 1,
1998, the Secretary of Health and Human Services shall submit to
Congress a report on the feasibility of, and administrative
requirements necessary to establish an alternative for certain
medical diagnoses (as determined by the Secretary) to the 96-hour
limitation for inpatient care in critical access hospitals required
by section 1820(c)(2)(B)(iii) of the Social Security Act (42 U.S.C.
1395i- 4(c)(2)(B)(iii)), as added by subsection (a) of this section.

(c) Conforming Amendments Relating to Rural Primary Care Hospitals
and Critical Access Hospitals.– (1) In general.–Title XI of the
Social Security Act (42 U.S.C. 1301 et seq.) and title XVIII of that
Act (42 U.S.C. 1395 et seq.) are each amended by striking “rural
primary care” each place it appears and inserting “critical access”.

(2) Definitions.–Section 1861(mm) of the Social Security Act (42
U.S.C. 1395x(mm)) is amended to read as follows:

~
critical access hospital; critical access hospital services
~

(mm)(1) The term ‘critical access hospital’ means a facility
certified by the Secretary as a critical access hospital under
section 1820(e).

(2) The term ‘inpatient critical access hospital services’ means
items and services, furnished to an inpatient of a critical access
hospital by such facility, that would be inpatient hospital services
if furnished to an inpatient of a hospital by a hospital.

(3) The term ‘outpatient critical access hospital services’ means
medical and other health services furnished by a critical access
hospital on an outpatient basis.

(3) Part a payment.–Section 1814 of the Social Security Act (42
U.S.C. 1395f) is amended– (A) in subsection (a)(8), by striking “72”
and inserting “96”; and (B) by amending subsection (l) to read as
follows:

~
Payment for Inpatient Critical Access Hospital Services ~

(l) The amount of payment under this part for inpatient critical
access hospital services is the reasonable costs of the critical
access hospital in providing such services.”.

(4) Payment continued to designated eachs.–Section 1886(d)(5)(D)
of the Social Security Act (42 U.S.C. 1395ww(d)(5)(D)) is amended–
(A) in clause (iii)(III), by inserting “as in effect on September 30,
1997” before the period at the end; and (B) in clause (v)– (i) by
inserting “as in effect on September 30, 1997” after “1820(i)(1)”;
and (ii) by striking “1820(g)” and inserting “1820(d)”.

(5) Part b payment.–Section 1834(g) of the Social Security Act
(42 U.S.C. 1395m(g)) is amended to read as follows: (g) Payment for
Outpatient Critical Access Hospital Services.– The amount of payment
under this part for outpatient critical access hospital services is
the reasonable costs of the critical access hospital in providing
such services.”.

(6) Transition for MAF.– (A) In general.–The Secretary of Health
and Human Services shall provide for an appropriate transition for a
facility that, as of the date of the enactment of this Act, operated
as a limited service rural hospital under a demonstration described
in section 4008(i)(1) of the Omnibus Budget Reconciliation Act of
1990 (42 U.S.C. 1395b-1 note) from such demonstration to the program
established under subsection (a).

At the conclusion of the transition period described in
subparagraph (B), the Secretary shall end such demonstration.

(B) Transition period described.– (i) Initial period.–Subject to
clause (ii), the transition period described in this subparagraph is
the period beginning on the date of the enactment of this Act and
ending on October 1, 1998.

(ii) Extension.–If the Secretary determines that the transition
is not complete as of October 1, 1998, the Secretary shall provide
for an appropriate extension of the transition period.

(d) Effective Date.–The amendments made by this section shall
apply to services furnished on or after October 1, 1997.

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SEC. 4202. PROHIBITING DENIAL OF REQUEST BY RURAL REFERRAL CENTERS
FOR RECLASSIFICATION ON BASIS OF COMPARABILITY OF WAGES.

(a) In General.–Section 1886(d)(10)(D) (42 U.S.C.
1395ww(d)(10)(D)) is amended– (1) by redesignating clause (iii) as
clause (iv); and (2) by inserting after clause (ii) the following new
clause: (iii) Under the guidelines published by the Secretary under
clause (i), in the case of a hospital which has ever been classified
by the Secretary as a rural referral center under paragraph (5)(C),
the Board may not reject the application of the hospital under this
paragraph on the basis of any comparison between the average hourly
wage of the hospital and the average hourly wage of hospitals in the
area in which it is located.”.

(b) Continuing Treatment of Previously Designated Centers.– (1)
In general.–Any hospital classified as a rural referral center by
the Secretary of Health and Human Services under section
1886(d)(5)(C) of the Social Security Act for fiscal year 1991 shall
be classified as such a rural referral center for fiscal year 1998
and each subsequent fiscal year.

(2) Budget neutrality.–The provisions of section 1886(d)(8)(D) of
the Social Security Act shall apply to reclassifications made
pursuant to paragraph (1) in the same manner as such provisions apply
to a reclassification under section 1886(d)(10) of such Act.

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SEC. 4203. HOSPITAL GEOGRAPHIC RECLASSIFICATION PERMITTED FOR
PURPOSES OF DISPROPORTIONATE SHARE PAYMENT ADJUSTMENTS.

(a) In General.–For the period described in subsection (c), the
Medicare Geographic Classification Review Board shall consider the
application under section 1886(d)(10)(C)(i) of the Social Security
Act (42 U.S.C. 1395ww(d)(10)(C)(i)) of a hospital described in
1886(d)(1)(B) of such Act (42 U.S.C. 1395ww(d)(1)(B)) to change the
hospital’s geographic classification for purposes of determining for
a fiscal year eligibility for and amount of additional payment
amounts under section 1886(d)(5)(F) of such Act (42 U.S.C.
1395ww(d)(5)(F)).

(b) Applicable Guidelines.–The Medicare Geographic Classification
Review Board shall apply the guidelines established for
reclassification under subclause (I) of section 1886(d)(10)(C)(i) of
such Act to reclassification by reason of subsection (a) until the
Secretary of Health and Human Services promulgates separate
guidelines for such reclassification.

(c) Period Described.–The period described in this subsection is
the period beginning on the date of the enactment of this Act and
ending 30 months after such date.

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SEC. 4204. MEDICARE-DEPENDENT, SMALL RURAL HOSPITAL PAYMENT
EXTENSION.

(a) Special Treatment Extended.– (1) Payment
methodology.–Section 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)) is
amended– (A) in clause (i), by striking “October 1, 1994,” and
inserting “October 1, 1994, or beginning on or after October 1, 1997,
and before October 1, 2001,”; and (B) in clause (ii)(II), by striking
“October 1, 1994,” and inserting “October 1, 1994, or beginning on or
after October 1, 1997, and before October 1, 2001,”.

(2) Extension of target amount.–Section 1886(b)(3)(D) (42 U.S.C.
1395ww(b)(3)(D)) is amended– (A) in the matter preceding clause (i),
by striking “September 30, 1994,” and inserting “September 30, 1994,
and for cost reporting periods beginning on or after October 1, 1997,
and before October 1, 2001,”; (B) in clause (ii), by striking “and”
at the end; (C) in clause (iii), by striking the period at the end
and inserting “, and”; and (D) by adding after clause (iii) the
following new clause: (iv) with respect to discharges occurring
during fiscal year 1998 through fiscal year 2000, the target amount
for the preceding year increased by the applicable percentage
increase under subparagraph (B)(iv).”.

(3) Permitting hospitals to decline reclassification.–Section
13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is amended by striking
“or fiscal year 1994” and inserting “, fiscal year 1994, fiscal year
1998, fiscal year 1999, or fiscal year 2000”.

(b) Effective Date.–The amendments made by subsection (a) shall
apply with respect to discharges occurring on or after October 1,
1997.

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SEC. 4205. RURAL HEALTH CLINIC SERVICES.

(a) Per-Visit Payment Limits for Provider-Based Clinics.– (1)
Extension of limit.– (A) In general.–The matter in section 1833(f)
(42 U.S.C. 1395l(f)) preceding paragraph (1) is amended by striking
“independent rural health clinics” and inserting “rural health
clinics (other than such clinics in rural hospitals with less than 50
beds)”.

(B) Effective date.–The amendment made by subparagraph (A)
applies to services furnished on or after January 1, 1998.

(2) Technical clarification.–Section 1833(f)(1) (42
U.S.C.1395l(f)(1)) is amended by inserting “per visit” after “$46”.

(b) Assurance of Quality Services.– (1) In general.–Subparagraph
(I) of the first sentence of section 1861(aa)(2) (42 U.S.C.
1395x(aa)(2)) is amended to read as follows: (I) has a quality
assessment and performance improvement program, and appropriate
procedures for review of utilization of clinic services, as the
Secretary may specify,”.

(2) Effective date.–The amendment made by paragraph (1) shall
take effect on January 1, 1998.

(c) Waiver of Certain Staffing Requirements Limited to Clinics in
Program.– (1) In general.–Section 1861(aa)(7)(B) (42 U.S.C.
1395x(aa)(7)(B)) is amended by inserting before the period “, or if
the facility has not yet been determined to meet the requirements
(including subparagraph (J) of the first sentence of paragraph (2))
of a rural health clinic”.

(2) Effective date.–The amendment made by paragraph (1) applies
to waiver requests made on or after January 1, 1998.

(d) Refinement of Shortage Area Requirements.– (1) Designation
reviewed triennially.–Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2))
is amended in the second sentence, in the matter in clause (i)
preceding subclause (I)– (A) by striking “and that is designated”
and inserting “and that, within the previous 3-year period, has been
designated”; and (B) by striking “or that is designated” and
inserting “or designated”.

(2) Area must have shortage of health care practitioners.–
Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)), as amended by paragraph
(1), is further amended in the second sentence, in the matter in
clause (i) preceding subclause (I)– (A) by striking the comma after
“personal health services”; and (B) by inserting “and in which there
are insufficient numbers of needed health care practitioners (as
determined by the Secretary),” after “Bureau of the Census)”.

(3) Previously qualifying clinics grandfathered only to prevent
shortage.– (A) In General.–Section 1861(aa)(2) of the Social
Security Act (42 U.S.C. 1395x(aa)(2)) is amended in the third
sentence by inserting before the period “if it is determined, in
accordance with criteria established by the Secretary in regulations,
to be essential to the delivery of primary care services that would
otherwise be unavailable in the geographic area served by the
clinic”.

(B) Payment for certain physician assistant services.– Section
1842(b)(6)(C) (42 U.S.C. 1395u(b)(6)(C)) is amended to read as
follows: (C) in the case of services described in clause (i) of
section 1861(s)(2)(K), payment shall be made to either (i) the
employer of the physician assistant involved, or (ii) with respect to
a physician assistant who was the owner of a rural health clinic (as
described in section 1861(aa)(2)) for a continuous period beginning
prior to the date of the enactment of the Balanced Budget Act of 1997
and ending on the date that the Secretary determines such rural
health clinic no longer meets the requirements of section
1861(aa)(2), for such services provided before January 1, 2003,
payment may be made directly to the physician assistant; and”.

(4) Effective dates; implementing regulations.– (A) In
general.–Except as otherwise provided, the amendments made by the
preceding paragraphs take effect on the date of the enactment of this
Act.

(B) Current rural health clinics.–The amendments made by the
preceding paragraphs take effect, with respect to entities that are
rural health clinics under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) on the date of enactment of this Act, on the
date of the enactment of this Act.

(C) Grandfathered clinics.– (i) In general.–The amendment made
by paragraph (3)(A) shall take effect on the effective date of
regulations issued by the Secretary under clause (ii).

(ii) Regulations.–The Secretary shall issue final regulations
implementing paragraph (3)(A) that shall take effect no later than
January 1, 1999.

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SEC. 4206. MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES.

(a) In General.–Not later than January 1, 1999, the Secretary of
Health and Human Services shall make payments from the Federal
Supplementary Medical Insurance Trust Fund under part B of title
XVIII of the Social Security Act (42 U.S.C. 1395j et seq.) in
accordance with the methodology described in subsection (b) for
professional consultation via telecommunications systems with a
physician (as defined in section 1861(r) of such Act (42 U.S.C.
1395x(r)) or a practitioner (described in section 1842(b)(18)(C) of
such Act (42 U.S.C. 1395u(b)(18)(C)) furnishing a service for which
payment may be made under such part to a beneficiary under the
medicare program residing in a county in a rural area (as defined in
section 1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))) that
is designated as a health professional shortage area under section
332(a)(1)(A) of the Public Health Service Act (42
U.S.C.254e(a)(1)(A)), notwithstanding that the individual physician
or practitioner providing the professional consultation is not at the
same location as the physician or practitioner furnishing the service
to that beneficiary.

(b) Methodology for Determining Amount of Payments.–Taking into
account the findings of the report required under section 192 of the
Health Insurance Portability and Accountability Act of 1996 (Public
Law 104-191; 110 Stat. 1988), the findings of the report required
under paragraph (c), and any other findings related to the clinical
efficacy and cost-effectiveness of telehealth applications, the
Secretary shall establish a methodology for determining the amount of
payments made under subsection (a) within the following parameters:
(1) The payment shall shared between the referring physician or
practitioner and the consulting physician or practitioner. The amount
of such payment shall not be greater than the current fee schedule of
the consulting physician or practitioner for the health care services
provided.

(2) The payment shall not include any reimbursement for any
telephone line charges or any facility fees, and a beneficiary may
not be billed for any such charges or fees.

(3) The payment shall be made subject to the coinsurance and
deductible requirements under subsections (a)(1) and (b) of section
1833 of the Social Security Act (42 U.S.C. 1395l).

(4) The payment differential of section 1848(a)(3) of such Act (42
U.S.C. 1395w-4(a)(3)) shall apply to services furnished by non-
participating physicians. The provisions of section 1848(g) of such
Act (42 U.S.C. 1395w-4(g)) and section 1842(b)(18) of such Act (42
U.S.C. 1395u(b)(18)) shall apply. Payment for such service shall be
increased annually by the update factor for physicians’ services
determined under section 1848(d) of such Act (42 U.S.C. 1395w- 4(d)).

(c) Supplemental Report.–Not later than January 1, 1999, the
Secretary shall submit a report to Congress which shall contain a
detailed analysis of– (1) how telemedicine and telehealth systems
are expanding access to health care services; (2) the clinical
efficacy and cost-effectiveness of telemedicine and telehealth
applications; (3) the quality of telemedicine and telehealth services
delivered; and (4) the reasonable cost of telecommunications charges
incurred in practicing telemedicine and telehealth in rural,
frontier, and underserved areas.

(d) Expansion of Telehealth Services for Certain Medicare
Beneficiaries.– (1) In general.–Not later than January 1, 1999, the
Secretary shall submit a report to Congress that examines the
possibility of making payments from the Federal Supplementary Medical
Insurance Trust Fund under part B of title XVIII of the Social
Security Act (42 U.S.C. 1395j et seq.) for professional consultation
via telecommunications systems with such a physician or practitioner
furnishing a service for which payment may be made under such part to
a beneficiary described in paragraph (2), notwithstanding that the
individual physician or practitioner providing the professional
consultation is not at the same location as the physician or
practitioner furnishing the service to that beneficiary.

(2) Beneficiary described.–A beneficiary described in this
paragraph is a beneficiary under the medicare program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) who does
not reside in a rural area (as so defined) that is designated as a
health professional shortage area under section 332(a)(1)(A) of the
Public Health Service Act (42 U.S.C. 254e(a)(1)(A)), who is homebound
or nursing homebound, and for whom being transferred for health care
services imposes a serious hardship.

(3) Report.–The report described in paragraph (1) shall contain a
detailed statement of the potential costs and savings to the medicare
program of making the payments described in that paragraph using
various reimbursement schemes.

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SEC. 4207. INFORMATICS, TELEMEDICINE, AND EDUCATION DEMONSTRATION
PROJECT.

(a) Purpose and Authorization.– (1) In general.–Not later than 9
months after the date of enactment of this section, the Secretary of
Health and Human Services shall provide for a demonstration project
described in paragraph (2).

(2) Description of project.– (A) In general.–The demonstration
project described in this paragraph is a single demonstration project
to use eligible health care provider telemedicine networks to apply
high-capacity computing and advanced networks to improve primary care
(and prevent health care complications) to medicare beneficiaries
with diabetes mellitus who are residents of medically underserved
rural areas or residents of medically underserved inner-city areas.

(B) Medically underserved defined.–As used in this paragraph, the
term medically underserved” has the meaning given such term in
section 330(b)(3) of the Public Health Service Act (42 U.S.C.
254b(b)(3)).

(3) Waiver.–The Secretary shall waive such provisions of title
XVIII of the Social Security Act as may be necessary to provide for
payment for services under the project in accordance with subsection
(d).

(4) Duration of project.–The project shall be conducted over a
4-year period.

(b) Objectives of Project.–The objectives of the project include
the following: (1) Improving patient access to and compliance with
appropriate care guidelines for individuals with diabetes mellitus
through direct telecommunications link with information networks in
order to improve patient quality-of-life and reduce overall health
care costs.

(2) Developing a curriculum to train health professionals
(particularly primary care health professionals) in the use of
medical informatics and telecommunications.

(3) Demonstrating the application of advanced technologies, such
as video-conferencing from a patient’s home, remote monitoring of a
patient’s medical condition, interventional informatics, and applying
individualized, automated care guidelines, to assist primary care
providers in assisting patients with diabetes in a home setting.

(4) Application of medical informatics to residents with limited
English language skills.

(5) Developing standards in the application of telemedicine and
medical informatics.

(6) Developing a model for the cost-effective delivery of primary
and related care both in a managed care environment and in a
fee-for-service environment.

(c) Eligible Health Care Provider Telemedicine Network Defined.–
For purposes of this section, the term eligible health care provider
telemedicine network” means a consortium that includes at least one
tertiary care hospital (but no more than 2 such hospitals), at least
one medical school, no more than 4 facilities in rural or urban
areas, and at least one regional telecommunications provider and that
meets the following requirements: (1) The consortium is located in an
area with a high concentration of medical schools and tertiary care
facilities in the United States and has appropriate arrangements
(within or outside the consortium) with such schools and facilities,
universities, and telecommunications providers, in order to conduct
the project.

(2) The consortium submits to the Secretary an application at such
time, in such manner, and containing such information as the
Secretary may require, including a description of the use to which
the consortium would apply any amounts received under the project and
the source and amount of non-Federal funds used in the project.

(3) The consortium guarantees that it will be responsible for
payment for all costs of the project that are not paid under this
section and that the maximum amount of payment that may be made to
the consortium under this section shall not exceed the amount
specified in subsection (d)(3).

(d) Coverage as Medicare Part B Services.– (1) In
general.–Subject to the succeeding provisions of this subsection,
services related to the treatment or management of (including
prevention of complications from) diabetes for medicare beneficiaries
furnished under the project shall be considered to be services
covered under part B of title XVIII of the Social Security Act.

(2) Payments.– (A) In general.–Subject to paragraph (3), payment
for such services shall be made at a rate of 50 percent of the costs
that are reasonable and related to the provision of such services. In
computing such costs, the Secretary shall include costs described in
subparagraph (B), but may not include costs described in subparagraph
(C).

(B) Costs that may be included.–The costs described in this
subparagraph are the permissible costs (as recognized by the
Secretary) for the following: (i) The acquisition of telemedicine
equipment for use in patients’ homes (but only in the case of
patients located in medically underserved areas).

(ii) Curriculum development and training of health professionals
in medical informatics and telemedicine.

(iii) Payment of telecommunications costs (including salaries and
maintenance of equipment), including costs of telecommunications
between patients’ homes and the eligible network and between the
network and other entities under the arrangements described in
subsection (c)(1).

(iv) Payments to practitioners and providers under the medicare
programs.

(C) Costs not included.–The costs described in this subparagraph
are costs for any of the following: (i) The purchase or installation
of transmission equipment (other than such equipment used by health
professionals to deliver medical informatics services under the
project).

(ii) The establishment or operation of a telecommunications common
carrier network.

(iii) Construction (except for minor renovations related to the
installation of reimbursable equipment) or the acquisition or
building of real property.

(3) Limitation.–The total amount of the payments that may be made
under this section shall not exceed $30,000,000 for the period of the
project (described in subsection (a)(4)).

(4) Limitation on cost-sharing.–The project may not impose cost
sharing on a medicare beneficiary for the receipt of services under
the project in excess of 20 percent of the costs that are reasonable
and related to the provision of such services.

(e) Reports.–The Secretary shall submit to the Committee on Ways
and Means and the Committee Commerce of the House of Representatives
and the Committee on Finance of the Senate interim reports on the
project and a final report on the project within 6 months after the
conclusion of the project. The final report shall include an
evaluation of the impact of the use of telemedicine and medical
informatics on improving access of medicare beneficiaries to health
care services, on reducing the costs of such services, and on
improving the quality of life of such beneficiaries.

(f) Definitions.–For purposes of this section: (1) Interventional
informatics.–The term interventional informatics” means using
information technology and virtual reality technology to intervene in
patient care.

(2) Medical informatics.–The term medical informatics” means the
storage, retrieval, and use of biomedical and related information for
problem solving and decision-making through computing and
communications technologies.

(3) Project.–The term project” means the demonstration project
under this section.

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