Title IV, SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS. (a) In General. (1) Limitations described. Part B of title XVIII, as amended by section 2003(a), is amended by inserting after section 1848 the following new section: ``limitations on payment for physicians' services furnished by high-cost hospital medical staffs ``Sec. 1849. (a) Services Subject to Reduction. ``(1) Determination of hospital-specific per admission relative value. Not later than October 1 of each year (beginning with 1997), the Secretary shall determine for each hospital ``(A) the hospital-specific per admission relative value under subsection (b)(2) for the following year; and ``(B)(i) whether such hospital-specific relative value is projected to exceed the allowable average per admission relative value applicable to the hospital for the following year under subsection (b)(1), and, if so, (ii) the hospital's projected excess relative value for the year under subsection (b)(3). ``(2) Reduction for services at hospitals exceeding allowable average per admission relative value. If the Secretary determines (under paragraph (1)) that a medical staff's hospital-specific per admission relative value for a year (beginning with 1998) is projected to exceed the allowable average per admission relative value applicable to the medical staff for the year, the Secretary shall reduce (in accordance with subsection (c)) the amount of payment otherwise determined under this part for each physicians' service furnished during the year to an inpatient of the hospital by an individual who is a member of the hospital's medical staff. ``(3) Timing of determination; notice to hospitals and carriers. Not later than October 1 of each year (beginning with 1997), the Secretary shall notify the medical executive committee of each hospital (as set forth in the Standards of the Joint Commission on the Accreditation of Health Organizations) of the determinations made with respect to the medical staff under paragraph (1). ``(b) Determination of Allowable Average Per Admission Relative Value and Hospital-Specific Per Admission Relative Values. ``(1) Allowable average per admission relative value. ``(A) Urban hospitals. In the case of a hospital located in an urban area, the allowable average per admission relative value established under this subsection ``(i) for 1998 and 1999, is equal to 125 percent of the median of the 1996 hospital-specific per admission relative values determined under paragraph (2) for all hospital medical staffs; and ``(ii) for 2000 and each succeeding year, is equal to 120 percent of the median of such relative values for all hospital medical staffs. ``(B) Rural hospitals. In the case of a hospital located in a rural area, the allowable average per admission relative value established under this subsection for 1998 and each succeeding year, is equal to 140 percent of the median of the 1996 hospital-specific per admission relative values determined under paragraph (2) for all hospital medical staffs. ``(2) Hospital-specific per admission relative value. ``(A) In general. The hospital-specific per admission relative value for a hospital (other than a teaching hospital), shall be equal to the average per admission relative value (as determined under section 1848(c)(2)) for each physician's service furnished to inpatients of the hospital by the hospital's medical staff (excluding interns and residents) during 1996, adjusted for variations in case-mix and disproportionate share status among hospitals (as determined by the Secretary under subparagraph (C)). ``(B) Special rule for teaching hospitals. The hospital-specific relative value for a teaching hospital shall be equal to the sum of ``(i) the average per admission relative value (as determined under section 1848(c)(2)) for each physician's service furnished to inpatients of the hospital by the hospital's medical staff (excluding interns and residents) during 1996, adjusted for variations in case-mix, disproportionate share status, and teaching status among hospitals (as determined by the Secretary under subparagraph (C)); and ``(ii) the equivalent per admission relative value (as determined under section 1848(c)(2)) for each physician's service furnished to inpatients of the hospital by interns and residents of the hospital during 1996, adjusted for variations in case-mix, disproportionate share status, and teaching status among hospitals (as determined by the Secretary under subparagraph (C)). The Secretary shall determine such equivalent relative value unit per admission for interns and residents based on the best available data for teaching hospitals and may make such adjustment in the aggregate. ``(C) Adjustment for teaching and disproportionate share hospitals. The Secretary shall adjust the allowable per admission relative values otherwise determined under this paragraph to take into account the needs of teaching hospitals and hospitals receiving additional payments under subparagraphs (F) and (G) of section 1886(d)(5). The adjustment for teaching status or disproportionate share shall not be less than zero. ``(3) Projected excess relative value defined. The `projected excess relative value' with respect to a hospital's medical staff for a year means the number of percentage points by which the Secretary determines (under subsection (a)(1)(B)) that the medical staff's hospital-specific per admission relative value (determined under paragraph (2)) will exceed the allowable average per admission relative value applicable to the hospital medical staff for the year (as determined under paragraph (1)). ``(c) Amount of Reduction. The amount of payment otherwise made under this part for a physician's service that is subject to a reduction under subsection (a) during a year shall be reduced 15 percent, in the case of a service furnished by a member of the medical staff of a hospital for which the Secretary determines under subsection (a)(1) that the hospital medical staff's projected relative value per admission exceeds the allowable average per admission relative value. ``(d) Reconciliation of Reductions Based on Hospital-Specific Relative Value Per Admission With Actual Relative Values. ``(1) Determination of actual average per admission relative value. Not later than October 1 of each year (beginning with 1999), the Secretary shall determine the actual average per admission relative value (as determined pursuant to section 1848(c)(2)) for the physicians' services furnished by members of a hospital's medical staff to inpatients of the hospital during the previous year, on the basis of claims for payment for such services that are submitted to the Secretary not later than 90 days after the last day of such previous year. The actual average per admission shall be adjusted by the appropriate case-mix, disproportionate share factor, and teaching factor for the hospital medical staff (as determined by the Secretary under subsection (b)(2)(C)). ``(2) Reconciliation with reductions taken. In the case of a hospital for which the payment amounts for physicians' services furnished by members of the hospital's medical staff to inpatients of the hospital were reduced under this section for a year ``(A) if the actual average per admission relative value for such hospital's medical staff during the year (as determined by the Secretary under paragraph (1)) did not exceed the allowable average per admission relative value applicable to the hospital's medical staff under subsection (b)(1) for the year, the Secretary shall reimburse the fiduciary agent for the medical staff by the amount by which payments for such services were reduced for the year under subsection (c); ``(B) if the actual average per admission relative value for such hospital's medical staff during the year is less than 10 percentage points above the allowable average per admission relative value applicable to the hospital's medical staff under subsection (b)(1) for the year, the Secretary shall reimburse the fiduciary agent for the medical staff, as a percent of the total allowed charges for physicians' services performed in such hospital (prior to the withhold), the difference between 10 percentage points and the actual number of percentage points that the staff exceeds the limit; ``(C) if the actual average per admission relative value for such hospital's medical staff during the year exceeded the allowable average per admission relative value applicable to the hospital's medical staff by 10 percentage points or more, none of the withhold is paid to the fiduciary agent for the medical staff. ``(3) Medical executive committee of a hospital. Each medical executive committee of a hospital whose medical staff is projected to exceed the allowable relative value per admission for a year, shall have one year from the date of notification that such medical staff is projected to exceed the allowable relative value per admission to designate a fiduciary agent for the medical staff to receive and disburse any appropriate withhold amount made by the carrier. ``(4) Alternative reimbursement to members of staff. At the request of a fiduciary agent for the medical staff, if the fiduciary agent for the medical staff is owed the reimbursement described in paragraph (2)(B) for excess reductions in payments during a year, the Secretary shall make such reimbursement to the members of the hospital's medical staff. ``(e) Definitions. In this section, the following definitions apply: ``(1) Medical staff. An individual furnishing a physician's service is considered to be on the medical staff of a hospital ``(A) if (in accordance with requirements for hospitals established by the Joint Commission on Accreditation of Health Organizations) ``(i) the individual is subject to bylaws, rules, and regulations established by the hospital to provide a framework for the self-governance of medical staff activities; ``(ii) subject to such bylaws, rules, and regulations, the individual has clinical privileges granted by the hospital's governing body; and ``(iii) under such clinical privileges, the individual may provide physicians' services independently within the scope of the individual's clinical privileges, or ``(B) if such physician provides at least one service to a Medicare beneficiary in such hospital. ``(2) Rural area; urban area. The terms `rural area' and `urban area' have the meaning given such terms under section 1886(d)(2)(D). ``(3) Teaching hospital. The term `teaching hospital' means a hospital which has a teaching program approved as specified in section 1861(b)(6).''. (2) Conforming amendments. (A) Section 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to reduction under section 1849)'' after ``1848(a)(1)''. (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w 4(a)(1)(B)) is amended by striking ``this subsection,'' and inserting ``this subsection and section 1849,''. (b) Requiring Physicians to Identify Hospital at Which Service Furnished. Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w 4(g)(4)(A)(i)) is amended by striking ``beneficiary,'' and inserting ``beneficiary (and, in the case of a service furnished to an inpatient of a hospital, report the hospital identification number on such claim form),''. (c) Effective Date. The amendments made by this section shall apply to services furnished on or after January 1, 1998.