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

`(a) PAYMENTS- The Secretary shall make two payments under this section to each children's hospital for each of fiscal years 2000 and 2001, one for the direct expenses and the other for indirect expenses associated with operating approved graduate medical residency training programs.

`(b) AMOUNT OF PAYMENTS-

`(1) IN GENERAL- Subject to paragraph (2), the amounts payable under this section to a children's hospital for an approved graduate medical residency training program for a fiscal year are each of the following amounts:

`(A) DIRECT EXPENSE AMOUNT- The amount determined under subsection (c) for direct expenses associated with operating approved graduate medical residency training programs.

`(B) INDIRECT EXPENSE AMOUNT- The amount determined under subsection (d) for indirect expenses associated with the treatment of more severely ill patients and the additional costs relating to teaching residents in such programs.

`(2) CAPPED AMOUNT-

`(A) IN GENERAL- The total of the payments made to children's hospitals under paragraph (1)(A) or paragraph (1)(B) in a fiscal year shall not exceed the funds appropriated under paragraph (1) or (2), respectively, of subsection (f) for such payments for that fiscal year.

`(B) PRO RATA REDUCTIONS OF PAYMENTS FOR DIRECT EXPENSES- If the Secretary determines that the amount of funds appropriated under subsection (f)(1) for a fiscal year is insufficient to provide the total amount of payments otherwise due for such periods under paragraph (1)(A), the Secretary shall reduce the amounts so payable on a pro rata basis to reflect such shortfall.

`(c) AMOUNT OF PAYMENT FOR DIRECT GRADUATE MEDICAL EDUCATION-

`(1) IN GENERAL- The amount determined under this subsection for payments to a children's hospital for direct graduate expenses relating to approved graduate medical residency training programs for a fiscal year is equal to the product of--

`(A) the updated per resident amount for direct graduate medical education, as determined under paragraph (2); and

`(B) the average number of full-time equivalent residents in the hospital's graduate approved medical residency training programs (as determined under section 1886(h)(4) of the Social Security Act during the fiscal year.

`(2) UPDATED PER RESIDENT AMOUNT FOR DIRECT GRADUATE MEDICAL EDUCATION- The updated per resident amount for direct graduate medical education for a hospital for a fiscal year is an amount determined as follows:

`(A) DETERMINATION OF HOSPITAL SINGLE PER RESIDENT AMOUNT- The Secretary shall compute for each hospital operating an approved graduate medical education program (regardless of whether or not it is a children's hospital) a single per resident amount equal to the average (weighted by number of full-time equivalent residents) of the primary care per resident amount and the non-primary care per resident amount computed under section 1886(h)(2) of the Social Security Act for cost reporting periods ending during fiscal year 1997.

`(B) DETERMINATION OF WAGE AND NON-WAGE-RELATED PROPORTION OF THE SINGLE PER RESIDENT AMOUNT- The Secretary shall estimate the average proportion of the single per resident amounts computed under subparagraph (A) that is attributable to wages and wage-related costs.

`(C) STANDARDIZING PER RESIDENT AMOUNTS- The Secretary shall establish a standardized per resident amount for each such hospital--

`(i) by dividing the single per resident amount computed under subparagraph (A) into a wage-related portion and a non-wage-related portion by applying the proportion determined under subparagraph (B);

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