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SEC. 311. USE OF NATIONAL AVERAGE PAYMENT METHODOLOGY IN COMPUTING DIRECT GRADUATE MEDICAL EDUCATION (DGME) PAYMENTS.

Section 1886(h) (42 U.S.C. 1395ww(h)) is amended--

(1) by amending clause (i) of paragraph (3)(B) to read as follows:

`(i)(I) for a cost reporting period beginning before October 1, 2000, the hospital's approved FTE resident amount (determined under paragraph (2)) for that period;

`(II) for a cost reporting period beginning on or after October 1, 2000, and before October 1, 2003, the national average per resident amount determined under

paragraph (9) or, if greater, the sum of the hospital-specific percentage (as defined in subparagraph (E)) of the hospital's approved FTE resident amount (determined under paragraph (2)) for the period and the national percentage (as defined in such subparagraph) of the national average per resident amount determined under paragraph (9); and

`(III) for a cost reporting period beginning on or after October 1, 2003, the national average per resident amount determined under paragraph (9); and';

(2) in paragraph (3), by adding at the end the following new subparagraph:

`(E) TRANSITION TO NATIONAL AVERAGE PER RESIDENT PAYMENT SYSTEM- For purposes of subparagraph (B)(i)(II), for the cost reporting period of a hospital beginning--

`(i) during fiscal year 2001, the hospital-specific percentage is 75 percent and the national percentage is 25 percent;

`(ii) during fiscal year 2002, the hospital-specific percentage is 50 percent and the national percentage is 50 percent; and

`(iii) during fiscal year 2003, the hospital-specific percentage is 25 percent and the national percentage is 75 percent.'; and

(3) by adding at the end the following new paragraph:

`(7) NATIONAL AVERAGE PER RESIDENT AMOUNT- The national average per resident amount for a hospital for a cost reporting period beginning in 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 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 paragraph (2) 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);

`(ii) by dividing the wage-related portion by the factor applied under subsection (d)(3)(E) for discharges occurring during fiscal year 1999 for the hospital's area; and

`(iii) by adding the non-wage-related portion to the amount computed under clause (ii).

`(D) DETERMINATION OF NATIONAL AVERAGE- The Secretary shall compute a national average per resident amount equal to the average of the standardized per resident amounts computed under subparagraph (C) for such hospitals, with the amount for each hospital weighted by the average number of full-time equivalent residents at such hospital.

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