SEC. 1501. DISTRIBUTION OF UNUSED RESIDENCY POSITIONS.

[a] In General- Section- 1886[h] of the Social Security Act [42 U.S.C. 1395ww[h]] is amended--

[1] in paragraph [4][F][i], by striking 'paragraph [7]' and inserting 'paragraphs [7] and [8]';

[2] in paragraph [4][H][i], by striking 'paragraph [7]' and inserting 'paragraphs [7] and [8]';

[3] in paragraph [7][E], by inserting 'and paragraph [8]' after 'this paragraph'; and

[4] by adding at the end the following new paragraph:

'[8] ADDITIONAL REDISTRIBUTION OF UNUSED RESIDENCY POSITIONS-

'[A] REDUCTIONS IN LIMIT BASED ON UNUSED POSITIONS-

'[i] PROGRAMS SUBJECT TO REDUCTION- If a hospital's reference resident level [specified in clause [ii]] is less than the otherwise applicable resident limit [as defined in subparagraph [C][ii]], effective for portions of cost reporting periods occurring on or after July 1, 2011, the otherwise applicable resident limit shall be reduced by 90 percent of the difference between such otherwise applicable resident limit and such reference resident level.

'[ii] REFERENCE RESIDENT LEVEL-

'[I] IN GENERAL- Except as otherwise provided in a subsequent subclause, the reference resident level specified in this clause for a hospital is the highest resident level for any of the 3 most recent cost reporting periods [ending before the date of the enactment of this paragraph] of the hospital for which a cost report has been settled [or, if not, submitted [subject to audit]], as determined by the Secretary.

'[II] USE OF MOST RECENT ACCOUNTING PERIOD TO RECOGNIZE EXPANSION OF EXISTING PROGRAMS- If a hospital submits a timely request to increase its resident level due to an expansion, or planned expansion, of an existing residency training program that is not reflected on the most recent settled or submitted cost report, after audit and subject to the discretion of the Secretary, subject to subclause [IV], the reference resident level for such hospital is the resident level that includes the additional residents attributable to such expansion or establishment, as determined by the Secretary. The Secretary is authorized to determine an alternative reference resident level for a hospital that submitted to the Secretary a timely request, before the start of the 2009-2010 academic year, for an increase in its reference resident level due to a planned expansion.

'[III] SPECIAL PROVIDER AGREEMENT- In the case of a hospital described in paragraph [4][H][v], the reference resident level specified in this clause is the limitation applicable under subclause [I] of such paragraph.

'[IV] PREVIOUS REDISTRIBUTION- The reference resident level specified in this clause for a hospital shall be increased to the extent required to take into account an increase in resident positions made available to the hospital under paragraph [7][B] that are not otherwise taken into account under a previous subclause.

'[iii] AFFILIATION- The provisions of clause [i] shall be applied to hospitals which are members of the same affiliated group [as defined by the Secretary under paragraph [4][H][ii]] and to the extent the hospitals can demonstrate that they are filling any additional resident slots allocated to other hospitals through an affiliation agreement, the Secretary shall adjust the determination of available slots accordingly, or which the Secretary otherwise has permitted the resident positions [under section 402 of the Social Security Amendments of 1967] to be aggregated for purposes of applying the resident position limitations under this subsection.

'[B] REDISTRIBUTION-

'[i] IN GENERAL- The Secretary shall increase the otherwise applicable resident limit for each qualifying hospital that submits an application under this subparagraph by such number as the Secretary may approve for portions of cost reporting periods occurring on or after July 1, 2011. The estimated aggregate number of increases in the otherwise applicable resident limit under this subparagraph may not exceed the Secretary's estimate of the aggregate reduction in such limits attributable to subparagraph [A].

'[ii] REQUIREMENTS FOR QUALIFYING HOSPITALS- A hospital is not a qualifying hospital for purposes of this paragraph unless the following requirements are met:

'[I] MAINTENANCE OF PRIMARY CARE RESIDENT LEVEL- The hospital maintains the number of primary care residents at a level that is not less than the base level of primary care residents increased by the number of additional primary care resident positions provided to the hospital under this subparagraph. For purposes of this subparagraph, the 'base level of primary care residents' for a hospital is the level of such residents as of a base period [specified by the Secretary], determined without regard to whether such positions were in excess of the otherwise applicable resident limit for such period but taking into account the application of subclauses [II] and [III] of subparagraph [A][ii].

'[II] DEDICATED ASSIGNMENT OF ADDITIONAL RESIDENT POSITIONS TO PRIMARY CARE- The hospital assigns all such additional resident positions for primary care residents.

'[III] ACCREDITATION- The hospital's residency programs in primary care are fully accredited or, in the case of a residency training program not in operation as of the base year, the hospital is actively applying for such accreditation for the program for such additional resident positions [as determined by the Secretary].

'[iii] CONSIDERATIONS IN REDISTRIBUTION- In determining for which qualifying hospitals the increase in the otherwise applicable resident limit is provided under this subparagraph, the Secretary shall take into account the demonstrated likelihood of the hospital filling the positions within the first 3 cost reporting periods beginning on or after July 1, 2011, made available under this subparagraph, as determined by the Secretary.

'[iv] PRIORITY FOR CERTAIN HOSPITALS- In determining for which qualifying hospitals the increase in the otherwise applicable resident limit is provided under this subparagraph, the Secretary shall distribute the increase to qualifying hospitals based on the following criteria:

'[I] The Secretary shall give preference to hospitals that had a reduction in resident training positions under subparagraph [A].

'[II] The Secretary shall give preference to hospitals with 3-year primary care residency training programs, such as family practice and general internal medicine.

'[III] The Secretary shall give preference to hospitals insofar as they have in effect formal arrangements [as determined by the Secretary] that place greater emphasis upon training in Federally qualified health centers, rural health clinics, and other nonprovider settings, and to hospitals that receive additional payments under subsection [d][5][F] and emphasize training in an outpatient department.

'[IV] The Secretary shall give preference to hospitals with a number of positions [as of July 1, 2009] in excess of the otherwise applicable resident limit for such period.

'[V] The Secretary shall give preference to hospitals that place greater emphasis upon training in a health professional shortage area [designated under section 332 of the Public Health Service Act] or a health professional needs area [designated under section 2211 of such Act].

'[VI] The Secretary shall give preference to hospitals in States that have low resident-to-population ratios [including a greater preference for those States with lower resident-to-population ratios].

'[v] LIMITATION- In no case shall more than 20 full-time equivalent additional residency positions be made available under this subparagraph with respect to any hospital.

'[vi] APPLICATION OF PER RESIDENT AMOUNTS FOR PRIMARY CARE- With respect to additional residency positions in a hospital attributable to the increase provided under this subparagraph, the approved FTE resident amounts are deemed to be equal to the hospital per resident amounts for primary care and nonprimary care computed under paragraph [2][D] for that hospital.

'[vi] DISTRIBUTION- The Secretary shall distribute the increase in resident training positions to qualifying hospitals under this subparagraph not later than July 1, 2011.

'[C] RESIDENT LEVEL AND LIMIT DEFINED- In this paragraph:

'[i] The term 'resident level' has the meaning given such term in paragraph [7][C][i].

'[ii] The term 'otherwise applicable resident limit' means, with respect to a hospital, the limit otherwise applicable under subparagraphs [F][i] and [H] of paragraph [4] on the resident level for the hospital determined without regard to this paragraph but taking into account paragraph [7][A].

'[D] MAINTENANCE OF PRIMARY CARE RESIDENT LEVEL- In carrying out this paragraph, the Secretary shall require hospitals that receive additional resident positions under subparagraph [B]--

'[i] to maintain records, and periodically report to the Secretary, on the number of primary care residents in its residency training programs; and

'[ii] as a condition of payment for a cost reporting period under this subsection for such positions, to maintain the level of such positions at not less than the sum of--

'[I] the base level of primary care resident positions [as determined under subparagraph [B][ii][I]] before receiving such additional positions; and

'[II] the number of such additional positions.'.

[b] IME-

[1] IN GENERAL- Section- 1886[d][5][B][v] of the Social Security Act [42 U.S.C. 1395ww[d][5][B][v]], in the second sentence, is amended--

[A] by striking 'subsection [h][7]' and inserting 'subsections [h][7] and [h][8]'; and

[B] by striking 'it applies' and inserting 'they apply'.

[2] CONFORMING PROVISION- Section- 1886[d][5][B] of the Social Security Act [42 U.S.C. 1395ww[d][5][B]] is amended by adding at the end the following clause:

'[x] For discharges occurring on or after July 1, 2011, insofar as an additional payment amount under this subparagraph is attributable to resident positions distributed to a hospital under subsection [h][8][B], the indirect teaching adjustment factor shall be computed in the same manner as provided under clause [ii] with respect to such resident positions.'.

[c] Conforming Amendment- Section- 422[b][2] of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 [Public Law 108-173] is amended by striking 'section 1886[h][7]' and all that follows and inserting 'paragraphs [7] and [8] of subsection [h] of section 1886 of the Social Security Act'.