A bill to amend title XVIII of the Social Security Act to provide for payment of hospitals under the DRG prospective payment system on the basis of a blend of hospital-specific rates and a national rate, depending on the degree of variation of costs within specific diagnosis-related groups.

Amends title XVIII (Medicare) of the Social Security Act to direct the Secretary of Health and Human Services to compute, and recompute biannually, for each diagnosis-related group a coefficient of variation which reflects the relative statistical distribution, from the mean, of the costs of discharges within that group among different hospitals located throughout the United States. Provides for a prospective payment rate utilizing a blend of national and individual hospital rates based on such coefficient of variation. Eliminates the distinction between rural and urban hospitals recognized under the prospective payment system.