To amend part B of title XVIII of the Social Security Act to improve payments for physicians' services and other outpatient services furnished under the Medicare Program, and for other purposes.

Amends title XVIII (Medicare) of the Social Security Act (SSA) to revise updates for physicians' services for 2003 through 2005.Mandates that the Medicare Payment Advisory Commission submit to Congress a described report on the effect of refinements to the practice expense component of payments for physicians' services in the case of services for which there are no physician work relative value units, after the transition to a full resource-based payment system in 2002.Provides that, for purposes of payment under the physician fee schedule, for physicians' services furnished during 2004, in no case may the work geographic index otherwise calculated be less than 0.985.Amends SSA title XVIII to replace provisions under Medicare part B for a limited number of demonstration projects for competitive acquisition of items and services with provisions for a permanent program for the establishment of programs for competitive acquisition of described items and services, including provisions for a demonstration project for application of competitive acquisition to clinical diagnostic laboratory tests.Substitutes a new phase-in methodology for the ambulance fee schedule amount portion of the phase-in and lengthens the phase-in schedule, including in such methodology adjustment in payment for certain long trips.Extends the moratorium on application of the therapy caps for an additional two years.Modifies the limitation on copayment amount for hospital outpatient department services.Provides for coverage of an initial preventive physical examination.Increases the composite rate 1.2 percent for renal dialysis services furnished in 2004.Amends BIPA (sic) to specify that the prohibition on exceptions to the composite rate would not apply to pediatric facilities that, as of October 1, 2002, do not have an exception rate as of such date. Defines "pediatric facility" as a renal facility at least 50 percent of whose patients are individuals under 18 years of age.Amends SSA title XVIII to exclude payment for screening mammography and unilateral and bilateral diagnostic mammography under the system for hospital outpatient services.Provides that for diagnostic mammography performed on or after January 1, 2004, for which payment is made under the physician fee schedule, the Secretary, based on the most recent cost data available, shall provide for an appropriate adjustment in the payment amount for the technical component of the diagnostic mammography.