SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Promoting Integrity in Medicare Act 
of 2016'' or ``PIMA of 2016''.

SEC. 2. FINDINGS; PURPOSES.

    (a) Findings.--Congress finds the following:
            (1) Recent studies by the Government Accountability Office 
        (GAO) examining self-referral practices in advanced diagnostic 
        imaging and anatomic pathology determined that financial 
        incentives were the most likely cause of increases in self-
        referrals.
            (2) For advanced diagnostic imaging, GAO stated that 
        ``providers who self-referred made 400,000 more referrals for 
        advanced imaging services than they would have if they were not 
        self-referring'', at a cost of ``more than $100 million'' in 
        2010.
            (3) For anatomic pathology, GAO found that ``self-referring 
        providers likely referred over 918,000 more anatomic pathology 
        services'' than they would have if they were not self-
        referring, costing Medicare approximately $69,000,000 more in 
        2010 than if self-referral was not permitted.
            (4) For radiation oncology, GAO found that intensity 
        modulated radiation therapy (IMRT) utilization among self-
        referring groups increased by 356 percent, with overall 
        increases in IMRT utilization rates and spending due entirely 
        to services performed by limited-specialty groups. The GAO 
        concluded that ``the higher use of IMRT by self-referring 
        providers results in higher costs for Medicare and 
        beneficiaries. To the extent that treatment decisions are 
        driven by providers' financial interest and not by patient 
        preference, these increased costs are difficult to justify''.
            (5) For physical therapy, GAO found that ``in the year a 
        provider began to self-refer, physical therapy service 
        referrals increased at a higher rate relative to non-self-
        referring providers of the same specialty''.
            (6) Noting the rapid growth of services covered by the in-
        office ancillary services (IOAS) exception and evidence that 
        these services are sometimes furnished inappropriately by 
        referring physicians, the Medicare Payment Advisory Commission 
        (MedPAC) stated that physician self-referral of ancillary 
        services creates incentives to increase volume under Medicare's 
        current fee-for-service payment systems and the rapid volume 
        growth contributes to Medicare's rising financial burden on 
        taxpayers and beneficiaries.
            (7) The President's Fiscal Year 2017 Budget includes the 
        change to remove the four services: advanced diagnostic 
        imaging, anatomic pathology, radiation oncology, and physical 
        therapy from the IOAS exception to the Stark Law and cited the 
        change as generating a savings score of $4,980,000,000 over 10 
        years. The nonpartisan Congressional Budget Office's analysis 
        of the President's Fiscal Year 2017 Budget listed the change as 
        generating a savings of $3,300,000,000 over 10 years.
            (8) According to the Centers for Medicare & Medicaid 
        Services, a key rationale for the IOAS exception was to permit 
        physicians to provide ancillary services in their offices to 
        better inform diagnosis and treatment decisions at the time of 
        the patient's initial office visit.
            (9) It is necessary, therefore, to distinguish between 
        services and procedures that were intended to be covered by the 
        IOAS exception, such as routine clinical laboratory services or 
        simple x-rays that are provided during the patient's initial 
        office visit, and other health care services which were clearly 
        not envisioned to be covered by that exception because they 
        cannot be performed during the patient's initial office visit.
            (10) According to a 2010 Health Affairs study, less than 10 
        percent of CT, MRI, and Nuclear Medicine scans take place on 
        the same day as the initial patient office visit.
            (11) According to a 2012 Health Affairs study, urologists' 
        self-referrals for anatomic pathology services of biopsy 
        specimens is linked to increased use and volume billed along 
        with a lower detection of prostate cancer.
            (12) According to an October 2011 Laboratory Economics 
        report, there has been an increase in the number of anatomic 
        pathology specimen units billed to the Medicare part B program 
        from 2006 through 2010, specifically for CPT Code 88305, and 
        the rate of increase billed by physician offices for this 
        service is accelerating at a far greater pace than the rest of 
        the provider segments.
            (13) According to a 2013 American Academy of Dermatology 
        Pathology Billing paper, arrangements involving the split of 
        the technical and professional components of anatomic pathology 
        services among different providers may endanger patient safety 
        and undermine quality of care.
            (14) In November 2012, Bloomberg News released an 
        investigative report that scrutinized ordeals faced by 
        California prostate cancer patients treated by a urology clinic 
        that owns radiation therapy equipment. The report found that 
        physician self-referral resulted in a detrimental impact on 
        patient care and drove up health care costs in the Medicare 
        program. The Wall Street Journal, the Washington Post, and the 
        Baltimore Sun have also published investigations showing that 
        urology groups owning radiation therapy machines have 
        utilization rates that rise quickly and are well above national 
        norms for radiation therapy treatment of prostate cancer.
            (15) According to a 2010 MedPAC report, only 3 percent of 
        outpatient physical therapy services were provided on the same 
        day as an office visit, only 9 percent within 7 days of an 
        office visit, and only 14 percent within 14 days of an office 
        visit. These services are not integral to the physician's 
        initial diagnosis and do not improve patient convenience 
        because patients must return for physical therapy treatments.
            (16) Those services intended to be covered under the IOAS 
        exception are not affected by this legislation.
            (17) The exception to the ownership or investment 
        prohibition for rural providers in the ``Stark'' rule is not 
        affected by this legislation.
    (b) Purposes.--The purposes of this Act are the following:
            (1) Maintain the in-office ancillary services exception and 
        preserve its original intent by removing certain complex 
        services from the exception--specifically, advanced imaging, 
        anatomic pathology, radiation therapy, and physical therapy.
            (2) Protect patients from misaligned provider financial 
        incentives.
            (3) Protect Medicare resources by saving billions of 
        dollars.
            (4) Accomplish the purposes described in paragraphs (1), 
        (2), and (3) in a manner that does not alter the existing 
        exception to the ownership or investment prohibition for rural 
        providers.

SEC. 3. LIMITATION ON APPLICATION OF PHYSICIANS' SERVICES AND IN-OFFICE 
              ANCILLARY SERVICES EXCEPTIONS.

    (a) In General.--Section 1877(b) of the Social Security Act (42 
U.S.C. 1395nn(b)) is amended--
            (1) in paragraph (1), by inserting ``, other than specified 
        non-ancillary services,'' after ``section 1861(q))''; and
            (2) in paragraph (2), by inserting ``, specified non-
        ancillary services,'' after ``(excluding infusion pumps)''.
    (b) Increase of Civil Money Penalties.--Section 1877(g) of the 
Social Security Act (42 U.S.C. 1395nn(g)) is amended--
            (1) in paragraph (3), by inserting ``, unless such bill or 
        claim included a bill or claim for a specified non-ancillary 
        service, in which case the civil money penalty shall be not 
        more than $25,000 for each such service'' before the period at 
        the end of the first sentence; and
            (2) in paragraph (4), by inserting ``(or $150,000 if such 
        referrals are for specified non-ancillary services)'' after 
        ``$100,000''.
    (c) Enhanced Screening of Claims.--Section 1877(g) of the Social 
Security Act (42 U.S.C. 1395nn(g)) is further amended by adding at the 
end the following new paragraph:
            ``(7) Compliance review for specified non-ancillary 
        services.--
                    ``(A) In general.--Not later than 180 days after 
                the date of the enactment of this paragraph, the 
                Secretary, in consultation with the Inspector General 
                of the Department of Health and Human Services, shall 
                review compliance with subsection (a)(1) with respect 
                to referrals for specified non-ancillary services in 
                accordance with procedures established by the 
                Secretary.
                    ``(B) Factors in compliance review.--Such 
                procedures--
                            ``(i) shall, for purposes of targeting 
                        types of entities that the Secretary determines 
                        represent a high risk of noncompliance with 
                        subsection (a)(1) with respect to such billing 
                        for such specified non-ancillary services, 
                        apply different levels of review based on such 
                        type; and
                            ``(ii) may include prepayment reviews, 
                        claims audits, focused medical review, and 
                        computer algorithms designed to identify 
                        payment or billing anomalies.''.
    (d) Definition of Specified Non-Ancillary Services.--Section 
1877(h) of the Social Security Act (42 U.S.C. 1395nn(h)) is amended by 
adding at the end the following new paragraphs:
            ``(8) Specified non-ancillary services.--
                    ``(A) Subject to subparagraph (B), the term 
                `specified non-ancillary service' means the following:
                            ``(i) Anatomic pathology services, as 
                        defined by the Secretary and including the 
                        technical or professional component of the 
                        following:
                                    ``(I) Surgical pathology.
                                    ``(II) Cytopathology.
                                    ``(III) Hematology.
                                    ``(IV) Blood banking.
                                    ``(V) Pathology consultation and 
                                clinical laboratory interpretation 
                                services.
                            ``(ii) Radiation therapy services and 
                        supplies, as defined by the Secretary.
                            ``(iii) Advanced diagnostic imaging studies 
                        (as defined in section 1834(e)(1)(B)).
                            ``(iv) Physical therapy services (as 
                        described in paragraph (6)(B)).
                            ``(v) Any other service that the Secretary 
                        has determined is not usually provided and 
                        completed as part of the office visit to a 
                        physician's office in which the service is 
                        determined to be necessary.
                    ``(B) The term `specified non-ancillary service' 
                does not include the following:
                            ``(i) Any service that is furnished--
                                    ``(I) in an urban area (as defined 
                                in section 1886(d)(2)(D)) to an 
                                individual who resides in a rural area 
                                (as defined in such section); and
                                    ``(II) to such individual in its 
                                entirety on the same day as the day on 
                                which, with respect to the condition 
                                for which the service is furnished, the 
                                initial office visit of the individual 
                                for such condition occurs.
                            ``(ii) Any service that is furnished--
                                    ``(I) by a provider of services or 
                                supplier participating in an 
                                accountable care organization that 
                                participates in the shared savings 
                                program established under section 1899; 
                                and
                                    ``(II) to a Medicare fee-for-
                                service beneficiary (as defined in 
                                section 1899(h)(3)) assigned to such 
                                accountable care organization.
                            ``(iii) Any service that is furnished by a 
                        provider or supplier pursuant to the 
                        participation of the provider or supplier in a 
                        payment and service delivery model selected 
                        under section 1115A(a).
                            ``(iv) Any service that is provided by an 
                        integrated health care delivery system.
            ``(9) Integrated health care.--The term `integrated health 
        care delivery system' means a group practice, as defined by the 
        Secretary, that--
                    ``(A) consists of at least--
                            ``(i) primary care physicians who provide 
                        primary care services (as defined in section 
                        1842(i)(4)); and
                            ``(ii) seven or more different and distinct 
                        physician specialties (not including 
                        subspecialties) which are practiced by 
                        physicians who are board certified in the 
                        physician specialty associated with the 
                        services that they provide;
                    ``(B) is governed by a governing body that has made 
                a determination (and has documented such determination) 
                that the system is focused on--
                            ``(i) promoting accountability for the 
                        quality, cost, and overall care for individuals 
                        entitled to benefits under part A or enrolled 
                        in part B, including by managing and 
                        coordinating care for such individuals; and
                            ``(ii) encouraging investment in 
                        infrastructure and redesigned care processes 
                        for high quality and efficient service delivery 
                        for patients, including individuals described 
                        in clause (i); and
                    ``(C) meets, with respect to the program under this 
                title, such cost reduction and quality goals as the 
                Secretary determines appropriate.''.
    (e) Construction.--Nothing in this section (or the amendments made 
by this section) shall be construed to affect the authority of the 
Secretary of Health and Human Services to waive under section 1899 of 
the Social Security Act (42 U.S.C. 1395jjj) the requirements imposed 
under the provisions of this section (or such amendments) or to affect 
the authority of the Secretary to implement the provisions under 
section 1848(q) of such Act (42 U.S.C. 1395w-4(q)) (relating to the 
eligible professionals Merit-Based Incentive Payment System under the 
Medicare program) or section 1833(z) of such Act (42 U.S.C. 1395l(z)) 
(relating to incentive payments for participation in eligible 
alternative payment models under such program).
    (f) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after the first day of the 
first month beginning more than 12 months after the date of the 
enactment of this Act.

SEC. 4. CLARIFICATION OF CERTAIN ENTITIES SUBJECT TO STARK RULE AND 
              ANTI-MARKUP RULE.

    Section 1877(h) of the Social Security Act (42 U.S.C. 1395nn(h)) is 
further amended by adding at the end the following new paragraph:
            ``(9) Clarification of certain entities subject to anti-
        markup rule.--In applying this section, the term `entity' shall 
        include a physician's practice when it bills under this title 
        for the technical component or the professional component of a 
        specified non-ancillary service, including when such service is 
        billed in compliance with section 1842(n)(1).''.

SEC. 5. CLARIFICATION OF SUPERVISION OF TECHNICAL COMPONENT OF ANATOMIC 
              PATHOLOGY SERVICES.

    Section 1861(s)(17) of the Social Security Act (42 U.S.C. 
1395x(s)(17)) is amended--
            (1) by striking ``and'' at the end of subparagraph (A);
            (2) by redesignating subparagraph (B) as subparagraph (C); 
        and
            (3) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) with regard to the provision of the technical 
                component of anatomic pathology services, meets the 
                applicable supervision requirements for laboratories 
                certified in the subspecialty of histopathology, 
                pursuant to section 353 of the Public Health Service 
                Act; and''.

SEC. 6. EXEMPTION FROM BUDGET NEUTRALITY UNDER PHYSICIAN FEE SCHEDULE.

    Section 1848(c)(2)(B)(v) of the Social Security Act (42 U.S.C. 
1395w-4(c)(2)(B)(v)) is amended by adding at the end the following new 
subclause:
                                    ``(VIII) Changes to limitations on 
                                certain physician referrals.--Effective 
                                for fee schedules established beginning 
                                with 2017, reduced expenditures 
                                attributable to the Promoting Integrity 
                                in Medicare Act of 2016.''.
Promoting Integrity in Medicare Act of 2016 or PIMA of 2016 This bill amends title XVIII (Medicare) of the Social Security Act to: (1)&nbsp;expand&nbsp;Medicare's prohibition on physician self-referrals to include, with specified exceptions,&nbsp;certain advanced imaging, anatomic pathology, radiation therapy, and physical therapy services; and (2) establish increased civil monetary penalties for violations of the self-referral prohibition with respect to those services. The Centers for Medicare &amp; Medicaid Services shall conduct a&nbsp;compliance review&nbsp;with respect to such referrals.
PIMA of 2016