SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Promoting Integrity in Medicare Act 
of 2013''.

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 million more in 
        2010 than if self-referral was not permitted.
            (4) 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.
            (5) 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.
            (6) 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.
            (7) 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.
            (8) 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.
            (9) 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.
            (10) 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.
            (11) 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.
            (12) 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.
            (13) Those services intended to be covered under the IOAS 
        exception are not affected by this legislation.
            (14) 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, 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 paragraph:
            ``(8) Specified non-ancillary services.--The term 
        `specified non-ancillary service' means a service that the 
        Secretary has determined is not usually provided and completed 
        during an office visit to a physician's office in which the 
        service is determined to be necessary, and includes the 
        following:
                    ``(A) 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.
                    ``(B) Radiation therapy services and supplies, as 
                defined by the Secretary.
                    ``(C) Advanced diagnostic imaging studies (as 
                defined in section 1834(e)(1)(B)).
                    ``(D) Physical therapy services (as described in 
                paragraph (6)(B)).''.
    (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 the requirements 
imposed under the provisions of this section (or such amendments) under 
section 1899 of the Social Security Act (42 U.S.C. 1395jjj).
    (f) Effective Date.--The amendments made by subsections (a) and (b) 
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 Services 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 2014, reduced expenditures 
                                attributable to the Promoting Integrity 
                                in Medicare Act of 2013.''.
Promoting Integrity in Medicare Act of 2013 - Amends title XVIII (Medicare) of the Social Security Act (SSA) with respect to the general exceptions to both ownership and compensation arrangement prohibitions against physician self-referrals of Medicare patients to the entity with which a physician has a certain financial relationship. Removes from the in-office ancillary services (IOAS) exception to such prohibitions certain services the Secretary of Health and Human Services (HHS) determines are not usually provided and completed during the visit to a physician's office in which such a service is determined to be necessary (non-ancillary services). (Thus subjects such non-ancillary services to the prohibitions against physician self-referrals). Lists among specified non-ancillary services: (1) anatomic pathology services (including the technical or professional component of surgical pathology, cytopathology, hematology, blood banking, and pathology consultation and clinical laboratory interpretation services), (2) radiation therapy services and supplies, (3) advanced diagnostic imaging studies, and (4) physical therapy services. Increases from a maximum of $15,000 to a maximum of $25,000 the civil monetary penalty in the case of a bill or claim for such services whose presenter knows or should have known they are for a service for which payment may not be made.  Increases from a maximum of $100,000 to a maximum of $150,000 the civil monetary penalty for any circumventive arrangement or scheme which a physician or other entity enters into knowing (or should know) has a principal purpose of assuring referrals by the physician to a particular entity which, if the physician directly made referrals to such entity, would be in violation of SSA title XVIII. Directs the Secretary to review compliance with the self-referral prohibitions with respect to referrals for specified non-ancillary services in accordance with procedures established by the Secretary. States that, in applying the self-referral prohibitions, the term &quot;entity&quot; includes a physician's practice when it bills under Medicare for the technical component or the professional component of a specified non-ancillary service.
Promoting Integrity in Medicare Act of 2013