Medicare Physician Ownership Referral Reform Act of 1995

SECTION 1. SHORT TITLE; REFERENCES IN ACT.

    (a) Short Title.--This Act may be cited as the ``Medicare Physician 
Ownership Referral Reform Act of 1995''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.

SEC. 2. REPEAL OF PROHIBITIONS BASED ON COMPENSATION ARRANGEMENTS.

    (a) In General.--Section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is 
amended by striking ``is--'' and all that follows through ``equity,'' 
and inserting the following: ``is (except as provided in subsection 
(c)) an ownership or investment interest in the entity through 
equity,''.
    (b) Conforming Amendments.--Section 1877 (42 U.S.C. 1395nn) is 
amended as follows:
            (1) In subsection (b)--
                    (A) in the heading, by striking ``to Both Ownership 
                and Compensation Arrangement Provisions'' and inserting 
                ``Where Financial Relationship Exists''; and
                    (B) by redesignating paragraph (4) as paragraph 
                (7).
            (2) In subsection (c)--
                    (A) by amending the heading to read as follows: 
                ``Exception for Ownership or Investment Interest in 
                Publicly Traded Securities and Mutual Funds''; and
                    (B) in the matter preceding paragraph (1), by 
                striking ``subsection (a)(2)(A)'' and inserting 
                ``subsection (a)(2)''.
            (3) In subsection (d)--
                    (A) by striking the matter preceding paragraph (1);
                    (B) in paragraph (3), by striking ``paragraph (1)'' 
                and inserting ``paragraph (4)''; and
                    (C) by redesignating paragraphs (1), (2), and (3) 
                as paragraphs (4), (5), and (6), and by transferring 
                and inserting such paragraphs after paragraph (3) of 
                subsection (b).
            (4) By striking subsection (e).
            (5) In subsection (f)(2), as amended by section 152(a) of 
        the Social Security Act Amendments of 1994--
                    (A) in the matter preceding paragraph (1), by 
                striking ``ownership, investment, and compensation'' 
                and inserting ``ownership and investment'';
                    (B) in paragraph (2), by striking ``subsection 
                (a)(2)(A)'' and all that follows through ``subsection 
                (a)(2)(B)),'' and inserting ``subsection (a)(2),''; and
                    (C) in paragraph (2), by striking ``or who have 
                such a compensation relationship with the entity''.
            (6) In subsection (h)--
                    (A) by striking paragraphs (1), (2), and (3);
                    (B) in paragraph (4)(A), by striking clause (iv); 
                and
                    (C) in paragraph (4)(B), by striking ``rules.--'' 
                and all that follows through ``(ii) Faculty'' and 
                inserting ``rules for faculty.

SEC. 3. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO PROHIBITION.

    (a) In General.--Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)) is 
amended by striking subparagraphs (B) through (K) and inserting the 
following:
                    ``(B) Items and services furnished by a community 
                pharmacy (as defined in paragraph (1)).
                    ``(C) Magnetic resonance imaging and computerized 
                tomography services.
                    ``(D) Outpatient physical therapy services.''.
    (b) Community Pharmacy Defined.--Section 1877(h) (42 U.S.C. 
1395nn(h)), as amended by section 2(b)(6), is amended by inserting 
before paragraph (4) the following new paragraph:
            ``(1) Community pharmacy.--The term `community pharmacy' 
        means any entity licensed or certified to dispense outpatient 
        prescription drugs by the State in which the entity is located 
        (including an entity which dispenses such drugs by mail order), 
        but does not include such an entity which is owned and operated 
        by--
                    ``(A) a hospital;
                    ``(B) an ambulatory surgical center described in 
                section 1832(a)(2)(F)(i); or
                    ``(C) a prepaid plan described in subsection 
                (b)(3).''.
    (c) Conforming Amendments.--Section 1877(b)(2) (42 U.S.C. 
1395nn(b)(2)) is amended in the matter preceding subparagraph (A) by 
striking ``services'' and all that follows through ``supplies)--'' and 
inserting ``services--''.

SEC. 4. DELAY IN IMPLEMENTATION UNTIL PROMULGATION OF REGULATIONS.

    (a) In General.--Section 13562(b) of OBRA-1993 (42 U.S.C. 1395nn 
note) is amended--
            (1) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (3)''; and
            (2) by adding at the end the following new paragraph:
            ``(3) Promulgation of regulations.--Notwithstanding 
        paragraphs (1) and (2), the amendments made by this section 
        shall not apply to any referrals made before the effective date 
        of final regulations promulgated by the Secretary of Health and 
        Human Services to carry out such amendments.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect as if included in the enactment of OBRA-1993.

SEC. 5. EXCEPTIONS TO PROHIBITION.

    (a) Revisions to Exception for In-office Ancillary Services.--
            (1) Repeal of site-of-service requirement.--Section 
        1877(b)(2)(A) (42 U.S.C. 1395nn(b)(2)(A)) is amended to read as 
        follows:
                    ``(A) that are furnished personally by the 
                referring physician, personally by a physician who is a 
                member of the same group practice as the referring 
                physician, or personally by individuals who are under 
                the general supervision of the physician or of another 
                physician in the group practice, and''.
            (2) Clarification of treatment of physician owners of group 
        practice.--Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is 
        amended by striking ``physician or group practice'' and 
        inserting ``physician, such group practice, or the physician 
        owners of such group practice''.
            (3) Conforming amendment.--Section 1877(b)(2) (42 U.S.C. 
        1395nn(b)(2)) is amended by amending the heading to read as 
        follows: ``Ancillary services furnished personally or through 
        group practice.--''.
    (b) Clarification of Exception for Services Furnished in a Rural 
Area.--Paragraph (5) of section 1877(b) (42 U.S.C. 1395nn(b)), as 
transferred by section 2(b)(3)(C), is amended by striking 
``substantially all'' and inserting ``not less than 75 percent''.
    (c) Revision of Exception for Prepaid Plans.--
            (1) Expansion of exception for certain managed care 
        arrangements.--Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is 
        amended--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``organization--'' and inserting 
                ``organization, directly or through contractual 
                arrangements with other entities, to individuals 
                enrolled with the organization--'';
                    (B) by striking ``or'' at the end of subparagraph 
                (C);
                    (C) by striking the period at the end of 
                subparagraph (D) and inserting a comma; and
                    (D) by adding at the end the following new 
                subparagraphs:
                    ``(E) with a contract with a State to provide 
                services under the State plan under title XIX (in 
                accordance with section 1903(m)); or
                    ``(F) which meets State regulatory requirements 
                applicable to health maintenance organizations and 
                which--
                            ``(i) provides designated health services 
                        directly or through contractual arrangements 
                        with providers;
                            ``(ii) assumes financial risk for the 
                        provision of services or provides services on 
                        behalf of another individual or entity 
                        (including but not limited to a self-insured 
                        employer, indemnity plan, physician, or 
                        physician group) that assumes financial risk 
for the provision of the item or service; and
                            ``(iii) subjects the services to a program 
                        of utilization review offered by an 
                        organization described in a preceding 
                        subparagraph, an organization meeting State 
                        regulatory requirements applicable to 
                        utilization review, or an organization 
                        accredited to perform utilization review 
                        considered appropriate by the Secretary.''.
            (2) New exception for other capitated payments.--Section 
        1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
        2(b)(3)(C), is amended--
                    (A) by redesignating paragraphs (4) through (7) as 
                paragraphs (5) through (8); and
                    (B) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) Other capitated payments.--In the case of a 
        designated health service which is included in the services for 
        which a physician or physician group (including a preferred 
        provider organization) is paid only on a capitated basis by a 
        health plan or insurer pursuant to a written arrangement 
        between the plan or insurer and the physician or physician 
        group in which the physician or physician group assumes 
        financial risk for the furnishing of the service.''.
    (d) New Exception for Shared Facility Services.--
            (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
        amended by section 2(b)(3)(C) and by subsection (c)(2), is 
        amended--
                    (A) by redesignating paragraphs (5) through (8) as 
                paragraphs (6) through (9); and
                    (B) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) Shared facility services.--In the case of a 
        designated health service consisting of a shared facility 
        service of a shared facility--
                    ``(A) that is furnished--
                            ``(i) personally by the referring physician 
                        who is a shared facility physician or 
                        personally by an individual directly employed 
                        or under the general supervision of such a 
                        physician,
                            ``(ii) by a shared facility in a building 
                        in which the referring physician furnishes 
                        substantially all of the services of the 
                        physician that are unrelated to the furnishing 
                        of shared facility services, and
                            ``(iii) to a patient of a shared facility 
                        physician; and
                    ``(B) that is billed by the referring physician or 
                a group practice of which the physician is a member.''.
            (2) Definitions.--Section 1877(h) (42 U.S.C. 1395nn(h)), as 
        amended by section 2(b)(6) and section 3(b), is amended by 
        inserting after paragraph (1) the following new paragraph:
            ``(2) Shared facility related definitions.--
                    ``(A) Shared facility service.--The term `shared 
                facility service' means, with respect to a shared 
                facility, a designated health service furnished by the 
                facility to patients of shared facility physicians.
                    ``(B) Shared facility.--The term `shared facility' 
                means an entity that furnishes shared facility services 
                under a shared facility arrangement.
                    ``(C) Shared facility physician.--The term `shared 
                facility physician' means, with respect to a shared 
                facility, a physician (or a group practice of which the 
                physician is a member) who has a financial relationship 
                under a shared facility arrangement with the facility.
                    ``(D) Shared facility arrangement.--The term 
                `shared facility arrangement' means, with respect to 
                the provision of shared facility services in a 
                building, a financial arrangement--
                            ``(i) which is only between physicians who 
                        are providing services (unrelated to shared 
                        facility services) in the same building,
                            ``(ii) in which the overhead expenses of 
                        the facility are shared, in accordance with 
                        methods previously determined by the physicians 
                        in the arrangement, among the physicians in the 
                        arrangement, and
                            ``(iii) which, in the case of a 
                        corporation, is wholly owned and controlled by 
                        shared facility physicians.''.
    (e) New Exception for Services Furnished in Communities With No 
Alternative Providers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
amended by section 2(b)(3)(C), subsection (c)(2), and subsection 
(d)(1), is amended--
            (1) by redesignating paragraphs (6) through (9) as 
        paragraphs (7) through (10); and
            (2) by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) No alternative providers in area.--In the case of a 
        designated health service furnished in any area with respect to 
        which the Secretary determines that individuals residing in the 
        area do not have reasonable access to such a designated health 
        service for which subsection (a)(1) does not apply.''.
    (f) New Exception for Services Furnished in Ambulatory Surgical 
Centers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
2(b)(3)(C), subsection (c)(2), subsection (d)(1), and subsection 
(e)(1), is amended--
            (1) by redesignating paragraphs (7) through (10) as 
        paragraphs (8) through (11); and
            (2) by inserting after paragraph (6) the following new 
        paragraph:
            ``(7) Services furnished in ambulatory surgical centers.--
        In the case of a designated health service furnished in an 
        ambulatory surgical center described in section 
        1832(a)(2)(F)(i).''.
    (g) New Exception for Services Furnished in Renal Dialysis 
Facilities.--Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by 
section 2(b)(3)(C), subsection (c)(2), subsection (d)(1), subsection 
(e)(1), and subsection (f), is amended--
            (1) by redesignating paragraphs (8) through (11) as 
        paragraphs (9) through (12); and
            (2) by inserting after paragraph (7) the following new 
        paragraph:
            ``(8) Services furnished in renal dialysis facilities.--In 
        the case of a designated health service furnished in a renal 
        dialysis facility under section 1881.''.
    (h) New Exception for Services Furnished in a Hospice.--Section 
1877(b) (42 U.S.C. 1395nn(b)), as amended by section 2(b)(3)(C), 
subsection (c)(2), subsection (d)(1), subsection (e)(1), subsection 
(f), and subsection (g), is amended--
            (1) by redesignating paragraphs (9) through (12) as 
        paragraphs (10) through (13); and
            (2) by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Services furnished by a hospice program.--In the case 
        of a designated health service furnished by a hospice program 
        under section 1861(dd)(2).''.
    (i) New Exception for Services Furnished in a Comprehensive 
Outpatient Rehabilitation Facility.--Section 1877(b) (42 U.S.C. 
1395nn(b)), as amended by section 2(b)(3)(C), subsection (c)(2), 
subsection (d)(1), subsection (e)(1), subsection (f), subsection (g), 
and subsection (h), is amended--
            (1) by redesignating paragraphs (10) through (13) as 
        paragraphs (11) through (14); and
            (2) by inserting after paragraph (9) the following new 
        paragraph:
            ``(10) Services furnished in a comprehensive outpatient 
        rehabilitation facility.--In the case of a designated health 
        service furnished in a comprehensive outpatient rehabilitation 
        facility under section 1861(cc)(2).''.

SEC. 6. REPEAL OF REPORTING REQUIREMENTS.

    Section 1877 (42 U.S.C. 1395nn) is amended--
            (1) by striking subsection (f); and
            (2) by striking subsection (g)(5).

SEC. 7. PREEMPTION OF STATE LAW.

    Section 1877 (42 U.S.C. 1395nn) is amended by adding at the end the 
following new subsection:
    ``(i) Preemption of State Law.--This section preempts State law to 
the extent State law is inconsistent with this section.''.

SEC. 8. EFFECTIVE DATE.

    Except as provided in section 4(b), the amendments made by this Act 
shall apply to referrals made on or after August 15, 1995, without 
regard to whether or not regulations to carry out the amendments have 
been promulgated by such date.
                                 
HR 2390 IH--2

Summary: Medicare Physician Ownership Referral Reform Act of 1995 - Amends title XVIII (Medicare) of the Social Security Act to: (1) repeal the prohibition of physician referrals to certain entities with which the referring physician has a financial relationship if such relationship is based on compensation arrangements only, (2) eliminate reporting requirements under such provisions. (3) provide that such provisions preempt State law to the extent it is inconsistent. And (4) limit the designated health services subject to such prohibition to items and services furnished by a community pharmacy, magnetic resonance imaging and computerized tomography services, and outpatient physical therapy services. Revises exceptions to such prohibition against physician referrals to an entity in which the referring physician has an ownership or investment relationship to: (1) repeal the site-of-service requirement for excepted in-office ancillary services. (2) revise the exceptions for services furnished in a rural area and for pre-paid plans. And (3) add new exceptions for shared facility services, services furnished in communities with no alternative providers, in ambulatory surgical centers, in renal dialysis facilities, in a hospice, or in a comprehensive outpatient rehabilitation facility, and designated health services for which a physician or physician group is paid only on a capitated basis by a health plan or insurer. Amends the Omnibus Budget Reconciliation Act of 1993 to make its amendments to such physician referral limitations inapplicable until the Secretary of Health and Human Services promulgates final implementing regulations.