79–006 

115TH CONGRESS REPT. 115-479 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

STARK ADMINISTRATIVE SIMPLIFICATION ACT OF 2017 

DECEMBER 21, 2017.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. BRADY of Texas, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

[To accompany H.R. 3726] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 3726) to amend title XVIII of the Social Security Act to 

create alternative sanctions for technical noncompliance with the 

Stark rule under Medicare, and for other purposes, having considered the same, report favorably thereon with an amendment and 

recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 4 

A. Purpose and Summary ..................................................................... 4 

B. Background and Need for Legislation ............................................. 4 

C. Legislative History ............................................................................ 5 

II. EXPLANATION OF THE BILL ................................................................... 5 

A. Stark Administrative Simplification Act of 2017 ........................... 5 

III. VOTES OF THE COMMITTEE .................................................................... 6 

IV. BUDGET EFFECTS OF THE BILL ............................................................ 6 

A. Committee Estimate of Budgetary Effects ...................................... 6 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority .................................................................. 6 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 7 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 8 

A. Committee Oversight Findings and Recommendations ................. 8 

B. Statement of General Performance Goals and Objectives ............. 8 

C. Information Relating to Unfunded Mandates ................................ 8 

D. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 8 

E. Duplication of Federal Programs ..................................................... 8 

F. Disclosure of Directed Rule Makings .............................................. 9 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 9 

2 

VII. EXCHANGES OF LETTERS WITH ADDITIONAL COMMITTEES OF 

REFERRAL ................................................................................................. 29 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Stark Administrative Simplification Act of 2017’’. 

SEC. 2. ALTERNATIVE SANCTIONS FOR TECHNICAL NONCOMPLIANCE WITH STARK RULE 

UNDER MEDICARE. 

Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is amended by adding 

at the end the following new subsection: 

‘‘(j) SELF-DISCLOSURE PROTOCOLS.— 

‘‘(1) IN GENERAL.—Beginning one year after the date of the enactment of this 

subsection— 

‘‘(A) an entity or individual may voluntarily disclose a compensation arrangement with actual or potential inadvertent technical noncompliance 

with subsection (a)(1) (as defined in paragraph (3)(H)) pursuant to either 

the self-referral disclosure protocol (defined in paragraph (2)) or the alternative protocol for technical noncompliance under paragraph (3); 

‘‘(B) disclosures voluntarily withdrawn from the alternative protocol for 

technical noncompliance may be submitted to the self-referral disclosure 

protocol; and 

‘‘(C) an entity that, prior to the establishment of the alternative protocol 

for technical noncompliance, disclosed to the self-referral disclosure protocol 

a compensation arrangement that was in inadvertent technical noncompliance with subsection (a)(1), may elect , not later than one year after such 

alternative protocol is established, to withdraw such disclosure from the 

self-referral disclosure protocol and instead submit the disclosure to such 

alternative protocol. 

‘‘(2) SELF-REFERRAL DISCLOSURE PROTOCOL.—The term ‘self-referral disclosure 

protocol’ or ‘SRDP’ means the protocol specified in section 6409 of Public Law 

111–148. 

‘‘(3) ALTERNATIVE PROTOCOL FOR INADVERTANT TECHNICAL NONCOMPLIANCE.— 

‘‘(A) IN GENERAL.—The Secretary shall establish, not later than one year 

after the date of the enactment of this subsection, an alternative protocol 

for technical noncompliance (in this subsection referred to as the ‘APTN’) 

to enable entities to disclose arrangements that were previously in inadvertent technical noncompliance with subsection (a)(1) and, upon the Secretary’s acceptance of the disclosure, make payment of a civil monetary 

penalty. Payment of such civil monetary penalty for an arrangement shall 

resolve only overpayments due and owing as a result of such arrangement’s 

inadvertent technical noncompliance with subsection (a)(1). The provisions 

of section 6409 of Public Law 111–148 shall not apply to this subsection. 

‘‘(B) DISCLOSURE REQUIREMENTS.—Arrangements disclosed to the APTN 

must— 

‘‘(i) involve only inadvertent technical noncompliance with subsection 

(a)(1) that was ended by termination or expiration of the arrangement, 

or by action of the parties to the arrangement to resolve the technical 

noncompliance, prior to the date of submission of the disclosure to the 

APTN; 

‘‘(ii) be made in the form and manner specified by the Secretary on 

the public Internet website of the Centers for Medicare & Medicaid 

Services and include descriptions of— 

‘‘(I) the compensation arrangement that was in technical noncompliance with subsection (a)(1); 

‘‘(II) how and when the technical noncompliance with subsection 

(a)(1) was ended or the arrangement was otherwise terminated; 

and 

‘‘(III) how the remuneration paid under the compensation arrangement being disclosed was— 

‘‘(aa) consistent with the fair market value of the items and 

services that were provided under the compensation arrangement; and 

‘‘(bb) not determined in a manner that directly or indirectly 

takes into account the volume or value of referrals or other 

business generated between the parties; 

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‘‘(iii) include a form settlement agreement provided by the Secretary 

signed by the entity; and 

‘‘(iv) include a certification from the entity that, to the best of the entity’s knowledge, the information provided is truthful information and 

is based on a good faith effort to bring the matter to the Secretary’s 

attention. 

‘‘(C) ACCEPTANCE OR REJECTION OF DISCLOSURE BY THE SECRETARY.—The 

following rules shall apply to the acceptance or rejection of a disclosure 

under the APTN: 

‘‘(i) The Secretary shall accept or reject a complete, accurate, and 

timely disclosure. 

‘‘(ii) Upon receipt of a disclosure, the Secretary shall notify the disclosing party of such receipt. 

‘‘(iii) The Secretary may request additional information from the disclosing party. 

‘‘(iv) Upon acceptance by the Secretary, the Secretary shall notify the 

disclosing party in writing of such acceptance. 

‘‘(v) The disclosure shall be rejected if— 

‘‘(I) the disclosing party fails to furnish the additional information requested by the Secretary in such form and manner as the 

Secretary may specify; or 

‘‘(II) in the Secretary’s sole determination, the noncompliance 

disclosed did not meet the disclosure requirements specified in subparagraph (B). 

‘‘(vi) The disclosure shall be accepted if— 

‘‘(I) the Secretary has issued a written notice to the disclosing 

party that the disclosure is determined to satisfy the requirements 

for disclosures under this section; or 

‘‘(II) the disclosure is complete, accurate, and timely and satisfies 

each of the requirements for disclosures under this section, 180 calendar days have passed since notification of receipt by the Secretary of the disclosure, and the Secretary has not rejected the disclosure during that period. 

‘‘(vii) In determining whether to accept a disclosure, the Secretary 

may reasonably rely on the information and certifications included in 

the disclosure. 

‘‘(D) RULE FOR WITHDRAWAL OF DISCLOSURE.—Prior to acceptance or rejection of a disclosure by the Secretary, an entity may voluntarily withdraw 

such disclosure from the APTN. 

‘‘(E) CIVIL MONETARY PENALTIES PURSUANT TO THE ALTERNATIVE PROTOCOL FOR TECHNICAL NONCOMPLIANCE.— 

‘‘(i) IN GENERAL.—Subject to clause (ii), for each arrangement disclosed under this subsection and accepted under subparagraph (C), the 

Secretary shall impose a single civil monetary penalty of— 

‘‘(I) $5,000, in the case in which disclosure of the inadvertant 

technical noncompliance with subsection (a)(1) was submitted to 

the Secretary not later than the date that is one year after the initial date of inadvertent technical noncompliance with subsection 

(a)(1); or 

‘‘(II) $10,000, in the case in which the disclosure of the 

inadvertant technically noncompliance with subsection (a)(1) was 

submitted to the Secretary— 

‘‘(aa) after the date that is more than one year after the initial date of the entity’s inadvertent technical noncompliance 

with subsection (a)(1); and 

‘‘(bb) not after the date that is 3 years (or, in the case of a 

disclosure submitted after the 5th year for which this subsection applies, the date that is 2 years) from the initial date 

of the entity’s inadvertent technical noncompliance with subsection (a)(1). 

‘‘(ii) SPECIAL RULE FOR ENTITIES THAT DISCLOSED TO THE APTN AFTER

WITHDRAWING A DISCLOSURE FROM THE SRDP.—In the case of an entity 

that elects under paragraph (1)(C) to withdraw a disclosure from the 

self-referral disclosure protocol (as defined in paragraph (2)) and instead submit the disclosure to the APTN under this subsection, in determining the applicable civil monetary penalty under clause (i), the 

date of disclosure to the self-referral disclosure protocol shall be substituted for the date of disclosure to the APTN. 

4 

‘‘(F) RELATION TO ADVISORY OPINIONS.—The APTN shall be separate from 

the advisory opinion process set forth in regulations implementing subsection (g) of this section. 

‘‘(G) PUBLICATION ON INTERNET WEBSITE OF APTN INFORMATION.—Not 

later than one year after the date of the enactment of this subsection, the 

Secretary shall post information on the public Internet website of the Centers for Medicare & Medicaid Services to inform relevant stakeholders of 

how to disclose and make payment of a civil monetary penalty for inadvertent technical noncompliance with subsection (a)(1). 

‘‘(H) DEFINITIONS.—In this subsection: 

‘‘(i) TECHNICAL NONCOMPLIANCE.—The term ‘technical noncompliance 

with subsection (a)(1)’ means, with respect to a compensation arrangement, that— 

‘‘(I) the arrangement is not signed by one or more parties to the 

arrangement; 

‘‘(II) following the expiration of the arrangement, the arrangement was a holdover arrangement for a period longer than permitted in regulations issued by the Secretary; or 

‘‘(III) the contemporaneous written documentation evidencing the 

terms of the arrangement identifies the parties to the arrangement 

and the items, services, space, or equipment, as applicable, but is 

not sufficient to satisfy the writing requirement of an applicable 

exception. 

‘‘(ii) INADVERTENT.—The term ‘inadvertent’ means, with respect to a 

compensation arrangement that is in technical noncompliance with 

subsection (a)(1), that an entity that is a party to the compensation arrangement did not know or should not have known of the noncompliance. 

‘‘(I) ADMINISTRATION.—Chapter 35 of title 44, United States Code, shall 

not apply to this subsection. 

‘‘(J) IMPLEMENTATION.—Notwithstanding any other provision of law, the 

Secretary may implement the provisions of this paragraph by program instruction or otherwise.’’. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

The bill, H.R. 3726, the ‘‘Stark Administrative Simplification Act 

of 2017,’’ as ordered reported by the Committee on Ways and 

Means on September 13, 2017, would create an alternative pathway to resolve inadvertent technical violations of the ‘‘Stark Laws,’’ 

that prevent financial interests from interfering with clinical decisions. 

B. BACKGROUND AND NEED FOR LEGISLATION

On September 11, 2017, Representative Marchant (R–TX) and 

Representative Kind (D–WI) introduced H.R. 3726, legislation to 

create alternative sanctions for technical noncompliance with the 

physician self-referral laws, commonly known as the ‘‘Stark Laws’’ 

under Medicare. The Committee on Ways and Means received an 

additional referral for the bill because it includes Medicare provisions that fall within the jurisdiction of the Committee, including 

changes to relevant provisions of the Social Security Act (‘‘SSA’’). 

Section 1877 of the SSA, commonly referred to as the ‘‘Stark 

Laws,’’ prohibits physicians from referring Medicare beneficiaries 

to facilities in which they (or a close family member) have a financial stake and prohibits that facility from billing for Medicare services performed as a result of such referral. 

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C. LEGISLATIVE HISTORY

Background 

H.R. 3726 was introduced on September 11, 2017, and was referred to the Committee on Energy and Commerce and additionally 

to the Committee on Ways and Means. 

Committee hearings 

On June 8, 2017, the Committee held a hearing on The Department of Health and Human Services’ Fiscal Year 2018 Budget Request, in which topics such as the Stark Laws were discussed. 

On June 8, 2016, the Subcommittee on Health held a Member 

Day hearing on various proposals to make improvements to and 

strengthen the Medicare program for all beneficiaries. 

Committee action 

The Committee on Ways and Means marked up H.R. 3726, the 

Stark Administrative Simplification Act of 2017, on September 13, 

2017, and ordered the bill, as amended, favorably reported (with a 

quorum being present). 

Additionally, previously in the 115th Congress, the Committee on 

Ways and Means marked up H.R. 3178, the ‘‘Medicare Part B Improvement Act,’’ on July 13, 2017, which included provisions to improve the application of Stark Law rules. That bill was ordered, as 

amended, favorably reported (with a quorum being present). 

II. EXPLANATION OF THE BILL 

A. STARK ADMINISTRATIVE SIMPLIFICATION ACT OF 2017 

PRESENT LAW

Current law does not differentiate between unintentional, technical Stark violations like missing a signature, and intentional, 

substantial violations, such as hospital payments for physician 

services above fair-market value or an arrangement that induces 

referrals. 

REASONS FOR CHANGE

Concerns remain that currently inadvertent, technical violations 

are fined in the same ways as substantial violations. In fact, penalties for technical violations can run into the millions of dollars regardless of knowing, substantive fraudulent behavior or not. The 

purpose of the legislation is to allow those with inadvertent, technical violations to self-report and pay a standard fine to resolve the 

violation. 

EXPLANATION OF PROVISIONS

The legislation would create a pathway to resolve inadvertent, 

technical violations of the Stark Laws by allowing for the payment 

of civil monetary penalties (‘‘CMPs’’). Specifically, this section 

would establish a self-disclosure protocol whereby an entity or individual may voluntarily disclose inadvertent technical non-compliance under two pathways: (1) current law self-referral disclosure 

protocol; or (2) the new alternative protocol for technical noncompliance (‘‘APTN’’). 

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Entities would be able to report under the new APTN only if the 

violations were technical in nature, if the arrangements otherwise 

met the fair-market standards, and if the arrangements were not 

based on inducing referrals. Technical violations include violations 

related to a missing signature requirements, insufficient written 

documentation requirements, and the continuation of lease arrangements that have expired more than one year. Through the 

newly established APTN, entities would be able to pay a CMP to 

resolve the violation in the amount of $5,000 or $10,000, depending 

on whether the entity self-reported within one or three years. 

Participation in the APTN pathway would be available only for 

inadvertent actions that were ended prior to the date of submission 

of the disclosure to the APTN, and made public through CMS’ 

website, among other requirements. The legislation lays out parameters for acceptance or rejection of disclosures by the Secretary of 

Health and Human Services, including a determination within 180 

days of notice of receipt by the Secretary. 

EFFECTIVE DATE

The legislation becomes effective one year after the date of enactment. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 3726, the Stark Administrative Simplification 

Act of 2017, on September 13, 2017. 

The Chairman’s amendment in the nature of a substitute was 

adopted by a voice vote (with a quorum being present). 

The bill, H.R. 3726, was ordered favorably reported as amended 

by voice vote (with a quorum being present). 

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 3726, as reported. 

The Committee agrees with the estimate prepared by the Congressional Budget Office (CBO), which is included below. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee states 

further that the bill involves no new or increased tax expenditures. 

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C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, September 22, 2017. 

Hon. KEVIN BRADY, Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3726, the Stark Administrative Simplification Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Lara Robillard. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 3726—Stark Administrative Simplification Act of 2017 

H.R. 3726 would modify the process by which providers can disclose and resolve technical violations of the Medicare statute. In 

CBO’s judgment, the process envisioned in H.R. 3726 would be very 

similar to current law and would result in similar outcomes. As a 

result, CBO estimates that enacting H.R. 3726 would have no effect on the federal budget. 

Under current law, providers participating in Medicare may not 

refer beneficiaries to other providers in which they have a financial 

interest. Those statutory prohibitions are commonly called the 

Stark Law, after former Representative Pete Stark, who sponsored 

the original legislation, and certain exceptions are permitted. 

The Affordable Care Act mandated the development of a new 

process, the Self-Referral Disclosure Protocol (SDRP), through 

which providers who had violated the Stark law could disclose that 

violation and pay penalties. According to data from the Centers for 

Medicare and Medicaid Services, as of the end of calendar year 

2016, providers have settled 233 disclosures and paid $23 million 

in fines. 

H.R. 3726 would create an alternative to the SDRP for a small 

subset of violations and providers could choose between the SDRP 

and that new process. The alternative protocol would be limited to 

those technical violations involving paperwork issues or the extension of permitted arrangements for a longer period than permitted 

under current regulations. 

CBO expects that the amount of fines collected under the alternative protocol would probably be similar to the fines that will be 

collected under the SDRP. Therefore, CBO estimates that enacting 

H.R. 3726 would have no effect on the federal budget. 

Enacting H.R. 3726 would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. 

8 

CBO estimates that enacting H.R. 3726 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2028. H.R. 3726 contains no privatesector or intergovernmental mandates as defined in the Unfunded 

Mandates Reform Act and would impose no costs on state, local, or 

tribal governments. 

The CBO staff contact for this estimate is Lara Robillard. The estimate was approved by Theresa Gullo, Assistant Director for 

Budget Analysis. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee made findings and recommendations that are reflected in this report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill does 

not authorize funding, so no statement of general performance 

goals and objectives is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

D. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

E. DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

9 

F. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), the 

following statement is made concerning directed rule makings: 

The Committee advises that the bill requires no directed 

rulemakings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is show in roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

SOCIAL SECURITY ACT 

* * * * * * * 

TITLE XVIII—HEALTH INSURANCE FOR THE AGED AND 

DISABLED 

* * * * * * * 

PART E—MISCELLANEOUS PROVISIONS

* * * * * * * 

LIMITATION ON CERTAIN PHYSICIAN REFERRALS

SEC. 1877. (a) PROHIBITION OF CERTAIN REFERRALS.— (1) IN GENERAL.—Except as provided in subsection (b), if a 

physician (or an immediate family member of such physician) 

has a financial relationship with an entity specified in paragraph (2), then— 

(A) the physician may not make a referral to the entity 

for the furnishing of designated health services for which 

payment otherwise may be made under this title, and 

(B) the entity may not present or cause to be presented 

a claim under this title or bill to any individual, third 

party payor, or other entity for designated health services 

furnished pursuant to a referral prohibited under subparagraph (A). 

(2) FINANCIAL RELATIONSHIP SPECIFIED.—For purposes of this 

section, a financial relationship of a physician (or an immediate family member of such physician) with an entity specified 

in this paragraph is— 

(A) except as provided in subsections (c) and (d), an ownership or investment interest in the entity, or 

10 

(B) except as provided in subsection (e), a compensation 

arrangement (as defined in subsection (h)(1)) between the 

physician (or an immediate family member of such physician) and the entity. 

An ownership or investment interest described in subparagraph (A) may be through equity, debt, or other means and includes an interest in an entity that holds an ownership or investment interest in any entity providing the designated 

health service. 

(b) GENERAL EXCEPTIONS TO BOTH OWNERSHIP AND COMPENSA- TION ARRANGEMENT PROHIBITIONS.—Subsection (a)(1) shall not 

apply in the following cases: 

(1) PHYSICIANS’ SERVICES.—In the case of physicians’ services 

(as defined in section 1861(q)) provided personally by (or under 

the personal supervision of) another physician in the same 

group practice (as defined in subsection (h)(4)) as the referring 

physician. 

(2) IN-OFFICE ANCILLARY SERVICES.—In the case of services 

(other than durable medical equipment (excluding infusion 

pumps) and parenteral and enteral nutrients, equipment, and 

supplies)— 

(A) that are furnished— 

(i) 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 directly supervised by the physician 

or by another physician in the group practice, and 

(ii)(I) in a building in which the referring physician 

(or another physician who is a member of the same 

group practice) furnishes physicians’ services unrelated to the furnishing of designated health services, 

or 

(II) in the case of a referring physician who is a 

member of a group practice, in another building which 

is used by the group practice— 

(aa) for the provision of some or all of the 

group’s clinical laboratory services, or 

(bb) for the centralized provision of the group’s 

designated health services (other than clinical laboratory services), 

unless the Secretary determines other terms and conditions under which the provision of such services does 

not present a risk of program or patient abuse, and 

(B) that are billed by the physician performing or supervising the services, by a group practice of which such physician is a member under a billing number assigned to the 

group practice, or by an entity that is wholly owned by 

such physician or such group practice, 

if the ownership or investment interest in such services meets 

such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse. 

Such requirements shall, with respect to magnetic resonance 

imaging, computed tomography, positron emission tomography, 

and any other designated health services specified under subsection (h)(6)(D) that the Secretary determines appropriate, inVerDate Sep 11 2014 02:32 Dec 23, 2017 Jkt 079006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR479P1.XXX HR479P1
11 

clude a requirement that the referring physician inform the individual in writing at the time of the referral that the individual may obtain the services for which the individual is 

being referred from a person other than a person described in 

subparagraph (A)(i) and provide such individual with a written 

list of suppliers (as defined in section 1861(d)) who furnish 

such services in the area in which such individual resides. 

(3) PREPAID PLANS.—In the case of services furnished by an 

organization— 

(A) with a contract under section 1876 to an individual 

enrolled with the organization, 

(B) described in section 1833(a)(1)(A) to an individual 

enrolled with the organization, 

(C) receiving payments on a prepaid basis, under a demonstration project under section 402(a) of the Social Security Amendments of 1967 or under section 222(a) of the Social Security Amendments of 1972, to an individual enrolled with the organization, 

(D) that is a qualified health maintenance organization 

(within the meaning of section 1310(d) of the Public 

Health Service Act) to an individual enrolled with the organization, or 

(E) that is a Medicare+Choice organization under part C 

that is offering a coordinated care plan described in section 

1851(a)(2)(A) to an individual enrolled with the organization. 

(4) OTHER PERMISSIBLE EXCEPTIONS.—In the case of any 

other financial relationship which the Secretary determines, 

and specifies in regulations, does not pose a risk of program or 

patient abuse. 

(5) ELECTRONIC PRESCRIBING.—An exception established by 

regulation under section 1860D–3(e)(6). 

(c) GENERAL EXCEPTION RELATED ONLY TO OWNERSHIP OR INVESTMENT PROHIBITION FOR OWNERSHIP IN PUBLICLY TRADED SECURITIES AND MUTUAL FUNDS.—Ownership of the following shall 

not be considered to be an ownership or investment interest described in subsection (a)(2)(A): 

(1) Ownership of investment securities (including shares or 

bonds, debentures, notes, or other debt instruments) which 

may be purchased on terms generally available to the public 

and which are— 

(A)(i) securities listed on the New York Stock Exchange, 

the American Stock Exchange, or any regional exchange in 

which quotations are published on a daily basis, or foreign 

securities listed on a recognized foreign, national, or regional exchange in which quotations are published on a 

daily basis, or 

(ii) traded under an automated interdealer quotation 

system operated by the National Association of Securities 

Dealers, and 

(B) in a corporation that had, at the end of the corporation’s most recent fiscal year, or on average during the previous 3 fiscal years, stockholder equity exceeding 

$75,000,000. 

12 

(2) Ownership of shares in a regulated investment company 

as defined in section 851(a) of the Internal Revenue Code of 

1986, if such company had, at the end of the company’s most 

recent fiscal year, or on average during the previous 3 fiscal 

years, total assets exceeding $75,000,000. 

(d) ADDITIONAL EXCEPTIONS RELATED ONLY TO OWNERSHIP OR

INVESTMENT PROHIBITION.—The following, if not otherwise excepted under subsection (b), shall not be considered to be an ownership or investment interest described in subsection (a)(2)(A): 

(1) HOSPITALS IN PUERTO RICO.—In the case of designated 

health services provided by a hospital located in Puerto Rico. 

(2) RURAL PROVIDERS.—In the case of designated health services furnished in a rural area (as defined in section 

1886(d)(2)(D)) by an entity, if— 

(A) substantially all of the designated health services 

furnished by the entity are furnished to individuals residing in such a rural area; 

(B) effective for the 18-month period beginning on the 

date of the enactment of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003, the entity is 

not a specialty hospital (as defined in subsection (h)(7)); 

and 

(C) in the case where the entity is a hospital, the hospital meets the requirements of paragraph (3)(D). 

(3) HOSPITAL OWNERSHIP.—In the case of designated health 

services provided by a hospital (other than a hospital described 

in paragraph (1)) if— 

(A) the referring physician is authorized to perform services at the hospital; 

(B) effective for the 18-month period beginning on the 

date of the enactment of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003, the hospital 

is not a specialty hospital (as defined in subsection (h)(7)); 

(C) the ownership or investment interest is in the hospital itself (and not merely in a subdivision of the hospital); and 

(D) the hospital meets the requirements described in 

subsection (i)(1) not later than 18 months after the date of 

the enactment of this subparagraph. 

(e) EXCEPTIONS RELATING TO OTHER COMPENSATION ARRANGEMENTS.—The following shall not be considered to be a compensation arrangement described in subsection (a)(2)(B): 

(1) RENTAL OF OFFICE SPACE; RENTAL OF EQUIPMENT.— 

(A) OFFICE SPACE.—Payments made by a lessee to a lessor for the use of premises if— 

(i) the lease is set out in writing, signed by the parties, and specifies the premises covered by the lease, 

(ii) the space rented or leased does not exceed that 

which is reasonable and necessary for the legitimate 

business purposes of the lease or rental and is used 

exclusively by the lessee when being used by the lessee, except that the lessee may make payments for the 

use of space consisting of common areas if such payments do not exceed the lessee’s pro rata share of expenses for such space based upon the ratio of the 

13 

space used exclusively by the lessee to the total 

amount of space (other than common areas) occupied 

by all persons using such common areas, 

(iii) the lease provides for a term of rental or lease 

for at least 1 year, 

(iv) the rental charges over the term of the lease are 

set in advance, are consistent with fair market value, 

and are not determined in a manner that takes into 

account the volume or value of any referrals or other 

business generated between the parties, 

(v) the lease would be commercially reasonable even 

if no referrals were made between the parties, and 

(vi) the lease meets such other requirements as the 

Secretary may impose by regulation as needed to protect against program or patient abuse. 

(B) EQUIPMENT.—Payments made by a lessee of equipment to the lessor of the equipment for the use of the 

equipment if— 

(i) the lease is set out in writing, signed by the parties, and specifies the equipment covered by the lease, 

(ii) the equipment rented or leased does not exceed 

that which is reasonable and necessary for the legitimate business purposes of the lease or rental and is 

used exclusively by the lessee when being used by the 

lessee, 

(iii) the lease provides for a term of rental or lease 

of at least 1 year, 

(iv) the rental charges over the term of the lease are 

set in advance, are consistent with fair market value, 

and are not determined in a manner that takes into 

account the volume or value of any referrals or other 

business generated between the parties, 

(v) the lease would be commercially reasonable even 

if no referrals were made between the parties, and 

(vi) the lease meets such other requirements as the 

Secretary may impose by regulation as needed to protect against program or patient abuse. 

(2) BONA FIDE EMPLOYMENT RELATIONSHIPS.—Any amount 

paid by an employer to a physician (or an immediate family 

member of such physician) who has a bona fide employment relationship with the employer for the provision of services if— 

(A) the employment is for identifiable services, 

(B) the amount of the remuneration under the employment— 

(i) is consistent with the fair market value of the 

services, and 

(ii) is not determined in a manner that takes into 

account (directly or indirectly) the volume or value of 

any referrals by the referring physician, 

(C) the remuneration is provided pursuant to an agreement which would be commercially reasonable even if no 

referrals were made to the employer, and 

(D) the employment meets such other requirements as 

the Secretary may impose by regulation as needed to protect against program or patient abuse. 

14 

Subparagraph (B)(ii) shall not prohibit the payment of remuneration in the form of a productivity bonus based on services 

performed personally by the physician (or an immediate family 

member of such physician). 

(3) PERSONAL SERVICE ARRANGEMENTS.— (A) IN GENERAL.—Remuneration from an entity under an 

arrangement (including remuneration for specific physicians’ services furnished to a nonprofit blood center) if— 

(i) the arrangement is set out in writing, signed by 

the parties, and specifies the services covered by the 

arrangement, 

(ii) the arrangement covers all of the services to be 

provided by the physician (or an immediate family 

member of such physician) to the entity, 

(iii) the aggregate services contracted for do not exceed those that are reasonable and necessary for the 

legitimate business purposes of the arrangement, 

(iv) the term of the arrangement is for at least 1 

year, 

(v) the compensation to be paid over the term of the 

arrangement is set in advance, does not exceed fair 

market value, and except in the case of a physician incentive plan described in subparagraph (B), is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties, 

(vi) the services to be performed under the arrangement do not involve the counseling or promotion or a 

business arrangement or other activity that violates 

any State or Federal law, and 

(vii) the arrangement meets such other requirements as the Secretary may impose by regulation as 

needed to protect against program or patient abuse. 

(B) PHYSICIAN INCENTIVE PLAN EXCEPTION.— 

(i) IN GENERAL.—In the case of a physician incentive 

plan (as defined in clause (ii)) between a physician and 

an entity, the compensation may be determined in a 

manner (through a withhold, capitation, bonus, or otherwise) that takes into account directly or indirectly 

the volume or value of any referrals or other business 

generated between the parties, if the plan meets the 

following requirements: 

(I) No specific payment is made directly or indirectly under the plan to a physician or a physician 

group as an inducement to reduce or limit medically necessary services provided with respect to a 

specific individual enrolled with the entity. 

(II) In the case of a plan that places a physician 

or a physician group at substantial financial risk 

as determined by the Secretary pursuant to section 1876(i)(8)(A)(ii), the plan complies with any 

requirements the Secretary may impose pursuant 

to such section. 

(III) Upon request by the Secretary, the entity 

provides the Secretary with access to descriptive 

15 

information regarding the plan, in order to permit 

the Secretary to determine whether the plan is in 

compliance with the requirements of this clause. 

(ii) PHYSICIAN INCENTIVE PLAN DEFINED.—For purposes of this subparagraph, the term ‘‘physician incentive plan’’ means any compensation arrangement between an entity and a physician or physician group 

that may directly or indirectly have the effect of reducing or limiting services provided with respect to individuals enrolled with the entity. 

(4) REMUNERATION UNRELATED TO THE PROVISION OF DESIGNATED HEALTH SERVICES.—In the case of remuneration which 

is provided by a hospital to a physician if such remuneration 

does not relate to the provision of designated health services. 

(5) PHYSICIAN RECRUITMENT.—In the case of remuneration 

which is provided by a hospital to a physician to induce the 

physician to relocate to the geographic area served by the hospital in order to be a member of the medical staff of the hospital, if— 

(A) the physician is not required to refer patients to the 

hospital, 

(B) the amount of the remuneration under the arrangement is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician, and 

(C) the arrangement meets such other requirements as 

the Secretary may impose by regulation as needed to protect against program or patient abuse. 

(6) ISOLATED TRANSACTIONS.—In the case of an isolated financial transaction, such as a one-time sale of property or 

practice, if— 

(A) the requirements described in subparagraphs (B) and 

(C) of paragraph (2) are met with respect to the entity in 

the same manner as they apply to an employer, and 

(B) the transaction meets such other requirements as 

the Secretary may impose by regulation as needed to protect against program or patient abuse. 

(7) CERTAIN GROUP PRACTICE ARRANGEMENTS WITH A HOS- PITAL.— 

(A) In general.—An arrangement between a hospital and 

a group under which designated health services are provided by the group but are billed by the hospital if— 

(i) with respect to services provided to an inpatient 

of the hospital, the arrangement is pursuant to the 

provision of inpatient hospital services under section 

1861(b)(3), 

(ii) the arrangement began before December 19, 

1989, and has continued in effect without interruption 

since such date, 

(iii) with respect to the designated health services 

covered under the arrangement, substantially all of 

such services furnished to patients of the hospital are 

furnished by the group under the arrangement, 

(iv) the arrangement is pursuant to an agreement 

that is set out in writing and that specifies the servVerDate Sep 11 2014 02:32 Dec 23, 2017 Jkt 079006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6602 E:\HR\OC\HR479P1.XXX HR479P1
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ices to be provided by the parties and the compensation for services provided under the agreement, 

(v) the compensation paid over the term of the 

agreement is consistent with fair market value and 

the compensation per unit of services is fixed in advance and is not determined in a manner that takes 

into account the volume or value of any referrals or 

other business generated between the parties, 

(vi) the compensation is provided pursuant to an 

agreement which would be commercially reasonable 

even if no referrals were made to the entity, and 

(vii) the arrangement between the parties meets 

such other requirements as the Secretary may impose 

by regulation as needed to protect against program or 

patient abuse. 

(8) PAYMENTS BY A PHYSICIAN FOR ITEMS AND SERVICES.— 

Payments made by a physician— 

(A) to a laboratory in exchange for the provision of clinical laboratory services, or 

(B) to an entity as compensation for other items or services if the items or services are furnished at a price that 

is consistent with fair market value. 

(f) REPORTING REQUIREMENTS.—Each entity providing covered 

items or services for which payment may be made under this title 

shall provide the Secretary with the information concerning the entity’s ownership, investment, and compensation arrangements, including— 

(1) the covered items and services provided by the entity, 

and 

(2) the names and unique physician identification numbers 

of all physicians with an ownership or investment interest (as 

described in subsection (a)(2)(A)), or with a compensation arrangement (as described in subsection (a)(2)(B)), in the entity, 

or whose immediate relatives have such an ownership or investment interest or who have such a compensation relationship with the entity. 

Such information shall be provided in such form, manner, and at 

such times as the Secretary shall specify. The requirement of this 

subsection shall not apply to designated health services provided 

outside the United States or to entities which the Secretary determines provides services for which payment may be made under 

this title very infrequently. 

(g) SANCTIONS.— 

(1) DENIAL OF PAYMENT.—No payment may be made under 

this title for a designated health service which is provided in 

violation of subsection (a)(1). 

(2) REQUIRING REFUNDS FOR CERTAIN CLAIMS.—If a person 

collects any amounts that were billed in violation of subsection 

(a)(1), the person shall be liable to the individual for, and shall 

refund on a timely basis to the individual, any amounts so collected. 

(3) CIVIL MONEY PENALTY AND EXCLUSION FOR IMPROPER

CLAIMS.—Any person that presents or causes to be presented 

a bill or a claim for a service that such person knows or should 

know is for a service for which payment may not be made 

17 

under paragraph (1) or for which a refund has not been made 

under paragraph (2) shall be subject to a civil money penalty 

of not more than $15,000 for each such service. The provisions 

of section 1128A (other than the first sentence of subsection (a) 

and other than subsection (b)) shall apply to a civil money penalty under the previous sentence in the same manner as such 

provisions apply to a penalty or proceeding under section 

1128A(a). 

(4) CIVIL MONEY PENALTY AND EXCLUSION FOR CIRCUMVEN- TION SCHEMES.—Any physician or other entity that enters into 

an arrangement or scheme (such as a cross-referral arrangement) which the physician or entity knows 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 this section, shall be 

subject to a civil money penalty of not more than $100,000 for 

each such arrangement or scheme. The provisions of section 

1128A (other than the first sentence of subsection (a) and other 

than subsection (b)) shall apply to a civil money penalty under 

the previous sentence in the same manner as such provisions 

apply to a penalty or proceeding under section 1128A(a). 

(5) FAILURE TO REPORT INFORMATION.—Any person who is required, but fails, to meet a reporting requirement of subsection 

(f) is subject to a civil money penalty of not more than $10,000 

for each day for which reporting is required to have been 

made. The provisions of section 1128A (other than the first 

sentence of subsection (a) and other than subsection (b)) shall 

apply to a civil money penalty under the previous sentence in 

the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). 

(6) ADVISORY OPINIONS.— (A) IN GENERAL.—The Secretary shall issue written advisory opinions concerning whether a referral relating to 

designated health services (other than clinical laboratory 

services) is prohibited under this section. Each advisory 

opinion issued by the Secretary shall be binding as to the 

Secretary and the party or parties requesting the opinion. 

(B) APPLICATION OF CERTAIN RULES.—The Secretary 

shall, to the extent practicable, apply the rules under subsections (b)(3) and (b)(4) and take into account the regulations promulgated under subsection (b)(5) of section 1128D 

in the issuance of advisory opinions under this paragraph. 

(C) REGULATIONS.—In order to implement this paragraph in a timely manner, the Secretary may promulgate 

regulations that take effect on an interim basis, after notice and pending opportunity for public comment. 

(D) APPLICABILITY.—This paragraph shall apply to requests for advisory opinions made after the date which is 

90 days after the date of the enactment of this paragraph 

and before the close of the period described in section 

1128D(b)(6). 

(h) DEFINITIONS AND SPECIAL RULES.—For purposes of this section: 

(1) COMPENSATION ARRANGEMENT; REMUNERATION.—(A) The 

term ‘‘compensation arrangement’’ means any arrangement inVerDate Sep 11 2014 02:32 Dec 23, 2017 Jkt 079006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6602 E:\HR\OC\HR479P1.XXX HR479P1
18 

volving any remuneration between a physician (or an immediate family member of such physician) and an entity other 

than an arrangement involving only remuneration described in 

subparagraph (C). 

(B) The term ‘‘remuneration’’ includes any remuneration, directly or indirectly, overtly or covertly, in cash or in kind. 

(C) Remuneration described in this subparagraph is any remuneration consisting of any of the following: 

(i) The forgiveness of amounts owed for inaccurate tests 

or procedures, mistakenly performed tests or procedures, 

or the correction of minor billing errors. 

(ii) The provision of items, devices, or supplies that are 

used solely to— 

(I) collect, transport, process, or store specimens for 

the entity providing the item, device, or supply, or 

(II) order or communicate the results of tests or procedures for such entity. 

(iii) A payment made by an insurer or a self-insured 

plan to a physician to satisfy a claim, submitted on a fee 

for service basis, for the furnishing of health services by 

that physician to an individual who is covered by a policy 

with the insurer or by the self-insured plan, if— 

(I) the health services are not furnished, and the 

payment is not made, pursuant to a contract or other 

arrangement between the insurer or the plan and the 

physician, 

(II) the payment is made to the physician on behalf 

of the covered individual and would otherwise be made 

directly to such individual, 

(III) the amount of the payment is set in advance, 

does not exceed fair market value, and is not determined in a manner that takes into account directly or 

indirectly the volume or value of any referrals, and 

(IV) the payment meets such other requirements as 

the Secretary may impose by regulation as needed to 

protect against program or patient abuse. 

(2) EMPLOYEE.—An individual is considered to be ‘‘employed 

by’’ or an ‘‘employee’’ of an entity if the individual would be 

considered to be an employee of the entity under the usual 

common law rules applicable in determining the employer-employee relationship (as applied for purposes of section 

3121(d)(2) of the Internal Revenue Code of 1986). 

(3) FAIR MARKET VALUE.—The term ‘‘fair market value’’ 

means the value in arms length transactions, consistent with 

the general market value, and, with respect to rentals or 

leases, the value of rental property for general commercial purposes (not taking into account its intended use) and, in the 

case of a lease of space, not adjusted to reflect the additional 

value the prospective lessee or lessor would attribute to the 

proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee. 

(4) GROUP PRACTICE.— (A) DEFINITION OF GROUP PRACTICE.—The term ‘‘group 

practice’’ means a group of 2 or more physicians legally organized as a partnership, professional corporation, foundaVerDate Sep 11 2014 02:32 Dec 23, 2017 Jkt 079006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\HR479P1.XXX HR479P1
19 

tion, not-for-profit corporation, faculty practice plan, or 

similar association— 

(i) in which each physician who is a member of the 

group provides substantially the full range of services 

which the physician routinely provides, including medical care, consultation, diagnosis, or treatment, 

through the joint use of shared office space, facilities, 

equipment and personnel, 

(ii) for which substantially all of the services of the 

physicians who are members of the group are provided 

through the group and are billed under a billing number assigned to the group and amounts so received are 

treated as receipts of the group, 

(iii) in which the overhead expenses of and the income from the practice are distributed in accordance 

with methods previously determined, 

(iv) except as provided in subparagraph (B)(i), in 

which no physician who is a member of the group directly or indirectly receives compensation based on the 

volume or value of referrals by the physician, 

(v) in which members of the group personally conduct no less than 75 percent of the physician-patient 

encounters of the group practice, and 

(vi) which meets such other standards as the Secretary may impose by regulation. 

(B) SPECIAL RULES.— (i) PROFITS AND PRODUCTIVITY BONUSES.—A physician in a group practice may be paid a share of overall 

profits of the group, or a productivity bonus based on 

services personally performed or services incident to 

such personally performed services, so long as the 

share or bonus is not determined in any manner which 

is directly related to the volume or value of referrals 

by such physician. 

(ii) FACULTY PRACTICE PLANS.—In the case of a faculty practice plan associated with a hospital, institution of higher education, or medical school with an approved medical residency training program in which 

physician members may provide a variety of different 

specialty services and provide professional services 

both within and outside the group, as well as perform 

other tasks such as research, subparagraph (A) shall 

be applied only with respect to the services provided 

within the faculty practice plan. 

(5) REFERRAL; REFERRING PHYSICIAN.— 

(A) PHYSICIANS’ SERVICES.—Except as provided in subparagraph (C), in the case of an item or service for which 

payment may be made under part B, the request by a physician for the item or service, including the request by a 

physician for a consultation with another physician (and 

any test or procedure ordered by, or to be performed by (or 

under the supervision of) that other physician), constitutes 

a ‘‘referral’’ by a ‘‘referring physician’’. 

(B) OTHER ITEMS.—Except as provided in subparagraph 

(C), the request or establishment of a plan of care by a 

20 

physician which includes the provision of the designated 

health service constitutes a ‘‘referral’’ by a ‘‘referring physician’’. 

(C) CLARIFICATION RESPECTING CERTAIN SERVICES INTE- GRAL TO A CONSULTATION BY CERTAIN SPECIALISTS.—A request by a pathologist for clinical diagnostic laboratory 

tests and pathological examination services, a request by 

a radiologist for diagnostic radiology services, and a request by a radiation oncologist for radiation therapy, if 

such services are furnished by (or under the supervision 

of) such pathologist, radiologist, or radiation oncologist 

pursuant to a consultation requested by another physician 

does not constitute a ‘‘referral’’ by a ‘‘referring physician’’. 

(6) DESIGNATED HEALTH SERVICES.—The term ‘‘designated 

health services’’ means any of the following items or services: 

(A) Clinical laboratory services. 

(B) Physical therapy services. 

(C) Occupational therapy services. 

(D) Radiology services, including magnetic resonance imaging, computerized axial tomography scans, and 

ultrasound services. 

(E) Radiation therapy services and supplies. 

(F) Durable medical equipment and supplies. 

(G) Parenteral and enteral nutrients, equipment, and 

supplies. 

(H) Prosthetics, orthotics, and prosthetic devices and 

supplies. 

(I) Home health services. 

(J) Outpatient prescription drugs. 

(K) Inpatient and outpatient hospital services. 

(L) Outpatient speech-language pathology services. 

(7) SPECIALTY HOSPITAL.— 

(A) IN GENERAL.—For purposes of this section, except as 

provided in subparagraph (B), the term ‘‘specialty hospital’’ 

means a subsection (d) hospital (as defined in section 

1886(d)(1)(B)) that is primarily or exclusively engaged in 

the care and treatment of one of the following categories: 

(i) Patients with a cardiac condition. 

(ii) Patients with an orthopedic condition. 

(iii) Patients receiving a surgical procedure. 

(iv) Any other specialized category of services that 

the Secretary designates as inconsistent with the purpose of permitting physician ownership and investment interests in a hospital under this section. 

(B) EXCEPTION.—For purposes of this section, the term 

‘‘specialty hospital’’ does not include any hospital— 

(i) determined by the Secretary— 

(I) to be in operation before November 18, 2003; 

or 

(II) under development as of such date; 

(ii) for which the number of physician investors at 

any time on or after such date is no greater than the 

number of such investors as of such date; 

(iii) for which the type of categories described in 

subparagraph (A) at any time on or after such date is 

21 

no different than the type of such categories as of such 

date; 

(iv) for which any increase in the number of beds occurs only in the facilities on the main campus of the 

hospital and does not exceed 50 percent of the number 

of beds in the hospital as of November 18, 2003, or 5 

beds, whichever is greater; and 

(v) that meets such other requirements as the Secretary may specify. 

(i) REQUIREMENTS FOR HOSPITALS TO QUALIFY FOR RURAL PRO- VIDER AND HOSPITAL EXCEPTION TO OWNERSHIP OR INVESTMENT

PROHIBITION.— 

(1) REQUIREMENTS DESCRIBED.—For purposes of subsection 

(d)(3)(D), the requirements described in this paragraph for a 

hospital are as follows: 

(A) PROVIDER AGREEMENT.—The hospital had— 

(i) physician ownership or investment on December 

31, 2010; and 

(ii) a provider agreement under section 1866 in effect on such date. 

(B) LIMITATION ON EXPANSION OF FACILITY CAPACITY.— Except as provided in paragraph (3), the number of operating rooms, procedure rooms, and beds for which the hospital is licensed at any time on or after the date of the enactment of this subsection is no greater than the number 

of operating rooms, procedure rooms, and beds for which 

the hospital is licensed as of such date. 

(C) PREVENTING CONFLICTS OF INTEREST.— (i) The hospital submits to the Secretary an annual 

report containing a detailed description of— 

(I) the identity of each physician owner or investor and any other owners or investors of the hospital; and 

(II) the nature and extent of all ownership and 

investment interests in the hospital. 

(ii) The hospital has procedures in place to require 

that any referring physician owner or investor discloses to the patient being referred, by a time that permits the patient to make a meaningful decision regarding the receipt of care, as determined by the Secretary— 

(I) the ownership or investment interest, as applicable, of such referring physician in the hospital; and 

(II) if applicable, any such ownership or investment interest of the treating physician. 

(iii) The hospital does not condition any physician 

ownership or investment interests either directly or 

indirectly on the physician owner or investor making 

or influencing referrals to the hospital or otherwise 

generating business for the hospital. 

(iv) The hospital discloses the fact that the hospital 

is partially owned or invested in by physicians— 

(I) on any public website for the hospital; and 

(II) in any public advertising for the hospital. 

22 

(D) ENSURING BONA FIDE INVESTMENT.— 

(i) The percentage of the total value of the ownership or investment interests held in the hospital, or in 

an entity whose assets include the hospital, by physician owners or investors in the aggregate does not exceed such percentage as of the date of enactment of 

this subsection. 

(ii) Any ownership or investment interests that the 

hospital offers to a physician owner or investor are not 

offered on more favorable terms than the terms offered 

to a person who is not a physician owner or investor. 

(iii) The hospital (or any owner or investor in the 

hospital) does not directly or indirectly provide loans 

or financing for any investment in the hospital by a 

physician owner or investor. 

(iv) The hospital (or any owner or investor in the 

hospital) does not directly or indirectly guarantee a 

loan, make a payment toward a loan, or otherwise 

subsidize a loan, for any individual physician owner or 

investor or group of physician owners or investors that 

is related to acquiring any ownership or investment 

interest in the hospital. 

(v) Ownership or investment returns are distributed 

to each owner or investor in the hospital in an amount 

that is directly proportional to the ownership or investment interest of such owner or investor in the hospital. 

(vi) Physician owners and investors do not receive, 

directly or indirectly, any guaranteed receipt of or 

right to purchase other business interests related to 

the hospital, including the purchase or lease of any 

property under the control of other owners or investors 

in the hospital or located near the premises of the hospital. 

(vii) The hospital does not offer a physician owner or 

investor the opportunity to purchase or lease any 

property under the control of the hospital or any other 

owner or investor in the hospital on more favorable 

terms than the terms offered to an individual who is 

not a physician owner or investor. 

(E) PATIENT SAFETY.— 

(i) Insofar as the hospital admits a patient and does 

not have any physician available on the premises to 

provide services during all hours in which the hospital 

is providing services to such patient, before admitting 

the patient— 

(I) the hospital discloses such fact to a patient; 

and 

(II) following such disclosure, the hospital receives from the patient a signed acknowledgment 

that the patient understands such fact. 

(ii) The hospital has the capacity to— 

(I) provide assessment and initial treatment for 

patients; and 

23 

(II) refer and transfer patients to hospitals with 

the capability to treat the needs of the patient involved. 

(F) LIMITATION ON APPLICATION TO CERTAIN CONVERTED

FACILITIES.—The hospital was not converted from an ambulatory surgical center to a hospital on or after the date 

of enactment of this subsection. 

(2) PUBLICATION OF INFORMATION REPORTED.—The Secretary 

shall publish, and update on an annual basis, the information 

submitted by hospitals under paragraph (1)(C)(i) on the public 

Internet website of the Centers for Medicare & Medicaid Services. 

(3) EXCEPTION TO PROHIBITION ON EXPANSION OF FACILITY CAPACITY.— 

(A) PROCESS.— 

(i) ESTABLISHMENT.—The Secretary shall establish 

and implement a process under which a hospital that 

is an applicable hospital (as defined in subparagraph 

(E)) or is a high Medicaid facility described in subparagraph (F) may apply for an exception from the requirement under paragraph (1)(B). 

(ii) OPPORTUNITY FOR COMMUNITY INPUT.—The process under clause (i) shall provide individuals and entities in the community in which the applicable hospital 

applying for an exception is located with the opportunity to provide input with respect to the application. 

(iii) TIMING FOR IMPLEMENTATION.—The Secretary 

shall implement the process under clause (i) on February 1, 2012. 

(iv) REGULATIONS.—Not later than January 1, 2012, 

the Secretary shall promulgate regulations to carry 

out the process under clause (i). 

(B) FREQUENCY.—The process described in subparagraph 

(A) shall permit an applicable hospital to apply for an exception up to once every 2 years. 

(C) PERMITTED INCREASE.— (i) IN GENERAL.—Subject to clause (ii) and subparagraph (D), an applicable hospital granted an exception 

under the process described in subparagraph (A) may 

increase the number of operating rooms, procedure 

rooms, and beds for which the applicable hospital is licensed above the baseline number of operating rooms, 

procedure rooms, and beds of the applicable hospital 

(or, if the applicable hospital has been granted a previous exception under this paragraph, above the number of operating rooms, procedure rooms, and beds for 

which the hospital is licensed after the application of 

the most recent increase under such an exception). 

(ii) 100 PERCENT INCREASE LIMITATION.—The Secretary shall not permit an increase in the number of 

operating rooms, procedure rooms, and beds for which 

an applicable hospital is licensed under clause (i) to 

the extent such increase would result in the number 

of operating rooms, procedure rooms, and beds for 

which the applicable hospital is licensed exceeding 200 

24 

percent of the baseline number of operating rooms, 

procedure rooms, and beds of the applicable hospital. 

(iii) BASELINE NUMBER OF OPERATING ROOMS, PROCE- DURE ROOMS, AND BEDS.—In this paragraph, the term 

‘‘baseline number of operating rooms, procedure 

rooms, and beds’’ means the number of operating 

rooms, procedure rooms, and beds for which the applicable hospital is licensed as of the date of enactment 

of this subsection (or, in the case of a hospital that did 

not have a provider agreement in effect as of such date 

but does have such an agreement in effect on December 31, 2010, the effective date of such provider agreement). 

(D) INCREASE LIMITED TO FACILITIES ON THE MAIN CAMPUS OF THE HOSPITAL.—Any increase in the number of operating rooms, procedure rooms, and beds for which an applicable hospital is licensed pursuant to this paragraph 

may only occur in facilities on the main campus of the applicable hospital. 

(E) APPLICABLE HOSPITAL.—In this paragraph, the term 

‘‘applicable hospital’’ means a hospital— 

(i) that is located in a county in which the percentage increase in the population during the most recent 

5-year period (as of the date of the application under 

subparagraph (A)) is at least 150 percent of the percentage increase in the population growth of the State 

in which the hospital is located during that period, as 

estimated by Bureau of the Census; 

(ii) whose annual percent of total inpatient admissions that represent inpatient admissions under the 

program under title XIX is equal to or greater than 

the average percent with respect to such admissions 

for all hospitals located in the county in which the 

hospital is located; 

(iii) that does not discriminate against beneficiaries 

of Federal health care programs and does not permit 

physicians practicing at the hospital to discriminate 

against such beneficiaries; 

(iv) that is located in a State in which the average 

bed capacity in the State is less than the national average bed capacity; and 

(v) that has an average bed occupancy rate that is 

greater than the average bed occupancy rate in the 

State in which the hospital is located. 

(F) HIGH MEDICAID FACILITY DESCRIBED.—A high Medicaid facility described in this subparagraph is a hospital 

that— 

(i) is not the sole hospital in a county; 

(ii) with respect to each of the 3 most recent years 

for which data are available, has an annual percent of 

total inpatient admissions that represent inpatient admissions under title XIX that is estimated to be greater than such percent with respect to such admissions 

for any other hospital located in the county in which 

the hospital is located; and 

25 

(iii) meets the conditions described in subparagraph 

(E)(iii). 

(G) PROCEDURE ROOMS.—In this subsection, the term 

‘‘procedure rooms’’ includes rooms in which catheterizations, angiographies, angiograms, and endoscopies are performed, except such term shall not include emergency 

rooms or departments (exclusive of rooms in which catheterizations, angiographies, angiograms, and endoscopies 

are performed). 

(H) PUBLICATION OF FINAL DECISIONS.—Not later than 

60 days after receiving a complete application under this 

paragraph, the Secretary shall publish in the Federal Register the final decision with respect to such application. 

(I) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, 

or otherwise of the process under this paragraph (including the establishment of such process). 

(4) COLLECTION OF OWNERSHIP AND INVESTMENT INFORMATION.—For purposes of subparagraphs (A)(i) and (D)(i) of paragraph (1), the Secretary shall collect physician ownership and 

investment information for each hospital. 

(5) PHYSICIAN OWNER OR INVESTOR DEFINED.—For purposes 

of this subsection, the term ‘‘physician owner or investor’’ 

means a physician (or an immediate family member of such 

physician) with a direct or an indirect ownership or investment 

interest in the hospital. 

(6) CLARIFICATION.—Nothing in this subsection shall be construed as preventing the Secretary from revoking a hospital’s 

provider agreement if not in compliance with regulations implementing section 1866. 

(j) SELF-DISCLOSURE PROTOCOLS.— 

(1) IN GENERAL.—Beginning one year after the date of the enactment of this subsection— 

(A) an entity or individual may voluntarily disclose a 

compensation arrangement with actual or potential inadvertent technical noncompliance with subsection (a)(1) (as 

defined in paragraph (3)(H)) pursuant to either the self-referral disclosure protocol (defined in paragraph (2)) or the 

alternative protocol for technical noncompliance under 

paragraph (3); 

(B) disclosures voluntarily withdrawn from the alternative protocol for technical noncompliance may be submitted to the self-referral disclosure protocol; and 

(C) an entity that, prior to the establishment of the alternative protocol for technical noncompliance, disclosed to the 

self-referral disclosure protocol a compensation arrangement that was in inadvertent technical noncompliance with 

subsection (a)(1), may elect, not later than one year after 

such alternative protocol is established, to withdraw such 

disclosure from the self-referral disclosure protocol and instead submit the disclosure to such alternative protocol. 

(2) SELF-REFERRAL DISCLOSURE PROTOCOL.—The term ‘‘selfreferral disclosure protocol’’ or ‘‘SRDP’’ means the protocol specified in section 6409 of Public Law 111–148. 

26 

(3) ALTERNATIVE PROTOCOL FOR INADVERTANT TECHNICAL

NONCOMPLIANCE.— 

(A) IN GENERAL.—The Secretary shall establish, not later 

than one year after the date of the enactment of this subsection, an alternative protocol for technical noncompliance 

(in this subsection referred to as the ‘‘APTN’’) to enable entities to disclose arrangements that were previously in inadvertent technical noncompliance with subsection (a)(1) and, 

upon the Secretary’s acceptance of the disclosure, make payment of a civil monetary penalty. Payment of such civil 

monetary penalty for an arrangement shall resolve only 

overpayments due and owing as a result of such arrangement’s inadvertent technical noncompliance with subsection 

(a)(1). The provisions of section 6409 of Public Law 111– 

148 shall not apply to this subsection. 

(B) DISCLOSURE REQUIREMENTS.—Arrangements disclosed to the APTN must— 

(i) involve only inadvertent technical noncompliance 

with subsection (a)(1) that was ended by termination or 

expiration of the arrangement, or by action of the parties to the arrangement to resolve the technical noncompliance, prior to the date of submission of the disclosure to the APTN; 

(ii) be made in the form and manner specified by the 

Secretary on the public Internet website of the Centers 

for Medicare & Medicaid Services and include descriptions of— 

(I) the compensation arrangement that was in 

technical noncompliance with subsection (a)(1); 

(II) how and when the technical noncompliance 

with subsection (a)(1) was ended or the arrangement was otherwise terminated; and 

(III) how the remuneration paid under the compensation arrangement being disclosed was— 

(aa) consistent with the fair market value of 

the items and services that were provided 

under the compensation arrangement; and 

(bb) not determined in a manner that directly or indirectly takes into account the volume or value of referrals or other business 

generated between the parties; 

(iii) include a form settlement agreement provided by 

the Secretary signed by the entity; and 

(iv) include a certification from the entity that, to the 

best of the entity’s knowledge, the information provided 

is truthful information and is based on a good faith effort to bring the matter to the Secretary’s attention. 

(C) ACCEPTANCE OR REJECTION OF DISCLOSURE BY THE

SECRETARY.—The following rules shall apply to the acceptance or rejection of a disclosure under the APTN: 

(i) The Secretary shall accept or reject a complete, accurate, and timely disclosure. 

(ii) Upon receipt of a disclosure, the Secretary shall 

notify the disclosing party of such receipt. 

27 

(iii) The Secretary may request additional information from the disclosing party. 

(iv) Upon acceptance by the Secretary, the Secretary 

shall notify the disclosing party in writing of such acceptance. 

(v) The disclosure shall be rejected if— 

(I) the disclosing party fails to furnish the additional information requested by the Secretary in 

such form and manner as the Secretary may specify; or 

(II) in the Secretary’s sole determination, the 

noncompliance disclosed did not meet the disclosure requirements specified in subparagraph (B). 

(vi) The disclosure shall be accepted if— 

(I) the Secretary has issued a written notice to 

the disclosing party that the disclosure is determined to satisfy the requirements for disclosures 

under this section; or 

(II) the disclosure is complete, accurate, and 

timely and satisfies each of the requirements for 

disclosures under this section, 180 calendar days 

have passed since notification of receipt by the Secretary of the disclosure, and the Secretary has not 

rejected the disclosure during that period. 

(vii) In determining whether to accept a disclosure, 

the Secretary may reasonably rely on the information 

and certifications included in the disclosure. 

(D) RULE FOR WITHDRAWAL OF DISCLOSURE.—Prior to acceptance or rejection of a disclosure by the Secretary, an entity may voluntarily withdraw such disclosure from the 

APTN. 

(E) CIVIL MONETARY PENALTIES PURSUANT TO THE ALTERNATIVE PROTOCOL FOR TECHNICAL NONCOMPLIANCE.— 

(i) IN GENERAL.—Subject to clause (ii), for each arrangement disclosed under this subsection and accepted under subparagraph (C), the Secretary shall impose 

a single civil monetary penalty of— 

(I) $5,000, in the case in which disclosure of the 

inadvertant technical noncompliance with subsection (a)(1) was submitted to the Secretary not 

later than the date that is one year after the initial 

date of inadvertent technical noncompliance with 

subsection (a)(1); or 

(II) $10,000, in the case in which the disclosure 

of the inadvertant technically noncompliance with 

subsection (a)(1) was submitted to the Secretary— 

(aa) after the date that is more than one 

year after the initial date of the entity’s inadvertent technical noncompliance with subsection (a)(1); and 

(bb) not after the date that is 3 years (or, in 

the case of a disclosure submitted after the 5th 

year for which this subsection applies, the date 

that is 2 years) from the initial date of the enVerDate Sep 11 2014 02:32 Dec 23, 2017 Jkt 079006 PO 00000 Frm 00027 Fmt 6659 Sfmt 6603 E:\HR\OC\HR479P1.XXX HR479P1
28 

tity’s inadvertent technical noncompliance 

with subsection (a)(1). 

(ii) SPECIAL RULE FOR ENTITIES THAT DISCLOSED TO

THE APTN AFTER WITHDRAWING A DISCLOSURE FROM

THE SRDP.—In the case of an entity that elects under 

paragraph (1)(C) to withdraw a disclosure from the 

self-referral disclosure protocol (as defined in paragraph (2)) and instead submit the disclosure to the 

APTN under this subsection, in determining the applicable civil monetary penalty under clause (i), the date 

of disclosure to the self-referral disclosure protocol 

shall be substituted for the date of disclosure to the 

APTN. 

(F) RELATION TO ADVISORY OPINIONS.—The APTN shall 

be separate from the advisory opinion process set forth in 

regulations implementing subsection (g) of this section. 

(G) PUBLICATION ON INTERNET WEBSITE OF APTN INFORMATION.—Not later than one year after the date of the enactment of this subsection, the Secretary shall post information on the public Internet website of the Centers for Medicare & Medicaid Services to inform relevant stakeholders of 

how to disclose and make payment of a civil monetary penalty for inadvertent technical noncompliance with subsection (a)(1). 

(H) DEFINITIONS.—In this subsection: 

(i) TECHNICAL NONCOMPLIANCE.—The term ‘‘technical noncompliance with subsection (a)(1)’’ means, 

with respect to a compensation arrangement, that— 

(I) the arrangement is not signed by one or more 

parties to the arrangement; 

(II) following the expiration of the arrangement, 

the arrangement was a holdover arrangement for 

a period longer than permitted in regulations 

issued by the Secretary; or 

(III) the contemporaneous written documentation 

evidencing the terms of the arrangement identifies 

the parties to the arrangement and the items, services, space, or equipment, as applicable, but is not 

sufficient to satisfy the writing requirement of an 

applicable exception. 

(ii) INADVERTENT.—The term ‘‘inadvertent’’ means, 

with respect to a compensation arrangement that is in 

technical noncompliance with subsection (a)(1), that an 

entity that is a party to the compensation arrangement 

did not know or should not have known of the noncompliance. 

(I) ADMINISTRATION.—Chapter 35 of title 44, United 

States Code, shall not apply to this subsection. 

(J) IMPLEMENTATION.—Notwithstanding any other provision of law, the Secretary may implement the provisions of 

this paragraph by program instruction or otherwise. 

* * * * * * * 

29 


Insert folio 39 here HR479P1.001

VII. EXCHANGES OF LETTERS WITH ADDITIONAL 

COMMITTEES OF REFERRAL 

KEVIN 8RAOY, TEXAS, l.tongrcss of the tinitcd ~nltcs 

H.~. Jlousc of Rcprcscntariucs COMMITTEE ON WAYS AND MEANS 

J 102 LONGWORTH HOUSE OFFICE BUILDING 

(202) 225-3625 

DAVIDSTEWAftT 

STAFf DIRECTOR 

The Honorable Greg Walden 

Chairman 

Committee on Energy and Commerce 

2125 Rayburn House Oftice Building 

Washington, DC 20515 

Dear Chairman Walden, 

'!:D.lshington, Bil: 20i1HHS 

http://waysandmeans.house.gov 

December 5. 2017 

!IRANOONCASEY 

MINOfUTYCHIEfOFSTAff 

Thank you for your letter concerning H.R. 3726, the "Stark Administrative Simplification Act of 

20 17," on which the Energy and Commerce Committee was granted the primary referral. 

I am most appreciative of your decision to waive formal consideration ofH.R. 3726. I acknowledge 

that although you waived formal consideration of the bill, the Energy and Commerce Committee is in 

no way waiving its jurisdiction over the subject matter contained in those provisions of tbe bill that fall 

within your Rule X jurisdiction. I would support your effort to seek appointment of an appropriate 

number of conferees on any House-Senate conference involving this legislation. 

I will include a copy of our letters in our committee report and in the Congressional Record should tbis 

legislation be considered on the House tloor. 

cc: The Honorable Paul Ryan, ake 

The Honorable Richard E. Neal 

The Honorable Frank Pallone 

Thomas J. Wickham, Jr.. Parliamentarian 
30 


Insert folio 40 here HR479P1.002

ONE HUNDRED FIFTEENTH CONGRESS 

Congrrss of tfJe illnttcb $tatcs 

J!)ousr ot l'\rprrsentatlbes 

COMMITTEE ON ENERGY AND COMMERCE 

December 5, 2017 

The Honorable Kevin Brady 

Chairman 

Co111111ittee on Ways and Means 

ll 02 Longworth House Oft1cc Building 

Washington, DC 20515 

Dear Chairman Brady: 

I write concerning flR. 3 726, Stark Administrative Simplification Act of20 17, which 

was referred to the Committee on Energy and Commerce. 

1 wanted to notify you that the Committee will forgo action on H.R. 3726 so that it may 

proceed expeditiously to the House floor for consideration. This is done with the understanding 

that the Committee· s jurisdictional interests over this and similar legislation are in no way 

diminished or altered. ln addition, the Committee reserves the right to seck conferees on H.R. 

3 726 and requests your support when such a request is made. 

I would appreciate yottr response confirming this understanding with respect to H.R. 

3726 and ask that a of our exchange of letters on this matter be included in the 

consideration of the bill on the House tloor. 

Sincerely. 

0 

JUiSE'Y