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[House Report 107-288]
[From the U.S. Government Publishing Office]

107th Congress                                            Rept. 107-288
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================

 
         MEDICARE REGULATORY AND CONTRACTING REFORM ACT OF 2001

                                _______
                                

               November 13, 2001.--Ordered to be printed

                                _______
                                

   Mr. Thomas, from the Committee on Ways and Means,  submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2768]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 2768) to amend title XVIII of the Social Security 
Act to provide regulatory relief and contracting flexibility 
under the Medicare Program, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
 I. Introduction.....................................................22
        A. Purpose and Summary...................................    22
        B. Background and Need for Legislation...................    22
        C. Legislative History...................................    23
II. Explanation of Provisions........................................24
III.Votes of the Subcommittee........................................46

IV. Budget Effects of the Bill.......................................46
        A. Committee Estimate of Budget Effects..................    46
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures.........................................    46
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................    46
 V. Other Matters To Be Discussed Under the Rules of the House.......52
        A. Committee Oversight Findings and Recommendations......    52
        B. Summary of General Performance Goals and Objectives...    53
        C. Constitutional Authority Statement....................    53
VI. Changes in Existing Law Made by the Bill, as Reported............53

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; TABLE OF 
                    CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Medicare Regulatory 
and Contracting Reform Act of 2001''.
  (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.
  (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendments to Social Security Act; table of 
contents.
Sec. 2. Issuance of regulations.
Sec. 3. Compliance with changes in regulations and policies.
Sec. 4. Increased flexibility in medicare administration.
Sec. 5. Provider education and technical assistance.
Sec. 6. Small provider technical assistance demonstration program.
Sec. 7. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman.
Sec. 8. Provider appeals.
Sec. 9. Recovery of overpayments and prepayment review; enrollment of 
providers.
Sec. 10. Beneficiary outreach demonstration program.
Sec. 11. Policy development regarding evaluation and management (E & M) 
documentation guidelines.
Sec. 12. Improvement in oversight of technology and coverage.
Sec. 13. Miscellaneous provisions.

  (d) Construction.--Nothing in this Act shall be construed--
          (1) to compromise or affect existing legal authority for 
        addressing fraud or abuse, whether it be criminal prosecution, 
        civil enforcement, or administrative remedies, including under 
        sections 3729 through 3733 of title 31, United States Code 
        (known as the False Claims Act); or
          (2) to prevent or impede the Department of Health and Human 
        Services in any way from its ongoing efforts to eliminate 
        waste, fraud, and abuse in the medicare program.
Furthermore, the consolidation of medicare administrative contracting 
set forth in this Act does not constitute consolidation of the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund or reflect any position on that issue.
  (e) Use of Term Supplier in Medicare.--Section 1861 (42 U.S.C. 1395x) 
is amended by inserting after subsection (c) the following new 
subsection:

                               ``Supplier

  ``(d) The term `supplier' means, unless the context otherwise 
requires, a physician or other practitioner, a facility, or other 
entity (other than a provider of services) that furnishes items or 
services under this title.''.

SEC. 2. ISSUANCE OF REGULATIONS.

  (a) Consolidation of Promulgation to Once a Month.--
          (1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended 
        by adding at the end the following new subsection:
  ``(d)(1) The Secretary shall issue proposed or final (including 
interim final) regulations to carry out this title only on one business 
day of every month unless publication on another date is necessary to 
comply with requirements under law.
  ``(2) The Secretary shall coordinate issuance of new regulations 
relating to a category of provider of services or suppliers based on an 
analysis of the collective impact of regulatory changes on that 
category of providers or suppliers.''.
          (2) Report on publication of regulations on a quarterly 
        basis.--Not later than 3 years after the date of the enactment 
        of this Act, the Secretary of Health and Human Services shall 
        submit to Congress a report on the feasibility of requiring 
        that regulations described in section 1871(d) of the Social 
        Security Act only be promulgated on a single day every calendar 
        quarter.
          (3) Effective date.--The amendment made by paragraph (1) 
        shall apply to regulations promulgated on or after the date 
        that is 30 days after the date of the enactment of this Act.
  (b) Regular Timeline for Publication of Final Rules.--
          (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is 
        amended by adding at the end the following new paragraph:
  ``(3)(A) The Secretary, in consultation with the Director of the 
Office of Management and Budget, shall establish and publish a regular 
timeline for the publication of final regulations based on the previous 
publication of a proposed regulation or an interim final regulation.
  ``(B) Such timeline may vary among different regulations based on 
differences in the complexity of the regulation, the number and scope 
of comments received, and other relevant factors. If the Secretary 
intends to vary such timeline with respect to the publication of a 
final regulation, the Secretary shall cause to have published in the 
Federal Register notice of the different timeline by not later than the 
end of the comment period respecting such regulation. Such notice shall 
include a brief explanation of the justification for such variation.
  ``(C) In the case of interim final regulations, upon the expiration 
of the regular timeline established under this paragraph for the 
publication of a final regulation after opportunity for public comment, 
the interim final regulation shall not continue in effect unless the 
Secretary publishes a notice of continuation of the regulation that 
includes an explanation of why the regular timeline was not complied 
with. If such a notice is published, the regular timeline for 
publication of the final regulation shall be treated as having begun 
again as of the date of publication of the notice.
  ``(D) The Secretary shall annually submit to Congress a report that 
describes the instances in which the Secretary failed to publish a 
final regulation within theapplicable timeline under this paragraph and 
that provides an explanation for such failures.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act. The 
        Secretary of Health and Human Services shall provide for an 
        appropriate transition to take into account the backlog of 
        previously published interim final regulations.
  (c) Limitations on New Matter in Final Regulations.--
          (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as 
        amended by subsection (b), is further amended by adding at the 
        end the following new paragraph:
  ``(4) If the Secretary publishes notice of proposed rulemaking 
relating to a regulation (including an interim final regulation), 
insofar as such final regulation includes a provision that is not a 
logical outgrowth of such notice of proposed rulemaking, that provision 
shall be treated as a proposed regulation and shall not take effect 
until there is the further opportunity for public comment and a 
publication of the provision again as a final regulation.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to final regulations published on or after the date 
        of the enactment of this Act.

SEC. 3. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES.

  (a) No Retroactive Application of Substantive Changes; Timeline for 
Compliance With Substantive Changes After Notice.--Section 1871 (42 
U.S.C. 1395hh), as amended by section 2(a), is amended by adding at the 
end the following new subsection:
  ``(e)(1)(A) A substantive change in regulations, manual instructions, 
interpretative rules, statements of policy, or guidelines of general 
applicability under this title shall not be applied (by extrapolation 
or otherwise) retroactively to items and services furnished before the 
date the change was issued, unless the Secretary determines that such 
retroactive application would have a positive impact on beneficiaries 
or providers of services and suppliers or would be necessary to comply 
with statutory requirements.
  ``(B) A substantive change in regulations, manual instructions, 
interpretative rules, statements of policy, or guidelines of general 
applicability under this title shall not become effective until at 
least 30 days after the Secretary issues the substantive change.
  ``(C) No action shall be taken against a provider of services or 
supplier with respect to noncompliance with such a substantive change 
for items and services furnished before the effective date of such a 
change.''.
  (b) Reliance on Guidance.--Section 1871(e), as added by subsection 
(a), is further amended by adding at the end the following new 
paragraph:
  ``(2)(A) If--
          ``(i) a provider of services or supplier follows the written 
        guidance (which may be transmitted electronically) provided by 
        the Secretary or by a medicare contractor (as defined in 
        section 1889(g)) acting within the scope of the contractor's 
        contract authority, with respect to the furnishing of items or 
        services and submission of a claim for benefits for such items 
        or services with respect to such provider or supplier;
          ``(ii) the Secretary determines that the provider of services 
        or supplier has accurately presented the circumstances relating 
        to such items, services, and claim to the contractor in 
        writing; and
          ``(iii) the guidance was in error;
the provider of services or supplier shall not be subject to any 
sanction (including any penalty or requirement for repayment of any 
amount) if the provider of services or supplier reasonably relied on 
such guidance.
  ``(B) Subparagraph (A) shall not be construed as preventing the 
recoupment or repayment (without any additional penalty) relating to an 
overpayment insofar as the overpayment was solely the result of a 
clerical or technical operational error.''.
  (c) GAO Study on Advisory Opinion Authority.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study to determine the feasibility and 
        appropriateness of establishing in the Secretary of Health and 
        Human Services and the Secretary's contractors authority to 
        provide legally binding advisory opinions on appropriate 
        interpretation and application of regulations to carry out the 
        medicare program under title XVIII of the Social Security Act. 
        Such study shall examine the appropriate timeframe for issuing 
        such advisory opinions, as well as the need for additional 
        staff and funding to provide such opinions.
          (2) Report.--The Comptroller General shall submit to Congress 
        a report on the study conducted under paragraph (1) by not 
        later than January 1, 2003.

SEC. 4. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

  (a) Consolidation and Flexibility in Medicare Administration.--
          (1) In general.--Title XVIII is amended by inserting after 
        section 1874 the following new section:
          ``contracts with medicare administrative contractors
  ``Sec. 1874A. (a) Authority.--
          ``(1) Authority to enter into contracts.--The Secretary may 
        enter into contracts with any entity to serve as a medicare 
        administrative contractor with respect to the performance of 
        any or all of the functions described in paragraph (3) or parts 
        of those functions (or, to the extent provided in a contract, 
        to secure performance thereof by other entities).
          ``(2) Medicare administrative contractor defined.--For 
        purposes of this title and title XI--
                  ``(A) In general.--The term `medicare administrative 
                contractor' means an agency, organization, or other 
                person with a contract under this section.
                  ``(B) Appropriate medicare administrative 
                contractor.--With respect to the performance of a 
                particular function or activity in relation to an 
                individual entitled to benefits under part A or 
                enrolled under part B, or both, a specific provider of 
                services or supplier (or class of such providers of 
                services or suppliers), the `appropriate' medicare 
                administrative contractor is the medicare 
                administrative contractor that has a contract under 
                this section with respect to the performance of that 
                function or activity in relation to that individual, 
                provider of services or supplier or class of provider 
                of services or supplier.
          ``(3) Functions described.--The functions referred to in 
        paragraph (1) are payment functions, provider services 
        functions, and beneficiary services functions as follows:
                  ``(A) Determination of payment amounts.--Determining 
                (subject to the provisions of section 1878 and to such 
                review by the Secretary as may be provided for by the 
                contracts) the amount of the payments required pursuant 
                to this title to be made to providers of services, 
                suppliers and individuals.
                  ``(B) Making payments.--Making payments described in 
                subparagraph (A) (including receipt, disbursement, and 
                accounting for funds in making such payments).
                  ``(C) Beneficiary education and assistance.--
                Providing education and outreach to individuals 
                entitled to benefits under part A or enrolled under 
                part B, or both, and providing assistance to those 
                individuals with specific issues, concerns or problems.
                  ``(D) Provider consultative services.--Providing 
                consultative services to institutions, agencies, and 
                other persons to enable them to establish and maintain 
                fiscal records necessary for purposes of this title and 
                otherwise to qualify as providers of services or 
                suppliers.
                  ``(E) Communication with providers.--Communicating to 
                providers of services and suppliers any information or 
                instructions furnished to the medicare administrative 
                contractor by the Secretary and serving as a channel of 
                communication from providers of services and suppliers 
                to the Secretary.
                  ``(F) Provider education and technical assistance.--
                Performing the functions relating to provider 
                education, training, and technical assistance.
                  ``(G) Additional functions.--Performing such other 
                functions as are necessary to carry out the purposes of 
                this title.
          ``(4) Relationship to mip contracts.--
                  ``(A) Nonduplication of duties.--In entering into 
                contracts under this section, the Secretary shall 
                assure that functions of medicare administrative 
                contractors in carrying out activities under parts A 
                and B do not duplicate activities carried out under the 
                Medicare Integrity Program under section 1893. The 
                previous sentence shall not apply with respect to the 
                activity described in section 1893(b)(5) (relating to 
                prior authorization of certain items of durable medical 
                equipment under section 1834(a)(15)).
                  ``(B) Construction.--An entity shall not be treated 
                as a medicare administrative contractor merely by 
                reason of having entered into a contract with the 
                Secretary under section 1893.
  ``(b) Contracting Requirements.--
          ``(1) Use of competitive procedures.--
                  ``(A) In general.--Except as provided in laws with 
                general applicability to Federal acquisition and 
                procurement or in subparagraph (B), the Secretary shall 
                use competitive procedures when entering into contracts 
                with medicare administrative contractors under this 
                section, taking into account performance quality as 
                well as price and other factors.
                  ``(B) Renewal of contracts.--The Secretary may renew 
                a contract with a medicare administrative contractor 
                under this section from term to term without regard to 
                section 5 of title 41, United States Code, or any other 
                provision of law requiring competition, if the medicare 
                administrative contractor has met or exceeded the 
                performance requirements applicable with respect to the 
                contract and contractor, except that the Secretary 
                shall provide for the application of competitive 
                procedures under such a contract not less frequently 
                than once every five years.
                  ``(C) Transfer of functions.--Functions may be 
                transferred among medicare administrative contractors 
                consistent with the provisions of this paragraph. The 
                Secretary shall ensure that performance quality is 
                considered in such transfers.
                  ``(D) Incentives for quality.--The Secretary shall 
                provide incentives for medicare administrative 
                contractors to provide quality service and to promote 
                efficiency.
          ``(2) Compliance with requirements.--No contract under this 
        section shall be entered into with any medicare administrative 
        contractor unless the Secretary finds that such medicare 
        administrative contractor will perform its obligations under 
        the contract efficiently and effectively and will meet such 
        requirements as to financial responsibility, legal authority, 
        quality of services provided, and other matters as the 
        Secretary finds pertinent.
          ``(3) Development of specific performance requirements.--In 
        developing contract performance requirements, the Secretary 
        shall develop performance requirements to carry out the 
        specific requirements applicable under this title to a function 
        described in subsection (a)(3). In developing such 
        requirements, the Secretary may consult with providers of 
        services and suppliers and organizations and agencies 
        performing functions necessary to carry out the purposes of 
        this section with respect to such performance requirements.
          ``(4) Information requirements.--The Secretary shall not 
        enter into a contract with a medicare administrative contractor 
        under this section unless the contractor agrees--
                  ``(A) to furnish to the Secretary such timely 
                information and reports as the Secretary may find 
                necessary in performing his functions under this title; 
                and
                  ``(B) to maintain such records and afford such access 
                thereto as the Secretary finds necessary to assure the 
                correctness and verification of the information and 
                reports under subparagraph (A) and otherwise to carry 
                out the purposes of this title.
          ``(5) Surety bond.--A contract with a medicare administrative 
        contractor under this section may require the medicare 
        administrative contractor, and any of its officers or employees 
        certifying payments or disbursing funds pursuant to the 
        contract, or otherwise participating in carrying out the 
        contract, to give surety bond to the United States in such 
        amount as the Secretary may deem appropriate.
  ``(c) Terms and Conditions.--
          ``(1) In general.--A contract with any medicare 
        administrative contractor under this section may contain such 
        terms and conditions as the Secretary finds necessary or 
        appropriate and may provide for advances of funds to the 
        medicare administrative contractor for the making of payments 
        by it under subsection (a)(3)(B).
          ``(2) Prohibition on mandates for certain data collection.--
        The Secretary may not require, as a condition of entering into 
        a contract under this section, that the medicare administrative 
        contractor match data obtained other than in its activities 
        under this title with data used in the administration of this 
        title for purposes of identifying situations in which the 
        provisions of section 1862(b) may apply.
  ``(d) Limitation on Liability of Medicare Administrative Contractors 
and Certain Officers.--
          ``(1) Certifying officer.--No individual designated pursuant 
        to a contract under this section as a certifying officer shall, 
        in the absence of gross negligence or intent to defraud the 
        United States, be liable with respect to any payments certified 
        by the individual under this section.
          ``(2) Disbursing officer.--No disbursing officer shall, in 
        the absence of gross negligence or intent to defraud the United 
        States, be liable with respect to any payment by such officer 
        under this section if it was based upon an authorization (which 
        meets the applicable requirements for such internal controls 
        established by the Comptroller General) of a certifying officer 
        designated as provided in paragraph (1) of this subsection.
          ``(3) Liability of medicare administrative contractor.--A 
        medicare administrative contractor shall be liable to the 
        United States for a payment referred to in paragraph (1) or (2) 
        if, in connection with such payment, an individual referred to 
        in either such paragraph acted with gross negligence or intent 
        to defraud the United States.
          ``(4) Indemnification by secretary.--The Secretary shall make 
        payment to a medicare administrative contractor under contract 
        with the Secretary pursuant to this section, or to any member 
        or employee thereof, or to any person who furnishes legal 
        counsel or services to such medicare administrative contractor, 
        in an amount equal to the reasonable amount of the expenses 
        incurred, as determined by the Secretary, in connection with 
        the defense of any civil suit, action, or proceeding brought 
        against such medicare administrative contractor or person 
        related to the performance of any duty, function, or activity 
        under such contract, if due care was exercised by the 
        contractor or person in the performance of such duty, function, 
        or activity.''.
          (2) Consideration of incorporation of current law 
        standards.--In developing contract performance requirements 
        under section 1874A(b) of the Social Security Act, as inserted 
        by paragraph (1), the Secretary of Health and Human Services 
        shall consider inclusion of the performance standards described 
        in sections 1816(f)(2) of such Act (relating to timely 
        processing of reconsiderations and applications for exemptions) 
        and section 1842(b)(2)(B) of such Act (relating to timely 
        review of determinations and fair hearing requests), as such 
        sections were in effect before the date of the enactment of 
        this Act.
  (b) Conforming Amendments to Section 1816 (Relating to Fiscal 
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
          (1) The heading is amended to read as follows:
        ``provisions relating to the administration of part a''.
          (2) Subsection (a) is amended to read as follows:
  ``(a) The administration of this part shall be conducted through 
contracts with medicare administrative contractors under section 
1874A.''.
          (3) Subsection (b) is repealed.
          (4) Subsection (c) is amended--
                  (A) by striking paragraph (1); and
                  (B) in each of paragraphs (2)(A) and (3)(A), by 
                striking ``agreement under this section'' and inserting 
                ``contract under section 1874A that provides for making 
                payments under this part''.
          (5) Subsections (d) through (i) are repealed.
          (6) Subsections (j) and (k) are each amended--
                  (A) by striking ``An agreement with an agency or 
                organization under this section'' and inserting ``A 
                contract with a medicare administrative contractor 
                under section 1874A with respect to the administration 
                of this part''; and
                  (B) by striking ``such agency or organization'' and 
                inserting ``such medicare administrative contractor'' 
                each place it appears.
          (7) Subsection (l) is repealed.
  (c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
          (1) The heading is amended to read as follows:
        ``provisions relating to the administration of part b''.
          (2) Subsection (a) is amended to read as follows:
  ``(a) The administration of this part shall be conducted through 
contracts with medicare administrative contractors under section 
1874A.''.
          (3) Subsection (b) is amended--
                  (A) by striking paragraph (1);
                  (B) in paragraph (2)--
                          (i) by striking subparagraphs (A) and (B);
                          (ii) in subparagraph (C), by striking 
                        ``carriers'' and inserting ``medicare 
                        administrative contractors''; and
                          (iii) by striking subparagraphs (D) and (E);
                  (C) in paragraph (3)--
                          (i) in the matter before subparagraph (A), by 
                        striking ``Each such contract shall provide 
                        that the carrier'' and inserting ``The 
                        Secretary'';
                          (ii) by striking ``will'' the first place it 
                        appears in each of subparagraphs (A), (B), (F), 
                        (G), (H), and (L) and inserting ``shall'';
                          (iii) in subparagraph (B), in the matter 
                        before clause (i), by striking ``to the 
                        policyholders and subscribers of the carrier'' 
                        and inserting ``to the policyholders and 
                        subscribers of the medicare administrative 
                        contractor'';
                          (iv) by striking subparagraphs (C), (D), and 
                        (E);
                          (v) in subparagraph (H)--
                                  (I) by striking ``if it makes 
                                determinations or payments with respect 
                                to physicians' services,''; and
                                  (II) by striking ``carrier'' and 
                                inserting ``medicare administrative 
                                contractor'';
                          (vi) by striking subparagraph (I);
                          (vii) in subparagraph (L), by striking the 
                        semicolon and inserting a period;
                          (viii) in the first sentence, after 
                        subparagraph (L), by striking ``and shall 
                        contain'' and all that follows through the 
                        period; and
                          (ix) in the seventh sentence, by inserting 
                        ``medicare administrative contractor,'' after 
                        ``carrier,''; and
                  (D) by striking paragraph (5);
                  (E) in paragraph (6)(D)(iv), by striking ``carrier'' 
                and inserting ``medicare administrative contractor'';
                  (F) in paragraph (7), by striking ``the carrier'' and 
                inserting ``the Secretary'' each place it appears.
          (4) Subsection (c) is amended--
                  (A) by striking paragraph (1);
                  (B) in paragraph (2), by striking ``contract under 
                this section which provides for the disbursement of 
                funds, as described in subsection (a)(1)(B),'' and 
                inserting ``contract under section 1874A that provides 
                for making payments under this part'';
                  (C) in paragraph (3)(A), by striking ``subsection 
                (a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
                  (D) in paragraph (4), by striking ``carrier'' and 
                inserting ``medicare administrative contractor'';
                  (E) in paragraph (5), by striking ``contract under 
                this section which provides for the disbursement of 
                funds, as described in subsection (a)(1)(B), shall 
                require the carrier'' and ``carrier responses'' and 
                inserting ``contract under section 1874A that provides 
                for making payments under this part shall require the 
                medicare administrative contractor'' and ``contractor 
                responses'', respectively; and
                  (F) by striking paragraph (6).
          (5) Subsections (d), (e), and (f) are repealed.
          (6) Subsection (g) is amended by striking ``carrier or 
        carriers'' and inserting ``medicare administrative contractor 
        or contractors''.
          (7) Subsection (h) is amended--
                  (A) in paragraph (2)--
                          (i) by striking ``Each carrier having an 
                        agreement with the Secretary under subsection 
                        (a)'' and inserting ``The Secretary''; and
                          (ii) by striking ``Each such carrier'' and 
                        inserting ``The Secretary'';
                  (B) in paragraph (3)(A)--
                          (i) by striking ``a carrier having an 
                        agreement with the Secretary under subsection 
                        (a)'' and inserting ``medicare administrative 
                        contractor having a contract under section 
                        1874A that provides for making payments under 
                        this part''; and
                          (ii) by striking ``such carrier'' and 
                        inserting ``such contractor'';
                  (C) in paragraph (3)(B)--
                          (i) by striking ``a carrier'' and inserting 
                        ``a medicare administrative contractor'' each 
                        place it appears; and
                          (ii) by striking ``the carrier'' and 
                        inserting ``the contractor'' each place it 
                        appears; and
                  (D) in paragraphs (5)(A) and (5)(B)(iii), by striking 
                ``carriers'' and inserting ``medicare administrative 
                contractors'' each place it appears.
          (8) Subsection (l) is amended--
                  (A) in paragraph (1)(A)(iii), by striking ``carrier'' 
                and inserting ``medicare administrative contractor''; 
                and
                  (B) in paragraph (2), by striking ``carrier'' and 
                inserting ``medicare administrative contractor''.
          (9) Subsection (p)(3)(A) is amended by striking ``carrier'' 
        and inserting ``medicare administrative contractor''.
          (10) Subsection (q)(1)(A) is amended by striking ``carrier''.
  (d) Effective Date; Transition Rule.--
          (1) Effective date.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect on October 1, 2003, and the Secretary of Health and 
        Human Services is authorized to take such steps before such 
        date as may be necessary to implement such amendments on a 
        timely basis.
          (2) General transition rules.--The Secretary shall take such 
        steps as are necessary to provide for an appropriate transition 
        from contracts under section 1816 and section 1842 of the 
        Social Security Act (42 U.S.C. 1395h, 1395u) to contracts under 
        section 1874A, as added by subsection (a)(1), consistent with 
        the requirements under such section to competitively bid all 
        contracts within 5 years after the effective date in paragraph 
        (1).
          (3) Authorizing continuation of mip functions under current 
        contracts and agreements and under rollover contracts.--The 
        provisions contained in the exception in section 1893(d)(2) of 
        the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
        continue to apply notwithstanding the amendments made by this 
        section, and any reference in such provisions to an agreement 
        or contract shall be deemed to include a contract under section 
        1874A of such Act, as inserted by subsection (a)(1), that 
        continues the activities referred to in such provisions.
  (e) References.--On and after the effective date provided under 
subsection (d), any reference to a fiscal intermediary or carrier under 
title XI or XVIII of the Social Security Act (or any regulation, manual 
instruction, interpretative rule, statement of policy, or guideline 
issued to carry out such titles) shall be deemed a reference to an 
appropriate medicare administrative contractor (as provided under 
section 1874A of the Social Security Act).

SEC. 5. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

  (a) Coordination of Education Funding.--
          (1) In general.--The Social Security Act is amended by 
        inserting after section 1888 the following new section:
             ``provider education and technical assistance
  ``Sec. 1889. (a) Coordination of Education Funding.--The Secretary 
shall coordinate the educational activities provided through medicare 
contractors (as defined in subsection (i), including under section 
1893) in order to maximize the effectiveness of Federal education 
efforts for providers of services and suppliers.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.
          (3) Report.--Not later than October 1, 2002, the Secretary of 
        Health and Human Services shall submit to Congress a report 
        that includes a description and evaluation of the steps taken 
        to coordinate the funding of provider education under section 
        1889(a) of the Social Security Act, as added by paragraph (1).
  (b) Incentives To Improve Contractor Performance.--
          (1) In general.--Section 1874A, as added by section 4(a)(1), 
        is amended by adding at the end the following new subsection:
  ``(e) Incentives To Improve Contractor Performance in Provider 
Education and Outreach.--
          ``(1) Methodology to measure contractor error rates.--In 
        order to give medicare administrative contractors an incentive 
        to implement effective education and outreach programs for 
        providers of services and suppliers, the Secretary shall, in 
        consultation with representatives of providers and suppliers, 
        develop and implement by October 1, 2003, a methodology to 
        measure the specific claims payment error rates of such 
        contractors in the processing or reviewing of medicare claims.
          ``(2) Identification of best practices.--The Secretary shall 
        identify the best practices developed by individual medicare 
        administrative contractors for educating providers of services 
        and suppliers and how to encourage the use of such best 
        practices nationwide.''.
          (2) Report.--Not later than October 1, 2003, the Secretary of 
        Health and Human Services shall submit to Congress a report 
        that describes how the Secretary intends to use the methodology 
        developed under section 1874A(e)(1) ofthe Social Security Act, 
as added by paragraph (1), in assessing medicare contractor performance 
in implementing effective education and outreach programs, including 
whether to use such methodology as the basis for performance bonuses. 
The report shall include an analysis of the sources of identified 
errors and potential changes in systems of contractors and rules of the 
Secretary that could reduce claims error rates.
  (c) Provision of Access to and Prompt Responses From Medicare 
Administrative Contractors.--
          (1) In general.--Section 1874A, as added by section 4(a)(1) 
        and as amended by subsection (b), is further amended by adding 
        at the end the following new subsection:
  ``(f) Response to Inquiries; Toll-Free Lines.--
          ``(1) Contractor responsibility.--Each medicare 
        administrative contractor shall, for those providers of 
        services and suppliers which submit claims to the contractor 
        for claims processing--
                  ``(A) respond in a clear, concise, and accurate 
                manner to specific billing and cost reporting questions 
                of providers of services and suppliers;
                  ``(B) maintain a toll-free telephone number at which 
                providers of services and suppliers may obtain 
                information regarding billing, coding, and other 
                appropriate information under this title;
                  ``(C) maintain a system for identifying (and 
                disclosing, upon request) who provides the information 
                referred to in subparagraphs (A) and (B); and
                  ``(D) monitor the accuracy, consistency, and 
                timeliness of the information so provided.
          ``(2) Evaluation.--In conducting evaluations of individual 
        medicare administrative contractors, the Secretary shall take 
        into account the results of the monitoring conducted under 
        paragraph (1)(D). The Secretary shall, in consultation with 
        organizations representing providers of services and suppliers, 
        establish standards relating to the accuracy, consistency, and 
        timeliness of the information so provided.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect October 1, 2003.
  (d) Improved Provider Education and Training.--
          (1) In general.--Section 1889, as added by subsection (a), is 
        amended by adding at the end the following new subsections:
  ``(b) Enhanced Education and Training.--
          ``(1) Additional resources.--For each of fiscal years 2003 
        and 2004, there are authorized to be appropriated to the 
        Secretary (in appropriate part from the Federal Hospital 
        Insurance Trust Fund and the Federal Supplementary Medical 
        Insurance Trust Fund) $10,000,000 .
          ``(2) Use.--The funds made available under paragraph (1) 
        shall be used to increase the conduct by medicare contractors 
        of education and training of providers of services and 
        suppliers regarding billing, coding, and other appropriate 
        items.
  ``(c) Tailoring Education and Training Activities for Small Providers 
or Suppliers.--
          ``(1) In general.--Insofar as a medicare contractor conducts 
        education and training activities, it shall tailor such 
        activities to meet the special needs of small providers of 
        services or suppliers (as defined in paragraph (2)).
          ``(2) Small provider of services or supplier.--In this 
        subsection, the term `small provider of services or supplier' 
        means--
                  ``(A) a provider of services with fewer than 25 full-
                time-equivalent employees; or
                  ``(B) a supplier with fewer than 10 full-time-
                equivalent employees.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2002.
  (e) Requirement To Maintain Internet Sites.--
          (1) In general.--Section 1889, as added by subsection (a) and 
        as amended by subsection (d), is further amended by adding at 
        the end the following new subsection:
  ``(d) Internet Sites; FAQs.--The Secretary, and each medicare 
contractor insofar as it provides services (including claims 
processing) for providers of services or suppliers, shall maintain an 
Internet site which--
          ``(1) provides answers in an easily accessible format to 
        frequently asked questions, and
          ``(2) includes other published materials of the contractor,
that relate to providers of services and suppliers under the programs 
under this title (and title XI insofar as it relates to such 
programs).''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2002.
  (f) Additional Provider Education Provisions.--
          (1) In general.--Section 1889, as added by subsection (a) and 
        as amended by subsections (d) and (e), is further amended by 
        adding at the end the following new subsections:
  ``(e) Encouragement of Participation in Education Program 
Activities.--A medicare contractor may not use a record of attendance 
at (or failure to attend) educational activities or other information 
gathered during an educational program conducted under this section or 
otherwise by the Secretary to select or track providers of services or 
suppliers for the purpose of conducting any type of audit or prepayment 
review.
  ``(f) Construction.--Nothing in this section or section 1893(g) shall 
be construed as providing for disclosure by a medicare contractor--
          ``(1) of the screens used for identifying claims that will be 
        subject to medical review; or
          ``(2) of information that would compromise pending law 
        enforcement activities or reveal findings of law enforcement-
        related audits.
  ``(g) Definitions.--For purposes of this section, the term `medicare 
contractor' includes the following:
          ``(1) A medicare administrative contractor with a contract 
        under section 1874A, including a fiscal intermediary with a 
        contract under section 1816 and a carrier with a contract under 
        section 1842.
          ``(2) An eligible entity with a contract under section 1893.
Such term does not include, with respect to activities of a specific 
provider of services or supplier an entity that has no authority under 
this title or title IX with respect to such activities and such 
provider of services or supplier.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.

SEC. 6. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION PROGRAM.

  (a) Establishment.--
          (1) In general.--The Secretary of Health and Human Services 
        shall establish a demonstration program (in this section 
        referred to as the ``demonstration program'') under which 
        technical assistance described in paragraph (2) is made 
        available, upon request and on a voluntary basis, to small 
        providers of services or suppliers in order to improve 
        compliance with the applicable requirements of the programs 
        under medicare program under title XVIII of the Social Security 
        Act (including provisions of title XI of such Act insofar as 
        they relate to such title and are not administered by the 
        Office of the Inspector General of the Department of Health and 
        Human Services).
          (2) Forms of technical assistance.--The technical assistance 
        described in this paragraph is--
                  (A) evaluation and recommendations regarding billing 
                and related systems; and
                  (B) information and assistance regarding policies and 
                procedures under the medicare program, including coding 
                and reimbursement.
          (3) Small providers of services or suppliers.--In this 
        section, the term ``small providers of services or suppliers'' 
        means--
                  (A) a provider of services with fewer than 25 full-
                time-equivalent employees; or
                  (B) a supplier with fewer than 10 full-time-
                equivalent employees.
  (b) Qualification of Contractors.--In conducting the demonstration 
program, the Secretary of Health and Human Services shall enter into 
contracts with qualified organizations (such as peer review 
organizations or entities described in section 1889(g)(2) of the Social 
Security Act, as inserted by section 5(f)(1)) with appropriate 
expertise with billing systems of the full range of providers of 
services and suppliers to provide the technical assistance. In awarding 
such contracts, the Secretary shall consider any prior investigations 
of the entity's work by the Inspector General of Department of Health 
and Human Services or the Comptroller General of the United States.
  (c) Description of Technical Assistance.--The technical assistance 
provided under the demonstration program shall include a direct and in-
person examination of billing systems and internal controls of small 
providers of services or suppliers to determine program compliance and 
to suggest more efficient or effective means of achieving such 
compliance.
  (d) Avoidance of Recovery Actions for Problems Identified as 
Corrected.--The Secretary of Health and Human Services shall provide 
that, absentevidence of fraud and notwithstanding any other provision 
of law, any errors found in a compliance review for a small provider of 
services or supplier that participates in the demonstration program 
shall not be subject to recovery action if the technical assistance 
personnel under the program determine that--
          (1) the problem that is the subject of the compliance review 
        has been corrected to their satisfaction within 30 days of the 
        date of the visit by such personnel to the small provider of 
        services or supplier; and
          (2) such problem remains corrected for such period as is 
        appropriate.
  (e) GAO Evaluation.--Not later than 2 years after the date of the 
date the demonstration program is first implemented, the Comptroller 
General, in consultation with the Inspector General of the Department 
of Health and Human Services, shall conduct an evaluation of the 
demonstration program. The evaluation shall include a determination of 
whether claims error rates are reduced for small providers of services 
or suppliers who participated in the program and the extent of improper 
payments made as a result of the demonstration program. The Comptroller 
General shall submit a report to the Secretary and the Congress on such 
evaluation and shall include in such report recommendations regarding 
the continuation or extension of the demonstration program.
  (f) Financial Participation by Providers.--The provision of technical 
assistance to a small provider of services or supplier under the 
demonstration program is conditioned upon the small provider of 
services or supplier paying an amount estimated (and disclosed in 
advance of a provider's or supplier's participation in the program) to 
be equal to 25 percent of the cost of the technical assistance.
  (g) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary of Health and Human Services (in 
appropriate part from the Federal Hospital Insurance Trust Fund and the 
Federal Supplementary Medical Insurance Trust Fund) to carry out the 
demonstration program--
          (1) for fiscal year 2003, $1,000,000, and
          (2) for fiscal year 2004, $6,000,000.

SEC. 7. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY OMBUDSMAN.

  (a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 1395ee) is 
amended--
          (1) by adding at the end of the heading the following: ``; 
        medicare provider ombudsman'';
          (2) by inserting ``Practicing Physicians Advisory Council.--
        (1)'' after ``(a)'';
          (3) in paragraph (1), as so redesignated under paragraph (2), 
        by striking ``in this section'' and inserting ``in this 
        subsection'';
          (4) by redesignating subsections (b) and (c) as paragraphs 
        (2) and (3), respectively; and
          (5) by adding at the end the following new subsection:
  ``(b) Medicare Provider Ombudsman.--The Secretary shall appoint a 
Medicare Provider Ombudsman. The Ombudsman shall--
          ``(1) provide assistance, on a confidential basis, to 
        providers of services and suppliers with respect to complaints, 
        grievances, and requests for information concerning the 
        programs under this title (including provisions of title XI 
        insofar as they relate to this title and are not administered 
        by the Office of the Inspector General of the Department of 
        Health and Human Services) and in the resolution of unclear or 
        conflicting guidance given by the Secretary and medicare 
        contractors to such providers of services and suppliers 
        regarding such programs and provisions and requirements under 
        this title and such provisions; and
          ``(2) submit recommendations to the Secretary for improvement 
        in the administration of this title and such provisions, 
        including--
                  ``(A) recommendations to respond to recurring 
                patterns of confusion in this title and such provisions 
                (including recommendations regarding suspending 
                imposition of sanctions where there is widespread 
                confusion in program administration), and
                  ``(B) recommendations to provide for an appropriate 
                and consistent response (including not providing for 
                audits) in cases of self-identified overpayments by 
                providers of services and suppliers.''.
  (b) Medicare Beneficiary Ombudsman.--Title XVIII is amended by 
inserting after section 1806 the following new section:
                    ``medicare beneficiary ombudsman
  ``Sec. 1807. (a) In General.--The Secretary shall appoint within the 
Department of Health and Human Services a Medicare Beneficiary 
Ombudsman who shall have expertise and experience in the fields of 
health care and advocacy.
  ``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
          ``(1) receive complaints, grievances, and requests for 
        information submitted by a medicare beneficiary, with respect 
        to any aspect of the medicare program;
          ``(2) provide assistance with respect to complaints, 
        grievances, and requests referred to in paragraph (1), 
        including--
                  ``(A) assistance in collecting relevant information 
                for such beneficiaries, to seek an appeal of a decision 
                or determination made by a fiscal intermediary, 
                carrier, Medicare+Choice organization, or the 
                Secretary; and
                  ``(B) assistance to such beneficiaries with any 
                problems arising from disenrollment from a 
                Medicare+Choice plan under part C; and
          ``(3) submit annual reports to Congress and the Secretary 
        that describe the activities of the Office and that include 
        such recommendations for improvement in the administration of 
        this title as the Ombudsman determines appropriate.''.
  (c) Funding.--There are authorized to be appropriated to the 
Secretary of Health and Human Services (in appropriate part from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund) to carry out the provisions of subsection 
(b) of section 1868 of the Social Security Act (relating to the 
Medicare Provider Ombudsman), as added by subsection (a)(5) and section 
1807 of such Act (relating to the Medicare Beneficiary Ombudsman), as 
added by subsection (b), such sums as are necessary for fiscal year 
2002 and each succeeding fiscal year.
  (d) Use of Central, Toll-Free Number (1-800-MEDICARE).--Section 
1804(b) (42 U.S.C. 1395b-2(b)) is amended by adding at the end the 
following: ``The Secretary shall provide, through the toll-free number 
1-800-MEDICARE, for a means by which individuals seeking information 
about, or assistance with, such programs who phone such toll-free 
number are transferred (without charge) to appropriate entities for the 
provision of such information or assistance. Such toll-free number 
shall be the toll-free number listed for general information and 
assistance in the annual notice under subsection (a) instead of the 
listing of numbers of individual contractors.''.

SEC. 8. PROVIDER APPEALS.

  (a) Medicare Administrative Law Judges.--Section 1869 (42 U.S.C. 
1395ff), as amended by section 521(a) of Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 (114 Stat. 2763A-534), 
as enacted into law by section 1(a)(6) of Public Law 106-554, is 
amended by adding at the end the following new subsection:
  ``(g) Medicare Administrative Law Judges.--
          ``(1) Transition plan.--Not later than October 1, 2003, the 
        Commissioner of Social Security and the Secretary shall develop 
        and implement a plan under which the functions of 
        administrative law judges responsible for hearing cases under 
        this title (and related provisions in title XI) shall be 
        transferred from the responsibility of the Commissioner and the 
        Social Security Administration to the Secretary and the 
        Department of Health and Human Services. The plan shall include 
        recommendations with respect to--
                  ``(A) the number of administrative law judges and 
                support staff required to hear and decide such cases in 
                a timely manner; and
                  ``(B) funding levels required for fiscal year 2004 
                and subsequent fiscal years under this subsection to 
                hear such cases in a timely manner.
        Nothing in this subsection shall be construed as affecting the 
        independence of administrative law judges from the Department 
        of Health and Human Services and from medicare contractors in 
        carrying out their responsibilities for hearing and deciding 
        cases.
          ``(2) Increased financial support.--In addition to any 
        amounts otherwise appropriated, there are authorized to be 
        appropriated (in appropriate part from the Federal Hospital 
        Insurance Trust Fund and the Federal Supplementary Medical 
        Insurance Trust Fund) to the Secretary to increase the number 
        of administrative law judges described in paragraph (1) and to 
        improve education and training for such judges and their staffs 
        in carrying out functions under this title, $5,000,000 for 
        fiscal year 2003 and such sums as are necessary for fiscal year 
        2004 and each subsequent fiscal year.
          ``(3) Submittal of plan to congress and gao; report of gao.--
        Not later than July 1, 2003, the Secretary shall submit to the 
        Committee on Ways and Means of the House of Representatives, 
        the Committee on Finance of the Senate, and the Comptroller 
        General of the United States the terms of the plan developed 
        under paragraph (1). No later than September 1, 2003, the 
        Comptroller General shall submit to such Committees a report 
        containing an evaluation of the terms of such plan.''.
  (b) Process for Expedited Access to Judicial Review.--
          (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)) as 
        amended by Medicare, Medicaid, and SCHIP Benefits Improvement 
        and Protection Act of 2000 (114 Stat. 2763A-534), as enacted 
        into law by section 1(a)(6) of Public Law 106-554, is amended--
                  (A) in paragraph (1)(A), by inserting ``, subject to 
                paragraph (2),'' before ``to judicial review of the 
                Secretary's final decision''; and
                  (B) by adding at the end the following new paragraph:
          ``(2) Expedited access to judicial review.--
                  ``(A) In general.--The Secretary shall establish a 
                process under which a provider of services or supplier 
                that furnishes an item or service or a beneficiary who 
                has filed an appeal under paragraph (1) (other than an 
                appeal filed under paragraph (1)(F)) may obtain access 
                to judicial review when a review panel (described in 
                subparagraph (D)), on its own motion or at the request 
                of the appellant, determines that it does not have the 
                authority to decide the question of law or regulation 
                relevant to the matters in controversy and that there 
                is no material issue of fact in dispute. The appellant 
                may make such request only once with respect to a 
                question of law or regulation in a case of an appeal.
                  ``(B) Prompt determinations.--If, after or coincident 
                with appropriately filing a request for an 
                administrative hearing, the appellant requests a 
                determination by the appropriate review panel that no 
                review panel has the authority to decide the question 
                of law or regulations relevant to the matters in 
                controversy and that there is no material issue of fact 
                in dispute and if such request is accompanied by the 
                documents and materials as the appropriate review panel 
                shall require for purposes of making such 
                determination, such review panel shall make a 
                determination on the request in writing within 60 days 
                after the date such review panel receives the request 
                and such accompanying documents and materials. Such a 
                determination by such review panel shall be considered 
                a final decision and not subject to review by the 
                Secretary.
                  ``(C) Access to judicial review.--
                          ``(i) In general.--If the appropriate review 
                        panel--
                                  ``(I) determines that there are no 
                                material issues of fact in dispute and 
                                that the only issue is one of law or 
                                regulation that no review panel has the 
                                authority to decide; or
                                  ``(II) fails to make such 
                                determination within the period 
                                provided under subparagraph (B);
                        then the appellant may bring a civil action as 
                        described in this subparagraph.
                          ``(ii) Deadline for filing.--Such action 
                        shall be filed, in the case described in--
                                  ``(I) clause (i)(I), within 60 days 
                                of date of the determination described 
                                in such subparagraph; or
                                  ``(II) clause (i)(II), within 60 days 
                                of the end of the period provided under 
                                subparagraph (B) for the determination.
                          ``(iii) Venue.--Such action shall be brought 
                        in the district court of the United States for 
                        the judicial district in which the appellant is 
                        located (or, in the case of an action brought 
                        jointly by more than one applicant, the 
                        judicial district in which the greatest number 
                        of applicants are located) or in the district 
                        court for the District of Columbia.
                          ``(iv) Interest on amounts in controversy.--
                        Where a provider of services or supplier seeks 
                        judicial review pursuant to this paragraph, the 
                        amount in controversy shall be subject to 
                        annual interest beginning on the first day of 
                        the first month beginning after the 60-day 
                        period as determined pursuant to clause (ii) 
                        and equal to the rate of interest on 
                        obligations issued for purchase by the Federal 
                        Hospital Insurance Trust Fund for the month in 
                        which the civil action authorized under this 
                        paragraph is commenced, to be awarded by the 
                        reviewing court in favor of the prevailing 
                        party. No interest awarded pursuant to the 
                        preceding sentence shall be deemed income or 
                        cost for the purposes of determining 
                        reimbursement due providers of services or 
                        suppliers under this Act.
                  ``(D) Review panels.--For purposes of this 
                subsection, a `review panel' is an administrative law 
                judge, the Departmental Appeals Board, a qualified 
                independent contractor (as defined in subsection 
                (c)(2)), or an entity designated by the Secretary for 
                purposes of making determinations under this 
                paragraph.''.
          (2) Application to termination proceedings.--Section 1866(h) 
        (42 U.S.C. 1395cc(h)) is amended by adding at the end the 
        following new paragraph:
  ``(3) The provisions of section 1869(b)(2) shall apply with respect 
to determinations described in paragraph (1) in the same manner as they 
apply to a provider of services that has filed an appeal under section 
1869(b)(1).''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to appeals filed on or after October 1, 2002.
  (c) Requiring Full and Early Presentation of Evidence.--
          (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
        amended by Medicare, Medicaid, and SCHIP Benefits Improvement 
        and Protection Act of 2000 (114 Stat. 2763A-534), as enacted 
        into law by section 1(a)(6) of Public Law 106-554, and as 
        amended by subsection (b), is further amended by adding at the 
        end the following new paragraph:
          ``(3) Requiring full and early presentation of evidence by 
        providers.--A provider of services or supplier may not 
        introduce evidence in any appeal under this section that was 
        not presented at the reconsideration conducted by the qualified 
        independent contractor under subsection (c), unless there is 
        good cause which precluded the introduction of such evidence at 
        or before that reconsideration.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2002.

SEC. 9. RECOVERY OF OVERPAYMENTS AND PREPAYMENT REVIEW; ENROLLMENT OF 
                    PROVIDERS.

  (a) Recovery of Overpayments and Prepayment Review.--Section 1893 (42 
U.S.C. 1395ddd) is amended by adding at the end the following new 
subsections:
  ``(f) Recovery of Overpayments and Prepayment Review.--
          ``(1) Use of repayment plans.--
                  ``(A) In general.--If the repayment, within 30 days 
                by a provider of services or supplier, of an 
                overpayment under this title would constitute a 
                hardship (as defined in subparagraph (B)), subject to 
                subparagraph (C), the Secretary shall enter into a plan 
                (which meets terms and conditions determined to be 
                appropriate by the Secretary) with the provider of 
                services or supplier for the offset or repayment of 
                such overpayment over a period of not longer than 3 
                years, or in the case of extreme hardship (as 
                determined by the Secretary) over a period of not 
                longer than 5 years. Interest shall accrue on the 
                balance through the period of repayment.
                  ``(B) Hardship.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A), the repayment of an 
                        overpayment (or overpayments) within 30 days is 
                        deemed to constitute a hardship if--
                                  ``(I) in the case of a provider of 
                                services that files cost reports, the 
                                aggregate amount of the overpayments 
                                exceeds 10 percent of the amount paid 
                                under this title to the provider of 
                                services for the cost reporting period 
                                covered by the most recently submitted 
                                cost report; or
                                  ``(II) in the case of another 
                                provider of services or supplier, the 
                                aggregate amount of the overpayments 
                                exceeds 10 percent of the amount paid 
                                under this title to the provider of 
                                services or supplier for the previous 
                                calendar year.
                          ``(ii) Rule of application.--The Secretary 
                        shall establish rules for the application of 
                        this subparagraph in the case of a provider of 
                        services or supplier that was not paid under 
                        this title during the previous year or was paid 
                        under this title only during a portion of that 
                        year.
                          ``(iii) Treatment of previous overpayments.--
                        If a provider of services or supplier has 
                        entered into a repayment plan under 
                        subparagraph (A) with respect to a specific 
                        overpayment amount, such payment amount under 
                        the repayment plan shall not be taken into 
                        account under clause (i) with respect to 
                        subsequent overpayment amounts.
                  ``(C) Exceptions.--Subparagraph (A) shall not apply 
                if the Secretary has reason to suspect that the 
                provider of services or supplier may file for 
                bankruptcy or otherwise cease to do business or if 
                there is an indication of fraud or abuse committed 
                against the program.
                  ``(D) Immediate collection if violation of repayment 
                plan.--If a provider of services or supplier fails to 
                make a payment in accordance with a repayment plan 
                under this paragraph, the Secretary may immediately 
                seek to offset or otherwise recover the total balance 
                outstanding (including applicable interest) under the 
                repayment plan.
          ``(2) Limitation on recoupment until determination by 
        qualified independent contractor.--
                  ``(A) In general.--In the case of a provider of 
                services or supplier that is determined to have 
                received an overpayment under this title and that seeks 
                a reconsideration by a qualified independent contractor 
                on such determination under section 1869(b)(1), the 
                Secretary may not take any action (or authorize any 
                other person, including any medicare contractor, as 
                defined in paragraph (9)) to recoup the overpayment 
                until the date the decision on the reconsideration has 
                been rendered.
                  ``(B) Collection with interest.--Insofar as the 
                determination on such appeal is against the provider of 
                services or supplier, interest on the overpayment shall 
                accrue on and after the date of the original notice of 
                overpayment. Insofar as such determination against the 
                provider of services or supplier is later reversed, the 
                Secretary shall provide for repayment of the amount 
                recouped plus interest at the same rate as would apply 
                under the previous sentence for the period in which the 
                amount was recouped.
          ``(3) Standardization of random prepayment review.--
                  ``(A) In general.--A medicare contractor may conduct 
                random prepayment review only to develop a contractor-
                wide or program-wide claims payment error rates or 
                under such additional circumstances as may be provided 
                under regulations, developed in consultation with 
                providers of services and suppliers.
                  ``(B) Construction.--Nothing in subparagraph (A) 
                shall be construed as preventing the denial of payments 
                for claims actually reviewed under a random prepayment 
                review.
          ``(4) Limitation on use of extrapolation.--A medicare 
        contractor may not use extrapolation to determine overpayment 
        amounts to be recovered by recoupment, offset, or otherwise 
        unless--
                  ``(A) there is a sustained or high level of payment 
                error (as defined by the Secretary by regulation); or
                  ``(B) documented educational intervention has failed 
                to correct the payment error (as determined by the 
                Secretary).
          ``(5) Provision of supporting documentation.--In the case of 
        a provider of services or supplier with respect to which 
        amounts were previously overpaid, a medicare contractor may 
        request the periodic production of records or supporting 
        documentation for a limited sample of submitted claims to 
        ensure that the previous practice is not continuing.
          ``(6) Consent settlement reforms.--
                  ``(A) In general.--The Secretary may use a consent 
                settlement (as defined in subparagraph (D)) to settle a 
                projected overpayment.
                  ``(B) Opportunity to submit additional information 
                before consent settlement offer.--Before offering a 
                provider of services or supplier a consent settlement, 
                the Secretary shall--
                          ``(i) communicate to the provider of services 
                        or supplier in a non-threatening manner that, 
                        based on a review of the medical records 
                        requested by the Secretary, a preliminary 
                        analysis indicates that there would be an 
                        overpayment; and
                          ``(ii) provide for a 45-day period during 
                        which the provider of services or supplier may 
                        furnish additional information concerning the 
                        medical records for the claims that had been 
                        reviewed.
                  ``(C) Consent settlement offer.--The Secretary shall 
                review any additional information furnished by the 
                provider of services or supplier under subparagraph 
                (B)(ii). Taking into consideration such information, 
                the Secretary shall determine if there still appears to 
                be an overpayment. If so, the Secretary--
                          ``(i) shall provide notice of such 
                        determination to the provider of services or 
                        supplier, including an explanation of the 
                        reason for such determination; and
                          ``(ii) in order to resolve the overpayment, 
                        may offer the provider of services or 
                        supplier--
                                  ``(I) the opportunity for a 
                                statistically valid random sample; or
                                  ``(II) a consent settlement.
                The opportunity provided under clause (ii)(I) does not 
                waive any appeal rights with respect to the alleged 
                overpayment involved.
                  ``(D) Consent settlement defined.--For purposes of 
                this paragraph, the term `consent settlement' means an 
                agreement between the Secretary and a provider of 
                services or supplier whereby both parties agree to 
                settle a projected overpayment based on less than a 
                statistically valid sample of claims and the provider 
                of services or supplier agrees not to appeal the claims 
                involved.
          ``(7) Limitations on non-random prepayment review.--
                          ``(A) Limitation on initiation of non-random 
                        prepayment review.--A medicare contractor may 
                        not initiate non-random prepayment review of a 
                        provider of services or supplier based on the 
                        initial identification by that provider of 
                        services or supplier of an improper billing 
                        practice unless there is a sustained or high 
                        level of payment error (as defined in paragraph 
                        (4)(A)).
                          ``(B) Termination of non-random prepayment 
                        review.--The Secretary shall issue regulations 
                        relating to the termination, including 
                        termination dates, of non-random prepayment 
                        review. Such regulations may vary such a 
                        termination date based upon the differences in 
                        the circumstances triggering prepayment review.
          ``(8) Payment audits.--
                  ``(A) Written notice for post-payment audits.--
                Subject to subparagraph (C), if a medicare contractor 
                decides to conduct a post-payment audit of a provider 
                of services or supplier under this title, the 
                contractor shall provide the provider of services or 
                supplier with written notice of the intent to conduct 
                such an audit.
                  ``(B) Explanation of findings for all audits.--
                Subject to subparagraph (C), if a medicare contractor 
                audits a provider of services or supplier under this 
                title, the contractor shall provide for an exit 
                conference with the provider or supplier during which 
                the contractor shall--
                          ``(i) give the provider of services or 
                        supplier a full review and explanation of the 
                        findings of the audit in a manner that is 
                        understandable to the provider of services or 
                        supplier and permits the development of an 
                        appropriate corrective action plan;
                          ``(ii) inform the provider of services or 
                        supplier of the appeal rights under this title;
                          ``(iii) give the provider of services or 
                        supplier an opportunity to provide additional 
                        information to the contractor; and
                          ``(iv) take into account information 
                        provided, on a timely basis, by the provider of 
                        services or supplier under clause (iii).
                  ``(C) Exception.--Subparagraphs (A) and (B) shall not 
                apply if the provision of notice or findings would 
                compromise pending law enforcement activities or reveal 
                findings of law enforcement-related audits.
          ``(9) Definitions.--For purposes of this subsection:
                  ``(A) Medicare contractor.--The term `medicare 
                contractor' has the meaning given such term in section 
                1889(g).
                  ``(B) Random prepayment review.--The term `random 
                prepayment review' means a demand for the production of 
                records or documentation absent cause with respect to a 
                claim.
  ``(g) Notice of Over-Utilization of Codes.--The Secretary shall 
establish a process under which the Secretary provides for notice to 
classes of providers of services and suppliers served by the contractor 
in cases in which the contractor has identified that particular billing 
codes may be overutilized by that class of providers of services or 
suppliers under the programs under this title (or provisions of title 
XI insofar as they relate to such programs).''.
  (b) Provider Enrollment Process; Right of Appeal.--
          (1) In general.--Section 1866 (42 U.S.C. 1395cc) is amended--
                  (A) by adding at the end of the heading the 
                following: ``; enrollment processes''; and
                  (B) by adding at the end the following new 
                subsection:
  ``(j) Enrollment Process for Providers of Services and Suppliers.--
          ``(1) In general.--The Secretary shall establish by 
        regulation a process for the enrollment of providers of 
        services and suppliers under this title.
          ``(2) Appeal process.--Such process shall provide--
                  ``(A) a method by which providers of services and 
                suppliers whose application to enroll (or, if 
                applicable, to renew enrollment) are denied are 
                provided a mechanism to appeal such denial; and
                  ``(B) prompt deadlines for actions on applications 
                for enrollment (and, if applicable, renewal of 
                enrollment) and for consideration of appeals.''.
          (2) Effective date.--The Secretary of Health and Human 
        Services shall provide for the establishment of the enrollment 
        and appeal process under the amendment made by paragraph (1) 
        within 6 months after the date of the enactment of this Act.
  (c) Process for Correction of Minor Errors and Omissions on Claims 
Without Pursuing Appeals Process.--The Secretary of Health and Human 
Services shall develop, in consultation with appropriate medicare 
contractors (as defined in section 1889(g) of the Social Security Act, 
as inserted by section 5(f)(1)) and representatives of providers of 
services and suppliers, a process whereby, in the case of minor errors 
or omissions that are detected in the submission of claims under the 
programs under title XVIII of such Act, a provider of services or 
supplier is given an opportunity to correct such an error or omission 
without the need to initiate an appeal. Such process shall include the 
ability to resubmit corrected claims.

SEC. 10. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

  (a) In General.--The Secretary of Health and Human Services shall 
establish a demonstration program (in this section referred to as the 
``demonstration program'') under which medicare specialists employed by 
the Department of Health and Human Services provide advice and 
assistance to medicare beneficiaries regarding the medicare program at 
the location of existing local offices of the Social Security 
Administration.
  (b) Locations.--
          (1) In general.--The demonstration program shall be conducted 
        in at least 6 offices or areas. Subject to paragraph (2), in 
        selecting such offices and areas, the Secretary shall provide 
        preference for offices with a high volume of visits by medicare 
        beneficiaries.
          (2) Assistance for rural beneficiaries.--The Secretary shall 
        provide for the selection of at least 2 rural areas to 
        participate in the demonstration program. In conducting the 
        demonstration program in such rural areas, the Secretary shall 
        provide for medicare specialists to travel among local offices 
        in a rural area on a scheduled basis.
  (c) Duration.--The demonstration program shall be conducted over a 3-
year period.
  (d) Evaluation and Report.--
          (1) Evaluation.--The Secretary shall provide for an 
        evaluation of the demonstration program. Such evaluation shall 
        include an analysis of--
                  (A) utilization of, and beneficiary satisfaction 
                with, the assistance provided under the program; and
                  (B) the cost-effectiveness of providing beneficiary 
                assistance through out-stationing medicare specialists 
                at local social security offices.
          (2) Report.--The Secretary shall submit to Congress a report 
        on such evaluation and shall include in such report 
        recommendations regarding the feasibility of permanently out-
        stationing medicare specialists at local offices of the Social 
        Security Administration.

SEC. 11. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E & M) 
                    DOCUMENTATION GUIDELINES.

  (a) In General.--The Secretary of Health and Human Services may not 
implement any new documentation guidelines for evaluation and 
management physician services under the title XVIII of the Social 
Security Act on or after the date of the enactment of this Act unless 
the Secretary--
          (1) has developed the guidelines in collaboration with 
        practicing physicians and provided for an assessment of the 
        proposed guidelines by the physician community;
          (2) has established a plan that contains specific goals, 
        including a schedule, for improving the use of such guidelines;
          (3) has conducted appropriate and representative pilot 
        projects under subsection (b) to test modifications to the 
        evaluation and management documentation guidelines;
          (4) finds that the objectives described in subsection (c) 
        will be met in the implementation of such guidelines; and
          (5) has conducted appropriate outreach to physicians for 
        education and training with respect to the guidelines.
The Secretary shall make changes to the manner in which existing 
evaluation and management documentation guidelines are implemented to 
reduce paperwork burdens on physicians.
  (b) Pilot Projects To Test Evaluation and Management Documentation 
Guidelines.--
          (1) Length and consultation.--Each pilot project under this 
        subsection shall--
                  (A) be of sufficient length to allow for preparatory 
                physician and medicare contractor education, analysis, 
                and use and assessment of potential evaluation and 
                management guidelines; and
                  (B) be conducted, in development and throughout the 
                planning and operational stages of the project, in 
                consultation with practicing physicians.
          (2) Range of pilot projects.--Of the pilot projects conducted 
        under this subsection--
                  (A) at least one shall focus on a peer review method 
                by physicians (not employed by a medicare contractor) 
                which evaluates medical record information for claims 
                submitted by physicians identified as statistical 
                outliers relative to definitions published in the 
                Current Procedures Terminology (CPT) code book of the 
                American Medical Association;
                  (B) one shall focus on an alternative method to 
                detailed guidelines based on physician documentation of 
                face to face encounter time with a patient;
                  (C) at least one shall be conducted for services 
                furnished in a rural area and at least one for services 
                furnished outside such an area; and
                  (D) at least one shall be conducted in a setting 
                where physicians bill under physicians services in 
                teaching settings and at one shall be conducted in a 
                setting other than a teaching setting.
          (3) Banning of targeting of pilot project participants.--Data 
        collected under this subsection shall not be used as the basis 
        for overpayment demands or post-payment audits.
          (4) Study of impact.--Each pilot project shall examine the 
        effect of the modified evaluation and management documentation 
        guidelines on--
                  (A) different types of physician practices, including 
                those with fewer than 10 full-time-equivalent employees 
                (including physicians); and
                  (B) the costs of physician compliance, including 
                education, implementation, auditing, and monitoring.
  (c) Objectives for Evaluation and Management Guidelines.--The 
objectives for modified evaluation and management documentation 
guidelines developed by the Secretary shall be to--
          (1) enhance clinically relevant documentation needed to code 
        accurately and assess coding levels accurately;
          (2) decrease the level of non-clinically pertinent and 
        burdensome documentation time and content in the physician's 
        medical record;
          (3) increase accuracy by reviewers; and
          (4) educate both physicians and reviewers.
  (d) Study of Simpler, Alternative Systems of Documentation for 
Physician Claims.--
          (1) Study.--The Secretary of Health and Human Services shall 
        carry out a study of the matters described in paragraph (2).
          (2) Matters described.--The matters referred to in paragraph 
        (1) are--
                  (A) the development of a simpler, alternative system 
                of requirements for documentation accompanying claims 
                for evaluation and management physician services for 
                which payment is made under title XVIII of the Social 
                Security Act; and
                  (B) consideration of systems other than current 
                coding and documentation requirements for payment for 
                such physician services.
          (3) Consultation with practicing physicians.--In designing 
        and carrying out the study under paragraph (1), the Secretary 
        shall consult with practicing physicians, including physicians 
        who are part of group practices.
          (4) Application of hipaa uniform coding requirements.--In 
        developing an alternative system under paragraph (2), the 
        Secretary shall consider requirements of administrative 
        simplification under part C of title XI of the Social Security 
        Act.
          (5) Report to congress.--(A) The Secretary shall submit to 
        Congress a report on the results of the study conducted under 
        paragraph (1).
          (B) The Medicare Payment Advisory Commission shall conduct an 
        analysis of the results of the study included in the report 
        under subparagraph (A) and shall submit a report on such 
        analysis to Congress.
  (e) Study on Appropriate Coding of Certain Extended Office Visits.--
The Secretary shall conduct a study of the appropriateness of coding in 
cases of extended office visits in which there is no diagnosis made. 
The Secretary shall submit a report to Congress on such study and shall 
include recommendations on how to code appropriately for such visits in 
a manner that takes into account the amount of time the physician spent 
with the patient.
  (f) Definitions.--In this section--
          (1) the term ``rural area'' has the meaning given that term 
        in section 1886(d)(2)(D) of the Social Security Act, 42 U.S.C. 
        1395ww(d)(2)(D); and
          (2) the term ``teaching settings'' are those settings 
        described in section 415.150 of title 42, Code of Federal 
        Regulations.

SEC. 12. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.

  (a) Improved Coordination Between FDA and CMS on Coverage of 
Breakthrough Medical Devices.--
          (1) In general.--Upon request by an applicant and to the 
        extent feasible (as determined by the Secretary of Health and 
        Human Services), the Secretary shall, in the case of a class 
        III medical device that is subject to premarket approval under 
        section 515 of the Federal Food, Drug, and Cosmetic Act, 
        coordinate reviews of coverage decisions under title XVIII of 
        the Social Security Act with the review for application for 
        premarket approval conducted by the Food and Drug 
        Administration under such section. Such coordination shall 
        include the sharing of appropriate information.
          (2) Publication of plan.--Not later than 6 months after the 
        date of the enactment of this Act, the Secretary shall submit 
        to appropriate Committees of Congress a report that contains 
        the plan for improving such coordination and for shortening the 
        time lag between the premarket approval by the Food and Drug 
        Administration and coding and coverage decisions by the Centers 
        for Medicare & Medicaid Services.
          (3) Construction.--Nothing in this subsection shall be 
        construed as changing the criteria for coverage of a medical 
        device under title XVIII of the Social Security Act nor 
        premarket approval by the Food and Drug Administration.
  (b) Council for Technology and Innovation.--
          (1) Establishment.--The Secretary of Health and Human 
        Services shall establish a Council for Technology and 
        Innovation within the Centers for Medicare & Medicaid Services 
        (in this section referred to as ``CMS'').
          (2) Composition.--The Council shall be composed of senior CMS 
        staff and clinicians and shall be chaired by the Executive 
        Coordinator for Technology and Innovation (appointed or 
        designated under paragraph (4)).
          (3) Duties.--The Council shall coordinate the activities of 
        coverage, coding, and payment processes under title XVIII of 
        the Social Security Act with respect to new technologies and 
        procedures, including new drug therapies, and shall coordinate 
        the exchange of information on new technologies between CMS and 
        other entities that make similar decisions.
          (4) Executive coordinator for technology and innovation.--The 
        Secretary shall appoint (or designate) a noncareer appointee 
        (as defined in section 3132(a)(7) of title 5, United States 
        Code) who shall serve as the Executive Coordinator for 
        Technology and Innovation. Such executive coordinator shall 
        report to the Administrator of CMS, shall chair the Council, 
        shall oversee the execution of its duties, and shall serve as a 
        single point of contact for outside groups and entities 
        regarding the coverage, coding, and payment processes under 
        title XVIII of the Social Security Act.
  (c) GAO Study on Improvements in External Data Collection for Use in 
the Medicare Inpatient Payment System.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study that analyzes which external data can be 
        collected in a shorter time frame by the Centers For Medicare & 
        Medicaid Services for use in computing payments for inpatient 
        hospital services. The study may include an evaluation of the 
        feasibility and appropriateness of using of quarterly samples 
        or special surveys or any other methods. The study shall 
        include an analysis of whether other executive agencies, such 
        as the Bureau of Labor Statistics in the Department of 
        Commerce, are best suited to collect this information.
          (2) Report.--By not later than October 1, 2002, the 
        Comptroller General shall submit a report to Congress on the 
        study under paragraph (1).
  (d) Application of OSHA Bloodborne Pathogens Standard to Certain 
Hospitals.--
          (1) In general.--Section 1866 (42 U.S.C. 1395cc) is amended--
                  (A) in subsection (a)(1)--
                          (i) in subparagraph (R), by striking ``and'' 
                        at the end;
                          (ii) in subparagraph (S), by striking the 
                        period at the end and inserting ``, and''; and
                          (iii) by inserting after subparagraph (S) the 
                        following new subparagraph:
          ``(T) in the case of hospitals that are not otherwise subject 
        to the Occupational Safety and Health Act of 1970, to comply 
        with the Bloodborne Pathogens standard under section 1910.1030 
        of title 29 of the Code of Federal Regulations (or as 
        subsequently redesignated).''; and
                  (B) by adding at the end of subsection (b) the 
                following new paragraph:
  ``(4)(A) A hospital that fails to comply with the requirement of 
subsection (a)(1)(T) (relating to the Bloodborne Pathogens standard) is 
subject to a civil money penalty in an amount described in subparagraph 
(B), but is not subject to termination of an agreement under this 
section.
  ``(B) The amount referred to in subparagraph (A) is an amount that is 
similar to the amount of civil penalties that may be imposed under 
section 17 of the Occupational Safety and Health Act of 1970 for a 
violation of the Bloodborne Pathogens standard referred to in 
subsection (a)(1)(T) by a hospital that is subject to the provisions of 
such Act.
  ``(C) A civil money penalty under this paragraph shall be imposed and 
collected in the same manner as civil money penalties under subsection 
(a) of section 1128A are imposed and collected under that section.''.
          (2) Effective date.--The amendments made by this paragraph 
        (1) shall apply to hospitals as of July 1, 2002.
  (e) IOM Study on Local Coverage Determinations.--
          (1) Study.--The Secretary shall enter into an arrangement 
        with the Institute of Medicine of the National Academy of 
        Sciences under which the Institute shall conduct a study on the 
        capabilities and information available for local coverage 
        determinations (including the application of local medical 
        review policies) under the medicare program under title XVIII 
        of the Social Security Act. Such study shall examine--
                  (A) the consistency of the definitions used in such 
                determinations;
                  (B) the extent to which such determinations are based 
                on evidence, including medical and scientific evidence;
                  (C) the advantages and disadvantages of local 
                coverage decisionmaking, including the flexibility it 
                offers for ensuring timely patient access to new 
                medical technology for which data are still be 
                collected;
                  (D) whether local coverage determinations are made, 
                in the absence of adequate data, in order to collect 
                such data in a manner that results in coverage of 
                experimental items or services; and
                  (E) the advantages and disadvantages of maintaining 
                local medicare contractor advisory committees that can 
                advise on local coverage decisions based on an open, 
                collaborative public process.
          (2) Report.--Such arrangement shall provide that the 
        Institute shall submit to the Secretary a report on such study 
        by not later than 3 years after the date of the enactment of 
        this Act. The Secretary shall promptly transmit a copy of such 
        report to Congress.
  (f) Methods for Determining Payment Basis For New Lab Tests.--Section 
1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end the 
following:
  ``(8)(A) The Secretary shall establish by regulation procedures for 
determining the basis for, and amount of, payment under this subsection 
for any clinical diagnostic laboratory test with respect to which a new 
or substantially revised HCPCS code is assigned on or after January 1, 
2003 (in this paragraph referred to as `new tests').
  ``(B) Determinations under subparagraph (A) shall be made only after 
the Secretary--
          ``(i) makes available to the public (through an Internet site 
        and other appropriate mechanisms) a list that includes any such 
        test for which establishment of a payment amount under this 
        subsection is being considered for a year;
          ``(ii) on the same day such list is made available, causes to 
        have published in the Federal Register notice of a meeting to 
        receive comments and recommendations (and data on which 
        recommendations are based) from the public on the appropriate 
        basis under this subsection for establishing payment amounts 
        for the tests on such list;
          ``(iii) not less than 30 days after publication of such 
        notice convenes a meeting, that includes representatives of 
        officials of the Centers for Medicare & Medicaid Services 
        involved in determining payment amounts, to receive such 
        comments and recommendations (and data on which the 
        recommendations are based);
          ``(iv) taking into account the comments and recommendations 
        (and accompanying data) received at such meeting, develops and 
        makes available to the public (through an Internet site and 
        other appropriate mechanisms) a list of proposed determinations 
        with respect to the appropriate basis for establishing a 
        payment amount under this subsection for each such code, 
        together with an explanation of the reasons for each such 
        determination, the data on which the determinations are based, 
        and a request for public written comments on the proposed 
        determination; and
          ``(v) taking into account the comments received during the 
        public comment period, develops and makes available to the 
        public (through an Internet site and other appropriate 
        mechanisms) a list of final determinations of the payment 
        amounts for such tests under this subsection, together with the 
        rationale for each such determination, the data on which the 
        determinations are based, and responses to comments and 
        suggestions received from the public.
  ``(C) Under the procedures established pursuant to subparagraph (A), 
the Secretary shall--
          ``(i) set forth the criteria for making determinations under 
        subparagraph (A); and
          ``(ii) make available to the public the data (other than 
        proprietary data) considered in making such determinations.
  ``(D) The Secretary may convene such further public meetings to 
receive public comments on payment amounts for new tests under this 
subsection as the Secretary deems appropriate.
  ``(E) For purposes of this paragraph:
          ``(i) The term `HCPCS' refers to the Health Care Procedure 
        Coding System.
          ``(ii) A code shall be considered to be `substantially 
        revised' if there is a substantive change to the definition of 
        the test or procedure to which the code applies (such as a new 
        analyte or a new methodology for measuring an existing analyte-
        specific test).''.

SEC. 13. MISCELLANEOUS PROVISIONS.

  (a) Treatment of Hospitals for Certain Services Under Medicare 
Secondary Payor (MSP) Provisions.--
          (1) In general.--The Secretary of Health and Human Services 
        shall not require a hospital (including a critical access 
        hospital) to ask questions (or obtain information) relating to 
        the application of section 1862(b) of the Social Security Act 
        (relating to medicare secondary payor provisions) in the case 
        of reference laboratory services described in paragraph (2), if 
        the Secretary does not impose such requirement in the case of 
        such services furnished by an independent laboratory.
          (2) Reference laboratory services described.--Reference 
        laboratory services described in this paragraph are clinical 
        laboratory diagnostic tests (or the interpretation of such 
        tests, or both) furnished without a face-to-face encounter 
        between the beneficiary and the hospital involved and in which 
        the hospital submits a claim only for such test or 
        interpretation.
  (b) Clarification of Prudent Layperson Test for Emergency Services 
Under the Medicare Fee-for-Service Program.--
          (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended by 
        inserting after subsection (c) the following new subsection:
  ``(d) In the case of hospital services and physicians' services 
that--
          ``(1) are furnished, to an individual who is not enrolled in 
        a Medicare+Choice plan under part C, by a hospital or a 
        critical access hospital; and
          ``(2) are needed to evaluate or stabilize an emergency 
        medical condition (as defined in section 1852(d)(3)(B), 
        relating to application of a prudent layperson rule) and that 
        are provided to meet the requirements of section 1867,
such services shall be deemed to be reasonable and necessary for the 
diagnosis or treatment of illness or injury for purposes of subsection 
(a)(1)(A).''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to items and services furnished on or after January 
        1, 2002.
  (c) Prompt Submission of Overdue Reports on Payment and Utilization 
of Outpatient Therapy Services.--The Secretary of Health and Human 
Services shall submit to Congress as expeditiously as practicable the 
reports required under section 4541(d)(2) of the Balanced Budget Act of 
1997 (relating to alternatives to a single annual dollar cap on 
outpatient therapy) and under section 221(d) of the Medicare, Medicaid, 
and SCHIP Balanced Budget Refinement Act of 1999 (relating to 
utilization patterns for outpatient therapy).
  (d) Authorizing Use of Arrangements With Other Hospice Programs To 
Provide Core Hospice Services in Certain Circumstances.--
          (1) In general.--Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) 
        is amended by adding at the end the following new subparagraph:
  ``(D) In extraordinary, exigent, or other non-routine circumstances, 
such as unanticipated periods of high patient loads, staffing shortages 
due to illness or other events, or temporary travel of a patient 
outside a hospice program's service area, a hospice program may enter 
into arrangements with another hospice program for the provision by 
that other program of services described in paragraph (2)(A)(ii)(I). 
The provisions of paragraph (2)(A)(ii)(II) shall apply with respect to 
the services provided under such arrangements.''.
          (2) Conforming payment provision.--Section 1814(i) (42 U.S.C. 
        1395f(i)) is amended by adding at the end the following new 
        paragraph:
  ``(4) In the case of hospice care provided by a hospice program under 
arrangements under section 1861(dd)(5)(D) made by another hospice 
program, the hospice program that made the arrangements shall bill and 
be paid for the hospice care.''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to hospice care provided on or after the date of 
        the enactment of this Act.

                            I. INTRODUCTION

                         A. Purpose and Summary

    The primary purpose of H.R. 2768 is to create a more 
collaborative, less confrontational relationship between 
providers and the Centers for Medicare and Medicaid Services. 
H.R. 2768 will diminish the paperwork load required to meet 
complex and technical regulatory requirements, and allow 
providers to spend more time with patients. H.R. 2768 
streamlines the regulatory process, enhances education and 
technical assistance for doctors and other health care 
providers, and protects the rights of providers in the audit 
and recovery process to ensure that the repayment process is 
fair and open.
    In addition, H.R. 2768 gives the Secretary the tools to 
manage Medicare program operations efficiently. For the first 
time, the Centers for Medicare and Medicaid Services will be 
able to competitively contract with the best entities available 
to process claims, make payments and answer questions. The 
Secretary will be free to promote quality by creating 
incentives for the Medicare Administrative Contractors to 
provide outstanding service to seniors and health care 
providers. Contractor reform initiatives will eliminate 
artificial distinctions between Medicare's Part A and Part B 
with regard to contracting practices. But this does not 
constitute a combination of the Part A and Part B trust funds 
or any position on that matter.
    Finally, HR 2768 includes several provisions to help 
beneficiaries interact with and better understand the Medicare 
program, including the establishment of an internal beneficiary 
ombudsman program, a demonstration program to place Medicare 
specialist in Social Security offices, and an improved 800-
number to facilitate communication between beneficiaries and 
CMS or its contractors.

               B. Background and Need for the Legislation

    H.R. 2768 was developed through months of consultation with 
health care providers and other experts, including public 
hearings before the Ways and Means Subcommittee on Health. 
Working closely with the Bush Administration, the Subcommittee 
began a thorough process of evaluation of the regulatory 
relationship between health care providers and suppliers and 
the Centers for Medicare and Medicaid Services (CMS). At the 
first public hearing that focused on bringing regulatory relief 
to Medicare providers, held on March 15, 2001, the Subcommittee 
received testimony from witnesses frustrated with a system that 
forces health care providers to spend their time and office 
resources on paperwork rather than patients.
    The message delivered by health care providers in that 
first hearing was unanimous--doctors and hospitals, home health 
agencies and nursing homes all told the Subcommittee that they 
are overwhelmed. Instead of caring for patients, health care 
providers testified that they spend too much time filling out 
unnecessary and confusing forms.
    In addition, Medicare's current contracting represents an 
antiquated, inefficient, and closed system based on cozy 
relationships between the government, contractors and 
providers.
    The Medicare contracting program is antiquated because 
contractors may not service the entire Medicare program, or 
particular functions within the program; rather Fiscal 
Intermediaries administer claims for facilities and carriers 
administer claims for all other providers. It has failed to 
keep pace with integrated delivery in the private sector.
    Medicare's contracting program is inefficient because 
Medicare does not award contracts through competitive 
procedures, but rather on provider nomination.
    Medicare's contracting program is closed. All but one of 
the contractors today have been with Medicare since the 
program's inception 36 years ago, and only insurers can provide 
contracting services.

                         C. Legislative History

    After the March 15 hearing, Chairman Nancy Johnson and 
Ranking Member Pete Stark wrote Secretary Thompson with a 
number of suggestions regarding regulatory improvements the 
Department could make using existing administrative authority. 
Many of those changes have already been adopted.
    However, because many of the problems identified through 
the Subcommittee's work could not be corrected 
administratively, the Subcommittee began work in March on a 
legislative package. Through extensive collaboration with the 
provider community, the General Accounting Office and the Bush 
Administration, a draft bill was developed. The bill was 
responsive to issues raised by the Office of Inspector General 
in order to ensure that the package extends regulatory relief 
to providers while protecting taxpayers and beneficiaries from 
waste, fraud, and abuse. The bill was introduced on August 2 as 
H.R. 2768 and referred to the Committee on Ways and Means' 
Subcommittee on Health and the Committee on Energy and 
Commerce.
    On September 25, the Subcommittee held a follow-up hearing 
on H.R. 2768 to elicit additional suggestions on the bill as 
introduced. Testimony was provided by CMS Administrator Tom 
Scully, the General Accounting Office and representatives of 
provider groups.
    After approving Representative Johnson's amendment in the 
nature of a substitute, the Subcommittee on Health ordered 
favorably reported the bill on October 4, 2001 to the full Ways 
and Means Committee by voice vote with a quorum present with no 
additional amendments.
    On October 11, after approving Chairman Thomas' amendment 
in the nature of a substitute, the full Committee on Ways and 
Means ordered favorably reported H.R. 2768 to the House of 
Representatives by voice vote with a quorum present. There were 
no additional amendments.

                     II. EXPLANATION OF PROVISIONS

Section 1. Short title; Amendments to Social Security Act; table of 
        contents

    Current Law.--No provision.
    Explanation of Provision.--Except as otherwise specified, 
the provisions would amend or repeal a section or other 
provisions of the Social Security Act. None of the provisions 
shall be construed to (1) compromise the existing legal 
authority for addressing Medicare fraud or abuse with respect 
to criminal prosecution, civil enforcement, or administrative 
remedies, including those established by the False Claims Act 
or (2) prevent the Department of Health and Human Services 
(HHS) from its ongoing efforts to eliminate waste, fraud, and 
abuse in Medicare. Also, consolidation of Medicare's 
administrative contracting (as provided for in this bill) would 
not consolidate the Federal Hospital Insurance Trust Fund, 
which pays for Part A services, and the Federal Supplementary 
Medical Insurance Trust Fund, which pays for Part B services. 
The bill notes that this administrative consolidation does not 
reflect any position on consolidation of other items related to 
Part A and Part B. Finally, the term, ``supplier,'' means a 
physician, practitioner, facility, or other nonprovider entity 
that furnishes Medicare items or services unless otherwise 
indicated.
    Effective Date.--Upon enactment.
    Reason for Change.--The Subcommittee is committed to 
extending needed regulatory relief to providers and suppliers 
while at the same time protecting taxpayers from waste, fraud 
and abuse.

Section 2. Issuance of regulations

            (a) Consolidation of promulgation to once a month
    Current Law.--The Secretary is required to issue 
regulations that are necessary to administer Parts A and B of 
the Medicare program. No rule, requirement or policy statement 
(other than a national coverage determination) that establishes 
or changes a substantive legal standard that determines 
Medicare's scope of benefits, level of payment, or eligibility 
of individuals, entities or organizations to receive benefits 
or furnish services can take effect unless it is promulgated by 
regulation. The Secretary must publish a proposed regulation in 
the Federal Register, with at least 60 days to solicit public 
comment, before issuing the final regulation with the following 
exceptions: (1) the statute permits the regulation to be issued 
in interim final form or provides for a shorter public comment 
period; (2) the statutory deadline for implementation of a 
provision is less than 150 days after the date of enactment of 
the statute containing the provision; (3) under the good cause 
exception contained in the rule-making provision of Title 5 of 
the United States Code, notice and public comment procedures 
are deemed impracticable, unnecessary or contrary to the public 
interest.
    Explanation of Provision.--The Secretary would be required 
(1) to issue proposed or final regulation (including interim 
final regulation) only on one business day of the month unless 
publication on another date is necessary to comply with 
statutory requirements and (2) coordinate the issuance of new 
regulations relating to a category of provider or supplier 
based on an analysis of the collective impact of the regulatory 
changes on such category. No later than 3 years after 
enactment, the Secretary would be required to report to 
Congress on the feasibility of issuing regulations only on one 
day in each calendar quarter.
    Effective Date.--The provisions would apply to regulations 
issued 30 days after enactment.
    Reason for Change.--The volume of Medicare regulations 
issued by CMS can be difficult for health care providers and 
suppliers, particularly small providers and suppliers, to 
monitor. By requiring periodicity on the release of 
regulations, providers and suppliers will be better able to 
keep informed of program changes.
    The collective impact provision ensures that the Department 
will consider the overall impact of any changes it is making on 
categories of providers and suppliers. If the Department 
determines that many changes affecting a particular category of 
providers or suppliers are underway, the Department should 
consult with representatives of that category to determine 
whether providers and suppliers would be better able to make 
the systems changes needed to accommodate thosechanges if all 
the new regulations were released simultaneously or staggered. Because 
of the burden implementing multiple regulations simultaneously can 
cause, the Secretary needs to coordinate new regulations based on an 
analysis of the collective impact the regulatory changes will have on 
any given category of provider or supplier.
            (b) Regular time line for publication of final rules
    Current Law.--See above. The Secretary must publish in the 
Federal Register no less frequently than every 3 months, a list 
of all manual instructions, interpretative rules, statements of 
policy, and guidelines which are promulgated to carry out 
Medicare's law.
    Explanation of Provision.--The Secretary, in consultation 
with the Director of the Office of Management and Budget, would 
establish and publish a regular time line for the publication 
of final regulations based on the previous publication of a 
proposed regulation or an interim final regulation. The time 
line may vary by regulation due to complexity, number and scope 
of comments received and other factors. The Secretary would be 
required to publish in the Federal Register any variations in 
the time line for publication of the final regulation. This 
notice of the different time line would need to: (1) be 
published no later than the end of the comment period for the 
proposed regulation and (2) include a brief explanation of the 
justification for such variation. If the regular time line 
established for an interim final regulation expires without 
promulgation of a final regulation (and associated public 
comment period), the interim final regulation would not remain 
in effect unless the Secretary publishes a notice of 
continuation that would include an explanation for not 
complying with the regular time line. The interim regulation's 
regular time line would be restarted on the date that the 
notice of continuation is published. The Secretary would be 
required to submit a report to Congress that describes and 
explains the instances where the final regulation was not 
published within the applicable time line.
    Effective Date.--Upon enactment. The Secretary would be 
required to provide for a transition period for previously 
published interim final regulations.
    Reason for Change.--Numerous regulations have been issued 
by CMS as interim final regulations and never finalized. This 
injects an element of uncertainty into the regulation in 
question, and it precludes the ability of CMS to incorporate 
changes based on comments received by interested parties into a 
final regulation. The provision ensures that proposed 
regulations will move through the process of finalization in a 
predictable and timely manner.
            (c) Limitation on new matter in final regulations
    Current Law.--No provision.
    Explanation of Provision.--A provision in a final 
regulation that is not a logical outgrowth of the proposed 
regulation would be treated as a proposed regulation and would 
not take effect without a separate public comment period 
followed by publication as a final regulation.
    Effective Date.--Upon enactment.
    Reason for Change.--The provision ensures that interested 
parties will be given an opportunity to comment on issues 
addressed in regulations before they take effect. The Committee 
recognizes that proposed regulations for annual payment updates 
for providers and suppliers include proposed overall payment 
updates, and that specific payment amounts for specific codes 
or specific payment areas are not typically included until 
final rules. The
    Committee does not intend to change past custom to 
recognize such details in final rules as a ``logical 
outgrowth'' of proposed rules.

Section 3. Compliance with changes in regulations and policies

            (a) No retroactive application of substantive changes; time 
                    line for compliance with substantive changes after 
                    notice
    Current Law.--No provision.
    Explanation of Provision.--A substantive change in Medicare 
regulations, manual instructions, interpretive rules, policy 
statements, or guidelines would not be applied retroactively to 
items or services furnished before the date it was issued, 
unless the Secretary determines that retroactive application 
would be necessary to comply with statutory requirements or 
would have a positive impact onbeneficiaries or providers and 
suppliers. The substantive change would not be effective until at least 
30 days after it is issued. No compliance action could be taken against 
a provider or supplier with respect to the change for items and 
services furnished before the effective date.
    Effective Date.--Upon enactment.
    Reason for Change.--This provision will ensure providers 
and suppliers will have sufficient time to make any changes to 
systems needed to comply with changes in regulations.
            (b) Reliance on guidance
    Current Law.--No provision.
    Explanation of Provision.--If (1) a provider or supplier 
follows written guidance (which may be transmitted 
electronically) provided by the Secretary or a Medicare 
contractor when furnishing an item or service and submitting a 
claim; (2) the Secretary finds that the circumstances relating 
to the furnished items and services have been accurately 
presented in writing to the contractor and (3) the guidance is 
inaccurate, the provider or supplier would not be subject to 
any sanction including repayment or any penalty. This provision 
would not be construed to prevent repayment (or payment of 
penalties) to the extent that the overpayments result from a 
clerical or technical operational error. GAO is instructed to 
conduct a study on the feasibility and appropriateness of 
legally binding advisory opinions on appropriate interpretation 
and application of Medicare regulations.
    Effective Date.--Upon enactment.
    Reason for Change.--This provision will ensure that 
providers and suppliers who acted in good faith based on the 
information they received from their contractors will not be 
vulnerable to recovery if it turns out that the contractor was 
in error. Providers should be able to rely on the directions or 
guidance provided to them by their Medicare contractors, even 
if there is a technical or clerical error on the part of the 
contractor in developing or providing the direction or 
guidance. The protections of new section 9(b) are not available 
in the case of a technical or clerical error that is not 
incorporated into direction or guidance and therefore not 
relied upon by the provider in providing supplies or services. 
For example, a simple miscalculation in the payment of a claim 
that results in the wrong amount being sent to a provider would 
be recoverable.

Section 4. Increased flexibility in Medicare administration

            (a) Consolidation and flexibility in Medicare 
                    administration
    Current Law.--Section 1816 of the Social Security Act 
authorizes the Secretary to establish agreements with fiscal 
intermediaries nominated by different provider associations to 
make Medicare payments for health care services furnished by 
institutional providers. Section 1842 of the Act authorizes the 
Secretary to enter into contracts with health insurer carriers 
to make Medicare payments to physicians, practitioners and 
other health care suppliers. Section 1834(a)(12) of the Act 
authorizes separate regional carriers for the payment of 
durable medical equipment (DME) claims. Section 1893 authorizes 
the Secretary to contract for certain program safeguard 
activities under the Medicare Integrity Program (MIP).
    Certain terms and conditions of the contracting agreements 
for fiscal intermediaries and carriers are specified in the 
Medicare statute. Medicare regulations coupled with long-
standing agency practices have further limited the way that 
contracts for claims administration services can be 
established. Specifically, the contracts are awarded without 
full and open competition; generally must cover the range of 
claims processing and related activities; cannot be terminated 
without cause and without the opportunity for a public hearing; 
and incorporate cost-based, not performance-based, 
reimbursement methods with no incentive bonuses.
    Certain functions and responsibilities of the fiscal 
intermediaries and carriers are specified in the statute to 
improve or maintaining good performance as well. The Secretary 
may not require that carriers or intermediaries match data 
obtained in its other activities with Medicare data in order to 
identify beneficiaries who have other insurance coverage as 
part of the Medicare Secondary Payer (MSP) program. With the 
exception of prior authorization of DME claims, an entity may 
not perform activities (or receive related payments) under a 
claims processing contractto the extent that the activities are 
carried out pursuant to a MIP contract. Performance standards with 
respect to the timeliness of reviews, fair hearings, reconsideration 
and exemption decisions are established as well.
    A Medicare contract with an intermediary or carrier may 
require any of its employees certifying or making payments 
provide a surety bond to the United States in an amount 
established by the Secretary. Neither the contractor nor the 
contractor's employee who certifies the amount of Medicare 
payments is liable for erroneous payments in the absence of 
gross negligence or intent to defraud the United States. 
Neither the contractor nor the contractor's employee who 
disburses payments is liable for erroneous payments in the 
absence of gross negligence or intent to defraud the United 
States, if such payments are based upon a voucher signed by the 
certifying employee.
    Explanation of Provision.--The legislation would add 
Section 1874A to the Social Security Act which would permit the 
Secretary to enter into contracts with any entity to serve as a 
Medicare administrative contractor. These contractors would 
perform, or secure the performance of (through subcontracting), 
some or all of the following tasks: determine payment amounts; 
making payments; educate and assist beneficiaries; consult and 
communicate with and assist providers and suppliers; and 
perform additional functions as necessary. The claims 
processing jurisdiction of a Medicare administrative contractor 
would be determined by the scope of the contract awarded to the 
entity. Specifically, the Medicare administrative contractor 
that would perform a particular function or activity is the 
entity that has the contract for that activity for any given 
beneficiary, any given provider or supplier, or class of 
provider or supplier.
    The Secretary would be required to use competitive 
procedures when entering into a Medicare administrative 
contract but would be able to renew a contract for up to five 
years without regard to statutory requirements concerning 
competitive contracting if the entity has exceeded specified 
performance standards. These standards would take into account 
performance, quality, price, and other factors. Functions would 
be able to be transferred among Medicare administrative 
contractors, consistent with these provisions. The Secretary 
would be required to (1) consider performance quality in such 
transfers; (2) provide incentives for the Medicare 
administrative contractors to provide efficient, high-quality 
services; and (3) develop performance standards with respect to 
each of the payment, provider service, and beneficiary service 
functions required of the contractors. With respect to 
developing the performance standards, the Secretary would be 
able to consult with providers, suppliers and organizations 
performing the contracting functions. The Secretary would be 
required to contract only with those entities that (1) will 
perform efficiently and effectively; (2) will meet standards 
for financial responsibility, legal authority and service 
quality among other pertinent matters; (3) will agree to 
furnish timely and necessary data; and (4) will maintain and 
provide access to necessary records and data. The Secretary 
retains his authority to cover the termination costs of current 
contractors.
    A Medicare administrative contract would contain provisions 
deemed necessary by the Secretary and may provide for advances 
of Medicare funds for the purposes of making payments to 
providers and suppliers. As under current law, the Secretary 
would not be able to require existing or new contractors to 
match their data with Medicare data for the purposes of the 
identifying beneficiaries with other insurance coverage. The 
Secretary would assure that the activities of the Medicare 
administrative contractors do not duplicate the Medicare 
Integrity Program (MIP) functions except with respect to the 
prior authorization of DME. An entity with a MIP contract would 
not be treated as a Medicare administrative contractor, solely 
by reason of the MIP contract. In developing contract 
performance requirements for Medicare administrative 
contractors, the Secretary would be required to consider the 
inclusion of the existing standards in effect for timeliness of 
reviews, fair hearings, reconsideration and exemption 
decisions.
    A Medicare administrative contractor and any of its 
employees certifying or disbursing payments may be required to 
provide a surety bond to the United States in an amount 
established by the Secretary. It is the intent of Congress that 
the definition of a surety bond in this instance includes 
fidelity bonds and the Secretary has the authority to request 
fidelity bonds. The liability standard of ``gross negligence or 
intent to defraud'' is retained for individuals and designated 
officers but the agency and organization are now also liable 
under a ``gross negligence or intent to defraud'' standard; 
neither the contractor nor the contractor's employee who 
certifies the amount of Medicare payments is liable for 
erroneous payments in the absence of gross negligence or intent 
to defraud the United States. Neither the contractor nor the 
contractor's employee who disburses payments is liable for 
erroneous payments in the absence of gross negligence or intent 
to defraud the United States, if such payments are based upon 
an authorization from the certifyingemployee AND the 
authorization meets the internal control standards established by 
General Accounting Office (GAO). The Secretary would pay the Medicare 
administrative contractor, its employees, or their legal 
representatives for defending these contractors or employees in a civil 
action related to the performance of their contractual duties, if due 
care was exercised in the performance of such duties. These payments 
would be equal to the reasonable amount of legal expense incurred.
    Effective Date.--See subsection (d).
    Reason for Change.--Medicare's current contracting 
represents an antiquated, inefficient, and closed system based 
on cozy relationships between the government, contractors and 
providers.
    The Medicare contracting program is antiquated because 
contractors may not provide service for the entire Medicare 
program, or particular functions within the program; rather 
Fiscal Intermediaries administer claims for facilities and 
carriers administer claims for all other providers. It has 
failed to keep pace with integrated claims administration 
practices in the private sector.
    Medicare's contracting program is inefficient because 
Medicare does not award contracts through competitive 
procedures, but rather on provider nomination.
    Medicare's contracting program is closed. All but one of 
the contractors today have been with Medicare since the 
program's inception 36 years ago, and only insurers can provide 
contracting services.
    This provision permits greater flexibility in contracting 
for administrative services between the Secretary and the 
Medicare contractors (entities that process claims under part A 
and part B of the Medicare program), including the flexibility 
to separately contract for all or parts of the contractor 
functions. The Secretary also may contract with a wider range 
of entities, so that the most efficient and effective 
contractor can be selected.
    These amendments require the Secretary to contract 
competitively at least once every five years for the 
administration of benefits under parts A and B. In conjunction 
with the elimination of cost contracts, it is intended to 
create incentives for improved service to beneficiaries and to 
providers of services and suppliers. Finally, it establishes a 
liability standard of gross negligence or intent to defraud for 
the agency or organization, to eliminate a statutory ambiguity 
that appeared to extend immunity to that entity for fraudulent 
payments certified and disbursed to Medicare Part A providers.
            (b) Conforming amendments to section 1816 (relating to 
                    fiscal intermediaries)
    Current Law.--Section 1816 of the Social Security Act 
establishes the provider nomination process, the contracting 
specifications, and performance standards for fiscal 
intermediaries that currently contract with Medicare to process 
claims and perform other related administrative activities for 
institutional providers.
    Explanation of Provision.--The provisions establish that 
the activities of fiscal intermediaries in administering 
Medicare would be conducted through contracts with Medicare 
administrative contractors as set forth in subsection (a). The 
provider nomination process and contracting specifications 
would be repealed. Certain performance standards with respect 
to the processing of clean claims would be retained. Certain 
annual reporting requirements concerning the contractor's 
overpayment recovery efforts would be retained.
    Effective Date.--See subsection (d).
    Reason for Change.--These amendments provide a basis for a 
unified contracting system for the administration of parts A 
and B, identical to the recent Congressionally mandated 
structure of the Medicare Integrity Program contractors. 
Consolidation of contracting duties as set forth in this 
legislation does not constitute consolidation of the Hospital 
Insurance and Medical Supplementary Insurance Trust Funds, or 
reflect any position on that issue. In addition, the 
elimination of provider nomination, which has been rarely 
allowed in recent years, is essential for bringing full and 
open competition into the contracting functions of the Medicare 
program.
            (c) Conforming amendments to section 1842 (relating to 
                    carriers)
    Current Law.--Section 1842 of the Social Security Act 
establishes that carriers will be used to administer certain 
Medicare benefits as well as the contracting requirements and 
certain performance standards for those activities.
    Explanation of Provision.--The provisions would establish 
that the activities of carriers administering Medicare would be 
conducted through contracts with Medicare administrative 
contractors as set forth in subsection (a). Certain 
instructions including those pertaining to nursing facilities' 
payments, claims assignment, physician participation, 
overpayment recoveries and billing by suppliers would be 
retained. Certain performance standards with respect to the 
processing of clean claims would be retained. Contracting 
specifications and other conforming changes would be 
established. The Secretary, not the contractor, would be 
responsible for taking necessary actions to assure that 
reasonable payments are made, for those made on both cost and 
charge basis. The Secretary, not the contractor, would be 
responsible for maintaining a toll-free telephone number for 
beneficiaries to obtain information on participating suppliers. 
Carrier fair hearing requirements would be eliminated. Certain 
annual reporting requirements concerning the contractor's 
overpayment recovery efforts would be retained.
    Effective Date.--See subsection (d).
    Reason for Change.--The provision establishes a basis for a 
unified contracting system, identical to the structure 
implemented for the Medicare Integrity Program contractors. It 
is important to note, however, that consolidation of 
contracting duties as set forth in this legislation does not 
constitute consolidation of the Hospital Insurance and Medical 
Supplementary Insurance Trust Funds, or reflect any position on 
that issue. In addition, the Secretary would have the 
flexibility to choose the best contractor(s) to provide 
telephone information on suppliers which is intended to reduce 
administrative costs and improve quality.
            (d) Effective date; transition rule
    Current Law.--No provision.
    Explanation of Provision.--Except as otherwise provided in 
this subsection, the provisions in this section would be 
effective October 1, 2003. The Secretary would be authorized to 
take necessary actions prior to that date in order to implement 
these amendments on a timely basis to transition from the 
contracts established under sections 1816 and 1842 of the 
Social Security Act to those established under the new section 
1874A created by this legislation. The transition would be 
consistent with the requirement that the administrative 
contracts be competitively bid by October 1, 2008. The 
requirement that MIP contracts be awarded on a competitive 
basis would continue to apply and would not be affected by the 
provisions in this section. The MIP contracting exception that 
allows agreements according to current law would be deemed to 
be a contract established under the new authority of 1874A and 
would continue existing activities. The Secretary has the 
authority to recognize the appropriate termination costs of 
current cost contracts in the transition from current cost 
contracts to competitively bid contracts.
    Reason for Change.--The provision provides for the 
appropriate transition between the current contracting system 
and these amendments.
            (e) References
    Current Law.--No provision.
    Explanation of Provision.--After this section becomes 
effective, any reference to fiscal intermediary or carrier 
would be considered a reference to the appropriate Medicare 
administrative contractor.
    Reason for Change.--These amendments are necessary to 
conform existing law to the new structure.

Section 5. Provider education and technical assistance

            (a) Coordination of education funding
    Current Law.--Medicare's provider education activities are 
funded through the program management appropriation and through 
the Education and Training component of the Medicare Integrity 
Program (MIP). Both claims processingcontractors (fiscal 
intermediaries and carriers) and MIP contractors may undertake provider 
education activities.
    Explanation of Provision.--The provision would add Section 
1889 to the Social Security Act which would require the 
Secretary to (1) coordinate the educational activities provided 
through the Medicare administrative and MIP contractors and (2) 
to submit an evaluation to Congress on actions taken to 
coordinate the funding of provider education.
    Effective Date.--Upon enactment with report due to Congress 
no later than October 1, 2002.
    Reason for Change.--This provision is intended to ensure 
that federal spending on provider education is coordinated and 
used as efficiently as possible to maximize the value obtained 
from the investment. It is not intended to change the 
proportion or Medicare Integrity Program funds spent on 
provider education.
            (b) Incentives to improve contractor performance
    Current Law.--No specific statutory provision. Since 
FY1996, as part of the audit required by the Chief Financial 
Officers Act, an estimate of improper payments in Medicare fee-
for-service has been established annually. As a recent 
initiative, CMS is implementing a comprehensive error rate 
testing program to produce national, contractor specific, 
benefit category specific and provider specific paid claim 
error rates.
    Explanation of Provision.--The Secretary would be required 
to (1) develop a methodology, in consultation with 
representatives of providers and suppliers, to measure the 
specific claims payment error rates at each Medicare 
administrative contractor; and (2) identify best practices 
developed at each contractor for educating providers and 
suppliers. The Secretary would be required to report to 
Congress on (1) the use of the claims error rate methodology in 
assessing the effectiveness of contractors' provider education 
and outreach programs and (2) whether methodology should be 
used as the basis of bonuses for contractors. The report shall 
also include an analysis of the sources of identified errors 
and potential changes in systems of contractors and rules of 
the Secretary that could reduce claims error rates.
    Effective Date.--Methodology is to be implemented and 
report is due to Congress by October 1, 2003.
    Reason for Change.--This provision would ensure that the 
Department monitors contractor level performance as it relates 
to claims payment error rates, and it would identify best 
practices for provider education--all with the goal of reducing 
payment errors and helping providers and suppliers better 
comply with program requirements.
            (c) Provision of access to and prompt responses from 
                    Medicare administrative contractors
    Current Law.--No specific statutory provision. Statutory 
provisions generally instruct carriers to assist providers and 
others who furnish services in developing procedures relating 
to utilization practices and to serve as a channel of 
communication relating information on program administration. 
Fiscal intermediaries are generally instructed to (1) provide 
consultative services to institutions and other agencies to 
enable them to establish and maintain fiscal records necessary 
for program participation and payment and (2) serve as a center 
for any information as well as a channel for communication with 
providers.
    Explanation of Provision.--Each Medicare administrative 
contractor would be required to (1) respond clearly, concisely 
and accurately to billing and cost reporting questions; (2) 
maintain a toll-free telephone number for such inquiries; (3) 
maintain a system for identifying, and disclosing on request, 
which employee provided the information; and (4) monitor the 
quality of the information provided. The Secretary would be 
required, in consultation with provider organizations, to 
establish performance standards with respect to telephone 
inquiries from providers and suppliers.
    Effective Date.--October 1, 2003.
    Reason for Change.--This provision is intended to improve 
contractor accountability to make contractors more responsive 
to providers and suppliers, and to increase the accuracy and 
reliability of the information provided in response to the 
questions received.
            (d) Improved provider education and training
    Current Law.--In FY2000, $54.8 million was spent on 
provider education and training activities: about $43 million 
from the program management appropriation and about $12 million 
came from the provider education and training component of MIP. 
In FY2001, about $57.3 million was budgeted for these 
activities.
    Explanation of Provision.--The provision would authorize an 
increased $10 million appropriation from Medicare Trust Funds 
(as appropriate from the Federal Hospital Insurance Trust Fund 
and the Federal Supplementary Medical Insurance Trust Fund) in 
FY2003 and FY2004 to increase Medicare contractors' billing, 
coding and other provider training activities. Medicare 
administrative contractors would be required to conduct 
education and training activities for small providers of 
services or suppliers, that is, institutional providers with 
less than 25 full-time equivalents (FTEs) or suppliers with 
less than 10 FTEs.
    Effective Date.--October 1, 2002.
    Reason for Change.--This provision acknowledges that 
contractors are being instructed to significantly improve their 
provider education and training efforts, and accordingly 
authorizes new funds to be available for those purposes.
            (e) Requirement to maintain Internet sites
    Current Law.--No provision.
    Explanation of Provision.--The Secretary and each Medicare 
administrative contractor would be required to maintain an 
Internet site which provides easily accessible answers to 
frequently asked questions as well as other published materials 
of the contractor.
    Effective Date.--October 1, 2002.
    Reason for Change.--This provision will facilitate greater 
ease of provider and supplier access to information provided by 
Medicare's contractors.
            (f) Additional provider education provisions
    Current Law.--No provision.
    Explanation of Provision.--A Medicare contractor would not 
be able to use attendance records at educational programs or 
information gathered during these programs to select or track 
providers or suppliers for audit or prepayment review. Nothing 
in the proposed legislation would require Medicare 
administrative contractors to disclose claims processing 
screens (computer edits that trigger medical review) or 
information that would compromise pending law enforcement 
activities or law enforcement-related audits.
    Effective Date.--Upon enactment.
    Reason for Change.--This provision addresses a concern 
raised by providers and suppliers that their participation in 
educational forums has been used to trigger audits. 
Participation in educational forums should be encouraged not 
discouraged.

Section 6. Small provider technical assistance demonstration program

    Current Law.--No provision.
    Explanation of Provision.--The Secretary would be required 
to establish a demonstration program that offers technical 
assistance, upon request, to small providers or suppliers 
(institutional providers with less than 25 full-time 
equivalents (FTEs) or suppliers with less than 10 FTEs.) 
Technical assistance would include direct in-person examination 
of billing systems and internal controls by qualified entities, 
such as peer review organizations or other entities. The 
technical assistance would also make available information and 
assistance regarding policies and procedures under Medicare, 
including coding and reimbursement. In awarding these 
contracts, the Secretary would be required to consider any 
prior investigations of the entity's work by the Office of the 
Inspector General (OIG) in HHS or the GAO. Participating 
providers and suppliers would be required to pay an amount 
estimated and disclosed in advance that would equal 25% of the 
cost of the technical assistance they received. Absent 
indications of fraud, errors found in the review would not be 
subject to recovery if the problem is corrected within 30 days 
of the on-site visit and remains corrected for anappropriate 
period. GAO, in consultation with the OIG, would be required to 
evaluate and recommend continuation of the demonstration project no 
later than two years after its implementation. The evaluation would 
include a determination of whether claims error rates were reduced for 
providers and suppliers who participated in the program. The evaluation 
would also study whether improper payments were made as a result of the 
demonstration. The provision would authorize $1 million in FY2003 and 
$6 million in FY2004 of appropriations from the Medicare Trust Funds to 
carry out demonstration project.
    Effective Date.--Upon enactment.
    Reason for Change.--Many large providers and suppliers have 
contracts with private consulting firms to help them navigate 
their interactions with the Medicare program. This type of 
assistance can be prohibitively expensive for small providers 
and suppliers--but they too are required to comply with complex 
program rules and regulations. This provision creates a new 
demonstration program to facilitate small provider and supplier 
access to expert technical assistance. The demonstration will 
also test whether encouraging technical assistance on the front 
end to help providers and suppliers play by the rules can save 
the program money in the longer term by promoting greater 
program compliance.

Section 7. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman

    Current Law.--No statutory provisions address Medicare 
Provider or Beneficiary Ombudsman programs. The Secretary is 
required to prepare and distribute an annual notice explaining 
Medicare benefits and limitations to coverage to Medicare 
beneficiaries. The Secretary is also required to provide 
information via a toll-free telephone number.
    Explanation of Provision.--The Secretary would be required 
to appoint a Medicare Provider Ombudsman to (1) to resolve 
unclear guidance and provide confidential assistance to 
providers and suppliers regarding complaints or questions about 
the Medicare program, including peer review and administrative 
requirements; and (2) recommend changes to improve program 
administration.
    The Secretary would also be required to appoint an internal 
Medicare Beneficiary Ombudsman from individuals with health 
care expertise and advocacy. The ombudsman would (1) receive 
complaints, grievances, and requests for information from 
Medicare beneficiaries; (2) provide assistance with respect to 
those complaints, grievances and requests, including assistance 
to beneficiaries who appeal claims determinations or those 
affected by the decisions of Medicare+Choice organizations to 
leave Medicare; and (3) submit an annual report to Congress and 
the Secretary describing activities and recommending changes to 
improve program administration from a beneficiary perspective.
    The provision would authorize appropriations of necessary 
sums in FY2002 and subsequently from the appropriate Medicare 
Trust Funds for these Ombudsman programs.
    Finally, the Secretary would be required to establish a 
toll-free number (1-800-MEDICARE) to triage individuals with 
questions or seeking help to the appropriate individuals or 
entities. The triage would occur with no charge. This toll-free 
number would be the only general information and assistance 
number listed in the Medicare handbook and annual notice 
provided to Medicare beneficiaries, replacing phone numbers for 
Medicare contractors. However, assistance numbers that are not 
Medicare contractors would continue to be listed separately, 
such as numbers for State Health Insurance Counseling and 
Assistance Programs.
    Effective Date.--Upon enactment.
    Reason for Change.--Beneficiaries and providers are 
currently confronted with a morass of bureaucracy and 
regulation, with no clear individual to assist them. The 
beneficiary handbook currently provides many pages of phone 
numbers, which can be very confusing for beneficiaries, rather 
than a single number that then triage beneficiaries to the 
appropriate person or entity. The provisions in this section 
are intended to help providers and beneficiaries navigate 
Medicare's complicated rules and regulations.

Section 8. Provider appeals

            (a) Medicare administrative law judges
    Current Law.--Medicare beneficiaries and, in certain 
circumstances, providers and suppliers of health care services, 
may appeal claims that are denied or payments that are reduced. 
Section 1869 of the Social Security Act was amended by Benefits 
Improvement and Protection Act of 2000 (BIPA) in its entirety, 
but the BIPA provisions are not yet effective. Generally, 
parties who have been denied coverage of an item or service 
have the right to appeal that decision through a series of 
administrative appeals and then into federal district court if 
the amounts of disputed claims in question meet certain 
thresholds at each step of the appeals process. A hearing by an 
administrative law judge (ALJ) in the Social Security 
Administration (SSA) is one component of the administrative 
appeals process.
    Explanation of Provision.--By October 1, 2003, the 
Commissioner of SSA and the Secretary would be required to 
develop and implement a plan to transfer the functions of the 
ALJs responsible for hearing Medicare cases from SSA to Health 
and Human Services. This plan would include recommendations on 
the number of judges and support staff required to adjudicate 
cases on a timely basis and funding needed for FY2004 and 
subsequently. The Secretary of HHS is required to submit to the 
Committee on Ways and Means of the House of Representatives, 
the Committee on Finance of the Senate, and the Comptroller 
General the terms of the plan by July 1, 2003. By September 1 
of that year, GAO has to report back to the Committees with an 
evaluation of the transfer plan. The provision would authorize 
increased appropriations, in addition to amounts otherwise 
appropriated, from the appropriate Medicare Trust Fund of $5 
million in FY2003 and as necessary in subsequent years in order 
to increase the number of administrative law judges and to 
improve education and training programs for judges and their 
staff in carrying out their Medicare activities. Nothing in 
this provision would be construed to affect the independence of 
ALJs in carrying out their responsibilities for adjudicating 
cases.
    Effective Date.--Upon enactment, with the mandated report 
concerning ALJ transfer due by October 1, 2003.
    Reason for Change.--The Office of Inspector General has 
identified moving the functions of the Medicare Administrative 
Law Judges to the Department of Health and Human Services as an 
important priority in improving the appeals system. This 
provision makes that transition and increases the emphasis on 
providing training Administrative Law Judges and their staffs 
to increase their expertise in Medicare's rules and 
regulations. The SSA Commissioner and the Secretary are 
instructed to work together on the transition plans in order to 
assure that the transition does not adversely affect the SSA 
ALJ appeals system.
            (b) Process for expedited access to judicial review
    Current Law.--Section 1869 (as modified by BIPA but not yet 
implemented) provides for expedited proceedings. Under BIPA 
provisions, an expedited determination is available to a 
beneficiary who has received notice: (1) that a provider plans 
to terminate services and a physician certifies that failure to 
continue services is likely to place the beneficiary's health 
at risk; or (2) the provider plans to discharge the 
beneficiary. In instances where the moving party alleges that 
no material issues of fact are in dispute, the Secretary will 
make an expedited determination as to whether any such facts 
are in dispute and, if not, will render a decision 
expeditiously.
    Explanation of Provision.--The Secretary would be required 
to establish a process where a provider or supplier of a 
service or a beneficiary who has filed an appeal may obtain 
access to judicial review when a review panel determines, no 
later than 60 days after the date of the written request and 
submission of supporting documentation, that it does not have 
the authority over law or regulation in question and where 
material facts are not in dispute. If so decided, the appellant 
would be able to bring a civil court action if the civil action 
is filed within 60 days. The venue for judicial review would be 
the U.S. District Court where the appellant is located, or 
where the greatest number of appellants are located, or in the 
district court in DC. The amount in controversy would be 
subject to annual interest awarded to the prevailing party by 
the reviewing court. The provision for expedited access to 
judicial review would apply to a provider's appeal concerning 
program participation.
    A review panel would be an administrative law judge (ALJ), 
the Departmental Appeals Board (DAB), a Qualified Independent 
Contractor (QIC) or other designated entity. A decision by the 
review panel would be a final decision and would not be subject 
to review by the Secretary. The appellant would be able to 
request this determination only once with respect to a 
particular question of law or regulation.
    These expedited access to judicial review provisions will 
also apply to application of termination proceedings, relating 
to survey and certification determinations, under 1866(h).
    Effective Date.--Applies to appeals filed on or after 
October 1, 2002.
    Reason for Change.--This provision ensures that if a review 
board certifies that there are no material facts in dispute and 
that the appeals process does not have authority to resolve the 
question at issue, the provider, supplier, or beneficiary may 
take their case to court in an expedited manner. This will 
facilitate more prompt resolution of challenges to the 
underlying validity of CMS regulations and determinations.
            (c) Requiring full and early presentation of evidence
    Current Law.--No provision.
    Explanation of Provision.--A provider of services or 
supplier would not be able to introduce evidence that was not 
presented at reconsideration conducted by the QIC unless a good 
cause precluded its introduction at or before that 
reconsideration.
    Effective Date.--On or before October 1, 2002.
    Reason for Change.--The Office of Inspector General 
identified this change as a priority to promote more 
expeditious resolution of appeals of denied claims. This 
provision requires prompt introduction of evidence relevant to 
a provider appeal.

Section 9. Recovery of overpayments and prepayment review; enrollment 
        of providers

            (a) Recovery of overpayments and prepayment review
    Current Law.--No specific statutory provisions address the 
payment plans, consent settlements, prepayment, or post-payment 
actions. Section 1833(j) of the Social Security Act provides 
that interest accrues on under- payments or overpayments 
starting 30 days of the date of the final determination of the 
accurate payment amount.
    Explanation of Provision.--Subject to certain 
qualifications, in circumstances where refund of an overpayment 
within 30 days would constitute a hardship, providers and 
suppliers would be allowed to repay overpayment amounts over a 
period of up to three years when their overpayment obligation 
exceeds a 10% threshold of their annual payments from Medicare. 
The Secretary would be able to determine cases of extreme 
hardship where a repayment period of up to five years could be 
established. Interest would accrue on the balance through the 
repayment period. The Secretary would be required to establish 
the way that newly-participating providers and suppliers could 
qualify for a repayment plan under this hardship provision. 
Previous overpayment amounts already included in an ongoing 
repayment plans would not be included in the calculation of the 
hardship threshold. The Secretary would be allowed to seek 
immediate collection if payments are not made as scheduled. 
Exceptions to this provision would be permitted in cases where 
bankruptcy may be declared or fraud or abuse is suspected.
    For providers and suppliers who appeal an overpayment 
determination, the Secretary would be prevented from recovering 
an overpayment until the date of the qualified independent 
contractor decision. The Secretary would be required (1) to 
collect interest that accrues starting on the date of the 
overpayment notice if the appeal decision is against the 
provider, physician, practitioner or supplier and (2) to pay 
the recouped amount plus interest if the appeal decision is 
subsequently reversed.
    Medicare contractors, both MIP and Medicare administrative 
contractors, would be able to conduct random prepayment reviews 
only in order to develop contractor-wide or program-wide claims 
payment error rates. These random prepayment reviews would be 
developed in consultation with providers and suppliers. 
Contractors would be able to deny payments for claims subject 
to the prepayment reviews.
    Medicare contractors would not be able to use extrapolation 
to determine overpayment amounts unless a sustained or high 
level of payment error exists (as defined by the Secretary 
through regulations) or a documented educationalintervention 
did not correct the payment error.
    Medicare contractors would be permitted to periodically 
request records or documentation for a limited sample of claims 
from providers or suppliers who had been overpaid to ensure 
that the previous practices have been corrected.
    The Secretary would be able to use a consent settlement to 
resolve a projected overpayment. As part of the process, the 
Secretary would be required to (1) communicate in a non-
threatening manner to a provider, or supplier that, based on a 
preliminary analysis of medical records, an overpayment may 
exist; (2) provide 45 days where additional information may be 
submitted by the provider and supplier regarding these medical 
records; (3) after considering the additional information, 
provide notice and explanation of any remaining overpayment 
determination; and (4) offer the opportunity for a 
statistically valid random sample (which would not waive appeal 
rights) or a consent settlement (based on a smaller sample with 
a waiver of appeal rights) to resolve the overpayment amounts.
    Medicare contractors would not be able to implement non-
random prepayment review based on initial identification of an 
improper billing practice by the provider or supplier unless a 
sustained or high level of payment error exists. The Secretary 
would be required to issue regulations concerning the timing 
and termination of prepayment reviews as well as the different 
circumstances that would affect the duration of these reviews.
    Medicare contractors would be required to provide a written 
notice of the intent to conduct a post-payment audit to 
providers, and suppliers selected as audit candidates. During 
the exit conference between the provider or supplier and the 
contractor, the contractor would be required to provide a full 
review and understandable explanation of the findings to those 
who have been audited. This full review (1) would permit the 
development of an appropriate corrective action plan; (2) would 
provide information on appeal rights; (3) would provide for an 
opportunity to supply additional information to the contractor; 
and (4) take into account that additional information which was 
provided on a timely basis. A notice of audit or explanation of 
findings would not be required if law enforcement activities or 
audits would be compromised.
    The Secretary would be required to establish a process 
where classes of providers and suppliers are notified that 
their Medicare contractor has identified specific billing codes 
that may be over-utilized.
    Effective Date.--Upon enactment.
    Reason for Change.--These provisions build greater 
consistency and predictability into Medicare's rules for 
recovery of overpayments and prepayment review, while 
protecting program integrity.
            (b) Enrollment process for providers of services and 
                    suppliers
    Current Law.--Providers and, to some extent, suppliers have 
access to certain appeal mechanisms if their application to 
participate in Medicare is denied or terminated. Section 
1866(h) of the Social Security Act provides for a hearing and 
for judicial review of that hearing for any institution or 
agency dissatisfied with a determination that it is not a 
provider (or that it can no longer be a provider). There is no 
statutory provision extending such judicial appeal rights to 
suppliers. Sections 1128(a) and (b) of the Act provide for the 
exclusion of certain individuals or entities because of the 
conviction of crimes related to their participation in 
Medicare; Section 1128(f) provides for hearing and judicial 
review for exclusions. In 1999, the Health Care Financing 
Administration (HCFA--now the Centers for Medicare and Medicaid 
Services or CMS) published a proposed regulation that would 
revise existing Medicare Part B administrative appeals 
procedures and extend them to all suppliers not currently 
covered.
    Explanation of Provision.--The Secretary would be required 
to establish by regulation an enrollment process which provides 
an appeal mechanism with prompt deadlines for those providers 
and suppliers whose applications to participate in Medicare are 
denied.
    Effective Date.--Within 6 months of enactment.
    Reason for Change.--This provision gives providers and 
suppliers an opportunity to appeal denials of their 
applications to participate in the Medicare program.
            (c) Process for correction of minor errors and omissions on 
                    claims without pursuing appeals process
    Current Law.--No provision.
    Explanation of Provision.--The Secretary would be required 
to develop, in consultation with appropriate Medicare 
contractors and health care associations, a process where minor 
claims errors can be corrected and resubmitted without 
appealing the claims denial.
    Effective Date.--Upon enactment.
    Reason for Change.--Many of the providers and suppliers who 
testified before the Subcommittee or contacted members directly 
emphasized the need to create a process in which they could 
correct claims that were denied because they were incomplete or 
contained minor errors without having to pursue a formal 
appeal. This provision instructs the Secretary to create such a 
process, which will alleviate pressure on the appeals system. 
The Subcommittee would be concerned, however, if this process 
were to become an incentive for providers to knowingly or 
negligently submit incomplete information.
    The Committee intends that the process for correction of 
minor errors and omissions on claims cover both the submission 
of prepayment and post-payment review claims. For example, if 
in the case of a home health claim, the physician has signed 
the plan of care and/or physician's order but has not dated it, 
the claim shall be returned to the home health agency and may 
be resubmitted by the home health agency with any incomplete or 
missing information without having to appeal the claim.

Section 10. Beneficiary outreach demonstration program

    Current Law.--No provision.
    Explanation of Provision.--The Secretary would be required 
to establish a 3-year demonstration project where Medicare 
specialists who are HHS employees are placed in at least six 
SSA offices to advise and assist Medicare beneficiaries. The 
SSA offices would be those with a high-volume of visits by 
Medicare beneficiaries; at least two of the offices would be in 
rural areas. In the rural SSA offices, the Secretary would 
provide for the Medicare specialists to travel among local 
offices on a scheduled basis. The Secretary would be required 
to (1) evaluate the project with respect to beneficiary 
utilization, beneficiary satisfaction, and cost-effectiveness 
and (2) recommend whether the demonstration should be 
established on a permanent basis.
    Effective Date.--Upon enactment.
    Reason for Change.--This provision makes Medicare experts 
available in six Social Security Administration offices to 
assist beneficiaries and answer their questions. The 
demonstration will test whether such outsourced Medicare 
specialists improve beneficiary utilization and understanding 
of the program, and beneficiary satisfaction.

Section 11. Policy development regarding evaluation and management 
        (E&M) documentation guidelines

    Current Law.--No provision.
    Explanation of Provision.--The Secretary would not be 
permitted to implement any documentation guidelines for 
evaluation and management (E&M) physician services unless the 
guidelines (1) are developed in collaboration with practicing 
physicians after assessment by the physician community; (2) 
based on a plan with deadlines for improving use of E&M codes; 
(3) are developed after completion of the pilot projects to 
test modifications to the codes; (4) are found to meet the 
desired objectives; and (5) are preceded by appropriate 
outreach and education of the physician community. The 
Secretary would make changes to existing E&M guidelines to 
reduce paperwork burdens on physicians. The Secretary would be 
required to modify E&M guidelines to (1) enhance clinically 
relevant documentation: (2) decrease the non-clinically 
pertinent documentation; (3) increase the reviewers' accuracy; 
and (4) educate the physicians and the reviewers.
    The provisions would establish different pilot projects in 
specified settings that would be (1) conducted in consultation 
with practicing physicians; (2) be ofsufficient length to 
educate physicians and contractors on E&M guidelines and (3) allow for 
an assessment of E&M guidelines and their use. A range of different 
projects would be established, including a peer review method by 
physicians as well as projects in a rural area, outside rural areas as 
well as in a teaching setting and non-teaching setting. One of the 
pilot programs would focus on an alternative method to detailed 
guidelines, based on physician documentation of face to face encounter 
time with a patient. The projects would examine the effect of modified 
E&M guidelines on different types of physician practices in terms of 
the cost of compliance. Data collected under these projects would not 
be the basis for overpayment demands or post-payment audits. The 
Secretary, in consultation with practicing physicians, would be 
required to evaluate the development of alternative E&M documentation 
systems with respect to administrative simplification requirements and 
report results of the study to Congress. The Medicare Payment Advisory 
Commission would conduct an analysis of the results of this study and 
submit a report to Congress.
    The Secretary would be required to conduct a study of the 
appropriate coding of extended office visits where no diagnosis 
is made and submit a report with recommendations to Congress.
    Effective Date.--Upon enactment.
    Reason for Change.--This provision is designed to promote 
greater consultation with practicing physicians with regard to 
the complicated evaluation and management and coding 
requirements governing Medicare payment for physician services.

Section 12. Improvement in oversight of technology and coverage

            (a) Improved coordination between FDA and CMS on coverage 
                    of breakthrough medical devices
    Current Law.--No provision.
    Explanation of Provision.--At the request of the applicant 
and to the extent feasible and upon request, the Secretary 
would be required to coordinate and share appropriate 
information under reviews of Medicare coverage decisions and 
Food and Drug Administration's (FDA) reviews of applications 
for pre-market approval of class III medical devices under 
Section 515 of the Federal Food, Drug, and Cosmetic Act. The 
Secretary would be required to submit a report on the 
implementation plan to lessen the delay between FDA's pre-
market approval and Medicare's coding and coverage decisions to 
the appropriate Congressional committees. This provision would 
not change Medicare's coverage nor FDA's pre-market approval 
criteria.
    Effective Date.--Upon enactment with report to Congress on 
implementation plan due no later than six months after 
enactment.
    Reason for Change.--After the FDA pre-market approval, the 
Medicare program does a second evaluation of breakthrough 
technologies to determine effectiveness and cost of those 
technologies compared to existing technologies. The review is 
necessary and appropriate, but it can take months between FDA 
approval and the availability of new technology for Medicare 
beneficiaries. By coordinating FDA and CMS approval of 
breakthrough medical devices, where feasible, this provision is 
intended to facilitate a more efficient process for the 
coverage of certain new technology by the Medicare program.
            (b) Council for Technology and Innovation
    Current Law.--No provision.
    Explanation of Provision.--The Secretary is required to 
establish a Council for Technology and Innovation within the 
Centers for Medicare and Medicaid Services (CMS) and appoint or 
designate a Executive Coordinator for Technology and 
Innovation. The Council would be composed of senior CMS staff 
chaired by the Executive Coordinator who reports to the CMS 
administrator. The Council shall coordinate Medicare's 
coverage, coding, and payment processes as well as information 
exchange with other entities with respect to new technologies 
and procedures, including drug therapies.
    Effective Date.--Upon enactment.
    Reason for Change.--CMS personnel responsible for coverage, 
coding and payment of medical innovation are often not well 
coordinated. This provisioncreates a focal point for technology 
and innovation within the Centers for Medicare and Medicaid Services by 
creating a Council to coordinate across the different Centers and 
Offices with responsibilities in this area. The Executive Coordinator 
also provides a single point of contact for outside groups, similar to 
recent initiatives launched by the Secretary for specific issues and 
types of providers.
            (c) GAO study on improvements in external data collection 
                    for use in the Medicare inpatient payment system
    Current Law.--No provision.
    Explanation of Provision.--GAO would be required to conduct 
a study which analyzes how external data can be collected for 
use in computing Medicare's inpatient hospital payments. The 
study may include an evaluation of the feasibility and 
appropriateness of using quarterly samples or special surveys 
among other methods. The study would include an analysis of 
whether other agencies, such as the Bureau of Labor Statistics 
in the Department of Commerce, are best suited to collect this 
information.
    Effective Date.--Report is due no later than October 1, 
2002.
            (d) Application of OSHA Blood Borne Pathogens standards to 
                    certain hospitals
    Current Law.--No provision.
    Explanation of Provision.--Public hospitals that are not 
otherwise subject to the Occupational Safety and Health Act of 
1970 would be required to comply with the Blood Borne Pathogens 
standard under section 1910.1030 of title 29 of the Code of 
Federal Regulations. A hospital that fails to comply with the 
requirement would be subject to a civil monetary penalty, but 
would not be terminated from participating in Medicare.
    Effective Date.--Applies to hospitals as of July 1, 2002.
    Reason for Change.--Last year, Congress enacted legislation 
that requires hospitals to utilize safe needles. However, that 
legislation only applies to non-government hospitals. Twenty-
four states have similar requirements on public hospitals. This 
provision would protect the health and safety of health care 
workers in those facilities by requiring public hospitals in 
the other 26 states and the District of Columbia to comply with 
this important standard.
            (e) IOM study on local coverage determinations
    Current Law.--No provision.
    Explanation of Provision.--The Secretary would be required 
to arrange for a study by the Institute of Medicine (IOM) that 
would examine the capabilities and information available to 
establish Medicare's local coverage determinations. The study 
would examine: (1) the consistency of definitions used in the 
determinations; (2) the extent to which the determinations are 
based on evidence; (3) the advantages and disadvantages of 
local decision making; (4) whether, in the absence of adequate 
data, determinations to cover experimental items or services 
are made in order to collect data; (5) the advantages and 
disadvantages of maintaining local medicare contractor advisory 
committees.
    Effective Date.--The IOM study would be due to the 
Secretary no later than three years after enactment when it 
would be promptly transmitted to Congress.
            (f) Methods for determining payment basis for new lab tests
    Current Law.--No provision.
    Explanation of Provision.--The Secretary would be required 
to establish by regulation procedures for determining the basis 
for any new clinical diagnostic laboratory test. The Secretary 
must make information available to the public on the 
methodology and data.
    Effective Date.--January 1, 2003.
    Reason for Change.--The Secretary of Health and Human 
Services is required to establish by regulation an open process 
for any clinical diagnostic laboratory test. Under the 
regulations, the Secretary shall develop criteria for use 
indetermining whether a laboratory test should be established through 
gap-filling or cross-walking to an existing code. When existing 
services are not sufficient and gap filling must be used, the criteria 
shall explain the basis of the data, the collection of the data, and 
the methodology for computing the rate.
    The intent of Congress is to open the process to allow CMS 
to have access to information from beneficiaries, physicians, 
health care experts and laboratories. Using the information it 
receives through this new process, CMS shall develop and make 
available to the public the information used to arrive at a 
final determination. The information will include the rationale 
for each such determination, the data on which the 
determination is based, and responses to public comments.

Section 13. Miscellaneous provisions

            (a) Treatment of hospitals for certain services under the 
                    Medicare Secondary Payor (MSP) provisions
    Current Law.--In certain instances when a beneficiary has 
other insurance coverage, Medicare becomes the secondary 
insurance. Medicare Secondary Payor is the Medicare program's 
process for coordination of benefits with other insurers. 
Section 1862(b)(6) of the Social Security Act requires an 
entity furnishing a Part B service to obtain information from 
the beneficiary on whether other insurance coverage is 
available.
    Explanation of Provision.--The Secretary would not require 
a hospital or a critical access hospital to ask questions or 
obtain information relating to the Medicare secondary payor 
provisions in the case of reference laboratory services if the 
same requirements are not imposed upon those provided by an 
independent laboratory. Reference laboratory services would be 
those clinical laboratory diagnostic tests and interpretations 
of same that are furnished without a face-to-face encounter 
between the beneficiary and the hospital where the hospital 
submits a claim for the services.
    Effective Date.--Upon enactment.
    Reason for Change.--Hospitals would not have to directly 
contact each beneficiary on their retirement date, black lung 
status and other insurance information for reference laboratory 
services. While current law provisions for a claim containing 
valid insurance information are maintained, this provision is 
intended to reduce the amount of paperwork and regulatory 
burden related to the provision of these reference laboratory 
services by hospital-based entities.
            (b) Clarification of prudent layperson test for emergency 
                    services under the Medicare fee-for-service program
    Current Law.--Medicare requires participating hospitals 
that operate an emergency room to provide necessary screening 
and stabilization services to a patient in order to determine 
whether an emergency medical situation exists prior to asking 
about insurance status of the patient.
    Explanation of Provision.--Services that are provided by a 
hospital or a critical access hospital to a Medicare 
beneficiary who is not enrolled in Medicare+Choice plans in 
order to evaluate or stabilize an emergency medical condition 
that meets the application of the prudent layperson rule are 
deemed to be reasonable and necessary covered services.
    Effective Date.--Effective for items or services furnished 
on or after January 1, 2002.
    Reason for Change.--This change is intended to clarify that 
services provided by hospitals under the Federal mandate on the 
provision of emergency services to assure the health and safety 
of Medicare beneficiaries are covered by the Medicare fee-for-
service program. It will eliminate regulatory burden by 
eliminating the necessity for the hospital to provide 
additional documentation or to appeal the denial of services 
provided under the prudent layperson standard. It is not 
intended to eliminate the section flexibility in a broader 
policy.
            (c) Submission of overdue reports on payment and 
                    utilization of outpatient therapy services
    Current Law.--Congress required the Secretary to submit a 
report by January 1, 2001 on the establishment of a mechanism 
for assuring appropriate utilization of outpatient therapy 
services. The Secretary was also required to conduct a study on 
the utilization of therapy services by June 30, 2001.
    Explanation of Provision.--The moratoria delaying annual 
outpatient therapy caps imposed by the Balanced Budget Act of 
1997 will expire on October 1, 2002. The Committee believes 
that the reimbursement policy for outpatient therapy services 
should be based on a policy that is not arbitrary but protects 
the program from the provision of inappropriate services. The 
Secretary is urged to submit the required reports to Congress 
immediately so that Congress can review any alternative 
policies on this issue as soon as possible.
    Effective Date.--Upon enactment.
            (d) Authorizing use of arrangements with other hospice 
                    programs to provide core hospice services in 
                    certain circumstances
    Current Law.--Hospice programs are not permitted to use 
services provided under arrangement rather to deliver hospice 
services. Services provided under arrangement are permitted for 
Part A and Part B hospital services as well as skilled nursing 
services. However, the originating hospital or skilled nursing 
facility is required to bill for the service and be responsible 
for the quality of care delivered by the subcontractor
    Explanation of Provision.--Hospice programs may enter into 
arrangements with another certified hospice program to provide 
services. The provision for under arrangement services is 
limited to extraordinary or non-routine circumstances, such as 
unanticipated periods of staffing shortages. The originating 
hospice program continues to bear the legal responsibility for 
billing and maintaining quality of care.
    Effective Date.--Upon enactment.
    Reason for Change.--Hospice programs would be allowed to 
use personnel from other hospice programs to provide services 
to hospice patients. The program is given the flexibility so 
that a hospice program could continue to serve a patient if he 
or she was temporarily out of the area due to travel. 
Otherwise, the provision of the care to the patient might be 
delayed by the paperwork and requirements in starting up a new 
service at another agency. It is the intent of Congress that 
the originating hospice maintains control over the billing and 
quality of care.

                               III. VOTES

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of H.R. 2768.

                       MOTION TO REPORT THE BILL

    H.R. 2768 was approved by voice vote with a quorum present

                          VOTES ON AMENDMENTS

    Chairman Thomas' amendment in the nature of a substitute 
was approved by voice vote with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made:
    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

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
Committee bill results in no increase in federal direct 
spending.

      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 Congressional Budget Office (CBO), the 
following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 5, 2001.
Hon. William M. Thomas,
Chairman, Committee on Ways and Means,
Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2768, the Medicare 
Regulatory and Contracting Reform Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Alexis 
Ahlstrom and Niall Brennan.
            Sincerely,
                                        Steven M. Lieberman
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 2768--Medicare Regulatory and Contracting Reform Act of 2001

    Summary: The Medicare Regulatory and Contracting Reform Act 
of 2001 would require the Centers for Medicare and Medicaid 
Services (CMS) to modify how Medicare regulations and policies 
are developed, communicated, and enforced, and would modify the 
procedures used to resolve disputes involving payment for 
services covered by Medicare. The bill would transfer certain 
administrative law judges from the Social Security 
Administration (SSA) to the Department of Health and Human 
Services (HHS). It would change the procedures by which 
Medicare makes contracts with entities, and would place new 
requirements on those entities. It would require the Secretary 
of HHS to conduct several demonstrations, and would require the 
completion of several studies and reports.
    Assuming the appropriation of the necessary funds, CBO 
estimates that implementing H.R. 2768 would cost $41 million in 
2002 and $548 million over the 2002-2006 period.
    The procedural changes required by H.R. 2768 would affect 
spending for services covered by Medicare, which is direct 
spending. However, many of the bill's requirements codify 
existing practices, while the other requirements would cause 
minor increases or decreases in spending for covered services. 
CBO estimates that the changes in direct spending would be 
insignificant. Because the bill would affect direct spending, 
pay-as-you-go procedures would apply.
    H.R. 2768 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA). The requirement for 
public hospitals participating in the Medicare program to 
comply with the bloodborne pathogens standard promulgated by 
the Occupational Safety and Health Administration (OSHA) would 
have cost implications for state and local governments. 
However, those requirements would be conditions of 
participating in a voluntary federal program and thus would not 
be intergovernmental mandates as defined in UMRA. H.R. 2768 
contains no private-sector mandates as defined in UMRA.
    Estimated Cost to the Federal Government: For this 
estimate, CBO assumes that the legislation would be enacted 
this fall and that estimated amounts would be appropriated each 
year. The costs of this legislation fall within budget function 
570 (Medicare).
    Basis of estimate: Table 1 shows the estimated 
authorization levels and outlays for Medicare administrative 
expenses under current law and under H.R. 2768. Assuming 
appropriation of the estimated amounts, CBO estimates that 
enacting H.R. 2768 would cost $41 million in 2002 and $548 
million over the 2002-2006 period.

                                 TABLE 1.--ESTIMATED BUDGET IMPACT OF H.R. 2768
----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2001     2002     2003     2004     2005     2006
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending for Medicare administrative costs under current
 law:
    Estimated budget authority \1\........................    3,352    3,500    3,646    3,797    3,955    4,118
    Estimated outlays.....................................    3,267    3,464    3,631    3,757    3,913    4,074
Proposed changes:
    Estimated authorization level.........................        0       46      125      134      126      130
    Estimated outlays.....................................        0       41      116      133      128      129
Spending for Medicare administrative costs under H.R.
 2768:
    Estimated authorization level.........................    3,352    3,546    3,771    3,931    4,081    4,248
    Estimated outlays.....................................    3,267    3,505    3,747    3,890    4,041    4,203
----------------------------------------------------------------------------------------------------------------
\1\ Budget authority for 2001 is the amount appropriated for that year.

    Contracting Reform.--Under current law, CMS contracts with 
fiscal intermediaries and carriers to process and pay claims, 
to educate providers regarding Medicare billing policy, and for 
other purposes. This bill would change both the method by which 
CMS enters into contracts and the activities required of 
contractors. CBO expects that these provisions would increase 
the cost of administering contracts, the total amount CMS 
spends on contracts, and spending by contractors on the 
education of providers about Medicare billing practices. We 
estimate the cost of implementing these provisions would be $14 
million in 2002 and $336 million during the 2002--2006 period.
    H.R. 2768 would direct CMS to provide incentives to 
contractors who meet or exceed certain performance standards. 
Based on information furnished by CMS, we estimate that the 
incentive payments would total 3 percent of operating payments 
to contractors, or about $233 million over the 2002-2006 
period.
    H.R. 2768 would require CMS to competitively bid contracts 
with fiscal intermediaries and carriers at least every five 
years. CBO expects that an additional 3-5 FTEs at the GS-12 
level would be needed throughout the period to write new 
competitively-bid contracts. The estimate assumes that about 
one-quarter of the contracts would be awarded to a nonincumbent 
bidder, and that it would cost about $2 million to transition 
between contractors. CBO estimates that implementing this 
provision would cost about $54 million over the 2002-2006 
period.
    In addition, the bill would direct the Medicare program to 
measure the payment error rates for individual contractors, 
which are believed to indicate how well providers understand 
proper Medicare billing procedures, with the intent of 
identifying contractors who have achieved high levels of 
provider education. This provision would expand current 
practice, which is to calculate a contractor-wide error rate. 
The bill would also expand the requirement for contractors to 
monitor the accuracy of information given to providers, and 
would limit the liability of contractors for payment errors. 
CBO estimates that complying with these provisions would cost 
about $27 million over the 2002-2006 period.
    The bill also would instruct contractors to tailor their 
educational efforts toward providers with staffs of fewer than 
26 people, or physicians with fewer than 11 staff members. The 
bill would authorize the appropriation of $10 million in 2003 
and in 2004 to provide additional educational services. CBO 
estimates that 80 percent of the authorized amount would be 
spent in the current fiscal year and 20 percent the year after.
    Appeals and Claims Payment Reform.--H.R. 2768 would change 
the processes by which Medicare pays claims and adjudicates 
appeals by providers of payment denials. CBO estimates that 
implementing these provisions would cost $9 million in 2002 and 
$104 million over the 2002-2006 period.
    Resubmission of claims.--Under current law, providers may 
pursue payment for claims initially submitted to contractors 
with errors and omissions either via resubmission of claims in 
some instances or via the appeals process. H.R. 2768 would 
direct CMS to expand the instances in which providers may 
resubmit claims directly to contractors. CBO expects that this 
provision would lead to an increase in the number of incomplete 
claims submitted and a 1 percent increase in the number of 
claims processed. We estimate that processing those incomplete 
claims would increase costs by $5 million in 2002 and by $46 
million over the 2002-2006 period.
    Reliance on guidance.--H.R. 2768 would prohibit any 
sanction (including recoupment of overpayments) of a provider 
who relies on written guidance from contractors. CBO assumes 
this provision would increase the number of requests for 
written guidance by 50 percent. Under current law, contractors 
are required to respond to those requests. CBO estimates that 
the cost to contractors of issuing written responses to the 
additional requests, and the cost to CMS of oversight of those 
responses, would total less than $500,000 in 2002 and $29 
million over the 2002-2006 period.
    Standardization of compliance actions.--The bill would also 
standardize existing policies regarding:
          Using random and non-random prepayment review;
          Using extrapolation after finding of overpayment;
          Enrolling providers and adjudicating appeals of 
        enrollment denials;
          Communicating findings of overpayment to providers;
          Notifying providers regarding billing codes that the 
        contractor suspects are being overused;
          Requiring providers to act within 45 days during the 
        consent settlement process;
          Collecting overpayments from providers.
    CBO estimates that implementing those provisions would cost 
$28 million over the 2002-2006 period.
    Appeals reform.--H.R. 2768 would modify the current appeals 
system. The bill would allow appellants to petition review 
boards for expedited access to judicial review outside of the 
Medicare review system. The bill would also require appellants 
to present all relevant evidence at the reconsideration level. 
These provisions are estimated to reduce administrative outlays 
by about $6 million over the 2002-2006 period because they are 
expected to reduce the caseload at the third and fourth level 
of appeals.
    The bill would transfer certain administrative law judges 
(ALJs) from the Social Security Administration to the 
Department of Health and Human Services. CBO estimates that the 
costs of planning and implementing the transfer, and providing 
the ALJs with additional training on Medicare issues, would 
total $8 million over the 2002-2006 period.
    These provisions would require CMS to make changes to 
current appeals and compliance systems but would not change the 
conditions under which Medicare would make payments to 
providers. Therefore, CBO estimates that these provisions would 
have no effect on direct spending.
    Demonstrations and New Program Areas.--H.R. 2768 would 
direct CMS to expand its programs to educate beneficiaries and 
providers. CBO estimates that implementing these provisions 
would cost $9 million in 2002 and $69 million during the 2002-
2006 period.
    The bill would create a demonstration project for the 
provision of technical services to small providers. 
Participating providers would receive education specifically 
related to their practice, as well as information about general 
Medicare billing and documentation requirements. Participants 
would contribute 25 percent of the costs of the technical 
assistance. The bill would authorize the appropriation of $1 
million in 2003 and $6 million in 2004 for the demonstration.
    The bill would also direct CMS to implement a three-year 
outreach demonstration in at least six locations throughout the 
United States. The program would involve the deployment of 
Medicare specialists to local Security Administration offices 
to provide beneficiaries assistance and advice regarding the 
Medicare program. CBO estimates that the costs of the 
demonstration, which would include the rental of office space, 
salaries for Medicare specialists, and travel, moving, and 
administrative expenses, would total $4 million over the 2002-
2006 period.
    H.R. 2768 would require CMS to develop two new ombudsman 
offices, for providers and beneficiaries, within the Medicare 
program. Each office would act as a liaison between either 
providers or beneficiaries and the agency. The offices would be 
responsible for offering advice and assistance to individuals 
regarding the program, as well as conveying the concerns of 
providers and beneficiaries to program officials. The bill 
would authorize such sums as may be necessary in 2002 and 
thereafter for these ombudsman offices. CBO estimates that the 
number of staff required to perform these functions would grow 
from 85 FTEs in 2002 to 155 FTEs in 2006. We estimate these 
ombudsman activities would cost $54 million over the 2002-2006 
period.
    H.R. 2768 would also require CMS to establish a Council for 
Technology and Innovation within CMS. The Secretary would 
appoint an Executive Coordinator for the council. CBO estimates 
that CMS would spend about $1 million a year to staff and 
operate the Council for Technology and Innovation.
    Development of Policies, Procedures, and Time Lines.--H.R. 
2768 would require CMS to develop new policies, procedures, and 
time lines with regard to the issuance of regulations, 
documentation guidelines for evaluation and management 
services, and the Medicare Secondary Payer program. CBO 
estimates the cost of implementing these provisions would be $9 
million in 2002 and $36 million during the 2002-2006 period.
    Final regulations.--The bill would require CMS to create a 
time line for the publication of final regulations and limit 
publication of new regulations to once a month. There currently 
are 22 ``interim final rules;'' the bill would require CMS to 
make those rules final, and would require CMS to finalize all 
future regulations.
    CBO estimates that it would cost about $9 million in 2002 
to finalize existing interim final rules. We estimate the CMS 
would need to hire an additional 3 to 5 staff, at the GS-11 
level or higher, and spend an additional $10 million through 
2006 to comply with the requirement to finalize all future 
interim regulations and to produce the required reports.
    Documentation guidelines for evaluation and management 
(E&M) services.--H.R. 2768 would restrict CMS from implementing 
new documentation guidelines for evaluation and management 
services until several conditions have been met. Those 
conditions include:
          Establishing plans to improve the guidelines;
          Completing pilot projects to test modifications to 
        the guidelines;
          Educating providers about the guidelines; and
          Consulting providers during the entire process of 
        testing and establishing the guidelines.
    CMS currently has E&M guidelines in place, and the bill 
would not require changes in those guidelines. CBO assumes that 
CMS will attempt to update those guidelines during the next few 
years, because both CMS and provider groups have expressed 
interest in doing so. The new procedural requirements would 
increase the cost of development and implementing new E&M 
guidelines. Establishing new guidelines for E&M documentation 
would require the hiring of at least two FTEs for 
administration of the pilot projects, for outreach to 
providers, and for consultation with providers. CBO further 
estimates that CMS would conduct at least three pilot projects, 
with each project costing around $1 million per year, and that 
the studies and reports required by these provisions would cost 
another $1 million.
    Medicare Secondary Payer program.--The Medicare Secondary 
Payer program requires providers and suppliers to collect 
insurance information from beneficiaries to determine whether 
Medicare will be the secondary payer on a claim. The bill would 
restrict Medicare from implementing special requirements for 
hospital-based laboratories that act as referral laboratories, 
with respect to gathering insurance information from patients, 
unlessindependent laboratories are also required to collect 
such information. Under current policy, referral laboratories, which 
conduct tests without direct contact with patients, would have to begin 
gathering this information beginning in January 2002. CBO estimates 
that the costs of complying with this provision would be negligible.
    Medicare Coverage Policies.--H.R. 2768 would change the 
timing of CMS's national coverage decisions concerning certain 
new technologies. Upon request by an applicant, the Secretary 
would be required, to the extent feasible, to coordinate 
reviews of coverage decisions with the review for premarket 
approval conducted by the Food and Drug Administration. H.R. 
2768 would require the Secretary to submit to the Congress a 
plan for achieving such coordination within six months. CBO 
estimates that establishing and operating the coordination 
process would cost $1 million in 2002 and $3 million over the 
2002-2006 period.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. CBO 
estimates that the bill would not affect receipts and would 
have no significant effect on direct spending.
    Estimated impact on state, local, and tribal governments: 
H.R. 2768 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act. The requirement for public 
hospitals participating in the Medicare program to comply with 
OSHA's bloodborne pathogens standard would have cost 
implications for state and local governments. The current OSHA 
standard applies to all private-sector employers with one or 
more employees, as well as to federal civilian employees. This 
bill would extend the requirement to all hospitals 
participating in the Medicare program, including state and 
local public hospitals. About half of the states currently have 
bloodborne pathogen standards that apply to these hospitals 
that are at least as stringent as the federal standard. Public 
hospitals in the remaining states could face additional costs 
as a result of the new requirement. Those costs, however, would 
result from participating in Medicare, a voluntary federal 
program, and thus would not be costs of an intergovernmental 
mandate as defined in UMRA.
    Estimated impact on the private sector: H.R. 2768 contains 
no private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal costs: Alexis Ahlstrom and 
Niall Brennan; impact on state, local, and tribal governments: 
Leo Lex; impact on the private sector: Stuart Guterman.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
need for this legislation was confirmed by the oversight 
hearings of the Subcommittee of Health. The hearings were as 
follows:
    The Subcommittee on Health held a hearing on March 15, 2001 
to examine how government can do its job better to ensure that 
beneficiaries are protected and that taxpayer dollars are used 
wisely and responsibly without placing undue burdens on 
providers. Testimony at the hearing was presented by the Office 
of the Inspector General, patient and provider groups and 
experts on the Medicare program.
    On September 25, 2001, the Subcommittee held a hearing on 
H.R. 2768, which includes provisions for facilitating access by 
beneficiaries and providers to information on the Medicare 
program, for improving the administration of the Medicare 
program and for reducing regulatory burden. The hearing 
included testimony from the Administration, the General 
Accounting Office, and health care providers.

         B. Summary of General Performance Goals and Objectives

    In compliance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
primary purpose of H.R. 2768 is to create a more collaborative, 
less confrontational relationship between providers and CMS.

                 C. Constitutional Authority Statement

    In compliance with clause 3(d)(1) of rule XIII of the Rules 
of the House of Representatives, relating to constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *'').

       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, existing law in which no change is 
proposed is shown in roman):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *

TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *

     notice of medicare benefits; medicare and medigap information

  Sec. 1804. (a)  * * *
  (b) The Secretary shall provide information via a toll-free 
telephone number on the programs under this title. The 
Secretary shall provide, through the toll-free number 1-800-
MEDICARE, for a means by which individuals seeking information 
about, or assistance with, such programs who phone such toll-
free number are transferred (without charge) to appropriate 
entities for the provision of such information or assistance. 
Such toll-free number shall be the toll-free number listed for 
general information and assistance in the annual notice under 
subsection (a) instead of the listing of numbers of individual 
contractors.

           *       *       *       *       *       *       *

                     medicare beneficiary ombudsman

  Sec. 1807. (a) In General.--The Secretary shall appoint 
within the Department of Health and Human Services a Medicare 
Beneficiary Ombudsman who shall have expertise and experience 
in the fields of health care and advocacy.
  (b) Duties.--The Medicare Beneficiary Ombudsman shall--
          (1) receive complaints, grievances, and requests for 
        information submitted by a medicare beneficiary, with 
        respect to any aspect of the medicare program;
          (2) provide assistance with respect to complaints, 
        grievances, and requests referred to in paragraph (1), 
        including--
                  (A) assistance in collecting relevant 
                information for such beneficiaries, to seek an 
                appeal of a decision or determination made by a 
                fiscal intermediary, carrier, Medicare+Choice 
                organization, or the Secretary; and
                  (B) assistance to such beneficiaries with any 
                problems arising from disenrollment from a 
                Medicare+Choice plan under part C; and
          (3) submit annual reports to Congress and the 
        Secretary that describe the activities of the Office 
        and that include such recommendations for improvement 
        in the administration of this title as the Ombudsman 
        determines appropriate.

           *       *       *       *       *       *       *

Part A--Hospital Insurance Benefits for the Aged and Disabled

           *       *       *       *       *       *       *

         CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES

               Requirement of Requests and Certifications

  Sec. 1814. (a)  * * *

           *       *       *       *       *       *       *

                        Payment for Hospice Care

  (i)(1)  * * *

           *       *       *       *       *       *       *

  (4) In the case of hospice care provided by a hospice program 
under arrangements under section 1861(dd)(5)(D) made by another 
hospice program, the hospice program that made the arrangements 
shall bill and be paid for the hospice care.

           *       *       *       *       *       *       *

[USE OF PUBLIC AGENCIES OR PRIVATE ORGANIZATIONS TO FACILITATE PAYMENT 
                       TO PROVIDERS OF SERVICES]

          provisions relating to the administration of part a

  Sec. 1816. [(a) If any group or association of providers of 
services wishes to have payments under this part to such 
providers made through a national, State, or other public or 
private agency or organization and nominates such agency or 
organization for this purpose, the Secretary is authorized to 
enter into an agreement with such agency or organization 
providing for the determination by such agency or organization 
(subject to the provisions of section 1878 and to such review 
by the Secretary as may be provided for by the agreement) of 
the amount of the payments required pursuant to this part to be 
made to such providers (and to providers assigned to such 
agency or organization under subsection (e)), and for the 
making of such payments by such agency or organization to such 
providers (and to providers assigned to such agency or 
organization under subsection (e)). Such agreement may also 
include provision for the agency or organization to do all or 
any part of the following: (1) to provide consultative services 
to institutions or agencies to enable them to establish and 
maintain fiscal records necessary for purposes of this part and 
otherwise to qualify as hospitals, extended care facilities, or 
home health agencies, and (2) with respect to the providers of 
services which are to receive payments through it (A) to serve 
as a center for, and communicate to providers, any information 
or instructions furnished to it by the Secretary, and serve as 
a channel of communication from providers to the Secretary; (B) 
to make such audits of the records ofproviders as may be 
necessary to insure that proper payments are made under this part; and 
(C) to perform such other functions as are necessary to carry out this 
subsection. As used in this title and part B of title XI, the term 
``fiscal intermediary'' means an agency or organization with a contract 
under this section.
  [(b) The Secretary shall not enter into or renew an agreement 
with any agency or organization under this section unless--
          [(1) he finds--
                  [(A) after applying the standards, criteria, 
                and procedures developed under subsection (f), 
                that to do so is consistent with the effective 
                and efficient administration of this part, and
                  [(B) that such agency or organization is 
                willing and able to assist the providers to 
                which payments are made through it under this 
                part in the application of safeguards against 
                unnecessary utilization of services furnished 
                by them to individuals entitled to hospital 
                insurance benefits under section 226, and the 
                agreement provides for such assistance; and
          [(2) such agency or organization agrees--
                  [(A) to furnish to the Secretary such of the 
                information acquired by it in carrying out its 
                agreement under this section, and
                  [(B) to provide the Secretary with access to 
                all such data, information, and claims 
                processing operations,
        as the Secretary may find necessary in performing his 
        functions under this part.]
  (a) The administration of this part shall be conducted 
through contracts with medicare administrative contractors 
under section 1874A.
  (c)[(1) An agreement with any agency or organization under 
this section may contain such terms and conditions as the 
Secretary finds necessary or appropriate, may provide for 
advances of funds to the agency or organization for the making 
of payments by it under subsection (a), and shall provide for 
payment of so much of the cost of administration of the agency 
or organization as is determined by the Secretary to be 
necessary and proper for carrying out the functions covered by 
the agreement. The Secretary shall provide that in determining 
the necessary and proper cost of administration, the Secretary 
shall, with respect to each agreement, take into account the 
amount that is reasonable and adequate to meet the costs which 
must be incurred by an efficiently and economically operated 
agency or organization in carrying out the terms of its 
agreement. The Secretary shall cause to have published in the 
Federal Register, by not later than September 1 before each 
fiscal year, data, standards, and methodology to be used to 
establish budgets for fiscal intermediaries under this section 
for that fiscal year, and shall cause to be published in the 
Federal Register for public comment, at least 90 days before 
such data, standards, and methodology are published, the data, 
standards, and methodology proposed to be used. The Secretary 
may not require, as a condition of entering into or renewing an 
agreement under this section or under section 1871, that a 
fiscal intermediary match data obtained other than in its 
activities under this part with data used in the administration 
of this part for purposes of identifying situations in which 
the provisions of section 1862(b) may apply.]
  (2)(A) Each [agreement under this section] contract under 
section 1874A that provides for making payments under this part 
shall provide that payment shall be issued, mailed, or 
otherwise transmitted with respect to not less than 95 percent 
of all claims submitted under this title--
          (i)  * * *

           *       *       *       *       *       *       *

  (3)(A) Each [agreement under this section] contract under 
section 1874A that provides for making payments under this part 
shall provide that no payment shall be issued, mailed, or 
otherwise transmitted with respect to any claim submitted under 
this title within the applicable number of calendar days after 
the date on which the claim is received.

           *       *       *       *       *       *       *

  [(d) If the nomination of an agency or organization as 
provided in this section is made by a group or association of 
providers of services, it shall not be binding on members of 
the group or association which notify the Secretary of their 
election to that effect. Any provider may, upon such notice as 
may be specified in the agreement under this section with an 
agency or organization, withdraw its nomination to receive 
payments through such agency or organization. Any provider 
which has withdrawn its nomination, and any provider which has 
not made a nomination, may elect to receive payments from any 
agency or organization which has entered into an agreement with 
the Secretary under this section if the Secretary and such 
agency or organization agree to it.
  [(e)(1) Notwithstanding subsections (a) and (d), the 
Secretary, after taking into consideration any preferences of 
providers of services, may assign or reassign any provider of 
services to any agency or organization which has entered into 
an agreement with him under this section, if he determines, 
after applying the standards, criteria, and procedures 
developed under subsection (f), that such assignment or 
reassignment would result in the more effective and efficient 
administration of this part.
  [(2) Notwithstanding subsections (a) and (d), the Secretary 
may (subject to the provisions of paragraph (4)) designate a 
national or regional agency or organization which has entered 
into an agreement with him under this section to perform 
functions under the agreement with respect to a class of 
providers of services in the Nation or region (as the case may 
be), if he determines, after applying the standards, criteria, 
and procedures developed under subsection (f), that such 
designation would result in more effective and efficient 
administration of this part.
  [(3)(A) Before the Secretary makes an assignment or 
reassignment under paragraph (1) of a provider of services to 
other than the agency or organization nominated by the 
provider, he shall furnish (i) the provider and such agency or 
organization with a full explanation of the reasons for his 
determination as to the efficiency and effectiveness of the 
agency or organization to perform the functions required under 
this part with respect to the provider, and (ii) such agency or 
organization with opportunity for a hearing, andsuch 
determination shall be subject to judicial review in accordance with 
chapter 7 of title 5, United States Code.
  [(B) Before the Secretary makes a designation under paragraph 
(2) with respect to a class of providers of services, he shall 
furnish (i) such providers and the agencies and organizations 
adversely affected by such designation with a full explanation 
of the reasons for his determination as to the efficiency and 
effectiveness of such agencies and organizations to perform the 
functions required under this part with respect to such 
providers, and (ii) the agencies and organizations adversely 
affected by such designation with opportunity for a hearing, 
and such determination shall be subject to judicial review in 
accordance with chapter 7 of title 5, United States Code.
  [(4) Notwithstanding subsections (a) and (d) and paragraphs 
(1), (2), and (3) of this subsection, the Secretary shall 
designate regional agencies or organizations which have entered 
into an agreement with him under this section to perform 
functions under such agreement with respect to home health 
agencies (as defined in section 1861(o)) in the region, except 
that in assigning such agencies to such designated regional 
agencies or organizations the Secretary shall assign a home 
health agency which is a subdivision of a hospital (and such 
agency and hospital are affiliated or under common control) 
only if, after applying such criteria relating to 
administrative efficiency and effectiveness as he shall 
promulgate, he determines that such assignment would result in 
the more effective and efficient administration of this title. 
By not later than July 1, 1987, the Secretary shall limit the 
number of such regional agencies or organizations to not more 
than ten.
  [(5) Notwithstanding any other provision of this title, the 
Secretary shall designate the agency or organization which has 
entered into an agreement under this section to perform 
functions under such an agreement with respect to each hospice 
program, except that with respect to a hospice program which is 
a subdivision of a provider of services (and such hospice 
program and provider of services are under common control) due 
regard shall be given to the agency or organization which 
performs the functions under this section for the provider of 
services.
  [(f)(1) In order to determine whether the Secretary should 
enter into, renew, or terminate an agreement under this section 
with an agency or organization, whether the Secretary should 
assign or reassign a provider of services to an agency or 
organization, and whether the Secretary should designate an 
agency or organization to perform services with respect to a 
class of providers of services, the Secretary shall develop 
standards, criteria, and procedures to evaluate such agency's 
or organization's (A) overall performance of claims processing 
(including the agency's or organization's success in recovering 
payments made under this title for services for which payment 
has been or could be made under a primary plan (as defined in 
section 1862(b)(2)(A))) and other related functions required to 
be performed by such an agency or organization under an 
agreement entered into under this section, and (B) performance 
of such functions with respect to specific providers of 
services, and the Secretary shall establish standards and 
criteria with respect to the efficient and effective 
administration of this part. No agency or organization shall be 
found under such standards and criteria not to be efficient or 
effective or to be less efficient or effective solely on the 
ground that the agency or organization serves only providers 
located in a single State.
  [(2) The standards and criteria established under paragraph 
(1) shall include--
          [(A) with respect to claims for services furnished 
        under this part by any provider of services other than 
        a hospital--
                  [(i) whether such agency or organization is 
                able to process 75 percent of reconsiderations 
                within 60 days (except in the case of fiscal 
                year 1989, 66 percent of reconsiderations) and 
                90 percent of reconsiderations within 90 days, 
                and
                  [(ii) the extent to which such agency's or 
                organization's determinations are reversed on 
                appeal; and
          [(B) with respect to applications for an exemption 
        from or exception or adjustment to the target amount 
        applicable under section 1886(b) to a hospital that is 
        not a subsection (d) hospital (as defined in section 
        1886(d)(1)(B))--
                  [(i) if such agency or organization receives 
                a completed application, whether such agency or 
                organization is able to process such 
                application not later than 75 days after the 
                application is filed, and
                  [(ii) if such agency or organization receives 
                an incomplete application, whether such agency 
                or organization is able to return the 
                application with instructions on how to 
                complete the application not later than 60 days 
                after the application is filed.
  [(g) An agreement with the Secretary under this section may 
be terminated--
          [(1) by the agency or organization which entered into 
        such agreement at such time and upon such notice to the 
        Secretary, to the public, and to the providers as may 
        be provided in regulations, or
          [(2) by the Secretary at such time and upon such 
        notice to the agency or organization, to the providers 
        which have nominated it for purposes of this section, 
        and to the public, as may be provided in regulations, 
        but only if he finds, after applying the standards, 
        criteria, and procedures developed under subsection (f) 
        and after reasonable notice and opportunity for hearing 
        to the agency or organization, that (A) the agency or 
        organization has failed substantially to carry out the 
        agreement, or (B) the continuation of some or all of 
        the functions provided for in the agreement with the 
        agency or organization is disadvantageous or is 
        inconsistent with the efficient administration of this 
        part.
  [(h) An agreement with an agency or organization under this 
section may require any of its officers or employees certifying 
payments or disbursing funds pursuant to the agreement, or 
otherwise participating in carrying out the agreement, to give 
surety bond to the United States in such amount as the 
Secretary may deem appropriate.
  [(i)(1) No individual designated pursuant to an agreement 
under this section as a certifying officer shall, in the 
absence ofgross negligence or intent to defraud the United 
States, be liable with respect to any payments certified by him under 
this section.
  [(2) No disbursing officer shall, in the absence of gross 
negligence or intent to defraud the United States, be liable 
with respect to any payment by him under this section if it was 
based upon a voucher signed by a certifying officer designated 
as provided in paragraph (1) of this subsection.
  [(3) No such agency or organization shall be liable to the 
United States for any payments referred to in paragraph (1) or 
(2).]
  (j) [An agreement with an agency or organization under this 
section] A contract with a medicare administrative contractor 
under section 1874A with respect to the administration of this 
part shall require that, with respect to a claim for home 
health services, extended care services, or post-hospital 
extended care services submitted by a provider to [such agency 
or organization] such medicare administrative contractor that 
is denied, [such agency or organization] such medicare 
administrative contractor--
          (1) furnish the provider and the individual with 
        respect to whom the claim is made with a written 
        explanation of the denial and of the statutory or 
        regulatory basis for the denial; and
          (2) in the case of a request for reconsideration of a 
        denial, promptly notify such individual and the 
        provider of the disposition of such reconsideration.
  (k) [An agreement with an agency or organization under this 
section] A contract with a medicare administrative contractor 
under section 1874A with respect to the administration of this 
part shall require that [such agency or organization] such 
medicare administrative contractor submit an annual report to 
the Secretary describing the steps taken to recover payments 
made for items or services for which payment has been or could 
be made under a primary plan (as defined in section 
1862(b)(2)(A)).
  [(l) No agency or organization may carry out (or receive 
payment for carrying out) any activity pursuant to an agreement 
under this section to the extent that the activity is carried 
out pursuant to a contract under the Medicare Integrity Program 
under section 1893.]

           *       *       *       *       *       *       *

   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *

                          PAYMENT OF BENEFITS

  Sec. 1833. (a)  * * *

           *       *       *       *       *       *       *

  (h)(1)  * * *

           *       *       *       *       *       *       *

  (8)(A) The Secretary shall establish by regulation procedures 
for determining the basis for, and amount of, payment under 
this subsection for any clinical diagnostic laboratory test 
with respect to which a new or substantially revised HCPCS code 
is assigned on or after January 1, 2003 (in this paragraph 
referred to as ``new tests'').
  (B) Determinations under subparagraph (A) shall be made only 
after the Secretary--
          (i) makes available to the public (through an 
        Internet site and other appropriate mechanisms) a list 
        that includes any such test for which establishment of 
        a payment amount under this subsection is being 
        considered for a year;
          (ii) on the same day such list is made available, 
        causes to have published in the Federal Register notice 
        of a meeting to receive comments and recommendations 
        (and data on which recommendations are based) from the 
        public on the appropriate basis under this subsection 
        for establishing payment amounts for the tests on such 
        list;
          (iii) not less than 30 days after publication of such 
        notice convenes a meeting, that includes 
        representatives of officials of the Centers for 
        Medicare & Medicaid Services involved in determining 
        payment amounts, to receive such comments and 
        recommendations (and data on which the recommendations 
        are based);
          (iv) taking into account the comments and 
        recommendations (and accompanying data) received at 
        such meeting, develops and makes available to the 
        public (through an Internet site and other appropriate 
        mechanisms) a list of proposed determinations with 
        respect to the appropriate basis for establishing a 
        payment amount under this subsection for each such 
        code, together with an explanation of the reasons for 
        each such determination, the data on which the 
        determinations are based, and a request for public 
        written comments on the proposed determination; and
          (v) taking into account the comments received during 
        the public comment period, develops and makes available 
        to the public (through an Internet site and other 
        appropriate mechanisms) a list of final determinations 
        of the payment amounts for such tests under this 
        subsection, together with the rationale for each such 
        determination, the data on which the determinations are 
        based, and responses to comments and suggestions 
        received from the public.
  (C) Under the procedures established pursuant to subparagraph 
(A), the Secretary shall--
          (i) set forth the criteria for making determinations 
        under subparagraph (A); and
          (ii) make available to the public the data (other 
        than proprietary data) considered in making such 
        determinations.
  (D) The Secretary may convene such further public meetings to 
receive public comments on payment amounts for new tests under 
this subsection as the Secretary deems appropriate.
  (E) For purposes of this paragraph:
          (i) The term ``HCPCS'' refers to the Health Care 
        Procedure Coding System.
          (ii) A code shall be considered to be ``substantially 
        revised'' if there is a substantive change to the 
        definition of the test or procedure to which the code 
        applies (such as a new analyte ora new methodology for 
measuring an existing analyte-specific test).

           *       *       *       *       *       *       *

            [USE OF CARRIERS FOR ADMINISTRATION OF BENEFITS]

          provisions relating to the administration of part b

  Sec. 1842. [(a) In order to provide for the administration of 
the benefits under this part with maximum efficiency and 
convenience for individuals entitled to benefits under this 
part and for providers of services and other persons furnishing 
services to such individuals, and with a view to furthering 
coordination of the administration of the benefits under part A 
and under this part, the Secretary is authorized to enter into 
contracts with carriers, including carriers with which 
agreements under section 1816 are in effect, which will perform 
some or all of the following functions (or, to the extent 
provided in such contracts, will secure performance thereof by 
other organizations); and, with respect to any of the following 
functions which involve payments for physicians' services on a 
reasonable charge basis, the Secretary shall to the extent 
possible enter into such contracts:
          [(1)(A) make determinations of the rates and amounts 
        of payments required pursuant to this part to be made 
        to providers of services and other persons on a 
        reasonable cost or reasonable charge basis (as may be 
        applicable);
          [(B) receive, disburse, and account for funds in 
        making such payments; and
          [(C) make such audits of the records of providers of 
        services as may be necessary to assure that proper 
        payments are made under this part;
          [(2)(A) determine compliance with the requirements of 
        section 1861(k) as to utilization review; and
          [(B) assist providers of services and other persons 
        who furnish services for which payment may be made 
        under this part in the development of procedures 
        relating to utilization practices, make studies of the 
        effectiveness of such procedures and methods for their 
        improvement, assist in the application of safeguards 
        against unnecessary utilization of services furnished 
        by providers of services and other persons to 
        individuals entitled to benefits under this part, and 
        provide procedures for and assist in arranging, where 
        necessary, the establishment of groups outside 
        hospitals (meeting the requirements of section 
        1861(k)(2)) to make reviews of utilization;
          [(3) serve as a channel of communication of 
        information relating to the administration of this 
        part; and
          [(4) otherwise assist, in such manner as the contract 
        may provide, in discharging administrative duties 
        necessary to carry out the purposes of this part.]
  (a) The administration of this part shall be conducted 
through contracts with medicare administrative contractors 
under section 1874A.
  (b)[(1) Contracts with carriers under subsection (a) may be 
entered into without regard to section 3709 of the Revised 
Statutes or any other provision of law requiring competitive 
bidding.]
  (2)[(A) No such contract shall be entered into with any 
carrier unless the Secretary finds that such carrier will 
perform its obligations under the contract efficiently and 
effectively and will meet such requirements as to financial 
responsibility, legal authority, and other matters as he finds 
pertinent. The Secretary shall publish in the Federal Register 
standards and criteria for the efficient and effective 
performance of contract obligations under this section, and 
opportunity shall be provided for public comment prior to 
implementation. In establishing such standards and criteria, 
the Secretary shall provide a system to measure a carrier's 
performance of responsibilities described in paragraph (3)(H), 
subsection (h), and section 1845(e)(2). The Secretary may not 
require, as a condition of entering into or renewing a contract 
under this section or under section 1871, that a carrier match 
data obtained other than in its activities under this part with 
data used in the administration of this part for purposes of 
identifying situations in which section 1862(b) may apply.
  [(B) The Secretary shall establish standards for evaluating 
carriers' performance of reviews of initial carrier 
determinations and of fair hearings under paragraph (3)(C), 
under which a carrier is expected--
          [(i) to complete such reviews, within 45 days after 
        the date of a request by an individual enrolled under 
        this part for such a review, in 95 percent of such 
        requests, and
          [(ii) to make a final determination, within 120 days 
        after the date of receipt of a request by an individual 
        enrolled under this part for a fair hearing under 
        paragraph (3)(C), in 90 percent of such cases.]
  (C) In the case of residents of nursing facilities who 
receive services described in clause (i) or (ii) of section 
1861(s)(2)(K) performed by a member of a team, the Secretary 
shall instruct [carriers] medicare administrative contractors 
to develop mechanisms which permit routine payment under this 
part for up to 1.5 visits per month per resident. In the 
previous sentence, the term ``team'' refers to a physician and 
includes a physician assistant acting under the supervision of 
the physician or a nurse practitioner working in collaboration 
with that physician, or both.
  [(D) In addition to any other standards and criteria 
established by the Secretary for evaluating carrier performance 
under this paragraph relating to avoiding erroneous payments, 
the carrier shall be subject to standards and criteria relating 
to the carrier's success in recovering payments made under this 
part for items or services for which payment has been or could 
be made under a primary plan (as defined in section 
1862(b)(2)(A)).
  [(E) With respect to the payment of claims for home health 
services under this part that, but for the amendments made by 
section 4611 of the Balanced Budget Act of 1997, would be 
payable under part A instead of under this part, the Secretary 
shall continue administration of such claims through fiscal 
intermediaries under section 1816.]
  (3) [Each such contract shall provide that the carrier] The 
Secretary--
          (A) [will] shall take such action as may be necessary 
        to assure that, where payment under this part for a 
        service is ona cost basis, the cost is reasonable cost 
(as determined under section 1861(v));
          (B) [will] shall take such action as may be necessary 
        to assure that, where payment under this part for a 
        service is on a charge basis, such charge will be 
        reasonable and not higher than the charge applicable, 
        for a comparable service and under comparable 
        circumstances, [to the policyholders and subscribers of 
        the carrier] to the policyholders and subscribers of 
        the medicare administrative contractor, and such 
        payment will (except as otherwise provided in section 
        1870(f)) be made--
                  (i) on the basis of an itemized bill; or
                  (ii) on the basis of an assignment under the 
                terms of which (I) the reasonable charge is the 
                full charge for the service, (II) the physician 
                or other person furnishing such service agrees 
                not to charge (and to refund amounts already 
                collected) for services for which payment under 
                this title is denied under section 1154(a)(2) 
                by reason of a determination under section 
                1154(a)(1)(B), and (III) the physician or other 
                person furnishing such service agrees not to 
                charge (and to refund amounts already 
                collected) for such service if payment may not 
                be made therefor by reason of the provisions of 
                paragraph (1) of section 1862(a), and if the 
                individual to whom such service was furnished 
                was without fault in incurring the expenses of 
                such service, and if the Secretary's 
                determination that payment (pursuant to such 
                assignment) was incorrect and was made 
                subsequent to the third year following the year 
                in which notice of such payment was sent to 
                such individual; except that the Secretary may 
                reduce such three-year period to not less than 
                one year if he finds such reduction is 
                consistent with the objectives of this title 
                (except in the case of physicians' services and 
                ambulance service furnished as described in 
                section 1862(a)(4), other than for purposes of 
                section 1870(f));
        but (in the case of bills submitted, or requests for 
        payment made, after March 1968) only if the bill is 
        submitted, or a written request for payment is made in 
        such other form as may be permitted under regulations, 
        no later than the close of the calendar year following 
        the year in which such service is furnished (deeming 
        any service furnished in the last 3 months of any 
        calendar year to have been furnished in the succeeding 
        calendar year);
          [(C) will establish and maintain procedures pursuant 
        to which an individual enrolled under this part will be 
        granted an opportunity for a fair hearing by the 
        carrier, in any case where the amount in controversy is 
        at least $100, but less than $500, when requests for 
        payment under this part with respect to services 
        furnished him are denied or are not acted upon with 
        reasonable promptness or when the amount of such 
        payment is in controversy;
          [(D) will furnish to the Secretary such timely 
        information and reports as he may find necessary in 
        performing his functions under this part;
          [(E) will maintain such records and afford such 
        access thereto as the Secretary finds necessary to 
        assure the correctness and verification of the 
        information and reports under subparagraph (D) and 
        otherwise to carry out the purposes of this part;]
          (F) [will] shall take such action as may be necessary 
        to assure that where payment under this part for a 
        service rendered is on a charge basis, such payment 
        shall be determined on the basis of the charge that is 
        determined in accordance with this section on the basis 
        of customary and prevailing charge levels in effect at 
        the time the service was rendered or, in the case of 
        services rendered more than 12 months before the year 
        in which the bill is submitted or request for payment 
        is made, on the basis of such levels in effect for the 
        12-month period preceding such year;
          (G) [will] shall, for a service that is furnished 
        with respect to an individual enrolled under this part, 
        that is not paid on an assignment-related basis, and 
        that is subject to a limiting charge under section 
        1848(g)--
                  (i)  * * *

           *       *       *       *       *       *       *

          (H) [if it makes determinations or payments with 
        respect to physicians' services, will] shall 
        implement--
                  (i) programs to recruit and retain physicians 
                as participating physicians in the area served 
                by the [carrier] medicare administrative 
                contractor, including educational and outreach 
                activities and the use of professional 
                relations personnel to handle billing and other 
                problems relating to payment of claims of 
                participating physicians; and

           *       *       *       *       *       *       *

          [(I) will submit annual reports to the Secretary 
        describing the steps taken to recover payments made 
        under this part for items or services for which payment 
        has been or could be made under a primary plan (as 
        defined in section 1862(b)(2)(A)); and]
          (L) [will] shall monitor and profile physicians' 
        billing patterns within each area or locality and 
        provide comparative data to physicians whose 
        utilization patterns vary significantly from other 
        physicians in the same payment area or locality[;].
[and shall contain such other terms and conditions not 
inconsistent with this section as the Secretary may find 
necessary or appropriate.] In determining the reasonable charge 
for services for purposes of this paragraph, there shall be 
taken into consideration the customary charges for similar 
services generally made by the physician or other person 
furnishing such services, as well as the prevailing charges in 
the locality for similar services. No charge may be determined 
to be reasonable in the case of bills submitted or requests for 
payment made under this part after December 31, 1970, if it 
exceeds the higher of (i) the prevailing charge recognized by 
the carrier and found acceptable by the Secretary for similar 
services in the same locality in administering this part on 
December 31, 1970, or (ii) the prevailing charge level that, on 
the basis of statistical data and methodology acceptable to the 
Secretary, wouldcover 75 percent of the customary charges made 
for similar services in the same locality during the 12-month period 
ending on the June 30 last preceding the start of the calendar year in 
which the service is rendered. In the case of physicians' services the 
prevailing charge level determined for purposes of clause (ii) of the 
preceding sentence for any twelve-month period (beginning after June 
30, 1973) specified in clause (ii) of such sentence may not exceed (in 
the aggregate) the level determined under such clause for the fiscal 
year ending June 30, 1973, or (with respect to physicians' services 
furnished in a year after 1987) the level determined under this 
sentence (or under any other provision of law affecting the prevailing 
charge level) for the previous year except to the extent that the 
Secretary finds, on the basis of appropriate economic index data, that 
such higher level is justified by year-to-year economic changes. With 
respect to power-operated wheelchairs for which payment may be made in 
accordance with section 1861(s)(6), charges determined to be reasonable 
may not exceed the lowest charge at which power-operated wheelchairs 
are available in the locality. In the case of medical services, 
supplies, and equipment (including equipment servicing) that, in the 
judgment of the Secretary, do not generally vary significantly in 
quality from one supplier to another, the charges incurred after 
December 31, 1972, determined to be reasonable may not exceed the 
lowest charge levels at which such services, supplies, and equipment 
are widely and consistently available in a locality except to the 
extent and under the circumstances specified by the Secretary. The 
requirement in subparagraph (B) that a bill be submitted or request for 
payment be made by the close of the following calendar year shall not 
apply if (I) failure to submit the bill or request the payment by the 
close of such year is due to the error or misrepresentation of an 
officer, employee, fiscal intermediary, carrier, medicare 
administrative contractor, or agent of the Department of Health and 
Human Services performing functions under this title and acting within 
the scope of his or its authority, and (II) the bill is submitted or 
the payment is requested promptly after such error or misrepresentation 
is eliminated or corrected. Notwithstanding the provisions of the third 
and fourth sentences preceding this sentence, the prevailing charge 
level in the case of a physician service in a particular locality 
determined pursuant to such third and fourth sentences for any calendar 
year after 1974 shall, if lower than the prevailing charge level for 
the fiscal year ending June 30, 1975, in the case of a similar 
physician service in the same locality by reason of the application of 
economic index data, be raised to such prevailing charge level for the 
fiscal year ending June 30, 1975, and shall remain at such prevailing 
charge level until the prevailing charge for a year (as adjusted by 
economic index data) equals or exceeds such prevailing charge level. 
The amount of any charges for outpatient services which shall be 
considered reasonable shall be subject to the limitations established 
by regulations issued by the Secretary pursuant to section 
1861(v)(1)(K), and in determining the reasonable charge for such 
services, the Secretary may limit such reasonable charge to a 
percentage of the amount of the prevailing charge for similar services 
furnished in a physician's office, taking into account the extent to 
which overhead costs associated with such outpatient services have been 
included in the reasonable cost or charge of the facility.

           *       *       *       *       *       *       *

  [(5) Each contract under this section shall be for a term of 
at least one year, and may be made automatically renewable from 
term to term in the absence of notice by either party of 
intention to terminate at the end of the current term; except 
that the Secretary may terminate any such contract at any time 
(after such reasonable notice and opportunity for hearing to 
the carrier involved as he may provide in regulations) if he 
finds that the carrier has failed substantially to carry out 
the contract or is carrying out the contract in a manner 
inconsistent with the efficient and effective administration of 
the insurance program established by this part.]
  (6) No payment under this part for a service provided to any 
individual shall (except as provided in section 1870) be made 
to anyone other than such individual or (pursuant to an 
assignment described in subparagraph (B)(ii) of paragraph (3)) 
the physician or other person who provided the service, except 
that (A) payment may be made (i) to the employer of such 
physician or other person if such physician or other person is 
required as a condition of his employment to turn over his fee 
for such service to his employer, or (ii) (where the service 
was provided in a hospital, critical access hospital, clinic, 
or other facility) to the facility in which the service was 
provided if there is a contractual arrangement between such 
physician or other person and such facility under which such 
facility submits the bill for such service, (B) payment may be 
made to an entity (i) which provides coverage of the services 
under a health benefits plan, but only to the extent that 
payment is not made under this part, (ii) which has paid the 
person who provided the service an amount (including the amount 
payable under this part) which that person has accepted as 
payment in full for the service, and (iii) to which the 
individual has agreed in writing that payment may be made under 
this part, (C) in the case of services described in clause (i) 
of section 1861(s)(2)(K), payment shall be made to either (i) 
the employer of the physician assistant involved, or (ii) with 
respect to a physician assistant who was the owner of a rural 
health clinic (as described in section 1861(aa)(2)) for a 
continuous period beginning prior to the date of the enactment 
of the Balanced Budget Act of 1997 and ending on the date that 
the Secretary determines such rural health clinic no longer 
meets the requirements of section 1861(aa)(2), payment may be 
made directly to the physician assistant, (D) payment may be 
made to a physician for physicians' services (and services 
furnished incident to such services) furnished by a second 
physician to patients of the first physician if (i) the first 
physician is unavailable to provide the services; (ii) the 
services are furnished pursuant to an arrangement between the 
two physicians that (I) is informal and reciprocal, or (II) 
involves per diem or other fee-for-time compensation for such 
services; (iii) the services are not provided by the second 
physician over a continuous period of more than 60 days; and 
(iv) the claim form submitted to the [carrier] medicare 
administrative contractor for such services includes the second 
physician's unique identifier (provided under the system 
established under subsection (r)) and indicatesthat the claim 
meets the requirements of this subparagraph for payment to the first 
physician, (E) in the case of an item or service (other than services 
described in section 1888(e)(2)(A)(ii)) furnished by, or under 
arrangements made by, a skilled nursing facility to an individual who 
(at the time the item or service is furnished) is a resident of a 
skilled nursing facility, payment shall be made to the facility, (F) in 
the case of home health services (including medical supplies described 
in section 1861(m)(5), but excluding durable medical equipment to the 
extent provided for in such section) furnished to an individual who (at 
the time the item or service is furnished) is under a plan of care of a 
home health agency, payment shall be made to the agency (without regard 
to whether or not the item or service was furnished by the agency, by 
others under arrangement with them made by the agency, or when any 
other contracting or consulting arrangement, or otherwise), and (G) in 
the case of services in a hospital or clinic to which section 1880(e) 
applies, payment shall be made to such hospital or clinic. No payment 
which under the preceding sentence may be made directly to the 
physician or other person providing the service involved (pursuant to 
an assignment described in subparagraph (B)(ii) of paragraph (3)) shall 
be made to anyone else under a reassignment or power of attorney 
(except to an employer or facility as described in clause (A) of such 
sentence); but nothing in this subsection shall be construed (i) to 
prevent the making of such a payment in accordance with an assignment 
from the individual to whom the service was provided or a reassignment 
from the physician or other person providing such service if such 
assignment or reassignment is made to a governmental agency or entity 
or is established by or pursuant to the order of a court of competent 
jurisdiction, or (ii) to preclude an agent of the physician or other 
person providing the service from receiving any such payment if (but 
only if) such agent does so pursuant to an agency agreement under which 
the compensation to be paid to the agent for his services for or in 
connection with the billing or collection of payments due such 
physician or other person under this title is unrelated (directly or 
indirectly) to the amount of such payments or the billings therefor, 
and is not dependent upon the actual collection of any such payment. 
For purposes of subparagraph (C) of the first sentence of this 
paragraph, an employment relationship may include any independent 
contractor arrangement, and employer status shall be determined in 
accordance with the law of the State in which the services described in 
such clause are performed.
  (7)(A) In the case of physicians' services furnished to a 
patient in a hospital with a teaching program approved as 
specified in section 1861(b)(6) but which does not meet the 
conditions described in section 1861(b)(7), [the carrier] the 
Secretary shall not provide (except on the basis described in 
subparagraph (C)) for payment for such services under this 
part--
          (i)  * * *

           *       *       *       *       *       *       *

  (B) The customary charge for such services in a hospital 
shall be determined in accordance with regulations issued by 
the Secretary and taking into account the following factors:
          (i) In the case of a physician who is not a teaching 
        physician (as defined by the Secretary), [the carrier] 
        the Secretary shall take into account the amounts the 
        physician charges for similar services in the 
        physician's practice outside the teaching setting.
          (ii) In the case of a teaching physician, if the 
        hospital, its physicians, or other appropriate billing 
        entity has established one or more schedules of charges 
        which are collected for medical and surgical services, 
        [the carrier] the Secretary shall base payment under 
        this title on the greatest of--
                  (I)  * * *

           *       *       *       *       *       *       *

  (C) In the case of physicians' services furnished to a 
patient in a hospital with a teaching program approved as 
specified in section 1861(b)(6) but which does not meet the 
conditions described in section 1861(b)(7), if the conditions 
described in subclauses (I) and (II) of subparagraph (A)(i) are 
met and if the physician elects payment to be determined under 
this subparagraph, [the carrier] the Secretary shall provide 
for payment for such services under this part on the basis of 
regulations of the Secretary governing reimbursement for the 
services of hospital-based physicians (and not on any other 
basis).

           *       *       *       *       *       *       *

  (c)[(1) Any contract entered into with a carrier under this 
section shall provide for advances of funds to the carrier for 
the making of payments by it under this part, and shall provide 
for payment of the cost of administration of the carrier, as 
determined by the Secretary to be necessary and proper for 
carrying out the functions covered by the contract. The 
Secretary shall provide that in determining a carrier's 
necessary and proper cost of administration, the Secretary 
shall, with respect to each contract, take into account the 
amount that is reasonable and adequate to meet the costs which 
must be incurred by an efficiently and economically operated 
carrier in carrying out the terms of its contract. The 
Secretary shall cause to have published in the Federal 
Register, by not later than September 1 before each fiscal 
year, data, standards, and methodology to be used to establish 
budgets for carriers under this section for that fiscal year, 
and shall cause to be published in the Federal Register for 
public comment, at least 90 days before such data, standards, 
and methodology are published, the data, standards, and 
methodology proposed to be used.]
  (2)(A) Each [contract under this section which provides for 
the disbursement of funds, as described in subsection 
(a)(1)(B),] contract under section 1874A that provides for 
making payments under this part shall provide that payment 
shall be issued,mailed, or otherwise transmitted with respect 
to not less than 95 percent of all claims submitted under this part--
          (i)  * * *

           *       *       *       *       *       *       *

  (3)(A) Each contract under this section which provides for 
the disbursement of funds, as described in [subsection 
(a)(1)(B)] section 1874A(a)(3)(B), shall provide that no 
payment shall be issued, mailed, or otherwise transmitted with 
respect to any claim submitted under this title within the 
applicable number of calendar days after the date on which the 
claim is received.

           *       *       *       *       *       *       *

  (4) Neither a [carrier] medicare administrative contractor 
nor the Secretary may impose a fee under this title--
          (A)  * * *

           *       *       *       *       *       *       *

  (5) Each [contract under this section which provides for the 
disbursement of funds, as described in subsection (a)(1)(B), 
shall require the carrier] contract under section 1874A that 
provides for making payments under this part shall require the 
medicare administrative contractor to meet criteria developed 
by the Secretary to measure the timeliness of [carrier 
responses] contractor responses to requests for payment of 
items described in section 1834(a)(15)(C).
  [(6) No carrier may carry out (or receive payment for 
carrying out) any activity pursuant to a contract under this 
subsection to the extent that the activity is carried out 
pursuant to a contract under the Medicare Integrity Program 
under section 1893. The previous sentence shall not apply with 
respect to the activity described in section 1893(b)(5) 
(relating to prior authorization of certain items of durable 
medical equipment under section 1834(a)(15)).
  [(d) Any contract with a carrier under this section may 
require such carrier or any of its officers or employees 
certifying payments or disbursing funds pursuant to the 
contract, or otherwise participating in carrying out the 
contract, to give surety bond to the United States in such 
amount as the Secretary may deem appropriate.
  [(e)(1) No individual designated pursuant to a contract under 
this section as a certifying officer shall, in the absence of 
gross negligence or intent to defraud the United States, be 
liable with respect to any payments certified by him under this 
section.
  [(2) No disbursing officer shall, in the absence of gross 
negligence or intent to defraud the United States, be liable 
with respect to any payment by him under this section if it was 
based upon a voucher signed by a certifying officer designated 
as provided in paragraph (1) of this subsection.
  [(3) No such carrier shall be liable to the United States for 
any payments referred to in paragraph (1) or (2).
  [(f) For purposes of this part, the term ``carrier'' means--
          [(1) with respect to providers of services and other 
        persons, a voluntary association, corporation, 
        partnership, or other nongovernmental organization 
        which is lawfully engaged in providing, paying for, or 
        reimbursing the cost of, health services under group 
        insurance policies or contracts, medical or hospital 
        service agreements, membership or subscription 
        contracts, or similar group arrangements, in 
        consideration of premiums or other periodic charges 
        payable to the carrier, including a health benefits 
        plan duly sponsored or underwritten by an employee 
        organization; and
          [(2) with respect to providers of services only, any 
        agency or organization (not described in paragraph (1)) 
        with which an agreement is in effect under section 
        1816.]
  (g) The Railroad Retirement Board shall, in accordance with 
such regulations as the Secretary may prescribe, contract with 
a [carrier or carriers] medicare administrative contractor or 
contractors to perform the functions set out in this section 
with respect to individuals entitled to benefits as qualified 
railroad retirement beneficiaries pursuant to section 226(a) of 
this Act and section 7(d) of the Railroad Retirement Act of 
1974.
  (h)(1)  * * *
  (2) [Each carrier having an agreement with the Secretary 
under subsection (a)] The Secretary shall maintain a toll-free 
telephone number or numbers at which individuals enrolled under 
this part may obtain the names, addresses, specialty, and 
telephone numbers of participating physicians and suppliers and 
may request a copy of an appropriate directory published under 
paragraph (4). [Each such carrier] The Secretary shall, without 
charge, mail a copy of such directory upon such a request.
  (3)(A) In any case in which [a carrier having an agreement 
with the Secretary under subsection (a)] medicare 
administrative contractor having a contract under section 1874A 
that provides for making payments under this part is able to 
develop a system for the electronic transmission to such 
carrier of bills for services, [such carrier] such contractor 
shall establish direct lines for the electronic receipt of 
claims from participating physicians and suppliers.
  (B) The Secretary shall establish a procedure whereby an 
individual enrolled under this part may assign, in an 
appropriate manner on the form claiming a benefit under this 
part for an item or service furnished by a participating 
physician or supplier, the individual's rights of payment under 
a medicare supplemental policy (described in section 
1882(g)(1)) in which the individual is enrolled. In the case 
such an assignment is properly executed and a payment 
determination is made by [a carrier] a medicare administrative 
contractor with a contract under this section, [the carrier] 
the contractor shall transmit to the private entity issuing the 
medicare supplemental policy notice of such fact and shall 
include an explanation of benefits and any additional 
information that the Secretary may determine to be appropriate 
in order to enable the entity to decide whether (and the amount 
of) any payment is due under the policy. The Secretary may 
enter into agreements for the transmittal of such information 
to entities electronically. The Secretary shall impose user 
fees for the transmittal of information under this subparagraph 
by [a carrier] a medicare administrative contractor, whether 
electronically or otherwise, and such user fees shall be 
collected and retained by [the carrier] the contractor.

           *       *       *       *       *       *       *

  (5)(A) The Secretary shall promptly notify individuals 
enrolled under this part through an annual mailing of the 
participation program under this subsection and the publication 
and availability of the directories and shall make the 
appropriate area directory or directories available in each 
district and branch office of the SocialSecurity 
Administration, in the offices of [carriers] medicare administrative 
contractors, and to senior citizen organizations.
  (B) The annual notice provided under subparagraph (A) shall 
include--
          (i)  * * *

           *       *       *       *       *       *       *

          (iii) an explanation of the assistance offered by 
        [carriers] medicare administrative contractors in 
        obtaining the names of participating physicians and 
        suppliers, and

           *       *       *       *       *       *       *

  (l)(1)(A) Subject to subparagraph (C), if--
          (i)  * * *

           *       *       *       *       *       *       *

          (iii)(I) a [carrier] medicare administrative 
        contractor determines under this part or a peer review 
        organization determines under part B of title XI that 
        payment may not be made by reason of section 1862(a)(1) 
        because a service otherwise covered under this title is 
        not reasonable and necessary under the standards 
        described in that section or (II) payment under this 
        title for such services is denied under section 
        1154(a)(2) by reason of a determination under section 
        1154(a)(1)(B), and

           *       *       *       *       *       *       *

  (2) Each [carrier] medicare administrative contractor with a 
contract in effect under this section with respect to 
physicians and each peer review organization with a contract 
under part B of title XI shall send any notice of denial of 
payment for physicians' services based on section 1862(a)(1) 
and for which payment is not requested on an assignment-related 
basis to the physician and the individual involved.

           *       *       *       *       *       *       *

  (p)(1)  * * *

           *       *       *       *       *       *       *

  (3) In the case of a request for payment for an item or 
service furnished by a physician not submitted on an 
assignment-related basis and which does not include the code 
(or codes) required under paragraph (1)--
          (A) if the physician knowingly and willfully fails to 
        provide the code (or codes) promptly upon request of 
        the Secretary or a [carrier] medicare administrative 
        contractor, the physician may be subject to a civil 
        money penalty in an amount not to exceed $2,000, and

           *       *       *       *       *       *       *

  (q)(1)(A) The Secretary, in consultation with groups 
representing physicians who furnish anesthesia services, shall 
establish by regulation a relative value guide for use in all 
[carrier] localities in making payment for physician anesthesia 
services furnished under this part. Such guide shall be 
designed so as to result in expenditures under this title for 
such services in an amount that would not exceed the amount of 
such expenditures which would otherwise occur.

           *       *       *       *       *       *       *

                    Part D--Miscellaneous Provisions

              definitions of services, institutions, etc.

  Sec. 1861. For purposes of this title--

                            Spell of Illness

  (a)  * * *

           *       *       *       *       *       *       *

                                Supplier

  (d) The term ``supplier'' means, unless the context otherwise 
requires, a physician or other practitioner, a facility, or 
other entity (other than a provider of services) that furnishes 
items or services under this title.

           *       *       *       *       *       *       *

                     Hospice Care; Hospice Program

  (dd)(1)  * * *

           *       *       *       *       *       *       *

  (5)(A)  * * *

           *       *       *       *       *       *       *

  (D) In extraordinary, exigent, or other non-routine 
circumstances, such as unanticipated periods of high patient 
loads, staffing shortages due to illness or other events, or 
temporary travel of a patient outside a hospice program's 
service area, a hospice program may enter into arrangements 
with another hospice program for the provision by that other 
program of services described in paragraph (2)(A)(ii)(I). The 
provisions of paragraph (2)(A)(ii)(II) shall apply with respect 
to the services provided under such arrangements.

           *       *       *       *       *       *       *

        exclusions from coverage and medicare as secondary payer

  Sec. 1862. (a)  * * *

           *       *       *       *       *       *       *

  (d) In the case of hospital services and physicians' services 
that--
          (1) are furnished, to an individual who is not 
        enrolled in a Medicare+Choice plan under part C, by a 
        hospital or a critical access hospital; and
          (2) are needed to evaluate or stabilize an emergency 
        medical condition (as defined in section 1852(d)(3)(B), 
        relating to application of a prudent layperson rule) 
        and that are provided to meet the requirements of 
        section 1867,
such services shall be deemed to be reasonable and necessary 
for the diagnosis or treatment of illness or injury for 
purposes of subsection (a)(1)(A).

           *       *       *       *       *       *       *

      agreements with providers of services; enrollment processes

  Sec. 1866. (a)(1) Any provider of services (except a fund 
designated for purposes of section 1814(g) and section 1835(e)) 
shall be qualified to participate under this title and shall be 
eligible for payments under this title if it files with the 
Secretary an agreement--
          (A)  * * *

           *       *       *       *       *       *       *

          (R) to contract only with a health care clearinghouse 
        (as defined in section 1171) that meets each standard 
        and implementation specification adopted or established 
        under part C of title XI on or after the date on which 
        the health care clearinghouse is required to comply 
        with the standard or specification, [and]
          (S) in the case of a hospital that has a financial 
        interest (as specified by the Secretary in regulations) 
        in an entity to which individuals are referred as 
        described in section 1861(ee)(2)(H)(ii), or in which 
        such an entity has such a financial interest, or in 
        which another entity has such a financial interest 
        (directly or indirectly) with such hospital and such an 
        entity, to maintain and disclose to the Secretary (in a 
        form and manner specified by the Secretary) information 
        on--
                  (i)  * * *

           *       *       *       *       *       *       *

                  (iii) the percentage of such individuals who 
                received such services from such provider (or 
                another such provider)[.], and
          (T) in the case of hospitals that are not otherwise 
        subject to the Occupational Safety and Health Act of 
        1970, to comply with the Bloodborne Pathogens standard 
        under section 1910.1030 of title 29 of the Code of 
        Federal Regulations (or as subsequently redesignated).

           *       *       *       *       *       *       *

  (b)(1)  * * *

           *       *       *       *       *       *       *

  (4)(A) A hospital that fails to comply with the requirement 
of subsection (a)(1)(T) (relating to the Bloodborne Pathogens 
standard) is subject to a civil money penalty in an amount 
described in subparagraph (B), but is not subject to 
termination of an agreement under this section.
  (B) The amount referred to in subparagraph (A) is an amount 
that is similar to the amount of civil penalties that may be 
imposed under section 17 of the Occupational Safety and Health 
Act of 1970 for a violation of the Bloodborne Pathogens 
standard referred to in subsection (a)(1)(T) by a hospital that 
is subject to the provisions of such Act.
  (C) A civil money penalty under this paragraph shall be 
imposed and collected in the same manner as civil money 
penalties under subsection (a) of section 1128A are imposed and 
collected under that section.

           *       *       *       *       *       *       *

  (h)(1)  * * *

           *       *       *       *       *       *       *

  (3) The provisions of section 1869(b)(2) shall apply with 
respect to determinations described in paragraph (1) in the 
same manner as they apply to a provider of services that has 
filed an appeal under section 1869(b)(1).

           *       *       *       *       *       *       *

  (j) Enrollment Process for Providers of Services and 
Suppliers.--
          (1) In general.--The Secretary shall establish by 
        regulation a process for the enrollment of providers of 
        services and suppliers under this title.
          (2) Appeal process.--Such process shall provide--
                  (A) a method by which providers of services 
                and suppliers whose application to enroll (or, 
                if applicable, to renew enrollment) are denied 
                are provided a mechanism to appeal such denial; 
                and
                  (B) prompt deadlines for actions on 
                applications for enrollment (and, if 
                applicable, renewal of enrollment) and for 
                consideration of appeals.

           *       *       *       *       *       *       *

  practicing physicians advisory council; medicare provider ombudsman

  Sec. 1868. (a) Practicing Physicians Advisory Council.--(1) 
The Secretary shall appoint, based upon nominations submitted 
by medical organizations representing physicians, a Practicing 
Physicians Advisory Council ([in this section] in this 
subsection referred to as the ``Council'') to be composed of 15 
physicians, each of whom has submitted at least 250 claims for 
physicians' services under this title in the previous year. At 
least 11 of the members of the Council shall be physicians 
described in section 1861(r)(1) and the members of the Council 
shall include both participating and nonparticipating 
physicians and physicians practicing in rural areas and 
underserved urban areas.
  [(b)] (2) The Council shall meet once during each calendar 
quarter to discuss certain proposed changes in regulations and 
carrier manual instructions related to physician services 
identified by the Secretary. To the extent feasible and 
consistent with statutory deadlines, such consultation shall 
occur before the publication of such proposed changes.
  [(c)] (3) Members of the Council shall be entitled to receive 
reimbursement of expenses and per diem in lieu of subsistence 
in the same manner as other members of advisory councils 
appointed by the Secretary are provided such reimbursement and 
per diem under this title.
  (b) Medicare Provider Ombudsman.--The Secretary shall appoint 
a Medicare Provider Ombudsman. The Ombudsman shall--
          (1) provide assistance, on a confidential basis, to 
        providers of services and suppliers with respect to 
        complaints, grievances, and requests for information 
        concerning the programs under this title (including 
        provisions of title XI insofar as they relate to this 
        title and are not administered by the Office of the 
        Inspector General of the Department of Health and Human 
        Services) and in the resolution of unclear or 
        conflicting guidance given by the Secretary and 
        medicare contractors to such providers of services and 
        suppliers regarding such programs and provisions and 
        requirements under this title and such provisions; and
          (2) submit recommendations to the Secretary for 
        improvement in the administration of this title and 
        such provisions, including--
                  (A) recommendations to respond to recurring 
                patterns of confusion in this title and such 
                provisions (including recommendations regarding 
                suspending imposition of sanctions where there 
                is widespread confusion in program 
                administration), and
                  (B) recommendations to provide for an 
                appropriate and consistent response (including 
                not providing for audits) in cases of self-
                identified overpayments by providers of 
                services and suppliers.

   The text of existing law for section 1869 is shown to reflect the 
   amendments made to that section by Public Law 106-554, effective 
                            October 1, 2002.

                        determinations; appeals

  Sec. 1869. (a)  * * *
  (b) Appeal Rights.--
          (1) In general.--
                  (A) Reconsideration of initial 
                determination.--Subject to subparagraph (D), 
                any individual dissatisfied with any initial 
                determination under subsection (a)(1) shall be 
                entitled to reconsideration of the 
                determination, and, subject to subparagraphs 
                (D) and (E), a hearing thereon by the Secretary 
                to the same extent as is provided in section 
                205(b) and, subject to paragraph (2), to 
                judicial review of the Secretary's final 
                decision after such hearing as is provided in 
                section 205(g). For purposes of the preceding 
                sentence, any reference to the ``Commissioner 
                of Social Security'' or the ``Social Security 
                Administration'' in subsection (g) or (l) of 
                section 205 shall be considered a reference to 
                the ``Secretary'' or the ``Department of Health 
                and Human Services'', respectively.

           *       *       *       *       *       *       *

          (2) Expedited access to judicial review.--
                  (A) In general.--The Secretary shall 
                establish a process under which a provider of 
                services or supplier that furnishes an item or 
                service or a beneficiary who has filed an 
                appeal under paragraph (1) (other than an 
                appeal filed under paragraph (1)(F)) may obtain 
                access to judicial review when a review panel 
                (described in subparagraph (D)), on its own 
                motion or at the request of the appellant, 
                determines that it does not have the authority 
                to decide the question of law or regulation 
                relevant to the matters in controversy and that 
                there is no material issue of fact in dispute. 
                The appellant may make such request only once 
                with respect to a question of law or regulation 
                in a case of an appeal.
                  (B) Prompt determinations.--If, after or 
                coincident with appropriately filing a request 
                for an administrative hearing, the appellant 
                requests a determination by the appropriate 
                review panel that no review panel has the 
                authority to decide the question of law or 
                regulations relevant to the matters in 
                controversy and that there is no material issue 
                of fact in dispute and if such request is 
                accompanied by the documents and materials as 
                the appropriate review panel shall require for 
                purposes of making such determination, such 
                review panel shall make a determination on the 
                request in writing within 60 days after the 
                date such review panel receives the request and 
                such accompanying documents and materials. Such 
                a determination by such review panel shall be 
                considered a final decision and not subject to 
                review by the Secretary.
                  (C) Access to judicial review.--
                          (i) In general.--If the appropriate 
                        review panel--
                                  (I) determines that there are 
                                no material issues of fact in 
                                dispute and that the only issue 
                                is one of law or regulation 
                                that no review panel has the 
                                authority to decide; or
                                  (II) fails to make such 
                                determination within the period 
                                provided under subparagraph 
                                (B);
                        then the appellant may bring a civil 
                        action as described in this 
                        subparagraph.
                          (ii) Deadline for filing.--Such 
                        action shall be filed, in the case 
                        described in--
                                  (I) clause (i)(I), within 60 
                                days of date of the 
                                determination described in such 
                                subparagraph; or
                                  (II) clause (i)(II), within 
                                60 days of the end of the 
                                period provided under 
                                subparagraph (B) for the 
                                determination.
                          (iii) Venue.--Such action shall be 
                        brought in the district court of the 
                        United States for the judicial district 
                        in which the appellant is located (or, 
                        in the case of an action brought 
                        jointly by more than one applicant, the 
                        judicial district in which the greatest 
                        number of applicants are located) or in 
                        the district court for the District of 
                        Columbia.
                          (iv) Interest on amounts in 
                        controversy.--Where a provider of 
                        services or supplier seeks judicial 
                        review pursuant to this paragraph, the 
                        amount in controversy shall be subject 
                        to annual interest beginning on the 
                        first day of the first month beginning 
                        after the 60-day period as determined 
                        pursuant to clause (ii) and equal to 
                        the rate of interest on obligations 
                        issuedfor purchase by the Federal 
Hospital Insurance Trust Fund for the month in which the civil action 
authorized under this paragraph is commenced, to be awarded by the 
reviewing court in favor of the prevailing party. No interest awarded 
pursuant to the preceding sentence shall be deemed income or cost for 
the purposes of determining reimbursement due providers of services or 
suppliers under this Act.
                  (D) Review panels.--For purposes of this 
                subsection, a ``review panel'' is an 
                administrative law judge, the Departmental 
                Appeals Board, a qualified independent 
                contractor (as defined in subsection (c)(2)), 
                or an entity designated by the Secretary for 
                purposes of making determinations under this 
                paragraph.
          (3) Requiring full and early presentation of evidence 
        by providers.--A provider of services or supplier may 
        not introduce evidence in any appeal under this section 
        that was not presented at the reconsideration conducted 
        by the qualified independent contractor under 
        subsection (c), unless there is good cause which 
        precluded the introduction of such evidence at or 
        before that reconsideration.

           *       *       *       *       *       *       *

  (g) Medicare Administrative Law Judges.--
          (1) Transition plan.--Not later than October 1, 2003, 
        the Commissioner of Social Security and the Secretary 
        shall develop and implement a plan under which the 
        functions of administrative law judges responsible for 
        hearing cases under this title (and related provisions 
        in title XI) shall be transferred from the 
        responsibility of the Commissioner and the Social 
        Security Administration to the Secretary and the 
        Department of Health and Human Services. The plan shall 
        include recommendations with respect to--
                  (A) the number of administrative law judges 
                and support staff required to hear and decide 
                such cases in a timely manner; and
                  (B) funding levels required for fiscal year 
                2004 and subsequent fiscal years under this 
                subsection to hear such cases in a timely 
                manner.
        Nothing in this subsection shall be construed as 
        affecting the independence of administrative law judges 
        from the Department of Health and Human Services and 
        from medicare contractors in carrying out their 
        responsibilities for hearing and deciding cases.
          (2) Increased financial support.--In addition to any 
        amounts otherwise appropriated, there are authorized to 
        be appropriated (in appropriate part from the Federal 
        Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund) to the 
        Secretary to increase the number of administrative law 
        judges described in paragraph (1) and to improve 
        education and training for such judges and their staffs 
        in carrying out functions under this title, $5,000,000 
        for fiscal year 2003 and such sums as are necessary for 
        fiscal year 2004 and each subsequent fiscal year.
          (3) Submittal of plan to congress and gao; report of 
        gao.--Not later than July 1, 2003, the Secretary shall 
        submit to the Committee on Ways and Means of the House 
        of Representatives, the Committee on Finance of the 
        Senate, and the Comptroller General of the United 
        States the terms of the plan developed under paragraph 
        (1). No later than September 1, 2003, the Comptroller 
        General shall submit to such Committees a report 
        containing an evaluation of the terms of such plan.

           *       *       *       *       *       *       *

                              REGULATIONS

  Sec. 1871. (a)(1)  * * *

           *       *       *       *       *       *       *

  (3)(A) The Secretary, in consultation with the Director of 
the Office of Management and Budget, shall establish and 
publish a regular timeline for the publication of final 
regulations based on the previous publication of a proposed 
regulation or an interim final regulation.
  (B) Such timeline may vary among different regulations based 
on differences in the complexity of the regulation, the number 
and scope of comments received, and other relevant factors. If 
the Secretary intends to vary such timeline with respect to the 
publication of a final regulation, the Secretary shall cause to 
have published in the Federal Register notice of the different 
timeline by not later than the end of the comment period 
respecting such regulation. Such notice shall include a brief 
explanation of the justification for such variation.
  (C) In the case of interim final regulations, upon the 
expiration of the regular timeline established under this 
paragraph for the publication of a final regulation after 
opportunity for public comment, the interim final regulation 
shall not continue in effect unless the Secretary publishes a 
notice of continuation of the regulation that includes an 
explanation of why the regular timeline was not complied with. 
If such a notice is published, the regular timeline for 
publication of the final regulation shall be treated as having 
begun again as of the date of publication of the notice.
  (D) The Secretary shall annually submit to Congress a report 
that describes the instances in which the Secretary failed to 
publish a final regulation within the applicable timeline under 
this paragraph and that provides an explanation for such 
failures.
  (4) If the Secretary publishes notice of proposed rulemaking 
relating to a regulation (including an interim final 
regulation), insofar as such final regulation includes a 
provision that is not a logical outgrowth of such notice of 
proposed rulemaking, that provision shall be treated as a 
proposed regulation and shall not take effect until there is 
the further opportunity for public comment and a publication of 
the provision again as a final regulation.

           *       *       *       *       *       *       *

  (d)(1) The Secretary shall issue proposed or final (including 
interim final) regulations to carry out this title only on one 
business day of every month unless publication on another date 
is necessary to comply with requirements under law.
  (2) The Secretary shall coordinate issuance of new 
regulations relating to a category of provider of services or 
suppliers based on an analysis of the collective impact of 
regulatory changes on that category of providers or suppliers.
  (e)(1)(A) A substantive change in regulations, manual 
instructions, interpretative rules, statements of policy, or 
guidelines of general applicability under this title shall not 
be applied (by extrapolation or otherwise) retroactively to 
items and services furnished before the date the change was 
issued, unless the Secretary determines that such retroactive 
application would have a positive impact on beneficiaries or 
providers of services and suppliers or would be necessary to 
comply with statutory requirements.
  (B) A substantive change in regulations, manual instructions, 
interpretative rules, statements of policy, or guidelines of 
general applicability under this title shall not become 
effective until at least 30 days after the Secretary issues the 
substantive change.
  (C) No action shall be taken against a provider of services 
or supplier with respect to noncompliance with such a 
substantive change for items and services furnished before the 
effective date of such a change.
  (2)(A) If--
          (i) a provider of services or supplier follows the 
        written guidance (which may be transmitted 
        electronically) provided by the Secretary or by a 
        medicare contractor (as defined in section 1889(f)) 
        acting within the scope of the contractor's contract 
        authority, with respect to the furnishing of items or 
        services and submission of a claim for benefits for 
        such items or services with respect to such provider or 
        supplier;
          (ii) the Secretary determines that the provider of 
        services or supplier has accurately presented the 
        circumstances relating to such items, services, and 
        claim to the contractor in writing; and
          (iii) the guidance was in error;
the provider of services or supplier shall not be subject to 
any sanction (including any penalty or requirement for 
repayment of any amount) if the provider of services or 
supplier reasonably relied on such guidance.
  (B) Subparagraph (A) shall not be construed as preventing the 
recoupment or repayment (without any additional penalty) 
relating to an overpayment insofar as the overpayment was 
solely the result of a clerical or technical operational error.

           *       *       *       *       *       *       *

           contracts with medicare administrative contractors

  Sec. 1874A. (a) Authority.--
          (1) Authority to enter into contracts.--The Secretary 
        may enter into contracts with any entity to serve as a 
        medicare administrative contractor with respect to the 
        performance of any or all of the functions described in 
        paragraph (3) or parts of those functions (or, to the 
        extent provided in a contract, to secure performance 
        thereof by other entities).
          (2) Medicare administrative contractor defined.--For 
        purposes of this title and title XI--
                  (A) In general.--The term ``medicare 
                administrative contractor'' means an agency, 
                organization, or other person with a contract 
                under this section.
                  (B) Appropriate medicare administrative 
                contractor.--With respect to the performance of 
                a particular function or activity in relation 
                to an individual entitled to benefits under 
                part A or enrolled under part B, or both, a 
                specific provider of services or supplier (or 
                class of such providers of services or 
                suppliers), the ``appropriate'' medicare 
                administrative contractor is the medicare 
                administrative contractor that has a contract 
                under this section with respect to the 
                performance of that function or activity in 
                relation to that individual, provider of 
                services or supplier or class of provider of 
                services or supplier.
          (3) Functions described.--The functions referred to 
        in paragraph (1) are payment functions, provider 
        services functions, and beneficiary services functions 
        as follows:
                  (A) Determination of payment amounts.--
                Determining (subject to the provisions of 
                section 1878 and to such review by the 
                Secretary as may be provided for by the 
                contracts) the amount of the payments required 
                pursuant to this title to be made to providers 
                of services, suppliers and individuals.
                  (B) Making payments.--Making payments 
                described in subparagraph (A) (including 
                receipt, disbursement, and accounting for funds 
                in making such payments).
                  (C) Beneficiary education and assistance.--
                Providing education and outreach to individuals 
                entitled to benefits under part A or enrolled 
                under part B, or both, and providing assistance 
                to those individuals with specific issues, 
                concerns or problems.
                  (D) Provider consultative services.--
                Providing consultative services to 
                institutions, agencies, and other persons to 
                enable them to establish and maintain fiscal 
                records necessary for purposes of this title 
                and otherwise to qualify as providers of 
                services or suppliers.
                  (E) Communication with providers.--
                Communicating to providers of services and 
                suppliers any information or instructions 
                furnished to the medicare administrative 
                contractor by the Secretary and serving as a 
                channel of communication from providers of 
                services and suppliers to the Secretary.
                  (F) Provider education and technical 
                assistance.--Performing the functions relating 
                to provider education, training, and technical 
                assistance.
                  (G) Additional functions.--Performing such 
                other functions as are necessary to carry out 
                the purposes of this title.
          (4) Relationship to mip contracts.--
                  (A) Nonduplication of duties.--In entering 
                into contracts under this section, the 
                Secretary shall assure that functions of 
                medicare administrative contractors in carrying 
                out activities under parts A and B do not 
                duplicate activities carried out under the 
                Medicare Integrity Programunder section 1893. 
The previous sentence shall not apply with respect to the activity 
described in section 1893(b)(5) (relating to prior authorization of 
certain items of durable medical equipment under section 1834(a)(15)).
                  (B) Construction.--An entity shall not be 
                treated as a medicare administrative contractor 
                merely by reason of having entered into a 
                contract with the Secretary under section 1893.
  (b) Contracting Requirements.--
          (1) Use of competitive procedures.--
                  (A) In general.--Except as provided in laws 
                with general applicability to Federal 
                acquisition and procurement or in subparagraph 
                (B), the Secretary shall use competitive 
                procedures when entering into contracts with 
                medicare administrative contractors under this 
                section, taking into account performance 
                quality as well as price and other factors.
                  (B) Renewal of contracts.--The Secretary may 
                renew a contract with a medicare administrative 
                contractor under this section from term to term 
                without regard to section 5 of title 41, United 
                States Code, or any other provision of law 
                requiring competition, if the medicare 
                administrative contractor has met or exceeded 
                the performance requirements applicable with 
                respect to the contract and contractor, except 
                that the Secretary shall provide for the 
                application of competitive procedures under 
                such a contract not less frequently than once 
                every five years.
                  (C) Transfer of functions.--Functions may be 
                transferred among medicare administrative 
                contractors consistent with the provisions of 
                this paragraph. The Secretary shall ensure that 
                performance quality is considered in such 
                transfers.
                  (D) Incentives for quality.--The Secretary 
                shall provide incentives for medicare 
                administrative contractors to provide quality 
                service and to promote efficiency.
          (2) Compliance with requirements.--No contract under 
        this section shall be entered into with any medicare 
        administrative contractor unless the Secretary finds 
        that such medicare administrative contractor will 
        perform its obligations under the contract efficiently 
        and effectively and will meet such requirements as to 
        financial responsibility, legal authority, quality of 
        services provided, and other matters as the Secretary 
        finds pertinent.
          (3) Development of specific performance 
        requirements.--In developing contract performance 
        requirements, the Secretary shall develop performance 
        requirements to carry out the specific requirements 
        applicable under this title to a function described in 
        subsection (a)(3). In developing such requirements, the 
        Secretary may consult with providers of services and 
        suppliers and organizations and agencies performing 
        functions necessary to carry out the purposes of this 
        section with respect to such performance requirements.
          (4) Information requirements.--The Secretary shall 
        not enter into a contract with a medicare 
        administrative contractor under this section unless the 
        contractor agrees--
                  (A) to furnish to the Secretary such timely 
                information and reports as the Secretary may 
                find necessary in performing his functions 
                under this title; and
                  (B) to maintain such records and afford such 
                access thereto as the Secretary finds necessary 
                to assure the correctness and verification of 
                the information and reports under subparagraph 
                (A) and otherwise to carry out the purposes of 
                this title.
          (5) Surety bond.--A contract with a medicare 
        administrative contractor under this section may 
        require the medicare administrative contractor, and any 
        of its officers or employees certifying payments or 
        disbursing funds pursuant to the contract, or otherwise 
        participating in carrying out the contract, to give 
        surety bond to the United States in such amount as the 
        Secretary may deem appropriate.
  (c) Terms and Conditions.--
          (1) In general.--A contract with any medicare 
        administrative contractor under this section may 
        contain such terms and conditions as the Secretary 
        finds necessary or appropriate and may provide for 
        advances of funds to the medicare administrative 
        contractor for the making of payments by it under 
        subsection (a)(3)(B).
          (2) Prohibition on mandates for certain data 
        collection.--The Secretary may not require, as a 
        condition of entering into a contract under this 
        section, that the medicare administrative contractor 
        match data obtained other than in its activities under 
        this title with data used in the administration of this 
        title for purposes of identifying situations in which 
        the provisions of section 1862(b) may apply.
  (d) Limitation on Liability of Medicare Administrative 
Contractors and Certain Officers.--
          (1) Certifying officer.--No individual designated 
        pursuant to a contract under this section as a 
        certifying officer shall, in the absence of gross 
        negligence or intent to defraud the United States, be 
        liable with respect to any payments certified by the 
        individual under this section.
          (2) Disbursing officer.--No disbursing officer shall, 
        in the absence of gross negligence or intent to defraud 
        the United States, be liable with respect to any 
        payment by such officer under this section if it was 
        based upon an authorization (which meets the applicable 
        requirements for such internal controls established by 
        the Comptroller General) of a certifying officer 
        designated as provided in paragraph (1) of this 
        subsection.
          (3) Liability of medicare administrative 
        contractor.--A medicare administrative contractor shall 
        be liable to the United States for a payment referred 
        to in paragraph (1) or (2) if, in connection with such 
        payment, an individual referred to in either such 
        paragraph acted with gross negligence or intent to 
        defraud the United States.
          (4) Indemnification by secretary.--The Secretary 
        shall make payment to a medicare administrative 
        contractor undercontract with the Secretary pursuant to 
this section, or to any member or employee thereof, or to any person 
who furnishes legal counsel or services to such medicare administrative 
contractor, in an amount equal to the reasonable amount of the expenses 
incurred, as determined by the Secretary, in connection with the 
defense of any civil suit, action, or proceeding brought against such 
medicare administrative contractor or person related to the performance 
of any duty, function, or activity under such contract, if due care was 
exercised by the contractor or person in the performance of such duty, 
function, or activity.
  (e) Incentives To Improve Contractor Performance in Provider 
Education and Outreach.--
          (1) Methodology to measure contractor error rates.--
        In order to give medicare administrative contractors an 
        incentive to implement effective education and outreach 
        programs for providers of services and suppliers, the 
        Secretary shall, in consultation with representatives 
        of providers and suppliers, develop and implement by 
        October 1, 2003, a methodology to measure the specific 
        claims payment error rates of such contractors in the 
        processing or reviewing of medicare claims.
          (2) Identification of best practices.--The Secretary 
        shall identify the best practices developed by 
        individual medicare administrative contractors for 
        educating providers of services and suppliers and how 
        to encourage the use of such best practices nationwide.
  (f) Response to Inquiries; Toll-Free Lines.--
          (1) Contractor responsibility.--Each medicare 
        administrative contractor shall, for those providers of 
        services and suppliers which submit claims to the 
        contractor for claims processing--
                  (A) respond in a clear, concise, and accurate 
                manner to specific billing and cost reporting 
                questions of providers of services and 
                suppliers;
                  (B) maintain a toll-free telephone number at 
                which providers of services and suppliers may 
                obtain information regarding billing, coding, 
                and other appropriate information under this 
                title;
                  (C) maintain a system for identifying (and 
                disclosing, upon request) who provides the 
                information referred to in subparagraphs (A) 
                and (B); and
                  (D) monitor the accuracy, consistency, and 
                timeliness of the information so provided.
          (2) Evaluation.--In conducting evaluations of 
        individual medicare administrative contractors, the 
        Secretary shall take into account the results of the 
        monitoring conducted under paragraph (1)(D). The 
        Secretary shall, in consultation with organizations 
        representing providers of services and suppliers, 
        establish standards relating to the accuracy, 
        consistency, and timeliness of the information so 
        provided.

           *       *       *       *       *       *       *

              provider education and technical assistance

  Sec. 1889. (a) Coordination of Education Funding.--The 
Secretary shall coordinate the educational activities provided 
through medicare contractors (as defined in subsection (i), 
including under section 1893) in order to maximize the 
effectiveness of Federal education efforts for providers of 
services and suppliers.
  (b) Enhanced Education and Training.--
          (1) Additional resources.--For each of fiscal years 
        2003 and 2004, there are authorized to be appropriated 
        to the Secretary (in appropriate part from the Federal 
        Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund) $10,000,000 
        .
          (2) Use.--The funds made available under paragraph 
        (1) shall be used to increase the conduct by medicare 
        contractors of education and training of providers of 
        services and suppliers regarding billing, coding, and 
        other appropriate items.
  (c) Tailoring Education and Training Activities for Small 
Providers or Suppliers.--
          (1) In general.--Insofar as a medicare contractor 
        conducts education and training activities, it shall 
        tailor such activities to meet the special needs of 
        small providers of services or suppliers (as defined in 
        paragraph (2)).
          (2) Small provider of services or supplier.--In this 
        subsection, the term ``small provider of services or 
        supplier'' means--
                  (A) a provider of services with fewer than 25 
                full-time-equivalent employees; or
                  (B) a supplier with fewer than 10 full-time-
                equivalent employees.
  (d) Internet Sites; FAQs.--The Secretary, and each medicare 
contractor insofar as it provides services (including claims 
processing) for providers of services or suppliers, shall 
maintain an Internet site which--
          (1) provides answers in an easily accessible format 
        to frequently asked questions, and
          (2) includes other published materials of the 
        contractor,
that relate to providers of services and suppliers under the 
programs under this title (and title XI insofar as it relates 
to such programs).
  (e) Encouragement of Participation in Education Program 
Activities.--A medicare contractor may not use a record of 
attendance at (or failure to attend) educational activities or 
other information gathered during an educational program 
conducted under this section or otherwise by the Secretary to 
select or track providers of services or suppliers for the 
purpose of conducting any type of audit or prepayment review.
  (f) Construction.--Nothing in this section or section 1893(g) 
shall be construed as providing for disclosure by a medicare 
contractor--
          (1) of the screens used for identifying claims that 
        will be subject to medical review; or
          (2) of information that would compromise pending law 
        enforcement activities or reveal findings of law 
        enforcement-related audits.
  (g) Definitions.--For purposes of this section, the term 
``medicare contractor'' includes the following:
          (1) A medicare administrative contractor with a 
        contract under section 1874A, including a fiscal 
        intermediary with a contract under section 1816 and a 
        carrier with a contract under section 1842.
          (2) An eligible entity with a contract under section 
        1893.
Such term does not include, with respect to activities of a 
specific provider of services or supplier an entity that has no 
authority under this title or title IX with respect to such 
activities and such provider of services or supplier.

           *       *       *       *       *       *       *

                       Medicare integrity program

  Sec. 1893. (a)  * * *

           *       *       *       *       *       *       *

  (f) Recovery of Overpayments and Prepayment Review.--
          (1) Use of repayment plans.--
                  (A) In general.--If the repayment, within 30 
                days by a provider of services or supplier, of 
                an overpayment under this title would 
                constitute a hardship (as defined in 
                subparagraph (B)), subject to subparagraph (C), 
                the Secretary shall enter into a plan (which 
                meets terms and conditions determined to be 
                appropriate by the Secretary) with the provider 
                of services or supplier for the offset or 
                repayment of such overpayment over a period of 
                not longer than 3 years, or in the case of 
                extreme hardship (as determined by the 
                Secretary) over a period of not longer than 5 
                years. Interest shall accrue on the balance 
                through the period of repayment.
                  (B) Hardship.--
                          (i) In general.--For purposes of 
                        subparagraph (A), the repayment of an 
                        overpayment (or overpayments) within 30 
                        days is deemed to constitute a hardship 
                        if--
                                  (I) in the case of a provider 
                                of services that files cost 
                                reports, the aggregate amount 
                                of the overpayments exceeds 10 
                                percent of the amount paid 
                                under this title to the 
                                provider of services for the 
                                cost reporting period covered 
                                by the most recently submitted 
                                cost report; or
                                  (II) in the case of another 
                                provider of services or 
                                supplier, the aggregate amount 
                                of the overpayments exceeds 10 
                                percent of the amount paid 
                                under this title to the 
                                provider of services or 
                                supplier for the previous 
                                calendar year.
                          (ii) Rule of application.--The 
                        Secretary shall establish rules for the 
                        application of this subparagraph in the 
                        case of a provider of services or 
                        supplier that was not paid under this 
                        title during the previous year or was 
                        paid under this title only during a 
                        portion of that year.
                          (iii) Treatment of previous 
                        overpayments.--If a provider of 
                        services or supplier has entered into a 
                        repayment plan under subparagraph (A) 
                        with respect to a specific overpayment 
                        amount, such payment amount under the 
                        repayment plan shall not be taken into 
                        account under clause (i) with respect 
                        to subsequent overpayment amounts.
                  (C) Exceptions.--Subparagraph (A) shall not 
                apply if the Secretary has reason to suspect 
                that the provider of services or supplier may 
                file for bankruptcy or otherwise cease to do 
                business or if there is an indication of fraud 
                or abuse committed against the program.
                  (D) Immediate collection if violation of 
                repayment plan.--If a provider of services or 
                supplier fails to make a payment in accordance 
                with a repayment plan under this paragraph, the 
                Secretary may immediately seek to offset or 
                otherwise recover the total balance outstanding 
                (including applicable interest) under the 
                repayment plan.
          (2) Limitation on recoupment until determination by 
        qualified independent contractor.--
                  (A) In general.--In the case of a provider of 
                services or supplier that is determined to have 
                received an overpayment under this title and 
                that seeks a reconsideration by a qualified 
                independent contractor on such determination 
                under section 1869(b)(1), the Secretary may not 
                take any action (or authorize any other person, 
                including any medicare contractor, as defined 
                in paragraph (9)) to recoup the overpayment 
                until the date the decision on the 
                reconsideration has been rendered.
                  (B) Collection with interest.--Insofar as the 
                determination on such appeal is against the 
                provider of services or supplier, interest on 
                the overpayment shall accrue on and after the 
                date of the original notice of overpayment. 
                Insofar as such determination against the 
                provider of services or supplier is later 
                reversed, the Secretary shall provide for 
                repayment of the amount recouped plus interest 
                at the same rate as would apply under the 
                previous sentence for the period in which the 
                amount was recouped.
          (3) Standardization of random prepayment review.--
                  (A) In general.--A medicare contractor may 
                conduct random prepayment review only to 
                develop a contractor-wide or program-wide 
                claims payment error rates or under such 
                additional circumstances as may be provided 
                under regulations, developed in consultation 
                with providers of services and suppliers.
                  (B) Construction.--Nothing in subparagraph 
                (A) shall be construed as preventing the denial 
                of payments for claims actually reviewed under 
                a random prepayment review.
          (4) Limitation on use of extrapolation.--A medicare 
        contractor may not use extrapolation to determine 
        overpaymentamounts to be recovered by recoupment, 
offset, or otherwise unless--
                  (A) there is a sustained or high level of 
                payment error (as defined by the Secretary by 
                regulation); or
                  (B) documented educational intervention has 
                failed to correct the payment error (as 
                determined by the Secretary).
          (5) Provision of supporting documentation.--In the 
        case of a provider of services or supplier with respect 
        to which amounts were previously overpaid, a medicare 
        contractor may request the periodic production of 
        records or supporting documentation for a limited 
        sample of submitted claims to ensure that the previous 
        practice is not continuing.
          (6) Consent settlement reforms.--
                  (A) In general.--The Secretary may use a 
                consent settlement (as defined in subparagraph 
                (D)) to settle a projected overpayment.
                  (B) Opportunity to submit additional 
                information before consent settlement offer.--
                Before offering a provider of services or 
                supplier a consent settlement, the Secretary 
                shall--
                          (i) communicate to the provider of 
                        services or supplier in a non-
                        threatening manner that, based on a 
                        review of the medical records requested 
                        by the Secretary, a preliminary 
                        analysis indicates that there would be 
                        an overpayment; and
                          (ii) provide for a 45-day period 
                        during which the provider of services 
                        or supplier may furnish additional 
                        information concerning the medical 
                        records for the claims that had been 
                        reviewed.
                  (C) Consent settlement offer.--The Secretary 
                shall review any additional information 
                furnished by the provider of services or 
                supplier under subparagraph (B)(ii). Taking 
                into consideration such information, the 
                Secretary shall determine if there still 
                appears to be an overpayment. If so, the 
                Secretary--
                          (i) shall provide notice of such 
                        determination to the provider of 
                        services or supplier, including an 
                        explanation of the reason for such 
                        determination; and
                          (ii) in order to resolve the 
                        overpayment, may offer the provider of 
                        services or supplier--
                                  (I) the opportunity for a 
                                statistically valid random 
                                sample; or
                                  (II) a consent settlement.
                The opportunity provided under clause (ii)(I) 
                does not waive any appeal rights with respect 
                to the alleged overpayment involved.
                  (D) Consent settlement defined.--For purposes 
                of this paragraph, the term ``consent 
                settlement'' means an agreement between the 
                Secretary and a provider of services or 
                supplier whereby both parties agree to settle a 
                projected overpayment based on less than a 
                statistically valid sample of claims and the 
                provider of services or supplier agrees not to 
                appeal the claims involved.
          (7) Limitations on non-random prepayment review.--
                          (A) Limitation on initiation of non-
                        random prepayment review.--A medicare 
                        contractor may not initiate non-random 
                        prepayment review of a provider of 
                        services or supplier based on the 
                        initial identification by that provider 
                        of services or supplier of an improper 
                        billing practice unless there is a 
                        sustained or high level of payment 
                        error (as defined in paragraph (4)(A)).
                          (B) Termination of non-random 
                        prepayment review.--The Secretary shall 
                        issue regulations relating to the 
                        termination, including termination 
                        dates, of non-random prepayment review. 
                        Such regulations may vary such a 
                        termination date based upon the 
                        differences in the circumstances 
                        triggering prepayment review.
          (8) Payment audits.--
                  (A) Written notice for post-payment audits.--
                Subject to subparagraph (C), if a medicare 
                contractor decides to conduct a post-payment 
                audit of a provider of services or supplier 
                under this title, the contractor shall provide 
                the provider of services or supplier with 
                written notice of the intent to conduct such an 
                audit.
                  (B) Explanation of findings for all audits.--
                Subject to subparagraph (C), if a medicare 
                contractor audits a provider of services or 
                supplier under this title, the contractor shall 
                provide for an exit conference with the 
                provider or supplier during which the 
                contractor shall--
                          (i) give the provider of services or 
                        supplier a full review and explanation 
                        of the findings of the audit in a 
                        manner that is understandable to the 
                        provider of services or supplier and 
                        permits the development of an 
                        appropriate corrective action plan;
                          (ii) inform the provider of services 
                        or supplier of the appeal rights under 
                        this title;
                          (iii) give the provider of services 
                        or supplier an opportunity to provide 
                        additional information to the 
                        contractor; and
                          (iv) take into account information 
                        provided, on a timely basis, by the 
                        provider of services or supplier under 
                        clause (iii).
                  (C) Exception.--Subparagraphs (A) and (B) 
                shall not apply if the provision of notice or 
                findings would compromise pending law 
                enforcement activities or reveal findings of 
                law enforcement-related audits.
          (9) Definitions.--For purposes of this subsection:
                  (A) Medicare contractor.--The term ``medicare 
                contractor'' has the meaning given such term in 
                section 1889(f).
                  (B) Random prepayment review.--The term 
                ``random prepayment review'' means a demand for 
                the production of records or documentation 
                absent cause with respect to a claim.
  (g) Notice of Over-Utilization of Codes.--The Secretary shall 
establish a process under which the Secretary provides for 
notice to classes of providers of services and suppliers served 
by the contractor in cases in which the contractor has 
identified that particular billing codes may be overutilized by 
that class of providers of services or suppliers under the 
programs under this title (or provisions of title XI insofar as 
they relate to such programs).

           *       *       *       *       *       *       *

                                
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