I 

108TH CONGRESS 

1ST SESSION H. R. 26

To amend title XVIII of the Social Security Act to revise and improve 

payments to providers of services under the Medicare Program, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 7, 2003

Mr. CARDIN introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Energy 

and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

To amend title XVIII of the Social Security Act to revise 

and improve payments to providers of services under 

the Medicare Program, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU4 RITY ACT; REFERENCES TO BIPA AND SEC5 RETARY; TABLE OF CONTENTS. 

6 (a) SHORT TITLE.—This Act may be cited as the 

7 ‘‘Medicare Payment Restoration and Benefits Improve8 ment Act of 2003’’. 
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1 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex2 cept as otherwise specifically provided, whenever in this 

3 Act an amendment is expressed in terms of an amendment 

4 to or repeal of a section or other provision, the reference 

5 shall be considered to be made to that section or other 

6 provision of the Social Security Act. 

7 (c) BIPA; SECRETARY.—In this Act: 

8 (1) BIPA.—The term ‘‘BIPA’’ means the 

9 Medicare, Medicaid, and SCHIP Benefits Improve10 ment and Protection Act of 2000, as enacted into 

11 law by section 1(a)(6) of Public Law 106–554. 

12 (2) SECRETARY.—The term ‘‘Secretary’’ means 

13 the Secretary of Health and Human Services. 

14 (d) TABLE OF CONTENTS.—The table of contents of 

15 this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; references to BIPA and 

Secretary; table of contents. 

TITLE I—PROVISIONS RELATING TO PART A 

Subtitle A—Inpatient Hospital Services 

Sec. 101. Revision of acute care hospital payment updates. 

Sec. 102. 2-year phased-in increase in the standardized amount in rural and 

small urban areas to achieve a single, uniform standardized 

amount. 

Sec. 103. 3-year increase in level of adjustment for indirect costs of medical 

education (IME). 

Sec. 104. More frequent update in weights used in hospital market basket. 

Sec. 105. Relief for certain non-teaching hospitals. 

Sec. 106. Enhanced disproportionate share hospital (DSH) treatment for rural 

hospitals and urban hospitals with fewer than 100 beds. 

Sec. 107. Recognition of new medical technologies under inpatient hospital 

PPS. 

Sec. 108. Improvements to critical access hospital program. 

Sec. 109. Phase-in of Federal rate for hospitals in Puerto Rico. 

Sec. 110. GAO study on improving the hospital wage index. 
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Subtitle B—Skilled Nursing Facility Services 

Sec. 121. Payment for covered skilled nursing facility services. 

Subtitle C—Hospice Care 

Sec. 131. Coverage of hospice consultation services. 

Sec. 132. 10 percent increase in payment for hospice care furnished in a frontier area. 

Sec. 133. Rural hospice demonstration project. 

TITLE II—PROVISIONS RELATING TO PART B 

Subtitle A—Physicians’ Services 

Sec. 201. Revision of updates for physicians’ services. 

Sec. 202. Studies on access to physicians’ services. 

Sec. 203. MedPAC report on payment for physicians’ services. 

Sec. 204. 1-year extension of treatment of certain physician pathology services 

under medicare. 

Sec. 205. Physician fee schedule wage index revision. 

Subtitle B—Provisions Relating to Preventive Benefits 

Sec. 211. Coverage of an initial preventive physical examination. 

Sec. 212. Coverage of cholesterol and blood lipid screening. 

Sec. 213. Improved payment for certain mammography services. 

Subtitle C—Hospital Outpatient Department Services 

Sec. 221. Adjustment to limit decline in payment. 

Subtitle D—Other Services 

Sec. 231. Adjustments to local fee schedules for clinical laboratory tests for improvement in cervical cancer detection. 

Sec. 232. Payment for ambulance services. 

Sec. 233. 2-year extension of moratorium on therapy caps; provisions relating 

to reports. 

Sec. 234. Renal dialysis services. 

Sec. 235. Waiver of part B late enrollment penalty for certain military retirees; 

special enrollment period. 

Sec. 236. Coverage of immunosuppressive drugs for all medicare beneficiaries. 

TITLE III—PROVISIONS RELATING TO PARTS A AND B 

Subtitle A—Home Health Services 

Sec. 301. Elimination of 15 percent reduction in payment rates under the prospective payment system. 

Sec. 302. Update in home health services. 

Sec. 303. Extension of temporary increase for home health services furnished 

in a rural area. 

Sec. 304. OASIS Task Force; suspension of certain OASIS data collection requirements pending Task Force submittal of report. 

Sec. 305. MedPAC study on medicare margins of home health agencies. 

Subtitle B—Other Provisions 
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Sec. 311. Modifications to Medicare Payment Advisory Commission (MedPAC). 

Sec. 312. Demonstration project for disease management for certain medicare 

beneficiaries with diabetes. 

Sec. 313. Demonstration project for medical adult day care services. 

Sec. 314. Publication on final written guidance concerning prohibitions against 

discrimination by national origin with respect to health care 

services. 

TITLE IV—PROVISIONS RELATING TO MANAGED CARE 

Sec. 401. Medicare+Choice improvements. 

Sec. 402. Specialized Medicare+Choice plans for special needs beneficiaries. 

Sec. 403. Extension of reasonable cost and SHMO contracts. 

Sec. 404. Extension of municipal health service demonstration projects. 

Sec. 405. Payment by PACE providers for medicare and medicaid services furnished by noncontract providers. 

TITLE V—REGULATORY REDUCTION AND CONTRACTING REFORM 

Subtitle A—Regulatory Reform 

Sec. 501. Construction; definition of supplier. 

Sec. 502. Issuance of regulations. 

Sec. 503. Compliance with changes in regulations and policies. 

Sec. 504. Reports and studies relating to regulatory reform. 

Subtitle B—Contracting Reform 

Sec. 511. Increased flexibility in medicare administration. 

Sec. 512. Requirements for information security for medicare administrative 

contractors. 

Subtitle C—Education and Outreach 

Sec. 521. Provider education and technical assistance. 

Sec. 522. Small provider technical assistance demonstration program. 

Sec. 523. Medicare provider ombudsman; medicare beneficiary ombudsman. 

Sec. 524. Beneficiary outreach demonstration program. 

Subtitle D—Appeals and Recovery 

Sec. 531. Transfer of responsibility for medicare appeals. 

Sec. 532. Process for expedited access to review. 

Sec. 533. Revisions to medicare appeals process. 

Sec. 534. Prepayment review. 

Sec. 535. Recovery of overpayments. 

Sec. 536. Provider enrollment process; right of appeal. 

Sec. 537. Process for correction of minor errors and omissions on claims without pursuing appeals process. 

Sec. 538. Prior determination process for certain items and services; advance 

beneficiary notices. 

Sec. 539. Appeals by providers when there is no other party available. 

Subtitle E—Miscellaneous Provisions 

Sec. 541. Policy development regarding evaluation and management (E & M) 

documentation guidelines. 
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Sec. 542. Prohibition of incidental fees and required purchase of non-covered 

items or services. 

Sec. 543. Improvement in oversight of technology and coverage. 

Sec. 544. Treatment of hospitals for certain services under medicare secondary 

payor (MSP) provisions. 

Sec. 545. Authorizing use of arrangements with other hospice programs to provide core hospice services in certain circumstances. 

Sec. 546. Application of OSHA bloodborne pathogens standard to certain hospitals. 

Sec. 547. BIPA-related technical amendments and corrections. 

Sec. 548. Conforming authority to waive a program exclusion. 

Sec. 549. Treatment of certain dental claims. 

Sec. 550. Annual publication of list of national coverage determinations.

1 TITLE I—PROVISIONS RELATING 

2 TO PART A 

3 Subtitle A—Inpatient Hospital 

4 Services 

5 SEC. 101. REVISION OF ACUTE CARE HOSPITAL PAYMENT 

6 UPDATES. 

7 Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 

8 U.S.C. 1395ww(b)(3)(B)(i)) is amended to read as fol9 lows: 

10 ‘‘(XVIII) for fiscal year 2003, the market bas11 ket percentage increase for sole community hospitals 

12 and such increase minus 0.25 percentage points for 

13 other hospitals, and’’.

14 SEC. 102. 2-YEAR PHASED-IN INCREASE IN THE STANDARD15 IZED AMOUNT IN RURAL AND SMALL URBAN 

16 AREAS TO ACHIEVE A SINGLE, UNIFORM 

17 STANDARDIZED AMOUNT. 

18 Section 1886(d)(3)(A)(iv) (42 U.S.C. 

19 1395ww(d)(3)(A)(iv)) is amended—
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1 (1) by striking ‘‘(iv) For discharges’’ and in2 serting ‘‘(iv)(I) Subject to the succeeding provisions 

3 of this clause, for discharges’’; and 

4 (2) by adding at the end the following new sub5 clauses: 

6 ‘‘(II) For discharges occurring during fiscal 

7 year 2003, the average standardized amount for hos8 pitals located other than in a large urban area shall 

be increased by 1 9 ⁄2 of the difference between the av10 erage standardized amount determined under sub11 clause (I) for hospitals located in large urban areas 

12 for such fiscal year and such amount determined 

13 (without regard to this subclause) for other hospitals 

14 for such fiscal year. 

15 ‘‘(III) For discharges occurring in a fiscal year 

16 beginning with fiscal year 2004, the Secretary shall 

17 compute an average standardized amount for hos18 pitals located in any area within the United States 

19 and within each region equal to the average stand20 ardized amount computed for the previous fiscal 

21 year under this subparagraph for hospitals located 

22 in a large urban area (or, beginning with fiscal year 

23 2005, for hospitals located in any area) increased by 

24 the applicable percentage increase under subsection 

25 (b)(3)(B)(i).’’. 
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1 SEC. 103. 3-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR 

2 INDIRECT COSTS OF MEDICAL EDUCATION 

3 (IME). 

4 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42 

5 U.S.C. 1395ww(d)(5)(B)(ii)) is amended—

6 (1) in subclause (VI)—

7 (A) by striking ‘‘fiscal year 2002’’ and in8 serting ‘‘fiscal years 2002, 2003, and 2004’’; 

9 and 

10 (B) by striking ‘‘and’’ at the end; 

11 (2) by redesignating subclause (VII) as sub12 clause (VIII); 

13 (3) in subclause (VIII) as so redesignated, by 

14 striking ‘‘2002’’ and inserting ‘‘2005’’; and 

15 (4) by inserting after subclause (VI) the fol16 lowing new subclause: 

17 ‘‘(VII) during fiscal year 2005, ‘c’ is equal 

18 to 1.47; and’’. 

19 (b) CONFORMING AMENDMENT RELATING TO DE20 TERMINATION OF STANDARDIZED AMOUNT.—Section 

21 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 

22 amended—

23 (1) by striking ‘‘1999 or’’ and inserting 

24 ‘‘1999,’’; and 
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1 (2) by inserting ‘‘, or of section 103(a) of the 

2 Medicare Payment Restoration and Benefits Im3 provement Act of 2003’’ after ‘‘2000’’. 

4 SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN 

5 HOSPITAL MARKET BASKET. 

6 (a) MORE FREQUENT UPDATES IN WEIGHTS.—After 

7 revising the weights used in the hospital market basket 

8 under section 1886(b)(3)(B)(iii) of the Social Security Act 

9 (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the most cur10 rent data available, the Secretary shall establish a fre11 quency for revising such weights in such market basket 

12 to reflect the most current data available more frequently 

13 than once every 5 years. 

14 (b) REPORT.—Not later than October 1, 2003, the 

15 Secretary shall submit a report to Congress on the fre16 quency established under subsection (a), including an ex17 planation of the reasons for, and options considered, in 

18 determining such frequency. 

19 SEC. 105. RELIEF FOR CERTAIN NON-TEACHING HOS20 PITALS. 

21 (a) IN GENERAL.—In the case of a non-teaching hos22 pital that meets the condition of subsection (b), in each 

23 of fiscal years 2003, 2004, and 2005 the amount of pay24 ment made to the hospital under section 1886(d) of the 

25 Social Security Act for discharges occurring during such 
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1 fiscal year only shall be increased as though the applicable 

2 percentage increase (otherwise applicable to discharges oc3 curring during such fiscal year under section 

4 1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C. 

5 1395ww(b)(3)(B)(i)) had been increased by 5 percentage 

6 points. The previous sentence shall be applied for each 

7 such fiscal year separately without regard to its applica8 tion in a previous fiscal year and shall not affect payment 

9 for discharges for any hospital occurring during a fiscal 

10 year after fiscal year 2005. 

11 (b) CONDITION.—A non-teaching hospital meets the 

12 condition of this subsection if—

13 (1) it is located in a rural area and the amount 

14 of the aggregate payments under subsection (d) of 

15 section 1886 of the Social Security Act for hospitals 

16 located in rural areas in the State for their cost re17 porting periods beginning during fiscal year 1999 is 

18 less than the aggregate allowable operating costs of 

19 inpatient hospital services (as defined in subsection 

20 (a)(4) of such section) for all subsection (d) hos21 pitals in such areas in such State with respect to 

22 such cost reporting periods; or 

23 (2) it is located in an urban area and the 

24 amount of the aggregate payments under subsection 

25 (d) of such section for hospitals located in urban 
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1 areas in the State for their cost reporting periods 

2 beginning during fiscal year 1999 is less than 103 

3 percent of the aggregate allowable operating costs of 

4 inpatient hospital services (as defined in subsection 

5 (a)(4) of such section) for all subsection (d) hos6 pitals in such areas in such State with respect to 

7 such cost reporting periods. 

8 The amounts under paragraphs (1) and (2) shall be deter9 mined by the Secretary of Health and Human Services 

10 based on data of the Medicare Payment Advisory Commis11 sion. 

12 (c) DEFINITIONS.—For purposes of this section: 

13 (1) NON-TEACHING HOSPITAL.—The term 

14 ‘‘non-teaching hospital’’ means, for a cost reporting 

15 period, a subsection (d) hospital (as defined in sub16 section (d)(1)(B) of section 1886 of the Social Secu17 rity Act, 42 U.S.C. 1395ww)) that is not receiving 

18 any additional payment under subsection (d)(5)(B) 

19 of such section or a payment under subsection (h) 

20 of such section for discharges occurring during the 

21 period. A subsection (d) hospital that receives addi22 tional payments under subsection (d)(5)(B) or (h) of 

23 such section shall, for purposes of this section, also 

24 be treated as a non-teaching hospital unless a chair25 man of a department in the medical school with 
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1 which the hospital is affiliated is serving or has been 

2 appointed as a clinical chief of service in the hos3 pital. 

4 (2) RURAL; URBAN.—The terms ‘‘rural’’ and 

5 ‘‘urban’’ have the meanings given such terms for 

6 purposes of section 1886(d) of the Social Security 

7 Act (42 U.S.C. 1395ww(d)). 

8 SEC. 106. ENHANCED DISPROPORTIONATE SHARE HOS9 PITAL (DSH) TREATMENT FOR RURAL HOS10 PITALS AND URBAN HOSPITALS WITH FEWER 

11 THAN 100 BEDS. 

12 (a) BLENDING OF PAYMENT AMOUNTS.—

13 (1) IN GENERAL.—Section 1886(d)(5)(F) (42 

14 U.S.C. 1395ww(d)(5)(F)) is amended by adding at 

15 the end the following new clause: 

16 ‘‘(xiv)(I) In the case of discharges in a fiscal year 

17 beginning on or after October 1, 2002, subject to sub18 clause (II), there shall be substituted for the dispropor19 tionate share adjustment percentage otherwise determined 

20 under clause (iv) (other than subclause (I)) or under 

21 clause (viii), (x), (xi), (xii), or (xiii), the old blend propor22 tion (specified under subclause (III)) of the dispropor23 tionate share adjustment percentage otherwise determined 

24 under the respective clause and 100 percent minus such 

25 old blend proportion of the disproportionate share adjust-
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1 ment percentage determined under clause (vii) (relating 

2 to large, urban hospitals). 

3 ‘‘(II) Under subclause (I), the disproportionate share 

4 adjustment percentage shall not exceed 10 percent for a 

5 hospital that is not classified as a rural referral center 

6 under subparagraph (C). 

7 ‘‘(III) For purposes of subclause (I), the old blend 

8 proportion for fiscal year 2003 is 80 percent, for each sub9 sequent year (through 2006) is the old blend proportion 

10 under this subclause for the previous year minus 20 per11 centage points, and for each year beginning with 2007 is 

12 0 percent.’’. 

13 (2) CONFORMING AMENDMENTS.—Section 

14 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is 

15 amended—

16 (A) in each of subclauses (II), (III), (IV), 

17 (V), and (VI) of clause (iv), by inserting ‘‘sub18 ject to clause (xiv) and’’ before ‘‘for discharges 

19 occurring’’; 

20 (B) in clause (viii), by striking ‘‘The for21 mula’’ and inserting ‘‘Subject to clause (xiv), 

22 the formula’’; and 

23 (C) in each of clauses (x), (xi), (xii), and 

24 (xiii), by striking ‘‘For purposes’’ and inserting 

25 ‘‘Subject to clause (xiv), for purposes’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply with respect to discharges occur3 ring on or after October 1, 2002. 

4 SEC. 107. RECOGNITION OF NEW MEDICAL TECHNOLOGIES 

5 UNDER INPATIENT HOSPITAL PPS. 

6 (a) IMPROVING TIMELINESS OF DATA COLLEC7 TION.—Section 1886(d)(5)(K) (42 U.S.C. 

8 1395ww(d)(5)(K)) is amended by adding at the end the 

9 following new clause: 

10 ‘‘(vii) Under the mechanism under this subpara11 graph, the Secretary shall provide for the addition of new 

12 diagnosis and procedure codes in April 1 of each year, but 

13 the addition of such codes shall not require the Secretary 

14 to adjust the payment (or diagnosis-related group classi15 fication) under this subsection until the fiscal year that 

16 begins after such date.’’. 

17 (b) ELIGIBILITY STANDARD.—

18 (1) MINIMUM PERIOD FOR RECOGNITION OF

19 NEW TECHNOLOGIES.—Section 1886(d)(5)(K)(vi) 

20 (42 U.S.C. 1395ww(d)(5)(K)(vi)) is amended—

21 (A) by inserting ‘‘(I)’’ after ‘‘(vi)’’; and 

22 (B) by adding at the end the following new 

23 subclause: 

24 ‘‘(II) Under such criteria, a service or technology 

25 shall not be denied treatment as a new service or tech-
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1 nology on the basis of the period of time in which the serv2 ice or technology has been in use if such period ends before 

3 the end of the 2-to-3-year period that begins on the effec4 tive date of implementation of a code under ICD–9–CM 

5 (or a successor coding methodology) that enables the iden6 tification of a significant sample of specific discharges in 

7 which the service or technology has been used.’’. 

8 (2) ADJUSTMENT OF THRESHOLD.—Section 

9 1886(d)(5)(K)(ii)(I) (42 U.S.C. 

10 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 

11 ‘‘(applying a threshold specified by the Secretary 

12 that is the lesser of 50 percent of the national aver13 age standardized amount for operating costs of inpa14 tient hospital services for all hospitals and all diag15 nosis-related groups or one standard deviation for 

16 the diagnosis-related group involved)’’ after ‘‘is inad17 equate’’. 

18 (3) CRITERION FOR SUBSTANTIAL IMPROVE19 MENT.—Section 1886(d)(5)(K)(vi) (42 U.S.C. 

20 1395ww(d)(5)(K)(vi)), as amended by paragraph 

21 (1), is further amended by adding at the end the fol22 lowing subclause: 

23 ‘‘(III) The Secretary shall by regulation provide for 

24 further clarification of the criteria applied to determine 

25 whether a new service or technology represents an advance 
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1 in medical technology that substantially improves the diag2 nosis or treatment of beneficiaries. Under such criteria, 

3 in determining whether a new service or technology rep4 resents an advance in medical technology that substan5 tially improves the diagnosis or treatment of beneficiaries, 

6 the Secretary shall deem a service or technology as meet7 ing such requirement if the service or technology is a drug 

8 or biological that is designated under section 506 or 526 

9 of the Federal Food, Drug, and Cosmetic Act, approved 

10 under section 314.510 or 601.41 of title 21, Code of Fed11 eral Regulations, or designated for priority review when 

12 the marketing application for such drug or biological was 

13 filed or is a medical device for which an exemption has 

14 been granted under section 520(m) of such Act, or for 

15 which priority review has been provided under section 

16 515(d)(5) of such Act.’’. 

17 (4) PROCESS FOR PUBLIC INPUT.—Section 

18 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as 

19 amended by paragraph (1), is amended—

20 (A) in clause (i), by adding at the end the 

21 following: ‘‘Such mechanism shall be modified 

22 to meet the requirements of clause (viii).’’; and 

23 (B) by adding at the end the following new 

24 clause: 
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1 ‘‘(viii) The mechanism established pursuant to clause 

2 (i) shall be adjusted to provide, before publication of a 

3 proposed rule, for public input regarding whether a new 

4 service or technology not described in the second sentence 

5 of clause (vi)(III) represents an advance in medical tech6 nology that substantially improves the diagnosis or treat7 ment of beneficiaries as follows: 

8 ‘‘(I) The Secretary shall make public and peri9 odically update a list of all the services and tech10 nologies for which an application for additional pay11 ment under this subparagraph is pending. 

12 ‘‘(II) The Secretary shall accept comments, rec13 ommendations, and data from the public regarding 

14 whether the service or technology represents a sub15 stantial improvement. 

16 ‘‘(III) The Secretary shall provide for a meeting 

17 at which organizations representing hospitals, physi18 cians, medicare beneficiaries, manufacturers, and 

19 any other interested party may present comments, 

20 recommendations, and data to the clinical staff of 

21 the Centers for Medicare & Medicaid Services before 

22 publication of a notice of proposed rulemaking re23 garding whether service or technology represents a 

24 substantial improvement.’’. 
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1 (c) PREFERENCE FOR USE OF DRG ADJUSTMENT.—

2 Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is 

3 further amended by adding at the end the following new 

4 clause: 

5 ‘‘(ix) Before establishing any add-on payment under 

6 this subparagraph with respect to a new technology, the 

7 Secretary shall seek to identify one or more diagnosis-re8 lated groups associated with such technology, based on 

9 similar clinical or anatomical characteristics and the cost 

10 of the technology. Within such groups the Secretary shall 

11 assign an eligible new technology into a diagnosis-related 

12 group where the average costs of care most closely approx13 imate the costs of care of using the new technology. In 

14 such case, no add-on payment under this subparagraph 

15 shall be made with respect to such new technology and 

16 this clause shall not affect the application of paragraph 

17 (4)(C)(iii).’’. 

18 (d) IMPROVEMENT IN PAYMENT FOR NEW TECH19 NOLOGY.—Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 

20 1395ww(d)(5)(K)(ii)(III)) is amended by inserting after 

21 ‘‘the estimated average cost of such service or technology’’ 

22 the following: ‘‘(based on the marginal rate applied to 

23 costs under subparagraph (A))’’. 

24 (e) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The Secretary shall imple2 ment the amendments made by this section so that 

3 they apply to classification for fiscal years beginning 

4 with fiscal year 2004. 

5 (2) RECONSIDERATIONS OF APPLICATIONS FOR

6 FISCAL YEAR 2003 THAT ARE DENIED.—In the case 

7 of an application for a classification of a medical 

8 service or technology as a new medical service or 

9 technology under section 1886(d)(5)(K) of the Social 

10 Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 

11 filed for fiscal year 2003 and that is denied—

12 (A) the Secretary shall automatically re13 consider the application as an application for 

14 fiscal year 2004 under the amendments made 

15 by this section; and 

16 (B) the maximum time period otherwise 

17 permitted for such classification of the service 

18 or technology shall be extended by 12 months. 

19 SEC. 108. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL 

20 PROGRAM. 

21 (a) REINSTATEMENT OF PERIODIC INTERIM PAY22 MENT (PIP).—Section 1815(e)(2) (42 U.S.C. 

23 1395g(e)(2)) is amended—

24 (1) by striking ‘‘and’’ at the end of subpara25 graph (C); 
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1 (2) by adding ‘‘and’’ at the end of subpara2 graph (D); and 

3 (3) by inserting after subparagraph (D) the fol4 lowing new subparagraph: 

5 ‘‘(E) inpatient critical access hospital services;’’. 

6 (b) CONDITION FOR APPLICATION OF SPECIAL PHY7 SICIAN PAYMENT ADJUSTMENT.—Section 1834(g)(2) (42 

8 U.S.C. 1395m(g)(2)) is amended by adding after and 

9 below subparagraph (B) the following: 

10 ‘‘The Secretary may not require, as a condition for 

11 applying subparagraph (B) with respect to a critical 

12 access hospital, that each physician providing profes13 sional services in the hospital must assign billing 

14 rights with respect to such services, except that such 

15 subparagraph shall not apply to those physicians 

16 who have not assigned such billing rights.’’. 

17 (c) FLEXIBILITY IN BED LIMITATION FOR HOS18 PITALS.—Section 1820 (42 U.S.C. 1395i–4) is amended—

19 (1) in subsection (c)(2)(B)(iii), by inserting 

20 ‘‘subject to paragraph (3)’’ after ‘‘(iii) provides’’; 

21 (2) by adding at the end of subsection (c) the 

22 following new paragraph: 

23 ‘‘(3) INCREASE IN MAXIMUM NUMBER OF BEDS

24 FOR HOSPITALS WITH STRONG SEASONAL CENSUS

25 FLUCTUATIONS.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (C), in the case of a hospital that dem3 onstrates that it meets the standards estab4 lished under subparagraph (B) and has not 

5 made the election described in subsection 

6 (f)(2)(A), the bed limitations otherwise applica7 ble under paragraph (2)(B)(iii) and subsection 

8 (f) shall be increased by 5 beds. 

9 ‘‘(B) STANDARDS.—The Secretary shall 

10 specify standards for determining whether a 

11 critical access hospital has sufficiently strong 

12 seasonal variations in patient admissions to jus13 tify the increase in bed limitation provided 

14 under subparagraph (A).’’; and 

15 (3) in subsection (f)—

16 (A) by inserting ‘‘(1)’’ after ‘‘(f)’’; and 

17 (B) by adding at the end the following new 

18 paragraph: 

19 ‘‘(2)(A) A hospital may elect to treat the reference 

20 in paragraph (1) to ‘15 beds’ as a reference to ‘25 beds’, 

21 but only if no more than 10 beds in the hospital are at 

22 any time used for non-acute care services. A hospital that 

23 makes such an election is not eligible for the increase pro24 vided under subsection (c)(3)(A). 
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1 ‘‘(B) The limitations in numbers of beds under the 

2 first sentence of paragraph (1) are subject to adjustment 

3 under subsection (c)(3).’’. 

4 (d) 5-YEAR EXTENSION OF THE AUTHORIZATION

5 FOR APPROPRIATIONS FOR GRANT PROGRAM.—Section 

6 1820(j) (42 U.S.C. 1395i–4(j)) is amended by striking 

7 ‘‘through 2002’’ and inserting ‘‘through 2007’’.

8 (e) PROHIBITION OF RETROACTIVE RECOUPMENT.—

9 The Secretary shall not recoup (or otherwise seek to re10 cover) overpayments made for outpatient critical access 

11 hospital services under part B of title XVIII of the Social 

12 Security Act, for services furnished in cost reporting peri13 ods that began before October 1, 2002, insofar as such 

14 overpayments are attributable to payment being based on 

15 80 percent of reasonable costs (instead of 100 percent of 

16 reasonable costs minus 20 percent of charges). 

17 (f) EFFECTIVE DATES.—

18 (1) REINSTATEMENT OF PIP.—The amend19 ments made by subsection (a) shall apply to pay20 ments made on or after January 1, 2003. 

21 (2) PHYSICIAN PAYMENT ADJUSTMENT CONDI22 TION.—The amendment made by subsection (b) 

23 shall be effective as if included in the enactment of 

24 section 403(d) of the Medicare, Medicaid, and 
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1 SCHIP Balanced Budget Refinement Act of 1999 

2 (113 Stat. 1501A–371). 

3 (3) FLEXIBILITY IN BED LIMITATION.—The 

4 amendments made by subsection (c) shall apply to 

5 designations made on or after January 1, 2003, but 

6 shall not apply to critical access hospitals that were 

7 designated as of such date. 

8 SEC. 109. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN 

9 PUERTO RICO. 

10 Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is 

11 amended—

12 (1) in subparagraph (A)—

13 (A) in clause (i), by striking ‘‘for dis14 charges beginning on or after October 1, 1997, 

15 50 percent (and for discharges between October 

16 1, 1987, and September 30, 1997, 75 percent)’’ 

17 and inserting ‘‘the applicable Puerto Rico per18 centage (specified in subparagraph (E))’’; and 

19 (B) in clause (ii), by striking ‘‘for dis20 charges beginning in a fiscal year beginning on 

21 or after October 1, 1997, 50 percent (and for 

22 discharges between October 1, 1987, and Sep23 tember 30, 1997, 25 percent)’’ and inserting 

24 ‘‘the applicable Federal percentage (specified in 

25 subparagraph (E))’’; and 
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1 (2) by adding at the end the following new sub2 paragraph:

3 ‘‘(E) For purposes of subparagraph (A), for dis4 charges occurring—

5 ‘‘(i) between October 1, 1987, and September 

6 30, 1997, the applicable Puerto Rico percentage is 

7 75 percent and the applicable Federal percentage is 

8 25 percent; 

9 ‘‘(ii) on or after October 1, 1997, and before 

10 October 1, 2003, the applicable Puerto Rico percent11 age is 50 percent and the applicable Federal per12 centage is 50 percent; 

13 ‘‘(iii) during fiscal year 2004, the applicable 

14 Puerto Rico percentage is 45 percent and the appli15 cable Federal percentage is 55 percent; 

16 ‘‘(iv) during fiscal year 2005, the applicable 

17 Puerto Rico percentage is 40 percent and the appli18 cable Federal percentage is 60 percent; 

19 ‘‘(v) during fiscal year 2006, the applicable 

20 Puerto Rico percentage is 35 percent and the appli21 cable Federal percentage is 65 percent; 

22 ‘‘(vi) during fiscal year 2007, the applicable 

23 Puerto Rico percentage is 30 percent and the appli24 cable Federal percentage is 70 percent; and 
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1 ‘‘(vii) on or after October 1, 2007, the applica2 ble Puerto Rico percentage is 25 percent and the ap3 plicable Federal percentage is 75 percent.’’. 

4 SEC. 110. GAO STUDY ON IMPROVING THE HOSPITAL WAGE 

5 INDEX. 

6 (a) STUDY.—

7 (1) IN GENERAL.—The Comptroller General of 

8 the United States shall conduct a study on the im9 provements that can be made in the measurement of 

10 regional differences in hospital wages reflected in the 

11 hospital wage index under section 1886(d) of the So12 cial Security Act (42 U.S.C. 1395ww(d)). 

13 (2) EXAMINATION OF USE OF METROPOLITAN

14 STATISTICAL AREAS (MSAS).—The study shall spe15 cifically examine the use of metropolitan statistical 

16 areas for purposes of computing and applying the 

17 wage index and whether the boundaries of such 

18 areas accurately reflect local labor markets. In addi19 tion, the study shall examine whether regional in20 equities are created as a result of infrequent updates 

21 of such boundaries and policies of the Bureau of the 

22 Census relating to commuting criteria. 

23 (3) WAGE DATA.—The study shall specifically 

24 examine the portions of the hospital cost reports re25 lating to wages, and methods for improving the ac-
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1 curacy of the wage data and for reducing inequities 

2 resulting from differences among hospitals in the re3 porting of wage data. 

4 (b) CONSULTATION WITH OMB.—The Comptroller 

5 General shall consult with the Director of Office of Man6 agement and Budget in conducting the study under sub7 section (a)(2). 

8 (c) REPORT.—Not later than July 1, 2003, the 

9 Comptroller General shall submit to Congress a report on 

10 the study conducted under subsection (a) and shall include 

11 in the report such recommendations as may be appropriate 

12 on—

13 (1) changes in the definition of labor market 

14 areas used for purposes of the area wage index 

15 under section 1886 of the Social Security Act; and 

16 (2) improvements in methods for the collection 

17 of wage data. 

18 Subtitle B—Skilled Nursing 

19 Facility Services 

20 SEC. 121. PAYMENT FOR COVERED SKILLED NURSING FA21 CILITY SERVICES. 

22 (a) 2-YEAR EXTENSION OF TEMPORARY INCREASE

23 IN NURSING COMPONENT OF PPS FEDERAL RATE.—Sec24 tion 312(a) of BIPA is amended by striking ‘‘, and before 
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1 October 1, 2002’’ and inserting ‘‘and before October 1, 

2 2004’’. 

3 (b) ADJUSTMENT TO RUGS FOR AIDS RESI4 DENTS.—

5 (1) IN GENERAL.—Paragraph (12) of section 

6 1888(e) (42 U.S.C. 1395yy(e)) is amended to read 

7 as follows: 

8 ‘‘(12) ADJUSTMENT FOR RESIDENTS WITH

9 AIDS.—

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (B), in the case of a resident of a skilled 

12 nursing facility who is afflicted with acquired 

13 immune deficiency syndrome (AIDS), the per 

14 diem amount of payment otherwise applicable 

15 shall be increased by 128 percent to reflect in16 creased costs associated with such residents. 

17 ‘‘(B) SUNSET.—Subparagraph (A) shall 

18 not apply on and after such date as the Sec19 retary certifies that there is an appropriate ad20 justment in the case mix under paragraph 

21 (4)(G)(i) to compensate for the increased costs 

22 associated with residents described in such sub23 paragraph.’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply to services furnished on 

3 or after October 1, 2003. 

4 (c) CMS STUDY AND REPORT.—

5 (1) STUDY.—The Secretary shall conduct a 

6 study to review the adequacy of funding under the 

7 medicaid program under title XIX of the Social Se8 curity Act for nursing facility care. 

9 (2) REPORT.—Not later than one year after the 

10 date of the enactment of this Act, the Secretary 

11 shall submit to Congress a report on the study con12 ducted under paragraph (1). The report shall in13 clude recommendations of the Secretary with respect 

14 to structural reform of funding systems to ensure 

15 quality nursing facility services for those eligible for 

16 benefits under the medicaid program. 

17 Subtitle C—Hospice Care 

18 SEC. 131. COVERAGE OF HOSPICE CONSULTATION SERV19 ICES. 

20 (a) COVERAGE OF HOSPICE CONSULTATION SERV21 ICES.—Section 1812(a) (42 U.S.C. 1395d(a)) is amend22 ed—

23 (1) by striking ‘‘and’’ at the end of paragraph 

24 (3); 
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1 (2) by striking the period at the end of para2 graph (4) and inserting ‘‘; and’’; and 

3 (3) by inserting after paragraph (4) the fol4 lowing new paragraph: 

5 ‘‘(5) for individuals who are terminally ill, have 

6 not made an election under subsection (d)(1), and 

7 have not previously received services under this 

8 paragraph, services that are furnished by a physi9 cian who is either the medical director or an em10 ployee of a hospice program and that consist of—

11 ‘‘(A) an evaluation of the individual’s need 

12 for pain and symptom management; 

13 ‘‘(B) counseling the individual with respect 

14 to end-of-life issues and care options; and 

15 ‘‘(C) advising the individual regarding ad16 vanced care planning.’’. 

17 (b) PAYMENT.—Section 1814(i) (42 U.S.C. l395f(i)) 

18 is amended by adding at the end the following new para19 graph: 

20 ‘‘(4) The amount paid to a hospice program with re21 spect to the services under section 1812(a)(5) for which 

22 payment may be made under this part shall be equal to 

23 an amount equivalent to the amount established for an 

24 office or other outpatient visit for evaluation and manage25 ment associated with presenting problems of moderate se-
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1 verity under the fee schedule established under section 

2 1848(b), other than the portion of such amount attrib3 utable to the practice expense component.’’. 

4 (c) CONFORMING AMENDMENT.—Section 

5 1861(dd)(2)(A)(i) (42 U.S.C. 1395x(dd)(2)(A)(i)) is 

6 amended by inserting before the comma at the end the 

7 following: ‘‘and services described in section 1812(a)(5)’’. 

8 (d) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to services provided by a hospice 

10 program on or after January 1, 2004. 

11 SEC. 132. 10 PERCENT INCREASE IN PAYMENT FOR HOS12 PICE CARE FURNISHED IN A FRONTIER AREA. 

13 (a) IN GENERAL.—Section 1814(i)(1) (42 U.S.C. 

14 1395f(i)(1)) is amended by adding at the end the following 

15 new subparagraph: 

16 ‘‘(D) With respect to hospice care furnished in a fron17 tier area on or after January 1, 2003, and before January 

18 1, 2008, the payment rates otherwise established for such 

19 care shall be increased by 10 percent. For purposes of this 

20 subparagraph, the term ‘frontier area’ means a county in 

21 which the population density is less than 7 persons per 

22 square mile.’’. 

23 (b) REPORT ON COSTS.—Not later than January 1, 

24 2007, the Comptroller General of the United States shall 

25 submit to Congress a report on the costs of furnishing 
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1 hospice care in frontier areas. Such report shall include 

2 recommendations regarding the appropriateness of extend3 ing, and modifying, the payment increase provided under 

4 the amendment made by subsection (a). 

5 SEC. 133. RURAL HOSPICE DEMONSTRATION PROJECT. 

6 (a) IN GENERAL.—The Secretary shall conduct a 

7 demonstration project for the delivery of hospice care to 

8 medicare beneficiaries in rural areas. Under the project 

9 medicare beneficiaries who are unable to receive hospice 

10 care in the home for lack of an appropriate caregiver are 

11 provided such care in a facility of 20 or fewer beds which 

12 offers, within its walls, the full range of services provided 

13 by hospice programs under section 1861(dd) of the Social 

14 Security Act (42 U.S.C. 1395x(dd)). 

15 (b) SCOPE OF PROJECT.—The Secretary shall con16 duct the project under this section with respect to no more 

17 than 3 hospice programs over a period of not longer than 

18 5 years each. 

19 (c) COMPLIANCE WITH CONDITIONS.—Under the 

20 demonstration project—

21 (1) the hospice program shall comply with oth22 erwise applicable requirements, except that it shall 

23 not be required to offer services outside of the home 

24 or to meet the requirements of section 

25 1861(dd)(2)(A)(iii) of the Social Security Act; and 
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1 (2) payments for hospice care shall be made at 

2 the rates otherwise applicable to such care under 

3 title XVIII of such Act. 

4 The Secretary may require the program to comply with 

5 such additional quality assurance standards for its provi6 sion of services in its facility as the Secretary deems ap7 propriate. 

8 (d) REPORT.—Upon completion of the project, the 

9 Secretary shall submit a report to Congress on the project 

10 and shall include in the report recommendations regarding 

11 extension of such project to hospice programs serving 

12 rural areas.

13 TITLE II—PROVISIONS 

14 RELATING TO PART B 

15 Subtitle A—Physicians’ Services 

16 SEC. 201. REVISION OF UPDATES FOR PHYSICIANS’ SERV17 ICES. 

18 (a) UPDATE FOR 2003 THROUGH 2005.—

19 (1) IN GENERAL.—Section 1848(d) (42 U.S.C. 

20 1395w–4(d)) is amended by adding at the end the 

21 following new paragraphs: 

22 ‘‘(5) UPDATE FOR 2003.—The update to the 

23 single conversion factor established in paragraph 

24 (1)(C) for 2003 is 2 percent. 
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1 ‘‘(6) SPECIAL RULES FOR UPDATE FOR 2004

2 AND 2005.—The following rules apply in determining 

3 the update adjustment factors under paragraph 

4 (4)(B) for 2004 and 2005: 

5 ‘‘(A) USE OF 2002 DATA IN DETERMINING

6 ALLOWABLE COSTS.—

7 ‘‘(i) The reference in clause (ii)(I) of 

8 such paragraph to April 1, 1996, is 

9 deemed to be a reference to January 1, 

10 2002. 

11 ‘‘(ii) The allowed expenditures for 

12 2002 is deemed to be equal to the actual 

13 expenditures for physicians’ services fur14 nished during 2002, as estimated by the 

15 Secretary. 

16 ‘‘(B) 1 PERCENTAGE POINT INCREASE IN

17 GDP UNDER SGR.—The annual average percent18 age growth in real gross domestic product per 

19 capita under subsection (f)(2)(C) for each of 

20 2003, 2004, and 2005 is deemed to be in21 creased by 1 percentage point.’’. 

22 (2) CONFORMING AMENDMENT.—Paragraph 

23 (4)(B) of such section is amended, in the matter be24 fore clause (i), by inserting ‘‘and paragraph (6)’’ 

25 after ‘‘subparagraph (D)’’. 
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1 (3) NOT TREATED AS CHANGE IN LAW AND

2 REGULATION IN SUSTAINABLE GROWTH RATE DE3 TERMINATION.—The amendments made by this sub4 section shall not be treated as a change in law for 

5 purposes of applying section 1848(f)(2)(D) of the 

6 Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)). 

7 (b) USE OF 10-YEAR ROLLING AVERAGE IN COM8 PUTING GROSS DOMESTIC PRODUCT.—

9 (1) IN GENERAL.—Section 1848(f)(2)(C) (42 

10 U.S.C. 1395w–4(f)(2)(C)) is amended—

11 (A) by striking ‘‘projected’’ and inserting 

12 ‘‘annual average’’; and 

13 (B) by striking ‘‘from the previous applica14 ble period to the applicable period involved’’ 

15 and inserting ‘‘during the 10-year period ending 

16 with the applicable period involved’’.

17 (2) EFFECTIVE DATE.—The amendment made 

18 by paragraph (1) shall apply to computations of the 

19 sustainable growth rate for years beginning with 

20 2002. 

21 (c) ELIMINATION OF TRANSITIONAL ADJUSTMENT.—

22 Section 1848(d)(4)(F) (42 U.S.C. 1395w–4(d)(4)(F)) is 

23 amended by striking ‘‘subparagraph (A)’’ and all that fol24 lows and inserting ‘‘subparagraph (A), for each of 2001 

25 and 2002, of ¥0.2 percent.’’. 
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1 (d) GAO STUDY OF MEDICARE PAYMENT FOR INHA2 LATION THERAPY.—

3 (1) STUDY.—The Comptroller General of the 

4 United States shall conduct a study to examine the 

5 adequacy of current reimbursements for inhalation 

6 therapy under the medicare program. 

7 (2) REPORT.—Not later than July 1, 2003, the 

8 Comptroller General shall submit to Congress a re9 port on the study conducted under paragraph (1). 

10 SEC. 202. STUDIES ON ACCESS TO PHYSICIANS’ SERVICES. 

11 (a) GAO STUDY ON BENEFICIARY ACCESS TO PHYSI12 CIANS’ SERVICES.—

13 (1) STUDY.—The Comptroller General of the 

14 United States shall conduct a study on access of 

15 medicare beneficiaries to physicians’ services under 

16 the medicare program. The study shall include—

17 (A) an assessment of the use by bene18 ficiaries of such services through an analysis of 

19 claims submitted by physicians for such services 

20 under part B of the medicare program; 

21 (B) an examination of changes in the use 

22 by beneficiaries of physicians’ services over 

23 time; 
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1 (C) an examination of the extent to which 

2 physicians are not accepting new medicare 

3 beneficiaries as patients. 

4 (2) REPORT.—Not later than 18 months after 

5 the date of the enactment of this Act, the Comp6 troller General shall submit to Congress a report on 

7 the study conducted under paragraph (1). The re8 port shall include a determination whether—

9 (A) data from claims submitted by physi10 cians under part B of the medicare program in11 dicate potential access problems for medicare 

12 beneficiaries in certain geographic areas; and 

13 (B) access by medicare beneficiaries to 

14 physicians’ services may have improved, re15 mained constant, or deteriorated over time.

16 (b) STUDY AND REPORT ON SUPPLY OF PHYSI17 CIANS.—

18 (1) STUDY.—The Secretary shall request the 

19 Institute of Medicine of the National Academy of 

20 Sciences to conduct a study on the adequacy of the 

21 supply of physicians (including specialists) in the 

22 United States and the factors that affect such sup23 ply. 

24 (2) REPORT TO CONGRESS.—Not later than 2 

25 years after the date of enactment of this section, the 
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1 Secretary shall submit to Congress a report on the 

2 results of the study described in paragraph (1), in3 cluding any recommendations for legislation. 

4 SEC. 203. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS’

5 SERVICES. 

6 Not later than 1 year after the date of the enactment 

7 of this Act, the Medicare Payment Advisory Commission 

8 shall submit to Congress a report on the effect of refine9 ments to the practice expense component of payments for 

10 physicians’ services, after the transition to a full resource11 based payment system in 2002, under section 1848 of the 

12 Social Security Act (42 U.S.C. 1395w–4). Such report 

13 shall examine the following matters by physician specialty: 

14 (1) The effect of such refinements on payment 

15 for physicians’ services. 

16 (2) The interaction of the practice expense com17 ponent with other components of and adjustments to 

18 payment for physicians’ services under such section. 

19 (3) The appropriateness of the amount of com20 pensation by reason of such refinements. 

21 (4) The effect of such refinements on access to 

22 care by medicare beneficiaries to physicians’ serv23 ices. 

24 (5) The effect of such refinements on physician 

25 participation under the medicare program.
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1 SEC. 204. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN 

2 PHYSICIAN PATHOLOGY SERVICES UNDER 

3 MEDICARE. 

4 Section 542(c) of BIPA is amended by striking ‘‘2-

5 year period’’ and inserting ‘‘3-year period’’.

6 SEC. 205. PHYSICIAN FEE SCHEDULE WAGE INDEX REVI7 SION. 

8 (a) INDEX REVISION.—

9 (1) IN GENERAL.—Subject to paragraph (2), 

10 notwithstanding any other provision of law, for pur11 poses of payment under the physician fee schedule 

12 under section 1848 of the Social Security Act (42 

13 U.S.C. 1395w–4) for physicians’ services furnished 

14 during 2004, in no case may the work geographic 

15 index otherwise calculated under subsection 

16 (e)(1)(A)(iii) of such section be less than 0.985. 

17 (2) SECRETARIAL DISCRETION.—Paragraph (1) 

18 shall not take effect or be in force if the Secretary 

19 determines, taking into account the report of the 

20 Comptroller General under subsection (b)(2), that 

21 there is no sound economic rationale for the imple22 mentation of such paragraph. 

23 (3) EXEMPTION FROM LIMITATION ON ANNUAL

24 ADJUSTMENTS.—Any increase in expenditures at25 tributable to paragraph (1) during 2004 shall not be 

26 taken into account in applying section 
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1 1848(c)(2)(B)(ii)(II) of the Social Security Act (42 

2 U.S.C. 1395w–4(c)(2)(B)(ii)(II)) for that year. 

3 (b) GAO REPORT.—

4 (1) EVALUATION.—As part of the study on geo5 graphic differences in payments for physicians’ serv6 ices conducted under section 309, the Comptroller 

7 General shall evaluate the following: 

8 (A) Whether there is a sound economic 

9 basis for the implementation of the adjustment 

10 under subsection (a)(1) in those areas in which 

11 the adjustment applies. 

12 (B) The effect of such adjustment on phy13 sician location and retention in areas affected 

14 by such adjustment, taking into account—

15 (i) differences in recruitment costs 

16 and retention rates for physicians, includ17 ing specialists, between large urban areas 

18 and other areas; and 

19 (ii) the mobility of physicians, includ20 ing specialists, over the last decade. 

21 (C) The appropriateness of establishing a 

22 floor of 1.0 for the work geographic index. 

23 (2) REPORT.—By not later than September 1, 

24 2003, the Comptroller General shall submit to Con-
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1 gress and to the Secretary a report on the evaluation 

2 conducted under paragraph (1). 

3 Subtitle B—Provisions Relating to 

4 Preventive Benefits

5 SEC. 211. COVERAGE OF AN INITIAL PREVENTIVE PHYS6 ICAL EXAMINATION. 

7 (a) COVERAGE.—Section 1861(s)(2) (42 U.S.C. 

8 1395x(s)(2)) is amended—

9 (1) in subparagraph (U), by striking ‘‘and’’ at 

10 the end; 

11 (2) in subparagraph (V), by inserting ‘‘and’’ at 

12 the end; and 

13 (3) by adding at the end the following new sub14 paragraph: 

15 ‘‘(W) an initial preventive physical examination 

16 (as defined in subsection (ww));’’. 

17 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 

18 1395x) is amended by adding at the end the following new 

19 subsection: 

20 ‘‘Initial Preventive Physical Examination 

21 ‘‘(ww) The term ‘initial preventive physical examina22 tion’ means physicians’ services consisting of a physical 

23 examination with the goal of health promotion and disease 

24 detection and includes items and services (excluding clin25 ical laboratory tests), as determined by the Secretary, con-
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1 sistent with the recommendations of the United States 

2 Preventive Services Task Force.’’. 

3 (c) WAIVER OF DEDUCTIBLE AND COINSURANCE.—

4 (1) DEDUCTIBLE.—The first sentence of sec5 tion 1833(b) (42 U.S.C. 1395l(b)) is amended—

6 (A) by striking ‘‘and’’ before ‘‘(6)’’, and 

7 (B) by inserting before the period at the 

8 end the following: ‘‘, and (7) such deductible 

9 shall not apply with respect to an initial preven10 tive physical examination (as defined in section 

11 1861(ww))’’. 

12 (2) COINSURANCE.—Section 1833(a)(1) (42 

13 U.S.C. 1395l(a)(1)) is amended—

14 (A) in clause (N), by inserting ‘‘(or 100 

15 percent in the case of an initial preventive phys16 ical examination, as defined in section 

17 1861(ww))’’ after ‘‘80 percent’’; and 

18 (B) in clause (O), by inserting ‘‘(or 100 

19 percent in the case of an initial preventive phys20 ical examination, as defined in section 

21 1861(ww))’’ after ‘‘80 percent’’. 

22 (d) PAYMENT AS PHYSICIANS’ SERVICES.—Section 

23 1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by in24 serting ‘‘(2)(W),’’ after ‘‘(2)(S),’’. 
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1 (e) OTHER CONFORMING AMENDMENTS.—Section 

2 1862(a) (42 U.S.C. 1395y(a)) is amended—

3 (1) in paragraph (1)—

4 (A) by striking ‘‘and’’ at the end of sub5 paragraph (H); 

6 (B) by striking the semicolon at the end of 

7 subparagraph (I) and inserting ‘‘, and’’; and 

8 (C) by adding at the end the following new 

9 subparagraph: 

10 ‘‘(J) in the case of an initial preventive physical 

11 examination, which is performed not later than 1 

12 year after the date the individual’s first coverage pe13 riod begins under part B;’’; and 

14 (2) in paragraph (7), by striking ‘‘or (H)’’ and 

15 inserting ‘‘(H), or (J)’’. 

16 (f) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to services furnished on or after 

18 January 1, 2004, but only for individuals whose coverage 

19 period begins on or after such date. 

20 SEC. 212. COVERAGE OF CHOLESTEROL AND BLOOD LIPID 

21 SCREENING. 

22 (a) COVERAGE.—Section 1861(s)(2) (42 U.S.C. 

23 1395x(s)(2)), as amended by section 211(a), is amended—

24 (1) in subparagraph (V), by striking ‘‘and’’ at 

25 the end; 
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1 (2) in subparagraph (W), by inserting ‘‘and’’ at 

2 the end; and 

3 (3) by adding at the end the following new sub4 paragraph: 

5 ‘‘(X) cholesterol and other blood lipid 

6 screening tests (as defined in subsection 

7 (XX));’’. 

8 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 

9 1395x), as amended by section 211(b), is amended by add10 ing at the end the following new subsection:

11 ‘‘Cholesterol and Other Blood Lipid Screening Tests 

12 ‘‘(xx)(1) The term ‘cholesterol and other blood lipid 

13 screening tests’ means diagnostic testing of cholesterol 

14 and other lipid levels of the blood for the purpose of early 

15 detection of abnormal cholesterol and other lipid levels. 

16 ‘‘(2) The Secretary shall establish standards, in con17 sultation with appropriate organizations, regarding the 

18 frequency and type of cholesterol and other blood lipid 

19 screening tests, except that such frequency may not be 

20 more often than once every 2 years.’’. 

21 (c) FREQUENCY.—Section 1862(a)(1) (42 U.S.C. 

22 1395y(a)(1)), as amended by section 514(e), is amend23 ed—

24 (1) by striking ‘‘and’’ at the end of subpara25 graph (I); 
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1 (2) by striking the semicolon at the end of sub2 paragraph (J) and inserting ‘‘; and’’; and 

3 (3) by adding at the end the following new sub4 paragraph: 

5 ‘‘(K) in the case of a cholesterol and other 

6 blood lipid screening tests (as defined in section 

7 1861(xx)(1)), which is performed more frequently 

8 than is covered under section 1861(xx)(2).’’. 

9 (d) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to tests furnished on or after Janu11 ary 1, 2004.

12 SEC. 213. IMPROVED PAYMENT FOR CERTAIN MAMMOG13 RAPHY SERVICES. 

14 (a) EXCLUSION FROM OPD FEE SCHEDULE.—Sec15 tion 1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is 

16 amended by inserting before the period at the end the fol17 lowing: ‘‘and does not include screening mammography (as 

18 defined in section 1861(jj)) and unilateral and bilateral 

19 diagnostic mammography’’. 

20 (b) ADJUSTMENT TO TECHNICAL COMPONENT.—For 

21 diagnostic mammography performed on or after January 

22 1, 2004, for which payment is made under the physician 

23 fee schedule under section 1848 of the Social Security Act 

24 (42 U.S.C. 1395w–4), the Secretary, based on the most 

25 recent cost data available, shall provide for an appropriate 
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1 adjustment in the payment amount for the technical com2 ponent of the diagnostic mammography. 

3 (c) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall apply to mammography performed on 

5 or after January 1, 2004. 

6 Subtitle C—Hospital Outpatient 

7 Department Services 

8 SEC. 221. ADJUSTMENT TO LIMIT DECLINE IN PAYMENT. 

9 Section 1833(t)(7) (42 U.S.C. 1395l(t)(7)) is amend10 ed—

11 (1) in the heading, by striking ‘‘TRANSITIONAL

12 ADJUSTMENT’’ and inserting ‘‘ADJUSTMENT’’; 

13 (2) in subparagraph (A)—

14 (A) in the heading, by striking ‘‘BEFORE

15 2002’’ and inserting ‘‘IN GENERAL’’; 

16 (B) in the matter preceding clause (i)—

17 (i) by striking ‘‘subparagraph (D)’’ 

18 and inserting ‘‘subparagraph (B)’’; 

19 (ii) by striking ‘‘furnished before Jan20 uary 1, 2002,’’; and 

21 (iii) by striking ‘‘subparagraph (E)’’ 

22 and inserting ‘‘subparagraph (C)’’; and 

23 (C) in clause (i), by striking ‘‘subpara24 graph (F)’’ and inserting ‘‘subparagraph (D)’’; 
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1 (3) by striking subparagraph (D) and inserting 

2 the following new subparagraph: 

3 ‘‘(D) HOLD HARMLESS PROVISIONS FOR

4 CANCER AND CHILDREN’S HOSPITALS.—In the 

5 case of a hospital that is described in clause 

6 (iii) or (v) of section 1886(d)(1)(B), for covered 

7 OPD services—

8 ‘‘(i) that are furnished on or after the 

9 date on which payment is first made under 

10 this subsection; and 

11 ‘‘(ii) for which the PPS amount is less 

12 than the pre-BBA amount (or for services 

13 furnished on or after January 1, 2002, is 

14 less than the greater of the pre-BBA 

15 amount or the reasonable costs incurred in 

16 furnishing such services), 

17 the amount of payment under this subsection 

18 shall be increased by the amount of such dif19 ference.’’;

20 (4) in subparagraph (F)(ii)(I), by striking 

21 ‘‘subparagraph (E)’’ and inserting ‘‘subparagraph 

22 (C)’’; and 

23 (5) by striking subparagraphs (B) and (C) and 

24 redesignating subparagraphs (D), (E), (F), (G), 
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1 (H), and (I) as subparagraphs (B), (C), (D), (E), 

2 (F), and (G), respectively. 

3 Subtitle D—Other Services 

4 SEC. 231. ADJUSTMENTS TO LOCAL FEE SCHEDULES FOR 

5 CLINICAL LABORATORY TESTS FOR IM6 PROVEMENT IN CERVICAL CANCER DETEC7 TION. 

8 Section 1833(h)(2) (42 U.S.C. 1395l(h)(2)) is 

9 amended by adding at the end the following new subpara10 graph: 

11 ‘‘(C) Notwithstanding any other provision of law, in 

12 the case of a diagnostic test for the detection of cervical 

13 cancer utilizing automated thin layer preparation tech14 niques for specimens collected in fluid medium, and for 

15 which a national limitation amount has been set pursuant 

16 to the parenthetical in paragraph (4)(B)(viii), furnished 

17 on or after July 1, 2003, and before June 30, 2005, the 

18 Secretary shall permit carriers and medicare administra19 tive contractors, as the case may be, to raise their local 

20 fee schedule amount for purposes of determining payment 

21 for such tests under this section, up to, but not to exceed 

22 the national limitation amount previously established for 

23 that test. Any such adjustment shall not affect such na24 tional limitation amount.’’.
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1 SEC. 232. PAYMENT FOR AMBULANCE SERVICES. 

2 (a) PHASE-IN PROVIDING FLOOR USING BLEND OF

3 FEE SCHEDULE AND REGIONAL FEE SCHEDULES.—Sec4 tion 1834(l) (42 U.S.C. 1395m(l)) is amended—

5 (1) in paragraph (2)(E), by inserting ‘‘con6 sistent with paragraph (10)’’ after ‘‘in an efficient 

7 and fair manner’’;

8 (2) by redesignating the paragraph (8) added 

9 by section 221(a) of BIPA as paragraph (9); and 

10 (3) by adding at the end the following new 

11 paragraph: 

12 ‘‘(10) PHASE-IN PROVIDING FLOOR USING

13 BLEND OF FEE SCHEDULE AND REGIONAL FEE

14 SCHEDULES.—In carrying out the phase-in under 

15 paragraph (2)(E) for each level of service furnished 

16 in a year before January 1, 2007, the portion of the 

17 payment amount that is based on the fee schedule 

18 shall not be less than the following blended rate of 

19 the fee schedule under paragraph (1) and of a re20 gional fee schedule for the region involved: 

21 ‘‘(A) For 2003, the blended rate shall be 

22 based 20 percent on the fee schedule under 

23 paragraph (1) and 80 percent on the regional 

24 fee schedule. 

25 ‘‘(B) For 2004, the blended rate shall be 

26 based 40 percent on the fee schedule under 
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1 paragraph (1) and 60 percent on the regional 

2 fee schedule. 

3 ‘‘(C) For 2005, the blended rate shall be 

4 based 60 percent on the fee schedule under 

5 paragraph (1) and 40 percent on the regional 

6 fee schedule. 

7 ‘‘(D) For 2006, the blended rate shall be 

8 based 80 percent on the fee schedule under 

9 paragraph (1) and 20 percent on the regional 

10 fee schedule. 

11 For purposes of this paragraph, the Secretary shall 

12 establish a regional fee schedule for each of the 9 

13 Census divisions using the methodology (used in es14 tablishing the fee schedule under paragraph (1)) to 

15 calculate a regional conversion factor and a regional 

16 mileage payment rate and using the same payment 

17 adjustments and the same relative value units as 

18 used in the fee schedule under such paragraph.’’. 

19 (b) ADJUSTMENT IN PAYMENT FOR CERTAIN LONG

20 TRIPS.—Section 1834(l), as amended by subsection (a), 

21 is further amended by adding at the end the following new 

22 paragraph: 

23 ‘‘(11) ADJUSTMENT IN PAYMENT FOR CERTAIN

24 LONG TRIPS.—In the case of ground ambulance 

25 services furnished on or after January 1, 2003, and 
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1 before January 1, 2008, regardless of where the 

2 transportation originates, the fee schedule estab3 lished under this subsection shall provide that, with 

4 respect to the payment rate for mileage for a trip 

5 above 50 miles the per mile rate otherwise established shall be increased by 1 6 ⁄4 of the payment per 

7 mile otherwise applicable to such miles.’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to ambulance services furnished 

10 on or after January 1, 2003. 

11 SEC. 233. 2-YEAR EXTENSION OF MORATORIUM ON THER12 APY CAPS; PROVISIONS RELATING TO RE13 PORTS. 

14 (a) 2-YEAR EXTENSION OF MORATORIUM ON THER15 APY CAPS.—Section 1833(g)(4) (42 U.S.C. 1395l(g)(4)) 

16 is amended by striking ‘‘and 2002’’ and inserting ‘‘2002, 

17 2003, and 2004’’. 

18 (b) PROMPT SUBMISSION OF OVERDUE REPORTS ON

19 PAYMENT AND UTILIZATION OF OUTPATIENT THERAPY

20 SERVICES.—Not later than December 31, 2002, the Sec21 retary shall submit to Congress the reports required under 

22 section 4541(d)(2) of the Balanced Budget Act of 1997 

23 (relating to alternatives to a single annual dollar cap on 

24 outpatient therapy) and under section 221(d) of the Medi25 care, Medicaid, and SCHIP Balanced Budget Refinement 
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1 Act of 1999 (relating to utilization patterns for outpatient 

2 therapy).

3 (c) IDENTIFICATION OF CONDITIONS AND DISEASES

4 JUSTIFYING WAIVER OF THERAPY CAP.—

5 (1) STUDY.—The Secretary shall request the 

6 Institute of Medicine of the National Academy of 

7 Sciences to identify conditions or diseases that 

8 should justify conducting an assessment of the need 

9 to waive the therapy caps under section 1833(g)(4) 

10 of the Social Security Act (42 U.S.C. 1395l(g)(4)). 

11 (2) REPORTS TO CONGRESS.—Not later than 

12 September 1, 2003, the Secretary shall submit to 

13 Congress a preliminary report on the conditions and 

14 diseases identified under paragraph (1) and not later 

15 than December 31, 2003, a final report on the con16 ditions and diseases so identified. 

17 (d) GAO STUDY OF PATIENT ACCESS TO PHYSICAL

18 THERAPIST SERVICES.—

19 (1) STUDY.—The Comptroller General of the 

20 United States shall conduct a study on access to 

21 physical therapist services in States authorizing such 

22 services without a physician referral and in States 

23 that require such a physician referral. The study 

24 shall—
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1 (A) examine the use of and referral pat2 terns for physical therapist services for patients 

3 age 50 and older in States that authorize such 

4 services without a physician referral and in 

5 States that require such a physician referral; 

6 (B) examine the use of and referral pat7 terns for physical therapist services for patients 

8 who are medicare beneficiaries; 

9 (C) examine the potential effect of prohib10 iting a physician from referring patients to 

11 physical therapy services owned by the physi12 cian and provided in the physician’s office; 

13 (D) examine the delivery of physical thera14 pists’ services within the facilities of Depart15 ment of Defense; and 

16 (E) analyze the potential impact on medi17 care beneficiaries and on expenditures under 

18 the medicare program of eliminating the need 

19 for a physician referral and physician certifi20 cation for physical therapist services under the 

21 medicare program. 

22 (2) REPORT.—The Comptroller General shall 

23 submit to Congress a report on the study conducted 

24 under paragraph (1) by not later than 1 year after 

25 the date of the enactment of this Act. 
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1 SEC. 234. RENAL DIALYSIS SERVICES. 

2 (a) REPORT ON DIFFERENCES IN COSTS IN DIF3 FERENT SETTINGS.—Not later than 1 year after the date 

4 of the enactment of this Act, the Comptroller General of 

5 the United States shall submit to Congress a report con6 taining—

7 (1) an analysis of the differences in costs of 

8 providing renal dialysis services under the medicare 

9 program in home settings and in facility settings; 

10 (2) an assessment of the percentage of overhead 

11 costs in home settings and in facility settings; and 

12 (3) an evaluation of whether the charges for 

13 home dialysis supplies and equipment are reasonable 

14 and necessary. 

15 (b) RESTORING COMPOSITE RATE EXCEPTIONS FOR

16 PEDIATRIC FACILITIES.—

17 (1) IN GENERAL.—Section 422(a)(2) of BIPA 

18 is amended—

19 (A) in subparagraph (A), by striking ‘‘and 

20 (C)’’ and inserting ‘‘, (C), and (D)’’; 

21 (B) in subparagraph (B), by striking ‘‘In 

22 the case’’ and inserting ‘‘Subject to subpara23 graph (D), in the case’’; and 

24 (C) by adding at the end the following new 

25 subparagraph: 
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1 ‘‘(D) INAPPLICABILITY TO PEDIATRIC FA2 CILITIES.—Subparagraphs (A) and (B) shall 

3 not apply, as of October 1, 2002, to pediatric 

4 facilities that do not have an exception rate de5 scribed in subparagraph (C) in effect on such 

6 date. For purposes of this subparagraph, the 

7 term ‘pediatric facility’ means a renal facility at 

8 least 50 percent of whose patients are individ9 uals under 18 years of age.’’. 

10 (2) CONFORMING AMENDMENT.—The fourth 

11 sentence of section 1881(b)(7) (42 U.S.C. 

12 1395rr(b)(7)) is amended by striking ‘‘The Sec13 retary’’ and inserting ‘‘Subject to section 422(a)(2) 

14 of the Medicare, Medicaid, and SCHIP Benefits Im15 provement and Protection Act of 2000, the Sec16 retary’’. 

17 (c) INCREASE IN RENAL DIALYSIS COMPOSITE RATE

18 FOR SERVICES FURNISHED IN 2004.—Notwithstanding 

19 any other provision of law, with respect to payment under 

20 part B of title XVIII of the Social Security Act for renal 

21 dialysis services furnished in 2004, the composite payment 

22 rate otherwise established under section 1881(b)(7) of 

23 such Act (42 U.S.C. 1395rr(b)(7)) shall be increased by 

24 1.2 percent.
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1 SEC. 235. WAIVER OF PART B LATE ENROLLMENT PENALTY 

2 FOR CERTAIN MILITARY RETIREES; SPECIAL 

3 ENROLLMENT PERIOD. 

4 (a) WAIVER OF PENALTY.—

5 (1) IN GENERAL.—Section 1839(b) (42 U.S.C. 

6 1395r(b)) is amended by adding at the end the fol7 lowing new sentence: ‘‘No increase in the premium 

8 shall be effected for a month in the case of an indi9 vidual who is 65 years of age or older, who enrolls 

10 under this part during 2001, 2002, or 2003, and 

11 who demonstrates to the Secretary before December 

12 31, 2003, that the individual is a covered beneficiary 

13 (as defined in section 1072(5) of title 10, United 

14 States Code). The Secretary of Health and Human 

15 Services shall consult with the Secretary of Defense 

16 in identifying individuals described in the previous 

17 sentence.’’. 

18 (2) EFFECTIVE DATE.—The amendment made 

19 by paragraph (1) shall apply to premiums for 

20 months beginning with January 2003. The Secretary 

21 of Health and Human Services shall establish a 

22 method for providing rebates of premium penalties 

23 paid for months on or after January 2003 for which 

24 a penalty does not apply under such amendment but 

25 for which a penalty was previously collected. 
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1 (b) MEDICARE PART B SPECIAL ENROLLMENT PE2 RIOD.—

3 (1) IN GENERAL.—In the case of any individual 

4 who, as of the date of the enactment of this Act, is 

5 65 years of age or older, is eligible to enroll but is 

6 not enrolled under part B of title XVIII of the So7 cial Security Act, and is a covered beneficiary (as 

8 defined in section 1072(5) of title 10, United States 

9 Code), the Secretary of Health and Human Services 

10 shall provide for a special enrollment period during 

11 which the individual may enroll under such part. 

12 Such period shall begin as soon as possible after the 

13 date of the enactment of this Act and shall end on 

14 December 31, 2003. 

15 (2) COVERAGE PERIOD.—In the case of an indi16 vidual who enrolls during the special enrollment pe17 riod provided under paragraph (1), the coverage pe18 riod under part B of title XVIII of the Social Secu19 rity Act shall begin on the first day of the month 

20 following the month in which the individual enrolls. 

21 SEC. 236. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR 

22 ALL MEDICARE BENEFICIARIES. 

23 (a) IN GENERAL.—Section 1861(s)(2)(J) (42 U.S.C. 

24 1395x(s)(2)(J)) is amended by striking ‘‘, to an individual 

25 who receives’’ and all that follows before the semicolon at 
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1 the end and inserting ‘‘to an individual who has received 

2 an organ transplant’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to drugs furnished on or after the 

5 date of the enactment of this Act. 

6 TITLE III—PROVISIONS 

7 RELATING TO PARTS A AND B 

8 Subtitle A—Home Health Services 

9 SEC. 301. ELIMINATION OF 15 PERCENT REDUCTION IN 

10 PAYMENT RATES UNDER THE PROSPECTIVE 

11 PAYMENT SYSTEM. 

12 (a) IN GENERAL.—Section 1895(b)(3)(A) (42 U.S.C. 

13 1395fff(b)(3)(A)) is amended to read as follows: 

14 ‘‘(A) INITIAL BASIS.—Under such system 

15 the Secretary shall provide for computation of 

16 a standard prospective payment amount (or 

17 amounts) as follows: 

18 ‘‘(i) Such amount (or amounts) shall 

19 initially be based on the most current au20 dited cost report data available to the Sec21 retary and shall be computed in a manner 

22 so that the total amounts payable under 

23 the system for fiscal year 2001 shall be 

24 equal to the total amount that would have 

25 been made if the system had not been in 
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1 effect and if section 1861(v)(1)(L)(ix) had 

2 not been enacted. 

3 ‘‘(ii) For fiscal year 2002 and for the 

4 first quarter of fiscal year 2003, such 

5 amount (or amounts) shall be equal to the 

6 amount (or amounts) determined under 

7 this paragraph for the previous fiscal year, 

8 updated under subparagraph (B). 

9 ‘‘(iii) For 2003, such amount (or 

10 amounts) shall be equal to the amount (or 

11 amounts) determined under this paragraph 

12 for fiscal year 2002, updated under sub13 paragraph (B) for 2003. 

14 ‘‘(iv) For 2004 and each subsequent 

15 year, such amount (or amounts) shall be 

16 equal to the amount (or amounts) deter17 mined under this paragraph for the pre18 vious year, updated under subparagraph 

19 (B). 

20 Each such amount shall be standardized in a 

21 manner that eliminates the effect of variations 

22 in relative case mix and area wage adjustments 

23 among different home health agencies in a 

24 budget neutral manner consistent with the case 

25 mix and wage level adjustments provided under 
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1 paragraph (4)(A). Under the system, the Sec2 retary may recognize regional differences or dif3 ferences based upon whether or not the services 

4 or agency are in an urbanized area.’’. 

5 (b) EFFECTIVE DATE.—The amendment made by 

6 subsection (a) shall take effect as if included in the 

7 amendments made by section 501 of the Medicare, Med8 icaid, and SCHIP Benefits Improvement and Protection 

9 Act of 2000 (as enacted into law by section 1(a)(6) of 

10 Public Law 106–554). 

11 SEC. 302. UPDATE IN HOME HEALTH SERVICES. 

12 (a) CHANGE TO CALENDAR YEAR UPDATE.—

13 (1) IN GENERAL.—Section 1895(b) (42 U.S.C. 

14 1395fff(b)(3)) is amended—

15 (A) in paragraph (3)(B)(i)—

16 (i) by striking ‘‘each fiscal year (be17 ginning with fiscal year 2002)’’ and insert18 ing ‘‘fiscal year 2002 and for each subse19 quent year (beginning with 2003)’’; and 

20 (ii) by inserting ‘‘or year’’ after ‘‘the 

21 fiscal year’’; 

22 (B) in paragraph (3)(B)(ii)—

23 (i) in subclause (II), by striking ‘‘fis24 cal year’’ and inserting ‘‘year’’ and by re-
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1 designating such subclause as subclause 

2 (III); and 

3 (ii) in subclause (I), by striking ‘‘each 

4 of fiscal years 2002 and 2003’’ and insert5 ing the following: ‘‘fiscal year 2002, the 

6 home health market basket percentage in7 crease (as defined in clause (iii)) minus 1.1 

8 percentage points; 

9 ‘‘(II) 2003’’; 

10 (C) in paragraph (3)(B)(iii), by inserting 

11 ‘‘or year’’ after ‘‘fiscal year’’ each place it ap12 pears; 

13 (D) in paragraph (3)(B)(iv)—

14 (i) by inserting ‘‘or year’’ after ‘‘fiscal 

15 year’’ each place it appears; and 

16 (ii) by inserting ‘‘or years’’ after ‘‘fis17 cal years’’; and 

18 (E) in paragraph (5), by inserting ‘‘or 

19 year’’ after ‘‘fiscal year’’. 

20 (2) TRANSITION RULE.—The standard prospec21 tive payment amount (or amounts) under section 

22 1895(b)(3) of the Social Security Act for the cal23 endar quarter beginning on October 1, 2002, shall 

24 be such amount (or amounts) for the previous cal25 endar quarter. 
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1 (b) CHANGES IN UPDATES FOR 2003, 2004, AND

2 2005.—Section 1895(b)(3)(B)(ii) (42 U.S.C. 

3 1395fff(b)(3)(B)(ii)), as amended by subsection (a)(1)(B), 

4 is amended—

5 (1) in subclause (II), by striking ‘‘the home 

6 health market basket percentage increase (as defined 

7 in clause (iii)) minus 1.1 percentage points’’ and in8 serting ‘‘2.0 percentage points’’; 

9 (2) by striking ‘‘or’’ at the end of subclause 

10 (II); 

11 (3) by redesignating subclause (III) as sub12 clause (V); and 

13 (4) by inserting after subclause (II) the fol14 lowing new subclause: 

15 ‘‘(III) 2004, 1.1 percentage 

16 points; 

17 ‘‘(IV) 2005, 2.7 percentage 

18 points; or’’. 

19 (c) PAYMENT ADJUSTMENT.—

20 (1) IN GENERAL.—Section 1895(b)(5) (42 

21 U.S.C. 1395fff(b)(5)) is amended by striking ‘‘5 per22 cent’’ and inserting ‘‘3 percent’’. 

23 (2) EFFECTIVE DATE.—The amendment made 

24 by paragraph (1) shall apply to years beginning with 

25 2003. 
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1 SEC. 303. EXTENSION OF TEMPORARY INCREASE FOR 

2 HOME HEALTH SERVICES FURNISHED IN A 

3 RURAL AREA. 

4 (a) IN GENERAL.—Section 508(a) BIPA (114 Stat. 

5 2763A–533) is amended—

6 (1) by striking ‘‘24-MONTH INCREASE BEGIN7 NING APRIL 1, 2001’’ and inserting ‘‘IN GENERAL’’; 

8 and 

9 (2) by striking ‘‘April 1, 2003’’ and inserting 

10 ‘‘January 1, 2005’’. 

11 (b) CONFORMING AMENDMENT.—Section 547(c)(2) 

12 of BIPA (114 Stat. 2763A–553) is amended by striking 

13 ‘‘the period beginning on April 1, 2001, and ending on 

14 September 30, 2002,’’ and inserting ‘‘a period under such 

15 section’’. 

16 SEC. 304. OASIS TASK FORCE; SUSPENSION OF CERTAIN 

17 OASIS DATA COLLECTION REQUIREMENTS 

18 PENDING TASK FORCE SUBMITTAL OF RE19 PORT. 

20 (a) ESTABLISHMENT.—The Secretary of Health and 

21 Human Services shall establish and appoint a task force 

22 (to be known as the ‘‘OASIS Task Force’’) to examine 

23 the data collection and reporting requirements under 

24 OASIS. For purposes of this section, the term ‘‘OASIS’’ 

25 means the Outcome and Assessment Information Set re-
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1 quired by reason of section 4602(e) of Balanced Budget 

2 Act of 1997 (42 U.S.C. 1395fff note). 

3 (b) COMPOSITION.—The OASIS Task Force shall be 

4 composed of the following: 

5 (1) Staff of the Centers for Medicare & Med6 icaid Services with expertise in post-acute care. 

7 (2) Representatives of home health agencies. 

8 (3) Health care professionals and research and 

9 health care quality experts outside the Federal Gov10 ernment with expertise in post-acute care. 

11 (4) Advocates for individuals requiring home 

12 health services.

13 (c) DUTIES.—

14 (1) REVIEW AND RECOMMENDATIONS.—The 

15 OASIS Task Force shall review and make rec16 ommendations to the Secretary regarding changes in 

17 OASIS to improve and simplify data collection for 

18 purposes of—

19 (A) assessing the quality of home health 

20 services; and 

21 (B) providing consistency in classification 

22 of patients into home health resource groups 

23 (HHRGs) for payment under section 1895 of 

24 the Social Security Act (42 U.S.C. 1395fff). 
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1 (2) SPECIFIC ITEMS.—In conducting the review 

2 under paragraph (1), the OASIS Task Force shall 

3 specifically examine—

4 (A) the 41 outcome measures currently in 

5 use; 

6 (B) the timing and frequency of data col7 lection; and 

8 (C) the collection of information on 

9 comorbidities and clinical indicators. 

10 (3) REPORT.—The OASIS Task Force shall 

11 submit a report to the Secretary containing its find12 ings and recommendations for changes in OASIS by 

13 not later than 18 months after the date of the enact14 ment of this Act. 

15 (d) SUNSET.—The OASIS Task Force shall termi16 nate 60 days after the date on which the report is sub17 mitted under subsection (c)(2).

18 (e) NONAPPLICATION OF FACA.—The provisions of 

19 the Federal Advisory Committee Act shall not apply to 

20 the OASIS Task Force. 

21 (f) SUSPENSION OF OASIS REQUIREMENT FOR COL22 LECTION OF DATA ON NON-MEDICARE AND NON-MED23 ICAID PATIENTS PENDING TASK FORCE REPORT.—

24 (1) IN GENERAL.—During the period described 

25 in paragraph (2), the Secretary of Health and 
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1 Human Services may not require, under section 

2 4602(e) of the Balanced Budget Act of 1997 or oth3 erwise under OASIS, a home health agency to gath4 er or submit information that relates to an indi5 vidual who is not eligible for benefits under either 

6 title XVIII or title XIX of the Social Security Act. 

7 (2) PERIOD OF SUSPENSION.—The period de8 scribed in this paragraph—

9 (A) begins on January 1, 2003, and 

10 (B) ends on the last day of the second 

11 month beginning after the date the report is 

12 submitted under subsection (c)(2). 

13 SEC. 305. MEDPAC STUDY ON MEDICARE MARGINS OF 

14 HOME HEALTH AGENCIES. 

15 (a) STUDY.—The Medicare Payment Advisory Com16 mission shall conduct a study of payment margins of home 

17 health agencies under the home health prospective pay18 ment system under section 1895 of the Social Security Act 

19 (42 U.S.C. 1395fff). Such study shall examine whether 

20 systematic differences in payment margins are related to 

21 differences in case mix (as measured by home health re22 source groups (HHRGs)) among such agencies. The study 

23 shall use the partial or full-year cost reports filed by home 

24 health agencies. 
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1 (b) REPORT.—Not later than 2 years after the date 

2 of the enactment of this Act, the Commission shall submit 

3 to Congress a report on the study under subsection (a). 

4 Subtitle B—Other Provisions 

5 SEC. 311. MODIFICATIONS TO MEDICARE PAYMENT ADVI6 SORY COMMISSION (MEDPAC). 

7 (a) EXAMINATION OF BUDGET CONSEQUENCES.—

8 Section 1805(b) (42 U.S.C. 1395b–6(b)) is amended by 

9 adding at the end the following new paragraph: 

10 ‘‘(8) EXAMINATION OF BUDGET CON11 SEQUENCES.—Before making any recommendations, 

12 the Commission shall examine the budget con13 sequences of such recommendations, directly or 

14 through consultation with appropriate expert enti15 ties.’’. 

16 (b) CONSIDERATION OF EFFICIENT PROVISION OF

17 SERVICES.—Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b–

18 6(b)(2)(B)(i)) is amended by inserting ‘‘the efficient provi19 sion of’’ after ‘‘expenditures for’’. 

20 (c) ADDITIONAL REPORTS.—

21 (1) DATA NEEDS AND SOURCES.—The Medicare 

22 Payment Advisory Commission shall conduct a 

23 study, and submit a report to Congress by not later 

24 than June 1, 2003, on the need for current data, 

25 and sources of current data available, to determine 
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1 the solvency and financial circumstances of hospitals 

2 and other medicare providers of services. The Com3 mission shall examine data on uncompensated care, 

4 as well as the share of uncompensated care ac5 counted for by the expenses for treating illegal 

6 aliens. 

7 (2) USE OF TAX-RELATED RETURNS.—Using 

8 return information provided under Form 990 of the 

9 Internal Revenue Service, the Commission shall sub10 mit to Congress, by not later than July 1, 2003, a 

11 report on the following: 

12 (A) Investments and capital financing of 

13 hospitals participating under the medicare pro14 gram and related foundations. 

15 (B) Access to capital financing for private 

16 and for not-for-profit hospitals. 

17 SEC. 312. DEMONSTRATION PROJECT FOR DISEASE MAN18 AGEMENT FOR CERTAIN MEDICARE BENE19 FICIARIES WITH DIABETES. 

20 (a) IN GENERAL.—The Secretary of Health and 

21 Human Services shall conduct a demonstration project 

22 under this section (in this section referred to as the 

23 ‘‘project’’) to demonstrate the impact on costs and health 

24 outcomes of applying disease management to certain medi25 care beneficiaries with diagnosed diabetes. In no case may 
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1 the number of participants in the project exceed 30,000 

2 at any time. 

3 (b) VOLUNTARY PARTICIPATION.—

4 (1) ELIGIBILITY.—Medicare beneficiaries are 

5 eligible to participate in the project only if—

6 (A) they are a member of a health dis7 parity population (as defined in section 

8 485E(d) of the Public Health Service Act), 

9 such as Hispanics; 

10 (B) they meet specific medical criteria 

11 demonstrating the appropriate diagnosis and 

12 the advanced nature of their disease; 

13 (C) their physicians approve of participa14 tion in the project; and 

15 (D) they are not enrolled in a 

16 Medicare+Choice plan. 

17 (2) BENEFITS.—A medicare beneficiary who is 

18 enrolled in the project shall be eligible—

19 (A) for disease management services re20 lated to their diabetes; and 

21 (B) for payment for all costs for prescrip22 tion drugs without regard to whether or not 

23 they relate to the diabetes, except that the 

24 project may provide for modest cost-sharing 

25 with respect to prescription drug coverage. 
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1 (c) CONTRACTS WITH DISEASE MANAGEMENT ORGA2 NIZATIONS.—

3 (1) IN GENERAL.—The Secretary of Health and 

4 Human Services shall carry out the project through 

5 contracts with up to three disease management orga6 nizations. The Secretary shall not enter into such 

7 a contract with an organization unless the organiza8 tion demonstrates that it can produce improved 

9 health outcomes and reduce aggregate medicare ex10 penditures consistent with paragraph (2). 

11 (2) CONTRACT PROVISIONS.—Under such con12 tracts—

13 (A) such an organization shall be required 

14 to provide for prescription drug coverage de15 scribed in subsection (b)(2)(B); 

16 (B) such an organization shall be paid a 

17 fee negotiated and established by the Secretary 

18 in a manner so that (taking into account sav19 ings in expenditures under parts A and B of 

20 the medicare program under title XVIII of the 

21 Social Security Act) there will be no net in22 crease, and to the extent practicable, there will 

23 be a net reduction in expenditures under the 

24 medicare program as a result of the project; 

25 and 
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1 (C) such an organization shall guarantee, 

2 through an appropriate arrangement with a re3 insurance company or otherwise, the prohibition 

4 on net increases in expenditures described in 

5 subparagraph (B). 

6 (3) PAYMENTS.—Payments to such organiza7 tions shall be made in appropriate proportion from 

8 the Trust Funds established under title XVIII of the 

9 Social Security Act. 

10 (d) APPLICATION OF MEDIGAP PROTECTIONS TO

11 DEMONSTRATION PROJECT ENROLLEES.—(1) Subject to 

12 paragraph (2), the provisions of section 1882(s)(3) (other 

13 than clauses (i) through (iv) of subparagraph (B)) and 

14 1882(s)(4) of the Social Security Act shall apply to enroll15 ment (and termination of enrollment) in the demonstra16 tion project under this section, in the same manner as they 

17 apply to enrollment (and termination of enrollment) with 

18 a Medicare+Choice organization in a Medicare+Choice 

19 plan. 

20 (2) In applying paragraph (1)—

21 (A) any reference in clause (v) or (vi) of section 

22 1882(s)(3)(B) of such Act to 12 months is deemed 

23 a reference to the period of the demonstration 

24 project; and 
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1 (B) the notification required under section 

2 1882(s)(3)(D) of such Act shall be provided in a 

3 manner specified by the Secretary of Health and 

4 Human Services. 

5 (e) DURATION.—The project shall last for not longer 

6 than 3 years. 

7 (f) WAIVER.—The Secretary of Health and Human 

8 Services shall waive such provisions of title XVIII of the 

9 Social Security Act as may be necessary to provide for 

10 payment for services under the project in accordance with 

11 subsection (c)(3). 

12 (g) REPORT.—The Secretary of Health and Human 

13 Services shall submit to Congress an interim report on the 

14 project not later than 2 years after the date it is first im15 plemented and a final report on the project not later than 

16 6 months after the date of its completion. Such reports 

17 shall include information on the impact of the project on 

18 costs and health outcomes and recommendations on the 

19 cost-effectiveness of extending or expanding the project. 

20 (h) WORKING GROUP ON MEDICARE DISEASE MAN21 AGEMENT PROGRAMS.—The Secretary shall establish 

22 within the Department of Health and Human Services a 

23 working group consisting of employees of the Department 

24 to carry out the following: 

25 (1) To oversee the project. 
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1 (2) To establish policy and criteria for medicare 

2 disease management programs within the Depart3 ment, including the establishment of policy and cri4 teria for such programs. 

5 (3) To identify targeted medical conditions and 

6 targeted individuals. 

7 (4) To select areas in which such programs are 

8 carried out. 

9 (5) To monitor health outcomes under such 

10 programs. 

11 (6) To measure the effectiveness of such pro12 grams in meeting any budget neutrality require13 ments. 

14 (7) Otherwise to serve as a central focal point 

15 within the Department for dissemination of informa16 tion on medicare disease management programs. 

17 (i) GAO STUDY ON DISEASE MANAGEMENT PRO18 GRAMS.—The Comptroller General of the United States 

19 shall conduct a study that compares disease management 

20 programs under title XVIII of the Social Security Act with 

21 such programs conducted in the private sector, including 

22 the prevalence of such programs and programs for case 

23 management. The study shall identify the cost-effective24 ness of such programs and any savings achieved by such 

25 programs. The Comptroller General shall submit a report 
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1 on such study to Congress by not later than 18 months 

2 after the date of the enactment of this Act. 

3 SEC. 313. DEMONSTRATION PROJECT FOR MEDICAL ADULT 

4 DAY CARE SERVICES. 

5 (a) ESTABLISHMENT.—Subject to the succeeding 

6 provisions of this section, the Secretary of Health and 

7 Human Services shall establish a demonstration project 

8 (in this section referred to as the ‘‘demonstration project’’) 

9 under which the Secretary shall, as part of a plan of an 

10 episode of care for home health services established for 

11 a medicare beneficiary, permit a home health agency, di12 rectly or under arrangements with a medical adult day 

13 care facility, to provide medical adult day care services as 

14 a substitute for a portion of home health services that 

15 would otherwise be provided in the beneficiary’s home. 

16 (b) PAYMENT.—

17 (1) IN GENERAL.—The amount of payment for 

18 an episode of care for home health services, a por19 tion of which consists of substitute medical adult 

20 day care services, under the demonstration project 

21 shall be made at a rate equal to 95 percent of the 

22 amount that would otherwise apply for such home 

23 health services under section 1895 of the Social Se24 curity Act (42 U.S.C. 1395fff). In no case may a 

25 home health agency, or a medical adult day care fa-
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1 cility under arrangements with a home health agen2 cy, separately charge a beneficiary for medical adult 

3 day care services furnished under the plan of care. 

4 (2) BUDGET NEUTRALITY FOR DEMONSTRA5 TION PROJECT.—Notwithstanding any other provi6 sion of law, the Secretary shall provide for an appro7 priate reduction in the aggregate amount of addi8 tional payments made under section 1895 of the So9 cial Security Act (42 U.S.C. 1395fff) to reflect any 

10 increase in amounts expended from the Trust Funds 

11 as a result of the demonstration project conducted 

12 under this section. 

13 (c) DEMONSTRATION PROJECT SITES.—The project 

14 established under this section shall be conducted in not 

15 more than 5 States selected by the Secretary that license 

16 or certify providers of services that furnish medical adult 

17 day care services. 

18 (d) DURATION.—The Secretary shall conduct the 

19 demonstration project for a period of 3 years. 

20 (e) VOLUNTARY PARTICIPATION.—Participation of 

21 medicare beneficiaries in the demonstration project shall 

22 be voluntary. The total number of such beneficiaries that 

23 may participate in the project at any given time may not 

24 exceed 15,000. 
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1 (f) PREFERENCE IN SELECTING AGENCIES.—In se2 lecting home health agencies to participate under the dem3 onstration project, the Secretary shall give preference to 

4 those agencies that are currently licensed or certified 

5 through common ownership and control to furnish medical 

6 adult day care services. 

7 (g) WAIVER AUTHORITY.—The Secretary may waive 

8 such requirements of title XVIII of the Social Security Act 

9 as may be necessary for the purposes of carrying out the 

10 demonstration project, other than waiving the requirement 

11 that an individual be homebound in order to be eligible 

12 for benefits for home health services. 

13 (h) EVALUATION AND REPORT.—The Secretary shall 

14 conduct an evaluation of the clinical and cost effectiveness 

15 of the demonstration project. Not later than 30 months 

16 after the commencement of the project, the Secretary shall 

17 submit to Congress a report on the evaluation, and shall 

18 include in the report the following: 

19 (1) An analysis of the patient outcomes and 

20 costs of furnishing care to the medicare beneficiaries 

21 participating in the project as compared to such out22 comes and costs to beneficiaries receiving only home 

23 health services for the same health conditions. 
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1 (2) Such recommendations regarding the exten2 sion, expansion, or termination of the project as the 

3 Secretary determines appropriate. 

4 (i) DEFINITIONS.—In this section: 

5 (1) HOME HEALTH AGENCY.—The term ‘‘home 

6 health agency’’ has the meaning given such term in 

7 section 1861(o) of the Social Security Act (42 

8 U.S.C. 1395x(o)). 

9 (2) MEDICAL ADULT DAY CARE FACILITY.—The 

10 term ‘‘medical adult day care facility’’ means a facil11 ity that—

12 (A) has been licensed or certified by a 

13 State to furnish medical adult day care services 

14 in the State for a continuous 2-year period; 

15 (B) is engaged in providing skilled nursing 

16 services and other therapeutic services directly 

17 or under arrangement with a home health agen18 cy; 

19 (C) meets such standards established by 

20 the Secretary to assure quality of care and such 

21 other requirements as the Secretary finds nec22 essary in the interest of the health and safety 

23 of individuals who are furnished services in the 

24 facility; and 
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1 (D) provides medical adult day care serv2 ices. 

3 (3) MEDICAL ADULT DAY CARE SERVICES.—

4 The term ‘‘medical adult day care services’’ means—

5 (A) home health service items and services 

6 described in paragraphs (1) through (7) of sec7 tion 1861(m) furnished in a medical adult day 

8 care facility; 

9 (B) a program of supervised activities fur10 nished in a group setting in the facility that—

11 (i) meet such criteria as the Secretary 

12 determines appropriate; and 

13 (ii) is designed to promote physical 

14 and mental health of the individuals; and 

15 (C) such other services as the Secretary 

16 may specify. 

17 (4) MEDICARE BENEFICIARY.—The term 

18 ‘‘medicare beneficiary’’ means an individual entitled 

19 to benefits under part A of this title, enrolled under 

20 part B of this title, or both. 
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1 SEC. 314. PUBLICATION ON FINAL WRITTEN GUIDANCE 

2 CONCERNING PROHIBITIONS AGAINST DIS3 CRIMINATION BY NATIONAL ORIGIN WITH 

4 RESPECT TO HEALTH CARE SERVICES. 

5 Not later than June 1, 2003, the Secretary shall issue 

6 final written guidance concerning the application of the 

7 prohibition in title VI of the Civil Rights Act of 1964 (42 

8 U.S.C. 2000d et seq.) against national origin discrimina9 tion as it affects persons with limited English proficiency 

10 with respect to access to health care services under the 

11 medicare program under title XVIII of the Social Security 

12 Act, the medicaid program under title XIX of such Act, 

13 and the SCHIP program under title XXI of such Act. 

14 TITLE IV—PROVISIONS 

15 RELATING TO MANAGED CARE 

16 SEC. 401. MEDICARE+CHOICE IMPROVEMENTS. 

17 (a) EQUALIZING PAYMENTS BETWEEN FEE-FOR18 SERVICE AND MEDICARE+CHOICE.—

19 (1) IN GENERAL.—Section 1853(c)(1) (42 

20 U.S.C. 1395w–23(c)(1)) is amended by adding at 

21 the end the following: 

22 ‘‘(D) BASED ON 100 PERCENT OF FEE23 FOR-SERVICE COSTS.—

24 ‘‘(i) IN GENERAL.—For 2003 and 

25 2004, the adjusted average per capita cost 

26 for the year involved, determined under 
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1 section 1876(a)(4) for the 

2 Medicare+Choice payment area for serv3 ices covered under parts A and B for indi4 viduals entitled to benefits under part A 

5 and enrolled under part B who are not en6 rolled in a Medicare+Choice plan under 

7 this part for the year, but adjusted to ex8 clude costs attributable to payments under 

9 section 1886(h).

10 ‘‘(ii) INCLUSION OF COSTS OF VA AND

11 DOD MILITARY FACILITY SERVICES TO

12 MEDICARE-ELIGIBLE BENEFICIARIES.—In 

13 determining the adjusted average per cap14 ita cost under clause (i) for a year, such 

15 cost shall be adjusted to include the Sec16 retary’s estimate, on a per capita basis, of 

17 the amount of additional payments that 

18 would have been made in the area involved 

19 under this title if individuals entitled to 

20 benefits under this title had not received 

21 services from facilities of the Department 

22 of Veterans Affairs or the Department of 

23 Defense.’’. 

24 (2) CONFORMING AMENDMENT.—Such section 

25 is further amended, in the matter before subpara-
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1 graph (A), by striking ‘‘or (C)’’ and inserting ‘‘(C), 

2 or (D)’’. 

3 (b) REVISION OF BLEND.—

4 (1) REVISION OF NATIONAL AVERAGE USED IN

5 CALCULATION OF BLEND.—Section 

6 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w–

7 23(c)(4)(B)(i)(II)) is amended by inserting ‘‘who 

8 (with respect to determinations for 2003 and for 

9 2004) are enrolled in a Medicare+Choice plan’’ 

10 after ‘‘the average number of medicare bene11 ficiaries’’. 

12 (2) CHANGE IN BUDGET NEUTRALITY.—Section 

13 1853(c) (42 U.S.C. 1395w–23(c)) is amended—

14 (A) in paragraph (1)(A), by inserting ‘‘(for 

15 a year before 2003)’’ after ‘‘multiplied’’; and 

16 (B) in paragraph (5), by inserting ‘‘(before 

17 2003)’’ after ‘‘for each year’’. 

18 (c) REVISION IN MINIMUM PERCENTAGE INCREASE

19 FOR 2003 AND 2004.—Section 1853(c)(1)(C) (42 U.S.C. 

20 1395w–23(c)(1)(C)) is amended by striking clause (iv) 

21 and inserting the following: 

22 ‘‘(iv) For 2002, 102 percent of the 

23 annual Medicare+Choice capitation rate 

24 under this paragraph for the area for 

25 2001. 
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1 ‘‘(v) For 2003 and 2004, 103 percent 

2 of the annual Medicare+Choice capitation 

3 rate under this paragraph for the area for 

4 the previous year. 

5 ‘‘(vi) For 2005 and each succeeding 

6 year, 102 percent of the annual 

7 Medicare+Choice capitation rate under 

8 this paragraph for the area for the pre9 vious year.’’. 

10 (d) INCLUSION OF COSTS OF DOD AND VA MILI11 TARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENE12 FICIARIES IN CALCULATION OF MEDICARE+CHOICE PAY13 MENT RATES.—Section 1853(c)(3) (42 U.S.C. 1395w–

14 23(c)(3)) is amended—

15 (1) in subparagraph (A), by striking ‘‘subpara16 graph (B)’’ and inserting ‘‘subparagraphs (B) and 

17 (E)’’, and 

18 (2) by adding at the end the following new sub19 paragraph: 

20 ‘‘(E) INCLUSION OF COSTS OF DOD AND

21 VA MILITARY FACILITY SERVICES TO MEDICARE22 ELIGIBLE BENEFICIARIES.—In determining the 

23 area-specific Medicare+Choice capitation rate 

24 under subparagraph (A) for a year (beginning 

25 with 2003), the annual per capita rate of pay-
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1 ment for 1997 determined under section 

2 1876(a)(1)(C) shall be adjusted to include in 

3 the rate the Secretary’s estimate, on a per cap4 ita basis, of the amount of additional payments 

5 that would have been made in the area involved 

6 under this title if individuals entitled to benefits 

7 under this title had not received services from 

8 facilities of the Department of Defense or the 

9 Department of Veterans Affairs.’’. 

10 (e) ANNOUNCEMENT OF REVISED

11 MEDICARE+CHOICE PAYMENT RATES.—Within 4 weeks 

12 after the date of the enactment of this Act, the Secretary 

13 shall determine, and shall announce (in a manner intended 

14 to provide notice to interested parties) Medicare+Choice 

15 capitation rates under section 1853 of the Social Security 

16 Act (42 U.S.C. 1395w–23) for 2003, revised in accordance 

17 with the provisions of this section. 

18 (f) MEDPAC STUDY OF AAPCC.—

19 (1) STUDY.—The Medicare Payment Advisory 

20 Commission shall conduct a study that assesses the 

21 method used for determining the adjusted average 

22 per capita cost (AAPCC) under section 1876(a)(4) 

23 of the Social Security Act (42 U.S.C. 

24 1395mm(a)(4)). Such study shall examine—
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1 (A) the bases for variation in such costs 

2 between different areas, including differences in 

3 input prices, utilization, and practice patterns; 

4 (B) the appropriate geographic area for 

5 payment under the Medicare+Choice program 

6 under part C of title XVIII of such Act; and 

7 (C) the accuracy of risk adjustment meth8 ods in reflecting differences in costs of pro9 viding care to different groups of beneficiaries 

10 served under such program. 

11 (2) REPORT.—Not later than 9 months after 

12 the date of the enactment of this Act, the Commis13 sion shall submit to Congress a report on the study 

14 conducted under paragraph (1). Such report shall 

15 include recommendations regarding changes in the 

16 methods for computing the adjusted average per 

17 capita cost among different areas. 

18 (g) REPORT ON IMPACT OF INCREASED FINANCIAL

19 ASSISTANCE TO MEDICARE+CHOICE PLANS.—Not later 

20 than July 1, 2003, the Secretary of Health and Human 

21 Services shall submit to Congress a report that describes 

22 the impact of additional financing provided under this Act 

23 and other Acts (including the Medicare, Medicaid, and 

24 SCHIP Balanced Budget Refinement Act of 1999 and 

25 BIPA) on the availability of Medicare+Choice plans in 
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1 different areas and its impact on lowering premiums and 

2 increasing benefits under such plans. 

3 SEC. 402. SPECIALIZED MEDICARE+CHOICE PLANS FOR 

4 SPECIAL NEEDS BENEFICIARIES. 

5 (a) TREATMENT AS COORDINATED CARE PLAN.—

6 Section 1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is 

7 amended by adding at the end the following new sentence: 

8 ‘‘Specialized Medicare+Choice plans for special needs 

9 beneficiaries (as defined in section 1859(b)(4)) may be 

10 any type of coordinated care plan.’’. 

11 (b) SPECIALIZED MEDICARE+CHOICE PLAN FOR

12 SPECIAL NEEDS BENEFICIARIES DEFINED.—Section 

13 1859(b) (42 U.S.C. 1395w–29(b)) is amended by adding 

14 at the end the following new paragraph: 

15 ‘‘(4) SPECIALIZED MEDICARE+CHOICE PLANS

16 FOR SPECIAL NEEDS BENEFICIARIES.—

17 ‘‘(A) IN GENERAL.—The term ‘specialized 

18 Medicare+Choice plan for special needs bene19 ficiaries’ means a Medicare+Choice plan that 

20 exclusively serves special needs beneficiaries (as 

21 defined in subparagraph (B)). 

22 ‘‘(B) SPECIAL NEEDS BENEFICIARY.—The 

23 term ‘special needs beneficiary’ means a 

24 Medicare+Choice eligible individual who—
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1 ‘‘(i) is institutionalized (as defined by 

2 the Secretary); 

3 ‘‘(ii) is entitled to medical assistance 

4 under a State plan under title XIX; or 

5 ‘‘(iii) meets such requirements as the 

6 Secretary may determine would benefit 

7 from enrollment in such a specialized 

8 Medicare+Choice plan described in sub9 paragraph (A) for individuals with severe 

10 or disabling chronic conditions.’’. 

11 (c) RESTRICTION ON ENROLLMENT PERMITTED.—

12 Section 1859 (42 U.S.C. 1395w–29) is amended by add13 ing at the end the following new subsection: 

14 ‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIAL15 IZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS

16 BENEFICIARIES.—In the case of a specialized 

17 Medicare+Choice plan (as defined in subsection (b)(4)), 

18 notwithstanding any other provision of this part and in 

19 accordance with regulations of the Secretary and for peri20 ods before January 1, 2007, the plan may restrict the en21 rollment of individuals under the plan to individuals who 

22 are within one or more classes of special needs bene23 ficiaries.’’.

24 (d) REPORT TO CONGRESS.—Not later than Decem25 ber 31, 2005, the Medicare Benefits Administrator shall 
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1 submit to Congress a report that assesses the impact of 

2 specialized Medicare+Choice plans for special needs bene3 ficiaries on the cost and quality of services provided to 

4 enrollees. Such report shall include an assessment of the 

5 costs and savings to the medicare program as a result of 

6 amendments made by subsections (a), (b), and (c). 

7 (e) EFFECTIVE DATES.—

8 (1) IN GENERAL.—The amendments made by 

9 subsections (a), (b), and (c) shall take effect upon 

10 the date of the enactment of this Act. 

11 (2) DEADLINE FOR ISSUANCE OF REQUIRE12 MENTS FOR SPECIAL NEEDS BENEFICIARIES; TRAN13 SITION.—No later than 6 months after the date of 

14 the enactment of this Act, the Secretary of Health 

15 and Human Services shall issue final regulations to 

16 establish requirements for special needs beneficiaries 

17 under section 1859(b)(4)(B)(iii) of the Social Secu18 rity Act, as added by subsection (b). 

19 SEC. 403. EXTENSION OF REASONABLE COST AND SHMO 

20 CONTRACTS. 

21 (a) REASONABLE COST CONTRACTS.—

22 (1) IN GENERAL.—Section 1876(h)(5)(C) (42 

23 U.S.C. 1395mm(h)(5)(C)) is amended—

24 (A) by inserting ‘‘(i)’’ after ‘‘(C)’’; 
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1 (B) by inserting before the period the fol2 lowing: ‘‘, except (subject to clause (ii)) in the 

3 case of a contract for an area which is not cov4 ered in the service area of 1 or more coordi5 nated care Medicare+Choice plans under part 

6 C’’; and 

7 (C) by adding at the end the following new 

8 clause: 

9 ‘‘(ii) In the case in which—

10 ‘‘(I) a reasonable cost reimbursement contract 

11 includes an area in its service area as of a date that 

12 is after December 31, 2003; 

13 ‘‘(II) such area is no longer included in such 

14 service area after such date by reason of the oper15 ation of clause (i) because of the inclusion of such 

16 area within the service area of a Medicare+Choice 

17 plan; and 

18 ‘‘(III) all Medicare+Choice plans subsequently 

19 terminate coverage in such area; 

20 such reasonable cost reimbursement contract may be ex21 tended and renewed to cover such area (so long as it is 

22 not included in the service area of any Medicare+Choice 

23 plan).’’. 

24 (2) STUDY.—The Medicare Benefits Adminis25 trator shall conduct a study of an appropriate tran-
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1 sition for plans offered under reasonable cost con2 tracts under section 1876 of the Social Security Act 

3 on and after January 1, 2005. Such a transition 

4 may take into account whether there are one or 

5 more coordinated care Medicare+Choice plans being 

6 offered in the areas involved. Not later than Feb7 ruary 1, 2004, the Administrator shall submit to 

8 Congress a report on such study and shall include 

9 recommendations regarding any changes in the 

10 amendment made by paragraph (1) as the Adminis11 trator determines to be appropriate. 

12 (b) EXTENSION OF SOCIAL HEALTH MAINTENANCE

13 ORGANIZATION (SHMO) DEMONSTRATION PROJECT.—

14 (1) IN GENERAL.—Section 4018(b)(1) of the 

15 Omnibus Budget Reconciliation Act of 1987 is 

16 amended by striking ‘‘the date that is 30 months 

17 after the date that the Secretary submits to Con18 gress the report described in section 4014(c) of the 

19 Balanced Budget Act of 1997’’ and inserting ‘‘De20 cember 31, 2004’’. 

21 (2) SHMOS OFFERING MEDICARE+CHOICE

22 PLANS.—Nothing in such section 4018 shall be con23 strued as preventing a social health maintenance or24 ganization from offering a Medicare+Choice plan 
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1 under part C of title XVIII of the Social Security 

2 Act.

3 SEC. 404. EXTENSION OF MUNICIPAL HEALTH SERVICE 

4 DEMONSTRATION PROJECTS. 

5 The last sentence of section 9215(a) of the Consoli6 dated Omnibus Budget Reconciliation Act of 1985 (42 

7 U.S.C. 1395b–1 note), as previously amended, is amended 

8 by striking ‘‘December 31, 2004, but only with respect 

9 to’’ and all that follows and inserting ‘‘December 31, 

10 2009, but only with respect to individuals who reside in 

11 the city in which the project is operated and so long as 

12 the total number of individuals participating in the project 

13 does not exceed the number of such individuals partici14 pating as of January 1, 1996.’’. 

15 SEC. 405. PAYMENT BY PACE PROVIDERS FOR MEDICARE 

16 AND MEDICAID SERVICES FURNISHED BY 

17 NONCONTRACT PROVIDERS. 

18 (a) MEDICARE SERVICES.—

19 (1) MEDICARE SERVICES FURNISHED BY PRO20 VIDERS OF SERVICES.—Section 1866(a)(1)(O) (42 

21 U.S.C. 1395cc(a)(1)(O)) is amended—

22 (A) by striking ‘‘part C or’’ and inserting 

23 ‘‘part C, with a PACE provider under section 

24 1894 or 1934, or’’; 

25 (B) by striking ‘‘(i)’’; 
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1 (C) by striking ‘‘and (ii)’’; and 

2 (D) by striking ‘‘members of the organiza3 tion’’ and inserting ‘‘members of the organiza4 tion or PACE program eligible individuals en5 rolled with the PACE provider,’’. 

6 (2) MEDICARE SERVICES FURNISHED BY PHYSI7 CIANS AND OTHER ENTITIES.—Section 1894(b) (42 

8 U.S.C. 1395eee(b)) is amended by adding at the end 

9 the following new paragraphs: 

10 ‘‘(3) TREATMENT OF MEDICARE SERVICES FUR11 NISHED BY NONCONTRACT PHYSICIANS AND OTHER

12 ENTITIES.—

13 ‘‘(A) APPLICATION OF MEDICARE+CHOICE

14 REQUIREMENT WITH RESPECT TO MEDICARE

15 SERVICES FURNISHED BY NONCONTRACT PHY16 SICIANS AND OTHER ENTITIES.—Section 

17 1852(k)(1) (relating to limitations on balance 

18 billing against Medicare+Choice organizations 

19 for noncontract physicians and other entities 

20 with respect to services covered under this title) 

21 shall apply to PACE providers, PACE program 

22 eligible individuals enrolled with such PACE 

23 providers, and physicians and other entities 

24 that do not have a contract establishing pay25 ment amounts for services furnished to such an 
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1 individual in the same manner as such section 

2 applies to Medicare+Choice organizations, indi3 viduals enrolled with such organizations, and 

4 physicians and other entities referred to in such 

5 section. 

6 ‘‘(B) REFERENCE TO RELATED PROVISION

7 FOR NONCONTRACT PROVIDERS OF SERVICES.—

8 For the provision relating to limitations on bal9 ance billing against PACE providers for serv10 ices covered under this title furnished by non11 contract providers of services, see section 

12 1866(a)(1)(O). 

13 ‘‘(4) REFERENCE TO RELATED PROVISION FOR

14 SERVICES COVERED UNDER TITLE XIX BUT NOT

15 UNDER THIS TITLE.—For provisions relating to limi16 tations on payments to providers participating under 

17 the State plan under title XIX that do not have a 

18 contract with a PACE provider establishing payment 

19 amounts for services covered under such plan (but 

20 not under this title) when such services are fur21 nished to enrollees of that PACE provider, see sec22 tion 1902(a)(66).’’. 

23 (b) MEDICAID SERVICES.—

24 (1) REQUIREMENT UNDER STATE PLAN.—Sec25 tion 1902(a) (42 U.S.C. 1396a(a) is amended—
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1 (A) in paragraph (64), by striking ‘‘and’’ 

2 at the end; 

3 (B) in paragraph (65), by striking the pe4 riod at the end and inserting ‘‘; and’’; and 

5 (C) by inserting after paragraph (65) the 

6 following new paragraph: 

7 ‘‘(66) provide, with respect to services cov8 ered under the State plan (but not under title 

9 XVIII) that are furnished to a PACE program 

10 eligible individual enrolled with a PACE pro11 vider by a provider participating under the 

12 State plan that does not have a contract with 

13 the PACE provider that establishes payment 

14 amounts for such services, that such partici15 pating provider may not require the PACE pro16 vider to pay the participating provider an 

17 amount greater than the amount that would 

18 otherwise be payable for the service to the par19 ticipating provider under the State plan for the 

20 State where the PACE provider is located (in 

21 accordance with regulations issued by the Sec22 retary).’’. 

23 (2) REFERENCE IN MEDICAID STATUTE.—Sec24 tion 1934(b) (42 U.S.C. 1396u–4(b)) is amended by 

25 adding at the end the following new paragraphs: 
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1 ‘‘(3) TREATMENT OF MEDICARE SERVICES FUR2 NISHED BY NONCONTRACT PHYSICIANS AND OTHER

3 ENTITIES.—

4 ‘‘(A) APPLICATION OF MEDICARE+CHOICE

5 REQUIREMENT WITH RESPECT TO MEDICARE

6 SERVICES FURNISHED BY NONCONTRACT PHY7 SICIANS AND OTHER ENTITIES.—Section 

8 1852(k)(1) (relating to limitations on balance 

9 billing against Medicare+Choice organizations 

10 for noncontract physicians and other entities 

11 with respect to services covered under title 

12 XVIII) shall apply to PACE providers, PACE 

13 program eligible individuals enrolled with such 

14 PACE providers, and physicians and other enti15 ties that do not have a contract establishing 

16 payment amounts for services furnished to such 

17 an individual in the same manner as such sec18 tion applies to Medicare+Choice organizations, 

19 individuals enrolled with such organizations, 

20 and physicians and other entities referred to in 

21 such section. 

22 ‘‘(B) REFERENCE TO RELATED PROVISION

23 FOR NONCONTRACT PROVIDERS OF SERVICES.—

24 For the provision relating to limitations on bal25 ance billing against PACE providers for serv-
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1 ices covered under title XVIII furnished by non2 contract providers of services, see section 

3 1866(a)(1)(O). 

4 ‘‘(4) REFERENCE TO RELATED PROVISION FOR

5 SERVICES COVERED UNDER THIS TITLE BUT NOT

6 UNDER TITLE XVIII.—For provisions relating to lim7 itations on payments to providers participating 

8 under the State plan under this title that do not 

9 have a contract with a PACE provider establishing 

10 payment amounts for services covered under such 

11 plan (but not under title XVIII) when such services 

12 are furnished to enrollees of that PACE provider, 

13 see section 1902(a)(66).’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to services furnished on or after 

16 January 1, 2003. 

17 TITLE V—REGULATORY REDUC18 TION AND CONTRACTING RE19 FORM 

20 Subtitle A—Regulatory Reform 

21 SEC. 501. CONSTRUCTION; DEFINITION OF SUPPLIER. 

22 (a) CONSTRUCTION.—Nothing in this title shall be 

23 construed—

24 (1) to compromise or affect existing legal rem25 edies for addressing fraud or abuse, whether it be 
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1 criminal prosecution, civil enforcement, or adminis2 trative remedies, including under sections 3729 

3 through 3733 of title 31, United States Code 

4 (known as the False Claims Act); or 

5 (2) to prevent or impede the Department of 

6 Health and Human Services in any way from its on7 going efforts to eliminate waste, fraud, and abuse in 

8 the medicare program. 

9 Furthermore, the consolidation of medicare administrative 

10 contracting set forth in this Act does not constitute con11 solidation of the Federal Hospital Insurance Trust Fund 

12 and the Federal Supplementary Medical Insurance Trust 

13 Fund or reflect any position on that issue. 

14 (b) DEFINITION OF SUPPLIER.—Section 1861 (42 

15 U.S.C. 1395x) is amended by inserting after subsection 

16 (c) the following new subsection: 

17 ‘‘Supplier 

18 ‘‘(d) The term ‘supplier’ means, unless the context 

19 otherwise requires, a physician or other practitioner, a fa20 cility, or other entity (other than a provider of services) 

21 that furnishes items or services under this title.’’.

22 SEC. 502. ISSUANCE OF REGULATIONS. 

23 (a) CONSOLIDATION OF PROMULGATION TO ONCE A

24 MONTH.—
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1 (1) IN GENERAL.—Section 1871 (42 U.S.C. 

2 1395hh) is amended by adding at the end the fol3 lowing new subsection: 

4 ‘‘(d)(1) Subject to paragraph (2), the Secretary shall 

5 issue proposed or final (including interim final) regula6 tions to carry out this title only on one business day of 

7 every month. 

8 ‘‘(2) The Secretary may issue a proposed or final reg9 ulation described in paragraph (1) on any other day than 

10 the day described in paragraph (1) if the Secretary—

11 ‘‘(A) finds that issuance of such regulation on 

12 another day is necessary to comply with require13 ments under law; or 

14 ‘‘(B) finds that with respect to that regulation 

15 the limitation of issuance on the date described in 

16 paragraph (1) is contrary to the public interest. 

17 If the Secretary makes a finding under this paragraph, 

18 the Secretary shall include such finding, and brief state19 ment of the reasons for such finding, in the issuance of 

20 such regulation. 

21 ‘‘(3) The Secretary shall coordinate issuance of new 

22 regulations described in paragraph (1) relating to a cat23 egory of provider of services or suppliers based on an anal24 ysis of the collective impact of regulatory changes on that 

25 category of providers or suppliers.’’. 
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1 (2) GAO REPORT ON PUBLICATION OF REGULA2 TIONS ON A QUARTERLY BASIS.—Not later than 3 

3 years after the date of the enactment of this Act, the 

4 Comptroller General of the United States shall sub5 mit to Congress a report on the feasibility of requir6 ing that regulations described in section 1871(d) of 

7 the Social Security Act be promulgated on a quar8 terly basis rather than on a monthly basis. 

9 (3) EFFECTIVE DATE.—The amendment made 

10 by paragraph (1) shall apply to regulations promul11 gated on or after the date that is 30 days after the 

12 date of the enactment of this Act. 

13 (b) REGULAR TIMELINE FOR PUBLICATION OF

14 FINAL RULES.—

15 (1) IN GENERAL.—Section 1871(a) (42 U.S.C. 

16 1395hh(a)) is amended by adding at the end the fol17 lowing new paragraph: 

18 ‘‘(3)(A) The Secretary, in consultation with the Di19 rector of the Office of Management and Budget, shall es20 tablish and publish a regular timeline for the publication 

21 of final regulations based on the previous publication of 

22 a proposed regulation or an interim final regulation. 

23 ‘‘(B) Such timeline may vary among different regula24 tions based on differences in the complexity of the regula25 tion, the number and scope of comments received, and 
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1 other relevant factors, but shall not be longer than 3 years 

2 except under exceptional circumstances. If the Secretary 

3 intends to vary such timeline with respect to the publica4 tion of a final regulation, the Secretary shall cause to have 

5 published in the Federal Register notice of the different 

6 timeline by not later than the timeline previously estab7 lished with respect to such regulation. Such notice shall 

8 include a brief explanation of the justification for such 

9 variation. 

10 ‘‘(C) In the case of interim final regulations, upon 

11 the expiration of the regular timeline established under 

12 this paragraph for the publication of a final regulation 

13 after opportunity for public comment, the interim final 

14 regulation shall not continue in effect unless the Secretary 

15 publishes (at the end of the regular timeline and, if appli16 cable, at the end of each succeeding 1-year period) a notice 

17 of continuation of the regulation that includes an expla18 nation of why the regular timeline (and any subsequent 

19 1-year extension) was not complied with. If such a notice 

20 is published, the regular timeline (or such timeline as pre21 viously extended under this paragraph) for publication of 

22 the final regulation shall be treated as having been ex23 tended for 1 additional year. 

24 ‘‘(D) The Secretary shall annually submit to Con25 gress a report that describes the instances in which the 
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1 Secretary failed to publish a final regulation within the 

2 applicable regular timeline under this paragraph and that 

3 provides an explanation for such failures.’’. 

4 (2) EFFECTIVE DATE.—The amendment made 

5 by paragraph (1) shall take effect on the date of the 

6 enactment of this Act. The Secretary shall provide 

7 for an appropriate transition to take into account 

8 the backlog of previously published interim final reg9 ulations. 

10 (c) LIMITATIONS ON NEW MATTER IN FINAL REGU11 LATIONS.—

12 (1) IN GENERAL.—Section 1871(a) (42 U.S.C. 

13 1395hh(a)), as amended by subsection (b), is further 

14 amended by adding at the end the following new 

15 paragraph: 

16 ‘‘(4) If the Secretary publishes notice of proposed 

17 rulemaking relating to a regulation (including an interim 

18 final regulation), insofar as such final regulation includes 

19 a provision that is not a logical outgrowth of such notice 

20 of proposed rulemaking, that provision shall be treated as 

21 a proposed regulation and shall not take effect until there 

22 is the further opportunity for public comment and a publi23 cation of the provision again as a final regulation.’’. 

24 (2) EFFECTIVE DATE.—The amendment made 

25 by paragraph (1) shall apply to final regulations 
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1 published on or after the date of the enactment of 

2 this Act. 

3 SEC. 503. COMPLIANCE WITH CHANGES IN REGULATIONS 

4 AND POLICIES. 

5 (a) NO RETROACTIVE APPLICATION OF SUB6 STANTIVE CHANGES.—

7 (1) IN GENERAL.—Section 1871 (42 U.S.C. 

8 1395hh), as amended by section 502(a), is amended 

9 by adding at the end the following new subsection: 

10 ‘‘(e)(1)(A) A substantive change in regulations, man11 ual instructions, interpretative rules, statements of policy, 

12 or guidelines of general applicability under this title shall 

13 not be applied (by extrapolation or otherwise) retroactively 

14 to items and services furnished before the effective date 

15 of the change, unless the Secretary determines that—

16 ‘‘(i) such retroactive application is necessary to 

17 comply with statutory requirements; or 

18 ‘‘(ii) failure to apply the change retroactively 

19 would be contrary to the public interest.’’. 

20 (2) EFFECTIVE DATE.—The amendment made 

21 by paragraph (1) shall apply to substantive changes 

22 issued on or after the date of the enactment of this 

23 Act. 

24 (b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE

25 CHANGES AFTER NOTICE.—
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1 (1) IN GENERAL.—Section 1871(e)(1), as 

2 added by subsection (a), is amended by adding at 

3 the end the following: 

4 ‘‘(B)(i) Except as provided in clause (ii), a sub5 stantive change referred to in subparagraph (A) shall not 

6 become effective before the end of the 30-day period that 

7 begins on the date that the Secretary has issued or pub8 lished, as the case may be, the substantive change. 

9 ‘‘(ii) The Secretary may provide for such a sub10 stantive change to take effect on a date that precedes the 

11 end of the 30-day period under clause (i) if the Secretary 

12 finds that waiver of such 30-day period is necessary to 

13 comply with statutory requirements or that the application 

14 of such 30-day period is contrary to the public interest. 

15 If the Secretary provides for an earlier effective date pur16 suant to this clause, the Secretary shall include in the 

17 issuance or publication of the substantive change a finding 

18 described in the first sentence, and a brief statement of 

19 the reasons for such finding. 

20 ‘‘(C) No action shall be taken against a provider of 

21 services or supplier with respect to noncompliance with 

22 such a substantive change for items and services furnished 

23 before the effective date of such a change.’’. 

24 (2) EFFECTIVE DATE.—The amendment made 

25 by paragraph (1) shall apply to compliance actions 
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1 undertaken on or after the date of the enactment of 

2 this Act. 

3 (c) RELIANCE ON GUIDANCE.—

4 (1) IN GENERAL.—Section 1871(e), as added 

5 by subsection (a), is further amended by adding at 

6 the end the following new paragraph: 

7 ‘‘(2)(A) If—

8 ‘‘(i) a provider of services or supplier follows 

9 the written guidance (which may be transmitted 

10 electronically) provided by the Secretary or by a 

11 medicare contractor (as defined in section 1889(g)) 

12 acting within the scope of the contractor’s contract 

13 authority, with respect to the furnishing of items or 

14 services and submission of a claim for benefits for 

15 such items or services with respect to such provider 

16 or supplier; 

17 ‘‘(ii) the Secretary determines that the provider 

18 of services or supplier has accurately presented the 

19 circumstances relating to such items, services, and 

20 claim to the contractor in writing; and 

21 ‘‘(iii) the guidance was in error; 

22 the provider of services or supplier shall not be subject 

23 to any sanction (including any penalty or requirement for 

24 repayment of any amount) if the provider of services or 

25 supplier reasonably relied on such guidance. 
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1 ‘‘(B) Subparagraph (A) shall not be construed as pre2 venting the recoupment or repayment (without any addi3 tional penalty) relating to an overpayment insofar as the 

4 overpayment was solely the result of a clerical or technical 

5 operational error.’’. 

6 (2) EFFECTIVE DATE.—The amendment made 

7 by paragraph (1) shall take effect on the date of the 

8 enactment of this Act but shall not apply to any 

9 sanction for which notice was provided on or before 

10 the date of the enactment of this Act. 

11 SEC. 504. REPORTS AND STUDIES RELATING TO REGU12 LATORY REFORM. 

13 (a) GAO STUDY ON ADVISORY OPINION AUTHOR14 ITY.—

15 (1) STUDY.—The Comptroller General of the 

16 United States shall conduct a study to determine the 

17 feasibility and appropriateness of establishing in the 

18 Secretary authority to provide legally binding advi19 sory opinions on appropriate interpretation and ap20 plication of regulations to carry out the medicare 

21 program under title XVIII of the Social Security 

22 Act. Such study shall examine the appropriate time23 frame for issuing such advisory opinions, as well as 

24 the need for additional staff and funding to provide 

25 such opinions. 
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1 (2) REPORT.—The Comptroller General shall 

2 submit to Congress a report on the study conducted 

3 under paragraph (1) by not later than January 1, 

4 2004. 

5 (b) REPORT ON LEGAL AND REGULATORY INCON6 SISTENCIES.—Section 1871 (42 U.S.C. 1395hh), as 

7 amended by section 503(a), is amended by adding at the 

8 end the following new subsection: 

9 ‘‘(f)(1) Not later than 2 years after the date of the 

10 enactment of this subsection, and every 2 years thereafter, 

11 the Secretary shall submit to Congress a report with re12 spect to the administration of this title and areas of incon13 sistency or conflict among the various provisions under 

14 law and regulation. 

15 ‘‘(2) In preparing a report under paragraph (1), the 

16 Secretary shall collect—

17 ‘‘(A) information from individuals entitled to 

18 benefits under part A or enrolled under part B, or 

19 both, providers of services, and suppliers and from 

20 the Medicare Beneficiary Ombudsman and the Medi21 care Provider Ombudsman with respect to such 

22 areas of inconsistency and conflict; and 

23 ‘‘(B) information from medicare contractors 

24 that tracks the nature of written and telephone in25 quiries. 
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1 ‘‘(3) A report under paragraph (1) shall include a de2 scription of efforts by the Secretary to reduce such incon3 sistency or conflicts, and recommendations for legislation 

4 or administrative action that the Secretary determines ap5 propriate to further reduce such inconsistency or con6 flicts.’’.

7 Subtitle B—Contracting Reform 

8 SEC. 511. INCREASED FLEXIBILITY IN MEDICARE ADMINIS9 TRATION. 

10 (a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE

11 ADMINISTRATION.—

12 (1) IN GENERAL.—Title XVIII is amended by 

13 inserting after section 1874 the following new sec14 tion: 

15 ‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE

16 CONTRACTORS

17 ‘‘SEC. 1874A. (a) AUTHORITY.—

18 ‘‘(1) AUTHORITY TO ENTER INTO CON19 TRACTS.—The Secretary may enter into contracts 

20 with any eligible entity to serve as a medicare ad21 ministrative contractor with respect to the perform22 ance of any or all of the functions described in para23 graph (4) or parts of those functions (or, to the ex24 tent provided in a contract, to secure performance 

25 thereof by other entities). 
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1 ‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is 

2 eligible to enter into a contract with respect to the 

3 performance of a particular function described in 

4 paragraph (4) only if—

5 ‘‘(A) the entity has demonstrated capa6 bility to carry out such function; 

7 ‘‘(B) the entity complies with such conflict 

8 of interest standards as are generally applicable 

9 to Federal acquisition and procurement; 

10 ‘‘(C) the entity has sufficient assets to fi11 nancially support the performance of such func12 tion; and 

13 ‘‘(D) the entity meets such other require14 ments as the Secretary may impose. 

15 ‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR

16 DEFINED.—For purposes of this title and title XI—

17 ‘‘(A) IN GENERAL.—The term ‘medicare 

18 administrative contractor’ means an agency, or19 ganization, or other person with a contract 

20 under this section. 

21 ‘‘(B) APPROPRIATE MEDICARE ADMINIS22 TRATIVE CONTRACTOR.—With respect to the 

23 performance of a particular function in relation 

24 to an individual entitled to benefits under part 

25 A or enrolled under part B, or both, a specific 
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1 provider of services or supplier (or class of such 

2 providers of services or suppliers), the ‘appro3 priate’ medicare administrative contractor is the 

4 medicare administrative contractor that has a 

5 contract under this section with respect to the 

6 performance of that function in relation to that 

7 individual, provider of services or supplier or 

8 class of provider of services or supplier. 

9 ‘‘(4) FUNCTIONS DESCRIBED.—The functions 

10 referred to in paragraphs (1) and (2) are payment 

11 functions, provider services functions, and functions 

12 relating to services furnished to individuals entitled 

13 to benefits under part A or enrolled under part B, 

14 or both, as follows: 

15 ‘‘(A) DETERMINATION OF PAYMENT

16 AMOUNTS.—Determining (subject to the provi17 sions of section 1878 and to such review by the 

18 Secretary as may be provided for by the con19 tracts) the amount of the payments required 

20 pursuant to this title to be made to providers 

21 of services, suppliers and individuals. 

22 ‘‘(B) MAKING PAYMENTS.—Making pay23 ments described in subparagraph (A) (including 

24 receipt, disbursement, and accounting for funds 

25 in making such payments). 
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1 ‘‘(C) BENEFICIARY EDUCATION AND AS2 SISTANCE.—Providing education and outreach 

3 to individuals entitled to benefits under part A 

4 or enrolled under part B, or both, and pro5 viding assistance to those individuals with spe6 cific issues, concerns or problems. 

7 ‘‘(D) PROVIDER CONSULTATIVE SERV8 ICES.—Providing consultative services to insti9 tutions, agencies, and other persons to enable 

10 them to establish and maintain fiscal records 

11 necessary for purposes of this title and other12 wise to qualify as providers of services or sup13 pliers. 

14 ‘‘(E) COMMUNICATION WITH PRO15 VIDERS.—Communicating to providers of serv16 ices and suppliers any information or instruc17 tions furnished to the medicare administrative 

18 contractor by the Secretary, and facilitating 

19 communication between such providers and sup20 pliers and the Secretary. 

21 ‘‘(F) PROVIDER EDUCATION AND TECH22 NICAL ASSISTANCE.—Performing the functions 

23 relating to provider education, training, and 

24 technical assistance. 
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1 ‘‘(G) ADDITIONAL FUNCTIONS.—Per2 forming such other functions as are necessary 

3 to carry out the purposes of this title. 

4 ‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—

5 ‘‘(A) NONDUPLICATION OF DUTIES.—In 

6 entering into contracts under this section, the 

7 Secretary shall assure that functions of medi8 care administrative contractors in carrying out 

9 activities under parts A and B do not duplicate 

10 activities carried out under the Medicare Integ11 rity Program under section 1893. The previous 

12 sentence shall not apply with respect to the ac13 tivity described in section 1893(b)(5) (relating 

14 to prior authorization of certain items of dura15 ble medical equipment under section 

16 1834(a)(15)). 

17 ‘‘(B) CONSTRUCTION.—An entity shall not 

18 be treated as a medicare administrative con19 tractor merely by reason of having entered into 

20 a contract with the Secretary under section 

21 1893. 

22 ‘‘(6) APPLICATION OF FEDERAL ACQUISITION

23 REGULATION.—Except to the extent inconsistent 

24 with a specific requirement of this title, the Federal 
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1 Acquisition Regulation applies to contracts under 

2 this title. 

3 ‘‘(b) CONTRACTING REQUIREMENTS.—

4 ‘‘(1) USE OF COMPETITIVE PROCEDURES.—

5 ‘‘(A) IN GENERAL.—Except as provided in 

6 laws with general applicability to Federal acqui7 sition and procurement or in subparagraph (B), 

8 the Secretary shall use competitive procedures 

9 when entering into contracts with medicare ad10 ministrative contractors under this section, tak11 ing into account performance quality as well as 

12 price and other factors.

13 ‘‘(B) RENEWAL OF CONTRACTS.—The Sec14 retary may renew a contract with a medicare 

15 administrative contractor under this section 

16 from term to term without regard to section 5 

17 of title 41, United States Code, or any other 

18 provision of law requiring competition, if the 

19 medicare administrative contractor has met or 

20 exceeded the performance requirements applica21 ble with respect to the contract and contractor, 

22 except that the Secretary shall provide for the 

23 application of competitive procedures under 

24 such a contract not less frequently than once 

25 every five years. 
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1 ‘‘(C) TRANSFER OF FUNCTIONS.—The 

2 Secretary may transfer functions among medi3 care administrative contractors consistent with 

4 the provisions of this paragraph. The Secretary 

5 shall ensure that performance quality is consid6 ered in such transfers. The Secretary shall pro7 vide public notice (whether in the Federal Reg8 ister or otherwise) of any such transfer (includ9 ing a description of the functions so trans10 ferred, a description of the providers of services 

11 and suppliers affected by such transfer, and 

12 contact information for the contractors in13 volved). 

14 ‘‘(D) INCENTIVES FOR QUALITY.—The 

15 Secretary shall provide incentives for medicare 

16 administrative contractors to provide quality 

17 service and to promote efficiency. 

18 ‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No 

19 contract under this section shall be entered into with 

20 any medicare administrative contractor unless the 

21 Secretary finds that such medicare administrative 

22 contractor will perform its obligations under the con23 tract efficiently and effectively and will meet such 

24 requirements as to financial responsibility, legal au-
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1 thority, quality of services provided, and other mat2 ters as the Secretary finds pertinent. 

3 ‘‘(3) PERFORMANCE REQUIREMENTS.—

4 ‘‘(A) DEVELOPMENT OF SPECIFIC PER5 FORMANCE REQUIREMENTS.—In developing 

6 contract performance requirements, the Sec7 retary shall develop performance requirements 

8 applicable to functions described in subsection 

9 (a)(4). 

10 ‘‘(B) CONSULTATION.— In developing such 

11 requirements, the Secretary may consult with 

12 providers of services and suppliers, organiza13 tions representing individuals entitled to bene14 fits under part A or enrolled under part B, or 

15 both, and organizations and agencies per16 forming functions necessary to carry out the 

17 purposes of this section with respect to such 

18 performance requirements. 

19 ‘‘(C) INCLUSION IN CONTRACTS.—All con20 tractor performance requirements shall be set 

21 forth in the contract between the Secretary and 

22 the appropriate medicare administrative con23 tractor. Such performance requirements—

24 ‘‘(i) shall reflect the performance re25 quirements developed under subparagraph 
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1 (A), but may include additional perform2 ance requirements; 

3 ‘‘(ii) shall be used for evaluating con4 tractor performance under the contract; 

5 and 

6 ‘‘(iii) shall be consistent with the writ7 ten statement of work provided under the 

8 contract. 

9 ‘‘(4) INFORMATION REQUIREMENTS.—The Sec10 retary shall not enter into a contract with a medi11 care administrative contractor under this section un12 less the contractor agrees—

13 ‘‘(A) to furnish to the Secretary such time14 ly information and reports as the Secretary may 

15 find necessary in performing his functions 

16 under this title; and 

17 ‘‘(B) to maintain such records and afford 

18 such access thereto as the Secretary finds nec19 essary to assure the correctness and verification 

20 of the information and reports under subpara21 graph (A) and otherwise to carry out the pur22 poses of this title. 

23 ‘‘(5) SURETY BOND.—A contract with a medi24 care administrative contractor under this section 

25 may require the medicare administrative contractor, 
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1 and any of its officers or employees certifying pay2 ments or disbursing funds pursuant to the contract, 

3 or otherwise participating in carrying out the con4 tract, to give surety bond to the United States in 

5 such amount as the Secretary may deem appro6 priate. 

7 ‘‘(c) TERMS AND CONDITIONS.—

8 ‘‘(1) IN GENERAL.—A contract with any medi9 care administrative contractor under this section 

10 may contain such terms and conditions as the Sec11 retary finds necessary or appropriate and may pro12 vide for advances of funds to the medicare adminis13 trative contractor for the making of payments by it 

14 under subsection (a)(4)(B). 

15 ‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN

16 DATA COLLECTION.—The Secretary may not require, 

17 as a condition of entering into, or renewing, a con18 tract under this section, that the medicare adminis19 trative contractor match data obtained other than in 

20 its activities under this title with data used in the 

21 administration of this title for purposes of identi22 fying situations in which the provisions of section 

23 1862(b) may apply. 

24 ‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD25 MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
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1 ‘‘(1) CERTIFYING OFFICER.—No individual des2 ignated pursuant to a contract under this section as 

3 a certifying officer shall, in the absence of gross neg4 ligence or intent to defraud the United States, be 

5 liable with respect to any payments certified by the 

6 individual under this section. 

7 ‘‘(2) DISBURSING OFFICER.—No disbursing of8 ficer shall, in the absence of gross negligence or in9 tent to defraud the United States, be liable with re10 spect to any payment by such officer under this sec11 tion if it was based upon an authorization (which 

12 meets the applicable requirements for such internal 

13 controls established by the Comptroller General) of 

14 a certifying officer designated as provided in para15 graph (1) of this subsection. 

16 ‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE

17 CONTRACTOR.—No medicare administrative con18 tractor shall be liable to the United States for a pay19 ment by a certifying or disbursing officer unless in 

20 connection with such payment or in the supervision 

21 of or selection of such officer the medicare adminis22 trative contractor acted with gross negligence. 

23 ‘‘(4) INDEMNIFICATION BY SECRETARY.—

24 ‘‘(A) IN GENERAL.—Subject to subpara25 graphs (B) and (D), in the case of a medicare 
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1 administrative contractor (or a person who is a 

2 director, officer, or employee of such a con3 tractor or who is engaged by the contractor to 

4 participate directly in the claims administration 

5 process) who is made a party to any judicial or 

6 administrative proceeding arising from or relat7 ing directly to the claims administration process 

8 under this title, the Secretary may, to the ex9 tent the Secretary determines to be appropriate 

10 and as specified in the contract with the con11 tractor, indemnify the contractor and such per12 sons. 

13 ‘‘(B) CONDITIONS.—The Secretary may 

14 not provide indemnification under subparagraph 

15 (A) insofar as the liability for such costs arises 

16 directly from conduct that is determined by the 

17 judicial proceeding or by the Secretary to be 

18 criminal in nature, fraudulent, or grossly neg19 ligent. If indemnification is provided by the Sec20 retary with respect to a contractor before a de21 termination that such costs arose directly from 

22 such conduct, the contractor shall reimburse the 

23 Secretary for costs of indemnification. 

24 ‘‘(C) SCOPE OF INDEMNIFICATION.—In25 demnification by the Secretary under subpara-
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1 graph (A) may include payment of judgments, 

2 settlements (subject to subparagraph (D)), 

3 awards, and costs (including reasonable legal 

4 expenses). 

5 ‘‘(D) WRITTEN APPROVAL FOR SETTLE6 MENTS.—A contractor or other person de7 scribed in subparagraph (A) may not propose to 

8 negotiate a settlement or compromise of a pro9 ceeding described in such subparagraph without 

10 the prior written approval of the Secretary to 

11 negotiate such settlement or compromise. Any 

12 indemnification under subparagraph (A) with 

13 respect to amounts paid under a settlement or 

14 compromise of a proceeding described in such 

15 subparagraph are conditioned upon prior writ16 ten approval by the Secretary of the final settle17 ment or compromise. 

18 ‘‘(E) CONSTRUCTION.—Nothing in this 

19 paragraph shall be construed—

20 ‘‘(i) to change any common law immu21 nity that may be available to a medicare 

22 administrative contractor or person de23 scribed in subparagraph (A); or 

24 ‘‘(ii) to permit the payment of costs 

25 not otherwise allowable, reasonable, or allo-
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1 cable under the Federal Acquisition Regu2 lations.’’. 

3 (2) CONSIDERATION OF INCORPORATION OF

4 CURRENT LAW STANDARDS.—In developing contract 

5 performance requirements under section 1874A(b) 

6 of the Social Security Act, as inserted by paragraph 

7 (1), the Secretary shall consider inclusion of the per8 formance standards described in sections 1816(f)(2) 

9 of such Act (relating to timely processing of recon10 siderations and applications for exemptions) and sec11 tion 1842(b)(2)(B) of such Act (relating to timely 

12 review of determinations and fair hearing requests), 

13 as such sections were in effect before the date of the 

14 enactment of this Act. 

15 (b) CONFORMING AMENDMENTS TO SECTION 1816 

16 (RELATING TO FISCAL INTERMEDIARIES).—Section 1816 

17 (42 U.S.C. 1395h) is amended as follows: 

18 (1) The heading is amended to read as follows: 

19 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF

20 PART A’’. 

21 (2) Subsection (a) is amended to read as fol22 lows: 

23 ‘‘(a) The administration of this part shall be con24 ducted through contracts with medicare administrative 

25 contractors under section 1874A.’’. 

26 (3) Subsection (b) is repealed. 
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1 (4) Subsection (c) is amended—

2 (A) by striking paragraph (1); and 

3 (B) in each of paragraphs (2)(A) and 

4 (3)(A), by striking ‘‘agreement under this sec5 tion’’ and inserting ‘‘contract under section 

6 1874A that provides for making payments 

7 under this part’’. 

8 (5) Subsections (d) through (i) are repealed. 

9 (6) Subsections (j) and (k) are each amended—

10 (A) by striking ‘‘An agreement with an 

11 agency or organization under this section’’ and 

12 inserting ‘‘A contract with a medicare adminis13 trative contractor under section 1874A with re14 spect to the administration of this part’’; and 

15 (B) by striking ‘‘such agency or organiza16 tion’’ and inserting ‘‘such medicare administra17 tive contractor’’ each place it appears. 

18 (7) Subsection (l) is repealed. 

19 (c) CONFORMING AMENDMENTS TO SECTION 1842 

20 (RELATING TO CARRIERS).—Section 1842 (42 U.S.C. 

21 1395u) is amended as follows: 

22 (1) The heading is amended to read as follows: 

23 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF

24 PART B’’. 

25 (2) Subsection (a) is amended to read as fol26 lows: 
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1 ‘‘(a) The administration of this part shall be con2 ducted through contracts with medicare administrative 

3 contractors under section 1874A.’’. 

4 (3) Subsection (b) is amended—

5 (A) by striking paragraph (1); 

6 (B) in paragraph (2)—

7 (i) by striking subparagraphs (A) and 

8 (B); 

9 (ii) in subparagraph (C), by striking 

10 ‘‘carriers’’ and inserting ‘‘medicare admin11 istrative contractors’’; and 

12 (iii) by striking subparagraphs (D) 

13 and (E); 

14 (C) in paragraph (3)—

15 (i) in the matter before subparagraph 

16 (A), by striking ‘‘Each such contract shall 

17 provide that the carrier’’ and inserting 

18 ‘‘The Secretary’’;

19 (ii) by striking ‘‘will’’ the first place it 

20 appears in each of subparagraphs (A), (B), 

21 (F), (G), (H), and (L) and inserting 

22 ‘‘shall’’; 

23 (iii) in subparagraph (B), in the mat24 ter before clause (i), by striking ‘‘to the 

25 policyholders and subscribers of the car-
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1 rier’’ and inserting ‘‘to the policyholders 

2 and subscribers of the medicare adminis3 trative contractor’’; 

4 (iv) by striking subparagraphs (C), 

5 (D), and (E); 

6 (v) in subparagraph (H)—

7 (I) by striking ‘‘if it makes deter8 minations or payments with respect to 

9 physicians’ services,’’ in the matter 

10 preceding clause (i); and 

11 (II) by striking ‘‘carrier’’ and in12 serting ‘‘medicare administrative con13 tractor’’ in clause (i); 

14 (vi) by striking subparagraph (I); 

15 (vii) in subparagraph (L), by striking 

16 the semicolon and inserting a period; 

17 (viii) in the first sentence, after sub18 paragraph (L), by striking ‘‘and shall con19 tain’’ and all that follows through the pe20 riod; and 

21 (ix) in the seventh sentence, by insert22 ing ‘‘medicare administrative contractor,’’ 

23 after ‘‘carrier,’’; and 

24 (D) by striking paragraph (5); 
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1 (E) in paragraph (6)(D)(iv), by striking 

2 ‘‘carrier’’ and inserting ‘‘medicare administra3 tive contractor’’; and 

4 (F) in paragraph (7), by striking ‘‘the car5 rier’’ and inserting ‘‘the Secretary’’ each place 

6 it appears. 

7 (4) Subsection (c) is amended—

8 (A) by striking paragraph (1); 

9 (B) in paragraph (2)(A), by striking ‘‘con10 tract under this section which provides for the 

11 disbursement of funds, as described in sub12 section (a)(1)(B),’’ and inserting ‘‘contract 

13 under section 1874A that provides for making 

14 payments under this part’’; 

15 (C) in paragraph (3)(A), by striking ‘‘sub16 section (a)(1)(B)’’ and inserting ‘‘section 

17 1874A(a)(3)(B)’’; 

18 (D) in paragraph (4), in the matter pre19 ceding subparagraph (A), by striking ‘‘carrier’’ 

20 and inserting ‘‘medicare administrative con21 tractor’’; and 

22 (E) by striking paragraphs (5) and (6). 

23 (5) Subsections (d), (e), and (f) are repealed. 
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1 (6) Subsection (g) is amended by striking ‘‘car2 rier or carriers’’ and inserting ‘‘medicare administra3 tive contractor or contractors’’. 

4 (7) Subsection (h) is amended—

5 (A) in paragraph (2)—

6 (i) by striking ‘‘Each carrier having 

7 an agreement with the Secretary under 

8 subsection (a)’’ and inserting ‘‘The Sec9 retary’’; and 

10 (ii) by striking ‘‘Each such carrier’’ 

11 and inserting ‘‘The Secretary’’; 

12 (B) in paragraph (3)(A)—

13 (i) by striking ‘‘a carrier having an 

14 agreement with the Secretary under sub15 section (a)’’ and inserting ‘‘medicare ad16 ministrative contractor having a contract 

17 under section 1874A that provides for 

18 making payments under this part’’; and 

19 (ii) by striking ‘‘such carrier’’ and in20 serting ‘‘such contractor’’; 

21 (C) in paragraph (3)(B)—

22 (i) by striking ‘‘a carrier’’ and insert23 ing ‘‘a medicare administrative contractor’’ 

24 each place it appears; and 
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1 (ii) by striking ‘‘the carrier’’ and in2 serting ‘‘the contractor’’ each place it ap3 pears; and 

4 (D) in paragraphs (5)(A) and (5)(B)(iii), 

5 by striking ‘‘carriers’’ and inserting ‘‘medicare 

6 administrative contractors’’ each place it ap7 pears. 

8 (8) Subsection (l) is amended—

9 (A) in paragraph (1)(A)(iii), by striking 

10 ‘‘carrier’’ and inserting ‘‘medicare administra11 tive contractor’’; and 

12 (B) in paragraph (2), by striking ‘‘carrier’’ 

13 and inserting ‘‘medicare administrative con14 tractor’’. 

15 (9) Subsection (p)(3)(A) is amended by striking 

16 ‘‘carrier’’ and inserting ‘‘medicare administrative 

17 contractor’’. 

18 (10) Subsection (q)(1)(A) is amended by strik19 ing ‘‘carrier’’. 

20 (d) EFFECTIVE DATE; TRANSITION RULE.—

21 (1) EFFECTIVE DATE.—

22 (A) IN GENERAL.—Except as otherwise 

23 provided in this subsection, the amendments 

24 made by this section shall take effect on Octo25 ber 1, 2004, and the Secretary is authorized to 
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1 take such steps before such date as may be nec2 essary to implement such amendments on a 

3 timely basis. 

4 (B) CONSTRUCTION FOR CURRENT CON5 TRACTS.—Such amendments shall not apply to 

6 contracts in effect before the date specified 

7 under subparagraph (A) that continue to retain 

8 the terms and conditions in effect on such date 

9 (except as otherwise provided under this Act, 

10 other than under this section) until such date 

11 as the contract is let out for competitive bid12 ding under such amendments. 

13 (C) DEADLINE FOR COMPETITIVE BID14 DING.—The Secretary shall provide for the let15 ting by competitive bidding of all contracts for 

16 functions of medicare administrative contrac17 tors for annual contract periods that begin on 

18 or after October 1, 2009. 

19 (D) WAIVER OF PROVIDER NOMINATION

20 PROVISIONS DURING TRANSITION.—During the 

21 period beginning on the date of the enactment 

22 of this Act and before the date specified under 

23 subparagraph (A), the Secretary may enter into 

24 new agreements under section 1816 of the So25 cial Security Act (42 U.S.C. 1395h) without re-
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1 gard to any of the provider nomination provi2 sions of such section. 

3 (2) GENERAL TRANSITION RULES.—The Sec4 retary shall take such steps, consistent with para5 graph (1)(B) and (1)(C), as are necessary to provide 

6 for an appropriate transition from contracts under 

7 section 1816 and section 1842 of the Social Security 

8 Act (42 U.S.C. 1395h, 1395u) to contracts under 

9 section 1874A, as added by subsection (a)(1). 

10 (3) AUTHORIZING CONTINUATION OF MIP

11 FUNCTIONS UNDER CURRENT CONTRACTS AND

12 AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—

13 The provisions contained in the exception in section 

14 1893(d)(2) of the Social Security Act (42 U.S.C. 

15 1395ddd(d)(2)) shall continue to apply notwith16 standing the amendments made by this section, and 

17 any reference in such provisions to an agreement or 

18 contract shall be deemed to include a contract under 

19 section 1874A of such Act, as inserted by subsection 

20 (a)(1), that continues the activities referred to in 

21 such provisions. 

22 (e) REFERENCES.—On and after the effective date 

23 provided under subsection (d)(1), any reference to a fiscal 

24 intermediary or carrier under title XI or XVIII of the So25 cial Security Act (or any regulation, manual instruction, 
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1 interpretative rule, statement of policy, or guideline issued 

2 to carry out such titles) shall be deemed a reference to 

3 an appropriate medicare administrative contractor (as 

4 provided under section 1874A of the Social Security Act). 

5 (f) REPORTS ON IMPLEMENTATION.—

6 (1) PLAN FOR IMPLEMENTATION.—By not later 

7 than October 1, 2003, the Secretary shall submit a 

8 report to Congress and the Comptroller General of 

9 the United States that describes the plan for imple10 mentation of the amendments made by this section. 

11 The Comptroller General shall conduct an evaluation 

12 of such plan and shall submit to Congress, not later 

13 than 6 months after the date the report is received, 

14 a report on such evaluation and shall include in such 

15 report such recommendations as the Comptroller 

16 General deems appropriate. 

17 (2) STATUS OF IMPLEMENTATION.—The Sec18 retary shall submit a report to Congress not later 

19 than October 1, 2007, that describes the status of 

20 implementation of such amendments and that in21 cludes a description of the following: 

22 (A) The number of contracts that have 

23 been competitively bid as of such date. 

24 (B) The distribution of functions among 

25 contracts and contractors. 
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1 (C) A timeline for complete transition to 

2 full competition. 

3 (D) A detailed description of how the Sec4 retary has modified oversight and management 

5 of medicare contractors to adapt to full com6 petition. 

7 SEC. 512. REQUIREMENTS FOR INFORMATION SECURITY 

8 FOR MEDICARE ADMINISTRATIVE CONTRAC9 TORS. 

10 (a) IN GENERAL.—Section 1874A, as added by sec11 tion 511(a)(1), is amended by adding at the end the fol12 lowing new subsection: 

13 ‘‘(e) REQUIREMENTS FOR INFORMATION SECU14 RITY.—

15 ‘‘(1) DEVELOPMENT OF INFORMATION SECU16 RITY PROGRAM.—A medicare administrative con17 tractor that performs the functions referred to in 

18 subparagraphs (A) and (B) of subsection (a)(4) (re19 lating to determining and making payments) shall 

20 implement a contractor-wide information security 

21 program to provide information security for the op22 eration and assets of the contractor with respect to 

23 such functions under this title. An information secu24 rity program under this paragraph shall meet the re25 quirements for information security programs im-
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1 posed on Federal agencies under section 3534(b)(2) 

2 of title 44, United States Code (other than require3 ments under subparagraphs (B)(ii), (F)(iii), and 

4 (F)(iv) of such section). 

5 ‘‘(2) INDEPENDENT AUDITS.—

6 ‘‘(A) PERFORMANCE OF ANNUAL EVALUA7 TIONS.—Each year a medicare administrative 

8 contractor that performs the functions referred 

9 to in subparagraphs (A) and (B) of subsection 

10 (a)(4) (relating to determining and making pay11 ments) shall undergo an evaluation of the infor12 mation security of the contractor with respect 

13 to such functions under this title. The evalua14 tion shall—

15 ‘‘(i) be performed by an entity that 

16 meets such requirements for independence 

17 as the Inspector General of the Depart18 ment of Health and Human Services may 

19 establish; and 

20 ‘‘(ii) test the effectiveness of informa21 tion security control techniques for an ap22 propriate subset of the contractor’s infor23 mation systems (as defined in section 

24 3502(8) of title 44, United States Code) 

25 relating to such functions under this title 
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1 and an assessment of compliance with the 

2 requirements of this subsection and related 

3 information security policies, procedures, 

4 standards and guidelines. 

5 ‘‘(B) DEADLINE FOR INITIAL EVALUA6 TION.—

7 ‘‘(i) NEW CONTRACTORS.—In the case 

8 of a medicare administrative contractor 

9 covered by this subsection that has not 

10 previously performed the functions referred 

11 to in subparagraphs (A) and (B) of sub12 section (a)(4) (relating to determining and 

13 making payments) as a fiscal intermediary 

14 or carrier under section 1816 or 1842, the 

15 first independent evaluation conducted 

16 pursuant subparagraph (A) shall be com17 pleted prior to commencing such functions. 

18 ‘‘(ii) OTHER CONTRACTORS.—In the 

19 case of a medicare administrative con20 tractor covered by this subsection that is 

21 not described in clause (i), the first inde22 pendent evaluation conducted pursuant 

23 subparagraph (A) shall be completed with24 in 1 year after the date the contractor 
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1 commences functions referred to in clause 

2 (i) under this section. 

3 ‘‘(C) REPORTS ON EVALUATIONS.—

4 ‘‘(i) TO THE INSPECTOR GENERAL.—

5 The results of independent evaluations 

6 under subparagraph (A) shall be submitted 

7 promptly to the Inspector General of the 

8 Department of Health and Human Serv9 ices. 

10 ‘‘(ii) TO CONGRESS.—The Inspector 

11 General of Department of Health and 

12 Human Services shall submit to Congress 

13 annual reports on the results of such eval14 uations.’’. 

15 (b) APPLICATION OF REQUIREMENTS TO FISCAL

16 INTERMEDIARIES AND CARRIERS.—

17 (1) IN GENERAL.—The provisions of section 

18 1874A(e)(2) of the Social Security Act (other than 

19 subparagraph (B)), as added by subsection (a), shall 

20 apply to each fiscal intermediary under section 1816 

21 of the Social Security Act (42 U.S.C. 1395h) and 

22 each carrier under section 1842 of such Act (42 

23 U.S.C. 1395u) in the same manner as they apply to 

24 medicare administrative contractors under such pro25 visions. 
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1 (2) DEADLINE FOR INITIAL EVALUATION.—In 

2 the case of such a fiscal intermediary or carrier with 

3 an agreement or contract under such respective sec4 tion in effect as of the date of the enactment of this 

5 Act, the first evaluation under section 

6 1874A(e)(2)(A) of the Social Security Act (as added 

7 by subsection (a)), pursuant to paragraph (1), shall 

8 be completed (and a report on the evaluation sub9 mitted to the Secretary) by not later than 1 year 

10 after such date. 

11 Subtitle C—Education and 

12 Outreach 

13 SEC. 521. PROVIDER EDUCATION AND TECHNICAL ASSIST14 ANCE. 

15 (a) COORDINATION OF EDUCATION FUNDING.—

16 (1) IN GENERAL.—The Social Security Act is 

17 amended by inserting after section 1888 the fol18 lowing new section: 

19 ‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

20 ‘‘SEC. 1889. (a) COORDINATION OF EDUCATION

21 FUNDING.—The Secretary shall coordinate the edu22 cational activities provided through medicare contractors 

23 (as defined in subsection (g), including under section 

24 1893) in order to maximize the effectiveness of Federal 

25 education efforts for providers of services and suppliers.’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall take effect on the date of the 

3 enactment of this Act. 

4 (3) REPORT.—Not later than October 1, 2003, 

5 the Secretary shall submit to Congress a report that 

6 includes a description and evaluation of the steps 

7 taken to coordinate the funding of provider edu8 cation under section 1889(a) of the Social Security 

9 Act, as added by paragraph (1). 

10 (b) INCENTIVES TO IMPROVE CONTRACTOR PER11 FORMANCE.—

12 (1) IN GENERAL.—Section 1874A, as added by 

13 section 511(a)(1) and as amended by section 512(a), 

14 is amended by adding at the end the following new 

15 subsection: 

16 ‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER17 FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—

18 In order to give medicare administrative contractors an 

19 incentive to implement effective education and outreach 

20 programs for providers of services and suppliers, the Sec21 retary shall develop and implement a methodology to 

22 measure the specific claims payment error rates of such 

23 contractors in the processing or reviewing of medicare 

24 claims.’’. 
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1 (2) APPLICATION TO FISCAL INTERMEDIARIES

2 AND CARRIERS.—The provisions of section 1874A(f) 

3 of the Social Security Act, as added by paragraph 

4 (1), shall apply to each fiscal intermediary under 

5 section 1816 of the Social Security Act (42 U.S.C. 

6 1395h) and each carrier under section 1842 of such 

7 Act (42 U.S.C. 1395u) in the same manner as they 

8 apply to medicare administrative contractors under 

9 such provisions. 

10 (3) GAO REPORT ON ADEQUACY OF METHOD11 OLOGY.—Not later than October 1, 2003, the Comp12 troller General of the United States shall submit to 

13 Congress and to the Secretary a report on the ade14 quacy of the methodology under section 1874A(f) of 

15 the Social Security Act, as added by paragraph (1), 

16 and shall include in the report such recommenda17 tions as the Comptroller General determines appro18 priate with respect to the methodology. 

19 (4) REPORT ON USE OF METHODOLOGY IN AS20 SESSING CONTRACTOR PERFORMANCE.—Not later 

21 than October 1, 2003, the Secretary shall submit to 

22 Congress a report that describes how the Secretary 

23 intends to use such methodology in assessing medi24 care contractor performance in implementing effec25 tive education and outreach programs, including 
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1 whether to use such methodology as a basis for per2 formance bonuses. The report shall include an anal3 ysis of the sources of identified errors and potential 

4 changes in systems of contractors and rules of the 

5 Secretary that could reduce claims error rates. 

6 (c) PROVISION OF ACCESS TO AND PROMPT RE7 SPONSES FROM MEDICARE ADMINISTRATIVE CONTRAC8 TORS.—

9 (1) IN GENERAL.—Section 1874A, as added by 

10 section 511(a)(1) and as amended by section 512(a) 

11 and subsection (b), is further amended by adding at 

12 the end the following new subsection: 

13 ‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PRO14 VIDERS OF SERVICES AND SUPPLIERS.—

15 ‘‘(1) COMMUNICATION STRATEGY.—The Sec16 retary shall develop a strategy for communications 

17 with individuals entitled to benefits under part A or 

18 enrolled under part B, or both, and with providers 

19 of services and suppliers under this title. 

20 ‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 

21 medicare administrative contractor shall, for those 

22 providers of services and suppliers which submit 

23 claims to the contractor for claims processing and 

24 for those individuals entitled to benefits under part 

25 A or enrolled under part B, or both, with respect 
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1 to whom claims are submitted for claims processing, 

2 provide general written responses (which may be 

3 through electronic transmission) in a clear, concise, 

4 and accurate manner to inquiries of providers of 

5 services, suppliers and individuals entitled to bene6 fits under part A or enrolled under part B, or both, 

7 concerning the programs under this title within 45 

8 business days of the date of receipt of such inquiries. 

9 ‘‘(3) RESPONSE TO TOLL-FREE LINES.—The 

10 Secretary shall ensure that each medicare adminis11 trative contractor shall provide, for those providers 

12 of services and suppliers which submit claims to the 

13 contractor for claims processing and for those indi14 viduals entitled to benefits under part A or enrolled 

15 under part B, or both, with respect to whom claims 

16 are submitted for claims processing, a toll-free tele17 phone number at which such individuals, providers 

18 of services and suppliers may obtain information re19 garding billing, coding, claims, coverage, and other 

20 appropriate information under this title. 

21 ‘‘(4) MONITORING OF CONTRACTOR RE22 SPONSES.—

23 ‘‘(A) IN GENERAL.—Each medicare admin24 istrative contractor shall, consistent with stand-
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1 ards developed by the Secretary under subpara2 graph (B)—

3 ‘‘(i) maintain a system for identifying 

4 who provides the information referred to in 

5 paragraphs (2) and (3); and 

6 ‘‘(ii) monitor the accuracy, consist7 ency, and timeliness of the information so 

8 provided. 

9 ‘‘(B) DEVELOPMENT OF STANDARDS.—

10 ‘‘(i) IN GENERAL.—The Secretary 

11 shall establish and make public standards 

12 to monitor the accuracy, consistency, and 

13 timeliness of the information provided in 

14 response to written and telephone inquiries 

15 under this subsection. Such standards shall 

16 be consistent with the performance require17 ments established under subsection (b)(3). 

18 ‘‘(ii) EVALUATION.—In conducting 

19 evaluations of individual medicare adminis20 trative contractors, the Secretary shall 

21 take into account the results of the moni22 toring conducted under subparagraph (A) 

23 taking into account as performance re24 quirements the standards established 

25 under clause (i). The Secretary shall, in 
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1 consultation with organizations rep2 resenting providers of services, suppliers, 

3 and individuals entitled to benefits under 

4 part A or enrolled under part B, or both, 

5 establish standards relating to the accu6 racy, consistency, and timeliness of the in7 formation so provided. 

8 ‘‘(C) DIRECT MONITORING.—Nothing in 

9 this paragraph shall be construed as preventing 

10 the Secretary from directly monitoring the ac11 curacy, consistency, and timeliness of the infor12 mation so provided.’’. 

13 (2) EFFECTIVE DATE.—The amendment made 

14 by paragraph (1) shall take effect October 1, 2003. 

15 (3) APPLICATION TO FISCAL INTERMEDIARIES

16 AND CARRIERS.—The provisions of section 1874A(g) 

17 of the Social Security Act, as added by paragraph 

18 (1), shall apply to each fiscal intermediary under 

19 section 1816 of the Social Security Act (42 U.S.C. 

20 1395h) and each carrier under section 1842 of such 

21 Act (42 U.S.C. 1395u) in the same manner as they 

22 apply to medicare administrative contractors under 

23 such provisions. 

24 (d) IMPROVED PROVIDER EDUCATION AND TRAIN25 ING.—
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1 (1) IN GENERAL.—Section 1889, as added by 

2 subsection (a), is amended by adding at the end the 

3 following new subsections: 

4 ‘‘(b) ENHANCED EDUCATION AND TRAINING.—

5 ‘‘(1) ADDITIONAL RESOURCES.—There are au6 thorized to be appropriated to the Secretary (in ap7 propriate part from the Federal Hospital Insurance 

8 Trust Fund and the Federal Supplementary Medical 

9 Insurance Trust Fund) $25,000,000 for each of fis10 cal years 2004 and 2005 and such sums as may be 

11 necessary for succeeding fiscal years. 

12 ‘‘(2) USE.—The funds made available under 

13 paragraph (1) shall be used to increase the conduct 

14 by medicare contractors of education and training of 

15 providers of services and suppliers regarding billing, 

16 coding, and other appropriate items and may also be 

17 used to improve the accuracy, consistency, and time18 liness of contractor responses. 

19 ‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI20 TIES FOR SMALL PROVIDERS OR SUPPLIERS.—

21 ‘‘(1) IN GENERAL.—Insofar as a medicare con22 tractor conducts education and training activities, it 

23 shall tailor such activities to meet the special needs 

24 of small providers of services or suppliers (as defined 

25 in paragraph (2)). 
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1 ‘‘(2) SMALL PROVIDER OF SERVICES OR SUP2 PLIER.—In this subsection, the term ‘small provider 

3 of services or supplier’ means—

4 ‘‘(A) a provider of services with fewer than 

5 25 full-time-equivalent employees; or 

6 ‘‘(B) a supplier with fewer than 10 full7 time-equivalent employees.’’. 

8 (2) EFFECTIVE DATE.—The amendment made 

9 by paragraph (1) shall take effect on October 1, 

10 2003. 

11 (e) REQUIREMENT TO MAINTAIN INTERNET

12 SITES.—

13 (1) IN GENERAL.—Section 1889, as added by 

14 subsection (a) and as amended by subsection (d), is 

15 further amended by adding at the end the following 

16 new subsection: 

17 ‘‘(d) INTERNET SITES; FAQS.—The Secretary, and 

18 each medicare contractor insofar as it provides services 

19 (including claims processing) for providers of services or 

20 suppliers, shall maintain an Internet site which—

21 ‘‘(1) provides answers in an easily accessible 

22 format to frequently asked questions, and 

23 ‘‘(2) includes other published materials of the 

24 contractor, 
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1 that relate to providers of services and suppliers under the 

2 programs under this title (and title XI insofar as it relates 

3 to such programs).’’.

4 (2) EFFECTIVE DATE.—The amendment made 

5 by paragraph (1) shall take effect on October 1, 

6 2003. 

7 (f) ADDITIONAL PROVIDER EDUCATION PROVI8 SIONS.—

9 (1) IN GENERAL.—Section 1889, as added by 

10 subsection (a) and as amended by subsections (d) 

11 and (e), is further amended by adding at the end the 

12 following new subsections: 

13 ‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDU14 CATION PROGRAM ACTIVITIES.—A medicare contractor 

15 may not use a record of attendance at (or failure to at16 tend) educational activities or other information gathered 

17 during an educational program conducted under this sec18 tion or otherwise by the Secretary to select or track pro19 viders of services or suppliers for the purpose of con20 ducting any type of audit or prepayment review. 

21 ‘‘(f) CONSTRUCTION.—Nothing in this section or sec22 tion 1893(g) shall be construed as providing for disclosure 

23 by a medicare contractor of information that would com24 promise pending law enforcement activities or reveal find25 ings of law enforcement-related audits. 
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1 ‘‘(g) DEFINITIONS.—For purposes of this section, the 

2 term ‘medicare contractor’ includes the following: 

3 ‘‘(1) A medicare administrative contractor with 

4 a contract under section 1874A, including a fiscal 

5 intermediary with a contract under section 1816 and 

6 a carrier with a contract under section 1842. 

7 ‘‘(2) An eligible entity with a contract under 

8 section 1893. 

9 Such term does not include, with respect to activities of 

10 a specific provider of services or supplier an entity that 

11 has no authority under this title or title IX with respect 

12 to such activities and such provider of services or sup13 plier.’’. 

14 (2) EFFECTIVE DATE.—The amendment made 

15 by paragraph (1) shall take effect on the date of the 

16 enactment of this Act. 

17 SEC. 522. SMALL PROVIDER TECHNICAL ASSISTANCE DEM18 ONSTRATION PROGRAM. 

19 (a) ESTABLISHMENT.—

20 (1) IN GENERAL.—The Secretary shall establish 

21 a demonstration program (in this section referred to 

22 as the ‘‘demonstration program’’) under which tech23 nical assistance described in paragraph (2) is made 

24 available, upon request and on a voluntary basis, to 

25 small providers of services or suppliers in order to 
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1 improve compliance with the applicable requirements 

2 of the programs under medicare program under title 

3 XVIII of the Social Security Act (including provi4 sions of title XI of such Act insofar as they relate 

5 to such title and are not administered by the Office 

6 of the Inspector General of the Department of 

7 Health and Human Services). 

8 (2) FORMS OF TECHNICAL ASSISTANCE.—The 

9 technical assistance described in this paragraph is—

10 (A) evaluation and recommendations re11 garding billing and related systems; and 

12 (B) information and assistance regarding 

13 policies and procedures under the medicare pro14 gram, including coding and reimbursement. 

15 (3) SMALL PROVIDERS OF SERVICES OR SUP16 PLIERS.—In this section, the term ‘‘small providers 

17 of services or suppliers’’ means—

18 (A) a provider of services with fewer than 

19 25 full-time-equivalent employees; or 

20 (B) a supplier with fewer than 10 full21 time-equivalent employees. 

22 (b) QUALIFICATION OF CONTRACTORS.—In con23 ducting the demonstration program, the Secretary shall 

24 enter into contracts with qualified organizations (such as 

25 peer review organizations or entities described in section 
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1 1889(g)(2) of the Social Security Act, as inserted by sec2 tion 5(f)(1)) with appropriate expertise with billing sys3 tems of the full range of providers of services and sup4 pliers to provide the technical assistance. In awarding such 

5 contracts, the Secretary shall consider any prior investiga6 tions of the entity’s work by the Inspector General of De7 partment of Health and Human Services or the Comp8 troller General of the United States. 

9 (c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The 

10 technical assistance provided under the demonstration 

11 program shall include a direct and in-person examination 

12 of billing systems and internal controls of small providers 

13 of services or suppliers to determine program compliance 

14 and to suggest more efficient or effective means of achiev15 ing such compliance. 

16 (d) AVOIDANCE OF RECOVERY ACTIONS FOR PROB17 LEMS IDENTIFIED AS CORRECTED.—The Secretary shall 

18 provide that, absent evidence of fraud and notwith19 standing any other provision of law, any errors found in 

20 a compliance review for a small provider of services or sup21 plier that participates in the demonstration program shall 

22 not be subject to recovery action if the technical assistance 

23 personnel under the program determine that—

24 (1) the problem that is the subject of the com25 pliance review has been corrected to their satisfac-
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1 tion within 30 days of the date of the visit by such 

2 personnel to the small provider of services or sup3 plier; and 

4 (2) such problem remains corrected for such pe5 riod as is appropriate. 

6 The previous sentence applies only to claims filed as part 

7 of the demonstration program and lasts only for the dura8 tion of such program and only as long as the small pro9 vider of services or supplier is a participant in such pro10 gram. 

11 (e) GAO EVALUATION.—Not later than 2 years after 

12 the date of the date the demonstration program is first 

13 implemented, the Comptroller General, in consultation 

14 with the Inspector General of the Department of Health 

15 and Human Services, shall conduct an evaluation of the 

16 demonstration program. The evaluation shall include a de17 termination of whether claims error rates are reduced for 

18 small providers of services or suppliers who participated 

19 in the program and the extent of improper payments made 

20 as a result of the demonstration program. The Comp21 troller General shall submit a report to the Secretary and 

22 the Congress on such evaluation and shall include in such 

23 report recommendations regarding the continuation or ex24 tension of the demonstration program. 
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1 (f) FINANCIAL PARTICIPATION BY PROVIDERS.—The 

2 provision of technical assistance to a small provider of 

3 services or supplier under the demonstration program is 

4 conditioned upon the small provider of services or supplier 

5 paying an amount estimated (and disclosed in advance of 

6 a provider’s or supplier’s participation in the program) to 

7 be equal to 25 percent of the cost of the technical assist8 ance. 

9 (g) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated to the Secretary (in ap11 propriate part from the Federal Hospital Insurance Trust 

12 Fund and the Federal Supplementary Medical Insurance 

13 Trust Fund) to carry out the demonstration program— 

14 (1) for fiscal year 2004, $1,000,000, and 

15 (2) for fiscal year 2005, $6,000,000. 

16 SEC. 523. MEDICARE PROVIDER OMBUDSMAN; MEDICARE 

17 BENEFICIARY OMBUDSMAN. 

18 (a) MEDICARE PROVIDER OMBUDSMAN.—Section 

19 1868 (42 U.S.C. 1395ee) is amended—

20 (1) by adding at the end of the heading the fol21 lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’; 

22 (2) by inserting ‘‘PRACTICING PHYSICIANS AD23 VISORY COUNCIL.—(1)’’ after ‘‘(a)’’; 
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1 (3) in paragraph (1), as so redesignated under 

2 paragraph (2), by striking ‘‘in this section’’ and in3 serting ‘‘in this subsection’’; 

4 (4) by redesignating subsections (b) and (c) as 

5 paragraphs (2) and (3), respectively; and 

6 (5) by adding at the end the following new sub7 section: 

8 ‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—The Sec9 retary shall appoint within the Department of Health and 

10 Human Services a Medicare Provider Ombudsman. The 

11 Ombudsman shall—

12 ‘‘(1) provide assistance, on a confidential basis, 

13 to providers of services and suppliers with respect to 

14 complaints, grievances, and requests for information 

15 concerning the programs under this title (including 

16 provisions of title XI insofar as they relate to this 

17 title and are not administered by the Office of the 

18 Inspector General of the Department of Health and 

19 Human Services) and in the resolution of unclear or 

20 conflicting guidance given by the Secretary and 

21 medicare contractors to such providers of services 

22 and suppliers regarding such programs and provi23 sions and requirements under this title and such 

24 provisions; and 
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1 ‘‘(2) submit recommendations to the Secretary 

2 for improvement in the administration of this title 

3 and such provisions, including—

4 ‘‘(A) recommendations to respond to recur5 ring patterns of confusion in this title and such 

6 provisions (including recommendations regard7 ing suspending imposition of sanctions where 

8 there is widespread confusion in program ad9 ministration), and 

10 ‘‘(B) recommendations to provide for an 

11 appropriate and consistent response (including 

12 not providing for audits) in cases of self-identi13 fied overpayments by providers of services and 

14 suppliers. 

15 The Ombudsman shall not serve as an advocate for any 

16 increases in payments or new coverage of services, but 

17 may identify issues and problems in payment or coverage 

18 policies.’’. 

19 (b) MEDICARE BENEFICIARY OMBUDSMAN.—Title 

20 XVIII, as amended by sections 105 and 701, is amended 

21 by inserting after section 1808 the following new section: 

22 ‘‘MEDICARE BENEFICIARY OMBUDSMAN

23 ‘‘SEC. 1809. (a) IN GENERAL.—The Secretary shall 

24 appoint within the Department of Health and Human 

25 Services a Medicare Beneficiary Ombudsman who shall 

26 have expertise and experience in the fields of health care 
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1 and education of (and assistance to) individuals entitled 

2 to benefits under this title. 

3 ‘‘(b) DUTIES.—The Medicare Beneficiary Ombuds4 man shall—

5 ‘‘(1) receive complaints, grievances, and re6 quests for information submitted by individuals enti7 tled to benefits under part A or enrolled under part 

8 B, or both, with respect to any aspect of the medi9 care program; 

10 ‘‘(2) provide assistance with respect to com11 plaints, grievances, and requests referred to in para12 graph (1), including—

13 ‘‘(A) assistance in collecting relevant infor14 mation for such individuals, to seek an appeal 

15 of a decision or determination made by a fiscal 

16 intermediary, carrier, Medicare+Choice organi17 zation, or the Secretary; and 

18 ‘‘(B) assistance to such individuals with 

19 any problems arising from disenrollment from a 

20 Medicare+Choice plan under part C; and 

21 ‘‘(3) submit annual reports to Congress and the 

22 Secretary that describe the activities of the Office 

23 and that include such recommendations for improve24 ment in the administration of this title as the Om25 budsman determines appropriate. 
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1 The Ombudsman shall not serve as an advocate for any 

2 increases in payments or new coverage of services, but 

3 may identify issues and problems in payment or coverage 

4 policies. 

5 ‘‘(c) WORKING WITH HEALTH INSURANCE COUN6 SELING PROGRAMS.—To the extent possible, the Ombuds7 man shall work with health insurance counseling programs 

8 (receiving funding under section 4360 of Omnibus Budget 

9 Reconciliation Act of 1990) to facilitate the provision of 

10 information to individuals entitled to benefits under part 

11 A or enrolled under part B, or both regarding 

12 Medicare+Choice plans and changes to those plans. Noth13 ing in this subsection shall preclude further collaboration 

14 between the Ombudsman and such programs.’’. 

15 (c) DEADLINE FOR APPOINTMENT.—The Secretary 

16 shall appoint the Medicare Provider Ombudsman and the 

17 Medicare Beneficiary Ombudsman, under the amendments 

18 made by subsections (a) and (b), respectively, by not later 

19 than 1 year after the date of the enactment of this Act. 

20 (d) FUNDING.—There are authorized to be appro21 priated to the Secretary (in appropriate part from the 

22 Federal Hospital Insurance Trust Fund and the Federal 

23 Supplementary Medical Insurance Trust Fund) to carry 

24 out the provisions of subsection (b) of section 1868 of the 

25 Social Security Act (relating to the Medicare Provider 
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1 Ombudsman), as added by subsection (a)(5) and section 

2 1809 of such Act (relating to the Medicare Beneficiary 

3 Ombudsman), as added by subsection (b), such sums as 

4 are necessary for fiscal year 2003 and each succeeding fis5 cal year. 

6 (e) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–

7 MEDICARE).—

8 (1) PHONE TRIAGE SYSTEM; LISTING IN MEDI9 CARE HANDBOOK INSTEAD OF OTHER TOLL-FREE

10 NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–

11 2(b)) is amended by adding at the end the following: 

12 ‘‘The Secretary shall provide, through the toll-free 

13 number 1–800–MEDICARE, for a means by which 

14 individuals seeking information about, or assistance 

15 with, such programs who phone such toll-free num16 ber are transferred (without charge) to appropriate 

17 entities for the provision of such information or as18 sistance. Such toll-free number shall be the toll-free 

19 number listed for general information and assistance 

20 in the annual notice under subsection (a) instead of 

21 the listing of numbers of individual contractors.’’. 

22 (2) MONITORING ACCURACY.—

23 (A) STUDY.—The Comptroller General of 

24 the United States shall conduct a study to mon25 itor the accuracy and consistency of information 
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1 provided to individuals entitled to benefits 

2 under part A or enrolled under part B, or both, 

3 through the toll-free number 1–800–MEDI4 CARE, including an assessment of whether the 

5 information provided is sufficient to answer 

6 questions of such individuals. In conducting the 

7 study, the Comptroller General shall examine 

8 the education and training of the individuals 

9 providing information through such number. 

10 (B) REPORT.—Not later than 1 year after 

11 the date of the enactment of this Act, the 

12 Comptroller General shall submit to Congress a 

13 report on the study conducted under subpara14 graph (A). 

15 SEC. 524. BENEFICIARY OUTREACH DEMONSTRATION PRO16 GRAM. 

17 (a) IN GENERAL.—The Secretary shall establish a 

18 demonstration program (in this section referred to as the 

19 ‘‘demonstration program’’) under which medicare special20 ists employed by the Department of Health and Human 

21 Services provide advice and assistance to individuals enti22 tled to benefits under part A of title XVIII of the Social 

23 Security Act, or enrolled under part B of such title, or 

24 both, regarding the medicare program at the location of 

25 existing local offices of the Social Security Administration. 
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1 (b) LOCATIONS.—

2 (1) IN GENERAL.—The demonstration program 

3 shall be conducted in at least 6 offices or areas. 

4 Subject to paragraph (2), in selecting such offices 

5 and areas, the Secretary shall provide preference for 

6 offices with a high volume of visits by individuals re7 ferred to in subsection (a). 

8 (2) ASSISTANCE FOR RURAL BENEFICIARIES.—

9 The Secretary shall provide for the selection of at 

10 least 2 rural areas to participate in the demonstra11 tion program. In conducting the demonstration pro12 gram in such rural areas, the Secretary shall provide 

13 for medicare specialists to travel among local offices 

14 in a rural area on a scheduled basis. 

15 (c) DURATION.—The demonstration program shall be 

16 conducted over a 3-year period. 

17 (d) EVALUATION AND REPORT.—

18 (1) EVALUATION.—The Secretary shall provide 

19 for an evaluation of the demonstration program. 

20 Such evaluation shall include an analysis of—

21 (A) utilization of, and satisfaction of those 

22 individuals referred to in subsection (a) with, 

23 the assistance provided under the program; and 

24 (B) the cost-effectiveness of providing ben25 eficiary assistance through out-stationing medi-
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1 care specialists at local offices of the Social Se2 curity Administration. 

3 (2) REPORT.—The Secretary shall submit to 

4 Congress a report on such evaluation and shall in5 clude in such report recommendations regarding the 

6 feasibility of permanently out-stationing medicare 

7 specialists at local offices of the Social Security Ad8 ministration. 

9 Subtitle D—Appeals and Recovery 

10 SEC. 531. TRANSFER OF RESPONSIBILITY FOR MEDICARE 

11 APPEALS. 

12 (a) TRANSITION PLAN.—

13 (1) IN GENERAL.—Not later than October 1, 

14 2003, the Commissioner of Social Security and the 

15 Secretary shall develop and transmit to Congress 

16 and the Comptroller General of the United States a 

17 plan under which the functions of administrative law 

18 judges responsible for hearing cases under title 

19 XVIII of the Social Security Act (and related provi20 sions in title XI of such Act) are transferred from 

21 the responsibility of the Commissioner and the So22 cial Security Administration to the Secretary and 

23 the Department of Health and Human Services. 

24 (2) GAO EVALUATION.—The Comptroller Gen25 eral of the United States shall evaluate the plan 
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1 and, not later than the date that is 6 months after 

2 the date on which the plan is received by the Comp3 troller General, shall submit to Congress a report on 

4 such evaluation. 

5 (b) TRANSFER OF ADJUDICATION AUTHORITY.—

6 (1) IN GENERAL.—Not earlier than July 1, 

7 2004, and not later than October 1, 2004, the Com8 missioner of Social Security and the Secretary shall 

9 implement the transition plan under subsection (a) 

10 and transfer the administrative law judge functions 

11 described in such subsection from the Social Secu12 rity Administration to the Secretary. 

13 (2) ASSURING INDEPENDENCE OF JUDGES.—

14 The Secretary shall assure the independence of ad15 ministrative law judges performing the administra16 tive law judge functions transferred under para17 graph (1) from the Centers for Medicare & Medicaid 

18 Services and its contractors.

19 (3) GEOGRAPHIC DISTRIBUTION.—The Sec20 retary shall provide for an appropriate geographic 

21 distribution of administrative law judges performing 

22 the administrative law judge functions transferred 

23 under paragraph (1) throughout the United States 

24 to ensure timely access to such judges. 
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1 (4) HIRING AUTHORITY.—Subject to the 

2 amounts provided in advance in appropriations Act, 

3 the Secretary shall have authority to hire adminis4 trative law judges to hear such cases, giving priority 

5 to those judges with prior experience in handling 

6 medicare appeals and in a manner consistent with 

7 paragraph (3), and to hire support staff for such 

8 judges. 

9 (5) FINANCING.—Amounts payable under law 

10 to the Commissioner for administrative law judges 

11 performing the administrative law judge functions 

12 transferred under paragraph (1) from the Federal 

13 Hospital Insurance Trust Fund and the Federal 

14 Supplementary Medical Insurance Trust Fund shall 

15 become payable to the Secretary for the functions so 

16 transferred. 

17 (6) SHARED RESOURCES.—The Secretary shall 

18 enter into such arrangements with the Commissioner 

19 as may be appropriate with respect to transferred 

20 functions of administrative law judges to share office 

21 space, support staff, and other resources, with ap22 propriate reimbursement from the Trust Funds de23 scribed in paragraph (5). 

24 (c) INCREASED FINANCIAL SUPPORT.—In addition to 

25 any amounts otherwise appropriated, to ensure timely ac-
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1 tion on appeals before administrative law judges and the 

2 Departmental Appeals Board consistent with section 1869 

3 of the Social Security Act (as amended by section 521 of 

4 BIPA, 114 Stat. 2763A–534), there are authorized to be 

5 appropriated (in appropriate part from the Federal Hos6 pital Insurance Trust Fund and the Federal Supple7 mentary Medical Insurance Trust Fund) to the Secretary 

8 such sums as are necessary for fiscal year 2004 and each 

9 subsequent fiscal year to—

10 (1) increase the number of administrative law 

11 judges (and their staffs) under subsection (b)(4); 

12 (2) improve education and training opportuni13 ties for administrative law judges (and their staffs); 

14 and 

15 (3) increase the staff of the Departmental Ap16 peals Board. 

17 (d) CONFORMING AMENDMENT.—Section 

18 1869(f)(2)(A)(i) (42 U.S.C. 1395ff(f)(2)(A)(i)), as added 

19 by section 522(a) of BIPA (114 Stat. 2763A–543), is 

20 amended by striking ‘‘of the Social Security Administra21 tion’’. 

22 SEC. 532. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 

23 (a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—Sec24 tion 1869(b) (42 U.S.C. 1395ff(b)) as amended by BIPA, 

25 is amended—
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1 (1) in paragraph (1)(A), by inserting ‘‘, subject 

2 to paragraph (2),’’ before ‘‘to judicial review of the 

3 Secretary’s final decision’’; 

4 (2) in paragraph (1)(F)—

5 (A) by striking clause (ii); 

6 (B) by striking ‘‘PROCEEDING’’ and all 

7 that follows through ‘‘DETERMINATION’’ and in8 serting ‘‘DETERMINATIONS AND RECONSIDER9 ATIONS’’; and 

10 (C) by redesignating subclauses (I) and 

11 (II) as clauses (i) and (ii) and by moving the 

12 indentation of such subclauses (and the matter 

13 that follows) 2 ems to the left; and 

14 (3) by adding at the end the following new 

15 paragraph: 

16 ‘‘(2) EXPEDITED ACCESS TO JUDICIAL RE17 VIEW.—

18 ‘‘(A) IN GENERAL.—The Secretary shall 

19 establish a process under which a provider of 

20 services or supplier that furnishes an item or 

21 service or an individual entitled to benefits 

22 under part A or enrolled under part B, or both, 

23 who has filed an appeal under paragraph (1) 

24 may obtain access to judicial review when a re25 view panel (described in subparagraph (D)), on 
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1 its own motion or at the request of the appel2 lant, determines that no entity in the adminis3 trative appeals process has the authority to de4 cide the question of law or regulation relevant 

5 to the matters in controversy and that there is 

6 no material issue of fact in dispute. The appel7 lant may make such request only once with re8 spect to a question of law or regulation in a 

9 case of an appeal. 

10 ‘‘(B) PROMPT DETERMINATIONS.—If, after 

11 or coincident with appropriately filing a request 

12 for an administrative hearing, the appellant re13 quests a determination by the appropriate re14 view panel that no review panel has the author15 ity to decide the question of law or regulations 

16 relevant to the matters in controversy and that 

17 there is no material issue of fact in dispute and 

18 if such request is accompanied by the docu19 ments and materials as the appropriate review 

20 panel shall require for purposes of making such 

21 determination, such review panel shall make a 

22 determination on the request in writing within 

23 60 days after the date such review panel re24 ceives the request and such accompanying docu25 ments and materials. Such a determination by 
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1 such review panel shall be considered a final de2 cision and not subject to review by the Sec3 retary. 

4 ‘‘(C) ACCESS TO JUDICIAL REVIEW.—

5 ‘‘(i) IN GENERAL.—If the appropriate 

6 review panel—

7 ‘‘(I) determines that there are no 

8 material issues of fact in dispute and 

9 that the only issue is one of law or 

10 regulation that no review panel has 

11 the authority to decide; or 

12 ‘‘(II) fails to make such deter13 mination within the period provided 

14 under subparagraph (B); 

15 then the appellant may bring a civil action 

16 as described in this subparagraph. 

17 ‘‘(ii) DEADLINE FOR FILING.—Such 

18 action shall be filed, in the case described 

19 in—

20 ‘‘(I) clause (i)(I), within 60 days 

21 of date of the determination described 

22 in such subparagraph; or 

23 ‘‘(II) clause (i)(II), within 60 

24 days of the end of the period provided 
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1 under subparagraph (B) for the deter2 mination. 

3 ‘‘(iii) VENUE.—Such action shall be 

4 brought in the district court of the United 

5 States for the judicial district in which the 

6 appellant is located (or, in the case of an 

7 action brought jointly by more than one 

8 applicant, the judicial district in which the 

9 greatest number of applicants are located) 

10 or in the district court for the District of 

11 Columbia. 

12 ‘‘(iv) INTEREST ON AMOUNTS IN CON13 TROVERSY.—Where a provider of services 

14 or supplier seeks judicial review pursuant 

15 to this paragraph, the amount in con16 troversy shall be subject to annual interest 

17 beginning on the first day of the first 

18 month beginning after the 60-day period 

19 as determined pursuant to clause (ii) and 

20 equal to the rate of interest on obligations 

21 issued for purchase by the Federal Hos22 pital Insurance Trust Fund and by the 

23 Federal Supplementary Medical Insurance 

24 Trust Fund for the month in which the 

25 civil action authorized under this para-
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1 graph is commenced, to be awarded by the 

2 reviewing court in favor of the prevailing 

3 party. No interest awarded pursuant to the 

4 preceding sentence shall be deemed income 

5 or cost for the purposes of determining re6 imbursement due providers of services or 

7 suppliers under this Act. 

8 ‘‘(D) REVIEW PANELS.—For purposes of 

9 this subsection, a ‘review panel’ is a panel con10 sisting of 3 members (who shall be administra11 tive law judges, members of the Departmental 

12 Appeals Board, or qualified individuals associ13 ated with a qualified independent contractor (as 

14 defined in subsection (c)(2)) or with another 

15 independent entity) designated by the Secretary 

16 for purposes of making determinations under 

17 this paragraph.’’. 

18 (b) APPLICATION TO PROVIDER AGREEMENT DETER19 MINATIONS.—Section 1866(h)(1) (42 U.S.C. 

20 1395cc(h)(1)) is amended—

21 (1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and 

22 (2) by adding at the end the following new sub23 paragraph: 

24 ‘‘(B) An institution or agency described in subpara25 graph (A) that has filed for a hearing under subparagraph 
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1 (A) shall have expedited access to judicial review under 

2 this subparagraph in the same manner as providers of 

3 services, suppliers, and individuals entitled to benefits 

4 under part A or enrolled under part B, or both, may ob5 tain expedited access to judicial review under the process 

6 established under section 1869(b)(2). Nothing in this sub7 paragraph shall be construed to affect the application of 

8 any remedy imposed under section 1819 during the pend9 ency of an appeal under this subparagraph.’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to appeals filed on or after October 

12 1, 2003. 

13 (d) EXPEDITED REVIEW OF CERTAIN PROVIDER

14 AGREEMENT DETERMINATIONS.—

15 (1) TERMINATION AND CERTAIN OTHER IMME16 DIATE REMEDIES.—The Secretary shall develop and 

17 implement a process to expedite proceedings under 

18 sections 1866(h) of the Social Security Act (42 

19 U.S.C. 1395cc(h)) in which the remedy of termi20 nation of participation, or a remedy described in 

21 clause (i) or (iii) of section 1819(h)(2)(B) of such 

22 Act (42 U.S.C. 1395i–3(h)(2)(B)) which is applied 

23 on an immediate basis, has been imposed. Under 

24 such process priority shall be provided in cases of 

25 termination. 
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1 (2) INCREASED FINANCIAL SUPPORT.—In addi2 tion to any amounts otherwise appropriated, to re3 duce by 50 percent the average time for administra4 tive determinations on appeals under section 

5 1866(h) of the Social Security Act (42 U.S.C. 

6 1395cc(h)), there are authorized to be appropriated 

7 (in appropriate part from the Federal Hospital In8 surance Trust Fund and the Federal Supplementary 

9 Medical Insurance Trust Fund) to the Secretary 

10 such additional sums for fiscal year 2004 and each 

11 subsequent fiscal year as may be necessary. The 

12 purposes for which such amounts are available in13 clude increasing the number of administrative law 

14 judges (and their staffs) and the appellate level staff 

15 at the Departmental Appeals Board of the Depart16 ment of Health and Human Services and educating 

17 such judges and staffs on long-term care issues. 

18 SEC. 533. REVISIONS TO MEDICARE APPEALS PROCESS. 

19 (a) REQUIRING FULL AND EARLY PRESENTATION OF

20 EVIDENCE.—

21 (1) IN GENERAL.—Section 1869(b) (42 U.S.C. 

22 1395ff(b)), as amended by BIPA and as amended by 

23 section 532(a), is further amended by adding at the 

24 end the following new paragraph: 
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1 ‘‘(3) REQUIRING FULL AND EARLY PRESEN2 TATION OF EVIDENCE BY PROVIDERS.—A provider 

3 of services or supplier may not introduce evidence in 

4 any appeal under this section that was not presented 

5 at the reconsideration conducted by the qualified 

6 independent contractor under subsection (c), unless 

7 there is good cause which precluded the introduction 

8 of such evidence at or before that reconsideration.’’. 

9 (2) EFFECTIVE DATE.—The amendment made 

10 by paragraph (1) shall take effect on October 1, 

11 2003. 

12 (b) USE OF PATIENTS’ MEDICAL RECORDS.—Section 

13 1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as 

14 amended by BIPA, is amended by inserting ‘‘(including 

15 the medical records of the individual involved)’’ after 

16 ‘‘clinical experience’’. 

17 (c) NOTICE REQUIREMENTS FOR MEDICARE AP18 PEALS.— 

19 (1) INITIAL DETERMINATIONS AND REDETER20 MINATIONS.—Section 1869(a) (42 U.S.C. 

21 1395ff(a)), as amended by BIPA, is amended by 

22 adding at the end the following new paragraph:

23 ‘‘(4) REQUIREMENTS OF NOTICE OF DETER24 MINATIONS AND REDETERMINATIONS.—A written 

25 notice of a determination on an initial determination 
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1 or on a redetermination, insofar as such determina2 tion or redetermination results in a denial of a claim 

3 for benefits, shall include—

4 ‘‘(A) the specific reasons for the deter5 mination, including—

6 ‘‘(i) upon request, the provision of the 

7 policy, manual, or regulation used in mak8 ing the determination; and 

9 ‘‘(ii) as appropriate in the case of a 

10 redetermination, a summary of the clinical 

11 or scientific evidence used in making the 

12 determination; 

13 ‘‘(B) the procedures for obtaining addi14 tional information concerning the determination 

15 or redetermination; and 

16 ‘‘(C) notification of the right to seek a re17 determination or otherwise appeal the deter18 mination and instructions on how to initiate 

19 such a redetermination or appeal under this 

20 section. 

21 The written notice on a redetermination shall be 

22 provided in printed form and written in a manner 

23 calculated to be understood by the individual entitled 

24 to benefits under part A or enrolled under part B, 

25 or both.’’. 
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1 (2) RECONSIDERATIONS.—Section 

2 1869(c)(3)(E) (42 U.S.C. 1395ff(c)(3)(E)), as 

3 amended by BIPA, is amended—

4 (A) by inserting ‘‘be written in a manner 

5 calculated to be understood by the individual 

6 entitled to benefits under part A or enrolled 

7 under part B, or both, and shall include (to the 

8 extent appropriate)’’ after ‘‘in writing, ’’; and 

9 (B) by inserting ‘‘and a notification of the 

10 right to appeal such determination and instruc11 tions on how to initiate such appeal under this 

12 section’’ after ‘‘such decision,’’. 

13 (3) APPEALS.—Section 1869(d) (42 U.S.C. 

14 1395ff(d)), as amended by BIPA, is amended—

15 (A) in the heading, by inserting ‘‘; NO16 TICE’’ after ‘‘SECRETARY’’; and 

17 (B) by adding at the end the following new 

18 paragraph: 

19 ‘‘(4) NOTICE.—Notice of the decision of an ad20 ministrative law judge shall be in writing in a man21 ner calculated to be understood by the individual en22 titled to benefits under part A or enrolled under part 

23 B, or both, and shall include—

24 ‘‘(A) the specific reasons for the deter25 mination (including, to the extent appropriate, 
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1 a summary of the clinical or scientific evidence 

2 used in making the determination); 

3 ‘‘(B) the procedures for obtaining addi4 tional information concerning the decision; and 

5 ‘‘(C) notification of the right to appeal the 

6 decision and instructions on how to initiate 

7 such an appeal under this section.’’. 

8 (4) SUBMISSION OF RECORD FOR APPEAL.—

9 Section 1869(c)(3)(J)(i) (42 U.S.C. 

10 1395ff(c)(3)(J)(i)) by striking ‘‘prepare’’ and insert11 ing ‘‘submit’’ and by striking ‘‘with respect to’’ and 

12 all that follows through ‘‘and relevant policies’’. 

13 (d) QUALIFIED INDEPENDENT CONTRACTORS.—

14 (1) ELIGIBILITY REQUIREMENTS OF QUALIFIED

15 INDEPENDENT CONTRACTORS.—Section 1869(c)(3) 

16 (42 U.S.C. 1395ff(c)(3)), as amended by BIPA, is 

17 amended—

18 (A) in subparagraph (A), by striking ‘‘suf19 ficient training and expertise in medical science 

20 and legal matters’’ and inserting ‘‘sufficient 

21 medical, legal, and other expertise (including 

22 knowledge of the program under this title) and 

23 sufficient staffing’’; and 

24 (B) by adding at the end the following new 

25 subparagraph: 
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1 ‘‘(K) INDEPENDENCE REQUIREMENTS.—

2 ‘‘(i) IN GENERAL.—Subject to clause 

3 (ii), a qualified independent contractor 

4 shall not conduct any activities in a case 

5 unless the entity—

6 ‘‘(I) is not a related party (as de7 fined in subsection (g)(5)); 

8 ‘‘(II) does not have a material fa9 milial, financial, or professional rela10 tionship with such a party in relation 

11 to such case; and 

12 ‘‘(III) does not otherwise have a 

13 conflict of interest with such a party. 

14 ‘‘(ii) EXCEPTION FOR REASONABLE

15 COMPENSATION.—Nothing in clause (i) 

16 shall be construed to prohibit receipt by a 

17 qualified independent contractor of com18 pensation from the Secretary for the con19 duct of activities under this section if the 

20 compensation is provided consistent with 

21 clause (iii). 

22 ‘‘(iii) LIMITATIONS ON ENTITY COM23 PENSATION.—Compensation provided by 

24 the Secretary to a qualified independent 

25 contractor in connection with reviews 
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1 under this section shall not be contingent 

2 on any decision rendered by the contractor 

3 or by any reviewing professional.’’. 

4 (2) ELIGIBILITY REQUIREMENTS FOR REVIEW5 ERS.—Section 1869 (42 U.S.C. 1395ff), as amended 

6 by BIPA, is amended—

7 (A) by amending subsection (c)(3)(D) to 

8 read as follows: 

9 ‘‘(D) QUALIFICATIONS FOR REVIEWERS.—

10 The requirements of subsection (g) shall be met 

11 (relating to qualifications of reviewing profes12 sionals).’’; and 

13 (B) by adding at the end the following new 

14 subsection: 

15 ‘‘(g) QUALIFICATIONS OF REVIEWERS.—

16 ‘‘(1) IN GENERAL.—In reviewing determina17 tions under this section, a qualified independent con18 tractor shall assure that—

19 ‘‘(A) each individual conducting a review 

20 shall meet the qualifications of paragraph (2); 

21 ‘‘(B) compensation provided by the con22 tractor to each such reviewer is consistent with 

23 paragraph (3); and 

24 ‘‘(C) in the case of a review by a panel de25 scribed in subsection (c)(3)(B) composed of 
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1 physicians or other health care professionals 

2 (each in this subsection referred to as a ‘review3 ing professional’), each reviewing professional 

4 meets the qualifications described in paragraph 

5 (4) and, where a claim is regarding the fur6 nishing of treatment by a physician (allopathic 

7 or osteopathic) or the provision of items or 

8 services by a physician (allopathic or osteo9 pathic), each reviewing professional shall be a 

10 physician (allopathic or osteopathic). 

11 ‘‘(2) INDEPENDENCE.—

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), each individual conducting a review 

14 in a case shall—

15 ‘‘(i) not be a related party (as defined 

16 in paragraph (5)); 

17 ‘‘(ii) not have a material familial, fi18 nancial, or professional relationship with 

19 such a party in the case under review; and 

20 ‘‘(iii) not otherwise have a conflict of 

21 interest with such a party. 

22 ‘‘(B) EXCEPTION.—Nothing in subpara23 graph (A) shall be construed to—

24 ‘‘(i) prohibit an individual, solely on 

25 the basis of a participation agreement with 
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1 a fiscal intermediary, carrier, or other con2 tractor, from serving as a reviewing profes3 sional if—

4 ‘‘(I) the individual is not involved 

5 in the provision of items or services in 

6 the case under review; 

7 ‘‘(II) the fact of such an agree8 ment is disclosed to the Secretary and 

9 the individual entitled to benefits 

10 under part A or enrolled under part 

11 B, or both, (or authorized representa12 tive) and neither party objects; and 

13 ‘‘(III) the individual is not an 

14 employee of the intermediary, carrier, 

15 or contractor and does not provide 

16 services exclusively or primarily to or 

17 on behalf of such intermediary, car18 rier, or contractor; 

19 ‘‘(ii) prohibit an individual who has 

20 staff privileges at the institution where the 

21 treatment involved takes place from serv22 ing as a reviewer merely on the basis of 

23 having such staff privileges if the existence 

24 of such privileges is disclosed to the Sec25 retary and such individual (or authorized 
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1 representative), and neither party objects; 

2 or 

3 ‘‘(iii) prohibit receipt of compensation 

4 by a reviewing professional from a con5 tractor if the compensation is provided 

6 consistent with paragraph (3). 

7 For purposes of this paragraph, the term ‘par8 ticipation agreement’ means an agreement re9 lating to the provision of health care services by 

10 the individual and does not include the provi11 sion of services as a reviewer under this sub12 section. 

13 ‘‘(3) LIMITATIONS ON REVIEWER COMPENSA14 TION.—Compensation provided by a qualified inde15 pendent contractor to a reviewer in connection with 

16 a review under this section shall not be contingent 

17 on the decision rendered by the reviewer. 

18 ‘‘(4) LICENSURE AND EXPERTISE.—Each re19 viewing professional shall be—

20 ‘‘(A) a physician (allopathic or osteopathic) 

21 who is appropriately credentialed or licensed in 

22 one or more States to deliver health care serv23 ices and has medical expertise in the field of 

24 practice that is appropriate for the items or 

25 services at issue; or 
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1 ‘‘(B) a health care professional who is le2 gally authorized in one or more States (in ac3 cordance with State law or the State regulatory 

4 mechanism provided by State law) to furnish 

5 the health care items or services at issue and 

6 has medical expertise in the field of practice 

7 that is appropriate for such items or services. 

8 ‘‘(5) RELATED PARTY DEFINED.—For purposes 

9 of this section, the term ‘related party’ means, with 

10 respect to a case under this title involving a specific 

11 individual entitled to benefits under part A or en12 rolled under part B, or both, any of the following: 

13 ‘‘(A) The Secretary, the medicare adminis14 trative contractor involved, or any fiduciary, of15 ficer, director, or employee of the Department 

16 of Health and Human Services, or of such con17 tractor. 

18 ‘‘(B) The individual (or authorized rep19 resentative). 

20 ‘‘(C) The health care professional that pro21 vides the items or services involved in the case. 

22 ‘‘(D) The institution at which the items or 

23 services (or treatment) involved in the case are 

24 provided. 
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1 ‘‘(E) The manufacturer of any drug or 

2 other item that is included in the items or serv3 ices involved in the case. 

4 ‘‘(F) Any other party determined under 

5 any regulations to have a substantial interest in 

6 the case involved.’’. 

7 (3) EFFECTIVE DATE.—The amendments made 

8 by paragraphs (1) and (2) shall be effective as if in9 cluded in the enactment of the respective provisions 

10 of subtitle C of title V of BIPA, (114 Stat. 2763A–

11 534). 

12 (4) TRANSITION.—In applying section 1869(g) 

13 of the Social Security Act (as added by paragraph 

14 (2)), any reference to a medicare administrative con15 tractor shall be deemed to include a reference to a 

16 fiscal intermediary under section 1816 of the Social 

17 Security Act (42 U.S.C. 1395h) and a carrier under 

18 section 1842 of such Act (42 U.S.C. 1395u).

19 SEC. 534. PREPAYMENT REVIEW. 

20 (a) IN GENERAL.—Section 1874A, as added by sec21 tion 511(a)(1) and as amended by sections 512(b), 

22 521(b)(1), and 521(c)(1), is further amended by adding 

23 at the end the following new subsection: 

24 ‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—
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1 ‘‘(1) CONDUCT OF RANDOM PREPAYMENT RE2 VIEW.—

3 ‘‘(A) IN GENERAL.—A medicare adminis4 trative contractor may conduct random prepay5 ment review only to develop a contractor-wide 

6 or program-wide claims payment error rates or 

7 under such additional circumstances as may be 

8 provided under regulations, developed in con9 sultation with providers of services and sup10 pliers. 

11 ‘‘(B) USE OF STANDARD PROTOCOLS

12 WHEN CONDUCTING PREPAYMENT REVIEWS.—

13 When a medicare administrative contractor con14 ducts a random prepayment review, the con15 tractor may conduct such review only in accord16 ance with a standard protocol for random pre17 payment audits developed by the Secretary. 

18 ‘‘(C) CONSTRUCTION.—Nothing in this 

19 paragraph shall be construed as preventing the 

20 denial of payments for claims actually reviewed 

21 under a random prepayment review. 

22 ‘‘(D) RANDOM PREPAYMENT REVIEW.—

23 For purposes of this subsection, the term ‘ran24 dom prepayment review’ means a demand for 
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1 the production of records or documentation ab2 sent cause with respect to a claim. 

3 ‘‘(2) LIMITATIONS ON NON-RANDOM PREPAY4 MENT REVIEW.—

5 ‘‘(A) LIMITATIONS ON INITIATION OF NON6 RANDOM PREPAYMENT REVIEW.—A medicare 

7 administrative contractor may not initiate non8 random prepayment review of a provider of 

9 services or supplier based on the initial identi10 fication by that provider of services or supplier 

11 of an improper billing practice unless there is a 

12 likelihood of sustained or high level of payment 

13 error (as defined in subsection (i)(3)(A)). 

14 ‘‘(B) TERMINATION OF NON-RANDOM PRE15 PAYMENT REVIEW.—The Secretary shall issue 

16 regulations relating to the termination, includ17 ing termination dates, of non-random prepay18 ment review. Such regulations may vary such a 

19 termination date based upon the differences in 

20 the circumstances triggering prepayment re21 view.’’. 

22 (b) EFFECTIVE DATE.—

23 (1) IN GENERAL.—Except as provided in this 

24 subsection, the amendment made by subsection (a) 
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1 shall take effect 1 year after the date of the enact2 ment of this Act. 

3 (2) DEADLINE FOR PROMULGATION OF CER4 TAIN REGULATIONS.—The Secretary shall first issue 

5 regulations under section 1874A(h) of the Social Se6 curity Act, as added by subsection (a), by not later 

7 than 1 year after the date of the enactment of this 

8 Act. 

9 (3) APPLICATION OF STANDARD PROTOCOLS

10 FOR RANDOM PREPAYMENT REVIEW.—Section 

11 1874A(h)(1)(B) of the Social Security Act, as added 

12 by subsection (a), shall apply to random prepayment 

13 reviews conducted on or after such date (not later 

14 than 1 year after the date of the enactment of this 

15 Act) as the Secretary shall specify. 

16 (c) APPLICATION TO FISCAL INTERMEDIARIES AND

17 CARRIERS.—The provisions of section 1874A(h) of the So18 cial Security Act, as added by subsection (a), shall apply 

19 to each fiscal intermediary under section 1816 of the So20 cial Security Act (42 U.S.C. 1395h) and each carrier 

21 under section 1842 of such Act (42 U.S.C. 1395u) in the 

22 same manner as they apply to medicare administrative 

23 contractors under such provisions. 
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1 SEC. 535. RECOVERY OF OVERPAYMENTS. 

2 (a) IN GENERAL.—Section 1893 (42 U.S.C. 

3 1395ddd) is amended by adding at the end the following 

4 new subsection: 

5 ‘‘(f) RECOVERY OF OVERPAYMENTS.—

6 ‘‘(1) USE OF REPAYMENT PLANS.—

7 ‘‘(A) IN GENERAL.—If the repayment, 

8 within 30 days by a provider of services or sup9 plier, of an overpayment under this title would 

10 constitute a hardship (as defined in subpara11 graph (B)), subject to subparagraph (C), upon 

12 request of the provider of services or supplier 

13 the Secretary shall enter into a plan with the 

14 provider of services or supplier for the repay15 ment (through offset or otherwise) of such over16 payment over a period of at least 6 months but 

17 not longer than 3 years (or not longer than 5 

18 years in the case of extreme hardship, as deter19 mined by the Secretary). Interest shall accrue 

20 on the balance through the period of repay21 ment. Such plan shall meet terms and condi22 tions determined to be appropriate by the Sec23 retary. 

24 ‘‘(B) HARDSHIP.—

25 ‘‘(i) IN GENERAL.—For purposes of 

26 subparagraph (A), the repayment of an 
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1 overpayment (or overpayments) within 30 

2 days is deemed to constitute a hardship 

3 if—

4 ‘‘(I) in the case of a provider of 

5 services that files cost reports, the ag6 gregate amount of the overpayments 

7 exceeds 10 percent of the amount paid 

8 under this title to the provider of 

9 services for the cost reporting period 

10 covered by the most recently sub11 mitted cost report; or 

12 ‘‘(II) in the case of another pro13 vider of services or supplier, the ag14 gregate amount of the overpayments 

15 exceeds 10 percent of the amount paid 

16 under this title to the provider of 

17 services or supplier for the previous 

18 calendar year. 

19 ‘‘(ii) RULE OF APPLICATION.—The 

20 Secretary shall establish rules for the ap21 plication of this subparagraph in the case 

22 of a provider of services or supplier that 

23 was not paid under this title during the 

24 previous year or was paid under this title 

25 only during a portion of that year.
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1 ‘‘(iii) TREATMENT OF PREVIOUS

2 OVERPAYMENTS.—If a provider of services 

3 or supplier has entered into a repayment 

4 plan under subparagraph (A) with respect 

5 to a specific overpayment amount, such 

6 payment amount under the repayment plan 

7 shall not be taken into account under 

8 clause (i) with respect to subsequent over9 payment amounts. 

10 ‘‘(C) EXCEPTIONS.—Subparagraph (A) 

11 shall not apply if—

12 ‘‘(i) the Secretary has reason to sus13 pect that the provider of services or sup14 plier may file for bankruptcy or otherwise 

15 cease to do business or discontinue partici16 pation in the program under this title; or 

17 ‘‘(ii) there is an indication of fraud or 

18 abuse committed against the program. 

19 ‘‘(D) IMMEDIATE COLLECTION IF VIOLA20 TION OF REPAYMENT PLAN.—If a provider of 

21 services or supplier fails to make a payment in 

22 accordance with a repayment plan under this 

23 paragraph, the Secretary may immediately seek 

24 to offset or otherwise recover the total balance 
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1 outstanding (including applicable interest) 

2 under the repayment plan. 

3 ‘‘(E) RELATION TO NO FAULT PROVI4 SION.—Nothing in this paragraph shall be con5 strued as affecting the application of section 

6 1870(c) (relating to no adjustment in the cases 

7 of certain overpayments). 

8 ‘‘(2) LIMITATION ON RECOUPMENT.—

9 ‘‘(A) IN GENERAL.—In the case of a pro10 vider of services or supplier that is determined 

11 to have received an overpayment under this title 

12 and that seeks a reconsideration by a qualified 

13 independent contractor on such determination 

14 under section 1869(b)(1), the Secretary may 

15 not take any action (or authorize any other per16 son, including any medicare contractor, as de17 fined in subparagraph (C)) to recoup the over18 payment until the date the decision on the re19 consideration has been rendered. If the provi20 sions of section 1869(b)(1) (providing for such 

21 a reconsideration by a qualified independent 

22 contractor) are not in effect, in applying the 

23 previous sentence any reference to such a recon24 sideration shall be treated as a reference to a 
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1 redetermination by the fiscal intermediary or 

2 carrier involved. 

3 ‘‘(B) COLLECTION WITH INTEREST.—Inso4 far as the determination on such appeal is 

5 against the provider of services or supplier, in6 terest on the overpayment shall accrue on and 

7 after the date of the original notice of overpay8 ment. Insofar as such determination against the 

9 provider of services or supplier is later reversed, 

10 the Secretary shall provide for repayment of the 

11 amount recouped plus interest at the same rate 

12 as would apply under the previous sentence for 

13 the period in which the amount was recouped. 

14 ‘‘(C) MEDICARE CONTRACTOR DEFINED.—

15 For purposes of this subsection, the term ‘medi16 care contractor’ has the meaning given such 

17 term in section 1889(g). 

18 ‘‘(3) LIMITATION ON USE OF EXTRAPO19 LATION.—A medicare contractor may not use ex20 trapolation to determine overpayment amounts to be 

21 recovered by recoupment, offset, or otherwise un22 less—

23 ‘‘(A) there is a sustained or high level of 

24 payment error (as defined by the Secretary by 

25 regulation); or 
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1 ‘‘(B) documented educational intervention 

2 has failed to correct the payment error (as de3 termined by the Secretary). 

4 ‘‘(4) PROVISION OF SUPPORTING DOCUMENTA5 TION.—In the case of a provider of services or sup6 plier with respect to which amounts were previously 

7 overpaid, a medicare contractor may request the 

8 periodic production of records or supporting docu9 mentation for a limited sample of submitted claims 

10 to ensure that the previous practice is not con11 tinuing. 

12 ‘‘(5) CONSENT SETTLEMENT REFORMS.—

13 ‘‘(A) IN GENERAL.—The Secretary may 

14 use a consent settlement (as defined in sub15 paragraph (D)) to settle a projected overpay16 ment. 

17 ‘‘(B) OPPORTUNITY TO SUBMIT ADDI18 TIONAL INFORMATION BEFORE CONSENT SET19 TLEMENT OFFER.—Before offering a provider 

20 of services or supplier a consent settlement, the 

21 Secretary shall—

22 ‘‘(i) communicate to the provider of 

23 services or supplier—

24 ‘‘(I) that, based on a review of 

25 the medical records requested by the 
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1 Secretary, a preliminary evaluation of 

2 those records indicates that there 

3 would be an overpayment; 

4 ‘‘(II) the nature of the problems 

5 identified in such evaluation; and 

6 ‘‘(III) the steps that the provider 

7 of services or supplier should take to 

8 address the problems; and 

9 ‘‘(ii) provide for a 45-day period dur10 ing which the provider of services or sup11 plier may furnish additional information 

12 concerning the medical records for the 

13 claims that had been reviewed. 

14 ‘‘(C) CONSENT SETTLEMENT OFFER.—The 

15 Secretary shall review any additional informa16 tion furnished by the provider of services or 

17 supplier under subparagraph (B)(ii). Taking 

18 into consideration such information, the Sec19 retary shall determine if there still appears to 

20 be an overpayment. If so, the Secretary—

21 ‘‘(i) shall provide notice of such deter22 mination to the provider of services or sup23 plier, including an explanation of the rea24 son for such determination; and 
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1 ‘‘(ii) in order to resolve the overpay2 ment, may offer the provider of services or 

3 supplier—

4 ‘‘(I) the opportunity for a statis5 tically valid random sample; or 

6 ‘‘(II) a consent settlement.

7 The opportunity provided under clause (ii)(I) 

8 does not waive any appeal rights with respect to 

9 the alleged overpayment involved. 

10 ‘‘(D) CONSENT SETTLEMENT DEFINED.—

11 For purposes of this paragraph, the term ‘con12 sent settlement’ means an agreement between 

13 the Secretary and a provider of services or sup14 plier whereby both parties agree to settle a pro15 jected overpayment based on less than a statis16 tically valid sample of claims and the provider 

17 of services or supplier agrees not to appeal the 

18 claims involved. 

19 ‘‘(6) NOTICE OF OVER-UTILIZATION OF

20 CODES.—The Secretary shall establish, in consulta21 tion with organizations representing the classes of 

22 providers of services and suppliers, a process under 

23 which the Secretary provides for notice to classes of 

24 providers of services and suppliers served by the con25 tractor in cases in which the contractor has identi-
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1 fied that particular billing codes may be overutilized 

2 by that class of providers of services or suppliers 

3 under the programs under this title (or provisions of 

4 title XI insofar as they relate to such programs). 

5 ‘‘(7) PAYMENT AUDITS.—

6 ‘‘(A) WRITTEN NOTICE FOR POST-PAY7 MENT AUDITS.—Subject to subparagraph (C), if 

8 a medicare contractor decides to conduct a 

9 post-payment audit of a provider of services or 

10 supplier under this title, the contractor shall 

11 provide the provider of services or supplier with 

12 written notice (which may be in electronic form) 

13 of the intent to conduct such an audit. 

14 ‘‘(B) EXPLANATION OF FINDINGS FOR ALL

15 AUDITS.—Subject to subparagraph (C), if a 

16 medicare contractor audits a provider of serv17 ices or supplier under this title, the contractor 

18 shall—

19 ‘‘(i) give the provider of services or 

20 supplier a full review and explanation of 

21 the findings of the audit in a manner that 

22 is understandable to the provider of serv23 ices or supplier and permits the develop24 ment of an appropriate corrective action 

25 plan; 
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1 ‘‘(ii) inform the provider of services or 

2 supplier of the appeal rights under this 

3 title as well as consent settlement options 

4 (which are at the discretion of the Sec5 retary); 

6 ‘‘(iii) give the provider of services or 

7 supplier an opportunity to provide addi8 tional information to the contractor; and 

9 ‘‘(iv) take into account information 

10 provided, on a timely basis, by the provider 

11 of services or supplier under clause (iii). 

12 ‘‘(C) EXCEPTION.—Subparagraphs (A) 

13 and (B) shall not apply if the provision of no14 tice or findings would compromise pending law 

15 enforcement activities, whether civil or criminal, 

16 or reveal findings of law enforcement-related 

17 audits. 

18 ‘‘(8) STANDARD METHODOLOGY FOR PROBE

19 SAMPLING.—The Secretary shall establish a stand20 ard methodology for medicare contractors to use in 

21 selecting a sample of claims for review in the case 

22 of an abnormal billing pattern.’’. 

23 (b) EFFECTIVE DATES AND DEADLINES.—

24 (1) USE OF REPAYMENT PLANS.—Section 

25 1893(f)(1) of the Social Security Act, as added by 
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1 subsection (a), shall apply to requests for repayment 

2 plans made after the date of the enactment of this 

3 Act. 

4 (2) LIMITATION ON RECOUPMENT.—Section 

5 1893(f)(2) of the Social Security Act, as added by 

6 subsection (a), shall apply to actions taken after the 

7 date of the enactment of this Act. 

8 (3) USE OF EXTRAPOLATION.—Section 

9 1893(f)(3) of the Social Security Act, as added by 

10 subsection (a), shall apply to statistically valid ran11 dom samples initiated after the date that is 1 year 

12 after the date of the enactment of this Act. 

13 (4) PROVISION OF SUPPORTING DOCUMENTA14 TION.—Section 1893(f)(4) of the Social Security 

15 Act, as added by subsection (a), shall take effect on 

16 the date of the enactment of this Act. 

17 (5) CONSENT SETTLEMENT.—Section 

18 1893(f)(5) of the Social Security Act, as added by 

19 subsection (a), shall apply to consent settlements en20 tered into after the date of the enactment of this 

21 Act. 

22 (6) NOTICE OF OVERUTILIZATION.—Not later 

23 than 1 year after the date of the enactment of this 

24 Act, the Secretary shall first establish the process 

25 for notice of overutilization of billing codes under 
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1 section 1893A(f)(6) of the Social Security Act, as 

2 added by subsection (a). 

3 (7) PAYMENT AUDITS.—Section 1893A(f)(7) of 

4 the Social Security Act, as added by subsection (a), 

5 shall apply to audits initiated after the date of the 

6 enactment of this Act. 

7 (8) STANDARD FOR ABNORMAL BILLING PAT8 TERNS.—Not later than 1 year after the date of the 

9 enactment of this Act, the Secretary shall first es10 tablish a standard methodology for selection of sam11 ple claims for abnormal billing patterns under sec12 tion 1893(f)(8) of the Social Security Act, as added 

13 by subsection (a). 

14 SEC. 536. PROVIDER ENROLLMENT PROCESS; RIGHT OF AP15 PEAL. 

16 (a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc) 

17 is amended—

18 (1) by adding at the end of the heading the fol19 lowing: ‘‘; ENROLLMENT PROCESSES’’; and 

20 (2) by adding at the end the following new sub21 section: 

22 ‘‘(j) ENROLLMENT PROCESS FOR PROVIDERS OF

23 SERVICES AND SUPPLIERS.—

24 ‘‘(1) ENROLLMENT PROCESS.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall 

2 establish by regulation a process for the enroll3 ment of providers of services and suppliers 

4 under this title.

5 ‘‘(B) DEADLINES.—The Secretary shall es6 tablish by regulation procedures under which 

7 there are deadlines for actions on applications 

8 for enrollment (and, if applicable, renewal of 

9 enrollment). The Secretary shall monitor the 

10 performance of medicare administrative con11 tractors in meeting the deadlines established 

12 under this subparagraph. 

13 ‘‘(C) CONSULTATION BEFORE CHANGING

14 PROVIDER ENROLLMENT FORMS.—The Sec15 retary shall consult with providers of services 

16 and suppliers before making changes in the pro17 vider enrollment forms required of such pro18 viders and suppliers to be eligible to submit 

19 claims for which payment may be made under 

20 this title. 

21 ‘‘(2) HEARING RIGHTS IN CASES OF DENIAL OR

22 NON-RENEWAL.—A provider of services or supplier 

23 whose application to enroll (or, if applicable, to 

24 renew enrollment) under this title is denied may 

25 have a hearing and judicial review of such denial 
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1 under the procedures that apply under subsection 

2 (h)(1)(A) to a provider of services that is dissatisfied 

3 with a determination by the Secretary.’’. 

4 (b) EFFECTIVE DATES.—

5 (1) ENROLLMENT PROCESS.—The Secretary 

6 shall provide for the establishment of the enrollment 

7 process under section 1866(j)(1) of the Social Secu8 rity Act, as added by subsection (a)(2), within 6 

9 months after the date of the enactment of this Act. 

10 (2) CONSULTATION.—Section 1866(j)(1)(C) of 

11 the Social Security Act, as added by subsection 

12 (a)(2), shall apply with respect to changes in pro13 vider enrollment forms made on or after January 1, 

14 2003. 

15 (3) HEARING RIGHTS.—Section 1866(j)(2) of 

16 the Social Security Act, as added by subsection 

17 (a)(2), shall apply to denials occurring on or after 

18 such date (not later than 1 year after the date of 

19 the enactment of this Act) as the Secretary specifies. 

20 SEC. 537. PROCESS FOR CORRECTION OF MINOR ERRORS 

21 AND OMISSIONS ON CLAIMS WITHOUT PUR22 SUING APPEALS PROCESS. 

23 The Secretary shall develop, in consultation with ap24 propriate medicare contractors (as defined in section 

25 1889(g) of the Social Security Act, as inserted by section 
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1 521(a)(1)) and representatives of providers of services and 

2 suppliers, a process whereby, in the case of minor errors 

3 or omissions (as defined by the Secretary) that are de4 tected in the submission of claims under the programs 

5 under title XVIII of such Act, a provider of services or 

6 supplier is given an opportunity to correct such an error 

7 or omission without the need to initiate an appeal. Such 

8 process shall include the ability to resubmit corrected 

9 claims. 

10 SEC. 538. PRIOR DETERMINATION PROCESS FOR CERTAIN 

11 ITEMS AND SERVICES; ADVANCE BENE12 FICIARY NOTICES. 

13 (a) IN GENERAL.—Section 1869 (42 U.S.C. 

14 1395ff(b)), as amended by sections 521 and 522 of BIPA 

15 and section 533(d)(2)(B), is further amended by adding 

16 at the end the following new subsection: 

17 ‘‘(h) PRIOR DETERMINATION PROCESS FOR CERTAIN

18 ITEMS AND SERVICES.—

19 ‘‘(1) ESTABLISHMENT OF PROCESS.—

20 ‘‘(A) IN GENERAL.—With respect to a 

21 medicare administrative contractor that has a 

22 contract under section 1874A that provides for 

23 making payments under this title with respect 

24 to eligible items and services described in sub25 paragraph (C), the Secretary shall establish a 
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1 prior determination process that meets the re2 quirements of this subsection and that shall be 

3 applied by such contractor in the case of eligible 

4 requesters. 

5 ‘‘(B) ELIGIBLE REQUESTER.—For pur6 poses of this subsection, each of the following 

7 shall be an eligible requester:

8 ‘‘(i) A physician, but only with respect 

9 to eligible items and services for which the 

10 physician may be paid directly. 

11 ‘‘(ii) An individual entitled to benefits 

12 under this title, but only with respect to an 

13 item or service for which the individual re14 ceives, from the physician who may be paid 

15 directly for the item or service, an advance 

16 beneficiary notice under section 1879(a) 

17 that payment may not be made (or may no 

18 longer be made) for the item or service 

19 under this title. 

20 ‘‘(C) ELIGIBLE ITEMS AND SERVICES.—

21 For purposes of this subsection and subject to 

22 paragraph (2), eligible items and services are 

23 items and services which are physicians’ serv24 ices (as defined in paragraph (4)(A) of section 
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1 1848(f) for purposes of calculating the sustain2 able growth rate under such section). 

3 ‘‘(2) SECRETARIAL FLEXIBILITY.—The Sec4 retary shall establish by regulation reasonable limits 

5 on the categories of eligible items and services for 

6 which a prior determination of coverage may be re7 quested under this subsection. In establishing such 

8 limits, the Secretary may consider the dollar amount 

9 involved with respect to the item or service, adminis10 trative costs and burdens, and other relevant factors. 

11 ‘‘(3) REQUEST FOR PRIOR DETERMINATION.—

12 ‘‘(A) IN GENERAL.—Subject to paragraph 

13 (2), under the process established under this 

14 subsection an eligible requester may submit to 

15 the contractor a request for a determination, 

16 before the furnishing of an eligible item or serv17 ice involved as to whether the item or service is 

18 covered under this title consistent with the ap19 plicable requirements of section 1862(a)(1)(A) 

20 (relating to medical necessity). 

21 ‘‘(B) ACCOMPANYING DOCUMENTATION.—

22 The Secretary may require that the request be 

23 accompanied by a description of the item or 

24 service, supporting documentation relating to 

25 the medical necessity for the item or service, 
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1 and any other appropriate documentation. In 

2 the case of a request submitted by an eligible 

3 requester who is described in paragraph 

4 (1)(B)(ii), the Secretary may require that the 

5 request also be accompanied by a copy of the 

6 advance beneficiary notice involved. 

7 ‘‘(4) RESPONSE TO REQUEST.—

8 ‘‘(A) IN GENERAL.—Under such process, 

9 the contractor shall provide the eligible re10 quester with written notice of a determination 

11 as to whether—

12 ‘‘(i) the item or service is so covered; 

13 ‘‘(ii) the item or service is not so cov14 ered; or 

15 ‘‘(iii) the contractor lacks sufficient 

16 information to make a coverage determina17 tion. 

18 If the contractor makes the determination de19 scribed in clause (iii), the contractor shall in20 clude in the notice a description of the addi21 tional information required to make the cov22 erage determination. 

23 ‘‘(B) DEADLINE TO RESPOND.—Such no24 tice shall be provided within the same time pe25 riod as the time period applicable to the con-
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1 tractor providing notice of initial determinations 

2 on a claim for benefits under subsection 

3 (a)(2)(A). 

4 ‘‘(C) INFORMING BENEFICIARY IN CASE OF

5 PHYSICIAN REQUEST.—In the case of a request 

6 in which an eligible requester is not the indi7 vidual described in paragraph (1)(B)(ii), the 

8 process shall provide that the individual to 

9 whom the item or service is proposed to be fur10 nished shall be informed of any determination 

11 described in clause (ii) (relating to a determina12 tion of non-coverage) and the right (referred to 

13 in paragraph (6)(B)) to obtain the item or serv14 ice and have a claim submitted for the item or 

15 service. 

16 ‘‘(5) EFFECT OF DETERMINATIONS.—

17 ‘‘(A) BINDING NATURE OF POSITIVE DE18 TERMINATION.—If the contractor makes the de19 termination described in paragraph (4)(A)(i), 

20 such determination shall be binding on the con21 tractor in the absence of fraud or evidence of 

22 misrepresentation of facts presented to the con23 tractor. 

24 ‘‘(B) NOTICE AND RIGHT TO REDETER25 MINATION IN CASE OF A DENIAL.—
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1 ‘‘(i) IN GENERAL.—If the contractor 

2 makes the determination described in para3 graph (4)(A)(ii)—

4 ‘‘(I) the eligible requester has the 

5 right to a redetermination by the con6 tractor on the determination that the 

7 item or service is not so covered; and 

8 ‘‘(II) the contractor shall include 

9 in notice under paragraph (4)(A) a 

10 brief explanation of the basis for the 

11 determination, including on what na12 tional or local coverage or noncov13 erage determination (if any) the de14 termination is based, and the right to 

15 such a redetermination. 

16 ‘‘(ii) DEADLINE FOR REDETERMINA17 TIONS.—The contractor shall complete and 

18 provide notice of such redetermination 

19 within the same time period as the time 

20 period applicable to the contractor pro21 viding notice of redeterminations relating 

22 to a claim for benefits under subsection 

23 (a)(3)(C)(ii). 

24 ‘‘(6) LIMITATION ON FURTHER REVIEW.—
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1 ‘‘(A) IN GENERAL.—Contractor determina2 tions described in paragraph (4)(A)(ii) or 

3 (4)(A)(iii) (and redeterminations made under 

4 paragraph (5)(B)), relating to pre-service 

5 claims are not subject to further administrative 

6 appeal or judicial review under this section or 

7 otherwise. 

8 ‘‘(B) DECISION NOT TO SEEK PRIOR DE9 TERMINATION OR NEGATIVE DETERMINATION

10 DOES NOT IMPACT RIGHT TO OBTAIN SERVICES, 

11 SEEK REIMBURSEMENT, OR APPEAL RIGHTS.—

12 Nothing in this subsection shall be construed as 

13 affecting the right of an individual who—

14 ‘‘(i) decides not to seek a prior deter15 mination under this subsection with re16 spect to items or services; or 

17 ‘‘(ii) seeks such a determination and 

18 has received a determination described in 

19 paragraph (4)(A)(ii), 

20 from receiving (and submitting a claim for) 

21 such items services and from obtaining adminis22 trative or judicial review respecting such claim 

23 under the other applicable provisions of this 

24 section. Failure to seek a prior determination 

25 under this subsection with respect to items and 
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1 services shall not be taken into account in such 

2 administrative or judicial review. 

3 ‘‘(C) NO PRIOR DETERMINATION AFTER

4 RECEIPT OF SERVICES.—Once an individual is 

5 provided items and services, there shall be no 

6 prior determination under this subsection with 

7 respect to such items or services.’’. 

8 (b) EFFECTIVE DATE; TRANSITION.—

9 (1) EFFECTIVE DATE.—The Secretary shall es10 tablish the prior determination process under the 

11 amendment made by subsection (a) in such a man12 ner as to provide for the acceptance of requests for 

13 determinations under such process filed not later 

14 than 18 months after the date of the enactment of 

15 this Act. 

16 (2) TRANSITION.—During the period in which 

17 the amendment made by subsection (a) has become 

18 effective but contracts are not provided under sec19 tion 1874A of the Social Security Act with medicare 

20 administrative contractors, any reference in section 

21 1869(g) of such Act (as added by such amendment) 

22 to such a contractor is deemed a reference to a fiscal 

23 intermediary or carrier with an agreement under 

24 section 1816, or contract under section 1842, re25 spectively, of such Act. 
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1 (3) LIMITATION ON APPLICATION TO SGR.—For 

2 purposes of applying section 1848(f)(2)(D) of the 

3 Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)), 

4 the amendment made by subsection (a) shall not be 

5 considered to be a change in law or regulation. 

6 (c) PROVISIONS RELATING TO ADVANCE BENE7 FICIARY NOTICES; REPORT ON PRIOR DETERMINATION

8 PROCESS.—

9 (1) DATA COLLECTION.—The Secretary shall 

10 establish a process for the collection of information 

11 on the instances in which an advance beneficiary no12 tice (as defined in paragraph (4)) has been provided 

13 and on instances in which a beneficiary indicates on 

14 such a notice that the beneficiary does not intend to 

15 seek to have the item or service that is the subject 

16 of the notice furnished. 

17 (2) OUTREACH AND EDUCATION.—The Sec18 retary shall establish a program of outreach and 

19 education for beneficiaries and providers of services 

20 and other persons on the appropriate use of advance 

21 beneficiary notices and coverage policies under the 

22 medicare program. 

23 (3) GAO REPORT REPORT ON USE OF ADVANCE

24 BENEFICIARY NOTICES.—Not later than 18 months 

25 after the date on which section 1869(g) of the Social 
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1 Security Act (as added by subsection (a)) takes ef2 fect, the Comptroller General of the United States 

3 shall submit to Congress a report on the use of ad4 vance beneficiary notices under title XVIII of such 

5 Act. Such report shall include information con6 cerning the providers of services and other persons 

7 that have provided such notices and the response of 

8 beneficiaries to such notices. 

9 (4) GAO REPORT ON USE OF PRIOR DETER10 MINATION PROCESS.—Not later than 18 months 

11 after the date on which section 1869(g) of the Social 

12 Security Act (as added by subsection (a)) takes ef13 fect, the Comptroller General of the United States 

14 shall submit to Congress a report on the use of the 

15 prior determination process under such section. Such 

16 report shall include—

17 (A) information concerning the types of 

18 procedures for which a prior determination has 

19 been sought, determinations made under the 

20 process, and changes in receipt of services re21 sulting from the application of such process; 

22 and 

23 (B) an evaluation of whether the process 

24 was useful for physicians (and other suppliers) 

25 and beneficiaries, whether it was timely, and 
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1 whether the amount of information required 

2 was burdensome to physicians and beneficiaries. 

3 (5) ADVANCE BENEFICIARY NOTICE DE4 FINED.—In this subsection, the term ‘‘advance bene5 ficiary notice’’ means a written notice provided 

6 under section 1879(a) of the Social Security Act (42 

7 U.S.C. 1395pp(a)) to an individual entitled to bene8 fits under part A or B of title XVIII of such Act 

9 before items or services are furnished under such 

10 part in cases where a provider of services or other 

11 person that would furnish the item or service be12 lieves that payment will not be made for some or all 

13 of such items or services under such title. 

14 SEC. 539. APPEALS BY PROVIDERS WHEN THERE IS NO 

15 OTHER PARTY AVAILABLE. 

16 (a) IN GENERAL.—Section 1870 (42 U.S.C. 1395gg) 

17 is amended by adding at the end the following new sub18 section: 

19 ‘‘(h) Notwithstanding subsection (f) or any other pro20 vision of law, the Secretary shall permit a provider of serv21 ices, physician, practitioner, or other supplier to appeal 

22 any determination of the Secretary under this title relating 

23 to services rendered under this title to an individual who 

24 subsequently dies if there is no other party available to 

25 appeal such determination.’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall take effect on the date of the enact3 ment of this Act and shall apply to items and services fur4 nished on or after such date.

5 Subtitle E—Miscellaneous 

6 Provisions 

7 SEC. 541. POLICY DEVELOPMENT REGARDING EVALUATION 

8 AND MANAGEMENT (E & M) DOCUMENTATION 

9 GUIDELINES. 

10 (a) IN GENERAL.—The Secretary may not implement 

11 any new documentation guidelines for evaluation and man12 agement physician services under the title XVIII of the 

13 Social Security Act on or after the date of the enactment 

14 of this Act unless the Secretary—

15 (1) has developed the guidelines in collaboration 

16 with practicing physicians (including both generalists 

17 and specialists) and provided for an assessment of 

18 the proposed guidelines by the physician community; 

19 (2) has established a plan that contains specific 

20 goals, including a schedule, for improving the use of 

21 such guidelines; 

22 (3) has conducted appropriate and representa23 tive pilot projects under subsection (b) to test modi24 fications to the evaluation and management docu25 mentation guidelines; 
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1 (4) finds that the objectives described in sub2 section (c) will be met in the implementation of such 

3 guidelines; and 

4 (5) has established, and is implementing, a pro5 gram to educate physicians on the use of such guide6 lines and that includes appropriate outreach. 

7 The Secretary shall make changes to the manner in which 

8 existing evaluation and management documentation guide9 lines are implemented to reduce paperwork burdens on 

10 physicians. 

11 (b) PILOT PROJECTS TO TEST EVALUATION AND

12 MANAGEMENT DOCUMENTATION GUIDELINES.—

13 (1) IN GENERAL.—The Secretary shall conduct 

14 under this subsection appropriate and representative 

15 pilot projects to test new evaluation and manage16 ment documentation guidelines referred to in sub17 section (a). 

18 (2) LENGTH AND CONSULTATION.—Each pilot 

19 project under this subsection shall—

20 (A) be voluntary; 

21 (B) be of sufficient length as determined 

22 by the Secretary to allow for preparatory physi23 cian and medicare contractor education, anal24 ysis, and use and assessment of potential eval25 uation and management guidelines; and 
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1 (C) be conducted, in development and 

2 throughout the planning and operational stages 

3 of the project, in consultation with practicing 

4 physicians (including both generalists and spe5 cialists). 

6 (3) RANGE OF PILOT PROJECTS.—Of the pilot 

7 projects conducted under this subsection—

8 (A) at least one shall focus on a peer re9 view method by physicians (not employed by a 

10 medicare contractor) which evaluates medical 

11 record information for claims submitted by phy12 sicians identified as statistical outliers relative 

13 to definitions published in the Current Proce14 dures Terminology (CPT) code book of the 

15 American Medical Association; 

16 (B) at least one shall focus on an alter17 native method to detailed guidelines based on 

18 physician documentation of face to face encoun19 ter time with a patient; 

20 (C) at least one shall be conducted for 

21 services furnished in a rural area and at least 

22 one for services furnished outside such an area; 

23 and 

24 (D) at least one shall be conducted in a 

25 setting where physicians bill under physicians’ 
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1 services in teaching settings and at least one 

2 shall be conducted in a setting other than a 

3 teaching setting. 

4 (4) BANNING OF TARGETING OF PILOT

5 PROJECT PARTICIPANTS.—Data collected under this 

6 subsection shall not be used as the basis for overpay7 ment demands or post-payment audits. Such limita8 tion applies only to claims filed as part of the pilot 

9 project and lasts only for the duration of the pilot 

10 project and only as long as the provider is a partici11 pant in the pilot project. 

12 (5) STUDY OF IMPACT.—Each pilot project 

13 shall examine the effect of the new evaluation and 

14 management documentation guidelines on—

15 (A) different types of physician practices, 

16 including those with fewer than 10 full-time17 equivalent employees (including physicians); 

18 and 

19 (B) the costs of physician compliance, in20 cluding education, implementation, auditing, 

21 and monitoring. 

22 (6) PERIODIC REPORTS.—The Secretary shall 

23 submit to Congress periodic reports on the pilot 

24 projects under this subsection. 
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1 (c) OBJECTIVES FOR EVALUATION AND MANAGE2 MENT GUIDELINES.—The objectives for modified evalua3 tion and management documentation guidelines developed 

4 by the Secretary shall be to—

5 (1) identify clinically relevant documentation 

6 needed to code accurately and assess coding levels 

7 accurately; 

8 (2) decrease the level of non-clinically pertinent 

9 and burdensome documentation time and content in 

10 the physician’s medical record; 

11 (3) increase accuracy by reviewers; and 

12 (4) educate both physicians and reviewers. 

13 (d) STUDY OF SIMPLER, ALTERNATIVE SYSTEMS OF

14 DOCUMENTATION FOR PHYSICIAN CLAIMS.—

15 (1) STUDY.—The Secretary shall carry out a 

16 study of the matters described in paragraph (2). 

17 (2) MATTERS DESCRIBED.—The matters re18 ferred to in paragraph (1) are—

19 (A) the development of a simpler, alter20 native system of requirements for documenta21 tion accompanying claims for evaluation and 

22 management physician services for which pay23 ment is made under title XVIII of the Social 

24 Security Act; and 
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1 (B) consideration of systems other than 

2 current coding and documentation requirements 

3 for payment for such physician services.

4 (3) CONSULTATION WITH PRACTICING PHYSI5 CIANS.—In designing and carrying out the study 

6 under paragraph (1), the Secretary shall consult 

7 with practicing physicians, including physicians who 

8 are part of group practices and including both gen9 eralists and specialists. 

10 (4) APPLICATION OF HIPAA UNIFORM CODING

11 REQUIREMENTS.—In developing an alternative sys12 tem under paragraph (2), the Secretary shall con13 sider requirements of administrative simplification 

14 under part C of title XI of the Social Security Act. 

15 (5) REPORT TO CONGRESS.—(A) Not later than 

16 October 1, 2004, the Secretary shall submit to Con17 gress a report on the results of the study conducted 

18 under paragraph (1). 

19 (B) The Medicare Payment Advisory Commis20 sion shall conduct an analysis of the results of the 

21 study included in the report under subparagraph (A) 

22 and shall submit a report on such analysis to Con23 gress. 

24 (e) STUDY ON APPROPRIATE CODING OF CERTAIN

25 EXTENDED OFFICE VISITS.—The Secretary shall conduct 
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1 a study of the appropriateness of coding in cases of ex2 tended office visits in which there is no diagnosis made. 

3 Not later than October 1, 2004, the Secretary shall submit 

4 a report to Congress on such study and shall include rec5 ommendations on how to code appropriately for such visits 

6 in a manner that takes into account the amount of time 

7 the physician spent with the patient. 

8 (f) DEFINITIONS.—In this section—

9 (1) the term ‘‘rural area’’ has the meaning 

10 given that term in section 1886(d)(2)(D) of the So11 cial Security Act, 42 U.S.C. 1395ww(d)(2)(D); and 

12 (2) the term ‘‘teaching settings’’ are those set13 tings described in section 415.150 of title 42, Code 

14 of Federal Regulations. 

15 SEC. 542. PROHIBITION OF INCIDENTAL FEES AND RE16 QUIRED PURCHASE OF NON-COVERED ITEMS 

17 OR SERVICES. 

18 (a) IN GENERAL.—Section 1842 of the Social Secu19 rity Act (42 U.S.C. 1395u) is amended by adding at the 

20 end the following new subsection: 

21 ‘‘(u) PROHIBITION OF INCIDENTAL FEES OR RE22 QUIRING PURCHASE OF NON-COVERED ITEMS OR SERV23 ICES.—
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1 ‘‘(1) IN GENERAL.—A physician, practitioner 

2 (as described in section 1842(b)(18)(C)), or other 

3 individual may not—

4 ‘‘(A) charge a membership fee or any other 

5 incidental fee to a medicare beneficiary (as de6 fined in section 1802(b)(5)(A)), or 

7 ‘‘(B) require a medicare beneficiary (as so 

8 defined) to purchase a non-covered item or 

9 service, 

10 as a prerequisite for the provision of a covered item 

11 or service to the beneficiary under this title. 

12 ‘‘(2) ENFORCEMENT.—If a physician, practi13 tioner, or other individual knowingly and willfully 

14 charges a fee, or requires purchase of a non-covered 

15 item or service, in violation of paragraph (1), the 

16 Secretary may apply sanctions against such physi17 cian in accordance with subsection (j)(2), except the 

18 maximum period of exclusion resulting from the ap19 plication of this paragraph shall not exceed 2 

20 years.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 subsection (a) shall apply to membership fees and other 

23 charges made, or purchases of items and services required, 

24 on or after the date of enactment of this Act. 
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1 SEC. 543. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY 

2 AND COVERAGE. 

3 (a) IMPROVED COORDINATION BETWEEN FDA AND

4 CMS ON COVERAGE OF BREAKTHROUGH MEDICAL DE5 VICES.—

6 (1) IN GENERAL.—Upon request by an appli7 cant and to the extent feasible (as determined by the 

8 Secretary), the Secretary shall, in the case of a class 

9 III medical device that is subject to premarket ap10 proval under section 515 of the Federal Food, Drug, 

11 and Cosmetic Act, ensure the sharing of appropriate 

12 information from the review for application for pre13 market approval conducted by the Food and Drug 

14 Administration for coverage decisions under title 

15 XVIII of the Social Security Act. 

16 (2) PUBLICATION OF PLAN.—Not later than 6 

17 months after the date of the enactment of this Act, 

18 the Secretary shall submit to appropriate Commit19 tees of Congress a report that contains the plan for 

20 improving such coordination and for shortening the 

21 time lag between the premarket approval by the 

22 Food and Drug Administration and coding and cov23 erage decisions by the Centers for Medicare & Med24 icaid Services. 

25 (3) CONSTRUCTION.—Nothing in this sub26 section shall be construed as changing the criteria 
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1 for coverage of a medical device under title XVIII of 

2 the Social Security Act nor premarket approval by 

3 the Food and Drug Administration and nothing in 

4 this subsection shall be construed to increase pre5 market approval application requirements under the 

6 Federal Food, Drug, and Cosmetic Act. 

7 (b) COUNCIL FOR TECHNOLOGY AND INNOVATION.—

8 Section 1868 (42 U.S.C. 1395ee), as amended by section 

9 523(a), is amended by adding at the end the following new 

10 subsection: 

11 ‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVA12 TION.—

13 ‘‘(1) ESTABLISHMENT.—The Secretary shall es14 tablish a Council for Technology and Innovation 

15 within the Centers for Medicare & Medicaid Services 

16 (in this section referred to as ‘CMS’). 

17 ‘‘(2) COMPOSITION.—The Council shall be com18 posed of senior CMS staff and clinicians and shall 

19 be chaired by the Executive Coordinator for Tech20 nology and Innovation (appointed or designated 

21 under paragraph (4)). 

22 ‘‘(3) DUTIES.—The Council shall coordinate the 

23 activities of coverage, coding, and payment processes 

24 under this title with respect to new technologies and 

25 procedures, including new drug therapies, and shall 
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1 coordinate the exchange of information on new tech2 nologies between CMS and other entities that make 

3 similar decisions. 

4 ‘‘(4) EXECUTIVE COORDINATOR FOR TECH5 NOLOGY AND INNOVATION.—The Secretary shall ap6 point (or designate) a noncareer appointee (as de7 fined in section 3132(a)(7) of title 5, United States 

8 Code) who shall serve as the Executive Coordinator 

9 for Technology and Innovation. Such executive coor10 dinator shall report to the Administrator of CMS, 

11 shall chair the Council, shall oversee the execution of 

12 its duties, and shall serve as a single point of con13 tact for outside groups and entities regarding the 

14 coverage, coding, and payment processes under this 

15 title.’’. 

16 (c) GAO STUDY ON IMPROVEMENTS IN EXTERNAL

17 DATA COLLECTION FOR USE IN THE MEDICARE INPA18 TIENT PAYMENT SYSTEM.—

19 (1) STUDY.—The Comptroller General of the 

20 United States shall conduct a study that analyzes 

21 which external data can be collected in a shorter 

22 time frame by the Centers for Medicare & Medicaid 

23 Services for use in computing payments for inpatient 

24 hospital services. The study may include an evalua25 tion of the feasibility and appropriateness of using 
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1 of quarterly samples or special surveys or any other 

2 methods. The study shall include an analysis of 

3 whether other executive agencies, such as the Bu4 reau of Labor Statistics in the Department of Com5 merce, are best suited to collect this information. 

6 (2) REPORT.—By not later than October 1, 

7 2003, the Comptroller General shall submit a report 

8 to Congress on the study under paragraph (1). 

9 (d) IOM STUDY ON LOCAL COVERAGE DETERMINA10 TIONS.—

11 (1) STUDY.—The Secretary shall enter into an 

12 arrangement with the Institute of Medicine of the 

13 National Academy of Sciences under which the Insti14 tute shall conduct a study on local coverage deter15 minations (including the application of local medical 

16 review policies) under the medicare program under 

17 title XVIII of the Social Security Act. Such study 

18 shall examine—

19 (A) the consistency of the definitions used 

20 in such determinations; 

21 (B) the types of evidence on which such 

22 determinations are based, including medical and 

23 scientific evidence; 

24 (C) the advantages and disadvantages of 

25 local coverage decisionmaking, including the 
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1 flexibility it offers for ensuring timely patient 

2 access to new medical technology for which data 

3 are still be collected; 

4 (D) the manner in which the local coverage 

5 determination process is used to develop data 

6 needed for a national coverage determination, 

7 including the need for collection of such data 

8 within a protocol and informed consent by indi9 viduals entitled to benefits under part A of title 

10 XVIII of the Social Security Act, or enrolled 

11 under part B of such title, or both; and 

12 (E) the advantages and disadvantages of 

13 maintaining local medicare contractor advisory 

14 committees that can advise on local coverage 

15 decisions based on an open, collaborative public 

16 process. 

17 (2) REPORT.—Such arrangement shall provide 

18 that the Institute shall submit to the Secretary a re19 port on such study by not later than 3 years after 

20 the date of the enactment of this Act. The Secretary 

21 shall promptly transmit a copy of such report to 

22 Congress. 

23 (e) METHODS FOR DETERMINING PAYMENT BASIS

24 FOR NEW LAB TESTS.—Section 1833(h) (42 U.S.C. 

25 1395l(h)) is amended by adding at the end the following: 
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1 ‘‘(8)(A) The Secretary shall establish by regulation 

2 procedures for determining the basis for, and amount of, 

3 payment under this subsection for any clinical diagnostic 

4 laboratory test with respect to which a new or substan5 tially revised HCPCS code is assigned on or after January 

6 1, 2004 (in this paragraph referred to as ‘new tests’).

7 ‘‘(B) Determinations under subparagraph (A) shall 

8 be made only after the Secretary—

9 ‘‘(i) makes available to the public (through an 

10 Internet site and other appropriate mechanisms) a 

11 list that includes any such test for which establish12 ment of a payment amount under this subsection is 

13 being considered for a year; 

14 ‘‘(ii) on the same day such list is made avail15 able, causes to have published in the Federal Reg16 ister notice of a meeting to receive comments and 

17 recommendations (and data on which recommenda18 tions are based) from the public on the appropriate 

19 basis under this subsection for establishing payment 

20 amounts for the tests on such list; 

21 ‘‘(iii) not less than 30 days after publication of 

22 such notice convenes a meeting, that includes rep23 resentatives of officials of the Centers for Medicare 

24 & Medicaid Services involved in determining pay25 ment amounts, to receive such comments and rec-
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1 ommendations (and data on which the recommenda2 tions are based); 

3 ‘‘(iv) taking into account the comments and rec4 ommendations (and accompanying data) received at 

5 such meeting, develops and makes available to the 

6 public (through an Internet site and other appro7 priate mechanisms) a list of proposed determinations 

8 with respect to the appropriate basis for establishing 

9 a payment amount under this subsection for each 

10 such code, together with an explanation of the rea11 sons for each such determination, the data on which 

12 the determinations are based, and a request for pub13 lic written comments on the proposed determination; 

14 and 

15 ‘‘(v) taking into account the comments received 

16 during the public comment period, develops and 

17 makes available to the public (through an Internet 

18 site and other appropriate mechanisms) a list of 

19 final determinations of the payment amounts for 

20 such tests under this subsection, together with the 

21 rationale for each such determination, the data on 

22 which the determinations are based, and responses 

23 to comments and suggestions received from the pub24 lic. 
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1 ‘‘(C) Under the procedures established pursuant to 

2 subparagraph (A), the Secretary shall—

3 ‘‘(i) set forth the criteria for making determina4 tions under subparagraph (A); and 

5 ‘‘(ii) make available to the public the data 

6 (other than proprietary data) considered in making 

7 such determinations. 

8 ‘‘(D) The Secretary may convene such further public 

9 meetings to receive public comments on payment amounts 

10 for new tests under this subsection as the Secretary deems 

11 appropriate. 

12 ‘‘(E) For purposes of this paragraph: 

13 ‘‘(i) The term ‘HCPCS’ refers to the Health 

14 Care Procedure Coding System. 

15 ‘‘(ii) A code shall be considered to be ‘substan16 tially revised’ if there is a substantive change to the 

17 definition of the test or procedure to which the code 

18 applies (such as a new analyte or a new methodology 

19 for measuring an existing analyte-specific test).’’. 

20 SEC. 544. TREATMENT OF HOSPITALS FOR CERTAIN SERV21 ICES UNDER MEDICARE SECONDARY PAYOR 

22 (MSP) PROVISIONS. 

23 (a) IN GENERAL.—The Secretary shall not require 

24 a hospital (including a critical access hospital) to ask ques25 tions (or obtain information) relating to the application 
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1 of section 1862(b) of the Social Security Act (relating to 

2 medicare secondary payor provisions) in the case of ref3 erence laboratory services described in subsection (b), if 

4 the Secretary does not impose such requirement in the 

5 case of such services furnished by an independent labora6 tory. 

7 (b) REFERENCE LABORATORY SERVICES DE8 SCRIBED.—Reference laboratory services described in this 

9 subsection are clinical laboratory diagnostic tests (or the 

10 interpretation of such tests, or both) furnished without a 

11 face-to-face encounter between the individual entitled to 

12 benefits under part A or enrolled under part B, or both, 

13 and the hospital involved and in which the hospital sub14 mits a claim only for such test or interpretation. 

15 SEC. 545. AUTHORIZING USE OF ARRANGEMENTS WITH 

16 OTHER HOSPICE PROGRAMS TO PROVIDE 

17 CORE HOSPICE SERVICES IN CERTAIN CIR18 CUMSTANCES. 

19 (a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C. 

20 1395x(dd)(5)) is amended by adding at the end the fol21 lowing new subparagraph: 

22 ‘‘(D) In extraordinary, exigent, or other non-routine 

23 circumstances, such as unanticipated periods of high pa24 tient loads, staffing shortages due to illness or other 

25 events, or temporary travel of a patient outside a hospice 
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1 program’s service area, a hospice program may enter into 

2 arrangements with another hospice program for the provi3 sion by that other program of services described in para4 graph (2)(A)(ii)(I). The provisions of paragraph 

5 (2)(A)(ii)(II) shall apply with respect to the services pro6 vided under such arrangements.’’. 

7 (b) CONFORMING PAYMENT PROVISION.—Section 

8 1814(i) (42 U.S.C. 1395f(i)), as amended by section 

9 421(b), is amended by adding at the end the following new 

10 paragraph: 

11 ‘‘(5) In the case of hospice care provided by a hospice 

12 program under arrangements under section 

13 1861(dd)(5)(D) made by another hospice program, the 

14 hospice program that made the arrangements shall bill 

15 and be paid for the hospice care.’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to hospice care provided on or after 

18 the date of the enactment of this Act. 

19 SEC. 546. APPLICATION OF OSHA BLOODBORNE PATHO20 GENS STANDARD TO CERTAIN HOSPITALS. 

21 (a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc) 

22 is amended—

23 (1) in subsection (a)(1)—

24 (A) in subparagraph (R), by striking 

25 ‘‘and’’ at the end; 
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1 (B) in subparagraph (S), by striking the 

2 period at the end and inserting ‘‘, and’’; and 

3 (C) by inserting after subparagraph (S) 

4 the following new subparagraph:

5 ‘‘(T) in the case of hospitals that are not other6 wise subject to the Occupational Safety and Health 

7 Act of 1970, to comply with the Bloodborne Patho8 gens standard under section 1910.1030 of title 29 of 

9 the Code of Federal Regulations (or as subsequently 

10 redesignated).’’; and 

11 (2) by adding at the end of subsection (b) the 

12 following new paragraph: 

13 ‘‘(4)(A) A hospital that fails to comply with the re14 quirement of subsection (a)(1)(T) (relating to the 

15 Bloodborne Pathogens standard) is subject to a civil 

16 money penalty in an amount described in subparagraph 

17 (B), but is not subject to termination of an agreement 

18 under this section. 

19 ‘‘(B) The amount referred to in subparagraph (A) is 

20 an amount that is similar to the amount of civil penalties 

21 that may be imposed under section 17 of the Occupational 

22 Safety and Health Act of 1970 for a violation of the 

23 Bloodborne Pathogens standard referred to in subsection 

24 (a)(1)(T) by a hospital that is subject to the provisions 

25 of such Act. 
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1 ‘‘(C) A civil money penalty under this paragraph shall 

2 be imposed and collected in the same manner as civil 

3 money penalties under subsection (a) of section 1128A are 

4 imposed and collected under that section.’’. 

5 (b) EFFECTIVE DATE.—The amendments made by 

6 this subsection (a) shall apply to hospitals as of July 1, 

7 2003. 

8 SEC. 547. BIPA-RELATED TECHNICAL AMENDMENTS AND 

9 CORRECTIONS. 

10 (a) TECHNICAL AMENDMENTS RELATING TO ADVI11 SORY COMMITTEE UNDER BIPA SECTION 522.—(1) Sub12 section (i) of section 1114 (42 U.S.C. 1314)—

13 (A) is transferred to section 1862 and added at 

14 the end of such section; and 

15 (B) is redesignated as subsection (j). 

16 (2) Section 1862 (42 U.S.C. 1395y) is amended—

17 (A) in the last sentence of subsection (a), by 

18 striking ‘‘established under section 1114(f)’’; and 

19 (B) in subsection (j), as so transferred and re20 designated—

21 (i) by striking ‘‘under subsection (f)’’; and 

22 (ii) by striking ‘‘section 1862(a)(1)’’ and 

23 inserting ‘‘subsection (a)(1)’’. 
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1 (b) TERMINOLOGY CORRECTIONS.—(1) Section 

2 1869(c)(3)(I)(ii) (42 U.S.C. 1395ff(c)(3)(I)(ii)), as 

3 amended by section 521 of BIPA, is amended—

4 (A) in subclause (III), by striking ‘‘policy’’ and 

5 inserting ‘‘determination’’; and 

6 (B) in subclause (IV), by striking ‘‘medical re7 view policies’’ and inserting ‘‘coverage determina8 tions’’. 

9 (2) Section 1852(a)(2)(C) (42 U.S.C. 1395w–

10 22(a)(2)(C)) is amended by striking ‘‘policy’’ and ‘‘POL11 ICY’’ and inserting ‘‘determination’’ each place it appears 

12 and ‘‘DETERMINATION’’, respectively. 

13 (c) REFERENCE CORRECTIONS.—Section 1869(f)(4) 

14 (42 U.S.C. 1395ff(f)(4)), as added by section 522 of 

15 BIPA, is amended—

16 (1) in subparagraph (A)(iv), by striking ‘‘sub17 clause (I), (II), or (III)’’ and inserting ‘‘clause (i), 

18 (ii), or (iii)’’; 

19 (2) in subparagraph (B), by striking ‘‘clause 

20 (i)(IV)’’ and ‘‘clause (i)(III)’’ and inserting ‘‘sub21 paragraph (A)(iv)’’ and ‘‘subparagraph (A)(iii)’’, re22 spectively; and 

23 (3) in subparagraph (C), by striking ‘‘clause 

24 (i)’’, ‘‘subclause (IV)’’ and ‘‘subparagraph (A)’’ and 

25 inserting ‘‘subparagraph (A)’’, ‘‘clause (iv)’’ and 
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1 ‘‘paragraph (1)(A)’’, respectively each place it ap2 pears. 

3 (d) OTHER CORRECTIONS.—Effective as if included 

4 in the enactment of section 521(c) of BIPA, section 

5 1154(e) (42 U.S.C. 1320c–3(e)) is amended by striking 

6 paragraph (5). 

7 (e) EFFECTIVE DATE.—Except as otherwise pro8 vided, the amendments made by this section shall be effec9 tive as if included in the enactment of BIPA. 

10 SEC. 548. CONFORMING AUTHORITY TO WAIVE A PROGRAM 

11 EXCLUSION. 

12 The first sentence of section 1128(c)(3)(B) (42 

13 U.S.C. 1320a–7(c)(3)(B)) is amended to read as follows: 

14 ‘‘Subject to subparagraph (G), in the case of an exclusion 

15 under subsection (a), the minimum period of exclusion 

16 shall be not less than five years, except that, upon the 

17 request of the administrator of a Federal health care pro18 gram (as defined in section 1128B(f)) who determines 

19 that the exclusion would impose a hardship on individuals 

20 entitled to benefits under part A of title XVIII or enrolled 

21 under part B of such title, or both, the Secretary may 

22 waive the exclusion under subsection (a)(1), (a)(3), or 

23 (a)(4) with respect to that program in the case of an indi24 vidual or entity that is the sole community physician or 
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1 sole source of essential specialized services in a commu2 nity.’’. 

3 SEC. 549. TREATMENT OF CERTAIN DENTAL CLAIMS. 

4 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) 

5 is amended by adding after subsection (g) the following 

6 new subsection: 

7 ‘‘(h)(1) Subject to paragraph (2), a group health plan 

8 (as defined in subsection (a)(1)(A)(v)) providing supple9 mental or secondary coverage to individuals also entitled 

10 to services under this title shall not require a medicare 

11 claims determination under this title for dental benefits 

12 specifically excluded under subsection (a)(12) as a condi13 tion of making a claims determination for such benefits 

14 under the group health plan. 

15 ‘‘(2) A group health plan may require a claims deter16 mination under this title in cases involving or appearing 

17 to involve inpatient dental hospital services or dental serv18 ices expressly covered under this title pursuant to actions 

19 taken by the Secretary.’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 subsection (a) shall take effect on the date that is 60 days 

22 after the date of the enactment of this Act. 
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1 SEC. 550. ANNUAL PUBLICATION OF LIST OF NATIONAL 

2 COVERAGE DETERMINATIONS. 

3 The Secretary shall provide, in an appropriate annual 

4 publication available to the public, a list of national cov5 erage determinations made under title XVIII of the Social 

6 Security Act in the previous year and information on how 

7 to get more information with respect to such determina8 tions.

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