I

104TH CONGRESS

1ST SESSION H. R. 2173

To amend title XVIII of the Social Security Act to modify the types of

ownership and compensation arrangements which are not considered arrangements between a physician and an entity furnishing a designated

health service under the Medicare Program for purposes of the provisions

of such title which deny payment for designated health services for

which a referral is made by a physician with an ownership or compensation arrangement with the entity furnishing the service.

IN THE HOUSE OF REPRESENTATIVES

AUGUST 2, 1995

Mr. STARK introduced the following bill; which was referred to the Committee

on Commerce, and in addition to the Committee on Ways and Means,

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 modify

the types of ownership and compensation arrangements

which are not considered arrangements between a physician and an entity furnishing a designated health service

under the Medicare Program for purposes of the provisions of such title which deny payment for designated

health services for which a referral is made by a physician with an ownership or compensation arrangement

with the entity furnishing the service.
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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.

4 This Act may be cited as the ‘‘Medicare Physician

5 Ownership and Referral Amendments of 1995’’.

6 SEC. 2. MODIFICATIONS TO EXCEPTIONS FOR CERTAIN

7 ARRANGEMENTS.

8 (a) EXCEPTIONS FOR BOTH OWNERSHIP AND COM9 PENSATION ARRANGEMENTS.—

10 (1) REPEAL OF EXCEPTION FOR PHYSICIANS’

11 SERVICES.—Section 1877(b) of the Social Security

12 Act (42 U.S.C. 1395nn(b)) is amended by striking

13 ‘‘Subsection (a)(1) shall not apply in the following

14 cases’’ and all that follows through paragraph (1).

15 (2) NEW EXCEPTION FOR SHARED FACILITY

16 SERVICES.—Section 1877(b) of such Act (42 U.S.C.

17 1395nn(b)), as amended by paragraph (1), is

18 amended by inserting before paragraph (2) the fol19 lowing new paragraph:

20 ‘‘(1) SHARED FACILITY SERVICES.—

21 ‘‘(A) IN GENERAL.—Subsection (a)(1)

22 shall not apply in the case of a designated

23 health service consisting of a shared facility

24 service of a shared facility—

25 ‘‘(i) that is furnished—
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1 ‘‘(I) personally by the referring

2 physician who is a shared facility phy3 sician or personally by an individual

4 directly employed by such a physician,

5 ‘‘(II) by a shared facility in a

6 building in which the referring physi7 cian furnishes substantially all of the

8 services of the physician that are un9 related to the furnishing of shared fa10 cility services, and

11 ‘‘(III) to a patient of a shared fa12 cility physician; and

13 ‘‘(ii) that is billed by the referring

14 physician.

15 ‘‘(B) SHARED FACILITY RELATED DEFINI16 TIONS.—

17 ‘‘(i) SHARED FACILITY SERVICE.—

18 The term ‘shared facility service’ means,

19 with respect to a shared facility, a des20 ignated health service furnished by the fa21 cility to patients of shared facility physi22 cians.

23 ‘‘(ii) SHARED FACILITY.—The term

24 ‘shared facility’ means an entity that fur-
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1 nishes shared facility services under a

2 shared facility arrangement.

3 ‘‘(iii) SHARED FACILITY PHYSICIAN.—

4 The term ‘shared facility physician’ means,

5 with respect to a shared facility, a physi6 cian who has a financial relationship under

7 a shared facility arrangement with the fa8 cility.

9 ‘‘(iv) SHARED FACILITY ARRANGE10 MENT.—The term ‘shared facility arrange11 ment’ means, with respect to the provision

12 of shared facility services in a building, a

13 financial arrangement—

14 ‘‘(I) which is only between physi15 cians who are providing services (un16 related to shared facility services) in

17 the same building,

18 ‘‘(II) in which the overhead ex19 penses of the facility are shared, in

20 accordance with methods previously

21 determined by the physicians in the

22 arrangement, among the physicians in

23 the arrangement, and
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1 ‘‘(III) which, in the case of a cor2 poration, is wholly owned and con3 trolled by shared facility physicians.’’.

4 (3) INCLUSION OF DURABLE MEDICAL EQUIP5 MENT AND PARENTERAL AND ENTERAL NUTRIENTS,

6 EQUIPMENT, AND SUPPLIES IN EXCEPTION FOR IN7 OFFICE ANCILLARY SERVICES.—Section 1877(b)(2)

8 of such Act (42 U.S.C. 1395nn(b)(2)) is amended by

9 striking ‘‘In the case of’’ and all that follows

10 through ‘‘supplies)’’ and inserting ‘‘Subsection

11 (a)(1) shall not apply in the case of designated

12 health services’’.

13 (4) NEW EXCEPTION FOR CAPITATED PAY14 MENTS.—Section 1877(b) of such Act (42 U.S.C.

15 1395nn(b)) is amended—

16 (A) by redesignating paragraph (4) as

17 paragraph (5); and

18 (B) by inserting after paragraph (3) the

19 following new paragraph:

20 ‘‘(4) OTHER CAPITATED PAYMENTS.—Sub21 section (a)(1) shall not apply in the case of a des22 ignated health service, if the designated health serv23 ice is included in the services for which a physician

24 or physician group is paid only on a capitated basis

25 by a health plan or insurer pursuant to a written ar-
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1 rangement between the plan or insurer and the phy2 sician or physician group in which the physician or

3 physician group assumes financial risk for the fur4 nishing of the service.’’.

5 (5) CONFORMING AMENDMENTS.—Paragraphs

6 (3) and (5) of section 1877(b) of such Act (42

7 U.S.C. 1395nn(b)), as redesignated by paragraph

8 (4), are each amended by striking ‘‘In the case of’’

9 and inserting ‘‘Subsection (a)(1) shall not apply in

10 the case of’’.

11 (b) REVISION OF EXCEPTIONS FOR CERTAIN COM12 PENSATION ARRANGEMENTS.—

13 (1) EXCEPTION FOR ALL ARRANGEMENTS

14 MEETING REQUIREMENTS.—Section 1877(a)(2)(B)

15 of such Act (42 U.S.C. 1395nn(a)(2)(B)) is amend16 ed—

17 (A) by striking ‘‘except as provided in sub18 section (e),’’; and

19 (B) by striking ‘‘entity.’’ and inserting

20 ‘‘entity which does not meet the requirements

21 of subsection (e).’’.

22 (2) REQUIREMENTS DESCRIBED.—Section

23 1877(e) of such Act (42 U.S.C. 1395nn(e)) is

24 amended to read to follows:
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1 ‘‘(e) REQUIREMENTS FOR PERMISSIBLE COMPENSA2 TION ARRANGEMENTS.—The requirements under this

3 subsection with respect to a compensation arrangement

4 are as follows:

5 ‘‘(1) The arrangement is in writing and is

6 signed by all parties to the arrangement.

7 ‘‘(2) The arrangement is consistent with fair

8 market value.

9 ‘‘(3) The amount of compensation under the ar10 rangement is not determined in a manner that takes

11 into account the volume or value of any referrals or

12 other business generated between the parties.

13 ‘‘(4) The arrangement would be commercially

14 reasonable even if no referrals were made between

15 the parties.

16 ‘‘(5) The services compensated or contracted

17 for do not exceed those that are reasonable and nec18 essary for the legitimate business purposes of the ar19 rangement.

20 ‘‘(6) The arrangement meets such other re21 quirements as the Secretary may impose as needed

22 to protect against program or patient abuse.’’.
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1 SEC. 3. EXCLUSION OF INTRAOCULAR LENS, EYEGLASSES,

2 AND CONTACT LENSES FROM DESIGNATED

3 HEALTH SERVICES SUBJECT TO PROHIBI4 TIONS.

5 Section 1877(h)(6)(H) of the Social Security Act (42

6 U.S.C. 1395nn(h)(6)(H)) is amended by striking the pe7 riod at the end and inserting the following: ‘‘, other than

8 an intraocluar lens inserted during or subsequent to cata9 ract surgery, eyeglasses, or contact lenses.’’.

10 SEC. 4. EFFECTIVE DATE.

11 The amendments made by this Act shall apply to re12 ferrals made on or after January 1, 1996.

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