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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2408 Introduced in House (IH)]

104th CONGRESS
  1st Session
                                H. R. 2408

To provide for enhanced penalties for health care fraud, and for other 
                               purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           September 27, 1995

  Mr. Coburn introduced the following bill; which was referred to the 
 Committee on Commerce, and in addition to the Committees on Ways and 
Means, the Judiciary, and Government Reform and Oversight, 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 provide for enhanced penalties for health care fraud, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care Anti-
Fraud Act of 1995''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                TITLE I--FRAUD AND ABUSE CONTROL PROGRAM

Sec. 101. Creation of Health Care Anti-Fraud Task Force.
Sec. 102. Employees of task force.
Sec. 103. Fraud and abuse control program.
Sec. 104. Court-imposed obligations upon health anti-fraud and abuse 
                            convictions.
Sec. 105. Health care fraud and abuse guidance.
      TITLE II--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

Sec. 201. Mandatory exclusion from participation in Medicare and State 
                            health care programs.
Sec. 202. Establishment of minimum period of exclusion for certain 
                            individuals and entities subject to 
                            permissive exclusion from Medicare and 
                            State health care programs.
Sec. 203. Permissive exclusion of individuals with ownership or control 
                            interest in sanctioned entities.
Sec. 204. Sanctions against practitioners and persons for failure to 
                            comply with statutory obligations.
Sec. 205. Intermediate sanctions for Medicare health maintenance 
                            organizations.
Sec. 206. Effective date.
         TITLE III--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 301. Establishment of the health care fraud and abuse data 
                            collection program.
                      TITLE IV--MONETARY PENALTIES

Sec. 401. Social Security Act civil monetary penalties.
Sec. 402. Other Social Security Act civil penalties.
Sec. 403. Social Security Act criminal penalties.
                TITLE V--AMENDMENTS TO ANTI-KICKBACK LAW

Sec. 501. Clarification of standards.
Sec. 502. Clarifications and additions to anti-kickback exceptions.
Sec. 503. Clarification of safe harbor authority in anti-kickback 
                            provisions.
        TITLE VI--AMENDMENTS TO THE PHYSICIAN SELF-REFERRAL LAW

Sec. 601. Financial relationship defined.
Sec. 602. Self-referrals for physician services.
Sec. 603. Risk-sharing arrangements.
Sec. 604. Physician Ownership
Sec. 605. Shared facility services.
Sec. 606. Payer directed care.
Sec. 607. Self-referrals for certain designated health services.
Sec. 608. Definition of direct supervision.
Sec. 609. Effective date.
              TITLE VII--MEDICARE BILLING ABUSE PREVENTION

Sec. 701. Implementation of General Accounting Office recommendations 
                            regarding Medicare claims processing.
Sec. 702. Minimum software requirements.
Sec. 703. Disclosure.
Sec. 704. Review and modification of regulations.
Sec. 705. Definitions.
Sec. 706. Termination of Proposed Medicare Transaction System.

                TITLE I--FRAUD AND ABUSE CONTROL PROGRAM

SEC. 101. CREATION OF NATIONAL HEALTH CARE ANTI-FRAUD TASK FORCE.

    (a) Purpose.--The Attorney General in consultation with the 
Secretary of the Department of Health and Human Services shall 
establish a national health care fraud task force to coordinate Federal 
law enforcement agencies to control fraud and abuse in the delivery of 
health care in the United States. This task force, through its regional 
offices, shall have the power to pursue both civil and/or criminal 
actions against any individual organization, or other entity whose acts 
knowingly and willfully amount to health care fraud or knowingly and 
willfully amount to fraud and abuse in the delivery of health care in 
the United States.
    (b) In General.--Consistent with section 101 of subtitle A, not 
later than one hundred twenty days after enactment, the Attorney 
General shall establish a health care fraud task force--
            (1) to target, investigate, and prosecute individuals who 
        organize, direct, finance, or are otherwise knowingly engaged 
        in health care fraud;
            (2) to work fully and effectively with State and local law 
        enforcement agencies;
            (3) to promote a coordinated health care fraud enforcement 
        effort and to encourage maximum cooperation among all Federal 
        agencies; and
            (4) to make full use of financial investigative techniques, 
        including tax law enforcement and, in order identify and 
        convict individuals and sanction entities that engage in health 
        care fraud.
    (c) Participants.--The Federal agencies that shall participate in 
the health care fraud task force are--
            (1) the Department of Justice (including the Federal Bureau 
        of Investigation);
            (2) the Department of Health and Human Services (including 
        the Office of the Inspector General);
            (3) the Department of Defense (CHAMPUS);
            (4) the Veteran's Administration:
            (5) the Railroad Retirement Board;
            (6) the United States Postal Inspection Service; and
            (7) the Internal Revenue Service.
    (d) The President shall designate one of the members as chair. The 
chair serves a term concurrent with that of the President. The chair 
shall serve as the chief executive officer of the task force.

SEC. 102. EMPLOYEES OF THE TASK FORCE.

    (a) Effective January 1, 1996, the following employees of the 
Government of the United States shall be assigned to the task force but 
shall remain as employees of their former Government employer for 
purposes of salary, compensation, benefits and all related matters:
            (1) Employees of the Department of Health and Human 
        Services whose primary duties related to health care fraud.
            (2) Employees of the Department of Justice whose primary 
        duties relate to health care fraud to include employees of the 
        Federal Bureau of Investigation and the Office for United 
        States Attorneys; and
            (3) Any other employee of the Federal Government selected 
        by the Commission for assignment to the task force.
    (b) The number of employees assigned to the task force pursuant to 
subsection (a) shall be sufficient to allow the task force to perform 
its objectives; provided, however, that the total number of individuals 
does not exceed fifty (50).
    (c) Objectives.--The objectives of the task force shall be--
            (1) to target, investigate, and prosecute individuals who 
        organize, direct, finance, or are otherwise engaged in health 
        care fraud;
            (2) to promote a coordinated health care fraud enforcement 
        effort, and to encourage maximum cooperation among all Federal 
        agencies; and
            (3) to work fully and effectively with State and local law 
        enforcement agencies.

SEC. 103. FRAUD AND ABUSE CONTROL PROGRAM.

    (a) Establishment of Program.--
            (1) In general.--Not later than January 1, 1996, the 
        Secretary of Health and Human Services (in this title referred 
        to as the ``Secretary''), acting through the Office of the 
        Inspector General of the Department of Health and Human 
        Services, and the Attorney General shall, after consultation 
        with the task force, establish a program--
                    (A) to coordinate Federal, State, and local law 
                enforcement programs to control fraud and abuse with 
                respect to the delivery of and payment for health care 
                in the United States;
                    (B) to conduct investigations, audits, evaluations, 
                and inspections, including undercover operations, 
                relating to ``fraud and abuse in'' the delivery of and 
                payment for health care in the United States;
                    (C) to facilitate the enforcement of the provisions 
                of sections 1128, 1128A, and 1128B of the Social 
                Security Act (42 U.S.C. 1320a-7, 1320a-7a, and 1320a-
                7b) and other statutes applicable to health care fraud 
                and abuse; and
                    (D) to provide for the modification and 
                establishment of safe harbors, and to issue advisory 
                opinions and special fraud alerts pursuant to section 
                105.
            (2) Coordination with health plans.--In carrying out the 
        program established under paragraph (1), the Secretary and the 
        Attorney General shall consult with, and arrange for the 
        sharing of data, with representatives of health plans.
            (3) Regulations.--
                    (A) In general.--The Secretary and the Attorney 
                General shall by regulation establish standards to 
                carry out the program under paragraph (1).
                    (B) Information standards.--
                            (i) In general.--Such regulations shall 
                        include standards relating to the furnishing of 
                        information by health plans, providers, and 
                        others to enable the Secretary and the Attorney 
                        General to carry out the program (including 
                        coordination with health plans under paragraph 
                        (2)).
                            (ii) Confidentiality.--Such regulations 
                        shall include procedures to assure that such 
                        information is provided and utilized in a 
                        manner that appropriately protects the 
                        confidentiality of the information and the 
                        privacy of individuals receiving health care 
                        services and items.
                            (iii) Qualified immunity for providing 
                        information.--The provisions of section 1157(a) 
                        of the Social Security Act (relating to 
                        limitation on liability) shall apply--
                                    (I) to a person providing 
                                information or communications to the 
                                Commission, the Secretary or the 
                                Attorney General in conjunction with 
                                their performance of duties under this 
                                Act; or
                                    (II) to health plans sharing 
                                information in good faith and without 
                                malice with any other health plan with 
                                respect to matters relating to health 
                                care fraud detection, investigation and 
                                prosecution.
            (4) Ensuring access to documentation.--The Inspector 
        General of the Department of Health and Human services is 
        authorized to exercise such authority described in paragraphs 
        (4) and (5) of section 6 of the Inspector General Act of 1978 
        (5 U.S.C. App.) (relating to subpoenas and administration of 
        oaths) with respect to the activities under the fraud and abuse 
        control program established under this subsection to the same 
        extent as the Inspector General may exercise such authorities 
        to perform the functions assigned by such Act.
            (5) Authority of inspector general.--Nothing in this Act 
        shall be construed to diminish the authority of any Inspector 
        General, including such authority as provided in the Inspector 
        General Act of 1978 (5 U.S.C. App.).
    (b) Health Plan Defined.--For purposes of this section, the term 
``health plan'' means a plan or program that provides health benefits, 
whether directly, through insurance, or otherwise, and includes--
            (1) a policy of health insurance;
            (2) a contract of a service benefit organization;
            (3) a membership agreement with a health maintenance 
        organization or other prepaid health plan; and
            (4) an employee welfare benefit plan or a multiple employer 
        welfare plan (as such terms are defined in section 3 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1002).

SEC. 104. COURT-IMPOSED OBLIGATIONS UPON HEALTH CARE FRAUD AND ABUSE 
              CONVICTIONS.

    (a) Identification of Community Service Opportunities.--Section 
1128B of the Social Security Act (42 U.S.C. 1320a-7b) is amended by 
adding at the end the following new subsection:
    ``(g) The Secretary may--
            ``(1) in consultation with State and local health care 
        officials, identify opportunities for the satisfaction of 
        community service obligations that a court may impose upon the 
        conviction of an offense under this section, and
            ``(2) make information concerning such opportunities 
        available to Federal and State law enforcement officers and 
        State and local health care officials.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 105. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

    (a) Solicitation and Publication of Modifications to Existing Safe 
Harbors and New Safe Harbors.--
            (1) In general.--
                    (A) Solicitation of proposals for safe harbors.--
                Not later than January 1, 1996, and not less than 
                annually thereafter, the Secretary shall publish a 
                notice in the Federal Register soliciting proposals, 
                which will be accepted during a 60-day period, for--
                            (i) modifications to existing safe harbors 
                        issued pursuant to section 14(a) of the 
                        Medicare and Medicaid Patient and Program 
                        Protection Act of 1987 (42 U.S.C. 1320a-7b 
                        note);
                            (ii) additional safe harbors specifying 
                        payment practices that shall not be treated as 
                        a criminal offense under section 1128B(b) of 
                        the Social Security Act (42 U.S.C. 1320a-7b(b)) 
                        and shall not serve as the basis for an 
                        exclusion under section 1128(b)(7) of such Act 
                        (42 U.S.C. 1320a-7(b)(7));
                            (iii) advisory opinions to be issued 
                        pursuant to subsection (b); and
                            (iv) special fraud alerts to be issued 
                        pursuant to subsection (c).
                    (B) Publication of proposed modifications and 
                proposed additional safe harbors.--After considering 
                the proposals described in clauses (i) and (ii) of 
                subparagraph (A), the Secretary, in consultation with 
                the Attorney General, shall by May of each year publish 
                in the Federal Register proposed modifications to 
                existing safe harbors and proposed additional safe 
                harbors, if appropriate, with a 60-day comment period. 
                After considering any public comments received during 
                this period, the Secretary shall within 60 days after 
                the close of the comment period issue final rules 
                modifying the existing safe harbors and establishing 
                new safe harbors, as appropriate.
                    (C) Report.--The Inspector General of the 
                Department of Health and Human Services (in this 
                section referred to as the ``Inspector General'') 
                shall, in an annual report to Congress or as part of 
                the year-end semiannual report required by section 5 of 
                the Inspector General Act of 1978 (5 U.S.C. App.), 
                describe the proposals received under clauses (i) and 
                (ii) of subparagraph (A) and explain which proposals 
                were included in the publication described in 
                subparagraph (B), which proposals were not included in 
                that publication, and the reasons for the rejection of 
                the proposals that were not included.
            (2) Criteria for modifying and establishing safe harbors.--
        In modifying and establishing safe harbors under paragraph 
        (1)(B), the Secretary may consider the extent to which 
        providing a safe harbor for the specified payment practice may 
        result in any of the following:
                    (A) An increase or decrease in access to health 
                care services.
                    (B) An increase or decrease in the quality of 
                health care services.
                    (C) An increase or decrease in patient freedom of 
                choice among health care providers.
                    (D) An increase or decrease in competition among 
                health care providers.
                    (E) An increase or decrease in the cost to health 
                care programs under the Social Security Act.
                    (F) An increase or decrease in the potential 
                overutilization of health care services.
                    (G) Any other factors the Secretary deems 
                appropriate in the interest of preventing fraud and 
                abuse in health care programs under the Social Security 
                Act.
    (b) Advisory Opinions.--
            (1) Advisory opinions under title xi.--Title XI of the 
        Social Security Act (42 U.S.C. 1301 et seq.) is amended by 
        inserting after section 1128B the following new section:

                          ``advisory opinions

    ``Sec. 1129. (a) Issuance of Advisory Opinions.--The Secretary 
shall issue advisory opinions as provided in this section.
    ``(b) Matters Subject to Advisory Opinions.--The Secretary shall 
issue advisory opinions as to the following matters:
            ``(1) What constitutes prohibited remuneration within the 
        meaning of section 1128B(b) of the Social Security Act.
            ``(2) Whether an arrangement or proposed arrangement 
        satisfies the criteria set forth in section 1128B(b)(3) of the 
        Social Security Act for activities which do not result in 
        prohibited remuneration.
            ``(3) Whether an arrangement or proposed arrangement 
        satisfies the criteria which the Secretary has established, or 
        shall establish by regulation for activities which do not 
        result in prohibited remuneration.
            ``(4) What constitutes an inducement to reduce or limit 
        services to individuals entitled to benefits under title XVIII 
        or title XIX within the meaning of section 1128B(b).
            ``(5) Whether an arrangement or proposed arrangement will 
        result in a prohibited referral within the meaning of section 
        1877 of the Social Security Act.
            ``(6) Whether an arrangement, activity or proposed 
        arrangement or proposed activity violates any other provision 
        of this Act.
    ``(c) Matters Not Subject to Advisory Opinions.--Such advisory 
opinions shall not address the following matters:
            ``(1) Whether the fair market value shall be, or was paid 
        or received for any goods, services or property.
            ``(2) Whether an individual is a bona fide employee within 
        the requirements of section 3121(d)(2) of the Internal Revenue 
        Code of 1986.
    ``(d) Effect of Advisory Opinions.--
            ``(1) In general.--Each advisory opinion issued by the 
        Secretary shall be binding as to the Secretary and the party or 
        parties requesting the opinion, so long as the party's actions 
        or omissions do not deviate from the actions or omissions 
        presented in the request for the advisory opinion.
            ``(2) The failure of a party to seek an advisory opinion 
        may not be introduced into evidence to prove that the party 
        intended to violate the provisions of sections 1128, 1128A, 
        1128B, 1877, of this Act.
    ``(e) Fee.--
            ``(1) In general.--The Secretary shall require an 
        individual or entity requesting an advisory opinion under this 
        section to submit a fee.
            ``(2) Amount.--The amount of the fee required under 
        paragraph (1) shall be equal to the costs incurred by the 
        Secretary in responding to the request.
    ``(f) Regulations.--The Secretary within 90 days of the date of the 
enactment shall issue regulations establishing a system for the 
issuance of advisory opinions. Such regulations shall provide for--
            ``(1) the procedure to be followed by a party applying for 
        an advisory opinion;
            ``(2) the procedure to be followed by the Secretary in 
        responding to a request for an advisory opinion;
            ``(3) the interval in which the Secretary shall respond; 
        and
            ``(4) the manner in which advisory opinions will be made 
        available to the public.
    ``(g) Interval for Issuance of Advisory Opinions.--Under no 
circumstances shall the interval in which the Secretary shall respond 
to a party requesting an advisory opinion exceed 30 days.''.
            (2) Advisory opinions relating to physician ownership and 
        referral.--Section 1877 of the Social Security Act (42 U.S.C. 
        1395nn) is amended by the addition of the following new 
        subsection:
    ``(i) Advisory Opinions.--
            ``(1) In general.--The Secretary shall issue advisory 
        opinions on whether an arrangement or proposed arrangement will 
        result in a prohibited referral within the meaning of this 
        section.
            ``(2) Effect of advisory opinions.--
                    ``(A) Each advisory opinion issued by the Secretary 
                shall be binding as to the Secretary and the party or 
                parties requesting the opinion, so long as the party's 
                actions or omissions do not deviate from the actions or 
                omissions presented in the request for the advisory 
                opinion.
                    ``(B) The failure of a party to seek an advisory 
                opinion may not be introduced into evidence to prove 
                that the party intended to violate the provisions of 
                this section.
            ``(3) Fee.--
                    ``(A) In general.--The Secretary shall require an 
                individual or entity requesting an advisory opinion 
                under this section to submit a fee.
                    ``(B) Amount.--The amount of the fee required under 
                paragraph (1) shall be equal to the costs incurred by 
                the Secretary in responding to the request.
            ``(3) Regulations.--The Secretary within one hundred and 
        twenty days of the date of enactment, shall issue regulations 
        establishing a system for the issuance of advisory opinions. 
        Such regulations shall provide for--
                    ``(A) the procedure to be followed by a party 
                applying for an advisory opinion;
                    ``(B) the procedure to be followed by the Secretary 
                in responding to a request for an advisory opinion;
                    ``(C) the interval in which the Secretary shall 
                respond; and
                    ``(D) the manner in which advisory opinions will be 
                made available to the public.
            ``(4) Interval for issuance of advisory opinions.--Under no 
        circumstances shall the interval in which the Secretary shall 
        respond to a party requesting an advisory opinion exceed thirty 
        days.''.
    (c) Special Fraud Alerts.--
            (1) In general.--
                    (A) Request for special fraud alerts.--Any person 
                may present, at any time, a request to the Inspector 
                General for a notice which informs the public of 
                practices which the Inspector General considers to be 
                suspect or of particular concern under section 1128B(b) 
                or section 1877 of the Social Security Act (42 U.S.C. 
                1320a-7b(b) or 42 U.S.C. 1395nn) (in this subsection 
                referred to as a ``special fraud alert'').
                    (B) Issuance and publication of special fraud 
                alerts.--Upon receipt of a request described in 
                subparagraph (A), the Inspector General shall 
                investigate the subject matter of the request to 
                determine whether a special fraud alert should be 
                issued. If appropriate, the Inspector General shall 
                issue a special fraud alert in response to the request. 
                All special fraud alerts issued pursuant to this 
                subparagraph shall be published in the Federal 
                Register.
            (2) Criteria for special fraud alerts.--In determining 
        whether to issue a special fraud alert upon a request described 
        in paragraph (1), the Inspector General may consider--
                    (A) whether and to what extent the practices that 
                would be identified in the special fraud alert may 
                result in any of the consequences described in 
                subsection (a)(2); and
                    (B) the volume and frequency of the conduct that 
                would be identified in the special fraud alert.

      TITLE II--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

SEC. 201. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

    (a) Individual Convicted of Felony Relating to Health Care Fraud.--
            (1) In general.--Section 1128(a) of the Social Security Act 
        (42 U.S.C. 1320a-7(a)) is amended by adding at the end the 
        following new paragraph:
            ``(3) Felony conviction relating to health care fraud.--Any 
        individual that has been convicted after the date of the 
        enactment of the Health Care Anti-Fraud Act of 1995, under 
        Federal or State law, in connection with the delivery of a 
        health care item or service or with respect to any act or 
        omission in a health care program (other than those 
        specifically described in paragraph (1)) operated by or 
        financed in whole or in part by any Federal, State, or local 
        government agency, of a criminal offense consisting of a felony 
        relating to fraud, theft, embezzlement, breach of fiduciary 
        responsibility, or other financial misconduct.''.
            (2) Conforming amendment.--Paragraph (1) of section 1128(b) 
        of such Act (42 U.S.C. 1320a-7(b)) is amended to read as 
        follows:
            ``(1) Conviction relating to fraud.--
                    ``(A) Conviction relating to health care fraud.--
                Any individual or entity with respect to a misdemeanor, 
                or entity with respect to a felony, that has been 
                convicted after the date of the enactment of the Health 
                Care Anti-Fraud Act of 1995, under Federal or State 
                law, of a criminal offense relating to fraud, theft, 
                embezzlement, breach of fiduciary responsibility, or 
                other financial misconduct--
                            ``(i) in connection with the delivery of a 
                        health care item or service; or
                            ``(ii) with respect to any act or omission 
                        in a health care program (other than those 
                        specifically described in subsection (a)(1)) 
                        operated by or financed in whole or in part by 
                        any Federal, State, or local government agency;
                    ``(B) Conviction relating to fraud generally.--Any 
                individual or entity that has been convicted after the 
                date of enactment of the Health Care Anti-Fraud Act of 
                1995, under Federal or State law, of a criminal offense 
                relating to fraud, theft, embezzlement, breach of 
                fiduciary responsibility, or other financial misconduct 
                with respect to any act or omission in a program (other 
                than a health care program) operated by or financed in 
                whole or in part by any Federal, State, or local 
                government agency.''.
    (b) Individual Convicted of Felony Relating to Controlled 
Substance.--
            (1) In general.--Section 1128(a) of the Social Security Act 
        (42 U.S.C. 1320a-7(a)), as amended by subsection (a), is 
        amended by adding at the end the following new paragraph:
            ``(4) Felony conviction relating to controlled substance.--
        Any individual or entity that has been convicted after the date 
        of the enactment of the Health Care Anti-Fraud Act of 1995, 
        under Federal or State law, of a criminal offense consisting of 
        a felony relating to the unlawful manufacture, distribution, 
        prescription, or dispensing of a controlled substance.''.
            (2) Conforming amendment.--Section 1128(b)(3) of such Act 
        (42 U.S.C. 1320a-7(b)(3)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.

SEC. 202. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

    Section 1128(c)(3) of the Social Security Act (42 U.S.C. 1320a-
7(c)(3)) is amended by adding at the end the following new 
subparagraphs:
                    ``(D) In the case of an exclusion of an individual 
                or entity under paragraph (1), (2), or (3) of 
                subsection (b), the period of the exclusion shall be 3 
                years, unless the Secretary determines in accordance 
                with published regulations that a shorter period is 
                appropriate because of mitigating circumstances or that 
                a longer period is appropriate because of aggravating 
                circumstances.
                    ``(E) In the case of an exclusion of an individual 
                or entity under subsection (b)(4) or (b)(5), the period 
                of the exclusion shall not be less than the period 
                during which the individual's or entity's license to 
                provide health care is revoked, suspended, or 
                surrendered, or the individual or the entity is 
                excluded or suspended from a Federal or State health 
                care program.
                    ``(F) In the case of an exclusion of an individual 
                or entity under subsection (b)(6)(B), the period of the 
                exclusion shall be not less than 1 year.''.

SEC. 203. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR CONTROL 
              INTEREST IN SANCTIONED ENTITIES.

    Section 1128(b) of the Social Security Act (42 U.S.C. 1320a-7(b)) 
is amended by adding at the end the following new paragraph:
            ``(15) Individuals controlling a sanctioned entity.--Any 
        individual who has a direct or indirect ownership or control 
        interest of 5 percent or more, or an ownership or control 
        interest (as defined in section 1124(a)(3)) in, or who is an 
        officer or managing employee (as defined in section 1126(b)) 
        of, an entity--
                    ``(A) that has been convicted of any offense 
                described in subsection (a) or in paragraph (1), (2), 
                or (3) of this subsection; or
                    ``(B) that has been excluded from participation 
                under a program under title XVIII or under a State 
                health care program, if the individual knew or had 
                reason to know of the offense of the entity upon which 
                the conviction or exclusion was based.''.

SEC. 204. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO 
              COMPLY WITH STATUTORY OBLIGATIONS.

    ``(a) Minimum Period of Exclusion for Practitioners and Persons 
Failing To Meet Statutory Obligations.--
            (1) In general.--The second sentence of section 1156(b)(1) 
        of the Social Security Act (42 U.S.C. 1320c-5(b)(1)) is amended 
        by striking ``may prescribe)'' and inserting ``may prescribe, 
        except that such period may not be less than 1 year)''.
            (2) Conforming amendment.--Section 1156(b)(2) of such Act 
        (42 U.S.C. 1320c-5(b)(2)) is amended by striking ``shall 
        remain'' and inserting ``shall (subject to the minimum period 
        specified in the second sentence of paragraph (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
Sanction.--Section 1156(b)(1) of the Social Security Act (42 U.S.C. 
1320c-5(b)(1)) is amended--
            (1) in the second sentence, by striking ``and determines'' 
        and all that follows through ``such obligations,''; and
            (2) by striking the third sentence.

SEC. 205. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) Application of Intermediate Sanctions for Any Program 
Violations.--
            (1) In general.--Section 1876(i)(1) of the Social Security 
        Act (42 U.S.C. 1395mm(i)(1)) is amended by striking ``the 
        Secretary may terminate'' and all that follows and inserting 
        ``in accordance with procedures established under paragraph 
        (9), the Secretary may at any time terminate any such contract 
        or may impose the intermediate sanctions described in paragraph 
        (6)(B) or (6)(C) (whichever is applicable) on the eligible 
        organization if the Secretary determines that the 
        organization--
                    ``(A) has failed substantially to carry out the 
                contract;
                    ``(B) is carrying out the contract in a manner 
                substantially inconsistent with the efficient and 
                effective administration of this section; or
                    ``(C) no longer substantially meets the applicable 
                conditions of subsections (b), (c), (e), and (f).''.
            (2) Other intermediate sanctions for miscellaneous program 
        violations.--Section 1876(i)(6) of such Act (42 U.S.C. 
        1395mm(i)(6)) is amended by adding at the end the following new 
        subparagraph:
                    ``(C) In the case of an eligible organization for 
                which the Secretary makes a determination under 
                paragraph (1) the basis of which is not described in 
                subparagraph (A), the Secretary may apply the following 
                intermediate sanctions:
                            ``(i) Civil money penalties of not more 
                        than $25,000 for each determination under 
                        paragraph (1) if the deficiency that is the 
                        basis of the determination has directly 
                        adversely affected (or has the substantial 
                        likelihood of adversely affecting) an 
                        individual covered under the organization's 
                        contract.
                            ``(ii) Civil money penalties of not more 
                        than $10,000 for each week beginning after the 
                        initiation of procedures by the Secretary under 
                        paragraph (9) during which the deficiency that 
                        is the basis of a determination under paragraph 
                        (1) exists.
                            ``(iii) Suspension of enrollment of 
                        individuals under this section after the date 
                        the Secretary notifies the organization of a 
                        determination under paragraph (1) and until the 
                        Secretary is satisfied that the deficiency that 
                        is the basis for the determination has been 
                        corrected and is not likely to recur.''.
            (3) Procedures for imposing sanctions.--Section 1876(i) of 
        such Act (42 U.S.C. m(i)) is amended by adding at the end the 
        following new paragraph:
            ``(9) The Secretary may terminate a contract with an 
        eligible organization under this section or may impose the 
        intermediate sanctions described in paragraph (6) on the 
        organization in accordance with formal investigation and 
        compliance procedures established by the Secretary under 
        which--
                    ``(A) the Secretary first provides the organization 
                with the reasonable opportunity to develop and 
                implement a corrective action plan to correct the 
                deficiencies that were the basis of the Secretary's 
                determination under paragraph (1) and the organization 
                fails to develop or implement such a plan;
                    ``(B) in deciding whether to impose sanctions, the 
                Secretary considers aggravating factors such as whether 
                an entity has a history of deficiencies or has not 
                taken action to correct deficiencies the Secretary has 
                brought to their attention;
                    ``(C) there are no unreasonable or unnecessary 
                delays between the finding of a deficiency and the 
                imposition of sanctions; and
                    ``(D) the Secretary provides the organization with 
                reasonable notice and opportunity for hearing 
                (including the right to appeal an initial decision) 
                before imposing any sanction or terminating the 
                contract.''.
            (4) Conforming amendments.--Section 1876(i)(6)(B) of such 
        Act (42 U.S.C. mm(i)(6)(B)) is amended by striking the second 
        sentence.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1996.

         TITLE III--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

SEC. 301. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA 
              COLLECTION PROGRAM.

    (a) General Purpose.--Not later than January 1, 1996, the Secretary 
(in this title referred to as the ``Secretary'') shall establish a 
national health care fraud and abuse data collection program for the 
reporting of final adverse actions (not including settlements in which 
no findings of liability have been made) against health care providers, 
suppliers, or practitioners as required by subsection (b), with access 
as set forth in subsection (c).
    (b) Reporting of Information.--
            (1) In general.--Each Government agency and health plan 
        shall report to the task force described in section 101 any 
        final adverse action (not including settlements in which no 
        findings of liability have been made) taken against a health 
        care provider, supplier, or practitioner.
            (2) Information to be reported.--The information to be 
        reported under paragraph (1) includes:
                    (A) The name and TIN (as defined in section 
                7701(a)(41)) of any health care provider, supplier, or 
                practitioner who is the subject of a final adverse 
                action.
                    (B) The name (if known) of any health care entity 
                with which a health care provider, supplier, or 
                practitioner is affiliated or associated.
                    (C) The nature of the final adverse action and 
                whether such action is on appeal.
                    (D) A description of the acts or omissions and 
                injuries upon which the final adverse action was based, 
                and such other information as the task force determines 
                is required for appropriate interpretation of 
                information reported under this section.
            (3) Confidentiality.--In determining what information is 
        required, the Secretary shall include procedures to assure that 
        the privacy of individuals receiving health care services is 
        appropriately protected.
            (4) Timing and form of reporting.--The information required 
        to be reported under this subsection shall be reported 
        regularly (but not less often than monthly) and in such form 
        and manner as the task force prescribes. Such information shall 
        first be required to be reported on a date specified by the 
        task force.
            (5) To whom reported.--The information required to be 
        reported under this subsection shall be reported to the task 
        force.
    (c) Disclosure and Correction of Information.--
            (1) Disclosure.--With respect to the information about 
        final adverse actions (not including settlements in which no 
        findings of liability have been made) reported to the task 
        force under this section respecting a health care provider, 
        supplier, or practitioner, the task force shall provide for--
                    (A) disclosure of the information, upon request, to 
                the health care provider, supplier, or licensed 
                practitioner, and
                    (B) procedures in the case of disputed accuracy of 
                the information.
            (2) Corrections.--Each Government agency and health plan 
        shall report corrections of information already reported about 
        any final adverse action taken against a health care provider, 
        supplier, or practitioner, in such form and manner that the 
        task force prescribes.
    (d) Access to Reported Information.--
            (1) Availability.--The information in this database shall 
        be available to Federal and State government agencies and 
        health plans pursuant to procedures that the task force shall 
        provide.
            (2) Fees for disclosure.--The task force may establish or 
        approve reasonable fees for the disclosure of information in 
        this database (other than with respect to requests by Federal 
        agencies). The amount of such a fee may not exceed the costs of 
        processing the requests for disclosure and of providing such 
        information. Such fees shall be available to the task force.
    (e) Protection From Liability for Reporting.--No person or entity 
shall be held liable in any civil action with respect to any report 
made as required by this section, without knowledge of the falsity of 
the information contained in the report.
    (f) Definitions and Special Rules.--For purposes of this section:
            (1)(A) The term ``final adverse action'' includes:
                    (i) Civil judgments against a health care provider 
                in Federal or State court related to the delivery of a 
                health care item or service.
                    (ii) Federal or State criminal convictions related 
                to the delivery of a health care item or service.
                    (iii) Actions by Federal or State agencies 
                responsible for the licensing and certification of 
                health care providers, suppliers, and licensed health 
                care practitioners, including--
                            (I) formal or official actions, such as 
                        revocation or suspension of a license (and the 
                        length of any such suspension), reprimand, 
                        censure or probation;
                            (II) any other loss of license of the 
                        provider, supplier, or practitioner, by 
                        operation of law; or
                            (III) any other negative action or finding 
                        by such Federal or State agency that is 
                        publicly available information.
                    (iv) Exclusion from participation in Federal and 
                State health care programs.
                    (v) Any other adjudicated actions or decisions that 
                the task force shall establish.
            (B) The term does not include any action--
                    (i) with respect to a malpractice claim; or
                    (ii) which is based on something other than health 
                care fraud and abuse.
            (2) The terms ``licensed health care practitioner'', 
        ``licensed practitioner'', and ``practitioner'' mean, with 
        respect to a State, an individual who is licensed or otherwise 
        authorized by the State to provide health care services (or any 
        individual who, without authority holds himself or herself out 
        to be so licensed or authorized).
            (3) The term ``health care provider'' means a provider of 
        services as defined in section 1861(u) of the Social Security 
        Act, and any entity, including a health maintenance 
organization, group medical practice, or any other entity listed by the 
Secretary in regulation, that provides health care services.
            (4) The term ``supplier'' means a supplier of health care 
        items and services described in section 1819 (a) and (b), and 
        section 1861 of the Social Security Act.
            (5) The term ``Government agency'' shall include:
                    (A) The Department of Justice.
                    (B) The Department of Health and Human Services.
                    (C) Any other Federal agency that either 
                administers or provides payment for the delivery of 
                health care services, including, but not limited to the 
                Department of Defense and the Veterans' Administration.
                    (D) State law enforcement agencies.
                    (E) State Medicaid fraud and abuse units.
                    (F) Federal or State agencies responsible for the 
                licensing and certification of health care providers 
                and licensed health care practitioners.
                    (G) The task force.
            (6) The term ``health plan'' has the meaning given such 
        term by section 101(c).
            (7) For purposes of paragraph (2), the existence of a 
        conviction shall be determined under paragraph (4) of section 
        1128(j) of the Social Security Act.
    (g) Conforming Amendment.--Section 1921(d) of the Social Security 
Act is amended by inserting ``and section 301 of the Health Care Anti-
Fraud Act of 1995'' after ``section 422 of the Health Care Quality 
Improvement Act of 1986''.

                      TITLE IV--MONETARY PENALTIES

SEC. 401. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

    (a) Modifications of Amounts of Penalties and Assessments.--Section 
1128A(a) of the Social Security Act (42 U.S.C. 1320a-7a(a)) is amended 
in the matter following paragraph (3)--
            (1) by striking ``$2,000'' and inserting ``$10,000'';
            (2) by striking $15,000 and inserting $75,000; and
            (3) by striking ``twice the amount'' and inserting ``3 
        times the amount''.
    (b) Claim for Item or Service Based on Incorrect Coding or 
Medically Unnecessary Services.--Section 1128A(a)(1) of the Social 
Security Act (42 U.S.C. 1320a-7a(a)(1)) is amended--
            (1) in subparagraph (A) by striking ``claimed,'' and 
        inserting ``claimed, including any person who engages in a 
        pattern or practice of presenting or causing to be presented a 
        claim for an item or service that is based on a code that the 
        person knows or has reason to know will result in a greater 
        payment to the person than the code the person knows or has 
        reason to know is applicable to the item or service actually 
        provided,'';
            (2) in subparagraph (C), by striking ``or'' at the end;
            (3) in subparagraph (D), by striking ``; or'' and inserting 
        ``, or''; and
            (4) by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person knows or has reason to know is not 
                medically necessary; or''.
    (c) Permittng Secretary To Impose Civil Monetary Penalty.--Section 
1128A(b) of the Social Security Act (42 U.S.C. 1320a-7a(a)) is amended 
by
            (1) adding the following new paragraph:
            ``(3) Any person (including any organization, agency, or 
        other entity, but excluding a beneficiary as defined in 
        subsection (i)(5)) who the Secretary determines has violated 
        section 1128B(b) of this title shall be subject to a civil 
        monetary penalty of not more than $10,000 for each such 
        violation. In addition, such person shall be subject to an 
        assessment of not more than three times the total amount of the 
        remuneration offered, paid, solicited, or received in violation 
        of section 1128B(b). The total amount of remuneration subject 
        to an assessment shall be calculated without regard to whether 
        some portion thereof also may have been intended to serve a 
        purpose other than one proscribed by section 1128B(b).'' and
            (2) striking $2,000 each place it appears and inserting 
        $10,000.
    (d) Sanctions Against Practitioners and Persons for Failure To 
Comply With Statutory Obligations.--Section 1156(b)(3) of the Social 
Security Act (42 U.S.C. 1320c-5(b)(3)) is amended by striking ``the 
actual or estimated cost'' and inserting ``up to $10,000 for each 
instance''.
    (e) Procedural Provisions.--Section 1876(i)(6) of the Social 
Security Act (42 U.S.C. m(i)(6)) is amended
            (1) by adding at the end the following new subparagraph:
                    ``(D) The provisions of section 1128A (other than 
                subsections (a) and (b)) shall apply to a civil money 
                penalty under subparagraph (A) or (B) in the same 
                manner as they apply to a civil money penalty or 
                proceeding under section 1128A(a).'',
            (2) by striking $25,000 and inserting $125,000;
            (3) by striking $100,000 and inserting $1,000,000; and
            (4) by striking $15,000 and inserting $75,000.
    (f) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Programs or Plans.--
            (1) Offer of remuneration.--Section 1128A(a) of the Social 
        Security Act (42 U.S.C. 1320a-7a(a)) is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (1)(D);
                    (B) by striking ``, or'' at the end of paragraph 
                (2) and inserting a semicolon;
                    (C) by striking the semicolon at the end of 
                paragraph (3) and inserting ``; or''; and
                    (D) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) offers to or transfers remuneration to any individual 
        eligible for benefits under title XVIII of this Act, or under a 
        State health care program (as defined in section 1128(h)) that 
        such person knows or should know is likely to influence such 
        individual to order or receive from a particular provider, 
        practitioner, or supplier any item or service for which payment 
        may be made, in whole or in part, under title XVIII, or a State 
        health care program;''.
            (2) Remuneration defined.--Section 1128A(i) of such Act (42 
        U.S.C. 1320a-7a(i)) is amended by adding the following new 
        paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value. The term `remuneration' does not include--
                    ``(A) the waiver of coinsurance and deductible 
                amounts by a person, if--
                            ``(i) the waiver is not offered as part of 
                        any advertisement or solicitation;
                            ``(ii) the person does not routinely waive 
                        coinsurance or deductible amounts; and
                            ``(iii) the person--
                                    ``(I) waives the coinsurance and 
                                deductible amounts after determining in 
                                good faith that the individual is in 
                                financial need;
                                    ``(II) fails to collect coinsurance 
                                or deductible amounts after making 
                                reasonable collection efforts; or
                                    ``(III) provides for any 
                                permissible waiver as specified in 
                                section 1128B(b)(3) or in regulations 
                                issued by the Secretary;
                    ``(B) differentials in coinsurance and deductible 
                amounts as part of a benefit plan design as long as the 
                differentials have been disclosed in writing to all 
                beneficiaries, third party payors, and providers, to 
                whom claims are presented; or
                    ``(C) incentives given to individuals to promote 
                the delivery of preventive care.
    (g) Clarification of Intent Standard.--Section 1128A(i) of the 
Social Security Act (42 U.S.C. 1320a-7a(i)) is amended, by adding at 
the end the following new paragraph:
            ``(6) The term `should know' means that a person, with 
        respect to information--
                    ``(A) acts in deliberate ignorance of the truth or 
                falsity of the information; or
                    ``(B) acts in reckless disregard of the truth or 
                falsity of the information.''
    (h) Effective Date.--The amendments made by this section shall take 
effect January 1, 1996.

SEC. 402. OTHER SOCIAL SECURITY ACT CIVIL PENALTIES.

    (a) Standards for Nursing Facilities.--
            (1) Providing advance notice of survey to nursing 
        facility.--Section 1819(g)(2)(A)(i) of such Act (42 U.S.C. 
        1395i-3(g)(2)(A)(i)) is amended by striking ``$2,000'' and 
        inserting ``$10,000''.
    (b) Distribution by Suppliers of Medical Equipment of Medical 
Necessity Forms.--
            (1) Section 1834(j)(2)(A)(iii) of such Act (42 U.S.C. 
        1395m(j)(2)(A)(iii)), as added by section 131(a)(1) of the 
        Social Security Act Amendments of 1994, is amended by striking 
        ``$1,000'' and inserting ``$5,000''; and
            (2) Section 1834(j)(2)(B) of the Social Security Act is 
        amended by inserting ``one-page'' before ``form''; and deleting 
        ``or other document'' after ``form''.
    (c) Intermediate Sanctions for Providers or Suppliers of Clinical 
Diagnostic Laboratory Tests.--Section 1846(b)(2)(A)(ii) of such Act (42 
U.S.C. 1395w-2(b)(2)(A)(ii)) is amended by striking ``$10,000'' and 
inserting ``$50,000''.
    (d) Medicare Secondary Payer.--
            (1) Offering financial incentives for beneficiaries not to 
        enroll in primary plans.--The second sentence of section 
        1862(b)(3)(C) of such Act (42 U.S.C. 1395y(b)(3)(C)) is amended 
        by striking ``$5,000'' and inserting ``$25,000''.
            (2) Failure of employer to provide matching information on 
        secondary payer situations.--The second sentence of section 
        1862(b)(5)(C)(ii) of such Act (42 U.S.C. 1395y(b)(5)(C)(ii) is 
        amended by striking ``$1,000'' and inserting ``$5,000''.
            (3) Failure of provider to provide information on 
        availability of other payers.--Section 1862(b)(6)(B) of such 
        Act (42 U.S.C. 1395y(b)(6)(B)), as added by section 
        151(a)(2)(A) of the Social Security Act Amendments of 1994, is 
        amended by striking ``$2,000'' and inserting ``$10,000''.
    (e) Referrals by Physicians With Ownership or Investment 
Interests.--
            (1) Circumvention schemes.--Section 1877(g)(4) of such Act 
        (42 U.S.C. 1395nn(g)(4)) is amended by striking ``$100,000'' 
        and inserting ``$500,000''.
            (2) Failure to report information.--Section 1877(g)(5) of 
        such Act (42 U.S.C. 1395nn(g)(5)) is amended by striking 
        ``$10,000'' and inserting ``$50,000''.
    (f) Medicare Supplemental Policies.--
            (1) Issuance of policies where no standards in effect.--The 
        second sentence of section 1882(a)(2) of such Act (42 U.S.C. 
        1395ss(a)(2)) is amended by striking ``$25,000'' and inserting 
        ``$125,000''.
            (2) Misrepresentations of policies.--Section 1882(d) of 
        such Act (42 U.S.C. 1395ss(d)) is amended--
                    (A) in paragraphs (1), (2), and (4)(A), by striking 
                ``$5,000'' and inserting ``$25,000''; and
                    (B) in paragraphs (3)(A) and (3)(B)(iv), by 
                striking ``$25,000 (or $15,000'' and inserting 
                ``$125,000 (or $75,000''.
            (3) Violation of benefits standards.--Section 1882(p) of 
        such Act (42 U.S.C. 1395ss(p)) is amended by striking ``$25,000 
        (or $15,000'' each place it appears in paragraphs (8) and 
        (9)(C) and inserting ``$125,000 (or $75,000''.
            (4) Violation of guaranteed renewability standards.--
        Section 1882(q)(5)(C) of such Act (42 U.S.C. 1395ss(q)(5)(C)) 
        is amended by striking ``$25,000'' and inserting ``$125,000''.
            (5) Violation of loss ratio standards.--Section 
        1882(r)(6)(A) of such Act (42 U.S.C. 1395ss(r)(6)(A)) is 
        amended by striking ``$25,000'' and inserting ``$125,000''.
            (6) Violation of pre-existing condition standards.--Section 
        1882(s)(3) of such Act (42 U.S.C. 1395ss(s)(3)) is amended by 
        striking ``$5,000'' and inserting ``$25,000''.
            (7) Medicare select policies.--Section 1882(t)(2) of such 
        Act (42 U.S.C. 1395ss(t)(2)) is amended by striking ``$25,000'' 
        and inserting ``$125,000''.
    (g) Violation of Home Health Participation Standards.--Section 1891 
of such Act (42 U.S.C. 1395bbb) is amended--
            (1) in subsection (a)(3)(D)(iii)(III), by striking 
        ``$5,000'' and inserting ``$25,000'';
            (2) in subsection (c)(1), by striking ``$2,000'' and 
        inserting ``$10,000''; and
            (3) in subsection (f)(2)(A)(i), by striking ``$10,000'' and 
        inserting ``$50,000''.

SEC. 403. SOCIAL SECURITY ACT CRIMINAL PENALTIES.

    (a) Section 1128B of the Social Security Act (42 U.S.C. 1320a-7b) 
is amended--
            (1) in subsection (a)--
                    (A) by striking ``$25,000'' and inserting 
                ``$50,000'', and
                    (B) by striking ``$10,000'' and inserting 
                ``$20,000'';
            (2) in subsections (b), (c), and (d), by striking 
        ``$25,000'' each place it appears and inserting ``$50,000''; 
        and
            (3) in subsection (e), by striking ``$2,000'' and inserting 
        ``$4,000''.

                TITLE V--AMENDMENTS TO ANTI-KICKBACK LAW

SEC. 501. CLARIFICATION OF STANDARDS.

    (a) Section 1128B(b) of the Social Security Act (42 U.S.C. 1320a-
7b(b)) is amended by inserting, ``the substantial and primary purpose 
of which is,'' after ``in kind'' in paragraph (1) thereof, and after 
``any person'' in paragraph (2) thereof.
    (b) Section 1128A(i) of the Social Security Act (42 U.S.C. 1320a-
7a(i)) is amended by adding at the end the following new paragraph:
            ``(6) The term ``should know'' means that a person, with 
        respect to information--
                    ``(A) acts in deliberate ignorance of the truth or 
                falsity of the information; or
                    ``(B) acts in reckless disregard of the truth or 
                falsity of the information.''

SEC. 502. CLARIFICATIONS AND ADDITIONS TO ANTI-KICKBACK EXCEPTIONS.

    (a) Exception for Discounts.--Section 1128B(b)(3)(A) of the Social 
Security Act (42 U.S.C. 1320a-7b(b)(3)(A)) is amended by inserting the 
following: ``(including reductions in price applied to combinations of 
items and services, and reductions made available as part of 
capitation, risk sharing, disease management or similar programs)'' 
after ``a discount or other reduction in price''; and by inserting at 
the end: ``provided, however, that where an entity which does not 
report its costs on a cost report separately claims an item or service 
for payment, and payment by the Medicare program or a state health care 
program is not based on actual acquisition costs, then a price 
reduction on the item or service may be properly disclosed and 
appropriately reflected by providing full and accurate information 
concerning the price reduction at the time the value of the reduction 
is known, at the request of the Secretary or a State agency.''
    (b) Section 1128B(b)(3) of the Social Security Act (42 U.S.C. 
Sec. 1320a-7b(b)(3)) is amended as follows:
            (1) In subparagraph (D), by striking ``Public Health 
        Service Act; and'' and inserting ``Public Health Service Act;''
            (2) By renumbering subparagraph (E) as subparagraph (K).
    (c) Exception for Managed Care Relationships.--Section 1128B(b)(3) 
of the Social Security Act (42 U.S.C. 1320a-7b(b)(3) is amended by 
inserting after subparagraph (D) the following:
                    ``(E) any reduction in cost sharing or increased 
                benefits given to an individual, any amounts paid to a 
                provider for an item or service furnished to an 
                individual, or any discount or reduction in price given 
                by the provider for such item or service if the item or 
                service is provided by an organization which--
                            ``(i) provides health care services 
                        directly or through one or more subsidiary 
                        entities or arranges under agreement with 
                        contract health care providers for the 
                        provision of items or services, in exchange for 
                        a premium; and
                            ``(ii) assumes or, in the case of items or 
                        services provided under agreement with contract 
                        health care providers, places the contract 
                        health care providers under, substantial 
                        financial risk (including through a withhold, 
                        capitation, incentive pool, per diem payment, 
                        or other similar substantial risk-sharing 
                        arrangement) for the provision of health 
                        services.
                For the purpose of this subparagraph, the term 
                ``contract health care provider'' means an individual 
                or entity under contract with a health plan to furnish 
                items or services to enrollees who are covered by the 
                health plan (which may include Title XVIII 
                beneficiaries and Title XIX recipients).''.
    (d) Exception for Risk-Sharing Arrangements.--Section 1128B(b)(3) 
of the Social Security Act (42 U.S.C. 1320a-7b(b)(3) is amended--
            (1) by redesignating subparagraph (E) as subparagraph (F);
            (2) by striking ``and'' at the end of subparagraph (D); and
            (3) by inserting after subparagraph (D) the following:
                    ``(E) any remuneration between an organization and 
                a provider of services pursuant to an agreement between 
                the organization and provider if the written agreement 
                places the provider of services at substantial 
                financial risk for the cost or utilization of the 
                services the provider is obligated to provide, whether 
                through capitation, incentive pools, per diem payments, 
                or a similar risk-sharing arrangement that places the 
                provider at substantial financial risk; and''.
    (e) Exception for De Minimus Remuneration.--Section 1128B(b)(3) of 
the Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is amended by 
inserting the following new subparagraph:
                    ``(F) items provided free of charge to a licensed 
                health care practitioner who is furnishing services 
                reimbursed under title XVIII or a State health care 
                program, provided the items primarily benefit patients 
                receiving such services and the value of the items does 
                not exceed limits set forth in generally accepted 
                professional or ethical guidelines applicable to the 
                health care practitioner (or, if no such guidelines 
                exist, the value of the items does not exceed limits 
                established by the Secretary);''.
    (f) Exceptions for Drug Samples.--Section 1128B(b)(3) of the Social 
Security Act (42 U.S.C. 1320a-7b(b)(3)) is amended by inserting the 
following new subparagraph:
                    ``(G) drug samples distributed in compliance with 
                section 503(d) of the Federal Food, Drug, and Cosmetic 
                Act (21 U.S.C. Sec. 553(d));''.
    (g) Exception for Scientific and Educational programs for 
Practitioners.--Section 1128B(b)(3) of the Social Security Act (42 
U.S.C. 1320a-7b(b)(3)) is amended by inserting the following new 
subparagraph:
                    ``(H) any amount paid to support scientific or 
                educational programs or materials for licensed health 
                care practitioners or pharmacists, provided that--
                            ``(i) such programs or materials are 
                        designed to improve the care or treatment of 
                        patients;
                            ``(ii) such programs are conducted in 
                        accordance with generally accepted professional 
                        or ethical guidelines applicable to the health 
                        care practitioner; and
                            ``(iii) the receipt of such amount, or of 
                        such programs or materials, is not conditioned 
                        on the purchase, lease, order, or furnishing 
                        (or the recommending for purchase, lease, 
                        order, or furnishing) of any item or service 
                        reimbursed under Title XVIII or a State health 
                        care program;''.
    (h) Exception for Educational Programs for Patients.--Section 
1128B(b)(3) of the Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is 
amended by inserting the following new subparagraph:
                    ``(I) any amount paid to provide educational 
                programs or materials for patients, provided that--
                            ``(i) the programs or materials are 
                        designed to improve the care, treatment 
                        (including compliance with treatment regimes), 
                        or health of such patients; and
                            ``(ii) the receipt of such amount, or of 
                        such programs or materials, is not conditioned 
                        on the purchase, lease, order or furnishing (or 
                        the recommending of the purchase, lease, order, 
                        or furnishing) of any item or service 
                        reimbursed under Title XVIII or a State health 
                        care program;''.
    (i) Exception for Payments Made on Behalf of Health Plans.--Section 
1128B(b)(3) of the Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is 
amended by inserting the following new subparagraph:
                    ``(J) any amount paid by a contract health plan 
                service firm to a contract health provider, provided 
                that the amount is paid at the direction of or on 
                behalf of a health plan, and that the purpose of the 
                payment is to reduce the cost or improve the quality of 
                items or services provided by the health plan to its 
                enrollees. For purposes of this subparagraph, the 
                term--
                            ``(i) `contract health plan service firm' 
                        means an entity that is under a written 
                        agreement with a health plan to assist in 
                        carrying out the functions of the health plan;
                            ``(ii) `contract health provider' means an 
                        individual or entity that is under written 
                        agreement with a health plan to furnish to the 
                        health plan's enrollees items or services that 
                        are covered by the health plan, or reimburse 
                        under Title XVIII or a State health care plan; 
                        and
                            ``(iii) `health plan' means an entity that 
                        furnishes or arranges under agreement with 
                        contract health care providers for the 
                        furnishing of items or services to enrollees, 
                        or furnishes insurance coverage for the 
                        provision of such items and services, in 
                        exchange for a premium.''.

SEC. 503. CLARIFICATION OF SAFE HARBOR AUTHORITY IN ANTI-KICKBACK 
              PROVISIONS.

    Section 1128B(b) of the Social Security Act (42 U.S.C. 1320a-7b(b)) 
is amended by adding at the end the following new paragraph:
            ``(4) The regulations authorized by section 14(a) of the 
        Medicare and Medicaid Patient and Program Protection Act of 
        1987 are--
                    ``(A) solely for the purpose of adding additional 
                exceptions to the conduct proscribed by this 
                subsection, not for the purpose of limiting the scope 
                of the exceptions specified in paragraph (3) of this 
                subsection; and
                    ``(B) for the purpose of prescribing criteria for 
                qualifying for an exception notwithstanding the intent 
                of the parties.''.

         TITLE VI AMENDMENTS TO THE PHYSICIAN SELF-REFERRAL LAW

SEC. 601. FINANCIAL RELATIONSHIP DEFINED.

    (a) Section 1877(a)(2) of the Social Security Act (42 U.S.C. 
1395nn(a)(2)) is amended by deleting the paragraph heading ``(A)''; by 
deleting ``,or'' at the end of paragraph (a) and by deleting, in its 
entirety, paragraph (B).
    (b) Section 1877(b) of the Social Security Act (42 U.S.C. 
1395nn(b)) by deleting in its heading all language following 
``EXCEPTIONS''.
    (c) Section 1877(d) of the Social Security Act (42 U.S.C. 
1395nn(d)) is amended in its title by deleting all language after 
``EXCEPTIONS''.
    (d) Section 1877(e) of the Social Security Act (42 U.S.C. 
1395nn(e)) is deleted in its entirety.
    (e) Section 1877(f) of the Social Security Act (42 U.S.C. 
1395nn(f)) is amended by deleting ``, and compensation'' after 
``investment'' and paragraph (2) is amended by deleting ``, or with a 
compensation arrangement (as described in subsection (a)(2)(B)) after 
``investment interest'' and by deleting ``or who have such a 
compensation relationship with the entity'' after ``investment 
interest.''
    (f) Section 1877(h) of the Social Security Act (42 U.S.C. 
1395nn(h)) is amended by deleting paragraphs (1), (2), and (3).

SEC. 602. SELF-REFERRALS FOR PHYSICIAN SERVICES.

    Section 1877(b)(1) of the Social Security Act (42 U.S.C. 
1395nn(b)(1)) is amended by inserting ``the physician or'' immediately 
before ``another physician.''

SEC. 603. RISK-SHARING ARRANGEMENTS.

    Section 1877(b)(3) of the Social Security Act (42 U.S.C. 
1395nn(b)(3)) is amended as follows:
            (1) By deleting from the heading the phrase ``Prepaid 
        Plans'' and inserting in its place ``Risk-Sharing 
        Arrangements''.
            (2) By deleting from the heading the word ``by'' and 
        inserting in its place ``to an individual enrolled with''; and
            (3) By adding after subparagraph (3)(D) the following new 
        subparagraph:
                    ``(E) pursuant to written agreement between the 
                organization and the provider of services if the 
                written agreement places the provider of services at 
                substantial financial risk (full or partial) for the 
                cost or utilization of the services the provider is 
                obligated to provide, whether through capitation, 
                incentive pools, per diem payment arrangements, or 
                other substantial financial risk-sharing 
                arrangements.''.

SEC. 604. PHYSICIAN OWNERSHIP.

    Section 1877(d) of the Social Security Act (42 U.S.C. 1395nn(d)) is 
amended by inserting at the end the following new paragraph:
            ``(4) Integrated delivery system ownership.--In the case of 
        the physician's ownership or investment interest in a 
        management services organization (MSO), preferred provider 
        organization (PPO), physician-hospital organization (PHO), 
        physician-hospital arrangement (PHA), or similar organization 
        designed to facilitate the integrated delivery of health care 
        services, if the referring physician is managed by or contracts 
        with the MSO, PPO, PHO, PHA or similar organization (or the 
        group practice of which the physician is a member is managed by 
        or contracts with the MSO, PPO, PHO, PHA or similar 
        organization and the ownership or investment interest is in the 
        MSO, PPO, PHA or similar organization itself (and not merely in 
        a subdivision thereof).''.

SEC. 605. SHARED FACILITY SERVICES.

    Section 1877(b) of such Act (42 U.S.C. 1395nn(b)) is amended--
            (1) by redesignating paragraph (4) as paragraph (6); and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Shared facility services.--
                    ``(A) In general.--In the case of a shared facility 
                services of a shared facility
                            ``(i) that is furnished
                                    ``(I) personally by the referring 
                                physician who is a shared facility 
                                physician by an individual directly 
                                employed or directly supervised by such 
                                a physician,
                                    ``(II) by a shared facility in a 
                                building in which the referring 
                                physician furnishes substantially all 
                                of the services of the physician that 
                                are unrelated to the furnishing of 
                                shared facility services, and
                                    ``(III) to a patient of a shared 
                                facility physician; and
                            ``(ii) that is billed by the referring 
                        physician.
                    ``(B) Shared facility related definitions.--
                            (i) Shared facility service.--The term 
                        ``shared facility service'' means, with respect 
                        to a shared facility, a designated health 
                        service furnished by the facility to patients 
                        of shared facility physicians.
                            (ii) Shared facility.--The term ``shared 
                        facility'' means an entity that furnishes 
                        shared facility services under a shared 
                        facility arrangement.
                            (iii) Shared facility physician.--The term 
                        ``shared facility, a physician who has a 
                        financial relationship under a shared facility 
                        arrangement with the facility.
                            (iv) Shared facility arrangement.--The term 
                        ``shared facility arrangement'' means, with 
                        respect to the provision of shared facility 
                        services in a building, a financial 
                        arrangement.
                                    (I) which is only between 
                                physicians who are providing services 
                                (unrelated to shared facility services) 
                                in the same building;
                                    (II) in which the overhead expenses 
                                of the facility are shared, in 
                                accordance with methods previously 
                                determined by the physicians in the 
                                arrangement; and
                                    (III) which, in the case of a 
                                corporation, is wholly owned and 
                                controlled by shared facility 
                                physicians.''.

SEC. 606. PAYER DIRECTED CARE.

    (a) Section 1877(b) of the Social Security Act (42 U.S.C. 
1395nn(b)) is amended by inserting the following paragraph after 
paragraph 4, as amended by section 604 of the Health Care Anti-Fraud 
Act of 1995:
            ``(5) Payer directed care.--In the case of items or 
        services furnished to a patient where the selection of provider 
        is substantially determined by, or results from financial 
        incentives provided by, a payer of such items or services.''.

SEC. 607. SELF-REFERRALS FOR CERTAIN DESIGNATED HEALTH SERVICES.

    (a) Section 1877(h)(6) of the Social Security Act (42 U.S.C. 
n(h)(6)) is amended by deleting paragraph (k) thereof.

SEC. 608. DEFINITION OF DIRECT SUPERVISION.

    (a) Section 1877(h) of the Social Security Act (42 U.S.C. n(h)) is 
amended by adding at the end thereof the following new paragraph:
            ``(7) `Directly supervised' by a physician means the 
        physician has responsibility for oversight of the provision, by 
        a person (whether or not an employee of the physician or group 
        practice), of in-office ancillary services, and such 
        responsibility must include:
                    ``(A) Specifying the tasks to be performed by the 
                person;
                    ``(B) Instructing the person with regard to the 
                manner and method for performing the tasks;
                    ``(C) Evaluating the person's performance of the 
                tasks;
                    ``(D) Taking, or causing to be taken, personnel 
                actions which are based upon evaluation of the person's 
                performance of the tasks; and
                    ``(E) Being available, in person or by telephone, 
                to the person at all times such person is providing in-
                office ancillary services.''.

SEC. 609. EFFECTIVE DATE.

    (a) Section 1877 of the Social Security Act (42 U.S.C. n(h)) is 
amended with respect to its effective date as follows:
    ``In the case of designated health services other than clinical 
laboratory services, this law shall apply to referrals made after the 
later of:
            ``(1) December 31, 1994; or
            ``(2) the date that final regulations implementing all 
        sections of this law are promulgated.''.

              TITLE VII--MEDICARE BILLING ABUSE PREVENTION

SEC. 701. IMPLEMENTATION OF GENERAL ACCOUNTING OFFICE RECOMMENDATIONS 
              REGARDING MEDICARE CLAIMS PROCESSING.

    (a) In General.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary shall, by regulation, contract, 
change order, or otherwise, require Medicare carriers to acquire 
commercial automatic data processing equipment (in this title referred 
to as ``ADPE'') meeting the requirements of section 702 to process 
Medicare part B claims for the purpose of identifying intentional 
billing code abuse.
    (b) Supplementation.--Any ADPE acquired in accordance with 
subsection (a) shall be used as a supplement to any other ADPE used in 
claims processing by Medicare carriers.
    (c) Standardization.--In order to ensure uniformity, the Secretary 
may require that Medicare carriers that use a common claims processing 
system acquire common ADPE in implementing subsection (a).
    (d) Implementation Date.--Any ADPE acquired in accordance with 
subsection (a) shall be in use by Medicare carriers not later than one 
year after the date of the enactment of this Act.

SEC. 702. MINIMUM SOFTWARE REQUIREMENTS.

    (a) In General.--The requirements described in this section are as 
follows:
            (1) The ADPE shall be a commercial item and shall be 
        reviewed by a private standard setting organization with 
        expertise in the development of descriptive terms and 
        identifying codes for reporting medical services and 
        procedures. The Secretary shall determine the appropriate 
        organization to perform this review.
            (2) The ADPE shall surpass the capability of ADPE used in 
        the processing of Medicare part B claims for identification of 
        code manipulation on the day before the date of the enactment 
        of this Act.
            (3) The ADPE shall be capable of being modified to--
                    (A) satisfy pertinent statutory requirements of the 
                Medicare program; and
                    (B) conform to general policies of the Health Care 
                Financing Administration regarding claims processing.
    (b) Minimum Standards.--Nothing in this title shall be construed as 
preventing the use of ADPE which exceeds the minimum requirements 
described in subsection (a).

SEC. 703. DISCLOSURE.

    (a) In General.--Notwithstanding any other provision of law, and 
except as provided in subsection (b), any ADPE or date related thereto 
acquired by Medicare carriers in accordance with section 701(a) shall 
not be subject to public disclosure.
    (b) Exception.--The Secretary may authorize the public disclosure 
of any ADPE or data related thereto acquired by Medicare carriers in 
accordance with section 701(a) if the Secretary determines that--
            (1) release of such information is in the public interest; 
        and
            (2) the information to be released is not protected from 
        disclosure under section 552(b) of title 5, United States Code.
    (c) Copyright Protection.--Nothing in this part, or any other part, 
shall be construed to divest the holder of a copyright in any code set, 
of its copyright in such code set or in any derivative work made 
therefrom.

SEC. 704. REVIEW AND MODIFICATION OF REGULATIONS.

    Not later than 30 days after the date of the enactment of this Act, 
the Secretary shall order a review of existing regulations, guidelines, 
and other guidance governing Medicare payment policies and billing code 
abuse to determine if revision of or addition to those regulations, 
guidelines, or guidance is necessary to maximize the benefits to the 
Federal Government of the use of ADPE acquired pursuant to section 701.

SEC. 705. DEFINITIONS.

    For purposes of this title--
            (1) The term ``automatic data processing equipment'' (ADPE) 
        has the same meaning as in section 111(a)(2) of the Federal 
        Property and Medicare payments for Medicare part B benefits 
        payable on a charge basis and to perform other related 
        functions.
            (2) The term ``billing code abuse'' means the intentional 
        and willful submission to Medicare carriers of claims for 
        services that include procedure codes that do not appropriately 
        describe the total services provided or otherwise violate 
        Medicare payment policies.
            (3) The term ``commercial item'' has the same meaning as in 
        section 4(12) of the Office of Federal Procurement Policy Act 
        (41 U.S.C. 403(12)).
            (4) The term ``Medicare part B'' means the supplementary 
        medical insurance program authorized under part B of title 
        XVIII of the Social Security Act (42 U.S.C. 1395j-1395w-4).
            (5) The term ``Medicare carrier'' means an entity that has 
        a contract with the Health Care Financing Administration to 
        determine and make Medicare payments for Medicare part B 
        benefits payable on a charge basis and to perform other related 
        functions.
            (6) The term ``payment policies'' means regulations and 
        other rules that govern billing code abuses such as unbundling, 
        global service violations, double billing, and unnecessary use 
        of assistants at surgery.
            (7) The term ``Secretary'' means the Secretary of Health 
        and Human Services.

SEC. 706. TERMINATION OF PROPOSED MEDICARE TRANSACTION SYSTEM.

    The Secretary may not implement the Medicare transaction system 
proposed to detect improper billing for items and services under the 
Medicare program resulting from the improper unbundling of items and 
services.
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