I

104TH CONGRESS

1ST SESSION H. R. 2390

To revise the restrictions under the medicare program against payment for

services furnished by a facility in which the referring physician has

an ownership interest, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 21, 1995

Mr. THOMAS (for himself, Mr. BILIRAKIS, and Mr. BARTON of Texas) introduced the following bill; which was referred to the Committee on Ways

and Means, and in addition to the Committee on Commerce for a period

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

concerned

A BILL

To revise the restrictions under the medicare program

against payment for services furnished by a facility in

which the referring physician has an ownership interest,

and for other purposes.

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

3 SECTION 1. SHORT TITLE; REFERENCES IN ACT.

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

5 ‘‘Medicare Physician Ownership Referral Reform Act of

6 1995’’.
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1 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex2 cept as otherwise specifically provided, whenever in this

3 Act an amendment is expressed in terms of an amendment

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

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

6 provision of the Social Security Act.

7 SEC. 2. REPEAL OF PROHIBITIONS BASED ON COMPENSA8 TION ARRANGEMENTS.

9 (a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.

10 1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that

11 follows through ‘‘equity,’’ and inserting the following: ‘‘is

12 (except as provided in subsection (c)) an ownership or in13 vestment interest in the entity through equity,’’.

14 (b) CONFORMING AMENDMENTS.—Section 1877 (42

15 U.S.C. 1395nn) is amended as follows:

16 (1) In subsection (b)—

17 (A) in the heading, by striking ‘‘TO BOTH

18 OWNERSHIP AND COMPENSATION ARRANGE19 MENT PROVISIONS’’ and inserting ‘‘WHERE FI20 NANCIAL RELATIONSHIP EXISTS’’; and

21 (B) by redesignating paragraph (4) as

22 paragraph (7).

23 (2) In subsection (c)—

24 (A) by amending the heading to read as

25 follows: ‘‘EXCEPTION FOR OWNERSHIP OR IN-
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1 VESTMENT INTEREST IN PUBLICLY TRADED

2 SECURITIES AND MUTUAL FUNDS’’; and

3 (B) in the matter preceding paragraph (1),

4 by striking ‘‘subsection (a)(2)(A)’’ and inserting

5 ‘‘subsection (a)(2)’’.

6 (3) In subsection (d)—

7 (A) by striking the matter preceding para8 graph (1);

9 (B) in paragraph (3), by striking ‘‘para10 graph (1)’’ and inserting ‘‘paragraph (4)’’; and

11 (C) by redesignating paragraphs (1), (2),

12 and (3) as paragraphs (4), (5), and (6), and by

13 transferring and inserting such paragraphs

14 after paragraph (3) of subsection (b).

15 (4) By striking subsection (e).

16 (5) In subsection (f)(2), as amended by section

17 152(a) of the Social Security Act Amendments of

18 1994—

19 (A) in the matter preceding paragraph (1),

20 by striking ‘‘ownership, investment, and com21 pensation’’ and inserting ‘‘ownership and in22 vestment’’;

23 (B) in paragraph (2), by striking ‘‘sub24 section (a)(2)(A)’’ and all that follows through
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1 ‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub2 section (a)(2),’’; and

3 (C) in paragraph (2), by striking ‘‘or who

4 have such a compensation relationship with the

5 entity’’.

6 (6) In subsection (h)—

7 (A) by striking paragraphs (1), (2), and

8 (3);

9 (B) in paragraph (4)(A), by striking clause

10 (iv); and

11 (C) in paragraph (4)(B), by striking

12 ‘‘RULES.—’’ and all that follows through ‘‘(ii)

13 FACULTY’’ and inserting ‘‘RULES FOR FAC14 ULTY.

15 SEC. 3. REVISION OF DESIGNATED HEALTH SERVICES SUB16 JECT TO PROHIBITION.

17 (a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.

18 1395nn(h)(6)) is amended by striking subparagraphs (B)

19 through (K) and inserting the following:

20 ‘‘(B) Items and services furnished by a

21 community pharmacy (as defined in paragraph

22 (1)).

23 ‘‘(C) Magnetic resonance imaging and

24 computerized tomography services.
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1 ‘‘(D) Outpatient physical therapy serv2 ices.’’.

3 (b) COMMUNITY PHARMACY DEFINED.—Section

4 1877(h) (42 U.S.C. 1395nn(h)), as amended by section

5 2(b)(6), is amended by inserting before paragraph (4) the

6 following new paragraph:

7 ‘‘(1) COMMUNITY PHARMACY.—The term ‘com8 munity pharmacy’ means any entity licensed or cer9 tified to dispense outpatient prescription drugs by

10 the State in which the entity is located (including an

11 entity which dispenses such drugs by mail order),

12 but does not include such an entity which is owned

13 and operated by—

14 ‘‘(A) a hospital;

15 ‘‘(B) an ambulatory surgical center de16 scribed in section 1832(a)(2)(F)(i); or

17 ‘‘(C) a prepaid plan described in subsection

18 (b)(3).’’.

19 (c) CONFORMING AMENDMENTS.—Section

20 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended in the

21 matter preceding subparagraph (A) by striking ‘‘services’’

22 and all that follows through ‘‘supplies)—’’ and inserting

23 ‘‘services—’’.
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1 SEC. 4. DELAY IN IMPLEMENTATION UNTIL PROMULGA2 TION OF REGULATIONS.

3 (a) IN GENERAL.—Section 13562(b) of OBRA–1993

4 (42 U.S.C. 1395nn note) is amended—

5 (1) in paragraph (1), by striking ‘‘paragraph

6 (2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and

7 (2) by adding at the end the following new

8 paragraph:

9 ‘‘(3) PROMULGATION OF REGULATIONS.—Not10 withstanding paragraphs (1) and (2), the amend11 ments made by this section shall not apply to any

12 referrals made before the effective date of final regu13 lations promulgated by the Secretary of Health and

14 Human Services to carry out such amendments.’’.

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

16 subsection (a) shall take effect as if included in the enact17 ment of OBRA–1993.

18 SEC. 5. EXCEPTIONS TO PROHIBITION.

19 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN20 CILLARY SERVICES.—

21 (1) REPEAL OF SITE-OF-SERVICE REQUIRE22 MENT.—Section 1877(b)(2)(A) (42 U.S.C.

23 1395nn(b)(2)(A)) is amended to read as follows:

24 ‘‘(A) that are furnished personally by the

25 referring physician, personally by a physician

26 who is a member of the same group practice as
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1 the referring physician, or personally by individ2 uals who are under the general supervision of

3 the physician or of another physician in the

4 group practice, and’’.

5 (2) CLARIFICATION OF TREATMENT OF PHYSI6 CIAN OWNERS OF GROUP PRACTICE.—Section

7 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is

8 amended by striking ‘‘physician or group practice’’

9 and inserting ‘‘physician, such group practice, or the

10 physician owners of such group practice’’.

11 (3) CONFORMING AMENDMENT.—Section

12 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by

13 amending the heading to read as follows: ‘‘ANCIL14 LARY SERVICES FURNISHED PERSONALLY OR

15 THROUGH GROUP PRACTICE.—’’.

16 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

17 FURNISHED IN A RURAL AREA.—Paragraph (5) of section

18 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section

19 2(b)(3)(C), is amended by striking ‘‘substantially all’’ and

20 inserting ‘‘not less than 75 percent’’.

21 (c) REVISION OF EXCEPTION FOR PREPAID

22 PLANS.—

23 (1) EXPANSION OF EXCEPTION FOR CERTAIN

24 MANAGED CARE ARRANGEMENTS.—Section

25 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is amended—
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1 (A) in the matter preceding subparagraph

2 (A), by striking ‘‘organization—’’ and inserting

3 ‘‘organization, directly or through contractual

4 arrangements with other entities, to individuals

5 enrolled with the organization—’’;

6 (B) by striking ‘‘or’’ at the end of subpara7 graph (C);

8 (C) by striking the period at the end of

9 subparagraph (D) and inserting a comma; and

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

11 subparagraphs:

12 ‘‘(E) with a contract with a State to pro13 vide services under the State plan under title

14 XIX (in accordance with section 1903(m)); or

15 ‘‘(F) which meets State regulatory require16 ments applicable to health maintenance organi17 zations and which—

18 ‘‘(i) provides designated health serv19 ices directly or through contractual ar20 rangements with providers;

21 ‘‘(ii) assumes financial risk for the

22 provision of services or provides services on

23 behalf of another individual or entity (in24 cluding but not limited to a self-insured

25 employer, indemnity plan, physician, or
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1 physician group) that assumes financial

2 risk for the provision of the item or serv3 ice; and

4 ‘‘(iii) subjects the services to a pro5 gram of utilization review offered by an or6 ganization described in a preceding sub7 paragraph, an organization meeting State

8 regulatory requirements applicable to utili9 zation review, or an organization accred10 ited to perform utilization review consid11 ered appropriate by the Secretary.’’.

12 (2) NEW EXCEPTION FOR OTHER CAPITATED

13 PAYMENTS.—Section 1877(b) (42 U.S.C.

14 1395nn(b)), as amended by section 2(b)(3)(C), is

15 amended—

16 (A) by redesignating paragraphs (4)

17 through (7) as paragraphs (5) through (8); and

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

19 following new paragraph:

20 ‘‘(4) OTHER CAPITATED PAYMENTS.—In the

21 case of a designated health service which is included

22 in the services for which a physician or physician

23 group (including a preferred provider organization)

24 is paid only on a capitated basis by a health plan or

25 insurer pursuant to a written arrangement between
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1 the plan or insurer and the physician or physician

2 group in which the physician or physician group as3 sumes financial risk for the furnishing of the serv4 ice.’’.

5 (d) NEW EXCEPTION FOR SHARED FACILITY SERV6 ICES.—

7 (1) IN GENERAL.—Section 1877(b) (42 U.S.C.

8 1395nn(b)), as amended by section 2(b)(3)(C) and

9 by subsection (c)(2), is amended—

10 (A) by redesignating paragraphs (5)

11 through (8) as paragraphs (6) through (9); and

12 (B) by inserting after paragraph (4) the

13 following new paragraph:

14 ‘‘(5) SHARED FACILITY SERVICES.—In the case

15 of a designated health service consisting of a shared

16 facility service of a shared facility—

17 ‘‘(A) that is furnished—

18 ‘‘(i) personally by the referring physi19 cian who is a shared facility physician or

20 personally by an individual directly em21 ployed or under the general supervision of

22 such a physician,

23 ‘‘(ii) by a shared facility in a building

24 in which the referring physician furnishes

25 substantially all of the services of the phy-
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1 sician that are unrelated to the furnishing

2 of shared facility services, and

3 ‘‘(iii) to a patient of a shared facility

4 physician; and

5 ‘‘(B) that is billed by the referring physi6 cian or a group practice of which the physician

7 is a member.’’.

8 (2) DEFINITIONS.—Section 1877(h) (42 U.S.C.

9 1395nn(h)), as amended by section 2(b)(6) and sec10 tion 3(b), is amended by inserting after paragraph

11 (1) the following new paragraph:

12 ‘‘(2) SHARED FACILITY RELATED DEFINI13 TIONS.—

14 ‘‘(A) SHARED FACILITY SERVICE.—The

15 term ‘shared facility service’ means, with re16 spect to a shared facility, a designated health

17 service furnished by the facility to patients of

18 shared facility physicians.

19 ‘‘(B) SHARED FACILITY.—The term

20 ‘shared facility’ means an entity that furnishes

21 shared facility services under a shared facility

22 arrangement.

23 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

24 term ‘shared facility physician’ means, with re25 spect to a shared facility, a physician (or a
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1 group practice of which the physician is a mem2 ber) who has a financial relationship under a

3 shared facility arrangement with the facility.

4 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

5 The term ‘shared facility arrangement’ means,

6 with respect to the provision of shared facility

7 services in a building, a financial arrange8 ment—

9 ‘‘(i) which is only between physicians

10 who are providing services (unrelated to

11 shared facility services) in the same build12 ing,

13 ‘‘(ii) in which the overhead expenses

14 of the facility are shared, in accordance

15 with methods previously determined by the

16 physicians in the arrangement, among the

17 physicians in the arrangement, and

18 ‘‘(iii) which, in the case of a corpora19 tion, is wholly owned and controlled by

20 shared facility physicians.’’.

21 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

22 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—

23 Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by

24 section 2(b)(3)(C), subsection (c)(2), and subsection

25 (d)(1), is amended—
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1 (1) by redesignating paragraphs (6) through

2 (9) as paragraphs (7) through (10); and

3 (2) by inserting after paragraph (5) the follow4 ing new paragraph:

5 ‘‘(6) NO ALTERNATIVE PROVIDERS IN AREA.—

6 In the case of a designated health service furnished

7 in any area with respect to which the Secretary de8 termines that individuals residing in the area do not

9 have reasonable access to such a designated health

10 service for which subsection (a)(1) does not apply.’’.

11 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

12 AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42

13 U.S.C. 1395nn(b)), as amended by section 2(b)(3)(C),

14 subsection (c)(2), subsection (d)(1), and subsection (e)(1),

15 is amended—

16 (1) by redesignating paragraphs (7) through

17 (10) as paragraphs (8) through (11); and

18 (2) by inserting after paragraph (6) the follow19 ing new paragraph:

20 ‘‘(7) SERVICES FURNISHED IN AMBULATORY

21 SURGICAL CENTERS.—In the case of a designated

22 health service furnished in an ambulatory surgical

23 center described in section 1832(a)(2)(F)(i).’’.

24 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

25 RENAL DIALYSIS FACILITIES.—Section 1877(b) (42
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1 U.S.C. 1395nn(b)), as amended by section 2(b)(3)(C),

2 subsection (c)(2), subsection (d)(1), subsection (e)(1), and

3 subsection (f), is amended—

4 (1) by redesignating paragraphs (8) through

5 (11) as paragraphs (9) through (12); and

6 (2) by inserting after paragraph (7) the follow7 ing new paragraph:

8 ‘‘(8) SERVICES FURNISHED IN RENAL DIALYSIS

9 FACILITIES.—In the case of a designated health

10 service furnished in a renal dialysis facility under

11 section 1881.’’.

12 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN

13 A HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

14 amended by section 2(b)(3)(C), subsection (c)(2), sub15 section (d)(1), subsection (e)(1), subsection (f), and sub16 section (g), is amended—

17 (1) by redesignating paragraphs (9) through

18 (12) as paragraphs (10) through (13); and

19 (2) by inserting after paragraph (8) the follow20 ing new paragraph:

21 ‘‘(9) SERVICES FURNISHED BY A HOSPICE PRO22 GRAM.—In the case of a designated health service

23 furnished by a hospice program under section

24 1861(dd)(2).’’.
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1 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN

2 A COMPREHENSIVE OUTPATIENT REHABILITATION FA3 CILITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

4 amended by section 2(b)(3)(C), subsection (c)(2), sub5 section (d)(1), subsection (e)(1), subsection (f), subsection

6 (g), and subsection (h), is amended—

7 (1) by redesignating paragraphs (10) through

8 (13) as paragraphs (11) through (14); and

9 (2) by inserting after paragraph (9) the follow10 ing new paragraph:

11 ‘‘(10) SERVICES FURNISHED IN A COMPREHEN12 SIVE OUTPATIENT REHABILITATION FACILITY.—In

13 the case of a designated health service furnished in

14 a comprehensive outpatient rehabilitation facility

15 under section 1861(cc)(2).’’.

16 SEC. 6. REPEAL OF REPORTING REQUIREMENTS.

17 Section 1877 (42 U.S.C. 1395nn) is amended—

18 (1) by striking subsection (f); and

19 (2) by striking subsection (g)(5).

20 SEC. 7. PREEMPTION OF STATE LAW.

21 Section 1877 (42 U.S.C. 1395nn) is amended by add22 ing at the end the following new subsection:

23 ‘‘(i) PREEMPTION OF STATE LAW.—This section pre24 empts State law to the extent State law is inconsistent

25 with this section.’’.
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1 SEC. 8. EFFECTIVE DATE.

2 Except as provided in section 4(b), the amendments

3 made by this Act shall apply to referrals made on or after

4 August 15, 1995, without regard to whether or not regula5 tions to carry out the amendments have been promulgated

6 by such date.

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