86–720

108TH CONGRESS REPT. 108–74 " HOUSE OF REPRESENTATIVES ! 1st Session Part 2

MEDICARE REGULATORY AND CONTRACTING REFORM ACT 

OF 2003

APRIL 29, 2003.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. TAUZIN, from the Committee on Energy and Commerce, 

submitted the following 

R E P O R T 

[To accompany H.R. 810] 

[Including cost estimate of the Congressional Budget Office]

The Committee on Energy and Commerce, to whom was referred 

the bill (H.R. 810) to amend title XVIII of the Social Security Act 

to provide regulatory relief and contracting flexibility under the 

Medicare Program, having considered the same, report favorably 

thereon with an amendment and recommend that the bill as 

amended do pass.

CONTENTS 

Page 

Amendment .............................................................................................................. 1

Purpose and Summary ............................................................................................ 37

Background and Need for Legislation .................................................................... 37

Hearings ................................................................................................................... 38

Committee Consideration ........................................................................................ 38

Committee Votes ...................................................................................................... 39

Committee Oversight Findings ............................................................................... 39

Statement of General Performance Goals and Objectives .................................... 39

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 39

Committee Cost Estimate ....................................................................................... 39

Congressional Budget Office Estimate ................................................................... 39

Federal Mandates Statement ................................................................................. 46

Advisory Committee Statement .............................................................................. 46

Constitutional Authority Statement ...................................................................... 46

Applicability to Legislative Branch ........................................................................ 46

Section-by-Section Analysis of the Legislation ...................................................... 46

Changes in Existing Law Made by the Bill, as Reported ..................................... 68

AMENDMENT

The amendment is as follows: 

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Strike all after the enacting clause and insert the following:

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

(a) SHORT TITLE.—This Act may be cited as the ‘‘Medicare Regulatory and Contracting Reform Act of 2003’’. 

(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except as otherwise specifically provided, whenever in this Act an amendment is expressed in terms of an amendment 

to or repeal of a section or other provision, the reference shall be considered to be 

made to that section or other provision of the Social Security Act. 

(c) TABLE OF CONTENTS.—The table of contents of this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; table of contents. 

Sec. 2. Findings and construction. 

Sec. 3. Definitions. 

TITLE I—REGULATORY REFORM 

Sec. 101. Issuance of regulations. 

Sec. 102. Compliance with changes in regulations and policies. 

Sec. 103. Reports and studies relating to regulatory reform. 

TITLE II—CONTRACTING REFORM 

Sec. 201. Increased flexibility in medicare administration. 

Sec. 202. Requirements for information security for medicare administrative contractors. 

TITLE III—EDUCATION AND OUTREACH 

Sec. 301. Provider education and technical assistance. 

Sec. 302. Small provider technical assistance demonstration program. 

Sec. 303. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman. 

Sec. 304. Beneficiary outreach demonstration program. 

Sec. 305. Inclusion of additional information in notices to beneficiaries about skilled nursing facility benefits. 

Sec. 306. Information on medicare-certified skilled nursing facilities in hospital discharge plans. 

TITLE IV—APPEALS AND RECOVERY 

Sec. 401. Transfer of responsibility for medicare appeals. 

Sec. 402. Process for expedited access to review. 

Sec. 403. Revisions to medicare appeals process. 

Sec. 404. Prepayment review. 

Sec. 405. Recovery of overpayments. 

Sec. 406. Provider enrollment process; right of appeal. 

Sec. 407. Process for correction of minor errors and omissions on claims without pursuing appeals process. 

Sec. 408. Prior determination process for certain items and services; advance beneficiary notices. 

TITLE V—MISCELLANEOUS PROVISIONS 

Sec. 501. Policy development regarding evaluation and management (E & M) documentation guidelines. 

Sec. 502. Improvement in oversight of technology and coverage. 

Sec. 503. Treatment of hospitals for certain services under medicare secondary payor (MSP) provisions. 

Sec. 504. EMTALA improvements. 

Sec. 505. Emergency Medical Treatment and Active Labor Act (EMTALA) Technical Advisory Group. 

Sec. 506. Authorizing use of arrangements to provide core hospice services in certain circumstances. 

Sec. 507. Application of OSHA bloodborne pathogens standard to certain hospitals. 

Sec. 508. BIPA-related technical amendments and corrections. 

Sec. 509. Conforming authority to waive a program exclusion. 

Sec. 510. Treatment of certain dental claims. 

Sec. 511. Enhancement of program integrity efforts in medicare provider enrollment. 

Sec. 512. Other provisions.

SEC. 2. FINDINGS AND CONSTRUCTION. 

(a) FINDINGS.—Congress finds the following: 

(1) The overwhelming majority of providers of services and suppliers in the 

United States are law-abiding persons who provide important health care services to patients each day. 

(2) The Secretary of Health and Human Services should work to streamline 

paperwork requirements under the medicare program and communicate clearer 

instructions to providers of services and suppliers so that they may spend more 

time caring for patients. 

(b) CONSTRUCTION.—Nothing in this Act shall be construed—

(1) to compromise or affect existing legal remedies for addressing fraud or 

abuse, whether it be criminal prosecution, civil enforcement, or administrative 

remedies, including under sections 3729 through 3733 of title 31, United States 

Code (known as the False Claims Act); or 

(2) to prevent or impede the Department of Health and Human Services in 

any way from its ongoing efforts to eliminate waste, fraud, and abuse in the 

medicare program. 

Furthermore, the consolidation of medicare administrative contracting set forth in 

this Act does not constitute consolidation of the Federal Hospital Insurance Trust 

Fund and the Federal Supplementary Medical Insurance Trust Fund or reflect any 

position on that issue. 

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SEC. 3. DEFINITIONS. 

(a) USE OF TERM SUPPLIER IN MEDICARE.—Section 1861 (42 U.S.C. 1395x) is 

amended by inserting after subsection (c) the following new subsection: 

‘‘Supplier 

‘‘(d) The term ‘supplier’ means, unless the context otherwise requires, a physician 

or other practitioner, a facility, or other entity (other than a provider of services) 

that furnishes items or services under this title.’’. 

(b) OTHER TERMS USED IN ACT.—In this Act: 

(1) BIPA.—The term ‘‘BIPA’’ means the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, as enacted into law by section 

1(a)(6) of Public Law 106–554. 

(2) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Health and 

Human Services. 

TITLE I—REGULATORY REFORM 

SEC. 101. ISSUANCE OF REGULATIONS. 

(a) REGULAR TIMELINE FOR PUBLICATION OF FINAL RULES.—

(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 1395hh(a)) is amended by adding 

at the end the following new paragraph: 

‘‘(3)(A) The Secretary, in consultation with the Director of the Office of Management and Budget, shall establish and publish a regular timeline for the publication 

of final regulations based on the previous publication of a proposed regulation or 

an interim final regulation. 

‘‘(B) Such timeline may vary among different regulations based on differences in 

the complexity of the regulation, the number and scope of comments received, and 

other relevant factors, but shall not be longer than 3 years except under exceptional 

circumstances. If the Secretary intends to vary such timeline with respect to the 

publication of a final regulation, the Secretary shall cause to have published in the 

Federal Register notice of the different timeline by not later than the timeline previously established with respect to such regulation. Such notice shall include a brief 

explanation of the justification for such variation. 

‘‘(C) In the case of interim final regulations, upon the expiration of the regular 

timeline established under this paragraph for the publication of a final regulation 

after opportunity for public comment, the interim final regulation shall not continue 

in effect unless the Secretary publishes (at the end of the regular timeline and, if 

applicable, at the end of each succeeding 1-year period) a notice of continuation of 

the regulation that includes an explanation of why the regular timeline (and any 

subsequent 1-year extension) was not complied with. If such a notice is published, 

the regular timeline (or such timeline as previously extended under this paragraph) 

for publication of the final regulation shall be treated as having been extended for 

1 additional year. 

‘‘(D) The Secretary shall annually submit to Congress a report that describes the 

instances in which the Secretary failed to publish a final regulation within the applicable regular timeline under this paragraph and that provides an explanation for 

such failures.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on the date of the enactment of this Act. The Secretary shall provide for 

an appropriate transition to take into account the backlog of previously published interim final regulations. 

(b) LIMITATIONS ON NEW MATTER IN FINAL REGULATIONS.—

(1) IN GENERAL.—Section 1871(a) (42 U.S.C. 1395hh(a)), as amended by subsection (a), is amended by adding at the end the following new paragraph: 

‘‘(4) If the Secretary publishes a final regulation that includes a provision that is 

not a logical outgrowth of a previously published notice of proposed rulemaking or 

interim final rule, such provision shall be treated as a proposed regulation and shall 

not take effect until there is the further opportunity for public comment and a publication of the provision again as a final regulation.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

final regulations published on or after the date of the enactment of this Act. 

SEC. 102. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES. 

(a) NO RETROACTIVE APPLICATION OF SUBSTANTIVE CHANGES.—

(1) IN GENERAL.—Section 1871 (42 U.S.C. 1395hh), as amended by section 

101(a), is amended by adding at the end the following new subsection: 

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‘‘(d)(1)(A) A substantive change in regulations, manual instructions, interpretative 

rules, statements of policy, or guidelines of general applicability under this title 

shall not be applied (by extrapolation or otherwise) retroactively to items and services furnished before the effective date of the change, unless the Secretary determines that—

‘‘(i) such retroactive application is necessary to comply with statutory requirements; or 

‘‘(ii) failure to apply the change retroactively would be contrary to the public 

interest.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

substantive changes issued on or after the date of the enactment of this Act. 

(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE CHANGES AFTER NOTICE.—

(1) IN GENERAL.—Section 1871(d)(1), as added by subsection (a), is amended 

by adding at the end the following: 

‘‘(B)(i) Except as provided in clause (ii), a substantive change referred to in subparagraph (A) shall not become effective before the end of the 30-day period that 

begins on the date that the Secretary has issued or published, as the case may be, 

the substantive change. 

‘‘(ii) The Secretary may provide for such a substantive change to take effect on 

a date that precedes the end of the 30-day period under clause (i) if the Secretary 

finds that waiver of such 30-day period is necessary to comply with statutory requirements or that the application of such 30-day period is contrary to the public 

interest. If the Secretary provides for an earlier effective date pursuant to this 

clause, the Secretary shall include in the issuance or publication of the substantive 

change a finding described in the first sentence, and a brief statement of the reasons for such finding. 

‘‘(C) No action shall be taken against a provider of services or supplier with respect to noncompliance with such a substantive change for items and services furnished before the effective date of such a change.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

compliance actions undertaken on or after the date of the enactment of this Act. 

(c) RELIANCE ON GUIDANCE.—

(1) IN GENERAL.—Section 1871(d), as added by subsection (a), is further 

amended by adding at the end the following new paragraph: 

‘‘(2)(A) If—

‘‘(i) a provider of services or supplier follows the written guidance (which may 

be transmitted electronically) provided by the Secretary or by a medicare contractor (as defined in section 1889(g)) acting within the scope of the contractor’s 

contract authority, with respect to the furnishing of items or services and submission of a claim for benefits for such items or services with respect to such 

provider or supplier; 

‘‘(ii) the Secretary determines that the provider of services or supplier has accurately presented the circumstances relating to such items, services, and claim 

to the contractor in writing; and 

‘‘(iii) the guidance was in error; 

the provider of services or supplier shall not be subject to any sanction (including 

any penalty or requirement for repayment of any amount) if the provider of services 

or supplier reasonably relied on such guidance. 

‘‘(B) Subparagraph (A) shall not be construed as preventing the recoupment or repayment (without any additional penalty) relating to an overpayment insofar as the 

overpayment was solely the result of a clerical or technical operational error.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on the date of the enactment of this Act but shall not apply to any sanction 

for which notice was provided on or before the date of the enactment of this 

Act. 

SEC. 103. REPORTS AND STUDIES RELATING TO REGULATORY REFORM. 

(a) GAO STUDY ON ADVISORY OPINION AUTHORITY.—

(1) STUDY.—The Comptroller General of the United States shall conduct a 

study to determine the feasibility and appropriateness of establishing in the 

Secretary authority to provide legally binding advisory opinions on appropriate 

interpretation and application of regulations to carry out the medicare program 

under title XVIII of the Social Security Act. Such study shall examine the appropriate timeframe for issuing such advisory opinions, as well as the need for 

additional staff and funding to provide such opinions. 

(2) REPORT.—The Comptroller General shall submit to Congress a report on 

the study conducted under paragraph (1) by not later than one year after the 

date of the enactment of this Act. 

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(b) REPORT ON LEGAL AND REGULATORY INCONSISTENCIES.—Section 1871 (42 

U.S.C. 1395hh), as amended by section 2(a), is amended by adding at the end the 

following new subsection: ‘‘(e)(1) Not later than 2 years after the date of the enactment of this subsection, 

and every 2 years thereafter, the Secretary shall submit to Congress a report with 

respect to the administration of this title and areas of inconsistency or conflict 

among the various provisions under law and regulation. ‘‘(2) In preparing a report under paragraph (1), the Secretary shall collect— ‘‘(A) information from individuals entitled to benefits under part A or enrolled 

under part B, or both, providers of services, and suppliers and from the Medicare Beneficiary Ombudsman and the Medicare Provider Ombudsman with respect to such areas of inconsistency and conflict; and 

‘‘(B) information from medicare contractors that tracks the nature of written 

and telephone inquiries. 

‘‘(3) A report under paragraph (1) shall include a description of efforts by the Secretary to reduce such inconsistency or conflicts, and recommendations for legislation 

or administrative action that the Secretary determines appropriate to further reduce 

such inconsistency or conflicts.’’. 

TITLE II—CONTRACTING REFORM 

SEC. 201. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION. 

(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE ADMINISTRATION.—

(1) IN GENERAL.—Title XVIII is amended by inserting after section 1874 the 

following new section: 

‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE CONTRACTORS

‘‘SEC. 1874A. (a) AUTHORITY.—

‘‘(1) AUTHORITY TO ENTER INTO CONTRACTS.—The Secretary may enter into 

contracts with any eligible entity to serve as a medicare administrative contractor with respect to the performance of any or all of the functions described 

in paragraph (4) or parts of those functions (or, to the extent provided in a contract, to secure performance thereof by other entities). 

‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is eligible to enter into a contract 

with respect to the performance of a particular function described in paragraph 

(4) only if—

‘‘(A) the entity has demonstrated capability to carry out such function; 

‘‘(B) the entity complies with such conflict of interest standards as are 

generally applicable to Federal acquisition and procurement; 

‘‘(C) the entity has sufficient assets to financially support the performance of such function; and 

‘‘(D) the entity meets such other requirements as the Secretary may impose. 

‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR DEFINED.—For purposes of this 

title and title XI—

‘‘(A) IN GENERAL.—The term ‘medicare administrative contractor’ means 

an agency, organization, or other person with a contract under this section. 

‘‘(B) APPROPRIATE MEDICARE ADMINISTRATIVE CONTRACTOR.—With respect 

to the performance of a particular function in relation to an individual entitled to benefits under part A or enrolled under part B, or both, a specific 

provider of services or supplier (or class of such providers of services or suppliers), the ‘appropriate’ medicare administrative contractor is the medicare 

administrative contractor that has a contract under this section with respect to the performance of that function in relation to that individual, provider of services or supplier or class of provider of services or supplier. 

‘‘(4) FUNCTIONS DESCRIBED.—The functions referred to in paragraphs (1) and 

(2) are payment functions, provider services functions, and functions relating to 

services furnished to individuals entitled to benefits under part A or enrolled 

under part B, or both, as follows: 

‘‘(A) DETERMINATION OF PAYMENT AMOUNTS.—Determining (subject to the 

provisions of section 1878 and to such review by the Secretary as may be 

provided for by the contracts) the amount of the payments required pursuant to this title to be made to providers of services, suppliers and individuals. 

‘‘(B) MAKING PAYMENTS.—Making payments described in subparagraph 

(A) (including receipt, disbursement, and accounting for funds in making 

such payments). 

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‘‘(C) BENEFICIARY EDUCATION AND ASSISTANCE.—Providing education and 

outreach to individuals entitled to benefits under part A or enrolled under 

part B, or both, and providing assistance to those individuals with specific 

issues, concerns or problems. ‘‘(D) PROVIDER CONSULTATIVE SERVICES.—Providing consultative services 

to institutions, agencies, and other persons to enable them to establish and 

maintain fiscal records necessary for purposes of this title and otherwise to 

qualify as providers of services or suppliers. ‘‘(E) COMMUNICATION WITH PROVIDERS.—Communicating to providers of 

services and suppliers any information or instructions furnished to the 

medicare administrative contractor by the Secretary, and facilitating communication between such providers and suppliers and the Secretary. ‘‘(F) PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.—Performing the 

functions relating to provider education, training, and technical assistance. ‘‘(G) ADDITIONAL FUNCTIONS.—Performing such other functions as are 

necessary to carry out the purposes of this title. ‘‘(5) RELATIONSHIP TO MIP CONTRACTS.— ‘‘(A) NONDUPLICATION OF DUTIES.—In entering into contracts under this 

section, the Secretary shall assure that functions of medicare administrative contractors in carrying out activities under parts A and B do not duplicate activities carried out under the Medicare Integrity Program under section 1893. The previous sentence shall not apply with respect to the activity 

described in section 1893(b)(5) (relating to prior authorization of certain 

items of durable medical equipment under section 1834(a)(15)). 

‘‘(B) CONSTRUCTION.—An entity shall not be treated as a medicare administrative contractor merely by reason of having entered into a contract with 

the Secretary under section 1893. 

‘‘(6) APPLICATION OF FEDERAL ACQUISITION REGULATION.—Except to the extent 

inconsistent with a specific requirement of this title, the Federal Acquisition 

Regulation applies to contracts under this title. 

‘‘(b) CONTRACTING REQUIREMENTS.—

‘‘(1) USE OF COMPETITIVE PROCEDURES.—

‘‘(A) IN GENERAL.—Except as provided in laws with general applicability 

to Federal acquisition and procurement or in subparagraph (B), the Secretary shall use competitive procedures when entering into contracts with 

medicare administrative contractors under this section, taking into account 

performance quality as well as price and other factors. 

‘‘(B) RENEWAL OF CONTRACTS.—The Secretary may renew a contract with 

a medicare administrative contractor under this section from term to term 

without regard to section 5 of title 41, United States Code, or any other provision of law requiring competition, if the medicare administrative contractor has met or exceeded the performance requirements applicable with 

respect to the contract and contractor, except that the Secretary shall provide for the application of competitive procedures under such a contract not 

less frequently than once every five years. 

‘‘(C) TRANSFER OF FUNCTIONS.—The Secretary may transfer functions 

among medicare administrative contractors consistent with the provisions 

of this paragraph. The Secretary shall ensure that performance quality is 

considered in such transfers. The Secretary shall provide public notice 

(whether in the Federal Register or otherwise) of any such transfer (including a description of the functions so transferred, a description of the providers of services and suppliers affected by such transfer, and contact information for the contractors involved). 

‘‘(D) INCENTIVES FOR QUALITY.—The Secretary shall provide incentives for 

medicare administrative contractors to provide quality service and to promote efficiency. 

‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No contract under this section shall 

be entered into with any medicare administrative contractor unless the Secretary finds that such medicare administrative contractor will perform its obligations under the contract efficiently and effectively and will meet such requirements as to financial responsibility, legal authority, quality of services provided, 

and other matters as the Secretary finds pertinent. 

‘‘(3) PERFORMANCE REQUIREMENTS.—

‘‘(A) DEVELOPMENT OF SPECIFIC PERFORMANCE REQUIREMENTS.—In developing contract performance requirements, the Secretary shall develop performance requirements applicable to functions described in subsection 

(a)(4). 

‘‘(B) CONSULTATION.— In developing such requirements, the Secretary 

may consult with providers of services and suppliers, organizations repVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00006 Fmt 6659 Sfmt 6621 E:\HR\OC\HR074P2.XXX HR074P2
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resenting individuals entitled to benefits under part A or enrolled under 

part B, or both, and organizations and agencies performing functions necessary to carry out the purposes of this section with respect to such performance requirements. ‘‘(C) INCLUSION IN CONTRACTS.—All contractor performance requirements 

shall be set forth in the contract between the Secretary and the appropriate 

medicare administrative contractor. Such performance requirements— ‘‘(i) shall reflect the performance requirements developed under subparagraph (A), but may include additional performance requirements; ‘‘(ii) shall be used for evaluating contractor performance under the 

contract; and ‘‘(iii) shall be consistent with the written statement of work provided 

under the contract. ‘‘(4) INFORMATION REQUIREMENTS.—The Secretary shall not enter into a contract with a medicare administrative contractor under this section unless the 

contractor agrees— ‘‘(A) to furnish to the Secretary such timely information and reports as 

the Secretary may find necessary in performing his functions under this 

title; and ‘‘(B) to maintain such records and afford such access thereto as the Secretary finds necessary to assure the correctness and verification of the information and reports under subparagraph (A) and otherwise to carry out 

the purposes of this title. 

‘‘(5) SURETY BOND.—A contract with a medicare administrative contractor 

under this section may require the medicare administrative contractor, and any 

of its officers or employees certifying payments or disbursing funds pursuant to 

the contract, or otherwise participating in carrying out the contract, to give surety bond to the United States in such amount as the Secretary may deem appropriate. 

‘‘(c) TERMS AND CONDITIONS.—

‘‘(1) IN GENERAL.—A contract with any medicare administrative contractor 

under this section may contain such terms and conditions as the Secretary finds 

necessary or appropriate and may provide for advances of funds to the medicare 

administrative contractor for the making of payments by it under subsection 

(a)(4)(B). 

‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN DATA COLLECTION.—The Secretary may not require, as a condition of entering into, or renewing, a contract 

under this section, that the medicare administrative contractor match data obtained other than in its activities under this title with data used in the administration of this title for purposes of identifying situations in which the provisions 

of section 1862(b) may apply. 

‘‘(d) LIMITATION ON LIABILITY OF MEDICARE ADMINISTRATIVE CONTRACTORS AND

CERTAIN OFFICERS.—

‘‘(1) CERTIFYING OFFICER.—No individual designated pursuant to a contract 

under this section as a certifying officer shall, in the absence of the reckless disregard of the individual’s obligations or the intent by that individual to defraud 

the United States, be liable with respect to any payments certified by the individual under this section. 

‘‘(2) DISBURSING OFFICER.—No disbursing officer shall, in the absence of the 

reckless disregard of the officer’s obligations or the intent by that officer to defraud the United States, be liable with respect to any payment by such officer 

under this section if it was based upon an authorization (which meets the applicable requirements for such internal controls established by the Comptroller 

General) of a certifying officer designated as provided in paragraph (1) of this 

subsection. 

‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE CONTRACTOR.—

‘‘(A) IN GENERAL.—No medicare administrative contractor shall be liable to 

the United States for a payment by a certifying or disbursing officer unless, in 

connection with such payment, the medicare administrative contractor acted 

with reckless disregard of its obligations under its medicare administrative contract or with intent to defraud the United States. 

‘‘(B) RELATIONSHIP TO FALSE CLAIMS ACT.—Nothing in this subsection shall be 

construed to limit liability for conduct that would constitute a violation of sections 3729 through 3731 of title 31, United States Code (commonly known as 

the ‘False Claims Act’). 

‘‘(4) INDEMNIFICATION BY SECRETARY.—

‘‘(A) IN GENERAL.—Subject to subparagraphs (B) and (D), in the case of 

a medicare administrative contractor (or a person who is a director, officer, 

or employee of such a contractor or who is engaged by the contractor to parVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00007 Fmt 6659 Sfmt 6621 E:\HR\OC\HR074P2.XXX HR074P2
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ticipate directly in the claims administration process) who is made a party 

to any judicial or administrative proceeding arising from or relating directly 

to the claims administration process under this title, the Secretary may, to 

the extent the Secretary determines to be appropriate and as specified in 

the contract with the contractor, indemnify the contractor and such persons. 

‘‘(B) CONDITIONS.—The Secretary may not provide indemnification under 

subparagraph (A) insofar as the liability for such costs arises directly from 

conduct that is determined by the judicial proceeding or by the Secretary 

to be criminal in nature, fraudulent, or grossly negligent. If indemnification 

is provided by the Secretary with respect to a contractor before a determination that such costs arose directly from such conduct, the contractor 

shall reimburse the Secretary for costs of indemnification. 

‘‘(C) SCOPE OF INDEMNIFICATION.—Indemnification by the Secretary under 

subparagraph (A) may include payment of judgments, settlements (subject 

to subparagraph (D)), awards, and costs (including reasonable legal expenses). 

‘‘(D) WRITTEN APPROVAL FOR SETTLEMENTS.—A contractor or other person 

described in subparagraph (A) may not propose to negotiate a settlement 

or compromise of a proceeding described in such subparagraph without the 

prior written approval of the Secretary to negotiate such settlement or compromise. Any indemnification under subparagraph (A) with respect to 

amounts paid under a settlement or compromise of a proceeding described 

in such subparagraph are conditioned upon prior written approval by the 

Secretary of the final settlement or compromise. 

‘‘(E) CONSTRUCTION.—Nothing in this paragraph shall be construed—

‘‘(i) to change any common law immunity that may be available to 

a medicare administrative contractor or person described in subparagraph (A); or 

‘‘(ii) to permit the payment of costs not otherwise allowable, reasonable, or allocable under the Federal Acquisition Regulations.’’. 

(2) CONSIDERATION OF INCORPORATION OF CURRENT LAW STANDARDS.—In developing contract performance requirements under section 1874A(b) of the Social Security Act, as inserted by paragraph (1), the Secretary shall consider inclusion of the performance standards described in sections 1816(f)(2) of such Act 

(relating to timely processing of reconsiderations and applications for exemptions) and section 1842(b)(2)(B) of such Act (relating to timely review of determinations and fair hearing requests), as such sections were in effect before the 

date of the enactment of this Act. 

(b) CONFORMING AMENDMENTS TO SECTION 1816 (RELATING TO FISCAL INTERMEDIARIES).—Section 1816 (42 U.S.C. 1395h) is amended as follows: 

(1) The heading is amended to read as follows: 

‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART A’’. 

(2) Subsection (a) is amended to read as follows: 

‘‘(a) The administration of this part shall be conducted through contracts with 

medicare administrative contractors under section 1874A.’’. 

(3) Subsection (b) is repealed. 

(4) Subsection (c) is amended—

(A) by striking paragraph (1); and 

(B) in each of paragraphs (2)(A) and (3)(A), by striking ‘‘agreement under 

this section’’ and inserting ‘‘contract under section 1874A that provides for 

making payments under this part’’. 

(5) Subsections (d) through (i) are repealed. 

(6) Subsections (j) and (k) are each amended—

(A) by striking ‘‘An agreement with an agency or organization under this 

section’’ and inserting ‘‘A contract with a medicare administrative contractor under section 1874A with respect to the administration of this part’’; 

and 

(B) by striking ‘‘such agency or organization’’ and inserting ‘‘such medicare administrative contractor’’ each place it appears. 

(7) Subsection (l) is repealed. 

(c) CONFORMING AMENDMENTS TO SECTION 1842 (RELATING TO CARRIERS).—Section 1842 (42 U.S.C. 1395u) is amended as follows: 

(1) The heading is amended to read as follows: 

‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART B’’. 

(2) Subsection (a) is amended to read as follows: 

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‘‘(a) The administration of this part shall be conducted through contracts with 

medicare administrative contractors under section 1874A.’’. (3) Subsection (b) is amended— (A) by striking paragraph (1); 

(B) in paragraph (2)— (i) by striking subparagraphs (A) and (B); 

(ii) in subparagraph (C), by striking ‘‘carriers’’ and inserting ‘‘medicare administrative contractors’’; and 

(iii) by striking subparagraphs (D) and (E); 

(C) in paragraph (3)— (i) in the matter before subparagraph (A), by striking ‘‘Each such contract shall provide that the carrier’’ and inserting ‘‘The Secretary’’; 

(ii) by striking ‘‘will’’ the first place it appears in each of subparagraphs (A), (B), (F), (G), (H), and (L) and inserting ‘‘shall’’; 

(iii) in subparagraph (B), in the matter before clause (i), by striking ‘‘to the policyholders and subscribers of the carrier’’ and inserting ‘‘to 

the policyholders and subscribers of the medicare administrative contractor’’; 

(iv) by striking subparagraphs (C), (D), and (E); 

(v) in subparagraph (H)— (I) by striking ‘‘if it makes determinations or payments with respect to physicians’ services,’’ in the matter preceding clause (i); 

and 

(II) by striking ‘‘carrier’’ and inserting ‘‘medicare administrative 

contractor’’ in clause (i); 

(vi) by striking subparagraph (I); 

(vii) in subparagraph (L), by striking the semicolon and inserting a 

period; 

(viii) in the first sentence, after subparagraph (L), by striking ‘‘and 

shall contain’’ and all that follows through the period; and 

(ix) in the seventh sentence, by inserting ‘‘medicare administrative 

contractor,’’ after ‘‘carrier,’’; and 

(D) by striking paragraph (5); 

(E) in paragraph (6)(D)(iv), by striking ‘‘carrier’’ and inserting ‘‘medicare 

administrative contractor’’; and 

(F) in paragraph (7), by striking ‘‘the carrier’’ and inserting ‘‘the Secretary’’ each place it appears. 

(4) Subsection (c) is amended—

(A) by striking paragraph (1); 

(B) in paragraph (2)(A), by striking ‘‘contract under this section which 

provides for the disbursement of funds, as described in subsection (a)(1)(B),’’

and inserting ‘‘contract under section 1874A that provides for making payments under this part’’; 

(C) in paragraph (3)(A), by striking ‘‘subsection (a)(1)(B)’’ and inserting 

‘‘section 1874A(a)(3)(B)’’; 

(D) in paragraph (4), in the matter preceding subparagraph (A), by striking ‘‘carrier’’ and inserting ‘‘medicare administrative contractor’’; and 

(E) by striking paragraphs (5) and (6). 

(5) Subsections (d), (e), and (f) are repealed. 

(6) Subsection (g) is amended by striking ‘‘carrier or carriers’’ and inserting 

‘‘medicare administrative contractor or contractors’’. 

(7) Subsection (h) is amended—

(A) in paragraph (2)—

(i) by striking ‘‘Each carrier having an agreement with the Secretary 

under subsection (a)’’ and inserting ‘‘The Secretary’’; and 

(ii) by striking ‘‘Each such carrier’’ and inserting ‘‘The Secretary’’; 

(B) in paragraph (3)(A)—

(i) by striking ‘‘a carrier having an agreement with the Secretary 

under subsection (a)’’ and inserting ‘‘medicare administrative contractor 

having a contract under section 1874A that provides for making payments under this part’’; and 

(ii) by striking ‘‘such carrier’’ and inserting ‘‘such contractor’’; 

(C) in paragraph (3)(B)—

(i) by striking ‘‘a carrier’’ and inserting ‘‘a medicare administrative 

contractor’’ each place it appears; and 

(ii) by striking ‘‘the carrier’’ and inserting ‘‘the contractor’’ each place 

it appears; and 

(D) in paragraphs (5)(A) and (5)(B)(iii), by striking ‘‘carriers’’ and inserting ‘‘medicare administrative contractors’’ each place it appears. 

10

(8) Subsection (l) is amended—

(A) in paragraph (1)(A)(iii), by striking ‘‘carrier’’ and inserting ‘‘medicare 

administrative contractor’’; and 

(B) in paragraph (2), by striking ‘‘carrier’’ and inserting ‘‘medicare administrative contractor’’. 

(9) Subsection (p)(3)(A) is amended by striking ‘‘carrier’’ and inserting ‘‘medicare administrative contractor’’. 

(10) Subsection (q)(1)(A) is amended by striking ‘‘carrier’’. 

(d) EFFECTIVE DATE; TRANSITION RULE.—

(1) EFFECTIVE DATE.—

(A) IN GENERAL.—Except as otherwise provided in this subsection, the 

amendments made by this section shall take effect on October 1, 2005, and 

the Secretary is authorized to take such steps before such date as may be 

necessary to implement such amendments on a timely basis. 

(B) CONSTRUCTION FOR CURRENT CONTRACTS.—Such amendments shall 

not apply to contracts in effect before the date specified under subparagraph (A) that continue to retain the terms and conditions in effect on such 

date (except as otherwise provided under this Act, other than under this 

section) until such date as the contract is let out for competitive bidding 

under such amendments. 

(C) DEADLINE FOR COMPETITIVE BIDDING.—The Secretary shall provide for 

the letting by competitive bidding of all contracts for functions of medicare 

administrative contractors for annual contract periods that begin on or after 

October 1, 2010. 

(D) WAIVER OF PROVIDER NOMINATION PROVISIONS DURING TRANSITION.—

During the period beginning on the date of the enactment of this Act and 

before the date specified under subparagraph (A), the Secretary may enter 

into new agreements under section 1816 of the Social Security Act (42 

U.S.C. 1395h) without regard to any of the provider nomination provisions 

of such section. 

(2) GENERAL TRANSITION RULES.—The Secretary shall take such steps, consistent with paragraph (1)(B) and (1)(C), as are necessary to provide for an appropriate transition from contracts under section 1816 and section 1842 of the 

Social Security Act (42 U.S.C. 1395h, 1395u) to contracts under section 1874A, 

as added by subsection (a)(1). 

(3) AUTHORIZING CONTINUATION OF MIP FUNCTIONS UNDER CURRENT CONTRACTS AND AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—The provisions 

contained in the exception in section 1893(d)(2) of the Social Security Act (42 

U.S.C. 1395ddd(d)(2)) shall continue to apply notwithstanding the amendments 

made by this section, and any reference in such provisions to an agreement or 

contract shall be deemed to include a contract under section 1874A of such Act, 

as inserted by subsection (a)(1), that continues the activities referred to in such 

provisions. 

(e) REFERENCES.—On and after the effective date provided under subsection (d)(1), 

any reference to a fiscal intermediary or carrier under title XI or XVIII of the Social 

Security Act (or any regulation, manual instruction, interpretative rule, statement 

of policy, or guideline issued to carry out such titles) shall be deemed a reference 

to an appropriate medicare administrative contractor (as provided under section 

1874A of the Social Security Act). 

(f) REPORTS ON IMPLEMENTATION.—

(1) PLAN FOR IMPLEMENTATION.—By not later than October 1, 2004, the Secretary shall submit a report to Congress and the Comptroller General of the 

United States that describes the plan for implementation of the amendments 

made by this section. The Comptroller General shall conduct an evaluation of 

such plan and shall submit to Congress, not later than 6 months after the date 

the report is received, a report on such evaluation and shall include in such report such recommendations as the Comptroller General deems appropriate. 

(2) STATUS OF IMPLEMENTATION.—The Secretary shall submit a report to Congress not later than October 1, 2008, that describes the status of implementation of such amendments and that includes a description of the following: 

(A) The number of contracts that have been competitively bid as of such 

date. 

(B) The distribution of functions among contracts and contractors. 

(C) A timeline for complete transition to full competition. 

(D) A detailed description of how the Secretary has modified oversight 

and management of medicare contractors to adapt to full competition. 

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SEC. 202. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE ADMINISTRATIVE 

CONTRACTORS. 

(a) IN GENERAL.—Section 1874A, as added by section 201(a)(1), is amended by 

adding at the end the following new subsection: ‘‘(e) REQUIREMENTS FOR INFORMATION SECURITY.— ‘‘(1) DEVELOPMENT OF INFORMATION SECURITY PROGRAM.—A medicare administrative contractor that performs the functions referred to in subparagraphs (A) 

and (B) of subsection (a)(4) (relating to determining and making payments) 

shall implement a contractor-wide information security program to provide information security for the operation and assets of the contractor with respect 

to such functions under this title. An information security program under this 

paragraph shall meet the requirements for information security programs imposed on Federal agencies under paragraphs (1) through (8) of section 3544(b) 

of title 44, United States Code (other than the requirements under paragraph 

(2)(D)(i) of such section). 

‘‘(2) INDEPENDENT AUDITS.—

‘‘(A) PERFORMANCE OF ANNUAL EVALUATIONS.—Each year a medicare administrative contractor that performs the functions referred to in subparagraphs (A) and (B) of subsection (a)(4) (relating to determining and making 

payments) shall undergo an evaluation of the information security of the 

contractor with respect to such functions under this title. The evaluation 

shall—

‘‘(i) be performed by an entity that meets such requirements for independence as the Inspector General of the Department of Health and 

Human Services may establish; and 

‘‘(ii) test the effectiveness of information security control techniques 

of an appropriate subset of the contractor’s information systems (as defined in section 3502(8) of title 44, United States Code) relating to such 

functions under this title and an assessment of compliance with the requirements of this subsection and related information security policies, 

procedures, standards and guidelines, including policies and procedures 

as may be prescribed by the Director of the Office of Management and 

Budget and applicable information security standards promulgated 

under section 11331 of title 40, United States Code. 

‘‘(B) DEADLINE FOR INITIAL EVALUATION.—

‘‘(i) NEW CONTRACTORS.—In the case of a medicare administrative 

contractor covered by this subsection that has not previously performed 

the functions referred to in subparagraphs (A) and (B) of subsection 

(a)(4) (relating to determining and making payments) as a fiscal intermediary or carrier under section 1816 or 1842, the first independent 

evaluation conducted pursuant subparagraph (A) shall be completed 

prior to commencing such functions. 

‘‘(ii) OTHER CONTRACTORS.—In the case of a medicare administrative 

contractor covered by this subsection that is not described in clause (i), 

the first independent evaluation conducted pursuant subparagraph (A) 

shall be completed within 1 year after the date the contractor commences functions referred to in clause (i) under this section. 

‘‘(C) REPORTS ON EVALUATIONS.—

‘‘(i) TO THE DEPARTMENT OF HEALTH AND HUMAN SERVICES.—The results of independent evaluations under subparagraph (A) shall be submitted promptly to the Inspector General of the Department of Health 

and Human Services and to the Secretary. 

‘‘(ii) TO CONGRESS.—The Inspector General of Department of Health 

and Human Services shall submit to Congress annual reports on the 

results of such evaluations, including assessments of the scope and sufficiency of such evaluations. 

‘‘(iii) AGENCY REPORTING.—The Secretary shall address the results of 

such evaluations in reports required under section 3544(c) of title 44, 

United States Code.’’. 

(b) APPLICATION OF REQUIREMENTS TO FISCAL INTERMEDIARIES AND CARRIERS.—

(1) IN GENERAL.—The provisions of section 1874A(e)(2) of the Social Security 

Act (other than subparagraph (B)), as added by subsection (a), shall apply to 

each fiscal intermediary under section 1816 of the Social Security Act (42 U.S.C. 

1395h) and each carrier under section 1842 of such Act (42 U.S.C. 1395u) in 

the same manner as they apply to medicare administrative contractors under 

such provisions. 

(2) DEADLINE FOR INITIAL EVALUATION.—In the case of such a fiscal intermediary or carrier with an agreement or contract under such respective section 

in effect as of the date of the enactment of this Act, the first evaluation under 

12

section 1874A(e)(2)(A) of the Social Security Act (as added by subsection (a)), 

pursuant to paragraph (1), shall be completed (and a report on the evaluation 

submitted to the Secretary) by not later than 1 year after such date. 

TITLE III—EDUCATION AND OUTREACH 

SEC. 301. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE. 

(a) COORDINATION OF EDUCATION FUNDING.— (1) IN GENERAL.—The Social Security Act is amended by inserting after section 1888 the following new section: 

‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

‘‘SEC. 1889. (a) COORDINATION OF EDUCATION FUNDING.—The Secretary shall coordinate the educational activities provided through medicare contractors (as defined in subsection (g), including under section 1893) in order to maximize the effectiveness of Federal education efforts for providers of services and suppliers.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on the date of the enactment of this Act. 

(3) REPORT.—Not later than October 1, 2004, the Secretary shall submit to 

Congress a report that includes a description and evaluation of the steps taken 

to coordinate the funding of provider education under section 1889(a) of the Social Security Act, as added by paragraph (1). 

(b) INCENTIVES TO IMPROVE CONTRACTOR PERFORMANCE.—

(1) IN GENERAL.—Section 1874A, as added by section 201(a)(1) and as amended by section 202(a), is amended by adding at the end the following new subsection: 

‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORMANCE IN PROVIDER EDUCATION

AND OUTREACH.—The Secretary shall use specific claims payment error rates or 

similar methodology of medicare administrative contractors in the processing or reviewing of medicare claims in order to give such contractors an incentive to implement effective education and outreach programs for providers of services and suppliers.’’. 

(2) APPLICATION TO FISCAL INTERMEDIARIES AND CARRIERS.—The provisions of 

section 1874A(f) of the Social Security Act, as added by paragraph (1), shall 

apply to each fiscal intermediary under section 1816 of the Social Security Act 

(42 U.S.C. 1395h) and each carrier under section 1842 of such Act (42 U.S.C. 

1395u) in the same manner as they apply to medicare administrative contractors under such provisions. 

(3) GAO REPORT ON ADEQUACY OF METHODOLOGY.—Not later than October 1, 

2004, the Comptroller General of the United States shall submit to Congress 

and to the Secretary a report on the adequacy of the methodology under section 

1874A(f) of the Social Security Act, as added by paragraph (1), and shall include 

in the report such recommendations as the Comptroller General determines appropriate with respect to the methodology. 

(4) REPORT ON USE OF METHODOLOGY IN ASSESSING CONTRACTOR PERFORMANCE.—Not later than October 1, 2004, the Secretary shall submit to Congress 

a report that describes how the Secretary intends to use such methodology in 

assessing medicare contractor performance in implementing effective education 

and outreach programs, including whether to use such methodology as a basis 

for performance bonuses. The report shall include an analysis of the sources of 

identified errors and potential changes in systems of contractors and rules of 

the Secretary that could reduce claims error rates. 

(c) PROVISION OF ACCESS TO AND PROMPT RESPONSES FROM MEDICARE ADMINISTRATIVE CONTRACTORS.—

(1) IN GENERAL.—Section 1874A, as added by section 201(a)(1) and as amended by section 202(a) and subsection (b), is further amended by adding at the 

end the following new subsection: 

‘‘(g) COMMUNICATIONS WITH BENEFICIARIES, PROVIDERS OF SERVICES AND SUPPLIERS.—

‘‘(1) COMMUNICATION STRATEGY.—The Secretary shall develop a strategy for 

communications with individuals entitled to benefits under part A or enrolled 

under part B, or both, and with providers of services and suppliers under this 

title. 

‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each medicare administrative contractor shall, for those providers of services and suppliers which submit claims 

to the contractor for claims processing and for those individuals entitled to benefits under part A or enrolled under part B, or both, with respect to whom 

13

claims are submitted for claims processing, provide general written responses 

(which may be through electronic transmission) in a clear, concise, and accurate 

manner to inquiries of providers of services, suppliers and individuals entitled 

to benefits under part A or enrolled under part B, or both, concerning the programs under this title within 45 business days of the date of receipt of such 

inquiries. ‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Secretary shall ensure that each 

medicare administrative contractor shall provide, for those providers of services 

and suppliers which submit claims to the contractor for claims processing and 

for those individuals entitled to benefits under part A or enrolled under part 

B, or both, with respect to whom claims are submitted for claims processing, 

a toll-free telephone number at which such individuals, providers of services 

and suppliers may obtain information regarding billing, coding, claims, coverage, and other appropriate information under this title. ‘‘(4) MONITORING OF CONTRACTOR RESPONSES.— ‘‘(A) IN GENERAL.—Each medicare administrative contractor shall, consistent with standards developed by the Secretary under subparagraph 

(B)— ‘‘(i) maintain a system for identifying who provides the information 

referred to in paragraphs (2) and (3); and ‘‘(ii) monitor the accuracy, consistency, and timeliness of the information so provided. 

‘‘(B) DEVELOPMENT OF STANDARDS.—

‘‘(i) IN GENERAL.—The Secretary shall establish and make public 

standards to monitor the accuracy, consistency, and timeliness of the 

information provided in response to written and telephone inquiries 

under this subsection. Such standards shall be consistent with the performance requirements established under subsection (b)(3). 

‘‘(ii) EVALUATION.—In conducting evaluations of individual medicare 

administrative contractors, the Secretary shall take into account the results of the monitoring conducted under subparagraph (A) taking into 

account as performance requirements the standards established under 

clause (i). The Secretary shall, in consultation with organizations representing providers of services, suppliers, and individuals entitled to 

benefits under part A or enrolled under part B, or both, establish 

standards relating to the accuracy, consistency, and timeliness of the 

information so provided. 

‘‘(C) DIRECT MONITORING.—Nothing in this paragraph shall be construed 

as preventing the Secretary from directly monitoring the accuracy, consistency, and timeliness of the information so provided.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect October 1, 2004. 

(3) APPLICATION TO FISCAL INTERMEDIARIES AND CARRIERS.—The provisions of 

section 1874A(g) of the Social Security Act, as added by paragraph (1), shall 

apply to each fiscal intermediary under section 1816 of the Social Security Act 

(42 U.S.C. 1395h) and each carrier under section 1842 of such Act (42 U.S.C. 

1395u) in the same manner as they apply to medicare administrative contractors under such provisions. 

(d) IMPROVED PROVIDER EDUCATION AND TRAINING.—

(1) IN GENERAL.—Section 1889, as added by subsection (a), is amended by 

adding at the end the following new subsections: 

‘‘(b) ENHANCED EDUCATION AND TRAINING.—

‘‘(1) ADDITIONAL RESOURCES.—There are authorized to be appropriated to the 

Secretary (in appropriate part from the Federal Hospital Insurance Trust Fund 

and the Federal Supplementary Medical Insurance Trust Fund) $25,000,000 for 

each of fiscal years 2005 and 2006 and such sums as may be necessary for succeeding fiscal years. 

‘‘(2) USE.—The funds made available under paragraph (1) shall be used to increase the conduct by medicare contractors of education and training of providers of services and suppliers regarding billing, coding, and other appropriate 

items and may also be used to improve the accuracy, consistency, and timeliness of contractor responses. 

‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVITIES FOR SMALL PROVIDERS OR

SUPPLIERS.—

‘‘(1) IN GENERAL.—Insofar as a medicare contractor conducts education and 

training activities, it shall tailor such activities to meet the special needs of 

small providers of services or suppliers (as defined in paragraph (2)). 

‘‘(2) SMALL PROVIDER OF SERVICES OR SUPPLIER.—In this subsection, the term 

‘small provider of services or supplier’ means—

14

‘‘(A) a provider of services with fewer than 25 full-time-equivalent employees; or 

‘‘(B) a supplier with fewer than 10 full-time-equivalent employees.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on October 1, 2004. 

(e) REQUIREMENT TO MAINTAIN INTERNET SITES.—

(1) IN GENERAL.—Section 1889, as added by subsection (a) and as amended 

by subsection (d), is further amended by adding at the end the following new 

subsection: 

‘‘(d) INTERNET SITES; FAQS.—The Secretary, and each medicare contractor insofar 

as it provides services (including claims processing) for providers of services or suppliers, shall maintain an Internet site which—

‘‘(1) provides answers in an easily accessible format to frequently asked questions, and 

‘‘(2) includes other published materials of the contractor, 

that relate to providers of services and suppliers under the programs under this title 

(and title XI insofar as it relates to such programs).’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on October 1, 2004. 

(f) ADDITIONAL PROVIDER EDUCATION PROVISIONS.—

(1) IN GENERAL.—Section 1889, as added by subsection (a) and as amended 

by subsections (d) and (e), is further amended by adding at the end the following new subsections: 

‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDUCATION PROGRAM ACTIVITIES.—A 

medicare contractor may not use a record of attendance at (or failure to attend) educational activities or other information gathered during an educational program conducted under this section or otherwise by the Secretary to select or track providers 

of services or suppliers for the purpose of conducting any type of audit or prepayment review. 

‘‘(f) CONSTRUCTION.—Nothing in this section or section 1893(g) shall be construed 

as providing for disclosure by a medicare contractor of information that would compromise pending law enforcement activities or reveal findings of law enforcementrelated audits. 

‘‘(g) DEFINITIONS.—For purposes of this section, the term ‘medicare contractor’ includes the following: 

‘‘(1) A medicare administrative contractor with a contract under section 

1874A, including a fiscal intermediary with a contract under section 1816 and 

a carrier with a contract under section 1842. 

‘‘(2) An eligible entity with a contract under section 1893. 

Such term does not include, with respect to activities of a specific provider of services or supplier an entity that has no authority under this title or title IX with respect to such activities and such provider of services or supplier.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on the date of the enactment of this Act. 

SEC. 302. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION PROGRAM. 

(a) ESTABLISHMENT.—

(1) IN GENERAL.—The Secretary shall establish a demonstration program (in 

this section referred to as the ‘‘demonstration program’’) under which technical 

assistance described in paragraph (2) is made available, upon request and on 

a voluntary basis, to small providers of services or suppliers in order to improve 

compliance with the applicable requirements of the programs under medicare 

program under title XVIII of the Social Security Act (including provisions of 

title XI of such Act insofar as they relate to such title and are not administered 

by the Office of the Inspector General of the Department of Health and Human 

Services). 

(2) FORMS OF TECHNICAL ASSISTANCE.—The technical assistance described in 

this paragraph is—

(A) evaluation and recommendations regarding billing and related systems; and 

(B) information and assistance regarding policies and procedures under 

the medicare program, including coding and reimbursement. 

(3) SMALL PROVIDERS OF SERVICES OR SUPPLIERS.—In this section, the term 

‘‘small providers of services or suppliers’’ means—

(A) a provider of services with fewer than 25 full-time-equivalent employees; or 

(B) a supplier with fewer than 10 full-time-equivalent employees. 

(b) QUALIFICATION OF CONTRACTORS.—In conducting the demonstration program, 

the Secretary shall enter into contracts with qualified organizations (such as peer 

15

review organizations or entities described in section 1889(g)(2) of the Social Security 

Act, as inserted by section 5(f)(1)) with appropriate expertise with billing systems 

of the full range of providers of services and suppliers to provide the technical assistance. In awarding such contracts, the Secretary shall consider any prior investigations of the entity’s work by the Inspector General of Department of Health and 

Human Services or the Comptroller General of the United States. 

(c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The technical assistance provided 

under the demonstration program shall include a direct and in-person examination 

of billing systems and internal controls of small providers of services or suppliers 

to determine program compliance and to suggest more efficient or effective means 

of achieving such compliance. 

(d) AVOIDANCE OF RECOVERY ACTIONS FOR PROBLEMS IDENTIFIED AS CORRECTED.—The Secretary shall provide that, absent evidence of fraud and notwithstanding any other provision of law, any errors found in a compliance review for 

a small provider of services or supplier that participates in the demonstration program shall not be subject to recovery action if the technical assistance personnel 

under the program determine that—

(1) the problem that is the subject of the compliance review has been corrected to their satisfaction within 30 days of the date of the visit by such personnel to the small provider of services or supplier; and 

(2) such problem remains corrected for such period as is appropriate. 

The previous sentence applies only to claims filed as part of the demonstration program and lasts only for the duration of such program and only as long as the small 

provider of services or supplier is a participant in such program. 

(e) GAO EVALUATION.—Not later than 2 years after the date of the date the demonstration program is first implemented, the Comptroller General, in consultation 

with the Inspector General of the Department of Health and Human Services, shall 

conduct an evaluation of the demonstration program. The evaluation shall include 

a determination of whether claims error rates are reduced for small providers of 

services or suppliers who participated in the program and the extent of improper 

payments made as a result of the demonstration program. The Comptroller General 

shall submit a report to the Secretary and the Congress on such evaluation and 

shall include in such report recommendations regarding the continuation or extension of the demonstration program. 

(f) FINANCIAL PARTICIPATION BY PROVIDERS.—The provision of technical assistance 

to a small provider of services or supplier under the demonstration program is conditioned upon the small provider of services or supplier paying an amount estimated 

(and disclosed in advance of a provider’s or supplier’s participation in the program) 

to be equal to 25 percent of the cost of the technical assistance. 

(g) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated 

to the Secretary (in appropriate part from the Federal Hospital Insurance Trust 

Fund and the Federal Supplementary Medical Insurance Trust Fund) to carry out 

the demonstration program—

(1) for fiscal year 2005, $1,000,000, and 

(2) for fiscal year 2006, $6,000,000. 

SEC. 303. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY OMBUDSMAN. 

(a) MEDICARE PROVIDER OMBUDSMAN.—Section 1868 (42 U.S.C. 1395ee) is amended—

(1) by adding at the end of the heading the following: ‘‘; MEDICARE PROVIDER

OMBUDSMAN’’; 

(2) by inserting ‘‘PRACTICING PHYSICIANS ADVISORY COUNCIL.—(1)’’ after ‘‘(a)’’; 

(3) in paragraph (1), as so redesignated under paragraph (2), by striking ‘‘in 

this section’’ and inserting ‘‘in this subsection’’; 

(4) by redesignating subsections (b) and (c) as paragraphs (2) and (3), respectively; and 

(5) by adding at the end the following new subsection: 

‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—The Secretary shall appoint within the 

Department of Health and Human Services a Medicare Provider Ombudsman. The 

Ombudsman shall—

‘‘(1) provide assistance, on a confidential basis, to providers of services and 

suppliers with respect to complaints, grievances, and requests for information 

concerning the programs under this title (including provisions of title XI insofar 

as they relate to this title and are not administered by the Office of the Inspector General of the Department of Health and Human Services) and in the resolution of unclear or conflicting guidance given by the Secretary and medicare 

contractors to such providers of services and suppliers regarding such programs 

and provisions and requirements under this title and such provisions; and 

16

‘‘(2) submit recommendations to the Secretary for improvement in the administration of this title and such provisions, including— ‘‘(A) recommendations to respond to recurring patterns of confusion in 

this title and such provisions (including recommendations regarding suspending imposition of sanctions where there is widespread confusion in program administration), and ‘‘(B) recommendations to provide for an appropriate and consistent response (including not providing for audits) in cases of self-identified overpayments by providers of services and suppliers. 

The Ombudsman shall not serve as an advocate for any increases in payments or 

new coverage of services, but may identify issues and problems in payment or coverage policies.’’. (b) MEDICARE BENEFICIARY OMBUDSMAN.—Title XVIII is amended by inserting 

after section 1806 the following new section: 

‘‘MEDICARE BENEFICIARY OMBUDSMAN

‘‘SEC. 1807. (a) IN GENERAL.—The Secretary shall appoint within the Department 

of Health and Human Services a Medicare Beneficiary Ombudsman who shall have 

expertise and experience in the fields of health care and education of (and assistance to) individuals entitled to benefits under this title. ‘‘(b) DUTIES.—The Medicare Beneficiary Ombudsman shall— ‘‘(1) receive complaints, grievances, and requests for information submitted by 

individuals entitled to benefits under part A or enrolled under part B, or both, 

with respect to any aspect of the medicare program; ‘‘(2) provide assistance with respect to complaints, grievances, and requests 

referred to in paragraph (1), including— ‘‘(A) assistance in collecting relevant information for such individuals, to 

seek an appeal of a decision or determination made by a fiscal intermediary, carrier, Medicare+Choice organization, or the Secretary; and ‘‘(B) assistance to such individuals with any problems arising from 

disenrollment from a Medicare+Choice plan under part C; and ‘‘(3) submit annual reports to Congress and the Secretary that describe the 

activities of the Office and that include such recommendations for improvement 

in the administration of this title as the Ombudsman determines appropriate. 

The Ombudsman shall not serve as an advocate for any increases in payments or 

new coverage of services, but may identify issues and problems in payment or coverage policies. ‘‘(c) WORKING WITH HEALTH INSURANCE COUNSELING PROGRAMS.—To the extent 

possible, the Ombudsman shall work with health insurance counseling programs 

(receiving funding under section 4360 of Omnibus Budget Reconciliation Act of 

1990) to facilitate the provision of information to individuals entitled to benefits 

under part A or enrolled under part B, or both regarding Medicare+Choice plans 

and changes to those plans. Nothing in this subsection shall preclude further collaboration between the Ombudsman and such programs.’’. (c) DEADLINE FOR APPOINTMENT.—The Secretary shall appoint the Medicare Provider Ombudsman and the Medicare Beneficiary Ombudsman, under the amendments made by subsections (a) and (b), respectively, by not later than 1 year after 

the date of the enactment of this Act. 

(d) FUNDING.—There are authorized to be appropriated to the Secretary (in appropriate part from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund) to carry out the provisions of subsection 

(b) of section 1868 of the Social Security Act (relating to the Medicare Provider Ombudsman), as added by subsection (a)(5) and section 1807 of such Act (relating to 

the Medicare Beneficiary Ombudsman), as added by subsection (b), such sums as 

are necessary for fiscal year 2004 and each succeeding fiscal year. 

(e) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–MEDICARE).—

(1) PHONE TRIAGE SYSTEM; LISTING IN MEDICARE HANDBOOK INSTEAD OF OTHER

TOLL-FREE NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–2(b)) is amended by 

adding at the end the following: ‘‘The Secretary shall provide, through the tollfree number 1–800–MEDICARE, for a means by which individuals seeking information about, or assistance with, such programs who phone such toll-free 

number are transferred (without charge) to appropriate entities for the provision of such information or assistance. Such toll-free number shall be the tollfree number listed for general information and assistance in the annual notice 

under subsection (a) instead of the listing of numbers of individual contractors.’’. 

(2) MONITORING ACCURACY.—

(A) STUDY.—The Comptroller General of the United States shall conduct 

a study to monitor the accuracy and consistency of information provided to 

individuals entitled to benefits under part A or enrolled under part B, or 

17

both, through the toll-free number 1–800–MEDICARE, including an assessment of whether the information provided is sufficient to answer questions 

of such individuals. In conducting the study, the Comptroller General shall 

examine the education and training of the individuals providing information through such number. 

(B) REPORT.—Not later than 1 year after the date of the enactment of this 

Act, the Comptroller General shall submit to Congress a report on the 

study conducted under subparagraph (A). 

SEC. 304. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM. 

(a) IN GENERAL.—The Secretary shall establish a demonstration program (in this 

section referred to as the ‘‘demonstration program’’) under which medicare specialists employed by the Department of Health and Human Services provide advice and 

assistance to individuals entitled to benefits under part A of title XVIII of the Social 

Security Act, or enrolled under part B of such title, or both, regarding the medicare 

program at the location of existing local offices of the Social Security Administration. 

(b) LOCATIONS.—

(1) IN GENERAL.—The demonstration program shall be conducted in at least 

6 offices or areas. Subject to paragraph (2), in selecting such offices and areas, 

the Secretary shall provide preference for offices with a high volume of visits 

by individuals referred to in subsection (a). 

(2) ASSISTANCE FOR RURAL BENEFICIARIES.—The Secretary shall provide for 

the selection of at least 2 rural areas to participate in the demonstration program. In conducting the demonstration program in such rural areas, the Secretary shall provide for medicare specialists to travel among local offices in a 

rural area on a scheduled basis. 

(c) DURATION.—The demonstration program shall be conducted over a 3-year period. 

(d) EVALUATION AND REPORT.—

(1) EVALUATION.—The Secretary shall provide for an evaluation of the demonstration program. Such evaluation shall include an analysis of—

(A) utilization of, and satisfaction of those individuals referred to in subsection (a) with, the assistance provided under the program; and 

(B) the cost-effectiveness of providing beneficiary assistance through outstationing medicare specialists at local offices of the Social Security Administration. 

(2) REPORT.—The Secretary shall submit to Congress a report on such evaluation and shall include in such report recommendations regarding the feasibility 

of permanently out-stationing medicare specialists at local offices of the Social 

Security Administration. 

SEC. 305. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO BENEFICIARIES ABOUT 

SKILLED NURSING FACILITY BENEFITS. 

(a) IN GENERAL.—The Secretary shall provide that in medicare beneficiary notices 

provided (under section 1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a)) 

with respect to the provision of post-hospital extended care services under part A 

of title XVIII of the Social Security Act, there shall be included information on the 

number of days of coverage of such services remaining under such part for the medicare beneficiary and spell of illness involved. 

(b) EFFECTIVE DATE.—Subsection (a) shall apply to notices provided during calendar quarters beginning more than 6 months after the date of the enactment of 

this Act. 

SEC. 306. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING FACILITIES IN HOSPITAL DISCHARGE PLANS. 

(a) AVAILABILITY OF DATA.—The Secretary shall publicly provide information that 

enables hospital discharge planners, medicare beneficiaries, and the public to identify skilled nursing facilities that are participating in the medicare program. 

(b) INCLUSION OF INFORMATION IN CERTAIN HOSPITAL DISCHARGE PLANS.—

(1) IN GENERAL.—Section 1861(ee)(2)(D) (42 U.S.C. 1395x(ee)(2)(D)) is amended—

(A) by striking ‘‘hospice services’’ and inserting ‘‘hospice care and posthospital extended care services’’; and 

(B) by inserting before the period at the end the following: ‘‘and, in the 

case of individuals who are likely to need post-hospital extended care services, the availability of such services through facilities that participate in 

the program under this title and that serve the area in which the patient 

resides’’. 

18

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall apply to 

discharge plans made on or after such date as the Secretary shall specify, but 

not later than 6 months after the date the Secretary provides for availability 

of information under subsection (a). 

TITLE IV—APPEALS AND RECOVERY 

SEC. 401. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS. 

(a) TRANSITION PLAN.—

(1) IN GENERAL.—Not later than October 1, 2004, the Commissioner of Social 

Security and the Secretary shall develop and transmit to Congress and the 

Comptroller General of the United States a plan under which the functions of 

administrative law judges responsible for hearing cases under title XVIII of the 

Social Security Act (and related provisions in title XI of such Act) are transferred from the responsibility of the Commissioner and the Social Security Administration to the Secretary and the Department of Health and Human Services. 

(2) GAO EVALUATION.—The Comptroller General of the United States shall 

evaluate the plan and, not later than the date that is 6 months after the date 

on which the plan is received by the Comptroller General, shall submit to Congress a report on such evaluation. 

(b) TRANSFER OF ADJUDICATION AUTHORITY.—

(1) IN GENERAL.—Not earlier than July 1, 2005, and not later than October 

1, 2005, the Commissioner of Social Security and the Secretary shall implement 

the transition plan under subsection (a) and transfer the administrative law 

judge functions described in such subsection from the Social Security Administration to the Secretary. 

(2) ASSURING INDEPENDENCE OF JUDGES.—The Secretary shall assure the 

independence of administrative law judges performing the administrative law 

judge functions transferred under paragraph (1) from the Centers for Medicare 

& Medicaid Services and its contractors. In order to assure such independence, 

the Secretary shall place such judges in an administrative office that is organizationally and functionally separate from such Centers. Such judges shall report 

to, and be under the general supervision of, the Secretary, but shall not report 

to, or be subject to supervision by, another other officer of the Department. 

(3) GEOGRAPHIC DISTRIBUTION.—The Secretary shall provide for an appropriate geographic distribution of administrative law judges performing the administrative law judge functions transferred under paragraph (1) throughout 

the United States to ensure timely access to such judges. 

(4) HIRING AUTHORITY.—Subject to the amounts provided in advance in appropriations Act, the Secretary shall have authority to hire administrative law 

judges to hear such cases, giving priority to those judges with prior experience 

in handling medicare appeals and in a manner consistent with paragraph (3), 

and to hire support staff for such judges. 

(5) FINANCING.—Amounts payable under law to the Commissioner for administrative law judges performing the administrative law judge functions transferred under paragraph (1) from the Federal Hospital Insurance Trust Fund 

and the Federal Supplementary Medical Insurance Trust Fund shall become 

payable to the Secretary for the functions so transferred. 

(6) SHARED RESOURCES.—The Secretary shall enter into such arrangements 

with the Commissioner as may be appropriate with respect to transferred functions of administrative law judges to share office space, support staff, and other 

resources, with appropriate reimbursement from the Trust Funds described in 

paragraph (5). 

(c) INCREASED FINANCIAL SUPPORT.—In addition to any amounts otherwise appropriated, to ensure timely action on appeals before administrative law judges and the 

Departmental Appeals Board consistent with section 1869 of the Social Security Act 

(as amended by section 521 of BIPA, 114 Stat. 2763A–534), there are authorized to 

be appropriated (in appropriate part from the Federal Hospital Insurance Trust 

Fund and the Federal Supplementary Medical Insurance Trust Fund) to the Secretary such sums as are necessary for fiscal year 2005 and each subsequent fiscal 

year to—

(1) increase the number of administrative law judges (and their staffs) under 

subsection (b)(4); 

(2) improve education and training opportunities for administrative law 

judges (and their staffs); and 

(3) increase the staff of the Departmental Appeals Board. 

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(d) CONFORMING AMENDMENT.—Section 1869(f)(2)(A)(i) (42 U.S.C. 

1395ff(f)(2)(A)(i)), as added by section 522(a) of BIPA (114 Stat. 2763A–543), is 

amended by striking ‘‘of the Social Security Administration’’. 

SEC. 402. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 

(a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—Section 1869(b) (42 U.S.C. 1395ff(b)) 

as amended by BIPA, is amended—

(1) in paragraph (1)(A), by inserting ‘‘, subject to paragraph (2),’’ before ‘‘to 

judicial review of the Secretary’s final decision’’; 

(2) in paragraph (1)(F)—

(A) by striking clause (ii); 

(B) by striking ‘‘PROCEEDING’’ and all that follows through ‘‘DETERMINATION’’ and inserting ‘‘DETERMINATIONS AND RECONSIDERATIONS’’; and 

(C) by redesignating subclauses (I) and (II) as clauses (i) and (ii) and by 

moving the indentation of such subclauses (and the matter that follows) 2 

ems to the left; and 

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

‘‘(2) EXPEDITED ACCESS TO JUDICIAL REVIEW.—

‘‘(A) IN GENERAL.—The Secretary shall establish a process under which 

a provider of services or supplier that furnishes an item or service or an 

individual entitled to benefits under part A or enrolled under part B, or 

both, who has filed an appeal under paragraph (1) may obtain access to judicial review when a review panel (described in subparagraph (D)), on its 

own motion or at the request of the appellant, determines that no entity 

in the administrative appeals process has the authority to decide the question of law or regulation relevant to the matters in controversy and that 

there is no material issue of fact in dispute. The appellant may make such 

request only once with respect to a question of law or regulation in a case 

of an appeal. 

‘‘(B) PROMPT DETERMINATIONS.—If, after or coincident with appropriately 

filing a request for an administrative hearing, the appellant requests a determination by the appropriate review panel that no review panel has the 

authority to decide the question of law or regulations relevant to the matters in controversy and that there is no material issue of fact in dispute 

and if such request is accompanied by the documents and materials as the 

appropriate review panel shall require for purposes of making such determination, such review panel shall make a determination on the request in 

writing within 60 days after the date such review panel receives the request and such accompanying documents and materials. Such a determination by such review panel shall be considered a final decision and not subject to review by the Secretary. 

‘‘(C) ACCESS TO JUDICIAL REVIEW.—

‘‘(i) IN GENERAL.—If the appropriate review panel—

‘‘(I) determines that there are no material issues of fact in dispute and that the only issue is one of law or regulation that no review panel has the authority to decide; or 

‘‘(II) fails to make such determination within the period provided 

under subparagraph (B); 

then the appellant may bring a civil action as described in this subparagraph. 

‘‘(ii) DEADLINE FOR FILING.—Such action shall be filed, in the case described in—

‘‘(I) clause (i)(I), within 60 days of date of the determination described in such subparagraph; or 

‘‘(II) clause (i)(II), within 60 days of the end of the period provided under subparagraph (B) for the determination. 

‘‘(iii) VENUE.—Such action shall be brought in the district court of the 

United States for the judicial district in which the appellant is located 

(or, in the case of an action brought jointly by more than one applicant, 

the judicial district in which the greatest number of applicants are located) or in the district court for the District of Columbia. 

‘‘(iv) INTEREST ON AMOUNTS IN CONTROVERSY.—Where a provider of 

services or supplier seeks judicial review pursuant to this paragraph, 

the amount in controversy shall be subject to annual interest beginning 

on the first day of the first month beginning after the 60-day period 

as determined pursuant to clause (ii) and equal to the rate of interest 

on obligations issued for purchase by the Federal Hospital Insurance 

Trust Fund and by the Federal Supplementary Medical Insurance 

Trust Fund for the month in which the civil action authorized under 

20

this paragraph is commenced, to be awarded by the reviewing court in 

favor of the prevailing party. No interest awarded pursuant to the preceding sentence shall be deemed income or cost for the purposes of determining reimbursement due providers of services or suppliers under 

this Act. 

‘‘(D) REVIEW PANELS.—For purposes of this subsection, a ‘review panel’ is 

a panel consisting of 3 members (who shall be administrative law judges, 

members of the Departmental Appeals Board, or qualified individuals associated with a qualified independent contractor (as defined in subsection 

(c)(2)) or with another independent entity) designated by the Secretary for 

purposes of making determinations under this paragraph.’’. 

(b) APPLICATION TO PROVIDER AGREEMENT DETERMINATIONS.—Section 1866(h)(1) 

(42 U.S.C. 1395cc(h)(1)) is amended—

(1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and 

(2) by adding at the end the following new subparagraph: 

‘‘(B) An institution or agency described in subparagraph (A) that has filed for a 

hearing under subparagraph (A) shall have expedited access to judicial review under 

this subparagraph in the same manner as providers of services, suppliers, and individuals entitled to benefits under part A or enrolled under part B, or both, may obtain expedited access to judicial review under the process established under section 

1869(b)(2). Nothing in this subparagraph shall be construed to affect the application 

of any remedy imposed under section 1819 during the pendency of an appeal under 

this subparagraph.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to appeals filed on or after October 1, 2004. 

(d) EXPEDITED REVIEW OF CERTAIN PROVIDER AGREEMENT DETERMINATIONS.—

(1) TERMINATION AND CERTAIN OTHER IMMEDIATE REMEDIES.—The Secretary 

shall develop and implement a process to expedite proceedings under sections 

1866(h) of the Social Security Act (42 U.S.C. 1395cc(h)) in which the remedy of 

termination of participation, or a remedy described in clause (i) or (iii) of section 

1819(h)(2)(B) of such Act (42 U.S.C. 1395i–3(h)(2)(B)) which is applied on an immediate basis, has been imposed. Under such process priority shall be provided 

in cases of termination. 

(2) INCREASED FINANCIAL SUPPORT.—In addition to any amounts otherwise appropriated, to reduce by 50 percent the average time for administrative determinations on appeals under section 1866(h) of the Social Security Act (42 U.S.C. 

1395cc(h)), there are authorized to be appropriated (in appropriate part from 

the Federal Hospital Insurance Trust Fund and the Federal Supplementary 

Medical Insurance Trust Fund) to the Secretary such additional sums for fiscal 

year 2005 and each subsequent fiscal year as may be necessary. The purposes 

for which such amounts are available include increasing the number of administrative law judges (and their staffs) and the appellate level staff at the Departmental Appeals Board of the Department of Health and Human Services and 

educating such judges and staffs on long-term care issues. 

SEC. 403. REVISIONS TO MEDICARE APPEALS PROCESS. 

(a) REQUIRING FULL AND EARLY PRESENTATION OF EVIDENCE.—

(1) IN GENERAL.—Section 1869(b) (42 U.S.C. 1395ff(b)), as amended by BIPA 

and as amended by section 402(a), is further amended by adding at the end the 

following new paragraph: 

‘‘(3) REQUIRING FULL AND EARLY PRESENTATION OF EVIDENCE BY PROVIDERS.—

A provider of services or supplier may not introduce evidence in any appeal 

under this section that was not presented at the reconsideration conducted by 

the qualified independent contractor under subsection (c), unless there is good 

cause which precluded the introduction of such evidence at or before that reconsideration.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall take effect on October 1, 2004. 

(b) USE OF PATIENTS’ MEDICAL RECORDS.—Section 1869(c)(3)(B)(i) (42 U.S.C. 

1395ff(c)(3)(B)(i)), as amended by BIPA, is amended by inserting ‘‘(including the 

medical records of the individual involved)’’ after ‘‘clinical experience’’. 

(c) NOTICE REQUIREMENTS FOR MEDICARE APPEALS.—

(1) INITIAL DETERMINATIONS AND REDETERMINATIONS.—Section 1869(a) (42 

U.S.C. 1395ff(a)), as amended by BIPA, is amended by adding at the end the 

following new paragraphs: 

‘‘(4) REQUIREMENTS OF NOTICE OF DETERMINATIONS.—With respect to an initial determination insofar as it results in a denial of a claim for benefits—

‘‘(A) the written notice on the determination shall include—

21

‘‘(i) the reasons for the determination, including whether a local medical review policy or a local coverage determination was used; ‘‘(ii) the procedures for obtaining additional information concerning 

the determination, including the information described in subparagraph 

(B); and ‘‘(iii) notification of the right to seek a redetermination or otherwise 

appeal the determination and instructions on how to initiate such a redetermination under this section; and ‘‘(B) the person provided such notice may obtain, upon request, the specific provision of the policy, manual, or regulation used in making the determination. ‘‘(5) REQUIREMENTS OF NOTICE OF REDETERMINATIONS.—With respect to a redetermination insofar as it results in a denial of a claim for benefits— ‘‘(A) the written notice on the redetermination shall include— ‘‘(i) the specific reasons for the redetermination; 

‘‘(ii) as appropriate, a summary of the clinical or scientific evidence 

used in making the redetermination; ‘‘(iii) a description of the procedures for obtaining additional information concerning the redetermination; and ‘‘(iv) notification of the right to appeal the redetermination and instructions on how to initiate such an appeal under this section; 

‘‘(B) such written notice shall be provided in printed form and written in 

a manner calculated to be understood by the individual entitled to benefits 

under part A or enrolled under part B, or both; and 

‘‘(C) the person provided such notice may obtain, upon request, information on the specific provision of the policy, manual, or regulation used in 

making the redetermination.’’. 

(2) RECONSIDERATIONS.—Section 1869(c)(3)(E) (42 U.S.C. 1395ff(c)(3)(E)), as 

amended by BIPA, is amended—

(A) by inserting ‘‘be written in a manner calculated to be understood by 

the individual entitled to benefits under part A or enrolled under part B, 

or both, and shall include (to the extent appropriate)’’ after ‘‘in writing, ’’; 

and 

(B) by inserting ‘‘and a notification of the right to appeal such determination and instructions on how to initiate such appeal under this section’’

after ‘‘such decision,’’. 

(3) APPEALS.—Section 1869(d) (42 U.S.C. 1395ff(d)), as amended by BIPA, is 

amended—

(A) in the heading, by inserting ‘‘; NOTICE’’ after ‘‘SECRETARY’’; and 

(B) by adding at the end the following new paragraph: 

‘‘(4) NOTICE.—Notice of the decision of an administrative law judge shall be 

in writing in a manner calculated to be understood by the individual entitled 

to benefits under part A or enrolled under part B, or both, and shall include—

‘‘(A) the specific reasons for the determination (including, to the extent 

appropriate, a summary of the clinical or scientific evidence used in making 

the determination); 

‘‘(B) the procedures for obtaining additional information concerning the 

decision; and 

‘‘(C) notification of the right to appeal the decision and instructions on 

how to initiate such an appeal under this section.’’. 

(4) SUBMISSION OF RECORD FOR APPEAL.—Section 1869(c)(3)(J)(i) (42 U.S.C. 

1395ff(c)(3)(J)(i)) by striking ‘‘prepare’’ and inserting ‘‘submit’’ and by striking 

‘‘with respect to’’ and all that follows through ‘‘and relevant policies’’. 

(d) QUALIFIED INDEPENDENT CONTRACTORS.—

(1) ELIGIBILITY REQUIREMENTS OF QUALIFIED INDEPENDENT CONTRACTORS.—

Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)), as amended by BIPA, is amended—

(A) in subparagraph (A), by striking ‘‘sufficient training and expertise in 

medical science and legal matters’’ and inserting ‘‘sufficient medical, legal, 

and other expertise (including knowledge of the program under this title) 

and sufficient staffing’’; and 

(B) by adding at the end the following new subparagraph: 

‘‘(K) INDEPENDENCE REQUIREMENTS.—

‘‘(i) IN GENERAL.—Subject to clause (ii), a qualified independent contractor shall not conduct any activities in a case unless the entity—

‘‘(I) is not a related party (as defined in subsection (g)(5)); 

‘‘(II) does not have a material familial, financial, or professional 

relationship with such a party in relation to such case; and 

‘‘(III) does not otherwise have a conflict of interest with such a 

party. 

22

‘‘(ii) EXCEPTION FOR REASONABLE COMPENSATION.—Nothing in clause 

(i) shall be construed to prohibit receipt by a qualified independent contractor of compensation from the Secretary for the conduct of activities 

under this section if the compensation is provided consistent with 

clause (iii). ‘‘(iii) LIMITATIONS ON ENTITY COMPENSATION.—Compensation provided by the Secretary to a qualified independent contractor in connection with reviews under this section shall not be contingent on any decision rendered by the contractor or by any reviewing professional.’’. (2) ELIGIBILITY REQUIREMENTS FOR REVIEWERS.—Section 1869 (42 U.S.C. 

1395ff), as amended by BIPA, is amended— (A) by amending subsection (c)(3)(D) to read as follows: 

‘‘(D) QUALIFICATIONS FOR REVIEWERS.—The requirements of subsection (g) 

shall be met (relating to qualifications of reviewing professionals).’’; and 

(B) by adding at the end the following new subsection: ‘‘(g) QUALIFICATIONS OF REVIEWERS.— ‘‘(1) IN GENERAL.—In reviewing determinations under this section, a qualified 

independent contractor shall assure that— ‘‘(A) each individual conducting a review shall meet the qualifications of 

paragraph (2); ‘‘(B) compensation provided by the contractor to each such reviewer is 

consistent with paragraph (3); and 

‘‘(C) in the case of a review by a panel described in subsection (c)(3)(B) 

composed of physicians or other health care professionals (each in this subsection referred to as a ‘reviewing professional’), a reviewing professional 

meets the qualifications described in paragraph (4) and, where a claim is 

regarding the furnishing of treatment by a physician (allopathic or osteopathic) or the provision of items or services by a physician (allopathic or 

osteopathic), each reviewing professional shall be a physician (allopathic or 

osteopathic). 

‘‘(2) INDEPENDENCE.—

‘‘(A) IN GENERAL.—Subject to subparagraph (B), each individual conducting a review in a case shall—

‘‘(i) not be a related party (as defined in paragraph (5)); 

‘‘(ii) not have a material familial, financial, or professional relationship with such a party in the case under review; and 

‘‘(iii) not otherwise have a conflict of interest with such a party. 

‘‘(B) EXCEPTION.—Nothing in subparagraph (A) shall be construed to—

‘‘(i) prohibit an individual, solely on the basis of a participation agreement with a fiscal intermediary, carrier, or other contractor, from serving as a reviewing professional if—

‘‘(I) the individual is not involved in the provision of items or 

services in the case under review; 

‘‘(II) the fact of such an agreement is disclosed to the Secretary 

and the individual entitled to benefits under part A or enrolled 

under part B, or both, (or authorized representative) and neither 

party objects; and 

‘‘(III) the individual is not an employee of the intermediary, carrier, or contractor and does not provide services exclusively or primarily to or on behalf of such intermediary, carrier, or contractor; 

‘‘(ii) prohibit an individual who has staff privileges at the institution 

where the treatment involved takes place from serving as a reviewer 

merely on the basis of having such staff privileges if the existence of 

such privileges is disclosed to the Secretary and such individual (or authorized representative), and neither party objects; or 

‘‘(iii) prohibit receipt of compensation by a reviewing professional 

from a contractor if the compensation is provided consistent with paragraph (3). 

For purposes of this paragraph, the term ‘participation agreement’ means 

an agreement relating to the provision of health care services by the individual and does not include the provision of services as a reviewer under 

this subsection. 

‘‘(3) LIMITATIONS ON REVIEWER COMPENSATION.—Compensation provided by a 

qualified independent contractor to a reviewer in connection with a review 

under this section shall not be contingent on the decision rendered by the reviewer. 

‘‘(4) LICENSURE AND EXPERTISE.—Each reviewing professional shall be—

‘‘(A) a physician (allopathic or osteopathic) who is appropriately 

credentialed or licensed in one or more States to deliver health care services 

23

and has medical expertise in the field of practice that is appropriate for the 

items or services at issue; or 

‘‘(B) a health care professional who is legally authorized in one or more 

States (in accordance with State law or the State regulatory mechanism 

provided by State law) to furnish the health care items or services at issue 

and has medical expertise in the field of practice that is appropriate for 

such items or services. 

‘‘(5) RELATED PARTY DEFINED.—For purposes of this section, the term ‘related 

party’ means, with respect to a case under this title involving a specific individual entitled to benefits under part A or enrolled under part B, or both, any 

of the following: 

‘‘(A) The Secretary, the medicare administrative contractor involved, or 

any fiduciary, officer, director, or employee of the Department of Health 

and Human Services, or of such contractor. 

‘‘(B) The individual (or authorized representative). 

‘‘(C) The health care professional that provides the items or services involved in the case. 

‘‘(D) The institution at which the items or services (or treatment) involved 

in the case are provided. 

‘‘(E) The manufacturer of any drug or other item that is included in the 

items or services involved in the case. 

‘‘(F) Any other party determined under any regulations to have a substantial interest in the case involved.’’. 

(3) REDUCING MINIMUM NUMBER OF QUALIFIED INDEPENDENT CONTRACTORS.—

Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is amended by striking ‘‘not fewer 

than 12 qualified independent contractors under this subsection’’ and inserting 

‘‘a sufficient number of qualified independent contractors (but not fewer than 

4 such contractors) to conduct reconsiderations consistent with the timeframes 

applicable under this subsection’’. 

(4) EFFECTIVE DATE.—The amendments made by paragraphs (1) and (2) shall 

be effective as if included in the enactment of the respective provisions of subtitle C of title V of BIPA, (114 Stat. 2763A–534). 

(5) TRANSITION.—In applying section 1869(g) of the Social Security Act (as 

added by paragraph (2)), any reference to a medicare administrative contractor 

shall be deemed to include a reference to a fiscal intermediary under section 

1816 of the Social Security Act (42 U.S.C. 1395h) and a carrier under section 

1842 of such Act (42 U.S.C. 1395u). 

SEC. 404. PREPAYMENT REVIEW. 

(a) IN GENERAL.—Section 1874A, as added by section 201(a)(1) and as amended 

by sections 202(b), 301(b)(1), and 301(c)(1), is further amended by adding at the end 

the following new subsection: 

‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—

‘‘(1) CONDUCT OF RANDOM PREPAYMENT REVIEW.—

‘‘(A) IN GENERAL.—A medicare administrative contractor may conduct 

random prepayment review only to develop a contractor-wide or programwide claims payment error rates or under such additional circumstances as 

may be provided under regulations, developed in consultation with providers of services and suppliers. 

‘‘(B) USE OF STANDARD PROTOCOLS WHEN CONDUCTING PREPAYMENT REVIEWS.—When a medicare administrative contractor conducts a random prepayment review, the contractor may conduct such review only in accordance 

with a standard protocol for random prepayment audits developed by the 

Secretary. 

‘‘(C) CONSTRUCTION.—Nothing in this paragraph shall be construed as 

preventing the denial of payments for claims actually reviewed under a random prepayment review. 

‘‘(D) RANDOM PREPAYMENT REVIEW.—For purposes of this subsection, the 

term ‘random prepayment review’ means a demand for the production of 

records or documentation absent cause with respect to a claim. 

‘‘(2) LIMITATIONS ON NON-RANDOM PREPAYMENT REVIEW.—

‘‘(A) LIMITATIONS ON INITIATION OF NON-RANDOM PREPAYMENT REVIEW.—

A medicare administrative contractor may not initiate non-random prepayment review of a provider of services or supplier based on the initial identification by that provider of services or supplier of an improper billing practice unless there is a likelihood of sustained or high level of payment error 

(as defined in subsection (i)(3)(A)). 

‘‘(B) TERMINATION OF NON-RANDOM PREPAYMENT REVIEW.—The Secretary 

shall issue regulations relating to the termination, including termination 

24

dates, of non-random prepayment review. Such regulations may vary such 

a termination date based upon the differences in the circumstances triggering prepayment review.’’. 

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in this subsection, the amendment made 

by subsection (a) shall take effect 1 year after the date of the enactment of this 

Act. 

(2) DEADLINE FOR PROMULGATION OF CERTAIN REGULATIONS.—The Secretary 

shall first issue regulations under section 1874A(h) of the Social Security Act, 

as added by subsection (a), by not later than 1 year after the date of the enactment of this Act. 

(3) APPLICATION OF STANDARD PROTOCOLS FOR RANDOM PREPAYMENT REVIEW.—Section 1874A(h)(1)(B) of the Social Security Act, as added by subsection 

(a), shall apply to random prepayment reviews conducted on or after such date 

(not later than 1 year after the date of the enactment of this Act) as the Secretary shall specify. 

(c) APPLICATION TO FISCAL INTERMEDIARIES AND CARRIERS.—The provisions of section 1874A(h) of the Social Security Act, as added by subsection (a), shall apply to 

each fiscal intermediary under section 1816 of the Social Security Act (42 U.S.C. 

1395h) and each carrier under section 1842 of such Act (42 U.S.C. 1395u) in the 

same manner as they apply to medicare administrative contractors under such provisions. 

SEC. 405. RECOVERY OF OVERPAYMENTS. 

(a) IN GENERAL.—Section 1893 (42 U.S.C. 1395ddd) is amended by adding at the 

end the following new subsection: 

‘‘(f) RECOVERY OF OVERPAYMENTS.—

‘‘(1) USE OF REPAYMENT PLANS.—

‘‘(A) IN GENERAL.—If the repayment, within 30 days by a provider of services or supplier, of an overpayment under this title would constitute a hardship (as defined in subparagraph (B)), subject to subparagraph (C), upon request of the provider of services or supplier the Secretary shall enter into 

a plan with the provider of services or supplier for the repayment (through 

offset or otherwise) of such overpayment over a period of at least 6 months 

but not longer than 3 years (or not longer than 5 years in the case of extreme hardship, as determined by the Secretary). Interest shall accrue on 

the balance through the period of repayment. Such plan shall meet terms 

and conditions determined to be appropriate by the Secretary. 

‘‘(B) HARDSHIP.—

‘‘(i) IN GENERAL.—For purposes of subparagraph (A), the repayment 

of an overpayment (or overpayments) within 30 days is deemed to constitute a hardship if—

‘‘(I) in the case of a provider of services that files cost reports, 

the aggregate amount of the overpayments exceeds 10 percent of 

the amount paid under this title to the provider of services for the 

cost reporting period covered by the most recently submitted cost 

report; or 

‘‘(II) in the case of another provider of services or supplier, the 

aggregate amount of the overpayments exceeds 10 percent of the 

amount paid under this title to the provider of services or supplier 

for the previous calendar year. 

‘‘(ii) RULE OF APPLICATION.—The Secretary shall establish rules for 

the application of this subparagraph in the case of a provider of services or supplier that was not paid under this title during the previous 

year or was paid under this title only during a portion of that year. 

‘‘(iii) TREATMENT OF PREVIOUS OVERPAYMENTS.—If a provider of services or supplier has entered into a repayment plan under subparagraph 

(A) with respect to a specific overpayment amount, such payment 

amount under the repayment plan shall not be taken into account 

under clause (i) with respect to subsequent overpayment amounts. 

‘‘(C) EXCEPTIONS.—Subparagraph (A) shall not apply if—

‘‘(i) the Secretary has reason to suspect that the provider of services 

or supplier may file for bankruptcy or otherwise cease to do business 

or discontinue participation in the program under this title; or 

‘‘(ii) there is an indication of fraud or abuse committed against the 

program. 

‘‘(D) IMMEDIATE COLLECTION IF VIOLATION OF REPAYMENT PLAN.—If a provider of services or supplier fails to make a payment in accordance with a 

repayment plan under this paragraph, the Secretary may immediately seek 

25

to offset or otherwise recover the total balance outstanding (including applicable interest) under the repayment plan. 

‘‘(E) RELATION TO NO FAULT PROVISION.—Nothing in this paragraph shall 

be construed as affecting the application of section 1870(c) (relating to no 

adjustment in the cases of certain overpayments). 

‘‘(2) LIMITATION ON RECOUPMENT.—

‘‘(A) IN GENERAL.—In the case of a provider of services or supplier that 

is determined to have received an overpayment under this title and that 

seeks a reconsideration by a qualified independent contractor on such determination under section 1869(b)(1), the Secretary may not take any action 

(or authorize any other person, including any medicare contractor, as defined in subparagraph (C)) to recoup the overpayment until the date the decision on the reconsideration has been rendered. If the provisions of section 

1869(b)(1) (providing for such a reconsideration by a qualified independent 

contractor) are not in effect, in applying the previous sentence any reference to such a reconsideration shall be treated as a reference to a redetermination by the fiscal intermediary or carrier involved. 

‘‘(B) COLLECTION WITH INTEREST.—Insofar as the determination on such 

appeal is against the provider of services or supplier, interest on the overpayment shall accrue on and after the date of the original notice of overpayment. Insofar as such determination against the provider of services or supplier is later reversed, the Secretary shall provide for repayment of the 

amount recouped plus interest at the same rate as would apply under the 

previous sentence for the period in which the amount was recouped. 

‘‘(C) MEDICARE CONTRACTOR DEFINED.—For purposes of this subsection, 

the term ‘medicare contractor’ has the meaning given such term in section 

1889(g). 

‘‘(3) LIMITATION ON USE OF EXTRAPOLATION.—A medicare contractor may not 

use extrapolation to determine overpayment amounts to be recovered by 

recoupment, offset, or otherwise unless—

‘‘(A) there is a sustained or high level of payment error (as defined by the 

Secretary by regulation); or 

‘‘(B) documented educational intervention has failed to correct the payment error (as determined by the Secretary). 

‘‘(4) PROVISION OF SUPPORTING DOCUMENTATION.—In the case of a provider of 

services or supplier with respect to which amounts were previously overpaid, a 

medicare contractor may request the periodic production of records or supporting documentation for a limited sample of submitted claims to ensure that 

the previous practice is not continuing. 

‘‘(5) CONSENT SETTLEMENT REFORMS.—

‘‘(A) IN GENERAL.—The Secretary may use a consent settlement (as defined in subparagraph (D)) to settle a projected overpayment. 

‘‘(B) OPPORTUNITY TO SUBMIT ADDITIONAL INFORMATION BEFORE CONSENT

SETTLEMENT OFFER.—Before offering a provider of services or supplier a 

consent settlement, the Secretary shall—

‘‘(i) communicate to the provider of services or supplier—

‘‘(I) that, based on a review of the medical records requested by 

the Secretary, a preliminary evaluation of those records indicates 

that there would be an overpayment; 

‘‘(II) the nature of the problems identified in such evaluation; 

and 

‘‘(III) the steps that the provider of services or supplier should 

take to address the problems; and 

‘‘(ii) provide for a 45-day period during which the provider of services 

or supplier may furnish additional information concerning the medical 

records for the claims that had been reviewed. 

‘‘(C) CONSENT SETTLEMENT OFFER.—The Secretary shall review any additional information furnished by the provider of services or supplier under 

subparagraph (B)(ii). Taking into consideration such information, the Secretary shall determine if there still appears to be an overpayment. If so, the 

Secretary—

‘‘(i) shall provide notice of such determination to the provider of services or supplier, including an explanation of the reason for such determination; and 

‘‘(ii) in order to resolve the overpayment, may offer the provider of 

services or supplier—

‘‘(I) the opportunity for a statistically valid random sample; or 

‘‘(II) a consent settlement. 

26

The opportunity provided under clause (ii)(I) does not waive any appeal 

rights with respect to the alleged overpayment involved. ‘‘(D) CONSENT SETTLEMENT DEFINED.—For purposes of this paragraph, the 

term ‘consent settlement’ means an agreement between the Secretary and 

a provider of services or supplier whereby both parties agree to settle a projected overpayment based on less than a statistically valid sample of claims 

and the provider of services or supplier agrees not to appeal the claims involved. ‘‘(6) NOTICE OF OVER-UTILIZATION OF CODES.—The Secretary shall establish, in 

consultation with organizations representing the classes of providers of services 

and suppliers, a process under which the Secretary provides for notice to classes 

of providers of services and suppliers served by the contractor in cases in which 

the contractor has identified that particular billing codes may be overutilized 

by that class of providers of services or suppliers under the programs under this 

title (or provisions of title XI insofar as they relate to such programs). ‘‘(7) PAYMENT AUDITS.— ‘‘(A) WRITTEN NOTICE FOR POST-PAYMENT AUDITS.—Subject to subparagraph (C), if a medicare contractor decides to conduct a post-payment audit 

of a provider of services or supplier under this title, the contractor shall 

provide the provider of services or supplier with written notice (which may 

be in electronic form) of the intent to conduct such an audit. 

‘‘(B) EXPLANATION OF FINDINGS FOR ALL AUDITS.—Subject to subparagraph (C), if a medicare contractor audits a provider of services or supplier 

under this title, the contractor shall—

‘‘(i) give the provider of services or supplier a full review and explanation of the findings of the audit in a manner that is understandable 

to the provider of services or supplier and permits the development of 

an appropriate corrective action plan; 

‘‘(ii) inform the provider of services or supplier of the appeal rights 

under this title as well as consent settlement options (which are at the 

discretion of the Secretary); 

‘‘(iii) give the provider of services or supplier an opportunity to provide additional information to the contractor; and 

‘‘(iv) take into account information provided, on a timely basis, by the 

provider of services or supplier under clause (iii). 

‘‘(C) EXCEPTION.—Subparagraphs (A) and (B) shall not apply if the provision of notice or findings would compromise pending law enforcement activities, whether civil or criminal, or reveal findings of law enforcement-related 

audits. 

‘‘(8) STANDARD METHODOLOGY FOR PROBE SAMPLING.—The Secretary shall establish a standard methodology for medicare contractors to use in selecting a 

sample of claims for review in the case of an abnormal billing pattern.’’. 

(b) EFFECTIVE DATES AND DEADLINES.—

(1) USE OF REPAYMENT PLANS.—Section 1893(f)(1) of the Social Security Act, 

as added by subsection (a), shall apply to requests for repayment plans made 

after the date of the enactment of this Act. 

(2) LIMITATION ON RECOUPMENT.—Section 1893(f)(2) of the Social Security Act, 

as added by subsection (a), shall apply to actions taken after the date of the 

enactment of this Act. 

(3) USE OF EXTRAPOLATION.—Section 1893(f)(3) of the Social Security Act, as 

added by subsection (a), shall apply to statistically valid random samples initiated after the date that is 1 year after the date of the enactment of this Act. 

(4) PROVISION OF SUPPORTING DOCUMENTATION.—Section 1893(f)(4) of the Social Security Act, as added by subsection (a), shall take effect on the date of 

the enactment of this Act. 

(5) CONSENT SETTLEMENT.—Section 1893(f)(5) of the Social Security Act, as 

added by subsection (a), shall apply to consent settlements entered into after 

the date of the enactment of this Act. 

(6) NOTICE OF OVERUTILIZATION.—Not later than 1 year after the date of the 

enactment of this Act, the Secretary shall first establish the process for notice 

of overutilization of billing codes under section 1893A(f)(6) of the Social Security 

Act, as added by subsection (a). 

(7) PAYMENT AUDITS.—Section 1893A(f)(7) of the Social Security Act, as added 

by subsection (a), shall apply to audits initiated after the date of the enactment 

of this Act. 

(8) STANDARD FOR ABNORMAL BILLING PATTERNS.—Not later than 1 year after 

the date of the enactment of this Act, the Secretary shall first establish a standard methodology for selection of sample claims for abnormal billing patterns 

under section 1893(f)(8) of the Social Security Act, as added by subsection (a). 

27

SEC. 406. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL. 

(a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc) is amended— (1) by adding at the end of the heading the following: ‘‘; ENROLLMENT PROC- ESSES’’; and 

(2) by adding at the end the following new subsection: ‘‘(j) ENROLLMENT PROCESS FOR PROVIDERS OF SERVICES AND SUPPLIERS.— ‘‘(1) ENROLLMENT PROCESS.— ‘‘(A) IN GENERAL.—The Secretary shall establish by regulation a process 

for the enrollment of providers of services and suppliers under this title. ‘‘(B) DEADLINES.—The Secretary shall establish by regulation procedures 

under which there are deadlines for actions on applications for enrollment 

(and, if applicable, renewal of enrollment). The Secretary shall monitor the 

performance of medicare administrative contractors in meeting the deadlines established under this subparagraph. ‘‘(C) CONSULTATION BEFORE CHANGING PROVIDER ENROLLMENT FORMS.— The Secretary shall consult with providers of services and suppliers before 

making changes in the provider enrollment forms required of such providers and suppliers to be eligible to submit claims for which payment may 

be made under this title. ‘‘(2) HEARING RIGHTS IN CASES OF DENIAL OR NON-RENEWAL.—A provider of 

services or supplier whose application to enroll (or, if applicable, to renew enrollment) under this title is denied may have a hearing and judicial review of 

such denial under the procedures that apply under subsection (h)(1)(A) to a provider of services that is dissatisfied with a determination by the Secretary.’’. 

(b) EFFECTIVE DATES.—

(1) ENROLLMENT PROCESS.—The Secretary shall provide for the establishment 

of the enrollment process under section 1866(j)(1) of the Social Security Act, as 

added by subsection (a)(2), within 6 months after the date of the enactment of 

this Act. 

(2) CONSULTATION.—Section 1866(j)(1)(C) of the Social Security Act, as added 

by subsection (a)(2), shall apply with respect to changes in provider enrollment 

forms made on or after January 1, 2004. 

(3) HEARING RIGHTS.—Section 1866(j)(2) of the Social Security Act, as added 

by subsection (a)(2), shall apply to denials occurring on or after such date (not 

later than 1 year after the date of the enactment of this Act) as the Secretary 

specifies. 

SEC. 407. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS ON CLAIMS WITHOUT PURSUING APPEALS PROCESS. 

The Secretary shall develop, in consultation with appropriate medicare contractors (as defined in section 1889(g) of the Social Security Act, as inserted by section 

301(a)(1)) and representatives of providers of services and suppliers, a process 

whereby, in the case of minor errors or omissions (as defined by the Secretary) that 

are detected in the submission of claims under the programs under title XVIII of 

such Act, a provider of services or supplier is given an opportunity to correct such 

an error or omission without the need to initiate an appeal. Such process shall include the ability to resubmit corrected claims. 

SEC. 408. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND SERVICES; ADVANCE 

BENEFICIARY NOTICES. 

(a) IN GENERAL.—Section 1869 (42 U.S.C. 1395ff(b)), as amended by sections 521 

and 522 of BIPA and section 403(d)(2)(B), is further amended by adding at the end 

the following new subsection: 

‘‘(h) PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND SERVICES.—

‘‘(1) ESTABLISHMENT OF PROCESS.—

‘‘(A) IN GENERAL.—With respect to a medicare administrative contractor 

that has a contract under section 1874A that provides for making payments 

under this title with respect to eligible items and services described in subparagraph (C), the Secretary shall establish a prior determination process 

that meets the requirements of this subsection and that shall be applied by 

such contractor in the case of eligible requesters. 

‘‘(B) ELIGIBLE REQUESTER.—For purposes of this subsection, each of the 

following shall be an eligible requester: 

‘‘(i) A physician, but only with respect to eligible items and services 

for which the physician may be paid directly. 

‘‘(ii) An individual entitled to benefits under this title, but only with 

respect to an item or service for which the individual receives, from the 

physician who may be paid directly for the item or service, an advance 

beneficiary notice under section 1879(a) that payment may not be made 

(or may no longer be made) for the item or service under this title. 

28

‘‘(C) ELIGIBLE ITEMS AND SERVICES.—For purposes of this subsection and 

subject to paragraph (2), eligible items and services are items and services 

which are physicians’ services (as defined in paragraph (4)(A) of section 

1848(f) for purposes of calculating the sustainable growth rate under such 

section). 

‘‘(2) SECRETARIAL FLEXIBILITY.—The Secretary shall establish by regulation 

reasonable limits on the categories of eligible items and services for which a 

prior determination of coverage may be requested under this subsection. In establishing such limits, the Secretary may consider the dollar amount involved 

with respect to the item or service, administrative costs and burdens, and other 

relevant factors. 

‘‘(3) REQUEST FOR PRIOR DETERMINATION.—

‘‘(A) IN GENERAL.—Subject to paragraph (2), under the process established 

under this subsection an eligible requester may submit to the contractor a 

request for a determination, before the furnishing of an eligible item or 

service involved as to whether the item or service is covered under this title 

consistent with the applicable requirements of section 1862(a)(1)(A) (relating to medical necessity). 

‘‘(B) ACCOMPANYING DOCUMENTATION.—The Secretary may require that 

the request be accompanied by a description of the item or service, supporting documentation relating to the medical necessity for the item or 

service, and any other appropriate documentation. In the case of a request 

submitted by an eligible requester who is described in paragraph (1)(B)(ii), 

the Secretary may require that the request also be accompanied by a copy 

of the advance beneficiary notice involved. 

‘‘(4) RESPONSE TO REQUEST.—

‘‘(A) IN GENERAL.—Under such process, the contractor shall provide the 

eligible requester with written notice of a determination as to whether—

‘‘(i) the item or service is so covered; 

‘‘(ii) the item or service is not so covered; or 

‘‘(iii) the contractor lacks sufficient information to make a coverage 

determination. 

If the contractor makes the determination described in clause (iii), the contractor shall include in the notice a description of the additional information required to make the coverage determination. 

‘‘(B) DEADLINE TO RESPOND.—Such notice shall be provided within the 

same time period as the time period applicable to the contractor providing 

notice of initial determinations on a claim for benefits under subsection 

(a)(2)(A). 

‘‘(C) INFORMING BENEFICIARY IN CASE OF PHYSICIAN REQUEST.—In the case 

of a request in which an eligible requester is not the individual described 

in paragraph (1)(B)(ii), the process shall provide that the individual to 

whom the item or service is proposed to be furnished shall be informed of 

any determination described in clause (ii) (relating to a determination of 

non-coverage) and the right (referred to in paragraph (6)(B)) to obtain the 

item or service and have a claim submitted for the item or service. 

‘‘(5) EFFECT OF DETERMINATIONS.—

‘‘(A) BINDING NATURE OF POSITIVE DETERMINATION.—If the contractor 

makes the determination described in paragraph (4)(A)(i), such determination shall be binding on the contractor in the absence of fraud or evidence 

of misrepresentation of facts presented to the contractor. 

‘‘(B) NOTICE AND RIGHT TO REDETERMINATION IN CASE OF A DENIAL.—

‘‘(i) IN GENERAL.—If the contractor makes the determination described in paragraph (4)(A)(ii)—

‘‘(I) the eligible requester has the right to a redetermination by 

the contractor on the determination that the item or service is not 

so covered; and 

‘‘(II) the contractor shall include in notice under paragraph (4)(A) 

a brief explanation of the basis for the determination, including on 

what national or local coverage or noncoverage determination (if 

any) the determination is based, and the right to such a redetermination. 

‘‘(ii) DEADLINE FOR REDETERMINATIONS.—The contractor shall complete and provide notice of such redetermination within the same time 

period as the time period applicable to the contractor providing notice 

of redeterminations relating to a claim for benefits under subsection 

(a)(3)(C)(ii). 

‘‘(6) LIMITATION ON FURTHER REVIEW.—

29

‘‘(A) IN GENERAL.—Contractor determinations described in paragraph 

(4)(A)(ii) or (4)(A)(iii) (and redeterminations made under paragraph (5)(B)), 

relating to pre-service claims are not subject to further administrative appeal or judicial review under this section or otherwise. ‘‘(B) DECISION NOT TO SEEK PRIOR DETERMINATION OR NEGATIVE DETER- MINATION DOES NOT IMPACT RIGHT TO OBTAIN SERVICES, SEEK REIMBURSE- MENT, OR APPEAL RIGHTS.—Nothing in this subsection shall be construed as 

affecting the right of an individual who— ‘‘(i) decides not to seek a prior determination under this subsection 

with respect to items or services; or ‘‘(ii) seeks such a determination and has received a determination described in paragraph (4)(A)(ii), 

from receiving (and submitting a claim for) such items services and from 

obtaining administrative or judicial review respecting such claim under the 

other applicable provisions of this section. Failure to seek a prior determination under this subsection with respect to items and services shall not 

be taken into account in such administrative or judicial review. ‘‘(C) NO PRIOR DETERMINATION AFTER RECEIPT OF SERVICES.—Once an individual is provided items and services, there shall be no prior determination under this subsection with respect to such items or services.’’. (b) EFFECTIVE DATE; TRANSITION.—

(1) EFFECTIVE DATE.—The Secretary shall establish the prior determination 

process under the amendment made by subsection (a) in such a manner as to 

provide for the acceptance of requests for determinations under such process 

filed not later than 18 months after the date of the enactment of this Act. 

(2) TRANSITION.—During the period in which the amendment made by subsection (a) has become effective but contracts are not provided under section 

1874A of the Social Security Act with medicare administrative contractors, any 

reference in section 1869(g) of such Act (as added by such amendment) to such 

a contractor is deemed a reference to a fiscal intermediary or carrier with an 

agreement under section 1816, or contract under section 1842, respectively, of 

such Act. 

(3) LIMITATION ON APPLICATION TO SGR.—For purposes of applying section 

1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)), the amendment made by subsection (a) shall not be considered to be a change in law or 

regulation. 

(c) PROVISIONS RELATING TO ADVANCE BENEFICIARY NOTICES; REPORT ON PRIOR

DETERMINATION PROCESS.—

(1) DATA COLLECTION.—The Secretary shall establish a process for the collection of information on the instances in which an advance beneficiary notice (as 

defined in paragraph (4)) has been provided and on instances in which a beneficiary indicates on such a notice that the beneficiary does not intend to seek 

to have the item or service that is the subject of the notice furnished. 

(2) OUTREACH AND EDUCATION.—The Secretary shall establish a program of 

outreach and education for beneficiaries and providers of services and other persons on the appropriate use of advance beneficiary notices and coverage policies 

under the medicare program. 

(3) GAO REPORT REPORT ON USE OF ADVANCE BENEFICIARY NOTICES.—Not 

later than 18 months after the date on which section 1869(g) of the Social Security Act (as added by subsection (a)) takes effect, the Comptroller General of the 

United States shall submit to Congress a report on the use of advance beneficiary notices under title XVIII of such Act. Such report shall include information concerning the providers of services and other persons that have provided 

such notices and the response of beneficiaries to such notices. 

(4) GAO REPORT ON USE OF PRIOR DETERMINATION PROCESS.—Not later than 

18 months after the date on which section 1869(g) of the Social Security Act 

(as added by subsection (a)) takes effect, the Comptroller General of the United 

States shall submit to Congress a report on the use of the prior determination 

process under such section. Such report shall include—

(A) information concerning the types of procedures for which a prior determination has been sought, determinations made under the process, and 

changes in receipt of services resulting from the application of such process; 

and 

(B) an evaluation of whether the process was useful for physicians (and 

other suppliers) and beneficiaries, whether it was timely, and whether the 

amount of information required was burdensome to physicians and beneficiaries. 

(5) ADVANCE BENEFICIARY NOTICE DEFINED.—In this subsection, the term ‘‘advance beneficiary notice’’ means a written notice provided under section 1879(a) 

30

of the Social Security Act (42 U.S.C. 1395pp(a)) to an individual entitled to benefits under part A or B of title XVIII of such Act before items or services are 

furnished under such part in cases where a provider of services or other person 

that would furnish the item or service believes that payment will not be made 

for some or all of such items or services under such title. 

TITLE V—MISCELLANEOUS PROVISIONS 

SEC. 501. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E & M) DOCUMENTATION GUIDELINES. 

(a) IN GENERAL.—The Secretary may not implement any new documentation 

guidelines for evaluation and management physician services under the title XVIII 

of the Social Security Act on or after the date of the enactment of this Act unless 

the Secretary—

(1) has developed the guidelines in collaboration with practicing physicians 

(including both generalists and specialists) and provided for an assessment of 

the proposed guidelines by the physician community; 

(2) has established a plan that contains specific goals, including a schedule, 

for improving the use of such guidelines; 

(3) has conducted appropriate and representative pilot projects under subsection (b) to test modifications to the evaluation and management documentation guidelines; 

(4) finds that the objectives described in subsection (c) will be met in the implementation of such guidelines; and 

(5) has established, and is implementing, a program to educate physicians on 

the use of such guidelines and that includes appropriate outreach. 

The Secretary shall make changes to the manner in which existing evaluation and 

management documentation guidelines are implemented to reduce paperwork burdens on physicians. 

(b) PILOT PROJECTS TO TEST EVALUATION AND MANAGEMENT DOCUMENTATION

GUIDELINES.—

(1) IN GENERAL.—The Secretary shall conduct under this subsection appropriate and representative pilot projects to test new evaluation and management 

documentation guidelines referred to in subsection (a). 

(2) LENGTH AND CONSULTATION.—Each pilot project under this subsection 

shall—

(A) be voluntary; 

(B) be of sufficient length as determined by the Secretary to allow for preparatory physician and medicare contractor education, analysis, and use 

and assessment of potential evaluation and management guidelines; and 

(C) be conducted, in development and throughout the planning and operational stages of the project, in consultation with practicing physicians (including both generalists and specialists). 

(3) RANGE OF PILOT PROJECTS.—Of the pilot projects conducted under this 

subsection—

(A) at least one shall focus on a peer review method by physicians (not 

employed by a medicare contractor) which evaluates medical record information for claims submitted by physicians identified as statistical outliers 

relative to definitions published in the Current Procedures Terminology 

(CPT) code book of the American Medical Association; 

(B) at least one shall focus on an alternative method to detailed guidelines based on physician documentation of face to face encounter time with 

a patient; 

(C) at least one shall be conducted for services furnished in a rural area 

and at least one for services furnished outside such an area; and 

(D) at least one shall be conducted in a setting where physicians bill 

under physicians’ services in teaching settings and at least one shall be conducted in a setting other than a teaching setting. 

(4) BANNING OF TARGETING OF PILOT PROJECT PARTICIPANTS.—Data collected 

under this subsection shall not be used as the basis for overpayment demands 

or post-payment audits. Such limitation applies only to claims filed as part of 

the pilot project and lasts only for the duration of the pilot project and only as 

long as the provider is a participant in the pilot project. 

(5) STUDY OF IMPACT.—Each pilot project shall examine the effect of the new 

evaluation and management documentation guidelines on—

(A) different types of physician practices, including those with fewer than 

10 full-time-equivalent employees (including physicians); and 

31

(B) the costs of physician compliance, including education, implementation, auditing, and monitoring. 

(6) PERIODIC REPORTS.—The Secretary shall submit to Congress periodic reports on the pilot projects under this subsection. 

(c) OBJECTIVES FOR EVALUATION AND MANAGEMENT GUIDELINES.—The objectives 

for modified evaluation and management documentation guidelines developed by the 

Secretary shall be to—

(1) identify clinically relevant documentation needed to code accurately and 

assess coding levels accurately; 

(2) decrease the level of non-clinically pertinent and burdensome documentation time and content in the physician’s medical record; 

(3) increase accuracy by reviewers; and 

(4) educate both physicians and reviewers. 

(d) STUDY OF SIMPLER, ALTERNATIVE SYSTEMS OF DOCUMENTATION FOR PHYSICIAN

CLAIMS.—

(1) STUDY.—The Secretary shall carry out a study of the matters described 

in paragraph (2). 

(2) MATTERS DESCRIBED.—The matters referred to in paragraph (1) are—

(A) the development of a simpler, alternative system of requirements for 

documentation accompanying claims for evaluation and management physician services for which payment is made under title XVIII of the Social Security Act; and 

(B) consideration of systems other than current coding and documentation requirements for payment for such physician services. 

(3) CONSULTATION WITH PRACTICING PHYSICIANS.—In designing and carrying 

out the study under paragraph (1), the Secretary shall consult with practicing 

physicians, including physicians who are part of group practices and including 

both generalists and specialists. 

(4) APPLICATION OF HIPAA UNIFORM CODING REQUIREMENTS.—In developing an 

alternative system under paragraph (2), the Secretary shall consider requirements of administrative simplification under part C of title XI of the Social Security Act. 

(5) REPORT TO CONGRESS.—(A) Not later than October 1, 2005, the Secretary 

shall submit to Congress a report on the results of the study conducted under 

paragraph (1). 

(B) The Medicare Payment Advisory Commission shall conduct an analysis of 

the results of the study included in the report under subparagraph (A) and shall 

submit a report on such analysis to Congress. 

(e) STUDY ON APPROPRIATE CODING OF CERTAIN EXTENDED OFFICE VISITS.—The 

Secretary shall conduct a study of the appropriateness of coding in cases of extended 

office visits in which there is no diagnosis made. Not later than October 1, 2005, 

the Secretary shall submit a report to Congress on such study and shall include recommendations on how to code appropriately for such visits in a manner that takes 

into account the amount of time the physician spent with the patient. 

(f) DEFINITIONS.—In this section—

(1) the term ‘‘rural area’’ has the meaning given that term in section 

1886(d)(2)(D) of the Social Security Act, 42 U.S.C. 1395ww(d)(2)(D); and 

(2) the term ‘‘teaching settings’’ are those settings described in section 

415.150 of title 42, Code of Federal Regulations. 

SEC. 502. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE. 

(a) COUNCIL FOR TECHNOLOGY AND INNOVATION.—Section 1868 (42 U.S.C. 1395ee), 

as amended by section 301(a), is amended by adding at the end the following new 

subsection: 

‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVATION.—

‘‘(1) ESTABLISHMENT.—The Secretary shall establish a Council for Technology 

and Innovation within the Centers for Medicare & Medicaid Services (in this 

section referred to as ‘CMS’). 

‘‘(2) COMPOSITION.—The Council shall be composed of senior CMS staff and 

clinicians and shall be chaired by the Executive Coordinator for Technology and 

Innovation (appointed or designated under paragraph (4)). 

‘‘(3) DUTIES.—The Council shall coordinate the activities of coverage, coding, 

and payment processes under this title with respect to new technologies and 

procedures, including new drug therapies, and shall coordinate the exchange of 

information on new technologies between CMS and other entities that make 

similar decisions. 

‘‘(4) EXECUTIVE COORDINATOR FOR TECHNOLOGY AND INNOVATION.—The Secretary shall appoint (or designate) a noncareer appointee (as defined in section 

3132(a)(7) of title 5, United States Code) who shall serve as the Executive CoorVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00031 Fmt 6659 Sfmt 6621 E:\HR\OC\HR074P2.XXX HR074P2
32

dinator for Technology and Innovation. Such executive coordinator shall report 

to the Administrator of CMS, shall chair the Council, shall oversee the execution of its duties, and shall serve as a single point of contact for outside groups 

and entities regarding the coverage, coding, and payment processes under this 

title.’’. (b) METHODS FOR DETERMINING PAYMENT BASIS FOR NEW LAB TESTS.—Section 

1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end the following: ‘‘(8)(A) The Secretary shall establish by regulation procedures for determining the 

basis for, and amount of, payment under this subsection for any clinical diagnostic 

laboratory test with respect to which a new or substantially revised HCPCS code 

is assigned on or after January 1, 2005 (in this paragraph referred to as ‘new tests’). ‘‘(B) Determinations under subparagraph (A) shall be made only after the Secretary—

‘‘(i) makes available to the public (through an Internet site and other appropriate mechanisms) a list that includes any such test for which establishment 

of a payment amount under this subsection is being considered for a year; ‘‘(ii) on the same day such list is made available, causes to have published 

in the Federal Register notice of a meeting to receive comments and recommendations (and data on which recommendations are based) from the public 

on the appropriate basis under this subsection for establishing payment 

amounts for the tests on such list; 

‘‘(iii) not less than 30 days after publication of such notice convenes a meeting, that includes representatives of officials of the Centers for Medicare & Medicaid Services involved in determining payment amounts, to receive such comments and recommendations (and data on which the recommendations are 

based); 

‘‘(iv) taking into account the comments and recommendations (and accompanying data) received at such meeting, develops and makes available to the 

public (through an Internet site and other appropriate mechanisms) a list of 

proposed determinations with respect to the appropriate basis for establishing 

a payment amount under this subsection for each such code, together with an 

explanation of the reasons for each such determination, the data on which the 

determinations are based, and a request for public written comments on the 

proposed determination; and 

‘‘(v) taking into account the comments received during the public comment period, develops and makes available to the public (through an Internet site and 

other appropriate mechanisms) a list of final determinations of the payment 

amounts for such tests under this subsection, together with the rationale for

each such determination, the data on which the determinations are based, and 

responses to comments and suggestions received from the public. 

‘‘(C) Under the procedures established pursuant to subparagraph (A), the Secretary shall—

‘‘(i) set forth the criteria for making determinations under subparagraph (A); 

and 

‘‘(ii) make available to the public the data (other than proprietary data) considered in making such determinations. 

‘‘(D) The Secretary may convene such further public meetings to receive public 

comments on payment amounts for new tests under this subsection as the Secretary 

deems appropriate. 

‘‘(E) For purposes of this paragraph: 

‘‘(i) The term ‘HCPCS’ refers to the Health Care Procedure Coding System. 

‘‘(ii) A code shall be considered to be ‘substantially revised’ if there is a substantive change to the definition of the test or procedure to which the code applies (such as a new analyte or a new methodology for measuring an existing 

analyte-specific test).’’. 

(c) GAO STUDY ON IMPROVEMENTS IN EXTERNAL DATA COLLECTION FOR USE IN

THE MEDICARE INPATIENT PAYMENT SYSTEM.—

(1) STUDY.—The Comptroller General of the United States shall conduct a 

study that analyzes which external data can be collected in a shorter time 

frame by the Centers for Medicare & Medicaid Services for use in computing 

payments for inpatient hospital services. The study may include an evaluation 

of the feasibility and appropriateness of using of quarterly samples or special 

surveys or any other methods. The study shall include an analysis of whether 

other executive agencies, such as the Bureau of Labor Statistics in the Department of Commerce, are best suited to collect this information. 

(2) REPORT.—By not later than October 1, 2004, the Comptroller General 

shall submit a report to Congress on the study under paragraph (1). 

(d) PROCESS FOR ADOPTION OF ICD CODES AS DATA STANDARD.—Section 1172(f) 

(42 U.S.C. 1320d–1(f)) is amended by inserting after the first sentence the following: 

33

‘‘Notwithstanding the preceding sentence, if the National Committee on Vital and 

Health Statistics has not made a recommendation to the Secretary before the date 

of the enactment of this sentence, with respect to the adoption of the International 

Classification of Diseases, 10th Revision, Procedure Coding System (‘ICD–10–PCS’) 

and the International Classification of Diseases, 10th Revision, Clinical Modification 

(‘ICD–10–CM’) as a standard under this part for the reporting of services, the Secretary may adopt ICD–10–PCS and ICD–10–CM as such a standard on or after such 

date without receiving such a recommendation.’’. 

SEC. 503. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER MEDICARE SECONDARY PAYOR (MSP) PROVISIONS. 

(a) IN GENERAL.—The Secretary shall not require a hospital (including a critical 

access hospital) to ask questions (or obtain information) relating to the application 

of section 1862(b) of the Social Security Act (relating to medicare secondary payor 

provisions) in the case of reference laboratory services described in subsection (b), 

if the Secretary does not impose such requirement in the case of such services furnished by an independent laboratory. 

(b) REFERENCE LABORATORY SERVICES DESCRIBED.—Reference laboratory services 

described in this subsection are clinical laboratory diagnostic tests (or the interpretation of such tests, or both) furnished without a face-to-face encounter between the 

individual entitled to benefits under part A or enrolled under part B, or both, and 

the hospital involved and in which the hospital submits a claim only for such test 

or interpretation. 

SEC. 504. EMTALA IMPROVEMENTS. 

(a) PAYMENT FOR EMTALA-MANDATED SCREENING AND STABILIZATION SERVICES.—

(1) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) is amended by inserting 

after subsection (c) the following new subsection: 

‘‘(d) For purposes of subsection (a)(1)(A), in the case of any item or service that 

is required to be provided pursuant to section 1867 to an individual who is entitled 

to benefits under this title, determinations as to whether the item or service is reasonable and necessary shall be made on the basis of the information available to 

the treating physician or practitioner (including the patient’s presenting symptoms 

or complaint) at the time the item or service was ordered or furnished by the physician or practitioner (and not on the patient’s principal diagnosis). When making 

such determinations with respect to such an item or service, the Secretary shall not 

consider the frequency with which the item or service was provided to the patient 

before or after the time of the admission or visit.’’. 

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to 

items and services furnished on or after January 1, 2004. 

(b) NOTIFICATION OF PROVIDERS WHEN EMTALA INVESTIGATION CLOSED.—Section 

1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is amended by adding at the end the following new paragraph: 

‘‘(4) NOTICE UPON CLOSING AN INVESTIGATION.—The Secretary shall establish 

a procedure to notify hospitals and physicians when an investigation under this 

section is closed.’’. 

(c) PRIOR REVIEW BY PEER REVIEW ORGANIZATIONS IN EMTALA CASES INVOLVING

TERMINATION OF PARTICIPATION.—

(1) IN GENERAL.—Section 1867(d)(3) (42 U.S.C. 1395dd(d)(3)) is amended—

(A) in the first sentence, by inserting ‘‘or in terminating a hospital’s participation under this title’’ after ‘‘in imposing sanctions under paragraph 

(1)’’; and 

(B) by adding at the end the following new sentences: ‘‘Except in the case 

in which a delay would jeopardize the health or safety of individuals, the 

Secretary shall also request such a review before making a compliance determination as part of the process of terminating a hospital’s participation 

under this title for violations related to the appropriateness of a medical 

screening examination, stabilizing treatment, or an appropriate transfer as 

required by this section, and shall provide a period of 5 days for such review. The Secretary shall provide a copy of the organization’s report to the 

hospital or physician consistent with confidentiality requirements imposed 

on the organization under such part B.’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall apply to 

terminations of participation initiated on or after the date of the enactment of 

this Act. 

34

SEC. 505. EMERGENCY MEDICAL TREATMENT AND ACTIVE LABOR ACT (EMTALA) TECHNICAL 

ADVISORY GROUP. 

(a) ESTABLISHMENT.—The Secretary shall establish a Technical Advisory Group 

(in this section referred to as the ‘‘Advisory Group’’) to review issues related to the 

Emergency Medical Treatment and Labor Act (EMTALA) and its implementation. 

In this section, the term ‘‘EMTALA’’ refers to the provisions of section 1867 of the 

Social Security Act (42 U.S.C. 1395dd). 

(b) MEMBERSHIP.—The Advisory Group shall be composed of 19 members, including the Administrator of the Centers for Medicare & Medicaid Services and the Inspector General of the Department of Health and Human Services and of which— (1) 4 shall be representatives of hospitals, including at least one public hospital, that have experience with the application of EMTALA and at least 2 of 

which have not been cited for EMTALA violations; 

(2) 7 shall be practicing physicians drawn from the fields of emergency medicine, cardiology or cardiothoracic surgery, orthopedic surgery, neurosurgery, pediatrics or a pediatric subspecialty, obstetrics-gynecology, and psychiatry, with 

not more than one physician from any particular field; 

(3) 2 shall represent patients; 

(4) 2 shall be staff involved in EMTALA investigations from different regional 

offices of the Centers for Medicare & Medicaid Services; and 

(5) 1 shall be from a State survey office involved in EMTALA investigations 

and 1 shall be from a peer review organization, both of whom shall be from 

areas other than the regions represented under paragraph (4). 

In selecting members described in paragraphs (1) through (3), the Secretary shall 

consider qualified individuals nominated by organizations representing providers 

and patients. 

(c) GENERAL RESPONSIBILITIES.—The Advisory Group— (1) shall review EMTALA regulations; 

(2) may provide advice and recommendations to the Secretary with respect to 

those regulations and their application to hospitals and physicians; 

(3) shall solicit comments and recommendations from hospitals, physicians, 

and the public regarding the implementation of such regulations; and 

(4) may disseminate information on the application of such regulations to hospitals, physicians, and the public. 

(d) ADMINISTRATIVE MATTERS.— (1) CHAIRPERSON.—The members of the Advisory Group shall elect a member 

to serve as chairperson of the Advisory Group for the life of the Advisory Group. 

(2) MEETINGS.—The Advisory Group shall first meet at the direction of the 

Secretary. The Advisory Group shall then meet twice per year and at such other 

times as the Advisory Group may provide. 

(e) TERMINATION.—The Advisory Group shall terminate 30 months after the date 

of its first meeting. 

(f) WAIVER OF ADMINISTRATIVE LIMITATION.—The Secretary shall establish the Advisory Group notwithstanding any limitation that may apply to the number of advisory committees that may be established (within the Department of Health and 

Human Services or otherwise). 

SEC. 506. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE HOSPICE SERVICES IN 

CERTAIN CIRCUMSTANCES. 

(a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is amended by adding at the end the following: ‘‘(D) In extraordinary, exigent, or other non-routine circumstances, such as unanticipated periods of high patient loads, staffing shortages due to illness or other 

events, or temporary travel of a patient outside a hospice program’s service area, 

a hospice program may enter into arrangements with another hospice program for 

the provision by that other program of services described in paragraph (2)(A)(ii)(I). 

The provisions of paragraph (2)(A)(ii)(II) shall apply with respect to the services provided under such arrangements. 

‘‘(E) A hospice program may provide services described in paragraph (1)(A) other 

than directly by the program if the services are highly specialized services of a registered professional nurse and are provided non-routinely and so infrequently so 

that the provision of such services directly would be impracticable and prohibitively 

expensive.’’. 

(b) CONFORMING PAYMENT PROVISION.—Section 1814(i) (42 U.S.C. 1395f(i)) is 

amended by adding at the end the following new paragraph: 

‘‘(4) In the case of hospice care provided by a hospice program under arrangements under section 1861(dd)(5)(D) made by another hospice program, the hospice 

program that made the arrangements shall bill and be paid for the hospice care.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to hospice care provided on or after the date of the enactment of this Act. 

35

SEC. 507. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD TO CERTAIN HOSPITALS. 

(a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc) is amended— (1) in subsection (a)(1)— (A) in subparagraph (R), by striking ‘‘and’’ at the end; 

(B) in subparagraph (S), by striking the period at the end and inserting ‘‘, and’’; and 

(C) by inserting after subparagraph (S) the following new subparagraph: ‘‘(T) in the case of hospitals that are not otherwise subject to the Occupational 

Safety and Health Act of 1970, to comply with the Bloodborne Pathogens standard under section 1910.1030 of title 29 of the Code of Federal Regulations (or 

as subsequently redesignated).’’; and 

(2) by adding at the end of subsection (b) the following new paragraph: ‘‘(4)(A) A hospital that fails to comply with the requirement of subsection (a)(1)(T) 

(relating to the Bloodborne Pathogens standard) is subject to a civil money penalty 

in an amount described in subparagraph (B), but is not subject to termination of 

an agreement under this section. ‘‘(B) The amount referred to in subparagraph (A) is an amount that is similar to 

the amount of civil penalties that may be imposed under section 17 of the Occupational Safety and Health Act of 1970 for a violation of the Bloodborne Pathogens 

standard referred to in subsection (a)(1)(T) by a hospital that is subject to the provisions of such Act. ‘‘(C) A civil money penalty under this paragraph shall be imposed and collected 

in the same manner as civil money penalties under subsection (a) of section 1128A 

are imposed and collected under that section.’’. (b) EFFECTIVE DATE.—The amendments made by this subsection (a) shall apply 

to hospitals as of July 1, 2004. 

SEC. 508. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS. 

(a) TECHNICAL AMENDMENTS RELATING TO ADVISORY COMMITTEE UNDER BIPA 

SECTION 522.—(1) Subsection (i) of section 1114 (42 U.S.C. 1314)— (A) is transferred to section 1862 and added at the end of such section; and 

(B) is redesignated as subsection (j). 

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

(A) in the last sentence of subsection (a), by striking ‘‘established under section 1114(f)’’; and 

(B) in subsection (j), as so transferred and redesignated—

(i) by striking ‘‘under subsection (f)’’; and 

(ii) by striking ‘‘section 1862(a)(1)’’ and inserting ‘‘subsection (a)(1)’’. 

(b) TERMINOLOGY CORRECTIONS.—(1) Section 1869(c)(3)(I)(ii) (42 U.S.C. 

1395ff(c)(3)(I)(ii)), as amended by section 521 of BIPA, is amended—

(A) in subclause (III), by striking ‘‘policy’’ and inserting ‘‘determination’’; and 

(B) in subclause (IV), by striking ‘‘medical review policies’’ and inserting ‘‘coverage determinations’’. 

(2) Section 1852(a)(2)(C) (42 U.S.C. 1395w–22(a)(2)(C)) is amended by striking 

‘‘policy’’ and ‘‘POLICY’’ and inserting ‘‘determination’’ each place it appears and ‘‘DETERMINATION’’, respectively. 

(c) REFERENCE CORRECTIONS.—Section 1869(f)(4) (42 U.S.C. 1395ff(f)(4)), as added 

by section 522 of BIPA, is amended—

(1) in subparagraph (A)(iv), by striking ‘‘subclause (I), (II), or (III)’’ and inserting ‘‘clause (i), (ii), or (iii)’’; 

(2) in subparagraph (B), by striking ‘‘clause (i)(IV)’’ and ‘‘clause (i)(III)’’ and 

inserting ‘‘subparagraph (A)(iv)’’ and ‘‘subparagraph (A)(iii)’’, respectively; and 

(3) in subparagraph (C), by striking ‘‘clause (i)’’, ‘‘subclause (IV)’’ and ‘‘subparagraph (A)’’ and inserting ‘‘subparagraph (A)’’, ‘‘clause (iv)’’ and ‘‘paragraph 

(1)(A)’’, respectively each place it appears. 

(d) OTHER CORRECTIONS.—Effective as if included in the enactment of section 

521(c) of BIPA, section 1154(e) (42 U.S.C. 1320c–3(e)) is amended by striking paragraph (5). 

(e) EFFECTIVE DATE.—Except as otherwise provided, the amendments made by 

this section shall be effective as if included in the enactment of BIPA. 

SEC. 509. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION. 

The first sentence of section 1128(c)(3)(B) (42 U.S.C. 1320a–7(c)(3)(B)) is amended 

to read as follows: ‘‘Subject to subparagraph (G), in the case of an exclusion under 

subsection (a), the minimum period of exclusion shall be not less than five years, 

except that, upon the request of the administrator of a Federal health care program 

(as defined in section 1128B(f)) who determines that the exclusion would impose a 

hardship on individuals entitled to benefits under part A of title XVIII or enrolled 

under part B of such title, or both, the Secretary may waive the exclusion under 

36

subsection (a)(1), (a)(3), or (a)(4) with respect to that program in the case of an individual or entity that is the sole community physician or sole source of essential specialized services in a community.’’. 

SEC. 510. TREATMENT OF CERTAIN DENTAL CLAIMS. 

(a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y), as amended by section 

508(a)(1), is amended by adding at the end the following new subsection: 

‘‘(k)(1) Subject to paragraph (2), a group health plan (as defined in subsection 

(a)(1)(A)(v)) providing supplemental or secondary coverage to individuals also entitled to services under this title shall not require a medicare claims determination 

under this title for dental benefits specifically excluded under subsection (a)(12) as 

a condition of making a claims determination for such benefits under the group 

health plan. 

‘‘(2) A group health plan may require a claims determination under this title in 

cases involving or appearing to involve inpatient dental hospital services or dental 

services expressly covered under this title pursuant to actions taken by the Secretary.’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall take effect on 

the date that is 60 days after the date of the enactment of this Act. 

SEC. 511. ENHANCEMENT OF PROGRAM INTEGRITY EFFORTS IN MEDICARE PROVIDER ENROLLMENT. 

(a) IN GENERAL.—Section 1842(b)(6)(A) (42 U.S.C. 1395u(b)(6)(A)) is amended—

(1) by striking ‘‘or’’ before ‘‘(ii)’’; and 

(2) by inserting after ‘‘for such service,’’ the following: ‘‘or (iii) where the service was provided under a contractual arrangement between such physician or 

other person and an entity (such as a medical group, physician practice management organization, or a staffing company), to the entity if under such arrangement such entity submits the bill for such service and such arrangement 

meets such other qualifications to assure program integrity as the Secretary 

may provide,’’. 

(b) EFFECTIVE DATE.—The amendments made by section shall apply to payments 

made on or after the date of the enactment of this Act. 

SEC. 512. OTHER PROVISIONS. 

(a) GAO REPORTS ON THE PHYSICIAN COMPENSATION.—

(1) SUSTAINABLE GROWTH RATE AND UPDATES.—Not later than 6 months after 

the date of the enactment of this Act, the Comptroller General of the United 

States shall submit to Congress a report on the appropriateness of the updates 

in the conversion factor under subsection (d)(3) of section 1848 of the Social Security Act (42 U.S.C. 1395w–4), including the appropriateness of the sustainable 

growth rate formula under subsection (f) of such section for 2002 and succeeding years. Such report shall examine the stability and predictability of such 

updates and rate and alternatives for the use of such rate in the updates. 

(2) PHYSICIAN COMPENSATION GENERALLY.—Not later than 12 months after 

the date of the enactment of this Act, the Comptroller General shall submit to 

Congress a report on all aspects of physician compensation for services furnished under title XVIII of the Social Security Act, and how those aspects interact and the effect on appropriate compensation for physician services. Such report shall review alternatives for the physician fee schedule under section 1848 

of such title (42 U.S.C. 1395w–4). 

(b) ANNUAL PUBLICATION OF LIST OF NATIONAL COVERAGE DETERMINATIONS.—The 

Secretary shall provide, in an appropriate annual publication available to the public, 

a list of national coverage determinations made under title XVIII of the Social Security Act in the previous year and information on how to get more information with 

respect to such determinations. 

(c) GAO REPORT ON FLEXIBILITY IN APPLYING HOME HEALTH CONDITIONS OF PARTICIPATION TO PATIENTS WHO ARE NOT MEDICARE BENEFICIARIES.—Not later than 

6 months after the date of the enactment of this Act, the Comptroller General of 

the United States shall submit to Congress a report on the implications if there 

were flexibility in the application of the medicare conditions of participation for 

home health agencies with respect to groups or types of patients who are not medicare beneficiaries. The report shall include an analysis of the potential impact of 

such flexible application on clinical operations and the recipients of such services 

and an analysis of methods for monitoring the quality of care provided to such recipients. 

(d) OIG REPORT ON NOTICES RELATING TO USE OF HOSPITAL LIFETIME RESERVE

DAYS.—Not later than 1 year after the date of the enactment of this Act, the Inspector General of the Department of Health and Human Services shall submit a report 

to Congress on—

37

(1) the extent to which hospitals provide notice to medicare beneficiaries in 

accordance with applicable requirements before they use the 60 lifetime reserve 

days described in section 1812(a)(1) of the Social Security Act (42 U.S.C. 

1395d(a)(1)); and 

(2) the appropriateness and feasibility of hospitals providing a notice to such 

beneficiaries before they completely exhaust such lifetime reserve days.

PURPOSE AND SUMMARY

The purpose of H.R. 810, the Medicare and Contracting Reform 

Act of 2003, is to streamline Medicare’s regulatory process, ease paperwork burdens, and improve Medicare’s responsiveness to beneficiaries and health care providers. Most importantly, this legislation addresses the need for consistent and accurate written responses from Medicare contractors. It also includes significant reform of Medicare’s contracting and administrative appeals processes, and improvements in beneficiary and provider outreach and 

education. 

BACKGROUND AND NEED FOR LEGISLATION

Covering about 40 million beneficiaries at an annual cost of nearly $240 billion, the Medicare program is the nation’s largest health 

insurance program. It enrolls and pays claims from nearly one million providers of services, physicians, practitioners, facilities, suppliers, and health plans. The Centers for Medicare and Medicaid 

Services (CMS) is the federal agency that administers Medicare, relying on contractors to annually process and pay about 900 million 

claims for services furnished under the traditional fee-for-service 

program. 

The complexity of the Medicare program and the environment in 

which CMS operates is widely recognized. Because of the large 

number of laws and regulations that govern the Medicare program, 

many health care providers feel as though they are forced to spend 

as much time with paperwork as they do with patients. Complaints 

about confusing and burdensome regulations are common. 

During the 107th Congress, the Subcommittee on Health and the 

Subcommittee on Oversight and Investigations conducted a comprehensive review of the major programs, policies, and operations 

of CMS, focusing specifically on the agency’s administration of the 

Medicare program. As part of this ongoing initiative, known as ‘‘Patients First: A 21st Century Promise to Ensure Quality and Affordable Health Coverage,’’ the Subcommittees examined the current 

complexities in the Medicare program, the extent to which such 

complexities are affecting patient care, and the role Congress can 

play in addressing these concerns. 

In an effort to identify concerns and burdens that Medicare beneficiaries and health care providers face on a daily basis, the Committee on Energy and Commerce disseminated two surveys, one for 

beneficiaries and the other for health care providers. These surveys 

were designed to elicit input about ways the delivery of quality 

health care could be improved and waste, mismanagement, and bureaucratic delays could be eliminated. The surveys asked Medicare’s true stakeholders—beneficiaries and health care providers-to 

report on their interactions with the Medicare program and identify areas where problems exist. The provider survey also asked 

providers of services, physicians, practitioners, facilities, and supVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00037 Fmt 6659 Sfmt 6602 E:\HR\OC\HR074P2.XXX HR074P2
38

pliers to identify some of the most burdensome regulations they 

deal with routinely, as well as provide recommendations to improve 

the federal health care system. With more than 3,500 responses, 

the surveys were a valuable Committee resource. 

Through the ‘‘Patients First’’ project and survey responses, the 

Committee documented and identified many of the complexities of 

the Medicare program and the systemic problems faced by Medicare beneficiaries and health care providers. For example, the majority of health care providers who responded to the Committee’s 

survey described the difficulty associated with getting guidance 

from CMS to appropriately navigate the federal rules and regulations governing Medicare, often describing the inconsistent information they receive when seeking answers to their questions. In 

addition, many health care providers stated that the educational 

materials they receive from Medicare are neither clear nor concise. 

Further, many beneficiaries reported problems with Medicare’s customer service. 

The Committee is pleased that the Secretary has published a notice of proposed rulemaking to provide Medicare payment for clinical psychology internship training programs that would not qualify 

under Medicare’s existing provider-operated criteria. The Committee notes that Congress has consistently urged the Secretary to 

initiate payment for the training of clinical psychologists since 

1997. Supportive language has been included in conference reports 

accompanying Medicare legislation in 1999 (Report 106–479), and 

in 2000 (Senate Report 106–293). 

The Committee is concerned, however, that a delay in the rule 

may mean that hospitals and institutions will reduce or eliminate 

psychology training programs and urges implementation of the rule 

as soon as possible. The Committee notes that clinical psychologists 

provide valuable and unique services to Medicare beneficiaries during their training. Regarding their training, clinical psychologists 

are distinguishable from other health care professionals in that 

they are the only doctoral level mental health professionals fully 

participating in Medicare whose clinical training is not currently 

reimbursed. In addition, their clinical internship training is entirely controlled, administered, supervised, evaluated, and certified 

by the hospital or institution, separately accredited, and distinct 

from any university training they receive. Clinical psychologists are 

hospital-based in the final stages of their training functioning in a 

parallel status to medical interns and residents, not medical nursing or health professional students. Where a clinical psychologist 

has clearly finished their educational curriculum and is training 

solely in the hospital setting, it is the intention of Congress that 

the hospital be reimbursed if that training is hospital-based. 

HEARINGS

The Committee on Energy and Commerce has not held hearings 

on the legislation during the 108th Congress. 

COMMITTEE CONSIDERATION

On Wednesday, March 26, 2003, the Full Committee met in open 

markup session and favorably ordered H.R. 810 reported to the 

House, as amended, by a voice vote, a quorum being present. 

39

COMMITTEE VOTES

There were no record votes taken in connection with ordering 

H.R. 810 reported. A motion by Mr. Tauzin to order H.R. 810 reported to the House, as amended, was agreed to by a voice vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has not held oversight or legislative hearings on this legislation. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

The objective of H.R. 810 is to provide regulatory relief to providers of services, physicians, practitioners, facilities, and suppliers 

furnishing health care services to Medicare beneficiaries and improve education and outreach to beneficiaries and providers. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee finds that H.R. 810, the 

Medicare Regulatory and Contracting Reform Act of 2003, would 

result in no new or increased budget authority, entitlement authority, or tax expenditures or revenues. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, April 8, 2003. 

Hon. W.J. ‘‘BILLY’’ TAUZIN, Chairman, Committee on Energy and Commerce, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 810, the Medicare Regulatory and Contracting Reform Act of 2003. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Alexis Ahlstrom. 

Sincerely, 

BARRY B. ANDERSON

(For Douglas Holtz-Eakin, Director). 

Enclosure. 

40

H.R. 810—Medicare Regulatory and Contracting Reform Act of 

2003

Summary: The Medicare Regulatory and Contracting Reform Act 

of 2003 would require the Centers for Medicare and Medicaid Services (CMS) to modify how Medicare regulations and policies are developed and enforced, and would modify the procedures used to resolve disputes involving payment for services covered by Medicare. 

The bill would transfer certain administrative law judges from the 

Social Security Administration (SSA) to the Department of Health 

and Human Services (HHS). It would change the procedures by 

which Medicare makes contracts with entities to process and pay 

claims, and it would place new requirements on those contractors. 

It would require the Secretary of HHS to conduct several demonstrations, to initiate new outreach and education programs, and 

to complete several studies and reports. CBO estimates that implementing H.R. 810 would cost $68 million in 2004 and $1.6 billion 

over the 2004–2008 period, assuming appropriation of the necessary funds. 

The procedural changes required by H.R. 810 would affect spending for services covered by Medicare, which is direct spending. 

However, many of the bill’s requirements codify existing practices, 

while the other requirements would cause minor increases or decreases in spending for covered services. These changes could have 

significant impacts or direct spending in any given year, however, 

CBO estimates that the net change in direct spending would be insignificant over the 2004–2013 period. 

H.R. 810 would expand an existing intergovernmental and private-sector mandate, as defined by the Unfunded Mandates Reform 

Act (UMRA), but CBO cannot estimate whether any new costs of 

complying with the mandate would exceed the thresholds established by UMRA. (In 2003, the thresholds are $59 million for intergovernmental mandates and $117 million for private-sector mandates.)

Under current law, the Secretary of HHS establishes standards 

for collecting and reporting health data based on the recommendations of the National Committee on Vital and Health Statistics 

(NCVHS). H.R. 810 would allow the Secretary to establish a new 

coding system without such a recommendation. This expanded authority could increase the cost of the existing mandate on public 

and private health plans and providers regarding the coding system they must use. Because such a change would depend on future 

actions of the Secretary, however, CBO does not have a basis for 

estimating the increased cost. 

The bill also includes a requirement for public hospitals that participate in the Medicare program to comply with the Occupational 

Safety and Health Administration (OSHA) bloodborne pathogens 

standard. That requirement would be a condition of participating 

in the Medicare program, and thus not an intergovernmental mandate. 

Estimated cost to the Federal Government: The following table 

shows the estimated authorization levels and outlays for Medicare 

administrative expenses under current law and under H.R. 810. 

Assuming appropriation of the estimated amounts, CBO estimates 

that implementing H.R. 810 would cost $68 million in 2004 and 

41

$1.6 billion over the 2004–2008 period. The costs of this legislation 

fall within budget function 570 (Medicare).

By Fiscal Year, in Millions of Dollars 

2003 2004 2005 2006 2007 2008

SPENDING SUBJECT TO APPROPRIATION 1

Spending for Medicare Administrative Costs 

Under Current Law: 

Estimated Authorization Level 2 .................. 3,798 3,931 4,078 4,236 4,418 4,626

Estimated Outlays ....................................... 3,797 3,925 4,064 4,209 4,377 4,579

Proposed Changes: 

Estimated Authorization Level ..................... 0 76 489 397 313 329

Estimated Outlays ....................................... 0 68 448 406 321 327

Spending for Medicare Administrative Costs 

Under H.R. 810: 

Estimated Authorization Level ..................... 3,798 4,007 4,567 4,633 4,731 4,955

Estimated Outlays ....................................... 3,797 3,993 4,512 4,615 4,698 4,906

1 Enacting H.R. 810 also would affect direct spending, but CBO estimates there would be no significant net impact over the 2004–2013 

period. 2 The 2003 level is the amount appropriated for that year. The 2004–2008 levels are baseline projections, which assume annual adjustments for anticipated inflation. 

Basis of estimate: For this estimate, CBO assumes that the legislation will be enacted July 1, 2003 and that the necessary amounts 

will be appropriated each year, beginning in fiscal year 2004. 

Spending subject to appropriation 

Implementing H.R. 810 would require increased appropriations 

for the administration of Medicare. In particular, the bill would increase the costs to CMS for contracting, for adjudicating appeals, 

for education and outreach to providers and beneficiaries, and for 

developing new policies concerning the issuance of regulations and 

guidelines. 

Contracting Reform. Under current law, CMS contracts with fiscal intermediaries and carriers to process and pay claims, to educate providers regarding Medicare billing policy, and for other purposes. This bill would change the activities required of contractors 

and the methods by which CMS enters into contracts and oversees 

the activities of contractors. CBO estimates that these provisions 

would increase the cost of administering contracts and the total 

amount CMS spends on contracts by $37 million in 2004 and $1.3 

billion over the 2004–2008 period. 

Contracting Changes. H.R. 810 would direct CMS to provide incentives to contractors who meet or exceed certain performance 

standards. Based on information furnished by CMS, we estimate 

that the incentive payments would total 3 percent of operating payments to contractors, or about $250 million over the 2004–2008 period. 

H.R. 810 would require CMS to competitively bid contracts with 

fiscal intermediaries and carriers at least every five years. CBO expects that an additional 3-to-5 full-time-equivalent employees 

(FTEs) at the GS–12 level would be needed throughout the period 

to write new competitively bid contracts. The estimate assumes 

that about one-quarter of the contracts would be awarded to a nonincumbent bidder, and that it would cost about $2 million to transition between contractors. CBO estimates that implementing this 

provision would cost about $66 million over the 2004–2008 period. 

CBO expects that the competitive bidding of contracts would yield 

42

savings to CMS over the long run, but that savings over the 2004–

2008 period would probably not be significant. 

New Contractor Activities. The bill would require contractors to 

respond to written requests for guidance within 45 days of receipt, 

and would make that response binding on the Medicare program. 

We expect that contractors would receive 50 percent more written 

requests under H.R. 810 than they would under current law, with 

each request costing $16 dollars to process in 2004. This, plus the 

requirement that contractors respond to those requests within 45 

days, would require contractors to hire additional employees. CBO 

estimates that implementing these provisions would cost $11 million in 2004 and $81 million over the 2004–2008 period. 

The bill also would require contractors to monitor the accuracy 

of information given to providers and the timeliness of contractors’

processing of providers’ enrollment applications. CBO estimates 

that complying with these provisions would cost about $16 million 

over the 2004–2008 period. 

Beginning in January 2005, the bill would require contractors, 

upon request of a beneficiary or provider, to make a determination 

about whether Medicare will cover a particular service or item before that service is furnished. The contractor would be required to 

conduct a medical review and to make the coverage decision within 

45 days. CBO estimates that contractors would make about 

100,000 determinations a year at an average cost of about $125 per 

determination (at 2005 prices). We estimate the cost of administering this program would total $44 million over the 2005–2008 

period. 

The bill would require contractors to create a system by which 

providers may resubmit claims originally submitted with errors or 

omissions without having to pursue payment via the appeals process. CBO estimates the cost of developing and operating systems to 

process these resubmitted claims would total $5 million in 2004 

and $56 million over the 2004–2008 period. 

The bill also would require contractors to give providers or beneficiaries, upon request, a summary of the clinical and scientific evidence used in making a determination and in making a redetermination, in the case of an appeal. CBO estimates the cost of making available scientific and clinical evidence on determinations and 

redeterminations would total $706 million over the 2004–2008 period. 

Appeals Reform. H.R. 810 would change the processes by which 

Medicare adjudicates appeals by providers of payment denials and 

conducts compliance actions against providers. The bill would delay 

the date by which CMS is required to implement certain provisions 

of the Beneficiary Improvement and Protection Act and modify 

other provisions. CBO estimates that implementing these provisions would cost $9 million in 2004 and $94 million over the 2004–

2008 period. 

Administrative Law Judge Transfer. The bill would transfer certain administrative law judges (ALJs) from the Social Security Administration to the Department of Health and Human Services and 

would permit the Secretary to hire more ALJs. CBO estimates that 

the costs of planning and implementing the transfer, adding ALJs, 

and providing the ALJs with additional training on Medicare issues 

43

would be $1 million in 2004 and would total $45 million over the 

2004–2008 period. 

Standardization of Compliance and Appeals Actions. The bill 

would also standardize existing policies regarding the use of random and non-random prepayment review, the use of extrapolation 

in the case of overpayments, and the offering of repayment plans 

in the case of overpayment. In addition, H.R. 810 would create procedures by which appellants may petition for expedited access to 

judicial review in federal district court in certain circumstances. 

The bill also would require that judgments by administrative law 

judges contain the scientific evidence used in their decision, similar 

to the bill’s requirements of contractors. CBO estimates that imple- menting those provisions would cost $46 million over the 2004– 2008 period. These provisions would require CMS to make changes 

to current appeals and compliance systems but would not change 

the conditions under which Medicare would make payments to providers. Therefore, CBO estimates that these provisions would have 

no effect on direct spending. 

Provider and Beneficiary Programs. H.R. 810 would direct CMS 

to expand its programs to educate beneficiaries and providers. CBO 

estimates that implementing these provisions would cost $10 million in 2004 and $171 million during the 2004–2008 period. The bill would authorize the appropriation of $25 million in 2005 

and in 2006, and such sums as necessary in subsequent years, for 

the education of providers on Medicare billing and coding practices. 

H.R. 810 would direct the Secretary to conduct a demonstration 

with small providers and suppliers in which they can get specific 

help with Medicare policies, including coding and reimbursement. 

CBO estimates that implementing these provisions would cost $108 

million over the 2004–2008 period. 

H.R. 810 would require CMS to designate two ombudsmen to act 

as liaisons between providers and Medicare, and between beneficiaries and Medicare. CBO assumes that, in order to respond to 

providers’ and beneficiaries’ needs and complaints, the ombudsmen 

would require the aid of several staff members. CBO estimates the 

cost of implementing these provisions would be $59 million over the 

2004–2008 period. 

The bill would direct CMS to implement a three-year outreach 

demonstration in at least six locations throughout the United 

States. The program would involve the deployment of Medicare 

specialists to local Social Security Administration offices to provide 

beneficiaries assistance and advice regarding the Medicare program. CBO estimates that the costs of the demonstration, which 

would include the rental of office space, salaries for Medicare specialists, and travel, moving, and administrative expenses, would 

total $4 million over the 2004–2008 period. 

Development of Policies, Procedures, and Time Lines. H.R. 810 

would require CMS to develop new policies, procedures, and time 

lines with regard to the issuance of regulations and documentation 

guidelines for evaluation and management services. CBO estimates 

the cost of implementing these provisions would be $9 million in 

2004 and $37 million during the 2004–2008 period. 

Final Regulations. The bill would require CMS to create a time 

line for publishing final regulations and would limit publication of 

new regulations to once a month. The estimate assumes there curVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00043 Fmt 6659 Sfmt 6602 E:\HR\OC\HR074P2.XXX HR074P2
44

rently are about 20 ‘‘interim final rules’’; the bill would require 

CMS to make those rules final, and would require CMS to finalize 

all future regulations. We estimate that CMS would need to hire 

an additional 3-to-5 people, at the GS–11 level or higher, to comply 

with the requirement to finalize all future interim regulations and 

to produce the required reports. CBO estimates the cost of implementing these provisions would be $9 million in 2004 and $19 million during the 2004–2008 period. 

Documentation Guidelines for Evaluation and Management 

(E&M) Services. H.R. 810 would restrict CMS from implementing 

new documentation guidelines for evaluation and management 

services until several conditions have been met. Those conditions 

include: • Establishing plans to improve the guidelines; • Completing pilot projects to test modifications to the guidelines; • Educating providers about the guidelines; and • Consulting providers during the entire process of testing 

and establishing the guidelines. 

CMS currently has E&M guidelines in place, and the bill would 

not require changes in those guidelines. CBO assumes that CMS 

will attempt to update those guidelines during the next few years, 

because both CMS and provider groups have expressed interest in 

doing so. The new procedural requirements would increase the cost 

of developing and implementing new E&M documentation would 

require the hiring of at least two FTEs for the administration of 

the pilot projects, for outreach to providers, and for consultation 

with providers. CBO further estimates that CMS would conduct at 

least three pilot project with each project costing around $1 million 

per year, and that the studies and reports required by these provisions would cost another $1 million.

Miscellaneous provisions. H.R. 810 would require the Secretary, 

the Comptroller General, and the Office of the Inspector General 

to conduct several studies, produce reports, and conduct evaluations. In addition, the bill would require the Secretary to establish 

two groups, a technical group to review issues relating to the 

Emergency Medical Treatment and Active Labor Act and a council 

for technology and innovation to coordinate activities with respect 

to new medical technologies. CBO estimates that conducting these 

activities would cost $12 million over the 2004–2008 period. 

Direct spending 

H.R. 810 would change the conditions under which Medicare 

would pay for services and would create a process to establish 

whether an item or service is covered prior to a beneficiary receiving the service. CBO estimates that enacting these provisions 

would have no significant effect on direct spending. 

In general, if a provider is not certain whether Medicare will pay 

for a service or item in a particular case, there is no process under 

current law that enables the provider or beneficiary to find out in 

advance whether Medicare will pay for that service or item. In such 

cases, the provider may request that the beneficiary sign an advanced beneficiary notice (ABN) by which the beneficiary accepts 

responsibility for paying for the service if Medicare denies payment. (The provider is prohibited from charging the beneficiary if 

45

the beneficiary does not sign an ABN and Medicare subsequently 

denies payment.) 

The bill would authorize the Secretary to specify services for 

which the provider or beneficiary may request a coverage determination before a service is furnished. Upon receipt of such a request, the bill would require the contractor to conduct a medical review and issue a decision within 45 days. The bill would make a 

positive determination by a contractor binding, but it would limit 

the number of appeals a provider could make in the event of a negative determination by a contractor. 

H.R. 810 directs the Secretary to exclude this provision as a 

change in law or regulation in the calculation of the sustainable 

growth rate (SGR) used in the calculation of physician payments 

under Medicare. (In general, changes in law and regulations are incorporated into the calculation of the SGR). The SGR is a self-correcting mechanism: any additional services paid for under this provision would be offset by lower physician payments in subsequent 

years. CBO therefore estimates that enacting this provision could 

affect direct spending in each year, but would not have a significant impact over the 2004–2013 period. 

Intergovenrmental and private-sector impact: H.R. 810 would expand an existing intergovernmental and private-sector mandate, as 

defined by UMRA, but CBO cannot estimate whether any new 

costs of complying with the mandate would exceed the thresholds 

established by UMRA. (In 2003, the thresholds are $59 million for 

intergovernmental mandates and $117 million for private-sector 

mandates. The thresholds are adjusted annually for inflation.) 

Intergovernmental and private-sector mandates 

Current law directs the Secretary of HHS to establish standards 

for collecting and reporting health data under the health Insurance 

Portability and Accountability Act. As a result, public and private 

health plans, health care clearinghouses, and health care providers 

must use the coding systems authorized by the Secretary when 

they record and exchange health care information. The law also requires the Secretary to rely on the recommendations, of the National Committee on Vital and Health Statistics when establishing 

those coding standards H.R. 810 would allow the Secretary to establish a new coding system (the International Classification of 

Diseases, 10th Revision: ICD–10) in the absence of an explicit recommendation from the NCVHS to move to that new system. 

This expanded authority could increase the cost of the existing 

mandate on public and private health plans and providers regarding the coding system they must use. It is unclear however, whether the Secretary would actually require the implementation of the 

ICD–10 in the absence of a recommendation from the NCVHS, and 

it is also unclear whether the NCVHS will recommend a new system in the near future under current law. As a result, CBO does 

not have a basis for determining whether the affected entities 

would face additional costs, of if they did, whether those increased 

costs would exceed the intergovernmental and private-sector 

thresholds specified in UMRA ($50 million and $117 million, respectively, in 2003, adjusted annually for inflation). Information 

about the potential effects of such a change are limited. However, 

HHS is conducting a study of the costs of moving of the ICD–10, 

46

as well as the savings that plans and providers would obtain by operating under the new, more efficient system. HHS expects to release the findings of that study late in the summer of 2003. 

Other impacts on state, local, and tribal governments: Although 

not an intergovernmental mandate as defined by UMRA, the requirement for public hospitals that participate in the Medicare program to comply with the OSHA bloodborne pathogens standard 

would have cost implications for state and local governments. The 

current OSHA standard applies to all private-sector employers with 

one or more employees, as well as federal civilian employees. This 

bill would extend the requirement to all hospitals participating in 

the Medicare program, including state and local public hospitals. 

About half of the states currently have bloodborne pathogen standards that apply to these hospitals that are at least as stringent as 

the federal standard, and many other hospitals have voluntarily established comparable standards. Consequently, CBO does not expect the costs of the requirement to be significant, and any such 

costs would result from participating in a voluntary federal program and thus would not be costs of an intergovernmental mandate as defined in UMRA. 

Estimate prepared by: Federal costs: Alexis Ahlstrom; Impact on 

State, local, and tribal governments: Leo Lex; Impact on the private sector: Robert Nguyen. 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional authority for this legislation is provided in Article I, section 8, clause 

3, which grants Congress the power to regulate commerce with foreign nations, among the several States, and with the Indian tribes. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

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

contents 

Section 1 establishes the short title as the ‘‘Medicare Regulatory 

and Contracting Reform Act of 2003.’’

47

Section 2. Findings and construction 

Section 2 states that none of the provisions will be construed to 

(1) compromise existing remedies for addressing Medicare fraud or 

abuse with respect to criminal prosecution, civil enforcement, or administrative remedies, including those established by the False 

Claims Act or (2) prevent the Department of Health and Human 

Services (HHS) from its efforts to eliminate waste, fraud, and 

abuse in Medicare. Also, consolidation of Medicare’s administrative 

contracting provided for in this bill would not consolidate the Federal Hospital Insurance Trust Fund which pays for Part A services 

and the Federal Supplementary Medical Insurance Trust Fund 

which pays for Part B services. The bill notes that this administrative consolidation does not reflect any position on that issue. 

Section 3. Definitions 

Section 3 defines a ‘‘supplier’’ as a physician, practitioner, facility 

or other non-provider entity that furnishes Medicare items or services unless otherwise indicated, and ‘‘Secretary’’ as the Secretary of 

Health and Human Services. 

TITLE I—REGULATORY REFORM 

Section 101. Issuance of regulations 

Section 101(a) requires the Secretary, in consultation with the 

Director of the Office of Management and Budget, to establish and 

publish a regular timeline for the publication of final regulations 

based on the previous publication of a proposed regulation or an interim final regulation. The timeline may vary by regulation due to 

complexity, number and scope of comments received and other factors, but would not be longer than 3 years unless there are exceptional circumstances. If the Secretary intends to vary a regulation’s 

timeline, a notice of the different timeline would be required to be 

published in the Federal Register. This notice would include a brief 

explanation of the justification for such variation. If the timeline 

established for an interim final regulation expires without promulgation of a final regulation (including the public comment period), 

the interim final regulation would not remain in effect unless the 

Secretary publishes a notice of continuation that includes an explanation for not complying with the deadlines. This provision applies 

to the regular timelines and any subsequent 1-year extension to 

the timeline. If a notice of continuation is published, the regular 

timeline or the timeline as previously extended would be extended 

for 1 additional year. The Secretary would be required to submit 

a report to Congress that describes and explains the instances 

where the final regulation was not published within the applicable 

timeline. The Secretary would be required to provide for a transition period for previously published interim final regulations. 

Subsection (b) states a provision in a final regulation that is not 

a logical outgrowth of the proposed regulation (including an interim 

final regulation) would be treated as a proposed regulation and 

would not take effect without a separate public comment period followed by its publication as a final regulation. This provision would 

apply to final regulations published on or after enactment. 

48

Section 102. Compliance with changes in regulations and policies 

Section 102(a) states that a substantive change in a regulatory 

or a sub-regulatory issuance would not be applied retroactively to 

items or services, unless the Secretary determines that retroactive 

application (1) would be necessary to comply with statutory requirements, or (2) would be beneficial to the public interest. This 

provision would apply to substantive changes issued on or after enactment. 

Subsection (b) states a substantive change would not become effective before 30 days after the date the change is issued or published. The Secretary would be able to waive the 30-day period to 

comply with statutory requirements or if such waiver is in the public interest. If an earlier date is established, the Secretary would 

be required to include a brief explanation of such finding in the 

issuance or publication of the substantive change. No compliance 

action against a provider or supplier for goods and services furnished before the effective date of the substantive change would be 

permitted. This provision would apply to compliance actions undertaken on or after enactment. 

Subsection (c) states if (1) a provider or supplier follows written 

guidance (which may be transmitted electronically) provided by the 

Secretary or a Medicare contractor when furnishing an item or 

service and submitting a claim; (2) the Secretary finds that the circumstances relating to the furnished items and services have been 

accurately presented in writing to the contractor; and, (3) the guidance is inaccurate, then the provider or supplier who reasonably relied on the guidance would not be subject to any sanction or penalty, including repayment. This provision would not be construed 

to prevent recoupment or repayment (without additional penalty) if 

the overpayment was solely the result of a clerical or technical 

operational error. This provision would be effective upon enactment, but would not apply to sanctions where notice was provided 

on or before enactment. 

Section 103. Reports and studies relating to regulatory reform 

Section 103 requires the General Accounting Office (GAO) to conduct a study to determine the appropriateness and feasibility of 

providing the authority to the Secretary to issue legally binding advisory opinions on the interpretation and application of Medicare 

regulations. The study would examine the appropriate timeframe 

for issuing the opinions as well as the need for additional staff and 

funding. GAO would submit the study to Congress no later than 

one year after enactment. 

This section would require the Secretary to report to Congress on 

the administration of the Medicare program and inconsistencies 

among existing Medicare statutory or regulatory provisions. The report would include (1) information from beneficiaries, providers, 

suppliers, Medicare Beneficiary and Provider Ombudsmen (established in section 303 of this legislation), and Medicare contractors; 

(2) descriptions of efforts to reduce inconsistencies; and, (3) recommendations from the Secretary for appropriate legislation or administrative actions. The report would be due no later than 2 years 

after enactment and every 2 years thereafter. 

49

TITLE II—CONTRACTING REFORM 

Section 201. Increased flexibility in medicare administration 

Section 201(a) adds section 1874A to the Act which permits the 

Secretary to enter into contracts with any eligible entity to serve 

as a Medicare administrative contractor. These contractors would 

perform or secure the performance (through subcontracting) of 

some or all of the following tasks: (1) determine payment amounts; 

(2) make payments; (3) educate and assist beneficiaries; (4) provide 

consultative services; (5) communicate with providers and suppliers; (6) educate and offer technical assistance to providers; and, 

(7) perform additional functions as necessary. An entity eligible to 

enter into a contract with respect to the performance of a particular function would (1) have demonstrated capability to carry 

out such function; (2) comply with conflict of interest standards 

that are generally applicable to Federal acquisition and procurement; (3) have sufficient assets to financially support the performance of such functions; and, (4) meet other requirements imposed 

by the Secretary. The claims processing jurisdiction of a Medicare 

administrative contractor would be determined by the scope of the 

contract awarded to the entity. Specifically, the Medicare administrative contractor that would perform a particular function is the 

entity that has the contract to perform that function for any given 

beneficiary, any given provider or supplier. 

The Federal Acquisition Regulations (FAR) would apply to Medicare administration contracts except to the extent inconsistent with 

a specific Medicare requirement. The Secretary would be required 

to use competitive procedures when entering into a Medicare administrative contract and would take into account performance 

quality, price, and other factors. The Secretary would be able to 

renew a contract for up to 5 years without regard to statutory requirements concerning competitive contracting if the entity has 

met or exceeded specified performance standards. The Secretary 

would be able to transfer functions among contractors consistent 

with these provisions. The Secretary would be required to (1) ensure that performance quality is considered in such transfers and 

(2) provide notice of such transfer (in the Federal Register or otherwise) that describes the transferred functions and the affected providers and suppliers and also includes contractor contact information. 

The Secretary would be required to (1) provide incentives for the 

Medicare administrative contractors to provide efficient, high-quality services, and (2) develop performance standards with respect to 

each of the payment, provider service, and beneficiary service functions required of the contractors. The Secretary may include satisfaction of beneficiaries as a standard for measuring performance. 

In developing the performance standards, the Secretary would be 

able to consult with providers and suppliers, organizations representing Medicare beneficiaries, and Medicare contractors. The 

Secretary would be required to contract only with those entities 

that (1) perform efficiently and effectively; (2) meet standards for 

financial responsibility, legal authority and service quality among 

other pertinent matters; (3) agree to furnish timely and necessary 

data; and, (4) maintain and provide access to necessary records and 

data. The performance requirements would be (1) set forth in the 

50

contract between the Secretary and the appropriate Medicare contractor; (2) used to evaluate contractor performance; and, (3) consistent with the contract’s written statement of work. The statement of work and contract are public documents. A Medicare administrative contract would contain provisions deemed necessary 

by the Secretary and may provide for advances of Medicare funds 

for the purposes of making payments to providers and suppliers. In 

developing contract performance requirements for Medicare administrative contractors, the Secretary would be required to consider 

the existing timeliness standards for reconsiderations, applications 

for exemption, and initial determinations. 

The existing MSP provision would apply; the Secretary would not 

be able to require contractors to match their data with Medicare 

data for the purposes of identifying beneficiaries with other insurance coverage. The Secretary would assure that the activities of the 

Medicare administrative contractors do not duplicate the Medicare 

Integrity Program (MIP) functions except with respect to the prior 

authorization of durable medical equipment. An entity with a MIP 

contract would not be treated as a Medicare administrative contractor, solely by reason of the MIP contract. 

A Medicare administrative contractor and any of its employees 

certifying or disbursing payments may be required to give surety 

bond to the United States in an amount established by the Secretary. It is the intent of Congress that the definition of a surety 

bond in this instance includes fidelity bonds and the Secretary has 

the authority to request fidelity bonds. The contractor’s employee 

who certifies payments will not be liable for erroneous payments in 

the absence of reckless disregard or intent to defraud the United 

States. The contractor’s employee who disburses payments would 

not be liable for erroneous payments in the absence of reckless disregard or intent to defraud the United States, if such payments are 

based upon an authorization from the certifying employee and the 

authorization meets the internal control standards established by 

GAO. The contractor would not be liable for payments made by certifying or disbursing officers unless in connection with such a payment the Medicare administrative contractor acted with reckless 

disregard or intent to defraud the United States. Section 202(d) 

clarifies that Medicare administrative contractors are not liable for 

inadvertent billing errors but, as in the past, are liable for all penalties and damages resulting from reckless disregard of their obligations under their Medicare administrative contracts or intent to 

defraud the United States. The ‘‘reckless disregard’’ standard is the 

same as that under the False Claims Act, which has been used effectively by whistleblowers and the Department of Justice to uncover and penalize fraud against the Medicare program by some 

fiscal intermediaries and carriers. This ‘‘reckless disregard’’ standard, which does not require proof of specific intent to defraud, is 

designed to balance the practical need to shelter Medicare administrative contractors from frivolous civil litigation by disgruntled providers or beneficiaries with the Medicare program’s interest in protecting itself from contractor fraud. This subsection makes it clear 

that the False Claims Act continues, as in the past, to remain 

available as a remedy for fraud against Medicare by contractors, 

and that, as in the past, the damages and penalties which the 

Medicare program is entitled to recover from fraudulent contractors 

51

include not just administrative payments but also the affected payments from the Medicare trust funds. 

The Secretary would be able to indemnify a Medicare administrative contractor, subcontractor, or employee who is made a party to 

any judicial or administrative proceeding arising from the claims 

administration process to an appropriate extent as determined by 

the Secretary and specified in the contract. Indemnification in this 

case may include payment of judgments, certain settlements, 

awards and costs (including reasonable legal expenses). Settlement 

proposals would not be negotiated or compromised without prior 

written approval by the Secretary. The Secretary would not be able 

to provide any indemnification if the liability arises directly from 

conduct that is determined in the proceeding or by the Secretary 

to be criminal in nature, fraudulent, or grossly negligent; if such 

indemnification is provided before this determination, the contractor would reimburse the Secretary for the costs. The provisions 

would not change common law immunity available to the Medicare 

contractor or other party or permit the payment of costs not otherwise allowable, reasonable or allocable under FAR. 

Subsection (b) establishes that the existing administrative activities of fiscal intermediaries would be conducted through contracts 

with Medicare administrative contractors set forth previously. The 

provider nomination process and contracting specifications would 

be repealed. Certain performance standards with respect to the 

processing of clean claims would be retained. Certain annual reporting requirements concerning the contractor’s overpayment recovery efforts would be retained. 

Subsection (c) establishes that the existing administrative activities of carriers would be conducted through contracts with Medicare administrative contractors set forth previously. Certain instructions including those pertaining to nursing facilities payments, claims assignment, physician participation, overpayment recoveries and billing by suppliers would be retained. Certain performance standards with respect to the processing of clean claims 

would be retained. Contracting specifications and other conforming 

changes would be established. The Secretary, not the contractor, 

would be responsible for taking necessary actions to assure that 

reasonable payments are made, for those made on both a cost and 

charge basis. The Secretary, not the contractor, would be responsible for maintaining a toll-free telephone number for beneficiaries 

to obtain information on participating suppliers. The requirements 

for carrier fair hearings would be eliminated to conform with existing law. Certain annual reporting requirements concerning the contractor’s overpayment recovery efforts would be retained. 

Subsection (d) states, except as otherwise provided in this subsection, the provisions in this section would be effective October 1, 

2005. The Secretary would be authorized to take necessary actions 

prior to that date in order to implement these amendments on a 

timely basis, to transition from the contracts established under sections 1816 and 1842 of the Act to those established under the new 

section 1874A created by this legislation. The transition would be 

consistent with the requirement that the administrative contracts 

be competitively bid by October 1, 2010. The MIP contracts be 

awarded on a competitive basis would continue to apply and would 

not be affected by the provisions in this section. Any reference to 

52

a contract in the existing MIP contracting exceptions would be 

deemed to include a contract under the new 1874A that continues 

such MIP activities. 

Subsection (e) states that after this section becomes effective, any 

reference to fiscal intermediary or carrier would be considered a 

reference to the appropriate Medicare administrative contractor.

Subsection (f) requires the Secretary to submit an implementation plan to Congress and GAO no later than October 1, 2004. GAO 

would evaluate the plan and include appropriate recommendations 

no later than 6 months after the plan is received. No later than October 1, 2008, the Secretary would be required to submit a status 

report to Congress including (1) the number of contracts that have 

been competitively bid; (2) the distribution of functions among contracts and contractors; (3) a timeline for complete transition to full 

competition; and, (4) a detailed description of changes to contractor 

oversight and management. 

Section 202. Requirements for information security for medicare administrative contractors 

Section 202 requires Medicare administrative contractors that 

determine and make payments to implement a contractor-wide information security program that meets the requirements imposed 

on Federal agencies to ensure the security, integrity, confidentiality, authenticity, and availability of operational data and systems supporting operations. An annual audit of the information security at each Medicare administrative contractor: (1) would be performed by an independent entity that meets the independence requirements specified by the Office of Inspector General (OIG) in 

HHS, and (2) would test the effectiveness of information security 

control techniques for an appropriate subset of the contractor’s systems. An audit of new contractors (those that have not been fiscal 

intermediaries or carriers) would be required prior to the start of 

their performing Medicare payment functions. An audit of existing 

contractors (those that are now fiscal intermediaries and carriers) 

would be required to be completed within 1 year from enactment. 

The results of the audits would be reported promptly to the OIG 

which will submit a report annually to Congress. These provisions 

would be equally applicable to fiscal intermediaries and carriers as 

to Medicare administrative contractors. 

TITLE III—EDUCATION AND OUTREACH 

Section 301. Provider education and technical assistance 

Section 301(a) adds section 1889 to the Act to require the Secretary (1) to coordinate the educational activities provided through 

the Medicare administrative and MIP contractors, and (2) to submit an evaluation to Congress, no later than October 1, 2004, on 

actions taken to coordinate the funding of provider education. 

Subsection (b) requires the Secretary to use the specific claims 

payment error rates or similar methodology at each Medicare administrative contractor. This methodology would apply to existing 

fiscal intermediaries and carriers in the same manner as it applies 

to Medicare administrative contractors. No later than October 1, 

2004, GAO would submit to Congress and to the Secretary a report 

on the adequacy of the methodology, including recommendations as 

53

appropriate. No later than October 1, 2004, the Secretary would be 

required to report to Congress on (1) the use of the claims error 

rate methodology in assessing the effectiveness of contractors’ provider education and outreach programs, and (2) whether such 

methodology should be used as a basis of contractors’ performance 

bonuses. 

Subsection (c) requires the Secretary, by October 1, 2004, to develop a communication strategy with beneficiaries, providers and 

suppliers. Each Medicare administrative contractor would be required to (1) provide general written responses (which may be 

through electronic transmission) in a clear, concise and accurate 

manner to written inquiries from beneficiaries, providers and suppliers within 45 business days; (2) provide a toll-free telephone 

number where these interested parties may obtain billing, coding, 

claims, coverage and other appropriate Medicare information; (3) 

maintain a system for identifying which employee provided both 

the written and oral information; and, (4) monitor the accuracy, 

consistency, and timeliness of the information provided. The Secretary would be required to establish and make public the standards used to monitor the accuracy, consistency, and timeliness of 

information provided in response to written and telephone inquiries. The standards would be developed in consultation with provider, supplier, and beneficiary organizations and would be consistent with the contractors’ performance requirements. The Secretary would be able to directly monitor the quality of the information so provided. These provisions would also apply to existing fiscal intermediaries and carriers. 

Subsection (d) authorizes $25 million in Medicare appropriations 

in FY2005 and FY2006 and such funds as necessary in subsequent 

years to increase provider education and training and to improve 

the accuracy and quality of contractor responses. The Committee 

intends for this amount to be provided in addition to current funding levels. Starting on October 1, 2004, the contractors’ training activities would be tailored to the special needs of small providers 

and suppliers. The provision defines a small provider as an institution with fewer than 25 full-time equivalents employees (FTEs) and 

a small supplier as one with fewer than 10 FTEs. 

Subsection (e) requires the Secretary and each contractor, by October 1, 2004, to maintain an Internet site that provides answers 

to frequently asked questions in an easily accessible format as well 

as other materials published by the contractor. 

Subsection (f) would not permit a Medicare contractor to use attendance records at educational programs or information gathered 

during these programs to select or track candidates for audit or 

prepayment review. Nothing in the proposed legislation would require Medicare administrative contractors to disclose information 

that would compromise pending law enforcement activities or reveal findings of law enforcement-related audits. Nothing in this 

section or section 1893(g) shall be construed as preventing the disclosure by a Medicare contractor of information on attendance at 

education activities for law enforcement purposes. Nothing in this 

section or section 1893(g) shall be construed as providing for the 

disclosure by a Medicare contractor of the claims processing 

screens or computer edits used for identifying claims that will be 

subject to review. 

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Section 302. Small provider technical assistance demonstration program

Section 302 requires the Secretary to establish a demonstration 

program and contract with qualified entities to offer technical assistance, when requested and on a voluntary basis, to small providers or suppliers. Small providers and suppliers would be those 

institutional providers with less than 25 FTEs or suppliers with 

less than 10 FTEs. Technical assistance would include direct, inperson examination of billing systems and internal controls by 

qualified entities such as peer review organizations or other entities. In awarding these contracts, the Secretary would be required 

to consider any prior investigations of the entity’s work by the OIG 

in HHS or GAO. Participating providers and suppliers would be required to pay an amount estimated and disclosed in advance that 

would equal 25% of the cost of the technical assistance they received. Absent indications of fraud, errors found in the review 

would not be subject to recovery if the problem is corrected within 

30 days of the on-site visit and remains corrected for an appropriate period. However, this protection would only apply to claims 

filed as part of the demonstration project, would last only for the 

duration of the project and only as long as the provider or supplier 

was participating in the project. GAO, in consultation with the 

OIG, would be required to evaluate and recommend continuation of 

the demonstration project no later than 2 years after its implementation. The evaluation would include a determination of whether 

claims error rates were reduced for providers and suppliers who 

participated in the program. The demonstration project would be 

authorized at $1 million in FY2005 and $6 million in FY2006 of appropriations from the Medicare Trust Funds. 

Section 303. Medicare Provider Ombudsman; Medicare Beneficiary 

Ombudsman 

Section 303(a) requires the Secretary, one year after enactment, 

to appoint a Medicare Provider Ombudsman within HHS to (1) to 

resolve unclear guidance and provide confidential assistance to providers and suppliers regarding complaints or questions about the 

Medicare program including peer review and administrative requirements, and (2) recommend changes to improve program administration. The ombudsman would not advocate any increases in 

payments or expanded coverage, but would identify issues and 

problems in current payment and coverage policies. The Medicare 

Provider Ombudsman shall make recommendations to the Secretary concerning how to respond to recurring patterns of confusion 

in the Medicare program. Such a recommendation may include calling for the suspension of the imposition of provider sanctions (except those sanctions relating to the quality of care) where there is 

widespread confusion in program administration. Nothing in this 

section shall be construed as allowing for the suspension of provider sanctions relating to the quality of care, regardless of whether widespread confusion in the Medicare program exists. 

Subsection (b) requires the Secretary, one year after enactment, 

to appoint a Medicare Beneficiary Ombudsman within HHS from 

individuals with health care expertise, advocacy, and education of 

Medicare beneficiaries. The ombudsman would (1) receive complaints, grievances, and requests for information from Medicare 

55

beneficiaries; (2) provide assistance with respect to those complaints, grievances and requests, including assistance to beneficiaries who appeal claims determinations or those affected by the 

decisions of Medicare+Choice (M+C) organizations to leave Medicare; and, (3) submit an annual report to Congress and the Secretary describing activities and recommending changes to improve 

program administration. The ombudsman would not advocate any 

increases in payments or expanded coverage, but would identify 

issues and problems in current payment and coverage policies. To 

the extent possible, the Beneficiary Ombudsman would work with 

the Health Insurance Counseling Programs, authorized under section 4360 of Omnibus Reconciliation Act of 1990, to facilitate the 

provision of information to Medicare beneficiaries regarding M+C 

plans and any changes related to those plans. Nothing in this subsection would preclude further collaboration between the Medicare 

Beneficiary Ombudsman and these programs. 

Subsection (c) requires the Secretary to appoint the Medicare 

Provider Ombudsman and the Medicare Beneficiary Ombudsman 

by no later than 1 year after enactment. 

Subsection (d) authorizes appropriations of necessary sums in FY 

2004 and subsequently from the appropriate Medicare Trust Funds 

for the ombudsman programs. 

Subsection (e) requires the Secretary to prepare and distribute 

an annual notice explaining Medicare benefits and limitations to 

coverage to Medicare beneficiaries. The Secretary is also required 

to provide information via a toll-free telephone number. 

The Secretary would be required to establish a toll-free number 

(1–800–MEDICARE) that will transfer individuals with questions 

or seeking help to the appropriate entities. The transfer would 

occur with no charge. This toll-free number would be the general 

information and assistance number listed on the annual notice provided to beneficiaries. GAO would be required to (1) monitor the 

adequacy, accuracy, and consistency of the information provided to 

Medicare beneficiaries through the toll-free 1–800 MEDICARE 

number; and (2) examine the education and training of those providing the information through the toll-free number. GAO would be 

required to submit a report to Congress no later than 1 year from 

enactment. 

Section 304. Beneficiary outreach demonstration program 

Section 304 requires the Secretary to establish a 3-year demonstration project where Medicare specialists who are HHS employees are placed in at least six Social Security Administration (SSA) 

offices to advise and assist Medicare beneficiaries. The SSA offices 

would be those with a high-volume of visits by Medicare beneficiaries; at least two of which would be in rural areas. In the rural 

SSA offices, the Secretary would provide for the Medicare specialists to travel among local offices on a scheduled basis. The Secretary would be required to (1) evaluate the project with respect to 

beneficiary utilization, beneficiary satisfaction, and cost-effectiveness; and (2) recommend whether the demonstration should be established on a permanent basis.

56

Section 305. Inclusion of additional information in notices to beneficiaries about skilled nursing facility benefits 

Beneficiaries currently utilizing skilled nursing facilities (SNFs) 

are sometimes unaware that their Medicare coverage is ending and 

they must secure other means of payment for their nursing home 

care. Section 305 requires the Secretary to provide in Medicare 

beneficiary notices (sec. 1806(a) of the SSA title XVIII) information 

on the number of days of coverage of nursing home services remaining well in advance of the end of the 100 days of care. This 

shall apply to notices provided more than 6 months after the date 

of enactment of this Act. 

Section 306. Information on medicare-certified skilled nursing facilities in hospital discharge plans 

Some hospitals discharge patients, who would otherwise be eligible for the Medicare SNF benefit, to facilities that are not Medicare-certified without informing the beneficiary that they would not 

receive Medicare coverage for their care or that other Medicare-certified facilities may be available. Section 306 requires the Secretary 

to provide public information that enables hospital discharger planners, Medicare beneficiaries, and the public to identify skilled nursing facilities that are participating in the Medicare program. This 

shall apply to discharge plans made no more than 6 months after 

the date the Secretary provides for the availability of information 

under this section. 

TITLE IV—APPEALS AND RECOVERY 

Section 401. Transfer of responsibility for medicare appeals 

Section 401 requires, by October 1, 2004, the Commissioner of 

SSA and the Secretary to develop and transmit a plan to Congress 

and GAO describing the transfer of functions of the Administrative 

Law Judges (ALJs) who are responsible for hearing Medicare and 

Medicare related cases from SSA to HHS. The plan would be transmitted to Congress and GAO no later than October 1, 2004. GAO 

would evaluate the plan and submit a report to Congress within 6 

months. The Secretary and the Commissioner of SSA would implement the transitional plan and transfer the ALJ functions no earlier than July 1, 2005 and no later than October 1, 2005. The Secretary would assure the independence of the ALJs performing the 

ALJ function from the Centers of Medicare and Medicaid Services 

(CMS) and its contractors by placing the ALJs in an administrative 

office that is organizationally and functionally separate from CMS. 

Such judges would not report to or be subject to any officer within 

the Department except the Secretary. The Secretary would also locate the ALJs with an appropriate geographic distribution to ensure access. Subject to appropriations, the Secretary would be permitted to hire ALJs and support staff with priority given to ALJs 

with experience in handling Medicare appeals. Amounts previously 

paid to SSA for the ALJs performing the ALJ functions would be 

payable to the Secretary for the transferred functions. The Secretary would be permitted to enter into arrangements with SSA to 

share office space, support staff, and other resources with appropriate reimbursement from the Medicare trust funds. Increased appropriations would be permitted to increase the number of ALJs 

57

and support staff; improve education and training for ALJs and 

their staff; and increase Departmental Appeals Board (DAB) staff. 

The transition plan shall include information on the following: 

1. Workload—The number of such ALJs and support staff required now and in the future to hear and decide such cases in a 

timely manner, taking into account the current and anticipated 

claims volume, appeals, number of beneficiaries, and statutory 

changes. 

2. Cost Projections—Funding levels required for fiscal year 2004 

and subsequent fiscal years under this subsection to hear such 

cases in a timely manner. 

3. Transition Timetable—A timetable for the transition. 

4. Regulations—The establishment of specific regulations to govern the appeals process. 

5. Case tracking—The development of a unified case tracking 

system that will facilitate the maintenance and transfer of case 

specific data across both the fee-for-service and managed care components of the Medicare program. 

6. Feasibility of Precedential Authority—The feasibility of developing a process to give binding, precedential authority to decisions 

of the Departmental Appeals Board in the Department of Health 

and Human Services that addresses broad legal issues. 

7. Access to ALJs—The feasibility of filing appeals with ALJs 

electronically and the feasibility of conducting hearings using teleor video-conference technologies. 

Section 402. Process for expedited access to review 

Section 402 (a) requires the Secretary to establish an appeals 

process for a provider, supplier, or beneficiary which permits access 

to judicial review when a review panel determines that no entity 

in the administrative appeals process has authority to decide the 

question of law or regulation in controversy and where material 

facts are not in dispute. The appellant would be able to make such 

requests only once with respect to a question of law or regulation 

for a specific dispute. If the appellant requests this determination 

and submits appropriate supporting documentation, the review 

panel would make this determination in writing no later than 60 

days after the receiving the request. A review panel would consist 

of a panel of three members who are ALJs, members of the DAB, 

or qualified individuals associated with a Qualified Independent 

Contractor (QIC) or other independent entity designated by the 

Secretary to make these determinations. The determination by the 

review panel would be considered a final decision and not subject 

to review by the Secretary. Given such a determination or a failure 

to make the determination within the 60-day deadline, the appellant would be able to request judicial review before a civil court. 

The filing deadline for this civil action would be within 60 days of 

the determination or within 60 days of the end of the deadline to 

make such determination. The venue for judicial review would be 

the U.S. District Court where the appellant is located, or where the 

greatest number of appellants are located, or in the district court 

for the District of Columbia. The amount in controversy would be 

subject to annual interest beginning on the first day of the first 

month beginning after the 60-day deadline for filing. Interest would 

be equal to the rate of interest on obligations issued for purchase 

58

by the Medicare trust funds effective for the month that the civil 

action is authorized to commence. The interest payments would not 

be deemed to be Medicare reimbursement. 

Subsection (b) concerns section 1866(h) of the Act and provides 

for a hearing and for judicial review for any institution or agency 

dissatisfied with a determination that it is not a provider (or that 

it can no longer be a provider). 

An agency or institution’s appeal concerning program participation under section 1866 would have access to expedited judicial review under section 1869 provisions. This provision would not be 

construed to affect remedies applied to assure quality of care in 

skilled nursing facilities (under section 1819) while such appeals 

are pending. 

Subsection (c) establishes the effective date and states that 

amendments in the section would apply to appeals filed on or after 

October 1, 2004. 

Subsection (d) requires the Secretary to develop and implement 

a process under 1866(h) to expedite provider agreement determinations including those instances where participation is terminated or 

other sanctions (including denials of new admissions or the immediate appointment of temporary management) against skilled nursing facilities have been imposed. Priority would be given to termination of provider agreements. Increased appropriations from the 

Medicare trust funds in FY 2003 and subsequently would be authorized in order to (1) reduce the average time for administrative 

determinations on provider participation appeals by 50%; (2) increase the number of ALJs and their staff as well as appellate level 

staff at the DAB; and, (3) educate such judges and their staff on 

long-term care issues. 

The provisions in 402(a–c) on expedited access to judicial review 

ensure that if a review board certifies that there are no material 

facts in dispute and that the appeals process does not have authority to resolve the question at issue, the provider, supplier, or beneficiary may take their case to court in an expedited manner. This 

will facilitate more prompt resolution of challenges to the underlying validity of CMS regulations and determinations. To the extent that any part of an appeal poses a factual dispute that is being 

adjudicated before an administrative tribunal, this provision would 

not authorize the severance of the legal issues from the underlying 

factual dispute. 

Section 403. Revisions to medicare appeals process 

Section 403(a) states that starting no later than October 1, 2004, 

a provider or supplier would not be able to introduce evidence that 

was not presented at reconsideration conducted by the QIC unless 

a good cause precluded its introduction at or before that reconsideration. 

When deciding whether there is good cause to introduce new evidence, the adjudicator should ensure, after consideration of the totality of the circumstances, that disallowing the introduction of 

such new evidence would unfairly prejudice the case. The totality 

of the circumstances may include, but is not limited to, the following: evidence is not yet available; the appellant was not represented at a lower level of appeal; the appellant was not aware 

of her rights; or the appellant did not understand the proceeding. 

59

Subsection (b) requires medical records of the individual involved 

in the appeal to be included as part of the applicable information 

used by QICs in their reconsideration process. 

Subsection (c) establishes requirements for initial determination 

and redetermination notices. In all instances notices must be provided in printed form, be written in a manner easily understood by 

the beneficiary, and must include both procedures for obtaining additional information about the determination and notification of the 

right to and process for appealing the determination. 

The notice of initial determination shall also include the reasons 

for the determination, including whether a local medical review 

policy or local coverage determination was used. The redetermination shall include the specific reasons for the determination and as 

appropriate, a summary of the clinical or scientific evidence used 

in making the determination. 

Comparable requirements would be extended to ALJ decisions. 

These decisions would have to be written in an understandable 

manner and include the specific reasons for the decision, an appropriate summary of the evidence, the procedures for obtaining additional information about the decision, and a notification of appeal 

rights and instructions. 

The current requirements that a QIC prepare documentation and 

an explanation of the issues for an appeal to an ALJ would be 

modified: a QIC would be required to submit the information required in an appeal of a Medicare contractor’s decision to the ALJ. 

Subsection (d) states that to qualify as a QIC, an entity would 

be required to have sufficient medical, legal and other expertise, including knowledge of the Medicare program as well as sufficient 

professional qualifications, independence and staffing to make reconsideration decisions. A QIC would be required to assure that reviewers meet qualification and compensation requirements. If a reconsideration request indicates that the treatment was furnished 

or the item or service was provided by a physician, each reviewing 

professional should be a physician. 

Entities and their professional reviewers would have to meet 

independence requirements and may not (1) be a related party; (2) 

have a material familial, financial, or professional relationship with 

a related party; or, (3) have a conflict of interest with respect to 

a related party. QIC’s compensation would not be contingent on 

any decision by the QIC or by any reviewing professional. A reviewer’s compensation would not be contingent on any decision rendered by the reviewer. In this context, a related party to a Medicare case involving an individual beneficiary would be (1) the Secretary, the Medicare administrative contractor involved, any fiduciary, officer, director or employee of HHS or such Medicare contractor; (2) the individual or authorized representative; (3) the 

health professional, institution or entity that provides or manufactures the item or service involved in the case; and, (4) any other 

party with substantial interest in the case, as defined by regulation. An individual affiliated with a fiscal intermediary, carrier or 

other contractor would be able to act as a QIC reviewer if (1) the 

individual is not involved with the provision of the item or service 

of the case; (2) the individual is not an employee of the Medicare 

contractor and does not provide services exclusively or primarily to 

or on behalf of the contractor; and, (3) the fact of the relationship 

60

is disclosed to the Secretary and the Medicare beneficiary or authorized representative who do not object. An individual with staff 

privileges at the institution where treatment occurs would be able 

to serve as a reviewer if the affiliation is disclosed without objection. 

Each reviewing professional would be required to be (1) an 

allopathic or osteopathic physician or health care professional who 

is appropriately credentialed or licensed in one or more states to 

deliver health care services and has medical expertise in the field 

of practice appropriate for the case, or (2) a health care professional 

who is legally authorized in one or more states (in accordance with 

state law or according to the appropriate state regulatory mechanism) to furnish the health care items or service and has medical 

expertise in the field of practice appropriate for the case. A sufficient number of qualified independent contractors (but not fewer 

than four) shall be available to conduct appeals consistent with the 

timeframes under this section. 

Section 404. Prepayment review 

Section 404 states that Medicare administrative contractors 

would be able to conduct random prepayment reviews in order to 

develop contractor-wide or program-wide claims payment error 

rates or under additional circumstances as established by regulations that are developed in consultation with providers and suppliers. Medicare administrative contractors would be permitted to 

conduct random prepayment reviews in accordance with a standard 

protocol developed by the Secretary. The Secretary would not be 

able to initiate a non-random prepayment review based on the initial identification by a provider or supplier of an improper billing 

practice unless there is a likelihood of sustained or high level of 

payment error. The Secretary would be required to issue regulations relating to the termination of such non-random prepayment 

reviews that could incorporate differences in the circumstances that 

triggered such a review that may affect its duration. No provision 

would prevent the denial of payment for claims actually reviewed 

under random prepayment review. These provisions would be applied to fiscal intermediaries and carriers. The provisions would be 

effective no later than 1 year from enactment. The Secretary would 

be required to issue regulations before that deadline; the random 

prepayment review protocols would apply to reviews after a date 

specified by the Secretary (but no later than 1 year from enactment). 

Section 405. Recovery of overpayments 

Section 405 states that subject to certain qualifications, in circumstances where refund of an overpayment within 30 days would 

constitute a hardship, providers and suppliers on request would be 

allowed to repay the overpayment amount (by offset or otherwise) 

over a period of at least 6 months and up to 3 years when their 

obligation exceeds a 10% threshold of their annual payments from 

Medicare. The Secretary would be able to establish a repayment 

period of up to 5 years in cases of extreme hardship. Interest would 

accrue on the balance through the repayment period. The Secretary 

would be required to establish a process under which newly participating providers and suppliers could qualify for a repayment plan 

61

under this hardship provision. Previous overpayment amounts already included in an ongoing repayment plan would not be included in the calculation of the hardship threshold. The Secretary 

would be allowed to seek immediate collection if payments are not 

made as scheduled. Exceptions to this provision would be permitted 

in cases where the Secretary has reason to suspect that bankruptcy 

may be declared, if the provider or supplier may otherwise cease 

to do business or discontinue participating in the Medicare program, or where fraud or abuse against Medicare is indicated. This 

provision would not affect the application of existing no-fault provisions which preclude recovery under circumstances where incorrect 

payment has been made to an individual who is without fault or 

where the recovery would decrease payments to another person 

who is without fault. 

Upon enactment, the Secretary would not be able to initiate any 

recovery action if the provider or supplier has sought a reconsideration of the Medicare overpayment by a QIC until the date of the 

reconsideration decision. If QIC’s are not yet in place, the recovery 

would not be initiated until the date of a redetermination decision 

by a fiscal intermediary or a carrier. If monies have been offset or 

repaid, the Secretary would return those amounts plus applicable 

interest if the original overpayment determination is reversed. If 

such an overpayment determination is upheld, interest would accrue beginning on the date of the original overpayment notice; the 

interest amount would be the rate otherwise applicable for Medicare overpayments. 

Not later than 1 year after enactment, a Medicare contractor 

would not be able to use extrapolation to determine overpayment 

amounts for statistically valid random samples initiated after the 

date of enactment, unless, as determined by the Secretary, a sustained or high level of payment error exists or a documented educational intervention did not correct the payment error. Where providers and suppliers have previously been overpaid, Medicare contractors would be able to require periodic production of records or 

supporting documentation for a limited sample of submitted claims 

to ensure that a previous practice has been discontinued. 

The Secretary would be able to use a consent settlement to resolve a projected overpayment. Before entering into any consent 

settlements after the date of enactment, the Secretary would be required to communicate to a provider or supplier that based on a 

preliminary evaluation of a medical records review, an overpayment may exist; the nature of the identified problems; and the necessary steps to address the problem. The Secretary would provide 

45 days where additional information may be submitted concerning 

the claims for which the medical records have been reviewed. After 

considering the additional information, the Secretary would provide 

notice and explanation of any remaining overpayment determination and would offer the opportunity for a statistically valid random sample (which would not waive appeal rights) or a consent 

settlement (based on a smaller sample with a waiver of appeal 

rights) to resolve the overpayment amounts. 

Not later than 1 year after enactment, the Secretary would be required to establish, in consultation with health care associations, a 

process where classes of providers and suppliers are notified that 

62

their Medicare contractor has identified specific billing codes that 

may be over-utilized. 

For audits initiated after enactment, Medicare contractors would 

be required to provide a written notice (which may be in electronic 

form) of the intent to conduct a post-payment audit to those selected as audit candidates. Medicare contractors would be required 

to provide those who have been audited a full review and understandable explanation of the findings that: (1) permits the development of an appropriate corrective action plan; (2) provides information on appeal rights as well as consent settlements (which are at 

the discretion of the Secretary); and, (3) provides for an opportunity 

to supply additional information to the contractor. Medicare contractors would be required to take into account the information 

provided, on a timely basis. The provisions requiring notice of audit 

and findings would not apply if pending law enforcement activities 

would be compromised or findings of law enforcement-related audits would be revealed. 

Not later than 1 year after enactment, the Secretary would be required to establish a standard methodology for Medicare contractors to use in selecting a claims sample for a review of abnormal 

billing patterns. 

These provisions would apply to Medicare administrative contractors including fiscal intermediaries and carriers as well as 

those eligible entities with MIP contracts. 

Section 406. Provider enrollment process; right of appeal 

Section 406 requires the Secretary to (1) establish by regulation 

an enrollment process for providers and suppliers which would include deadlines for actions on enrollment applications within 6 

months of enactment; (2) monitor the performance of Medicare administrative contractors in meeting the deadlines; and, (3) consult 

with providers and suppliers in making changes to the enrollment 

forms made on or after January 1, 2004. In establishing an enrollment process for providers and suppliers, the Secretary would build 

upon existing Medicare practice. 

Providers and suppliers whose application to enroll or reenroll 

has been denied and who are dissatisfied with the determination 

would be entitled to a hearing and judicial review of the determination under the procedures that currently apply to providers. This 

provision would apply to denials after a date specified by the Secretary which could not be later than 1 year from enactment. 

Section 407. Process for correction of minor errors and omissions on 

claims without pursuing appeals process 

Section 407 requires the Secretary to develop, in consultation 

with appropriate Medicare contractors and health care associations, a process where minor claims errors and omissions can be 

corrected and resubmitted without appealing the claims denial. The 

Committee would be concerned, however, if this process were to become an incentive for providers to knowingly or negligently submit 

incomplete information. 

The Committee intends that the process for the correction of 

minor errors and omissions on claims cover both the submission of 

prepayment and post-payment review claims. For example, if in the 

case of a home health claim, the physician has signed the plan of 

63

care and/or physician’s order but has not dated it, the claim shall 

be returned to the home health agency and may be resubmitted by 

the home health agency with any incomplete or missing information without having to appeal the claim. 

Section 408. Prior determination process for certain items and services; advance beneficiary notices 

Section 408 requires the Secretary to establish a process through 

regulation where physicians and beneficiaries can establish whether Medicare covers certain items and services before such services 

are provided. Under current law, a beneficiary or provider does not 

find out definitively whether an item or service will be covered by 

Medicare until after it is provided. This process may only be used 

by either (1) a physician, but only with respect to eligible items and 

services for which the physician may be paid directly or (2) a Medicare beneficiary who receives an advance beneficiary notice (ABN) 

from the physician who may be paid directly for the service in 

question. 

The Secretary may establish by regulation reasonable limits on 

the categories of eligible items and services for which a prior determination may be requested. The Secretary would be able to require 

that the request be accompanied by a description of the item or 

service and other supporting documentation including a copy of the 

ABN if the beneficiary is requesting the prior determination. 

The contractor would be required to provide the eligible requester with a written notice stating whether or not the item or 

service is covered (or that the information provided is insufficient 

to make a determination). The notice must be provided in accordance with existing deadlines for initial determinations and must include a brief explanation of the basis for the decision and the right 

to redetermination. In the case of a request by a physician, both 

the physician and the beneficiary would be informed of the decision. Prior determinations would be binding on the Medicare contractor, absent fraud or misrepresentation of facts. 

If unsuccessful, the requestor would have the right to request a 

redetermination of the decision, however, contractors’ prior determinations (and redeterminations on such prior determinations) 

would not be subject to further administrative or judicial review. 

This limitation on further review only applies to cases under section 408; an individual would retain existing rights to administrative or judicial review after receiving the service or receiving a determination that a service would not be covered. No prior determinations would be rendered after services are rendered or items 

are provided. 

The Secretary would be required to (1) establish the process to 

allow for the processing of such requests beginning 18 months after 

enactment; (2) collect data on the advance determinations; and, (3) 

establish a beneficiary and provider outreach and education program. 

GAO would be required to report on the use of the advance beneficiary notice and prior determination process no later than 18 

months of its implementation. 

64

TITLE V—MISCELLANEOUS PROVISIONS 

Section 501. Policy development regarding evaluation and management (E&M) documentation guidelines 

Section 501 prohibits the Secretary from implementing any new 

documentation guidelines on or after enactment for evaluation and 

management (E&M) physician services unless the guidelines (1) 

are developed in collaboration with practicing physicians (both generalists and specialists) after assessment by the physician community; (2) based on a plan with deadlines for improving use of E&M 

codes; (3) are developed after completion of the pilot projects to test 

modifications to the codes; (4) are found to meet the desired objectives; and, (5) are preceded by establishment of appropriate outreach and education of the physician community. The Secretary 

would make changes to existing E&M guidelines to reduce paperwork burdens on physicians. 

The Secretary would be required to modify E&M guidelines to (1) 

identify clinically relevant documentation: (2) decrease non-clinically pertinent documentation; (3) increase the reviewers’ accuracy; 

and, (4) educate the physicians and the reviewers. 

The provisions would establish different pilot projects in specified 

settings that would be (1) conducted on a voluntary basis in consultation with practicing physicians (both generalists and specialists); (2) be of sufficient length to educate physicians and contractors on E&M guidelines and, (3) allow for an assessment of E&M 

guidelines and their use. A range of different projects would be established and include at least one project that (1) uses a physician 

peer review method; (2) uses an alternative method based on faceto-face encounter time with the patient; (3) is in a rural area; (4) 

is outside a rural area; and, (5) involves physicians billing in a 

teaching setting and non-teaching setting. The projects would examine the effect of modified E&M guidelines on different types of 

physician practices in terms of the cost of compliance. Data collected under these projects would not be the basis for overpayment 

demands or post-payment audits. This protection would apply to 

claims filed as part of the project, would last the duration of the 

project, and would last for as long as the provider participated in 

the project. The Secretary, in consultation with practicing physicians including those in groups practices as well as generalists and 

specialists, would be required to evaluate the development of alternative E&M documentation systems with respect to administrative 

simplification requirements and report results of the study to Congress by October 1, 2005. The Medicare Payment Advisory Commission would conduct an analysis of the results of this study and 

submit a report to Congress. 

The Secretary would be required to conduct a study of the appropriate coding of extended office visits where no diagnosis is made 

and submit a report with recommendations to Congress no later 

than October 1, 2005. 

Section 502. Improvement in oversight of technology and coverage 

Section 502(a) requires the Secretary to establish a Council for 

Technology and Innovation within CMS. The Council would be 

composed of senior CMS staff with an executive coordinator, who 

is designated or appointed by the Secretary and reports to the CMS 

65

administrator. The chairperson would serve as a single point of 

contact for outside groups and entities regarding Medicare coverage, coding, and payment processes. The Council would coordinate Medicare’s coverage, coding, and payment processes as well as 

information exchange with other entities with respect to new technologies and procedures, including drug therapies. 

The Secretary would be required to establish procedures (by regulation) for determining the basis and amount of payments for new 

clinical diagnostic laboratory tests. New laboratory tests would be 

defined as those assigned a new Health Care Procedure Coding 

System (HCPCS) code on or after January 1, 2005. 

Subsection (b) requires the Secretary, as part of this procedure, 

to (1) provide a list (on an Internet site or other appropriate venue) 

of tests for which payments are being established in that year; (2) 

publish a notice of a meeting in the Federal Register on the day 

the list becomes available; (3) hold the public meeting no earlier 

than 30 days after the notice to receive public comments and recommendations; and, (4) take into account the comments, recommendations and accompanying data in both proposed and final 

payment determinations. The Secretary would set forth the criteria 

for making these determinations; make public the available data 

considered in making such determinations; and could convene other 

public meetings as necessary. 

Subsection (c) requires GAO to conduct a study analyzing which 

external data can be collected by CMS for use in computing Medicare’s inpatient hospital payments. The study may include an evaluation of the feasibility and appropriateness of using quarterly 

samples or special surveys among other methods. The study would 

include an analysis of whether other agencies, such as the Bureau 

of Labor Statistics in the Department of Commerce, are best suited 

to collect this information. The report would be submitted to Congress no later than October 1, 2004. 

In subsection (d), if the National Committee on Vital and Health 

Statistics (NCVHS) has not made a recommendation to the Secretary before the date of enactment with respect to the adoption of 

the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD–10–PCS) and the International Classification of Diseases, 10th Revision, Clinical Modification (ICD–10–

CM), the Secretary may adopt ICD–10–PCS and ICD–10–CM as a 

standard on or after enactment of this Act. 

Section 503. Treatment of hospitals for certain services under the 

medicare secondary payor (MSP) provisions 

Section 503 states that the Secretary would not require a hospital or a critical access hospital to ask questions or obtain information relating to the Medicare secondary payor provisions in the 

case of reference laboratory services if the same requirements are 

not imposed upon those provided by an independent laboratory. 

Reference laboratory services would be those clinical laboratory diagnostic tests and interpretations of the same that are furnished 

without a face-to-face encounter between the beneficiary and the 

hospital where the hospital submits a claim for the services. 

66

Section 504. EMTALA improvements 

Section 504 states that emergency room services provided to 

screen and stabilize a Medicare beneficiary furnished after January 

1, 2004, would be evaluated as reasonable and necessary on the 

basis of the patient’s presenting symptoms or complaint available 

to the treating physician or practitioner at the time the services 

were ordered and not the patient’s principal diagnosis. The Secretary would not be able to consider the frequency with which the 

item or service was provided to the patient before or after the time 

of admission or visit. The Secretary shall also not count the provision of the item or service during such an admission or visit when 

considering the frequency with which the item or service is furnished on subsequent occasions. The Secretary would be required 

to establish a procedure to notify hospitals and physicians when an 

EMTALA investigation is closed. Except in the case where a delay 

would jeopardize the health and safety of individuals, the Secretary 

would be required to request a PRO review before making a compliance determination that would terminate a hospital’s Medicare 

participation because of EMTALA violation. The current period of 

5 business days would apply to such a PRO review. The Secretary 

would be required to provide a copy of the report to the hospital 

or physician, consistent with existing confidentiality requirements. 

This provision would apply to terminations initiated on or after enactment. 

Section 505. Emergency Medical Treatment and Active Labor 

(EMTALA) Task Force 

Section 505 requires the Secretary to establish a 19-member 

technical advisory group under specified requirements to review 

issues related to EMTALA. The advisory group would be comprised 

of: the CMS administrator; the OIG; four hospital representatives 

who have EMTALA experience (including one person from a public 

hospital and at least two of whom have not experienced EMTALA 

violations), seven practicing physicians with EMTALA experience; 

two patient representatives; two regional CMS staff involved in 

EMTALA investigations; one representative from a state survey organization and one representative from a PRO. The Secretary 

would (1) consider qualified individuals who are nominated by organizations representing providers and patients in selecting the 

task force, and (2) establish the advisory group without regard to 

any limits on the number of such groups that may be established 

(within HHS or otherwise). 

The advisory group would be required to (1) elect a member as 

chairperson; (2) schedule its first meeting at the direction of the 

Secretary and meet at least twice a year subsequently; and, (3) terminate 30 months after the date of its first meeting. The advisory 

group would review EMTALA regulations; provide advice and recommendations to the Secretary; solicit public comments from interested parties; and disseminate information on the application of the 

EMTALA regulations. 

Section 506. Authorizing use of arrangements to provide core hospice services in certain circumstances 

Section 506 states that hospice programs may enter into arrangements with another certified hospice program to provide services if 

67

the services are highly specialized services of a registered nurse. 

The services that could be provided under these arrangements 

would be limited to extraordinary or non-routine circumstances, 

such as unanticipated periods of staffing shortages. The originating 

hospice program would continue to be responsible for billing and 

maintaining quality of care. 

Section 507. Application of OSHA bloodborne pathogens standard 

to certain hospitals 

As of July 1, 2004, public hospitals that are not otherwise subject 

to the Occupational Safety and Health Act of 1970 would be required to comply with the Bloodborne Pathogens standard under 

section 1910.1030 of Title 29 of the Code of Federal Regulations. 

Section 507 states that a hospital that fails to comply with the requirement would be subject to a civil monetary penalty, but would 

not be terminated from participating in Medicare. 

Section 508. BIPA-related technical amendments and corrections 

Section 508 would incorporate section 1114 of the Act which relates to the appointment of advisory councils and other advisory 

groups into section 1862 of the Act which relates to exclusions from 

Medicare coverage. Other terms established by BIPA would be 

changed-from ‘‘policy’’ to ‘‘determinations.’’

Section 509. Conforming authority to waive a program exclusion 

Section 509 permits the Administrator of a federal health program to request a waiver of a program exclusion if the exclusion 

of a sole community physician or source of specialized services in 

a community would impose a hardship. This conforming change 

would extend the same waiver authority currently in Medicare and 

Medicaid to federal health programs. In addition, waivers could be 

requested for Medicare, Medicaid, and federal health programs 

with respect to all exclusions except those related to patient abuse 

or neglect. 

Section 510. Treatment of Certain Dental Claims 

Section 510 prohibits group health plans from requiring a Medicare claims determination for dental benefits that are specifically 

excluded from Medicare coverage as a condition of making a determination for coverage under the group health plan. In so doing, 

this provision would ensure that dentists would not have to submit 

claims to the Medicare program (and thus enroll in the Medicare 

program) when the services they are providing are clearly those 

that are categorically excluded from coverage. In those cases that 

involve or appear to involve inpatient hospital services or dental 

services expressly covered by Medicare, a group health plan may 

require the claim to be first submitted to the Medicare program. 

Section 511. Enhancement of program integrity efforts in medicare 

provider enrollment 

Section 511 amends the Social Security Act to allow physicians 

providing Medicare covered services to reassign Medicare payment 

to entities with which they have an independent contractor arrangement (such as a medical group, a physician practice management organization, or a staffing company) so long as there is a conVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00067 Fmt 6659 Sfmt 6602 E:\HR\OC\HR074P2.XXX HR074P2
68

tractual arrangement between the physician and the entity under 

which the entity submits the bill for such service. As a result, the 

Secretary could enroll these entities in the Medicare program. The 

Secretary may also provide for other enrollment qualifications to 

assure program integrity. 

This provision will streamline Medicare enrollment while also 

enhancing HHS’ program integrity efforts. By permitting entities 

that retain independent contractors to enroll with the Medicare 

program, HHS will be able to monitor the claims submitted by the 

entities that retain independent contractors as well as those entities that employ physicians. The Secretary may develop enrollment 

qualifications to assure program integrity. The Committee supports 

appropriate program integrity efforts for any entities billing the 

Medicare program including entities with employees as well as 

independent contractors. The changes made by this provision shall 

apply to Medicare payments made on or after date of enactment. 

Section 512. Other provisions 

Section 512(a) states that no later than 6 months from enactment, GAO would be required to report to Congress on the appropriateness of the updates in the conversion factor including the appropriateness of the sustainable growth rate (SGR) formula for 

2002 and subsequent years. The report would examine the stability 

and predictability of the updates and rate as well as the alternatives for use of the SGR in the updates. No later than 12 months 

from enactment, GAO would be required to report to Congress on 

all aspects of physician compensation for Medicare services. The report would review alternative physician payment structures, and 

provide recommendations to make the current system more stable 

and less complex. 

Subsection (b) requires the Secretary to provide, in an annual report that will be publicly available, a list of Medicare’s national 

coverage determinations made in the previous year and include information on how to learn more about such determinations. 

Subsection (c) requires the GAO to submit to Congress a report 

on the implications if there were flexibility in the application of the 

Medicare Conditions of Participation (COP) for home health agencies with respect to groups or types of patients who are not Medicare beneficiaries. This report shall be submitted to Congress no 

later than 6 months after enactment of the Act. 

Subsection (d) requires the HHS OIG to submit a report to Congress that examines the (1) the extent to which hospitals provide 

notice to Medicare beneficiaries in accordance with application requirement before they use their 60 lifetime reserve days and (2) the 

appropriateness and feasibility of hospitals providing a notice to 

such beneficiaries before they completely exhaust their lifetime reserve days. The OIG shall submit this report no later than one year 

after enactment of the Act.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

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

69

SOCIAL SECURITY ACT 

* * * * * * *

TITLE XI—GENERAL PROVISIONS, PEER REVIEW, AND 

ADMINISTRATIVE SIMPLIFICATION 

* * * * * * *

PART A—GENERAL PROVISIONS

* * * * * * *

APPOINTMENT OF ADVISORY COUNCIL AND OTHER ADVISORY GROUPS

SEC. 1114. (a)***

* * * * * * *

ø(i)(1) Any advisory committee appointed under subsection (f ) to 

advise the Secretary on matters relating to the interpretation, application, or implementation of section 1862(a)(1) shall assure the 

full participation of a nonvoting member in the deliberations of the 

advisory committee, and shall provide such nonvoting member access to all information and data made available to voting members 

of the advisory committee, other than information that—

ø(A) is exempt from disclosure pursuant to subsection (a) of 

section 552 of title 5, United States Code, by reason of subsection (b)(4) of such section (relating to trade secrets); or 

ø(B) the Secretary determines would present a conflict of interest relating to such nonvoting member. 

ø(2) If an advisory committee described in paragraph (1) organizes into panels of experts according to types of items or services 

considered by the advisory committee, any such panel of experts 

may report any recommendation with respect to such items or services directly to the Secretary without the prior approval of the advisory committee or an executive committee thereof.¿

* * * * * * *

EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM

PARTICIPATION IN MEDICARE AND STATE HEALTH CARE PROGRAMS

SEC. 1128. (a)***

* * * * * * *

(c) NOTICE, EFFECTIVE DATE, AND PERIOD OF EXCLUSION.—

(1) * * *

* * * * * * *

(3)(A)***

(B) øSubject to subparagraph (G), in the case of an exclusion 

under subsection (a), the minimum period of exclusion shall be not 

less than five years, except that, upon the request of a State, the 

Secretary may waive the exclusion under subsection (a)(1) in the 

case of an individual or entity that is the sole community physician 

or sole source of essential specialized services in a community.¿

Subject to subparagraph (G), in the case of an exclusion under subsection (a), the minimum period of exclusion shall be not less than 

five years, except that, upon the request of the administrator of a 

Federal health care program (as defined in section 1128B(f)) who 

70

determines that the exclusion would impose a hardship on individuals entitled to benefits under part A of title XVIII or enrolled under 

part B of such title, or both, the Secretary may waive the exclusion 

under subsection (a)(1), (a)(3), or (a)(4) with respect to that program 

in the case of an individual or entity that is the sole community 

physician or sole source of essential specialized services in a community. The Secretary’s decision whether to waive the exclusion shall 

not be reviewable. 

* * * * * * *

PART B—PEER REVIEW OF THE UTILIZATION AND QUALITY OF

HEALTH CARE SERVICES

* * * * * * *

FUNCTIONS OF PEER REVIEW ORGANIZATIONS

SEC. 1154. (a)***

* * * * * * *

(e)(1)***

* * * * * * *

ø(5) In any review conducted under paragraph (2) or (3), the organization shall solicit the views of the patient involved (or the patient’s representative).¿

* * * * * * *

PART C—ADMINISTRATIVE SIMPLIFICATION

* * * * * * *

GENERAL REQUIREMENTS FOR ADOPTION OF STANDARDS

SEC. 1172. (a)***

* * * * * * *

(f) ASSISTANCE TO THE SECRETARY.—In complying with the requirements of this part, the Secretary shall rely on the recommendations of the National Committee on Vital and Health Statistics established under section 306(k) of the Public Health Service 

Act (42 U.S.C. 242k(k)), and shall consult with appropriate Federal 

and State agencies and private organizations. Notwithstanding the 

preceding sentence, if the National Committee on Vital and Health 

Statistics has not made a recommendation to the Secretary before 

the date of the enactment of this sentence, with respect to the adoption of the International Classification of Diseases, 10th Revision, 

Procedure Coding System (‘‘ICD–10–PCS’’) and the International 

Classification of Diseases, 10th Revision, Clinical Modification 

(‘‘ICD–10–CM’’) as a standard under this part for the reporting of 

services, the Secretary may adopt ICD–10–PCS and ICD–10–CM as 

such a standard on or after such date without receiving such a recommendation. The Secretary shall publish in the Federal Register 

any recommendation of the National Committee on Vital and 

Health Statistics regarding the adoption of a standard under this 

part. 

* * * * * * *

71

TITLE XVIII—HEALTH INSURANCE FOR THE AGED AND 

DISABLED 

* * * * * * *

NOTICE OF MEDICARE BENEFITS; MEDICARE AND MEDIGAP

INFORMATION

SEC. 1804. (a)***

(b) The Secretary shall provide information via a toll-free telephone number on the programs under this title. The Secretary shall 

provide, through the toll-free number 1–800–MEDICARE, for a 

means by which individuals seeking information about, or assistance with, such programs who phone such toll-free number are 

transferred (without charge) to appropriate entities for the provision 

of such information or assistance. Such toll-free number shall be the 

toll-free number listed for general information and assistance in the 

annual notice under subsection (a) instead of the listing of numbers 

of individual contractors.

* * * * * * *

MEDICARE BENEFICIARY OMBUDSMAN

SEC. 1807. (a) IN GENERAL.—The Secretary shall appoint within 

the Department of Health and Human Services a Medicare Beneficiary Ombudsman who shall have expertise and experience in the 

fields of health care and education of (and assistance to) individuals entitled to benefits under this title. 

(b) DUTIES.—The Medicare Beneficiary Ombudsman shall— (1) receive complaints, grievances, and requests for information submitted by individuals entitled to benefits under part A 

or enrolled under part B, or both, with respect to any aspect of 

the medicare program; 

(2) provide assistance with respect to complaints, grievances, 

and requests referred to in paragraph (1), including—

(A) assistance in collecting relevant information for such 

individuals, to seek an appeal of a decision or determination made by a fiscal intermediary, carrier, 

Medicare+Choice organization, or the Secretary; and 

(B) assistance to such individuals with any problems 

arising from disenrollment from a Medicare+Choice plan 

under part C; and 

(3) submit annual reports to Congress and the Secretary that 

describe the activities of the Office and that include such recommendations for improvement in the administration of this 

title as the Ombudsman determines appropriate. 

The Ombudsman shall not serve as an advocate for any increases 

in payments or new coverage of services, but may identify issues and 

problems in payment or coverage policies. 

(c) WORKING WITH HEALTH INSURANCE COUNSELING PRO- GRAMS.—To the extent possible, the Ombudsman shall work with 

health insurance counseling programs (receiving funding under section 4360 of Omnibus Budget Reconciliation Act of 1990) to facilitate the provision of information to individuals entitled to benefits 

under part A or enrolled under part B, or both regarding 

Medicare+Choice plans and changes to those plans. Nothing in this 

72

subsection shall preclude further collaboration between the Ombudsman and such programs.

* * * * * * *

PART A—HOSPITAL INSURANCE BENEFITS FOR THE AGED AND

DISABLED

* * * * * * *

CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES

Requirement of Requests and Certifications 

SEC. 1814. (a)***

* * * * * * *

Payment for Hospice Care 

(i)(1)***

* * * * * * *

(4) In the case of hospice care provided by a hospice program 

under arrangements under section 1861(dd)(5)(D) made by another 

hospice program, the hospice program that made the arrangements 

shall bill and be paid for the hospice care.

* * * * * * *

øUSE OF PUBLIC AGENCIES OR PRIVATE ORGANIZATIONS TO

FACILITATE PAYMENT TO PROVIDERS OF SERVICES¿

PROVISIONS RELATING TO THE ADMINISTRATION OF PART A

SEC. 1816. ø(a) If any group or association of providers of services wishes to have payments under this part to such providers 

made through a national, State, or other public or private agency 

or organization and nominates such agency or organization for this 

purpose, the Secretary is authorized to enter into an agreement 

with such agency or organization providing for the determination 

by such agency or organization (subject to the provisions of section 

1878 and to such review by the Secretary as may be provided for 

by the agreement) of the amount of the payments required pursuant to this part to be made to such providers (and to providers assigned to such agency or organization under subsection (e)), and for 

the making of such payments by such agency or organization to 

such providers (and to providers assigned to such agency or organization under subsection (e)). Such agreement may also include provision for the agency or organization to do all or any part of the 

following: (1) to provide consultative services to institutions or 

agencies to enable them to establish and maintain fiscal records 

necessary for purposes of this part and otherwise to qualify as hospitals, extended care facilities, or home health agencies, and (2) 

with respect to the providers of services which are to receive payments through it (A) to serve as a center for, and communicate to 

providers, any information or instructions furnished to it by the 

Secretary, and serve as a channel of communication from providers 

to the Secretary; (B) to make such audits of the records of providers as may be necessary to insure that proper payments are 

73

made under this part; and (C) to perform such other functions as 

are necessary to carry out this subsection. As used in this title and 

part B of title XI, the term ‘‘fiscal intermediary’’ means an agency 

or organization with a contract under this section. 

ø(b) The Secretary shall not enter into or renew an agreement 

with any agency or organization under this section unless— ø(1) he finds— ø(A) after applying the standards, criteria, and procedures developed under subsection (f), that to do so is consistent with the effective and efficient administration of 

this part, and 

ø(B) that such agency or organization is willing and able 

to assist the providers to which payments are made 

through it under this part in the application of safeguards 

against unnecessary utilization of services furnished by 

them to individuals entitled to hospital insurance benefits 

under section 226, and the agreement provides for such assistance; and 

ø(2) such agency or organization agrees— ø(A) to furnish to the Secretary such of the information 

acquired by it in carrying out its agreement under this section, and 

ø(B) to provide the Secretary with access to all such 

data, information, and claims processing operations, 

as the Secretary may find necessary in performing his functions under this part.¿

(a) The administration of this part shall be conducted through 

contracts with medicare administrative contractors under section 

1874A.

(c)ø(1) An agreement with any agency or organization under this 

section may contain such terms and conditions as the Secretary 

finds necessary or appropriate, may provide for advances of funds 

to the agency or organization for the making of payments by it 

under subsection (a), and shall provide for payment of so much of 

the cost of administration of the agency or organization as is determined by the Secretary to be necessary and proper for carrying out 

the functions covered by the agreement. The Secretary shall provide that in determining the necessary and proper cost of administration, the Secretary shall, with respect to each agreement, take 

into account the amount that is reasonable and adequate to meet 

the costs which must be incurred by an efficiently and economically 

operated agency or organization in carrying out the terms of its 

agreement. The Secretary shall cause to have published in the Federal Register, by not later than September 1 before each fiscal year, 

data, standards, and methodology to be used to establish budgets 

for fiscal intermediaries under this section for that fiscal year, and 

shall cause to be published in the Federal Register for public comment, at least 90 days before such data, standards, and methodology are published, the data, standards, and methodology proposed to be used. The Secretary may not require, as a condition of 

entering into or renewing an agreement under this section or under 

section 1871, that a fiscal intermediary match data obtained other 

than in its activities under this part with data used in the administration of this part for purposes of identifying situations in which 

the provisions of section 1862(b) may apply.¿

74

(2)(A) Each øagreement under this section¿ contract under section 1874A that provides for making payments under this part shall 

provide that payment shall be issued, mailed, or otherwise transmitted with respect to not less than 95 percent of all claims submitted under this title—

(i) * * *

* * * * * * *

(3)(A) Each øagreement under this section¿ contract under section 1874A that provides for making payments under this part shall 

provide that no payment shall be issued, mailed, or otherwise 

transmitted with respect to any claim submitted under this title 

within the applicable number of calendar days after the date on 

which the claim is received. 

* * * * * * *

ø(d) If the nomination of an agency or organization as provided 

in this section is made by a group or association of providers of 

services, it shall not be binding on members of the group or association which notify the Secretary of their election to that effect. 

Any provider may, upon such notice as may be specified in the 

agreement under this section with an agency or organization, withdraw its nomination to receive payments through such agency or 

organization. Any provider which has withdrawn its nomination, 

and any provider which has not made a nomination, may elect to 

receive payments from any agency or organization which has entered into an agreement with the Secretary under this section if 

the Secretary and such agency or organization agree to it. 

ø(e)(1) Notwithstanding subsections (a) and (d), the Secretary, 

after taking into consideration any preferences of providers of services, may assign or reassign any provider of services to any agency 

or organization which has entered into an agreement with him 

under this section, if he determines, after applying the standards, 

criteria, and procedures developed under subsection (f), that such 

assignment or reassignment would result in the more effective and 

efficient administration of this part. 

ø(2) Notwithstanding subsections (a) and (d), the Secretary may 

(subject to the provisions of paragraph (4)) designate a national or 

regional agency or organization which has entered into an agreement with him under this section to perform functions under the 

agreement with respect to a class of providers of services in the Nation or region (as the case may be), if he determines, after applying 

the standards, criteria, and procedures developed under subsection 

(f), that such designation would result in more effective and efficient administration of this part. 

ø(3)(A) Before the Secretary makes an assignment or reassignment under paragraph (1) of a provider of services to other than 

the agency or organization nominated by the provider, he shall furnish (i) the provider and such agency or organization with a full 

explanation of the reasons for his determination as to the efficiency 

and effectiveness of the agency or organization to perform the functions required under this part with respect to the provider, and (ii) 

such agency or organization with opportunity for a hearing, and 

such determination shall be subject to judicial review in accordance 

with chapter 7 of title 5, United States Code. 

75

ø(B) Before the Secretary makes a designation under paragraph 

(2) with respect to a class of providers of services, he shall furnish 

(i) such providers and the agencies and organizations adversely affected by such designation with a full explanation of the reasons 

for his determination as to the efficiency and effectiveness of such 

agencies and organizations to perform the functions required under 

this part with respect to such providers, and (ii) the agencies and 

organizations adversely affected by such designation with opportunity for a hearing, and such determination shall be subject to judicial review in accordance with chapter 7 of title 5, United States 

Code. 

ø(4) Notwithstanding subsections (a) and (d) and paragraphs (1), 

(2), and (3) of this subsection, the Secretary shall designate regional agencies or organizations which have entered into an agreement with him under this section to perform functions under such 

agreement with respect to home health agencies (as defined in section 1861(o)) in the region, except that in assigning such agencies 

to such designated regional agencies or organizations the Secretary 

shall assign a home health agency which is a subdivision of a hospital (and such agency and hospital are affiliated or under common 

control) only if, after applying such criteria relating to administrative efficiency and effectiveness as he shall promulgate, he determines that such assignment would result in the more effective and 

efficient administration of this title. By not later than July 1, 1987, 

the Secretary shall limit the number of such regional agencies or 

organizations to not more than ten. 

ø(5) Notwithstanding any other provision of this title, the Secretary shall designate the agency or organization which has entered into an agreement under this section to perform functions 

under such an agreement with respect to each hospice program, except that with respect to a hospice program which is a subdivision 

of a provider of services (and such hospice program and provider 

of services are under common control) due regard shall be given to 

the agency or organization which performs the functions under this 

section for the provider of services. 

ø(f)(1) In order to determine whether the Secretary should enter 

into, renew, or terminate an agreement under this section with an 

agency or organization, whether the Secretary should assign or reassign a provider of services to an agency or organization, and 

whether the Secretary should designate an agency or organization 

to perform services with respect to a class of providers of services, 

the Secretary shall develop standards, criteria, and procedures to 

evaluate such agency’s or organization’s (A) overall performance of 

claims processing (including the agency’s or organization’s success 

in recovering payments made under this title for services for which 

payment has been or could be made under a primary plan (as defined in section 1862(b)(2)(A))) and other related functions required 

to be performed by such an agency or organization under an agreement entered into under this section, and (B) performance of such 

functions with respect to specific providers of services, and the Secretary shall establish standards and criteria with respect to the efficient and effective administration of this part. No agency or organization shall be found under such standards and criteria not to be 

efficient or effective or to be less efficient or effective solely on the 

76

ground that the agency or organization serves only providers located in a single State. 

ø(2) The standards and criteria established under paragraph (1) 

shall include—

ø(A) with respect to claims for services furnished under this 

part by any provider of services other than a hospital—

ø(i) whether such agency or organization is able to process 75 percent of reconsiderations within 60 days (except 

in the case of fiscal year 1989, 66 percent of reconsiderations) and 90 percent of reconsiderations within 90 days, 

and 

ø(ii) the extent to which such agency’s or organization’s 

determinations are reversed on appeal; and 

ø(B) with respect to applications for an exemption from or 

exception or adjustment to the target amount applicable under 

section 1886(b) to a hospital that is not a subsection (d) hospital (as defined in section 1886(d)(1)(B))—

ø(i) if such agency or organization receives a completed 

application, whether such agency or organization is able to 

process such application not later than 75 days after the 

application is filed, and 

ø(ii) if such agency or organization receives an incomplete application, whether such agency or organization is 

able to return the application with instructions on how to 

complete the application not later than 60 days after the 

application is filed. 

ø(g) An agreement with the Secretary under this section may be 

terminated—

ø(1) by the agency or organization which entered into such 

agreement at such time and upon such notice to the Secretary, 

to the public, and to the providers as may be provided in regulations, or 

ø(2) by the Secretary at such time and upon such notice to 

the agency or organization, to the providers which have nominated it for purposes of this section, and to the public, as may 

be provided in regulations, but only if he finds, after applying 

the standards, criteria, and procedures developed under subsection (f) and after reasonable notice and opportunity for 

hearing to the agency or organization, that (A) the agency or 

organization has failed substantially to carry out the agreement, or (B) the continuation of some or all of the functions 

provided for in the agreement with the agency or organization 

is disadvantageous or is inconsistent with the efficient administration of this part. 

ø(h) An agreement with an agency or organization under this 

section may require any of its officers or employees certifying payments or disbursing funds pursuant to the agreement, or otherwise 

participating in carrying out the agreement, to give surety bond to 

the United States in such amount as the Secretary may deem appropriate. 

ø(i)(1) No individual designated pursuant to an agreement under 

this section as a certifying officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payments certified by him under this section. 

77

ø(2) No disbursing officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payment by him under this section if it was based 

upon a voucher signed by a certifying officer designated as provided 

in paragraph (1) of this subsection. 

ø(3) No such agency or organization shall be liable to the United 

States for any payments referred to in paragraph (1) or (2).¿

(j) øAn agreement with an agency or organization under this section¿ A contract with a medicare administrative contractor under 

section 1874A with respect to the administration of this part shall 

require that, with respect to a claim for home health services, extended care services, or post-hospital extended care services submitted by a provider to øsuch agency or organization¿ such medicare administrative contractor that is denied, øsuch agency or organization¿ such medicare administrative contractor— (1) * * *

* * * * * * *

(k) øAn agreement with an agency or organization under this 

section¿ A contract with a medicare administrative contractor 

under section 1874A with respect to the administration of this part

shall require that øsuch agency or organization¿ such medicare administrative contractor submit an annual report to the Secretary 

describing the steps taken to recover payments made for items or 

services for which payment has been or could be made under a primary plan (as defined in section 1862(b)(2)(A)). 

ø(l) No agency or organization may carry out (or receive payment 

for carrying out) any activity pursuant to an agreement under this 

section to the extent that the activity is carried out pursuant to a 

contract under the Medicare Integrity Program under section 

1893.¿

* * * * * * *

PART B—SUPPLEMENTARY MEDICAL INSURANCE BENEFITS FOR THE

AGED AND DISABLED

* * * * * * *

PAYMENT OF BENEFITS

SEC. 1833. (a)***

* * * * * * *

(h)(1)***

* * * * * * *

(8)(A) The Secretary shall establish by regulation procedures for 

determining the basis for, and amount of, payment under this subsection for any clinical diagnostic laboratory test with respect to 

which a new or substantially revised HCPCS code is assigned on 

or after January 1, 2005 (in this paragraph referred to as ‘‘new 

tests’’). 

(B) Determinations under subparagraph (A) shall be made only 

after the Secretary—

(i) makes available to the public (through an Internet site and 

other appropriate mechanisms) a list that includes any such 

78

test for which establishment of a payment amount under this 

subsection is being considered for a year; 

(ii) on the same day such list is made available, causes to 

have published in the Federal Register notice of a meeting to receive comments and recommendations (and data on which recommendations are based) from the public on the appropriate 

basis under this subsection for establishing payment amounts 

for the tests on such list; 

(iii) not less than 30 days after publication of such notice convenes a meeting, that includes representatives of officials of the 

Centers for Medicare & Medicaid Services involved in determining payment amounts, to receive such comments and recommendations (and data on which the recommendations are 

based); 

(iv) taking into account the comments and recommendations 

(and accompanying data) received at such meeting, develops 

and makes available to the public (through an Internet site and 

other appropriate mechanisms) a list of proposed determinations with respect to the appropriate basis for establishing a 

payment amount under this subsection for each such code, together with an explanation of the reasons for each such determination, the data on which the determinations are based, and 

a request for public written comments on the proposed determination; and 

(v) taking into account the comments received during the public comment period, develops and makes available to the public 

(through an Internet site and other appropriate mechanisms) a 

list of final determinations of the payment amounts for such 

tests under this subsection, together with the rationale for each 

such determination, the data on which the determinations are 

based, and responses to comments and suggestions received 

from the public. 

(C) Under the procedures established pursuant to subparagraph 

(A), the Secretary shall—

(i) set forth the criteria for making determinations under subparagraph (A); and 

(ii) make available to the public the data (other than proprietary data) considered in making such determinations. 

(D) The Secretary may convene such further public meetings to receive public comments on payment amounts for new tests under this 

subsection as the Secretary deems appropriate. 

(E) For purposes of this paragraph: 

(i) The term ‘‘HCPCS’’ refers to the Health Care Procedure 

Coding System. 

(ii) A code shall be considered to be ‘‘substantially revised’’ if 

there is a substantive change to the definition of the test or procedure to which the code applies (such as a new analyte or a 

new methodology for measuring an existing analyte-specific 

test).

* * * * * * *

79

øUSE OF CARRIERS FOR ADMINISTRATION OF BENEFITS¿

PROVISIONS RELATING TO THE ADMINISTRATION OF PART B

SEC. 1842. ø(a) In order to provide for the administration of the 

benefits under this part with maximum efficiency and convenience 

for individuals entitled to benefits under this part and for providers 

of services and other persons furnishing services to such individuals, and with a view to furthering coordination of the administration of the benefits under part A and under this part, the Secretary 

is authorized to enter into contracts with carriers, including carriers with which agreements under section 1816 are in effect, 

which will perform some or all of the following functions (or, to the 

extent provided in such contracts, will secure performance thereof 

by other organizations); and, with respect to any of the following 

functions which involve payments for physicians’ services on a reasonable charge basis, the Secretary shall to the extent possible 

enter into such contracts: 

ø(1)(A) make determinations of the rates and amounts of 

payments required pursuant to this part to be made to providers of services and other persons on a reasonable cost or 

reasonable charge basis (as may be applicable); 

ø(B) receive, disburse, and account for funds in making such 

payments; and 

ø(C) make such audits of the records of providers of services 

as may be necessary to assure that proper payments are made 

under this part; 

ø(2)(A) determine compliance with the requirements of section 1861(k) as to utilization review; and 

ø(B) assist providers of services and other persons who furnish services for which payment may be made under this part 

in the development of procedures relating to utilization practices, make studies of the effectiveness of such procedures and 

methods for their improvement, assist in the application of 

safeguards against unnecessary utilization of services furnished by providers of services and other persons to individuals 

entitled to benefits under this part, and provide procedures for 

and assist in arranging, where necessary, the establishment of 

groups outside hospitals (meeting the requirements of section 

1861(k)(2)) to make reviews of utilization; 

ø(3) serve as a channel of communication of information relating to the administration of this part; and 

ø(4) otherwise assist, in such manner as the contract may 

provide, in discharging administrative duties necessary to 

carry out the purposes of this part.¿

(a) The administration of this part shall be conducted through 

contracts with medicare administrative contractors under section 

1874A.

(b)ø(1) Contracts with carriers under subsection (a) may be entered into without regard to section 3709 of the Revised Statutes 

or any other provision of law requiring competitive bidding.¿

(2)ø(A) No such contract shall be entered into with any carrier 

unless the Secretary finds that such carrier will perform its obligations under the contract efficiently and effectively and will meet 

such requirements as to financial responsibility, legal authority, 

and other matters as he finds pertinent. The Secretary shall pubVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00079 Fmt 6659 Sfmt 6601 E:\HR\OC\HR074P2.XXX HR074P2
80

lish in the Federal Register standards and criteria for the efficient 

and effective performance of contract obligations under this section, 

and opportunity shall be provided for public comment prior to implementation. In establishing such standards and criteria, the Secretary shall provide a system to measure a carrier’s performance 

of responsibilities described in paragraph (3)(H), subsection (h), 

and section 1845(e)(2). The Secretary may not require, as a condition of entering into or renewing a contract under this section or 

under section 1871, that a carrier match data obtained other than 

in its activities under this part with data used in the administration of this part for purposes of identifying situations in which section 1862(b) may apply. 

ø(B) The Secretary shall establish standards for evaluating carriers’ performance of reviews of initial carrier determinations and 

of fair hearings under paragraph (3)(C), under which a carrier is 

expected—ø(i) to complete such reviews, within 45 days after the date 

of a request by an individual enrolled under this part for such 

a review, in 95 percent of such requests, and 

ø(ii) to make a final determination, within 120 days after the 

date of receipt of a request by an individual enrolled under this 

part for a fair hearing under paragraph (3)(C), in 90 percent 

of such cases.¿

(C) In the case of residents of nursing facilities who receive services described in clause (i) or (ii) of section 1861(s)(2)(K) performed 

by a member of a team, the Secretary shall instruct øcarriers¿

medicare administrative contractors to develop mechanisms which 

permit routine payment under this part for up to 1.5 visits per 

month per resident. In the previous sentence, the term ‘‘team’’ refers to a physician and includes a physician assistant acting under 

the supervision of the physician or a nurse practitioner working in 

collaboration with that physician, or both. 

ø(D) In addition to any other standards and criteria established 

by the Secretary for evaluating carrier performance under this 

paragraph relating to avoiding erroneous payments, the carrier 

shall be subject to standards and criteria relating to the carrier’s 

success in recovering payments made under this part for items or 

services for which payment has been or could be made under a primary plan (as defined in section 1862(b)(2)(A)). 

ø(E) With respect to the payment of claims for home health services under this part that, but for the amendments made by section 

4611 of the Balanced Budget Act of 1997, would be payable under 

part A instead of under this part, the Secretary shall continue administration of such claims through fiscal intermediaries under section 1816.¿

(3) øEach such contract shall provide that the carrier¿ The Secretary—

(A) øwill¿ shall take such action as may be necessary to assure that, where payment under this part for a service is on 

a cost basis, the cost is reasonable cost (as determined under 

section 1861(v)); 

(B) øwill¿ shall take such action as may be necessary to assure that, where payment under this part for a service is on 

a charge basis, such charge will be reasonable and not higher 

than the charge applicable, for a comparable service and under 

81

comparable circumstances, øto the policyholders and subscribers of the carrier¿ to the policyholders and subscribers of 

the medicare administrative contractor, and such payment will 

(except as otherwise provided in section 1870(f)) be made—

(i) * * *

* * * * * * *

ø(C) will establish and maintain procedures pursuant to 

which an individual enrolled under this part will be granted an 

opportunity for a fair hearing by the carrier, in any case where 

the amount in controversy is at least $100, but less than $500, 

when requests for payment under this part with respect to 

services furnished him are denied or are not acted upon with 

reasonable promptness or when the amount of such payment 

is in controversy; 

ø(D) will furnish to the Secretary such timely information 

and reports as he may find necessary in performing his functions under this part; 

ø(E) will maintain such records and afford such access thereto as the Secretary finds necessary to assure the correctness 

and verification of the information and reports under subparagraph (D) and otherwise to carry out the purposes of this 

part;¿

(F) øwill¿ shall take such action as may be necessary to assure that where payment under this part for a service rendered is on a charge basis, such payment shall be determined 

on the basis of the charge that is determined in accordance 

with this section on the basis of customary and prevailing 

charge levels in effect at the time the service was rendered or, 

in the case of services rendered more than 12 months before 

the year in which the bill is submitted or request for payment 

is made, on the basis of such levels in effect for the 12-month 

period preceding such year; 

(G) øwill¿ shall, for a service that is furnished with respect 

to an individual enrolled under this part, that is not paid on 

an assignment-related basis, and that is subject to a limiting 

charge under section 1848(g)— (i) * * *

* * * * * * *

(H) øif it makes determinations or payments with respect to 

physicians’ services, will¿ shall implement— (i) programs to recruit and retain physicians as participating physicians in the area served by the øcarrier¿ medicare administrative contractor, including educational and 

outreach activities and the use of professional relations 

personnel to handle billing and other problems relating to 

payment of claims of participating physicians; and 

* * * * * * *

ø(I) will submit annual reports to the Secretary describing 

the steps taken to recover payments made under this part for 

items or services for which payment has been or could be made 

under a primary plan (as defined in section 1862(b)(2)(A)); 

and¿

82

(L) øwill¿ shall monitor and profile physicians’ billing patterns within each area or locality and provide comparative 

data to physicians whose utilization patterns vary significantly 

from other physicians in the same payment area or localityø;¿. øand shall contain such other terms and conditions not inconsistent 

with this section as the Secretary may find necessary or appropriate.¿ In determining the reasonable charge for services for purposes of this paragraph, there shall be taken into consideration the 

customary charges for similar services generally made by the physician or other person furnishing such services, as well as the prevailing charges in the locality for similar services. No charge may 

be determined to be reasonable in the case of bills submitted or requests for payment made under this part after December 31, 1970, 

if it exceeds the higher of (i) the prevailing charge recognized by 

the carrier and found acceptable by the Secretary for similar services in the same locality in administering this part on December 

31, 1970, or (ii) the prevailing charge level that, on the basis of statistical data and methodology acceptable to the Secretary, would 

cover 75 percent of the customary charges made for similar services 

in the same locality during the 12-month period ending on the 

June 30 last preceding the start of the calendar year in which the 

service is rendered. In the case of physicians’ services the prevailing charge level determined for purposes of clause (ii) of the 

preceding sentence for any twelve-month period (beginning after 

June 30, 1973) specified in clause (ii) of such sentence may not exceed (in the aggregate) the level determined under such clause for 

the fiscal year ending June 30, 1973, or (with respect to physicians’ services furnished in a year after 1987) the level determined under 

this sentence (or under any other provision of law affecting the prevailing charge level) for the previous year except to the extent that 

the Secretary finds, on the basis of appropriate economic index 

data, that such higher level is justified by year-to-year economic 

changes. With respect to power-operated wheelchairs for which 

payment may be made in accordance with section 1861(s)(6), 

charges determined to be reasonable may not exceed the lowest 

charge at which power-operated wheelchairs are available in the locality. In the case of medical services, supplies, and equipment (including equipment servicing) that, in the judgment of the Secretary, do not generally vary significantly in quality from one supplier to another, the charges incurred after December 31, 1972, determined to be reasonable may not exceed the lowest charge levels 

at which such services, supplies, and equipment are widely and 

consistently available in a locality except to the extent and under 

the circumstances specified by the Secretary. The requirement in 

subparagraph (B) that a bill be submitted or request for payment 

be made by the close of the following calendar year shall not apply 

if (I) failure to submit the bill or request the payment by the close 

of such year is due to the error or misrepresentation of an officer, 

employee, fiscal intermediary, carrier, medicare administrative contractor, or agent of the Department of Health and Human Services 

performing functions under this title and acting within the scope 

of his or its authority, and (II) the bill is submitted or the payment 

is requested promptly after such error or misrepresentation is 

eliminated or corrected. Notwithstanding the provisions of the 

third and fourth sentences preceding this sentence, the prevailing 

83

charge level in the case of a physician service in a particular locality determined pursuant to such third and fourth sentences for any 

calendar year after 1974 shall, if lower than the prevailing charge 

level for the fiscal year ending June 30, 1975, in the case of a similar physician service in the same locality by reason of the application of economic index data, be raised to such prevailing charge 

level for the fiscal year ending June 30, 1975, and shall remain at 

such prevailing charge level until the prevailing charge for a year 

(as adjusted by economic index data) equals or exceeds such prevailing charge level. The amount of any charges for outpatient 

services which shall be considered reasonable shall be subject to 

the limitations established by regulations issued by the Secretary 

pursuant to section 1861(v)(1)(K), and in determining the reasonable charge for such services, the Secretary may limit such reasonable charge to a percentage of the amount of the prevailing charge 

for similar services furnished in a physician’s office, taking into account the extent to which overhead costs associated with such outpatient services have been included in the reasonable cost or 

charge of the facility. 

* * * * * * * 

ø(5) Each contract under this section shall be for a term of at 

least one year, and may be made automatically renewable from 

term to term in the absence of notice by either party of intention 

to terminate at the end of the current term; except that the Secretary may terminate any such contract at any time (after such 

reasonable notice and opportunity for hearing to the carrier involved as he may provide in regulations) if he finds that the carrier 

has failed substantially to carry out the contract or is carrying out 

the contract in a manner inconsistent with the efficient and effective administration of the insurance program established by this 

part.¿

(6) No payment under this part for a service provided to any individual shall (except as provided in section 1870) be made to anyone other than such individual or (pursuant to an assignment described in subparagraph (B)(ii) of paragraph (3)) the physician or 

other person who provided the service, except that (A) payment 

may be made (i) to the employer of such physician or other person 

if such physician or other person is required as a condition of his 

employment to turn over his fee for such service to his employer, 

øor¿ (ii) (where the service was provided in a hospital, critical access hospital, clinic, or other facility) to the facility in which the 

service was provided if there is a contractual arrangement between 

such physician or other person and such facility under which such 

facility submits the bill for such service, or (iii) where the service 

was provided under a contractual arrangement between such physician or other person and an entity (such as a medical group, physician practice management organization, or a staffing company), to 

the entity if under such arrangement such entity submits the bill for 

such service and such arrangement meets such other qualifications 

to assure program integrity as the Secretary may provide, (B) payment may be made to an entity (i) which provides coverage of the 

services under a health benefits plan, but only to the extent that 

payment is not made under this part, (ii) which has paid the person who provided the service an amount (including the amount 

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ment in full for the service, and (iii) to which the individual has 

agreed in writing that payment may be made under this part, (C) 

in the case of services described in clause (i) of section 

1861(s)(2)(K), payment shall be made to either (i) the employer of 

the physician assistant involved, or (ii) with respect to a physician 

assistant who was the owner of a rural health clinic (as described 

in section 1861(aa)(2)) for a continuous period beginning prior to 

the date of the enactment of the Balanced Budget Act of 1997 and 

ending on the date that the Secretary determines such rural health 

clinic no longer meets the requirements of section 1861(aa)(2), payment may be made directly to the physician assistant, (D) payment 

may be made to a physician for physicians’ services (and services 

furnished incident to such services) furnished by a second physician to patients of the first physician if (i) the first physician is unavailable to provide the services; (ii) the services are furnished pursuant to an arrangement between the two physicians that (I) is informal and reciprocal, or (II) involves per diem or other fee-for-time 

compensation for such services; (iii) the services are not provided 

by the second physician over a continuous period of more than 60 

days; and (iv) the claim form submitted to the øcarrier¿ medicare 

administrative contractor for such services includes the second physician’s unique identifier (provided under the system established 

under subsection (r)) and indicates that the claim meets the requirements of this subparagraph for payment to the first physician, 

(E) in the case of an item or service (other than services described 

in section 1888(e)(2)(A)(ii)) furnished by, or under arrangements 

made by, a skilled nursing facility to an individual who (at the 

time the item or service is furnished) is a resident of a skilled nursing facility, payment shall be made to the facility, (F) in the case 

of home health services (including medical supplies described in 

section 1861(m)(5), but excluding durable medical equipment to the 

extent provided for in such section) furnished to an individual who 

(at the time the item or service is furnished) is under a plan of care 

of a home health agency, payment shall be made to the agency 

(without regard to whether or not the item or service was furnished 

by the agency, by others under arrangement with them made by 

the agency, or when any other contracting or consulting arrangement, or otherwise), and (G) in the case of services in a hospital 

or clinic to which section 1880(e) applies, payment shall be made 

to such hospital or clinic. No payment which under the preceding 

sentence may be made directly to the physician or other person 

providing the service involved (pursuant to an assignment described in subparagraph (B)(ii) of paragraph (3)) shall be made to 

anyone else under a reassignment or power of attorney (except to 

an employer or facility as described in clause (A) of such sentence); 

but nothing in this subsection shall be construed (i) to prevent the 

making of such a payment in accordance with an assignment from 

the individual to whom the service was provided or a reassignment 

from the physician or other person providing such service if such 

assignment or reassignment is made to a governmental agency or 

entity or is established by or pursuant to the order of a court of 

competent jurisdiction, or (ii) to preclude an agent of the physician 

or other person providing the service from receiving any such payment if (but only if) such agent does so pursuant to an agency 

agreement under which the compensation to be paid to the agent 

85

for his services for or in connection with the billing or collection of 

payments due such physician or other person under this title is unrelated (directly or indirectly) to the amount of such payments or 

the billings therefor, and is not dependent upon the actual collection of any such payment. For purposes of subparagraph (C) of the 

first sentence of this paragraph, an employment relationship may 

include any independent contractor arrangement, and employer 

status shall be determined in accordance with the law of the State 

in which the services described in such clause are performed. 

(7)(A) In the case of physicians’ services furnished to a patient 

in a hospital with a teaching program approved as specified in section 1861(b)(6) but which does not meet the conditions described in 

section 1861(b)(7), øthe carrier¿ the Secretary shall not provide (except on the basis described in subparagraph (C)) for payment for 

such services under this part— (i) * * *

* * * * * * *

(B) The customary charge for such services in a hospital shall be 

determined in accordance with regulations issued by the Secretary 

and taking into account the following factors: 

(i) In the case of a physician who is not a teaching physician 

(as defined by the Secretary), øthe carrier¿ the Secretary shall 

take into account the amounts the physician charges for similar services in the physician’s practice outside the teaching setting. 

(ii) In the case of a teaching physician, if the hospital, its 

physicians, or other appropriate billing entity has established 

one or more schedules of charges which are collected for medical and surgical services, øthe carrier¿ the Secretary shall base 

payment under this title on the greatest of— (I) * * *

* * * * * * *

(C) In the case of physicians’ services furnished to a patient in 

a hospital with a teaching program approved as specified in section 

1861(b)(6) but which does not meet the conditions described in section 1861(b)(7), if the conditions described in subclauses (I) and (II) 

of subparagraph (A)(i) are met and if the physician elects payment 

to be determined under this subparagraph, øthe carrier¿ the Secretary shall provide for payment for such services under this part 

on the basis of regulations of the Secretary governing reimbursement for the services of hospital-based physicians (and not on any 

other basis). 

* * * * * * *

(c)ø(1) Any contract entered into with a carrier under this section 

shall provide for advances of funds to the carrier for the making 

of payments by it under this part, and shall provide for payment 

of the cost of administration of the carrier, as determined by the 

Secretary to be necessary and proper for carrying out the functions 

covered by the contract. The Secretary shall provide that in determining a carrier’s necessary and proper cost of administration, the 

Secretary shall, with respect to each contract, take into account the 

amount that is reasonable and adequate to meet the costs which 

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86

rier in carrying out the terms of its contract. The Secretary shall 

cause to have published in the Federal Register, by not later than 

September 1 before each fiscal year, data, standards, and methodology to be used to establish budgets for carriers under this section 

for that fiscal year, and shall cause to be published in the Federal 

Register for public comment, at least 90 days before such data, 

standards, and methodology are published, the data, standards, 

and methodology proposed to be used.¿

(2)(A) Each øcontract under this section which provides for the 

disbursement of funds, as described in subsection (a)(1)(B),¿ contract under section 1874A that provides for making payments under 

this part shall provide that payment shall be issued, mailed, or otherwise transmitted with respect to not less than 95 percent of all 

claims submitted under this part—

(i) * * *

* * * * * * *

(3)(A) Each contract under this section which provides for the 

disbursement of funds, as described in øsubsection (a)(1)(B)¿ section 1874A(a)(3)(B), shall provide that no payment shall be issued, 

mailed, or otherwise transmitted with respect to any claim submitted under this title within the applicable number of calendar 

days after the date on which the claim is received. 

(4) Neither a øcarrier¿ medicare administrative contractor nor 

the Secretary may impose a fee under this title— (A) * * *

* * * * * * *

ø(5) Each contract under this section which provides for the disbursement of funds, as described in subsection (a)(1)(B), shall require the carrier to meet criteria developed by the Secretary to 

measure the timeliness of carrier responses to requests for payment of items described in section 1834(a)(15)(C). 

ø(6) No carrier may carry out (or receive payment for carrying 

out) any activity pursuant to a contract under this subsection to 

the extent that the activity is carried out pursuant to a contract 

under the Medicare Integrity Program under section 1893. The previous sentence shall not apply with respect to the activity described 

in section 1893(b)(5) (relating to prior authorization of certain 

items of durable medical equipment under section 1834(a)(15)). 

ø(d) Any contract with a carrier under this section may require 

such carrier or any of its officers or employees certifying payments 

or disbursing funds pursuant to the contract, or otherwise participating in carrying out the contract, to give surety bond to the 

United States in such amount as the Secretary may deem appropriate. 

ø(e)(1) No individual designated pursuant to a contract under 

this section as a certifying officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payments certified by him under this section. 

ø(2) No disbursing officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payment by him under this section if it was based 

upon a voucher signed by a certifying officer designated as provided 

in paragraph (1) of this subsection. 

87

ø(3) No such carrier shall be liable to the United States for any 

payments referred to in paragraph (1) or (2). 

ø(f) For purposes of this part, the term ‘‘carrier’’ means— ø(1) with respect to providers of services and other persons, 

a voluntary association, corporation, partnership, or other nongovernmental organization which is lawfully engaged in providing, paying for, or reimbursing the cost of, health services 

under group insurance policies or contracts, medical or hospital 

service agreements, membership or subscription contracts, or 

similar group arrangements, in consideration of premiums or 

other periodic charges payable to the carrier, including a 

health benefits plan duly sponsored or underwritten by an employee organization; and 

ø(2) with respect to providers of services only, any agency or 

organization (not described in paragraph (1)) with which an 

agreement is in effect under section 1816.¿

(g) The Railroad Retirement Board shall, in accordance with such 

regulations as the Secretary may prescribe, contract with a øcarrier 

or carriers¿ medicare administrative contractor or contractors to 

perform the functions set out in this section with respect to individuals entitled to benefits as qualified railroad retirement beneficiaries pursuant to section 226(a) of this Act and section 7(d) of 

the Railroad Retirement Act of 1974. 

(h)(1)***

(2) øEach carrier having an agreement with the Secretary under 

subsection (a)¿ The Secretary shall maintain a toll-free telephone 

number or numbers at which individuals enrolled under this part 

may obtain the names, addresses, specialty, and telephone numbers of participating physicians and suppliers and may request a 

copy of an appropriate directory published under paragraph (4). 

øEach such carrier¿ The Secretary shall, without charge, mail a 

copy of such directory upon such a request. 

(3)(A) In any case in which øa carrier having an agreement with 

the Secretary under subsection (a)¿ medicare administrative contractor having a contract under section 1874A that provides for 

making payments under this part is able to develop a system for 

the electronic transmission to øsuch carrier¿ such contractor of bills 

for services, such carrier shall establish direct lines for the electronic receipt of claims from participating physicians and suppliers. 

(B) The Secretary shall establish a procedure whereby an individual enrolled under this part may assign, in an appropriate manner on the form claiming a benefit under this part for an item or 

service furnished by a participating physician or supplier, the individual’s rights of payment under a medicare supplemental policy 

(described in section 1882(g)(1)) in which the individual is enrolled. 

In the case such an assignment is properly executed and a payment determination is made by øa carrier¿ a medicare administrative contractor with a contract under this section, øthe carrier¿ the 

contractor shall transmit to the private entity issuing the medicare 

supplemental policy notice of such fact and shall include an explanation of benefits and any additional information that the Secretary may determine to be appropriate in order to enable the entity to decide whether (and the amount of) any payment is due under 

the policy. The Secretary may enter into agreements for the transmittal of such information to entities electronically. The Secretary 

88

shall impose user fees for the transmittal of information under this 

subparagraph by øa carrier¿ a medicare administrative contractor, whether electronically or otherwise, and such user fees shall be collected and retained by øthe carrier¿ the contractor. 

* * * * * * *

(5)(A) The Secretary shall promptly notify individuals enrolled 

under this part through an annual mailing of the participation program under this subsection and the publication and availability of 

the directories and shall make the appropriate area directory or directories available in each district and branch office of the Social 

Security Administration, in the offices of øcarriers¿ medicare administrative contractors, and to senior citizen organizations. 

(B) The annual notice provided under subparagraph (A) shall include—

(i) * * *

(iii) an explanation of the assistance offered by øcarriers¿

medicare administrative contractors in obtaining the names of 

participating physicians and suppliers, and 

* * * * * * *

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

* * * * * * *

(iii)(I) a øcarrier¿ medicare administrative contractor determines under this part or a peer review organization determines under part B of title XI that payment may not be made 

by reason of section 1862(a)(1) because a service otherwise covered under this title is not reasonable and necessary under the 

standards described in that section or (II) payment under this 

title for such services is denied under section 1154(a)(2) by reason of a determination under section 1154(a)(1)(B), and 

* * * * * * *

(2) Each øcarrier¿ medicare administrative contractor with a contract in effect under this section with respect to physicians and 

each peer review organization with a contract under part B of title 

XI shall send any notice of denial of payment for physicians’ services based on section 1862(a)(1) and for which payment is not requested on an assignment-related basis to the physician and the individual involved. 

* * * * * * *

(p)(1)***

* * * * * * *

(3) In the case of a request for payment for an item or service 

furnished by a physician not submitted on an assignment-related 

basis and which does not include the code (or codes) required under 

paragraph (1)—

(A) if the physician knowingly and willfully fails to provide 

the code (or codes) promptly upon request of the Secretary or 

a øcarrier¿ medicare administrative contractor, the physician 

may be subject to a civil money penalty in an amount not to 

exceed $2,000, and 

* * * * * * *

89

(q)(1)(A) The Secretary, in consultation with groups representing 

physicians who furnish anesthesia services, shall establish by regulation a relative value guide for use in all øcarrier¿ localities in 

making payment for physician anesthesia services furnished under 

this part. Such guide shall be designed so as to result in expenditures under this title for such services in an amount that would not 

exceed the amount of such expenditures which would otherwise 

occur. 

* * * * * * *

PART C—MEDICARE+CHOICE PROGRAM

* * * * * * *

BENEFITS AND BENEFICIARY PROTECTIONS

SEC. 1852. (a) BASIC BENEFITS.—

(1) * * *

(2) SATISFACTION OF REQUIREMENT.—

(A) * * *

* * * * * * *

(C) ELECTION OF UNIFORM COVERAGE øPOLICY¿ DETERMINATION.—In the case of a Medicare+Choice organization 

that offers a Medicare+Choice plan in an area in which 

more than one local coverage øpolicy¿ determination is applied with respect to different parts of the area, the organization may elect to have the local coverage øpolicy¿ determination for the part of the area that is most beneficial to 

Medicare+Choice enrollees (as identified by the Secretary) 

apply with respect to all Medicare+Choice enrollees enrolled in the plan. 

* * * * * * *

PART D—MISCELLANEOUS PROVISIONS

DEFINITIONS OF SERVICES, INSTITUTIONS, ETC. 

SEC. 1861. For purposes of this title—

Spell of Illness 

(a) * * *

* * * * * * *

Supplier 

(d) The term ‘‘supplier’’ means, unless the context otherwise requires, a physician or other practitioner, a facility, or other entity 

(other than a provider of services) that furnishes items or services 

under this title.

* * * * * * *

Hospice Care; Hospice Program 

(dd)(1)***

* * * * * * *

90

(5)(A)***

* * * * * * *

(D) In extraordinary, exigent, or other non-routine circumstances, 

such as unanticipated periods of high patient loads, staffing shortages due to illness or other events, or temporary travel of a patient 

outside a hospice program’s service area, a hospice program may 

enter into arrangements with another hospice program for the provision by that other program of services described in paragraph 

(2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II) shall apply 

with respect to the services provided under such arrangements. 

(E) A hospice program may provide services described in paragraph (1)(A) other than directly by the program if the services are 

highly specialized services of a registered professional nurse and are 

provided non-routinely and so infrequently so that the provision of 

such services directly would be impracticable and prohibitively expensive.

* * * * * * *

Discharge Planning Process 

(ee)(1)***

(2) The Secretary shall develop guidelines and standards for the 

discharge planning process in order to ensure a timely and smooth 

transition to the most appropriate type of and setting for post-hospital or rehabilitative care. The guidelines and standards shall include the following: 

(A) * * *

* * * * * * *

(D) A discharge planning evaluation must include an evaluation of a patient’s likely need for appropriate post-hospital 

services, including øhospice services¿ hospice care and posthospital extended care services, and the availability of those 

services, including the availability of home health services 

through individuals and entities that participate in the program under this title and that serve the area in which the patient resides and that request to be listed by the hospital as 

available and, in the case of individuals who are likely to need 

post-hospital extended care services, the availability of such 

services through facilities that participate in the program under 

this title and that serve the area in which the patient resides. 

* * * * * * *

EXCLUSIONS FROM COVERAGE AND MEDICARE AS SECONDARY PAYER

SEC. 1862. (a) Notwithstanding any other provision of this title, 

no payment may be made under part A or part B for any expenses 

incurred for items or services—

(1) * * *

* * * * * * *

Paragraph (7) shall not apply to Federally qualified health center 

services described in section 1861(aa)(3)(B). In making a national 

coverage determination (as defined in paragraph (1)(B) of section 

1869(f )) the Secretary shall ensure that the public is afforded notice and opportunity to comment prior to implementation by the 

91

Secretary of the determination; meetings of advisory committees 

øestablished under section 1114(f )¿ with respect to the determination are made on the record; in making the determination, the Secretary has considered applicable information (including clinical experience and medical, technical, and scientific evidence) with respect to the subject matter of the determination; and in the determination, provide a clear statement of the basis for the determination (including responses to comments received from the public), 

the assumptions underlying that basis, and make available to the 

public the data (other than proprietary data) considered in making 

the determination. 

* * * * * * *

(d) For purposes of subsection (a)(1)(A), in the case of any item 

or service that is required to be provided pursuant to section 1867 

to an individual who is entitled to benefits under this title, determinations as to whether the item or service is reasonable and necessary shall be made on the basis of the information available to the 

treating physician or practitioner (including the patient’s presenting 

symptoms or complaint) at the time the item or service was ordered 

or furnished by the physician or practitioner (and not on the patient’s principal diagnosis). When making such determinations with 

respect to such an item or service, the Secretary shall not consider 

the frequency with which the item or service was provided to the patient before or after the time of the admission or visit.

* * * * * * *

ø(i)¿ (j)(1) Any advisory committee appointed øunder subsection 

(f )¿ to advise the Secretary on matters relating to the interpretation, application, or implementation of øsection 1862(a)(1)¿ subsection (a)(1) shall assure the full participation of a nonvoting 

member in the deliberations of the advisory committee, and shall 

provide such nonvoting member access to all information and data 

made available to voting members of the advisory committee, other 

than information that—

(A) is exempt from disclosure pursuant to subsection (a) of 

section 552 of title 5, United States Code, by reason of subsection (b)(4) of such section (relating to trade secrets); or 

(B) the Secretary determines would present a conflict of interest relating to such nonvoting member. 

(2) If an advisory committee described in paragraph (1) organizes 

into panels of experts according to types of items or services considered by the advisory committee, any such panel of experts may report any recommendation with respect to such items or services directly to the Secretary without the prior approval of the advisory 

committee or an executive committee thereof.

(k)(1) Subject to paragraph (2), a group health plan (as defined 

in subsection (a)(1)(A)(v)) providing supplemental or secondary coverage to individuals also entitled to services under this title shall 

not require a medicare claims determination under this title for 

dental benefits specifically excluded under subsection (a)(12) as a 

condition of making a claims determination for such benefits under 

the group health plan. 

(2) A group health plan may require a claims determination 

under this title in cases involving or appearing to involve inpatient 

92

dental hospital services or dental services expressly covered under 

this title pursuant to actions taken by the Secretary.

* * * * * * *

øAGREEMENTS WITH PROVIDERS OF SERVICES¿

AGREEMENTS WITH PROVIDERS OF SERVICES; ENROLLMENT

PROCESSES

SEC. 1866. (a)(1) Any provider of services (except a fund designated for purposes of section 1814(g) and section 1835(e)) shall be 

qualified to participate under this title and shall be eligible for payments under this title if it files with the Secretary an agreement— (A) * * *

* * * * * * *

(R) to contract only with a health care clearinghouse (as defined in section 1171) that meets each standard and implementation specification adopted or established under part C of title 

XI on or after the date on which the health care clearinghouse 

is required to comply with the standard or specification, øand¿

(S) in the case of a hospital that has a financial interest (as 

specified by the Secretary in regulations) in an entity to which 

individuals are referred as described in section 

1861(ee)(2)(H)(ii), or in which such an entity has such a financial interest, or in which another entity has such a financial 

interest (directly or indirectly) with such hospital and such an 

entity, to maintain and disclose to the Secretary (in a form and 

manner specified by the Secretary) information on— (i) * * *

* * * * * * *

(iii) the percentage of such individuals who received such 

services from such provider (or another such provider)ø.¿, and

(T) in the case of hospitals that are not otherwise subject to 

the Occupational Safety and Health Act of 1970, to comply with 

the Bloodborne Pathogens standard under section 1910.1030 of 

title 29 of the Code of Federal Regulations (or as subsequently 

redesignated).

* * * * * * *

(b)(1)***

* * * * * * *

(4)(A) A hospital that fails to comply with the requirement of subsection (a)(1)(T) (relating to the Bloodborne Pathogens standard) is 

subject to a civil money penalty in an amount described in subparagraph (B), but is not subject to termination of an agreement under 

this section. 

(B) The amount referred to in subparagraph (A) is an amount 

that is similar to the amount of civil penalties that may be imposed 

under section 17 of the Occupational Safety and Health Act of 1970 

for a violation of the Bloodborne Pathogens standard referred to in 

subsection (a)(1)(T) by a hospital that is subject to the provisions of 

such Act. 

(C) A civil money penalty under this paragraph shall be imposed 

and collected in the same manner as civil money penalties under 

93

subsection (a) of section 1128A are imposed and collected under that 

section.

* * * * * * *

(h)(1)(A) Except as provided in paragraph (2), an institution or 

agency dissatisfied with a determination by the Secretary that it 

is not a provider of services or with a determination described in 

subsection (b)(2) shall be entitled to a hearing thereon by the Secretary (after reasonable notice) to the same extent as is provided 

in section 205(b), and to judicial review of the Secretary’s final decision after such hearing as is provided in section 205(g), except 

that, in so applying such sections and in applying section 205(l) 

thereto, any reference therein to the Commissioner of Social Security or the Social Security Administration shall be considered a reference to the Secretary or the Department of Health and Human 

Services, respectively.

(B) An institution or agency described in subparagraph (A) that 

has filed for a hearing under subparagraph (A) shall have expedited 

access to judicial review under this subparagraph in the same manner as providers of services, suppliers, and individuals entitled to 

benefits under part A or enrolled under part B, or both, may obtain 

expedited access to judicial review under the process established 

under section 1869(b)(2). Nothing in this subparagraph shall be 

construed to affect the application of any remedy imposed under section 1819 during the pendency of an appeal under this subparagraph.

* * * * * * *

(j) ENROLLMENT PROCESS FOR PROVIDERS OF SERVICES AND SUPPLIERS.—

(1) ENROLLMENT PROCESS.—

(A) IN GENERAL.—The Secretary shall establish by regulation a process for the enrollment of providers of services 

and suppliers under this title. 

(B) DEADLINES.—The Secretary shall establish by regulation procedures under which there are deadlines for actions 

on applications for enrollment (and, if applicable, renewal 

of enrollment). The Secretary shall monitor the performance 

of medicare administrative contractors in meeting the deadlines established under this subparagraph. 

(C) CONSULTATION BEFORE CHANGING PROVIDER ENROLLMENT FORMS.—The Secretary shall consult with providers 

of services and suppliers before making changes in the provider enrollment forms required of such providers and suppliers to be eligible to submit claims for which payment 

may be made under this title. 

(2) HEARING RIGHTS IN CASES OF DENIAL OR NON-RENEWAL.—

A provider of services or supplier whose application to enroll 

(or, if applicable, to renew enrollment) under this title is denied 

may have a hearing and judicial review of such denial under 

the procedures that apply under subsection (h)(1)(A) to a provider of services that is dissatisfied with a determination by the 

Secretary.

* * * * * * *

94

EXAMINATION AND TREATMENT FOR EMERGENCY MEDICAL

CONDITIONS AND WOMEN IN LABOR

SEC. 1867. (a)***

* * * * * * *

(d) ENFORCEMENT.—

(1) * * *

* * * * * * *

(3) CONSULTATION WITH PEER REVIEW ORGANIZATIONS.—In 

considering allegations of violations of the requirements of this 

section in imposing sanctions under paragraph (1) or in terminating a hospital’s participation under this title, the Secretary 

shall request the appropriate utilization and quality control 

peer review organization (with a contract under part B of title 

XI) to assess whether the individual involved had an emergency medical condition which had not been stabilized, and 

provide a report on its findings. Except in the case in which 

a delay would jeopardize the health or safety of individuals, 

the Secretary shall request such a review before effecting a 

sanction under paragraph (1) and shall provide a period of at 

least 60 days for such review. Except in the case in which a 

delay would jeopardize the health or safety of individuals, the 

Secretary shall also request such a review before making a compliance determination as part of the process of terminating a 

hospital’s participation under this title for violations related to 

the appropriateness of a medical screening examination, stabilizing treatment, or an appropriate transfer as required by this 

section, and shall provide a period of 5 days for such review. 

The Secretary shall provide a copy of the organization’s report 

to the hospital or physician consistent with confidentiality requirements imposed on the organization under such part B.

(4) NOTICE UPON CLOSING AN INVESTIGATION.—The Secretary 

shall establish a procedure to notify hospitals and physicians 

when an investigation under this section is closed.

* * * * * * *

øPRACTICING PHYSICIANS ADVISORY COUNCIL¿

PRACTICING PHYSICIANS ADVISORY COUNCIL; MEDICARE PROVIDER

OMBUDSMAN

SEC. 1868. (a)PRACTICING PHYSICIANS ADVISORY COUNCIL.—(1)

The Secretary shall appoint, based upon nominations submitted by 

medical organizations representing physicians, a Practicing Physicians Advisory Council (in this øsection¿ subsection referred to as 

the ‘‘Council’’) to be composed of 15 physicians, each of whom has 

submitted at least 250 claims for physicians’ services under this 

title in the previous year. At least 11 of the members of the Council 

shall be physicians described in section 1861(r)(1) and the members 

of the Council shall include both participating and nonparticipating 

physicians and physicians practicing in rural areas and underserved urban areas. 

ø(b)¿ (2) The Council shall meet once during each calendar quarter to discuss certain proposed changes in regulations and carrier 

manual instructions related to physician services identified by the 

95

Secretary. To the extent feasible and consistent with statutory 

deadlines, such consultation shall occur before the publication of 

such proposed changes. 

ø(c)¿ (3) Members of the Council shall be entitled to receive reimbursement of expenses and per diem in lieu of subsistence in the 

same manner as other members of advisory councils appointed by 

the Secretary are provided such reimbursement and per diem 

under this title.

(b) MEDICARE PROVIDER OMBUDSMAN.—The Secretary shall appoint within the Department of Health and Human Services a 

Medicare Provider Ombudsman. The Ombudsman shall— (1) provide assistance, on a confidential basis, to providers of 

services and suppliers with respect to complaints, grievances, 

and requests for information concerning the programs under 

this title (including provisions of title XI insofar as they relate 

to this title and are not administered by the Office of the Inspector General of the Department of Health and Human Services) 

and in the resolution of unclear or conflicting guidance given 

by the Secretary and medicare contractors to such providers of 

services and suppliers regarding such programs and provisions 

and requirements under this title and such provisions; and 

(2) submit recommendations to the Secretary for improvement 

in the administration of this title and such provisions, including— (A) recommendations to respond to recurring patterns of 

confusion in this title and such provisions (including recommendations regarding suspending imposition of sanctions where there is widespread confusion in program administration), and 

(B) recommendations to provide for an appropriate and 

consistent response (including not providing for audits) in 

cases of self-identified overpayments by providers of services 

and suppliers. 

The Ombudsman shall not serve as an advocate for any increases 

in payments or new coverage of services, but may identify issues and 

problems in payment or coverage policies. 

(c) COUNCIL FOR TECHNOLOGY AND INNOVATION.— (1) ESTABLISHMENT.—The Secretary shall establish a Council 

for Technology and Innovation within the Centers for Medicare 

& Medicaid Services (in this section referred to as ‘‘CMS’’). 

(2) COMPOSITION.—The Council shall be composed of senior 

CMS staff and clinicians and shall be chaired by the Executive 

Coordinator for Technology and Innovation (appointed or designated under paragraph (4)). 

(3) DUTIES.—The Council shall coordinate the activities of 

coverage, coding, and payment processes under this title with 

respect to new technologies and procedures, including new drug 

therapies, and shall coordinate the exchange of information on 

new technologies between CMS and other entities that make 

similar decisions. 

(4) EXECUTIVE COORDINATOR FOR TECHNOLOGY AND INNOVATION.—The Secretary shall appoint (or designate) a noncareer 

appointee (as defined in section 3132(a)(7) of title 5, United 

States Code) who shall serve as the Executive Coordinator for 

Technology and Innovation. Such executive coordinator shall 

96

report to the Administrator of CMS, shall chair the Council, 

shall oversee the execution of its duties, and shall serve as a 

single point of contact for outside groups and entities regarding 

the coverage, coding, and payment processes under this title.

DETERMINATIONS; APPEALS

SEC. 1869. (a) INITIAL DETERMINATIONS.—

(1) * * *

* * * * * * *

(4) REQUIREMENTS OF NOTICE OF DETERMINATIONS.—With respect to an initial determination insofar as it results in a denial 

of a claim for benefits—

(A) the written notice on the determination shall include—

(i) the reasons for the determination, including 

whether a local medical review policy or a local coverage determination was used; 

(ii) the procedures for obtaining additional information concerning the determination, including the information described in subparagraph (B); and 

(iii) notification of the right to seek a redetermination 

or otherwise appeal the determination and instructions 

on how to initiate such a redetermination under this 

section; and 

(B) the person provided such notice may obtain, upon request, the specific provision of the policy, manual, or regulation used in making the determination. 

(5) REQUIREMENTS OF NOTICE OF REDETERMINATIONS.—With 

respect to a redetermination insofar as it results in a denial of 

a claim for benefits— (A) the written notice on the redetermination shall include—

(i) the specific reasons for the redetermination; 

(ii) as appropriate, a summary of the clinical or scientific evidence used in making the redetermination; 

(iii) a description of the procedures for obtaining additional information concerning the redetermination; 

and 

(iv) notification of the right to appeal the redetermination and instructions on how to initiate such an 

appeal under this section; 

(B) such written notice shall be provided in printed form 

and written in a manner calculated to be understood by the 

individual entitled to benefits under part A or enrolled 

under part B, or both; and 

(C) the person provided such notice may obtain, upon request, information on the specific provision of the policy, 

manual, or regulation used in making the redetermination.

(b) APPEAL RIGHTS.— (1) IN GENERAL.—

(A) RECONSIDERATION OF INITIAL DETERMINATION.—Subject to subparagraph (D), any individual dissatisfied with 

any initial determination under subsection (a)(1) shall be 

entitled to reconsideration of the determination, and, subVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00096 Fmt 6659 Sfmt 6601 E:\HR\OC\HR074P2.XXX HR074P2
97

ject to subparagraphs (D) and (E), a hearing thereon by 

the Secretary to the same extent as is provided in section 

205(b) and, subject to paragraph (2), to judicial review of 

the Secretary’s final decision after such hearing as is provided in section 205(g). For purposes of the preceding sentence, any reference to the ‘‘Commissioner of Social Security’’ or the ‘‘Social Security Administration’’ in subsection 

(g) or (l) of section 205 shall be considered a reference to 

the ‘‘Secretary’’ or the ‘‘Department of Health and Human 

Services’’, respectively. 

* * * * * * *

(F) EXPEDITED øPROCEEDINGS.— ø(i) EXPEDITED DETERMINATION¿ DETERMINATIONS

AND RECONSIDERATIONS.—In the case of an individual 

who has received notice from a provider of services 

that such provider plans— ø(I)¿ (i) to terminate services provided to an individual and a physician certifies that failure to continue the provision of such services is likely to place 

the individual’s health at significant risk, or 

ø(II)¿ (ii) to discharge the individual from the provider of services, 

the individual may request, in writing or orally, an expedited determination or an expedited reconsideration 

of an initial determination made under subsection 

(a)(1), as the case may be, and the Secretary shall provide such expedited determination or expedited reconsideration. 

ø(ii) EXPEDITED HEARING.—In a hearing by the Secretary under this section, in which the moving party 

alleges that no material issues of fact are in dispute, 

the Secretary shall make an expedited determination 

as to whether any such facts are in dispute and, if not, 

shall render a decision expeditiously.¿

* * * * * * *

(2) EXPEDITED ACCESS TO JUDICIAL REVIEW.—

(A) IN GENERAL.—The Secretary shall establish a process 

under which a provider of services or supplier that furnishes an item or service or an individual entitled to benefits under part A or enrolled under part B, or both, who 

has filed an appeal under paragraph (1) may obtain access 

to judicial review when a review panel (described in subparagraph (D)), on its own motion or at the request of the 

appellant, determines that no entity in the administrative 

appeals process has the authority to decide the question of 

law or regulation relevant to the matters in controversy and 

that there is no material issue of fact in dispute. The appellant may make such request only once with respect to a 

question of law or regulation in a case of an appeal. 

(B) PROMPT DETERMINATIONS.—If, after or coincident 

with appropriately filing a request for an administrative 

hearing, the appellant requests a determination by the appropriate review panel that no review panel has the authority to decide the question of law or regulations relevant to 

98

the matters in controversy and that there is no material 

issue of fact in dispute and if such request is accompanied 

by the documents and materials as the appropriate review 

panel shall require for purposes of making such determination, such review panel shall make a determination on the 

request in writing within 60 days after the date such review 

panel receives the request and such accompanying documents and materials. Such a determination by such review 

panel shall be considered a final decision and not subject 

to review by the Secretary. 

(C) ACCESS TO JUDICIAL REVIEW.— (i) IN GENERAL.—If the appropriate review panel— (I) determines that there are no material issues 

of fact in dispute and that the only issue is one of 

law or regulation that no review panel has the authority to decide; or 

(II) fails to make such determination within the 

period provided under subparagraph (B); 

then the appellant may bring a civil action as described in this subparagraph. 

(ii) DEADLINE FOR FILING.—Such action shall be 

filed, in the case described in— (I) clause (i)(I), within 60 days of date of the determination described in such subparagraph; or 

(II) clause (i)(II), within 60 days of the end of the 

period provided under subparagraph (B) for the 

determination. 

(iii) VENUE.—Such action shall be brought in the 

district court of the United States for the judicial district in which the appellant is located (or, in the case 

of an action brought jointly by more than one applicant, the judicial district in which the greatest number 

of applicants are located) or in the district court for the 

District of Columbia. 

(iv) INTEREST ON AMOUNTS IN CONTROVERSY.—Where 

a provider of services or supplier seeks judicial review 

pursuant to this paragraph, the amount in controversy 

shall be subject to annual interest beginning on the 

first day of the first month beginning after the 60-day 

period as determined pursuant to clause (ii) and equal 

to the rate of interest on obligations issued for purchase 

by the Federal Hospital Insurance Trust Fund and by 

the Federal Supplementary Medical Insurance Trust 

Fund for the month in which the civil action authorized under this paragraph is commenced, to be awarded by the reviewing court in favor of the prevailing 

party. No interest awarded pursuant to the preceding 

sentence shall be deemed income or cost for the purposes of determining reimbursement due providers of 

services or suppliers under this Act. 

(D) REVIEW PANELS.—For purposes of this subsection, a 

‘‘review panel’’ is a panel consisting of 3 members (who 

shall be administrative law judges, members of the Departmental Appeals Board, or qualified individuals associated 

with a qualified independent contractor (as defined in subVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00098 Fmt 6659 Sfmt 6603 E:\HR\OC\HR074P2.XXX HR074P2
99

section (c)(2)) or with another independent entity) designated by the Secretary for purposes of making determinations under this paragraph. 

(3) REQUIRING FULL AND EARLY PRESENTATION OF EVIDENCE

BY PROVIDERS.—A provider of services or supplier may not introduce evidence in any appeal under this section that was not 

presented at the reconsideration conducted by the qualified 

independent contractor under subsection (c), unless there is 

good cause which precluded the introduction of such evidence 

at or before that reconsideration.

* * * * * * *

(c) CONDUCT OF RECONSIDERATIONS BY INDEPENDENT CONTRACTORS.—

(1) * * *

* * * * * * *

(3) REQUIREMENTS.—Any qualified independent contractor 

entering into a contract with the Secretary under this subsection shall meet all of the following requirements: 

(A) IN GENERAL.—The qualified independent contractor 

shall perform such duties and functions and assume such 

responsibilities as may be required by the Secretary to 

carry out the provisions of this subsection, and shall have 

øsufficient training and expertise in medical science and 

legal matters¿ sufficient medical, legal, and other expertise 

(including knowledge of the program under this title) and 

sufficient staffing to make reconsiderations under this subsection. 

(B) RECONSIDERATIONS.—

(i) IN GENERAL.—The qualified independent contractor shall review initial determinations. Where an 

initial determination is made with respect to whether 

an item or service is reasonable and necessary for the 

diagnosis or treatment of illness or injury (under section 1862(a)(1)(A)), such review shall include consideration of the facts and circumstances of the initial determination by a panel of physicians or other appropriate health care professionals and any decisions with 

respect to the reconsideration shall be based on applicable information, including clinical experience (including the medical records of the individual involved)

and medical, technical, and scientific evidence. 

* * * * * * *

ø(D) LIMITATION ON INDIVIDUAL REVIEWING DETERMINATIONS.—

ø(i) PHYSICIANS AND HEALTH CARE PROFESSIONAL.—

No physician or health care professional under the employ of a qualified independent contractor may review—

ø(I) determinations regarding health care services furnished to a patient if the physician or 

health care professional was directly responsible 

for furnishing such services; or 

100

ø(II) determinations regarding health care services provided in or by an institution, organization, 

or agency, if the physician or any member of the 

family of the physician or health care professional 

has, directly or indirectly, a significant financial 

interest in such institution, organization, or agency. 

ø(ii) FAMILY DESCRIBED.—For purposes of this paragraph, the family of a physician or health care professional includes the spouse (other than a spouse who is 

legally separated from the physician or health care 

professional under a decree of divorce or separate 

maintenance), children (including stepchildren and legally adopted children), grandchildren, parents, and 

grandparents of the physician or health care professional.¿

(D) QUALIFICATIONS FOR REVIEWERS.—The requirements 

of subsection (g) shall be met (relating to qualifications of 

reviewing professionals).

(E) EXPLANATION OF DECISION.—Any decision with respect to a reconsideration of a qualified independent contractor shall be in writing, be written in a manner calculated to be understood by the individual entitled to benefits under part A or enrolled under part B, or both, and 

shall include (to the extent appropriate) and shall include 

a detailed explanation of the decision as well as a discussion of the pertinent facts and applicable regulations applied in making such decision, and a notification of the 

right to appeal such determination and instructions on how 

to initiate such appeal under this section and in the case 

of a determination of whether an item or service is reasonable and necessary for the diagnosis or treatment of illness 

or injury (under section 1862(a)(1)(A)) an explanation of 

the medical and scientific rationale for the decision. 

* * * * * * *

(I) DATA COLLECTION.—

(i) * * *

(ii) TYPE OF DATA COLLECTED.—Each qualified independent contractor shall keep accurate records of each 

decision made, consistent with standards established 

by the Secretary for such purpose. Such records shall 

be maintained in an electronic database in a manner 

that provides for identification of the following: 

(I) * * *

* * * * * * *

(III) Situations suggesting the need for changes 

in national or local coverage øpolicy¿ determination. 

(IV) Situations suggesting the need for changes 

in local ømedical review policies¿ coverage determinations. 

* * * * * * *

101

(J) HEARINGS BY THE SECRETARY.—The qualified independent contractor shall (i) øprepare¿ submit such information as is required for an appeal of a decision of the 

contractor øwith respect to a reconsideration to the Secretary for a hearing, including as necessary, explanations 

of issues involved in the decision and relevant policies¿, 

and (ii) participate in such hearings as required by the 

Secretary.

(K) INDEPENDENCE REQUIREMENTS.—

(i) IN GENERAL.—Subject to clause (ii), a qualified 

independent contractor shall not conduct any activities 

in a case unless the entity—

(I) is not a related party (as defined in subsection (g)(5)); 

(II) does not have a material familial, financial, 

or professional relationship with such a party in 

relation to such case; and 

(III) does not otherwise have a conflict of interest 

with such a party. 

(ii) EXCEPTION FOR REASONABLE COMPENSATION.—

Nothing in clause (i) shall be construed to prohibit receipt by a qualified independent contractor of compensation from the Secretary for the conduct of activities under this section if the compensation is provided 

consistent with clause (iii). 

(iii) LIMITATIONS ON ENTITY COMPENSATION.—Compensation provided by the Secretary to a qualified independent contractor in connection with reviews under 

this section shall not be contingent on any decision rendered by the contractor or by any reviewing professional.

(4) NUMBER OF QUALIFIED INDEPENDENT CONTRACTORS.—The 

Secretary shall enter into contracts with ønot fewer than 12 

qualified independent contractors under this subsection¿ a sufficient number of qualified independent contractors (but not 

fewer than 4 such contractors) to conduct reconsiderations consistent with the timeframes applicable under this subsection. 

* * * * * * *

(d) DEADLINES FOR HEARINGS BY THE SECRETARY; NOTICE.—

(1) * * *

* * * * * * *

(4) NOTICE.—Notice of the decision of an administrative law 

judge shall be in writing in a manner calculated to be understood by the individual entitled to benefits under part A or enrolled under part B, or both, and shall include—

(A) the specific reasons for the determination (including, 

to the extent appropriate, a summary of the clinical or scientific evidence used in making the determination); 

(B) the procedures for obtaining additional information 

concerning the decision; and 

102

(C) notification of the right to appeal the decision and instructions on how to initiate such an appeal under this section.

* * * * * * *

(f ) REVIEW OF COVERAGE DETERMINATIONS.— (1) * * *

(2) LOCAL COVERAGE DETERMINATION.— (A) IN GENERAL.—Review of any local coverage determination shall be subject to the following limitations: 

(i) Upon the filing of a complaint by an aggrieved 

party, such a determination shall be reviewed by an 

administrative law judge øof the Social Security Administration¿. The administrative law judge— (I) * * *

* * * * * * *

(4) PENDING NATIONAL COVERAGE DETERMINATIONS.— (A) IN GENERAL.—In the event the Secretary has not 

issued a national coverage or noncoverage determination 

with respect to a particular type or class of items or services, an aggrieved person (as described in paragraph (5)) 

may submit to the Secretary a request to make such a determination with respect to such items or services. By not 

later than the end of the 90-day period beginning on the 

date the Secretary receives such a request (notwithstanding the receipt by the Secretary of new evidence (if 

any) during such 90-day period), the Secretary shall take 

one of the following actions: 

(i) * * *

* * * * * * *

(iv) Issue a notice that states that the Secretary has 

not completed a review of the request for a national 

coverage determination and that includes an identification of the remaining steps in the Secretary’s review process and a deadline by which the Secretary 

will complete the review and take an action described 

in øsubclause (I), (II), or (III)¿ clause (i), (ii), or (iii). 

(B) DEEMED ACTION BY THE SECRETARY.—In the case of 

an action described in øclause (i)(IV)¿ subparagraph 

(A)(iv), if the Secretary fails to take an action referred to 

in such clause by the deadline specified by the Secretary 

under such clause, then the Secretary is deemed to have 

taken an action described in øclause (i)(III)¿ subparagraph 

(A)(iii) as of the deadline. 

(C) EXPLANATION OF DETERMINATION.—When issuing a 

determination under øclause (i)¿ subparagraph (A), the 

Secretary shall include an explanation of the basis for the 

determination. An action taken under clause (i) (other 

than øsubclause (IV)¿ clause (iv)) is deemed to be a national coverage determination for purposes of review under 

øsubparagraph (A)¿ paragraph (1)(A). 

* * * * * * *

(g) QUALIFICATIONS OF REVIEWERS.—

103

(1) IN GENERAL.—In reviewing determinations under this section, a qualified independent contractor shall assure that— (A) each individual conducting a review shall meet the 

qualifications of paragraph (2); 

(B) compensation provided by the contractor to each such 

reviewer is consistent with paragraph (3); and 

(C) in the case of a review by a panel described in subsection (c)(3)(B) composed of physicians or other health care 

professionals (each in this subsection referred to as a ‘‘reviewing professional’’), a reviewing professional meets the 

qualifications described in paragraph (4) and, where a 

claim is regarding the furnishing of treatment by a physician (allopathic or osteopathic) or the provision of items or 

services by a physician (allopathic or osteopathic), each reviewing professional shall be a physician (allopathic or osteopathic). 

(2) INDEPENDENCE.— (A) IN GENERAL.—Subject to subparagraph (B), each individual conducting a review in a case shall— (i) not be a related party (as defined in paragraph 

(5)); 

(ii) not have a material familial, financial, or professional relationship with such a party in the case under 

review; and 

(iii) not otherwise have a conflict of interest with 

such a party. 

(B) EXCEPTION.—Nothing in subparagraph (A) shall be 

construed to— (i) prohibit an individual, solely on the basis of a 

participation agreement with a fiscal intermediary, 

carrier, or other contractor, from serving as a reviewing professional if— (I) the individual is not involved in the provision 

of items or services in the case under review; 

(II) the fact of such an agreement is disclosed to 

the Secretary and the individual entitled to benefits under part A or enrolled under part B, or both, 

(or authorized representative) and neither party 

objects; and 

(III) the individual is not an employee of the 

intermediary, carrier, or contractor and does not 

provide services exclusively or primarily to or on 

behalf of such intermediary, carrier, or contractor; 

(ii) prohibit an individual who has staff privileges at 

the institution where the treatment involved takes place 

from serving as a reviewer merely on the basis of having such staff privileges if the existence of such privileges is disclosed to the Secretary and such individual 

(or authorized representative), and neither party objects; or 

(iii) prohibit receipt of compensation by a reviewing 

professional from a contractor if the compensation is 

provided consistent with paragraph (3). 

For purposes of this paragraph, the term ‘‘participation 

agreement’’ means an agreement relating to the provision of 

104

health care services by the individual and does not include 

the provision of services as a reviewer under this subsection. 

(3) LIMITATIONS ON REVIEWER COMPENSATION.—Compensation provided by a qualified independent contractor to a reviewer in connection with a review under this section shall not 

be contingent on the decision rendered by the reviewer. 

(4) LICENSURE AND EXPERTISE.—Each reviewing professional 

shall be—

(A) a physician (allopathic or osteopathic) who is appropriately credentialed or licensed in one or more States to 

deliver health care services and has medical expertise in 

the field of practice that is appropriate for the items or 

services at issue; or 

(B) a health care professional who is legally authorized 

in one or more States (in accordance with State law or the 

State regulatory mechanism provided by State law) to furnish the health care items or services at issue and has medical expertise in the field of practice that is appropriate for 

such items or services. 

(5) RELATED PARTY DEFINED.—For purposes of this section, 

the term ‘‘related party’’ means, with respect to a case under 

this title involving a specific individual entitled to benefits 

under part A or enrolled under part B, or both, any of the following: 

(A) The Secretary, the medicare administrative contractor 

involved, or any fiduciary, officer, director, or employee of 

the Department of Health and Human Services, or of such 

contractor. 

(B) The individual (or authorized representative). 

(C) The health care professional that provides the items 

or services involved in the case. 

(D) The institution at which the items or services (or 

treatment) involved in the case are provided. 

(E) The manufacturer of any drug or other item that is 

included in the items or services involved in the case. 

(F) Any other party determined under any regulations to 

have a substantial interest in the case involved. 

(h) PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND

SERVICES.—

(1) ESTABLISHMENT OF PROCESS.—

(A) IN GENERAL.—With respect to a medicare administrative contractor that has a contract under section 1874A that 

provides for making payments under this title with respect 

to eligible items and services described in subparagraph 

(C), the Secretary shall establish a prior determination 

process that meets the requirements of this subsection and 

that shall be applied by such contractor in the case of eligible requesters. 

(B) ELIGIBLE REQUESTER.—For purposes of this subsection, each of the following shall be an eligible requester: 

(i) A physician, but only with respect to eligible items 

and services for which the physician may be paid directly. 

105

(ii) An individual entitled to benefits under this title, 

but only with respect to an item or service for which 

the individual receives, from the physician who may be 

paid directly for the item or service, an advance beneficiary notice under section 1879(a) that payment may 

not be made (or may no longer be made) for the item 

or service under this title. 

(C) ELIGIBLE ITEMS AND SERVICES.—For purposes of this 

subsection and subject to paragraph (2), eligible items and 

services are items and services which are physicians’ services (as defined in paragraph (4)(A) of section 1848(f) for 

purposes of calculating the sustainable growth rate under 

such section). 

(2) SECRETARIAL FLEXIBILITY.—The Secretary shall establish 

by regulation reasonable limits on the categories of eligible 

items and services for which a prior determination of coverage 

may be requested under this subsection. In establishing such 

limits, the Secretary may consider the dollar amount involved 

with respect to the item or service, administrative costs and 

burdens, and other relevant factors. 

(3) REQUEST FOR PRIOR DETERMINATION.— (A) IN GENERAL.—Subject to paragraph (2), under the 

process established under this subsection an eligible requester may submit to the contractor a request for a determination, before the furnishing of an eligible item or service involved as to whether the item or service is covered 

under this title consistent with the applicable requirements 

of section 1862(a)(1)(A) (relating to medical necessity). 

(B) ACCOMPANYING DOCUMENTATION.—The Secretary 

may require that the request be accompanied by a description of the item or service, supporting documentation relating to the medical necessity for the item or service, and any 

other appropriate documentation. In the case of a request 

submitted by an eligible requester who is described in paragraph (1)(B)(ii), the Secretary may require that the request 

also be accompanied by a copy of the advance beneficiary 

notice involved. 

(4) RESPONSE TO REQUEST.— (A) IN GENERAL.—Under such process, the contractor 

shall provide the eligible requester with written notice of a 

determination as to whether— (i) the item or service is so covered; 

(ii) the item or service is not so covered; or 

(iii) the contractor lacks sufficient information to 

make a coverage determination. 

If the contractor makes the determination described in 

clause (iii), the contractor shall include in the notice a description of the additional information required to make 

the coverage determination. 

(B) DEADLINE TO RESPOND.—Such notice shall be provided within the same time period as the time period applicable to the contractor providing notice of initial determinations on a claim for benefits under subsection (a)(2)(A). 

(C) INFORMING BENEFICIARY IN CASE OF PHYSICIAN REQUEST.—In the case of a request in which an eligible reVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00105 Fmt 6659 Sfmt 6603 E:\HR\OC\HR074P2.XXX HR074P2
106

quester is not the individual described in paragraph 

(1)(B)(ii), the process shall provide that the individual to 

whom the item or service is proposed to be furnished shall 

be informed of any determination described in clause (ii) 

(relating to a determination of non-coverage) and the right 

(referred to in paragraph (6)(B)) to obtain the item or service and have a claim submitted for the item or service. 

(5) EFFECT OF DETERMINATIONS.—

(A) BINDING NATURE OF POSITIVE DETERMINATION.—If 

the contractor makes the determination described in paragraph (4)(A)(i), such determination shall be binding on the 

contractor in the absence of fraud or evidence of misrepresentation of facts presented to the contractor. 

(B) NOTICE AND RIGHT TO REDETERMINATION IN CASE OF

A DENIAL.—

(i) IN GENERAL.—If the contractor makes the determination described in paragraph (4)(A)(ii)—

(I) the eligible requester has the right to a redetermination by the contractor on the determination 

that the item or service is not so covered; and 

(II) the contractor shall include in notice under 

paragraph (4)(A) a brief explanation of the basis 

for the determination, including on what national 

or local coverage or noncoverage determination (if 

any) the determination is based, and the right to 

such a redetermination. 

(ii) DEADLINE FOR REDETERMINATIONS.—The contractor shall complete and provide notice of such redetermination within the same time period as the time 

period applicable to the contractor providing notice of 

redeterminations relating to a claim for benefits under 

subsection (a)(3)(C)(ii). 

(6) LIMITATION ON FURTHER REVIEW.—

(A) IN GENERAL.—Contractor determinations described in 

paragraph (4)(A)(ii) or (4)(A)(iii) (and redeterminations 

made under paragraph (5)(B)), relating to pre-service 

claims are not subject to further administrative appeal or 

judicial review under this section or otherwise. 

(B) DECISION NOT TO SEEK PRIOR DETERMINATION OR

NEGATIVE DETERMINATION DOES NOT IMPACT RIGHT TO OBTAIN SERVICES, SEEK REIMBURSEMENT, OR APPEAL

RIGHTS.—Nothing in this subsection shall be construed as 

affecting the right of an individual who—

(i) decides not to seek a prior determination under 

this subsection with respect to items or services; or 

(ii) seeks such a determination and has received a 

determination described in paragraph (4)(A)(ii), 

from receiving (and submitting a claim for) such items 

services and from obtaining administrative or judicial review respecting such claim under the other applicable provisions of this section. Failure to seek a prior determination 

under this subsection with respect to items and services 

shall not be taken into account in such administrative or 

judicial review. 

107

(C) NO PRIOR DETERMINATION AFTER RECEIPT OF SERV- ICES.—Once an individual is provided items and services, 

there shall be no prior determination under this subsection 

with respect to such items or services.

* * * * * * *

REGULATIONS

SEC. 1871. (a)(1)***

* * * * * * *

(3)(A) The Secretary, in consultation with the Director of the Office of Management and Budget, shall establish and publish a regular timeline for the publication of final regulations based on the 

previous publication of a proposed regulation or an interim final 

regulation. 

(B) Such timeline may vary among different regulations based on 

differences in the complexity of the regulation, the number and 

scope of comments received, and other relevant factors, but shall not 

be longer than 3 years except under exceptional circumstances. If the 

Secretary intends to vary such timeline with respect to the publication of a final regulation, the Secretary shall cause to have published in the Federal Register notice of the different timeline by not 

later than the timeline previously established with respect to such 

regulation. Such notice shall include a brief explanation of the justification for such variation. 

(C) In the case of interim final regulations, upon the expiration 

of the regular timeline established under this paragraph for the 

publication of a final regulation after opportunity for public comment, the interim final regulation shall not continue in effect unless 

the Secretary publishes (at the end of the regular timeline and, if 

applicable, at the end of each succeeding 1-year period) a notice of 

continuation of the regulation that includes an explanation of why 

the regular timeline (and any subsequent 1-year extension) was not 

complied with. If such a notice is published, the regular timeline (or 

such timeline as previously extended under this paragraph) for publication of the final regulation shall be treated as having been extended for 1 additional year. 

(D) The Secretary shall annually submit to Congress a report that 

describes the instances in which the Secretary failed to publish a 

final regulation within the applicable regular timeline under this 

paragraph and that provides an explanation for such failures. 

(4) If the Secretary publishes a final regulation that includes a 

provision that is not a logical outgrowth of a previously published 

notice of proposed rulemaking or interim final rule, such provision 

shall be treated as a proposed regulation and shall not take effect 

until there is the further opportunity for public comment and a publication of the provision again as a final regulation.

* * * * * * *

(d)(1)(A) A substantive change in regulations, manual instructions, interpretative rules, statements of policy, or guidelines of general applicability under this title shall not be applied (by extrapolation or otherwise) retroactively to items and services furnished before the effective date of the change, unless the Secretary determines 

that—

108

(i) such retroactive application is necessary to comply with 

statutory requirements; or 

(ii) failure to apply the change retroactively would be contrary 

to the public interest. 

(B)(i) Except as provided in clause (ii), a substantive change referred to in subparagraph (A) shall not become effective before the 

end of the 30-day period that begins on the date that the Secretary 

has issued or published, as the case may be, the substantive change. 

(ii) The Secretary may provide for such a substantive change to 

take effect on a date that precedes the end of the 30-day period 

under clause (i) if the Secretary finds that waiver of such 30-day period is necessary to comply with statutory requirements or that the 

application of such 30-day period is contrary to the public interest. 

If the Secretary provides for an earlier effective date pursuant to 

this clause, the Secretary shall include in the issuance or publication of the substantive change a finding described in the first sentence, and a brief statement of the reasons for such finding. 

(C) No action shall be taken against a provider of services or supplier with respect to noncompliance with such a substantive change 

for items and services furnished before the effective date of such a 

change. 

(2)(A) If— (i) a provider of services or supplier follows the written guidance (which may be transmitted electronically) provided by the 

Secretary or by a medicare contractor (as defined in section 

1889(g)) acting within the scope of the contractor’s contract authority, with respect to the furnishing of items or services and 

submission of a claim for benefits for such items or services 

with respect to such provider or supplier; 

(ii) the Secretary determines that the provider of services or 

supplier has accurately presented the circumstances relating to 

such items, services, and claim to the contractor in writing; and 

(iii) the guidance was in error; 

the provider of services or supplier shall not be subject to any sanction (including any penalty or requirement for repayment of any 

amount) if the provider of services or supplier reasonably relied on 

such guidance. 

(B) Subparagraph (A) shall not be construed as preventing the 

recoupment or repayment (without any additional penalty) relating 

to an overpayment insofar as the overpayment was solely the result 

of a clerical or technical operational error. 

(e)(1) Not later than 2 years after the date of the enactment of this 

subsection, and every 2 years thereafter, the Secretary shall submit 

to Congress a report with respect to the administration of this title 

and areas of inconsistency or conflict among the various provisions 

under law and regulation. 

(2) In preparing a report under paragraph (1), the Secretary shall 

collect—

(A) information from individuals entitled to benefits under 

part A or enrolled under part B, or both, providers of services, 

and suppliers and from the Medicare Beneficiary Ombudsman 

and the Medicare Provider Ombudsman with respect to such 

areas of inconsistency and conflict; and 

(B) information from medicare contractors that tracks the nature of written and telephone inquiries. 

109

(3) A report under paragraph (1) shall include a description of efforts by the Secretary to reduce such inconsistency or conflicts, and 

recommendations for legislation or administrative action that the 

Secretary determines appropriate to further reduce such inconsistency or conflicts.

* * * * * * *

CONTRACTS WITH MEDICARE ADMINISTRATIVE CONTRACTORS

SEC. 1874A. (a) AUTHORITY.— (1) AUTHORITY TO ENTER INTO CONTRACTS.—The Secretary 

may enter into contracts with any eligible entity to serve as a 

medicare administrative contractor with respect to the performance of any or all of the functions described in paragraph (4) 

or parts of those functions (or, to the extent provided in a contract, to secure performance thereof by other entities). 

(2) ELIGIBILITY OF ENTITIES.—An entity is eligible to enter 

into a contract with respect to the performance of a particular 

function described in paragraph (4) only if— (A) the entity has demonstrated capability to carry out 

such function; 

(B) the entity complies with such conflict of interest 

standards as are generally applicable to Federal acquisition and procurement; 

(C) the entity has sufficient assets to financially support 

the performance of such function; and 

(D) the entity meets such other requirements as the Secretary may impose. 

(3) MEDICARE ADMINISTRATIVE CONTRACTOR DEFINED.—For 

purposes of this title and title XI— (A) IN GENERAL.—The term ‘‘medicare administrative 

contractor’’ means an agency, organization, or other person 

with a contract under this section. 

(B) APPROPRIATE MEDICARE ADMINISTRATIVE CONTRACTOR.—With respect to the performance of a particular 

function in relation to an individual entitled to benefits 

under part A or enrolled under part B, or both, a specific 

provider of services or supplier (or class of such providers 

of services or suppliers), the ‘‘appropriate’’ medicare administrative contractor is the medicare administrative contractor that has a contract under this section with respect 

to the performance of that function in relation to that individual, provider of services or supplier or class of provider 

of services or supplier. 

(4) FUNCTIONS DESCRIBED.—The functions referred to in 

paragraphs (1) and (2) are payment functions, provider services 

functions, and functions relating to services furnished to individuals entitled to benefits under part A or enrolled under part 

B, or both, as follows: 

(A) DETERMINATION OF PAYMENT AMOUNTS.—Determining (subject to the provisions of section 1878 and to 

such review by the Secretary as may be provided for by the 

contracts) the amount of the payments required pursuant to 

this title to be made to providers of services, suppliers and 

individuals. 

110

(B) MAKING PAYMENTS.—Making payments described in 

subparagraph (A) (including receipt, disbursement, and accounting for funds in making such payments). 

(C) BENEFICIARY EDUCATION AND ASSISTANCE.—Providing education and outreach to individuals entitled to 

benefits under part A or enrolled under part B, or both, 

and providing assistance to those individuals with specific 

issues, concerns or problems. 

(D) PROVIDER CONSULTATIVE SERVICES.—Providing consultative services to institutions, agencies, and other persons to enable them to establish and maintain fiscal 

records necessary for purposes of this title and otherwise to 

qualify as providers of services or suppliers. 

(E) COMMUNICATION WITH PROVIDERS.—Communicating 

to providers of services and suppliers any information or 

instructions furnished to the medicare administrative contractor by the Secretary, and facilitating communication between such providers and suppliers and the Secretary. 

(F) PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.— Performing the functions relating to provider education, 

training, and technical assistance. 

(G) ADDITIONAL FUNCTIONS.—Performing such other 

functions as are necessary to carry out the purposes of this 

title. 

(5) RELATIONSHIP TO MIP CONTRACTS.— (A) NONDUPLICATION OF DUTIES.—In entering into contracts under this section, the Secretary shall assure that 

functions of medicare administrative contractors in carrying out activities under parts A and B do not duplicate 

activities carried out under the Medicare Integrity Program 

under section 1893. The previous sentence shall not apply 

with respect to the activity described in section 1893(b)(5) 

(relating to prior authorization of certain items of durable 

medical equipment under section 1834(a)(15)). 

(B) CONSTRUCTION.—An entity shall not be treated as a 

medicare administrative contractor merely by reason of 

having entered into a contract with the Secretary under section 1893. 

(6) APPLICATION OF FEDERAL ACQUISITION REGULATION.—Except to the extent inconsistent with a specific requirement of this 

title, the Federal Acquisition Regulation applies to contracts 

under this title. 

(b) CONTRACTING REQUIREMENTS.—

(1) USE OF COMPETITIVE PROCEDURES.—

(A) IN GENERAL.—Except as provided in laws with general applicability to Federal acquisition and procurement 

or in subparagraph (B), the Secretary shall use competitive 

procedures when entering into contracts with medicare administrative contractors under this section, taking into account performance quality as well as price and other factors. 

(B) RENEWAL OF CONTRACTS.—The Secretary may renew 

a contract with a medicare administrative contractor under 

this section from term to term without regard to section 5 

of title 41, United States Code, or any other provision of 

111

law requiring competition, if the medicare administrative 

contractor has met or exceeded the performance requirements applicable with respect to the contract and contractor, except that the Secretary shall provide for the application of competitive procedures under such a contract 

not less frequently than once every five years. 

(C) TRANSFER OF FUNCTIONS.—The Secretary may transfer functions among medicare administrative contractors 

consistent with the provisions of this paragraph. The Secretary shall ensure that performance quality is considered 

in such transfers. The Secretary shall provide public notice 

(whether in the Federal Register or otherwise) of any such 

transfer (including a description of the functions so transferred, a description of the providers of services and suppliers affected by such transfer, and contact information for 

the contractors involved). 

(D) INCENTIVES FOR QUALITY.—The Secretary shall provide incentives for medicare administrative contractors to 

provide quality service and to promote efficiency. 

(2) COMPLIANCE WITH REQUIREMENTS.—No contract under 

this section shall be entered into with any medicare administrative contractor unless the Secretary finds that such medicare 

administrative contractor will perform its obligations under the 

contract efficiently and effectively and will meet such requirements as to financial responsibility, legal authority, quality of 

services provided, and other matters as the Secretary finds pertinent. 

(3) PERFORMANCE REQUIREMENTS.—

(A) DEVELOPMENT OF SPECIFIC PERFORMANCE REQUIREMENTS.—In developing contract performance requirements, 

the Secretary shall develop performance requirements applicable to functions described in subsection (a)(4). 

(B) CONSULTATION.— In developing such requirements, 

the Secretary may consult with providers of services and 

suppliers, organizations representing individuals entitled to 

benefits under part A or enrolled under part B, or both, 

and organizations and agencies performing functions necessary to carry out the purposes of this section with respect 

to such performance requirements. 

(C) INCLUSION IN CONTRACTS.—All contractor performance requirements shall be set forth in the contract between 

the Secretary and the appropriate medicare administrative 

contractor. Such performance requirements—

(i) shall reflect the performance requirements developed under subparagraph (A), but may include additional performance requirements; 

(ii) shall be used for evaluating contractor performance under the contract; and 

(iii) shall be consistent with the written statement of 

work provided under the contract. 

(4) INFORMATION REQUIREMENTS.—The Secretary shall not 

enter into a contract with a medicare administrative contractor 

under this section unless the contractor agrees—

112

(A) to furnish to the Secretary such timely information 

and reports as the Secretary may find necessary in performing his functions under this title; and 

(B) to maintain such records and afford such access 

thereto as the Secretary finds necessary to assure the correctness and verification of the information and reports 

under subparagraph (A) and otherwise to carry out the 

purposes of this title. 

(5) SURETY BOND.—A contract with a medicare administrative contractor under this section may require the medicare administrative contractor, and any of its officers or employees certifying payments or disbursing funds pursuant to the contract, 

or otherwise participating in carrying out the contract, to give 

surety bond to the United States in such amount as the Secretary may deem appropriate. 

(c) TERMS AND CONDITIONS.— (1) IN GENERAL.—A contract with any medicare administrative contractor under this section may contain such terms and 

conditions as the Secretary finds necessary or appropriate and 

may provide for advances of funds to the medicare administrative contractor for the making of payments by it under subsection (a)(4)(B). 

(2) PROHIBITION ON MANDATES FOR CERTAIN DATA COLLEC- TION.—The Secretary may not require, as a condition of entering into, or renewing, a contract under this section, that the 

medicare administrative contractor match data obtained other 

than in its activities under this title with data used in the administration of this title for purposes of identifying situations 

in which the provisions of section 1862(b) may apply. 

(d) LIMITATION ON LIABILITY OF MEDICARE ADMINISTRATIVE CON- TRACTORS AND CERTAIN OFFICERS.— (1) CERTIFYING OFFICER.—No individual designated pursuant 

to a contract under this section as a certifying officer shall, in 

the absence of the reckless disregard of the individual’s obligations or the intent by that individual to defraud the United 

States, be liable with respect to any payments certified by the 

individual under this section. 

(2) DISBURSING OFFICER.—No disbursing officer shall, in the 

absence of the reckless disregard of the officer’s obligations or 

the intent by that officer to defraud the United States, be liable 

with respect to any payment by such officer under this section 

if it was based upon an authorization (which meets the applicable requirements for such internal controls established by the 

Comptroller General) of a certifying officer designated as provided in paragraph (1) of this subsection. 

(3) LIABILITY OF MEDICARE ADMINISTRATIVE CONTRACTOR.—

(A) IN GENERAL.—No medicare administrative contractor 

shall be liable to the United States for a payment by a certifying or disbursing officer unless, in connection with such payment, the medicare administrative contractor acted with reckless disregard of its obligations under its medicare administrative contract or with intent to defraud the United States. 

(B) RELATIONSHIP TO FALSE CLAIMS ACT.—Nothing in this 

subsection shall be construed to limit liability for conduct that 

would constitute a violation of sections 3729 through 3731 of 

113

title 31, United States Code (commonly known as the ‘‘False 

Claims Act’’). 

(4) INDEMNIFICATION BY SECRETARY.— (A) IN GENERAL.—Subject to subparagraphs (B) and (D), 

in the case of a medicare administrative contractor (or a 

person who is a director, officer, or employee of such a contractor or who is engaged by the contractor to participate 

directly in the claims administration process) who is made 

a party to any judicial or administrative proceeding arising 

from or relating directly to the claims administration process under this title, the Secretary may, to the extent the Secretary determines to be appropriate and as specified in the 

contract with the contractor, indemnify the contractor and 

such persons. 

(B) CONDITIONS.—The Secretary may not provide indemnification under subparagraph (A) insofar as the liability 

for such costs arises directly from conduct that is determined by the judicial proceeding or by the Secretary to be 

criminal in nature, fraudulent, or grossly negligent. If indemnification is provided by the Secretary with respect to 

a contractor before a determination that such costs arose 

directly from such conduct, the contractor shall reimburse 

the Secretary for costs of indemnification. 

(C) SCOPE OF INDEMNIFICATION.—Indemnification by the 

Secretary under subparagraph (A) may include payment of 

judgments, settlements (subject to subparagraph (D)), 

awards, and costs (including reasonable legal expenses). 

(D) WRITTEN APPROVAL FOR SETTLEMENTS.—A contractor 

or other person described in subparagraph (A) may not propose to negotiate a settlement or compromise of a proceeding described in such subparagraph without the prior 

written approval of the Secretary to negotiate such settlement or compromise. Any indemnification under subparagraph (A) with respect to amounts paid under a settlement 

or compromise of a proceeding described in such subparagraph are conditioned upon prior written approval by the 

Secretary of the final settlement or compromise. 

(E) CONSTRUCTION.—Nothing in this paragraph shall be 

construed— (i) to change any common law immunity that may be 

available to a medicare administrative contractor or 

person described in subparagraph (A); or 

(ii) to permit the payment of costs not otherwise allowable, reasonable, or allocable under the Federal Acquisition Regulations. 

(e) REQUIREMENTS FOR INFORMATION SECURITY.—

(1) DEVELOPMENT OF INFORMATION SECURITY PROGRAM.—A 

medicare administrative contractor that performs the functions 

referred to in subparagraphs (A) and (B) of subsection (a)(4) 

(relating to determining and making payments) shall implement a contractor-wide information security program to provide 

information security for the operation and assets of the contractor with respect to such functions under this title. An information security program under this paragraph shall meet the 

requirements for information security programs imposed on 

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Federal agencies under paragraphs (1) through (8) of section 

3544(b) of title 44, United States Code (other than the requirements under paragraph (2)(D)(i) of such section). 

(2) INDEPENDENT AUDITS.— (A) PERFORMANCE OF ANNUAL EVALUATIONS.—Each year 

a medicare administrative contractor that performs the 

functions referred to in subparagraphs (A) and (B) of subsection (a)(4) (relating to determining and making payments) shall undergo an evaluation of the information security of the contractor with respect to such functions under 

this title. The evaluation shall— (i) be performed by an entity that meets such requirements for independence as the Inspector General of the 

Department of Health and Human Services may establish; and 

(ii) test the effectiveness of information security control techniques of an appropriate subset of the contractor’s information systems (as defined in section 3502(8) 

of title 44, United States Code) relating to such functions under this title and an assessment of compliance 

with the requirements of this subsection and related information security policies, procedures, standards and 

guidelines, including policies and procedures as may 

be prescribed by the Director of the Office of Management and Budget and applicable information security 

standards promulgated under section 11331 of title 40, 

United States Code. 

(B) DEADLINE FOR INITIAL EVALUATION.— (i) NEW CONTRACTORS.—In the case of a medicare 

administrative contractor covered by this subsection 

that has not previously performed the functions referred to in subparagraphs (A) and (B) of subsection 

(a)(4) (relating to determining and making payments) 

as a fiscal intermediary or carrier under section 1816 

or 1842, the first independent evaluation conducted 

pursuant subparagraph (A) shall be completed prior to 

commencing such functions. 

(ii) OTHER CONTRACTORS.—In the case of a medicare 

administrative contractor covered by this subsection 

that is not described in clause (i), the first independent 

evaluation conducted pursuant subparagraph (A) shall 

be completed within 1 year after the date the contractor 

commences functions referred to in clause (i) under this 

section. 

(C) REPORTS ON EVALUATIONS.—

(i) TO THE DEPARTMENT OF HEALTH AND HUMAN

SERVICES.—The results of independent evaluations 

under subparagraph (A) shall be submitted promptly 

to the Inspector General of the Department of Health 

and Human Services and to the Secretary. 

(ii) TO CONGRESS.—The Inspector General of Department of Health and Human Services shall submit to 

Congress annual reports on the results of such evaluations, including assessments of the scope and sufficiency of such evaluations. 

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(iii) AGENCY REPORTING.—The Secretary shall address the results of such evaluations in reports required 

under section 3544(c) of title 44, United States Code. 

(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORMANCE IN PRO- VIDER EDUCATION AND OUTREACH.—The Secretary shall use specific 

claims payment error rates or similar methodology of medicare administrative contractors in the processing or reviewing of medicare 

claims in order to give such contractors an incentive to implement 

effective education and outreach programs for providers of services 

and suppliers. 

(g) COMMUNICATIONS WITH BENEFICIARIES, PROVIDERS OF SERV- ICES AND SUPPLIERS.— (1) COMMUNICATION STRATEGY.—The Secretary shall develop 

a strategy for communications with individuals entitled to benefits under part A or enrolled under part B, or both, and with 

providers of services and suppliers under this title. 

(2) RESPONSE TO WRITTEN INQUIRIES.—Each medicare administrative contractor shall, for those providers of services and 

suppliers which submit claims to the contractor for claims processing and for those individuals entitled to benefits under part 

A or enrolled under part B, or both, with respect to whom 

claims are submitted for claims processing, provide general 

written responses (which may be through electronic transmission) in a clear, concise, and accurate manner to inquiries 

of providers of services, suppliers and individuals entitled to 

benefits under part A or enrolled under part B, or both, concerning the programs under this title within 45 business days 

of the date of receipt of such inquiries. 

(3) RESPONSE TO TOLL-FREE LINES.—The Secretary shall ensure that each medicare administrative contractor shall provide, for those providers of services and suppliers which submit 

claims to the contractor for claims processing and for those individuals entitled to benefits under part A or enrolled under 

part B, or both, with respect to whom claims are submitted for 

claims processing, a toll-free telephone number at which such 

individuals, providers of services and suppliers may obtain information regarding billing, coding, claims, coverage, and other 

appropriate information under this title. 

(4) MONITORING OF CONTRACTOR RESPONSES.— (A) IN GENERAL.—Each medicare administrative contractor shall, consistent with standards developed by the 

Secretary under subparagraph (B)—

(i) maintain a system for identifying who provides 

the information referred to in paragraphs (2) and (3); 

and 

(ii) monitor the accuracy, consistency, and timeliness 

of the information so provided. 

(B) DEVELOPMENT OF STANDARDS.—

(i) IN GENERAL.—The Secretary shall establish and 

make public standards to monitor the accuracy, consistency, and timeliness of the information provided in 

response to written and telephone inquiries under this 

subsection. Such standards shall be consistent with the 

performance requirements established under subsection 

(b)(3). 

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(ii) EVALUATION.—In conducting evaluations of individual medicare administrative contractors, the Secretary shall take into account the results of the monitoring conducted under subparagraph (A) taking into 

account as performance requirements the standards established under clause (i). The Secretary shall, in consultation with organizations representing providers of 

services, suppliers, and individuals entitled to benefits 

under part A or enrolled under part B, or both, establish standards relating to the accuracy, consistency, 

and timeliness of the information so provided. 

(C) DIRECT MONITORING.—Nothing in this paragraph 

shall be construed as preventing the Secretary from directly 

monitoring the accuracy, consistency, and timeliness of the 

information so provided. 

(h) CONDUCT OF PREPAYMENT REVIEW.—

(1) CONDUCT OF RANDOM PREPAYMENT REVIEW.—

(A) IN GENERAL.—A medicare administrative contractor 

may conduct random prepayment review only to develop a 

contractor-wide or program-wide claims payment error 

rates or under such additional circumstances as may be 

provided under regulations, developed in consultation with 

providers of services and suppliers. 

(B) USE OF STANDARD PROTOCOLS WHEN CONDUCTING

PREPAYMENT REVIEWS.—When a medicare administrative 

contractor conducts a random prepayment review, the contractor may conduct such review only in accordance with a 

standard protocol for random prepayment audits developed 

by the Secretary. 

(C) CONSTRUCTION.—Nothing in this paragraph shall be 

construed as preventing the denial of payments for claims 

actually reviewed under a random prepayment review. 

(D) RANDOM PREPAYMENT REVIEW.—For purposes of this 

subsection, the term ‘‘random prepayment review’’ means a 

demand for the production of records or documentation absent cause with respect to a claim. 

(2) LIMITATIONS ON NON-RANDOM PREPAYMENT REVIEW.—

(A) LIMITATIONS ON INITIATION OF NON-RANDOM PREPAYMENT REVIEW.—A medicare administrative contractor may 

not initiate non-random prepayment review of a provider of 

services or supplier based on the initial identification by 

that provider of services or supplier of an improper billing 

practice unless there is a likelihood of sustained or high 

level of payment error (as defined in subsection (i)(3)(A)). 

(B) TERMINATION OF NON-RANDOM PREPAYMENT REVIEW.—The Secretary shall issue regulations relating to the 

termination, including termination dates, of non-random 

prepayment review. Such regulations may vary such a termination date based upon the differences in the circumstances triggering prepayment review.

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PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

SEC. 1889. (a) COORDINATION OF EDUCATION FUNDING.—The Secretary shall coordinate the educational activities provided through 

medicare contractors (as defined in subsection (g), including under 

section 1893) in order to maximize the effectiveness of Federal education efforts for providers of services and suppliers. 

(b) ENHANCED EDUCATION AND TRAINING.—

(1) ADDITIONAL RESOURCES.—There are authorized to be appropriated to the Secretary (in appropriate part from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund) $25,000,000 for each 

of fiscal years 2005 and 2006 and such sums as may be necessary for succeeding fiscal years. 

(2) USE.—The funds made available under paragraph (1) 

shall be used to increase the conduct by medicare contractors of 

education and training of providers of services and suppliers regarding billing, coding, and other appropriate items and may 

also be used to improve the accuracy, consistency, and timeliness of contractor responses. 

(c) TAILORING EDUCATION AND TRAINING ACTIVITIES FOR SMALL

PROVIDERS OR SUPPLIERS.—

(1) IN GENERAL.—Insofar as a medicare contractor conducts 

education and training activities, it shall tailor such activities 

to meet the special needs of small providers of services or suppliers (as defined in paragraph (2)). 

(2) SMALL PROVIDER OF SERVICES OR SUPPLIER.—In this subsection, the term ‘‘small provider of services or supplier’’

means—

(A) a provider of services with fewer than 25 full-timeequivalent employees; or 

(B) a supplier with fewer than 10 full-time-equivalent 

employees. 

(d) INTERNET SITES; FAQS.—The Secretary, and each medicare 

contractor insofar as it provides services (including claims processing) for providers of services or suppliers, shall maintain an 

Internet site which—

(1) provides answers in an easily accessible format to frequently asked questions, and 

(2) includes other published materials of the contractor, 

that relate to providers of services and suppliers under the programs under this title (and title XI insofar as it relates to such programs). 

(e) ENCOURAGEMENT OF PARTICIPATION IN EDUCATION PROGRAM

ACTIVITIES.—A medicare contractor may not use a record of attendance at (or failure to attend) educational activities or other information gathered during an educational program conducted under this 

section or otherwise by the Secretary to select or track providers of 

services or suppliers for the purpose of conducting any type of audit 

or prepayment review. 

(f) CONSTRUCTION.—Nothing in this section or section 1893(g) 

shall be construed as providing for disclosure by a medicare contractor of information that would compromise pending law enforcement activities or reveal findings of law enforcement-related audits. 

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(g) DEFINITIONS.—For purposes of this section, the term ‘‘medicare 

contractor’’ includes the following: 

(1) A medicare administrative contractor with a contract 

under section 1874A, including a fiscal intermediary with a 

contract under section 1816 and a carrier with a contract under 

section 1842. 

(2) An eligible entity with a contract under section 1893. 

Such term does not include, with respect to activities of a specific 

provider of services or supplier an entity that has no authority 

under this title or title IX with respect to such activities and such 

provider of services or supplier.

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MEDICARE INTEGRITY PROGRAM

SEC. 1893. (a)***

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(f) RECOVERY OF OVERPAYMENTS.— (1) USE OF REPAYMENT PLANS.— (A) IN GENERAL.—If the repayment, within 30 days by a 

provider of services or supplier, of an overpayment under 

this title would constitute a hardship (as defined in subparagraph (B)), subject to subparagraph (C), upon request 

of the provider of services or supplier the Secretary shall 

enter into a plan with the provider of services or supplier 

for the repayment (through offset or otherwise) of such overpayment over a period of at least 6 months but not longer 

than 3 years (or not longer than 5 years in the case of extreme hardship, as determined by the Secretary). Interest 

shall accrue on the balance through the period of repayment. Such plan shall meet terms and conditions determined to be appropriate by the Secretary. 

(B) HARDSHIP.— (i) IN GENERAL.—For purposes of subparagraph (A), 

the repayment of an overpayment (or overpayments) 

within 30 days is deemed to constitute a hardship if—

(I) in the case of a provider of services that files 

cost reports, the aggregate amount of the overpayments exceeds 10 percent of the amount paid under 

this title to the provider of services for the cost reporting period covered by the most recently submitted cost report; or 

(II) in the case of another provider of services or 

supplier, the aggregate amount of the overpayments exceeds 10 percent of the amount paid under 

this title to the provider of services or supplier for 

the previous calendar year. 

(ii) RULE OF APPLICATION.—The Secretary shall establish rules for the application of this subparagraph 

in the case of a provider of services or supplier that 

was not paid under this title during the previous year 

or was paid under this title only during a portion of 

that year. 

(iii) TREATMENT OF PREVIOUS OVERPAYMENTS.—If a 

provider of services or supplier has entered into a reVerDate Jan 31 2003 10:29 May 01, 2003 Jkt 086720 PO 00000 Frm 00118 Fmt 6659 Sfmt 6603 E:\HR\OC\HR074P2.XXX HR074P2
119

payment plan under subparagraph (A) with respect to 

a specific overpayment amount, such payment amount 

under the repayment plan shall not be taken into account under clause (i) with respect to subsequent overpayment amounts. 

(C) EXCEPTIONS.—Subparagraph (A) shall not apply if— (i) the Secretary has reason to suspect that the provider of services or supplier may file for bankruptcy or 

otherwise cease to do business or discontinue participation in the program under this title; or 

(ii) there is an indication of fraud or abuse committed against the program. 

(D) IMMEDIATE COLLECTION IF VIOLATION OF REPAYMENT

PLAN.—If a provider of services or supplier fails to make a 

payment in accordance with a repayment plan under this 

paragraph, the Secretary may immediately seek to offset or 

otherwise recover the total balance outstanding (including 

applicable interest) under the repayment plan. 

(E) RELATION TO NO FAULT PROVISION.—Nothing in this 

paragraph shall be construed as affecting the application of 

section 1870(c) (relating to no adjustment in the cases of 

certain overpayments). 

(2) LIMITATION ON RECOUPMENT.— (A) IN GENERAL.—In the case of a provider of services or 

supplier that is determined to have received an overpayment under this title and that seeks a reconsideration by a 

qualified independent contractor on such determination 

under section 1869(b)(1), the Secretary may not take any 

action (or authorize any other person, including any medicare contractor, as defined in subparagraph (C)) to recoup 

the overpayment until the date the decision on the reconsideration has been rendered. If the provisions of section 

1869(b)(1) (providing for such a reconsideration by a qualified independent contractor) are not in effect, in applying 

the previous sentence any reference to such a reconsideration shall be treated as a reference to a redetermination by 

the fiscal intermediary or carrier involved. 

(B) COLLECTION WITH INTEREST.—Insofar as the determination on such appeal is against the provider of services 

or supplier, interest on the overpayment shall accrue on 

and after the date of the original notice of overpayment. Insofar as such determination against the provider of services 

or supplier is later reversed, the Secretary shall provide for 

repayment of the amount recouped plus interest at the same 

rate as would apply under the previous sentence for the period in which the amount was recouped. 

(C) MEDICARE CONTRACTOR DEFINED.—For purposes of 

this subsection, the term ‘‘medicare contractor’’ has the 

meaning given such term in section 1889(g). 

(3) LIMITATION ON USE OF EXTRAPOLATION.—A medicare contractor may not use extrapolation to determine overpayment 

amounts to be recovered by recoupment, offset, or otherwise unless— (A) there is a sustained or high level of payment error (as 

defined by the Secretary by regulation); or 

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(B) documented educational intervention has failed to 

correct the payment error (as determined by the Secretary). 

(4) PROVISION OF SUPPORTING DOCUMENTATION.—In the case 

of a provider of services or supplier with respect to which 

amounts were previously overpaid, a medicare contractor may 

request the periodic production of records or supporting documentation for a limited sample of submitted claims to ensure 

that the previous practice is not continuing. 

(5) CONSENT SETTLEMENT REFORMS.—

(A) IN GENERAL.—The Secretary may use a consent settlement (as defined in subparagraph (D)) to settle a projected 

overpayment. 

(B) OPPORTUNITY TO SUBMIT ADDITIONAL INFORMATION

BEFORE CONSENT SETTLEMENT OFFER.—Before offering a 

provider of services or supplier a consent settlement, the 

Secretary shall—

(i) communicate to the provider of services or supplier—

(I) that, based on a review of the medical records 

requested by the Secretary, a preliminary evaluation of those records indicates that there would be 

an overpayment; 

(II) the nature of the problems identified in such 

evaluation; and 

(III) the steps that the provider of services or 

supplier should take to address the problems; and 

(ii) provide for a 45-day period during which the provider of services or supplier may furnish additional information concerning the medical records for the 

claims that had been reviewed. 

(C) CONSENT SETTLEMENT OFFER.—The Secretary shall 

review any additional information furnished by the provider of services or supplier under subparagraph (B)(ii). 

Taking into consideration such information, the Secretary 

shall determine if there still appears to be an overpayment. 

If so, the Secretary—

(i) shall provide notice of such determination to the 

provider of services or supplier, including an explanation of the reason for such determination; and 

(ii) in order to resolve the overpayment, may offer the 

provider of services or supplier—

(I) the opportunity for a statistically valid random sample; or 

(II) a consent settlement. 

The opportunity provided under clause (ii)(I) does not 

waive any appeal rights with respect to the alleged overpayment involved. 

(D) CONSENT SETTLEMENT DEFINED.—For purposes of 

this paragraph, the term ‘‘consent settlement’’ means an 

agreement between the Secretary and a provider of services 

or supplier whereby both parties agree to settle a projected 

overpayment based on less than a statistically valid sample 

of claims and the provider of services or supplier agrees not 

to appeal the claims involved. 

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(6) NOTICE OF OVER-UTILIZATION OF CODES.—The Secretary 

shall establish, in consultation with organizations representing 

the classes of providers of services and suppliers, a process 

under which the Secretary provides for notice to classes of providers of services and suppliers served by the contractor in cases 

in which the contractor has identified that particular billing 

codes may be overutilized by that class of providers of services 

or suppliers under the programs under this title (or provisions 

of title XI insofar as they relate to such programs). 

(7) PAYMENT AUDITS.— (A) WRITTEN NOTICE FOR POST-PAYMENT AUDITS.—Subject to subparagraph (C), if a medicare contractor decides 

to conduct a post-payment audit of a provider of services or 

supplier under this title, the contractor shall provide the 

provider of services or supplier with written notice (which 

may be in electronic form) of the intent to conduct such an 

audit. 

(B) EXPLANATION OF FINDINGS FOR ALL AUDITS.—Subject 

to subparagraph (C), if a medicare contractor audits a provider of services or supplier under this title, the contractor 

shall—

(i) give the provider of services or supplier a full review and explanation of the findings of the audit in a 

manner that is understandable to the provider of services or supplier and permits the development of an appropriate corrective action plan; 

(ii) inform the provider of services or supplier of the 

appeal rights under this title as well as consent settlement options (which are at the discretion of the Secretary); 

(iii) give the provider of services or supplier an opportunity to provide additional information to the contractor; and 

(iv) take into account information provided, on a 

timely basis, by the provider of services or supplier 

under clause (iii). 

(C) EXCEPTION.—Subparagraphs (A) and (B) shall not 

apply if the provision of notice or findings would compromise pending law enforcement activities, whether civil 

or criminal, or reveal findings of law enforcement-related 

audits. 

(8) STANDARD METHODOLOGY FOR PROBE SAMPLING.—The 

Secretary shall establish a standard methodology for medicare 

contractors to use in selecting a sample of claims for review in 

the case of an abnormal billing pattern. 

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