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103D CONGRESS

1ST SESSION H. R. 345

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

the ban on physician referrals to health care providers with which the

physician has a financial relationship.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

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

Committees on Ways and Means and Energy and Commerce

APRIL 1, 1993

Additional sponsor: Mr. LEVIN

A BILL

To amend title XVIII of the Social Security Act to extend

and improve the ban on physician referrals to health

care providers with which the physician has a financial

relationship.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Comprehensive Physi5 cian Ownership and Referral Act of 1993’’.
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1 SEC. 2. APPLICATION OF MEDICARE BAN ON SELF-REFER2 RALS TO ALL PAYORS.

3 Section 1877 of the Social Security Act (42 U.S.C.

4 1395nn) is amended—

5 (1) in subsection (a)—

6 (A) in paragraph (1)(A), by striking ‘‘for

7 which payment otherwise may be made under

8 this title’’ and inserting ‘‘for which a charge is

9 imposed’’, and

10 (B) in paragraph (1)(B), by striking

11 ‘‘under this title’’;

12 (2) by amending paragraph (1) of subsection

13 (g) to read as follows:

14 ‘‘(1) DENIAL OF PAYMENT.—No payment may

15 be made under this title, under another Federal

16 health care program, or under a State health care

17 program (as defined in section 1128(h)) for a des18 ignated health service for which a claim is presented

19 in violation of subsection (a)(1)(B). No individual,

20 third party payor, or other entity is liable for pay21 ment for designated health services for which a

22 claim is presented in violation of such subsection.’’;

23 and

24 (3) in subsection (g)(3), by striking ‘‘for which

25 payment may not be made under paragraph (1)’’
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1 and inserting ‘‘for which such a claim may not be

2 presented under subsection (a)(1)’’.

3 SEC. 3. EXTENSION OF SELF-REFERRAL BAN TO ADDI4 TIONAL SPECIFIED SERVICES.

5 (a) IN GENERAL.—Section 1877 of the Social Secu6 rity Act is further amended—

7 (1) by striking ‘‘clinical laboratory services’’

8 and ‘‘CLINICAL LABORATORY SERVICES’’ and insert9 ing ‘‘designated health services’’ and ‘‘DESIGNATED

10 HEALTH SERVICES’’, respectively, each place either

11 appears in subsections (a)(1), (b)(2)(A)(ii)(I),

12 (b)(4), (d)(1), (d)(2), and (d)(3), and

13 (2) by adding at the end the following new sub14 section:

15 ‘‘(i) DESIGNATED HEALTH SERVICES DEFINED.—In

16 this section, the term ‘designated health services’ means—

17 ‘‘(1) clinical laboratory services;

18 ‘‘(2) physical therapy services;

19 ‘‘(3) radiology services, including magnetic reso20 nance imaging, computerized axial tomography

21 scans, and ultrasound services;

22 ‘‘(4) radiation therapy services;

23 ‘‘(5) the furnishing of durable medical equip24 ment;
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1 ‘‘(6) the furnishing of parenteral and enteral

2 nutrition equipment and supplies;

3 ‘‘(7) the furnishing of outpatient prescription

4 drugs;

5 ‘‘(8) ambulance services;

6 ‘‘(9) home infusion therapy services;

7 ‘‘(10) occupational therapy services; and

8 ‘‘(11) inpatient and outpatient hospital services

9 (including services furnished at a psychiatric or re10 habilitation hospital).’’.

11 (b) CONFORMING AMENDMENTS.—Section 1877 of

12 such Act is further amended—

13 (1) in subsection (d)(2), by striking ‘‘labora14 tory’’ and inserting ‘‘entity’’,

15 (2) in subsection (g)(1), by striking ‘‘clinical

16 laboratory service’’ and inserting ‘‘designated health

17 service’’, and

18 (3) in subsection (h)(7)(B), by striking ‘‘clinical

19 laboratory service’’ and inserting ‘‘designated health

20 service’’.

21 SEC. 4. CHANGES IN EXCEPTIONS AND OTHER PROVISIONS

22 RELATING TO COMPENSATION ARRANGE23 MENTS.

24 (a) MULTIPLE LOCATIONS FOR GROUP PRAC25 TICES.—Section 1877(b)(2)(A)(ii)(II) of the Social Secu-
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1 rity Act is amended by striking ‘‘centralized provision’’

2 and inserting ‘‘provision of some or all’’.

3 (b) TREATMENT OF COMPENSATION ARRANGE4 MENTS.—

5 (1) RENTAL OF OFFICE SPACE AND EQUIP6 MENT.—Paragraph (1) of section 1877(e) of such

7 Act is amended to read as follows:

8 ‘‘(1) RENTAL OF OFFICE SPACE; RENTAL OF

9 EQUIPMENT.—

10 ‘‘(A) OFFICE SPACE.—Payments made by

11 a lessee to a lessor for the use of premises if—

12 ‘‘(i) the lease is set out in writing,

13 signed by the parties, and specifies the

14 premises covered by the lease,

15 ‘‘(ii) the aggregate space rented or

16 leased is reasonable and necessary for the

17 legitimate business purposes of the lease or

18 rental,

19 ‘‘(iii) the lease provides for a term of

20 rental or lease for at least one year,

21 ‘‘(iv) in the case of a lease that is in22 tended to provide the lessee with access to

23 the premises for periodic intervals of time,

24 rather than on a full-time basis, the lease

25 specifies exactly the schedule of such inter-
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1 vals, their length, and the rent for such

2 intervals,

3 ‘‘(v) the rental charges over the term

4 of the lease are set in advance, are consist5 ent with fair market value, and are not de6 termined in a manner that takes into ac7 count the volume or value of any referrals

8 or other business generated between the

9 parties,

10 ‘‘(vi) the lease would be commercially

11 reasonable even if no referrals were made

12 between the parties, and

13 ‘‘(vii) the compensation arrangement

14 meets such other requirements as the Sec15 retary may impose by regulation as needed

16 to protect against program or patient

17 abuse.

18 ‘‘(B) EQUIPMENT.—Payments made by a

19 lessee of equipment to the lessor of the equip20 ment for the use of the equipment if—

21 ‘‘(i) the lease is set out in writing,

22 signed by the parties, and specifies the

23 equipment covered by the lease,
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1 ‘‘(ii) the equipment rented or leased is

2 reasonable and necessary for the legitimate

3 business purposes of the lease or rental,

4 ‘‘(iii) the lease provides for a term of

5 rental or lease of at least one year,

6 ‘‘(iv) in the case of a lease that is in7 tended to provide the lessee with use of the

8 equipment for periodic intervals of time,

9 rather than on a full-time basis, the lease

10 specifies exactly the schedule of such inter11 vals, their length, and the rent for such in12 tervals,

13 ‘‘(v) the rental charges over the term

14 of the lease are set in advance, are consist15 ent with fair market value, and are not de16 termined in a manner that takes into ac17 count the volume or value of any referrals

18 or other business generated between the

19 parties,

20 ‘‘(vi) the lease would be commercially

21 reasonable even if no referrals were made

22 between the parties, and

23 ‘‘(vii) the compensation arrangement

24 meets such other requirements as the Sec25 retary may impose by regulation as needed
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1 to protect against program or patient

2 abuse.’’.

3 (2) BONA FIDE EMPLOYMENT RELATION4 SHIPS.—Paragraph (2) of such section is amended—

5 (A) by striking ‘‘WITH HOSPITALS’’,

6 (B) by striking ‘‘An arrangement’’ and all

7 that follows through ‘‘if’’ and inserting ‘‘Any

8 amount paid by an employer to an employee

9 who has a bona fide employment relationship

10 with the employer for employment, or paid by

11 a hospital pursuant to an arrangement with a

12 physician (or immediate family member) for the

13 provision of administrative services, if’’,

14 (C) in subparagraphs (A), (B), and (D), by

15 striking ‘‘arrangement’’ and inserting ‘‘employ16 ment relationship or arrangement’’, and

17 (D) in subparagraph (C), by striking ‘‘to

18 the hospital’’.

19 (3) ADDITIONAL EXCEPTIONS.—Such sub20 section is further amended by adding at the end the

21 following new paragraphs:

22 ‘‘(7) PAYMENTS TO A PHYSICIAN FOR OTHER

23 ITEMS OR SERVICES.—

24 ‘‘(A) IN GENERAL.—Payments made by an

25 entity to a physician (or family member) who is
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1 not employed by the entity as compensation for

2 services specified in subparagraph (B), if—

3 ‘‘(i) the compensation agreement is

4 set out in writing and specifies the services

5 to be provided by the parties, the com6 pensation for each unit of service provided

7 under the agreement, and the schedule for

8 the provision of such services,

9 ‘‘(ii) the compensation paid over the

10 term of the agreement is consistent with

11 fair market value and is not determined in

12 a manner that takes into account the vol13 ume or value of any referrals or other busi14 ness generated between the parties,

15 ‘‘(iii) the compensation is provided

16 pursuant to an agreement which would be

17 commercially reasonable even if no refer18 rals were made to the entity, and

19 ‘‘(iv) the compensation arrangement

20 meets such other requirements as the Sec21 retary may impose by regulation as needed

22 to protect against program or patient

23 abuse.
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1 ‘‘(B) SPECIFIED SERVICES.—For purposes

2 of subparagraph (A), the services specified in

3 this subparagraph are any of the following:

4 ‘‘(i) Consultative services that—

5 ‘‘(I) relate to results that have

6 been obtained that are outside estab7 lished parameters, or are specifically

8 requested by the referring physician

9 on a specified patient,

10 ‘‘(II) are furnished by a physi11 cian other than the referring physi12 cian (or by another physician who is

13 a member of the same group prac14 tice), and

15 ‘‘(III) for which the physician

16 furnishes a written report for that

17 patient.

18 ‘‘(ii) Interpretation of tissue pathology

19 or Pap smear slides or the provision of

20 other cytology services.

21 ‘‘(iii) Phlebotomy services for pater22 nity or toxicology testing where the serv23 ices are furnished by a physician other

24 than the physician referring the individual

25 for such testing (or by another physician
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1 who is a member of the same group prac2 tice).

3 ‘‘(iv) Employment-related health care

4 services, including a payment by a self-in5 sured employer for services rendered to

6 employee applicants, employees, or their

7 families under the terms of a health bene8 fit plan.

9 ‘‘(v) Services as a clinical consultant

10 to the entity as required for certification of

11 the provider under section 353 of the Pub12 lic Health Service Act.

13 ‘‘(vi) Services required by local, State,

14 or Federal licensure, accreditation, or

15 other health and safety provisions.

16 ‘‘(vii) Services billed in the name of a

17 group practice provided by a physician

18 under contract to the group practice for

19 services not otherwise available directly

20 through a physician who is a member of

21 the group.

22 ‘‘(8) PAYMENTS BY A PHYSICIAN FOR ITEMS

23 AND SERVICES.—Payments made by a physician—

24 ‘‘(A) to a laboratory in exchange for the

25 provision of clinical laboratory services, or
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1 ‘‘(B) to an entity as compensation for

2 other items or services if the items or services

3 are furnished at a price that is consistent with

4 fair market value and are generally available to

5 referrors and non-referrors alike on similar

6 terms and conditions.

7 ‘‘(9) PAYMENTS FOR PATHOLOGY SERVICES OF

8 A GROUP PRACTICE.—Payments made to a group

9 practice for pathology services under an agreement

10 if—

11 ‘‘(A) the agreement is set out in writing

12 and specifies the services to be provided by the

13 parties and the compensation for services pro14 vided under the agreement,

15 ‘‘(B) the compensation paid over the term

16 of the agreement is consistent with fair market

17 value and is not determined in a manner that

18 takes into account the volume or value of any

19 referrals or other business generated between

20 the parties,

21 ‘‘(C) the compensation is provided pursu22 ant to an agreement which would be commer23 cially reasonable even if no referrals were made

24 to the entity; and
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1 ‘‘(D) the compensation arrangement be2 tween the parties meets such other require3 ments as the Secretary may impose by regula4 tion as needed to protect against program or

5 patient abuse.’’.

6 (c) TREATMENT OF GROUP PRACTICES.—

7 (1) USE OF BILLING NUMBERS, ETC.—Section

8 1877 of the Social Security Act is amended—

9 (A) in subsection (b)(2)(B), by inserting

10 ‘‘under a billing number assigned to the group

11 practice’’ after ‘‘member’’,

12 (B) in subsection (h)(4)(B), by inserting

13 ‘‘and under a billing number assigned to the

14 group’’ after ‘‘in the name of the group’’, and

15 (C) in subsection (h)(4)(C), by striking

16 ‘‘by members of the group’’.

17 (2) TREATMENT OF CLINICAL LABORATORY

18 SERVICES FURNISHED UNDER ARRANGEMENTS BE19 TWEEN HOSPITALS AND GROUP PRACTICES.—

20 (A) IN GENERAL.—Section 1877(h)(4) of

21 such Act is amended—

22 (i) in subparagraph (B) (as amended

23 by paragraph (1)(B)), by inserting ‘‘(or

24 are billed in the name of a hospital for

25 which the group provides clinical labora-
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1 tory services pursuant to an arrangement

2 that meets the requirements of subpara3 graph (B))’’ after ‘‘assigned to the group’’;

4 (ii) by redesignating subparagraphs

5 (A) through (D) as clauses (i) through

6 (iv), respectively;

7 (iii) by inserting ‘‘(A)’’ after ‘‘.—’’;

8 and

9 (iv) by adding at the end the following

10 new subparagraph:

11 ‘‘(B) The requirements of this subparagraph,

12 with respect to an arrangement for clinical labora13 tory services provided by the laboratory of a group

14 and billed in the name of a hospital, are that—

15 ‘‘(i) with respect to services provided to an

16 inpatient of the hospital, the arrangement is

17 pursuant to the provision of inpatient hospital

18 services under section 1861(b)(3);

19 ‘‘(ii) the arrangement began before Decem20 ber 19, 1989, and has continued in effect with21 out interruption since such date;

22 ‘‘(iii) the laboratory provides substantially

23 all of the clinical laboratory services to the hos24 pital’s patients;
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1 ‘‘(iv) the arrangement is pursuant to an

2 agreement that is set out in writing and that

3 specifies the services to be provided by the par4 ties and the compensation for services provided

5 under the agreement;

6 ‘‘(v) the compensation paid over the term

7 of the agreement is consistent with fair market

8 value and the compensation per unit of services

9 is fixed in advance and is not determined in a

10 manner that takes into account the volume or

11 value of any referrals or other business gen12 erated between the parties;

13 ‘‘(vi) the compensation is provided pursu14 ant to an agreement which would be commer15 cially reasonable even if no referrals were made

16 to the entity; and

17 ‘‘(vii) the arrangement between the parties

18 meets such other requirements as the Secretary

19 may impose by regulation as needed to protect

20 against program or patient abuse.’’.

21 (B) CONFORMING AMENDMENT.—Section

22 1877(b)(2)(B) of such Act is amended by in23 serting ‘‘(or by a hospital for which such a

24 group practice provides clinical laboratory serv25 ices pursuant to an arrangement that meets the
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1 requirements of subsection (h)(4)(B))’’ after

2 ‘‘by a group practice of which such physician is

3 a member’’.

4 (3) TREATMENT OF CERTAIN FACULTY PRAC5 TICE PLANS.—The last sentence of section

6 1877(h)(4)(A) of such Act, as redesignated by para7 graph (1)(A), is amended by inserting ‘‘, institution

8 of higher education, or medical school’’ after ‘‘hos9 pital’’.

10 (d) EXPANDING RURAL PROVIDER EXCEPTION TO

11 COVER COMPENSATION ARRANGEMENTS.—

12 (1) IN GENERAL.—Section 1877(b) of such Act

13 is further amended—

14 (A) by redesignating paragraph (5) as

15 paragraph (7), and

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

17 following new paragraph:

18 ‘‘(5) RURAL PROVIDERS.—In the case of des19 ignated services if—

20 ‘‘(A) the entity furnishing the services is in

21 a rural area (as defined in section

22 1886(d)(2)(D)), and

23 ‘‘(B) substantially all of the services fur24 nished by the entity to individuals entitled to
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1 benefits under this title are furnished to such

2 individuals who reside in such a rural area.’’.

3 (2) CONFORMING AMENDMENTS.—Section

4 1877(d) of such Act is amended—

5 (A) by striking paragraph (2), and

6 (B) by redesignating paragraph (3) as

7 paragraph (2).

8 (e) EXEMPTION OF COMPENSATION ARRANGEMENTS

9 INVOLVING CERTAIN TYPES OF REMUNERATION.—Sec10 tion 1877(h)(1) of such Act is amended—

11 (1) by striking subparagraph (B);

12 (2) in subparagraph (A), by inserting before the

13 period the following: ‘‘(other than an arrangement

14 involving only remuneration described in subpara15 graph (B))’’; and

16 (3) by adding at the end the following new sub17 paragraph:

18 ‘‘(B) Remuneration described in this subpara19 graph is any remuneration consisting of any of the

20 following:

21 ‘‘(i) The forgiveness of amounts owed for

22 inaccurate tests or procedures, mistakenly per23 formed tests or procedures, or the correction of

24 minor billing errors.
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1 ‘‘(ii) The provision of items, devices, or

2 supplies of minor value that are used to—

3 ‘‘(I) collect, transport, process, or

4 store specimens for the entity providing

5 the item, device, or supply, or

6 ‘‘(II) communicate the results of tests

7 or procedures for such entity.

8 ‘‘(iii) The furnishing by an entity of lab9 oratory services to a group practice affiliated

10 with the entity, if the entity provides all or sub11 stantially all of the clinical laboratory services

12 of the group practice.’’.

13 (f) MISCELLANEOUS AND TECHNICAL CORREC14 TIONS.—Section 1877 of such Act is amended—

15 (1) in the fourth sentence of subsection (f)—

16 (A) by striking ‘‘provided’’ and inserting

17 ‘‘furnished’’, and

18 (B) by striking ‘‘provides’’ and inserting

19 ‘‘furnish’’;

20 (2) in the fifth sentence of subsection (f)—

21 (A) by striking ‘‘providing’’ each place it

22 appears and inserting ‘‘furnishing’’,

23 (B) by striking ‘‘with respect to the provid24 ers’’ and inserting ‘‘with respect to the enti25 ties’’, and
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1 (C) by striking ‘‘diagnostic imaging serv2 ices of any type’’ and inserting ‘‘magnetic reso3 nance imaging, computerized axial tomography

4 scans, and ultrasound services’’; and

5 (3) in subsection (a)(2)(B), by striking ‘‘sub6 section (h)(1)(A)’’ and inserting ‘‘subsection (h)(1)’’.

7 SEC. 5. EFFECTIVE DATES.

8 (a) EXPANSION OF COVERAGE AND PAYORS.—The

9 amendments made by sections 2 and 3 shall apply with

10 respect to a referral by a physician for designated health

11 services (as described in section 1877(i) of the Social Se12 curity Act) made on or after the first day of the first

13 month beginning 2 years after the date of the enactment

14 of this Act.

15 (b) CHANGES IN EXCEPTIONS, ETC.—The amend16 ments made by section 4 shall apply to referrals made on

17 or after January 1, 1992.

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