II

104TH CONGRESS

1ST SESSION S. 245

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

purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 19 (legislative day, JANUARY 10), 1995

Mr. COHEN (for himself, Mr. DOLE, Mr. SIMPSON, Mr. STEVENS, Mr.

D’AMATO, Mr. GRAHAM, Mr. COATS, Mr. GREGG, Mr. WARNER, Mr.

NICKLES, Mr. PRYOR, Mr. BOND, Mr. CHAFEE, Mr. FORD, and Mr. DOMENICI) introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To provide for enhanced penalties for health care fraud,

and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Care Fraud Prevention Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—ALL-PAYER FRAUD AND ABUSE CONTROL PROGRAM
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Sec. 101. All-payer fraud and abuse control program.

Sec. 102. Application of certain Federal health anti-fraud and abuse sanctions

to all fraud and abuse against any health plan.

Sec. 103. Health care fraud and abuse guidance.

Sec. 104. Reporting of fraudulent actions under medicare.

TITLE II—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND

ABUSE

Sec. 201. Mandatory exclusion from participation in medicare and State health

care programs.

Sec. 202. Establishment of minimum period of exclusion for certain individuals

and entities subject to permissive exclusion from medicare and

State health care programs.

Sec. 203. Permissive exclusion of individuals with ownership or control interest

in sanctioned entities.

Sec. 204. Sanctions against practitioners and persons for failure to comply with

statutory obligations.

Sec. 205. Intermediate sanctions for medicare health maintenance organizations.

Sec. 206. Effective date.

TITLE III—ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 301. Establishment of the health care fraud and abuse data collection program.

TITLE IV—CIVIL MONETARY PENALTIES

Sec. 401. Civil monetary penalties.

TITLE V—AMENDMENTS TO CRIMINAL LAW

Sec. 501. Health care fraud.

Sec. 502. Forfeitures for Federal health care offenses.

Sec. 503. Injunctive relief relating to Federal health care offenses.

Sec. 504. Grand jury disclosure.

Sec. 505. False Statements.

Sec. 506. Voluntary disclosure program.

Sec. 507. Obstruction of criminal investigations of Federal health care offenses.

Sec. 508. Theft or embezzlement.

Sec. 509. Laundering of monetary instruments.

TITLE VI—PAYMENTS FOR STATE HEALTH CARE FRAUD

CONTROL UNITS

Sec. 601. Establishment of State fraud units.

Sec. 602. Requirements for State fraud units.

Sec. 603. Scope and purpose.

Sec. 604. Payments to States.
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1 TITLE I—ALL-PAYER FRAUD AND

2 ABUSE CONTROL PROGRAM

3 SEC. 101. ALL-PAYER FRAUD AND ABUSE CONTROL PRO4 GRAM.

5 (a) ESTABLISHMENT OF PROGRAM.—

6 (1) IN GENERAL.—Not later than January 1,

7 1996, the Secretary of Health and Human Services

8 (in this title referred to as the ‘‘Secretary’’), acting

9 through the Office of the Inspector General of the

10 Department of Health and Human Services, and the

11 Attorney General shall establish a program—

12 (A) to coordinate Federal, State, and local

13 law enforcement programs to control fraud and

14 abuse with respect to the delivery of and pay15 ment for health care in the United States,

16 (B) to conduct investigations, audits, eval17 uations, and inspections relating to the delivery

18 of and payment for health care in the United

19 States,

20 (C) to facilitate the enforcement of the

21 provisions of sections 1128, 1128A, and 1128B

22 of the Social Security Act and other statutes

23 applicable to health care fraud and abuse, and

24 (D) to provide for the modification and es25 tablishment of safe harbors and to issue inter-
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1 pretative rulings and special fraud alerts pursu2 ant to section 103.

3 (2) COORDINATION WITH HEALTH PLANS.—In

4 carrying out the program established under para5 graph (1), the Secretary and the Attorney General

6 shall consult with, and arrange for the sharing of

7 data with representatives of health plans.

8 (3) REGULATIONS.—

9 (A) IN GENERAL.—The Secretary and the

10 Attorney General shall by regulation establish

11 standards to carry out the program under para12 graph (1).

13 (B) INFORMATION STANDARDS.—

14 (i) IN GENERAL.—Such standards

15 shall include standards relating to the fur16 nishing of information by health plans,

17 providers, and others to enable the Sec18 retary and the Attorney General to carry

19 out the program (including coordination

20 with health plans under paragraph (2)).

21 (ii) CONFIDENTIALITY.—Such stand22 ards shall include procedures to assure

23 that such information is provided and uti24 lized in a manner that appropriately pro25 tects the confidentiality of the information
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1 and the privacy of individuals receiving

2 health care services and items.

3 (iii) QUALIFIED IMMUNITY FOR PRO4 VIDING INFORMATION.—The provisions of

5 section 1157(a) of the Social Security Act

6 (relating to limitation on liability) shall

7 apply to a person providing information to

8 the Secretary or the Attorney General in

9 conjunction with their performance of du10 ties under this section.

11 (C) DISCLOSURE OF OWNERSHIP INFOR12 MATION.—

13 (i) IN GENERAL.—Such standards

14 shall include standards relating to the dis15 closure of ownership information described

16 in clause (ii) by any entity providing health

17 care services and items.

18 (ii) OWNERSHIP INFORMATION DE19 SCRIBED.—The ownership information de20 scribed in this clause includes—

21 (I) a description of such items

22 and services provided by such entity;

23 (II) the names and unique physi24 cian identification numbers of all phy25 sicians with a financial relationship
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1 (as defined in section 1877(a)(2) of

2 the Social Security Act) with such en3 tity;

4 (III) the names of all other indi5 viduals with such an ownership or in6 vestment interest in such entity; and

7 (IV) any other ownership and re8 lated information required to be dis9 closed by such entity under section

10 1124 or section 1124A of the Social

11 Security Act, except that the Sec12 retary shall establish procedures

13 under which the information required

14 to be submitted under this subclause

15 will be reduced with respect to health

16 care provider entities that the Sec17 retary determines will be unduly bur18 dened if such entities are required to

19 comply fully with this subclause.

20 (4) AUTHORIZATION OF APPROPRIATIONS FOR

21 INVESTIGATORS AND OTHER PERSONNEL.—In addi22 tion to any other amounts authorized to be appro23 priated to the Secretary, the Attorney General, the

24 Director of the Federal Bureau of Investigation, and

25 the Inspectors General of the Departments of De-
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1 fense, Labor, and Veterans Affairs and of the Office

2 of Personnel Management, for health care anti-fraud

3 and abuse activities for a fiscal year, there are au4 thorized to be appropriated additional amounts,

5 from the Health Care Fraud and Abuse Account de6 scribed in subsection (b) of this section, as may be

7 necessary to enable the Secretary, the Attorney Gen8 eral, and such Inspectors General to conduct inves9 tigations and audits of allegations of health care

10 fraud and abuse and otherwise carry out the pro11 gram established under paragraph (1) in a fiscal

12 year.

13 (5) ENSURING ACCESS TO DOCUMENTATION.—

14 The Inspector General of the Department of Health

15 and Human Services is authorized to exercise the

16 authority described in paragraphs (4) and (5) of sec17 tion 6 of the Inspector General Act of 1978 (relating

18 to subpoenas and administration of oaths) with re19 spect to the activities under the all-payer fraud and

20 abuse control program established under this sub21 section to the same extent as such Inspector General

22 may exercise such authorities to perform the func23 tions assigned by such Act.

24 (6) AUTHORITY OF INSPECTOR GENERAL.—

25 Nothing in this Act shall be construed to diminish
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1 the authority of any Inspector General, including

2 such authority as provided in the Inspector General

3 Act of 1978.

4 (7) HEALTH PLAN DEFINED.—For the purposes

5 of this subsection, the term ‘‘health plan’’ shall have

6 the meaning given such term in section 1128(i) of

7 the Social Security Act.

8 (b) HEALTH CARE FRAUD AND ABUSE CONTROL AC9 COUNT.—

10 (1) ESTABLISHMENT.—

11 (A) IN GENERAL.—There is hereby estab12 lished an account to be known as the ‘‘Health

13 Care Fraud and Abuse Control Account’’ (in

14 this section referred to as the ‘‘Anti-Fraud Ac15 count’’). The Anti-Fraud Account shall consist

16 of—

17 (i) such gifts and bequests as may be

18 made as provided in subparagraph (B);

19 (ii) such amounts as may be deposited

20 in the Anti-Fraud Account as provided in

21 subsection (a)(4), sections 5441(b) and

22 5442(b), and title XI of the Social Security

23 Act; and
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1 (iii) such amounts as are transferred

2 to the Anti-Fraud Account under subpara3 graph (C).

4 (B) AUTHORIZATION TO ACCEPT GIFTS.—

5 The Anti-Fraud Account is authorized to accept

6 on behalf of the United States money gifts and

7 bequests made unconditionally to the Anti8 Fraud Account, for the benefit of the Anti9 Fraud Account or any activity financed through

10 the Anti-Fraud Account.

11 (C) TRANSFER OF AMOUNTS.—

12 (i) IN GENERAL.—The Secretary of

13 the Treasury shall transfer to the Anti14 Fraud Account an amount equal to the

15 sum of the following:

16 (I) Criminal fines imposed in

17 cases involving a Federal health care

18 offense (as defined in section

19 982(a)(6)(B) of title 18, United

20 States Code).

21 (ii) Administrative penalties and as22 sessments imposed under titles XI, XVIII,

23 and XIX of the Social Security Act (except

24 as otherwise provided by law).
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1 (iii) Amounts resulting from the for2 feiture of property by reason of a Federal

3 health care offense.

4 (iv) Penalties and damages imposed

5 under the False Claims Act (31 U.S.C.

6 3729 et seq.), in cases involving claims re7 lated to the provision of health care items

8 and services (other than funds awarded to

9 a relator or for restitution).

10 (2) USE OF FUNDS.—

11 (A) IN GENERAL.—Amounts in the Anti12 Fraud Account shall be available to carry out

13 the health care fraud and abuse control pro14 gram established under subsection (a) (includ15 ing the administration of the program), and

16 may be used to cover costs incurred in operat17 ing the program, including costs (including

18 equipment, salaries and benefits, and travel and

19 training) of—

20 (i) prosecuting health care matters

21 (through criminal, civil, and administrative

22 proceedings);

23 (ii) investigations;

24 (iii) financial and performance audits

25 of health care programs and operations;
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1 (iv) inspections and other evaluations;

2 and

3 (v) provider and consumer education

4 regarding compliance with the provisions of

5 this title.

6 (B) FUNDS USED TO SUPPLEMENT AGEN7 CY APPROPRIATIONS.—It is intended that dis8 bursements made from the Anti-Fraud Account

9 to any Federal agency be used to increase and

10 not supplant the recipient agency’s appro11 priated operating budget.

12 (3) ANNUAL REPORT.—The Secretary and the

13 Attorney General shall submit jointly an annual re14 port to Congress on the amount of revenue which is

15 generated and disbursed by the Anti-Fraud Account

16 in each fiscal year.

17 (4) USE OF FUNDS BY INSPECTOR GENERAL.—

18 (A) REIMBURSEMENTS FOR INVESTIGA19 TIONS.—The Inspector General is authorized to

20 receive and retain for current use reimburse21 ment for the costs of conducting investigations,

22 when such restitution is ordered by a court, vol23 untarily agreed to by the payer, or otherwise.

24 (B) CREDITING.—Funds received by the

25 Inspector General or the Inspectors General of
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1 the Departments of Defense, Labor, and Veter2 ans Affairs and of the Office of Personnel Man3 agement, as reimbursement for costs of con4 ducting investigations shall be deposited to the

5 credit of the appropriation from which initially

6 paid, or to appropriations for similar purposes

7 currently available at the time of deposit, and

8 shall remain available for obligation for 1 year

9 from the date of their deposit.

10 SEC. 102. APPLICATION OF CERTAIN FEDERAL HEALTH

11 ANTI-FRAUD AND ABUSE SANCTIONS TO

12 FRAUD AND ABUSE AGAINST ANY HEALTH

13 PLAN.

14 (a) CRIMES.—

15 (1) SOCIAL SECURITY ACT.—Section 1128B of

16 the Social Security Act (42 U.S.C. 1320a–7b) is

17 amended as follows:

18 (A) In the heading, by adding at the end

19 the following: ‘‘OR HEALTH PLANS’’.

20 (B) In subsection (a)(1)—

21 (i) by striking ‘‘title XVIII or’’ and

22 inserting ‘‘title XVIII,’’, and

23 (ii) by adding at the end the follow24 ing: ‘‘or a health plan (as defined in sec25 tion 1128(i)),’’.
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1 (C) In subsection (a)(5), by striking ‘‘title

2 XVIII or a State health care program’’ and in3 serting ‘‘title XVIII, a State health care pro4 gram, or a health plan’’.

5 (D) In the second sentence of subsection

6 (a)—

7 (i) by inserting after ‘‘title XIX’’ the

8 following: ‘‘or a health plan’’, and

9 (ii) by inserting after ‘‘the State’’ the

10 following: ‘‘or the plan’’.

11 (2) IDENTIFICATION OF COMMUNITY SERVICE

12 OPPORTUNITIES.—Section 1128B of such Act (42

13 U.S.C. 1320a–7b) is further amended by adding at

14 the end the following new subsection:

15 ‘‘(f) The Secretary may—

16 ‘‘(1) in consultation with State and local health

17 care officials, identify opportunities for the satisfac18 tion of community service obligations that a court

19 may impose upon the conviction of an offense under

20 this section, and

21 ‘‘(2) make information concerning such oppor22 tunities available to Federal and State law enforce23 ment officers and State and local health care

24 officials.’’.
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1 (b) HEALTH PLAN DEFINED.—Section 1128 of the

2 Social Security Act (42 U.S.C. 1320a–7) is amended by

3 redesignating subsection (i) as subsection (j) and by in4 serting after subsection (h) the following new subsection:

5 ‘‘(i) HEALTH PLAN DEFINED.—For purposes of sec6 tions 1128A and 1128B, the term ‘health plan’ means a

7 plan that provides health benefits, whether through di8 rectly, through insurance, or otherwise, and includes a pol9 icy of health insurance, a contract of a service benefit or10 ganization, or a membership agreement with a health

11 maintenance organization or other prepaid health plan,

12 and also includes an employee welfare benefit plan or a

13 multiple employer welfare plan (as such terms are defined

14 in section 3 of the Employee Retirement Income Security

15 Act of 1974).’’.

16 (c) EFFECTIVE DATE.—The amendments made by

17 this section shall take effect on January 1, 1996.

18 SEC. 103. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

19 (a) SOLICITATION AND PUBLICATION OF MODIFICA20 TIONS TO EXISTING SAFE HARBORS AND NEW SAFE

21 HARBORS.—

22 (1) IN GENERAL.—

23 (A) SOLICITATION OF PROPOSALS FOR

24 SAFE HARBORS.—Not later than January 1,

25 1996, and not less than annually thereafter, the
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1 Secretary shall publish a notice in the Federal

2 Register soliciting proposals, which will be ac3 cepted during a 60-day period, for—

4 (i) modifications to existing safe har5 bors issued pursuant to section 14(a) of

6 the Medicare and Medicaid Patient and

7 Program Protection Act of 1987 (42

8 U.S.C. 1320a–7b note);

9 (ii) additional safe harbors specifying

10 payment practices that shall not be treated

11 as a criminal offense under section

12 1128B(b) of the Social Security Act the

13 (42 U.S.C. 1320a–7b(b)) and shall not

14 serve as the basis for an exclusion under

15 section 1128(b)(7) of such Act (42 U.S.C.

16 1320a–7(b)(7));

17 (iii) interpretive rulings to be issued

18 pursuant to subsection (b); and

19 (iv) special fraud alerts to be issued

20 pursuant to subsection (c).

21 (B) PUBLICATION OF PROPOSED MODI22 FICATIONS AND PROPOSED ADDITIONAL SAFE

23 HARBORS.—After considering the proposals de24 scribed in clauses (i) and (ii) of subparagraph

25 (A), the Secretary, in consultation with the At-
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1 torney General, shall publish in the Federal

2 Register proposed modifications to existing safe

3 harbors and proposed additional safe harbors, if

4 appropriate, with a 60-day comment period.

5 After considering any public comments received

6 during this period, the Secretary shall issue

7 final rules modifying the existing safe harbors

8 and establishing new safe harbors, as appro9 priate.

10 (C) REPORT.—The Inspector General of

11 the Department of Health and Human Services

12 (hereafter in this section referred to as the ‘‘In13 spector General’’) shall, in an annual report to

14 Congress or as part of the year-end semiannual

15 report required by section 5 of the Inspector

16 General Act of 1978 (5 U.S.C. App.), describe

17 the proposals received under clauses (i) and (ii)

18 of subparagraph (A) and explain which propos19 als were included in the publication described in

20 subparagraph (B), which proposals were not in21 cluded in that publication, and the reasons for

22 the rejection of the proposals that were not in23 cluded.

24 (2) CRITERIA FOR MODIFYING AND ESTABLISH25 ING SAFE HARBORS.—In modifying and establishing
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1 safe harbors under paragraph (1)(B), the Secretary

2 may consider the extent to which providing a safe

3 harbor for the specified payment practice may result

4 in any of the following:

5 (A) An increase or decrease in access to

6 health care services.

7 (B) An increase or decrease in the quality

8 of health care services.

9 (C) An increase or decrease in patient free10 dom of choice among health care providers.

11 (D) An increase or decrease in competition

12 among health care providers.

13 (E) An increase or decrease in the ability

14 of health care facilities to provide services in

15 medically underserved areas or to medically un16 derserved populations.

17 (F) An increase or decrease in the cost to

18 Government health care programs.

19 (G) An increase or decrease in the poten20 tial overutilization of health care services.

21 (H) The existence or nonexistence of any

22 potential financial benefit to a health care pro23 fessional or provider which may vary based on

24 their decisions of—
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1 (i) whether to order a health care

2 item or service; or

3 (ii) whether to arrange for a referral

4 of health care items or services to a par5 ticular practitioner or provider.

6 (I) Any other factors the Secretary deems

7 appropriate in the interest of preventing fraud

8 and abuse in Government health care programs.

9 (b) INTERPRETIVE RULINGS.—

10 (1) IN GENERAL.—

11 (A) REQUEST FOR INTERPRETIVE RUL12 ING.—Any person may present, at any time, a

13 request to the Inspector General for a state14 ment of the Inspector General’s current inter15 pretation of the meaning of a specific aspect of

16 the application of sections 1128A and 1128B of

17 the Social Security Act (hereafter in this sec18 tion referred to as an ‘‘interpretive ruling’’).

19 (B) ISSUANCE AND EFFECT OF INTERPRE20 TIVE RULING.—

21 (i) IN GENERAL.—If appropriate, the

22 Inspector General shall in consultation

23 with the Attorney General, issue an inter24 pretive ruling in response to a request de25 scribed in subparagraph (A). Interpretive
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1 rulings shall not have the force of law and

2 shall be treated as an interpretive rule

3 within the meaning of section 553(b) of

4 title 5, United States Code. All interpretive

5 rulings issued pursuant to this provision

6 shall be published in the Federal Register

7 or otherwise made available for public in8 spection.

9 (ii) REASONS FOR DENIAL.—If the In10 spector General does not issue an interpre11 tive ruling in response to a request de12 scribed in subparagraph (A), the Inspector

13 General shall notify the requesting party of

14 such decision and shall identify the reasons

15 for such decision.

16 (2) CRITERIA FOR INTERPRETIVE RULINGS.—

17 (A) IN GENERAL.—In determining whether

18 to issue an interpretive ruling under paragraph

19 (1)(B), the Inspector General may consider—

20 (i) whether and to what extent the re21 quest identifies an ambiguity within the

22 language of the statute, the existing safe

23 harbors, or previous interpretive rulings;

24 and
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1 (ii) whether the subject of the re2 quested interpretive ruling can be ade3 quately addressed by interpretation of the

4 language of the statute, the existing safe

5 harbor rules, or previous interpretive rul6 ings, or whether the request would require

7 a substantive ruling not authorized under

8 this subsection.

9 (B) NO RULINGS ON FACTUAL ISSUES.—

10 The Inspector General shall not give an inter11 pretive ruling on any factual issue, including

12 the intent of the parties or the fair market

13 value of particular leased space or equipment.

14 (c) SPECIAL FRAUD ALERTS.—

15 (1) IN GENERAL.—

16 (A) REQUEST FOR SPECIAL FRAUD

17 ALERTS.—Any person may present, at any

18 time, a request to the Inspector General for a

19 notice which informs the public of practices

20 which the Inspector General considers to be

21 suspect or of particular concern under section

22 1128B(b) of the Social Security Act (42 U.S.C.

23 1320a–7b(b)) (hereafter in this subsection re24 ferred to as a ‘‘special fraud alert’’).
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1 (B) ISSUANCE AND PUBLICATION OF SPE2 CIAL FRAUD ALERTS.—Upon receipt of a re3 quest described in subparagraph (A), the In4 spector General shall investigate the subject

5 matter of the request to determine whether a

6 special fraud alert should be issued. If appro7 priate, the Inspector General shall in consulta8 tion with the Attorney General, issue a special

9 fraud alert in response to the request. All spe10 cial fraud alerts issued pursuant to this sub11 paragraph shall be published in the Federal

12 Register.

13 (2) CRITERIA FOR SPECIAL FRAUD ALERTS.—

14 In determining whether to issue a special fraud alert

15 upon a request described in paragraph (1), the In16 spector General may consider—

17 (A) whether and to what extent the prac18 tices that would be identified in the special

19 fraud alert may result in any of the con20 sequences described in subsection (a)(2); and

21 (B) the volume and frequency of the con22 duct that would be identified in the special

23 fraud alert.
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1 SEC. 104. REPORTING OF FRAUDULENT ACTIONS UNDER

2 MEDICARE.

3 Not later than 1 year after the date of the enactment

4 of this Act, the Secretary shall establish a program

5 through which individuals entitled to benefits under the

6 medicare program may report to the Secretary on a con7 fidential basis (at the individual’s request) instances of

8 suspected fraudulent actions arising under the program by

9 providers of items and services under the program.

10 TITLE II—REVISIONS TO CUR11 RENT SANCTIONS FOR FRAUD

12 AND ABUSE

13 SEC. 201. MANDATORY EXCLUSION FROM PARTICIPATION

14 IN MEDICARE AND STATE HEALTH CARE PRO15 GRAMS.

16 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

17 TO FRAUD.—

18 (1) IN GENERAL.—Section 1128(a) of the So19 cial Security Act (42 U.S.C. 1320a–7(a)) is amend20 ed by adding at the end the following new para21 graph:

22 ‘‘(3) FELONY CONVICTION RELATING TO

23 FRAUD.—Any individual or entity that has been con24 victed after the date of the enactment of the Health

25 Care Fraud Prevention Act of 1995, under Federal

26 or State law, in connection with the delivery of a
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1 health care item or service or with respect to any act

2 or omission in a program (other than those specifi3 cally described in paragraph (1)) operated by or fi4 nanced in whole or in part by any Federal, State, or

5 local government agency, of a criminal offense con6 sisting of a felony relating to fraud, theft, embezzle7 ment, breach of fiduciary responsibility, or other fi8 nancial misconduct.’’.

9 (2) CONFORMING AMENDMENT.—Section

10 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

11 is amended—

12 (A) in the heading, by striking ‘‘CONVIC13 TION’’ and inserting ‘‘MISDEMEANOR CONVIC14 TION’’; and

15 (B) by striking ‘‘criminal offense’’ and in16 serting ‘‘criminal offense consisting of a mis17 demeanor’’.

18 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

19 TO CONTROLLED SUBSTANCE.—

20 (1) IN GENERAL.—Section 1128(a) of the So21 cial Security Act (42 U.S.C. 1320a–7(a)), as amend22 ed by subsection (a), is amended by adding at the

23 end the following new paragraph:

24 ‘‘(4) FELONY CONVICTION RELATING TO CON25 TROLLED SUBSTANCE.—Any individual or entity
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1 that has been convicted after the date of the enact2 ment of the Health Care Fraud Prevention Act of

3 1995, under Federal or State law, of a criminal of4 fense consisting of a felony relating to the unlawful

5 manufacture, distribution, prescription, or dispens6 ing of a controlled substance.’’.

7 (2) CONFORMING AMENDMENT.—Section

8 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

9 is amended—

10 (A) in the heading, by striking ‘‘CONVIC11 TION’’ and inserting ‘‘MISDEMEANOR CONVIC12 TION’’; and

13 (B) by striking ‘‘criminal offense’’ and in14 serting ‘‘criminal offense consisting of a mis15 demeanor’’.

16 SEC. 202. ESTABLISHMENT OF MINIMUM PERIOD OF EX17 CLUSION FOR CERTAIN INDIVIDUALS AND

18 ENTITIES SUBJECT TO PERMISSIVE EXCLU19 SION FROM MEDICARE AND STATE HEALTH

20 CARE PROGRAMS.

21 Section 1128(c)(3) of the Social Security Act (42

22 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

23 the following new subparagraphs:

24 ‘‘(D) In the case of an exclusion of an individual or

25 entity under paragraph (1), (2), or (3) of subsection (b),
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1 the period of the exclusion shall be 3 years, unless the

2 Secretary determines in accordance with published regula3 tions that a shorter period is appropriate because of miti4 gating circumstances or that a longer period is appro5 priate because of aggravating circumstances.

6 ‘‘(E) In the case of an exclusion of an individual or

7 entity under subsection (b)(4) or (b)(5), the period of the

8 exclusion shall not be less than the period during which

9 the individual’s or entity’s license to provide health care

10 is revoked, suspended, or surrendered, or the individual

11 or the entity is excluded or suspended from a Federal or

12 State health care program.

13 ‘‘(F) In the case of an exclusion of an individual or

14 entity under subsection (b)(6)(B), the period of the exclu15 sion shall be not less than 1 year.’’.

16 SEC. 203. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

17 OWNERSHIP OR CONTROL INTEREST IN

18 SANCTIONED ENTITIES.

19 Section 1128(b) of the Social Security Act (42 U.S.C.

20 1320a–7(b)) is amended by adding at the end the follow21 ing new paragraph:

22 ‘‘(15) INDIVIDUALS CONTROLLING A SANC23 TIONED ENTITY.—Any individual who has a direct

24 or indirect ownership or control interest of 5 percent

25 or more, or an ownership or control interest (as de-
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1 fined in section 1124(a)(3)) in, or who is an officer,

2 director, agent, or managing employee (as defined in

3 section 1126(b)) of, an entity—

4 ‘‘(A) that has been convicted of any of5 fense described in subsection (a) or in para6 graph (1), (2), or (3) of this subsection;

7 ‘‘(B) against which a civil monetary pen8 alty has been assessed under section 1128A; or

9 ‘‘(C) that has been excluded from partici10 pation under a program under title XVIII or

11 under a State health care program.’’.

12 SEC. 204. SANCTIONS AGAINST PRACTITIONERS AND PER13 SONS FOR FAILURE TO COMPLY WITH STATU14 TORY OBLIGATIONS.

15 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI16 TIONERS AND PERSONS FAILING TO MEET STATUTORY

17 OBLIGATIONS.—

18 (1) IN GENERAL.—The second sentence of sec19 tion 1156(b)(1) of the Social Security Act (42

20 U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may

21 prescribe)’’ and inserting ‘‘may prescribe, except

22 that such period may not be less than 1 year)’’.

23 (2) CONFORMING AMENDMENT.—Section

24 1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is

25 amended by striking ‘‘shall remain’’ and inserting
27

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1 ‘‘shall (subject to the minimum period specified in

2 the second sentence of paragraph (1)) remain’’.

3 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI4 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

5 of the Social Security Act (42 U.S.C. 1320c–5(b)(1)) is

6 amended—

7 (1) in the second sentence, by striking ‘‘and de8 termines’’ and all that follows through ‘‘such obliga9 tions,’’; and

10 (2) by striking the third sentence.

11 SEC. 205. INTERMEDIATE SANCTIONS FOR MEDICARE

12 HEALTH MAINTENANCE ORGANIZATIONS.

13 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

14 ANY PROGRAM VIOLATIONS.—

15 (1) IN GENERAL.—Section 1876(i)(1) of the

16 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

17 amended by striking ‘‘the Secretary may terminate’’

18 and all that follows and inserting the following: ‘‘in

19 accordance with procedures established under para20 graph (9), the Secretary may at any time terminate

21 any such contract or may impose the intermediate

22 sanctions described in paragraph (6)(B) or (6)(C)

23 (whichever is applicable) on the eligible organization

24 if the Secretary determines that the organization—
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1 ‘‘(A) has failed substantially to carry out

2 the contract;

3 ‘‘(B) is carrying out the contract in a man4 ner inconsistent with the efficient and effective

5 administration of this section; or

6 ‘‘(C) no longer substantially meets the ap7 plicable conditions of subsections (b), (c), (e),

8 and (f).’’.

9 (2) OTHER INTERMEDIATE SANCTIONS FOR

10 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

11 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is

12 amended by adding at the end the following new

13 subparagraph:

14 ‘‘(C) In the case of an eligible organization for which

15 the Secretary makes a determination under paragraph (1)

16 the basis of which is not described in subparagraph (A),

17 the Secretary may apply the following intermediate sanc18 tions:

19 ‘‘(i) Civil money penalties of not more than

20 $25,000 for each determination under paragraph (1)

21 if the deficiency that is the basis of the determina22 tion has directly adversely affected (or has the sub23 stantial likelihood of adversely affecting) an individ24 ual covered under the organization’s contract.
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1 ‘‘(ii) Civil money penalties of not more than

2 $10,000 for each week beginning after the initiation

3 of procedures by the Secretary under paragraph (9)

4 during which the deficiency that is the basis of a de5 termination under paragraph (1) exists.

6 ‘‘(iii) Suspension of enrollment of individuals

7 under this section after the date the Secretary noti8 fies the organization of a determination under para9 graph (1) and until the Secretary is satisfied that

10 the deficiency that is the basis for the determination

11 has been corrected and is not likely to recur.’’.

12 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

13 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

14 is amended by adding at the end the following new

15 paragraph:

16 ‘‘(9) The Secretary may terminate a contract with an

17 eligible organization under this section or may impose the

18 intermediate sanctions described in paragraph (6) on the

19 organization in accordance with formal investigation and

20 compliance procedures established by the Secretary under

21 which—

22 ‘‘(A) the Secretary provides the organization

23 with the opportunity to develop and implement a

24 corrective action plan to correct the deficiencies that
30

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1 were the basis of the Secretary’s determination

2 under paragraph (1);

3 ‘‘(B) in deciding whether to impose sanctions,

4 the Secretary considers aggravating factors such as

5 whether an entity has a history of deficiencies or has

6 not taken action to correct deficiencies the Secretary

7 has brought to their attention;

8 ‘‘(C) there are no unreasonable or unnecessary

9 delays between the finding of a deficiency and the

10 imposition of sanctions; and

11 ‘‘(D) the Secretary provides the organization

12 with reasonable notice and opportunity for hearing

13 (including the right to appeal an initial decision) be14 fore imposing any sanction or terminating the con15 tract.’’.

16 (4) CONFORMING AMENDMENTS.—Section

17 1876(i)(6)(B) of such Act (42 U.S.C.

18 1395mm(i)(6)(B)) is amended by striking the sec19 ond sentence.

20 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA21 TIONS.—

22 (1) REQUIREMENT FOR WRITTEN AGREE23 MENT.—Section 1876(i)(7)(A) of the Social Security

24 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by
31

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1 striking ‘‘an agreement’’ and inserting ‘‘a written

2 agreement’’.

3 (2) DEVELOPMENT OF MODEL AGREEMENT.—

4 Not later than July 1, 1996, the Secretary shall de5 velop a model of the agreement that an eligible orga6 nization with a risk-sharing contract under section

7 1876 of the Social Security Act must enter into with

8 an entity providing peer review services with respect

9 to services provided by the organization under sec10 tion 1876(i)(7)(A) of such Act.

11 (3) REPORT BY GAO.—

12 (A) STUDY.—The Comptroller General of

13 the United States shall conduct a study of the

14 costs incurred by eligible organizations with

15 risk-sharing contracts under section 1876(b) of

16 such Act of complying with the requirement of

17 entering into a written agreement with an en18 tity providing peer review services with respect

19 to services provided by the organization, to20 gether with an analysis of how information gen21 erated by such entities is used by the Secretary

22 to assess the quality of services provided by

23 such eligible organizations.

24 (B) REPORT TO CONGRESS.—Not later

25 than July 1, 1998, the Comptroller General
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1 shall submit a report to the Committee on

2 Ways and Means and the Committee on Energy

3 and Commerce of the House of Representatives

4 and the Committee on Finance and the Special

5 Committee on Aging of the Senate on the study

6 conducted under subparagraph (A).

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply with respect to contract years be9 ginning on or after January 1, 1996.

10 SEC. 206. EFFECTIVE DATE.

11 The amendments made by this part shall take effect

12 January 1, 1996.

13 TITLE III—ADMINISTRATIVE

14 AND MISCELLANEOUS PROVI15 SIONS

16 SEC. 301. ESTABLISHMENT OF THE HEALTH CARE FRAUD

17 AND ABUSE DATA COLLECTION PROGRAM.

18 (a) GENERAL PURPOSE.—Not later than January 1,

19 1996, the Secretary shall establish a national health care

20 fraud and abuse data collection program for the reporting

21 of final adverse actions (not including settlements in which

22 no findings of liability have been made) against health

23 care providers, suppliers, or practitioners as required by

24 subsection (b), with access as set forth in subsection (c).

25 (b) REPORTING OF INFORMATION.—
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1 (1) IN GENERAL.—Each government agency

2 and health plan shall report any final adverse action

3 (not including settlements in which no findings of li4 ability have been made) taken against a health care

5 provider, supplier, or practitioner.

6 (2) INFORMATION TO BE REPORTED.—The in7 formation to be reported under paragraph (1) in8 cludes:

9 (A) The name of any health care provider,

10 supplier, or practitioner who is the subject of a

11 final adverse action.

12 (B) The name (if known) of any health

13 care entity with which a health care provider,

14 supplier, or practitioner is affiliated or associ15 ated.

16 (C) The nature of the final adverse action.

17 (D) A description of the acts or omissions

18 and injuries upon which the final adverse action

19 was based, and such other information as the

20 Secretary determines by regulation is required

21 for appropriate interpretation of information re22 ported under this section.

23 (3) CONFIDENTIALITY.—In determining what

24 information is required, the Secretary shall include

25 procedures to assure that the privacy of individuals
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1 receiving health care services is appropriately pro2 tected.

3 (4) TIMING AND FORM OF REPORTING.—The

4 information required to be reported under this sub5 section shall be reported regularly (but not less often

6 than monthly) and in such form and manner as the

7 Secretary prescribes. Such information shall first be

8 required to be reported on a date specified by the

9 Secretary.

10 (5) TO WHOM REPORTED.—The information re11 quired to be reported under this subsection shall be

12 reported to the Secretary.

13 (c) DISCLOSURE AND CORRECTION OF INFORMA14 TION.—

15 (1) DISCLOSURE.—With respect to the informa16 tion about final adverse actions (not including settle17 ments in which no findings of liability have been

18 made) reported to the Secretary under this section

19 respecting a health care provider, supplier, or practi20 tioner, the Secretary shall, by regulation, provide

21 for—

22 (A) disclosure of the information, upon re23 quest, to the health care provider, supplier, or

24 licensed practitioner, and
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1 (B) procedures in the case of disputed ac2 curacy of the information.

3 (2) CORRECTIONS.—Each Government agency

4 and health plan shall report corrections of informa5 tion already reported about any final adverse action

6 taken against a health care provider, supplier, or

7 practitioner, in such form and manner that the Sec8 retary prescribes by regulation.

9 (d) ACCESS TO REPORTED INFORMATION.—

10 (1) AVAILABILITY.—The information in this

11 database shall be available to Federal and State gov12 ernment agencies and health plans pursuant to pro13 cedures that the Secretary shall provide by regula14 tion.

15 (2) FEES FOR DISCLOSURE.—The Secretary

16 may establish or approve reasonable fees for the dis17 closure of information in this database. The amount

18 of such a fee may not exceed the costs of processing

19 the requests for disclosure and of providing such in20 formation. Such fees shall be available to the Sec21 retary or, in the Secretary’s discretion to the agency

22 designated under this section to cover such costs.

23 (e) PROTECTION FROM LIABILITY FOR REPORT24 ING.—No person or entity, including the agency des25 ignated by the Secretary in subsection (b)(5) shall be held
36

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1 liable in any civil action with respect to any report made

2 as required by this section, without knowledge of the fal3 sity of the information contained in the report.

4 (f) DEFINITIONS AND SPECIAL RULES.—For pur5 poses of this section:

6 (1) The term ‘‘final adverse action’’ includes:

7 (A) Civil judgments against a health care

8 provider in Federal or State court related to the

9 delivery of a health care item or service.

10 (B) Federal or State criminal convictions

11 related to the delivery of a health care item or

12 service.

13 (C) Actions by Federal or State agencies

14 responsible for the licensing and certification of

15 health care providers, suppliers, and licensed

16 health care practitioners, including—

17 (i) formal or official actions, such as

18 revocation or suspension of a license (and

19 the length of any such suspension), rep20 rimand, censure or probation,

21 (ii) any other loss of license of the

22 provider, supplier, or practitioner, by oper23 ation of law, or
37

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1 (iii) any other negative action or find2 ing by such Federal or State agency that

3 is publicly available information.

4 (D) Exclusion from participation in Fed5 eral or State health care programs.

6 (E) Any other adjudicated actions or deci7 sions that the Secretary shall establish by regu8 lation.

9 (2) The terms ‘‘licensed health care practi10 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

11 mean, with respect to a State, an individual who is

12 licensed or otherwise authorized by the State to pro13 vide health care services (or any individual who,

14 without authority holds himself or herself out to be

15 so licensed or authorized).

16 (3) The term ‘‘health care provider’’ means a

17 provider of services as defined in section 1861(u) of

18 the Social Security Act, and any entity, including a

19 health maintenance organization, group medical

20 practice, or any other entity listed by the Secretary

21 in regulation, that provides health care services.

22 (4) The term ‘‘supplier’’ means a supplier of

23 health care items and services described in section

24 1819(a) and (b), and section 1861 of the Social Se25 curity Act.
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1 (5) The term ‘‘Government agency’’ shall in2 clude:

3 (A) The Department of Justice.

4 (B) The Department of Health and

5 Human Services.

6 (C) Any other Federal agency that either

7 administers or provides payment for the deliv8 ery of health care services, including, but not

9 limited to the Department of Defense and the

10 Veterans’ Administration.

11 (D) State law enforcement agencies.

12 (E) State medicaid fraud and abuse units.

13 (F) Federal or State agencies responsible

14 for the licensing and certification of health care

15 providers and licensed health care practitioners.

16 (6) The term ‘‘health plan’’ has the meaning

17 given to such term by section 1128(i) of the Social

18 Security Act.

19 (7) For purposes of paragraph (2), the exist20 ence of a conviction shall be determined under para21 graph (4) of section 1128(j) of the Social Security

22 Act.

23 (g) CONFORMING AMENDMENT.—Section 1921(d) of

24 the Social Security Act is amended by inserting ‘‘and sec25 tion 301 of the Health Care Fraud Prevention Act of
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1 1995’’ after ‘‘section 422 of the Health Care Quality Im2 provement Act of 1986’’.

3 TITLE IV—CIVIL MONETARY

4 PENALTIES

5 SEC. 401. CIVIL MONETARY PENALTIES.

6 (a) GENERAL CIVIL MONETARY PENALTIES.—Sec7 tion 1128A of the Social Security Act (42 U.S.C. 1320a–

8 7a) is amended as follows:

9 (1) In subsection (a)(1), by inserting ‘‘or of any

10 health plan (as defined in section 1128(i)),’’ after

11 ‘‘subsection (i)(1)),’’.

12 (2) In subsection (f)—

13 (A) by redesignating paragraph (3) as

14 paragraph (4); and

15 (B) by inserting after paragraph (2) the

16 following new paragraphs:

17 ‘‘(3) With respect to amounts recovered arising

18 out of a claim under a health plan, the portion of

19 such amounts as is determined to have been paid by

20 the plan shall be repaid to the plan, and the portion

21 of such amounts attributable to the amounts recov22 ered under this section by reason of the amendments

23 made by the Health Care Fraud Prevention Act of

24 1995 (as estimated by the Secretary) shall be depos25 ited into the Health Care Fraud and Abuse Control
40

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1 Account established under section 101(b) of such

2 Act.’’.

3 (3) In subsection (i)—

4 (A) in paragraph (2), by inserting ‘‘or

5 under a health plan’’ before the period at the

6 end, and

7 (B) in paragraph (5), by inserting ‘‘or

8 under a health plan’’ after ‘‘or XX’’.

9 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

10 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

11 Section 1128A(a) of the Social Security Act (42 U.S.C.

12 1320a–7a(a)) is amended—

13 (1) by striking ‘‘or’’ at the end of paragraph

14 (1)(D);

15 (2) by striking ‘‘, or’’ at the end of paragraph

16 (2) and inserting a semicolon;

17 (3) by striking the semicolon at the end of

18 paragraph (3) and inserting ‘‘; or’’; and

19 (4) by inserting after paragraph (3) the follow20 ing new paragraph:

21 ‘‘(4) in the case of a person who is not an orga22 nization, agency, or other entity, is excluded from

23 participating in a program under title XVIII or a

24 State health care program in accordance with this

25 subsection or under section 1128 and who, at the
41

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1 time of a violation of this subsection, retains a direct

2 or indirect ownership or control interest of 5 percent

3 or more, or an ownership or control interest (as de4 fined in section 1124(a)(3)) in, or who is an officer,

5 director, agent, or managing employee (as defined in

6 section 1126(b)) of, an entity that is participating in

7 a program under title XVIII or a State health care

8 program;’’.

9 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES

10 AND ASSESSMENTS.—Section 1128A(a) of the Social Se11 curity Act (42 U.S.C. 1320a–7a(a)), as amended by sub12 section (b), is amended in the matter following paragraph

13 (4)—

14 (1) by striking ‘‘$2,000’’ and inserting

15 ‘‘$10,000’’;

16 (2) by inserting ‘‘; in cases under paragraph

17 (4), $10,000 for each day the prohibited relationship

18 occurs’’ after ‘‘false or misleading information was

19 given’’; and

20 (3) by striking ‘‘twice the amount’’ and insert21 ing ‘‘3 times the amount’’.

22 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR23 RECT CODING OR MEDICALLY UNNECESSARY SERV24 ICES.—Section 1128A(a)(1) of the Social Security Act (42

25 U.S.C. 1320a–7a(a)(1)) is amended—
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1 (1) in subparagraph (A) by striking ‘‘claimed,’’

2 and inserting the following: ‘‘claimed, including any

3 person who repeatedly presents or causes to be pre4 sented a claim for an item or service that is based

5 on a code that the person knows or should know will

6 result in a greater payment to the person than the

7 code the person knows or should know is applicable

8 to the item or service actually provided,’’;

9 (2) in subparagraph (C), by striking ‘‘or’’ at

10 the end;

11 (3) in subparagraph (D), by striking ‘‘; or’’ and

12 inserting ‘‘, or’’; and

13 (4) by inserting after subparagraph (D) the fol14 lowing new subparagraph:

15 ‘‘(E) is for a medical or other item or serv16 ice that a person repeatedly knows or should

17 know is not medically necessary; or’’.

18 (e) PERMITTING SECRETARY TO IMPOSE CIVIL MON19 ETARY PENALTY.—Section 1128A(b) of the Social Secu20 rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding

21 the following new paragraph:

22 ‘‘(3) Any person (including any organization,

23 agency, or other entity, but excluding a beneficiary

24 as defined in subsection (i)(5)) who the Secretary

25 determines has violated section 1128B(b) of this
43

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1 title shall be subject to a civil monetary penalty of

2 not more than $10,000 for each such violation. In

3 addition, such person shall be subject to an assess4 ment of not more than twice the total amount of the

5 remuneration offered, paid, solicited, or received in

6 violation of section 1128B(b). The total amount of

7 remuneration subject to an assessment shall be cal8 culated without regard to whether some portion

9 thereof also may have been intended to serve a pur10 pose other than one proscribed by section

11 1128B(b).’’.

12 (f) SANCTIONS AGAINST PRACTITIONERS AND PER13 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI14 GATIONS.—Section 1156(b)(3) of the Social Security Act

15 (42 U.S.C. 1320c–5(b)(3)) is amended by striking ‘‘the

16 actual or estimated cost’’ and inserting the following: ‘‘up

17 to $10,000 for each instance’’.

18 (g) PROCEDURAL PROVISIONS.—Section 1876(i)(6)

19 of such Act (42 U.S.C. 1395mm(i)(6)) is further amended

20 by adding at the end the following new subparagraph:

21 ‘‘(D) The provisions of section 1128A (other than

22 subsections (a) and (b)) shall apply to a civil money pen23 alty under subparagraph (A) or (B) in the same manner

24 as they apply to a civil money penalty or proceeding under

25 section 1128A(a).’’.
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1 (h) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect January 1, 1996.

3 (i) PROHIBITION AGAINST OFFERING INDUCEMENTS

4 TO INDIVIDUALS ENROLLED UNDER PROGRAMS OR

5 PLANS.—

6 (1) OFFER OF REMUNERATION.—Section

7 1128A(a) of the Social Security Act (42 U.S.C.

8 1320a–7a(a)) is amended—

9 (A) by striking ‘‘or’’ at the end of para10 graph (1)(D);

11 (B) by striking ‘‘, or’’ at the end of para12 graph (2) and inserting a semicolon;

13 (C) by striking the semicolon at the end of

14 paragraph (3) and inserting ‘‘; or’’; and

15 (D) by inserting after paragraph (3) the

16 following new paragraph:

17 ‘‘(4) offers to or transfers remuneration to any

18 individual eligible for benefits under title XVIII of

19 this Act, or under a State health care program (as

20 defined in section 1128(h)) that such person knows

21 or should know is likely to influence such individual

22 to order or receive from a particular provider, practi23 tioner, or supplier any item or service for which pay24 ment may be made, in whole or in part, under title

25 XVIII, or a State health care program;’’.
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1 (2) REMUNERATION DEFINED.—Section

2 1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is

3 amended by adding the following new paragraph:

4 ‘‘(6) The term ‘remuneration’ includes the waiv5 er of coinsurance and deductible amounts (or any

6 part thereof), and transfers of items or services for

7 free or for other than fair market value. The term

8 ‘remuneration’ does not include—

9 ‘‘(A) the waiver of coinsurance and deduct10 ible amounts by a person, if—

11 ‘‘(i) the waiver is not offered as part

12 of any advertisement or solicitation;

13 ‘‘(ii) the person does not routinely

14 waive coinsurance or deductible amounts;

15 and

16 ‘‘(iii) the person—

17 ‘‘(I) waives the coinsurance and

18 deductible amounts after determining

19 in good faith that the individual is in

20 financial need;

21 ‘‘(II) fails to collect coinsurance

22 or deductible amounts after making

23 reasonable collection efforts; or

24 ‘‘(III) provides for any permis25 sible waiver as specified in section
46

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1 1128B(b)(3) or in regulations issued

2 by the Secretary;

3 ‘‘(B) differentials in coinsurance and de4 ductible amounts as part of a benefit plan de5 sign as long as the differentials have been dis6 closed in writing to all third party payors to

7 whom claims are presented and as long as the

8 differentials meet the standards as defined in

9 regulations promulgated by the Secretary; or

10 ‘‘(C) incentives given to individuals to pro11 mote the delivery of preventive care as deter12 mined by the Secretary in regulations.’’.

13 TITLE V—AMENDMENTS TO

14 CRIMINAL LAW

15 SEC. 501. HEALTH CARE FRAUD.

16 (a) IN GENERAL.—

17 (1) FINES AND IMPRISONMENT FOR HEALTH

18 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

19 United States Code, is amended by adding at the

20 end the following new section:

21 ‘‘§ 1347. Health care fraud

22 ‘‘(a) Whoever knowingly executes, or attempts to exe23 cute, a scheme or artifice—
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1 ‘‘(1) to defraud any health plan or other per2 son, in connection with the delivery of or payment

3 for health care benefits, items, or services; or

4 ‘‘(2) to obtain, by means of false or fraudulent

5 pretenses, representations, or promises, any of the

6 money or property owned by, or under the custody

7 or control of, any health plan, or person in connec8 tion with the delivery of or payment for health care

9 benefits, items, or services;

10 shall be fined under this title or imprisoned not more than

11 10 years, or both. If the violation results in serious bodily

12 injury (as defined in section 1365(g)(3) of this title), such

13 person shall be imprisoned for any term of years.

14 ‘‘(b) For purposes of this section, the term ‘health

15 plan’ has the same meaning given such term in section

16 1128(i) of the Social Security Act.’’.

17 (2) CLERICAL AMENDMENT.—The table of sec18 tions at the beginning of chapter 63 of title 18,

19 United States Code, is amended by adding at the

20 end the following:

‘‘1347. Health care fraud.’’.

21 (b) CRIMINAL FINES DEPOSITED IN THE HEALTH

22 CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec23 retary of the Treasury shall deposit into the Health Care

24 Fraud and Abuse Control Account established under sec25 tion 101(b) an amount equal to the criminal fines imposed
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1 under section 1347 of title 18, United States Code (relat2 ing to health care fraud).

3 SEC. 502. FORFEITURES FOR FEDERAL HEALTH CARE OF4 FENSES.

5 (a) IN GENERAL.—Section 982(a) of title 18, United

6 States Code, is amended by adding after paragraph (5)

7 the following new paragraph:

8 ‘‘(6)(A) The court, in imposing sentence on a person

9 convicted of a Federal health care offense, shall order the

10 person to forfeit property, real or personal, that—

11 ‘‘(i) is used in the commission of the offense if

12 the offense results in a financial loss or gain of

13 $50,000 or more; or

14 ‘‘(ii) constitutes or is derived from proceeds

15 traceable to the commission of the offense.

16 ‘‘(B) For purposes of this paragraph, the term ‘Fed17 eral health care offense’ means a violation of, or a criminal

18 conspiracy to violate—

19 ‘‘(i) section 1347 of this title;

20 ‘‘(ii) section 1128B of the Social Security Act;

21 ‘‘(iii) sections 287, 371, 664, 666, 1001, 1027,

22 1341, 1343, or 1954 of this title if the violation or

23 conspiracy relates to health care fraud; and
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1 ‘‘(iv) section 501 or 511 of the Employee Re2 tirement Income Security Act of 1974, if the viola3 tion or conspiracy relates to health care fraud.’’.

4 (b) PROPERTY FORFEITED DEPOSITED IN HEALTH

5 CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec6 retary of the Treasury shall deposit into the Health Care

7 Fraud and Abuse Control Account established under sec8 tion 101(b) an amount equal to amounts resulting from

9 forfeiture of property by reason of a Federal health care

10 offense pursuant to section 982(a)(6) of title 18, United

11 States Code.

12 SEC. 503. INJUNCTIVE RELIEF RELATING TO FEDERAL

13 HEALTH CARE OFFENSES.

14 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

15 United States Code, is amended—

16 (1) by striking ‘‘or’’ at the end of subparagraph

17 (A);

18 (2) by inserting ‘‘or’’ at the end of subpara19 graph (B); and

20 (3) by adding at the end the following:

21 ‘‘(C) committing or about to commit a

22 Federal health care offense (as defined in sec23 tion 982(a)(6)(B) of this title);’’.

24 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of

25 title 18, United States Code, is amended by inserting ‘‘or
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1 a Federal health care offense (as defined in section

2 982(a)(6)(B))’’ after ‘‘title)’’.

3 SEC. 504. GRAND JURY DISCLOSURE.

4 Section 3322 of title 18, United States Code, is

5 amended—

6 (1) by redesignating subsections (c) and (d) as

7 subsections (d) and (e), respectively; and

8 (2) by inserting after subsection (b) the follow9 ing:

10 ‘‘(c) A person who is privy to grand jury information

11 concerning a Federal health care offense (as defined in

12 section 982(a)(6)(B))—

13 ‘‘(1) received in the course of duty as an attor14 ney for the Government; or

15 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the

16 Federal Rules of Criminal Procedure;

17 may disclose that information to an attorney for the Gov18 ernment to use in any investigation or civil proceeding re19 lating to health care fraud.’’.

20 SEC. 505. FALSE STATEMENTS.

21 (a) IN GENERAL.—Chapter 47, of title 18, United

22 States Code, is amended by adding at the end the follow23 ing:
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1 ‘‘§ 1033. False statements relating to health care mat2 ters

3 ‘‘Whoever, in any matter involving a health plan,

4 knowingly and willfully falsifies, conceals, or covers up by

5 any trick, scheme, or device a material fact, or makes any

6 false, fictitious, or fraudulent statements or representa7 tions, or makes or uses any false writing or document

8 knowing the same to contain any false, fictitious, or fraud9 ulent statement or entry, shall be fined under this title

10 or imprisoned not more than 5 years, or both.’’.

11 (b) CLERICAL AMENDMENT.—The table of sections

12 at the beginning of chapter 47 of title 18, United States

13 Code, in amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.

14 SEC. 506. VOLUNTARY DISCLOSURE PROGRAM.

15 In consultation with the Attorney General of the

16 United States, the Secretary of Health and Human Serv17 ices shall publish proposed regulations not later than 9

18 months after the date of enactment of this Act, and final

19 regulations not later than 18 months after such date of

20 enactment, establishing a program of voluntary disclosure

21 that would facilitate the enforcement of sections 1128A

22 and 1128B of the Social Security Act (42 U.S.C. 1320a–

23 7a and 1320a–7b) and other relevant provisions of Fed24 eral law relating to health care fraud and abuse. Such pro25 gram should promote and provide incentives for disclo-
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1 sures of potential violations of such sections and provi2 sions by providing that, under certain circumstances, the

3 voluntary disclosure of wrongdoing would result in the im4 position of penalties and punishments less substantial

5 than those that would be assessed for the same wrong6 doing if voluntary disclosure did not occur.

7 SEC. 507. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF

8 FEDERAL HEALTH CARE OFFENSES.

9 (a) IN GENERAL.—Chapter 73 of title 18, United

10 States Code, is amended by adding at the end the follow11 ing new section:

12 ‘‘§ 1518. Obstruction of Criminal Investigations of

13 Federal Health Care Offenses.

14 ‘‘(a) IN GENERAL.—Whoever willfully prevents, ob15 structs, misleads, delays or attempts to prevent, obstruct,

16 mislead, or delay the communication of information or

17 records relating to a Federal health care offense to a

18 criminal investigator shall be fined under this title or im19 prisoned not more than 5 years, or both.

20 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

21 in this section the term ‘Federal health care offense’ has

22 the same meaning given such term in section 982(a)(6)(B)

23 of this title.

24 ‘‘(c) CRIMINAL INVESTIGATOR.—As used in this sec25 tion the term ‘criminal investigator’ means any individual
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1 duly authorized by a department, agency, or armed force

2 of the United States to conduct or engage in investigations

3 for prosecutions for violations of health care offenses.’’.

4 (b) CLERICAL AMENDMENT.—The table of sections

5 at the beginning of chapter 73 of title 18, United States

6 Code, in amended by adding at the end the following:

‘‘1518. Obstruction of Criminal Investigations of Federal Health Care Offenses.’’.

7 SEC. 508. THEFT OR EMBEZZLEMENT.

8 (a) IN GENERAL.—Chapter 31 of title 18, United

9 States Code, is amended by adding at the end the follow10 ing new section:

11 ‘‘§ 669. Theft or Embezzlement in Connection with

12 Health Care.

13 ‘‘(a) IN GENERAL.—Whoever willfully embezzles,

14 steals, or otherwise without authority willfully and unlaw15 fully converts to the use of any person other than the

16 rightful owner, or intentionally misapplies any of the mon17 eys, funds, securities, premiums, credits, property, or

18 other assets of a health care benefit program, shall be

19 fined under this title or imprisoned not more than 10

20 years, or both.

21 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

22 in this section the term ‘Federal health care offense’ has

23 the same meaning given such term in section 982(a)(6)(B)

24 of this title.’’.
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 at the beginning of chapter 31 of title 18, United States

3 Code, is amended by adding at the end the following:

‘‘669. Theft or Embezzlement in Connection with Health Care.’’.

4 SEC. 509. LAUNDERING OF MONETARY INSTRUMENTS.

5 Section 1956(c)(7) of title 18, United States Code,

6 is amended by adding at the end the following new sub7 paragraph:

8 ‘‘(F) Any act or activity constituting an of9 fense involving a Federal health care offense as

10 that term is defined in section 982(a)(6)(B) of

11 this title.’’.

12 TITLE VI—PAYMENTS FOR

13 STATE HEALTH CARE FRAUD

14 CONTROL UNITS

15 SEC. 601. ESTABLISHMENT OF STATE FRAUD UNITS.

16 (a) ESTABLISHMENT OF HEALTH CARE FRAUD AND

17 ABUSE CONTROL UNIT.—The Governor of each State

18 shall, consistent with State law, establish and maintain in

19 accordance with subsection (b) a State agency to act as

20 a Health Care Fraud and Abuse Control Unit for purposes

21 of this part.

22 (b) DEFINITION.—In this section, a ‘‘State Fraud

23 Unit’’ means a Health Care Fraud and Abuse Control

24 Unit designated under subsection (a) that the Secretary

25 certifies meets the requirements of this part.
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1 SEC. 602. REQUIREMENTS FOR STATE FRAUD UNITS.

2 (a) IN GENERAL.—The State Fraud Unit must—

3 (1) be a single identifiable entity of the State

4 government;

5 (2) be separate and distinct from any State

6 agency with principal responsibility for the adminis7 tration of any Federally-funded or mandated health

8 care program;

9 (3) meet the other requirements of this section.

10 (b) SPECIFIC REQUIREMENTS DESCRIBED.—The

11 State Fraud Unit shall—

12 (1) be a Unit of the office of the State Attorney

13 General or of another department of State govern14 ment which possesses statewide authority to pros15 ecute individuals for criminal violations;

16 (2) if it is in a State the constitution of which

17 does not provide for the criminal prosecution of indi18 viduals by a statewide authority and has formal pro19 cedures, (A) assure its referral of suspected criminal

20 violations to the appropriate authority or authorities

21 in the State for prosecution, and (B) assure its as22 sistance of, and coordination with, such authority or

23 authorities in such prosecutions; or

24 (3) have a formal working relationship with the

25 office of the State Attorney General or the appro26 priate authority or authorities for prosecution and
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1 have formal procedures (including procedures for its

2 referral of suspected criminal violations to such of3 fice) which provide effective coordination of activities

4 between the Fraud Unit and such office with respect

5 to the detection, investigation, and prosecution of

6 suspected criminal violations relating to any Feder7 ally-funded or mandated health care programs.

8 (c) STAFFING REQUIREMENTS.—The State Fraud

9 Unit shall—

10 (1) employ attorneys, auditors, investigators

11 and other necessary personnel; and

12 (2) be organized in such a manner and provide

13 sufficient resources as is necessary to promote the

14 effective and efficient conduct of State Fraud Unit

15 activities.

16 (d) COOPERATIVE AGREEMENTS; MEMORANDA OF

17 UNDERSTANDING.—The State Fraud Unit shall have co18 operative agreements with—

19 (1) Federally-funded or mandated health care

20 programs;

21 (2) similar Fraud Units in other States, as ex22 emplified through membership and participation in

23 the National Association of Medicaid Fraud Control

24 Units or its successor; and

25 (3) the Secretary.
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1 (e) REPORTS.—The State Fraud Unit shall submit

2 to the Secretary an application and an annual report con3 taining such information as the Secretary determines to

4 be necessary to determine whether the State Fraud Unit

5 meets the requirements of this section.

6 (f) FUNDING SOURCE; PARTICIPATION IN ALL7 PAYER PROGRAM.—In addition to those sums expended

8 by a State under section 604(a) for purposes of determin9 ing the amount of the Secretary’s payments, a State

10 Fraud Unit may receive funding for its activities from

11 other sources, the identity of which shall be reported to

12 the Secretary in its application or annual report. The

13 State Fraud Unit shall participate in the all-payer fraud

14 and abuse control program established under section 101.

15 SEC. 603. SCOPE AND PURPOSE.

16 The State Fraud Unit shall carry out the following

17 activities:

18 (1) The State Fraud Unit shall conduct a state19 wide program for the investigation and prosecution

20 (or referring for prosecution) of violations of all ap21 plicable state laws regarding any and all aspects of

22 fraud in connection with any aspect of the adminis23 tration and provision of health care services and ac24 tivities of providers of such services under any Fed25 erally-funded or mandated health care programs;
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1 (2) The State Fraud Unit shall have procedures

2 for reviewing complaints of the abuse or neglect of

3 patients of facilities (including patients in residential

4 facilities and home health care programs) that re5 ceive payments under any Federally-funded or man6 dated health care programs, and, where appropriate,

7 to investigate and prosecute such complaints under

8 the criminal laws of the State or for referring the

9 complaints to other State agencies for action.

10 (3) The State Fraud Unit shall provide for the

11 collection, or referral for collection to the appro12 priate agency, of overpayments that are made under

13 any Federally-funded or mandated health care pro14 gram and that are discovered by the State Fraud

15 Unit in carrying out its activities.

16 SEC. 604. PAYMENTS TO STATES.

17 (a) MATCHING PAYMENTS TO STATES.—Subject to

18 subsection (c), for each year for which a State has a State

19 Fraud Unit approved under section 602(b) in operation

20 the Secretary shall provide for a payment to the State for

21 each quarter in a fiscal year in an amount equal to the

22 applicable percentage of the sums expended during the

23 quarter by the State Fraud Unit.

24 (b) APPLICABLE PERCENTAGE DEFINED.—
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1 (1) IN GENERAL.—In subsection (a), the ‘‘ap2 plicable percentage’’ with respect to a State for a

3 fiscal year is—

4 (A) 90 percent, for quarters occurring dur5 ing the first 3 years for which the State Fraud

6 Unit is in operation; or

7 (B) 75 percent, for any other quarters.

8 (2) TREATMENT OF STATES WITH MEDICAID

9 FRAUD CONTROL UNITS.—In the case of a State

10 with a State medicaid fraud control in operation

11 prior to or as of the date of the enactment of this

12 Act, in determining the number of years for which

13 the State Fraud Unit under this part has been in

14 operation, there shall be included the number of

15 years for which such State medicaid fraud control

16 unit was in operation.

17 (c) LIMIT ON PAYMENT.—Notwithstanding sub18 section (a), the total amount of payments made to a State

19 under this section for a fiscal year may not exceed the

20 amounts as authorized pursuant to section 1903(b)(3) of

21 the Social Security Act.

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