II

105TH CONGRESS

1ST SESSION S. 146

To permit medicare beneficiaries to enroll with qualified provider-sponsored

organizations under title XVIII of the Social Security Act, and for

other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 21, 1997

Mr. FRIST for Mr. ROCKEFELLER (for himself and Mr. FRIST) introduced the

following bill; which was read twice and referred to the Committee on Finance

A BILL

To permit medicare beneficiaries to enroll with qualified provider-sponsored organizations under title XVIII of the

Social Security Act, and for other purposes.

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

3 SECTION 1. SHORT TITLE; REFERENCES.

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

5 ‘‘Provider-Sponsored Organization Act of 1997’’.

6 (b) REFERENCES TO SOCIAL SECURITY ACT.—Ex7 cept as otherwise specifically provided, whenever in this

8 Act an amendment is expressed in terms of an amendment

9 to or repeal of a section or other provision, the reference
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1 shall be considered to be made to that section or other

2 provision of the Social Security Act.

3 SEC. 2. QUALIFIED PROVIDER-SPONSORED ORGANIZA4 TIONS AS MEDICARE HEALTH PLAN OPTION.

5 Section 1876(b) (42 U.S.C. 1395mm(b)) is amended

6 to read as follows:

7 ‘‘(b)(1) For purposes of this section, the term ‘eligible

8 organization’ means a public or private entity (which may

9 be a health maintenance organization, a competitive medi10 cal plan, or a qualified provider-sponsored organization)

11 that—

12 ‘‘(A) is organized and licensed under State law

13 to offer prepaid health services or health benefits

14 coverage in each State in which the entity seeks to

15 enroll individuals who are entitled to benefits under

16 this title; and

17 ‘‘(B) is described in paragraph (2), (3), or (4).

18 ‘‘(2) An entity is described in this paragraph if the

19 entity is a qualified health maintenance organization (as

20 defined in section 1310(d) of the Public Health Service

21 Act).

22 ‘‘(3)(A) An entity is described in this paragraph if

23 the entity—

24 ‘‘(i) provides to enrolled members health care

25 services that include at least—
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1 ‘‘(I) physicians’ services performed by phy2 sicians (as defined in section 1861(r)(1));

3 ‘‘(II) inpatient hospital services;

4 ‘‘(III) laboratory, X-ray, emergency, and

5 preventive services; and

6 ‘‘(IV) out-of-area coverage;

7 ‘‘(ii) is compensated (except for deductibles, co8 insurance, and copayments) for the provision of

9 health care services to enrolled members by a pay10 ment which is paid on a periodic basis without re11 gard to the date the health care services are pro12 vided and which is fixed without regard to the fre13 quency, extent, or kind of health care service actu14 ally provided to a member;

15 ‘‘(iii) provides physicians’ services primarily—

16 ‘‘(I) directly through physicians who are ei17 ther employees or partners of such organiza18 tion; or

19 ‘‘(II) through contracts with individual

20 physicians or 1 or more groups of physicians

21 (organized on a group practice or individual

22 practice basis);

23 ‘‘(iv) except as provided in subsection (i), as24 sumes full financial risk on a prospective basis for
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1 the provision of health care services listed in clause

2 (i), except that such entity may—

3 ‘‘(I) obtain insurance or make other ar4 rangements for the cost of providing to any en5 rolled member health care services listed in

6 clause (i), the aggregate value of which exceeds

7 $5,000 in any year;

8 ‘‘(II) obtain insurance or make other ar9 rangements for the cost of health care services

10 listed in clause (i) provided to its enrolled mem11 bers other than through the entity because

12 medical necessity required their provision before

13 they could be secured through the entity;

14 ‘‘(III) obtain insurance or make other ar15 rangements for not more than 90 percent of the

16 amount by which its costs for any of its fiscal

17 years exceed 115 percent of its income for such

18 fiscal year; and

19 ‘‘(IV) make arrangements with physicians

20 or other health professionals, health care insti21 tutions, or any combination of such individuals

22 or institutions to assume all or part of the fi23 nancial risk on a prospective basis for the provi24 sion of basic health services by the physicians
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1 or other health professionals or through the in2 stitutions; and

3 ‘‘(v) has made adequate provision against the

4 risk of insolvency, which provision is satisfactory to

5 the Secretary.

6 ‘‘(B) Subparagraph (A)(i)(II) shall not apply to an

7 entity that has contracted with a single State agency ad8 ministering a State plan approved under title XIX for the

9 provision of services (other than inpatient hospital serv10 ices) to individuals eligible for such services under such

11 State plan on a prepaid risk basis prior to 1970.

12 ‘‘(4) An entity is described in this paragraph if the

13 entity is a qualified provider-sponsored organization (as

14 defined in subsection (l)(1)(A)).’’.

15 SEC. 3. PARTIAL RISK ARRANGEMENTS.

16 Section 1876 (42 U.S.C. 1395mm) is amended—

17 (1) by redesignating subsections (i) and (j) as

18 subsections (j) and (k), respectively; and

19 (2) by inserting after subsection (h) the follow20 ing:

21 ‘‘(i) The Secretary may enter into a partial risk con22 tract with an eligible organization under which—

23 ‘‘(1) notwithstanding subsection (b)(3)(A)(iv),

24 the organization and the program established under

25 this title share the financial risk associated with the
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1 services the organization provides to individuals enti2 tled to benefits under part A and enrolled under

3 part B or enrolled under part B only;

4 ‘‘(2) notwithstanding subsections (a)(1) and

5 (h)(2), payment is based on—

6 ‘‘(A) a blend of—

7 ‘‘(i) the payments that would other8 wise be made to such organization under a

9 risk-sharing contract under subsection (g);

10 and

11 ‘‘(ii) the payments that would be

12 made to such organization under a reason13 able cost reimbursement contract under

14 subsection (h); or

15 ‘‘(B) any other methodology agreed upon

16 by the Secretary and the organization; and

17 ‘‘(3) adjustments, if appropriate, are made to

18 payments to the organization under this section to

19 reflect any risk assumed by such program.’’.

20 SEC. 4. STANDARDS AND REQUIREMENTS FOR QUALIFIED

21 PROVIDER-SPONSORED ORGANIZATIONS.

22 Section 1876 (42 U.S.C. 1395mm), as amended by

23 section 3 of this Act, is amended by adding at the end

24 the following:
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1 ‘‘(l)(1)(A) For purposes of this section, the term

2 ‘qualified provider-sponsored organization’ means a pro3 vider-sponsored organization that—

4 ‘‘(i) provides a substantial proportion (as de5 fined by the Secretary, in accordance with subpara6 graph (C) and the regulations established under sec7 tion 1889) of the health care items and services

8 under the contract under this section directly

9 through the provider or through an affiliated group

10 of providers that comprise the organization; and

11 ‘‘(ii) is certified under section 1890 as meeting

12 the regulations established under section 1889,

13 which, except as provided in the succeeding para14 graphs of this subsection, shall be based on the re15 quirements that apply to an organization described

16 in subsection (b)(3) with a risk contract under sub17 section (g).

18 ‘‘(B) For purposes of this section, the term ‘provider19 sponsored organization’ means a public or private entity

20 that is a provider or a group of affiliated providers orga21 nized to deliver a spectrum of health care services (includ22 ing basic hospital and physicians’ services) under contract

23 to purchasers of such services.

24 ‘‘(C) In defining a ‘substantial proportion’ for pur25 poses of subparagraph (A)(i), the Secretary—
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1 ‘‘(i) shall take into account the need for such

2 an organization to assume responsibility for provid3 ing—

4 ‘‘(I) significantly more than the majority

5 of the items and services under the contract

6 under this section through its own affiliated

7 providers; and

8 ‘‘(II) most of the remainder of the items

9 and services under the contract through provid10 ers with which the organization has an agree11 ment to provide such items and services,

12 in order to assure financial stability and to address

13 the practical considerations involved in integrating

14 the delivery of a wide range of service providers;

15 ‘‘(ii) shall take into account the need for such

16 an organization to provide a limited proportion of

17 the items and services under the contract through

18 providers that are neither affiliated with nor have an

19 agreement with the organization; and

20 ‘‘(iii) may allow for variation in the definition

21 of substantial proportion among such organizations

22 based on relevant differences among the organiza23 tions, such as their location in an urban or rural

24 area.
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1 ‘‘(D) For purposes of this paragraph, a provider is

2 ‘affiliated’ with another provider if, through contract, own3 ership, or otherwise—

4 ‘‘(i) one provider, directly or indirectly, controls,

5 is controlled by, or is under the control of the other;

6 ‘‘(ii) each provider is a participant in a lawful

7 combination under which each provider shares, di8 rectly or indirectly, substantial financial risk in con9 nection with their operations;

10 ‘‘(iii) both providers are part of a controlled

11 group of corporations under section 1563 of the In12 ternal Revenue Code of 1986; or

13 ‘‘(iv) both providers are part of an affiliated

14 service group under section 414 of such Code.

15 ‘‘(E) For purposes of subparagraph (D), control is

16 presumed to exist if one party, directly or indirectly, owns,

17 controls, or holds the power to vote, or proxies for, not

18 less than 51 percent of the voting rights or governance

19 rights of another.

20 ‘‘(2)(A) Subject to subparagraph (B), subsection

21 (b)(1)(A) (relating to State licensure) shall not apply to

22 a qualified provider-sponsored organization.

23 ‘‘(B) Beginning on January 1, 2002, subsection

24 (b)(1)(A) shall only apply (and subparagraph (A) of this
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1 paragraph shall no longer apply) to a qualified provider2 sponsored organization in a State if—

3 ‘‘(i) the financial solvency and capital adequacy

4 standards for licensure of the organization under the

5 laws of the State are identical to the regulations es6 tablished under section 1889; and

7 ‘‘(ii) the standards for licensure of the organi8 zation under the laws of the State (other than the

9 standards referred to in clause (i)) are substantially

10 equivalent to the standards established by regula11 tions under section 1889.

12 ‘‘(C)(i) A provider-sponsored organization, to which

13 subsection (b)(1)(A) applies by reason of subparagraph

14 (B), that seeks to operate in a State under a full risk con15 tract under subsection (g) or a partial risk contract under

16 subsection (i) may apply for a waiver of the requirement

17 of subsection (b)(1)(A) for that organization operating in

18 that State.

19 ‘‘(ii) The Secretary shall act on such a waiver applica20 tion within 60 days after the date it is filed and shall grant

21 a waiver for an organization with respect to a State if the

22 Secretary determines that—

23 ‘‘(I) the State did not act upon a licensure ap24 plication within 90 days after the date it was filed;

25 or
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1 ‘‘(II)(aa) the State denied a licensure applica2 tion; and

3 ‘‘(bb) the State’s licensing standards or review

4 process are determined by the Secretary to impose

5 unreasonable barriers to market entry, including

6 through the imposition of any requirements, proce7 dures, or other standards on such organization that

8 are not generally applicable to any other entities en9 gaged in substantially similar activities.

10 ‘‘(iii) In the case of a waiver granted under this para11 graph for an organization—

12 ‘‘(I) the waiver shall be effective for a 24-month

13 period, except that it may be renewed based on a

14 subsequent application filed during the last 6

15 months of such period;

16 ‘‘(II) if the State failed to meet the requirement

17 of clause (ii)(I)—

18 ‘‘(aa) any application for a renewal may be

19 made on the basis described in clause (ii)(I)

20 only if the State does not act on a pending li21 censure application during the 24-month period

22 specified in subclause (I);

23 ‘‘(bb) any application for renewal (other

24 than one made on the basis described in clause
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1 (ii)(I)) may be made only on the basis described

2 in clause (ii)(II); and

3 ‘‘(cc) the waiver shall cease to be effective

4 on approval of the licensure application by the

5 State during such 24-month period; and

6 ‘‘(III) any provisions of State law that relate to

7 the licensing of the organization and prohibit the or8 ganization from providing coverage pursuant to a

9 contract under this title shall be superseded during

10 the period for which such waiver is effective.

11 ‘‘(D) Nothing in this paragraph shall be construed

12 as—

13 ‘‘(i) limiting the number of times such a waiver

14 may be renewed under subparagraph (C)(iii)(I); or

15 ‘‘(ii) affecting the operation of section 514 of

16 the Employee Retirement Income Security Act of

17 1974 (29 U.S.C. 1144).

18 ‘‘(3) The requirement of subsection (b)(3)(A)(i) (re19 lating to benefit package for commercial enrollees) shall

20 not apply to a qualified provider-sponsored organization.

21 ‘‘(4) The requirement of subsection (b)(3)(A)(iii) (re22 lating to delivery of physicians’ services) shall apply to a

23 qualified provider-sponsored organization, except that the

24 Secretary shall by regulation specify alternative delivery
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1 models or arrangements that may be used by such organi2 zations in lieu of the models or arrangements specified in

3 such subsection.

4 ‘‘(5) The requirement of subsection (b)(3)(A)(iv) (re5 lating to risk assumption) shall apply to a qualified pro6 vider-sponsored organization, except that any such organi7 zation with a full risk contract under subsection (g) may

8 (with the approval of the Secretary) obtain insurance or

9 make other arrangements for covering costs in excess of

10 those permitted to be covered by such insurance and any

11 arrangements under subsection (b)(3)(A)(iv)(III).

12 ‘‘(6)(A) A qualified provider-sponsored organization

13 shall be treated as meeting the requirement of subsection

14 (b)(3)(A)(v) (relating to adequate provision against risk

15 of insolvency) if the organization is fiscally sound.

16 ‘‘(B) A qualified provider-sponsored organization

17 shall be treated as fiscally sound for purposes of subpara18 graph (A) if the organization—

19 ‘‘(i) has a net worth that is not less than the

20 required net worth (as defined in subparagraph (C));

21 and

22 ‘‘(ii) has established adequate claims reserves

23 (as defined in subparagraph (D)).

24 ‘‘(C) For purposes of subparagraph (B)(i), the term

25 ‘required net worth’ means—
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1 ‘‘(i) in the case of an organization with a full

2 risk contract under subsection (g), a net worth (de3 termined in accordance with statutory accounting

4 principles for insurance companies and health main5 tenance organizations), not less than the greatest

6 of—

7 ‘‘(I) $1,500,000 at the time of application

8 and $1,000,000 thereafter,

9 ‘‘(II) the sum of—

10 ‘‘(aa) 8 percent of the cost of health

11 services that are not provided directly by

12 the organization or its affiliated providers

13 to enrollees; and

14 ‘‘(bb) 4 percent of the estimated an15 nual costs of health services provided di16 rectly by the organization or its affiliated

17 providers to enrollees; or

18 ‘‘(III) 3 months of uncovered expenditures;

19 and

20 ‘‘(ii) in the case of an organization with a par21 tial risk contract under subsection (i), an amount

22 determined in accordance with clause (i), except that

23 in applying subclause (II) of such clause, the Sec24 retary shall substitute for the percentages specified
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1 in such subclause such lower percentages as are ap2 propriate to reflect the risk-sharing arrangements

3 under the contract.

4 ‘‘(D) For purposes of subparagraph (B)(ii), the term

5 ‘adequate claims reserves’ means, with respect to an orga6 nization, reserves for claims that are—

7 ‘‘(i) incurred but not reported; or

8 ‘‘(ii) reported but unpaid,

9 that are determined in accordance with statutory account10 ing principles for insurance companies and health mainte11 nance organizations and with professional standards of ac12 tuarial practice and are certified by an independent actu13 ary as adequate in light of the operations and contracts

14 of the organization.

15 ‘‘(E) In applying statutory accounting principles for

16 purposes of determining the net worth of an organization

17 under subparagraph (B)(i), the Secretary shall—

18 ‘‘(i) treat as ‘admitted assets’—

19 ‘‘(I) land, buildings, and equipment of the

20 organization used for the direct provision of

21 health care services;

22 ‘‘(II) any receivables from governmental

23 programs due for more than 90 days; and

24 ‘‘(III) any other assets designated by the

25 Secretary; and
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1 ‘‘(ii) recognize, as a contribution to surplus,

2 amounts received under subordinated debt (meeting

3 such requirements as the Secretary may specify).

4 ‘‘(F) The Secretary shall recognize ways of complying

5 with the requirement of subparagraph (A) other than by

6 means of subparagraph (B), including (alone or in com7 bination)—

8 ‘‘(i) letters of credit from a bank;

9 ‘‘(ii) financial guarantees from financially

10 strong parties including affiliates;

11 ‘‘(iii) unrestricted fund balances;

12 ‘‘(iv) diversity of lines of business and presence

13 of nonrisk related revenue;

14 ‘‘(v) certification of fiscal soundness by an inde15 pendent actuary;

16 ‘‘(vi) reinsurance ceded to, or stop loss insur17 ance purchased through, a recognized commercial in18 surance company; and

19 ‘‘(vii) any other methods that the Secretary de20 termines are acceptable for such purpose.

21 ‘‘(7)(A) A qualified provider-sponsored organization

22 shall not be treated as meeting the requirements of sub23 section (c)(6) (relating to an ongoing quality assurance
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1 program) unless the quality assurance program of the or2 ganization meets the requirements of subparagraphs (B)

3 and (C).

4 ‘‘(B) A quality assurance program meets the require5 ments of this subparagraph if the program—

6 ‘‘(i) stresses health outcomes;

7 ‘‘(ii) provides opportunities for input by physi8 cians and other health care professionals;

9 ‘‘(iii) monitors and evaluates high volume and

10 high risk services and the care of acute and chronic

11 conditions;

12 ‘‘(iv) evaluates the continuity and coordination

13 of care that enrollees receive;

14 ‘‘(v) establishes mechanisms to detect both un15 derutilization and overutilization of services;

16 ‘‘(vi) after identifying areas for improvement,

17 establishes or alters practice parameters;

18 ‘‘(vii) takes action to improve quality and assess

19 the effectiveness of such action through systematic

20 followup;

21 ‘‘(viii) makes available information on quality

22 and outcomes measures to facilitate beneficiary com23 parison and choice of health coverage options (in
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1 such form and on such quality and outcomes meas2 ures as the Secretary determines to be appropriate);

3 and

4 ‘‘(ix) is evaluated on an ongoing basis as to its

5 effectiveness.

6 ‘‘(C) If a qualified provider-sponsored organization

7 utilizes case-by-case utilization review, the organization

8 shall—

9 ‘‘(i) base such review on written protocols devel10 oped on the basis of current standards of medical

11 practice; and

12 ‘‘(ii) implement a plan under which—

13 ‘‘(I) such review is coordinated with the

14 quality assurance program of the organization;

15 and

16 ‘‘(II) a transition is made from relying pre17 dominantly on case-by-case review to review fo18 cusing on patterns of care.

19 ‘‘(D) A qualified provider-sponsored organization

20 shall be treated as meeting the requirements of subpara21 graphs (A) and (B) and the requirements of subsection

22 (c)(6) if the organization is accredited (and periodically

23 reaccredited) by a private organization under a process

24 that the Secretary has determined assures that the organi25 zation meets standards that are no less stringent than the
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1 standards established under section 1889 to carry out this

2 paragraph and subsection (c).’’.

3 SEC. 5. EXEMPTION FROM CERTAIN ENROLLMENT RE4 QUIREMENTS FOR ELIGIBLE ORGANIZATIONS

5 MEETING ENHANCED QUALITY ASSURANCE

6 REQUIREMENTS.

7 (a) IN GENERAL.—Section 1876 of the Social Secu8 rity Act (42 U.S.C. 1395mm), as amended by section 4

9 of this Act, is amended by adding at the end the following:

10 ‘‘(m)(1) An eligible organization shall be deemed to

11 meet the requirements of subsection (f) (relating to enroll12 ment composition) if the organization demonstrates that

13 it—

14 ‘‘(A) is capable of providing coordinated care in

15 accordance with the quality assurance standards es16 tablished under subsections (c)(6) and (l)(7)(B); and

17 ‘‘(B) has experience, under a past or present

18 arrangement, providing coordinated care to individ19 uals (other than individuals who are entitled to bene20 fits under this title) who are enrollees, participants,

21 or beneficiaries of a health plan or a State plan ap22 proved under title XIX.
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1 ‘‘(2) An eligible organization shall be treated as meet2 ing the quality assurance standards referred to in para3 graph (1)(A) if the organization is accredited (and periodi4 cally reaccredited) by a private organization under a proc5 ess that the Secretary has determined assures that the or6 ganization meets standards that are no less stringent than

7 the requirements of that subparagraph.

8 ‘‘(3) For purposes of paragraph (1), the term ‘health

9 plan’ means—

10 ‘‘(A) any contract of insurance, including any

11 hospital or medical service policy or certificate, hos12 pital or medical service plan contract, or health

13 maintenance organization contract, that is provided

14 by a carrier; and

15 ‘‘(B) an employee welfare benefit plan insofar

16 as the plan provides health benefits and is funded in

17 a manner other than through the purchase of one or

18 more policies or contracts described in subparagraph

19 (A).

20 ‘‘(4) For purposes of paragraph (3), the term ‘car21 rier’ means a licensed insurance company, a hospital or

22 medical service corporation (including an existing Blue

23 Cross or Blue Shield organization), or any other entity

24 licensed or certified by a State to provide health insurance

25 or health benefits.’’.
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1 (b) SIZE REQUIREMENT FOR ELIGIBLE ORGANIZA2 TIONS.—Section 1876(g)(1) (42 U.S.C. 1395mm(g)(1)) is

3 amended—

4 (1) by striking ‘‘5000’’ and inserting ‘‘1500’’;

5 and

6 (2) by striking ‘‘fewer’’ and inserting ‘‘500 or

7 more’’.

8 (c) CONFORMING AMENDMENT.—Section 1876(f)(1)

9 (42 U.S.C. 1395mm(f)(1)) is amended by striking ‘‘Each

10 eligible’’ and inserting ‘‘Except as provided in subsection

11 (m), each eligible’’.

12 SEC. 6. ADJUSTED COMMUNITY RATE FOR A QUALIFIED

13 PROVIDER-SPONSORED ORGANIZATION.

14 Section 1876(g) (42 U.S.C. 1395mm(g)) is amended

15 by adding at the end the following:

16 ‘‘(7) In the case of a qualified provider-sponsored or17 ganization, the adjusted community rate under subsection

18 (e)(3) and paragraph (2) may be computed (in a manner

19 specified by the Secretary) using data in the general com20 mercial marketplace or (during a transition period) based

21 on the costs incurred by the organization in providing such

22 a product.’’.
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1 SEC. 7. PROCEDURES RELATING TO PARTICIPATION OF A

2 PHYSICIAN IN A QUALIFIED PROVIDER-SPON3 SORED ORGANIZATION.

4 Section 1876 (42 U.S.C. 1395mm), as amended by

5 section 5 of this Act, is amended by adding at the end

6 the following:

7 ‘‘(n) A qualified provider-sponsored organization

8 shall not be treated as meeting the requirements of this

9 section unless the organization—

10 ‘‘(1) establishes reasonable procedures, as de11 termined by the Secretary, relating to the participa12 tion (under an agreement between a physician or

13 group of physicians and the organization) of physi14 cians under contracts under this section, including

15 procedures to provide—

16 ‘‘(A) notice of the rules regarding partici17 pation;

18 ‘‘(B) written notice of a participation deci19 sion that is adverse to a physician; and

20 ‘‘(C) a process within the organization for

21 appealing an adverse decision, including the

22 presentation of information and views of the

23 physician regarding such decision; and

24 ‘‘(2) consults with physicians who have entered

25 into participation agreements with the organization
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1 regarding the organization’s medical policy, quality,

2 and medical management procedures.

3 Paragraph (1)(C) shall not be construed to require a live

4 evidentiary hearing, a verbatim record, or representation

5 of the appealing party by legal counsel.’’.

6 SEC. 8. ESTABLISHMENT OF REGULATIONS; CERTIFI7 CATION PROCEDURES.

8 Part C of title XVIII (42 U.S.C. 1395x et seq.) is

9 amended by inserting after section 1888 (42 U.S.C.

10 1395yy) the following:

11 ‘‘ESTABLISHMENT OF REGULATIONS FOR QUALIFIED

12 PROVIDER-SPONSORED ORGANIZATIONS

13 ‘‘SEC. 1889. (a) INTERIM REGULATIONS.—

14 ‘‘(1) IN GENERAL.—Not later than 180 days

15 after the date of enactment of this section, the Sec16 retary shall promulgate regulations to implement the

17 requirements for qualified provider-sponsored orga18 nizations under section 1876). Such regulations shall

19 be issued on an interim basis, but shall become ef20 fective upon publication and shall remain in effect

21 until the end of December 31, 2001.

22 ‘‘(2) CONSULTATION.—In developing regula23 tions under this subsection, the Secretary shall con24 sult with the National Association of Insurance

25 Commissioners, the American Academy of Actuaries,

26 State health departments, associations representing
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1 provider-sponsored organizations, quality experts

2 (including private accreditation organizations), and

3 medicare beneficiaries.

4 ‘‘(3) CONTRACTS WITH STATE AGENCIES.—The

5 Secretary shall enter into contracts with appropriate

6 State agencies to monitor performance and bene7 ficiary access to services provided under this title

8 during the period in which interim regulations are in

9 effect under this subsection.

10 ‘‘(b) PERMANENT REGULATIONS.—

11 ‘‘(1) IN GENERAL.—Not later than July 1,

12 2001, the Secretary shall issue permanent regula13 tions to implement the requirements for qualified

14 provider-sponsored organizations under section

15 1876.

16 ‘‘(2) CONSULTATION.—In developing regula17 tions under this subsection, the Secretary shall con18 sult with the organizations and individuals listed in

19 subsection (a)(2).

20 ‘‘(3) EFFECTIVE DATE.—The permanent regu21 lations developed under this subsection shall be ef22 fective on and after January 1, 2002.

23 ‘‘CERTIFICATION OF PROVIDER-SPONSORED

24 ORGANIZATIONS

25 ‘‘SEC. 1890. (a) IN GENERAL.—
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1 ‘‘(1) PROCESS FOR CERTIFICATION.—The Sec2 retary shall establish a process for the certification

3 of provider-sponsored organizations as qualified pro4 vider-sponsored organizations under section 1876.

5 Such process shall provide that an application for

6 certification shall be approved or denied not later

7 than 90 days after receipt of a complete application.

8 ‘‘(2) FEES.—The Secretary may impose user

9 fees on entities seeking certification under this sub10 section in such amounts as the Secretary deems suf11 ficient to pay the costs to the Secretary resulting

12 from the certification process.

13 ‘‘(b) DECERTIFICATION.—If a qualified provider14 sponsored organization is decertified under this section,

15 the organization shall notify each enrollee with the organi16 zation under section 1876 of such decertification.’’.

17 SEC. 9. DEMONSTRATION OF COORDINATED ACUTE AND

18 LONG-TERM CARE BENEFITS; QUALIFIED

19 PROVIDER-SPONSORED ORGANIZATIONS

20 UNDER MEDICAID PROGRAMS.

21 (a) DEMONSTRATION OF COORDINATED ACUTE AND

22 LONG-TERM CARE BENEFITS.—The Secretary of Health

23 and Human Services shall provide, in not less than 10

24 States, for demonstration projects that permit State med25 icaid programs under title XIX of the Social Security Act
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1 (42 U.S.C. 1396 et seq.) to be treated as eligible organiza2 tions under section 1876 of that Act (42 U.S.C. 1395mm)

3 for the purpose of demonstrating the delivery of primary,

4 acute, and long-term care through an integrated delivery

5 network that emphasizes noninstitutional care to individ6 uals who are—

7 (1) eligible to enroll with an organization under

8 such section; and

9 (2) eligible to receive medical assistance under

10 a State program approved under title XIX of the So11 cial Security Act (42 U.S.C. 1396 et seq.).

12 (b) PROVIDER-SPONSORED ORGANIZATIONS UNDER

13 MEDICAID PROGRAMS.—Section 1903(m)(1)(A) (42

14 U.S.C. 1396b(m)(1)(A)) is amended, in the matter pre15 ceding clause (i), by inserting ‘‘(which may be a provider16 sponsored organization, as defined in section

17 1876(l)(1)(B))’’ after ‘‘public or private organization’’.

18 (c) CONFORMING AMENDMENTS.—

19 (1) Section 1866(a)(1)(O) is amended by strik20 ing ‘‘1876(i)(2)(A)’’ and inserting ‘‘1876(j)(2)(A)’’.

21 (2) Section 1877(e)(3)(B)(i)(II) is amended by

22 striking ‘‘1876(i)(8)(A)(ii)’’ and inserting

23 ‘‘1876(j)(8)(A)(ii)’’.
27

•S 146 IS

1 SEC. 10. REPORT ON MEDICARE CONTRACTS INVOLVING

2 PARTIAL RISK.

3 (a) REPORT.—Not later than 4 years after the date

4 of enactment of this Act, the Secretary of Health and

5 Human Services (in this section referred to as the ‘‘Sec6 retary’’) shall submit a report to the Committee on Ways

7 and Means and the Committee on Commerce of the House

8 of Representatives and the Committee on Finance of the

9 Senate.

10 (b) CONTENTS OF REPORT.—The report described in

11 subsection (a) shall include—

12 (1) the number and type of partial-risk con13 tracts entered into by the Secretary under section

14 1876(i) of the Social Security Act (42 U.S.C.

15 1395mm(i));

16 (2) the type of eligible organizations operating

17 such contracts;

18 (3) the impact such contracts have had on in19 creasing beneficiary access and choice under the

20 medicare program under title XVIII of that Act (42

21 U.S.C. 1395 et seq.); and

22 (4) a recommendation as to whether the Sec23 retary should continue to enter into partial-risk con24 tracts under section 1876(i) of that Act (42 U.S.C.

25 1395mm(i)).
28

•S 146 IS

1 SEC. 11. EFFECTIVE DATES; INTERIM FINAL REGULATIONS.

2 (a) EFFECTIVE DATES.—

3 (1) IN GENERAL.—Except as provided in para4 graph (2), this Act and the amendments made by

5 this Act shall take effect on the date of enactment

6 of this Act.

7 (2) ELIGIBLE ORGANIZATION AMENDMENTS.—

8 The amendments made by sections 2 through 8 shall

9 take effect on the date of enactment of this Act and

10 shall apply to contract years beginning on or after

11 January 1, 1998.

12 (b) USE OF INTERIM FINAL REGULATIONS.—In

13 order to carry out the amendments made by this Act in

14 a timely manner for eligible organizations under section

15 1876 of the Social Security Act (42 U.S.C. 1395mm), ex16 cluding organizations described in subsection (b)(4) of

17 that section, the Secretary of Health and Human Services

18 may promulgate regulations that take effect on an interim

19 basis, after notice and opportunity for public comment.

Æ