I

106TH CONGRESS

1ST SESSION H. R. 2229

To amend titles XI and XVIII of the Social Security Act to combat waste,

fraud, and abuse in the Medicare Program.

IN THE HOUSE OF REPRESENTATIVES

JUNE 15, 1999

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

on Ways and Means, and in addition to the Committee on Commerce,

for a period to be subsequently determined by the Speaker, in each case

for consideration of such provisions as fall within the jurisdiction of the

committee concerned

A BILL

To amend titles XI and XVIII of the Social Security Act

to combat waste, fraud, and abuse in the Medicare Program.

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 ‘‘Medicare Fraud and Reimbursement Reform Act of

6 1999’’.

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

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. No mark-up for drugs, biologicals, or parenteral nutrients.
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Sec. 3. Elimination of overpayments for epogen.

Sec. 4. Mental health partial hospitalization services.

Sec. 5. Information requirements.

Sec. 6. Centers of excellence.

1 SEC. 2. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PAREN2 TERAL NUTRIENTS.

3 (a) IN GENERAL.—Section 1842(o) of the Social Se4 curity Act (42 U.S.C. 1395u(o)) is amended to read as

5 follows:

6 ‘‘(o)(1) If a physician’s, supplier’s, or any other per7 son’s bill or request for payment for services includes a

8 charge for a drug, biological, or parenteral nutrient for

9 which payment may be made under this part and the drug,

10 biological, or parenteral nutrient is not paid on a cost or

11 prospective payment basis as otherwise provided in this

12 part, the payment amount established in this subsection

13 for the drug, biological, or parenteral nutrient shall be the

14 lowest of the following:

15 ‘‘(A) The actual acquisition cost, as defined in

16 paragraph (2), to the person submitting the claim

17 for payment for the drug, biological, or parenteral

18 nutrient.

19 ‘‘(B) 95 percent of the average wholesale price

20 of such drug, biological, or parenteral nutrient, as

21 determined by the Secretary.

22 ‘‘(C) For payments for drugs, biologicals, or

23 parenteral nutrients furnished on or after January
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1 1, 2000, the median actual acquisition cost of all

2 claims for payment for such drugs, biologicals, or

3 parenteral nutrients for the 12-month period begin4 ning July 1, 1998 (and adjusted, as the Secretary

5 determines appropriate, to reflect changes in the

6 cost of such drugs, biologicals, or parenteral nutri7 ents due to inflation, and such other factors as the

8 Secretary determines appropriate).

9 ‘‘(D) The amount otherwise determined under

10 this part.

11 ‘‘(2) For purposes of paragraph (1)(A), the term ‘ac12 tual acquisition cost’ means, with respect to such drugs,

13 biologicals, or parenteral nutrients the cost of the drugs,

14 biologicals, or parenteral nutrients based on the most eco15 nomical case size in inventory on the date of dispensing

16 or, if less, the most economical case size purchased within

17 six months of the date of dispensing whether or not that

18 specific drug, biological, or nutrient was furnished to an

19 individual whether or not enrolled under this part. Such

20 term includes appropriate adjustments, as determined by

21 the Secretary, for all discounts, rebates, or any other ben22 efit in cash or in kind (including travel, equipment, or free

23 products). The Secretary shall include an additional pay24 ment for administrative, storage, and handling costs.
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1 ‘‘(3)(A) No payment shall be made under this part

2 for drugs, biologicals, or parenteral nutrients to a person

3 whose bill or request for payment for such drugs,

4 biologicals, or parenteral nutrients does not include a

5 statement of the person’s actual acquisition cost.

6 ‘‘(B) A person may not bill an individual enrolled

7 under this part—

8 ‘‘(i) any amount other than the payment

9 amount specified in paragraph (1), (4), or (5) (plus

10 any applicable deductible and coinsurance amounts),

11 or

12 ‘‘(ii) any amount for such drugs, biologicals, or

13 parenteral nutrients for which payment may not be

14 made pursuant to subparagraph (A).

15 ‘‘(C) If a person knowingly and willfully in repeated

16 cases bills one or more individuals in violation of subpara17 graph (B), the Secretary may apply sanctions against that

18 person in accordance with subsection (j)(2).

19 ‘‘(4) The Secretary may pay a reasonable dispensing

20 fee (less the applicable deductible and coinsurance

21 amounts) for drugs or biologicals to a licensed pharmacy

22 approved to dispense drugs or biologicals under this part,

23 if payment for such drugs or biologicals is made to the

24 pharmacy.
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1 ‘‘(5) The Secretary shall pay a reasonable amount

2 (less the applicable deductible and coinsurance amounts)

3 for the services associated with the furnishing of paren4 teral nutrients for which payment is determined under this

5 subsection.’’.

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

7 subsection (a) apply to drugs, biologicals, and parenteral

8 nutrients furnished on or after January 1, 2000.

9 (c) ELIMINATION OF REPORT ON AVERAGE WHOLE10 SALE PRICE.—Section 4556 of the Balanced Budget Act

11 of 1997 is amended—

12 (1) by striking subsection (c); and

13 (2) by redesignating subsection (d) as sub14 section (c).

15 SEC. 3. ELIMINATION OF OVERPAYMENTS FOR EPOGEN.

16 Section 1881(b)(11)(B)(ii) of the Social Security Act

17 (42 U.S.C. 1395rr(b)(11)(B)(ii)) is amended—

18 (1) in subclause (I)—

19 (A) by striking ‘‘provided during 1994’’

20 and inserting ‘‘provided before fiscal year

21 2000’’; and

22 (B) by striking ‘‘and’’ at the end;

23 (2) by redesignating subclause (II) as subclause

24 (III);
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1 (3) by inserting after subclause (I) the fol2 lowing new subclause:

3 ‘‘(II) for erythropoietin provided during

4 fiscal year 2000, in an amount equal to $9 per

5 thousand units (rounded to the nearest 100

6 units), and’’; and

7 (4) in subclause (III), as so redesignated, by

8 striking ‘‘year’’ each place it occurs and inserting

9 ‘‘fiscal year’’.

10 SEC. 4. MENTAL HEALTH PARTIAL HOSPITALIZATION SERV11 ICES

12 (a) LIMITATION ON LOCATION OF PROVISION OF

13 SERVICES.—

14 (1) IN GENERAL.—Section 1861(ff)(2) of the

15 Social Security Act (42 U.S.C. 1395x(ff)(2)) is

16 amended in the matter following subparagraph (I)—

17 (A) by striking ‘‘and furnished’’ and in18 serting ‘‘furnished’’; and

19 (B) by inserting before the period the fol20 lowing: ‘‘, and furnished other than in a skilled

21 nursing facility, residential treatment facility or

22 other residential setting (as determined by the

23 Secretary)’’.

24 (2) EFFECTIVE DATE.—The amendments made

25 by paragraph (1) apply with respect to partial hos-
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1 pitalization services furnished on or after the first

2 day of the third month beginning after the date of

3 the enactment of this Act.

4 (b) QUALIFICATIONS FOR COMMUNITY MENTAL

5 HEALTH CENTERS.—

6 (1) IN GENERAL.—Section 1861(ff)(3)(B) of

7 the Social Security Act (42 U.S.C. 1395x(ff)(3)(B))

8 is amended by striking ‘‘entity’’ and all that follows

9 and inserting the following: ‘‘entity that—

10 ‘‘(i)(I) provides the mental health services de11 scribed in section 1913(c)(1) of the Public Health

12 Service Act; or

13 ‘‘(II) in the case of an entity operating in a

14 State that by law precludes the entity from pro15 viding a service described in such section itself, pro16 vides for such service by contract with an approved

17 organization or entity (as determined by the Sec18 retary);

19 ‘‘(ii) meets applicable licensing or certification

20 requirements for community mental health centers

21 in the State in which it is located; and

22 ‘‘(iii) meets such additional conditions as the

23 Secretary shall specify to ensure (I) the health and

24 safety of individuals being furnished such services,

25 (II) the effective and efficient furnishing of such
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1 services, and (III) the compliance of such entity with

2 the criteria described in such section.’’.

3 (2) EFFECTIVE DATE.—The amendment made

4 by paragraph (1) applies with respect to community

5 mental health centers furnishing services under the

6 medicare program on or after the first day of the

7 third month beginning after the date of the enact8 ment of this Act.

9 (c) GUIDELINES FOR ITEMS AND SERVICES COM10 PRISING PARTIAL HOSPITALIZATION SERVICES.—Not

11 later than 180 days after the date of the enactment of

12 this Act, the Secretary shall first adopt national coverage

13 and administrative policies for partial hospitalization serv14 ices furnished under title XVIII of the Social Security Act,

15 using a negotiated rulemaking process under subchapter

16 III of chapter 5 of title 5, United States Code.

17 (d) REFINEMENT OF PERIODICITY OF REVIEW OF

18 PLAN FOR PARTIAL HOSPITALIZATION SERVICES.—

19 (1) IN GENERAL.—Section 1835(a)(2)(F)(ii) of

20 the Social Security Act (42 U.S.C.

21 1395n(a)(2)(F)(ii)) is amended by inserting ‘‘at a

22 reasonable rate (as determined by the Secretary)’’

23 after ‘‘is reviewed periodically’’.

24 (2) EFFECTIVE DATE.—The amendment made

25 by paragraph (1) applies with respect to plans for
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1 furnishing partial hospitalization services established

2 on or after the first day of the third month begin3 ning after the date of the enactment of this Act.

4 (e) RECERTIFICATION OF PROVIDERS OF PARTIAL

5 HOSPITALIZATION SERVICES.—

6 (1) IN GENERAL.—With respect to each com7 munity mental health center that furnishes partial

8 hospitalization services for which payment is made

9 under title XVIII of the Social Security Act, the

10 Secretary of Health and Human Services shall pro11 vide for periodic recertification to ensure that the

12 provision of such services complies with applicable

13 requirements of such title.

14 (2) DEADLINE FOR FIRST RECERTIFICATION.—

15 The first recertification under paragraph (1) shall be

16 completed not later than one year after the date of

17 the enactment of this Act.

18 (f) CIVIL MONETARY PENALTIES FOR FALSE CER19 TIFICATION OF ELIGIBILITY FOR HOSPICE CARE OR PAR20 TIAL HOSPITALIZATION SERVICES.—

21 (1) IN GENERAL.—Section 1128A(b)(3) of the

22 Social Security Act (42 U.S.C. 1320a–7a(b)(3)) is

23 amended—
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1 (A) in subparagraph (A)(ii), by inserting ‘‘,

2 hospice care, or partial hospitalization services’’

3 after ‘‘home health services’’; and

4 (B) in subparagraph (B), by inserting ‘‘,

5 section 1814(a)(7) in the case of hospice care,

6 or section 1835(a)(2)(F) in the case of partial

7 hospitalization services’’ after ‘‘in the case of

8 home health services’’.

9 (2) EFFECTIVE DATE.—The amendments made

10 by paragraph (1) apply with respect to certifications

11 of eligibility for hospice care or partial hospitaliza12 tion services under the medicare program made on

13 or after the first day of the third month beginning

14 after the date of the enactment of this Act.

15 (g) DEMONSTRATION FOR COST EFFECTIVE WRAP

16 AROUND MENTAL HEALTH SERVICES.—

17 (1) ESTABLISHMENT.—

18 (A) IN GENERAL.—The Secretary of Health

19 and Human Services shall implement a demonstra20 tion project (in this subsection referred to as the

21 ‘‘project’’) under part B of title XVIII of the Social

22 Security Act under which community mental health

23 centers may offer wrap around mental health serv24 ices (as defined in subparagraph (B)(i)) for purposes
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1 of providing for a full continuum of ambulatory be2 havioral health care services.

3 (B) DEFINITIONS.—

4 (i) WRAP AROUND MENTAL HEALTH

5 SERVICES DEFINED.—The term ‘‘wrap

6 around mental health services’’ means

7 comprehensive outpatient mental health

8 services furnished to an individual pursu9 ant to an individualized treatment plan de10 veloped by a mental health professional, in

11 consultation with the family of the indi12 vidual (if available). Such services are fur13 nished to the individual through a com14 prehensive, multidisciplinary health and so15 cial services delivery system that provides

16 coordinated therapeutic interventions, in17 cluding medical services, psychotherapy

18 services, occupational therapy services, and

19 social work services.

20 (ii) LICENSED MENTAL HEALTH PRO21 FESSIONAL.—The term ‘‘mental health

22 professional’’ means any of the following

23 individuals who are licensed by the State in

24 which the individual furnishes services (as

25 that term is described in paragraphs (1),
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1 (2)(M), and (2)(N) (as the case may be) of

2 section 1861(s) of the Social Security Act

3 (42 U.S.C. 1395x(s))) to design and exe4 cute treatment plans described in clause (i)

5 without the supervision of another health

6 care practitioner:

7 (I) A physician, as defined in sec8 tion 1861(r)(1) of such Act (42

9 U.S.C. 1395x(r)(1)).

10 (II) A clinical psychologist, as de11 fined by the Secretary pursuant to

12 section 1861(ii) of such Act (42

13 U.S.C. 1395x(ii)).

14 (III) A clinical social worker, as

15 defined in section 1861(hh) of such

16 Act (42 U.S.C. 1395x(hh)).

17 (2) SELECTION OF CENTERS.—For purposes of

18 implementing such project, the Secretary shall select

19 for participation in the project community mental

20 health centers that serve populations in three dif21 ferent States, one of which predominantly serves

22 rural populations.

23 (3) CAPITATED PAYMENT.—The Secretary shall

24 establish and make prospective monthly payments of
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1 a capitation amount for individuals receiving wrap

2 around mental health services under this project.

3 (4) EVALUATION AND REPORT.—

4 (A) EVALUATION.—The Secretary shall

5 evaluate the project. Such evaluation shall in6 clude an examination of—

7 (i) the project’s effect on the health,

8 well-being, condition, and functional level

9 of beneficiaries receiving wrap around

10 mental health services;

11 (ii) any savings to the medicare pro12 gram by reason of capitated payments for

13 wrap around medical services consisting of

14 partial hospitalization services (as that

15 term is defined in section 1861(ff) of the

16 Social Security Act (42 U.S.C. 1395x(ff));

17 (iii) the impact of basing payment for

18 such services on a capitated basis; and

19 (iv) the project’s effect on utilization

20 of inpatient services (including inpatient

21 mental health services) and associated

22 costs.

23 (B) REPORT.—Not later than four years

24 after the date of the enactment of this Act, the

25 Secretary shall submit to Congress a report
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1 containing a statement of the findings and con2 clusions of the Secretary pursuant to the eval3 uation conducted under subparagraph (A), to4 gether with any recommendations for legislation

5 the Secretary considers appropriate with respect

6 to—

7 (i) the provision of additional mental

8 health services by community mental

9 health centers under partial hospitalization

10 services; and

11 (ii) payment for such services on a

12 capitated basis.

13 (5) DURATION.—The project shall be conducted

14 for a three year period.

15 (6) FUNDING.—The Secretary shall provide for

16 the transfer from the Federal Hospital Insurance

17 Trust Fund, established under section 1817 of the

18 Social Security Act (42 U.S.C. 1395i), of such funds

19 as are necessary for the costs of carrying out the

20 demonstration project under this subsection.

21 SEC. 5. INFORMATION REQUIREMENTS.

22 (a) INFORMATION FROM GROUP HEALTH PLANS.—

23 Section 1862(b) of the Social Security Act (42 U.S.C.

24 1395y(b)) is amended by adding at the end the following:
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1 ‘‘(7) INFORMATION FROM GROUP HEALTH

2 PLANS.—

3 ‘‘(A) PROVISION OF INFORMATION BY

4 GROUP HEALTH PLANS.—The administrator of

5 a group health plan subject to the requirements

6 of paragraph (1) shall provide to the Secretary

7 such of the information elements described in

8 subparagraph (C) as the Secretary specifies,

9 and in such manner and at such times as the

10 Secretary may specify (but not more frequently

11 than four times per year), with respect to each

12 individual covered under the plan who is enti13 tled to any benefits under this title.

14 ‘‘(B) PROVISION OF INFORMATION BY EM15 PLOYERS AND EMPLOYEE ORGANIZATIONS.—An

16 employer (or employee organization) that main17 tains or participates in a group health plan sub18 ject to the requirements of paragraph (1) shall

19 provide to the administrator of the plan such of

20 the information elements required to be pro21 vided under subparagraph (A), and in such

22 manner and at such times as the Secretary may

23 specify, at a frequency consistent with that re24 quired under subparagraph (A) with respect to

25 each individual described in subparagraph (A)
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1 who is covered under the plan by reason of em2 ployment with that employer or membership in

3 the organization.

4 ‘‘(C) INFORMATION ELEMENTS.—The in5 formation elements described in this subpara6 graph are the following:

7 ‘‘(i) ELEMENTS CONCERNING THE IN8 DIVIDUAL.—

9 ‘‘(I) The individual’s name.

10 ‘‘(II) The individual’s date of

11 birth.

12 ‘‘(III) The individual’s sex.

13 ‘‘(IV) The individual’s social se14 curity insurance number.

15 ‘‘(V) The number assigned by the

16 Secretary to the individual for claims

17 under this title.

18 ‘‘(VI) The family relationship of

19 the individual to the person who has

20 or had current or employment status

21 with the employer.

22 ‘‘(ii) ELEMENTS CONCERNING THE

23 FAMILY MEMBER WITH CURRENT OR

24 FORMER EMPLOYMENT STATUS.—
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1 ‘‘(I) The name of the person in

2 the individual’s family who has cur3 rent or former employment status

4 with the employer.

5 ‘‘(II) That person’s social secu6 rity insurance number.

7 ‘‘(III) The number or other iden8 tifier assigned by the plan to that per9 son.

10 ‘‘(IV) The periods of coverage for

11 that person under the plan.

12 ‘‘(V) The employment status of

13 that person (current or former) dur14 ing those periods of coverage.

15 ‘‘(VI) The classes (of that per16 son’s family members) covered under

17 the plan.

18 ‘‘(iii) PLAN ELEMENTS.—

19 ‘‘(I) The items and services cov20 ered under the plan.

21 ‘‘(II) The name and address to

22 which claims under the plan are to be

23 sent.

24 ‘‘(iv) ELEMENTS CONCERNING THE

25 EMPLOYER.—
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1 ‘‘(I) The employer’s name.

2 ‘‘(II) The employer’s address.

3 ‘‘(III) The employer identifica4 tion number of the employer.

5 ‘‘(D) USE OF IDENTIFIERS.—The adminis6 trator of a group health plan shall utilize a

7 unique identifier for the plan in providing infor8 mation under subparagraph (A) and in other

9 transactions, as may be specified by the Sec10 retary, related to the provisions of this sub11 section. The Secretary may provide to the ad12 ministrator the unique identifier described in

13 the preceding sentence.

14 ‘‘(E) PENALTY FOR NONCOMPLIANCE.—

15 Any entity that knowingly and willfully fails to

16 comply with a requirement imposed by the pre17 vious subparagraphs shall be subject to a civil

18 money penalty not to exceed $1,000 for each in19 cident of such failure. The provisions of section

20 1128A (other than subsections (a) and (b))

21 shall apply to a civil money penalty under the

22 previous sentence in the same manner as those

23 provisions apply to a penalty or proceeding

24 under section 1128A(a).’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall take effect 180 days after the date

3 of enactment of this Act.

4 SEC. 6. CENTERS OF EXCELLENCE.

5 (a) IN GENERAL.—Title XVIII of the Social Security

6 Act is amended by inserting after section 1896 the fol7 lowing new section:

8 ‘‘CENTERS OF EXCELLENCE

9 ‘‘SEC. 1897. (a) IN GENERAL.—The Secretary shall

10 use a competitive process to contract with specific hos11 pitals or other entities for furnishing services related to

12 surgical procedures, and for furnished services (unrelated

13 to surgical procedures) to hospital inpatients that the Sec14 retary determines to be appropriate. Such services may in15 clude any services covered under this title that the Sec16 retary determines to be appropriate, including post-hos17 pital services.

18 ‘‘(b) QUALITY STANDARDS.—Only entities that meet

19 quality standards established by the Secretary shall be eli20 gible to contract under this section. In considering quality,

21 the Secretary shall take into account the quality, experi22 ence, and quantity of services of physicians who provide

23 services in more than one entity. Contracting entities shall

24 implement a quality improvement plan approved by the

25 Secretary.
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1 ‘‘(c) PAYMENT.—Payment under this section shall be

2 made on the basis of negotiated all-inclusive rates. The

3 amount of payment made by the Secretary to an entity

4 under this title for services covered under a contract shall

5 be less than the aggregate amount of the payments that

6 the Secretary would have otherwise made for the services.

7 ‘‘(d) CONTRACT PERIOD.—A contract period shall be

8 3 years (subject to renewal), as long as the entity con9 tinues to meet quality and other contractual standards.

10 ‘‘(e) INCENTIVES FOR USE OF CENTERS.—The Sec11 retary may permit entities under a contract under this sec12 tion to furnish additional services or waive beneficiary

13 cost-sharing, subject to the approval of the Secretary.

14 ‘‘(f) LIMIT ON NUMBER OF CENTERS.—The Sec15 retary shall limit the number of centers in a geographic

16 area to the number needed to meet projected demand for

17 contracted services.’’.

18 (b) EFFECTIVE DATES.—

19 (1) The amendment made by subsection (a) ap20 plies to services furnished on or after October 1,

21 2001.

22 (2) By October 1, 2001, the Secretary shall

23 enter into contracts under the amendment made by

24 subsection (a) for coronary artery by-pass surgery

25 and other heart procedures, knee replacement sur-
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1 gery, and hip replacement surgery, in geographic

2 areas nationwide such that at least 20 percent of the

3 projected number of those procedures can be pro4 vided under such contracts.

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