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[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 475 Introduced in House (IH)]

105th CONGRESS
  1st Session
                                H. R. 475

To amend title XVIII of the Social Security Act to provide for offering 
 the option of Medicare coverage through qualified provider-sponsored 
             organizations (PSOs), and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 21, 1997

 Mr. Greenwood (for himself and Mr. Stenholm) introduced the following 
bill; which was referred to the Committee on Commerce, and in addition 
to the Committees on Ways and Means, and the Judiciary, 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 title XVIII of the Social Security Act to provide for offering 
 the option of Medicare coverage through qualified provider-sponsored 
             organizations (PSOs), and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Provider-
Sponsored Organization Act of 1997''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Qualified provider-sponsored organizations as medicare health 
                            plan option.
Sec. 3. Authorizing payment of all medicare health plans on a partial 
                            risk basis.
Sec. 4. Elimination of enrollment composition requirement for eligible 
                            organizations meeting enhanced quality 
                            standards.
Sec. 5. Clarification of use of provider-sponsored organizations under 
                            medicaid program.
Sec. 6. Demonstration of coordinated acute and long-term care benefits 
                            under medicare and medicaid programs.
Sec. 7. Rules on coverage of emergency services by all medicare health 
                            plans.
Sec. 8. Preemption of State law restrictions on managed care 
                            arrangements.
Sec. 9. Publication of antitrust guidelines on activities of provider-
                            sponsored organizations.

SEC. 2. QUALIFIED PROVIDER-SPONSORED ORGANIZATIONS AS MEDICARE HEALTH 
              PLAN OPTION.

    (a)  Qualified Provider-Sponsored Organizations as Eligible 
Organizations Under the Medicare Program.--Part C of title XVIII of the 
Social Security Act is amended--
            (1) in section 1876(b) (42 U.S.C. 1395mm(b))--
                    (A) in the matter before paragraph (1), by striking 
                ``or a competitive medical plan'' and inserting ``, a 
                competitive medical plan, or a provider-sponsored 
                organization'', and
                    (B) in paragraph (1), by inserting ``or is a 
                qualified provider-sponsored organization (as defined 
                in section 1889(a))'' after ``Act)''; and
            (2) by inserting after section 1888 the following new 
        section:

  ``requirements, standards, and certification of provider-sponsored 
                             organizations

    ``Sec. 1889. (a) Definitions of Qualified Provider-Sponsored 
Organization; Provider-Sponsored Organization.--For purposes of section 
1876 and this section--
            ``(1) Qualified Provider-Sponsored Organization.--The term 
        `qualified provider-sponsored organization' means a provider-
        sponsored organization that--
                    ``(A) subject to subsection (b), is organized and 
                licensed under State law to offer prepaid health 
                services or health benefits coverage in each State in 
                which the entity seeks to enroll individuals under 
                section 1876 who are entitled to benefits under this 
                title;
                    ``(B) provides a substantial proportion (as defined 
                by the Secretary in the standards established under 
                subsection (g) consistent with paragraph (3)) of the 
                health care items and services under the contract under 
                section 1876 directly through the provider or 
                affiliated group of providers comprising the 
                organization; and
                    ``(C) is certified under subsection (h) as meeting 
                the standards established under subsection (g), which 
                except as provided in subsection (c), shall be based on 
                the requirements that apply to an entity described in 
                section 1876(b)(2) with a full risk contract under 
                section 1876(g).
            ``(2) Provider-sponsored organization.--The term `provider-
        sponsored organization' means a public or private entity that 
        is a provider or group of affiliated providers organized to 
        deliver a spectrum of health care services (including basic 
        hospital and physicians services) under contract to purchasers 
        of such services.
            ``(3) Substantial proportion.--In defining what is a 
        `substantial proportion' for purposes of paragraph (1)(B), the 
        Secretary--
                    ``(A) shall take into account the need for such an 
                organization to assume responsibility for providing--
                            ``(i) significantly more than the majority 
                        of the items and services under the contract 
                        under section 1876 through its own affiliated 
                        providers, and
                            ``(ii) most of the remainder of items and 
                        services under such contract through providers 
                        with which the organization has an agreement to 
provide such items and services,
                in order to assure financial stability and to address 
                the practical considerations involved in integrating 
                the delivery of a wide range of service providers;
                    ``(B) shall take into account the need for such an 
                organization to provide a limited proportion of the 
                items and services under such contract through 
                providers that are neither affiliated with nor have an 
                agreement with such organization; and
                    ``(C) may vary such proportion based upon relevant 
                differences among organizations, such as their location 
                in an urban or rural area.
            ``(4) Affiliation.--
                    ``(A) In general.--For purposes of this subsection, 
                a provider is `affiliated' with another provider if, 
                through contract, ownership, or otherwise--
                            ``(i) one provider, directly or indirectly, 
                        controls, is controlled by, or is under common 
                        control with the other,
                            ``(ii) each provider is a participant in a 
                        lawful combination under which each provider 
                        shares, directly or indirectly, substantial 
                        financial risk in connection with their 
                        operations,
                            ``(iii) both providers are part of a 
                        controlled group of corporations under section 
                        1563 of the Internal Revenue Code of 1986, or
                            ``(iv) both providers are part of an 
                        affiliated service group under section 414 of 
                        such Code.
                    ``(B) Control.--For purposes of subparagraph (A), 
                control is presumed to exist if one party, directly or 
                indirectly, owns, controls, or holds the power to vote, 
                or proxies for, not less than 51 percent of the voting 
                rights or governance rights of another.
    ``(b) Application and Waiver of State Licensure Requirement.--
            ``(1) In general.--Subject to paragraph (2), subsection 
        (a)(1)(A) (relating to State licensure) shall not apply to a 
        provider-sponsored organization.
            ``(2) Delayed exception.--Effective on and after January 1, 
        2002, subsection (a)(1)(A) shall only apply (and paragraph (1) 
        of this subsection shall no longer apply) to a provider-
        sponsored organization in a State if--
                    ``(A) the financial solvency and capital adequacy 
                standards for licensure of the organization under the 
                laws of the State are identical to the standards 
                established under subsection (g), and
                    ``(B) the standards for licensure of the 
                organization under the laws of the State (other than 
                the standards referred to in subparagraph (A)) are 
                substantially equivalent to the standards established 
                under subsection (g).
            ``(3) Application for waiver.--
                    ``(A) In general.--A provider-sponsored 
                organization to which subsection (a)(1)(A) applies that 
                seeks to operate in a State under a full risk contract 
                under section 1876(g) or a partial risk contract under 
                section 1876(i) may apply for a waiver of the 
                requirement of subsection (a)(1)(A) for that 
                organization operating in that State.
                    ``(B) Action on application.--The Secretary shall 
                act on such an application within 60 days after the 
                date it is filed and shall grant a waiver for an 
                organization with respect to a State if the Secretary 
                determines that--
                            ``(i) the State did not act upon such a 
                        licensure application within 90 days after the 
                        date it was filed, or
                            ``(ii)(I) the State denied such a licensure 
                        application, and
                            ``(II) the State's licensing standards or 
                        review process impose unreasonable barriers to 
                        market entry, including through the imposition 
                        of any requirements, procedures, or other 
                        standards on such organizations that are not 
                        generally applicable to any other entities 
                        engaged in substantially similar business.
                    ``(C) Effective period of waiver.--In the case of a 
                waiver granted under this paragraph for an 
                organization--
                            ``(i) the waiver shall be effective for a 
                        24-month period, except that it may be renewed 
                        based on a subsequent application filed during 
                        the last 6 months of such period;
                            ``(ii) if the State failed to meet the 
                        requirement of subparagraph (B)(i)--
                                    ``(I) any application for a renewal 
                                may be made on the basis described in 
                                subparagraph (B)(i) only if the State 
                                does not act on a pending licensure 
                                application during the 24-month period 
                                specified in clause (i),
                                    ``(II) any application for renewal 
                                (other than one made on the basis 
                                described in subparagraph (B)(i)) may 
                                be made only on the basis described in 
                                subparagraph (B)(ii), and
                                    ``(III) the waiver shall cease to 
                                be effective upon approval of the 
                                licensure application by the State 
                                during such 24-month period; and
                            ``(iii) any provisions of State law that 
                        relate to the licensing of the organization and 
                        prohibit the organization from providing 
                        coverage pursuant to a contract under section 
                        1876 shall be superseded during the period for 
                        which such waiver is effective.
            ``(4) Construction.--Nothing in this subsection shall be 
        construed as--
                    ``(A) limiting the number of times such a waiver 
                may be renewed under paragraph (3)(C)(i), or
                    ``(B) affecting the operation of section 514 of the 
                Employee Retirement Income Security Act of 1974.
    ``(c) Application of Certain Requirements.--
            ``(1) Waiver of benefit package requirement.--For purposes 
        of carrying out subsection (a)(1)(C), the requirement of 
        subsection (b)(2)(A) (relating to benefit package for 
        commercial enrollees) of section 1876 shall not be applied.
            ``(2) Exception for method of delivering physicians 
        services.--For purposes of carrying out subsection (a)(1)(C), 
        the requirement of subsection (b)(2)(C) (relating to delivery 
        of physicians services) of section 1876 shall be applied, 
        except that the Secretary shall by regulation specify 
        alternative delivery models or arrangements that may be used by 
        such organizations in lieu of the models or arrangements 
        specified in such subsection.
            ``(3) Exception for risk assumption.--For purposes of 
        carrying out subsection (a)(1)(C), the requirement of 
        subsection (b)(2)(D) (relating to risk assumption) of section 
        1876 shall be applied, except that any provider-sponsored 
        organization with a full risk contract under section 1876(g) 
        may (with the concurrence of the Secretary) obtain insurance or 
        make other arrangements for covering costs in excess of those 
        permitted to be covered by such insurance and arrangements 
        under section 1876(b)(2)(D)(iii).
            ``(4) Treatment of meeting financial solvency 
        requirement.--
                    ``(A) In general.--For purposes of carrying out 
                subsection (a)(1)(C), a provider-sponsored organization 
                shall be treated as meeting the requirement of 
                subsection (b)(2)(E) (relating to adequate provision 
                against risk of insolvency) of section 1876 if the 
                organization is fiscally sound.
                    ``(B) Fiscal soundness.--A provider-sponsored 
                organization shall be treated as fiscally sound for 
                purposes of subparagraph (A) if the organization--
                            ``(i) has a net worth that is not less than 
                        the required net worth (as defined in clause 
                        (i) or (ii) of subparagraph (C), as the case 
                        may be), and
                            ``(ii) has established adequate claims 
                        reserves (as defined in subparagraph (D)).
                    ``(C) Required net worth defined.--For purposes of 
                subparagraph (B)(i)--
                            ``(i) Full risk contracts.--The term 
                        `required net worth' means, in the case of an 
                        organization with a full risk contract under 
                        section 1876(g), a net worth (determined in 
                        accordance with statutory accounting principles 
                        for insurance companies and health maintenance 
                        organizations) that is not less than the 
                        greatest of the following:
                                    ``(I) $1,500,000 at the time of 
                                application and $1,000,000 thereafter.
                                    ``(II) The sum of 8 percent of the 
                                cost of health services that are not 
                                provided directly by the organization 
                                or its affiliated providers to 
                                enrollees, plus 4 percent of the 
                                estimated annual costs of health 
                                services provided directly by the 
                                organization or its affiliated 
                                providers to enrollees.
                                    ``(III) 3 months of uncovered 
                                expenditures.
                            ``(ii) Partial risk contracts.--The term 
                        `required net worth' means, in the case of an 
                        organization with a partial risk contract under 
                        section 1876(i), an amount determined in 
                        accordance with clause (i), except that in 
                        applying subclause (II) of such clause, the 
                        Secretary shall substitute for the percentages 
                        specified in such subclause such lower 
                        percentages as are appropriate to reflect the 
                        risk-sharing arrangements under the contract.
                    ``(D) Adequate claims reserves.--For purposes of 
                subparagraph (B)(ii), the term `adequate claims 
                reserves' means, with respect to an organization, 
                reserves for claims that are--
                            ``(i) incurred but not reported, or
                            ``(ii) reported but unpaid,
                that are determined in accordance with statutory 
                accounting principles for insurance companies and 
                health maintenance organizations and with professional 
                standards of actuarial practice and that are certified 
                by an independent actuary as adequate in light of the 
                operations and contracts of the organization.
                    ``(E) Application of accounting principles.--In 
                applying statutory accounting principles for purposes 
                of determining the net worth of an organization under 
                subparagraph (B)(i), the Secretary shall--
                            ``(i) treat as `admitted assets'--
                                    ``(I) land, buildings, and 
                                equipment of the organization used for 
                                the direct provision of health care 
                                services,
                                    ``(II) any receivables from 
                                governmental programs due for more than 
                                90 days, and
                                    ``(III) any other assets designated 
                                by the Secretary; and
                            ``(ii) recognize, as a contribution to 
                        surplus, amounts received under subordinated 
                        debt (meeting such requirements as the 
                        Secretary may specify).
                    ``(F) Methods of demonstrating compliance.--The 
                Secretary shall recognize ways of complying with the 
                requirement of subparagraph (A) other than by means of 
                subparagraph (B), including (alone or in combination)--
                            ``(i) letters of credit from a bank,
                            ``(ii) financial guarantees from 
                        financially strong parties including 
                        affiliates,
                            ``(iii) unrestricted fund balances,
                            ``(iv) diversity of lines of business and 
                        presence of non risk related revenue,
                            ``(v) certification by an independent 
                        actuary,
                            ``(vi) reinsurance ceded to, or stop loss 
                        insurance purchased through, a recognized 
                        commercial insurance company, and
                            ``(vii) other methods acceptable to the 
                        Secretary.
    ``(d) Requirement for Ongoing Quality Assurance Program.--
            ``(1) In general.--A provider-sponsored organization shall 
        not be treated as meeting the requirements of subsection (c)(6) 
        (relating to an ongoing quality assurance program) of section 
        1876 unless the quality assurance program of the organization 
        meets the requirements of paragraphs (2) and (3).
            ``(2) Required elements of quality assurance program.--A 
        quality assurance program meets the requirements of this 
        paragraph if the program--
                    ``(A) stresses health outcomes;
                    ``(B) provides opportunities for input by 
                physicians and other health care professionals;
                    ``(C) monitors and evaluates high volume and high 
                risk services and the care of acute and chronic 
                conditions;
                    ``(D) evaluates the continuity and coordination of 
                care that enrollees receive;
                    ``(E) establishes mechanisms to detect both 
                underutilization and overutilization of services;
                    ``(F) after identifying areas for improvement, 
                establishes or alters practice parameters;
                    ``(G) takes action to improve quality and assess 
                the effectiveness of such action through systematic 
                follow up;
                    ``(H) makes available information on quality and 
                outcomes measures to facilitate beneficiary comparison 
                and choice of health coverage options (in such form and 
                on such quality and outcomes measures as the Secretary 
                determines to be appropriate); and
                    ``(I) is evaluated on an ongoing basis as to its 
                effectiveness.
            ``(3) Treatment of case-by-case utilization review.--If a 
        provider-sponsored organization utilizes case-by-case 
        utilization review in its quality assurance program, the 
        organization shall--
                    ``(A) base such review on written protocols 
                developed on the basis of current standards of medical 
                practice; and
                    ``(B) implement a plan under which--
                            ``(i) such review is coordinated with the 
                        quality assurance program of the organization, 
                        and
                            ``(ii) a transition is made from relying 
                        predominantly on case-by-case review to review 
                        focusing on patterns of care.
            ``(4) Compliance through accreditation.--A provider-
        sponsored organization shall be treated as meeting the 
        requirements of paragraphs (2) and (3) of this subsection and 
        the requirements of section 1876(c)(6) if the organization is 
        accredited (and periodically reaccredited) by a private 
        organization under a process that the Secretary has determined 
        assures that the organization meets standards for quality 
        assurance programs that are no less stringent than the 
        standards established for such programs under subsection (g) to 
        carry out this subsection and section 1876(c).
    ``(e) Requirement for Participation Procedures.--A provider-
sponsored organization shall not be treated as meeting the requirements 
of this section unless--
            ``(1) the organization establishes reasonable procedures 
        relating to the participation (under an agreement between a 
        physician or group of physicians and the organization) of 
        physicians under contracts under section 1876 and such 
        procedures include--
                    ``(A) providing notice of the rules regarding 
                participation,
                    ``(B) providing written notice of participation 
                decisions that are adverse to physicians, and
                    ``(C) providing a process within the organization 
                for appealing adverse decisions, including the 
                presentation of information and views of the physician 
                regarding such decision; and
            ``(2) the organization consults with physicians who have 
        entered into participation agreements with the organization 
        regarding the organization's medical policy, quality, and 
        medical management procedures.
Paragraph (1)(C) shall not be construed as requiring a live evidentiary 
hearing, a verbatim record, or representation of the appealing party by 
legal counsel.
    ``(f) Other Special Rules for Treatment of Provider-Sponsored 
Organizations.--
            ``(1) Waiver of minimum enrollment rules.--In the case of a 
        provider-sponsored organization, paragraph (1) of section 
        1876(g)--
                    ``(A) shall not apply for the first 3 contract 
                years of the organization under section 1876, and
                    ``(B) shall be applied for contract years 
                thereafter--
                            ``(i) by substituting `1500' for `5000', 
                        and
                            ``(ii) by substituting `at least 500' for 
                        `fewer'.
            ``(2) Adjusted community rate.--In the case of a provider-
        sponsored organization, the adjusted community rate under 
        subsections (e)(3) and (g)(2) of section 1876 may be computed 
        (in a manner specified by the Secretary) using data in the 
        general commercial marketplace or (during a transition period) 
        based on the costs incurred by the organization in providing 
        such a product.
    ``(g) Establishment of Standards for Qualified Provider-sponsored 
Organizations.--
            ``(1) Interim standards.--
                    ``(A) In general.--The Secretary shall issue 
                regulations regarding standards for qualified provider-
                sponsored organizations within 180 days after the date 
                of the enactment of this section. Such regulations 
                shall be issued on an interim basis, but shall become 
                effective upon publication and shall be effective 
                through December 31, 2001.
                    ``(B) Solicitation of views.--In developing 
                standards under this paragraph, the Secretary shall 
                solicit the views of the National Association of 
                Insurance Commissioners, the American Academy of 
                Actuaries, State health departments, associations 
                representing provider-sponsored organizations, quality 
                experts (including private accreditation 
                organizations), and medicare beneficiaries.
                    ``(C) Contracts to monitor performance.--The 
                Secretary shall enter into contracts with appropriate 
                State agencies to monitor performance and beneficiary 
                access to services under this title during the period 
                in which interim standards are in effect under this 
                paragraph.
            ``(2) Permanent standards.--
                    ``(A) In general.--Not later than July 1, 2001, the 
                Secretary shall issue permanent standards under this 
                paragraph.
                    ``(B) Consultation.--In developing standards under 
                this paragraph, the Secretary shall consult with the 
                organizations and individuals referred to in paragraph 
                (1)(B).
                    ``(C) Effective date.--The standards under this 
                paragraph shall be effective for periods after December 
                31, 2001.
            ``(3) Preemption.--The standards established under this 
        subsection shall supersede any State law or regulation with 
        respect to qualified provider-sponsored organizations insofar 
        as such law or regulation--
                    ``(A) applies to individuals enrolled with such an 
                organization under a contract under section 1876, and
                    ``(B) does not meet the requirements of subsection 
                (b)(2).
    ``(h) Certification.--
            ``(1) Establishment of process.--The Secretary shall 
        establish a process for the certification of provider-sponsored 
        organizations as qualified provider-sponsored organizations 
        under this section. Such process shall provide that an 
        application for certification shall be approved or denied not 
        later than 90 days after the date of receipt of the 
        application.
            ``(2) Application of accreditation.--
                    ``(A) In general.--The process under this 
                subsection shall, to the maximum extent practical, 
                provide that provider-sponsored organizations that are 
                accredited by a qualified private accreditation process 
                that the Secretary finds applies standards that are no 
                less stringent than the standards established under 
                subsection (g) are deemed to meet the corresponding 
                standards of this title.
                    ``(B) Period of validity of accreditation.--The use 
                of an accreditation under subparagraph (A) shall be 
                valid only for such period as the Secretary specifies.
            ``(3) Imposition of certification fee.--The Secretary may 
        impose user fees on entities seeking certification under this 
        subsection in such amounts as the Secretary deems sufficient to 
        finance the costs of such certification.
            ``(4) Decertification.--If a provider-sponsored 
        organization is decertified under this subsection, the 
        organization shall notify each enrollee with the organization 
        under section 1876 of such decertification.''.
    (b) Effective Date; Use of Interim Regulations.--
            (1) In general.--The amendments made by this section shall 
        become effective on the date of the enactment of this Act and 
        apply to contract years beginning on or after January 1, 1998.
            (2) Use of interim final regulations.--In order to carry 
        out the amendments made by this section in a timely manner, the 
        Secretary of Health and Human Services may promulgate 
        regulations that take effect on an interim basis, after notice 
        and pending opportunity for public comment.

SEC. 3. AUTHORIZING PAYMENT OF ALL MEDICARE HEALTH PLANS ON A PARTIAL 
              RISK BASIS.

    (a) In General.--Section 1876 of the Social Security Act (42 U.S.C. 
1395mm) is amended--
            (1) by redesignating subsections (i) and (j) as subsections 
        (k) and (l), respectively, and
            (2) by inserting after subsection (h) the following:
    ``(i) The Secretary may enter into a partial risk contract with an 
eligible organization under which--
            ``(1) notwithstanding subsection (b)(2)(D), the 
        organization and the program established under this title share 
        the financial risk associated with the services the 
        organization provides to individuals entitled to benefits under 
        part A and enrolled under part B or enrolled under part B only;
            ``(2) notwithstanding subsections (a)(1) and (h)(2), 
        payment is based on--
                    ``(A) a blend of--
                             (i) the payments that would otherwise be 
                        made to such organization under a risk-sharing 
                        contract under subsection (g), and
                            ``(ii) the payments that would be made to 
                        such organization under a reasonable cost 
                        reimbursement contract under subsection (h), or
                    ``(B) any other methodology agreed upon by the 
                Secretary and the organization; and
            ``(3) adjustments, if appropriate, are made to the payments 
        under this section to the organization to reflect any risk 
        assumed by such program.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on the date of the enactment of this Act and apply to 
contract years beginning on or after January 1, 1998.

SEC. 4. ELIMINATION OF ENROLLMENT COMPOSITION REQUIREMENT FOR ELIGIBLE 
              ORGANIZATIONS MEETING ENHANCED QUALITY STANDARDS.

    (a) In General.--Section 1876 of the Social Security Act (42 U.S.C. 
1395mm), as amended by section 3, is amended by inserting after 
subsection (i) the following:
    ``(j)(1) An eligible organization shall be treated as meeting the 
requirement of section 1876(f) (relating to enrollment composition) if 
the organization demonstrates that it--
            ``(A) is capable of providing coordinated care in 
        accordance with the quality assurance standards established 
        under subsection (c)(6) and paragraph (2) of section 1889(d), 
        and
            ``(B) has experience, under a past or present arrangement, 
        providing coordinated care to individuals (other than 
        individuals who are entitled to benefits under this title) who 
        are enrollees, participants, or beneficiaries of a health plan 
        or a State plan approved under title XIX.
    ``(2) An eligible organization shall be treated as meeting the 
standards referred to in paragraph (1)(A) if the organization is 
accredited (and periodically reaccredited) by a private organization 
under a process that the Secretary has determined assures that the 
organization meets standards for quality assurance programs that are no 
less stringent than the standards established for such programs under 
subsection (c) and section 1889(g).
    ``(3) Definitions.--For purposes of this subsection:
            ``(A) Health plan.--The term `health plan' means--
                    ``(i) any contract of insurance, including any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization contract, that is provided by 
                a carrier (as defined in subparagraph (B)), and
                    ``(ii) an employee welfare benefit plan insofar as 
                the plan provides health benefits and is funded in a 
                manner other than through the purchase of one or more 
                policies or contracts described in clause (i).
            ``(B) Carrier.--The term `carrier' means a licensed 
        insurance company, a hospital or medical service corporation 
        (including an existing Blue Cross or Blue Shield organization), 
        or other entity licensed or certified by a State to provide 
        health insurance or health benefits.
    (b) Effective Date.--The amendments made by this subsection shall 
become effective on the date of the enactment of this Act and apply to 
contract years beginning on or after January 1, 1998.

SEC. 5. CLARIFICATION OF USE OF PROVIDER-SPONSORED ORGANIZATIONS UNDER 
              MEDICAID PROGRAM.

    Section 1903(m)(1)(A) of the Social Security Act (42 U.S.C. 
1396b(m)(1)(A)) is amended, in the matter before clause (i), by 
inserting ``(which may be a provider-sponsored organization, as defined 
in section 1889(a)(2))'' after ``public or private organization''.

SEC. 6. DEMONSTRATION OF COORDINATED ACUTE AND LONG-TERM CARE BENEFITS 
              UNDER MEDICARE AND MEDICAID PROGRAMS.

    The Secretary of Health and Human Services shall provide, in at 
least 10 States, for demonstration projects that permit Medicaid 
programs under title XIX to be treated as eligible organizations under 
section 1876 for individuals who are eligible to enroll with an 
organization under such section and are eligible to receive medical 
assistance under a State program approved under title XIX, for the 
purpose of demonstrating the delivery of primary, acute, and long-term 
care through an integrated delivery network that emphasizes 
noninstitutional care.

SEC. 7. RULES ON COVERAGE OF EMERGENCY SERVICES BY ALL MEDICARE HEALTH 
              PLANS.

    (a) In General.--Section 1876(c) of the Social Security Act (42 
U.S.C. 1395mm(c)) is amended--
            (1) in paragraph (4)--
                    (A) by striking ``and'' at the end of subparagraph 
                (A), and
                    (B) by striking subparagraph (B) and inserting in 
                lieu thereof the following:
            ``(B) provide for reimbursement with respect to services 
        which are covered under subparagraph (A) which are provided to 
        such an individual other than through the organization, if--
                    ``(i) the services were medically necessary and 
                immediately required because of an unforeseen illness, 
                injury, or condition, and
                    ``(ii) it was not reasonable given the 
                circumstances to obtain the services through the 
                organization;
            ``(C) provide coverage for emergency services (as defined 
        in paragraph (9))--
                    ``(i) without regard to prior authorization, and
                    ``(ii) subject to the requirement of subparagraph 
                (B)(ii), without regard to the emergency care 
                provider's contractual relationship with the 
                organization; and
            ``(D) make available 24 hours a day and 7 days a week a 
        person authorized to make any prior authorization determination 
        that is required by the organization as a condition of coverage 
        or payment for items and services included in the benefits 
        described in paragraph (2)(A) that are furnished with respect 
        to--
                    ``(i) a medical condition that is--
                            ``(I) identified pursuant to an appropriate 
                        screening examination (as described in section 
                        1867(a)), and
                            ``(II) not an emergency medical condition 
                        (as defined in section 1867(e)(1)), or
                    ``(ii) an emergency medical condition (as so 
                defined) after that condition has been stabilized (as 
                defined in section 1867(e)(3)(B)),
        and makes such determinations within a period of time that 
        meets standards established by the Secretary.''; and
            (2) by adding at the end the following:
    ``(9) In this subsection, the term `emergency services' means--
            ``(A) an appropriate medical screening examination and 
        related ancillary services (as described in section 1867(a)) 
        furnished in a hospital emergency department, and
            ``(B) necessary stabilizing examination and treatment 
        services (as described in section 1867(b)) for an emergency 
        medical condition (as defined in section 1867(e)(1)).''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on the date of the enactment of this Act and shall 
apply to contract years beginning on or after January 1, 1998.

SEC. 8. PREEMPTION OF STATE LAW RESTRICTIONS ON MANAGED CARE 
              ARRANGEMENTS.

    (a) Limitation of State Law Restrictions on Managed Care 
Arrangements.--Effective as of January 1, 1998--
            (1) a State may not prohibit a carrier or group health plan 
        providing health coverage from including incentives for 
        enrollees to use the services of participating providers;
            (2) a State may not prohibit such a carrier or plan from 
        limiting coverage of services to those provided by a 
        participating provider;
            (3) a State may not prohibit the negotiation of rates and 
        forms of payments for providers by such a carrier or plan with 
        respect to health coverage;
            (4) a State may not prohibit such a carrier or plan from 
        limiting the number of participating providers;
            (5) a State may not prohibit such a carrier or plan from 
        requiring that services be provided (or authorized) by a 
        practitioner selected by the enrollee from a list of available 
        participating providers or, except for services of a physician 
        who specializes in obstetrics and gynecology, from requiring 
        enrollees to obtain referral in order to have coverage for 
        treatment by a specialist or health institution;
            (6) a State may not prohibit or limit the corporate 
        practice of medicine; and
            (7) a State may not prohibit the adoption and operation of 
        a utilization review program.
    (b) Definitions.--In this section:
            (1) Managed care coverage.--The term ``managed care 
        coverage'' means health coverage to the extent the coverage is 
        provided through a managed care arrangement (as defined in 
        paragraph (3)).
            (2) Participating provider.--The term ``participating 
        provider'' means an entity or individual which provides, sells, 
        or leases health care services as part of a provider network 
        (as defined in paragraph (4)).
            (3) Managed care arrangement.--The term ``managed care 
        arrangement'' means, with respect to a group health plan or 
        under health insurance coverage, an arrangement under such plan 
        or coverage under which providers agree to provide items and 
        services covered under the arrangement to individuals covered 
        under the plan or who have such coverage.
            (4) Provider network.--The term ``provider network'' means, 
        with respect to a group health plan or health insurance 
        coverage, providers who have entered into an agreement 
        described in paragraph (3).
            (5) Utilization review program.--The term ``utilization 
        review program'' means a system of reviewing the medical 
        necessity and appropriateness of patient services (which may 
        include inpatient and outpatient services) using specified 
        guidelines. Such a system may include pattern analysis, 
        preadmission certification, the application of practice 
        guidelines, continued stay review, discharge planning, 
        preauthorization of ambulatory procedures, and retrospective 
        review.
            (6) State.--The term ``State'' includes the District of 
        Columbia, Puerto Rico, Guam, the Virgin Islands, the Northern 
        Mariana Islands, and American Samoa.
    (c) Exemption of Laws Preventing Denial of Life Saving Medical 
Treatment Pending Transfer to Another Health Care Provider.--Nothing in 
this section shall be construed to invalidate any State law that has 
the effect of preventing involuntary denial of life-preserving medical 
treatment when such denial would cause the involuntary death of the 
patient pending transfer of the patient to a health care provider 
willing to provide such treatment.
    (d) Purpose; Rule of Construction.--The purpose of this section is 
to permit use of the mechanisms specified in paragraphs (1) through (7) 
of subsection (a) in the States. Nothing in this section shall be 
construed as prohibiting a State from regulating or limiting abusive 
arrangements or practices that act inappropriately to withhold, limit, 
or delay access to covered services.

SEC. 9. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES OF PROVIDER-
              SPONSORED ORGANIZATIONS.

    (a) In General.--The Department of Justice and the Federal Trade 
Commission shall jointly provide for the development and publication of 
explicit guidelines on the application of antitrust laws to the 
activities of provider-sponsored organizations (as defined in section 
1889(a)(2) of the Social Security Act). The guidelines shall--
            (1) address issues relating to the formation, development, 
        and operation of such organizations, and
            (2) be designed to facilitate the development and operation 
        of such organizations.
    (b) Effect of Guidelines.--The guidelines established under 
subsection (a) shall--
            (1) be binding on all enforcement activities undertaken 
        pursuant to the antitrust laws, and
            (2) serve as guidance to the attorneys general and courts 
        of the States in interpreting and applying the antitrust laws 
        of the States to provider-sponsored organizations.
    (c) Definition.--For purposes of this section, the term ``antitrust 
laws'' has the meaning given to such term in the first section of the 
Clayton Act (15 U.S.C. 12), except that such term includes section 5 of 
the Federal Trade Commission Act (15 U.S.C. 45) to the extent such 
section applies to unfair competition.
    (d) Deadline; Annual Updates.--The guidelines required by 
subsection (a) shall be published not later than 180 days after the 
date of the enactment of this Act and shall be updated at least 
annually thereafter based on consultations with interested parties.
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