I

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.

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 Provider-Sponsored Organization Act of

6 1997’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 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.

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

5 (a) QUALIFIED PROVIDER-SPONSORED ORGANIZA6 TIONS AS ELIGIBLE ORGANIZATIONS UNDER THE MEDI7 CARE PROGRAM.—Part C of title XVIII of the Social Se8 curity Act is amended—

9 (1) in section 1876(b) (42 U.S.C.

10 1395mm(b))—

11 (A) in the matter before paragraph (1), by

12 striking ‘‘or a competitive medical plan’’ and in13 serting ‘‘, a competitive medical plan, or a pro14 vider-sponsored organization’’, and

15 (B) in paragraph (1), by inserting ‘‘or is a

16 qualified provider-sponsored organization (as

17 defined in section 1889(a))’’ after ‘‘Act)’’; and

18 (2) by inserting after section 1888 the following

19 new section:
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1 ‘‘REQUIREMENTS, STANDARDS, AND CERTIFICATION OF

2 PROVIDER-SPONSORED ORGANIZATIONS

3 ‘‘SEC. 1889. (a) DEFINITIONS OF QUALIFIED PRO4 VIDER-SPONSORED ORGANIZATION; PROVIDER-SPON5 SORED ORGANIZATION.—For purposes of section 1876

6 and this section—

7 ‘‘(1) QUALIFIED PROVIDER-SPONSORED ORGA8 NIZATION.—The term ‘qualified provider-sponsored

9 organization’ means a provider-sponsored organiza10 tion that—

11 ‘‘(A) subject to subsection (b), is organized

12 and licensed under State law to offer prepaid

13 health services or health benefits coverage in

14 each State in which the entity seeks to enroll

15 individuals under section 1876 who are entitled

16 to benefits under this title;

17 ‘‘(B) provides a substantial proportion (as

18 defined by the Secretary in the standards estab19 lished under subsection (g) consistent with

20 paragraph (3)) of the health care items and

21 services under the contract under section 1876

22 directly through the provider or affiliated group

23 of providers comprising the organization; and

24 ‘‘(C) is certified under subsection (h) as

25 meeting the standards established under sub-
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1 section (g), which except as provided in sub2 section (c), shall be based on the requirements

3 that apply to an entity described in section

4 1876(b)(2) with a full risk contract under sec5 tion 1876(g).

6 ‘‘(2) PROVIDER-SPONSORED ORGANIZATION.—

7 The term ‘provider-sponsored organization’ means a

8 public or private entity that is a provider or group

9 of affiliated providers organized to deliver a spec10 trum of health care services (including basic hospital

11 and physicians services) under contract to pur12 chasers of such services.

13 ‘‘(3) SUBSTANTIAL PROPORTION.—In defining

14 what is a ‘substantial proportion’ for purposes of

15 paragraph (1)(B), the Secretary—

16 ‘‘(A) shall take into account the need for

17 such an organization to assume responsibility

18 for providing—

19 ‘‘(i) significantly more than the ma20 jority of the items and services under the

21 contract under section 1876 through its

22 own affiliated providers, and

23 ‘‘(ii) most of the remainder of items

24 and services under such contract through

25 providers with which the organization has
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1 an agreement to provide such items and

2 services,

3 in order to assure financial stability and to ad4 dress the practical considerations involved in in5 tegrating the delivery of a wide range of service

6 providers;

7 ‘‘(B) shall take into account the need for

8 such an organization to provide a limited pro9 portion of the items and services under such

10 contract through providers that are neither af11 filiated with nor have an agreement with such

12 organization; and

13 ‘‘(C) may vary such proportion based upon

14 relevant differences among organizations, such

15 as their location in an urban or rural area.

16 ‘‘(4) AFFILIATION.—

17 ‘‘(A) IN GENERAL.—For purposes of this

18 subsection, a provider is ‘affiliated’ with an19 other provider if, through contract, ownership,

20 or otherwise—

21 ‘‘(i) one provider, directly or indi22 rectly, controls, is controlled by, or is

23 under common control with the other,

24 ‘‘(ii) each provider is a participant in

25 a lawful combination under which each
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1 provider shares, directly or indirectly, sub2 stantial financial risk in connection with

3 their operations,

4 ‘‘(iii) both providers are part of a con5 trolled group of corporations under section

6 1563 of the Internal Revenue Code of

7 1986, or

8 ‘‘(iv) both providers are part of an af9 filiated service group under section 414 of

10 such Code.

11 ‘‘(B) CONTROL.—For purposes of subpara12 graph (A), control is presumed to exist if one

13 party, directly or indirectly, owns, controls, or

14 holds the power to vote, or proxies for, not less

15 than 51 percent of the voting rights or govern16 ance rights of another.

17 ‘‘(b) APPLICATION AND WAIVER OF STATE LICEN18 SURE REQUIREMENT.—

19 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

20 subsection (a)(1)(A) (relating to State licensure)

21 shall not apply to a provider-sponsored organization.

22 ‘‘(2) DELAYED EXCEPTION.—Effective on and

23 after January 1, 2002, subsection (a)(1)(A) shall

24 only apply (and paragraph (1) of this subsection
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1 shall no longer apply) to a provider-sponsored orga2 nization in a State if—

3 ‘‘(A) the financial solvency and capital ade4 quacy standards for licensure of the organiza5 tion under the laws of the State are identical to

6 the standards established under subsection (g),

7 and

8 ‘‘(B) the standards for licensure of the or9 ganization under the laws of the State (other

10 than the standards referred to in subparagraph

11 (A)) are substantially equivalent to the stand12 ards established under subsection (g).

13 ‘‘(3) APPLICATION FOR WAIVER.—

14 ‘‘(A) IN GENERAL.—A provider-sponsored

15 organization to which subsection (a)(1)(A) ap16 plies that seeks to operate in a State under a

17 full risk contract under section 1876(g) or a

18 partial risk contract under section 1876(i) may

19 apply for a waiver of the requirement of sub20 section (a)(1)(A) for that organization operat21 ing in that State.

22 ‘‘(B) ACTION ON APPLICATION.—The Sec23 retary shall act on such an application within

24 60 days after the date it is filed and shall grant
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1 a waiver for an organization with respect to a

2 State if the Secretary determines that—

3 ‘‘(i) the State did not act upon such

4 a licensure application within 90 days after

5 the date it was filed, or

6 ‘‘(ii)(I) the State denied such a licen7 sure application, and

8 ‘‘(II) the State’s licensing standards

9 or review process impose unreasonable bar10 riers to market entry, including through

11 the imposition of any requirements, proce12 dures, or other standards on such organi13 zations that are not generally applicable to

14 any other entities engaged in substantially

15 similar business.

16 ‘‘(C) EFFECTIVE PERIOD OF WAIVER.—In

17 the case of a waiver granted under this para18 graph for an organization—

19 ‘‘(i) the waiver shall be effective for a

20 24-month period, except that it may be re21 newed based on a subsequent application

22 filed during the last 6 months of such pe23 riod;

24 ‘‘(ii) if the State failed to meet the re25 quirement of subparagraph (B)(i)—
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1 ‘‘(I) any application for a renewal

2 may be made on the basis described in

3 subparagraph (B)(i) only if the State

4 does not act on a pending licensure

5 application during the 24-month pe6 riod specified in clause (i),

7 ‘‘(II) any application for renewal

8 (other than one made on the basis de9 scribed in subparagraph (B)(i)) may

10 be made only on the basis described in

11 subparagraph (B)(ii), and

12 ‘‘(III) the waiver shall cease to

13 be effective upon approval of the li14 censure application by the State dur15 ing such 24-month period; and

16 ‘‘(iii) any provisions of State law that

17 relate to the licensing of the organization

18 and prohibit the organization from provid19 ing coverage pursuant to a contract under

20 section 1876 shall be superseded during

21 the period for which such waiver is effec22 tive.

23 ‘‘(4) CONSTRUCTION.—Nothing in this sub24 section shall be construed as—
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1 ‘‘(A) limiting the number of times such a

2 waiver may be renewed under paragraph

3 (3)(C)(i), or

4 ‘‘(B) affecting the operation of section 514

5 of the Employee Retirement Income Security

6 Act of 1974.

7 ‘‘(c) APPLICATION OF CERTAIN REQUIREMENTS.—

8 ‘‘(1) WAIVER OF BENEFIT PACKAGE REQUIRE9 MENT.—For purposes of carrying out subsection

10 (a)(1)(C), the requirement of subsection (b)(2)(A)

11 (relating to benefit package for commercial enroll12 ees) of section 1876 shall not be applied.

13 ‘‘(2) EXCEPTION FOR METHOD OF DELIVERING

14 PHYSICIANS SERVICES.—For purposes of carrying

15 out subsection (a)(1)(C), the requirement of sub16 section (b)(2)(C) (relating to delivery of physicians

17 services) of section 1876 shall be applied, except

18 that the Secretary shall by regulation specify alter19 native delivery models or arrangements that may be

20 used by such organizations in lieu of the models or

21 arrangements specified in such subsection.

22 ‘‘(3) EXCEPTION FOR RISK ASSUMPTION.—For

23 purposes of carrying out subsection (a)(1)(C), the

24 requirement of subsection (b)(2)(D) (relating to risk

25 assumption) of section 1876 shall be applied, except
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1 that any provider-sponsored organization with a full

2 risk contract under section 1876(g) may (with the

3 concurrence of the Secretary) obtain insurance or

4 make other arrangements for covering costs in ex5 cess of those permitted to be covered by such insur6 ance and arrangements under section

7 1876(b)(2)(D)(iii).

8 ‘‘(4) TREATMENT OF MEETING FINANCIAL SOL9 VENCY REQUIREMENT.—

10 ‘‘(A) IN GENERAL.—For purposes of carry11 ing out subsection (a)(1)(C), a provider-spon12 sored organization shall be treated as meeting

13 the requirement of subsection (b)(2)(E) (relat14 ing to adequate provision against risk of insol15 vency) of section 1876 if the organization is fis16 cally sound.

17 ‘‘(B) FISCAL SOUNDNESS.—A provider18 sponsored organization shall be treated as fis19 cally sound for purposes of subparagraph (A) if

20 the organization—

21 ‘‘(i) has a net worth that is not less

22 than the required net worth (as defined in

23 clause (i) or (ii) of subparagraph (C), as

24 the case may be), and
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1 ‘‘(ii) has established adequate claims

2 reserves (as defined in subparagraph (D)).

3 ‘‘(C) REQUIRED NET WORTH DEFINED.—

4 For purposes of subparagraph (B)(i)—

5 ‘‘(i) FULL RISK CONTRACTS.—The

6 term ‘required net worth’ means, in the

7 case of an organization with a full risk

8 contract under section 1876(g), a net

9 worth (determined in accordance with stat10 utory accounting principles for insurance

11 companies and health maintenance organi12 zations) that is not less than the greatest

13 of the following:

14 ‘‘(I) $1,500,000 at the time of

15 application and $1,000,000 thereafter.

16 ‘‘(II) The sum of 8 percent of the

17 cost of health services that are not

18 provided directly by the organization

19 or its affiliated providers to enrollees,

20 plus 4 percent of the estimated annual

21 costs of health services provided di22 rectly by the organization or its affili23 ated providers to enrollees.

24 ‘‘(III) 3 months of uncovered ex25 penditures.
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1 ‘‘(ii) PARTIAL RISK CONTRACTS.—The

2 term ‘required net worth’ means, in the

3 case of an organization with a partial risk

4 contract under section 1876(i), an amount

5 determined in accordance with clause (i),

6 except that in applying subclause (II) of

7 such clause, the Secretary shall substitute

8 for the percentages specified in such sub9 clause such lower percentages as are ap10 propriate to reflect the risk-sharing ar11 rangements under the contract.

12 ‘‘(D) ADEQUATE CLAIMS RESERVES.—For

13 purposes of subparagraph (B)(ii), the term

14 ‘adequate claims reserves’ means, with respect

15 to an organization, reserves for claims that

16 are—

17 ‘‘(i) incurred but not reported, or

18 ‘‘(ii) reported but unpaid,

19 that are determined in accordance with statu20 tory accounting principles for insurance compa21 nies and health maintenance organizations and

22 with professional standards of actuarial practice

23 and that are certified by an independent actu24 ary as adequate in light of the operations and

25 contracts of the organization.
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1 ‘‘(E) APPLICATION OF ACCOUNTING PRIN2 CIPLES.—In applying statutory accounting

3 principles for purposes of determining the net

4 worth of an organization under subparagraph

5 (B)(i), the Secretary shall—

6 ‘‘(i) treat as ‘admitted assets’—

7 ‘‘(I) land, buildings, and equip8 ment of the organization used for the

9 direct provision of health care serv10 ices,

11 ‘‘(II) any receivables from gov12 ernmental programs due for more

13 than 90 days, and

14 ‘‘(III) any other assets des15 ignated by the Secretary; and

16 ‘‘(ii) recognize, as a contribution to

17 surplus, amounts received under subordi18 nated debt (meeting such requirements as

19 the Secretary may specify).

20 ‘‘(F) METHODS OF DEMONSTRATING COM21 PLIANCE.—The Secretary shall recognize ways

22 of complying with the requirement of subpara23 graph (A) other than by means of subpara24 graph (B), including (alone or in combina25 tion)—
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1 ‘‘(i) letters of credit from a bank,

2 ‘‘(ii) financial guarantees from finan3 cially strong parties including affiliates,

4 ‘‘(iii) unrestricted fund balances,

5 ‘‘(iv) diversity of lines of business and

6 presence of non risk related revenue,

7 ‘‘(v) certification by an independent

8 actuary,

9 ‘‘(vi) reinsurance ceded to, or stop

10 loss insurance purchased through, a recog11 nized commercial insurance company, and

12 ‘‘(vii) other methods acceptable to the

13 Secretary.

14 ‘‘(d) REQUIREMENT FOR ONGOING QUALITY ASSUR15 ANCE PROGRAM.—

16 ‘‘(1) IN GENERAL.—A provider-sponsored orga17 nization shall not be treated as meeting the require18 ments of subsection (c)(6) (relating to an ongoing

19 quality assurance program) of section 1876 unless

20 the quality assurance program of the organization

21 meets the requirements of paragraphs (2) and (3).

22 ‘‘(2) REQUIRED ELEMENTS OF QUALITY ASSUR23 ANCE PROGRAM.—A quality assurance program

24 meets the requirements of this paragraph if the pro25 gram—
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1 ‘‘(A) stresses health outcomes;

2 ‘‘(B) provides opportunities for input by

3 physicians and other health care professionals;

4 ‘‘(C) monitors and evaluates high volume

5 and high risk services and the care of acute and

6 chronic conditions;

7 ‘‘(D) evaluates the continuity and coordi8 nation of care that enrollees receive;

9 ‘‘(E) establishes mechanisms to detect both

10 underutilization and overutilization of services;

11 ‘‘(F) after identifying areas for improve12 ment, establishes or alters practice parameters;

13 ‘‘(G) takes action to improve quality and

14 assess the effectiveness of such action through

15 systematic follow up;

16 ‘‘(H) makes available information on qual17 ity and outcomes measures to facilitate bene18 ficiary comparison and choice of health cov19 erage options (in such form and on such quality

20 and outcomes measures as the Secretary deter21 mines to be appropriate); and

22 ‘‘(I) is evaluated on an ongoing basis as to

23 its effectiveness.

24 ‘‘(3) TREATMENT OF CASE-BY-CASE UTILIZA25 TION REVIEW.—If a provider-sponsored organization
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1 utilizes case-by-case utilization review in its quality

2 assurance program, the organization shall—

3 ‘‘(A) base such review on written protocols

4 developed on the basis of current standards of

5 medical practice; and

6 ‘‘(B) implement a plan under which—

7 ‘‘(i) such review is coordinated with

8 the quality assurance program of the orga9 nization, and

10 ‘‘(ii) a transition is made from relying

11 predominantly on case-by-case review to

12 review focusing on patterns of care.

13 ‘‘(4) COMPLIANCE THROUGH ACCREDITA14 TION.—A provider-sponsored organization shall be

15 treated as meeting the requirements of paragraphs

16 (2) and (3) of this subsection and the requirements

17 of section 1876(c)(6) if the organization is accred18 ited (and periodically reaccredited) by a private or19 ganization under a process that the Secretary has

20 determined assures that the organization meets

21 standards for quality assurance programs that are

22 no less stringent than the standards established for

23 such programs under subsection (g) to carry out this

24 subsection and section 1876(c).
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1 ‘‘(e) REQUIREMENT FOR PARTICIPATION PROCE2 DURES.—A provider-sponsored organization shall not be

3 treated as meeting the requirements of this section un4 less—

5 ‘‘(1) the organization establishes reasonable

6 procedures relating to the participation (under an

7 agreement between a physician or group of physi8 cians and the organization) of physicians under con9 tracts under section 1876 and such procedures in10 clude—

11 ‘‘(A) providing notice of the rules regard12 ing participation,

13 ‘‘(B) providing written notice of participa14 tion decisions that are adverse to physicians,

15 and

16 ‘‘(C) providing a process within the organi17 zation for appealing adverse decisions, including

18 the presentation of information and views of the

19 physician regarding such decision; and

20 ‘‘(2) the organization consults with physicians

21 who have entered into participation agreements with

22 the organization regarding the organization’s medi23 cal policy, quality, and medical management proce24 dures.
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1 Paragraph (1)(C) shall not be construed as requiring a

2 live evidentiary hearing, a verbatim record, or representa3 tion of the appealing party by legal counsel.

4 ‘‘(f) OTHER SPECIAL RULES FOR TREATMENT OF

5 PROVIDER-SPONSORED ORGANIZATIONS.—

6 ‘‘(1) WAIVER OF MINIMUM ENROLLMENT

7 RULES.—In the case of a provider-sponsored organi8 zation, paragraph (1) of section 1876(g)—

9 ‘‘(A) shall not apply for the first 3 con10 tract years of the organization under section

11 1876, and

12 ‘‘(B) shall be applied for contract years

13 thereafter—

14 ‘‘(i) by substituting ‘1500’ for ‘5000’,

15 and

16 ‘‘(ii) by substituting ‘at least 500’ for

17 ‘fewer’.

18 ‘‘(2) ADJUSTED COMMUNITY RATE.—In the

19 case of a provider-sponsored organization, the ad20 justed community rate under subsections (e)(3) and

21 (g)(2) of section 1876 may be computed (in a man22 ner specified by the Secretary) using data in the

23 general commercial marketplace or (during a transi24 tion period) based on the costs incurred by the orga25 nization in providing such a product.
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1 ‘‘(g) ESTABLISHMENT OF STANDARDS FOR QUALI2 FIED PROVIDER-SPONSORED ORGANIZATIONS.—

3 ‘‘(1) INTERIM STANDARDS.—

4 ‘‘(A) IN GENERAL.—The Secretary shall

5 issue regulations regarding standards for quali6 fied provider-sponsored organizations within

7 180 days after the date of the enactment of this

8 section. Such regulations shall be issued on an

9 interim basis, but shall become effective upon

10 publication and shall be effective through De11 cember 31, 2001.

12 ‘‘(B) SOLICITATION OF VIEWS.—In devel13 oping standards under this paragraph, the Sec14 retary shall solicit the views of the National As15 sociation of Insurance Commissioners, the

16 American Academy of Actuaries, State health

17 departments, associations representing provider18 sponsored organizations, quality experts (in19 cluding private accreditation organizations),

20 and medicare beneficiaries.

21 ‘‘(C) CONTRACTS TO MONITOR PERFORM22 ANCE.—The Secretary shall enter into contracts

23 with appropriate State agencies to monitor per24 formance and beneficiary access to services

25 under this title during the period in which in-
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1 terim standards are in effect under this para2 graph.

3 ‘‘(2) PERMANENT STANDARDS.—

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

5 2001, the Secretary shall issue permanent

6 standards under this paragraph.

7 ‘‘(B) CONSULTATION.—In developing

8 standards under this paragraph, the Secretary

9 shall consult with the organizations and individ10 uals referred to in paragraph (1)(B).

11 ‘‘(C) EFFECTIVE DATE.—The standards

12 under this paragraph shall be effective for peri13 ods after December 31, 2001.

14 ‘‘(3) PREEMPTION.—The standards established

15 under this subsection shall supersede any State law

16 or regulation with respect to qualified provider-spon17 sored organizations insofar as such law or regula18 tion—

19 ‘‘(A) applies to individuals enrolled with

20 such an organization under a contract under

21 section 1876, and

22 ‘‘(B) does not meet the requirements of

23 subsection (b)(2).

24 ‘‘(h) CERTIFICATION.—
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1 ‘‘(1) ESTABLISHMENT OF PROCESS.—The Sec2 retary shall establish a process for the certification

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

5 Such process shall provide that an application for

6 certification shall be approved or denied not later

7 than 90 days after the date of receipt of the applica8 tion.

9 ‘‘(2) APPLICATION OF ACCREDITATION.—

10 ‘‘(A) IN GENERAL.—The process under

11 this subsection shall, to the maximum extent

12 practical, provide that provider-sponsored orga13 nizations that are accredited by a qualified pri14 vate accreditation process that the Secretary

15 finds applies standards that are no less strin16 gent than the standards established under sub17 section (g) are deemed to meet the correspond18 ing standards of this title.

19 ‘‘(B) PERIOD OF VALIDITY OF ACCREDITA20 TION.—The use of an accreditation under sub21 paragraph (A) shall be valid only for such pe22 riod as the Secretary specifies.

23 ‘‘(3) IMPOSITION OF CERTIFICATION FEE.—The

24 Secretary may impose user fees on entities seeking

25 certification under this subsection in such amounts
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1 as the Secretary deems sufficient to finance the

2 costs of such certification.

3 ‘‘(4) DECERTIFICATION.—If a provider-spon4 sored organization is decertified under this sub5 section, the organization shall notify each enrollee

6 with the organization under section 1876 of such de7 certification.’’.

8 (b) EFFECTIVE DATE; USE OF INTERIM REGULA9 TIONS.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall become effective on the date of the

12 enactment of this Act and apply to contract years

13 beginning on or after January 1, 1998.

14 (2) USE OF INTERIM FINAL REGULATIONS.—In

15 order to carry out the amendments made by this

16 section in a timely manner, the Secretary of Health

17 and Human Services may promulgate regulations

18 that take effect on an interim basis, after notice and

19 pending opportunity for public comment.

20 SEC. 3. AUTHORIZING PAYMENT OF ALL MEDICARE

21 HEALTH PLANS ON A PARTIAL RISK BASIS.

22 (a) IN GENERAL.—Section 1876 of the Social Secu23 rity Act (42 U.S.C. 1395mm) is amended—

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

25 subsections (k) and (l), respectively, and
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1 (2) by inserting after subsection (h) the follow2 ing:

3 ‘‘(i) The Secretary may enter into a partial risk con4 tract with an eligible organization under which—

5 ‘‘(1) notwithstanding subsection (b)(2)(D), the

6 organization and the program established under this

7 title share the financial risk associated with the serv8 ices the organization provides to individuals entitled

9 to benefits under part A and enrolled under part B

10 or enrolled under part B only;

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

12 (h)(2), payment is based on—

13 ‘‘(A) a blend of—

14 (i) the payments that would otherwise

15 be made to such organization under a risk16 sharing contract under subsection (g), and

17 ‘‘(ii) the payments that would be

18 made to such organization under a reason19 able cost reimbursement contract under

20 subsection (h), or

21 ‘‘(B) any other methodology agreed upon

22 by the Secretary and the organization; and

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

24 the payments under this section to the organization

25 to reflect any risk assumed by such program.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall become effective on the date of the

3 enactment of this Act and apply to contract years begin4 ning on or after January 1, 1998.

5 SEC. 4. ELIMINATION OF ENROLLMENT COMPOSITION RE6 QUIREMENT FOR ELIGIBLE ORGANIZATIONS

7 MEETING ENHANCED QUALITY STANDARDS.

8 (a) IN GENERAL.—Section 1876 of the Social Secu9 rity Act (42 U.S.C. 1395mm), as amended by section 3,

10 is amended by inserting after subsection (i) the following:

11 ‘‘(j)(1) An eligible organization shall be treated as

12 meeting the requirement of section 1876(f) (relating to en13 rollment composition) if the organization demonstrates

14 that it—

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

16 accordance with the quality assurance standards es17 tablished under subsection (c)(6) and paragraph (2)

18 of section 1889(d), and

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

20 arrangement, providing coordinated care to individ21 uals (other than individuals who are entitled to bene22 fits under this title) who are enrollees, participants,

23 or beneficiaries of a health plan or a State plan ap24 proved under title XIX.
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1 ‘‘(2) An eligible organization shall be treated as meet2 ing the standards referred to in paragraph (1)(A) if the

3 organization is accredited (and periodically reaccredited)

4 by a private organization under a process that the Sec5 retary has determined assures that the organization meets

6 standards for quality assurance programs that are no less

7 stringent than the standards established for such pro8 grams under subsection (c) and section 1889(g).

9 ‘‘(3) DEFINITIONS.—For purposes of this subsection:

10 ‘‘(A) HEALTH PLAN.—The term ‘health plan’

11 means—

12 ‘‘(i) any contract of insurance, including

13 any hospital or medical service policy or certifi14 cate, hospital or medical service plan contract,

15 or health maintenance organization contract,

16 that is provided by a carrier (as defined in sub17 paragraph (B)), and

18 ‘‘(ii) an employee welfare benefit plan inso19 far as the plan provides health benefits and is

20 funded in a manner other than through the

21 purchase of one or more policies or contracts

22 described in clause (i).

23 ‘‘(B) CARRIER.—The term ‘carrier’ means a li24 censed insurance company, a hospital or medical

25 service corporation (including an existing Blue Cross
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1 or Blue Shield organization), or other entity licensed

2 or certified by a State to provide health insurance or

3 health benefits.

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

5 this subsection shall become effective on the date of the

6 enactment of this Act and apply to contract years begin7 ning on or after January 1, 1998.

8 SEC. 5. CLARIFICATION OF USE OF PROVIDER-SPONSORED

9 ORGANIZATIONS UNDER MEDICAID PRO10 GRAM.

11 Section 1903(m)(1)(A) of the Social Security Act (42

12 U.S.C. 1396b(m)(1)(A)) is amended, in the matter before

13 clause (i), by inserting ‘‘(which may be a provider-spon14 sored organization, as defined in section 1889(a)(2))’’

15 after ‘‘public or private organization’’.

16 SEC. 6. DEMONSTRATION OF COORDINATED ACUTE AND

17 LONG-TERM CARE BENEFITS UNDER MEDI18 CARE AND MEDICAID PROGRAMS.

19 The Secretary of Health and Human Services shall

20 provide, in at least 10 States, for demonstration projects

21 that permit Medicaid programs under title XIX to be

22 treated as eligible organizations under section 1876 for

23 individuals who are eligible to enroll with an organization

24 under such section and are eligible to receive medical as25 sistance under a State program approved under title XIX,
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1 for the purpose of demonstrating the delivery of primary,

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

3 network that emphasizes noninstitutional care.

4 SEC. 7. RULES ON COVERAGE OF EMERGENCY SERVICES

5 BY ALL MEDICARE HEALTH PLANS.

6 (a) IN GENERAL.—Section 1876(c) of the Social Se7 curity Act (42 U.S.C. 1395mm(c)) is amended—

8 (1) in paragraph (4)—

9 (A) by striking ‘‘and’’ at the end of sub10 paragraph (A), and

11 (B) by striking subparagraph (B) and in12 serting in lieu thereof the following:

13 ‘‘(B) provide for reimbursement with respect to

14 services which are covered under subparagraph (A)

15 which are provided to such an individual other than

16 through the organization, if—

17 ‘‘(i) the services were medically necessary

18 and immediately required because of an unfore19 seen illness, injury, or condition, and

20 ‘‘(ii) it was not reasonable given the cir21 cumstances to obtain the services through the

22 organization;

23 ‘‘(C) provide coverage for emergency services

24 (as defined in paragraph (9))—
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1 ‘‘(i) without regard to prior authorization,

2 and

3 ‘‘(ii) subject to the requirement of sub4 paragraph (B)(ii), without regard to the emer5 gency care provider’s contractual relationship

6 with the organization; and

7 ‘‘(D) make available 24 hours a day and 7 days

8 a week a person authorized to make any prior au9 thorization determination that is required by the or10 ganization as a condition of coverage or payment for

11 items and services included in the benefits described

12 in paragraph (2)(A) that are furnished with respect

13 to—

14 ‘‘(i) a medical condition that is—

15 ‘‘(I) identified pursuant to an appro16 priate screening examination (as described

17 in section 1867(a)), and

18 ‘‘(II) not an emergency medical condi19 tion (as defined in section 1867(e)(1)), or

20 ‘‘(ii) an emergency medical condition (as so

21 defined) after that condition has been stabilized

22 (as defined in section 1867(e)(3)(B)),

23 and makes such determinations within a period of

24 time that meets standards established by the Sec25 retary.’’; and
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1 (2) by adding at the end the following:

2 ‘‘(9) In this subsection, the term ‘emergency services’

3 means—

4 ‘‘(A) an appropriate medical screening examina5 tion and related ancillary services (as described in

6 section 1867(a)) furnished in a hospital emergency

7 department, and

8 ‘‘(B) necessary stabilizing examination and

9 treatment services (as described in section 1867(b))

10 for an emergency medical condition (as defined in

11 section 1867(e)(1)).’’.

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

13 subsection (a) shall become effective on the date of the

14 enactment of this Act and shall apply to contract years

15 beginning on or after January 1, 1998.

16 SEC. 8. PREEMPTION OF STATE LAW RESTRICTIONS ON

17 MANAGED CARE ARRANGEMENTS.

18 (a) LIMITATION OF STATE LAW RESTRICTIONS ON

19 MANAGED CARE ARRANGEMENTS.—Effective as of Janu20 ary 1, 1998—

21 (1) a State may not prohibit a carrier or group

22 health plan providing health coverage from including

23 incentives for enrollees to use the services of partici24 pating providers;
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1 (2) a State may not prohibit such a carrier or

2 plan from limiting coverage of services to those pro3 vided by a participating provider;

4 (3) a State may not prohibit the negotiation of

5 rates and forms of payments for providers by such

6 a carrier or plan with respect to health coverage;

7 (4) a State may not prohibit such a carrier or

8 plan from limiting the number of participating pro9 viders;

10 (5) a State may not prohibit such a carrier or

11 plan from requiring that services be provided (or au12 thorized) by a practitioner selected by the enrollee

13 from a list of available participating providers or, ex14 cept for services of a physician who specializes in ob15 stetrics and gynecology, from requiring enrollees to

16 obtain referral in order to have coverage for treat17 ment by a specialist or health institution;

18 (6) a State may not prohibit or limit the cor19 porate practice of medicine; and

20 (7) a State may not prohibit the adoption and

21 operation of a utilization review program.

22 (b) DEFINITIONS.—In this section:

23 (1) MANAGED CARE COVERAGE.—The term

24 ‘‘managed care coverage’’ means health coverage to

25 the extent the coverage is provided through a man-
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1 aged care arrangement (as defined in paragraph

2 (3)).

3 (2) PARTICIPATING PROVIDER.—The term

4 ‘‘participating provider’’ means an entity or individ5 ual which provides, sells, or leases health care serv6 ices as part of a provider network (as defined in

7 paragraph (4)).

8 (3) MANAGED CARE ARRANGEMENT.—The term

9 ‘‘managed care arrangement’’ means, with respect to

10 a group health plan or under health insurance cov11 erage, an arrangement under such plan or coverage

12 under which providers agree to provide items and

13 services covered under the arrangement to individ14 uals covered under the plan or who have such cov15 erage.

16 (4) PROVIDER NETWORK.—The term ‘‘provider

17 network’’ means, with respect to a group health plan

18 or health insurance coverage, providers who have en19 tered into an agreement described in paragraph (3).

20 (5) UTILIZATION REVIEW PROGRAM.—The term

21 ‘‘utilization review program’’ means a system of re22 viewing the medical necessity and appropriateness of

23 patient services (which may include inpatient and

24 outpatient services) using specified guidelines. Such

25 a system may include pattern analysis, preadmission
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1 certification, the application of practice guidelines,

2 continued stay review, discharge planning,

3 preauthorization of ambulatory procedures, and ret4 rospective review.

5 (6) STATE.—The term ‘‘State’’ includes the

6 District of Columbia, Puerto Rico, Guam, the Virgin

7 Islands, the Northern Mariana Islands, and Amer8 ican Samoa.

9 (c) EXEMPTION OF LAWS PREVENTING DENIAL OF

10 LIFE SAVING MEDICAL TREATMENT PENDING TRANSFER

11 TO ANOTHER HEALTH CARE PROVIDER.—Nothing in this

12 section shall be construed to invalidate any State law that

13 has the effect of preventing involuntary denial of life-pre14 serving medical treatment when such denial would cause

15 the involuntary death of the patient pending transfer of

16 the patient to a health care provider willing to provide

17 such treatment.

18 (d) PURPOSE; RULE OF CONSTRUCTION.—The pur19 pose of this section is to permit use of the mechanisms

20 specified in paragraphs (1) through (7) of subsection (a)

21 in the States. Nothing in this section shall be construed

22 as prohibiting a State from regulating or limiting abusive

23 arrangements or practices that act inappropriately to

24 withhold, limit, or delay access to covered services.
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1 SEC. 9. PUBLICATION OF ANTITRUST GUIDELINES ON AC2 TIVITIES OF PROVIDER-SPONSORED ORGANI3 ZATIONS.

4 (a) IN GENERAL.—The Department of Justice and

5 the Federal Trade Commission shall jointly provide for the

6 development and publication of explicit guidelines on the

7 application of antitrust laws to the activities of provider8 sponsored organizations (as defined in section 1889(a)(2)

9 of the Social Security Act). The guidelines shall—

10 (1) address issues relating to the formation, de11 velopment, and operation of such organizations, and

12 (2) be designed to facilitate the development

13 and operation of such organizations.

14 (b) EFFECT OF GUIDELINES.—The guidelines estab15 lished under subsection (a) shall—

16 (1) be binding on all enforcement activities un17 dertaken pursuant to the antitrust laws, and

18 (2) serve as guidance to the attorneys general

19 and courts of the States in interpreting and applying

20 the antitrust laws of the States to provider-spon21 sored organizations.

22 (c) DEFINITION.—For purposes of this section, the

23 term ‘‘antitrust laws’’ has the meaning given to such term

24 in the first section of the Clayton Act (15 U.S.C. 12), ex25 cept that such term includes section 5 of the Federal
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1 Trade Commission Act (15 U.S.C. 45) to the extent such

2 section applies to unfair competition.

3 (d) DEADLINE; ANNUAL UPDATES.—The guidelines

4 required by subsection (a) shall be published not later

5 than 180 days after the date of the enactment of this Act

6 and shall be updated at least annually thereafter based

7 on consultations with interested parties.

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