104
‘‘(A) IN
GENERAL.—With respect to a 
medicare administrative contractor that has a 
contract under section 1874A that provides for 
making payments under this title with respect 
to eligible items and services described in sub-
paragraph (C), the Secretary shall establish a 
prior determination process that meets the re-
quirements of this subsection and that shall be 
applied by such contractor in the case of eligible 
requesters. 
‘‘(B) ELIGIBLE
REQUESTER.—For pur-
poses of this subsection, each of the following 
shall be an eligible requester: 
‘‘(i) A physician, but only with respect 
to eligible items and services for which the 
physician may be paid directly. 
‘‘(ii) An individual entitled to benefits 
under this title, but only with respect to an 
item or service for which the individual re-
ceives, from the physician who may be paid 
directly for the item or service, an advance 
beneficiary notice under section 1879(a) 
that payment may not be made (or may no 
longer be made) for the item or service 
under this title.
105
‘‘(C) ELIGIBLE
ITEMS
AND
SERVICES.—
For purposes of this subsection and subject to 
paragraph (2), eligible items and services are 
items and services which are physicians’ serv-
ices (as defined in paragraph (4)(A) of section 
1848(f) for purposes of calculating the sustain-
able growth rate under such section). 
‘‘(2) SECRETARIAL
FLEXIBILITY.—The Sec-
retary shall establish by regulation reasonable limits 
on the categories of eligible items and services for 
which a prior determination of coverage may be re-
quested under this subsection. In establishing such 
limits, the Secretary may consider the dollar amount 
involved with respect to the item or service, adminis-
trative costs and burdens, and other relevant factors. 
‘‘(3) REQUEST FOR PRIOR DETERMINATION.—
‘‘(A) IN GENERAL.—Subject to paragraph 
(2), under the process established under this 
subsection an eligible requester may submit to 
the contractor a request for a determination, 
before the furnishing of an eligible item or serv-
ice involved as to whether the item or service is 
covered under this title consistent with the ap-
plicable requirements of section 1862(a)(1)(A) 
(relating to medical necessity).
106
‘‘(B) ACCOMPANYING DOCUMENTATION.—
The Secretary may require that the request be 
accompanied by a description of the item or 
service, supporting documentation relating to 
the medical necessity for the item or service, 
and any other appropriate documentation. In 
the case of a request submitted by an eligible 
requester who is described in paragraph 
(1)(B)(ii), the Secretary may require that the 
request also be accompanied by a copy of the 
advance beneficiary notice involved. 
‘‘(4) RESPONSE TO REQUEST.—
‘‘(A) IN GENERAL.—Under such process, 
the contractor shall provide the eligible re-
quester with written notice of a determination 
as to whether—
‘‘(i) the item or service is so covered; 
‘‘(ii) the item or service is not so cov-
ered; or 
‘‘(iii) the contractor lacks sufficient 
information to make a coverage determina-
tion. 
If the contractor makes the determination de-
scribed in clause (iii), the contractor shall in-
clude in the notice a description of the addi-
107
tional information required to make the cov-
erage determination. 
‘‘(B) DEADLINE TO RESPOND.—Such no-
tice shall be provided within the same time pe-
riod as the time period applicable to the con-
tractor providing notice of initial determinations 
on a claim for benefits under subsection 
(a)(2)(A).
‘‘(C) INFORMING BENEFICIARY IN CASE OF 
PHYSICIAN REQUEST.—In the case of a request 
in which an eligible requester is not the indi-
vidual described in paragraph (1)(B)(ii), the 
process shall provide that the individual to 
whom the item or service is proposed to be fur-
nished shall be informed of any determination 
described in clause (ii) (relating to a determina-
tion of non-coverage) and the right (referred to 
in paragraph (6)(B)) to obtain the item or serv-
ice and have a claim submitted for the item or 
service. 
‘‘(5) EFFECT OF DETERMINATIONS.—
‘‘(A) BINDING NATURE OF POSITIVE DE-
TERMINATION.—If the contractor makes the de-
termination described in paragraph (4)(A)(i), 
such determination shall be binding on the con-
108
tractor in the absence of fraud or evidence of 
misrepresentation of facts presented to the con-
tractor. 
‘‘(B) NOTICE
AND
RIGHT
TO
REDETER-
MINATION IN CASE OF A DENIAL.—
‘‘(i) IN GENERAL.—If the contractor 
makes the determination described in para-
graph (4)(A)(ii)—
‘‘(I) the eligible requester has the 
right to a redetermination by the con-
tractor on the determination that the 
item or service is not so covered; and 
‘‘(II) the contractor shall include 
in notice under paragraph (4)(A) a 
brief explanation of the basis for the 
determination, including on what na-
tional or local coverage or noncov-
erage determination (if any) the de-
termination is based, and the right to 
such a redetermination. 
‘‘(ii) DEADLINE
FOR
REDETERMINA-
TIONS.—The contractor shall complete and 
provide notice of such redetermination 
within the same time period as the time 
period applicable to the contractor pro-
109
viding notice of redeterminations relating 
to a claim for benefits under subsection 
(a)(3)(C)(ii). 
‘‘(6) LIMITATION ON FURTHER REVIEW.—
‘‘(A) IN GENERAL.—Contractor determina-
tions described in paragraph (4)(A)(ii) or 
(4)(A)(iii) (and redeterminations made under 
paragraph (5)(B)), relating to pre-service 
claims are not subject to further administrative 
appeal or judicial review under this section or 
otherwise. 
‘‘(B) DECISION NOT TO SEEK PRIOR DE-
TERMINATION
OR
NEGATIVE
DETERMINATION 
DOES NOT IMPACT RIGHT TO OBTAIN SERVICES, 
SEEK REIMBURSEMENT, OR APPEAL RIGHTS.—
Nothing in this subsection shall be construed as 
affecting the right of an individual who—
‘‘(i) decides not to seek a prior deter-
mination under this subsection with re-
spect to items or services; or 
‘‘(ii) seeks such a determination and 
has received a determination described in 
paragraph (4)(A)(ii), 
from receiving (and submitting a claim for) 
such items services and from obtaining adminis-
110
trative or judicial review respecting such claim 
under the other applicable provisions of this 
section. Failure to seek a prior determination 
under this subsection with respect to items and 
services shall not be taken into account in such 
administrative or judicial review. 
‘‘(C) NO
PRIOR
DETERMINATION
AFTER 
RECEIPT OF SERVICES.—Once an individual is 
provided items and services, there shall be no 
prior determination under this subsection with 
respect to such items or services.’’. 
(b) EFFECTIVE DATE; TRANSITION.—
(1) EFFECTIVE DATE.—The Secretary shall es-
tablish the prior determination process under the 
amendment made by subsection (a) in such a man-
ner as to provide for the acceptance of requests for 
determinations under such process filed not later 
than 18 months after the date of the enactment of 
this Act. 
(2) TRANSITION.—During the period in which 
the amendment made by subsection (a) has become 
effective but contracts are not provided under sec-
tion 1874A of the Social Security Act with medicare 
administrative contractors, any reference in section 
1869(g) of such Act (as added by such amendment)
111
to such a contractor is deemed a reference to a fiscal 
intermediary or carrier with an agreement under 
section 1816, or contract under section 1842, re-
spectively, of such Act. 
(3) LIMITATION ON APPLICATION TO SGR.—For 
purposes of applying section 1848(f)(2)(D) of the 
Social Security Act (42 U.S.C. 1395w–4(f)(2)(D)), 
the amendment made by subsection (a) shall not be 
considered to be a change in law or regulation. 
(c) PROVISIONS RELATING
TO ADVANCE BENE-
FICIARY NOTICES; REPORT ON PRIOR DETERMINATION 
PROCESS.—
(1) DATA
COLLECTION.—The Secretary shall 
establish a process for the collection of information 
on the instances in which an advance beneficiary no-
tice (as defined in paragraph (4)) has been provided 
and on instances in which a beneficiary indicates on 
such a notice that the beneficiary does not intend to 
seek to have the item or service that is the subject 
of the notice furnished. 
(2) OUTREACH
AND
EDUCATION.—The Sec-
retary shall establish a program of outreach and 
education for beneficiaries and providers of services 
and other persons on the appropriate use of advance
112
beneficiary notices and coverage policies under the 
medicare program. 
(3) GAO REPORT REPORT ON USE OF ADVANCE 
BENEFICIARY NOTICES.—Not later than 18 months 
after the date on which section 1869(g) of the Social 
Security Act (as added by subsection (a)) takes ef-
fect, the Comptroller General of the United States 
shall submit to Congress a report on the use of ad-
vance beneficiary notices under title XVIII of such 
Act. Such report shall include information con-
cerning the providers of services and other persons 
that have provided such notices and the response of 
beneficiaries to such notices. 
(4) GAO REPORT ON USE OF PRIOR DETER-
MINATION
PROCESS.—Not later than 18 months 
after the date on which section 1869(g) of the Social 
Security Act (as added by subsection (a)) takes ef-
fect, the Comptroller General of the United States 
shall submit to Congress a report on the use of the 
prior determination process under such section. Such 
report shall include—
(A) information concerning the types of 
procedures for which a prior determination has 
been sought, determinations made under the 
process, and changes in receipt of services re-
113
sulting from the application of such process; 
and 
(B) an evaluation of whether the process 
was useful for physicians (and other suppliers) 
and beneficiaries, whether it was timely, and 
whether the amount of information required 
was burdensome to physicians and beneficiaries. 
(5) 
ADVANCE
BENEFICIARY
NOTICE
DE-
FINED.—In this subsection, the term ‘‘advance bene-
ficiary notice’’ means a written notice provided 
under section 1879(a) of the Social Security Act (42 
U.S.C. 1395pp(a)) to an individual entitled to bene-
fits under part A or B of title XVIII of such Act 
before items or services are furnished under such 
part in cases where a provider of services or other 
person that would furnish the item or service be-
lieves that payment will not be made for some or all 
of such items or services under such title.
TITLE V—MISCELLANEOUS 
PROVISIONS 
SEC. 501. POLICY DEVELOPMENT REGARDING EVALUATION 
AND MANAGEMENT (E & M) DOCUMENTATION 
GUIDELINES. 
(a) IN GENERAL.—The Secretary may not implement 
any new documentation guidelines for evaluation and man-
115
(b) PILOT PROJECTS TO TEST EVALUATION AND 
MANAGEMENT DOCUMENTATION GUIDELINES.—
(1) IN GENERAL.—The Secretary shall conduct 
under this subsection appropriate and representative 
pilot projects to test new evaluation and manage-
ment documentation guidelines referred to in sub-
section (a). 
(2) LENGTH AND CONSULTATION.—Each pilot 
project under this subsection shall—
(A) be voluntary; 
(B) be of sufficient length as determined 
by the Secretary to allow for preparatory physi-
cian and medicare contractor education, anal-
ysis, and use and assessment of potential eval-
uation and management guidelines; and 
(C) be conducted, in development and 
throughout the planning and operational stages 
of the project, in consultation with practicing 
physicians (including both generalists and spe-
cialists). 
(3) RANGE OF PILOT PROJECTS.—Of the pilot 
projects conducted under this subsection—
(A) at least one shall focus on a peer re-
view method by physicians (not employed by a 
medicare contractor) which evaluates medical
116
record information for claims submitted by phy-
sicians identified as statistical outliers relative 
to definitions published in the Current Proce-
dures Terminology (CPT) code book of the 
American Medical Association; 
(B) at least one shall focus on an alter-
native method to detailed guidelines based on 
physician documentation of face to face encoun-
ter time with a patient; 
(C) at least one shall be conducted for 
services furnished in a rural area and at least 
one for services furnished outside such an area; 
and 
(D) at least one shall be conducted in a 
setting where physicians bill under physicians’ 
services in teaching settings and at least one 
shall be conducted in a setting other than a 
teaching setting. 
(4) 
BANNING
OF
TARGETING
OF
PILOT 
PROJECT PARTICIPANTS.—Data collected under this 
subsection shall not be used as the basis for overpay-
ment demands or post-payment audits. Such limita-
tion applies only to claims filed as part of the pilot 
project and lasts only for the duration of the pilot
117
project and only as long as the provider is a partici-
pant in the pilot project. 
(5) STUDY
OF
IMPACT.—Each pilot project 
shall examine the effect of the new evaluation and 
management documentation guidelines on—
(A) different types of physician practices, 
including those with fewer than 10 full-time-
equivalent employees (including physicians); 
and 
(B) the costs of physician compliance, in-
cluding education, implementation, auditing, 
and monitoring. 
(6) PERIODIC REPORTS.—The Secretary shall 
submit to Congress periodic reports on the pilot 
projects under this subsection. 
(c) OBJECTIVES FOR EVALUATION AND MANAGE-
MENT GUIDELINES.—The objectives for modified evalua-
tion and management documentation guidelines developed 
by the Secretary shall be to—
(1) identify clinically relevant documentation 
needed to code accurately and assess coding levels 
accurately; 
(2) decrease the level of non-clinically pertinent 
and burdensome documentation time and content in 
the physician’s medical record;
118
(3) increase accuracy by reviewers; and 
(4) educate both physicians and reviewers. 
(d) STUDY OF SIMPLER, ALTERNATIVE SYSTEMS OF 
DOCUMENTATION FOR PHYSICIAN CLAIMS.—
(1) STUDY.—The Secretary shall carry out a 
study of the matters described in paragraph (2). 
(2) MATTERS
DESCRIBED.—The matters re-
ferred to in paragraph (1) are—
(A) the development of a simpler, alter-
native system of requirements for documenta-
tion accompanying claims for evaluation and 
management physician services for which pay-
ment is made under title XVIII of the Social 
Security Act; and 
(B) consideration of systems other than 
current coding and documentation requirements 
for payment for such physician services.
(3) CONSULTATION
WITH
PRACTICING
PHYSI-
CIANS.—In designing and carrying out the study 
under paragraph (1), the Secretary shall consult 
with practicing physicians, including physicians who 
are part of group practices and including both gen-
eralists and specialists. 
(4) APPLICATION OF HIPAA UNIFORM CODING 
REQUIREMENTS.—In developing an alternative sys-
119
tem under paragraph (2), the Secretary shall con-
sider requirements of administrative simplification 
under part C of title XI of the Social Security Act. 
(5) REPORT TO CONGRESS.—(A) Not later than 
October 1, 2005, the Secretary shall submit to Con-
gress a report on the results of the study conducted 
under paragraph (1). 
(B) The Medicare Payment Advisory Commis-
sion shall conduct an analysis of the results of the 
study included in the report under subparagraph (A) 
and shall submit a report on such analysis to Con-
gress. 
(e) STUDY ON APPROPRIATE CODING OF CERTAIN 
EXTENDED OFFICE VISITS.—The Secretary shall conduct 
a study of the appropriateness of coding in cases of ex-
tended office visits in which there is no diagnosis made. 
Not later than October 1, 2005, the Secretary shall submit 
a report to Congress on such study and shall include rec-
ommendations on how to code appropriately for such visits 
in a manner that takes into account the amount of time 
the physician spent with the patient. 
(f) DEFINITIONS.—In this section—
(1) the term ‘‘rural area’’ has the meaning 
given that term in section 1886(d)(2)(D) of the So-
cial Security Act, 42 U.S.C. 1395ww(d)(2)(D); and
120
(2) the term ‘‘teaching settings’’ are those set-
tings described in section 415.150 of title 42, Code 
of Federal Regulations. 
SEC. 502. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY 
AND COVERAGE. 
(a) IMPROVED COORDINATION BETWEEN FDA AND 
CMS ON COVERAGE OF BREAKTHROUGH MEDICAL DE-
VICES.—
(1) IN GENERAL.—Upon request by an appli-
cant and to the extent feasible (as determined by the 
Secretary), the Secretary shall, in the case of a class 
III medical device that is subject to premarket ap-
proval under section 515 of the Federal Food, Drug, 
and Cosmetic Act, ensure the sharing of appropriate 
information from the review for application for pre-
market approval conducted by the Food and Drug 
Administration for coverage decisions under title 
XVIII of the Social Security Act. 
(2) PUBLICATION OF PLAN.—Not later than 6 
months after the date of the enactment of this Act, 
the Secretary shall submit to appropriate Commit-
tees of Congress a report that contains the plan for 
improving such coordination and for shortening the 
time lag between the premarket approval by the 
Food and Drug Administration and coding and cov-
121
erage decisions by the Centers for Medicare & Med-
icaid Services. 
(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed as changing the criteria 
for coverage of a medical device under title XVIII of 
the Social Security Act nor premarket approval by 
the Food and Drug Administration and nothing in 
this subsection shall be construed to increase pre-
market approval application requirements under the 
Federal Food, Drug, and Cosmetic Act. 
(b) COUNCIL FOR TECHNOLOGY AND INNOVATION.—
Section 1868 (42 U.S.C. 1395ee), as amended by section 
301(a), is amended by adding at the end the following new 
subsection: 
‘‘(c) COUNCIL
FOR
TECHNOLOGY
AND
INNOVA-
TION.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish a Council for Technology and Innovation 
within the Centers for Medicare & Medicaid Services 
(in this section referred to as ‘CMS’). 
‘‘(2) COMPOSITION.—The Council shall be com-
posed of senior CMS staff and clinicians and shall 
be chaired by the Executive Coordinator for Tech-
nology and Innovation (appointed or designated 
under paragraph (4)).
122
‘‘(3) DUTIES.—The Council shall coordinate the 
activities of coverage, coding, and payment processes 
under this title with respect to new technologies and 
procedures, including new drug therapies, and shall 
coordinate the exchange of information on new tech-
nologies between CMS and other entities that make 
similar decisions. 
‘‘(4) EXECUTIVE
COORDINATOR
FOR
TECH-
NOLOGY AND INNOVATION.—The Secretary shall ap-
point (or designate) a noncareer appointee (as de-
fined in section 3132(a)(7) of title 5, United States 
Code) who shall serve as the Executive Coordinator 
for Technology and Innovation. Such executive coor-
dinator shall report to the Administrator of CMS, 
shall chair the Council, shall oversee the execution of 
its duties, and shall serve as a single point of con-
tact for outside groups and entities regarding the 
coverage, coding, and payment processes under this 
title.’’. 
(c) GAO STUDY ON IMPROVEMENTS IN EXTERNAL 
DATA COLLECTION FOR USE IN THE MEDICARE INPA-
TIENT PAYMENT SYSTEM.—
(1) STUDY.—The Comptroller General of the 
United States shall conduct a study that analyzes 
which external data can be collected in a shorter
123
time frame by the Centers for Medicare & Medicaid 
Services for use in computing payments for inpatient 
hospital services. The study may include an evalua-
tion of the feasibility and appropriateness of using 
of quarterly samples or special surveys or any other 
methods. The study shall include an analysis of 
whether other executive agencies, such as the Bu-
reau of Labor Statistics in the Department of Com-
merce, are best suited to collect this information. 
(2) REPORT.—By not later than October 1, 
2004, the Comptroller General shall submit a report 
to Congress on the study under paragraph (1). 
(d) IOM STUDY ON LOCAL COVERAGE DETERMINA-
TIONS.—
(1) STUDY.—The Secretary shall enter into an 
arrangement with the Institute of Medicine of the 
National Academy of Sciences under which the Insti-
tute shall conduct a study on local coverage deter-
minations (including the application of local medical 
review policies) under the medicare program under 
title XVIII of the Social Security Act. Such study 
shall examine—
(A) the consistency of the definitions used 
in such determinations;
124
(B) the types of evidence on which such 
determinations are based, including medical and 
scientific evidence; 
(C) the advantages and disadvantages of 
local coverage decisionmaking, including the 
flexibility it offers for ensuring timely patient 
access to new medical technology for which data 
are still to be collected; 
(D) the manner in which the local coverage 
determination process is used to develop data 
needed for a national coverage determination, 
including the need for collection of such data 
within a protocol and informed consent by indi-
viduals entitled to benefits under part A of title 
XVIII of the Social Security Act, or enrolled 
under part B of such title, or both; and 
(E) the advantages and disadvantages of 
maintaining local medicare contractor advisory 
committees that can advise on local coverage 
decisions based on an open, collaborative public 
process. 
(2) REPORT.—Such arrangement shall provide 
that the Institute shall submit to the Secretary a re-
port on such study by not later than 3 years after 
the date of the enactment of this Act. The Secretary
125
shall promptly transmit a copy of such report to 
Congress. 
(e) METHODS FOR DETERMINING PAYMENT BASIS 
FOR NEW LAB TESTS.—Section 1833(h) (42 U.S.C. 
1395l(h)) is amended by adding at the end the following: 
‘‘(8)(A) The Secretary shall establish by regulation 
procedures for determining the basis for, and amount of, 
payment under this subsection for any clinical diagnostic 
laboratory test with respect to which a new or substan-
tially revised HCPCS code is assigned on or after January 
1, 2005 (in this paragraph referred to as ‘new tests’). 
‘‘(B) Determinations under subparagraph (A) shall 
be made only after the Secretary—
‘‘(i) makes available to the public (through an 
Internet site and other appropriate mechanisms) a 
list that includes any such test for which establish-
ment of a payment amount under this subsection is 
being considered for a year; 
‘‘(ii) on the same day such list is made avail-
able, causes to have published in the Federal Reg-
ister notice of a meeting to receive comments and 
recommendations (and data on which recommenda-
tions are based) from the public on the appropriate 
basis under this subsection for establishing payment 
amounts for the tests on such list;
126
‘‘(iii) not less than 30 days after publication of 
such notice convenes a meeting, that includes rep-
resentatives of officials of the Centers for Medicare 
& Medicaid Services involved in determining pay-
ment amounts, to receive such comments and rec-
ommendations (and data on which the recommenda-
tions are based); 
‘‘(iv) taking into account the comments and rec-
ommendations (and accompanying data) received at 
such meeting, develops and makes available to the 
public (through an Internet site and other appro-
priate mechanisms) a list of proposed determinations 
with respect to the appropriate basis for establishing 
a payment amount under this subsection for each 
such code, together with an explanation of the rea-
sons for each such determination, the data on which 
the determinations are based, and a request for pub-
lic written comments on the proposed determination; 
and 
‘‘(v) taking into account the comments received 
during the public comment period, develops and 
makes available to the public (through an Internet 
site and other appropriate mechanisms) a list of 
final determinations of the payment amounts for 
such tests under this subsection, together with the
127
rationale for each such determination, the data on 
which the determinations are based, and responses 
to comments and suggestions received from the pub-
lic. 
‘‘(C) Under the procedures established pursuant to 
subparagraph (A), the Secretary shall—
‘‘(i) set forth the criteria for making determina-
tions under subparagraph (A); and 
‘‘(ii) make available to the public the data 
(other than proprietary data) considered in making 
such determinations. 
‘‘(D) The Secretary may convene such further public 
meetings to receive public comments on payment amounts 
for new tests under this subsection as the Secretary deems 
appropriate. 
‘‘(E) For purposes of this paragraph: 
‘‘(i) The term ‘HCPCS’ refers to the Health 
Care Procedure Coding System. 
‘‘(ii) A code shall be considered to be ‘substan-
tially revised’ if there is a substantive change to the 
definition of the test or procedure to which the code 
applies (such as a new analyte or a new methodology 
for measuring an existing analyte-specific test).’’.