‘‘(B) a health care professional who is le-
gally authorized in one or more States (in ac-
cordance with State law or the State regulatory
mechanism provided by State law) to furnish
the health care items or services at issue and
has medical expertise in the field of practice
that is appropriate for such items or services.
‘‘(5) RELATED PARTY DEFINED.—For purposes
of this section, the term ‘related party’ means, with
respect to a case under this title involving a specific
individual entitled to benefits under part A or en-
rolled under part B, or both, any of the following:
‘‘(A) The Secretary, the medicare adminis-
trative contractor involved, or any fiduciary, of-
ficer, director, or employee of the Department
of Health and Human Services, or of such con-
tractor.
‘‘(B) The individual (or authorized rep-
resentative).
‘‘(C) The health care professional that pro-
vides the items or services involved in the case.
‘‘(D) The institution at which the items or
services (or treatment) involved in the case are
provided.
‘‘(E) The manufacturer of any drug or
other item that is included in the items or serv-
ices involved in the case.
‘‘(F) Any other party determined under
any regulations to have a substantial interest in
the case involved.’’.
(3) EFFECTIVE DATE.—The amendments made
by paragraphs (1) and (2) shall be effective as if in-
cluded in the enactment of the respective provisions
of subtitle C of title V of BIPA, (114 Stat. 2763A–
534).
(4) TRANSITION.—In applying section 1869(g)
of the Social Security Act (as added by paragraph
(2)), any reference to a medicare administrative con-
tractor shall be deemed to include a reference to a
fiscal intermediary under section 1816 of the Social
Security Act (42 U.S.C. 1395h) and a carrier under
section 1842 of such Act (42 U.S.C. 1395u).
SEC. 404. PREPAYMENT REVIEW.
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 201(a)(1) and as amended by sections 202(b),
301(b)(1), and 301(c)(1), is further amended by adding
at the end the following new subsection:
‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—
‘‘(1) CONDUCT OF RANDOM PREPAYMENT RE-
VIEW.—
‘‘(A) IN GENERAL.—A medicare adminis-
trative contractor may conduct random prepay-
ment review only to develop a contractor-wide
or program-wide claims payment error rates or
under such additional circumstances as may be
provided under regulations, developed in con-
sultation with providers of services and sup-
pliers.
‘‘(B) USE
OF
STANDARD
PROTOCOLS
WHEN CONDUCTING PREPAYMENT REVIEWS.—
When a medicare administrative contractor con-
ducts a random prepayment review, the con-
tractor may conduct such review only in accord-
ance with a standard protocol for random pre-
payment audits developed by the Secretary.
‘‘(C) CONSTRUCTION.—Nothing in this
paragraph shall be construed as preventing the
denial of payments for claims actually reviewed
under a random prepayment review.
‘‘(D) RANDOM
PREPAYMENT
REVIEW.—
For purposes of this subsection, the term ‘ran-
dom prepayment review’ means a demand for
the production of records or documentation ab-
sent cause with respect to a claim.
‘‘(2) LIMITATIONS
ON
NON-RANDOM
PREPAY-
MENT REVIEW.—
‘‘(A) LIMITATIONS ON INITIATION OF NON-
RANDOM
PREPAYMENT
REVIEW.—A medicare
administrative contractor may not initiate non-
random prepayment review of a provider of
services or supplier based on the initial identi-
fication by that provider of services or supplier
of an improper billing practice unless there is a
likelihood of sustained or high level of payment
error (as defined in subsection (i)(3)(A)).
‘‘(B) TERMINATION OF NON-RANDOM PRE-
PAYMENT REVIEW.—The Secretary shall issue
regulations relating to the termination, includ-
ing termination dates, of non-random prepay-
ment review. Such regulations may vary such a
termination date based upon the differences in
the circumstances triggering prepayment re-
view.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendment made by subsection (a)
shall take effect 1 year after the date of the enact-
ment of this Act.
(2) DEADLINE
FOR
PROMULGATION
OF
CER-
TAIN REGULATIONS.—The Secretary shall first issue
regulations under section 1874A(h) of the Social Se-
curity Act, as added by subsection (a), by not later
than 1 year after the date of the enactment of this
Act.
(3) APPLICATION
OF
STANDARD
PROTOCOLS
FOR
RANDOM
PREPAYMENT
REVIEW.—Section
1874A(h)(1)(B) of the Social Security Act, as added
by subsection (a), shall apply to random prepayment
reviews conducted on or after such date (not later
than 1 year after the date of the enactment of this
Act) as the Secretary shall specify.
(c) APPLICATION TO FISCAL INTERMEDIARIES AND
CARRIERS.—The provisions of section 1874A(h) of the So-
cial Security Act, as added by subsection (a), shall apply
to each fiscal intermediary under section 1816 of the So-
cial Security Act (42 U.S.C. 1395h) and each carrier
under section 1842 of such Act (42 U.S.C. 1395u) in the
same manner as they apply to medicare administrative
contractors under such provisions.
SEC. 405. RECOVERY OF OVERPAYMENTS.
(a) 
IN
GENERAL.—Section 
1893 
(42 
U.S.C.
1395ddd) is amended by adding at the end the following
new subsection:
‘‘(f) RECOVERY OF OVERPAYMENTS.—
‘‘(1) USE OF REPAYMENT PLANS.—
‘‘(A) IN
GENERAL.—If the repayment,
within 30 days by a provider of services or sup-
plier, of an overpayment under this title would
constitute a hardship (as defined in subpara-
graph (B)), subject to subparagraph (C), upon
request of the provider of services or supplier
the Secretary shall enter into a plan with the
provider of services or supplier for the repay-
ment (through offset or otherwise) of such over-
payment over a period of at least 6 months but
not longer than 3 years (or not longer than 5
years in the case of extreme hardship, as deter-
mined by the Secretary). Interest shall accrue
on the balance through the period of repay-
ment. Such plan shall meet terms and condi-
tions determined to be appropriate by the Sec-
retary.
‘‘(B) HARDSHIP.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the repayment of an
overpayment (or overpayments) within 30
days is deemed to constitute a hardship
if—
‘‘(I) in the case of a provider of
services that files cost reports, the ag-
gregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of
services for the cost reporting period
covered by the most recently sub-
mitted cost report; or
‘‘(II) in the case of another pro-
vider of services or supplier, the ag-
gregate amount of the overpayments
exceeds 10 percent of the amount paid
under this title to the provider of
services or supplier for the previous
calendar year.
‘‘(ii) RULE
OF
APPLICATION.—The
Secretary shall establish rules for the ap-
plication of this subparagraph in the case
of a provider of services or supplier that
was not paid under this title during the
previous year or was paid under this title
only during a portion of that year.
‘‘(iii) 
TREATMENT
OF
PREVIOUS
OVERPAYMENTS.—If a provider of services
or supplier has entered into a repayment
plan under subparagraph (A) with respect
to a specific overpayment amount, such
payment amount under the repayment plan
shall not be taken into account under
clause (i) with respect to subsequent over-
payment amounts.
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if—
‘‘(i) the Secretary has reason to sus-
pect that the provider of services or sup-
plier may file for bankruptcy or otherwise
cease to do business or discontinue partici-
pation in the program under this title; or
‘‘(ii) there is an indication of fraud or
abuse committed against the program.
‘‘(D) IMMEDIATE COLLECTION IF VIOLA-
TION OF REPAYMENT PLAN.—If a provider of
services or supplier fails to make a payment in
accordance with a repayment plan under this
paragraph, the Secretary may immediately seek
to offset or otherwise recover the total balance
outstanding 
(including 
applicable 
interest)
under the repayment plan.
‘‘(E) RELATION
TO
NO
FAULT
PROVI-
SION.—Nothing in this paragraph shall be con-
strued as affecting the application of section
1870(c) (relating to no adjustment in the cases
of certain overpayments).
‘‘(2) LIMITATION ON RECOUPMENT.—
‘‘(A) IN GENERAL.—In the case of a pro-
vider of services or supplier that is determined
to have received an overpayment under this title
and that seeks a reconsideration by a qualified
independent contractor on such determination
under section 1869(b)(1), the Secretary may
not take any action (or authorize any other per-
son, including any medicare contractor, as de-
fined in subparagraph (C) to recoup the over-
payment until the date the decision on the re-
consideration has been rendered. If the provi-
sions of section 1869(b)(1) (providing for such
a reconsideration by a qualified independent
contractor) are not in effect, in applying the
previous sentence any reference to such a recon-
sideration shall be treated as a reference to a
redetermination by the fiscal intermediary or
carrier involved.
‘‘(B) COLLECTION WITH INTEREST.—Inso-
far as the determination on such appeal is
against the provider of services or supplier, in-
terest on the overpayment shall accrue on and
after the date of the original notice of overpay-
ment. Insofar as such determination against the
provider of services or supplier is later reversed,
the Secretary shall provide for repayment of the
amount recouped plus interest at the same rate
as would apply under the previous sentence for
the period in which the amount was recouped.
‘‘(C) MEDICARE CONTRACTOR DEFINED.—
For purposes of this subsection, the term ‘medi-
care contractor’ has the meaning given such
term in section 1889(g).
‘‘(3) LIMITATION
ON
USE
OF
EXTRAPO-
LATION.—A medicare contractor may not use ex-
trapolation to determine overpayment amounts to be
recovered by recoupment, offset, or otherwise
unless—
‘‘(A) there is a sustained or high level of
payment error (as defined by the Secretary by
regulation); or
‘‘(B) documented educational intervention
has failed to correct the payment error (as de-
termined by the Secretary).
‘‘(4) PROVISION OF SUPPORTING DOCUMENTA-
TION.—In the case of a provider of services or sup-
plier with respect to which amounts were previously
overpaid, a medicare contractor may request the
periodic production of records or supporting docu-
mentation for a limited sample of submitted claims
to ensure that the previous practice is not con-
tinuing.
‘‘(5) CONSENT SETTLEMENT REFORMS.—
‘‘(A) IN
GENERAL.—The Secretary may
use a consent settlement (as defined in sub-
paragraph (D)) to settle a projected overpay-
ment.
‘‘(B) OPPORTUNITY
TO
SUBMIT
ADDI-
TIONAL INFORMATION BEFORE CONSENT SET-
TLEMENT OFFER.—Before offering a provider
of services or supplier a consent settlement, the
Secretary shall—
‘‘(i) communicate to the provider of
services or supplier—
‘‘(I) that, based on a review of
the medical records requested by the
Secretary, a preliminary evaluation of
those records indicates that there
would be an overpayment;
‘‘(II) the nature of the problems
identified in such evaluation; and
‘‘(III) the steps that the provider
of services or supplier should take to
address the problems; and
‘‘(ii) provide for a 45-day period dur-
ing which the provider of services or sup-
plier may furnish additional information
concerning the medical records for the
claims that had been reviewed.
‘‘(C) CONSENT SETTLEMENT OFFER.—The
Secretary shall review any additional informa-
tion furnished by the provider of services or
supplier under subparagraph (B)(ii). Taking
into consideration such information, the Sec-
retary shall determine if there still appears to
be an overpayment. If so, the Secretary—
‘‘(i) shall provide notice of such deter-
mination to the provider of services or sup-
plier, including an explanation of the rea-
son for such determination; and
‘‘(ii) in order to resolve the overpay-
ment, may offer the provider of services or
supplier—
‘‘(I) the opportunity for a statis-
tically valid random sample; or
‘‘(II) a consent settlement.
The opportunity provided under clause (ii)(I)
does not waive any appeal rights with respect to
the alleged overpayment involved.
‘‘(D) CONSENT SETTLEMENT DEFINED.—
For purposes of this paragraph, the term ‘con-
sent settlement’ means an agreement between
the Secretary and a provider of services or sup-
plier whereby both parties agree to settle a pro-
jected overpayment based on less than a statis-
tically valid sample of claims and the provider
of services or supplier agrees not to appeal the
claims involved.
‘‘(6) 
NOTICE
OF
OVER-UTILIZATION
OF
CODES.—The Secretary shall establish, in consulta-
tion with organizations representing the classes of
providers of services and suppliers, a process under
which the Secretary provides for notice to classes of
providers of services and suppliers served by the con-
tractor in cases in which the contractor has identi-
fied that particular billing codes may be overutilized
by that class of providers of services or suppliers
under the programs under this title (or provisions
of title XI insofar as they relate to such programs).
‘‘(7) PAYMENT AUDITS.—
‘‘(A) WRITTEN
NOTICE
FOR
POST-PAY-
MENT AUDITS.—Subject to subparagraph (C), if
a medicare contractor decides to conduct a
post-payment audit of a provider of services or
supplier under this title, the contractor shall
provide the provider of services or supplier with
written notice (which may be in electronic form)
of the intent to conduct such an audit.
‘‘(B) EXPLANATION OF FINDINGS FOR ALL
AUDITS.—Subject to subparagraph (C), if a
medicare contractor audits a provider of serv-
ices or supplier under this title, the contractor
shall—
‘‘(i) give the provider of services or
supplier a full review and explanation of
the findings of the audit in a manner that
is understandable to the provider of serv-
ices or supplier and permits the develop-
ment of an appropriate corrective action
plan;
‘‘(ii) inform the provider of services or
supplier of the appeal rights under this
title as well as consent settlement options
(which are at the discretion of the Sec-
retary);
‘‘(iii) give the provider of services or
supplier an opportunity to provide addi-
tional information to the contractor; and
‘‘(iv) take into account information
provided, on a timely basis, by the provider
of services or supplier under clause (iii).
‘‘(C) 
EXCEPTION.—Subparagraphs 
(A)
and (B) shall not apply if the provision of no-
tice or findings would compromise pending law
enforcement activities, whether civil or criminal,
or reveal findings of law enforcement-related
audits.
‘‘(8) STANDARD
METHODOLOGY
FOR
PROBE
SAMPLING.—The Secretary shall establish a stand-
ard methodology for medicare contractors to use in
selecting a sample of claims for review in the case
of an abnormal billing pattern.’’.
(b) EFFECTIVE DATES AND DEADLINES.—
(1) USE
OF
REPAYMENT
PLANS.—Section
1893(f)(1) of the Social Security Act, as added by
subsection (a), shall apply to requests for repayment
plans made after the date of the enactment of this
Act.
(2) LIMITATION
ON
RECOUPMENT.—Section
1893(f)(2) of the Social Security Act, as added by
subsection (a), shall apply to actions taken after the
date of the enactment of this Act.
(3) 
USE
OF
EXTRAPOLATION.—Section
1893(f)(3) of the Social Security Act, as added by
subsection (a), shall apply to statistically valid ran-
dom samples initiated after the date that is 1 year
after the date of the enactment of this Act.
(4) PROVISION
OF
SUPPORTING
DOCUMENTA-
TION.—Section 1893(f)(4) of the Social Security
Act, as added by subsection (a), shall take effect on
the date of the enactment of this Act.
(5) 
CONSENT
SETTLEMENT.—Section
1893(f)(5) of the Social Security Act, as added by
subsection (a), shall apply to consent settlements en-
tered into after the date of the enactment of this
Act.
(6) NOTICE OF OVERUTILIZATION.—Not later
than 1 year after the date of the enactment of this
Act, the Secretary shall first establish the process
for notice of overutilization of billing codes under
100
section 1893A(f)(6) of the Social Security Act, as
added by subsection (a).
(7) PAYMENT AUDITS.—Section 1893A(f)(7) of
the Social Security Act, as added by subsection (a),
shall apply to audits initiated after the date of the
enactment of this Act.
(8) STANDARD FOR ABNORMAL BILLING PAT-
TERNS.—Not later than 1 year after the date of the
enactment of this Act, the Secretary shall first es-
tablish a standard methodology for selection of sam-
ple claims for abnormal billing patterns under sec-
tion 1893(f)(8) of the Social Security Act, as added
by subsection (a).
SEC. 406. PROVIDER ENROLLMENT PROCESS; RIGHT OF AP-
PEAL.
(a) IN GENERAL.—Section 1866 (42 U.S.C. 1395cc)
is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; ENROLLMENT PROCESSES’’; and
(2) by adding at the end the following new sub-
section:
‘‘(j) ENROLLMENT PROCESS
FOR PROVIDERS
OF
SERVICES AND SUPPLIERS.—
‘‘(1) ENROLLMENT PROCESS.—
101
‘‘(A) IN
GENERAL.—The Secretary shall
establish by regulation a process for the enroll-
ment of providers of services and suppliers
under this title.
‘‘(B) DEADLINES.—The Secretary shall es-
tablish by regulation procedures under which
there are deadlines for actions on applications
for enrollment (and, if applicable, renewal of
enrollment). The Secretary shall monitor the
performance of medicare administrative con-
tractors in meeting the deadlines established
under this subparagraph.
‘‘(C) CONSULTATION
BEFORE
CHANGING
PROVIDER
ENROLLMENT
FORMS.—The Sec-
retary shall consult with providers of services
and suppliers before making changes in the pro-
vider enrollment forms required of such pro-
viders and suppliers to be eligible to submit
claims for which payment may be made under
this title.
‘‘(2) HEARING RIGHTS IN CASES OF DENIAL OR
NON-RENEWAL.—A provider of services or supplier
whose application to enroll (or, if applicable, to
renew enrollment) under this title is denied may
have a hearing and judicial review of such denial
102
under the procedures that apply under subsection
(h)(1)(A) to a provider of services that is dissatisfied
with a determination by the Secretary.’’.
(b) EFFECTIVE DATES.—
(1) ENROLLMENT
PROCESS.—The Secretary
shall provide for the establishment of the enrollment
process under section 1866(j)(1) of the Social Secu-
rity Act, as added by subsection (a)(2), within 6
months after the date of the enactment of this Act.
(2) CONSULTATION.—Section 1866(j)(1)(C) of
the Social Security Act, as added by subsection
(a)(2), shall apply with respect to changes in pro-
vider enrollment forms made on or after January 1,
2002.
(3) HEARING RIGHTS.—Section 1866(j)(2) of
the Social Security Act, as added by subsection
(a)(2), shall apply to denials occurring on or after
such date (not later than 1 year after the date of
the enactment of this Act) as the Secretary specifies.
SEC. 407. PROCESS FOR CORRECTION OF MINOR ERRORS
AND OMISSIONS ON CLAIMS WITHOUT PUR-
SUING APPEALS PROCESS.
The Secretary shall develop, in consultation with ap-
propriate medicare contractors (as defined in section
1889(g) of the Social Security Act, as inserted by section
103
301(a)(1)) and representatives of providers of services and
suppliers, a process whereby, in the case of minor errors
or omissions (as defined by the Secretary) that are de-
tected in the submission of claims under the programs
under title XVIII of such Act, a provider of services or
supplier is given an opportunity to correct such an error
or omission without the need to initiate an appeal. Such
process shall include the ability to resubmit corrected
claims.
SEC. 408. PRIOR DETERMINATION PROCESS FOR CERTAIN
ITEMS 
AND 
SERVICES; 
ADVANCE 
BENE-
FICIARY NOTICES.
(a) 
IN
GENERAL.—Section 
1869 
(42 
U.S.C.
1395ff(b)), as amended by sections 521 and 522 of BIPA
and section 403(d)(2)(B), is further amended by adding
at the end the following new subsection:
‘‘(h) PRIOR DETERMINATION PROCESS FOR CERTAIN
ITEMS AND SERVICES.—
‘‘(1) ESTABLISHMENT OF PROCESS.—
‘‘(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
104
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.
‘‘(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