the appropriate medicare administrative con-
tractor. Such performance requirements—
‘‘(i) shall reflect the performance re-
quirements published under subparagraph
(A), but may include additional perform-
ance requirements;
‘‘(ii) shall be used for evaluating con-
tractor performance under the contract;
and
‘‘(iii) shall be consistent with the writ-
ten statement of work provided under the
contract.
‘‘(4) INFORMATION REQUIREMENTS.—The Sec-
retary shall not enter into a contract with a medi-
care administrative contractor under this section un-
less the contractor agrees—
‘‘(A) to furnish to the Secretary such time-
ly information and reports as the Secretary may
find necessary in performing his functions
under this title; and
‘‘(B) to maintain such records and afford
such access thereto as the Secretary finds nec-
essary to assure the correctness and verification
of the information and reports under subpara-
graph (A) and otherwise to carry out the pur-
poses of this title.
‘‘(5) SURETY BOND.—A contract with a medi-
care administrative contractor under this section
may require the medicare administrative contractor,
and any of its officers or employees certifying pay-
ments or disbursing funds pursuant to the contract,
or otherwise participating in carrying out the con-
tract, to give surety bond to the United States in
such amount as the Secretary may deem appro-
priate.
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—A contract with any medi-
care administrative contractor under this section
may contain such terms and conditions as the Sec-
retary finds necessary or appropriate and may pro-
vide for advances of funds to the medicare adminis-
trative contractor for the making of payments by it
under subsection (a)(3)(B).
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN
DATA COLLECTION.—The Secretary may not require,
as a condition of entering into, or renewing, a con-
tract under this section, that the medicare adminis-
trative contractor match data obtained other than in
its activities under this title with data used in the
administration of this title for purposes of identi-
fying situations in which the provisions of section
1862(b) may apply.
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD-
MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as
a certifying officer shall, in the absence of gross neg-
ligence, recklessness, or knowledge, or intent to de-
fraud the United States, be liable with respect to
any payments certified by the individual under this
section.
‘‘(2) DISBURSING OFFICER.—No disbursing of-
ficer shall, in the absence of gross negligence, reck-
lessness, or knowledge, or intent to defraud the
United States, be liable with respect to any payment
by such officer under this section if it was based
upon an authorization (which meets the applicable
requirements for such internal controls established
by the Comptroller General) of a certifying officer
designated as provided in paragraph (1) of this sub-
section.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE
CONTRACTOR.—A 
medicare 
administrative 
con-
tractor shall be liable to the United States for a pay-
ment referred to in paragraph (1) or (2) if, in con-
nection with such payment, an individual referred to
in either such paragraph acted with gross neg-
ligence, recklessness, or knowledge, or intent to de-
fraud the United States.
‘‘(4) LIMITATION ON CIVIL LIABILITY.—
‘‘(A) IN GENERAL.—No medicare adminis-
trative contractor having a contract with the
Secretary under this section, and no person em-
ployed by, or having a fiduciary relationship
with, any such medicare administrative con-
tractor or who furnishes professional services to
such medicare administrative contractor, shall
by reason of the performance of any duty, func-
tion, or activity required or authorized pursuant
to this section or to a valid contract entered
into under this section, be held civilly liable
under any law of the United States or of any
State (or political subdivision thereof), absent a
finding of gross negligence, recklessness, or
knowledge, or intent to defraud the United
States in the performance of such duty, func-
tion, or activity.
‘‘(B) INDEMNIFICATION BY SECRETARY.—
The Secretary shall make payment to a medi-
care administrative contractor under contract
with the Secretary pursuant to this section, or
to any member or employee thereof, or to any
person who furnishes legal counsel or services
to such medicare administrative contractor, in
an amount equal to the reasonable amount of
the expenses incurred, as determined by the
Secretary, in connection with the defense of any
civil suit, action, or proceeding brought against
such medicare administrative contractor or per-
son related to the performance of any duty,
function, or activity under such contract, absent
a finding of gross negligence, recklessness, or
knowledge, or intent to defraud the United
States in the performance of such duty, func-
tion, or activity.’’.
(2) CONSIDERATION
OF
INCORPORATION
OF
CURRENT LAW STANDARDS.—In developing contract
performance requirements under section 1874A(b)
of the Social Security Act, as inserted by paragraph
(1), the Secretary of Health and Human Services
shall consider inclusion of the performance stand-
ards described in sections 1816(f)(2) of such Act
(relating to timely processing of reconsiderations and
applications 
for 
exemptions) 
and 
section
1842(b)(2)(B) of such Act (relating to timely review
of determinations and fair hearing requests), as such
sections were in effect before the date of the enact-
ment of this Act.
(b) CONFORMING AMENDMENTS TO SECTION 1816
(RELATING TO FISCAL INTERMEDIARIES).—Section 1816
(42 U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF
PART A’’.
(2) Subsection (a) is amended to read as fol-
lows:
‘‘(a) The administration of this part shall be con-
ducted through contracts with medicare administrative
contractors under section 1874A.’’.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended—
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and
(3)(A), by striking ‘‘agreement under this sec-
tion’’ and inserting ‘‘contract under section
1874A that provides for making payments
under this part’’.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended—
(A) by striking ‘‘An agreement with an
agency or organization under this section’’ and
inserting ‘‘A contract with a medicare adminis-
trative contractor under section 1874A with re-
spect to the administration of this part’’; and
(B) by striking ‘‘such agency or organiza-
tion’’ and inserting ‘‘such medicare administra-
tive contractor’’ each place it appears.
(7) Subsection (l) is repealed.
(c) CONFORMING AMENDMENTS TO SECTION 1842
(RELATING
TO CARRIERS).—Section 1842 (42 U.S.C.
1395u) is amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF
PART B’’.
(2) Subsection (a) is amended to read as fol-
lows:
‘‘(a) The administration of this part shall be con-
ducted through contracts with medicare administrative
contractors under section 1874A.’’.
(3) Subsection (b) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and
(B);
(ii) in subparagraph (C), by striking
‘‘carriers’’ and inserting ‘‘medicare admin-
istrative contractors’’; and
(iii) by striking subparagraphs (D)
and (E);
(C) in paragraph (3)—
(i) in the matter before subparagraph
(A), by striking ‘‘Each such contract shall
provide that the carrier’’ and inserting
‘‘The Secretary’’;
(ii) in subparagraph (B), in the mat-
ter before clause (i), by striking ‘‘to the
policyholders and subscribers of the car-
rier’’ and inserting ‘‘to the policyholders
and subscribers of the medicare adminis-
trative contractor’’;
(iii) by striking subparagraphs (C),
(D), and (E);
(iv) in subparagraph (H)—
(I) by striking ‘‘it’’ and inserting
‘‘the Secretary’’; and
(II) by striking ‘‘carrier’’ and in-
serting ‘‘medicare administrative con-
tractor’’; and
(v) in the seventh sentence, by insert-
ing ‘‘medicare administrative contractor,’’
after ‘‘carrier,’’; and
(D) by striking paragraph (5); and
(E) in paragraph (7) and succeeding para-
graphs, by striking ‘‘the carrier’’ and inserting
‘‘the Secretary’’ each place it appears.
(4) Subsection (c) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2), by striking ‘‘contract
under this section which provides for the dis-
bursement of funds, as described in subsection
(a)(1)(B),’’ and inserting ‘‘contract under sec-
tion 1874A that provides for making payments
under this part shall provide that the medicare
administrative contractor’’;
(C) in paragraph (4), by striking ‘‘a car-
rier’’ and inserting ‘‘medicare administrative
contractor’’;
(D) in paragraph (5), by striking ‘‘contract
under this section which provides for the dis-
bursement of funds, as described in subsection
(a)(1)(B), shall require the carrier’’ and insert-
ing ‘‘contract under section 1874A that pro-
vides for making payments under this part shall
require 
the 
medicare 
administrative 
con-
tractor’’; and
(E) by striking paragraph (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ‘‘car-
rier or carriers’’ and inserting ‘‘medicare administra-
tive contractor or contractors’’.
(7) Subsection (h) is amended—
(A) in paragraph (2)—
(i) by striking ‘‘Each carrier having
an agreement with the Secretary under
subsection (a)’’ and inserting ‘‘The Sec-
retary’’; and
(ii) by striking ‘‘Each such carrier’’
and inserting ‘‘The Secretary’’; and
(B) in paragraph (3)(A)—
(i) by striking ‘‘a carrier having an
agreement with the Secretary under sub-
section (a)’’ and inserting ‘‘medicare ad-
ministrative contractor having a contract
under section 1874A that provides for
making payments under this part’’; and
(ii) by striking ‘‘such carrier’’ and in-
serting ‘‘such contractor’’.
(d) EFFECTIVE DATE; TRANSITION RULE.—
section 1816 and section 1842 of the Social Security
Act (42 U.S.C. 1395h, 1395u) to contracts under
section 1874A, as added by subsection (a)(1).
(3) AUTHORIZING
CONTINUATION
OF
MIP
FUNCTIONS
UNDER
CURRENT
CONTRACTS
AND
AGREEMENTS AND UNDER ROLLOVER CONTRACTS.—
The provisions contained in the exception in section
1893(d)(2) of the Social Security Act (42 U.S.C.
1395ddd(d)(2)) shall continue to apply notwith-
standing the amendments made by this section, and
any reference in such provisions to an agreement or
contract shall be deemed to include a contract under
section 1874A of such Act, as inserted by subsection
(a)(1), that continues the activities referred to in
such provisions.
(e) REFERENCES.—On and after the effective date
provided under subsection (d), any reference to a fiscal
intermediary or carrier under title XI or XVIII of the So-
cial Security Act (or any regulation, manual instruction,
interpretative rule, statement of policy, or guideline issued
to carry out such titles) shall be deemed a reference to
an appropriate medicare administrative contractor (as
provided under section 1874A of the Social Security Act).
(f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO-
POSAL.—Not later than 6 months after the date of the
modified oversight and management of medi-
care contractors to adapt to full competition.
SEC. 302. REQUIREMENTS FOR INFORMATION SECURITY.
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 301, is amended by adding at the end the following
new subsection:
‘‘(e) REQUIREMENTS
FOR
INFORMATION
SECU-
RITY.—
‘‘(1) DEVELOPMENT
OF
INFORMATION
SECU-
RITY
PROGRAM.—A medicare administrative con-
tractor that performs the functions referred to in
subparagraphs (A) and (B) of subsection (a)(4) (re-
lating to determining and making payments) shall
develop and implement a contractor-wide informa-
tion security program to provide information secu-
rity for the operation and assets of the contractor
with respect to such functions under this title. An
information security program under this paragraph
shall meet the requirements for information security
programs imposed on Federal agencies under section
3534(b)(2) of title 44, United States Code (other
than requirements under subparagraphs (B)(ii),
(F)(iii), and (F)(iv) of such section).
‘‘(2) INDEPENDENT AUDITS.—
‘‘(A) PERFORMANCE OF ANNUAL EVALUA-
TIONS.—Each year a medicare administrative
contractor that performs the functions referred
to in subparagraphs (A) and (B) of subsection
(a)(4) (relating to determining and making pay-
ments) shall undergo an evaluation of the infor-
mation security program and practices of the
contractor with respect to such functions under
this title. The evaluation shall—
‘‘(i) be performed by an independent
entity that meets such requirements as the
Inspector General of the Department of
Health and Human Services may establish;
and
‘‘(ii) include testing of the effective-
ness of information security control tech-
niques for an appropriate subset of the
contractor’s information systems (as de-
fined in section 3502(8) of title 44, United
States Code) relating to such functions
under this title and an assessment of com-
pliance with the requirements of this sub-
section and related information security
policies, procedures, standards and guide-
lines.
‘‘(B) DEADLINE
FOR
INITIAL
EVALUA-
TION.—
‘‘(i) NEW CONTRACTORS.—In the case
of a medicare administrative contractor
covered by this subsection that has not
previously performed the functions referred
to in subparagraphs (A) and (B) of sub-
section (a)(4) (relating to determining and
making payments) as a fiscal intermediary
or carrier under section 1816 or 1842, the
first independent evaluation conducted
pursuant subparagraph (A) shall be com-
pleted prior to commencing such functions.
‘‘(ii) OTHER
CONTRACTORS.—In the
case of a medicare administrative con-
tractor covered by this subsection that is
not described in clause (i), the first inde-
pendent evaluation conducted pursuant
subparagraph (A) shall be completed with-
in 1 year after the date the contractor
commences functions referred to in clause
(i) under this section.
‘‘(C) REPORTS ON EVALUATIONS.—
‘‘(i) TO THE INSPECTOR GENERAL.—
The results of independent evaluations
under subparagraph (A) shall be submitted
promptly to the Inspector General of the
Department of Health and Human Serv-
ices.
‘‘(ii) TO
CONGRESS.—The Inspector
General of Department of Health and
Human Services shall submit to Congress
annual reports on the results of such eval-
uations.’’.
(b) APPLICATION
OF REQUIREMENTS
TO FISCAL
INTERMEDIARIES AND CARRIERS.—
(1) IN
GENERAL.—The provisions of section
1874A(e)(2) of the Social Security Act (other than
subparagraph (B)), as added by subsection (a), shall
apply to each fiscal intermediary under section 1816
of the Social 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 pro-
visions.
(2) DEADLINE FOR INITIAL EVALUATION.—In
the case of such a fiscal intermediary or carrier with
an agreement or contract under such respective sec-
tion in effect as of the date of the enactment of this
Act, 
the 
first 
evaluation 
under 
section
1874A(e)(2)(A) of the Social Security Act (as added
by subsection (a)), pursuant to paragraph (1), shall
be completed (and a report on the evaluation sub-
mitted to the Secretary of Health and Human Serv-
ices) by not later than 1 year after such date.
TITLE IV—EDUCATION AND
OUTREACH IMPROVEMENTS
SEC. 401. PROVIDER EDUCATION AND TECHNICAL ASSIST-
ANCE.
(a) COORDINATION OF EDUCATION FUNDING.—
(1) IN GENERAL.—The Social Security Act is
amended by inserting after section 1888 the fol-
lowing new section:
‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE
‘‘SEC. 1889. (a) COORDINATION
OF EDUCATION
FUNDING.—The Secretary shall coordinate the edu-
cational activities provided through medicare contractors
(as defined in subsection (g), including under section
1893) in order to maximize the effectiveness of Federal
education efforts for providers of services, physicians,
practitioners, and suppliers.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act.
(3) REPORT.—Not later than October 1, 2002,
the Secretary of Health and Human Services shall
submit to Congress a report that includes a descrip-
tion and evaluation of the steps taken to coordinate
the funding of provider education under section
1889(a) of the Social Security Act, as added by
paragraph (1).
(b) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE.—
(1) IN GENERAL.—Section 1874A, as added by
section 301(a)(1) and as amended by section 302, is
amended by adding at the end the following new
subsection:
‘‘(f) INCENTIVES TO IMPROVE CONTRACTOR PER-
FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—
‘‘(1) METHODOLOGY TO MEASURE CONTRACTOR
ERROR RATES.—In order to give medicare adminis-
trative contractors an incentive to implement effec-
tive education and outreach programs for providers
of services, physicians, practitioners, and suppliers,
the Secretary shall develop and implement by Octo-
ber 1, 2002, a methodology to measure the specific
claims payment error rates of such contractors in
the processing or reviewing of medicare claims.
‘‘(2) GAO REVIEW OF METHODOLOGY.—Before
implementation of such methodology, the Comp-
troller General of the United States shall review, and
make recommendations to the Secretary, regarding
the adequacy of such methodology.’’.
(2) REPORT.—Before implementation of the
methodology developed under section 1874A(f)(1) of
the Social Security Act, as added by paragraph (1),
the Secretary shall submit to Congress a report that
describes how the Secretary intends to use the meth-
odology in assessing medicare contractor perform-
ance in implementing effective education and out-
reach programs, including whether to use such
methodology as a basis for performance bonuses.
(c) 
REQUIREMENT
TO
MAINTAIN
INTERNET
SITES.—
(1) IN GENERAL.—Section 1889, as added by
subsection (a), is amended by adding at the end the
following new subsection:
‘‘(b) INTERNET SITES; FAQS.—The Secretary, and
each medicare contractor insofar as it provides services
(including claims processing) for providers of services,
physicians, practitioners, or suppliers, shall maintain an
Internet site which—
‘‘(1) provides answers in an easily accessible
format to frequently asked questions, and
‘‘(2) includes all materials published by the Sec-
retary or the contractor,
relating to providers of services, physicians, practitioners,
and suppliers under the programs under this title and title
XI insofar as it relates to such programs.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on October 1,
2002.
(d) IMPROVED PROVIDER EDUCATION AND TRAIN-
ING.—
(1) INCREASED FUNDING FOR ENHANCED EDU-
CATION AND TRAINING THROUGH MEDICARE INTEG-
RITY
PROGRAM.—Section 1817(k)(4) (42 U.S.C.
1395i(k)(4)) is amended—
(A) in subparagraph (A), by striking ‘‘sub-
paragraph (B)’’ and inserting ‘‘subparagraphs
(B) and (C)’’;
(B) in subparagraph (B), by striking ‘‘The
amount appropriated’’ and inserting ‘‘Subject
to subparagraph (C), the amount appro-
priated’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(C) ENHANCED
PROVIDER
EDUCATION
AND TRAINING.—
‘‘(i) IN GENERAL.—In addition to the
amount appropriated under subparagraph
(B), the amount appropriated under sub-
paragraph (A) for a fiscal year (beginning
with fiscal year 2003) is increased by
$35,000,000.
‘‘(ii) USE.—The funds made available
under this subparagraph shall be used only
to increase the conduct by medicare con-
tractors of education and training of pro-
viders of services, physicians, practitioners,
and suppliers regarding billing, coding, and
other appropriate items and may also be
used to improve the accuracy, consistency,
and timeliness of contractor responses to
written and phone inquiries from providers
of services, physicians, practitioners, and
suppliers.’’.
(2) TAILORING EDUCATION AND TRAINING FOR
SMALL PROVIDERS OR SUPPLIERS.—
(A) IN GENERAL.—Section 1889, as added
by subsection (a) and as amended by subsection
(c), is further amended by adding at the end
the following new subsection:
‘‘(c) TAILORING EDUCATION AND TRAINING ACTIVI-
TIES FOR SMALL PROVIDERS OR SUPPLIERS.—
‘‘(1) IN GENERAL.—Insofar as a medicare con-
tractor conducts education and training activities, it
shall take into consideration the special needs of
small providers of services or suppliers (as defined in
paragraph (2)). Such education and training activi-
ties for small providers or services and suppliers
may include the provision of technical assistance
(such as review of billing systems and internal con-
trols to determine program compliance and to sug-
gest more efficient and effective means of achieving
such compliance).
‘‘(2) SMALL PROVIDER OF SERVICES OR SUP-
PLIER.—In this subsection, the term ‘small provider
of services or supplier’ means—
‘‘(A) an institutional provider of services
with fewer than 25 full-time-equivalent employ-
ees; or
‘‘(B) a physician, practitioner, or supplier
with fewer than 10 full-time-equivalent employ-
ees.’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall take effect on
October 1, 2002.
(e) ADDITIONAL
PROVIDER
EDUCATION
PROVI-
SIONS.—
(1) IN GENERAL.—Section 1889, as added by
subsection (a) and as amended by subsections (c)
and (d)(2), is further amended by adding at the end
the following new subsections:
‘‘(d) ENCOURAGEMENT OF PARTICIPATION IN EDU-
CATION PROGRAM ACTIVITIES.—A medicare contractor
may not use a record of attendance at (or failure to at-
tend) educational activities or other information gathered
during an educational program conducted under this sec-
tion or otherwise by the Secretary to select or track pro-
viders of services, physicians, practitioners, or suppliers
for the purpose of conducting any type of audit or prepay-
ment review.
‘‘(e) CONSTRUCTION.—Nothing in this section or sec-
tion 1893(g) shall be construed as providing for disclosure
by a medicare contractor of information that would com-
promise pending law enforcement activities or reveal find-
ings of law enforcement-related audits.
‘‘(f) DEFINITIONS.—For purposes of this section and
section 1817(k)(4)(C), the term ‘medicare contractor’ in-
cludes the following:
‘‘(1) A medicare administrative contractor with
a contract under section 1874A, a fiscal inter-
mediary with a contract under section 1816, and a
carrier with a contract under section 1842.
‘‘(2) An eligible entity with a contract under
section 1893.
Such term does not include, with respect to activities of
a specific provider of services, physician, practitioner, or
supplier an entity that has no authority under this title
or title XI with respect to such activities and such provider
of services, physician, practitioner, or supplier.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act.
SEC. 402. ACCESS TO AND PROMPT RESPONSES FROM
MEDICARE ADMINISTRATIVE CONTRACTORS.
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 301 and as amended by sections 302 and 401(b)(1),
is further amended by adding at the end the following new
subsection:
‘‘(g) COMMUNICATIONS WITH BENEFICIARIES AND
PROVIDERS.—
‘‘(1) COMMUNICATION
STRATEGY.—The Sec-
retary shall develop a strategy for communications
with beneficiaries and with providers of services,
physicians, practitioners, and suppliers under this
title.
‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each
medicare administrative contractor shall provide
general written responses (which may be through
electronic transmission) in a clear, concise, and ac-
curate manner to inquiries by beneficiaries, pro-
viders of services, physicians, practitioners, and sup-
pliers concerning the programs under this title with-
in 45 business days of the date of receipt of such in-
quiries.
‘‘(3) RESPONSE TO TOLL-FREE LINES.—Each
medicare administrative contractor shall maintain a
toll-free telephone number at which beneficiaries,
providers, physicians, practitioners, and suppliers
may obtain information regarding billing, coding,
claims, coverage, and other appropriate information
under this title.
‘‘(4) 
MONITORING
OF
CONTRACTOR
RE-
SPONSES.—
‘‘(A) IN GENERAL.—Each medicare admin-
istrative contractor shall, consistent with stand-
ards developed by the Secretary under subpara-
graph (B)—
‘‘(i) maintain a system for identifying
who provides the information referred to in
paragraphs (2) and (3); and
‘‘(ii) monitor the accuracy, consist-
ency, and timeliness of the information so
provided.
‘‘(B) DEVELOPMENT OF STANDARDS.—
‘‘(i) IN
GENERAL.—The Secretary
shall establish (and publish in the Federal
Register) standards to monitor the accu-
racy, consistency, and timeliness of the in-
formation provided in response to written
and telephone inquiries under this sub-
section. Such standards shall be consistent
with the performance requirements estab-
lished under subsection (b)(3).
‘‘(ii) 
EVALUATION.—In 
conducting
evaluations of individual medicare adminis-
trative contractors, the Secretary shall
take into account the results of the moni-
toring conducted under subparagraph (A)
taking into account as performance re-
quirements 
the 
standards 
established
under clause (i).
‘‘(C) DIRECT
MONITORING.—Nothing in
this paragraph shall be construed as preventing
the Secretary from directly monitoring the ac-
curacy, consistency, and timeliness of the infor-
mation so provided.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect October 1, 2002.
SEC. 403. RELIANCE ON GUIDANCE.
(a) IN GENERAL.—Section 1871(e), as added by sec-
tion 102(a), is further amended by adding at the end the
following new paragraph:
‘‘(2) If—
‘‘(A) a provider of services, physician, practi-
tioner, or other supplier follows written guidance
provided—
‘‘(i) by the Secretary; or
‘‘(ii) by a medicare contractor (as defined
in section 1889(f) and whether in the form of
a written response to a written inquiry under
section 1874A(g)(1) or otherwise) acting within
the scope of the contractor’s contract authority,
in response to a written inquiry with respect to the
furnishing of items or services or the submission of
a claim for benefits for such items or services;
‘‘(B) the Secretary determines that—
‘‘(i) the provider of services, physician,
practitioner, or supplier has accurately pre-
sented the circumstances relating to such items,
services, and claim to the Secretary or the con-
tractor in the written guidance; and
‘‘(ii) there is no indication of fraud or
abuse committed by the provider of services,
physician, practitioner, or supplier against the
program under this title; and
‘‘(C) the guidance was in error;
the provider of services, physician, practitioner or supplier
shall not be subject to any penalty or interest under this
title (or the provisions of title XI insofar as they relate
to this title) relating to the provision of such items or serv-
ice or such claim if the provider of services, physician,
practitioner, or supplier reasonably relied on such guid-
ance. In applying this paragraph with respect to guidance
in the form of general responses to frequently asked ques-
tions, the Secretary retains authority to determine the ex-
tent to which such general responses apply to the par-
ticular circumstances of individual claims.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to penalties imposed on or after
the date of the enactment of this Act.
SEC. 404. FACILITATION OF CONSISTENT INFORMATION TO
PROVIDERS.
The Secretary shall appoint an individual within the
Department of Health and Human Services who shall be
responsible—
(1) for responding to complaints and grievances
from providers of services, physicians, practitioners,
and suppliers under the medicare program under
title XVIII of the Social Security Act (including pro-
visions of title XI of the Social Security Act insofar
as they relate to such title XVIII and are not admin-
istered by the Office of the Inspector General of the
Department of Health and Human Services) con-
cerning inconsistent information or inconsistent re-
sponses provided under such program; and
(2) in so responding, for facilitating an appro-
priate response from the Department of Health and
Human Services or from appropriate medicare con-
tractors.
Such individual shall not serve as an advocate for any spe-
cific policy within the Department.
SEC. 405. POLICY DEVELOPMENT REGARDING EVALUATION
AND MANAGEMENT (E & M) DOCUMENTATION
GUIDELINES.
(a) IN GENERAL.—The Secretary of Health and
Human Services may not implement any new documenta-
(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
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 be conducted for
services furnished in a rural area and at least
one for services furnished outside such an area;
and
(C) 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
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 new evaluation
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;
(3) increase accuracy by reviewers; and
(4) educate both physicians and reviewers.
(d) 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
(2) the term ‘‘teaching settings’’ are those set-
tings described in section 415.150 of title 42, Code
of Federal Regulations.
SEC. 406. BENEFICIARY OUTREACH DEMONSTRATION PRO-
GRAM.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall establish a demonstration program
(in this section referred to as the ‘‘demonstration pro-
gram’’) under which medicare specialists employed by the
Department of Health and Human Services provide advice
and assistance to medicare beneficiaries at the location of
existing local offices of the Social Security Administration.
(b) LOCATIONS.—
(1) IN GENERAL.—The demonstration program
shall be conducted in at least 6 offices or areas.
Subject to paragraph (2), in selecting such offices
and areas, the Secretary shall provide preference for
offices with a high volume of visits by medicare
beneficiaries.
(2) ASSISTANCE FOR RURAL BENEFICIARIES.—
The Secretary shall provide for the selection of at
least 2 rural areas to participate in the demonstra-
tion program. In conducting the demonstration pro-
gram in such rural areas, the Secretary shall provide
for medicare specialists to travel among local offices
in a rural area on a scheduled basis.
(c) DURATION.—The demonstration program shall be
conducted over a 3-year period.
(d) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall provide
for an evaluation of the demonstration program.
Such evaluation shall include an analysis of—
(A) utilization of, and beneficiary satisfac-
tion with, the assistance provided under the
program; and
(B) the cost-effectiveness of providing ben-
eficiary assistance through out-stationing medi-
care specialists at local social security offices.
(2) REPORT.—The Secretary shall submit to
Congress a report on such evaluation and shall in-
clude in such report recommendations regarding the
feasibility of permanently out-stationing medicare
specialists at local social security offices.
TITLE V—REVIEW, RECOVERY,
AND ENFORCEMENT REFORM
SEC. 501. PREPAYMENT REVIEW.
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 301 and as amended by sections 302, 401(b)(1), and
402, is further amended by adding at the end the following
new subsection:
‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—
‘‘(1) STANDARDIZATION OF RANDOM PREPAY-
MENT
REVIEW.—A medicare administrative con-
tractor shall conduct random prepayment review
only in accordance with a standard protocol for ran-
dom prepayment audits developed by the Secretary.
‘‘(2) LIMITATIONS ON INITIATION OF NON-RAN-
DOM PREPAYMENT REVIEW.—A medicare adminis-
trative contractor may not initiate non-random pre-
payment review of a provider of services, physician,
practitioner, or supplier based on the initial identi-
fication by that provider of services, physician, prac-
titioner, or supplier of an improper billing practice
unless there is a likelihood of sustained or high level
of payment error (as defined by the Secretary).
‘‘(3) TERMINATION OF NON-RANDOM PREPAY-
MENT REVIEW.—The Secretary shall issue regula-
tions relating to the termination, including termi-
nation dates, of non-random prepayment review.
Such regulations may vary such a termination date
based upon the differences in the circumstances trig-
gering prepayment review.
‘‘(4) CONSTRUCTION.—Nothing in this sub-
section shall be construed as preventing the denial of
payments for claims actually reviewed under a ran-
dom prepayment review. In the case of a provider of
services, physician, practitioner, or supplier with re-
spect to which amounts were previously overpaid,
nothing in this subsection shall be construed as lim-
iting the ability of a medicare administrative con-
tractor to request the periodic production of records
or supporting documentation for a limited sample of
submitted claims to ensure that the previous prac-
tice is not continuing.
‘‘(5) 
RANDOM
PREPAYMENT
REVIEW
DE-
FINED.—For purposes of this subsection, the term
‘random prepayment review’ means a demand for
the production of records or documentation absent
cause with respect to a claim.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection, the amendment made by subsection (a)
‘‘(A) IN
GENERAL.—If the repayment,
within the period otherwise permitted by a pro-
vider of services, physician, practitioner, or
other supplier, of an overpayment under this
title meets the standards developed under sub-
paragraph (B), subject to subparagraph (C),
and the provider, physician, practitioner, or
supplier requests the Secretary to enter into a
repayment plan with respect to such overpay-
ment, the Secretary shall enter into a plan with
the provider, physician, practitioner, or supplier
for the offset or repayment (at the election of
the provider, physician, practitioner, or sup-
plier) of such overpayment over a period of at
least one year, but not longer than 3 years. In-
terest shall accrue on the balance through the
period of repayment. The repayment plan shall
meet terms and conditions determined to be ap-
propriate by the Secretary.
‘‘(B) DEVELOPMENT
OF
STANDARDS.—
The Secretary shall develop standards for the
recovery of overpayments. Such standards
shall—
‘‘(i) include a requirement that the
Secretary take into account (and weigh in
favor of the use of a repayment plan) the
reliance 
(as 
described 
in 
section
1871(e)(2)) by a provider of services, phy-
sician, practitioner, and supplier on guid-
ance when determining whether a repay-
ment plan should be offered; and
‘‘(ii) provide for consideration of the
financial hardship imposed on a provider of
services, physician, practitioner, or supplier
in considering such a repayment plan.
In developing standards with regard to financial
hardship with respect to a provider of services,
physician, practitioner, or supplier, the Sec-
retary shall take into account the amount of the
proposed recovery as a proportion of payments
made to that provider, physician, practitioner,
or supplier.
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply if—
‘‘(i) the Secretary has reason to sus-
pect that the provider of services, physi-
cian, practitioner, or supplier may file for
bankruptcy or otherwise cease to do busi-
ness or discontinue participation 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, physician, practitioner, or supplier fails
to make a payment in accordance with a repay-
ment plan under this paragraph, the Secretary
may immediately seek to offset or otherwise re-
cover 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) NO RECOUPMENT UNTIL REDETER-
MINATION EXERCISED.—In the case of a pro-
vider of services, physician, practitioner, or sup-
plier that is determined to have received an
overpayment under this title and that seeks a
redetermination of such determination under
section 1869(a)(3), the Secretary may not take
any action (or authorize any other person, in-
cluding any medicare contractor, as defined in
paragraph (9)) to recoup the overpayment until
the date the decision on the redetermination
has been rendered.
‘‘(B) PAYMENT OF INTEREST.—
‘‘(i) RETURN OF RECOUPED AMOUNT
WITH INTEREST IN CASE OF REVERSAL.—
Insofar as such determination on appeal
against the provider of services, physician,
practitioner, or supplier is later reversed,
the Secretary shall provide for repayment
of the amount recouped plus interest for
the period in which the amount was re-
couped.
‘‘(ii) INTEREST IN CASE OF AFFIRMA-
TION.—Insofar as the determination on
such appeal is against the provider of serv-
ices, physician, practitioner, or supplier, in-
terest on the overpayment shall accrue on
and after the date of the original notice of
overpayment.
‘‘(iii) RATE OF INTEREST.—The rate
of interest under this subparagraph shall
be the rate otherwise applicable under this
title in the case of overpayments.
‘‘(3) 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,
physician, practitioner, or supplier under this
title, the contractor shall provide the provider of
services, physician, practitioner, 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, physician, practitioner, or supplier under
this title, the contractor shall—
‘‘(i) give the provider of services, phy-
sician, practitioner, or supplier a full re-
view and explanation of the findings of the
audit in a manner that is understandable
to the provider of services, physician, prac-
titioner, or supplier and permits the devel-
opment of an appropriate corrective action
plan;
‘‘(ii) inform the provider of services,
physician, practitioner, or supplier of the
appeal rights under this title as well as
consent settlement options (which are at
the discretion of the Secretary); and
‘‘(iii) give the provider of services,
physician, practitioner, or supplier an op-
portunity to provide additional information
to the contractor.
‘‘(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.
‘‘(D) MEDICARE CONTRACTOR DEFINED.—
For purposes of this paragraph and paragraph
(4), the term ‘medicare contractor’ has the
meaning given such term in section 1889(f).
‘‘(4) 
NOTICE
OF
OVER-UTILIZATION
OF
CODES.—The Secretary shall establish, in consulta-
tion with organizations representing the classes of
providers of services, physicians, practitioners, and
suppliers, a process under which the Secretary pro-
vides for notice to classes of providers of services,
physicians, practitioners, and suppliers served by a
medicare contractor in cases in which the contractor
has identified that particular billing codes may be
overutilized by that class of providers of services,
physicians, practitioners, or suppliers under the pro-
grams under this title (or provisions of title XI inso-
far as they relate to such programs).
‘‘(5) STANDARD
METHODOLOGY
FOR
PROBE
SAMPLING.—The Secretary shall establish a stand-
ard methodology for medicare administrative con-
tractors to use in selecting a sample of claims for re-
view in the case of an abnormal billing pattern.
‘‘(6) 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, physician, practitioner, or supplier a
consent settlement, the Secretary shall—
‘‘(i) communicate to the provider of
services, physician, practitioner, or supplier
in a non-threatening manner that, based
on a review of the medical records re-
quested by the Secretary, a preliminary
evaluation of those records indicates that
there would be an overpayment; and
‘‘(ii) provide for a 45-day period dur-
ing which the provider of services, physi-
cian, practitioner, or supplier may furnish
additional information concerning the med-
ical 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, physi-
cian, practitioner, or supplier under subpara-
graph (B)(ii). Taking into consideration such
information, the Secretary 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, physi-
cian, practitioner, or supplier, including an
explanation of the reason for such deter-
mination; and
‘‘(ii) in order to resolve the overpay-
ment, may offer the provider of services,
physician, practitioner, 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, physi-
cian, practitioner, or supplier whereby both par-
ties agree to settle a projected overpayment
based on less than a statistically valid sample of
claims and the provider of services, physician,
practitioner, or supplier agrees not to appeal
the claims involved.’’.
SEC. 503. PROCESS FOR CORRECTION OF INCOMPLETE OR
MISSING DATA WITHOUT PURSUING 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
401(e)(1)) and representatives of providers of services,
physicians, practitioners, and suppliers, a process where-
by, in the case of incomplete or missing information that
are detected in the submission of claims under the pro-
grams under title XVIII of such Act by such a provider,
physician, practitioner, or supplier, the claim—
(1) shall not be processed;
(2) shall be returned to that provider, physi-
cian, practitioner, or supplier; and
(3) may be resubmitted by the provider, physi-
cian, practitioner, or supplier with the incomplete or
missing information and without having to appeal
the claim.
SEC. 504. AUTHORITY TO WAIVE A PROGRAM EXCLUSION.
The first sentence of section 1128(c)(3)(B) (42
U.S.C. 1320a–7(c)(3)(B)) is amended to read as follows:
‘‘Subject to subparagraph (G), in the case of an exclusion
under subsection (a), the minimum period of exclusion
shall be not less than five years, except that, upon the
request of the administrator of a Federal health care pro-
gram (as defined in section 1128B(f)), the Secretary may
waive the exclusion under subsection (a)(1), (a)(3), or
(a)(4) with respect to that program in the case of an indi-
vidual or entity that is the sole community physician or
sole source of essential specialized services in a community
if the administrator finds that the exclusion would impose
a hardship on beneficiaries under that program.’’.
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