146
a type of health care service to individuals
under the terms of a MedicarePlus PSO prod-
uct—
(i) requires all members of such orga-
nization who engage in providing such type
of health care service to agree to provide
health care services of such type under
such contract,
(ii) receives the compensation paid for
the health care services of such type pro-
vided under such contract by such mem-
bers, and
(iii) provides for the distribution of
such compensation,
(D) has established, consistent with the re-
quirements of the MedicarePlus program for
provider-sponsored organizations, a program to
review, pursuant to written guidelines, the qual-
ity, efficiency, and appropriateness of treatment
methods and setting of services for all health
care providers and all patients participating in
such product, along with internal procedures to
correct identified deficiencies relating to such
methods and such services,
147
(E) has established, consistent with the re-
quirements of the MedicarePlus program for
provider-sponsored organizations, a program to
monitor and control utilization of health care
services provided under such product, for the
purpose of improving efficient, appropriate care
and eliminating the provision of unnecessary
health care services,
(F) has established a management pro-
gram to coordinate the delivery of health care
services for all health care providers and all pa-
tients participating in such product, for the
purpose of achieving efficiencies and enhancing
the quality of health care services provided, and
(G) has established, consistent with the re-
quirements of the MedicarePlus program for
provider-sponsored organizations, a grievance
and appeal process for such organization de-
signed to review and promptly resolve bene-
ficiary or patient grievances and complaints.
Such term may include a provider-sponsored organi-
zation.
(7) PROVIDER-SPONSORED
ORGANIZATION.—
The term ‘‘provider-sponsored organization’’ means
a MedicarePlus organization under the MedicarePlus
148
program that is a provider-sponsored organization
(as defined in section ll of the Social Security
Act).
(8) STATE.—The term ‘‘State’’ has the mean-
ing given it in section 4G(2) of the Clayton Act (15
U.S.C. 15g(2)).
(c) ISSUANCE OF GUIDELINES.—Not later than 120
days after the date of the enactment of this Act, the Attor-
ney General and the Federal Trade Commission shall
issue jointly guidelines specifying the enforcement policies
and analytical principles that will be applied by the De-
partment of Justice and the Commission with respect to
the operation of subsection (a).
PART 4—COMMISSIONS
SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.
(a) IN GENERAL.—Title XVIII, as amended by sec-
tion 15001(a), is amended by inserting after section 1805
the following new section:
‘‘MEDICARE PAYMENT REVIEW COMMISSION
‘‘SEC. 1806. (a) ESTABLISHMENT.—There is hereby
established the Medicare Payment Review Commission (in
this section referred to as the ‘Commission’).
‘‘(b) DUTIES.—
‘‘(1) GENERAL DUTIES AND REPORTS.—
149
‘‘(A) IN GENERAL.—The Commission shall
review, and make recommendations to Congress
concerning, payment policies under this title.
‘‘(B) ANNUAL
REPORTS.—By not later
than June 1 of each year, the Commission shall
submit a report to Congress containing an ex-
amination of issues affecting the medicare pro-
gram, including the implications of changes in
health care delivery in the United States and in
the market for health care services on the medi-
care program.
‘‘(C) ADDITIONAL
REPORTS.—The Com-
mission may submit to Congress from time to
time such other reports as the Commission
deems appropriate. By not later than May 1,
1997, the Commission shall submit to Congress
a report on the matter described in paragraph
(2)(G).
‘‘(D) SECRETARIAL
RESPONSE
IN
RULE-
MAKING.—The Secretary shall respond to rec-
ommendations of the Commission in notices of
rulemaking proceedings under this title.
‘‘(2) 
SPECIFIC
DUTIES
RELATING
TO
MEDICAREPLUS
PROGRAM.—Specifically, the Com-
150
mission 
shall 
review, 
with 
respect 
to 
the
MedicarePlus program under part C—
‘‘(A) the appropriateness of the methodol-
ogy for making payment to plans under such
program, including the making of differential
payments and the distribution of differential
updates among different payment areas);
‘‘(B) the appropriateness of the mecha-
nisms used to adjust payments for risk and the
need to adjust such mechanisms to take into ac-
count health status of beneficiaries;
‘‘(C) the implications of risk selection both
among MedicarePlus organizations and between
the 
MedicarePlus 
option 
and 
the 
non-
MedicarePlus option;
‘‘(D) in relation to payment under part C,
the development and implementation of mecha-
nisms to assure the quality of care for those en-
rolled with MedicarePlus organizations;
‘‘(E) the impact of the MedicarePlus pro-
gram on access to care for medicare bene-
ficiaries;
‘‘(F) the feasibility and desirability of ex-
tending the rules for open enrollment that apply
during the transition period to apply in each
151
county during the first 2 years in which
MedicarePlus products are made available to in-
dividuals residing in the county; and
‘‘(G) other major issues in implementation
and further development of the MedicarePlus
program.
‘‘(3) SPECIFIC
DUTIES
RELATING
TO
THE
FAILSAFE
BUDGET
MECHANISM.—Specifically, the
Commission shall review, with respect to the failsafe
budget mechanism described in section 1895—
‘‘(A) the appropriateness of the expendi-
ture projections by the Secretary under section
1895(c) for each medicare sector;
‘‘(B) the appropriateness of the growth
factors for each sector and the ability to take
into account substitution across sectors;
‘‘(C) the appropriateness of the mecha-
nisms for implementing reductions in payment
amounts for different sectors, including any ad-
justments to reflect changes in volume or inten-
sity resulting for any payment reductions;
‘‘(D) the impact of the mechanism on pro-
vider participation in parts A and B and in the
MedicarePlus program; and
152
‘‘(E) the appropriateness of the medicare
benefit budget (under section 1895(c)(2)(C) of
the Social Security Act), particularly for fiscal
years after fiscal year 2002.
‘‘(4) SPECIFIC DUTIES RELATING TO THE FEE-
FOR-SERVICE SYSTEM.—Specifically, the Commission
shall review payment policies under parts A and B,
including—
‘‘(A) the factors affecting expenditures for
services in different sectors, including the proc-
ess for updating hospital, physician, and other
fees,
‘‘(B) payment methodologies; and
‘‘(C) the impact of payment policies on ac-
cess and quality of care for medicare bene-
ficiaries.
‘‘(5) SPECIFIC
DUTIES
RELATING
TO
INTER-
ACTION OF PAYMENT POLICIES WITH HEALTH CARE
DELIVERY
GENERALLY.—Specifically the Commis-
sion shall review the effect of payment policies under
this title on the delivery of health care services
under this title and assess the implications of
changes in the health services market on the medi-
care program.
‘‘(c) MEMBERSHIP.—
153
‘‘(1) NUMBER AND APPOINTMENT.—The Com-
mission shall be composed of 15 members appointed
by the Comptroller General.
‘‘(2) QUALIFICATIONS.—The membership of the
Commission shall include individuals with national
recognition for their expertise in health finance and
economics, actuarial science, health facility manage-
ment, health plans and integrated delivery systems,
reimbursement of health facilities, allopathic and os-
teopathic physicians, and other providers of services,
and other related fields, who provide a mix of dif-
ferent professionals, broad geographic representa-
tion, and a balance between urban and rural rep-
resentatives, including physicians and other health
professionals, employers, third party payors, individ-
uals skilled in the conduct and interpretation of bio-
medical, health services, and health economics re-
search and expertise in outcomes and effectiveness
research and technology assessment. Such member-
ship shall also include representatives of consumers
and the elderly.
‘‘(3) CONSIDERATIONS
IN
INITIAL
APPOINT-
MENT.—To the extent possible, in first appointing
members to the Commission the Comptroller Gen-
eral shall consider appointing individuals who (as of
154
the date of the enactment of this section) were serv-
ing on the Prospective Payment Assessment Com-
mission or the Physician Payment Review Commis-
sion.
‘‘(4) TERMS.—
‘‘(A) IN GENERAL.—The terms of mem-
bers of the Commission shall be for 3 years ex-
cept that the Comptroller General shall des-
ignate staggered terms for the members first
appointed.
‘‘(B) VACANCIES.—Any member appointed
to fill a vacancy occurring before the expiration
of the term for which the member’s predecessor
was appointed shall be appointed only for the
remainder of that term. A member may serve
after the expiration of that member’s term until
a successor has taken office. A vacancy in the
Commission shall be filled in the manner in
which the original appointment was made.
‘‘(5) COMPENSATION.—While serving on the
business of the Commission (including traveltime), a
member of the Commission shall be entitled to com-
pensation at the per diem equivalent of the rate pro-
vided for level IV of the Executive Schedule under
section 5315 of title 5, United States Code; and
155
while so serving away from home and member’s reg-
ular place of business, a member may be allowed
travel expenses, as authorized by the Chairman of
the Commission. Physicians serving as personnel of
the Commission may be provided a physician com-
parability allowance by the Commission in the same
manner as Government physicians may be provided
such an allowance by an agency under section 5948
of title 5, United States Code, and for such purpose
subsection (i) of such section shall apply to the Com-
mission in the same manner as it applies to the Ten-
nessee Valley Authority. For purposes of pay (other
than pay of members of the Commission) and em-
ployment benefits, rights, and privileges, all person-
nel of the Commission shall be treated as if they
were employees of the United States Senate.
‘‘(6) CHAIRMAN; VICE CHAIRMAN.—The Comp-
troller General shall designate a member of the
Commission, at the time of appointment of the mem-
ber, as Chairman and a member as Vice Chairman
for that term of appointment.
‘‘(7) MEETINGS.—The Commission shall meet
at the call of the Chairman.
‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CON-
SULTANTS.—Subject to such review as the Comptroller
156
General deems necessary to assure the efficient adminis-
tration of the Commission, the Commission may—
‘‘(1) employ and fix the compensation of an Ex-
ecutive Director (subject to the approval of the
Comptroller General) and such other personnel as
may be necessary to carry out its duties (without re-
gard to the provisions of title 5, United States Code,
governing appointments in the competitive service);
‘‘(2) seek such assistance and support as may
be required in the performance of its duties from ap-
propriate Federal departments and agencies;
‘‘(3) enter into contracts or make other ar-
rangements, as may be necessary for the conduct of
the work of the Commission (without regard to sec-
tion 3709 of the Revised Statutes (41 U.S.C. 5));
‘‘(4) make advance, progress, and other pay-
ments which relate to the work of the Commission;
‘‘(5) provide transportation and subsistence for
persons serving without compensation; and
‘‘(6) prescribe such rules and regulations as it
deems necessary with respect to the internal organi-
zation and operation of the Commission.
‘‘(e) POWERS.—
‘‘(1) OBTAINING
OFFICIAL
DATA.—The Com-
mission may secure directly from any department or
157
agency of the United States information necessary
to enable it to carry out this section. Upon request
of the Chairman, the head of that department or
agency shall furnish that information to the Com-
mission on an agreed upon schedule.
‘‘(2) DATA COLLECTION.—In order to carry out
its functions, the Commission shall collect and as-
sess information to—
‘‘(A) utilize existing information, both pub-
lished and unpublished, where possible, collected
and assessed either by its own staff or under
other arrangements made in accordance with
this section,
‘‘(B) carry out, or award grants or con-
tracts for, original research and experimen-
tation, where existing information is inad-
equate, and
‘‘(C) adopt procedures allowing any inter-
ested party to submit information for the Com-
mission’s use in making reports and rec-
ommendations.
‘‘(3) ACCESS OF GAO TO INFORMATION.—The
Comptroller General shall have unrestricted access
to all deliberations, records, and data of the Com-
mission, immediately upon request.
158
‘‘(4) PERIODIC AUDIT.—The Commission shall
be subject to periodic audit by the General Account-
ing Office.
‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(1) REQUEST
FOR
APPROPRIATIONS.—The
Commission shall submit requests for appropriations
in the same manner as the Comptroller General sub-
mits requests for appropriations, but amounts ap-
propriated for the Commission shall be separate
from amounts appropriated for the Comptroller Gen-
eral.
‘‘(2) AUTHORIZATION.—There are authorized to
be appropriated such sums as may be necessary to
carry out the provisions of this section. 60 percent
of such appropriation shall be payable from the Fed-
eral Hospital Insurance Trust Fund, and 40 percent
of such appropriation shall be payable from the Fed-
eral 
Supplementary 
Medical 
Insurance 
Trust
Fund.’’.
(b) ABOLITION OF PROPAC AND PPRC.—
(1) PROPAC.—
(A) IN
GENERAL.—Section 1886(e) (42
U.S.C. 1395ww(e)) is amended—
(i) by striking paragraphs (2) and (6);
and
159
(ii) in paragraph (3), by striking ‘‘(A)
The Commission’’ and all that follows
through ‘‘(B)’’.
(B) CONFORMING
AMENDMENT.—Section
1862 (42 U.S.C. 1395y) is amended by striking
‘‘Prospective Payment Assessment Commis-
sion’’ each place it appears in subsection
(a)(1)(D) and subsection (i) and inserting
‘‘Medicare Payment Review Commission’’.
(2) PPRC.—
(A) IN GENERAL.—Title XVIII is amended
by striking section 1845 (42 U.S.C. 1395w–1).
(B) CONFORMING AMENDMENTS.—
(i) Section 1834(b)(2) (42 U.S.C.
1395m(b)(2)) is amended by striking
‘‘Physician Payment Review Commission’’
and inserting ‘‘Medicare Payment Review
Commission’’.
(ii) 
Section 
1842(b) 
(42 
U.S.C.
1395u(b)) is amended by striking ‘‘Physi-
cian Payment Review Commission’’ each
place it appears in paragraphs (9)(D) and
(14)(C)(i) and inserting ‘‘Medicare Pay-
ment Review Commission’’.
160
(iii) Section 1848 (42 U.S.C. 1395w–
4) is amended by striking ‘‘Physician Pay-
ment Review Commission’’ and inserting
‘‘Medicare Payment Review Commission’’
each 
place 
it 
appears 
in 
paragraph
(2)(A)(ii), (2)(B)(iii), and (5) of subsection
(c), 
subsection 
(d)(2)(F), 
paragraphs
(1)(B), (3), and (4)(A) of subsection (f),
and paragraphs (6)(C) and (7)(C) of sub-
section (g).
(c) EFFECTIVE DATE; TRANSITION.—
(1) IN
GENERAL.—The Comptroller General
shall first provide for appointment of members to
the Medicare Payment Review Commission (in this
subsection referred to as ‘‘MPRC’’) by not later
than March 31, 1996.
(2) TRANSITION.—Effective on a date (not later
than 30 days after the date a majority of members
of the MPRC have first been appointed, the Pro-
spective Payment Assessment Commission (in this
subsection referred to as ‘‘ProPAC’’) and the Physi-
cian Payment Review Commission (in this subsection
referred to as ‘‘PPRC’’), and amendments made by
subsection (b), are terminated. The Comptroller
General, to the maximum extent feasible, shall pro-
161
vide for the transfer to the MPRC of assets and
staff of ProPAC and PPRC, without any loss of
benefits or seniority by virtue of such transfers.
Fund balances available to the ProPAC or PPRC
for any period shall be available to the MPRC for
such period for like purposes.
(3) CONTINUING
RESPONSIBILITY
FOR
RE-
PORTS.—The MPRC shall be responsible for the
preparation and submission of reports required by
law to be submitted (and which have not been sub-
mitted by the date of establishment of the MPRC)
by the ProPAC and PPRC, and, for this purpose,
any reference in law to either such Commission is
deemed, after the appointment of the MPRC, to
refer to the MPRC.
SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY
BOOM GENERATION ON THE MEDICARE PRO-
GRAM.
(a) ESTABLISHMENT.—There is established a com-
mission to be known as the Commission on the Effect of
the Baby Boom Generation on the Medicare Program (in
this section referred to as the ‘‘Commission’’).
(b) DUTIES.—
(1) IN GENERAL.—The Commission shall—
162
(A) examine the financial impact on the
medicare program of the significant increase in
the number of medicare eligible individuals
which will occur beginning approximately dur-
ing 2010 and lasting for approximately 25
years, and
(B) make specific recommendations to the
Congress respecting a comprehensive approach
to preserve the medicare program for the period
during which such individuals are eligible for
medicare.
(2) 
CONSIDERATIONS
IN
MAKING
REC-
OMMENDATIONS.—In making its recommendations,
the Commission shall consider the following:
(A) The amount and sources of Federal
funds to finance the medicare program, includ-
ing the potential use of innovative financing
methods.
(B) The most efficient and effective man-
ner of administering the program, including the
appropriateness of continuing the application of
the failsafe budget mechanism under section
1895 of the Social Security Act for fiscal years
after fiscal year 2002 and the appropriate long-
term growth rates for contributions electing
163
coverage under MedicarePlus under part C of
title XVIII of such Act.
(C) Methods used by other nations to re-
spond to comparable demographic patterns in
eligibility for health care benefits for elderly
and disabled individuals.
(D) Modifying age-based eligibility to cor-
respond to changes in age-based eligibility
under the OASDI program.
(E) Trends in employment-related health
care for retirees, including the use of medical
savings accounts and similar financing devices.
(c) MEMBERSHIP.—
(1) APPOINTMENT.—The Commission shall be
composed of 15 members appointed as follows:
(A) The President shall appoint 3 mem-
bers.
(B) The Majority Leader of the Senate
shall appoint, after consultation with the minor-
ity leader of the Senate, 6 members, of whom
not more than 4 may be of the same political
party.
(C) The Speaker of the House of Rep-
resentatives shall appoint, after consultation
with the minority leader of the House of Rep-
164
resentatives, 6 members, of whom not more
than 4 may be of the same political party.
(2) CHAIRMAN
AND
VICE
CHAIRMAN.—The
Commission shall elect a Chairman and Vice Chair-
man from among its members.
(3) VACANCIES.—Any vacancy in the member-
ship of the Commission shall be filled in the manner
in which the original appointment was made and
shall not affect the power of the remaining members
to execute the duties of the Commission.
(4) QUORUM.—A quorum shall consist of 8
members of the Commission, except that 4 members
may conduct a hearing under subsection (e).
(5) MEETINGS.—The Commission shall meet at
the call of its Chairman or a majority of its mem-
bers.
(6) COMPENSATION AND REIMBURSEMENT OF
EXPENSES.—Members of the Commission are not
entitled to receive compensation for service on the
Commission. Members may be reimbursed for travel,
subsistence, and other necessary expenses incurred
in carrying out the duties of the Commission.
(d) STAFF AND CONSULTANTS.—
(1) STAFF.—The Commission may appoint and
determine the compensation of such staff as may be
166
(A) Upon the request of the Commission,
the Director of the Congressional Budget Office
shall provide to the Commission such cost esti-
mates as the Commission determines to be nec-
essary to carry out its duties.
(B) The Commission shall reimburse the
Director of the Congressional Budget Office for
expenses relating to the employment in the of-
fice of the Director of such additional staff as
may be necessary for the Director to comply
with requests by the Commission under sub-
paragraph (A).
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon
the request of the Commission, the head of any Fed-
eral agency is authorized to detail, without reim-
bursement, any of the personnel of such agency to
the Commission to assist the Commission in carry-
ing out its duties. Any such detail shall not interrupt
or otherwise affect the civil service status or privi-
leges of the Federal employee.
(5) TECHNICAL
ASSISTANCE.—Upon the re-
quest of the Commission, the head of a Federal
agency shall provide such technical assistance to the
Commission as the Commission determines to be
necessary to carry out its duties.
167
(6) USE OF MAILS.—The Commission may use
the United States mails in the same manner and
under the same conditions as Federal agencies and
shall, for purposes of the frank, be considered a
commission of Congress as described in section 3215
of title 39, United States Code.
(7) OBTAINING
INFORMATION.—The Commis-
sion may secure directly from any Federal agency
information necessary to enable it to carry out its
duties, if the information may be disclosed under
section 552 of title 5, United States Code. Upon re-
quest of the Chairman of the Commission, the head
of such agency shall furnish such information to the
Commission.
(8) ADMINISTRATIVE
SUPPORT
SERVICES.—
Upon the request of the Commission, the Adminis-
trator of General Services shall provide to the Com-
mission on a reimbursable basis such administrative
support services as the Commission may request.
(9) ACCEPTANCE OF DONATIONS.—The Com-
mission may accept, use, and dispose of gifts or do-
nations of services or property.
(10) PRINTING.—For purposes of costs relating
to printing and binding, including the cost of per-
sonnel detailed from the Government Printing Of-
168
fice, the Commission shall be deemed to be a com-
mittee of the Congress.
(f) REPORT.—Not later than May 1, 1997, the Com-
mission shall submit to Congress a report containing its
findings and recommendations regarding how to protect
and preserve the medicare program in a financially solvent
manner until 2030 (or, if later, throughout the period of
projected solvency of the Federal Old-Age and Survivors
Insurance Trust Fund). The report shall include detailed
recommendations for appropriate legislative initiatives re-
specting how to accomplish this objective.
(g) TERMINATION.—The Commission shall terminate
60 days after the date of submission of the report required
in subsection (f).
(h) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $1,500,000 to carry out
this section. Amounts appropriated to carry out this sec-
tion shall remain available until expended.
SEC. 15033. CHANGE IN APPOINTMENT OF ADMINISTRATOR
OF HCFA.
(a) IN GENERAL.—Section 1117 (42 U.S.C. 1317)
is amended by striking ‘‘President by and with the advice
and consent of the Senate’’ and inserting ‘‘Secretary of
Health and Human Services’’.
169
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act and shall apply to Administrators ap-
pointed on or after the date of the enactment of this Act.
PART 5—TREATMENT OF HOSPITALS WHICH PAR-
TICIPATE IN PROVIDER-SPONSORED ORGA-
NIZATIONS
SEC. 15041. TREATMENT OF HOSPITALS WHICH PARTICI-
PATE IN PROVIDER-SPONSORED ORGANIZA-
TIONS.
(a) IN GENERAL.—Section 501 of the Internal Reve-
nue Code of 1986 (relating to exemption from tax on cor-
porations, certain trusts, etc.) is amended by redesignat-
ing subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
‘‘(n) TREATMENT OF HOSPITALS PARTICIPATING IN
PROVIDER-SPONSORED ORGANIZATIONS.—An organiza-
tion shall not fail to be treated as organized and operated
exclusively for a charitable purpose for purposes of sub-
section (c)(3) solely because a hospital which is owned and
operated by such organization participates in a provider-
sponsored organization (as defined in section 1854(a)(1)
of the Social Security Act), whether or not the provider-
sponsored organization is exempt from tax. For purposes
of subsection (c)(3), any person with a material financial
170
interest in such a provider-sponsored organization shall be
treated as a private shareholder or individual with respect
to the hospital.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
Subtitle B—Preventing Fraud and
Abuse
PART 1—GENERAL PROVISIONS
SEC. 15101. INCREASING AWARENESS OF FRAUD AND
ABUSE.
(a) BENEFICIARY OUTREACH EFFORTS.—The Sec-
retary of Health and Human Services (acting through the
Administrator of the Health Care Financing Administra-
tion and the Inspector General of the Department of
Health and Human Services) shall make ongoing efforts
(through public service announcements, publications, and
other appropriate methods) to alert individuals entitled to
benefits under the medicare program of the existence of
fraud and abuse committed against the program and the
costs to the program of such fraud and abuse, and of the
existence of the toll-free telephone line operated by the
Secretary to receive information on fraud and abuse com-
mitted against the program.
171
(b) CLARIFICATION OF REQUIREMENT TO PROVIDE
EXPLANATION OF MEDICARE BENEFITS.—The Secretary
shall provide an explanation of benefits under the medi-
care program with respect to each item or service for
which payment may be made under the program which
is furnished to an individual, without regard to whether
or not a deductible or coinsurance may be imposed against
the individual with respect to the item or service.
(c) PROVIDER OUTREACH EFFORTS; PUBLICATION
OF FRAUD ALERTS.—
(1) SPECIAL FRAUD ALERTS.—
(A) IN GENERAL.—
(i) REQUEST
FOR
SPECIAL
FRAUD
ALERTS.—Any person may present, at any
time, a request to the Secretary to issue
and publish a special fraud alert.
(ii) 
SPECIAL
FRAUD
ALERT
DE-
FINED.—In this section, a ‘‘special fraud
alert’’ is a notice which informs the public
of practices which the Secretary considers
to be suspect or of particular concern
under the medicare program or a State
health care program (as defined in section
1128(h) of the Social Security Act).
172
(B) ISSUANCE AND PUBLICATION OF SPE-
CIAL FRAUD ALERTS.—
(i) INVESTIGATION.—Upon receipt of
a request for a special fraud alert under
subparagraph (A), the Secretary shall in-
vestigate the subject matter of the request
to determine whether a special fraud alert
should be issued. If appropriate, the Sec-
retary (in consultation with the Attorney
General) shall issue a special fraud alert in
response to the request. All special fraud
alerts issued pursuant to this subpara-
graph shall be published in the Federal
Register.
(ii) CRITERIA FOR ISSUANCE.—In de-
termining whether to issue a special fraud
alert upon a request under subparagraph
(A), the Secretary may consider—
(I) whether and to what extent
the practices that would be identified
in the special fraud alert may result
in any of the consequences described
in 15214(b); and
173
(II) the extent and frequency of
the conduct that would be identified
in the special fraud alert.
(2) PUBLICATION OF ALL HCFA FRAUD ALERTS
IN FEDERAL REGISTER.—Each notice issued by the
Health Care Financing Administration which in-
forms the public of practices which the Secretary
considers to be suspect or of particular concern
under the medicare program or a State health care
program (as defined in section 1128(h) of the Social
Security Act) shall be published in the Federal Reg-
ister, without regard to whether or not the notice
is issued by a regional office of the Health Care Fi-
nancing Administration.
SEC. 15102. BENEFICIARY INCENTIVE PROGRAMS.
(a) PROGRAM TO COLLECT INFORMATION ON FRAUD
AND ABUSE.—
(1) ESTABLISHMENT OF PROGRAM.—Not later
than 3 months after the date of the enactment of
this Act, the Secretary of Health and Human Serv-
ices (hereinafter in this subtitle referred to as the
‘‘Secretary’’) shall establish a program under which
the Secretary shall encourage individuals to report
to the Secretary information on individuals and enti-
ties who are engaging or who have engaged in acts
174
or omissions which constitute grounds for the impo-
sition of a sanction under section 1128, section
1128A, or section 1128B of the Social Security Act,
or who have otherwise engaged in fraud and abuse
against the medicare program for which there is a
sanction provided under law. The program shall dis-
courage provision of, and not consider, information
which is frivolous or otherwise not relevant or mate-
rial to the imposition of such a sanction.
(2) PAYMENT OF PORTION OF AMOUNTS COL-
LECTED.—If an individual reports information to
the Secretary under the program established under
paragraph (1) which serves as the basis for the col-
lection by the Secretary or the Attorney General of
any amount of at least $100 (other than any
amount paid as a penalty under section 1128B of
the Social Security Act), the Secretary may pay a
portion of the amount collected to the individual
(under procedures similar to those applicable under
section 7623 of the Internal Revenue Code of 1986
to payments to individuals providing information on
violations of such Code).
(b) PROGRAM TO COLLECT INFORMATION ON PRO-
GRAM EFFICIENCY.—
175
(1) ESTABLISHMENT OF PROGRAM.—Not later
than 3 months after the date of the enactment of
this Act, the Secretary shall establish a program
under which the Secretary shall encourage individ-
uals to submit to the Secretary suggestions on meth-
ods to improve the efficiency of the medicare pro-
gram.
(2) PAYMENT OF PORTION OF PROGRAM SAV-
INGS.—If an individual submits a suggestion to the
Secretary under the program established under
paragraph (1) which is adopted by the Secretary and
which results in savings to the program, the Sec-
retary may make a payment to the individual of
such amount as the Secretary considers appropriate.
SEC. 15103. INTERMEDIATE SANCTIONS FOR MEDICARE
HEALTH MAINTENANCE ORGANIZATIONS.
(a) APPLICATION OF INTERMEDIATE SANCTIONS FOR
ANY PROGRAM VIOLATIONS.—
(1) IN
GENERAL.—Section 1876(i)(1) (42
U.S.C. 1395mm(i)(1)) is amended by striking ‘‘the
Secretary may terminate’’ and all that follows and
inserting the following: ‘‘in accordance with proce-
dures established under paragraph (9), the Secretary
may at any time terminate any such contract or may
impose the intermediate sanctions described in para-
176
graph (6)(B) or (6)(C) (whichever is applicable) on
the eligible organization if the Secretary determines
that the organization—
‘‘(A) has failed substantially to carry out the
contract;
‘‘(B) is carrying out the contract in a manner
inconsistent with the efficient and effective adminis-
tration of this section;
‘‘(C) is operating in a manner that is not in the
best interests of the individuals covered under the
contract; or
‘‘(D) no longer substantially meets the applica-
ble conditions of subsections (b), (c), and (e).’’.
(2) OTHER
INTERMEDIATE
SANCTIONS
FOR
MISCELLANEOUS
PROGRAM
VIOLATIONS.—Section
1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by
adding at the end the following new subparagraph:
‘‘(C) In the case of an eligible organization for which
the Secretary makes a determination under paragraph (1)
the basis of which is not described in subparagraph (A),
the Secretary may apply the following intermediate sanc-
tions:
‘‘(i) civil money penalties of not more than
$25,000 for each determination under paragraph (1)
if the deficiency that is the basis of the determina-
177
tion has directly adversely affected (or has the sub-
stantial likelihood of adversely affecting) an individ-
ual covered under the organization’s contract;
‘‘(ii) civil money penalties of not more than
$10,000 for each week beginning after the initiation
of procedures by the Secretary under paragraph (9)
during which the deficiency that is the basis of a de-
termination under paragraph (1) exists; and
‘‘(iii) suspension of enrollment of individuals
under this section after the date the Secretary noti-
fies the organization of a determination under para-
graph (1) and until the Secretary is satisfied that
the deficiency that is the basis for the determination
has been corrected and is not likely to recur.’’.
(3) PROCEDURES FOR IMPOSING SANCTIONS.—
Section 1876(i) (42 U.S.C. 1395mm(i)) is amended
by adding at the end the following new paragraph:
‘‘(9) The Secretary may terminate a contract with an
eligible organization under this section or may impose the
intermediate sanctions described in paragraph (6) on the
organization in accordance with formal investigation and
compliance procedures established by the Secretary under
which—
‘‘(A) the Secretary provides the organization
with the opportunity to develop and implement a
178
corrective action plan to correct the deficiencies that
were the basis of the Secretary’s determination
under paragraph (1);
‘‘(B) the Secretary shall impose more severe
sanctions on organizations that have a history of de-
ficiencies or that have not taken steps to correct de-
ficiencies the Secretary has brought to their atten-
tion;
‘‘(C) there are no unreasonable or unnecessary
delays between the finding of a deficiency and the
imposition of sanctions; and
‘‘(D) the Secretary provides the organization
with reasonable notice and opportunity for hearing
(including the right to appeal an initial decision) be-
fore imposing any sanction or terminating the con-
tract.’’.
(4) CONFORMING AMENDMENTS.—(A) Section
1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is
amended by striking the second sentence.
(B) 
Section 
1876(i)(6) 
(42 
U.S.C.
1395mm(i)(6)) is further amended by adding at the
end the following new subparagraph:
‘‘(D) The provisions of section 1128A (other than
subsections (a) and (b)) shall apply to a civil money pen-
alty under subparagraph (A) or (B) in the same manner
179
as they apply to a civil money penalty or proceeding under
section 1128A(a).’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to contract years be-
ginning on or after January 1, 1996.
SEC. 15104. VOLUNTARY DISCLOSURE PROGRAM.
Title XI (42 U.S.C. 1301 et seq.) is amended by in-
serting after section 1128B the following new section:
‘‘VOLUNTARY DISCLOSURE OF ACTS OR OMISSIONS
‘‘SEC. 1129. (a) ESTABLISHMENT OF VOLUNTARY
DISCLOSURE PROGRAM.—Not later than 3 months after
the date of the enactment of this section, the Secretary
shall establish a program to encourage individuals and en-
tities to voluntarily disclose to the Secretary information
on acts or omissions of the individual or entity which con-
stitute grounds for the imposition of a sanction described
in section 1128, 1128A, or 1128B.
‘‘(b) EFFECT OF VOLUNTARY DISCLOSURE.—If an
individual or entity voluntarily discloses information with
respect to an act or omission to the Secretary under sub-
section (a), the following rules shall apply:
‘‘(1) The Secretary may waive, reduce, or other-
wise mitigate any sanction which would otherwise be
applicable to the individual or entity under section
1128, 1128A, or 1128B as a result of the act or
omission involved.
180
‘‘(2) No qui tam action may be brought pursu-
ant to chapter 37 of title 31, United States Code,
against the individual or entity with respect to the
act or omission involved.’’.
SEC. 15105. REVISIONS TO CURRENT SANCTIONS.
(a) DOUBLING THE AMOUNT OF CIVIL MONETARY
PENALTIES.—The maximum amount of civil monetary
penalties specified in section 1128A of the Social Security
Act or under title XVIII of such Act (as in effect on the
day before the date of the enactment of this Act) shall,
effective for violations occurring after the date of the en-
actment of this Act, be double the amount otherwise pro-
vided as of such date.
(b) ESTABLISHMENT OF MINIMUM PERIOD OF EX-
CLUSION FOR CERTAIN INDIVIDUALS AND ENTITIES SUB-
JECT TO PERMISSIVE EXCLUSION.—Section 1128(c)(3)
(42 U.S.C. 1320a–7(c)(3)) is amended by adding at the
end the following new subparagraphs:
‘‘(D) In the case of an exclusion of an individual or
entity under paragraph (1), (2), or (3) of subsection (b),
the period of the exclusion shall be 3 years, unless the
Secretary determines in accordance with regulations that
a shorter period is appropriate because of mitigating cir-
cumstances or that a longer period is appropriate because
of aggravating circumstances.
181
‘‘(E) In the case of an exclusion of an individual or
entity under subsection (b)(4) or (b)(5), the period of the
exclusion shall not be less than the period during which
the individual’s or entity’s license to provide health care
is revoked, suspended, or surrendered, or the individual
or the entity is excluded or suspended from a Federal or
State health care program.
‘‘(F) In the case of an exclusion of an individual or
entity under subsection (b)(6)(B), the period of the exclu-
sion shall be not less than 1 year.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to acts or omissions
occurring on or after January 1, 1996.
SEC. 15106. DIRECT SPENDING FOR ANTI-FRAUD ACTIVI-
TIES UNDER MEDICARE.
(a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO-
GRAM.—Title XVIII is amended by adding at the end the
following new section:
‘‘MEDICARE INTEGRITY PROGRAM
‘‘SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—
There is hereby established the Medicare Integrity Pro-
gram (hereafter in this section referred to as the ‘Pro-
gram’) under which the Secretary shall promote the integ-
rity of the medicare program by entering into contracts
in accordance with this section with eligible private entities
to carry out the activities described in subsection (b).
182
‘‘(b) ACTIVITIES DESCRIBED.—The activities de-
scribed in this subsection are as follows:
‘‘(1) Review of activities of providers of services
or other individuals and entities furnishing items
and services for which payment may be made under
this title (including skilled nursing facilities and
home health agencies), including medical and utiliza-
tion review and fraud review (employing similar
standards, processes, and technologies used by pri-
vate health plans, including equipment and software
technologies which surpass the capability of the
equipment and technologies used in the review of
claims under this title as of the date of the enact-
ment of this section).
‘‘(2) Audit of cost reports.
‘‘(3) Determinations as to whether payment
should not be, or should not have been, made under
this title by reason of section 1862(b), and recovery
of payments that should not have been made.
‘‘(4) Education of providers of services, bene-
ficiaries, and other persons with respect to payment
integrity and benefit quality assurance issues.
‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible
to enter into a contract under the Program to carry out
any of the activities described in subsection (b) if—
183
‘‘(1) the entity has demonstrated capability to
carry out such activities;
‘‘(2) in carrying out such activities, the entity
agrees to cooperate with the Inspector General of
the Department of Health and Human Services, the
Attorney General of the United States, and other
law enforcement agencies, as appropriate, in the in-
vestigation and deterrence of fraud and abuse in re-
lation to this title and in other cases arising out of
such activities;
‘‘(3) the entity’s financial holdings, interests, or
relationships will not interfere with its ability to per-
form the functions to be required by the contract in
an effective and impartial manner; and
‘‘(4) the entity meets such other requirements
as the Secretary may impose.
‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—
The Secretary shall enter into contracts under the Pro-
gram in accordance with such procedures as the Secretary
may by regulation establish, except that such procedures
shall include the following:
‘‘(1) The Secretary shall determine the appro-
priate number of separate contracts which are nec-
essary to carry out the Program and the appropriate
184
times at which the Secretary shall enter into such
contracts.
‘‘(2) The provisions of section 1153(e)(1) shall
apply to contracts and contracting authority under
this section, except that competitive procedures must
be used when entering into new contracts under this
section, or at any other time considered appropriate
by the Secretary.
‘‘(3) A contract under this section may be re-
newed without regard to any provision of law requir-
ing competition if the contractor has met or ex-
ceeded the performance requirements established in
the current contract.
‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The
Secretary shall by regulation provide for the limitation of
a contractor’s liability for actions taken to carry out a con-
tract under the Program, and such regulation shall, to the
extent the Secretary finds appropriate, employ the same
or comparable standards and other substantive and proce-
dural provisions as are contained in section 1157.
‘‘(f) TRANSFER OF AMOUNTS TO MEDICARE ANTI-
FRAUD AND ABUSE TRUST FUND.—For each fiscal year,
the Secretary shall transfer from the Federal Hospital In-
surance Trust Fund and the Federal Supplementary Med-
ical Insurance Trust Fund to the Medicare Anti-Fraud
185
and Abuse Trust Fund under subsection (g) such amounts
as are necessary to carry out the activities described in
subsection (b). Such transfer shall be in an allocation as
reasonably reflects the proportion of such expenditures as-
sociated with part A and part B.
‘‘(g) MEDICARE ANTI-FRAUD
AND ABUSE TRUST
FUND.—
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN GENERAL.—There is hereby estab-
lished in the Treasury of the United States the
Anti-Fraud and Abuse Trust Fund (hereafter
in this subsection referred to as the ‘Trust
Fund’). The Trust Fund shall consist of such
gifts and bequests as may be made as provided
in subparagraph (B) and such amounts as may
be deposited in the Trust Fund as provided in
subsection (f), paragraph (3), and title XI.
‘‘(B) AUTHORIZATION
TO
ACCEPT
GIFTS
AND BEQUESTS.—The Trust Fund is author-
ized to accept on behalf of the United States
money gifts and bequests made unconditionally
to the Trust Fund, for the benefit of the Trust
Fund or any activity financed through the
Trust Fund.
‘‘(2) INVESTMENT.—
186
‘‘(A) IN GENERAL.—The Secretary of the
Treasury shall invest such amounts of the Fund
as such Secretary determines are not required
to meet current withdrawals from the Fund in
government account serial securities.
‘‘(B) USE OF INCOME.—Any interest de-
rived from investments under subparagraph (A)
shall be credited to the Fund.
‘‘(3) 
AMOUNTS
DEPOSITED
INTO
TRUST
FUND.—In addition to amounts transferred under
subsection (f), there shall be deposited in the Trust
Fund—
‘‘(A) that portion of amounts recovered in
relation to section 1128A arising out of a claim
under title XVIII as remains after application
of subsection (f)(2) (relating to repayment of
the Federal Hospital Insurance Trust Fund or
the Federal Supplementary Medical Insurance
Trust Fund) of that section, as may be applica-
ble,
‘‘(B) fines imposed under section 1128B
arising out of a claim under this title, and
‘‘(C) penalties and damages imposed (other
than funds awarded to a relator or for restitu-
tion) under sections 3729 through 3732 of title
187
31, United States Code (pertaining to false
claims) in cases involving claims relating to pro-
grams under title XVIII, XIX, or XXI.
‘‘(4) DIRECT
APPROPRIATION
OF
FUNDS
TO
CARRY OUT PROGRAM.—
‘‘(A) IN
GENERAL.—There are appro-
priated from the Trust Fund for each fiscal
year such amounts as are necessary to carry
out the Medicare Integrity Program under this
section, subject to subparagraph (B).
‘‘(B) AMOUNTS SPECIFIED.—The amount
appropriated under subparagraph (A) for a fis-
cal year is as follows:
‘‘(i) For fiscal year 1996, such
amount 
shall 
be 
not 
less 
than
$430,000,000 
and 
not 
more 
than
$440,000,000.
‘‘(ii) For fiscal year 1997, such
amount 
shall 
be 
not 
less 
than
$490,000,000 
and 
not 
more 
than
$500,000,000.
‘‘(iii) For fiscal year 1998, such
amount 
shall 
be 
not 
less 
than
$550,000,000 
and 
not 
more 
than
$560,000,000.
188
‘‘(iv) For fiscal year 1999, such
amount 
shall 
be 
not 
less 
than
$620,000,000 
and 
not 
more 
than
$630,000,000.
‘‘(v) For fiscal year 2000, such
amount 
shall 
be 
not 
less 
than
$670,000,000 
and 
not 
more 
than
$680,000,000.
‘‘(vi) For fiscal year 2001, such
amount 
shall 
be 
not 
less 
than
$690,000,000 
and 
not 
more 
than
$700,000,000.
‘‘(vii) For fiscal year 2002, such
amount 
shall 
be 
not 
less 
than
$710,000,000 
and 
not 
more 
than
$720,000,000.
‘‘(5) ANNUAL
REPORT.—The Secretary shall
submit an annual report to Congress on the amount
of revenue which is generated and disbursed by the
Trust Fund in each fiscal year.’’.
(b) ELIMINATION OF FI AND CARRIER RESPONSIBIL-
ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO-
GRAM.—
(1) 
RESPONSIBILITIES
OF
FISCAL
INTERMEDIARIES
UNDER
PART
A.—Section 1816
189
(42 U.S.C. 1395h) is amended by adding at the end
the following new subsection:
‘‘(l) No agency or organization may carry out (or re-
ceive payment for carrying out) any activity pursuant to
an agreement under this section to the extent that the ac-
tivity is carried out pursuant to a contract under the Med-
icare Integrity Program under section 1893.’’.
(2) RESPONSIBILITIES
OF
CARRIERS
UNDER
PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is
amended by adding at the end the following new
paragraph:
‘‘(6) No carrier may carry out (or receive payment
for carrying out) any activity pursuant to a contract under
this subsection to the extent that the activity is carried
out pursuant to a contract under the Medicare Integrity
Program under section 1893.’’.
(c) 
CONFORMING
AMENDMENT.—Section
1128A(f)(3) (42 U.S.C. 1320a–7a(f)(3)) is amended by
striking ‘‘as miscellaneous receipts of the Treasury of the
United States’’ and inserting ‘‘in the Anti-Fraud and
Abuse Trust Fund established under section 1893(g)’’.
(d) DIRECT SPENDING FOR MEDICARE-RELATED AC-
TIVITIES
OF INSPECTOR GENERAL.—Section 1893, as
added by subsection (a), is amended by adding at the end
the following new subsection:
190
‘‘(h) DIRECT SPENDING FOR MEDICARE-RELATED
ACTIVITIES OF INSPECTOR GENERAL.—
‘‘(1) IN
GENERAL.—There are appropriated
from the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance
Trust Fund to the Inspector General of the Depart-
ment of Health and Human Services for each fiscal
year such amounts as are necessary to enable the
Inspector General to carry out activities relating to
the medicare program (as described in paragraph
(2)), subject to paragraph (3).
‘‘(2) ACTIVITIES
DESCRIBED.—The activities
described in this paragraph are as follows:
‘‘(A) Prosecuting medicare-related matters
through criminal, civil, and administrative pro-
ceedings.
‘‘(B) Conducting investigations relating to
the medicare program.
‘‘(C) Performing financial and performance
audits of programs and operations relating to
the medicare program.
‘‘(D) Performing inspections and other
evaluations relating to the medicare program.
191
‘‘(E) Conducting provider and conumer
education activities regarding the requirements
of this title.
‘‘(3) AMOUNTS
SPECIFIED.—The amount ap-
propriated under paragraph (1) for a fiscal year is
as follows:
‘‘(A) For fiscal year 1996, such amount
shall be $130,000,000.
‘‘(B) For fiscal year 1997, such amount
shall be $181,000,000.
‘‘(C) For fiscal year 1998, such amount
shall be $204,000,000.
‘‘(D) For each subsequent fiscal year, the
amount appropriated for the previous fiscal
year, increased by the percentage increase in
aggregate expenditures under this title for the
fiscal year involved over the previous fiscal year.
‘‘(4) ALLOCATION OF PAYMENTS AMONG TRUST
FUNDS.—The appropriations made under paragraph
(1) shall be in an allocation as reasonably reflects
the proportion of such expenditures associated with
part A and part B.’’.
192
SEC. 15107. PERMITTING CARRIERS TO CARRY OUT PRIOR
AUTHORIZATION FOR CERTAIN ITEMS OF DU-
RABLE MEDICAL EQUIPMENT.
(a) IN GENERAL.—Section 1834(a)(15) (42 U.S.C.
1395m(a)(15)), as amended by section 135(b) of the So-
cial Security Act Amendments of 1994, is amended by
adding at the end the following new subparagraphs:
‘‘(D) APPLICATION BY CARRIERS.—A car-
rier may develop (and periodically update) a list
of items under subparagraph (A) and a list of
suppliers under subparagraph (B) in the same
manner as the Secretary may develop (and peri-
odically update) such lists.
‘‘(E) WAIVER OF PUBLICATION REQUIRE-
MENT.—A carrier may make an advance deter-
mination under subparagraph (C) with respect
to an item or supplier on a list developed by the
Secretary or the carrier without regard to
whether or not the Secretary has promulgated
a regulation with respect to the list, except that
the carrier may not make such an advance de-
termination with respect to an item or supplier
on a list until the expiration of the 30-day pe-
riod beginning on the date the Secretary or the
carrier places the item or supplier on the list.’’.
193
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect as if included in the enact-
ment of the Social Security Act Amendments of 1994.
SEC. 15108. NATIONAL HEALTH CARE ANTI-FRAUD TASK
FORCE.
(a) ESTABLISHMENT.—The Attorney General, in
consultation with the Secretary of Health and Human
Services, shall establish a national health care anti-fraud
task force (in this section referred to as the ‘‘task force’’).
The Attorney General shall establish the task force within
120 days after the date of the enactment of this Act.
(b) COMPOSITION.—The task force shall include rep-
resentatives of Federal agencies involved in the investiga-
tion and prosecution of persons violating laws relating to
health care fraud and abuse, including at least one rep-
resentative from each of the following agencies:
(1) The Department of Justice and the Federal
Bureau of Investigation.
(2) The Department of Health and Human
Services and the Office of the Inspector General
within the Department.
(3) The office in the Department of Defense re-
sponsible for administration of the CHAMPUS pro-
gram.
(4) The Department of Veterans’ Affairs.
194
(5) The United States Postal Inspection Serv-
ice.
(6) The Internal Revenue Service.
The Attorney General (or the designee of the Attorney
General) shall serve as chair of the task force.
(c) DUTIES.—The task force shall coordinate Federal
law enforcement activities relating to health care fraud
and abuse in order to better control fraud and abuse in
the delivery of health care in the United States. Specifi-
cally, the task force shall coordinate activities—
(1) in order to assure the effective targeting
and investigation of persons who organize, direct, fi-
nance, or otherwise knowingly engage in health care
fraud, and
(2) in order to assure full and effective coopera-
tion between Federal and State agencies involved in
health care fraud investigations.
(d) STAFF.—Each member of the task force who rep-
resents an agency shall be responsible for providing for
the detail (from the agency) of at least one full-time staff
person to staff the task force. Such detail shall be without
change in salary, compensation, benefits, and other em-
ployment-related matters.
195
SEC. 15109. STUDY OF ADEQUACY OF PRIVATE QUALITY AS-
SURANCE PROGRAMS.
(a) IN GENERAL.—The Administrator of the Health
Care Financing Administration (acting through the Direc-
tor of the Office of Research and Demonstrations) shall
enter into an agreement with a private entity to conduct
a study during the 5-year period beginning on the date
of the enactment of this Act of the adequacy of the quality
assurance programs and consumer protections used by the
MedicarePlus program under part C of title XVIII of the
Social Security Act (as inserted by section 15002(a)), and
shall include in the study an analysis of the effectiveness
of such programs in protecting plan enrollees against the
risk of insufficient provision of benefits which may result
from utilization controls.
(b) REPORT.—Not later than 6 months after the con-
clusion of the 5-year period described in subsection (a),
the Administrator shall submit a report to Congress on
the study conducted under subsection (a).
SEC. 15110. PENALTY FOR FALSE CERTIFICATION FOR
HOME HEALTH SERVICES.
(a) IN GENERAL.—Section 1128A(b) (42 U.S.C.
1320a–7a(b)) is amended by adding at the end the follow-
ing new paragraph:
‘‘(3)(A) Any physician who executes a document de-
scribed in subparagraph (B) with respect to an individual
196
knowing that all of the requirements referred to in such
subparagraph are not met with respect to the individual
shall be subject to a civil monetary penalty of not more
than the greater of—
‘‘(i) $5,000, or
‘‘(ii) three times the amount of the payments
under title XVIII for home health services which are
made pursuant to such certification.
‘‘(B) A document described in this subparagraph is
any document that certifies, for purposes of title XVIII,
that an individual meets the requirements of section
1814(a)(2)(C) or 1835(a)(2)(A) in the case of home
health services furnished to the individual.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to certifications made on or
after the date of the enactment of this Act.
SEC. 15111. PILOT PROJECTS.
The Secretary of Health and Human Services shall
establish and operate 5 pilot projects (in various geo-
graphic regions of the United States) under which the Sec-
retary shall implement innovative approaches to monitor
payment claims under the medicare program to detect
those claims that are wasteful or fraudulent.
197
PART 2—REVISIONS TO CRIMINAL LAW
SEC. 15121. DEFINITION OF FEDERAL HEALTH CARE OF-
FENSE.
(a) IN GENERAL.—Chapter 2 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 24. Definition of Federal health care offense
‘‘(a) As used in this title, the term ‘Federal health
care offense’ means—
‘‘(1) a violation of, or criminal conspiracy to
violate section 226, 227, 669, 1035, 1347, or 1518
of this title;
‘‘(2) a violation of, or criminal conspiracy to
violate section 1128B of the Social Security Act (42
U.S.C. 1320a–7b);
‘‘(3) a violation of, or criminal conspiracy to
violate section 201, 287, 371, 664, 666, 1001, 1027,
1341, 1343, or 1954 of this title, if the violation or
conspiracy relates to a health care benefit program;
‘‘(4) a violation of, or criminal conspiracy to
violate section 501 or 511 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1131
or 29 U.S.C. 1141), if the violation or conspiracy re-
lates to a health care benefit program;
‘‘(5) the commission of, or attempt to commit,
an act which constitutes grounds for the imposition
198
of a penalty under section 303 of the Federal Food,
Drug, and Cosmetic Act, if the act or attempt re-
lates to a health care benefit program; or
‘‘(6) a violation of, or criminal conspiracy to
violate, section 3 of the Anti-Kickback Act of 1986
(41 U.S.C. 53), if the violation or conspiracy relates
to a health care benefit program.
‘‘(b) As used in this title, the term ‘health care bene-
fit program’ has the meaning given such term in section
1347(b) of this title.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 2 of title 18, United States
Code, is amended by inserting after the item relating to
section 23 the following new item:
‘‘24. Definition relating to Federal health care offense defined.’’.
SEC. 15122. HEALTH CARE FRAUD.
(a) IN GENERAL.—Chapter 63 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 1347. Health care fraud
‘‘(a) Whoever, having devised or intending to devise
a scheme or artifice, commits or attempts to commit an
act in furtherance of or for the purpose of executing such
scheme or artifice—
‘‘(1) to defraud any health care benefit pro-
gram; or
199
‘‘(2) to obtain, by means of false or fraudulent
pretenses, representations, or promises, any of the
money or property owned by, or under the custody
or control of, any health care benefit program,
shall be fined under this title or imprisoned not more than
10 years, or both. If the violation results in serious bodily
injury (as defined in section 1365 of this title), such per-
son shall be fined under this title or imprisoned not more
than 20 years, or both; and if the violation results in
death, such person shall be fined under this title, or im-
prisoned for any term of years or for life, or both.
‘‘(b) As used in this section, the term ‘health care
benefit program’ means any public or private plan or con-
tract under which any medical benefit, item, or service is
provided to any individual, and includes any individual or
entity who is providing a medical benefit, item, or service
for which payment may be made under the plan or con-
tract.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 63 of title 18, United States
Code, is amended by adding at the end the following:
‘‘1347. Health care fraud.’’.
SEC. 15123. THEFT OR EMBEZZLEMENT.
(a) IN GENERAL.—Chapter 31 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
200
‘‘§ 669. Theft or embezzlement in connection with
health care
‘‘(a) Whoever embezzles, steals, or otherwise without
authority willfully and unlawfully converts to the use of
any person other than the rightful owner, or intentionally
misapplies any of the moneys, funds, securities, premiums,
credits, property, or other assets of a health care benefit
program, shall be fined under this title or imprisoned not
more than 10 years, or both.
‘‘(b) As used in this section, the term ‘health care
benefit program’ has the meaning given such term in sec-
tion 1347(b) of this title.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 31 of title 18, United States
Code, is amended by adding at the end the following:
‘‘669. Theft or embezzlement in connection with health care.’’.
SEC. 15124. FALSE STATEMENTS.
(a) IN GENERAL.—Chapter 47 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 1035. False statements relating to health care mat-
ters
‘‘(a) Whoever, in any matter involving a health care
benefit program, knowingly and willfully falsifies, conceals,
or covers up by any trick, scheme, or device a material
fact, or makes any false, fictitious, or fraudulent state-
201
ments or representations, or makes or uses any false writ-
ing or document knowing the same to contain any false,
fictitious, or fraudulent statement or entry, shall be fined
under this title or imprisoned not more than 5 years, or
both.
‘‘(b) As used in this section, the term ‘health care
benefit program’ has the meaning given such term in sec-
tion 1347(b) of this title.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 47 of title 18, United States
Code, is amended by adding at the end the following new
item:
‘‘1035. False statements relating to health care matters.’’.
SEC. 15125. BRIBERY AND GRAFT.
(a) IN GENERAL.—Chapter 11 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 226. Bribery and graft in connection with health
care
‘‘(a) Whoever—
‘‘(1) directly or indirectly, corruptly gives, of-
fers, or promises anything of value to a health care
official, or offers or promises to give anything of
value to any other person, or attempts to violate this
subsection, with intent—
202
‘‘(A) to influence any of the health care of-
ficial’s actions, decisions, or duties relating to a
health care benefit program;
‘‘(B) to influence such an official to com-
mit or aid in the committing, or collude in or
allow, any fraud, or make opportunity for the
commission of any fraud, on a health care bene-
fit program; or
‘‘(C) to induce such an official to engage
in any conduct in violation of the lawful duty of
such official; or
‘‘(2) being a health care official, directly or in-
directly, corruptly demands, seeks, receives, accepts,
or agrees to accept anything of value personally or
for any other person or entity, the giving of which
violates paragraph (1) of this subsection, or at-
tempts to violate this subsection,
shall be fined under this title or imprisoned not more than
15 years, or both.
‘‘(b) Whoever—
‘‘(1) otherwise than as provided by law for the
proper discharge of any duty, directly or indirectly
gives, offers, or promises anything of value to a
health care official, for or because of any of the
health care official’s actions, decisions, or duties re-
203
lating to a health care benefit program, or attempts
to violate this subsection; or
‘‘(2) being a health care official, otherwise than
as provided by law for the proper discharge of any
duty, directly or indirectly, demands, seeks, receives,
accepts or agrees to accept anything of value person-
ally or for any other person or entity, the giving of
which violates paragraph (1) of this subsection, or
attempts to violate this subsection,
shall be fined under this title, or imprisoned not more than
2 years, or both.
‘‘(c) As used in this section—
‘‘(1) the term ‘health care official’ means—
‘‘(A) an administrator, officer, trustee, fi-
duciary, custodian, counsel, agent, or employee
of any health care benefit program;
‘‘(B) an officer, counsel, agent, or em-
ployee, of an organization that provides services
under contract to any health care benefit pro-
gram; or
‘‘(C) an official, employee, or agent of an
entity having regulatory authority over any
health care benefit program; and
204
‘‘(2) the term ‘health care benefit program’ has
the meaning given such term in section 1347(b) of
this title.’’.
(b) CLERICAL AMENDMENT.—The table of chapters
at the beginning of chapter 11 of title 18, United States
Code, is amended by adding at the end the following new
item:
‘‘226. Bribery and graft in connection with health care.’’.
SEC. 15126. ILLEGAL REMUNERATION WITH RESPECT TO
HEALTH CARE BENEFIT PROGRAMS.
(a) IN GENERAL.—Chapter 11 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 227. Illegal remuneration with respect to health
care benefit programs
‘‘(a) Whoever knowingly and willfully solicits or re-
ceives any remuneration (including any kickback, bribe, or
rebate) directly or indirectly, overtly or covertly, in cash
or in kind—
‘‘(1) in return for referring any individual to a
person for the furnishing or arranging for the fur-
nishing of any item or service for which payment
may be made in whole or in part by any health care
benefit program; or
‘‘(2) in return for purchasing, leasing, ordering,
or arranging for or recommending purchasing, leas-
205
ing, or ordering any good, facility, service, or item
for which payment may be made in whole or in part
by any health care benefit program, or attempting to
do so,
shall be fined under this title or imprisoned for not more
than 5 years, or both.
‘‘(b) Whoever knowingly and willfully offers or pays
any remuneration (including any kickback, bribe, or re-
bate) directly or indirectly, overtly, or covertly, in cash or
in kind to any person to induce such person—
‘‘(1) to refer an individual to a person for the
furnishing or arranging for the furnishing of any
item or service for which payment may be made in
whole or in part by any health benefit program; or
‘‘(2) to purchase, lease, order, or arrange for or
recommend purchasing, leasing, or ordering any
good, facility, service, or item for which payment
may be made in whole or in part by any health bene-
fit program or attempts to do so,
shall be fined under this title or imprisoned for not more
than 5 years, or both.
‘‘(c) Subsections (a) and (b) shall not apply to—
‘‘(1) a discount or other reduction in price ob-
tained by a provider of services or other entity under
a health care benefit program if the reduction in
206
price is properly disclosed and appropriately re-
flected in the costs claimed or charges made by the
provider or entity under a health care benefit pro-
gram;
‘‘(2) any amount paid by an employer to an em-
ployee (who has a bona fide employment relationship
with such employer) for employment in the provision
of covered items or services if the amount of the re-
muneration under the arrangement is consistent
with the fair market value of the services and is not
determined in a manner that takes into account (di-
rectly or indirectly) the volume or value of any refer-
rals;
‘‘(3) any amount paid by a vendor of goods or
services to a person authorized to act as a purchas-
ing agent for a group of individuals or entities who
are furnishing services reimbursed under a health
care benefit program if—
‘‘(A) the person has a written contract,
with each such individual or entity, which speci-
fies the amount to be paid the person, which
amount may be a fixed amount or a percentage
of the value of the purchases made by each
such individual or entity under the contract,
and
207
‘‘(B) in the case of an entity that is a pro-
vider of services (as defined in section 1861(u)
of the Social Security Act, the person discloses
(in such form and manner as the Secretary of
Health and Human Services requires) to the
entity and, upon request, to the Secretary the
amount received from each such vendor with re-
spect to purchases made by or on behalf of the
entity;
‘‘(4) a waiver of any coinsurance under part B
of title XVIII of the Social Security Act by a feder-
ally qualified health care center with respect to an
individual who qualifies for subsidized services under
a provision of the Public Health Service Act; and
‘‘(5) any payment practice specified by the Sec-
retary of Health and Human Services in regulations
promulgated pursuant to section 14(a) of the Medi-
care and Medicaid Patient and Program Protection
Act of 1987.
‘‘(d) Any person injured in his business or property
by reason of a violation of this section or section 226 of
this title may sue therefor in any appropriate United
States district court and shall recover threefold the dam-
ages such person sustains and the cost of the suit, includ-
ing a reasonable attorney’s fee.
208
‘‘(e) As used in this section, ‘health care benefit pro-
gram’ has the meaning given such term in section 1347(b)
of this title.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 11 of title 18, United States
Code, is amended by adding at the end the following:
‘‘227. Illegal remuneration with respect to health care benefit programs.’’.
(c) CONFORMING AMENDMENT.—Section 1128B of
the Social Security Act (42 U.S.C. 1320a–7b) is amended
by striking subsection (b).
SEC. 15127. OBSTRUCTION OF CRIMINAL INVESTIGATIONS
OF HEALTH CARE OFFENSES.
(a) IN GENERAL.—Chapter 73 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 1518. Obstruction of criminal investigations of
health care offenses
‘‘(a) Whoever willfully prevents, obstructs, misleads,
delays or attempts to prevent, obstruct, mislead, or delay
the communication of information or records relating to
a violation of a health care offense to a criminal investiga-
tor shall be fined under this title or imprisoned not more
than 5 years, or both.
‘‘(b) As used in this section the term ‘health care of-
fense’ has the meaning given such term in section 24 of
this title.
209
‘‘(c) As used in this section the term ‘criminal inves-
tigator’ means any individual duly authorized by a depart-
ment, agency, or armed force of the United States to con-
duct or engage in investigations for prosecutions for viola-
tions of health care offenses.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 73 of title 18, United States
Code, is amended by adding at the end the following new
item:
‘‘1518. Obstruction of criminal investigations of health care offenses.’’.
SEC. 15128. CIVIL PENALTIES FOR VIOLATIONS OF FED-
ERAL HEALTH CARE OFFENSES.
(a) IN GENERAL.—Chapter 63 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 1348. Civil penalties for violations of Federal
health care offenses
‘‘The Attorney General may bring a civil action in
the appropriate United States district court against any
person who engages in conduct constituting a violation of
Federal health care offense, as that term is defined in sec-
tion 24 of this title and, upon proof of such conduct by
a preponderance of the evidence, such person shall be sub-
ject to a civil penalty of not more than $50,000 for each
violation or the amount of compensation or proceeds which
the person received or offered for the prohibited conduct,
210
whichever amount is greater. The imposition of a civil pen-
alty under this section does not preclude any other crimi-
nal or civil statutory, common law, or administrative rem-
edy, which is available by law to the United States or any
other person.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 63 of title 18, United States Code, is amended
by adding at the end the following item:
‘‘1348. Civil penalties for violations of Federal health care offenses.’’.
SEC. 15129. INJUNCTIVE RELIEF RELATING TO HEALTH
CARE OFFENSES.
Section 1345(a)(1) of title 18, United States Code,
is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(A);
(2) by inserting ‘‘or’’ at the end of subpara-
graph (B); and
(3) by adding at the end the following:
‘‘(C) committing or about to commit a
Federal health care offense (as defined in sec-
tion 24 of this title).’’.
SEC. 15130. AUTHORIZED INVESTIGATIVE DEMAND PROCE-
DURES.
(a) IN GENERAL.—Chapter 233 of title 18, United
States Code, is amended by adding after section 3485 the
following:
211
‘‘§ 3486. Authorized investigative demand procedures
‘‘(a) AUTHORIZATION.—(1) In any investigation re-
lating to functions set forth in paragraph (2), the Attorney
General or the Director of the Federal Bureau of Inves-
tigation or their designees may issue in writing and cause
to be served a summons compelling the attendance and
testimony of witnesses and requiring the production of any
records (including any books, papers, documents, elec-
tronic media, or other objects or tangible things), which
may be relevant to an authorized law enforcement inquiry,
that a person or legal entity may possess or have care,
custody, or control. The attendance of witnesses and the
production of records may be required from any place in
any State or in any territory or other place subject to the
jurisdiction of the United States at any designated place
of hearing; except that a witness shall not be required to
appear at any hearing more than 500 miles distant from
the place where he was served with a subpoena. Witnesses
summoned under this section shall be paid the same fees
and mileage that are paid witnesses in the courts of the
United States. A summons requiring the production of
records shall describe the objects required to be produced
and prescribe a return date within a reasonable period of
time within which the objects can be assembled and made
available.
212
‘‘(2) Investigative demands utilizing an administra-
tive summons are authorized for:
‘‘(A) Any investigation with respect to any act
or activity constituting an offense involving a Fed-
eral health care offense as that term is defined in
section 24 of title 18, United States Code.
‘‘(B) Any investigation, with respect to viola-
tions of sections 1073 and 1074 of title 18, United
States Code, or in which an individual has been law-
fully charged with a Federal offense and such indi-
vidual is avoiding prosecution or custody or confine-
ment after conviction of such offense or attempt.
‘‘(b) SERVICE.—A subpoena issued under this section
may be served by any person designated in the subpoena
to serve it. Service upon a natural person may be made
by personal delivery of the subpoena to him. Service may
be made upon a domestic or foreign corporation or upon
a partnership or other unincorporated association which
is subject to suit under a common name, by delivering the
subpoena to an officer, to a managing or general agent,
or to any other agent authorized by appointment or by
law to receive service of process. The affidavit of the per-
son serving the subpoena entered on a true copy thereof
by the person serving it shall be proof of service.
213
‘‘(c) ENFORCEMENT.—In the case of contumacy by
or refusal to obey a subpoena issued to any person, the
Attorney General may invoke the aid of any court of the
United States within the jurisdiction of which the inves-
tigation is carried on or of which the subpoenaed person
is an inhabitant, or in which he carries on business or may
be found, to compel compliance with the subpoena. The
court may issue an order requiring the subpoenaed person
to appear before the Attorney General to produce records,
if so ordered, or to give testimony touching the matter
under investigation. Any failure to obey the order of the
court may be punished by the court as a contempt thereof.
All process in any such case may be served in any judicial
district in which such person may be found.
‘‘(d) IMMUNITY FROM CIVIL LIABILITY.—Notwith-
standing any Federal, State, or local law, any person, in-
cluding officers, agents, and employees, receiving a sum-
mons under this section, who complies in good faith with
the summons and thus produces the materials sought,
shall not be liable in any court of any State or the United
States to any customer or other person for such produc-
tion or for nondisclosure of that production to the cus-
tomer.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 223 of title 18, United States
214
Code, is amended by inserting after the item relating to
section 3485 the following new item:
‘‘3486. Authorized investigative demand procedures.’’.
(c) 
CONFORMING
AMENDMENT.—Section
1510(b)(3)(B) of title 18, United States Code, is amended
by inserting ‘‘or a Federal Bureau of Investigation sum-
mons (issued under section 3486 of title 18),’’ after ‘‘sub-
poena’’.
SEC. 15131. GRAND JURY DISCLOSURE.
Section 3322 of title 18, United States Code, is
amended—
(1) by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively; and
(2) by inserting after subsection (b) the follow-
ing:
‘‘(c) A person who is privy to grand jury information
concerning a health care offense—
‘‘(1) received in the course of duty as an attor-
ney for the Government; or
‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the
Federal Rules of Criminal Procedure;
may disclose that information to an attorney for the Gov-
ernment to use in any civil investigation or proceeding re-
lated to a Federal health care offense (as defined in sec-
tion 24 of this title).’’.
215
SEC. 15132. MISCELLANEOUS AMENDMENTS TO TITLE 18,
UNITED STATES CODE.
(a) LAUNDERING OF MONETARY INSTRUMENTS.—
Section 1956(c)(7) of title 18, United States Code, is
amended by adding at the end thereof the following:
‘‘(F) Any act or activity constituting an offense
involving a Federal health care offense as that term
is defined in section 24 of title 18, United States
Code.’’.
(b) ENHANCED PENALTIES.—Section 2326(2) of title
18, United States Code, is amended by striking ‘‘sections
that—’’ and inserting ‘‘or in the case of a Federal health
care offense as that term is defined in section 24 of this
title, that—’’.
(c) AUTHORIZATION FOR INTERCEPTION OF WIRE,
ORAL, 
OR
ELECTRONIC
COMMUNICATIONS.—Section
2516(1)(c) of title 18, United States Code, is amended—
(1) by inserting ‘‘section 226 (bribery and graft
in connection with health care), section 227 (illegal
remunerations)’’ after ‘‘section 224 (bribery in
sporting contests),’’; and
(2) by inserting ‘‘section 1347 (health care
fraud)’’ after ‘‘section 1344 (relating to bank
fraud),’’ .
(d) DEFINITIONS.—Section 1961(1) of title 18, Unit-
ed States Code, is amended—
216
(1) by inserting ‘‘sections 226 and 227 (relating
to bribery and graft, and illegal remuneration in
connection with health care)’’ after ‘‘section 224 (re-
lating to sports bribery),’’;
(2) by inserting ‘‘section 669 (relating to theft
or embezzlement in connection with health care)’’
after ‘‘section 664 (relating to embezzlement from
pension and welfare funds),’’; and
(3) by inserting ‘‘section 1347 (relating to
health care fraud)’’ after ‘‘section 1344 (relating to
financial institution fraud),’’.
(e) CRIMINAL FORFEITURE.—Section 982(a) of title
18, United States Code, is amended by adding at the end
the following new paragraph:
‘‘(6) The court in imposing sentence on a per-
son convicted of a Federal health care offense as de-
fined in section 24 of this title, shall order that the
offender forfeit to the United States any real or per-
sonal property constituting or derived from proceeds
that the offender obtained directly or indirectly as
the result of the offense.’’.
(f) REWARDS FOR INFORMATION LEADING TO PROS-
ECUTION AND CONVICTION.—Section 3059(c)(1) of title
18, United States Code, is amended by inserting ‘‘or fur-
nishes information unknown to the Government relating
217
to a possible prosecution of a Federal health care offense
as defined in section 24 of this title, which results in a
conviction’’ before the period at the end.
Subtitle C—Regulatory Relief
PART 1—PHYSICIAN OWNERSHIP REFERRAL
REFORM
SEC. 15201. REPEAL OF PROHIBITIONS BASED ON COM-
PENSATION ARRANGEMENTS.
(a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.
1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that
follows through ‘‘equity,’’ and inserting the following: ‘‘is
(except as provided in subsection (c)) an ownership or in-
vestment interest in the entity through equity,’’.
(b) CONFORMING AMENDMENTS.—Section 1877 (42
U.S.C. 1395nn) is amended as follows:
(1) In subsection (b)—
(A) in the heading, by striking ‘‘TO BOTH
OWNERSHIP
AND
COMPENSATION
ARRANGE-
MENT PROHIBITIONS’’ and inserting ‘‘WHERE
FINANCIAL RELATIONSHIP EXISTS’’; and
(B) by redesignating paragraph (4) as
paragraph (7).
(2) In subsection (c)—
(A) by amending the heading to read as
follows: ‘‘EXCEPTION FOR OWNERSHIP OR IN-
218
VESTMENT INTEREST
IN PUBLICLY TRADED
SECURITIES AND MUTUAL FUNDS’’; and
(B) in the matter preceding paragraph (1),
by striking ‘‘subsection (a)(2)(A)’’ and inserting
‘‘subsection (a)(2)’’.
(3) In subsection (d)—
(A) by striking the matter preceding para-
graph (1);
(B) in paragraph (3), by striking ‘‘para-
graph (1)’’ and inserting ‘‘paragraph (4)’’; and
(C) by redesignating paragraphs (1), (2),
and (3) as paragraphs (4), (5), and (6), and by
transferring and inserting such paragraphs
after paragraph (3) of subsection (b).
(4) By striking subsection (e).
(5) In subsection (f)(2)—
(A) in the matter preceding paragraph (1),
by striking ‘‘ownership, investment, and com-
pensation’’ and inserting ‘‘ownership and in-
vestment’’;
(B) in paragraph (2), by striking ‘‘sub-
section (a)(2)(A)’’ and all that follows through
‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub-
section (a)(2),’’; and
219
(C) in paragraph (2), by striking ‘‘or who
have such a compensation relationship with the
entity’’.
(6) In subsection (h)—
(A) by striking paragraphs (1), (2), and
(3);
(B) in paragraph (4)(A), by striking
clauses (iv) and (vi);
(C) in paragraph (4)(B), by striking
‘‘RULES.—’’ and all that follows through ‘‘(ii)
FACULTY’’ and inserting ‘‘RULES
FOR
FAC-
ULTY’’; and
(D) by adding at the end of paragraph (4)
the following new subparagraph:
‘‘(C) MEMBER OF A GROUP.—A physician
is a ‘member’ of a group if the physician is an
owner or a bona fide employee, or both, of the
group.’’.
SEC. 15202. REVISION OF DESIGNATED HEALTH SERVICES
SUBJECT TO PROHIBITION.
(a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.
1395nn(h)(6)) is amended by striking subparagraphs (B)
through (K) and inserting the following:
‘‘(B) Parenteral and enteral nutrients,
equipment, and supplies.
220
‘‘(C) Magnetic resonance imaging and
computerized tomography services.
‘‘(D) Outpatient physical or occupational
therapy services.’’.
(b) CONFORMING AMENDMENTS.—
(1) 
Section 
1877(b)(2) 
(42 
U.S.C.
1395nn(b)(2)) is amended in the matter preceding
subparagraph (A) by striking ‘‘services’’ and all that
follows through ‘‘supplies)—’’ and inserting ‘‘serv-
ices—’’.
(2) 
Section 
1877(h)(5)(C) 
(42 
U.S.C.
1395nn(h)(5)(C)) is amended—
(A) by striking ‘‘, a request by a radiolo-
gist for diagnostic radiology services, and a re-
quest by a radiation oncologist for radiation
therapy,’’ and inserting ‘‘and a request by a ra-
diologist for magnetic resonance imaging or for
computerized tomography’’, and
(B) by striking ‘‘radiologist, or radiation
oncologist’’ and inserting ‘‘or radiologist’’.
SEC. 15203. DELAY IN IMPLEMENTATION UNTIL PROMUL-
GATION OF REGULATIONS.
(a) IN GENERAL.—Section 13562(b) of OBRA–1993
(42 U.S.C. 1395nn note) is amended—
221
(1) in paragraph (1), by striking ‘‘paragraph
(2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(3) PROMULGATION OF REGULATIONS.—Not-
withstanding paragraphs (1) and (2), the amend-
ments made by this section shall not apply to any
referrals made before the effective date of final regu-
lations promulgated by the Secretary of Health and
Human Services to carry out such amendments.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect as if included in the enact-
ment of OBRA–1993.
SEC. 15204. EXCEPTIONS TO PROHIBITION.
(a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN-
CILLARY SERVICES.—
(1) REPEAL
OF
SITE-OF-SERVICE
REQUIRE-
MENT.—Section 1877 (42 U.S.C. 1395nn) is amend-
ed—
(A) by amending subparagraph (A) of sub-
section (b)(2) to read as follows:
‘‘(A) that are furnished personally by the
referring physician, personally by a physician
who is a member of the same group practice as
the referring physician, or personally by individ-
222
uals who are under the general supervision of
the physician or of another physician in the
group practice, and’’, and
(B) by adding at the end of subsection (h)
the following new paragraph:
‘‘(7) GENERAL SUPERVISION.—An individual is
considered to be under the ‘general supervision’ of a
physician if the physician (or group practice of
which the physician is a member) is legally respon-
sible for the services performed by the individual and
for ensuring that the individual meets licensure and
certification requirements, if any, applicable under
other provisions of law, regardless of whether or not
the physician is physically present when the individ-
ual furnishes an item or service.’’.
(2) CLARIFICATION OF TREATMENT OF PHYSI-
CIAN
OWNERS
OF
GROUP
PRACTICE.—Section
1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is
amended by striking ‘‘physician or such group prac-
tice’’ and inserting ‘‘physician, such group practice,
or the physician owners of such group practice’’.
(3) 
CONFORMING
AMENDMENT.—Section
1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by
amending the heading to read as follows: ‘‘ANCIL-
223
LARY
SERVICES
FURNISHED
PERSONALLY
OR
THROUGH GROUP PRACTICE.—’’.
(b) CLARIFICATION OF EXCEPTION FOR SERVICES
FURNISHED IN A RURAL AREA.—Paragraph (5) of section
1877(b) (42 U.S.C. 1395nn(b)), as transferred by section
15201(b)(3)(C), is amended by striking ‘‘substantially all’’
and inserting ‘‘not less than 75 percent’’.
(c) REVISION OF EXCEPTION FOR CERTAIN MAN-
AGED CARE ARRANGEMENTS.—Section 1877(b)(3) (42
U.S.C. 1395nn(b)(3)) is amended—
(1) in the heading by inserting ‘‘MANAGED
CARE ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;
(2) in the matter preceding subparagraph (A),
by striking ‘‘organization—’’ and inserting ‘‘organi-
zation, directly or through contractual arrangements
with other entities, to individuals enrolled with the
organization—’’;
(3) in subparagraph (A), by inserting ‘‘or part
C’’ after ‘‘section 1876’’;
(4) by striking ‘‘or’’ at the end of subparagraph
(C);
(5) by striking the period at the end of sub-
paragraph (D) and inserting a comma; and
(6) by adding at the end the following new sub-
paragraphs:
224
‘‘(E) with a contract with a State to pro-
vide services under the State plan under title
XIX (in accordance with section 1903(m)) or a
State MediGrant plan under title XXI; or
‘‘(F) which is a MedicarePlus organization
under part C or which provides or arranges for
the provision of health care items or services
pursuant to a written agreement between the
organization and an individual or entity if the
written agreement places the individual or en-
tity at substantial financial risk for the cost or
utilization of the items or services which the in-
dividual or entity is obligated to provide, wheth-
er through a withhold, capitation, incentive
pool, per diem payment, or any other similar
risk arrangement which places the individual or
entity at substantial financial risk.’’.
(d) NEW EXCEPTION FOR SHARED FACILITY SERV-
ICES.—
(1) IN GENERAL.—Section 1877(b) (42 U.S.C.
1395nn(b)), as amended by section 15201(b)(3)(C),
is amended—
(A) 
by 
redesignating 
paragraphs 
(4)
through (7) as paragraphs (5) through (8); and
225
(B) by inserting after paragraph (3) the
following new paragraph:
‘‘(4) SHARED FACILITY SERVICES.—In the case
of a designated health service consisting of a shared
facility service of a shared facility—
‘‘(A) that is furnished—
‘‘(i) personally by the referring physi-
cian who is a shared facility physician or
personally by an individual directly em-
ployed or under the general supervision of
such a physician,
‘‘(ii) by a shared facility in a building
in which the referring physician furnishes
substantially all of the services of the phy-
sician that are unrelated to the furnishing
of shared facility services, and
‘‘(iii) to a patient of a shared facility
physician; and
‘‘(B) that is billed by the referring physi-
cian or a group practice of which the physician
is a member.’’.
(2) DEFINITIONS.—Section 1877(h) (42 U.S.C.
1395nn(h)), as amended by section 15201(b)(6), is
amended by inserting before paragraph (4) the fol-
lowing new paragraph:
226
‘‘(1) SHARED
FACILITY
RELATED
DEFINI-
TIONS.—
‘‘(A) SHARED
FACILITY
SERVICE.—The
term ‘shared facility service’ means, with re-
spect to a shared facility, a designated health
service furnished by the facility to patients of
shared facility physicians.
‘‘(B) 
SHARED
FACILITY.—The 
term
‘shared facility’ means an entity that furnishes
shared facility services under a shared facility
arrangement.
‘‘(C) SHARED FACILITY PHYSICIAN.—The
term ‘shared facility physician’ means, with re-
spect to a shared facility, a physician (or a
group practice of which the physician is a mem-
ber) who has a financial relationship under a
shared facility arrangement with the facility.
‘‘(D) SHARED FACILITY ARRANGEMENT.—
The term ‘shared facility arrangement’ means,
with respect to the provision of shared facility
services in a building, a financial arrange-
ment—
‘‘(i) which is only between physicians
who are providing services (unrelated to
227
shared facility services) in the same build-
ing,
‘‘(ii) in which the overhead expenses
of the facility are shared, in accordance
with methods previously determined by the
physicians in the arrangement, among the
physicians in the arrangement, and
‘‘(iii) which, in the case of a corpora-
tion, is wholly owned and controlled by
shared facility physicians.’’.
(e) NEW EXCEPTION FOR SERVICES FURNISHED IN
COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—
Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by
section 15201(b)(3)(C) and subsection (d)(1), is amend-
ed—
(1) by redesignating paragraphs (5) through
(8) as paragraphs (6) through (9); and
(2) by inserting after paragraph (4) the follow-
ing new paragraph:
‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—
In the case of a designated health service furnished
in any area with respect to which the Secretary de-
termines that individuals residing in the area do not
have reasonable access to such a designated health
service for which subsection (a)(1) does not apply.’’.
228
(f) NEW EXCEPTION FOR SERVICES FURNISHED IN
AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42
U.S.C. 
1395nn(b)), 
as 
amended 
by 
section
15201(b)(3)(C), subsection (d)(1), and subsection (e)(1),
is amended—
(1) by redesignating paragraphs (6) through
(9) as paragraphs (7) through (10); and
(2) by inserting after paragraph (5) the follow-
ing new paragraph:
‘‘(6) SERVICES
FURNISHED
IN
AMBULATORY
SURGICAL CENTERS.—In the case of a designated
health service furnished in an ambulatory surgical
center described in section 1832(a)(2)(F)(i).’’.
(g) NEW EXCEPTION FOR SERVICES FURNISHED IN
RENAL
DIALYSIS
FACILITIES.—Section 1877(b) (42
U.S.C. 
1395nn(b)), 
as 
amended 
by 
section
15201(b)(3)(C), subsection (d)(1), subsection (e)(1), and
subsection (f), is amended—
(1) by redesignating paragraphs (7) through
(10) as paragraphs (8) through (11); and
(2) by inserting after paragraph (6) the follow-
ing new paragraph:
‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS
FACILITIES.—In the case of a designated health
229
service furnished in a renal dialysis facility under
section 1881.’’.
(h) NEW EXCEPTION FOR SERVICES FURNISHED IN
A HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by section 15201(b)(3)(C), subsection (d)(1),
subsection (e)(1), subsection (f), and subsection (g), is
amended—
(1) by redesignating paragraphs (8) through
(11) as paragraphs (9) through (12); and
(2) by inserting after paragraph (7) the follow-
ing new paragraph:
‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO-
GRAM.—In the case of a designated health service
furnished by a hospice program under section
1861(dd)(2).’’.
(i) NEW EXCEPTION FOR SERVICES FURNISHED IN
A COMPREHENSIVE OUTPATIENT REHABILITATION FA-
CILITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by section 15201(b)(3)(C), subsection (d)(1),
subsection (e)(1), subsection (f), subsection (g), and sub-
section (h), is amended—
(1) by redesignating paragraphs (9) through
(12) as paragraphs (10) through (13); and
(2) by inserting after paragraph (8) the follow-
ing new paragraph:
230
‘‘(9) SERVICES FURNISHED IN A COMPREHEN-
SIVE
OUTPATIENT
REHABILITATION
FACILITY.—In
the case of a designated health service furnished in
a comprehensive outpatient rehabilitation facility (as
defined in section 1861(cc)(2)).’’.
(i) 
DEFINITION
OF
REFERRAL.—Section
1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amend-
ed—
(1) by striking ‘‘an item or service’’ and insert-
ing ‘‘a designated health service’’, and
(2) by striking ‘‘the item or service’’ and insert-
ing ‘‘the designated health service’’.
SEC. 15205. REPEAL OF REPORTING REQUIREMENTS.
Section 1877 (42 U.S.C. 1395nn) is amended—
(1) by striking subsection (f); and
(2) by striking subsection (g)(5).
SEC. 15206. PREEMPTION OF STATE LAW.
Section 1877 (42 U.S.C. 1395nn) is amended by add-
ing at the end the following new subsection:
‘‘(i) PREEMPTION OF STATE LAW.—This section pre-
empts State law to the extent State law is inconsistent
with this section.’’.
SEC. 15207. EFFECTIVE DATE.
Except as provided in section 15203(b), the amend-
ments made by this part shall apply to referrals made on
231
or after August 14, 1995, regardless of whether or not
regulations are promulgated to carry out such amend-
ments.
PART 2—OTHER MEDICARE REGULATORY
RELIEF
SEC. 15211. REPEAL OF MEDICARE AND MEDICAID COV-
ERAGE DATA BANK.
(a) IN GENERAL.—Section 1144 (42 U.S.C. 1320b–
14) is repealed.
(b) CONFORMING AMENDMENTS.—
(1) MEDICARE.—Section 1862(b)(5) (42 U.S.C.
1395y(b)(5)) is amended—
(A) in subparagraph (B), by striking
‘‘under—’’ and all that follows through the end
and inserting ‘‘subparagraph (A) for purposes
of carrying out this subsection.’’, and
(B) in subparagraph (C)(i), by striking
‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara-
graph (B)’’.
(2) MEDICAID.—Section 1902(a)(25)(A)(i) (42
U.S.C. 1396a(a)(25)(A)(i)) is amended by striking
‘‘including the use of’’ and all that follows through
‘‘any additional measures’’.
232
(3) ERISA.—Section 101(f) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1021(f)) is repealed.
(4) DATA MATCHES.—Section 552a(a)(8)(B) of
title 5, United States Code, is amended—
(A) by adding ‘‘; or’’ at the end of clause
(v),
(B) by striking ‘‘or’’ at the end of clause
(vi), and
(C) by striking clause (vii).
SEC. 15212. CLARIFICATION OF LEVEL OF INTENT RE-
QUIRED FOR IMPOSITION OF SANCTIONS.
(a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE-
QUIRED
FOR IMPOSITION
OF CIVIL MONETARY PEN-
ALTIES.—
(1) 
IN
GENERAL.—Section 
1128A(a) 
(42
U.S.C. 1320a–7a(a)) is amended—
(A) in paragraphs (1) and (2), by inserting
‘‘knowingly’’ before ‘‘presents’’ each place it ap-
pears; and
(B) in paragraph (3), by striking ‘‘gives’’
and inserting ‘‘knowingly gives or causes to be
given’’.
233
(2) 
DEFINITION
OF
STANDARD.—Section
1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by
adding at the end the following new paragraph:
‘‘(6) The term ‘should know’ means that a per-
son, with respect to information—
‘‘(A) acts in deliberate ignorance of the
truth or falsity of the information; or
‘‘(B) acts in reckless disregard of the truth
or falsity of the information,
and no proof of specific intent to defraud is re-
quired.’’.
(b) CLARIFICATION OF EFFECT AND APPLICATION
OF SAFE HARBOR EXCEPTIONS.—For purposes of section
1128B(b)(3) of the Social Security Act, the specification
of any payment practice in regulations promulgated pur-
suant to section 14(a) of the Medicare and Medicaid Pro-
gram and Patient Protection Act of 1987 is—
(1) solely for the purpose of adding additional
exceptions to the types of conduct which are not
subject to an anti-kickback penalty under such sec-
tion and not for the purpose of limiting the scope of
such exceptions; and
(2) for the purpose of prescribing criteria for
qualifying for such an exception notwithstanding the
intent of the party involved.
234
(c) LIMITING IMPOSITION OF ANTI-KICKBACK PEN-
ALTIES TO ACTIONS WITH SIGNIFICANT PURPOSE TO IN-
DUCE REFERRALS.—Section 1128B(b)(2) (42 U.S.C.
1320a–7b(b)(2)) is amended in the matter preceding sub-
paragraph (A) by striking ‘‘to induce’’ and inserting ‘‘for
the significant purpose of inducing’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to acts or omissions occurring on
or after January 1, 1996.
SEC. 15213. ADDITIONAL EXCEPTION TO ANTI-KICKBACK
PENALTIES FOR MANAGED CARE ARRANGE-
MENTS.
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.
1320a–7b(b)(3)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D);
(2) by striking the period at the end of sub-
paragraph (E) and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) any remuneration between an organization
and an individual or entity providing services pursu-
ant to a written agreement between the organization
and the individual or entity if the organization is a
MedicarePlus organization under part C of title
235
XVIII or if the written agreement places the individ-
ual or entity at substantial financial risk for the cost
or utilization of the items or services which the indi-
vidual or entity is obligated to provide, whether
through a withhold, capitation, incentive pool, per
diem payment, or any other similar risk arrange-
ment which places the individual or entity at sub-
stantial financial risk.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to acts or omissions occurring
on or after January 1, 1996.
SEC. 15214. SOLICITATION AND PUBLICATION OF MODI-
FICATIONS TO EXISTING SAFE HARBORS AND
NEW SAFE HARBORS.
(a) IN GENERAL.—
(1) SOLICITATIONS.—Not later than January 1,
1996, and not less than annually thereafter, the Sec-
retary of Health and Human Services shall publish
a notice in the Federal Register soliciting proposals,
which will be accepted during a 60-day period, for—
(A) modifications to existing safe harbors
issued pursuant to section 14(a) of the Medi-
care and Medicaid Patient and Program Protec-
tion Act of 1987;
236
(B) additional safe harbors specifying pay-
ment practices that shall not be treated as a
criminal offense under section 1128B(b) of the
Social Security Act and shall not serve as the
basis for an exclusion under section 1128(b)(7)
of such Act; and
(C) special fraud alerts to be issued pursu-
ant to section 15101(c).
(2) PUBLICATION
OF
PROPOSED
MODIFICA-
TIONS
AND
PROPOSED
ADDITIONAL
SAFE
HAR-
BORS.—Not later than 120 days after receiving the
proposals described in subparagraphs (A) and (B) of
paragraph (1), the Secretary, after considering such
proposals in consultation with the Attorney General,
shall publish in the Federal Register proposed modi-
fications to existing safe harbors and proposed addi-
tional safe harbors, if appropriate, with a 60-day
comment period. After considering any public com-
ments received during this period, the Secretary
shall issue final rules modifying the existing safe
harbors and establishing new safe harbors, as appro-
priate.
(3) REPORT.—The Inspector General shall, in
an annual report to Congress or as part of the year-
end semiannual report required by section 5 of the
237
Inspector General Act of 1978, describe the propos-
als received under subparagraphs (A) and (B) of
paragraph (1) and explain which proposals were in-
cluded in the publication described in paragraph (2),
which proposals were not included in that publica-
tion, and the reasons for the rejection of the propos-
als that were not included.
(b) CRITERIA FOR MODIFYING AND ESTABLISHING
SAFE HARBORS.—In modifying and establishing safe har-
bors under subsection (a)(2), the Secretary may consider
the extent to which providing a safe harbor for the speci-
fied payment practice may result in any of the following:
(1) An increase or decrease in access to health
care services.
(2) An increase or decrease in the quality of
health care services.
(3) An increase or decrease in patient freedom
of choice among health care providers.
(4) An increase or decrease in competition
among health care providers.
(5) An increase or decrease in the cost to health
care programs of the Federal Government.
(6) An increase or decrease in the potential
overutilization of health care services.
238
(7) Any other factors the Secretary deems ap-
propriate in the interest of preventing fraud and
abuse in health care programs of the Federal Gov-
ernment.
SEC. 15215. ISSUANCE OF ADVISORY OPINIONS UNDER
TITLE XI.
(a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),
as amended by section 15104(a), is amended by inserting
after section 1129 the following new section:
‘‘ADVISORY OPINIONS
‘‘SEC. 1130. (a) ISSUANCE
OF ADVISORY OPIN-
IONS.—The Secretary shall issue written advisory opinions
as provided in this section.
‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—
The Secretary shall issue advisory opinions as to the fol-
lowing matters:
‘‘(1) What constitutes prohibited remuneration
within the meaning of section 1128B(b).
‘‘(2) Whether an arrangement or proposed ar-
rangement satisfies the criteria set forth in section
1128B(b)(3) for activities which do not result in
prohibited remuneration.
‘‘(3) Whether an arrangement or proposed ar-
rangement satisfies the criteria which the Secretary
has established, or shall establish by regulation for
239
activities which do not result in prohibited remu-
neration.
‘‘(4) What constitutes an inducement to reduce
or limit services to individuals entitled to benefits
under title XVIII or title XIX or title XXI within
the meaning of section 1128B(b).
‘‘(5) Whether any activity or proposed activity
constitutes grounds for the imposition of a sanction
under section 1128, 1128A, or 1128B.
‘‘(c) MATTERS NOT SUBJECT TO ADVISORY OPIN-
IONS.—Such advisory opinions shall not address the fol-
lowing matters:
‘‘(1) Whether the fair market value shall be, or
was paid or received for any goods, services or prop-
erty.
‘‘(2) Whether an individual is a bona fide em-
ployee within the requirements of section 3121(d)(2)
of the Internal Revenue Code of 1986.
‘‘(d) EFFECT OF ADVISORY OPINIONS.—
‘‘(1) BINDING AS TO SECRETARY AND PARTIES
INVOLVED.—Each advisory opinion issued by the
Secretary shall be binding as to the Secretary and
the party or parties requesting the opinion.
‘‘(2) FAILURE TO SEEK OPINION.—The failure
of a party to seek an advisory opinion may not be
240
introduced into evidence to prove that the party in-
tended to violate the provisions of sections 1128,
1128A, or 1128B.
‘‘(e) REGULATIONS.—
‘‘(1) IN GENERAL.—Not later than 180 days
after the date of the enactment of this section, the
Secretary shall issue regulations to carry out this
section. Such regulations shall provide for—
‘‘(A) the procedure to be followed by a
party applying for an advisory opinion;
‘‘(B) the procedure to be followed by the
Secretary in responding to a request for an ad-
visory opinion;
‘‘(C) the interval in which the Secretary
shall respond;
‘‘(D) the reasonable fee to be charged to
the party requesting an advisory opinion; and
‘‘(E) the manner in which advisory opin-
ions will be made available to the public.
‘‘(2) SPECIFIC CONTENTS.—Under the regula-
tions promulgated pursuant to paragraph (1)—
‘‘(A) the Secretary shall be required to re-
spond to a party requesting an advisory opinion
by not later than 30 days after the request is
received; and
241
‘‘(B) the fee charged to the party request-
ing an advisory opinion shall be equal to the
costs incurred by the Secretary in responding to
the request.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to requests for advisory opinions
made on or after January 1, 1996.
SEC. 15216. PRIOR NOTICE OF CHANGES IN BILLING AND
CLAIMS PROCESSING REQUIREMENTS FOR
PHYSICIANS’ SERVICES.
Except as may be specifically provided by Congress,
the Secretary of Health and Human Services may not im-
plement any change in the requirements imposed on the
billing and processing of claims for payment for physi-
cians’ services under part B of the medicare program un-
less the Secretary notifies the individuals furnishing such
services of the change not later than 120 days before the
effective date of the change.
PART 3—PROMOTING PHYSICIAN SELF-POLICING
SEC. 15221. EXEMPTION FROM ANTITRUST LAWS FOR CER-
TAIN ACTIVITIES OF MEDICAL SELF-REGU-
LATORY ENTITIES.
(a) EXEMPTION DESCRIBED.—An activity relating to
the provision of health care services shall be exempt from
the antitrust laws, and any State law similar to the anti-
242
trust laws, if the activity is within the safe harbor de-
scribed in subsection (b).
(b) SAFE HARBOR
FOR ACTIVITIES
OF MEDICAL
SELF-REGULATORY ENTITIES.—
(1) IN GENERAL.—The safe harbor referred to
in subsection (a) is, subject to paragraph (2), any
activity of a medical self-regulatory entity relating to
standard setting or standard enforcement activities
that are designed to promote the quality of health
care services provided to patients.
(2) EXCEPTION.—No activity of a medical self-
regulatory entity may be deemed to fall under the
safe harbor established under paragraph (1) if the
activity—
(A) is conducted for purposes of financial
gain, or
(B) interferes with the provision of health
care services by any health care provider who is
not a member of the specific profession which
is subject to the authority of the medical self-
regulatory entity.
(c) DEFINITIONS.—For purposes of this section:
(1) ANTITRUST
LAWS.—The term ‘‘antitrust
laws’’ has the meaning given it in subsection (a) of
the first section of the Clayton Act (15 U.S.C.
243
12(a)), except that such term includes section 5 of
the Federal Trade Commission Act (15 U.S.C. 45)
to the extent such section applies to unfair methods
of competition.
(2) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ means—
(A) a hospital or medical expense incurred
policy or certificate,
(B) a hospital or medical service plan con-
tract,
(C) a health maintenance subscriber con-
tract,
(D) a multiple employer welfare arrange-
ment or employee benefit plan (as defined
under the Employee Retirement Income Secu-
rity Act of 1974), or
(E) a MedicarePlus product (offered under
part C of title XVIII of the Social Security
Act),
that provides benefits with respect to health care
services.
(3) HEALTH CARE SERVICE.—The term ‘‘health
care service’’ means any service for which payment
may be made under a health benefit plan including
244
services related to the delivery or administration of
such service.
(4) MEDICAL SELF-REGULATORY ENTITY.—The
term ‘‘medical self-regulatory entity’’ means a medi-
cal society or association, a specialty board, a recog-
nized accrediting agency, or a hospital medical staff,
and includes the members, officers, employees, con-
sultants, and volunteers or committees of such an
entity.
(5) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any individual or en-
tity that is engaged in the delivery of health care
services in a State and that is required by State law
or regulation to be licensed or certified by the State
to engage in the delivery of such services in the
State.
(6) STANDARD
SETTING
OR
STANDARD
EN-
FORCEMENT ACTIVITIES.—The term ‘‘standard set-
ting or standard enforcement activities’’ means—
(A) accreditation of health care practition-
ers, health care providers, medical education in-
stitutions, or medical education programs,
(B) technology assessment and risk man-
agement activities,
245
(C) the development and implementation of
practice guidelines or practice parameters, or
(D) official peer review proceedings under-
taken by a hospital medical staff (or committee
thereof) or a medical society or association for
purposes of evaluating the professional conduct
or quality of health care provided by a medical
professional.
Subtitle D—Medical Liability
Reform
PART 1—GENERAL PROVISIONS
SEC. 15301. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This subtitle shall apply with
respect to any health care liability action brought in any
State or Federal court, except that this subtitle shall not
apply to—
(1) an action for damages arising from a vac-
cine-related injury or death to the extent that title
XXI of the Public Health Service Act applies to the
action, or
(2) an action under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1001 et
seq.).
246
(b) PREEMPTION.—This subtitle shall preempt any
State law to the extent such law is inconsistent with the
limitations contained in this subtitle. This subtitle shall
not preempt any State law that provides for defenses or
places limitations on a person’s liability in addition to
those contained in this subtitle or otherwise imposes great-
er restrictions than those provided in this subtitle.
(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (b) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
247
(d) AMOUNT
IN CONTROVERSY.—In an action to
which this subtitle applies and which is brought under sec-
tion 1332 of title 28, United States Code, the amount of
noneconomic damages or punitive damages, and attorneys’
fees or costs, shall not be included in determining whether
the matter in controversy exceeds the sum or value of
$50,000.
(e) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this subtitle shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of section 1331 or 1337 of
title 28, United States Code.
SEC. 15302. DEFINITIONS.
As used in this subtitle:
(1) ACTUAL DAMAGES.—The term ‘‘actual dam-
ages’’ means damages awarded to pay for economic
loss.
(2) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means a system established
under Federal or State law that provides for the res-
olution of health care liability claims in a manner
other than through health care liability actions.
248
(3) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and any person on whose behalf such an action is
brought. If such action is brought through or on be-
half of an estate, the term includes the claimant’s
decedent. If such action is brought through or on be-
half of a minor or incompetent, the term includes
the claimant’s legal guardian.
(4) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established.
Such measure or degree of proof is more than that
required under preponderance of the evidence but
less than that required for proof beyond a reason-
able doubt.
(5) COLLATERAL
SOURCE
PAYMENTS.—The
term ‘‘collateral source payments’’ means any
amount paid or reasonably likely to be paid in the
future to or on behalf of a claimant, or any service,
product, or other benefit provided or reasonably like-
ly to be provided in the future to or on behalf of a
claimant, as a result of an injury or wrongful death,
pursuant to—
249
(A) any State or Federal health, sickness,
income-disability, accident or workers’ com-
pensation Act;
(B) any health, sickness, income-disability,
or accident insurance that provides health bene-
fits or income-disability coverage;
(C) any contract or agreement of any
group, organization, partnership, or corporation
to provide, pay for, or reimburse the cost of
medical, hospital, dental, or income disability
benefits; and
(D) any other publicly or privately funded
program.
(6) DRUG.—The term ‘‘drug’’ has the meaning
given such term in section 201(g)(1) of the Federal
Food, 
Drug, 
and 
Cosmetic 
Act 
(21 
U.S.C.
321(g)(1)).
(7) ECONOMIC
LOSS.—The term ‘‘economic
loss’’ means any pecuniary loss resulting from injury
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs,
and loss of business or employment opportunities),
to the extent recovery for such loss is allowed under
applicable State law.
250
(8) HARM.—The term ‘‘harm’’ means any le-
gally cognizable wrong or injury for which punitive
damages may be imposed.
(9) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ means—
(A) a hospital or medical expense incurred
policy or certificate,
(B) a hospital or medical service plan con-
tract,
(C) a health maintenance subscriber con-
tract, or
(D) a MedicarePlus product (offered under
part C of title XVIII of the Social Security
Act),
that provides benefits with respect to health care
services.
(10) HEALTH
CARE
LIABILITY
ACTION.—The
term ‘‘health care liability action’’ means a civil ac-
tion brought in a State or Federal court against a
health care provider, an entity which is obligated to
provide or pay for health benefits under any health
benefit plan (including any person or entity acting
under a contract or arrangement to provide or ad-
minister any health benefit), or the manufacturer,
distributor, supplier, marketer, promoter, or seller of
251
a medical product, in which the claimant alleges a
claim (including third party claims, cross claims,
counter claims, or distribution claims) based upon
the provision of (or the failure to provide or pay for)
health care services or the use of a medical product,
regardless of the theory of liability on which the
claim is based or the number of plaintiffs, defend-
ants, or causes of action.
(11) HEALTH
CARE
LIABILITY
CLAIM.—The
term ‘‘health care liability claim’’ means a claim in
which the claimant alleges that injury was caused by
the provision of (or the failure to provide) health
care services.
(12) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any person that is en-
gaged in the delivery of health care services in a
State and that is required by the laws or regulations
of the State to be licensed or certified by the State
to engage in the delivery of such services in the
State.
(13) 
HEALTH
CARE
SERVICE.—The 
term
‘‘health care service’’ means any service for which
payment may be made under a health benefit plan
including services related to the delivery or adminis-
tration of such service.
252
(14) MEDICAL DEVICE.—The term ‘‘medical de-
vice’’ has the meaning given such term in section
201(h) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(h)).
(15) 
NONECONOMIC
DAMAGES.—The 
term
‘‘noneconomic damages’’ means damages paid to an
individual for pain and suffering, inconvenience,
emotional distress, mental anguish, loss of consor-
tium, injury to reputation, humiliation, and other
nonpecuniary losses.
(16) PERSON.—The term ‘‘person’’ means any
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any
other entity, including any governmental entity.
(17) PRODUCT SELLER.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘‘product seller’’ means a
person who, in the course of a business con-
ducted for that purpose—
(i) sells, distributes, rents, leases, pre-
pares, blends, packages, labels, or is other-
wise involved in placing, a product in the
stream of commerce, or
(ii) installs, repairs, or maintains the
harm-causing aspect of a product.
253
(B) EXCLUSION.—Such term does not in-
clude—
(i) a seller or lessor of real property;
(ii) a provider of professional services
in any case in which the sale or use of a
product is incidental to the transaction and
the essence of the transaction is the fur-
nishing of judgment, skill, or services; or
(iii) any person who—
(I) acts in only a financial capac-
ity with respect to the sale of a prod-
uct; or
(II) leases a product under a
lease arrangement in which the selec-
tion, possession, maintenance, and op-
eration of the product are controlled
by a person other than the lessor.
(18) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means damages awarded against any per-
son not to compensate for actual injury suffered, but
to punish or deter such person or others from en-
gaging in similar behavior in the future.
(19) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, American Samoa,
254
the Northern Mariana Islands, and any other terri-
tory or possession of the United States.
SEC. 15303. EFFECTIVE DATE.
This subtitle will apply to any health care liability ac-
tion brought in a Federal or State court and to any health
care liability claim subject to an alternative dispute resolu-
tion system, that is initiated on or after the date of enact-
ment of this subtitle, except that any health care liability
claim or action arising from an injury occurring prior to
the date of enactment of this subtitle shall be governed
by the applicable statute of limitations provisions in effect
at the time the injury occurred.
PART 2—UNIFORM STANDARDS FOR HEALTH
CARE LIABILITY ACTIONS
SEC. 15311. STATUTE OF LIMITATIONS.
A health care liability action may not be brought
after the expiration of the 2-year period that begins on
the date on which the alleged injury that is the subject
of the action was discovered or should reasonably have
been discovered, but in no case after the expiration of the
5-year period that begins on the date the alleged injury
occurred.
SEC. 15312. CALCULATION AND PAYMENT OF DAMAGES.
(a) TREATMENT OF NONECONOMIC DAMAGES.—
255
(1) LIMITATION ON NONECONOMIC DAMAGES.—
The total amount of noneconomic damages that may
be awarded to a claimant for losses resulting from
the injury which is the subject of a health care liabil-
ity action may not exceed $250,000, regardless of
the number of parties against whom the action is
brought or the number of actions brought with re-
spect to the injury.
(2) JOINT AND SEVERAL LIABILITY.—In any
health care liability action brought in State or Fed-
eral court, a defendant shall be liable only for the
amount of noneconomic damages attributable to
such defendant in direct proportion to such defend-
ant’s share of fault or responsibility for the claim-
ant’s actual damages, as determined by the trier of
fact. In all such cases, the liability of a defendant
for noneconomic damages shall be several and not
joint.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) GENERAL RULE.—Punitive damages may,
to the extent permitted by applicable State law, be
awarded in any health care liability action for harm
in any Federal or State court against a defendant if
the claimant establishes by clear and convincing evi-
256
dence that the harm suffered was the result of con-
duct—
(A) specifically intended to cause harm, or
(B) conduct manifesting a conscious, fla-
grant indifference to the rights or safety of oth-
ers.
(2) PROPORTIONAL AWARDS.—The amount of
punitive damages that may be awarded in any health
care liability action subject to this subtitle shall not
exceed 3 times the amount of damages awarded to
the claimant for economic loss, or $250,000, which-
ever is greater. This paragraph shall be applied by
the court and shall not be disclosed to the jury.
(3) 
APPLICABILITY.—This 
subsection 
shall
apply to any health care liability action brought in
any Federal or State court on any theory where pu-
nitive damages are sought. This subsection does not
create a cause of action for punitive damages. This
subsection does not preempt or supersede any State
or Federal law to the extent that such law would
further limit the award of punitive damages.
(4) BIFURCATION.—At the request of any
party, the trier of fact shall consider in a separate
proceeding whether punitive damages are to be
awarded and the amount of such award. If a sepa-
257
rate proceeding is requested, evidence relevant only
to the claim of punitive damages, as determined by
applicable State law, shall be inadmissible in any
proceeding to determine whether actual damages are
to be awarded.
(5) DRUGS AND DEVICES.—
(A) IN
GENERAL.—(i) Punitive damages
shall not be awarded against a manufacturer or
product seller of a drug or medical device which
caused the claimant’s harm where—
(I) such drug or device was subject to
premarket approval by the Food and Drug
Administration with respect to the safety
of the formulation or performance of the
aspect of such drug or device which caused
the claimant’s harm, or the adequacy of
the packaging or labeling of such drug or
device which caused the harm, and such
drug, device, packaging, or labeling was
approved by the Food and Drug Adminis-
tration; or
(II) the drug is generally recognized
as safe and effective pursuant to conditions
established by the Food and Drug Admin-
258
istration and applicable regulations, includ-
ing packaging and labeling regulations.
(ii) Clause (i) shall not apply in any case
in which the defendant, before or after pre-
market approval of a drug or device—
(I) intentionally and wrongfully with-
held from or misrepresented to the Food
and Drug Administration information con-
cerning such drug or device required to be
submitted under the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 301 et seq.)
or section 351 of the Public Health Service
Act (42 U.S.C. 262) that is material and
relevant to the harm suffered by the claim-
ant, or
(II) made an illegal payment to an of-
ficial or employee of the Food and Drug
Administration for the purpose of securing
or maintaining approval of such drug or
device.
(B) PACKAGING.—In a health care liability
action for harm which is alleged to relate to the
adequacy of the packaging or labeling of a drug
which is required to have tamper-resistant
packaging under regulations of the Secretary of
259
Health and Human Services (including labeling
regulations related to such packaging), the
manufacturer or product seller of the drug shall
not be held liable for punitive damages unless
such packaging or labeling is found by the court
by clear and convincing evidence to be substan-
tially out of compliance with such regulations.
(c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—
(1) GENERAL RULE.—In any health care liabil-
ity action in which the damages awarded for future
economic and noneconomic loss exceeds $50,000, a
person shall not be required to pay such damages in
a single, lump-sum payment, but shall be permitted
to make such payments periodically based on when
the damages are found likely to occur, as such pay-
ments are determined by the court.
(2) FINALITY OF JUDGMENT.—The judgment
of the court awarding periodic payments under this
subsection may not, in the absence of fraud, be re-
opened at any time to contest, amend, or modify the
schedule or amount of the payments.
(3) 
LUMP-SUM
SETTLEMENTS.—This 
sub-
section shall not be construed to preclude a settle-
ment providing for a single, lump-sum payment.
260
(d) TREATMENT
OF COLLATERAL SOURCE PAY-
MENTS.—
(1) INTRODUCTION
INTO
EVIDENCE.—In any
health care liability action, any defendant may intro-
duce evidence of collateral source payments. If any
defendant elects to introduce such evidence, the
claimant may introduce evidence of any amount paid
or contributed or reasonably likely to be paid or con-
tributed in the future by or on behalf of the claim-
ant to secure the right to such collateral source pay-
ments.
(2) NO SUBROGATION.—No provider of collat-
eral source payments shall recover any amount
against the claimant or receive any lien or credit
against the claimant’s recovery or be equitably or le-
gally subrogated the right of the claimant in a
health care liability action.
(3) APPLICATION TO SETTLEMENTS.—This sub-
section shall apply to an action that is settled as well
as an action that is resolved by a fact finder.
SEC. 15313. ALTERNATIVE DISPUTE RESOLUTION.
Any ADR used to resolve a health care liability action
or claim shall contain provisions relating to statute of limi-
tations, non-economic damages, joint and several liability,
punitive damages, collateral source rule, and periodic pay-
261
ments which are identical to the provisions relating to
such matters in this subtitle.
Subtitle E—Teaching Hospitals and
Graduate Medical Education
PART 1—TEACHING HOSPITAL AND GRADUATE
MEDICAL EDUCATION TRUST FUND
SEC. 15401. ESTABLISHMENT OF FUND; PAYMENTS TO
TEACHING HOSPITALS.
The Social Security Act (42 U.S.C. 300 et seq.) is
amended by adding after title XXI the following title:
‘‘TITLE XXII—TEACHING HOSPITAL AND
GRADUATE MEDICAL EDUCATION TRUST FUND
‘‘PART A—ESTABLISHMENT OF FUND
‘‘SEC. 2201. ESTABLISHMENT OF FUND.
‘‘(a) IN GENERAL.—There is established in the
Treasury of the United States a fund to be known as the
Teaching Hospital and Graduate Medical Education Trust
Fund (in this title referred to as the ‘Fund’), consisting
of amounts appropriated to the Fund in subsection (d)
and subsection (e)(3), amounts transferred to the Fund
under section 1886(j), and such gifts and bequests as may
be deposited in the Fund pursuant to subsection (f).
Amounts in the Fund are available until expended.
262
‘‘(b) EXPENDITURES FROM FUND.—Amounts in the
Fund are available to the Secretary for making payments
under section 2211.
‘‘(c) ACCOUNTS
IN FUND.—There are established
within the Fund the following accounts:
‘‘(1) The Indirect-Costs Medical Education Ac-
count.
‘‘(2) The Medicare Direct-Costs Medical Edu-
cation Account.
‘‘(3) The General Direct-Costs Medical Edu-
cation Account.
‘‘(d) GENERAL TRANSFERS TO FUND.—
‘‘(1) IN GENERAL.—For fiscal year 1997 and
each subsequent fiscal year, there are appropriated
to the Fund (effective on the applicable date under
paragraph (2)), out of any money in the Treasury
not otherwise appropriated, the following amounts
(as applicable to the fiscal year involved):
‘‘(A) 
For 
fiscal 
year 
1997,
$1,300,000,000.
‘‘(B) 
For 
fiscal 
year 
1998,
$1,500,000,000.
‘‘(C) For fiscal year 1999, $2,300,000,000.
‘‘(D) 
For 
fiscal 
year 
2000,
$3,100,000,000.
263
‘‘(E) 
For 
fiscal 
year 
2001,
$3,600,000,000.
‘‘(F) 
For 
fiscal 
year 
2002,
$4,000,000,000.
‘‘(G) For fiscal year 2003 and each subse-
quent fiscal year, the greater of the amount ap-
propriated for the preceding fiscal year or an
amount equal to the product of—
‘‘(i) the amount appropriated for the
preceding fiscal year; and
‘‘(ii) 1 plus the percentage increase in
the nominal gross domestic product for the
one-year period ending upon July 1 of such
preceding fiscal year.
‘‘(2) EFFECTIVE
DATE
FOR
ANNUAL
APPRO-
PRIATION.—For purposes of paragraph (1) (and for
purposes of section 2221(a)(1), and subsections
(b)(1)(A) and (c)(1)(A) of section 2231)), the appli-
cable date for a fiscal year is the first day of the fis-
cal year, exclusive of Saturdays, Sundays, and Fed-
eral holidays.
‘‘(3) 
ALLOCATION
AMONG
CERTAIN
AC-
COUNTS.—Of the amount appropriated in paragraph
(1) for a fiscal year—
264
‘‘(A) there shall be allocated to the Indi-
rect-Costs Medical Education Account the per-
centage determined under paragraph (4)(B);
and
‘‘(B) there shall be allocated to the Gen-
eral Direct-Costs Medical Education Account
the percentage determined under paragraph
(4)(C).
‘‘(4) DETERMINATION OF PERCENTAGES.—The
Secretary of Health and Human Services, acting
through the Administrator of the Health Care Fi-
nancing Administration, shall determine the follow-
ing:
‘‘(A) The total amount of payments that
were made under subsections (d)(5)(B) and (h)
of section 1886 for fiscal year 1994.
‘‘(B) The percentage of such total that was
constituted by payments under subsection
(d)(5)(B) of such section.
‘‘(C) The percentage of such total that was
constituted by payments under subsection (h) of
such section.
‘‘(e) INVESTMENT.—
‘‘(1) IN
GENERAL.—The Secretary of the
Treasury shall invest such amounts of the Fund as
265
such Secretary determines are not required to meet
current withdrawals from the Fund. Such invest-
ments may be made only in interest-bearing obliga-
tions of the United States. For such purpose, such
obligations may be acquired on original issue at the
issue price, or by purchase of outstanding obliga-
tions at the market price.
‘‘(2) SALE
OF
OBLIGATIONS.—Any obligation
acquired by the Fund may be sold by the Secretary
of the Treasury at the market price.
‘‘(3) AVAILABILITY OF INCOME.—Any interest
derived from obligations acquired by the Fund, and
proceeds from any sale or redemption of such obliga-
tions, are hereby appropriated to the Fund.
‘‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS.—The
Fund may accept on behalf of the United States money
gifts and bequests made unconditionally to the Fund for
the benefit of the Fund or any activity financed through
the Fund.
‘‘PART B—PAYMENTS TO TEACHING HOSPITALS
‘‘Subpart 1—Requirement of Payments
‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOS-
PITALS.
‘‘(a) IN GENERAL.—Subject to subsection (d), in the
case of each teaching hospital that in accordance with sub-
266
section (b) submits to the Secretary a payment document
for fiscal year 1997 or any subsequent fiscal year, the Sec-
retary shall make payments for the year to the teaching
hospital for the costs of operating approved medical resi-
dency training programs. Such payments shall be made
from the Fund, and the total of the payments to the hos-
pital for the fiscal year shall equal the sum of the follow-
ing:
‘‘(1) An amount determined under section 2221
(relating to the indirect costs of graduate medical
education).
‘‘(2) An amount determined under section 2231
(relating to the direct costs of graduate medical edu-
cation).
‘‘(b) PAYMENT DOCUMENT.—For purposes of sub-
section (a), a payment document is a document containing
such information as may be necessary for the Secretary
to make payments under such subsection to a teaching
hospital for a fiscal year. The document is submitted in
accordance with this subsection if the document is submit-
ted not later than the date specified by the Secretary, and
the document is in such form and is made in such manner
as the Secretary may require. The Secretary may require
that information under this subsection be submitted to the
Secretary in periodic reports.
267
‘‘(c) ADMINISTRATOR
OF PROGRAMS.—This part,
and the subsequent parts of this title, shall be carried out
by the Secretary acting through the Administrator of the
Health Care Financing Administration.
‘‘(d) SPECIAL RULES.—
‘‘(1) AUTHORITY
REGARDING
PAYMENTS
TO
CONSORTIA
OF
PROVIDERS.—In the case of pay-
ments under subsection (a) that are determined
under section 2231:
‘‘(A) The requirement under such sub-
section to make the payments to teaching hos-
pitals is subject to the authority of the Sec-
retary under section 2233(a) to make payments
to qualifying consortia.
‘‘(B) If the Secretary authorizes such a
consortium for purposes of section 2233(a),
subsections (a) and (b) of this section apply to
the consortium to the same extent and in the
same manner as the subsections apply to teach-
ing hospitals.
‘‘(2) CERTAIN HOSPITALS.—Paragraph (1) of
subsection (a) is subject to sections 2222 and 2223
of subpart 2. Paragraph (2) of subsection (a) is sub-
ject to sections 2232 through 2234 of subpart 3.
268
‘‘(e) APPROVED MEDICAL RESIDENCY TRAINING
PROGRAM.—For purposes of this title, the term ‘approved
medical residency training program’ has the meaning
given such term in section 1886(h)(5)(A).
‘‘Subpart 2—Amount Relating to Indirect Costs of
Graduate Medical Education
‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO IN-
DIRECT COSTS.
‘‘(a) 
IN
GENERAL.—For 
purposes 
of 
section
2211(a)(1), the amount determined under this section for
a teaching hospital for a fiscal year is the product of—
‘‘(1) the amount in the Indirect-Costs Medical
Education Account on the applicable date under sec-
tion 2201(d) (once the appropriation under such sec-
tion is made); and
‘‘(2) the percentage determined for the hospital
under subsection (b).
‘‘(b) HOSPITAL-SPECIFIC PERCENTAGE.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(2), the percentage determined under this sub-
section for a teaching hospital is the mean average
of the respective percentages determined under para-
graph (3) for each fiscal year of the applicable pe-
riod (as defined in paragraph (2)), adjusted by the
Secretary (upward or downward, as the case may
269
be) on a pro rata basis to the extent necessary to
ensure that the sum of the percentages determined
under this paragraph for all teaching hospitals is
equal to 100 percent. The preceding sentence is sub-
ject to sections 2222 and 2223.
‘‘(2) APPLICABLE
PERIOD
REGARDING
REL-
EVANT DATA; FISCAL YEARS 1992 THROUGH 1994.—
For purposes of this part, the term ‘applicable pe-
riod’ means the period beginning on the first day of
fiscal year 1992 and continuing through the end of
fiscal year 1994.
‘‘(3) RESPECTIVE DETERMINATIONS FOR FIS-
CAL YEARS OF APPLICABLE PERIOD.—For purposes
of paragraph (1), the percentage determined under
this paragraph for a teaching hospital for a fiscal
year of the applicable period is the percentage con-
stituted by the ratio of—
‘‘(A) the total amount of payments re-
ceived 
by 
the 
hospital 
under 
section
1886(d)(5)(B) for discharges occurring during
the fiscal year involved; to
‘‘(B) the sum of the respective amounts
determined under subparagraph (A) for the fis-
cal year for all teaching hospitals.
270
‘‘(c) AVAILABILITY OF DATA.—If a teaching hospital
received the payments specified in subsection (b)(3)(A)
during the applicable period but a complete set of the rel-
evant data is not available to the Secretary for purposes
of determining an amount under such subsection for the
fiscal year involved, the Secretary shall for purposes of
such subsection make an estimate on the basis of such
data as are available to the Secretary for the applicable
period.
‘‘SEC. 2222. INDIRECT COSTS; SPECIAL RULES REGARDING
DETERMINATION 
OF 
HOSPITAL-SPECIFIC
PERCENTAGE.
‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS
1995 AND 1996.—
‘‘(1) IN GENERAL.—In the case of a teaching
hospital 
whose 
first 
payments 
under 
section
1886(d)(5)(B) were for discharges occurring in fis-
cal year 1995 or in fiscal year 1996 (referred to in
this subsection individually as a ‘first payment
year’), the percentage determined under paragraph
(2) for the hospital is deemed to be the percentage
applicable under section 2221(b) to the hospital, ex-
cept that the percentage under paragraph (2) shall
be adjusted in accordance with section 2221(b)(1) to
the extent determined by the Secretary to be nec-
271
essary with respect to a sum that equals 100 per-
cent.
‘‘(2) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage deter-
mined under this paragraph for a teaching hospital
is the percentage constituted by the ratio of the
amount determined under subparagraph (A) to the
amount determined under subparagraph (B), as fol-
lows:
‘‘(A)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the total
amount of payments received by the hospital
under section 1886(d)(5)(B) for discharges oc-
curring during fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996, the amount determined
under this subparagraph is an amount equal to
an estimate by the Secretary of the total
amount of payments that would have been paid
to the hospital under section 1886(d)(5)(B) for
discharges occurring during fiscal year 1995 if
such section, as in effect for fiscal year 1996,
had applied to the hospital for discharges occur-
ring during fiscal year 1995.
272
‘‘(B)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the aggregate
total of the payments received by teaching hos-
pitals under section 1886(d)(5)(B) for dis-
charges occurring during fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996—
‘‘(I) the Secretary shall make an esti-
mate in accordance with subparagraph
(A)(ii) for all teaching hospitals; and
‘‘(II) the amount determined under
this subparagraph is the sum of the esti-
mates made by the Secretary under
subclause (I).
‘‘(b) NEW TEACHING HOSPITALS.—
‘‘(1) IN GENERAL.—Subject to paragraph (4),
in the case of a teaching hospital that did not re-
ceive payments under section 1886(d)(5)(B) for any
of the fiscal years 1992 through 1996, the percent-
age determined under paragraph (3) for the hospital
is deemed to be the percentage applicable under sec-
tion 2221(b) to the hospital, except that the percent-
age under paragraph (3) shall be adjusted in accord-
ance with section 2221(b)(1) to the extent deter-
273
mined by the Secretary to be necessary with respect
to a sum that equals 100 percent.
‘‘(2) DESIGNATED
FISCAL
YEAR
REGARDING
DATA.—The determination under paragraph (3) of a
percentage for a teaching hospital described in para-
graph (1) shall be made for the most recent fiscal
year for which the Secretary has sufficient data to
make the determination (referred to in this sub-
section as the ‘designated fiscal year’).
‘‘(3) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage deter-
mined under this paragraph for the teaching hos-
pital involved is the percentage constituted by the
ratio of the amount determined under subparagraph
(A) to the amount determined under subparagraph
(B), as follows:
‘‘(A) The amount determined under this
subparagraph is an amount equal to an esti-
mate by the Secretary of the total amount of
payments that would have been paid to the hos-
pital under section 1886(d)(5)(B) for the des-
ignated fiscal year if such section, as in effect
for the first fiscal year for which payments pur-
suant to this subsection are to be made to the
274
hospital, had applied to the hospital for the des-
ignated fiscal year.
‘‘(B) The Secretary shall make an estimate
in accordance with subparagraph (A) for all
teaching hospitals. The amount determined
under this subparagraph is the sum of the esti-
mates made by the Secretary under the preced-
ing sentence.
‘‘(4) LIMITATION.—This subsection does not
apply to a teaching hospital described in paragraph
(1) if the hospital is in a State for which a dem-
onstration project under section 1814(b)(3) is in ef-
fect.
‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case
of two or more teaching hospitals that have each received
payments pursuant to section 2221 for one or more fiscal
years and that undergo a consolidation or merger, the per-
centage applicable to the resulting teaching hospital for
purposes of section 2221(b) is the sum of the respective
percentages that would have applied pursuant to such sec-
tion if the hospitals had not undergone the consolidation
or merger.
275
‘‘SEC. 2223. INDIRECT COSTS; ALTERNATIVE PAYMENTS RE-
GARDING TEACHING HOSPITALS IN CERTAIN
STATES.
‘‘(a) IN GENERAL.—In the case of a teaching hospital
in a State for which a demonstration project under section
1814(b)(3) is in effect, this section applies in lieu of sec-
tion 2221. For purposes of section 2211(a)(1), the amount
determined for such a teaching hospital for a fiscal year
is the product of—
‘‘(1) the amount in the Indirect-Costs Medical
Education Account for the fiscal year pursuant to
the allocation under section 2201(d)(3)(A) for the
year; and
‘‘(2) the percentage determined under sub-
section (b) for the hospital.
‘‘(b) DETERMINATION OF PERCENTAGE.—For pur-
poses of subsection (a)(2):
‘‘(1) The Secretary shall make an estimate of
the total amount of payments that would have been
received under section 1886(d)(5)(B) by the hospital
involved with respect to each of the fiscal years of
the applicable period if such section (as in effect for
such fiscal years) had applied to the hospital for
such years.
‘‘(2) The percentage determined under this sub-
section for the hospital for a fiscal year is a mean
276
average percentage determined for the hospital in
accordance 
with 
the 
methodology 
of 
section
2221(b)(1), except that the estimate made by the
Secretary under paragraph (1) of this subsection for
a fiscal year of the applicable period is deemed to be
the amount that applies for purposes of section
2221(b)(3)(A) for such year.
‘‘(c) RULE REGARDING PAYMENTS FROM CERTAIN
AMOUNTS.—In the case of a teaching hospital described
in subsection (a), this section does not authorize any pay-
ment to the hospital from amounts transferred to the
Fund under section 1886(j).
‘‘(d) ADJUSTMENT
REGARDING
PAYMENTS
TO
OTHER HOSPITALS.—In the case of a fiscal year for which
payments pursuant to subsection (a) are made to one or
more teaching hospitals, the following applies:
‘‘(1) The Secretary shall determine a percent-
age equal to the sum of the respective percentages
determined for the hospitals under subsection (b).
‘‘(2) The Secretary shall determine an amount
equal to the product of—
‘‘(A) the percentage determined under
paragraph (1); and
‘‘(B) the amount in the Indirect-Costs
Medical Education Account for the fiscal year
277
pursuant 
to 
the 
transfer 
under 
section
1886(j)(1).
‘‘(3) The Secretary shall, for each hospital
(other than hospitals described in subsection (a)),
make payments to the hospital in amounts whose
sum for the fiscal year is equal to the product of—
‘‘(A) the amount determined under para-
graph (2); and
‘‘(B) the percentage that applies to the
hospital for purposes of section 2221(b), except
that such percentage shall be adjusted in ac-
cordance with the methodology of section
2221(b)(1) to the extent determined by the Sec-
retary to be necessary with respect to a sum
that equals 100 percent.
‘‘Subpart 3—Amount Relating to Direct Costs of
Graduate Medical Education
‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO DI-
RECT COSTS.
‘‘(a) 
IN
GENERAL.—For 
purposes 
of 
section
2211(a)(2), the amount determined under this section for
a teaching hospital for a fiscal year is the sum of—
‘‘(1) the amount determined under subsection
(b) (relating to the General Direct-Costs Medical
Education Account); and
278
‘‘(2) the amount determined under subsection
(c) (relating to the Medicare Direct-Costs Medical
Education Account).
‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(1), the amount determined under this subsection
for a teaching hospital for a fiscal year is the prod-
uct of—
‘‘(A) the amount in the General Direct-
Costs Medical Education Account on the appli-
cable date under section 2201(d) (once the ap-
propriation under such section is made); and
‘‘(B) the percentage determined for the
hospital under paragraph (2).
‘‘(2) HOSPITAL-SPECIFIC PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(B), the percentage determined under
this paragraph for a teaching hospital is the
mean average of the respective percentages de-
termined under subparagraph (B) for each fis-
cal year of the applicable period (as defined in
section 2221(b)(2)), adjusted by the Secretary
(upward or downward, as the case may be) on
a pro rata basis to the extent necessary to en-
sure that the sum of the percentages deter-
279
mined under this subparagraph for all teaching
hospitals is equal to 100 percent. The preceding
sentence is subject to sections 2232 through
2234.
‘‘(B) RESPECTIVE
DETERMINATIONS
FOR
FISCAL
YEARS
OF
APPLICABLE
PERIOD.—For
purposes of subparagraph (A), the percentage
determined under this subparagraph for a
teaching hospital for a fiscal year of the appli-
cable period is the percentage constituted by
the ratio of—
‘‘(i) the total amount of payments re-
ceived by the hospital under section
1886(h) for cost reporting periods begin-
ning during the fiscal year involved; to
‘‘(ii) the sum of the respective
amounts determined under clause (i) for
the fiscal year for all teaching hospitals.
‘‘(3) AVAILABILITY
OF
DATA.—If a teaching
hospital received the payments specified in para-
graph (2)(B)(i) during the applicable period but a
complete set of the relevant data is not available to
the Secretary for purposes of determining an
amount under such paragraph for the fiscal year in-
volved, the Secretary shall for purposes of such
280
paragraph make an estimate on the basis of such
data as are available to the Secretary for the appli-
cable period.
‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a)(2), the amount determined under this subsection
for a teaching hospital for a fiscal year is the prod-
uct of—
‘‘(A) the amount in the Medicare Direct-
Costs Medical Education Account on the appli-
cable date under section 2201(d) (once the ap-
propriation under such section is made); and
‘‘(B) the percentage determined for the
hospital under paragraph (2) for the fiscal year.
‘‘(2) HOSPITAL-SPECIFIC
PERCENTAGE.—For
purposes of paragraph (1)(B), the percentage deter-
mined under this subsection for a teaching hospital
for a fiscal year is the percentage constituted by the
ratio of—
‘‘(A) the estimate made by the Secretary
for the hospital for the fiscal year under section
1886(j)(2)(B); to
‘‘(B) the sum of the respective estimates
referred to in subparagraph (A) for all teaching
hospitals.
281
‘‘SEC. 2232. DIRECT COSTS; SPECIAL RULES REGARDING
DETERMINATION 
OF 
HOSPITAL-SPECIFIC
PERCENTAGE.
‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS
1995 AND 1996.—
‘‘(1) IN GENERAL.—In the case of a teaching
hospital whose first payments under section 1886(h)
were for the cost reporting period beginning in fiscal
year 1995 or in fiscal year 1996 (referred to in this
subsection individually as a ‘first payment year’),
the percentage determined under paragraph (2) for
the hospital is deemed to be the percentage applica-
ble under section 2231(b)(2) to the hospital, except
that the percentage under paragraph (2) shall be ad-
justed in accordance with section 2231(b)(2)(A) to
the extent determined by the Secretary to be nec-
essary with respect to a sum that equals 100 per-
cent.
‘‘(2) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage deter-
mined under this paragraph for a teaching hospital
is the percentage constituted by the ratio of the
amount determined under subparagraph (A) to the
amount determined under subparagraph (B), as fol-
lows:
282
‘‘(A)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the total
amount of payments received by the hospital
under section 1886(h) for cost reporting periods
beginning in fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996, the amount determined
under this subparagraph is an amount equal to
an estimate by the Secretary of the total
amount of payments that would have been paid
to the hospital under section 1886(h) for cost
reporting periods beginning in fiscal year 1995
if such section, as in effect for fiscal year 1996,
had applied to the hospital for fiscal year 1995.
‘‘(B)(i) If the first payment year for the
hospital is fiscal year 1995, the amount deter-
mined under this subparagraph is the aggregate
total of the payments received by teaching hos-
pitals under section 1886(h) for cost reporting
periods beginning in fiscal year 1995.
‘‘(ii) If the first payment year for the hos-
pital is fiscal year 1996—
283
‘‘(I) the Secretary shall make an esti-
mate in accordance with subparagraph
(A)(ii) for all teaching hospitals; and
‘‘(II) the amount determined under
this subparagraph is the sum of the esti-
mates made by the Secretary under
subclause (I).
‘‘(b) NEW TEACHING HOSPITALS.—
‘‘(1) IN GENERAL.—Subject to paragraph (4),
in the case of a teaching hospital that did not re-
ceive payments under section 1886(h) for any of the
fiscal years 1992 through 1996, the percentage de-
termined under paragraph (3) for the hospital is
deemed to be the percentage applicable under section
2231(b)(2) to the hospital, except that the percent-
age under paragraph (3) shall be adjusted in accord-
ance with section 2231(b)(2)(A) to the extent deter-
mined by the Secretary to be necessary with respect
to a sum that equals 100 percent.
‘‘(2) DESIGNATED
FISCAL
YEAR
REGARDING
DATA.—The determination under paragraph (3) of a
percentage for a teaching hospital described in para-
graph (1) shall be made for the most recent fiscal
year for which the Secretary has sufficient data to
284
make the determination (referred to in this sub-
section as the ‘designated fiscal year’).
‘‘(3) DETERMINATION
OF
PERCENTAGE.—For
purposes of paragraph (1), the percentage deter-
mined under this paragraph for the teaching hos-
pital involved is the percentage constituted by the
ratio of the amount determined under subparagraph
(A) to the amount determined under subparagraph
(B), as follows:
‘‘(A) The amount determined under this
subparagraph is an amount equal to an esti-
mate by the Secretary of the total amount of
payments that would have been paid to the hos-
pital under section 1886(h) for the designated
fiscal year if such section, as in effect for the
first fiscal year for which payments pursuant to
this subsection are to be made to the hospital,
had applied to the hospital for cost reporting
periods beginning in the designated fiscal year.
‘‘(B) The Secretary shall make an estimate
in accordance with subparagraph (A) for all
teaching hospitals. The amount determined
under this subparagraph is the sum of the esti-
mates made by the Secretary under the preced-
ing sentence.