of Health and Human Services (in this section referred
to as the ‘‘Secretary’’) shall provide an explanation of ben-
efits under the medicare program under title XVIII of the
Social Security Act 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.
(b) 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 shall establish a program
under which the Secretary shall encourage individ-
uals to report to the Secretary information on indi-
viduals and entities who are engaging or who have
engaged in acts or omissions which constitute
grounds for the imposition of a sanction under sec-
tion 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 discourage provision of, and not
consider, information which is frivolous or otherwise
not relevant or material 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).
(c) PROGRAM TO COLLECT INFORMATION ON PRO-
GRAM EFFICIENCY.—
(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. 204. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD
AND ABUSE SANCTIONS TO FRAUD AND
ABUSE AGAINST FEDERAL HEALTH CARE
PROGRAMS.
(a) IN
GENERAL.—Section 1128B (42 U.S.C.
1320a–7b) is amended as follows:
(1) In the heading, by striking ‘‘MEDICARE OR
STATE
HEALTH
CARE
PROGRAMS’’ and inserting
‘‘FEDERAL HEALTH CARE PROGRAMS’’.
(2) In subsection (a)(1), by striking ‘‘a program
under title XVIII or a State health care program (as
defined in section 1128(h))’’ and inserting ‘‘a Fed-
eral health care program’’.
(3) In subsection (a)(5), by striking ‘‘a program
under title XVIII or a State health care program’’
and inserting ‘‘a Federal health care program’’.
(4) In the second sentence of subsection (a)—
(A) by striking ‘‘a State plan approved
under title XIX’’ and inserting ‘‘a Federal
health care program’’, and
(B) by striking ‘‘the State may at its op-
tion (notwithstanding any other provision of
that title or of such plan)’’ and inserting ‘‘the
administrator of such program may at its op-
tion (notwithstanding any other provision of
such program)’’.
(5) In subsection (b), by striking ‘‘title XVIII
or a State health care program’’ each place it ap-
pears and inserting ‘‘a Federal health care pro-
gram’’.
(6) In subsection (c), by inserting ‘‘(as defined
in section 1128(h))’’ after ‘‘a State health care pro-
gram’’.
(7) By adding at the end the following new sub-
section:
‘‘(f) For purposes of this section, the term ‘Federal
health care program’ means—
‘‘(1) any plan or program that provides health
benefits, whether directly, through insurance, or oth-
erwise, which is funded directly, in whole or in part,
by the United States Government (other than the
health insurance program under chapter 89 of title
5, United States Code); or
‘‘(2) any State health care program, as defined
in section 1128(h).’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1997.
SEC. 205. GUIDANCE REGARDING APPLICATION OF HEALTH
CARE FRAUD AND ABUSE SANCTIONS.
Title XI (42 U.S.C. 1301 et seq.), as amended by
section 201, is amended by inserting after section 1128C
the following new section:
‘‘GUIDANCE REGARDING APPLICATION OF HEALTH CARE
FRAUD AND ABUSE SANCTIONS
‘‘SEC. 1128D. (a) SOLICITATION AND PUBLICATION
OF MODIFICATIONS TO EXISTING SAFE HARBORS AND
NEW SAFE HARBORS.—
‘‘(1) IN GENERAL.—
‘‘(A) SOLICITATION
OF
PROPOSALS
FOR
SAFE
HARBORS.—Not later than January 1,
1997, and not less than annually thereafter, the
Secretary shall publish a notice in the Federal
Register soliciting proposals, which will be ac-
cepted during a 60-day period, for—
‘‘(i) modifications to existing safe har-
bors issued pursuant to section 14(a) of
the Medicare and Medicaid Patient and
Program Protection Act of 1987 (42
U.S.C. 1320a–7b note);
‘‘(ii) additional safe harbors specifying
payment practices that shall not be treated
as a criminal offense under section
1128B(b) and shall not serve as the basis
for an exclusion under section 1128(b)(7);
‘‘(iii) advisory opinions to be issued
pursuant to subsection (b); and
‘‘(iv) special fraud alerts to be issued
pursuant to subsection (c).
‘‘(B) PUBLICATION
OF
PROPOSED
MODI-
FICATIONS AND PROPOSED ADDITIONAL SAFE
HARBORS.—After considering the proposals de-
scribed in clauses (i) and (ii) of subparagraph
(A), the Secretary, in consultation with the At-
torney General, shall publish in the Federal
Register proposed modifications to existing safe
harbors and proposed additional safe harbors, if
appropriate, with a 60-day comment period.
After considering any public comments received
during this period, the Secretary shall issue
final rules modifying the existing safe harbors
and establishing new safe harbors, as appro-
priate.
‘‘(C) REPORT.—The Inspector General of
the Department of Health and Human Services
(in this section referred to as the ‘Inspector
General’) shall, in an annual report to Congress
or as part of the year-end semiannual report re-
quired by section 5 of the Inspector General
Act of 1978 (5 U.S.C. App.), describe the pro-
posals received under clauses (i) and (ii) of sub-
paragraph (A) and explain which proposals
were included in the publication described in
subparagraph (B), which proposals were not in-
cluded in that publication, and the reasons for
the rejection of the proposals that were not in-
cluded.
‘‘(2) CRITERIA
FOR
MODIFYING
AND
ESTAB-
LISHING SAFE HARBORS.—In modifying and estab-
lishing safe harbors under paragraph (1)(B), the
Secretary may consider the extent to which provid-
ing a safe harbor for the specified payment practice
may result in any of the following:
‘‘(A) An increase or decrease in access to
health care services.
‘‘(B) An increase or decrease in the quality
of health care services.
‘‘(C) An increase or decrease in patient
freedom of choice among health care providers.
‘‘(D) An increase or decrease in competi-
tion among health care providers.
‘‘(E) An increase or decrease in the ability
of health care facilities to provide services in
medically underserved areas or to medically un-
derserved populations.
‘‘(F) An increase or decrease in the cost to
Federal health care programs (as defined in
section 1128B(f)).
‘‘(G) An increase or decrease in the poten-
tial overutilization of health care services.
‘‘(H) The existence or nonexistence of any
potential financial benefit to a health care pro-
fessional or provider which may vary based on
their decisions of—
‘‘(i) whether to order a health care
item or service; or
‘‘(ii) whether to arrange for a referral
of health care items or services to a par-
ticular practitioner or provider.
‘‘(I) Any other factors the Secretary deems
appropriate in the interest of preventing fraud
and abuse in Federal health care programs (as
so defined).
‘‘(b) ADVISORY OPINIONS.—
‘‘(1) ISSUANCE OF ADVISORY OPINIONS.—The
Secretary shall issue written advisory opinions as
provided in this subsection.
‘‘(2) MATTERS
SUBJECT
TO
ADVISORY
OPIN-
IONS.—The Secretary shall issue advisory opinions
as to the following matters:
‘‘(A) What constitutes prohibited remu-
neration 
within 
the 
meaning 
of 
section
1128B(b).
‘‘(B) Whether an arrangement or proposed
arrangement satisfies the criteria set forth in
section 1128B(b)(3) for activities which do not
result in prohibited remuneration.
‘‘(C) Whether an arrangement or proposed
arrangement satisfies the criteria which the
Secretary has established, or shall establish by
regulation for activities which do not result in
prohibited remuneration.
‘‘(D) 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).
‘‘(E) Whether any activity or proposed ac-
tivity constitutes grounds for the imposition of
a sanction under section 1128, 1128A, or
1128B.
‘‘(3) MATTERS
NOT
SUBJECT
TO
ADVISORY
OPINIONS.—Such advisory opinions shall not address
the following matters:
‘‘(A) Whether the fair market value shall
be, or was paid or received for any goods, serv-
ices or property.
‘‘(B) Whether an individual is a bona fide
employee within the requirements of section
3121(d)(2) of the Internal Revenue Code of
1986.
‘‘(4) EFFECT OF ADVISORY OPINIONS.—
‘‘(A) BINDING
AS
TO
SECRETARY
AND
PARTIES INVOLVED.—Each advisory opinion is-
sued by the Secretary shall be binding as to the
Secretary and the party or parties requesting
the opinion.
‘‘(B) FAILURE
TO
SEEK
OPINION.—The
failure of a party to seek an advisory opinion
may not be introduced into evidence to prove
that the party intended to violate the provisions
of sections 1128, 1128A, or 1128B.
‘‘(5) REGULATIONS.—
‘‘(A) IN
GENERAL.—Not later than 180
days after the date of the enactment of this sec-
tion, the Secretary shall issue regulations to
carry out this section. Such regulations shall
provide for—
‘‘(i) the procedure to be followed by a
party applying for an advisory opinion;
‘‘(ii) the procedure to be followed by
the Secretary in responding to a request
for an advisory opinion;
‘‘(iii) the interval in which the Sec-
retary shall respond;
‘‘(iv) the reasonable fee to be charged
to the party requesting an advisory opin-
ion; and
‘‘(v) the manner in which advisory
opinions will be made available to the pub-
lic.
‘‘(B) SPECIFIC
CONTENTS.—Under the
regulations promulgated pursuant to subpara-
graph (A)—
‘‘(i) the Secretary shall be required to
respond to a party requesting an advisory
opinion by not later than 30 days after the
request is received; and
‘‘(ii) the fee charged to the party re-
questing an advisory opinion shall be equal
to the costs incurred by the Secretary in
responding to the request.
‘‘(c) SPECIAL FRAUD ALERTS.—
‘‘(1) IN GENERAL.—
‘‘(A) 
REQUEST
FOR
SPECIAL
FRAUD
ALERTS.—Any person may present, at any
time, a request to the Inspector General for a
notice which informs the public of practices
which the Inspector General considers to be
suspect or of particular concern under the med-
icare program or a State health care program,
as defined in section 1128(h) (in this subsection
referred to as a ‘special fraud alert’).
‘‘(B) ISSUANCE AND PUBLICATION OF SPE-
CIAL FRAUD ALERTS.—Upon receipt of a re-
quest described in subparagraph (A), the In-
spector General shall investigate the subject
matter of the request to determine whether a
special fraud alert should be issued. If appro-
priate, the Inspector General shall issue a spe-
cial fraud alert in response to the request. All
special fraud alerts issued pursuant to this sub-
paragraph shall be published in the Federal
Register.
‘‘(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—
In determining whether to issue a special fraud alert
upon a request described in paragraph (1), the In-
spector General may consider—
‘‘(A) whether and to what extent the prac-
tices that would be identified in the special
fraud alert may result in any of the con-
sequences described in subsection (a)(2); and
‘‘(B) the volume and frequency of the con-
duct that would be identified in the special
fraud alert.’’.
Subtitle B—Revisions to Current
Sanctions for Fraud and Abuse
SEC. 211. MANDATORY EXCLUSION FROM PARTICIPATION
IN MEDICARE AND STATE HEALTH CARE PRO-
GRAMS.
(a) INDIVIDUAL CONVICTED OF FELONY RELATING
TO HEALTH CARE FRAUD.—
(1) IN GENERAL.—Section 1128(a) (42 U.S.C.
1320a–7(a)) is amended by adding at the end the
following new paragraph:
‘‘(3) 
FELONY
CONVICTION
RELATING
TO
HEALTH
CARE
FRAUD.—Any individual or entity
that has been convicted after the date of the enact-
ment of the Health Coverage Availability and Af-
fordability Act of 1996, under Federal or State law,
in connection with the delivery of a health care item
or service or with respect to any act or omission in
a health care program (other than those specifically
described in paragraph (1)) operated by or financed
in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting
of a felony relating to fraud, theft, embezzlement,
breach of fiduciary responsibility, or other financial
misconduct.’’.
(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 1128(b) (42 U.S.C. 1320a–7(b)) is
amended to read as follows:
‘‘(1) CONVICTION RELATING TO FRAUD.—Any
individual or entity that has been convicted after the
date of the enactment of the Health Coverage Avail-
ability and Affordability Act of 1996, under Federal
or State law—
‘‘(A) of a criminal offense consisting of a
misdemeanor relating to fraud, theft, embezzle-
ment, breach of fiduciary responsibility, or
other financial misconduct—
‘‘(i) in connection with the delivery of
a health care item or service, or
‘‘(ii) with respect to any act or omis-
sion in a health care program (other than
those specifically described in subsection
(a)(1)) operated by or financed in whole or
in part by any Federal, State, or local gov-
ernment agency; or
‘‘(B) of a criminal offense relating to
fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct
with respect to any act or omission in a pro-
gram (other than a health care program) oper-
ated by or financed in whole or in part by any
Federal, State, or local government agency.’’.
(b) INDIVIDUAL CONVICTED OF FELONY RELATING
TO CONTROLLED SUBSTANCE.—
(1) IN GENERAL.—Section 1128(a) (42 U.S.C.
1320a–7(a)), as amended by subsection (a), is
amended by adding at the end the following new
paragraph:
‘‘(4) FELONY CONVICTION RELATING TO CON-
TROLLED
SUBSTANCE.—Any individual or entity
that has been convicted after the date of the enact-
ment of the Health Coverage Availability and Af-
fordability Act of 1996, under Federal or State law,
of a criminal offense consisting of a felony relating
to the unlawful manufacture, distribution, prescrip-
tion, or dispensing of a controlled substance.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(3) (42 U.S.C. 1320a–7(b)(3)) is amended—
(A) in the heading, by striking ‘‘CONVIC-
TION’’ and inserting ‘‘MISDEMEANOR CONVIC-
TION’’; and
(B) by striking ‘‘criminal offense’’ and in-
serting ‘‘criminal offense consisting of a mis-
demeanor’’.
SEC. 212. ESTABLISHMENT OF MINIMUM PERIOD OF EX-
CLUSION FOR CERTAIN INDIVIDUALS AND
ENTITIES SUBJECT TO PERMISSIVE EXCLU-
SION FROM MEDICARE AND STATE HEALTH
CARE PROGRAMS.
Section 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is
amended by adding at the end the following new subpara-
graphs:
‘‘(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 published regula-
tions that a shorter period is appropriate because of miti-
gating circumstances or that a longer period is appro-
priate because of aggravating circumstances.
‘‘(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.’’.
SEC. 213. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH
OWNERSHIP 
OR 
CONTROL 
INTEREST 
IN
SANCTIONED ENTITIES.
Section 1128(b) (42 U.S.C. 1320a–7(b)) is amended
by adding at the end the following new paragraph:
‘‘(15) INDIVIDUALS
CONTROLLING
A
SANC-
TIONED ENTITY.—(A) Any individual—
‘‘(i) who has a direct or indirect ownership
or control interest in a sanctioned entity and
who knows or should know (as defined in sec-
tion 1128A(i)(6)) of the action constituting the
basis for the conviction or exclusion described
in subparagraph (B); or
‘‘(ii) who is an officer or managing em-
ployee (as defined in section 1126(b)) of such
an entity.
‘‘(B) For purposes of subparagraph (A), the
term ‘sanctioned entity’ means an entity—
‘‘(i) that has been convicted of any offense
described in subsection (a) or in paragraph (1),
(2), or (3) of this subsection; or
‘‘(ii) that has been excluded from partici-
pation under a program under title XVIII or
under a State health care program.’’.
SEC. 214. SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATU-
TORY OBLIGATIONS.
(a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI-
TIONERS AND PERSONS FAILING TO MEET STATUTORY
OBLIGATIONS.—
(1) IN GENERAL.—The second sentence of sec-
tion 1156(b)(1) (42 U.S.C. 1320c–5(b)(1)) is
amended by striking ‘‘may prescribe)’’ and inserting
‘‘may prescribe, except that such period may not be
less than 1 year)’’.
100
ganization if the Secretary determines that the orga-
nization—
‘‘(A) has failed substantially to carry out
the contract;
‘‘(B) is carrying out the contract in a man-
ner substantially inconsistent with the efficient
and effective administration of this section; or
‘‘(C) no longer substantially meets the ap-
plicable conditions of subsections (b), (c), (e),
and (f).’’.
(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-
tion has directly adversely affected (or has the sub-
stantial likelihood of adversely affecting) an individ-
ual covered under the organization’s contract.
101
‘‘(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.
‘‘(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 first provides the organiza-
tion with the reasonable opportunity to develop and
implement a corrective action plan to correct the de-
ficiencies that were the basis of the Secretary’s de-
102
termination under paragraph (1) and the organiza-
tion fails to develop or implement such a plan;
‘‘(B) in deciding whether to impose sanctions,
the Secretary considers aggravating factors such as
whether an organization has a history of deficiencies
or has not taken action to correct deficiencies the
Secretary has brought to the organization’s 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.—Section
1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is
amended by striking the second sentence.
(b) AGREEMENTS WITH PEER REVIEW ORGANIZA-
TIONS.—Section 
1876(i)(7)(A) 
(42 
U.S.C.
1395mm(i)(7)(A)) is amended by striking ‘‘an agreement’’
and inserting ‘‘a written agreement’’.
103
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to contract years be-
ginning on or after January 1, 1996.
SEC. 216. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PEN-
ALTIES FOR DISCOUNTING AND MANAGED
CARE ARRANGEMENTS.
(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 items or serv-
ices, or a combination thereof, pursuant to a written
agreement between the organization and the individ-
ual or entity if the organization is an eligible organi-
zation under section 1876 or if the written agree-
ment places the individual or entity at substantial fi-
nancial risk for the cost or utilization of the items
or services, or a combination thereof, which the indi-
vidual or entity is obligated to provide, whether
through a withhold, capitation, incentive pool, per
104
diem payment, or any other similar risk arrange-
ment which places the individual or entity at sub-
stantial financial risk.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to written agreements entered into
on or after January 1, 1997.
SEC. 217. CRIMINAL PENALTY FOR FRAUDULENT DISPOSI-
TION OF ASSETS IN ORDER TO OBTAIN MED-
ICAID BENEFITS.
Section 1128B(a) (42 U.S.C. 1320a–7b(a)) is
amended—
(1) by striking ‘‘or’’ at the end of paragraph
(4);
(2) by adding ‘‘or’’ at the end of paragraph (5);
and
(3) by inserting after paragraph (5) the follow-
ing new paragraph:
‘‘(6) knowingly and willfully disposes of assets
(including by any transfer in trust) in order for an
individual to become eligible for medical assistance
under a State plan under title XIX, if disposing of
the assets results in the imposition of a period of in-
eligibility 
for 
such 
assistance 
under 
section
1917(c),’’.
105
SEC. 218. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this subtitle shall take effect January 1, 1997.
Subtitle C—Data Collection
SEC. 221. ESTABLISHMENT OF THE HEALTH CARE FRAUD
AND ABUSE DATA COLLECTION PROGRAM.
(a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),
as amended by sections 211 and 215, is amended by in-
serting after section 1128D the following new section:
‘‘HEALTH CARE FRAUD AND ABUSE DATA COLLECTION
PROGRAM
‘‘SEC. 1128E. (a) GENERAL PURPOSE.—Not later
than January 1, 1997, the Secretary shall establish a na-
tional health care fraud and abuse data collection program
for the reporting of final adverse actions (not including
settlements in which no findings of liability have been
made) against health care providers, suppliers, or practi-
tioners as required by subsection (b), with access as set
forth in subsection (c).
‘‘(b) REPORTING OF INFORMATION.—
‘‘(1) IN GENERAL.—Each Government agency
and health plan shall report any final adverse action
(not including settlements in which no findings of li-
ability have been made) taken against a health care
provider, supplier, or practitioner.
106
‘‘(2) INFORMATION TO BE REPORTED.—The in-
formation to be reported under paragraph (1) in-
cludes:
‘‘(A) The name and TIN (as defined in
section 7701(a)(41) of the Internal Revenue
Code of 1986) of any health care provider, sup-
plier, or practitioner who is the subject of a
final adverse action.
‘‘(B) The name (if known) of any health
care entity with which a health care provider,
supplier, or practitioner is affiliated or associ-
ated.
‘‘(C) The nature of the final adverse action
and whether such action is on appeal.
‘‘(D) A description of the acts or omissions
and injuries upon which the final adverse action
was based, and such other information as the
Secretary determines by regulation is required
for appropriate interpretation of information re-
ported under this section.
‘‘(3) CONFIDENTIALITY.—In determining what
information is required, the Secretary shall include
procedures to assure that the privacy of individuals
receiving health care services is appropriately pro-
tected.
107
‘‘(4) TIMING AND FORM OF REPORTING.—The
information required to be reported under this sub-
section shall be reported regularly (but not less often
than monthly) and in such form and manner as the
Secretary prescribes. Such information shall first be
required to be reported on a date specified by the
Secretary.
‘‘(5) TO WHOM REPORTED.—The information
required to be reported under this subsection shall
be reported to the Secretary.
‘‘(c) DISCLOSURE AND CORRECTION OF INFORMA-
TION.—
‘‘(1) DISCLOSURE.—With respect to the infor-
mation about final adverse actions (not including
settlements in which no findings of liability have
been made) reported to the Secretary under this sec-
tion respecting a health care provider, supplier, or
practitioner, the Secretary shall, by regulation, pro-
vide for—
‘‘(A) disclosure of the information, upon
request, to the health care provider, supplier, or
licensed practitioner, and
‘‘(B) procedures in the case of disputed ac-
curacy of the information.
108
‘‘(2) CORRECTIONS.—Each Government agency
and health plan shall report corrections of informa-
tion already reported about any final adverse action
taken against a health care provider, supplier, or
practitioner, in such form and manner that the Sec-
retary prescribes by regulation.
‘‘(d) ACCESS TO REPORTED INFORMATION.—
‘‘(1) AVAILABILITY.—The information in this
database shall be available to Federal and State gov-
ernment agencies and health plans pursuant to pro-
cedures that the Secretary shall provide by regula-
tion.
‘‘(2) FEES FOR DISCLOSURE.—The Secretary
may establish or approve reasonable fees for the dis-
closure of information in this database (other than
with respect to requests by Federal agencies). The
amount of such a fee shall be sufficient to recover
the full costs of operating the database. Such fees
shall be available to the Secretary or, in the Sec-
retary’s discretion to the agency designated under
this section to cover such costs.
‘‘(e) PROTECTION FROM LIABILITY FOR REPORT-
ING.—No person or entity, including the agency des-
ignated by the Secretary in subsection (b)(5) shall be held
liable in any civil action with respect to any report made
109
as required by this section, without knowledge of the fal-
sity of the information contained in the report.
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section:
‘‘(1) FINAL ADVERSE ACTION.—
‘‘(A) IN GENERAL.—The term ‘final ad-
verse action’ includes:
‘‘(i) Civil judgments against a health
care provider, supplier, or practitioner in
Federal or State court related to the deliv-
ery of a health care item or service.
‘‘(ii) Federal or State criminal convic-
tions related to the delivery of a health
care item or service.
‘‘(iii) Actions by Federal or State
agencies responsible for the licensing and
certification of health care providers, sup-
pliers, and licensed health care practition-
ers, including—
‘‘(I) formal or official actions,
such as revocation or suspension of a
license (and the length of any such
suspension), reprimand, censure or
probation,
110
‘‘(II) any other loss of license or
the right to apply for, or renew, a li-
cense of the provider, supplier, or
practitioner, whether by operation of
law, voluntary surrender, non-renew-
ability, or otherwise, or
‘‘(III) any other negative action
or finding by such Federal or State
agency that is publicly available infor-
mation.
‘‘(iv) Exclusion from participation in
Federal or State health care programs.
‘‘(v) Any other adjudicated actions or
decisions that the Secretary shall establish
by regulation.
‘‘(B) EXCEPTION.—The term does not in-
clude any action with respect to a malpractice
claim.
‘‘(2) 
PRACTITIONER.—The 
terms 
‘licensed
health care practitioner’, ‘licensed practitioner’, and
‘practitioner’ mean, with respect to a State, an indi-
vidual who is licensed or otherwise authorized by the
State to provide health care services (or any individ-
ual who, without authority holds himself or herself
out to be so licensed or authorized).
111
‘‘(3) GOVERNMENT AGENCY.—The term ‘Gov-
ernment agency’ shall include:
‘‘(A) The Department of Justice.
‘‘(B) The Department of Health and
Human Services.
‘‘(C) Any other Federal agency that either
administers or provides payment for the deliv-
ery of health care services, including, but not
limited to the Department of Defense and the
Veterans’ Administration.
‘‘(D) State law enforcement agencies.
‘‘(E) State medicaid fraud control units.
‘‘(F) Federal or State agencies responsible
for the licensing and certification of health care
providers and licensed health care practitioners.
‘‘(4) HEALTH PLAN.—The term ‘health plan’
has the meaning given such term by section
1128C(c).
‘‘(5) DETERMINATION
OF
CONVICTION.—For
purposes of paragraph (1), the existence of a convic-
tion shall be determined under paragraph (4) of sec-
tion 1128(i).’’.
(b) IMPROVED PREVENTION IN ISSUANCE OF MEDI-
CARE PROVIDER NUMBERS.—Section 1842(r) (42 U.S.C.
1395u(r)) is amended by adding at the end the following
112
new sentence: ‘‘Under such system, the Secretary may im-
pose appropriate fees on such physicians to cover the costs
of investigation and recertification activities with respect
to the issuance of the identifiers.’’.
Subtitle D—Civil Monetary
Penalties
SEC. 231. SOCIAL SECURITY ACT CIVIL MONETARY PEN-
ALTIES.
(a) GENERAL CIVIL MONETARY PENALTIES.—Sec-
tion 1128A (42 U.S.C. 1320a–7a) is amended as follows:
(1) In the third sentence of subsection (a), by
striking ‘‘programs under title XVIII’’ and inserting
‘‘Federal health care programs (as defined in section
1128B(f)(1))’’.
(2) In subsection (f)—
(A) by redesignating paragraph (3) as
paragraph (4); and
(B) by inserting after paragraph (2) the
following new paragraph:
‘‘(3) With respect to amounts recovered arising
out of a claim under a Federal health care program
(as defined in section 1128B(f)), the portion of such
amounts as is determined to have been paid by the
program shall be repaid to the program, and the
portion of such amounts attributable to the amounts
113
recovered under this section by reason of the amend-
ments made by the Health Coverage Availability and
Affordability Act of 1996 (as estimated by the Sec-
retary) shall be deposited into the Federal Hospital
Insurance 
Trust 
Fund 
pursuant 
to 
section
1817(k)(2)(C).’’.
(3) In subsection (i)—
(A) in paragraph (2), by striking ‘‘title V,
XVIII, XIX, or XX of this Act’’ and inserting
‘‘a Federal health care program (as defined in
section 1128B(f))’’,
(B) in paragraph (4), by striking ‘‘a health
insurance or medical services program under
title XVIII or XIX of this Act’’ and inserting
‘‘a Federal health care program (as so de-
fined)’’, and
(C) in paragraph (5), by striking ‘‘title V,
XVIII, XIX, or XX’’ and inserting ‘‘a Federal
health care program (as so defined)’’.
(4) By adding at the end the following new sub-
section:
‘‘(m)(1) For purposes of this section, with respect to
a Federal health care program not contained in this Act,
references to the Secretary in this section shall be deemed
to be references to the Secretary or Administrator of the
114
department or agency with jurisdiction over such program
and references to the Inspector General of the Department
of Health and Human Services in this section shall be
deemed to be references to the Inspector General of the
applicable department or agency.
‘‘(2)(A) The Secretary and Administrator of the de-
partments and agencies referred to in paragraph (1) may
include in any action pursuant to this section, claims with-
in the jurisdiction of other Federal departments or agen-
cies as long as the following conditions are satisfied:
‘‘(i) The case involves primarily claims submit-
ted to the Federal health care programs of the de-
partment or agency initiating the action.
‘‘(ii) The Secretary or Administrator of the de-
partment or agency initiating the action gives notice
and an opportunity to participate in the investiga-
tion to the Inspector General of the department or
agency with primary jurisdiction over the Federal
health care programs to which the claims were sub-
mitted.
‘‘(B) If the conditions specified in subparagraph (A)
are fulfilled, the Inspector General of the department or
agency initiating the action is authorized to exercise all
powers granted under the Inspector General Act of 1978
with respect to the claims submitted to the other depart-
115
ments or agencies to the same manner and extent as pro-
vided in that Act with respect to claims submitted to such
departments or agencies.’’.
(b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP
OR CONTROL INTEREST IN PARTICIPATING ENTITY.—
Section 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(1)(D);
(2) by striking ‘‘, or’’ at the end of paragraph
(2) and inserting a semicolon;
(3) by striking the semicolon at the end of
paragraph (3) and inserting ‘‘; or’’; and
(4) by inserting after paragraph (3) the follow-
ing new paragraph:
‘‘(4) in the case of a person who is not an orga-
nization, agency, or other entity, is excluded from
participating in a program under title XVIII or a
State health care program in accordance with this
subsection or under section 1128 and who, at the
time of a violation of this subsection—
‘‘(i) retains a direct or indirect ownership
or control interest in an entity that is partici-
pating in a program under title XVIII or a
State health care program, and who knows or
116
should know of the action constituting the basis
for the exclusion; or
‘‘(ii) is an officer or managing employee
(as defined in section 1126(b)) of such an en-
tity;’’.
(c) MODIFICATIONS
OF AMOUNTS
OF PENALTIES
AND
ASSESSMENTS.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)), as amended by subsection (b), is amended
in the matter following paragraph (4)—
(1) 
by 
striking 
‘‘$2,000’’ 
and 
inserting
‘‘$10,000’’;
(2) by inserting ‘‘; in cases under paragraph
(4), $10,000 for each day the prohibited relationship
occurs’’ after ‘‘false or misleading information was
given’’; and
(3) by striking ‘‘twice the amount’’ and insert-
ing ‘‘3 times the amount’’.
(d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR-
RECT CODING
OR MEDICALLY UNNECESSARY SERV-
ICES.—Section 1128A(a)(1) (42 U.S.C. 1320a–7a(a)(1))
is amended—
(1) in subparagraph (A) by striking ‘‘claimed,’’
and inserting ‘‘claimed, including any person who
engages in a pattern or practice of presenting or
causing to be presented a claim for an item or serv-
117
ice that is based on a code that the person knows
or should know will result in a greater payment to
the person than the code the person knows or should
know is applicable to the item or service actually
provided,’’;
(2) in subparagraph (C), by striking ‘‘or’’ at
the end;
(3) in subparagraph (D), by striking ‘‘; or’’ and
inserting ‘‘, or’’; and
(4) by inserting after subparagraph (D) the fol-
lowing new subparagraph:
‘‘(E) is for a medical or other item or serv-
ice that a person knows or should know is not
medically necessary; or’’.
(e) SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI-
GATIONS.—Section 1156(b)(3) (42 U.S.C. 1320c–5(b)(3))
is amended by striking ‘‘the actual or estimated cost’’ and
inserting ‘‘up to $10,000 for each instance’’.
(f) PROCEDURAL PROVISIONS.—Section 1876(i)(6)
(42 U.S.C. 1395mm(i)(6)), as amended by section
215(a)(2), is 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-
118
alty under subparagraph (B)(i) or (C)(i) in the same man-
ner as such provisions apply to a civil money penalty or
proceeding under section 1128A(a).’’.
(g) PROHIBITION AGAINST OFFERING INDUCEMENTS
TO
INDIVIDUALS
ENROLLED
UNDER
PROGRAMS
OR
PLANS.—
(1) 
OFFER
OF
REMUNERATION.—Section
1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (1)(D);
(B) by striking ‘‘, or’’ at the end of para-
graph (2) and inserting a semicolon;
(C) by striking the semicolon at the end of
paragraph (3) and inserting ‘‘; or’’; and
(D) by inserting after paragraph (3) the
following new paragraph:
‘‘(4) offers to or transfers remuneration to any
individual eligible for benefits under title XVIII of
this Act, or under a State health care program (as
defined in section 1128(h)) that such person knows
or should know is likely to influence such individual
to order or receive from a particular provider, practi-
tioner, or supplier any item or service for which pay-
ment may be made, in whole or in part, under title
119
XVIII, or a State health care program (as so de-
fined);’’.
(2) 
REMUNERATION
DEFINED.—Section
1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by
adding the following new paragraph:
‘‘(6) The term ‘remuneration’ includes the waiv-
er of coinsurance and deductible amounts (or any
part thereof), and transfers of items or services for
free or for other than fair market value. The term
‘remuneration’ does not include—
‘‘(A) the waiver of coinsurance and deduct-
ible amounts by a person, if—
‘‘(i) the waiver is not offered as part
of any advertisement or solicitation;
‘‘(ii) the person does not routinely
waive coinsurance or deductible amounts;
and
‘‘(iii) the person—
‘‘(I) waives the coinsurance and
deductible amounts after determining
in good faith that the individual is in
financial need;
‘‘(II) fails to collect coinsurance
or deductible amounts after making
reasonable collection efforts; or
120
‘‘(III) provides for any permis-
sible waiver as specified in section
1128B(b)(3) or in regulations issued
by the Secretary;
‘‘(B) differentials in coinsurance and de-
ductible amounts as part of a benefit plan de-
sign as long as the differentials have been dis-
closed in writing to all beneficiaries, third party
payers, and providers, to whom claims are pre-
sented and as long as the differentials meet the
standards as defined in regulations promulgated
by the Secretary not later than 180 days after
the date of the enactment of the Health Cov-
erage Availability and Affordability Act of
1996; or
‘‘(C) incentives given to individuals to pro-
mote the delivery of preventive care as deter-
mined by the Secretary in regulations so pro-
mulgated.’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall take effect January 1, 1997.
121
SEC. 232. CLARIFICATION OF LEVEL OF INTENT REQUIRED
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’’.
(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.’’.
122
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to acts or omissions occurring on
or after January 1, 1997.
SEC. 233. 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
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.’’.
123
(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.
Subtitle E—Revisions to Criminal
Law
SEC. 241. DEFINITION OF FEDERAL HEALTH CARE OF-
FENSE.
(a) IN GENERAL.—Chapter 1 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 a violation of, or a criminal conspiracy
to violate—
‘‘(1) section 669, 1035, or 1347 of this title; or
‘‘(2) section 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.
‘‘(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.’’.
124
SEC. 242. HEALTH CARE FRAUD.
(a) OFFENSE.—
(1) IN GENERAL.—Chapter 63 of title 18, Unit-
ed States Code, is amended by adding at the end the
following:
‘‘§ 1347. Health care fraud
‘‘(a) Whoever knowingly executes, or attempts to exe-
cute, a scheme or artifice—
‘‘(1) to defraud any health care benefit pro-
gram; or
‘‘(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,
in connection with the delivery of or payment for health
care benefits, items, or services, 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 person 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 imprisoned 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, affecting commerce, under which any medical bene-
125
fit, item, or service is provided to any individual, and in-
cludes any individual or entity who is providing a medical
benefit, item, or service for which payment may be made
under the plan or contract.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions 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.’’.
(b) CRIMINAL FINES DEPOSITED IN FEDERAL HOS-
PITAL INSURANCE TRUST FUND.—The Secretary of the
Treasury shall deposit into the Federal Hospital Insurance
Trust Fund pursuant to section 1817(k)(2)(C) of the So-
cial Security Act (42 U.S.C. 1395i) an amount equal to
the criminal fines imposed under section 1347 of title 18,
United States Code (relating to health care fraud).
SEC. 243. THEFT OR EMBEZZLEMENT.
(a) IN GENERAL.—Chapter 31 of title 18, United
States Code, is amended by adding at the end the follow-
ing:
‘‘§ 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,
126
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; but if the value of such prop-
erty does not exceed the sum of $100 the defendant shall
be fined under this title or imprisoned not more than one
year, 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. 244. 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—
‘‘(1) falsifies, conceals, or covers up by any
trick, scheme, or device a material fact; or
‘‘(2) makes any false, fictitious, or fraudulent
statements or representations, or makes or uses any
false writing or document knowing the same to con-
127
tain any false, fictitious, or fraudulent statement or
entry,
in connection with the delivery of or payment for health
care benefits, items, or services, 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. 245. 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 Federal health care offense to a criminal
investigator shall be fined under this title or imprisoned
not more than 5 years, or both.
128
‘‘(b) 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. 246. LAUNDERING OF MONETARY INSTRUMENTS.
Section 1956(c)(7) of title 18, United States Code,
is amended by adding at the end the following:
‘‘(F) Any act or activity constituting an of-
fense involving a Federal health care offense.’’.
SEC. 247. INJUNCTIVE RELIEF RELATING TO HEALTH CARE
OFFENSES.
(a) IN GENERAL.—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.’’.
129
(b) FREEZING OF ASSETS.—Section 1345(a)(2) of
title 18, United States Code, is amended by inserting ‘‘or
a Federal health care offense’’.
SEC. 248. 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:
‘‘§ 3486. Authorized investigative demand procedures
‘‘(a) AUTHORIZATION.—In any investigation relating
to any act or activity involving a Federal health care of-
fense, the Attorney General or the Attorney General’s des-
ignee may issue in writing and cause to be served a sub-
poena requiring the production of any records (including
any books, papers, documents, electronic 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. A
subpoena shall describe the objects required to be pro-
duced and prescribe a return date within a reasonable pe-
riod of time within which the objects can be assembled
and made available.
‘‘(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
130
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.
‘‘(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-
131
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.
‘‘(e) LIMITATION ON USE.—(1) Health information
about an individual that is disclosed under this section
may not be used in, or disclosed to any person for use
in, any administrative, civil, or criminal action or inves-
tigation directed against the individual who is the subject
of the information unless the action or investigation arises
out of and is directly related to receipt of health care or
payment for health care or action involving a fraudulent
claim related to health; or if authorized by an appropriate
order of a court of competent jurisdiction, granted after
application showing good cause therefor.
‘‘(2) In assessing good cause, the court shall weigh
the public interest and the need for disclosure against the
injury to the patient, to the physician-patient relationship,
and to the treatment services.
‘‘(3) Upon the granting of such order, the court, in
determining the extent to which any disclosure of all or
132
any part of any record is necessary, shall impose appro-
priate safeguards against unauthorized disclosure.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 223 of title 18, United States
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 Department of Justice subpoena (issued
under section 3486 of title 18),’’ after ‘‘subpoena’’.
SEC. 249. FORFEITURES FOR FEDERAL HEALTH CARE OF-
FENSES.
(a) IN GENERAL.—Section 982(a) of title 18, United
States Code, is amended by adding after paragraph (5)
the following new paragraph:
‘‘(6) The court, in imposing sentence on a person con-
victed of a Federal health care offense, shall order the per-
son to forfeit property, real or personal, that constitutes
or is derived, directly or indirectly, from gross proceeds
traceable to the commission of the offense.’’.
(b) 
CONFORMING
AMENDMENT.—Section
982(b)(1)(A) of title 18, United States Code, is amended
by inserting ‘‘or (a)(6)’’ after ‘‘(a)(1)’’.
(c) PROPERTY FORFEITED DEPOSITED IN FEDERAL
HOSPITAL INSURANCE TRUST FUND.—
133
(1) IN GENERAL.—After the payment of the
costs of asset forfeiture has been made, and notwith-
standing any other provision of law, the Secretary of
the Treasury shall deposit into the Federal Hospital
Insurance 
Trust 
Fund 
pursuant 
to 
section
1817(k)(2)(C) of the Social Security Act, as added
by section 301(b), an amount equal to the net
amount realized from the forfeiture of property by
reason of a Federal health care offense pursuant to
section 982(a)(6) of title 18, United States Code.
(2) COSTS OF ASSET FORFEITURE.—For pur-
poses of paragraph (1), the term ‘‘payment of the
costs of asset forfeiture’’ means—
(A) the payment, at the discretion of the
Attorney General, of any expenses necessary to
seize, detain, inventory, safeguard, maintain,
advertise, sell, or dispose of property under sei-
zure, detention, or forfeited, or of any other
necessary expenses incident to the seizure, de-
tention, forfeiture, or disposal of such property,
including payment for—
(i) contract services,
(ii) the employment of outside con-
tractors to operate and manage properties
or provide other specialized services nec-
134
essary to dispose of such properties in an
effort to maximize the return from such
properties; and
(iii) reimbursement of any Federal,
State, or local agency for any expenditures
made to perform the functions described in
this subparagraph;
(B) at the discretion of the Attorney Gen-
eral, the payment of awards for information or
assistance leading to a civil or criminal forfeit-
ure involving any Federal agency participating
in the Health Care Fraud and Abuse Control
Account;
(C) the compromise and payment of valid
liens and mortgages against property that has
been forfeited, subject to the discretion of the
Attorney General to determine the validity of
any such lien or mortgage and the amount of
payment to be made, and the employment of at-
torneys and other personnel skilled in State real
estate law as necessary;
(D) payment authorized in connection with
remission or mitigation procedures relating to
property forfeited; and
135
(E) the payment of State and local prop-
erty taxes on forfeited real property that ac-
crued between the date of the violation giving
rise to the forfeiture and the date of the forfeit-
ure order.
Subtitle F—Administrative
Simplification
SEC. 251. PURPOSE.
It is the purpose of this subtitle to improve the medi-
care program under title XVIII of the Social Security Act,
the medicaid program under title XIX of such Act, and
the efficiency and effectiveness of the health care system,
by encouraging the development of a health information
system through the establishment of standards and re-
quirements for the electronic transmission of certain
health information.
SEC. 252. ADMINISTRATIVE SIMPLIFICATION.
(a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.)
is amended by adding at the end the following:
‘‘PART C—ADMINISTRATIVE SIMPLIFICATION
‘‘SEC. 1171. DEFINITIONS.
‘‘For purposes of this part:
‘‘(1) CLEARINGHOUSE.—The term ‘clearing-
house’ means a public or private entity that—
136
‘‘(A) processes or facilitates the processing
of nonstandard data elements of health infor-
mation into standard data elements; or
‘‘(B) provides the means by which persons
may meet the requirements of this part.
‘‘(2) CODE SET.—The term ‘code set’ means
any set of codes used for encoding data elements,
such as tables of terms, medical concepts, medical
diagnostic codes, or medical procedure codes.
‘‘(3) COORDINATION OF BENEFITS.—The term
‘coordination of benefits’ means determining and co-
ordinating the financial obligations of health plans
when health care benefits are payable under 2 or
more health plans.
‘‘(4) HEALTH
CARE
PROVIDER.—The term
‘health care provider’ includes a provider of services
(as defined in section 1861(u)), a provider of medi-
cal or other health services (as defined in section
1861(s)), and any other person furnishing health
care services or supplies.
‘‘(5) HEALTH INFORMATION.—The term ‘health
information’ means any information, whether oral or
recorded in any form or medium that—
‘‘(A) is created or received by a health care
provider, health plan, public health authority,
137
employer, life insurer, school or university, or
clearinghouse; and
‘‘(B) relates to the past, present, or future
physical or mental health or condition of an in-
dividual, the provision of health care to an indi-
vidual, or the past, present, or future payment
for the provision of health care to an individual.
‘‘(6) HEALTH PLAN.—The term ‘health plan’
means a plan which provides, or pays the cost of,
health benefits. Such term includes the following, or
any combination thereof:
‘‘(A) Part A or part B of the medicare
program under title XVIII.
‘‘(B) The medicaid program under title
XIX.
‘‘(C) A medicare supplemental policy (as
defined in section 1882(g)(1)).
‘‘(D) Coverage issued as a supplement to
liability insurance.
‘‘(E) General liability insurance.
‘‘(F) Worker’s compensation or similar in-
surance.
‘‘(G) Automobile or automobile medical-
payment insurance.
138
‘‘(H) A long-term care policy, including a
nursing home fixed indemnity policy (unless the
Secretary determines that such a policy does
not provide sufficiently comprehensive coverage
of a benefit so that the policy should be treated
as a health plan).
‘‘(I) A hospital or fixed indemnity income-
protection policy.
‘‘(J) An employee welfare benefit plan, as
defined in section 3(1) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(1)), but only to the extent the plan is es-
tablished or maintained for the purpose of pro-
viding health benefits and has 50 or more par-
ticipants (as defined in section 3(7) of such
Act).
‘‘(K) An employee welfare benefit plan or
any other arrangement which is established or
maintained for the purpose of offering or pro-
viding health benefits to the employees of 2 or
more employers.
‘‘(L) The health care program for active
military personnel under title 10, United States
Code.
139
‘‘(M) The veterans health care program
under chapter 17 of title 38, United States
Code.
‘‘(N) The Civilian Health and Medical Pro-
gram of the Uniformed Services (CHAMPUS),
as defined in section 1073(4) of title 10, United
States Code.
‘‘(O) The Indian health service program
under the Indian Health Care Improvement Act
(25 U.S.C. 1601 et seq.).
‘‘(P) The Federal Employees Health Bene-
fit Plan under chapter 89 of title 5, United
States Code.
‘‘(Q) Such other plan or arrangement as
the Secretary determines is a health plan.
‘‘(7) INDIVIDUALLY IDENTIFIABLE HEALTH IN-
FORMATION.—The term ‘individually identifiable
health information’ means any information, includ-
ing demographic information collected from an indi-
vidual, that—
‘‘(A) is created or received by a health care
provider, health plan, employer, or clearing-
house; and
‘‘(B) relates to the past, present, or future
physical or mental health or condition of an in-
140
dividual, the provision of health care to an indi-
vidual, or the past, present, or future payment
for the provision of health care to an individual,
and—
‘‘(i) identifies an individual; or
‘‘(ii) with respect to which there is a
reasonable basis to believe that the infor-
mation can be used to identify an individ-
ual.
‘‘(8) STANDARD.—The term ‘standard’, when
used with reference to a data element of health in-
formation or a transaction referred to in section
1173(a)(1), means any such data element or trans-
action that meets each of the standards and imple-
mentation specifications adopted or established by
the Secretary with respect to the data element or
transaction under sections 1172 and 1173.
‘‘(9) STANDARD SETTING ORGANIZATION.—The
term ‘standard setting organization’ means a stand-
ard setting organization accredited by the American
National Standards Institute, including the National
Council for Prescription Drug Programs, that devel-
ops standards for information transactions, data ele-
ments, or any other standard that is necessary to,
or will facilitate, the implementation of this part.
141
‘‘SEC. 1172. GENERAL REQUIREMENTS FOR ADOPTION OF
STANDARDS.
‘‘(a) APPLICABILITY.—Any standard or modification
of a standard adopted under this part shall apply to the
following persons:
‘‘(1) A health plan.
‘‘(2) A clearinghouse.
‘‘(3) A health care provider who transmits any
health information in electronic form in connection
with a transaction referred to in section 1173(a)(1).
‘‘(b) REDUCTION OF COSTS.—Any standard or modi-
fication of a standard adopted under this part shall be
consistent with the objective of reducing the administra-
tive costs of providing and paying for health care.
‘‘(c) ROLE
OF
STANDARD
SETTING
ORGANIZA-
TIONS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), any standard or modification of a stand-
ard adopted under this part shall be developed or
modified by a standard setting organization.
‘‘(2) SPECIAL RULE.—The Secretary may adopt
a standard or modification of a standard that is dif-
ferent from any standard developed or modified by
a standard setting organization, if—
‘‘(A) the different standard or modification
will substantially reduce administrative costs to
142
health care providers and health plans com-
pared to the alternatives; and
‘‘(B) the standard or modification is pro-
mulgated in accordance with the rulemaking
procedures of subchapter III of chapter 5 of
title 5, United States Code.
‘‘(d) IMPLEMENTATION SPECIFICATIONS.—The Sec-
retary shall establish specifications for implementing each
of the standards and modifications adopted under this
part.
‘‘(e) PROTECTION OF TRADE SECRETS.—Except as
otherwise required by law, a standard or modification of
a standard adopted under this part shall not require dis-
closure of trade secrets or confidential commercial infor-
mation by a person required to comply with this part.
‘‘(f) ASSISTANCE TO THE SECRETARY.—In complying
with the requirements of this part, the Secretary shall rely
on the recommendations of the Health Information Advi-
sory Committee established under section 1179 and shall
consult with appropriate Federal and State agencies and
private organizations. The Secretary shall publish in the
Federal Register the recommendations of the Health In-
formation Advisory Committee regarding the adoption of
a standard or modification of a standard under this part.
143
‘‘SEC. 1173. STANDARDS FOR INFORMATION TRANSACTIONS
AND DATA ELEMENTS.
‘‘(a) STANDARDS
TO ENABLE ELECTRONIC EX-
CHANGE.—
‘‘(1) IN GENERAL.—The Secretary shall adopt
standards for transactions, and data elements for
such transactions, to enable health information to be
exchanged electronically, that are—
‘‘(A) appropriate for the financial and ad-
ministrative transactions described in para-
graph (2); and
‘‘(B) related to other financial and admin-
istrative transactions determined appropriate by
the Secretary consistent with the goals of im-
proving the operation of the health care system
and reducing administrative costs.
‘‘(2) TRANSACTIONS.—The transactions re-
ferred to in paragraph (1)(A) are the following:
‘‘(A) Claims (including coordination of
benefits) or equivalent encounter information.
‘‘(B) Claims attachments.
‘‘(C) Enrollment and disenrollment.
‘‘(D) Eligibility.
‘‘(E) Health care payment and remittance
advice.
‘‘(F) Premium payments.
144
‘‘(G) First report of injury.
‘‘(H) Claims status.
‘‘(I) Referral certification and authoriza-
tion.
‘‘(3) ACCOMMODATION
OF
SPECIFIC
PROVID-
ERS.—The standards adopted by the Secretary
under paragraph (1) shall accommodate the needs of
different types of health care providers.
‘‘(b) UNIQUE HEALTH IDENTIFIERS.—
‘‘(1) IN GENERAL.—The Secretary shall adopt
standards providing for a standard unique health
identifier for each individual, employer, health plan,
and health care provider for use in the health care
system. In carrying out the preceding sentence for
each health plan and health care provider, the Sec-
retary shall take into account multiple uses for iden-
tifiers and multiple locations and specialty classifica-
tions for health care providers.
‘‘(2) USE
OF
IDENTIFIERS.—The standards
adopted under paragraphs (1) shall specify the pur-
poses for which a unique health identifier may be
used.
‘‘(c) CODE SETS.—
‘‘(1) IN GENERAL.—The Secretary shall adopt
standards that—
157
adopted or established under sections 1172 and
1173, shall supersede any contrary provision of
State law, including a provision of State law that re-
quires medical or health plan records (including bill-
ing information) to be maintained or transmitted in
written rather than electronic form.
‘‘(2) EXCEPTIONS.—A provision or requirement
under this part, or a standard or implementation
specification adopted or established under sections
1172 and 1173, shall not supersede a contrary pro-
vision of State law, if the provision of State law—
‘‘(A) imposes requirements, standards, or
implementation specifications that are more
stringent than the requirements, standards, or
implementation specifications under this part
with respect to the privacy of individually iden-
tifiable health information; or
‘‘(B) is a provision the Secretary deter-
mines—
‘‘(i) is necessary to prevent fraud and
abuse, or for other purposes; or
‘‘(ii) addresses controlled substances.
‘‘(b) PUBLIC HEALTH REPORTING.—Nothing in this
part shall be construed to invalidate or limit the authority,
power, or procedures established under any law providing