711
Title IV, Subtitle A
(B) by inserting after subparagraph (H)
the following new subparagraph:
‘‘(I) will notify individuals and entities fur-
nishing items and services for which payment may
be made under this part of any major change in the
procedures for billing for such items and services at
least 120 days before such change is to take effect;
and’’.
(3) EFFECTIVE DATE.—The amendments made
by paragraphs (1) and (2) shall apply to agreements
with fiscal intermediaries under section 1816 of the
Social Security Act and to contracts with carriers
under section 1842 of such Act for years beginning
after the expiration of the 9-month period beginning
on the date of the enactment of this Act.
PART 5—AMENDMENTS TO ANTI-
FRAUD AND ABUSE PROVISIONS
SEC. 4041. ANTI-KICKBACK PROVISIONS.
(a) REVISION TO PENALTIES.—
(1) PERMITTING SECRETARY TO IMPOSE CIVIL
MONETARY PENALTY.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)) is amended—
(A) by striking ‘‘or’’ at the end of para-
graphs (1) and (2);
712
Title IV, Subtitle A
(B) by striking the semicolon at the end of
paragraph (3) and inserting ‘‘; or’’; and
(C) by inserting after paragraph (3) the
following new paragraph:
‘‘(4) carries out any activity in violation of
paragraph (1) or (2) of section 1128B(b);’’.
(2) DESCRIPTION
OF
CIVIL
MONETARY
PEN-
ALTY
APPLICABLE.—Section 1128A(a) (42 U.S.C.
1320a–7a(a)) is amended—
(A) by striking ‘‘given).’’ at the end of the
first sentence and inserting the following:
‘‘given or, in cases under paragraph (4),
$50,000 for each such violation).’’; and
(B) by striking ‘‘claim.’’ at the end of the
second sentence and inserting the following:
‘‘claim (or, in cases under paragraph (4), dam-
ages of not more than three times the total
amount of remuneration offered, paid, solicited,
or received, without regard to whether a portion
of such remuneration was offered, paid, solic-
ited, or received for a lawful purpose).’’.
(3) INCREASE IN CRIMINAL PENALTY.—Para-
graphs (1) and (2) of section 1128B(b) (42 U.S.C.
1320a–7b(b)) are each amended—
713
Title IV, Subtitle A
(A) by striking ‘‘$25,000’’ and inserting
‘‘$50,000’’; and
(B) by striking the period at the end and
inserting the following: ‘‘, and shall be subject
to damages of not more than three times the
total remuneration offered, paid, solicited, or
received, without regard to whether a portion of
such remuneration was offered, paid, solicited,
or received for a lawful purpose.’’.
(b) REVISIONS TO EXCEPTIONS.—
(1) 
EXCEPTION
FOR
DISCOUNTS.—Section
1128B(b)(3)(A) (42 U.S.C. 1320a–7b(b)(3)(A)) is
amended by striking ‘‘program;’’ and inserting ‘‘pro-
gram and is not—
‘‘(i) for the furnishing of one item or serv-
ice without charge or at a reduced charge in ex-
change for any agreement to buy a different
item or service;
‘‘(ii) applicable to one payor but not to
providers of services or other entities under title
XVIII or a State health care program; or
‘‘(iii) in the form of a cash payment;’’.
(2) EXCEPTION
FOR
PAYMENTS
TO
EMPLOY-
EES.—Section 1128B(b)(3)(B) (42 U.S.C. 1320a–
7b(b)(3)(B)) is amended by inserting at the end ‘‘if
714
Title IV, Subtitle A
the amount of remuneration under the arrangement
is consistent with the fair market value of the serv-
ices and is not determined in a manner that takes
into account (directly or indirectly) the volume or
value of any referrals, except that such employee can
be paid remuneration in the form of a productivity
bonus based on services personally performed by the
employee.’’.
(3) EXCEPTION FOR WAIVER OF COINSURANCE
BY CERTAIN PROVIDERS.—Section 1128B(b)(3)(D)
(42 U.S.C. 1320a–7b(b)(3)(D)) is amended to read
as follows:
‘‘(D) a waiver or reduction of any coinsurance
or other copayment if the waiver or reduction is
made pursuant to a public schedule of discounts
which the person is obligated as a matter of law to
apply to certain individuals.’’.
(4) NEW
EXCEPTION
FOR
CERTAIN
PRO-
VIDERS.—Section 1128B(b)(3) (42 U.S.C. 1320a–
7b(b)(3)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (D);
(B) by striking the period at the end of
subparagraph (E) and inserting ‘‘; and’’; and
715
Title IV, Subtitle A
(C) by adding at the end the following new
subparagraph:
‘‘(F) any remuneration obtained by or given to
an individual or entity who receives assistance under
a grant or cooperative agreement for the provision of
health care services under title V, title XX, or the
Public Health Service Act, or is obligated as a mat-
ter of law to provide services according to a schedule
which provides for discounts based on the ability of
the individual services to pay, if—
‘‘(i) in the case of an individual or entity
who receives assistance under a grant or coop-
erative agreement for the provision of health
care services under title V, title XX, or the
Public Health Service Act, the remuneration is
directly and primarily related to the activity
supported by the grant or cooperative agree-
ment; and
‘‘(ii) the remuneration is pursuant to a
written arrangement for the use or procurement
of space, equipment, goods, or services for the
referral of patients that—
‘‘(I) 
does 
not 
result 
in 
private
inurement to any current employee, officer,
member of the Board of Directors, or
716
Title IV, Subtitle A
agent of the recipient or any other person
involved in recommending or negotiating
the arrangement; and
‘‘(II) does not preclude the referral of
patients to other providers of service of the
patient’s own choosing and does not inter-
fere with the ability of health professionals
to refer patients to providers of services
they believe are the most appropriate, ex-
cept to the extent such choices or referrals
are limited by the terms of a health plan
in which the patient has enrolled or the
terms of a grant or cooperative agreement
described in clause (i).’’.
(5) NEW
EXCEPTION
FOR
CAPITATED
PAY-
MENTS.—Section 1128B(b)(3) (42 U.S.C. 1320a–
7b(b)(3)), as amended by paragraph (4), is further
amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (E);
(B) by striking the period at the end of
subparagraph (F) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subparagraph—
717
Title IV, Subtitle A
‘‘(G) any reduction in cost sharing or increased
benefits given to an individual, any amounts paid to
a provider of services for items or services furnished
to an individual, or any discount or reduction in
price given by the provider for such items or serv-
ices, if the individual is enrolled with and such items
and services are covered under any of the following:
‘‘(i) A health plan which is furnishing
items or services under title XVIII or a State
health care program to individuals on an at-
risk, prepaid, capitated basis pursuant to a
written agreement with the Secretary or a State
health care program.
‘‘(ii) An organization receiving payments
on a prepaid basis, under a demonstration
project under section 402(a) of the Social Secu-
rity Amendments of 1967 or under section
222(a) of the Social Security Amendments of
1972.
‘‘(iii) Any other plan or insurer under
which each participating provider is paid wholly
on an at-risk, prepaid, capitated basis for such
items or services pursuant to a written arrange-
ment between the plan and the provider.’’.
718
Title IV, Subtitle A
(c) CLARIFICATION OF COVERAGE OF EMPLOYERS
AND EMPLOYEES.—Section 1128B(b) (42 U.S.C. 1320a–
7b(b)), as amended by subsection (a)(4), is further amend-
ed by adding at the end the following new paragraph:
‘‘(5) In this subsection, the term ‘referral’ includes
the referral by an employee to his or her employer of any
item or service for which payment may be made in whole
or in part under title XVIII or a State health care pro-
gram.’’
(d) AUTHORIZATION FOR THE SECRETARY TO ISSUE
REGULATIONS.—Section 1128B(b) (42 U.S.C. 1320a–
7b(b)), as amended by subsections (a)(4) and (c), is fur-
ther amended by adding at the end the following new para-
graph:
‘‘(6) The Secretary is authorized to impose by regula-
tion such other requirements as needed to protect against
program or patient abuse with respect to any of the excep-
tions described in paragraph (3).’’.
(e) CLARIFICATION OF OTHER ELEMENTS OF OF-
FENSE.—Section 1128B(b) (42 U.S.C. 1320a–7b(b)) is
amended—
(1) in paragraph (1) in the matter preceding
subparagraph (A), by striking ‘‘kind—’’ and insert-
ing ‘‘kind with intent to be influenced—’’;
719
Title IV, Subtitle A
(2) in paragraph (1)(A), by striking ‘‘in return
for referring’’ and inserting ‘‘to refer’’;
(3) in paragraph (1)(B), by striking ‘‘in return
for purchasing, leasing, ordering, or arranging for or
recommending’’ and inserting ‘‘to purchase, lease,
order, or arrange for or recommend’’;
(4) in paragraph (2) in the matter preceding
subparagraph (A), by striking ‘‘to induce such per-
son’’ and inserting ‘‘with intent to influence such
person’’; and
(5) by adding at the end of paragraphs (1) and
(2) the following sentence: ‘‘A violation exists under
this paragraph if one or more purposes of the remu-
neration is unlawful under this paragraph.’’.
SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN
SELF-REFERRAL.
(a) CLARIFICATION
OF PAYMENT BAN.—Section
1877(a)(1)(B) (42 U.S.C. 1395nn(a)(1)(B)) is amended
to read as follows:
‘‘(B) no physician or entity may present or
cause to be presented a claim under this title or bill
to any third party payor or other entity for des-
ignated health services furnished pursuant to a re-
ferral prohibited under subparagraph (A).’’.
720
Title IV, Subtitle A
(b) CLARIFICATION
OF COVERAGE
OF HOLDING
COMPANY TYPE ARRANGEMENTS AND LOANS.—The last
sentence of section 1877(a)(2) (42 U.S.C. 1395nn(a)(2))
is amended by striking ‘‘an interest in an entity that holds
an ownership or investment interest in any entity pro-
viding the designated health service’’ and inserting the fol-
lowing: ‘‘a loan from the entity, and an interest held indi-
rectly through means such as (but not limited to) having
a family member hold such investment interest or holding
a legal or beneficial interest in another entity (such as a
trust or holding company) that holds such investment in-
terest’’.
(c) REVISIONS TO GENERAL EXCEPTIONS TO BOTH
OWNERSHIP AND COMPENSATION ARRANGEMENT PROHI-
BITIONS.—
(1) REPEAL OF EXCEPTION FOR PHYSICIANS’
SERVICES.—Section 1877(b) (42 U.S.C. 1395nn(b))
is amended—
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) and
(3) as paragraphs (1) and (2).
(2) REVISION TO IN-OFFICE ANCILLARY SERV-
ICES
EXCEPTION.—Section 1877(b)(1) (42 U.S.C.
1395nn(b)(1)), as redesignated by paragraph (1), is
amended—
721
Title IV, Subtitle A
(A) in the matter preceding subparagraph
(A), by striking ‘‘services (other than durable
medical equipment (excluding infusion pumps)
and parenteral and enteral nutrients, equip-
ment, and supplies)’’ and inserting ‘‘clinical lab-
oratory services, x-ray and ultrasound services
that are provided at low-cost (as determined in
accordance with regulations of the Secretary)’’;
and
(B) in subparagraph (A)—
(i) in clause (ii)(I), by striking ‘‘(or
another physician who is a member of the
same group practice)’’,
(ii) in clause (ii)(II) by inserting ‘‘the
same or’’ before ‘‘another building’’, and
(iii) in clause (ii)(II)(bb), by inserting
‘‘all of’’ after ‘‘centralized provision of’’.
(3) REVISION TO PREPAID PLAN EXCEPTION.—
Section 1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as
redesignated by paragraph (1), is amended to read
as follows:
‘‘(2) PREPAID
PLANS.—In the case of des-
ignated 
health 
services 
furnished 
by 
an
organization—
722
Title IV, Subtitle A
‘‘(A) with a risk sharing contract under
section 1876(g) to an individual enrolled with
the organization,
‘‘(B) receiving payments on a prepaid
basis, under a demonstration project under sec-
tion 402(a) of the Social Security Amendments
of 1967 or under section 222(a) of the Social
Security Amendments of 1972, to an individual
enrolled with the organization, or
‘‘(C) that is a qualified health maintenance
organization (within the meaning of section
1310(d) of the Public Health Service Act) to an
individual enrolled with the organization.’’.
(4) NEW
EXCEPTION
FOR
CAPITATED
PAY-
MENTS.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by paragraph (1), is amended by inserting
after paragraph (2) the following new paragraph:
‘‘(3) OTHER
CAPITATED
PAYMENTS.—In the
case of a designated health service, if the designated
health service is included in the services for which a
physician or physician group is paid wholly on an at-
risk, prepaid, capitated basis by a health plan or in-
surer pursuant to a written arrangement between
the plan or insurer and the physician or physician
group.’’.
723
Title IV, Subtitle A
(d) REVISION TO PUBLICLY TRADED SECURITIES
EXCEPTION.—Section 
1877(c)(1) 
(42 
U.S.C.
1395nn(c)(1)) is amended by inserting ‘‘at the time ac-
quired by the physician’’ after ‘‘which may be purchased
on terms generally available to the public’’.
(e) REVISION TO RURAL PROVIDER EXCEPTION.—
Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended
by striking ‘‘substantially all’’ and inserting ‘‘not less than
85 percent (as determined in accordance with regulations
of the Secretary)’’.
(f) REVISIONS TO EXCEPTIONS RELATING TO OTHER
COMPENSATION ARRANGEMENTS.—
(1) EXCEPTION FOR PERSONAL SERVICES AR-
RANGEMENTS.—(A) Section 1877(e)(3)(B)(i)(II) (42
U.S.C. 1395nn(e)(3)(B)(i)(II)) is amended to read
as follows:
‘‘(II) If the plan places a physi-
cian or physician group at substantial
financial risk (as determined by the
Secretary 
pursuant 
to 
section
1876(i)(8)(A)(ii)), for services not
provided by the physician, the entity
complies with the provisions of sub-
clauses 
(I) 
and 
(II) 
of 
section
1876(i)(8)(A)(ii).’’;
724
Title IV, Subtitle A
(B) 
Section 
1877(e)(3)(B)(ii), 
U.S.C.
1395nn(e)(3)(B)(ii) is amended by striking ‘‘may di-
rectly or indirectly have the effect of’’ and inserting
‘‘has the purpose of’’.
(2) REPEAL OF EXCEPTION FOR REMUNERA-
TION
UNRELATED
TO
THE
PROVISION
OF
DES-
IGNATED HEALTH SERVICES.—Section 1877(e) (42
U.S.C. 1395nn(e)) is amended—
(A) by striking paragraph (4); and
(B) by redesignating paragraphs (5), (6),
(7), and (8) as paragraphs (4), (5), (6), and
(7).
(3) EXCEPTION FOR CERTAIN PHYSICIAN RE-
CRUITMENT.—Section 
1877(e)(4) 
(42 
U.S.C.
1395nn(e)(4)), as redesignated by paragraph (2), is
amended to read as follows:
‘‘(4) PHYSICIAN RECRUITMENT.—In the case of
remuneration which is provided by an entity located
in a rural area (as defined in section 1886(d)(2)(D))
or a health professional shortage areas (designated
under section 332 of the Public Health Service Act),
or an entity for which 85 percent of the patients are
members of a medically underserved population des-
ignated under section 330 of the Public Health Serv-
ice Act (as determined in accordance with regula-
725
Title IV, Subtitle A
tions of the Secretary), in order to induce a physi-
cian who has been practicing within the physician’s
current specialty for less than one year to establish
staff privileges at the entity, or to induce any other
physician to relocate his or her primary place of
practice to the geographic area served by the entity,
if the following standards are met:
‘‘(A) The arrangement is set forth in a
written agreement that specifies the benefits
provided by the entity to the physician, the
terms under which the benefits are to be pro-
vided, and the obligations of each party.
‘‘(B) If a physician is leaving an estab-
lished practice, the physical location of the new
primary place of practice must be not less than
100 miles from the location of the established
primary place of practice and at least 85 per-
cent of the revenues of the physician’s new
practice must be generated from new patients
for whom the physician did not previously pro-
vide services at the former practice.
‘‘(C) The benefits are provided by the enti-
ty for a period not in excess of 3 years, and the
terms of the agreement are not renegotiated
during this 3-year period in any substantial as-
726
Title IV, Subtitle A
pect, unless the physician’s new primary place
of practice is designated as a health profes-
sional shortage area (pursuant to section 332 of
the Public Health Service Act) for the physi-
cian’s specialty category during the entire dura-
tion of the relationship between the physician
and the entity.
‘‘(D) There is no requirement that the
physician make referrals to, be in a position to
make or influence referrals to, or otherwise gen-
erate business for the entity as a condition for
receiving the benefits.
‘‘(E) The physician is not restricted from
establishing staff privileges at, referring any
service to, or otherwise generating any business
for any other entity of the physician’s choosing.
‘‘(F) The amount or value of the benefits
provided by the entity may not vary (or be ad-
justed or renegotiated) in any manner based on
the volume or value of any expected referrals to
or business otherwise generated for the entity
by the physician for which payment may be
made in whole or in part under this title or a
State health care program (as defined in section
1128(h)).
727
Title IV, Subtitle A
‘‘(G) The physician agrees to treat patients
entitled to benefits under this title or enrolled
in a State plan for medical assistance under
title XIX.’’.
(4) 
EXCEPTION
FOR
ISOLATED
TRANS-
ACTIONS.—Section 
1877(e)(5) 
(42 
U.S.C.
1395nn(e)(6)), as redesignated by paragraph (2), is
amended—
(A) by redesignating subparagraph (B) as
subparagraph (C);
(B) by striking ‘‘and’’ at the end of sub-
paragraph (A); and
(C) by inserting after subparagraph (A)
the following new subparagraph:
‘‘(B) there is no financing of the sale be-
tween the parties, and’’.
(5) EXCEPTION FOR PAYMENTS BY A PHYSI-
CIAN.—Section 
1877(e)(7) 
(42 
U.S.C.
1395nn(e)(7)), as redesignated by paragraph (2), is
amended to read as follows:
‘‘(7) PAYMENTS BY A PHYSICIAN FOR ITEMS
AND SERVICES.—Payments made by a physician to
an individual or entity as compensation for items or
services if the items or services are furnished at a
price that is consistent with fair market value.’’.
728
Title IV, Subtitle A
(6) ADDITIONAL
EXCEPTION
FOR
DISCOUNTS
OR OTHER REDUCTIONS IN PRICE.—Section 1877(e)
(42 U.S.C. 1395nn(e)), as amended by paragraph
(2), is amended by adding at the end the following
new paragraph:
‘‘(8) DISCOUNTS
OR
OTHER
REDUCTIONS
IN
PRICE.—Discounts or other reductions in price be-
tween a physician and an entity for items or services
for which payment may be made under this title so
long as the discount or other reduction in price is
properly disclosed and appropriately reflected in the
costs claimed or charges made by the physician or
entity under this title and is not—
‘‘(A) for the furnishing of one item or serv-
ice without charge or at a reduced charge in ex-
change for any agreement to buy a different
item or service,
‘‘(B) applicable to one or more payers but
not to all individuals and entities providing
services for which payment may be made under
this title, or
‘‘(C) in the form of a cash payment.’’.
(g) CLARIFICATION OF SANCTION AUTHORITY.—Sec-
tion 1877(g)(4) (42 U.S.C. 1395nn(g)(4)) is amended by
striking ‘‘Any physician’’ and all that follows through ‘‘to
729
Title IV, Subtitle A
such entity,’’ and inserting the following: ‘‘Any physician
or other entity that enters into an arrangement or scheme
(such as a cross-referral arrangement or an arrangement
with multiple leases overlapping in time for the same or
similar rental space or equipment) which the physician or
entity knows or should know has a principal purpose of
inducing referrals to another entity, which referrals, if
made directly by the physician or entity to such other enti-
ty,’’.
(h) CLARIFICATION OF DEFINITION OF REMUNERA-
TION.—Section 
1877(h)(1)(B) 
(42 
U.S.C.
1395nn(h)(1)(B)) is amended to read as follows:
‘‘(B) The term ‘remuneration’ includes any pay-
ment, discount or other reduction in price, forgive-
ness of debt or other benefit made directly or indi-
rectly, overtly or covertly, in cash or in kind.’’.
(i) REVISION
TO DEFINITION
OF GROUP PRAC-
TICE.—Section 1877(h)(4) (42 U.S.C. 1395nn(h)(4)) is
amended—
(1) in subparagraph (A)(vi), by striking the pe-
riod at the end and inserting the following: ‘‘, in-
cluding a requirement for the physical grouping of
physician practices as may be reasonably required to
prevent the abuse of any exceptions provided to
group practices under this section.’’; and
730
Title IV, Subtitle A
(2) in subparagraph (B)(i), by striking ‘‘or
services incident to such personally performed serv-
ices’’.
(j) EXPANSION TO COVER ADDITIONAL ITEMS AND
SERVICES.—Section 
1877(h)(6) 
(42 
U.S.C.
1395nn(h)(6)), as amended by section 2005(c)(3), is
amended—
(1) in subparagraph (D), by striking ‘‘or
other’’; and
(2) by adding at the end the following new sub-
paragraphs:
‘‘(M) Diagnostic services.
‘‘(N) Any other item or service not ren-
dered by the physician personally or by a per-
son under the physician’s direct supervision.’’.
(k) AUTHORIZATION FOR THE SECRETARY TO ISSUE
REGULATIONS.—Section 1877 (42 U.S.C. 1395nn) is
amended by adding the following new subsection:
‘‘(i) ADDITIONAL REQUIREMENTS.—The Secretary is
authorized to impose by regulation such other require-
ments as needed to protect against program or patient
abuse with respect to any of the exceptions under this sec-
tion.’’.
(l) INCORPORATION OF AMENDMENTS MADE UNDER
OBRA–1993.—In this section, any reference to section