I
104TH CONGRESS
1ST SESSION
H. R. 2408
To provide for enhanced penalties for health care fraud, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 27, 1995
Mr. COBURN introduced the following bill; which was referred to the Commit-
tee on Commerce, and in addition to the Committees on Ways and
Means, the Judiciary, and Government Reform and Oversight, for a pe-
riod to be subsequently determined by the Speaker, in each case for con-
sideration of such provisions as fall within the jurisdiction of the commit-
tee concerned
A BILL
To provide for enhanced penalties for health care fraud,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Health Care Anti-Fraud Act of 1995’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—FRAUD AND ABUSE CONTROL PROGRAM
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Sec. 101. Creation of Health Care Anti-Fraud Task Force.
Sec. 102. Employees of task force.
Sec. 103. Fraud and abuse control program.
Sec. 104. Court-imposed obligations upon health anti-fraud and abuse convic-
tions.
Sec. 105. Health care fraud and abuse guidance.
TITLE II—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND
ABUSE
Sec. 201. Mandatory exclusion from participation in Medicare and State health
care programs.
Sec. 202. Establishment of minimum period of exclusion for certain individuals
and entities subject to permissive exclusion from Medicare and
State health care programs.
Sec. 203. Permissive exclusion of individuals with ownership or control interest
in sanctioned entities.
Sec. 204. Sanctions against practitioners and persons for failure to comply with
statutory obligations.
Sec. 205. Intermediate sanctions for Medicare health maintenance organiza-
tions.
Sec. 206. Effective date.
TITLE III—ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS
Sec. 301. Establishment of the health care fraud and abuse data collection pro-
gram.
TITLE IV—MONETARY PENALTIES
Sec. 401. Social Security Act civil monetary penalties.
Sec. 402. Other Social Security Act civil penalties.
Sec. 403. Social Security Act criminal penalties.
TITLE V—AMENDMENTS TO ANTI-KICKBACK LAW
Sec. 501. Clarification of standards.
Sec. 502. Clarifications and additions to anti-kickback exceptions.
Sec. 503. Clarification of safe harbor authority in anti-kickback provisions.
TITLE VI—AMENDMENTS TO THE PHYSICIAN SELF-REFERRAL
LAW
Sec. 601. Financial relationship defined.
Sec. 602. Self-referrals for physician services.
Sec. 603. Risk-sharing arrangements.
Sec. 604. Physician Ownership
Sec. 605. Shared facility services.
Sec. 606. Payer directed care.
Sec. 607. Self-referrals for certain designated health services.
Sec. 608. Definition of direct supervision.
Sec. 609. Effective date.
TITLE VII—MEDICARE BILLING ABUSE PREVENTION
Sec. 701. Implementation of General Accounting Office recommendations re-
garding Medicare claims processing.
Sec. 702. Minimum software requirements.
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Sec. 703. Disclosure.
Sec. 704. Review and modification of regulations.
Sec. 705. Definitions.
Sec. 706. Termination of Proposed Medicare Transaction System.
TITLE I—FRAUD AND ABUSE CONTROL
PROGRAM
SEC. 101. CREATION OF NATIONAL HEALTH CARE ANTI-
FRAUD TASK FORCE.
(a) PURPOSE.—The Attorney General in consultation
with the Secretary of the Department of Health and
Human Services shall establish a national health care
fraud task force to coordinate Federal law enforcement
agencies to control fraud and abuse in the delivery of
health care in the United States. This task force, through
its regional offices, shall have the power to pursue both
civil and/or criminal actions against any individual organi-
zation, or other entity whose acts knowingly and willfully
amount to health care fraud or knowingly and willfully
amount to fraud and abuse in the delivery of health care
in the United States.
(b) IN GENERAL.—Consistent with section 101 of
subtitle A, not later than one hundred twenty days after
enactment, the Attorney General shall establish a health
care fraud task force—
(1) to target, investigate, and prosecute individ-
uals who organize, direct, finance, or are otherwise
knowingly engaged in health care fraud;
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(2) to work fully and effectively with State and
local law enforcement agencies;
(3) to promote a coordinated health care fraud
enforcement effort and to encourage maximum co-
operation among all Federal agencies; and
(4) to make full use of financial investigative
techniques, including tax law enforcement and, in
order identify and convict individuals and sanction
entities that engage in health care fraud.
(c) PARTICIPANTS.—The Federal agencies that shall
participate in the health care fraud task force are—
(1) the Department of Justice (including the
Federal Bureau of Investigation);
(2) the Department of Health and Human
Services (including the Office of the Inspector Gen-
eral);
(3) the Department of Defense (CHAMPUS);
(4) the Veteran’s Administration:
(5) the Railroad Retirement Board;
(6) the United States Postal Inspection Service;
and
(7) the Internal Revenue Service.
(d) The President shall designate one of the members
as chair. The chair serves a term concurrent with that
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of the President. The chair shall serve as the chief execu-
tive officer of the task force.
SEC. 102. EMPLOYEES OF THE TASK FORCE.
(a) Effective January 1, 1996, the following employ-
ees of the Government of the United States shall be as-
signed to the task force but shall remain as employees of
their former Government employer for purposes of salary,
compensation, benefits and all related matters:
(1) Employees of the Department of Health
and Human Services whose primary duties related to
health care fraud.
(2) Employees of the Department of Justice
whose primary duties relate to health care fraud to
include employees of the Federal Bureau of Inves-
tigation and the Office for United States Attorneys;
and
(3) Any other employee of the Federal Govern-
ment selected by the Commission for assignment to
the task force.
(b) The number of employees assigned to the task
force pursuant to subsection (a) shall be sufficient to allow
the task force to perform its objectives; provided, however,
that the total number of individuals does not exceed fifty
(50).
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operations, relating to ‘‘fraud and abuse in’’ the
delivery of and payment for health care in the
United States;
(C) to facilitate the enforcement of the
provisions of sections 1128, 1128A, and 1128B
of the Social Security Act (42 U.S.C. 1320a–7,
1320a–7a, and 1320a–7b) and other statutes
applicable to health care fraud and abuse; and
(D) to provide for the modification and es-
tablishment of safe harbors, and to issue advi-
sory opinions and special fraud alerts pursuant
to section 105.
(2) COORDINATION WITH HEALTH PLANS.—In
carrying out the program established under para-
graph (1), the Secretary and the Attorney General
shall consult with, and arrange for the sharing of
data, with representatives of health plans.
(3) REGULATIONS.—
(A) IN GENERAL.—The Secretary and the
Attorney General shall by regulation establish
standards to carry out the program under para-
graph (1).
(B) INFORMATION STANDARDS.—
(i) IN
GENERAL.—Such regulations
shall include standards relating to the fur-
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nishing of information by health plans,
providers, and others to enable the Sec-
retary and the Attorney General to carry
out the program (including coordination
with health plans under paragraph (2)).
(ii) CONFIDENTIALITY.—Such regula-
tions shall include procedures to assure
that such information is provided and uti-
lized in a manner that appropriately pro-
tects the confidentiality of the information
and the privacy of individuals receiving
health care services and items.
(iii) QUALIFIED IMMUNITY FOR PRO-
VIDING INFORMATION.—The provisions of
section 1157(a) of the Social Security Act
(relating to limitation on liability) shall
apply—
(I) to a person providing infor-
mation or communications to the
Commission, the Secretary or the At-
torney General in conjunction with
their performance of duties under this
Act; or
(II) to health plans sharing infor-
mation in good faith and without mal-
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ice with any other health plan with re-
spect to matters relating to health
care fraud detection, investigation and
prosecution.
(4) ENSURING ACCESS TO DOCUMENTATION.—
The Inspector General of the Department of Health
and Human services is authorized to exercise such
authority described in paragraphs (4) and (5) of sec-
tion 6 of the Inspector General Act of 1978 (5
U.S.C. App.) (relating to subpoenas and administra-
tion of oaths) with respect to the activities under the
fraud and abuse control program established under
this subsection to the same extent as the Inspector
General may exercise such authorities to perform the
functions assigned by such Act.
(5) AUTHORITY
OF
INSPECTOR
GENERAL.—
Nothing in this Act shall be construed to diminish
the authority of any Inspector General, including
such authority as provided in the Inspector General
Act of 1978 (5 U.S.C. App.).
(b) HEALTH PLAN DEFINED.—For purposes of this
section, the term ‘‘health plan’’ means a plan or program
that provides health benefits, whether directly, through in-
surance, or otherwise, and includes—
(1) a policy of health insurance;
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(2) a contract of a service benefit organization;
(3) a membership agreement with a health
maintenance organization or other prepaid health
plan; and
(4) an employee welfare benefit plan or a mul-
tiple employer welfare plan (as such terms are de-
fined in section 3 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1002).
SEC. 104. COURT-IMPOSED OBLIGATIONS UPON HEALTH
CARE FRAUD AND ABUSE CONVICTIONS.
(a) IDENTIFICATION OF COMMUNITY SERVICE OP-
PORTUNITIES.—Section 1128B of the Social Security Act
(42 U.S.C. 1320a–7b) is amended by adding at the end
the following new subsection:
‘‘(g) The Secretary may—
‘‘(1) in consultation with State and local health
care officials, identify opportunities for the satisfac-
tion of community service obligations that a court
may impose upon the conviction of an offense under
this section, and
‘‘(2) make information concerning such oppor-
tunities available to Federal and State law enforce-
ment officers and State and local health care offi-
cials.’’.
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(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1996.
SEC. 105. HEALTH CARE FRAUD AND ABUSE GUIDANCE.
(a) SOLICITATION AND PUBLICATION OF MODIFICA-
TIONS TO EXISTING SAFE HARBORS AND NEW SAFE
HARBORS.—
(1) IN GENERAL.—
(A) SOLICITATION
OF
PROPOSALS
FOR
SAFE
HARBORS.—Not later than January 1,
1996, 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) of the Social Security Act (42
U.S.C. 1320a–7b(b)) and shall not serve
as the basis for an exclusion under section
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1128(b)(7) of such Act (42 U.S.C. 1320a–
7(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 by May of each year pub-
lish in the Federal Register proposed modifica-
tions to existing safe harbors and proposed ad-
ditional safe harbors, if appropriate, with a 60-
day comment period. After considering any pub-
lic comments received during this period, the
Secretary shall within 60 days after the close of
the comment period issue final rules modifying
the existing safe harbors and establishing new
safe harbors, as appropriate.
(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 Con-
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gress or as part of the year-end semiannual re-
port required by section 5 of the Inspector Gen-
eral Act of 1978 (5 U.S.C. App.), describe the
proposals received under clauses (i) and (ii) of
subparagraph (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 ESTABLISH-
ING SAFE HARBORS.—In modifying and establishing
safe harbors under paragraph (1)(B), the Secretary
may consider the extent to which providing 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 free-
dom of choice among health care providers.
(D) An increase or decrease in competition
among health care providers.
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‘‘(2) EFFECT OF ADVISORY OPINIONS.—
‘‘(A) Each advisory opinion issued by the
Secretary shall be binding as to the Secretary
and the party or parties requesting the opinion,
so long as the party’s actions or omissions do
not deviate from the actions or omissions pre-
sented in the request for the advisory opinion.
‘‘(B) The failure of a party to seek an ad-
visory opinion may not be introduced into evi-
dence to prove that the party intended to vio-
late the provisions of this section.
‘‘(3) FEE.—
‘‘(A) IN
GENERAL.—The Secretary shall
require an individual or entity requesting an ad-
visory opinion under this section to submit a
fee.
‘‘(B) AMOUNT.—The amount of the fee re-
quired under paragraph (1) shall be equal to
the costs incurred by the Secretary in respond-
ing to the request.
‘‘(3) REGULATIONS.—The Secretary within one
hundred and twenty days of the date of enactment,
shall issue regulations establishing a system for the
issuance of advisory opinions. Such regulations shall
provide for—
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‘‘(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; and
‘‘(D) the manner in which advisory opin-
ions will be made available to the public.
‘‘(4) INTERVAL
FOR
ISSUANCE
OF
ADVISORY
OPINIONS.—Under no circumstances shall the inter-
val in which the Secretary shall respond to a party
requesting an advisory opinion exceed thirty days.’’.
(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 section
1128B(b) or section 1877 of the Social Security
Act (42 U.S.C. 1320a–7b(b) or 42 U.S.C.
1395nn) (in this subsection referred to as a
‘‘special fraud alert’’).
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(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.
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TITLE II—REVISIONS TO CURRENT
SANCTIONS FOR FRAUD AND ABUSE
SEC. 201. 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) of the So-
cial Security Act (42 U.S.C. 1320a–7(a)) is amend-
ed by adding at the end the following new para-
graph:
‘‘(3) 
FELONY
CONVICTION
RELATING
TO
HEALTH
CARE
FRAUD.—Any individual that has
been convicted after the date of the enactment of the
Health Care Anti-Fraud Act of 1995, 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)) oper-
ated by or financed in whole or in part by any Fed-
eral, 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.’’.
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(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 1128(b) of such Act (42 U.S.C. 1320a–
7(b)) is amended to read as follows:
‘‘(1) CONVICTION RELATING TO FRAUD.—
‘‘(A) CONVICTION RELATING TO HEALTH
CARE FRAUD.—Any individual or entity with re-
spect to a misdemeanor, or entity with respect
to a felony, that has been convicted after the
date of the enactment of the Health Care Anti-
Fraud Act of 1995, under Federal or State law,
of a criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibil-
ity, 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;
‘‘(B) CONVICTION
RELATING
TO
FRAUD
GENERALLY.—Any individual or entity that has
been convicted after the date of enactment of
the Health Care Anti-Fraud Act of 1995, under
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Federal or State law, of a criminal offense re-
lating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial mis-
conduct with respect to any act or omission in
a program (other than a health care program)
operated by or financed in whole or in part by
any Federal, State, or local government agen-
cy.’’.
(b) INDIVIDUAL CONVICTED OF FELONY RELATING
TO CONTROLLED SUBSTANCE.—
(1) IN GENERAL.—Section 1128(a) of the So-
cial Security Act (42 U.S.C. 1320a–7(a)), as amend-
ed 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 Care Anti-Fraud Act of 1995,
under Federal or State law, of a criminal offense
consisting of a felony relating to the unlawful manu-
facture, distribution, prescription, or dispensing of a
controlled substance.’’.
(2) 
CONFORMING
AMENDMENT.—Section
1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))
is amended—
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(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. 202. 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) of the Social Security Act (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 indi-
vidual or entity under paragraph (1), (2), or (3)
of subsection (b), the period of the exclusion
shall be 3 years, unless the Secretary deter-
mines in accordance with published regulations
that a shorter period is appropriate because of
mitigating circumstances or that a longer pe-
riod is appropriate because of aggravating cir-
cumstances.
‘‘(E) In the case of an exclusion of an indi-
vidual or entity under subsection (b)(4) or
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(b)(5), the period of the exclusion shall not be
less than the period during which the individ-
ual’s or entity’s license to provide health care is
revoked, suspended, or surrendered, or the indi-
vidual or the entity is excluded or suspended
from a Federal or State health care program.
‘‘(F) In the case of an exclusion of an indi-
vidual or entity under subsection (b)(6)(B), the
period of the exclusion shall be not less than 1
year.’’.
SEC. 203. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH
OWNERSHIP 
OR 
CONTROL 
INTEREST 
IN
SANCTIONED ENTITIES.
Section 1128(b) of the Social Security Act (42 U.S.C.
1320a–7(b)) is amended by adding at the end the follow-
ing new paragraph:
‘‘(15) INDIVIDUALS
CONTROLLING
A
SANC-
TIONED ENTITY.—Any individual who has a direct
or indirect ownership or control interest of 5 percent
or more, or an ownership or control interest (as de-
fined in section 1124(a)(3)) in, or who is an officer
or managing employee (as defined in section
1126(b)) of, an entity—
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‘‘(A) that has been convicted of any of-
fense described in subsection (a) or in para-
graph (1), (2), or (3) of this subsection; or
‘‘(B) that has been excluded from partici-
pation under a program under title XVIII or
under a State health care program, if the indi-
vidual knew or had reason to know of the of-
fense of the entity upon which the conviction or
exclusion was based.’’.
SEC. 204. 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) of the Social Security Act (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)’’.
(2) 
CONFORMING
AMENDMENT.—Section
1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is
amended by striking ‘‘shall remain’’ and inserting
‘‘shall (subject to the minimum period specified in
the second sentence of paragraph (1)) remain’’.
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(b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI-
TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)
of the Social Security Act (42 U.S.C. 1320c–5(b)(1)) is
amended—
(1) in the second sentence, by striking ‘‘and de-
termines’’ and all that follows through ‘‘such obliga-
tions,’’; and
(2) by striking the third sentence.
SEC. 205. INTERMEDIATE SANCTIONS FOR MEDICARE
HEALTH MAINTENANCE ORGANIZATIONS.
(a) APPLICATION OF INTERMEDIATE SANCTIONS FOR
ANY PROGRAM VIOLATIONS.—
(1) IN
GENERAL.—Section 1876(i)(1) of the
Social Security Act (42 U.S.C. 1395mm(i)(1)) is
amended by striking ‘‘the Secretary may terminate’’
and all that follows and inserting ‘‘in accordance
with procedures established under paragraph (9),
the Secretary may at any time terminate any such
contract or may impose the intermediate sanctions
described in paragraph (6)(B) or (6)(C) (whichever
is applicable) on the eligible organization if the Sec-
retary determines that the organization—
‘‘(A) has failed substantially to carry out
the contract;
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‘‘(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) of such Act (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 sanctions:
‘‘(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 determination has directly ad-
versely affected (or has the substantial
likelihood of adversely affecting) an indi-
vidual covered under the organization’s
contract.
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‘‘(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
determination under paragraph (1) exists.
‘‘(iii) Suspension of enrollment of in-
dividuals under this section after the date
the Secretary notifies the organization of a
determination under paragraph (1) and
until the Secretary is satisfied that the de-
ficiency that is the basis for the determina-
tion has been corrected and is not likely to
recur.’’.
(3) PROCEDURES FOR IMPOSING SANCTIONS.—
Section 1876(i) of such Act (42 U.S.C. m(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—
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‘‘(A) the Secretary first provides the orga-
nization with the reasonable opportunity to de-
velop and implement a corrective action plan to
correct the deficiencies that were the basis of
the Secretary’s determination under paragraph
(1) and the organization fails to develop or im-
plement such a plan;
‘‘(B) in deciding whether to impose sanc-
tions, the Secretary considers aggravating fac-
tors such as whether an entity has a history of
deficiencies or has not taken action to correct
deficiencies the Secretary has brought to their
attention;
‘‘(C) there are no unreasonable or unneces-
sary delays between the finding of a deficiency
and the imposition of sanctions; and
‘‘(D) the Secretary provides the organiza-
tion with reasonable notice and opportunity for
hearing (including the right to appeal an initial
decision) before imposing any sanction or termi-
nating the contract.’’.
(4) 
CONFORMING
AMENDMENTS.—Section
1876(i)(6)(B) of such Act (42 U.S.C. mm(i)(6)(B))
is amended by striking the second sentence.
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(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to contract years be-
ginning on or after January 1, 1996.
TITLE III—ADMINISTRATIVE AND
MISCELLANEOUS PROVISIONS
SEC. 301. ESTABLISHMENT OF THE HEALTH CARE FRAUD
AND ABUSE DATA COLLECTION PROGRAM.
(a) GENERAL PURPOSE.—Not later than January 1,
1996, the Secretary (in this title referred to as the ‘‘Sec-
retary’’) shall establish a national 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 practitioners as required by sub-
section (b), with access as set forth in subsection (c).
(b) REPORTING OF INFORMATION.—
(1) IN
GENERAL.—Each Government agency
and health plan shall report to the task force de-
scribed in section 101 any final adverse action (not
including settlements in which no findings of liability
have been made) taken against a health care pro-
vider, supplier, or practitioner.
(2) INFORMATION TO BE REPORTED.—The in-
formation to be reported under paragraph (1) in-
cludes:
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(A) The name and TIN (as defined in sec-
tion 7701(a)(41)) of any health care provider,
supplier, 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
task force determines is required for appro-
priate interpretation of information reported
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.
(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
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task force prescribes. Such information shall first be
required to be reported on a date specified by the
task force.
(5) TO WHOM REPORTED.—The information re-
quired to be reported under this subsection shall be
reported to the task force.
(c) DISCLOSURE
AND CORRECTION
OF INFORMA-
TION.—
(1) DISCLOSURE.—With respect to the informa-
tion about final adverse actions (not including settle-
ments in which no findings of liability have been
made) reported to the task force under this section
respecting a health care provider, supplier, or practi-
tioner, the task force shall provide for—
(A) disclosure of the information, upon re-
quest, to the health care provider, supplier, or
licensed practitioner, and
(B) procedures in the case of disputed ac-
curacy of the information.
(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 task
force prescribes.
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(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 task force shall provide.
(2) FEES
FOR
DISCLOSURE.—The task force
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 may not exceed the costs of
processing the requests for disclosure and of provid-
ing such information. Such fees shall be available to
the task force.
(e) PROTECTION FROM LIABILITY
FOR REPORT-
ING.—No person or entity shall be held liable in any civil
action with respect to any report made as required by this
section, without knowledge of the falsity of the informa-
tion contained in the report.
(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section:
(1)(A) The term ‘‘final adverse action’’ in-
cludes:
(i) Civil judgments against a health care
provider in Federal or State court related to the
delivery of a health care item or service.
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(ii) Federal or State criminal convictions
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, suppliers, and licensed
health care practitioners, including—
(I) formal or official actions, such as
revocation or suspension of a license (and
the length of any such suspension), rep-
rimand, censure or probation;
(II) any other loss of license of the
provider, supplier, or practitioner, by oper-
ation of law; or
(III) any other negative action or
finding by such Federal or State agency
that is publicly available information.
(iv) Exclusion from participation in Fed-
eral and State health care programs.
(v) Any other adjudicated actions or deci-
sions that the task force shall establish.
(B) The term does not include any action—
(i) with respect to a malpractice claim; or
(ii) which is based on something other
than health care fraud and abuse.
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(2) The terms ‘‘licensed health care practi-
tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’
mean, with respect to a State, an individual who is
licensed or otherwise authorized by the State to pro-
vide health care services (or any individual who,
without authority holds himself or herself out to be
so licensed or authorized).
(3) The term ‘‘health care provider’’ means a
provider of services as defined in section 1861(u) of
the Social Security Act, and any entity, including a
health maintenance organization, group medical
practice, or any other entity listed by the Secretary
in regulation, that provides health care services.
(4) The term ‘‘supplier’’ means a supplier of
health care items and services described in section
1819 (a) and (b), and section 1861 of the Social Se-
curity Act.
(5) The term ‘‘Government agency’’ shall in-
clude:
(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
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limited to the Department of Defense and the
Veterans’ Administration.
(D) State law enforcement agencies.
(E) State Medicaid fraud and abuse units.
(F) Federal or State agencies responsible
for the licensing and certification of health care
providers and licensed health care practitioners.
(G) The task force.
(6) The term ‘‘health plan’’ has the meaning
given such term by section 101(c).
(7) For purposes of paragraph (2), the exist-
ence of a conviction shall be determined under para-
graph (4) of section 1128(j) of the Social Security
Act.
(g) CONFORMING AMENDMENT.—Section 1921(d) of
the Social Security Act is amended by inserting ‘‘and sec-
tion 301 of the Health Care Anti-Fraud Act of 1995’’
after ‘‘section 422 of the Health Care Quality Improve-
ment Act of 1986’’.
TITLE IV—MONETARY PENALTIES
SEC. 401. SOCIAL SECURITY ACT CIVIL MONETARY PEN-
ALTIES.
(a) MODIFICATIONS
OF AMOUNTS
OF PENALTIES
AND ASSESSMENTS.—Section 1128A(a) of the Social Se-
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curity Act (42 U.S.C. 1320a–7a(a)) is amended in the
matter following paragraph (3)—
(1) 
by 
striking 
‘‘$2,000’’ 
and 
inserting
‘‘$10,000’’;
(2) by striking $15,000 and inserting $75,000;
and
(3) by striking ‘‘twice the amount’’ and insert-
ing ‘‘3 times the amount’’.
(b) CLAIM FOR ITEM OR SERVICE BASED ON INCOR-
RECT CODING
OR MEDICALLY UNNECESSARY SERV-
ICES.—Section 1128A(a)(1) of the Social Security Act (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-
ice that is based on a code that the person knows
or has reason to know will result in a greater pay-
ment to the person than the code the person knows
or has reason to 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
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(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 has reason to know
is not medically necessary; or’’.
(c) PERMITTNG SECRETARY TO IMPOSE CIVIL MON-
ETARY PENALTY.—Section 1128A(b) of the Social Secu-
rity Act (42 U.S.C. 1320a–7a(a)) is amended by
(1) adding the following new paragraph:
‘‘(3) Any person (including any organization,
agency, or other entity, but excluding a beneficiary
as defined in subsection (i)(5)) who the Secretary
determines has violated section 1128B(b) of this
title shall be subject to a civil monetary penalty of
not more than $10,000 for each such violation. In
addition, such person shall be subject to an assess-
ment of not more than three times the total amount
of the remuneration offered, paid, solicited, or re-
ceived in violation of section 1128B(b). The total
amount of remuneration subject to an assessment
shall be calculated without regard to whether some
portion thereof also may have been intended to serve
a purpose other than one proscribed by section
1128B(b).’’ and
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(2) striking $2,000 each place it appears and
inserting $10,000.
(d) SANCTIONS AGAINST PRACTITIONERS AND PER-
SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI-
GATIONS.—Section 1156(b)(3) of the Social Security Act
(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’’.
(e) PROCEDURAL PROVISIONS.—Section 1876(i)(6)
of the Social Security Act (42 U.S.C. m(i)(6)) is amended
(1) by adding at the end the following new sub-
paragraph:
‘‘(D) The provisions of section 1128A
(other than subsections (a) and (b)) shall apply
to a civil money penalty under subparagraph
(A) or (B) in the same manner as they apply
to a civil money penalty or proceeding under
section 1128A(a).’’,
(2) by striking $25,000 and inserting $125,000;
(3) 
by 
striking 
$100,000 
and 
inserting
$1,000,000; and
(4) by striking $15,000 and inserting $75,000.
(f) PROHIBITION AGAINST OFFERING INDUCEMENTS
TO
INDIVIDUALS
ENROLLED
UNDER
PROGRAMS
OR
PLANS.—
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(1) 
OFFER
OF
REMUNERATION.—Section
1128A(a) of the Social Security Act (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
XVIII, or a State health care program;’’.
(2) 
REMUNERATION
DEFINED.—Section
1128A(i) of such Act (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
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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
‘‘(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-
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closed in writing to all beneficiaries, third party
payors, and providers, to whom claims are pre-
sented; or
‘‘(C) incentives given to individuals to pro-
mote the delivery of preventive care.
(g) CLARIFICATION OF INTENT STANDARD.—Section
1128A(i) of the Social Security Act (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.’’
(h) EFFECTIVE DATE.—The amendments made by
this section shall take effect January 1, 1996.
SEC. 402. OTHER SOCIAL SECURITY ACT CIVIL PENALTIES.
(a) STANDARDS FOR NURSING FACILITIES.—
(1) PROVIDING ADVANCE NOTICE OF SURVEY
TO NURSING FACILITY.—Section 1819(g)(2)(A)(i) of
such Act (42 U.S.C. 1395i–3(g)(2)(A)(i)) is amend-
ed by striking ‘‘$2,000’’ and inserting ‘‘$10,000’’.
(b) DISTRIBUTION
BY
SUPPLIERS
OF
MEDICAL
EQUIPMENT OF MEDICAL NECESSITY FORMS.—
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(1) Section 1834(j)(2)(A)(iii) of such Act (42
U.S.C. 1395m(j)(2)(A)(iii)), as added by section
131(a)(1) of the Social Security Act Amendments of
1994, is amended by striking ‘‘$1,000’’ and insert-
ing ‘‘$5,000’’; and
(2) Section 1834(j)(2)(B) of the Social Security
Act is amended by inserting ‘‘one-page’’ before
‘‘form’’; and deleting ‘‘or other document’’ after
‘‘form’’.
(c) INTERMEDIATE SANCTIONS FOR PROVIDERS OR
SUPPLIERS
OF
CLINICAL
DIAGNOSTIC
LABORATORY
TESTS.—Section 1846(b)(2)(A)(ii) of such Act (42 U.S.C.
1395w–2(b)(2)(A)(ii)) is amended by striking ‘‘$10,000’’
and inserting ‘‘$50,000’’.
(d) MEDICARE SECONDARY PAYER.—
(1) OFFERING
FINANCIAL
INCENTIVES
FOR
BENEFICIARIES
NOT
TO
ENROLL
IN
PRIMARY
PLANS.—The 
second 
sentence 
of 
section
1862(b)(3)(C) 
of 
such 
Act 
(42 
U.S.C.
1395y(b)(3)(C)) is amended by striking ‘‘$5,000’’
and inserting ‘‘$25,000’’.
(2) FAILURE
OF
EMPLOYER
TO
PROVIDE
MATCHING
INFORMATION
ON
SECONDARY
PAYER
SITUATIONS.—The 
second 
sentence 
of 
section
1862(b)(5)(C)(ii) 
of 
such 
Act 
(42 
U.S.C.
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1395y(b)(5)(C)(ii) is amended by striking ‘‘$1,000’’
and inserting ‘‘$5,000’’.
(3) FAILURE OF PROVIDER TO PROVIDE INFOR-
MATION ON AVAILABILITY OF OTHER PAYERS.—Sec-
tion 1862(b)(6)(B) of such Act (42 U.S.C.
1395y(b)(6)(B)), as added by section 151(a)(2)(A)
of the Social Security Act Amendments of 1994, is
amended by striking ‘‘$2,000’’ and inserting
‘‘$10,000’’.
(e) REFERRALS BY PHYSICIANS WITH OWNERSHIP
OR INVESTMENT INTERESTS.—
(1) 
CIRCUMVENTION
SCHEMES.—Section
1877(g)(4) of such Act (42 U.S.C. 1395nn(g)(4)) is
amended by striking ‘‘$100,000’’ and inserting
‘‘$500,000’’.
(2) FAILURE TO REPORT INFORMATION.—Sec-
tion 
1877(g)(5) 
of 
such 
Act 
(42 
U.S.C.
1395nn(g)(5)) is amended by striking ‘‘$10,000’’
and inserting ‘‘$50,000’’.
(f) MEDICARE SUPPLEMENTAL POLICIES.—
(1) ISSUANCE OF POLICIES WHERE NO STAND-
ARDS IN EFFECT.—The second sentence of section
1882(a)(2) of such Act (42 U.S.C. 1395ss(a)(2)) is
amended by striking ‘‘$25,000’’ and inserting
‘‘$125,000’’.
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(2) MISREPRESENTATIONS OF POLICIES.—Sec-
tion 1882(d) of such Act (42 U.S.C. 1395ss(d)) is
amended—
(A) in paragraphs (1), (2), and (4)(A), by
striking ‘‘$5,000’’ and inserting ‘‘$25,000’’;
and
(B) in paragraphs (3)(A) and (3)(B)(iv),
by striking ‘‘$25,000 (or $15,000’’ and insert-
ing ‘‘$125,000 (or $75,000’’.
(3) VIOLATION
OF
BENEFITS
STANDARDS.—
Section 1882(p) of such Act (42 U.S.C. 1395ss(p))
is amended by striking ‘‘$25,000 (or $15,000’’ each
place it appears in paragraphs (8) and (9)(C) and
inserting ‘‘$125,000 (or $75,000’’.
(4) VIOLATION OF GUARANTEED RENEWABIL-
ITY
STANDARDS.—Section 1882(q)(5)(C) of such
Act (42 U.S.C. 1395ss(q)(5)(C)) is amended by
striking ‘‘$25,000’’ and inserting ‘‘$125,000’’.
(5) VIOLATION OF LOSS RATIO STANDARDS.—
Section 1882(r)(6)(A) of such Act (42 U.S.C.
1395ss(r)(6)(A)) is amended by striking ‘‘$25,000’’
and inserting ‘‘$125,000’’.
(6) VIOLATION
OF
PRE-EXISTING
CONDITION
STANDARDS.—Section 1882(s)(3) of such Act (42
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U.S.C. 1395ss(s)(3)) is amended by striking
‘‘$5,000’’ and inserting ‘‘$25,000’’.
(7) MEDICARE
SELECT
POLICIES.—Section
1882(t)(2) of such Act (42 U.S.C. 1395ss(t)(2)) is
amended by striking ‘‘$25,000’’ and inserting
‘‘$125,000’’.
(g) VIOLATION OF HOME HEALTH PARTICIPATION
STANDARDS.—Section 1891 of such Act (42 U.S.C.
1395bbb) is amended—
(1) in subsection (a)(3)(D)(iii)(III), by striking
‘‘$5,000’’ and inserting ‘‘$25,000’’;
(2) in subsection (c)(1), by striking ‘‘$2,000’’
and inserting ‘‘$10,000’’; and
(3) in subsection (f)(2)(A)(i), by striking
‘‘$10,000’’ and inserting ‘‘$50,000’’.
SEC. 403. SOCIAL SECURITY ACT CRIMINAL PENALTIES.
(a) Section 1128B of the Social Security Act (42
U.S.C. 1320a–7b) is amended—
(1) in subsection (a)—
(A) by striking ‘‘$25,000’’ and inserting
‘‘$50,000’’, and
(B) by striking ‘‘$10,000’’ and inserting
‘‘$20,000’’;
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(2) in subsections (b), (c), and (d), by striking
‘‘$25,000’’ each place it appears and inserting
‘‘$50,000’’; and
(3) in subsection (e), by striking ‘‘$2,000’’ and
inserting ‘‘$4,000’’.
TITLE V—AMENDMENTS TO ANTI-
KICKBACK LAW
SEC. 501. CLARIFICATION OF STANDARDS.
(a) Section 1128B(b) of the Social Security Act (42
U.S.C. 1320a–7b(b)) is amended by inserting, ‘‘the sub-
stantial and primary purpose of which is,’’ after ‘‘in kind’’
in paragraph (1) thereof, and after ‘‘any person’’ in para-
graph (2) thereof.
(b) Section 1128A(i) of the Social Security Act (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
person, 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.’’
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SEC. 502. CLARIFICATIONS AND ADDITIONS TO ANTI-KICK-
BACK EXCEPTIONS.
(a) 
EXCEPTION
FOR
DISCOUNTS.—Section
1128B(b)(3)(A) of the Social Security Act (42 U.S.C.
1320a–7b(b)(3)(A)) is amended by inserting the following:
‘‘(including reductions in price applied to combinations of
items and services, and reductions made available as part
of capitation, risk sharing, disease management or similar
programs)’’ after ‘‘a discount or other reduction in price’’;
and by inserting at the end: ‘‘provided, however, that
where an entity which does not report its costs on a cost
report separately claims an item or service for payment,
and payment by the Medicare program or a state health
care program is not based on actual acquisition costs, then
a price reduction on the item or service may be properly
disclosed and appropriately reflected by providing full and
accurate information concerning the price reduction at the
time the value of the reduction is known, at the request
of the Secretary or a State agency.’’
(b) Section 1128B(b)(3) of the Social Security Act
(42 U.S.C. § 1320a–7b(b)(3)) is amended as follows:
(1) In subparagraph (D), by striking ‘‘Public
Health Service Act; and’’ and inserting ‘‘Public
Health Service Act;’’
(2) By renumbering subparagraph (E) as sub-
paragraph (K).
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(c) EXCEPTION
FOR MANAGED CARE RELATION-
SHIPS.—Section 1128B(b)(3) of the Social Security Act
(42 U.S.C. 1320a–7b(b)(3) is amended by inserting after
subparagraph (D) the following:
‘‘(E) any reduction in cost sharing or in-
creased benefits given to an individual, any
amounts paid to a provider for an item or serv-
ice furnished to an individual, or any discount
or reduction in price given by the provider for
such item or service if the item or service is
provided by an organization which—
‘‘(i) provides health care services di-
rectly or through one or more subsidiary
entities or arranges under agreement with
contract health care providers for the pro-
vision of items or services, in exchange for
a premium; and
‘‘(ii) assumes or, in the case of items
or services provided under agreement with
contract health care providers, places the
contract health care providers under, sub-
stantial financial risk (including through a
withhold, capitation, incentive pool, per
diem payment, or other similar substantial
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risk-sharing arrangement) for the provision
of health services.
For the purpose of this subparagraph, the term
‘‘contract health care provider’’ means an indi-
vidual or entity under contract with a health
plan to furnish items or services to enrollees
who are covered by the health plan (which may
include Title XVIII beneficiaries and Title XIX
recipients).’’.
(d) EXCEPTION
FOR
RISK-SHARING
ARRANGE-
MENTS.—Section 1128B(b)(3) of the Social Security Act
(42 U.S.C. 1320a–7b(b)(3) is amended—
(1) by redesignating subparagraph (E) as sub-
paragraph (F);
(2) by striking ‘‘and’’ at the end of subpara-
graph (D); and
(3) by inserting after subparagraph (D) the fol-
lowing:
‘‘(E) any remuneration between an organi-
zation and a provider of services pursuant to an
agreement between the organization and pro-
vider if the written agreement places the pro-
vider of services at substantial financial risk for
the cost or utilization of the services the pro-
vider is obligated to provide, whether through
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capitation, incentive pools, per diem payments,
or a similar risk-sharing arrangement that
places the provider at substantial financial risk;
and’’.
(e) EXCEPTION
FOR
DE
MINIMUS
REMUNERA-
TION.—Section 1128B(b)(3) of the Social Security Act
(42 U.S.C. 1320a–7b(b)(3)) is amended by inserting the
following new subparagraph:
‘‘(F) items provided free of charge to a li-
censed health care practitioner who is furnish-
ing services reimbursed under title XVIII or a
State health care program, provided the items
primarily benefit patients receiving such serv-
ices and the value of the items does not exceed
limits set forth in generally accepted profes-
sional or ethical guidelines applicable to the
health care practitioner (or, if no such guide-
lines exist, the value of the items does not ex-
ceed limits established by the Secretary);’’.
(f) EXCEPTIONS
FOR
DRUG
SAMPLES.—Section
1128B(b)(3) of the Social Security Act (42 U.S.C. 1320a–
7b(b)(3)) is amended by inserting the following new sub-
paragraph:
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‘‘(G) drug samples distributed in compli-
ance with section 503(d) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. § 553(d));’’.
(g) EXCEPTION FOR SCIENTIFIC AND EDUCATIONAL
PROGRAMS
FOR PRACTITIONERS.—Section 1128B(b)(3)
of the Social Security Act (42 U.S.C. 1320a–7b(b)(3)) is
amended by inserting the following new subparagraph:
‘‘(H) any amount paid to support scientific
or educational programs or materials for li-
censed health care practitioners or pharmacists,
provided that—
‘‘(i) such programs or materials are
designed to improve the care or treatment
of patients;
‘‘(ii) such programs are conducted in
accordance with generally accepted profes-
sional or ethical guidelines applicable to
the health care practitioner; and
‘‘(iii) the receipt of such amount, or of
such programs or materials, is not condi-
tioned on the purchase, lease, order, or
furnishing (or the recommending for pur-
chase, lease, order, or furnishing) of any
item or service reimbursed under Title
XVIII or a State health care program;’’.
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(h) EXCEPTION FOR EDUCATIONAL PROGRAMS FOR
PATIENTS.—Section 1128B(b)(3) of the Social Security
Act (42 U.S.C. 1320a–7b(b)(3)) is amended by inserting
the following new subparagraph:
‘‘(I) any amount paid to provide edu-
cational programs or materials for patients,
provided that—
‘‘(i) the programs or materials are de-
signed to improve the care, treatment (in-
cluding compliance with treatment re-
gimes), or health of such patients; and
‘‘(ii) the receipt of such amount, or of
such programs or materials, is not condi-
tioned on the purchase, lease, order or fur-
nishing (or the recommending of the pur-
chase, lease, order, or furnishing) of any
item or service reimbursed under Title
XVIII or a State health care program;’’.
(i) EXCEPTION FOR PAYMENTS MADE ON BEHALF
OF HEALTH PLANS.—Section 1128B(b)(3) of the Social
Security Act (42 U.S.C. 1320a–7b(b)(3)) is amended by
inserting the following new subparagraph:
‘‘(J) any amount paid by a contract health
plan service firm to a contract health provider,
provided that the amount is paid at the direc-
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tion of or on behalf of a health plan, and that
the purpose of the payment is to reduce the
cost or improve the quality of items or services
provided by the health plan to its enrollees. For
purposes of this subparagraph, the term—
‘‘(i) ‘contract health plan service firm’
means an entity that is under a written
agreement with a health plan to assist in
carrying out the functions of the health
plan;
‘‘(ii) ‘contract health provider’ means
an individual or entity that is under writ-
ten agreement with a health plan to fur-
nish to the health plan’s enrollees items or
services that are covered by the health
plan, or reimburse under Title XVIII or a
State health care plan; and
‘‘(iii) ‘health plan’ means an entity
that furnishes or arranges under agree-
ment with contract health care providers
for the furnishing of items or services to
enrollees, or furnishes insurance coverage
for the provision of such items and serv-
ices, in exchange for a premium.’’.
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SEC. 503. CLARIFICATION OF SAFE HARBOR AUTHORITY IN
ANTI-KICKBACK PROVISIONS.
Section 1128B(b) of the Social Security Act (42
U.S.C. 1320a–7b(b)) is amended by adding at the end the
following new paragraph:
‘‘(4) The regulations authorized by section
14(a) of the Medicare and Medicaid Patient and
Program Protection Act of 1987 are—
‘‘(A) solely for the purpose of adding addi-
tional exceptions to the conduct proscribed by
this subsection, not for the purpose of limiting
the scope of the exceptions specified in para-
graph (3) of this subsection; and
‘‘(B) for the purpose of prescribing criteria
for qualifying for an exception notwithstanding
the intent of the parties.’’.
TITLE VI AMENDMENTS TO THE
PHYSICIAN SELF-REFERRAL LAW
SEC. 601. FINANCIAL RELATIONSHIP DEFINED.
(a) Section 1877(a)(2) of the Social Security Act (42
U.S.C. 1395nn(a)(2)) is amended by deleting the para-
graph heading ‘‘(A)’’; by deleting ‘‘,or’’ at the end of para-
graph (a) and by deleting, in its entirety, paragraph (B).
(b) Section 1877(b) of the Social Security Act (42
U.S.C. 1395nn(b)) by deleting in its heading all language
following ‘‘EXCEPTIONS’’.
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(c) Section 1877(d) of the Social Security Act (42
U.S.C. 1395nn(d)) is amended in its title by deleting all
language after ‘‘EXCEPTIONS’’.
(d) Section 1877(e) of the Social Security Act (42
U.S.C. 1395nn(e)) is deleted in its entirety.
(e) Section 1877(f) of the Social Security Act (42
U.S.C. 1395nn(f)) is amended by deleting ‘‘, and com-
pensation’’ after ‘‘investment’’ and paragraph (2) is
amended by deleting ‘‘, or with a compensation arrange-
ment (as described in subsection (a)(2)(B)) after ‘‘invest-
ment interest’’ and by deleting ‘‘or who have such a com-
pensation relationship with the entity’’ after ‘‘investment
interest.’’
(f) Section 1877(h) of the Social Security Act (42
U.S.C. 1395nn(h)) is amended by deleting paragraphs (1),
(2), and (3).
SEC. 602. SELF-REFERRALS FOR PHYSICIAN SERVICES.
Section 1877(b)(1) of the Social Security Act (42
U.S.C. 1395nn(b)(1)) is amended by inserting ‘‘the physi-
cian or’’ immediately before ‘‘another physician.’’
SEC. 603. RISK-SHARING ARRANGEMENTS.
Section 1877(b)(3) of the Social Security Act (42
U.S.C. 1395nn(b)(3)) is amended as follows:
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(1) By deleting from the heading the phrase
‘‘Prepaid Plans’’ and inserting in its place ‘‘Risk-
Sharing Arrangements’’.
(2) By deleting from the heading the word ‘‘by’’
and inserting in its place ‘‘to an individual enrolled
with’’; and
(3) By adding after subparagraph (3)(D) the
following new subparagraph:
‘‘(E) pursuant to written agreement be-
tween the organization and the provider of serv-
ices if the written agreement places the provider
of services at substantial financial risk (full or
partial) for the cost or utilization of the services
the provider is obligated to provide, whether
through capitation, incentive pools, per diem
payment arrangements, or other substantial fi-
nancial risk-sharing arrangements.’’.
SEC. 604. PHYSICIAN OWNERSHIP.
Section 1877(d) of the Social Security Act (42 U.S.C.
1395nn(d)) is amended by inserting at the end the follow-
ing new paragraph:
‘‘(4) INTEGRATED DELIVERY SYSTEM OWNER-
SHIP.—In the case of the physician’s ownership or
investment interest in a management services orga-
nization (MSO), preferred provider organization
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sician by an individual directly em-
ployed or directly supervised by such
a physician,
‘‘(II) by a shared facility in a
building in which the referring physi-
cian furnishes substantially all of the
services of the physician that are un-
related to the furnishing of shared fa-
cility services, and
‘‘(III) to a patient of a shared fa-
cility physician; and
‘‘(ii) that is billed by the referring
physician.
‘‘(B) SHARED FACILITY RELATED DEFINI-
TIONS.—
(i) SHARED FACILITY SERVICE.—The
term ‘‘shared facility service’’ means, with
respect to a shared facility, a designated
health service furnished by the facility to
patients of shared facility physicians.
(ii) SHARED
FACILITY.—The term
‘‘shared facility’’ means an entity that fur-
nishes shared facility services under a
shared facility arrangement.
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(iii) SHARED FACILITY PHYSICIAN.—
The term ‘‘shared facility, a physician who
has a financial relationship under a shared
facility arrangement with the facility.
(iv) 
SHARED
FACILITY
ARRANGE-
MENT.—The term ‘‘shared facility arrange-
ment’’ means, with respect to the provision
of shared facility services in a building, a
financial arrangement.
(I) which is only between physi-
cians who are providing services (un-
related to shared facility services) in
the same building;
(II) in which the overhead ex-
penses of the facility are shared, in
accordance with methods previously
determined by the physicians in the
arrangement; and
(III) which, in the case of a cor-
poration, is wholly owned and con-
trolled by shared facility physicians.’’.
SEC. 606. PAYER DIRECTED CARE.
(a) Section 1877(b) of the Social Security Act (42
U.S.C. 1395nn(b)) is amended by inserting the following
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paragraph after paragraph 4, as amended by section 604
of the Health Care Anti-Fraud Act of 1995:
‘‘(5) PAYER DIRECTED CARE.—In the case of
items or services furnished to a patient where the se-
lection of provider is substantially determined by, or
results from financial incentives provided by, a payer
of such items or services.’’.
SEC. 607. SELF-REFERRALS FOR CERTAIN DESIGNATED
HEALTH SERVICES.
(a) Section 1877(h)(6) of the Social Security Act (42
U.S.C. n(h)(6)) is amended by deleting paragraph (k)
thereof.
SEC. 608. DEFINITION OF DIRECT SUPERVISION.
(a) Section 1877(h) of the Social Security Act (42
U.S.C. n(h)) is amended by adding at the end thereof the
following new paragraph:
‘‘(7) ‘Directly supervised’ by a physician means
the physician has responsibility for oversight of the
provision, by a person (whether or not an employee
of the physician or group practice), of in-office ancil-
lary services, and such responsibility must include:
‘‘(A) Specifying the tasks to be performed
by the person;
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‘‘(B) Instructing the person with regard to
the manner and method for performing the
tasks;
‘‘(C) Evaluating the person’s performance
of the tasks;
‘‘(D) Taking, or causing to be taken, per-
sonnel actions which are based upon evaluation
of the person’s performance of the tasks; and
‘‘(E) Being available, in person or by tele-
phone, to the person at all times such person is
providing in-office ancillary services.’’.
SEC. 609. EFFECTIVE DATE.
(a) Section 1877 of the Social Security Act (42
U.S.C. n(h)) is amended with respect to its effective date
as follows:
‘‘In the case of designated health services other than
clinical laboratory services, this law shall apply to referrals
made after the later of:
‘‘(1) December 31, 1994; or
‘‘(2) the date that final regulations implement-
ing all sections of this law are promulgated.’’.
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TITLE VII—MEDICARE BILLING ABUSE
PREVENTION
SEC. 701. IMPLEMENTATION OF GENERAL ACCOUNTING OF-
FICE RECOMMENDATIONS REGARDING MEDI-
CARE CLAIMS PROCESSING.
(a) IN GENERAL.—Not later than 90 days after the
date of the enactment of this Act, the Secretary shall, by
regulation, contract, change order, or otherwise, require
Medicare carriers to acquire commercial automatic data
processing equipment (in this title referred to as
‘‘ADPE’’) meeting the requirements of section 702 to
process Medicare part B claims for the purpose of identi-
fying intentional billing code abuse.
(b) SUPPLEMENTATION.—Any ADPE acquired in ac-
cordance with subsection (a) shall be used as a supplement
to any other ADPE used in claims processing by Medicare
carriers.
(c) STANDARDIZATION.—In order to ensure uniform-
ity, the Secretary may require that Medicare carriers that
use a common claims processing system acquire common
ADPE in implementing subsection (a).
(d) IMPLEMENTATION DATE.—Any ADPE acquired
in accordance with subsection (a) shall be in use by Medi-
care carriers not later than one year after the date of the
enactment of this Act.
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SEC. 702. MINIMUM SOFTWARE REQUIREMENTS.
(a) IN GENERAL.—The requirements described in
this section are as follows:
(1) The ADPE shall be a commercial item and
shall be reviewed by a private standard setting orga-
nization with expertise in the development of de-
scriptive terms and identifying codes for reporting
medical services and procedures. The Secretary shall
determine the appropriate organization to perform
this review.
(2) The ADPE shall surpass the capability of
ADPE used in the processing of Medicare part B
claims for identification of code manipulation on the
day before the date of the enactment of this Act.
(3) The ADPE shall be capable of being modi-
fied to—
(A) satisfy pertinent statutory require-
ments of the Medicare program; and
(B) conform to general policies of the
Health Care Financing Administration regard-
ing claims processing.
(b) MINIMUM STANDARDS.—Nothing in this title
shall be construed as preventing the use of ADPE which
exceeds the minimum requirements described in sub-
section (a).