(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2004. 
(f) ADDITIONAL
PROVIDER
EDUCATION
PROVI-
SIONS.—
(1) IN GENERAL.—Section 1889, as added by 
subsection (a) and as amended by subsections (d) 
and (e), is further amended by adding at the end the 
following new subsections: 
‘‘(e) ENCOURAGEMENT OF PARTICIPATION IN EDU-
CATION PROGRAM ACTIVITIES.—A medicare contractor 
may not use a record of attendance at (or failure to at-
tend) educational activities or other information gathered 
during an educational program conducted under this sec-
tion or otherwise by the Secretary to select or track pro-
viders of services or suppliers for the purpose of con-
ducting any type of audit or prepayment review. 
‘‘(f) CONSTRUCTION.—Nothing in this section or sec-
tion 1893(g) shall be construed as providing for disclosure 
by a medicare contractor of information that would com-
promise pending law enforcement activities or reveal find-
ings of law enforcement-related audits. 
‘‘(g) DEFINITIONS.—For purposes of this section, the 
term ‘medicare contractor’ includes the following:
‘‘(1) A medicare administrative contractor with 
a contract under section 1874A, including a fiscal 
intermediary with a contract under section 1816 and 
a carrier with a contract under section 1842. 
‘‘(2) An eligible entity with a contract under 
section 1893. 
Such term does not include, with respect to activities of 
a specific provider of services or supplier an entity that 
has no authority under this title or title IX with respect 
to such activities and such provider of services or sup-
plier.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on the date of the 
enactment of this Act. 
SEC. 302. SMALL PROVIDER TECHNICAL ASSISTANCE DEM-
ONSTRATION PROGRAM. 
(a) ESTABLISHMENT.—
(1) IN GENERAL.—The Secretary shall establish 
a demonstration program (in this section referred to 
as the ‘‘demonstration program’’) under which tech-
nical assistance described in paragraph (2) is made 
available, upon request and on a voluntary basis, to 
small providers of services or suppliers in order to 
improve compliance with the applicable requirements 
of the programs under medicare program under title
XVIII of the Social Security Act (including provi-
sions of title XI of such Act insofar as they relate 
to such title and are not administered by the Office 
of the Inspector General of the Department of 
Health and Human Services). 
(2) FORMS OF TECHNICAL ASSISTANCE.—The 
technical assistance described in this paragraph is—
(A) evaluation and recommendations re-
garding billing and related systems; and 
(B) information and assistance regarding 
policies and procedures under the medicare pro-
gram, including coding and reimbursement. 
(3) SMALL PROVIDERS OF SERVICES OR SUP-
PLIERS.—In this section, the term ‘‘small providers 
of services or suppliers’’ means—
(A) a provider of services with fewer than 
25 full-time-equivalent employees; or 
(B) a supplier with fewer than 10 full-
time-equivalent employees. 
(b) QUALIFICATION
OF
CONTRACTORS.—In con-
ducting the demonstration program, the Secretary shall 
enter into contracts with qualified organizations (such as 
peer review organizations or entities described in section 
1889(g)(2) of the Social Security Act, as inserted by sec-
tion 5(f)(1)) with appropriate expertise with billing sys-
tems of the full range of providers of services and sup-
pliers to provide the technical assistance. In awarding such 
contracts, the Secretary shall consider any prior investiga-
tions of the entity’s work by the Inspector General of De-
partment of Health and Human Services or the Comp-
troller General of the United States. 
(c) DESCRIPTION OF TECHNICAL ASSISTANCE.—The 
technical assistance provided under the demonstration 
program shall include a direct and in-person examination 
of billing systems and internal controls of small providers 
of services or suppliers to determine program compliance 
and to suggest more efficient or effective means of achiev-
ing such compliance. 
(d) AVOIDANCE OF RECOVERY ACTIONS FOR PROB-
LEMS IDENTIFIED AS CORRECTED.—The Secretary shall 
provide that, absent evidence of fraud and notwith-
standing any other provision of law, any errors found in 
a compliance review for a small provider of services or sup-
plier that participates in the demonstration program shall 
not be subject to recovery action if the technical assistance 
personnel under the program determine that—
(1) the problem that is the subject of the com-
pliance review has been corrected to their satisfac-
tion within 30 days of the date of the visit by such
personnel to the small provider of services or sup-
plier; and 
(2) such problem remains corrected for such pe-
riod as is appropriate. 
The previous sentence applies only to claims filed as part 
of the demonstration program and lasts only for the dura-
tion of such program and only as long as the small pro-
vider of services or supplier is a participant in such pro-
gram. 
(e) GAO EVALUATION.—Not later than 2 years after 
the date of the date the demonstration program is first 
implemented, the Comptroller General, in consultation 
with the Inspector General of the Department of Health 
and Human Services, shall conduct an evaluation of the 
demonstration program. The evaluation shall include a de-
termination of whether claims error rates are reduced for 
small providers of services or suppliers who participated 
in the program and the extent of improper payments made 
as a result of the demonstration program. The Comp-
troller General shall submit a report to the Secretary and 
the Congress on such evaluation and shall include in such 
report recommendations regarding the continuation or ex-
tension of the demonstration program. 
(f) FINANCIAL PARTICIPATION BY PROVIDERS.—The 
provision of technical assistance to a small provider of
services or supplier under the demonstration program is 
conditioned upon the small provider of services or supplier 
paying an amount estimated (and disclosed in advance of 
a provider’s or supplier’s participation in the program) to 
be equal to 25 percent of the cost of the technical assist-
ance. 
(g) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary (in ap-
propriate part from the Federal Hospital Insurance Trust 
Fund and the Federal Supplementary Medical Insurance 
Trust Fund) to carry out the demonstration program— 
(1) for fiscal year 2005, $1,000,000, and 
(2) for fiscal year 2006, $6,000,000. 
SEC. 303. MEDICARE PROVIDER OMBUDSMAN; MEDICARE 
BENEFICIARY OMBUDSMAN. 
(a) MEDICARE
PROVIDER
OMBUDSMAN.—Section 
1868 (42 U.S.C. 1395ee) is amended—
(1) by adding at the end of the heading the fol-
lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’; 
(2) by inserting ‘‘PRACTICING PHYSICIANS AD-
VISORY COUNCIL.—(1)’’ after ‘‘(a)’’; 
(3) in paragraph (1), as so redesignated under 
paragraph (2), by striking ‘‘in this section’’ and in-
serting ‘‘in this subsection’’;
(4) by redesignating subsections (b) and (c) as 
paragraphs (2) and (3), respectively; and 
(5) by adding at the end the following new sub-
section: 
‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—The Sec-
retary shall appoint within the Department of Health and 
Human Services a Medicare Provider Ombudsman. The 
Ombudsman shall—
‘‘(1) provide assistance, on a confidential basis, 
to providers of services and suppliers with respect to 
complaints, grievances, and requests for information 
concerning the programs under this title (including 
provisions of title XI insofar as they relate to this 
title and are not administered by the Office of the 
Inspector General of the Department of Health and 
Human Services) and in the resolution of unclear or 
conflicting guidance given by the Secretary and 
medicare contractors to such providers of services 
and suppliers regarding such programs and provi-
sions and requirements under this title and such 
provisions; and 
‘‘(2) submit recommendations to the Secretary 
for improvement in the administration of this title 
and such provisions, including—
‘‘(A) recommendations to respond to recur-
ring patterns of confusion in this title and such 
provisions (including recommendations regard-
ing suspending imposition of sanctions where 
there is widespread confusion in program ad-
ministration), and 
‘‘(B) recommendations to provide for an 
appropriate and consistent response (including 
not providing for audits) in cases of self-identi-
fied overpayments by providers of services and 
suppliers. 
The Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, but 
may identify issues and problems in payment or coverage 
policies.’’. 
(b) MEDICARE BENEFICIARY OMBUDSMAN.—Title 
XVIII is amended by inserting after section 1806 the fol-
lowing new section: 
‘‘MEDICARE BENEFICIARY OMBUDSMAN 
‘‘SEC. 1807. (a) IN GENERAL.—The Secretary shall 
appoint within the Department of Health and Human 
Services a Medicare Beneficiary Ombudsman who shall 
have expertise and experience in the fields of health care 
and education of (and assistance to) individuals entitled 
to benefits under this title.
‘‘(b) DUTIES.—The Medicare Beneficiary Ombuds-
man shall—
‘‘(1) receive complaints, grievances, and re-
quests for information submitted by individuals enti-
tled to benefits under part A or enrolled under part 
B, or both, with respect to any aspect of the medi-
care program; 
‘‘(2) provide assistance with respect to com-
plaints, grievances, and requests referred to in para-
graph (1), including—
‘‘(A) assistance in collecting relevant infor-
mation for such individuals, to seek an appeal 
of a decision or determination made by a fiscal 
intermediary, carrier, Medicare+Choice organi-
zation, or the Secretary; and 
‘‘(B) assistance to such individuals with 
any problems arising from disenrollment from a 
Medicare+Choice plan under part C; and 
‘‘(3) submit annual reports to Congress and the 
Secretary that describe the activities of the Office 
and that include such recommendations for improve-
ment in the administration of this title as the Om-
budsman determines appropriate. 
The Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, but
may identify issues and problems in payment or coverage 
policies. 
‘‘(c) WORKING WITH HEALTH INSURANCE COUN-
SELING PROGRAMS.—To the extent possible, the Ombuds-
man shall work with health insurance counseling programs 
(receiving funding under section 4360 of Omnibus Budget 
Reconciliation Act of 1990) to facilitate the provision of 
information to individuals entitled to benefits under part 
A or enrolled under part B, or both regarding 
Medicare+Choice plans and changes to those plans. Noth-
ing in this subsection shall preclude further collaboration 
between the Ombudsman and such programs.’’. 
(c) DEADLINE FOR APPOINTMENT.—The Secretary 
shall appoint the Medicare Provider Ombudsman and the 
Medicare Beneficiary Ombudsman, under the amendments 
made by subsections (a) and (b), respectively, by not later 
than 1 year after the date of the enactment of this Act. 
(d) FUNDING.—There are authorized to be appro-
priated to the Secretary (in appropriate part from the 
Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund) to carry 
out the provisions of subsection (b) of section 1868 of the 
Social Security Act (relating to the Medicare Provider 
Ombudsman), as added by subsection (a)(5) and section 
1807 of such Act (relating to the Medicare Beneficiary
Ombudsman), as added by subsection (b), such sums as 
are necessary for fiscal year 2004 and each succeeding fis-
cal year. 
(e) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–
MEDICARE).—
(1) PHONE TRIAGE SYSTEM; LISTING IN MEDI-
CARE HANDBOOK INSTEAD OF OTHER TOLL-FREE 
NUMBERS.—Section 1804(b) (42 U.S.C. 1395b–
2(b)) is amended by adding at the end the following: 
‘‘The Secretary shall provide, through the toll-free 
number 1–800–MEDICARE, for a means by which 
individuals seeking information about, or assistance 
with, such programs who phone such toll-free num-
ber are transferred (without charge) to appropriate 
entities for the provision of such information or as-
sistance. Such toll-free number shall be the toll-free 
number listed for general information and assistance 
in the annual notice under subsection (a) instead of 
the listing of numbers of individual contractors.’’. 
(2) MONITORING ACCURACY.—
(A) STUDY.—The Comptroller General of 
the United States shall conduct a study to mon-
itor the accuracy and consistency of information 
provided to individuals entitled to benefits 
under part A or enrolled under part B, or both,
through the toll-free number 1–800–MEDI-
CARE, including an assessment of whether the 
information provided is sufficient to answer 
questions of such individuals. In conducting the 
study, the Comptroller General shall examine 
the education and training of the individuals 
providing information through such number. 
(B) REPORT.—Not later than 1 year after 
the date of the enactment of this Act, the 
Comptroller General shall submit to Congress a 
report on the study conducted under subpara-
graph (A). 
SEC. 304. BENEFICIARY OUTREACH DEMONSTRATION PRO-
GRAM. 
(a) IN GENERAL.—The Secretary shall establish a 
demonstration program (in this section referred to as the 
‘‘demonstration program’’) under which medicare special-
ists employed by the Department of Health and Human 
Services provide advice and assistance to individuals enti-
tled to benefits under part A of title XVIII of the Social 
Security Act, or enrolled under part B of such title, or 
both, regarding the medicare program at the location of 
existing local offices of the Social Security Administration. 
(b) LOCATIONS.—
(1) IN GENERAL.—The demonstration program 
shall be conducted in at least 6 offices or areas. 
Subject to paragraph (2), in selecting such offices 
and areas, the Secretary shall provide preference for 
offices with a high volume of visits by individuals re-
ferred to in subsection (a). 
(2) ASSISTANCE FOR RURAL BENEFICIARIES.—
The Secretary shall provide for the selection of at 
least 2 rural areas to participate in the demonstra-
tion program. In conducting the demonstration pro-
gram in such rural areas, the Secretary shall provide 
for medicare specialists to travel among local offices 
in a rural area on a scheduled basis. 
(c) DURATION.—The demonstration program shall be 
conducted over a 3-year period. 
(d) EVALUATION AND REPORT.—
(1) EVALUATION.—The Secretary shall provide 
for an evaluation of the demonstration program. 
Such evaluation shall include an analysis of—
(A) utilization of, and satisfaction of those 
individuals referred to in subsection (a) with, 
the assistance provided under the program; and 
(B) the cost-effectiveness of providing ben-
eficiary assistance through out-stationing medi-
care specialists at local offices of the Social Se-
curity Administration. 
(2) REPORT.—The Secretary shall submit to 
Congress a report on such evaluation and shall in-
clude in such report recommendations regarding the 
feasibility of permanently out-stationing medicare 
specialists at local offices of the Social Security Ad-
ministration. 
TITLE IV—APPEALS AND 
RECOVERY 
SEC. 401. TRANSFER OF RESPONSIBILITY FOR MEDICARE 
APPEALS. 
(a) TRANSITION PLAN.—
(1) IN GENERAL.—Not later than October 1, 
2004, the Commissioner of Social Security and the 
Secretary shall develop and transmit to Congress 
and the Comptroller General of the United States a 
plan under which the functions of administrative law 
judges responsible for hearing cases under title 
XVIII of the Social Security Act (and related provi-
sions in title XI of such Act) are transferred from 
the responsibility of the Commissioner and the So-
cial Security Administration to the Secretary and 
the Department of Health and Human Services.
(2) GAO EVALUATION.—The Comptroller Gen-
eral of the United States shall evaluate the plan 
and, not later than the date that is 6 months after 
the date on which the plan is received by the Comp-
troller General, shall submit to Congress a report on 
such evaluation. 
(b) TRANSFER OF ADJUDICATION AUTHORITY.—
(1) IN
GENERAL.—Not earlier than July 1, 
2005, and not later than October 1, 2005, the Com-
missioner of Social Security and the Secretary shall 
implement the transition plan under subsection (a) 
and transfer the administrative law judge functions 
described in such subsection from the Social Secu-
rity Administration to the Secretary. 
(2) ASSURING INDEPENDENCE OF JUDGES.—
The Secretary shall assure the independence of ad-
ministrative law judges performing the administra-
tive law judge functions transferred under para-
graph (1) from the Centers for Medicare & Medicaid 
Services and its contractors. 
(3) GEOGRAPHIC
DISTRIBUTION.—The Sec-
retary shall provide for an appropriate geographic 
distribution of administrative law judges performing 
the administrative law judge functions transferred
under paragraph (1) throughout the United States 
to ensure timely access to such judges. 
(4) 
HIRING
AUTHORITY.—Subject 
to 
the 
amounts provided in advance in appropriations Act, 
the Secretary shall have authority to hire adminis-
trative law judges to hear such cases, giving priority 
to those judges with prior experience in handling 
medicare appeals and in a manner consistent with 
paragraph (3), and to hire support staff for such 
judges. 
(5) FINANCING.—Amounts payable under law 
to the Commissioner for administrative law judges 
performing the administrative law judge functions 
transferred under paragraph (1) from the Federal 
Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund shall 
become payable to the Secretary for the functions so 
transferred. 
(6) SHARED RESOURCES.—The Secretary shall 
enter into such arrangements with the Commissioner 
as may be appropriate with respect to transferred 
functions of administrative law judges to share office 
space, support staff, and other resources, with ap-
propriate reimbursement from the Trust Funds de-
scribed in paragraph (5).
(c) INCREASED FINANCIAL SUPPORT.—In addition to 
any amounts otherwise appropriated, to ensure timely ac-
tion on appeals before administrative law judges and the 
Departmental Appeals Board consistent with section 1869 
of the Social Security Act (as amended by section 521 of 
BIPA, 114 Stat. 2763A–534), there are authorized to be 
appropriated (in appropriate part from the Federal Hos-
pital Insurance Trust Fund and the Federal Supple-
mentary Medical Insurance Trust Fund) to the Secretary 
such sums as are necessary for fiscal year 2005 and each 
subsequent fiscal year to—
(1) increase the number of administrative law 
judges (and their staffs) under subsection (b)(4); 
(2) improve education and training opportuni-
ties for administrative law judges (and their staffs); 
and 
(3) increase the staff of the Departmental Ap-
peals Board. 
(d) 
CONFORMING
AMENDMENT.—Section 
1869(f)(2)(A)(i) (42 U.S.C. 1395ff(f)(2)(A)(i)), as added 
by section 522(a) of BIPA (114 Stat. 2763A–543), is 
amended by striking ‘‘of the Social Security Administra-
tion’’.
SEC. 402. PROCESS FOR EXPEDITED ACCESS TO REVIEW. 
(a) EXPEDITED ACCESS TO JUDICIAL REVIEW.—Sec-
tion 1869(b) (42 U.S.C. 1395ff(b)) as amended by BIPA, 
is amended—
(1) in paragraph (1)(A), by inserting ‘‘, subject 
to paragraph (2),’’ before ‘‘to judicial review of the 
Secretary’s final decision’’; 
(2) in paragraph (1)(F)—
(A) by striking clause (ii); 
(B) by striking ‘‘PROCEEDING’’ and all 
that follows through ‘‘DETERMINATION’’ and in-
serting ‘‘DETERMINATIONS
AND
RECONSIDER-
ATIONS’’; and 
(C) by redesignating subclauses (I) and 
(II) as clauses (i) and (ii) and by moving the 
indentation of such subclauses (and the matter 
that follows) 2 ems to the left; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(2) EXPEDITED
ACCESS
TO
JUDICIAL
RE-
VIEW.—
‘‘(A) IN
GENERAL.—The Secretary shall 
establish a process under which a provider of 
services or supplier that furnishes an item or 
service or an individual entitled to benefits 
under part A or enrolled under part B, or both,
who has filed an appeal under paragraph (1) 
may obtain access to judicial review when a re-
view panel (described in subparagraph (D)), on 
its own motion or at the request of the appel-
lant, determines that no entity in the adminis-
trative appeals process has the authority to de-
cide the question of law or regulation relevant 
to the matters in controversy and that there is 
no material issue of fact in dispute. The appel-
lant may make such request only once with re-
spect to a question of law or regulation in a 
case of an appeal. 
‘‘(B) PROMPT DETERMINATIONS.—If, after 
or coincident with appropriately filing a request 
for an administrative hearing, the appellant re-
quests a determination by the appropriate re-
view panel that no review panel has the author-
ity to decide the question of law or regulations 
relevant to the matters in controversy and that 
there is no material issue of fact in dispute and 
if such request is accompanied by the docu-
ments and materials as the appropriate review 
panel shall require for purposes of making such 
determination, such review panel shall make a 
determination on the request in writing within
60 days after the date such review panel re-
ceives the request and such accompanying docu-
ments and materials. Such a determination by 
such review panel shall be considered a final de-
cision and not subject to review by the Sec-
retary. 
‘‘(C) ACCESS TO JUDICIAL REVIEW.—
‘‘(i) IN GENERAL.—If the appropriate 
review panel—
‘‘(I) determines that there are no 
material issues of fact in dispute and 
that the only issue is one of law or 
regulation that no review panel has 
the authority to decide; or 
‘‘(II) fails to make such deter-
mination within the period provided 
under subparagraph (B); 
then the appellant may bring a civil action 
as described in this subparagraph. 
‘‘(ii) DEADLINE
FOR
FILING.—Such 
action shall be filed, in the case described 
in—
‘‘(I) clause (i)(I), within 60 days 
of date of the determination described 
in such subparagraph; or
‘‘(II) clause (i)(II), within 60 
days of the end of the period provided 
under subparagraph (B) for the deter-
mination. 
‘‘(iii) VENUE.—Such action shall be 
brought in the district court of the United 
States for the judicial district in which the 
appellant is located (or, in the case of an 
action brought jointly by more than one 
applicant, the judicial district in which the 
greatest number of applicants are located) 
or in the district court for the District of 
Columbia. 
‘‘(iv) INTEREST ON AMOUNTS IN CON-
TROVERSY.—Where a provider of services 
or supplier seeks judicial review pursuant 
to this paragraph, the amount in con-
troversy shall be subject to annual interest 
beginning on the first day of the first 
month beginning after the 60-day period 
as determined pursuant to clause (ii) and 
equal to the rate of interest on obligations 
issued for purchase by the Federal Hos-
pital Insurance Trust Fund and by the 
Federal Supplementary Medical Insurance
Trust Fund for the month in which the 
civil action authorized under this para-
graph is commenced, to be awarded by the 
reviewing court in favor of the prevailing 
party. No interest awarded pursuant to the 
preceding sentence shall be deemed income 
or cost for the purposes of determining re-
imbursement due providers of services or 
suppliers under this Act. 
‘‘(D) REVIEW PANELS.—For purposes of 
this subsection, a ‘review panel’ is a panel con-
sisting of 3 members (who shall be administra-
tive law judges, members of the Departmental 
Appeals Board, or qualified individuals associ-
ated with a qualified independent contractor (as 
defined in subsection (c)(2)) or with another 
independent entity) designated by the Secretary 
for purposes of making determinations under 
this paragraph.’’. 
(b) APPLICATION TO PROVIDER AGREEMENT DETER-
MINATIONS.—Section 
1866(h)(1) 
(42 
U.S.C. 
1395cc(h)(1)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and 
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) An institution or agency described in subpara-
graph (A) that has filed for a hearing under subparagraph 
(A) shall have expedited access to judicial review under 
this subparagraph in the same manner as providers of 
services, suppliers, and individuals entitled to benefits 
under part A or enrolled under part B, or both, may ob-
tain expedited access to judicial review under the process 
established under section 1869(b)(2). Nothing in this sub-
paragraph shall be construed to affect the application of 
any remedy imposed under section 1819 during the pend-
ency of an appeal under this subparagraph.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to appeals filed on or after October 
1, 2004. 
(d) EXPEDITED REVIEW
OF CERTAIN PROVIDER 
AGREEMENT DETERMINATIONS.—
(1) TERMINATION AND CERTAIN OTHER IMME-
DIATE REMEDIES.—The Secretary shall develop and 
implement a process to expedite proceedings under 
sections 1866(h) of the Social Security Act (42 
U.S.C. 1395cc(h)) in which the remedy of termi-
nation of participation, or a remedy described in 
clause (i) or (iii) of section 1819(h)(2)(B) of such 
Act (42 U.S.C. 1395i–3(h)(2)(B)) which is applied 
on an immediate basis, has been imposed. Under
such process priority shall be provided in cases of 
termination. 
(2) INCREASED FINANCIAL SUPPORT.—In addi-
tion to any amounts otherwise appropriated, to re-
duce by 50 percent the average time for administra-
tive determinations on appeals under section 
1866(h) of the Social Security Act (42 U.S.C. 
1395cc(h)), there are authorized to be appropriated 
(in appropriate part from the Federal Hospital In-
surance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund) to the Secretary 
such additional sums for fiscal year 2005 and each 
subsequent fiscal year as may be necessary. The 
purposes for which such amounts are available in-
clude increasing the number of administrative law 
judges (and their staffs) and the appellate level staff 
at the Departmental Appeals Board of the Depart-
ment of Health and Human Services and educating 
such judges and staffs on long-term care issues. 
SEC. 403. REVISIONS TO MEDICARE APPEALS PROCESS. 
(a) REQUIRING FULL AND EARLY PRESENTATION OF 
EVIDENCE.—
(1) IN GENERAL.—Section 1869(b) (42 U.S.C. 
1395ff(b)), as amended by BIPA and as amended by
section 402(a), is further amended by adding at the 
end the following new paragraph: 
‘‘(3) REQUIRING
FULL
AND
EARLY
PRESEN-
TATION OF EVIDENCE BY PROVIDERS.—A provider 
of services or supplier may not introduce evidence in 
any appeal under this section that was not presented 
at the reconsideration conducted by the qualified 
independent contractor under subsection (c), unless 
there is good cause which precluded the introduction 
of such evidence at or before that reconsideration.’’.
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect on October 1, 
2004. 
(b) USE OF PATIENTS’ MEDICAL RECORDS.—Section 
1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as 
amended by BIPA, is amended by inserting ‘‘(including 
the medical records of the individual involved)’’ after 
‘‘clinical experience’’. 
(c) NOTICE REQUIREMENTS
FOR MEDICARE AP-
PEALS.— 
(1) INITIAL DETERMINATIONS AND REDETER-
MINATIONS.—Section 
1869(a) 
(42 
U.S.C. 
1395ff(a)), as amended by BIPA, is amended by 
adding at the end the following new paragraph:
‘‘(4) REQUIREMENTS
OF
NOTICE
OF
DETER-
MINATIONS
AND
REDETERMINATIONS.—A written 
notice of a determination on an initial determination 
or on a redetermination, insofar as such determina-
tion or redetermination results in a denial of a claim 
for benefits, shall include—
‘‘(A) the specific reasons for the deter-
mination, including—
‘‘(i) upon request, the provision of the 
policy, manual, or regulation used in mak-
ing the determination; and 
‘‘(ii) as appropriate in the case of a 
redetermination, a summary of the clinical 
or scientific evidence used in making the 
determination; 
‘‘(B) the procedures for obtaining addi-
tional information concerning the determination 
or redetermination; and 
‘‘(C) notification of the right to seek a re-
determination or otherwise appeal the deter-
mination and instructions on how to initiate 
such a redetermination or appeal under this 
section. 
The written notice on a redetermination shall be 
provided in printed form and written in a manner
calculated to be understood by the individual entitled 
to benefits under part A or enrolled under part B, 
or both.’’. 
(2) 
RECONSIDERATIONS.—Section 
1869(c)(3)(E) (42 U.S.C. 1395ff(c)(3)(E)), as 
amended by BIPA, is amended—
(A) by inserting ‘‘be written in a manner 
calculated to be understood by the individual 
entitled to benefits under part A or enrolled 
under part B, or both, and shall include (to the 
extent appropriate)’’ after ‘‘in writing, ’’; and 
(B) by inserting ‘‘and a notification of the 
right to appeal such determination and instruc-
tions on how to initiate such appeal under this 
section’’ after ‘‘such decision,’’. 
(3) APPEALS.—Section 1869(d) (42 U.S.C. 
1395ff(d)), as amended by BIPA, is amended—
(A) in the heading, by inserting ‘‘; NO-
TICE’’ after ‘‘SECRETARY’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(4) NOTICE.—Notice of the decision of an ad-
ministrative law judge shall be in writing in a man-
ner calculated to be understood by the individual en-
titled to benefits under part A or enrolled under part 
B, or both, and shall include—
‘‘(A) the specific reasons for the deter-
mination (including, to the extent appropriate, 
a summary of the clinical or scientific evidence 
used in making the determination); 
‘‘(B) the procedures for obtaining addi-
tional information concerning the decision; and 
‘‘(C) notification of the right to appeal the 
decision and instructions on how to initiate 
such an appeal under this section.’’. 
(4) SUBMISSION
OF
RECORD
FOR
APPEAL.—
Section 
1869(c)(3)(J)(i) 
(42 
U.S.C. 
1395ff(c)(3)(J)(i)) by striking ‘‘prepare’’ and insert-
ing ‘‘submit’’ and by striking ‘‘with respect to’’ and 
all that follows through ‘‘and relevant policies’’. 
(d) QUALIFIED INDEPENDENT CONTRACTORS.—
(1) ELIGIBILITY REQUIREMENTS OF QUALIFIED 
INDEPENDENT
CONTRACTORS.—Section 1869(c)(3) 
(42 U.S.C. 1395ff(c)(3)), as amended by BIPA, is 
amended—
(A) in subparagraph (A), by striking ‘‘suf-
ficient training and expertise in medical science 
and legal matters’’ and inserting ‘‘sufficient 
medical, legal, and other expertise (including
knowledge of the program under this title) and 
sufficient staffing’’; and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(K) INDEPENDENCE REQUIREMENTS.—
‘‘(i) IN GENERAL.—Subject to clause 
(ii), a qualified independent contractor 
shall not conduct any activities in a case 
unless the entity—
‘‘(I) is not a related party (as de-
fined in subsection (g)(5)); 
‘‘(II) does not have a material fa-
milial, financial, or professional rela-
tionship with such a party in relation 
to such case; and 
‘‘(III) does not otherwise have a 
conflict of interest with such a party. 
‘‘(ii) EXCEPTION
FOR
REASONABLE 
COMPENSATION.—Nothing in clause (i) 
shall be construed to prohibit receipt by a 
qualified independent contractor of com-
pensation from the Secretary for the con-
duct of activities under this section if the 
compensation is provided consistent with 
clause (iii).
‘‘(iii) LIMITATIONS ON ENTITY COM-
PENSATION.—Compensation provided by 
the Secretary to a qualified independent 
contractor in connection with reviews 
under this section shall not be contingent 
on any decision rendered by the contractor 
or by any reviewing professional.’’.
(2) ELIGIBILITY REQUIREMENTS FOR REVIEW-
ERS.—Section 1869 (42 U.S.C. 1395ff), as amended 
by BIPA, is amended—
(A) by amending subsection (c)(3)(D) to 
read as follows: 
‘‘(D) QUALIFICATIONS FOR REVIEWERS.—
The requirements of subsection (g) shall be met 
(relating to qualifications of reviewing profes-
sionals).’’; and 
(B) by adding at the end the following new 
subsection: 
‘‘(g) QUALIFICATIONS OF REVIEWERS.—
‘‘(1) IN
GENERAL.—In reviewing determina-
tions under this section, a qualified independent con-
tractor shall assure that—
‘‘(A) each individual conducting a review 
shall meet the qualifications of paragraph (2);
‘‘(B) compensation provided by the con-
tractor to each such reviewer is consistent with 
paragraph (3); and 
‘‘(C) in the case of a review by a panel de-
scribed in subsection (c)(3)(B) composed of 
physicians or other health care professionals 
(each in this subsection referred to as a ‘review-
ing professional’), each reviewing professional 
meets the qualifications described in paragraph 
(4) and, where a claim is regarding the fur-
nishing of treatment by a physician (allopathic 
or osteopathic) or the provision of items or 
services by a physician (allopathic or osteo-
pathic), each reviewing professional shall be a 
physician (allopathic or osteopathic). 
‘‘(2) INDEPENDENCE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each individual conducting a review 
in a case shall—
‘‘(i) not be a related party (as defined 
in paragraph (5)); 
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with 
such a party in the case under review; and
‘‘(iii) not otherwise have a conflict of 
interest with such a party. 
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to—
‘‘(i) prohibit an individual, solely on 
the basis of a participation agreement with 
a fiscal intermediary, carrier, or other con-
tractor, from serving as a reviewing profes-
sional if—
‘‘(I) the individual is not involved 
in the provision of items or services in 
the case under review; 
‘‘(II) the fact of such an agree-
ment is disclosed to the Secretary and 
the individual entitled to benefits 
under part A or enrolled under part 
B, or both, (or authorized representa-
tive) and neither party objects; and 
‘‘(III) the individual is not an 
employee of the intermediary, carrier, 
or contractor and does not provide 
services exclusively or primarily to or 
on behalf of such intermediary, car-
rier, or contractor;
‘‘(ii) prohibit an individual who has 
staff privileges at the institution where the 
treatment involved takes place from serv-
ing as a reviewer merely on the basis of 
having such staff privileges if the existence 
of such privileges is disclosed to the Sec-
retary and such individual (or authorized 
representative), and neither party objects; 
or 
‘‘(iii) prohibit receipt of compensation 
by a reviewing professional from a con-
tractor if the compensation is provided 
consistent with paragraph (3). 
For purposes of this paragraph, the term ‘par-
ticipation agreement’ means an agreement re-
lating to the provision of health care services by 
the individual and does not include the provi-
sion of services as a reviewer under this sub-
section. 
‘‘(3) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by a qualified inde-
pendent contractor to a reviewer in connection with 
a review under this section shall not be contingent 
on the decision rendered by the reviewer.
‘‘(4) LICENSURE
AND
EXPERTISE.—Each re-
viewing professional shall be—
‘‘(A) a physician (allopathic or osteopathic) 
who is appropriately credentialed or licensed in 
one or more States to deliver health care serv-
ices and has medical expertise in the field of 
practice that is appropriate for the items or 
services at issue; or 
‘‘(B) a health care professional who is le-
gally authorized in one or more States (in ac-
cordance with State law or the State regulatory 
mechanism provided by State law) to furnish 
the health care items or services at issue and 
has medical expertise in the field of practice 
that is appropriate for such items or services. 
‘‘(5) RELATED PARTY DEFINED.—For purposes 
of this section, the term ‘related party’ means, with 
respect to a case under this title involving a specific 
individual entitled to benefits under part A or en-
rolled under part B, or both, any of the following: 
‘‘(A) The Secretary, the medicare adminis-
trative contractor involved, or any fiduciary, of-
ficer, director, or employee of the Department 
of Health and Human Services, or of such con-
tractor.
‘‘(B) The individual (or authorized rep-
resentative). 
‘‘(C) The health care professional that pro-
vides the items or services involved in the case. 
‘‘(D) The institution at which the items or 
services (or treatment) involved in the case are 
provided.
‘‘(E) The manufacturer of any drug or 
other item that is included in the items or serv-
ices involved in the case. 
‘‘(F) Any other party determined under 
any regulations to have a substantial interest in 
the case involved.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by paragraphs (1) and (2) shall be effective as if in-
cluded in the enactment of the respective provisions 
of subtitle C of title V of BIPA, (114 Stat. 2763A–
534). 
(4) TRANSITION.—In applying section 1869(g) 
of the Social Security Act (as added by paragraph 
(2)), any reference to a medicare administrative con-
tractor shall be deemed to include a reference to a 
fiscal intermediary under section 1816 of the Social 
Security Act (42 U.S.C. 1395h) and a carrier under 
section 1842 of such Act (42 U.S.C. 1395u).
SEC. 404. PREPAYMENT REVIEW. 
(a) IN GENERAL.—Section 1874A, as added by sec-
tion 201(a)(1) and as amended by sections 202(b), 
301(b)(1), and 301(c)(1), is further amended by adding 
at the end the following new subsection: 
‘‘(h) CONDUCT OF PREPAYMENT REVIEW.—
‘‘(1) CONDUCT OF RANDOM PREPAYMENT RE-
VIEW.—
‘‘(A) IN GENERAL.—A medicare adminis-
trative contractor may conduct random prepay-
ment review only to develop a contractor-wide 
or program-wide claims payment error rates or 
under such additional circumstances as may be 
provided under regulations, developed in con-
sultation with providers of services and sup-
pliers. 
‘‘(B) USE
OF
STANDARD
PROTOCOLS 
WHEN CONDUCTING PREPAYMENT REVIEWS.—
When a medicare administrative contractor con-
ducts a random prepayment review, the con-
tractor may conduct such review only in accord-
ance with a standard protocol for random pre-
payment audits developed by the Secretary. 
‘‘(C) CONSTRUCTION.—Nothing in this 
paragraph shall be construed as preventing the
denial of payments for claims actually reviewed 
under a random prepayment review. 
‘‘(D) RANDOM
PREPAYMENT
REVIEW.—
For purposes of this subsection, the term ‘ran-
dom prepayment review’ means a demand for 
the production of records or documentation ab-
sent cause with respect to a claim. 
‘‘(2) LIMITATIONS
ON
NON-RANDOM
PREPAY-
MENT REVIEW.—
‘‘(A) LIMITATIONS ON INITIATION OF NON-
RANDOM
PREPAYMENT
REVIEW.—A medicare 
administrative contractor may not initiate non-
random prepayment review of a provider of 
services or supplier based on the initial identi-
fication by that provider of services or supplier 
of an improper billing practice unless there is a 
likelihood of sustained or high level of payment 
error (as defined in subsection (i)(3)(A)). 
‘‘(B) TERMINATION OF NON-RANDOM PRE-
PAYMENT REVIEW.—The Secretary shall issue 
regulations relating to the termination, includ-
ing termination dates, of non-random prepay-
ment review. Such regulations may vary such a 
termination date based upon the differences in
under section 1842 of such Act (42 U.S.C. 1395u) in the 
same manner as they apply to medicare administrative 
contractors under such provisions. 
SEC. 405. RECOVERY OF OVERPAYMENTS. 
(a) 
IN
GENERAL.—Section 
1893 
(42 
U.S.C. 
1395ddd) is amended by adding at the end the following 
new subsection: 
‘‘(f) RECOVERY OF OVERPAYMENTS.—
‘‘(1) USE OF REPAYMENT PLANS.—
‘‘(A) IN
GENERAL.—If the repayment, 
within 30 days by a provider of services or sup-
plier, of an overpayment under this title would 
constitute a hardship (as defined in subpara-
graph (B)), subject to subparagraph (C), upon 
request of the provider of services or supplier 
the Secretary shall enter into a plan with the 
provider of services or supplier for the repay-
ment (through offset or otherwise) of such over-
payment over a period of at least 6 months but 
not longer than 3 years (or not longer than 5 
years in the case of extreme hardship, as deter-
mined by the Secretary). Interest shall accrue 
on the balance through the period of repay-
ment. Such plan shall meet terms and condi-
tions determined to be appropriate by the Sec-
retary. 
‘‘(B) HARDSHIP.—
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A), the repayment of an 
overpayment (or overpayments) within 30 
days is deemed to constitute a hardship 
if—
‘‘(I) in the case of a provider of 
services that files cost reports, the ag-
gregate amount of the overpayments 
exceeds 10 percent of the amount paid 
under this title to the provider of 
services for the cost reporting period 
covered by the most recently sub-
mitted cost report; or 
‘‘(II) in the case of another pro-
vider of services or supplier, the ag-
gregate amount of the overpayments 
exceeds 10 percent of the amount paid 
under this title to the provider of 
services or supplier for the previous 
calendar year. 
‘‘(ii) RULE
OF
APPLICATION.—The 
Secretary shall establish rules for the ap-
plication of this subparagraph in the case 
of a provider of services or supplier that 
was not paid under this title during the 
previous year or was paid under this title 
only during a portion of that year. 
‘‘(iii) 
TREATMENT
OF
PREVIOUS 
OVERPAYMENTS.—If a provider of services 
or supplier has entered into a repayment 
plan under subparagraph (A) with respect 
to a specific overpayment amount, such 
payment amount under the repayment plan 
shall not be taken into account under 
clause (i) with respect to subsequent over-
payment amounts. 
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(A) 
shall not apply if—
‘‘(i) the Secretary has reason to sus-
pect that the provider of services or sup-
plier may file for bankruptcy or otherwise 
cease to do business or discontinue partici-
pation in the program under this title; or 
‘‘(ii) there is an indication of fraud or 
abuse committed against the program. 
‘‘(D) IMMEDIATE COLLECTION IF VIOLA-
TION OF REPAYMENT PLAN.—If a provider of
services or supplier fails to make a payment in 
accordance with a repayment plan under this 
paragraph, the Secretary may immediately seek 
to offset or otherwise recover the total balance 
outstanding 
(including 
applicable 
interest) 
under the repayment plan. 
‘‘(E) RELATION
TO
NO
FAULT
PROVI-
SION.—Nothing in this paragraph shall be con-
strued as affecting the application of section 
1870(c) (relating to no adjustment in the cases 
of certain overpayments). 
‘‘(2) LIMITATION ON RECOUPMENT.—
‘‘(A) IN GENERAL.—In the case of a pro-
vider of services or supplier that is determined 
to have received an overpayment under this title 
and that seeks a reconsideration by a qualified 
independent contractor on such determination 
under section 1869(b)(1), the Secretary may 
not take any action (or authorize any other per-
son, including any medicare contractor, as de-
fined in subparagraph (C)) to recoup the over-
payment until the date the decision on the re-
consideration has been rendered. If the provi-
sions of section 1869(b)(1) (providing for such 
a reconsideration by a qualified independent
contractor) are not in effect, in applying the 
previous sentence any reference to such a recon-
sideration shall be treated as a reference to a 
redetermination by the fiscal intermediary or 
carrier involved. 
‘‘(B) COLLECTION WITH INTEREST.—Inso-
far as the determination on such appeal is 
against the provider of services or supplier, in-
terest on the overpayment shall accrue on and 
after the date of the original notice of overpay-
ment. Insofar as such determination against the 
provider of services or supplier is later reversed, 
the Secretary shall provide for repayment of the 
amount recouped plus interest at the same rate 
as would apply under the previous sentence for 
the period in which the amount was recouped. 
‘‘(C) MEDICARE CONTRACTOR DEFINED.—
For purposes of this subsection, the term ‘medi-
care contractor’ has the meaning given such 
term in section 1889(g). 
‘‘(3) LIMITATION
ON
USE
OF
EXTRAPO-
LATION.—A medicare contractor may not use ex-
trapolation to determine overpayment amounts to be 
recovered by recoupment, offset, or otherwise un-
less—
‘‘(A) there is a sustained or high level of 
payment error (as defined by the Secretary by 
regulation); or 
‘‘(B) documented educational intervention 
has failed to correct the payment error (as de-
termined by the Secretary). 
‘‘(4) PROVISION OF SUPPORTING DOCUMENTA-
TION.—In the case of a provider of services or sup-
plier with respect to which amounts were previously 
overpaid, a medicare contractor may request the 
periodic production of records or supporting docu-
mentation for a limited sample of submitted claims 
to ensure that the previous practice is not con-
tinuing. 
‘‘(5) CONSENT SETTLEMENT REFORMS.—
‘‘(A) IN
GENERAL.—The Secretary may 
use a consent settlement (as defined in sub-
paragraph (D)) to settle a projected overpay-
ment. 
‘‘(B) OPPORTUNITY
TO
SUBMIT
ADDI-
TIONAL INFORMATION BEFORE CONSENT SET-
TLEMENT OFFER.—Before offering a provider 
of services or supplier a consent settlement, the 
Secretary shall—
‘‘(i) communicate to the provider of 
services or supplier—
‘‘(I) that, based on a review of 
the medical records requested by the 
Secretary, a preliminary evaluation of 
those records indicates that there 
would be an overpayment; 
‘‘(II) the nature of the problems 
identified in such evaluation; and 
‘‘(III) the steps that the provider 
of services or supplier should take to 
address the problems; and 
‘‘(ii) provide for a 45-day period dur-
ing which the provider of services or sup-
plier may furnish additional information 
concerning the medical records for the 
claims that had been reviewed. 
‘‘(C) CONSENT SETTLEMENT OFFER.—The 
Secretary shall review any additional informa-
tion furnished by the provider of services or 
supplier under subparagraph (B)(ii). Taking 
into consideration such information, the Sec-
retary shall determine if there still appears to 
be an overpayment. If so, the Secretary—
‘‘(i) shall provide notice of such deter-
mination to the provider of services or sup-
plier, including an explanation of the rea-
son for such determination; and 
‘‘(ii) in order to resolve the overpay-
ment, may offer the provider of services or 
supplier—
‘‘(I) the opportunity for a statis-
tically valid random sample; or 
‘‘(II) a consent settlement. 
The opportunity provided under clause (ii)(I) 
does not waive any appeal rights with respect to 
the alleged overpayment involved. 
‘‘(D) CONSENT SETTLEMENT DEFINED.—
For purposes of this paragraph, the term ‘con-
sent settlement’ means an agreement between 
the Secretary and a provider of services or sup-
plier whereby both parties agree to settle a pro-
jected overpayment based on less than a statis-
tically valid sample of claims and the provider 
of services or supplier agrees not to appeal the 
claims involved. 
‘‘(6) 
NOTICE
OF
OVER-UTILIZATION
OF 
CODES.—The Secretary shall establish, in consulta-
tion with organizations representing the classes of
providers of services and suppliers, a process under 
which the Secretary provides for notice to classes of 
providers of services and suppliers served by the con-
tractor in cases in which the contractor has identi-
fied that particular billing codes may be overutilized 
by that class of providers of services or suppliers 
under the programs under this title (or provisions 
of title XI insofar as they relate to such programs). 
‘‘(7) PAYMENT AUDITS.—
‘‘(A) WRITTEN
NOTICE
FOR
POST-PAY-
MENT AUDITS.—Subject to subparagraph (C), if 
a medicare contractor decides to conduct a 
post-payment audit of a provider of services or 
supplier under this title, the contractor shall 
provide the provider of services or supplier with 
written notice (which may be in electronic form) 
of the intent to conduct such an audit. 
‘‘(B) EXPLANATION OF FINDINGS FOR ALL 
AUDITS.—Subject to subparagraph (C), if a 
medicare contractor audits a provider of serv-
ices or supplier under this title, the contractor 
shall—
‘‘(i) give the provider of services or 
supplier a full review and explanation of 
the findings of the audit in a manner that
is understandable to the provider of serv-
ices or supplier and permits the develop-
ment of an appropriate corrective action 
plan; 
‘‘(ii) inform the provider of services or 
supplier of the appeal rights under this 
title as well as consent settlement options 
(which are at the discretion of the Sec-
retary); 
‘‘(iii) give the provider of services or 
supplier an opportunity to provide addi-
tional information to the contractor; and 
‘‘(iv) take into account information 
provided, on a timely basis, by the provider 
of services or supplier under clause (iii). 
‘‘(C) 
EXCEPTION.—Subparagraphs 
(A) 
and (B) shall not apply if the provision of no-
tice or findings would compromise pending law 
enforcement activities, whether civil or criminal, 
or reveal findings of law enforcement-related 
audits. 
‘‘(8) STANDARD
METHODOLOGY
FOR
PROBE 
SAMPLING.—The Secretary shall establish a stand-
ard methodology for medicare contractors to use in