I
106TH CONGRESS
1ST SESSION
H. R. 2229
To amend titles XI and XVIII of the Social Security Act to combat waste,
fraud, and abuse in the Medicare Program.
IN THE HOUSE OF REPRESENTATIVES
JUNE 15, 1999
Mr. STARK introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committee on Commerce,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend titles XI and XVIII of the Social Security Act
to combat waste, fraud, and abuse in the Medicare Program.
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
‘‘Medicare Fraud and Reimbursement Reform Act of
1999’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. No mark-up for drugs, biologicals, or parenteral nutrients.
Sec. 3. Elimination of overpayments for epogen.
Sec. 4. Mental health partial hospitalization services.
Sec. 5. Information requirements.
Sec. 6. Centers of excellence.
SEC. 2. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PAREN-
TERAL NUTRIENTS.
(a) IN GENERAL.—Section 1842(o) of the Social Se-
curity Act (42 U.S.C. 1395u(o)) is amended to read as
follows:
‘‘(o)(1) If a physician’s, supplier’s, or any other per-
son’s bill or request for payment for services includes a
charge for a drug, biological, or parenteral nutrient for
which payment may be made under this part and the drug,
biological, or parenteral nutrient is not paid on a cost or
prospective payment basis as otherwise provided in this
part, the payment amount established in this subsection
for the drug, biological, or parenteral nutrient shall be the
lowest of the following:
‘‘(A) The actual acquisition cost, as defined in
paragraph (2), to the person submitting the claim
for payment for the drug, biological, or parenteral
nutrient.
‘‘(B) 95 percent of the average wholesale price
of such drug, biological, or parenteral nutrient, as
determined by the Secretary.
‘‘(C) For payments for drugs, biologicals, or
parenteral nutrients furnished on or after January
1, 2000, the median actual acquisition cost of all
claims for payment for such drugs, biologicals, or
parenteral nutrients for the 12-month period begin-
ning July 1, 1998 (and adjusted, as the Secretary
determines appropriate, to reflect changes in the
cost of such drugs, biologicals, or parenteral nutri-
ents due to inflation, and such other factors as the
Secretary determines appropriate).
‘‘(D) The amount otherwise determined under
this part.
‘‘(2) For purposes of paragraph (1)(A), the term ‘ac-
tual acquisition cost’ means, with respect to such drugs,
biologicals, or parenteral nutrients the cost of the drugs,
biologicals, or parenteral nutrients based on the most eco-
nomical case size in inventory on the date of dispensing
or, if less, the most economical case size purchased within
six months of the date of dispensing whether or not that
specific drug, biological, or nutrient was furnished to an
individual whether or not enrolled under this part. Such
term includes appropriate adjustments, as determined by
the Secretary, for all discounts, rebates, or any other ben-
efit in cash or in kind (including travel, equipment, or free
products). The Secretary shall include an additional pay-
ment for administrative, storage, and handling costs.
‘‘(3)(A) No payment shall be made under this part
for drugs, biologicals, or parenteral nutrients to a person
whose bill or request for payment for such drugs,
biologicals, or parenteral nutrients does not include a
statement of the person’s actual acquisition cost.
‘‘(B) A person may not bill an individual enrolled
under this part—
‘‘(i) any amount other than the payment
amount specified in paragraph (1), (4), or (5) (plus
any applicable deductible and coinsurance amounts),
or
‘‘(ii) any amount for such drugs, biologicals, or
parenteral nutrients for which payment may not be
made pursuant to subparagraph (A).
‘‘(C) If a person knowingly and willfully in repeated
cases bills one or more individuals in violation of subpara-
graph (B), the Secretary may apply sanctions against that
person in accordance with subsection (j)(2).
‘‘(4) The Secretary may pay a reasonable dispensing
fee (less the applicable deductible and coinsurance
amounts) for drugs or biologicals to a licensed pharmacy
approved to dispense drugs or biologicals under this part,
if payment for such drugs or biologicals is made to the
pharmacy.
‘‘(5) The Secretary shall pay a reasonable amount
(less the applicable deductible and coinsurance amounts)
for the services associated with the furnishing of paren-
teral nutrients for which payment is determined under this
subsection.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) apply to drugs, biologicals, and parenteral
nutrients furnished on or after January 1, 2000.
(c) ELIMINATION OF REPORT ON AVERAGE WHOLE-
SALE PRICE.—Section 4556 of the Balanced Budget Act
of 1997 is amended—
(1) by striking subsection (c); and
(2) by redesignating subsection (d) as sub-
section (c).
SEC. 3. ELIMINATION OF OVERPAYMENTS FOR EPOGEN.
Section 1881(b)(11)(B)(ii) of the Social Security Act
(42 U.S.C. 1395rr(b)(11)(B)(ii)) is amended—
(1) in subclause (I)—
(A) by striking ‘‘provided during 1994’’
and inserting ‘‘provided before fiscal year
2000’’; and
(B) by striking ‘‘and’’ at the end;
(2) by redesignating subclause (II) as subclause
(III);
(3) by inserting after subclause (I) the fol-
lowing new subclause:
‘‘(II) for erythropoietin provided during
fiscal year 2000, in an amount equal to $9 per
thousand units (rounded to the nearest 100
units), and’’; and
(4) in subclause (III), as so redesignated, by
striking ‘‘year’’ each place it occurs and inserting
‘‘fiscal year’’.
SEC. 4. MENTAL HEALTH PARTIAL HOSPITALIZATION SERV-
ICES
(a) LIMITATION
ON LOCATION
OF PROVISION
OF
SERVICES.—
(1) IN GENERAL.—Section 1861(ff)(2) of the
Social Security Act (42 U.S.C. 1395x(ff)(2)) is
amended in the matter following subparagraph (I)—
(A) by striking ‘‘and furnished’’ and in-
serting ‘‘furnished’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, and furnished other than in a skilled
nursing facility, residential treatment facility or
other residential setting (as determined by the
Secretary)’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) apply with respect to partial hos-
pitalization services furnished on or after the first
day of the third month beginning after the date of
the enactment of this Act.
(b) QUALIFICATIONS
FOR
COMMUNITY
MENTAL
HEALTH CENTERS.—
(1) IN
GENERAL.—Section 1861(ff)(3)(B) of
the Social Security Act (42 U.S.C. 1395x(ff)(3)(B))
is amended by striking ‘‘entity’’ and all that follows
and inserting the following: ‘‘entity that—
‘‘(i)(I) provides the mental health services de-
scribed in section 1913(c)(1) of the Public Health
Service Act; or
‘‘(II) in the case of an entity operating in a
State that by law precludes the entity from pro-
viding a service described in such section itself, pro-
vides for such service by contract with an approved
organization or entity (as determined by the Sec-
retary);
‘‘(ii) meets applicable licensing or certification
requirements for community mental health centers
in the State in which it is located; and
‘‘(iii) meets such additional conditions as the
Secretary shall specify to ensure (I) the health and
safety of individuals being furnished such services,
(II) the effective and efficient furnishing of such
services, and (III) the compliance of such entity with
the criteria described in such section.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies with respect to community
mental health centers furnishing services under the
medicare program on or after the first day of the
third month beginning after the date of the enact-
ment of this Act.
(c) GUIDELINES FOR ITEMS AND SERVICES COM-
PRISING
PARTIAL
HOSPITALIZATION
SERVICES.—Not
later than 180 days after the date of the enactment of
this Act, the Secretary shall first adopt national coverage
and administrative policies for partial hospitalization serv-
ices furnished under title XVIII of the Social Security Act,
using a negotiated rulemaking process under subchapter
III of chapter 5 of title 5, United States Code.
(d) REFINEMENT OF PERIODICITY OF REVIEW OF
PLAN FOR PARTIAL HOSPITALIZATION SERVICES.—
(1) IN GENERAL.—Section 1835(a)(2)(F)(ii) of
the 
Social 
Security 
Act 
(42 
U.S.C.
1395n(a)(2)(F)(ii)) is amended by inserting ‘‘at a
reasonable rate (as determined by the Secretary)’’
after ‘‘is reviewed periodically’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) applies with respect to plans for
furnishing partial hospitalization services established
on or after the first day of the third month begin-
ning after the date of the enactment of this Act.
(e) RECERTIFICATION OF PROVIDERS OF PARTIAL
HOSPITALIZATION SERVICES.—
(1) IN GENERAL.—With respect to each com-
munity mental health center that furnishes partial
hospitalization services for which payment is made
under title XVIII of the Social Security Act, the
Secretary of Health and Human Services shall pro-
vide for periodic recertification to ensure that the
provision of such services complies with applicable
requirements of such title.
(2) DEADLINE FOR FIRST RECERTIFICATION.—
The first recertification under paragraph (1) shall be
completed not later than one year after the date of
the enactment of this Act.
(f) CIVIL MONETARY PENALTIES FOR FALSE CER-
TIFICATION OF ELIGIBILITY FOR HOSPICE CARE OR PAR-
TIAL HOSPITALIZATION SERVICES.—
(1) IN GENERAL.—Section 1128A(b)(3) of the
Social Security Act (42 U.S.C. 1320a–7a(b)(3)) is
amended—
(A) in subparagraph (A)(ii), by inserting ‘‘,
hospice care, or partial hospitalization services’’
after ‘‘home health services’’; and
(B) in subparagraph (B), by inserting ‘‘,
section 1814(a)(7) in the case of hospice care,
or section 1835(a)(2)(F) in the case of partial
hospitalization services’’ after ‘‘in the case of
home health services’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) apply with respect to certifications
of eligibility for hospice care or partial hospitaliza-
tion services under the medicare program made on
or after the first day of the third month beginning
after the date of the enactment of this Act.
(g) DEMONSTRATION FOR COST EFFECTIVE WRAP
AROUND MENTAL HEALTH SERVICES.—
(1) ESTABLISHMENT.—
(A) IN
GENERAL.—The Secretary of Health
and Human Services shall implement a demonstra-
tion project (in this subsection referred to as the
‘‘project’’) under part B of title XVIII of the Social
Security Act under which community mental health
centers may offer wrap around mental health serv-
ices (as defined in subparagraph (B)(i)) for purposes