I
105TH CONGRESS
1ST SESSION
H. R. 475
To amend title XVIII of the Social Security Act to provide for offering
the option of Medicare coverage through qualified provider-sponsored
organizations (PSOs), and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 21, 1997
Mr. GREENWOOD (for himself and Mr. STENHOLM) introduced the following
bill; which was referred to the Committee on Commerce, and in addition
to the Committees on Ways and Means, and the Judiciary, for a period
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To amend title XVIII of the Social Security Act to provide
for offering the option of Medicare coverage through
qualified provider-sponsored organizations (PSOs), 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
‘‘Medicare Provider-Sponsored Organization Act of
1997’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Qualified provider-sponsored organizations as medicare health plan op-
tion.
Sec. 3. Authorizing payment of all medicare health plans on a partial risk basis.
Sec. 4. Elimination of enrollment composition requirement for eligible organiza-
tions meeting enhanced quality standards.
Sec. 5. Clarification of use of provider-sponsored organizations under medicaid
program.
Sec. 6. Demonstration of coordinated acute and long-term care benefits under
medicare and medicaid programs.
Sec. 7. Rules on coverage of emergency services by all medicare health plans.
Sec. 8. Preemption of State law restrictions on managed care arrangements.
Sec. 9. Publication of antitrust guidelines on activities of provider-sponsored or-
ganizations.
SEC. 2. QUALIFIED PROVIDER-SPONSORED ORGANIZA-
TIONS AS MEDICARE HEALTH PLAN OPTION.
(a) QUALIFIED PROVIDER-SPONSORED ORGANIZA-
TIONS AS ELIGIBLE ORGANIZATIONS UNDER THE MEDI-
CARE PROGRAM.—Part C of title XVIII of the Social Se-
curity Act is amended—
(1) 
in 
section 
1876(b) 
(42 
U.S.C.
1395mm(b))—
(A) in the matter before paragraph (1), by
striking ‘‘or a competitive medical plan’’ and in-
serting ‘‘, a competitive medical plan, or a pro-
vider-sponsored organization’’, and
(B) in paragraph (1), by inserting ‘‘or is a
qualified provider-sponsored organization (as
defined in section 1889(a))’’ after ‘‘Act)’’; and
(2) by inserting after section 1888 the following
new section:
provider shares, directly or indirectly, sub-
stantial financial risk in connection with
their operations,
‘‘(iii) both providers are part of a con-
trolled group of corporations under section
1563 of the Internal Revenue Code of
1986, or
‘‘(iv) both providers are part of an af-
filiated service group under section 414 of
such Code.
‘‘(B) CONTROL.—For purposes of subpara-
graph (A), control is presumed to exist if one
party, directly or indirectly, owns, controls, or
holds the power to vote, or proxies for, not less
than 51 percent of the voting rights or govern-
ance rights of another.
‘‘(b) APPLICATION AND WAIVER OF STATE LICEN-
SURE REQUIREMENT.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
subsection (a)(1)(A) (relating to State licensure)
shall not apply to a provider-sponsored organization.
‘‘(2) DELAYED EXCEPTION.—Effective on and
after January 1, 2002, subsection (a)(1)(A) shall
only apply (and paragraph (1) of this subsection
shall no longer apply) to a provider-sponsored orga-
nization in a State if—
‘‘(A) the financial solvency and capital ade-
quacy standards for licensure of the organiza-
tion under the laws of the State are identical to
the standards established under subsection (g),
and
‘‘(B) the standards for licensure of the or-
ganization under the laws of the State (other
than the standards referred to in subparagraph
(A)) are substantially equivalent to the stand-
ards established under subsection (g).
‘‘(3) APPLICATION FOR WAIVER.—
‘‘(A) IN GENERAL.—A provider-sponsored
organization to which subsection (a)(1)(A) ap-
plies that seeks to operate in a State under a
full risk contract under section 1876(g) or a
partial risk contract under section 1876(i) may
apply for a waiver of the requirement of sub-
section (a)(1)(A) for that organization operat-
ing in that State.
‘‘(B) ACTION ON APPLICATION.—The Sec-
retary shall act on such an application within
60 days after the date it is filed and shall grant
a waiver for an organization with respect to a
State if the Secretary determines that—
‘‘(i) the State did not act upon such
a licensure application within 90 days after
the date it was filed, or
‘‘(ii)(I) the State denied such a licen-
sure application, and
‘‘(II) the State’s licensing standards
or review process impose unreasonable bar-
riers to market entry, including through
the imposition of any requirements, proce-
dures, or other standards on such organi-
zations that are not generally applicable to
any other entities engaged in substantially
similar business.
‘‘(C) EFFECTIVE PERIOD OF WAIVER.—In
the case of a waiver granted under this para-
graph for an organization—
‘‘(i) the waiver shall be effective for a
24-month period, except that it may be re-
newed based on a subsequent application
filed during the last 6 months of such pe-
riod;
‘‘(ii) if the State failed to meet the re-
quirement of subparagraph (B)(i)—
‘‘(I) any application for a renewal
may be made on the basis described in
subparagraph (B)(i) only if the State
does not act on a pending licensure
application during the 24-month pe-
riod specified in clause (i),
‘‘(II) any application for renewal
(other than one made on the basis de-
scribed in subparagraph (B)(i)) may
be made only on the basis described in
subparagraph (B)(ii), and
‘‘(III) the waiver shall cease to
be effective upon approval of the li-
censure application by the State dur-
ing such 24-month period; and
‘‘(iii) any provisions of State law that
relate to the licensing of the organization
and prohibit the organization from provid-
ing coverage pursuant to a contract under
section 1876 shall be superseded during
the period for which such waiver is effec-
tive.
‘‘(4) CONSTRUCTION.—Nothing in this sub-
section shall be construed as—
‘‘(A) limiting the number of times such a
waiver may be renewed under paragraph
(3)(C)(i), or
‘‘(B) affecting the operation of section 514
of the Employee Retirement Income Security
Act of 1974.
‘‘(c) APPLICATION OF CERTAIN REQUIREMENTS.—
‘‘(1) WAIVER OF BENEFIT PACKAGE REQUIRE-
MENT.—For purposes of carrying out subsection
(a)(1)(C), the requirement of subsection (b)(2)(A)
(relating to benefit package for commercial enroll-
ees) of section 1876 shall not be applied.
‘‘(2) EXCEPTION FOR METHOD OF DELIVERING
PHYSICIANS
SERVICES.—For purposes of carrying
out subsection (a)(1)(C), the requirement of sub-
section (b)(2)(C) (relating to delivery of physicians
services) of section 1876 shall be applied, except
that the Secretary shall by regulation specify alter-
native delivery models or arrangements that may be
used by such organizations in lieu of the models or
arrangements specified in such subsection.
‘‘(3) EXCEPTION FOR RISK ASSUMPTION.—For
purposes of carrying out subsection (a)(1)(C), the
requirement of subsection (b)(2)(D) (relating to risk
assumption) of section 1876 shall be applied, except