I
104TH CONGRESS
1ST SESSION
H. R. 2390
To revise the restrictions under the medicare program against payment for
services furnished by a facility in which the referring physician has
an ownership interest, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 21, 1995
Mr. THOMAS (for himself, Mr. BILIRAKIS, and Mr. BARTON of Texas) intro-
duced 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 consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To revise the restrictions under the medicare program
against payment for services furnished by a facility in
which the referring physician has an ownership interest,
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; REFERENCES IN ACT.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Physician Ownership Referral Reform Act of
1995’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
Act an amendment is expressed in terms of an amendment
to or repeal of a section or other provision, the reference
shall be considered to be made to that section or other
provision of the Social Security Act.
SEC. 2. REPEAL OF PROHIBITIONS BASED ON COMPENSA-
TION ARRANGEMENTS.
(a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.
1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that
follows through ‘‘equity,’’ and inserting the following: ‘‘is
(except as provided in subsection (c)) an ownership or in-
vestment interest in the entity through equity,’’.
(b) CONFORMING AMENDMENTS.—Section 1877 (42
U.S.C. 1395nn) is amended as follows:
(1) In subsection (b)—
(A) in the heading, by striking ‘‘TO BOTH
OWNERSHIP
AND
COMPENSATION
ARRANGE-
MENT PROVISIONS’’ and inserting ‘‘WHERE FI-
NANCIAL RELATIONSHIP EXISTS’’; and
(B) by redesignating paragraph (4) as
paragraph (7).
(2) In subsection (c)—
(A) by amending the heading to read as
follows: ‘‘EXCEPTION FOR OWNERSHIP OR IN-
VESTMENT INTEREST
IN PUBLICLY TRADED
SECURITIES AND MUTUAL FUNDS’’; and
(B) in the matter preceding paragraph (1),
by striking ‘‘subsection (a)(2)(A)’’ and inserting
‘‘subsection (a)(2)’’.
(3) In subsection (d)—
(A) by striking the matter preceding para-
graph (1);
(B) in paragraph (3), by striking ‘‘para-
graph (1)’’ and inserting ‘‘paragraph (4)’’; and
(C) by redesignating paragraphs (1), (2),
and (3) as paragraphs (4), (5), and (6), and by
transferring and inserting such paragraphs
after paragraph (3) of subsection (b).
(4) By striking subsection (e).
(5) In subsection (f)(2), as amended by section
152(a) of the Social Security Act Amendments of
1994—
(A) in the matter preceding paragraph (1),
by striking ‘‘ownership, investment, and com-
pensation’’ and inserting ‘‘ownership and in-
vestment’’;
(B) in paragraph (2), by striking ‘‘sub-
section (a)(2)(A)’’ and all that follows through
‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub-
section (a)(2),’’; and
(C) in paragraph (2), by striking ‘‘or who
have such a compensation relationship with the
entity’’.
(6) In subsection (h)—
(A) by striking paragraphs (1), (2), and
(3);
(B) in paragraph (4)(A), by striking clause
(iv); and
(C) in paragraph (4)(B), by striking
‘‘RULES.—’’ and all that follows through ‘‘(ii)
FACULTY’’ and inserting ‘‘RULES
FOR
FAC-
ULTY.
SEC. 3. REVISION OF DESIGNATED HEALTH SERVICES SUB-
JECT TO PROHIBITION.
(a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.
1395nn(h)(6)) is amended by striking subparagraphs (B)
through (K) and inserting the following:
‘‘(B) Items and services furnished by a
community pharmacy (as defined in paragraph
(1)).
‘‘(C) Magnetic resonance imaging and
computerized tomography services.
‘‘(D) Outpatient physical therapy serv-
ices.’’.
(b) COMMUNITY
PHARMACY
DEFINED.—Section
1877(h) (42 U.S.C. 1395nn(h)), as amended by section
2(b)(6), is amended by inserting before paragraph (4) the
following new paragraph:
‘‘(1) COMMUNITY PHARMACY.—The term ‘com-
munity pharmacy’ means any entity licensed or cer-
tified to dispense outpatient prescription drugs by
the State in which the entity is located (including an
entity which dispenses such drugs by mail order),
but does not include such an entity which is owned
and operated by—
‘‘(A) a hospital;
‘‘(B) an ambulatory surgical center de-
scribed in section 1832(a)(2)(F)(i); or
‘‘(C) a prepaid plan described in subsection
(b)(3).’’.
(c) 
CONFORMING
AMENDMENTS.—Section
1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended in the
matter preceding subparagraph (A) by striking ‘‘services’’
and all that follows through ‘‘supplies)—’’ and inserting
‘‘services—’’.
SEC. 4. DELAY IN IMPLEMENTATION UNTIL PROMULGA-
TION OF REGULATIONS.
(a) IN GENERAL.—Section 13562(b) of OBRA–1993
(42 U.S.C. 1395nn note) is amended—
(1) in paragraph (1), by striking ‘‘paragraph
(2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(3) PROMULGATION OF REGULATIONS.—Not-
withstanding paragraphs (1) and (2), the amend-
ments made by this section shall not apply to any
referrals made before the effective date of final regu-
lations promulgated by the Secretary of Health and
Human Services to carry out such amendments.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect as if included in the enact-
ment of OBRA–1993.
SEC. 5. EXCEPTIONS TO PROHIBITION.
(a) REVISIONS TO EXCEPTION FOR IN-OFFICE AN-
CILLARY SERVICES.—
(1) REPEAL
OF
SITE-OF-SERVICE
REQUIRE-
MENT.—Section 
1877(b)(2)(A) 
(42 
U.S.C.
1395nn(b)(2)(A)) is amended to read as follows:
‘‘(A) that are furnished personally by the
referring physician, personally by a physician
who is a member of the same group practice as
the referring physician, or personally by individ-
uals who are under the general supervision of
the physician or of another physician in the
group practice, and’’.
(2) CLARIFICATION OF TREATMENT OF PHYSI-
CIAN
OWNERS
OF
GROUP
PRACTICE.—Section
1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is
amended by striking ‘‘physician or group practice’’
and inserting ‘‘physician, such group practice, or the
physician owners of such group practice’’.
(3) 
CONFORMING
AMENDMENT.—Section
1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by
amending the heading to read as follows: ‘‘ANCIL-
LARY
SERVICES
FURNISHED
PERSONALLY
OR
THROUGH GROUP PRACTICE.—’’.
(b) CLARIFICATION OF EXCEPTION FOR SERVICES
FURNISHED IN A RURAL AREA.—Paragraph (5) of section
1877(b) (42 U.S.C. 1395nn(b)), as transferred by section
2(b)(3)(C), is amended by striking ‘‘substantially all’’ and
inserting ‘‘not less than 75 percent’’.
(c) 
REVISION
OF
EXCEPTION
FOR
PREPAID
PLANS.—
(1) EXPANSION OF EXCEPTION FOR CERTAIN
MANAGED
CARE
ARRANGEMENTS.—Section
1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is amended—
(A) in the matter preceding subparagraph
(A), by striking ‘‘organization—’’ and inserting
‘‘organization, directly or through contractual
arrangements with other entities, to individuals
enrolled with the organization—’’;
(B) by striking ‘‘or’’ at the end of subpara-
graph (C);
(C) by striking the period at the end of
subparagraph (D) and inserting a comma; and
(D) by adding at the end the following new
subparagraphs:
‘‘(E) with a contract with a State to pro-
vide services under the State plan under title
XIX (in accordance with section 1903(m)); or
‘‘(F) which meets State regulatory require-
ments applicable to health maintenance organi-
zations and which—
‘‘(i) provides designated health serv-
ices directly or through contractual ar-
rangements with providers;
‘‘(ii) assumes financial risk for the
provision of services or provides services on
behalf of another individual or entity (in-
cluding but not limited to a self-insured
employer, indemnity plan, physician, or
physician group) that assumes financial
risk for the provision of the item or serv-
ice; and
‘‘(iii) subjects the services to a pro-
gram of utilization review offered by an or-
ganization described in a preceding sub-
paragraph, an organization meeting State
regulatory requirements applicable to utili-
zation review, or an organization accred-
ited to perform utilization review consid-
ered appropriate by the Secretary.’’.
(2) NEW EXCEPTION FOR OTHER CAPITATED
PAYMENTS.—Section 
1877(b) 
(42 
U.S.C.
1395nn(b)), as amended by section 2(b)(3)(C), is
amended—
(A) 
by 
redesignating 
paragraphs 
(4)
through (7) as paragraphs (5) through (8); and
(B) by inserting after paragraph (3) the
following new paragraph:
‘‘(4) OTHER
CAPITATED
PAYMENTS.—In the
case of a designated health service which is included
in the services for which a physician or physician
group (including a preferred provider organization)
is paid only on a capitated basis by a health plan or
insurer pursuant to a written arrangement between
the plan or insurer and the physician or physician
group in which the physician or physician group as-
sumes financial risk for the furnishing of the serv-
ice.’’.
(d) NEW EXCEPTION FOR SHARED FACILITY SERV-
ICES.—
(1) IN GENERAL.—Section 1877(b) (42 U.S.C.
1395nn(b)), as amended by section 2(b)(3)(C) and
by subsection (c)(2), is amended—
(A) 
by 
redesignating 
paragraphs 
(5)
through (8) as paragraphs (6) through (9); and
(B) by inserting after paragraph (4) the
following new paragraph:
‘‘(5) SHARED FACILITY SERVICES.—In the case
of a designated health service consisting of a shared
facility service of a shared facility—
‘‘(A) that is furnished—
‘‘(i) personally by the referring physi-
cian who is a shared facility physician or
personally by an individual directly em-
ployed or under the general supervision of
such a physician,
‘‘(ii) by a shared facility in a building
in which the referring physician furnishes
substantially all of the services of the phy-
sician that are unrelated to the furnishing
of shared facility services, and
‘‘(iii) to a patient of a shared facility
physician; and
‘‘(B) that is billed by the referring physi-
cian or a group practice of which the physician
is a member.’’.
(2) DEFINITIONS.—Section 1877(h) (42 U.S.C.
1395nn(h)), as amended by section 2(b)(6) and sec-
tion 3(b), is amended by inserting after paragraph
(1) the following new paragraph:
‘‘(2) SHARED
FACILITY
RELATED
DEFINI-
TIONS.—
‘‘(A) SHARED
FACILITY
SERVICE.—The
term ‘shared facility service’ means, with re-
spect to a shared facility, a designated health
service furnished by the facility to patients of
shared facility physicians.
‘‘(B) 
SHARED
FACILITY.—The 
term
‘shared facility’ means an entity that furnishes
shared facility services under a shared facility
arrangement.
‘‘(C) SHARED FACILITY PHYSICIAN.—The
term ‘shared facility physician’ means, with re-
spect to a shared facility, a physician (or a
group practice of which the physician is a mem-
ber) who has a financial relationship under a
shared facility arrangement with the facility.
‘‘(D) SHARED FACILITY ARRANGEMENT.—
The term ‘shared facility arrangement’ means,
with respect to the provision of shared facility
services in a building, a financial arrange-
ment—
‘‘(i) which is only between physicians
who are providing services (unrelated to
shared facility services) in the same build-
ing,
‘‘(ii) in which the overhead expenses
of the facility are shared, in accordance
with methods previously determined by the
physicians in the arrangement, among the
physicians in the arrangement, and
‘‘(iii) which, in the case of a corpora-
tion, is wholly owned and controlled by
shared facility physicians.’’.
(e) NEW EXCEPTION FOR SERVICES FURNISHED IN
COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—
Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by
section 2(b)(3)(C), subsection (c)(2), and subsection
(d)(1), is amended—
(1) by redesignating paragraphs (6) through
(9) as paragraphs (7) through (10); and
(2) by inserting after paragraph (5) the follow-
ing new paragraph:
‘‘(6) NO ALTERNATIVE PROVIDERS IN AREA.—
In the case of a designated health service furnished
in any area with respect to which the Secretary de-
termines that individuals residing in the area do not
have reasonable access to such a designated health
service for which subsection (a)(1) does not apply.’’.
(f) NEW EXCEPTION FOR SERVICES FURNISHED IN
AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42
U.S.C. 1395nn(b)), as amended by section 2(b)(3)(C),
subsection (c)(2), subsection (d)(1), and subsection (e)(1),
is amended—
(1) by redesignating paragraphs (7) through
(10) as paragraphs (8) through (11); and
(2) by inserting after paragraph (6) the follow-
ing new paragraph:
‘‘(7) SERVICES
FURNISHED
IN
AMBULATORY
SURGICAL CENTERS.—In the case of a designated
health service furnished in an ambulatory surgical
center described in section 1832(a)(2)(F)(i).’’.
(g) NEW EXCEPTION FOR SERVICES FURNISHED IN
RENAL
DIALYSIS
FACILITIES.—Section 1877(b) (42
U.S.C. 1395nn(b)), as amended by section 2(b)(3)(C),
subsection (c)(2), subsection (d)(1), subsection (e)(1), and
subsection (f), is amended—
(1) by redesignating paragraphs (8) through
(11) as paragraphs (9) through (12); and
(2) by inserting after paragraph (7) the follow-
ing new paragraph:
‘‘(8) SERVICES FURNISHED IN RENAL DIALYSIS
FACILITIES.—In the case of a designated health
service furnished in a renal dialysis facility under
section 1881.’’.
(h) NEW EXCEPTION FOR SERVICES FURNISHED IN
A HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by section 2(b)(3)(C), subsection (c)(2), sub-
section (d)(1), subsection (e)(1), subsection (f), and sub-
section (g), is amended—
(1) by redesignating paragraphs (9) through
(12) as paragraphs (10) through (13); and
(2) by inserting after paragraph (8) the follow-
ing new paragraph:
‘‘(9) SERVICES FURNISHED BY A HOSPICE PRO-
GRAM.—In the case of a designated health service
furnished by a hospice program under section
1861(dd)(2).’’.
(i) NEW EXCEPTION FOR SERVICES FURNISHED IN
A COMPREHENSIVE OUTPATIENT REHABILITATION FA-
CILITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by section 2(b)(3)(C), subsection (c)(2), sub-
section (d)(1), subsection (e)(1), subsection (f), subsection
(g), and subsection (h), is amended—
(1) by redesignating paragraphs (10) through
(13) as paragraphs (11) through (14); and
(2) by inserting after paragraph (9) the follow-
ing new paragraph:
‘‘(10) SERVICES FURNISHED IN A COMPREHEN-
SIVE
OUTPATIENT
REHABILITATION
FACILITY.—In
the case of a designated health service furnished in
a comprehensive outpatient rehabilitation facility
under section 1861(cc)(2).’’.
SEC. 6. REPEAL OF REPORTING REQUIREMENTS.
Section 1877 (42 U.S.C. 1395nn) is amended—
(1) by striking subsection (f); and
(2) by striking subsection (g)(5).
SEC. 7. PREEMPTION OF STATE LAW.
Section 1877 (42 U.S.C. 1395nn) is amended by add-
ing at the end the following new subsection:
‘‘(i) PREEMPTION OF STATE LAW.—This section pre-
empts State law to the extent State law is inconsistent
with this section.’’.
SEC. 8. EFFECTIVE DATE.
Except as provided in section 4(b), the amendments
made by this Act shall apply to referrals made on or after
August 15, 1995, without regard to whether or not regula-
tions to carry out the amendments have been promulgated
by such date.
Æ
HR 2390 IH—2