I
105TH CONGRESS
2D SESSION
H. R. 3471
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
MARCH 17, 1998
Mr. STARK (for himself and Mr. BROWN of Ohio) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committees on Commerce, 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 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; AMENDMENTS TO SOCIAL SECU-
RITY ACT; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Fraud and Overpayment Act of 1998’’.
(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.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; table of contents.
Sec. 2. No mark-up for drugs, biologicals, or parenteral nutrients.
Sec. 3. Mental health partial hospitalization services.
Sec. 4. Information requirements.
Sec. 5. Eliminate overpayments for epogen.
Sec. 6. Centers of excellence.
Sec. 7. Repeal of clarification concerning levels of knowledge required for impo-
sition of civil monetary penalties.
Sec. 8. Repeal of expanded exception for risk-sharing contract to anti-kickback
provisions.
Sec. 9. Limiting the use of automatic stays and discharge in bankruptcy pro-
ceedings for provider liability for health care fraud.
Sec. 10. Administrative fees for medicare overpayment collection.
SEC. 2. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PAREN-
TERAL NUTRIENTS.
(a) IN
GENERAL.—Section 1842(o) (42 U.S.C.
1395u(o)), as added by section 4556(a) of the Balanced
Budget Act of 1997, 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-
‘‘(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, 1999.
(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. MENTAL HEALTH PARTIAL HOSPITALIZATION SERV-
ICES.
(a) LIMITATION
ON LOCATION
OF PROVISION
OF
SERVICES.—
(1) IN
GENERAL.—Section 1861(ff)(2) (42
U.S.C. 1395x(ff)(2)) is amended in the matter fol-
lowing 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 or in an individual’s home or
other residential setting’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to partial hospitaliza-
tion services furnished on or after the first day of
the sixth month beginning after the date of the en-
actment of this Act.
(b) QUALIFICATIONS
FOR
COMMUNITY
MENTAL
HEALTH CENTERS.—Section 1861(ff)(3)(B) (42 U.S.C.
1395x(ff)(3)(B)) is amended by striking ‘‘entity’’ and all
that follows and inserting the following: ‘‘entity that—
‘‘(i) provides the mental health services de-
scribed in paragraph (1) of section 1913(c) of the
Public Health Service Act;
‘‘(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 standards as the
Secretary shall specify to ensure (I) the health and
safety of individuals being furnished such services,
(II) the effective or efficient furnishing of such serv-
ices, and (III) the compliance of such entity with the
criteria described in such section.’’.
SEC. 4. INFORMATION REQUIREMENTS.
(a) INFORMATION FROM GROUP HEALTH PLANS.—
Section 1862(b) is amended by adding at the end the fol-
lowing:
‘‘(7) INFORMATION
FROM
GROUP
HEALTH
PLANS.—
‘‘(A) PROVISION
OF
INFORMATION
BY
GROUP HEALTH PLANS.—The administrator of
a group health plan subject to the requirements
of paragraph (1) shall provide to the Secretary
such of the information elements described in
subparagraph (C) as the Secretary specifies,
and in such manner and at such times as the
Secretary may specify (but not more frequently
than four times per year), with respect to each
individual covered under the plan who is enti-
tled to any benefits under this title.
‘‘(B) PROVISION OF INFORMATION BY EM-
PLOYERS AND EMPLOYEE ORGANIZATIONS.—An
employer (or employee organization) that main-
tains or participates in a group health plan sub-
ject to the requirements of paragraph (1) shall
provide to the administrator of the plan such of
the information elements required to be pro-
vided under subparagraph (A), and in such
manner and at such times as the Secretary may
specify, at a frequency consistent with that re-
quired under subparagraph (A) with respect to
each individual described in subparagraph (A)
who is covered under the plan by reason of em-
ployment with that employer or membership in
the organization.
‘‘(C) INFORMATION
ELEMENTS.—The in-
formation elements described in this subpara-
graph are the following:
‘‘(i) ELEMENTS CONCERNING THE IN-
DIVIDUAL.—
‘‘(I) The individual’s name.
‘‘(II) The individual’s date of
birth.
‘‘(III) The individual’s sex.
‘‘(IV) The individual’s social se-
curity insurance number.
‘‘(V) The number assigned by the
Secretary to the individual for claims
under this title.
‘‘(VI) The family relationship of
the individual to the person who has
or had current or employment status
with the employer.
‘‘(ii) ELEMENTS
CONCERNING
THE
FAMILY
MEMBER
WITH
CURRENT
OR
FORMER EMPLOYMENT STATUS.—
‘‘(I) The name of the person in
the individual’s family who has cur-
rent or former employment status
with the employer.
‘‘(II) That person’s social secu-
rity insurance number.
‘‘(III) The number or other iden-
tifier assigned by the plan to that per-
son.
‘‘(IV) The periods of coverage for
that person under the plan.
‘‘(V) The employment status of
that person (current or former) dur-
ing those periods of coverage.
‘‘(VI) The classes (of that per-
son’s family members) covered under
the plan.
‘‘(iii) PLAN ELEMENTS.—
‘‘(I) The items and services cov-
ered under the plan.
‘‘(II) The name and address to
which claims under the plan are to be
sent.
‘‘(iv) ELEMENTS
CONCERNING
THE
EMPLOYER.—
‘‘(I) The employer’s name.
‘‘(II) The employer’s address.
‘‘(III) The employer identifica-
tion number of the employer.
‘‘(D) USE OF IDENTIFIERS.—The adminis-
trator of a group health plan shall utilize a
unique identifier for the plan in providing infor-
mation under subparagraph (A) and in other
transactions, as may be specified by the Sec-
retary, related to the provisions of this sub-
section. The Secretary may provide to the ad-
ministrator the unique identifier described in
the preceding sentence.
‘‘(E) PENALTY
FOR
NONCOMPLIANCE.—
Any entity that knowingly and willfully fails to
comply with a requirement imposed by the pre-
vious subparagraphs shall be subject to a civil
money penalty not to exceed $1,000 for each in-
cident of such failure. The provisions of section
1128A (other than subsections (a) and (b))
shall apply to a civil money penalty under the
previous sentence in the same manner as those
provisions apply to a penalty or proceeding
under section 1128A(a).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect 180 days after the date
of enactment of this Act.
SEC. 5. ELIMINATE OVERPAYMENTS FOR EPOGEN.
Section 
1881(b)(11)(B)(ii) 
(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
1999’’; and
(B) by striking ‘‘and’’ at the end;
(2) by redesignating subclause (II) as subclause
(III);
(3) by inserting after subclause (I) the follow-
ing new subclause:
‘‘(II) for erythropoietin provided during
fiscal year 1999, 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. 6. CENTERS OF EXCELLENCE.
(a) IN GENERAL.—Title XVIII is amended by insert-
ing after section 1896 the following new section:
‘‘CENTERS OF EXCELLENCE
‘‘SEC. 1897. (a) IN GENERAL.—The Secretary shall
use a competitive process to contract with specific hos-
pitals or other entities for furnishing services related to
surgical procedures, and for furnished services (unrelated
to surgical procedures) to hospital inpatients that the Sec-
retary determines to be appropriate. Such services may in-
clude any services covered under this title that the Sec-
retary determines to be appropriate, including post-hos-
pital services.
‘‘(b) QUALITY STANDARDS.—Only entities that meet
quality standards established by the Secretary shall be eli-
gible to contract under this section. In considering quality,
the Secretary shall take into account the quality, experi-
ence, and quantity of services of physicians who provide
services in more than one entity. Contracting entities shall
implement a quality improvement plan approved by the
Secretary.
‘‘(c) PAYMENT.—Payment under this section shall be
made on the basis of negotiated all-inclusive rates. The
amount of payment made by the Secretary to an entity
under this title for services covered under a contract shall
be less than the aggregate amount of the payments that
the Secretary would have otherwise made for the services.
‘‘(d) CONTRACT PERIOD.—A contract period shall be
3 years (subject to renewal), as long as the entity contin-
ues to meet quality and other contractual standards.
‘‘(e) INCENTIVES FOR USE OF CENTERS.—The Sec-
retary may permit entities under a contract under this sec-
tion to furnish additional services or waive beneficiary
cost-sharing, subject to the approval of the Secretary.
‘‘(f) LIMIT ON NUMBER OF CENTERS.—The Sec-
retary shall limit the number of centers in a geographic
area to the number needed to meet projected demand for
contracted services.’’.
(b) EFFECTIVE DATES.—
(1) The amendment made by subsection (a) ap-
plies to services furnished on or after October 1,
1998.
(2) By October 1, 1998, the Secretary shall
enter into contracts under the amendment made by
subsection (a) for coronary artery by-pass surgery
and other heart procedures, knee replacement sur-
gery, and hip replacement surgery, in geographic
areas nationwide such that at least 20 percent of the
projected number of those procedures can be pro-
vided under such contracts.
SEC. 7. REPEAL OF CLARIFICATION CONCERNING LEVELS
OF KNOWLEDGE REQUIRED FOR IMPOSITION
OF CIVIL MONETARY PENALTIES.
(a) ELIMINATION OF ‘‘KNOWING’’ STANDARD.—Sec-
tion 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended by
striking ‘‘knowingly’’ in paragraphs (1), (2), and (3).
(b) ELIMINATION OF STATUTORY DEFINITION OF
‘‘SHOULD KNOW’’.—Section 1128A(i) (42 U.S.C. 1320a–
7a(i)) is amended by striking paragraph (7).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to acts or omissions occurring on
or after the date of the enactment of this Act.
SEC. 8. REPEAL OF EXPANDED EXCEPTION FOR RISK-SHAR-
ING CONTRACT TO ANTI-KICKBACK PROVI-
SIONS.
(a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.
1320a–7b(b)(3)) is amended—
(1) by adding ‘‘and’’ at the end of subpara-
graph (D);
(2) by striking ‘‘; and’’ at the end of subpara-
graph (E) and inserting a period; and
(3) by striking subparagraph (F).
(b) ELIMINATION OF REPORT.—Subsection (b) of
section 216 of the Health Insurance Portability and Ac-
countability Act of 1996 is repealed.
(c) EFFECTIVE DATES.—(1) The amendments made
by subsection (a) shall apply to remuneration provided on
or after the date of the enactment of this Act, regardless
of whether it is pursuant to an agreement or arrangement
entered into before such date.
(2) Subsection (b) shall take effect on the date of the
enactment of this Act.
SEC. 9. LIMITING THE USE OF AUTOMATIC STAYS AND DIS-
CHARGE IN BANKRUPTCY PROCEEDINGS FOR
PROVIDER LIABILITY FOR HEALTH CARE
FRAUD.
(a) NONAPPLICABILITY OF AUTOMATIC STAY PROVI-
SIONS.—
(1) IN
EXCLUSION
PROCEEDINGS.—Section
1128 (42 U.S.C. 1320a–7), as amended by section
4303(a) of the Balanced Budget Act of 1997, is
amended by adding at the end the following new
subsection:
‘‘(k) NONAPPLICABILITY OF BANKRUPTCY STAY.—
An exclusion imposed under this section or a proceeding
seeking an exclusion under this section is not subject to
the automatic stay under section 362(a) of title 11, United
States Code.’’.
(2) IN CIVIL MONEY PENALTY PROCEEDINGS.—
Section 1128A(a) (42 U.S.C. 1320a–7a(a)) is
amended by adding at the end the following: ‘‘An ex-
clusion, penalty, or assessment imposed under this
section or a proceeding that seeks an exclusion, pen-
alty, or assessment under this section, is not subject
to the automatic stay under section 362(a) of title
11, United States Code. Notwithstanding any other
provision of law, amounts made payable under this
section are not dischargeable under any provision of
such title.’’.
(3) IN RECOUPMENT UNDER PART A OF MEDI-
CARE.—Section 1815(d) (42 U.S.C. 1395g(d)) is
amended—
(A) by inserting ‘‘(1)’’ after ‘‘(d)’’, and