SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU-
RITY ACT; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Regulatory and Contracting Reform Act of
2001’’.
(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. Findings and construction.
Sec. 3. Definitions.
TITLE I—REGULATORY REFORM
Sec. 101. Issuance of regulations.
Sec. 102. Compliance with changes in regulations and policies.
Sec. 103. Reports and studies relating to regulatory reform.
TITLE II—CONTRACTING REFORM
Sec. 201. Increased flexibility in medicare administration.
Sec. 202. Requirements for information security for medicare administrative
contractors.
TITLE III—EDUCATION AND OUTREACH
Sec. 301. Provider education and technical assistance.
Sec. 302. Small provider technical assistance demonstration program.
Sec. 303. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman.
Sec. 304. Beneficiary outreach demonstration program.
TITLE IV—APPEALS AND RECOVERY
Sec. 401. Transfer of responsibility for medicare appeals.
Sec. 402. Process for expedited access to review.
Sec. 403. Revisions to medicare appeals process.
Sec. 404. Prepayment review.
Sec. 405. Recovery of overpayments.
Sec. 406. Provider enrollment process; right of appeal.
Sec. 407. Process for correction of minor errors and omissions on claims without
pursuing appeals process.
Sec. 408. Prior determination process for certain items and services; advance
beneficiary notices.
TITLE V—MISCELLANEOUS PROVISIONS
Sec. 501. Policy development regarding evaluation and management (E & M)
documentation guidelines.
Sec. 502. Improvement in oversight of technology and coverage.
Sec. 503. Treatment of hospitals for certain services under medicare secondary
payor (MSP) provisions.
Sec. 504. EMTALA improvements.
Sec. 505. Emergency Medical Treatment and Active Labor Act (EMTALA)
Technical Advisory Group.
Sec. 506. Authorizing use of arrangements with other hospice programs to pro-
vide core hospice services in certain circumstances.
Sec. 507. Application of OSHA bloodborne pathogens standard to certain hos-
pitals.
Sec. 508. One-year delay in lock in procedures for Medicare+Choice plans;
change in Medicare+Choice reporting deadlines and annual,
coordinated election period for 2002.
Sec. 509. BIPA-related technical amendments and corrections.
Sec. 510. Conforming authority to waive a program exclusion.
Sec. 511. Treatment of certain dental claims.
Sec. 512. Miscellaneous reports, studies, and publication requirements.
SEC. 2. FINDINGS AND CONSTRUCTION.
(a) FINDINGS.—Congress finds the following:
(1) The overwhelming majority of providers of
services and suppliers in the United States are law-
abiding persons who provide important health care
services to patients each day.
(2) The Secretary of Health and Human Serv-
ices should work to streamline paperwork require-
ments under the medicare program and commu-
nicate clearer instructions to providers of services
and suppliers so that they may spend more time car-
ing for patients.
(b) CONSTRUCTION.—Nothing in this Act shall be
construed—
(1) to compromise or affect existing legal rem-
edies for addressing fraud or abuse, whether it be
criminal prosecution, civil enforcement, or adminis-
trative remedies, including under sections 3729
through 3733 of title 31, United States Code
(known as the False Claims Act); or
(2) to prevent or impede the Department of
Health and Human Services in any way from its on-
going efforts to eliminate waste, fraud, and abuse in
the medicare program.
Furthermore, the consolidation of medicare administrative
contracting set forth in this Act does not constitute con-
solidation of the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance Trust
Fund or reflect any position on that issue.
SEC. 3. DEFINITIONS.
(a) USE OF TERM SUPPLIER IN MEDICARE.—Section
1861 (42 U.S.C. 1395x) is amended by inserting after
subsection (c) the following new subsection:
‘‘Supplier
‘‘(d) The term ‘supplier’ means, unless the context
otherwise requires, a physician or other practitioner, a fa-
cility, or other entity (other than a provider of services)
that furnishes items or services under this title.’’.
(b) OTHER TERMS USED IN ACT.—In this Act:
(1) BIPA.—The term ‘‘BIPA’’ means the
Medicare, Medicaid, and SCHIP Benefits Improve-
ment and Protection Act of 2000, as enacted into
law by section 1(a)(6) of Public Law 106–554.
(2) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
TITLE I—REGULATORY REFORM
SEC. 101. ISSUANCE OF REGULATIONS.
(a) CONSOLIDATION OF PROMULGATION TO ONCE A
MONTH.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C.
1395hh) is amended by adding at the end the fol-
lowing new subsection:
‘‘(d)(1) Subject to paragraph (2), the Secretary shall
issue proposed or final (including interim final) regula-
tions to carry out this title only on one business day of
every month.
‘‘(2) The Secretary may issue a proposed or final reg-
ulation described in paragraph (1) on any other day than
the day described in paragraph (1) if the Secretary—
‘‘(A) finds that issuance of such regulation on
another day is necessary to comply with require-
ments under law; or
‘‘(B) finds that with respect to that regulation
the limitation of issuance on the date described in
paragraph (1) is contrary to the public interest.
If the Secretary makes a finding under this paragraph,
the Secretary shall include such finding, and brief state-
ment of the reasons for such finding, in the issuance of
such regulation.
‘‘(3) The Secretary shall coordinate issuance of new
regulations described in paragraph (1) relating to a cat-
egory of provider of services or suppliers based on an anal-
ysis of the collective impact of regulatory changes on that
category of providers or suppliers.’’.
(2) GAO REPORT ON PUBLICATION OF REGULA-
TIONS ON A QUARTERLY BASIS.—Not later than 3
years after the date of the enactment of this Act, the
Comptroller General of the United States shall sub-
mit to Congress a report on the feasibility of requir-
ing that regulations described in section 1871(d) of
the Social Security Act be promulgated on a quar-
terly basis rather than on a monthly basis.
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to regulations promul-
gated on or after the date that is 30 days after the
date of the enactment of this Act.
(b) REGULAR
TIMELINE
FOR
PUBLICATION
OF
FINAL RULES.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3)(A) The Secretary, in consultation with the Di-
rector of the Office of Management and Budget, shall es-
tablish and publish a regular timeline for the publication
of final regulations based on the previous publication of
a proposed regulation or an interim final regulation.
‘‘(B) Such timeline may vary among different regula-
tions based on differences in the complexity of the regula-
tion, the number and scope of comments received, and
other relevant factors, but shall not be longer than 3 years
except under exceptional circumstances. If the Secretary
intends to vary such timeline with respect to the publica-
tion of a final regulation, the Secretary shall cause to have
published in the Federal Register notice of the different
timeline by not later than the timeline previously estab-
lished with respect to such regulation. Such notice shall
include a brief explanation of the justification for such
variation.
‘‘(C) In the case of interim final regulations, upon
the expiration of the regular timeline established under
this paragraph for the publication of a final regulation
after opportunity for public comment, the interim final
regulation shall not continue in effect unless the Secretary
publishes (at the end of the regular timeline and, if appli-
cable, at the end of each succeeding 1-year period) a notice
of continuation of the regulation that includes an expla-
nation of why the regular timeline (and any subsequent
1-year extension) was not complied with. If such a notice
is published, the regular timeline (or such timeline as pre-
viously extended under this paragraph) for publication of
the final regulation shall be treated as having been ex-
tended for 1 additional year.
‘‘(D) The Secretary shall annually submit to Con-
gress a report that describes the instances in which the
Secretary failed to publish a final regulation within the
applicable regular timeline under this paragraph and that
provides an explanation for such failures.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act. The Secretary shall provide
for an appropriate transition to take into account
the backlog of previously published interim final reg-
ulations.
(c) LIMITATIONS ON NEW MATTER IN FINAL REGU-
LATIONS.—
(1) IN GENERAL.—Section 1871(a) (42 U.S.C.
1395hh(a)), as amended by subsection (b), is further
amended by adding at the end the following new
paragraph:
‘‘(4) If the Secretary publishes notice of proposed
rulemaking relating to a regulation (including an interim
final regulation), insofar as such final regulation includes
a provision that is not a logical outgrowth of such notice
of proposed rulemaking, that provision shall be treated as
a proposed regulation and shall not take effect until there
is the further opportunity for public comment and a publi-
cation of the provision again as a final regulation.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to final regulations
published on or after the date of the enactment of
this Act.
SEC. 102. COMPLIANCE WITH CHANGES IN REGULATIONS
AND POLICIES.
(a) NO
RETROACTIVE
APPLICATION
OF
SUB-
STANTIVE CHANGES.—
(1) IN
GENERAL.—Section 1871 (42 U.S.C.
1395hh), as amended by section 101(a), is amended
by adding at the end the following new subsection:
‘‘(e)(1)(A) A substantive change in regulations, man-
ual instructions, interpretative rules, statements of policy,
or guidelines of general applicability under this title shall
not be applied (by extrapolation or otherwise) retroactively
to items and services furnished before the effective date
of the change, unless the Secretary determines that—
‘‘(i) such retroactive application is necessary to
comply with statutory requirements; or
‘‘(ii) failure to apply the change retroactively
would be contrary to the public interest.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to substantive changes
issued on or after the date of the enactment of this
Act.
(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE
CHANGES AFTER NOTICE.—
(1) IN
GENERAL.—Section 1871(e)(1), as
added by subsection (a), is amended by adding at
the end the following:
‘‘(B)(i) Except as provided in clause (ii), a sub-
stantive change referred to in subparagraph (A) shall not
become effective before the end of the 30-day period that
begins on the date that the Secretary has issued or pub-
lished, as the case may be, the substantive change.
‘‘(ii) The Secretary may provide for such a sub-
stantive change to take effect on a date that precedes the
end of the 30-day period under clause (i) if the Secretary
finds that waiver of such 30-day period is necessary to
comply with statutory requirements or that the application
of such 30-day period is contrary to the public interest.
If the Secretary provides for an earlier effective date pur-
suant to this clause, the Secretary shall include in the
issuance or publication of the substantive change a finding
described in the first sentence, and a brief statement of
the reasons for such finding.
‘‘(C) No action shall be taken against a provider of
services or supplier with respect to noncompliance with
such a substantive change for items and services furnished
before the effective date of such a change.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to compliance actions
undertaken on or after the date of the enactment of
this Act.
(c) RELIANCE ON GUIDANCE.—
(1) IN GENERAL.—Section 1871(e), as added
by subsection (a), is further amended by adding at
the end the following new paragraph:
‘‘(2)(A) If—
‘‘(i) a provider of services or supplier follows
the written guidance (which may be transmitted
electronically) provided by the Secretary or by a
medicare contractor (as defined in section 1889(g))
acting within the scope of the contractor’s contract
authority, with respect to the furnishing of items or
services and submission of a claim for benefits for
such items or services with respect to such provider
or supplier;
‘‘(ii) the Secretary determines that the provider
of services or supplier has accurately presented the
circumstances relating to such items, services, and
claim to the contractor in writing; and
‘‘(iii) the guidance was in error;
the provider of services or supplier shall not be subject
to any sanction (including any penalty or requirement for
repayment of any amount) if the provider of services or
supplier reasonably relied on such guidance.
‘‘(B) Subparagraph (A) shall not be construed as pre-
venting the recoupment or repayment (without any addi-
tional penalty) relating to an overpayment insofar as the
overpayment was solely the result of a clerical or technical
operational error.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall take effect on the date of the
enactment of this Act but shall not apply to any
sanction for which notice was provided on or before
the date of the enactment of this Act.
SEC. 103. REPORTS AND STUDIES RELATING TO REGU-
LATORY REFORM.
(a) GAO STUDY ON ADVISORY OPINION AUTHOR-
ITY.—
(1) STUDY.—The Comptroller General of the
United States shall conduct a study to determine the
feasibility and appropriateness of establishing in the
Secretary authority to provide legally binding advi-
sory opinions on appropriate interpretation and ap-
plication of regulations to carry out the medicare
program under title XVIII of the Social Security
Act. Such study shall examine the appropriate time-
frame for issuing such advisory opinions, as well as
the need for additional staff and funding to provide
such opinions.
(2) REPORT.—The Comptroller General shall
submit to Congress a report on the study conducted
under paragraph (1) by not later than January 1,
2003.
(b) REPORT ON LEGAL AND REGULATORY INCON-
SISTENCIES.—Section 1871 (42 U.S.C. 1395hh), as
amended by section 2(a), is amended by adding at the end
the following new subsection:
‘‘(f)(1) Not later than 2 years after the date of the
enactment of this subsection, and every 2 years thereafter,
the Secretary shall submit to Congress a report with re-
spect to the administration of this title and areas of incon-
sistency or conflict among the various provisions under
law and regulation.
‘‘(2) In preparing a report under paragraph (1), the
Secretary shall collect—
‘‘(A) information from individuals entitled to
benefits under part A or enrolled under part B, or
both, providers of services, and suppliers and from
the Medicare Beneficiary Ombudsman and the Medi-
care Provider Ombudsman with respect to such
areas of inconsistency and conflict; and
‘‘(B) information from medicare contractors
that tracks the nature of written and telephone in-
quiries.
‘‘(3) A report under paragraph (1) shall include a de-
scription of efforts by the Secretary to reduce such incon-
sistency or conflicts, and recommendations for legislation
or administrative action that the Secretary determines ap-
propriate to further reduce such inconsistency or con-
flicts.’’.
TITLE II—CONTRACTING
REFORM
SEC. 201. INCREASED FLEXIBILITY IN MEDICARE ADMINIS-
TRATION.
(a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE
ADMINISTRATION.—
(1) IN GENERAL.—Title XVIII is amended by
inserting after section 1874 the following new sec-
tion:
‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE
CONTRACTORS
‘‘SEC. 1874A. (a) AUTHORITY.—
‘‘(1) 
AUTHORITY
TO
ENTER
INTO
CON-
TRACTS.—The Secretary may enter into contracts
with any eligible entity to serve as a medicare ad-
ministrative contractor with respect to the perform-
ance of any or all of the functions described in para-
graph (4) or parts of those functions (or, to the ex-
tent provided in a contract, to secure performance
thereof by other entities).
‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is
eligible to enter into a contract with respect to the
performance of a particular function described in
paragraph (4) only if—
‘‘(A) the entity has demonstrated capa-
bility to carry out such function;
‘‘(B) the entity complies with such conflict
of interest standards as are generally applicable
to Federal acquisition and procurement;
‘‘(C) the entity has sufficient assets to fi-
nancially support the performance of such func-
tion; and
‘‘(D) the entity meets such other require-
ments as the Secretary may impose.
‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR
DEFINED.—For purposes of this title and title XI—
‘‘(A) IN
GENERAL.—The term ‘medicare
administrative contractor’ means an agency, or-
ganization, or other person with a contract
under this section.
‘‘(B) APPROPRIATE
MEDICARE
ADMINIS-
TRATIVE
CONTRACTOR.—With respect to the
performance of a particular function in relation
to an individual entitled to benefits under part
A or enrolled under part B, or both, a specific
provider of services or supplier (or class of such
providers of services or suppliers), the ‘appro-
priate’ medicare administrative contractor is the
medicare administrative contractor that has a
contract under this section with respect to the
performance of that function in relation to that
individual, provider of services or supplier or
class of provider of services or supplier.
‘‘(4) FUNCTIONS
DESCRIBED.—The functions
referred to in paragraphs (1) and (2) are payment
functions, provider services functions, and functions
relating to services furnished to individuals entitled
to benefits under part A or enrolled under part B,
or both, as follows:
‘‘(A) 
DETERMINATION
OF
PAYMENT
AMOUNTS.—Determining (subject to the provi-
sions of section 1878 and to such review by the
Secretary as may be provided for by the con-
tracts) the amount of the payments required
pursuant to this title to be made to providers
of services, suppliers and individuals.
‘‘(B) MAKING
PAYMENTS.—Making pay-
ments described in subparagraph (A) (including
receipt, disbursement, and accounting for funds
in making such payments).
‘‘(C) BENEFICIARY
EDUCATION
AND
AS-
SISTANCE.—Providing education and outreach
to individuals entitled to benefits under part A
or enrolled under part B, or both, and pro-
viding assistance to those individuals with spe-
cific issues, concerns or problems.
‘‘(D) PROVIDER
CONSULTATIVE
SERV-
ICES.—Providing consultative services to insti-
tutions, agencies, and other persons to enable
them to establish and maintain fiscal records
necessary for purposes of this title and other-
wise to qualify as providers of services or sup-
pliers.
‘‘(E) 
COMMUNICATION
WITH
PRO-
VIDERS.—Communicating to providers of serv-
ices and suppliers any information or instruc-
tions furnished to the medicare administrative
contractor by the Secretary, and facilitating
communication between such providers and sup-
pliers and the Secretary.
‘‘(F) PROVIDER
EDUCATION
AND
TECH-
NICAL ASSISTANCE.—Performing the functions
relating to provider education, training, and
technical assistance.
‘‘(G) 
ADDITIONAL
FUNCTIONS.—Per-
forming such other functions as are necessary
to carry out the purposes of this title.
‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
‘‘(A) NONDUPLICATION
OF
DUTIES.—In
entering into contracts under this section, the
Secretary shall assure that functions of medi-
care administrative contractors in carrying out
activities under parts A and B do not duplicate
activities carried out under the Medicare Integ-
rity Program under section 1893. The previous
sentence shall not apply with respect to the ac-
tivity described in section 1893(b)(5) (relating
to prior authorization of certain items of dura-
ble 
medical 
equipment 
under 
section
1834(a)(15)).
‘‘(B) CONSTRUCTION.—An entity shall not
be treated as a medicare administrative con-
tractor merely by reason of having entered into
a contract with the Secretary under section
1893.
‘‘(6) APPLICATION
OF
FEDERAL
ACQUISITION
REGULATION.—Except to the extent inconsistent
with a specific requirement of this title, the Federal
Acquisition Regulation applies to contracts under
this title.
‘‘(b) CONTRACTING REQUIREMENTS.—
‘‘(1) USE OF COMPETITIVE PROCEDURES.—
‘‘(A) IN GENERAL.—Except as provided in
laws with general applicability to Federal acqui-
sition and procurement or in subparagraph (B),
the Secretary shall use competitive procedures
when entering into contracts with medicare ad-
ministrative contractors under this section, tak-
ing into account performance quality as well as
price and other factors.
‘‘(B) RENEWAL OF CONTRACTS.—The Sec-
retary may renew a contract with a medicare
administrative contractor under this section
from term to term without regard to section 5
of title 41, United States Code, or any other
provision of law requiring competition, if the
medicare administrative contractor has met or
exceeded the performance requirements applica-
ble with respect to the contract and contractor,
except that the Secretary shall provide for the
application of competitive procedures under
such a contract not less frequently than once
every five years.
‘‘(C) TRANSFER
OF
FUNCTIONS.—The
Secretary may transfer functions among medi-
care administrative contractors consistent with
the provisions of this paragraph. The Secretary
shall ensure that performance quality is consid-
ered in such transfers. The Secretary shall pro-
vide public notice (whether in the Federal Reg-
ister or otherwise) of any such transfer (includ-
ing a description of the functions so trans-
ferred, a description of the providers of services
and suppliers affected by such transfer, and
contact information for the contractors in-
volved).
‘‘(D) INCENTIVES
FOR
QUALITY.—The
Secretary shall provide incentives for medicare
administrative contractors to provide quality
service and to promote efficiency.
‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No
contract under this section shall be entered into with
any medicare administrative contractor unless the
Secretary finds that such medicare administrative
contractor will perform its obligations under the con-
tract efficiently and effectively and will meet such
requirements as to financial responsibility, legal au-
thority, quality of services provided, and other mat-
ters as the Secretary finds pertinent.
‘‘(3) PERFORMANCE REQUIREMENTS.—
‘‘(A) DEVELOPMENT
OF
SPECIFIC
PER-
FORMANCE
REQUIREMENTS.—In 
developing
contract performance requirements, the Sec-
retary shall develop performance requirements
applicable to functions described in subsection
(a)(4).
‘‘(B) CONSULTATION.— In developing such
requirements, the Secretary may consult with
providers of services and suppliers, organiza-
tions representing individuals entitled to bene-
fits under part A or enrolled under part B, or
both, and organizations and agencies per-
forming functions necessary to carry out the
purposes of this section with respect to such
performance requirements.
‘‘(C) INCLUSION IN CONTRACTS.—All con-
tractor performance requirements shall be set
forth in the contract between the Secretary and
the appropriate medicare administrative con-
tractor. Such performance requirements—
‘‘(i) shall reflect the performance re-
quirements developed under subparagraph
(A), but may include additional perform-
ance requirements;
‘‘(ii) shall be used for evaluating con-
tractor performance under the contract;
and
‘‘(iii) shall be consistent with the writ-
ten statement of work provided under the
contract.
‘‘(4) INFORMATION REQUIREMENTS.—The Sec-
retary shall not enter into a contract with a medi-
care administrative contractor under this section un-
less the contractor agrees—
‘‘(A) to furnish to the Secretary such time-
ly information and reports as the Secretary may
find necessary in performing his functions
under this title; and
‘‘(B) to maintain such records and afford
such access thereto as the Secretary finds nec-
essary to assure the correctness and verification
of the information and reports under subpara-
graph (A) and otherwise to carry out the pur-
poses of this title.
‘‘(5) SURETY BOND.—A contract with a medi-
care administrative contractor under this section
may require the medicare administrative contractor,
and any of its officers or employees certifying pay-
ments or disbursing funds pursuant to the contract,
or otherwise participating in carrying out the con-
tract, to give surety bond to the United States in
such amount as the Secretary may deem appro-
priate.
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) IN GENERAL.—A contract with any medi-
care administrative contractor under this section
may contain such terms and conditions as the Sec-
retary finds necessary or appropriate and may pro-
vide for advances of funds to the medicare adminis-
trative contractor for the making of payments by it
under subsection (a)(4)(B).
‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN
DATA COLLECTION.—The Secretary may not require,
as a condition of entering into, or renewing, a con-
tract under this section, that the medicare adminis-
trative contractor match data obtained other than in
its activities under this title with data used in the
administration of this title for purposes of identi-
fying situations in which the provisions of section
1862(b) may apply.
‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD-
MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—
‘‘(1) CERTIFYING OFFICER.—No individual des-
ignated pursuant to a contract under this section as
a certifying officer shall, in the absence of gross neg-
ligence or intent to defraud the United States, be
liable with respect to any payments certified by the
individual under this section.
‘‘(2) DISBURSING OFFICER.—No disbursing of-
ficer shall, in the absence of gross negligence or in-
tent to defraud the United States, be liable with re-
spect to any payment by such officer under this sec-
tion if it was based upon an authorization (which
meets the applicable requirements for such internal
controls established by the Comptroller General) of
a certifying officer designated as provided in para-
graph (1) of this subsection.
‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE
CONTRACTOR.—No medicare administrative con-
tractor shall be liable to the United States for a pay-
ment by a certifying or disbursing officer unless in
connection with such payment or in the supervision
of or selection of such officer the medicare adminis-
trative contractor acted with gross negligence.
‘‘(4) INDEMNIFICATION BY SECRETARY.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (D), in the case of a medicare
administrative contractor (or a person who is a
director, officer, or employee of such a con-
tractor or who is engaged by the contractor to
participate directly in the claims administration
process) who is made a party to any judicial or
administrative proceeding arising from or relat-
ing directly to the claims administration process
under this title, the Secretary may, to the ex-
tent the Secretary determines to be appropriate
and as specified in the contract with the con-
tractor, indemnify the contractor and such per-
sons.
‘‘(B) CONDITIONS.—The Secretary may
not provide indemnification under subparagraph
(A) insofar as the liability for such costs arises
directly from conduct that is determined by the
judicial proceeding or by the Secretary to be
criminal in nature, fraudulent, or grossly neg-
ligent. If indemnification is provided by the Sec-
retary with respect to a contractor before a de-
termination that such costs arose directly from
such conduct, the contractor shall reimburse the
Secretary for costs of indemnification.
‘‘(C) SCOPE
OF
INDEMNIFICATION.—In-
demnification by the Secretary under subpara-
graph (A) may include payment of judgments,
settlements (subject to subparagraph (D)),
awards, and costs (including reasonable legal
expenses).
‘‘(D) WRITTEN
APPROVAL
FOR
SETTLE-
MENTS.—A contractor or other person de-
scribed in subparagraph (A) may not propose to
negotiate a settlement or compromise of a pro-
ceeding described in such subparagraph without
the prior written approval of the Secretary to
negotiate such settlement or compromise. Any
indemnification under subparagraph (A) with
respect to amounts paid under a settlement or
compromise of a proceeding described in such
subparagraph are conditioned upon prior writ-
ten approval by the Secretary of the final settle-
ment or compromise.
‘‘(E) CONSTRUCTION.—Nothing in this
paragraph shall be construed—
‘‘(i) to change any common law immu-
nity that may be available to a medicare
administrative contractor or person de-
scribed in subparagraph (A); or
‘‘(ii) to permit the payment of costs
not otherwise allowable, reasonable, or allo-
cable under the Federal Acquisition Regu-
lations.’’.
(2) CONSIDERATION
OF
INCORPORATION
OF
CURRENT LAW STANDARDS.—In developing contract