An Act to strengthen the capability of the Government to detect, prosecute, and punish fraudulent activities under the medicare and Medicaid programs, and for other purposes.
PL 95-142 (H.R.3), enacted 10/25/1977

PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1175 
Public Law 95-142 
95th Congress 
An Act 
To strengthen the capability of the Government to detect, prosecute, and punish 
fraudulent activities under the medicare and medicaid programs, and for 
other purposes. 
Be it enacted by the Senate and House of Representatives 
of the 
United States of America in Congress assemhled^ 
SHORT TITLE 
SECTION 1. This Act may be cited as the "Medicare-Medicaid Anti-
Fraud and Abuse Amendments". 
rROIIIBITION AGAINST ASSIGNMENT BY PHYSICIANS AND OTHERS OF CLAIMS 
FOR SERVICES: CLAIMS PAYMENT PROCEDURES FOR MEDICAID PROGRAM 
Oct. 25, 1977 
[H.R. 3] 
Medicare-
Medicaid 
Anti-Fraud and 
Abuse 
Amendments. 
42 use 1305 
note. 
Carrier contracts. 
42 use 1395u. 
SEC. 2. (a)(1) Section 1842(b)(5) of the Social Security Act is 
amended by adding at the end thereof the following new sentence: 
"No payment which under the preceding sentence may be made 
directly to the physician or other person providing the service in-
volved (pursuant to an assignment described in subparagraph (B) (ii) 
of paragraph (3)) shall be made to anyone else under a reassignment 
or power of attorney (except to an employer or facility as described 
in clause (A) or (B) of such sentence) ; but nothing in this subsection 
shall be construed (i) to prevent the making of such a payment in 
accordance with an assignment from the individual to whom the serv-
ice was provided or a reassignment from the physician or other person 
providing such service if such assignment or reassignment is made to 
a governmental agency or entity or is established by or pursuant to 
the order of a court of competent jurisdiction, or (ii) to preclude an 
agent of the physician or other person providing the service from 
receiving any such payment if (but only if) such agent does so pur-
suant to an agency agreement under which the compensation to be 
paid to the agent for his services for or in connection with the billing 
or collection of payments due such physician or other person under 
this title is unrelated (directly or indirectly) to the amount of such 
payments or the billings therefor, and is not dependent upon the actual 
collection of any such payment.". 
(2) Section 1815 of such Act is amended by adding at the end 
42 USe 1395g, 
thereof the following new subsection: 
"(c) No payment which may be made to a provider of services 
under this title for any service furnished to an individual shall be 
made to any other person under an assignment or power of attorney; 
but nothing in this subsection shall be construed (1) to prevent the 
making of such a payment in accordance with an assignment from 
the provider if such assignment is made to a governmental agency 
or entity or is established by or pursuant to the order of a court of 
competent jurisdiction, or (2) to preclude an agent of the provider 
of services from receiving any such payment if (but only if) such 
agent does so pursuant to an agency agreement under which the com-
pensation to be paid to the agent for his services for on in connection 
with the billing or collection of payments due such provider under this 
title is unrelated (directly or indirectly) to the amount of such pay-
91 STAT. 1176 
PUBLIC LAW 95-142—OCT. 25, 1977 
ments or the billings therefor, and is not dependent upon the actual 
collection of any such payment.". 
State plans for 
(3) Section 1902(a) (32) of such Act is amended to read as follows: 
medical 
"(32) provide that no payment under the plan for any care 
lo^^TT^r'i !»o^ 
or service provided to an individual shall be made to anyone other 
139oa. 
than such individual or the person or institution providing such 
care or service, under an assignment or power of attorney or 
otherwise; except that— 
"(A) in the case of any care or service provided by a phy-
sician, dentist, or other individual practitioner, such payment 
may be made (i) to the employer of such physician, dentist, 
or other practitioner if such physician, dentist, or practitioner 
is required as a condition of his employment to turn over his 
fee for such care or service to his employer, or (ii) (where 
the care or service was provided in a hospital, clinic, or other 
facility) to the facility in which the care or service was pro-
vided if there is a contractual arrangement between such 
physician, dentist, or practitioner and such facility under 
which such facility submits the bill for such care or service; 
and 
"(B) nothing in this paragraph shall be construed (i) to 
prevent the making of such a payment in accordance with 
an assignment from the person or institution providing the 
care or service involved if such assignment is made to a gov-
ernmental agency or entity or is established by or pursuant 
to the order of a court of competent jurisdiction, or (ii) to 
preclude an agent of such person or institution from receiving 
any such payment if (but only if) such agent does so pursuant 
to an agency agreement under which the compensation to 
be paid to the agent for his services for or in connection with 
the billing or collection of payments due such person or insti-
tution under the plan is unrelated (directly or indirectly) 
to the amount of such payments or the billings therefor, and 
is not dependent upon the actual collection of any such 
payment;". 
Effective date. 
(4) The amendments made by this subsection shall apply with 
42 use 1395g 
respect to care and services furnished on or after the date of the 
'**>*®- 
enactment of this Act. 
(b)(1) Section 1902(a) of the Social Security Act is amended— 
(A) by striking out "and" at the end of paragraph (35) ; 
(B) by striking out the period at the end of paragraph (36) 
and inserting in lieu thereof "; and"; 
Claims payment 
(C) by inserting immediately after paragraph (36) the foliow-
procedures. 
jng new paragraph: 
"(37) provide for claims payment procedures which (A) ensure 
that 90 per centum of claims for payment (for which no further 
written information or substantiation is required in order to make 
payment) made for services covered under the plan and furnished 
by health care practitioners through individual or group practices 
or through shared health facilities are paid within 30 days of the 
date of receipt of such claims and that 99 per centum of such claims 
are paid within 90 days of the date of receipt of such claims, and 
(B) provide for procedures of prepayment and postpayment 
claims review, including review of appropriate data with respect 
to the recipient and provider of a service and the nature of the 
service for which payment is claimed, to ensure the proper and 
efficient payment of claims and management of the program."; 
and 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1177 
(D) by inserting at the end thereof the following paragraph: 
"The requirement of clause (A) of paragraph (37) with respect to 
a State plan may be waived by the Secretary if he finds that the State 
has exercised good faith in trying to meet such requirement.". 
(2) The amendments made by paragraph (1) shall apply to calen-
dar quarters beginning on and after July 1,1978, with respect to State 
plans approved under title XIX of the Social Security Act. 
DISCLOSURE o r OWNERSHIP AND RELATED INFORMATION 
State plans. 
Effective date. 
42 u s e 1396a 
note. 
42 u s e 1396. 
SEC. 3. (a)(1) Part A of title XI of the Social Security Act is Regulations, 
amended by inserting immediately after section 1123 the following ^^ USC 1301. 
new section: 
DISCLOSURE OF OWNERSHIP AND RELATED INFORMATION 
42 u s e 1320a-3. 
42 u s e 701, 
1395, 1396, 
1397. 
"SEC. 1124. (a)(1) The Secretary shall by regulation or by con-
tract provision provide that each disclosing entity (as defined in para-
graph (2)) shall— 
"(A) as a condition of the disclosing entity's participation in, 
or certification or recertification under, any of the programs 
established by titles V, XVIII, XIX, and XX,' or 
"(B) as a condition for the approval or renewal of a contract or 
agreement between the disclosing entity and the Secretary or the 
appropriate State agency under any of the programs established 
under titles V, XVIII, XIX, and XX, 
supply the Secretary or the appropriate State agency with full and 
complete information as to the identity of each person with an owner-
ship or control interest (as defined in paragraph (3)) in the entity or 
in any subcontractor (as defined by the Secretary in regulations) in 
which the entity directly or indirectly has a 5 per centum or more 
ownership interest. 
"(2) As used in this section, the term 'disclosing entity' means an 
entity which is— 
" (A) a provider of services (as defined in section 1861 (u), other 
than a fund), an independent clinical laboratory, a renal disease 
facility, or a health maintenance organization (as defined in sec-
tion 1301 (a) of the Public Health Service Act) ; 
"(B) an entity (other than an individual practitioner or group 
of practitioners) that furnishes, or arranges for the furnishing of, 
items or services with respect to which payment may be claimed 
by the entity under any plan or program established pursuant to 
title V or under a State plan approved under title XIX; 
"(C) a carrier or other agency or organization that is acting as 
a fiscal intermediary or agent with respect to one or more pro-
viders of services (for purposes of part A or part B of title XVIII, 
or both, or for purposes of a State plan approved under title 
XIX) pursuant to (i) an agreement under section 1816, (ii) a Po^^' P- 1198. 
contract under section 1842, or (iii) an agreement with a single 42 USe 1395u. 
State agency administering or supervising the administration of 
a State plan approved under title XIX; or 
"(D) an entity (other than an individual practitioner or group 
of practitioners) that furnishes, or arranges for the furnishing of, 
health related services with respect to which payment may be 
claimed by the entity under a State plan or program approved 
under title XX. 
Definitions. 
42 u s e 300e. 
91 STAT. 1178 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 use 1395x. 
Agreements. 
42 use 1395cc. 
42 use 1396a. 
Ante, p. 1177. 
Business records, 
availability. 
"(3) As used in this section, the term 'person with an ownership or 
control interest' means, with respect to an entity, a person who— 
"(A) (i) has directly or indirectly (as determined by the Sec-
retary in regulations) an ownership interest of 5 per centum or 
more in the entity; or 
"(ii) is the owner (in whole or in part) of an interest of 5 per 
centum or more in any mortgage, deed of trust, note, or other 
obligation secured (in whole or in part) by the entity or any of 
the property or assets thereof; or 
"(B) is an officer or director of the entity, if the entity is orga-
nized as a corporation; or 
"(C) is a partner in the entity, if the entity is organized as a 
partnership. 
"(b) To the extent determined to be feasible under regulations of 
the Secretary, a disclosing entity shall also include in the information 
supplied under subsection (a) (1), with respect to each person with an 
ownership or control interest in the entity, the name of any other dis-
closing entity with respect to which the person is a person with an 
ownership or control interest.". 
(2) Section 1861 (j) (11) of such Act is amended to read as follows: 
"(11) complies with the requirements of section 1124;". 
(b) Clause (C) of section 1866(b) (2) of such Act is amended by 
inserting "(i)" after "failed", and by adding after "to verify such 
information," the following: "or (ii) to supply (within such period 
as may be specified by the Secretary in regulations) upon request 
specifically addressed to such provider by the Secretary (I) full and 
complete information as to the ownership of a subcontractor (as 
defined by the Secretary in regulations) with whom such provider has 
had, during the previous twelve months, business transactions in an 
aggregate amount in excess of $25,000, and (II) full and complete 
information as to any significant Ijusiness transactions (as defined 
by the Secretary in regulations), occurring during the five-year period 
ending on the date of such request, between such provider and any 
wholly owned supplier or between such provider and any subcon-
tractor,". 
(c) (1) Section 1902(a) of such Act (as amended by section 2(b) (1) 
of this Act) is amended— 
(A) by amending paragraph (35) to read as follows: 
" (35) provide that any intermediate care facility receiving pay-
ments under such plan complies with the requirements of sec-
tion 1124;"; 
(B) by striking out "and" at the end of paragraph (36); 
(C) by striking out the period at the end of paragraph (37) 
and inserting in lieu thereof "; and"; and 
(D) by inserting after paragraph (37) the following new 
paragraph: 
"(38) require that an entity (other than an individual prac-
titioner or a group of practitioners) that furnishes, or arranges 
for the furnishing of, items or services under the plan, shall sup-
ply (within such period as may be specified in regulations by the 
Secretary or by the single State agency which administers or 
supei-vises the administration of the plan) upon request specifi-
cally addressed to such entity by the Secretary or such State 
agency, respectively, (A) full and complete information as to 
the ownership of a subcontractor (as defined by the Secretary 
in regulations) with whom such entity has had, during the previ-
ous twelve months, business transactions in an aggregate amoimt 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1179 
in excess of $25,000, and (B) full and complete information as 
to any significant business transactions (as defined by the Secre-
tary in regulations), occurring during the five-year period end-
ing on the date of such request, between such entity and any 
wholly owned supplier or between such entity and any sub-
contractor.". 
(2) Section 1903(i) (2) of such Act is amended by inserting before 
the semicolon at the end thereof the following: ", or by reason of 
noncompliance with a request made by the Secretary under clause 
(C)(ii) of such section 1866(b)(2) or under section" 1902(a) (38)". 
(d) (1) Section 2003(d) (1) of such Act is amended— 
(A) by striking out "and" at the end of subparagraph (H); 
(B) by striking out the period at the end of subparagraph (I) 
and inserting in lieu thereof "; and"; and 
(C) by adding after subparagraph (I) the following new 
subparagraph: 
"(J) provides that any entity (other than an individual prac-
titioner or a group of practitioners) receiving payments for the 
provision of health related services complies with the require-
ments of section 1124, and supplies (within such period as may 
be specified in regulations by the Secretary or by the State 
agency which administers or supervises the administration of the 
plan) upon request specifically addressed to such entity by the 
Secretary or such State agency, respectively, (i) full and com-
plete information as to the ownership of a subcontractor (as 
defined by the Secretary in regulations) with whom such entity 
has had, during the previous twelve months, business transactions 
in an aggregate amount in excess of $25,000, and (ii) full and com-
plete information as to any significant business transactions (as 
defined by the Secretary in regulations), occurring during the 
five-year period ending on the date of such request, between such 
entity and any wholly owned supplier or between such entity 
and any subcontractor.". 
(2) Section 2002(a) of such Act is amended by adding at the end 
thereof the following new paragraph: 
"(15) No payment may be made under this section with respect to 
any expenditure for the provision of any health related service if 
such service is provided by an entity which has failed to comply with 
a request made by the Secretary or State agency under section 2003 
(d) (1) (J), for so long as such entity remains in noncompliance with 
such request.". 
(e) The amendment made by subsection (a) (1) shall apply with 
respect to certifications and recertifications made (and participation in 
the programs established by titles V, XVIII, XIX, and XX of the 
Social Security Act pursuant to certifications and recertifications 
made), and fiscal intermediary or agent agreements or contracts 
entered into or renewed, on and after the date of the enactment of this 
Act. The remaining amendments made by this section shall take 
effect on the date of the enactment of this Act; except that the amend-
ments made by subsections (c) and (d) shall become effective Jan-
uary 1,1978. 
42 
use 
1396b. 
42 
use 
1395cc. 
42 
use 
1396a. 
42 
use 
1397b. 
Business records, 
availability. 
Ante, p. 1177. 
Payments to 
States. 
42 u s e 1397a. 
Supra. 
Effective dates. 
42 u s e 1320a-3 
note. 
42 u s e 701, 
1395, 1396, 
1397. 
PENALTIES FOR DEFRAUDING MEDICARE AND MEDICAID PROGRAMS 
SEC. 4. (a) Section 1877 of the Social Security Act is amended to 42 USe 1395nn. 
read as follows: 
91 STAT. 1180 
PUBLIC LAW 95-142—OCT. 25, 1977 
a 
Material facts, 
misrepre-
sentationu 
Fraudulently 
secured benefits. 
Benefits, misuse. 
Illegal 
remunerations. 
PENALTIES 
"SEC. 1877. (a) Whoever— 
"(1) knowingly and willfully makes or causes to be made any 
false statement or representation of a material fact in any appli-
cation for any benefit or payment under this title, 
"(2) at any time knowingly and willfully makes or causes to 
be made any false statement or representation of a material fact 
for use in determining rights to any such benefit or payment, 
"(3) having knowledge of the occurrence of any event affecting 
(A) his initial or continued right to any such benefit or payment, 
or (B) the initial or continued right to any such benefit or pay-
ment of any other individual in whose behalf he has applied for 
or is receiving such benefit or payment, conceals or fails to disclose 
such event with an intent fraudulently to secure such benefit or 
payment either in a greater amount or quantity than is due or 
when no such benefit or payment is authorized, or 
" (4) having made application to receive any such benefit or pay-
ment for the use and benefit of another and having received it, 
knowingly and willfully converts such benefit or payment or any 
part thereof to a use other than for the use and benefit of such 
other person, 
shall (i) in the case of such a statement, representation, concealment, 
failure, or conversion by any person in connection with the furnishing 
(by that person) of items or services for which payment is or may be 
made under this title, be guilty of a felony and upon conviction thereof 
fined not more than $25,000 or imprisoned for not more than five years 
or both, or (ii) in the case of such a statement, representation, conceal-
ment, failure, or conversion by any other person, be guilty of a mis-
demeanor and upon conviction thereof fined not more than $10,000 or 
imprisoned for not more than one year, or both. 
"(b) (1) Whoever solicits or receives any remuneration (including 
any kickback, bribe, or rebate) directly or indirectly, overtly or 
covertly, in cash or in kind— 
"(A) in return for referring an individual to a person for the 
furnishing or arranging for the furnishing of any item or service 
for which payment may be made in whole or in part under this 
title, or 
"(B) in return for purchasing, leasing, ordering, or arranging 
for or recommending purchasing, leasing, or ordering any good, 
facility, service, or item for which payment may be made in whole 
or in part under this title, 
shall be guilty of a felony and upon conviction thereof, shall be fined 
not more than $25,000 or imprisoned for not more than five years, or 
both. 
"(2) Whoever offers or pays any remuneration (including any kick-
back, bribe, or rebate) directly or indirectly, overtly or covertly, in 
cash or in kind to any person to induce such person— 
"(A) to refer an individual to a person for the furnishing or 
arranging for the furnishing of any item or service for which 
payment may be made in whole or in part under this title, or 
"(B) to purchase, lease, order, or arrange for or recommend 
purchasing, leasing, or ordering any good, facility, service, or 
item for which payment may be made in whole or in part under 
this title, 
shall be guilty of a felony and upon conviction thereof, shall be fined 
not more than $25,000 or imprisoned for not more than five years, or 
both. 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1181 
"(3) Paragraphs (1) and (2) shall not apply to— 
"(A) a discount or other reduction in price obtained by a pro-
vider of services or other entity under this title if the reduction in 
price is properly disclosed and appropriately reflected in the costs 
claimed or charges made by the provider or entity under this title; 
and 
"(B) any amount paid by an employer to an employee (who 
has a bona fide employment relationship with such employer) for 
employment in the provision of covered items or services. 
"(c) Whoever knowingly and willfully makes or causes to be made, 
or induces or seeks to induce the making of, any false statement or 
representation of a material fact with respect to the conditions or 
operation of any institution or facility in order that such institution 
or facility may qualify (either upon initial certification or upon recerti-
fication) as a hospital, skilled nursing facility, or home health agency 
(as those terms are defined in section 1861), shall be guilty of a 
felony and upon conviction thereof shall be fined not more than 
$25,000 or imprisoned for not more than five years, or both. 
"(d) Whoever accepts assignments described in section 1842(b) (3) 
(B) (ii) and knowingly, willfully, and repeatedly violates the term 
of such assignments specified in subclause (I) of such section, shall 
be guilty of a misdemeanor and upon conviction thereof shall be fined 
not more than $2,000 or imprisoned for not more than six months, or 
both.". 
(b) Section 1909 of such Act is amended to read as follows: 
Health care 
facilities, 
condition or 
operation, 
misrepre-
sentation. 
42 use 1396h, 
Misrepre-
sentation of 
material facts. 
Fraudulently 
secured benefits). 
PENALTIES 
"SEC. 1909. (a) Whoever— 
"(1) knowingly and willfully makes or causes to be made anj 
false statement or representation of a material fact in any appli-
cation for any benefit or payment under a State plan approved 
under this title, 
"(2) at any time knowingly and willfully makes or causes to 
be made any false statement or representation of a material fact 
for use in determining rights to such benefit or payment, 
"(3) having knowledge of the occurrence of any event affecting 
(A) his initial or continued right to any such benefit or payment, 
or (B) the initial or continued right to any such benefit or pay-
ment of any other individual in whose behalf he has applied for or 
is receiving such benefit or payment, conceals or fails to disclose 
such event with an intent fraudulently to secure such benefit or 
payment either in a greater amount or quantity than is due or 
when no such benefit or payment is authorized, or 
"(4) having made application to receive any such benefit or Benefits, misuse 
payment for the use and benefit of another and having received it, 
knowingly and willfully converts such benefit or payment or any 
part thereof to a use other than for the use and benefit of such 
other person, 
shall (i) in the case of such a statement, representation, concealment, 
failure, or conversion by any person in connection with the furnishing 
(by that person) of items or services for which payment is or may be 
made under this title, be guilty of a felony and upon conviction thereof 
fined not more than $25,000 or imprisoned for not more than five years 
or both, or (ii) in the case of such a statement, representation, conceal-
ment, failure, or conversion by any other person, be guilty of a mis-
demeanor and upon conviction thereof fined not more than $10,000 
91 STAT. 1182 
PUBLIC LAW 95-142—OCT. 25, 1977 
State benefits, 
eligibility 
restrictions. 
Illegal 
remunerations. 
Health care 
facilities, 
condition or 
operation, 
misrepre-
sentation. 
or imprisoned for not more than one year, or both. In addition, in any 
case where an individual who is otherwise eligible for assistance under 
a State plan approved under this title is convicted of an offense under 
the preceding provisions of this subsection, the State may at its option 
(notwithstanding any other provision of this title or of such plan) 
limit, restrict, or suspend the eligibility of that individual for such 
period (not exceeding one year) as it deems appropriate; but the 
imposition of a limitation, restriction, or suspension with respect to 
the eligibility of any individual under this sentence shall not affect the 
eligibility of any other person for assistance under the plan, regardless 
of the relationship between that individual and such other person. 
"(b) (1) Whoever solicits or receives any remuneration (including 
any kickback, bribe, or rebate) directly or indirectly, overtly or 
covertly, in cash or in kind— 
"(A) in return for referring an individual to a person for the 
furnishing or arranging for the furnishing of any item or service 
for which payment may be made in whole or in part under this 
title, or 
"(B) in return for purchasing, leasing, ordering, or arranging 
for or recommending purchasing, leasing, or ordering any good, 
facility, service, or item for which payment may be made in 
whole or in part under this title, 
shall be guilty of a felony and upon conviction thereof, shall be fined 
not more than $25,000 or imprisoned for not more than five years, or 
both. 
" (2) Whoever offers or pays any remuneration (including any kick-
back, bribe, or rebate) directly or indirectly, overtly or covertly, in 
cash or in kind to any person to induce such person— 
"(A) to refer an individual to a person for the furnishing or 
arranging for the furnishing of any item or service for which pay-
ment may be made in whole or in part under this title, or 
"(B) to purchase, lease, order, or arrange for or recommend 
purchasing, leasing, or ordering any good, facilitj^, service, or 
item for which payment may be made in whole or m part under 
this title, 
shall be guilty of a felony and upon conviction thereof, shall be fined 
not more than $25,000 or imprisoned for not more than five years, or 
both. 
"(3) Paragraphs (1) and (2) shall not apply to— 
"(A) a discount or other reduction m price obtained by a pro-
vider of services or other entity under this title if the reduction 
in price is properly disclosed and appropriately reflected in the 
costs claimed or charges made by the provider or entity under this 
title; and 
"(B) any amount paid by an employer to an employee (who 
has a bona fide employment relationship with such employer) for 
employment in the provision of covered items or services. 
"(c) Whoever knowingly and willfully makes or causes to be made, 
or induces or seeks to induce the making of, any false statement or 
representation of a material fact with respect to the conditions or oper-
ation of any institution or facility in order that such institution or 
facility may qualify (either upon initial certification or upon recerti-
fication) as a hospital, skilled nursing facility, intermediate care facil-
ity, or home health agency (as those terms are employed in this title) 
shall be guilty of a felony and upon conviction thereof shall be fined 
not more than $25,000 or imprisoned for not more than five years, or 
both. 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1183 
"(d) Whoever knowingly and willfully— 
"(1) charges, for any service provided to a patient under a 
State plan approved under this title, money or other consideration 
at a rate in excess of the rates established by the State, or 
"(2) charges, solicits, accepts, or receives, in addition to any 
amount otherwise required to be paid under a State plan approved 
under this title, any gift, money, donation, or other consideration 
(other than a charitable, religious, or philanthropic contribution 
from an organization or from a person unrelated to the patient) — 
"(A) as a precondition of admitting a patient to a hos-
pital, skilled nursing facility, or intermediate care facility, 
or 
"(B) as a requirement for the patient's continued stay in 
such a facility, 
when the cost of the services provided therein to the patient is 
paid for (in whole or in part) under the State plan, 
shall be guilty of a felony and upon conviction thereof shall be fined 
not more than $25,000 or imprisoned for not more than five years, or 
both.". 
(c) Section 204(a) of Public Law 94-505 (42 U.S.C. 3524) (relating 
to annual reports of the Health, Education, and Welfare Inspector 
General) is amended by adding at the end thereof the following sen-
tences: "Such report also shall include a detailed description of the 
cases referred by the Department of Health, Education, and Welfare 
to the Department of Justice during the period covered by the report, 
an evaluation of the performance of the Department of Justice in the 
investigation and prosecution of criminal violations relating to fraud 
in the programs of health insurance and medical assistance provided 
under titles XVIII and XIX of the Social Security Act, and any 
recommendations with respect to improving the performance of such 
activities by the Department of Justice, Promptly, after the Inspector 
General submits such a report to Congress, the Attorney General 
shall report to Congress concerning the details of the disposition of 
the cases referred to the Department of Justice and described in the 
Inspector General's report.". 
(d) The amendments made by subsections (a) and (b) shall apply 
with respect to acts occurring and statements or representations made 
on or after the date of the enactment of this Act. 
Health care 
facilities, illegal 
patient 
admittance and 
retention 
practices. 
Reports to 
Congress, 
contents. 
42 use 1395, 
1396. 
Effective date. 
42 u s e 1395nri 
note. 
AMENDMENTS RELATED TO PROFESSIONAL, STANDARDS REVIEW 
ORGANIZATIONS 
SEC. 5. (a) Section 1152(e) of the Social Security Act is amended 42 USC 1320c-l. 
to read as follows: 
"(e) Where the Secretary finds a Professional Standards Review 
Organization (whether designated on a conditional basis or other-
wise) to be competent to perform review responsibilities, the review, 
certification, and similar activities otherwise required pursuant to pro-
visions of this Act (other than this part) shall not be applicable with 
respect to those providers, suppliers, and practitioners being reviewed 
by such Professional Standards Review Organization, except to the 
extent specified by the Secretary. Nothing in the preceding sentence 
shall be construed as rendering inapplicable any provision of this Act 
wherein requirements with respect to conditions for eligibility to or 
payment of benefits (as distinct from reviews and certifications made 
with respect to determinations of the kind made pursuant to para-
graphs (1) and (2) of section 1155 (a)) must be satisfied.". 
42 USC 1320c-^l.. 
91 STAT. 1184 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 u s e 1320C-3. 
Trial period, 
extension. 
42 u s e 1320C-4. 
Grants. 
Review 
responsibility 
requests. 
Ambulatory care 
services, review. 
"Shared health 
facility." 
42 u s e 1301. 
(b)(1) Section 1154 (b) of such Act is amended— 
(A) by striking out "(which may not exceed 24 months)" in 
the first sentence and inserting in lieu thereof "(which may not 
exceed 48 months except as provided in subsection (c))"; 
(B) by inserting ", in addition to review of health care services 
provided by or in institutions," in the first sentence after "per-
form"; and 
(C) by striking out "or ordered by physicians" and all that 
follows through "and organizations" in the second sentence and 
inserting in lieu thereof "by or in institutions (including ancillary 
services) and, in addition, review of such other health care serv-
ices as the Secretary may require". 
(2) Section 1154 of such Act is further amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection: 
"(c) If the Secretary finds that an organization designated under 
subsection (a) has been unable to perform satisfactorily all of the 
duties and functions recjuired under this part for reasons beyond the 
organization's control, he may extend such organization's trial period 
for an additional period not exceeding twenty-four months.". 
(c)(1) Section 1155 of such Act is amended— 
(A) by striking out "directly or indirectly involved in" in sub-
section (a)(6)(A) and inserting in lieu thereof "directly respon-
sible for"; 
(B) by striking out "any financial" in subsection (a)(6)(B) 
and inserting in lieu thereof "a significant financial"; 
(C) by inserting after subsection (f) (2) the following new 
j)aragraph: 
"(3) Any such agreement with an organization under this part may 
be in the form of a grant or an assistance agreement."; and 
(D) by sitriking out subsection (g) and inserting in lieu thereof 
the following new^ subsection: 
"(g)(1) Where a Professional Standards Review Organization 
(whether designated on a conditional basis or otherwise) requests 
review responsibility with respect to services furnished in shared 
health facilities, the Secretary must give priority to such request, with 
the highest priority being assigned to requests from organizations 
located in areas with substantial numbers of shared health facilities. 
"(2) The Secretary shall require any Professional Standards 
Review Organization which is capable of exercising review responsi-
bility with respect to ambulatory care services to perform review 
responsibility with respect to such services on and after a date not 
earlier than the date the organization is designated as a Professional 
Standards Review Organization (other than under section 1154) and 
not later than two years after the date the organization has been so 
designated, but any Such designated Professional Standards Review 
Organization may be approved to perform such review responsibility 
at any earlier time if such organization applies for, and is found 
capable of exercising, such responsibility.". 
(2) Section 1101(a) of such Act is amended by inserting after para-
graph (8) the following new paragraph: 
"(9) The term 'shared health facility' means any arrangement 
whereby— 
"(A) two or more health care practitioners practice their pro-
fessions at a common physical location; 
"(B) such practitioners share (i) common waiting areas, exam-
ining rooms, treatment rooms, or other space, (ii) the services of 
supporting staff, or (iii) equipment; 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1185 
"(C) such practitioners have a person (who may himself be a 
practitioner) — 
"(i) who is in charge of, controls, manages, or super^dses 
subsitantial aspects of the arrangement or operation for the 
delivery of health or medical services at such common physi-
cal location, other than the direct furnishing of professional 
health care services by the practitioners to their patients; or 
"(ii) who makes available to such practitioners the services 
of supporting staff who are not employees of such practi-
tioners ; 
and who is compensated in whole or in part, for the use of such 
common physical location or support services pertaining thereto, 
on a basis related to amounts charged or collected for the services 
rendered or ordered at such location or on any basis clearly 
unrelated to the value of the services provided by the person; and 
" ( D ) at least one of such practitioners received payments on a 
fee-for-service basis under titles V, X V I I I , and X I X in an 
amount exceeding $5,000 for any one month during the preceding 
12 months or in an aggregate amount exceeding $40,000 during 
the preceding 12 months; 
except that such term does not include a provider of services (as de-
fined in section 1861 (u) of this Act), a health maintenance organiza-
tion (as defined in section 1301(a) of the Public Health Service Act), 
a hospital cooperative shared services organization meeting the 
requirements of section 501(e) of the Internal Revenue Code of 1954, 
or any public entity.". 
(d) (1) Section 1158 of such Act is amended by adding at the end 
thereof the following new subsection: 
"(c) 
Where 
a 
Professional 
Standards 
Review 
Organization 
(whether designated on a conditional basis or otherwise) has been 
found competent by the Secretary to assume review responsibility with 
respect to specified types of health care services or specified providers 
or practitioners of such services and is performing such reviews, deter-
minations made pursuant to paragraphs (1) and (2) of section 1155 
(a) in connection with such reviews shall constitute the conclusive 
determination on those issues (subject to sections 1159, 1171(a)(1), 
and 1171(d)(3)) for purposes of payment under this Act, and no 
reviews with respect to those determinations shall be conducted, for 
purposes of payment, by agencies and organizations which are parties 
to agreements entered into by the Secretary pursuant to section 1816, 
carriers which are parties to contracts entered into by the Secretary 
pursuant to section 1842, or single State agencies administering or 
supervising the administration of State plans approved under title 
XIX.". 
(2) (A) Section 1152(b) (2) of such Act is amended by strikinj; out 
"submitted to him by the association, agency, or organization" and 
inserting in lieu thereof "which shall be developed and submitted by 
the association, agency, or organization in accordance with subsec-
tion (h)". 
(B) Section 1152 of such Act is further amended by ndding at the 
end thereof the following new subsection: 
"(h) (1) During the development and preparation by an organiza-
tion of its formal plan under subsection (b) (2) or of any modifica-
tion of such plan to include review of services in skilled nursing 
facilities (as defined in section 1861 (j)) or intermediate care facilHies 
(as defined in section 1905(c)) or review of ambulatory care services, 
the organization shall consult with the single State agency responsible 
42 use 701, 
1395, 1396. 
42 use 1395x. 
42 use 300e. 
26 use 501. 
eiaim paymen1:s 
review. 
42 use 1320C-7. 
42 use 1320C-4. 
42 use 1320C-8. 
Post, p. 1186. 
42 use 1395h. 
42 use 1395u. 
42 use 1320C-1. 
State health care 
facility plans, 
preparation. 
42 use 1395x. 
42 use 1396<i. 
91 STAT. 1186 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 use 1396. 
Evaluation 
procedures. 
Ante, p. 1184. 
Ante, p. 1185. 
for administering or supervising the administration of the State plan 
approved under title X I X for the State in which the organization is 
located. 
" (2) Such plan and any such modification shall be submitted to the 
Governor of such State, at the time of its submission to the Secretary, 
for his comments. 
"(3) The Secretary, before making the findings described in sub-
section (b)(2) or a finding regarding the organization's capability to 
perform review of such services (as the case may be), shall consider 
any such comments submitted to him by such Governor before the end 
of the thirty-day period beginning on the date of submission of the 
plan or of any such modification (as the case may be). 
"(4) If, after considering such comments, the Secretary intends to 
make findings which are adverse to such comments, the Secretary shall 
provide the Governor making such comments with the opportunity to 
submit additional evidence and comments on such intended 
findings 
during a period of not less than thirty days ending before the findings 
became effective.". 
(C) Section 1154 of such Act (as amended by subsection (b) (2) of 
this section) is further amended by adding after subsection (d) the 
following new subsection: 
"(e) In determining whether an organization designated on a con-
ditional basis as the Professional Standards Review Organization for 
any area is substantially carrying out its duties in a satisfactory man-
ner and should be considered a qualified organization, the Secretary 
shall follow the procedures specified in section 1152(h) (concerning 
the Secretary's consideration of comments of the Governor of the State 
in which the organization is located).". 
(D) Part B of title X I of such Act is amended by adding after sec-
tion 1170 the following new section: 
42 use 
1320C-20. 
42 use 1320c-^. 
Ante, p. 1185. 
42 use 1396. 
,, ... '. 
( 
».- ] 
Waiver. 
MEMORANDUMS OF UNDERSTANDING; FEDERAL-STATE RELATIONS 
GENERALLY 
"SEC. 1171. (a) (1) Except as provided in paragraph (2), no deter-
mination made by a Professional Standards Review Organization 
pursuant to paragraphs (1) and (2) of section 1155(a) in connection 
with reviews shall constitute conclusive determinations under section 
1158(c) for purposes of payment under title X I X , unless such orga-
nization has entered into a memorandum of understanding, approved 
by the Secretary, with the single State agency responsible for admin-
istering or supervising the administration of the State plan approved 
under title X I X for the State in which the organization is located 
(hereinafter in this section referred to as the 'State agency') for the 
purpose of delineating the relationship between the organization and 
the State agency and of providing for the exchange of data or infor-
mation, and for administrative procedures, coordination mechanisms, 
and modification of the memorandum at any time that additional 
responsibility for review by the organization is authorized by the 
Secretary. 
"(2) The requirement of paragraph (1) may be waived by the 
Secretary if (A) the State agency indicates to the Secretary that it 
does not wish to enter into a memorandum of understanding with the 
organization involved, or (B) the Secretary finds that the State agency 
has refused to negotiate in good faith or in a timely manner with the 
organization involved. 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1187 
"(b)(1) The State agency may request a Professional Standards 
Keview Organization which is entering into such a memorandum of 
understanding with the agency to include in the memorandum a 
specification of review goals or methods (additional to any such goals 
or methods contained in the organization's formal plan) for the per-
formance of the organization's duties and functions under this part. 
"(2) If the agency and the organization cannot reach agreement 
regarding the inclusion of any such requested specification, the Secre-
tary shall review such specification and shall require that the specifi-
cation be included in the memorandum to the extent that the Secretary 
determines that such specification of goals or methods (A) is con-
sistent with the functions of the organization under this part and with 
the provisions of title XIX and the State's plan approved under such 
title, and (B) does not seriously impact on the effectiveness and uni-
formity of the organization's review of health care services paid for 
under title XVIII and title XIX of this Act. 
"(c) Notwithstanding any other provision of this Act, the State 
agency may contract with any Professional Standards Keview Orga-
nization located in the State for the performance of review responsi-
bilities in addition to those performed pursuant to this part (and the 
cost of performance of such additional responsibilities is reimbure-
able as an expense of the State agency under section 1903(a)) if— 
"(1) the State agency formally requests the performance of 
such additional responsibilities, and 
"(2) the performance of such additional responsibilities is not 
inconsistent with this part and is provided for in an amendment 
to the State's plan w-hich is approved by the Secretary under 
title XIX. 
" (d) (1) Each State agency may monitor the performance of review 
i-esponsibilities by Professional Standards Review Organizations 
located within the State, in accordance with a State monitoring plan 
which is developed after review and comment by such organizations 
and is approved by the Secretary. The costs of activities of the State 
agency under and in accordance with such plan are reimbursable as 
an expense of the State agency under section 1903 (a). 
"(2) A monitoring plan developed and approved under paragraph 
(1) may include a specification of performance criteria for judging 
the effectiveness of the review performance of the Professional Stand-
ards Review Organizations. If the State agency and the Professional 
Standards Review Organizations cannot reach agreement regarding 
such criteria, the Secretary shall assist the agency and organizations 
in resolving the matters in dispute. 
"(3) (A) Whenever a State agency monitoring the performance of 
review responsibilities by a Professional Standards Review Organiza-
tion under a plan developed and approved under paragraph (1) sub-
mits to the Secretary reasonable documentation that the review 
determinations of such organization have caused an unreasonable and 
detrimental impact on total State expenditures under title XIX and on 
the appropriateness of care received by individuals under the State's 
plan approved under such title, and requests the Secretary to act, the 
Secretary shall, within thirty days from the date of receipt of the docu-
mentation, make a determination as to the reasonableness of the allega-
tion by the State agency. If the Secretary determines that the review 
determinations of such organization have caused an unreasonable and 
detrimental impact on total State expenditures under title XIX and 
on the appropriateness of care received by individuals under the State's 
plan approved under such title, unless the Secretary determines that 
Review goals and 
methods, 
specification. 
42 u s e 1396. 
42 u s e 1395. 
Additional State 
review requests!. 
42 u s e 1396b. 
State monitoring 
plans. 
Review 
organization's 
authority, 
suspension. 
91 STAT. 1188 
PUBLIC LAW 95-142—OCT. 25, 1977 
Ante, p. 1185. 
42 u s e 1396. 
42 u s e 1395. 
Notification of 
congressional 
committees. 
Procedures and 
mechanisms, 
development. 
Review 
committees of 
hospitals and 
other health care 
facilities. 
42 u s e 1320C-4. 
Post, p. 1207. 
42 u s e 1396d. 
the organization has taken appropriate corrective action, he shall 
immediately suspend such organization's authority in whole or in part 
under section 1158(c) to make conclusive determinations for purposes 
of payment under title XIX (and he may suspend such authority for 
purposes of payment under title XVIII) until he (i) reevaluates such 
organization's performance of the responsibilities involved and deter-
mines that such performance does not have such unreasonahle and 
detrimental impact, or (ii) determines that the organization has taken 
appropriate corrective action. Any determination made by the Secre-
tary under this subparagraph shall be final and shall not be subject to 
judicial review. 
"(B) The Secretary shall notify the State agency submitting such 
documentation, and the organization involved, in writing, of his deter-
mination, any subsequent actions taken, and the basis thereof, and shall 
notify the appropriate committees of the United States House of Rep-
resentatives and the Senate of any such documentation submitted and 
the actions taken. 
"(e) (1) The Secretary shall in a timely manner establish procedures 
and mechanisms to govern his relationships with State agencies under 
this part (specifically including his relationships with such agencies in 
connection with their respective functions under the preceding provi-
sions of this section). Such mechanisms shall include periodic consul-
tation by the Secretary with State agency representatives and 
representatives of Professional Standards Review Organizations 
regarding relationships between such agencies and such organizations 
(including the appropriate exchange of data and information between 
such agencies and such organizations) and other problems of mutual 
concern, and such procedures shall permit the State agency to be repre-
sented on any project assessments conducted by the Secretary with 
respect to a Professional Standards Review Organization located 
within its State. 
"(2) Each Professional Standards Review Organization shall pro-
vide to the State agency for the State in which it is located, upon 
request, data or information which the Secretary requires such organi-
zations to report to him routinely on a periodic basis, and such other 
data or information as the Secretary authorizes to be disclosed.". 
(3) (A) Section 1155(e) (1) of such Act is amended by striking out 
"of a hospital or other operating health care facility or organization" 
and inserting in lieu thereof "of a hospital (including any skilled 
nursing facility, as defined in section 1861 (j), or intermediate care 
facility, as defined in section 1905(c), which is also a part of such 
hospital) or other operating health care facility or organization 
(other than such a skilled nursing facility or intermediate care facility 
which is not a part of a hospital)". 
(B) Section 1155(a) of such Act is amended— 
(i) by inserting "(except as provided in paragraph (7))" in 
paragraph (1) after "institutional and noninstitutional providers 
of health care services"; and 
(ii) by inserting after paragraph (6) the following new 
paragraph: 
"(7) (A) Except as provided in subparagraph (B), a Professional 
Standards Review Organization located in a State has the function 
and duty to assume responsibility for the review under paragraph (1) 
of professional activities in intermediate care facilities (as defined in 
section 1905(c)) and in public institutions for the mentally retarded 
(described in section 1905(d) (1)) only if (i) the Secretary finds, on 
the basis of such documentation as he may require from the State, that 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1189 
42 u s e 1320C-9. 
42 use 
1320C-12. 
Data and 
information. 
42 use 
1320C-15. 
the single State agency which administers or supervises the adminis- 42 USe 1396. 
tration of the State plan approved under title XIX for that State is not 
performing effective review of the quality and necessity of health care 
services provided in such facilities and institutions, or (ii) the State 
requests such organization to assume such responsibility. 
"(B) A Professional Standards Review Organization located in 
a State has the function and duty to assume responsibility for the 
review under paragraph (1) of professional activities in intermediate 
care facilities in the State that are also skilled nursing facilities (as 
defined in section 1861(j)), to the extent that the Secretary finds Post, ^p. 1207. 
that the performance of such function by the single State agency 
(described in subparagraph (A)) for that State is inefficient.". 
(e) Section 1160(b)(1) of such Act is amended by striking out 
"practitioner or provider" and inserting in lieu thereof "health care 
practitioner or hospital, or other health care facility, agency, or orga-
nization" each time it appeare therein, 
(f) Section 1163(a) (2) of such Act is amended to read as follows: 
"(2) Members of the Council shall be appointed for a term of three 
years, except that the Secretary may provide, in the case of any terms 
scheduled to expire after January 1, 1978, for such shorter terms as 
will ensure that (on a continuing basis) the terms of no more than 
four members expire in any year. Members of the Council shall be 
eligible for reappointment.". 
(g) Section 1163 of such Act is amended by striking out subsection 
(f). 
(h) Section 1166 of such Act is amended— 
(1) by striking out "or (2)" in subsection (a) and inserting 
inlieuthereof ", (2)"; 
(2) by inserting the following immediately before the period 
at the end of subsection (a) : ", or (3) in accordance with subsec-
tion (b)"; 
(3) by redesignating subsection (b) as subsection (c) ; 
(4) by inserting the following new subsection immediately after 
subsection (a) ; 
" (b) A Professional Standards Review Organization shall provide, 
in accordance with procedures established by the Secretary, data and 
information— 
"(1) to assist Federal and State agencies recognized by the 
Secretary as having responsibility for identifying and investi-
gating cases or patterns of fraud or abuse, which data and 
information shall be provided by such organization to such 
agencies at the request of such agencies at the discretion of such 
Organization on the basis of its findings with respect to evidence 
of fraud or abuse; and 
" (2) to assist the Secretary, and such Federal and State agen-
cies recognized by the Secretary as having health planning or 
related responsibilities under Federal or State law (including 
health systems agencies and State health planning and develop-
ment agencies), in carrying out appropriate health care plan-
ning and related activities, which data and information shall be 
provided in such format and manner as may be prescribed by the 
Secretary or agreed upon by the responsible Federal and State 
agencies and such Organization, and shall be in the form of 
aggregate statistical data (without identifying any individual) 
on a geographic, institutional, or other basis reflecting the vol-
ume and frequency of services furnished, as well as the demo-
graphic characteristics of the population subject to review by 
such Organization. 
91 STAT. 1190 
PUBLIC LAW 95-142—OCT. 25, 1977 
Patient records, 
nondisclosure. 
42 use 
1320C-15. 
Payment. 
42 use 
1320C-16. 
42 u s e 1320C-4. 
42 use 
1320C-17. 
Annual report to 
eongress. 
Ante, p. 1186. 
The penalty provided in subsection (c) shall not apply to the disclo-
sure of any data and information received under this subsection, 
except that such penalty shall apply to the disclosure (by the agency 
receiving such data and information) of any such data and informa-
tion described in paragraph (1) unless such disclosure is made in a 
judicial, administrative, or other formal legal proceeding resulting 
from an investigation conducted by the agency receiving the data and 
information."; and 
(5) by inserting after subsection (c) (as so redesignated) the 
following new subsection: 
"(d) No patient record in the possession of a Professional Stand-
ai-ds Review Organization, a Statewide Professional Standards 
Review Council, or the National Professional Standards Review 
Council shall be subject to subpena or discovery proceedings in a civil 
action.". 
(i) Section 1167 of such Act is amended by adding the following 
new subsection at the end thereof: 
"(d) The Secretary shall make payment to a Professional Standards 
Review Organization, whether conditionally designated or qualified, 
or to any member or employee thereof, or to any person who furnishes 
legal counsel or services to such organization, in an amount equal to 
the reasonable amount of the expenses incurred, as determined by 
the Secretary, in connection with the defense of any suit, action, or 
proceeding brought against such organization, member, or employee 
related to the performance of any duty or function of such organiza-
tion, member, or employee (as described in section 1155).". 
(j) Section 1168 of such Act is amended by adding at the end thereof 
the following new sentence: "The Secretary shall make payments to 
Professional Standards Review Organizations (whether designated 
on a conditional basis or otherwise) from funds described in the first 
sentence of this section (without any requirement for the contribution 
of funds by any State or political subdivision thereof) for expenses 
incurred in the performance of duties by such Orgnizations.". 
(k) Part B of title XT of such Act (as amended by subsection (d) 
(2) (D) of this section) is further amended by adding after section 
1171 the following new section: 
(( 
42 use 
1320C-21. 
42 
use 
701, 
1301, 
1395, 
1396. 
ANNUAL REPORTS 
"SEC. 1172. The Secretary shall submit to the Congress not later 
than April 1,1978, and not later than April 1 of each year thereafter, 
a full and complete report on the administration, impact, and cost of 
the program under this part during the preceding fiscal year, including 
data and information on— 
"(1) the number, status (conditional or otherwise), and service 
areas of, and review methodologies employed by, all Professional 
Standards Review Organizations participating in the program; 
"(2) the number of health care institutions and practitioners 
whose services are subject to review by Professional Standards 
Review Organizations, and the number of beneficiaries and recip-
ients who received services subject to such review during such 
year; 
"(3) the imposition of penalties and sanctions under this title 
for violations of law and for failure to comply with the obliga-
tions imposed by this part; 
"(4) the total costs incurred under titles V, XI, XVIII, and 
XIX of this Act in the implementation and operation of all pro-
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1191 
cedures required by such titles for the review of services to deter-
mine their medical necessity, appropriateness of use, and quality; 
"(5) changes in utilization rates and patterns, and changes in 
medical procedures and practices, attributable to the activities of 
Professional Standards Review Organizations; 
"(6) the results of program evaluation activities, including the 
operation of data collection systems and the status of Profes-
sional Standards Review Organization data policy and imple-
mentation ; 
"(7) the extent to which Professional Standards Review Orga-
nizations are performing reviews of services for other govern-
mental or private health insurance programs; and 
"(8) recommendations for legislative changes.". 
(1) (1) Title X I of such Act (as amended by subsections (d) (2) (D) ^«««. P- 1190. 
and (k) of this section) is further amended by adding after section 
1172 the following new section: 
'MEDICAL 
OFFICERS IN AMERICAN 
SAMOA, THE NORTHERN 
MARIANA 
ISLANDS, AND THE TRUST TERRITORY OF THE PACIFIC ISLANDS TO BE 
INCLUDED IN THE PROFESSIONAL STANDARDS REVIEW PROGRAM 
"SEC. 1173. For purposes of applying this part (except sections 
1155(c) and 1163) to American Samoa, the Northern Mariana Islands, 
and the Trust Territory of the Pacific Islands, individuals licensed to 
practice medicine in those places shall be considered to be physicians 
and doctors of medicine.". 
(2) The second sentence of section 1101(a)(1) of such Act is 
amended by inserting "and in part B of this title" after "title V". 
(m) Section 1861 (w) (2) of such Act is amended by inserting "part 
B of this title or under" immediately after "entitled to have payment 
made for such services under". 
(n) Section 1167 of such Act is amended— 
(1) by inserting "or to any Statewide Professional Standards 
Review Council" in subsection (a) after "Professional Standards 
Review Organization"; 
(2) by inserting "or such Council" in subsection (a) after "such 
Organization"; 
(3) by inserting "or of any Statewide Professional Standards 
Review Council" in subsection (b) (1) after "Professional Stand-
ards Review Organization"; 
(4) by inserting "or council" in subsection 
(b)(1) 
after 
"organization"; 
(5) by inserting "or of Statewide Professional 
Standards 
Review Councils" in subsection (b) (1) after "Review Organiza-
tions"; and 
(6) by inserting "AND STATEWIDE PROFESSIONAL STANDARDS REVIEW 
COUNCILS" in the heading of the section after "PROFESSIONAL STAND-
ARDS REVIEW ORGANIZATIONS". 
(o) (1) Section 1152(b) (1) (A) of such Act is amended by striking 
out "subsection ( c ) ( i ) " and inserting in lieu thereof "subsection 
(c)(1)". 
(2) Section 1155(a)(1) of such Act is amended by striking out 
"(subject to the provisions of subsection ( g ) ) " in the matter preced-
ing subparagraph ( A ) . 
(3) Section 1160(b) (1) of such Act is amended by inserting "or" 
after "permanently" in the matter following subparagraph (B). 
42 use 
1320C-22. 
42 use 1320C-4, 
1320C-12. 
42 use 1301. 
42 use 1395x. 
42 use 
1320C-16. 
42 use 1320C-1. 
42 use 13200-1. 
Ante, p. 1189. 
91 STAT. 1192 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 u s e 1320C-4. 
Ante, p. 1177. 
(p) Section 1155(a) (5) of such Act is amended by striking out all 
that follows "Professional Standards Eeview Organization" and 
inserting in lieu thereof a period. 
ISSUANCE OF SUBPENAS BY COMPTROLLER GENERAL 
SEC. 6. Part A of title XI of the Social Security Act is amended 
by inserting after section 1124 (added by section 3(a) of this Act) 
the following new section: 
42 u s e 1320a-4. 
Noncompliance, 
penalty. 
Representation. 
5 u s e 101 et seq. 
5 
use 
5101, 
5331, 
5361. 
Personal medical 
records, 
nondisclosure. 
ISSUANCE OF SUBPENAS BY COMPTROLLER GENERAL 
"SEC. 1125. (a) For the purpose of any audit, investigation, exam-
ination, analysis, review, evaluation, or other function authorized by 
law w^ith respect to any program authorized under this Act, the Comp-
troller General of the L^^nited States shall have powder to sign and issue 
subpenas to any person requiring the production of any pertinent 
books, records, documents, or other information. Subpenas so issued by 
the Comptroller General shall be served by anyone authorized by him 
(1) by delivering a copy thereof to the person named therein, or (2) 
by registered mail or by certified mail addressed to such person at his 
last dwelling place or principal place of business. A verified return 
by the person so serving the subpena setting forth the manner of 
service, or, in the case of service by registered mail or by certified mail, 
the return post office receipt therefor signed by the person so served, 
shall be proof of service. 
"(b) In case of contumacy by, or refusal to obey a subpena issued 
pursuant to subsection (a) of this section and duly served upon, any 
person, any district court of the United States for the judicial district 
in which such person charged with contumacy or refusal to obey is 
found or resides or transacts business, upon application by the Comp-
troller General, shall have jurisdiction to issue an order requiring such 
person to produce the books, records, documents, or other information 
sought by the subpena; and any failure to obey such order of the court 
may be punished by the court as a contempt thereof. In proceedings 
brought under this subsection, the Comptroller General shall be repre-
sented by attorneys employed in the General Accounting Office or by 
counsel whom he may employ without regard to the provisions of 
title 5, United States Code, governing appointments in the competitive 
service, and the provisions of chapter 51 and subchapters III and VI 
of chapter 53 of such title, relating to classification and General 
Schedule pay rates. 
"(c) No personal medical record in the possession of the General 
Accounting Office shall be subject to subpena or discovery proceedings 
in a civil action.". 
42 u s e 1395y. 
('tt! -yt 
42 use 1396. 
SUSPENSION OP PRACTITIONERS CONVICTED OP MEDICARE-
RELATED CRIMES 
OR MEDICAID-
SEC. 7. (a) Section 1862 of the Social Security Act is amended by 
adding at the end thereof the following new subsection: 
"(e) (1) Whenever the Secretary determines that a physician or 
other individual practitioner has been convicted (on or after the date 
of the enactment of this subsection, or within such period prior to that 
date as the Secretary shall specify in regulations) of a criminal offense 
related to such physician's or practitioner's involvement in the pro-
grams under this title or the program under title XIX, the Secretary 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1193 
shall suspend such physician or practitioner from participation in the 
program under this title for such period as he may deem appropriate; 
and no payment may be made under this title with respect to any item 
or service furnished by such physician or practitioner during the 
period of such suspension. The provisions of paragraphs (2) and 
(3) of subsection (d) shall apply with respect to determinations made 
by the Secretary under this subsection. 
" (2) In any case where the Secretary under paragraph (1) suspends 
any physician or other individual practitioner from participation in 
the program under this title, he shall— 
"(A) promptly notify each single State agency which admin-
isters or supervises the administration of a State plan approved 
under title XIX of the fact, circumstances, and period of such 
suspension; and 
"(B) promptly notify the appropriate State or local agency 
or authority having responsibility for the licensing or certification 
of such physician or practitioner of the fact and circumstances of 
such suspension, request that appropriate investigations be made 
and sanctions invoked in accordance with applicable State law 
and policy, and request that such State or local agency or author-
ity keep the Secretary and the Inspector General of the Depart-
ment of Health, Education, and Welfare fully and currently 
informed with respect to any actions taken in response to such 
request.". 
(b) Section 1902(a) of such Act (as amended by section 2(b) and 
3 (c) of this Act) is amended— 
(1) by striking out "and" at the end of paragraph (37); 
(2) by striking out the period at the end of paragraph (38) 
and inserting in lieu thereof "; and"; and 
(3) by inserting after paragraph (38) the following new 
paragraph: 
"(39) provide that, subject to subsection (g), whenever the 
single State agency which administers or supervises the adminis-
tration of the State plan is notified by the Secretary under section 
1862(e) (2) (A) that a physician or other individual practitioner 
has been suspended from participation in the program under title 
XVIII, the agency shall promptly suspend such physician or 
practitioner from participation in the plan for not less than the 
period specified in such notice, and no payment may be made 
under the plan with respect to any item or service furnished by 
such physician or practitioner during the period of the suspension 
under this title.". 
(c) Section 1902 of such Act is amended by adding after subsection 
(f) the following new subsection: 
"(g) The Secretary may waive suspension under subsection (a) (39) 
of a physician's or practitioner's participation in a State plan 
approved under this title and of the prohibition under such subsection 
of payment for any item or service furnished by him during the period 
of such suspension, if the single State agency which administers or 
supervises the administration of the plan submits a request to the 
Secretary for such waiver and if the Secretary approves such request.". 
(d) Section 332(c) of the Public Health Service Act (relating to 
considerations in.the designation of health manpower shortage areas) 
is amended by inserting after paragraph (2) the following new 
paragraph: 
Notification of 
State or local 
agencies. 
42 u s e 1396. 
Ante, pp. 1176, 
1178. 
Ante, p. 1192. 
42 u s e 1395. 
Suspension, 
waiver. 
Supra. 
42 u s e 254e, 
91 STAT. 1194 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 use 1395, 
1396. 
Effective dates. 
42 use 254e 
note. 
42 use 1396a 
note. 
"(3) The extent to which individuals who are (A) residents 
of the area, members of the population group, or patients in the 
medical facility or other public facility under consideration for 
designation, and (B) entitled to have payment made for medical 
services under title XVIII or XIX of the Social Security Act, 
cannot obtain such services because of suspension of physicians 
from the programs under such titles.". 
(e) (1) The amendment made by subsection (d) shall apply with 
respect to determinations and designations made on and after the date 
of the enactment of this Act. 
(2) The amendment made by subsection (b) shall become effective 
on January 1,1978. 
) 
DISCLOSURE BY PROVIDERS OF OWNERS AND CERTAIN OTHER INDIVIDUALS 
CONVICTED OF CERTAIN OFFENSES 
Ante, p. 1192. 
SEC 8. (a) Part A of title XI of the Social Security Act is amended 
by inserting after section 1125 (added by section 6 of this Act) the 
following new section: 
42 use 
1320a-5. 
42 use 1395, 
1396, 1397. 
"Managing' 
employee. 
42 use 1395cc. 
" D I S C L O S U R E B Y INSTITUTIONS, ORGANIZATIONS, AND AGENCIES OF OWNERS 
AND CERTAIN OTHER INDIVIDUALS WHO HAVE BEEN CONVICTED OF CER-
TAIN OFFENSES 
"SEC. 1126. (a) As a condition of participation in or certification 
or recertification under the programs established by titles XVIII, 
XIX, and XX, any hospital, nursing facility, or other institution, 
organization, or agency shall be required to disclose to the Secretary 
or to the appropriate State agency the name of any person who— 
"(1) has a direct or indirect ownership or control interest of 5 
percent or more in such institution, organization, or agency or is 
an officer, director, agent, or managing employee (as defined in 
subsection (b)) of such institution, organization, or agency, and 
"(2) has been convicted (on or after the date of the enactment 
of this section, or within such period prior to that date as the Sec-
retary shall specify in regulations) of a criminal offense related 
to the involvement of such person in any of such programs. 
The Secretary or the appropriate State agency shall promptly notify 
the Inspector General in the Department of Health, Education, and 
Welfare of the receipt from any institution, organization, or agency 
of any application or request for such participation, certification, or 
recertification which discloses the name of any such person, and shall 
notify the Inspector General of the action taken with respect to such 
application or request. 
(b) For the purposes of this section, the term 'managing employee' 
means, with respect to an institution, organization, or agency, an indi-
vidual, including a general manager, business manager, administrator, 
and director, who exercises operational or managerial control over the 
institution, organization, or agency, or who directly or indirectly con-
ducts the day-to-day operations of the institution, organization, or 
agency.". 
(b) (1) Section 1866 (a) of such Act is amended by adding at the end 
thereof the following new paragraph: 
"(3) The Secretary may refuse to enter into or renew an agreement 
under this section with a provider of services if any person who has a 
direct or indirect ownership or control interest of 5 percent or more in 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1195 
Ante, p. 1194. 
42 use 1395CC. 
42 use 1396b. 
such provider, or who is an officer, director, agent, or managing 
employee (as defined in section 1126(b)) of such provider, is a person 
described in section 1126 (a).". 
(2) Section 1866(b) (2) of such Act is amended by inserting before 
the period at the end thereof the following: ", or (G) that such pro-
vider (at the time the agreement was entered into) did not fully and 
accurately make any disclosure required of it by section 1126(a)''. 
(c) Section 1903 of such Act is amended by adding after subsection 
(m) the following new subsection: 
"(n) The State agency may refuse to enter into any contract or 
agreement with a hospital, nursing home, or other institution, organi-
zation, or agency for purposes of participation under the State plan, 
or otherwise to approve an institution, organization, or agency for 
• 
such purposes, if any person, who has a direct or indirect ownership 
or control interest of 5 percent or more in such institution, organiza-
tion, or agency, or who is an officer, director, agent, or managing 
employee (as defined in section 1126(b)) of such institution, organi-
zation, or agency, is a person described in section 1126(a) (whether 
or not such institution, organization, or agency has in effect an agree-
ment entered into with the Secretary pursuant to section 1866 or is 
subject to a suspension of payment order issued under subsection (]) 
of this section); and, notwithstanding any other provision of this 
section, the State agency may terminate any such contract, agree-
ment, or approval if it determines that the institution, organization, 
or agency did not fully and accurately make any disclosure required 
of it by section 1126(a) at the time such contract or agreement was 
entered into or such approval was given.". 
^ 
(d) Section 2002(a) of such Act (as amended by section 3(d) of 
l 
this Act) is further amended by adding at the end thereof the fol- ^nt^, p- 1179, 
lowing new paragraph: 
" (16) Any State may refuse to enter into a contract or other arrange-
ment with a provider of services for purposes of participation under 
the program established by this title, or otherwise to approve a pro-
vider for such purposes, if any person who has a direct or indirect 
ownership or control interest of 5 percent or more in such provider, 
or who is an officer, director, agent, or managing employee (as defined 
in section 1126(b)) of such provider, is a person described in section 
1126 (a), and the State may terminate any such contract, arrangement, 
or approval if it determines that the provider did not fully and accu-
rately make any disclosure required of it by section 1126(a) at the 
time the contract or arrangement was entered into or the approval 
was given.". 
(e) The amendments made by this section shall apply with respect 
to contracts, agreements, and arrangements entered into and approv-
als given pursuant to applications or requests made on and after the 
first day of the fourth month beginning after the date of the enact-
ment of this Act. 
Effective date. 
42 use 1320a-5 
note. 
FEDERAL ACCESS TO RECORDS 
SEC. 9. Section 1902(a) (27) (B) of the Social Security Act is 42 USe 1396a. 
amended by inserting "or the Secretary" after "State agency" each 
place it appears. 
CLAIMS PROCESSING AND INFORMATION RETRIEVAL SYSTEMS FOR MEDICAID 
PROGRAMS 
SEC. 10. (a) Section 1903(a)(3)(B) of the Social Security Act is 
amended by striking out "notice to each individual who is furnished 
services covered by the plan of the specific services so covered" and 
42 use 1396b. 
91 STAT. 1196 
PUBLIC LAW 95-142—OCT. 25, 1977 
Effective date. 
42 use 1396b 
note. 
inserting in lieu thereof "notice to eacli individual who is furnished 
services covered by the plan, or to each individual in a sample group 
of individuals who are furnished such services, of the specific services 
(other than confidential services) so covered". 
(b) The amendment made by subsection (a) shall apply with respect 
to calendar quarters beginning after the date of the enactment of this 
Act. 
Ante, p. 1195. 
/ii/hi. 
42 use 1396k. 
RESTRICTION ON FEDERAL MEDICAID PAYMENTS; ASSIGNMENT OF RIGHTS 
OF P A Y M E N T ; INCENTIVE PAYMENTS 
SEC. 11. (a) Section 1903 of the Social Security Act is amended by 
adding after subsection (n) (added by section 8(c) of this Act) the 
following new subsections: 
"(o) Notwithstanding the preceding provisions of this section, no 
payment shall be made to a State under the preceding provisions of 
this section for expenditures for medical assistance provided for an 
individual under its State plan approved under this title to the extent 
that a private insurer (as defined by the Secretary by regulation) 
would have been obligated to provide such assistance but for a provi-
sion of its insurance contract which has the effect of limiting or exclud-
ing such obligation because the individual is eligible for or is provided 
medical assistance under the plan. 
"(p)(l) When a political subdivision of a State makes, for the 
State of which it is a political subdivision, or one State makes, for 
another State, the enforcement and collection of rights of support or 
payment assigned under section 1912, pursuant to a cooperative 
arrangement under such section (either within or outside of such 
State), there shall be paid to such political subdivision or such other 
State from amounts which would otherwise represent the Federal 
share of payments for medical assistance provided to the eligible 
individuals on whose behalf such enforcement and collection was made, 
an amount equal to 15 percent of any amount collected which is attrib-
utable to such rights of support or payment. 
"(2) Where more than one jurisdiction is involved in such enforce-
ment or collection, the amount of the incentive payment determined 
under paragraph (1) shall be allocated among the jurisdictions in a 
manner to be prescribed by the Secretary.". 
(b) Title XIX of the Social Security Act is amended by adding at 
the end thereof the following new section: 
a 
ASSIGNMENT OF RIGHTS OF PAYMENT 
"SEC. 1912. (a) For the purpose of assisting in the collection of 
medical support payments and other payments for medical care owed 
to recipients of medical assistance under the State plan approved 
under this title, a State plan for medical assistance may— 
"(1) provide that, as a condition of eligibility for medical 
assistance under the State plan to an individual wlio has the legal 
capacity to execute an assignment for himself, the individual is 
required— 
"(A) to assign the State any rights, of the individual or 
of any other person who is eligible for medical assistance 
under this title and on whose behalf the individual has the 
legal authority to execute an assignment of such rights, to 
support (specified as support for the purpose of medical care 
by a court or administrative order) and to payment for medi-
cal care from any third party; and 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1197 
Cooperative 
arrangements 
with State 
agencies. 
"(B) to cooperate with the State (i) in establishing the 
paternity of such person (referred to in subparagraph (A)) 
if the person is a child born out of Avedlock, and (ii) in obtain-
ing support and payments (described in subparagraph (A)) 
for himself and for such person, unless (in either case) the 
individual is found to have good cause for refusing to coop-
erate as determined by the State agency in accordance with 
standards prescribed by the Secretary, which standards shall 
take into consideration the best interests of the individuals 
involved; and 
"(2) provide for entering into cooperative arrangements 
(including financial arrangements), with any appropriate agency 
of any State (including, with respect to the enforcement and 
collection of rights of payment for medical care by or through a 
parent, with a State's agency established or designated under sec-
tion 454(3)) and with appropriate courts and law enforcement 42 USC 654. 
officials, to assist the agency or agencies administering the State 
; J plan with respect to (A) the enforcement and collection of rights 
- > ; ; 
to support or payment assigned under this section and (B) any 
other maltters of common concern. 
"(b) Such part of any amount collected by the State under an Retainages. 
assignment made under the provisions of this section shall be retained 
by the State as is necessary to reimburse it for medical assistance pay-
ments made on behalf of an individual with respect to whom such 
assignment was executed (with appropriate reimbursement of the 
" 
Federal Government to the extent of its participation in the financing 
of such medical assistance), and the remainder of such amount col-
lected shall be paid to such individual.". 
(c) The amendment made by subsection (a) shall apply with respect 
to medical assistance provided, under a State plan approved under 
title XIX of the Social Security Act, on and after January 1,1978. 
Effective date. 
42 USC 1396b 
note. 
42 USC 1396. 
STUDY AND REVIEW OF MEDICARE CLAIMS PROCESSING 
SEC. 12. The Comptroller General of the United States shall con- 42 USC 1395W 
duct a comprehensive study and review of the administrative structure °°t^-
established for the processing of claims under title XVIII of the Social 
Security Act, for the purpose of determining whether and to what 42 USC 1395. 
extent more efficient claims administration under such title could be 
achieved— 
(1) by reducing the number of participating intermediaries 
and carriers; 
(2) by making a single organization responsible for the proc-
essing of claims, under both part A and part B of such title, in a 
particular geographic area; 
(3) by providing for the performance of claims processing 
functions on the basis of a prospective fixed price; 
f 
(4) by providing incentive payments for the most efficitmt 
organizations; or 
(5) by other modifications in such structure and related pro-
cedures. 
The Comptroller General shall submit to the Congress no later than Report to 
July 1, 1979, a complete report setting forth the results of such study Congress, 
and review, together with his findings and his recommendations with 
respect thereto. 
ABOLITION OF PROGRAM REVIEW TEAMS UNDER MEDICARE 
SEC. 13. (a) Section 1862(d) of the Social Security Act is amended 42 USC 1395y. 
by striking out paragraph (4). 
91 STAT. 1198 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 use 1395y. 
(b) (1) Section 1862(d) (1) (B) of such Act is amended by striking 
out ", with the concurrence of the appropriate program review team 
appointed pursuant to paragraph (4),". 
(2) Section 1862(d)(1)(C) of such Act is amended to read as 
follows: 
"(C) has furnished services or supplies which are determined 
by the Secretary, on the basis of reports transmitted to him in 
42 use 1320C-6. 
accordance with section 1157 of this Act (or, in the absence of any 
such report, on the basis of such data as he acquires in the admin-
istration of the program under this title), to be substantially in 
excess of the needs of individuals or to be of a quality which fails 
to meet professionally recognized standards of health care.". 
42 use 1395CC. 
(3) Clause (F) of section 1866(b) (2) of such Act is amended to 
read as follows: "(F) that such provider has furnished services or 
supplies which are determined by the Secretary to be substantially in 
' 
excess of the needs of individuals or to be of a quality which fails to 
meet professionally recognized standards of health care.". 
42 use 1320C-6. 
(4) Section 1157 of such Act is amended by striking out the last 
sentence. 
Effective date. 
(c) The amendments made by this section shall take effect on the 
42USei320c-6 date of the enactment of this Act. 
note. 
AMENDMENTS RELATING TO FISCAL INTERMEDIARIES 
42 use 1395h. 
SEC. 14. (a) Section 1816 of the Social Security Act is amended— 
(1) by inserting "(and to providers assigned to such agency 
or organization under subsection (e))" in the first sentence of 
subsection (a) after "to such providers" the second and third 
times it appears; 
Agreements. 
(2) by amending subsection (b) to read as follows: 
"(b) The Secretary shall not enter into or renew an agreement 
with any agency or organization under this section unless— 
" (1) he finds— 
" (A) after applying the standards, criteria, and proce-
Ji^ 
dures developed under subsection (f), that to do so is con-
sistent with the effective and efficient administration of this 
part, and 
> 
< J V 
"(B) that such agency or organization is willing and able 
to assist the providers to which payments are made through 
it under this part in the application of safeguards against 
unnecessary utilization of services furnished by them to indi-
viduals entitled to hospital insurance benefits under section 
42 use 426. 
226, and the agreement provides for such assistance; and 
Information, 
"(2) such agency or organization agrees— 
availability. 
"(A) to furnish to the Secretary such of the information 
acquired by it in carrying out its agreement under this sec-
tion, and 
"(B) to provide the Secretary with access to all such data, 
information, and claims processing operations, 
as the Secretary may find necessary in performing his functions 
under this part."; 
(3) by inserting "after applying the standards, criteria, and 
i^ra. 
j4 
procedures developed under subsection (f) and" in subsection 
(e) (2) before "after reasonable notice"; 
(4) by redesignating subsections (e), (f), and (g) as subsec-
tions (g), (h), and (i), respectively; and 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1199 
(5) by inserting after subsection (d) the following new 42 USC 1395h. 
subsections: 
"(e)(1) Notwithstanding subsections (a) and (d), the Secretary, 
after taking into consideration any preferences of providers of serv-
ices, may assign or reassign any provider of services to any agency or 
organization which has entered into an agreement with him under this 
section, if he determines, after applying the standards, criteria, and 
procedures developed under subsection (f), that such assignment or 
reassignment would result in the more effective and efficient adminis-
tration of this part. 
"(2) Notwithstanding subsections (a) and (d), the Secretary may 
designate a national or regional agency or organization which has 
entered into an agreement with him under this section to perform 
functions under the agreement with respect to a class of providers of 
services in the Nation or region (as the case may be), if he determines, 
after applying the standards, criteria, and procedures developed under 
subsection (f), that such designation would result in more effective 
and efficient administration of this part. 
" (3) (A) Before the Secretary makes an assignment or reassignment 
under paragraph (1) of a provider of services to other than the agency 
or organization nominated by the provider, he shall furnish (i) the 
provider" and such agency or organization with a full explanation of 
the reasons for his determination as to the efficiency and effectiveness 
of the agency or organization to perform the functions required under 
this part with respect to the provider, and (ii) such agency or organi- Hearing, 
zation with opportunity for a hearing, and such determination shall be 
subject to judicial review in accordance with chapter 7 of title 5, 
United States Code. 
5 USC 701. 
"(B) Before the Secretary makes a designation under paragraph 
(2) with respect to a class of providers of services, he shall furnish (i) 
such providers and the agencies and organizations adversely affected 
by such designation with a full explanation of the reasons for his 
determination as to the efficiency and effectiveness of such agencies and 
organizations to perform the functions required under this part with 
respect to such providers, and (ii) the agencies and organizations Hearing, 
adversely affected by such designation with opportunity for a hearing, 
and such determination shall be subject to judicial review in accord-
ance with chapter 7 of title 5, United States Code. 
"(f) In order to determine whether the Secretary should enter into. Standards, 
renew, or- terminate an agreement under this section with an agency or development, 
organization, whether the Secretary should assign or reassign a pro-
vider of services to an agency or organization, and whether the Secre-
tary should designate an agency or organization to perform services 
with respect to a class of providers of services, the Secretary shall 
develop standards, criteria, and procedures to evaluate such agency's or 
organization's (1) overall performance of claims processing and "other 
related functions required to be performed by such an agency or 
organization under an agreement entered into under this section,' and 
(2) performance of such functions with respect to specific providers of 
services, and the Secretary shall establish, by regulation, standards 
and criteria with respect to the efficient and effective administration 
of this part. No agency or organization shall be found under such 
standards and criteria not to be efficient or effective or to be less efficient 
or effective solely on the ground that the agency or organization serves 
only providers located in a single State.". 
91 STAT. 1200 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 use 1395h 
note. 
Effective dates. 
42 use 1395h 
note. 
(b) The Secretary of Health, Education, and Welfare shall develop 
the standards, criteria, and procedures described in subsection (f) of 
section 1816 of the Social Security Act (as added by subsection (a) (5)) 
not later than October 1,1978. 
(c) The amendment made by paragraphs (2) and (3) of subsection 
(a) to the extent that they require application of standards, criteria, 
and procedures developed under section 1816(f) of the Social Security 
Act shall apply to the entering into, renewal, or termination of agree-
ments on and after October 1,1978. 
(d) Except as provided in subsection (c), the amendment made by 
subsection (a) (2) shall apply to agreements entered into or renewed on 
or after the date of enactment of this Act. 
Agreements. 
42 u s e 1395CC. 
Notification to 
Secretary. 
Effective date. 
42 u s e 1395cc 
note. 
DISCLOSURE BY PROVIDERS OF THE HIRING OF CERTAIN FORMER EMPLOYEES 
OF FISCAL INTERMEDIARIES 
SEC. 15. (a) Section 1866(a)(1) of the Social Security Act is 
amended— 
(1) by striking out the period at the end of subparagraph (C) 
and inserting in lieu thereof ", and"; and 
(2) by inserting after subparagraph (C) the following new 
subparagraph: 
"(D) to promptly notify the Secretary of its employment of an 
individual who, at any time during the year preceding such 
employment, was employed in a managerial, accounting, auditing, 
or similar capacity (as determined by the Secretary by regulation) 
by an agency or organization which serves as a fiscal intermediary 
or carrier (for purposes of part A or part B, or both, of this title) 
with respect to the provider.", 
(b) The amendments made by subsection (a) shall apply with 
respect to agreements entered into or renewed on and after the date of 
enactment of this Act. 
42 use 1395Z. 
Used equipment, 
coinsurance 
PAYMENT FOR DURABLE MEDICAL EQUIPMENT 
SEC. 16. (a) Section 1833(f) of the Social Security Act is amended 
to read as follows: 
"(f)(1) In the case of durable medical equipment to be furnished an 
individual as described in section 1861(s)(6), the Secretary shall 
determine, on the basis of such medical and other evidence as he finds 
appropriate (including certification by the attending physician with 
respect to expected duration of need), whether the expected duration 
of the medical need for the equipment warrants a presumption that 
purchase of the equipment would be less costly or more practical than 
rental. If the Secretary determines that such a presumption does exist, 
he shall require that the equipment be purchased, on a lease-purchase 
basis or otherwise, and shall make payment in accordance with the 
lease-purchase agreement (or in a lump sum amount if the equipment 
is purchased other than on a lease-purchase basis); except that the 
Secretary may authorize the rental of the equipment notwithstand-
ing such determination if he determines that the purchase of the equip-
ment would be inconsistent with the purposes of this title or would 
create an undue financial hardship on the individual who will use it. 
"(2) With respect to purchases of used durable medical equipment, 
the Secretary may waive the 20 percent coinsurance amount applicable 
under subsection (a) whenever the purchase price of the used equip-
ment is at least 25 percent less than the reasonable charge for com-
parable new equipment. 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1201 
"(3) For purposes of paragraph (1), the Secretary may, pursuant 
to agreements made with suppliers of durable medical equipment, 
establish reimbursement procedures which he finds to be equitable, 
economical, and feasible. 
"(4) The Secretary shall encourage suppliers of durable medical 
equipment to make their equipment available to individuals entitled 
to benefits under this title on a lease-purchase basis whenever pos-
sible.". 
(b) The amendment made by subsection (a) shall apply with 
respect to durable medical equipment purchased or rented on or after 
October 1,1977. 
Reimbursement 
procedures. 
Effective date. 
42 use 1395/ 
note. 
FUNDING OF STATE MEDICAID FRAUD CONTROL UNITS 
SEC. 17. (a) Section 1903(a) of the Social Security Act is amended 42 USC 13966. 
by redesignating paragraph (6) as paragraph (7) and by inserting 
after paragraph (5) the following new paragraph: 
"(6) subject to subsection (b) (3), an amount equal to 90 per 
centum of the sums expended during each quarter beginning on 
. 
or after October 1, 1977, and ending before October 1, 1980, with 
respect to costs incurred during such quarter (as found necessary 
/ 
by the Secretary for the elimination of fraud in the provision and 
administration of medical assistance provided under the State 
plan) which are attributable to the establishment and operation 
of (including the training of personnel employed by) a State 
medicaid fraud control unit (described in subsection (q)); plus". 
(b) Section 1903(b) of such Act is amended by inserting after 
paragraph (2) the following new paragraph: 
"(3) The amount of funds which the Secretary is otherwise obli-
gated to pay a State during a quarter under subsection (a) (6) may 
not exceed the higher of— 
"(A) $125,000, or 
"CB) one-quarter of 1 per centum of the sums expended by the 
Federal, State, and local governments during the previous quarter 
in carrying out the State's plan under this title.". 
(c) Section 1903 of such Act is further amended by inserting after "State medicaid 
subsection (p) (added by section 11(a) of this Act) the following new fraud control 
subsection: 
unit." 
"(Q) For the purposes of this section, the term 'State medicaid 
fraud control unit' means a single identifiable entity of the State gov- 
• 
ernment which the Secretary certifies (and annually recertifies) as 
meeting the following requirements: 
"(1) The entity (A) is a unit of the office of the State Attorney 
General or of another department of State government which pos-
sesses statewide authority to prosecute individuals for criminal 
• 
violations, (B) is in a State the constitution of which does not pro-
vide for the criminal prosecution of individuals by a statewide 
, ' 
• 
authority and has formal procedures, approved by the Secretary, 
that (i) assure its referral of suspected criminal violations relat-
ing to the program under this title to the appropriate authority 
or authorities in the State for prosecution and (ii) assure its 
assistance of, and coordination with, such authority or authorities 
in such prosecutions, or (C) has a formal working relationship 
with the office of the State Attorney General and has formal pro-
cedures (including procedures for its referral of suspected crim-
inal violations to such office) which are approved by the Secretary 
91 STAT. 1202 
PUBLIC LAW 95-142—OCT. 25, 1977 
Application and 
annual reports, 
submittal to 
Secretary. 
42 use 
1395b-l. 
42 u s e 1305. 
Effective date. 
42 use 1396b 
note. 
Regulations. 
and which provide effective coordination of activities between the 
entity and such office with respect to the detection, investigation, 
and prosecution of suspected criminal violations relating to the 
program under this title. 
; 
"(2) The entity is separate and distinct from the single State 
• 
agency that administers or supervises the administration of the 
State plan under this title. 
"(3) The entity's function is conducting a statewide program 
for the investigation and prosecution of violations of all applicable 
State laws regarding any and all aspects of fraud in connection 
with any aspect of the provision of medical assistance and the 
activities of providers of such assistance under the State plan 
under this title. 
" (4) The entity has procedures for reviewing complaints of the 
abuse and neglect of patients of health care facilities which receive 
payments under the State plan under this title, and, where 
appropriate, for acting upon such complaints under the criminal 
laws of the State or for referring them to other State agencies for 
action. 
"(5) The entity provides for the collection, or referral for col-
lection to a single State agency, of overpayments that are made 
under the State plan to health care facilities and that are discov-
ered by the entity in carrying out its activities. 
" (6) The entity employs such auditors, attorneys, investigators, 
and other necessary personnel and is organized in such a manner 
as is necessary to promote the effective and efficient conduct of the 
entity's activities. 
"(7) The entity submits to the Secretary an application and 
annual reports containing such information as the Secretary deter-
mines, by regulation, to be necessary to determine whether the 
entity meets the other requirements of this subsection.". 
(d) Section 402(a) (1) of the Social Security Amendments of 1967 
(Public Law 90-248), as amended by section 222 of the Social Security 
Amendments of 1972 (Public Law 92-603), is amended— 
(1) by striking out "and" at the end of subparagraph (H); 
(2) by striking out the period at the end of subparagraph (I) 
and inserting in lieu thereof "; and"; and 
(3) by adding after subparagraph (I) the following new 
subparagraph: 
"(J) to develop or demonstrate improved methods for the 
investigation and prosecution of fraud in the provision of care or 
services under the health programs established by the Social 
Security Act.". 
(e) (1) The amendment made by subsection (a) shall apply with 
respect to calendar quarters beginning after September 30,1977. 
(2) The Secretary of Health, Education, and Welfare shall estab-
lish such regulations, not later than ninety days after the date of enact-
ment of this Act, as are necessary to carry out the amendments made 
by this section. 
Report to 
congressional 
committees. 
42 use 1395/Z 
note. 
REPORT ON HOME HEALTH AND OTHER IN-HOME SERVICES 
SEC. 18. (a) Not later than one year after the date of enactment of 
this Act, the Secretary of Health, Education, and Welfare shall sub-
mit to the appropriate committees of the Congress a report analyzing, 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1203 
evaluating, and making recommendations with respect to, all aspects 
(including the availability, administration, provision, reimbursement 
procedures, and cost) of the delivery of home health and other in-home 
services authorized to be provided under titles XVIII, XIX, and 
XX of the Social Security Act. 
(b) Such report shall include an evaluation of the coordination of 
such services provided under the different titles, and shall also include 
recommendations for changes in regulations and legislation with 
respect to— 
(1) the scope and definition of such services provided under 
such titles; 
(2) the requirements for an individual to be eligible to receive 
such services under such titles; 
(3) the standards for certification of providers of such services 
under such titles and (as appropriate) the uniformity of such 
standards for the programs under the different titles; 
(4) procedures for control of utilization and assurance of 
quality of such services under such titles, including (as appro-
priate) the licensing and accreditation of agencies providing such 
services, a certificate of need program with respect to the offer-
ing of such services, and the development and use of norms and 
standards for review of the utilization and quality of such 
services; 
(5) methods of reimbursement for such services, including (A) 
methods of comparing costs incurred by different providers of 
such services in order to determine the reasonableness of such costs 
and (B) methods which provide for more uniform reimbursement 
"5 procedures under titles XVIII and XIX of the Social Security 
Act; and 
(6) the prevention of fraud and abuse in the delivery of such 
services under such titles, 
the reasons for such recommendations, an analysis of the impact of 
implementing such recommendations on the cost of such services and 
the demand for such services, and the methods of financing any rec-
ommended increased provision of such services under such titles. 
(c) In developing the report the Secretary shall consult with pro-
fessional organizations, experts, and individual health professionals 
in the field of home health and other in-home services and with pro-
viders, private insurers, and consumers of such services. 
42 u s e 1395, 
1396, 1397. 
Evaluation. 
Legislative 
recommenda-
tions. 
Consultation. 
ESTABLISHMENT OF UNIFORM REPORTING SYSTEMS FOR DIFFERENT TYPES 
OP HEALTH 
SERVICES FACILITIES AND ORGANIZATIONS; 
MAKING OF 
REPORTS UNDER MEDICARE AND MEDICAID PROGRAMS I N ACCORDANCE 
WITH SUCH SYSTEMS 
SEC. 19. (a) Part A of title X I of this Social Security Act is 
amended by inserting after section 1120 the following new section: 
" U N I J F O R M 
R E P O R T I N G 
S Y S T E M S 
F O R 
H E A L T H 
S E R V I C E S FACILITIES 
AND 
ORGANIZATIONS 
"SEC. 1121. (a) For the purposes of reporting the cost of services 
provided by, of planning, and of measuring and comparing the effi-
ciency of and effective use of services in, hospitals, skilled nursing 
facilities, intermediate care facilities, home health agencies, health 
maintenance organizations, and other types of health services facili-
Establishment, 
regulations. 
42 u s e 1320a. 
91 STAT. 1204 
PUBLIC LAW 95-142—OCT. 25, 1977 
42 use 242k. 
Duties. 
Information, 
availability. 
42 use 300/-4. 
42 use 300m. 
42 use 1395x. 
Reports. 
AnU, p. 1193. 
ties and organizations to which payment may be made under this Act, 
the Secretary shall establish by regulation, for each such type of 
health services facility or organization, a uniform system for the 
reporting by a facility or organization of that type of the following 
information: 
" (1) The aggregate cost of operation and the aggregate volume 
of services. 
"(2) The costs and volume of services for various functional 
accounts and subaccounts. 
"(3) Rates, by category of patient and class of purchaser. 
"(4) Capital assets, as defined by the Secretary, including (as 
appropriate) capital funds, debt service, lease agreements used 
in lieu of capital funds, and the value of land, facilities, and 
equipment. 
"(5) Discharge and bill data. 
The uniform reporting system for a type of health services facility or 
organization shall provide for appropriate variation in the applica-
tion of the system to different classes of facilities or organizations 
within that type and shall be established, to the extent practicable, 
consistent with the cooperative system for producing comparable and 
uniform health information and statistics described in section 306(e) 
(1) of the Public Health Service Act. In reporting under such a sys-
tem, hospitals shall employ such chart of accounts, definitions, princi-
ples, and statistics as the Secretary may prescribe in order to reach 
a uniform reconciliation of financial and statistical data for specified 
uniform reports to be provided to the Secretary. 
"(b) The Secretary shall— 
"(1) monitor the operation of the systems established under 
subsection (a); 
•' 
"(2) assist with and support demonstrations and evaluations 
of the effectiveness and cost of the operation of such systems and 
i 
encourage State adoption of such systems; and 
^ 
"(3) periodically revise such systems to improve their effec-
tiveness and diminish their cost. 
"(c) The Secretary shall provide information obtained through 
use of the uniform reporting systems described in subsection (a) in a 
useful manner and format to appropriate agencies and organizations, 
including health systems agencies (designated under section 1515 of 
the Public Health Service Act) and State health planning and develop-
ment agencies (designated under section 1521 of such Act), as may be 
necessary to carry out such agencies' and organizations' functions.". 
(b)(1) Section 1861 (v)(l) of the Social Security Act is amended 
by adding after subparagraph (E) the following new subparagraph: 
"(F) Such regulations shall require each provider of services (other 
than a fund) to make reports to the Secretary of information described 
in section 1121(a) in accordance with the uniform reporting system 
(established under such section) for that type of provider.". 
(2) Section 1902(a) of such Act (as amended by sections 2(b), 
3(c), and 7 (b) of this Act) is amended— 
(A) by striking out "and" at the end of paragraph (38) ; 
(B) by striking out the period at the end of paragraph (39) 
and inserting in lieu thereof "; and"; and 
(C) by inserting after paragraph (39) the following new 
paragraph: 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1205 
Consultation. 
42 u s e 1320a 
note. 
"(40) require each health services facility or organization Reports 
- • which receives payments under the plan and of a type for which 
a uniform reporting system has been established under section 
1121 (a) to make reports to the Secretary of information described -
in such section in accordance with the uniform reporting system 
„ 
(established under such section) for that type of facility or 
organization.". 
(c)(1) The Secretary of Health, Education, and Welfare shall 
establish the systems described in section 1121(a) of the Social Secu-
rity Act (added by subsection (a) of this section) only after consulta-
tion with interested parties and— 
(A) for hospitals, skilled nursing facilities, and intermediate 
care facilities, not later than the end of the one-year period, and 
(B) for other types of health services facilities and organiza-
tions, not later than the end of the two-year period, 
beginning on the date of enactment of this Act. 
(2) (A) The amendments made by subsection (b) shall apply with 
respect to operations of a hospital, skilled nursing facility, or inter-
mediate care facility, on and after the first day of its first fiscal year 
which begins after the end of the six-month period beginning on the 
date a uniform reporting system is established (under section 1121(a) 
of the Social Security Act) for that type of health services facility. 
(B) The amendments made by subsection (b) shall apply, with 
respect to the operation of a health services facility or organization 
w'hich is neither a hospital, a skilled nursing facility, nor an intermedi-
ate care facility, on and after the first day of its first fiscal year which 
begins after such date as the Secretary of Health, Education, and 
Welfare determines to be appropriate for the implementation of the 
reporting requirement for that type of facility or organization. 
(C) Except as provided in subparagraphs (A) and (B), the amend-
ments made by subsection (b) (2) shall apply, with respect to State 
plans approved under title XIX of the Social Security Act, on and 42 USC 1396 
after October 1,1977. 
Effective dates. 
42 USC 1396a 
note. 
DELAY I N , AND WARTER OF, I M P O S m O N OF REDUCTION OF FEDERAL MEDI-
CAL ASSISTANCE PERCENTAGE DUE TO A S T A T E ' S FAILURE TO HAVE AN 
EFFECTIVE MEDICAID UTILIZATION CONTROL PROGRAM 
SEC 20. (a) Section 1903 (g) of the Social Security Act is amended— 42 USC 1396b. 
(1) by striking out "With respect to" in the first sentence of 
paragraph (1) and inserting in lieu thereof "Subject to paragraph 
' 
(3), with respect to"; 
(2) by striking out "by 331^ per centum thereof" in paragraph 
. . . . 
. 
^^^^. 
mined under paragraph (5))"; 
(1) and inserting in lieu thereoi by a per centum thereof (deter-
(2) before "sample 
following new 
(3) by inserting "timely" in paragraph 
onsite surveys"; and 
(4) by adding after paragraph (2) the 
paragraphs: 
" (3) (A) No reduction in the Federal medical assistance percentage 
of a State otherwise required to be imposed under this subsection shall 
take effect— 
91 STAT. 1206 
PUBLIC LAW 95-142—OCT. 25, 1977 
.{rp :iiS : 
"(i) if such reduction is due to the State's unsatisfactory or 
invalid showing made with respect to a calendar quarter begin-
ning before January 1,1977; 
" (ii) before January 1,1978; 
Notice to States. 
" (iii) unless a notice of such reduction has been provided to the 
State at least 30 days before the date such reduction takes effect; or 
" (iv) due to the State's unsatisfactory or invalid showing made 
with respect to a calendar quarter beginning after September 30, 
.„„, 
1977, unless notice of such reduction has been provided to the State 
no later than the first day of the fourth calendar quarter following 
the calendar quarter with respect to which such showing was 
made. 
Waiver. 
"(I^) The Secretary shall waive application of any reduction in 
the Federal medical assistance percentage of a State otherwise required 
to be imposed under paragraph (1) because a showing by the State, 
made under such paragraph with respect to a calendar quarter ending 
after January 1, 1977, and before October 1,1977, is determined to be 
either unsatisfactory under such paragraph or invalid under para-
graph (2), if the Secretary determines that the State's showing made 
under paragraph (1) with respect to the calendar quarter ending on 
December 31, 1977, is satisfactory under such paragraph and is valid 
under paragraph (2). 
"(4) (A) The Secretary may not find the showing of a State, with 
respect to a calendar quarter under paragraph (1), to be satisfactory 
if the showing is submitted to the Secretary later than the 30th day 
after the last day of the calendar quarter, unless the State demon-
strates to the satisfaction of the Secretary good cause for not meeting 
such deadline. 
"(B) The Secretary shall find a showing of a State, with respect to 
a calendar quarter under paragraph (1), to be satisfactory under such 
-
: t
? .1 r«3 I ' 
paragraph with respect to the requirement that the State conduct 
annual onsite inspections in mental hospitals, skilled nursing facili-
ties, and intermediate care facilities under paragraph (26) and (31) 
42 use 1396a. 
of section 1902(a), if the showing demonstrates that the State has 
conducted such an onsite inspection during the 12-month period end-
ing on the last date of the calendar quarter— 
"(i) in each of not less than 98 per centum of the number of 
'
^ = ' 
• 
such hospitals and facilities requiring such inspection, and 
"(ii) in every such hospital or facility which has 200 or more 
beds, 
and that, with respect to such hospitals and facilities not inspected 
within such period, the State has exercised good faith and due deli-
gence in attempting to conduct such inspection, or if the State dem-
onstrates to the satisfaction of the Secretary that it would have made 
such a showing but for failings of a technical nature only. 
" (5) In the case of a State's unsatisfactory or invalid showing made 
with respect to a type of facility or institutional services in a calendar 
quarter, the per centum amount of the reduction of the State's Federal 
medical assistance percentage for that type of services under para-
graph (1) is equal to 331^ per centum multiplied by a fraction, the 
denominator of which is equal to the total number of patients receiv-
ing that type of services in that quarter under the State plan in facili-
ties or institutions for which a showing was required to be made under 
this subsection, and the numerator of which is equal to the number of 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1207 
such patients receiving such type of services in that quarter in those 
facilities or institutions for which a satisfactory and valid showing 
was not made for that calendar quarter. 
"(6) The Secretary shall submit to Congress, not later than sixty 
days after the end of such calendar quarter, a report on— 
"(A) his determination as to whether or not each showing, 
made under paragraph (1) by a State with respect to the calendar 
quarter, has been found to be satisfactory under such paragraph; 
"(B) his review (through onsite surveys and otherwise) under 
paragraph (2) of the validity of showings previously submitted 
by a State; and 
"(C) any reduction in the Federal medical assistance percent-
age he has imposed on a State because of its submittal under para-
graph (1) of an unsatisfactory or invalid showing.", 
(b) Section 1902(a) (26) of the Social Security Act is amended by 
inserting after "social service personnel" the following: ", or, in the 
case of skilled nursing facilities, composed of physicians or registered 
nurses and other appropriate health and social service personnel". 
(c)(1) Except as provided in paragraph (2), the amendments made 
by this section shall be effective on October 1,1977, and the Secretary 
of Health, Education, and Welfare shall promptly adjust payments 
made to States under section 1903 of the Social Security Act to reflect 
the changes made by such amendments. 
(2) The amount of any reduction in the Federal medical assistance 
percentage of a State, otherwise required to be imposed under section 
1903(g) (1) of the Social Security Act because of an unsatisfactory 
or invalid showing made by the State with respect to a calendar quar-
ter beginning on or after January 1, 1977, shall be determined under 
such section as amended by this section. Subparagraph (B) of para-
graph (4) of section 1905(g) of such Act, as added by this section, 
shall apply to any showing; made by a State under such section with 
respect to a calendar quarter beginning on or after January 1, 1977. 
Report to 
Congress. 
42 u s e 1396a. 
Effective date. 
42 u s e 1396b 
note. 
Payments, 
adjustment. 
42 u s e 13961). 
PROTECTION OF PATIENT FUNDS 
SEC. 21. (a) Section 1861 (j) of the Social Security Act is amended 
by striking out "and" at the end of paragraph (13) and inserting im-
mediately after such paragraph (13) the following new paragraph: 
"(14) establishes and maintains a system that (A) assures a 
full and complete accounting of its patients' personal funds, and 
(B) includes the use of such separate account for such funds as 
will preclude any commingling of such funds with facility funds 
or with the funds of any person other than another such patient; 
and", 
(b) The Secretary of Health, Education, and Welfare shall, by 
regulation, define those costs which may be charged to the personal 
funds of patients in skilled nursing facilities who are individuals 
receiving benefits under the provisions of title XVIII, or under a State 
plan approved under the provisions of title XIX, of the Social Secu-
rity Act, and those costs which are to be included in the reasonable cost 
or reasonable chargre for extended care services as determined under 
the provisions of title XVIII, or for skilled nursing and intermediate 
care facility services as determined under the provisions of title XIX, 
of such Act. 
Accounting 
system, 
establishment. 
42 u s e 1395x. 
Costs, definition. 
42 u s e 1395x 
note. 
42 u s e 1395, 
1396. 
91 STAT. 1208 
PUBLIC LAW 95-142—OCT. 25, 1977 
Effective date. 
Regulations. 
(c) (1) The amendments made by subsection (a) shall be effective 
on the first day of the first calendar quarter which begins more than 
six months after the date of enactment of this Act. 
(2) The Secretary of Health, Education, and Welfare shall issue 
the regulations required under subsection (b) within ninety days after 
the date of enactment of this Act. 
Ante, p. 1185. 
Effective date. 
42 use 1320C-7 
note. 
42 use 1395f. 
42 use 1395t. 
42 use 426. 
,1";-'IN-
P A Y M E N T FOR INSTITUTIONAL CARE BEYOND DATE DETERMINED 
MEDICALLY 
NECESSARY 
SEC. 22. (a) Section 1158 of the Social Security Act is amended— 
(1) by inserting "and subsection (d)" in subsection (a) after 
"section 1159"; and 
(2) by adding after subsection (c) (as added by section 5(d) 
(1) of this Act) the following new subsection: 
"(d) In any case in which a Professional Standards Review Orga-
nization disapproves (under subsection (a)) of inpatient hospital 
services or posthospital extended care services, payment may be made 
for such services furnished before the second day after the day on 
which the provider received notice of such disapproval, or, if such 
organization determines that more time is required in order to arrange 
postdischarge care, payment may be made for such services furnished 
before the fourth day after the day on which the provider received 
notice of such disapproval.". 
(b) The amendments made by subsection (a) shall be effective on 
the date of enactment of this Act. 
PAYMENT UNDER THE MEDICARE PROGRAM FOR CERTAIN HOSPITAL SERV-
ICES PROVIDED IN 
V E T E R A N S ' ADMINISTRATION 
HOSPITALS 
SEC. 23. (a) Section 1814(c) of the Social Security Act is amended 
by inserting "or subsection (j)" after "subsection (d)". 
(b) Section 1814 of such Act is further amended by adding at the 
end thereof the following new subsection: 
. . t 
"Payment for Certain Hospital Services Provided in 
Veterans' Administration Hospitals 
"(j) (1) Payments shall also be made to any hospital operated by 
the Veterans' Administration for inpatient hospital services furnished 
in a calendar year by the hospital, or under arrangements (as defined 
in section 1861 (w)) with it, to an individual entitled to hospital bene-
fits under section 226 even though the hospital is a Federal provider 
of services if (A) the individual was not entitled to have the services 
furnished to him free of charge by the hospital, (B) the individual 
was admitted to the hospital in the reasonable belief on the part of 
the admitting authorities that the individual was a person who was 
entitled to have the services furnished to him free of charge, (C) the 
authorities of the hospital, in admitting the individual, and the indi-
vidual, acted in good faith, and (D) the services were furnished dur-
ing a period ending with the close of the day on which the authorities 
operating the hospital first became aware of the fact that the individ-
ual was not entitled to have the services furnished to him by the 
hospital free of charge, or (if later) ending with the first day on 
which it was medically feasible to remove the individual from the 
hospital by discharging him therefrom or transferring him to a hos-
pital which has in effect an agreement under this title. 
PUBLIC LAW 95-142—OCT. 25, 1977 
91 STAT. 1209 
"(2) Payment for services described in paragraph (1) shall be in 
an amount equal to the charge imposed by the Veterans' Administra-
tion for such services, or (if less) the reasonable costs for such services 
(as estimated by the Secretary). Any such payment shall be made to 
the entity to which payment for the services involved would have 
been payable, if payment for such services had been made by the 
individual receiving the services involved (or by another private per-
son acting on behalf of such individual).". 
i 
(c) The amendments made by this section shall apply to inpatient Effective date. 
hospital services furnished on and after July 1,1974. 
^2 USC 1395f 
Approved October 25, 1977. 
LEGISLATIVE HISTORY: 
HOUSE REPORTS: No. 95-393, Pt. I (Comm. on Ways and Means), and Pt. II (Coram, 
on Interstate and Foreign Commerce) and No. 95-673 (Comm. of 
Conference). 
SENATE REPORT No. 95-453 accompanying S. 143 (Comm. on Finance). 
CONGRESSIONAL RECORD, Vol. 123 (1977): 
Sept. 22, 23, considered and passed House. 
Sept. 30, considered and passed Senate, amended, in lieu of S. 143. 
Oct. 13, House and Senate agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 13, No. 44: 
Oct. 25, Presidential statement.