An Act to amend the Public Health Service Act to provide assistance and encouragement for the establishment and expansion of health maintenance organizations, and for other purposes.
PL 93-222 (S.14), enacted 12/29/1973

914 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
Public Law 93-222 
December 29, 1973 
AN A C T 
'. 
To amend the Public Health Service Act to provide assistance and encourage-
ment for the establishment and expansion of health maintenance organizations, 
and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
Health Mainte- 
JJnited States of America in Gonqress assembled^ 
nance Organiza- 
•' 
a 
i 
tionActofi973. 
SHORT TITLE AND TABLE OF CONTENTS 
SECTION 1, This Act, with the following table of contents, may be 
cited as the "Health Maintenance Organization Act of 1973". 
TABLE OF CONTENTS 
Sec. 1. Short title and table of contents. 
Sec. 2. Health maintenance organizations. 
' 
"TITLE XIII—HEALTH MAINTENANCE 
ORGANIZATIONS 
"Sec. 1301. Requirements for health maintenance organizations. 
"Sec. 1302. Definitions. 
"Sec. 1303. Grants and contracts for feasibility surveys. 
"Sec. 1304. Grants, contracts, and loan guarantees for planning and for 
initial development costs. 
"Sec. 1305. Loans and loan guarantees for initial operation costs. 
"Sec. 1306. Application requirements. 
"Sec. 1307. Administration of assistance programs. 
^ 
"Sec. 1308. General provisions relating to loan guarantees and loans. 
"Sec. 1309. Authorizations of appropriations. 
"Sec. 1310. Employees' health benefits plans. 
"Sec. 1311. Restrictive State laws and practices. 
"Sec. 1312. Continued regulation of health maintenance organizations. 
"Sec. 1313. Limitation on source of funding for health maintenance orga-
nizations. 
"Sec. 1314. Program evaluation. 
"Sec. 1315. Annual report.". 
• , ; 
Sec. 3. Quality assurance. 
Sec. 4. Health care quality assurance programs study. 
Sec. 5. Reports respecting medically underserved areas and population groups 
and non-metropolitan areas. 
Sec. 6. Health services for Indians and domestic agricultural migratory and 
seasonal workers. 
Sec. 7. Conforming amendments. 
HEALTH MAINTENANCE ORGANIZATIONS 
Ante, pp. 594, 
SEC. 2, Tlic PubHc Health Service Act is amended by adding after 
^°'*- 
title X I I the following new title: 
'^TITLE XIII—HEALTH MAINTENANCE ORGANIZATIONS 
" R E Q U I R E M E N T S 
FOR 
H E A L T H 
MAINTENANCE ORGANIZATIONS 
Definition. 
"SEC. 1301. (a) FoT purposes of this title, the term 'health mainte-
nance organization' means a legal entity which (1) provides basic and 
supplemental health services to its members in the manner prescribed 
by subsection (b), and (2) is organized and operated in the manner 
prescribed by subsection (c). 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
915 
Basic health 
services. 
'•(b) A health maintenance organization shall provide, without 
limitations as to time or cost other than those prescribed by or under 
this title, basic and supplemental health services to its members in 
the following manner: 
" (1) Each member is to be provided basic health services for a 
basic health services payment which (A) is to be paid on a peri-
odic basis without regard to the dates health services (within the 
basic health services) are provided; (B) is fixed without regard 
to the frequency, extent, or kind of health service (within the basic 
health services) actually furnished; (C) is fixed under a commu-
nity rating system; and (D) may be supplemented by addi-
tional nominal payments which may be required for the provision 
of specific services (within the basic health services), except that 
such payments may not be required where or in such a manner 
that they serve (as determined under regulations of the Secre-
tary) as a barrier to the delivery of health services. Such addi-
tional nominal payments shall be fixed in accordance with the 
regulations of the Secretary. 
"(2) For such payment or payments (hereinafter in this title 
referred to as 'supplemental health services payments') as the 
health maintenance organization may i-equire in addition to the 
basic health services payment, the organization shall pro\'ide to 
each of its member's each health service (A) which is included in 
supplemental health services (as defined in section 1302(2)), (B) 
for w^hich the required health manpower are available in the area 
served by the organization, and (C) for the provision of which 
the member has contracted with the organization. Supplemental 
health services payments which are fixed on a prepayment basis 
shall be fixed under a community rating system. 
" (3) The services of health pi'ofessionals which are pi-ovided as 
basic health sei'vices sliall be provided through health profes-
sionals w^ho are members of the stafi^ of the health maintenance 
oi-ganization or through a medical group (or gr-oups) or indi-
vidual practice association (or associations), except that this par-
agraph shall not apply in the case of (A) health professionals* 
services which the organization determines, in conformity with 
regulations of the Secretary, are unusual or infrequently used, or 
(B) any basic health service provided a member of the health 
maintenance organization other than by such a health professional 
because it was medically necessary that the service be provided to 
the member before he could have it provided by such a health 
professional. For pui'poses of this paragraph, the term '"health ^ "Health pro 
professionals' means physicians, dentists, nurses, podiatrists, 
optometrists, and such other individuals engaged in the delivery 
of health services as the Secretary may by regulation designate. 
"'(4) Basic health services (and supplemental health services in 
the case of the members who have contracted therefor) shall 
within the area served by the health maintenance organization be 
available and accessible to each of its members promptly as appro-
priate and in a manner which assures continuity, and when 
medically necessary be available and accessible twenty-four hours 
a day and seven days a week. A member of a health maintenance 
organization shall be reimbursed by the organization for his 
expenses in securing basic or supplemental health services other 
than through the organization if it was medically necessary that 
the services be provided before he could secure them through the 
organization. 
fessionals. 
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PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
Functions. 
'^(c) Eiicli health maintenance organization shall— 
"(1) have a fiscally sound operation and adequate provision 
against the risk of insolvency which is satisfactory to the 
-
^ 
Secretary; 
' 
"(2) assume full financial risk on a prospective basis for the 
provision of basic health services, except that a health mainte-
nance organization may obtain insurance or make other arrange-
ments (A) for the cost of providing to any member basic health 
services the aggregate value of which exceeds $5,000 in any year, 
(B) for the cost of basic health services provided to its members 
other than through the organization because medical necessity 
required their provision before they could be secured through the 
organization, and (C) for not more than 90 per centum of the 
amount by which its costs for any of its fiscal years exceed 115 
per centum of its income for such fiscal year; 
"(3) enroll persons who are broadly representative of the vari-
ous age, social, and income groups within the area it serves, except 
that in the case of a health maintenance organization which has 
a medically underserved population located (in whole or in part) 
in the area it serves, not more than 75 per centum of the members 
of that organization may be enrolled from the medically under-
served population unless the area in which such population resides 
is also a rural area (as designated by the Secretary) ; 
"(4) have an open enrollment period of not less than thirty 
days at least once dui-ing each consecutive twelve-month period 
during which enrollment period it accepts, up to its capacity, 
individuals in the order in which they apply for enrollment, except 
that if the organization demonstrates to the satisfaction of the 
Secr-etary that— 
"(A) it has enrolled, or will be compelled to enroll, a 
disproportionate number of individuals who are likely to 
utilize its services more often than an actuarially determined 
average (as determined under regulations of the Secretary) 
and enrollment during an open enrollment period of an addi-
tional number of such individuals will jeopardize its economic 
viability, or 
• 
"(B) if it maintained an open enrollment period it would 
not be able to comply with the requirements of paragraph (3), 
^^^''^'"' 
the Secretary may waive compliance by the organization with 
the open enrollment requirement of this paragraph for not more 
than three consecutive twelve-month periods and may provide 
additional waivers to that organization if it makes the demon-
stration required by subparagraph (A) or (B) ; 
"(5) not expel or refuse to re-enroll anv member because of his 
health status or his requirements for health services; 
"(6) be organized in such a manner that assures that (A) at 
least one-third of the membership of the policymaking body of 
the health maintenance organization will be members of the orga-
nization, and (B) there will be equitable representation on such 
bodv of members from medically underserved populations served 
by the organization; 
"(7) be organized in such a manner that provides meaningful 
procedures for hearing and resolving e-rievances between the 
health maintenance organization (including the medical group 
or groups and other health delivery entities providing health serv-
ices for the organization) and the members of the organization; 
"(8) have organizational arrangements, established in accord-
ance with regulations of the Secretary, for an ongoing quality 
assurance program for its health services which program (A) 
stresses health outcomes, and (B) provides review by physicians 
87 STAT.] 
PUBLIC LAW 9 3 - 2 2 2 - D E C . 29, 1973 
917 
and other health professionals of the process followed in the pro-
vision of health services; 
"(9) provide medical social services for its members and 
encourage and actively provide for its members health education 
services, education in the appropriate use of health services, and 
education in the contribution each member can make to the main-
tenance of his own health; 
"(10) provide, or make arrangements for, continuing educa-
tion for its health professional staff; and 
"(11) provide, in accordance with regulations of the Secretary 
(including safeguards concerning the confidentiality of the doctor-
patient relationship), an effective procedure for developing, com-
piling, evaluating, and reporting to the Secretary, statistics and 
other information (which the Secretary shall publish and dis-
seminate on an annual basis and which the health maintenance 
organization shall disclose, in a manner acceptable to the Secre-
tary, to its members and the general public) relating to (A) the 
cost of its operations, (B) the patterns of utilization of its serv-
ices, (C) the availability, accessibility, and acceptability of its 
services, (D) to the extent practical, developments in the health 
status of its members, and (E) such other matters as the Secretary 
may require. 
"DEFINITIONS 
"SEC. 1802. For purposes of this title: 
"(1) The term 'basic health services' means— 
"(A) physician services (including consultant and referral 
services by a physician) ; 
"(B) inpatient and outpatient hospital services; 
"(C) medically necessary emergency health services; 
"(D) short-term (not to exceed twenty visits), outpatient 
evaluative and crisis intervention mental health services; 
"(E) medical treatment and referral services (including refer-
ral services to appropriate ancillary services) for the abuse of or 
addiction to alcohol and drugs; 
"(F) diagnostic laboratory and diagnostic and therapeutic 
radiologic services; 
"(G) home health services; and 
"(H) preventive health services (including voluntary family 
planning services, infertility services, preventive dental care for 
children, and children's eye examinations conducted to determine 
the need for vision correction). 
If a service of a physician described in the preceding sentence may 
also be provided under applicable State law by a dentist, optometrist, 
or podiatrist, a health maintenance organization may provide such 
service through a dentist, optometrist, or podiatrist (as the case may 
be) licensed to provide such service. For purposes of this paragraph, 
the term 'home health services' means health services provided at a 
member's home by health care personnel, as prescribed or directed by 
the responsible physician or other authority designated by the health 
maintenance organization. A health maintenance organization is 
authorized, in connection with the prescription of drugs, to maintain, 
re\'iew, and evaluate (in accordance with regulations of the Secretary) 
a drug use profile of its members receiving such service, evaluate pat-
ter-ns of drug utilization to assure optimum drug therapy, and provide 
for instruction of its members and of health professionals in the use of 
})rescription and non-prescription drugs. 
"(2) The term 'supplemental health services' means— 
"(A) services of facilities for intermediate and long-term care; 
918 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
"(B) vision care not included as a basic health service under 
paragraph (1)(A) or ( 1 ) ( H ) ; 
"(C) dental services not included as a basic health service 
under paragraph (1)(A) or ( 1 ) ( H ) ; 
"(D) mental health services not included as a basic health serv-
ice under paragraph (1) (D); 
"(E) long-term physical medicine and rehabilitative services 
(including physical therapy); and 
"(F) the provision of prescription drugs prescribed in the 
course of the provision by the health maintenance organization 
of a basic health service or a service described in the preceding 
subparagraphs of this paragraph. 
If a service of a physician described in the preceding sentence may 
also be provided under applicable State law by a dentist, optometrist, 
or podiatrist, a health maintenance organization may provide such 
service through an optometrist, dentist, or podiatrist (as the case 
may be) licensed to provide such service. A health maintenance orga-
nization is authorized, in connection with the prescription or provision 
of prescription drugs, to maintain, review, and evaluate (in accordance 
with regulations of the Secretary) a drug use profile of its members 
receiving such services, evaluate patterns of drug utilization to assure 
optimum drug therapy, and provide for instruction of its members 
and of health professionals in the use of prescription and non-prescrip-
tion drugs. 
"(3) The term 'member when used in connection with a health 
maintenance organization means an individual who has entered into 
a contractual arrangement, or on Avhose behalf a contractual arrange-
ment has been entered into, with the organization under Avhich the 
organization assumes the responsibility for the provision to such 
individual of basic health services and of such supplemental health 
services as may be contracted for. 
"(4) The term 'medical group' means a partnership, association, or 
other group— 
"(A) which is composed of health professionals licensed to 
practice medicine or osteopathy and of such other licensed health 
professionals (including dentists, optometrists, and podiatrists) 
as are necessary for the provision of health services for which the 
group is responsible; 
"(B) a majority of the members of which are licensed to prac-
tice medicine or osteopathy; and 
"(C) the members of which (i) as their principal professional 
activity and as a group responsibility engage in the coordinated 
practice of their profession for a health maintenance organization ; 
(ii) pool their income from practice as members of the group and 
distribute it among themselves according to a prearranged salary 
or drawing account or other plan; (iii) share medical and other 
records and substantial portions of major equipment and of pro-
/ 
fessional, technical, and administrative staff; (iv) utilize such 
additional professional personnel, allied health professions per-
sonnel, and other health personnel (as specified in regulations of 
the Secretary) as are available and appropriate for the effective 
and efficient delivery of the services of the members of the group; 
and (v) arrange for and encourage continuing education in the 
field of clinical medicine and related areas for the mrembers of the 
group. 
" (5) The term 'individual practice association' means a partnership, 
corporation, association, or other legal entity which has entered into 
a services arrangement (or arrangements) with persons who are 
licensed to practice medicine, osteopathy, dentistry, podiatry, optome-
87 STAT.] 
PUBLIC LAW 9 3 - 2 2 2 - D E C . 29, 1973 
919 
try, or other health profession in a State and a majority of whom are 
licensed to practice medicine or osteopathy. Such an arrangement 
shall provide— 
" (A) that such persons shall provide their professional services 
in accordance with a compensation arrangement established by 
the entity; and 
"(B) to the extent feasible (i) that such persons shall utilize 
such additional professional personnel, allied health professions 
pei-sonnel, and other health personnel (as specified in regulations 
of the Secretary) as are available and appropriate for the effective 
and efficient delivery of the services of the persons who are parties 
to the arrangement, (ii) for the sharing by such persons of med-
ical and other records, equipment, and professional, technical, 
and administrative staff, and (iii) for the arrangement and 
encouragement of the continuing education of such persons in the 
field of clinical medicine and related areas. 
" (6) The term 'section 314(a) State health planning agency' means 
the agency of a State which administers or supervises the administra-
tion of a State's health planning functions under a State plan approved 
under section 314(a) (hereinafter in this title referred to as a 'section sAsttT^isoA^' 
314(a) plan') ; and the term 'section 314(b) areawide health planning 
42 use 245'. 
agency' means a public or nonprofit private agency or organization 
which has developed a comprehensive regional, metropolitan, or other 
local area plan or plans referred to in section 314(b) (hereinafter in 
this title referred to as a 'section 314(b) plan'). 
" (7) The term 'medically underserved population' means the popu-
lation of an urban or rural area designated by the Secretary as an area 
with a shortage of personal health services or a population group 
designated by the Secretary as having a shortage of such services. 
Such a designation may be made by the Secretary only after con-
sideration of the comments (if any) of (A) each section 314(a) State 
health planning agency whose section 314(a) plan covers (in whole 
or in part) such urban or rural area or the area in which such popu-
lation group resides, and (B) each section 314(b) areawide health 
planning agency whose section 314(b) plan covers (in whole or in 
part) such urban or rural area or the area in which such population 
group resides. 
"(8) The term 'community rating system' means a system of fixing 
rates of payments for health services. Under such a system rates of 
payments may be determined on a per-person or per-family basis and 
may vary with the number of persons in a family, but except as other-
wise authorized in the next sentence, such rates must be equivalent for 
all individuals and for all families of similar composition. The follow-
ing differentials in rates of payments may be established under such 
system: 
"(A) Nominal differentials in such rates may be established to 
reflect the different administrative costs of collecting payments 
from the following categories of members: 
"(i) Individual members (including their families), 
"(ii) Small groups of members (as determined under regu-
lations of the Secretary). 
" (iii) Large groups of members (as determined under regu-
lations of the Secretary). 
"(B) Differentials in such rates may be established for mem-
bers enrolled in a health maintenance organization pursuant to a 
contract with a governmental authority under section 1079 or 
1086 of title 10, United States Code, or under any otlier govern- 
so stat. 863. 
mental program (other than the health benefits program author-
ized by chapter 89 of title 5, United States Code) or any health 
8° stat. eoo. 
5 u s e 8901 • 
920 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
benefits program for employees of States, political subdivisions 
of States, and other public entities. 
"(9) The term 'non-metropolitan area' means an area no part of 
which is within an area designated as a standard metropolitan statisti-
cal area by the Office of Management and Budget and which does not 
contain a city whose population exceeds fifty thousand individuals. 
"GRANTS AND CONTRACTS FOR FEASIBILITY SURVEYS 
"SEC. 1303. (a) The Secretary may make grants to and enter into 
contracts with public or nonprofit private entities for projects for 
surveys or other activities to determine the feasibility of developing 
and operating or expanding the operation of health maintenance 
organizations. 
"(b) An application for a grant or contract under this section 
shall contain— 
"(1) assurances satisfactory to the Secretary that, in conduct-
ing surveys or other activities with assistance under a grant or 
contract under this section, the applicant will (A) cooperate with 
s/sarVaV/'' 
^^^ section 314(b) areawide health planning agency (if any) 
42 use 246. 
whose section 314(b) plan covers (in whole or in part) the area 
for which the survey or other activity will be conducted, and 
(B) notify the medical society serving such area of such surveys 
or other activities; and 
"(2) such other information as the Secretary may by regula-
tion prescribe. 
"(c) In considering applications foi" gi'ants and contracts under 
this section, tlie Secretary shall give prior'ity to an application which 
contains or is suppoi'ted by assurances satisfactory to the Secretai-y 
that at the time the health maintenance orgaiiization for which such 
application or proposal is submitted first becomes operational not less 
than 30 per centum of its members will be members of a medically 
underserved population. 
Limitations. 
"(d) (1) Except as provided in pai-agi'aph (2), the following limi-
tations apply with lespect to grants and contracts made under this 
section: 
"(A) If a project has been assisted with a grant or contract 
under subsection (a), the Secretary may not make any other grant 
or enter into any other contract under this section for such project. 
"(B) Any pi'oject for- which a gr-ant is made or contract entered 
into must be completed within twelve months from the date the 
grant is made or contract entered into. 
"(2) The Secretary may make not more than one additional grant 
or enter into not more than one additional contract for a project for 
which a gi-ant has previously been made or a contract previously 
entered into, and he may permit additional time (up to twelve months) 
for completion of the project if he determines that the additional 
grant or conti'act (as the case may be), or additional time, or both, is 
needed to adequately complete the project. 
"(e) The amount to be paid by the United States under a grant 
made, oi' contract entei'ed into, under subsection (a) shall be deter-
mined by the Secretary, except that (1) the amount to be paid by the 
United States under any single grant or contract for any project may 
not exceed $50,000, and (2) the aggregate of the amounts to be paid 
by the United States for any project under such subsection under 
grants or contracts, or both, may not exceed the greater of (A) 90 
per centum of the cost of such project (as determined under regula-
tions of the Secretary), or (B) in the case of a project for a health 
maintenance organization which will serve a medically underserved 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
921 
population, such greater percentage (up to 100 per centum) of such 
cost as the Secretary may prescribe if he determines that the ceiling 
on the grants and contracts for such project should be determined by 
such greater percentage. 
"(f) Payments under grants under this section may be made in 
Payments. 
advance or by way of reimbursement and at such intervals and on 
such conditions as the Secretary finds necessary. 
"(g) Contracts may be entered into under this section without 
regard to sections 3648 and 3709 of the Revised Statutes (31 U.S.C. 
529;41U.S.C. 5). 
"(h) Payments under grants and contracts under this section shall 
be made from appropriations made under section 1309(a). 
"(i) Of the sums appropriated for any fiscal year under section 
1309(a) for grants and contracts under this section, not less than 
20 per centum shall be set aside and obligated in such fiscal year 
for projects (1) to determine the feasibility of developing and operat-
ing or expanding the operation of health maintenance organizations 
which the Secretary determines may reasonably be expected to have 
after their development or expansion not less than 66 per centum of 
their membership draw-n fi-om residents of non-metropolitan areas, 
and (2) the applications for which meet the requirements of this title 
for approval. Sums set aside in the fiscal year ending June 30, 1974, or 
June 30, 1975, for projects described in the preceding sentence but not 
obligated in such fiscal year for grants and contracts under tliis section 
because of a lack of applicants for projects meeting the requirements 
of such sentence shall remain available for obligation under this sec-
tion in the succeeding fiscal year for projects other than those described 
in clause (1) of such sentence. 
"(JKANTS, CONTRACTS, AND LOAN GUARANTEES FOR PLANNING AND FOR 
INITIAL DEVELOPMENT 
COSTS 
"SEC. 1304. (a) The Secretary may— 
"(1) make grants to and enter into contracts with public or 
nonprofit private entities for planning projects for the establish-
ment of health maintenance organizations or for the significant 
expansion of the membership of, or areas served by, health main-
tenance organizations; and 
' 
"(2) guarantee to non-Federal lenders payment of the prin-
cipal of and the interest on loans made to private entities (other 
than nonprofit private entities) for planning projects for the 
establishment or expansion of health maintenance organizations 
to serve medically underserved populations. 
Planning projects assisted under this subsection shall include devel-
opment of plans for the marketing of the services of the health main-
tenance organization. 
,. 
"(b)(1) The Secretary may— 
' 
"(A) make grants to and enter into contracts with public or 
nonprofit private entities for projects for the initial development 
of health maintenance organizations; and 
"(B) guarantee to non-Federal lenders payment of the princi-
pal of and the interest on loans made to any private entity (other 
than a nonprofit private entity) for a project for the initial devel-
opment of a health maintenance organization which will serve a 
medically underserved population. 
"(2) For purposes of this section, the term 'initial development' dlvriopment." 
when used to describe a project for which assistance is authorized by 
this subsection includes significant expansion of the membership of, 
or the area served by, a health maintenance organization. Funds under 
922 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
grants and contracts under this subsection and under loans guaranteed 
under this subsection may only be utilized for such purposes as the 
Secretary may prescribe in regulations. Such purposes may include 
(A) the implementation of an enrollment campaign for such an orga-
nization, (B) the detailed design of and arrangements for the health 
services to be provided by such an organization, (C) the development 
of administrative and internal organizational arrangements, including 
fiscal control and fund accounting procedures, and the development of 
a capital financing program, (D) the recruitment of personnel for such 
an organization and the conduct of training activities for such jjerson-
nel, and (E) the payment of architects' and engineers' fees. 
^ 
''(3) A grant or contract under this subsection may only be made 
or entered into for initial development costs in the one-year period 
beginning on the first day of the first month in which such grant or 
contract is made or entered into. The number of grants made for any 
initial development project under this subsection when added to the 
number of contracts entered into for such project under this subsection 
may not exceed three. A loan guarantee under this subsection may only 
be made for a loan (or loans) for such costs incurred in a period not to 
exceed three years. 
"(c)(1) An application for a grant, contract, or loan guarantee 
under subsection (a) for a planning project shall contain assurances 
satisfactory to the Secretary that in carrying out the planning project 
for wiiich the grant, contract, or loan guarantee is sought, the appli-
8/stlt!\'304?' 
cant will (A) coo])erate with the section 314(b) areawide health plan-
42 use 246. 
ning agency (if any) whose section 314(b) plan covers (in whole or 
in part) the area proposed to be served by the health maintenance 
organization for which the planning project will be conducted, and 
(B) notify the medical society serving such area of the planning 
project. 
" (2) If the Secretary makes a grant or loan guarantee or enters into 
a contract under subsection (a) for a planning project for a health 
maintenance organization, he may, within the period in which the 
planning project must be completed, make a grant or loan guarantee 
or enter into a contract under subsection (b) for the initial develop-
ment of that health maintenance organization; but no grant or loan 
guarantee may be made or contract entered into under subsection (b) 
for initial development of a health maintenance organization unless 
the Secretary determines that (A) sufficient planning for its estab-
lishment or expansion (as the case may be) has been conducted by the 
applicant for the grant, contract, or loan guarantee, and (B) the 
feasibility of establishing and operating, or of expanding, the health 
maintenance organization has been established by the applicant. 
"(d) In considering applications for grants and contracts under 
this section, the Secretary shall give priority to an application which 
contains or is supported by assurances satisfactory to the Secretary 
that at the time the health maintenance organization for which such 
application is submitted first becomes operational not less than 30 
per centum of its members will be members of a medically underserved 
poDulation. 
Limitations. 
«^g^ ^ ]^\ Exccpt as providcd in paragraph (2), the following limita-
tions apply with respect to grants, loan guarantees, and contracts made 
under subsection (a) of this section: 
"(A) If a planning project has been assisted with grant, loan 
guarantee, or contract under subsection (a), the Secretary may not 
make any other ])lannmflr crant or loan guarantee or enter into any 
other planning contract for such project under this section. 
"(B) Any project for which a grant or loan guarantee is made 
or contract entered into must be completed within twelve months 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
923 
from the date the grant or loan guarantee is made or contract 
entered into. 
"(2) The Secretary may not make more than one additional grant 
or loan guarantee or enter into not more than one additional contract 
for a planning project for which a grant or loan guarantee has pre-
viously been made or a contract previously entered into, and he may 
permit additional time (up to twelve months) for completion of the 
project if he determines that the additional grant, loan guarantee, or 
contract (as the case may be), or additional time, or both, is needed to 
adequately complete the project. 
"(f) (1) The amount to be paid by the United States under a grant 
made, or contract entered into, under subsection (a) for a planning 
project, and (except as provided in paragraph (3) of this subsection) 
the amount of principal of a loan for a planning project which may be 
guaranteed under such subsection, shall be determined by the Secre-
tary, except that (A) the amount to be paid by the United States under 
any single grant or contract, and the amount of principal of any 
single loan guaranteed under such subsection, may not exceed $125,000, 
and (B) the aggregate of the amounts to be paid for any project by 
the United States under grants or contracts, or both, under such sub-
section, and the aggregate amount of principal of loans guaranteed 
under such subsection for any project, may not exceed the greater of 
(i) 90 per centum of the cost of such project (as determined under 
regulations of the Secretary), or (ii) in the case of a project for a 
health maintenance organization which will serve a medically under-
served population, such greatei' pei-centage (up to 100 per centum) of 
such cost as the Secretary may presei-ibe if he determines that the ceil-
ing on the grants, contracts, and loan guarantees (or any combination 
thereof) for such project should be determined by such greater 
percentage. 
"(2) The amount to be paid by tl:e United States under a grant 
made, or contract entered into, under subsection (b) for an initial 
development project, and (except as provided in paragraph (3) of this 
subsection) the amount of principal of a loan for an initial develop-
ment project which may be guaranteed under such subsection, shall be 
determined by the Secretary; except that the amounts to be paid by the 
United States for any initial development pi-oject under grants or 
contracts, or both, under* such subsection, and the aggregate amount of 
principal of loans guaranteed under such subsection for any project, 
may not exceed the lesser of— 
"(A) $1,000,000, or 
"(B) an amount equal to the greater of (i) 90 per centum of 
the cost of such project (as determined under regulations of the 
Secretary), or (ii) in the case of a project for a health mainte-
nance organization which will serve a medically underserved 
po})ulation, such greater percentage (up to 100 per centum) of 
such cost as the Secretary may prescribe if he determines that 
the ceiling on the grants, contracts, and loan guarantees (or any 
combination thereof) for such project should be determined by 
such greater percentage. 
"(3) The cumulative total of the principal of the loans outstanding 
at any time with respect to which guarantees have been issued under 
this section mav not exceed such limitations as may be specified in 
appropriation Acts. 
"(g) Payments under grants under this section may be made in 
Payments. 
advance or by way of reimbursement and at such intervals and on 
such conditions as the Secretary finds necessary. 
"(h) Contracts may be entered into under this section without 
regard to sections 3648 and 3709 of the Revised Statutes (31 U.S.C. 
529: 41 U.S.C. 5). 
924 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
" (i) Payments under grants and contracts under this section shall 
be made from appropriations under section 1309(a). 
"(j) Loan guarantees under subsection (a) (2) for planning projects 
may be made through the fiscal year ending June 30, 1976; and loan 
guarantees under subsection (b) (1) (B) for initial development proj-
ects may be made through the fiscal year ending June 30, 1977. 
"(k) (1) Of the sums appropriated for any fiscal year under section 
1309(a) for grants and contracts under subsection (a) of this section, 
not less than 20 per centum shall be set aside and obligated in such 
fiscal year for projects (A) to plan the establishment or expansion 
of health maintenance organizations which the Secretary determines 
may reasonably be expected to have after their establishment or expan-
sion not less than 66 per centum of their membership drawn from 
residents of non-metropolitan areas, and (B) the applications for 
which meet the requirements of this title for approval. Sums set aside 
in the fiscal year ending June 30, 1974, or June 30, 1975, for projects 
described in the preceding sentence but not obligated in such fiscal 
year for grants and contracts under subsection (a) of this section 
because of a lack of applicants for projects meeting the requirements 
of such sentence shall remain available for obligation under such sub-
section in the succeeding fiscal year for projects other than those 
described in clause (A) of such sentence. 
"(2) Of the sums appropriated for any fiscal year under section 
1309(a) for grants and contracts under subsection (b) of this section, 
not less than 20 per centum shall be set aside and obligated in such 
f 
fiscal year for projects (A) for the initial development of health main-
tenance organizations which the Secretary determines may reasonably 
be expected to have after their initial development not less than 66 
I^er centum of their membership drawn from residents of non-
metropolitan areas, and (B) the applications for which meet the 
requirements of this title for approval. Sums set aside in the fiscal year 
ending June 30, 1974, or in either of the next two fiscal years for 
pi-ojects described in the preceding sentence but not obligated in such 
fiscal year for grants and contracts under subsection (b) of this section 
because of a lack of applicants for projects meeting the requirements 
of such sentence shall remain available for obligation under such 
subsection in the succeeding fiscal year for projects other than those 
described in clause (A) of such sentence. 
"LOANS AND LOAN GUARANTEES FOR INITIAL OPERATION COSTS 
"SEC. 1305. (a) The Secretary may— 
"(1) make loans to public or nonprofit private health mainte-
nance organizations to assist them in meeting the amount by Avhich 
their operating costs in the period of the first thirty-six months 
of their operation exceed their revenues in that period; 
"(2) make loans to public or nonprofit private health mainte-
nance organizations to assist them in meeting the amount by which 
their operating costs, which the Secretary determines are attribut-
able to significant expansion in their membership or area served 
and which are incurred in the period of the first thirty-six months 
of their operation after such expansion, exceed their revenues in 
that period which the Secretary determines are attributable to 
such expansion; and 
lendTr's^^lTarin- 
" (^) guarautec to uou-Federal lenders payment of the principal 
teed payment, 
of and thc Intcrcst on loans made to any private health mainte-
condition. 
nance organization (other than a private nonprofit health main-
tenance organization) for the amounts referred to in paragraph 
(1) or (2), but only if such health maintenance organization will 
serve a medically underserved population. 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
925 
No loan or loan guarantee may be made under this subsection for the 
operating costs of a health maintenance organization unless the Secre-
tary determines that the organization has made all reasonable attempts 
to meet such costs. 
" (b) (1) Except as provided in paragraph (2), the principal amount 
Limitations. 
of any loan made or guaranteed under subsection (a) in any fiscal year 
for a health maintenance organization may not exceed $1,000,000 and 
the aggregate amount of principal of loans made or guaranteed, or 
both, under this section for a health maintenance organization may not 
exceed $2,500,000. 
"(2) The cumulative total of the principal of the loans outstanding 
at any time which have been directly made, or with respect to which 
guarantees have been issued, under subsection (a) may not exceed such 
limitations as may be specified in appropriation Acts. 
', . 
"(c) Loans under this section shall be made from the fund estab-
lished under section 1308 (e). 
"(d) A loan or loan guarantee may be made under this section 
through the fiscal year ending June 30,1978. 
"(e) Of the sums used for loans under this section in any fiscal year 
from the loan fund established under section 1308(e), not less than 
20 per centum shall be used for loans for projects (1) for the initial 
operation of health maintenance organizations which the Secretary 
determines have not less than 66 per centum of their membership 
drawn from residents of nonmetropolitan areas, and (2) the applica-
tions for which meet the requirements of this title for approval. 
"APPLICATION REQUIREMENTS 
"SEC. 1306. (a) No grant, contract, loan, or loan guarantee may be 
made under this title unless an application therefor has been sub-
mitted to, and approved by, the Secretary. 
"(b) The Secretary may not approve an application for a grant, 
contract, loan, or loan guarantee under this title unless— 
"(1) in the case of an application for assistance under section 
1303 or 1304, such application meets the application requirements 
of such section and in the case of an application for a loan or loan 
guarantee, such application meets the requirements of section 
1308; 
"(2) he determines that the applicant making the application 
would not be able to complete the project or undertaking for which 
the application is submitted without the assistance applied for; 
"(3) the application contains satisfactory specification of the 
existing or anticipated (A) population group or groups to be 
served by the proposed or existing health maintenance organiza-
tion described in the application, (B) membership of such orga-
nization, (C) methods, terms, and periods of the enrollment of 
members of such organization, (I)^ estimated costs ner member 
of the health and educational services to be provided by such 
organization and the nature of such costs, (E) sources of profes-
sional services for such organization, and organizational arranQ;e-
ments of such organization for providing health and educational 
services, (F) organizational arrangements of such organization 
for an ongoing quality assurance program in conformity with the 
requirements of section 1301(c), (G) sources of prepavment and 
.. 
other forms of payment for the services to be provided by such 
organization, (H) facilities, and additional capital investments 
and sources of financing therefor, available to such organization 
to provide the ]eve\ and scope of services proposed. (I) adminis-
trative, managerial, and financial arrangements and capabilities 
926 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 
STAT. 
80 Stat. 1181; 
84 Stat. 1304. 
42 u s e 246. 
Multiple appli-
cations. 
Standards and 
procedures, regu-
lations . 
of such organization, (J) role for members in the planning and 
policymaking for such organization, (K) grievance procedures 
for members of such organization, and (L) evaluations of the 
support for and acceptance of such organization by the popula-
tion to be served, the sources of operating support, and the pro-
fessional groups to be involved or affected thereby; 
" (4) contains or is supported by assurances satisfactory to the 
Secretary that the applicant making the application will, in 
accordance with such criteria as the Secretary shall by regulation 
prescribe, enroll, and maintain an enrollment of the maximum 
number of members that its available and potential resources 
(as determined under regulations of the Secretary) will enable 
it to effectively serve; 
" (5) the section 314 (b) areawide health planning agency whose 
section 314(b) plan covers (in whole or in part) the area to be 
served by the health maintenance organization for which such 
application is submitted, or if there is no such agency, the section 
314(a) State health planning agency whose section 314(a) plan 
covers (in whole or in part) such area, has, in accordance with 
regulations of the Secretary under subsection (c) of this section, 
been provided an opportunity to review the application and to 
submit to the Secretary for his consideration its recommendations 
respecting approval of the application or if under applicable 
State law such an application may not be submitted without the 
approval of the section 314(b) areawide health planning agency 
or the section 314(a) State health planning agency, the required 
approval has been obtained; 
"(6) in the case of an application made for a project which 
previously received a grant, contract, loan, or loan guarantee 
under this title, such application contains or is supported by 
assurances satisfactory to the Secretary that the applicant making 
the application has the financial capability to adequately carry 
out the purposes of such project and has developed and operated 
such project in accordance with the requirements of this title and 
with the plans contained in previous applications for such assist-
ance; and 
"(7) the application is submitted in such form and manner, 
and contains such additional information, as the Secretary shall 
prescribe in regulations. 
An organization making multiple applications for more than one 
grant, contract, loan, or loan guarantee under this title, simultaneously 
or over the course of time, shall not be required to submit duplicate or 
redundant information but shall be required to update the specifica-
tions (required by paragraph (3)) respecting the existing or proposed 
health maintenance organization in such manner and with such fre-
quency as the Secretary may by regulation prescribe. 
"(c) The Secretary shall by regulation establish standards and 
procedures for section 314(b) areawide health planning agencies and 
section 314(a) State health planning agencies to follow in reviewing 
and commenting on applications for grants, contracts, loans, and loan 
guarantees under this title. 
Recordkeeping. 
''ADMINISTRATION OF ASSISTANCE PROORAMS 
"SEC. 1307. (a) (1) Each recipient of a grant, contract, loan, or loan 
guarantee under this title shall keej) such records as the Seci-etary shall 
prescribe, including records which fully disclose the amount and dis-
position by such recipient of the proceeds of the grant, contract, or 
Secretary of HEW, 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
927 
loan (directly made or guaranteed), the total cost of the undertaking 
in connection with which such assistance was given or used, the amount 
of that portion of the cost of the undertaking supplied by other 
sources, and such other records as w^ill facilitate an effective audit. 
"(2) The Secretary, or any of his duly authorized representatives, 
shall have access for the purpose of audit and examination to any 
books, documents, papers, and records of the recipients of a grant, con-
tract, loan, or loan guarantee under this title which relate to such 
assistance. 
"(b) Upon expiration of the period for which a grant, contract, s^^^°^^J^lf 
loan, or loan guarantee was provided an entity under this title, such 
entity shall make a full and complete report to the Secretary in such 
manner as he may by regulation prescribe. Each such report shall 
contain, among such other matters as the Secretary may by regula-
tion require, descriptions of plans, developments, and operations 
relating to the matters referred to in section 1306 (b)(3). 
"(c) If in any fiscal year the funds appropriated under section 
1309 are insufficient to fund all applications approved under this title 
for that fiscal year, the Secretary shall, after applying the applicable 
priorities under sections 1303 and 1304, give priority to the funding of 
applications for projects which the Secretary determines are the most 
likely to be economically viable. 
"(d) An entity which provides health services to a defined popula-
tion on a prepaid basis and which has members who are entitled to 
insurance benefits under title XVIII of the Social Security Act or to 
'^^ ^*^*- 29i; 
medical assistance under a State plan approved under title X I X of 
42 use 1395. 
such Act may be considered as a health maintenance organization for 
42 use 1396. 
purposes of receiving assistance under this title if— 
"(1) with respect to its members who are entitled to such 
insurance benefits or to such medical assistance it (A) provides 
health services in accordance with section 1301(b), except that 
(i) it does not furnish to those members the health services (with-
in the basic health services) for which it may not be compensated 
under such title XVIII or such State plan, and (ii) it does not 
fix the basic or supplemental health services payment for such 
members under a community rating system, and (B) is organized 
and operated in the manner prescribed by section 1301(c), except 
that it does not assume full financial risk on a prospective basis 
for the provision to such members of basic or supplemental health 
services with respect to which it is not required under such title 
X V I I I or such State plan to assume such financial risk; and 
" (2) with respect to its other members it provides health serv-
ices in accordance with section 1301(b) and is organized and oper-
ated in the manner prescribed by section 1301(c). 
"(e) In any fiscal year no loan guarantee may be made under this 
title if the making of such guarantee would cause the cumulative total 
of the principal of the loans guaranteed under this title in such fiscal 
year to exceed the amount of grant and contract funds obligated under 
this title in such fiscal year; except that this subsection shall not apply 
if the amount of grant and contract funds obligated under this title 
in such fiscal year equals the sums appropriated under section 1309 for 
grants and contracts for such fiscal year. 
"GENERAL PROVISIOXS RELATING TO LOAN GUARANTEES AND LOANS 
"SEC, 1308. (a) (1) The Secretary may not approve an application 
for a loan guarantee under this title unless he determines, that (A) 
the terms, conditions, security (if any), and schedule and amount of 
repayments with respect to the loan are sufficient to protect the finan-
928 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
cial interests of the United States and are otherwise reasonable, includ-
ing a determination that the rate of interest does not exceed such per 
centum per annum on the principal obligation outstanding as the Sec-
retary determines to be reasonable, taking into account the range of 
^ 
interest rates prevailing in the private market for similar loans and 
the risks assumed by the United States, and (B) the loan would not 
be available on reasonable terms and conditions without the guarantee 
under this title. 
"(2) (A) The tjnited States shall be entitled to recover from the 
applicant for a loan guarantee under this title the amount of any pay-
ment made pursuant to such guarantee, unless the Secretary for good 
cause waives such right of recovery; and, upon making any such pay-
ment, the United States shall be subrogated to all of the rights of the 
recipient of the payments with respect to which the guarantee was 
made. 
"(B) To the extent permitted by subparagraph (C), any terms and 
conditions applicable to a loan guarantee under this title (including 
terms and conditions imposed under subparagraph (D)) may be 
modified by the Secretary to the extent he determines it to be consistent 
with the financial interest of the United States. 
"(C) Any loan guarantee made by the Secretary under this title 
shall be incontestable (i) in the hands of an applicant on whose behalf 
such guarantee is made unless the applicant engaged in fraud or mis-
representation in securing such guarantee, and (li) as to any person 
(or his successor in interest) who makes or contracts to make a loan 
to such applicant in reliance thereon unless such person (or his succes-
sor in interest) engaged in fraud or misrepresentation in making or 
contracting to make such loan. 
"(D) Guarantees of loans under this title shall be subject to such 
further terms and conditions as the Secretary detei'mines to be neces-
sary to assure that the purposes of this title will be achieved. 
Application 
"(b) (1) The Secretary may not approve an application for a loan 
requirements. 
i
i
'
-
i 
i 
under this title unless— 
"(A) the Secretary is reasonably satisfied that the applicant 
therefor will be able to make payments of principal and interest 
thereon when due, and 
"(B) the applicant provides the Secretary with reasonable 
assurances that there will be available to it such additional funds 
as may be necessary to complete the project or undertaking with 
respect to which such loan is i-equested. 
"(2) Any loan made under this title shall (A) have such security, 
(B) have such maturity date, (C) be repayable in such installments, 
(D) bear interest at a rate comparable to the current rate of interest 
prevailing, on the date the loan is made, with respect to loans guaran-
teed under this title, and (P]) be subject to such other terms and condi-
tions (including provisions for recovery in case of default), as the 
Secretary determines to be necessary to carry out the purposes of this 
title while adequately protecting the financial interests of the United 
States. 
live°^^'^^ "^^*^' 
"(3) The Secretary may, for good cause but with due regard to the 
financial interests of the United States, waive any right of recovery 
which he has by reason of the failure of a borrower to make payments 
of principal of and interest on a loan made under this title, except that 
if such loan is sold and guaranteed, any such waiver shall have no 
effect upon the Secretary's guarantee of timely payment of principal 
and interest. 
Loans, sale. 
" ((.) (^) The Secretary may from time to time, but with due regard 
to the financial interests of the United States, sell loans made by him 
under this title. 
waiver 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
929 
"(2) The Secretary may agree, prior to his sale of any such loan, 
to guarantee to the purchaser (and any successor in interest of the 
purchaser) compliance by the borrower with the terms and conditions 
of such loan. Any such agreement shall contain such terms and condi-
tions as the Secretary considers necessary to protect the financial inter-
ests of the United States or as otherwise appropriate. Any such 
agreement may (A) provide that the Secretary shall act as agent of 
any such purchaser for the purpose of collecting from the borrower 
to which such loan was made and paying over to such purchaser, a,ny 
payments of principal and interest payable by such organization under 
such loan; and (B) provide for the repurchase by the Secretary of 
any such loan on such terms and conditions as may be specified in 
the agreement. The full faith and credit of the United States is pledged 
to the payment of all amounts which may be required to be paid under 
any guarantee under this paragraph. 
"(3) After any loan under this title to a public health maintenance 
organization has been sold and guaranteed under this subsection, inter-
est paid on such loan which is received by the purchaser thereof (or 
his successor in interest) shall be included in the gross income of the' 
purchaser of the loan (or his successor in interest) for the purpose of 
chapter 1 of the Internal Revenue Code of 1954. 
26^usc°V e
'
f 
"(4) Amounts received by the Secretary as proceeds from the sale seq. 
of loans under this subsection shall be deposited in the loan fund 
established under subsection (e). 
"(d) (1) There is established in the Treasury a loan guarantee fund fund^esubifrh!* 
(hereinafter in this subsection referred to as the 'fund') which shall ment'. 
be available to the Secretary without fiscal year limitation, in such 
amounts as may be specified from time to time in appi'opriation Acts, 
to enable him to discharge his responsibilities under loan guarantees 
issued by him under this title. There are authorized to be appropri-
ated from time to time such amounts as may be necessary to provide 
the sums required for the fund. To the extent authorized in appro-
priation Acts, there shall also be deposited in the fund amounts 
received by the Secretary in connection with loan guarantees under 
this title and other property or assets derived by him from his opera-
tions respecting such loan guarantees, including any money derived 
from the sale of assets. 
"(2) If at any time the sums in the funds are insufficient to enable 
the Secretary to discharge his responsibilities under guarantees issued 
by him under this title, he is authorized to issue to the Secretary of 
the Treasury notes or other obligations in such forms and denomina-
tions, bearing such maturities, and subject to such terms and condi-
tions, as may be prescribed by the Secretary with the approval of the 
Secretary of the Treasury. Such notes or other obligations shall bear 
interest at a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the United States of comparable maturities 
during the month preceding the issuance of the notes or other obliga-
tions. The Secretary of the Treasury shall purchase any notes and 
other obligations issued under this paragraph and for that purpose he 
may use as a public debt transaction the proceeds from the sale of any 
securities issued under the Second Liberty Bond Act, and the purposes 
^° s'ajt^- ^288. 
for which the securities may be issued under that Act are extended to 
"""^ ^''' 
include any purchase of such notes and obligations. The Secretary of 
the Treasury may at any time sell any of the notes or other obligations 
acquired by him under this paragraph. All redemptions, purchases, 
and sales by the Secretary of the Treasury of such notes or other obli-
gations shall be treated as public debt transactions of the United States. 
Sums borrowed under this i^aragraph shall be deposited in the fund 
31 use 774. 
22-150 O - 75 - 61 
930 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
and redemption of such notes and obligations shall be made by the 
Secretary from the fund. 
est'a°biish'ment 
"^^-^ There is established in the Treasury a loan fund (hereinafter 
in this subsection referred to as the 'fund') which shall be available to 
the Secretary without fiscal year limitation, in such amounts as may be 
specified from time to time in appit)priation Acts, to enable him to 
make loans under this title. There shall also be deposited in the fund 
amounts received by the Secretary as interest payments and repayment 
of principal on loans made under this title and other property or assets 
derived by him from his operations respecting such loans, from the 
sale of loans under subsection (c) of this section, or from the sale of 
assets. 
"AUTHORIZATIONS OF APPROPRIATIONS 
"SEC. 1309. (a) For the purpose of making payments under grants 
and contracts under sections 1303, 1304(a), and 1304(b), there are 
authorized to be appropriated $25,000,000 for the fiscal year ending 
June 30, 1974, $55,000,000 for the fiscal year ending June 30, 1975, 
and $85,000,000 for the fiscal year ending June 30, 1976; and for the 
purpose of making payments under grants and contracts under sec-
tion 1304(b) for the fiscal year ending June 30, 1977, there is author-
ized to be appropriated $85,000,000. 
"(b) There is authorized to be appropriated to the loan fund estab-
lished under section 1308(e) $75,000,000 in the aggregrate for the fiscal 
years ending June 30,1974, and June 30,1975. 
"EMPLOYEES' HEALTH BENEFITS PLANS 
"SEC. 1310. (a) Each employer which is required during any calen-
dar quarter to pay its employees the minimum wage specified by sec-
80^stat^8*38°^^' 
^^^^ 
^^ ^^® ''^^^^ Labor Standards Act of 1938 (or would be required 
29 use 206. 
to pay his employees such wage but for section 13(a) of such Act), and 
7 5 Stat. 71; 
whlch duriug such calendar quarter employed an average number of 
86 Stat.' 375! 
employees of not less than twenty-five, shall, in accordance with regu-
29 use 213. 
lations which the Secretary shall prescribe, include in any health 
benefits plan offered to its employees in the calendar year beginning 
after such calendar quarter the option of membership in qualified 
health maintenance organizations which are engaged in the provision 
of basic and supplemental health services in the areas in which such 
employees reside. 
"(b) If there is more than one qualified health maintenance organi-
zation which is engaged in the provision of basic and supplemental 
health services in the area in which the employees of an employer sub-
ject to subsection (a) reside and if— 
"(1) one or more of such organizations provides basic health 
services through professionals who are members of the staff of the 
organization or a medical group (or groups), and 
"(2) one or more of such organizations provides such services 
through an individual practice association (or associations), 
then of the qualified health maintenance organizations included in a 
health benefits plan of such employer pursuant to subsection (a) at 
least one shall be an organization which provides basic health services 
as described in clause (1) and at least one shall be an organization 
which provides basic health services as described in clause (2). 
"(c) No employer shall be required to pay more for health benefits 
as a result of the application of this section than would otherwise be 
required by any prevailing collective bargaining agreement or other 
legally enforceable contract for the provision of health benefits 
between the employer and its employees. Failure of any employer to 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
931 
comply with the requirements of subsection (a) shall be considered a 
willful violation of section 15 of the Fair Labor Standards Act of 1938. gg^^tff^'gi^g"^^' 
"(d) For purposes of this section, the term '(qualified health mainte- 
29 use 21's. 
nance organization' means (1) a health mamtenance organization . 'g^"°^"!®^ 
which has provided assurances satisfactory to the Secretary that it ^Ince ^gan\za-
provides basic and supplemental health services to its members in the tion." 
manner prescribed by section 1301(b) and that it is organized and 
operated in the manner prescribed by section 1301(c), and (^2) an 
entity which proposes to become a health maintenance organization 
and which the Secretary determines will wh<^.n it becomes operational 
provide basic and supplemental health services to its members in the 
manner prescribed by section 1301(b) and will be organized and 
operated in the manner prescribed by section 1301 (c). 
u 
RESTRICTIVE STATE LAWS AND PRACTICES 
"SEC. 1311. (a) In the case of any entity— 
"(1) which cannot do business as a health maintenance orga-
nization in a State in which it proposes to furnish basic and sup-
plemental health services because that State by law, regulation, or 
otherwise— 
" (A) requires as a condition to doing business in that State 
that a medical society approve the furnishing of services by 
the entity, 
"(B) requires that physicians constitute all or a percentage 
of its governing body, 
"(C) requires that all physicians or a percentage of physi-
cians in the locale participate or be permitted to participate 
in the provision of services for the entity, or 
" (D) requires that the entity meet requirements for insur-
ers of health care services doing business in that State respect-
ing initial capitalization and establishment of 
financial 
reserves against insolvency, and 
"(2) for which a grant, contract, loan, or loan guarantee was 
made under this title or which is a qualified health maintenance 
organization for purposes of section 1310 (relating to employees' 
health benefits plans), 
such requirements shall not apply to that entity so as to prevent it 
fi-om operating as a health maintenance organization in accordance 
with section 1301. 
"(b) No State may establish or enforce any law which prevents a 
health maintenance organization for which a grant, contract, loan, or 
loan guarantee was made under this title or which is a qualified health 
maintenance organization for purposes of section 1310 (relating to 
employees' health benefits plans), from soliciting members through 
advertising its services, charges, or other nonprofessional aspects of 
its operation. This subsection does not authorize any advertising which 
identifies, refers to, or makes any qualitative judgment concerning, any 
health professional who provides services for a health maintenance 
organization. 
" C O N T I N U E D REGULATION OF HEALTH MAINTENANCE ORGANIZATIONS 
"SEC. 1312. (a) If the Secretary determines that an entity which 
received a grant, contract, loan, or loan guarantee under this title as 
a health maintenance organization or which was included in a health 
benefits plan offered to employees pursuant to section 1310— 
"(1) fails to provide basic and supplemental services to its 
members, 
932 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
"(2) fails to provide such services in the manner prescribed by 
section 1301(b), or 
"(^3) is not organized or operated in the manner prescribed by 
section 1301(c), 
the Secretary may, in addition to any other remedies available to him, 
bring a civil action in the United States district court for the district 
in which such entity is located to enforce its compliance with any 
assurances it furnished him respecting the provision of basic and 
supplemental health services or its organization or operation, as the 
case may be, which assurances were made under section 1310 or when 
application was made under this title for a grant, contract, loan, or 
loan guarantee. 
"(b) The Secretary, through the Assistant Secretary for Health, 
shall administer subsection (a) in the Office of the Assistant Secretary 
for Health. 
"LIMITATION ON SOURCE OF FUNDING FOR HEALTH MAINTENANCE 
ORGANIZATIONS 
"SEC. 1313. No funds appropriated under any provision of this Act 
other than this title may be used— 
"(1) for grants or contracts for surveys or other activities to 
determine the feasibility of developing or expanding health main-
tenance organizations or other entities which provide, directly or 
indirectly, health services to a defined population on a prepaid 
basis; 
" (2) for grants or contracts, or for payments under loan guar-
antees, for planning projects for the establishment or expansion 
of such organizations or entities; 
" (3) for grants or contracts, or for payments under loan guar-
antees, for projects for the initial development or expansion of 
such organizations or entities; or 
" (4) for loans, or for payments under loan guarantees, to assist 
in meetiiig the costs of the initial operation after establishment or 
expansion of such organizations or entities. 
Congress. 
a 
PROGRAM EVALUATION 
"SEC. 1314. (a) The Comptroller General shall evaluate the oper-
ations of at least fifty of the health maintenance organizations for 
which assistance was provided under section 1303, 1304, or 1305. The 
I)eriod of operation of such health maintenance organizations which 
shall be evaluated under this subsection shall be not less than thirty-six 
Report to 
months. The Comptroller General shall report to the Congress the 
results of the evaluation not later than ninety days after at least fifty 
of such health maintenance organizations have been in operation for 
at least thirty-six months. Such report shall contain findings— 
"(1) with respect to the ability of the organizations evaluated 
to operate on a fiscally sound basis without continued Federal 
financial assistance, 
"(2) with respect to the ability of such organizations to meet 
the requirements of section 1301(c) respecting their organization 
' a n d operation, 
" (3) with respect to the ability of such organizations to provide 
basic and supplemental health services in the manner prescribed 
by section 1301(b), 
" (4) with respect to the ability of such organizations to include 
indigent and high-risk individuals in their membership, and 
" (5) with respect to the ability of such organizations to provide 
services to medically underserved populations. 
Report to Con-
gress. 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
933 
" (b) The Comptroller General shall also conduct a study of the ^^^^y-
economic effects on employers resulting from their compliance with 
the requirements of section 1310. The Comptroller General shall report 
to the Congress the results of such study not later than thirty-six 
months after the date of the enactment of this title. 
•'(c) The Comptroller General shall evaluate (1) the operations ^bf 
Evaluation. 
distinct categories of health maintenance organizations in comparison 
with each other, (2) health maintenance organizations as a group in 
comparison with alternative forms of health care delivery, and (3) the 
impact that health maintenance organizations, individually, by cate-
gory, and as a group, have on the health of the public. The Comp- 
Report to con-
troller General shall report to the Congress the results of such ^''^^^^ 
evaluation not later than thirty-six months after the date of the enact-
ment of this title. 
"ANNUAL REPORT 
'*SEC. 1315. (a) The Secretary shall periodically review the pro- Review, report 
grams of assistance authorized by this title and make an annual report ° °"^''^^^' 
to the Congress of a summary of the activities under each program. 
The Secretary shall include in such summary— 
" (1) a summary of each grant, contract, loan, or loan guarantee 
made under this title in the period covered by the report and a 
list of the health maintenance organizations which during such 
period became qualified health maintenance organizations for 
purposes of section 1310; 
"(2) the statistics and other information reported in such 
period to the Secretary in accordance with section 1301(c) (11); 
"(3) findings with respect to the ability of the health main-
tenance organizations assisted under this title— 
" (A) to operate on a fiscally sound basis without continued 
Federal financial assistance, 
"(B) to meet the requirements of section 1301(c) respect-
ing their oi'ganization and operation, 
"(C) to provide basic and supplemental health services in 
the manner prescribed by section 1301 (b), 
"(D) to include indigent and high-risk individuals in their 
membership, and 
"(E) to provide services to medically underserved popula-
tions; and 
"(4) findings with respect to— 
"(A) the operation of distinct categories of health main-
tenance organizations in comparison with each other, 
"(B) health maintenance organizations as a group in com-
parison with alternative forms of health care delivery, and 
"(C) the impact that health maintenance organizations, 
individually, by category, and as a group, have on the health 
of the public. 
"(b) The Office of Management and Budget may review tlie Secre- 
Review. 
tary's report under subsection (a) before its submission to the Con-
gress, but the Office may not revise the report or delay its submission. 
and it may submit to the Congress its comments (and those of other „.^,°f™^'^*^i^''''" 
departments or agencies of the Government) respecting such report." mlttal to Con-
gress. 
QUALITY 
ASSURANCE 
SEC. 3. Title Til of the Public Health Service Act is amended by g/staues!^'' 
adding at the end thereof the following new part: 
42 use 2*41. 
934 
PUBLIC LAW 93-222-DEC. 29, 1973 
[87 STAT. 
Research and 
evaluation pro-
grams . 
81 Stat. 534. 
42 u s e 242b. 
Appropriation. 
Annual report 
to President and 
Congress. 
Review. 
Comments, sub-
mittal to Secretary 
of HEW and Con-
gress. 
" P A R T K — Q U A L I T Y AssuRAXtE 
"QUALITY ASSURANCE 
"SEC. 399C. (a) (1) The Secretary, through the Assistant Secretary 
for Health, shall conduct research and evaluation programs respecting 
the effectiveness, administration, and eiifoi'cement of quality assurance 
programs. Such research and evaluation programs shall be carried out 
in cooperation with the entity within the Department which adminis-
ters the programs of assistance under section 804. 
"(2) For the purpose of carrying out paragraph (1), there are 
authorized to be appropriated $4,000,000 for the fiscal year ending 
June 30, 1974, $8,000,000 for the fiscal year ending June 30, 1975, 
$9,000,000 for the fiscal year ending June 30, 1976, $9,000,000 for the 
fiscal year ending June 30, 1977, and $10,000,000 for the fiscal year 
ending June 30, 1978. 
"(b) The Secretary shall make an annual report to the Congress 
and the President on (1) the quality of health care in the United 
States, (2) the operation of quality assurance programs, and (3) 
advances made through reseai'ch and evaluation of the effectiveness, 
administration, and enforcement of quality assurance programs. The 
first annual report under this subsection shall be made with respect to 
calendar year 1974 and shall be submitted not later than March 1, 197;). 
The Office of Management and l^udget may review the Secretary's 
report under this subsection before its submission to the Congress, but 
the Office may not revise the report or delay its submission to the Con-
gress, and it may submit to the Secretary and the Congress its 
comments (and those of other departments and agencies of the Go\-
ernment) with resi)ect to such lepoit." 
Contract 
authority. 
Contract with 
nonprofit private 
organization. 
HEALTH CARE QUALITY ASSURANCE PROGRAMS STIT)Y 
SEC. 4. (a) The Seci-etary of Health, Education, and Welfare shall 
contract, in accordance with subsection (b), for the conduct of a study 
to— 
(1) analyze past and present mechanisms (both required by 
law and voluntary) to assure the quality of health care, identify 
the strengths and weaknesses of current major prototypes of 
health care quality assurance systems, and identify on a compa-
I'able basis the costs of such ])rototypes; 
(2) provide a set of basic principles to be followed by any 
effective health care quality assurance system, including principles 
affecting the scope of the system, methods for assessing care, data 
requirements, specifications for the development of criteria and 
standards which relate to desired outcomes of care, and means for 
assessing the responsiveness of such care to the needs and percep-
tions of the consumers of such care; 
(3) provide an assessment of programs for improving the per-
formance of health practitioners and institutions in providing 
high-quality health care, including a study of the effectiveness of 
sanctions and educational programs; 
(4) define the specific needs for a program of research and eval-
uation in health care quality assurance methods, including the 
design of prospective evaluations protocols for health care qual-
ity assurance systems; and 
(5) provide methods for assessing the quality of health care 
from the point of view of consumers of such care. 
(b) The Seci-etary shall contract for the conduct of the study 
required by subsection (a) with a nonprofit ])rivate organization 
which— 
87 STAT. ] 
PUBLIC LAW 93-222-DEC. 29, 1973 
935 
(1) has a national i-eputatiou for objectivity in the conduct of 
studies for the Federal (Tovei'innent; 
(2) has the capacity to readily marshall the widest })ossible 
range of expertise and advice relevant to the conduct of such 
study; 
(3) has a membership and competent staff which have back-
grounds in government, the health sciences, and the social sciences; 
(-t) lias a history of interest and activity in health policy issue;:! 
related to such study; and 
(5) has extensive existing contracts with interested public and 
private agencies and organizations. 
The Secretary shall enter into such contract within 90 days of the date 
of the enactment of the first Act making an appropriation under sub-
section (d). 
(c) An interim rei)ort i)roviding a plan for the study required bv 
Reports to con-
1 
• 
/ 
\ 
1 
11 I 
1 
• 
1 1 
ii 
' A - 
T 
i- 
J.1 ' 
gressional coni" 
subsection (a) shall be submitted by tlie organization conducting the mittees. 
study to the Committee on Interstate and Foreign Commerce of the 
House of Representatives and the Committee on Labor and Public 
Welfare of the Senate by June 30, 1974; and a final report giving the 
results of the study and providing specifications for an effective qual-
ity assurance system shall be submitted by such organization to the 
Committee on Interstate and Foreign Commerce of the House of Rep-
resentatives and the Committee on Labor and Public Welfare of the 
Senateby January 31,1976. 
. 
(d) There is authorized to be appropriated $10,000,000. which shall 
Appropriation. 
be available without fiscal year limitation, for the conduct of the study 
required by subsection (a). 
liKPOirrS HKSrKCTlXa 
M E D I C A L L Y rXDKKSKHVKD AREAS AND 
I'OPILATION 
(JKOUl'S AND XON-MKTKOPOLITAX AREAS 
SEC. 5. Within three months of the date of the enactment of this ^esT"'*^ *° ^'°"" 
Act. the Secretary of Health, Education, and Welfare shall report to 
the Congress the criteria used by him in the designation of medically 
underserved areas and ])opulation groups for the purposes of section 
1302(7) of the Public Health Service Act. AVithin one year of such 
^"'^' P- ^^'• 
date, the Secretary shall report to the Congress (1) the areas and popu-
lation groups designated by him under such section 1302(7) as having 
a shortage of personal health services. (2) the comments (if any) 
submitted by State and areawide comprehensive health planning agen-
cies under such section with i-espect to any such designation, and (3) 
the areas which meet the definitional standards under section 1302(9) 
of such Act for non-metroi)olitan areas. The Office of Management 
Review, 
and l^udget nuiy review the Secretai-y's report under this section 
before its submission to the Congi-ess. but the Office may not revise the 
leport or delay its submission Ix^yond the date prescribed for its sub-
mission, and it may submit to Congress its comments (and those of 
comments, sub-
other departments and agencies of the (lovei-nment) respecting such 
ivpoi-t. 
mittal to Con-
gress. 
IIEALTir SERVICES FOR IXDIAXS AXD DOINIESTlC AORICULTVI^AL 
MKJRATORY AXD SEASONAL WORKERS 
SEC. (). (a) The first section of the Act of August 5,1954 (42 I'.S.C. 
2001), is amended by inserting " ( a ) " after "That" and by adding at 
^8 stat. 674. 
the end thereof the following new subsection : 
•'(b) In can-ying out his functions, responsibilities, authoiities. and 
<luties under this Act. the Secretai-y is authorized. Avith the consent 
of the Indian people sei'ved, to contract with i)i'ivate or other non-
76 Stat. 592; 
84 Stat. 52 
936 
PUBLIC LAW 93-223-DEC. 29, 1973 
[87 STAT. 
Federal health agencies or organizations for the provision of health 
services to such people on a fee-for-service basis or on a prepayment 
or other similar basis.". 
(b) The Secretary of Health, Education, and Welfare, in connec-
tion with existing authority (except section,810 of the Public Healtli 
Service Act) for the provision of health services to domestic agricul-
42 use 2'42h. 
tural migratory workers, to persons who j^erform seasonal agricultural 
services similar to the services performed by such workers, and to the 
families of such workers and persons, is authorized to arrange for the 
provision of health services to such workers and persons and tlieir 
families through health maintenance organizations. In carrying out 
this subsection the Secretary may only use sums appropriated after 
the date of the enactment of this Act. 
CONP^ORMING AMENDMENTS 
86^stat?\"3^7^^' 
^^^'- '''• ^'^) Sectlou 1 of the Public Health Service Act is amended 
42 use 2o'i 
to read as follows: 
note. 
"SHORT TITLE 
"SECTION 1. This Act may be cited as the 'Public Health Service 
Act'." 
(b) Title X I I I of the Act of July 1, 1944 (58 Stat. 682) (as so 
designated by section 2(b) of the Emergency Medical Services Sys-
tems Act of 1973 (Public Law 98-154)) is repealed. 
(c) Section 806(g) of the Federal National Mortgage Association 
82 Stat. 542. 
Act (12 U.S.C. 1721(g)) Is amended by inserting ", or which are 
guaranteed under title X I I I of the Pubic Health Service Act" after 
"chapter 87 of title 88, United States Code". 
Approved December 29, 1973. 
Repeal. 
Ante, p. 604 
38 u s e 1801. 
Public Law 93-223 
December 29, 1973 
A N A C T 
. : ! 
i_ To amend the District of Columbia Minimum Wage Act so as to enable airline 
employees to exchange days at regular rates of compensation, and for other 
purposes. 
D.c. 
Airline employ-
e e it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assenihled, That section 4(b) 
ee'sTworkdays""' 
of the Dlstrlct of Columbia Minimum Wage Act (D.C. Code, sec. 36-
^''s^'o^Ttlt • 964 • 
^^^ ('^)) ^^ amended by: 
84 Stat. 1938;' 
(1) Striking the word "or" following the semicolon in subpara-
85 Stat. 658. 
g r a p h ( 4 ) ; 
(2) striking the period at the end of subparagraph (5) and 
inserting in lieu thereof "; or"; 
(3) inserting after subparagraph (5) the following new sub-
paragraph : 
"(6) any employee employed by a carrier by air who volun-
tarily exchanges workdays with another employee for the pri-
mary purpose of utilizing air travel benefits available to such 
employees.". 
Approved December 29, 1973.