[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3046 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 3046

 To amend title XVIII of the Social Security Act to provide regulatory 
relief, appeals process reforms, contracting flexibility, and education 
    improvements under the Medicare Program, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 4, 2001

Mr. Toomey (for himself, Ms. Berkley, Mr. Bilirakis, Mr. Brown of Ohio, 
Mr. Tauzin, Mr. Dingell, Mr. Norwood, Mr. Hall of Texas, Mr. Greenwood, 
  Mr. Pallone, Mr. Upton, Mrs. Capps, Mr. Burr of North Carolina, Mr. 
Strickland, Mr. Buyer, Mr. Waxman, Mr. Deal of Georgia, Mr. Barrett of 
   Wisconsin, Mr. Whitfield, Mr. Stupak, Mr. Bryant, Mr. Towns, Mr. 
Pickering, Mr. Deutsch, Mr. Ehrlich, Mr. Wynn, Mr. Barton of Texas, Mr. 
 Green of Texas, Mr. Baker, and Mr. Cooksey) introduced the following 
  bill; which was referred to the Committee on Ways and Means, and in 
addition to the Committee on Energy and Commerce, for a period of time 
    to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend title XVIII of the Social Security Act to provide regulatory 
relief, appeals process reforms, contracting flexibility, and education 
    improvements under the Medicare Program, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; TABLE OF 
              CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Regulatory, Appeals, Contracting, and Education Reform Act of 2001''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) BIPA.--In this Act, the term ``BIPA'' means the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, as 
enacted into law by section 1(a)(6) of Public Law 106-554.
    (d) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendments to Social Security Act; table of 
                            contents.
Sec. 2. Findings.
Sec. 3. Construction.
                       TITLE I--REGULATORY REFORM

Sec. 101. Issuance of regulations.
Sec. 102. Compliance with changes in regulations and policies.
Sec. 103. Report on regulatory burdens.
Sec. 104. Report on the sustainable growth rate and regulatory costs.
                    TITLE II--APPEALS PROCESS REFORM

Sec. 201. Transfer of responsibility for medicare appeals.
Sec. 202. Expedited access to judicial review.
Sec. 203. Expedited review of certain provider agreement 
                            determinations.
Sec. 204. Revisions to medicare appeals process.
Sec. 205. Hearing rights related to decisions by the Secretary to deny 
                            or not renew a medicare enrollment 
                            agreement; consultation before changing 
                            provider enrollment forms.
Sec. 206. Appeals by providers when there is no other party available.
                     TITLE III--CONTRACTING REFORM

Sec. 301. Increased flexibility in medicare administration.
Sec. 302. Requirements for information security.
             TITLE IV--EDUCATION AND OUTREACH IMPROVEMENTS

Sec. 401. Provider education and technical assistance.
Sec. 402. Access to and prompt responses from medicare administrative 
                            contractors.
Sec. 403. Reliance on guidance.
Sec. 404. Facilitation of consistent information to providers.
Sec. 405. Policy development regarding evaluation and management (E & 
                            M) documentation guidelines.
Sec. 406. Beneficiary outreach demonstration program.
           TITLE V--REVIEW, RECOVERY, AND ENFORCEMENT REFORM

Sec. 501. Prepayment review.
Sec. 502. Recovery of overpayments.
Sec. 503. Process for correction of incomplete or missing data without 
                            pursuing appeals process.
Sec. 504. Authority to waive a program exclusion.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The overwhelming majority of providers of services, 
        physicians, practitioners, and suppliers in the United States 
        are law-abiding persons who provide important health care 
        services to patients each day.
            (2) The Secretary of Health and Human Services should work 
        to streamline paperwork requirements under the medicare program 
        and communicate clearer instructions to providers of services, 
        physicians, practitioners, and suppliers so that they may spend 
        more time caring for patients.

SEC. 3. CONSTRUCTION.

    (a) No Effect on Legal Authority.--Nothing in this Act shall be 
construed to compromise or affect existing legal authority for 
addressing fraud or abuse, whether it be criminal prosecution, civil 
enforcement, or administrative remedies, including under sections 3729 
through 3733 of title 31, United States Code (known as the False Claims 
Act).
    (b) No Effect on Medicare Waste, Fraud, and Abuse Efforts.--Nothing 
in this Act shall be construed to prevent or impede the Department of 
Health and Human Services in any way from its ongoing efforts to 
eliminate waste, fraud, and abuse in the medicare program.
    (c) Clarification Related to Medicare Trust Funds.--The 
consolidation of medicare administrative contracting set forth in this 
Act does not constitute (or reflect any position on the issue of) 
consolidation of the Federal Hospital Insurance Trust Fund and the 
Federal Supplementary Medical Insurance Trust Fund.

                       TITLE I--REGULATORY REFORM

SEC. 101. ISSUANCE OF REGULATIONS.

    (a) Consolidation of Promulgation to Once a Month.--
            (1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended 
        by adding at the end the following new subsection:
    ``(d)(1) Subject to paragraph (2), the Secretary shall issue 
proposed or final (including interim final) regulations to carry out 
this title only on one business day of every month.
    ``(2) The Secretary may issue a proposed or final regulation 
described in paragraph (1) on any other day than the day described in 
paragraph (1) if the Secretary--
            ``(A) finds that issuance of such regulation on another day 
        is necessary to comply with requirements under law; or
            ``(B) finds that with respect to that regulation the 
        limitation of issuance on the date described in paragraph (1) 
        is contrary to the public interest.
If the Secretary makes a finding under this paragraph, the Secretary 
shall include such finding, and brief statement of the reasons for such 
finding, in the issuance of such regulation.''.
            (2) Report on publication of regulations on a quarterly 
        basis.--Not later than 3 years after the date of the enactment 
        of this Act, the Secretary of Health and Human Services (in 
        this Act referred to as the ``Secretary'') shall submit to 
        Congress a report on the feasibility of requiring that 
        regulations described in section 1871(d) of the Social Security 
        Act only be promulgated on a single day every calendar quarter.
            (3) Effective date.--The amendment made by paragraph (1) 
        shall apply to regulations promulgated on or after the date 
        that is 30 days after the date of the enactment of this Act.
    (b) Regular Timeline for Publication of Final Regulations.--
            (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is 
        amended by adding at the end the following new paragraph:
    ``(3)(A) The Secretary, in consultation with the Director of the 
Office of Management and Budget, shall establish a regular timeline for 
the publication of final regulations based on the previous publication 
of a proposed regulation or an interim final regulation.
    ``(B) With respect to publication of final regulations based on the 
previous publication of a proposed regulation, such timeline may vary 
among different regulations based on differences in the complexity of 
the regulation, the number and scope of comments received, and other 
relevant factors.
    ``(C)(i) With respect to the publication of final regulations based 
on the previous publication of an interim final regulation--
            ``(I) subject to clause (ii), the Secretary shall publish 
        the final regulation within the 12-month period that begins on 
        the date of publication of the interim final regulation;
            ``(II) if a final regulation is not published by the 
        deadline established under this subparagraph, the interim final 
        regulation shall not continue in effect unless the Secretary 
        publishes a notice described in clause (ii) by such deadline; 
        and
            ``(III) the final regulation shall include responses to 
        comments submitted in response to the interim final regulation.
    ``(ii) If the Secretary determines before the deadline otherwise 
established in this subparagraph that there is good cause, specified in 
a notice published before such deadline, for delaying the deadline 
otherwise applicable under this subparagraph, the deadline otherwise 
established under this subparagraph shall be extended for such period 
as the Secretary specifies in such notice.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act. The 
        Secretary of Health and Human Services shall provide for an 
        appropriate transition to take into account the backlog of 
        previously published interim final regulations.
    (c) Limitations on New Matter in Final Regulations.--
            (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as 
        amended by subsection (b), is further amended by adding at the 
        end the following new paragraph:
            ``(4) Insofar as a final regulation (other than an interim 
        final regulation) includes a provision that is not a logical 
        outgrowth of the relevant notice of proposed rulemaking 
        relating to such regulation, that provision shall be treated as 
        a proposed regulation and shall not take effect until there is 
        the further opportunity for public comment and a publication of 
        the provision again as a final regulation.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to final regulations published on or after the date 
        of the enactment of this Act.

SEC. 102. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES.

    (a) No Retroactive Application of Substantive Changes.--
            (1) In general.--Section 1871 (42 U.S.C. 1395hh), as 
        amended by section 101(a), is amended by adding at the end the 
        following new subsection:
    ``(e)(1)(A) A substantive change in regulations, manual 
instructions, interpretative rules, statements of policy, or guidelines 
of general applicability under this title shall not be applied (by 
extrapolation or otherwise) retroactively to items and services 
furnished before the effective date of the change, unless the Secretary 
determines that--
            ``(i) such retroactive application is necessary to comply 
        with statutory requirements; or
            ``(ii) failure to apply the change retroactively would be 
        contrary to the public interest.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to substantive changes issued on or after the date 
        of the enactment of this Act.
    (b) Timeline for Compliance With Substantive Changes After 
Notice.--
            (1) In general.--Section 1871(e)(1), as added by subsection 
        (a), is further amended by adding at the end the following:
    ``(B) A compliance action may be made against a provider of 
services, physician, practitioner, or other supplier with respect to 
noncompliance with such a substantive change only for items and 
services furnished on or after the effective date of the change.
    ``(C)(i) Except as provided in clause (ii), a substantive change 
may not take effect until not earlier than the date that is the end of 
the 30-day period that begins on the date that the Secretary has issued 
or published, as the case may be, the substantive change.
    ``(ii) The Secretary may provide for a substantive change to take 
effect on a date the precedes the end of the 30-day period under clause 
(i) if the Secretary finds that waiver of such 30-day period is 
necessary to comply with statutory requirements or that the application 
of such 30-day period is contrary to the public interest. If the 
Secretary provides for an earlier effective date pursuant to this 
clause, the Secretary shall include in the issuance or publication of 
the substantive change a finding described in the first sentence, and a 
brief statement of the reasons for such finding.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to compliance actions undertaken on or after the 
        date of the enactment of this Act.

SEC. 103. REPORT ON REGULATORY BURDENS.

    Section 1871 (42 U.S.C. 1395hh), as amended by sections 101(a) and 
102, is amended by adding at the end the following new subsection:
    ``(f)(1) Not later than 2 years after the date of the enactment of 
this subsection, and every 2 years thereafter, the Secretary shall 
submit to Congress a report with respect to the administration of this 
title and areas of inconsistency or conflict among the various 
provisions under law and regulation.
    ``(2) In preparing a report under paragraph (1), the Secretary 
shall collect--
            ``(A) information from beneficiaries, providers of 
        services, physicians, practitioners, and other suppliers, and 
        from the individual under section 404 of the Medicare 
        Regulatory, Appeals, Contracting, and Education Reform Act of 
        2001 with respect to such areas of inconsistency and conflict; 
        and
            ``(B) information from medicare contractors that tracks the 
        nature of written and telephones inquiries.
    ``(3) A report under paragraph (1) shall include a description of 
efforts by the Secretary to reduce such inconsistency or conflicts, and 
recommendations for legislation or administrative action that the 
Secretary determines appropriate to further reduce such inconsistency 
or conflicts.''.

SEC. 104. REPORT ON THE SUSTAINABLE GROWTH RATE AND REGULATORY COSTS.

    Not later than 18 months after the date of the enactment of this 
Act, the Comptroller General of the United States shall submit to 
Congress a report on the accuracy of the sustainable growth rate (under 
section 1848(f) of the Social Security Act, 42 U.S.C. 1395w-4(f)) in 
accounting for regulatory costs.

                    TITLE II--APPEALS PROCESS REFORM

SEC. 201. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

    (a) Designation of Medicare-Only Administrative Law Judges.--The 
Commissioner of Social Security shall designate, not later than 60 days 
after the date of the enactment of this Act, certain administrative law 
judges of the Social Security Administration whose duties to hear and 
decide appeals shall be limited to those appeals arising under title 
XVIII of the Social Security Act, including under section 1869 of such 
Act (as amended by section 521 of BIPA, 114 Stat. 2763A-534). The 
Commissioner shall only provide for the assignment of such appeals to 
the judges so designated.
    (b) Medicare-Specific Training.--Not later than 60 days after the 
date on which the Commissioner of Social Security designates 
administrative law judges under subsection (a), the Secretary of Health 
and Human Services shall provide for appropriate education and training 
of those judges with respect to appeals under the medicare program. 
Such education and training shall be furnished not less frequently than 
annually, and shall be updated as the Secretary determines appropriate.
    (c) Transition Plan.--
            (1) In general.--Not later than October 1, 2002, the 
        Commissioner of Social Security and the Secretary of Health and 
        Human Services shall develop and transmit to Congress a plan 
        under which administrative law judges responsible solely for 
        hearing appeals described in subsection (a)(1) are transferred 
        from the responsibility of the Commissioner and the Social 
        Security Administration to the Secretary and the Department of 
        Health and Human Services.
            (2) Contents.--The plan shall include information on the 
        following:
                    (A) Workload.--The number of such administrative 
                law judges and support staff required now and in the 
                future to hear and decide such cases in a timely 
                manner, taking into account the current and anticipated 
                claims volume, appeals, number of beneficiaries, and 
                statutory changes.
                    (B) Cost projections.--Funding levels required for 
                fiscal year 2004 and subsequent fiscal years under this 
                subsection to hear such cases in a timely manner.
                    (C) Transition timetable.--A timetable for the 
                transition.
                    (D) Regulations.--The establishment of specific 
                regulations to govern the appeals process.
                    (E) Case tracking.--The development of a unified 
                case tracking system that will facilitate the 
                maintenance and transfer of case specific data across 
                both the fee-for-service and managed care components of 
                the medicare program.
                    (F) Feasibility of precedential authority.--The 
                feasibility of developing a process to give decisions 
                of the Departmental Appeals Board in the Department of 
                Health and Human Services addressing broad legal issues 
                binding, precedential authority.
                    (G) Access to administrative law judges.--The 
                feasibility of filing appeals with administrative law 
                judges electronically, and the feasibility of 
                conducting hearings using tele- or video-conference 
                technologies.
            (3) Additional information.--The plan may also include 
        recommendations for further Congressional action, including 
        modifications to the requirements and deadlines established 
        under section 1869 of the Social Security Act (as amended by 
        sections 521 and 522 of BIPA, 114 Stat. 2763A-534).
    (d) Transfer of Adjudication Authority.--
            (1) In general.--Not later than October 1, 2003, the 
        Commissioner of Social Security and the Secretary shall provide 
        for the transfer of responsibility for the administrative law 
        judges designated under subsection (a) (and responsibilities of 
        such judges) from the Social Security Administration to the 
        Secretary of Health and Human Services.
            (2) Assuring independence of judges.--The Secretary shall 
        effect such transfer in a manner that assures the independence 
        of such judges from the Centers for Medicare & Medicaid 
        Services and its contractors.
            (3) Geographic distribution.--The Secretary shall provide 
        for an appropriate geographic distribution of such judges 
        throughout the United States to ensure timely access to such 
        judges.
            (4) Hiring authority.--Subject to the amounts provided in 
        advance in appropriations Act, the Secretary shall have 
        authority to hire additional administrative law judges to hear 
        such cases, giving priority to those judges with prior 
        experience in handling medicare appeals and in a manner 
        consistent with paragraph (3), and to hire support staff for 
        such judges.
            (5) Financing.--Amounts payable under law to the 
        Commissioner for such judges from the Federal Hospital 
        Insurance Trust Fund and the Federal Supplementary Medical 
        Insurance Trust Fund shall become payable to the Secretary for 
        the judges so transferred.
            (6) Shared office space.--The Secretary shall enter into 
        such arrangements with the Commissioner as may be appropriate 
        for transferred administrative law judges to share office 
        space, support staff, and other resources, with appropriate 
        reimbursement from the Trust Funds described in paragraph (5).
    (e) Increased Financial Support.--In addition to any amounts 
otherwise appropriated, to ensure timely action on appeals before 
administrative law judges consistent with section 1869 of the Social 
Security Act (as amended by section 521 of BIPA, 114 Stat. 2763A-534), 
there are authorized to be appropriated (in appropriate part from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund) to the Secretary to increase the number 
of administrative law judges (and their staffs) under subsection (d)(4) 
and to improve education and training opportunities for administrative 
law judges (and their staffs), such sums as are necessary for fiscal 
year 2003 and each subsequent fiscal year.

SEC. 202. EXPEDITED ACCESS TO JUDICIAL REVIEW.

    (a) In General.--Section 1869(b) (42 U.S.C. 1395ff(b)), as amended 
by section 521 of BIPA, 114 Stat. 2763A-534, is amended--
            (1) in paragraph (1)(A), by inserting ``, subject to 
        paragraph (2),'' before ``to judicial review of the Secretary's 
        final decision''; and
            (2) by adding at the end the following new paragraph:
            ``(2) Expedited access to judicial review.--
                    ``(A) In general.--The Secretary shall establish a 
                process under which a provider of service or supplier 
                that furnishes an item or service or a beneficiary who 
                has filed an appeal under paragraph (1) (other than an 
                appeal filed under paragraph (1)(F)) may obtain access 
                to judicial review when a review panel (described in 
                subparagraph (D)), on its own motion or at the request 
                of the appellant, determines that the Departmental 
                Appeals Board does not have the authority to decide the 
                question of law or regulation relevant to the matters 
                in controversy and that there is no material issue of 
                fact in dispute. The appellant may make such request 
                only once with respect to a question of law or 
                regulation for a specific matter in dispute in a case 
                of an appeal.
                    ``(B) Prompt determinations.--If, after or 
                coincident with appropriately filing a request for an 
                administrative hearing, the appellant requests a 
                determination by the appropriate review panel that the 
                Departmental Appeals Board does not have the authority 
                to decide the question of law or regulations relevant 
                to the matters in controversy and that there is no 
                material issue of fact in dispute and if such request 
                is accompanied by the documents and materials as the 
                appropriate review panel shall require for purposes of 
                making such determination, such review panel shall make 
                a determination on the request in writing within 60 
                days after the date such review panel receives the 
                request and such accompanying documents and materials. 
                Such a determination by such review panel shall be 
                considered a final decision and not subject to review 
                by the Secretary.
                    ``(C) Access to judicial review.--
                            ``(i) In general.--If the appropriate 
                        review panel--
                                    ``(I) determines that there are no 
                                material issues of fact in dispute and 
                                that the only issue is one of law or 
                                regulation that the Departmental 
                                Appeals Board does not have authority 
                                to decide; or
                                    ``(II) fails to make such 
                                determination within the period 
                                provided under subparagraph (B);
                        then the appellant may bring a civil action as 
                        described in this subparagraph.
                            ``(ii) Deadline for filing.--Such action 
                        shall be filed, in the case described in--
                                    ``(I) clause (i)(I), within 60 days 
                                of date of the determination described 
                                in such subparagraph; or
                                    ``(II) clause (i)(II), within 60 
                                days of the end of the period provided 
                                under subparagraph (B) for the 
                                determination.
                            ``(iii) Venue.--Such action shall be 
                        brought in the district court of the United 
                        States for the judicial district in which the 
                        appellant is located (or, in the case of an 
                        action brought jointly by more than one 
                        applicant, the judicial district in which the 
                        greatest number of applicants are located) or 
                        in the district court for the District of 
                        Columbia.
                            ``(iv) Interest on any amounts in 
                        controversy.--Where a provider of services or 
                        supplier seeks judicial review pursuant to this 
                        paragraph, the amount in controversy (if any) 
                        shall be subject to annual interest beginning 
                        on the first day of the first month beginning 
                        after the 60-day period as determined pursuant 
                        to clause (ii) and equal to the rate of 
                        interest on obligations issued for purchase by 
                        the Federal Supplementary Medical Insurance 
                        Trust Fund for the month in which the civil 
                        action authorized under this paragraph is 
                        commenced, to be awarded by the reviewing court 
                        in favor of the prevailing party. No interest 
                        awarded pursuant to the preceding sentence 
                        shall be deemed income or cost for the purposes 
                        of determining reimbursement due providers of 
                        services, physicians, practitioners, and other 
                        suppliers under this Act.
                    ``(D) Review panel defined.--For purposes of this 
                subsection, a `review panel' is a panel of 3 members 
                from the Departmental Appeals Board, selected for the 
                purpose of making determinations under this 
                paragraph.''.
    (b) Application to Provider Agreement Determinations.--Section 
1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
            (1) by inserting ``(A)'' after ``(h)(1)''; and
            (2) by adding at the end the following new subparagraph:
    ``(B) An institution or agency described in subparagraph (A) that 
has filed for a hearing under subparagraph (A) shall have expedited 
access to judicial review under this subparagraph in the same manner as 
providers of services, suppliers, and beneficiaries may obtain 
expedited access to judicial review under the process established under 
section 1869(b)(2). Nothing in this subparagraph shall be construed to 
affect the application of any remedy imposed under section 1819 during 
the pendency of an appeal under this subparagraph.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to appeals filed on or after October 1, 2003.

SEC. 203. EXPEDITED REVIEW OF CERTAIN PROVIDER AGREEMENT 
              DETERMINATIONS.

    (a) Termination and Immediate Sanctions.--The Secretary shall 
develop and implement a process to expedite proceedings under sections 
1866(h) of the Social Security Act (42 U.S.C. 1395cc(h)) in which the 
sanction of termination of participation or a sanction described in 
clause (i) or (iii) of section 1819(h)(2)(B) of such Act (42 U.S.C. 
1395i-3(h)(2)(B)) has been imposed. Under such process priority shall 
be provided in cases of termination.
    (b) Increased Financial Support.--In addition to any amounts 
otherwise appropriated, to reduce by 50 percent the average time for 
administrative determinations on appeals under section 1866(h) of the 
Social Security Act (42 U.S.C. 1395cc(h)), there are authorized to be 
appropriated (in appropriate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund) 
to the Secretary such additional sums such sums for fiscal year 2003 
and each subsequent fiscal year as may be necessary to increase the 
number of administrative law judges (and their staffs) at the 
Departmental Appeals Board of the Department of Health and Human 
Services and to educate such judges and staff on long-term care issues.

SEC. 204. REVISIONS TO MEDICARE APPEALS PROCESS.

    (a) Timeframes for the Completion of the Record.--Section 1869(b) 
(42 U.S.C. 1395ff(b)), as amended by section 521 of BIPA, 114 Stat. 
2763A-534, and as amended in section 202(a), is further amended by 
adding at the end the following new paragraph:
            ``(3) Timely submission of evidence.--
                    ``(A) Deadline for submission of evidence.--The 
                deadline to complete the record in an appeal is 90 days 
                after the date the request for appeal is filed. The 
                appellant in such an appeal may request an extension of 
                such deadline for good cause. The adjudicator may 
                extend such deadline based upon a finding of good cause 
                to a date specified by the adjudicator.
                    ``(B) Delay in decision deadlines until completion 
                of record.--Notwithstanding any other provision of this 
                section, the deadlines otherwise established for the 
                making of determination by adjudicators under this 
                section shall be tolled during time period between the 
                date of the filing of the request for appeal and the 
                date on which the record is complete.
                    ``(C) Adjudicator defined.--For purposes of this 
                paragraph, the term `adjudicator' means a qualified 
                independent contractor under subsection (c), an 
                administrative law judge, or an administrative appeals 
                judge under the Departmental Appeals Board.''.
    (b) Use of Patients' Medical Records.--Section 1869(c)(3)(B)(i) (42 
U.S.C. 1395ff(c)(3)(B)(i)) is amended by inserting ``(including the 
medical records of the individual involved)'' after ``clinical 
experience''.
    (c) Notice Requirements for Medicare Appeals.--
            (1) Initial determinations and redeterminations.--Section 
        1869(a) (42 U.S.C. 1395ff(a)) is amended by adding at the end 
        the following new paragraph:
            ``(4) Requirements of notice of determinations and 
        redeterminations.--A written notice of a determination on an 
        initial determination or on a redetermination, insofar as such 
        determination or redetermination results in a denial of a claim 
        for benefits, shall be provided in printed form and written in 
        a manner calculated to be understood by the beneficiary and 
        shall include--
                    ``(A) the specific reasons for the determination 
                (including, as appropriate, a summary of the clinical 
                or scientific evidence used in making the 
                determination);
                    ``(B) the procedures for obtaining additional 
                information concerning the determination or 
                redetermination; and
                    ``(C) notification of the right to seek a 
                redetermination or otherwise appeal the determination 
                and instructions on how to initiate such a 
                redetermination or appeal under this section.''.
            (2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C. 
        1395ff(c)(3)(E)) is amended--
                    (A) by inserting ``be written in a manner 
                calculated to be understood by the beneficiary, and 
                shall include (to the extent appropriate)'' after ``in 
                writing, ''; and
                    (B) by inserting ``and a notification of the right 
                to appeal such determination and instructions on how to 
                initiate such appeal under this section'' after ``such 
                decision, ''.
            (3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)) is 
        amended--
                    (A) in the heading, by inserting ``; Notice'' after 
                ``Secretary''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(4) Notice.--Notice of the decision of an administrative 
        law judge shall be in writing in a manner calculated to be 
        understood by the beneficiary and shall include--
                    ``(A) the specific reasons for the determination 
                (including, to the extent appropriate, a summary of the 
                clinical or scientific evidence used in making the 
                determination);
                    ``(B) the procedures for obtaining additional 
                information concerning the decision; and
                    ``(C) notification of the right to appeal the 
                decision and instructions on how to initiate such an 
                appeal under this section.''.
            (4) Preparation of record for appeal.--Section 
        1869(c)(3)(J) (42 U.S.C. 1395ff(c)(3)(J)) by striking ``such 
        information as is required for an appeal'' and inserting ``the 
        record for the appeal''.
    (d) Qualified Independent Contractors.--
            (1) Eligibility requirements of qualified independent 
        contractors.--Section 1869(c) (42 U.S.C. 1395ff(c)) is 
        amended--
                    (A) in paragraph (2)--
                            (i) by inserting ``(except in the case of a 
                        utilization and quality control peer review 
                        organization, as defined in section 1152)'' 
                        after ``means an entity or organization that''; 
                        and
                            (ii) by striking the period at the end and 
                        inserting the following: ``and meets the 
                        following requirements:
                    ``(A) General requirements.--
                            ``(i) The entity or organization has 
                        (directly or through contracts or other 
                        arrangements) sufficient medical, legal, and 
                        other expertise (including knowledge of the 
                        program under this title) and sufficient 
                        staffing to carry out duties of a qualified 
                        independent contractor under this section on a 
                        timely basis.
                            ``(ii) The entity or organization has 
                        provided assurances that it will conduct 
                        activities consistent with the applicable 
                        requirements of this section, including that it 
                        will not conduct any activities in a case 
                        unless the independence requirements of 
                        subparagraph (B) are met with respect to the 
                        case.
                            ``(iii) The entity or organization meets 
                        such other requirements as the appropriate 
                        Secretary provides by regulation.
                    ``(B) Independence requirements.--
                            ``(i) In general.--Subject to clause (ii), 
                        an entity or organization meets the 
                        independence requirements of this subparagraph 
                        with respect to any case if the entity--
                                    ``(I) is not a related party (as 
                                defined in subsection (g)(5));
                                    ``(II) does not have a material 
                                familial, financial, or professional 
                                relationship with such a party in 
                                relation to such case; and
                                    ``(III) does not otherwise have a 
                                conflict of interest with such a party 
                                (as determined under regulations).
                            ``(ii) Exception for reasonable 
                        compensation.--Nothing in clause (i) shall be 
                        construed to prohibit receipt by a qualified 
                        independent contractor of compensation from the 
                        Secretary for the conduct of activities under 
                        this section if the compensation is provided 
                        consistent with clause (iii).
                            ``(iii) Limitations on entity 
                        compensation.--Compensation provided by the 
                        Secretary to a qualified independent contractor 
                        in connection with reviews under this section 
                        shall--
                                    ``(I) not exceed a reasonable 
                                level; and
                                    ``(II) not be contingent on any 
                                decision rendered by the contractor or 
                                by any reviewing professional.''; and
                    (B) in paragraph (3)(A), by striking ``, and shall 
                have sufficient training and expertise in medical 
                science and legal matters to make reconsiderations 
                under this subsection''.
            (2) Eligibility requirements for reviewers.--Section 1869 
        (42 U.S.C. 1395ff) is amended--
                    (A) by amending subsection (c)(3)(D) to read as 
                follows:
                    ``(D) Qualifications for reviewers.--The 
                requirements of subsection (g) shall be met (relating 
                to qualifications of reviewing professionals).''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(g) Qualifications of Reviewers.--
            ``(1) In general.--In reviewing determinations under this 
        section, a qualified independent contractor shall assure that--
                    ``(A) each individual conducting a review shall 
                meet the qualifications of paragraph (2);
                    ``(B) compensation provided by the contractor to 
                each such reviewer is consistent with paragraph (3); 
                and
                    ``(C) in the case of a review by a panel described 
                in subsection (c)(3)(B) composed of physicians or other 
                health care professionals (each in this subsection 
                referred to as a `reviewing professional'), each 
                reviewing professional meets the qualifications 
                described in paragraph (4).
            ``(2) Independence.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each individual conducting a review in a case shall--
                            ``(i) not be a related party (as defined in 
                        paragraph (5));
                            ``(ii) not have a material familial, 
                        financial, or professional relationship with 
                        such a party in the case under review; and
                            ``(iii) not otherwise have a conflict of 
                        interest with such a party (as determined under 
                        regulations).
                    ``(B) Exception.--Nothing in subparagraph (A) shall 
                be construed to--
                            ``(i) prohibit an individual, solely on the 
                        basis of affiliation with a fiscal 
                        intermediary, carrier, or other contractor, 
                        from serving as an reviewing professional if--
                                    ``(I) a non-affiliated individual 
                                is not reasonably available;
                                    ``(II) the affiliated individual is 
                                not involved in the provision of items 
                                or services in the case under review;
                                    ``(III) the fact of such an 
                                affiliation is disclosed to the 
                                Secretary and the beneficiary (or 
                                authorized representative) and neither 
                                party objects; and
                                    ``(IV) the affiliated individual is 
                                not an employee of the intermediary, 
                                carrier, or contractor and does not 
                                provide services exclusively or 
                                primarily to or on behalf of such 
                                intermediary, carrier, or contractor;
                            ``(ii) prohibit an individual who has staff 
                        privileges at the institution where the 
                        treatment involved takes place from serving as 
                        a reviewer merely on the basis of such 
                        affiliation if the affiliation is disclosed to 
                        the Secretary and the beneficiary (or 
                        authorized representative), and neither party 
                        objects; or
                            ``(iii) prohibit receipt of compensation by 
                        a reviewing professional from a contractor if 
                        the compensation is provided consistent with 
                        paragraph (3).
            ``(3) Limitations on reviewer compensation.--Compensation 
        provided by a qualified independent contractor to a reviewer in 
        connection with a review under this section shall--
                    ``(A) not exceed a reasonable level; and
                    ``(B) not be contingent on the decision rendered by 
                the reviewer.
            ``(4) Licensure and expertise.--Each reviewing professional 
        shall be a physician (allopathic or osteopathic) or health care 
        professional who--
                    ``(A) is appropriately credentialed or licensed in 
                1 or more States to deliver health care services; and
                    ``(B) typically treats the condition, makes the 
                diagnosis, or provides the type of treatment under 
                review.
            ``(5) Related party defined.--For purposes of this section, 
        the term `related party' means, with respect to a case under 
        this title involving an individual beneficiary, any of the 
        following:
                    ``(A) The Secretary, the fiscal intermediary or 
                carrier involved, or any fiduciary, officer, director, 
                or employee of the Department of Health and Human 
                Services, or of such intermediary or carrier.
                    ``(B) The individual (or authorized 
                representative).
                    ``(C) The health care professional that provides 
                the items or services involved in the case.
                    ``(D) The institution at which the items or 
                services (or treatment) involved in the case are 
                provided.
                    ``(E) The manufacturer of any drug or other item 
                that is included in the items or services involved in 
                the case.
                    ``(F) Any other party determined under any 
                regulations to have a substantial interest in the case 
                involved.''.
    (e) Implementation of Certain BIPA Reforms.--
            (1) Section 521 of BIPA (114 Stat. 2763A-543) is amended--
                    (A) in subsection (c), by striking ``and (4)'' and 
                inserting ``(4), and (5)'';
                    (B) in subsection (d), by striking ``October 1, 
                2002'' and inserting ``October 1, 2003''; and
                    (C) by adding at the end the following new 
                subsection:
    ``(e) Use of PRO Process for Termination and Discharges During 
Transition Period.--
            ``(1) In general.--In the case of an individual who 
        receives a notice of termination or discharge described in 
        subsection (b)(1)(F) of section 1869 of the Social Security Act 
        (as added by subsection (a)) that relates to an initial 
        determination described in subsection (a)(1)(C) of such section 
        and that is made during the applicable period described in 
        paragraph (2), the individual may request, in writing or 
        orally, an expedited review of such termination or discharge 
        under section 1154(e) of such Act (as in effect before the end 
        of such period and subject to paragraph (3)).
            ``(2) Applicable period.--This subsection shall apply on or 
        after October 1, 2002, and before the effective date provided 
        under subsection (d).
            ``(3) Rules of application.--In applying section 1154(e) of 
        the Social Security Act under paragraph (1)--
                    ``(A) any reference in such section--
                            ``(i) to a hospital is deemed a reference 
                        to a provider of services;
                            ``(ii) to inpatient hospital care or 
                        services is deemed a reference to services of 
                        such a provider of services;
                            ``(iii) a notice under paragraph (1) is 
                        deemed a reference to the notice described in 
                        paragraph (1) of this subsection; and
                            ``(iv) an inpatient is deemed a reference 
                        to a patient;
                    ``(B) paragraph (1) of such section 1154(e) shall 
                not apply; and
                    ``(C) the provisions of section 1869(b)(1)(F)(ii) 
                of such Act (as amended by subsection (a)) (relating to 
                expedited hearings) shall apply to the review under 
                this subsection except that any reference in such 
                section to the Secretary or a hearing under this 
                subsection shall be deemed a reference to a peer review 
                organization and a review under such section 
                1154(e).''.
            (2) Section 522(d) of BIPA (114 Stat. 2763A-547) is amended 
        by striking ``October 1, 2001'' and inserting ``October 1, 
        2002''.
    (f) Effective Date.--The amendments made by this section shall be 
effective as if included in the enactment of the respective provisions 
of subtitle C of title V of BIPA, 114 Stat. 2763A-534.

SEC. 205. HEARING RIGHTS RELATED TO DECISIONS BY THE SECRETARY TO DENY 
              OR NOT RENEW A MEDICARE ENROLLMENT AGREEMENT; 
              CONSULTATION BEFORE CHANGING PROVIDER ENROLLMENT FORMS.

    (a) Hearing Rights.--
            (1) In general.--Section 1866 (42 U.S.C. 1395cc) is amended 
        by adding at the end the following new subsection:
    ``(j) Hearing Rights in Cases of Denial or Non-Renewal.--The 
Secretary shall establish by regulation procedures under which--
            ``(1) there are deadlines for actions on applications for 
        enrollment (and, if applicable, renewal of enrollment); and
            ``(2) providers of services, physicians, practitioners, and 
        suppliers whose application to enroll (or, if applicable, to 
        renew enrollment) are denied are provided a mechanism to appeal 
        such denial and a deadline for consideration of such 
        appeals.''.
            (2) Effective date.--The Secretary of Health and Human 
        Services shall provide for the establishment of the procedures 
        under the amendment made by paragraph (1) within 6 months after 
        the date of the enactment of this Act.
    (b) Consultation Before Changing Provider Enrollment Forms.--
Section 1871 (42 U.S.C. 1395hh), as amended by sections 101(a), 102, 
and 103, is further amended by adding at the end the following new 
subsection:
    ``(g) The Secretary shall consult with providers of services, 
physicians, practitioners, and suppliers before making changes in the 
provider enrollment forms required of such providers, physicians, 
practitioners, and suppliers to be eligible to submit claims for which 
payment may be made under this title.''.

SEC. 206. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY AVAILABLE.

    (a) In General.--Section 1870 (42 U.S.C. 1395gg) is amended by 
adding at the end the following new subsection:
    ``(h) Notwithstanding subsection (f) or any other provision of law, 
the Secretary shall permit a provider of services, physician, 
practitioner, or other supplier to appeal any determination of the 
Secretary under this title relating to services rendered under this 
title to an individual who subsequently dies, if there is no other 
party available to appeal such determination, so long as the estate of 
the individual, and the individual's family and heirs, are not liable 
for paying for the item or service and are not liable for any increased 
coinsurance or deductible amounts resulting from any decision 
increasing the reimbursement amount for the provider of services, 
physician, practitioner, or supplier.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act and shall apply to 
items and services furnished on or after such date.

                     TITLE III--CONTRACTING REFORM

SEC. 301. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

    (a) Consolidation and Flexibility in Medicare Administration.--
            (1) In general.--Title XVIII is amended by inserting after 
        section 1874 the following new section:

          ``contracts with medicare administrative contractors

    ``Sec. 1874A. (a) Authority.--
            ``(1) Authority to enter into contracts.--The Secretary may 
        enter into contracts with any eligible entity to serve as a 
        medicare administrative contractor with respect to the 
        performance of any or all of the functions described in 
        paragraph (4) or parts of those functions (or, to the extent 
        provided in a contract, to secure performance thereof by other 
        entities).
            ``(2) Eligibility of entities.--An entity is eligible to 
        enter into a contract with respect to the performance of a 
        particular function or activity described in paragraph (4) only 
        if--
                    ``(A) the entity has demonstrated capability to 
                carry out such function;
                    ``(B) the entity complies with such conflict of 
                interest standards as are generally applicable to 
                Federal acquisition and procurement;
                    ``(C) the entity has sufficient assets to 
                financially support the performance of such function; 
                and
                    ``(D) the entity meets such other requirements as 
                the Secretary may impose.
            ``(3) Medicare administrative contractor defined.--For 
        purposes of this title and title XI--
                    ``(A) In general.--The term `medicare 
                administrative contractor' means an agency, 
                organization, or other person with a contract under 
                this section.
                    ``(B) Appropriate medicare administrative 
                contractor.--With respect to the performance of a 
                particular function or activity in relation to an 
                individual entitled to benefits under part A or 
                enrolled under part B, or both, a specific provider of 
                services, physician, practitioner, or supplier (or 
                class of such providers of services, physicians, 
                practitioners, or suppliers), the `appropriate' 
                medicare administrative contractor is the medicare 
                administrative contractor that has a contract under 
                this section with respect to the performance of that 
                function or activity in relation to that individual, 
                provider of services, physician, practitioner, or 
                supplier or class of provider of services, physician, 
                practitioner, or supplier.
            ``(4) Functions described.--The functions referred to in 
        paragraphs (1) and (2) are payment functions, provider services 
        functions, and beneficiary services functions as follows:
                    ``(A) Determination of payment amounts.--
                Determining (subject to the provisions of section 1878 
                and to such review by the Secretary as may be provided 
                for by the contracts) the amount of the payments 
                required pursuant to this title to be made to providers 
                of services, physicians, practitioners, and suppliers.
                    ``(B) Making payments.--Making payments described 
                in subparagraph (A).
                    ``(C) Beneficiary education and assistance.--
                Serving as a center for, and communicating to 
                individuals entitled to benefits under part A or 
                enrolled under part B, or both, with respect to 
                education and outreach for those individuals, and 
                assistance with specific issues, concerns or problems 
                of those individuals.
                    ``(D) Provider consultative services.--Providing 
                consultative services to institutions, agencies, and 
                other persons to enable them to establish and maintain 
                fiscal records necessary for purposes of this title and 
                otherwise to qualify as providers of services, 
                physicians, practitioners, or suppliers.
                    ``(E) Communication with providers.--Serving as a 
                center for, and communicating to providers of services, 
                physicians, practitioners, and suppliers, any 
                information or instructions furnished to the medicare 
                administrative contractor by the Secretary, and serving 
                as a channel of communication from such providers, 
                physicians, practitioners, and suppliers to the 
                Secretary.
                    ``(F) Provider education and technical 
                assistance.--Performing the functions described in 
                subsections (e) and (f), relating to education, 
                training, and technical assistance to providers of 
                services, physicians, practitioners, and suppliers.
                    ``(G) Additional functions.--Performing such other 
                functions as are necessary to carry out the purposes of 
                this title.
            ``(5) Relationship to mip contracts.--
                    ``(A) Nonduplication of duties.--In entering into 
                contracts under this section, the Secretary shall 
                assure that functions of medicare administrative 
                contractors in carrying out activities under parts A 
                and B do not duplicate functions carried out under the 
                Medicare Integrity Program under section 1893. The 
                previous sentence shall not apply with respect to the 
                activity described in section 1893(b)(5) (relating to 
                prior authorization of certain items of durable medical 
                equipment under section 1834(a)(15)).
                    ``(B) Construction.--An entity shall not be treated 
                as a medicare administrative contractor merely by 
                reason of having entered into a contract with the 
                Secretary under section 1893.
            ``(6) Application of federal acquisition regulation.--
        Except to the extent inconsistent with a specific requirement 
        of this title, the Federal Acquisition Regulation applies to 
        contracts under this title.
    ``(b) Contracting Requirements.--
            ``(1) Use of competitive procedures.--
                    ``(A) In general.--Except as provided in laws with 
                general applicability to Federal acquisition and 
                procurement or in subparagraph (B), the Secretary shall 
                use competitive procedures when entering into contracts 
                with medicare administrative contractors under this 
                section.
                    ``(B) Renewal of contracts.--The Secretary may 
                renew a contract with a medicare administrative 
                contractor under this section from term to term without 
                regard to section 5 of title 41, United States Code, or 
                any other provision of law requiring competition, if 
                the medicare administrative contractor has met or 
                exceeded the performance requirements applicable with 
                respect to the contract and contractor, except that the 
                Secretary shall provide for the application of 
                competitive procedures under such a contract not less 
                frequently than once every five years.
                    ``(C) Transfer of functions.--The Secretary may 
                transfer functions among medicare administrative 
                contractors without regard to any provision of law 
                requiring competition. The Secretary shall ensure that 
                performance quality is considered in such transfers.
                    ``(D) Incentives for quality.--The Secretary shall 
                provide incentives for medicare administrative 
                contractors to provide quality service and to promote 
                efficiency.
            ``(2) Compliance with requirements.--No contract under this 
        section shall be entered into with any medicare administrative 
        contractor unless the Secretary finds that such medicare 
        administrative contractor will perform its obligations under 
        the contract efficiently and effectively and will meet such 
        requirements as to financial responsibility, legal authority, 
        and other matters as the Secretary finds pertinent.
            ``(3) Performance requirements.--
                    ``(A) Development of specific performance 
                requirements.--The Secretary shall develop contract 
                performance requirements to carry out the specific 
                requirements applicable under this title to a function 
                described in subsection (a)(4) and shall develop 
                standards for measuring the extent to which a 
                contractor has met such requirements. The Secretary 
                shall publish in the Federal Register such performance 
                requirements and measurement standards.
                    ``(B) Considerations.--The Secretary may include as 
                one of the standards satisfaction level as measured by 
                provider and beneficiary surveys.
                    ``(C) Inclusion in contracts.--All contractor 
                performance requirements shall be set forth in the 
                contract between the Secretary and the appropriate 
                medicare administrative contractor. Such performance 
                requirements--
                            ``(i) shall reflect the performance 
                        requirements published under subparagraph (A), 
                        but may include additional performance 
                        requirements;
                            ``(ii) shall be used for evaluating 
                        contractor performance under the contract; and
                            ``(iii) shall be consistent with the 
                        written statement of work provided under the 
                        contract.
            ``(4) Information requirements.--The Secretary shall not 
        enter into a contract with a medicare administrative contractor 
        under this section unless the contractor agrees--
                    ``(A) to furnish to the Secretary such timely 
                information and reports as the Secretary may find 
                necessary in performing his functions under this title; 
                and
                    ``(B) to maintain such records and afford such 
                access thereto as the Secretary finds necessary to 
                assure the correctness and verification of the 
                information and reports under subparagraph (A) and 
                otherwise to carry out the purposes of this title.
            ``(5) Surety bond.--A contract with a medicare 
        administrative contractor under this section may require the 
        medicare administrative contractor, and any of its officers or 
        employees certifying payments or disbursing funds pursuant to 
        the contract, or otherwise participating in carrying out the 
        contract, to give surety bond to the United States in such 
        amount as the Secretary may deem appropriate.
    ``(c) Terms and Conditions.--
            ``(1) In general.--A contract with any medicare 
        administrative contractor under this section may contain such 
        terms and conditions as the Secretary finds necessary or 
        appropriate and may provide for advances of funds to the 
        medicare administrative contractor for the making of payments 
        by it under subsection (a)(3)(B).
            ``(2) Prohibition on mandates for certain data 
        collection.--The Secretary may not require, as a condition of 
        entering into, or renewing, a contract under this section, that 
        the medicare administrative contractor match data obtained 
        other than in its activities under this title with data used in 
        the administration of this title for purposes of identifying 
situations in which the provisions of section 1862(b) may apply.
    ``(d) Limitation on Liability of Medicare Administrative 
Contractors and Certain Officers.--
            ``(1) Certifying officer.--No individual designated 
        pursuant to a contract under this section as a certifying 
        officer shall, in the absence of gross negligence, 
        recklessness, or knowledge, or intent to defraud the United 
        States, be liable with respect to any payments certified by the 
        individual under this section.
            ``(2) Disbursing officer.--No disbursing officer shall, in 
        the absence of gross negligence, recklessness, or knowledge, or 
        intent to defraud the United States, be liable with respect to 
        any payment by such officer under this section if it was based 
        upon an authorization (which meets the applicable requirements 
        for such internal controls established by the Comptroller 
        General) of a certifying officer designated as provided in 
        paragraph (1) of this subsection.
            ``(3) Liability of medicare administrative contractor.--A 
        medicare administrative contractor shall be liable to the 
        United States for a payment referred to in paragraph (1) or (2) 
        if, in connection with such payment, an individual referred to 
        in either such paragraph acted with gross negligence, 
        recklessness, or knowledge, or intent to defraud the United 
        States.
            ``(4) Limitation on civil liability.--
                    ``(A) In general.--No medicare administrative 
                contractor having a contract with the Secretary under 
                this section, and no person employed by, or having a 
                fiduciary relationship with, any such medicare 
                administrative contractor or who furnishes professional 
                services to such medicare administrative contractor, 
                shall by reason of the performance of any duty, 
                function, or activity required or authorized pursuant 
                to this section or to a valid contract entered into 
                under this section, be held civilly liable under any 
                law of the United States or of any State (or political 
                subdivision thereof), absent a finding of gross 
                negligence, recklessness, or knowledge, or intent to 
                defraud the United States in the performance of such 
                duty, function, or activity.
                    ``(B) Indemnification by secretary.--The Secretary 
                shall make payment to a medicare administrative 
                contractor under contract with the Secretary pursuant 
                to this section, or to any member or employee thereof, 
                or to any person who furnishes legal counsel or 
                services to such medicare administrative contractor, in 
                an amount equal to the reasonable amount of the 
                expenses incurred, as determined by the Secretary, in 
                connection with the defense of any civil suit, action, 
                or proceeding brought against such medicare 
                administrative contractor or person related to the 
                performance of any duty, function, or activity under 
                such contract, absent a finding of gross negligence, 
                recklessness, or knowledge, or intent to defraud the 
                United States in the performance of such duty, 
                function, or activity.''.
            (2) Consideration of incorporation of current law 
        standards.--In developing contract performance requirements 
        under section 1874A(b) of the Social Security Act, as inserted 
        by paragraph (1), the Secretary of Health and Human Services 
        shall consider inclusion of the performance standards described 
        in sections 1816(f)(2) of such Act (relating to timely 
        processing of reconsiderations and applications for exemptions) 
        and section 1842(b)(2)(B) of such Act (relating to timely 
        review of determinations and fair hearing requests), as such 
        sections were in effect before the date of the enactment of 
        this Act.
    (b) Conforming Amendments to Section 1816 (Relating to Fiscal 
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
            (1) The heading is amended to read as follows:

        ``provisions relating to the administration of part a''.

            (2) Subsection (a) is amended to read as follows:
    ``(a) The administration of this part shall be conducted through 
contracts with medicare administrative contractors under section 
1874A.''.
            (3) Subsection (b) is repealed.
            (4) Subsection (c) is amended--
                    (A) by striking paragraph (1); and
                    (B) in each of paragraphs (2)(A) and (3)(A), by 
                striking ``agreement under this section'' and inserting 
                ``contract under section 1874A that provides for making 
                payments under this part''.
            (5) Subsections (d) through (i) are repealed.
            (6) Subsections (j) and (k) are each amended--
                    (A) by striking ``An agreement with an agency or 
                organization under this section'' and inserting ``A 
                contract with a medicare administrative contractor 
                under section 1874A with respect to the administration 
                of this part''; and
                    (B) by striking ``such agency or organization'' and 
                inserting ``such medicare administrative contractor'' 
                each place it appears.
            (7) Subsection (l) is repealed.
    (c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
            (1) The heading is amended to read as follows:

        ``provisions relating to the administration of part b''.

            (2) Subsection (a) is amended to read as follows:
    ``(a) The administration of this part shall be conducted through 
contracts with medicare administrative contractors under section 
1874A.''.
            (3) Subsection (b) is amended--
                    (A) by striking paragraph (1);
                    (B) in paragraph (2)--
                            (i) by striking subparagraphs (A) and (B);
                            (ii) in subparagraph (C), by striking 
                        ``carriers'' and inserting ``medicare 
                        administrative contractors''; and
                            (iii) by striking subparagraphs (D) and 
                        (E);
                    (C) in paragraph (3)--
                            (i) in the matter before subparagraph (A), 
                        by striking ``Each such contract shall provide 
                        that the carrier'' and inserting ``The 
                        Secretary'';
                            (ii) in subparagraph (B), in the matter 
                        before clause (i), by striking ``to the 
                        policyholders and subscribers of the carrier'' 
                        and inserting ``to the policyholders and 
                        subscribers of the medicare administrative 
                        contractor'';
                            (iii) by striking subparagraphs (C), (D), 
                        and (E);
                            (iv) in subparagraph (H)--
                                    (I) by striking ``it'' and 
                                inserting ``the Secretary''; and
                                    (II) by striking ``carrier'' and 
                                inserting ``medicare administrative 
                                contractor''; and
                            (v) in the seventh sentence, by inserting 
                        ``medicare administrative contractor,'' after 
                        ``carrier,''; and
                    (D) by striking paragraph (5); and
                    (E) in paragraph (7) and succeeding paragraphs, by 
                striking ``the carrier'' and inserting ``the 
                Secretary'' each place it appears.
            (4) Subsection (c) is amended--
                    (A) by striking paragraph (1);
                    (B) in paragraph (2), by striking ``contract under 
                this section which provides for the disbursement of 
                funds, as described in subsection (a)(1)(B),'' and 
                inserting ``contract under section 1874A that provides 
                for making payments under this part shall provide that 
                the medicare administrative contractor'';
                    (C) in paragraph (4), by striking ``a carrier'' and 
                inserting ``medicare administrative contractor'';
                    (D) in paragraph (5), by striking ``contract under 
                this section which provides for the disbursement of 
                funds, as described in subsection (a)(1)(B), shall 
                require the carrier'' and inserting ``contract under 
                section 1874A that provides for making payments under 
                this part shall require the medicare administrative 
                contractor''; and
                    (E) by striking paragraph (6).
            (5) Subsections (d), (e), and (f) are repealed.
            (6) Subsection (g) is amended by striking ``carrier or 
        carriers'' and inserting ``medicare administrative contractor 
        or contractors''.
            (7) Subsection (h) is amended--
                    (A) in paragraph (2)--
                            (i) by striking ``Each carrier having an 
                        agreement with the Secretary under subsection 
                        (a)'' and inserting ``The Secretary''; and
                            (ii) by striking ``Each such carrier'' and 
                        inserting ``The Secretary''; and
                    (B) in paragraph (3)(A)--
                            (i) by striking ``a carrier having an 
                        agreement with the Secretary under subsection 
                        (a)'' and inserting ``medicare administrative 
                        contractor having a contract under section 
                        1874A that provides for making payments under 
                        this part''; and
                            (ii) by striking ``such carrier'' and 
                        inserting ``such contractor''.
    (d) Effective Date; Transition Rule.--
            (1) Effective date.--
                    (A) Application to competitively bid contracts.--
                The amendments made by this section shall apply to 
                contracts that are competitively bid on or after such 
                date or dates (but not later than 1 year after the date 
                of the enactment of this Act) as the Secretary of 
                Health and Human Services specifies.
                    (B) Construction for current contracts.--Such 
                amendments shall not apply to contracts in effect 
                before the date specified under subparagraph (A) that 
                continue to retain the terms and conditions in effect 
                on such date until such date as the contract is let out 
                for competitive bidding under such amendments.
                    (C) Deadline for competitive bidding.--The 
                Secretary shall provide for the letting by competitive 
                bidding of all contracts for functions of medicare 
                administrative contractors for annual contract periods 
                that begin on or after October 1, 2008.
            (2) General transition rules.--The Secretary shall take 
        such steps, consistent with paragraph (1)(B) and (1)(C), as are 
        necessary to provide for an appropriate transition from 
        contracts under section 1816 and section 1842 of the Social 
        Security Act (42 U.S.C. 1395h, 1395u) to contracts under 
        section 1874A, as added by subsection (a)(1).
            (3) Authorizing continuation of mip functions under current 
        contracts and agreements and under rollover contracts.--The 
        provisions contained in the exception in section 1893(d)(2) of 
        the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
        continue to apply notwithstanding the amendments made by this 
        section, and any reference in such provisions to an agreement 
        or contract shall be deemed to include a contract under section 
        1874A of such Act, as inserted by subsection (a)(1), that 
        continues the activities referred to in such provisions.
    (e) References.--On and after the effective date provided under 
subsection (d), any reference to a fiscal intermediary or carrier under 
title XI or XVIII of the Social Security Act (or any regulation, manual 
instruction, interpretative rule, statement of policy, or guideline 
issued to carry out such titles) shall be deemed a reference to an 
appropriate medicare administrative contractor (as provided under 
section 1874A of the Social Security Act).
    (f) Secretarial Submission of Legislative Proposal.--Not later than 
6 months after the date of the enactment of this Act, the Secretary of 
Health and Human Services shall submit to the appropriate committees of 
Congress a legislative proposal providing for such technical and 
conforming amendments in the law as are required by the provisions of 
this section.
    (g) Reports on Implementation.--
            (1) Proposal for implementation.--The Secretary shall 
        submit a report to Congress not later than one year after the 
        date of the enactment of this Act that describes the 
        Secretary's plan for implementation of the amendments made by 
        this section.
            (2) Status of implementation.--The Secretary shall submit a 
        report to Congress not later than October 1, 2006, that 
        describes the status of implementation of such amendments and 
        that includes a description of the following:
                    (A) The number of contracts that have been 
                competitively bid as of such date.
                    (B) The distribution of functions among contracts 
                and contractors.
                    (C) A timeline for complete transition to full 
                competition.
                    (D) A detailed description of how the Secretary of 
                Health and Human Services has modified oversight and 
                management of medicare contractors to adapt to full 
                competition.

SEC. 302. REQUIREMENTS FOR INFORMATION SECURITY.

    (a) In General.--Section 1874A, as added by section 301, is amended 
by adding at the end the following new subsection:
    ``(e) Requirements for Information Security.--
            ``(1) Development of information security program.--A 
        medicare administrative contractor that performs the functions 
        referred to in subparagraphs (A) and (B) of subsection (a)(4) 
        (relating to determining and making payments) shall develop and 
        implement a contractor-wide information security program to 
        provide information security for the operation and assets of 
        the contractor with respect to such functions under this title. 
        An information security program under this paragraph shall meet 
        the requirements for information security programs imposed on 
        Federal agencies under section 3534(b)(2) of title 44, United 
        States Code (other than requirements under subparagraphs 
        (B)(ii), (F)(iii), and (F)(iv) of such section).
            ``(2) Independent audits.--
                    ``(A) Performance of annual evaluations.--Each year 
                a medicare administrative contractor that performs the 
                functions referred to in subparagraphs (A) and (B) of 
                subsection (a)(4) (relating to determining and making 
                payments) shall undergo an evaluation of the 
                information security program and practices of the 
                contractor with respect to such functions under this 
                title. The evaluation shall--
                            ``(i) be performed by an independent entity 
                        that meets such requirements as the Inspector 
                        General of the Department of Health and Human 
                        Services may establish; and
                            ``(ii) include testing of the effectiveness 
                        of information security control techniques for 
                        an appropriate subset of the contractor's 
                        information systems (as defined in section 
                        3502(8) of title 44, United States Code) 
                        relating to such functions under this title and 
                        an assessment of compliance with the 
                        requirements of this subsection and related 
                        information security policies, procedures, 
                        standards and guidelines.
                    ``(B) Deadline for initial evaluation.--
                            ``(i) New contractors.--In the case of a 
                        medicare administrative contractor covered by 
                        this subsection that has not previously 
                        performed the functions referred to in 
                        subparagraphs (A) and (B) of subsection (a)(4) 
                        (relating to determining and making payments) 
                        as a fiscal intermediary or carrier under 
                        section 1816 or 1842, the first independent 
                        evaluation conducted pursuant subparagraph (A) 
                        shall be completed prior to commencing such 
                        functions.
                            ``(ii) Other contractors.--In the case of a 
                        medicare administrative contractor covered by 
                        this subsection that is not described in clause 
                        (i), the first independent evaluation conducted 
                        pursuant subparagraph (A) shall be completed 
                        within 1 year after the date the contractor 
                        commences functions referred to in clause (i) 
                        under this section.
                    ``(C) Reports on evaluations.--
                            ``(i) To the inspector general.--The 
                        results of independent evaluations under 
                        subparagraph (A) shall be submitted promptly to 
                        the Inspector General of the Department of 
                        Health and Human Services.
                            ``(ii) To congress.--The Inspector General 
                        of Department of Health and Human Services 
                        shall submit to Congress annual reports on the 
                        results of such evaluations.''.
    (b) Application of Requirements to Fiscal Intermediaries and 
Carriers.--
            (1) In general.--The provisions of section 1874A(e)(2) of 
        the Social Security Act (other than subparagraph (B)), as added 
        by subsection (a), shall apply to each fiscal intermediary 
        under section 1816 of the Social Security Act (42 U.S.C. 1395h) 
        and each carrier under section 1842 of such Act (42 U.S.C. 
        1395u) in the same manner as they apply to medicare 
        administrative contractors under such provisions.
            (2) Deadline for initial evaluation.--In the case of such a 
        fiscal intermediary or carrier with an agreement or contract 
        under such respective section in effect as of the date of the 
        enactment of this Act, the first evaluation under 
section 1874A(e)(2)(A) of the Social Security Act (as added by 
subsection (a)), pursuant to paragraph (1), shall be completed (and a 
report on the evaluation submitted to the Secretary of Health and Human 
Services) by not later than 1 year after such date.

             TITLE IV--EDUCATION AND OUTREACH IMPROVEMENTS

SEC. 401. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

    (a) Coordination of Education Funding.--
            (1) In general.--The Social Security Act is amended by 
        inserting after section 1888 the following new section:

             ``provider education and technical assistance

    ``Sec. 1889. (a) Coordination of Education Funding.--The Secretary 
shall coordinate the educational activities provided through medicare 
contractors (as defined in subsection (g), including under section 
1893) in order to maximize the effectiveness of Federal education 
efforts for providers of services, physicians, practitioners, and 
suppliers.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.
            (3) Report.--Not later than October 1, 2002, the Secretary 
        of Health and Human Services shall submit to Congress a report 
        that includes a description and evaluation of the steps taken 
        to coordinate the funding of provider education under section 
        1889(a) of the Social Security Act, as added by paragraph (1).
    (b) Incentives To Improve Contractor Performance.--
            (1) In general.--Section 1874A, as added by section 
        301(a)(1) and as amended by section 302, is amended by adding 
        at the end the following new subsection:
    ``(f) Incentives To Improve Contractor Performance in Provider 
Education and Outreach.--
            ``(1) Methodology to measure contractor error rates.--In 
        order to give medicare administrative contractors an incentive 
        to implement effective education and outreach programs for 
        providers of services, physicians, practitioners, and 
        suppliers, the Secretary shall develop and implement by October 
        1, 2002, a methodology to measure the specific claims payment 
        error rates of such contractors in the processing or reviewing 
        of medicare claims.
            ``(2) GAO review of methodology.--Before implementation of 
        such methodology, the Comptroller General of the United States 
        shall review, and make recommendations to the Secretary, 
        regarding the adequacy of such methodology.''.
            (2) Report.--Before implementation of the methodology 
        developed under section 1874A(f)(1) of the Social Security Act, 
        as added by paragraph (1), the Secretary shall submit to 
        Congress a report that describes how the Secretary intends to 
        use the methodology in assessing medicare contractor 
        performance in implementing effective education and outreach 
        programs, including whether to use such methodology as a basis 
        for performance bonuses.
    (c) Requirement To Maintain Internet Sites.--
            (1) In general.--Section 1889, as added by subsection (a), 
        is amended by adding at the end the following new subsection:
    ``(b) Internet Sites; FAQs.--The Secretary, and each medicare 
contractor insofar as it provides services (including claims 
processing) for providers of services, physicians, practitioners, or 
suppliers, shall maintain an Internet site which--
            ``(1) provides answers in an easily accessible format to 
        frequently asked questions, and
            ``(2) includes all materials published by the Secretary or 
        the contractor,
relating to providers of services, physicians, practitioners, and 
suppliers under the programs under this title and title XI insofar as 
it relates to such programs.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2002.
    (d) Improved Provider Education and Training.--
            (1) Increased funding for enhanced education and training 
        through medicare integrity program.--Section 1817(k)(4) (42 
        U.S.C. 1395i(k)(4)) is amended--
                    (A) in subparagraph (A), by striking ``subparagraph 
                (B)'' and inserting ``subparagraphs (B) and (C)'';
                    (B) in subparagraph (B), by striking ``The amount 
                appropriated'' and inserting ``Subject to subparagraph 
                (C), the amount appropriated''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(C) Enhanced provider education and training.--
                            ``(i) In general.--In addition to the 
                        amount appropriated under subparagraph (B), the 
                        amount appropriated under subparagraph (A) for 
                        a fiscal year (beginning with fiscal year 2003) 
                        is increased by $35,000,000.
                            ``(ii) Use.--The funds made available under 
                        this subparagraph shall be used only to 
                        increase the conduct by medicare contractors of 
                        education and training of providers of 
                        services, physicians, practitioners, and 
                        suppliers regarding billing, coding, and other 
                        appropriate items and may also be used to 
                        improve the accuracy, consistency, and 
                        timeliness of contractor responses to written 
                        and phone inquiries from providers of services, 
                        physicians, practitioners, and suppliers.''.
            (2) Tailoring education and training for small providers or 
        suppliers.--
                    (A) In general.--Section 1889, as added by 
                subsection (a) and as amended by subsection (c), is 
                further amended by adding at the end the following new 
                subsection:
    ``(c) Tailoring Education and Training Activities for Small 
Providers or Suppliers.--
            ``(1) In general.--Insofar as a medicare contractor 
        conducts education and training activities, it shall take into 
        consideration the special needs of small providers of services 
        or suppliers (as defined in paragraph (2)). Such education and 
        training activities for small providers or services and 
        suppliers may include the provision of technical assistance 
        (such as review of billing systems and internal controls to 
        determine program compliance and to suggest more efficient and 
        effective means of achieving such compliance).
            ``(2) Small provider of services or supplier.--In this 
        subsection, the term `small provider of services or supplier' 
        means--
                    ``(A) an institutional provider of services with 
                fewer than 25 full-time-equivalent employees; or
                    ``(B) a physician, practitioner, or supplier with 
                fewer than 10 full-time-equivalent employees.''.
                    (B) Effective date.--The amendment made by 
                subparagraph (A) shall take effect on October 1, 2002.
    (e) Additional Provider Education Provisions.--
            (1) In general.--Section 1889, as added by subsection (a) 
        and as amended by subsections (c) and (d)(2), is further 
        amended by adding at the end the following new subsections:
    ``(d) Encouragement of Participation in Education Program 
Activities.--A medicare contractor may not use a record of attendance 
at (or failure to attend) educational activities or other information 
gathered during an educational program conducted under this section or 
otherwise by the Secretary to select or track providers of services, 
physicians, practitioners, or suppliers for the purpose of conducting 
any type of audit or prepayment review.
    ``(e) Construction.--Nothing in this section or section 1893(g) 
shall be construed as providing for disclosure by a medicare contractor 
of information that would compromise pending law enforcement activities 
or reveal findings of law enforcement-related audits.
    ``(f) Definitions.--For purposes of this section and section 
1817(k)(4)(C), the term `medicare contractor' includes the following:
            ``(1) A medicare administrative contractor with a contract 
        under section 1874A, a fiscal intermediary with a contract 
        under section 1816, and a carrier with a contract under section 
        1842.
            ``(2) An eligible entity with a contract under section 
        1893.
Such term does not include, with respect to activities of a specific 
provider of services, physician, practitioner, or supplier an entity 
that has no authority under this title or title XI with respect to such 
activities and such provider of services, physician, practitioner, or 
supplier.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.

SEC. 402. ACCESS TO AND PROMPT RESPONSES FROM MEDICARE ADMINISTRATIVE 
              CONTRACTORS.

    (a) In General.--Section 1874A, as added by section 301 and as 
amended by sections 302 and 401(b)(1), is further amended by adding at 
the end the following new subsection:
    ``(g) Communications With Beneficiaries and Providers.--
            ``(1) Communication strategy.--The Secretary shall develop 
        a strategy for communications with beneficiaries and with 
        providers of services, physicians, practitioners, and suppliers 
        under this title.
            ``(2) Response to written inquiries.--Each medicare 
        administrative contractor shall provide general written 
        responses (which may be through electronic transmission) in a 
        clear, concise, and accurate manner to inquiries by 
        beneficiaries, providers of services, physicians, 
        practitioners, and suppliers concerning the programs under this 
        title within 45 business days of the date of receipt of such 
        inquiries.
            ``(3) Response to toll-free lines.--Each medicare 
        administrative contractor shall maintain a toll-free telephone 
        number at which beneficiaries, providers, physicians, 
        practitioners, and suppliers may obtain information regarding 
        billing, coding, claims, coverage, and other appropriate 
        information under this title.
            ``(4) Monitoring of contractor responses.--
                    ``(A) In general.--Each medicare administrative 
                contractor shall, consistent with standards developed 
                by the Secretary under subparagraph (B)--
                            ``(i) maintain a system for identifying who 
                        provides the information referred to in 
                        paragraphs (2) and (3); and
                            ``(ii) monitor the accuracy, consistency, 
                        and timeliness of the information so provided.
                    ``(B) Development of standards.--
                            ``(i) In general.--The Secretary shall 
                        establish (and publish in the Federal Register) 
                        standards to monitor the accuracy, consistency, 
                        and timeliness of the information provided in 
                        response to written and telephone inquiries 
                        under this subsection. Such standards shall be 
                        consistent with the performance requirements 
                        established under subsection (b)(3).
                            ``(ii) Evaluation.--In conducting 
                        evaluations of individual medicare 
                        administrative contractors, the Secretary shall 
                        take into account the results of the monitoring 
                        conducted under subparagraph (A) taking into 
                        account as performance requirements the 
                        standards established under clause (i).
                    ``(C) Direct monitoring.--Nothing in this paragraph 
                shall be construed as preventing the Secretary from 
                directly monitoring the accuracy, consistency, and 
                timeliness of the information so provided.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect October 1, 2002.

SEC. 403. RELIANCE ON GUIDANCE.

    (a) In General.--Section 1871(e), as added by section 102(a), is 
further amended by adding at the end the following new paragraph:
    ``(2) If--
            ``(A) a provider of services, physician, practitioner, or 
        other supplier follows written guidance provided--
                    ``(i) by the Secretary; or
                    ``(ii) by a medicare contractor (as defined in 
                section 1889(f) and whether in the form of a written 
                response to a written inquiry under section 1874A(g)(1) 
                or otherwise) acting within the scope of the 
                contractor's contract authority,
        in response to a written inquiry with respect to the furnishing 
        of items or services or the submission of a claim for benefits 
        for such items or services;
            ``(B) the Secretary determines that--
                    ``(i) the provider of services, physician, 
                practitioner, or supplier has accurately presented the 
                circumstances relating to such items, services, and 
                claim to the Secretary or the contractor in the written 
                guidance; and
                    ``(ii) there is no indication of fraud or abuse 
                committed by the provider of services, physician, 
                practitioner, or supplier against the program under 
                this title; and
            ``(C) the guidance was in error;
the provider of services, physician, practitioner or supplier shall not 
be subject to any penalty or interest under this title (or the 
provisions of title XI insofar as they relate to this title) relating 
to the provision of such items or service or such claim if the provider 
of services, physician, practitioner, or supplier reasonably relied on 
such guidance. In applying this paragraph with respect to guidance in 
the form of general responses to frequently asked questions, the 
Secretary retains authority to determine the extent to which such 
general responses apply to the particular circumstances of individual 
claims.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to penalties imposed on or after the date of the enactment of 
this Act.

SEC. 404. FACILITATION OF CONSISTENT INFORMATION TO PROVIDERS.

    The Secretary shall appoint an individual within the Department of 
Health and Human Services who shall be responsible--
            (1) for responding to complaints and grievances from 
        providers of services, physicians, practitioners, and suppliers 
        under the medicare program under title XVIII of the Social 
        Security Act (including provisions of title XI of the Social 
        Security Act insofar as they relate to such title XVIII and are 
        not administered by the Office of the Inspector General of the 
        Department of Health and Human Services) concerning 
        inconsistent information or inconsistent responses provided 
        under such program; and
            (2) in so responding, for facilitating an appropriate 
        response from the Department of Health and Human Services or 
        from appropriate medicare contractors.
Such individual shall not serve as an advocate for any specific policy 
within the Department.

SEC. 405. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E & 
              M) DOCUMENTATION GUIDELINES.

    (a) In General.--The Secretary of Health and Human Services may not 
implement any new documentation guidelines for evaluation and 
management physician services under the title XVIII of the Social 
Security Act on or after the date of the enactment of this Act unless 
the Secretary--
            (1) has developed the guidelines in collaboration with 
        practicing physicians (including both generalists and 
        specialists) and provided for an assessment of the proposed 
        guidelines by the physician community;
            (2) has established a plan that contains specific goals, 
        including a schedule, for improving the use of such guidelines;
            (3) has conducted appropriate and representative pilot 
        projects under subsection (b) to test the evaluation and 
        management documentation guidelines;
            (4) finds that the objectives described in subsection (c) 
        will be met in the implementation of such guidelines; and
            (5) has established, and is implementing, a program to 
        educate physicians on the use of such guidelines.
The Secretary may make changes to the manner in which existing 
evaluation and management documentation guidelines are implemented to 
reduce paperwork burdens on physicians.
    (b) Pilot Projects To Test Evaluation and Management Documentation 
Guidelines.--
            (1) In general.--The Secretary shall conduct under this 
        subsection appropriate and representative pilot projects to 
        test new evaluation and management documentation guidelines 
        referred to in subsection (a).
            (2) Length and consultation.--Each pilot project under this 
        subsection shall--
                    (A) be voluntary;
                    (B) be of sufficient length as determined by the 
                Secretary to allow for preparatory physician and 
                medicare contractor education, analysis, and use and 
                assessment of potential evaluation and management 
                guidelines; and
                    (C) be conducted, in development and throughout the 
                planning and operational stages of the project, in 
                consultation with practicing physicians (including both 
                generalists and specialists).
            (3) Range of pilot projects.--Of the pilot projects 
        conducted under this subsection--
                    (A) at least one shall focus on a peer review 
                method by physicians (not employed by a medicare 
                contractor) which evaluates medical record information 
                for claims submitted by physicians identified as 
                statistical outliers relative to definitions published 
                in the Current Procedures Terminology (CPT) code book 
                of the American Medical Association;
                    (B) at least one shall be conducted for services 
                furnished in a rural area and at least one for services 
                furnished outside such an area; and
                    (C) at least one shall be conducted in a setting 
                where physicians bill under physicians services in 
                teaching settings and at least one shall be conducted 
                in a setting other than a teaching setting.
            (4) Banning of targeting of pilot project participants.--
        Data collected under this subsection shall not be used as the 
        basis for overpayment demands or post-payment audits. Such 
        limitation applies only to claims filed as part of the pilot 
        project and lasts only for the duration of the pilot project 
        and only as long as the provider is a participant in the pilot 
        project.
            (5) Study of impact.--Each pilot project shall examine the 
        effect of the new evaluation and management documentation 
        guidelines on--
                    (A) different types of physician practices, 
                including those with fewer than 10 full-time-equivalent 
                employees (including physicians); and
                    (B) the costs of physician compliance, including 
                education, implementation, auditing, and monitoring.
            (6) Periodic reports.--The Secretary shall submit to 
        Congress periodic reports on the pilot projects under this 
        subsection.
    (c) Objectives for Evaluation and Management Guidelines.--The 
objectives for new evaluation and management documentation guidelines 
developed by the Secretary shall be to--
            (1) identify clinically relevant documentation needed to 
        code accurately and assess coding levels accurately;
            (2) decrease the level of non-clinically pertinent and 
        burdensome documentation time and content in the physician's 
        medical record;
            (3) increase accuracy by reviewers; and
            (4) educate both physicians and reviewers.
    (d) Definitions.--In this section--
            (1) the term ``rural area'' has the meaning given that term 
        in section 1886(d)(2)(D) of the Social Security Act, 42 U.S.C. 
        1395ww(d)(2)(D); and
            (2) the term ``teaching settings'' are those settings 
        described in section 415.150 of title 42, Code of Federal 
        Regulations.

SEC. 406. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

    (a) In General.--The Secretary of Health and Human Services shall 
establish a demonstration program (in this section referred to as the 
``demonstration program'') under which medicare specialists employed by 
the Department of Health and Human Services provide advice and 
assistance to medicare beneficiaries at the location of existing local 
offices of the Social Security Administration.
    (b) Locations.--
            (1) In general.--The demonstration program shall be 
        conducted in at least 6 offices or areas. Subject to paragraph 
        (2), in selecting such offices and areas, the Secretary shall 
        provide preference for offices with a high volume of visits by 
        medicare beneficiaries.
            (2) Assistance for rural beneficiaries.--The Secretary 
        shall provide for the selection of at least 2 rural areas to 
        participate in the demonstration program. In conducting the 
        demonstration program in such rural areas, the Secretary shall 
        provide for medicare specialists to travel among local offices 
        in a rural area on a scheduled basis.
    (c) Duration.--The demonstration program shall be conducted over a 
3-year period.
    (d) Evaluation and Report.--
            (1) Evaluation.--The Secretary shall provide for an 
        evaluation of the demonstration program. Such evaluation shall 
        include an analysis of--
                    (A) utilization of, and beneficiary satisfaction 
                with, the assistance provided under the program; and
                    (B) the cost-effectiveness of providing beneficiary 
                assistance through out-stationing medicare specialists 
                at local social security offices.
            (2) Report.--The Secretary shall submit to Congress a 
        report on such evaluation and shall include in such report 
        recommendations regarding the feasibility of permanently out-
        stationing medicare specialists at local social security 
        offices.

           TITLE V--REVIEW, RECOVERY, AND ENFORCEMENT REFORM

SEC. 501. PREPAYMENT REVIEW.

    (a) In General.--Section 1874A, as added by section 301 and as 
amended by sections 302, 401(b)(1), and 402, is further amended by 
adding at the end the following new subsection:
    ``(h) Conduct of Prepayment Review.--
            ``(1) Standardization of random prepayment review.--A 
        medicare administrative contractor shall conduct random 
        prepayment review only in accordance with a standard protocol 
        for random prepayment audits developed by the Secretary.
            ``(2) Limitations on initiation of non-random prepayment 
        review.--A medicare administrative contractor may not initiate 
        non-random prepayment review of a provider of services, 
        physician, practitioner, or supplier based on the initial 
        identification by that provider of services, physician, 
        practitioner, or supplier of an improper billing practice 
        unless there is a likelihood of sustained or high level of 
        payment error (as defined by the Secretary).
            ``(3) Termination of non-random prepayment review.--The 
        Secretary shall issue regulations relating to the termination, 
        including termination dates, of non-random prepayment review. 
        Such regulations may vary such a termination date based upon 
        the differences in the circumstances triggering prepayment 
        review.
            ``(4) Construction.--Nothing in this subsection shall be 
        construed as preventing the denial of payments for claims 
        actually reviewed under a random prepayment review. In the case 
        of a provider of services, physician, practitioner, or supplier 
        with respect to which amounts were previously overpaid, nothing 
        in this subsection shall be construed as limiting the ability 
        of a medicare administrative contractor to request the periodic 
        production of records or supporting documentation for a limited 
        sample of submitted claims to ensure that the previous practice 
        is not continuing.
            ``(5) Random prepayment review defined.--For purposes of 
        this subsection, the term `random prepayment review' means a 
        demand for the production of records or documentation absent 
        cause with respect to a claim.''.
    (b) Effective Date.--
            (1) In general.--Except as provided in this subsection, the 
        amendment made by subsection (a) shall take effect on the date 
        of the enactment of this Act.
            (2) Deadline for promulgation of certain regulations.--The 
        Secretary shall first issue regulations under section 1874A(h) 
        of the Social Security Act, as added by subsection (a), by not 
        later than 1 year after the date of the enactment of this Act.
            (3) Application of standard protocols for random prepayment 
        review.--Section 1874A(h)(1) of the Social Security Act, as 
        added by subsection (a), shall apply to random prepayment 
        reviews conducted on or after such date (not later than 1 year 
        after the date of the enactment of this Act) as the Secretary 
        shall specify. The Secretary shall develop and publish the 
        standard protocol under such section by not later than 1 year 
        after the date of the enactment of this Act.

SEC. 502. RECOVERY OF OVERPAYMENTS.

    (a) In General.--Section 1874A, as added by section 301 and as 
amended by sections 302, 401(b)(1), 402, and 501(a), is further amended 
by adding at the end the following new subsection:
    ``(i) Recovery of Overpayments.--
            ``(1) Use of repayment plans.--
                    ``(A) In general.--If the repayment, within the 
                period otherwise permitted by a provider of services, 
                physician, practitioner, or other supplier, of an 
                overpayment under this title meets the standards 
                developed under subparagraph (B), subject to 
                subparagraph (C), and the provider, physician, 
                practitioner, or supplier requests the Secretary to 
                enter into a repayment plan with respect to such 
                overpayment, the Secretary shall enter into a plan with 
                the provider, physician, practitioner, or supplier for 
                the offset or repayment (at the election of the 
                provider, physician, practitioner, or supplier) of such 
                overpayment over a period of at least one year, but not 
                longer than 3 years. Interest shall accrue on the 
                balance through the period of repayment. The repayment 
                plan shall meet terms and conditions determined to be 
                appropriate by the Secretary.
                    ``(B) Development of standards.--The Secretary 
                shall develop standards for the recovery of 
                overpayments. Such standards shall--
                            ``(i) include a requirement that the 
                        Secretary take into account (and weigh in favor 
                        of the use of a repayment plan) the reliance 
                        (as described in section 1871(e)(2)) by a 
                        provider of services, physician, practitioner, 
                        and supplier on guidance when determining 
                        whether a repayment plan should be offered; and
                            ``(ii) provide for consideration of the 
                        financial hardship imposed on a provider of 
                        services, physician, practitioner, or supplier 
                        in considering such a repayment plan.
                In developing standards with regard to financial 
                hardship with respect to a provider of services, 
                physician, practitioner, or supplier, the Secretary 
                shall take into account the amount of the proposed 
                recovery as a proportion of payments made to that 
                provider, physician, practitioner, or supplier.
                    ``(C) Exceptions.--Subparagraph (A) shall not apply 
                if--
                            ``(i) the Secretary has reason to suspect 
                        that the provider of services, physician, 
                        practitioner, or supplier may file for 
                        bankruptcy or otherwise cease to do business or 
                        discontinue participation in the program under 
                        this title; or
                            ``(ii) there is an indication of fraud or 
                        abuse committed against the program.
                    ``(D) Immediate collection if violation of 
                repayment plan.--If a provider of services, physician, 
                practitioner, or supplier fails to make a payment in 
                accordance with a repayment plan under this paragraph, 
                the Secretary may immediately seek to offset or 
                otherwise recover the total balance outstanding 
                (including applicable interest) under the repayment 
                plan.
                    ``(E) Relation to no fault provision.--Nothing in 
                this paragraph shall be construed as affecting the 
                application of section 1870(c) (relating to no 
                adjustment in the cases of certain overpayments).
            ``(2) Limitation on recoupment.--
                    ``(A) No recoupment until redetermination 
                exercised.--In the case of a provider of services, 
                physician, practitioner, or supplier that is determined 
                to have received an overpayment under this title and 
                that seeks a redetermination of such determination 
                under section 1869(a)(3), the Secretary may not take 
                any action (or authorize any other person, including 
                any medicare contractor, as defined in paragraph (9)) 
                to recoup the overpayment until the date the decision 
                on the redetermination has been rendered.
                    ``(B) Payment of interest.--
                            ``(i) Return of recouped amount with 
                        interest in case of reversal.--Insofar as such 
                        determination on appeal against the provider of 
                        services, physician, practitioner, or supplier 
                        is later reversed, the Secretary shall provide 
                        for repayment of the amount recouped plus 
                        interest for the period in which the amount was 
                        recouped.
                            ``(ii) Interest in case of affirmation.--
                        Insofar as the determination on such appeal is 
                        against the provider of services, physician, 
                        practitioner, or supplier, interest on the 
                        overpayment shall accrue on and after the date 
                        of the original notice of overpayment.
                            ``(iii) Rate of interest.--The rate of 
                        interest under this subparagraph shall be the 
                        rate otherwise applicable under this title in 
                        the case of overpayments.
            ``(3) Payment audits.--
                    ``(A) Written notice for post-payment audits.--
                Subject to subparagraph (C), if a medicare contractor 
                decides to conduct a post-payment audit of a provider 
                of services, physician, practitioner, or supplier under 
                this title, the contractor shall provide the provider 
                of services, physician, practitioner, or supplier with 
                written notice (which may be in electronic form) of the 
                intent to conduct such an audit.
                    ``(B) Explanation of findings for all audits.--
                Subject to subparagraph (C), if a medicare contractor 
                audits a provider of services, physician, practitioner, 
                or supplier under this title, the contractor shall--
                            ``(i) give the provider of services, 
                        physician, practitioner, or supplier a full 
                        review and explanation of the findings of the 
                        audit in a manner that is understandable to the 
                        provider of services, physician, practitioner, 
                        or supplier and permits the development of an 
                        appropriate corrective action plan;
                            ``(ii) inform the provider of services, 
                        physician, practitioner, or supplier of the 
                        appeal rights under this title as well as 
                        consent settlement options (which are at the 
                        discretion of the Secretary); and
                            ``(iii) give the provider of services, 
                        physician, practitioner, or supplier an 
                        opportunity to provide additional information 
                        to the contractor.
                    ``(C) Exception.--Subparagraphs (A) and (B) shall 
                not apply if the provision of notice or findings would 
                compromise pending law enforcement activities, whether 
                civil or criminal, or reveal findings of law 
                enforcement-related audits.
                    ``(D) Medicare contractor defined.--For purposes of 
                this paragraph and paragraph (4), the term `medicare 
                contractor' has the meaning given such term in section 
                1889(f).
            ``(4) Notice of over-utilization of codes.--The Secretary 
        shall establish, in consultation with organizations 
        representing the classes of providers of services, physicians, 
        practitioners, and suppliers, a process under which the 
        Secretary provides for notice to classes of providers of 
        services, physicians, practitioners, and suppliers served by a 
        medicare contractor in cases in which the contractor has 
        identified that particular billing codes may be overutilized by 
        that class of providers of services, physicians, practitioners, 
        or suppliers under the programs under this title (or provisions 
        of title XI insofar as they relate to such programs).
            ``(5) Standard methodology for probe sampling.--The 
        Secretary shall establish a standard methodology for medicare 
        administrative contractors to use in selecting a sample of 
        claims for review in the case of an abnormal billing pattern.
            ``(6) Consent settlement reforms.--
                    ``(A) In general.--The Secretary may use a consent 
                settlement (as defined in subparagraph (D)) to settle a 
                projected overpayment.
                    ``(B) Opportunity to submit additional information 
                before consent settlement offer.--Before offering a 
                provider of services, physician, practitioner, or 
                supplier a consent settlement, the Secretary shall--
                            ``(i) communicate to the provider of 
                        services, physician, practitioner, or supplier 
                        in a non-threatening manner that, based on a 
                        review of the medical records requested by the 
                        Secretary, a preliminary evaluation of those 
records indicates that there would be an overpayment; and
                            ``(ii) provide for a 45-day period during 
                        which the provider of services, physician, 
                        practitioner, or supplier may furnish 
                        additional information concerning the medical 
                        records for the claims that had been reviewed.
                    ``(C) Consent settlement offer.--The Secretary 
                shall review any additional information furnished by 
                the provider of services, physician, practitioner, or 
                supplier under subparagraph (B)(ii). Taking into 
                consideration such information, the Secretary shall 
                determine if there still appears to be an overpayment. 
                If so, the Secretary--
                            ``(i) shall provide notice of such 
                        determination to the provider of services, 
                        physician, practitioner, or supplier, including 
                        an explanation of the reason for such 
                        determination; and
                            ``(ii) in order to resolve the overpayment, 
                        may offer the provider of services, physician, 
                        practitioner, or supplier--
                                    ``(I) the opportunity for a 
                                statistically valid random sample; or
                                    ``(II) a consent settlement.
                The opportunity provided under clause (ii)(I) does not 
                waive any appeal rights with respect to the alleged 
                overpayment involved.
                    ``(D) Consent settlement defined.--For purposes of 
                this paragraph, the term `consent settlement' means an 
                agreement between the Secretary and a provider of 
                services, physician, practitioner, or supplier whereby 
                both parties agree to settle a projected overpayment 
                based on less than a statistically valid sample of 
                claims and the provider of services, physician, 
                practitioner, or supplier agrees not to appeal the 
                claims involved.''.

SEC. 503. PROCESS FOR CORRECTION OF INCOMPLETE OR MISSING DATA WITHOUT 
              PURSUING APPEALS PROCESS.

    The Secretary shall develop, in consultation with appropriate 
medicare contractors (as defined in section 1889(g) of the Social 
Security Act, as inserted by section 401(e)(1)) and representatives of 
providers of services, physicians, practitioners, and suppliers, a 
process whereby, in the case of incomplete or missing information that 
are detected in the submission of claims under the programs under title 
XVIII of such Act by such a provider, physician, practitioner, or 
supplier, the claim--
            (1) shall not be processed;
            (2) shall be returned to that provider, physician, 
        practitioner, or supplier; and
            (3) may be resubmitted by the provider, physician, 
        practitioner, or supplier with the incomplete or missing 
        information and without having to appeal the claim.

SEC. 504. AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

    The first sentence of section 1128(c)(3)(B) (42 U.S.C. 1320a-
7(c)(3)(B)) is amended to read as follows: ``Subject to subparagraph 
(G), in the case of an exclusion under subsection (a), the minimum 
period of exclusion shall be not less than five years, except that, 
upon the request of the administrator of a Federal health care program 
(as defined in section 1128B(f)), the Secretary may waive the exclusion 
under subsection (a)(1), (a)(3), or (a)(4) with respect to that program 
in the case of an individual or entity that is the sole community 
physician or sole source of essential specialized services in a 
community if the administrator finds that the exclusion would impose a 
hardship on beneficiaries under that program.''.
                                 <all>