[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6575 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 6575

 To amend title XVIII of the Social Security Act to improve operations 
of recovery auditors under the Medicare integrity program, to increase 
 transparency and accuracy in audits conducted by contractors, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 16, 2012

  Mr. Graves of Missouri (for himself, Mr. Schiff, Mr. Long, and Mr. 
    Akin) 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 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 improve operations 
of recovery auditors under the Medicare integrity program, to increase 
 transparency and accuracy in audits conducted by contractors, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Audit 
Improvement Act of 2012''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Combined additional documentation request limit.
Sec. 3. Improvement of recovery auditor operations.
Sec. 4. Greater transparency of recovery auditor performance.
Sec. 5. Restoring due process rights under the AB rebilling 
                            demonstration.
Sec. 6. Accurate payment for rebilled claims.
Sec. 7. Requirement for physician validation for medical necessity 
                            denials.

SEC. 2. COMBINED ADDITIONAL DOCUMENTATION REQUEST LIMIT.

    (a) Establishment of Annual Limits.--The Secretary of Health and 
Human Services shall establish a process under which the number of 
additional documentation requests made by a Medicare contractor (as 
defined in subsection (b)(1)) pursuant to a complex prepayment audit or 
complex postpayment audit under chapter 3 of the Medicare Program 
Integrity Manual, or otherwise, with respect to part A claims (as 
defined in subsection (b)(2)) of a hospital in a year may not exceed, 
across all such contractors with respect to such claims of such 
hospital, the lesser of--
            (1) 2 percent of all such claims for such year; or
            (2) 500 additional documentation requests during any 45-day 
        period.
    (b) Definitions.--In this section:
            (1) Medicare contractor.--The term ``Medicare contractor'' 
        means any of the following:
                    (A) A Medicare administrative contractor under 
                section 1874A of the Social Security Act (42 U.S.C. 
                1395kk), including a fiscal intermediary and a carrier 
                under sections 1816 and 1842, respectively.
                    (B) A recovery audit contractor, zone program 
                integrity contractor, and program safeguard or 
                integrity contractor under section 1893(h) of such Act 
                (42 U.S.C. 1395ddd(h)).
                    (C) A Comprehensive Error Rate Testing (CERT) 
                program contractor with a contract with the Secretary 
                of Health and Human Services to review error rates 
                under title XVIII of the Social Security Act (42 U.S.C. 
                1395 et seq.).
            (2) Part a claim.--The term ``part A claim'' means a claim 
        for payment under part A of title XVIII of the Social Security 
        Act (42 U.S.C. 1395c et seq.) made by a hospital for furnishing 
        inpatient hospital services to individuals entitled to have 
        payment made on their behalf under such part A for the 
        furnishing of such services.
            (3) Hospital.--The term ``hospital'' has the meaning given 
        such term under subsection (e) of section 1861 of the Social 
        Security Act (42 U.S.C. 1395x), and includes a psychiatric 
        hospital as defined in subsection (f) of such section. In 
        applying such definition for purposes of this section, such 
        term means the campus of the hospital, as identified by the tax 
        identification number of the hospital, and includes all 
        inpatient hospital facilities under such number located in the 
        same area.
    (c) Effective Date.--This section takes effect on the date of the 
enactment of this Act and shall apply with respect to claims submitted 
for payment under title XVIII of the Social Security Act for items or 
services furnished by providers of services or suppliers on or after 
January 1, 2013.

SEC. 3. IMPROVEMENT OF RECOVERY AUDITOR OPERATIONS.

    (a) Recovery Auditors.--
            (1) In general.--Section 1893(h) of the Social Security Act 
        (42 U.S.C. 1395ddd(h)) is amended by adding at the end the 
        following new paragraph:
            ``(10) Mandatory terms and conditions under contracts with 
        recovery audit contractors.--In addition to such other terms 
        and conditions as the Secretary may require under contracts 
        with recovery audit contractors under this subsection with 
        respect to a hospital, including a psychiatric hospital (as 
        defined in section 1861(f)), the Secretary shall ensure each of 
        the following requirements are included under such contracts:
                    ``(A) Penalties for certain compliance failures.--
                            ``(i) In general.--Each such contract shall 
                        provide for the imposition of financial 
                        penalties by the Secretary under such contract 
                        in the case of any recovery audit contractor 
                        with respect to which the Secretary determines 
                        there is a pattern of failure by such 
                        contractor to meet any program requirement 
                        described in clause (ii). The Secretary shall 
                        establish the amount of financial penalties and 
                        the periodicity under which such penalties 
                        shall be imposed under this subparagraph, in no 
                        case less often than annually.
                            ``(ii) Program requirement described.--For 
                        purposes of this subparagraph, each of the 
                        following requirements under the statement of 
                        work for a recovery audit contractor 
                        constitutes a program requirement with respect 
                        to which failure to meet such requirement shall 
                        result in the imposition of a financial penalty 
                        under clause (i):
                                    ``(I) Audit deadline.--Completing a 
                                determination with respect to each 
                                audit of a hospital the recovery audit 
                                contractor conducts within the 
                                timeframes applicable under guidelines 
                                of the Secretary.
                                    ``(II) Timely communication.--In 
                                the case of a denial of a claim of a 
                                hospital, furnishing the hospital a 
                                demand letter in a timely fashion under 
                                claims and appeals timeframes 
                                applicable under guidelines of the 
                                Secretary.
                    ``(B) Penalty for overturned appeals.--
                            ``(i) In general.--Each such contract shall 
                        require a recovery audit contractor to pay a 
                        fee to the prevailing party in the case of a 
                        claim denial that is overturned on appeal.
                            ``(ii) Fee amount.--The amount of the fee 
                        payable by a recovery audit contractor to a 
                        prevailing party under clause (i) shall be 
                        determined under a fee schedule established by 
                        the Secretary for such purpose.
                    ``(C) Postpayment and prepayment audits.--
                            ``(i) Requiring focus on widespread payment 
                        errors.--
                                    ``(I) In general.--The Secretary 
                                shall not approve the conduct of a 
                                postpayment or prepayment medical 
                                necessity audit by a recovery audit 
                                contractor unless such review addresses 
                                a widespread payment error rate (as 
                                defined in clause (ii)).
                                    ``(II) Cessation of audit.--A 
                                recovery audit contractor that 
                                commences an audit under subclause (I) 
                                shall cease such audit or any similar 
                                audits, if upon annual review, the 
                                applicable payment error rate is no 
                                longer a widespread payment error rate 
                                (as so defined).
                            ``(ii) Widespread payment error rate 
                        defined.--
                                    ``(I) In general.--In this 
                                subparagraph, the term `widespread 
                                payment error rate' means, with respect 
                                to medical necessity reviews conducted 
                                by a recovery audit contractor, a 
                                payment error rate that exceeds the 
                                rate specified in subclause (II) for a 
                                particular medical necessity audit 
                                determined by the Secretary using a 
                                statistically significant sampling of 
                                claims submitted by hospitals in the 
                                jurisdiction of the recovery audit 
                                contractor and adjusted to take into 
                                account claim denials overturned on 
                                appeal.
                                    ``(II) Rate specified.--The rate 
                                specified in this subclause is 40 
                                percent, except that the Secretary 
                                shall annually evaluate such rate and 
                                reduce it as necessary to account for 
                                changes in payment error rates with the 
                                aim of continued, steady improvement of 
                                billing practices.
                    ``(D) Guidelines for prepayment review.--
                            ``(i) In general.--A recovery audit 
                        contractor may only conduct prepayment review 
                        in the manner provided under prepayment review 
                        guidelines (described in clause (ii)) 
                        established by the Secretary.
                            ``(ii) Consistent prepayment review 
                        guidelines.--For purposes of prepayment review 
                        activities authorized under this subsection and 
                        section 1874A(h) (relating to prepayment review 
                        by medicare administrative contractors), the 
                        Secretary shall establish guidelines under 
                        which consistent criteria for minimum payment 
                        error rates or improper billing practices 
                        occasion prepayment review by contractors under 
                        this subsection and section 1874A. Such 
                        guidelines shall include criteria for 
                        termination, including termination dates, of 
                        prepayment review.''.
            (2) Conforming amendment to apply financial penalties 
        imposed on recovery contractors to the trust funds.--Section 
        1893(h)(2) of the Social Security Act (42 U.S.C. 1395ddd(h)(2)) 
        is amended by inserting ``, and amounts collected by the 
        Secretary under paragraph (10)(A)(i) (relating to financial 
        penalties for contractor compliance failures),'' after 
        ``paragraph (1)(C)''.
    (b) Conforming Amendment for Medicare Administrative Contractors.--
Section 1874A of the Social Security Act (42 U.S.C. 1395kk-1) is 
amended by adding at the end the following new subsection:
    ``(h) Mandatory Terms and Conditions Under Contracts With Medicare 
Administrative Contractors.--In addition to such other terms and 
conditions as the Secretary may require under contracts with medicare 
administrative contractors under this section with respect to a 
hospital, including a psychiatric hospital (as defined in section 
1861(f)), the Secretary shall ensure each of the following requirements 
are included under such contracts:
            ``(1) Postpayment and prepayment audits.--
                    ``(A) Requiring focus on widespread payment 
                errors.--
                            ``(i) In general.--The Secretary shall not 
                        approve the conduct of a postpayment or 
                        prepayment medical necessity audit by a 
                        medicare administrative contractor unless such 
                        review addresses a widespread payment error 
                        rate (as defined in subparagraph (B)).
                            ``(ii) Cessation of audit.--A medicare 
                        administrative contractor that commences an 
                        audit under clause (i) shall cease such audit 
                        or any similar audits, if upon annual review, 
                        the applicable payment error rate is no longer 
                        a widespread payment error rate (as so 
                        defined).
                    ``(B) Widespread payment error rate defined.--In 
                this paragraph, the term `widespread payment error 
                rate' means, with respect to medical necessity reviews 
                conducted by a medicare administrative contractor, a 
                payment error rate of 40 percent or greater for a 
                particular medical necessity audit determined by the 
                Secretary using a statistically significant sampling of 
                claims submitted by hospitals in the jurisdiction of 
                the medicare administrative contractor and adjusted to 
                take into account claim denials overturned on appeal.
            ``(2) Guidelines for prepayment review.--A medicare 
        administrative contractor may only conduct prepayment review in 
        the manner provided under prepayment review guidelines 
        established by the Secretary under section 
        1893(h)(10)(D)(ii).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contracts entered into or renewed with recovery audit 
contractors under section 1893(h) of the Social Security Act (42 U.S.C. 
1395ddd(h)) and medicare administrative contractors under section 1874A 
of the Social Security Act (42 U.S.C. 1395kk-1) on or after the date of 
the enactment of this Act.

SEC. 4. GREATER TRANSPARENCY OF RECOVERY AUDITOR PERFORMANCE.

    (a) Annual Publication of Relevant Performance Information.--
Section 1893(h) of the Social Security Act (42 U.S.C. 1395ddd(h)), as 
amended by section 3(a), is further amended by adding at the end the 
following new paragraph:
            ``(11) Information on recovery audit contractor 
        performance.--With respect to each recovery audit contractor 
        with a contract under this section for a contract year, the 
        Secretary shall publish on the Internet website of the Centers 
        for Medicare & Medicaid Services the following information with 
        respect to the performance of each such recovery audit 
        contractor:
                    ``(A) Publicly available information on audit 
                rates, denials, and appeals outcomes.--With respect to 
                the performance of each such recovery audit contractor 
                during a contract year, the Secretary shall post on 
                such Internet website the following information:
                            ``(i) Audits.--The aggregate number of 
                        audits conducted by the recovery audit 
                        contractor during the contract year involved, 
                        as well as the number of audits of each of the 
                        following audit types (each in this paragraph 
                        referred to as an `audit type'):
                                    ``(I) Automated.
                                    ``(II) Complex.
                                    ``(III) Medical necessity review.
                                    ``(IV) Part A claims.
                                    ``(V) Part B claims.
                                    ``(VI) Durable medical equipment 
                                claims.
                                    ``(VII) Part A medical necessity.
                            ``(ii) Denials.--The aggregate number of 
                        denials for each audit type made by the 
                        recovery audit contractor during the contract 
                        year involved.
                            ``(iii) Denial rates.--The denial rate of 
                        the recovery audit contractor during the 
                        contract year involved for part A claims, part 
                        B claims, and durable medical equipment claims.
                            ``(iv) Appeals.--The aggregate number of 
                        appeals filed by providers of services and 
                        suppliers with respect to denials for each 
                        audit type made by the recovery audit 
                        contractor during the contract year involved.
                            ``(v) Appeals rates.--The aggregate rate of 
                        appeals filed by providers of services and 
                        suppliers with respect to denials for each 
                        audit type made by the recovery audit 
                        contractor during the contract year involved.
                            ``(vi) Appeals outcomes at each of the 5 
                        stages of appeal.--The outcome of each appeal 
                        filed by a provider of services or supplier of 
                        a denial made by a recovery audit contractor at 
                        each level of appeal as follows:
                                    ``(I) Reconsideration by the 
                                relevant medicare contractor.
                                    ``(II) Redetermination by a 
                                qualified independent contractor.
                                    ``(III) Administrative law judge 
                                hearing.
                                    ``(IV) Medicare Appeals Council 
                                review.
                                    ``(V) United States District Court 
                                judicial review.
                            ``(vii) Net denials.--The net denial for 
                        each audit type, calculated as the difference 
                        between the number of denials for such audit 
                        type under clause (ii) and the number of 
                        denials for such audit type overturned on 
                        appeal.
                    ``(B) Public availability of independent 
                performance evaluation.--The Secretary shall make 
                available on such Internet website the results of any 
                performance evaluation with respect to each recovery 
                audit contractor conducted by an independent entity 
                selected by the Secretary for such purpose. Each 
                performance evaluation shall include in its results for 
                posting on such Internet website a determination of 
                annual error rates of the recovery audit contractor for 
                each audit type and the net denials described in 
                subparagraph (A)(vii).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to contracts entered into or renewed with recovery audit 
contractors under section 1893(h) of the Social Security Act (42 U.S.C. 
1395ddd(h)) on or after the date of the enactment of this Act.

SEC. 5. RESTORING DUE PROCESS RIGHTS UNDER THE AB REBILLING 
              DEMONSTRATION.

    (a) Clarification of Availability of All Appeal Rights.--In 
conducting the AB Rebilling Demonstration (as defined in subsection 
(b)), the Secretary of Health and Human Services may not prohibit any 
appeal from, or any form of appeal available to, a hospital with 
respect to the inpatient hospital services furnished for which payment 
may be made under part A of title XVIII of the Social Security Act for 
which the claim submitted by such hospital was denied as an inpatient 
admission by a recovery auditor with a contract under section 1893(h) 
of such Act (42 U.S.C. 1395ddd(h)) due to a finding by the contractor 
that the inpatient admission was not reasonable and medically 
necessary.
    (b) AB Rebilling Demonstration Defined.--In this section, the term 
``AB Rebilling Demonstration'' means the Medicare Part A to Part B 
Rebilling (AB Rebilling) Demonstration conducted during calendar years 
2012 through 2014 by the Secretary of Health and Human Services through 
the Administrator of the Centers for Medicare & Medicaid Services under 
which a hospital with a participation agreement under the Medicare 
program may receive 90 percent of the allowable part B payment for part 
A short-stay claims that are denied on the basis that the inpatient 
admission was not reasonable and necessary.

SEC. 6. ACCURATE PAYMENT FOR REBILLED CLAIMS.

    (a) Rebilling Under Part B Inpatient Claims Denied Based on Site of 
Service Where Services Found Medically Necessary at the Outpatient 
Level.--
            (1) Recovery auditors.--Section 1893(h) of the Social 
        Security Act (42 U.S.C. 1395ddd(h)), as amended by sections 
        3(a) and 4(a), is further amended by adding at the end the 
        following new paragraph:
            ``(12) Treatment of resubmission of specified claims as 
        original claims.--
                    ``(A) Treatment as original claim.--The 
                resubmission of a specified claim (as defined in 
                subparagraph (C)) shall be deemed to be an original 
                claim for purposes of--
                            ``(i) payment under part B; and
                            ``(ii) provisions under this title relating 
                        to--
                                    ``(I) the authority of a hospital 
                                to resubmit a claim for payment under 
                                the appropriate section of this title; 
                                and
                                    ``(II) requirements for the timely 
                                submission of claims, including under 
                                sections 1814(a), 1842(b)(3), and 
                                1835(a).
                    ``(B) Payment for items and services under 
                resubmitted claim.--Payment shall be made for a 
                specified claim resubmitted under subparagraph (A) for 
                all the items and services furnished for which payment 
                may be made under part B.
                    ``(C) Definitions.--In this paragraph:
                            ``(i) Specified claim.--The term `specified 
                        claim' means a claim submitted by a hospital 
                        for payment under part A for inpatient hospital 
                        services which a recovery audit contractor 
                        determines--
                                    ``(I) the inpatient hospital 
                                services were not medically necessary 
                                and reasonable under section 
                                1862(a)(1)(A) based on site of service; 
                                and
                                    ``(II) the services furnished would 
                                be medically necessary and reasonable 
                                in an outpatient setting of the 
                                hospital.
                            ``(ii) Resubmission.--The term 
                        `resubmission' includes, with respect to a 
                        specified claim of a hospital, the submission 
                        by the hospital of a new claim or of an 
                        adjusted original claim.''.
            (2) Conforming amendment for medicare administrative 
        contractors.--Subsection (h) of section 1874A of the Social 
        Security Act (42 U.S.C. 1395kk-1), as added by section 3(b), is 
        further amended by adding at the end the following new 
        paragraph:
            ``(3) Treatment of resubmission of specified claims as 
        original claims.--
                    ``(A) Treatment as original claim.--The 
                resubmission of a specified claim (as defined in 
                subparagraph (C)) shall be deemed to be an original 
                claim for purposes of--
                            ``(i) payment under part B; and
                            ``(ii) provisions under this title relating 
                        to--
                                    ``(I) the authority of a hospital 
                                to resubmit a claim for payment under 
                                the appropriate section of this title; 
                                and
                                    ``(II) requirements for the timely 
                                submission of claims, including under 
                                sections 1814(a), 1842(b)(3), and 
                                1835(a).
                    ``(B) Payment for items and services under 
                resubmitted claim.--Payment shall be made for a 
                specified claim resubmitted under subparagraph (A) for 
                all the items and services furnished for which payment 
                may be made under part B.
                    ``(C) Definitions.--In this paragraph:
                            ``(i) Specified claim.--The term `specified 
                        claim' means a claim submitted by a hospital 
                        for payment under part A for inpatient hospital 
                        services which a medicare administrative 
                        contractor determines--
                                    ``(I) the inpatient hospital 
                                services were not medically necessary 
                                and reasonable under section 
                                1862(a)(1)(A) based on site of service; 
                                and
                                    ``(II) the services furnished would 
                                be medically necessary and reasonable 
                                in an outpatient setting of the 
                                hospital.
                            ``(ii) Resubmission.--The term 
                        `resubmission' includes, with respect to a 
                        specified claim of a hospital, the submission 
                        by the hospital of a new claim or of an 
                        adjusted original claim.''.
            (3) Conforming requirement for cert contractors.--
                    (A) Treatment of resubmission of specified claims 
                as original claims.--A Comprehensive Error Rate Testing 
                (CERT) program contractor with a contract with the 
                Secretary of Health and Human Services to review error 
                rates under title XVIII of the Social Security Act (42 
                U.S.C. 1395 et seq.) shall deem the resubmission of a 
                specified claim (as defined in subparagraph (C)) as an 
                original claim for purposes of--
                            (i) payment under part B of such title 
                        XVII; and
                            (ii) provisions under such title relating 
                        to--
                                    (I) the authority of a hospital to 
                                resubmit a claim for payment under the 
                                appropriate section of such title; and
                                    (II) requirements for the timely 
                                submission of claims, including under 
                                sections 1814(a), 1842(b)(3), and 
                                1835(a) of such Act (42 U.S.C. 
                                1395f(a), 1395u(b)(3), and 1395n(a), 
                                respectively).
                    (B) Payment for items and services under 
                resubmitted claim.--Payment shall be made for a 
                specified claim resubmitted under subparagraph (A) for 
                all the items and services furnished for which payment 
                may be made under part B of such title XVIII.
                    (C) Definitions.--In this paragraph:
                            (i) Specified claim.--The term ``specified 
                        claim'' means a claim submitted by a hospital 
                        (as defined in section 1861(e) of such Act (42 
                        U.S.C. 1395x(e))) for payment under title XVIII 
                        of such Act for inpatient hospital services 
                        which a Comprehensive Error Rate Testing (CERT) 
                        program contractor determines--
                                    (I) the inpatient hospital services 
                                were not medically necessary and 
                                reasonable under section 1862(a)(1)(A) 
                                of such Act based on site of service; 
                                and
                                    (II) the services furnished would 
                                be medically necessary and reasonable 
                                in an outpatient setting of the 
                                hospital.
                            (ii) Resubmission.--The term 
                        ``resubmission'' includes, with respect to a 
                        specified claim of a hospital, the submission 
                        by the hospital of a new claim or of an 
                        adjusted original claim.
            (4) Effective date.--The amendments made by paragraphs (1) 
        and (2), and the provisions of paragraph (3), shall apply to 
        contracts entered into or renewed with recovery audit 
        contractors under section 1893(h) of the Social Security Act 
        (42 U.S.C. 1395ddd(h)), medicare administrative contractors 
        under section 1874A of the Social Security Act (42 U.S.C. 
        1395kk-1) and Comprehensive Error Rate Testing (CERT) program 
        contractors, respectively, on or after the date of the 
        enactment of this Act.
    (b) Treatment of Audited Claims as Reopened.--
            (1) Recovery auditors.--Section 1893(h)(4) of the Social 
        Security Act (42 U.S.C. 1395ddd(h)(4)) is amended by adding 
        after and below subparagraph (B) the following:
        ``For purposes of the ability of a hospital to resubmit a claim 
        for payment under the appropriate section of this title and for 
        purposes of requirements for the timely submission of claims by 
        hospitals, including under sections 1814(a), 1842(b)(3), and 
        1835(a), any claim that is the subject of an audit by a 
        recovery audit contractor with a contract under this section 
        shall be deemed to be a reopened claim.''.
            (2) Conforming amendment for medicare administrative 
        contractors.--Section 1874A(h) of the Social Security Act (42 
        U.S.C. 1395kk-1(h)), as added by section 3(b) and as amended by 
        subsection (a)(2), is further amended by adding at the end the 
        following new paragraph:
            ``(4) Treatment of audited claims as reopened.--For 
        purposes of the ability of a hospital to resubmit a claim for 
        payment under the appropriate provisions of this title and for 
        purposes of requirements for the timely submission of claims by 
        hospitals, including under sections 1814(a), 1842(b)(3), and 
        1835(a), any claim that is the subject of an audit by a 
        medicare administrative contractor with a contract under this 
        section shall be deemed to be a reopened claim.''.
            (3) Conforming requirement for cert contractors.--
                    (A) Treatment of audited claims as reopened.--Any 
                claim made for payment for services furnished by a 
                hospital under title XVIII of the Social Security Act 
                (42 U.S.C. 1395 et seq.) that is the subject of an 
                audit by a Comprehensive Error Rate Testing (CERT) 
                program contractor with a contract with the Secretary 
                of Health and Human Services shall be deemed to be a 
                reopened claim for purposes of the ability of such 
                hospital to resubmit a claim for payment under the 
                appropriate provisions of such title XVIII and for 
                purposes of requirements for the timely submission of 
                claims by hospitals under such title XVIII, including 
                under sections 1814(a), 1842(b)(3), and 1835(a) of the 
                Social Security Act (42 U.S.C. 1395f(a), 1395u(b)(3), 
                and 1395n(a), respectively).
                    (B) Definition.--In this paragraph, the term 
                ``hospital'' has the meaning given such term in 
                subsection (e) of section 1861 of the Social Security 
                Act (42 U.S.C. 1395x), and includes a psychiatric 
                hospital as defined in subsection (f) of such section.
            (4) Effective date.--The amendments made by paragraphs (1) 
        and (2), and the provisions of paragraph (3), shall take effect 
        on the date of the enactment of this Act and apply to claims 
        subject to audit on or after September 1, 2010.

SEC. 7. REQUIREMENT FOR PHYSICIAN VALIDATION FOR MEDICAL NECESSITY 
              DENIALS.

    (a) Recovery Auditors.--Section 1893(h) of the Social Security Act 
(42 U.S.C. 1395ddd(h)), as amended by sections 3(a), 4(a), and 6(a)(1), 
is further amended by adding at the end the following new paragraph:
            ``(13) Physician validation of medical necessity denials 
        made by non-physician reviewers.--
                    ``(A) In general.--Each contract under this section 
                for a recovery audit contractor shall require that a 
                physician (as defined in section 1861(r)(1)) review 
                each denial of a claim for medical necessity when a 
                medical necessity review of such claim is performed and 
                a denial is made by an employee of the contractor who 
                is not a physician (as so defined).
                    ``(B) Determination; validation.--A physician 
                reviewing a claim under subparagraph (A) shall--
                            ``(i) make a determination whether the 
                        denial of the claim under the medical necessity 
                        review by the non-physician employee is 
                        appropriate;
                            ``(ii) sign and certify such determination; 
                        and
                            ``(iii) append such signed and certified 
                        determination to the claim file.
                    ``(C) Treatment as medically necessary.--A claim 
                with respect to which a denial has been made as 
                described in subparagraph (A) for which the physician 
                determines the denial is not appropriate under 
                subparagraph (B) shall be deemed to be medically 
                necessary.
                    ``(D) Medical necessity review defined.--In this 
                paragraph, the term `medical necessity review' means, 
                with respect to an audit of a claim of a provider of 
                services or supplier, a review conducted by a recovery 
                audit contractor for the purpose of determining whether 
                an item or service furnished for which the claim is 
                filed by such provider of services or supplier is 
                reasonable and necessary for the diagnosis or treatment 
                of illness or injury under section 1862(a)(1)(A).''.
    (b) Conforming Amendment to Medicare Administrative Contractors.--
Subsection (h) of section 1874A of the Social Security Act (42 U.S.C. 
1395kk-1), as added by section 3(b) and as amended by subsections 
(a)(2) and (b)(2) of section 6, is further amended by adding at the end 
the following new paragraph:
            ``(5) Physician validation of medical necessity denials 
        made by non-physician reviewers.--
                    ``(A) In general.--A physician (as defined in 
                section 1861(r)(1)) shall review each denial of a claim 
                for medical necessity when a medical necessity review 
                of such claim is performed and a denial is made by an 
                employee of the contractor who is not a physician (as 
                so defined).
                    ``(B) Determination; validation.--A physician 
                reviewing a claim under subparagraph (A) shall--
                            ``(i) make a determination whether the 
                        denial of the claim under the medical necessity 
                        review by the non-physician employee is 
                        appropriate;
                            ``(ii) sign and certify such determination; 
                        and
                            ``(iii) append such signed and certified 
                        determination to the claim file.
                    ``(C) Treatment as medically necessary.--A claim 
                with respect to which a denial has been made as 
                described in subparagraph (A) for which the physician 
                determines the denial is not appropriate under 
                subparagraph (B) shall be deemed to be medically 
                necessary.
                    ``(D) Medical necessity review defined.--In this 
                paragraph, the term `medical necessity review' means, 
                with respect to an audit of a claim of a provider of 
                services or supplier, a review conducted by a medicare 
                administrative contractor for the purpose of 
                determining whether an item or service furnished for 
                which the claim is filed by such provider of services 
                or supplier is reasonable and necessary for the 
                diagnosis or treatment of illness or injury under 
                section 1862(a)(1)(A).''.
    (c) Conforming Requirement for CERT Contractors.--
            (1) Contract requirement for physician validation of 
        medical necessity denials made by non-physician reviewers.--The 
        Secretary of Health and Human Services shall require under each 
        contract with a Comprehensive Error Rate Testing (CERT) program 
        contractor to review error rates under title XVIII of the 
        Social Security Act (42 U.S.C. 1395 et seq.) that the CERT 
        program contractor ensure that a physician (as defined in 
        section 1861(r)(1) of such Act (42 U.S.C. 1395x(r)(1))) reviews 
        each denial of a claim for medical necessity when a medical 
        necessity review of such claim is performed and a denial is 
        made by an employee of the contractor who is not a physician 
        (as so defined).
            (2) Determination; validation.--A physician reviewing a 
        claim under paragraph (1) shall--
                    (A) make a determination whether the denial of the 
                claim under the medical necessity review by the non-
                physician employee is appropriate;
                    (B) sign and certify such determination; and
                    (C) append such signed and certified determination 
                to the claim file.
            (3) Treatment as medically necessary.--A claim with respect 
        to which a denial has been made as described in paragraph (1) 
        for which the physician determines the denial is not 
        appropriate under paragraph (2) shall be deemed to be medically 
        necessary.
            (4) Medical necessity review defined.--In this subsection, 
        the term ``medical necessity review'' means, with respect to an 
        audit of a claim of a provider of services or supplier, a 
        review conducted by a CERT program contractor for the purpose 
        of determining whether an item or service furnished for which 
        the claim is filed by such provider of services or supplier is 
        reasonable and necessary for the diagnosis or treatment of 
        illness or injury under section 1862(a)(1)(A) of the Social 
        Security Act (42 U.S.C. 1395y(a)(1)(A)).
    (d) Effective Date.--The amendments made by subsections (a) and 
(b), and the provisions of subsection (c), shall apply to contracts 
entered into or renewed with recovery audit contractors under section 
1893(h) of the Social Security Act (42 U.S.C. 1395ddd(h)), medicare 
administrative contractors under section 1874A of the Social Security 
Act (42 U.S.C. 1395kk-1) and Comprehensive Error Rate Testing (CERT) 
program contractors, respectively, on or after the date of the 
enactment of this Act.
                                 <all>