[Senate Report 105-257]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 484
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-257
_______________________________________________________________________


 
         FEDERAL EMPLOYEES HEALTH CARE PROTECTION ACT OF 1997

                               __________

                              R E P O R T

                                 of the


                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                             Together with

                            ADDITIONAL VIEWS

                              to accompany

                               H.R. 1836

    TO AMEND CHAPTER 89 OF TITLE 5, UNITED STATES CODE, TO IMPROVE 
 ADMINISTRATION OF SANCTIONS AGAINST UNFIT HEALTH CARE PROVIDERS UNDER 
 THE FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM, AND FOR OTHER PURPOSES





                  July 21 1998.--Ordered to be printed


                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOHN GLENN, Ohio
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas                DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico         RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi            ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma                MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
             Hannah S. Sistare, Staff Director and Counsel
                       Dan Blair, Senior Counsel
               Ann C. Rehfuss, Professional Staff Member
                 Leonard Weiss, Minority Staff Director
                       Lynn L. Baker, Chief Clerk


                                                       Calendar No. 484
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-257
_______________________________________________________________________


        THE FEDERAL EMPLOYEES HEALTH CARE PROTECTION ACT OF 1998
                                _______
                                

                 July 21, 1998.--Ordered to be printed

_______________________________________________________________________


Mr. Thompson, from the Committee on Governmental Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1836]

    The Committee on Governmental Affairs, to which was 
referred the bill (H.R. 1836) to strength the integrity and 
standards of the Federal Employee Health Benefits Program 
(FEHBP) and allow it to maintain its reputation as a high 
quality and cost-effective program, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends, by a vote of 9-0, that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Purpose..............................................1
 II. Legislative History..............................................2
III. Need for Legislation.............................................2
 IV. Section-by-Section Analysis......................................3
  V. Estimated Cost of Legislation...................................11
 VI. Evaluation of Regulatory Impact.................................15
VII. Additional Views................................................16
VIII.Changes in Existing Law.........................................54


                         I. Summary and Purpose

    H.R. 1836, the Federal Employee Health Care Protection Act 
of 1998, was designed to make a number of improvements to the 
Federal Employee Health Benefits Program (FEHBP). Specifically, 
the bill would allow the government to impose sanctions on the 
providers or bar them from selling coverage to any government 
agency; would encourage full disclosure in discounted rate 
agreements; and would establish standards for readmitting 
discontinued health plans and for crediting of associated 
contingency reserves. Additionally, the bill would make a 
number of technical changes.

                        II. Legislative History

    H.R. 1836 was introduced by Representative Dan Burton (R-
IN) on June 10, 1997. The bill was referred to the House 
Government Reform and Oversight Committee on June 10, 1997 and 
to the Subcommittee on Civil Service on June 11, 1997. The 
legislation was marked up, with amendments, by the Subcommittee 
on October 22, 1997, and by the full Committee on October 31, 
1997. No hearings were held, nor written testimony received. 
The House passed H.R. 1836 by voice vote, under suspension of 
the rules, on November 4, 1997.
    On November 5, 1997, H.R. 1836 was referred to the Senate 
Committee on Governmental Affairs, and to the Subcommittee on 
International Security, Proliferation, and Federal Services on 
November 11, 1997. On March 31, 1998, a majority (8) of the 
Subcommittee Members approved reporting favorably H.R. 1836 to 
the full Committee. No hearings were held, nor testimony 
received.
    The Committee proceeded to consider H.R. 1836 on April 1, 
1998. A technical amendment to section 4 was offered by Senator 
Cochran. The amendment changed certain dates in Section 4 of 
the bill to recognize that the health plans currently offered 
to employees by the Federal Reserve and the Federal Deposit 
Insurance Corporation did not cease to exist in January 1998. 
Those agencies may now terminate those health plans before 
January 3, 1999, thereby allowing employees of those agencies 
to enroll in the Federal Employee Health Benefits Program. The 
amendment was adopted by voice vote. H.R. 1836, as amended, was 
considered en bloc with other legislation and was reported 
favorably to the full Senate by a recorded vote of 9-0. Voting 
in the affirmative were Senators Akaka, Cleland, Durbin, Glenn, 
Levin, Cochran, Nickles, Roth, and Thompson.

                       III. Need for Legislation

    H.R. 1836, as amended by the Committee, addresses several 
areas of operation of the Federal Employees Health Benefits 
Program. The legislation provides the Office of Personnel 
Management with additional ways of fighting waste, fraud, and 
abuse in the program. Thus, OPM will be equipped to deal 
effectively with health care providers who participate in 
fraudulent activities affecting the FEHBP. In addition, the 
legislation permits certain employees of the Federal Deposit 
Insurance Corporation and the Federal Reserve Board to 
participate in the FEHBP, establishes statutory requirements 
regarding the readmitting of health care plans sponsored by 
employee organizations that have previously discontinued 
participation in the FEHBP, and increases the maximum amount of 
the physicians' comparability allowance from $20,000 to 
$30,000. These changes improve the operation of the program to 
the benefit of program enrollees, carriers, taxpayers and the 
federal government.
    One area of program operation addressed by H.R. 1836 
involves the practice of plan carriers contracting with third 
parties to obtain discounts from health care providers. The 
Committee recognizes the important role that Preferred Provider 
Organizations (PPOs) play in today's health care market. 
Frequently, the PPOs negotiate discounted rate schedules with 
health care providers in exchange for certain incentives. The 
incentives may include an agreement to steer patients to the 
provider, in the case of so-called ``directed PPOs,'' or they 
may include financial incentives such as prepayment or prompt 
payment in the case of so-called ``non-directed PPOs.'' Both 
directed and non-directed PPOs provide legitimate and valuable 
benefits to health care providers, carriers, and patients.
    Based upon concerns raised to the House Government Reform 
and Oversight Committee by the American Medical Association and 
the American Hospital Association that certain payers were 
taking advantage of discounts to which they were not entitled, 
the Office of Personnel Management Inspector General was 
requested to conduct a review ``. . . to determine whether 
silent PPOs were used by FEHBP carriers to capture discounts to 
which they were not entitled.'' That report is included in the 
Additional Views submitted by Senator Thad Cochran, Chairman of 
the Subcommittee on International Security, Proliferation and 
Federal Services.
    Under this bill, OPM must encourage carriers to seek 
assurances from any person with whom they contract to obtain 
discounted rates from providers that the conditions for such 
discounts are fully disclosed to the providers who grant them. 
Further, the Committee recognizes the necessity of the 
existence of contracts between providers and networks, and the 
benefits that PPO arrangements provide the FEHBP.

                    IV. Section-by-Section Analysis

                         section 1. short title

    This Act may be cited as the ``Federal Employees Health 
Care Protection Act of 1998''.

                section 2. debarment and other sanctions

    Section 2 relates to debarment and other sanctions on 
health care providers in the Federal Employees Health Benefits 
Program (FEHBP).

Definitions

    Current law.--Defines the terms ``provider of health 
care,'' ``individual covered under this chapter,'' and 
``convicted.''
    H.R. 1836.--Retains these definitions and adds another for 
``should know,''--``a person, with respect to information, acts 
in deliberate ignorance of, or in reckless disregard of, the 
truth or falsity of the information, and no proof of specific 
intent to defraud is required.''

Authority to debar

    Current law.--The Office of Personnel Management (OPM) has 
permissive authority to debar, i.e., exclude certain providers 
of health care services or supplies from participating in the 
FEHBP.
    H.R. 1836.--Retains permissive authority to debar, but adds 
mandatory authority to debar.

Grounds for debarment

    Current law.--OPM may debar any provider that has been 
convicted, under federal or state law, or a criminal offense--
          (1) relating to fraud, corruption, breach of 
        fiduciary responsibility or other financial misconduct 
        in connection with the delivery of a health care 
        service or supply;
          (2) relating to neglect or abuse of patients in 
        connection with the delivery of a health care service 
        or supply;
          (3) in connection with the interference with or 
        obstruction of an investigation or prosecution of a 
        criminal offense described in (1) or (2); or
          (4) relating to the unlawful manufacture, 
        distribution, prescription, or dispensing of a 
        controlled substance.
    OPM also may debar any provider--
          (1) whose license to provide health care services or 
        supplies has been revoked, suspended, restricted, or 
        not renewed by a state licensing authority for reasons 
        relating to the provider's professional competence or 
        performance or financial integrity; or
          (2) that surrendered such a license while a formal 
        disciplinary proceeding was pending before such an 
        authority, if the proceeding concerned competence, 
        performance, or financial integrity.
    H.R. 1836.--Changes permissive debarment to mandatory for 
any provider convicted of criminal matters cited in grounds 1-4 
above.
    Further, this provision adds an additional ground for 
mandatory debarment for any provider that currently is 
suspended or excluded from participation under any program of 
the federal government involving procurement or nonprocurement 
activities.
    The section retains the permissive debarment for the above 
grounds relating to professional licensing.
    The section adds four additional grounds for permissive 
debarment for--
          (1) any provider that is an entity directly or 
        indirectly owned, or with a five percent or more 
        controlling interest, by an individual who was 
        convicted of any offense that is a ground for mandatory 
        debarment, against whom a civil monetary penalty has 
        been assessed, or who has been debarred from 
        participating in FEHBP;
          (2) any individual who directly or indirectly owns or 
        has a controlling interest in an entity and who knows 
        or should know of the action constituting the basis for 
        the entity's conviction of any offense for which 
        mandatory debarment may be imposed, assessment with a 
        civil penalty, or debarment from participation;
          (3) any provider that OPM determines, in connection 
        with claims presented, has charged for health care 
        services or supplies in an amount substantially in 
        excess of the provider's customary charges for such 
        services or supplies (unless OPM finds there is good 
        cause for such a charge) or has charged for health care 
        services or supplies substantially in excess of the 
        needs of the covered individual or which are of a 
        quality which fails to meet professionally recognized 
        standards for the services or supplies; or
          (4) any provider that OPM determines has committed 
        acts for which a civil penalty may be imposed.

Consequence of debarment

    Current law.--No payment may be made by a carrier pursuant 
to any FEHBP contract to a provider that is barred from 
participating in the program for any service or supply 
furnished by the provider during the period of debarment.
    H.R. 1836.--No change.

Authority for civil penalties and additional sanctions

    Current law.--OPM has permissive authority to impose, in 
addition to other penalties that may be prescribed by law, and 
after consulting with the Attorney General, a civil monetary 
penalty of not more than $10,000 for any item or service 
involved.
    In addition, a provider against whom a civil penalty has 
been imposed is subject to a mandatory assessment of not more 
than twice the amount claimed for each item or service.
    Moreover, OPM has permissive authority in the same 
proceeding to bar such provider from participating in FEHBP.
    H.R. 1836.--No change.

Grounds for imposing civil penalties and additional sanctions

    Current law.--OPM has permissive authority to impose a 
monetary civil penalty, mandatory authority to impose an 
assessment, and permissive authority to debar whenever it 
determines--
          (1) in connection with a claim presented under FEHBP, 
        that a provider of health care services or supplies has 
        charged for health care services or supplies--
                  (A) that the provider knows or should have 
                known were not provided as claimed; or
                  (B) in an amount substantially in excess of 
                the provider's customary charges or 
                substantially in excess of the needs of the 
                covered individual or are of a quality that 
                fails to meet professionally recognized 
                standards for such services or supplies;
          (2) has knowingly made, or caused to be made, any 
        false statement of a material fact which is reflected 
        in an FEHBP claim; or
          (3) has knowingly failed to provide any information 
        to a carrier or to OPM to determine whether a payment 
        or reimbursement is payable under FEHBP or the amount 
        of any such payment or reimbursement.
    H.R. 1836.--Amends paragraph (1) above by substituting 
``claims'' in place of ``claim,'' retaining (A), deleting (B), 
and replacing it with two grounds for any provider that has 
charged for a health care service or supply which the provider 
knows or should have known involves--
          (B) charges in violation of applicable charge 
        limitations under 5 U.S.C. section 8904(b) relating to 
        Medicare; or
          (C) an item or service furnished during a period when 
        the provider was excluded from participation in FEHBP 
        pursuant to a determination by OPM, other than as 
        permitted under subsection (g)(2)(B) relating to 
        postponing the effective date of a debarment.

Time limitation on debarment or imposing civil penalties

    Current law.--OPM may not initiate any debarment proceeding 
based on a criminalconviction later than six years after a 
provider was convicted and may not impose a civil penalty, assessment, 
or debarment later than six years after the date a claim meriting a 
civil penalty is presented.
    H.R. 1836.--No change.

Factors to be considered in debarment or imposing civil penalties

    Current law.--In determining the appropriateness of 
imposing debarment, a period of debarment, or a civil penalty, 
OPM is required to take into account--
          (1) the nature of any claims involved and the 
        circumstances under which they were presented;
          (2) the degree of culpability, history of prior 
        offenses or improper conduct of the provider involved; 
        and
          (3) such other matters as justice may require.
    H.R. 1836.--Limits consideration of these factors only to 
cases where debarment is permissive or to civil penalties; it 
does not require considering them for mandatory debarments.

Effective date of debarment

    Current law.--Debarment of a provider under permissive 
debarment authority or in connection with a civil penalty is 
effective at such time and upon such reasonable notice to the 
provider and to carriers and covered individuals as specified 
by OPM regulations. Debarment is effective for any health care 
services or supplies furnished by a provider on or after the 
effective date of debarment, except for inpatient services to 
an individual who was admitted to the institution before the 
date of debarment until 30 days after that date, unless OPM 
determines a shorter period is necessary in order to protect 
the health or safety of the individual receiving those 
services.
    Any notice of debarment must specify the date the debarment 
will become effective and the minimum period it will remain in 
effect.
    H.R. 1836.--In most circumstances, under mandatory and 
permissive debarment authorities, the debarring official has 
authority to determine the effective date of debarment without 
regard to a hearing. Any provider may request a hearing after 
the effective date of debarment. However, in the case of 
permissive debarments on the grounds that would subject the 
provider to civil monetary penalties, OPM cannot make a 
determination which is adverse to a provider until the provider 
has been given reasonable notice and an opportunity for the 
determination to be made after a hearing. The hearing must 
occur before the adverse action is taken, unless OPM determines 
that the health or safety of individuals receiving health care 
warrants an earlier date.

Period of debarment

    Current law.--Generally, the minimum period as specified by 
OPM regulation. Existing law does not mandate a minimum period 
of debarment.
    H.R. 1836.--Generally imposes that providers convicted 
under federal or state law of specified offenses must be 
debarred for at least three years. Those offenses include:
          (1) fraud, corruption, breach of fiduciary 
        responsibility or other financial misconduct;
          (2) neglect or abuse of patients;
          (3) interference with or obstruction of an 
        investigation or prosecution of a criminal offense 
        described in paragraphs (1) and (2) above;
          (4) a criminal offense relating to the manufacture, 
        distribution, prescription, or dispensing of a 
        controlled substance.

Termination of debarment

    Current law.--A provider permissively barred from 
participating in the FEHBP may, after the expiration of the 
minimum period of debarment specified in the notice, apply to 
OPM for termination of debarment. OPM may terminate the 
debarment after the end of the minimum debarment period if it 
determines that there is no basis under the permissive 
debarment authority or the civil penalty authority for 
continuing the debarment and there are reasonable assurances 
that the types of action which formed the basis for the 
original debarment have not recurred or will not recur.
    OPM may terminate the debarment of a provider before the 
expiration of the minimum debarment period if it determines 
that there is no basis for continuing the debarment, there are 
reasonable assurances that such behavior has not and will not 
recur, and early termination is warranted because the provider 
is the sole community provider or the sole source of essential 
specialized services in a community.
    H.R. 1836.--Authorizes OPM to terminate a mandatory 
debarment after the minimum debarment period if it determines 
that there is a no basis under mandatory debarment authority 
for continuing the debarment.

Notice and hearing requirements and judicial review

    Current law.--OPM may not make a determination under 
permissive debarment authority or civil penalty authority 
adverse to a provider until after the provider has been given 
written notice and an opportunity for a hearing, i.e., a pre-
adverse action hearing. Any person adversely affected by an OPM 
final adverse decision may obtain review of the decision in the 
United States Court of Appeals for the Federal Circuit. A 
written petition requesting modification or setting aside of 
OPM's decision must be filed within 60 days after the provider 
is notified.
    H.R. 1836.--Amends this provision by substituting that any 
provider that is subject of an adverse OPM determination is 
entitled to reasonable notice and an opportunity to request a 
hearing of record, i.e. a post-adverse action hearing of 
record. OPM is required to grant a request for a hearing upon a 
showing that due process rights previously have not been 
afforded for any finding of fact relied upon as a cause for an 
adverse determination.
    Such a hearing is conducted without regard to subchapter II 
of chapter 5 of title 5, United States Code, relating to 
administrative procedure, and chapter 7 of title 5, relating to 
judicial review. The hearing is conducted by a hearing officer 
who is appointed by the Director of OPM. A request for a 
hearing is required to be filed within such a period and in 
accordance with procedures as prescribed by OPM.
    Any provider adversely affected by a final decision made 
after a hearing may seek review in the United States District 
Court for the District of Columbia or for the district in which 
the plaintiff resides or has his principle place of business by 
filing an appeal within 60 days from the date the decision is 
issued.
    The court has power to enter, upon the pleadings and 
record, a judgment affirming, modifying, or setting aside, in 
whole or in part, OPM's decision, with or without remanding the 
cause for a hearing. The district court may not set aside or 
remand an OPM decision unless there is not substantial evidence 
on the record to support the findings of OPM or unless the 
action taken by OPM constitutes an abuse of discretion.

Venue of civil penalty actions

    Current law.--A civil action to recover civil monetary 
penalties or assessments must be brought by the Attorney 
General and may be brought in the district court where the 
claim involved was presented or where the person subject to the 
penalty resides. Amounts recovered are paid to OPM for deposit 
into the Employees Health Benefits Fund.
    H.R. 1836.--Retains current law and adds that the amount of 
a penalty or assessment as determined by OPM, or other amount 
OPM may agree to in compromise, may be withheld from any sum 
then or later owing by the United States to the party against 
whom the penalty or assessment has been levied.

Effective dates

    Current law.--Not applicable.
    H.R. 1836.-With three exceptions, the amendments made by 
H.R. 1836 take effect on the date of enactment.
    The first exception relates to permissive debarment under 
specified circumstances and applies only to the extent that the 
misconduct which is the basis for the permissive debarment 
occurs after the date of enactment.
    The second exception involves civil monetary penalties and 
assessments for violations of charge limitation relating to 
Medicare and applies only for charges for items or services 
furnished after the date of enactment.
    The third exception relates to the minimum three year 
period of mandatory debarment for grounds prescribed in the 
mandatory debarment section and applies only with respect to 
criminal convictions that occur after enactment.

  section 3. miscellaneous amendments relating to the health benefits 
                     program for federal employees

    Current Law.--Does not specify that an association of 
organizations may serve as the carrier for any health benefits 
plan in the FEHBP. It also does not specify that the carrier 
for the government-wide Service Benefit Plan need not contract 
with underwriting affiliates licensed in all of the States and 
the District of Columbia.
    H.R. 1836.--Amends the definition of ``carrier'' and the 
description of the govenrment-wide Service Benefit Plan under 
current law. Additionally, H.R. 1836 broadens the preemption 
provisions in current law to enable national plans to offer 
uniform benefits and rates to enrollees regardless of where 
they live.
    Specifically, section 3 does the following:
    Amends paragraph (7) of section 8901, title 5, U.S.C. by 
striking ``organization'' and inserting ``organization and an 
association of organizations or other entities described in 
this paragraph sponsoring a health benefits plan.''
    Amends paragraph (1) of section 8903, title 5, U.S.C. by 
striking ``plan'' and inserting ``plan, which may be 
underwritten by participating affiliates licensed in any number 
of States.''
    Amends section 8902(m) of title 5, U.S.C. by striking 
``(m)(1) and all that follows through that paragraph, and 
inserting ``(m)(1) The terms of any contract under this chapter 
which relate to the nature, provision, or extent of coverage or 
benefits (including payments with respect to benefits) shall 
supersede and preempt any State or local law, or any regulation 
issued thereunder, which relates to health insurance or plan.''

  section 4. consistent coverage for individuals enrolled in a health 
           plan administered by the federal banking agencies

    Current law.--Requies that federal retirees must have 
participated in the FEHBP for at least five years immediately 
preceding retirement in order to be eligible to participate in 
the FEHBP as a retiree and for certain continuation of coverage 
upon separation from service. In recent years, the Federal 
Reserve Board, the Federal Deposit Insurance Corporation, the 
Office of the Comptroller of the Currency, and the Office of 
Thrift Supervision have sponsored their own health insurance 
plans for their employees. These agencies are now dropping 
those plans and participating in the FEHBP. P.L. 103-409 
allowed employees of the Office of the Comptroller of the 
Currency and the Office of Thrift Supervision to participate in 
the FEHBP if they had been enrolled in their agency's plan 
before separation in order to meet the five year requirement.
    H.R. 1836.--Would deem participation in a health insurance 
plan sponsored by the Federal Deposit Insurance Corporation and 
the Board of Governors of the Federal Reserve System to meet 
the enrollment requirements for participation in the FEHBP as 
retirees or under continuation of coverage conditions. it would 
require these federal banking agencies to make a payment to the 
FEHBP fund to cover the government's share of premium costs for 
retirees who would, by the Act, be made eligible for FEHBP 
coverage as an annuitant.
    In an amendment adopted by the Committee, the effective 
dates for the transition in the FEHBP is changed from ``on 
January 3, 1998'' to ``on or before January 2, 1999'' to ensure 
that the transition in the FEHBP is limited only to those 
Federal Reserve and FDIC employees who were participating in 
the health care plans that those agencies are now terminating. 
In addition, this amendment reflects the fact that the health 
plans currently offered to employees by the Federal Reserve and 
the FDIC did not cease to exist in January 1998; and that those 
agencies may now terminate those health plans anytime before 
January 3, 1999 thereby allowing employees to move into the 
FEHBP.

          section 5. full disclosure in health plan contracts

    Current law.--Does not have a full disclosure requirement.
    H.R. 1836.--Directs OPM to encourage carriers who obtain 
provider discounts to seek assurance that the conditions for 
such discounts are fully disclosed to the providers who grant 
them.

section 6. provisions relating to certain plans that have discontinued 
                      their participation in fehbp

    Current Law.--Does not allow health care plans sponsored by 
an employee organization to reenter the FEHBP after previously 
discontinuing its participation. Additionally--with respect to 
the contingency reserves of the discontinued plans--OPM is 
required to distribute those reserves to plans continuing in 
the FEHBP in the contract year after the discontinuance.
    H.R. 1836.--Amends chapter 89 of title 5 by adding the 
following after section 8903(a): 8903(b). Authority to readmit 
an employee organization plan.
    In the event that a plan described by section 8903(3) or 
8903a is discontinued (other than in the circumstance described 
in section 8909(d)), the plan may be reconsidered for FEHBP 
eligibility for any contract year after the third contract year 
in which the plan was discontinued.
    Subsection (e) of section 8909 of title 5, U.S.C., is 
amended by striking ``(e) and inserting ``(e)(1)'' and by 
adding language that requires OPM to distribute the contingency 
fund reserves of certain discontinued plans within 2 contract 
years.

     section 7. maximum physicians comparability allowance payable

    Current Law.--In 1978 the Federal Physicians Comparability 
Act, PL 95-603, was passed and provided a maximum of $10,000 
per year in additional compensation for one year of service for 
physicians where significant recruitment and retention problems 
exist. In 1987 the maximum physicians comparability allowance 
(PCA) as increased by Congress to $20,000 per year. These 
provisions are codified in 5 U.S.C. 5948 and implementing 
regulations were issued by OPM in 5 C.F.R. 595.
    H.R. 1836.--Increases the maximum physicians comparability 
allowance Federal agencies may pay from $20,000 to $30,000 per 
year.

          section 8. clarification relating to section 8902(k)

    Current Law.--Requires carriers offering health benefit 
plans under the FEHBP to provide for direct payment for 
services which may be performed by a clinical psychologist, 
optometrist, nurse midwife, nursing school administered clinic, 
or nurse practitioner/clinical specialist, licensed or 
certified as such under Federal or State law, as applicable, or 
by a qualified clinical social worker as defined in section 
8901(11).
    H.R. 1836.--Amends section 8902(k) of title 5, U.S.C., by 
inserting after paragraph (1) language ensuring that no health 
benefits plan is precluded from providing direct access or 
direct payments for services provided by a health care 
professional not listed in paragraph (1), as long as the 
professional is licensed or certified as such under Federal or 
State law.

                    V. Estimated Cost of Legislation

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 1, 1998.
Hon. Fred D. Thompson,
Chairman, Committee on Governmental Affairs, U.S. Senate, Washington, 
        DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1836, the Federal 
Employees Health Care Protection Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts for the federal 
budgetary impact are Tom Bradley (for the Federal Employees 
Health Benefits program), Mary Maginniss (for the Federal 
Deposit Insurance Corporation) and John R. Righter (for federal 
pay), and Mark Booth (for the Federal Reserve). The CBO staff 
contact for the state and local impact is Leo Lex.
            Sincerely,
                                          June E. O'Neil, Director.
    Enclosure.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.R. 1836--Federal Employees Health Care Protection Act of 1998

    Summary: H.R. 1836 would modify the administration of the 
Federal Employees Health Benefits (FEHB) program, transfer the 
health coverage of retirees and certain active employees of the 
Federal Deposit Insurance Corporation (FDIC) and the Board of 
Governors of the Federal Reserve to the FEHB program, and raise 
the pay of certain physicians employed by the federal 
government. CBO estimates that the legislation would reduce 
direct spending by $54 million and federal revenues by $7 
million over the 1999-2003 period. Consequently, pay-as-you-go 
procedures would apply to the legislation. In addition, CBO 
estimates that implementing H.R. 1836 would increase 
discretionary outlays by $30 million over the 1999-2003 period, 
assuming appropriation of the necessary amounts.
    H.R. 1836 would expand a preemption of state and local 
authority to regulate health care plans that provide coverage 
under FEHB. This preemption would be considered a mandate under 
the Unfunded Mandates Reform Act (UMRA). However, because the 
preemption would simply limit the application of state law in 
some circumstances, CBO estimates that any costs to state or 
local governments arising from this mandate would be minimal. 
H.R. 1836 contains no private-sector mandates as defined in 
UMRA.
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of H.R. 1836 is shown in the following table. 
This estimate assumes that the legislation will be enacted by 
the start of fiscal year 1999. The legislation would effect 
governmental receipts and outlays in several budget functions.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING                                           
FDIC:                                                                                                           
    Estimated budget authority......................         0         0         0         0         0         0
    Estimated outlays...............................         0       160       -14       -15       -18       -20
FEHB:                                                                                                           
    Estimated budget authority......................         0      -178         6         7         8        10
    Estimated outlays...............................         0      -178         6         7         8        10
Total Changes in Direct Spending:                                                                               
    Estimated budget authority......................         0      -178         6         7         8        10
    Estimated outlays...............................         0       -18        -8        -8       -10       -10
                                                                                                                
                                               CHANGES IN REVENUES                                              
                                                                                                                
FEBH Coverage for Federal Reserve:                                                                              
    Estimated revenues..............................         0       -11         1         1         1         1
                                                                                                                
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Spemding on Physicians Comparability Allowance Under                                                            
 Current Law:\1\                                                                                                
    Estimated budget authority......................        27        27        27        27        14         0
    Estimated outlays...............................        27        27        27        27        14         1
Proposed changes:                                                                                               
    Estimated authorization level...................         0         7         9         9         5         0
    Estimated outlays...............................         0         7         9         9         5     (\2\)
Spending on Physicians Comparability Allowance Under                                                            
 H.R. 1836:                                                                                                     
    Estimated authorization level...................        27        34        36        36        19         0
    Estimated outlays...............................        27        34        36        36        19        1 
----------------------------------------------------------------------------------------------------------------
\1\ Under current law, agencies can offer allowances to physicians through fiscal year 2000, with the contracts 
  for such allowances extending through fiscal year 2002.                                                       
\2\ Less than $500,000.                                                                                         

    Basis of estimate: By modifying the health coverage of FDIC 
and Federal Reserve retirees and active employees within five 
year of retirement, H.R. 1836 would affect both direct spending 
(for the FIC and the FEHB program) and revenues (for the 
Federal Reserve). In addition,increasing the pay of certain 
physicians employed by the government would affect discretionary 
spending.
            Direct spending and Revenues
    Health Insurance Transfer for Certain Employees. H.R. 1836 
would transfer the health insurance coverage of retirees and 
certain active employees of the FDIC and the Board of Governors 
of the Federal Reserve System to the FEHB program. Currently, 
those two agencies operate their own health insurance programs. 
The legislation would also require the two agencies to make a 
one-time payment to the Office of Personnel Management (OPM), 
which administers the FEHB program, to cover the long-term cost 
of the government's contribution toward the insurance premiums 
of the newly covered individuals.
    The shifting of the FDIC employees and retirees to the FEHB 
program would reduct direct spending in each year because the 
FDIC pays more for health insurance than the FEHB program 
would. The current FDIC plan is more expensive that the typical 
FEHB plan because the insured employees are older and fewer in 
number, and it provides more general coverage. Ongoing savings 
would grow form an estimated $7 million in fiscal year 1999 to 
$11 million in 2003. CBO assumes that the FDIC would make the 
required one-time payment to OPM in January 1999. We estimate 
that the one-time payment would be $170 million; but we also 
estimate that the FDIC would save $10 million in the same year 
from lower health insurance costs. The net cost to the FDIC in 
1999, therefore, would be $160 million. Reflecting the transfer 
from the FDIC, the FEHB program would receive the payment of 
$170 million in that year but would incur additional costs of 
about $3 million to insure those employees and retirees, for 
new savings of $167 million to the FEHB program.
    The transfer between the Federal Reserve and the FEHB 
program would have a similar effect, but significantly fewer 
employees would be affected at the Federal Reserve. We estimate 
that the Federal Reserve would make a one-time payment of $12 
million to OPM in 1999, with associated savings of $1 million, 
for a net reduction in revenues of $11 million. The associated 
savings to the Federal Reserve and costs to the FEHB program 
beyond 1999 would both approximate $1 million per year, 
although FEHB costs may be slightly less and the Federal 
Reserve's savings slightly more. Also, the budgetary effects on 
the Federal Reserve are recorded on the revenue side of the 
budget. Thus, the resulting increases in federal revenues 
beyond 1999 would approximate the increase in FEHB costs for 
coverage of Federal Reserve personnel, and the net budgetary 
impact each year would be negligible.
    Other Provisions. CBO estimates that the other provisions 
of H.R. 1836 would not significantly affect FEHB spending. The 
legislation would strengthen OPM's ability to bar or sanction 
unethical health providers and expand a preemption of state and 
local authority to regulate health plans that provide coverage 
under FEHB. Enacting those provision might reduce FEHB costs 
slightly.
    H.R. 1836 also would require OPM to encourage carriers to 
seek assurances that health care providers who contract with 
third parities to provide discounted rates are made aware of 
the conditions for those discounts. That provision could 
discourage some FEHB plans from using certain discount vendors, 
potentially increasing costs. Based on a survey conducted by 
OPM, however, FEHB plans believe that their discount vendors 
disclose the conditions of the discount to health care 
providers.
    Finally, section 8 would allow plans to make direct 
payments to certain non-physician providers, even when such 
arrangements are not required by law. Because plans already 
have such authority, the enactment of that section would not 
affect FEHB spending.
            Spending subject to appropriation
    H.R. 1836 would increase the maximum annual allowance 
payable to eligible federal physicians to $30,000. Current law 
authorizes certain agencies to pay allowances of up to $20,000 
a year to recruit and retain physicians for certain positions, 
such as those with long-term vacancies or high turnover rates. 
To receive the allowance, physicians must agree to work at 
least one year at the agency. CBO estimates that increasing the 
maximum annual allowance from $20,000 to $30,000 would increase 
salary costs by $30 million over the 1999-2003 period. This 
estimate is based on information provided by OPM, including 
data on the number of federal physicians receiving 
comparability allowances and the average annual premium that 
they receive under current service agreements. CBO estimates 
that the provision would increase the average allowance for 
1,800 physicians by about $5,000 a year and that agencies would 
modify service agreements with physicans within the few months 
of fiscal year 1999.
    The authority for agencies to offer allowances to 
physicians was extended through fiscal year 2000 by the 
Treasury and General Government Appropriations Act for fiscal 
year 1998 (Public Law 105-61). Under that authority, agencies 
and physicians can enter into contracts that extend through the 
end of fiscal year 2002. Most service agreements are made for 
two years. CBO assumes that the number of outstanding contracts 
in fiscal year 2001 will approximate the number of contracts in 
2000, and that the number of contracts in fiscal year 2002 will 
be about one-half of the number estimated for 2001. Thus, the 
increase in costs for fiscal year 2002 is lower than for 
previous years.
    Pay-as-you-go consideration: The Balances Budget and 
Emergency Deficit Control Act of 1985 sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. The net changes in outlays and governments receipts 
that are subject to pay-as-you-go procedures are shown in the 
following table. For the purposes of enforcing pay-as-you-go 
procedures, only the effects in the current year, the budget 
year, and the succeeding four years are counted.
    The budget excludes from pay-as-you-go calculations 
expenses associated with maintaining the deposit insurance 
commitment. CBO assumes that the increase in costs to the FEHB 
program and the decreases to the FDIC from its employees 
joining the FEHB plan would be excluded from the pay-as-you-go 
calculations because they would be associated with maintaining 
the deposit insurance commitment. The budgetary effects on the 
Federal Reserve, and the corresponding effect on outlays of the 
FEHB program, would not be excluded.

                                                        [By fiscal year, in millions of dollars]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   1998    1999    2000    2001    2002    2003    2004    2005    2006    2007    2008 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays..............................................       0     -11       1       1       1       1       1       1       1       1       1
Changes in receipts.............................................       0     -11       1       1       1       1       1       1       1       1       1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
H.R. 1836 would add language expanding the preemption of state 
and local authority to regulate health care plans that provide 
coverage under the FEHB program. Current law prohibits state 
and local governments from regulating the nature and extent of 
coverage and benefits for people covered by the FEHB program if 
the regulation of law is inconsistent with the contract 
provisions. The new language would preclude state and local 
governments from regulating the provision of coverage or 
benefits as well, and it removers the language dealing with 
inconsistencies, thereby giving the federal contract provisions 
clear authority. These changes would affect states that have 
requirements governing what types of organization can provide 
health care when those requirements are different from those 
under federal contracts. This preemption would be considered a 
mandate under UMRA. However, because the only effect of the 
preemption would be to limit the application of state law in 
some circumstances, CBO estimates that any costs to state or 
local governments arising from this mandate would be minimal.
    Estimated impact on the private sector: H.R. 1836 contains 
no private-sector mandates as defined in UMRA.
    Previous CBO estimate: On November 3, 1997, CBO prepared a 
cost estimate for H.R. 1836, as ordered reported by the House 
Committee on Government Reform and Oversight on October 31, 
1997. For the House version of H.R. 1836, CBO did not estimate 
any effect on direct spending or governmental receipts. This 
estimate corrects that error.
    Estimate prepared by: Federal Costs: Tom Bradley, FEHB, 
Mary Maginniss, FDIC, Mark Booth, Federal Reserve, and John R. 
Righter, federal pay.
    Impact on State, local, and Tribal governments: Leo Lex.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                  VI. Evaluation of Regulatory Impact

    Pursuant to the requirement of paragraph 11(b) of rule XXVI 
of the Standing Rules of the Senate, the Committee has 
considered the regulatory and paperwork impact of H.R. 1836. 
The Committee reports that section only 3 of H.R. 1836, making 
technical changes regarding national plans, would result in a 
mandate, but costs to state and local government have been 
estimated by CBO to be minimal. Provisions of the bill relating 
to health insurance [section 3(c)] would preempt all State and 
local laws that relate to health insurance or plans. Section 2 
of H.R. 1836 should reduce administrative burdens on the Office 
of Personnel Management by streamlining the debarment process. 
In general, OPM would be permitted to debar a provider prior to 
a hearing being held. Section 4 of H.R. 1836 would reduce the 
administrative burdens on both the Federal Reserve and the FDIC 
by enabling them to avoid maintenance of a non FEBH program 
plan for Federal Reserve and FDIC employees currently 
ineligible for FEHBP coverage. Under H.R. 1836, these 
ineligible individuals will be offered FEHBP coverage at no 
cost to the Federal government.

      VII. Additional Views of Senators Cochran, Glenn, and Levin

    At the request of the House Subcommittee on Civil Service, 
the Office of Personnel Management Inspector General (OPM IG) 
conducted a study to determine whether silent Preferred 
Provider Organizations (PPOs) were used by Federal Employee 
Health Benefit Plan (FEHBP) carriers to capture discounts to 
which they were not entitled. In brief, the IG found no 
evidence that health care providers were being victimized by 
FEHBP carriers, nor any evidence of schemes allowing payers to 
capture discounts they are not contractually entitled to 
receive. Although we support inclusion in H.R. 1836 of section 
5 bill language, we believe Congress should be careful to avoid 
interjecting the federal government into contractual issues 
between health care providers and health plans.
    A recent audit by the OPM IG defined ``Silent'' PPOs as a 
health care provider discount taken by a FEHBP carrier without 
a contract existing between the PPO and the health care 
provider. This is the type of unethical practice that the FEHBP 
carriers should avoid.
    Further, PPOs, both directed and non-directed, provide 
various incentives to health care providers which contract with 
PPOs for the benefit of FEHBP, i.e., to reduce health care 
costs. The FEHBP must continue to benefit from these 
relationships, recognizing that the PPOs must always have a 
contract with the health care provider.
    Attached is the February 26, 1998 report of the OPM IG, as 
submitted to Congress, by Patrick E. McFarland, Inspector 
General, Office of Personnel Management.

                                   Carl Levin.
                                   John Glenn.
                                   Thad Cochran.
                            Office of Personnel Management,
                                 Washington, DC, February 26, 1998.
Hon. Thad Cochran,
Chairman, Subcommittee on International Security, Proliferation and 
        Federal Services, Senate Committee on Governmental Affairs, 
        Washington, DC.
    Dear Chairman Cochran: As a result of interest initially 
expressed by Chairman Mica, House Subcommittee on Civil 
Service, Committee on Government Reform and Oversight, the 
Office of Personnel Management (OPM), Office of the Inspector 
General (OIG) has performed a review of the use of ``silent'' 
and ``non-directed'' Preferred Providers Organizations (PPOs) 
in the Federal Employees Health Benefits Program (FEHBP). Our 
report is enclosed. The committee expressed the concerns of the 
American Hospital Association and American Medical Association 
who suggested that health care providers are being victimized 
by schemes that create payment discounts for payers who are not 
entitled to them. These schemes are purportedly carried out by 
``silent PPOs.'' Thus, the principal purpose of our review was 
to determine whether ``silent PPOs'' were used by FEHBP 
carriers to capture discounts to which they were not entitled. 
Our review did not disclose any evidence that FEHBP carriers 
used ``silent PPOs'' to capture discounts or that health care 
providers were otherwise victimized by FEHBP carriers. 
Nevertheless, we observed that for 1.3 percent of the claims we 
tested, discounts taken were inconsistent with agreed upon 
contract terms. We do not consider these errors to be material 
nor are they indicative of a systemic problem.
    At the request of the committee, we also determined how 
wording in OPM's annual carrier call letter, which encouraged 
carriers to seek discounts on providers' bills, came to be 
included in the call letter. We found that the wording was 
included as a result of discussions between House Appropriation 
Committee's staff and OPM's former Associate Director for 
Retirement and Insurance.
    A copy of this report has been sent to Representative Dan 
Burton, Chairman, Committee on Government Reform and Oversight. 
If you need any additional information related to this review, 
please call me, or have a member of your staff call Harvey D. 
Thorp, Assistant Inspector General for Audits.
            Sincerely,
                           Patrick E. McFarland, Inspector General.
    Enclosure.





                     VIII. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *


CHAPTER 59--ALLOWANCES

           *       *       *       *       *       *       *


SUBCHAPTER IV--MISCELLANEOUS ALLOWANCES

           *       *       *       *       *       *       *


Sec. 5948. Physicians comparability allowances

  (a) Notwithstanding any other provision of law, and in order 
to recruit and retain highly qualified Government physicians, 
the head of an agency, subject to the provisions of this 
section, section 5307, and such regulations as the President or 
his designee may prescribe, may enter into a service agreement 
with a Government physician which provides for such physician 
to complete a specified period of service in such agency in 
return for an allowance for the duration of such agreement in 
an amount to be determined by the agency head and specified in 
the agreement, but not to exceed--
          (1) * * *
          (2) [$20,000] $30,000 per annum if the Government 
        physician has served as a Government physician for more 
        than twenty-four months.
For the purpose of determining length of service as a 
Government physician, service as a physician under section 4104 
or 4114 of title 38 or active service as a medical officer in 
the commissioned corps of the Public Health Service under Title 
II of the Public Health Service Act (42 U.S.C. ch. 6A) shall be 
deemed service as a Government physician.

           *       *       *       *       *       *       *


                      CHAPTER 89--HEALTH INSURANCE

Sec.
8901.  Definitions.
     * * * * * * *
8903b.  Authority to readmit an employee organization plan.

           *       *       *       *       *       *       *


Sec. 8901. Definitions

  For the purpose of this chapter--
          (1) ``employee'' means--
                  (A) * * *

           *       *       *       *       *       *       *

          (7) ``carrier'' means a voluntary association, 
        corporation, partnership, or other nongovernmental 
        organization which is lawfully engaged in providing, 
        paying for, or reimbursing the cost of, health services 
        under group insurance policies or contracts, medical or 
        hospital service agreements, membership or subscription 
        contracts, or similar group arrangements, in 
        consideration of premiums or other periodic charges 
        payable to the carrier, including a health benefits 
        plan duly sponsored or underwritten by an employee 
        [organization;] organization and an association of 
        organizations or other entities described in this 
        paragraph sponsoring a health benefits plan;

           *       *       *       *       *       *       *


Sec. 8902. Contracting authority

  (a) * * *
  (k)(1) When a contract under this chapter requires payment or 
reimbursement for services which may be performed by a clinical 
psychologist, optometrist, nurse midwife, nursing school 
administered clinic, or nurse practitioner/clinical specialist, 
licensed or certified as such under Federal or State law, as 
applicable, or by a qualified clinical social worker as defined 
in section 8901(11), an employee, annuitant, family member, 
former spouse, or person having continued coverage under 
section 8905a of this title covered by the contract shall be 
free to select, and shall have direct access to, such a 
clinical psychologist, qualified clinical social worker, 
optometrist, nurse midwife, nursing school administered clinic, 
or nurse practitioner/nurse clinical specialist without 
supervision or referral by another health practitioner and 
shall be entitled under the contract to have payment or 
reimbursement made to him or on his behalf for the services 
performed.
  (2) Nothing in this subsection shall be considered to 
preclude a health benefits plan from providing direct access or 
direct payment or reimbursement to a provider in a health care 
practice or profession other than a practice or profession 
listed in paragraph (1), if such provider is licensed or 
certified as such under Federal or State law.
  [(2)] (3) The provisions of this subsection shall not apply 
to comprehensive medical plans as described in section 8903(4) 
of this title.

           *       *       *       *       *       *       *

  [(m)(1) The provisions of any contract under this chapter 
which relate to the nature or extent of coverage or benefits 
(including payments with respect to benefits) shall supersede 
and preempt any State or local law, or any regulation issued 
thereunder, which relates to health insurance or plans to the 
extent that such law or regulation is inconsistent with such 
contractual provisions.]
  (m)(1) The terms of any contract under this chapter which 
relate to the nature, provision, or extent of coverage or 
benefits (including payments with respect to benefits) shall 
supersede and preempt any State or local law, or any regulation 
issued thereunder, which relates to health insurance or plans.

           *       *       *       *       *       *       *


Sec. 8902a. Debarment and other sanctions

  (a)(1) For the purpose of this section--
          (A) the term ``provider of health care services or 
        supplies'' or ``provider'' means a physician, hospital, 
        or other individual or entity which furnishes health 
        care services or supplies;
          (B) the term ``individual covered under this 
        chapter'' or ``covered individual'' means an employee, 
        annuitant, family member, or former spouse covered by a 
        health benefits plan described by section 8903 or 
        8903a; [and]
          (C) an individual or entity shall be considered to 
        have been ``convicted'' of a criminal offense if--
                  (i) * * *

           *       *       *       *       *       *       *

                  (iv) in the case of an individual, the 
                individual has entered a first offender or 
                other program pursuant to which a judgment of 
                conviction for such offense has been withheld;
        without regard to the pendency or outcome of any appeal 
        (other than a judgment of acquittal based on innocence) 
        or request for relief on behalf of the individual or 
        entity[.]; and
          (D) the term ``should know'' means that a person, 
        with respect to information, acts in deliberate 
        ignorance of, or in reckless disregard of, the truth or 
        falsity of the information, and no proof of specific 
        intent to defraud is required;
  (2)(A) Notwithstanding section 8902(j) or any other provision 
of this chapter, if, under [subsection (b) or (c)] subsection 
(b), (c), or (d), a provider is barred from participating in 
the program under this chapter, no payment may be made by a 
carrier pursuant to any contract under this chapter (either to 
such provider or by reimbursement) for any service or supply 
furnished by such provider during the period of the debarment.

           *       *       *       *       *       *       *

  (b) [The Office of Personnel Management may bar] The Office 
of Personnel Management shall bar the following providers of 
health care services or supplies from participating in the 
program under this chapter:
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Any provider--
                  [(A) whose license to provide health care 
                services or supplies has been revoked, 
                suspended, restricted, or not renewed, by a 
                State licensing authority for reasons relating 
                to the provider's professional competence, 
                professional performance, or financial 
                integrity; or
                  [(B) that surrendered such a license while a 
                formal disciplinary proceeding was pending 
                before such an authority, if the proceeding 
                concerned the provider's professional 
                competence, professional performance, or 
                financial integrity.]
          (5) Any provider that is currently debarred, 
        suspended, or otherwise excluded from any procurement 
        or nonprocurement activity (within the meaning of 
        section 2455 of the Federal Acquisition Streamlining 
        Act of 1994).
  (c) The Office may bar the following providers of health care 
services from participating in the program under this chapter:
          (1) Any provider--
                  (A) whose license to provide health care 
                services or supplies has been revoked, 
                suspended, restricted, or not renewed, by a 
                State licensing authority for reasons relating 
                to the provider's professional competence, 
                professional performance, or financial 
                integrity; or
                  (B) that surrendered such a license while a 
                formal disciplinary proceeding was pending 
                before such an authority, if the proceeding 
                concerned the provider's professional 
                competence, professional performance, or 
                financial integrity.
          (2) Any provider that is an entity directly or 
        indirectly owned, or with a control interest of 5 
        percent or more held, by an individual who has been 
        convicted of any offense described in subsection (b), 
        against whom a civil monetary penalty has been assessed 
        under subsection (d), or who has been debarred from 
        participation under this chapter.
          (3) Any individual who directly or indirectly owns or 
        has a control interest in a sanctioned entity and who 
        knows or should know of the action constituting the 
        basis for the entity's conviction of any offense 
        described in subsection (b), assessment with a civil 
        monetary penalty under subsection (d), or debarment 
        from participation under this chapter.
          (4) Any provider that the Office determines, in 
        connection with claims presented under this chapter, 
        has charged for health care services or supplies in an 
        amount substantially in excess of such provider's 
        customary charge for such services or supplies (unless 
        the Office finds there is good cause for such charge), 
        or charged for health care services or supplies which 
        are substantially in excess of the needs of the covered 
        individual or which are of a quality that fails to meet 
        professionally recognized standards for such services 
        or supplies.
          (5) Any provider that the Office determines has 
        committed acts described in subsection (d).
Any determination under paragraph (4) relating to whether a 
charge for health care services or supplies is substantially in 
excess of the needs of the covered individual shall be made by 
trained reviewers based on written medical protocols developed 
by physicians. In the event such a determination cannot be made 
based on such protocols, a physician in an appropriate 
specialty shall be consulted.
  [(c)] (d) Whenever the Office determines--
          [(1) in connection with a claim presented under this 
        chapter, that a provider of health care services or 
        supplies--
                  [(A) has charged for health care services or 
                supplies that the provider knows or should have 
                known were not provided as claimed; or
                  [(B) has charged for health care services or 
                supplies in an amount substantially in excess 
                of such provider's customary charges for such 
                services or supplies, or charged for health 
                care services or supplies which are 
                substantially in excess of the needs of the 
                covered individual or which are of a quality 
                that fails to meet professionally recognized 
                standards for such services or supplies;]
          (1) in connection with claims presented under this 
        chapter, that a provider has charged for a health care 
        service or supply which the provider knows or should 
        have known involves--
                  (A) an item or service not provided as 
                claimed,
                  (B) charges in violation of applicable charge 
                limitations under section 8904(b), or
                  (C) an item or service furnished during a 
                period in which the provider was debarred from 
                participation under this chapter pursuant to a 
                determination by the Office under this section, 
                other than as permitted under subsection 
                (g)(2)(B);

           *       *       *       *       *       *       *

  [(d)] (e) The Office--
          (1) * * *

           *       *       *       *       *       *       *

  [(e)] (f) In making a determination relating to the 
appropriateness of imposing or the period of any debarment 
under this section (where such debarment is not mandatory), or 
the appropriateness of imposing or the amount of any civil 
penalty or assessment under this section, the Office shall take 
into account--
          (1) * * *

           *       *       *       *       *       *       *

  [(f)(1) The debarment of a provider under subsection (b) or 
(c) shall be effective at such time and upon such reasonable 
notice to such provider, and to carriers and covered 
individuals, as may be specified in regulations prescribed by 
the Office.]
  (g)(1)(A) Except as provided in subparagraph (B), debarment 
of a provider under subsection (b) or (c) shall be effective at 
such time and upon such reasonable notice to such provider, and 
to carriers and covered individuals, as shall be specified in 
regulations prescribed by the Office. Any such provider that is 
debarred from participation may request a hearing in accordance 
with subsection (h)(1).
  (B) Unless the Office determines that the health or safety of 
individuals receiving health care services warrants an earlier 
effective date, the Office shall not make a determination 
adverse to a provider under subsection (c)(5) or (d) until such 
provider has been given reasonable notice and an opportunity 
for the determination to be made after a hearing as provided in 
accordance with subsection (h)(1).

           *       *       *       *       *       *       *

  (3) Any notice of debarment referred to in paragraph (1) 
shall specify the date as of which debarment becomes effective 
and the minimum period of time for which such debarment is to 
remain effective. In the case of a debarment under paragraph 
(1), (2), (3), or (4) of subsection (b), the minimum period of 
debarment shall not be less than 3 years, except as provided in 
paragraph (4)(B)(ii).
  (4)(A) A provider barred from participating in the program 
under this chapter may, after the expiration of the minimum 
period of debarment referred to in paragraph (3), apply to the 
Office, in such manner as the Office may by regulation 
prescribe, for termination of the debarment.
  (B) The Office may--
          (i) terminate the debarment of a provider, pursuant 
        to an application filed by such provider after the end 
        of the minimum debarment period, if the Office 
        determines, based on the conduct of the applicant, 
        that--
                  (I) there is no basis under [subsection (b) 
                or (c)] subsection (b), (c), or (d) for 
                continuing the debarment; and

           *       *       *       *       *       *       *

  [(6) The Office shall, upon written request and payment of a 
reasonable charge to defray the cost of complying with such 
request, furnish a current list of any providers barred from 
participating in the program under this chapter, including the 
minimum period of time remaining under the terms of each 
provider's debarment.]
  [(g)(1) The Office may not make a determination under 
subsection (b) or (c) adverse to a provider of health care 
services or supplies until such provider has been given written 
notice and an opportunity for a hearing on the record. A 
provider is entitled to be represented by counsel, to present 
witnesses, and to cross-examine witnesses against the provider 
in any such hearing.
  [(2) Notwithstanding section 8912, any person adversely 
affected by a final decision under paragraph (1) may obtain 
review of such decision in the United States Court of Appeals 
for the Federal Circuit. A written petition requesting that the 
decision be modified or set aside must be filed within 60 days 
after the date on which such person is notified of such 
decision.]
  (h)(1) Any provider of health care services or supplies that 
is the subject of an adverse determination by the Office under 
this section shall be entitled to reasonable notice and an 
opportunity to request a hearing of record, and to judicial 
review as provided in this subsection after the Office renders 
a final decision. The Office shall grant a request for a 
hearing upon a showing that due process rights have not 
previously been afforded with respect to any finding of fact 
which is relied upon as a cause for an adverse determination 
under this section. Such hearing shall be conducted without 
regard to subchapter II of chapter 5 and chapter 7 of this 
title by a hearing officer who shall be designated by the 
Director of the Office and who shall not otherwise have been 
involved in the adverse determination being appealed. A request 
for a hearing under this subsection shall be filed within such 
period and in accordance with such procedures as the Office 
shall prescribe by regulation.
  (2) Any provider adversely affected by a final decision under 
paragraph (1) made after a hearing to which such provider was a 
party may seek review of such decision in the United States 
District Court for the District of Columbia or for the district 
in which the plaintiff resides or has his or her principal 
place of business by filing a notice of appeal in such court 
within 60 days after the datethe decision is issued, and by 
simultaneously sending copies of such notice by certified mail to the 
Director of the Office and to the Attorney General. In answer to the 
appeal, the Director of the Office shall promptly file in such court a 
certified copy of the transcript of the record, if the Office conducted 
a hearing, and other evidence upon which the findings and decision 
complained of are based. The court shall have power to enter, upon the 
pleadings and evidence of record, a judgment affirming, modifying, or 
setting aside, in whole or in part, the decision of the Office, with or 
without remanding the case for a rehearing. The district court shall 
not set aside or remand the decision of the Office unless there is not 
substantial evidence on the record, taken as whole, to support the 
findings by the Office of a cause for action under this section or 
unless action taken by the Office constitutes an abuse of discretion.
  (3) Matters that were raised or that could have been raised 
in a hearing under paragraph (1) or an appeal under paragraph 
(2) may not be raised as a defense to a civil action by the 
United States to collect a penalty or assessment imposed under 
this section.
  [(h)] (i) A civil action to recover civil monetary penalties 
or assessments under subsection [(c)] (d) shall be brought by 
the Attorney General in the name of the United States, and may 
be brought in the United States district court for the district 
where the claim involved was presented or where the person 
subject to the penalty resides. Amounts recovered under this 
section shall be paid to the Office for deposit into the 
Employees Health Benefits Fund. The amount of a penalty or 
assessment as finally determined by the Office, or other amount 
the Office may agree to in compromise, may be deducted from any 
sum then or later owing by the United States to the party 
against whom the penalty or assessment has been levied.
  [(i)] (j) The Office shall prescribe regulations under which, 
with respect to services or supplies furnished by a debarred 
provider to a covered individual during the period of such 
provider's debarment, payment or reimbursement under this 
chapter may be made, notwithstanding the fact of such 
debarment, if such individual did not know or could not 
reasonably be expected to have known of the debarment. In any 
such instance, the carrier involved shall take appropriate 
measures to ensure that the individual is informed of the 
debarment and the minimum period of time remaining under the 
terms of the debarment.

Sec. 8903. Health benefits plans

  The Office of Personnel Management may contract for or 
approve the following health benefits plans:
          (1) Service Benefit Plan.--One Government-wide plan, 
        which may be underwritten by participating affiliates 
        licensed in any number of States, offering two levels 
        of benefits, under which payment is made by a carrier 
        under contracts with physicians, hospitals, or other 
        providers of health services for benefits of the types 
        described by section 8904(1) of this title given to 
        employees, annuitants, members of their families, 
        former spouses, or persons having continued coverage 
        under section 8905a of this title, or, under certain 
        conditions, payment is made by a carrier to the 
        employee, annuitant, family member, former spouse, or 
        person having continued coverage under section 8905a of 
        this title.

           *       *       *       *       *       *       *


Sec. 8903b. Authority to readmit an employee organization plan

  (a) In the event that a plan described by section 8903(3) or 
8903a is discontinued under this chapter (other than in the 
circumstance described in section 8909(d)), that 
discontinuation shall be disregarded, for purposes of any 
determination as to that plan's eligibility to be considered an 
approved plan under this chapter, but only for purposes of any 
contract year later than the third contract year beginning 
after such plan is so discontinued.
  (b) A contract for a plan approved under this section shall 
require the carrier--
          (1) to demonstrate experience in service delivery 
        within a managed care system (including provider 
        networks) throughout the United States; and
          (2) if the carrier involved would not otherwise be 
        subject to the requirement set forth in section 
        8903a(c)(1), to satisfy such requirement.

Sec. 8909. Employees Health Benefits Fund

  (a) * * *

           *       *       *       *       *       *       *

  (e)(1) Except as provided by subsection (d) of this section, 
when a plan described by section 8903(3) or (4) or 8903a of 
this title is discontinued under this chapter, the contingency 
reserve of that plan shall be credited to the contingency 
reserves of the plans continuing under this chapter for the 
contract term following that in which termination occurs, each 
reserve to be credited in proportion to the amount of the 
subscription charges paid and accrued to the plan for the year 
of termination.
  (2) Any crediting required under paragraph (1) pursuant to 
the discontinuation of any plan under this chapter shall be 
completed by the end of the second contract year beginning 
after such plan is so discontinued.
  (3) The Office shall prescribe regulations in accordance with 
which this subsection shall be applied in the case of any plan 
which is discontinued before being credited with the full 
amount to which it would otherwise be entitled based on the 
discontinuation of any other plan.

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