[House Report 108-74]
[From the U.S. Government Publishing Office]



108th Congress                                             Rept. 108-74
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



.          MEDICARE REGULATORY AND CONTRACTING REFORM ACT OF 2003

                                _______
                                

                 April 11, 2003.--Ordered to be printed

                                _______
                                

    Mr. Thomas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 810]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 810) to amend title XVIII of the Social Security Act 
to provide regulatory relief and contracting flexibility under 
the Medicare Program, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background..........................................38
          A. Purpose and Summary.................................    38
          B. Background and Need for Legislation.................    38
          C. Legislative History.................................    39
 II. Explanation of the Bill.........................................40
          A. Regulatory Reform...................................    41
          B. Contracting Reform..................................    43
          C. Education and Outreach Improvements.................    50
          D. Appeals and Recovery................................    56
          E. Miscellaneous Provisions............................    69
III. Votes of the Committee..........................................81
 IV. Budget Effects of the Bill......................................83
          A. Committee Estimate of Budgetary Effects.............    83
          B. Statement Regarding New Budgetary Authority and Tax 
              Expenditures.......................................    83
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    83
  V. Other Matters To Be Discussed Under the Rules of the House......89
 VI. Changes in Existing Law Made by the Bill, as Reported...........90
VII. Dissenting Views...............................................144

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

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

  (a) Short Title.--This Act may be cited as the ``Medicare Regulatory 
and Contracting Reform Act of 2003''.
  (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
  (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendments to Social Security Act; table of 
contents.
Sec. 2. Findings and construction.
Sec. 3. Definitions.

                       TITLE I--REGULATORY REFORM

Sec. 101. Issuance of regulations.
Sec. 102. Compliance with changes in regulations and policies.
Sec. 103. Reports and studies relating to regulatory reform.

                      TITLE II--CONTRACTING REFORM

Sec. 201. Increased flexibility in medicare administration.
Sec. 202. Requirements for information security for medicare 
administrative contractors.

                   TITLE III--EDUCATION AND OUTREACH

Sec. 301. Provider education and technical assistance.
Sec. 302. Small provider technical assistance demonstration program.
Sec. 303. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman.
Sec. 304. Beneficiary outreach demonstration program.
Sec. 305. Inclusion of additional information in notices to 
beneficiaries about skilled nursing facility benefits.
Sec. 306. Information on medicare-certified skilled nursing facilities 
in hospital discharge plans.

                     TITLE IV--APPEALS AND RECOVERY

Sec. 401. Transfer of responsibility for medicare appeals.
Sec. 402. Process for expedited access to review.
Sec. 403. Revisions to medicare appeals process.
Sec. 404. Prepayment review.
Sec. 405. Recovery of overpayments.
Sec. 406. Provider enrollment process; right of appeal.
Sec. 407. Process for correction of minor errors and omissions without 
pursuing appeals process.
Sec. 408. Prior determination process for certain items and services; 
advance beneficiary notices.

                   TITLE V--MISCELLANEOUS PROVISIONS

Sec. 501. Policy development regarding evaluation and management (E & 
M) documentation guidelines.
Sec. 502. Improvement in oversight of technology and coverage.
Sec. 503. Treatment of hospitals for certain services under medicare 
secondary payor (MSP) provisions.
Sec. 504. EMTALA improvements.
Sec. 505. Emergency Medical Treatment and Active Labor Act (EMTALA) 
Technical Advisory Group.
Sec. 506. Authorizing use of arrangements to provide core hospice 
services in certain circumstances.
Sec. 507. Application of OSHA bloodborne pathogens standard to certain 
hospitals.
Sec. 508. BIPA-related technical amendments and corrections.
Sec. 509. Conforming authority to waive a program exclusion.
Sec. 510. Treatment of certain dental claims.
Sec. 511. Furnishing hospitals with information to compute DSH formula.
Sec. 512. Revisions to reassignment provisions.
Sec. 513. Specialized Medicare+Choice plans for special needs 
beneficiaries.
Sec. 514. Temporary suspension of OASIS requirement for collection of 
data on non-medicare and non-medicaid patients.
Sec. 515. Miscellaneous reports, studies, and publication requirements.

SEC. 2. FINDINGS AND CONSTRUCTION.

  (a) Findings.--Congress finds the following:
          (1) The overwhelming majority of providers of services and 
        suppliers in the United States are law-abiding persons who 
        provide important health care services to patients each day.
          (2) The Secretary of Health and Human Services should work to 
        streamline paperwork requirements under the medicare program 
        and communicate clearer instructions to providers of services 
        and suppliers so that they may spend more time caring for 
        patients.
  (b) Construction.--Nothing in this Act shall be construed--
          (1) to compromise or affect existing legal remedies for 
        addressing fraud or abuse, whether it be criminal prosecution, 
        civil enforcement, or administrative remedies, including under 
        sections 3729 through 3733 of title 31, United States Code 
        (known as the False Claims Act); or
          (2) to prevent or impede the Department of Health and Human 
        Services in any way from its ongoing efforts to eliminate 
        waste, fraud, and abuse in the medicare program.
Furthermore, the consolidation of medicare administrative contracting 
set forth in this Act does not constitute consolidation of the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund or reflect any position on that issue.

SEC. 3. DEFINITIONS.

  (a) Use of Term Supplier in Medicare.--Section 1861 (42 U.S.C. 1395x) 
is amended by inserting after subsection (c) the following new 
subsection:

                               ``Supplier

  ``(d) The term `supplier' means, unless the context otherwise 
requires, a physician or other practitioner, a facility, or other 
entity (other than a provider of services) that furnishes items or 
services under this title.''.
  (b) Other Terms Used in Act.--In this Act:
          (1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, 
        and SCHIP Benefits Improvement and Protection Act of 2000, as 
        enacted into law by section 1(a)(6) of Public Law 106-554.
          (2) Secretary.--The term ``Secretary'' means the Secretary of 
        Health and Human Services.

                       TITLE I--REGULATORY REFORM

SEC. 101. ISSUANCE OF REGULATIONS.

  (a) Limitations on New Matter in Final Regulations.--Section 1871(a) 
(42 U.S.C. 1395hh(a)) is amended by adding at the end the following new 
paragraph:
  ``(3) If the Secretary publishes a final regulation that includes a 
provision that is not a logical outgrowth of a previously published 
notice of proposed rulemaking or interim final rule, such provision 
shall be treated as a proposed regulation and shall not take effect 
until there is the further opportunity for public comment and a 
publication of the provision again as a final regulation.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to final regulations published on or after the date of the enactment of 
this Act.

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

  (a) No Retroactive Application of Substantive Changes.--
          (1) In general.--Section 1871 (42 U.S.C. 1395hh), as amended 
        by section 101(a), is amended by adding at the end the 
        following new subsection:
  ``(d)(1)(A) A substantive change in regulations, manual instructions, 
interpretative rules, statements of policy, or guidelines of general 
applicability under this title shall not be applied (by extrapolation 
or otherwise) retroactively to items and services furnished before the 
effective date of the change, unless the Secretary determines that--
          ``(i) such retroactive application is necessary to comply 
        with statutory requirements; or
          ``(ii) failure to apply the change retroactively would be 
        contrary to the public interest.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to substantive changes issued on or after the date 
        of the enactment of this Act.
  (b) Timeline for Compliance With Substantive Changes After Notice.--
          (1) In general.--Section 1871(d)(1), as added by subsection 
        (a), is amended by adding at the end the following:
  ``(B)(i) Except as provided in clause (ii), a substantive change 
referred to in subparagraph (A) shall not become effective before the 
end of the 30-day period that begins on the date that the Secretary has 
issued or published, as the case may be, the substantive change.
  ``(ii) The Secretary may provide for such a substantive change to 
take effect on a date that precedes the end of the 30-day period under 
clause (i) if the Secretary finds that waiver of such 30-day period is 
necessary to comply with statutory requirements or that the application 
of such 30-day period is contrary to the public interest. If the 
Secretary provides for an earlier effective date pursuant to this 
clause, the Secretary shall include in the issuance or publication of 
the substantive change a finding described in the first sentence, and a 
brief statement of the reasons for such finding.
  ``(C) No action shall be taken against a provider of services or 
supplier with respect to noncompliance with such a substantive change 
for items and services furnished before the effective date of such a 
change.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to compliance actions undertaken on or after the 
        date of the enactment of this Act.
  (c) Reliance on Guidance.--
          (1) In general.--Section 1871(d), as added by subsection (a), 
        is further amended by adding at the end the following new 
        paragraph:
  ``(2)(A) If--
          ``(i) a provider of services or supplier follows the written 
        guidance (which may be transmitted electronically) provided by 
        the Secretary or by a medicare contractor (as defined in 
        section 1889(g)) acting within the scope of the contractor's 
        contract authority, with respect to the furnishing of items or 
        services and submission of a claim for benefits for such items 
        or services with respect to such provider or supplier;
          ``(ii) the Secretary determines that the provider of services 
        or supplier has accurately presented the circumstances relating 
        to such items, services, and claim to the contractor in 
        writing; and
          ``(iii) the guidance was in error;
the provider of services or supplier shall not be subject to any 
sanction (including any penalty or requirement for repayment of any 
amount) if the provider of services or supplier reasonably relied on 
such guidance.
  ``(B) Subparagraph (A) shall not be construed as preventing the 
recoupment or repayment (without any additional penalty) relating to an 
overpayment insofar as the overpayment was solely the result of a 
clerical or technical operational error.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act but 
        shall not apply to any sanction for which notice was provided 
        on or before the date of the enactment of this Act.

SEC. 103. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.

  (a) GAO Study on Advisory Opinion Authority.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study to determine the feasibility and 
        appropriateness of establishing in the Secretary authority to 
        provide legally binding advisory opinions on appropriate 
        interpretation and application of regulations to carry out the 
        medicare program under title XVIII of the Social Security Act. 
        Such study shall examine the appropriate timeframe for issuing 
        such advisory opinions, as well as the need for additional 
        staff and funding to provide such opinions.
          (2) Report.--The Comptroller General shall submit to Congress 
        a report on the study conducted under paragraph (1) by not 
        later than one year after the date of the enactment of this 
        Act.
  (b) Report on Legal and Regulatory Inconsistencies.--Section 1871 (42 
U.S.C. 1395hh), as amended by section 2(a), is amended by adding at the 
end the following new subsection:
  ``(e)(1) Not later than 2 years after the date of the enactment of 
this subsection, and every 2 years thereafter, the Secretary shall 
submit to Congress a report with respect to the administration of this 
title and areas of inconsistency or conflict among the various 
provisions under law and regulation.
  ``(2) In preparing a report under paragraph (1), the Secretary shall 
collect--
          ``(A) information from individuals entitled to benefits under 
        part A or enrolled under part B, or both, providers of 
        services, and suppliers and from the Medicare Beneficiary 
        Ombudsman and the Medicare Provider Ombudsman with respect to 
        such areas of inconsistency and conflict; and
          ``(B) information from medicare contractors that tracks the 
        nature of written and telephone inquiries.
  ``(3) A report under paragraph (1) shall include a description of 
efforts by the Secretary to reduce such inconsistency or conflicts, and 
recommendations for legislation or administrative action that the 
Secretary determines appropriate to further reduce such inconsistency 
or conflicts.''.

                      TITLE II--CONTRACTING REFORM

SEC. 201. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

  (a) Consolidation and Flexibility in Medicare Administration.--
          (1) In general.--Title XVIII is amended by inserting after 
        section 1874 the following new section:
          ``contracts with medicare administrative contractors
  ``Sec. 1874A. (a) Authority.--
          ``(1) Authority to enter into contracts.--The Secretary may 
        enter into contracts with any eligible entity to serve as a 
        medicare administrative contractor with respect to the 
        performance of any or all of the functions described in 
        paragraph (4) or parts of those functions (or, to the extent 
        provided in a contract, to secure performance thereof by other 
        entities).
          ``(2) Eligibility of entities.--An entity is eligible to 
        enter into a contract with respect to the performance of a 
        particular function described in paragraph (4) only if--
                  ``(A) the entity has demonstrated capability to carry 
                out such function;
                  ``(B) the entity complies with such conflict of 
                interest standards as are generally applicable to 
                Federal acquisition and procurement;
                  ``(C) the entity has sufficient assets to financially 
                support the performance of such function; and
                  ``(D) the entity meets such other requirements as the 
                Secretary may impose.
          ``(3) Medicare administrative contractor defined.--For 
        purposes of this title and title XI--
                  ``(A) In general.--The term `medicare administrative 
                contractor' means an agency, organization, or other 
                person with a contract under this section.
                  ``(B) Appropriate medicare administrative 
                contractor.--With respect to the performance of a 
                particular function in relation to an individual 
                entitled to benefits under part A or enrolled under 
                part B, or both, a specific provider of services or 
                supplier (or class of such providers of services or 
                suppliers), the `appropriate' medicare administrative 
                contractor is the medicare administrative contractor 
                that has a contract under this section with respect to 
                the performance of that function in relation to that 
                individual, provider of services or supplier or class 
                of provider of services or supplier.
          ``(4) Functions described.--The functions referred to in 
        paragraphs (1) and (2) are payment functions, provider services 
        functions, and functions relating to services furnished to 
        individuals entitled to benefits under part A or enrolled under 
        part B, or both, as follows:
                  ``(A) Determination of payment amounts.--Determining 
                (subject to the provisions of section 1878 and to such 
                review by the Secretary as may be provided for by the 
                contracts) the amount of the payments required pursuant 
                to this title to be made to providers of services, 
                suppliers and individuals.
                  ``(B) Making payments.--Making payments described in 
                subparagraph (A) (including receipt, disbursement, and 
                accounting for funds in making such payments).
                  ``(C) Beneficiary education and assistance.--
                Providing education and outreach to individuals 
                entitled to benefits under part A or enrolled under 
                part B, or both, and providing assistance to those 
                individuals with specific issues, concerns or problems.
                  ``(D) Provider consultative services.--Providing 
                consultative services to institutions, agencies, and 
                other persons to enable them to establish and maintain 
                fiscal records necessary for purposes of this title and 
                otherwise to qualify as providers of services or 
                suppliers.
                  ``(E) Communication with providers.--Communicating to 
                providers of services and suppliers any information or 
                instructions furnished to the medicare administrative 
                contractor by the Secretary, and facilitating 
                communication between such providers and suppliers and 
                the Secretary.
                  ``(F) Provider education and technical assistance.--
                Performing the functions relating to provider 
                education, training, and technical assistance.
                  ``(G) Additional functions.--Performing such other 
                functions as are necessary to carry out the purposes of 
                this title.
          ``(5) Relationship to mip contracts.--
                  ``(A) Nonduplication of duties.--In entering into 
                contracts under this section, the Secretary shall 
                assure that functions of medicare administrative 
                contractors in carrying out activities under parts A 
                and B do not duplicate activities carried out under the 
                Medicare Integrity Program under section 1893. The 
                previous sentence shall not apply with respect to the 
                activity described in section 1893(b)(5) (relating to 
                prior authorization of certain items of durable medical 
                equipment under section 1834(a)(15)).
                  ``(B) Construction.--An entity shall not be treated 
                as a medicare administrative contractor merely by 
                reason of having entered into a contract with the 
                Secretary under section 1893.
          ``(6) Application of federal acquisition regulation.--Except 
        to the extent inconsistent with a specific requirement of this 
        title, the Federal Acquisition Regulation applies to contracts 
        under this title.
  ``(b) Contracting Requirements.--
          ``(1) Use of competitive procedures.--
                  ``(A) In general.--Except as provided in laws with 
                general applicability to Federal acquisition and 
                procurement or in subparagraph (B), the Secretary shall 
                use competitive procedures when entering into contracts 
                with medicare administrative contractors under this 
                section, taking into account performance quality as 
                well as price and other factors.
                  ``(B) Renewal of contracts.--The Secretary may renew 
                a contract with a medicare administrative contractor 
                under this section from term to term without regard to 
                section 5 of title 41, United States Code, or any other 
                provision of law requiring competition, if the medicare 
                administrative contractor has met or exceeded the 
                performance requirements applicable with respect to the 
                contract and contractor, except that the Secretary 
                shall provide for the application of competitive 
                procedures under such a contract not less frequently 
                than once every five years.
                  ``(C) Transfer of functions.--The Secretary may 
                transfer functions among medicare administrative 
                contractors consistent with the provisions of this 
                paragraph. The Secretary shall ensure that performance 
                quality is considered in such transfers. The Secretary 
                shall provide public notice (whether in the Federal 
                Register or otherwise) of any such transfer (including 
                a description of the functions so transferred, a 
                description of the providers of services and suppliers 
                affected by such transfer, and contact information for 
                the contractors involved).
                  ``(D) Incentives for quality.--The Secretary shall 
                provide incentives for medicare administrative 
                contractors to provide quality service and to promote 
                efficiency.
          ``(2) Compliance with requirements.--No contract under this 
        section shall be entered into with any medicare administrative 
        contractor unless the Secretary finds that such medicare 
        administrative contractor will perform its obligations under 
        the contract efficiently and effectively and will meet such 
        requirements as to financial responsibility, legal authority, 
        quality of services provided, and other matters as the 
        Secretary finds pertinent.
          ``(3) Performance requirements.--
                  ``(A) Development of specific performance 
                requirements.--In developing contract performance 
                requirements, the Secretary shall develop performance 
                requirements applicable to functions described in 
                subsection (a)(4).
                  ``(B) Consultation.-- In developing such 
                requirements, the Secretary may consult with providers 
                of services and suppliers, organizations representing 
                individuals entitled to benefits under part A or 
                enrolled under part B, or both, and organizations and 
                agencies performing functions necessary to carry out 
                the purposes of this section with respect to such 
                performance requirements.
                  ``(C) Inclusion in contracts.--All contractor 
                performance requirements shall be set forth in the 
                contract between the Secretary and the appropriate 
                medicare administrative contractor. Such performance 
                requirements--
                          ``(i) shall reflect the performance 
                        requirements developed under subparagraph (A), 
                        but may include additional performance 
                        requirements;
                          ``(ii) shall be used for evaluating 
                        contractor performance under the contract; and
                          ``(iii) shall be consistent with the written 
                        statement of work provided under the contract.
          ``(4) Information requirements.--The Secretary shall not 
        enter into a contract with a medicare administrative contractor 
        under this section unless the contractor agrees--
                  ``(A) to furnish to the Secretary such timely 
                information and reports as the Secretary may find 
                necessary in performing his functions under this title; 
                and
                  ``(B) to maintain such records and afford such access 
                thereto as the Secretary finds necessary to assure the 
                correctness and verification of the information and 
                reports under subparagraph (A) and otherwise to carry 
                out the purposes of this title.
          ``(5) Surety bond.--A contract with a medicare administrative 
        contractor under this section may require the medicare 
        administrative contractor, and any of its officers or employees 
        certifying payments or disbursing funds pursuant to the 
        contract, or otherwise participating in carrying out the 
        contract, to give surety bond to the United States in such 
        amount as the Secretary may deem appropriate.
  ``(c) Terms and Conditions.--
          ``(1) In general.--A contract with any medicare 
        administrative contractor under this section may contain such 
        terms and conditions as the Secretary finds necessary or 
        appropriate and may provide for advances of funds to the 
        medicare administrative contractor for the making of payments 
        by it under subsection (a)(4)(B).
          ``(2) Prohibition on mandates for certain data collection.--
        The Secretary may not require, as a condition of entering into, 
        or renewing, a contract under this section, that the medicare 
        administrative contractor match data obtained other than in its 
        activities under this title with data used in the 
        administration of this title for purposes of identifying 
        situations in which the provisions of section 1862(b) may 
        apply.
  ``(d) Limitation on Liability of Medicare Administrative Contractors 
and Certain Officers.--
          ``(1) Certifying officer.--No individual designated pursuant 
        to a contract under this section as a certifying officer shall, 
        in the absence of the reckless disregard of the individual's 
        obligations or the intent by that individual to defraud the 
        United States, be liable with respect to any payments certified 
        by the individual under this section.
          ``(2) Disbursing officer.--No disbursing officer shall, in 
        the absence of the reckless disregard of the officer's 
        obligations or the intent by that officer to defraud the United 
        States, be liable with respect to any payment by such officer 
        under this section if it was based upon an authorization (which 
        meets the applicable requirements for such internal controls 
        established by the Comptroller General) of a certifying officer 
        designated as provided in paragraph (1) of this subsection.
          ``(3) Liability of medicare administrative contractor.--
                  ``(A) In general.--No medicare administrative 
                contractor shall be liable to the United States for a 
                payment by a certifying or disbursing officer unless, 
                in connection with such payment, the medicare 
                administrative contractor acted with reckless disregard 
                of its obligations under its medicare administrative 
                contract or with intent to defraud the United States.
                  ``(B) Relationship to false claims act.--Nothing in 
                this subsection shall be construed to limit liability 
                for conduct that would constitute a violation of 
                sections 3729 through 3731 of title 31, United States 
                Code (commonly known as the `False Claims Act').
          ``(4) Indemnification by secretary.--
                  ``(A) In general.--Subject to subparagraphs (B) and 
                (D), in the case of a medicare administrative 
                contractor (or a person who is a director, officer, or 
                employee of such a contractor or who is engaged by the 
                contractor to participate directly in the claims 
                administration process) who is made a party to any 
                judicial or administrative proceeding arising from or 
                relating directly to the claims administration process 
                under this title, the Secretary may, to the extent the 
                Secretary determines to be appropriate and as specified 
                in the contract with the contractor, indemnify the 
                contractor and such persons.
                  ``(B) Conditions.--The Secretary may not provide 
                indemnification under subparagraph (A) insofar as the 
                liability for such costs arises directly from conduct 
                that is determined by the judicial proceeding or by the 
                Secretary to be criminal in nature, fraudulent, or 
                grossly negligent. If indemnification is provided by 
                the Secretary with respect to a contractor before a 
                determination that such costs arose directly from such 
                conduct, the contractor shall reimburse the Secretary 
                for costs of indemnification.
                  ``(C) Scope of indemnification.--Indemnification by 
                the Secretary under subparagraph (A) may include 
                payment of judgments, settlements (subject to 
                subparagraph (D)), awards, and costs (including 
                reasonable legal expenses).
                  ``(D) Written approval for settlements.--A contractor 
                or other person described in subparagraph (A) may not 
                propose to negotiate a settlement or compromise of a 
                proceeding described in such subparagraph without the 
                prior written approval of the Secretary to negotiate 
                such settlement or compromise. Any indemnification 
                under subparagraph (A) with respect to amounts paid 
                under a settlement or compromise of a proceeding 
                described in such subparagraph are conditioned upon 
                prior written approval by the Secretary of the final 
                settlement or compromise.
                  ``(E) Construction.--Nothing in this paragraph shall 
                be construed--
                          ``(i) to change any common law immunity that 
                        may be available to a medicare administrative 
                        contractor or person described in subparagraph 
                        (A); or
                          ``(ii) to permit the payment of costs not 
                        otherwise allowable, reasonable, or allocable 
                        under the Federal Acquisition Regulations.''.
          (2) Consideration of incorporation of current law 
        standards.--In developing contract performance requirements 
        under section 1874A(b) of the Social Security Act, as inserted 
        by paragraph (1), the Secretary shall consider inclusion of the 
        performance standards described in sections 1816(f)(2) of such 
        Act (relating to timely processing of reconsiderations and 
        applications for exemptions) and section 1842(b)(2)(B) of such 
        Act (relating to timely review of determinations and fair 
        hearing requests), as such sections were in effect before the 
        date of the enactment of this Act.
  (b) Conforming Amendments to Section 1816 (Relating to Fiscal 
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
          (1) The heading is amended to read as follows:
        ``provisions relating to the administration of part a''.
          (2) Subsection (a) is amended to read as follows:
  ``(a) The administration of this part shall be conducted through 
contracts with medicare administrative contractors under section 
1874A.''.
          (3) Subsection (b) is repealed.
          (4) Subsection (c) is amended--
                  (A) by striking paragraph (1); and
                  (B) in each of paragraphs (2)(A) and (3)(A), by 
                striking ``agreement under this section'' and inserting 
                ``contract under section 1874A that provides for making 
                payments under this part''.
          (5) Subsections (d) through (i) are repealed.
          (6) Subsections (j) and (k) are each amended--
                  (A) by striking ``An agreement with an agency or 
                organization under this section'' and inserting ``A 
                contract with a medicare administrative contractor 
                under section 1874A with respect to the administration 
                of this part''; and
                  (B) by striking ``such agency or organization'' and 
                inserting ``such medicare administrative contractor'' 
                each place it appears.
          (7) Subsection (l) is repealed.
  (c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
          (1) The heading is amended to read as follows:
        ``provisions relating to the administration of part b''.
          (2) Subsection (a) is amended to read as follows:
  ``(a) The administration of this part shall be conducted through 
contracts with medicare administrative contractors under section 
1874A.''.
          (3) Subsection (b) is amended--
                  (A) by striking paragraph (1);
                  (B) in paragraph (2)--
                          (i) by striking subparagraphs (A) and (B);
                          (ii) in subparagraph (C), by striking 
                        ``carriers'' and inserting ``medicare 
                        administrative contractors''; and
                          (iii) by striking subparagraphs (D) and (E);
                  (C) in paragraph (3)--
                          (i) in the matter before subparagraph (A), by 
                        striking ``Each such contract shall provide 
                        that the carrier'' and inserting ``The 
                        Secretary'';
                          (ii) by striking ``will'' the first place it 
                        appears in each of subparagraphs (A), (B), (F), 
                        (G), (H), and (L) and inserting ``shall'';
                          (iii) in subparagraph (B), in the matter 
                        before clause (i), by striking ``to the 
                        policyholders and subscribers of the carrier'' 
                        and inserting ``to the policyholders and 
                        subscribers of the medicare administrative 
                        contractor'';
                          (iv) by striking subparagraphs (C), (D), and 
                        (E);
                          (v) in subparagraph (H)--
                                  (I) by striking ``if it makes 
                                determinations or payments with respect 
                                to physicians' services,'' in the 
                                matter preceding clause (i); and
                                  (II) by striking ``carrier'' and 
                                inserting ``medicare administrative 
                                contractor'' in clause (i);
                          (vi) by striking subparagraph (I);
                          (vii) in subparagraph (L), by striking the 
                        semicolon and inserting a period;
                          (viii) in the first sentence, after 
                        subparagraph (L), by striking ``and shall 
                        contain'' and all that follows through the 
                        period; and
                          (ix) in the seventh sentence, by inserting 
                        ``medicare administrative contractor,'' after 
                        ``carrier,''; and
                  (D) by striking paragraph (5);
                  (E) in paragraph (6)(D)(iv), by striking ``carrier'' 
                and inserting ``medicare administrative contractor''; 
                and
                  (F) in paragraph (7), by striking ``the carrier'' and 
                inserting ``the Secretary'' each place it appears.
          (4) Subsection (c) is amended--
                  (A) by striking paragraph (1);
                  (B) in paragraph (2)(A), by striking ``contract under 
                this section which provides for the disbursement of 
                funds, as described in subsection (a)(1)(B),'' and 
                inserting ``contract under section 1874A that provides 
                for making payments under this part'';
                  (C) in paragraph (3)(A), by striking ``subsection 
                (a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
                  (D) in paragraph (4), in the matter preceding 
                subparagraph (A), by striking ``carrier'' and inserting 
                ``medicare administrative contractor''; and
                  (E) by striking paragraphs (5) and (6).
          (5) Subsections (d), (e), and (f) are repealed.
          (6) Subsection (g) is amended by striking ``carrier or 
        carriers'' and inserting ``medicare administrative contractor 
        or contractors''.
          (7) Subsection (h) is amended--
                  (A) in paragraph (2)--
                          (i) by striking ``Each carrier having an 
                        agreement with the Secretary under subsection 
                        (a)'' and inserting ``The Secretary''; and
                          (ii) by striking ``Each such carrier'' and 
                        inserting ``The Secretary'';
                  (B) in paragraph (3)(A)--
                          (i) by striking ``a carrier having an 
                        agreement with the Secretary under subsection 
                        (a)'' and inserting ``medicare administrative 
                        contractor having a contract under section 
                        1874A that provides for making payments under 
                        this part''; and
                          (ii) by striking ``such carrier'' and 
                        inserting ``such contractor'';
                  (C) in paragraph (3)(B)--
                          (i) by striking ``a carrier'' and inserting 
                        ``a medicare administrative contractor'' each 
                        place it appears; and
                          (ii) by striking ``the carrier'' and 
                        inserting ``the contractor'' each place it 
                        appears; and
                  (D) in paragraphs (5)(A) and (5)(B)(iii), by striking 
                ``carriers'' and inserting ``medicare administrative 
                contractors'' each place it appears.
          (8) Subsection (l) is amended--
                  (A) in paragraph (1)(A)(iii), by striking ``carrier'' 
                and inserting ``medicare administrative contractor''; 
                and
                  (B) in paragraph (2), by striking ``carrier'' and 
                inserting ``medicare administrative contractor''.
          (9) Subsection (p)(3)(A) is amended by striking ``carrier'' 
        and inserting ``medicare administrative contractor''.
          (10) Subsection (q)(1)(A) is amended by striking ``carrier''.
  (d) Effective Date; Transition Rule.--
          (1) Effective date.--
                  (A) In general.--Except as otherwise provided in this 
                subsection, the amendments made by this section shall 
                take effect on October 1, 2005, and the Secretary is 
                authorized to take such steps before such date as may 
                be necessary to implement such amendments on a timely 
                basis.
                  (B) Construction for current contracts.--Such 
                amendments shall not apply to contracts in effect 
                before the date specified under subparagraph (A) that 
                continue to retain the terms and conditions in effect 
                on such date (except as otherwise provided under this 
                Act, other than under this section) until such date as 
                the contract is let out for competitive bidding under 
                such amendments.
                  (C) Deadline for competitive bidding.--The Secretary 
                shall provide for the letting by competitive bidding of 
                all contracts for functions of medicare administrative 
                contractors for annual contract periods that begin on 
                or after October 1, 2010.
                  (D) Waiver of provider nomination provisions during 
                transition.--During the period beginning on the date of 
                the enactment of this Act and before the date specified 
                under subparagraph (A), the Secretary may enter into 
                new agreements under section 1816 of the Social 
                Security Act (42 U.S.C. 1395h) without regard to any of 
                the provider nomination provisions of such section.
          (2) General transition rules.--The Secretary shall take such 
        steps, consistent with paragraph (1)(B) and (1)(C), as are 
        necessary to provide for an appropriate transition from 
        contracts under section 1816 and section 1842 of the Social 
        Security Act (42 U.S.C. 1395h, 1395u) to contracts under 
        section 1874A, as added by subsection (a)(1).
          (3) Authorizing continuation of mip functions under current 
        contracts and agreements and under rollover contracts.--The 
        provisions contained in the exception in section 1893(d)(2) of 
        the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
        continue to apply notwithstanding the amendments made by this 
        section, and any reference in such provisions to an agreement 
        or contract shall be deemed to include a contract under section 
        1874A of such Act, as inserted by subsection (a)(1), that 
        continues the activities referred to in such provisions.
  (e) References.--On and after the effective date provided under 
subsection (d)(1), any reference to a fiscal intermediary or carrier 
under title XI or XVIII of the Social Security Act (or any regulation, 
manual instruction, interpretative rule, statement of policy, or 
guideline issued to carry out such titles) shall be deemed a reference 
to an appropriate medicare administrative contractor (as provided under 
section 1874A of the Social Security Act).
  (f) Reports on Implementation.--
          (1) Plan for implementation.--By not later than October 1, 
        2004, the Secretary shall submit a report to Congress and the 
        Comptroller General of the United States that describes the 
        plan for implementation of the amendments made by this section. 
        The Comptroller General shall conduct an evaluation of such 
        plan and shall submit to Congress, not later than 6 months 
        after the date the report is received, a report on such 
        evaluation and shall include in such report such 
        recommendations as the Comptroller General deems appropriate.
          (2) Status of implementation.--The Secretary shall submit a 
        report to Congress not later than October 1, 2008, that 
        describes the status of implementation of such amendments and 
        that includes a description of the following:
                  (A) The number of contracts that have been 
                competitively bid as of such date.
                  (B) The distribution of functions among contracts and 
                contractors.
                  (C) A timeline for complete transition to full 
                competition.
                  (D) A detailed description of how the Secretary has 
                modified oversight and management of medicare 
                contractors to adapt to full competition.

SEC. 202. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE 
                    ADMINISTRATIVE CONTRACTORS.

  (a) In General.--Section 1874A, as added by section 201(a)(1), is 
amended by adding at the end the following new subsection:
  ``(e) Requirements for Information Security.--
          ``(1) Development of information security program.--A 
        medicare administrative contractor that performs the functions 
        referred to in subparagraphs (A) and (B) of subsection (a)(4) 
        (relating to determining and making payments) shall implement a 
        contractor-wide information security program to provide 
        information security for the operation and assets of the 
        contractor with respect to such functions under this title. An 
        information security program under this paragraph shall meet 
        the requirements for information security programs imposed on 
        Federal agencies under paragraphs (1) through (8) of section 
        3544(b) of title 44, United States Code (other than 
        requirements under paragraphs (2)(D)(i), (5)(A), and (5)(B) of 
        such section).
          ``(2) Independent audits.--
                  ``(A) Performance of annual evaluations.--Each year a 
                medicare administrative contractor that performs the 
                functions referred to in subparagraphs (A) and (B) of 
                subsection (a)(4) (relating to determining and making 
                payments) shall undergo an evaluation of the 
                information security of the contractor with respect to 
                such functions under this title. The evaluation shall--
                          ``(i) be performed by an entity that meets 
                        such requirements for independence as the 
                        Inspector General of the Department of Health 
                        and Human Services may establish; and
                          ``(ii) test the effectiveness of information 
                        security policies, procedures, and practices of 
                        a representative subset of the contractor's 
                        information systems (as defined in section 
                        3502(8) of title 44, United States Code) 
                        relating to such functions under this title and 
                        an assessment of compliance with the 
                        requirements of this subsection and related 
                        information security policies, procedures, 
                        standards and guidelines, including policies 
                        and procedures as may be prescribed by the 
                        Director of the Office of Management and Budget 
                        and applicable information security standards 
                        promulgated under section 11331 of title 40, 
                        United States Code.
                  ``(B) Deadline for initial evaluation.--
                          ``(i) New contractors.--In the case of a 
                        medicare administrative contractor covered by 
                        this subsection that has not previously 
                        performed the functions referred to in 
                        subparagraphs (A) and (B) of subsection (a)(4) 
                        (relating to determining and making payments) 
                        as a fiscal intermediary or carrier under 
                        section 1816 or 1842, the first independent 
                        evaluation conducted pursuant subparagraph (A) 
                        shall be completed prior to commencing such 
                        functions.
                          ``(ii) Other contractors.--In the case of a 
                        medicare administrative contractor covered by 
                        this subsection that is not described in clause 
                        (i), the first independent evaluation conducted 
                        pursuant subparagraph (A) shall be completed 
                        within 1 year after the date the contractor 
                        commences functions referred to in clause (i) 
                        under this section.
                  ``(C) Reports on evaluations.--
                          ``(i) To the department of health and human 
                        services.--The results of independent 
                        evaluations under subparagraph (A) shall be 
                        submitted promptly to the Inspector General of 
                        the Department of Health and Human Services and 
                        to the Secretary.
                          ``(ii) To congress.--The Inspector General of 
                        Department of Health and Human Services shall 
                        submit to Congress annual reports on the 
                        results of such evaluations, including 
                        assessments of the scope and sufficiency of 
                        such evaluations.
                          ``(iii) Agency reporting.--The Secretary 
                        shall address the results of such evaluations 
                        in reports required under section 3544(c) of 
                        title 44, United States Code.''.
  (b) Application of Requirements to Fiscal Intermediaries and 
Carriers.--
          (1) In general.--The provisions of section 1874A(e)(2) of the 
        Social Security Act (other than subparagraph (B)), as added by 
        subsection (a), shall apply to each fiscal intermediary under 
        section 1816 of the Social Security Act (42 U.S.C. 1395h) and 
        each carrier under section 1842 of such Act (42 U.S.C. 1395u) 
        in the same manner as they apply to medicare administrative 
        contractors under such provisions.
          (2) Deadline for initial evaluation.--In the case of such a 
        fiscal intermediary or carrier with an agreement or contract 
        under such respective section in effect as of the date of the 
        enactment of this Act, the first evaluation under section 
        1874A(e)(2)(A) of the Social Security Act (as added by 
        subsection (a)), pursuant to paragraph (1), shall be completed 
        (and a report on the evaluation submitted to the Secretary) by 
        not later than 1 year after such date.

                   TITLE III--EDUCATION AND OUTREACH

SEC. 301. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

  (a) Coordination of Education Funding.--
          (1) In general.--The Social Security Act is amended by 
        inserting after section 1888 the following new section:
             ``provider education and technical assistance
  ``Sec. 1889. (a) Coordination of Education Funding.--The Secretary 
shall coordinate the educational activities provided through medicare 
contractors (as defined in subsection (g), including under section 
1893) in order to maximize the effectiveness of Federal education 
efforts for providers of services and suppliers.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.
          (3) Report.--Not later than October 1, 2004, the Secretary 
        shall submit to Congress a report that includes a description 
        and evaluation of the steps taken to coordinate the funding of 
        provider education under section 1889(a) of the Social Security 
        Act, as added by paragraph (1).
  (b) Incentives To Improve Contractor Performance.--
          (1) In general.--Section 1874A, as added by section 201(a)(1) 
        and as amended by section 202(a), is amended by adding at the 
        end the following new subsection:
  ``(f) Incentives To Improve Contractor Performance in Provider 
Education and Outreach.--The Secretary shall use specific claims 
payment error rates or similar methodology of medicare administrative 
contractors in the processing or reviewing of medicare claims in order 
to give such contractors an incentive to implement effective education 
and outreach programs for providers of services and suppliers.''.
          (2) Application to fiscal intermediaries and carriers.--The 
        provisions of section 1874A(f) of the Social Security Act, as 
        added by paragraph (1), shall apply to each fiscal intermediary 
        under section 1816 of the Social Security Act (42 U.S.C. 1395h) 
        and each carrier under section 1842 of such Act (42 U.S.C. 
        1395u) in the same manner as they apply to medicare 
        administrative contractors under such provisions.
          (3) GAO report on adequacy of methodology.--Not later than 
        October 1, 2004, the Comptroller General of the United States 
        shall submit to Congress and to the Secretary a report on the 
        adequacy of the methodology under section 1874A(f) of the 
        Social Security Act, as added by paragraph (1), and shall 
        include in the report such recommendations as the Comptroller 
        General determines appropriate with respect to the methodology.
          (4) Report on use of methodology in assessing contractor 
        performance.--Not later than October 1, 2004, the Secretary 
        shall submit to Congress a report that describes how the 
        Secretary intends to use such methodology in assessing medicare 
        contractor performance in implementing effective education and 
        outreach programs, including whether to use such methodology as 
        a basis for performance bonuses. The report shall include an 
        analysis of the sources of identified errors and potential 
        changes in systems of contractors and rules of the Secretary 
        that could reduce claims error rates.
  (c) Provision of Access to and Prompt Responses From Medicare 
Administrative Contractors.--
          (1) In general.--Section 1874A, as added by section 201(a)(1) 
        and as amended by section 202(a) and subsection (b), is further 
        amended by adding at the end the following new subsection:
  ``(g) Communications With Beneficiaries, Providers of Services and 
Suppliers.--
          ``(1) Communication strategy.--The Secretary shall develop a 
        strategy for communications with individuals entitled to 
        benefits under part A or enrolled under part B, or both, and 
        with providers of services and suppliers under this title.
          ``(2) Response to written inquiries.--Each medicare 
        administrative contractor shall, for those providers of 
        services and suppliers which submit claims to the contractor 
        for claims processing and for those individuals entitled to 
        benefits under part A or enrolled under part B, or both, with 
        respect to whom claims are submitted for claims processing, 
        provide general written responses (which may be through 
        electronic transmission) in a clear, concise, and accurate 
        manner to inquiries of providers of services, suppliers and 
        individuals entitled to benefits under part A or enrolled under 
        part B, or both, concerning the programs under this title 
        within 45 business days of the date of receipt of such 
        inquiries.
          ``(3) Response to toll-free lines.--The Secretary shall 
        ensure that each medicare administrative contractor shall 
        provide, for those providers of services and suppliers which 
        submit claims to the contractor for claims processing and for 
        those individuals entitled to benefits under part A or enrolled 
        under part B, or both, with respect to whom claims are 
        submitted for claims processing, a toll-free telephone number 
        at which such individuals, providers of services and suppliers 
        may obtain information regarding billing, coding, claims, 
        coverage, and other appropriate information under this title.
          ``(4) Monitoring of contractor responses.--
                  ``(A) In general.--Each medicare administrative 
                contractor shall, consistent with standards developed 
                by the Secretary under subparagraph (B)--
                          ``(i) maintain a system for identifying who 
                        provides the information referred to in 
                        paragraphs (2) and (3); and
                          ``(ii) monitor the accuracy, consistency, and 
                        timeliness of the information so provided.
                  ``(B) Development of standards.--
                          ``(i) In general.--The Secretary shall 
                        establish and make public standards to monitor 
                        the accuracy, consistency, and timeliness of 
                        the information provided in response to written 
                        and telephone inquiries under this subsection. 
                        Such standards shall be consistent with the 
                        performance requirements established under 
                        subsection (b)(3).
                          ``(ii) Evaluation.--In conducting evaluations 
                        of individual medicare administrative 
                        contractors, the Secretary shall take into 
                        account the results of the monitoring conducted 
                        under subparagraph (A) taking into account as 
                        performance requirements the standards 
                        established under clause (i). The Secretary 
                        shall, in consultation with organizations 
                        representing providers of services, suppliers, 
                        and individuals entitled to benefits under part 
                        A or enrolled under part B, or both, establish 
                        standards relating to the accuracy, 
                        consistency, and timeliness of the information 
                        so provided.
                  ``(C) Direct monitoring.--Nothing in this paragraph 
                shall be construed as preventing the Secretary from 
                directly monitoring the accuracy, consistency, and 
                timeliness of the information so provided.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect October 1, 2004.
          (3) Application to fiscal intermediaries and carriers.--The 
        provisions of section 1874A(g) of the Social Security Act, as 
        added by paragraph (1), shall apply to each fiscal intermediary 
        under section 1816 of the Social Security Act (42 U.S.C. 1395h) 
        and each carrier under section 1842 of such Act (42 U.S.C. 
        1395u) in the same manner as they apply to medicare 
        administrative contractors under such provisions.
  (d) Improved Provider Education and Training.--
          (1) In general.--Section 1889, as added by subsection (a), is 
        amended by adding at the end the following new subsections:
  ``(b) Enhanced Education and Training.--
          ``(1) Additional resources.--There are authorized to be 
        appropriated to the Secretary (in appropriate part from the 
        Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund) $25,000,000 for 
        each of fiscal years 2005 and 2006 and such sums as may be 
        necessary for succeeding fiscal years.
          ``(2) Use.--The funds made available under paragraph (1) 
        shall be used to increase the conduct by medicare contractors 
        of education and training of providers of services and 
        suppliers regarding billing, coding, and other appropriate 
        items and may also be used to improve the accuracy, 
        consistency, and timeliness of contractor responses.
  ``(c) Tailoring Education and Training Activities for Small Providers 
or Suppliers.--
          ``(1) In general.--Insofar as a medicare contractor conducts 
        education and training activities, it shall tailor such 
        activities to meet the special needs of small providers of 
        services or suppliers (as defined in paragraph (2)).
          ``(2) Small provider of services or supplier.--In this 
        subsection, the term `small provider of services or supplier' 
        means--
                  ``(A) a provider of services with fewer than 25 full-
                time-equivalent employees; or
                  ``(B) a supplier with fewer than 10 full-time-
                equivalent employees.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2004.
  (e) Requirement To Maintain Internet Sites.--
          (1) In general.--Section 1889, as added by subsection (a) and 
        as amended by subsection (d), is further amended by adding at 
        the end the following new subsection:
  ``(d) Internet Sites; FAQs.--The Secretary, and each medicare 
contractor insofar as it provides services (including claims 
processing) for providers of services or suppliers, shall maintain an 
Internet site which--
          ``(1) provides answers in an easily accessible format to 
        frequently asked questions, and
          ``(2) includes other published materials of the contractor,
that relate to providers of services and suppliers under the programs 
under this title (and title XI insofar as it relates to such 
programs).''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2004.
  (f) Additional Provider Education Provisions.--
          (1) In general.--Section 1889, as added by subsection (a) and 
        as amended by subsections (d) and (e), is further amended by 
        adding at the end the following new subsections:
  ``(e) Encouragement of Participation in Education Program 
Activities.--A medicare contractor may not use a record of attendance 
at (or failure to attend) educational activities or other information 
gathered during an educational program conducted under this section or 
otherwise by the Secretary to select or track providers of services or 
suppliers for the purpose of conducting any type of audit or prepayment 
review.
  ``(f) Construction.--Nothing in this section or section 1893(g) shall 
be construed as providing for disclosure by a medicare contractor of 
information that would compromise pending law enforcement activities or 
reveal findings of law enforcement-related audits.
  ``(g) Definitions.--For purposes of this section, the term `medicare 
contractor' includes the following:
          ``(1) A medicare administrative contractor with a contract 
        under section 1874A, including a fiscal intermediary with a 
        contract under section 1816 and a carrier with a contract under 
        section 1842.
          ``(2) An eligible entity with a contract under section 1893.
Such term does not include, with respect to activities of a specific 
provider of services or supplier an entity that has no authority under 
this title or title IX with respect to such activities and such 
provider of services or supplier.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.

SEC. 302. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION PROGRAM.

  (a) Establishment.--
          (1) In general.--The Secretary shall establish a 
        demonstration program (in this section referred to as the 
        ``demonstration program'') under which technical assistance 
        described in paragraph (2) is made available, upon request and 
        on a voluntary basis, to small providers of services or 
        suppliers in order to improve compliance with the applicable 
        requirements of the programs under medicare program under title 
        XVIII of the Social Security Act (including provisions of title 
        XI of such Act insofar as they relate to such title and are not 
        administered by the Office of the Inspector General of the 
        Department of Health and Human Services).
          (2) Forms of technical assistance.--The technical assistance 
        described in this paragraph is--
                  (A) evaluation and recommendations regarding billing 
                and related systems; and
                  (B) information and assistance regarding policies and 
                procedures under the medicare program, including coding 
                and reimbursement.
          (3) Small providers of services or suppliers.--In this 
        section, the term ``small providers of services or suppliers'' 
        means--
                  (A) a provider of services with fewer than 25 full-
                time-equivalent employees; or
                  (B) a supplier with fewer than 10 full-time-
                equivalent employees.
  (b) Qualification of Contractors.--In conducting the demonstration 
program, the Secretary shall enter into contracts with qualified 
organizations (such as peer review organizations or entities described 
in section 1889(g)(2) of the Social Security Act, as inserted by 
section 5(f)(1)) with appropriate expertise with billing systems of the 
full range of providers of services and suppliers to provide the 
technical assistance. In awarding such contracts, the Secretary shall 
consider any prior investigations of the entity's work by the Inspector 
General of Department of Health and Human Services or the Comptroller 
General of the United States.
  (c) Description of Technical Assistance.--The technical assistance 
provided under the demonstration program shall include a direct and in-
person examination of billing systems and internal controls of small 
providers of services or suppliers to determine program compliance and 
to suggest more efficient or effective means of achieving such 
compliance.
  (d) Avoidance of Recovery Actions for Problems Identified as 
Corrected.--The Secretary shall provide that, absent evidence of fraud 
and notwithstanding any other provision of law, any errors found in a 
compliance review for a small provider of services or supplier that 
participates in the demonstration program shall not be subject to 
recovery action if the technical assistance personnel under the program 
determine that--
          (1) the problem that is the subject of the compliance review 
        has been corrected to their satisfaction within 30 days of the 
        date of the visit by such personnel to the small provider of 
        services or supplier; and
          (2) such problem remains corrected for such period as is 
        appropriate.
The previous sentence applies only to claims filed as part of the 
demonstration program and lasts only for the duration of such program 
and only as long as the small provider of services or supplier is a 
participant in such program.
  (e) GAO Evaluation.--Not later than 2 years after the date of the 
date the demonstration program is first implemented, the Comptroller 
General, in consultation with the Inspector General of the Department 
of Health and Human Services, shall conduct an evaluation of the 
demonstration program. The evaluation shall include a determination of 
whether claims error rates are reduced for small providers of services 
or suppliers who participated in the program and the extent of improper 
payments made as a result of the demonstration program. The Comptroller 
General shall submit a report to the Secretary and the Congress on such 
evaluation and shall include in such report recommendations regarding 
the continuation or extension of the demonstration program.
  (f) Financial Participation by Providers.--The provision of technical 
assistance to a small provider of services or supplier under the 
demonstration program is conditioned upon the small provider of 
services or supplier paying an amount estimated (and disclosed in 
advance of a provider's or supplier's participation in the program) to 
be equal to 25 percent of the cost of the technical assistance.
  (g) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary (in appropriate part from the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund) to carry out the demonstration program--
          (1) for fiscal year 2005, $1,000,000, and
          (2) for fiscal year 2006, $6,000,000.

SEC. 303. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY OMBUDSMAN.

  (a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 1395ee) is 
amended--
          (1) by adding at the end of the heading the following: ``; 
        medicare provider ombudsman'';
          (2) by inserting ``Practicing Physicians Advisory Council.--
        (1)'' after ``(a)'';
          (3) in paragraph (1), as so redesignated under paragraph (2), 
        by striking ``in this section'' and inserting ``in this 
        subsection'';
          (4) by redesignating subsections (b) and (c) as paragraphs 
        (2) and (3), respectively; and
          (5) by adding at the end the following new subsection:
  ``(b) Medicare Provider Ombudsman.--The Secretary shall appoint 
within the Department of Health and Human Services a Medicare Provider 
Ombudsman. The Ombudsman shall--
          ``(1) provide assistance, on a confidential basis, to 
        providers of services and suppliers with respect to complaints, 
        grievances, and requests for information concerning the 
        programs under this title (including provisions of title XI 
        insofar as they relate to this title and are not administered 
        by the Office of the Inspector General of the Department of 
        Health and Human Services) and in the resolution of unclear or 
        conflicting guidance given by the Secretary and medicare 
        contractors to such providers of services and suppliers 
        regarding such programs and provisions and requirements under 
        this title and such provisions; and
          ``(2) submit recommendations to the Secretary for improvement 
        in the administration of this title and such provisions, 
        including--
                  ``(A) recommendations to respond to recurring 
                patterns of confusion in this title and such provisions 
                (including recommendations regarding suspending 
                imposition of sanctions where there is widespread 
                confusion in program administration), and
                  ``(B) recommendations to provide for an appropriate 
                and consistent response (including not providing for 
                audits) in cases of self-identified overpayments by 
                providers of services and suppliers.
The Ombudsman shall not serve as an advocate for any increases in 
payments or new coverage of services, but may identify issues and 
problems in payment or coverage policies.''.
  (b) Medicare Beneficiary Ombudsman.--Title XVIII is amended by 
inserting after section 1806 the following new section:
                    ``medicare beneficiary ombudsman
  ``Sec. 1807. (a) In General.--The Secretary shall appoint within the 
Department of Health and Human Services a Medicare Beneficiary 
Ombudsman who shall have expertise and experience in the fields of 
health care and education of (and assistance to) individuals entitled 
to benefits under this title.
  ``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
          ``(1) receive complaints, grievances, and requests for 
        information submitted by individuals entitled to benefits under 
        part A or enrolled under part B, or both, with respect to any 
        aspect of the medicare program;
          ``(2) provide assistance with respect to complaints, 
        grievances, and requests referred to in paragraph (1), 
        including--
                  ``(A) assistance in collecting relevant information 
                for such individuals, to seek an appeal of a decision 
                or determination made by a fiscal intermediary, 
                carrier, Medicare+Choice organization, or the 
                Secretary; and
                  ``(B) assistance to such individuals with any 
                problems arising from disenrollment from a 
                Medicare+Choice plan under part C; and
          ``(3) submit annual reports to Congress and the Secretary 
        that describe the activities of the Office and that include 
        such recommendations for improvement in the administration of 
        this title as the Ombudsman determines appropriate.
The Ombudsman shall not serve as an advocate for any increases in 
payments or new coverage of services, but may identify issues and 
problems in payment or coverage policies.
  ``(c) Working With Health Insurance Counseling Programs.--To the 
extent possible, the Ombudsman shall work with health insurance 
counseling programs (receiving funding under section 4360 of Omnibus 
Budget Reconciliation Act of 1990) to facilitate the provision of 
information to individuals entitled to benefits under part A or 
enrolled under part B, or both regarding Medicare+Choice plans and 
changes to those plans. Nothing in this subsection shall preclude 
further collaboration between the Ombudsman and such programs.''.
  (c) Deadline for Appointment.--The Secretary shall appoint the 
Medicare Provider Ombudsman and the Medicare Beneficiary Ombudsman, 
under the amendments made by subsections (a) and (b), respectively, by 
not later than 1 year after the date of the enactment of this Act.
  (d) Funding.--There are authorized to be appropriated to the 
Secretary (in appropriate part from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund) 
to carry out the provisions of subsection (b) of section 1868 of the 
Social Security Act (relating to the Medicare Provider Ombudsman), as 
added by subsection (a)(5) and section 1807 of such Act (relating to 
the Medicare Beneficiary Ombudsman), as added by subsection (b), such 
sums as are necessary for fiscal year 2004 and each succeeding fiscal 
year.
  (e) Use of Central, Toll-Free Number (1-800-MEDICARE).--
          (1) Phone triage system; listing in medicare handbook instead 
        of other toll-free numbers.--Section 1804(b) (42 U.S.C. 1395b-
        2(b)) is amended by adding at the end the following: ``The 
        Secretary shall provide, through the toll-free number 1-800-
        MEDICARE, for a means by which individuals seeking information 
        about, or assistance with, such programs who phone such toll-
        free number are transferred (without charge) to appropriate 
        entities for the provision of such information or assistance. 
        Such toll-free number shall be the toll-free number listed for 
        general information and assistance in the annual notice under 
        subsection (a) instead of the listing of numbers of individual 
        contractors.''.
          (2) Monitoring accuracy.--
                  (A) Study.--The Comptroller General of the United 
                States shall conduct a study to monitor the accuracy 
                and consistency of information provided to individuals 
                entitled to benefits under part A or enrolled under 
                part B, or both, through the toll-free number 1-800-
                MEDICARE, including an assessment of whether the 
                information provided is sufficient to answer questions 
                of such individuals. In conducting the study, the 
                Comptroller General shall examine the education and 
                training of the individuals providing information 
                through such number.
                  (B) Report.--Not later than 1 year after the date of 
                the enactment of this Act, the Comptroller General 
                shall submit to Congress a report on the study 
                conducted under subparagraph (A).

SEC. 304. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

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

SEC. 305. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO 
                    BENEFICIARIES ABOUT SKILLED NURSING FACILITY 
                    BENEFITS.

  (a) In General.--The Secretary shall provide that in medicare 
beneficiary notices provided (under section 1806(a) of the Social 
Security Act, 42 U.S.C. 1395b-7(a)) with respect to the provision of 
post-hospital extended care services under part A of title XVIII of the 
Social Security Act, there shall be included information on the number 
of days of coverage of such services remaining under such part for the 
medicare beneficiary and spell of illness involved.
  (b) Effective Date.--Subsection (a) shall apply to notices provided 
during calendar quarters beginning more than 6 months after the date of 
the enactment of this Act.

SEC. 306. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING FACILITIES 
                    IN HOSPITAL DISCHARGE PLANS.

  (a) Availability of Data.--The Secretary shall publicly provide 
information that enables hospital discharge planners, medicare 
beneficiaries, and the public to identify skilled nursing facilities 
that are participating in the medicare program.
  (b) Inclusion of Information in Certain Hospital Discharge Plans.--
          (1) In general.--Section 1861(ee)(2)(D) (42 U.S.C. 
        1395x(ee)(2)(D)) is amended--
                  (A) by striking ``hospice services'' and inserting 
                ``hospice care and post-hospital extended care 
                services''; and
                  (B) by inserting before the period at the end the 
                following: ``and, in the case of individuals who are 
                likely to need post-hospital extended care services, 
                the availability of such services through facilities 
                that participate in the program under this title and 
                that serve the area in which the patient resides''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to discharge plans made on or after such date as 
        the Secretary shall specify, but not later than 6 months after 
        the date the Secretary provides for availability of information 
        under subsection (a).

                     TITLE IV--APPEALS AND RECOVERY

SEC. 401. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

  (a) Transition Plan.--
          (1) In general.--Not later than October 1, 2004, the 
        Commissioner of Social Security and the Secretary shall develop 
        and transmit to Congress and the Comptroller General of the 
        United States a plan under which the functions of 
        administrative law judges responsible for hearing cases under 
        title XVIII of the Social Security Act (and related provisions 
        in title XI of such Act) are transferred from the 
        responsibility of the Commissioner and the Social Security 
        Administration to the Secretary and the Department of Health 
        and Human Services.
          (2) GAO evaluation.--The Comptroller General of the United 
        States shall evaluate the plan and, not later than the date 
        that is 6 months after the date on which the plan is received 
        by the Comptroller General, shall submit to Congress a report 
        on such evaluation.
  (b) Transfer of Adjudication Authority.--
          (1) In general.--Not earlier than July 1, 2005, and not later 
        than October 1, 2005, the Commissioner of Social Security and 
        the Secretary shall implement the transition plan under 
        subsection (a) and transfer the administrative law judge 
        functions described in such subsection from the Social Security 
        Administration to the Secretary.
          (2) Assuring independence of judges.--The Secretary shall 
        assure the independence of administrative law judges performing 
        the administrative law judge functions transferred under 
        paragraph (1) from the Centers for Medicare & Medicaid Services 
        and its contractors. In order to assure such independence, the 
        Secretary shall place such judges in an administrative office 
        that is organizationally and functionally separate from such 
        Centers. Such judges shall report to, and be under the general 
        supervision of, the Secretary (or, to the extent the Secretary 
        delegates such authority, the officer next in rank below the 
        Secretary), but shall not report to, or be subject to 
        supervision by, any other officer of the Department.
          (3) Geographic distribution.--The Secretary shall provide for 
        an appropriate geographic distribution of administrative law 
        judges performing the administrative law judge functions 
        transferred under paragraph (1) throughout the United States to 
        ensure timely access to such judges.
          (4) Hiring authority.--Subject to the amounts provided in 
        advance in appropriations Act, the Secretary shall have 
        authority to hire administrative law judges to hear such cases, 
        giving priority to those judges with prior experience in 
        handling medicare appeals and in a manner consistent with 
        paragraph (3), and to hire support staff for such judges.
          (5) Financing.--Amounts payable under law to the Commissioner 
        for administrative law judges performing the administrative law 
        judge functions transferred under paragraph (1) from the 
        Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund shall become payable 
        to the Secretary for the functions so transferred.
          (6) Shared resources.--The Secretary shall enter into such 
        arrangements with the Commissioner as may be appropriate with 
        respect to transferred functions of administrative law judges 
        to share office space, support staff, and other resources, with 
        appropriate reimbursement from the Trust Funds described in 
        paragraph (5).
  (c) Increased Financial Support.--In addition to any amounts 
otherwise appropriated, to ensure timely action on appeals before 
administrative law judges and the Departmental Appeals Board consistent 
with section 1869 of the Social Security Act (as amended by section 521 
of BIPA, 114 Stat. 2763A-534), there are authorized to be appropriated 
(in appropriate part from the Federal Hospital Insurance Trust Fund and 
the Federal Supplementary Medical Insurance Trust Fund) to the 
Secretary such sums as are necessary for fiscal year 2005 and each 
subsequent fiscal year to--
          (1) increase the number of administrative law judges (and 
        their staffs) under subsection (b)(4);
          (2) improve education and training opportunities for 
        administrative law judges (and their staffs); and
          (3) increase the staff of the Departmental Appeals Board.
  (d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 U.S.C. 
1395ff(f)(2)(A)(i)), as added by section 522(a) of BIPA (114 Stat. 
2763A-543), is amended by striking ``of the Social Security 
Administration''.

SEC. 402. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

  (a) Expedited Access to Judicial Review.--Section 1869(b) (42 U.S.C. 
1395ff(b)) as amended by BIPA, is amended--
          (1) in paragraph (1)(A), by inserting ``, subject to 
        paragraph (2),'' before ``to judicial review of the Secretary's 
        final decision'';
          (2) in paragraph (1)(F)--
                  (A) by striking clause (ii);
                  (B) by striking ``proceeding'' and all that follows 
                through ``determination'' and inserting 
                ``determinations and reconsiderations''; and
                  (C) by redesignating subclauses (I) and (II) as 
                clauses (i) and (ii) and by moving the indentation of 
                such subclauses (and the matter that follows) 2 ems to 
                the left; and
          (3) by adding at the end the following new paragraph:
          ``(2) Expedited access to judicial review.--
                  ``(A) In general.--The Secretary shall establish a 
                process under which a provider of services or supplier 
                that furnishes an item or service or an individual 
                entitled to benefits under part A or enrolled under 
                part B, or both, who has filed an appeal under 
                paragraph (1) may obtain access to judicial review when 
                a review panel (described in subparagraph (D)), on its 
                own motion or at the request of the appellant, 
                determines that no entity in the administrative appeals 
                process has the authority to decide the question of law 
                or regulation relevant to the matters in controversy 
                and that there is no material issue of fact in dispute. 
                The appellant may make such request only once with 
                respect to a question of law or regulation in a case of 
                an appeal.
                  ``(B) Prompt determinations.--If, after or coincident 
                with appropriately filing a request for an 
                administrative hearing, the appellant requests a 
                determination by the appropriate review panel that no 
                review panel has the authority to decide the question 
                of law or regulations relevant to the matters in 
                controversy and that there is no material issue of fact 
                in dispute and if such request is accompanied by the 
                documents and materials as the appropriate review panel 
                shall require for purposes of making such 
                determination, such review panel shall make a 
                determination on the request in writing within 60 days 
                after the date such review panel receives the request 
                and such accompanying documents and materials. Such a 
                determination by such review panel shall be considered 
                a final decision and not subject to review by the 
                Secretary.
                  ``(C) Access to judicial review.--
                          ``(i) In general.--If the appropriate review 
                        panel--
                                  ``(I) determines that there are no 
                                material issues of fact in dispute and 
                                that the only issue is one of law or 
                                regulation that no review panel has the 
                                authority to decide; or
                                  ``(II) fails to make such 
                                determination within the period 
                                provided under subparagraph (B);
                        then the appellant may bring a civil action as 
                        described in this subparagraph.
                          ``(ii) Deadline for filing.--Such action 
                        shall be filed, in the case described in--
                                  ``(I) clause (i)(I), within 60 days 
                                of date of the determination described 
                                in such subparagraph; or
                                  ``(II) clause (i)(II), within 60 days 
                                of the end of the period provided under 
                                subparagraph (B) for the determination.
                          ``(iii) Venue.--Such action shall be brought 
                        in the district court of the United States for 
                        the judicial district in which the appellant is 
                        located (or, in the case of an action brought 
                        jointly by more than one applicant, the 
                        judicial district in which the greatest number 
                        of applicants are located) or in the district 
                        court for the District of Columbia.
                          ``(iv) Interest on amounts in controversy.--
                        Where a provider of services or supplier seeks 
                        judicial review pursuant to this paragraph, the 
                        amount in controversy shall be subject to 
                        annual interest beginning on the first day of 
                        the first month beginning after the 60-day 
                        period as determined pursuant to clause (ii) 
                        and equal to the rate of interest on 
                        obligations issued for purchase by the Federal 
                        Hospital Insurance Trust Fund and by the 
                        Federal Supplementary Medical Insurance Trust 
                        Fund for the month in which the civil action 
                        authorized under this paragraph is commenced, 
                        to be awarded by the reviewing court in favor 
                        of the prevailing party. No interest awarded 
                        pursuant to the preceding sentence shall be 
                        deemed income or cost for the purposes of 
                        determining reimbursement due providers of 
                        services or suppliers under this Act.
                  ``(D) Review panels.--For purposes of this 
                subsection, a `review panel' is a panel consisting of 3 
                members (who shall be administrative law judges, 
                members of the Departmental Appeals Board, or qualified 
                individuals associated with a qualified independent 
                contractor (as defined in subsection (c)(2)) or with 
                another independent entity) designated by the Secretary 
                for purposes of making determinations under this 
                paragraph.''.
  (b) Application to Provider Agreement Determinations.--Section 
1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
          (1) by inserting ``(A)'' after ``(h)(1)''; and
          (2) by adding at the end the following new subparagraph:
  ``(B) An institution or agency described in subparagraph (A) that has 
filed for a hearing under subparagraph (A) shall have expedited access 
to judicial review under this subparagraph in the same manner as 
providers of services, suppliers, and individuals entitled to benefits 
under part A or enrolled under part B, or both, may obtain expedited 
access to judicial review under the process established under section 
1869(b)(2). Nothing in this subparagraph shall be construed to affect 
the application of any remedy imposed under section 1819 during the 
pendency of an appeal under this subparagraph.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to appeals filed on or after October 1, 2004.
  (d) Expedited Review of Certain Provider Agreement Determinations.--
          (1) Termination and certain other immediate remedies.--The 
        Secretary shall develop and implement a process to expedite 
        proceedings under sections 1866(h) of the Social Security Act 
        (42 U.S.C. 1395cc(h)) in which the remedy of termination of 
        participation, or a remedy described in clause (i) or (iii) of 
        section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-3(h)(2)(B)) 
        which is applied on an immediate basis, has been imposed. Under 
        such process priority shall be provided in cases of 
        termination.
          (2) Increased financial support.--In addition to any amounts 
        otherwise appropriated, to reduce by 50 percent the average 
        time for administrative determinations on appeals under section 
        1866(h) of the Social Security Act (42 U.S.C. 1395cc(h)), there 
        are authorized to be appropriated (in appropriate part from the 
        Federal Hospital Insurance Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund) to the Secretary 
        such additional sums for fiscal year 2005 and each subsequent 
        fiscal year as may be necessary. The purposes for which such 
        amounts are available include increasing the number of 
        administrative law judges (and their staffs) and the appellate 
        level staff at the Departmental Appeals Board of the Department 
        of Health and Human Services and educating such judges and 
        staffs on long-term care issues.
  (e) Process for Reinstatement of Approval of Certain SNF Training 
Programs.--
          (1) In general.--In the case of a termination of approval of 
        a nurse aide training program described in paragraph (2) of a 
        skilled nursing facility, the Secretary shall develop and 
        implement a process for the reinstatement of approval of such 
        program before the end of the mandatory 2 year disapproval 
        period if the facility and program is certified by the 
        Secretary, in coordination with the applicable State survey and 
        certification agency and after public notice, as being in 
        compliance with applicable requirements and as having remedied 
        any deficiencies in the facility or program that resulted in 
        noncompliance.
          (2) Termination of approval described.--A termination of 
        approval of a training program described in this paragraph is a 
        mandatory 2-year disapproval provided for under section 
        1819(f)(2)(B)(iii) of the Social Security Act (42 U.S.C. 1395i-
        3(f)(2)(B)(iii)) if the only basis for the mandatory 
        disapproval was the assessment of a civil money penalty of not 
        less than $5,000.

SEC. 403. REVISIONS TO MEDICARE APPEALS PROCESS.

  (a) Requiring Full and Early Presentation of Evidence.--
          (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
        amended by BIPA and as amended by section 402(a), is further 
        amended by adding at the end the following new paragraph:
          ``(3) Requiring full and early presentation of evidence by 
        providers.--A provider of services or supplier may not 
        introduce evidence in any appeal under this section that was 
        not presented at the reconsideration conducted by the qualified 
        independent contractor under subsection (c), unless there is 
        good cause which precluded the introduction of such evidence at 
        or before that reconsideration.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on October 1, 2004.
  (b) Use of Patients' Medical Records.--Section 1869(c)(3)(B)(i) (42 
U.S.C. 1395ff(c)(3)(B)(i)), as amended by BIPA, is amended by inserting 
``(including the medical records of the individual involved)'' after 
``clinical experience''.
  (c) Notice Requirements for Medicare Appeals.--
          (1) Initial determinations and redeterminations.--Section 
        1869(a) (42 U.S.C. 1395ff(a)), as amended by BIPA, is amended 
        by adding at the end the following new paragraphs:
          ``(4) Requirements of notice of determinations.--With respect 
        to an initial determination insofar as it results in a denial 
        of a claim for benefits--
                  ``(A) the written notice on the determination shall 
                include--
                          ``(i) the reasons for the determination, 
                        including whether a local medical review policy 
                        or a local coverage determination was used;
                          ``(ii) the procedures for obtaining 
                        additional information concerning the 
                        determination, including the information 
                        described in subparagraph (B); and
                          ``(iii) notification of the right to seek a 
                        redetermination or otherwise appeal the 
                        determination and instructions on how to 
                        initiate such a redetermination under this 
                        section; and
                  ``(B) the person provided such notice may obtain, 
                upon request, the specific provision of the policy, 
                manual, or regulation used in making the determination.
          ``(5) Requirements of notice of redeterminations.--With 
        respect to a redetermination insofar as it results in a denial 
        of a claim for benefits--
                  ``(A) the written notice on the redetermination shall 
                include--
                          ``(i) the specific reasons for the 
                        redetermination;
                          ``(ii) as appropriate, a summary of the 
                        clinical or scientific evidence used in making 
                        the redetermination;
                          ``(iii) a description of the procedures for 
                        obtaining additional information concerning the 
                        redetermination; and
                          ``(iv) notification of the right to appeal 
                        the redetermination and instructions on how to 
                        initiate such an appeal under this section;
                  ``(B) such written notice shall be provided in 
                printed form and written in a manner calculated to be 
                understood by the individual entitled to benefits under 
                part A or enrolled under part B, or both; and
                  ``(C) the person provided such notice may obtain, 
                upon request, information on the specific provision of 
                the policy, manual, or regulation used in making the 
                redetermination.''.
          (2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C. 
        1395ff(c)(3)(E)), as amended by BIPA, is amended--
                  (A) by inserting ``be written in a manner calculated 
                to be understood by the individual entitled to benefits 
                under part A or enrolled under part B, or both, and 
                shall include (to the extent appropriate)'' after ``in 
                writing, ''; and
                  (B) by inserting ``and a notification of the right to 
                appeal such determination and instructions on how to 
                initiate such appeal under this section'' after ``such 
                decision,''.
          (3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)), as 
        amended by BIPA, is amended--
                  (A) in the heading, by inserting ``; Notice'' after 
                ``Secretary''; and
                  (B) by adding at the end the following new paragraph:
          ``(4) Notice.--Notice of the decision of an administrative 
        law judge shall be in writing in a manner calculated to be 
        understood by the individual entitled to benefits under part A 
        or enrolled under part B, or both, and shall include--
                  ``(A) the specific reasons for the determination 
                (including, to the extent appropriate, a summary of the 
                clinical or scientific evidence used in making the 
                determination);
                  ``(B) the procedures for obtaining additional 
                information concerning the decision; and
                  ``(C) notification of the right to appeal the 
                decision and instructions on how to initiate such an 
                appeal under this section.''.
          (4) Submission of record for appeal.--Section 
        1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by striking 
        ``prepare'' and inserting ``submit'' and by striking ``with 
        respect to'' and all that follows through ``and relevant 
        policies''.
  (d) Qualified Independent Contractors.--
          (1) Eligibility requirements of qualified independent 
        contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)), as 
        amended by BIPA, is amended--
                  (A) in subparagraph (A), by striking ``sufficient 
                training and expertise in medical science and legal 
                matters'' and inserting ``sufficient medical, legal, 
                and other expertise (including knowledge of the program 
                under this title) and sufficient staffing''; and
                  (B) by adding at the end the following new 
                subparagraph:
                  ``(K) Independence requirements.--
                          ``(i) In general.--Subject to clause (ii), a 
                        qualified independent contractor shall not 
                        conduct any activities in a case unless the 
                        entity--
                                  ``(I) is not a related party (as 
                                defined in subsection (g)(5));
                                  ``(II) does not have a material 
                                familial, financial, or professional 
                                relationship with such a party in 
                                relation to such case; and
                                  ``(III) does not otherwise have a 
                                conflict of interest with such a party.
                          ``(ii) Exception for reasonable 
                        compensation.--Nothing in clause (i) shall be 
                        construed to prohibit receipt by a qualified 
                        independent contractor of compensation from the 
                        Secretary for the conduct of activities under 
                        this section if the compensation is provided 
                        consistent with clause (iii).
                          ``(iii) Limitations on entity compensation.--
                        Compensation provided by the Secretary to a 
                        qualified independent contractor in connection 
                        with reviews under this section shall not be 
                        contingent on any decision rendered by the 
                        contractor or by any reviewing professional.''.
          (2) Eligibility requirements for reviewers.--Section 1869 (42 
        U.S.C. 1395ff), as amended by BIPA, is amended--
                  (A) by amending subsection (c)(3)(D) to read as 
                follows:
                  ``(D) Qualifications for reviewers.--The requirements 
                of subsection (g) shall be met (relating to 
                qualifications of reviewing professionals).''; and
                  (B) by adding at the end the following new 
                subsection:
  ``(g) Qualifications of Reviewers.--
          ``(1) In general.--In reviewing determinations under this 
        section, a qualified independent contractor shall assure that--
                  ``(A) each individual conducting a review shall meet 
                the qualifications of paragraph (2);
                  ``(B) compensation provided by the contractor to each 
                such reviewer is consistent with paragraph (3); and
                  ``(C) in the case of a review by a panel described in 
                subsection (c)(3)(B) composed of physicians or other 
                health care professionals (each in this subsection 
                referred to as a `reviewing professional'), a reviewing 
                professional meets the qualifications described in 
                paragraph (4) and, where a claim is regarding the 
                furnishing of treatment by a physician (allopathic or 
                osteopathic) or the provision of items or services by a 
                physician (allopathic or osteopathic), a reviewing 
                professional shall be a physician (allopathic or 
                osteopathic).
          ``(2) Independence.--
                  ``(A) In general.--Subject to subparagraph (B), each 
                individual conducting a review in a case shall--
                          ``(i) not be a related party (as defined in 
                        paragraph (5));
                          ``(ii) not have a material familial, 
                        financial, or professional relationship with 
                        such a party in the case under review; and
                          ``(iii) not otherwise have a conflict of 
                        interest with such a party.
                  ``(B) Exception.--Nothing in subparagraph (A) shall 
                be construed to--
                          ``(i) prohibit an individual, solely on the 
                        basis of a participation agreement with a 
                        fiscal intermediary, carrier, or other 
                        contractor, from serving as a reviewing 
                        professional if--
                                  ``(I) the individual is not involved 
                                in the provision of items or services 
                                in the case under review;
                                  ``(II) the fact of such an agreement 
                                is disclosed to the Secretary and the 
                                individual entitled to benefits under 
                                part A or enrolled under part B, or 
                                both, (or authorized representative) 
                                and neither party objects; and
                                  ``(III) the individual is not an 
                                employee of the intermediary, carrier, 
                                or contractor and does not provide 
                                services exclusively or primarily to or 
                                on behalf of such intermediary, 
                                carrier, or contractor;
                          ``(ii) prohibit an individual who has staff 
                        privileges at the institution where the 
                        treatment involved takes place from serving as 
                        a reviewer merely on the basis of having such 
                        staff privileges if the existence of such 
                        privileges is disclosed to the Secretary and 
                        such individual (or authorized representative), 
                        and neither party objects; or
                          ``(iii) prohibit receipt of compensation by a 
                        reviewing professional from a contractor if the 
                        compensation is provided consistent with 
                        paragraph (3).
                For purposes of this paragraph, the term `participation 
                agreement' means an agreement relating to the provision 
                of health care services by the individual and does not 
                include the provision of services as a reviewer under 
                this subsection.
          ``(3) Limitations on reviewer compensation.--Compensation 
        provided by a qualified independent contractor to a reviewer in 
        connection with a review under this section shall not be 
        contingent on the decision rendered by the reviewer.
          ``(4) Licensure and expertise.--Each reviewing professional 
        shall be--
                  ``(A) a physician (allopathic or osteopathic) who is 
                appropriately credentialed or licensed in one or more 
                States to deliver health care services and has medical 
                expertise in the field of practice that is appropriate 
                for the items or services at issue; or
                  ``(B) a health care professional who is legally 
                authorized in one or more States (in accordance with 
                State law or the State regulatory mechanism provided by 
                State law) to furnish the health care items or services 
                at issue and has medical expertise in the field of 
                practice that is appropriate for such items or 
                services.
          ``(5) Related party defined.--For purposes of this section, 
        the term `related party' means, with respect to a case under 
        this title involving a specific individual entitled to benefits 
        under part A or enrolled under part B, or both, any of the 
        following:
                  ``(A) The Secretary, the medicare administrative 
                contractor involved, or any fiduciary, officer, 
                director, or employee of the Department of Health and 
                Human Services, or of such contractor.
                  ``(B) The individual (or authorized representative).
                  ``(C) The health care professional that provides the 
                items or services involved in the case.
                  ``(D) The institution at which the items or services 
                (or treatment) involved in the case are provided.
                  ``(E) The manufacturer of any drug or other item that 
                is included in the items or services involved in the 
                case.
                  ``(F) Any other party determined under any 
                regulations to have a substantial interest in the case 
                involved.''.
          (3) Reducing minimum number of qualified independent 
        contractors.--Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is 
        amended by striking ``not fewer than 12 qualified independent 
        contractors under this subsection'' and inserting ``a 
        sufficient number of qualified independent contractors (but not 
        fewer than 4 such contractors) to conduct reconsiderations 
        consistent with the timeframes applicable under this 
        subsection''.
          (4) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall be effective as if included in the enactment of 
        the respective provisions of subtitle C of title V of BIPA, 
        (114 Stat. 2763A-534).
          (5) Transition.--In applying section 1869(g) of the Social 
        Security Act (as added by paragraph (2)), any reference to a 
        medicare administrative contractor shall be deemed to include a 
        reference to a fiscal intermediary under section 1816 of the 
        Social Security Act (42 U.S.C. 1395h) and a carrier under 
        section 1842 of such Act (42 U.S.C. 1395u).

SEC. 404. PREPAYMENT REVIEW.

  (a) In General.--Section 1874A, as added by section 201(a)(1) and as 
amended by sections 202(b), 301(b)(1), and 301(c)(1), is further 
amended by adding at the end the following new subsection:
  ``(h) Conduct of Prepayment Review.--
          ``(1) Conduct of random prepayment review.--
                  ``(A) In general.--A medicare administrative 
                contractor may conduct random prepayment review only to 
                develop a contractor-wide or program-wide claims 
                payment error rates or under such additional 
                circumstances as may be provided under regulations, 
                developed in consultation with providers of services 
                and suppliers.
                  ``(B) Use of standard protocols when conducting 
                prepayment reviews.--When a medicare administrative 
                contractor conducts a random prepayment review, the 
                contractor may conduct such review only in accordance 
                with a standard protocol for random prepayment audits 
                developed by the Secretary.
                  ``(C) Construction.--Nothing in this paragraph shall 
                be construed as preventing the denial of payments for 
                claims actually reviewed under a random prepayment 
                review.
                  ``(D) Random prepayment review.--For purposes of this 
                subsection, the term `random prepayment review' means a 
                demand for the production of records or documentation 
                absent cause with respect to a claim.
          ``(2) Limitations on non-random prepayment review.--
                  ``(A) Limitations on initiation of non-random 
                prepayment review.--A medicare administrative 
                contractor may not initiate non-random prepayment 
                review of a provider of services or supplier based on 
                the initial identification by that provider of services 
                or supplier of an improper billing practice unless 
                there is a likelihood of sustained or high level of 
                payment error (as defined in subsection (i)(3)(A)).
                  ``(B) Termination of non-random prepayment review.--
                The Secretary shall issue regulations relating to the 
                termination, including termination dates, of non-random 
                prepayment review. Such regulations may vary such a 
                termination date based upon the differences in the 
                circumstances triggering prepayment review.''.
  (b) Effective Date.--
          (1) In general.--Except as provided in this subsection, the 
        amendment made by subsection (a) shall take effect 1 year after 
        the date of the enactment of this Act.
          (2) Deadline for promulgation of certain regulations.--The 
        Secretary shall first issue regulations under section 1874A(h) 
        of the Social Security Act, as added by subsection (a), by not 
        later than 1 year after the date of the enactment of this Act.
          (3) Application of standard protocols for random prepayment 
        review.--Section 1874A(h)(1)(B) of the Social Security Act, as 
        added by subsection (a), shall apply to random prepayment 
        reviews conducted on or after such date (not later than 1 year 
        after the date of the enactment of this Act) as the Secretary 
        shall specify.
  (c) Application to Fiscal Intermediaries and Carriers.--The 
provisions of section 1874A(h) of the Social Security Act, as added by 
subsection (a), shall apply to each fiscal intermediary under section 
1816 of the Social Security Act (42 U.S.C. 1395h) and each carrier 
under section 1842 of such Act (42 U.S.C. 1395u) in the same manner as 
they apply to medicare administrative contractors under such 
provisions.

SEC. 405. RECOVERY OF OVERPAYMENTS.

  (a) In General.--Section 1893 (42 U.S.C. 1395ddd) is amended by 
adding at the end the following new subsection:
  ``(f) Recovery of Overpayments.--
          ``(1) Use of repayment plans.--
                  ``(A) In general.--If the repayment, within 30 days 
                by a provider of services or supplier, of an 
                overpayment under this title would constitute a 
                hardship (as defined in subparagraph (B)), subject to 
                subparagraph (C), upon request of the provider of 
                services or supplier the Secretary shall enter into a 
                plan with the provider of services or supplier for the 
                repayment (through offset or otherwise) of such 
                overpayment over a period of at least 6 months but not 
                longer than 3 years (or not longer than 5 years in the 
                case of extreme hardship, as determined by the 
                Secretary). Interest shall accrue on the balance 
                through the period of repayment. Such plan shall meet 
                terms and conditions determined to be appropriate by 
                the Secretary.
                  ``(B) Hardship.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A), the repayment of an 
                        overpayment (or overpayments) within 30 days is 
                        deemed to constitute a hardship if--
                                  ``(I) in the case of a provider of 
                                services that files cost reports, the 
                                aggregate amount of the overpayments 
                                exceeds 10 percent of the amount paid 
                                under this title to the provider of 
                                services for the cost reporting period 
                                covered by the most recently submitted 
                                cost report; or
                                  ``(II) in the case of another 
                                provider of services or supplier, the 
                                aggregate amount of the overpayments 
                                exceeds 10 percent of the amount paid 
                                under this title to the provider of 
                                services or supplier for the previous 
                                calendar year.
                          ``(ii) Rule of application.--The Secretary 
                        shall establish rules for the application of 
                        this subparagraph in the case of a provider of 
                        services or supplier that was not paid under 
                        this title during the previous year or was paid 
                        under this title only during a portion of that 
                        year.
                          ``(iii) Treatment of previous overpayments.--
                        If a provider of services or supplier has 
                        entered into a repayment plan under 
                        subparagraph (A) with respect to a specific 
                        overpayment amount, such payment amount under 
                        the repayment plan shall not be taken into 
                        account under clause (i) with respect to 
                        subsequent overpayment amounts.
                  ``(C) Exceptions.--Subparagraph (A) shall not apply 
                if--
                          ``(i) the Secretary has reason to suspect 
                        that the provider of services or supplier may 
                        file for bankruptcy or otherwise cease to do 
                        business or discontinue participation in the 
                        program under this title; or
                          ``(ii) there is an indication of fraud or 
                        abuse committed against the program.
                  ``(D) Immediate collection if violation of repayment 
                plan.--If a provider of services or supplier fails to 
                make a payment in accordance with a repayment plan 
                under this paragraph, the Secretary may immediately 
                seek to offset or otherwise recover the total balance 
                outstanding (including applicable interest) under the 
                repayment plan.
                  ``(E) Relation to no fault provision.--Nothing in 
                this paragraph shall be construed as affecting the 
                application of section 1870(c) (relating to no 
                adjustment in the cases of certain overpayments).
          ``(2) Limitation on recoupment.--
                  ``(A) In general.--In the case of a provider of 
                services or supplier that is determined to have 
                received an overpayment under this title and that seeks 
                a reconsideration by a qualified independent contractor 
                on such determination under section 1869(b)(1), the 
                Secretary may not take any action (or authorize any 
                other person, including any medicare contractor, as 
                defined in subparagraph (C)) to recoup the overpayment 
                until the date the decision on the reconsideration has 
                been rendered. If the provisions of section 1869(b)(1) 
                (providing for such a reconsideration by a qualified 
                independent contractor) are not in effect, in applying 
                the previous sentence any reference to such a 
                reconsideration shall be treated as a reference to a 
                redetermination by the fiscal intermediary or carrier 
                involved.
                  ``(B) Collection with interest.--Insofar as the 
                determination on such appeal is against the provider of 
                services or supplier, interest on the overpayment shall 
                accrue on and after the date of the original notice of 
                overpayment. Insofar as such determination against the 
                provider of services or supplier is later reversed, the 
                Secretary shall provide for repayment of the amount 
                recouped plus interest at the same rate as would apply 
                under the previous sentence for the period in which the 
                amount was recouped.
                  ``(C) Medicare contractor defined.--For purposes of 
                this subsection, the term `medicare contractor' has the 
                meaning given such term in section 1889(g).
          ``(3) Limitation on use of extrapolation.--A medicare 
        contractor may not use extrapolation to determine overpayment 
        amounts to be recovered by recoupment, offset, or otherwise 
        unless--
                  ``(A) there is a sustained or high level of payment 
                error (as defined by the Secretary by regulation); or
                  ``(B) documented educational intervention has failed 
                to correct the payment error (as determined by the 
                Secretary).
          ``(4) Provision of supporting documentation.--In the case of 
        a provider of services or supplier with respect to which 
        amounts were previously overpaid, a medicare contractor may 
        request the periodic production of records or supporting 
        documentation for a limited sample of submitted claims to 
        ensure that the previous practice is not continuing.
          ``(5) Consent settlement reforms.--
                  ``(A) In general.--The Secretary may use a consent 
                settlement (as defined in subparagraph (D)) to settle a 
                projected overpayment.
                  ``(B) Opportunity to submit additional information 
                before consent settlement offer.--Before offering a 
                provider of services or supplier a consent settlement, 
                the Secretary shall--
                          ``(i) communicate to the provider of services 
                        or supplier--
                                  ``(I) that, based on a review of the 
                                medical records requested by the 
                                Secretary, a preliminary evaluation of 
                                those records indicates that there 
                                would be an overpayment;
                                  ``(II) the nature of the problems 
                                identified in such evaluation; and
                                  ``(III) the steps that the provider 
                                of services or supplier should take to 
                                address the problems; and
                          ``(ii) provide for a 45-day period during 
                        which the provider of services or supplier may 
                        furnish additional information concerning the 
                        medical records for the claims that had been 
                        reviewed.
                  ``(C) Consent settlement offer.--The Secretary shall 
                review any additional information furnished by the 
                provider of services or supplier under subparagraph 
                (B)(ii). Taking into consideration such information, 
                the Secretary shall determine if there still appears to 
                be an overpayment. If so, the Secretary--
                          ``(i) shall provide notice of such 
                        determination to the provider of services or 
                        supplier, including an explanation of the 
                        reason for such determination; and
                          ``(ii) in order to resolve the overpayment, 
                        may offer the provider of services or 
                        supplier--
                                  ``(I) the opportunity for a 
                                statistically valid random sample; or
                                  ``(II) a consent settlement.
                The opportunity provided under clause (ii)(I) does not 
                waive any appeal rights with respect to the alleged 
                overpayment involved.
                  ``(D) Consent settlement defined.--For purposes of 
                this paragraph, the term `consent settlement' means an 
                agreement between the Secretary and a provider of 
                services or supplier whereby both parties agree to 
                settle a projected overpayment based on less than a 
                statistically valid sample of claims and the provider 
                of services or supplier agrees not to appeal the claims 
                involved.
          ``(6) Notice of over-utilization of codes.--The Secretary 
        shall establish, in consultation with organizations 
        representing the classes of providers of services and 
        suppliers, a process under which the Secretary provides for 
        notice to classes of providers of services and suppliers served 
        by the contractor in cases in which the contractor has 
        identified that particular billing codes may be overutilized by 
        that class of providers of services or suppliers under the 
        programs under this title (or provisions of title XI insofar as 
        they relate to such programs).
          ``(7) Payment audits.--
                  ``(A) Written notice for post-payment audits.--
                Subject to subparagraph (C), if a medicare contractor 
                decides to conduct a post-payment audit of a provider 
                of services or supplier under this title, the 
                contractor shall provide the provider of services or 
                supplier with written notice (which may be in 
                electronic form) of the intent to conduct such an 
                audit.
                  ``(B) Explanation of findings for all audits.--
                Subject to subparagraph (C), if a medicare contractor 
                audits a provider of services or supplier under this 
                title, the contractor shall--
                          ``(i) give the provider of services or 
                        supplier a full review and explanation of the 
                        findings of the audit in a manner that is 
                        understandable to the provider of services or 
                        supplier and permits the development of an 
                        appropriate corrective action plan;
                          ``(ii) inform the provider of services or 
                        supplier of the appeal rights under this title 
                        as well as consent settlement options (which 
                        are at the discretion of the Secretary);
                          ``(iii) give the provider of services or 
                        supplier an opportunity to provide additional 
                        information to the contractor; and
                          ``(iv) take into account information 
                        provided, on a timely basis, by the provider of 
                        services or supplier under clause (iii).
                  ``(C) Exception.--Subparagraphs (A) and (B) shall not 
                apply if the provision of notice or findings would 
                compromise pending law enforcement activities, whether 
                civil or criminal, or reveal findings of law 
                enforcement-related audits.
          ``(8) Standard methodology for probe sampling.--The Secretary 
        shall establish a standard methodology for medicare contractors 
        to use in selecting a sample of claims for review in the case 
        of an abnormal billing pattern.''.
  (b) Effective Dates and Deadlines.--
          (1) Use of repayment plans.--Section 1893(f)(1) of the Social 
        Security Act, as added by subsection (a), shall apply to 
        requests for repayment plans made after the date of the 
        enactment of this Act.
          (2) Limitation on recoupment.--Section 1893(f)(2) of the 
        Social Security Act, as added by subsection (a), shall apply to 
        actions taken after the date of the enactment of this Act.
          (3) Use of extrapolation.--Section 1893(f)(3) of the Social 
        Security Act, as added by subsection (a), shall apply to 
        statistically valid random samples initiated after the date 
        that is 1 year after the date of the enactment of this Act.
          (4) Provision of supporting documentation.--Section 
        1893(f)(4) of the Social Security Act, as added by subsection 
        (a), shall take effect on the date of the enactment of this 
        Act.
          (5) Consent settlement.--Section 1893(f)(5) of the Social 
        Security Act, as added by subsection (a), shall apply to 
        consent settlements entered into after the date of the 
        enactment of this Act.
          (6) Notice of overutilization.--Not later than 1 year after 
        the date of the enactment of this Act, the Secretary shall 
        first establish the process for notice of overutilization of 
        billing codes under section 1893A(f)(6) of the Social Security 
        Act, as added by subsection (a).
          (7) Payment audits.--Section 1893A(f)(7) of the Social 
        Security Act, as added by subsection (a), shall apply to audits 
        initiated after the date of the enactment of this Act.
          (8) Standard for abnormal billing patterns.--Not later than 1 
        year after the date of the enactment of this Act, the Secretary 
        shall first establish a standard methodology for selection of 
        sample claims for abnormal billing patterns under section 
        1893(f)(8) of the Social Security Act, as added by subsection 
        (a).

SEC. 406. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.

  (a) In General.--Section 1866 (42 U.S.C. 1395cc) is amended--
          (1) by adding at the end of the heading the following: ``; 
        enrollment processes''; and
          (2) by adding at the end the following new subsection:
  ``(j) Enrollment Process for Providers of Services and Suppliers.--
          ``(1) Enrollment process.--
                  ``(A) In general.--The Secretary shall establish by 
                regulation a process for the enrollment of providers of 
                services and suppliers under this title.
                  ``(B) Deadlines.--The Secretary shall establish by 
                regulation procedures under which there are deadlines 
                for actions on applications for enrollment (and, if 
                applicable, renewal of enrollment). The Secretary shall 
                monitor the performance of medicare administrative 
                contractors in meeting the deadlines established under 
                this subparagraph.
                  ``(C) Consultation before changing provider 
                enrollment forms.--The Secretary shall consult with 
                providers of services and suppliers before making 
                changes in the provider enrollment forms required of 
                such providers and suppliers to be eligible to submit 
                claims for which payment may be made under this title.
          ``(2) Hearing rights in cases of denial or non-renewal.--A 
        provider of services or supplier whose application to enroll 
        (or, if applicable, to renew enrollment) under this title is 
        denied may have a hearing and judicial review of such denial 
        under the procedures that apply under subsection (h)(1)(A) to a 
        provider of services that is dissatisfied with a determination 
        by the Secretary.''.
  (b) Effective Dates.--
          (1) Enrollment process.--The Secretary shall provide for the 
        establishment of the enrollment process under section 
        1866(j)(1) of the Social Security Act, as added by subsection 
        (a)(2), within 6 months after the date of the enactment of this 
        Act.
          (2) Consultation.--Section 1866(j)(1)(C) of the Social 
        Security Act, as added by subsection (a)(2), shall apply with 
        respect to changes in provider enrollment forms made on or 
        after January 1, 2004.
          (3) Hearing rights.--Section 1866(j)(2) of the Social 
        Security Act, as added by subsection (a)(2), shall apply to 
        denials occurring on or after such date (not later than 1 year 
        after the date of the enactment of this Act) as the Secretary 
        specifies.

SEC. 407. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS WITHOUT 
                    PURSUING APPEALS PROCESS.

  (a) Claims.--The Secretary shall develop, in consultation with 
appropriate medicare contractors (as defined in section 1889(g) of the 
Social Security Act, as inserted by section 301(a)(1)) and 
representatives of providers of services and suppliers, a process 
whereby, in the case of minor errors or omissions (as defined by the 
Secretary) that are detected in the submission of claims under the 
programs under title XVIII of such Act, a provider of services or 
supplier is given an opportunity to correct such an error or omission 
without the need to initiate an appeal. Such process shall include the 
ability to resubmit corrected claims.
  (b) Permitting Use of Corrected and Supplementary Data.--
          (1) In general.--Section 1886(d)(10)(D)(vi) (42 U.S.C. 
        1395ww(d)(10)(D)(vi)) is amended by adding after subclause (II) 
        at the end the following:
``Notwithstanding subclause (I), a hospital may submit, and the 
Secretary may accept upon verification, data that corrects or 
supplements the data described in such subclause without regard to 
whether the corrected or supplementary data relate to a cost report 
that has been settled.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to fiscal years beginning with fiscal year 2004.
          (3) Submittal and resubmittal of applications permitted for 
        fiscal year 2004.--
                  (A) In general.--Notwithstanding any other provision 
                of law, a hospital may submit (or resubmit) an 
                application for a change described in section 
                1886(d)(10)(C)(i)(II) of the Social Security Act for 
                fiscal year 2004 if the hospital demonstrates on a 
                timely basis to the satisfaction of the Secretary that 
                the use of corrected or supplementary data under the 
                amendment made by paragraph (1) would materially affect 
                the approval of such an application.
                  (B) Application of budget neutrality.--If one or more 
                hospital's applications are approved as a result of 
                paragraph (1) and subparagraph (A) for fiscal year 
                2004, the Secretary shall make a proportional 
                adjustment in the standardized amounts determined under 
                section 1886(d)(3) of the Social Security Act (42 
                U.S.C. 1395ww(d)(3)) for fiscal year 2004 to assure 
                that approval of such applications does not result in 
                aggregate payments under section 1886(d) of such Act 
                that are greater or less than those that would 
                otherwise be made if paragraph (1) and subparagraph (A) 
                did not apply.

SEC. 408. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND SERVICES; 
                    ADVANCE BENEFICIARY NOTICES.

  (a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as amended by 
sections 521 and 522 of BIPA and section 403(d)(2)(B), is further 
amended by adding at the end the following new subsection:
  ``(h) Prior Determination Process for Certain Items and Services.--
          ``(1) Establishment of process.--
                  ``(A) In general.--With respect to a medicare 
                administrative contractor that has a contract under 
                section 1874A that provides for making payments under 
                this title with respect to eligible items and services 
                described in subparagraph (C), the Secretary shall 
                establish a prior determination process that meets the 
                requirements of this subsection and that shall be 
                applied by such contractor in the case of eligible 
                requesters.
                  ``(B) Eligible requester.--For purposes of this 
                subsection, each of the following shall be an eligible 
                requester:
                          ``(i) A physician, but only with respect to 
                        eligible items and services for which the 
                        physician may be paid directly.
                          ``(ii) An individual entitled to benefits 
                        under this title, but only with respect to an 
                        item or service for which the individual 
                        receives, from the physician who may be paid 
                        directly for the item or service, an advance 
                        beneficiary notice under section 1879(a) that 
                        payment may not be made (or may no longer be 
                        made) for the item or service under this title.
                  ``(C) Eligible items and services.--For purposes of 
                this subsection and subject to paragraph (2), eligible 
                items and services are items and services which are 
                physicians' services (as defined in paragraph (4)(A) of 
                section 1848(f) for purposes of calculating the 
                sustainable growth rate under such section).
          ``(2) Secretarial flexibility.--The Secretary shall establish 
        by regulation reasonable limits on the categories of eligible 
        items and services for which a prior determination of coverage 
        may be requested under this subsection. In establishing such 
        limits, the Secretary may consider the dollar amount involved 
        with respect to the item or service, administrative costs and 
        burdens, and other relevant factors.
          ``(3) Request for prior determination.--
                  ``(A) In general.--Subject to paragraph (2), under 
                the process established under this subsection an 
                eligible requester may submit to the contractor a 
                request for a determination, before the furnishing of 
                an eligible item or service involved as to whether the 
                item or service is covered under this title consistent 
                with the applicable requirements of section 
                1862(a)(1)(A) (relating to medical necessity).
                  ``(B) Accompanying documentation.--The Secretary may 
                require that the request be accompanied by a 
                description of the item or service, supporting 
                documentation relating to the medical necessity for the 
                item or service, and any other appropriate 
                documentation. In the case of a request submitted by an 
                eligible requester who is described in paragraph 
                (1)(B)(ii), the Secretary may require that the request 
                also be accompanied by a copy of the advance 
                beneficiary notice involved.
          ``(4) Response to request.--
                  ``(A) In general.--Under such process, the contractor 
                shall provide the eligible requester with written 
                notice of a determination as to whether--
                          ``(i) the item or service is so covered;
                          ``(ii) the item or service is not so covered; 
                        or
                          ``(iii) the contractor lacks sufficient 
                        information to make a coverage determination.
                If the contractor makes the determination described in 
                clause (iii), the contractor shall include in the 
                notice a description of the additional information 
                required to make the coverage determination.
                  ``(B) Deadline to respond.--Such notice shall be 
                provided within the same time period as the time period 
                applicable to the contractor providing notice of 
                initial determinations on a claim for benefits under 
                subsection (a)(2)(A).
                  ``(C) Informing beneficiary in case of physician 
                request.--In the case of a request in which an eligible 
                requester is not the individual described in paragraph 
                (1)(B)(ii), the process shall provide that the 
                individual to whom the item or service is proposed to 
                be furnished shall be informed of any determination 
                described in clause (ii) (relating to a determination 
                of non-coverage) and the right (referred to in 
                paragraph (6)(B)) to obtain the item or service and 
                have a claim submitted for the item or service.
          ``(5) Effect of determinations.--
                  ``(A) Binding nature of positive determination.--If 
                the contractor makes the determination described in 
                paragraph (4)(A)(i), such determination shall be 
                binding on the contractor in the absence of fraud or 
                evidence of misrepresentation of facts presented to the 
                contractor.
                  ``(B) Notice and right to redetermination in case of 
                a denial.--
                          ``(i) In general.--If the contractor makes 
                        the determination described in paragraph 
                        (4)(A)(ii)--
                                  ``(I) the eligible requester has the 
                                right to a redetermination by the 
                                contractor on the determination that 
                                the item or service is not so covered; 
                                and
                                  ``(II) the contractor shall include 
                                in notice under paragraph (4)(A) a 
                                brief explanation of the basis for the 
                                determination, including on what 
                                national or local coverage or 
                                noncoverage determination (if any) the 
                                determination is based, and the right 
                                to such a redetermination.
                          ``(ii) Deadline for redeterminations.--The 
                        contractor shall complete and provide notice of 
                        such redetermination within the same time 
                        period as the time period applicable to the 
                        contractor providing notice of redeterminations 
                        relating to a claim for benefits under 
                        subsection (a)(3)(C)(ii).
          ``(6) Limitation on further review.--
                  ``(A) In general.--Contractor determinations 
                described in paragraph (4)(A)(ii) or (4)(A)(iii) (and 
                redeterminations made under paragraph (5)(B)), relating 
                to pre-service claims are not subject to further 
                administrative appeal or judicial review under this 
                section or otherwise.
                  ``(B) Decision not to seek prior determination or 
                negative determination does not impact right to obtain 
                services, seek reimbursement, or appeal rights.--
                Nothing in this subsection shall be construed as 
                affecting the right of an individual who--
                          ``(i) decides not to seek a prior 
                        determination under this subsection with 
                        respect to items or services; or
                          ``(ii) seeks such a determination and has 
                        received a determination described in paragraph 
                        (4)(A)(ii),
                from receiving (and submitting a claim for) such items 
                services and from obtaining administrative or judicial 
                review respecting such claim under the other applicable 
                provisions of this section. Failure to seek a prior 
                determination under this subsection with respect to 
                items and services shall not be taken into account in 
                such administrative or judicial review.
                  ``(C) No prior determination after receipt of 
                services.--Once an individual is provided items and 
                services, there shall be no prior determination under 
                this subsection with respect to such items or 
                services.''.
  (b) Effective Date; Transition.--
          (1) Effective date.--The Secretary shall establish the prior 
        determination process under the amendment made by subsection 
        (a) in such a manner as to provide for the acceptance of 
        requests for determinations under such process filed not later 
        than 18 months after the date of the enactment of this Act.
          (2) Transition.--During the period in which the amendment 
        made by subsection (a) has become effective but contracts are 
        not provided under section 1874A of the Social Security Act 
        with medicare administrative contractors, any reference in 
        section 1869(g) of such Act (as added by such amendment) to 
        such a contractor is deemed a reference to a fiscal 
        intermediary or carrier with an agreement under section 1816, 
        or contract under section 1842, respectively, of such Act.
          (3) Limitation on application to sgr.--For purposes of 
        applying section 1848(f)(2)(D) of the Social Security Act (42 
        U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection (a) 
        shall not be considered to be a change in law or regulation.
  (c) Provisions Relating to Advance Beneficiary Notices; Report on 
Prior Determination Process.--
          (1) Data collection.--The Secretary shall establish a process 
        for the collection of information on the instances in which an 
        advance beneficiary notice (as defined in paragraph (4)) has 
        been provided and on instances in which a beneficiary indicates 
        on such a notice that the beneficiary does not intend to seek 
        to have the item or service that is the subject of the notice 
        furnished.
          (2) Outreach and education.--The Secretary shall establish a 
        program of outreach and education for beneficiaries and 
        providers of services and other persons on the appropriate use 
        of advance beneficiary notices and coverage policies under the 
        medicare program.
          (3) GAO report report on use of advance beneficiary 
        notices.--Not later than 18 months after the date on which 
        section 1869(g) of the Social Security Act (as added by 
        subsection (a)) takes effect, the Comptroller General of the 
        United States shall submit to Congress a report on the use of 
        advance beneficiary notices under title XVIII of such Act. Such 
        report shall include information concerning the providers of 
        services and other persons that have provided such notices and 
        the response of beneficiaries to such notices.
          (4) GAO report on use of prior determination process.--Not 
        later than 18 months after the date on which section 1869(g) of 
        the Social Security Act (as added by subsection (a)) takes 
        effect, the Comptroller General of the United States shall 
        submit to Congress a report on the use of the prior 
        determination process under such section. Such report shall 
        include--
                  (A) information concerning the types of procedures 
                for which a prior determination has been sought, 
                determinations made under the process, and changes in 
                receipt of services resulting from the application of 
                such process; and
                  (B) an evaluation of whether the process was useful 
                for physicians (and other suppliers) and beneficiaries, 
                whether it was timely, and whether the amount of 
                information required was burdensome to physicians and 
                beneficiaries.
          (5) Advance beneficiary notice defined.--In this subsection, 
        the term ``advance beneficiary notice'' means a written notice 
        provided under section 1879(a) of the Social Security Act (42 
        U.S.C. 1395pp(a)) to an individual entitled to benefits under 
        part A or B of title XVIII of such Act before items or services 
        are furnished under such part in cases where a provider of 
        services or other person that would furnish the item or service 
        believes that payment will not be made for some or all of such 
        items or services under such title.

                   TITLE V--MISCELLANEOUS PROVISIONS

SEC. 501. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E & 
                    M) DOCUMENTATION GUIDELINES.

  (a) In General.--The Secretary may not implement any new 
documentation guidelines for, or clinical examples of, evaluation and 
management physician services under the title XVIII of the Social 
Security Act on or after the date of the enactment of this Act unless 
the Secretary--
          (1) has developed the guidelines in collaboration with 
        practicing physicians (including both generalists and 
        specialists) and provided for an assessment of the proposed 
        guidelines by the physician community;
          (2) has established a plan that contains specific goals, 
        including a schedule, for improving the use of such guidelines;
          (3) has conducted appropriate and representative pilot 
        projects under subsection (b) to test modifications to the 
        evaluation and management documentation guidelines;
          (4) finds that the objectives described in subsection (c) 
        will be met in the implementation of such guidelines; and
          (5) has established, and is implementing, a program to 
        educate physicians on the use of such guidelines and that 
        includes appropriate outreach.
The Secretary shall make changes to the manner in which existing 
evaluation and management documentation guidelines are implemented to 
reduce paperwork burdens on physicians.
  (b) Pilot Projects To Test Evaluation and Management Documentation 
Guidelines.--
          (1) In general.--The Secretary shall conduct under this 
        subsection appropriate and representative pilot projects to 
        test new evaluation and management documentation guidelines 
        referred to in subsection (a).
          (2) Length and consultation.--Each pilot project under this 
        subsection shall--
                  (A) be voluntary;
                  (B) be of sufficient length as determined by the 
                Secretary to allow for preparatory physician and 
                medicare contractor education, analysis, and use and 
                assessment of potential evaluation and management 
                guidelines; and
                  (C) be conducted, in development and throughout the 
                planning and operational stages of the project, in 
                consultation with practicing physicians (including both 
                generalists and specialists).
          (3) Range of pilot projects.--Of the pilot projects conducted 
        under this subsection--
                  (A) at least one shall focus on a peer review method 
                by physicians (not employed by a medicare contractor) 
                which evaluates medical record information for claims 
                submitted by physicians identified as statistical 
                outliers relative to definitions published in the 
                Current Procedures Terminology (CPT) code book of the 
                American Medical Association;
                  (B) at least one shall focus on an alternative method 
                to detailed guidelines based on physician documentation 
                of face to face encounter time with a patient;
                  (C) at least one shall be conducted for services 
                furnished in a rural area and at least one for services 
                furnished outside such an area; and
                  (D) at least one shall be conducted in a setting 
                where physicians bill under physicians' services in 
                teaching settings and at least one shall be conducted 
                in a setting other than a teaching setting.
          (4) Banning of targeting of pilot project participants.--Data 
        collected under this subsection shall not be used as the basis 
        for overpayment demands or post-payment audits. Such limitation 
        applies only to claims filed as part of the pilot project and 
        lasts only for the duration of the pilot project and only as 
        long as the provider is a participant in the pilot project.
          (5) Study of impact.--Each pilot project shall examine the 
        effect of the new evaluation and management documentation 
        guidelines on--
                  (A) different types of physician practices, including 
                those with fewer than 10 full-time-equivalent employees 
                (including physicians); and
                  (B) the costs of physician compliance, including 
                education, implementation, auditing, and monitoring.
          (6) Periodic reports.--The Secretary shall submit to Congress 
        periodic reports on the pilot projects under this subsection.
  (c) Objectives for Evaluation and Management Guidelines.--The 
objectives for modified evaluation and management documentation 
guidelines developed by the Secretary shall be to--
          (1) identify clinically relevant documentation needed to code 
        accurately and assess coding levels accurately;
          (2) decrease the level of non-clinically pertinent and 
        burdensome documentation time and content in the physician's 
        medical record;
          (3) increase accuracy by reviewers; and
          (4) educate both physicians and reviewers.
  (d) Study of Simpler, Alternative Systems of Documentation for 
Physician Claims.--
          (1) Study.--The Secretary shall carry out a study of the 
        matters described in paragraph (2).
          (2) Matters described.--The matters referred to in paragraph 
        (1) are--
                  (A) the development of a simpler, alternative system 
                of requirements for documentation accompanying claims 
                for evaluation and management physician services for 
                which payment is made under title XVIII of the Social 
                Security Act; and
                  (B) consideration of systems other than current 
                coding and documentation requirements for payment for 
                such physician services.
          (3) Consultation with practicing physicians.--In designing 
        and carrying out the study under paragraph (1), the Secretary 
        shall consult with practicing physicians, including physicians 
        who are part of group practices and including both generalists 
        and specialists.
          (4) Application of hipaa uniform coding requirements.--In 
        developing an alternative system under paragraph (2), the 
        Secretary shall consider requirements of administrative 
        simplification under part C of title XI of the Social Security 
        Act.
          (5) Report to congress.--(A) Not later than October 1, 2005, 
        the Secretary shall submit to Congress a report on the results 
        of the study conducted under paragraph (1).
          (B) The Medicare Payment Advisory Commission shall conduct an 
        analysis of the results of the study included in the report 
        under subparagraph (A) and shall submit a report on such 
        analysis to Congress.
  (e) Study on Appropriate Coding of Certain Extended Office Visits.--
The Secretary shall conduct a study of the appropriateness of coding in 
cases of extended office visits in which there is no diagnosis made. 
Not later than October 1, 2005, the Secretary shall submit a report to 
Congress on such study and shall include recommendations on how to code 
appropriately for such visits in a manner that takes into account the 
amount of time the physician spent with the patient.
  (f) Definitions.--In this section--
          (1) the term ``rural area'' has the meaning given that term 
        in section 1886(d)(2)(D) of the Social Security Act, 42 U.S.C. 
        1395ww(d)(2)(D); and
          (2) the term ``teaching settings'' are those settings 
        described in section 415.150 of title 42, Code of Federal 
        Regulations.

SEC. 502. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.

  (a) Council for Technology and Innovation.--Section 1868 (42 U.S.C. 
1395ee), as amended by section 301(a), is amended by adding at the end 
the following new subsection:
  ``(c) Council for Technology and Innovation.--
          ``(1) Establishment.--The Secretary shall establish a Council 
        for Technology and Innovation within the Centers for Medicare & 
        Medicaid Services (in this section referred to as `CMS').
          ``(2) Composition.--The Council shall be composed of senior 
        CMS staff and clinicians and shall be chaired by the Executive 
        Coordinator for Technology and Innovation (appointed or 
        designated under paragraph (4)).
          ``(3) Duties.--The Council shall coordinate the activities of 
        coverage, coding, and payment processes under this title with 
        respect to new technologies and procedures, including new drug 
        therapies, and shall coordinate the exchange of information on 
        new technologies between CMS and other entities that make 
        similar decisions.
          ``(4) Executive coordinator for technology and innovation.--
        The Secretary shall appoint (or designate) a noncareer 
        appointee (as defined in section 3132(a)(7) of title 5, United 
        States Code) who shall serve as the Executive Coordinator for 
        Technology and Innovation. Such executive coordinator shall 
        report to the Administrator of CMS, shall chair the Council, 
        shall oversee the execution of its duties, and shall serve as a 
        single point of contact for outside groups and entities 
        regarding the coverage, coding, and payment processes under 
        this title.''.
  (b) Methods for Determining Payment Basis for New Lab Tests.--Section 
1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end the 
following:
  ``(8)(A) The Secretary shall establish by regulation procedures for 
determining the basis for, and amount of, payment under this subsection 
for any clinical diagnostic laboratory test with respect to which a new 
or substantially revised HCPCS code is assigned on or after January 1, 
2005 (in this paragraph referred to as `new tests').
  ``(B) Determinations under subparagraph (A) shall be made only after 
the Secretary--
          ``(i) makes available to the public (through an Internet site 
        and other appropriate mechanisms) a list that includes any such 
        test for which establishment of a payment amount under this 
        subsection is being considered for a year;
          ``(ii) on the same day such list is made available, causes to 
        have published in the Federal Register notice of a meeting to 
        receive comments and recommendations (and data on which 
        recommendations are based) from the public on the appropriate 
        basis under this subsection for establishing payment amounts 
        for the tests on such list;
          ``(iii) not less than 30 days after publication of such 
        notice convenes a meeting, that includes representatives of 
        officials of the Centers for Medicare & Medicaid Services 
        involved in determining payment amounts, to receive such 
        comments and recommendations (and data on which the 
        recommendations are based);
          ``(iv) taking into account the comments and recommendations 
        (and accompanying data) received at such meeting, develops and 
        makes available to the public (through an Internet site and 
        other appropriate mechanisms) a list of proposed determinations 
        with respect to the appropriate basis for establishing a 
        payment amount under this subsection for each such code, 
        together with an explanation of the reasons for each such 
        determination, the data on which the determinations are based, 
        and a request for public written comments on the proposed 
        determination; and
          ``(v) taking into account the comments received during the 
        public comment period, develops and makes available to the 
        public (through an Internet site and other appropriate 
        mechanisms) a list of final determinations of the payment 
        amounts for such tests under this subsection, together with the 
        rationale for each such determination, the data on which the 
        determinations are based, and responses to comments and 
        suggestions received from the public.
  ``(C) Under the procedures established pursuant to subparagraph (A), 
the Secretary shall--
          ``(i) set forth the criteria for making determinations under 
        subparagraph (A); and
          ``(ii) make available to the public the data (other than 
        proprietary data) considered in making such determinations.
  ``(D) The Secretary may convene such further public meetings to 
receive public comments on payment amounts for new tests under this 
subsection as the Secretary deems appropriate.
  ``(E) For purposes of this paragraph:
          ``(i) The term `HCPCS' refers to the Health Care Procedure 
        Coding System.
          ``(ii) A code shall be considered to be `substantially 
        revised' if there is a substantive change to the definition of 
        the test or procedure to which the code applies (such as a new 
        analyte or a new methodology for measuring an existing analyte-
        specific test).''.
  (c) GAO Study on Improvements in External Data Collection for Use in 
the Medicare Inpatient Payment System.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study that analyzes which external data can be 
        collected in a shorter time frame by the Centers for Medicare & 
        Medicaid Services for use in computing payments for inpatient 
        hospital services. The study may include an evaluation of the 
        feasibility and appropriateness of using of quarterly samples 
        or special surveys or any other methods. The study shall 
        include an analysis of whether other executive agencies, such 
        as the Bureau of Labor Statistics in the Department of 
        Commerce, are best suited to collect this information.
          (2) Report.--By not later than October 1, 2004, the 
        Comptroller General shall submit a report to Congress on the 
        study under paragraph (1).
  (d) Process for Adoption of ICD Codes as Data Standard.--Section 
1172(f) (42 U.S.C. 1320d-1(f)) is amended by inserting after the first 
sentence the following: ``Notwithstanding the preceding sentence, if 
the National Committee on Vital and Health Statistics has not made a 
recommendation to the Secretary before the date of the enactment of 
this sentence, with respect to the adoption of the International 
Classification of Diseases, 10th Revision, Procedure Coding System 
(`ICD-10-PCS') and the International Classification of Diseases, 10th 
Revision, Clinical Modification (`ICD-10-CM') as a standard under this 
part for the reporting of services, the Secretary may adopt ICD-10-PCS 
and ICD-10-CM as such a standard on or after such date without 
receiving such a recommendation.''.

SEC. 503. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER MEDICARE 
                    SECONDARY PAYOR (MSP) PROVISIONS.

  (a) In General.--The Secretary shall not require a hospital 
(including a critical access hospital) to ask questions (or obtain 
information) relating to the application of section 1862(b) of the 
Social Security Act (relating to medicare secondary payor provisions) 
in the case of reference laboratory services described in subsection 
(b), if the Secretary does not impose such requirement in the case of 
such services furnished by an independent laboratory.
  (b) Reference Laboratory Services Described.--Reference laboratory 
services described in this subsection are clinical laboratory 
diagnostic tests (or the interpretation of such tests, or both) 
furnished without a face-to-face encounter between the individual 
entitled to benefits under part A or enrolled under part B, or both, 
and the hospital involved and in which the hospital submits a claim 
only for such test or interpretation.

SEC. 504. EMTALA IMPROVEMENTS.

  (a) Payment for EMTALA-Mandated Screening and Stabilization 
Services.--
          (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended by 
        inserting after subsection (c) the following new subsection:
  ``(d) For purposes of subsection (a)(1)(A), in the case of any item 
or service that is required to be provided pursuant to section 1867 to 
an individual who is entitled to benefits under this title, 
determinations as to whether the item or service is reasonable and 
necessary shall be made on the basis of the information available to 
the treating physician or practitioner (including the patient's 
presenting symptoms or complaint) at the time the item or service was 
ordered or furnished by the physician or practitioner (and not on the 
patient's principal diagnosis). When making such determinations with 
respect to such an item or service, the Secretary shall not consider 
the frequency with which the item or service was provided to the 
patient before or after the time of the admission or visit.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to items and services furnished on or after January 
        1, 2004.
  (b) Notification of Providers When EMTALA Investigation Closed.--
Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is amended by adding at 
the end the following new paragraph:
          ``(4) Notice upon closing an investigation.--The Secretary 
        shall establish a procedure to notify hospitals and physicians 
        when an investigation under this section is closed.''.
  (c) Prior Review by Peer Review Organizations in EMTALA Cases 
Involving Termination of Participation.--
          (1) In general.--Section 1867(d)(3) (42 U.S.C. 1395dd(d)(3)) 
        is amended--
                  (A) in the first sentence, by inserting ``or in 
                terminating a hospital's participation under this 
                title'' after ``in imposing sanctions under paragraph 
                (1)''; and
                  (B) by adding at the end the following new sentences: 
                ``Except in the case in which a delay would jeopardize 
                the health or safety of individuals, the Secretary 
                shall also request such a review before making a 
                compliance determination as part of the process of 
                terminating a hospital's participation under this title 
                for violations related to the appropriateness of a 
                medical screening examination, stabilizing treatment, 
                or an appropriate transfer as required by this section, 
                and shall provide a period of 5 days for such review. 
                The Secretary shall provide a copy of the 
                organization's report to the hospital or physician 
                consistent with confidentiality requirements imposed on 
                the organization under such part B.''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to terminations of participation initiated on or 
        after the date of the enactment of this Act.

SEC. 505. EMERGENCY MEDICAL TREATMENT AND ACTIVE LABOR ACT (EMTALA) 
                    TECHNICAL ADVISORY GROUP.

  (a) Establishment.--The Secretary shall establish a Technical 
Advisory Group (in this section referred to as the ``Advisory Group'') 
to review issues related to the Emergency Medical Treatment and Labor 
Act (EMTALA) and its implementation. In this section, the term 
``EMTALA'' refers to the provisions of section 1867 of the Social 
Security Act (42 U.S.C. 1395dd).
  (b) Membership.--The Advisory Group shall be composed of 19 members, 
including the Administrator of the Centers for Medicare & Medicaid 
Services and the Inspector General of the Department of Health and 
Human Services and of which--
          (1) 4 shall be representatives of hospitals, including at 
        least one public hospital, that have experience with the 
        application of EMTALA and at least 2 of which have not been 
        cited for EMTALA violations;
          (2) 7 shall be practicing physicians drawn from the fields of 
        emergency medicine, cardiology or cardiothoracic surgery, 
        orthopedic surgery, neurosurgery, pediatrics or a pediatric 
        subspecialty, obstetrics-gynecology, and psychiatry, with not 
        more than one physician from any particular field;
          (3) 2 shall represent patients;
          (4) 2 shall be staff involved in EMTALA investigations from 
        different regional offices of the Centers for Medicare & 
        Medicaid Services; and
          (5) 1 shall be from a State survey office involved in EMTALA 
        investigations and 1 shall be from a peer review organization, 
        both of whom shall be from areas other than the regions 
        represented under paragraph (4).
In selecting members described in paragraphs (1) through (3), the 
Secretary shall consider qualified individuals nominated by 
organizations representing providers and patients.
  (c) General Responsibilities.--The Advisory Group--
          (1) shall review EMTALA regulations;
          (2) may provide advice and recommendations to the Secretary 
        with respect to those regulations and their application to 
        hospitals and physicians;
          (3) shall solicit comments and recommendations from 
        hospitals, physicians, and the public regarding the 
        implementation of such regulations; and
          (4) may disseminate information on the application of such 
        regulations to hospitals, physicians, and the public.
  (d) Administrative Matters.--
          (1) Chairperson.--The members of the Advisory Group shall 
        elect a member to serve as chairperson of the Advisory Group 
        for the life of the Advisory Group.
          (2) Meetings.--The Advisory Group shall first meet at the 
        direction of the Secretary. The Advisory Group shall then meet 
        twice per year and at such other times as the Advisory Group 
        may provide.
  (e) Termination.--The Advisory Group shall terminate 30 months after 
the date of its first meeting.
  (f) Waiver of Administrative Limitation.--The Secretary shall 
establish the Advisory Group notwithstanding any limitation that may 
apply to the number of advisory committees that may be established 
(within the Department of Health and Human Services or otherwise).

SEC. 506. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE HOSPICE 
                    SERVICES IN CERTAIN CIRCUMSTANCES.

  (a) In General.--Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is 
amended by adding at the end the following:
  ``(D) In extraordinary, exigent, or other non-routine circumstances, 
such as unanticipated periods of high patient loads, staffing shortages 
due to illness or other events, or temporary travel of a patient 
outside a hospice program's service area, a hospice program may enter 
into arrangements with another hospice program for the provision by 
that other program of services described in paragraph (2)(A)(ii)(I). 
The provisions of paragraph (2)(A)(ii)(II) shall apply with respect to 
the services provided under such arrangements.
  ``(E) A hospice program may provide services described in paragraph 
(1)(A) other than directly by the program if the services are highly 
specialized services of a registered professional nurse and are 
provided non-routinely and so infrequently so that the provision of 
such services directly would be impracticable and prohibitively 
expensive.''.
  (b) Conforming Payment Provision.--Section 1814(i) (42 U.S.C. 
1395f(i)) is amended by adding at the end the following new paragraph:
  ``(4) In the case of hospice care provided by a hospice program under 
arrangements under section 1861(dd)(5)(D) made by another hospice 
program, the hospice program that made the arrangements shall bill and 
be paid for the hospice care.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to hospice care provided on or after the date of the enactment of this 
Act.

SEC. 507. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD TO CERTAIN 
                    HOSPITALS.

  (a) In General.--Section 1866 (42 U.S.C. 1395cc) is amended--
          (1) in subsection (a)(1)--
                  (A) in subparagraph (R), by striking ``and'' at the 
                end;
                  (B) in subparagraph (S), by striking the period at 
                the end and inserting ``, and''; and
                  (C) by inserting after subparagraph (S) the following 
                new subparagraph:
          ``(T) in the case of hospitals that are not otherwise subject 
        to the Occupational Safety and Health Act of 1970 or a State 
        occupational safety and health plan that is approved under 
        section 18(b) of such Act, to comply with the Bloodborne 
        Pathogens standard under section 1910.1030 of title 29 of the 
        Code of Federal Regulations (or as subsequently 
        redesignated).''; and
          (2) by adding at the end of subsection (b) the following new 
        paragraph:
  ``(4)(A) A hospital that fails to comply with the requirement of 
subsection (a)(1)(T) (relating to the Bloodborne Pathogens standard) is 
subject to a civil money penalty in an amount described in subparagraph 
(B), but is not subject to termination of an agreement under this 
section.
  ``(B) The amount referred to in subparagraph (A) is an amount that is 
similar to the amount of civil penalties that may be imposed under 
section 17 of the Occupational Safety and Health Act of 1970 for a 
violation of the Bloodborne Pathogens standard referred to in 
subsection (a)(1)(T) by a hospital that is subject to the provisions of 
such Act.
  ``(C) A civil money penalty under this paragraph shall be imposed and 
collected in the same manner as civil money penalties under subsection 
(a) of section 1128A are imposed and collected under that section.''.
  (b) Effective Date.--The amendments made by this subsection (a) shall 
apply to hospitals as of July 1, 2004.

SEC. 508. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.

  (a) Technical Amendments Relating to Advisory Committee Under BIPA 
Section 522.--(1) Subsection (i) of section 1114 (42 U.S.C. 1314)--
          (A) is transferred to section 1862 and added at the end of 
        such section; and
          (B) is redesignated as subsection (j).
  (2) Section 1862 (42 U.S.C. 1395y) is amended--
          (A) in the last sentence of subsection (a), by striking 
        ``established under section 1114(f)''; and
          (B) in subsection (j), as so transferred and redesignated--
                  (i) by striking ``under subsection (f)''; and
                  (ii) by striking ``section 1862(a)(1)'' and inserting 
                ``subsection (a)(1)''.
  (b) Terminology Corrections.--(1) Section 1869(c)(3)(I)(ii) (42 
U.S.C. 1395ff(c)(3)(I)(ii)), as amended by section 521 of BIPA, is 
amended--
          (A) in subclause (III), by striking ``policy'' and inserting 
        ``determination''; and
          (B) in subclause (IV), by striking ``medical review 
        policies'' and inserting ``coverage determinations''.
  (2) Section 1852(a)(2)(C) (42 U.S.C. 1395w-22(a)(2)(C)) is amended by 
striking ``policy'' and ``policy'' and inserting ``determination'' each 
place it appears and ``determination'', respectively.
  (c) Reference Corrections.--Section 1869(f)(4) (42 U.S.C. 
1395ff(f)(4)), as added by section 522 of BIPA, is amended--
          (1) in subparagraph (A)(iv), by striking ``subclause (I), 
        (II), or (III)'' and inserting ``clause (i), (ii), or (iii)'';
          (2) in subparagraph (B), by striking ``clause (i)(IV)'' and 
        ``clause (i)(III)'' and inserting ``subparagraph (A)(iv)'' and 
        ``subparagraph (A)(iii)'', respectively; and
          (3) in subparagraph (C), by striking ``clause (i)'', 
        ``subclause (IV)'' and ``subparagraph (A)'' and inserting 
        ``subparagraph (A)'', ``clause (iv)'' and ``paragraph (1)(A)'', 
        respectively each place it appears.
  (d) Other Corrections.--Effective as if included in the enactment of 
section 521(c) of BIPA, section 1154(e) (42 U.S.C. 1320c-3(e)) is 
amended by striking paragraph (5).
  (e) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall be effective as if included in the enactment 
of BIPA.

SEC. 509. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

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

SEC. 510. TREATMENT OF CERTAIN DENTAL CLAIMS.

  (a) In General.--Section 1862 (42 U.S.C. 1395y), as amended by 
section 508(a)(1), is amended by adding at the end the following new 
subsection:
  ``(k)(1) Subject to paragraph (2), a group health plan (as defined in 
subsection (a)(1)(A)(v)) providing supplemental or secondary coverage 
to individuals also entitled to services under this title shall not 
require a medicare claims determination under this title for dental 
benefits specifically excluded under subsection (a)(12) as a condition 
of making a claims determination for such benefits under the group 
health plan.
  ``(2) A group health plan may require a claims determination under 
this title in cases involving or appearing to involve inpatient dental 
hospital services or dental services expressly covered under this title 
pursuant to actions taken by the Secretary.''.
  (b) Effective Date.--The amendment made by subsection (a) shall take 
effect on the date that is 60 days after the date of the enactment of 
this Act.

SEC. 511. FURNISHING HOSPITALS WITH INFORMATION TO COMPUTE DSH FORMULA.

  Beginning not later than 1 year after the date of the enactment of 
this Act, the Secretary shall furnish to subsection (d) hospitals (as 
defined in section 1886(d)(1)(B) of the Social Security Act, 42 U.S.C. 
1395ww(d)(1)(B)) the data necessary for such hospitals to compute the 
number of patient days described in subclause (II) of section 
1886(d)(5)(F)(vi) of the Social Security Act (42 U.S.C. 
1395ww(d)(5)(F)(vi)) used in computing the disproportionate patient 
percentage under such section for that hospital. Such data shall also 
be furnished to other hospitals which would qualify for additional 
payments under part A of title XVIII of the Social Security Act on the 
basis of such data.

SEC. 512. REVISIONS TO REASSIGNMENT PROVISIONS.

  (a) In General.--Section 1842(b)(6)(A)(ii) (42 U.S.C. 
1395u(b)(6)(A)(ii)) is amended to read as follows: ``(ii) where the 
service was provided under a contractual arrangement between such 
physician or other person and a qualified entity (as defined by the 
Secretary) or other person, to the entity or other person if under such 
arrangement such entity or individual submits the bill for such service 
and such arrangement (I) includes joint and several liability for 
overpayment by such physician or other person and such entity or other 
person, and (II) meets such other program integrity and other 
safeguards as the Secretary may determine to be appropriate,''.
  (b) Conforming Amendment.--The second sentence of section 1842(b)(6) 
(42 U.S.C. 1395u(b)(6)) is amended by striking ``except to an employer 
or facility as described in clause (A)'' and inserting ``except to an 
employer, entity, or other person as described in subparagraph (A)''.
  (c) Effective Date.--The amendments made by this section shall apply 
to payments made on or after one year after the date of the enactment 
of this Act.

SEC. 513. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
                    BENEFICIARIES.

  (a) Treatment as Coordinated Care Plan.--Section 1851(a)(2)(A) (42 
U.S.C. 1395w-21(a)(2)(A)) is amended by adding at the end the following 
new sentence: ``Specialized Medicare+Choice plans for special needs 
beneficiaries (as defined in section 1859(b)(4)) may be any type of 
coordinated care plan.''.
  (b) Specialized Medicare+Choice Plan for Special Needs Beneficiaries 
Defined.--Section 1859(b) (42 U.S.C. 1395w-29(b)) is amended by adding 
at the end the following new paragraph:
          ``(4) Specialized medicare+choice plans for special needs 
        beneficiaries.--
                  ``(A) In general.--The term `specialized 
                Medicare+Choice plan for special needs beneficiaries' 
                means a Medicare+Choice plan that exclusively serves 
                special needs beneficiaries (as defined in subparagraph 
                (B)).
                  ``(B) Special needs beneficiary.--The term `special 
                needs beneficiary' means a Medicare+Choice eligible 
                individual who--
                          ``(i) is institutionalized (as defined by the 
                        Secretary);
                          ``(ii) is entitled to medical assistance 
                        under a State plan under title XIX; or
                          ``(iii) meets such requirements as the 
                        Secretary may determine would benefit from 
                        enrollment in such a specialized 
                        Medicare+Choice plan described in subparagraph 
                        (A) for individuals with severe or disabling 
                        chronic conditions.''.
  (c) Restriction on Enrollment Permitted.--Section 1859 (42 U.S.C. 
1395w-29) is amended by adding at the end the following new subsection:
  ``(f) Restriction on Enrollment for Specialized Medicare+Choice Plans 
for Special Needs Beneficiaries.--In the case of a specialized 
Medicare+Choice plan (as defined in subsection (b)(4)), notwithstanding 
any other provision of this part and in accordance with regulations of 
the Secretary and for periods before January 1, 2008, the plan may 
restrict the enrollment of individuals under the plan to individuals 
who are within one or more classes of special needs beneficiaries.''.
  (d) Report to Congress.--Not later than December 31, 2006, the 
Secretary shall submit to Congress a report that assesses the impact of 
specialized Medicare+Choice plans for special needs beneficiaries on 
the cost and quality of services provided to enrollees. Such report 
shall include an assessment of the costs and savings to the medicare 
program as a result of amendments made by subsections (a), (b), and 
(c).
  (e) Effective Dates.--
          (1) In general.--The amendments made by subsections (a), (b), 
        and (c) shall take effect upon the date of the enactment of 
        this Act.
          (2) Deadline for issuance of requirements for special needs 
        beneficiaries; transition.--No later than 6 months after the 
        date of the enactment of this Act, the Secretary shall issue 
        final regulations to establish requirements for special needs 
        beneficiaries under section 1859(b)(4)(B)(iii) of the Social 
        Security Act, as added by subsection (b).

SEC. 514. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR COLLECTION OF 
                    DATA ON NON-MEDICARE AND NON-MEDICAID PATIENTS.

  (a) In General.--During the period described in subsection (b), the 
Secretary may not require, under section 4602(e) of the Balanced Budget 
Act of 1997 or otherwise under OASIS, a home health agency to gather or 
submit information that relates to an individual who is not eligible 
for benefits under either title XVIII or title XIX of the Social 
Security Act (such information in this section referred to as ``non-
medicare/medicaid OASIS information'').
  (b) Period of Suspension.--The period described in this subsection--
          (1) begins on the date of the enactment of this Act; and
          (2) ends on the last day of the 2nd month beginning after the 
        date as of which the Secretary has published final regulations 
        regarding the collection and use by the Centers for Medicare & 
        Medicaid Services of non-medicare/medicaid OASIS information 
        following the submission of the report required under 
        subsection (c).
  (c) Report.--
          (1) Study.--The Secretary shall conduct a study on how non-
        medicare/medicaid OASIS information is and can be used by large 
        home health agencies. Such study shall examine--
                  (A) whether there are unique benefits from the 
                analysis of such information that cannot be derived 
                from other information available to, or collected by, 
                such agencies; and
                  (B) the value of collecting such information by small 
                home health agencies compared to the administrative 
                burden related to such collection.
        In conducting the study the Secretary shall obtain 
        recommendations from quality assessment experts in the use of 
        such information and the necessity of small, as well as large, 
        home health agencies collecting such information.
          (2) Report.--The Secretary shall submit to Congress a report 
        on the study conducted under paragraph (1) by not later than 18 
        months after the date of the enactment of this Act.
  (d) Construction.--Nothing in this section shall be construed as 
preventing home health agencies from collecting non-medicare/medicaid 
OASIS information for their own use.

SEC. 515. MISCELLANEOUS REPORTS, STUDIES, AND PUBLICATION REQUIREMENTS.

  (a) GAO Reports on the Physician Compensation.--
          (1) Sustainable growth rate and updates.--Not later than 6 
        months after the date of the enactment of this Act, the 
        Comptroller General of the United States shall submit to 
        Congress a report on the appropriateness of the updates in the 
        conversion factor under subsection (d)(3) of section 1848 of 
        the Social Security Act (42 U.S.C. 1395w-4), including the 
        appropriateness of the sustainable growth rate formula under 
        subsection (f) of such section for 2002 and succeeding years. 
        Such report shall examine the stability and predictability of 
        such updates and rate and alternatives for the use of such rate 
        in the updates.
          (2) Physician compensation generally.--Not later than 12 
        months after the date of the enactment of this Act, the 
        Comptroller General shall submit to Congress a report on all 
        aspects of physician compensation for services furnished under 
        title XVIII of the Social Security Act, and how those aspects 
        interact and the effect on appropriate compensation for 
        physician services. Such report shall review alternatives for 
        the physician fee schedule under section 1848 of such title (42 
        U.S.C. 1395w-4).
  (b) Annual Publication of List of National Coverage Determinations.--
The Secretary shall provide, in an appropriate annual publication 
available to the public, a list of national coverage determinations 
made under title XVIII of the Social Security Act in the previous year 
and information on how to get more information with respect to such 
determinations.
  (c) GAO Report on Flexibility in Applying Home Health Conditions of 
Participation to Patients Who Are Not Medicare Beneficiaries.--Not 
later than 6 months after the date of the enactment of this Act, the 
Comptroller General of the United States shall submit to Congress a 
report on the implications if there were flexibility in the application 
of the medicare conditions of participation for home health agencies 
with respect to groups or types of patients who are not medicare 
beneficiaries. The report shall include an analysis of the potential 
impact of such flexible application on clinical operations and the 
recipients of such services and an analysis of methods for monitoring 
the quality of care provided to such recipients.
  (d) OIG Report on Notices Relating to Use of Hospital Lifetime 
Reserve Days.--Not later than 1 year after the date of the enactment of 
this Act, the Inspector General of the Department of Health and Human 
Services shall submit a report to Congress on--
          (1) the extent to which hospitals provide notice to medicare 
        beneficiaries in accordance with applicable requirements before 
        they use the 60 lifetime reserve days described in section 
        1812(a)(1) of the Social Security Act (42 U.S.C. 1395d(a)(1)); 
        and
          (2) the appropriateness and feasibility of hospitals 
        providing a notice to such beneficiaries before they completely 
        exhaust such lifetime reserve days.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    There are currently over 130,000 pages of regulations for 
the Medicare program. These regulations are often confusing, 
overly burdensome and can take away from providers' time with 
patients. They are also needed to assure payment for services 
rendered and to monitor compliance with the conditions of 
participation and other quality of care requirements.
    The purpose of H.R. 810 is to streamline paperwork 
requirements under the Medicare program and communicate clearer 
instructions to providers of services and suppliers so that 
they may spend more time caring for patients. At the same time, 
the bill does not prevent or impede the ability of the existing 
legal authorities to combat waste, fraud and abuse. It is also 
intended to reform the Medicare contracting process to make it 
more open by requiring competition.

                 B. Background and Need for Legislation

    Regulatory Reform.--This bill would provide protections for 
beneficiaries and providers by requiring new matter introduced 
in a final rule that is not a logical outgrowth of previously 
published material to be treated as a proposed regulation until 
there is public comment. It also prohibits retroactive 
application of regulations and policies. Finally, providers 
that rely on written, but erroneous guidance from the Secretary 
or its contractors shall not be subject to sanctions if they 
reasonably relied on such guidance.
    Contracting Reform.--This bill would reform Medicare's 
contracting system for administrative functions by 
consolidating contracting functions for Part A and Part B, 
requiring competition among contractors, and providing for more 
flexibility for contractors.
    Education and Outreach.--This bill would improve 
beneficiary and provider education and outreach by: requiring 
coordination of educational activities: providing incentives to 
improve contractor performance, requiring written responses 
within 45 days; providing a toll-free telephone number for 
questions about the program and outreach programs for 
beneficiaries and small providers. It also establishes 
ombudsmen for beneficiaries and providers and a demonstration 
program to place Medicare staff in selected Social Security 
offices.
    Appeals.--This bill would transfer responsibility for 
Medicare appeals from Social Security to the Department of 
Health and Human Services. The Administrative Law Judges would 
maintain their independence from the Centers for Medicare and 
Medicaid Services. It also establishes requirements for 
independence of the Qualified Independent Contractors by 
ensuring no conflicts of interest. Finally, beneficiaries would 
be provided with more information on the disposition of their 
cases.
    Overpayment.--This bill establishes standards for 
prepayment review, audits and consent settlements; allows for 
hardship in the case of repayment of overpayments; and limits 
recoupments by the program until the first independent level of 
appeal--qualified independent contractors--is determined. It 
also allows for beneficiaries and physicians to ask for prior 
authorization for physician office services.
    Miscellaneous and Technical Provisions.--This bill contains 
a number of provisions that would facilitate the introduction 
of new technology into the system. It also limits some 
information requests to providers or otherwise requires the 
Secretary to provide the information. It provides flexibility 
to hospice organizations in extraordinary circumstances.

                         C. Legislative History


                          SUBCOMMITTEE ACTION

    During the 107th Congress, the Subcommittee held two 
hearings on regulatory and contracting reform: March 15, 2001 
and September 25th, 2001. After Subcommittee Chairman Johnson 
and Representative Stark introduced the ``Medicare Regulatory 
Contracting Reform Act of 2001'' (HR 2768) on August 2, the 
Committee favorably reported that bill October 4, 2001 on a 
voice vote. After conferring with the Energy and Commerce 
Committee, a revised version (HR 3391) was introduced and 
passed the House 408-0 on December 4, 2001. Most of the 
provisions in this bill were incorporated into the Medicare 
Modernization and Prescription Drug Act (HR 4954), which passed 
the House in June, 2002.
    Action commenced on regulatory and contracting reform in 
the 108th Congress with the introduction of the Medicare 
Regulatory and Contracting Reform Act (HR 810) of 2003 by 
Chairman Johnson and Representative Stark on February 12. This 
bill is nearly identical to HR 3391 that passed the House in 
the 107th Congress. The Subcommittee on Health held a hearing 
on HR 810 on February 13th 2003, and heard testimony from CMS 
Administrator Tom Scully, Dr. Douglas Wood, Chairman of the 
Secretary's Advisory Committee on Regulatory Reform, and 
provider and beneficiary representatives.
    On March 19, 2003, the Subcommittee on Health favorably 
reported on a voice vote to the full Committee H.R. 810 the 
``Medicare Regulatory and Contracting Reform Act of 2003.'' The 
major changes made in the Chairman's amendment in the nature of 
a substitute were to conform the liability for contractors to 
language negotiated by the Department of Justice, Office of 
Inspector General, CMS and contractors, and to delete obsolete 
provisions, which CMS is already undertaking administratively.

                         FULL COMMITTEE ACTION

    On April 2, 2003, the Committee reported 19-13 on H.R. 810 
the ``Medicare Regulatory and Contracting Reform Act of 2003.'' 
The major changes made in the Chairman's amendment in the 
nature of a substitute were: adding a process to facilitate the 
adoption of updated diagnoses and procedure codes called ICD-
10; allowing certain staffing companies to enroll in Medicare; 
and for specialized Medicare+Choice plans to exclusively serve 
special needs beneficiaries.
    Two additional amendments were approved by the Committee. 
The first was to suspend the collection of unused home health 
data on privately-insured patients until CMS analyses how this 
data can be used and moves through the regulatory and public 
comment process. The second amendment would provide for an 
exception process where the Secretary can, under certain 
limited conditions, reinstate the nurse aide training programs 
of a skilled nursing facility. The Secretary (in conjunction 
with the State survey agencies and allowing for public notice 
from patients and their families and patient advocacy groups) 
must certify that the homes are fully in compliance with any 
Federal or State regulations on quality of care.

                      II. EXPLANATION OF THE BILL


Section 1. Short Title; Amendments to Social Security Act; Table of 
        Contents

    Current Law. No provision.
    Explanation of Provision. Except as otherwise specified, 
the provisions would amend or repeal a section or other 
provisions of the Social Security Act.
    Effective Date. Upon enactment.

Section 2. Findings and Construction

    Current Law. No provision.
    Explanation of Provision. Congress finds that the 
overwhelming numbers of providers are law-abiding and directs 
the Secretary to streamline Medicare's paperwork requirements 
so that time spent on patient care can increase.
    None of the provisions shall be construed to (1) compromise 
or affect the existing legal authorities, procedures or 
remedies for addressing Medicare fraud or abuse whether it be 
criminal investigation and prosecution, civil enforcement, or 
administrative remedies, including those established by the 
False Claims Act or (2) prevent any existing legal authorities 
from eliminating waste, fraud, and abuse in Medicare. Also, 
consolidation of Medicare's administrative contracting 
functions (as provided for in this bill) would not consolidate 
the Federal Hospital Insurance Trust Fund, which pays for Part 
A services and the Federal Supplementary Medical Insurance 
Trust fund, which pays for Part B services. The bill notes that 
this administrative consolidation of contracting functions does 
not reflect any position on that issue.
    Effective Date. Upon enactment.
    Reason for Change. The Committee is committed to extending 
needed regulatory relief to providers and suppliers while at 
the same time protecting taxpayers from waste, fraud and abuse.

Section 3. Definitions

    Current Law. No provision.
    Explanation of Provision. The term, ``supplier,'' means a 
physician, practitioner, facility or other nonprovider entity 
that furnishes Medicare items or services unless otherwise 
indicated. BIPA means the Medicare Medicaid and SCHIP Benefits 
Improvement and Protection Act of 2000 and Secretary means the 
Secretary of Health and Human Services (HHS).
    Effective Date. Upon enactment.

                     A. Title I--Regulatory Reform


Section 101. Issuance of Regulations

(a) Limitation on New Matter in Final Regulations

    Current Law. No provision.
    Explanation of Provision. A provision in a final regulation 
that is not a logical outgrowth of a previously published 
notice or proposed rulemaking or interim final rule would be 
treated as a proposed regulation and would not take effect 
without a separate public comment period followed by its 
publication as a final regulation.
    Effective Date. Final regulations published on or after 
enactment.
    Reason for Change. The provision ensures that interested 
parties will be given an opportunity to comment on issues 
addressed in regulations before they take effect. The Committee 
recognizes that proposed regulations for annual payment updates 
for providers and suppliers include proposed overall payment 
updates, and that specific payment amounts for specific codes 
or specific payment areas are not typically included until 
final rules. The Committee does not intend to change the 
requirements or application of the Administrative Procedures 
Act. It is the Committee's intent that if the Secretary 
publishes a final rulemaking document which includes a 
provision that is not a logical outgrowth of a previously 
published notice of proposed rulemaking, such provision will 
not take effect until there is further opportunity for public 
comment and a publication of the provision again as a final 
regulation.

Section 102. Compliance With Changes in Regulations and Policies

(a) No Retroactive Application of Substantive Changes

    Current Law. No provision.
    Explanation of Provision. A substantive change in a 
regulatory or a subregulatory issuance would not be applied 
retroactively to items or services, unless the Secretary 
determines that retroactive application (1) would be necessary 
to comply with statutory requirements; or (2) would be 
beneficial to the public interest.
    Effective Date. For substantive changes issued on or after 
enactment.
    Reason for Change. This provision will ensure that 
Medicare's rules are not generally applied retroactively.

(b) Timeline for Compliance With Substantive Changes After Notice

    Current Law. No provision.
    Explanation of Provision. A substantive change would not 
become effective before 30 days after the date the change is 
issued or published. The Secretary would be able to waive the 
30-day period to comply with statutory requirements or if such 
waiver is in the public interest. If an earlier date is 
established, the Secretary would be required to include a brief 
explanation of such finding in the issuance or publication of 
the substantive change. No compliance action would be permitted 
against a provider or supplier for goods and services furnished 
before the effective date of the substantive change.
    Effective Date. For compliance actions undertaken on or 
after enactment.
    Reason for Change. This provision will ensure providers and 
suppliers have sufficient time to make any changes to systems 
needed to comply with changes in regulations.

(c) Reliance on Guidance

    Current Law. No provision.
    Explanation of Provision. A provider or supplier who 
reasonably relied on erroneous guidance would not be subject to 
any sanction or penalties, including repayment, provided the 
following conditions were met: (1) The provider or supplier 
follows written guidance (which may be transmitted 
electronically) provided by the Secretary or a Medicare 
contractor when furnishing an item or service and submitting a 
claim; (2) the Secretary finds that the circumstances relating 
to the furnished items and services have been accurately 
presented in writing to the contractor; and (3) the guidance is 
inaccurate. This provision would not prevent recoupment or 
repayment (without additional penalty) if the overpayment were 
solely the result of a clerical or technical operational error.
    Effective Date. Upon enactment, but would not apply to 
sanctions where notice was provided on or before enactment.
    Reason for Change. This provision will ensure that 
providers and suppliers who, in good faith based on the 
information received from contractors will not be vulnerable to 
recovery if it turns out that the contractor was in error. 
Providers should be able to rely on the directions or guidance 
provided by their Medicare contractors.

Section 103. Reports and Studies Relating to Regulatory Reform

    Current Law. No provision.
    Explanation of Provision. The legislation has two studies 
in this area. First, the Comptroller General of the United 
States (GAO) would be required to conduct a study to determine 
the appropriateness and feasibility of providing the authority 
to the Secretary to issue legally binding advisory opinions on 
the interpretation and application of Medicare regulations. The 
study would examine the appropriate time frame for issuing the 
decisions as well as the need for additional staff and funding. 
GAO would submit the study not later than one year after 
enactment.
    Second, the Secretary would be required to report to 
Congress on the administration of the Medicare program and 
inconsistencies among existing Medicare statutory or regulatory 
provisions. The report would include (1) information from 
beneficiaries, providers, suppliers, Medicare Beneficiary and 
Provider Ombudsmen (established in Section 303 of this 
legislation), and Medicare contractors; (2) descriptions of 
efforts to reduce inconsistencies; and (3) recommendations from 
the Secretary for appropriate legislation or administrative 
actions. The report would be due no later than two years after 
enactment and every two years thereafter.
    Effective Date. Upon enactment.
    Reason for Change. The Committee is interested in receiving 
additional information regarding both advisory opinions and 
inconsistencies in Medicare regulations.

                    B. Title II--Contracting Reform


Section 201. Increased Flexibility in Medicare Administration

(a) Consolidation and Flexibility in Medicare Administration

    Current Law. Section 1816 of the Social Security Act 
authorizes the Secretary to establish agreements with fiscal 
intermediaries nominated by different provider associations to 
make Medicare payments for health care services furnished by 
institutional providers. Section 1842 of the Act authorizes the 
Secretary to enter into contracts with health insurers (or 
carriers) to make Medicare payments to physicians, 
practitioners and other health care suppliers. Section 
1834(a)(12) of the Act authorizes separate regional carriers 
for the payment of durable medical equipment (DME) claims. 
Section 1893 authorizes the Secretary to contract for certain 
program safeguard activities under the Medicare Integrity 
Program (MIP).
    Certain terms and conditions of the contracting agreements 
for fiscal intermediaries and carriers are specified in the 
Medicare statute. Medicare regulations coupled with long-
standing agency practices have further limited the way that 
contracts for claims administration services can be 
established. Specifically, the contracts are awarded without 
full and open competition; generally must cover the range of 
claims processing and related activities; cannot be terminated 
without cause and without the opportunity for a public hearing; 
and incorporate cost-based, not performance-based, 
reimbursement methods with no incentive bonuses.
    Certain functions and responsibilities of the fiscal 
intermediaries and carriers are specified in the statute as 
well. The Secretary may not require that carriers or 
intermediaries match data obtained in its other activities with 
Medicare data in order to identify beneficiaries who have other 
insurance coverage as part of the Medicare Secondary Payer 
(MSP) program. With the exception of prior authorization of DME 
claims, an entity may not perform activities (or receive 
related payments) under a claims processing contract to the 
extent that the activities are carried out pursuant to a MIP 
contract. Performance standards with respect to the timeliness 
of reviews, fair hearings, reconsiderations and exemption 
decisions are established as well.
    A Medicare contract with an intermediary or carrier may 
require any of its employees certifying or making payments 
provide a surety bond to the United States in an amount 
established by the Secretary. Neither the contractor nor the 
contractor's employee who certifies the amount of Medicare 
payments is liable for erroneous payments in the absence of 
gross negligence or intent to defraud the United States. 
Neither the contractor nor the contractor's employee who 
disburses payments is liable for erroneous payments in the 
absence of gross negligence or intent to defraud the United 
States, if such payments are based upon a voucher signed by the 
certifying employee.
    Explanation of Provision. The legislation would add Section 
1874A to the Social Security Act to permit the Secretary to 
enter into contracts with any entity to serve as a Medicare 
administrative contractor. These contractors would perform or 
secure the performance (through subcontracting) of some or all 
of the following tasks: determine payment amounts; make 
payments; educate and assist beneficiaries; provide 
consultative services; communicate with providers and 
suppliers; educate and offer technical assistance to providers; 
and perform additional functions as necessary. An entity 
eligible to enter into a contract with respect to the 
performance of a particular function as an entity would (1) 
have demonstrated capability to carry out such function; (2) 
comply with conflict of interest standards that are generally 
applicable under Federal acquisition and procurement; (3) have 
sufficient assets to financially support the performance of 
such functions and (4) meet other requirements imposed by the 
Secretary. The claims processing jurisdiction of Medicare 
administrative contractor would be determined by the scope of 
the contract awarded to the entity. Specifically, the Medicare 
administrative contractor that would perform a particular 
function is the entity that has the contract to perform that 
function for any given beneficiary, any given provider or 
supplier, or class of same.
    The Federal Acquisition Rules (FAR) would apply to Medicare 
administrative contracts except to the extent they are 
inconsistent with a specific Medicare requirement. The 
Secretary would be required to use competitive procedures when 
entering into a Medicare administrative contract and would take 
into account performance quality, price, and other factors. The 
Secretary would be able to renew a contract for up to five 
years without regard to statutory requirements concerning 
competitive contracting if the entity has met or exceeded 
specified performance standards. The Secretary would be able to 
transfer functions among contractors consistent with these 
provisions. The Secretary would be required to (1) ensure that 
performance quality is considered in such transfers and (2) 
provide notice of such transfer (in the Federal Register or 
otherwise) including a description of the transferred 
functions, the affected providers and suppliers, and includes 
contractor contact information.
    The Secretary would be required to (1) provide incentives 
for the Medicare administrative contractors to provide 
efficient, high-quality services; and (2) develop performance 
standards with respect to each of the payment, provider 
service, and beneficiary service functions required of the 
contractors. In developing the performance standards, the 
Secretary would be able to consult with providers and 
suppliers, organizations representing Medicare beneficiaries, 
and Medicare contractors. In developing the performance 
requirements for Medicare administrative contractors, the 
Secretary may include satisfaction of beneficiaries as a 
standard for measuring performance. The Secretary would be 
required to contract only with those entities that will (1) 
perform efficiently and effectively; (2) meet standards for 
financial responsibility, legal authority and service quality 
among other pertinent matters; (3) agree to furnish timely and 
necessary data; and (4) maintain and provide access to 
necessary records and data.
    The performance requirements would be (1) set forth in the 
contract between the Secretary and the appropriate Medicare 
contractor; (2) used to evaluate contractor performance; and 
(3) consistent with the contract's written statement of work. 
The statement of work and contract are public documents. A 
Medicare administrative contract would contain provisions 
deemed necessary by the Secretary and may provide for advances 
of Medicare funds for the purposes of making payments to 
providers and suppliers. In developing contract performance 
requirements for Medicare administrative contractors, the 
Secretary would be required to consider the inclusion of the 
existing standards in effect for timeliness of reviews, 
reconsiderations and exemption decisions.
    The existing MSP provision would apply: the Secretary would 
not be able to require contractors to match their data with 
Medicare data for the purposes of the identifying beneficiaries 
with other insurance coverage. The Secretary would assure that 
the activities of the Medicare administrative contractors do 
not duplicate the Medicare Integrity Program (MIP) functions 
except with respect to the prior authorization of durable 
medical equipment. An entity with a MIP contract would not be 
treated as a Medicare administrative contractor simply because 
it has a MIP contract.
    A Medicare administrative contractor and any of its 
employees certifying or disbursing payments may be required to 
provide a surety bond to the United States in an amount 
established by the Secretary. It is the intent of Congress that 
the definition of a surety bond in this instance includes 
fidelity bonds and the Secretary has the authority to request 
fidelity bonds.
    A Medicare administrative contractor, certifying officer, 
or disbursing officer shall not be liable for erroneous 
payments in the absence of reckless disregard or intent to 
defraud the United States. While Medicare administrative 
contractors are not liable for inadvertent billing errors, as 
in the past, they are liable for all penalties and damages 
resulting from reckless disregard of their obligations under 
their Medicare administrative contracts or intent to defraud 
the United States. The ``reckless disregard'' standard is the 
same as that under the False Claims Act which has been used 
effectively by whistleblowers and the Department of Justice to 
uncover and penalize fraud against the Medicare program by some 
fiscal intermediaries and carriers. This ``reckless disregard'' 
standard, which does not require proof of specific intent to 
defraud, is designed to balance the practical need to shelter 
Medicare Administrative Contractors from frivolous civil 
litigation by disgruntled providers or beneficiaries with the 
Medicare program's interest in protecting itself from 
contractor fraud. This section makes it clear that the False 
Claims Act continues, as in the past, to remain available as a 
remedy for fraud against Medicare by contractors, and that, as 
in the past, the damages and penalties which the Medicare 
program is entitled to recover from fraudulent contractors 
include not just administrative payments but also the affected 
payments from the Medicare trust funds.
    The Secretary would be able to indemnify a Medicare 
administrative contractor, subcontractor, or employee who is 
made a party to any judicial or administrative proceeding 
arising from the claims administration process to an 
appropriate extent as determined by the Secretary and specified 
in the contract. Indemnification in this case may include 
payment of judgments, certain settlements, awards and costs 
(including reasonable legal expenses). Settlement proposals 
would not be negotiated or compromised without prior written 
approval by the Secretary. The Secretary would not be able to 
provide any indemnification if the liability arises directly 
from conduct that is determined in the proceeding or by the 
Secretary to be criminal in nature or fraudulent. If 
indemnification is provided before such determination is made 
that such costs arose directly from such conduct, the 
contractor would reimburse the Secretary for these costs. The 
provisions would not change common law immunity available to 
the Medicare contractor or other party, or permit the payment 
of costs not otherwise allowable, reasonable or allocable under 
the Federal Acquisition Regulation.
    Effective Date. See subsection (d).
    Reason for Change. Medicare's current contracting 
represents an antiquated, inefficient, and closed system based 
on cozy relationships between the government, contractors and 
providers.
    Medicare contracting is antiquated because contractors may 
not provide service for the entire Medicare program, or 
particular functions within the program; rather Fiscal 
Intermediaries administer claims for facilities and carriers 
administer claims for all other providers. It has failed to 
keep pace with integrated claims administration practices in 
the private sector.
    Medicare contracting is inefficient because Medicare does 
not award contracts for Fiscal Intermediaries through 
competitive procedures, but rather on provider nomination.
    Medicare contracting is a closed system. All but one of the 
contractors today have been with Medicare since the program's 
inception 38 years ago, and only insurers can provide 
contracting services under current law.
    This provision permits greater flexibility in contracting 
for administrative services between the Secretary and the 
Medicare contractors (entities that process claims under Part A 
and Part B of the Medicare program), including the flexibility 
to separately contract for all or parts of the contractor 
functions. The Secretary also may contract with a wider range 
of entities, so that the most efficient and effective 
contractor can be selected.
    These amendments require the Secretary to contract 
competitively at least once every five years for the 
administration of benefits under Parts A and B. In conjunction 
with the elimination of cost contracts, it is intended to 
create incentives for improved service to beneficiaries and to 
providers of services and suppliers.

(b) Conforming Amendments to Section 1816 (Relating to Fiscal 
        Intermediaries)

    Current Law. Section 1816 of the Social Security Act 
establishes the provider nomination process, the contracting 
specifications, and performance standards for fiscal 
intermediaries that currently contract with Medicare to process 
claims and perform other related administrative activities for 
institutional providers.
    Explanation of Provision. The provisions establish that the 
activities of fiscal intermediaries in administering Medicare 
would be conducted through contracts with Medicare 
administrative contractors as set forth in subsection (a). The 
provider nomination process and contracting specifications 
would be repealed. Certain performance standards with respect 
to the processing of clean claims would be retained. Certain 
annual reporting requirements concerning the contractor's 
overpayment recovery efforts would be retained.
    Effective Date. See subsection (d).
    Reason for Change. These amendments provide a basis for a 
unified contracting system for the administration of Parts A 
and B, identical to the recent Congressionally mandated 
structure of the Medicare Integrity Program contractors. 
Consolidation of contracting duties as set forth in this 
legislation does not constitute consolidation of the Hospital 
Insurance and Medical Supplementary Insurance Trust Funds, or 
reflect any position on that issue. In addition, the 
elimination of provider nomination, which hospitals have rarely 
been allowed to exercise in recent years, is essential for 
bringing full and open competition into the contracting 
functions of the Medicare program.

(c) Conforming Amendments to Section 1842 (Relating to Carriers)

    Current Law. Section 1842 of the Social Security Act 
establishes that carriers will be used to administer certain 
Medicare benefits as well as the contracting requirements and 
certain performance standards for those activities.
    Explanation of Provision. The provisions would establish 
that the activities of carriers administering Medicare would be 
conducted through contracts with Medicare administrative 
contractors as set forth in subsection (a). Certain 
instructions including those pertaining to nursing facilities 
payments, claims assignment, physician participation, 
overpayment recoveries and billing by suppliers would be 
retained. Certain performance standards with respect to the 
processing of clean claims would be retained. Contracting 
specifications and other conforming changes would be 
established. The Secretary, not the contractor, would be 
responsible for taking necessary actions to assure that 
reasonable payments are made, for those made on both a cost and 
charge basis. The Secretary, not the contractor, would be 
responsible for maintaining a toll-free telephone number for 
beneficiaries to obtain information on participating suppliers. 
Since the Carrier fair hearing requirement were eliminated in 
BIPA, the requirements for the hearing are eliminated to 
conform with existing law. Certain annual reporting 
requirements concerning the contractor's overpayment recovery 
efforts would be retained.
    The Committee directs the Secretary's attention to the 
provision of the Balanced Budget Act of 1997 requiring CMS to 
designate no more than five regional carriers to process 
laboratory claims. This provision was passed in order to 
streamline the processing of laboratory claims and was to be 
implemented by July 1, 1999, but CMS has taken no action to 
date. In consultation with the clinical laboratory industry, 
CMS may consider other potential solutions, including the 
designation of a single contractor to process all claims of 
laboratory entities operating in more than one state. CMS is 
directed to report back to the Committee on Ways and Means and 
the Committee on Energy and Commerce within three months 
detailing the action it has taken to implement this directive.
    Effective Date. See subsection (d).
    Reason for Change. The provision establishes a basis for a 
unified contracting system, identical to the structure 
implemented for the Medicare Integrity Program (MIP) 
contractors. It is important to note, however, that 
consolidation of contracting duties as set forth in this 
legislation does not constitute consolidation of the Hospital 
Insurance and Medical Supplementary Insurance Trust Funds, or 
reflect any position on that issue. In addition, the Secretary 
would have the flexibility to choose the best contractor(s) to 
provide telephone information on suppliers which is intended to 
reduce administrative costs and improve quality. Since the 
carrier fair hearing requirement was eliminated in previous 
legislation, the requirements for the hearing are eliminated in 
order to conform with existing law.

(d) Effective Date; Transition Rule

    Current Law. No provision.
    Explanation of Provision. Except as otherwise provided in 
this subsection, the provisions in this section would be 
effective October 1, 2005. The Secretary would be authorized to 
take necessary actions prior to that date in order to implement 
these amendments on a timely basis to transition from the 
contracts established under sections 1816 and 1842 of the 
Social Security Act to those established under the new section 
1874A created by this legislation. The transition would be 
consistent with the requirement that the administrative 
contracts be competitively bid by October 1, 2010. The 
requirement that MIP contracts be awarded on a competitive 
basis would continue to apply and would not be affected by the 
provisions in this section. The MIP contracting exception that 
allows agreements according to current law would be deemed to 
be a contract established under the new authority of 1874A and 
would continue existing activities. The Secretary has the 
authority to recognize the appropriate termination costs of the 
current contractors during the transition from cost contracts 
to competitively bid contracts.

(e) References

    Current Law. No provision.
    Explanation of Provision. After this section becomes 
effective, any reference to fiscal intermediary or carrier 
would be considered a reference to the appropriate Medicare 
administrative contractor.

(f) Reports on Implementation

    Current Law. No provision.
    Explanation of Provision. The Secretary would submit an 
implementation plan to Congress and GAO no later than October 
1, 2004. GAO would evaluate the plan and include appropriate 
recommendations no later than six months after the plan is 
received. No later than October 1, 2008, the Secretary would be 
required to submit a status report to Congress including (1) 
the number of contracts that have been competitively bid; (2) 
the distribution of functions among contracts and contractors; 
(3) a timeline for complete transition to full competition; and 
(4) a detailed description of changes to contractor oversight 
and management.
    Effective Dates. Upon enactment.

Section 202. Requirements for Information Security

    Current Law. No provision.
    Explanation of Provision. Medicare administrative 
contractors that determine and make payments would be required 
to implement a contractor-wide information security program 
that meets the requirements imposed on Federal agencies to 
ensure the security, integrity, confidentiality, authenticity, 
and availability of operational data and systems supporting 
operations. An annual audit of the information security at each 
Medicare administrative contractor: (1) would be performed by 
an independent entity that meets the independence requirements 
specified by the Office of the Inspector General (OIG) in HHS; 
and (2) would test the effectiveness of the information 
security techniques for an appropriate subset of the 
contractor's systems. An audit of new contractors (those that 
have not been fiscal intermediaries or carriers) would be 
required prior to the start of their performing Medicare 
payment functions. An audit of existing contractors (those that 
are now fiscal intermediaries and carriers) would be required 
to be completed within one year from enactment. The results of 
the audits would be reported promptly to the OIG which will 
submit a report annually to Congress. These provisions would be 
equally applicable to fiscal intermediaries and carriers as to 
Medicare administrative contractors.
    Effective Date. Upon enactment.
    Reason for Change. The increased reliance by the Federal 
government on the Internet and related telecommunications 
technologies has resulted in enhanced inter-connectivity and 
interdependencies associated with Federal computer systems and 
between federal and private computer systems. Over the past 
several years, this inter-connectivity or ``networking'' has 
resulted in increased security vulnerabilities that have put at 
greater risk computer systems and data that are critical to 
ensuring national and economic security and public health and 
welfare, including sensitive, non-public information that is 
collected and maintained by CMS and its business partners.
    Investigations have revealed significant security 
weaknesses, which the agency has been working to address. Some 
of the computer security concerns identified include weak 
password management, inadequate access controls, excessive user 
privileges, improper network configurations, and inadequate 
testing of critical systems. In addition, the OIG conducted 
assessments of financial controls--including electronic data 
processing controls--at CMS and its major Medicare contractors, 
and, in every year since 1997, the OIG has identified computer 
security controls to be a material weakness at both CMS and the 
Medicare contractors reviewed.
    Section 202 is intended to assist CMS in identifying and 
working with contractors to address potential security 
deficiencies in order to ensure that sensitive, non-public 
information related to the processing of Medicare claims is 
adequately secure from unauthorized access, misuse, or 
destruction.

           C. Title III--Education and Outreach Improvements


Section 301. Provider Education and Technical Assistance

(a) Coordination of Education Funding

    Current Law. Medicare's provider education activities are 
funded through the program management appropriation and through 
the Education and Training component of the Medicare Integrity 
Program (MIP). Both claims processing contractors (fiscal 
intermediaries and carriers) and MIP contractors may undertake 
provider education activities.
    Explanation of Provision. The provision would add Section 
1889 to the Social Security Act which would require the 
Secretary to (1) coordinate the educational activities provided 
through the Medicare administrative and MIP contractors and (2) 
to submit an evaluation to Congress, no later than October 1, 
2002, on actions taken to coordinate the funding of provider 
education.
    Effective Date. Upon enactment.
    Reason for Change. This provision is intended to ensure 
that federal spending on provider education is coordinated and 
used as efficiently as possible to maximize the value obtained 
from the investment. It is not intended to change the 
proportion of Medicare Integrity Program funds spent on 
provider education.

(b) Incentives to Improve Contractor Performance

    Current Law. No specific statutory provision. Since FY1996, 
as part of the audit required by the Chief Financial Officers 
Act, an estimate of improper payments in Medicare fee-for-
service has been established annually. As a recent initiative, 
CMS is implementing a comprehensive error rate testing program 
to produce national, contractor specific, benefit category 
specific and provider specific paid claim error rates.
    Explanation of Provision. The Secretary would be required 
to use the specific claims payment error rates or similar 
methodology at each Medicare administrative contractor to 
provide incentives for such contractors to effectively educate 
providers on proper claims procedures. This methodology would 
apply to existing fiscal intermediaries and carriers in the 
same manner as it applies to Medicare administrative 
contractors. No later than October 1, 2004, GAO would submit to 
Congress and to the Secretary a report on the adequacy of the 
methodology, including recommendations as appropriate. No later 
than October 1, 2004, the Secretary would be required to report 
to Congress on (1) the use of the claims error rate methodology 
in assessing the effectiveness of contractors' provider 
education and outreach programs and (2) whether methodology 
should be used as a basis to pay contractors' performance 
bonuses.
    Effective Date. As specified.
    Reason for Change. This provision would ensure that the 
Department monitors contractor performance for claims payment 
error rates, and it would identify best practices for provider 
education--all with the goal of reducing payment errors and 
helping providers and suppliers better comply with program 
requirements. It is the Committee's intent that, in 
consultation with representatives of providers and suppliers, 
the Secretary shall identify and encourage best practices 
developed by contractors for educating providers and suppliers.

(c) Provision of Access to and Prompt Responses From Medicare 
        Administrative Contractors

    Current Law. No specific statutory provision. Statutory 
provisions generally instruct carriers to assist providers and 
others who furnish services in developing procedures relating 
to utilization practices and to serve as a channel of 
communication relating information on program administration. 
Fiscal intermediaries are generally instructed to (1) provide 
consultative services to institutions and other agencies to 
enable them to establish and maintain fiscal records necessary 
for program participation and payment and (2) serve as a center 
for any information as well as a channel for communication with 
providers.
    Explanation of Provision. The Secretary would be required 
to develop a communication strategy with beneficiaries, 
providers and suppliers. Each Medicare administrative 
contractor would be required to (1) provide general written 
responses (which may be through electronic transmission) in a 
clear, concise and accurate manner to written inquiries from 
beneficiaries, providers and suppliers within 45 business days; 
(2) provide a toll-free telephone number where these interested 
parties may obtain billing, coding, claims, coverage and other 
appropriate Medicare information; (3) maintain a system for 
identifying which employee provided both the written and oral 
information; and (4) monitor the accuracy, consistency, and 
timeliness of the information provided. The Secretary would be 
required to establish and make public the standards used to 
monitor the accuracy, consistency, and timeliness of 
information provided in response to written and telephone 
inquiries. The standards would be developed in consultation 
with provider, supplier, and beneficiary organizations and 
would be consistent with the contractors' performance 
requirements. The Secretary would be able to directly monitor 
the quality of the information so provided. These provisions 
would also apply to existing fiscal intermediaries and 
carriers. The Medicare administrative contractor is required to 
record the subject matter and content of any advice, in part, 
to facilitate tracking the accuracy of the advice.
    Effective Date. By October 1, 2004.
    Reason for Change. This provision is intended to improve 
contractor accountability to make contractors more responsive 
to providers and suppliers, and to increase the accuracy, 
timeliness and reliability of the information provided in 
response to the questions received.

(d) Improved Provider Education and Training

    Current Law. In FY2000, $54.8 million was spent on provider 
education and training activities: about $43 million came from 
the program management appropriation and about $12 million came 
from the Provider Education and Training component of MIP. In 
FY2001, about $57.3 million was budgeted for these activities.
    Explanation of Provision. The provisions would authorize 
$25 million in Medicare appropriations in FY2005 and FY2006 and 
such funds as necessary in subsequent years to increase 
provider education and training and to improve the accuracy and 
quality of contractor responses. The Committee intends for this 
amount to be provided in addition to current funding levels. 
Starting on October 1, 2004, the contractors' training 
activities would accommodate the special needs of small 
providers and suppliers. The provisions define a small provider 
as an institution with fewer than 25 full-time equivalents 
(FTEs) and a non-facility based provider or supplier with fewer 
than 10 FTEs.
    Effective Date. Upon enactment and as specified.
    Reason for Change. This provision acknowledges that 
contractors are being instructed to significantly improve their 
provider education and training efforts, and accordingly 
authorizes new funds to be available for those purposes.

(e) Requirement To Maintain Internet Sites

    Current Law. No provision.
    Explanation of Provision. The Secretary and each contractor 
would be required to maintain an Internet site that provides 
answers to frequently asked questions in an easily accessible 
format as well as other materials published by the contractor.
    Effective Date. By October 1, 2004.
    Reason for Change. This provision will facilitate greater 
ease of provider and supplier access to information provided by 
Medicare's contractors.

(f) Additional Provider Education Provisions

    Current Law. No provision.
    Explanation of Provision. A Medicare contractor would not 
be able to use attendance records at educational programs or 
information gathered during these programs to select or track 
candidates for audit or prepayment review. Nothing in the 
proposed legislation would require Medicare administrative 
contractors to disclose information that would compromise 
pending law enforcement activities or reveal findings of law 
enforcement-related audits.
    Effective Date. Upon enactment.
    Reason for Change. This provision addresses a concern 
raised by providers and suppliers that their participation in 
educational forums has been used to trigger audits. 
Participation in educational forums should be encouraged not 
discouraged.
    Nothing in this section or section 1893(g) shall be 
construed as preventing the disclosure by a Medicare contractor 
of information on attendance at education activities for law 
enforcement purposes. Nothing in this section or section 
1893(g) shall be construed as providing for the disclosure by a 
Medicare contractor of the claims processing screens or 
computer edits used for identifying claims that will be subject 
to review.

Section 302. Small Provider Technical Assistance Demonstration Program

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to establish a demonstration program and contract with 
qualified entities to offer technical assistance, when 
requested and on a voluntary basis, to small providers or 
suppliers. Small providers and suppliers would be those 
institutional providers with less than 25 full-time equivalents 
(FTEs) or suppliers with less than 10 FTEs. Technical 
assistance would include direct, in-person examination of 
billing systems and internal controls by qualified entities 
such as peer review organizations or other entities. In 
awarding these contracts, the Secretary would be required to 
consider any prior investigations of the entity's work by the 
Office of the Inspector General (OIG) in HHS or the GAO. 
Participating providers and suppliers would be required to pay 
an amount estimated and disclosed in advance that would equal 
25 percent of the cost of the technical assistance they 
received. Absent indications of fraud, errors found in the 
review would not be subject to recovery if the problem is 
corrected within 30 days of the on-site visit and remains 
corrected for an appropriate period. However, this protection 
would only apply to claims filed as part of the demonstration 
project, would last only for the duration of the project and 
only as long as the provider or supplier was participating in 
the project. GAO, in consultation with the OIG, would be 
required to evaluate and provide recommendations on the 
continuation of the demonstration project no later than two 
years after its implementation. The evaluation would include a 
determination of whether claims error rates were reduced for 
providers and suppliers who participated in the program. The 
provision would authorize $1 million in FY2005 and $6 million 
in FY2006 of appropriations from the Medicare Trust Funds to 
carry out demonstration project.
    Effective Date. Upon enactment.
    Reason for Change. Many large providers and suppliers have 
contracts with private consulting firms to help them navigate 
their interactions with the Medicare program. This type of 
assistance can be prohibitively expensive for small providers 
and suppliers--but they are also required to comply with 
complex program rules and regulations. This provision creates a 
new demonstration program to facilitate small provider and 
supplier access to expert technical assistance. The 
demonstration will also test whether encouraging technical 
assistance on the front end to help providers and suppliers 
play by the rules can save the program money in the long term 
by promoting greater program compliance.

Section 303. Medicare Provider Ombudsman; Medicare Beneficiary 
        Ombudsman

(a) Medicare Provider Ombudsman

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to appoint a Medicare Provider Ombudsman within HHS to (1) to 
resolve unclear guidance and provide confidential assistance to 
providers and suppliers regarding complaints or questions about 
the Medicare program including peer review and administrative 
requirements; and (2) recommend changes to improve program 
administration. The Ombudsman would not advocate any increases 
in payments or expanded coverage, but would identify issues and 
problems in current payment and coverage policies.
    Effective Date. One year after enactment.
    Reason for Change. Providers are currently confronted with 
a morass of bureaucracy and regulation, with no clear 
individual to assist them. The new ombudsman will help 
providers navigate Medicare's complicated rules and 
regulations.
    The Medicare Provider Ombudsman shall make recommendations 
to the Secretary concerning how to respond to recurring 
patterns of confusion in the Medicare program. Such a 
recommendation may include calling for the suspension of the 
imposition of provider sanctions (except those sanctions 
relating to the quality of care) where there is widespread 
confusion in program administration. Nothing in this section 
shall be construed as allowing for the suspension of provider 
sanctions relating to the quality of care, regardless of 
whether widespread confusion in the Medicare program exists.

(b) Medicare Beneficiary Ombudsman

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to appoint a Medicare Beneficiary Ombudsman within HHS from 
individuals with health care expertise, advocacy, and education 
of Medicare beneficiaries. The ombudsman would (1) receive 
complaints, grievances, and requests for information from 
Medicare beneficiaries; (2) provide assistance with respect to 
those complaints, grievances and requests, including assistance 
to beneficiaries who appeal claims determinations or those 
affected by the decisions of Medicare+Choice organizations to 
leave Medicare; and (3) submit an annual report to Congress and 
the Secretary describing activities and recommending changes to 
improve program administration. The Ombudsman would not 
advocate any increases in payments or expanded coverage, but 
would identify issues and problems in current payment and 
coverage policies.
    To the extent possible, the Beneficiary Ombudsman would 
work with the Health Insurance and Assistance Counseling 
Programs authorized under Section 4360 of OBRA 1990, to 
facilitate the provision of information to Medicare 
beneficiaries regarding Medicare+Choice plans and any changes 
related to those plans. In addition, nothing in this section 
would preclude further collaboration, as appropriate, between 
the Beneficiary Ombudsman and these programs.
    Effective Date. One year after enactment.
    Reason for Change. Beneficiaries confront a morass of 
bureaucracy and regulation, with no clear individual to assist 
them. This new ombudsman will help beneficiaries navigate 
Medicare's complicated rules and regulations.

(c) Funding

    Current Law. No provision
    Explanation of Provision. The provision would authorize 
appropriations of necessary sums in FY2004 and subsequently 
from the appropriate Medicare Trust Funds for the Ombudsman 
programs.
    Effective Date. Upon enactment.
    Reason for Change. The Committee acknowledges that 
implementing these new functions will have a cost and 
accordingly authorize necessary appropriations.

(d) Use of Central Toll Free Number (1-800-MEDICARE)

    Current Law. The Secretary is required to prepare and 
distribute an annual notice explaining Medicare benefits and 
limitations to coverage to Medicare beneficiaries. The 
Secretary is also required to provide information via a toll-
free telephone number.
    Explanation of Provision. The Secretary would be required 
to establish a toll-free number (1-800-MEDICARE) which will 
transfer individuals with questions or seeking help to the 
appropriate entities. The transfer would occur with no charge. 
This toll-free number would be the general information and 
assistance number listed on the annual notice provided to 
beneficiaries. GAO would be required to (1) monitor the 
adequacy, accuracy, and consistency of the information provided 
to Medicare beneficiaries through the toll-free 1-800-MEDICARE 
number and (2) examine the education and training of those 
providing the information through the toll-free number. GAO 
would be required to submit a report to Congress no later than 
one year from enactment. This toll-free number is intended to 
supplement, not replace, information and assistance available 
through non-federal sources. For example, contact information 
for the State Health Insurance Assistance Programs (SHIPs) 
should still be listed in the beneficiary handbook.
    Effective Date. Upon enactment.
    Reason for Change. The beneficiary handbook currently 
provides many pages of phone numbers, which can be very 
confusing for beneficiaries, rather than a single number that 
then can triage and transfer beneficiaries to the appropriate 
person or entity. This provision will promote better access to 
information for beneficiaries.

Section 304. Beneficiary Outreach Demonstration Program

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to establish a 3-year demonstration project where Medicare 
specialists who are HHS employees are placed in at least six 
SSA offices to advise and assist Medicare beneficiaries. The 
SSA offices would be those with a high-volume of visits by 
Medicare beneficiaries; at least two of which would be in rural 
areas. In the rural SSA offices, the Secretary would provide 
for the Medicare specialists to travel among local offices on a 
scheduled basis. The Secretary would be required to (1) 
evaluate the project with respect to beneficiary utilization, 
beneficiary satisfaction, and cost-effectiveness and (2) 
recommend whether the demonstration should be expanded and made 
permanent.
    Effective Date. Upon enactment.
    Reason for Change. This provision makes Medicare experts 
available in six Social Security Administration offices to 
assist beneficiaries and answer their questions. The 
demonstration will test whether such outsourced Medicare 
specialists improve beneficiary understanding of the program 
and beneficiary satisfaction.

Section 305. Notification About Skilled Nursing Facility Benefits

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to provide beneficiaries with information about the remaining 
number of days of skilled nursing facility coverage.
    Effective Date. For notices provided during calendar 
quarters beginning more than six months after enactment.
    Reason for Change. Beneficiaries are not always aware that 
their Medicare coverage is running out, and may need time to 
arrange alternate financing for continued skilled nursing 
facility care. This provision will provide beneficiaries with 
advance notice of the expiration of their skilled nursing 
benefit so that they have time to make arrangements without 
disruptions in care.

Section 306. Information on Medicare-Certified Skilled Nursing 
        Facilities in Hospital Discharge Plans

    Current Law. No provision.
    Explanation of Provision. The Secretary would make publicly 
available information that enables hospital discharge planners, 
Medicare beneficiaries, and the public to identify skilled 
nursing facilities that are participating in Medicare.
    Hospital discharge plans would be required to identify, for 
individuals who are likely to need post-hospital extended care 
services, the availability of Medicare-certified skilled 
nursing facilities that serve the area in which the patient 
resides.
    Effective Date. Not later than 6 months after the Secretary 
provides for the availability of information needed for 
discharge plans.
    Reason for Change. The Committee has received reports of 
beneficiaries being discharged to non-Medicare skilled nursing 
facilities or beds. This provision is intended to assure that 
beneficiaries are given information during discharge planning 
about Medicare participating facilities. Thus, this provision 
would ensure that beneficiaries who need post acute care are 
notified about the availability of Medicare participating 
skilled nursing facilities in the area.

                   D. Title IV--Appeals and Recovery


Section 401. Transfer of Responsibility for Medicare Appeals

    Current Law. Medicare beneficiaries and, in certain 
circumstances, providers and suppliers of health care services 
may appeal claims that are denied or payments that are reduced. 
Section 1869 of the Social Security Act, which covers the 
Medicare claims appeals process, was amended by BIPA in its 
entirety, but the BIPA provisions are not yet effective. 
Generally, parties who have been denied coverage of an item or 
service have the right to appeal that decision through a series 
of administrative appeals and then into federal district court 
if the amounts of disputed claims in question meet certain 
thresholds at each step of the appeals process. A hearing by an 
administrative law judge (ALJ) in the Social Security 
Administration (SSA) with review by the Department Appeals 
Board (DAB) is a component of the administrative appeals 
process.
    Explanation of Provision. By October 1, 2004, the 
Commissioner of SSA and the Secretary would develop a plan to 
transfer the functions of the administrative law judges (ALJs) 
who are responsible for hearing Medicare and Medicare related 
cases from SSA to HHS. The plan would be transmitted to 
Congress and GAO no later than October 1, 2004. The GAO would 
evaluate the plan and submit a report to Congress within six 
months. The Secretary and the Commissioner of SSA would 
implement the transition plan and transfer the ALJ functions no 
earlier than July 1, 2005 and no later than October 1, 2005. 
The Secretary would (1) assure the ALJ's independence from the 
Centers of Medicare and Medicaid Services (CMS) by placing the 
ALJs in an administrative office that is organizationally and 
functionally separate from CMS; and (2) locate the ALJs with an 
appropriate geographic distribution to ensure access. Subject 
to appropriations, the Secretary would be permitted to hire 
ALJs and support staff with priority given to ALJs with 
experience in handling Medicare appeals. Amounts previously 
paid to SSA for the ALJs performing the ALJ functions would be 
payable to the Secretary for the transferred functions. The 
Secretary would be permitted to enter into arrangements with 
SSA to share office space, support staff, and other resources 
with appropriate reimbursement from the Medicare trust funds. 
Increased appropriations would be permitted to increase the 
number of ALJs and support staff; improve education and 
training for ALJs and their staff; and increase DAB staff.
    Effective Date. Upon enactment.
    Reason for Change. The Office of Inspector General has 
identified moving the functions of the Medicare Administrative 
Law Judges to the Department of Health and Human Services as an 
important priority in improving the appeals system. This 
provision makes that transition and increases the emphasis on 
providing training Administrative Law Judges and their staffs 
to increase their expertise in Medicare's rules and 
regulations. The SSA Commissioner and the Secretary are 
instructed to work together on the transition plans in order to 
assure that the transition does not adversely affect the SSA 
ALJ appeals system. The Committee objects to recent proposals 
to locate the ALJs in CMS.
    The transition plan shall include information on the 
following:
           Workload--The number of such administrative 
        law judges and support staff required now and in the 
        future to hear and decide such cases in a timely 
        manner, taking into account the current and anticipated 
        claims volume, appeals, number of beneficiaries, and 
        statutory changes;
           Cost Projections--Funding levels required 
        for fiscal year 2004 and subsequent fiscal years under 
        this subsection to hear such cases in a timely manner;
           Transition Timetable--A timetable for the 
        transition;
           Regulations--The establishment of specific 
        regulations to govern the appeals process;
           Case Tracking--The development of a unified 
        case tracking system that will facilitate the 
        maintenance and transfer of case specific data across 
        both the fee-for-service and managed care components of 
        the Medicare program;
           Feasibility of Precedential Authority--The 
        feasibility of developing a process to give binding, 
        precedential authority to decisions of the Departmental 
        Appeals Board in the Department of Health and Human 
        Services that address broad legal issues; and
           Access to Administrative Law Judges--The 
        feasibility of filing appeals with administrative law 
        judges electronically, and the feasibility of 
        conducting hearings using tele- or video-conference 
        technologies.

Section 402. Process for Expedited Access to Judicial Review

(a) In General

    Current Law. Section 521 of BIPA (which is not yet 
implemented) amends Section 1869 to establish deadlines for 
filing appeals and for making decisions in the Medicare appeals 
process. Generally, an initial determination is to be completed 
no later than 45 days from the date a claim for benefits is 
received; an individual dissatisfied with an initial 
determination is entitled to a redetermination by a carrier or 
fiscal intermediary if requested within 120 days of the 
determination date. The redetermination is to be completed no 
later than 30 days from the request date. The Secretary may 
reopen or revise any initial determination or reconsidered 
determination under guidelines established by regulation.
    An individual dissatisfied with the redetermination is 
entitled to reconsideration by a qualified independent 
contractor (QIC) if the request is initiated within 180 days of 
the notice of the adverse redetermination. With certain 
exceptions, a QIC reconsideration decision is to be completed 
within 30 days from the date a timely request has been filed. 
After a QIC's reconsideration, if the remaining contested 
amount is greater than $100, an individual is entitled to a 
hearing by an administrative law judge and then a review by the 
DAB. Both the ALJ hearing and the DAB review are to be 
completed within 90 days of a timely filed request for such an 
action.
    If the dispute is not satisfactorily resolved and the 
contested amounts are greater than $1,000, the individual is 
entitled to judicial review of the decision. Under certain 
circumstances, a beneficiary is entitled to an expedited 
determination with accelerated deadlines. BIPA also provides 
for an expedited hearing under Section 1869, where the moving 
party alleges that no material issues of fact are in dispute; 
the Secretary makes an expedited determination as to whether 
any such facts are in dispute and, if not, renders a decision 
expeditiously.
    Explanation of Provision. The Secretary would establish an 
appeals process for a provider, supplier, or beneficiary that 
permits access to judicial review when a review panel 
determines that no entity in the administrative appeals process 
has authority to decide the question of law or regulation in 
controversy and where material facts are not in dispute. The 
appellant would be able to make such request only once with 
respect to a question of law or regulation for a specific 
dispute. If the appellant requests this determination and 
submits appropriate supporting documentation, the review panel 
would make this determination in writing no later than 60 days 
after receiving the request. A review panel would consist of a 
panel of three members who are ALJs, members of the DAB, or 
qualified individuals associated with a QIC or other 
independent entity designated by the Secretary to make these 
determinations. The determination by the review panel would be 
considered a final decision and not subject to review by the 
Secretary. Given such a determination or a failure to make the 
determination within the 60-day deadline, the appellant would 
be able to request judicial review before a civil court. The 
filing deadline for this civil action would be within 60 days 
of the determination or within 60 days of the end of the 
deadline to make such determination. The venue for judicial 
review would be the U.S. District Court where the appellant is 
located, or where the greatest number of appellants are 
located, or in the district court for the District of Columbia. 
The amount in controversy would be subject to annual interest 
beginning on the first day of the first month beginning after 
the 60-day deadline for filing. Interest would be equal to the 
rate of interest on obligations issued for purchase by the 
Medicare trust funds effective for the month that the civil 
action is authorized to commence. The interest payments would 
not be deemed to be Medicare reimbursement.
    Effective Date. See section (c).

(b) Application to Provider Agreement Determinations

    Current Law. Section 1866(h) of the Social Security Act 
provides for a hearing and for judicial review of that hearing 
for any institution or agency dissatisfied with a determination 
that it is not a provider (or that it can no longer be a 
provider).
    Explanation of Provision. An agency or institution's appeal 
concerning program participation under Section 1866 would have 
access to expedited judicial review under Section 1869 
provisions. This provision would not be construed to affect 
remedies applied to assure quality of care in skilled nursing 
facilities (under Section 1819) while such appeals are pending.

(c) Effective Date

    Explanation of Provision. Amendments in the section would 
apply to appeals filed on or after October 1, 2004.
    Reason for Change. The provisions in 402 (a-c) on expedited 
access to judicial review ensure that if a review board 
certifies that there are no material facts in dispute and that 
the appeals process does not have authority to resolve the 
question at issue, the provider, supplier, or beneficiary may 
take their case to court in an expedited manner. This will 
facilitate more prompt resolution of challenges to the 
underlying validity of CMS regulations and determinations. To 
the extent that any part of an appeal poses a factual dispute 
that is being adjudicated before an administrative tribunal, 
this provision would not authorize the severance of the legal 
issues from the underlying factual dispute.

(d) Expedited Review of Certain Provider Agreement Determinations

    Current Law. No provision.
    Explanation of Provision. The Secretary would develop and 
implement a process under 1866(h) to expedite provider 
agreement determinations including those instances where 
participation is terminated or other sanctions (including 
denials of new admissions or appointment of temporary 
management) against skilled nursing facilities have been 
imposed. Priority would be given to termination of provider 
agreements. Increased appropriations from the Medicare trust 
funds in FY2005 and subsequently would be authorized in order 
to (1) reduce the average time for administrative 
determinations on provider participation appeals by 50 percent; 
(2) increase the number of ALJs and their staff; and (3) 
educate the ALJs and their staff on long term care issues.
    Effective Date. Upon enactment.
    Reason for Change. Given the disruption to beneficiaries if 
a facility is closed, this provides for an expedited appeal 
concerning a termination from Medicare.

(e) Process for Reinstatement of Approval of Certain Skilled Nursing 
        Programs

    Current Law. Civil Monetary Penalties (CMPs) can be applied 
when a nursing home is out of compliance with the standards of 
care. The facility is out of compliance when it has one or more 
deficiencies that subject a resident to at least the potential 
for more than minimal harm. The CMPs can also be applied 
retroactively to the date of initial non-compliance. The CMPs 
can also be applied when a facility is currently in compliance 
but was not in compliance at one point in the past. The GAO 
stated in March of 1999 that Congress established the CMPs to 
create a strong incentive for facilities to maintain compliance 
with federal standards.
    Nurse aides render most of the daily care furnished to a 
nursing home resident and about 60 percent of all nursing care. 
Nurse aides must have 75 hours of training with 16 hours in 
clinical training. Nursing homes that wish to sponsor a 
training program must obtain state approval. All states 
periodically review and recertify the approved nurse aide 
training programs. According to the Office of the Inspector 
General, inadequate levels of staffing are one of the major 
problems with nursing homes. In particular, more nurse aide 
staffing can address problems, such as poor hygiene.
    The law requires suspension of the nurse aide training 
program if the facility has been assessed a civil monetary 
penalty of not less than $5,000. The suspension of the training 
program is also secondary to the CMPs, to the extent that 
during an appeal of the CMPs, the nurse aide training program 
can continue over the 2 to 3 years required to complete the 
appeal.
    Explanation of Provision. The Secretary is required to 
develop a process for the reinstatement of the nurse aide 
program before the end of the mandatory 2-year suspension for 
those facilities that have corrected any deficiencies. The 
Secretary must certify, in coordination with the state and 
after public notice and comment by beneficiaries and their 
advocacy groups, that the facility is in compliance and has 
remedied any deficiencies. An exception already exists for 
facilities in rural areas without any nearby nursing 
facilities, which allows them to have their aides trained in 
the facility by outside nurses.
    Effective Date. Upon enactment.
    Reason for Change. This penalty is applied automatically in 
conjunction with CMPs with no Secretarial discretion. This 
provision provides much needed Secretarial discretion so that 
the Secretary can impose CMPs but permit nurse training to 
resume if deficiencies have been corrected and the facility is 
back in compliance. Under the current law, the suspension can 
be wholly unrelated to any quality problems or any problems 
with the training program. The link between any actual problem 
and the suspension of the training program is weak because this 
penalty is suspended during the 2 to 3 year process of the 
appeal of a CMP. There appears to be no direct evidence from 
OIG or GAO studies that this penalty is critical to enforcement 
rather it is the CMPs that are the key. Indeed, this penalty is 
so severe that it may deter the use of CMPs. While immediate 
correction of any deficiencies is required by CMS after a 
survey, the review process will encourage continued compliance, 
which has been a significant problem with nursing homes.

Section 403. Revisions to Medicare Appeals Process

(a) Requiring Full and Early Presentation of Evidence

    Current Law. No provision.
    Explanation of Provision. A provider or supplier would not 
be able to introduce evidence that was not presented at 
reconsideration conducted by the QIC unless a good cause 
precluded its introduction at or before that reconsideration.
    Effective Date. On or before October 1, 2004.
    Reason for Change. The Office of Inspector General 
identified this change as a priority to promote more 
expeditious resolution of appeals of denied claims. This 
provision requires prompt introduction of evidence relevant to 
a provider appeal. When deciding whether there is good cause to 
introduce new evidence, the adjudicator should ensure, after 
consideration of the totality of the circumstances, that 
disallowing the introduction of such new evidence would 
unfairly prejudice the case. The totality of the circumstances 
may include, but is not limited to, the following: evidence is 
not yet available; the appellant was not represented at a lower 
level of appeal; the appellant was not aware of her rights; or 
the appellant did not understand the proceeding.

(b) Use of Patients' Medical Records

    Current Law. BIPA established QIC reconsiderations as part 
of the Medicare's administrative review process. To reconsider 
whether a service is reasonable and necessary, a QIC will 
employ panel of physicians or other appropriate health care 
professionals to review the facts and the circumstances of the 
initial determination. The QIC reconsideration is to be based 
on applicable information, including clinical experience, and 
medical, technical, and scientific evidence.
    Explanation of Provision. Medical records of the individual 
involved in the appeal would be included as part of the 
applicable information used by QICs in their reconsideration 
process.
    Effective Date. Upon enactment.
    Reason for Change. In the determination of whether an item 
or service is reasonable and necessary for an individual, a 
beneficiary's medical records should be considered with other 
relevant information.

(c) Notice Requirements for Medicare Appeals

    Current Law. Section 521 of BIPA (which is not yet 
implemented) amends Section 1869 appeals process in its 
entirety, but did not establish specific notice requirements 
for each part of the Medicare appeals process.
    Explanation of Provision. The provisions would establish 
that a written notice of an initial determination associated 
with a claims denial be provided. The notice would include: (1) 
the reason for the denial and, upon request, the specific 
policy, manual or regulation used to make the decision; (2) the 
procedures for obtaining additional information concerning the 
determination; and (3) notification of appeal rights and 
associated instructions.
    The provisions would amend the existing requirement that a 
reconsideration decision be written and establish that the 
decision would have to be provided in printed form and written 
in a manner that could be understood by the beneficiary; the 
notice would include: as appropriate, a summary of the clinical 
or scientific evidence used to make the decision; upon request, 
the policy manual or regulation used to make the decision; and 
a detailed explanation of the decision to the extent 
appropriate. The requirement that the reconsideration decision 
include a notice of appeal rights and relevant instructions 
would also be established.
    Comparable requirements would be extended to ALJ decisions. 
These decisions would have to be written in an understandable 
manner and include the specific reasons for the decision, an 
appropriate summary of the evidence, the procedures for 
obtaining additional information about the decision, and a 
notification of appeal rights and instructions.
    The current requirements that a QIC prepare documentation 
and an explanation of the issues for an appeal to an ALJ would 
be modified: a QIC would be required to submit the information 
required in an appeal of a Medicare contractor's decision to 
the ALJ.
    Effective Date. Upon enactment.
    Reason for Change. Currently, Medicare only provides 
beneficiaries with a brief statement about the initial 
determination of her claim on the Medicare Summary Notice. This 
provision provides additional information to beneficiaries (or 
providers who appeal on their behalf) about Medicare's denial 
of their claim for benefits; the reasons for the denial, and 
the rights to further appeal so that beneficiaries can have a 
clear and concise understanding of decisions affecting their 
medical care.

(d) Qualified Independent Contractors

    Current Law. BIPA established Qualified Independent 
Contractor (QIC) reconsiderations as part of Medicare's 
administrative review process. A QIC is an entity or 
organization that is independent of any organization under 
contract with the Secretary that makes initial determinations 
and that meets the established requirements for sufficient 
training and expertise in medical science and legal matters to 
make such reconsiderations. QIC reviews include consideration 
of the facts and circumstances by a panel of physicians or 
appropriate health professionals. No physician or health care 
professional employed by a QIC may review determinations 
regarding services provided to a patient, if directly 
responsible for furnishing the services to that patient. Review 
of home health care services is also prohibited by physicians 
and other professionals who have a significant direct or 
indirect financial interest in the agency or institution 
providing the care. This prohibition extends to physicians and 
professionals who have family members with such significant 
financial interests.
    Explanation of Provision. To qualify as a QIC, an entity 
would be required to have sufficient medical, legal and other 
expertise, including knowledge of the Medicare program as well 
as sufficient professional qualifications, independence and 
staffing to make reconsideration decisions. A QIC would be 
required to assure that reviewers meet qualification and 
compensation requirements. If a reconsideration request 
indicates that a physician furnished the item or service, a 
reviewing professional should be a physician. Entities and 
their professional reviewers would have to meet independence 
requirements and may not: (1) be a related party; (2) have a 
material familial, financial, or professional relationships 
with a related party; or (3) have a conflict of interest with 
respect to a related party. QIC's compensation would not be 
contingent on any decision by the QIC or by any reviewing 
professional. A reviewer's compensation would not be contingent 
on any decision rendered by the reviewer. In this context, a 
related party to a Medicare case involving an individual 
beneficiary is (1) the Secretary, the Medicare administrative 
contractor involved, any fiduciary, officer, director or 
employee of HHS or such Medicare contractor; (2) the individual 
or authorized representative; (3) the health professional, 
institution or entity that provides or manufactures the item or 
service involved in the case; and (4) any other party with 
substantial interest in the case, as defined by regulation.
    Individuals affiliated with a fiscal intermediary, carrier 
or other contractor would be able to act as a QIC reviewer if 
(1) a individual is not involved with the provision of the item 
or service of the case; (2) individual is not an employee of 
the Medicare contractor and does not provide services 
exclusively or primarily to or on behalf of the contractor; and 
(3) the fact of the relationship is disclosed to the Secretary 
and the Medicare beneficiary or authorized representative who 
do not object. Individuals with staff privileges at the 
institution where treatment occurs would be able to serve as a 
reviewer if the affiliation is disclosed and there is no 
objection. Each reviewing professional shall be a allopathic or 
osteopathic physician or health care professional who is 
legally authorized to furnish items and services that are the 
subject of review in one or more states; and has medical 
expertise in the appropriate field for the case.
    The provision would reduce the minimum number of QICs from 
twelve to a sufficient number, not fewer than four, to conduct 
reconsiderations consistent with established time frames for 
appeals.
    Effective Date. As if included in BIPA.
    Reason for Change. The BIPA 2000 law laid out broad 
provisions for revision of the Medicare appeals process. These 
provisions strengthen the appeals process by enhancing the 
criteria related to the independence and expertise of the 
reviewers and review entities.

Section 404. Prepayment Review

    Current Law. No provision.
    Explanation of Provision. Medicare administrative 
contractors would be able to conduct random prepayment reviews 
in order to develop contractor-wide or program-wide claims 
payment error rates or under additional circumstances as 
established by regulations that are developed in consultation 
with providers and suppliers. Medicare administrative 
contractors would be permitted to conduct random prepayment 
reviews in accordance with a standard protocol developed by the 
Secretary. The Secretary would not be able to initiate non-
random prepayment review based on the initial identification by 
a provider or supplier of an improper billing practice unless 
there is a likelihood of sustained or high level of payment 
error. The Secretary would be required to issue regulations 
relating to the termination, including termination dates, of 
non-random prepayment review. Such regulations may vary such a 
termination date based upon the differences in the 
circumstances triggering prepayment reviews. No provision would 
prevent the denial of payment for claims actually reviewed 
under random prepayment review. These provisions would be 
applied to fiscal intermediaries and carriers.
    Effective Date. No later than one year from enactment. The 
Secretary would be required to issue regulations before that 
deadline; the random prepayment review protocols would apply to 
reviews after a date specified by the Secretary (but no later 
than one year from enactment.)
    Reason for Change. These provisions build greater 
consistency and predictability into Medicare's rules for 
prepayment review, while protecting program integrity.

Section 405. Recovery of Overpayments

    Current Law. No provision with respect to repayment plans. 
Section 1833(j) of the Social Security Act provides that 
interest accrues on underpayments or overpayments starting 
within 30 days of the date of the final determination of the 
accurate payment amount.
    Explanation of Provision. Subject to certain 
qualifications, in circumstances where refund of an overpayment 
within 30 days would constitute a hardship, providers and 
suppliers on request would be allowed to repay the overpayment 
amount (by offset or otherwise) over a period of at least six 
months up to three years when their obligation exceeds a ten 
percent threshold of their annual payments from Medicare. The 
Secretary would be able to establish a repayment period of up 
to five years in cases of extreme hardship. Interest would 
accrue on the balance through the repayment period. The 
Secretary would be required to establish a process under which 
newly-participating providers and suppliers could qualify for a 
repayment plan under this hardship provision. Previous 
overpayment amounts already included in an ongoing repayment 
plans would not be included in the calculation of the hardship 
threshold. The Secretary would be allowed to seek immediate 
collection if payments are not made as scheduled. Exceptions to 
this provision would be permitted in cases where the Secretary 
has reason to suspect that bankruptcy may be declared or that 
the provider or supplier may otherwise cease to do business or 
discontinue participating in the Medicare program. This 
subparagraph shall not apply if the Secretary has reason to 
suspect that false claims, fraud or abuse have been committed 
against the program. This provision would not affect the 
application of existing no-fault provisions which preclude 
recovery under certain circumstances where incorrect payment 
has been made to an individual who is without fault or where 
the recovery would decrease payments to another person who is 
without fault.
    Upon enactment, the Secretary would not be able to initiate 
any recovery action if the provider or supplier has sought a 
reconsideration of the Medicare overpayment by a qualified 
independent contractor (QIC) until the date of the 
reconsideration decision. If QIC's are not yet in place, the 
recovery would not be initiated until the date of a 
redetermination decision by a fiscal intermediary or a carrier. 
If monies have been offset or repaid, the Secretary would 
return those amounts plus applicable interest if the original 
overpayment determination is reversed. If such an overpayment 
determination is upheld, interest would accrue beginning on the 
date of the original overpayment notice; the interest amount 
would be the rate otherwise applicable for Medicare 
overpayments.
    Not later than one year after enactment, a Medicare 
contractor would not be able to use extrapolation to make 
overpayment determinations initiated after the date of 
enactment, unless, as determined by the Secretary, a sustained 
or high level of payment error exists or a documented 
educational intervention did not correct the payment error.
    Where providers and suppliers have previously been 
overpaid, Medicare contractors would be able to require 
periodic production of records or supporting documentation for 
a limited sample of submitted claims to ensure that a previous 
practice has been discontinued.
    The Secretary would be able to use a consent settlement to 
resolve a projected overpayment. Before entering into any 
consent settlements after the date of enactment, the Secretary 
would be required to communicate to a provider or supplier that 
based on a preliminary evaluation of a medical records review, 
an overpayment may exist; the nature of the identified 
problems; and the necessary steps to address the problem. The 
Secretary would provide 45-days where additional information 
may be submitted concerning the claims for which the medical 
records have been reviewed. After considering the additional 
information, the Secretary would provide notice and explanation 
of any remaining overpayment determination and would offer the 
opportunity for a statistically valid random sample (which 
would not waive appeal rights) or a consent settlement (based 
on a smaller sample with a waiver of appeal rights) to resolve 
the overpayment amounts.
    Not later than one year after enactment, the Secretary 
would be required to establish, in consultation with health 
care associations, a process where classes of providers and 
suppliers are notified that their Medicare contractor has 
identified specific billing codes that may be over-utilized.
    For audits initiated after enactment, Medicare contractors 
would be required to provide a written notice (which may be in 
electronic form) of the intent to conduct a post-payment audit 
to those selected as audit candidates. Medicare contractors 
would be required to provide those who have been audited a full 
review and understandable explanation of the findings that: (1) 
permits the development of an appropriate corrective action 
plan; (2) provides information on appeal rights as well as 
consent settlements (which are at the discretion of the 
Secretary); and (3) provides for an opportunity to supply 
additional information to the contractor. Medicare contractors 
would be required to take into account the information provided 
on a timely basis. The provisions requiring notice of audit and 
findings would not apply if pending law enforcement activities 
would be compromised or findings of law enforcement-related 
audits would be revealed.
    Not later than one year after enactment, the Secretary 
would be required to establish a standard methodology for 
Medicare contractors to use in selecting a claims sample for a 
review of abnormal billing patterns.
    These provisions would apply to Medicare administrative 
contractors including fiscal intermediaries and carriers as 
well as those eligible entities with MIP contracts. These 
provisions do not apply to actions taken by the Department of 
Justice.
    Effective Date. Upon enactment.
    Reason for Change. These provisions build greater 
consistency and predictability into Medicare's rules for 
recovery of overpayments, while protecting program integrity.

Section 406. Provider Enrollment Process; Right of Appeal

    Current Law. Providers and, to some extent suppliers, have 
access to certain appeal mechanisms if their application to 
participate in Medicare is denied or terminated. Section 
1866(h) of the Social Security Act provides for a hearing and 
for judicial review of that hearing for any institution or 
agency dissatisfied with a determination that it is not a 
provider (or that it can no longer be a provider). There is no 
statutory provision extending such judicial appeal rights to 
suppliers. Sections 1128(a) and (b) of the Act provide for the 
exclusion of certain individuals or entities because of the 
conviction of crimes related to their participation in 
Medicare; Section 1128(f) provides for hearing and judicial 
review for exclusions. In 1999, the Health Care Financing 
Administration (HCFA--now the Centers for Medicare and Medicaid 
Services or CMS) published a proposed regulation that would 
revise existing Medicare Part B administrative appeals 
procedures and extend them to all suppliers not currently 
covered.
    Explanation of Provision. The Secretary would be required 
to (1) establish by regulation an enrollment process for 
providers and suppliers which would include deadlines for 
actions on enrollment applications within six months of 
enactment; (2) monitor the performance of Medicare 
administrative contractors in meeting the deadlines: (3) 
consult with providers and suppliers in making changes to the 
enrollment forms made on or after January 1, 2004. In 
establishing an enrollment process for providers and suppliers, 
the Secretary would build upon existing Medicare practice.
    Providers and suppliers whose application to enroll or 
reenroll has been denied and who are dissatisfied with the 
determination would be entitled to a hearing and judicial 
review of the determination under the procedures that currently 
apply to providers. This provision would apply to denials after 
a date specified by the Secretary which could not be later than 
one year from enactment.
    Effective Date. Upon enactment.
    Reason for Change. This provision gives providers and 
suppliers an opportunity to appeal denials of their 
applications to participate in the Medicare program.

Section 407. Process for Correction of Minor Errors and Omissions 
        Without Pursuing Appeals Process

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to develop, in consultation with appropriate Medicare 
contractors and health care associations, a process where minor 
claims errors and omissions can be corrected and resubmitted 
without appealing the claims denial. In addition, a hospital 
may submit corrected or supplemented data for applications 
under 1886(d)(10)(C)(i)(II).
    Effective Date. Upon enactment.
    Reason for Change. Many of the providers and suppliers who 
testified before the Subcommittee or contacted members directly 
emphasized the need to create a process in which they could 
correct claims or other forms that were denied because they 
were incomplete or contained minor errors without having to 
pursue a formal appeal. This provision instructs the Secretary 
to create such a process, which will alleviate pressure on the 
appeals system. The Committee would be concerned, however, if 
this process were to become an incentive for providers to 
knowingly or negligently submit incomplete information.
    The Committee intends that the process for correction of 
minor errors and omissions on claims cover both the submission 
of prepayment and post-payment review claims. For example, if 
in the case of a home health claim, the physician has signed 
the plan of care and/or physician's order but has not dated it, 
the claim shall be returned to the home health agency and may 
be resubmitted by the home health agency with any incomplete or 
missing information without having to appeal the claim. At the 
same time, past errors and omission in the data as part of 
applications under 1886(d)(10)(C)(i)(II) should not prevent a 
reexamination of the data in the normal application process 
given the significant financial consequences for any individual 
hospital.

Section 408. Prior Determination Process for Certain Items and 
        Services; Advance Beneficiary Notices

    Current Law. Medicare law prohibits payment for items and 
services that are not medically reasonable and necessary for 
the diagnosis or treatment of an illness or an injury. Under 
certain circumstances, however, Medicare will pay for non-
covered services that have been provided if both the 
beneficiary and the provider of the services did not know and 
could not have reasonably been expected to know that Medicare 
payment would not be made for these services.
    However, in most circumstances either the beneficiary or 
the provider will be liable in the event that Medicare does not 
cover an item or service. There are detailed rules on 
beneficiary and provider liability in the statute. A provider 
may be held liable for providing uncovered services, if, for 
example, specific requirements are published by the Medicare 
contractor or the provider has received a denial or reduction 
of payment on the same or similar service. In cases where the 
provider believes that the service may not be covered as 
reasonable and necessary, the provider may limit his liability 
by providing an acceptable advance notice of Medicare's 
possible denial of payment to the patient. The notice must be 
given in writing, in advance of providing the service; include 
the patient's name, date and description of service as well as 
reasons why the service would not be covered; and must be 
signed and dated by the patient to indicate that the 
beneficiary will assume financial liability for the service if 
Medicare payment is denied or reduced. Currently, when there is 
a question about coverage, there is no way for a beneficiary or 
provider to find out in advance whether or not Medicare will 
cover that item or service for that particular beneficiary.
    Explanation of Provision. The Secretary would be required 
to establish a process through regulation where physicians and 
beneficiaries can establish whether Medicare covers certain 
items and services before such services are provided. An 
eligible requestor would be either a physician or a Medicare 
beneficiary who receives an advance beneficiary notice (ABN) 
from a physician. Eligible items and services for review are 
those physicians' services under 1848(f)(4)(A) for which a 
physician may be paid directly. The provisions would establish: 
(1) such prior determinations would be binding on the Medicare 
contractor, absent fraud or misrepresentation of facts; (2) the 
right to redetermination in the case of a denial; (3) the 
applicability of existing deadlines with respect to those 
redeterminations; (4) contractors' prior determinations (and 
redeterminations) are not subject to further administrative or 
judicial review; and (5) an individual retains all rights to 
usual administrative or judicial review after receiving the 
service or receiving a determination that a service would not 
be covered. This section also requires that whenever a 
physician requests a pre-service determination (or 
redetermination), beneficiaries must still receive notices that 
include information explaining the beneficiary's right to 
receive the service and request access to the appeals process 
under section 1869. The calculation of the sustainable growth 
rate for physician updates is modified so that the increase in 
utilization from this provision is included. These provisions 
would not affect a Medicare beneficiary's rights in any future 
appeal or judicial action. The Secretary must establish the 
process to allow for the processing of such requests beginning 
18 months after enactment. The Secretary would be required to 
collect data on the advance determinations and to establish a 
beneficiary and provider outreach and education program. GAO is 
required to report on the use of the advance beneficiary notice 
and prior determination process within 18 months of its 
implementation.
    Effective Date. Upon enactment.
    Reason for Change. The Committee believes that when there 
is a question of whether Medicare will cover certain care for a 
beneficiary, the beneficiary should have the right to find out 
what will be covered before getting the service and risking 
financial liability. Doctors also should be able to make such a 
request on behalf of a particular patient. This provision is 
particularly important for seniors and disabled individuals who 
tend to be risk adverse and live on fixed incomes.

                  E. Title V--Miscellaneous Provisions


Section 501. Policy Development Regarding Evaluation and Management 
        (E&M) Documentation Guidelines

    Current Law. No provision.
    Explanation of Provision. The Secretary would not be 
permitted to implement any new documentation guidelines on or 
after enactment for evaluation and management (E&M) physician 
services unless the guidelines (1) are developed in 
collaboration with practicing physicians (both generalists and 
specialists) after assessment by the physician community; (2) 
based on a plan with deadlines for improving use of E&M codes; 
(3) are developed after completion of the pilot projects to 
test modifications to the codes; (4) are found to meet the 
desired objectives; and (5) are preceded the establishment of 
an appropriate outreach and education of the physician 
community. The Secretary would make changes to existing E&M 
guidelines to reduce paperwork burdens on physicians. The 
Secretary would be required to modify E&M guidelines to: (1) 
identify clinically relevant documentation; (2) decrease non-
clinically pertinent documentation; (3) increase the reviewers' 
accuracy; and (4) educate the physicians and the reviewers.
    The provisions would establish different pilot projects in 
specified settings that would be: (1) conducted on a voluntary 
basis in consultation with practicing physicians (both 
generalists and specialists); (2) be of sufficient length to 
educate physicians and contractors on E&M guidelines and (3) 
allow for an assessment of E&M guidelines and their use. A 
range of different projects would be established and include at 
least one project that (1) uses a physician peer review method; 
(2) uses an alternative method based on face-to-face encounter 
time with the patient; (3) is in a rural area; (4) is outside a 
rural area; and (5) involves physicians billing in a teaching 
setting and nonteaching setting. The projects would examine the 
effect of modified E&M guidelines on different types of 
physician practices in terms of the cost of compliance. Data 
collected under these projects would not be the basis for 
overpayment demands or post-payment audits. This protection 
would apply to claims filed as part of the project, would last 
the duration of the project, and would last for as long as the 
provider participated in the project. The Secretary, in 
consultation with practicing physicians including those in 
groups practices as well as generalists and specialists, would 
be required to evaluate the development of alternative E&M 
documentation systems with respect to administrative 
simplification requirements and report results of the study to 
Congress by October 1, 2005. The Medicare Payment Advisory 
Commission would conduct an analysis of the results of this 
study and submit a report to Congress.
    The Secretary would be required to conduct a study of the 
appropriate coding of extended office visits where no diagnosis 
is made and submit a report with recommendations to Congress no 
later than October 1, 2005.
    Effective Date. Upon enactment.
    Reason for Change. This provision is designed to promote 
greater consultation with practicing physicians with regard to 
the complicated evaluation and management and coding 
requirements governing Medicare payment for physician services.

Section 502. Improvement in Oversight of Technology and Coverage

(a) Council for Technology and Innovation

    Current Law. No provision.
    Explanation of Provision. The Secretary is required to 
establish a Council for Technology and Innovation within the 
Centers for Medicare and Medicaid Services (CMS). The council 
would be composed of senior CMS staff with an Executive 
Coordinator, who is designated or appointed by the Secretary 
and reports to the CMS administrator. The Chairperson would 
serve as a single point of contact for outside groups and 
entities regarding Medicare coverage, coding, and payment 
processes. The Council would coordinate Medicare's coverage, 
coding, and payment processes as well as information exchange 
with other entities with respect to new technologies and 
procedures, including drug therapies.
    Effective Date. Upon enactment.
    Reason for Change. CMS personnel responsible for coverage, 
coding and payment of medical innovation are often not well 
coordinated. This provision creates a focal point for 
technology and innovation within the Centers for Medicare and 
Medicaid Services by creating a Council to coordinate across 
the different Centers and Offices with responsibilities in this 
area. The Executive Coordinator also provides a single point of 
contact for outside groups, similar to recent initiatives 
launched by the Secretary for specific issues and types of 
providers.

(b) Methods for Determining Payment Basis for New Lab Tests

    Current Law. Outpatient clinical diagnostic laboratory 
tests are paid on the basis of area wide fee schedules. The law 
establishes cap on the payment amounts that is currently set at 
74 percent of the median for all fee schedules for that test. 
The cap is set at 100 percent of the median for tests performed 
after January 1, 2001 that the Secretary determines are new 
tests for which no limitation amount has previously been 
established.
    Explanation of Provision. The Secretary would be required 
to establish procedures (by regulation) for determining the 
basis and amount of payments for new clinical diagnostic 
laboratory tests. New laboratory tests would be defined as 
those assigned a new Health Care Procedure Coding System 
(HCPCS) code on or after January 1, 2005. The Secretary, as 
part of this procedure, would be required to: (1) provide a 
list (on an Internet site or other appropriate venue) of tests 
for which payments are being established in that year; (2) 
publish a notice of a meeting in the Federal Register on the 
day the list becomes available; (3) hold the public meeting no 
earlier than 30 days after the notice to receive public 
comments and recommendations; (4) take into account the 
comments, recommendations and accompanying data in both 
proposed and final payment determinations. The Secretary would 
set forth the criteria for making these determinations; make 
public the available data considered in making such 
determinations; and could convene other public meetings as 
necessary.
    Effective Date. Upon enactment.
    Reason for Change. The Secretary of Health and Human 
Services is required to establish by regulation an open process 
for any clinical diagnostic laboratory test. Under the 
regulations, the Secretary shall develop criteria for use in 
determining whether a laboratory test should be established 
through gap-filling or cross-walking to an existing code. When 
existing services are not sufficient and gap filling must be 
used, the criteria shall explain the basis of the data, the 
collection of the data, and the methodology for computing the 
rate. It is the view of the Committee that, in these cases, it 
is not appropriate for carriers or the agency to substitute the 
payment amount of an alternative test for the gap-fill amount.
    The intent of Congress is to open the process to allow CMS 
to have access to information from beneficiaries, physicians, 
health care experts and laboratories. Using the information it 
receives through this new process, CMS shall develop and make 
available to the public the information used to arrive at a 
final determination. The information will include the rationale 
for each such determination, the data on which the 
determination is based, and responses to public comments.

(c) Report on Improvements in External Data Collection for Use in the 
        Medicare Inpatient System

    Current Law. No provision.
    Explanation of Provision. No later than October 1, 2004, 
the Comptroller would submit to Congress a study that analyzes 
the collection of external data for in computing data for 
inpatient hospital services. This should include a survey of 
data sources such as the Department of Labor, or U.S. or 
foreign sales information.
    Effective Date. Upon enactment.
    Reason for Change. The Committee is soliciting expert 
review from GAO on implications of flexible application of the 
Medicare conditions of participation for home health agencies.

(d) Process for Adoption of ICD Codes as Data Standard

    Current Law. No provision.
    Explanation of Provision. The provision permits the 
Secretary to adopt the updated version of the ICD-10 procedure 
and classification codes if the National Committee on Vital and 
Health Statistics (NCVHS) has not made a recommendation to the 
Secretary with respect to the adoption of these codes.
    Effective Date. Upon enactment.
    Reason for Change. ICD-10 is more clinically accurate and 
specific than ICD-9 and has been adopted by every developed 
country in the world. The International Classification of 
Disease (ICD-9) coding system was adopted in 1979 and remains 
in effect for procedure and diagnosis coding in the hospital 
inpatient setting and for reporting diagnosis codes in the 
hospital outpatient departments and physician offices. The 
NCVHS began investigating adoption of an updated coding 
system--ICD-10--in 1990. As part of HIPAA in 1996, Congress 
required NCVHS to make a recommendation on adoption prior to 
Secretarial approval. To date, NCVHS still has not issued a 
recommendation.
    The current ICD-9 code system has run out of codes. As a 
result there are several distinct procedures performed in 
different parts of the body that have widely different resource 
utilization that are grouped together under the same procedure 
code. For example, code 99.29, Injection or infusion of other 
therapeutic or prophylactic substance, has been used to report 
a wide variety of procedures such as: an injection of 
epinephrine to cauterize a rectal ulcer, infusion of a narcotic 
into a pump for pain relief, insertion of an implant in the eye 
for slow release of an antiviral drug, and injection into the 
uterine artery to treat a fibroid. Such vagueness in coding 
hampers the program in detecting fraud and from knowing what 
services are being delivered to Medicare beneficiaries. Last 
year, CMS did find 100 unused codes under the eye and ear 
section of ICD-9, which is an imperfect albeit necessary 
solution given the lack of clinical coherence and potential 
confusion for coders. The timing of moving to ICD-10 is 
critical given that less than 75 codes remain and installation 
of the new procedure and diagnosis codes by hospitals will take 
at least 2 years. In the meantime, new initiatives for public 
health as well as bioterrorism are severely compromised by the 
lack of codes. For example, no code was available for the 
anthrax attack in 2001. Finally, the continued use of 
inappropriate and ill-defined codes in ICD-9 makes the program 
vulnerable to fraud and abuse. The specificity of ICD-10 will 
make it easier for coders to avoid mistakes and for the program 
to check for fraud.

Section 503. Treatment of Hospitals for Certain Services Under the 
        Medicare Secondary Payor (MSP) Provisions

    Current Law. In certain instances when a beneficiary has 
other insurance coverage, Medicare becomes the secondary 
insurance. Medicare Secondary Payor is the Medicare program's 
coordination of benefits with other insurers. Section 
1862(b)(6) of the Social Security Act requires an entity 
furnishing a Part B service to obtain information from the 
beneficiary on whether other insurance coverage is available.
    Explanation of Provision. The Secretary would not require a 
hospital or a critical access hospital to ask questions or 
obtain information relating to the Medicare secondary payor 
provisions in the case of reference laboratory services if the 
same requirements are not imposed upon those provided by an 
independent laboratory. Reference laboratory services would be 
those clinical laboratory diagnostic tests and interpretations 
of same that are furnished without a face-to-face encounter 
between the beneficiary and the hospital where the hospital 
submits a claim for the services.
    Effective Date. Upon enactment.
    Reason for Change. Hospitals would not have to directly 
contact each beneficiary on their retirement date, black lung 
status and other insurance information for reference laboratory 
services. While current law provisions for a claim containing 
valid insurance information are maintained, this provision is 
intended to reduce the amount of paperwork and regulatory 
burden related to the provision of these reference laboratory 
services by hospital-based entities.

Section 504. EMTALA Improvements

    Current Law. Medicare requires participating hospitals that 
operate an emergency room to provide necessary screening and 
stabilization services to a patient in order to determine 
whether an emergency medical situation exist prior to asking 
about insurance status of the patient.
    Hospitals that are found to be in violation of EMTALA 
requirements may face civil monetary penalties and termination 
of their provider agreement. After a state investigation of an 
EMTALA complaint, the CMS Regional Office may ask their local 
peer review organization (PRO) to perform a 5-day review to 
obtain additional medical expertise. This review is 
discretionary. However, prior to imposing a civil monetary 
penalty, the Secretary is required to request that a PRO assess 
whether the involved beneficiary had an emergency condition 
that had not been stabilized and provide a report on its 
findings. Except in the case where a delay would jeopardize the 
health or safety of individuals, the Secretary provides 60-day 
period for the requested PRO review.
    Explanation of Provision. Emergency room services provided 
to screen and stabilize a Medicare beneficiary furnished after 
January 1, 2004, would be evaluated as reasonable and necessary 
on the basis of the information available to the treating 
physician or practitioner at the time the services were 
ordered; this would include the patient's presenting symptoms 
or complaint and not the patient's principal diagnosis. The 
Secretary would not be able to consider the frequency with 
which the item or service was provided to the patient before 
the time of admission or visit. The Secretary shall also not 
count the provision of the item or service during such an 
admission or visit when considering the frequency with which 
the item or service is furnished on subsequent occasions.
    The Secretary would be required to establish a procedure to 
notify hospitals and physicians when an EMTALA investigation is 
closed.
    Except in the case where a delay would jeopardize the 
health and safety of individuals, the Secretary would be 
required to request a PRO review before making a compliance 
determination that would terminate a hospital's Medicare 
participation because of EMTALA violation. The current period 
of review for the discretionary review--5 business days--would 
apply for such review. The Secretary shall provide a copy of 
the report on its findings to the hospital or physician, 
consistent with existing confidentiality requirements. This 
provision would apply to terminations initiated on or after 
enactment.
    Effective Date. Upon enactment.
    Reason for Change. Providers have reported that some 
Medicare contractors are looking at final diagnoses (not 
presenting symptoms) in applying local medical review policies 
(LMRPs) that match particular tests to particular diagnoses--if 
a test does not match a listed diagnosis, payment is denied. 
Other claims are reportedly being denied based on LMRPs that 
set frequency limits for certain tests--if the test's use in 
the emergency room exceeds a frequency limit, payment is 
denied. In its January 2001 report entitled ``The Emergency 
Medical Treatment and Labor Act: The Enforcement Process,'' the 
OIG recommended that CMS ensure that peer review occurs before 
a provider is terminated from the Medicare program for an 
EMTALA violation. This section implements that recommendation, 
making the current discretionary PRO review process mandatory 
in cases that involve a question of medical judgement.

Section 505. Emergency Medical Treatment and Active Labor (EMTALA) 
        Technical Advisory Group

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to establish a 19-member technical advisory group under 
specified requirements to review issues related to the 
Emergency Medical Treatment and Labor Act (EMTALA). The 
advisory group would include: the CMS Administrator; the OIG; 
four hospital representatives who have EMTALA experience, 
(including one person from a public hospital and two of whom 
have not experienced EMTALA violations) seven practicing 
physicians with EMTALA experience; two patient representatives; 
two regional CMS staff involved in EMTALA investigations; one 
representative from a State survey organization and one 
representative from a PRO. The Secretary would select qualified 
individuals who are nominated by organizations representing 
providers and patients.
    The advisory group would be required to: (1) elect a member 
to as chairperson; (2) schedule its first meeting at the 
direction of the Secretary and meet at least twice a year 
subsequently; and (3) terminate 30 months after the date of its 
first meeting. The advisory group would review EMTALA 
regulations; provide advice and recommendations to the 
Secretary; solicit public comments from interested parties; and 
disseminate information on the application of the EMTALA 
regulations.
    Effective Date. Upon enactment.
    Reason for Change. In its January 2001 report entitled 
``The Emergency Medical Treatment and Labor Act: The 
Enforcement Process,'' the OIG recommended that CMS establish 
an EMTALA technical advisory group that includes all EMTALA 
stakeholders to help the agency resolve any emerging issues 
related to implementation of the law. Some of these current 
issues include specialists who refuse to service on call panels 
and inconsistencies between State and Federal law governing 
emergency medical services. In its June 2001 report entitled 
``Emergency Care: EMTALA Implementations and Enforcement 
Issues,'' the GAO also concluded that the establishment of a 
technical advisory group could help CMS work with hospitals and 
physicians to achieve the goals of EMTALA and avoid creating 
unnecessary burdens for providers. This section implements the 
OIG recommendation, establishing a 19-member technical advisory 
group within HHS.

Section 506. Authorizing Use of Arrangements To Provide Core Hospice 
        Services in Certain Circumstances

    Current Law. Hospice programs are not permitted to use 
services provided under arrangement to deliver core hospice 
services. Under arrangement services are permitted for 
providers delivering Part A and Part B hospital services as 
well for skilled nursing services. However, the originating 
hospital or skilled nursing facility is required to bill for 
the service and be responsible for the quality of care 
delivered by the subcontractor.
    Explanation of Provision. Hospice programs may enter into 
arrangements with another certified hospice program to provide 
services. The provision for under arrangement services is 
limited to extraordinary or non-routine circumstances, such as 
unanticipated periods of staffing shortages. The originating 
hospice program continues to bear the legal responsibility for 
billing and maintaining quality of care.
    In addition, hospice programs may make arrangements for 
highly specialized services of a registered professional nurse 
for non-routine and infrequent services that would be 
impracticable and prohibitively expensive to provide directly.
    Effective Date. For hospice care provided after enactment.
    Reason for Change. Hospice programs would be allowed to use 
personnel from other hospice programs to provide services to 
hospice patients. The program is given the flexibility so that 
a hospice program could continue to serve a patient if he or 
she was temporarily out of the area due to travel. Otherwise, 
the provision of the care to the patient might be delayed by 
the paperwork and requirements in starting up a new service at 
another agency. The program is also given the flexibility to 
arrange for highly specialized services of a registered 
professional nurse for non-routine and infrequent services that 
the hospice cannot reasonably provide directly. It is the 
intent of Congress that the originating hospice maintains 
control over the billing and quality of care.

Section 507. Application of OSHA Bloodborne Pathogens Standards to 
        Certain Hospitals

    Current Law. Section 1866 establishes certain conditions of 
participation that providers must meet in order to participate 
in Medicare.
    Explanation of Provision. Public hospitals that are not 
otherwise subject to the Occupational Safety and Health Act of 
1970 would be required to comply with the Bloodborne Pathogens 
standard under section 1910.1030 of title 29 of the Code of 
Federal Regulations. A hospital that fails to comply with the 
requirement would be subject to a civil monetary penalty, but 
would not be terminated from participating in Medicare.
    Effective Date. Applies to hospitals as of July 1, 2004.
    Reason for Change. Last year, Congress enacted legislation 
that requires hospitals to utilize safe needles. However, that 
legislation only applies to non-government hospitals. Twenty-
four states have similar requirements on public hospitals. This 
provision would protect the health and safety of health care 
workers in those facilities by requiring public hospitals in 
the other 26 states and the District of Columbia to comply with 
this important standard.

Section 508. BIPA-Related Technical Amendments and Corrections

    Current Law. BIPA established an advisory process for 
national coverage determinations where panels of experts formed 
by advisory committees could forward their recommendations 
directly to the Secretary without prior approval of the 
advisory committee or the Executive Committee.
    Explanation of Provision. This provision makes technical 
corrections related to the Medicare Coverage Advisory Committee 
by transferring the provisions from Title 11 to Title 18 and by 
removing incorrect cross references to the establishment 
authority.
    Effective Date. As if included in BIPA.

Section 509. Conforming Authority To Waive Program Exclusion

    Current Law. The Secretary is required to exclude 
individuals and entities from participation in Federal Health 
Programs who are (1) convicted of a criminal offense related to 
health care delivery under Medicare or under State health 
programs; (2) convicted of a criminal offense related to 
patient abuse or neglect under Federal or State law; (3) 
convicted of a felony relating to fraud, theft, or financial 
misconduct relating to a health care program financed or 
operated by the Federal, State or local government; or (4) 
convicted of a felony related to a controlled substance. At the 
request of a state, the Secretary is permitted to waive a 
program exclusion with respect to Medicare or Medicaid, but 
only for exclusions described in (1) above.
    Explanation of Provision. The Administrator of a Federal 
health program would be permitted to request a waiver of a 
program exclusion if the exclusion of a sole community 
physician or source of specialized services in a community 
would impose a hardship. This conforming change would extend 
the same waiver authority currently in Medicare and Medicaid to 
federal health programs. In addition, waivers could be 
requested for Medicare, Medicaid, and federal health programs 
with respect to all exclusions except those related to patient 
abuse or neglect.
    Effective Date. Upon enactment.
    Reason for Change. This technical correction was requested 
by the Office of Inspector General.

Section 510. Treatment of Certain Dental Claims

    Current Law. Under current law, providers of services and 
suppliers submitting claims to Medicare must be enrolled in the 
Medicare program. However, certain services are specifically 
excluded from coverage under Medicare. Under current law, no 
payment may be made under part A or part B of the Medicare 
program for any services in connection with the care, 
treatment, filling, removal, or replacement of teeth or 
structures directly supporting teeth, except in the case of 
inpatient hospital services associated with the provision of 
these dental services if the individual's underlying medical 
condition and clinical status or the severity of the dental 
service require hospitalization.
    Explanation of Provision. This provision would prohibit 
group health plans from requiring a Medicare claims 
determination for dental benefits that are specifically 
excluded from Medicare coverage as a condition of making a 
determination for coverage under the group health plan. In so 
doing, this provision would ensure that dentists would not have 
to submit claims to the Medicare program (and thus enroll in 
the Medicare program) when the services they are providing are 
clearly those that are categorically excluded from coverage. In 
those cases that involve or appear to involve inpatient 
hospital services or dental services expressly covered by 
Medicare, a group health plan may require the claim to be first 
submitted to the Medicare program.
    Effective Date. Sixty days after enactment.
    Reason for Change. The Committee is concerned about private 
insurers requiring dentists to submit claims to Medicare for 
non-covered services before making a determination for coverage 
under the group health plan. Because of this requirement, 
dentists have been forced to enroll in the Medicare program to 
submit claims for services that are categorically excluded from 
Medicare coverage. Dentists view Medicare's enrollment 
application process as overly burdensome, particularly in light 
of the fact that most dental services are not covered by 
Medicare. This provision would alleviate the enrollment burden 
placed on dentists providing services clearly excluded from 
Medicare coverage, consistent with the overarching goal of this 
legislation to reduce regulatory burdens.

Section 511. Furnishing Hospitals With Information To Compute DSH 
        Formula

    Current Law. No provision.
    Explanation of Provision. The Secretary should furnish to 
hospitals the data necessary to compute the Medicaid days 
percentage on the Medicare cost report for the purposes of 
computing Medicare disproportionate share payments. It is the 
sense of this Committee that the Secretary has the flexibility 
to explore different models of dissemination of the data. For 
instance, in Arizona, the hospitals submit the data to the 
states for verification and the states forward it to the fiscal 
intermediaries.
    Effective Date. 1 year after enactment.
    Reason for Change. Hospitals have reported that it is 
difficult and expensive to verify their Medicaid days for use 
for Medicare inpatient payments. The Medicare program has 
experienced problems with improper payments being made due to 
the poor quality of the data.

Section 512. Revisions to Reassignment Provisions

    Current Law. Medicare does not permit staffing companies 
that use independent contractors to enroll in Medicare and 
receive direct Medicare reimbursement for health care services 
rendered by independent contractor physicians. Physician 
staffing companies set up complicated payment arrangements to 
work around this limitation.
    Explanation of Provision. This provision would allow 
entities, such as staffing companies, to enroll in Medicare and 
to submit bills for services provided by a physician or other 
person, when the entity has an arrangement with the physician 
or other person that includes joint and several liability for 
overpayment, and meets other program integrity safeguards as 
the Secretary determines appropriate.
    Effective Date. Applies to payments made on or after one 
year after enactment.
    Reason for Change. In a March 2003 report, GAO recommended 
that Congress enact legislation permitting the reassignment of 
benefits to staffing companies that retain contractor 
physicians, and requiring these companies to seek enrollment in 
Medicare. GAO argued that this change would enhance program 
integrity by allowing claims monitoring.

Section 513. Specialized Medicare+Choice Plans for Special Needs 
        Beneficiaries

    Current Law. Under current law, Medicare+Choice (M+C) 
programs are required to enroll all beneficiaries, regardless 
of their health status, and cannot exclusively enroll or 
specialize in care for frail elderly beneficiaries. Such 
requirements are intended to prevent health plans from 
enrolling only the healthy and avoiding the sick. Specialized 
plans are designed to provide coverage to the frailest 
beneficiaries, and are not designed to provide coverage to the 
entire Medicare population. One model for providing a 
specialized Medicare+Choice plan, Evercare, operates as a 
demonstration program, which is set to expire in December 2003.
    Explanation of Provision. This provision would allow 
specialized plans for special needs beneficiaries (such as the 
Evercare demonstration) to become any type of M+C coordinated 
care plan and to limit enrollment to special needs 
beneficiaries. Special needs beneficiaries would be defined as 
those M+C eligible individuals who are institutionalized, 
entitled to Medicaid, or meet requirements determined by the 
Secretary. Enrollment in specialized M+C plans could be limited 
to special needs beneficiaries until January 1, 2008. The 
Secretary would be required to report to Congress by December 
31, 2006 providing an assessment of the impact of these plans. 
The Secretary would be required to issue final regulations 
establishing requirements for special needs beneficiaries 
within 6 months after enactment of this legislation.
    Effective Date. Upon enactment.
    Reason for Change. This provision is needed to allow 
specialized plans for special needs beneficiaries to continue 
to operate under the Medicare program after a demonstration 
ends, by allowing these plans to limit enrollment to 
beneficiaries with special needs. This model of care is based 
on resource-intensive hands-on care coordination that is best 
suited for frail elderly beneficiaries. Allowing specialized 
plans to become any type of M+C coordinated care plan would 
enhance plan and beneficiary flexibility.

Section 514. Temporary Suspension of OASIS for Non-Medicare and Non-
        Medicaid Patients During Study and Regulatory Period

    Current Law. The Conditions of Participation require 
collection of OASIS data for all patients but the data for non-
Medicare and Non-Medicaid patients are not transmitted for use 
in any Federal data analysis. Medicare and Medicaid data are 
currently used by CMS as part of the quality measurement 
program.
    Explanation of Provision. CMS would be required to analyze 
how these data could be used in quality measurement or for 
other assessments. After the report, CMS must go through 
rulemaking to propose and finalize how these data for 
individuals who are not insured through a public program are to 
be used. The collection of the data by home health agencies on 
other than a voluntary basis (except where it conflicts with 
state law) is suspended until 60 days after publication of the 
final rule.
    Effective Date. Upon enactment.
    Reason for Change. Requiring home health agencies to 
collect data on private pay patients imposes a significant 
paperwork burden upon agencies. This requirement has nothing to 
do with quality or documentation of Medicare or Medicare 
patients. More troubling, these data are not collected or used 
for any national assessment process. Moreover, the privately 
insured population differs substantially from the Medicare/
Medicaid population and may use different kinds of services. 
The Committee believes that CMS need to analyze how these data 
can best be used. Moreover, the OASIS data contain very 
specific information on the patient, their finances and their 
living situation. To ensure the privacy of these individuals, 
Congress believes that CMS should proceed through rule-making 
to demonstrate to the public that confidentiality can be 
maintained and allow for public comments.

Section 515. Miscellaneous Reports, Studies and Publication 
        Requirements

(a) GAO Reports on Physician Compensation

    Current Law. No provision.
    Explanation of Provision. No later than 6 months from 
enactment, GAO would be required to report to Congress on the 
appropriateness of the updates in the conversion factor 
including the appropriateness of the sustainable growth rate 
(SGR) formula for 2002 and subsequent years. The report would 
examine the stability and predictability of the updates and 
rate as well as the alternatives for use of the SGR in the 
updates. No later than 12 months from enactment, GAO would be 
required to report to Congress on all aspects of physician 
compensation for Medicare services. The report would review 
alternative physician payment structures, and provide 
recommendations to make the current system more stable and less 
complex.
    Effective Date. Upon enactment.
    Reason for Change. The Committee is soliciting expert 
feedback from GAO on ways to improve Medicare's complicated 
system of physician payment.

(b) Annual Publication of List on National Coverage Determinations

    Current Law. No provision.
    Explanation of Provision. The Secretary would be required 
to provide, in an annual report that will be publicly 
available, a list of Medicare's national coverage 
determinations made in the previous year and include 
information on how to learn more about such determinations.
    Effective Date. Upon enactment.

(c) Report on Applying Home Health Conditions of Participation

    Current Law. No provision.
    Explanation of Provision. No later than 6 months from 
enactment, GAO would be required to report to Congress on the 
implications if there were flexibility in the application of 
Medicare conditions of participation for home health agencies 
with respect to groups or types of patients who are not 
Medicare beneficiaries. The report would include an analysis of 
the potential impact of flexible application on clinical 
operations and recipients of home health services, and analysis 
of methods for monitoring quality of care provided to patients.
    Effective Date. Upon enactment.
    Reason for Change. The Committee is soliciting expert 
review from GAO on implications of flexible application of the 
Medicare conditions of participation for home health agencies.

(d) Report on Notices Relating to Use of Hospital Lifetime Reserve Days

    Current Law. No provision.
    Explanation of Provision. No later than 1 year from 
enactment, the Inspector General would be required to submit a 
report to Congress on the extent to which hospitals provide 
notice to beneficiaries before they use their 60 lifetime 
reserve days, and the appropriateness of providing a notice to 
beneficiaries before they completely exhaust their lifetime 
reserve days.
    Effective date. Upon enactment.
    Reason for Change. The Committee is soliciting oversight on 
hospital compliance with requirements to notify beneficiaries 
about use of their 60 lifetime reserve days, and expert opinion 
on the appropriateness of a new notification requirement to 
inform beneficiaries before they exhaust their lifetime reserve 
days.

(e) Clarifications and Instructions to the Secretary

    First, the Committee is pleased that the Secretary has 
published a notice of proposed rulemaking to provide Medicare 
payment for clinical psychology internship training programs 
that would not qualify under Medicare's existing provider-
operated criteria. The Committee notes that Congress has 
consistently urged the Secretary to initiate payment for the 
training of clinical psychologists since 1997. Supportive 
language has been included in conference reports accompanying 
Medicare legislation in 1999 (Report 106-479), and in 2000 
(Senate Report 106-293).
    The Committee is concerned, however, that a delay in the 
rule may mean that hospitals and institutions will reduce or 
eliminate psychology training programs and urges implementation 
of the rule as soon as possible. The Committee notes that 
clinical psychologists provide valuable and unique services to 
Medicare beneficiaries during their training. Regarding their 
training, clinical psychologists are distinguishable from other 
health care professionals in that they are the only doctoral 
level mental health professionals fully participating in 
Medicare whose clinical training is not currently reimbursed. 
In addition, their clinical internship training is entirely 
controlled, administered, supervised, evaluated, and certified 
by the hospital or institution, separately accredited, and 
distinct from any university training they receive. Clinical 
psychologists are hospital-based in the final stages of their 
training functioning in a parallel status to medical interns 
and residents, not medical nursing or health professional 
students. Where a clinical psychologist has clearly finished 
their educational curriculum and is training solely in the 
hospital setting, it is the intention of Congress that the 
hospital be reimbursed if that training is hospital-based.
    Second, Congresses original intent on BIPA section 
422(a)(2) on the dialysis composite rate has not been correctly 
interpreted by CMS. The intent was not to bar end stage renal 
disease (ESRD) composite rate exception relief for facilities 
that are not presently being paid under an exception to the 
composite rate. It is the Committee's expectation that CMS will 
evaluate ESRD composite rate exception requests submitted in 
2002 and subsequent years by new renal dialysis facilities and 
existing facilities that do not have an exception.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the bill, H.R. 810.

                       MOTION TO REPORT THE BILL

    The bill, H.R. 810, as amended, was ordered favorably 
reported by a roll call vote of 19 yeas to 13 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Crane......................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Shaw.......................        X   ........  .........  Mr. Matsui.......  ........  ........  .........
Mrs. Johnson...................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Houghton...................  ........  ........  .........  Mr. Cardin.......  ........  ........  .........
Mr. Herger.....................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. McCrery....................        X   ........  .........  Mr. Kleczka......  ........        X   .........
Mr. Camp.......................        X   ........  .........  Mr. Lewis (GA)...  ........  ........  .........
Mr. Ramstad....................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Nussle.....................  ........  ........  .........  Mr. McNulty......  ........  ........  .........
Mr. Johnson....................        X   ........  .........  Mr. Jefferson....  ........        X   .........
Ms. Dunn.......................        X   ........  .........  Mr. Tanner.......  ........        X   .........
Mr. Collins....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Portman....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. English....................        X   ........  .........  Mr. Pomeroy......  ........        X   .........
Mr. Hayworth...................        X   ........  .........  Mr. Sandlin......  ........        X   .........
Mr. Weller.....................  ........  ........  .........  Ms. Tubbs Jones..  ........        X   .........
Mr. Hulshof....................        X   ........
Mr. McInnis....................  ........
Mr. Lewis (KY).................        X   ........
Mr. Foley......................        X   ........
Mr. Brady......................        X   ........
Mr. Ryan.......................        X   ........
Mr. Cantor.....................  ........
----------------------------------------------------------------------------------------------------------------

                          VOTES ON AMENDMENTS

    An amendment in the nature of a substitute by Chairman 
Thomas, was agreed to by a rollcall vote of 19 yeas to 13 nays. 
The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Crane......................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Shaw.......................        X   ........  .........  Mr. Matsui.......  ........
Mrs. Johnson...................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Houghton...................  ........  ........  .........  Mr. Cardin.......  ........
Mr. Herger.....................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. McCrery....................        X   ........  .........  Mr. Kleczka......  ........        X   .........
Mr. Camp.......................        X   ........  .........  Mr. Lewis (GA)...  ........
Mr. Ramstad....................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Nussle.....................  ........  ........  .........  Mr. McNulty......  ........
Mr. Johnson....................        X   ........  .........  Mr. Jefferson....  ........        X   .........
Ms. Dunn.......................        X   ........  .........  Mr. Tanner.......  ........        X   .........
Mr. Collins....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Portman....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. English....................        X   ........  .........  Mr. Pomeroy......  ........        X   .........
Mr. Hayworth...................        X   ........  .........  Mr. Sandlin......  ........        X   .........
Mr. Weller.....................  ........  ........  .........  Ms. Tubbs Jones..  ........        X   .........
Mr. Hulshof....................        X   ........
Mr. McInnis....................  ........
Mr. Lewis (KY).................        X   ........
Mr. Foley......................        X   ........
Mr. Brady......................        X   ........
Mr. Ryan.......................        X   ........
Mr. Cantor.....................  ........
----------------------------------------------------------------------------------------------------------------

    A rollcall vote was conducted on the following amendments 
to the Chairman's amendment in the nature of a substitute.
    An amendment by Mrs. Johnson to require the Center for 
Medicare and Medicaid Services (CMS) to evaluate within 18 
months the value of collection data on non-Medicare and non-
Medicaid patients, suspend the collection of OASIS data on non-
Medicare and non-Medicaid patients until CMS has finalized 
regulations on the collection and use of such data, and would 
not prevent home health agencies from continuing to collect 
OASIA data on non-Medicare and non-Medicaid patients if they so 
desire, was agreed to by a roll call vote of 21 yeas to 13 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Crane......................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Shaw.......................        X   ........  .........  Mr. Matsui.......  ........  ........  .........
Mrs. Johnson...................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Houghton...................  ........  ........  .........  Mr. Cardin.......  ........        X   .........
Mr. Herger.....................  ........        X   .........  Mr. McDermott....  ........        X   .........
Mr. McCrery....................  ........        X   .........  Mr. Kleczka......  ........        X   .........
Mr. Camp.......................  ........        X   .........  Mr. Lewis (GA)...  ........  ........  .........
Mr. Ramstad....................  ........        X   .........  Mr. Neal.........  ........        X   .........
Mr. Nussle.....................  ........        X   .........  Mr. McNulty......  ........        X   .........
Mr. Johnson....................  ........        X   .........  Mr. Jefferson....  ........  ........  .........
Ms. Dunn.......................  ........        X   .........  Mr. Tanner.......  ........        X   .........
Mr. Collins....................  ........        X   .........  Mr. Becerra......  ........        X   .........
Mr. Portman....................  ........        X   .........  Mr. Doggett......  ........        X   .........
Mr. English....................  ........        X   .........  Mr. Pomeroy......  ........        X   .........
Mr. Hayworth...................  ........        X   .........  Mr. Sandlin......  ........  ........  .........
Mr. Weller.....................  ........        X   .........  Ms. Tubbs Jones..  ........        X   .........
Mr. Hulshof....................  ........  ........  .........  .................  ........  ........  .........
Mr. McInnis....................  ........  ........  .........  .................  ........  ........  .........
Mr. Lewis (KY).................  ........        X   .........  .................  ........  ........  .........
Mr. Foley......................  ........        X   .........  .................  ........  ........  .........
Mr. Brady......................  ........        X   .........  .................  ........  ........  .........
Mr. Ryan.......................  ........        X   .........  .................  ........  ........  .........
Mr. Cantor.....................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Camp, which would require the Secretary 
to develop a process for the reinstatement of the nurse aid 
program before the mandatory 2-year disapproval program, and 
require that the facility and program must be certified by the 
Secretary as being in compliance and having remedied any 
deficiencies, was agreed by a roll call vote of 19 yeas to 13 
nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas.....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Crane......................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Shaw.......................        X   ........  .........  Mr. Matsui.......  ........  ........  .........
Mrs. Johnson...................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Houghton...................  ........  ........  .........  Mr. Cardin.......  ........  ........  .........
Mr. Herger.....................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. McCrery....................        X   ........  .........  Mr. Kleczka......  ........        X   .........
Mr. Camp.......................        X   ........  .........  Mr. Lewis (GA)...  ........  ........  .........
Mr. Ramstad....................        X   ........  .........  Mr. Neal.........  ........        X   .........
Mr. Nussle.....................  ........  ........  .........  Mr. McNulty......  ........  ........  .........
Mr. Johnson....................        X   ........  .........  Mr. Jefferson....  ........        X   .........
Ms. Dunn.......................        X   ........  .........  Mr. Tanner.......  ........        X   .........
Mr. Collins....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Portman....................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. English....................        X   ........  .........  Mr. Pomeroy......  ........        X   .........
Mr. Hayworth...................        X   ........  .........  Mr. Sandlin......  ........        X   .........
Mr. Weller.....................  ........  ........  .........  Ms. Tubbs Jones..  ........        X   .........
Mr. Hulshof....................        X   ........  .........
Mr. McInnis....................  ........  ........  .........
Mr. Lewis (KY).................        X   ........  .........
Mr. Foley......................        X   ........  .........
Mr. Brady......................        X   ........  .........
Mr. Ryan.......................        X   ........  .........
Mr. Cantor.....................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made:
    The Committee agrees with the zero budgetary estimate 
prepared by the Congressional Budget Office (CBO), which is 
included below. However, it does believe that some of the 
administrative costs to the agency are overstated because CMS 
has indicated that it is already performing some of the 
provisions.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
Committee bill would result in no increase in federal direct 
spending.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives requiring a cost estimate 
prepared by the Congressional Budget Office (CBO), the 
following report prepared by the CBO is provided.
                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 8, 2003.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 810, the Medicare 
Regulatory and Contracting Reform Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Alexis 
Ahlstrom.
            Sincerely,
                                          Barry B. Anderson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 810-Medicare Regulatory and Contracting Reform Act of 2003

    Summary: The Medicare Regulatory and Contracting Reform Act 
of 2003 would require the Centers for Medicare and Medicaid 
Services (CMS) to modify how Medicare regulations and policies 
are developed and enforced, and would modify the procedures 
used to resolve disputes involving payment for services covered 
by Medicare. The bill would transfer certain administrative law 
judges from the Social Security Administration (SSA) to the 
Department of Health and Human Services (HHS). It would change 
the procedures by which Medicare makes contracts with entities 
to process and pay claims, and it would place new requirements 
on those contractors. It would require the Secretary of HHS to 
conduct several demonstrations, to initiate new outreach and 
education programs, and to complete several studies and 
reports. CBO estimates that implementing H.R. 810 would cost 
$61 million in 2004 and $1.6 billion over the 2004-2008 period, 
assuming appropriation of the necessary funds.
    The procedural changes required by H.R. 810 would affect 
spending for services covered by Medicare, which is direct 
spending. However, many of the bill's requirements codify 
existing practices, while the other requirements would cause 
minor increases or decreases in spending for covered services. 
These changes could have significant impacts on direct spending 
in any given year, however, CBO estimates that the net change 
in direct spending would be insignificant over the 2004-2013 
period.
    H.R. 810 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
The requirement for public hospitals participating in the 
Medicare program to comply with the bloodborne pathogens 
standard promulgated by the Occupational Safety and Health 
Administration (OSHA) would have cost implications for state 
and local governments. However, that requirement would be a 
condition of participating in a voluntary federal program and 
thus would not be an intergovernmental mandate as defined in 
UMRA.
    Estimated cost to the Federal Government: The following 
table shows the estimated authorization levels and outlays for 
Medicare administrative expenses under current law and under 
H.R. 810. Assuming appropriation of the estimated amounts, CBO 
estimates that implementing H.R. 810 would cost $61 million in 
2004 and $1.6 billion over the 2004-2008 period. The costs of 
this legislation fall within budget function 570 (Medicare).

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2003    2004    2005    2006    2007    2008
----------------------------------------------------------------------------------------------------------------
                                      SPENDING SUBJECT TO APPROPRIATION \1\

Spending for Medicare administrative costs under current law:
    Estimated authorization level \2\...........................   3,798   3,931   4,078   4,236   4,418   4,626
    Estimated outlays...........................................   3,797   3,925   4,064   4,209   4,377   4,579
Proposed changes:
    Estimated authorization level...............................       0      68     486     396     312     328
    Estimated outlays...........................................       0      61     444     405     321     327
Spending for Medicare administrative costs under H.R. 810:
    Estimated authorization level...............................   3,798   3,999   4,564   4,632   4,730   4,954
    Estimated outlays...........................................   3,797   3,986   4,508   4,614   4,698   4,906
----------------------------------------------------------------------------------------------------------------
\1\ Enacting H.R. 810 also would affect direct spending, but CBO estimates there would be no significant net
  impact over the 2004-2013 period.
\2\ The 2003 level is the amount appropriated for that year. The 2004-2008 levels are baseline projections,
  which assume annual adjustments for anticipated inflation.

Basis of estimate

    For this estimate, CBO assumes that the legislation will be 
enacted July 1, 2003 and that the necessary amounts will be 
appropriated each year, beginning in fiscal year 2004.
            Spending subject to appropriation
    Implementing H.R. 810 would require increased 
appropriations for the administration of Medicare. In 
particular, the bill would increase the costs to CMS for 
contracting, for adjudicating appeals, for education and 
outreach to providers and beneficiaries, and for other 
activities.
    Contracting Reform. Under current law, CMS contracts with 
fiscal intermediaries and carriers to process and pay claims, 
to educate providers regarding Medicare billing policy, and for 
other purposes. This bill would change the activities required 
of contractors and the methods by which CMS enters into 
contracts and oversees the activities or contractors. CBO 
estimates that these provisions would increase the cost of 
administering contracts and the total amount CMS spends on 
contracts by $37 million in 2004 and $1.3 billion over the 
2004-2008 period.
    Contracting Changes. H.R. 810 would direct CMS to provide 
incentives to contractors who meet or exceed certain 
performance standards. Based on information furnished by CMS, 
we estimate that the incentive payments would total 3 percent 
of operating payments to contractors, or about $250 million 
over the 2004-2008 period.
    H.R. 810 would require CMS to competitively bid contracts 
with fiscal intermediaries and carriers at least every five 
years. CBO expects that an additional 3-to-5 full-time-
equivalent employees (FTEs) at the GS-12 level would be needed 
throughout the period to write new competitively bid contracts. 
The estimate assumes that about one-quarter of the contracts 
would be awarded to a nonincumbent bidder, and that it would 
cost about $2 million to transition between contractors. CBO 
estimates that implementing this provision would cost about $66 
million over the 2004-2008 period. CBO expects that the 
competitive bidding of contracts would yield savings to CMS 
over the long run, but that savings over the 2004-2008 period 
would probably not be significant.
    New Contractor Activities. The bill would require 
contractors to respond to written requests for guidance within 
45 days of receipt, and would make the response binding on the 
Medicare program. We expect that contractors would receive 50 
percent more written requests under H.R. 810 than they would 
under current law, with each request costing $16 to process in 
2004. This, plus the requirement that contractors respond to 
those requests within 45 days, would require contractors to 
hire additional employees. CBO estimates that implementing 
these provisions would cost $11 million in 2004 and $81 million 
over the 2004-2008 period.
    The bill also would require contractors to monitor the 
accuracy of information given to providers and the timeliness 
of contractors' processing of providers' enrollment 
applications. CBO estimates that complying with these 
provisions would cost about $16 million over the 2004-2008 
period.
    Beginning in January 2005, the bill would require 
contractors, upon request of a beneficiary or provider, to make 
a determination about whether Medicare will cover a particular 
service or item before that service is furnished. The 
contractor would be required to conduct a medical review and to 
make the coverage decision within 45 days. CBO estimates that 
contractors would make about 100,000 determinations a year at 
an average cost of about $125 per determination (at 2005 
prices). We estimate the cost of administering this program 
would total $44 million over the 2005-2008 period.
    The bill would require contractors to create a system by 
which providers may resubmit claims originally submitted with 
errors or omissions without having to pursue payment via the 
appeals process. CBO estimates the cost of developing and 
operating systems to process these resubmitted claims would 
total $5 million in 2004 and $56 million over the 2004-2008 
period.
    The bill also would require contractors to give providers 
or beneficiaries, upon request, a summary of the clinical and 
scientific evidence used in making a determination and in 
making a redetermination, in the case of an appeal. CBO 
estimates the cost of making available scientific and clinical 
evidence on determinations and redeterminations would total 
$706 million over the 2004-2008 period.
    Appeals Reform. H.R. 810 would change the processes by 
which Medicare adjudicates appeals by providers of payment 
denials and conducts compliance actions against providers. The 
bill would delay the date by which CMS is required to implement 
certain provisions of the Beneficiary Improvement and 
Protection Act and modify other provisions. CBO estimates that 
implementing these provisions would cost $9 million in 2004 and 
$94 million over the 2004-2008 period.
    Administrative Law Judge Transfer. The bill would transfer 
certain law judges (ALJs) from the Social Security 
Administration to the Department of Health and Human Services 
and would permit the Secretary to hire more ALJs. CBO estimates 
that the costs of planning and implementing the transfer, 
adding ALJs, and providing the ALJs with additional training on 
Medicare issues would be $1 million in 2004 and would total $45 
million over the 2004-2008 period.
    Standardization of Compliance and Appeals Actions. The bill 
would also standardize existing policies regarding the use of 
random and non-random prepayment review, the use of 
extrapolation in the case of overpayments, and the offering of 
repayment plans in the case of overpayment. In addition, H.R. 
810 would create procedures by which appellants may petition 
for expedited access to judicial review in federal district 
court in certain circumstances. The bill also would require 
that judgments by administrative law judges contain the 
scientific evidence used in their decision, similar to the 
bill's requirements of contractors. CBO estimates that 
implementing those provisions would cost $46 million over the 
2004-2008 period. These provisions would require CMS to make 
changes to current appeals and compliance systems but would not 
change the conditions under which Medicare would make payments 
to providers. Therefore, CBO estimates that these provisions 
would have no effect on direct spending.
    Provider and Beneficiary Program. H.R. 810 would direct CMS 
to expand its programs to educate beneficiaries and providers. 
CBO estimates that implementing these provisions would cost $10 
million in 2004 and $171 million during the 2004-2008 period.
    The bill would authorize the appropriation of $25 million 
in 2005 and in 2006, and such sums as necessary in subsequent 
years, for the education of providers on Medicare billing and 
coding practices. H.R. 810 would direct the Secretary to 
conduct a demonstration with small providers and suppliers in 
which they can get specific help with Medicare policies, 
including coding and reimbursement. CBO estimates that 
implementing these provisions would cost $108 million over the 
2004-2008 period.
    H.R. 810 would require CMS to designate two ombudsmen to 
act as liaisons between providers and Medicare, and between 
beneficiaries and Medicare. CBO assumes that, in order to 
respond to providers' and beneficiaries' needs and complaints, 
the ombudsmen would require the aid of several staff members. 
CBO estimates the cost of implementing these provisions would 
be $59 million over the 2004-2008 period.
    The bill would direct CMS to implement a three-year 
outreach demonstration in at least six locations throughout the 
United States. The program would involve the deployment of 
Medicare specialists to local Social Security Administration 
offices to provide beneficiaries assistance and advice 
regarding the Medicare program. CBO estimates that the costs of 
the demonstration, which would include the rental of office 
space, salaries for Medicare specialists, and travel, moving, 
and administrative expenses, would total $4 million over the 
2004-2008 period.
    Miscellaneous provisions. H.R. 810 contains several 
provisions, that CBO estimates would require additional 
resources to implement. These provisions would:
     Require the Secretary, the Comptroller General, 
and the Office of the Inspector General to conduct several 
studies, produce reports, and conduct evaluations.
     Require the Secretary to establish two groups, a 
technical group to review issues relating to the Emergency 
Medical Treatment and Active Labor Act and a council for 
technology and innovation to coordinate activities with respect 
to new medical technologies.
     Restrict CMS from implementing new documentation 
guidelines for evaluation and management services until several 
conditions had been met.
     Allow hospitals to submit corrected and 
supplementary data in order to change the geographic adjustment 
factor used in the calculation of payments to that hospital for 
Medicare services. CMS would have to reprocess that data and 
would have to recalculate the geographic adjustment factors for 
other hospitals.
     Require CMS to provide data to hospitals for the 
calculation of additional payments for the care of low-income 
patients.
    CBO estimates that conducting these activities would cost 
$35 million over the 2004-2008 period.
            Direct spending
    H.R. 810 would change the conditions under which Medicare 
would pay for services, would create a process to establish 
whether an item or service is covered prior to a beneficiary 
receiving the service, and would reallocate payments between 
hospitals. CBO estimates that enacting these provisions would 
have no significant effect on direct spending.
    In general, if a provider is not certain whether Medicare 
will pay for a service or item in a particular case, there is 
no process under current law that enables the provider or 
beneficiary to find out in advance whether Medicare will pay 
for that service or item. In such cases, the provider may 
request that the beneficiary sign an advanced beneficiary 
notice (ABN) by which the beneficiary accepts responsibility 
for paying for the service if Medicare denies payment. (The 
provider is prohibited from charging the beneficiary if the 
beneficiary does not sign an ABN and Medicare subsequently 
denies payment.
    The bill would authorize the Secretary to specify services 
for which the provider or beneficiary may request a coverage 
determination before a service is furnished. Upon receipt of 
such a request, the bill would require the contractor to 
conduct a medical review and issue a decision within 45 days. 
The bill would make a positive determination by a contractor 
binding, but it would limit the number of appeals a provider 
could make in the event of a negative determination by a 
contractor.
    H.R. 810 directs the Secretary to exclude this provision as 
a change in law or regulation in the calculation of the 
sustainable growth rate (SGR) used in the calculation of 
physician payments under Medicare. (In general, changes in law 
and regulation are incorporated into the calculation of the 
SGR). The SGR is a self-correcting mechanism: any additional 
services paid for under this provision would be offset by lower 
physician payments in subsequent years. CBO therefore estimates 
that enacting this provision could affect direct spending in 
each year, but would not have a significant impact over the 
2004-2013 period.
    H.R. 810 also would allow hospitals to submit corrected 
wage data to qualify for higher Medicare payment rates. The 
increase in payments to qualifying hospitals would be offset by 
reductions in payment rates for all other hospitals. Therefore, 
CBO estimates that enacting this provision would have no effect 
on direct spending or receipts.
    Estimated impact on state, local, and tribal governments: 
H.R. 810 contains no intergovernmental mandates as defined in 
UMRA. The requirement for public hospitals participating in the 
Medicare program to comply with OSHA's bloodborne pathogens 
standard would have cost implications for state and local 
governments. The current OSHA standard applies to all private-
sector employers with one or more employees, as well as to 
federal civilian employees. This bill would extend the 
requirement to all hospitals participating in the Medicare 
program, including state and local public hospitals. About half 
of the states currently have bloodborne pathogen standards that 
apply to these hospitals that are at least as stringent as the 
federal standard, and many hospitals in other states have 
voluntarily established comparable standards. Consequently, CBO 
does not expect the costs of the requirement to be significant. 
Any such costs would result from participating in Medicare, a 
voluntary federal program, and thus would not be costs of an 
intergovernmental mandate as defined in UMRA.
    Estimated impact on the private sector: H.R. 810 contains 
no private-sector mandates as defined in UMRA.
    Previous estimate: On April 8, 2003, CBO transmitted a cost 
estimate for H.R. 810 as ordered reported by the House 
Committee on Energy and Commerce on March 26, 2003. This 
version of H.R. 810 does not include a provision that would 
require CMS to make all interim final regulations final, 
whereas the version reported by the Energy and Commerce 
Committee does. CBO estimated implementing that provision would 
cost $19 million over the 2004-2018 period. However, this 
version of H.R. 810 includes two provisions that the Energy and 
Commerce version does not: one that allows hospitals to 
resubmit data relevant to their geographic adjustment payments, 
and one that requires CMS to provide hospitals with data used 
to calculate additional payments for the provision of services 
to low-income patients. CBO estimates these provisions would 
cost $6 million over the 2004-2008 period to implement. The 
costs of these provisions are included above in the 
``Miscellaneous Provisions'' cost subtotal of $35 million over 
the five-year period.
    Estimate prepared by: Federal costs: Alexis Ahlstrom; 
impact on state, local, and tribal governments: Leo Lex; impact 
on the private sector: Robert Nguyen.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
need for this legislation was confirmed by the oversight 
hearings of the Subcommittee on Health. The hearings were as 
follows:
    The Subcommittee on Health held a series of hearings on 
Medicare Reform during the 107th and the 108th Congress to 
examine the implications of regulatory burden on seniors and 
providers. A list of these hearings may be found in this report 
in Section I. Introduction, Part C. Legislative History (Page 
3).

         B. Summary of General Performance Goals and Objectives

    In compliance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
primary purpose of H.R. 4954 is to create a prescription drug 
benefit into the Medicare program while modernizing other 
aspects of the program.

                 C. Constitutional Authority Statement

    In compliance with clause 3(d)(1) of rule XIII of the Rules 
of the House of Representatives, relating to constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts, and excises, to pay the 
debts and to provide for * * * the General Welfare of the 
United States * * *'').

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, 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):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *



     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
SIMPLIFICATION

           *       *       *       *       *       *       *



Part A--General Provisions

           *       *       *       *       *       *       *



       APPOINTMENT OF ADVISORY COUNCIL AND OTHER ADVISORY GROUPS

  Sec. 1114. (a) * * *

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  [(i)(1) Any advisory committee appointed under subsection (f 
) to advise the Secretary on matters relating to the 
interpretation, application, or implementation of section 
1862(a)(1) shall assure the full participation of a nonvoting 
member in the deliberations of the advisory committee, and 
shall provide such nonvoting member access to all information 
and data made available to voting members of the advisory 
committee, other than information that--
          [(A) is exempt from disclosure pursuant to subsection 
        (a) of section 552 of title 5, United States Code, by 
        reason of subsection (b)(4) of such section (relating 
        to trade secrets); or
          [(B) the Secretary determines would present a 
        conflict of interest relating to such nonvoting member.
  [(2) If an advisory committee described in paragraph (1) 
organizes into panels of experts according to types of items or 
services considered by the advisory committee, any such panel 
of experts may report any recommendation with respect to such 
items or services directly to the Secretary without the prior 
approval of the advisory committee or an executive committee 
thereof.]

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  EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM PARTICIPATION IN 
                MEDICARE AND STATE HEALTH CARE PROGRAMS

  Sec. 1128. (a) * * *

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  (c) Notice, Effective Date, and Period of Exclusion.--(1) * * 
*

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  (3)(A) * * *
  (B) [Subject to subparagraph (G), in the case of an exclusion 
under subsection (a), the minimum period of exclusion shall be 
not less than five years, except that, upon the request of a 
State, the Secretary may waive the exclusion under subsection 
(a)(1) in the case of an individual or entity that is the sole 
community physician or sole source of essential specialized 
services in a community.] Subject to subparagraph (G), in the 
case of an exclusion under subsection (a), the minimum period 
of exclusion shall be not less than five years, except that, 
upon the request of the administrator of a Federal health care 
program (as defined in section 1128B(f)) who determines that 
the exclusion would impose a hardship on individuals entitled 
to benefits under part A of title XVIII or enrolled under part 
B of such title, or both, the Secretary may waive the exclusion 
under subsection (a)(1), (a)(3), or (a)(4) with respect to that 
program in the case of an individual or entity that is the sole 
community physician or sole source of essential specialized 
services in a community. The Secretary's decision whether to 
waive the exclusion shall not be reviewable.

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   Part B--Peer Review of the Utilization and Quality of Health Care 
Services

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                 FUNCTIONS OF PEER REVIEW ORGANIZATIONS

  Sec. 1154. (a) * * *

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  (e)(1) * * *

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  [(5) In any review conducted under paragraph (2) or (3), the 
organization shall solicit the views of the patient involved 
(or the patient's representative).]

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Part C--Administrative Simplification

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             GENERAL REQUIREMENTS FOR ADOPTION OF STANDARDS

  Sec. 1172. (a) * * *

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  (f) Assistance to the Secretary.--In complying with the 
requirements of this part, the Secretary shall rely on the 
recommendations of the National Committee on Vital and Health 
Statistics established under section 306(k) of the Public 
Health Service Act (42 U.S.C. 242k(k)), and shall consult with 
appropriate Federal and State agencies and private 
organizations. Notwithstanding the preceding sentence, if the 
National Committee on Vital and Health Statistics has not made 
a recommendation to the Secretary before the date of the 
enactment of this sentence, with respect to the adoption of the 
International Classification of Diseases, 10th Revision, 
Procedure Coding System (``ICD-10-PCS'') and the International 
Classification of Diseases, 10th Revision, Clinical 
Modification (``ICD-10-CM'') as a standard under this part for 
the reporting of services, the Secretary may adopt ICD-10-PCS 
and ICD-10-CM as such a standard on or after such date without 
receiving such a recommendation. The Secretary shall publish in 
the Federal Register any recommendation of the National 
Committee on Vital and Health Statistics regarding the adoption 
of a standard under this part.

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TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *



     NOTICE OF MEDICARE BENEFITS; MEDICARE AND MEDIGAP INFORMATION

  Sec. 1804. (a) * * *
  (b) The Secretary shall provide information via a toll-free 
telephone number on the programs under this title. The 
Secretary shall provide, through the toll-free number 1-800-
MEDICARE, for a means by which individuals seeking information 
about, or assistance with, such programs who phone such toll-
free number are transferred (without charge) to appropriate 
entities for the provision of such information or assistance. 
Such toll-free number shall be the toll-free number listed for 
general information and assistance in the annual notice under 
subsection (a) instead of the listing of numbers of individual 
contractors.

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                     MEDICARE BENEFICIARY OMBUDSMAN

  Sec. 1807. (a) In General.--The Secretary shall appoint 
within the Department of Health and Human Services a Medicare 
Beneficiary Ombudsman who shall have expertise and experience 
in the fields of health care and education of (and assistance 
to) individuals entitled to benefits under this title.
  (b) Duties.--The Medicare Beneficiary Ombudsman shall--
          (1) receive complaints, grievances, and requests for 
        information submitted by individuals entitled to 
        benefits under part A or enrolled under part B, or 
        both, with respect to any aspect of the medicare 
        program;
          (2) provide assistance with respect to complaints, 
        grievances, and requests referred to in paragraph (1), 
        including--
                  (A) assistance in collecting relevant 
                information for such individuals, to seek an 
                appeal of a decision or determination made by a 
                fiscal intermediary, carrier, Medicare+Choice 
                organization, or the Secretary; and
                  (B) assistance to such individuals with any 
                problems arising from disenrollment from a 
                Medicare+Choice plan under part C; and
          (3) submit annual reports to Congress and the 
        Secretary that describe the activities of the Office 
        and that include such recommendations for improvement 
        in the administration of this title as the Ombudsman 
        determines appropriate.
The Ombudsman shall not serve as an advocate for any increases 
in payments or new coverage of services, but may identify 
issues and problems in payment or coverage policies.
  (c) Working With Health Insurance Counseling Programs.--To 
the extent possible, the Ombudsman shall work with health 
insurance counseling programs (receiving funding under section 
4360 of Omnibus Budget Reconciliation Act of 1990) to 
facilitate the provision of information to individuals entitled 
to benefits under part A or enrolled under part B, or both 
regarding Medicare+Choice plans and changes to those plans. 
Nothing in this subsection shall preclude further collaboration 
between the Ombudsman and such programs.

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Part A--Hospital Insurance Benefits for the Aged and Disabled

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         CONDITIONS OF AND LIMITATIONS ON PAYMENT FOR SERVICES

               Requirement of Requests and Certifications

  Sec. 1814. (a) * * *

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                        Payment for Hospice Care

  (i)(1) * * *

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  (4) In the case of hospice care provided by a hospice program 
under arrangements under section 1861(dd)(5)(D) made by another 
hospice program, the hospice program that made the arrangements 
shall bill and be paid for the hospice care.

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[USE OF PUBLIC AGENCIES OR PRIVATE ORGANIZATIONS TO FACILITATE PAYMENT 
                       TO PROVIDERS OF SERVICES]

          PROVISIONS RELATING TO THE ADMINISTRATION OF PART A

  Sec. 1816. [(a) If any group or association of providers of 
services wishes to have payments under this part to such 
providers made through a national, State, or other public or 
private agency or organization and nominates such agency or 
organization for this purpose, the Secretary is authorized to 
enter into an agreement with such agency or organization 
providing for the determination by such agency or organization 
(subject to the provisions of section 1878 and to such review 
by the Secretary as may be provided for by the agreement) of 
the amount of the payments required pursuant to this part to be 
made to such providers (and to providers assigned to such 
agency or organization under subsection (e)), and for the 
making of such payments by such agency or organization to such 
providers (and to providers assigned to such agency or 
organization under subsection (e)). Such agreement may also 
include provision for the agency or organization to do all or 
any part of the following: (1) to provide consultative services 
to institutions or agencies to enable them to establish and 
maintain fiscal records necessary for purposes of this part and 
otherwise to qualify as hospitals, extended care facilities, or 
home health agencies, and (2) with respect to the providers of 
services which are to receive payments through it (A) to serve 
as a center for, and communicate to providers, any information 
or instructions furnished to it by the Secretary, and serve as 
a channel of communication from providers to the Secretary; (B) 
to make such audits of the records of providers as may be 
necessary to insure that proper payments are made under this 
part; and (C) to perform such other functions as are necessary 
to carry out this subsection. As used in this title and part B 
of title XI, the term ``fiscal intermediary'' means an agency 
or organization with a contract under this section.
  [(b) The Secretary shall not enter into or renew an agreement 
with any agency or organization under this section unless--
          [(1) he finds--
                  [(A) after applying the standards, criteria, 
                and procedures developed under subsection (f), 
                that to do so is consistent with the effective 
                and efficient administration of this part, and
                  [(B) that such agency or organization is 
                willing and able to assist the providers to 
                which payments are made through it under this 
                part in the application of safeguards against 
                unnecessary utilization of services furnished 
                by them to individuals entitled to hospital 
                insurance benefits under section 226, and the 
                agreement provides for such assistance; and
          [(2) such agency or organization agrees--
                  [(A) to furnish to the Secretary such of the 
                information acquired by it in carrying out its 
                agreement under this section, and
                  [(B) to provide the Secretary with access to 
                all such data, information, and claims 
                processing operations,
        as the Secretary may find necessary in performing his 
        functions under this part.]
  (a) The administration of this part shall be conducted 
through contracts with medicare administrative contractors 
under section 1874A.
  (c)[(1) An agreement with any agency or organization under 
this section may contain such terms and conditions as the 
Secretary finds necessary or appropriate, may provide for 
advances of funds to the agency or organization for the making 
of payments by it under subsection (a), and shall provide for 
payment of so much of the cost of administration of the agency 
or organization as is determined by the Secretary to be 
necessary and proper for carrying out the functions covered by 
the agreement. The Secretary shall provide that in determining 
the necessary and proper cost of administration, the Secretary 
shall, with respect to each agreement, take into account the 
amount that is reasonable and adequate to meet the costs which 
must be incurred by an efficiently and economically operated 
agency or organization in carrying out the terms of its 
agreement. The Secretary shall cause to have published in the 
Federal Register, by not later than September 1 before each 
fiscal year, data, standards, and methodology to be used to 
establish budgets for fiscal intermediaries under this section 
for that fiscal year, and shall cause to be published in the 
Federal Register for public comment, at least 90 days before 
such data, standards, and methodology are published, the data, 
standards, and methodology proposed to be used. The Secretary 
may not require, as a condition of entering into or renewing an 
agreement under this section or under section 1871, that a 
fiscal intermediary match data obtained other than in its 
activities under this part with data used in the administration 
of this part for purposes of identifying situations in which 
the provisions of section 1862(b) may apply.]
  (2)(A) Each [agreement under this section] contract under 
section 1874A that provides for making payments under this part 
shall provide that payment shall be issued, mailed, or 
otherwise transmitted with respect to not less than 95 percent 
of all claims submitted under this title--
          (i)  * * *

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  (3)(A) Each [agreement under this section] contract under 
section 1874A that provides for making payments under this part 
shall provide that no payment shall be issued, mailed, or 
otherwise transmitted with respect to any claim submitted under 
this title within the applicable number of calendar days after 
the date on which the claim is received.

           *       *       *       *       *       *       *

  [(d) If the nomination of an agency or organization as 
provided in this section is made by a group or association of 
providers of services, it shall not be binding on members of 
the group or association which notify the Secretary of their 
election to that effect. Any provider may, upon such notice as 
may be specified in the agreement under this section with an 
agency or organization, withdraw its nomination to receive 
payments through such agency or organization. Any provider 
which has withdrawn its nomination, and any provider which has 
not made a nomination, may elect to receive payments from any 
agency or organization which has entered into an agreement with 
the Secretary under this section if the Secretary and such 
agency or organization agree to it.
  [(e)(1) Notwithstanding subsections (a) and (d), the 
Secretary, after taking into consideration any preferences of 
providers of services, may assign or reassign any provider of 
services to any agency or organization which has entered into 
an agreement with him under this section, if he determines, 
after applying the standards, criteria, and procedures 
developed under subsection (f), that such assignment or 
reassignment would result in the more effective and efficient 
administration of this part.
  [(2) Notwithstanding subsections (a) and (d), the Secretary 
may (subject to the provisions of paragraph (4)) designate a 
national or regional agency or organization which has entered 
into an agreement with him under this section to perform 
functions under the agreement with respect to a class of 
providers of services in the Nation or region (as the case may 
be), if he determines, after applying the standards, criteria, 
and procedures developed under subsection (f), that such 
designation would result in more effective and efficient 
administration of this part.
  [(3)(A) Before the Secretary makes an assignment or 
reassignment under paragraph (1) of a provider of services to 
other than the agency or organization nominated by the 
provider, he shall furnish (i) the provider and such agency or 
organization with a full explanation of the reasons for his 
determination as to the efficiency and effectiveness of the 
agency or organization to perform the functions required under 
this part with respect to the provider, and (ii) such agency or 
organization with opportunity for a hearing, and such 
determination shall be subject to judicial review in accordance 
with chapter 7 of title 5, United States Code.
  [(B) Before the Secretary makes a designation under paragraph 
(2) with respect to a class of providers of services, he shall 
furnish (i) such providers and the agencies and organizations 
adversely affected by such designation with a full explanation 
of the reasons for his determination as to the efficiency and 
effectiveness of such agencies and organizations to perform the 
functions required under this part with respect to such 
providers, and (ii) the agencies and organizations adversely 
affected by such designation with opportunity for a hearing, 
and such determination shall be subject to judicial review in 
accordance with chapter 7 of title 5, United States Code.
  [(4) Notwithstanding subsections (a) and (d) and paragraphs 
(1), (2), and (3) of this subsection, the Secretary shall 
designate regional agencies or organizations which have entered 
into an agreement with him under this section to perform 
functions under such agreement with respect to home health 
agencies (as defined in section 1861(o)) in the region, except 
that in assigning such agencies to such designated regional 
agencies or organizations the Secretary shall assign a home 
health agency which is a subdivision of a hospital (and such 
agency and hospital are affiliated or under common control) 
only if, after applying such criteria relating to 
administrative efficiency and effectiveness as he shall 
promulgate, he determines that such assignment would result in 
the more effective and efficient administration of this title. 
By not later than July 1, 1987, the Secretary shall limit the 
number of such regional agencies or organizations to not more 
than ten.
  [(5) Notwithstanding any other provision of this title, the 
Secretary shall designate the agency or organization which has 
entered into an agreement under this section to perform 
functions under such an agreement with respect to each hospice 
program, except that with respect to a hospice program which is 
a subdivision of a provider of services (and such hospice 
program and provider of services are under common control) due 
regard shall be given to the agency or organization which 
performs the functions under this section for the provider of 
services.
  [(f)(1) In order to determine whether the Secretary should 
enter into, renew, or terminate an agreement under this section 
with an agency or organization, whether the Secretary should 
assign or reassign a provider of services to an agency or 
organization, and whether the Secretary should designate an 
agency or organization to perform services with respect to a 
class of providers of services, the Secretary shall develop 
standards, criteria, and procedures to evaluate such agency's 
or organization's (A) overall performance of claims processing 
(including the agency's or organization's success in recovering 
payments made under this title for services for which payment 
has been or could be made under a primary plan (as defined in 
section 1862(b)(2)(A))) and other related functions required to 
be performed by such an agency or organization under an 
agreement entered into under this section, and (B) performance 
of such functions with respect to specific providers of 
services, and the Secretary shall establish standards and 
criteria with respect to the efficient and effective 
administration of this part. No agency or organization shall be 
found under such standards and criteria not to be efficient or 
effective or to be less efficient or effective solely on the 
ground that the agency or organization serves only providers 
located in a single State.
  [(2) The standards and criteria established under paragraph 
(1) shall include--
          [(A) with respect to claims for services furnished 
        under this part by any provider of services other than 
        a hospital--
                  [(i) whether such agency or organization is 
                able to process 75 percent of reconsiderations 
                within 60 days (except in the case of fiscal 
                year 1989, 66 percent of reconsiderations) and 
                90 percent of reconsiderations within 90 days, 
                and
                  [(ii) the extent to which such agency's or 
                organization's determinations are reversed on 
                appeal; and
          [(B) with respect to applications for an exemption 
        from or exception or adjustment to the target amount 
        applicable under section 1886(b) to a hospital that is 
        not a subsection (d) hospital (as defined in section 
        1886(d)(1)(B))--
                  [(i) if such agency or organization receives 
                a completed application, whether such agency or 
                organization is able to process such 
                application not later than 75 days after the 
                application is filed, and
                  [(ii) if such agency or organization receives 
                an incomplete application, whether such agency 
                or organization is able to return the 
                application with instructions on how to 
                complete the application not later than 60 days 
                after the application is filed.
  [(g) An agreement with the Secretary under this section may 
be terminated--
          [(1) by the agency or organization which entered into 
        such agreement at such time and upon such notice to the 
        Secretary, to the public, and to the providers as may 
        be provided in regulations, or
          [(2) by the Secretary at such time and upon such 
        notice to the agency or organization, to the providers 
        which have nominated it for purposes of this section, 
        and to the public, as may be provided in regulations, 
        but only if he finds, after applying the standards, 
        criteria, and procedures developed under subsection (f) 
        and after reasonable notice and opportunity for hearing 
        to the agency or organization, that (A) the agency or 
        organization has failed substantially to carry out the 
        agreement, or (B) the continuation of some or all of 
        the functions provided for in the agreement with the 
        agency or organization is disadvantageous or is 
        inconsistent with the efficient administration of this 
        part.
  [(h) An agreement with an agency or organization under this 
section may require any of its officers or employees certifying 
payments or disbursing funds pursuant to the agreement, or 
otherwise participating in carrying out the agreement, to give 
surety bond to the United States in such amount as the 
Secretary may deem appropriate.
  [(i)(1) No individual designated pursuant to an agreement 
under this section as a certifying officer shall, in the 
absence of gross negligence or intent to defraud the United 
States, be liable with respect to any payments certified by him 
under this section.
  [(2) No disbursing officer shall, in the absence of gross 
negligence or intent to defraud the United States, be liable 
with respect to any payment by him under this section if it was 
based upon a voucher signed by a certifying officer designated 
as provided in paragraph (1) of this subsection.
  [(3) No such agency or organization shall be liable to the 
United States for any payments referred to in paragraph (1) or 
(2).]
  (j) [An agreement with an agency or organization under this 
section] A contract with a medicare administrative contractor 
under section 1874A with respect to the administration of this 
part shall require that, with respect to a claim for home 
health services, extended care services, or post-hospital 
extended care services submitted by a provider to [such agency 
or organization] such medicare administrative contractor that 
is denied, [such agency or organization] such medicare 
administrative contractor--
          (1) * * *

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  (k) [An agreement with an agency or organization under this 
section] A contract with a medicare administrative contractor 
under section 1874A with respect to the administration of this 
part shall require that [such agency or organization] such 
medicare administrative contractor submit an annual report to 
the Secretary describing the steps taken to recover payments 
made for items or services for which payment has been or could 
be made under a primary plan (as defined in section 
1862(b)(2)(A)).
  [(l) No agency or organization may carry out (or receive 
payment for carrying out) any activity pursuant to an agreement 
under this section to the extent that the activity is carried 
out pursuant to a contract under the Medicare Integrity Program 
under section 1893.]

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   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *


                          PAYMENT OF BENEFITS

  Sec. 1833. (a) * * *

           *       *       *       *       *       *       *

  (h)(1) * * *

           *       *       *       *       *       *       *

  (8)(A) The Secretary shall establish by regulation procedures 
for determining the basis for, and amount of, payment under 
this subsection for any clinical diagnostic laboratory test 
with respect to which a new or substantially revised HCPCS code 
is assigned on or after January 1, 2005 (in this paragraph 
referred to as ``new tests'').
  (B) Determinations under subparagraph (A) shall be made only 
after the Secretary--
          (i) makes available to the public (through an 
        Internet site and other appropriate mechanisms) a list 
        that includes any such test for which establishment of 
        a payment amount under this subsection is being 
        considered for a year;
          (ii) on the same day such list is made available, 
        causes to have published in the Federal Register notice 
        of a meeting to receive comments and recommendations 
        (and data on which recommendations are based) from the 
        public on the appropriate basis under this subsection 
        for establishing payment amounts for the tests on such 
        list;
          (iii) not less than 30 days after publication of such 
        notice convenes a meeting, that includes 
        representatives of officials of the Centers for 
        Medicare & Medicaid Services involved in determining 
        payment amounts, to receive such comments and 
        recommendations (and data on which the recommendations 
        are based);
          (iv) taking into account the comments and 
        recommendations (and accompanying data) received at 
        such meeting, develops and makes available to the 
        public (through an Internet site and other appropriate 
        mechanisms) a list of proposed determinations with 
        respect to the appropriate basis for establishing a 
        payment amount under this subsection for each such 
        code, together with an explanation of the reasons for 
        each such determination, the data on which the 
        determinations are based, and a request for public 
        written comments on the proposed determination; and
          (v) taking into account the comments received during 
        the public comment period, develops and makes available 
        to the public (through an Internet site and other 
        appropriate mechanisms) a list of final determinations 
        of the payment amounts for such tests under this 
        subsection, together with the rationale for each such 
        determination, the data on which the determinations are 
        based, and responses to comments and suggestions 
        received from the public.
  (C) Under the procedures established pursuant to subparagraph 
(A), the Secretary shall--
          (i) set forth the criteria for making determinations 
        under subparagraph (A); and
          (ii) make available to the public the data (other 
        than proprietary data) considered in making such 
        determinations.
  (D) The Secretary may convene such further public meetings to 
receive public comments on payment amounts for new tests under 
this subsection as the Secretary deems appropriate.
  (E) For purposes of this paragraph:
          (i) The term ``HCPCS'' refers to the Health Care 
        Procedure Coding System.
          (ii) A code shall be considered to be ``substantially 
        revised'' if there is a substantive change to the 
        definition of the test or procedure to which the code 
        applies (such as a new analyte or a new methodology for 
        measuring an existing analyte-specific test).

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            [USE OF CARRIERS FOR ADMINISTRATION OF BENEFITS]

          PROVISIONS RELATING TO THE ADMINISTRATION OF PART B

  Sec. 1842. [(a) In order to provide for the administration of 
the benefits under this part with maximum efficiency and 
convenience for individuals entitled to benefits under this 
part and for providers of services and other persons furnishing 
services to such individuals, and with a view to furthering 
coordination of the administration of the benefits under part A 
and under this part, the Secretary is authorized to enter into 
contracts with carriers, including carriers with which 
agreements under section 1816 are in effect, which will perform 
some or all of the following functions (or, to the extent 
provided in such contracts, will secure performance thereof by 
other organizations); and, with respect to any of the following 
functions which involve payments for physicians' services on a 
reasonable charge basis, the Secretary shall to the extent 
possible enter into such contracts:
          [(1)(A) make determinations of the rates and amounts 
        of payments required pursuant to this part to be made 
        to providers of services and other persons on a 
        reasonable cost or reasonable charge basis (as may be 
        applicable);
          [(B) receive, disburse, and account for funds in 
        making such payments; and
          [(C) make such audits of the records of providers of 
        services as may be necessary to assure that proper 
        payments are made under this part;
          [(2)(A) determine compliance with the requirements of 
        section 1861(k) as to utilization review; and
          [(B) assist providers of services and other persons 
        who furnish services for which payment may be made 
        under this part in the development of procedures 
        relating to utilization practices, make studies of the 
        effectiveness of such procedures and methods for their 
        improvement, assist in the application of safeguards 
        against unnecessary utilization of services furnished 
        by providers of services and other persons to 
        individuals entitled to benefits under this part, and 
        provide procedures for and assist in arranging, where 
        necessary, the establishment of groups outside 
        hospitals (meeting the requirements of section 
        1861(k)(2)) to make reviews of utilization;
          [(3) serve as a channel of communication of 
        information relating to the administration of this 
        part; and
          [(4) otherwise assist, in such manner as the contract 
        may provide, in discharging administrative duties 
        necessary to carry out the purposes of this part.]
  (a) The administration of this part shall be conducted 
through contracts with medicare administrative contractors 
under section 1874A.
  (b)[(1) Contracts with carriers under subsection (a) may be 
entered into without regard to section 3709 of the Revised 
Statutes or any other provision of law requiring competitive 
bidding.]
  (2)[(A) No such contract shall be entered into with any 
carrier unless the Secretary finds that such carrier will 
perform its obligations under the contract efficiently and 
effectively and will meet such requirements as to financial 
responsibility, legal authority, and other matters as he finds 
pertinent. The Secretary shall publish in the Federal Register 
standards and criteria for the efficient and effective 
performance of contract obligations under this section, and 
opportunity shall be provided for public comment prior to 
implementation. In establishing such standards and criteria, 
the Secretary shall provide a system to measure a carrier's 
performance of responsibilities described in paragraph (3)(H), 
subsection (h), and section 1845(e)(2). The Secretary may not 
require, as a condition of entering into or renewing a contract 
under this section or under section 1871, that a carrier match 
data obtained other than in its activities under this part with 
data used in the administration of this part for purposes of 
identifying situations in which section 1862(b) may apply.
  [(B) The Secretary shall establish standards for evaluating 
carriers' performance of reviews of initial carrier 
determinations and of fair hearings under paragraph (3)(C), 
under which a carrier is expected--
          [(i) to complete such reviews, within 45 days after 
        the date of a request by an individual enrolled under 
        this part for such a review, in 95 percent of such 
        requests, and
          [(ii) to make a final determination, within 120 days 
        after the date of receipt of a request by an individual 
        enrolled under this part for a fair hearing under 
        paragraph (3)(C), in 90 percent of such cases.]
  (C) In the case of residents of nursing facilities who 
receive services described in clause (i) or (ii) of section 
1861(s)(2)(K) performed by a member of a team, the Secretary 
shall instruct [carriers] medicare administrative contractors 
to develop mechanisms which permit routine payment under this 
part for up to 1.5 visits per month per resident. In the 
previous sentence, the term ``team'' refers to a physician and 
includes a physician assistant acting under the supervision of 
the physician or a nurse practitioner working in collaboration 
with that physician, or both.
  [(D) In addition to any other standards and criteria 
established by the Secretary for evaluating carrier performance 
under this paragraph relating to avoiding erroneous payments, 
the carrier shall be subject to standards and criteria relating 
to the carrier's success in recovering payments made under this 
part for items or services for which payment has been or could 
be made under a primary plan (as defined in section 
1862(b)(2)(A)).
  [(E) With respect to the payment of claims for home health 
services under this part that, but for the amendments made by 
section 4611 of the Balanced Budget Act of 1997, would be 
payable under part A instead of under this part, the Secretary 
shall continue administration of such claims through fiscal 
intermediaries under section 1816.]
  (3) [Each such contract shall provide that the carrier] The 
Secretary--
          (A) [will] shall take such action as may be necessary 
        to assure that, where payment under this part for a 
        service is on a cost basis, the cost is reasonable cost 
        (as determined under section 1861(v));
          (B) [will] shall take such action as may be necessary 
        to assure that, where payment under this part for a 
        service is on a charge basis, such charge will be 
        reasonable and not higher than the charge applicable, 
        for a comparable service and under comparable 
        circumstances, [to the policyholders and subscribers of 
        the carrier] to the policyholders and subscribers of 
        the medicare administrative contractor, and such 
        payment will (except as otherwise provided in section 
        1870(f)) be made--
                  (i)  * * *

           *       *       *       *       *       *       *

          [(C) will establish and maintain procedures pursuant 
        to which an individual enrolled under this part will be 
        granted an opportunity for a fair hearing by the 
        carrier, in any case where the amount in controversy is 
        at least $100, but less than $500, when requests for 
        payment under this part with respect to services 
        furnished him are denied or are not acted upon with 
        reasonable promptness or when the amount of such 
        payment is in controversy;
          [(D) will furnish to the Secretary such timely 
        information and reports as he may find necessary in 
        performing his functions under this part;
          [(E) will maintain such records and afford such 
        access thereto as the Secretary finds necessary to 
        assure the correctness and verification of the 
        information and reports under subparagraph (D) and 
        otherwise to carry out the purposes of this part;]
          (F) [will] shall take such action as may be necessary 
        to assure that where payment under this part for a 
        service rendered is on a charge basis, such payment 
        shall be determined on the basis of the charge that is 
        determined in accordance with this section on the basis 
        of customary and prevailing charge levels in effect at 
        the time the service was rendered or, in the case of 
        services rendered more than 12 months before the year 
        in which the bill is submitted or request for payment 
        is made, on the basis of such levels in effect for the 
        12-month period preceding such year;
          (G) [will] shall, for a service that is furnished 
        with respect to an individual enrolled under this part, 
        that is not paid on an assignment-related basis, and 
        that is subject to a limiting charge under section 
        1848(g)--
                  (i)  * * *

           *       *       *       *       *       *       *

          (H) [if it makes determinations or payments with 
        respect to physicians' services, will] shall 
        implement--
                  (i) programs to recruit and retain physicians 
                as participating physicians in the area served 
                by the [carrier] medicare administrative 
                contractor, including educational and outreach 
                activities and the use of professional 
                relations personnel to handle billing and other 
                problems relating to payment of claims of 
                participating physicians; and

           *       *       *       *       *       *       *

          [(I) will submit annual reports to the Secretary 
        describing the steps taken to recover payments made 
        under this part for items or services for which payment 
        has been or could be made under a primary plan (as 
        defined in section 1862(b)(2)(A)); and]
          (L) [will] shall monitor and profile physicians' 
        billing patterns within each area or locality and 
        provide comparative data to physicians whose 
        utilization patterns vary significantly from other 
        physicians in the same payment area or locality[;].
[and shall contain such other terms and conditions not 
inconsistent with this section as the Secretary may find 
necessary or appropriate.] In determining the reasonable charge 
for services for purposes of this paragraph, there shall be 
taken into consideration the customary charges for similar 
services generally made by the physician or other person 
furnishing such services, as well as the prevailing charges in 
the locality for similar services. No charge may be determined 
to be reasonable in the case of bills submitted or requests for 
payment made under this part after December 31, 1970, if it 
exceeds the higher of (i) the prevailing charge recognized by 
the carrier and found acceptable by the Secretary for similar 
services in the same locality in administering this part on 
December 31, 1970, or (ii) the prevailing charge level that, on 
the basis of statistical data and methodology acceptable to the 
Secretary, would cover 75 percent of the customary charges made 
for similar services in the same locality during the 12-month 
period ending on the June 30 last preceding the start of the 
calendar year in which the service is rendered. In the case of 
physicians' services the prevailing charge level determined for 
purposes of clause (ii) of the preceding sentence for any 
twelve-month period (beginning after June 30, 1973) specified 
in clause (ii) of such sentence may not exceed (in the 
aggregate) the level determined under such clause for the 
fiscal year ending June 30, 1973, or (with respect to 
physicians' services furnished in a year after 1987) the level 
determined under this sentence (or under any other provision of 
law affecting the prevailing charge level) for the previous 
year except to the extent that the Secretary finds, on the 
basis of appropriate economic index data, that such higher 
level is justified by year-to-year economic changes. With 
respect to power-operated wheelchairs for which payment may be 
made in accordance with section 1861(s)(6), charges determined 
to be reasonable may not exceed the lowest charge at which 
power-operated wheelchairs are available in the locality. In 
the case of medical services, supplies, and equipment 
(including equipment servicing) that, in the judgment of the 
Secretary, do not generally vary significantly in quality from 
one supplier to another, the charges incurred after December 
31, 1972, determined to be reasonable may not exceed the lowest 
charge levels at which such services, supplies, and equipment 
are widely and consistently available in a locality except to 
the extent and under the circumstances specified by the 
Secretary. The requirement in subparagraph (B) that a bill be 
submitted or request for payment be made by the close of the 
following calendar year shall not apply if (I) failure to 
submit the bill or request the payment by the close of such 
year is due to the error or misrepresentation of an officer, 
employee, fiscal intermediary, carrier, medicare administrative 
contractor, or agent of the Department of Health and Human 
Services performing functions under this title and acting 
within the scope of his or its authority, and (II) the bill is 
submitted or the payment is requested promptly after such error 
or misrepresentation is eliminated or corrected. 
Notwithstanding the provisions of the third and fourth 
sentences preceding this sentence, the prevailing charge level 
in the case of a physician service in a particular locality 
determined pursuant to such third and fourth sentences for any 
calendar year after 1974 shall, if lower than the prevailing 
charge level for the fiscal year ending June 30, 1975, in the 
case of a similar physician service in the same locality by 
reason of the application of economic index data, be raised to 
such prevailing charge level for the fiscal year ending June 
30, 1975, and shall remain at such prevailing charge level 
until the prevailing charge for a year (as adjusted by economic 
index data) equals or exceeds such prevailing charge level. The 
amount of any charges for outpatient services which shall be 
considered reasonable shall be subject to the limitations 
established by regulations issued by the Secretary pursuant to 
section 1861(v)(1)(K), and in determining the reasonable charge 
for such services, the Secretary may limit such reasonable 
charge to a percentage of the amount of the prevailing charge 
for similar services furnished in a physician's office, taking 
into account the extent to which overhead costs associated with 
such outpatient services have been included in the reasonable 
cost or charge of the facility.

           *       *       *       *       *       *       *

  [(5) Each contract under this section shall be for a term of 
at least one year, and may be made automatically renewable from 
term to term in the absence of notice by either party of 
intention to terminate at the end of the current term; except 
that the Secretary may terminate any such contract at any time 
(after such reasonable notice and opportunity for hearing to 
the carrier involved as he may provide in regulations) if he 
finds that the carrier has failed substantially to carry out 
the contract or is carrying out the contract in a manner 
inconsistent with the efficient and effective administration of 
the insurance program established by this part.]
  (6) No payment under this part for a service provided to any 
individual shall (except as provided in section 1870) be made 
to anyone other than such individual or (pursuant to an 
assignment described in subparagraph (B)(ii) of paragraph (3)) 
the physician or other person who provided the service, except 
that (A) payment may be made (i) to the employer of such 
physician or other person if such physician or other person is 
required as a condition of his employment to turn over his fee 
for such service to his employer, or [(ii) (where the service 
was provided in a hospital, critical access hospital, clinic, 
or other facility) to the facility in which the service was 
provided if there is a contractual arrangement between such 
physician or other person and such facility under which such 
facility submits the bill for such service, (B) payment may be 
made to an entity (i) which provides coverage of the services 
under a health benefits plan, but only to the extent that 
payment is not made under this part, (ii) which has paid the 
person who provided the service an amount (including the amount 
payable under this part) which that person has accepted as 
payment in full for the service, and] (ii) where the service 
was provided under a contractual arrangement between such 
physician or other person and a qualified entity (as defined by 
the Secretary) or other person, to the entity or other person 
if under such arrangement such entity or individual submits the 
bill for such service and such arrangement (I) includes joint 
and several liability for overpayment by such physician or 
other person and such entity or other person, and (II) meets 
such other program integrity and other safeguards as the 
Secretary may determine to be appropriate, (iii) to which the 
individual has agreed in writing that payment may be made under 
this part, (C) in the case of services described in clause (i) 
of section 1861(s)(2)(K), payment shall be made to either (i) 
the employer of the physician assistant involved, or (ii) with 
respect to a physician assistant who was the owner of a rural 
health clinic (as described in section 1861(aa)(2)) for a 
continuous period beginning prior to the date of the enactment 
of the Balanced Budget Act of 1997 and ending on the date that 
the Secretary determines such rural health clinic no longer 
meets the requirements of section 1861(aa)(2), payment may be 
made directly to the physician assistant, (D) payment may be 
made to a physician for physicians' services (and services 
furnished incident to such services) furnished by a second 
physician to patients of the first physician if (i) the first 
physician is unavailable to provide the services; (ii) the 
services are furnished pursuant to an arrangement between the 
two physicians that (I) is informal and reciprocal, or (II) 
involves per diem or other fee-for-time compensation for such 
services; (iii) the services are not provided by the second 
physician over a continuous period of more than 60 days; and 
(iv) the claim form submitted to the carrier for such services 
includes the second physician's unique identifier (provided 
under the system established under subsection (r)) and 
indicates that the claim meets the requirements of this 
subparagraph for payment to the first physician, (E) in the 
case of an item or service (other than services described in 
section 1888(e)(2)(A)(ii)) furnished by, or under arrangements 
made by, a skilled nursing facility to an individual who (at 
the time the item or service is furnished) is a resident of a 
skilled nursing facility, payment shall be made to the 
facility, (F) in the case of home health services (including 
medical supplies described in section 1861(m)(5), but excluding 
durable medical equipment to the extent provided for in such 
section) furnished to an individual who (at the time the item 
or service is furnished) is under a plan of care of a home 
health agency, payment shall be made to the agency (without 
regard to whether or not the item or service was furnished by 
the agency, by others under arrangement with them made by the 
agency, or when any other contracting or consulting 
arrangement, or otherwise), and (G) in the case of services in 
a hospital or clinic to which section 1880(e) applies, payment 
shall be made to such hospital or clinic. No payment which 
under the preceding sentence may be made directly to the 
physician or other person providing the service involved 
(pursuant to an assignment described in subparagraph (B)(ii) of 
paragraph (3)) shall be made to anyone else under a 
reassignment or power of attorney ([except to an employer or 
facility as described in clause (A)] except to an employer, 
entity, or other person as described in subparagraph (A) of 
such sentence); but nothing in this subsection shall be 
construed (i) to prevent the making of such a payment in 
accordance with an assignment from the individual to whom the 
service was provided or a reassignment from the physician or 
other person providing such service if such assignment or 
reassignment is made to a governmental agency or entity or is 
established by or pursuant to the order of a court of competent 
jurisdiction, or (ii) to preclude an agent of the physician or 
other person providing the service from receiving any such 
payment if (but only if) such agent does so pursuant to an 
agency agreement under which the compensation to be paid to the 
agent for his services for or in connection with the billing or 
collection of payments due such physician or other person under 
this title is unrelated (directly or indirectly) to the amount 
of such payments or the billings therefor, and is not dependent 
upon the actual collection of any such payment. For purposes of 
subparagraph (C) of the first sentence of this paragraph, an 
employment relationship may include any independent contractor 
arrangement, and employer status shall be determined in 
accordance with the law of the State in which the services 
described in such clause are performed.
  (7)(A) In the case of physicians' services furnished to a 
patient in a hospital with a teaching program approved as 
specified in section 1861(b)(6) but which does not meet the 
conditions described in section 1861(b)(7), [the carrier] the 
Secretary shall not provide (except on the basis described in 
subparagraph (C)) for payment for such services under this 
part--
          (i)  * * *

           *       *       *       *       *       *       *

  (B) The customary charge for such services in a hospital 
shall be determined in accordance with regulations issued by 
the Secretary and taking into account the following factors:
          (i) In the case of a physician who is not a teaching 
        physician (as defined by the Secretary), [the carrier] 
        the Secretary shall take into account the amounts the 
        physician charges for similar services in the 
        physician's practice outside the teaching setting.
          (ii) In the case of a teaching physician, if the 
        hospital, its physicians, or other appropriate billing 
        entity has established one or more schedules of charges 
        which are collected for medical and surgical services, 
        [the carrier] the Secretary shall base payment under 
        this title on the greatest of--
                  (I)  * * *

           *       *       *       *       *       *       *

  (C) In the case of physicians' services furnished to a 
patient in a hospital with a teaching program approved as 
specified in section 1861(b)(6) but which does not meet the 
conditions described in section 1861(b)(7), if the conditions 
described in subclauses (I) and (II) of subparagraph (A)(i) are 
met and if the physician elects payment to be determined under 
this subparagraph, [the carrier] the Secretary shall provide 
for payment for such services under this part on the basis of 
regulations of the Secretary governing reimbursement for the 
services of hospital-based physicians (and not on any other 
basis).

           *       *       *       *       *       *       *

  (c)[(1) Any contract entered into with a carrier under this 
section shall provide for advances of funds to the carrier for 
the making of payments by it under this part, and shall provide 
for payment of the cost of administration of the carrier, as 
determined by the Secretary to be necessary and proper for 
carrying out the functions covered by the contract. The 
Secretary shall provide that in determining a carrier's 
necessary and proper cost of administration, the Secretary 
shall, with respect to each contract, take into account the 
amount that is reasonable and adequate to meet the costs which 
must be incurred by an efficiently and economically operated 
carrier in carrying out the terms of its contract. The 
Secretary shall cause to have published in the Federal 
Register, by not later than September 1 before each fiscal 
year, data, standards, and methodology to be used to establish 
budgets for carriers under this section for that fiscal year, 
and shall cause to be published in the Federal Register for 
public comment, at least 90 days before such data, standards, 
and methodology are published, the data, standards, and 
methodology proposed to be used.]
  (2)(A) Each [contract under this section which provides for 
the disbursement of funds, as described in subsection 
(a)(1)(B),] contract under section 1874A that provides for 
making payments under this part shall provide that payment 
shall be issued, mailed, or otherwise transmitted with respect 
to not less than 95 percent of all claims submitted under this 
part--
          (i)  * * *

           *       *       *       *       *       *       *

  (3)(A) Each contract under this section which provides for 
the disbursement of funds, as described in [subsection 
(a)(1)(B)] section 1874A(a)(3)(B), shall provide that no 
payment shall be issued, mailed, or otherwise transmitted with 
respect to any claim submitted under this title within the 
applicable number of calendar days after the date on which the 
claim is received.
  (4) Neither a [carrier] medicare administrative contractor 
nor the Secretary may impose a fee under this title--
          (A)  * * *

           *       *       *       *       *       *       *

  [(5) Each contract under this section which provides for the 
disbursement of funds, as described in subsection (a)(1)(B), 
shall require the carrier to meet criteria developed by the 
Secretary to measure the timeliness of carrier responses to 
requests for payment of items described in section 
1834(a)(15)(C).
  [(6) No carrier may carry out (or receive payment for 
carrying out) any activity pursuant to a contract under this 
subsection to the extent that the activity is carried out 
pursuant to a contract under the Medicare Integrity Program 
under section 1893. The previous sentence shall not apply with 
respect to the activity described in section 1893(b)(5) 
(relating to prior authorization of certain items of durable 
medical equipment under section 1834(a)(15)).
  [(d) Any contract with a carrier under this section may 
require such carrier or any of its officers or employees 
certifying payments or disbursing funds pursuant to the 
contract, or otherwise participating in carrying out the 
contract, to give surety bond to the United States in such 
amount as the Secretary may deem appropriate.
  [(e)(1) No individual designated pursuant to a contract under 
this section as a certifying officer shall, in the absence of 
gross negligence or intent to defraud the United States, be 
liable with respect to any payments certified by him under this 
section.
  [(2) No disbursing officer shall, in the absence of gross 
negligence or intent to defraud the United States, be liable 
with respect to any payment by him under this section if it was 
based upon a voucher signed by a certifying officer designated 
as provided in paragraph (1) of this subsection.
  [(3) No such carrier shall be liable to the United States for 
any payments referred to in paragraph (1) or (2).
  [(f) For purposes of this part, the term ``carrier'' means--
          [(1) with respect to providers of services and other 
        persons, 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; and
          [(2) with respect to providers of services only, any 
        agency or organization (not described in paragraph (1)) 
        with which an agreement is in effect under section 
        1816.]
  (g) The Railroad Retirement Board shall, in accordance with 
such regulations as the Secretary may prescribe, contract with 
a [carrier or carriers] medicare administrative contractor or 
contractors to perform the functions set out in this section 
with respect to individuals entitled to benefits as qualified 
railroad retirement beneficiaries pursuant to section 226(a) of 
this Act and section 7(d) of the Railroad Retirement Act of 
1974.
  (h)(1) * * *
  (2) [Each carrier having an agreement with the Secretary 
under subsection (a)] The Secretary shall maintain a toll-free 
telephone number or numbers at which individuals enrolled under 
this part may obtain the names, addresses, specialty, and 
telephone numbers of participating physicians and suppliers and 
may request a copy of an appropriate directory published under 
paragraph (4). [Each such carrier] The Secretary shall, without 
charge, mail a copy of such directory upon such a request.
  (3)(A) In any case in which [a carrier having an agreement 
with the Secretary under subsection (a)] medicare 
administrative contractor having a contract under section 1874A 
that provides for making payments under this part is able to 
develop a system for the electronic transmission to [such 
carrier] such contractor of bills for services, such carrier 
shall establish direct lines for the electronic receipt of 
claims from participating physicians and suppliers.
  (B) The Secretary shall establish a procedure whereby an 
individual enrolled under this part may assign, in an 
appropriate manner on the form claiming a benefit under this 
part for an item or service furnished by a participating 
physician or supplier, the individual's rights of payment under 
a medicare supplemental policy (described in section 
1882(g)(1)) in which the individual is enrolled. In the case 
such an assignment is properly executed and a payment 
determination is made by [a carrier] a medicare administrative 
contractor with a contract under this section, [the carrier] 
the contractor shall transmit to the private entity issuing the 
medicare supplemental policy notice of such fact and shall 
include an explanation of benefits and any additional 
information that the Secretary may determine to be appropriate 
in order to enable the entity to decide whether (and the amount 
of) any payment is due under the policy. The Secretary may 
enter into agreements for the transmittal of such information 
to entities electronically. The Secretary shall impose user 
fees for the transmittal of information under this subparagraph 
by [a carrier] a medicare administrative contractor, whether 
electronically or otherwise, and such user fees shall be 
collected and retained by [the carrier] the contractor.

           *       *       *       *       *       *       *

  (5)(A) The Secretary shall promptly notify individuals 
enrolled under this part through an annual mailing of the 
participation program under this subsection and the publication 
and availability of the directories and shall make the 
appropriate area directory or directories available in each 
district and branch office of the Social Security 
Administration, in the offices of [carriers] medicare 
administrative contractors, and to senior citizen 
organizations.
  (B) The annual notice provided under subparagraph (A) shall 
include--
          (i) * * *
          (iii) an explanation of the assistance offered by 
        [carriers] medicare administrative contractors in 
        obtaining the names of participating physicians and 
        suppliers, and

           *       *       *       *       *       *       *

  (l)(1)(A) Subject to subparagraph (C), if--
          (i) * * *

           *       *       *       *       *       *       *

          (iii)(I) a [carrier] medicare administrative 
        contractor determines under this part or a peer review 
        organization determines under part B of title XI that 
        payment may not be made by reason of section 1862(a)(1) 
        because a service otherwise covered under this title is 
        not reasonable and necessary under the standards 
        described in that section or (II) payment under this 
        title for such services is denied under section 
        1154(a)(2) by reason of a determination under section 
        1154(a)(1)(B), and

           *       *       *       *       *       *       *

  (2) Each [carrier] medicare administrative contractor with a 
contract in effect under this section with respect to 
physicians and each peer review organization with a contract 
under part B of title XI shall send any notice of denial of 
payment for physicians' services based on section 1862(a)(1) 
and for which payment is not requested on an assignment-related 
basis to the physician and the individual involved.

           *       *       *       *       *       *       *

  (p)(1) * * *

           *       *       *       *       *       *       *

  (3) In the case of a request for payment for an item or 
service furnished by a physician not submitted on an 
assignment-related basis and which does not include the code 
(or codes) required under paragraph (1)--
          (A) if the physician knowingly and willfully fails to 
        provide the code (or codes) promptly upon request of 
        the Secretary or a [carrier] medicare administrative 
        contractor, the physician may be subject to a civil 
        money penalty in an amount not to exceed $2,000, and

           *       *       *       *       *       *       *

  (q)(1)(A) The Secretary, in consultation with groups 
representing physicians who furnish anesthesia services, shall 
establish by regulation a relative value guide for use in all 
[carrier] localities in making payment for physician anesthesia 
services furnished under this part. Such guide shall be 
designed so as to result in expenditures under this title for 
such services in an amount that would not exceed the amount of 
such expenditures which would otherwise occur.

           *       *       *       *       *       *       *


                    Part C--Medicare+Choice Program

                 ELIGIBILITY, ELECTION, AND ENROLLMENT

  Sec. 1851. (a) Choice of Medicare Benefits Through 
Medicare+Choice Plans.--
          (1) * * *
          (2) Types of medicare+choice plans that may be 
        available.--A Medicare+Choice plan may be any of the 
        following types of plans of health insurance:
                  (A) Coordinated care plans.--Coordinated care 
                plans which provide health care services, 
                including but not limited to health maintenance 
                organization plans (with or without point of 
                service options), plans offered by provider-
                sponsored organizations (as defined in section 
                1855(d)), and preferred provider organization 
                plans. Specialized Medicare+Choice plans for 
                special needs beneficiaries (as defined in 
                section 1859(b)(4)) may be any type of 
                coordinated care plan.

           *       *       *       *       *       *       *


                  BENEFITS AND BENEFICIARY PROTECTIONS

  Sec. 1852. (a) Basic Benefits.--
          (1) * * *
          (2) Satisfaction of requirement.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Election of uniform coverage [policy] 
                determination.--In the case of a 
                Medicare+Choice organization that offers a 
                Medicare+Choice plan in an area in which more 
                than one local coverage [policy] determination 
                is applied with respect to different parts of 
                the area, the organization may elect to have 
                the local coverage [policy] determination for 
                the part of the area that is most beneficial to 
                Medicare+Choice enrollees (as identified by the 
                Secretary) apply with respect to all 
                Medicare+Choice enrollees enrolled in the plan.

           *       *       *       *       *       *       *


                 DEFINITIONS; MISCELLANEOUS PROVISIONS

  Sec. 1859. (a) * * *
  (b) Definitions Relating to Medicare+Choice Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Specialized medicare+choice plans for special 
        needs beneficiaries.--
                  (A) In general.--The term ``specialized 
                Medicare+Choice plan for special needs 
                beneficiaries'' means a Medicare+Choice plan 
                that exclusively serves special needs 
                beneficiaries (as defined in subparagraph (B)).
                  (B) Special needs beneficiary.--The term 
                ``special needs beneficiary'' means a 
                Medicare+Choice eligible individual who--
                          (i) is institutionalized (as defined 
                        by the Secretary);
                          (ii) is entitled to medical 
                        assistance under a State plan under 
                        title XIX; or
                          (iii) meets such requirements as the 
                        Secretary may determine would benefit 
                        from enrollment in such a specialized 
                        Medicare+Choice plan described in 
                        subparagraph (A) for individuals with 
                        severe or disabling chronic conditions.

           *       *       *       *       *       *       *

  (f) Restriction on Enrollment for Specialized Medicare+Choice 
Plans for Special Needs Beneficiaries.--In the case of a 
specialized Medicare+Choice plan (as defined in subsection 
(b)(4)), notwithstanding any other provision of this part and 
in accordance with regulations of the Secretary and for periods 
before January 1, 2008, the plan may restrict the enrollment of 
individuals under the plan to individuals who are within one or 
more classes of special needs beneficiaries.

           *       *       *       *       *       *       *


                    Part D--Miscellaneous Provisions

              DEFINITIONS OF SERVICES, INSTITUTIONS, ETC.

  Sec. 1861. For purposes of this title--

                            Spell of Illness

  (a) * * *

           *       *       *       *       *       *       *


                                Supplier

  (d) The term ``supplier'' means, unless the context otherwise 
requires, a physician or other practitioner, a facility, or 
other entity (other than a provider of services) that furnishes 
items or services under this title.

           *       *       *       *       *       *       *


                     Hospice Care; Hospice Program

  (dd)(1) * * *

           *       *       *       *       *       *       *

  (5)(A) * * *

           *       *       *       *       *       *       *

  (D) In extraordinary, exigent, or other non-routine 
circumstances, such as unanticipated periods of high patient 
loads, staffing shortages due to illness or other events, or 
temporary travel of a patient outside a hospice program's 
service area, a hospice program may enter into arrangements 
with another hospice program for the provision by that other 
program of services described in paragraph (2)(A)(ii)(I). The 
provisions of paragraph (2)(A)(ii)(II) shall apply with respect 
to the services provided under such arrangements.
  (E) A hospice program may provide services described in 
paragraph (1)(A) other than directly by the program if the 
services are highly specialized services of a registered 
professional nurse and are provided non-routinely and so 
infrequently so that the provision of such services directly 
would be impracticable and prohibitively expensive.

           *       *       *       *       *       *       *


                       Discharge Planning Process

  (ee)(1) * * *
  (2) The Secretary shall develop guidelines and standards for 
the discharge planning process in order to ensure a timely and 
smooth transition to the most appropriate type of and setting 
for post-hospital or rehabilitative care. The guidelines and 
standards shall include the following:
          (A) * * *

           *       *       *       *       *       *       *

          (D) A discharge planning evaluation must include an 
        evaluation of a patient's likely need for appropriate 
        post-hospital services, including [hospice services] 
        hospice care and post-hospital extended care services, 
        and the availability of those services, including the 
        availability of home health services through 
        individuals and entities that participate in the 
        program under this title and that serve the area in 
        which the patient resides and that request to be listed 
        by the hospital as available and, in the case of 
        individuals who are likely to need post-hospital 
        extended care services, the availability of such 
        services through facilities that participate in the 
        program under this title and that serve the area in 
        which the patient resides.

           *       *       *       *       *       *       *


        EXCLUSIONS FROM COVERAGE AND MEDICARE AS SECONDARY PAYER

  Sec. 1862. (a) Notwithstanding any other provision of this 
title, no payment may be made under part A or part B for any 
expenses incurred for items or services--
          (1) * * *

           *       *       *       *       *       *       *

Paragraph (7) shall not apply to Federally qualified health 
center services described in section 1861(aa)(3)(B). In making 
a national coverage determination (as defined in paragraph 
(1)(B) of section 1869(f )) the Secretary shall ensure that the 
public is afforded notice and opportunity to comment prior to 
implementation by the Secretary of the determination; meetings 
of advisory committees [established under section 1114(f )] 
with respect to the determination are made on the record; in 
making the determination, the Secretary has considered 
applicable information (including clinical experience and 
medical, technical, and scientific evidence) with respect to 
the subject matter of the determination; and in the 
determination, provide a clear statement of the basis for the 
determination (including responses to comments received from 
the public), the assumptions underlying that basis, and make 
available to the public the data (other than proprietary data) 
considered in making the determination.

           *       *       *       *       *       *       *

  (d) For purposes of subsection (a)(1)(A), in the case of any 
item or service that is required to be provided pursuant to 
section 1867 to an individual who is entitled to benefits under 
this title, determinations as to whether the item or service is 
reasonable and necessary shall be made on the basis of the 
information available to the treating physician or practitioner 
(including the patient's presenting symptoms or complaint) at 
the time the item or service was ordered or furnished by the 
physician or practitioner (and not on the patient's principal 
diagnosis). When making such determinations with respect to 
such an item or service, the Secretary shall not consider the 
frequency with which the item or service was provided to the 
patient before or after the time of the admission or visit.

           *       *       *       *       *       *       *

  [(i)] (j)(1) Any advisory committee appointed [under 
subsection (f )] to advise the Secretary on matters relating to 
the interpretation, application, or implementation of [section 
1862(a)(1)] subsection (a)(1) shall assure the full 
participation of a nonvoting member in the deliberations of the 
advisory committee, and shall provide such nonvoting member 
access to all information and data made available to voting 
members of the advisory committee, other than information 
that--
          (A) is exempt from disclosure pursuant to subsection 
        (a) of section 552 of title 5, United States Code, by 
        reason of subsection (b)(4) of such section (relating 
        to trade secrets); or
          (B) the Secretary determines would present a conflict 
        of interest relating to such nonvoting member.
  (2) If an advisory committee described in paragraph (1) 
organizes into panels of experts according to types of items or 
services considered by the advisory committee, any such panel 
of experts may report any recommendation with respect to such 
items or services directly to the Secretary without the prior 
approval of the advisory committee or an executive committee 
thereof.
  (k)(1) Subject to paragraph (2), a group health plan (as 
defined in subsection (a)(1)(A)(v)) providing supplemental or 
secondary coverage to individuals also entitled to services 
under this title shall not require a medicare claims 
determination under this title for dental benefits specifically 
excluded under subsection (a)(12) as a condition of making a 
claims determination for such benefits under the group health 
plan.
  (2) A group health plan may require a claims determination 
under this title in cases involving or appearing to involve 
inpatient dental hospital services or dental services expressly 
covered under this title pursuant to actions taken by the 
Secretary.

           *       *       *       *       *       *       *


                [AGREEMENTS WITH PROVIDERS OF SERVICES]

      AGREEMENTS WITH PROVIDERS OF SERVICES; ENROLLMENT PROCESSES

  Sec. 1866. (a)(1) Any provider of services (except a fund 
designated for purposes of section 1814(g) and section 1835(e)) 
shall be qualified to participate under this title and shall be 
eligible for payments under this title if it files with the 
Secretary an agreement--
          (A) * * *

           *       *       *       *       *       *       *

          (R) to contract only with a health care clearinghouse 
        (as defined in section 1171) that meets each standard 
        and implementation specification adopted or established 
        under part C of title XI on or after the date on which 
        the health care clearinghouse is required to comply 
        with the standard or specification, [and]
          (S) in the case of a hospital that has a financial 
        interest (as specified by the Secretary in regulations) 
        in an entity to which individuals are referred as 
        described in section 1861(ee)(2)(H)(ii), or in which 
        such an entity has such a financial interest, or in 
        which another entity has such a financial interest 
        (directly or indirectly) with such hospital and such an 
        entity, to maintain and disclose to the Secretary (in a 
        form and manner specified by the Secretary) information 
        on--
                  (i) * * *

           *       *       *       *       *       *       *

                  (iii) the percentage of such individuals who 
                received such services from such provider (or 
                another such provider)[.], and
          (T) in the case of hospitals that are not otherwise 
        subject to the Occupational Safety and Health Act of 
        1970 or a State occupational safety and health plan 
        that is approved under section 18(b) of such Act, to 
        comply with the Bloodborne Pathogens standard under 
        section 1910.1030 of title 29 of the Code of Federal 
        Regulations (or as subsequently redesignated).

           *       *       *       *       *       *       *

  (b)(1) * * *

           *       *       *       *       *       *       *

  (4)(A) A hospital that fails to comply with the requirement 
of subsection (a)(1)(T) (relating to the Bloodborne Pathogens 
standard) is subject to a civil money penalty in an amount 
described in subparagraph (B), but is not subject to 
termination of an agreement under this section.
  (B) The amount referred to in subparagraph (A) is an amount 
that is similar to the amount of civil penalties that may be 
imposed under section 17 of the Occupational Safety and Health 
Act of 1970 for a violation of the Bloodborne Pathogens 
standard referred to in subsection (a)(1)(T) by a hospital that 
is subject to the provisions of such Act.
  (C) A civil money penalty under this paragraph shall be 
imposed and collected in the same manner as civil money 
penalties under subsection (a) of section 1128A are imposed and 
collected under that section.

           *       *       *       *       *       *       *

  (h)(1)(A) Except as provided in paragraph (2), an institution 
or agency dissatisfied with a determination by the Secretary 
that it is not a provider of services or with a determination 
described in subsection (b)(2) shall be entitled to a hearing 
thereon by the Secretary (after reasonable notice) to the same 
extent as is provided in section 205(b), and to judicial review 
of the Secretary's final decision after such hearing as is 
provided in section 205(g), except that, in so applying such 
sections and in applying section 205(l) thereto, any reference 
therein to the Commissioner of Social Security or the Social 
Security Administration shall be considered a reference to the 
Secretary or the Department of Health and Human Services, 
respectively.
  (B) An institution or agency described in subparagraph (A) 
that has filed for a hearing under subparagraph (A) shall have 
expedited access to judicial review under this subparagraph in 
the same manner as providers of services, suppliers, and 
individuals entitled to benefits under part A or enrolled under 
part B, or both, may obtain expedited access to judicial review 
under the process established under section 1869(b)(2). Nothing 
in this subparagraph shall be construed to affect the 
application of any remedy imposed under section 1819 during the 
pendency of an appeal under this subparagraph.

           *       *       *       *       *       *       *

  (j) Enrollment Process for Providers of Services and 
Suppliers.--
          (1) Enrollment process.--
                  (A) In general.--The Secretary shall 
                establish by regulation a process for the 
                enrollment of providers of services and 
                suppliers under this title.
                  (B) Deadlines.--The Secretary shall establish 
                by regulation procedures under which there are 
                deadlines for actions on applications for 
                enrollment (and, if applicable, renewal of 
                enrollment). The Secretary shall monitor the 
                performance of medicare administrative 
                contractors in meeting the deadlines 
                established under this subparagraph.
                  (C) Consultation before changing provider 
                enrollment forms.--The Secretary shall consult 
                with providers of services and suppliers before 
                making changes in the provider enrollment forms 
                required of such providers and suppliers to be 
                eligible to submit claims for which payment may 
                be made under this title.
          (2) Hearing rights in cases of denial or non-
        renewal.--A provider of services or supplier whose 
        application to enroll (or, if applicable, to renew 
        enrollment) under this title is denied may have a 
        hearing and judicial review of such denial under the 
        procedures that apply under subsection (h)(1)(A) to a 
        provider of services that is dissatisfied with a 
        determination by the Secretary.

           *       *       *       *       *       *       *


EXAMINATION AND TREATMENT FOR EMERGENCY MEDICAL CONDITIONS AND WOMEN IN 
                                 LABOR

  Sec. 1867. (a) * * *

           *       *       *       *       *       *       *

  (d) Enforcement.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Consultation with peer review organizations.--In 
        considering allegations of violations of the 
        requirements of this section in imposing sanctions 
        under paragraph (1) or in terminating a hospital's 
        participation under this title, the Secretary shall 
        request the appropriate utilization and quality control 
        peer review organization (with a contract under part B 
        of title XI) to assess whether the individual involved 
        had an emergency medical condition which had not been 
        stabilized, and provide a report on its findings. 
        Except in the case in which a delay would jeopardize 
        the health or safety of individuals, the Secretary 
        shall request such a review before effecting a sanction 
        under paragraph (1) and shall provide a period of at 
        least 60 days for such review. Except in the case in 
        which a delay would jeopardize the health or safety of 
        individuals, the Secretary shall also request such a 
        review before making a compliance determination as part 
        of the process of terminating a hospital's 
        participation under this title for violations related 
        to the appropriateness of a medical screening 
        examination, stabilizing treatment, or an appropriate 
        transfer as required by this section, and shall provide 
        a period of 5 days for such review. The Secretary shall 
        provide a copy of the organization's report to the 
        hospital or physician consistent with confidentiality 
        requirements imposed on the organization under such 
        part B.
          (4) Notice upon closing an investigation.--The 
        Secretary shall establish a procedure to notify 
        hospitals and physicians when an investigation under 
        this section is closed.

           *       *       *       *       *       *       *


                [PRACTICING PHYSICIANS ADVISORY COUNCIL]

  PRACTICING PHYSICIANS ADVISORY COUNCIL; MEDICARE PROVIDER OMBUDSMAN

  Sec. 1868. (a) Practicing Physicians Advisory Council.--(1) 
The Secretary shall appoint, based upon nominations submitted 
by medical organizations representing physicians, a Practicing 
Physicians Advisory Council (in this [section] subsection 
referred to as the ``Council'') to be composed of 15 
physicians, each of whom has submitted at least 250 claims for 
physicians' services under this title in the previous year. At 
least 11 of the members of the Council shall be physicians 
described in section 1861(r)(1) and the members of the Council 
shall include both participating and nonparticipating 
physicians and physicians practicing in rural areas and 
underserved urban areas.
  [(b)] (2) The Council shall meet once during each calendar 
quarter to discuss certain proposed changes in regulations and 
carrier manual instructions related to physician services 
identified by the Secretary. To the extent feasible and 
consistent with statutory deadlines, such consultation shall 
occur before the publication of such proposed changes.
  [(c)] (3) Members of the Council shall be entitled to receive 
reimbursement of expenses and per diem in lieu of subsistence 
in the same manner as other members of advisory councils 
appointed by the Secretary are provided such reimbursement and 
per diem under this title.
  (b) Medicare Provider Ombudsman.--The Secretary shall appoint 
within the Department of Health and Human Services a Medicare 
Provider Ombudsman. The Ombudsman shall--
          (1) provide assistance, on a confidential basis, to 
        providers of services and suppliers with respect to 
        complaints, grievances, and requests for information 
        concerning the programs under this title (including 
        provisions of title XI insofar as they relate to this 
        title and are not administered by the Office of the 
        Inspector General of the Department of Health and Human 
        Services) and in the resolution of unclear or 
        conflicting guidance given by the Secretary and 
        medicare contractors to such providers of services and 
        suppliers regarding such programs and provisions and 
        requirements under this title and such provisions; and
          (2) submit recommendations to the Secretary for 
        improvement in the administration of this title and 
        such provisions, including--
                  (A) recommendations to respond to recurring 
                patterns of confusion in this title and such 
                provisions (including recommendations regarding 
                suspending imposition of sanctions where there 
                is widespread confusion in program 
                administration), and
                  (B) recommendations to provide for an 
                appropriate and consistent response (including 
                not providing for audits) in cases of self-
                identified overpayments by providers of 
                services and suppliers.
The Ombudsman shall not serve as an advocate for any increases 
in payments or new coverage of services, but may identify 
issues and problems in payment or coverage policies.
  (c) Council for Technology and Innovation.--
          (1) Establishment.--The Secretary shall establish a 
        Council for Technology and Innovation within the 
        Centers for Medicare & Medicaid Services (in this 
        section referred to as ``CMS'').
          (2) Composition.--The Council shall be composed of 
        senior CMS staff and clinicians and shall be chaired by 
        the Executive Coordinator for Technology and Innovation 
        (appointed or designated under paragraph (4)).
          (3) Duties.--The Council shall coordinate the 
        activities of coverage, coding, and payment processes 
        under this title with respect to new technologies and 
        procedures, including new drug therapies, and shall 
        coordinate the exchange of information on new 
        technologies between CMS and other entities that make 
        similar decisions.
          (4) Executive coordinator for technology and 
        innovation.--The Secretary shall appoint (or designate) 
        a noncareer appointee (as defined in section 3132(a)(7) 
        of title 5, United States Code) who shall serve as the 
        Executive Coordinator for Technology and Innovation. 
        Such executive coordinator shall report to the 
        Administrator of CMS, shall chair the Council, shall 
        oversee the execution of its duties, and shall serve as 
        a single point of contact for outside groups and 
        entities regarding the coverage, coding, and payment 
        processes under this title.

                        DETERMINATIONS; APPEALS

  Sec. 1869. (a) Initial Determinations.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Requirements of notice of determinations.--With 
        respect to an initial determination insofar as it 
        results in a denial of a claim for benefits--
                  (A) the written notice on the determination 
                shall include--
                          (i) the reasons for the 
                        determination, including whether a 
                        local medical review policy or a local 
                        coverage determination was used;
                          (ii) the procedures for obtaining 
                        additional information concerning the 
                        determination, including the 
                        information described in subparagraph 
                        (B); and
                          (iii) notification of the right to 
                        seek a redetermination or otherwise 
                        appeal the determination and 
                        instructions on how to initiate such a 
                        redetermination under this section; and
                  (B) the person provided such notice may 
                obtain, upon request, the specific provision of 
                the policy, manual, or regulation used in 
                making the determination.
          (5) Requirements of notice of redeterminations.--With 
        respect to a redetermination insofar as it results in a 
        denial of a claim for benefits--
                  (A) the written notice on the redetermination 
                shall include--
                          (i) the specific reasons for the 
                        redetermination;
                          (ii) as appropriate, a summary of the 
                        clinical or scientific evidence used in 
                        making the redetermination;
                          (iii) a description of the procedures 
                        for obtaining additional information 
                        concerning the redetermination; and
                          (iv) notification of the right to 
                        appeal the redetermination and 
                        instructions on how to initiate such an 
                        appeal under this section;
                  (B) such written notice shall be provided in 
                printed form and written in a manner calculated 
                to be understood by the individual entitled to 
                benefits under part A or enrolled under part B, 
                or both; and
                  (C) the person provided such notice may 
                obtain, upon request, information on the 
                specific provision of the policy, manual, or 
                regulation used in making the redetermination.
  (b) Appeal Rights.--
          (1) In general.--
                  (A) Reconsideration of initial 
                determination.--Subject to subparagraph (D), 
                any individual dissatisfied with any initial 
                determination under subsection (a)(1) shall be 
                entitled to reconsideration of the 
                determination, and, subject to subparagraphs 
                (D) and (E), a hearing thereon by the Secretary 
                to the same extent as is provided in section 
                205(b) and, subject to paragraph (2), to 
                judicial review of the Secretary's final 
                decision after such hearing as is provided in 
                section 205(g). For purposes of the preceding 
                sentence, any reference to the ``Commissioner 
                of Social Security'' or the ``Social Security 
                Administration'' in subsection (g) or (l) of 
                section 205 shall be considered a reference to 
                the ``Secretary'' or the ``Department of Health 
                and Human Services'', respectively.

           *       *       *       *       *       *       *

                  (F) Expedited [proceedings.--
                          [(i) Expedited determination] 
                        determinations and reconsiderations.--
                        In the case of an individual who has 
                        received notice from a provider of 
                        services that such provider plans--
                          [(I)] (i) to terminate services 
                        provided to an individual and a 
                        physician certifies that failure to 
                        continue the provision of such services 
                        is likely to place the individual's 
                        health at significant risk, or
                          [(II)] (ii) to discharge the 
                        individual from the provider of 
                        services,
                        the individual may request, in writing 
                        or orally, an expedited determination 
                        or an expedited reconsideration of an 
                        initial determination made under 
                        subsection (a)(1), as the case may be, 
                        and the Secretary shall provide such 
                        expedited determination or expedited 
                        reconsideration.
                          [(ii) Expedited hearing.--In a 
                        hearing by the Secretary under this 
                        section, in which the moving party 
                        alleges that no material issues of fact 
                        are in dispute, the Secretary shall 
                        make an expedited determination as to 
                        whether any such facts are in dispute 
                        and, if not, shall render a decision 
                        expeditiously.]

           *       *       *       *       *       *       *

          (2) Expedited access to judicial review.--
                  (A) In general.--The Secretary shall 
                establish a process under which a provider of 
                services or supplier that furnishes an item or 
                service or an individual entitled to benefits 
                under part A or enrolled under part B, or both, 
                who has filed an appeal under paragraph (1) may 
                obtain access to judicial review when a review 
                panel (described in subparagraph (D)), on its 
                own motion or at the request of the appellant, 
                determines that no entity in the administrative 
                appeals process has the authority to decide the 
                question of law or regulation relevant to the 
                matters in controversy and that there is no 
                material issue of fact in dispute. The 
                appellant may make such request only once with 
                respect to a question of law or regulation in a 
                case of an appeal.
                  (B) Prompt determinations.--If, after or 
                coincident with appropriately filing a request 
                for an administrative hearing, the appellant 
                requests a determination by the appropriate 
                review panel that no review panel has the 
                authority to decide the question of law or 
                regulations relevant to the matters in 
                controversy and that there is no material issue 
                of fact in dispute and if such request is 
                accompanied by the documents and materials as 
                the appropriate review panel shall require for 
                purposes of making such determination, such 
                review panel shall make a determination on the 
                request in writing within 60 days after the 
                date such review panel receives the request and 
                such accompanying documents and materials. Such 
                a determination by such review panel shall be 
                considered a final decision and not subject to 
                review by the Secretary.
                  (C) Access to judicial review.--
                          (i) In general.--If the appropriate 
                        review panel--
                                  (I) determines that there are 
                                no material issues of fact in 
                                dispute and that the only issue 
                                is one of law or regulation 
                                that no review panel has the 
                                authority to decide; or
                                  (II) fails to make such 
                                determination within the period 
                                provided under subparagraph 
                                (B);
                        then the appellant may bring a civil 
                        action as described in this 
                        subparagraph.
                          (ii) Deadline for filing.--Such 
                        action shall be filed, in the case 
                        described in--
                                  (I) clause (i)(I), within 60 
                                days of date of the 
                                determination described in such 
                                subparagraph; or
                                  (II) clause (i)(II), within 
                                60 days of the end of the 
                                period provided under 
                                subparagraph (B) for the 
                                determination.
                          (iii) Venue.--Such action shall be 
                        brought in the district court of the 
                        United States for the judicial district 
                        in which the appellant is located (or, 
                        in the case of an action brought 
                        jointly by more than one applicant, the 
                        judicial district in which the greatest 
                        number of applicants are located) or in 
                        the district court for the District of 
                        Columbia.
                          (iv) Interest on amounts in 
                        controversy.--Where a provider of 
                        services or supplier seeks judicial 
                        review pursuant to this paragraph, the 
                        amount in controversy shall be subject 
                        to annual interest beginning on the 
                        first day of the first month beginning 
                        after the 60-day period as determined 
                        pursuant to clause (ii) and equal to 
                        the rate of interest on obligations 
                        issued for purchase by the Federal 
                        Hospital Insurance Trust Fund and by 
                        the Federal Supplementary Medical 
                        Insurance Trust Fund for the month in 
                        which the civil action authorized under 
                        this paragraph is commenced, to be 
                        awarded by the reviewing court in favor 
                        of the prevailing party. No interest 
                        awarded pursuant to the preceding 
                        sentence shall be deemed income or cost 
                        for the purposes of determining 
                        reimbursement due providers of services 
                        or suppliers under this Act.
                  (D) Review panels.--For purposes of this 
                subsection, a ``review panel'' is a panel 
                consisting of 3 members (who shall be 
                administrative law judges, members of the 
                Departmental Appeals Board, or qualified 
                individuals associated with a qualified 
                independent contractor (as defined in 
                subsection (c)(2)) or with another independent 
                entity) designated by the Secretary for 
                purposes of making determinations under this 
                paragraph.
          (3) Requiring full and early presentation of evidence 
        by providers.--A provider of services or supplier may 
        not introduce evidence in any appeal under this section 
        that was not presented at the reconsideration conducted 
        by the qualified independent contractor under 
        subsection (c), unless there is good cause which 
        precluded the introduction of such evidence at or 
        before that reconsideration.

           *       *       *       *       *       *       *

  (c) Conduct of Reconsiderations by Independent Contractors.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Requirements.--Any qualified independent 
        contractor entering into a contract with the Secretary 
        under this subsection shall meet all of the following 
        requirements:
                  (A) In general.--The qualified independent 
                contractor shall perform such duties and 
                functions and assume such responsibilities as 
                may be required by the Secretary to carry out 
                the provisions of this subsection, and shall 
                have [sufficient training and expertise in 
                medical science and legal matters] sufficient 
                medical, legal, and other expertise (including 
                knowledge of the program under this title) and 
                sufficient staffing to make reconsiderations 
                under this subsection.
                  (B) Reconsiderations.--
                          (i) In general.--The qualified 
                        independent contractor shall review 
                        initial determinations. Where an 
                        initial determination is made with 
                        respect to whether an item or service 
                        is reasonable and necessary for the 
                        diagnosis or treatment of illness or 
                        injury (under section 1862(a)(1)(A)), 
                        such review shall include consideration 
                        of the facts and circumstances of the 
                        initial determination by a panel of 
                        physicians or other appropriate health 
                        care professionals and any decisions 
                        with respect to the reconsideration 
                        shall be based on applicable 
                        information, including clinical 
                        experience (including the medical 
                        records of the individual involved) and 
                        medical, technical, and scientific 
                        evidence.

           *       *       *       *       *       *       *

                  [(D) Limitation on individual reviewing 
                determinations.--
                          [(i) Physicians and health care 
                        professional.--No physician or health 
                        care professional under the employ of a 
                        qualified independent contractor may 
                        review--
                                  [(I) determinations regarding 
                                health care services furnished 
                                to a patient if the physician 
                                or health care professional was 
                                directly responsible for 
                                furnishing such services; or
                                  [(II) determinations 
                                regarding health care services 
                                provided in or by an 
                                institution, organization, or 
                                agency, if the physician or any 
                                member of the family of the 
                                physician or health care 
                                professional has, directly or 
                                indirectly, a significant 
                                financial interest in such 
                                institution, organization, or 
                                agency.
                          [(ii) Family described.--For purposes 
                        of this paragraph, the family of a 
                        physician or health care professional 
                        includes the spouse (other than a 
                        spouse who is legally separated from 
                        the physician or health care 
                        professional under a decree of divorce 
                        or separate maintenance), children 
                        (including stepchildren and legally 
                        adopted children), grandchildren, 
                        parents, and grandparents of the 
                        physician or health care professional.]
                  (D) Qualifications for reviewers.--The 
                requirements of subsection (g) shall be met 
                (relating to qualifications of reviewing 
                professionals).
                  (E) Explanation of decision.--Any decision 
                with respect to a reconsideration of a 
                qualified independent contractor shall be in 
                writing, be written in a manner calculated to 
                be understood by the individual entitled to 
                benefits under part A or enrolled under part B, 
                or both, and shall include (to the extent 
                appropriate) and shall include a detailed 
                explanation of the decision as well as a 
                discussion of the pertinent facts and 
                applicable regulations applied in making such 
                decision, and a notification of the right to 
                appeal such determination and instructions on 
                how to initiate such appeal under this section 
                and in the case of a determination of whether 
                an item or service is reasonable and necessary 
                for the diagnosis or treatment of illness or 
                injury (under section 1862(a)(1)(A)) an 
                explanation of the medical and scientific 
                rationale for the decision.

           *       *       *       *       *       *       *

                  (I) Data collection.--
                          (i) * * *
                          (ii) Type of data collected.--Each 
                        qualified independent contractor shall 
                        keep accurate records of each decision 
                        made, consistent with standards 
                        established by the Secretary for such 
                        purpose. Such records shall be 
                        maintained in an electronic database in 
                        a manner that provides for 
                        identification of the following:
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) Situations suggesting 
                                the need for changes in 
                                national or local coverage 
                                [policy] determination.
                                  (IV) Situations suggesting 
                                the need for changes in local 
                                [medical review policies] 
                                coverage determinations.

           *       *       *       *       *       *       *

                  (J) Hearings by the secretary.--The qualified 
                independent contractor shall (i) [prepare] 
                submit such information as is required for an 
                appeal of a decision of the contractor [with 
                respect to a reconsideration to the Secretary 
                for a hearing, including as necessary, 
                explanations of issues involved in the decision 
                and relevant policies], and (ii) participate in 
                such hearings as required by the Secretary.
                  (K) Independence requirements.--
                          (i) In general.--Subject to clause 
                        (ii), a qualified independent 
                        contractor shall not conduct any 
                        activities in a case unless the 
                        entity--
                                  (I) is not a related party 
                                (as defined in subsection 
                                (g)(5));
                                  (II) does not have a material 
                                familial, financial, or 
                                professional relationship with 
                                such a party in relation to 
                                such case; and
                                  (III) does not otherwise have 
                                a conflict of interest with 
                                such a party.
                          (ii) Exception for reasonable 
                        compensation.--Nothing in clause (i) 
                        shall be construed to prohibit receipt 
                        by a qualified independent contractor 
                        of compensation from the Secretary for 
                        the conduct of activities under this 
                        section if the compensation is provided 
                        consistent with clause (iii).
                          (iii) Limitations on entity 
                        compensation.--Compensation provided by 
                        the Secretary to a qualified 
                        independent contractor in connection 
                        with reviews under this section shall 
                        not be contingent on any decision 
                        rendered by the contractor or by any 
                        reviewing professional.
          (4) Number of qualified independent contractors.--The 
        Secretary shall enter into contracts with [not fewer 
        than 12 qualified independent contractors under this 
        subsection] a sufficient number of qualified 
        independent contractors (but not fewer than 4 such 
        contractors) to conduct reconsiderations consistent 
        with the timeframes applicable under this subsection.

           *       *       *       *       *       *       *

  (d) Deadlines for Hearings by the Secretary; Notice.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Notice.--Notice of the decision of an 
        administrative law judge shall be in writing in a 
        manner calculated to be understood by the individual 
        entitled to benefits under part A or enrolled under 
        part B, or both, and shall include--
                  (A) the specific reasons for the 
                determination (including, to the extent 
                appropriate, a summary of the clinical or 
                scientific evidence used in making the 
                determination);
                  (B) the procedures for obtaining additional 
                information concerning the decision; and
                  (C) notification of the right to appeal the 
                decision and instructions on how to initiate 
                such an appeal under this section.

           *       *       *       *       *       *       *

  (f ) Review of Coverage Determinations.--
          (1) * * *
          (2) Local coverage determination.--
                  (A) In general.--Review of any local coverage 
                determination shall be subject to the following 
                limitations:
                          (i) Upon the filing of a complaint by 
                        an aggrieved party, such a 
                        determination shall be reviewed by an 
                        administrative law judge [of the Social 
                        Security Administration]. The 
                        administrative law judge--
                                  (I) * * *

           *       *       *       *       *       *       *

          (4) Pending national coverage determinations.--
                  (A) In general.--In the event the Secretary 
                has not issued a national coverage or 
                noncoverage determination with respect to a 
                particular type or class of items or services, 
                an aggrieved person (as described in paragraph 
                (5)) may submit to the Secretary a request to 
                make such a determination with respect to such 
                items or services. By not later than the end of 
                the 90-day period beginning on the date the 
                Secretary receives such a request 
                (notwithstanding the receipt by the Secretary 
                of new evidence (if any) during such 90-day 
                period), the Secretary shall take one of the 
                following actions:
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) Issue a notice that states that 
                        the Secretary has not completed a 
                        review of the request for a national 
                        coverage determination and that 
                        includes an identification of the 
                        remaining steps in the Secretary's 
                        review process and a deadline by which 
                        the Secretary will complete the review 
                        and take an action described in 
                        [subclause (I), (II), or (III)] clause 
                        (i), (ii), or (iii).
                  (B) Deemed action by the secretary.--In the 
                case of an action described in [clause (i)(IV)] 
                subparagraph (A)(iv), if the Secretary fails to 
                take an action referred to in such clause by 
                the deadline specified by the Secretary under 
                such clause, then the Secretary is deemed to 
                have taken an action described in [clause 
                (i)(III)] subparagraph (A)(iii) as of the 
                deadline.
                  (C) Explanation of determination.--When 
                issuing a determination under [clause (i)] 
                subparagraph (A), the Secretary shall include 
                an explanation of the basis for the 
                determination. An action taken under clause (i) 
                (other than [subclause (IV)] clause (iv)) is 
                deemed to be a national coverage determination 
                for purposes of review under [subparagraph (A)] 
                paragraph (1)(A).

           *       *       *       *       *       *       *

  (g) Qualifications of Reviewers.--
          (1) In general.--In reviewing determinations under 
        this section, a qualified independent contractor shall 
        assure that--
                  (A) each individual conducting a review shall 
                meet the qualifications of paragraph (2);
                  (B) compensation provided by the contractor 
                to each such reviewer is consistent with 
                paragraph (3); and
                  (C) in the case of a review by a panel 
                described in subsection (c)(3)(B) composed of 
                physicians or other health care professionals 
                (each in this subsection referred to as a 
                ``reviewing professional''), a reviewing 
                professional meets the qualifications described 
                in paragraph (4) and, where a claim is 
                regarding the furnishing of treatment by a 
                physician (allopathic or osteopathic) or the 
                provision of items or services by a physician 
                (allopathic or osteopathic), a reviewing 
                professional shall be a physician (allopathic 
                or osteopathic).
          (2) Independence.--
                  (A) In general.--Subject to subparagraph (B), 
                each individual conducting a review in a case 
                shall--
                          (i) not be a related party (as 
                        defined in paragraph (5));
                          (ii) not have a material familial, 
                        financial, or professional relationship 
                        with such a party in the case under 
                        review; and
                          (iii) not otherwise have a conflict 
                        of interest with such a party.
                  (B) Exception.--Nothing in subparagraph (A) 
                shall be construed to--
                          (i) prohibit an individual, solely on 
                        the basis of a participation agreement 
                        with a fiscal intermediary, carrier, or 
                        other contractor, from serving as a 
                        reviewing professional if--
                                  (I) the individual is not 
                                involved in the provision of 
                                items or services in the case 
                                under review;
                                  (II) the fact of such an 
                                agreement is disclosed to the 
                                Secretary and the individual 
                                entitled to benefits under part 
                                A or enrolled under part B, or 
                                both, (or authorized 
                                representative) and neither 
                                party objects; and
                                  (III) the individual is not 
                                an employee of the 
                                intermediary, carrier, or 
                                contractor and does not provide 
                                services exclusively or 
                                primarily to or on behalf of 
                                such intermediary, carrier, or 
                                contractor;
                          (ii) prohibit an individual who has 
                        staff privileges at the institution 
                        where the treatment involved takes 
                        place from serving as a reviewer merely 
                        on the basis of having such staff 
                        privileges if the existence of such 
                        privileges is disclosed to the 
                        Secretary and such individual (or 
                        authorized representative), and neither 
                        party objects; or
                          (iii) prohibit receipt of 
                        compensation by a reviewing 
                        professional from a contractor if the 
                        compensation is provided consistent 
                        with paragraph (3).
                For purposes of this paragraph, the term 
                ``participation agreement'' means an agreement 
                relating to the provision of health care 
                services by the individual and does not include 
                the provision of services as a reviewer under 
                this subsection.
          (3) Limitations on reviewer compensation.--
        Compensation provided by a qualified independent 
        contractor to a reviewer in connection with a review 
        under this section shall not be contingent on the 
        decision rendered by the reviewer.
          (4) Licensure and expertise.--Each reviewing 
        professional shall be--
                  (A) a physician (allopathic or osteopathic) 
                who is appropriately credentialed or licensed 
                in one or more States to deliver health care 
                services and has medical expertise in the field 
                of practice that is appropriate for the items 
                or services at issue; or
                  (B) a health care professional who is legally 
                authorized in one or more States (in accordance 
                with State law or the State regulatory 
                mechanism provided by State law) to furnish the 
                health care items or services at issue and has 
                medical expertise in the field of practice that 
                is appropriate for such items or services.
          (5) Related party defined.--For purposes of this 
        section, the term ``related party'' means, with respect 
        to a case under this title involving a specific 
        individual entitled to benefits under part A or 
        enrolled under part B, or both, any of the following:
                  (A) The Secretary, the medicare 
                administrative contractor involved, or any 
                fiduciary, officer, director, or employee of 
                the Department of Health and Human Services, or 
                of such contractor.
                  (B) The individual (or authorized 
                representative).
                  (C) The health care professional that 
                provides the items or services involved in the 
                case.
                  (D) The institution at which the items or 
                services (or treatment) involved in the case 
                are provided.
                  (E) The manufacturer of any drug or other 
                item that is included in the items or services 
                involved in the case.
                  (F) Any other party determined under any 
                regulations to have a substantial interest in 
                the case involved.
  (h) Prior Determination Process for Certain Items and 
Services.--
          (1) Establishment of process.--
                  (A) In general.--With respect to a medicare 
                administrative contractor that has a contract 
                under section 1874A that provides for making 
                payments under this title with respect to 
                eligible items and services described in 
                subparagraph (C), the Secretary shall establish 
                a prior determination process that meets the 
                requirements of this subsection and that shall 
                be applied by such contractor in the case of 
                eligible requesters.
                  (B) Eligible requester.--For purposes of this 
                subsection, each of the following shall be an 
                eligible requester:
                          (i) A physician, but only with 
                        respect to eligible items and services 
                        for which the physician may be paid 
                        directly.
                          (ii) An individual entitled to 
                        benefits under this title, but only 
                        with respect to an item or service for 
                        which the individual receives, from the 
                        physician who may be paid directly for 
                        the item or service, an advance 
                        beneficiary notice under section 
                        1879(a) that payment may not be made 
                        (or may no longer be made) for the item 
                        or service under this title.
                  (C) Eligible items and services.--For 
                purposes of this subsection and subject to 
                paragraph (2), eligible items and services are 
                items and services which are physicians' 
                services (as defined in paragraph (4)(A) of 
                section 1848(f) for purposes of calculating the 
                sustainable growth rate under such section).
          (2) Secretarial flexibility.--The Secretary shall 
        establish by regulation reasonable limits on the 
        categories of eligible items and services for which a 
        prior determination of coverage may be requested under 
        this subsection. In establishing such limits, the 
        Secretary may consider the dollar amount involved with 
        respect to the item or service, administrative costs 
        and burdens, and other relevant factors.
          (3) Request for prior determination.--
                  (A) In general.--Subject to paragraph (2), 
                under the process established under this 
                subsection an eligible requester may submit to 
                the contractor a request for a determination, 
                before the furnishing of an eligible item or 
                service involved as to whether the item or 
                service is covered under this title consistent 
                with the applicable requirements of section 
                1862(a)(1)(A) (relating to medical necessity).
                  (B) Accompanying documentation.--The 
                Secretary may require that the request be 
                accompanied by a description of the item or 
                service, supporting documentation relating to 
                the medical necessity for the item or service, 
                and any other appropriate documentation. In the 
                case of a request submitted by an eligible 
                requester who is described in paragraph 
                (1)(B)(ii), the Secretary may require that the 
                request also be accompanied by a copy of the 
                advance beneficiary notice involved.
          (4) Response to request.--
                  (A) In general.--Under such process, the 
                contractor shall provide the eligible requester 
                with written notice of a determination as to 
                whether--
                          (i) the item or service is so 
                        covered;
                          (ii) the item or service is not so 
                        covered; or
                          (iii) the contractor lacks sufficient 
                        information to make a coverage 
                        determination.
                If the contractor makes the determination 
                described in clause (iii), the contractor shall 
                include in the notice a description of the 
                additional information required to make the 
                coverage determination.
                  (B) Deadline to respond.--Such notice shall 
                be provided within the same time period as the 
                time period applicable to the contractor 
                providing notice of initial determinations on a 
                claim for benefits under subsection (a)(2)(A).
                  (C) Informing beneficiary in case of 
                physician request.--In the case of a request in 
                which an eligible requester is not the 
                individual described in paragraph (1)(B)(ii), 
                the process shall provide that the individual 
                to whom the item or service is proposed to be 
                furnished shall be informed of any 
                determination described in clause (ii) 
                (relating to a determination of non-coverage) 
                and the right (referred to in paragraph (6)(B)) 
                to obtain the item or service and have a claim 
                submitted for the item or service.
          (5) Effect of determinations.--
                  (A) Binding nature of positive 
                determination.--If the contractor makes the 
                determination described in paragraph (4)(A)(i), 
                such determination shall be binding on the 
                contractor in the absence of fraud or evidence 
                of misrepresentation of facts presented to the 
                contractor.
                  (B) Notice and right to redetermination in 
                case of a denial.--
                          (i) In general.--If the contractor 
                        makes the determination described in 
                        paragraph (4)(A)(ii)--
                                  (I) the eligible requester 
                                has the right to a 
                                redetermination by the 
                                contractor on the determination 
                                that the item or service is not 
                                so covered; and
                                  (II) the contractor shall 
                                include in notice under 
                                paragraph (4)(A) a brief 
                                explanation of the basis for 
                                the determination, including on 
                                what national or local coverage 
                                or noncoverage determination 
                                (if any) the determination is 
                                based, and the right to such a 
                                redetermination.
                          (ii) Deadline for redeterminations.--
                        The contractor shall complete and 
                        provide notice of such redetermination 
                        within the same time period as the time 
                        period applicable to the contractor 
                        providing notice of redeterminations 
                        relating to a claim for benefits under 
                        subsection (a)(3)(C)(ii).
          (6) Limitation on further review.--
                  (A) In general.--Contractor determinations 
                described in paragraph (4)(A)(ii) or 
                (4)(A)(iii) (and redeterminations made under 
                paragraph (5)(B)), relating to pre-service 
                claims are not subject to further 
                administrative appeal or judicial review under 
                this section or otherwise.
                  (B) Decision not to seek prior determination 
                or negative determination does not impact right 
                to obtain services, seek reimbursement, or 
                appeal rights.--Nothing in this subsection 
                shall be construed as affecting the right of an 
                individual who--
                          (i) decides not to seek a prior 
                        determination under this subsection 
                        with respect to items or services; or
                          (ii) seeks such a determination and 
                        has received a determination described 
                        in paragraph (4)(A)(ii),
                from receiving (and submitting a claim for) 
                such items services and from obtaining 
                administrative or judicial review respecting 
                such claim under the other applicable 
                provisions of this section. Failure to seek a 
                prior determination under this subsection with 
                respect to items and services shall not be 
                taken into account in such administrative or 
                judicial review.
                  (C) No prior determination after receipt of 
                services.--Once an individual is provided items 
                and services, there shall be no prior 
                determination under this subsection with 
                respect to such items or services.

           *       *       *       *       *       *       *


                              REGULATIONS

  Sec. 1871. (a)(1) * * *

           *       *       *       *       *       *       *

  (3) If the Secretary publishes a final regulation that 
includes a provision that is not a logical outgrowth of a 
previously published notice of proposed rulemaking or interim 
final rule, such provision shall be treated as a proposed 
regulation and shall not take effect until there is the further 
opportunity for public comment and a publication of the 
provision again as a final regulation.

           *       *       *       *       *       *       *

  (d)(1)(A) A substantive change in regulations, manual 
instructions, interpretative rules, statements of policy, or 
guidelines of general applicability under this title shall not 
be applied (by extrapolation or otherwise) retroactively to 
items and services furnished before the effective date of the 
change, unless the Secretary determines that--
          (i) such retroactive application is necessary to 
        comply with statutory requirements; or
          (ii) failure to apply the change retroactively would 
        be contrary to the public interest.
  (B)(i) Except as provided in clause (ii), a substantive 
change referred to in subparagraph (A) shall not become 
effective before the end of the 30-day period that begins on 
the date that the Secretary has issued or published, as the 
case may be, the substantive change.
  (ii) The Secretary may provide for such a substantive change 
to take effect on a date that precedes the end of the 30-day 
period under clause (i) if the Secretary finds that waiver of 
such 30-day period is necessary to comply with statutory 
requirements or that the application of such 30-day period is 
contrary to the public interest. If the Secretary provides for 
an earlier effective date pursuant to this clause, the 
Secretary shall include in the issuance or publication of the 
substantive change a finding described in the first sentence, 
and a brief statement of the reasons for such finding.
  (C) No action shall be taken against a provider of services 
or supplier with respect to noncompliance with such a 
substantive change for items and services furnished before the 
effective date of such a change.
  (2)(A) If--
          (i) a provider of services or supplier follows the 
        written guidance (which may be transmitted 
        electronically) provided by the Secretary or by a 
        medicare contractor (as defined in section 1889(g)) 
        acting within the scope of the contractor's contract 
        authority, with respect to the furnishing of items or 
        services and submission of a claim for benefits for 
        such items or services with respect to such provider or 
        supplier;
          (ii) the Secretary determines that the provider of 
        services or supplier has accurately presented the 
        circumstances relating to such items, services, and 
        claim to the contractor in writing; and
          (iii) the guidance was in error;
the provider of services or supplier shall not be subject to 
any sanction (including any penalty or requirement for 
repayment of any amount) if the provider of services or 
supplier reasonably relied on such guidance.
  (B) Subparagraph (A) shall not be construed as preventing the 
recoupment or repayment (without any additional penalty) 
relating to an overpayment insofar as the overpayment was 
solely the result of a clerical or technical operational error.
  (e)(1) Not later than 2 years after the date of the enactment 
of this subsection, and every 2 years thereafter, the Secretary 
shall submit to Congress a report with respect to the 
administration of this title and areas of inconsistency or 
conflict among the various provisions under law and regulation.
  (2) In preparing a report under paragraph (1), the Secretary 
shall collect--
          (A) information from individuals entitled to benefits 
        under part A or enrolled under part B, or both, 
        providers of services, and suppliers and from the 
        Medicare Beneficiary Ombudsman and the Medicare 
        Provider Ombudsman with respect to such areas of 
        inconsistency and conflict; and
          (B) information from medicare contractors that tracks 
        the nature of written and telephone inquiries.
  (3) A report under paragraph (1) shall include a description 
of efforts by the Secretary to reduce such inconsistency or 
conflicts, and recommendations for legislation or 
administrative action that the Secretary determines appropriate 
to further reduce such inconsistency or conflicts.

           *       *       *       *       *       *       *


           CONTRACTS WITH MEDICARE ADMINISTRATIVE CONTRACTORS

  Sec. 1874A. (a) Authority.--
          (1) Authority to enter into contracts.--The Secretary 
        may enter into contracts with any eligible entity to 
        serve as a medicare administrative contractor with 
        respect to the performance of any or all of the 
        functions described in paragraph (4) or parts of those 
        functions (or, to the extent provided in a contract, to 
        secure performance thereof by other entities).
          (2) Eligibility of entities.--An entity is eligible 
        to enter into a contract with respect to the 
        performance of a particular function described in 
        paragraph (4) only if--
                  (A) the entity has demonstrated capability to 
                carry out such function;
                  (B) the entity complies with such conflict of 
                interest standards as are generally applicable 
                to Federal acquisition and procurement;
                  (C) the entity has sufficient assets to 
                financially support the performance of such 
                function; and
                  (D) the entity meets such other requirements 
                as the Secretary may impose.
          (3) Medicare administrative contractor defined.--For 
        purposes of this title and title XI--
                  (A) In general.--The term ``medicare 
                administrative contractor'' means an agency, 
                organization, or other person with a contract 
                under this section.
                  (B) Appropriate medicare administrative 
                contractor.--With respect to the performance of 
                a particular function in relation to an 
                individual entitled to benefits under part A or 
                enrolled under part B, or both, a specific 
                provider of services or supplier (or class of 
                such providers of services or suppliers), the 
                ``appropriate'' medicare administrative 
                contractor is the medicare administrative 
                contractor that has a contract under this 
                section with respect to the performance of that 
                function in relation to that individual, 
                provider of services or supplier or class of 
                provider of services or supplier.
          (4) Functions described.--The functions referred to 
        in paragraphs (1) and (2) are payment functions, 
        provider services functions, and functions relating to 
        services furnished to individuals entitled to benefits 
        under part A or enrolled under part B, or both, as 
        follows:
                  (A) Determination of payment amounts.--
                Determining (subject to the provisions of 
                section 1878 and to such review by the 
                Secretary as may be provided for by the 
                contracts) the amount of the payments required 
                pursuant to this title to be made to providers 
                of services, suppliers and individuals.
                  (B) Making payments.--Making payments 
                described in subparagraph (A) (including 
                receipt, disbursement, and accounting for funds 
                in making such payments).
                  (C) Beneficiary education and assistance.--
                Providing education and outreach to individuals 
                entitled to benefits under part A or enrolled 
                under part B, or both, and providing assistance 
                to those individuals with specific issues, 
                concerns or problems.
                  (D) Provider consultative services.--
                Providing consultative services to 
                institutions, agencies, and other persons to 
                enable them to establish and maintain fiscal 
                records necessary for purposes of this title 
                and otherwise to qualify as providers of 
                services or suppliers.
                  (E) Communication with providers.--
                Communicating to providers of services and 
                suppliers any information or instructions 
                furnished to the medicare administrative 
                contractor by the Secretary, and facilitating 
                communication between such providers and 
                suppliers and the Secretary.
                  (F) Provider education and technical 
                assistance.--Performing the functions relating 
                to provider education, training, and technical 
                assistance.
                  (G) Additional functions.--Performing such 
                other functions as are necessary to carry out 
                the purposes of this title.
          (5) Relationship to mip contracts.--
                  (A) Nonduplication of duties.--In entering 
                into contracts under this section, the 
                Secretary shall assure that functions of 
                medicare administrative contractors in carrying 
                out activities under parts A and B do not 
                duplicate activities carried out under the 
                Medicare Integrity Program under section 1893. 
                The previous sentence shall not apply with 
                respect to the activity described in section 
                1893(b)(5) (relating to prior authorization of 
                certain items of durable medical equipment 
                under section 1834(a)(15)).
                  (B) Construction.--An entity shall not be 
                treated as a medicare administrative contractor 
                merely by reason of having entered into a 
                contract with the Secretary under section 1893.
          (6) Application of federal acquisition regulation.--
        Except to the extent inconsistent with a specific 
        requirement of this title, the Federal Acquisition 
        Regulation applies to contracts under this title.
  (b) Contracting Requirements.--
          (1) Use of competitive procedures.--
                  (A) In general.--Except as provided in laws 
                with general applicability to Federal 
                acquisition and procurement or in subparagraph 
                (B), the Secretary shall use competitive 
                procedures when entering into contracts with 
                medicare administrative contractors under this 
                section, taking into account performance 
                quality as well as price and other factors.
                  (B) Renewal of contracts.--The Secretary may 
                renew a contract with a medicare administrative 
                contractor under this section from term to term 
                without regard to section 5 of title 41, United 
                States Code, or any other provision of law 
                requiring competition, if the medicare 
                administrative contractor has met or exceeded 
                the performance requirements applicable with 
                respect to the contract and contractor, except 
                that the Secretary shall provide for the 
                application of competitive procedures under 
                such a contract not less frequently than once 
                every five years.
                  (C) Transfer of functions.--The Secretary may 
                transfer functions among medicare 
                administrative contractors consistent with the 
                provisions of this paragraph. The Secretary 
                shall ensure that performance quality is 
                considered in such transfers. The Secretary 
                shall provide public notice (whether in the 
                Federal Register or otherwise) of any such 
                transfer (including a description of the 
                functions so transferred, a description of the 
                providers of services and suppliers affected by 
                such transfer, and contact information for the 
                contractors involved).
                  (D) Incentives for quality.--The Secretary 
                shall provide incentives for medicare 
                administrative contractors to provide quality 
                service and to promote efficiency.
          (2) Compliance with requirements.--No contract under 
        this section shall be entered into with any medicare 
        administrative contractor unless the Secretary finds 
        that such medicare administrative contractor will 
        perform its obligations under the contract efficiently 
        and effectively and will meet such requirements as to 
        financial responsibility, legal authority, quality of 
        services provided, and other matters as the Secretary 
        finds pertinent.
          (3) Performance requirements.--
                  (A) Development of specific performance 
                requirements.--In developing contract 
                performance requirements, the Secretary shall 
                develop performance requirements applicable to 
                functions described in subsection (a)(4).
                  (B) Consultation.-- In developing such 
                requirements, the Secretary may consult with 
                providers of services and suppliers, 
                organizations representing individuals entitled 
                to benefits under part A or enrolled under part 
                B, or both, and organizations and agencies 
                performing functions necessary to carry out the 
                purposes of this section with respect to such 
                performance requirements.
                  (C) Inclusion in contracts.--All contractor 
                performance requirements shall be set forth in 
                the contract between the Secretary and the 
                appropriate medicare administrative contractor. 
                Such performance requirements--
                          (i) shall reflect the performance 
                        requirements developed under 
                        subparagraph (A), but may include 
                        additional performance requirements;
                          (ii) shall be used for evaluating 
                        contractor performance under the 
                        contract; and
                          (iii) shall be consistent with the 
                        written statement of work provided 
                        under the contract.
          (4) Information requirements.--The Secretary shall 
        not enter into a contract with a medicare 
        administrative contractor under this section unless the 
        contractor agrees--
                  (A) to furnish to the Secretary such timely 
                information and reports as the Secretary may 
                find necessary in performing his functions 
                under this title; and
                  (B) to maintain such records and afford such 
                access thereto as the Secretary finds necessary 
                to assure the correctness and verification of 
                the information and reports under subparagraph 
                (A) and otherwise to carry out the purposes of 
                this title.
          (5) Surety bond.--A contract with a medicare 
        administrative contractor under this section may 
        require the medicare administrative contractor, and any 
        of its officers or employees certifying payments or 
        disbursing funds pursuant to the contract, or otherwise 
        participating in carrying out the contract, to give 
        surety bond to the United States in such amount as the 
        Secretary may deem appropriate.
  (c) Terms and Conditions.--
          (1) In general.--A contract with any medicare 
        administrative contractor under this section may 
        contain such terms and conditions as the Secretary 
        finds necessary or appropriate and may provide for 
        advances of funds to the medicare administrative 
        contractor for the making of payments by it under 
        subsection (a)(4)(B).
          (2) Prohibition on mandates for certain data 
        collection.--The Secretary may not require, as a 
        condition of entering into, or renewing, a contract 
        under this section, that the medicare administrative 
        contractor match data obtained other than in its 
        activities under this title with data used in the 
        administration of this title for purposes of 
        identifying situations in which the provisions of 
        section 1862(b) may apply.
  (d) Limitation on Liability of Medicare Administrative 
Contractors and Certain Officers.--
          (1) Certifying officer.--No individual designated 
        pursuant to a contract under this section as a 
        certifying officer shall, in the absence of the 
        reckless disregard of the individual's obligations or 
        the intent by that individual to defraud the United 
        States, be liable with respect to any payments 
        certified by the individual under this section.
          (2) Disbursing officer.--No disbursing officer shall, 
        in the absence of the reckless disregard of the 
        officer's obligations or the intent by that officer to 
        defraud the United States, be liable with respect to 
        any payment by such officer under this section if it 
        was based upon an authorization (which meets the 
        applicable requirements for such internal controls 
        established by the Comptroller General) of a certifying 
        officer designated as provided in paragraph (1) of this 
        subsection.
          (3) Liability of medicare administrative 
        contractor.--
          (A) In general.--No medicare administrative 
        contractor shall be liable to the United States for a 
        payment by a certifying or disbursing officer unless, 
        in connection with such payment, the medicare 
        administrative contractor acted with reckless disregard 
        of its obligations under its medicare administrative 
        contract or with intent to defraud the United States.
          (B) Relationship to false claims act.--Nothing in 
        this subsection shall be construed to limit liability 
        for conduct that would constitute a violation of 
        sections 3729 through 3731 of title 31, United States 
        Code (commonly known as the ``False Claims Act'').
          (4) Indemnification by secretary.--
                  (A) In general.--Subject to subparagraphs (B) 
                and (D), in the case of a medicare 
                administrative contractor (or a person who is a 
                director, officer, or employee of such a 
                contractor or who is engaged by the contractor 
                to participate directly in the claims 
                administration process) who is made a party to 
                any judicial or administrative proceeding 
                arising from or relating directly to the claims 
                administration process under this title, the 
                Secretary may, to the extent the Secretary 
                determines to be appropriate and as specified 
                in the contract with the contractor, indemnify 
                the contractor and such persons.
                  (B) Conditions.--The Secretary may not 
                provide indemnification under subparagraph (A) 
                insofar as the liability for such costs arises 
                directly from conduct that is determined by the 
                judicial proceeding or by the Secretary to be 
                criminal in nature, fraudulent, or grossly 
                negligent. If indemnification is provided by 
                the Secretary with respect to a contractor 
                before a determination that such costs arose 
                directly from such conduct, the contractor 
                shall reimburse the Secretary for costs of 
                indemnification.
                  (C) Scope of indemnification.--
                Indemnification by the Secretary under 
                subparagraph (A) may include payment of 
                judgments, settlements (subject to subparagraph 
                (D)), awards, and costs (including reasonable 
                legal expenses).
                  (D) Written approval for settlements.--A 
                contractor or other person described in 
                subparagraph (A) may not propose to negotiate a 
                settlement or compromise of a proceeding 
                described in such subparagraph without the 
                prior written approval of the Secretary to 
                negotiate such settlement or compromise. Any 
                indemnification under subparagraph (A) with 
                respect to amounts paid under a settlement or 
                compromise of a proceeding described in such 
                subparagraph are conditioned upon prior written 
                approval by the Secretary of the final 
                settlement or compromise.
                  (E) Construction.--Nothing in this paragraph 
                shall be construed--
                          (i) to change any common law immunity 
                        that may be available to a medicare 
                        administrative contractor or person 
                        described in subparagraph (A); or
                          (ii) to permit the payment of costs 
                        not otherwise allowable, reasonable, or 
                        allocable under the Federal Acquisition 
                        Regulations.
  (e) Requirements for Information Security.--
          (1) Development of information security program.--A 
        medicare administrative contractor that performs the 
        functions referred to in subparagraphs (A) and (B) of 
        subsection (a)(4) (relating to determining and making 
        payments) shall implement a contractor-wide information 
        security program to provide information security for 
        the operation and assets of the contractor with respect 
        to such functions under this title. An information 
        security program under this paragraph shall meet the 
        requirements for information security programs imposed 
        on Federal agencies under paragraphs (1) through (8) of 
        section 3544(b) of title 44, United States Code (other 
        than requirements under paragraphs (2)(D)(i), (5)(A), 
        and (5)(B) of such section).
          (2) Independent audits.--
                  (A) Performance of annual evaluations.--Each 
                year a medicare administrative contractor that 
                performs the functions referred to in 
                subparagraphs (A) and (B) of subsection (a)(4) 
                (relating to determining and making payments) 
                shall undergo an evaluation of the information 
                security of the contractor with respect to such 
                functions under this title. The evaluation 
                shall--
                          (i) be performed by an entity that 
                        meets such requirements for 
                        independence as the Inspector General 
                        of the Department of Health and Human 
                        Services may establish; and
                          (ii) test the effectiveness of 
                        information security policies, 
                        procedures, and practices of a 
                        representative subset of the 
                        contractor's information systems (as 
                        defined in section 3502(8) of title 44, 
                        United States Code) relating to such 
                        functions under this title and an 
                        assessment of compliance with the 
                        requirements of this subsection and 
                        related information security policies, 
                        procedures, standards and guidelines, 
                        including policies and procedures as 
                        may be prescribed by the Director of 
                        the Office of Management and Budget and 
                        applicable information security 
                        standards promulgated under section 
                        11331 of title 40, United States Code.
                  (B) Deadline for initial evaluation.--
                          (i) New contractors.--In the case of 
                        a medicare administrative contractor 
                        covered by this subsection that has not 
                        previously performed the functions 
                        referred to in subparagraphs (A) and 
                        (B) of subsection (a)(4) (relating to 
                        determining and making payments) as a 
                        fiscal intermediary or carrier under 
                        section 1816 or 1842, the first 
                        independent evaluation conducted 
                        pursuant subparagraph (A) shall be 
                        completed prior to commencing such 
                        functions.
                          (ii) Other contractors.--In the case 
                        of a medicare administrative contractor 
                        covered by this subsection that is not 
                        described in clause (i), the first 
                        independent evaluation conducted 
                        pursuant subparagraph (A) shall be 
                        completed within 1 year after the date 
                        the contractor commences functions 
                        referred to in clause (i) under this 
                        section.
                  (C) Reports on evaluations.--
                          (i) To the department of health and 
                        human services.--The results of 
                        independent evaluations under 
                        subparagraph (A) shall be submitted 
                        promptly to the Inspector General of 
                        the Department of Health and Human 
                        Services and to the Secretary.
                          (ii) To congress.--The Inspector 
                        General of Department of Health and 
                        Human Services shall submit to Congress 
                        annual reports on the results of such 
                        evaluations, including assessments of 
                        the scope and sufficiency of such 
                        evaluations.
                          (iii) Agency reporting.--The 
                        Secretary shall address the results of 
                        such evaluations in reports required 
                        under section 3544(c) of title 44, 
                        United States Code.
  (f) Incentives To Improve Contractor Performance in Provider 
Education and Outreach.--The Secretary shall use specific 
claims payment error rates or similar methodology of medicare 
administrative contractors in the processing or reviewing of 
medicare claims in order to give such contractors an incentive 
to implement effective education and outreach programs for 
providers of services and suppliers.
  (g) Communications with Beneficiaries, Providers of Services 
and Suppliers.--
          (1) Communication strategy.--The Secretary shall 
        develop a strategy for communications with individuals 
        entitled to benefits under part A or enrolled under 
        part B, or both, and with providers of services and 
        suppliers under this title.
          (2) Response to written inquiries.--Each medicare 
        administrative contractor shall, for those providers of 
        services and suppliers which submit claims to the 
        contractor for claims processing and for those 
        individuals entitled to benefits under part A or 
        enrolled under part B, or both, with respect to whom 
        claims are submitted for claims processing, provide 
        general written responses (which may be through 
        electronic transmission) in a clear, concise, and 
        accurate manner to inquiries of providers of services, 
        suppliers and individuals entitled to benefits under 
        part A or enrolled under part B, or both, concerning 
        the programs under this title within 45 business days 
        of the date of receipt of such inquiries.
          (3) Response to toll-free lines.--The Secretary shall 
        ensure that each medicare administrative contractor 
        shall provide, for those providers of services and 
        suppliers which submit claims to the contractor for 
        claims processing and for those individuals entitled to 
        benefits under part A or enrolled under part B, or 
        both, with respect to whom claims are submitted for 
        claims processing, a toll-free telephone number at 
        which such individuals, providers of services and 
        suppliers may obtain information regarding billing, 
        coding, claims, coverage, and other appropriate 
        information under this title.
          (4) Monitoring of contractor responses.--
                  (A) In general.--Each medicare administrative 
                contractor shall, consistent with standards 
                developed by the Secretary under subparagraph 
                (B)--
                          (i) maintain a system for identifying 
                        who provides the information referred 
                        to in paragraphs (2) and (3); and
                          (ii) monitor the accuracy, 
                        consistency, and timeliness of the 
                        information so provided.
                  (B) Development of standards.--
                          (i) In general.--The Secretary shall 
                        establish and make public standards to 
                        monitor the accuracy, consistency, and 
                        timeliness of the information provided 
                        in response to written and telephone 
                        inquiries under this subsection. Such 
                        standards shall be consistent with the 
                        performance requirements established 
                        under subsection (b)(3).
                          (ii) Evaluation.--In conducting 
                        evaluations of individual medicare 
                        administrative contractors, the 
                        Secretary shall take into account the 
                        results of the monitoring conducted 
                        under subparagraph (A) taking into 
                        account as performance requirements the 
                        standards established under clause (i). 
                        The Secretary shall, in consultation 
                        with organizations representing 
                        providers of services, suppliers, and 
                        individuals entitled to benefits under 
                        part A or enrolled under part B, or 
                        both, establish standards relating to 
                        the accuracy, consistency, and 
                        timeliness of the information so 
                        provided.
                  (C) Direct monitoring.--Nothing in this 
                paragraph shall be construed as preventing the 
                Secretary from directly monitoring the 
                accuracy, consistency, and timeliness of the 
                information so provided.
  (h) Conduct of Prepayment Review.--
          (1) Conduct of random prepayment review.--
                  (A) In general.--A medicare administrative 
                contractor may conduct random prepayment review 
                only to develop a contractor-wide or program-
                wide claims payment error rates or under such 
                additional circumstances as may be provided 
                under regulations, developed in consultation 
                with providers of services and suppliers.
                  (B) Use of standard protocols when conducting 
                prepayment reviews.--When a medicare 
                administrative contractor conducts a random 
                prepayment review, the contractor may conduct 
                such review only in accordance with a standard 
                protocol for random prepayment audits developed 
                by the Secretary.
                  (C) Construction.--Nothing in this paragraph 
                shall be construed as preventing the denial of 
                payments for claims actually reviewed under a 
                random prepayment review.
                  (D) Random prepayment review.--For purposes 
                of this subsection, the term ``random 
                prepayment review'' means a demand for the 
                production of records or documentation absent 
                cause with respect to a claim.
          (2) Limitations on non-random prepayment review.--
                  (A) Limitations on initiation of non-random 
                prepayment review.--A medicare administrative 
                contractor may not initiate non-random 
                prepayment review of a provider of services or 
                supplier based on the initial identification by 
                that provider of services or supplier of an 
                improper billing practice unless there is a 
                likelihood of sustained or high level of 
                payment error (as defined in subsection 
                (i)(3)(A)).
                  (B) Termination of non-random prepayment 
                review.--The Secretary shall issue regulations 
                relating to the termination, including 
                termination dates, of non-random prepayment 
                review. Such regulations may vary such a 
                termination date based upon the differences in 
                the circumstances triggering prepayment review.

           *       *       *       *       *       *       *


              PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

  Sec. 1889. (a) Coordination of Education Funding.--The 
Secretary shall coordinate the educational activities provided 
through medicare contractors (as defined in subsection (g), 
including under section 1893) in order to maximize the 
effectiveness of Federal education efforts for providers of 
services and suppliers.
  (b) Enhanced Education and Training.--
          (1) Additional resources.--There are authorized to be 
        appropriated to the Secretary (in appropriate part from 
        the Federal Hospital Insurance Trust Fund and the 
        Federal Supplementary Medical Insurance Trust Fund) 
        $25,000,000 for each of fiscal years 2005 and 2006 and 
        such sums as may be necessary for succeeding fiscal 
        years.
          (2) Use.--The funds made available under paragraph 
        (1) shall be used to increase the conduct by medicare 
        contractors of education and training of providers of 
        services and suppliers regarding billing, coding, and 
        other appropriate items and may also be used to improve 
        the accuracy, consistency, and timeliness of contractor 
        responses.
  (c) Tailoring Education and Training Activities for Small 
Providers or Suppliers.--
          (1) In general.--Insofar as a medicare contractor 
        conducts education and training activities, it shall 
        tailor such activities to meet the special needs of 
        small providers of services or suppliers (as defined in 
        paragraph (2)).
          (2) Small provider of services or supplier.--In this 
        subsection, the term ``small provider of services or 
        supplier'' means--
                  (A) a provider of services with fewer than 25 
                full-time-equivalent employees; or
                  (B) a supplier with fewer than 10 full-time-
                equivalent employees.
  (d) Internet Sites; FAQs.--The Secretary, and each medicare 
contractor insofar as it provides services (including claims 
processing) for providers of services or suppliers, shall 
maintain an Internet site which--
          (1) provides answers in an easily accessible format 
        to frequently asked questions, and
          (2) includes other published materials of the 
        contractor,
that relate to providers of services and suppliers under the 
programs under this title (and title XI insofar as it relates 
to such programs).
  (e) Encouragement of Participation in Education Program 
Activities.--A medicare contractor may not use a record of 
attendance at (or failure to attend) educational activities or 
other information gathered during an educational program 
conducted under this section or otherwise by the Secretary to 
select or track providers of services or suppliers for the 
purpose of conducting any type of audit or prepayment review.
  (f) Construction.--Nothing in this section or section 1893(g) 
shall be construed as providing for disclosure by a medicare 
contractor of information that would compromise pending law 
enforcement activities or reveal findings of law enforcement-
related audits.
  (g) Definitions.--For purposes of this section, the term 
``medicare contractor'' includes the following:
          (1) A medicare administrative contractor with a 
        contract under section 1874A, including a fiscal 
        intermediary with a contract under section 1816 and a 
        carrier with a contract under section 1842.
          (2) An eligible entity with a contract under section 
        1893.
Such term does not include, with respect to activities of a 
specific provider of services or supplier an entity that has no 
authority under this title or title IX with respect to such 
activities and such provider of services or supplier.

           *       *       *       *       *       *       *


                       MEDICARE INTEGRITY PROGRAM

  Sec. 1893. (a) * * *

           *       *       *       *       *       *       *

  (f) Recovery of Overpayments.--
          (1) Use of repayment plans.--
                  (A) In general.--If the repayment, within 30 
                days by a provider of services or supplier, of 
                an overpayment under this title would 
                constitute a hardship (as defined in 
                subparagraph (B)), subject to subparagraph (C), 
                upon request of the provider of services or 
                supplier the Secretary shall enter into a plan 
                with the provider of services or supplier for 
                the repayment (through offset or otherwise) of 
                such overpayment over a period of at least 6 
                months but not longer than 3 years (or not 
                longer than 5 years in the case of extreme 
                hardship, as determined by the Secretary). 
                Interest shall accrue on the balance through 
                the period of repayment. Such plan shall meet 
                terms and conditions determined to be 
                appropriate by the Secretary.
                  (B) Hardship.--
                          (i) In general.--For purposes of 
                        subparagraph (A), the repayment of an 
                        overpayment (or overpayments) within 30 
                        days is deemed to constitute a hardship 
                        if--
                                  (I) in the case of a provider 
                                of services that files cost 
                                reports, the aggregate amount 
                                of the overpayments exceeds 10 
                                percent of the amount paid 
                                under this title to the 
                                provider of services for the 
                                cost reporting period covered 
                                by the most recently submitted 
                                cost report; or
                                  (II) in the case of another 
                                provider of services or 
                                supplier, the aggregate amount 
                                of the overpayments exceeds 10 
                                percent of the amount paid 
                                under this title to the 
                                provider of services or 
                                supplier for the previous 
                                calendar year.
                          (ii) Rule of application.--The 
                        Secretary shall establish rules for the 
                        application of this subparagraph in the 
                        case of a provider of services or 
                        supplier that was not paid under this 
                        title during the previous year or was 
                        paid under this title only during a 
                        portion of that year.
                          (iii) Treatment of previous 
                        overpayments.--If a provider of 
                        services or supplier has entered into a 
                        repayment plan under subparagraph (A) 
                        with respect to a specific overpayment 
                        amount, such payment amount under the 
                        repayment plan shall not be taken into 
                        account under clause (i) with respect 
                        to subsequent overpayment amounts.
                  (C) Exceptions.--Subparagraph (A) shall not 
                apply if--
                          (i) the Secretary has reason to 
                        suspect that the provider of services 
                        or supplier may file for bankruptcy or 
                        otherwise cease to do business or 
                        discontinue participation in the 
                        program under this title; or
                          (ii) there is an indication of fraud 
                        or abuse committed against the program.
                  (D) Immediate collection if violation of 
                repayment plan.--If a provider of services or 
                supplier fails to make a payment in accordance 
                with a repayment plan under this paragraph, the 
                Secretary may immediately seek to offset or 
                otherwise recover the total balance outstanding 
                (including applicable interest) under the 
                repayment plan.
                  (E) Relation to no fault provision.--Nothing 
                in this paragraph shall be construed as 
                affecting the application of section 1870(c) 
                (relating to no adjustment in the cases of 
                certain overpayments).
          (2) Limitation on recoupment.--
                  (A) In general.--In the case of a provider of 
                services or supplier that is determined to have 
                received an overpayment under this title and 
                that seeks a reconsideration by a qualified 
                independent contractor on such determination 
                under section 1869(b)(1), the Secretary may not 
                take any action (or authorize any other person, 
                including any medicare contractor, as defined 
                in subparagraph (C)) to recoup the overpayment 
                until the date the decision on the 
                reconsideration has been rendered. If the 
                provisions of section 1869(b)(1) (providing for 
                such a reconsideration by a qualified 
                independent contractor) are not in effect, in 
                applying the previous sentence any reference to 
                such a reconsideration shall be treated as a 
                reference to a redetermination by the fiscal 
                intermediary or carrier involved.
                  (B) Collection with interest.--Insofar as the 
                determination on such appeal is against the 
                provider of services or supplier, interest on 
                the overpayment shall accrue on and after the 
                date of the original notice of overpayment. 
                Insofar as such determination against the 
                provider of services or supplier is later 
                reversed, the Secretary shall provide for 
                repayment of the amount recouped plus interest 
                at the same rate as would apply under the 
                previous sentence for the period in which the 
                amount was recouped.
                  (C) Medicare contractor defined.--For 
                purposes of this subsection, the term 
                ``medicare contractor'' has the meaning given 
                such term in section 1889(g).
          (3) Limitation on use of extrapolation.--A medicare 
        contractor may not use extrapolation to determine 
        overpayment amounts to be recovered by recoupment, 
        offset, or otherwise unless--
                  (A) there is a sustained or high level of 
                payment error (as defined by the Secretary by 
                regulation); or
                  (B) documented educational intervention has 
                failed to correct the payment error (as 
                determined by the Secretary).
          (4) Provision of supporting documentation.--In the 
        case of a provider of services or supplier with respect 
        to which amounts were previously overpaid, a medicare 
        contractor may request the periodic production of 
        records or supporting documentation for a limited 
        sample of submitted claims to ensure that the previous 
        practice is not continuing.
          (5) Consent settlement reforms.--
                  (A) In general.--The Secretary may use a 
                consent settlement (as defined in subparagraph 
                (D)) to settle a projected overpayment.
                  (B) Opportunity to submit additional 
                information before consent settlement offer.--
                Before offering a provider of services or 
                supplier a consent settlement, the Secretary 
                shall--
                          (i) communicate to the provider of 
                        services or supplier--
                                  (I) that, based on a review 
                                of the medical records 
                                requested by the Secretary, a 
                                preliminary evaluation of those 
                                records indicates that there 
                                would be an overpayment;
                                  (II) the nature of the 
                                problems identified in such 
                                evaluation; and
                                  (III) the steps that the 
                                provider of services or 
                                supplier should take to address 
                                the problems; and
                          (ii) provide for a 45-day period 
                        during which the provider of services 
                        or supplier may furnish additional 
                        information concerning the medical 
                        records for the claims that had been 
                        reviewed.
                  (C) Consent settlement offer.--The Secretary 
                shall review any additional information 
                furnished by the provider of services or 
                supplier under subparagraph (B)(ii). Taking 
                into consideration such information, the 
                Secretary shall determine if there still 
                appears to be an overpayment. If so, the 
                Secretary--
                          (i) shall provide notice of such 
                        determination to the provider of 
                        services or supplier, including an 
                        explanation of the reason for such 
                        determination; and
                          (ii) in order to resolve the 
                        overpayment, may offer the provider of 
                        services or supplier--
                                  (I) the opportunity for a 
                                statistically valid random 
                                sample; or
                                  (II) a consent settlement.
                The opportunity provided under clause (ii)(I) 
                does not waive any appeal rights with respect 
                to the alleged overpayment involved.
                  (D) Consent settlement defined.--For purposes 
                of this paragraph, the term ``consent 
                settlement'' means an agreement between the 
                Secretary and a provider of services or 
                supplier whereby both parties agree to settle a 
                projected overpayment based on less than a 
                statistically valid sample of claims and the 
                provider of services or supplier agrees not to 
                appeal the claims involved.
          (6) Notice of over-utilization of codes.--The 
        Secretary shall establish, in consultation with 
        organizations representing the classes of providers of 
        services and suppliers, a process under which the 
        Secretary provides for notice to classes of providers 
        of services and suppliers served by the contractor in 
        cases in which the contractor has identified that 
        particular billing codes may be overutilized by that 
        class of providers of services or suppliers under the 
        programs under this title (or provisions of title XI 
        insofar as they relate to such programs).
          (7) Payment audits.--
                  (A) Written notice for post-payment audits.--
                Subject to subparagraph (C), if a medicare 
                contractor decides to conduct a post-payment 
                audit of a provider of services or supplier 
                under this title, the contractor shall provide 
                the provider of services or supplier with 
                written notice (which may be in electronic 
                form) of the intent to conduct such an audit.
                  (B) Explanation of findings for all audits.--
                Subject to subparagraph (C), if a medicare 
                contractor audits a provider of services or 
                supplier under this title, the contractor 
                shall--
                          (i) give the provider of services or 
                        supplier a full review and explanation 
                        of the findings of the audit in a 
                        manner that is understandable to the 
                        provider of services or supplier and 
                        permits the development of an 
                        appropriate corrective action plan;
                          (ii) inform the provider of services 
                        or supplier of the appeal rights under 
                        this title as well as consent 
                        settlement options (which are at the 
                        discretion of the Secretary);
                          (iii) give the provider of services 
                        or supplier an opportunity to provide 
                        additional information to the 
                        contractor; and
                          (iv) take into account information 
                        provided, on a timely basis, by the 
                        provider of services or supplier under 
                        clause (iii).
                  (C) Exception.--Subparagraphs (A) and (B) 
                shall not apply if the provision of notice or 
                findings would compromise pending law 
                enforcement activities, whether civil or 
                criminal, or reveal findings of law 
                enforcement-related audits.
          (8) Standard methodology for probe sampling.--The 
        Secretary shall establish a standard methodology for 
        medicare contractors to use in selecting a sample of 
        claims for review in the case of an abnormal billing 
        pattern.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

    For two years, members of this Committee have worked on a 
bipartisan basis to write this legislation. Democratic and, 
until now, Republican members have faithfully followed the 
ground rules and operating principles established by the 
Chairmen of the Committee and the Health Subcommittee with 
respect to the creation and consideration of the Medicare 
Regulatory and Contracting Reform Act. This common 
understanding helped the Committee set aside partisan 
differences and unified member support on both sides of the 
aisle for this targeted bill. Such consensus on legislation 
affecting Medicare has been virtually non-existent in the 
Committee in recent years.
    We stongly support the legislation as presented in the 
Chairman's mark. Our vote to oppose reporting of the 
legislation was primarily a reflection of our protest of the 
abandonment of a process that had served both the Committee and 
the issues under consideration well.
    The addition of controversial amendments in the Committee 
undercut the process and seriously undermined the trust and 
goodwill that had accumulated among members around the 
development and advancement of this particular legislation.
    We do not normally like to be put in a position where 
amendments are discouraged, as it undermines the free and full 
debate that should be the hallmark of the democratic process. 
However, in this case, it was well-understood to be a 
bipartisan directive. When this legislation was before the 
Committee in the 107th Congress, the Chairman had stipulated 
that amendments could not be offered.
    Given an opportunity for full and fair debate regarding the 
amendments that were offered, some of us might have been able 
to find bipartisan agreement on these issues, as has been done 
on other provisions in the mark. That said, many of us are 
concerned about the issues raised by the beneficiary 
organizations that opposed the amendments. Those organizations, 
whose letters have been inserted elsewhere in the Record, 
include the AARP and the National Citizens' Coalition for 
Nursing Home Reform. Testimony from the Center for Medicare 
Advocacy at the Health Subcommittee hearing on H.R. 810 also 
reflects concerns about both of the proposals that were offered 
as amendments.
    In addition, there was an explicit prior agreement between 
the Chairman and Ranking Member of the Health Subcommittee that 
the OASIS issue dealt with in the Johnson amendment would 
instead be reflected in a General Accounting Office study. 
Furthermore, the Camp amendment to rollback penalties for 
nursing homes with serious deficiencies flies in the face of 
the need to increase oversight and enforcement of quality 
standards in the nursing homes.
    Members and staff have spent countless hours meeting with 
various affected interest groups, the Administration, and 
colleagues on the Energy and Commerce Committee over the past 
two years. The Chairman's Mark consisted of policies that were 
broadly supported on both sides of the aisle. We hope that the 
legislation brought to the floor reflects that agreement.

                                   Pete Stark.
                                   Stephanie Tubbs Jones.
                                   Jerry Kleczka.
                                   Lloyd Doggett.
                                   William J. Jefferson.
                                   Ben Cardin.
                                   Richard E. Neal.
                                   Earl Pomeroy.
                                   Charles B. Rangel.
                                   Sander Levin.
                                   Xavier Becerra.
                                   Michael R. McNulty.
                                   Max Sandlin.
                                   John Lewis.
                                   Jim McDermott.
                                   John S. Tanner.

                                
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