Medicare Payment Restoration and Benefits Improvement Act of 2003

108th CONGRESS
1st Session

H. R. 26

To amend title XVIII of the Social Security Act to revise and improve payments to providers of services under the Medicare Program, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

January 7, 2003

Mr. CARDIN introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend title XVIII of the Social Security Act to revise and improve payments to providers of services under the Medicare Program, and for other purposes.

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

SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; REFERENCES TO BIPA AND SECRETARY; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Medicare Payment Restoration and Benefits Improvement 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.

(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.

(d) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; references to BIPA and Secretary; table of contents.

TITLE I--PROVISIONS RELATING TO PART A

Subtitle A--Inpatient Hospital Services

Sec. 101. Revision of acute care hospital payment updates.

Sec. 102. 2-year phased-in increase in the standardized amount in rural and small urban areas to achieve a single, uniform standardized amount.

Sec. 103. 3-year increase in level of adjustment for indirect costs of medical education (IME).

Sec. 104. More frequent update in weights used in hospital market basket.

Sec. 105. Relief for certain non-teaching hospitals.

Sec. 106. Enhanced disproportionate share hospital (DSH) treatment for rural hospitals and urban hospitals with fewer than 100 beds.

Sec. 107. Recognition of new medical technologies under inpatient hospital PPS.

Sec. 108. Improvements to critical access hospital program.

Sec. 109. Phase-in of Federal rate for hospitals in Puerto Rico.

Sec. 110. GAO study on improving the hospital wage index.

Subtitle B--Skilled Nursing Facility Services

Sec. 121. Payment for covered skilled nursing facility services.

Subtitle C--Hospice Care

Sec. 131. Coverage of hospice consultation services.

Sec. 132. 10 percent increase in payment for hospice care furnished in a frontier area.

Sec. 133. Rural hospice demonstration project.

TITLE II--PROVISIONS RELATING TO PART B

Subtitle A--Physicians' Services

Sec. 201. Revision of updates for physicians' services.

Sec. 202. Studies on access to physicians' services.

Sec. 203. MedPAC report on payment for physicians' services.

Sec. 204. 1-year extension of treatment of certain physician pathology services under medicare.

Sec. 205. Physician fee schedule wage index revision.

Subtitle B--Provisions Relating to Preventive Benefits

Sec. 211. Coverage of an initial preventive physical examination.

Sec. 212. Coverage of cholesterol and blood lipid screening.

Sec. 213. Improved payment for certain mammography services.

Subtitle C--Hospital Outpatient Department Services

Sec. 221. Adjustment to limit decline in payment.

Subtitle D--Other Services

Sec. 231. Adjustments to local fee schedules for clinical laboratory tests for improvement in cervical cancer detection.

Sec. 232. Payment for ambulance services.

Sec. 233. 2-year extension of moratorium on therapy caps; provisions relating to reports.

Sec. 234. Renal dialysis services.

Sec. 235. Waiver of part B late enrollment penalty for certain military retirees; special enrollment period.

Sec. 236. Coverage of immunosuppressive drugs for all medicare beneficiaries.

TITLE III--PROVISIONS RELATING TO PARTS A AND B

Subtitle A--Home Health Services

Sec. 301. Elimination of 15 percent reduction in payment rates under the prospective payment system.

Sec. 302. Update in home health services.

Sec. 303. Extension of temporary increase for home health services furnished in a rural area.

Sec. 304. OASIS Task Force; suspension of certain OASIS data collection requirements pending Task Force submittal of report.

Sec. 305. MedPAC study on medicare margins of home health agencies.

Subtitle B--Other Provisions

Sec. 311. Modifications to Medicare Payment Advisory Commission (MedPAC).

Sec. 312. Demonstration project for disease management for certain medicare beneficiaries with diabetes.

Sec. 313. Demonstration project for medical adult day care services.

Sec. 314. Publication on final written guidance concerning prohibitions against discrimination by national origin with respect to health care services.

TITLE IV--PROVISIONS RELATING TO MANAGED CARE

Sec. 401. Medicare+Choice improvements.

Sec. 402. Specialized Medicare+Choice plans for special needs beneficiaries.

Sec. 403. Extension of reasonable cost and SHMO contracts.

Sec. 404. Extension of municipal health service demonstration projects.

Sec. 405. Payment by PACE providers for medicare and medicaid services furnished by noncontract providers.

TITLE V--REGULATORY REDUCTION AND CONTRACTING REFORM

Subtitle A--Regulatory Reform

Sec. 501. Construction; definition of supplier.

Sec. 502. Issuance of regulations.

Sec. 503. Compliance with changes in regulations and policies.

Sec. 504. Reports and studies relating to regulatory reform.

Subtitle B--Contracting Reform

Sec. 511. Increased flexibility in medicare administration.

Sec. 512. Requirements for information security for medicare administrative contractors.

Subtitle C--Education and Outreach

Sec. 521. Provider education and technical assistance.

Sec. 522. Small provider technical assistance demonstration program.

Sec. 523. Medicare provider ombudsman; medicare beneficiary ombudsman.

Sec. 524. Beneficiary outreach demonstration program.

Subtitle D--Appeals and Recovery

Sec. 531. Transfer of responsibility for medicare appeals.

Sec. 532. Process for expedited access to review.

Sec. 533. Revisions to medicare appeals process.

Sec. 534. Prepayment review.

Sec. 535. Recovery of overpayments.

Sec. 536. Provider enrollment process; right of appeal.

Sec. 537. Process for correction of minor errors and omissions on claims without pursuing appeals process.

Sec. 538. Prior determination process for certain items and services; advance beneficiary notices.

Sec. 539. Appeals by providers when there is no other party available.

Subtitle E--Miscellaneous Provisions

Sec. 541. Policy development regarding evaluation and management (E & M) documentation guidelines.

Sec. 542. Prohibition of incidental fees and required purchase of non-covered items or services.

Sec. 543. Improvement in oversight of technology and coverage.

Sec. 544. Treatment of hospitals for certain services under medicare secondary payor (MSP) provisions.

Sec. 545. Authorizing use of arrangements with other hospice programs to provide core hospice services in certain circumstances.

Sec. 546. Application of OSHA bloodborne pathogens standard to certain hospitals.

Sec. 547. BIPA-related technical amendments and corrections.

Sec. 548. Conforming authority to waive a program exclusion.

Sec. 549. Treatment of certain dental claims.

Sec. 550. Annual publication of list of national coverage determinations.

TITLE I--PROVISIONS RELATING TO PART A

Subtitle A--Inpatient Hospital Services

SEC. 101. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended to read as follows:

`(XVIII) for fiscal year 2003, the market basket percentage increase for sole community hospitals and such increase minus 0.25 percentage points for other hospitals, and'.

SEC. 102. 2-YEAR PHASED-IN INCREASE IN THE STANDARDIZED AMOUNT IN RURAL AND SMALL URBAN AREAS TO ACHIEVE A SINGLE, UNIFORM STANDARDIZED AMOUNT.

Section 1886(d)(3)(A)(iv) (42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended--

(1) by striking `(iv) For discharges' and inserting `(iv)(I) Subject to the succeeding provisions of this clause, for discharges'; and

(2) by adding at the end the following new subclauses:

`(II) For discharges occurring during fiscal year 2003, the average standardized amount for hospitals located other than in a large urban area shall be increased by 1/2 of the difference between the average standardized amount determined under subclause (I) for hospitals located in large urban areas for such fiscal year and such amount determined (without regard to this subclause) for other hospitals for such fiscal year.

`(III) For discharges occurring in a fiscal year beginning with fiscal year 2004, the Secretary shall compute an average standardized amount for hospitals located in any area within the United States and within each region equal to the average standardized amount computed for the previous fiscal year under this subparagraph for hospitals located in a large urban area (or, beginning with fiscal year 2005, for hospitals located in any area) increased by the applicable percentage increase under subsection (b)(3)(B)(i).'.

SEC. 103. 3-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS OF MEDICAL EDUCATION (IME).

(a) IN GENERAL- Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--

(1) in subclause (VI)--

(A) by striking `fiscal year 2002' and inserting `fiscal years 2002, 2003, and 2004'; and

(B) by striking `and' at the end;

(2) by redesignating subclause (VII) as subclause (VIII);

(3) in subclause (VIII) as so redesignated, by striking `2002' and inserting `2005'; and

(4) by inserting after subclause (VI) the following new subclause:

`(VII) during fiscal year 2005, `c' is equal to 1.47; and'.

(b) CONFORMING AMENDMENT RELATING TO DETERMINATION OF STANDARDIZED AMOUNT- Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended--

(1) by striking `1999 or' and inserting `1999,'; and

(2) by inserting `, or of section 103(a) of the Medicare Payment Restoration and Benefits Improvement Act of 2003' after `2000'.

SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL MARKET BASKET.

(a) MORE FREQUENT UPDATES IN WEIGHTS- After revising the weights used in the hospital market basket under section 1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the most current data available, the Secretary shall establish a frequency for revising such weights in such market basket to reflect the most current data available more frequently than once every 5 years.

(b) REPORT- Not later than October 1, 2003, the Secretary shall submit a report to Congress on the frequency established under subsection (a), including an explanation of the reasons for, and options considered, in determining such frequency.

SEC. 105. RELIEF FOR CERTAIN NON-TEACHING HOSPITALS.

(a) IN GENERAL- In the case of a non-teaching hospital that meets the condition of subsection (b), in each of fiscal years 2003, 2004, and 2005 the amount of payment made to the hospital under section 1886(d) of the Social Security Act for discharges occurring during such fiscal year only shall be increased as though the applicable percentage increase (otherwise applicable to discharges occurring during such fiscal year under section 1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)) had been increased by 5 percentage points. The previous sentence shall be applied for each such fiscal year separately without regard to its application in a previous fiscal year and shall not affect payment for discharges for any hospital occurring during a fiscal year after fiscal year 2005.

(b) CONDITION- A non-teaching hospital meets the condition of this subsection if--

(1) it is located in a rural area and the amount of the aggregate payments under subsection (d) of section 1886 of the Social Security Act for hospitals located in rural areas in the State for their cost reporting periods beginning during fiscal year 1999 is less than the aggregate allowable operating costs of inpatient hospital services (as defined in subsection (a)(4) of such section) for all subsection (d) hospitals in such areas in such State with respect to such cost reporting periods; or

(2) it is located in an urban area and the amount of the aggregate payments under subsection (d) of such section for hospitals located in urban areas in the State for their cost reporting periods beginning during fiscal year 1999 is less than 103 percent of the aggregate allowable

operating costs of inpatient hospital services (as defined in subsection (a)(4) of such section) for all subsection (d) hospitals in such areas in such State with respect to such cost reporting periods.

The amounts under paragraphs (1) and (2) shall be determined by the Secretary of Health and Human Services based on data of the Medicare Payment Advisory Commission.

(1) NON-TEACHING HOSPITAL- The term `non-teaching hospital' means, for a cost reporting period, a subsection (d) hospital (as defined in subsection (d)(1)(B) of section 1886 of the Social Security Act, 42 U.S.C. 1395ww)) that is not receiving any additional payment under subsection (d)(5)(B) of such section or a payment under subsection (h) of such section for discharges occurring during the period. A subsection (d) hospital that receives additional payments under subsection (d)(5)(B) or (h) of such section shall, for purposes of this section, also be treated as a non-teaching hospital unless a chairman of a department in the medical school with which the hospital is affiliated is serving or has been appointed as a clinical chief of service in the hospital.

(2) RURAL; URBAN- The terms `rural' and `urban' have the meanings given such terms for purposes of section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)).

SEC. 106. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) TREATMENT FOR RURAL HOSPITALS AND URBAN HOSPITALS WITH FEWER THAN 100 BEDS.

(a) BLENDING OF PAYMENT AMOUNTS-

(1) IN GENERAL- Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is amended by adding at the end the following new clause:

`(xiv)(I) In the case of discharges in a fiscal year beginning on or after October 1, 2002, subject to subclause (II), there shall be substituted for the disproportionate share adjustment percentage otherwise determined under clause (iv) (other than subclause (I)) or under clause (viii), (x), (xi), (xii), or (xiii), the old blend proportion (specified under subclause (III)) of the disproportionate share adjustment percentage otherwise determined under the respective clause and 100 percent minus such old blend proportion of the disproportionate share adjustment percentage determined under clause (vii) (relating to large, urban hospitals).

`(II) Under subclause (I), the disproportionate share adjustment percentage shall not exceed 10 percent for a hospital that is not classified as a rural referral center under subparagraph (C).

`(III) For purposes of subclause (I), the old blend proportion for fiscal year 2003 is 80 percent, for each subsequent year (through 2006) is the old blend proportion under this subclause for the previous year minus 20 percentage points, and for each year beginning with 2007 is 0 percent.'.

(2) CONFORMING AMENDMENTS- Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is amended--

(A) in each of subclauses (II), (III), (IV), (V), and (VI) of clause (iv), by inserting `subject to clause (xiv) and' before `for discharges occurring';

(B) in clause (viii), by striking `The formula' and inserting `Subject to clause (xiv), the formula'; and

(C) in each of clauses (x), (xi), (xii), and (xiii), by striking `For purposes' and inserting `Subject to clause (xiv), for purposes'.

(b) EFFECTIVE DATE- The amendments made by this section shall apply with respect to discharges occurring on or after October 1, 2002.

SEC. 107. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT HOSPITAL PPS.

(a) IMPROVING TIMELINESS OF DATA COLLECTION- Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by adding at the end the following new clause:

`(vii) Under the mechanism under this subparagraph, the Secretary shall provide for the addition of new diagnosis and

procedure codes in April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) under this subsection until the fiscal year that begins after such date.'.

(b) ELIGIBILITY STANDARD-

(1) MINIMUM PERIOD FOR RECOGNITION OF NEW TECHNOLOGIES- Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is amended--

(A) by inserting `(I)' after `(vi)'; and

(B) by adding at the end the following new subclause:

`(II) Under such criteria, a service or technology shall not be denied treatment as a new service or technology on the basis of the period of time in which the service or technology has been in use if such period ends before the end of the 2-to-3-year period that begins on the effective date of implementation of a code under ICD-9-CM (or a successor coding methodology) that enables the identification of a significant sample of specific discharges in which the service or technology has been used.'.

(2) ADJUSTMENT OF THRESHOLD- Section 1886(d)(5)(K)(ii)(I) (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting `(applying a threshold specified by the Secretary that is the lesser of 50 percent of the national average standardized amount for operating costs of inpatient hospital services for all hospitals and all diagnosis-related groups or one standard deviation for the diagnosis-related group involved)' after `is inadequate'.

(3) CRITERION FOR SUBSTANTIAL IMPROVEMENT- Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended by paragraph (1), is further amended by adding at the end the following subclause:

`(III) The Secretary shall by regulation provide for further clarification of the criteria applied to determine whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of beneficiaries. Under such criteria, in determining whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of beneficiaries, the Secretary shall deem a service or technology as meeting such requirement if the service or technology is a drug or biological that is designated under section 506 or 526 of the Federal Food, Drug, and Cosmetic Act, approved under section 314.510 or 601.41 of title 21, Code of Federal Regulations, or designated for priority review when the marketing application for such drug or biological was filed or is a medical device for which an exemption has been granted under section 520(m) of such Act, or for which priority review has been provided under section 515(d)(5) of such Act.'.

(4) PROCESS FOR PUBLIC INPUT- Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is amended--

(A) in clause (i), by adding at the end the following: `Such mechanism shall be modified to meet the requirements of clause (viii).'; and

(B) by adding at the end the following new clause:

`(viii) The mechanism established pursuant to clause (i) shall be adjusted to provide, before publication of a proposed rule, for public input regarding whether a new service or technology not described in the second sentence of clause (vi)(III) represents an advance in medical technology that substantially improves the diagnosis or treatment of beneficiaries as follows:

`(I) The Secretary shall make public and periodically update a list of all the services and technologies for which an application for additional payment under this subparagraph is pending.

`(II) The Secretary shall accept comments, recommendations, and data from the public regarding whether the service or technology represents a substantial improvement.

`(III) The Secretary shall provide for a meeting at which organizations representing hospitals, physicians, medicare beneficiaries, manufacturers, and any other interested party may present comments, recommendations, and data to the clinical staff of the Centers for Medicare & Medicaid Services before publication of a notice of proposed rulemaking regarding whether service or technology represents a substantial improvement.'.

(c) PREFERENCE FOR USE OF DRG ADJUSTMENT- Section 1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended by adding at the end the following new clause:

`(ix) Before establishing any add-on payment under this subparagraph with respect to a new technology, the Secretary shall seek to identify one or more diagnosis-related groups associated with such technology, based on similar clinical or anatomical characteristics and the cost of the technology. Within such groups the Secretary shall assign an eligible new technology into a diagnosis-related group where the average costs of care most closely approximate the costs of care of using the new technology. In such case, no add-on payment under this subparagraph shall be made with respect to such new technology and this clause shall not affect the application of paragraph (4)(C)(iii).'.

(d) IMPROVEMENT IN PAYMENT FOR NEW TECHNOLOGY- Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) is amended by inserting after `the estimated average cost of such service or technology' the following: `(based on the marginal rate applied to costs under subparagraph (A))'.

(e) EFFECTIVE DATE-

(1) IN GENERAL- The Secretary shall implement the amendments made by this section so that they apply to classification for fiscal years beginning with fiscal year 2004.

(2) RECONSIDERATIONS OF APPLICATIONS FOR FISCAL YEAR 2003 THAT ARE DENIED- In the case of an application for a classification of a medical service or technology as a new medical service or technology under section 1886(d)(5)(K) of the Social Security Act (42 U.S.C.

1395ww(d)(5)(K)) that was filed for fiscal year 2003 and that is denied--

(A) the Secretary shall automatically reconsider the application as an application for fiscal year 2004 under the amendments made by this section; and

(B) the maximum time period otherwise permitted for such classification of the service or technology shall be extended by 12 months.

SEC. 108. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

(a) REINSTATEMENT OF PERIODIC INTERIM PAYMENT (PIP)- Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--

(1) by striking `and' at the end of subparagraph (C);

(2) by adding `and' at the end of subparagraph (D); and

(3) by inserting after subparagraph (D) the following new subparagraph:

`(E) inpatient critical access hospital services;'.

(b) CONDITION FOR APPLICATION OF SPECIAL PHYSICIAN PAYMENT ADJUSTMENT- Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is amended by adding after and below subparagraph (B) the following:

`The Secretary may not require, as a condition for applying subparagraph (B) with respect to a critical access hospital, that each physician providing professional services in the hospital must assign billing rights with respect to such services, except that such subparagraph shall not apply to those physicians who have not assigned such billing rights.'.

(1) in subsection (c)(2)(B)(iii), by inserting `subject to paragraph (3)' after `(iii) provides';

(2) by adding at the end of subsection (c) the following new paragraph:

`(3) INCREASE IN MAXIMUM NUMBER OF BEDS FOR HOSPITALS WITH STRONG SEASONAL CENSUS FLUCTUATIONS-

`(A) IN GENERAL- Subject to subparagraph (C), in the case of a hospital that demonstrates that it meets the standards established under subparagraph (B) and has not made the election described in subsection (f)(2)(A), the bed limitations otherwise applicable under paragraph (2)(B)(iii) and subsection (f) shall be increased by 5 beds.

`(B) STANDARDS- The Secretary shall specify standards for determining whether a critical access hospital has sufficiently strong seasonal variations in patient admissions to justify the increase in bed limitation provided under subparagraph (A).'; and

(3) in subsection (f)--

(A) by inserting `(1)' after `(f)'; and

(B) by adding at the end the following new paragraph:

`(2)(A) A hospital may elect to treat the reference in paragraph (1) to `15 beds' as a reference to `25 beds', but only if no more than 10 beds in the hospital are at any time used for non-acute care services. A hospital that makes such an election is not eligible for the increase provided under subsection (c)(3)(A).

`(B) The limitations in numbers of beds under the first sentence of paragraph (1) are subject to adjustment under subsection (c)(3).'.

(d) 5-YEAR EXTENSION OF THE AUTHORIZATION FOR APPROPRIATIONS FOR GRANT PROGRAM- Section 1820(j) (42 U.S.C. 1395i-4(j)) is amended by striking `through 2002' and inserting `through 2007'.

(e) PROHIBITION OF RETROACTIVE RECOUPMENT- The Secretary shall not recoup (or otherwise seek to recover) overpayments made for outpatient critical access hospital services under part B of title XVIII of the Social Security Act, for services furnished in cost reporting periods that began before October 1, 2002, insofar as such overpayments are attributable to payment being based on 80 percent of reasonable costs (instead of 100 percent of reasonable costs minus 20 percent of charges).

(f) EFFECTIVE DATES-

(1) REINSTATEMENT OF PIP- The amendments made by subsection (a) shall apply to payments made on or after January 1, 2003.

(2) PHYSICIAN PAYMENT ADJUSTMENT CONDITION- The amendment made by subsection (b) shall be effective as if included in the enactment of section 403(d) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-371).

(3) FLEXIBILITY IN BED LIMITATION- The amendments made by subsection (c) shall apply to designations made on or after January 1, 2003, but shall not apply to critical access hospitals that were designated as of such date.

SEC. 109. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN PUERTO RICO.

Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--

(1) in subparagraph (A)--

(A) in clause (i), by striking `for discharges beginning on or after October 1, 1997, 50 percent (and for discharges between October 1, 1987, and September 30, 1997, 75 percent)' and inserting `the applicable Puerto Rico percentage (specified in subparagraph (E))'; and

(B) in clause (ii), by striking `for discharges beginning in a fiscal year beginning on or after October 1, 1997, 50 percent (and for discharges between October 1, 1987, and September 30, 1997, 25 percent)' and inserting `the applicable Federal percentage (specified in subparagraph (E))'; and

(2) by adding at the end the following new subparagraph:

`(E) For purposes of subparagraph (A), for discharges occurring--

`(i) between October 1, 1987, and September 30, 1997, the applicable Puerto Rico percentage is 75 percent and the applicable Federal percentage is 25 percent;

`(ii) on or after October 1, 1997, and before October 1, 2003, the applicable Puerto Rico percentage is 50 percent and the applicable Federal percentage is 50 percent;

`(iii) during fiscal year 2004, the applicable Puerto Rico percentage is 45 percent and the applicable Federal percentage is 55 percent;

`(iv) during fiscal year 2005, the applicable Puerto Rico percentage is 40 percent and the applicable Federal percentage is 60 percent;

`(v) during fiscal year 2006, the applicable Puerto Rico percentage is 35 percent and the applicable Federal percentage is 65 percent;

`(vi) during fiscal year 2007, the applicable Puerto Rico percentage is 30 percent and the applicable Federal percentage is 70 percent; and

`(vii) on or after October 1, 2007, the applicable Puerto Rico percentage is 25 percent and the applicable Federal percentage is 75 percent.'.

SEC. 110. GAO STUDY ON IMPROVING THE HOSPITAL WAGE INDEX.

(a) STUDY-

(1) IN GENERAL- The Comptroller General of the United States shall conduct a study on the improvements that can be made in the measurement of regional differences in hospital wages reflected in the hospital wage index under section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)).

(2) EXAMINATION OF USE OF METROPOLITAN STATISTICAL AREAS (MSAS)- The study shall specifically examine the use of metropolitan statistical areas for purposes of computing and applying the wage index and whether the boundaries of such areas accurately reflect local labor markets. In addition, the study shall examine whether regional inequities are created as a result of infrequent updates of such boundaries and policies of the Bureau of the Census relating to commuting criteria.

(3) WAGE DATA- The study shall specifically examine the portions of the hospital cost reports relating to wages, and methods for improving the accuracy of the wage data and for reducing inequities resulting from differences among hospitals in the reporting of wage data.

(b) CONSULTATION WITH OMB- The Comptroller General shall consult with the Director of Office of Management and Budget in conducting the study under subsection (a)(2).

(c) REPORT- Not later than July 1, 2003, the Comptroller General shall submit to Congress a report on the study conducted under subsection (a) and shall include in the report such recommendations as may be appropriate on--

(1) changes in the definition of labor market areas used for purposes of the area wage index under section 1886 of the Social Security Act; and

(2) improvements in methods for the collection of wage data.

Subtitle B--Skilled Nursing Facility Services

SEC. 121. PAYMENT FOR COVERED SKILLED NURSING FACILITY SERVICES.

(a) 2-YEAR EXTENSION OF TEMPORARY INCREASE IN NURSING COMPONENT OF PPS FEDERAL RATE- Section 312(a) of BIPA is amended by striking `, and before October 1, 2002' and inserting `and before October 1, 2004'.

(b) ADJUSTMENT TO RUGS FOR AIDS RESIDENTS-

(1) IN GENERAL- Paragraph (12) of section 1888(e) (42 U.S.C. 1395yy(e)) is amended to read as follows:

`(12) ADJUSTMENT FOR RESIDENTS WITH AIDS-

`(A) IN GENERAL- Subject to subparagraph (B), in the case of a resident of a skilled nursing facility who is afflicted with acquired immune deficiency syndrome (AIDS), the per diem amount of payment otherwise applicable shall be increased by 128 percent to reflect increased costs associated with such residents.

`(B) SUNSET- Subparagraph (A) shall not apply on and after such date as the Secretary certifies that there is an appropriate adjustment in the case mix under paragraph (4)(G)(i) to compensate for the increased costs associated with residents described in such subparagraph.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to services furnished on or after October 1, 2003.

(1) STUDY- The Secretary shall conduct a study to review the adequacy of funding under the medicaid program under title XIX of the Social Security Act for nursing facility care.

(2) REPORT- Not later than one year after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the study conducted under paragraph (1). The report shall include recommendations of the Secretary with respect to structural reform of funding systems to ensure quality nursing facility services for those eligible for benefits under the medicaid program.

Subtitle C--Hospice Care

SEC. 131. COVERAGE OF HOSPICE CONSULTATION SERVICES.

(a) COVERAGE OF HOSPICE CONSULTATION SERVICES- Section 1812(a) (42 U.S.C. 1395d(a)) is amended--

(1) by striking `and' at the end of paragraph (3);

(2) by striking the period at the end of paragraph (4) and inserting `; and'; and

(3) by inserting after paragraph (4) the following new paragraph:

`(5) for individuals who are terminally ill, have not made an election under subsection (d)(1), and have not previously received services under this paragraph, services that are furnished by a physician who is either the medical

director or an employee of a hospice program and that consist of--

`(A) an evaluation of the individual's need for pain and symptom management;

`(B) counseling the individual with respect to end-of-life issues and care options; and

`(C) advising the individual regarding advanced care planning.'.

(b) PAYMENT- Section 1814(i) (42 U.S.C. l395f(i)) is amended by adding at the end the following new paragraph:

`(4) The amount paid to a hospice program with respect to the services under section 1812(a)(5) for which payment may be made under this part shall be equal to an amount equivalent to the amount established for an office or other outpatient visit for evaluation and management associated with presenting problems of moderate severity under the fee schedule established under section 1848(b), other than the portion of such amount attributable to the practice expense component.'.

(c) CONFORMING AMENDMENT- Section 1861(dd)(2)(A)(i) (42 U.S.C. 1395x(dd)(2)(A)(i)) is amended by inserting before the comma at the end the following: `and services described in section 1812(a)(5)'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to services provided by a hospice program on or after January 1, 2004.

SEC. 132. 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE FURNISHED IN A FRONTIER AREA.

(a) IN GENERAL- Section 1814(i)(1) (42 U.S.C. 1395f(i)(1)) is amended by adding at the end the following new subparagraph:

`(D) With respect to hospice care furnished in a frontier area on or after January 1, 2003, and before January 1, 2008, the payment rates otherwise established for such care shall be increased by 10 percent. For purposes of this subparagraph, the term `frontier area' means a county in which the population density is less than 7 persons per square mile.'.

(b) REPORT ON COSTS- Not later than January 1, 2007, the Comptroller General of the United States shall submit to Congress a report on the costs of furnishing hospice care in frontier areas. Such report shall include recommendations regarding the appropriateness of extending, and modifying, the payment increase provided under the amendment made by subsection (a).

SEC. 133. RURAL HOSPICE DEMONSTRATION PROJECT.

(a) IN GENERAL- The Secretary shall conduct a demonstration project for the delivery of hospice care to medicare beneficiaries in rural areas. Under the project medicare beneficiaries who are unable to receive hospice care in the home for lack of an appropriate caregiver are provided such care in a facility of 20 or fewer beds which offers, within its walls, the full range of services provided by hospice programs under section 1861(dd) of the Social Security Act (42 U.S.C. 1395x(dd)).

(b) SCOPE OF PROJECT- The Secretary shall conduct the project under this section with respect to no more than 3 hospice programs over a period of not longer than 5 years each.

(1) the hospice program shall comply with otherwise applicable requirements, except that it shall not be required to offer services outside of the home or to meet the requirements of section 1861(dd)(2)(A)(iii) of the Social Security Act; and

(2) payments for hospice care shall be made at the rates otherwise applicable to such care under title XVIII of such Act.

The Secretary may require the program to comply with such additional quality assurance standards for its provision of services in its facility as the Secretary deems appropriate.

(d) REPORT- Upon completion of the project, the Secretary shall submit a report to Congress on the project and shall include in the report recommendations regarding extension of such project to hospice programs serving rural areas.

TITLE II--PROVISIONS RELATING TO PART B

Subtitle A--Physicians' Services

SEC. 201. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

(a) UPDATE FOR 2003 THROUGH 2005-

(1) IN GENERAL- Section 1848(d) (42 U.S.C. 1395w-4(d)) is amended by adding at the end the following new paragraphs:

`(5) UPDATE FOR 2003- The update to the single conversion factor established in paragraph (1)(C) for 2003 is 2 percent.

`(6) SPECIAL RULES FOR UPDATE FOR 2004 AND 2005- The following rules apply in determining the update adjustment factors under paragraph (4)(B) for 2004 and 2005:

`(A) USE OF 2002 DATA IN DETERMINING ALLOWABLE COSTS-

`(i) The reference in clause (ii)(I) of such paragraph to April 1, 1996, is deemed to be a reference to January 1, 2002.

`(ii) The allowed expenditures for 2002 is deemed to be equal to the actual expenditures for physicians' services furnished during 2002, as estimated by the Secretary.

`(B) 1 PERCENTAGE POINT INCREASE IN GDP UNDER SGR- The annual average percentage growth in real gross domestic product per capita under subsection (f)(2)(C) for each of 2003, 2004, and 2005 is deemed to be increased by 1 percentage point.'.

(2) CONFORMING AMENDMENT- Paragraph (4)(B) of such section is amended, in the matter before clause (i), by inserting `and paragraph (6)' after `subparagraph (D)'.

(3) NOT TREATED AS CHANGE IN LAW AND REGULATION IN SUSTAINABLE GROWTH RATE DETERMINATION- The amendments made by this subsection shall not be treated as a change in law for purposes of applying section 1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w-4(f)(2)(D)).

(b) USE OF 10-YEAR ROLLING AVERAGE IN COMPUTING GROSS DOMESTIC PRODUCT-

(1) IN GENERAL- Section 1848(f)(2)(C) (42 U.S.C. 1395w-4(f)(2)(C)) is amended--

(A) by striking `projected' and inserting `annual average'; and

(B) by striking `from the previous applicable period to the applicable period involved' and inserting `during the 10-year period ending with the applicable period involved'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to computations of the sustainable growth rate for years beginning with 2002.

(c) ELIMINATION OF TRANSITIONAL ADJUSTMENT- Section 1848(d)(4)(F) (42 U.S.C. 1395w-4(d)(4)(F)) is amended by striking `subparagraph (A)' and all that follows and inserting `subparagraph (A), for each of 2001 and 2002, of -0.2 percent.'.

(d) GAO Study of Medicare Payment for Inhalation Therapy-

(1) STUDY- The Comptroller General of the United States shall conduct a study to examine the adequacy of current reimbursements for inhalation therapy under the medicare program.

(2) REPORT- Not later than July 1, 2003, the Comptroller General shall submit to Congress a report on the study conducted under paragraph (1).

SEC. 202. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.

(a) GAO STUDY ON BENEFICIARY ACCESS TO PHYSICIANS' SERVICES-

(1) STUDY- The Comptroller General of the United States shall conduct a study on access of medicare beneficiaries to physicians' services under the medicare program. The study shall include--

(A) an assessment of the use by beneficiaries of such services through an analysis of claims submitted by physicians for such services under part B of the medicare program;

(B) an examination of changes in the use by beneficiaries of physicians' services over time;

(2) REPORT- Not later than 18 months after the date of the enactment of this Act, the Comptroller General shall submit to Congress a report on the study conducted under paragraph (1). The report shall include a determination whether--

(A) data from claims submitted by physicians under part B of the medicare program indicate potential access problems for medicare beneficiaries in certain geographic areas; and

(B) access by medicare beneficiaries to physicians' services may have improved, remained constant, or deteriorated over time.

(b) STUDY AND REPORT ON SUPPLY OF PHYSICIANS-

(1) STUDY- The Secretary shall request the Institute of Medicine of the National Academy of Sciences to conduct a study on the adequacy of the supply of physicians (including specialists) in the United States and the factors that affect such supply.

(2) REPORT TO CONGRESS- Not later than 2 years after the date of enactment of this section, the Secretary shall submit to Congress a report on the results of the study described in paragraph (1), including any recommendations for legislation.

SEC. 203. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

Not later than 1 year after the date of the enactment of this Act, the Medicare Payment Advisory Commission shall submit to Congress a report on the effect of refinements to the practice expense component of payments for physicians' services, after the transition to a full resource-based payment system in 2002, under section 1848 of the Social Security Act (42 U.S.C. 1395w-4). Such report shall examine the following matters by physician specialty:

(1) The effect of such refinements on payment for physicians' services.

(2) The interaction of the practice expense component with other components of and adjustments to payment for physicians' services under such section.

(3) The appropriateness of the amount of compensation by reason of such refinements.

(4) The effect of such refinements on access to care by medicare beneficiaries to physicians' services.

(5) The effect of such refinements on physician participation under the medicare program.

SEC. 204. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES UNDER MEDICARE.

Section 542(c) of BIPA is amended by striking `2-year period' and inserting `3-year period'.

SEC. 205. PHYSICIAN FEE SCHEDULE WAGE INDEX REVISION.

(a) INDEX REVISION-

(1) IN GENERAL- Subject to paragraph (2), notwithstanding any other provision of law, for purposes of payment under the physician fee schedule under section 1848 of the Social Security Act (42 U.S.C. 1395w-4) for physicians' services furnished during 2004, in no case may the work geographic index otherwise calculated under subsection (e)(1)(A)(iii) of such section be less than 0.985.

(2) SECRETARIAL DISCRETION- Paragraph (1) shall not take effect or be in force if the Secretary determines,

taking into account the report of the Comptroller General under subsection (b)(2), that there is no sound economic rationale for the implementation of such paragraph.

(3) EXEMPTION FROM LIMITATION ON ANNUAL ADJUSTMENTS- Any increase in expenditures attributable to paragraph (1) during 2004 shall not be taken into account in applying section 1848(c)(2)(B)(ii)(II) of the Social Security Act (42 U.S.C. 1395w-4(c)(2)(B)(ii)(II)) for that year.

(b) GAO REPORT-

(1) EVALUATION- As part of the study on geographic differences in payments for physicians' services conducted under section 309, the Comptroller General shall evaluate the following:

(A) Whether there is a sound economic basis for the implementation of the adjustment under subsection (a)(1) in those areas in which the adjustment applies.

(B) The effect of such adjustment on physician location and retention in areas affected by such adjustment, taking into account--

(i) differences in recruitment costs and retention rates for physicians, including specialists, between large urban areas and other areas; and

(ii) the mobility of physicians, including specialists, over the last decade.

(2) REPORT- By not later than September 1, 2003, the Comptroller General shall submit to Congress and to the Secretary a report on the evaluation conducted under paragraph (1).

Subtitle B--Provisions Relating to Preventive Benefits

SEC. 211. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL EXAMINATION.

(a) COVERAGE- Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is amended--

(1) in subparagraph (U), by striking `and' at the end;

(2) in subparagraph (V), by inserting `and' at the end; and

(3) by adding at the end the following new subparagraph:

`(W) an initial preventive physical examination (as defined in subsection (ww));'.

(b) SERVICES DESCRIBED- Section 1861 (42 U.S.C. 1395x) is amended by adding at the end the following new subsection:

`Initial Preventive Physical Examination

`(ww) The term `initial preventive physical examination' means physicians' services consisting of a physical examination with the goal of health promotion and disease detection and includes items and services (excluding clinical laboratory tests), as determined by the Secretary, consistent with the recommendations of the United States Preventive Services Task Force.'.

(1) DEDUCTIBLE- The first sentence of section 1833(b) (42 U.S.C. 1395l(b)) is amended--

(A) by striking `and' before `(6)', and

(B) by inserting before the period at the end the following: `, and (7) such deductible shall not apply with respect to an initial preventive physical examination (as defined in section 1861(ww))'.

(2) COINSURANCE- Section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is amended--

(A) in clause (N), by inserting `(or 100 percent in the case of an initial preventive physical examination, as defined in section 1861(ww))' after `80 percent'; and

(B) in clause (O), by inserting `(or 100 percent in the case of an initial preventive physical examination, as defined in section 1861(ww))' after `80 percent'.

(d) PAYMENT AS PHYSICIANS' SERVICES- Section 1848(j)(3) (42 U.S.C. 1395w-4(j)(3)) is amended by inserting `(2)(W),' after `(2)(S),'.

(e) OTHER CONFORMING AMENDMENTS- Section 1862(a) (42 U.S.C. 1395y(a)) is amended--

(1) in paragraph (1)--

(A) by striking `and' at the end of subparagraph (H);

(B) by striking the semicolon at the end of subparagraph (I) and inserting `, and'; and

`(J) in the case of an initial preventive physical examination, which is performed not later than 1 year after the date the individual's first coverage period begins under part B;'; and

(2) in paragraph (7), by striking `or (H)' and inserting `(H), or (J)'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to services furnished on or after January 1, 2004, but only for individuals whose coverage period begins on or after such date.

SEC. 212. COVERAGE OF CHOLESTEROL AND BLOOD LIPID SCREENING.

(a) COVERAGE- Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as amended by section 211(a), is amended--

(1) in subparagraph (V), by striking `and' at the end;

(2) in subparagraph (W), by inserting `and' at the end; and

(3) by adding at the end the following new subparagraph:

`(X) cholesterol and other blood lipid screening tests (as defined in subsection (XX));'.

(b) SERVICES DESCRIBED- Section 1861 (42 U.S.C. 1395x), as amended by section 211(b), is amended by adding at the end the following new subsection:

`Cholesterol and Other Blood Lipid Screening Tests

`(xx)(1) The term `cholesterol and other blood lipid screening tests' means diagnostic testing of cholesterol and other lipid levels of the blood for the purpose of early detection of abnormal cholesterol and other lipid levels.

`(2) The Secretary shall establish standards, in consultation with appropriate organizations, regarding the frequency and type of cholesterol and other blood lipid screening tests, except that such frequency may not be more often than once every 2 years.'.

(1) by striking `and' at the end of subparagraph (I);

(2) by striking the semicolon at the end of subparagraph (J) and inserting `; and'; and

(3) by adding at the end the following new subparagraph:

`(K) in the case of a cholesterol and other blood lipid screening tests (as defined in section 1861(xx)(1)), which is performed more frequently than is covered under section 1861(xx)(2).'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to tests furnished on or after January 1, 2004.

SEC. 213. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

(a) EXCLUSION FROM OPD FEE SCHEDULE- Section 1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is amended by inserting before the period at the end the following: `and does not include screening mammography (as defined in section 1861(jj)) and unilateral and bilateral diagnostic mammography'.

(b) ADJUSTMENT TO TECHNICAL COMPONENT- For diagnostic mammography performed on or after January 1, 2004, for which payment is made under the physician fee schedule under section 1848 of the Social Security Act (42 U.S.C. 1395w-4), the Secretary, based on the most recent cost data available, shall provide for an appropriate adjustment in the payment amount for the technical component of the diagnostic mammography.

(c) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to mammography performed on or after January 1, 2004.

Subtitle C--Hospital Outpatient Department Services

SEC. 221. ADJUSTMENT TO LIMIT DECLINE IN PAYMENT.

(1) in the heading, by striking `TRANSITIONAL ADJUSTMENT' and inserting `ADJUSTMENT';

(2) in subparagraph (A)--

(A) in the heading, by striking `BEFORE 2002' and inserting `IN GENERAL';

(B) in the matter preceding clause (i)--

(i) by striking `subparagraph (D)' and inserting `subparagraph (B)';

(ii) by striking `furnished before January 1, 2002,'; and

(iii) by striking `subparagraph (E)' and inserting `subparagraph (C)'; and

(3) by striking subparagraph (D) and inserting the following new subparagraph:

`(D) HOLD HARMLESS PROVISIONS FOR CANCER AND CHILDREN'S HOSPITALS- In the case of a hospital that is described in clause (iii) or (v) of section 1886(d)(1)(B), for covered OPD services--

`(i) that are furnished on or after the date on which payment is first made under this subsection; and

`(ii) for which the PPS amount is less than the pre-BBA amount (or for services furnished on or after January 1, 2002, is less than the greater of the pre-BBA amount or the reasonable costs incurred in furnishing such services),

the amount of payment under this subsection shall be increased by the amount of such difference.';

(4) in subparagraph (F)(ii)(I), by striking `subparagraph (E)' and inserting `subparagraph (C)'; and

(5) by striking subparagraphs (B) and (C) and redesignating subparagraphs (D), (E), (F), (G), (H), and (I) as subparagraphs (B), (C), (D), (E), (F), and (G), respectively.

Subtitle D--Other Services

SEC. 231. ADJUSTMENTS TO LOCAL FEE SCHEDULES FOR CLINICAL LABORATORY TESTS FOR IMPROVEMENT IN CERVICAL CANCER DETECTION.

`(C) Notwithstanding any other provision of law, in the case of a diagnostic test for the detection of cervical cancer utilizing automated thin layer preparation techniques for specimens collected in fluid medium, and for which a national limitation amount has been set pursuant to the parenthetical in paragraph (4)(B)(viii), furnished on or after July 1, 2003, and before June 30, 2005, the Secretary shall permit carriers and medicare administrative contractors, as the case may be, to raise their local fee schedule amount for purposes of determining payment for such tests under this section, up to, but not to exceed the national limitation amount previously established for that test. Any such adjustment shall not affect such national limitation amount.'.

SEC. 232. PAYMENT FOR AMBULANCE SERVICES.

(a) PHASE-IN PROVIDING FLOOR USING BLEND OF FEE SCHEDULE AND REGIONAL FEE SCHEDULES- Section 1834(l) (42 U.S.C. 1395m(l)) is amended--

(1) in paragraph (2)(E), by inserting `consistent with paragraph (10)' after `in an efficient and fair manner';

(2) by redesignating the paragraph (8) added by section 221(a) of BIPA as paragraph (9); and

(3) by adding at the end the following new paragraph:

`(10) PHASE-IN PROVIDING FLOOR USING BLEND OF FEE SCHEDULE AND REGIONAL FEE SCHEDULES- In carrying out the phase-in under paragraph (2)(E) for each level of service furnished in a year before January 1, 2007, the portion of the payment amount that is based on the fee schedule shall not be less than the following blended rate of the fee schedule under paragraph (1) and of a regional fee schedule for the region involved:

`(A) For 2003, the blended rate shall be based 20 percent on the fee schedule under paragraph (1) and 80 percent on the regional fee schedule.

`(B) For 2004, the blended rate shall be based 40 percent on the fee schedule under paragraph (1) and 60 percent on the regional fee schedule.

`(C) For 2005, the blended rate shall be based 60 percent on the fee schedule under paragraph (1) and 40 percent on the regional fee schedule.

`(D) For 2006, the blended rate shall be based 80 percent on the fee schedule under paragraph (1) and 20 percent on the regional fee schedule.

For purposes of this paragraph, the Secretary shall establish a regional fee schedule for each of the 9 Census divisions using the methodology (used in establishing the fee schedule under paragraph (1)) to calculate a regional conversion factor and a regional mileage payment rate and using the same payment adjustments and the same relative value units as used in the fee schedule under such paragraph.'.

(b) ADJUSTMENT IN PAYMENT FOR CERTAIN LONG TRIPS- Section 1834(l), as amended by subsection (a), is further amended by adding at the end the following new paragraph:

`(11) ADJUSTMENT IN PAYMENT FOR CERTAIN LONG TRIPS- In the case of ground ambulance services furnished on or after January 1, 2003, and before January 1, 2008, regardless of where the transportation originates, the fee schedule established under this subsection shall provide that, with respect to the payment rate for mileage for a trip above 50 miles the per mile rate otherwise established shall be increased by 1/4 of the payment per mile otherwise applicable to such miles.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to ambulance services furnished on or after January 1, 2003.

SEC. 233. 2-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS; PROVISIONS RELATING TO REPORTS.

(a) 2-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS- Section 1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by striking `and 2002' and inserting `2002, 2003, and 2004'.

(b) PROMPT SUBMISSION OF OVERDUE REPORTS ON PAYMENT AND UTILIZATION OF OUTPATIENT THERAPY SERVICES- Not later than December 31, 2002, the Secretary shall submit to Congress the reports required under section 4541(d)(2) of the Balanced Budget Act of 1997 (relating to alternatives to a single annual dollar cap on outpatient therapy) and under section 221(d) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (relating to utilization patterns for outpatient therapy).

(1) STUDY- The Secretary shall request the Institute of Medicine of the National Academy of Sciences to identify conditions or diseases that should justify conducting an assessment of the need to waive the therapy caps under section 1833(g)(4) of the Social Security Act (42 U.S.C. 1395l(g)(4)).

(2) REPORTS TO CONGRESS- Not later than September 1, 2003, the Secretary shall submit to Congress a preliminary report on the conditions and diseases identified under paragraph (1) and not later than December 31, 2003, a final report on the conditions and diseases so identified.

(d) GAO STUDY OF PATIENT ACCESS TO PHYSICAL THERAPIST SERVICES-

(1) STUDY- The Comptroller General of the United States shall conduct a study on access to physical therapist services in States authorizing such services without a physician referral and in States that require such a physician referral. The study shall--

(A) examine the use of and referral patterns for physical therapist services for patients age 50 and older in States that authorize such services without a physician referral and in States that require such a physician referral;

(B) examine the use of and referral patterns for physical therapist services for patients who are medicare beneficiaries;

(C) examine the potential effect of prohibiting a physician from referring patients to physical therapy services owned by the physician and provided in the physician's office;

(D) examine the delivery of physical therapists' services within the facilities of Department of Defense; and

(E) analyze the potential impact on medicare beneficiaries and on expenditures under the medicare program of eliminating the need for a physician referral and physician certification for physical therapist services under the medicare program.

(2) REPORT- The Comptroller General shall submit to Congress a report on the study conducted under paragraph (1) by not later than 1 year after the date of the enactment of this Act.

SEC. 234. RENAL DIALYSIS SERVICES.

(a) REPORT ON DIFFERENCES IN COSTS IN DIFFERENT SETTINGS- Not later than 1 year after the date of the enactment of this Act, the Comptroller General of the United States shall submit to Congress a report containing--

(1) an analysis of the differences in costs of providing renal dialysis services under the medicare program in home settings and in facility settings;

(2) an assessment of the percentage of overhead costs in home settings and in facility settings; and

(3) an evaluation of whether the charges for home dialysis supplies and equipment are reasonable and necessary.

(b) RESTORING COMPOSITE RATE EXCEPTIONS FOR PEDIATRIC FACILITIES-

(1) IN GENERAL- Section 422(a)(2) of BIPA is amended--

(A) in subparagraph (A), by striking `and (C)' and inserting `, (C), and (D)';

(B) in subparagraph (B), by striking `In the case' and inserting `Subject to subparagraph (D), in the case'; and

`(D) INAPPLICABILITY TO PEDIATRIC FACILITIES- Subparagraphs (A) and (B) shall not apply, as of October 1, 2002, to pediatric facilities that do not have an exception rate described in subparagraph (C) in effect on such date. For purposes of this subparagraph, the term `pediatric facility' means a renal facility at least 50 percent of whose patients are individuals under 18 years of age.'.

(2) CONFORMING AMENDMENT- The fourth sentence of section 1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking `The Secretary' and inserting `Subject to section 422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, the Secretary'.

provision of law, with respect to payment under part B of title XVIII of the Social Security Act for renal dialysis services furnished in 2004, the composite payment rate otherwise established under section 1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) shall be increased by 1.2 percent.

SEC. 235. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN MILITARY RETIREES; SPECIAL ENROLLMENT PERIOD.

(a) WAIVER OF PENALTY-

(1) IN GENERAL- Section 1839(b) (42 U.S.C. 1395r(b)) is amended by adding at the end the following new sentence: `No increase in the premium shall be effected for a month in the case of an individual who is 65 years of age or older, who enrolls under this part during 2001, 2002, or 2003, and who demonstrates to the Secretary before December 31, 2003, that the individual is a covered beneficiary (as defined in section 1072(5) of title 10, United States Code). The Secretary of Health and Human Services shall consult with the Secretary of Defense in identifying individuals described in the previous sentence.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to premiums for months beginning with January 2003. The Secretary of Health and Human Services shall establish a method for providing rebates of premium penalties paid for months on or after January 2003 for which a penalty does not apply under such amendment but for which a penalty was previously collected.

(b) MEDICARE PART B SPECIAL ENROLLMENT PERIOD-

(1) IN GENERAL- In the case of any individual who, as of the date of the enactment of this Act, is 65 years of age or older, is eligible to enroll but is not enrolled under part B of title XVIII of the Social Security Act, and is a covered beneficiary (as defined in section 1072(5) of title 10, United States Code), the Secretary of Health and Human Services shall provide for a special enrollment period during which the individual may enroll under such part. Such period shall begin as soon as possible after the date of the enactment of this Act and shall end on December 31, 2003.

(2) COVERAGE PERIOD- In the case of an individual who enrolls during the special enrollment period provided under paragraph (1), the coverage period under part B of title XVIII of the Social Security Act shall begin on the first day of the month following the month in which the individual enrolls.

SEC. 236. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR ALL MEDICARE BENEFICIARIES.

(a) IN GENERAL- Section 1861(s)(2)(J) (42 U.S.C. 1395x(s)(2)(J)) is amended by striking `, to an individual who receives' and all that follows before the semicolon at the end and inserting `to an individual who has received an organ transplant'.

(b) EFFECTIVE DATE- The amendments made by this section shall apply to drugs furnished on or after the date of the enactment of this Act.

TITLE III--PROVISIONS RELATING TO PARTS A AND B

Subtitle A--Home Health Services

SEC. 301. ELIMINATION OF 15 PERCENT REDUCTION IN PAYMENT RATES UNDER THE PROSPECTIVE PAYMENT SYSTEM.

(a) IN GENERAL- Section 1895(b)(3)(A) (42 U.S.C. 1395fff(b)(3)(A)) is amended to read as follows:

`(A) INITIAL BASIS- Under such system the Secretary shall provide for computation of a standard prospective payment amount (or amounts) as follows:

`(i) Such amount (or amounts) shall initially be based on the most current audited cost report data available to the Secretary and shall be computed in a manner so that the total amounts payable under the system for fiscal year 2001 shall be equal to the total amount that would have been made if the system had not been in effect and if section 1861(v)(1)(L)(ix) had not been enacted.

`(ii) For fiscal year 2002 and for the first quarter of fiscal year 2003, such amount (or amounts) shall be equal to the amount (or amounts) determined under this paragraph for the previous fiscal year, updated under subparagraph (B).

`(iii) For 2003, such amount (or amounts) shall be equal to the amount (or amounts) determined under this paragraph for fiscal year 2002, updated under subparagraph (B) for 2003.

`(iv) For 2004 and each subsequent year, such amount (or amounts) shall be equal to the amount (or amounts) determined under this paragraph for the previous year, updated under subparagraph (B).

Each such amount shall be standardized in a manner that eliminates the effect of variations in relative case mix and area wage adjustments among different home health agencies in a budget neutral manner consistent with the case mix and wage level adjustments provided under paragraph (4)(A). Under the system, the Secretary may recognize regional differences or differences based upon whether or not the services or agency are in an urbanized area.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect as if included in the amendments made by section 501 of 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).

SEC. 302. UPDATE IN HOME HEALTH SERVICES.

(a) CHANGE TO CALENDAR YEAR UPDATE-

(1) IN GENERAL- Section 1895(b) (42 U.S.C. 1395fff(b)(3)) is amended--

(A) in paragraph (3)(B)(i)--

(i) by striking `each fiscal year (beginning with fiscal year 2002)' and inserting `fiscal year 2002 and for each subsequent year (beginning with 2003)'; and

(ii) by inserting `or year' after `the fiscal year';

(B) in paragraph (3)(B)(ii)--

(i) in subclause (II), by striking `fiscal year' and inserting `year' and by redesignating such subclause as subclause (III); and

(ii) in subclause (I), by striking `each of fiscal years 2002 and 2003' and inserting the following: `fiscal year 2002, the home health market basket percentage increase (as defined in clause (iii)) minus 1.1 percentage points;

`(II) 2003';

(D) in paragraph (3)(B)(iv)--

(i) by inserting `or year' after `fiscal year' each place it appears; and

(ii) by inserting `or years' after `fiscal years'; and

(E) in paragraph (5), by inserting `or year' after `fiscal year'.

(2) TRANSITION RULE- The standard prospective payment amount (or amounts) under section 1895(b)(3) of the Social Security Act for the calendar quarter beginning on October 1, 2002, shall be such amount (or amounts) for the previous calendar quarter.

(b) CHANGES IN UPDATES FOR 2003, 2004, AND 2005- Section 1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as amended by subsection (a)(1)(B), is amended--

(1) in subclause (II), by striking `the home health market basket percentage increase (as defined in clause (iii)) minus 1.1 percentage points' and inserting `2.0 percentage points';

(2) by striking `or' at the end of subclause (II);

(3) by redesignating subclause (III) as subclause (V); and

(4) by inserting after subclause (II) the following new subclause:

`(III) 2004, 1.1 percentage points;

`(IV) 2005, 2.7 percentage points; or'.

(1) IN GENERAL- Section 1895(b)(5) (42 U.S.C. 1395fff(b)(5)) is amended by striking `5 percent' and inserting `3 percent'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to years beginning with 2003.

SEC. 303. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH SERVICES FURNISHED IN A RURAL AREA.

(a) IN GENERAL- Section 508(a) BIPA (114 Stat. 2763A-533) is amended--

(1) by striking `24-MONTH INCREASE BEGINNING APRIL 1, 2001' and inserting `IN GENERAL'; and

(2) by striking `April 1, 2003' and inserting `January 1, 2005'.

(b) CONFORMING AMENDMENT- Section 547(c)(2) of BIPA (114 Stat. 2763A-553) is amended by striking `the period beginning on April 1, 2001, and ending on September 30, 2002,' and inserting `a period under such section'.

SEC. 304. OASIS TASK FORCE; SUSPENSION OF CERTAIN OASIS DATA COLLECTION REQUIREMENTS PENDING TASK FORCE SUBMITTAL OF REPORT.

(a) ESTABLISHMENT- The Secretary of Health and Human Services shall establish and appoint a task force (to be known as the `OASIS Task Force') to examine the data collection and reporting requirements under OASIS. For purposes of this section, the term `OASIS' means the Outcome and Assessment Information Set required by reason of section 4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 1395fff note).

(b) COMPOSITION- The OASIS Task Force shall be composed of the following:

(1) Staff of the Centers for Medicare & Medicaid Services with expertise in post-acute care.

(2) Representatives of home health agencies.

(3) Health care professionals and research and health care quality experts outside the Federal Government with expertise in post-acute care.

(4) Advocates for individuals requiring home health services.

(1) REVIEW AND RECOMMENDATIONS- The OASIS Task Force shall review and make recommendations to the Secretary regarding changes in OASIS to improve and simplify data collection for purposes of--

(A) assessing the quality of home health services; and

(B) providing consistency in classification of patients into home health resource groups (HHRGs) for payment under section 1895 of the Social Security Act (42 U.S.C. 1395fff).

(2) SPECIFIC ITEMS- In conducting the review under paragraph (1), the OASIS Task Force shall specifically examine--

(A) the 41 outcome measures currently in use;

(B) the timing and frequency of data collection; and

(3) REPORT- The OASIS Task Force shall submit a report to the Secretary containing its findings and recommendations for changes in OASIS by not later than 18 months after the date of the enactment of this Act.

(d) SUNSET- The OASIS Task Force shall terminate 60 days after the date on which the report is submitted under subsection (c)(2).

(e) NONAPPLICATION OF FACA- The provisions of the Federal Advisory Committee Act shall not apply to the OASIS Task Force.

(f) SUSPENSION OF OASIS REQUIREMENT FOR COLLECTION OF DATA ON NON-MEDICARE AND NON-MEDICAID PATIENTS PENDING TASK FORCE REPORT-

(1) IN GENERAL- During the period described in paragraph (2), the Secretary of Health and Human Services 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.

(2) PERIOD OF SUSPENSION- The period described in this paragraph--

(A) begins on January 1, 2003, and

(B) ends on the last day of the second month beginning after the date the report is submitted under subsection (c)(2).

SEC. 305. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH AGENCIES.

(a) STUDY- The Medicare Payment Advisory Commission shall conduct a study of payment margins of home health agencies under the home health prospective payment system under section 1895 of the Social Security Act (42 U.S.C. 1395fff). Such study shall examine whether systematic differences in payment margins are related to differences in case mix (as measured by home health resource groups (HHRGs)) among such agencies. The study shall use the partial or full-year cost reports filed by home health agencies.

(b) REPORT- Not later than 2 years after the date of the enactment of this Act, the Commission shall submit to Congress a report on the study under subsection (a).

Subtitle B--Other Provisions

SEC. 311. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY COMMISSION (MEDPAC).

(a) EXAMINATION OF BUDGET CONSEQUENCES- Section 1805(b) (42 U.S.C. 1395b-6(b)) is amended by adding at the end the following new paragraph:

`(8) EXAMINATION OF BUDGET CONSEQUENCES- Before making any recommendations, the Commission shall examine the budget consequences of such recommendations, directly or through consultation with appropriate expert entities.'.

(b) CONSIDERATION OF EFFICIENT PROVISION OF SERVICES- Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is amended by inserting `the efficient provision of' after `expenditures for'.

(1) DATA NEEDS AND SOURCES- The Medicare Payment Advisory Commission shall conduct a study, and submit a report to Congress by not later than June 1, 2003, on the need for current data, and sources of current data available, to determine the solvency and financial circumstances of hospitals and other medicare providers of services. The Commission shall examine data on uncompensated care, as well as the share of uncompensated care accounted for by the expenses for treating illegal aliens.

(2) USE OF TAX-RELATED RETURNS- Using return information provided under Form 990 of the Internal Revenue Service, the Commission shall submit to Congress, by not later than July 1, 2003, a report on the following:

(A) Investments and capital financing of hospitals participating under the medicare program and related foundations.

(B) Access to capital financing for private and for not-for-profit hospitals.

SEC. 312. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR CERTAIN MEDICARE BENEFICIARIES WITH DIABETES.

(a) IN GENERAL- The Secretary of Health and Human Services shall conduct a demonstration project under this section (in this section referred to as the `project') to demonstrate the impact on costs and health outcomes of applying disease management to certain medicare beneficiaries with diagnosed diabetes. In no case may the number of participants in the project exceed 30,000 at any time.

(b) VOLUNTARY PARTICIPATION-

(1) ELIGIBILITY- Medicare beneficiaries are eligible to participate in the project only if--

(A) they are a member of a health disparity population (as defined in section 485E(d) of the Public Health Service Act), such as Hispanics;

(B) they meet specific medical criteria demonstrating the appropriate diagnosis and the advanced nature of their disease;

(D) they are not enrolled in a Medicare+Choice plan.

(2) BENEFITS- A medicare beneficiary who is enrolled in the project shall be eligible--

(A) for disease management services related to their diabetes; and

(B) for payment for all costs for prescription drugs without regard to whether or not they relate to the diabetes, except that the project may provide for modest cost-sharing with respect to prescription drug coverage.

(1) IN GENERAL- The Secretary of Health and Human Services shall carry out the project through contracts with up to three disease management organizations.

The Secretary shall not enter into such a contract with an organization unless the organization demonstrates that it can produce improved health outcomes and reduce aggregate medicare expenditures consistent with paragraph (2).

(2) CONTRACT PROVISIONS- Under such contracts--

(A) such an organization shall be required to provide for prescription drug coverage described in subsection (b)(2)(B);

(B) such an organization shall be paid a fee negotiated and established by the Secretary in a manner so that (taking into account savings in expenditures under parts A and B of the medicare program under title XVIII of the Social Security Act) there will be no net increase, and to the extent practicable, there will be a net reduction in expenditures under the medicare program as a result of the project; and

(C) such an organization shall guarantee, through an appropriate arrangement with a reinsurance company or otherwise, the prohibition on net increases in expenditures described in subparagraph (B).

(3) PAYMENTS- Payments to such organizations shall be made in appropriate proportion from the Trust Funds established under title XVIII of the Social Security Act.

(d) APPLICATION OF MEDIGAP PROTECTIONS TO DEMONSTRATION PROJECT ENROLLEES- (1) Subject to paragraph (2), the provisions of section 1882(s)(3) (other than clauses (i) through (iv) of subparagraph (B)) and 1882(s)(4) of the Social Security Act shall apply to enrollment (and termination of enrollment) in the demonstration project under this section, in the same manner as they apply to enrollment (and termination of enrollment) with a Medicare+Choice organization in a Medicare+Choice plan.

(2) In applying paragraph (1)--

(A) any reference in clause (v) or (vi) of section 1882(s)(3)(B) of such Act to 12 months is deemed a reference to the period of the demonstration project; and

(B) the notification required under section 1882(s)(3)(D) of such Act shall be provided in a manner specified by the Secretary of Health and Human Services.

(e) DURATION- The project shall last for not longer than 3 years.

(f) WAIVER- The Secretary of Health and Human Services shall waive such provisions of title XVIII of the Social Security Act as may be necessary to provide for payment for services under the project in accordance with subsection (c)(3).

(g) REPORT- The Secretary of Health and Human Services shall submit to Congress an interim report on the project not later than 2 years after the date it is first implemented and a final report on the project not later than 6 months after the date of its completion. Such reports shall include information on the impact of the project on costs and health outcomes and recommendations on the cost-effectiveness of extending or expanding the project.

(h) WORKING GROUP ON MEDICARE DISEASE MANAGEMENT PROGRAMS- The Secretary shall establish within the Department of Health and Human Services a working group consisting of employees of the Department to carry out the following:

(1) To oversee the project.

(2) To establish policy and criteria for medicare disease management programs within the Department, including the establishment of policy and criteria for such programs.

(3) To identify targeted medical conditions and targeted individuals.

(4) To select areas in which such programs are carried out.

(5) To monitor health outcomes under such programs.

(6) To measure the effectiveness of such programs in meeting any budget neutrality requirements.

(7) Otherwise to serve as a central focal point within the Department for dissemination of information on medicare disease management programs.

(i) GAO STUDY ON DISEASE MANAGEMENT PROGRAMS- The Comptroller General of the United States shall conduct a study that compares disease management programs under title XVIII of the Social Security Act with such programs conducted in the private sector, including the prevalence of such programs and programs for case management. The study shall identify the cost-effectiveness of such programs and any savings achieved by such programs. The Comptroller General shall submit a report on such study to Congress by not later than 18 months after the date of the enactment of this Act.

SEC. 313. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE SERVICES.

(a) ESTABLISHMENT- Subject to the succeeding provisions of this section, the Secretary of Health and Human Services shall establish a demonstration project (in this section referred to as the `demonstration project') under which the Secretary shall, as part of a plan of an episode of care for home health services established for a medicare beneficiary, permit a home health agency, directly or under arrangements with a medical adult day care facility, to provide medical adult day care services as a substitute for a portion of home health services that would otherwise be provided in the beneficiary's home.

(b) PAYMENT-

(1) IN GENERAL- The amount of payment for an episode of care for home health services, a portion of which consists of substitute medical adult day care services, under the demonstration project shall be made at a rate equal to 95 percent of the amount that would otherwise apply for such home health services under section 1895 of the Social Security Act (42 U.S.C. 1395fff). In no case may a home health agency, or a medical adult day care facility under arrangements with a home health agency, separately charge a beneficiary for medical adult day care services furnished under the plan of care.

(2) BUDGET NEUTRALITY FOR DEMONSTRATION PROJECT- Notwithstanding any other provision of law, the Secretary shall provide for an appropriate reduction in the

aggregate amount of additional payments made under section 1895 of the Social Security Act (42 U.S.C. 1395fff) to reflect any increase in amounts expended from the Trust Funds as a result of the demonstration project conducted under this section.

(c) DEMONSTRATION PROJECT SITES- The project established under this section shall be conducted in not more than 5 States selected by the Secretary that license or certify providers of services that furnish medical adult day care services.

(d) DURATION- The Secretary shall conduct the demonstration project for a period of 3 years.

(e) VOLUNTARY PARTICIPATION- Participation of medicare beneficiaries in the demonstration project shall be voluntary. The total number of such beneficiaries that may participate in the project at any given time may not exceed 15,000.

(f) PREFERENCE IN SELECTING AGENCIES- In selecting home health agencies to participate under the demonstration project, the Secretary shall give preference to those agencies that are currently licensed or certified through common ownership and control to furnish medical adult day care services.

(g) WAIVER AUTHORITY- The Secretary may waive such requirements of title XVIII of the Social Security Act as may be necessary for the purposes of carrying out the demonstration project, other than waiving the requirement that an individual be homebound in order to be eligible for benefits for home health services.

(h) EVALUATION AND REPORT- The Secretary shall conduct an evaluation of the clinical and cost effectiveness of the demonstration project. Not later than 30 months after the commencement of the project, the Secretary shall submit to Congress a report on the evaluation, and shall include in the report the following:

(1) An analysis of the patient outcomes and costs of furnishing care to the medicare beneficiaries participating in the project as compared to such outcomes and costs to beneficiaries receiving only home health services for the same health conditions.

(2) Such recommendations regarding the extension, expansion, or termination of the project as the Secretary determines appropriate.

(i) DEFINITIONS- In this section:

(1) HOME HEALTH AGENCY- The term `home health agency' has the meaning given such term in section 1861(o) of the Social Security Act (42 U.S.C. 1395x(o)).

(2) MEDICAL ADULT DAY CARE FACILITY- The term `medical adult day care facility' means a facility that--

(A) has been licensed or certified by a State to furnish medical adult day care services in the State for a continuous 2-year period;

(B) is engaged in providing skilled nursing services and other therapeutic services directly or under arrangement with a home health agency;

(C) meets such standards established by the Secretary to assure quality of care and such other requirements as the Secretary finds necessary in the interest of the health and safety of individuals who are furnished services in the facility; and

(D) provides medical adult day care services.

(3) MEDICAL ADULT DAY CARE SERVICES- The term `medical adult day care services' means--

(A) home health service items and services described in paragraphs (1) through (7) of section 1861(m) furnished in a medical adult day care facility;

(B) a program of supervised activities furnished in a group setting in the facility that--

(i) meet such criteria as the Secretary determines appropriate; and

(ii) is designed to promote physical and mental health of the individuals; and

(4) MEDICARE BENEFICIARY- The term `medicare beneficiary' means an individual entitled to benefits under part A of this title, enrolled under part B of this title, or both.

SEC. 314. PUBLICATION ON FINAL WRITTEN GUIDANCE CONCERNING PROHIBITIONS AGAINST DISCRIMINATION BY NATIONAL ORIGIN WITH RESPECT TO HEALTH CARE SERVICES.

Not later than June 1, 2003, the Secretary shall issue final written guidance concerning the application of the prohibition in title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) against national origin discrimination as it affects persons with limited English proficiency with respect to access to health care services under the medicare program under title XVIII of the Social Security Act, the medicaid program under title XIX of such Act, and the SCHIP program under title XXI of such Act.

TITLE IV--PROVISIONS RELATING TO MANAGED CARE

SEC. 401. MEDICARE+CHOICE IMPROVEMENTS.

(a) EQUALIZING PAYMENTS BETWEEN FEE-FOR-SERVICE AND MEDICARE+CHOICE-

(1) IN GENERAL- Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended by adding at the end the following:

`(D) BASED ON 100 PERCENT OF FEE-FOR-SERVICE COSTS-

`(i) IN GENERAL- For 2003 and 2004, the adjusted average per capita cost for the year involved, determined under section 1876(a)(4) for the Medicare+Choice payment area for services covered under parts A and B for individuals entitled to benefits under part A and enrolled under part B who are not enrolled in a Medicare+Choice plan under this part for the year, but adjusted to exclude costs attributable to payments under section 1886(h).

`(ii) INCLUSION OF COSTS OF VA AND DOD MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the adjusted average per capita cost under clause (i) for a year, such cost shall be adjusted to include the Secretary's estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Veterans Affairs or the Department of Defense.'.

(2) CONFORMING AMENDMENT- Such section is further amended, in the matter before subparagraph (A), by striking `or (C)' and inserting `(C), or (D)'.

(b) REVISION OF BLEND-

(1) REVISION OF NATIONAL AVERAGE USED IN CALCULATION OF BLEND- Section 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w-23(c)(4)(B)(i)(II)) is amended by inserting `who (with respect to determinations for 2003 and for 2004) are enrolled in a Medicare+Choice plan' after `the average number of medicare beneficiaries'.

(2) CHANGE IN BUDGET NEUTRALITY- Section 1853(c) (42 U.S.C. 1395w-23(c)) is amended--

(A) in paragraph (1)(A), by inserting `(for a year before 2003)' after `multiplied'; and

(B) in paragraph (5), by inserting `(before 2003)' after `for each year'.

(c) REVISION IN MINIMUM PERCENTAGE INCREASE FOR 2003 AND 2004- Section 1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is amended by striking clause (iv) and inserting the following:

`(iv) For 2002, 102 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for 2001.

`(v) For 2003 and 2004, 103 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for the previous year.

`(vi) For 2005 and each succeeding year, 102 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for the previous year.'.

(d) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES IN CALCULATION OF MEDICARE+CHOICE PAYMENT RATES- Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)) is amended--

(1) in subparagraph (A), by striking `subparagraph (B)' and inserting `subparagraphs (B) and (E)', and

(2) by adding at the end the following new subparagraph:

`(E) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the area-specific Medicare+Choice capitation rate under subparagraph (A) for a year (beginning with 2003), the annual per capita rate of payment for 1997 determined under section 1876(a)(1)(C) shall be adjusted to include in the rate the Secretary's estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Defense or the Department of Veterans Affairs.'.

(e) ANNOUNCEMENT OF REVISED MEDICARE+CHOICE PAYMENT RATES- Within 4 weeks after the date of the enactment of this Act, the Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties) Medicare+Choice capitation rates under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for 2003, revised in accordance with the provisions of this section.

(f) MEDPAC STUDY OF AAPCC-

(1) STUDY- The Medicare Payment Advisory Commission shall conduct a study that assesses the method used for determining the adjusted average per capita cost (AAPCC) under section 1876(a)(4) of the Social Security Act (42 U.S.C. 1395mm(a)(4)). Such study shall examine--

(A) the bases for variation in such costs between different areas, including differences in input prices, utilization, and practice patterns;

(B) the appropriate geographic area for payment under the Medicare+Choice program under part C of title XVIII of such Act; and

(C) the accuracy of risk adjustment methods in reflecting differences in costs of providing care to different groups of beneficiaries served under such program.

(2) REPORT- Not later than 9 months after the date of the enactment of this Act, the Commission shall submit to Congress a report on the study conducted under paragraph (1). Such report shall include recommendations regarding changes in the methods for computing the adjusted average per capita cost among different areas.

(g) REPORT ON IMPACT OF INCREASED FINANCIAL ASSISTANCE TO MEDICARE+CHOICE PLANS- Not later than July 1, 2003, the Secretary of Health and Human Services shall submit to Congress a report that describes the impact of additional financing provided under this Act and other Acts (including the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 and BIPA) on the availability of Medicare+Choice plans in different areas and its impact on lowering premiums and increasing benefits under such plans.

SEC. 402. 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, 2007, 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, 2005, the Medicare Benefits Administrator 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 of Health and Human Services 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. 403. EXTENSION OF REASONABLE COST AND SHMO CONTRACTS.

(a) REASONABLE COST CONTRACTS-

(1) IN GENERAL- Section 1876(h)(5)(C) (42 U.S.C. 1395mm(h)(5)(C)) is amended--

(A) by inserting `(i)' after `(C)';

(B) by inserting before the period the following: `, except (subject to clause (ii)) in the case of a contract for an area which is not covered in the service area of 1 or more coordinated care Medicare+Choice plans under part C'; and

`(ii) In the case in which--

`(I) a reasonable cost reimbursement contract includes an area in its service area as of a date that is after December 31, 2003;

`(II) such area is no longer included in such service area after such date by reason of the operation of clause (i) because of the inclusion of such area within the service area of a Medicare+Choice plan; and

`(III) all Medicare+Choice plans subsequently terminate coverage in such area;

such reasonable cost reimbursement contract may be extended and renewed to cover such area (so long as it is not included in the service area of any Medicare+Choice plan).'.

(2) STUDY- The Medicare Benefits Administrator shall conduct a study of an appropriate transition for plans offered under reasonable cost contracts under section 1876 of the Social Security Act on and after January 1, 2005. Such a transition may take into account whether there are one or more coordinated care Medicare+Choice plans being offered in the areas involved. Not later than February 1, 2004, the Administrator shall submit to Congress a report on such study and shall include recommendations regarding any changes in the amendment made by paragraph (1) as the Administrator determines to be appropriate.

(b) EXTENSION OF SOCIAL HEALTH MAINTENANCE ORGANIZATION (SHMO) DEMONSTRATION PROJECT-

(1) IN GENERAL- Section 4018(b)(1) of the Omnibus Budget Reconciliation Act of 1987 is amended by striking `the date that is 30 months after the date that the Secretary submits to Congress the report described in section 4014(c) of the Balanced Budget Act of 1997' and inserting `December 31, 2004'.

(2) SHMOS OFFERING MEDICARE+CHOICE PLANS- Nothing in such section 4018 shall be construed as preventing a social health maintenance organization from offering a Medicare+Choice plan under part C of title XVIII of the Social Security Act.

SEC. 404. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION PROJECTS.

The last sentence of section 9215(a) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (42 U.S.C. 1395b-1 note), as previously amended, is amended by striking `December 31, 2004, but only with respect to' and all that follows and inserting `December 31, 2009, but only with respect to individuals who reside in the city in which the project is operated and so long as the total number of individuals participating in the project does not exceed the number of such individuals participating as of January 1, 1996.'.

SEC. 405. PAYMENT BY PACE PROVIDERS FOR MEDICARE AND MEDICAID SERVICES FURNISHED BY NONCONTRACT PROVIDERS.

(a) MEDICARE SERVICES-

(1) MEDICARE SERVICES FURNISHED BY PROVIDERS OF SERVICES- Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended--

(A) by striking `part C or' and inserting `part C, with a PACE provider under section 1894 or 1934, or';

(B) by striking `(i)';

(D) by striking `members of the organization' and inserting `members of the organization or PACE program eligible individuals enrolled with the PACE provider,'.

(2) MEDICARE SERVICES FURNISHED BY PHYSICIANS AND OTHER ENTITIES- Section 1894(b) (42 U.S.C. 1395eee(b)) is amended by adding at the end the following new paragraphs:

`(3) TREATMENT OF MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES-

payment amounts for services furnished to such an individual in the same manner as such section applies to Medicare+Choice organizations, individuals enrolled with such organizations, and physicians and other entities referred to in such section.

`(B) REFERENCE TO RELATED PROVISION FOR NONCONTRACT PROVIDERS OF SERVICES- For the provision relating to limitations on balance billing against PACE providers for services covered under this title furnished by noncontract providers of services, see section 1866(a)(1)(O).

`(4) REFERENCE TO RELATED PROVISION FOR SERVICES COVERED UNDER TITLE XIX BUT NOT UNDER THIS TITLE- For provisions relating to limitations on payments to providers participating under the State plan under title XIX that do not have a contract with a PACE provider establishing payment amounts for services covered under such plan (but not under this title) when such services are furnished to enrollees of that PACE provider, see section 1902(a)(66).'.

(b) MEDICAID SERVICES-

(1) REQUIREMENT UNDER STATE PLAN- Section 1902(a) (42 U.S.C. 1396a(a) is amended--

(A) in paragraph (64), by striking `and' at the end;

(B) in paragraph (65), by striking the period at the end and inserting `; and'; and

`(66) provide, with respect to services covered under the State plan (but not under title XVIII) that are furnished to a PACE program eligible individual enrolled with a PACE provider by a provider participating under the State plan that does not have a contract with the PACE provider that establishes payment amounts for such services, that such participating provider may not require the PACE provider to pay the participating provider an amount greater than the amount that would otherwise be payable for the service to the participating provider under the State plan for the State where the PACE provider is located (in accordance with regulations issued by the Secretary).'.

(2) REFERENCE IN MEDICAID STATUTE- Section 1934(b) (42 U.S.C. 1396u-4(b)) is amended by adding at the end the following new paragraphs:

`(3) TREATMENT OF MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES-

`(A) APPLICATION OF MEDICARE+CHOICE REQUIREMENT WITH RESPECT TO MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES- Section 1852(k)(1) (relating to limitations on balance billing against Medicare+Choice organizations for noncontract physicians and other entities with respect to services covered under title XVIII) shall apply to PACE providers, PACE program eligible individuals enrolled with such PACE providers, and physicians and other entities that do not have a contract establishing payment amounts for services furnished to such an individual in the same manner as such section applies to Medicare+Choice organizations, individuals enrolled with such organizations, and physicians and other entities referred to in such section.

`(B) REFERENCE TO RELATED PROVISION FOR NONCONTRACT PROVIDERS OF SERVICES- For the provision relating to limitations on balance billing against PACE providers for services covered under title XVIII furnished by noncontract providers of services, see section 1866(a)(1)(O).

`(4) REFERENCE TO RELATED PROVISION FOR SERVICES COVERED UNDER THIS TITLE BUT NOT UNDER TITLE XVIII- For provisions relating to limitations on payments to providers participating under the State plan under this title that do not have a contract with a PACE provider establishing payment amounts for services covered under such plan (but not under title XVIII) when such services are furnished to enrollees of that PACE provider, see section 1902(a)(66).'.

TITLE V--REGULATORY REDUCTION AND CONTRACTING REFORM

Subtitle A--Regulatory Reform

SEC. 501. CONSTRUCTION; DEFINITION OF SUPPLIER.

(a) CONSTRUCTION- Nothing in this title 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.

(b) DEFINITION OF SUPPLIER- 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.'.

SEC. 502. ISSUANCE OF REGULATIONS.

(a) CONSOLIDATION OF PROMULGATION TO ONCE A MONTH-

(1) IN GENERAL- Section 1871 (42 U.S.C. 1395hh) is amended by adding at the end the following new subsection:

`(d)(1) Subject to paragraph (2), the Secretary shall issue proposed or final (including interim final) regulations to carry out this title only on one business day of every month.

`(2) The Secretary may issue a proposed or final regulation described in paragraph (1) on any other day than the day described in paragraph (1) if the Secretary--

`(A) finds that issuance of such regulation on another day is necessary to comply with requirements under law; or

`(B) finds that with respect to that regulation the limitation of issuance on the date described in paragraph (1) is contrary to the public interest.

If the Secretary makes a finding under this paragraph, the Secretary shall include such finding, and brief statement of the reasons for such finding, in the issuance of such regulation.

`(3) The Secretary shall coordinate issuance of new regulations described in paragraph (1) relating to a category of provider of services or suppliers based on an analysis of the collective impact of regulatory changes on that category of providers or suppliers.'.

(2) GAO REPORT ON PUBLICATION OF REGULATIONS ON A QUARTERLY BASIS- Not later than 3 years after the date of the enactment of this Act, the Comptroller General of the United States shall submit to Congress a report on the feasibility of requiring that regulations described in section 1871(d) of the Social Security Act be promulgated on a quarterly basis rather than on a monthly basis.

(3) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to regulations promulgated on or after the date that is 30 days after the date of the enactment of this Act.

(b) REGULAR TIMELINE FOR PUBLICATION OF FINAL RULES-

(1) IN GENERAL- Section 1871(a) (42 U.S.C. 1395hh(a)) is amended by adding at the end the following new paragraph:

`(3)(A) The Secretary, in consultation with the Director of the Office of Management and Budget, shall establish and publish a regular timeline for the publication of final regulations based on the previous publication of a proposed regulation or an interim final regulation.

`(B) Such timeline may vary among different regulations based on differences in the complexity of the regulation, the number and scope of comments received, and other relevant factors, but shall not be longer than 3 years except under exceptional circumstances. If the Secretary intends to vary such timeline with respect to the publication of a final regulation, the Secretary shall cause to have published in the Federal Register notice of the different timeline by not later than the timeline previously established with respect to such regulation. Such notice shall include a brief explanation of the justification for such variation.

`(C) In the case of interim final regulations, upon the expiration of the regular timeline established under this paragraph for the publication of a final regulation after opportunity for public comment, the interim final regulation shall not continue in effect unless the Secretary publishes (at the end of the regular timeline and, if applicable, at the end of each succeeding 1-year period) a notice of continuation of the regulation that includes an explanation of why the regular timeline (and any subsequent 1-year extension) was not complied with. If such a notice is published, the regular timeline (or such timeline as previously extended under this paragraph) for publication of the final regulation shall be treated as having been extended for 1 additional year.

`(D) The Secretary shall annually submit to Congress a report that describes the instances in which the Secretary failed to publish a final regulation within the applicable regular timeline under this paragraph and that provides an explanation for such failures.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall take effect on the date of the enactment of this Act. The Secretary shall provide for an appropriate transition to take into account the backlog of previously published interim final regulations.

(1) IN GENERAL- Section 1871(a) (42 U.S.C. 1395hh(a)), as amended by subsection (b), is further amended by adding at the end the following new paragraph:

`(4) If the Secretary publishes notice of proposed rulemaking relating to a regulation (including an interim final regulation), insofar as such final regulation includes a provision that is not a logical outgrowth of such notice of proposed rulemaking, that provision shall be treated as a proposed regulation and shall not take effect until there is the further opportunity for public comment and a publication of the provision again as a final regulation.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to final regulations published on or after the date of the enactment of this Act.

SEC. 503. 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 502(a), is amended by adding at the end the following new subsection:

`(e)(1)(A) A substantive change in regulations, manual instructions, interpretative rules, statements of policy, or guidelines of general applicability under this title shall not be applied (by extrapolation or otherwise) retroactively to items and services furnished before the effective date of the change, unless the Secretary determines that--

`(i) such retroactive application is necessary to comply with statutory requirements; or

`(ii) failure to apply the change retroactively would be contrary to the public interest.'.

(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to substantive changes issued on or after the date of the enactment of this Act.

(b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE CHANGES AFTER NOTICE-

(1) IN GENERAL- Section 1871(e)(1), as added by subsection (a), is 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.

(1) IN GENERAL- Section 1871(e), 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. 504. 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 January 1, 2004.

(b) REPORT ON LEGAL AND REGULATORY INCONSISTENCIES- Section 1871 (42 U.S.C. 1395hh), as amended by section 503(a), is amended by adding at the end the following new subsection:

`(f)(1) Not later than 2 years after the date of the enactment of this subsection, and every 2 years thereafter, the Secretary shall submit to Congress a report with respect to the administration of this title and areas of inconsistency or conflict among the various provisions under law and regulation.

`(2) In preparing a report under paragraph (1), the Secretary shall collect--

`(A) information from 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.'.

Subtitle B--Contracting Reform

SEC. 511. 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 gross negligence or intent to defraud the United States, be liable with respect to any payments certified by the individual under this section.

`(2) DISBURSING OFFICER- No disbursing officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payment by such officer under this section if it was based upon an authorization (which meets the applicable requirements for such internal controls established by the Comptroller General) of a certifying officer designated as provided in paragraph (1) of this subsection.

`(3) LIABILITY OF MEDICARE ADMINISTRATIVE CONTRACTOR- 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 or in the supervision of or selection of such officer the medicare administrative contractor acted with gross negligence.

`(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.

(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);

(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';

(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';

(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, 2004, 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, 2009.

(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, 2003, 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, 2007, 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.

(D) A detailed description of how the Secretary has modified oversight and management of medicare contractors to adapt to full competition.

SEC. 512. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE ADMINISTRATIVE CONTRACTORS.

(a) IN GENERAL- Section 1874A, as added by section 511(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 section 3534(b)(2) of title 44, United States Code (other than requirements under subparagraphs (B)(ii), (F)(iii), and (F)(iv) of such section).

`(2) INDEPENDENT AUDITS-

`(A) PERFORMANCE OF ANNUAL EVALUATIONS- Each year a medicare administrative contractor that performs the functions referred to in subparagraphs (A) and (B) of subsection (a)(4) (relating to determining and making payments) shall undergo an evaluation of the information security 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 control techniques for an appropriate subset of the contractor's information systems (as defined in section 3502(8) of title 44, United States Code) relating to such functions under this title and an assessment of compliance with the requirements of this subsection and related information security policies, procedures, standards and guidelines.

`(B) DEADLINE FOR INITIAL EVALUATION-

`(i) NEW CONTRACTORS- In the case of a medicare administrative contractor covered by this subsection that has not previously performed the functions referred to in subparagraphs (A) and (B) of subsection (a)(4) (relating to determining and making payments) as a fiscal intermediary or carrier under section 1816 or 1842, the first independent evaluation conducted pursuant subparagraph (A) shall be completed prior to commencing such functions.

`(ii) OTHER CONTRACTORS- In the case of a medicare administrative contractor covered by this subsection that is not described in clause (i), the first independent evaluation conducted pursuant subparagraph (A) shall be completed within 1 year

after the date the contractor commences functions referred to in clause (i) under this section.

`(C) REPORTS ON EVALUATIONS-

`(i) TO THE INSPECTOR GENERAL- The results of independent evaluations under subparagraph (A) shall be submitted promptly to the Inspector General of the Department of Health and Human Services.

`(ii) TO CONGRESS- The Inspector General of Department of Health and Human Services shall submit to Congress annual reports on the results of such evaluations.'.

(b) APPLICATION OF REQUIREMENTS TO FISCAL INTERMEDIARIES AND CARRIERS-

(1) IN GENERAL- The provisions of section 1874A(e)(2) of the Social Security Act (other than subparagraph (B)), as added by subsection (a), shall apply to each fiscal intermediary under section 1816 of the Social Security Act (42 U.S.C. 1395h) and each carrier under section 1842 of such Act (42 U.S.C. 1395u) in the same manner as they apply to medicare administrative contractors under such provisions.

(2) DEADLINE FOR INITIAL EVALUATION- In the case of such a fiscal intermediary or carrier with an agreement or contract under such respective section in effect as of the date of the enactment of this Act, the first evaluation under section 1874A(e)(2)(A) of the Social Security Act (as added by subsection (a)), pursuant to paragraph (1), shall be completed (and a report on the evaluation submitted to the Secretary) by not later than 1 year after such date.

Subtitle C--Education and Outreach

SEC. 521. 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, 2003, 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 511(a)(1) and as amended by section 512(a), is amended by adding at the end the following new subsection:

`(f) INCENTIVES TO IMPROVE CONTRACTOR PERFORMANCE IN PROVIDER EDUCATION AND OUTREACH- In order to give medicare administrative contractors an incentive to implement effective education and outreach programs for providers of services and suppliers, the Secretary shall develop and implement a methodology to measure the specific claims payment error rates of such contractors in the processing or reviewing of medicare claims.'.

(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, 2003, 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, 2003, 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.

(1) IN GENERAL- Section 1874A, as added by section 511(a)(1) and as amended by section 512(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, 2003.

(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 2004 and 2005 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, 2003.

(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, 2003.

(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. 522. 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 2004, $1,000,000, and

(2) for fiscal year 2005, $6,000,000.

SEC. 523. 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, as amended by sections 105 and 701, is amended by inserting after section 1808 the following new section:

`MEDICARE BENEFICIARY OMBUDSMAN

`SEC. 1809. (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 1809 of such Act (relating to the Medicare Beneficiary Ombudsman), as added by subsection (b), such sums as are necessary for fiscal year 2003 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. 524. 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.

(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.

Subtitle D--Appeals and Recovery

SEC. 531. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

(a) TRANSITION PLAN-

(1) IN GENERAL- Not later than October 1, 2003, 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, 2004, and not later than October 1, 2004, 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.

(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 2004 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. 532. 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.'.

(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 2004 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.

SEC. 533. 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 532(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, 2003.

(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'.

(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 paragraph:

`(4) REQUIREMENTS OF NOTICE OF DETERMINATIONS AND REDETERMINATIONS- A written notice of a determination on an initial determination or on a redetermination, insofar as such determination or redetermination results in a denial of a claim for benefits, shall include--

`(A) the specific reasons for the determination, including--

`(i) upon request, the provision of the policy, manual, or regulation used in making the determination; and

`(ii) as appropriate in the case of a redetermination, a summary of the clinical or scientific evidence used in making the determination;

`(B) the procedures for obtaining additional information concerning the determination or redetermination; and

`(C) notification of the right to seek a redetermination or otherwise appeal the determination and instructions on how to initiate such a redetermination or appeal under this section.

The written notice on a redetermination 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.'.

(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'), each 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), each 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) 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).

(4) 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. 534. PREPAYMENT REVIEW.

(a) IN GENERAL- Section 1874A, as added by section 511(a)(1) and as amended by sections 512(b), 521(b)(1), and 521(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. 535. 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. 536. 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, 2003.

(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. 537. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS ON CLAIMS WITHOUT PURSUING APPEALS PROCESS.

The Secretary shall develop, in consultation with appropriate medicare contractors (as defined in section 1889(g) of the Social Security Act, as inserted by section 521(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.

SEC. 538. 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 533(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.

(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.

SEC. 539. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY AVAILABLE.

(a) IN GENERAL- Section 1870 (42 U.S.C. 1395gg) is amended by adding at the end the following new subsection:

`(h) Notwithstanding subsection (f) or any other provision of law, the Secretary shall permit a provider of services, physician, practitioner, or other supplier to appeal any determination of the Secretary under this title relating to services rendered under this title to an individual who subsequently dies if there is no other party available to appeal such determination.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect on the date of the enactment of this Act and shall apply to items and services furnished on or after such date.

Subtitle E--Miscellaneous Provisions

SEC. 541. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E & M) DOCUMENTATION GUIDELINES.

(a) IN GENERAL- The Secretary may not implement any new documentation guidelines for evaluation and management physician services under the title XVIII of the Social Security Act on or after the date of the enactment of this Act unless the Secretary--

(1) has developed the guidelines in collaboration with practicing physicians (including both generalists and specialists) and provided for an assessment of the proposed guidelines by the physician community;

(2) has established a plan that contains specific goals, including a schedule, for improving the use of such guidelines;

(3) has conducted appropriate and representative pilot projects under subsection (b) to test 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, 2004, 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, 2004, 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. 542. PROHIBITION OF INCIDENTAL FEES AND REQUIRED PURCHASE OF NON-COVERED ITEMS OR SERVICES.

(a) IN GENERAL- Section 1842 of the Social Security Act (42 U.S.C. 1395u) is amended by adding at the end the following new subsection:

`(u) PROHIBITION OF INCIDENTAL FEES OR REQUIRING PURCHASE OF NON-COVERED ITEMS OR SERVICES-

`(1) IN GENERAL- A physician, practitioner (as described in section 1842(b)(18)(C)), or other individual may not--

`(A) charge a membership fee or any other incidental fee to a medicare beneficiary (as defined in section 1802(b)(5)(A)), or

`(B) require a medicare beneficiary (as so defined) to purchase a non-covered item or service,

as a prerequisite for the provision of a covered item or service to the beneficiary under this title.

`(2) ENFORCEMENT- If a physician, practitioner, or other individual knowingly and willfully charges a fee, or requires purchase of a non-covered item or service, in violation of paragraph (1), the Secretary may apply sanctions against such physician in accordance with subsection (j)(2), except the maximum period of exclusion resulting from the application of this paragraph shall not exceed 2 years.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to membership fees and other charges made, or purchases of items and services required, on or after the date of enactment of this Act.

SEC. 543. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.

(a) IMPROVED COORDINATION BETWEEN FDA AND CMS ON COVERAGE OF BREAKTHROUGH MEDICAL DEVICES-

(1) IN GENERAL- Upon request by an applicant and to the extent feasible (as determined by the Secretary), the Secretary shall, in the case of a class III medical device that is subject to premarket approval under section 515 of

the Federal Food, Drug, and Cosmetic Act, ensure the sharing of appropriate information from the review for application for premarket approval conducted by the Food and Drug Administration for coverage decisions under title XVIII of the Social Security Act.

(2) PUBLICATION OF PLAN- Not later than 6 months after the date of the enactment of this Act, the Secretary shall submit to appropriate Committees of Congress a report that contains the plan for improving such coordination and for shortening the time lag between the premarket approval by the Food and Drug Administration and coding and coverage decisions by the Centers for Medicare & Medicaid Services.

(3) CONSTRUCTION- Nothing in this subsection shall be construed as changing the criteria for coverage of a medical device under title XVIII of the Social Security Act nor premarket approval by the Food and Drug Administration and nothing in this subsection shall be construed to increase premarket approval application requirements under the Federal Food, Drug, and Cosmetic Act.

(b) COUNCIL FOR TECHNOLOGY AND INNOVATION- Section 1868 (42 U.S.C. 1395ee), as amended by section 523(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.'.

(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, 2003, the Comptroller General shall submit a report to Congress on the study under paragraph (1).

(d) IOM STUDY ON LOCAL COVERAGE DETERMINATIONS-

(1) STUDY- The Secretary shall enter into an arrangement with the Institute of Medicine of the National Academy of Sciences under which the Institute shall conduct a study on local coverage determinations (including the application of local medical review policies) under the medicare program under title XVIII of the Social Security Act. Such study shall examine--

(A) the consistency of the definitions used in such determinations;

(B) the types of evidence on which such determinations are based, including medical and scientific evidence;

(C) the advantages and disadvantages of local coverage decisionmaking, including the flexibility it offers for ensuring timely patient access to new medical technology for which data are still be collected;

(D) the manner in which the local coverage determination process is used to develop data needed for a national coverage determination, including the need for collection of such data within a protocol and informed consent by 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; and

(E) the advantages and disadvantages of maintaining local medicare contractor advisory committees that can advise on local coverage decisions based on an open, collaborative public process.

(2) REPORT- Such arrangement shall provide that the Institute shall submit to the Secretary a report on such study by not later than 3 years after the date of the enactment of this Act. The Secretary shall promptly transmit a copy of such report to Congress.

(e) 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, 2004 (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).'.

SEC. 544. 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. 545. AUTHORIZING USE OF ARRANGEMENTS WITH OTHER HOSPICE PROGRAMS 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 new subparagraph:

`(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.'.

(b) CONFORMING PAYMENT PROVISION- Section 1814(i) (42 U.S.C. 1395f(i)), as amended by section 421(b), is amended by adding at the end the following new paragraph:

`(5) 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. 546. 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

`(T) in the case of hospitals that are not otherwise subject to the Occupational Safety and Health Act of 1970, 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, 2003.

SEC. 547. 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.

(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. 548. 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. 549. TREATMENT OF CERTAIN DENTAL CLAIMS.

(a) IN GENERAL- Section 1862 (42 U.S.C. 1395y) is amended by adding after subsection (g) the following new subsection:

`(h)(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. 550. 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.

END