Health Security Act
Title IV
TITLE IV_MEDICARE AND MEDICAID


table of contents of title


Sec._4000._References in title.
Subtitle A_Medicare and the Alliance System
Part 1_Enrollment of Medicare Beneficiaries in Regional Alliance Plans
Sec._4001._Optional State integration of medicare beneficiaries into regional alliance plans.
Sec._4002._Individual election to remain in certain health plans.
Sec._4003._Treatment of certain medicare beneficiaries.
Sec._4004._Prohibiting employers from taking into account status as medicare beneficiary on any grounds.
Part 2_Encouraging Managed Care Under Medicare Program; Coordination With Medigap Plans
Sec._4011._Enrollment and termination of enrollment.
Sec._4012._Uniform informational materials.
Sec._4013._Outlier payments.
Sec._4014._Point of service option.
Part 3_Medicare Coverage Expansions
Sec._4021._Reference to coverage of outpatient prescription drugs.
Sec._4022._Coverage of services of advanced practice nurses.
Part 4_Coordination With Administrative Simplification and Quality Management Initiatives
Sec._4031._Repeal of separate medicare peer review program.
Sec._4032._Mandatory assignment for all part B services.
Sec._4033._Elimination of complexities caused by dual funding sources and rules for payment of claims.
Sec._4034._Repeal of PRO precertification requirement for certain surgical procedures.
Sec._4035._Requirements for changes in billing procedures.
Part 5_Amendments to Anti-fraud and Abuse Provisions
Sec._4041._Anti-kickback provisions.
Sec._4042._Revisions to limitations on physician self-referral.
Sec._4043._Civil monetary penalties.
Sec._4044._Exclusions from program participation.
Sec._4045._Sanctions against practitioners and persons for failure to comply with statutory obligations relating to quality of care.
Sec._4046._Effective date.
Part 6_Funding of Graduate Medical Education and Academic Health Centers
Sec._4051._Transfers from medicare trust funds for graduate medical education.
Sec._4052._Transfers from hospital insurance trust fund for academic health centers.
Part 7_Coverage of Services Provided by Facilities and Plans of Departments of Defense and Veterans Affairs
Sec._4061._Treatment of uniformed services health plan as eligible organization under medicare.
Sec._4062._Coverage of services provided to medicare beneficiaries by plans and facilities of Department of Veterans Affairs.
Sec._4063._Conforming amendments.
Subtitle B_Savings in Medicare Program
Part 1_Savings Relating to Part A
Sec._4101._Reduction in update for inpatient hospital services.
Sec._4102._Reduction in adjustment for indirect medical education.
Sec._4103._Reduction in payments for capital-related costs for inpatient hospital services.
Sec._4104._Revisions to payment adjustments for disproportionate share hospitals in participating States.
Sec._4105._Moratorium on designation of additional long-term care hospitals.
Sec._4106._Extension of freeze on updates to routine service costs of skilled nursing facilities.
Part 2_Savings Relating to Part B
Sec._4111._Establishment of cumulative expenditure goals for physician services.
Sec._4112._Use of real GDP to adjust for volume and intensity; repeal of restriction on maximum reduction permitted in default update.
Sec._4113._Reduction in conversion factor for physician fee schedule for 1995.
Sec._4114._Limitations on payment for physicians' services furnished by high-cost hospital medical staffs.
Sec._4115._Medicare incentives for physicians to provide primary care.
Sec._4116._Elimination of formula-driven overpayments for certain outpatient hospital services.
Sec._4117._Imposition of coinsurance on laboratory services.
Sec._4118._Application of competitive bidding process for Part B items and services.
Sec._4119._Application of competitive acquisition procedures for laboratory services.
Part 3_Savings Relating to Parts A and B
Sec._4131._Medicare secondary payer changes.
Sec._4132._Payment limits for HMOs and CMPs with risk-sharing contracts.
Sec._4133._Reduction in routine cost limits for home health services.
Sec._4134._Imposition of copayment for certain home health visits.
Sec._4135._Expansion of centers of excellence.
Part 4_Part B Premium
Sec._4141._General Part B premium.
Subtitle C_Medicaid
Part 1_Comprehensive Benefit Package
Sec._4201._Limiting coverage under medicaid of items and services covered under comprehensive benefit package.
Part 2_Expanding Eligibility for Nursing Facility Services; Long-term Care Integration Option
Sec._4211._Spenddown eligibility for nursing facility residents.
Sec._4212._Increased income and resource disregards for nursing facility residents.
Sec._4213._New State long-term care integration option.
Sec._4214._Informing nursing home residents about availability of assistance for home and community-based services.
Part 3_Other Benefits
Sec._4221._Treatment of items and services not covered under the comprehensive benefit package.
Sec._4222._Establishment of program for poverty-level children with special needs.
Part 4_Discontinuation of Certain Payment Policies
Sec._4231._Discontinuation of medicaid DSH payments.
Sec._4232._Discontinuation of reimbursement standards for inpatient hospital services.
Part 5_Coordination With Administrative Simplification and Quality Management Initiatives
Sec._4241._Requirements for changes in billing procedures.
Part 6_Medicaid Commission
Sec._4251._Medicaid commission.
Subtitle D_Increase in SSI Personal Needs Allowance
Sec._4301._Increase in ssi personal needs allowance.

Title IV, Subtitle A
TITLE IV_MEDICARE AND MEDICAID
SEC. 4000. REFERENCES IN TITLE.
__(a) Amendments to Social Security Act._Except as otherwise specifically provided, whenever in this title 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.
__(b) References to OBRA._In this title, the terms ``OBRA	1986'', ``OBRA	1987'', ``OBRA	1989'', ``OBRA	1990'', and ``OBRA	1993'' refer to the Omnibus Budget Reconciliation Act of 1986 (Public Law 99	509), the Omnibus Budget Reconciliation Act of 1987 (Public Law 100	203), the Omnibus Budget Reconciliation Act of 1989 (Public Law 101	239), the Omnibus Budget Reconciliation Act of 1990 (Public Law 101	508), and the Omnibus Budget Reconciliation Act of 1993 (Public Law 103	66), respectively.
Subtitle A_Medicare and the Alliance System
PART 1_ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL ALLIANCE PLANS
SEC. 4001. OPTIONAL STATE INTEGRATION OF MEDICARE BENEFICIARIES INTO REGIONAL ALLIANCE PLANS.
__Title XVIII is amended by adding at the end the following:
``integration of medicare into state health security programs
__``Sec. 1893. (a) Payment to States._The Secretary shall pay a participating State that has submitted an application, as specified by subsection (b) which the Secretary has approved under subsection (c), the amount specified by subsection (d) for the period specified by subsection (e) for covered medicare beneficiaries. This section shall apply without regard to whether or not a State is a single-payer State.
__``(b) Application by State._An application submitted by a participating State shall contain the following assurances:
__``(1) Designation of classes covered._
__``(A) Designation of classes of medicare beneficiaries covered._In the application the State shall designate which of the following classes of medicare beneficiaries are to be covered:
__``(i) Individuals who are 65 years of age or older.
__``(ii) Individuals who are eligible for benefits under part A by reason of section 226(b) or section 1818A (relating to disabled individuals).
__``(iii) Individuals who are eligible for benefits under part A only by reason of section 226A (relating to individuals with end stage renal disease).
A State may not restrict the individuals within such a class who are to be covered under this section.
__``(B) Limitation._An individual may not be covered under the application unless the individual is entitled to benefits under part A and is enrolled under part B.
__``(2) Enrollment in and selection of health plans._
__``(A) Enrollment._Each medicare-eligible individual (within a class of medicare beneficiaries covered under the application) who is a resident of the State will be enrolled in a regional alliance health plan serving the area in which the individual resides (or, in the case of an individual who is a resident of a single-payer State, in the Statewide single-payer system operated under part 2 of subtitle C of title I of the Health Security Act).
__``(B) Selection._Each such individual will have the same choice among applicable health plans as other individuals in the State who are eligible individuals under the Health Security Act.
__``(C) Offer of fee-for-service plan._Each such individual shall be offered enrollment in at least one health plan that is a fee-for-service plan (or, in the case of an indivdiual who is a resident of a single-payer State, the Statewide single-payer system under part 2 of subtitle B of title I of the Health Security Act) that meets the following requirements:
__``(i) The plan's premium rate, and the actuarial value of the plan's deductibles, coinsurance, and copayments, charged to the individual do not exceed the actuarial value of the premium rate, coinsurance, and deductibles that would be applicable on the average to such individuals if this section did not apply to those individuals.
__``(ii) The plan's payment rates for hospital services, post-hospital extended care services, home health services, home intravenous drug therapy services, comprehensive outpatient rehabilitation facility services, hospice care, dialysis services for individuals with end stage renal disease, and facility services furnished in connection with ambulatory surgical procedures are accepted as payment in full.
__``(iii) The plan's payment rates for physicians' services are no less a percentage of the amounts accepted as payment in full than are the payment rates for physicians' services under part B.
__``(3) Coverage of full medicare benefits._For each health plan providing coverage under this section_
__``(A) the plan shall cover at least the items and services for which payment would otherwise be made under this title, and
__``(B) coverage determinations under the plan are made under rules that are no more restrictive than otherwise applicable under this title.
__``(4) Premium._During the period for which payments are made to a State under this section, the requirements of the Health Security Act relating to premiums that are otherwise applicable with respect to individuals enrolled in health plans in a State shall not apply with respect to medicare-eligible individuals in the State who are covered under the State's application under this section. Nothing in the previous sentence shall operate to permit a State or health plans in a State to charge different premiums among medicare-eligible individuals within the same premium class under the Health Security Act.

__``(5) Quality assurance._For each health plan providing coverage under this section there are quality assurance mechanisms for covered medicare individuals that equal, or exceed, such mechanisms otherwise applicable under this title.
__``(6) Review rights._Covered medicare individuals have review, reconsideration, and appeal rights (including appeals to courts of the State) that equal or exceed such rights otherwise applicable under this title.
__``(7) Data reporting and access to documents._The State will_
__``(A) provide such utilization and statistical data as the Secretary determines are needed for purposes of the programs established under this title, and
__``(B) the State will ensure access by the Secretary or the Comptroller General to relevant documents.

__``(8) Use of payments._Payments made to the State under subsection (a) will be used only to carry out the purposes of this section.
__``(c) Approval by Secretary._The Secretary shall approve an application under subsection (b) if the Secretary finds_
__``(1) that the individuals covered under the State's application shall receive at least the benefits provided under this title (including cost sharing);
__``(2) that the amount of expenditures that will be made under this title will not exceed the amount of expenditures that will be made if the State's application is not accepted; and
__``(3) that the State is able and willing to carry out the assurances provided in its application.
__``(d) Amount and Source of Payment._
__``(1) Amount of payment._For purposes of subsection (a), the amount of payments to a State_
__``(A) for the first year for which payments are made to the State under this section shall be determined by the applicable rate specified in section 1876(a)(1)(C) (but at 100 percent, rather than 95 percent, of the applicable amount) for each medicare-eligible individual who is a resident of the State (but without regard to any reduction based on payments to be made under section 1876(a)(1)(G)), and
__``(B) for each succeeding year, shall be determined by the applicable rate determined under subparagraph (A) or this subparagraph for the preceding year for each such individual, adjusted by the regional alliance inflation factor applicable to regional alliances in the State (as determined in accordance with subtitle A of title VI of the Health Security Act) for the year.
__``(2) Source of payment._Payment shall be made from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund as provided under paragraph (5) of section 1876(a) (other than as provided under subparagraph (B) of that paragraph).
__``(e) Period for Which Payment Made._The period for which payment may be made under subsection (a) to a State_
__``(1) begins with January 1 of the first calendar year for which the Secretary approves under subsection (c) the application of the State; and
__``(2) ends_
__``(A) on December 31 of the year in which the State notifies the Secretary (before April of that year) that the State no longer intends to receive payments under this section, or
__``(B) if the Secretary finds that the State is no longer in substantial compliance with the requirements under paragraphs (2) or (3) of subsection (c), at the time specified by the Secretary.
No termination is effective under paragraph (2) unless notice has been provided to medicare covered individuals, health providers, and health plans affected by the termination.

__``(f) Payments Under this Section as Sole Medicare Benefits._Payments to a State under subsection (a) shall be instead of the amounts that would otherwise be payable, pursuant to sections 1814(b) and 1833(a), for services furnished to medicare-eligible residents of the State covered under the application.
__``(g) Evaluation._The Secretary shall evaluate on an ongoing basis the compliance of a State with the requirements of this section.
__``(h) Definitions._In this section the terms `applicable health plan', `fee-for-service plan', `health care budget', `health plan', `medicare-eligible individual', `participating State', `single-payer State', and `Statewide single-payer system' have the meanings of those terms in the Health Security Act.''.
SEC. 4002. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS.
__(a) In General._Section 1876 (42 U.S.C. 1395mm) is amended by adding at the end the following new subsection:
__``(k)(1) Notwithstanding any other provision of this section, each eligible organization with a risk-sharing contract that is the sponsor of a health plan under subtitle E of title I of the Health Security Act shall provide each individual who meets the requirements of paragraph (2) with the opportunity to elect (by submitting an application at such time and in such manner as specified by the Secretary) to continue enrollment in such plan and to have payments made by the Secretary to the plan on the individual's behalf in accordance with paragraph (3).
__``(2) An individual meets the requirements of this paragraph if the individual is_
__``(A) enrolled in the health plan of an eligible organization in a month in which the individual is either not entitled to benefits under part A, or is an eligible employee (as defined in the Health Security Act) or the spouse of an eligible employee, 
__``(B) entitled to benefits under part A and enrolled under part B in the succeeding month,
__``(C) an eligible individual under the Health Security Act in that succeeding month, and
__``(D) not an eligible employee (as defined in the Health Security Act) or the spouse of an eligible employee in that succeeding month.
__``(3) The Secretary shall make a payment to an eligible organization on behalf of each individual enrolled with the organization for whom an election is in effect under this subsection in an amount determined by the rate specified by subsection (a)(1)(C). Such payment shall be made from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund as provided under subsection (a)(5) (other than as provided under subparagraph (B) of that paragraph).
__``(4) The period for which payment may be made under paragraph (3)_
__``(A) begins with the first month for which the individual meets the requirements of paragraph (2) (or a later month, in the case of a late application, as may be specified by the Secretary); and
__``(B) ends with the earliest of_
__``(i) the month following the month_
__``(I) in which the individual notifies the Secretary that the individual no longer wishes to be enrolled in the health plan of the eligible organization and to have payment made on the individual's behalf under this subsection; and
__``(II) which is a month specified by the Secretary as a uniform open enrollment period under subsection (c)(3)(A)(i), or
__``(ii) the month in which the individual ceases to meet the requirements of paragraph (2).
__``(5) Notwithstanding any other provision of this title, payments to a health plan under this subsection on behalf of an individual shall be the sole payments made with respect to items and services furnished to the individual during the period for which the indivdual's election under this subsection is in effect.''.
__(b) Conforming Amendment._Section 1838(b) (42 U.S.C. 1395q(b)) is amended by inserting after ``section 1843(e)'' the following: ``, 1876(c)(3)(B), 1876(k)(4)(B), or 1890(j)(1)(B)(iv)''.
SEC. 4003. TREATMENT OF CERTAIN MEDICARE BENEFICIARIES.
__Title XVIII, as amended by section 4001, is further amended by adding at the end the following new section:
``treatment of certain medicare-eligible individuals under health security act
__``Sec. 1894. (a) No Medicare Coverage for Certain Medicare-Eligible Individuals._Notwithstanding any other provision of this title or title II, an individual is not entitled to receive payment or have payment made on the individual's behalf under this title for items and services furnished during a year if the individual is not treated as a medicare-eligible individual under the Health Security Act during the year through the application of section 1012(a) of such Act.
__``(b) Transfers to Regional Alliances._The Secretary shall provide for a transfer from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, in appropriate proportions, to each regional alliance in each year of the amount of the reductions in liability owed to the alliance in the year resulting from the application of section 6115 of the Health Security Act.''.

SEC. 4004. PROHIBITING EMPLOYERS FROM TAKING INTO ACCOUNT STATUS AS MEDICARE BENEFICIARY ON ANY GROUNDS.
__(a) Extension of Protections for Working Aged to Group Health Plans of All Employers._Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) is amended by striking clauses (ii) and (iii).
__(b) Extension of Protections for Disabled Active Individuals to All Group Health Plans._
__(1) In general._Section 1862(b)(1)(B) (42 U.S.C. 1395y(b)(1)(B)), as amended by section 13561(e) of OBRA	1993, is amended_
__(A) in clause (i)_
__(i) by striking ``large group health plan (as defined in clause (iv)(II))'' and inserting ``group health plan (as defined in subparagraph (A)(v))'', and
__(ii) by striking ``clause (iv)(I)'' and inserting ``clause (iv)''; and
__(B) by striking clause (iv).
__(2) Conforming amendment._Section 1862(b)(1)(A)(v) (42 U.S.C. 1395y(b)(1)(A)(v)) is amended by striking ``this subparagraph, and subparagraph (C)'' and inserting ``this paragraph''.
__(c) Repeal of Limitation on Period of Protection for Individuals With End Stage Renal Disease._
__(1) In general._Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as amended by section 13561(c) of OBRA	1993, is amended_
__(A) in clause (i), by striking ``during the 12-month period'' and all that follows through ``such benefits'';
__(B) in clause (ii), by striking the semicolon at the end and inserting a period; and
__(C) by striking the matter following clause (ii).
__(2) Conforming amendment._Section 1862(b)(1) is amended_
__(A) in subparagraph (A), by striking clause (iv); and
__(B) in subparagraph (B), by striking clause (ii).
__(d) Effective Date._The amendments made by this section shall apply with respect to medicare-eligible individuals residing in a participating State as of January 1 of the first year for which the State is a participating State.


PART 2_ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM; COORDINATION WITH MEDIGAP PLANS
SEC. 4011. ENROLLMENT AND TERMINATION OF ENROLLMENT.
__(a) Uniform Open Enrollment Periods._
__(1) For capitated plans._The first sentence of section 1876(c)(3)(A)(i) (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by inserting ``(which may be specified by the Secretary)'' after ``open enrollment period''.
__(2) For medigap plans._Section 1882(s) (42 U.S.C. 1395ss(s)) is amended_
__(A) in paragraph (3), by striking ``paragraphs (1) and (2)'' and inserting ``paragraph (1), (2), or (3)'',
__(B) by redesignating paragraph (3) as paragraph (4), and
__(C) by inserting after paragraph (2) the following new paragraph:
__``(3) Each issuer of a medicare supplemental policy shall have an open enrollment period (which may be specified by the Secretary), of at least 30 days duration every year, during which the issuer may not deny or condition the issuance or effectiveness of a medicare supplemental policy, or discriminate in the pricing of the policy, because of age, health status, claims experience, receipt of health care, or medical condition. The policy may not provide any time period applicable to pre-existing conditions, waiting periods, elimination periods, and probationary periods (except as provided by paragraph (2)(B)). The Secretary may require enrollment through a third party.''.
__(b) Enrollments for New Medicare Beneficiaries and Those Who Move._Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amended_
__(1) in clause (i), by striking ``clause (ii)'' and inserting ``clauses (ii) through (iv)'', and
__(2) by adding at the end the following:
__``(iii) Each eligible organization shall have an open enrollment period for each individual eligible to enroll under subsection (d) during any enrollment period specified by section 1837 that applies to that individual. Enrollment under this clause shall be effective as specified by section 1838.
__``(iv) Each eligible organization shall have an open enrollment period for each individual eligible to enroll under subsection (d) who has previously resided outside the geographic area which the organization serves. The enrollment period shall begin with the beginning of the month that precedes the month in which the individual becomes a resident of that geographic area and shall end at the end of the following month. Enrollment under this clause shall be effective as of the first of the month following the month in which the individual enrolls.''.
__(c) Enrollment Through Third Party; Uniform Termination of Enrollment._The first sentence of section 1876(c)(3)(B) (42 U.S.C. 1395mm(c)(3)(B)) is amended_
__(1) by inserting ``(including enrollment through a third party)'' after ``regulations'', and
__(2) by striking everything after ``with the eligible organization'' and inserting ``during an annual period as prescribed by the Secretary, and as specified by the Secretary in the case of financial insolvency of the organization, if the individual moves from the geographic area served by the organization, or in other special circumstances that the Secretary may prescribe.''.


__(d) Effective Date._The amendments made by the previous subsections apply to enrollments and terminations of enrollments occurring after 1995 (but only after the Secretary of Health and Human Services has prescribed the relevant annual period), except that the amendments made by subsection (a)(2) apply to enrollments for a medicare supplemental policy made after 1995.


SEC. 4012. UNIFORM INFORMATIONAL MATERIALS.
__(a) For Capitation Plans._Section 1876(c)(3)(C) (42 U.S.C. 1395mm(c)(3)(C)) is amended by adding at the end the following: ``In addition, the Secretary shall develop and distribute comparative materials about all eligible organizations. Each eligible organization shall reimburse the Secretary for its pro rata share (as determined by the Secretary) of the costs incurred by the Secretary in carrying out the requirements of the preceding sentence and other enrollment activities.''.
__(b) For Medigap Plans._Paragraph (1) of section 1882(f) (42 U.S.C. 1395ss(f)) is amended to read as follows:
__``(f)(1) The Secretary shall develop and distribute comparative materials about all medicare supplemental policies issued in a State. Each issuer of such a policy shall reimburse the Secretary for its pro rata share (as determined by the Secretary) of the costs incurred by the Secretary in carrying out the requirements of the preceding sentence and other enrollment activities, or the issuer shall no longer be considered as meeting the requirements of this section.''.
__(c) Effective Date._The amendments made by this section shall apply with respect to materials for enrollment in years after 1995.

SEC. 4013. OUTLIER PAYMENTS.
__(a) General Rule._Section 1876(a)(1) (42 U.S.C. 1395mm(a)(1)) is amended by adding at the end the following:
__``(G)(i) In the case of an eligible organization with a risk-sharing contract, the Secretary may make additional payments to the organization equal to not more than 50 percent of the imputed reasonable cost (or, if so requested by the organization, the reasonable cost) above the threshold amount of services covered under parts A and B and provided (or paid for) in a year by the organization to any individual enrolled with the organization under this section.
__``(ii) For purposes of clause (i), the `imputed reasonable cost' is an amount determined by the Secretary on a national, regional, or other basis that is related to the reasonable cost of services.
__``(iii) For purposes of clause (i), the `threshold amount' is an amount determined by the Secretary from time to time, adjusted by the geographic factor utilized in determining payments to the organization under subparagraph (C) and rounded to the nearest multiple of $100, such that the total amount to be paid under this subparagraph for a year is estimated to be 5 percent or less of the total amount to be paid under risk-sharing contracts for services furnished for that year.
__``(iv) An eligible organization shall submit a claim for additional payments under subsection (i) within such time as the Secretary may specify.''.
__(b) Conforming Amendment._Section 1876(a)(1)(C) (42 U.S.C. 1395mm(a)(1)(C)), as amended by section 4122(a), is further amended by inserting ``, and reduced (by a uniform percentage) determined by the Secretary so that the total reduction is estimated to equal the amount to be paid under subparagraph (G) for a particular year'' before the period.
__(c) Effective Date._The amendments made by the preceding subsections apply to services furnished after 1994.
SEC. 4014. POINT OF SERVICE OPTION.
__(a) Point of Service Contracts._Part C of title XVIII is amended by inserting after section 1889 the following:
``point of service option

__``Sec. 1890. (a) Establishment of Program._Not later than July 1, 1995, the Secretary shall promulgate regulations establishing a point-of-service program under which individuals entitled to benefits under this title may enroll in a point-of-service network that meets such criteria as the Secretary may establish and may obtain such benefits through providers and suppliers who are members of the network.
__``(b) Criteria for Networks._In establishing criteria for point-of-service networks under the program under this section, the Secretary shall_
__``(1) designate appropriate geographic service areas for such networks to ensure that each network has a sufficient number of participating members to provide items and services under this title to beneficiaries;
__``(2) establish qualifications relating to the business structure and ownership of networks;
__``(3) establish requirements for participating members;
__``(4) establish a schedule of payments for services furnished by networks, including a schedule of bundled payment arrangements for selected medical and surgical procedures;
__``(5) delineate permissible incentive arrangements to encourage physicians and other suppliers to join the network;
__``(6) specify the rules under which carriers under section 1842 may administer the program;
__``(7) identify certain illnesses and conditions for which the use of case management by the network will result in savings;
__``(8) standards for the processing and payment of claims for payment for services furnished by the network, including standards for the apportionment of payments among the Trust Funds established under this title; and
__``(9) such other criteria as the Secretary considers appropriate.''.
__(b) Conforming Amendments._
__(1) Section 1812(a) (42 U.S.C. 1395d(a)) is amended_
__(A) by striking ``and'' at the end of paragraph (3),
__(B) by substituting ``; and'' for the period at the end of paragraph (4), and
__(C) by adding at the end the following:
__``(5) such additional items and services furnished by a provider of services to an individual subject to case management as may be specified under a point-of-service network arrangement under section 1890.''.
__(2)(A) Section 1814(b) (42 U.S.C. 1395f(b)) is amended_
__(i) in paragraph (1), by inserting ``or (4)'' after ``paragraph (3)'',
__(ii) by striking ``or'' at the end of paragraph (2),
__(iii) by substituting ``; and'' for the period at the end of paragraph (3), and
__(iv) by inserting after paragraph (3) the following:
__``(4) in the case of items and services furnished through a point of service network (as described in section 1890), the payment basis specified under the arrangement established for such network, plus any bonus payments as determined under subsection (i) of that section.''.
__(B) The matter in section 1886(d)(1)(A) (42 U.S.C. 1395ww(d)(1)(A)) preceding clause (i) is amended by inserting ``(other than paragraph (4))'' after ``1814(b)''.
__(3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended_
__(A) by striking ``and'' at the end of subparagraph (I),
__(B) by substituting ``; and'' for the period at the end of subparagraph (J), and
__(C) by adding at the end the following:
__``(K) such additional items and services (other than inpatient services furnished by providers of services) as may be specified in an arrangement for a point-of-service network under section 1890.''.
__(4) Section 1833 (42 U.S.C. 1395l), as amended by section 4032, is amended by adding at the end the following new subsection:
__``(u) In the case of items and services furnished through a point of service network (as described in section 1890), there shall be paid (subject to subsection (b)) amounts equal to 80 percent of the payment basis specified in an agreement entered into pursuant to that section, plus any bonus payments as determined under subsection (i) of that section.''.
__(5) Section 1862(a)(1)(B) (42 U.S.C. 1395y(a)(1)(B)) is amended by inserting ``or section 1890(h)'' after ``section 1861(s)(10)''.
__(6) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by sections 4034(b)(4), 4118(b), and 2001(c), is further amended_
__(A) in paragraph (7), by striking ``or under paragraph (1)(F)'' and inserting ``, under paragraph (1)(F), or under a contract under section 1890'',
__(B) by striking ``or'' at the end of paragraph (16),
__(C) by striking the period at the end of paragraph (17) and inserting ``; or'', and
__(D) by inserting after paragraph (17) the following new paragraph:
__``(18) which are furnished to an individual and related to a health condition with respect to which he is subject to case management through a point-of-service network under section 1890 but which are not included in the plan of care developed for such individual and agreed to by him and the case manager.''.
__(c) Effective Date._The amendments made by this subsection shall take effect January 1, 1996.
PART 3_MEDICARE COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS
SEC. 4021. REFERENCE TO COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.
__For provisions adding a new outpatient prescription drug benefit to the medicare program, see subtitle A of title II.
SEC. 4022. COVERAGE OF SERVICES OF ADVANCED PRACTICE NURSES.
__(a) Coverage._Section 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended_
__(1) by striking ``and'' at the end of clause (iii);
__(2) in clause (iv), by striking ``(i) or (ii)'' and inserting ``(i), (ii), or (iv)'';
__(3) by redesignating clause (iv) as clause (v); and
__(4) by inserting after clause (iii) the following new clause:
__``(iv) services which would be physicians' services if furnished by a physician (as defined in subsection (r)(1)) and which are performed by an advanced practice nurse (as defined in subsection (aa)(5)) working in collaboration (as defined in subsection (aa)(6)) with such a physician which the advanced practice nurse is legally authorized to perform by the State in which the services are performed, and''.
__(b) Application of Payment Rules and Methodology Used for Services of Nurse Practitioners and Clinical Nurse Specialists in Rural Areas._
__(1) Direct payment._Section 1832(a)(2)(B)(iii) (42 U.S.C. 1395k(a)(2)(B)(iii)) is amended by striking ``1861(s)(2)(K)(i),'' and inserting ``1861(s)(2)(K)(i) or section 1861(s)(2)(K)(iv),''.
__(2) Amount of payment._Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(M)), as amended by section 13544(b)(2)(B) of OBRA	1993, is amended by striking ``rural area),'' and inserting ``rural area) or section 1861(s)(2)(K)(iv) (relating to services of advanced practice nurses),''.
__(3) Mandatory assignment._The section 1833(r) added by section 4155(b)(3) of OBRA	1990 is amended_
__(1) in paragraph (1)_
__(A) by striking ``rural area),'' and inserting ``rural area) or section 1861(s)(2)(K)(iv) (relating to services of advanced practice nurses),'', and
__(B) by striking ``nurse practitioner or clinical nurse specialist'' each place it appears and inserting ``nurse practitioner, clinical nurse specialist, or advanced practice nurse''; and
__(2) by inserting ``or section 1861(s)(2)(K)(iv)'' after ``section 1861(s)(2)(K)(iii)'' each place it appears.
__(c) Services Defined._Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended_
__(1) by striking ``and the term `clinical nurse specialist''' and inserting ``, the term `clinical nurse specialist', and the term `advanced practice nurse'''; and
__(2) by striking ``or clinical nurse specialist'' and inserting ``clinical nurse specialist, or advanced practice nurse''.
__(d) Effective Date._The amendments made by this section shall apply to services furnished on or after January 1, 1995.


PART 4_COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY MANAGEMENT INITIATIVES
SEC. 4031. REPEAL OF SEPARATE MEDICARE PEER REVIEW PROGRAM.
__Part B of title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is amended by adding at the end the following new section:
``termination
__``Sec. 1165. The provisions of this part shall terminate effective upon the adoption of the National Quality Management Program under subtitle A of title V of the Health Security Act. Any reference to this part or any section in this part shall not be effective after such date.''. 


SEC. 4032. MANDATORY ASSIGNMENT FOR ALL PART B SERVICES.
__Section 1833 (42 U.S.C. 1395l) is amended_
__(1) by redesignating the subsection (r) added by section 4206(b)(2) of OBRA	1990 as subsection (s); and
__(2) by adding at the end the following new subsection:
__``(t)(1) Notwithstanding any other provision of this part, payment under this part for any item or service furnished on or after January 1, 1996, may only be made on an assignment-related basis.
__``(2) Except for deductible, coinsurance, or copayment amounts applicable under this part, no physician, supplier, or other person may bill or collect any amount from an individual enrolled under this part a bill for an item or service for which payment may be made under this part. No such individual is liable for payment of any amounts billed in violation of the previous sentence.
__``(3) If a physician, supplier, or other person knowingly and willfully bills or collects an amount in violation of paragraph (2), the Secretary may apply sanctions against such physician, supplier, or other person in accordance with section 1842(j)(2). Paragraph (4) of section 1842(j) shall apply in this paragraph in the same manner as such paragraph applies to such section.''.

SEC. 4033. ELIMINATION OF COMPLEXITIES CAUSED BY DUAL FUNDING SOURCES AND RULES FOR PAYMENT OF CLAIMS.
__(a) In General._The Secretary of Health and Human Services shall take such steps as may be necessary to consolidate the administration (including processing systems) of parts A and B of the medicare program (under title XVIII of the Social Security Act).
__(b) Combination of Intermediary and Carrier Functions._In taking such steps, the Secretary shall contract with a single entity that combines the fiscal intermediary and carrier functions in each area except where the Secretary finds that special regional or national contracts are appropriate.
__(c) Superseding Conflicting Requirements._The provisions of sections 1816 and 1842 of the Social Security Act (including provider nominating provisions in such section 1816) are superseded to the extent required to carry out this section.
SEC. 4034. REPEAL OF PRO PRECERTIFICATION REQUIREMENT FOR CERTAIN SURGICAL PROCEDURES.
__(a) In General._Section 1164 (42 U.S.C. 1320c	13) is repealed.
__(b) Conforming Amendments._
__(1) Section 1154 (42 U.S.C. 1320c	3) is amended_
__(A) in subsection (a), by striking paragraph (12), and
__(B) in subsection (d), by striking ``(and except as provided in section 1164)''.
__(2) Section 1833 (42 U.S.C. 1395l) is amended_
__(A) in subsection (a)(1)(D)(i), by striking ``, or for tests furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion)'';
__(B) in subsection (a)(1), by striking clause (G);
__(C) in subsection (a)(2)(A), by striking ``, to items and services (other than clinical diagnostic laboratory tests) furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion),'';
__(D) in subsection (a)(2)(D)(i)_
__(i) by striking ``basis,'' and inserting ``basis or'', and
__(ii) by striking ``, or for tests furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion)'';
__(E) in subsection (a)(3), by striking ``and for items and services furnished in connection with obtaining a second opinion required under section 1164(c)(2), or a third opinion, if the second opinion was in disagreement with the first opinion)''; and
__(F) in the first sentence of subsection (b), by striking ``(4)'' and all that follows through ``and (5)'' and inserting and ``(4)''.
__(3) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is amended by striking ``and for items and services furnished in connection with obtaining a second opinion required under section 1164(c)(2), or a third opinion, if the second opinion was in disagreement with the first opinion)''.
__(4) Section 1862(a) (42 U.S.C. 1395y(a)) is amended_
__(A) by adding ``or'' at the end of paragraph (14),
__(B) by striking ``; or'' at the end of paragraph (15) and inserting a period, and
__(C) by striking paragraph (16).
__(5) The third sentence of section 1866(a)(2)(A) (42 U.S.C. 1395w(a)(2)(A)) is amended by striking ``, with respect to items and services furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion),''.
__(c) Effective Date._The amendments made by this section shall apply to services provided on or after the date of the enactment of this Act.
SEC. 4035. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.
__(a) Limitation on Frequency of System Changes._The Secretary of Health and Human Services may not implement any change in the system used for the billing and processing of claims for payment for items and services furnished under title XVIII of the Social Security Act within 6 months of implementing any previous change in such system.
__(b) Advance Notification to Providers as Requirement for Carriers and Fiscal Intermediaries._
__(1) Fiscal intermediaries._Section 1816(c) (42 U.S.C. 1395h(c)) is amended by adding at the end the following new paragraph:
__``(4) Each agreement with an agency or organization under this section shall provide that the agency or organization shall notify providers of services of any major change in the procedures for billing for services furnished under this part at least 120 days before such change is to take effect.''.
__(2) Carriers._Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended_
__(A) by striking ``and'' at the end of subparagraph (G) and the end of subparagraph (H); and
__(B) by inserting after subparagraph (H) the following new subparagraph:
__``(I) will notify individuals and entities furnishing items and services for which payment may be made under this part of any major change in the procedures for billing for such items and services at least 120 days before such change is to take effect; and''.
__(3) Effective date._The amendments made by paragraphs (1) and (2) shall apply to agreements with fiscal intermediaries under section 1816 of the Social Security Act and to contracts with carriers under section 1842 of such Act for years beginning after the expiration of the 9-month period beginning on the date of the enactment of this Act.


PART 5_AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS
SEC. 4041. ANTI-KICKBACK PROVISIONS.
__(a) Revision to Penalties._
__(1) Permitting secretary to impose civil monetary penalty._Section 1128A(a) (42 U.S.C. 1320a	7a(a)) is amended_
__(A) by striking ``or'' at the end of paragraphs (1) and (2);
__(B) by striking the semicolon at the end of paragraph (3) and inserting ``; or''; and
__(C) by inserting after paragraph (3) the following new paragraph:
__``(4) carries out any activity in violation of paragraph (1) or (2) of section 1128B(b);''.

__(2) Description of civil monetary penalty applicable._Section 1128A(a) (42 U.S.C. 1320a	7a(a)) is amended_
__(A) by striking ``given).'' at the end of the first sentence and inserting the following: ``given or, in cases under paragraph (4), $50,000 for each such violation).''; and
__(B) by striking ``claim.'' at the end of the second sentence and inserting the following: ``claim (or, in cases under paragraph (4), an assessment of not more than three times the total amount of remuneration offered, paid, solicited, or received, without regard to whether a portion of such remuneration was offered, paid solicited, or received for a lawful purpose).''.

__(3) Increase in criminal penalty._Paragraphs (1) and (2) of section 1128B(b) (42 U.S.C. 1320a	7b(b)) are each amended_
__(A) by striking ``$25,000'' and inserting ``$50,000''; and
__(B) by striking the period at the end and inserting the following: ``, and shall be subject to an assessment of not more than three times the total remuneration offered, paid, solicited, or received, without regard to whether a portion of such remuneration was offered, paid solicited, or received for a lawful purpose.''.

__(4) Civil remedy._Section 1128B(b) (42 U.S.C. 1320a	7b(b)) is amended by adding at the end the following new paragraph:
__``(4) Any person who carries out any activity in violation of paragraph (1) or (2) shall be subject to a penalty of not more than $50,000 fo reach such violation, and shall be subject to an assessment of not more than three times the total remuneration offered, paid, solicited, or received, without regard to whether a portion of such remuneration was offered, paid solicited, or received for a lawful purpose.''.

__(b) Revisions to Exceptions._
__(1) Exception for discounts._Section 1128B(b)(3)(A) (42 U.S.C. 1320a-7b(b)(3)(A)) is amended by striking ``program;'' and inserting ``program and is not_
__``(i) for the furnishing of one item or service without charge or at a reduced charge in exchange for any agreement to buy a different item or service;
__``(ii) applicable to one payor but not to providers of services or other entities under title XVIII or a State health care program; or
__``(iii) in the form of a cash payment;''.
__(2) Exception for payments to employees._Section 1128B(b)(3)(B) (42 U.S.C. 1320a	7b(b)(3)(B)) is amended by inserting at the end ``if the amount of remuneration under the arrangement is consistent with the fair market value of the services and is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals, except that such employees can be paid remuneration in the form of a productivity bonus based on services personally performed by the employee.

__(3) Exception for waiver of coinsurance by certain providers._Section 1128B(b)(3)(D) (42 U.S.C. 1320a-7b(b)(3)(D)) is amended to read as follows:
__``(D) a waiver or reduction of any coinsurance or other copayment_
__``(i) if the waiver or reduction is made pursuant to a public schedule of discounts which the person is obligated as a matter of law to apply to certain individuals, or
__``(ii) under part B of title XVIII by any person if the person does not routinely waive coinsurance or deductible amounts and the person_
__``(I) waives the coinsurance and deductible amounts after determining in good faith that the individual is indigent;
__``(II) fails to collect coinsurance or deductible amounts after making reasonable collection efforts; or
__``(III) provides for any permissible waiver as specified in section 1128B(b)(3) or in regulations issued by the Secretary.''.

__(4) New exception for certain providers._Section 1128B(b)(3) (42 U.S.C. 1320a	7b(b)(3)) is amended_
__(A) by striking ``and'' at the end of subparagraph (D);
__(B) by striking the period at the end of subparagraph (E) and inserting ``; and''; and
__(C) by adding at the end the following new subparagraph:
__``(F) any remuneration obtained by or given to an individual or entity who is obligated as a matter of law to waive or reduce coinsurance or other copayment for certain individuals pursuant to a public schedule of discounts, if the remuneration is pursuant to a written arrangement for the use or procurement of space, equipment, goods or services or for the referral of patients if_
__``(i) the arrangement does not result in private inurement to any current employee, officer, member of the Board of Directors, or agent of the recipient or any other person involved in recommending or negotiating the arrangement; and
__``(ii) the arrangement does not preclude the referral of patients to other providers of service of the patient's own choosing and does not interfere with the ability of health professionals to refer patients to providers of services they believe are the most appropriate, except to the extent such choices or referrals are limited by the terms of a health plan in which the patient has enrolled or the terms of the Federal grant or cooperative agreement.''.
__(5) New exception for capitated payments._Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)), as amended by paragraph (4), is further amended_
__(A) by striking ``and'' at the end of subparagraph (E);
__(B) by striking the period at the end of subparagraph (F) and inserting ``; and''; and
__(C) by adding at the end the following new subparagraph_
__``(G) any reduction in cost sharing or increased benefits given to an individual, any amounts paid to a provider of services for items or services furnished to an individual, or any discount or reduction in price given by the provider for such items or services, if the individual is enrolled with and such items and services are covered under any of the following:
__``(i) A health plan which is furnishing items or services under title XVIII or a State health care program to individuals on an at-risk, prepaid, capitated basis pursuant to a written agreement with the Secretary or a State health care program.
__``(ii) An organization receiving payments on a prepaid basis, under a demonstration project under section 402(a) of the Social Security Amendments of 1967 or under section 222(a) of the Social Security Amendments of 1972.
__``(iii) Any other plan or insurer under which a participating provider is paid wholly on an at-risk, prepaid, capitated basis for such items or services pursuant to a written arrangement between the plan and the provider.''.

__(c) Clarification of Coverage of Employers and Employees._Section 1128B(b) (42 U.S.C. 1320a	7b(b)), as amended by subsection (a)(4), is further amended by adding at the end the following new paragraph:

__``(5) In this subsection, the term `referral' includes the referral by an employee to his or her employer of any item or service for which payment may be made in whole or in part under title XVIII or a State health care program.''

__(d) Authorization for the Secretary To Issue Regulations._Section 1128B(b) (42 U.S.C. 1320a	7b(b)), as amended by subsections (a)(4) and (c), is further amended by adding at the end the following new paragraph_
__``(6) The Secretary is authorized to impose by regulation such other requirements as needed to protect against program or patient abuse with respect to any of the exceptions described in paragraph (3).''.
__(e) Clarification of Other Elements of Offense._Section 1128B(b) (42 U.S.C. 1320a	7b(b)) is amended_
__(1) in paragraph (1) in the matter preceding subparagraph (A), by striking ``kind_'' and inserting ``kind with intent to be influenced_'';
__(2) in paragraph (1)(A), by striking ``in return for referring'' and inserting ``to refer'';
__(3) in paragraph (1)(B), by striking ``in return for purchasing, leasing, ordering, or arranging for or recommending'' and inserting ``to purchase, lease, order, or arrange for or recommend''; and
__(4) in paragraph (2) in the matter preceding subparagraph (A), by striking ``to induce such person'' and inserting ``with intent to influence such person''.
 

SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL.
__(a) Clarification of Payment Ban._Section 1877(a)(1)(B) (42 U.S.C. 1395nn(a)(1)(B)) is amended to read as follows:
__``(B) no physician or entity may present or cause to be presented a claim under this title or bill to any third party payor or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A).''.
__(b) Clarification of Coverage of Holding Company Type Arrangements and Loans._The last sentence of section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is amended by striking ``an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service'' and inserting the following: ``a loan from the entity, and an interest held indirectly through means such as (but not limited to) having a family member hold such investment interest or holding a legal or beneficial interest in another entity (such as a trust or holding company) that holds such investment interest''.
__(c) Revisions to General Exceptions to Both Ownership and Compensation Arrangement Prohibitions._
__(1) Repeal of exception for physicians' services._Section 1877(b) (42 U.S.C. 1395nn(b)) is amended_
__(A) by striking paragraph (1); and
__(B) by redesignating paragraphs (2) and (3) as paragraphs paragraphs (1) and (2).
__(2) Revision to in-office ancillary services exception._Section 1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by paragraph (1), is amended_
__(A) in the matter preceding subparagraph (A), by striking ``services (other than durable medical equipment (excluding infusion pumps) and parenteral and enteral nutrients, equipment, and supplies)'' and inserting ``clinical laboratory services, x-ray and ultrasound services that are provided at low-cost (as determined in accordance with regulations of the Secretary)''; and
__(B) in subparagraph (A)_
__(i) in clause (ii)(I), by striking ``(or another physician who is a member of the same group practice)'',
__(ii) in clause (ii)(II) by inserting ``the same or'' before ``another building'', and
__(iii) in clause (ii)(II)(bb), by inserting ``all of'' after ``centralized provision of''.
__(3) Revision to prepaid plan exception._Section 1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as redesignated by paragraph (1), is amended to read as follows:
__``(2) Prepaid plans._In the case of services furnished by an organization_
__``(A) with a risk sharing contract under section 1876(g) to an individual enrolled with the organization,
__``(B) receiving payments on a prepaid basis, under a demonstration project under section 402(a) of the Social Security Amendments of 1967 or under section 222(a) of the Social Security Amendments of 1972, to an individual enrolled with the organization, or
__``(C) that is a qualified health maintenance organization (within the meaning of section 1310(d) of the Public Health Service Act) to an individual enrolled with the organization.''.
__(4) New exception for capitated payments._Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by paragraph (1), is amended by inserting after paragraph (2) the following new paragraph:
__``(3) Capitated payments._In the case of a designated health service, if the designated health service is included in the services for which a physician or physician group is paid wholly on an at-risk, prepaid, capitated basis by a health plan or insurer pursuant to a written arrangement between the plan or insurer and the physician or physician group.''.
__(d) Revision to Publicly Traded Securities Exception._Section 1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at the time acquired by the physician'' after ``which may be purchased on terms generally available to the public''.
__(e) Revision to Rural Provider Exception._Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended by striking ``substantially all'' and inserting ``not less than 85 percent (as determined in accordance with regulations of the Secretary)''.

__(f) Revisions to Exceptions Relating to Other Compensation Arrangements._
__(1) Exception for personal services arrangements._(A) Section 1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II)) is amended to read as follows:
__``(II) If the plan places a physician or physician group at substantial financial risk (as determined by the Secretary pursuant to section 1876(i)(8)(A)(ii)), for services not provided by the physician, the entity complies with the provisions of subclauses (I) and (II) of section 1876(i)(8)(A)(ii).'';
__(B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 1395nn(e)(3)(B)(ii) is amended by striking ``may directly or indirectly have the effect of'' and inserting ``has the purpose of''.
__(2) Repeal of exception for remuneration unrelated to the provision of designated health services._Section 1877(e) (42 U.S.C. 1395nn(e)) is amended_
__(A) by striking paragraph (4); and
__(B) by redesignating paragraphs (5), (6), (7), and (8) as paragraphs (4), (5), (6), and (7).
__(3) Exception for certain physician recruitment._Section 1877(e)(4) (42 U.S.C. 1395nn(e)(4)), as redesignated by paragraph (2), is amended to read as follows:
__``(4) Physician recruitment._In the case of remuneration which is provided by an entity located in a rural area (as defined in section 1886(d)(2)(D)) or a health professional shortage areas (designated under section 332 of the Public Health Service Act), or an entity that serves a significant number of individuals who are members of a medically underserved population (designated under section 330 of the Public Health Service Act), in order to induce a physician who has been practicing within the physician's current specialty for less than one year to establish staff privileges at the entity, or to induce any other physician to relocate his or her primary place of practice to the geographic area served by the entity, if the following standards are met:
__``(A) The arrangement is set forth in a written agreement that specifies the benefits provided by the entity to the physician, the terms under which the benefits are to be provided, and the obligations of each party.
__``(B) If a physician is leaving an established practice, the physical location of the new primary place of practice must be not less than 100 miles from the location of the established primary place of practice and at least 85 percent of the revenues of the physician's new practice must be generated from new patients for whom the physician did not previously provide services at the former practice.
__``(C) The benefits are provided by the entity for a period not in excess of 3 years, and the terms of the agreement are not renegotiated during this 3-year period in any substantial aspect, unless the physician's new primary place of practice is designated as a health professional shortage area (pursuant to section 332 of the Public Health Service Act) for the physician's specialty category during the entire duration of the relationship between the physician and the entity.
__``(D) There is no requirement that the physician make referrals to, be in a position to make or influence referrals to, or otherwise generate business for the entity as a condition for receiving the benefits.
__``(E) The physician is not restricted from establishing staff privileges at, referring any service to, or otherwise generating any business for any other entity of the physician's choosing.
__``(F) The amount or value of the benefits provided by the entity may not vary (or be adjusted or renegotiated) in any manner based on the volume or value of any expected referrals to or business otherwise generated for the entity by the physician for which payment may be made in whole or in part under this title or a State health care program (as defined in section 1128(h)).
__``(G) The physician agrees to treat patients entitled to benefits under this title or enrolled in a State plan for medical assistance under title XIX.''.
__(4) Exception for isolated transactions._Section 1877(e)(5) (42 U.S.C. 1395nn(e)(6)), as redesignated by paragraph (2), is amended_
__(A) by redesignating subparagraph (B) as subparagraph (C);
__(B) by striking ``and'' at the end of subparagraph (A); and
__(C) by inserting after subparagraph (A) the following new subparagraph:
__``(B) there is no financing of the sale between the parties, and''.
__(5) Exception for payments by a physician._Section 1877(e)(7) (42 U.S.C. 1395nn(e)(7)), as redesignated by paragraph (2), is amended to read as follows:
__``(7) Payments by a physician for items and services._Payments made by a physician to a laboratory in exchange for the provision of clinical laboratory services furnished at a price that is consistent with fair market value.''.
__(6) Additional exception for discounts or other reductions in price._Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by paragraph (2), is amended by adding at the end the following new paragraph:
__``(8) Discounts or other reductions in price._Discounts or other reductions in price between a physician and an entity for items or services for which payment may be made under this title so long as the discount or other reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the physician or entity under this title and is not_
__``(A) for the furnishing of one item or service without charge or at a reduced charge in exchange for any agreement to buy a different item or service,
__``(B) applicable to one or more payers but not to all individuals and entities providing services for which payment may be made under this title, or
__``(C) in the form of a cash payment.''.


__(g) Clarification of Sanction Authority._Section 1877(g)(4) (42 U.S.C. 1395nn(g)(4)) is amended by striking ``Any physician'' and all that follows through ``to such entity,'' and inserting the following: ``Any physician or other entity that enters into an arrangement or scheme (such as a cross-referral arrangement or an arrangement with multiple leases overlapping in time for the same or similar rental space or equipment) which the physician or entity knows or should know has a principal purpose of inducing referrals to another entity, which referrals, if made directly by the physician or entity to such other entity,''.

__(h) Clarification of Definition of Remuneration._Section 1877(h)(1)(B) (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as follows:
__``(B) The term `remuneration' includes any payment, discount or other reduction in price, forgiveness of debt or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.''.
__(i) Revision to Definition of Group Practice._Section 1877(h)(4) (42 U.S.C. 1395nn(h)(4)) is amended_
__(1) in subparagraph (A)(vi), by striking the period at the end and inserting the following: ``, including a requirement for the physical grouping of physician practices as may be reasonably required to prevent the abuse of any exceptions provided to group practices under this section.''; and
__(2) in subparagraph (B)(i), by striking ``or services incident to such personally performed services''.


__(j) Revision of Definition of Referral; Referring Physician._
__(1) In general._Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) is amended by striking subparagraph (C).
__(2) Conforming amendments._Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) is amended_
__(A) in subparagraph (A), by striking ``Except as provided in subparagraph (C), in'' and inserting ``In''; and
__(B) in subparagraph (B), by striking ``Except as provided in subparagraph (C), the'' and inserting ``The''.
__(k) Expansion to Cover Additional Items and Services._Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)), as amended by section 2006(c)(3), is amended_
__(1) in subparagraph (D), by striking ``or other''; and
__(2) by adding at the end the following new subparagraphs:
__``(M) Diagnostic services.
__``(N) Any other item or service not rendered by the physician personally or by a person under the physician's direct supervision.''.

__(l) Authorization for the Secretary to Issue Regulations._Section 1877 (42 U.S.C. 1395nn) is amended by adding the following new subsection:
__``(i) Additional Requirements._The Secretary is authorized to impose by regulation such other requirements as needed to protect against program or patient abuse with respect to any of the exceptions under this section.''.

__(m) Incorporation of Amendments Made Under OBRA	1993._In this section, any reference to section 1877 of the Social Security Act shall be considered a reference to such section as amended by section 13562(a) of OBRA	1993.

SEC. 4043. CIVIL MONETARY PENALTIES.
__(a) Prohibition Against Offering Inducements to Individuals Enrolled Under Plans._
__(1) Offer of remuneration._Section 1128A(a) (42 U.S.C. 1320a	7a(a)) (as amended by section 4041(a)(1)) is amended_
__(A) by striking ``; or'' at the end of paragraph (3) and inserting a semicolon;
__(B) by striking the semicolon at the end of paragraph (4) and inserting ``; or''; and
__(C) by inserting after paragraph (4) the following new paragraph:
__``(5) offers, pays, or transfers remuneration to any individual eligible for benefits under title XVIII of this Act, or under a State health care program (as defined in section 1128(h)) that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under title XVIII, or a State health care program;''.
__(2) Remuneration defined._Section 1128A(i) (42 U.S.C. 1320a	7a(i)) is amended by adding at the end the following new paragraph:
__``(6) The term `remuneration' includes the waiver of coinsurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market value, except that such term does not include the waiver of coinsurance or deductible amounts by a person or entity, if_
__``(A) the waiver is not offered as part of any advertisement or solicitation; 
__``(B) the person does not routinely waive coinsurance or deductible amounts; and
__``(C) the person_
__``(i) waives the coinsurance and deductible amounts after determining in good faith that the individual is indigent;
__``(ii) fails to collect coinsurance or deductible amounts after making reasonable collection efforts; or
__``(iii) provides for any permissible waiver as specified in section 1128B(b)(3) or in regulations issued by the Secretary.''.
__(b) Claim for Item or Service Based on Incorrect Coding or Medically Unnecessary Services._Section 1128A(a)(1) (42 U.S.C. 1320a-7a(a)(1)) is amended_
__(1) in subparagraph (A), by striking ``claimed,'' and inserting the following: ``claimed, including any person who presents or causes to be presented a claim for an item or service which includes a procedure or diagnosis code that the person knows or should know will result in a greater payment to the person than the code applicable to the item or service actually provided or actual patient medical condition,'';
__(2) in subparagraph (C), by striking ``or'' at the end;
__(3) in subparagraph (D), by striking ``; or'' and inserting ``, or''; and
__(4) by inserting after subparagraph (D) the following new subparagraph:
__``(E) is for a medical or other item or service that a person knows or should know is not medically necessary; or''.
__(c) Excluded Individual Retaining Ownership or Control Interest in Participating Entity._Section 1128A(a) of such Act, as amended by section 4041(a)(1) and subsection (a)(1), is further amended_
__(1) by striking ``or'' at the end of paragraph (4);
__(2) by striking the semicolon at the end of paragraph (5) and inserting ``; or''; and
__(3) by inserting after paragraph (5) the following new paragraph:
__``(6) in the case of a person who is not an organization, agency, or other entity, who is excluded from participating in a program under title XVIII or a State health care program in accordance with this section, section 1128, or section 1156 and who, during the period of exclusion, retains either a direct or indirect ownership or control interest of 5 percent or more in, or an ownership or control interest (as defined in section 1124(a)(3)) in, or who is an officer, director, agent, or managing employee (as defined in section 1126(b)) of, an entity that is participating in a program under title XVIII or a State health care program;''.

__(d) Additional Offenses Relating to Alliance System._Section 1128A(a) of such Act, as amended by section 4041(a)(1) and subsections (a)(1) and (c), is further amended_
__(1) by striking ``or'' at the end of paragraph (5);
__(2) by striking the semicolon at the end of paragraph (6) and inserting ``; or''; and
__(3) by inserting after paragraph (6) the following new paragraphs:
__``(7) engages in a practice that circumvents a payment methodology intended to reimburse for two or more discreet medical items or services at a single or fixed amount, including but not limited to, multiple admissions or readmission to hospitals and other institutions reimbursed on a diagnosis reimbursement grouping basis;
__``(8) engages in a practice which has the effect of limiting or discouraging (as compared to other plan enrollees) the utilization of health care services covered by law or under the service contract by title XIX or other publicly subsidized patients, including but not limited to differential standards for the location and hours of service offered by providers participating in the plan;
__``(9) substantially fails to cooperate with a quality assurance program or a utilization review activity;
__``(10) fails substantially to provide or authorize medically necessary items and services that are required to be provided to an individual covered under a health plan or public program for the delivery of or payment for health care items or services, if the failure has adversely affected (or had a substantial likelihood of adversely affecting) the individual;
__``(11) employs or contracts with any individual or entity who is excluded from participating in a program under title XVIII or a State health care program in accordance with this section, section 1128, or section 1156, for the provision of any services (including but not limited to health care, utilization review, medical social work, or administrative), or employs or contracts with any entity for the direct or indirect provision of such services, through such an excluded individual or entity; or
__``(12) submits false or fraudulent statements, data or information or claims to the National Health Board established under part 1 of subtitle F of title I of the Health Security Act, any other federal agency, a state health care agency, a health alliance, or any other Federal, state or local agency charged with implementation or oversight of the plan that the person knows or should know is fraudulent;''.

__(e) Modifications of Amounts of Penalties and Assessments._Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by section 4041(a), subsection (a)(1), subsection (c), and subsection (d), is amended in the matter following paragraph (6)_
__(1) by striking ``$2,000'' and inserting ``$10,000'';
__(2) by inserting after ``under paragraph (4), $50,000 for each such violation'' the following: ``; in cases under paragraph (5), $10,000 for each such offer of transfer; in cases under paragraph (6), $10,000 for each day the prohibited relationship occurs; in cases under paragraphs (7) through (12), an amount not to exceed $50,000 for each such determination by the Secretary''; and
__(3) by striking ``twice the amount'' and inserting ``three times the amount''.
__(f) Interest on Penalties._Section 1128A(f) (42 U.S.C. 1320a-7a(f)) is amended by adding after the first sentence the following: ``Interest shall accrue on the penalties and assessments (as defined in subsection (g)) imposed by a final determination of the Secretary in accordance with an annual rate established by the Secretary under the Federal Claims Collection Act. The rate of interest charged shall be the rate in effect on the date the determination becomes final and shall remain fixed at that rate until the entire amount due is paid. In addition, the Secretary is authorized to recover the costs of collection in any case where the penalties and assessments are not paid within 30 days after the determination becomes final, or in the case of a compromised amount, where payments are more than 90 days past due. In lieu of actual costs, the Secretary is authorized to impose a charge of up to 10 percent of the amount of penalties and assessments owed to cover the costs of collection.''.
__(g) Authorization To Act._
__(1) In general._The first sentence of section 1128A(c)(1) (42 U.S.C. 1320a-7a(c)(1)) is amended by striking all that follows ``(b)'' and inserting the following: ``unless, within one year after the date the Secretary presents a case to the Attorney General for consideration, the Attorney General brings an action in a district court of the United States.''.
__(2) Effective date._The amendment made by this paragraph (1) shall apply to cases presented by the Secretary of Health and Human Services for consideration on or after the date of the enactment of this Act.

__(h) Deposit of Penalties Collected into All-Payer Trust Fund._Section 1128A(f)(3) (42 U.S.C. 1320a	7a(f)(3)) is amended by striking ``as miscellaneous receipts of the Treasury of the United States'' and inserting ``in the All-Payer Health Care Fraud and Abuse Control Trust Fund established under section 5402 of the Health Security Act''.
__(i) Clarification of Penalty Imposed on Excluded Provider Furnishing Services._Section 1128A(a)(1)(D) (42 U.S.C. 1320a	7a(a)(1)(D)) is amended by inserting ``who furnished the service'' after ``in which the person was''.
 

SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION.
__(a) Mandatory Exclusion for Individual Convicted of Criminal Offense Related to Health Care Fraud._Section 1128 (42 U.S.C. 1320a-7) is amended_
__(1) by amending paragraph (1) of subsection (a) to read as follows:
__``(1) Convictions of program-related crimes and health care fraud._
__``(A) Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under title XVIII or under any State health care program; or
__``(B) Any individual or entity that has been convicted, under Federal or State law, in connection with the delivery of a health care item or service of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.''; and
__(2) in subsection (b)(1), by striking ``in connection with the delivery of a health care item or service or''.
__(b) Establishment of Minimum Period of Exclusion for Certain Individuals and Entities Subject to Permissive Exclusion From Medicare and State Health Care Programs._Section 1128(c)(3) (42 U.S.C. 1320a	7(c)(3)) is amended by adding at the end the following new subparagraphs:
__``(D) In the case of an exclusion of an individual or entity under paragraphs (1), (2), or (3) of subsection (b), the period of exclusion shall be a minimum of 3 years, unless the Secretary determines that a longer period is appropriate because of aggravating circumstances.
__``(E) In the case of an exclusion of an individual or entity under paragraph (4) or (5) of subsection (b), the period of the exclusion shall not be less than the period during which the individual's or entity's license to provide health care is revoked, suspended, or surrendered, or the individual or the entity is excluded or suspended from a Federal or State health care program.
__``(F) In the case of an exclusion of an individual or entity under subsection (b)(6)(B), the period of the exclusion shall be not less than 1 year.''.
__(c) Revision to Exclusion for Default on Health Education Loan or Scholarship Obligations._Section 1128(b)(14) (42 U.S.C. 1320a	7(b)(14)) is amended by striking ``all reasonable steps'' and inserting ``reasonable steps''.
__(d) Permissive Exclusion of Individuals With Ownership or Control Interest in Sanctioned Entities._Section 1128(b) (42 U.S.C. 1320a-7(b)), is amended by adding at the end the following new paragraph:
__``(15) Individuals controlling a sanctioned entity._Any individual who has a direct or indirect ownership or control interest of 5 percent or more, or an ownership or control interest (as defined in section 1124(a)(3)) in, or who is an officer, director, agent, or managing employee (as defined in section 1126(b)) of, an entity_
__``(A) that has been convicted of any offense described in subsection (a) or in paragraph (1), (2), or (3) of this subsection;
__``(B) against which a civil monetary penalty has been assessed under section 1128A; or
__``(C) that has been excluded from participation under a program under title XVIII or under a State health care program.''.

__(e) Exclusions Based on Actions Under Alliance System._Section 1128(b) (42 U.S.C. 1320a	7(b)), as amended by subsections (a) and (d), is amended_
__(1) in paragraph (1), by striking ``XVIII or under a State health care program'' and inserting ``XVIII, a State health care program, or under an applicable health plan (as defined in section 1902(6) of the Health Security Act)'';
__(2) in paragraph (7), by striking the period at the end and inserting ``, or in section 5412 of the Health Security Act.'';
__(3) in paragraph (8)(B)_
__(A) in clause (ii), by striking ``1128A'' and inserting ``1128A or under section 5412 of the Health Security Act'', and
__(B) in clause (iii), by striking ``XVIII or under a State health care program'' and inserting ``XVIII, a State health care program, or under an applicable health plan (as defined in section 1902(6) of the Health Security Act)'';
__(4) in paragraph (9), by striking the period at the end and inserting ``, or any information requested by the Inspector General of the Department of Health and Human Services to carry out the All-Payer Health Care Fraud and Abuse Control Program established under section 5401 of the Health Security Act.'';
__(5) in paragraph (11)_
__(A) by striking ``title XVIII or a State health care program'' and inserting ``title XVIII, a State health care program, or an applicable health plan (as defined in section 1902(6) of the Health Security Act)'',
__(B) by striking ``Secretary or the appropriate State agency'' and inserting ``Secretary, the appropriate State agency, or plan sponsor'', and
__(C) by striking ``Secretary or that agency'' and inserting ``Secretary, that agency, or that sponsor'';
__(6) in paragraph (12), by adding at the end the following new subparagraph:
__``(E) Any entity authorized by law to (i) conduct on-site health, safety or patient care reviews and surveys or (ii) to investigate whether any actions have occurred that would subject an individual or entity to the imposition of any sanctions under this section, section 1128A, section 1128B, or part 2 of subtitle E of title V of the Health Security Act.''; and
__(7) in paragraph (15)_
__(A) in subparagraph (B), by striking ``1128A'' and inserting ``1128A or section 54.. of the Health Security Act'', and
__(B) in subparagraph (C), by striking ``title XVIII or under a State health care program'' and inserting ``title XVIII, a State health care program, or an applicable health plan (as defined in section 1902(6) of the Health Security Act''.

__(f) Appeal of Exclusions to Court of Appeals._Section 1128(f)(1) (42 U.S.C. 1320a	7(f)(1)) is amended by striking the period at the end and inserting the following: ``, except that any action brought to appeal such decision shall be brought in the United States Court of Appeals for the judicial circuit in which the individual or entity resides or has a principal place of business (or, if the individual or entity does not reside or have a principal place of business within any such judicial circuit, in the United States Court of Appeals for the District of Columbia Circuit).''.
SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS RELATING TO QUALITY OF CARE.
__(a) Minimum Period of Exclusion for Practitioners and Persons Failing To Meet Statutory Obligations._
__(1) In general._The second sentence of section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may prescribe)'' and inserting ``may prescribe, except that such period may not be less than one year)''.
__(2) Conforming amendment._Section 1156(b)(2) (42 U.S.C. 1320c-5(b)(2)) is amended by striking ``shall remain'' and inserting ``shall (subject to the minimum period specified in the second sentence of paragraph (1)) remain''.
__(b) Repeal of ``Unwilling or Unable'' Condition for Imposition of Sanction._Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended_
__(1) in the second sentence, by striking ``and determines'' and all that follows through ``such obligations,'' and
__(2) by striking the third sentence.
__(c) Amount of Civil Money Penalty._Section 1156(b)(3) (42 U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' and inserting the following: ``$50,000 for each instance''.
SEC. 4046. EFFECTIVE DATE.
__The amendments made by this part shall take effect January 1, 1995.


PART 6_FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH CENTERS
SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE MEDICAL EDUCATION.
__(a) In General._For purposes of complying with section 3034(a), there shall be transferred to the Secretary from the Federal Hospital Insurance Trust Fund (established under section 1817 of the Social Security Act) and the Federal Supplementary Medical Insurance Trust Fund (established under section 1841 of such Act) the following amount (in the aggregate), as applicable to a calendar year:
__(1) In the case of a calendar year prior to 1998, the proportion of the amounts expended from such Trust Funds during the most recent fiscal year ending before the first day of such calendar year for payments for the direct costs of graduate medical education under section 1886(h) of such Act that is attributable to payments to hospitals located in the States that are participating States for the calendar year.
__(2) In the case of calendar year 1998, the amount expended from such Trust Funds during fiscal year 1997 for payments for such direct costs of graduate medical education.
__(3) In the case of each subsequent calendar year, the amount specified in paragraph (2) increased by the product of such amount and the general health care inflation factor (as defined in section 6001(a)(3), except that for purposes of this subparagraph the increases provided for in subparagraphs (A) through (C) of such section shall not be made).

__(b) Allocation of Amount Among Funds._With respect to the amount required under subsection (a) to be transferred for an academic year from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, the Secretary shall determine an equitable allocation of such amount among the funds.
__(c) Termination of Graduate Medical Education Payments Under Medicare._
__(1) In General._ Section 1886(h) (42 U.S.C. 1395ww(h)) is amended by adding at the end the following new paragraph:
__``(6) Termination of payments attributable to costs of training physicians._Notwithstanding any other provision of this section or section 1861(v), no payment may be made under this title for direct graduate medical education costs attributable to an approved medical residency training program for any cost reporting period (or portion thereof) beginning on or after January 1, 1998 (or, in the case of costs of a program operating in a State that is a participating State under the Health Security Act for a year prior to 1998, on or after January 1 of the first year for which the State is such a participating State).''.

__(2) Prohibition against recognition of costs._Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the end the following new subparagraph:
__``(T) Such regulations shall not include any provision for specific recognition of the costs of graduate medical education for hospitals for any cost reporting period (or portion thereof) beginning on or after January 1, 1998 (or, in the case of a hospital located in a State that is a participating State under the Health Security Act for a year prior to 1998, ending on or before December 31 of the year prior to the first year for which the State is such a participating State). Nothing in the previous sentence shall be construed to affect in any way payments to hospitals for the costs of any approved educational activities that are not described in such sentence.''.

SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST FUND FOR ACADEMIC HEALTH CENTERS.
__(a) In General._For purposes of complying with section 3104(a), there shall be transferred to the Secretary from the Federal Hospital Insurance Trust Fund (established under section 1817 of the Social Security Act) the following amount (in the aggregate), as applicable to a calendar year:
__(1) In the case of a calendar year prior to 1998, the proportion of the amounts expended from such Trust Fund during the most recent fiscal year ending before the first day of such calendar year for payments for the indirect costs of medical education under section 1886(d)(5)(B) of such Act that is attributable to discharges of hospitals located in the States that are participating States for the calendar year.
__(2) In the case of calendar year 1998, the amount expended from such Trust Fund during fiscal year 1997 for payments for such indirect costs of medical education.
__(3) In the case of each subsequent calendar year, the amount specified in paragraph (2) increased by the product of such amount and the general health care inflation factor (as defined in section 6001(a)(3), except that for purposes of this subparagraph the increases provided for in subparagraphs (A) through (C) of such section shall not be made).
__(b) Termination of Payments Under Medicare._
__(1) In general._Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is amended in the matter preceding clause (i) by striking ``The Secretary'' and inserting ``For discharges occurring before January 1, 1998 (or, in the case of discharges of a hospital located in a State that is a participating State under the Health Security Act for a year prior to 1998, before January 1 of the first year for which the State is such a participating State), the Secretary''.
__(2) Adjustment to standardized amounts._Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ``excluding'' and inserting ``for discharges occurring before January 1, 1998, (or, in the case of discharges of a hospital located in a State that is a participating State under the Health Security Act for a year prior to 1998, before January 1 of the first year for which the State is such a participating State) excluding''.

PART 7_COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF DEPARTMENTS OF DEFENSE AND VETERANS AFFAIRS
SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH PLAN AS ELIGIBLE ORGANIZATION UNDER MEDICARE.
__(a) In General._Section 1876 (42 U.S.C. 1395mm), as amended by section 4002(a), is further amended by adding at the end the following new subsection:
__``(l) Notwithstanding any other provision of this section, a Uniformed Services Health Plan of the Department of Defense under chapter 55 of title 10, United States Code, shall be considered an eligible organization under this section, and the Secretary shall make payments to such Plan during a year on behalf of any individuals entitled to benefits under this title who are enrolled with such a Plan during the year in such amounts and under such terms and conditions as may be imposed under an agreement between the Secretary and the Secretary of Defense.''.
__(b) Effective Date._The amendment made by subsection (a) shall apply to items and services furnished under title XVIII of the Social Security Act on or after January 1, 1998.
SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDICARE BENEFICIARIES BY PLANS AND FACILITIES OF DEPARTMENT OF VETERANS AFFAIRS.
__(a) In General._Title XVIII, as amended by sections 4001 and 4003, is further amended by adding at the end the following new section:
``treatment of plans and facilities of department of veterans affairs as providers
__``Sec. 1895. (a) In General._Notwithstanding any other provision of this title_
__``(1) a VA health plan (as defined in section 1801(2) of title 38, United States Code) shall be considered an eligible organization for purposes of section 1876; and
__``(2) a health care facility of the Department of Veterans Affairs shall be considered a provider of services under section 1861(u).
__``(b) Eligibility for Payments._
__``(1) VA health plans._The Secretary shall make payments to a VA health plan during a year on behalf of any individuals entitled to benefits under this title who are enrolled with such a plan during the year in the same amounts and under the same terms and conditions under which the Secretary makes payments to eligible organizations with a risk-sharing contract under section 1876.
__``(2) Health care facilities._The Secretary shall make payments to a health care facility of the Department of Veterans Affairs for services provided to an individual entitled to benefits under this title in the same amounts and under the same terms and conditions under which the Secretary makes payments to provider of services under this title.''.
__(b) Effective Date._The amendment made by subsection (a) shall apply to items and services furnished under title XVIII of the Social Security Act on or after January 1, 1998.
SEC. 4063. CONFORMING AMENDMENTS.
__(a) Part A._Section 1814 (42 U.S.C. 1395f) is amended by striking subsection (c).
__(b) Part B._Section 1835 (42 U.S.C. 1395n) is amended by striking subsection (d).
__(c) Additional Conforming Amendment._Section 1880(a) (42 U.S.C. 1395qq(a)) is amended by striking ``, notwithstanding sections 1814(c) and 1835(d),''.
__(d) Effective Date._The amendments made by this section shall take effect January 1, 1998.

Title IV, Subtitle B
Subtitle B_Savings in Medicare Program
PART 1_SAVINGS RELATING TO PART A
SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES.
__Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)), as amended by section 13501(a)(1) of OBRA	1993, is amended_
__(1) in subclause (XII)_
__(A) by striking ``fiscal year 1997'' and inserting ``for each of the fiscal years 1997 through 2000'', and
__(B) by striking ``0.5 percentage point'' and inserting ``2.0 percentage points''; and
__(2) in subclause (XIII), by striking ``fiscal year 1998'' and inserting ``fiscal year 2001''.





SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION.
__Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as follows:
__``(ii) For purposes of clause (i)(II), the indirect teaching adjustment factor is equal to c * (((1+r) to the nth power) - 1), where `r' is the ratio of the hospital's full-time equivalent interns and residents to beds and `n' equals .405. For discharges occurring on or after_
__``(I) May 1, 1986, and before October 1, 1994, `c' is equal to 1.89,
__``(II) October 1, 1994, and before October 1, 1995, `c' is equal to 1.395, and
__``(III) October 1, 1995, `c' is equal to 0.74.''.

SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR INPATIENT HOSPITAL SERVICES.
__(a) PPS Hospitals._
__(1) Reduction in base payment rates._Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)), as amended by section 13501(a)(3) of OBRA	1993, is amended by adding at the end the following new sentence: ``In addition to the reduction described in the preceding sentence, the Secretary shall reduce by 7.31 percent the unadjusted standard Federal capital payment rate (as described in 42 CFR 412.308(c), as in effect on the date of the enactment of the Health Security Act) and shall reduce by 10.41 percent the unadjusted hospital-specific rate (as described in 42 CFR 412.328(e)(1), as in effect on the date of the enactment of the Health Security Act).''.
__(2) Reduction in update._Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended_
__(A) in subparagraph (B)(i)_
__(i) by striking ``and (II)'' and inserting ``(II)'', and
__(ii) by striking the semicolon at the end and inserting the following: ``, and (III) an annual update factor established for the prospective payment rates applicable to discharges in a fiscal year which (subject to reduction under subparagraph (C)) will be based upon such factor as the Secretary determines appropriate to take into account amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality;'';
__(B) by redesignating subparagraph (C) as subparagraph (D); and
__(C) by inserting after subparagraph (B) the following new subparagraph:
__``(C)(i) With respect to payments attributable to portions of cost reporting periods or discharges occurring during each of the fiscal years 1996 through 2000, the Secretary shall include a reduction in the annual update factor established under subparagraph (B)(i)(III) for discharges in the year equal to the applicable update reduction described in clause (ii) to adjust for excessive increases in capital costs per discharge for fiscal years prior to fiscal year 1992 (but in no event may such reduction result in an annual update factor less than zero).
__``(ii) In clause (i), the term `applicable update reduction' means, with respect to the update factor for a fiscal year_
__``(I) 4.9 percentage points; or
__``(II) if the annual update factor for the previous fiscal year was less than the applicable update reduction for the previous year, the sum of 4.9 percentage points and the difference between the annual update factor for the previous year and the applicable update reduction for the previous year.''.
__(b) PPS-Exempt Hospitals._Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by section 4051(c)(2), is further amended by adding at the end the following new subparagraph:
__``(U) Such regulations shall provide that, in determining the amount of the payments that may be made under this title with respect to the capital-related costs of inpatient hospital services furnished by a hospital that is not a subsection (d) hospital (as defined in section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as defined in section 1886(d)(9)(A)), the Secretary shall reduce the amounts of such payments otherwise established under this title by 15 percent for payments attributable to portions of cost reporting periods occurring during each of the fiscal years 1996 through 2000.''.

SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR DISPROPORTIONATE SHARE HOSPITALS IN PARTICIPATING STATES.
__(a) Application of Alternative Adjustments._Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended_
__(1) by redesignating subparagraphs (H) and (I) as subparagraphs (I) and (J); and
__(2) by inserting after subparagraph (G) the following new subparagraph:
__``(H)(i) In accordance with this subparagraph, the Secretary shall provide for an additional payment for each subsection (d) hospital that is located in a participating State under subtitle C of title I of the Health Security Act during a cost reporting period and that meets the eligibility requirements described in clause (iii).
__``(ii) The amount of the additional payment made under clause (i) for each discharge shall be determined by multiplying_
__``(I) the sum of the amount determined under paragraph (1)(A)(ii)(II) (or, if applicable, the amount determined under paragraph (1)(A)(iii)) and the amount paid to the hospital under subparagraph (A) for the discharge, by
__``(II) the SSI adjustment percentage for the cost reporting period in which the discharge occurs (as defined in clause (iv)).
__``(iii) A hospital meets the eligibility requirements described in this clause with respect to a cost reporting period if_
__``(I) in the case of a hospital that is located in an urban area and that has more than 100 beds, the hospital's SSI patient percentage (as defined in clause (v)) for the cost reporting period is not less than 5 percent;
__``(II) in the case of a hospital that is located in an urban area and that has less than 100 beds, the hospital's SSI patient percentage is not less than 17 percent;
__``(III) in the case of a hospital that is classified as a rural referral center under subparagraph (C) or a sole community hospital under subparagraph (D), the hospital's SSI patient percentage for the cost reporting period is not less than 23 percent; and
__``(IV) in the case of any other hospital, the hospital's SSI patient percentage is not less than 23 percent.
__``(iv) For purposes of clause (ii), the `SSI adjustment percentage' applicable to a hospital for a cost reporting period is equal to_
__``(I) in the case of a hospital described in clause (iii)(I), the percentage determined in accordance with the following formula: e to the nth power, where `e' is the natural antilog of 1 and where `n' is equal to (.5642 * (the hospital's SSI patient percentage for the cost reporting period - .055)) - 1;
__``(II) in the case of a hospital described in clause (iii)(II) or clause (iii)(IV), 2 percent; and
__``(III) in the case of a hospital described in clause (iii)(III), the sum of 2 percent and .30 percent of the difference between the hospital's SSI patient percentage for the cost reporting period and 23 percent.
__``(v) In this subparagraph, a hospital's `SSI patient percentage' with respect to a cost reporting period is equal to the fraction (expressed as a percentage)_
__``(I) the numerator of which is the number of the hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A and were entitled to supplementary security income benefits (excluding State supplementation) under title XVI; and
__``(II) the denominator of which is the number of the hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A.''.

__(b) No Standardization Resulting From Reduction._Section 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended_
__(1) by striking ``exclude additional payments'' and inserting ``adjust such estimate for changes in payments'';
__(2) by striking ``1989 or'' and inserting ``1989,''; and
__(3) by striking the period at the end and inserting the following: ``, or the enactment of section 4104 of the Health Security Act.''.
__(c) Conforming Amendment._Section 1886(d)(5)(F)(i) (42 U.S.C. 1395ww(d)(5)(F)(i)) is amended in the matter preceding subclause (I) by inserting after ``hospital'' the following: ``that is not located in a State that is a participating State under subtitle C of title I of the Health Security Act''.


SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL LONG-TERM CARE HOSPITALS.
__Notwithstanding clause (iv) of section 1886(d)(1)(B) of the Social Security Act, a hospital which has an average inpatient length of stay (as determined by the Secretary of Health and Human Services) of greater than 25 days shall not be treated as a hospital described in such clause for purposes of title XVIII of such Act unless the hospital was treated as a hospital described in such clause for purposes of such title as of the date of the enactment of this Act.


SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COSTS OF SKILLED NURSING FACILITIES.
__(a) Payments Based on Cost Limits._Section 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking ``112 percent'' each place it appears and inserting ``100 percent (adjusted by such amount as the Secretary determines to be necessary to preserve the savings resulting from the enactment of section 13503(a)(1) of the Omnibus Budget Reconciliation Act of 1993)''.
__(b) Payments Determined on Prospective Basis._Section 1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105 percent'' and inserting ``100 percent (adjusted by such amount as the Secretary determines to be necessary to preserve the savings resulting from the enactment of section 13503(b) of the Omnibus Budget Reconciliation Act of 1993)''.
__(c) Effective Date._The amendments made by subsections (a) and(b) shall apply to cost reporting periods beginning on or after October 1, 1995.
PART 2_SAVINGS RELATING TO PART B
SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR PHYSICIAN SERVICES.
__(a) Use of Cumulative Performance Standard._Section 1848(f)(2) (42 U.S.C. 1395w	4(f)(2)) is amended_
__(1) in subparagraph (A)_
__(A) in the heading, by striking ``In general'' and inserting ``Fiscal years 1991 through 1993._'',
__(B) in the matter preceding clause (i), by striking ``a fiscal year (beginning with fiscal year 1991)'' and inserting ``fiscal years 1991, 1992, and 1993'', and
__(C) in the matter following clause (iv), by striking ``subparagraph (B)'' and inserting ``subparagraph (C)'';
__(2) in subparagraph (B), by striking ``subparagraph (A)'' and inserting ``subparagraphs (A) and (B)'';
__(3) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D); and
__(4) by inserting after subparagraph (A) the following new subparagraph:
__``(B) Fiscal years beginning with fiscal year 1994._Unless Congress otherwise provides, the performance standard rate of increase, for all physicians' services and for each category of physicians's services, for a fiscal year beginning with fiscal year 1994 shall be equal to the performance standard rate of increase determined under this paragraph for the previous fiscal year, increased by the product of_
__``(i) 1 plus the Secretary's estimate of the weighted average percentage increase (divided by 100) in the fees for all physicians' services or for the category of physicians' services, respectively, under this part for portions of calendar years included in the fiscal year involved,
__``(ii) 1 plus the Secretary's estimate of the percentage increase or decrease (divided by 100) in the average number of individuals enrolled under this part (other than HMO enrollees) from the previous fiscal year to the fiscal year involved,
__``(iii) 1 plus the Secretary's estimate of the average annual percentage growth (divided by 100) in volume and intensity of all physicians' services or of the category of physicians' services, respectively, under this part for the 5-fiscal-year period ending with the preceding fiscal year (based upon information contained in the most recent annual report made pursuant to section 1841(b)(2)), and
__``(iv) 1 plus the Secretary's estimate of the percentage increase or decrease (divided by 100) in expenditures for all physicians' services or of the category of physicians' services, respectively, in the fiscal year (compared with the previous fiscal year) which are estimated to result from changes in law or regulations affecting the percentage increase described in clause (i) and which is not taken into account in the percentage increase described in clause (i),
minus 1, multiplied by 100, and reduced by the performance standard factor (specified in subparagraph (C)).''.
__(b) Treatment of Default Update._
__(1) In general._Section 1848(d)(3)(B) (42 U.S.C. 1395w	4(d)(3)(B)) is amended_
__(A) in clause (i)_
__(i) in the heading, by striking ``In general'' and inserting ``1992 through 1995'', and
__(ii) by striking ``for a year'' and inserting ``for 1992, 1993, 1994, and 1995''; and
__(B) by adding after clause (ii) the following new clause:
__``(iii) Years beginning with 1996._
__``(I) In general._The update for a category of physicians' services for a year beginning with 1996 provided under subparagraph (A) shall be increased or decreased by the same percentage by which the cumulative percentage increase in actual expenditures for such category of physicians' services for such year was less or greater, respectively, than the performance standard rate of increase (established under subsection (f)) for such category of services for such year.
__``(II) Cumulative percentage increase defined._In subclause (I), the `cumulative percentage increase in actual expenditures' for a year shall be equal to the product of the adjusted increases for each year beginning with 1994 up to and including the year involved, minus 1 and multiplied by 100. In the previous sentence, the `adjusted increase' for a year is equal to 1 plus the percentage increase in actual expenditures for the year.''.

__(2) Conforming amendment._Section 1848(d)(3)(A)(i) (42 U.S.C. 1395w	4(d)(3)(A)(i)) is amended by striking ``subparagraph (B)'' and inserting ``subparagraphs (B) and (C)''.
SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; REPEAL OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN DEFAULT UPDATE.
__(a) Use of Real GDP to Adjust for Volume and Intensity._Section 1848(f)(2)(B)(iii) (42 U.S.C. 1395w	4(f)(2)(B)(iii)), as added by section 4111(a), is amended to read as follows:
__``(iii) 1 plus the average per capita growth in the real gross domestic product (divided by 100) for the 5-fiscal-year period ending with the previous fiscal year (increased by 1.5 percentage points for the category of services consisting of primary care services), and''.
__(b) Repeal of Restriction on Maximum Reduction._Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w	4(d)(3)(B)(ii)), as amended by section 13512(b) of OBRA	1993, is amended_
__(1) in the heading, by inserting ``in certain years'' after ``adjustment'';
__(2) in the matter preceding subclause (I), by striking ``for a year'';
__(3) in subclause (I), by adding ``and'' at the end;
__(4) in subclause (II), by striking ``, and'' and inserting a period; and
__(5) by striking subclause (III).
SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE SCHEDULE FOR 1995.
__Section 1848(d)(1) (42 U.S.C. 1395w	4(d)(1)) is amended_
__(1) in subparagraph (A), by inserting after ``subparagraph (B)'' the following: ``, and, in the case of 1995, specified in subparagraph (C)'';
__(2) by redesignating subparagraph (C) as subparagraph (D); and
__(3) by inserting after subparagraph (B) the following new subparagraph:
__``(C) Special provision for 1995._For purposes of subparagraph (A), the conversion factor specified in this subparagraph for 1995 is_
__``(i) in the case of physicians' services included in the category of primary care services (as defined in subsection (j)(1)), the conversion factor established under this subsection for 1994 adjusted by the update established under paragraph (3) for 1995; and
__``(ii) in the case of any other physicians' services, the conversion factor established under this subsection for 1994 reduced by 3 percentage points.''.

SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS.
__(a) In General._
__(1) Limitations described._Part B of title XVIII, as amended by section 2003(a), is amended by inserting after section 1848 the following new section:
``limitations on payment for physicians' services furnished by high-cost hospital medical staffs
__``Sec. 1849. (a) Services Subject to Reduction._
__``(1) Determination of hospital-specific per admission relative value._Not later than October 1 of each year (beginning with 1997), the Secretary shall determine for each hospital_
__``(A) the hospital-specific per admission relative value under subsection (b)(2) for the following year; and
__``(B)(i) whether such hospital-specific relative value is projected to exceed the allowable average per admission relative value applicable to the hospital for the following year under subsection (b)(1), and, if so, (ii) the hospital's projected excess relative value for the year under subsection (b)(3).
__``(2) Reduction for services at hospitals exceeding allowable average per admission relative value._If the Secretary determines (under paragraph (1)) that a medical staff's hospital-specific per admission relative value for a year (beginning with 1998) is projected to exceed the allowable average per admission relative value applicable to the medical staff for the year, the Secretary shall reduce (in accordance with subsection (c)) the amount of payment otherwise determined under this part for each physicians' service furnished during the year to an inpatient of the hospital by an individual who is a member of the hospital's medical staff.
__``(3) Timing of determination; notice to hospitals and carriers._Not later than October 1 of each year (beginning with 1997), the Secretary shall notify the medical executive committee of each hospital (as set forth in the Standards of the Joint Commission on the Accreditation of Health Organizations) of the determinations made with respect to the medical staff under paragraph (1).


__``(b) Determination of Allowable Average Per Admission Relative Value and Hospital-Specific Per Admission Relative Values._
__``(1) Allowable average per admission relative value._
__``(A) Urban hospitals._In the case of a hospital located in an urban area, the allowable average per admission relative value established under this subsection_
__``(i) for 1998 and 1999, is equal to 125 percent of the median of the 1996 hospital-specific per admission relative values determined under paragraph (2) for all hospital medical staffs; and
__``(ii) for 2000 and each succeeding year, is equal to 120 percent of the median of such relative values for all hospital medical staffs.



__``(B) Rural hospitals._In the case of a hospital located in a rural area, the allowable average per admission relative value established under this subsection for 1998 and each succeeding year, is equal to 140 percent of the median of the 1996 hospital-specific per admission relative values determined under paragraph (2) for all hospital medical staffs.

__``(2) Hospital-specific per admission relative value._
__``(A) In general._The hospital-specific per admission relative value for a hospital (other than a teaching hospital), shall be equal to the average per admission relative value (as determined under section 1848(c)(2)) for each physician's service furnished to inpatients of the hospital by the hospital's medical staff (excluding interns and residents) during 1996, adjusted for variations in case-mix and disproportionate share status among hospitals (as determined by the Secretary under subparagraph (C)).
__``(B) Special rule for teaching hospitals._The hospital-specific relative value for a teaching hospital shall be equal to the sum of_
__``(i) the average per admission relative value (as determined under section 1848(c)(2)) for each physician's service furnished to inpatients of the hospital by the hospital's medical staff (excluding interns and residents) during 1996, adjusted for variations in case-mix, disproportionate share status, and teaching status among hospitals (as determined by the Secretary under subparagraph (C)); and
__``(ii) the equivalent per admission relative value (as determined under section 1848(c)(2)) for each physician's service furnished to inpatients of the hospital by interns and residents of the hospital during 1996, adjusted for variations in case-mix, disproportionate share status, and teaching status among hospitals (as determined by the Secretary under subparagraph (C)). The Secretary shall determine such equivalent relative value unit per admission for interns and residents based on the best available data for teaching hospitals and may make such adjustment in the aggregate.
__``(C) Adjustment for teaching and disproportionate share hospitals._The Secretary shall adjust the allowable per admission relative values otherwise determined under this paragraph to take into account the needs of teaching hospitals and hospitals receiving additional payments under subparagraphs (F) and (G) of section 1886(d)(5). The adjustment for teaching status or disproportionate share shall not be less than zero.
__``(3) Projected excess relative value defined._The `projected excess relative value' with respect to a hospital's medical staff for a year means the number of percentage points by which the Secretary determines (under subsection (a)(1)(B)) that the medical staff's hospital-specific per admission relative value (determined under paragraph (2)) will exceed the allowable average per admission relative value applicable to the hospital medical staff for the year (as determined under paragraph (1)).
__``(c) Amount of Reduction._The amount of payment otherwise made under this part for a physician's service that is subject to a reduction under subsection (a) during a year shall be reduced 15 percent, in the case of a service furnished by a member of the medical staff of a hospital for which the Secretary determines under subsection (a)(1) that the hospital medical staff's projected relative value per admission exceeds the allowable average per admission relative value.

__``(d) Reconciliation of Reductions Based on Hospital-Specific Relative Value Per Admission With Actual Relative Values._
__``(1) Determination of actual average per admission relative value._Not later than October 1 of each year (beginning with 1999), the Secretary shall determine the actual average per admission relative value (as determined pursuant to section 1848(c)(2)) for the physicians' services furnished by members of a hospital's medical staff to inpatients of the hospital during the previous year, on the basis of claims for payment for such services that are submitted to the Secretary not later than 90 days after the last day of such previous year. The actual average per admission shall be adjusted by the appropriate case-mix, disproportionate share factor, and teaching factor for the hospital medical staff (as determined by the Secretary under subsection (b)(2)(C)).
__``(2) Reconciliation with reductions taken._In the case of a hospital for which the payment amounts for physicians' services furnished by