PHYSICIAN PAYMENT REFORM.

SEC. 6102. PHYSICIAN PAYMENT REFORM. (a) In General.—Part B of title XVIII of the Social Security Act is amended by adding at the end the following new section: “payment for physicians’ services “Sec. 1848. (a) Payment Based on Fee Schedule.— “(1) In general.— Effective for all physicians’ services (as defined in subsection (j)(3)) furnished under this part during a year (beginning with 1992) for which payment is otherwise made on the basis of a reasonable charge or on the basis of a fee schedule under section 1834(b) or 1834(f), payment under this part shall instead be based on the lesser of— “(A) the actual charge for the service, or “(B) subject to the succeeding provisions of this subsection, the amount determined under the fee schedule established under subsection (b) for services furnished during that year (in this subsection referred to as the ‘fee schedule amount’). “(2) Transition to full fee schedule.— “(A) Limiting reductions and increases to 15 percent in 1992.— “(i) Limit on increase.—In the case of a service in a fee schedule area (as defined in subsection (j)(2)) for which the adjusted historical payment basis (as defined in subparagraph (D)) is less than 85 percent of the fee schedule amount for services furnished in 1992, there shall be substituted for the fee schedule amount an amount equal to the adjusted historical payment basis plus 15 percent of the fee schedule amount otherwise established (without regard to this paragraph). “(ii) Limit in reduction.—In the case of a service in a fee schedule area for which the adjusted historical payment basis exceeds 115 percent of the fee schedule amount for services furnished in 1992, there shall be substituted for the fee schedule amount an amount equal to the adjusted historical payment basis minus 15 percent of the fee schedule amount otherwise established (without regard to this paragraph). “(B) Special rule for 1993, 1994, and 1995.—If a physicians’ service in a fee schedule area is subject to the provisions of subparagraph (A) in 1992, for physicians’ services furnished in the area— “(i) during 1993, there shall be substituted for the fee schedule amount an amount equal to the sum of— “(I) 75 percent of the fee schedule amount deter mined under subparagraph (A), adjusted by the update established under subsection (d)(3) for 1993, and “(II) 25 percent of the fee schedule amount determined under paragraph (1) for 1993 without regard to this paragraph; “(ii) during 1994, there shall be substituted for the fee schedule amount an amount equal to the sum of— 103 STAT. 2170 “(I) 67 percent of the fee schedule amount determined under clause (i), adjusted by the update established under subsection (d)(3) for 1994, and “(II) 33 percent of the fee schedule amount determined under paragraph (1) for 1994 without regard to this paragraph; and “(iii) during 1995, there shall be substituted for the fee schedule amount an amount equal to the sum of— “(I) 50 percent of the fee schedule amount determined under clause (ii) adjusted by the update established under subsection (d)(3) for 1995, and “(II) 50 percent of the fee schedule amount determined under paragraph (1) for 1995 without regard to this paragraph. “(C) Special rule for anesthesia services.—With respect to physicians’ services which are anesthesia services, the Secretary shall provide for a transition in the same manner as a transition is provided for other services under subparagraph (B). “(D) Adjusted historical payment basis defined.— “(i) In general.—In this paragraph, the term ‘adjusted historical payment basis’ means, with respect to a physicians’ service furnished in a fee schedule area, the weighted average prevailing charge applied in the area for the service in 1991 (as determined by the Secretary without regard to physician specialty and as adjusted to reflect payments for services with customary charges below the prevailing charge or other payment limitations imposed by law or regulation) adjusted by the update established under subsection (d)(3) for 1992. “(ii) Application to radiology services.—In applying clause (i) in the case of physicians’ services which are radiology services (including radiologist services, as defined in section 1834(b)(6)), there shall be substituted for the weighted average prevailing charge the amount provided under the fee schedule established for the service for the fee schedule area under section 1834(b). “(3) Incentives for participating physicians.—In applying paragraph (1)(B) in the case of a nonparticipating physician, the fee schedule amount shall be 95 percent of such amount otherwise applied under this subsection (without regard to this paragraph). “(b) Establishment of Fee Schedules.— “(1) In general.— Before January 1 of each year beginning with 1992, the Secretary shall establish, by regulation, fee schedules that establish payment amounts for all physicians’ services furnished in all fee schedule areas (as defined in subsection (j)(2)) for the year. Except as provided in paragraph (2), each such payment amount for a service shall be equal to the product of— “(A) the relative value for the service (as determined in subsection (c)(2)), “(B) the conversion factor (established under subsection (d)) for the year, and “(C) the geographic adjustment factor (established under subsection (e)(2)) for the service for the fee schedule area. 103 STAT. 2171 “(2) Treatment of radiology services and anesthesia services.— “(A) Radiology services.—With respect to radiology services (including radiologist services, as defined in section 1834(b)(6)), the Secretary shall base the relative values on the relative value scale developed under section 1834(b)(1)(A), with appropriate modifications of the relative values to assure that the relative values established for radiology services which are similar or related to other physicians’ services are consistent with the relative values established for those similar or related services. “(B) Anesthesia services.—In establishing the fee schedule for anesthesia services for which a relative value guide has been established under section 4048(b) of the Omnibus Budget Reconciliation Act of 1987, the Secretary shall use, to the extent practicable, such relative value guide, with appropriate adjustment of the conversion factor, in a manner to assure that the fee schedule amounts for anesthesia services are consistent with the fee schedule amounts for other services determined by the Secretary to be of comparable value. In applying the previous sentence, the Secretary shall adjust the conversion factor by geographic adjustment factors in the same manner as such adjustment is made under paragraph (1)(C). “(C) Consultation.—The Secretary shall consult with the Physician Payment Review Commission and organizations representing physicians or suppliers who furnish radiology services and anesthesia services in applying subparagraphs (A) and (B). “(c) Determination of Relative Values for Physicians’ Services.— “(1) Division of physicians’ services into components.— In this section, with respect to a physicians’ service: “(A) Work component defined.—The term ‘work component’ means the portion of the resources used in furnishing the service that reflects physician time and intensity in furnishing the service. Such portion shall— “(i) include activities before and after direct patient contact, and “(ii) be defined, with respect to surgical procedures, to reflect a global definition including preoperative and post-operative physicians’ services. “(B) Practice expense component defined.—The term ‘practice expense component’ means the portion of the resources used in furnishing the service that reflects the general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising practice expenses. In this subparagraph, the term ‘practice expenses’ includes all expenses for furnishing physicians’ services, excluding malpractice expenses, physician compensation, and other physician fringe benefits. “(C) Malpractice component defined.—The term ‘malpractice component’ means the portion of the resources used in furnishing the service that reflects malpractice expenses in furnishing the service. “(2) Determination of relative values.— 103 STAT. 2172 “(A) In general.— “(i) Combination of units for components.—The Secretary shall develop a methodology for combining the work, practice expense, and malpractice relative value units, determined under subparagraph (C), for each service in a manner to produce a single relative value for that service. “(ii) Extrapolation.—The Secretary may use extrapolation and other techniques to determine the number of relative value units for physicians’ services for which specific data are not available and shall take into account recommendations of the Physician Payment Review Commission and the results of consultations with organizations representing physicians who provide such services. “(B) Periodic review and adjustments in relative values.— “(i) Periodic review.—The Secretary, not less often than every 5 years, shall review the relative values established under this paragraph for all physicians’ services. “(ii) Adjustments.— “(I) In general.—The Secretary shall, to the extent the Secretary determines to be necessary and subject to subclause (II), adjust the number of such units to take into account changes in medical practice, coding changes, new data on relative value components, or the addition of new procedures. The Secretary shall publish an explanation of the basis for such adjustments. “(II) Limitation on annual adjustments.—The adjustments under subclause (I) for a year may not cause the amount of expenditures under this part for the year to differ by more than $20,000,000 from the amount of expenditures under this part that would have been made if such adjustments had not been made. “(iii) Consultation.—The Secretary, in making adjustments under clause (ii), shall consult with the Physician Payment Review Commission and organizations representing physicians. “(C) Computation of relative value units for components.—For purposes of this section for each physicians’ service— “(i) Work relative value units.—The Secretary shall determine a number of work relative value units for the service based on the relative resources incorporating physician time and intensity required in furnishing the service. “(ii) Practice expense relative value units.—The Secretary shall determine a number of practice expense relative value units equal to the product of— “(I) the base allowed charges (as defined in subparagraph (D)) for the service, and “(II) the practice expense percentage for the service (as determined under paragraph (3)(C)(ii)). 103 STAT. 2173 “(iii) Malpractice relative value units.—The Secretary shall determine a number of malpractice relative value units equal to the product of— “(I) the base allowed charges (as defined in subparagraph (D)) for the service, and “(II) the malpractice percentage for the service (as determined under paragraph (3)(C)(iii)). “(D) Base allowed charges defined.—In this paragraph, the term ‘base allowed charges’ means, with respect to a physician’s service, the national average allowed charges for the service under this part for services furnished during 1991, as estimated by the Secretary using the most recent data available. “(3) Component percentages.— For purposes of paragraph (2), the Secretary shall determine a work percentage, a practice expense percentage, and a malpractice percentage for each physician’s service as follows: “(A) Division of services by specialty.—For each physician’s service or class of physicians’ services, the Secretary shall determine the average percentage of each such service or class of services that is performed, nationwide, under this part by physicians in each of the different physician specialties (as identified by the Secretary). “(B) Division of specialty by component.—The Secretary shall determine the average percentage division of resources, among the work component, the practice expense component, and the malpractice component, used by physicians in each of such specialties in furnishing physicians’ services. Such percentages shall be based on national data that describe the elements of physician practice costs and revenues, by physician specialty. The Secretary may use extrapolation and other techniques to determine practice costs and revenues for specialties for which adequate data are not available. “(C) Determination of component percentages.— “(i) Work percentage.—The work percentage for a service (or class of services) is equal to the sum (for all physician specialties) of— “(I) the average percentage division for the work component for each physician specialty (determined under subparagraph (B)), multiplied by “(II) the proportion (determined under subparagraph (A)) of such service (or services) performed by physicians in that specialty. “(ii) Practice expense percentage.—The practice expense percentage for a service (or class of services) is equal to the sum (for all physician specialties) of— “(I) the average percentage division for the practice expense component for each physician specialty (determined under subparagraph (B)), multiplied by “(II) by the proportion (determined under subparagraph (A)) of such service (or services) performed by physicians in that specialty. “(iii) Malpractice percentage.—The malpractice percentage for a service (or class of services) is equal to the sum (for all physician specialties) of— 103 STAT. 2174 “(I) the average percentage division for the malpractice component for each physician specialty (determined under subparagraph (B)), multiplied by “(II) by the proportion (determined under subparagraph (A)) of such service (or services) performed by physicians in that specialty. “(D) Periodic recomputation.—The Secretary may, from time to time, provide for the recomputation of work percentages, practice expense percentages, and malpractice percentages determined under this paragraph. “(3) Ancillary policies.—The Secretary may establish ancillary policies (with respect to the use of modifiers, local codes, and other matters) as may be necessary to implement this subsection. “(4) Coding.—The Secretary shall establish a uniform procedure coding system for the coding of all physicians’ services. The Secretary shall provide for an appropriate coding structure for visits and consultations. The Secretary may incorporate the use of time in the coding for visits and consultations only for services furnished on or after January 1, 1993. The Secretary, in establishing such coding system, shall consult with the Physician Payment Review Commission and other organizations representing physicians. “(5) No variation for specialists.—The Secretary may not vary the conversion factor or the number of relative value units for a physicians’ service based on whether the physician furnishing the service is a specialist or based on the type of specialty of the physician. “(d) Conversion Factors.— “(1) Establishment.— “(A) In general.—The conversion factor for each year shall be the conversion factor established under this subsection for the previous year (or, in the case of 1992, specified in subparagraph (B)) adjusted by the update (established under subparagraph (C)) for the year involved. “(B) Special provision for 1992.—For purposes of subparagraph (A), the conversion factor specified in this subparagraph is a conversion factor (determined by the Secretary) which, if this section were to apply during 1991 using such conversion factor, would result in the same aggregate amount of payments under this part for physicians’ services as the estimated aggregate amount of the payments under this part for such services in 1991. “(C) Publication.—The Secretary shall cause to have published in the Federal Register, during the last 15 days of October of— “(i) 1991, the conversion factor (or factors) which will apply to physicians’ services for 1992, and the update (or updates) determined under paragraph (3) for 1992; and “(ii) each succeeding year, the update (or updates) determined under paragraph (3) for the following year. “(2) Recommendation of update.— “(A) In general.—Not later than April 15 of each year (beginning with 1991), the Secretary shall transmit to the Congress a report that includes a recommendation on the 103 STAT. 2175appropriate update (or updates) in the conversion factor (or factors) for all physicians’ services in the following year. The Secretary may recommend a uniform update or different updates for different categories or groups of services. In making the recommendation, the Secretary shall consider— “(i) the percentage change in the medicare economic index (described in the fourth sentence of section 1842(b)(3)) for that year; “(ii) the percentage by which actual expenditures for all physicians’ services (as defined in subsection (f)(5)(A)) under this part for the fiscal year ending in the year preceding the year in which such recommendation is made were greater or less than actual expenditures for all such physicians’ services in the fiscal year ending in the second preceding year; “(iii) the relationship between the percentage determined under clause (ii) for a fiscal year and the performance standard rate of increase (established under subsection (f)(2)) for that fiscal year; “(iv) changes in volume or intensity of services; “(v) access to services; and “(vi) other factors that may contribute to changes in volume or intensity of services or access to services. For purposes of making the comparison under clause (iii), the Secretary shall adjust the performance standard rate of increase for a fiscal year to reflect changes in the actual proportion of HMO enrollees (as defined in subsection (f)(5)(B)) in that fiscal year compared with such proportion for the previous fiscal year. “(B) Additional considerations.—In making recommendations under subparagraph (A), the Secretary may also consider— “(i) unexpected changes by physicians in response to the implementation of the fee schedule; “(ii) unexpected changes in outlay projections; “(iii) changes in the quality or appropriateness of care; and “(iv) any other relevant factors not measured in the resource-based payment methodology. “(C) Special rule for 1992 update.—In considering the update for 1992, the Secretary shall make a separate determination of the percentage and relationship described in clauses (ii) and (iii) of subparagraph (A) with respect to the category of surgical services (as defined by the Secretary pursuant to subsection (j)(1)). “(D) Explanation of update.—The Secretary shall include in each report under subparagraph (A)— “(i) the update recommended for each category of physicians’ services (established by the Secretary under subsection (j)(I)) and for each of the following groups of physicians’ services: nonsurgical services, visits, consultations, and emergency room services; “(ii) the rationale for the recommended update (or updates) for each category and group of services described in clause (i); and 103 STAT. 2176 “(iii) the data and analyses underlying the update (or updates) recommended. “(E) Computation of budget-neutral adjustment.— “(i) In general.—The Secretary shall include in the report made under subparagraph (A) in a year a statement of the percentage by which (I) the actual expenditures for physicians’ services under this part (during the fiscal year ending in the preceding year, as set forth in most recent annual report made pursuant to section 1841(b)(2)), exceeded, or was less than (II) the expenditures projected for the fiscal year under clause (ii). “(ii) Projected expenditures.—For purposes of clause (i), the expenditures projected under this clause for a fiscal year is the actual expenditures for physicians’ services made under this part in the second preceding fiscal year— “(I) increased by the weighted average percentage increase permitted under this part for physicians’ services in the preceding fiscal year; “(II) adjusted to reflect the percentage change in the average number of individuals enrolled under this part (who are not enrolled with a risk-sharing contract under section 1876) for the preceding fiscal year compared with the second preceding fiscal year; “(III) adjusted to reflect the average annual percentage growth in the volume and intensity of physicians’ services under this part for the five-fiscal-year period ending with the second preceding fiscal year; and “(IV) adjusted to reflect the percentage change in expenditures for physicians’ services under this part in the preceding fiscal year (compared with the second preceding fiscal year) which result from changes in law or regulations. “(F) Commission review.—The Physician Payment Review Commission shall review the report submitted under subparagraph (A) in a year and shall submit to the Congress, by not later than May 15 of the year, a report including its recommendations respecting the update (or updates) in the conversion factor (or factors) for the following year. “(3) Update.— “(A) Based on index.— “(i) In general.—Unless Congress otherwise provides, subject to subparagraph (B), for purposes of this section the update for a year is equal to the Secretary’s estimate of the percentage increase in the appropriate update index (as defined in clause (ii)) for the year. “(ii) Appropriate update index defined.—In clause (i), the term ‘appropriate update index’ means— “(I) for services for which prevailing charges in 1989 were subject to a limit under the fourth sentence of section 1842(b)(3), the medicare economic index (referred to in that sentence), and 103 STAT. 2177 “(II) for other services, such index (such as the consumer price index) that was applicable under this part in 1989 to increases in the payment amounts recognized under this part with respect to such services. “(B) Adjustment in update.— “(i) In general.—The update for a year provided under subparagraph (A) shall, subject to clause (ii), be increased or decreased by the same percentage by which (I) the percentage increase in the actual expenditures for physicians’ services (as defined in section (f)(5)(A)) in the second previous fiscal year over the third previous fiscal year, was less or greater, respectively, than (II) the performance standard rate of increase (established under subsection (f)) for such category of services for the second previous fiscal year. “(ii) Restrictions on adjustment.—The adjustment made under clause (i) for a year may not result in a decrease of— “(I) more than 2 percentage points for the update for 1992 or 1993, “(II) 2½ percentage points for the update for 1994 or 1995, and “(III) 3 percentage points for the update for any succeeding year. “(e) Geographic Adjustment Factors.— “(1) Establishment of geographic indices.— “(A) In general.—Subject to subparagraph (B), the Secretary shall establish— “(i) an index which reflects the relative costs of the mix of goods and services comprising practice expenses (other than malpractice expenses) in the different fee schedule areas compared to the national average of such costs, “(ii) an index which reflects the relative costs of malpractice expenses in the different fee schedule areas compared to the national average of such costs, and “(iii) an index which reflects ¼ of the difference between the relative value of physicians’ work effort in each of the different fee schedule areas and the national average of such work effort. “(B) Class-specific geographic cost-of-practice indices.—The Secretary may establish more than one index under subparagraph (A)(i) in the case of classes of physicians’ services, if, because of differences in the mix of goods and services comprising practice expenses for the different classes of services, the application of a single index under such clause to different classes of such services would be substantially inequitable. “(2) Computation of geographic adjustment factor.—For purposes of subsection (b)(1)(C), for all physicians’ services for each fee schedule area the Secretary shall establish a geographic adjustment factor equal to the sum of the geographic cost-of-practice adjustment factor (specified in paragraph (3)), the geographic malpractice adjustment factor (specified in para-103 STAT. 2178graph (4)), and the geographic physician work adjustment factor (specified in paragraph (5)) for the service and the area. “(3) Geographic cost-of-practice adjustment factor.— For purposes of paragraph (2), the ‘geographic cost-of-practice adjustment factor’, for a service for a fee schedule area, is the product of— “(A) the proportion of the total relative value for the service that reflects the relative value units for the practice expense component, and “(B) the geographic cost-of-practice index value for the area for the service, based on the index established under paragraph (1)(A)(i) or (1)(B) (as the case may be). “(4) Geographic malpractice adjustment factor.— For purposes of paragraph (2), the ‘geographic malpractice adjustment factor’, for a service for a fee schedule area, is the product of— “(A) the proportion of the total relative value for the service that reflects the relative value units for the malpractice component, and “(B) the geographic malpractice index value for the area, based on the index established under paragraph (1)(A)(ii). “(5) Geographic physician work adjustment factor.—For purposes of paragraph (2), the ‘geographic physician work adjustment factor, for a service for a fee schedule area, is the product of— “(A) the proportion of the total relative value for the service that reflects the relative value units for the work component, and “(B) the geographic physician work index value for the area, based on the index established under paragraph (1)(A)(iii). “(f) Medicare Volume Performance Standard Rates of Increase.— “(1) Process for establishing medicare volume performance standard rates of increase.— “(A) Secretary’s recommendation.—By not later than April 15 of each year (beginning with 1990), the Secretary shall transmit to the Congress a recommendation on performance standard rates of increase for all physicians’ services and for each category of such services for the fiscal year beginning in such year. In making the recommendation, the Secretary shall confer with organizations representing physicians and shall consider— “(i) inflation, “(ii) changes in numbers of enrollees (other than HMO enrollees) under this part, “(iii) changes in the age composition of enrollees (other than HMO enrollees) under this part, “(iv) changes in technology, “(v) evidence of inappropriate utilization of services, “(vi) evidence of lack of access to necessary physicians’ services, and “(vii) such other factors as the Secretary considers appropriate. “(B) Commission review.—The Physician Payment Review Commission shall review the recommendation transmitted during a year under subparagraph (A) and shall make its recommendation to Congress, by not later 103 STAT. 2179than May 15 of the year, respecting the performance standard rates of increase for the fiscal year beginning in that year. “(C) Publication of performance standard rates of increase.—The Secretary shall cause to have published in the Federal Register, in the last 15 days of October of each year (beginning with 1990), the performance standard rates of increase for all physicians’ services and for each category of physicians’ services for the fiscal year beginning in that year. The Secretary shall cause to nave published in the Federal Register, by not later than January 1, 1990, the performance standard rate of increase under subparagraph (D) for fiscal year 1990. “(D) Performance standard rate of increase for fiscal year 1990.—The performance standard rate of increase for fiscal year 1990 is equal to the sum of— “(i) the Secretary’s estimate of the weighted average percentage increase in the reasonable charges for physicians’ services (as defined in subsection (f)(5)(A)) under this part for calendar years included in fiscal year 1990, “(ii) the Secretary’s estimate of the percentage increase or decrease in the average number of individuals enrolled under this part (other than HMO enrollees) from fiscal year 1989 to fiscal year 1990, “(iii) the Secretary’s estimate of the average annual percentage growth in volume and intensity of physicians’ services under this part for the 5-fiscal-year period ending with fiscal year 1989 (based upon information contained in the most recent annual report made pursuant to section 1841(b)(2)), and “(iv) the Secretary’s estimate of the percentage increase or decrease in expenditures for physicians’ services (as defined in subsection (f)(5)(A)) in fiscal year 1990 (compared with fiscal year 1989) which will result from changes in law or regulations and which is not taken into account in the percentage increase described in clause (i), reduced by ½ percent. “(2) Specification of performance standard rates of increase for subsequent fiscal years.— “(A) In general.—Unless Congress otherwise provides, subject to paragraph (4), each performance standard rate of increase for a fiscal year (beginning with fiscal year 1991) shall be equal to the sum of— “(i) the Secretary’s estimate of the weighted average percentage increase in the fees for physicians’ services (as defined in subsection (f)(5)(A)) under this part for calendar years included in the fiscal year involved, “(ii) the Secretary’s estimate of the percentage increase or decrease 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) the Secretary’s estimate of the average annual percentage growth in volume and intensity of physicians’ services under this part for the 5-fiscal-year 103 STAT. 2180period 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) the Secretary’s estimate of the percentage increase or decrease in expenditures for physicians’ services (as defined in subsection (f)(5)(A)) in the fiscal year (compared with the preceding fiscal year) which will result from changes in law or regulations and which is not taken into account in the percentage increase described in clause (i), reduced by the performance standard factor (specified in subparagraph (B)). In clause (i), the term ‘fees’ means, with respect to 1991, reasonable charges and, with respect to any succeeding year, fee schedule amounts. “(B) Performance standard factor.—For purposes of subparagraph (A), the performance standard factor— “(i) for 1991 is 1 percentage point, “(ii) for 1992 is 1 ½ percentage points, and “(iii) for each succeeding year is 2 percentage points. “(3) Quarterly reporting.—The Secretary shall establish procedures for providing, on a quarterly basis to the Physician Payment Review Commission, the Congressional Budget Office, the Congressional Research Service, the Committees on Ways and Means and Energy and Commerce of the House of Representatives, and the Committee on Finance of the Senate, information on compliance with performance standard rates of increase established under this subsection. “(4) Separate group-specific performance standard rates of increase.— “(A) Implementation of plan.—Subject to paragraph (B), the Secretary shall, after completion of the study required under section 6102(e)(3) of the Omnibus Budget Reconciliation Act of 1989, but not before October 1, 1991, implement a plan under which qualified physician groups could elect annually separate performance standard rates of increase other than the performance standard rate of increase established for the year under paragraph (2) for such physicians. The Secretary shall develop criteria to determine which physician groups are eligible to elect to have applied to such groups separate performance standard rates of increase and the methods by which such group-specific performance standard rates of increase would be accomplished. The Secretary shall report to the Congress on the criteria and methods by April 15, 1991. The Physician Payment Review Commission shall review and comment on such recommendations by May 15, 1991. Before implementing group-specific performance standard rates of increase, the Secretary shall provide for notice and comment in the Federal Register and consult with organizations representing physicians. “(B) Approval.—The Secretary may not implement the plan described in subparagraph (A), unless Congress specifically approves the plan. “(5) Definitions.— In this subsection: “(A) Services included in physicians’ services.—The term ‘physicians’ services’ includes other items and services (such as clinical diagnostic laboratory tests and radiology 103 STAT. 2181services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician’s office, but does not include services furnished to an HMO enrollee under a risk-sharing contract under section 1876. “(B) HMO enrollee.—The term ‘HMO enrollee’ means, with respect to a fiscal year, an individual enrolled under this part who is enrolled with an entity under a risk-sharing contract under section 1876 in the fiscal year. “(g) Limitation on Beneficiary Liability.— “(1) Limitation on actual charges for unassigned claims.—If a nonparticipating physician knowingly and willfully bills on a repeated basis for physicians’ services (furnished with respect to an individual enrolled under this part on or after January 1, 1991) an actual charge in excess of the limiting charge described in paragraph (2) and for which payment is not made on an assignment-related basis under this part, the Secretary may apply sanctions against such physician in accordance with section 1842(j)(2). “(2) Limiting charge defined.— “(A) For 1991.—For physicians’ services of a physician furnished during 1991, the ‘limiting charge’ shall be the same percentage (or, if less, 25 percent) above the recognized payment amount under this part with respect to the physician (as a nonparticipating physician) as the percentage by which— “(i) the maximum allowable actual charge (as determined under section 1842(j)(1)(C) as of December 31, 1990, or, if less, the maximum actual charge otherwise permitted for the service under this part as of such date) for the service of the physician, exceeds “(ii) the recognized payment amount for the service of the physician (as a nonparticipating physician) as of such date. “(B) For 1992.—For physicians’ services furnished during 1992, the ‘limiting charge’ shall be the same percentage (or, if less, 20 percent) above the recognized payment amount under this part for nonparticipating physicians as the percentage by which— “(i) the limiting charge (as determined under subparagraph (A) as of December 31, 1991) for the service, exceeds “(ii) the recognized payment amount for the service for nonparticipating physicians as of such date. “(C) After 1992.—For physicians’ services furnished in a year after 1992, the ‘limiting charge’ shall be 115 percent of the recognized payment amount under this part for nonparticipating physicians. “(D) Recognized payment amount.—In this section, the term ‘recognized payment amount’ means, for services furnished on or after January 1, 1992, the fee schedule amount determined under subsection (a), and, for services furnished during 1991, the applicable percentage (as defined in section 1842(b)(4)(A)(iv)) of the prevailing charge (or fee schedule amount) for nonparticipating physicians for that year. “(3) Limitation on charges for medicare beneficiaries eligible for medicaid benefits.— 103 STAT. 2182 “(A) In general.—Payment for physicians’ services furnished on or after April 1, 1990, to an individual who is enrolled under this part and eligible for any medical assistance (including as a qualified medicare beneficiary, as defined in section 1905(p)(1)) with respect to such services under a State plan approved under title XIX may only be made on an assignment-related basis. “(B) Penalty.—A person may not bill for physicians’ services subject to subparagraph (A) other than on an assignment-related basis. If a person knowingly and willfully bills for physicians’ services in violation of the previous sentence, the Secretary may apply sanctions against the person in accordance with section 1842(j)(2). “(4) Physician submission of claims.— “(A) In general.—For services furnished on or after September 1, 1990, within 1 year after the date of providing a service for which payment is made under this part on a reasonable charge or fee schedule basis, a physician, supplier, or other person (or an employer or facility in the cases described in section 1842(b)(6)(A))— “(i) shall complete and submit a claim for such service on a standard claim form specified by the Secretary to the carrier on behalf of a beneficiary, and “(ii) may not impose any charge relating to completing and submitting such a form. “(B) Penalty.—(i) With respect to an assigned claim wherever a physician, provider, supplier or other person (or an employer or facility in the cases described m section 1842(b)(6)(A)) fails to submit such a claim as required in subparagraph (A), the Secretary shall reduce by 10 percent the amount that would otherwise be paid for such claim under this part. “(ii) If a physician, supplier, or other person (or an employer or facility in the cases described in section 1842(b)(6)(A)) fails to submit a claim required to be submitted under subparagraph (A) or imposes a charge in violation of such subparagraph, the Secretary shall apply the sanction with respect to such a violation in the same manner as a sanction may be imposed under section 1842(p)(3) for a violation of section 1842(p)(1). “(5) Electronic billing; direct deposit.—The Secretary shall encourage and develop a system providing for expedited payment for claims submitted electronically. The Secretary shall also encourage and provide incentives allowing for direct deposit as payments for services furnished by participating physicians. The Secretary shall provide physicians with such technical information as necessary to enable such physicians to submit claims electronically. The Secretary shall submit a plan to Congress on this paragraph by May 1, 1990. “(6) Monitoring of charges.— “(A) In general.—The Secretary shall monitor— “(i) the actual charges of nonparticipating physicians for physicians’ services furnished on or after January 1, 1991, to individuals enrolled under this part, and “(ii) changes (by specialty, type of service, and geographic area) in (I) the proportion of expenditures for physicians’ services provided under this part by partici-103 STAT. 2183pating physicians, (II) the proportion of expenditures for such services for which payment is made under this part on an assignment-related basis, and (III) the amounts charged above the recognized payment amounts under this part. “(B) Report.—The Secretary shall, by not later than April 15 of each year (beginning in 1992), report to the Congress regarding the changes described in subparagraph (A)(ii). “(C) Plan.—If the Secretary finds that there has been a significant decrease in the proportions described in subclauses (I) and (II) of subparagraph (A)(ii) or an increase in the amounts described in subclause (III) of that subparagraph, the Secretary shall develop a plan to address such a problem and transmit to Congress recommendations regarding the plan. The Physician Payment Review Commission shall review the Secretary’s plan and recommendations and transmit to Congress its comments regarding such plan and recommendations. “(7) Monitoring of utilization and access.— “(A) In general.—The Secretary shall monitor— “(i) changes in the utilization of and access to services furnished under this part within geographic, population, and service related categories, “(ii) possible sources of inappropriate utilization of services furnished under this part which contribute to the overall level of expenditures under this part, and “(iii) factors underlying these changes and their interrelationships. “(B) Report.—The Secretary shall by not later than April 15, of each year (beginning with 1991) report to the Congress on the changes described in subparagraph (A)(i) and shall include in the report an examination of the factors (including factors relating to different services and specific categories and groups of services and geographic and demographic variations in utilization) which may contribute to such changes. “(C) Recommendations.—The Secretary shall include in each annual report under subparagraph (B) recommendations— “(i) addressing any identified patterns of inappropriate utilization, “(ii) on utilization review, “(iii) on physician education or patient education, “(iv) addressing any problems of beneficiary access to care made evident by the monitoring process, and “(v) on such other matters as the Secretary deems appropriate. The Physician Payment Review Commission shall comment on the Secretary’s recommendations and in developing its comments, the Commission shall convene and consult a panel of physician experts to evaluate the implications of medical utilization patterns for the quality of and access to patient care. “(h) Sending Information to Physicians.—Before the beginning of each year (beginning with 1992), the Secretary shall send to each physician furnishing physicians’ services under this part, for serv-103 STAT. 2184ices commonly performed by the physician, information on fee schedule amounts that apply for the year in the fee schedule area for participating and non-participating physicians, and the maximum amount that may be charged consistent with subsection (g)(2). Such information shall be transmitted in conjunction with notices to physicians under section 1842(h) (relating to the participating physician program) for a year. “(i) Miscellaneous Provisions.— “(1) Restriction on administrative and judicial review.— There shall be no administrative or judicial review under section 1869 or otherwise of— “(A) the determination of the historical payment basis (as defined in subsection (a)(2)(C)(i)), “(B) the determination of relative values and relative value units under subsection (c), “(C) the determination of conversion factors under subsection (d), “(D) the establishment of geographic adjustment factors under subsection (e), and “(E) the establishment of the system for the coding of physicians’ services under this section. “(j) Definitions.—In this section: “(1) Category.—The term ‘category’ means, with respect to physicians’ services, surgical services, and all physicians’ services other than surgical services, and such other category or categories of physicians’ services as the Secretary, from time to time, defines in regulation. The Secretary shall define surgical services and publish such definition in the Federal Register no later than May 1, 1990, after consultation with organizations representing physicians. “(2) Fee schedule area.—The term ‘fee schedule area’ means a locality used under section 1842(b) for purposes of computing payment amounts for physicians’ services. “(3) Physicians’ services.—The term ‘physicians’ services’ includes items and services described in paragraphs (1), (2)(A), (2)(D), (3), and (4) of section 1861(s) (other than clinical diagnostic laboratory tests and such other items and services as the Secretary may specify). “(4) Practice expenses.—The term ‘practice expenses’ includes all expenses for furnishing physicians’ services, excluding malpractice expenses, physician compensation, and other physician fringe benefits.”. (b) Requirements for Carriers to Profile Physicians.—Section 1842(b)(3) of such Act (42 U.S.C. 1395u(b)(3)) is amended— (1) by striking “and” at the end of subparagraph (J), (2) by inserting “and” at the end of subparagraph (K), and (3) by inserting after subparagraph (K) the following new subparagraph: “(L) will monitor and profile physicians’ billing patterns within each area or locality and provide comparative data to physicians whose utilization patterns vary significantly from other physicians in the same payment area or locality;”. (c) Rural and Inner-City Access Adjustments.— (1) Adjustments.— Section 1833(m) of such Act (42 U.S.C. 1395l(m)) is amended— (A) by striking “class 1 or class 2”, and (B) by striking “5 percent” and inserting “10 percent” 103 STAT. 2185 (2) Effective date.—The amendments made by paragraph (1) shall apply to services furnished on or after January 1, 1991. (d) Studies.— (1) GAO study of alternative payment methodology for malpractice component.— The Comptroller General shall provide for— (A) a study of alternative ways of paying, under section 1848 of the Social Security Act, for the malpractice component for physicians’ services, in a manner that would assure, to the extent practicable, payment for medicare’s share of malpractice insurance premiums, and (B) a study to examine alternative resolution procedures for malpractice claims respecting professional services furnished under the medicare program. The examination under subparagraph (B) shall include review of the feasibility of establishing procedures that involve no-fault payment or that involve mandatory arbitration. By not later than April 1, 1991, the Comptroller General shall submit a report to Congress on the results of the studies. (2) Study of payments to risk-contracting plans.—The Secretary of Health and Human Services (in this subsection referred to as the “Secretary”) shall conduct a study of how payments under section 1848 of the Social Security Act may affect payments to eligible organizations with risk-sharing contracts under section 1876 of such Act. By not later than April 1, 1990, the Secretary shall submit a report to Congress on such study and shall include in the report such recommendations for such changes in the methodology for payment under such risk-sharing contracts as the Secretary deems appropriate. (3) Study of volume performance standard rates of increase by geography, specialty, and type of service.— The Secretary shall conduct a study of the feasibility of establishing, under section 1848(f) of the Social Security Act, separate performance standard rates of increase for services furnished by or within each of the following (including combinations of the following): (A) Geographic area (such as a region, State, or other area). (B) Specialty or group of specialties of physicians. (C) Type of services (such as primary care, services of hospital-based physicians, and other inpatient services). Such study shall also include the scope of services included within, or excluded from, the rate of increase in expenditure system. By not later than July 1, 1990, the Secretary shall submit a report to Congress on such study and shall include in the report such recommendations respecting the feasibility of establishing separate performance standard rates of increase in expenditures as the Secretary deems appropriate. (4) HHS visit code modification study.—The Secretary shall conduct a study of the desirability of including time as a factor in establishing visit codes. By not later than July 1, 1991, the Secretary shall consult with the Physician Payment Review Commission, and submit a report to Congress on such study and shall include in the report recommendations respecting the desirability of modifying the number of visit codes, whether greater coding uniformity would result from including time in visit codes when compared with clarifying the clinical descrip-103 STAT. 2186tions of existing codes, and the ability to audit physician time accurately. (5) Commission study of payment for practice expenses.— The Physician Payment Review Commission shall conduct a study of— (A) the extent to which practice costs and malpractice costs vary by geographic locality (including region. State, Metropolitan Statistical Areas, or other areas and by specialty), (B) the extent to which available geographic practice-cost indices accurately reflect practice costs and malpractice costs in rural areas, (C) which geographic units would be most appropriate to use in measuring and adjusting practice costs and malpractice costs, (D) appropriate methods for allocating malpractice expenses to particular procedures which could be incorporated into the determination of relative values for particular procedures using a consensus panel and other appropriate methodologies, (E) the effect of alternative methods of allocating malpractice expenses on medicare expenditures by specialty, type of service, and by geographic area, and (F) the special circumstances of rural independent laboratories in determining the geographic cost-of-practice index. By not later than July 1, 1991, the Commission shall submit a report to the Committees on Ways and Means and Energy and Commerce of the House of Representatives and the Committee on Finance of the Senate on the study and shall include in the report such recommendations as it deems appropriate. (6) Commission study of geographic payment areas.—The Physician Payment Review Commission shall conduct a study of the feasibility and desirability of using Metropolitan Statistical Areas or other payment areas for purposes of payment for physicians’ services under part B of title XVIII of the Social Security Act. By not later than July 1, 1991, the Commission shall submit a report to Congress on such study and shall include in the report recommendations on the desirability of retaining current carrier-wide localities, changing to a system of statewide localities, or adopting Metropolitan Statistical Areas or other payment areas for purposes of payment under such part B. (7) Commission study of payment for non-physician providers of medicare services.—The Physician Payment Review Commission shall conduct a study of the implications of a resource-based fee schedule for physicians’ services for non-physician practitioners, such as physician assistants, clinical psychologists, nurse midwives, and other health practitioners whose services can be billed under the medicare program on a fee-for-service basis. The study shall address (A) what the proper level of payment should be for these practitioners, (B) whether or not adjustments to their payments should be subject to the medicare volume performance standard process, and (C) what update to use for services outside the medicare volume performance standard process. The Commission shall submit a report to Congress on such study by not later than July 1, 1991. 103 STAT. 2187 (8) Commission study of physician fees under medicaid.—The Physician Payment Review Commission shall conduct a study on physician fees under State medicaid programs established under title XIX of the Social Security Act. The Commission shall specifically examine in such study the adequacy of physician reimbursement under such programs, physician participation in such programs, and access to care by medicaid beneficiaries. By no later than July 1, 1991, the Commission shall submit a report to Congress on such study and shall include such recommendations as the Commission deems appropriate. (9) GAO study on physician anti-trust issues.—The Comptroller General shall conduct a study of the effect of anti-trust laws on the ability of physicians to act in groups to educate and discipline peers of such physicians in order to reduce and eliminate ineffective practice patterns and inappropriate utilization. The study shall further address anti-trust issues as they relate to the adoption of practice guidelines by third-party payers and the role that practice guidelines might play as a defense in malpractice cases. By no later than July 1, 1991, the Comptroller General shall submit a report to Congress on such study and shall make such recommendations as the Comptroller General deems appropriate. (e) Miscellaneous Conforming Amendments.— (1) Reference to new payment rules.— Section 1833(a)(1) of the Social Security Act (42 U.S.C. 1395l(a)(1)) is amended— (A) by striking “and” before clause (M), and (B) by inserting before the semicolon the following new clause: “and (N) with respect to expenses incurred for physicians’ services (as defined in section 1848(j)(3)), the amounts paid shall be 80 percent of the payment basis determined under section 1848(a)(1)”. (2) Changing reference to maximum allowable actual charges.—Section 1842(b)(3)(G) of such Act (42 U.S.C. 1395u(b)(3)(G)) is amended by striking “maximum allowable actual charges (established under subsection (j)(1)(C))” and inserting “limiting charges established under subsection (j)(1)(C)”. (3) Differential for participating physicians.—Effective for physicians’ services furnished on or after January 1, 1992, the first sentence of section 1842(b)(4)(A)(iv) of such Act (42 U.S.C. 1395u(b)(4)(A)(iv)) is amended by inserting “and before January 1, 1992,” after “January 1, 1987,”. (4) Payment for physician assistants.—Section 1842(b)(12)(A)(ii)(II) of such Act (42 U.S.C. 1395u(b)(12)(A)(ii)(II)) is amended by inserting “(or, for services furnished on or after January 1, 1992, the fee schedule amount specified in section 1848, as the case may be)” after “prevailing charge rate for such services”. (5) Payment for certified registered nurse anesthetists.—Section 1833(a)(1)(H) of such Act (42 U.S.C. 1395l(a)(1)(H)) is amended by inserting “(or, for services furnished on or after January 1, 1992, the fee schedule amount provided under section 1848, as the case may be)” after “prevailing charge that would be recognized”. 103 STAT. 2188 (6) Payment for radiologist services.—(A) Section 1833(a)(1)(J) of such Act (42 U.S.C. 1395l(a)(1)(J)) is amended by inserting “subject to section 1848,” before “the amounts”. (B) Section 4049(b)(2) of the Omnibus Budget Reconciliation Act of 1987 is amended by striking “, and until” and all that follows through “Social Security Act”. (7) Payment for nurse midwives.—Section 1833(a)(1)(K) of the Social Security Act (42 U.S.C. 1395l(a)(1)(K)) is amended by inserting “, or, for services furnished on or after January 1, 1992, 65 percent of the fee schedule amount provided under section 1848 for the same service performed by a physician” after “for the same service performed by a physician”. (8) Physicians’ services for individuals with end stage renal disease.—Section 1881(b)(3)(A) of such Act (42 U.S.C. 1395rr(b)(3)(A)) is amended by inserting “or, for services furnished on or after January 1, 1992, on the basis described in section 1848” after “comparable services”. (9) Extension of maximum allowable actual charge limits.—Subparagraphs (B)(ii) and (D)(v) of section 1842(j)(1) of such Act (42 U.S.C. 1395u(j)(1)) are each amended by striking all that follows “after” the first place it appears and inserting “December 31, 1990.”. (10) Treatment of certain eye examination visits as primary care services.—In applying section 1842(i)(4) of the Social Security Act for services furnished on or after January 1, 1990, intermediate and comprehensive office visits for eye examinations and treatments (codes 92002 and 92004) shall be considered to be primary care services. (11) Distribution of model fee schedule.—By September 1, 1990, the Secretary shall develop a Model Fee Schedule, using the methodology set forth in section 1848 of the Social Security Act. The Model Fee Schedule shall include as many services as the Secretary concludes can be assigned valid relative values. The Secretary shall submit the Model Fee Schedule to the appropriate committees of Congress and make it generally available to the public. (f) Payment for Pathology Services.— (1) Fee schedule.—Section 1834 of the Social Security Act (42 U.S.C. 1395m) is amended by adding at the end the following new subsection: “(f) Fee Schedule for Physician Pathology Services.— “(1) Application.—Subject to section 1848, the Secretary shall provide for application of a fee schedule with respect to physician pathology services. Subject to paragraph (2), such fee schedule shall be based on relative values developed by the Secretary, in consultation with organizations representing physicians performing such services. Such fee schedule shall be designed so as to result in expenditures under this part for services covered under the schedule in an amount that would not exceed the amount of such expenditures which would otherwise occur. In developing such fee schedule the Secretary shall take into account the special circumstances of rural independent laboratories. “(2) Geographic area adjustment.—The Secretary shall provide for a geographic area adjustment of the conversion factors in a manner comparable to the geographic area adjustment applied to physicians’ services under section 1848 during the year in which the services are furnished.”. 103 STAT. 2189 (2) Payment on basis of fee schedule.— Section 1833(a)(1)(J) of such Act (42 U.S.C. 1395l(a)(1)( J)) is amended— (A) by inserting “or physician pathology services” after “1834(b)(6))”, and (B) by inserting “or section 1834(f), respectively” after “1834(b)”. (3) Effective date.—The amendments made by this subsection shall apply to services furnished on or after January 1, 1991. (g) Effective Date.—Except as otherwise provided in this section, this section, and the amendments made by this section, shall take effect on the date of the enactment of this Act.