
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC1395nn]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
        SUBCHAPTER XVIII--HEALTH INSURANCE FOR AGED AND DISABLED
 
                    Part D--Miscellaneous Provisions
 
Sec. 1395nn. Limitation on certain physician referrals


(a) Prohibition of certain referrals

                           (1) In general

        Except as provided in subsection (b) of this section, if a 
    physician (or an immediate family member of such physician) has a 
    financial relationship with an entity specified in paragraph (2), 
    then--
            (A) the physician may not make a referral to the entity for 
        the furnishing of designated health services for which payment 
        otherwise may be made under this subchapter, and
            (B) the entity may not present or cause to be presented a 
        claim under this subchapter or bill to any individual, third 
        party payor, or other entity for designated health services 
        furnished pursuant to a referral prohibited under subparagraph 
        (A).

                (2) Financial relationship specified

        For purposes of this section, a financial relationship of a 
    physician (or an immediate family member of such physician) with an 
    entity specified in this paragraph is--
            (A) except as provided in subsections (c) and (d) of this 
        section, an ownership or investment interest in the entity, or
            (B) except as provided in subsection (e) of this section, a 
        compensation arrangement (as defined in subsection (h)(1) of 
        this section) between the physician (or an immediate family 
        member of such physician) and the entity.

    An ownership or investment interest described in subparagraph (A) 
    may be through equity, debt, or other means and includes an interest 
    in an entity that holds an ownership or investment interest in any 
    entity providing the designated health service.

(b) General exceptions to both ownership and compensation arrangement 
        prohibitions

    Subsection (a)(1) of this section shall not apply in the following 
cases:

                      (1) Physicians' services

        In the case of physicians' services (as defined in section 
    1395x(q) of this title) provided personally by (or under the 
    personal supervision of) another physician in the same group 
    practice (as defined in subsection (h)(4) of this section) as the 
    referring physician.

                  (2) In-office ancillary services

        In the case of services (other than durable medical equipment 
    (excluding infusion pumps) and parenteral and enteral nutrients, 
    equipment, and supplies)--
            (A) that are furnished--
                (i) personally by the referring physician, personally by 
            a physician who is a member of the same group practice as 
            the referring physician, or personally by individuals who 
            are directly supervised by the physician or by another 
            physician in the group practice, and
                (ii)(I) in a building in which the referring physician 
            (or another physician who is a member of the same group 
            practice) furnishes physicians' services unrelated to the 
            furnishing of designated health services, or
                (II) in the case of a referring physician who is a 
            member of a group practice, in another building which is 
            used by the group practice--
                    (aa) for the provision of some or all of the group's 
                clinical laboratory services, or
                    (bb) for the centralized provision of the group's 
                designated health services (other than clinical 
                laboratory services),

          unless the Secretary determines other terms and conditions 
            under which the provision of such services does not present 
            a risk of program or patient abuse, and

            (B) that are billed by the physician performing or 
        supervising the services, by a group practice of which such 
        physician is a member under a billing number assigned to the 
        group practice, or by an entity that is wholly owned by such 
        physician or such group practice,

    if the ownership or investment interest in such services meets such 
    other requirements as the Secretary may impose by regulation as 
    needed to protect against program or patient abuse.

                          (3) Prepaid plans

        In the case of services furnished by an organization--
            (A) with a contract under section 1395mm of this title to an 
        individual enrolled with the organization,
            (B) described in section 1395l(a)(1)(A) of this title to an 
        individual enrolled with the organization,
            (C) receiving payments on a prepaid basis, under a 
        demonstration project under section 1395b-1(a) of this title or 
        under section 222(a) of the Social Security Amendments of 1972, 
        to an individual enrolled with the organization,
            (D) that is a qualified health maintenance organization 
        (within the meaning of section 300e-9(d) \1\ of this title) to 
        an individual enrolled with the organization, or
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    \1\ See References in Text note below.
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            (E) that is a Medicare+Choice organization under part C of 
        this subchapter that is offering a coordinated care plan 
        described in section 1395w-21(a)(2)(A) of this title to an 
        individual enrolled with the organization.

                  (4) Other permissible exceptions

        In the case of any other financial relationship which the 
    Secretary determines, and specifies in regulations, does not pose a 
    risk of program or patient abuse.

(c) General exception related only to ownership or investment 
        prohibition for ownership in publicly traded securities and 
        mutual funds

    Ownership of the following shall not be considered to be an 
ownership or investment interest described in subsection (a)(2)(A) of 
this section:
        (1) Ownership of investment securities (including shares or 
    bonds, debentures, notes, or other debt instruments) which may be 
    purchased on terms generally available to the public and which are--
            (A)(i) securities listed on the New York Stock Exchange, the 
        American Stock Exchange, or any regional exchange in which 
        quotations are published on a daily basis, or foreign securities 
        listed on a recognized foreign, national, or regional exchange 
        in which quotations are published on a daily basis, or
            (ii) traded under an automated interdealer quotation system 
        operated by the National Association of Securities Dealers, and
            (B) in a corporation that had, at the end of the 
        corporation's most recent fiscal year, or on average during the 
        previous 3 fiscal years, stockholder equity exceeding 
        $75,000,000.

        (2) Ownership of shares in a regulated investment company as 
    defined in section 851(a) of the Internal Revenue Code of 1986, if 
    such company had, at the end of the company's most recent fiscal 
    year, or on average during the previous 3 fiscal years, total assets 
    exceeding $75,000,000.

(d) Additional exceptions related only to ownership or investment 
        prohibition

    The following, if not otherwise excepted under subsection (b) of 
this section, shall not be considered to be an ownership or investment 
interest described in subsection (a)(2)(A) of this section:

                    (1) Hospitals in Puerto Rico

        In the case of designated health services provided by a hospital 
    located in Puerto Rico.

                         (2) Rural provider

        In the case of designated health services furnished in a rural 
    area (as defined in section 1395ww(d)(2)(D) of this title) by an 
    entity, if substantially all of the designated health services 
    furnished by such entity are furnished to individuals residing in 
    such a rural area.

                       (3) Hospital ownership

        In the case of designated health services provided by a hospital 
    (other than a hospital described in paragraph (1)) if--
            (A) the referring physician is authorized to perform 
        services at the hospital, and
            (B) the ownership or investment interest is in the hospital 
        itself (and not merely in a subdivision of the hospital).

(e) Exceptions relating to other compensation arrangements

    The following shall not be considered to be a compensation 
arrangement described in subsection (a)(2)(B) of this section:

           (1) Rental of office space; rental of equipment

        (A) Office space

            Payments made by a lessee to a lessor for the use of 
        premises if--
                (i) the lease is set out in writing, signed by the 
            parties, and specifies the premises covered by the lease,
                (ii) the space rented or leased does not exceed that 
            which is reasonable and necessary for the legitimate 
            business purposes of the lease or rental and is used 
            exclusively by the lessee when being used by the lessee, 
            except that the lessee may make payments for the use of 
            space consisting of common areas if such payments do not 
            exceed the lessee's pro rata share of expenses for such 
            space based upon the ratio of the space used exclusively by 
            the lessee to the total amount of space (other than common 
            areas) occupied by all persons using such common areas,
                (iii) the lease provides for a term of rental or lease 
            for at least 1 year,
                (iv) the rental charges over the term of the lease are 
            set in advance, are consistent with fair market value, and 
            are not determined in a manner that takes into account the 
            volume or value of any referrals or other business generated 
            between the parties,
                (v) the lease would be commercially reasonable even if 
            no referrals were made between the parties, and
                (vi) the lease meets such other requirements as the 
            Secretary may impose by regulation as needed to protect 
            against program or patient abuse.

        (B) Equipment

            Payments made by a lessee of equipment to the lessor of the 
        equipment for the use of the equipment if--
                (i) the lease is set out in writing, signed by the 
            parties, and specifies the equipment covered by the lease,
                (ii) the equipment rented or leased does not exceed that 
            which is reasonable and necessary for the legitimate 
            business purposes of the lease or rental and is used 
            exclusively by the lessee when being used by the lessee,
                (iii) the lease provides for a term of rental or lease 
            of at least 1 year,
                (iv) the rental charges over the term of the lease are 
            set in advance, are consistent with fair market value, and 
            are not determined in a manner that takes into account the 
            volume or value of any referrals or other business generated 
            between the parties,
                (v) the lease would be commercially reasonable even if 
            no referrals were made between the parties, and
                (vi) the lease meets such other requirements as the 
            Secretary may impose by regulation as needed to protect 
            against program or patient abuse.

               (2) Bona fide employment relationships

        Any amount paid by an employer to a physician (or an immediate 
    family member of such physician) who has a bona fide employment 
    relationship with the employer for the provision of services if--
            (A) the employment is for identifiable services,
            (B) the amount of the remuneration under the employment--
                (i) is consistent with the fair market value of the 
            services, and
                (ii) is not determined in a manner that takes into 
            account (directly or indirectly) the volume or value of any 
            referrals by the referring physician,

            (C) the remuneration is provided pursuant to an agreement 
        which would be commercially reasonable even if no referrals were 
        made to the employer, and
            (D) the employment meets such other requirements as the 
        Secretary may impose by regulation as needed to protect against 
        program or patient abuse.

    Subparagraph (B)(ii) shall not prohibit the payment of remuneration 
    in the form of a productivity bonus based on services performed 
    personally by the physician (or an immediate family member of such 
    physician).

                  (3) Personal service arrangements

        (A) In general

            Remuneration from an entity under an arrangement (including 
        remuneration for specific physicians' services furnished to a 
        nonprofit blood center) if--
                (i) the arrangement is set out in writing, signed by the 
            parties, and specifies the services covered by the 
            arrangement,
                (ii) the arrangement covers all of the services to be 
            provided by the physician (or an immediate family member of 
            such physician) to the entity,
                (iii) the aggregate services contracted for do not 
            exceed those that are reasonable and necessary for the 
            legitimate business purposes of the arrangement,
                (iv) the term of the arrangement is for at least 1 year,
                (v) the compensation to be paid over the term of the 
            arrangement is set in advance, does not exceed fair market 
            value, and except in the case of a physician incentive plan 
            described in subparagraph (B), is not determined in a manner 
            that takes into account the volume or value of any referrals 
            or other business generated between the parties,
                (vi) the services to be performed under the arrangement 
            do not involve the counseling or promotion or a business 
            arrangement or other activity that violates any State or 
            Federal law, and
                (vii) the arrangement meets such other requirements as 
            the Secretary may impose by regulation as needed to protect 
            against program or patient abuse.

        (B) Physician incentive plan exception

            (i) In general

                In the case of a physician incentive plan (as defined in 
            clause (ii)) between a physician and an entity, the 
            compensation may be determined in a manner (through a 
            withhold, capitation, bonus, or otherwise) that takes into 
            account directly or indirectly the volume or value of any 
            referrals or other business generated between the parties, 
            if the plan meets the following requirements:
                    (I) No specific payment is made directly or 
                indirectly under the plan to a physician or a physician 
                group as an inducement to reduce or limit medically 
                necessary services provided with respect to a specific 
                individual enrolled with the entity.
                    (II) In the case of a plan that places a physician 
                or a physician group at substantial financial risk as 
                determined by the Secretary pursuant to section 
                1395mm(i)(8)(A)(ii) of this title, the plan complies 
                with any requirements the Secretary may impose pursuant 
                to such section.
                    (III) Upon request by the Secretary, the entity 
                provides the Secretary with access to descriptive 
                information regarding the plan, in order to permit the 
                Secretary to determine whether the plan is in compliance 
                with the requirements of this clause.
            (ii) ``Physician incentive plan'' defined

                For purposes of this subparagraph, the term ``physician 
            incentive plan'' means any compensation arrangement between 
            an entity and a physician or physician group that may 
            directly or indirectly have the effect of reducing or 
            limiting services provided with respect to individuals 
            enrolled with the entity.

     (4) Remuneration unrelated to the provision of designated 
                               health services

        In the case of remuneration which is provided by a hospital to a 
    physician if such remuneration does not relate to the provision of 
    designated health services.

                      (5) Physician recruitment

        In the case of remuneration which is provided by a hospital to a 
    physician to induce the physician to relocate to the geographic area 
    served by the hospital in order to be a member of the medical staff 
    of the hospital, if--
            (A) the physician is not required to refer patients to the 
        hospital,
            (B) the amount of the remuneration under the arrangement is 
        not determined in a manner that takes into account (directly or 
        indirectly) the volume or value of any referrals by the 
        referring physician, and
            (C) the arrangement meets such other requirements as the 
        Secretary may impose by regulation as needed to protect against 
        program or patient abuse.

                      (6) Isolated transactions

        In the case of an isolated financial transaction, such as a one-
    time sale of property or practice, if--
            (A) the requirements described in subparagraphs (B) and (C) 
        of paragraph (2) are met with respect to the entity in the same 
        manner as they apply to an employer, and
            (B) the transaction meets such other requirements as the 
        Secretary may impose by regulation as needed to protect against 
        program or patient abuse.

       (7) Certain group practice arrangements with a hospital

        (A) \2\ In general
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    \2\ So in original. No subpar. (B) has been enacted.
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            An arrangement between a hospital and a group under which 
        designated health services are provided by the group but are 
        billed by the hospital if--
                (i) with respect to services provided to an inpatient of 
            the hospital, the arrangement is pursuant to the provision 
            of inpatient hospital services under section 1395x(b)(3) of 
            this title.
                (ii) the arrangement began before December 19, 1989, and 
            has continued in effect without interruption since such 
            date,
                (iii) with respect to the designated health services 
            covered under the arrangement, substantially all of such 
            services furnished to patients of the hospital are furnished 
            by the group under the arrangement,
                (iv) the arrangement is pursuant to an agreement that is 
            set out in writing and that specifies the services to be 
            provided by the parties and the compensation for services 
            provided under the agreement,
                (v) the compensation paid over the term of the agreement 
            is consistent with fair market value and the compensation 
            per unit of services is fixed in advance and is not 
            determined in a manner that takes into account the volume or 
            value of any referrals or other business generated between 
            the parties,
                (vi) the compensation is provided pursuant to an 
            agreement which would be commercially reasonable even if no 
            referrals were made to the entity, and
                (vii) the arrangement between the parties meets such 
            other requirements as the Secretary may impose by regulation 
            as needed to protect against program or patient abuse.

         (8) Payments by a physician for items and services

        Payments made by a physician--
            (A) to a laboratory in exchange for the provision of 
        clinical laboratory services, or
            (B) to an entity as compensation for other items or services 
        if the items or services are furnished at a price that is 
        consistent with fair market value.

(f) Reporting requirements

    Each entity providing covered items or services for which payment 
may be made under this subchapter shall provide the Secretary with the 
information concerning the entity's ownership, investment, and 
compensation arrangements, including--
        (1) the covered items and services provided by the entity, and
        (2) the names and unique physician identification numbers of all 
    physicians with an ownership or investment interest (as described in 
    subsection (a)(2)(A) of this section), or with a compensation 
    arrangement (as described in subsection (a)(2)(B) of this section), 
    in the entity, or whose immediate relatives have such an ownership 
    or investment interest or who have such a compensation relationship 
    with the entity.

Such information shall be provided in such form, manner, and at such 
times as the Secretary shall specify. The requirement of this subsection 
shall not apply to designated health services provided outside the 
United States or to entities which the Secretary determines provides \3\ 
services for which payment may be made under this subchapter very 
infrequently.
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    \3\ So in original. Probably should be ``provide''.
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(g) Sanctions

                        (1) Denial of payment

        No payment may be made under this subchapter for a designated 
    health service which is provided in violation of subsection (a)(1) 
    of this section.

              (2) Requiring refunds for certain claims

        If a person collects any amounts that were billed in violation 
    of subsection (a)(1) of this section, the person shall be liable to 
    the individual for, and shall refund on a timely basis to the 
    individual, any amounts so collected.

      (3) Civil money penalty and exclusion for improper claims

        Any person that presents or causes to be presented a bill or a 
    claim for a service that such person knows or should know is for a 
    service for which payment may not be made under paragraph (1) or for 
    which a refund has not been made under paragraph (2) shall be 
    subject to a civil money penalty of not more than $15,000 for each 
    such service. The provisions of section 1320a-7a of this title 
    (other than the first sentence of subsection (a) and other than 
    subsection (b)) shall apply to a civil money penalty under the 
    previous sentence in the same manner as such provisions apply to a 
    penalty or proceeding under section 1320a-7a(a) of this title.

      (4) Civil money penalty and exclusion for circumvention 
                                   schemes

        Any physician or other entity that enters into an arrangement or 
    scheme (such as a cross-referral arrangement) which the physician or 
    entity knows or should know has a principal purpose of assuring 
    referrals by the physician to a particular entity which, if the 
    physician directly made referrals to such entity, would be in 
    violation of this section, shall be subject to a civil money penalty 
    of not more than $100,000 for each such arrangement or scheme. The 
    provisions of section 1320a-7a of this title (other than the first 
    sentence of subsection (a) and other than subsection (b)) shall 
    apply to a civil money penalty under the previous sentence in the 
    same manner as such provisions apply to a penalty or proceeding 
    under section 1320a-7a(a) of this title.

                  (5) Failure to report information

        Any person who is required, but fails, to meet a reporting 
    requirement of subsection (f) of this section is subject to a civil 
    money penalty of not more than $10,000 for each day for which 
    reporting is required to have been made. The provisions of section 
    1320a-7a of this title (other than the first sentence of subsection 
    (a) and other than subsection (b)) shall apply to a civil money 
    penalty under the previous sentence in the same manner as such 
    provisions apply to a penalty or proceeding under section 1320a-
    7a(a) of this title.

                        (6) Advisory opinions

        (A) In general

            The Secretary shall issue written advisory opinions 
        concerning whether a referral relating to designated health 
        services (other than clinical laboratory services) is prohibited 
        under this section. Each advisory opinion issued by the 
        Secretary shall be binding as to the Secretary and the party or 
        parties requesting the opinion.

        (B) Application of certain rules

            The Secretary shall, to the extent practicable, apply the 
        rules under subsections (b)(3) and (b)(4) of this section and 
        take into account the regulations promulgated under subsection 
        (b)(5) of section 1320a-7d of this title in the issuance of 
        advisory opinions under this paragraph.

        (C) Regulations

            In order to implement this paragraph in a timely manner, the 
        Secretary may promulgate regulations that take effect on an 
        interim basis, after notice and pending opportunity for public 
        comment.

        (D) Applicability

            This paragraph shall apply to requests for advisory opinions 
        made after the date which is 90 days after August 5, 1997, and 
        before the close of the period described in section 1320a-
        7d(b)(6) of this title.

(h) Definitions and special rules

    For purposes of this section:

             (1) Compensation arrangement; remuneration

        (A) The term ``compensation arrangement'' means any arrangement 
    involving any remuneration between a physician (or an immediate 
    family member of such physician) and an entity other than an 
    arrangement involving only remuneration described in subparagraph 
    (C).
        (B) The term ``remuneration'' includes any remuneration, 
    directly or indirectly, overtly or covertly, in cash or in kind.
        (C) Remuneration described in this subparagraph is any 
    remuneration consisting of any of the following:
            (i) The forgiveness of amounts owed for inaccurate tests or 
        procedures, mistakenly performed tests or procedures, or the 
        correction of minor billing errors.
            (ii) The provision of items, devices, or supplies that are 
        used solely to--
                (I) collect, transport, process, or store specimens for 
            the entity providing the item, device, or supply, or
                (II) order or communicate the results of tests or 
            procedures for such entity.

            (iii) A payment made by an insurer or a self-insured plan to 
        a physician to satisfy a claim, submitted on a fee for service 
        basis, for the furnishing of health services by that physician 
        to an individual who is covered by a policy with the insurer or 
        by the self-insured plan, if--
                (I) the health services are not furnished, and the 
            payment is not made, pursuant to a contract or other 
            arrangement between the insurer or the plan and the 
            physician,
                (II) the payment is made to the physician on behalf of 
            the covered individual and would otherwise be made directly 
            to such individual,
                (III) the amount of the payment is set in advance, does 
            not exceed fair market value, and is not determined in a 
            manner that takes into account directly or indirectly the 
            volume or value of any referrals, and
                (IV) the payment meets such other requirements as the 
            Secretary may impose by regulation as needed to protect 
            against program or patient abuse.

                            (2) Employee

        An individual is considered to be ``employed by'' or an 
    ``employee'' of an entity if the individual would be considered to 
    be an employee of the entity under the usual common law rules 
    applicable in determining the employer-employee relationship (as 
    applied for purposes of section 3121(d)(2) of the Internal Revenue 
    Code of 1986).

                        (3) Fair market value

        The term ``fair market value'' means the value in arms length 
    transactions, consistent with the general market value, and, with 
    respect to rentals or leases, the value of rental property for 
    general commercial purposes (not taking into account its intended 
    use) and, in the case of a lease of space, not adjusted to reflect 
    the additional value the prospective lessee or lessor would 
    attribute to the proximity or convenience to the lessor where the 
    lessor is a potential source of patient referrals to the lessee.

                         (4) Group practice

        (A) Definition of group practice

            The term ``group practice'' means a group of 2 or more 
        physicians legally organized as a partnership, professional 
        corporation, foundation, not-for-profit corporation, faculty 
        practice plan, or similar association--
                (i) in which each physician who is a member of the group 
            provides substantially the full range of services which the 
            physician routinely provides, including medical care, 
            consultation, diagnosis, or treatment, through the joint use 
            of shared office space, facilities, equipment and personnel,
                (ii) for which substantially all of the services of the 
            physicians who are members of the group are provided through 
            the group and are billed under a billing number assigned to 
            the group and amounts so received are treated as receipts of 
            the group,
                (iii) in which the overhead expenses of and the income 
            from the practice are distributed in accordance with methods 
            previously determined,
                (iv) except as provided in subparagraph (B)(i), in which 
            no physician who is a member of the group directly or 
            indirectly receives compensation based on the volume or 
            value of referrals by the physician,
                (v) in which members of the group personally conduct no 
            less than 75 percent of the physician-patient encounters of 
            the group practice, and
                (vi) which meets such other standards as the Secretary 
            may impose by regulation.

        (B) Special rules

            (i) Profits and productivity bonuses

                A physician in a group practice may be paid a share of 
            overall profits of the group, or a productivity bonus based 
            on services personally performed or services incident to 
            such personally performed services, so long as the share or 
            bonus is not determined in any manner which is directly 
            related to the volume or value of referrals by such 
            physician.
            (ii) Faculty practice plans

                In the case of a faculty practice plan associated with a 
            hospital, institution of higher education, or medical school 
            with an approved medical residency training program in which 
            physician members may provide a variety of different 
            specialty services and provide professional services both 
            within and outside the group, as well as perform other tasks 
            such as research, subparagraph (A) shall be applied only 
            with respect to the services provided within the faculty 
            practice plan.

                  (5) Referral; referring physician

        (A) Physicians' services

            Except as provided in subparagraph (C), in the case of an 
        item or service for which payment may be made under part B of 
        this subchapter, the request by a physician for the item or 
        service, including the request by a physician for a consultation 
        with another physician (and any test or procedure ordered by, or 
        to be performed by (or under the supervision of) that other 
        physician), constitutes a ``referral'' by a ``referring 
        physician''.

        (B) Other items

            Except as provided in subparagraph (C), the request or 
        establishment of a plan of care by a physician which includes 
        the provision of the designated health service constitutes a 
        ``referral'' by a ``referring physician''.

        (C) Clarification respecting certain services integral to a 
                consultation by certain specialists

            A request by a pathologist for clinical diagnostic 
        laboratory tests and pathological examination services, a 
        request by a radiologist for diagnostic radiology services, and 
        a request by a radiation oncologist for radiation therapy, if 
        such services are furnished by (or under the supervision of) 
        such pathologist, radiologist, or radiation oncologist pursuant 
        to a consultation requested by another physician does not 
        constitute a ``referral'' by a ``referring physician''.

                   (6) Designated health services

        The term ``designated health services'' means any of the 
    following items or services:
            (A) Clinical laboratory services.
            (B) Physical therapy services.
            (C) Occupational therapy services.
            (D) Radiology services, including magnetic resonance 
        imaging, computerized axial tomography scans, and ultrasound 
        services.
            (E) Radiation therapy services and supplies.
            (F) Durable medical equipment and supplies.
            (G) Parenteral and enteral nutrients, equipment, and 
        supplies.
            (H) Prosthetics, orthotics, and prosthetic devices and 
        supplies.
            (I) Home health services.
            (J) Outpatient prescription drugs.
            (K) Inpatient and outpatient hospital services.

(Aug. 14, 1935, ch. 531, title XVIII, Sec. 1877, as added Pub. L. 101-
239, title VI, Sec. 6204(a), Dec. 19, 1989, 103 Stat. 2236; amended Pub. 
L. 101-508, title IV, Sec. 4207(e)(1)-(3), (k)(2), formerly 
Sec. 4027(e)(1)-(3), (k)(2), Nov. 5, 1990, 104 Stat. 1388-121, 1388-122, 
1388-124, renumbered Pub. L. 103-432, title I, Sec. 160(d)(4), Oct. 31, 
1994, 108 Stat. 4444; Pub. L. 103-66, title XIII, Sec. 13562(a), Aug. 
10, 1993, 107 Stat. 596; Pub. L. 103-432, title I, Sec. 152(a), (b), 
Oct. 31, 1994, 108 Stat. 4436; Pub. L. 105-33, title IV, Sec. 4314, Aug. 
5, 1997, 111 Stat. 389; Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title 
V, Sec. 524(a)], Nov. 29, 1999, 113 Stat. 1536, 1501A-387.)

                       References in Text

    Section 222(a) of the Social Security Amendments of 1972, referred 
to in subsec. (b)(3)(C), is section 222(a) of Pub. L. 92-603, Oct. 30, 
1972, 86 Stat. 1329, which is set out as a note under section 1395b-1 of 
this title.
    Section 300e-9(d) of this title, referred to in subsec. (b)(3)(D), 
was redesignated section 300e-9(c) of this title by Pub. L. 100-517, 
Sec. 7(b), Oct. 24, 1988, 102 Stat. 2580.
    Part C of this subchapter, referred to in subsec. (b)(3)(E), is 
classified to section 1395w-21 et seq. of this title.
    The Internal Revenue Code, referred to in subsecs. (c)(2) and 
(h)(2), is classified generally to Title 26, Internal Revenue Code.
    Part B of this subchapter, referred to in subsec. (h)(5)(A), is 
classified to section 1395j et seq. of this title.


                            Prior Provisions

    A prior section 1395nn, act Aug. 14, 1935, ch. 531, title XVIII, 
Sec. 1877, as added and amended Oct. 30, 1972, Pub. L. 92-603, title II, 
Secs. 242(b), 278(b)(8), 86 Stat. 1419, 1454; Oct. 25, 1977, Pub. L. 95-
142, Sec. 4(a), 91 Stat. 1179; Dec. 5, 1980, Pub. L. 96-499, title IX, 
Sec. 917, 94 Stat. 2625; July 18, 1984, Pub. L. 98-369, div. B, title 
III, Sec. 2306(f)(2), 98 Stat. 1073; Oct. 21, 1986, Pub. L. 99-509, 
title IX, Sec. 9321(a)(1), 100 Stat. 2016; Aug. 18, 1987, Pub. L. 100-
93, Sec. 4(c), 101 Stat. 689, enumerated offenses relating to the 
Medicare program and penalties for such offenses, prior to repeal by 
Pub. L. 100-93, Secs. 4(e), 15(a), Aug. 18, 1987, 101 Stat. 689, 698, 
effective at end of fourteen-day period beginning Aug. 18, 1987, and 
inapplicable to administrative proceedings commenced before end of such 
period.


                               Amendments

    1999--Subsec. (b)(3)(C). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 524(a)(1)], struck out ``or'' at the end.
    Subsec. (b)(3)(D). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 524(a)(2)], substituted ``, or'' for period at end.
    Subsec. (b)(3)(E). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 524(a)(3)], which directed addition of provisions at end of par. 
(3) but which separated directory language from language to be added 
because of the apparent placement out of sequence of pars. (2) and (3) 
of Sec. 524(a), was executed by adding subpar. (E) at end of par. (3) to 
reflect the probable intent of Congress.
    1997--Subsec. (g)(6). Pub. L. 105-33 added par. (6).
    1994--Subsec. (f). Pub. L. 103-432, Sec. 152(a)(1), (4), (5), in 
introductory provisions, substituted ``ownership, investment, and 
compensation arrangements'' for ``ownership arrangements'', and in 
closing provisions, substituted ``designated health services'' for 
``covered items and services'' and struck out ``Such information shall 
first be provided not later than October 1, 1991.'' after ``shall 
specify.'' and ``The Secretary may waive the requirements of this 
subsection (and the requirements of chapter 35 of title 44 with respect 
to information provided under this subsection) with respect to reporting 
by entities in a State (except for entities providing designated health 
services) so long as such reporting occurs in at least 10 States, and 
the Secretary may waive such requirements with respect to the providers 
in a State required to report so long as such requirements are not 
waived with respect to parenteral and enteral suppliers, end stage renal 
disease facilities, suppliers of ambulance services, hospitals, entities 
providing physical therapy services, and entities providing diagnostic 
imaging services of any type.'' at end.
    Subsec. (f)(2). Pub. L. 103-432, Sec. 152(a)(2), (3), inserted ``, 
or with a compensation arrangement (as described in subsection (a)(2)(B) 
of this section),'' after ``investment interest (as described in 
subsection (a)(2)(A) of this section)'' and ``interest or who have such 
a compensation relationship with the entity'' before period at end.
    Subsec. (h)(6). Pub. L. 103-432, Sec. 152(b), in subpar. (D), 
substituted ``services, including magnetic resonance imaging, 
computerized axial tomography scans, and ultrasound services'' for ``or 
other diagnostic services'', and in subpars. (E), (F), and (H), inserted 
``and supplies'' before period at end.
    1993--Subsecs. (a) to (e). Pub. L. 103-66, Sec. 13562(a)(1), amended 
headings and text of subsecs. (a) to (e) generally, substituting present 
provisions for provisions which related to: prohibition of certain 
referrals in subsec. (a), general exceptions to both ownership and 
compensation arrangement prohibitions in subsec. (b), general exception 
related only to ownership or investment prohibition for ownership in 
publicly-traded securities in subsec. (c), additional exceptions related 
only to ownership or investment prohibition in subsec. (d), and 
exceptions relating to other compensation arrangements in subsec. (e).
    Subsec. (f). Pub. L. 103-66, Sec. 13562(a)(3), substituted 
``designated health services'' for ``clinical laboratory services'' in 
concluding provisions.
    Subsec. (g)(1). Pub. L. 103-66, Sec. 13562(a)(4), substituted 
``designated health service'' for ``clinical laboratory service''.
    Subsec. (h). Pub. L. 103-66, Sec. 13562(a)(2), amended heading and 
text of subsec. (h) generally, substituting pars. (1) to (6) for former 
pars. (1) to (7) which defined ``compensation arrangement'', 
``remuneration'', ``employee'', ``fair market value'', ``group 
practice'', ``investor'', ``interested investor'', ``disinterested 
investor'', ``referral'', and ``referring physician''.
    1990--Subsec. (b)(4), (5). Pub. L. 101-508, Sec. 4207(e)(2), 
formerly Sec. 4027(e)(2), as renumbered by Pub. L. 103-432, 
Sec. 160(d)(4), added par. (4) and redesignated former par. (4) as (5).
    Subsec. (f). Pub. L. 101-508, Sec. 4207(e)(3)(B), (C), formerly 
Sec. 4027(e)(3)(B), (C), as renumbered by Pub. L. 103-432, 
Sec. 160(d)(4), substituted ``October 1, 1991'' for ``1 year after 
December 19, 1989'' in second sentence and inserted at end ``The 
requirement of this subsection shall not apply to covered items and 
services provided outside the United States or to entities which the 
Secretary determines provides services for which payment may be made 
under this subchapter very infrequently. The Secretary may waive the 
requirements of this subsection (and the requirements of chapter 35 of 
title 44 with respect to information provided under this subsection) 
with respect to reporting by entities in a State (except for entities 
providing clinical laboratory services) so long as such reporting occurs 
in at least 10 States, and the Secretary may waive such requirements 
with respect to the providers in a State required to report so long as 
such requirements are not waived with respect to parenteral and enteral 
suppliers, end stage renal disease facilities, suppliers of ambulance 
services, hospitals, entities providing physical therapy services, and 
entities providing diagnostic imaging services of any type.''
    Subsec. (f)(2). Pub. L. 101-508, Sec. 4207(e)(3)(A), formerly 
Sec. 4027(e)(3)(A), as renumbered by Pub. L. 103-432, Sec. 160(d)(4), 
amended par. (2) generally. Prior to amendment, par. (2) read as 
follows: ``the names and all of the medicare provider numbers of the 
physicians who are interested investors or who are immediate relatives 
of interested investors.''
    Subsec. (g)(5). Pub. L. 101-508, Sec. 4207(k)(2), formerly 
Sec. 4027(k)(2), as renumbered by Pub. L. 103-432, Sec. 160(d)(4), 
inserted at end ``The provisions of section 1320a-7a of this title 
(other than the first sentence of subsection (a) and other than 
subsection (b)) shall apply to a civil money penalty under the previous 
sentence in the same manner as such provisions apply to a penalty or 
proceeding under section 1320a-7a(a) of this title.''
    Subsec. (h)(6). Pub. L. 101-508, Sec. 4207(e)(1)(C), formerly 
Sec. 4027(e)(1)(C), as renumbered by Pub. L. 103-432, Sec. 160(d)(4), 
added par. (6). Former par. (6) redesignated (7).
    Pub. L. 101-508, Sec. 4207(e)(1)(A), (B), formerly 
Sec. 4027(e)(1)(A), (B), as renumbered by Pub. L. 103-432, 
Sec. 160(d)(4), substituted ``in the case of an item or service for 
which payment may be made under part B of this subchapter, the request 
by a physician for the item or service,'' for ``in the case of a 
clinical laboratory service which under law is required to be provided 
by (or under the supervision of) a physician, the request by a physician 
for the service,'' in subpar. (A) and struck out ``in the case of 
another clinical laboratory service,'' after ``subparagraph (C),'' in 
subpar. (B).
    Subsec. (h)(7). Pub. L. 101-508, Sec. 4207(e)(1)(C), formerly 
Sec. 4027(e)(1)(C), as renumbered by Pub. L. 103-432, Sec. 160(d)(4), 
redesignated par. (6) as (7).


                    Effective Date of 1999 Amendment

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 524(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-388, provided that: ``The amendment 
made by this section [amending this section] shall apply to services 
furnished on or after the date of the enactment of this Act [Nov. 29, 
1999].''


                    Effective Date of 1994 Amendment

    Section 152(d)(1) of Pub. L. 103-432 provided that: ``The amendments 
made by subsections (a) and (b) [amending this section] shall apply to 
referrals made on or after January 1, 1995.''


                    Effective Date of 1993 Amendment

    Section 13562(b) of Pub. L. 103-66, as amended by Pub. L. 103-432, 
title I, Sec. 152(c), Oct. 31, 1994, 108 Stat. 4437, provided that:
    ``(1) In general.--Except as provided in paragraph (2), the 
amendments made by this section [amending this section] shall apply to 
referrals--
        ``(A) made on or after January 1, 1992, in the case of clinical 
    laboratory services, and
        ``(B) made after December 31, 1994, in the case of other 
    designated health services.
    ``(2) Exceptions.--With respect to referrals made for clinical 
laboratory services on or before December 31, 1994--
        ``(A) the second sentence of subsection (a)(2), and subsections 
    (b)(2)(B) and (d)(2), of section 1877 of the Social Security Act 
    [subsecs. (a)(2), (b)(2)(B), and (d)(2) of this section] (as in 
    effect on the day before the date of the enactment of this Act [Aug. 
    10, 1993]) shall apply instead of the corresponding provisions in 
    section 1877 (as amended by this Act);
        ``(B) section 1877(b)(4) of the Social Security Act [subsec. 
    (b)(4) of this section] (as in effect on the day before the date of 
    the enactment of this Act) shall apply;
        ``(C) the requirements of section 1877(c)(2) of the Social 
    Security Act [subsec. (c)(2) of this section] (as amended by this 
    Act) shall not apply to any securities of a corporation that meets 
    the requirements of section 1877(c)(2) of the Social Security Act 
    (as in effect on the day before the date of the enactment of this 
    Act);
        ``(D) section 1877(e)(3) of the Social Security Act [subsec. 
    (e)(3) of this section] (as amended by this Act) shall apply, except 
    that it shall not apply to any arrangement that meets the 
    requirements of subsection (e)(2) or subsection (e)(3) of section 
    1877 of the Social Security Act (as in effect on the day before the 
    date of the enactment of this Act);
        ``(E) the requirements of clauses (iv) and (v) of section 
    1877(h)(4)(A), and of clause (i) of section 1877(h)(4)(B), of the 
    Social Security Act [subsec. (h)(4)(A)(iv), (v), (B)(i) of this 
    section] (as amended by this Act) shall not apply; and
        ``(F) section 1877(h)(4)(B) of the Social Security Act [subsec. 
    (h)(4)(B) of this section] (as in effect on the day before the date 
    of the enactment of this Act) shall apply instead of section 
    1877(h)(4)(A)(ii) of such Act (as amended by this Act).''
    [Section 152(d)(2) of Pub. L. 103-432 provided that: ``The amendment 
made by subsection (c) [amending section 13562(b) of Pub. L. 103-66, set 
out above] shall apply as if included in the enactment of OBRA-1993 
[Pub. L. 103-66].'']


                    Effective Date of 1990 Amendment

    Section 4207(e)(5), formerly 4027(e)(5), of Pub. L. 101-508, as 
renumbered by Pub. L. 103-432, title I, Sec. 160(d)(4), Oct. 31, 1994, 
108 Stat. 4444, provided that: ``The amendments made by this subsection 
[amending this section and provisions set out below] shall be effective 
as if included in the enactment of section 6204 of the Omnibus Budget 
Reconciliation Act of 1989 [Pub. L. 101-239].''


                             Effective Date

    Section 6204(c) of Pub. L. 101-239 provided that:
    ``(1) Except as provided in paragraph (2), the amendments made by 
this section [enacting this section and amending section 1395l of this 
title] shall become effective with respect to referrals made on or after 
January 1, 1992.
    ``(2) The reporting requirement of section 1877(f) of the Social 
Security Act [subsec. (f) of this section] shall take effect on October 
1, 1990.''


                    Deadline for Certain Regulations

    Section 6204(d) of Pub. L. 101-239, as amended by Pub. L. 101-508, 
title IV, Sec. 4207(e)(4)(B), formerly Sec. 4027(e)(4)(B), Nov. 5, 1990, 
104 Stat. 1388-122, renumbered Pub. L. 103-432, title I, Sec. 160(d)(4), 
Oct. 31, 1994, 108 Stat. 4444, provided that: ``The Secretary of Health 
and Human Services shall publish final regulations to carry out section 
1877 of the Social Security Act [this section] by not later than October 
1, 1991.''


             GAO Study of Ownership by Referring Physicians

    Section 6204(e) of Pub. L. 101-239 directed Comptroller General to 
conduct a study of ownership of hospitals and other providers of 
medicare services by referring physicians and, by not later than Feb. 1, 
1991, report to Congress on results of such study, prior to repeal by 
Pub. L. 104-316, title I, Sec. 122(h)(1), Oct. 19, 1996, 110 Stat. 3837.


             Statistical Summary of Comparative Utilization

    Section 6204(f) of Pub. L. 101-239, as amended by Pub. L. 101-508, 
title IV, Sec. 4207(e)(4)(A), formerly Sec. 4027(e)(4)(A), Nov. 5, 1990, 
104 Stat. 1388-122, renumbered Pub. L. 103-432, title I, Sec. 160(d)(4), 
Oct. 31, 1994, 108 Stat. 4444; Pub. L. 104-316, title I, Sec. 122(h)(2), 
Oct. 19, 1996, 110 Stat. 3837, directed Secretary of Health and Human 
Services, not later than June 30, 1992, to submit to Congress a 
statistical profile comparing utilization of items and services by 
medicare beneficiaries served by entities in which the referring 
physician has a direct or indirect financial interest and by medicare 
beneficiaries served by other entities, for the States and entities 
specified in subsec. (f) of this section (other than entities providing 
clinical laboratory services).

                  Section Referred to in Other Sections

    This section is referred to in section 1396b of this title.
