
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document affected by Public Law 106-554 Section 1(a)(6)[617(a)]]
[Document affected by Public Law 106-554 Section 1(a)(6)[623(a)]]
[Document affected by Public Law 106-554 Section 1(a)(6)[617(b)]]
[Document affected by Public Law 106-554 Section 1(a)(6)[623(b)]]
[CITE: 42USC1395w-27]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
        SUBCHAPTER XVIII--HEALTH INSURANCE FOR AGED AND DISABLED
 
                     Part C--Medicare+Choice Program
 
Sec. 1395w-27. Contracts with Medicare+Choice organizations


(a) In general

    The Secretary shall not permit the election under section 1395w-21 
of this title of a Medicare+Choice plan offered by a Medicare+
Choice organization under this part, and no payment shall be made under 
section 1395w-23 of this title to an organization, unless the Secretary 
has entered into a contract under this section with the organization 
with respect to the offering of such plan. Such a contract with an 
organization may cover more than 1 Medicare+Choice plan. Such contract 
shall provide that the organization agrees to comply with the applicable 
requirements and standards of this part and the terms and conditions of 
payment as provided for in this part.

(b) Minimum enrollment requirements

                           (1) In general

        Subject to paragraph (2), the Secretary may not enter into a 
    contract under this section with a Medicare+Choice organization 
    unless the organization has--
            (A) at least 5,000 individuals (or 1,500 individuals in the 
        case of an organization that is a provider-sponsored 
        organization) who are receiving health benefits through the 
        organization, or
            (B) at least 1,500 individuals (or 500 individuals in the 
        case of an organization that is a provider-sponsored 
        organization) who are receiving health benefits through the 
        organization if the organization primarily serves individuals 
        residing outside of urbanized areas.

                    (2) Application to MSA plans

        In applying paragraph (1) in the case of a Medicare+Choice 
    organization that is offering an MSA plan, paragraph (1) shall be 
    applied by substituting covered lives for individuals.

                       (3) Allowing transition

        The Secretary may waive the requirement of paragraph (1) during 
    the first 3 contract years with respect to an organization.

(c) Contract period and effectiveness

                             (1) Period

        Each contract under this section shall be for a term of at least 
    1 year, as determined by the Secretary, and may be made 
    automatically renewable from term to term in the absence of notice 
    by either party of intention to terminate at the end of the current 
    term.

                      (2) Termination authority

        In accordance with procedures established under subsection (h) 
    of this section, the Secretary may at any time terminate any such 
    contract if the Secretary determines that the organization--
            (A) has failed substantially to carry out the contract;
            (B) is carrying out the contract in a manner inconsistent 
        with the efficient and effective administration of this part; or
            (C) no longer substantially meets the applicable conditions 
        of this part.

                   (3) Effective date of contracts

        The effective date of any contract executed pursuant to this 
    section shall be specified in the contract, except that in no case 
    shall a contract under this section which provides for coverage 
    under an MSA plan be effective before January 1999 with respect to 
    such coverage.

                      (4) Previous terminations

        (A) In general

            The Secretary may not enter into a contract with a 
        Medicare+Choice organization if a previous contract with that 
        organization under this section was terminated at the request of 
        the organization within the preceding 2-year period, except as 
        provided in subparagraph (B) and except in such other 
        circumstances which warrant special consideration, as determined 
        by the Secretary.

        (B) Earlier re-entry permitted where change in payment policy

            Subparagraph (A) shall not apply with respect to the 
        offering by a Medicare+Choice organization of a Medicare+Choice 
        plan in a Medicare+Choice payment area if during the 6-month 
        period beginning on the date the organization notified the 
        Secretary of the intention to terminate the most recent previous 
        contract, there was a legislative change enacted (or a 
        regulatory change adopted) that has the effect of increasing 
        payment amounts under section 1395w-23 of this title for that 
        Medicare+Choice payment area.

                      (5) Contracting authority

        The authority vested in the Secretary by this part may be 
    performed without regard to such provisions of law or regulations 
    relating to the making, performance, amendment, or modification of 
    contracts of the United States as the Secretary may determine to be 
    inconsistent with the furtherance of the purpose of this subchapter.

(d) Protections against fraud and beneficiary protections

                        (1) Periodic auditing

        The Secretary shall provide for the annual auditing of the 
    financial records (including data relating to medicare utilization, 
    costs, and computation of the adjusted community rate) of at least 
    one-third of the Medicare+
    Choice organizations offering Medicare+
    Choice plans under this part. The Comptroller General shall monitor 
    auditing activities conducted under this subsection.

                      (2) Inspection and audit

        Each contract under this section shall provide that the 
    Secretary, or any person or organization designated by the 
    Secretary--
            (A) shall have the right to inspect or otherwise evaluate 
        (i) the quality, appropriateness, and timeliness of services 
        performed under the contract, and (ii) the facilities of the 
        organization when there is reasonable evidence of some need for 
        such inspection, and
            (B) shall have the right to audit and inspect any books and 
        records of the Medicare+Choice organization that pertain (i) to 
        the ability of the organization to bear the risk of potential 
        financial losses, or (ii) to services performed or 
        determinations of amounts payable under the contract.

             (3) Enrollee notice at time of termination

        Each contract under this section shall require the organization 
    to provide (and pay for) written notice in advance of the contract's 
    termination, as well as a description of alternatives for obtaining 
    benefits under this subchapter, to each individual enrolled with the 
    organization under this part.

                           (4) Disclosure

        (A) In general

            Each Medicare+Choice organization shall, in accordance with 
        regulations of the Secretary, report to the Secretary financial 
        information which shall include the following:
                (i) Such information as the Secretary may require 
            demonstrating that the organization has a fiscally sound 
            operation.
                (ii) A copy of the report, if any, filed with the Health 
            Care Financing Administration containing the information 
            required to be reported under section 1320a-3 of this title 
            by disclosing entities.
                (iii) A description of transactions, as specified by the 
            Secretary, between the organization and a party in interest. 
            Such transactions shall include--
                    (I) any sale or exchange, or leasing of any property 
                between the organization and a party in interest;
                    (II) any furnishing for consideration of goods, 
                services (including management services), or facilities 
                between the organization and a party in interest, but 
                not including salaries paid to employees for services 
                provided in the normal course of their employment and 
                health services provided to members by hospitals and 
                other providers and by staff, medical group (or groups), 
                individual practice association (or associations), or 
                any combination thereof; and
                    (III) any lending of money or other extension of 
                credit between an organization and a party in interest.

        The Secretary may require that information reported respecting 
        an organization which controls, is controlled by, or is under 
        common control with, another entity be in the form of a 
        consolidated financial statement for the organization and such 
        entity.

        (B) ``Party in interest'' defined

            For the purposes of this paragraph, the term ``party in 
        interest'' means--
                (i) any director, officer, partner, or employee 
            responsible for management or administration of a 
            Medicare+Choice organization, any person who is directly or 
            indirectly the beneficial owner of more than 5 percent of 
            the equity of the organization, any person who is the 
            beneficial owner of a mortgage, deed of trust, note, or 
            other interest secured by, and valuing more than 5 percent 
            of the organization, and, in the case of a Medicare+Choice 
            organization organized as a nonprofit corporation, an 
            incorporator or member of such corporation under applicable 
            State corporation law;
                (ii) any entity in which a person described in clause 
            (i)--
                    (I) is an officer or director;
                    (II) is a partner (if such entity is organized as a 
                partnership);
                    (III) has directly or indirectly a beneficial 
                interest of more than 5 percent of the equity; or
                    (IV) has a mortgage, deed of trust, note, or other 
                interest valuing more than 5 percent of the assets of 
                such entity;

                (iii) any person directly or indirectly controlling, 
            controlled by, or under common control with an organization; 
            and
                (iv) any spouse, child, or parent of an individual 
            described in clause (i).

        (C) Access to information

            Each Medicare+Choice organization shall make the information 
        reported pursuant to subparagraph (A) available to its enrollees 
        upon reasonable request.

                        (5) Loan information

        The contract shall require the organization to notify the 
    Secretary of loans and other special financial arrangements which 
    are made between the organization and subcontractors, affiliates, 
    and related parties.

(e) Additional contract terms

                           (1) In general

        The contract shall contain such other terms and conditions not 
    inconsistent with this part (including requiring the organization to 
    provide the Secretary with such information) as the Secretary may 
    find necessary and appropriate.

            (2) Cost-sharing in enrollment-related costs

        (A) In general

            A Medicare+Choice organization shall pay the fee established 
        by the Secretary under subparagraph (B).

        (B) Authorization

            The Secretary is authorized to charge a fee to each 
        Medicare+Choice organization with a contract under this part 
        that is equal to the organization's pro rata share (as 
        determined by the Secretary) of the aggregate amount of fees 
        which the Secretary is directed to collect in a fiscal year. Any 
        amounts collected shall be available without further 
        appropriation to the Secretary for the purpose of carrying out 
        section 1395w-21 of this title (relating to enrollment and 
        dissemination of information) and section 1395b-4 of this title 
        (relating to the health insurance counseling and assistance 
        program).

        (C) Authorization of appropriations

            There are authorized to be appropriated for the purposes 
        described in subparagraph (B) for each fiscal year beginning 
        with fiscal year 2001 an amount equal to $100,000,000, reduced 
        by the amount of fees authorized to be collected under this 
        paragraph for the fiscal year.

        (D) Limitation

            In any fiscal year the fees collected by the Secretary under 
        subparagraph (B) shall not exceed the lesser of--
                (i) the estimated costs to be incurred by the Secretary 
            in the fiscal year in carrying out the activities described 
            in section 1395w-21 of this title and section 1395b-4 of 
            this title; or
                (ii)(I) $200,000,000 in fiscal year 1998;
                (II) $150,000,000 in fiscal year 1999;
                (III) $100,000,000 in fiscal year 2000; and
                (IV) the Medicare+Choice portion (as defined in 
            subparagraph (E)) of $100,000,000 in fiscal year 2001 and 
            each succeeding fiscal year.

        (E) Medicare+Choice portion defined

            In this paragraph, the term ``Medicare+Choice portion'' 
        means, for a fiscal year, the ratio, as estimated by the 
        Secretary, of--
                (i) the average number of individuals enrolled in 
            Medicare+Choice plans during the fiscal year, to
                (ii) the average number of individuals entitled to 
            benefits under part A of this subchapter, and enrolled under 
            part B of this subchapter, during the fiscal year.

(f) Prompt payment by Medicare+Choice organization

                           (1) Requirement

        A contract under this part shall require a Medicare+Choice 
    organization to provide prompt payment (consistent with the 
    provisions of sections 1395h(c)(2) and 1395u(c)(2) of this title) of 
    claims submitted for services and supplies furnished to enrollees 
    pursuant to the contract, if the services or supplies are not 
    furnished under a contract between the organization and the provider 
    or supplier (or in the case of a Medicare+Choice private fee-for-
    service plan, if a claim is submitted to such organization by an 
    enrollee).

     (2) Secretary's option to bypass noncomplying organization

        In the case of a Medicare+Choice eligible organization which the 
    Secretary determines, after notice and opportunity for a hearing, 
    has failed to make payments of amounts in compliance with paragraph 
    (1), the Secretary may provide for direct payment of the amounts 
    owed to providers and suppliers (or, in the case of a 
    Medicare+Choice private fee-for-service plan, amounts owed to the 
    enrollees) for covered services and supplies furnished to 
    individuals enrolled under this part under the contract. If the 
    Secretary provides for the direct payments, the Secretary shall 
    provide for an appropriate reduction in the amount of payments 
    otherwise made to the organization under this part to reflect the 
    amount of the Secretary's payments (and the Secretary's costs in 
    making the payments).

(g) Intermediate sanctions

                           (1) In general

        If the Secretary determines that a Medicare+Choice organization 
    with a contract under this section--
            (A) fails substantially to provide medically necessary items 
        and services that are required (under law or under the contract) 
        to be provided to an individual covered under the contract, if 
        the failure has adversely affected (or has substantial 
        likelihood of adversely affecting) the individual;
            (B) imposes premiums on individuals enrolled under this part 
        in excess of the amount of the Medicare+Choice monthly basic and 
        supplemental beneficiary premiums permitted under section 1395w-
        24 of this title;
            (C) acts to expel or to refuse to re-enroll an individual in 
        violation of the provisions of this part;
            (D) engages in any practice that would reasonably be 
        expected to have the effect of denying or discouraging 
        enrollment (except as permitted by this part) by eligible 
        individuals with the organization whose medical condition or 
        history indicates a need for substantial future medical 
        services;
            (E) misrepresents or falsifies information that is 
        furnished--
                (i) to the Secretary under this part, or
                (ii) to an individual or to any other entity under this 
            part;

            (F) fails to comply with the applicable requirements of 
        section 1395w-22(j)(3) or 1395w-22(k)(2)(A)(ii) of this title; 
        or
            (G) employs or contracts with any individual or entity that 
        is excluded from participation under this subchapter under 
        section 1320a-7 or 1320a-7a of this title for the provision of 
        health care, utilization review, medical social work, or 
        administrative services or employs or contracts with any entity 
        for the provision (directly or indirectly) through such an 
        excluded individual or entity of such services;

    the Secretary may provide, in addition to any other remedies 
    authorized by law, for any of the remedies described in paragraph 
    (2).

                            (2) Remedies

        The remedies described in this paragraph are--
            (A) civil money penalties of not more than $25,000 for each 
        determination under paragraph (1) or, with respect to a 
        determination under subparagraph (D) or (E)(i) of such 
        paragraph, of not more than $100,000 for each such 
        determination, plus, with respect to a determination under 
        paragraph (1)(B), double the excess amount charged in violation 
        of such paragraph (and the excess amount charged shall be 
        deducted from the penalty and returned to the individual 
        concerned), and plus, with respect to a determination under 
        paragraph (1)(D), $15,000 for each individual not enrolled as a 
        result of the practice involved,
            (B) suspension of enrollment of individuals under this part 
        after the date the Secretary notifies the organization of a 
        determination under paragraph (1) and until the Secretary is 
        satisfied that the basis for such determination has been 
        corrected and is not likely to recur, or
            (C) suspension of payment to the organization under this 
        part for individuals enrolled after the date the Secretary 
        notifies the organization of a determination under paragraph (1) 
        and until the Secretary is satisfied that the basis for such 
        determination has been corrected and is not likely to recur.

                  (3) Other intermediate sanctions

        In the case of a Medicare+Choice organization for which the 
    Secretary makes a determination under subsection (c)(2) of this 
    section the basis of which is not described in paragraph (1), the 
    Secretary may apply the following intermediate sanctions:
            (A) Civil money penalties of not more than $25,000 for each 
        determination under subsection (c)(2) of this section if the 
        deficiency that is the basis of the determination has directly 
        adversely affected (or has the substantial likelihood of 
        adversely affecting) an individual covered under the 
        organization's contract.
            (B) Civil money penalties of not more than $10,000 for each 
        week beginning after the initiation of civil money penalty 
        procedures by the Secretary during which the deficiency that is 
        the basis of a determination under subsection (c)(2) of this 
        section exists.
            (C) Suspension of enrollment of individuals under this part 
        after the date the Secretary notifies the organization of a 
        determination under subsection (c)(2) of this section and until 
        the Secretary is satisfied that the deficiency that is the basis 
        for the determination has been corrected and is not likely to 
        recur.

                      (4) Civil money penalties

        The provisions of section 1320a-7a (other than subsections (a) 
    and (b)) of this title shall apply to a civil money penalty under 
    paragraph (2) or (3) in the same manner as they apply to a civil 
    money penalty or proceeding under section 1320a-7a(a) of this title.

(h) Procedures for termination

                           (1) In general

        The Secretary may terminate a contract with a Medicare+Choice 
    organization under this section in accordance with formal 
    investigation and compliance procedures established by the Secretary 
    under which--
            (A) the Secretary provides the organization with the 
        reasonable opportunity to develop and implement a corrective 
        action plan to correct the deficiencies that were the basis of 
        the Secretary's determination under subsection (c)(2) of this 
        section; and
            (B) the Secretary provides the organization with reasonable 
        notice and opportunity for hearing (including the right to 
        appeal an initial decision) before terminating the contract.

        (2) Exception for imminent and serious risk to health

        Paragraph (1) shall not apply if the Secretary determines that a 
    delay in termination, resulting from compliance with the procedures 
    specified in such paragraph prior to termination, would pose an 
    imminent and serious risk to the health of individuals enrolled 
    under this part with the organization.

(Aug. 14, 1935, ch. 531, title XVIII, Sec. 1857, as added Pub. L. 105-
33, title IV, Sec. 4001, Aug. 5, 1997, 111 Stat. 319; amended Pub. L. 
106-113, div. B, Sec. 1000(a)(6) [title V, Secs. 513(a), (b)(1), 
522(a)], Nov. 29, 1999, 113 Stat. 1536, 1501A-383, 1501A-387.)

                       References in Text

    Parts A and B of this subchapter, referred to in subsec. 
(e)(2)(E)(ii), are classified to section 1395c et seq. and section 1395j 
et seq., respectively, of this title.


                               Amendments

    1999--Subsec. (c)(4). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 513(b)(1)(B), (C)], designated existing provisions as subpar. (A), 
inserted heading, realigned margins, and added subpar. (B).
    Pub. L. 106-113, Sec. 1000(a)(6) [title V, Sec. 513(a), (b)(1)(A)], 
substituted ``2-year period'' for ``5-year period'' and ``except as 
provided in subparagraph (B) and except in such other circumstances'' 
for ``except in circumstances''.
    Subsec. (e)(2)(B). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 522(a)(1)], substituted ``Any amounts collected shall be available 
without further appropriation to the Secretary for'' for ``Any amounts 
collected are authorized to be appropriated only for''.
    Subsec. (e)(2)(C). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 522(a)(2)], amended heading and text of subpar. (C) generally. 
Prior to amendment, text read as follows: ``For any fiscal year, the 
fees authorized under subparagraph (B) are contingent upon enactment in 
an appropriations act of a provision specifying the aggregate amount of 
fees the Secretary is directed to collect in a fiscal year. Fees 
collected during any fiscal year under this paragraph shall be deposited 
and credited as offsetting collections.''
    Subsec. (e)(2)(D)(ii)(II). Pub. L. 106-113, Sec. 1000(a)(6) [title 
V, Sec. 522(a)(3)(A)], struck out ``and'' after semicolon.
    Subsec. (e)(2)(D)(ii)(III). Pub. L. 106-113, Sec. 1000(a)(6) [title 
V, Sec. 522(a)(3)(B)], substituted ``; and'' for ``and each subsequent 
fiscal year.''
    Subsec. (e)(2)(D)(ii)(IV). Pub. L. 106-113, Sec. 1000(a)(6) [title 
V, Sec. 522(a)(3)(C)], added subcl. (IV).
    Subsec. (e)(2)(E). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 522(a)(4)], added subpar. (E).


                    Effective Date of 1999 Amendment

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 513(c)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-383, provided that: ``The 
amendments made by this section [amending this section] apply to 
contract terminations occurring before, on, or after the date of the 
enactment of this Act [Nov. 29, 1999].''
    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 522(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-387, provided that: ``The 
amendments made by subsection (a) [amending this section] apply to fees 
charged on or after January 1, 2001. The Secretary of Health and Human 
Services may not increase the fees charged under section 1857(e)(2) of 
the Social Security Act (42 U.S.C. 1395w-27(e)(2)) for the 3-month 
period beginning with October 2000 above the level in effect during the 
previous 9-month period.''


             Construction Relating to Additional Exceptions

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 513(b)(2)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-383, provided that: ``Nothing in 
the amendment made by paragraph (1)(C) [amending this section] shall be 
construed to affect the authority of the Secretary of Health and Human 
Services to provide for exceptions in addition to the exception provided 
in such amendment, including exceptions provided under Operational 
Policy Letter <greek-i>103 (OPL99.103).''


  Immediate Effective Date for Certain Requirements for Demonstrations

    Section 4002(g) of Pub. L. 105-33 provided that: ``Section 
1857(e)(2) of the Social Security Act [subsec. (e)(2) of this section] 
(requiring contribution to certain costs related to the enrollment 
process comparative materials) applies to demonstrations with respect to 
which enrollment is effected or coordinated under section 1851 of such 
Act [section 1395w-21 of this title].''

                  Section Referred to in Other Sections

    This section is referred to in sections 1395w-21, 1395w-22, 1395w-
23, 1395w-25, 1395w-28, 1395mm, 1395eee, 1396u-4 of this title.
