Title IV, SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL. (a) Clarification of Payment Ban. Section 1877(a)(1)(B) (42 U.S.C. 1395nn(a)(1)(B)) is amended to read as follows: ``(B) no physician or entity may present or cause to be presented a claim under this title or bill to any third party payor or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A).''. (b) Clarification of Coverage of Holding Company Type Arrangements and Loans. The last sentence of section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is amended by striking ``an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service'' and inserting the following: ``a loan from the entity, and an interest held indirectly through means such as (but not limited to) having a family member hold such investment interest or holding a legal or beneficial interest in another entity (such as a trust or holding company) that holds such investment interest''. (c) Revisions to General Exceptions to Both Ownership and Compensation Arrangement Prohibitions. (1) Repeal of exception for physicians' services. Section 1877(b) (42 U.S.C. 1395nn(b)) is amended (A) by striking paragraph (1); and (B) by redesignating paragraphs (2) and (3) as paragraphs paragraphs (1) and (2). (2) Revision to in-office ancillary services exception. Section 1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by paragraph (1), is amended (A) in the matter preceding subparagraph (A), by striking ``services (other than durable medical equipment (excluding infusion pumps) and parenteral and enteral nutrients, equipment, and supplies)'' and inserting ``clinical laboratory services, x-ray and ultrasound services that are provided at low-cost (as determined in accordance with regulations of the Secretary)''; and (B) in subparagraph (A) (i) in clause (ii)(I), by striking ``(or another physician who is a member of the same group practice)'', (ii) in clause (ii)(II) by inserting ``the same or'' before ``another building'', and (iii) in clause (ii)(II)(bb), by inserting ``all of'' after ``centralized provision of''. (3) Revision to prepaid plan exception. Section 1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as redesignated by paragraph (1), is amended to read as follows: ``(2) Prepaid plans. In the case of services furnished by an organization ``(A) with a risk sharing contract under section 1876(g) to an individual enrolled with the organization, ``(B) receiving payments on a prepaid basis, under a demonstration project under section 402(a) of the Social Security Amendments of 1967 or under section 222(a) of the Social Security Amendments of 1972, to an individual enrolled with the organization, or ``(C) that is a qualified health maintenance organization (within the meaning of section 1310(d) of the Public Health Service Act) to an individual enrolled with the organization.''. (4) New exception for capitated payments. Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by paragraph (1), is amended by inserting after paragraph (2) the following new paragraph: ``(3) Capitated payments. In the case of a designated health service, if the designated health service is included in the services for which a physician or physician group is paid wholly on an at-risk, prepaid, capitated basis by a health plan or insurer pursuant to a written arrangement between the plan or insurer and the physician or physician group.''. (d) Revision to Publicly Traded Securities Exception. Section 1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at the time acquired by the physician'' after ``which may be purchased on terms generally available to the public''. (e) Revision to Rural Provider Exception. Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended by striking ``substantially all'' and inserting ``not less than 85 percent (as determined in accordance with regulations of the Secretary)''. (f) Revisions to Exceptions Relating to Other Compensation Arrangements. (1) Exception for personal services arrangements. (A) Section 1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II)) is amended to read as follows: ``(II) If the plan places a physician or physician group at substantial financial risk (as determined by the Secretary pursuant to section 1876(i)(8)(A)(ii)), for services not provided by the physician, the entity complies with the provisions of subclauses (I) and (II) of section 1876(i)(8)(A)(ii).''; (B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 1395nn(e)(3)(B)(ii) is amended by striking ``may directly or indirectly have the effect of'' and inserting ``has the purpose of''. (2) Repeal of exception for remuneration unrelated to the provision of designated health services. Section 1877(e) (42 U.S.C. 1395nn(e)) is amended (A) by striking paragraph (4); and (B) by redesignating paragraphs (5), (6), (7), and (8) as paragraphs (4), (5), (6), and (7). (3) Exception for certain physician recruitment. Section 1877(e)(4) (42 U.S.C. 1395nn(e)(4)), as redesignated by paragraph (2), is amended to read as follows: ``(4) Physician recruitment. In the case of remuneration which is provided by an entity located in a rural area (as defined in section 1886(d)(2)(D)) or a health professional shortage areas (designated under section 332 of the Public Health Service Act), or an entity that serves a significant number of individuals who are members of a medically underserved population (designated under section 330 of the Public Health Service Act), in order to induce a physician who has been practicing within the physician's current specialty for less than one year to establish staff privileges at the entity, or to induce any other physician to relocate his or her primary place of practice to the geographic area served by the entity, if the following standards are met: ``(A) The arrangement is set forth in a written agreement that specifies the benefits provided by the entity to the physician, the terms under which the benefits are to be provided, and the obligations of each party. ``(B) If a physician is leaving an established practice, the physical location of the new primary place of practice must be not less than 100 miles from the location of the established primary place of practice and at least 85 percent of the revenues of the physician's new practice must be generated from new patients for whom the physician did not previously provide services at the former practice. ``(C) The benefits are provided by the entity for a period not in excess of 3 years, and the terms of the agreement are not renegotiated during this 3-year period in any substantial aspect, unless the physician's new primary place of practice is designated as a health professional shortage area (pursuant to section 332 of the Public Health Service Act) for the physician's specialty category during the entire duration of the relationship between the physician and the entity. ``(D) There is no requirement that the physician make referrals to, be in a position to make or influence referrals to, or otherwise generate business for the entity as a condition for receiving the benefits. ``(E) The physician is not restricted from establishing staff privileges at, referring any service to, or otherwise generating any business for any other entity of the physician's choosing. ``(F) The amount or value of the benefits provided by the entity may not vary (or be adjusted or renegotiated) in any manner based on the volume or value of any expected referrals to or business otherwise generated for the entity by the physician for which payment may be made in whole or in part under this title or a State health care program (as defined in section 1128(h)). ``(G) The physician agrees to treat patients entitled to benefits under this title or enrolled in a State plan for medical assistance under title XIX.''. (4) Exception for isolated transactions. Section 1877(e)(5) (42 U.S.C. 1395nn(e)(6)), as redesignated by paragraph (2), is amended (A) by redesignating subparagraph (B) as subparagraph (C); (B) by striking ``and'' at the end of subparagraph (A); and (C) by inserting after subparagraph (A) the following new subparagraph: ``(B) there is no financing of the sale between the parties, and''. (5) Exception for payments by a physician. Section 1877(e)(7) (42 U.S.C. 1395nn(e)(7)), as redesignated by paragraph (2), is amended to read as follows: ``(7) Payments by a physician for items and services. Payments made by a physician to a laboratory in exchange for the provision of clinical laboratory services furnished at a price that is consistent with fair market value.''. (6) Additional exception for discounts or other reductions in price. Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by paragraph (2), is amended by adding at the end the following new paragraph: ``(8) Discounts or other reductions in price. Discounts or other reductions in price between a physician and an entity for items or services for which payment may be made under this title so long as the discount or other reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the physician or entity under this title and is not ``(A) for the furnishing of one item or service without charge or at a reduced charge in exchange for any agreement to buy a different item or service, ``(B) applicable to one or more payers but not to all individuals and entities providing services for which payment may be made under this title, or ``(C) in the form of a cash payment.''. (g) Clarification of Sanction Authority. Section 1877(g)(4) (42 U.S.C. 1395nn(g)(4)) is amended by striking ``Any physician'' and all that follows through ``to such entity,'' and inserting the following: ``Any physician or other entity that enters into an arrangement or scheme (such as a cross-referral arrangement or an arrangement with multiple leases overlapping in time for the same or similar rental space or equipment) which the physician or entity knows or should know has a principal purpose of inducing referrals to another entity, which referrals, if made directly by the physician or entity to such other entity,''. (h) Clarification of Definition of Remuneration. Section 1877(h)(1)(B) (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as follows: ``(B) The term `remuneration' includes any payment, discount or other reduction in price, forgiveness of debt or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.''. (i) Revision to Definition of Group Practice. Section 1877(h)(4) (42 U.S.C. 1395nn(h)(4)) is amended (1) in subparagraph (A)(vi), by striking the period at the end and inserting the following: ``, including a requirement for the physical grouping of physician practices as may be reasonably required to prevent the abuse of any exceptions provided to group practices under this section.''; and (2) in subparagraph (B)(i), by striking ``or services incident to such personally performed services''. (j) Revision of Definition of Referral; Referring Physician. (1) In general. Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) is amended by striking subparagraph (C). (2) Conforming amendments. Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) is amended (A) in subparagraph (A), by striking ``Except as provided in subparagraph (C), in'' and inserting ``In''; and (B) in subparagraph (B), by striking ``Except as provided in subparagraph (C), the'' and inserting ``The''. (k) Expansion to Cover Additional Items and Services. Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)), as amended by section 2006(c)(3), is amended (1) in subparagraph (D), by striking ``or other''; and (2) by adding at the end the following new subparagraphs: ``(M) Diagnostic services. ``(N) Any other item or service not rendered by the physician personally or by a person under the physician's direct supervision.''. (l) Authorization for the Secretary to Issue Regulations. Section 1877 (42 U.S.C. 1395nn) is amended by adding the following new subsection: ``(i) Additional Requirements. The Secretary is authorized to impose by regulation such other requirements as needed to protect against program or patient abuse with respect to any of the exceptions under this section.''. (m) Incorporation of Amendments Made Under OBRA 1993. In this section, any reference to section 1877 of the Social Security Act shall be considered a reference to such section as amended by section 13562(a) of OBRA 1993.