Title IV, SEC. 4118. APPLICATION OF COMPETITIVE BIDDING PROCESS FOR PART B ITEMS AND SERVICES. (a) General Rule. Part B of title XVIII of the Social Security Act is amended by inserting after section 1846 the following: ``competition acquisition for items and services ``Sec. 1847. (a) Establishment of Bidding Areas. ``(1) In general. The Secretary shall establish competitive acquisition areas for the purpose of awarding a contract or contracts for the furnishing under this part of the items and services described in subsection (c) on or after January 1, 1995. The Secretary may establish different competitive acquisition areas under this subsection for different classes of items and services under this part. ``(2) Criteria for establishment. The competitive acquisition areas established under paragraph (1) shall ``(A) initially be, or be within, metropolitan statistical areas; and ``(B) be chosen based on the availability and accessibility of suppliers and the probable savings to be realized by the use of competitive bidding in the furnishing of items and services in the area. ``(b) Awarding of Contracts in Areas. ``(1) In general. The Secretary shall conduct a competition among individuals and entities supplying items and services under this part for each competitive acquisition area established under subsection (a) for each class of items and services. ``(2) Conditions for awarding contract. The Secretary may not award a contract to any individual or entity under the competition conducted pursuant to paragraph (1) to furnish an item or service under this part unless the Secretary finds that the individual or entity ``(A) meets quality standards specified by the Secretary for the furnishing of such item or service; and ``(B) offers to furnish a total quantity of such item or service that is sufficient to meet the expected need within the competitive acquisition area. ``(3) Contents of contract. A contract entered into with an individual or entity under the competition conducted pursuant to paragraph (1) shall specify (for all of the items and services within a class) ``(A) the quantity of items and services the entity shall provide; and ``(B) such other terms and conditions as the Secretary may require. ``(c) Services Described. The items and services to which the provisions of this section shall apply are as follows: ``(1) Magnetic resonance imaging tests and computerized axial tomography scans, including a physician's interpretation of the results of such tests and scans. ``(2) Oxygen and oxygen equipment. ``(3) Enteral and parenteral nutrients, supplies, and equipment. ``(4) Such other items and services for which the Secretary determines that the use of competitive acquisition under this section will be appropriate and cost-effective.''. (b) Items and Services To Be Furnished Only Through Competitive Acquisition. Section 1862(a) (42 U.S.C. 1395y(a)), as amended by section 4034(b)(4), is amended (1) by striking ``or'' at the end of paragraph (14); (2) by striking the period at the end of paragraph (15) and inserting ``; or''; and (3) by inserting after paragraph (15) the following new paragraph: ``(16) where such expenses are for an item or service furnished in a competitive acquisition area (as established by the Secretary under section 1847(a)) by an individual or entity other than the supplier with whom the Secretary has entered into a contract under section 1847(b) for the furnishing of such item or service in that area, unless the Secretary finds that such expenses were incurred in a case of urgent need.''. (c) Reduction in Payment Amounts if Competitive Acquisition Fails to Achieve Minimum Reduction in Payments. Notwithstanding any other provision of title XVIII of the Social Security Act, if the establishment of competitive acquisition areas under section 1847 of such Act (as added by subsection (a)) and the limitation of coverage for items and services under part B of such title to items and services furnished by providers with competitive acquisition contracts under such section does not result in a reduction of at least 10 percent in the payment amount under part B during a year for any such item or service from the payment amount for the previous year, the Secretary shall reduce the payment amount by such percentage as the Secretary determines necessary to result in such a reduction. (d) Effective Date. The amendments made by this section shall apply to items and services furnished under part B of title XVIII of the Social Security Act on or after January 1, 1995.