Duration, termination, effective date, and terms of contract; powers and duties of Secretary
Each contract under this section shall be for a term of at least one 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; except that in accordance with procedures established under paragraph (9), the Secretary may at any time terminate any such contract or may impose the intermediate sanctions described in paragraph (6)(B) or (6)(C) (whichever is applicable) on the eligible organization if the Secretary determines that the organization—
has failed substantially to carry out the contract;
no longer substantially meets the applicable conditions of subsections (b), (c), (e), and (f).
The effective date of any contract executed pursuant to this section shall be specified in the contract.
Each contract under this section—
shall provide that the Secretary, or any person or organization designated by him—
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
shall have the right to audit and inspect any books and records of the eligible 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;
shall require the organization with a risk-sharing contract 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 under this section with the organization; and
shall require the organization to comply with subsections (a) and (c) of section 300e–17 of this title
(relating to disclosure of certain financial information) and with the requirement of section 300e(c)(8) 1
of this title (relating to liability arrangements to protect members);
shall require the organization to provide and supply information (described in section 1395cc(b)(2)(C)(ii) of this title
) in the manner such information is required to be provided or supplied under that section;
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; and
shall contain such other terms and conditions not inconsistent with this section (including requiring the organization to provide the Secretary with such information) as the Secretary may find necessary and appropriate.
The Secretary may not enter into a risk-sharing contract with an eligible organization if a previous risk-sharing contract with that organization under this section was terminated at the request of the organization within the preceding five-year period, except in circumstances which warrant special consideration, as determined by the Secretary.
The authority vested in the Secretary by this section 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.
If the Secretary determines that an eligible organization with a contract under this section—
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;
imposes premiums on individuals enrolled under this section in excess of the premiums permitted;
acts to expel or to refuse to re-enroll an individual in violation of the provisions of this section;
engages in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment (except as permitted by this section) by eligible individuals with the organization whose medical condition or history indicates a need for substantial future medical services;
misrepresents or falsifies information that is furnished—
to the Secretary under this section, or
to an individual or to any other entity under this section;
fails to comply with the requirements of subsection (g)(6)(A) or paragraph (8); or
in the case of a risk-sharing contract, 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 subparagraph (B).
The remedies described in this subparagraph are—
civil money penalties of not more than $25,000 for each determination under subparagraph (A) or, with respect to a determination under clause (iv) or (v)(I) of such subparagraph, of not more than $100,000 for each such determination, plus, with respect to a determination under subparagraph (A)(ii), double the excess amount charged in violation of such subparagraph (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 subparagraph (A)(iv), $15,000 for each individual not enrolled as a result of the practice involved,
suspension of enrollment of individuals under this section after the date the Secretary notifies the organization of a determination under subparagraph (A) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur, or
suspension of payment to the organization under this section for individuals enrolled after the date the Secretary notifies the organization of a determination under subparagraph (A) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur.
In the case of an eligible organization for which the Secretary makes a determination under paragraph (1), the basis of which is not described in subparagraph (A), the Secretary may apply the following intermediate sanctions:
Civil money penalties of not more than $25,000 for each determination under paragraph (1) 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.
Civil money penalties of not more than $10,000 for each week beginning after the initiation of procedures by the Secretary under paragraph (9) during which the deficiency that is the basis of a determination under paragraph (1) exists.
Suspension of enrollment of individuals under this section after the date the Secretary notifies the organization of a determination under paragraph (1) 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.
Each risk-sharing contract with an eligible organization under this section shall provide that the organization will maintain a written agreement with a quality improvement organization (which has a contract with the Secretary under part B of subchapter XI for the area in which the eligible organization is located) or with an entity selected by the Secretary under section 1320c–3(a)(4)(C) 1
of this title under which the review organization will perform functions under section 1320c–3(a)(4)(B) of this title
and section 1320c–3(a)(14) of this title
(other than those performed under contracts described in section 1395cc(a)(1)(F) of this title
) with respect to services, furnished by the eligible organization, for which payment may be made under this subchapter.
For purposes of payment under this subchapter, the cost of such agreement to the eligible organization shall be considered a cost incurred by a provider of services in providing covered services under this subchapter and shall be paid directly by the Secretary to the review organization on behalf of such eligible organization in accordance with a schedule established by the Secretary.
shall be transferred in appropriate proportions from the Federal Hospital Insurance Trust Fund and from the Supplementary Medical Insurance Trust Fund, without regard to amounts appropriated in advance in appropriation Acts, in the same manner as transfers are made for payment for services provided directly to beneficiaries, and
shall not be less in the aggregate for such organizations for a fiscal year than the amounts the Secretary determines to be sufficient to cover the costs of such organizations’ conducting activities described in subparagraph (A) with respect to such eligible organizations under part B of subchapter XI.
Each contract with an eligible organization under this section shall provide that the organization may not operate any physician incentive plan (as defined in subparagraph (B)) unless the following requirements are met:
No specific payment is made directly or indirectly under the plan to a physician or physician group as an inducement to reduce or limit medically necessary services provided with respect to a specific individual enrolled with the organization.
If the plan places a physician or physician group at substantial financial risk (as determined by the Secretary) for services not provided by the physician or physician group, the organization—
provides stop-loss protection for the physician or group that is adequate and appropriate, based on standards developed by the Secretary that take into account the number of physicians placed at such substantial financial risk in the group or under the plan and the number of individuals enrolled with the organization who receive services from the physician or the physician group, and
conducts periodic surveys of both individuals enrolled and individuals previously enrolled with the organization to determine the degree of access of such individuals to services provided by the organization and satisfaction with the quality of such services.
The organization provides the Secretary with descriptive information regarding the plan, sufficient to permit the Secretary to determine whether the plan is in compliance with the requirements of this subparagraph.
In this paragraph, the term “physician incentive plan” means any compensation arrangement between an eligible organization 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 organization.
The Secretary may terminate a contract with an eligible organization under this section or may impose the intermediate sanctions described in paragraph (6) on the organization in accordance with formal investigation and compliance procedures established by the Secretary under which—
the Secretary first 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 paragraph (1) and the organization fails to develop or implement such a plan;
in deciding whether to impose sanctions, the Secretary considers aggravating factors such as whether an organization has a history of deficiencies or has not taken action to correct deficiencies the Secretary has brought to the organization’s attention;
there are no unreasonable or unnecessary delays between the finding of a deficiency and the imposition of sanctions; and
the Secretary provides the organization with reasonable notice and opportunity for hearing (including the right to appeal an initial decision) before imposing any sanction or terminating the contract.
[Aug. 14, 1935, ch. 531], title XVIII, § 1876, as added and amended [Pub. L. 92–603, title II], §§ 226(a), 278(b)(3), Oct. 30, 1972, [86 Stat. 1396], 1453; [Pub. L. 93–233, § 18(m)], (n), Dec. 31, 1973, [87 Stat. 970], 971; [Pub. L. 94–460, title II, § 201(a)]–(d), Oct. 8, 1976, [90 Stat. 1956], 1957; [Pub. L. 95–292, § 5], June 13, 1978, [92 Stat. 315]; [Pub. L. 97–248, title I, § 114(a)], Sept. 3, 1982, [96 Stat. 341]; [Pub. L. 97–448, title III, § 309(b)(12)], Jan. 12, 1983, [96 Stat. 2409]; [Pub. L. 98–21, title VI], §§ 602(g), 606(a)(3)(H), Apr. 20, 1983, [97 Stat. 164], 171; [Pub. L. 98–369, div. B, title III], §§ 2350(a)(1), (b)(1), (2), (c), 2354(b)(37), (38), July 18, 1984, [98 Stat. 1097], 1098, 1102; [Pub. L. 99–272, title IX, § 9211(a)]–(d), Apr. 7, 1986, [100 Stat. 178], 179; [Pub. L. 99–509, title IX], §§ 9312(b)(1), (c)(1), (2), (d)(1), (e)(1), (f), 9353(e)(2), Oct. 21, 1986, [100 Stat. 1999–2001], 2048; [Pub. L. 99–514, title XVIII, § 1895(b)(11)(A)], Oct. 22, 1986, [100 Stat. 2934]; [Pub. L. 100–203, title IV], §§ 4011(a)(1), (b)(1), 4012(b), 4013(a), 4014, 4018(a), 4039(h)(8), Dec. 22, 1987, [101 Stat. 1330–60], 1330–61, 1330–65, as amended [Pub. L. 100–360, title IV, § 411(c)(3)], (e)(3), July 1, 1988, [102 Stat. 773], 776; [Pub. L. 100–360, title II]