POLITICS
08/15/2009 05:12 am ET | Updated May 25, 2011

House Health Care Bill (Pages 201-250)

House Health Care Bill (Pages 201-250)

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ending with fiscal year 2019 as is not taken into account under subparagraph (A).

''(4) STUDY OF FEDERAL HEALTH REFORM SAVINGS.--The Director of the Office of Management and Budget shall conduct a study of the reductions in Federal expenditures during fiscal years 2010 through 2019 which are attributable to the provisions of, and amendments made by, division B of the America's Affordable Health Choices Act of 2009. The Director shall complete such study not later than December 1, 2012.

''(5) REDUCTIONSINFEDERALEXPENDITURES DETERMINED WITHOUT REGARD TO PROGRAMIN-
VESTMENTS.--For purposes of paragraphs (3) and (4), reductions in Federal expenditures shall be determined without regard to section 1121 of the America's Affordable Health Choices Act of 2009 and other program investments under division B thereof.

''(d) MODIFIED ADJUSTED GROSS INCOME.--For purposes of this section, the term 'modified adjusted gross income' means adjusted gross income reduced by any deduction allowed for investment interest (as defined in section 163(d)). In the case of an estate or trust, adjusted

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gross income shall be determined as provided in section 67(e).

''(e) INFLATION ADJUSTMENTS.--

''(1) IN GENERAL.--In the case of taxable years beginning after 2011, the dollar amounts in subsection (a) shall be increased by an amount equal to--

''(A) such dollar amount, multiplied by

''(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting 'calendar year 2010' for 'calendar year 1992' in subparagraph (B) thereof.

''(2) ROUNDING.--If any amount as adjusted under paragraph (1) is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.

''(f) SPECIALRULES.--

''(1) NONRESIDENT ALIEN.--In the case of a nonresident alien individual, only amounts taken into account in connection with the tax imposed under section 871(b) shall be taken into account under this section.

''(2) CITIZENS AND RESIDENTS LIVING ABROAD.--The dollar amounts in effect under sub-

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section (a) (after the application of subsections (b) and (e)) shall be decreased by the excess of--

''(A) the amounts excluded from the taxpayer's gross income under section 911, over

''(B) the amounts of any deductions or exclusions disallowed under section 911(d)(6) with respect to the amounts described in subparagraph (A).

''(3) CHARITABLE TRUSTS.--Subsection (a) shall not apply to a trust all the unexpired interests
in which are devoted to one or more of the purposes described in section 170(c)(2)(B).

''(4) NOT TREATED AS TAX IMPOSED BY THIS CHAPTER FOR CERTAIN PURPOSES.--The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.''.

(b) CLERICAL AMENDMENT.--The table of subparts for part VIII of subchapter A of chapter 1 of such Code, as added by this title, is amended by inserting after the item relating to subpart A the following new item:

''SUBPART B. SURCHARGE ON HIGH INCOME INDIVIDUALS.''.
(c) SECTION 15 NOT TO APPLY.--The amendment made by subsection (a) shall not be treated as a change

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in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

(d) EFFECTIVE DATE.--The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

SEC. 442. DELAY IN APPLICATION OF WORLDWIDE ALLOCATION OF INTEREST.

(a) IN GENERAL.--Paragraphs (5)(D) and (6) of section 864(f) of the Internal Revenue Code of 1986 are each amended by striking ''December 31, 2010'' and inserting ''December 31, 2019''.

(b) TRANSITION.--Subsection (f) of section 864 of such Code is amended by striking paragraph (7).

PART 2--PREVENTION OF TAX AVOIDANCE

SEC. 451. LIMITATION ON TREATY BENEFITS FOR CERTAIN
DEDUCTIBLE PAYMENTS.

(a) IN GENERAL.--Section 894 of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended by adding at the end the following new subsection:

''(d) LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS.--

''(1) IN GENERAL.--In the case of any deductible related-party payment, any withholding tax imposed under chapter 3 (and any tax imposed under

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subpart A or B of this part) with respect to such payment may not be reduced under any treaty of the United States unless any such withholding tax would be reduced under a treaty of the United States if such payment were made directly to the foreign parent corporation.

''(2) DEDUCTIBLE RELATED-PARTY PAYMENT.--For purposes of this subsection, the term 'deductible related-party payment' means any payment made, directly or indirectly, by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities.

''(3) FOREIGN CONTROLLED GROUP OF ENTITIES.--For purposes of this subsection--

''(A) IN GENERAL.--The term 'foreign controlled group of entities' means a controlled group of entities the common parent of which is a foreign corporation.

''(B) CONTROLLED GROUP OF ENTITIES.-- The term 'controlled group of entities' means a controlled group of corporations as defined in section 1563(a)(1), except that--

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''(i) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears therein, and

''(ii) the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563. A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).

''(4) FOREIGN PARENT CORPORATION.--For purposes of this subsection, the term 'foreign parent corporation' means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A).

''(5) REGULATIONS.--The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for--

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''(A) the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation, and

''(B) the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities.''.

(b) EFFECTIVE DATE.--The amendment made by this section shall apply to payments made after the date of the enactment of this Act.

SEC. 452. CODIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

(a) IN GENERAL.--Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

''(o) CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.--

''(1) APPLICATION OF DOCTRINE.--In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if--

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''(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer's economic position, and

''(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

''(2) SPECIAL RULE WHERE TAXPAYER RELIES ON PROFIT POTENTIAL.--

''(A) IN GENERAL.--The potential for profit of a transaction shall be taken into account in determining whether the requirements of subparagraphs (A) and (B) of paragraph (1) are met with respect to the transaction only if the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected.

''(B) TREATMENT OF FEES AND FOREIGN TAXES.--Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (A).

''(3) STATE AND LOCAL TAX BENEFITS.--For purposes of paragraph (1), any State or local income

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tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect.

''(4) FINANCIAL ACCOUNTING BENEFITS.--For purposes of paragraph (1)(B), achieving a financial
accounting benefit shall not be taken into account as a purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of Federal income tax.

''(5) DEFINITIONS AND SPECIAL RULES.--For purposes of this subsection--
''(A) ECONOMIC SUBSTANCE DOCTRINE.-- The term 'economic substance doctrine' means the common law doctrine under which tax benefits under subtitle A with respect to a trans- action are not allowable if the transaction does not have economic substance or lacks a business purpose.

''(B) EXCEPTION FOR PERSONAL TRANSACTIONS OF INDIVIDUALS.--In the case of an
individual, paragraph (1) shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.

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''(C) OTHER COMMON LAW DOCTRINES NOT AFFECTED.--Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.

''(D) DETERMINATION OF APPLICATION OF DOCTRINE NOT AFFECTED.--The determination of whether the economic substance doctrine is relevant to a transaction (or series of trans- actions) shall be made in the same manner as if this subsection had never been enacted.

''(6) REGULATIONS.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this sub- section.''.

(b) EFFECTIVE DATE.--The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

SEC. 453. PENALTIES FOR UNDERPAYMENTS.

(a) PENALTY FOR UNDER PAYMENTS ATTRIBUTABLE TO TRANSACTIONS LACKING ECONOMIC SUBSTANCE.--

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(1) IN GENERAL.--Subsection (b) of section 6662 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (5) the following new paragraph:

''(6) Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.''.

(2) INCREASED PENALTY FOR NONDISCLOSED TRANSACTIONS.--Section 6662 of such Code is amended by adding at the end the following new subsection:

''(i) INCREASE IN PENALTY IN CASE OF NON DIS- CLOSED NON ECONOMIC SUBSTANCE TRANSACTIONS.--

''(1) IN GENERAL.--In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance trans- actions, subsection (a) shall be applied with respect to such portion by substituting '40 percent' for '20 percent'.

''(2) NON DISCLOSED NON ECONOMIC SUB-
STANCE TRANSACTIONS.--For purposes of this sub-
section, the term 'nondisclosed noneconomic sub-
stance transaction' means any portion of a trans-

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action described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

''(3) SPECIAL RULE FOR AMENDED RETURNS.--Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified
by the Secretary.''.

(3) CONFORMING AMENDMENT.--Subparagraph (B) of section 6662A(e)(2) of such Code is amended--

(A) by striking ''section 6662(h)'' and inserting ''subsections (h) or (i) of section 6662'',
and

(B) by striking ''GROSS VALUATION MISSTATEMENT PENALTY'' in the heading and inserting ''CERTAIN INCREASED UNDERPAYMENT PENALTIES''.

(b) REASONABLE CAUSE EXCEPTION NOT APPLICABLE TO NONECONOMIC SUBSTANCE TRANSACTIONS, TAX

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SHELTERS, AND CERTAIN LARGE OR PUBLICLY TRADED PERSONS.--Subsection (c) of section 6664 of such Code is amended--

(1) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,

(2) by striking ''paragraph (2)'' in paragraph (4), as so redesignated, and inserting ''paragraph
(3)'', and

(3) by inserting after paragraph (1) the following new paragraph:

''(2) EXCEPTION.--Paragraph (1) shall not apply to--

''(A) to any portion of an underpayment which is attributable to one or more tax shelters
(as defined in section 6662(d)(2)(C)) or transactions described in section 6662(b)(6), and

''(B) to any taxpayer if such taxpayer is a specified person (as defined in section
6662(d)(2)(D)(ii)).''.

(c) APPLICATION OF PENALTY FOR ERRONEOUS CLAIM FOR REFUND OR CREDIT TO NONECONOMIC SUBSTANCE TRANSACTIONS.--Section 6676 of such Code is amended by redesignating subsection (c) as subsection (d) and inserting after subsection (b) the following new subsection:

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''(c) NONECONOMIC SUBSTANCE TRANSACTIONS TREATED AS LACKING REASONABLE BASIS.--For purposes of this section, any excessive amount which is attributable to any transaction described in section 6662(b)(6) shall not be treated as having a reasonable basis.''.

(d) SPECIAL UNDERSTATEMENT REDUCTION RULE FOR CERTAIN LARGE OR PUBLICLY TRADED PERSONS.--

(1) IN GENERAL.--Paragraph (2) of section 6662(d) of such Code is amended by adding at the
end the following new subparagraph:

''(D) SPECIAL REDUCTION RULE FOR CERTAIN LARGE OR PUBLICLY TRADED PERSONS.--

''(i) IN GENERAL.--In the case of any specified person--

''(I) subparagraph (B) shall not apply, and

''(II) the amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to any item with respect to which the taxpayer has a reasonable belief that the tax treatment of such item by the taxpayer is more likely than not the proper tax treatment of such item.

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''(ii) SPECIFIED PERSON.--For purposes of this subparagraph, the term 'specified person' means--

''(I) any person required to file periodic or other reports under section 13 of the Securities Exchange Act of 1934, and

''(II) any corporation with gross receipts in excess of $100,000,000 for the taxable year involved. All persons treated as a single employer under section 52(a) shall be treated as one person for purposes of subclause (II).''.

(2) CONFORMING AMENDMENT.--Subparagraph (C) of section 6662(d)(2) of such Code is amended by striking ''Subparagraph (B)'' and inserting ''Subparagraphs (B) and (D)(i)(II)''.

(e) EFFECTIVE DATE.--The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

SEC. 1001. TABLE OF CONTENTS OF DIVISION.
The table of contents for this division is as follows:

DIVISION B--MEDICARE AND MEDICAID IMPROVEMENTS

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TITLE I--IMPROVING HEALTH CARE VALUE
Subtitle A--Provisions Related to Medicare Part A
PART1--MARKET BASKET UPDATES

Sec. 1101. Skilled nursing facility payment update.
Sec. 1102. Inpatient rehabilitation facility payment update.
Sec. 1103. Incorporating productivity improvements into market basket updates that do not already incorporate such improvements.

PART2--OTHER MEDICARE PART A PROVISIONS
Sec. 1111. Payments to skilled nursing facilities.
Sec. 1112. Medicare DSH report and payment adjustments in response to coverage expansion.
Subtitle B--Provisions Related to Part B

PART1--PHYSICIANS' SERVICES
Sec. 1121. Sustainable growth rate reform.
Sec. 1122. Misvalued codes under the physician fee schedule.
Sec. 1123. Payments for efficient areas.
Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI).
Sec. 1125. Adjustment to Medicare payment localities.

PART2--MARKET BASKET UPDATES
Sec. 1131. Incorporating productivity improvements into market basket updates that do not already incorporate such improvements.

PART3--OTHER PROVISIONS
Sec. 1141. Rental and purchase of power-driven wheelchairs.
Sec. 1142. Extension of payment rule for brachytherapy.
Sec. 1143. Home infusion therapy report to congress.
Sec. 1144. Require ambulatory surgical centers (ASCs) to submit cost data and other data.
Sec. 1145. Treatment of certain cancer hospitals.
Sec. 1146. Medicare Improvement Fund.
Sec. 1147. Payment for imaging services.
Sec. 1148. Durable medical equipment program improvements.
Sec. 1149. MedPAC study and report on bone mass measurement.
Subtitle C--Provisions Related to Medicare Parts A and B
Sec. 1151. Reducing potentially preventable hospital readmissions.
Sec. 1152. Post acute care services payment reform plan and bundling pilot program.
Sec. 1153. Home health payment update for 2010.
Sec. 1154. Payment adjustments for home health care.
Sec. 1155. Incorporating productivity improvements into market basket update for home health services.
Sec. 1156. Limitation on Medicare exceptions to the prohibition on certain physician referrals made to hospitals.
Sec. 1157. Institute of Medicine study of geographic adjustment factors under Medicare.

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Sec. 1158. Revision of Medicare payment systems to address geographic inequities.
Subtitle D--Medicare Advantage Reforms
PART1--PAYMENT AND ADMINISTRATION
Sec. 1161. Phase-in of payment based on fee-for-service costs.
Sec. 1162. Quality bonus payments.
Sec. 1163. Extension of Secretarial coding intensity adjustment authority.
Sec. 1164. Simplification of annual beneficiary election periods.
Sec. 1165. Extension of reasonable cost contracts.
Sec. 1166. Limitation of waiver authority for employer group plans.
Sec. 1167. Improving risk adjustment for payments.
Sec. 1168. Elimination of MA Regional Plan Stabilization Fund.

PART2--BENEFICIARY PROTECTIONS AND ANTI-FRAUD
Sec. 1171. Limitation on cost-sharing for individual health services.
Sec. 1172. Continuous open enrollment for enrollees in plans with enrollment suspension.
Sec. 1173. Information for beneficiaries on MA plan administrative costs.
Sec. 1174. Strengthening audit authority.
Sec. 1175. Authority to deny plan bids.

PART3--TREATMENT OF SPECIAL NEEDS PLANS
Sec. 1176. Limitation on enrollment outside open enrollment period of individuals into chronic care specialized MA plans for special needs individuals.
Sec. 1177. Extension of authority of special needs plans to restrict enrollment.
Subtitle E--Improvements to Medicare Part D
Sec. 1181. Elimination of coverage gap.
Sec. 1182. Discounts for certain part D drugs in original coverage gap.
Sec. 1183. Repeal of provision relating to submission of claims by pharmacies located in or contracting with long-term care facilities.
Sec. 1184. Including costs incurred by AIDS drug assistance programs and Indian Health Service in providing prescription drugs toward the annual out-of-pocket threshold under part D.
Sec. 1185. Permitting mid-year changes in enrollment for formulary changes that adversely impact an enrollee.
Subtitle F--Medicare Rural Access Protections
Sec. 1191. Telehealth expansion and enhancements.
Sec. 1192. Extension of outpatient hold harmless provision.
Sec. 1193. Extension of section 508 hospital reclassifications.
Sec. 1194. Extension of geographic floor for work.
Sec. 1195. Extension of payment for technical component of certain physician pathology services.
Sec. 1196. Extension of ambulance add-ons.

TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS
Subtitle A--Improving and Simplifying Financial Assistance for Low Income
Medicare Beneficiaries

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Sec. 1201. Improving assets tests for Medicare Savings Program and low-income subsidy program.
Sec. 1202. Elimination of part D cost-sharing for certain non-institutionalized full-benefit dual eligible individuals.
Sec. 1203. Eliminating barriers to enrollment.
Sec. 1204. Enhanced oversight relating to reimbursements for retroactive low income subsidy enrollment.
Sec. 1205. Intelligent assignment in enrollment.
Sec. 1206. Special enrollment period and automatic enrollment process for cer-
tain subsidy eligible individuals.
Sec. 1207. Application of MA premiums prior to rebate in calculation of low
income subsidy benchmark.
Subtitle B--Reducing Health Disparities
Sec. 1221. Ensuring effective communication in Medicare.
Sec. 1222. Demonstration to promote access for Medicare beneficiaries with limited English proficiency by providing reimbursement for culturally and linguistically appropriate services.
Sec. 1223. IOM report on impact of language access services.
Sec. 1224. Definitions.
Subtitle C--Miscellaneous Improvements
Sec. 1231. Extension of therapy caps exceptions process.
Sec. 1232. Extended months of coverage of immunosuppressive drugs for kidney transplant patients and other renal dialysis provisions.
Sec. 1233. Advance care planning consultation.
Sec. 1234. Part B special enrollment period and waiver of limited enrollment penalty for TRICARE beneficiaries.
Sec. 1235. Exception for use of more recent tax year in case of gains from sale
of primary residence in computing part B income-related premium.
Sec. 1236. Demonstration program on use of patient decisions aids.

TITLE III--PROMOTING PRIMARY CARE, MENTAL HEALTH SERVICES, AND COORDINATED CARE
Sec. 1301. Accountable Care Organization pilot program.
Sec. 1302. Medical home pilot program.
Sec. 1303. Payment incentive for selected primary care services.
Sec. 1304. Increased reimbursement rate for certified nurse-midwives.
Sec. 1305. Coverage and waiver of cost-sharing for preventive services.
Sec. 1306. Waiver of deductible for colorectal cancer screening tests regardless of coding, subsequent diagnosis, or ancillary tissue removal.
Sec. 1307. Excluding clinical social worker services from coverage under the medicare skilled nursing facility prospective payment system and consolidated payment.
Sec. 1308. Coverage of marriage and family therapist services and mental health counselor services.
Sec. 1309. Extension of physician fee schedule mental health add-on.
Sec. 1310. Expanding access to vaccines.

TITLE IV--QUALITY
Subtitle A--Comparative Effectiveness Research

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Sec. 1401. Comparative effectiveness research.
Subtitle B--Nursing Home Transparency

PART1--IMPROVING TRANSPARENCY OF INFORMATION ON SKILLED NURSING FACILITIES AND NURSING FACILITIES
Sec. 1411. Required disclosure of ownership and additional disclosable parties information.
Sec. 1412. Accountability requirements.
Sec. 1413. Nursing home compare Medicare website.
Sec. 1414. Reporting of expenditures.
Sec. 1415. Standardized complaint form.
Sec. 1416. Ensuring staffing accountability.

PART2--TARGETING ENFORCEMENT
Sec. 1421. Civil money penalties.
Sec. 1422. National independent monitor pilot program.
Sec. 1423. Notification of facility closure.

PART3--IMPROVING STAFF TRAINING
Sec. 1431. Dementia and abuse prevention training.
Sec. 1432. Study and report on training required for certified nurse aides and supervisory staff.
Subtitle C--Quality Measurements
Sec. 1441. Establishment of national priorities for quality improvement.
Sec. 1442. Development of new quality measures; GAO evaluation of data collection process for quality measurement.
Sec. 1443. Multi-stakeholder pre-rulemaking input into selection of quality measures.
Sec. 1444. Application of quality measures.
Sec. 1445. Consensus-based entity funding.
Subtitle D--Physician Payments Sunshine Provision
Sec. 1451. Reports on financial relationships between manufacturers and distributors of covered drugs, devices, biologicals, or medical supplies under Medicare, Medicaid, or CHIP and physicians and other health care entities and between physicians and other health care entities.
Subtitle E--Public Reporting on Health Care-Associated Infections
Sec. 1461. Requirement for public reporting by hospitals and ambulatory surgical centers on health care-associated infections.

TITLE V--MEDICARE GRADUATE MEDICAL EDUCATION
Sec. 1501. Distribution of unused residency positions.
Sec. 1502. Increasing training in nonprovider settings.
Sec. 1503. Rules for counting resident time for didactic and scholarly activities and other activities.
Sec. 1504. Preservation of resident cap positions from closed hospitals.
Sec. 1505. Improving accountability for approved medical residency training.

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TITLE VI--PROGRAM INTEGRITY
Subtitle A--Increased Funding to Fight Waste, Fraud, and Abuse
Sec. 1601. Increased funding and flexibility to fight fraud and abuse.
Subtitle B--Enhanced Penalties for Fraud and Abuse
Sec. 1611. Enhanced penalties for false statements on provider or supplier enrollment applications.
Sec. 1612. Enhanced penalties for submission of false statements material to a false claim.
Sec. 1613. Enhanced penalties for delaying inspections.
Sec. 1614. Enhanced hospice program safeguards.
Sec. 1615. Enhanced penalties for individuals excluded from program participation.
Sec. 1616. Enhanced penalties for provision of false information by Medicare Advantage and part D plans.
Sec. 1617. Enhanced penalties for Medicare Advantage and part D marketing violations.
Sec. 1618. Enhanced penalties for obstruction of program audits.
Sec. 1619. Exclusion of certain individuals and entities from participation in Medicare and State health care programs.
Subtitle C--Enhanced Program and Provider Protections
Sec. 1631. Enhanced CMS program protection authority.
Sec. 1632. Enhanced Medicare, Medicaid, and CHIP program disclosure requirements relating to previous affiliations.
Sec. 1633. Required inclusion of payment modifier for certain evaluation and management services.
Sec. 1634. Evaluations and reports required under Medicare Integrity Program.
Sec. 1635. Require providers and suppliers to adopt programs to reduce waste, fraud, and abuse.
Sec. 1636. Maximum period for submission of Medicare claims reduced to not more than 12 months.
Sec. 1637. Physicians who order durable medical equipment or home health services required to be Medicare enrolled physicians or eligible professionals.
Sec. 1638. Requirement for physicians to provide documentation on referrals to programs at high risk of waste and abuse.
Sec. 1639. Face to face encounter with patient required before physicians may certify eligibility for home health services or durable medical equipment under Medicare.
Sec. 1640. Extension of testimonial subpoena authority to program exclusion investigations.
Sec. 1641. Required repayments of Medicare and Medicaid overpayments.
Sec. 1642. Expanded application of hardship waivers for OIG exclusions to beneficiaries of any Federal health care program.
Sec. 1643. Access to certain information on renal dialysis facilities.
Sec. 1644. Billing agents, clearinghouses, or other alternate payees required to register under Medicare.
Sec. 1645. Conforming civil monetary penalties to False Claims Act amendments.

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Subtitle D--Access to Information Needed to Prevent Fraud, Waste, and Abuse
Sec. 1651. Access to Information Necessary to Identify Fraud, Waste, and Abuse.
Sec. 1652. Elimination of duplication between the Healthcare Integrity and Protection Data Bank and the National Practitioner Data Bank.
Sec. 1653. Compliance with HIPAA privacy and security standards.

TITLE VII--MEDICAID AND CHIP
Subtitle A--Medicaid and Health Reform
Sec. 1701. Eligibility for individuals with income below 133-1⁄3 percent of the Federal poverty level.
Sec. 1702. Requirements and special rules for certain Medicaid eligible individuals.
Sec. 1703. CHIP and Medicaid maintenance of effort.
Sec. 1704. Reduction in Medicaid DSH.
Sec. 1705. Expanded outstationing.
Subtitle B--Prevention
Sec. 1711. Required coverage of preventive services.
Sec. 1712. Tobacco cessation.
Sec. 1713. Optional coverage of nurse home visitation services.
Sec. 1714. State eligibility option for family planning services.
Subtitle C--Access
Sec. 1721. Payments to primary care practitioners.
Sec. 1722. Medical home pilot program.
Sec. 1723. Translation or interpretation services.
Sec. 1724. Optional coverage for freestanding birth center services.
Sec. 1725. Inclusion of public health clinics under the vaccines for children program.
Subtitle D--Coverage
Sec. 1731. Optional medicaid coverage of low-income HIV-infected individuals.
Sec. 1732. Extending transitional Medicaid Assistance (TMA).
Sec. 1733. Requirement of 12-month continuous coverage under certain CHIP programs.
Subtitle E--Financing
Sec. 1741. Payments to pharmacists.
Sec. 1742. Prescription drug rebates.
Sec. 1743. Extension of prescription drug discounts to enrollees of medicaid managed care organizations.
Sec. 1744. Payments for graduate medical education.
Subtitle F--Waste, Fraud, and Abuse
Sec. 1751. Health-care acquired conditions.
Sec. 1752. Evaluations and reports required under Medicaid Integrity Program.

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Sec. 1753. Require providers and suppliers to adopt programs to reduce waste, fraud, and abuse.
Sec. 1754. Overpayments.
Sec. 1755. Managed Care Organizations.
Sec. 1756. Termination of provider participation under Medicaid and CHIP if terminated under Medicare or other State plan or child health plan.
Sec. 1757. Medicaid and CHIP exclusion from participation relating to certain ownership, control, and management affiliations.
Sec. 1758. Requirement to report expanded set of data elements under MMIS to detect fraud and abuse.
Sec. 1759. Billing agents, clearinghouses, or other alternate payees required to register under Medicaid.
Sec. 1760. Denial of payments for litigation-related misconduct.
Subtitle G--Puerto Rico and the Territories
Sec. 1771. Puerto Rico and territories.
Subtitle H--Miscellaneous
Sec. 1781. Technical corrections.
Sec. 1782. Extension of QI program.

TITLE VIII--REVENUE-RELATED PROVISIONS
Sec. 1801. Disclosures to facilitate identification of individuals likely to be ineligible for the low-income assistance under the Medicare prescription drug program to assist Social Security Administration's outreach to eligible individuals.
Sec. 1802. Comparative Effectiveness Research Trust Fund; financing for Trust Fund.

TITLE IX--MISCELLANEOUS PROVISIONS
Sec. 1901. Repeal of trigger provision.
Sec. 1902. Repeal of comparative cost adjustment (CCA) program.
Sec. 1903. Extension of gainsharing demonstration.
Sec. 1904. Grants to States for quality home visitation programs for families with young children and families expecting children.
Sec. 1905. Improved coordination and protection for dual eligibles.

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TITLE I--IMPROVING HEALTH CARE VALUE
Subtitle A--Provisions Related to Medicare Part A

PART 1--MARKET BASKET UPDATES

SEC. 1101. SKILLED NURSING FACILITY PAYMENT UPDATE.

(a) IN GENERAL.--Section 1888(e)(4)(E)(ii) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(E)(ii)) is amended--

(1) in subclause (III), by striking ''and'' at the end;

(2) by redesignating subclause (IV) as subclause (VI); and

(3) by inserting after subclause (III) the following new subclauses:

''(IV) for each of fiscal years 2004 through 2009, the rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved;

''(V) for fiscal year 2010, the rate computed for the previous fiscal year; and''.

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(b) DELAYED EFFECTIVE DATE.--Section 1888(e)(4)(E)(ii)(V) of the Social Security Act, as inserted by subsection (a)(3), shall not apply to payment for days before January 1, 2010.

SEC. 1102. INPATIENT REHABILITATION FACILITY PAYMENT UPDATE.

(a) IN GENERAL.--Section 1886(j)(3)(C) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by striking ''and 2009'' and inserting ''through 2010''.

(b) DELAYED EFFECTIVE DATE.--The amendment made by subsection (a) shall not apply to payment units occurring before January 1, 2010.

SEC. 1103. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATES
THAT DO NOT ALREADY INCORPORATE SUCH IMPROVEMENTS.

(a) INPATIENT ACUTE HOSPITALS.--Section 1886(b)(3)(B) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B)) is amended--

(1) in clause (iii)--

(A) by striking ''(iii) For purposes of this subparagraph,'' and inserting ''(iii)(I) For purposes of this subparagraph, subject to the productivity adjustment described in subclause (II),''; and

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(B) by adding at the end the following new subclause:

''(II) The productivity adjustment described in this subclause, with respect to an increase or change for a fiscal year or year or cost reporting period, or other annual period, is a productivity offset equal to the percentage change in the 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity (as recently published before the promulgation of such increase for the year or period involved). Except as other-
wise provided, any reference to the increase described in this clause shall be a reference to the percentage increase described in subclause (I) minus the percentage change under this subclause.'';

(2) in the first sentence of clause (viii)(I), by inserting ''(but not below zero)'' after ''shall be re-
duced''; and

(3) in the first sentence of clause (ix)(I)--

(A) by inserting ''(determined without regard to clause (iii)(II)'' after ''clause (i)'' the second time it appears; and

(B) by inserting ''(but not below zero)'' after ''reduced''.

(b) SKILLED NURSING FACILITIES.--Section 1888(e)(5)(B) of such Act (42 U.S.C. 1395yy(e)(5))(B)

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is amended by inserting ''subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)'' after ''as calculated by the Secretary''.

(c) LONG TERM CARE HOSPITALS.--Section 1886(m) of the Social Security Act (42 U.S.C.
1395ww(m)) is amended by adding at the end the following new paragraph:

''(3) PRODUCTIVITY ADJUSTMENT.--In implementing the system described in paragraph (1) for
discharges occurring during the rate year ending in 2010 or any subsequent rate year for a hospital, to the extent that an annual percentage increase factor applies to a base rate for such discharges for the hospital, such factor shall be subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II).''.

(d) IN PATIENT REHABILITATION FACILITIES.--The second sentence of section 1886(j)(3)(C) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by inserting ''(subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II))'' after ''appropriate per-
centage increase''.

(e) PSYCHIATRIC HOSPITALS.--Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended by adding at the end the following new subsection:

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''(o) PROSPECTIVE PAYMENT FOR PSYCHIATRIC HOSPITALS.--

''(1) REFERENCE TO ESTABLISHMENT AND IMPLEMENTATION OF SYSTEM.--For provisions related to the establishment and implementation of a prospective payment system for payments under this title for inpatient hospital services furnished by psychiatric hospitals (as described in clause (i) of subsection (d)(1)(B) and psychiatric units (as described in the matter following clause (v) of such subsection), see section 124 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999.

''(2) PRODUCTIVITY ADJUSTMENT.--In implementing the system described in paragraph (1) for
discharges occurring during the rate year ending in 2011 or any subsequent rate year for a psychiatric hospital or unit described in such paragraph, to the extent that an annual percentage increase factor applies to a base rate for such discharges for the hospital or unit, respectively, such factor shall be subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II).''.

(f) HOSPICE CARE.--Subclause (VII) of section 1814(i)(1)(C)(ii) of the Social Security Act (42 U.S.C.

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1395f(i)(1)(C)(ii)) is amended by inserting after ''the market basket percentage increase'' the following: ''(which is subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II))''.

(g) EFFECTIVE DATE.--The amendments made by subsections (a), (b), (d), and (f) shall apply to annual increases effected for fiscal years beginning with fiscal year 2010.

PART 2--OTHER MEDICARE PART A PROVISIONS

SEC. 1111. PAYMENTS TO SKILLED NURSING FACILITIES.

(a) CHANGE IN RECALIBRATION FACTOR.--

(1) ANALYSIS.--The Secretary of Health and Human Services shall conduct, using calendar year 2006 claims data, an initial analysis comparing total payments under title XVIII of the Social Security Act for skilled nursing facility services under the RUG-53 and under the RUG-44 classification systems.

(2) ADJUSTMENT IN RECALIBRATION FACTOR.--Based on the initial analysis under paragraph

(1), the Secretary shall adjust the case mix indexes under section 1888(e)(4)(G)(i) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(G)(i)) for fiscal year 2010 by the appropriate recalibration factor as proposed in the proposed rule for Medicare skilled nurs-

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ing facilities issued by such Secretary on May 12, 2009 (74 Federal Register 22214 et seq.).

(b) CHANGE IN PAYMENT FOR NONTHERAPY ANCILLARY(NTA) SERVICES AND THERAPY SERVICES.--

(1) CHANGES UNDER CURRENT SNF CLASSIFICATION SYSTEM.--

(A) IN GENERAL.--Subject to subpara- graph (B), the Secretary of Health and Human Services shall, under the system for payment of skilled nursing facility services under section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)), increase payment by 10 percent for non-therapy ancillary services (as specified by the Secretary in the notice issued on November 27, 1998 (63 Federal Register 65561 et seq.)) and shall decrease payment for the therapy case mix component of such rates by 5.5 percent.

(B) EFFECTIVE DATE.--The changes in payment described in subparagraph (A) shall apply for days on or after January 1, 2010, and until the Secretary implements an alternative case mix classification system for payment of skilled nursing facility services under section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)).

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(C) IMPLEMENTATION.--Notwithstanding any other provision of law, the Secretary may implement by program instruction or otherwise the provisions of this paragraph.

(2) CHANGES UNDER A FUTURE SNF CASE MIX CLASSIFICATION SYSTEM.--

(A) ANALYSIS.--

(i) IN GENERAL.--The Secretary of Health and Human Services shall analyze payments for non-therapy ancillary services under a future skilled nursing facility classification system to ensure the accuracy of payment for non-therapy ancillary services. Such analysis shall consider use of appropriate indicators which may include age, physical and mental status, ability to perform activities of daily living, prior nursing home stay, broad RUG category, and a proxy for length of stay.

(ii) APPLICATION.--Such analysis shall be conducted in a manner such that the future skilled nursing facility classification system is implemented to apply to services furnished during a fiscal year beginning with fiscal year 2011.

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(B) CONSULTATION.--In conducting the analysis under subparagraph (A), the Secretary
shall consult with interested parties, including the Medicare Payment Advisory Commission and other interested stakeholders, to identify appropriate predictors of nontherapy ancillary costs.
(
C) RULE MAKING.--The Secretary shall include the result of the analysis under sub-
paragraph (A) in the fiscal year 2011 rulemaking cycle for purposes of implementation beginning for such fiscal year.

(D) IMPLEMENTATION.--Subject to subparagraph (E) and consistent with subparagraph (A)(ii), the Secretary shall implement changes to payments for non-therapy ancillary services (which may include a separate rate component for non-therapy ancillary services and may include use of a model that predicts payment amounts applicable for non-therapy ancillary services) under such future skilled nursing facility services classification system as the Secretary determines appropriate based on the analysis conducted pursuant to subparagraph (A).

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(E) BUDGET NEUTRALITY.--The Secretary shall implement changes described in subparagraph (D) in a manner such that the estimated expenditures under such future skilled nursing facility services classification system for a fiscal year beginning with fiscal year 2011 with such changes would be equal to the estimated expenditures that would otherwise occur under title XVIII of the Social Security Act under such future skilled nursing facility services classification system for such year without such changes.

(c) OUTLIER POLICY FOR NTA AND THERAPY.--Section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)) is amended by adding at the end the following new paragraph:

''(13) OUTLIERS FOR NTA AND THERAPY.--

''(A) IN GENERAL.--With respect to outliers because of unusual variations in the type or amount of medically necessary care, beginning with October 1, 2010, the Secretary--

''(i) shall provide for an addition or adjustment to the payment amount otherwise made under this section with respect

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to non-therapy ancillary services in the case of such outliers; and

''(ii) may provide for such an addition or adjustment to the payment amount otherwise made under this section with respect to therapy services in the case of such outliers.

''(B) OUTLIERS BASED ON AGGREGATE COSTS.--Outlier adjustments or additional payments described in subparagraph (A) shall be based on aggregate costs during a stay in a skilled nursing facility and not on the number of days in such stay.

''(C) BUDGET NEUTRALITY.-- The Secretary shall reduce estimated payments that would otherwise be made under the prospective payment system under this subsection with respect to a fiscal year by 2 percent. The total amount of the additional payments or payment adjustments for outliers made under this paragraph with respect to a fiscal year may not exceed 2 percent of the total payments projected or estimated to be made based on the prospective payment system under this subsection for the fiscal year.''.

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(d) CONFORMING AMENDMENTS.--Section 1888(e)(8) of such Act (42 U.S.C. 1395yy(e)(8)) is amended--

(1) in subparagraph (A), by inserting ''and adjustment under section 1111(b) of the America's Affordable Health Choices Act of 2009;

(2) in subparagraph (B), by striking ''and'';

(3) in subparagraph (C), by striking the period and inserting ''; and''; and

(4) by adding at the end the following new subparagraph:

''(D) the establishment of outliers under paragraph (13).''.

SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUSTMENTS IN RESPONSE TO COVERAGE EXPANSION.

(a) DSH REPORT.--

(1) IN GENERAL.--Not later than January 1, 2016, the Secretary of Health and Human Services
shall submit to Congress a report on Medicare DSH taking into account the impact of the health care reforms carried out under division A in reducing the number of uninsured individuals. The report shall include recommendations relating to the following:

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(A) The appropriate amount, targeting, and distribution of Medicare DSH to compensate for higher Medicare costs associated with serving low-income beneficiaries (taking into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size), consistent with the original intent of Medicare DSH.

(B) The appropriate amount, targeting, and distribution of Medicare DSH to hospitals given their continued uncompensated care costs, to the extent such costs remain.

(2) COORDINATION WITH MEDICAID DSH REPORT.--The Secretary shall coordinate the report under this subsection with the report on Medicaid DSH under section 1704(a).

(b) PAYMENT ADJUSTMENTS IN RESPONSE TO COVERAGE EXPANSION.--

(1) IN GENERAL.--If there is a significant decrease in the national rate of uninsurance as a result of this Act (as determined under paragraph (2)(A)), then the Secretary of Health and Human Services shall, beginning in fiscal year 2017, implement the following adjustments to Medicare DSH:

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(A) The amount of Medicare DSH shall be adjusted based on the recommendations of the report under subsection (a)(1)(A) and shall take into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size.

(B) Subject to paragraph (3), increase Medicare DSH for a hospital by an additional amount that is based on the amount of uncompensated care provided by the hospital based on criteria for uncompensated care as determined by the Secretary, which shall exclude bad debt.

(2) SIGNIFICANT DECREASE IN NATIONAL RATE OF UNINSURANCE AS A RESULT OF THIS ACT.--For purposes of this subsection--

(A) IN GENERAL.--There is a ''significant decrease in the national rate of uninsurance as
a result of this Act'' if there is a decrease in the national rate of uninsurance (as defined in
subparagraph (B)) from 2012 to 2014 that exceeds 8 percentage points.

(B) NATIONAL RATE OF UNINSURANCE DEFINED.--The term ''national rate of uninsurance'' means, for a year, such rate for the under-65 population for the year as deter-

P. 237

mined and published by the Bureau of the Census in its Current Population Survey in or about September of the succeeding year.

(3) UNCOMPENSATED CARE INCREASE.--

(A) COMPUTATION OF DSH SAVINGS.--For each fiscal year (beginning with fiscal year 2017), the Secretary shall estimate the aggregate reduction in Medicare DSH that will result from the adjustment under paragraph (1)(A).

(B) STRUCTURE OF PAYMENT INCREASE.--The Secretary shall compute the increase in Medicare DSH under paragraph (1)(B) for a fiscal year in accordance with a formula established by the Secretary that provides that--

(i) the aggregate amount of such increase for the fiscal year does not exceed 50 percent of the aggregate reduction in Medicare DSH estimated by the Secretary for such fiscal year; and
(ii) hospitals with higher levels of uncompensated care receive a greater in-
crease.

(c) MEDICARE DSH.--In this section, the term ''Medicare DSH'' means adjustments in payments under

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section 1886(d)(5)(F) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(F)) for inpatient hospital services furnished by disproportionate share hospitals.

Subtitle B--Provisions Related to Part B

PART 1--PHYSICIANS' SERVICES

SEC. 1121. SUSTAINABLE GROWTH RATE REFORM.

(a) TRANSITIONAL UPDATE FOR 2010.--Section 1848(d) of the Social Security Act (42 U.S.C. 1395w-4(d)) is amended by adding at the end the following new paragraph:

''(10) UPDATEFOR2010.--The update to the single conversion factor established in paragraph (1)(C) for 2010 shall be the percentage increase in the MEI (as defined in section 1842(i)(3)) for that year.''.

(b) REBASING SGR USING 2009; LIMITATION ON CUMULATIVE ADJUSTMENT PERIOD.--Section 1848(d)(4) of such Act (42 U.S.C. 1395w-4(d)(4)) is amended--

(1) in subparagraph (B), by striking ''subparagraph (D)'' and inserting ''subparagraphs (D) and
(G)''; and

(2) by adding at the end the following new subparagraph:

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''(G) REBASING USING 2009 FOR FUTURE UPDATE ADJUSTMENTS.--In determining the update adjustment factor under subparagraph

(B) for 2011 and subsequent years--

''(i) the allowed expenditures for 2009 shall be equal to the amount of the actual expenditures for physicians' services during 2009; and
''(ii) the reference in subparagraph (B)(ii)(I) to 'April 1, 1996' shall be treated as a reference to 'January 1, 2009 (or, if later, the first day of the fifth year before the year involved)'.''.

(c) LIMITATION ON PHYSICIANS' SERVICES INCLUDED IN TARGET GROWTH RATE COMPUTATION TO SERVICES COVERED UNDER PHYSICIAN FEE SCHEDULE.--Effective for services furnished on or after January 1, 2009, section 1848(f)(4)(A) of such Act is amended striking ''(such as clinical'' and all that follows through ''in a physician's office'' and inserting ''for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than

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such services when furnished in the facility of a provider of services)''.

(d) ESTABLISHMENT OF SEPARATE TARGET GROWTH RATES FOR CATEGORIES OF SERVICES.--

(1) ESTABLISHMENT OF SERVICE CATEGORIES.--Subsection (j) of section 1848 of the Social Security Act (42 U.S.C. 1395w-4) is amended by adding at the end the following new paragraph:

''(5) SERVICE CATEGORIES.--For services furnished on or after January 1, 2009, each of the following categories of physicians' services (as defined in paragraph (3)) shall be treated as a separate 'service category':

''(A) Evaluation and management services that are procedure codes (for services covered under this title) for--

''(i) services in the category designated Evaluation and Management in the Health Care Common Procedure Coding System (established by the Secretary under subsection (c)(5) as of December 31, 2009, and as subsequently modified by the Secretary); and

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''(ii) preventive services (as defined in section 1861(iii)) for which payment is
made under this section.

''(B) All other services not described in subparagraph (A). Service categories established under this paragraph shall apply without regard to the specialty of the physician furnishing the service.''.

(2) ESTABLISHMENT OF SEPARATE CONVERSION FACTORS FOR EACH SERVICE CATEGORY.-- Subsection (d)(1) of section 1848 of the Social Security Act (42 U.S.C. 1395w-4) is amended--

(A) in subparagraph (A)--

(i) by designating the sentence beginning ''The conversion factor'' as clause (i) with the heading ''APPLICATION OF SINGLE CONVERSION FACTOR.--'' and with appropriate indentation;
(ii) by striking ''The conversion factor'' and inserting ''Subject to clause (ii),
the conversion factor''; and
(iii) by adding at the end the following new clause:

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''(ii) APPLICATION OF MULTIPLE CONVERSION FACTORS BEGINNING WITH
2011.--

''(I) IN GENERAL.--In applying clause (i) for years beginning with 2011, separate conversion factors shall be established for each service category of physicians' services (as defined in subsection (j)(5)) and any reference in this section to a conversion factor for such years shall be deemed to be a reference to the conversion factor for each of such categories.

''(II) INITIAL CONVERSION FACTORS.--Such factors for 2011 shall be based upon the single conversion factor for the previous year multiplied by the update established under paragraph (11) for such category for 2011.

''(III) UPDATING OF CONVERSION FACTORS.--Such factor for a service category for a subsequent year shall be based upon the conversion

P. 243

factor for such category for the previous year and adjusted by the update established for such category under paragraph (11) for the year involved.''; and

(B) in subparagraph (D), by striking ''other physicians' services'' and inserting ''for
physicians' services described in the service category described in subsection (j)(5)(B)''.

(3) ESTABLISHING UPDATES FOR CONVERSION FACTORS FOR SERVICE CATEGORIES.--Section 1848(d) of the Social Security Act (42 U.S.C. 1395w-4(d)), as amended by subsection (a), is amended--

(A) in paragraph (4)(C)(iii), by striking ''The allowed'' and inserting ''Subject to paragraph (11)(B), the allowed''; and

(B) by adding at the end the following new paragraph:

''(11) UPDATES FOR SERVICE CATEGORIES BEGINNING WITH 2011.--
''(A) IN GENERAL.--In applying paragraph (4) for a year beginning with 2011, the following rules apply:

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''(i) APPLICATIONOF SEPARATE UPDATE ADJUSTMENTS FOR EACH SERVICE CATEGORY.--Pursuant to paragraph (1)(A)(ii)(I), the update shall be made to the conversion factor for each service category (as defined in subsection (j)(5)) based upon an update adjustment factor for the respective category and year and the update adjustment factor shall be computed, for a year, separately for each service category.

''(ii) COMPUTATION OF ALLOWED AND ACTUAL EXPENDITURES BASED ON SERVICE CATEGORIES.--In computing the prior year adjustment component and the cumulative adjustment component under clauses (i) and (ii) of paragraph (4)(B), the following rules apply:

''(I) APPLICATION BASED ON SERVICE CATEGORIES.--The allowed expenditures and actual expenditures shall be the allowed and actual expenditures for the service category, as determined under subparagraph (B).

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''(II) APPLICATION OF CATEGORY SPECIFIC TARGET GROWTH RATE.-- The growth rate applied under clause (ii)(II) of such paragraph shall be the target growth rate for the service cat-
egory involved under subsection (f)(5).

''(B) DETERMINATION OF ALLOWED EXPENDITURES.--In applying paragraph (4) for a year beginning with 2010, notwithstanding subparagraph (C)(iii) of such paragraph, the allowed expenditures for a service category for a year is an amount computed by the Secretary as follows:

''(i) FOR2010.--For 2010:

''(I) TOTAL 2009 ACTUAL EXPENDITURES FOR ALL SERVICES INCLUDED IN SGR COMPUTATION FOR EACH SERVICE CATEGORY.--Compute total actual expenditures for physicians' services (as defined in subsection (f)(4)(A)) for 2009 for each service category.

''(II) INCREASE BY GROWTH RATE TO OBTAIN 2010 ALLOWED EXPENDITURES FOR SERVICE CAT-

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EGORY.--Compute allowed expenditures for the service category for 2010 by increasing the allowed expenditures for the service category for 2009 computed under subclause (I) by the target growth rate for such service category under subsection (f) for 2010.

''(ii) FOR SUBSEQUENT YEARS.--For a subsequent year, take the amount of allowed expenditures for such category for the preceding year (under clause (i) or this clause) and increase it by the target growth rate determined under subsection (f) for such category and year.''.

(4) APPLICATION OF SEPARATE TARGET GROWTH RATES FOR EACH CATEGORY.--

(A) IN GENERAL.--Section 1848(f) of the Social Security Act (42 U.S.C. 1395w-4(f)) is amended by adding at the end the following new paragraph:

''(5) APPLICATION OF SEPARATE TARGET GROWTH RATES FOR EACH SERVICE CATEGORY BEGINNING WITH 2010.--The target growth rate for a year beginning with 2010 shall be computed and applied separately under this subsection for each serv-

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ice category (as defined in subsection (j)(5)) and shall be computed using the same method for computing the target growth rate except that the factor described in paragraph (2)(C) for--

''(A) the service category described in subsection (j)(5)(A) shall be increased by 0.02; and

''(B) the service category described in subsection (j)(5)(B) shall be increased by 0.01.''.

(B) USE OF TARGET GROWTH RATES.-- Section 1848 of such Act is further amended--

(i) in subsection (d)--

(I) in paragraph (1)(E)(ii), by inserting ''or target'' after ''sustainable''; and

(II) in paragraph (4)(B)(ii)(II), by inserting ''or target'' after ''sustainable''; and

(ii) in the heading of subsection (f), by inserting ''AND TARGET GROWTH RATE'' after ''SUSTAINABLE GROWTH RATE'';

(iii) in subsection (f)(1)--

(I) by striking ''and'' at the end of subparagraph (A);

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(II) in subparagraph (B), by inserting ''before 2010'' after ''each succeeding year'' and by striking the period at the end and inserting ''; and''; and

(III) by adding at the end the following new subparagraph:

''(C) November 1 of each succeeding year the target growth rate for such succeeding year and each of the 2 preceding years.''; and

(iv) in subsection (f)(2), in the matter before subparagraph (A), by inserting after ''beginning with 2000'' the following: ''and ending with 2009''.

(e) APPLICATION TO ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM.--In applying the target growth rate under subsections (d) and (f) of section 1848 of the Social Security Act to services furnished by a practitioner to beneficiaries who are attributable to an accountable care organization under the pilot program provided under section 1866D of such Act, the Secretary of Health and Human Services shall develop, not later than January 1, 2012, for application beginning with 2012, a method that--

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(1) allows each such organization to have its own expenditure targets and updates for such practitioners, with respect to beneficiaries who are attributable to that organization, that are consistent with the methodologies described in such subsection (f); and

(2) provides that the target growth rate applicable to other physicians shall not apply to such
physicians to the extent that the physicians' services are furnished through the accountable care organization. In applying paragraph (1), the Secretary of Health and Human Services may apply the difference in the update under such paragraph on a claim-by-claim or lump sum basis and such a payment shall be taken into account under the pilot program.

SEC. 1122. MISVALUED CODES UNDER THE PHYSICIAN FEE SCHEDULE.

(a) IN GENERAL.--Section 1848(c)(2) of the Social Security Act (42 U.S.C. 1395w-4(c)(2)) is amended by adding at the end the following new subparagraphs:

''(K) POTENTIALLY MISVALUED CODES.--

''(i) IN GENERAL.--The Secretary shall--

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''(I) periodically identify services as being potentially misvalued using criteria specified in clause (ii); and

''(II) review and make appropriate adjustments to the relative values established under this paragraph for services identified as being potentially misvalued under subclause (I).

''(ii) IDENTIFICATION OF POTENTIALLY MISVALUED CODES.--For purposes of identifying potentially misvalued services pursuant to clause (i)(I), the Secretary shall examine (as the Secretary determines to be appropriate) codes (and families of codes as appropriate) for which there has been the fastest growth; codes (and fami- lies of codes as appropriate) that have experienced substantial changes in practice expenses; codes for new technologies or services within an appropriate period (such as three years) after the relative values are initially established for such codes; multiple codes that are frequently billed in conjunction with furnishing a single service; codes with low relative values, particu-...

Continue to pages 251-300

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