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House Health Care Bill (Pages 301-350)

First Posted: 08/15/09 06:12 AM ET Updated: 05/25/11 02:40 PM ET

Health Care

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whether it should be made only upon use of post acute care services or for every discharge.

(3) Whether the bundle should be applied across all categories of providers of inpatient services (including critical access hospitals) and post acute care services or whether it should be limited to certain categories of providers, services, or discharges, such as high volume or high cost MSDRGs.

(4) The extent to which payment rates could be established to achieve offsets for efficiencies that could be expected to be achieved with a bundle payment, whether such rates should be established on a national basis or for different geographic areas, should vary according to discharge, case mix, outliers, and geographic differences in wages or other appropriate adjustments, and how to update such rates.

(5) The nature of protections needed for individuals under a system of bundled payments to ensure that individuals receive quality care, are furnished the level and amount of services needed as determined by an appropriate assessment instrument, are offered choice of provider, and the extent to which transitional care services would improve

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quality of care for individuals and the functioning of a bundled post-acute system.

(6) The nature of relationships that may be required between hospitals and providers of post acute care services to facilitate bundled payments, including the application of gainsharing, anti-referral, anti-kickback, and anti-trust laws.

(7) Quality measures that would be appropriate for reporting by hospitals and post acute providers (such as measures that assess changes in functional status and quality measures appropriate for each type of post acute services provider including how the reporting of such quality measures could be coordinated with other reporting of such quality measures by such providers otherwise required).

(8) How cost-sharing for a post acute care bundle should be treated relative to current rules for cost-sharing for inpatient hospital, home health, skilled nursing facility, and other services.

(9) How other programmatic issues should be treated in a post acute care bundle, including rules specific to various types of post-acute providers such as the post-acute transfer policy, three-day hospital stay to qualify for services furnished by skilled nursing facilities, and the coordination of payments and

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care under the Medicare program and the Medicaid program.

(10) Such other issues as the Secretary deems appropriate.

(c) CONSULTATIONS AND ANALYSIS.--

(1) CONSULTATION WITH STAKEHOLDERS.--In developing the plan under subsection (a)(1), the Secretary shall consult with relevant stakeholders and shall consider experience with such research studies and demonstrations that the Secretary determines appropriate.

(2) ANALYSIS AND DATA COLLECTION.--In developing such plan, the Secretary shall--

(A) analyze the issues described in subsection (b) and other issues that the Secretary determines appropriate;

(B) analyze the impacts (including geographic impacts) of post acute service reform approaches, including bundling of such services on individuals, hospitals, post acute care providers, and physicians;

(C) use existing data (such as data submitted on claims) and collect such data as the Secretary determines are appropriate to develop such plan required in this section; and

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(D) if patient functional status measures are appropriate for the analysis, to the extent practical, build upon the CARE tool being developed pursuant to section 5008 of the Deficit Reduction Act of 2005.

(d) ADMINISTRATION.--

(1) FUNDING.--For purposes of carrying out the provisions of this section, in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary for the Center for Medicare & Medicaid Services Program Management Account $15,000,000 for each of the fiscal years 2010 through 2012. Amounts appropriated under this paragraph for a fiscal year shall be available until expended.

(2) EXPEDITED DATA COLLECTION.--Chapter 35 of title 44, United States Code shall not apply to this section.

(e) PUBLICREPORTS.--

(1) INTERIM REPORTS.--The Secretary shall issue interim public reports on a periodic basis on the plan described in subsection (a)(1), the issues described in subsection (b), and impact analyses as the Secretary determines appropriate.

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(2) FINAL REPORT.--Not later than the date that is 3 years after the date of the enactment of this Act, the Secretary shall issue a final public report on such plan, including analysis of issues described in subsection (b) and impact analyses.

(f) CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT PROGRAM AND EXPANSION TO INCLUDE POST ACUTE SERVICES.--

(1) IN GENERAL.--Part E of title XVIII of the Social Security Act is amended by inserting after section 1866C the following new section: ''SEC. 1866D. CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION TO PILOT PROGRAM AND EXPANSION TO INCLUDE POST ACUTE SERVICES.

''(a) .--By not later than January 1, 2011, the Secretary shall, for the purpose of promoting the use of bundled payments to promote efficient and high quality delivery of care--

''(1) convert the acute care episode demonstration program conducted under section 1866C to a pilot program; and

''(2) subject to subsection (c), expand such program as so converted to include post acute services and such other services the Secretary determines to

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be appropriate, which may include transitional services. ''(b) SCOPE.--The pilot program under subsection 3 (a) may include additional geographic areas and additional conditions which account for significant program spending, as defined by the Secretary. Nothing in this subsection shall be construed as limiting the number of hospital and physician groups or the number of hospital and post-acute provider groups that may participate in the pilot program.

''(c) LIMITATION.--The Secretary shall only expand the pilot program under subsection (a)(2) if the Secretary finds that-

''(1) the demonstration program under section 1866C and pilot program under this section maintain or increase the quality of care received by individuals enrolled under this title; and

''(2) such demonstration program and pilot program reduce program expenditures and, based on the certification under subsection (d), that the expansion of such pilot program would result in estimated spending that would be less than what spending would otherwise be in the absence of this section.

''(d) CERTIFICATION.--For purposes of subsection (c), the Chief Actuary of the Centers for Medicare & Med-

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icaid Services shall certify whether expansion of the pilot program under this section would result in estimated spending that would be less than what spending would otherwise be in the absence of this section.

''(e) VOLUNTARY PARTICIPATION.--Nothing in this paragraph shall be construed as requiring the participation of an entity in the pilot program under this section.''.

(2) CONFORMING AMENDMENT.--Section 1866C(b) of the Social Security Act (42 U.S.C. 1395cc-3(b)) is amended by striking ''The Secretary'' and inserting ''Subject to section 1866D, the Secretary''.

SEC. 1153. HOME HEALTH PAYMENT UPDATE FOR 2010.

Section 1895(b)(3)(B)(ii) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended-

(1) in subclause (IV), by striking ''and'';

(2) by redesignating subclause (V) as subclause (VII); and

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

''(V) 2007, 2008, and 2009, subject to clause (v), the home health market basket percentage increase;
''(VI) 2010, subject to clause (v), 0 percent; and''.

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SEC. 1154. PAYMENT ADJUSTMENTS FOR HOME HEALTH CARE.

(a) ACCELERATION OF ADJUSTMENT FOR CASE MIX CHANGES.--Section 1895(b)(3)(B) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended

(1) in clause (iv), by striking ''Insofar as'' and inserting ''Subject to clause (vi), insofar as''; and

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

''(vi) SPECIAL RULE FOR CASE MIX CHANGES FOR 2011.

''(I) IN GENERAL.--With respect to the case mix adjustments established in section 484.220(a) of title 42, Code of Federal Regulations, the Secretary shall apply, in 2010, the adjustment established in paragraph (3) of such section for 2011, in addition to applying the adjustment established in paragraph (2) for 2010.

''(II) CONSTRUCTION.--Nothing in this clause shall be construed as limiting the amount of adjustment for case mix for 2010 or 2011 if more recent data indicate an appropriate adjustment that is greater than the

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amount established in the section de
scribed in subclause (I).''.

(b) REBASING HOME HEALTH PROSPECTIVE PAYMENT AMOUNT.--Section 1895(b)(3)(A) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(A)) is amended

(1) in clause (i)

(A) in subclause (III), by inserting ''and before 2011'' after ''after the period described in subclause (II)''; and

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

''(IV) Subject to clause (iii)(I), for 2011, such amount (or amounts) shall be adjusted by a uniform percentage determined to be appropriate by the Secretary based on analysis of factors such as changes in the average number and types of visits in an episode, the change in intensity of visits in an episode, growth in cost per episode, and other factors that the Secretary considers to be relevant.
''(V) Subject to clause (iii)(II), for a year after 2011, such a amount (or amounts) shall be equal to the

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amount (or amounts) determined under this clause for the previous year, updated under subparagraph (B).''; and

(2) by adding at the end the following new clause:
''(iii) SPECIAL RULE IN CASE OF INABILITY TO EFFECT TIMELY REBASING. ''(I) APPLICATION OF PROXY AMOUNT FOR 2011.--If the Secretary is not able to compute the amount (or amounts) under clause (i)(IV) so as to permit, on a timely basis, the application of such clause for 2011, the Secretary shall substitute for such amount (or amounts) 95 percent of the amount (or amounts) that would otherwise be specified under clause (i)(III) if it applied for 2011.

''(II) ADJUSTMENT FOR SUBSEQUENT YEARS BASED ON DATA.--If the Secretary applies subclause (I), the Secretary before July 1, 2011, shall compare the amount (or amounts) applied under such sub-


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clause with the amount (or amounts) that should have been applied under clause (i)(IV). The Secretary shall decrease or increase the prospective payment amount (or amounts) under clause (i)(V) for 2012 (or, at the Secretary's discretion, over a period of several years beginning with 2012) by the amount (if any) by which the amount (or amounts) applied under subclause (I) is greater or less, respectively, than the amount (or amounts) that should have been applied under clause (i)(IV).''. 14

SEC. 1155. INCORPORATING PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATE FOR HOME HEALTH SERVICES.

(a) IN GENERAL.--Section 1895(b)(3)(B) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended-

(1) in clause (iii), by inserting ''(including being
subject to the productivity adjustment described in
section 1886(b)(3)(B)(iii)(II))'' after ''in the same
manner''; and


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(2) in clause (v)(I), by inserting ''(but not below 0)'' after ''reduced''.

(b) EFFECTIVE DATE.--The amendment made by subsection (a) shall apply to home health market basket percentage increases for years beginning with 2010.

SEC. 1156. LIMITATION ON MEDICARE EXCEPTIoNS TO THE PROHIBITION ON CERTAIN PHYSICIAN REFERRALS MADE TO HOSPITALS.

(a) IN GENERAL.--Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is amended--

(1) in subsection (d)(2)--

(A) in subparagraph (A), by striking ''and'' at the end;

(B) in subparagraph (B), by striking the period at the end and inserting ''; and''; and

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

''(C) in the case where the entity is a hospital, the hospital meets the requirements of paragraph (3)(D).'';

(2) in subsection (d)(3)--

(A) in subparagraph (B), by striking ''and'' at the end;

(B) in subparagraph (C), by striking the period at the end and inserting ''; and''; and

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

''(D) the hospital meets the requirements described in subsection (i)(1).'';

(3) by amending subsection (f) to read as follows:

''(f) REPORTING AND DISCLOSURE REQUIREMENTS.--

''(1) IN GENERAL.--Each entity providing covered items or services for which payment may be made under this title shall provide the Secretary with the information concerning the entity's ownership, investment, and compensation arrangements, including--

''(A) the covered items and services provided by the entity, and

''(B) the names and unique physician identification numbers of all physicians with an ownership or investment interest (as described in subsection (a)(2)(A)), or with a compensation arrangement (as described in subsection (a)(2)(B)), in the entity, or whose immediate relatives have such an ownership or investment interest or who have such a compensation relationship with the entity.

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Such information shall be provided in such form, manner, and at such times as the Secretary shall specify. The requirement of this subsection shall not apply to designated health services provided outside the United States or to entities which the Secretary determines provide services for which payment may be made under this title very infrequently.

''(2) REQUIREMENTS FOR HOSPITALS WITH PHYSICIAN OWNERSHIP OR INVESTMENT.--In the case of a hospital that meets the requirements described in subsection (i)(1), the hospital shall--

''(A) submit to the Secretary an initial report, and periodic updates at a frequency determined by the Secretary, containing a detailed description of the identity of each physician owner and physician investor and any other owners or investors of the hospital;

''(B) require that any referring physician owner or investor discloses to the individual being referred, by a time that permits the individual to make a meaningful decision regarding the receipt of services, as determined by the Secretary, the ownership or investment interest, as applicable, of such referring physician in the hospital; and

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''(C) disclose the fact that the hospital is partially or wholly owned by one or more physicians or has one or more physician investors--

''(i) on any public website for the hospital; and

''(ii) in any public advertising for the
hospital.The information to be reported or disclosed under this paragraph shall be provided in such form, manner, and at such times as the Secretary shall specify. The requirements of this paragraph shall not apply to designated health services furnished outside the United States or to entities which the Secretary determines provide services for which payment may be made under this title very infrequently.

''(3) PUBLICATION OF INFORMATION.--The
Secretary shall publish, and periodically update, the information submitted by hospitals under paragraph (2)(A) on the public Internet website of the Centers for Medicare & Medicaid Services.'';

(4) by amending subsection (g)(5) to read as follows:

''(5) FAILURE TO REPORT OR DISCLOSE INFORMATION.--


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''(A) REPORTING.--Any person who is required, but fails, to meet a reporting requirement of paragraphs (1) and (2)(A) of subsection (f) is subject to a civil money penalty of not more than $10,000 for each day for which reporting is required to have been made.

''(B) DISCLOSURE.--Any physician who is required, but fails, to meet a disclosure require ment of subsection (f)(2)(B) or a hospital that is required, but fails, to meet a disclosure requirement of subsection (f)(2)(C) is subject to a civil money penalty of not more than $10,000 for each case in which disclosure is required to have been made.

''(C) APPLICATION.--The provisions of section 1128A (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under subparagraphs (A) and (B) in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).''; and

(5) by adding at the end the following new subsection:

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''(i) REQUIREMENTS TO QUALIFY FOR RURAL PROVIDER AND HOSPITAL OWNERSHIP EXCEPTIONS TO SELF-REFERRAL PROHIBITION.--

''(1) REQUIREMENTS DESCRIBED.--For purposes of subsection (d)(3)(D), the requirements described in this paragraph are as follows:

''(A) PROVIDER AGREEMENT.--The hospital had--

''(i) physician ownership or investment on January 1, 2009; and
''(ii) a provider agreement under section 1866 in effect on such date.

''(B) PROHIBITION ON PHYSICIAN OWNERSHIP OR INVESTMENT.--The percentage of the total value of the ownership or investment interests held in the hospital, or in an entity whose assets include the hospital, by physician owners or investors in the aggregate does not exceed such percentage as of the date of enactment of this subsection.

''(C) PROHIBITION ON EXPANSION OF FACILITY CAPACITY.--Except as provided in paragraph (2), the number of operating rooms, procedure rooms, or beds of the hospital at any time on or after the date of the enactment of

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this subsection are no greater than the number of operating rooms, procedure rooms, or beds, respectively, as of such date.

''(D) ENSURING BONA FIDE OWNERSHIP AND INVESTMENT.--

''(i) Any ownership or investment in
terests that the hospital offers to a physician are not offered on more favorable terms than the terms offered to a person who is not in a position to refer patients or otherwise generate business for the hospital.
''(ii) The hospital (or any investors in the hospital) does not directly or indirectly provide loans or financing for any physician owner or investor in the hospital.
''(iii) The hospital (or any investors in the hospital) does not directly or indirectly guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan, for any physician owner or investor or group of physician owners or investors that is related to acquiring any ownership or investment interest in the hospital.

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''(iv) Ownership or investment returns are distributed to each owner or investor in the hospital in an amount that is directly proportional to the ownership or investment interest of such owner or investor in the hospital.
''(v) The investment interest of the owner or investor is directly proportional to the owner's or investor's capital contributions made at the time the ownership or investment interest is obtained.
''(vi) Physician owners and investors do not receive, directly or indirectly, any guaranteed receipt of or right to purchase other business interests related to the hospital, including the purchase or lease of any property under the control of other owners or investors in the hospital or located near the premises of the hospital.
''(vii) The hospital does not offer a physician owner or investor the opportunity to purchase or lease any property under the control of the hospital or any other owner or investor in the hospital on more favorable terms than the terms of-

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fered to a person that is not a physician owner or investor.

''(viii) The hospital does not condition any physician ownership or investment interests either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise generating business for the hospital.

''(E) PATIENTSAFETY.--In the case of a
hospital that does not offer emergency services, the hospital has the capacity to--

''(i) provide assessment and initial treatment for medical emergencies; and
''(ii) if the hospital lacks additional capabilities required to treat the emergency involved, refer and transfer the patient with the medical emergency to a hospital with the required capability.

''(F) LIMITATION ON APPLICATION TO CERTAIN CONVERTED FACILITIES.--The hospital was not converted from an ambulatory surgical center to a hospital on or after the date of enactment of this subsection.

''(2) EXCEPTION TO PROHIBITION ON EXPANSION OF FACILITY CAPACITY.--

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''(A) PROCESS.--


''(i) ESTABLISHMENT.--The Secretary shall establish and implement a process under which a hospital may apply for an exception from the requirement under paragraph (1)(C).
''(ii) OPPORTUNITY FOR COMMUNITY INPUT.--The process under clause (i) shall provide persons and entities in the community in which the hospital applying for an exception is located with the opportunity to provide input with respect to the application.
''(iii) TIMING FOR IMPLEMENTATION.--The Secretary shall implement the process under clause (i) on the date that is one month after the promulgation of regulations described in clause (iv).
''(iv) REGULATIONS.--Not later than the first day of the month beginning 18 months after the date of the enactment of this subsection, the Secretary shall promulgate regulations to carry out the process under clause (i). The Secretary may issue

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such regulations as interim final regulations.

''(B) FREQUENCY.--The process described in subparagraph (A) shall permit a hospital to apply for an exception up to once every 2 years.

''(C) PERMITTED INCREASE.--

''(i) IN GENERAL.--Subject to clause (ii) and subparagraph (D), a hospital granted an exception under the process described in subparagraph (A) may increase the number of operating rooms, procedure rooms, or beds of the hospital above the baseline number of operating rooms, procedure rooms, or beds, respectively, of the hospital (or, if the hospital has been granted a previous exception under this paragraph, above the number of operating rooms, procedure rooms, or beds, respectively, of the hospital after the application of the most recent increase under such an exception).
''(ii) 100 PERCENT INCREASE LIMITATION.--The Secretary shall not permit an increase in the number of operating rooms,procedure rooms, or beds of a hospital

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under clause (i) to the extent such increase would result in the number of operating rooms, procedure rooms, or beds of the hospital exceeding 200 percent of the baseline number of operating rooms, procedure rooms, or beds of the hospital.
''(iii) BASELINE NUMBER OF OPERATING ROOMS, PROCEDURE ROOMS, OR BEDS.--In this paragraph, the term 'baseline number of operating rooms, procedure rooms, or beds' means the number of operating rooms, procedure rooms, or beds of a hospital as of the date of enactment of this subsection.

''(D) INCREASE LIMITED TO FACILITIES ON THE MAIN CAMPUS OF THE HOSPITAL.-- Any increase in the number of operating rooms, procedure rooms, or beds of a hospital pursuant to this paragraph may only occur in facilities on the main campus of the hospital.

''(E) CONDITIONS FOR APPROVAL OF AN INCREASE IN FACILITY CAPACITY.--The Secretary may grant an exception under the process described in subparagraph (A) only to a
hospital--

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''(i) that is located in a county in which the percentage increase in the population during the most recent 5-year period for which data are available is estimated to
be at least 150 percent of the percentage increase in the population growth of the State in which the hospital is located during that period, as estimated by Bureau of the Census and available to the Secretary;
''(ii) whose annual percent of total inpatient admissions that represent inpatient admissions under the program under title XIX is estimated to be equal to or greater than the average percent with respect to such admissions for all hospitals located in the county in which the hospital is located;
''(iii) that does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries;
''(iv) that is located in a State in which the average bed capacity in the State is estimated to be less than the national average bed capacity;

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''(v) that has an average bed occupancy rate that is estimated to be greater than the average bed occupancy rate in the State in which the hospital is located; and
''(vi) that meets other conditions as determined by the Secretary.

''(F) PROCEDURE ROOMS.--In this subsection, the term 'procedure rooms' includes rooms in which catheterizations, angiographies, angiograms, and endoscopies are furnished, but such term shall not include emergency rooms or departments (except for rooms in which catheterizations, angiographies, angiograms, and endoscopies are furnished).

''(G) PUBLICATION OF FINAL DECISIONS.--Not later than 120 days after receiving a complete application under this paragraph, the Secretary shall publish on the public Internet website of the Centers for Medicare & Medicaid Services the final decision with respect to such application.

''(H) LIMITATION ON REVIEW.--There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the exception process under this paragraph,

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including the establishment of such process, and any determination made under such process.

''(3) PHYSICIAN OWNER OR INVESTOR DEFINED.--For purposes of this subsection and subsection (f)(2), the term 'physician owner or investor' means a physician (or an immediate family member of such physician) with a direct or an indirect ownership or investment interest in the hospital.

''(4) PATIENT SAFETY REQUIREMENT.--In the case of a hospital to which the requirements of paragraph (1) apply, insofar as the hospital admits a patient and does not have any physician available on the premises 24 hours per day, 7 days per week, before admitting the patient--

''(A) the hospital shall disclose such fact to the patient; and

''(B) following such disclosure, the hospital shall receive from the patient a signed acknowledgment that the patient understands such fact.

''(5) CLARIFICATION.--Nothing in this subsection shall be construed as preventing the Secretary from terminating a hospital's provider agreement if the hospital is not in compliance with regulations pursuant to section 1866.''.

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(b) VERIFYING COMPLIANCE.--The Secretary of Health and Human Services shall establish policies and procedures to verify compliance with the requirements described in subsections (i)(1) and (i)(4) of section 1877 of the Social Security Act, as added by subsection (a)(5). The Secretary may use unannounced site reviews of hospitals and audits to verify compliance with such requirements.

(c) IMPLEMENTATION.--

(1) FUNDING.--For purposes of carrying out the amendments made by subsection (a) and the provisions of subsection (b), in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated there are appropriated to the Secretary of Health and Human Services for the Centers for Medicare & Medicaid Services Program Management Account $5,000,000 for each fiscal year beginning with fiscal year 2010. Amounts appropriated under this paragraph for a fiscal year shall be available until expended.

(2) ADMINISTRATION.--Chapter 35 of title 44, United States Code, shall not apply to the amendments made by subsection
(a) and the provisions of subsection (b).


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SEC. 1157. INSTITUTE OF MEDICINE STUDY OF GEO GRAPHIC ADJUSTMENT FACTORS UNDER MEDICARE.

(a) IN GENERAL.--The Secretary of Health and Human Services shall enter into a contract with the Institute of Medicine of the National Academy of Science to conduct a comprehensive empirical study, and provide recommendations as appropriate, on the accuracy of the geographic adjustment factors established under sections 1848(e) and 1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395w-4(e), 11395ww(d)(3)).

(b) MATTERS INCLUDED.--Such study shall include an evaluation and assessment of the following with respect to such adjustment factors:

(1) Empirical validity of the adjustment factors.

(2) Methodology used to determine the adjustment factors.

(3) Measures used for the adjustment factors, taking into account--

(A) timeliness of data and frequency of revisions to such data;

(B) sources of data and the degree to which such data are representative of costs; and

(C) operational costs of providers who participate in Medicare.

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(c) EVALUATION.--Such study shall, within the context of the United States health care marketplace, evaluate and consider the following:

(1) The effect of the adjustment factors on the level and distribution of the health care workforce and resources, including--

(A) recruitment and retention that takes into account workforce mobility between urban and rural areas;

(B) ability of hospitals and other facilities to maintain an adequate and skilled workforce; and

(C) patient access to providers and needed medical technologies.

(2) The effect of the adjustment factors on population health and quality of care.

(3) The effect of the adjustment factors on the ability of providers to furnish efficient, high value care.

(d) REPORT.--The contract under subsection (a) shall provide for the Institute of Medicine to submit, not later than one year after the date of the enactment of this Act, to the Secretary and the Congress a report containing results and recommendations of the study conducted under this section.

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(e) FUNDING.--There are authorized to be appropriated to carry out this section such sums as may be necessary.
SEC. 1158. REVISION OF MEDICARE PAYMENT SYSTEMS TO ADDRESS GEOGRAPHIC INEQUITIES.

(a) IN GENERAL.--The Secretary of Health and Human Services, taking into account the recommendations made in the report under section 1157(d), shall include in the proposed rules published to implement changes to payment systems for physicians and hospitals under sections 1848(e) and 1886(d)(3)(E), respectively, of the Social Security Act, proposals to revise geographic ad
justment factors for such payment systems for services furnished under the Medicare program. Such proposed rules shall be published in the rulemaking period immediately following submission of the report under section 1157(d).

(b) PAYMENT ADJUSTMENTS.--

(1) FUNDING FOR IMPROVEMENTS.--In making any changes to the geographic adjustment factors in accordance with subsection (a), the Secretary shall use funds made available for such purposes under subsection (c).

(2) ENSURING FAIRNESS.--In carrying out this subsection, the Secretary shall not change payment

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rates to be less than they would have been had this section not been enacted.

(c) FUNDING.--Amounts in the Medicare Improvement Fund under section 1898 of the Social Security Act (42 U.S.C. 1395iii), as amended by section 1146, shall be available to the Secretary to make changes to the geographic adjustments factors established under sections 1848(e) and 1886(d)(3)(E) of the Social Security Act. For such purpose, such funds shall be available for expenditure for services furnished before January 1, 2014, and shall not exceed the total amounts available under such Fund for such period. No more than one-half of such amounts shall be available for expenditure for services furnished in any one payment year.

Subtitle D--Medicare Advantage Reforms

PART 1--PAYMENT AND ADMINISTRATION

SEC. 1161. PHASE-IN OF PAYMENT BASED ON FEE-FOR-SERVICE COSTS.

Section 1853 of the Social Security Act (42 U.S.C. 1395w-23) is amended--

(1) in subsection (j)(1)(A)--

(A) by striking ''beginning with 2007'' and inserting ''for 2007, 2008, 2009, and 2010''; and

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(B) by inserting after ''(k)(1)'' the following: '', or, beginning with 2011, 1⁄12 of the blended benchmark amount determined under subsection (n)(1)''; and

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

''(n) DETERMINATION OF BLENDED BENCHMARK AMOUNT.--

''(1) IN GENERAL.--For purposes of subsection (j), subject to paragraphs (3) and (4), the term 'blended benchmark amount' means for an area--

''(A) for 2011 the sum of--

''(i) 2⁄3 of the applicable amount (as defined in subsection (k)) for the area and year; and
''(ii) 1⁄3 of the amount specified in paragraph (2) for the area and year;

''(B) for 2012 the sum of--

''(i) 1⁄3 of the applicable amount for the area and year; and
''(ii) 2⁄3 of the amount specified in paragraph (2) for the area and year; and

''(C) for a subsequent year the amount specified in paragraph (2) for the area and year.

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''(2) SPECIFIED AMOUNT.--The amount specified in this paragraph for an area and year is the amount specified in subsection (c)(1)(D)(i) for the area and year adjusted (in a manner specified by the Secretary) to take into account the phase-out in the indirect costs of medical education from capitation rates described in subsection (k)(4).

''(3) FEE-FOR-SERVICE PAYMENT FLOOR.--In no case shall the blended benchmark amount for an area and year be less than the amount specified in paragraph (2).

''(4) EXCEPTION FOR PACE PLANS.--This subsection shall not apply to payments to a PACE program under section 1894.''.
SEC. 1162. QUALITY BONUS PAYMENTS.

(a) IN GENERAL.--Section 1853 of the Social Security Act (42 U.S.C. 1395w-23), as amended by section 1161, is amended--

(1) in subsection (j), by inserting ''subject to subsection (o),'' after ''For purposes of this part''; and

(2) by adding at the end the following new sub-section: ''(o) QUALITY BASED PAYMENT ADJUSTMENT.--

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''(1) HIGH QUALITY PLAN ADJUSTMENT.--For years beginning with 2011, in the case of a Medicare Advantage plan that is identified (under paragraph (3)(E)(ii)) as a high quality MA plan with respect to the year, the blended benchmark amount under subsection (n)(1) shall be increased--

''(A) for 2011, by 1.0 percent;

''(B) for 2012, by 2.0 percent; and

''(C) for a subsequent year, by 3.0 percent.

''(2) IMPROVED QUALITY PLAN ADJUSTMENT.-- For years beginning with 2011, in the case of a Medicare Advantage plan that is identified (under paragraph (3)(E)(iii)) as an improved quality MA plan with respect to the year, blended benchmark amount under subsection (n)(1) shall be increased--

''(A) for 2011, by 0.33 percent;

''(B) for 2012, by 0.66 percent; and

''(C) for a subsequent year, by 1.0 percent.

''(3) DETERMINATIONS OF QUALITY.--

''(A) QUALITY PERFORMANCE.--The Sec-retary shall provide for the computation of a quality performance score for each Medicare Advantage plan to be applied for each year beginning with 2010.

''(B) COMPUTATION OF SCORE.--

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''(i) FOR YEARS BEFORE 2014.--For years before 2014, the quality performance score for a Medicare Advantage plan shall be computed based on a blend (as designated by the Secretary) of the plan's per-formance on--

''(I) HEDIS effectiveness of care quality measures;
''(II) CAHPS quality measures; and
''(III) such other measures of clinical quality as the Secretary may specify. 1Such measures shall be risk-adjusted as the Secretary deems appropriate.
''(ii) ESTABLISHMENT OF OUTCOME-BASED MEASURES.--By not later than for
2013 the Secretary shall implement reporting requirements for quality under this section on measures selected under clause
(iii) that reflect the outcomes of care experienced by individuals enrolled in Medicare Advantage plans (in addition to measures described in clause (i)). Such measures may include--

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''(I) measures of rates of admission and readmission to a hospital;

''(II) measures of prevention quality, such as those established by the Agency for Healthcare Research and Quality (that include hospital admission rates for specified conditions);

''(III) measures of patient mortality and morbidity following surgery;

''(IV) measures of health functioning (such as limitations on activities of daily living) and survival for patients with chronic diseases;

''(V) measures of patient safety; and

''(VI) other measure of outcomes and patient quality of life as determined by the Secretary. Such measures shall be risk-adjusted as the Secretary deems appropriate. In determining the quality measures to be used under this clause, the Secretary shall take into consideration the recommendations of the Medicare Payment Advisory Commission in its report to Congress under section

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168 of the Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110-275) and shall provide preference to measures collected on and comparable to measures used in measuring quality under parts A and B.

''(iii) RULES FOR SELECTION OF MEASURES.--The Secretary shall select measures for purposes of clause (ii) consistent with the following:

''(I) The Secretary shall provide preference to clinical quality measures that have been endorsed by the entity with a contract with the Secretary under section 1890(a).

''(II) Prior to any measure being selected under this clause, the Secretary shall publish in the Federal Register such measure and provide for a period of public comment on such measure.

''(iv) TRANSITIONAL USE OF BLEND.--For payments for 2014 and 2015, the Secretary may compute the quality performance score for a Medicare Ad-

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vantage plan based on a blend of the measures specified in clause (i) and the measures described in clause (ii) and selected under clause (iii).

''(v) USE OF QUALITY OUTCOMES MEASURES.--For payments beginning with 2016, the preponderance of measures used under this paragraph shall be quality outcomes measures described in clause (ii) and selected under clause (iii).

''(C) DATA USED IN COMPUTING SCORE.-Such score for application for--

''(i) payments in 2011 shall be based on quality performance data for plans for 2009; and

''(ii) payments in 2012 and a subsequent year shall be based on quality performance data for plans for the second preceding year.

''(D) REPORTINGOF DATA.--Each Medicare Advantage organization shall provide for the reporting to the Secretary of quality performance data described in subparagraph (B) (in order to determine a quality performance

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score under this paragraph) in such time and manner as the Secretary shall specify.

''(E) RANKING OF PLANS.--

''(i) INITIAL RANKING.--Based on the quality performance score described in subparagraph (B) achieved with respect to a year, the Secretary shall rank plan performance--

''(I) from highest to lowest based on absolute scores; and

''(II) from highest to lowest based on percentage improvement in the score for the plan from the previous year. A plan which does not report quality performance data under subparagraph (D) shall be counted, for purposes of such ranking, as having the lowest plan performance and lowest percentage improvement.

''(ii) IDENTIFICATION OF HIGH QUALITY PLANS IN TOP QUINTILE BASED ON PROJECTED ENROLLMENT.--The Secretary shall, based on the scores for each plan under clause (i)(I) and the Secretary's pro-

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jected enrollment for each plan and subject to clause (iv), identify those Medicare Advantage plans with the highest score that, based upon projected enrollment, are projected to include in the aggregate 20 percent of the total projected enrollment for the year. For purposes of this subsection, a plan so identified shall be referred to in this subsection as a 'high quality MA plan'.

''(iii) IDENTIFICATION OF IMPROVED QUALITY PLANS IN TOP QUINTILE BASED ON PROJECTED ENROLLMENT.--The Secretary shall, based on the percentage improvement score for each plan under clause (i)(II) and the Secretary's projected enrollment for each plan and subject to clause (iv), identify those Medicare Advantage plans with the greatest percentage improvement score that, based upon projected enrollment, are projected to include in the aggregate 20 percent of the total projected enrollment for the year. For purposes of this subsection, a plan so identified that is not a high quality plan for the year shall

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be referred to in this subsection as an 'improved quality MA plan'.

''(iv) AUTHORITY TO DISQUALIFY CERTAIN PLANS.--In applying clauses (ii) and (iii), the Secretary may determine not to
identify a Medicare Advantage plan if the Secretary has identified deficiencies in the plan's compliance with rules for such plans under this part.

''(F) NOTIFICATION.--The Secretary, in the annual announcement required under subsection (b)(1)(B) in 2011 and each succeeding year, shall notify the Medicare Advantage organization that is offering a high quality plan or an improved quality plan of such identification for the year and the quality performance payment adjustment for such plan for the year. The Secretary shall provide for publication on the website for the Medicare program of the information described in the previous sentence.''.

SEC. 1163. EXTENSION OF SECRETARIAL CODING INTENSITY ADJUSTMENT AUTHORITY.

Section 1853(a)(1)(C)(ii) of the Social Security Act (42 U.S.C. 1395w-23(a)(1)(C)(ii) is amended--

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(1) in the matter before subclause (I), by striking ''through 2010'' and inserting ''and each subsequent year''; and

(2) in subclause (II)--

(A) by inserting ''periodically'' before ''conduct an analysis'';

(B) by inserting ''on a timely basis'' after ''are incorporated''; and

(C) by striking ''only for 2008, 2009, and 2010'' and inserting ''for 2008 and subsequent years''.

SEC. 1164. SIMPLIFICATION OF ANNUAL BENEFICIARY ELECTION PERIODS.

(a) 2 WEEK PROCESSING PERIOD FOR ANNUAL ENROLLMENT PERIOD (AEP).--Paragraph (3)(B) of section 1851(e) of the Social Security Act (42 U.S.C. 1395w-21(e)) is amended--

(1) by striking ''and'' at the end of clause (iii);

(2) in clause (iv)--

(A) by striking ''and succeeding years'' and inserting '', 2008, 2009, and 2010''; and

(B) by striking the period at the end and inserting ''; and''; and

(3) by adding at the end the following new clause:

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''(v) with respect to 2011 and succeeding years, the period beginning on November 1 and ending on December 15 of the year before such year.''.

(b) ELIMINATION OF 3-MONTH ADDITIONAL OPEN ENROLLMENT PERIOD(OEP).--Effective for plan years beginning with 2011, paragraph (2) of such section is amended by striking subparagraph (C).

SEC. 1165. EXTENSION OF REASONABLE COST CONTRACTS.

Section 1876(h)(5)(C) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)) is amended--

(1) in clause (ii), by striking ''January 1, 2010'' and inserting ''January 1, 2012''; and

(2) in clause (iii), by striking ''the service area for the year'' and inserting ''the portion of the plan's service area for the year that is within the service area of a reasonable cost reimbursement contract''.

SEC. 1166. LIMITATION OF WAIVER AUTHORITY FOR EMPLOYER GROUP PLANS.

(a) IN GENERAL.--The first sentence of paragraph (2) of section 1857(i) of the Social Security Act (42 U.S.C. 1395w-27(i)) is amended by inserting before the period at the end the following: '', but only if 90 percent of the Medicare Advantage eligible individuals enrolled

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under such plan reside in a county in which the MA organization offers an MA local plan''.

(b) EFFECTIVE DATE.--The amendment made by subsection (a) shall apply for plan years beginning on or after January 1, 2011, and shall not apply to plans which were in effect as of December 31, 2010.

SEC. 1167. IMPROVING RISK ADJUSTMENT FOR PAYMENTS.

(a) REPORT TO CONGRESS.--Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit to Congress a report that evaluates the adequacy of the risk adjustment system under section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395-23(a)(1)(C)) in predicting costs for beneficiaries with chronic or co-morbid conditions, beneficiaries dually-eligible for Medicare and Medicaid, and non-Medicaid eligible low-income beneficiaries; and the need and feasibility of including further gradations of diseases or conditions and multiple years of beneficiary data.

(b) IMPROVEMENTS TO RISK ADJUSTMENT.--Not later than January 1, 2012, the Secretary shall implement necessary improvements to the risk adjustment system under section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395-23(a)(1)(C)), taking into account the evaluation under subsection (a).

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SEC. 1168. ELIMINATION OF MA REGIONAL PLAN STABILIZATION FUND.

(a) IN GENERAL.--Section 1858 of the Social Security Act (42 U.S.C. 1395w-27a) is amended by striking subsection (e).

(b) TRANSITION.--Any amount contained in the MA Regional Plan Stabilization Fund as of the date of the enactment of this Act shall be transferred to the Federal Supplementary Medical Insurance Trust Fund.

PART 2--BENEFICIARY PROTECTIONS AND ANTI-FRAUD

SEC. 1171. LIMITATION ON COST-SHARING FOR INDIVIDUAL HEALTH SERVICES.

(a) IN GENERAL.--Section 1852(a)(1) of the Social Security Act (42 U.S.C. 1395w-22(a)(1)) is amended--

(1) in subparagraph (A), by inserting before the period at the end the following: ''with cost-sharing that is no greater (and may be less) than the cost-sharing that would otherwise be imposed under such program option'';

(2) in subparagraph (B)(i), by striking ''or an actuarially equivalent level of cost-sharing as determined in this part''; and

(3) by amending clause (ii) of subparagraph (B) to read as follows:

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''(ii) PERMITTING USE OF FLAT COPAYMENT OR PER DIEM RATE.--Nothing in clause (i) shall be construed as prohibiting a Medicare Advantage plan from using a flat copayment or per diem rate, in lieu of the cost-sharing that would be imposed under part A or B, so long as the amount of the cost-sharing imposed does not exceed the amount of the cost-sharing that would be imposed under the respective part if the individual were not enrolled in a plan under this part.''.

(b) LIMITATION FOR DUAL ELIGIBLES AND QUALIFIED MEDICARE BENEFICIARIES.--Section 1852(a) of such Act is amended by adding at the end the following new paragraph:

''(7) LIMITATION ON COST-SHARING FOR DUAL ELIGIBLES AND QUALIFIED MEDICARE BENEFICIARIES.--In the case of a individual who is a full- benefit dual eligible individual (as defined in section 1935(c)(6)) or a qualified medicare beneficiary (as defined in section 1905(p)(1)) who is enrolled in a Medicare Advantage plan, the plan may not impose cost-sharing that exceeds the amount of cost-sharing that would be permitted with respect to the indi-

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vidual under this title and title XIX if the individual were not enrolled with such plan.''.

(c) EFFECTIVE DATES.--

(1) The amendments made by subsection (a) shall apply to plan years beginning on or after January 1, 2011.

(2) The amendments made by subsection (b) shall apply to plan years beginning on or after January 1, 2011.

SEC. 1172. CONTINUOUS OPEN ENROLLMENT FOR ENROLLEES IN PLANS WITH ENROLLMENT SUSPENSION.

Section 1851(e)(4) of the Social Security Act (42 U.S.C. 1395w(e)(4)) is amended--

(1) in subparagraph (C), by striking at the end ''or'';

(2) in subparagraph (D)--

(A) by inserting '', taking into account the health or well-being of the individual'' before the period; and

(B) by redesignating such subparagraph as subparagraph (E); and

(3) by inserting after subparagraph (C) the following new subparagraph:

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''(D)) the individual is enrolled in an MA plan and enrollment in the plan is suspended under paragraph (2)(B) or (3)(C) of section 1857(g) because of a failure of the plan to meet applicable requirements; or''.

SEC. 1173. INFORMATION FOR BENEFICIARIES ON MA PLAN ADMINISTRATIVE COSTS.

(a) DISCLOSURE OF MEDICAL LOSS RATIOS AND OTHER EXPENSE DATA.--Section 1851 of the Social Security Act (42 U.S.C. 1395w-21), as previously amended by this subtitle, is amended by adding at the end the following new subsection:

''(p) PUBLICATION OF MEDICAL LOSS RATIOS AND OTHER COST-RELATED INFORMATION.--

''(1) IN GENERAL.--The Secretary shall publish, not later than November 1 of each year (beginning with 2011), for each MA plan contract, the medical loss ratio of the plan in the previous year.

''(2) SUBMISSION OF DATA.--

''(A) IN GENERAL.--Each MA organization shall submit to the Secretary, in a form and manner specified by the Secretary, data necessary for the Secretary to publish the medical loss ratio on a timely basis.

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''(B) DATA FOR 2010 AND 2011.--The data submitted under subparagraph (A) for 2010 and for 2011 shall be consistent in content with the data reported as part of the MA plan bid in June 2009 for 2010.

''(C) USE OF STANDARDIZED ELEMENTS AND DEFINITIONS.--The data to be submitted under subparagraph (A) relating to medical loss ratio for a year, beginning with 2012, shall be submitted based on the standardized elements and definitions developed under paragraph (3).

''(3) DEVELOPMENT OF DATA REPORTING STANDARDS.--

''(A) IN GENERAL.--The Secretary shall develop and implement standardized data elements and definitions for reporting under this subsection, for contract years beginning with 2012, of data necessary for the calculation of the medical loss ratio for MA plans. Not later than December 31, 2010, the Secretary shall publish a report describing the elements and definitions so developed.

''(B) CONSULTATION.--The Secretary shall consult with the Health Choices Commissioner, representatives of MA organizations, ex-

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perts on health plan accounting systems, and representatives of the National Association of Insurance Commissioners, in the development of such data elements and definitions.

''(4) MEDICAL LOSS RATIO TO BE DEFINED.-- For purposes of this part, the term 'medical loss ratio' has the meaning given such term by the Secretary, taking into account the meaning given such term by the Health Choices Commissioner under section 116 of the America's Affordable Health Choices Act of 2009.''.

(b) MINIMUM MEDICAL LOSS RATIO.--Section 1857(e) of the Social Security Act (42 U.S.C. 1395w-27(e)) is amended by adding at the end the following new paragraph:

''(4) REQUIREMENT FOR MINIMUM MEDICAL LOSS RATIO.--If the Secretary determines for a contract year (beginning with 2014) that an MA plan has failed to have a medical loss ratio (as defined in section 1851(p)(4)) of at least .85--

''(A) the Secretary shall require the Medicare Advantage organization offering the plan to give enrollees a rebate (in the second succeeding contract year) of premiums under this part (or part B or part D, if applicable) by...

[Continued on pages 351-400]

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