[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1356 Introduced in Senate (IS)]






109th CONGRESS
  1st Session
                                S. 1356

 To amend title XVIII of the Social Security Act to provide incentives 
   for the provision of high qaulity care under the medicare program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 30, 2005

   Mr. Grassley (for himself, Mr. Baucus, Mr. Enzi, and Mr. Kennedy) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend title XVIII of the Social Security Act to provide incentives 
   for the provision of high quality care under the medicare program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; REFERENCE TO 
              SECRETARY; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Value 
Purchasing Act of 2005''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) Reference to Secretary.--In this Act, the term ``Secretary'' 
means the Secretary of Health and Human Services.
    (d) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendments to Social Security Act; reference to 
                            Secretary; table of contents.
Sec. 2. Findings; purpose.
           TITLE I--MEASURING QUALITY AND EFFICIENCY OF CARE

Sec. 101. Establishment of quality measurement systems for medicare 
                            value-based purchasing programs.
Sec. 102. MedPAC study and reports on the impact of medicare value-
                            based purchasing programs.
             TITLE II--VALUE-BASED PURCHASING FOR HOSPITALS

                       Subtitle A--PPS Hospitals

Sec. 201. PPS hospital value-based purchasing program.
                 Subtitle B--Critical Access Hospitals

Sec. 211. MedPAC study and report regarding a value-based purchasing 
                            program for critical access hospitals.
Sec. 212. Value-based purchasing demonstration program for critical 
                            access hospitals.
     TITLE III--VALUE-BASED PURCHASING FOR PHYSICIANS AND CERTAIN 
                             PRACTITIONERS

Sec. 301. Physician and practitioner value-based purchasing program.
Sec. 302. Demonstration project on data coordination through the use of 
                            health information technology.
Sec. 303. Sense of the Senate regarding payments under medicare 
                            physician fee schedule.
               TITLE IV--VALUE-BASED PURCHASING FOR PLANS

                  Subtitle A--Medicare Advantage Plans

Sec. 401. Plan value-based purchasing program.
      Subtitle B--Plans Offering Part D Prescription Drug Coverage

Sec. 411. MedPAC study and report regarding a value-based purchasing 
                            program for plans offering part D 
                            prescription drug coverage.
   TITLE V--VALUE-BASED PURCHASING FOR PROVIDERS AND FACILITIES THAT 
PROVIDE SERVICES TO MEDICARE BENEFICIARIES WITH END STAGE RENAL DISEASE

Sec. 501. End stage renal disease provider and facility value-based 
                            purchasing program.
Sec. 502. Value-based purchasing under the demonstration of bundled 
                            case-mix adjusted payment system for ESRD 
                            services.
Sec. 503. Chronic kidney disease demonstration projects.
Sec. 504. MedPAC study and report regarding a value-based purchasing 
                            program for pediatric renal dialysis 
                            facilities.
Sec. 505. MedPAC report on ESRD provider and facility value-based 
                            purchasing program.
Sec. 506. Sense of the Senate regarding an update to the composite rate 
                            payment for dialysis services.
       TITLE VI--VALUE-BASED PURCHASING FOR HOME HEALTH AGENCIES

Sec. 601. Home health agency value-based purchasing program.
    TITLE VII--VALUE-BASED PURCHASING FOR SKILLED NURSING FACILITIES

Sec. 701. Requirement for skilled nursing facilities to report 
                            functional capacity of medicare residents 
                            upon admission and discharge.
Sec. 702. HHS study on measures of quality for skilled nursing 
                            facilities; voluntary reporting of skilled 
                            nursing facility quality data.
Sec. 703. MedPAC study and report regarding a value-based purchasing 
                            program for skilled nursing facilities.
                   TITLE VIII--ADDITIONAL PROVISIONS

Sec. 801. Exception to Federal anti-kickback and physician self 
                            referral laws for the provision of 
                            permitted support.
Sec. 802. National health information pilot project.
Sec. 803. Health care value project.
Sec. 804. Demonstration project on data aggregation across all payors 
                            of health care.
Sec. 805. GAO studies and reports on the accuracy and completeness of 
                            quality data.
Sec. 806. HHS study and report regarding telehealth and telemedicine.

SEC. 2. FINDINGS; PURPOSE.

    (a) Findings.--Congress makes the following findings:
            (1) The United States pays more per capita for health care 
        than any other developed nation, yet--
                    (A) we rank 37th in health care quality according 
                to the World Health Organization; and
                    (B) as many as 100,000 patients die each year in 
                the United States as a result of medical errors.
            (2) The Institute of Medicine of the National Academy of 
        Sciences has highlighted problems with our health care system 
        in the areas of quality and patient safety, and has concluded 
        that the United States should commit to building an information 
        infrastructure to support health care delivery, quality 
        measurement and improvement, consumer health, public 
        accountability, research, education, and evidence-based 
        medicine.
            (3) The New England Journal of Medicine has published 
        research in an article entitled ``The Quality of Health Care 
        Delivered to Adults in the United States'' showing that adults 
        in the United States receive recommended health care only about 
        half of the time.
            (4) Health Affairs has published an article entitled 
        ``Medicare Spending, the Physician Workforce, and 
        Beneficiaries' Quality of Care'' showing that more care is not 
        necessarily better care.
            (5) Duke University has published a survey showing that 65 
        percent of United States business leaders, unlike their 
        European and Asian counterparts, feel that it is very important 
        for Congress to address the cost of health care.
            (6) The Midwest Business Group on Health has found that 
        inefficient resource use in health care represents more than 30 
        percent of health care spending in the United States.
            (7) Payment policies under the medicare program under title 
        XVIII of the Social Security Act do not include mechanisms 
        designed to improve the quality of care.
            (8) The medicare program should reward health care 
        providers who show that they are delivering high quality health 
        care and that they are achieving improvements in the quality of 
        care delivered to their patients.
            (9) The medicare program should promote the adoption of 
        health information technology, which can enhance the quality of 
        health care services, prevent medical errors, and enable 
        greater efficiency of health care delivery with improved 
        outcomes.
            (10) Reimbursement for items and services furnished under 
        the medicare program should be based on a value-based 
        purchasing system.
    (b) Purpose.--The purpose of this Act is to require the Secretary 
of Health and Human Services to develop and implement value-based 
purchasing programs under the medicare program in order to improve the 
quality and efficiency of health care.

           TITLE I--MEASURING QUALITY AND EFFICIENCY OF CARE

SEC. 101. ESTABLISHMENT OF QUALITY MEASUREMENT SYSTEMS FOR MEDICARE 
              VALUE-BASED PURCHASING PROGRAMS.

    (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is amended--
            (1) by redesignating part E as part F; and
            (2) by inserting after part D the following new part:

                    ``Part E--Value-Based Purchasing

   ``quality measurement systems for value-based purchasing programs

    ``Sec. 1860E-1. (a) Establishment.--
            ``(1) In general.--The Secretary shall develop quality 
        measurement systems for purposes of providing value-based 
        payments to--
                    ``(A) hospitals pursuant to section 1860E-2;
                    ``(B) physicians and practitioners pursuant to 
                section 1860E-3;
                    ``(C) plans pursuant to section 1860E-4;
                    ``(D) end stage renal disease providers and 
                facilities pursuant to section 1860E-5; and
                    ``(E) home health agencies pursuant to section 
                1860E-6.
            ``(2) Quality.--The systems developed under paragraph (1) 
        shall measure the quality of the care furnished by the provider 
        involved.
            ``(3) High quality health care defined.--In this part, the 
        term `high quality health care' means health care that is safe, 
        effective, patient-centered, timely, equitable, efficient, 
        necessary, and appropriate.
    ``(b) Requirements for Systems.--Under each quality measurement 
system described in subsection (a)(1), the Secretary shall do the 
following:
            ``(1) Measures.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall select measures of quality to be used 
                by the Secretary under each system.
                    ``(B) Requirements.--In selecting the measures to 
                be used under each system pursuant to subparagraph (A), 
                the Secretary shall, to the extent feasible, ensure 
                that--
                            ``(i) such measures are evidence-based, 
                        reliable and valid, and feasible to collect and 
                        report;
                            ``(ii) measures of process, structure, 
                        outcomes, beneficiary experience, efficiency, 
                        and equity are included;
                            ``(iii) measures of overuse and underuse of 
                        health care items and services are included;
                            ``(iv)(I) at least 1 measure of health 
                        information technology infrastructure that 
                        enables the provision of high quality health 
                        care and facilitates the exchange of health 
                        information, such as the use of one or more 
                        elements of a qualified health information 
                        system (as defined in subparagraph (E)), is 
                        included during the first year each system is 
                        implemented; and
                            ``(II) additional measures of health 
                        information technology infrastructure are 
                        included in subsequent years;
                            ``(v) in the case of the system that is 
                        used to provide value-based payments to 
                        hospitals under section 1860E-2, by not later 
                        than January 1, 2008, at least 5 measures that 
                        take into account the unique characteristics of 
                        small hospitals located in rural areas and 
                        frontier areas are included; and
                            ``(vi) measures that assess the quality of 
                        care furnished to frail individuals over the 
                        age of 75 and to individuals with multiple 
                        complex chronic conditions are included.
                    ``(C) Requirement for collection of data on a 
                measure for 1 year prior to use under the systems.--
                Data on any measure selected by the Secretary under 
                subparagraph (A) must be collected by the Secretary for 
                at least a 12-month period before such measure may be 
                used to determine whether a provider receives a value-
                based payment under a program described in subsection 
                (a)(1).
                    ``(D) Authority to vary measures.--
                            ``(i) Under system applicable to 
                        hospitals.--In the case of the system 
                        applicable to hospitals under section 1860E-2, 
                        the Secretary may vary the measures selected 
                        under subparagraph (A) by hospital depending on 
                        the size of, and the scope of services provided 
                        by, the hospital.
                            ``(ii) Under system applicable to 
                        physicians and practitioners.--In the case of 
                        the system applicable to physicians and 
                        practitioners under section 1860E-3, the 
                        Secretary may vary the measures selected under 
                        subparagraph (A) by physician or practitioner 
                        depending on the specialty of the physician, 
                        the type of practitioner, or the volume of 
                        services furnished to beneficiaries by the 
                        physician or practitioner.
                            ``(iii) Under system applicable to esrd 
                        providers and facilities.--In the case of the 
                        system applicable to providers of services and 
                        renal dialysis facilities under section 1860E-
                        5, the Secretary may vary the measures selected 
                        under subparagraph (A) by provider or facility 
                        depending on the type of, the size of, and the 
                        scope of services provided by, the provider or 
                        facility.
                            ``(iv) Under system applicable to home 
                        health agencies.--In the case of the system 
                        applicable to home health agencies under 
                        section 1860E-6, the Secretary may vary the 
                        measures selected under subparagraph (A) by 
                        agency depending on the size of, and the scope 
                        of services provided by, the agency.
                    ``(E) Qualified health information system 
                defined.--For purposes of subparagraph (B)(iv)(I), the 
                term `qualified health information system' means a 
                computerized system (including hardware, software, and 
                training) that--
                            ``(i) protects the privacy and security of 
                        health information and properly encrypts such 
                        health information;
                            ``(ii) maintains and provides access to 
                        patients' health records in an electronic 
                        format;
                            ``(iii) incorporates decision support 
                        software to reduce medical errors and enhance 
                        health care quality;
                            ``(iv) is consistent with data standards 
                        and certification processes recommended by the 
                        Secretary;
                            ``(v) allows for the reporting of quality 
                        measures; and
                            ``(vi) includes other features determined 
                        appropriate by the Secretary.
            ``(2) Weights of measures.--
                    ``(A) In general.--The Secretary shall assign 
                weights to the measures used by the Secretary under 
                each system.
                    ``(B) Consideration.--If the Secretary determines 
                appropriate, in assigning the weights under 
                subparagraph (A)--
                            ``(i) measures of clinical effectiveness 
                        shall be weighted more heavily than measures of 
                        beneficiary experience; and
                            ``(ii) measures of risk adjusted outcomes 
                        shall be weighted more heavily than measures of 
                        process; and
            ``(3) Risk adjustment.--The Secretary shall establish 
        procedures, as appropriate, to control for differences in 
        beneficiary health status and beneficiary characteristics. To 
        the extent feasible, such procedures may be based on existing 
        models for controlling for such differences.
            ``(4) Maintenance.--
                    ``(A) In general.--The Secretary shall, as 
                determined appropriate, but not more often than once 
                each 12-month period, update each system, including 
                through--
                            ``(i) the addition of more accurate and 
                        precise measures under the systems and the 
                        retirement of existing outdated measures under 
                        the system;
                            ``(ii) the refinement of the weights 
                        assigned to measures under the system; and
                            ``(iii) the refinement of the risk 
                        adjustment procedures established pursuant to 
                        paragraph (3) under the system.
                    ``(B) Update shall allow for comparison of data.--
                Each update under subparagraph (A) of a quality 
                measurement system shall allow for the comparison of 
                data from one year to the next for purposes of 
                providing value-based payments under the programs 
                described in subsection (a)(1).
            ``(5) Use of most recent quality data.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the Secretary shall use the most 
                recent quality data with respect to the provider 
                involved that is available to the Secretary.
                    ``(B) Insufficient data due to low volume.--If the 
                Secretary determines that there is insufficient data 
                with respect to a measure or measures because of a low 
                number of services provided, the Secretary may 
                aggregate data across more than 1 fiscal or calendar 
                year, as the case may be.
    ``(c) Requirements for Developing and Updating the Systems.--In 
developing and updating each quality measurement system under this 
section, the Secretary shall--
            ``(1) take into account the quality measures developed by 
        nationally recognized quality measurement organizations, 
        researchers, health care provider organizations, and other 
        appropriate groups;
            ``(2) consult with, and take into account the 
        recommendations of, the entity that the Secretary has an 
        arrangement with under subsection (e);
            ``(3) consult with provider-based groups and clinical 
        specialty societies;
            ``(4) take into account existing quality measurement 
        systems that have been developed through a rigorous process of 
        validation and with the involvement of entities and persons 
        described in subsection (e)(2)(B); and
            ``(5) take into account--
                    ``(A) each of the reports by the Medicare Payment 
                Advisory Commission that are required under the 
                Medicare Value Purchasing Act of 2005;
                    ``(B) the results of--
                            ``(i) the demonstrations required under 
                        such Act;
                            ``(ii) the demonstration program under 
                        section 1866A;
                            ``(iii) the demonstration program under 
                        section 1866C; and
                            ``(iv) any other demonstration or pilot 
                        program conducted by the Secretary relating to 
                        measuring and rewarding quality and efficiency 
                        of care; and
                    ``(C) the report by the Institute of Medicine of 
                the National Academy of Sciences under section 238(b) 
                of the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173).
    ``(d) Requirements for Implementing the Systems.--In implementing 
each quality measurement system under this section, the Secretary shall 
consult with entities--
            ``(1) that have joined together to develop strategies for 
        quality measurement and reporting, including the feasibility of 
        collecting and reporting meaningful data on quality measures; 
        and
            ``(2) that involve representatives of health care 
        providers, health plans, consumers, employers, purchasers, 
        quality experts, government agencies, and other individuals and 
        groups that are interested in quality of care.
    ``(e) Arrangement With an Entity To Provide Advice and 
Recommendations.--
            ``(1) Arrangement.--On and after July 1, 2006, the 
        Secretary shall have in place an arrangement with an entity 
        that meets the requirements described in paragraph (2) under 
        which such entity provides the Secretary with advice on, and 
        recommendations with respect to, the development and updating 
        of the quality measurement systems under this section, 
        including the assigning of weights to the measures under 
        subsection (b)(2).
            ``(2) Requirements described.--The requirements described 
        in this paragraph are the following:
                    ``(A) The entity is a private nonprofit entity 
                governed by an executive director and a board.
                    ``(B) The members of the entity include 
                representatives of--
                            ``(i)(I) health plans and providers 
                        receiving reimbursement under this title for 
                        the provision of items and services, including 
                        health plans and providers with experience in 
                        the care of the frail elderly and individuals 
                        with multiple complex chronic conditions; or
                            ``(II) groups representing such health 
                        plans and providers;
                            ``(ii) groups representing individuals 
                        receiving benefits under this title;
                            ``(iii) purchasers and employers or groups 
                        representing purchasers or employers;
                            ``(iv) organizations that focus on quality 
                        improvement as well as the measurement and 
                        reporting of quality measures;
                            ``(v) State government health programs;
                            ``(vi) persons skilled in the conduct and 
                        interpretation of biomedical, health services, 
                        and health economics research and with 
                        expertise in outcomes and effectiveness 
                        research and technology assessment; and
                            ``(vii) persons or entities involved in the 
                        development and establishment of standards and 
                        certification for health information technology 
                        systems and clinical data.
                    ``(C) The membership of the entity is 
                representative of individuals with experience with--
                            ``(i) urban health care issues;
                            ``(ii) safety net health care issues; and
                            ``(iii) rural and frontier health care 
                        issues.
                    ``(D) The entity does not charge a fee for 
                membership for participation in the work of the entity 
                related to the arrangement with the Secretary under 
                paragraph (1). If the entity does require a fee for 
                membership for participation in other functions of the 
                entity, there shall be no linkage between such fee and 
                participation in the work of the entity related to such 
                arrangement with the Secretary.
                    ``(E) The entity--
                            ``(i) permits any member described in 
                        subparagraph (B) to vote on matters of the 
                        entity related to the arrangement with the 
                        Secretary under paragraph (1); and
                            ``(ii) ensures that such members have an 
                        equal vote on such matters .
                    ``(F) With respect to matters related to the 
                arrangement with the Secretary under paragraph (1), the 
                entity conducts its business in an open and transparent 
                manner and provides the opportunity for public comment.
                    ``(G) The entity operates as a voluntary consensus 
                standards setting organization as defined for purposes 
                of section 12(d) of the National Technology Transfer 
                and Advancement Act of 1995 (Public Law 104-113) and 
                Office of Management and Budget Revised Circular A-119 
                (published in the Federal Register on February 10, 
                1998).
            ``(3) Authorization of appropriations.--For the purpose of 
        carrying out the provisions of this subsection, there are 
        authorized to be appropriated--
                    ``(A) for each of the fiscal years 2006 and 2007, 
                $3,000,000; and
                    ``(B) for fiscal year 2008 and each subsequent 
                fiscal year, an amount equal to the sum of--
                            ``(i) $3,000,000; and
                            ``(ii) such amount multiplied by the 
                        percentage (if any) by which the average of the 
                        Consumer Price Index for all urban consumers 
                        (United States city average) for the 12-month 
                        period ending with June of the calendar year in 
                        which such fiscal year begins exceeds such 
                        average for the 12-month period ending with 
                        June 2006.''.
    (b) Conforming References to Previous Part E.--Any reference in law 
(in effect before the date of the enactment of this Act) to part E of 
title XVIII of the Social Security Act is deemed a reference to part F 
of such title (as in effect after such date).

SEC. 102. MEDPAC STUDY AND REPORTS ON THE IMPACT OF MEDICARE VALUE-
              BASED PURCHASING PROGRAMS.

    (a) Study.--The Medicare Payment Advisory Commission shall conduct 
a study on how the medicare value-based purchasing programs under part 
E of title XVIII of the Social Security Act, as added by this Act, will 
impact medicare beneficiaries, medicare providers, and the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund under sections 1817 and 1841, respectively, of the 
Social Security Act (42 U.S.C. 1395i; 1395t), including how such 
programs will impact the access of such beneficiaries to items and 
services under the medicare program and the volume and utilization of 
such items and services.
    (b) Reports.--
            (1) Initial report.--
                    (A) In general.--Not later than March 1, 2008, the 
                Commission shall submit a report to Congress and the 
                Secretary on the study conducted under subsection (a).
                    (B) Contents.--The report submitted under 
                subparagraph (A) shall include--
                            (i) an analysis of the impact of the data 
                        collection and submission and reporting 
                        requirements under the amendments made by this 
                        Act on the quality of care under the medicare 
                        program, including the impact of such 
                        requirements on--
                                    (I) subsection (d) hospitals (as 
                                defined in section 1886(d)(1)(B) of the 
                                Social Security Act (42 U.S.C. 
                                1395w(d)(1)(B)) with a low number of 
                                inpatient beds or a low volume of 
                                discharges in a year; and
                                    (II) physicians with a low number 
                                of patient encounters in a year;
                            (ii) a detailed description of issues for 
                        the Secretary to consider in implementing and 
                        updating the medicare value-based purchasing 
                        programs under part E of title XVIII of such 
                        Act and recommendations on such issues; and
                            (iii) recommendations for such legislation 
                        and administrative actions as the Commission 
                        considers appropriate.
            (2) Interim and final report.--
                    (A) In general.--Not later than March 1, 2011, and 
                June 1, 2012, the Commission shall submit a report to 
                Congress and the Secretary on the study conducted under 
                subsection (a).
                    (B) Contents.--The reports submitted under 
                subparagraph (A) shall include--
                            (i) an update on the items described in 
                        clauses (i) and (ii) of paragraph (1)(B);
                            (ii) an analysis of the impact of the 
                        payment changes on providers under the medicare 
                        program by reason of the amendments made by 
                        this Act; and
                            (iii) recommendations for such legislation 
                        and administrative actions as the Commission 
                        considers appropriate.

             TITLE II--VALUE-BASED PURCHASING FOR HOSPITALS

                       Subtitle A--PPS Hospitals

SEC. 201. PPS HOSPITAL VALUE-BASED PURCHASING PROGRAM.

    (a) Voluntary Submission of Hospital Quality Data.--
            (1) Update for hospitals that submit quality data.--Section 
        1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is amended--
                    (A) in clause (vii)--
                            (i) in subclause (I), by striking ``for 
                        each of fiscal years 2005 through 2007'' and 
                        inserting ``for fiscal years 2005 and 2006''; 
                        and
                            (ii) in subclause (II), by striking 
                        ``Each'' and inserting ``For fiscal years 2005 
                        and 2006, each''; and
                    (B) by adding at the end the following new clause:
    ``(viii)(I) For purposes of clause (i)(XX), for fiscal year 2007 
and each subsequent fiscal year, in the case of a subsection (d) 
hospital that does not submit data in accordance with subclause (II) 
with respect to such a fiscal year, the applicable percentage increase 
under such clause for such fiscal year shall be reduced by 2 percentage 
points. Such reduction shall apply only with respect to the fiscal year 
involved, and the Secretary shall not take into account such reduction 
in computing the applicable percentage increase under clause (i)(XX) 
for a subsequent fiscal year.
    ``(II) For fiscal year 2007 and each subsequent fiscal year, each 
subsection (d) hospital shall submit to the Secretary such data that 
the Secretary determines is appropriate for the measurement of health 
care quality, including data necessary for the operation of the PPS 
hospital value-based purchasing program under section 1860E-2. Such 
data shall be submitted in a form and manner, and at a time, specified 
by the Secretary for purposes of this clause.
    ``(III) The Secretary shall establish procedures for making data 
submitted under subclause (II) available to the public in a clear and 
understandable form. Such procedures shall ensure that a subsection (d) 
hospital has the opportunity to review the data that is to be made 
public with respect to the hospital prior to such data being made 
public.''.
            (2) Conforming amendments.--Section 1886(b)(3)(B)(i) (42 
        U.S.C. 1395ww(b)(3)(B)(i)) is amended--
                    (A) in subclause (XIX), by striking ``2007'' and 
                inserting ``2006''; and
                    (B) in subclause (XX)--
                            (i) by striking ``2008'' and inserting 
                        ``2007''; and
                            (ii) by inserting ``subject to clause 
                        (viii),'' after ``fiscal year,''.
    (b) Program.--Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
inserting after section 1860E-1, as added by section 101(a), the 
following new section:

             ``pps hospital value-based purchasing program

    ``Sec. 1860E-2. (a) Program.--
            ``(1) In general.--The Secretary shall establish a program 
        under which value-based payments are provided each fiscal year 
        to hospitals that demonstrate the provision of high quality 
        health care to individuals who are entitled to benefits under 
        part A and are inpatients of the hospital.
            ``(2) Program to begin in fiscal year 2007.--The Secretary 
        shall establish the program under this section so that value-
        based payments described in subsection (b) are made with 
        respect to fiscal year 2007 and each subsequent fiscal year.
            ``(3) Applicability of program to hospitals.--For purposes 
        of this section, the term `hospital' means a subsection (d) 
        hospital (as defined in section 1886(d)(1)(B)).
    ``(b) Value-Based Payments.--
            ``(1) In general.--Subject to paragraph (4), the Secretary 
        shall make a value-based payment to a hospital with respect to 
        a fiscal year if the Secretary determines that the quality of 
        the care provided in that year to individuals who are entitled 
        to benefits under part A and are inpatients of the hospital--
                    ``(A) has substantially improved (as determined by 
                the Secretary) over the prior year; or
                    ``(B) exceeds a threshold established by the 
                Secretary.
            ``(2) Use of system.--In determining which hospitals 
        qualify for a value-based payment under paragraph (1), the 
        Secretary shall use the quality measurement system developed 
        for this section pursuant to section 1860E-1(a).
            ``(3) Determination of amount of award and allocation of 
        awards.--
                    ``(A) In general.--The Secretary shall determine--
                            ``(i) the amount of a value-based payment 
                        under paragraph (1) provided to a hospital; and
                            ``(ii) subject to subparagraph (B), the 
                        allocation of the total amount available under 
                        subsection (d) for value-based payments for any 
                        fiscal year between payments with respect to 
                        hospitals that meet the requirement under 
                        subparagraph (A) of paragraph (1) and hospitals 
                        that meet the requirement under subparagraph 
                        (B) of such paragraph.
                    ``(B) Requirements regarding the amount of funding 
                available for value-based payments for hospitals 
                exceeding a threshold.--The Secretary shall ensure 
                that--
                            ``(i) a majority of the total amount 
                        available under subsection (d) for value-based 
                        payments for any fiscal year is provided to 
                        hospitals that are receiving such payments 
                        because they meet the requirement under 
                        paragraph (1)(B); and
                            ``(ii) with respect to fiscal year 2008 and 
                        each subsequent fiscal year, the percentage of 
                        the total amount available under subsection (d) 
                        for value-based payments for any fiscal year 
                        that is used to make payments to hospitals that 
                        meet such requirement is greater than such 
                        percentage in the previous fiscal year.
            ``(4) Requirements.--
                    ``(A) Required submission of data.--In order for a 
                hospital to be eligible for a value-based payment for a 
                fiscal year, the hospital must have complied with the 
                requirements under section 1886(b)(3)(B)(viii)(II) with 
                respect to that fiscal year.
                    ``(B) Attestation regarding data.--In order for a 
                hospital to be eligible for a value-based payment for a 
                fiscal year, the hospital must have provided the 
                Secretary (under procedures established by the 
                Secretary) with an attestation that the data submitted 
                under section 1886(b)(3)(B)(viii)(II) for the fiscal 
                year is complete and accurate.
            ``(5) Total amount of value-based payments equal to total 
        amount of available funding.--The Secretary shall establish 
        payment amounts under paragraph (3)(A) so that, as estimated by 
        the Secretary, the total amount of value-based payments made in 
        a fiscal year under paragraph (1) is equal to the total amount 
        available under subsection (d) for such payments for the year.
            ``(6) Payment methods and timing of payments.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                payment of value-based payments under paragraph (1) 
                shall be based on such a method as the Secretary 
                determines appropriate.
                    ``(B) Timing.--The Secretary shall ensure that 
                value-based payments under paragraph (1) with respect 
                to a fiscal year are made by not later than the close 
                of the following fiscal year.
    ``(c) Description of How Hospitals Would Have Fared Under Program 
if Program Had Applied to Fiscal Year 2006.--Not later than January 1, 
2007, the Secretary shall provide each hospital with a description of 
the Secretary's estimate of how payments to the hospital under this 
title would have been affected with respect to items and services 
furnished in fiscal year 2006 if the program under this section (and 
the amendments made by subsections (a) and (c) of section 201 of the 
Medicare Value Purchasing Act of 2005) had been in effect with respect 
to fiscal year 2006.
    ``(d) Funding.--
            ``(1) Amount.--The amount available for value-based 
        payments under this section with respect to a fiscal year shall 
        be equal to the amount of the reduction in expenditures under 
        the Federal Hospital Insurance Trust Fund under section 1817 in 
        the year as a result of the amendments made by section 201(c) 
        of the Medicare Value Purchasing Act of 2005, as estimated by 
        the Secretary.
            ``(2) Payments from trust fund.--Payments to hospitals 
        under this section shall be made from the Federal Hospital 
        Insurance Trust Fund.''.
    (c) Reduction of Average Standardized Amount for Hospitals That 
Submit Quality Data in Order To Fund Program.--
            (1) In general.--Section 1886(d)(3)(B) (42 U.S.C. 
        1395ww(d)(3)(B)) is amended to read as follows:
            ``(B) Reduction of average standardized amount for value of 
        outlier payments and to fund value-based purchasing program.--
                    ``(i) Outlier payments.--The Secretary shall reduce 
                each of the average standardized amounts determined 
                under subparagraph (A) (and determined without regard 
                to any reduction under clause (ii)) by a factor equal 
                to the proportion of payments under this subsection (as 
                estimated by the Secretary as if the applicable percent 
                in clause (ii) were zero) based on DRG prospective 
                payment amounts which are additional payments described 
                in paragraph (5)(A) (relating to outlier payments).
                    ``(ii) Value-based purchasing program.--In the case 
                of a subsection (d) hospital that complies with the 
                submission requirements under subsection 
                (b)(3)(B)(viii))(II) for a fiscal year, in addition to 
                the reduction under clause (i), the Secretary shall 
                reduce each of the average standardized amounts 
                determined under subparagraph (A) for that fiscal year 
                (and determined without regard to any reduction under 
                clause (i)) by the applicable percent (as defined in 
                clause (iii)) for that fiscal year.
                    ``(iii) Applicable percent.--For purposes of clause 
                (ii), the term `applicable percent' means--
                            ``(I) for fiscal year 2007, 1.0 percent;
                            ``(II) for fiscal year 2008, 1.25 percent;
                            ``(III) for fiscal year 2009, 1.5 percent;
                            ``(IV) for fiscal year 2010, 1.75 percent; 
                        and
                            ``(V) for fiscal year 2011 and each 
                        subsequent year, 2.0 percent.''.
            (2) Conforming amendment.--Section 1886(d)(5)(A)(iv) (42 
        U.S.C. 1395ww(d)(5)(A)(iv)) is amended by adding at the end the 
        following new sentence: ``Such projection or estimate shall be 
        made as if the applicable percent under paragraph (3)(B)(ii) 
        were zero.''.

                 Subtitle B--Critical Access Hospitals

SEC. 211. MEDPAC STUDY AND REPORT REGARDING A VALUE-BASED PURCHASING 
              PROGRAM FOR CRITICAL ACCESS HOSPITALS.

    (a) Study.--The Medicare Payment Advisory Commission shall conduct 
a study on the advisability and feasibility of establishing a value-
based purchasing program under the medicare program under title XVIII 
of the Social Security Act for critical access hospitals (as defined in 
section 1861(mm)(1) of such Act (42 U.S.C. 1395x(mm)(1)).
    (b) Report.--Not later than March 1, 2007, the Commission shall 
submit a report to Congress and the Secretary on the study conducted 
under subsection (a) together with recommendations for such legislation 
and administrative actions as the Commission considers appropriate.

SEC. 212. VALUE-BASED PURCHASING DEMONSTRATION PROGRAM FOR CRITICAL 
              ACCESS HOSPITALS.

    (a) Establishment.--
            (1) In general.--Not later than 6 months after the date of 
        enactment of this Act, the Secretary shall establish a 
        demonstration program under which the Secretary establishes a 
        value-based purchasing program under the medicare program under 
        title XVIII of the Social Security Act for critical access 
        hospitals (as defined in section 1861(mm)(1) of such Act (42 
        U.S.C. 1395x(mm)(1)) in order to test innovative methods of 
        measuring and rewarding quality health care furnished by such 
        hospitals.
            (2) Duration.--The demonstration program under this section 
        shall be conducted for a 2-year period.
            (3) Sites.--The Secretary shall conduct the demonstration 
        program under this section at 6 critical access hospitals. The 
        Secretary shall ensure that such hospitals are representative 
        of the spectrum of such hospitals that participate in the 
        medicare program.
    (b) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act as may be necessary to 
carry out the demonstration program under this section.
    (c) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund under section 1817 of the Social 
Security Act (42 U.S.C. 1395i) of such funds as are necessary for the 
costs of carrying out the demonstration program under this section.
    (d) Report.--Not later than 6 months after the demonstration 
program under this section is completed, the Secretary shall submit to 
Congress a report on the demonstration program together with--
            (1) recommendations on the establishment of a permanent 
        value-based purchasing program under the medicare program for 
        critical access hospitals; and
            (2) recommendations for such other legislation or 
        administrative action as the Secretary determines appropriate.

     TITLE III--VALUE-BASED PURCHASING FOR PHYSICIANS AND CERTAIN 
                             PRACTITIONERS

SEC. 301. PHYSICIAN AND PRACTITIONER VALUE-BASED PURCHASING PROGRAM.

    (a) Voluntary Submission of Physician and Practitioner Quality 
Data.--
            (1) Update for physicians and practitioners that submit 
        quality data.--Section 1848(d)(4) (42 U.S.C. 1395w-4(d)(4)) is 
        amended by adding at the end the following new subparagraph:
                    ``(G) Adjustment if quality data not submitted.--
                            ``(i) Adjustment.--For 2007 and each 
                        subsequent year, in the case of services 
                        furnished by a physician or a practitioner (as 
                        defined in section 1860E-3(a)(3)) that does not 
                        submit data in accordance with clause (ii) with 
                        respect to such a year, the update under 
                        subparagraph (A) shall be reduced by 2 
                        percentage points. Such reduction shall apply 
                        only with respect to the year involved, and the 
                        Secretary shall not take into account such 
                        reduction in computing the conversion factor 
                        for a subsequent year.
                            ``(ii) Submission of quality data.--For 
                        2007 and each subsequent year, each physician 
                        and practitioner (as defined in section 1860E-
                        3(a)(3)) shall submit to the Secretary such 
                        data that the Secretary determines is 
                        appropriate for the measurement of health 
                        outcomes and other indices of quality, 
                        including data necessary for the operation of 
                        the physician and practitioner value-based 
                        purchasing program under section 1860E-3. Such 
                        data shall be submitted in a form and manner, 
                        and at a time, specified by the Secretary for 
                        purposes of this subparagraph.
                            ``(iii) Available to the public.--
                                    ``(I) In general.--Subject to 
                                subclause (II), the Secretary shall 
                                establish procedures for making data 
                                submitted under clause (ii), with 
                                respect to items and services furnished 
                                on or after January 1, 2008, available 
                                to the public in a clear and 
                                understandable form. Such procedures 
                                shall ensure that a physician or 
                                practitioner has the opportunity to 
                                review the data that is to be made 
                                public with respect to the physician or 
                                practitioner prior to such data being 
                                made public.
                                    ``(II) Exceptions.--The Secretary 
                                shall establish exceptions to the 
                                requirement for making data available 
                                to the public under the first sentence 
                                of subclause (I). In providing for such 
                                exceptions, the Secretary shall take 
                                into account the size and specialty 
                                representation of the practice 
                                involved.''.
            (2) Conforming amendment.--Section 1848(d)(4)(A) (42 U.S.C. 
        1395w-4(d)(4)(A)) is amended, in the matter preceding clause 
        (i), by striking ``subparagraph (F)'' and inserting 
        ``subparagraphs (F) and (G)''.
    (b) Program.--Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
inserting after section 1860E-2, as added by section 201(b), the 
following new section:

      ``physician and practitioner value-based purchasing program

    ``Sec. 1860E-3. (a) Program.--
            ``(1) In general.--The Secretary shall establish a program 
        under which value-based payments are provided each year to 
        physicians and practitioners that demonstrate the provision of 
        high quality health care to individuals enrolled under part B.
            ``(2) Program to begin in 2008.--The Secretary shall 
        establish the program under this section so that value-based 
        payments described in subsection (b) are made with respect to 
        2008 and each subsequent year.
            ``(3) Definition of physician and practitioner.--In this 
        section:
                    ``(A) Physician.--The term `physician' has the 
                meaning given that term in section 1861(r).
                    ``(B) Practitioner.--The term `practitioner' 
                means--
                            ``(i) a practitioner described in section 
                        1842(b)(18)(C);
                            ``(ii) a physical therapist (as described 
                        in section 1861(p));
                            ``(iii) an occupational therapist (as so 
                        described); and
                            ``(iv) a qualified speech-language 
                        pathologist (as defined in section 
                        1861(ll)(3)(A)).
            ``(4) Identification of physicians and practitioners.--For 
        purposes of applying this section and paragraphs (4)(G) and (6) 
        of section 1848(d), the Secretary shall establish procedures 
        for the identification of physicians and practitioners, such as 
        through physician or practitioner billing units or other units.
    ``(b) Value-Based Payments.--
            ``(1) In general.--Subject to paragraph (4), the Secretary 
        shall make a value-based payment to a physician or a 
        practitioner with respect to a year if the Secretary determines 
        that both the quality of the care and the efficiency of the 
        care provided in that year by the physician or practitioner to 
        individuals enrolled under part B--
                    ``(A) has substantially improved (as determined by 
                the Secretary) over the prior year; or
                    ``(B) exceeds a threshold established by the 
                Secretary.
            ``(2) Use of systems and data.--
                    ``(A) In general.--In determining which physicians 
                and practitioners qualify for a value-based payment 
                under paragraph (1), the Secretary shall use--
                            ``(i) the quality measurement system 
                        developed for this section pursuant to section 
                        1860E-1(a) with respect to the quality of the 
                        care provided by the physician or practitioner; 
                        and
                            ``(ii) the comparative utilization system 
                        developed under subsection (c) with respect to 
                        the efficiency of such care.
            ``(3) Determination of amount of award and allocation of 
        awards.--
                    ``(A) In general.--The Secretary shall determine--
                            ``(i) the amount of a value-based payment 
                        under paragraph (1) provided to a physician or 
                        a practitioner; and
                            ``(ii) subject to subparagraph (B), the 
                        allocation of the total amount available under 
                        subsection (e) for value-based payments for any 
                        year between payments with respect to 
                        physicians and practitioners that meet the 
                        requirement under subparagraph (A) of paragraph 
                        (1) and physicians and practitioners that meet 
                        the requirement under subparagraph (B) of such 
                        paragraph.
                    ``(B) Requirements regarding the amount of funding 
                available for value-based payments for physicians and 
                practitioners exceeding a threshold.--The Secretary 
                shall ensure that--
                            ``(i) a majority of the total amount 
                        available under subsection (e) for value-based 
                        payments for any year is provided to physicians 
                        and practitioners that are receiving such 
                        payments because they meet the requirement 
                        under paragraph (1)(B); and
                            ``(ii) with respect to 2009 and each 
                        subsequent year, the percentage of the total 
                        amount available under subsection (e) for 
                        value-based payments for any year that is used 
                        to make payments to physicians and 
                        practitioners that meet such requirement is 
                        greater than such percentage in the previous 
                        year.
            ``(4) Requirements.--
                    ``(A) Required submission of data.--In order for a 
                physician or a practitioner to be eligible for a value-
                based payment for a year, the physician or practitioner 
                must have complied with the requirements under section 
                1848(d)(6)(B)(ii) with respect to that year.
                    ``(B) Attestation regarding data.--In order for a 
                physician or a practitioner to be eligible for a value-
                based payment for a year, the physician or practitioner 
                must have provided the Secretary (under procedures 
                established by the Secretary) with an attestation that 
                the data submitted under section 1848(d)(6)(B)(ii) with 
                respect to that year is complete and accurate.
            ``(5) Total amount of value-based payments equal to total 
        amount of available funding.--The Secretary shall establish 
        payment amounts under paragraph (3)(A) so that, as estimated by 
        the Secretary, the total amount of value-based payments made in 
        a year under paragraph (1) is equal to the total amount 
        available under subsection (e) for such payments for the year.
            ``(6) Payment methods and timing of payments.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                payment of value-based payments under paragraph (1) 
                shall be based on such a method as the Secretary 
                determines appropriate.
                    ``(B) Timing.--The Secretary shall ensure that 
                value-based payments under paragraph (1) with respect 
                to a year are made by not later than December 31 of the 
                subsequent year.
    ``(c) Comparative Utilization System.--
            ``(1) Development.--The Secretary shall develop a 
        comparative utilization system for purposes of providing value-
        based payments under subsection (b).
            ``(2) Additional measures of efficient resource use.--The 
        comparative utilization system developed under paragraph (1) 
        shall measure the efficiency of the care provided by a 
        physician or practitioner.
            ``(3) Requirements for system.--Under the comparative 
        utilization system described in paragraph (1), the Secretary 
        shall do the following:
                    ``(A) Measures.--The Secretary shall select 
                measures of efficiency to be used by the Secretary 
                under the system.
                    ``(B) Use of claims data for utilization patterns 
                and efficiency.--
                            ``(i) Review of claims data.--The Secretary 
                        shall review claims data with respect to 
                        services furnished or ordered by physicians and 
                        practitioners.
                            ``(ii) Use of most recent claims data.--The 
                        Secretary shall use the most recent claims data 
                        with respect to the physician or practitioner 
                        that is available to the Secretary.
                    ``(C) Risk adjustment.--The Secretary shall 
                establish procedures, as appropriate, to control for 
                differences in beneficiary health status and 
                beneficiary characteristics.
            ``(4) Annual Reports.--Beginning in 2006, the Secretary 
        shall provide physicians and practitioners with annual reports 
        on the utilization of items and services under this title based 
        upon the review of claims data under paragraph (3)(B). With 
        respect to reports provided in 2006 and 2007, such reports are 
        confidential and the Secretary shall not make such reports 
        available to the public.
    ``(d) Description of How Physicians and Practitioners Would Have 
Fared Under Program if Program Had Applied to 2007.--Not later than 
March 1, 2008, the Secretary shall provide each physician and 
practitioner with a description of the Secretary's estimate of how 
payments to the physician or practitioner under this title would have 
been affected with respect to items and services furnished in 2007 if 
the program under this section (and the amendments made by subsections 
(a) and (c) of section 301 of the Medicare Value Purchasing Act of 
2005) had been in effect with respect to 2007.
    ``(e) Funding.--
            ``(1) Amount.--The amount available for value-based 
        payments under this section with respect to a year shall be 
        equal to the amount of the reduction in expenditures under the 
        Federal Supplementary Medical Insurance Trust Fund under 
        section 1841 in the year as a result of the amendments made by 
        section 301(c) of the Medicare Value Purchasing Act of 2005, as 
        estimated by the Secretary.
            ``(2) Payments from trust fund.--Payments to physicians and 
        practitioners under this section shall be made from the Federal 
        Supplementary Medical Insurance Trust Fund.''.
    (c) Reduction in Conversion Factor for Physicians and Practitioners 
That Submit Quality Data in Order To Fund Program.--
            (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
        amended by adding at the end the following new paragraph:
            ``(6) Reduction in conversion factor for physicians and 
        practitioners in order to fund value-based purchasing 
        program.--
                    ``(A) In general.--For 2008 and each subsequent 
                year, the single conversion factor otherwise applicable 
                under this subsection to services furnished in the year 
                by a physician or a practitioner (as defined in section 
                1860E-3(a)(3)) that complies with the requirements 
                under paragraph (4)(G)(ii) for the year (determined 
                after application of the update under paragraph (4)) 
                shall be reduced by the applicable percent.
                    ``(B) Applicable percent.--For purposes of 
                subparagraph (A), the term `applicable percent' means--
                            ``(i) for 2008, 1.0 percent;
                            ``(ii) for 2009, 1.25 percent;
                            ``(iii) for 2010, 1.5 percent;
                            ``(iv) for 2011, 1.75 percent; and
                            ``(v) for 2012 and each subsequent year, 
                        2.0 percent.''.
            (2) Conforming amendment.--Section 1848(d)(1)(A) (42 U.S.C. 
        1395w-4(d)(1)(A)) is amended by striking ``The conversion 
        factor'' and inserting ``Subject to paragraph (6), the 
        conversion factor''.

SEC. 302. DEMONSTRATION PROJECT ON DATA COORDINATION THROUGH THE USE OF 
              HEALTH INFORMATION TECHNOLOGY.

    (a) Demonstration Project.--
            (1) Establishment.--Not later than 6 months after the date 
        of enactment of this Act, the Secretary, in consultation with 
        the National Coordinator for Health Information Technology, 
        shall establish a demonstration project to determine the 
        threshold amount of information technology connectivity that is 
        necessary in order to improve the ability of physicians and 
        practitioners (as defined in section 1860E-3(a)(3) of the 
        Social Security Act, as added by section 301(b)) in rural and 
        frontier areas to--
                    (A) collect, report, and maintain data on quality 
                of care; and
                    (B) use such data as a resource for improving the 
                quality and efficiency of the care provided to medicare 
                beneficiaries by such physicians and practitioners.
            (2) Duration.--The demonstration project under this section 
        shall be conducted for a 3-year period.
            (3) Sites.--The Secretary shall conduct the project under 
        this section at 6 sites.
            (4) Participants.--Participants in the demonstration 
        project under this section may include regional networks, 
        public-private partnerships including health care providers, 
        persons or entities involved in the delivery of health care 
        through the use of telemedicine and telehealth, and other 
        persons or entities determined appropriate by the Secretary.
            (5) Requirement for participants.--Participants in the 
        demonstration project under this section shall comply with any 
        interoperability and certification standards and processes that 
        have been developed or adopted by the Secretary or a designee 
        of the Secretary.
    (b) Report.--
            (1) In general.--Not later than 6 months after the 
        demonstration project under this section is completed, the 
        Secretary shall submit to Congress a report on the 
        demonstration project.
            (2) Contents.--The report submitted under paragraph (1) 
        shall include--
                    (A) an analysis of--
                            (i) the types of information accessed, 
                        transferred, and exchanged through different 
                        models for information technology connectivity;
                            (ii) the characteristics of such models 
                        that have been successful in providing improved 
                        information flow and improved quality and 
                        efficiency in health care; and
                            (iii) barriers to widespread adoption of 
                        such models; and
                    (B) recommendations for such legislation and 
                administrative actions as the Secretary considers 
                appropriate.
    (c) Funding.--There are authorized to be appropriated to the 
Secretary such sums as may be necessary to carry out this section.

SEC. 303. SENSE OF THE SENATE REGARDING PAYMENTS UNDER MEDICARE 
              PHYSICIAN FEE SCHEDULE.

    (a) Findings.--The Senate makes the following findings:
            (1) Based on current projections, estimates suggest that, 
        absent any action, payment amounts under the physician fee 
        schedule under section 1848 of the Social Security Act (42 
        U.S.C. 1395w-4) will be reduced by 4.3 percent in 2006 and 
        further reduced each year thereafter until 2011.
            (2) Future increases in medicare beneficiary cost-sharing 
        raise concerns about the affordability of the medicare program 
        for such beneficiaries: The medicare part B premium will be 
        increased due to any update of the physician fee schedule and 
        such beneficiaries will also begin paying a premium for the 
        prescription drug benefit under part D of the medicare program 
        in January 2006.
            (3) The current formula under the physician fee schedule 
        that is used to reimburse physicians under the medicare 
        program--
                    (A) has not been successful in appropriately 
                controlling the volume of services provided by 
                physicians; and
                    (B) is not a sustainable model for determining 
                physician payments under the medicare program in the 
                future.
            (4) The Centers for Medicare & Medicaid Services should use 
        its administrative authority to exclude medicare-covered drugs 
        and biologicals from the formula used under the physician fee 
        schedule and accurately reflect in the formula the direct and 
        indirect cost of increases due to coverage decisions, 
        administrative actions, and rules and regulations.
    (b) Sense of the Senate.--It is the sense of the Senate that, while 
the provisions of, and amendments made by, this Act develop a value-
based purchasing program for physicians and other practitioners under 
the medicare program, further action by Congress is needed to address 
the negative physician payment updates under such program in order to 
ensure--
            (1) the long-term stability of the medicare payment system 
        for items and services furnished by physicians and other health 
        care professionals;
            (2) appropriate reimbursement under the medicare program 
        for such items and services that is consistent with high 
        quality and efficient delivery of such items and services; and
            (3) future access to, and the affordability of, such items 
        and services for medicare beneficiaries.

               TITLE IV--VALUE-BASED PURCHASING FOR PLANS

                  Subtitle A--Medicare Advantage Plans

SEC. 401. PLAN VALUE-BASED PURCHASING PROGRAM.

    (a) Submission of Quality Data.--
            (1) Medicare advantage organizations.--Section 1852(e) (42 
        U.S.C. 1395w-22(e)), as amended by section 722 of the Medicare 
        Prescription Drug, Improvement, and Modernization Act of 2003 
        (Public Law 108-173; 117 Stat. 2347), is amended--
                    (A) in paragraph (1), by striking ``an MA private 
                fee-for-service plan or''; and
                    (B) in paragraph (3)--
                            (i) in subparagraph (A)--
                                    (I) in clause (i), by adding at the 
                                end the following new sentence: ``Such 
                                data shall include data necessary for 
                                the operation of the plan value-based 
                                purchasing program under section 1860E-
                                4.'';
                                    (II) by redesignating clause (iv) 
                                as clause (vi); and
                                    (III) by inserting after clause 
                                (iii) the following new clauses:
                            ``(iv) Application to ma private fee-for-
                        service plans.--The Secretary shall establish 
                        as appropriate by regulation requirements for 
                        the collection, analysis, and reporting of data 
                        that permits the measurement of health outcomes 
                        and other indices of quality for MA 
                        organizations with respect to MA private fee-
                        for-service plans.''.
                            ``(v) Availability to the public.--The 
                        Secretary shall establish procedures for making 
                        data reported under this subparagraph available 
                        to the public in a clear and understandable 
                        form. Such procedures shall ensure that an MA 
                        organization has the opportunity to review the 
                        data that is to be made public with respect to 
                        the plan offered by the organization prior to 
                        such data being made public.''; and
                            (ii) in subparagraph (B)--
                                    (I) in clause (i), by striking 
                                ``The'' and inserting ``Subject to 
                                clause (ii), the''; and
                                    (II) by striking clause (ii) and 
                                inserting the following new clause:
                            ``(ii) Changes in types of data.--Subject 
                        to clause (iii), the Secretary may only change 
                        the types of data that are required to be 
                        submitted under subparagraph (A) after 
                        submitting to Congress a report on the reasons 
                        for such changes that was prepared--
                                    ``(I) in the case of data necessary 
                                for the operation of the plan value-
                                based purchasing program under section 
                                1860E-4, after the requirements under 
                                subsections (c) and (d) of section 
                                1860E-1 have been complied with; and
                                    ``(II) in the case of any other 
                                data, in consultation with MA 
                                organizations and private accrediting 
                                bodies.''.
            (2) Eligible entities with reasonable cost contracts.--
        Section 1876(h) (42 U.S.C. 1395mm(h)) is amended by adding at 
        the end the following new paragraph:
    ``(6)(A) With respect to plan years beginning on or after January 
1, 2006, an eligible entity with a reasonable cost reimbursement 
contract under this subsection shall submit to the Secretary such data 
that the Secretary determines is appropriate for the measurement of 
health outcomes and other indices of quality, including data necessary 
for the operation of the plan value-based purchasing program under 
section 1860E-4. Such data shall be submitted in a form and manner, and 
at a time, specified by the Secretary for purposes of this 
subparagraph.
    ``(B) The Secretary shall establish procedures for making data 
reported under subparagraph (A) available to the public in a clear and 
understandable form. Such procedures shall ensure that an eligible 
entity has the opportunity to review the data that is to be made public 
with respect to the contract prior to such data being made public.''.
            (3) Effective Date.--The amendments made by this subsection 
        shall apply to plan years beginning on or after January 1, 
        2006.
            (4) Sense of the senate.--It is the sense of the Senate 
        that, in establishing the timeframes for Medicare Advantage 
        organizations and entities with a reasonable cost reimbursement 
        contract under section 1876(h) of the Social Security Act (42 
        U.S.C. 1395mm(h)) to report quality data under sections 
        1852(e)(3) and 1876(h)(6), respectively, of such Act, as added 
        by this section, the Secretary should take into account other 
        timeframes for reporting quality data that such organizations 
        and entities are subject to under other Federal and State 
        programs and in the commercial market.
    (b) Program.--Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
inserting after section 1860E-3, as added by section 301(b), the 
following new section:

                 ``plan value-based purchasing program

    ``Sec. 1860E-4. (a) Program.--
            ``(1) In general.--The Secretary shall establish a program 
        under which value-based payments are provided each year to 
        Medicare Advantage organizations offering Medicare Advantage 
        plans under part C that demonstrate the provision of high 
        quality health care to enrollees under the plan.
            ``(2) Program to begin in 2009.--The Secretary shall 
        establish the program under this section so that value-based 
        payments under subsection (b) are made with respect to 2009 and 
        each subsequent year.
            ``(3) Definitions of medicare advantage organization and 
        plan.--
                    ``(A) In general.--In this section:
                            ``(i) Medicare advantage organization.--The 
                        term `Medicare Advantage organization' has the 
                        meaning given such term in section 1859(a)(1).
                            ``(ii) Medicare advantage plan.--The term 
                        `Medicare Advantage plan' has the meaning given 
                        such term in section 1859(b)(1).
                    ``(B) Applicability of program to medicare 
                advantage regional and local plans.--For purposes of 
                this section, the term `Medicare Advantage plan' shall 
                include both Medicare Advantage regional plans (as 
                defined in section 1859(b)(4)) and Medicare Advantage 
                local plans (as defined in section 1859(b)(5)).
                    ``(C) Applicability of program to reasonable cost 
                contracts.--Except for paragraphs (5) and (6) of 
                subsection (b), for purposes of this section, the 
                terms--
                            ``(i) `Medicare Advantage organization' and 
                        `organization' include an organization that is 
                        providing benefits under a reasonable cost 
                        reimbursement contract under section 1876(h); 
                        and
                            ``(ii) `Medicare Advantage plan' and `plan' 
                        include such a contract.
    ``(b) Value-Based Payments.--
            ``(1) In general.--Subject to paragraph (4), the Secretary 
        shall make value-based payments to Medicare Advantage 
        organizations with respect to each Medicare Advantage plan 
        offered by the organization during a year if the Secretary 
        determines that the quality of the care provided under the 
        plan--
                    ``(A) has substantially improved (as determined by 
                the Secretary) over the prior year; or
                    ``(B) exceeds a threshold established by the 
                Secretary.
            ``(2) Use of system.--In determining which organizations 
        offering Medicare Advantage plans qualify for a value-based 
        payment under paragraph (1), the Secretary shall--
                    ``(A) use the quality measurement system developed 
                for this section pursuant to section 1860E-1(a); and
                    ``(B) ensure that awards are based on data from a 
                full 12-month period (or 24-month period in the case of 
                an award described in paragraph (1)(A)), such periods 
                determined without regard to calendar year periods.
            ``(3) Determination of amount of award and allocation of 
        awards.--
                    ``(A) In general.--The Secretary shall determine--
                            ``(i) the amount of a value-based payment 
                        under paragraph (1) provided to an organization 
                        with respect to a plan; and
                            ``(ii) subject to subparagraph (B), the 
                        allocation of the total amount available under 
                        subsection (d) for value-based payments for any 
                        year between payments with respect to plans 
                        that meet the requirement under subparagraph 
                        (A) of paragraph (1) and plans that meet the 
                        requirement under subparagraph (B) of such 
                        paragraph.
                    ``(B) Requirement regarding the amount of funding 
                available for value-based payments for plans exceeding 
                a threshold.--The Secretary shall ensure that--
                            ``(i) a majority of the total amount 
                        available under subsection (d) for value-based 
                        payments for any year is provided to 
                        organizations, with respect to plans offered by 
                        such organizations, that are receiving such 
                        payments because they meet the requirement 
                        under paragraph (1)(B); and
                            ``(ii) with respect to 2010 and each 
                        subsequent year, the percentage of the total 
                        amount available under subsection (d) for 
                        value-based payments for any year that is used 
                        to make payments to organizations, with respect 
                        to plans offered by such organizations, that 
                        meet such requirement is greater than such 
                        percentage in the previous year.
            ``(4) Use of payments.--Value-based payments received under 
        this section may only be used for the following purposes:
                    ``(A) To invest in quality improvement programs 
                operated by the organization with respect to the plan.
                    ``(B) To enhance beneficiary benefits under the 
                plan.
            ``(5) Required submission of data.--In order for an 
        organization to be eligible for a value-based payment for a 
        year with respect to a Medicare Advantage plan or a reasonable 
        cost contract, the organization must have provided for the 
        collection, analysis, and reporting of data pursuant to 
        sections 1852(e)(3) (or submitted the data under section 
        1876(h)(6) in the case of a reasonable cost contract) with 
        respect to the plan or contract for the 2 years preceding that 
        year.
            ``(6) No effect on medicare advantage plan bids.--In order 
        for a Medicare Advantage organization to be eligible for a 
        value-based payment for a year with respect to a Medicare 
        Advantage plan, the organization must have provided the 
        Secretary with an attestation that the program under this 
        section, including the payment adjustments made by reason of 
        the amendments made by section 401(c)(1) of the Medicare Value 
        Purchasing Act of 2005, had no effect on the integrity and 
        actuarial soundness of the bid submitted under section 1854 for 
        the plan for the year.
            ``(7) Total amount of value-based payments equal to total 
        amount of reduction in payments.--The Secretary shall establish 
        payment amounts under paragraph (3)(A) so that, as estimated by 
        the Secretary, the total amount of value-based payments made in 
        a year under paragraph (1) is equal to the total amount 
        available under subsection (d) for such payments for the year.
            ``(8) Payment methods and timing of payments.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                payment of value-based payments under paragraph (1) 
                shall be based on such a method as the Secretary 
                determines appropriate.
                    ``(B) Timing.--The Secretary shall ensure that 
                value-based payments under paragraph (1) with respect 
                to a year are made by not later than March 1 of the 
                subsequent year.
    ``(c) Description of How Plans Would Have Fared Under Program if 
Program Had Applied to 2008.--Not later than March 1, 2009, the 
Secretary shall provide each Medicare Advantage organization offering a 
Medicare Advantage plan with a description of the Secretary's estimate 
of how payments under this title to such organization with respect to 
the plan for 2008 would have been affected if the program under this 
section (and the amendments made by subsections (a) and (c) of section 
401 of the Medicare Value Purchasing Act of 2005) had been in effect 
with respect to 2008.
    ``(d) Funding.--
            ``(1) Amount.--The amount available for value-based 
        payments under this section with respect to a year shall be 
        equal to the amount of the reduction in expenditures under the 
        Federal Hospital Insurance Trust Fund under section 1817 and 
        the Federal Supplementary Medical Insurance Trust Fund under 
        section 1841 in the year as a result of the amendments made by 
        section 401(c) of the Medicare Value Purchasing Act of 2005, as 
        estimated by the Secretary.
            ``(2) Payments from trust funds.--Payments to organizations 
        under this section shall be made from the Federal Hospital 
        Insurance Trust Fund and the Federal Supplementary Medical 
        Insurance Trust Fund in the same proportion as payments to 
        Medicare Advantage organizations are made from such Trust Funds 
        under the first sentence of section 1853(f).''.
    (c) Reduction in Payments to Organizations in Order To Fund 
Program.--
            (1) Medicare advantage payments.--
                    (A) In general.--Section 1853(a)(1) (42 U.S.C. 
                1395w-23(a)(1)), as amended by section 222(e) of the 
                Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2200), is amended--
                            (i) in clauses (i) and (ii) of subparagraph 
                        (B), by inserting ``and, for 2009 and each 
                        subsequent year, except in the case of an MSA 
                        plan or an MA plan for which there was no 
                        contract under section 1857 during either of 
                        the preceding 2 years, reduced by the 
                        applicable percent (as defined in subparagraph 
                        (I))'' after ``(G)''; and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(I) Applicable percent.--For purposes of clauses 
                (i) and (ii) of subparagraph (B), the term `applicable 
                percent' means--
                            ``(i) for 2009, 1.0 percent;
                            ``(ii) for 2010, 1.25 percent;
                            ``(iii) for 2011, 1.5 percent;
                            ``(iv) for 2012, 1.75 percent; and
                            ``(v) for 2013 and each subsequent year, 
                        2.0 percent.''.
                    (B) Reductions in payments do not affect the rebate 
                for bids below the benchmark.--The amendments made by 
                subparagraph (A) shall not be construed to have any 
                effect on--
                            (i) the determination of whether a Medicare 
                        Advantage plan has average per capita monthly 
                        savings described in paragraph (3)(C) or (4)(C) 
                        of section 1854(b) of the Social Security Act 
                        (42 U.S.C. 1395w-24(b)); or
                            (ii) the amount of such savings.
            (2) Reasonable cost contract payments.--Section 1876(h) (42 
        U.S.C. 1395mm(h)), as amended by subsection (a)(2), is amended 
        by adding at the end the following new paragraph:
    ``(7) Notwithstanding the preceding provisions of this subsection, 
the Secretary shall reduce each payment to an eligible organization 
under this subsection with respect to benefits provided on or after 
January 1, 2009, by an amount equal to the applicable percent (as 
defined in section 1853(a)(1)(I)) of the payment amount. The preceding 
sentence shall have no effect on payments to eligible organizations for 
the provision of qualified prescription drug coverage under part D.''.
    (d) Requirement for Reporting on Use of Value-Based Payments.--
            (1) MA plans.--Section 1854(a) (42 U.S.C. 1395w-24(a)), as 
        amended by section 222(a) of the Medicare Prescription Drug, 
        Improvement, and Modernization Act of 2003 (Public Law 108-173; 
        117 Stat. 2193), is amended--
                    (A) in paragraph (1)(A)(i), by striking ``or 
                (6)(A)'' and inserting ``(6)(A), or (7)''; and
                    (B) by adding at the end the following:
            ``(7) Submission of information of how value-based payments 
        will be used.--For an MA plan for a plan year beginning on or 
        after January 1, 2011, the information described in this 
        paragraph is a description of how the organization offering the 
        plan will use any value-based payments that the organization 
        received under section 1860E-4 with respect to the plan for the 
        year preceding the year in which such information is 
        submitted.''.
            (2) Reasonable cost contracts.--Section 1876(h) (42 U.S.C. 
        1395mm(h)), as amended by subsection (c)(2), is amended by 
        adding at the end the following new paragraph:
    ``(8) Not later than July 1 of each year (beginning in 2010), any 
eligible entity with a reasonable cost reimbursement contract under 
this subsection that received a value-based payment under section 
1860E-4 with respect to the contract for the preceding year shall 
submit to the Secretary a report containing a description of how the 
organization will use such payments under the contract.''.

      Subtitle B--Plans Offering Part D Prescription Drug Coverage

SEC. 411. MEDPAC STUDY AND REPORT REGARDING A VALUE-BASED PURCHASING 
              PROGRAM FOR PLANS OFFERING PART D PRESCRIPTION DRUG 
              COVERAGE.

    (a) Study.--The Medicare Payment Advisory Commission shall conduct 
a study on the advisability and feasibility of establishing a value-
based purchasing program under the medicare program under title XVIII 
of the Social Security Act with respect to the provision of 
prescription drug coverage under part D of such title under 
prescription drug plans and fallback prescription drug plans under such 
part D, under Medicare Advantage plans under part C of such Act, and 
under reasonable cost contracts under section 1876(h) of such Act (42 
U.S.C. 1395mm).
    (b) Report.--Not later than March 1, 2007, the Commission shall 
submit a report to Congress and the Secretary on the study conducted 
under subsection (a) together with recommendations for such legislation 
and administrative actions as the Commission considers appropriate.

   TITLE V--VALUE-BASED PURCHASING FOR PROVIDERS AND FACILITIES THAT 
PROVIDE SERVICES TO MEDICARE BENEFICIARIES WITH END STAGE RENAL DISEASE

SEC. 501. END STAGE RENAL DISEASE PROVIDER AND FACILITY VALUE-BASED 
              PURCHASING PROGRAM.

    (a) Voluntary Submission of Quality Data.--Section 1881(b) (42 
U.S.C. 1395rr(b)) is amended by adding at the end the following new 
paragraph:
            ``(14) By not later than July 31, 2006, the Secretary shall 
        establish procedures under which providers of services and 
        renal dialysis facilities that receive payments under paragraph 
        (12) or (13) may submit to the Secretary data that permits the 
        measurement of health outcomes and other indices of quality.''.
    (b) Program.--Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
inserting after section 1860E-4, as added by section 401(b), the 
following new section:

      ``esrd provider and facility value-based purchasing program

    ``Sec. 1860E-5. (a) Program.--
            ``(1) In general.--The Secretary shall establish a program 
        under which value-based payments are provided each year to 
        providers of services and renal dialysis facilities that--
                    ``(A) provide items and services to individuals 
                with end stage renal disease who are enrolled under 
                part B; and
                    ``(B) demonstrate the provision of high quality 
                health care to such individuals.
            ``(2) Program to begin in 2007.--The Secretary shall 
        establish the program under this section so that value-based 
        payments described in subsection (b) are made with respect to 
        2007 and each subsequent year.
            ``(3) Exclusions from program.--
                    ``(A) Pediatric facilities.--Any renal dialysis 
                facility at least 50 percent of whose patients are 
                individuals under 18 years of age shall not be included 
                in the program under this section.
                    ``(B) Providers and facilities currently 
                participating in bundled case-mix demonstration not 
                included in program.--Any provider of services or renal 
                dialysis facility that is currently participating in 
                the bundled case-mix adjusted payment system for ESRD 
                services demonstration project under section 623(e) of 
                the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173) shall 
                not be included in the program under this section, but 
                only for so long as the provider or facility is so 
                participating.
    ``(b) Value-Based Payments.--
            ``(1) In general.--Subject to paragraph (4), the Secretary 
        shall make a value-based payment to a provider of services or a 
        renal dialysis facility with respect to a year if the Secretary 
        determines that the quality of the care provided in that year 
        by the provider or facility to individuals with end stage renal 
        disease who are enrolled under part B--
                    ``(A) has substantially improved (as determined by 
                the Secretary) over the prior year; or
                    ``(B) exceeds a threshold established by the 
                Secretary.
            ``(2) Use of system.--In determining which providers of 
        services and renal dialysis facilities qualify for a value-
        based payment under paragraph (1), the Secretary shall use the 
        quality measurement system developed for this section pursuant 
        to section 1860E-1(a).
            ``(3) Determination of amount of award and allocation of 
        awards.--
                    ``(A) In general.--The Secretary shall determine--
                            ``(i) the amount of a value-based payment 
                        under paragraph (1) provided to a provider of 
                        services or a renal dialysis facility; and
                            ``(ii) subject to subparagraphs (B) and 
                        (C), the allocation of the total amount 
                        available under subsection (c) for value-based 
                        payments for any year between payments with 
                        respect to providers and facilities that meet 
                        the requirement under subparagraph (A) of 
                        paragraph (1) and providers and facilities that 
                        meet the requirement under subparagraph (B) of 
                        such paragraph.
                    ``(B) Requirement regarding amount of funding 
                available for value-based payments for providers and 
                facilities exceeding a threshold.--The Secretary shall 
                ensure that--
                            ``(i) a majority of the total amount 
                        available under subsection (c) for value-based 
                        payments for any year is provided to providers 
                        of services and renal dialysis facilities that 
                        are receiving such payments because they meet 
                        the requirement under paragraph (1)(B); and
                            ``(ii) with respect to 2009 and each 
                        subsequent year, the percentage of the total 
                        amount available under subsection (c) for 
                        value-based payments for any year that is used 
                        to make payments to providers and facilities 
                        that meet such requirement is greater than such 
                        percentage in the previous year.
                    ``(C) Only value-based payments for providers and 
                facilities exceeding a threshold in 2007.--With respect 
                to 2007, the entire amount available under subsection 
                (c) for value-based payments for that year shall be 
                used to make payments to providers of services and 
                renal dialysis facilities that meet the requirement 
                under paragraph (1)(B).
            ``(4) Requirements.--
                    ``(A) Required submission of data.--
                            ``(i) In general.--In order for a provider 
                        of services or a renal dialysis facility to be 
                        eligible for a value-based payment for a year, 
                        the provider or facility must have provided for 
                        the submission of data in accordance with 
                        clause (ii) with respect to that year.
                            ``(ii) Submission of data.--For 2007 and 
                        each subsequent year, each provider of services 
                        and renal dialysis facility that receives 
                        payments under paragraph (12) shall submit to 
                        the Secretary such data that the Secretary 
                        determines is appropriate for the measurement 
                        of health outcomes and other indices of 
                        quality, including data necessary for the 
                        operation of the program under this section. 
                        Such data shall be submitted in a form and 
                        manner, and at a time, specified by the 
                        Secretary for purposes of this clause.
                            ``(iii) Availability to the public.--The 
                        Secretary shall establish procedures for making 
                        data submitted under clause (ii) available to 
                        the public in a clear and understandable form. 
                        Such procedures shall ensure that a provider or 
                        facility has the opportunity to review the data 
                        that is to be made public with respect to the 
                        provider or facility prior to such data being 
                        made public.
                    ``(B) Attestation regarding data.--In order for a 
                provider of services or a renal dialysis facility to be 
                eligible for a value-based payment for a year, the 
                provider or facility must have provided the Secretary 
                (under procedures established by the Secretary) with an 
                attestation that the data submitted under subparagraph 
                (A)(ii) for the year is complete and accurate.
            ``(5) Total amount of value-based payments equal to total 
        amount of available funding.--The Secretary shall establish 
        payment amounts under paragraph (3)(A) so that, as estimated by 
        the Secretary, the total amount of value-based payments made in 
        a year under paragraph (1) is equal to the total amount 
        available under subsection (c) for such payments for the year.
            ``(6) Payment methods and timing of payments.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                payment of value-based payments under paragraph (1) 
                shall be based on such a method as the Secretary 
                determines appropriate.
                    ``(B) Timing.--The Secretary shall ensure that 
                value-based payments under paragraph (1) with respect 
                to a year are made by not later than December 31 of the 
                subsequent year.
    ``(c) Funding.--
            ``(1) Amount.--The amount available for value-based 
        payments under this section with respect to a year shall be 
        equal to the amount of the reduction in expenditures under the 
        Federal Supplementary Medical Insurance Trust Fund under 
        section 1841 in the year by reason of the application of 
        section 1881(b)(12)(G), as estimated by the Secretary.
            ``(2) Payments from trust fund.--Payments to providers of 
        services and renal dialysis facilities under this section shall 
        be made from the Federal Supplementary Medical Insurance Trust 
        Fund.''.
    (c) Reduction in Case-Mix Adjusted Prospective Payment Amount in 
Order To Fund Program.--Section 1881(b)(12) (42 U.S.C. 1395rr(b)(12)) 
is amended--
            (1) by redesignating subparagraph (G) as subparagraph (H); 
        and
            (2) by inserting after subparagraph (F) the following new 
        subparagraph:
            ``(G)(i) In the case of any payment made under this 
        paragraph for an item or service furnished on or after January 
        1, 2007, such payment shall be reduced by the applicable 
        percent. The preceding sentence shall not apply to a payment 
        for an item or service furnished by a provider of services or a 
        renal dialysis facility that is excluded from the program under 
        section 1860E-5 by reason of subsection (a)(3) of such section 
        at the time the item or service is furnished.
            ``(ii) For purposes of clause (i), the term `applicable 
        percent' means--
                    ``(I) for 2007, 1.0 percent;
                    ``(II) for 2008, 1.25 percent;
                    ``(III) for 2009, 1.5 percent;
                    ``(IV) for 2010, 1.75 percent; and
                    ``(V) for 2011 and each subsequent year, 2.0 
                percent.''.

SEC. 502. VALUE-BASED PURCHASING UNDER THE DEMONSTRATION OF BUNDLED 
              CASE-MIX ADJUSTED PAYMENT SYSTEM FOR ESRD SERVICES.

    Section 623(e) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (42 U.S.C. 1395rr note) is amended by adding 
at the end the following new paragraph:
            ``(7) Value-based purchasing program.--As part of the 
        demonstration project under this subsection, the Secretary 
        shall, beginning January 1, 2007, implement a value-based 
        purchasing program for providers and facilities participating 
        in the demonstration project. The Secretary shall implement 
        such value-based purchasing program in a similar manner as the 
        ESRD provider and facility value-based purchasing program is 
        implemented under section 1860E-5 of the Social Security Act, 
        including the funding of such program.''.

SEC. 503. CHRONIC KIDNEY DISEASE DEMONSTRATION PROJECTS.

    (a) In General.--Not later than January 1, 2007, the Secretary 
shall establish demonstration projects to--
            (1) increase public awareness about--
                    (A) the factors that lead to chronic kidney 
                disease;
                    (B) how to prevent such disease;
                    (C) how to treat such disease; and
                    (D) how to avoid kidney failure;
            (2) enhance surveillance systems and expand research to 
        better assess the prevalence and incidence of chronic kidney 
        disease; and
            (3) evaluate approaches for providing outreach and 
        education to groups or special populations with a high 
        prevalence of chronic kidney disease, such as Native Americans 
        and Alaskan Natives.
    (b) Scope and Duration.--
            (1) Scope.--The Secretary shall select at least 3 States in 
        which to conduct demonstration projects under this section. In 
        selecting the States under this paragraph, the Secretary shall 
        take into account the size of the population of medicare 
        beneficiaries with end-stage renal disease in the State and 
        ensure the participation of individuals who reside in rural and 
        urban areas.
            (2) Duration.--The demonstration projects under this 
        section shall be conducted for a period not to exceed 3 years.
    (c) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act as may be necessary to 
carry out the demonstration projects under this section.
    (d) Report.--Not later than 6 months after the date on which the 
demonstration projects under this section are completed, the Secretary 
shall submit to Congress a report on the demonstration projects 
together with recommendations for such legislation and administrative 
action as the Secretary determines appropriate.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section.

SEC. 504. MEDPAC STUDY AND REPORT REGARDING A VALUE-BASED PURCHASING 
              PROGRAM FOR PEDIATRIC RENAL DIALYSIS FACILITIES.

    (a) Study.--The Medicare Payment Advisory Commission shall conduct 
a study on the advisability and feasibility of--
            (1) including renal dialysis facilities described in 
        subsection (a)(3)(A) of section 1860E-5 of the Social Security 
        Act, as added by section 501(b), in the value-based purchasing 
        program under such section 1860E-5; or
            (2) establishing a value-based purchasing program under the 
        medicare program under title XVIII of such Act for such 
        facilities.
    (b) Report.--Not later than June 1, 2007, the Commission shall 
submit a report to Congress and the Secretary on the study conducted 
under subsection (a) together with recommendations for such legislation 
and administrative actions as the Commission considers appropriate.

SEC. 505. MEDPAC REPORT ON ESRD PROVIDER AND FACILITY VALUE-BASED 
              PURCHASING PROGRAM.

    (a) Report.--Not later than June 1, 2008, the Medicare Payment 
Advisory Commission shall submit a report to Congress and the Secretary 
on the implementation of the ESRD provider and facility value-based 
purchasing program under section 1860E-5 of the Social Security Act, as 
added by section 501(b).
    (b) Contents.--The report submitted under subsection (a) shall 
include--
            (1) a detailed description of issues for the Secretary to 
        consider in operating the ESRD provider and facility value-
        based purchasing program and recommendations on such issues; 
        and
            (2) recommendations for such legislation and administrative 
        actions as the Commission considers appropriate.
    (c) Consideration of Demonstration Project.--In preparing the 
report to be submitted under subsection (a), the Commission shall take 
into account the results to date of the demonstration of bundled case-
mix adjusted payment system for ESRD services under section 623(e) of 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (42 U.S.C. 1395rr note).

SEC. 506. SENSE OF THE SENATE REGARDING AN UPDATE TO THE COMPOSITE RATE 
              PAYMENT FOR DIALYSIS SERVICES.

    It is the sense of the Senate that--
            (1) while the provisions of, and amendments made by, this 
        Act develop a value-based purchasing program for providers of 
        services and renal dialysis facilities furnishing dialysis 
        services to medicare beneficiaries, Congress should address the 
        need for an update to the composite rate payment for dialysis 
        services under section 1881(b)(12) of the Social Security Act 
        (42 U.S.C. 1395rr(b)(12)) in order to ensure--
                    (A) appropriate reimbursement under the medicare 
                program for such services that is consistent with high 
                quality and efficient delivery of such services; and
                    (B) future access to, and the affordability of, 
                such services for medicare beneficiaries;
            (2) if Congress determines that an update to such composite 
        rate payment is appropriate, Congress should ensure that the 
        update takes into account any change in the costs of furnishing 
        dialysis services resulting from--
                    (A) the adoption of scientific and technological 
                innovations used to provide such services;
                    (B) changes in the manner or method of furnishing 
                such services; and
                    (C) productivity improvements in the furnishing of 
                such services.

       TITLE VI--VALUE-BASED PURCHASING FOR HOME HEALTH AGENCIES

SEC. 601. HOME HEALTH AGENCY VALUE-BASED PURCHASING PROGRAM.

    (a) Update for Home Health Agencies That Submit Quality Data.--
Section 1895(b)(3)(B) (42 U.S.C.fff(b)(3)(B)) is amended--
            (1) in clause (ii)(IV), by inserting ``subject to clause 
        (v),'' after ``subsequent year,''; and
            (2) by adding at the end the following new clause:
                            ``(v) Adjustment if quality data not 
                        submitted.--
                                    ``(I) Adjustment.--For purposes of 
                                clause (ii)(IV), for 2007 and each 
                                subsequent year, in the case of a home 
                                health agency that does not submit data 
                                in accordance with subclause (II) with 
                                respect to such a year, the home health 
                                market basket percentage increase 
                                applicable under such clause for such 
                                year shall be reduced by 2 percentage 
                                points. Such reduction shall apply only 
                                with respect to the year involved, and 
                                the Secretary shall not take into 
                                account such reduction in computing the 
                                prospective payment amount under this 
                                section for a subsequent year.
                                    ``(II) Submission of quality 
                                data.--For 2007 and each subsequent 
                                year, each home health agency shall 
                                submit to the Secretary such data that 
                                the Secretary determines is appropriate 
                                for the measurement of health care 
                                quality, including data necessary for 
                                the operation of the home health agency 
                                value-based purchasing program under 
                                section 1860E-6. Such data shall be 
                                submitted in a form and manner, and at 
                                a time, specified by the Secretary for 
                                purposes of this clause.
                                    ``(III) The Secretary shall 
                                establish procedures for making data 
                                submitted under subclause (II) 
                                available to the public in a clear and 
                                understandable form.''.
    (b) Program.--Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
inserting after section 1860E-5, as added by section 501(b), the 
following new section:

          ``home health agency value-based purchasing program

    ``Sec. 1860E-6. (a) Program.--
            ``(1) In general.--The Secretary shall establish a program 
        under which value-based payments are provided each year to home 
        health agencies that demonstrate the provision of high quality 
        health care to individuals entitled to benefits under part A or 
        enrolled under part B.
            ``(2) Program to begin in 2008.--The Secretary shall 
        establish the program under this section so that value-based 
        payments described in subsection (b) are made with respect to 
        2008 and each subsequent year.
            ``(3) Home health agency defined.--In this section, the 
        term ``home health agency'' has the meaning given that term in 
        section 1861(o).
    ``(b) Value-Based Payments.--
            ``(1) In general.--Subject to paragraph (4), the Secretary 
        shall make a value-based payment to a home health agency with 
        respect to a year if the Secretary determines that the quality 
        of the care provided in that year by the agency to individuals 
        entitled to benefits under part A or enrolled under part B--
                    ``(A) has substantially improved (as determined by 
                the Secretary) over the prior year; or
                    ``(B) exceeds a threshold established by the 
                Secretary.
            ``(2) Use of system.--In determining which home health 
        agencies qualify for a value-based payment under paragraph (1), 
        the Secretary shall use the quality measurement system 
        developed for this section pursuant to section 1860E-1(a).
            ``(3) Determination of amount of award and allocation of 
        awards.--
                    ``(A) In general.--The Secretary shall determine--
                            ``(i) the amount of a value-based payment 
                        under paragraph (1) provided to a home health 
                        agency; and
                            ``(ii) subject to subparagraph (B), the 
                        allocation of the total amount available under 
                        subsection (d) for value-based payments for any 
                        year between payments with respect to agencies 
                        that meet the requirement under subparagraph 
                        (A) of paragraph (1) and agencies that meet the 
                        requirement under subparagraph (B) of such 
                        paragraph.
                    ``(B) Requirements regarding the amount of funding 
                available for value-based payments for agencies 
                exceeding a threshold.--The Secretary shall ensure 
                that--
                            ``(i) a majority of the total amount 
                        available under subsection (d) for value-based 
                        payments for any year is provided to home 
                        health agencies that are receiving such 
                        payments because they meet the requirement 
                        under paragraph (1)(B); and
                            ``(ii) with respect to 2009 and each 
                        subsequent year, the percentage of the total 
                        amount available under subsection (d) for 
                        value-based payments for any year that is used 
                        to make payments to agencies that meet such 
                        requirement is greater than such percentage in 
                        the previous year.
            ``(4) Requirements.--
                    ``(A) Required submission of data.--In order for a 
                home health agency to be eligible for a value-based 
                payment for a year, the agency must have complied with 
                the requirements under section 1895(b)(3)(B)(v)(II) 
                with respect to that year.
                    ``(B) Attestation regarding data.--In order for a 
                home health agency to be eligible for a value-based 
                payment for a year, the agency must have provided the 
                Secretary (under procedures established by the 
                Secretary) with an attestation that the data submitted 
                under section 1895(b)(3)(B)(v)(II) with respect to that 
                year is complete and accurate.
            ``(5) Total amount of value-based payments equal to total 
        amount of available funding.--The Secretary shall establish 
        payment amounts under paragraph (3)(A) so that, as estimated by 
        the Secretary, the total amount of value-based payments made in 
        a year under paragraph (1) is equal to the total amount 
        available under subsection (d) for such payments for the year.
            ``(6) Payment methods and timing of payments.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                payment of value-based payments under paragraph (1) 
                shall be based on such a method as the Secretary 
                determines appropriate.
                    ``(B) Timing.--The Secretary shall ensure that 
                value-based payments under paragraph (1) with respect 
                to a year are made by not later than December 31 of the 
                subsequent year.
    ``(c) Description of How Agencies Would Have Fared Under Program if 
Program Had Applied to 2007.--Not later than January 1, 2008, the 
Secretary shall provide each home health agency with a description of 
the Secretary's estimate of how payments to the agency under this title 
would have been affected with respect to items and services furnished 
in 2007 if the program under this section (and the amendments made by 
subsections (a) and (c) of section 601 of the Medicare Value Purchasing 
Act of 2005) had been in effect with respect to 2007.
    ``(d) Funding.--
            ``(1) Amount.--The amount available for value-based 
        payments under this section with respect to a year shall be 
        equal to the amount of the reduction in expenditures under the 
        the Federal Hospital Insurance Trust Fund under section 1817 
        and Federal Supplementary Medical Insurance Trust Fund under 
        section 1841 in the year as a result of the application of 
        section 1895(b)(3)(D), as estimated by the Secretary.
            ``(2) Payments from trust fund.--Payments to home health 
        agencies under this section shall be made from the the Federal 
        Hospital Insurance Trust Fund and Federal Supplementary Medical 
        Insurance Trust Fund, in the same proportion as payments for 
        home health services are made from such trust funds.''.
    (c) Reduction in Standard Prospective Payment Amount for Agencies 
That Submit Quality Data in Order To Fund Program.--Section 1895(b)(3) 
(42 U.S.C. 1395fff(b)(3)) is amended by adding at the end the following 
new subparagraph:
                    ``(D) Reduction in order to fund value-based 
                purchasing program.--
                            ``(i) In general.--For 2008 and each 
                        subsequent year, in the case of a home health 
                        agency that complies with the submission 
                        requirements under section 1895(b)(3)(B)(v)(II) 
                        for the year, the standard prospective payment 
                        amount (or amounts) otherwise applicable under 
                        this paragraph for the year shall be reduced by 
                        the applicable percent.
                            ``(ii) Applicable percent.--For purposes of 
                        clause (i), the term `applicable percent' 
                        means--
                                    ``(I) for 2008, 1.0 percent;
                                    ``(II) for 2009, 1.25 percent;
                                    ``(III) for 2010, 1.5 percent;
                                    ``(IV) for 2011, 1.75 percent; and
                                    ``(V) for 2012 and each subsequent 
                                year, 2.0 percent.''.

    TITLE VII--VALUE-BASED PURCHASING FOR SKILLED NURSING FACILITIES

SEC. 701. REQUIREMENT FOR SKILLED NURSING FACILITIES TO REPORT 
              FUNCTIONAL CAPACITY OF MEDICARE RESIDENTS UPON ADMISSION 
              AND DISCHARGE.

    Section 1819(b) (42 U.S.C. 1395i-3(b)) is amended by adding at the 
end the following new paragraph:
            ``(9) Reporting functional capacity at admission and 
        discharge.--
                    ``(A) In general.--On and after October 1, 2006, a 
                skilled nursing facility must submit a report to the 
                Secretary on the functional capacity of each resident 
                who is entitled to benefits under this part at the time 
                of--
                            ``(i) the admission of such resident; and
                            ``(ii) the discharge of such resident.
                    ``(B) Timeframe.--A report required under 
                subparagraph (A) shall be submitted within 10 days of 
                the admission or discharge, as the case may be.''.

SEC. 702. HHS STUDY ON MEASURES OF QUALITY FOR SKILLED NURSING 
              FACILITIES; VOLUNTARY REPORTING OF SKILLED NURSING 
              FACILITY QUALITY DATA.

    (a) HHS Study and Report on Measures of Quality for Skilled Nursing 
Facilities.--
            (1) Study.--The Secretary shall conduct a study to 
        determine the appropriate measures, including process and 
        staffing measures, that should be used to evaluate the quality 
        of the health care provided by skilled nursing facilities to 
        individuals who are entitled to benefits under part A of title 
        XVIII of the Social Security Act.
            (2) Report.--Not later than July 1, 2008, the Secretary 
        shall submit a report to Congress on the study conducted under 
        paragraph (1) together with recommendations for such 
        legislation and administrative actions as the Secretary 
        considers appropriate.
            (3) Consultation.--In conducting the study under paragraph 
        (1) and preparing the report under paragraph (2), the Secretary 
        shall consult with the entities described in subsections 
        (c)(1), (c)(2), and (d) of section 1860E-1 of the Social 
        Security Act, as added by section 101.
    (b) Voluntary Submission of Skilled Nursing Facility Quality 
Data.--
            (1) Update for skilled nursing facilities that submit 
        quality data.--Section 1888(e)(4)(E) (42 U.S.C. 
        1395yy(e)(4)(E)) is amended--
                    (A) in clause (ii)(IV), by inserting ``subject to 
                clause (iii),'' after ``subsequent fiscal year,''; and
                    (B) by adding at the end the following new clause:
                            ``(iii) Adjustment if quality data not 
                        submitted.--
                                    ``(I) Adjustment.--For purposes of 
                                clause (ii)(IV), for fiscal year 2009 
                                and each subsequent fiscal year, in the 
                                case of a skilled nursing facility that 
                                does not submit data in accordance with 
                                subclause (II) with respect to such a 
                                fiscal year, the skilled nursing 
                                facility market basket percentage 
                                change applicable under such clause for 
                                such fiscal year shall be reduced by 2 
                                percentage points. Such reduction shall 
                                apply only with respect to the fiscal 
                                year involved, and the Secretary shall 
                                not take into account such reduction in 
                                computing the Federal per diem rate 
                                under this section for a subsequent 
                                fiscal year.
                                    ``(II) Submission of quality 
                                data.--For fiscal year 2009 and each 
                                subsequent fiscal year, each skilled 
                                nursing facility shall submit to the 
                                Secretary such data that the Secretary 
                                determines is appropriate for the 
                                measurement of health outcomes and 
                                other indices of quality. Such data 
                                shall be submitted in a form and 
                                manner, and at a time, specified by the 
                                Secretary for purposes of this clause.
                                    ``(III) The Secretary shall 
                                establish procedures for making data 
                                submitted under subclause (II) 
                                available to the public in a clear and 
                                understandable form. Such procedures 
                                shall ensure that a facility has the 
                                opportunity to review the data that is 
                                to be made public with respect to the 
                                facility prior to such data being made 
                                public.''.

SEC. 703. MEDPAC STUDY AND REPORT REGARDING A VALUE-BASED PURCHASING 
              PROGRAM FOR SKILLED NURSING FACILITIES.

    (a) Study.--The Medicare Payment Advisory Commission shall conduct 
a study on the advisability and feasibility of establishing a value-
based purchasing program under the medicare program under title XVIII 
of the Social Security Act for skilled nursing facilities (as defined 
in section 1819(a) of such Act (42 U.S.C. 1395i-3(a)).
    (b) Report.--Not later than March 1, 2009, the Commission shall 
submit a report to Congress and the Secretary on the study conducted 
under subsection (a) together with recommendations for such legislation 
and administrative actions as the Commission considers appropriate.

                   TITLE VIII--ADDITIONAL PROVISIONS

SEC. 801. EXCEPTION TO FEDERAL ANTI-KICKBACK AND PHYSICIAN SELF 
              REFERRAL LAWS FOR THE PROVISION OF PERMITTED SUPPORT.

    (a) Anti-Kickback.--Section 1128B(b) (42 U.S.C. 1320a-7b(b)(3)) is 
amended--
            (1) in paragraph (3)--
                    (A) in subparagraph (G), by striking ``and'' at the 
                end;
                    (B) in subparagraph (H), as added by section 237(d) 
                of the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2213)--
                            (i) by moving such subparagraph 2 ems to 
                        the left; and
                            (ii) by striking the period at the end and 
                        inserting a semicolon;
                    (C) by redesignating subparagraph (H), as added by 
                section 431(a) of the Medicare Prescription Drug, 
                Improvement, and Modernization Act of 2003 (Public Law 
                108-173; 117 Stat. 2287), as subparagraph (I);
                    (D) in subparagraph (I), as so redesignated--
                            (i) by moving such subparagraph 2 ems to 
                        the left; and
                            (ii) by striking the period at the end and 
                        inserting ``; and''; and
                    (E) by adding at the end the following new:
                    ``(J) during the 5-year period beginning on the 
                date the Secretary issues the interim final rule under 
                section 801(c)(1) of the Medicare Value Purchasing Act 
                of 2005, the provision, with or without charge, of any 
                permitted support (as defined in paragraph (4)).''; and
            (2) by adding at the end the following new paragraph:
            ``(4) Permitted support.--
                    ``(A) Definition of permitted support.--Subject to 
                subparagraph (B), in this section, the term `permitted 
                support' means the provision of any equipment, item, 
                information, right, license, intellectual property, 
                software, training, or service used for developing, 
                implementing, operating, or facilitating the use of 
                systems designed to improve the quality of health care 
                and to promote the electronic exchange of health 
                information.
                    ``(B) Exception.--The term `permitted support' 
                shall not include the provision of--
                            ``(i) any support that is determined in a 
                        manner that is related to the volume or value 
                        of any referrals or other business generated 
                        between the parties for which payment may be 
                        made in whole or in part under a Federal health 
                        care program;
                            ``(ii) any support that has more than 
                        incidental utility or value to the recipient 
                        beyond the exchange of health care information; 
                        or
                            ``(iii) any health information technology 
                        system, product, or service that is not capable 
                        of exchanging health care information in 
                        compliance with data standards consistent with 
                        interoperability.
                    ``(C) Determination.--In establishing regulations 
                with respect to the requirement under subparagraph 
                (B)(iii), the Secretary shall take in account--
                            ``(I) whether the health information 
                        technology system, product, or service is 
                        widely accepted within the industry and whether 
                        there is sufficient industry experience to 
                        ensure successful implementation of the system, 
                        product, or service; and
                            ``(II) whether the health information 
                        technology system, product, or service improves 
                        quality of care, enhances patient safety, or 
                        provides greater administrative 
                        efficiencies.''.
    (b) Physician Self-Referral.--Section 1877(e) (42 U.S.C. 1395nn(e)) 
is amended by adding at the end the following new paragraph:
            ``(9) Permitted support.--During the 5-year period 
        beginning on the date the Secretary issues the interim final 
        rule under section 801(c)(1) of the Medicare Value Purchasing 
        Act of 2005, the provision, with or without charge, of any 
        permitted support (as defined in section 1128B(b)(4)).''.
    (c) Regulations.--In order to carry out the amendments made by this 
section--
            (1) the Secretary shall issue an interim final rule with 
        comment period by not later than the date that is 180 days 
        after the date of enactment of this Act;
            (2) the Secretary shall issue a final rule by not later 
        than the date that is 180 days after the date that the interim 
        final rule under paragraph (1) is issued.

SEC. 802. NATIONAL HEALTH INFORMATION NETWORK PILOT PROJECT.

    (a) Pilot Project.--
            (1) Establishment.--For the purpose of improving health 
        care quality, not later than 6 months after the date of 
        enactment of this Act, the Secretary, in consultation with the 
        National Coordinator for Health Information Technology, shall 
        establish a pilot project to facilitate the exchange of--
                    (A) clinical claims and outcomes data with respect 
                to beneficiaries under the medicare and medicaid 
                programs, particularly such beneficiaries who are 
                dually eligible under such programs; and
                    (B) clinical research findings and practice 
                guidelines.
            (2) Duration.--The pilot project under this section shall 
        be conducted for a 3-year period.
            (3) Sites.--The Secretary shall conduct the pilot project 
        in 4 regions that--
                    (A) include at least 3 distinct health care 
                markets; and
                    (B) are located in a State or multiple States.
            (4) Participants.--Participants in the pilot project under 
        this section--
                    (A) shall include a physician, a physician group 
                practice, a hospital, a free-standing laboratory, a 
                renal dialysis provider or facility, a home health 
                agency, a skilled nursing facility, a safety net 
                provider, and any other entity or person determined 
                appropriate by the Secretary; and
                    (B) may include regional health information 
                networks, health plans, providers under the medicare 
                program not described in subparagraph (A), vendors of 
                health information technology systems and software, 
                academic entities, and other entities involved in the 
                exchange of data related to patient health status, 
                clinical care guidelines, medical research, billing, 
                claims, and health care quality.
            (5) Requirement for participants.--Participants in the 
        pilot project under this section shall--
                    (A) comply with any interoperability standards and 
                certification requirements and processes that have been 
                developed or adopted by the Secretary or a designee of 
                the Secretary;
                    (B) to the extent feasible, use existing resources, 
                including the Internet; and
                    (C) incorporate data systems and software from more 
                than one competing vendor.
            (6) Waiver authority.--The Secretary may waive such 
        requirements of titles XI and XVIII of the Social Security Act 
        as may be necessary to carry out the pilot project under this 
        section.
    (b) Reports.--
            (1) In general.--Not later than the date that is 6 months 
        prior to the date that the pilot project under this section is 
        completed, and not later than the date that is 6 months after 
        the date the project is completed, the Secretary shall submit 
        to Congress a report on the pilot project.
            (2) Contents.--Each report submitted under paragraph (1) 
        shall include--
                    (A) an analysis of--
                            (i) the methodologies for building a 
                        National Health Information Infrastructure; and
                            (ii) the impact of the pilot project on 
                        medicare beneficiaries, medicare providers, and 
                        the Medicare Trust Funds;
                    (B) findings regarding access to, and the quality 
                of, care, efficiency of resource use, volume and 
                utilization rates, and the projected future impact on 
                the Medicare Trust Funds and other health care spending 
                if the pilot project is expanded under subsection (c);
                    (C) a detailed description if issued related to the 
                nationwide expansion of the pilot project pursuant to 
                subsection (c); and
                    (D) recommendations for such legislation and 
                administrative actions as the Secretary considers 
                appropriate, including actions related to the 
                nationwide expansion of the pilot project under 
                subsection (c).
            (3) Medicare trust funds defined.--In this title, the term 
        ``Medicare Trust Funds'' means the Federal Hospital Insurance 
        Trust Fund under section 1817 of the Social Security Act (42 
        U.S.C. 1395i) and the Federal Supplementary Medical Insurance 
        Trust Fund under section 1841 of such Act (42 U.S.C. 1395t).
    (c) Expansion.--After conducting the pilot project under this 
section for not less than 2 years, the Secretary may transition and 
implement such project on a national basis.
    (d) Funding.--There are authorized to be appropriated to the 
Secretary such sums as may be necessary to carry out this section.

SEC. 803. HEALTH CARE VALUE PROJECT.

    (a) Project.--
            (1) Establishment.--Not later than 6 months after the date 
        of enactment of this Act, the Secretary shall establish a 
        project to document, track, and quantify the value created, 
        both in terms of patient outcomes and reduced expenditures 
        under the Medicare Trust Funds, by delivering high-quality 
        health care to individuals under the medicare program under 
        title XVIII of the Social Security Act.
            (2) Duration.--The project under this section shall be 
        conducted for a 1-year period.
            (3) Project requirements.--
                    (A) Sites.--The Secretary shall conduct the project 
                under this section at 6 sites, of which--
                            (i) 2 shall include community-based 
                        seatings; and
                            (ii) 2 shall include rural or frontier 
                        health care facilities.
                    (B) Teams.--
                            (i) In general.--Under the project, the 
                        Secretary shall assign to each site selected 
                        under subparagraph (A) a team made up of--
                                    (I) process engineers skilled at 
                                identifying and correcting flaws within 
                                the system of health care delivery;
                                    (II) health care providers and 
                                practitioners located at the site; and
                                    (III) activity-based cost 
                                accountants skilled at attaching real 
                                costs to health care outcomes.
                            (ii) Requirement.--The Secretary should 
                        select members of the team under clause (i) 
                        from within the local community when possible.
                    (C) Duties.--
                            (i) In general.--Under the project, members 
                        of the team assigned to a site shall perform 
                        detailed observations on the process of health 
                        care delivery, process analysis and 
                        improvement, and financial analysis using 
                        hospital data, clinical data from the site, and 
                        medicare claims data.
                            (ii) Medicare claims data.--In order to 
                        provide for a more complete analysis of the 
                        total costs and value of care, the Secretary 
                        shall make all medicare claims data available 
                        to members of the team so that links can be 
                        made to charges associated with physician 
                        visits, skilled nursing facility stays, and 
                        home health visits, inpatient and outpatient 
                        rehabilitation, durable medical equipment, 
                        clinical laboratory tests and other diagnostic 
                        tests, including imaging, and other items and 
                        services furnished to medicare beneficiaries.
            (4) Incentive payments.--If the Secretary determines that 
        the project under this section will result in reduced 
        expenditures under the Medicare Trust Funds, the Secretary may 
        make incentive payments at a site to encourage entities and 
        persons to participate in the project. The total amount of such 
        payments may not exceed the total amount of such reduced 
        expenditures, as estimated by the Secretary.
            (5) Waiver authority.--The Secretary may waive such 
        requirements of titles XI and XVIII of the Social Security Act 
        as may be necessary to carry out the project under this 
        section.
    (b) Report.--
            (1) In general.--Not later than 18 months after the date of 
        enactment of this Act, the Secretary shall submit to Congress a 
        report on the project under this section.
            (2) Contents.--The report submitted under paragraph (1) 
        shall include--
                    (A) a detailed description of the findings from 
                each of the 6 sites at which the project was conducted; 
                and
                    (B) recommendations for such legislation and 
                administrative actions as the Secretary considers 
                appropriate.
    (c) Funding.--There are authorized to be appropriated to the 
Secretary such sums as may be necessary to carry out this section.

SEC. 804. DEMONSTRATION PROJECT ON DATA AGGREGATION ACROSS ALL PAYORS 
              OF HEALTH CARE SERVICES.

    (a) Demonstration Project.--
            (1) Establishment.--Not later than 6 months after the date 
        of enactment of this Act, the Secretary shall establish a 
        demonstration project to evaluate the process, costs, and 
        benefits of aggregating data on quality of care across all 
        payors of health care costs within health care delivery 
        markets.
            (2) Data.--In selecting data to be aggregated under the 
        demonstration project under this section, the Secretary shall 
        give priority to measures which have the most potential to 
        inform health care decisions by consumers and patients, to 
        improve quality and efficiency of care delivered, and to be 
        implemented by providers in a timely manner.
            (3) Duration.--The demonstration project under this section 
        shall be conducted for a 2-year period.
            (4) Sites.--The Secretary shall conduct the demonstration 
        project under this section in 3 health care delivery markets or 
        geographic areas, at least 1 of which shall be a market or an 
        area where quality of care data is being aggregated from 
        multiple sources in the private sector.
            (5) Participants.--Participants in the demonstration 
        project under this section may include regional health 
        information networks, health plans, self-insured employers, 
        State health programs, and other entities responsible for 
        payment of costs associated with health care coverage and with 
        the exchange of data related to patient health status, billing, 
        claims, and health care quality.
            (6) Requirement for participants.--Participants in the 
        demonstration project under this section shall comply with any 
        interoperability and certification standards and processes that 
        have been developed or adopted by the Secretary or a designee 
        of the Secretary.
            (7) Waiver authority.--The Secretary may waive such 
        requirements of titles XI and XVIII of the Social Security Act 
        as may be necessary to carry out the demonstration project 
        under this section.
    (b) Report.--
            (1) In general.--Not later than 1 year after the 
        demonstration project under this section is completed, the 
        Secretary shall submit to Congress a report on the 
        demonstration project.
            (2) Contents.--The report submitted under paragraph (1) 
        shall include--
                    (A) an analysis of--
                            (i) the methodologies for data aggregation, 
                        including processes for aggregation, analysis, 
                        attribution, risk adjustment, and reporting;
                            (ii) issues related to privacy, security, 
                        and data ownership;
                            (iii) the cost-effectiveness of different 
                        methodologies for data aggregation; and
                            (iv) the effects of aggregation on the 
                        information provided to consumers and patients; 
                        and
                    (B) recommendations for such legislation and 
                administrative actions as the Secretary considers 
                appropriate.
    (d) Funding.--There are authorized to be appropriated to the 
Secretary such sums as may be necessary to carry out this section.

SEC. 805. GAO STUDIES AND REPORTS ON THE ACCURACY AND COMPLETENESS OF 
              QUALITY DATA.

    (a) Studies.--The Comptroller General of the United States shall 
conduct a study on the following:
            (1) The accuracy and completeness of the data submitted by 
        hospitals pursuant to section 1886(b)(3)(B)(viii)(II) of the 
        Social Security Act, as added by section 201(a)(1)(B), and the 
        appropriateness of value-based payments made to hospitals under 
        section 1860E-2 of such Act, as added by section 201(b), based 
        on such data.
            (2) The accuracy and completeness of the data submitted by 
        physicians and practitioners pursuant to section 
        1848(d)(4)(G)(ii) of the Social Security Act, as added by 
        section 301(a)(1), and the appropriateness of value-based 
        payments made to physicians and practitioners under section 
        1860E-3 of such Act, as added by section 301(b), based on such 
        data.
            (3) The accuracy and completeness of the data submitted by 
        organizations pursuant to sections 1852(e)(3) and 1876(h)(6) of 
        the Social Security Act, as added by section 401(a), and the 
        appropriateness of value-based payments made to organizations 
        under section 1860E-4 of such Act, as added by section 401(b), 
        based on such data.
            (4) The accuracy and completeness of the data submitted by 
        providers of services and renal dialysis facilities pursuant to 
        subsection (b)(4) of section 1860E-5 of the Social Security 
        Act, as added by section 501(b), and the appropriateness of 
        value-based payments made to organizations under such section 
        1860E-5 based on such data.
            (5) The accuracy and completeness of the data submitted by 
        home health agencies pursuant to section 1895(b)(3)(B)(v)(II) 
        of the Social Security Act, as added by section 601(a), and the 
        appropriateness of value-based payments made to organizations 
        under such section 1860E-6 of such Act, as added by section 
        601(b), based on such data.
    (b) Reports.--Not later than 2 years after the implementation of 
each of the value-based purchasing programs under sections 1860E-2, 
1860E-3, 1860E-4, 1860E-5, and 1860E-6 of the Social Security Act, as 
added by this Act, the Comptroller General of the United States shall 
submit to Congress and the Secretary a report on the study conducted 
under subsection (a) that relates to data used under the applicable 
program, together with such recommendations for legislative or 
administrative action as the Comptroller General determines to be 
appropriate.

SEC. 806. HHS STUDY AND REPORT REGARDING TELEHEALTH AND TELEMEDICINE.

    (a) Study.--The Secretary shall conduct, or contract with a private 
entity to conduct, a study that examines the following:
            (1) The variation among State laws that relate to the 
        licensure of physicians and practitioners (as defined in 
        section 1860E-3(a)(3) of the Social Security Act, as added by 
        section 301(b)).
            (2) How such variation impacts the electronic exchange of 
        health information for the purposes of telehealth and 
        telemedicine.
            (3) How such variation impacts the quality and safety of 
        care furnished to, the experience of, and the financial cost 
        incurred by, individuals in underserved and frontier areas who 
        must travel long distances for routine visits with out-of-State 
        physicians and practitioners (as so defined).
            (4) The potential for interstate coordination between State 
        licensure boards in regulating the practices of physician and 
        practitioners (as so defined) to improve the matters described 
        in paragraph (3), and the potential costs of such coordination.
    (b) Report.--Not later than 1 year after the date of enactment of 
this Act, the Secretary shall submit a report to Congress on the study 
conducted under subsection (a) together with recommendations for such 
legislation and administrative actions as the Secretary considers 
appropriate.
                                 <all>