[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 295 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                 S. 295

To amend title XVIII of the Social Security Act to improve the quality 
     and efficiency of the Medicare program through measurement of 
 readmission rates and resource use and to develop a pilot program to 
  provide episodic payments to organized groups of multispecialty and 
  multilevel providers of services and suppliers for hospitalization 
         episodes associated with select, high cost diagnoses.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 21, 2009

 Mr. Bingaman 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 improve the quality 
     and efficiency of the Medicare program through measurement of 
 readmission rates and resource use and to develop a pilot program to 
  provide episodic payments to organized groups of multispecialty and 
  multilevel providers of services and suppliers for hospitalization 
         episodes associated with select, high cost diagnoses.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Quality and Payment Reform 
Act of 2009''.

SEC. 2. FINDINGS.

    (a) Findings Relating to Medicare Reporting of Readmission Rates 
and Resource Use and the Medicare Fee-for-Service Payment System.--
Congress makes the following findings:
            (1) The Medicare program under title XVIII of the Social 
        Security Act (42 U.S.C. 1395 et seq.) does not publically or 
        privately report to health care providers on resource use and, 
        as a result, many health care providers are unaware of their 
        practices with respect to resource use.
            (2) In 2008, the Congressional Budget Office reported that 
        areas with higher Medicare spending scored lower, on average, 
        on a composite indicator of quality of care furnished to 
        Medicare beneficiaries.
            (3) Feedback on resource use has been shown to increase 
        awareness among health care providers and encourage positive 
        behavioral changes.
            (4) The Medicare program pays for all patient 
        hospitalizations based on the diagnosis, regardless of whether 
        the hospitalization is a readmission or the initial episode of 
        care.
            (5) The Medicare Payment Advisory Commission reports that 
        within 30 days of discharge from a hospital, 17.6 percent of 
        admissions are readmitted to the hospital. In 2005, the 
        Medicare program spent $15,000,000,000 on such readmissions.
            (6) The Commonwealth Fund Commission on a High Performance 
        Health System found that Medicare 30-day readmission rates 
        varied from 14 percent to 22 percent with respect to the lowest 
        and highest decile of States.
    (b) Findings Relating to the Bundling of Medicare Payments to 
Health Care Providers.--Congress makes the following findings:
            (1) Bundled payments incentivize health care providers to 
        determine and provide the most efficient mix of services to 
        Medicare beneficiaries with regard to cost and quality.
            (2) The Medicare Payment Advisory Commission reports that 
        bundled payments around a given episode of care under the 
        Medicare program would encourage collaboration among providers 
        of services and suppliers, reduce fragmentation in health care 
        delivery, and improve the accountability for cost and the 
        quality of care.
            (3) The Medicare Participating Heart Bypass Center 
        Demonstration which was conducted during the period of 1990 to 
        1996 found that bundled payments for cardiac bypass cases were 
        successful in reducing spending on laboratory diagnostics, 
        pharmacy services, intensive care, physician consults, and 
        post-discharge care while maintaining a high quality of care. 
        The Medicare program saved approximately 10 percent on bypass 
        patients treated under the demonstration.
            (4) The 16th Commonwealth Fund/Modern Healthcare Health 
        Care Opinion Leaders Survey, released November 3, 2008, found 
        that more than \2/3\ of respondents reported that the fee-for-
        service payment system under the Medicare program is not 
        effective at encouraging high quality and efficient care and 
        more than \3/4\ of respondents reported preferring a move 
        toward bundled per patient payments under the Medicare program. 
        Respondents favored shared accountability for resource use as a 
        means for improving efficiency, and at least \2/3\ of 
        respondents supported realigning payment incentives for 
        providers of services and suppliers under the Medicare program 
        in order to improve efficiency and effectiveness.

SEC. 3. PAYMENT ADJUSTMENT FOR READMISSION RATES AND RESOURCE USE.

    (a) Payment Adjustment.--
            (1) In general.--Title XVIII of the Social Security Act (42 
        U.S.C. 1395 et seq.) is amended by adding at the end the 
        following new section:

      ``payment adjustment for readmission rates and resource use

    ``Sec. 1899.  (a) Reporting of Readmission Rates and Resource 
Use.--
            ``(1) Annual review.--Beginning not later than 1 year after 
        the date of enactment of this section, the Secretary shall 
        conduct an annual review of readmission rates and resource use 
        for conditions selected by the Secretary under paragraph (5)--
                    ``(A) with respect to subsection (d) hospitals and 
                affiliated physicians (or similarly licensed providers 
                of services and suppliers); and
                    ``(B) with respect to the program under this title.
            ``(2) Reporting.--
                    ``(A) To hospitals and affiliated physicians.--
                Beginning not later than 1 year after the date of 
                enactment of this section, taking into consideration 
                the results of the annual review under paragraph (1), 
                the Secretary shall provide confidential reports to 
                subsection (d) hospitals and to affiliated physicians 
                (or similarly licensed providers of services and 
                suppliers) that measure the readmission rates and 
                resource use for conditions selected by the Secretary 
                under paragraph (5).
                    ``(B) To the public.--Beginning not later than 3 
                years after such date of enactment, taking into 
                consideration the results of such annual review, the 
                Secretary shall make available to the public an annual 
                report that measures the readmission rates and resource 
                use under this title for conditions selected by the 
                Secretary under paragraph (5). Such annual reports 
                shall, to the extent practicable, be integrated into 
                public reporting of data submitted under section 
                1886(b)(3)(B)(viii) with respect to subsection (d) 
                hospitals and data submitted under section 1848(m) with 
                respect to eligible professionals.
            ``(3) Definition of readmission.--The Secretary shall 
        define readmission for purposes of this section. Such 
        definition shall--
                    ``(A) include a time frame of at least 30 days 
                between the initial admission and the applicable 
                readmission;
                    ``(B) capture readmissions to any hospital (as 
                defined in section 1861(e)) or any critical access 
                hospital (as defined in section 1861(mm)(1)) and not be 
                limited to readmissions to the subsection (d) hospital 
                of the initial admission; and
                    ``(C) ensure that the diagnosis for both the 
                initial admission and the applicable readmission are 
                related.
            ``(4) Penalties for non-reporting.--The Secretary shall 
        establish procedures for the collection of data necessary to 
        carry out this subsection. Such procedures shall--
                    ``(A) subject to subparagraph (B), provide for the 
                imposition of penalties for subsection (d) hospitals 
                and affiliated physicians (or similarly licensed 
                providers of services and suppliers) that do not submit 
                such data; and
                    ``(B) include a hardship exceptions process for 
                affiliated physicians (and similarly licensed providers 
                of services and suppliers) who do not have the 
                resources to participate (except that such process may 
                not apply to more than 20 percent of affiliated 
                physicians (or similarly licensed providers of services 
                and suppliers)).
            ``(5) Selection of conditions.--
                    ``(A) Initial selection.--The Secretary shall 
                select conditions for the reporting of readmission 
                rates and resource use under this subsection--
                            ``(i) that have a high volume under this 
                        title; or
                            ``(ii) that have high readmission rates 
                        under this title.
                    ``(B) Updating conditions selected.--Not less 
                frequently than every 3 years, the Secretary shall 
                review and update as appropriate the conditions 
                selected under subparagraph (A).
            ``(6) Time period of measurement.--The Secretary shall, as 
        appropriate and subject to the requirements of this subsection, 
        determine an appropriate time period for the measurement of 
        readmission rates and resource use for purposes of this 
        section.
            ``(7) Risk adjustment of data.--The Secretary shall make 
        appropriate adjustments to any data used in analyzing or 
        reporting readmission rates and resource use under this 
        section, including any data used to conduct the annual review 
        under paragraph (1), in the preparation of reports under 
        subparagraph (A) or (B) of paragraph (2), or in the 
        determination of whether a subsection (d) hospital or an 
        affiliated physician (or a similarly licensed provider of 
        services or supplier) has met the benchmarks established under 
        subsection (b)(1)(A)(i) to take into account variations in 
        health status and other patient characteristics.
            ``(8) Incorporation into quality reporting initiatives.--
        The Secretary shall, to the extent practicable, incorporate 
        readmission rates and resource use measurements into quality 
        reporting initiatives for other Medicare payment systems, 
        including such initiatives with respect to skilled nursing 
        facilities and home health agencies.
    ``(b) Payment Adjustment for Readmission Rates and Resource Use.--
            ``(1) In general.--
                    ``(A) Benchmarks.--
                            ``(i) In general.--The Secretary shall 
                        establish benchmarks for measuring the 
                        readmission rates and resource use of 
                        subsection (d) hospitals and affiliated 
                        physicians (or similarly licensed providers of 
                        services and suppliers) under this section.
                            ``(ii) Report to congress on methodologies 
                        used to establish benchmarks.--Not later than 2 
                        years after the date of enactment of this 
                        section, the Secretary shall submit to Congress 
                        a report on the methodologies used to establish 
                        the benchmarks under clause (i).
                            ``(iii) Risk adjustment of data.--In 
                        determining whether a subsection (d) hospital 
                        has met the benchmarks established under clause 
                        (i) for purposes of the payment adjustment 
                        under this subsection, the Secretary shall 
                        provide for risk adjustment of data in 
                        accordance with subsection (a)(7).
                    ``(B) Payment adjustment.--Not later than 3 years 
                after the date of enactment of this section, in the 
                case of a subsection (d) hospital that the Secretary 
                determines does not meet 1 or more of the benchmarks 
                established under subparagraph (A)(i) during the time 
                period of measurement, the Secretary shall reduce the 
                base operating DRG payment amount (as defined in 
                subparagraph (C)) for the subsection (d) hospital for 
                each discharge occurring in the succeeding fiscal year 
                by--
                            ``(i) 1 percent or an amount that the 
                        Secretary determines is proportionate to the 
                        number of readmissions of the subsection (d) 
                        hospital which exceed the applicable benchmark 
                        established under subparagraph (A)(i), 
                        whichever is greater; or
                            ``(ii) in the case where the Secretary 
                        updates the amount of the payment adjustment 
                        under paragraph (3), such updated amount.
                    ``(C) Base operating drg payment amount defined.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), in this subsection, the term `base 
                        operating DRG payment amount' means, with 
                        respect to a subsection (d) hospital for a 
                        fiscal year--
                                    ``(I) the payment amount that would 
                                otherwise be made under section 1886(d) 
                                for a discharge if this subsection did 
                                not apply; reduced by
                                    ``(II) any portion of such payment 
                                amount that is attributable to payments 
                                under paragraphs (5)(A), (5)(B), 
                                (5)(F), and (12) of such section 
                                1886(d).
                            ``(ii) Special rules for certain 
                        hospitals.--
                                    ``(I) Sole community hospitals.--In 
                                the case of a sole community hospital, 
                                in applying clause (i)(I), the payment 
                                amount that would otherwise be made 
                                under subsection (d) for a discharge if 
                                this subsection did not apply shall be 
                                determined without regard to 
                                subparagraphs (I) and (L) of subsection 
                                (b)(3) of section 1886 and subparagraph 
                                (D) of subsection (d)(5) of such 
                                section.
                                    ``(II) Hospitals paid under section 
                                1814.--In the case of a hospital that 
                                is paid under section 1814(b)(3), the 
                                term `base operating DRG payment 
                                amount' means the payment amount under 
                                such section.
            ``(2) Shared accountability.--The Secretary shall examine 
        ways to create shared accountability with providers of services 
        and suppliers associated with episodes of care, including how 
        any penalty could be distributed among such providers of 
        services and suppliers as appropriate and how to avoid 
        inappropriate gainsharing by such providers of services and 
        suppliers.
            ``(3) Annual update.--The Secretary shall annually update 
        the benchmarks established under paragraph (1)(A)(i) and the 
        payment adjustment under paragraph (1)(B) to further 
        incentivize improvements in readmission rates and resource use.
            ``(4) Incorporation of new measures.--In the case where the 
        Secretary updates the conditions selected under subsection 
        (a)(5)(B), any new condition selected shall not be considered 
        in determining whether a subsection (d) hospital has met the 
        benchmarks established under paragraph (1)(A)(i) for purposes 
        of the payment adjustment under paragraph (1)(B) during the 
        period beginning on the date of the selection and ending 1 year 
        after such date.''.
            (2) Conforming amendment.--Section 1886(d)(1)(A) of the 
        Social Security Act (42 U.S.C. 1395ww(d)(1)(A)), in the matter 
        preceding clause (i), is amended by striking ``section 1813'' 
        and inserting ``sections 1813 and 1899''.
    (b) Voluntary Pilot Program for Bundled Payments for Episodes of 
Treatment.--
            (1) Initial implementation.--
                    (A) In general.--The Secretary of Health and Human 
                Services (in this subsection referred to as the 
                ``Secretary'') shall establish a pilot program to 
                provide episodic payments to hospitals and other 
                organizing entities for items and services associated 
                with hospitalization episodes of Medicare beneficiaries 
                with respect to 1 or more conditions selected under 
                subparagraph (B).
                    (B) Selection.--The Secretary shall initially 
                implement the pilot program for hospitalization 
                episodes with respect to conditions that have a high 
                volume, high readmission rate, or high rate of post-
                acute care under the Medicare program under title XVIII 
                of the Social Security Act (42 U.S.C. 1395 et seq.) (as 
                determined by the Secretary).
                    (C) Payments.--
                            (i) In general.--Under the pilot program, 
                        episodic payments shall--
                                    (I) be risk adjusted; and
                                    (II) cover all costs under parts A 
                                and B of the Medicare program 
                                associated with a hospitalization 
                                episode with respect to the selected 
                                condition, which includes the period 
                                beginning on the date of 
                                hospitalization and ending 30 days 
                                after the date of discharge.
                            (ii) Compatibility of payment mechanisms.--
                        The Secretary shall, to the extent feasible, 
                        ensure that the payment mechanism under the 
                        pilot program functions with payment mechanisms 
                        under the original Medicare fee for service 
                        program under parts A and B of title XVIII of 
                        the Social Security Act and under the Medicare 
                        Advantage program under part C of such title.
                            (iii) Process.--Under the pilot program, 
                        episodic payments shall be made to a hospital 
                        or other organizing entity participating in the 
                        pilot program. The participating hospitals and 
                        other organizing entities shall make payments 
                        to other providers of services and suppliers 
                        who furnished items or services associated with 
                        the hospitalization episode (in an amount 
                        negotiated between the participating hospital 
                        and the provider of services or supplier).
                            (iv) Savings.--The Secretary shall 
                        establish procedures to ensure that the 
                        Secretary, participating hospitals or other 
                        organizing entities, providers of services, and 
                        suppliers share any savings associated with 
                        higher efficiency care furnished under the 
                        pilot program.
                    (D) Inclusion of variety of providers of services 
                and suppliers.--In selecting providers of services and 
                suppliers to participate in the pilot program, the 
                Secretary shall establish criteria to ensure the 
                inclusion of a variety of providers of services and 
                suppliers, including providers of services and 
                suppliers that serve a wide range of Medicare 
                beneficiaries, including Medicare beneficiaries located 
                in rural and urban areas and low-income Medicare 
                beneficiaries.
                    (E) Duration.--The Secretary shall conduct the 
                pilot program under this paragraph for a 5-year period.
                    (F) Implementation.--The Secretary shall implement 
                the pilot program not later than 2 years after the date 
                of enactment of this Act.
                    (G) Definition of organizing entity.--In this 
                subsection, the term ``organizing entity'' means an 
                entity responsible for the organization and 
                administration of the furnishing of items and services 
                associated with a hospitalization episode of a Medicare 
                beneficiary with respect to 1 or more conditions 
                selected under subparagraph (B).
            (2) Expanded implementation.--
                    (A) Establishment of thresholds for expansion.--The 
                Secretary shall, prior to the implementation of the 
                pilot program under paragraph (1), establish clear 
                thresholds for use in determining whether 
                implementation of the pilot program should be expanded 
                under subparagraph (B).
                    (B) Expanded implementation.--If the Secretary 
                determines the thresholds established under 
                subparagraph (A) are met, the Secretary may expand 
                implementation of the pilot program to additional 
                providers of services, suppliers, and episodes of 
                treatment not covered under the pilot program as 
                conducted under paragraph (1), which may include the 
                implementation of the pilot program on a national 
                basis.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary to carry out 
        this subsection.
                                 <all>