[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5823 Introduced in House (IH)]

113th CONGRESS
  2d Session
                                H. R. 5823

 To amend title XVIII of the Social Security Act to create incentives 
 for healthcare providers to promote quality healthcare outcomes, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            December 9, 2014

 Mr. Matheson introduced the following bill; which was referred to the 
 Committee on Energy and Commerce, and in addition to the Committee on 
   Ways and Means, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend title XVIII of the Social Security Act to create incentives 
 for healthcare providers to promote quality healthcare outcomes, and 
                          for other purposes.

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

SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Incentivizing 
Healthcare Quality Outcomes Act of 2014''.
    (b) Findings.--Congress makes the following findings:
            (1) Healthcare delivery organizations are faced with an 
        unmanageable array of quality measures and methods of risk 
        adjustment that are overly process oriented, may not relate to 
        health outcomes, and create a significant administrative 
        burden.
            (2) Existing quality measures and methods of risk 
        adjustment used to adjust Medicare payments should be replaced 
        with a comprehensive and clinically credible quality 
        measurement system based on the rate of occurrence of 
        potentially preventable outcomes.
            (3) Payment adjustment for quality outcomes should be 
        applied to all types of healthcare delivery organizations 
        including hospitals, health systems, Medicare Advantage plans, 
        health homes, and accountable care organizations as well as 
        healthcare professionals.

SEC. 2. INCENTIVIZING HEALTHCARE QUALITY OUTCOMES.

    (a) 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:

              ``incentivizing healthcare quality outcomes

    ``Sec. 1899B.  (a) Adjustment of Payments to Health-Care Delivery 
Organization for Potentially Preventable Outcomes.--
            ``(1) In general.--In order to provide an incentive for 
        each applicable healthcare delivery organization (as defined in 
        subsection (k)) to reduce potentially preventable outcomes, the 
        amount of payments to the organization under this title for an 
        applicable prospective period (as defined in such subsection) 
        shall be the amount otherwise determined multiplied by the 
        healthcare delivery organization-specific adjustment factor 
        determined under paragraph (2) for such period.
            ``(2) Healthcare delivery organization specific payment 
        adjustment factor.--
                    ``(A) In general.--For purposes of paragraph (1), 
                subject to subparagraph (B), the healthcare delivery 
                organization-specific payment adjustment factor 
                described in this paragraph for an applicable 
                healthcare delivery organization for an applicable 
                prospective period is equal to 1 minus the ratio 
                (expressed as a percentage), as determined by the 
                Secretary, of--
                            ``(i) the composite aggregate payments for 
                        excess potentially preventable outcomes 
                        (described in subsection (c)(1)) for the 
                        organization and period; to
                            ``(ii) the aggregate payments under this 
                        title to the organization for such period.
                    ``(B) Phase-in of healthcare delivery organization-
                specific adjustment factor.--In no case shall the 
                healthcare delivery organization-specific payment 
                adjustment factor under subparagraph (A) be--
                            ``(i) less than 97 percent or more than 103 
                        percent for fiscal year 2016;
                            ``(ii) be less than 94 percent or more than 
                        106 percent for fiscal year 2017; or
                            ``(iii) be less than 90 percent or more 
                        than 110 percent for fiscal year 2018 and each 
                        subsequent fiscal year.
    ``(b) Adjustment to the Annual Update Factor for Payments to 
Healthcare Professionals in a Geographic Region for Potentially 
Preventable Outcomes.--
            ``(1) In general.--In order to provide an incentive for 
        healthcare professionals (that are not part of an applicable 
        healthcare delivery organization) in a geographic region to 
        coordinate care and reduce potentially preventable outcomes, 
        the annual update factor for traditional Medicare fee-for-
        service payments to all such professionals in a geographic 
        region established under paragraph (3) for an applicable 
        prospective period (beginning on or after October 1, 2015) 
        shall be equal to the annual update factor that would otherwise 
        apply multiplied by the geographic-specific potentially 
        preventable outcomes adjustment factor (as described in 
        paragraph (2)) for the geographic region and period.
            ``(2) Geographic-specific potentially preventable outcomes 
        adjustment factor.--
                    ``(A) In general.--For purposes of paragraph (1), 
                subject to subparagraph (B), the geographic-specific 
                potentially preventable outcomes adjustment factor 
                described in this paragraph for a geographic region for 
                an applicable prospective period is equal to 1 minus 
                the ratio (expressed as a percentage), as determined by 
                the Secretary, of--
                            ``(i) the sum of the composite aggregate 
                        payments for excess potentially preventable 
                        outcomes (described in subsection (c)(1)) for 
                        Medicare beneficiaries enrolled in traditional 
                        Medicare fee-for-service across all applicable 
                        healthcare delivery organizations physically 
                        located in the geographic region for the 
                        applicable historical period; to
                            ``(ii) the aggregate payments for Medicare 
                        beneficiaries enrolled in traditional Medicare 
                        fee-for-service across all applicable 
                        healthcare delivery organizations physically 
                        located in the geographic region for such 
                        applicable historical period.
                    ``(B) Phase-in.--In no case shall the geographic-
                specific potentially preventable outcomes adjustment 
                factor for a geographic region under this paragraph--
                            ``(i) be less than 95 percent or more than 
                        105 percent for fiscal year 2016;
                            ``(ii) be less than 90 percent or more than 
                        110 percent for fiscal year 2017; or
                            ``(iii) be less than 80 percent or more 
                        than 120 percent for fiscal year 2018 and each 
                        subsequent fiscal year.
            ``(3) Geographic region.--
                    ``(A) In general.--For the purposes of this 
                subsection and subject to subparagraph (B), the 
                Secretary shall establish geographic regions to which 
                healthcare professionals shall be assigned.
                    ``(B) Restrictions.--
                            ``(i) Geographic regions.--To the extent 
                        practical, the Secretary shall define 
                        geographic regions based on core base 
                        statistical areas as defined by the Director of 
                        the Office of Management and Budget.
                            ``(ii) Assignment of healthcare 
                        professionals to geographic regions.--The 
                        geographic region to which a healthcare 
                        professional is assigned shall be the 
                        geographic region in which a plurality of 
                        Medicare beneficiaries treated by such 
                        professional for the applicable historical 
                        period reside, as determined by the Secretary.
            ``(4) Report on using individual healthcare professional 
        performance.--No later than January 1, 2017, the Secretary 
        shall submit to Congress a report proposing a method of 
        combining the potentially preventable outcomes performance of 
        individual healthcare professionals with the geographic-
        specific potentially preventable outcomes performance for a 
        geographic region under paragraph (2) for the purpose of 
        determining the potentially preventable outcomes adjustment 
        factor under paragraph (1) to the annual adjustment factor for 
        payments to such individual healthcare professionals.
    ``(c) Composite Aggregate Payments for Excess Potentially 
Preventable Outcomes.--
            ``(1) In general.--The composite aggregate payments for 
        excess potentially preventable outcomes for an applicable 
        healthcare delivery organization or geographic region for an 
        applicable historical period described in this paragraph is 
        equal to the sum of the following for the healthcare delivery 
        organization or geographic region and period:
                    ``(A) Preventable complications.--The aggregate 
                payments for excess inpatient potentially preventable 
                complications (as defined in subsection (e)(1)(B)).
                    ``(B) Preventable readmissions.--The aggregate 
                payments for excess potentially preventable 
                readmissions (as defined in subsection (f)(1)(B)).
                    ``(C) Preventable admissions.--The aggregate 
                payments for excess potentially preventable admissions 
                computed (as defined in subsection (g)(1)(B)).
                    ``(D) Preventable emergency room visits.--The 
                aggregate payments for excess potentially preventable 
                emergency room visits (as defined in subsection 
                (h)(1)(B)).
                    ``(E) Preventable outpatient ancillary services.--
                The aggregate payments for excess potentially 
                preventable outpatient ancillary services (as defined 
                in subsection (i)(1)(B)).
            ``(2) Offsetting potentially preventable outcome values 
        being positive or negative.--The aggregate payments for 
        individual excess potentially preventable outcomes under 
        subsections (e)(1)(B), (f)(1)(B), (g)(1)(B), (h)(1)(B), and 
        (i)(1)(B) may have a positive value (indicating the healthcare 
        delivery organization had more potentially preventable outcomes 
        than expected) or a negative value (indicating the healthcare 
        delivery organization had fewer potentially preventable 
        outcomes than expected). The summing of the individual excess 
        potentially preventable outcomes in paragraph (1) for 
        potentially preventable outcomes allows negative values for 
        individual potentially preventable outcomes to offset in part 
        or in whole positive values of other potentially preventable 
        outcomes.
            ``(3) Exclusions.--The Secretary shall determine the 
        applicability of each type of potentially preventable outcome 
        to different types of healthcare delivery organizations and may 
        exclude potentially preventable outcomes from the calculation 
        of aggregate payments referred to in paragraph (1) for types of 
        healthcare delivery organizations if the Secretary determines 
        that such outcomes are not applicable for such types of 
        organizations.
    ``(d) Superseding Existing Payment Adjustments for Quality; Budget 
Neutral Adjustment.--
            ``(1) In general.--For applicable prospective periods 
        beginning on or after October 1, 2015, no payment adjustment 
        for quality performance shall be made pursuant any of the 
        following provisions:
                    ``(A) Payment adjustments for hospital acquired 
                conditions under section 1886(d)(4)(D), as added by 
                section 5001(c) of Deficit Reduction Act of 2005.
                    ``(B) Payment adjustments for value based 
                purchasing for inpatient hospital services under 
                section 1886(o) and for physicians' services under 
                section 1848(p).
                    ``(C) Payment adjustments for hospital readmissions 
                under section 1886(q), as added by section 3025 of the 
                Patient Protection and Affordable Care Act.
                    ``(D) Payment adjustments for hospital acquired 
                conditions under section 1886(p), as added by section 
                3008 of the Patient Protection and Affordable Care Act.
                    ``(E) Payment adjustments for Medicare Advantage 
                Plans under Sections 1853(n) and 1853(o).
                    ``(F) Other payment adjustments for quality as 
                determined by the Secretary.
            ``(2) Payment adjustments for reporting quality information 
        unchanged.--Payment adjustments for reporting quality 
        information that are unrelated to actual quality performance 
        under sections 1833(t)(17), 1848(a), 1848(k), 1848(m) and 
        1833(i)(2)(D) shall not be affected by this subsection.
            ``(3) Mandated reductions under current law.--The Secretary 
        shall determine the annual reductions in payment mandated by 
        the provisions described in paragraph (1) for fiscal year 2016 
        and for each subsequent fiscal year.
            ``(4) Payment reduction factor to achieve budget 
        neutrality.--The Secretary shall determine a payment reduction 
        factor for fiscal year 2016 and for each subsequent fiscal 
        year, to be applied under subsections (e)(1)(A)(ii), 
        (f)(1)(A)(ii), (g)(1)(A)(ii), (h)(1)(A)(ii), and (i)(1)(A)(ii), 
        subject to the limitations in subsections (a)(2)(B) and 
        (b)(2)(B), so that there is an aggregate payment reduction 
        under this section for such fiscal year equivalent to the 
        aggregate reduction in payment determined under paragraph (3) 
        for such fiscal year.
    ``(e) Aggregate Payments for Excess Inpatient Potentially 
Preventable Complications.--
            ``(1) Excess inpatient potentially preventable 
        complications; aggregate payments for excess inpatient 
        potentially preventable complications defined.--In this 
        section:
                    ``(A) Excess inpatient potentially preventable 
                complications.--
                            ``(i) In general.--The term `excess 
                        inpatient potentially preventable 
                        complications' means, for an applicable 
                        hospital and other applicable healthcare 
                        delivery organizations determined appropriate 
                        by the Secretary for an applicable historical 
                        period for each type of inpatient hospital 
                        potentially preventable complication identified 
                        under paragraph (2), the sum across all risk 
                        classes (as defined in clause (iii)) of the 
                        difference between--
                                    ``(I) the expected number of 
                                inpatient hospital potentially 
                                preventable complications for the type 
                                of complication for the applicable 
                                hospital based on the standard 
                                complication rate computed under clause 
                                (ii) in each risk class; and
                                    ``(II) the applicable hospital's 
                                actual number of inpatient hospital 
                                potentially preventable complications 
                                for the type of inpatient potentially 
                                preventable complication in each risk 
                                class in the applicable historical 
                                period.
                        Such difference may be a positive or negative 
                        number.
                            ``(ii) Standard complication rate.--In 
                        carrying out clause (i)(I), the standard 
                        complication rate shall be based on the average 
                        rate of each type of inpatient hospital 
                        potentially preventable complication in each 
                        risk class in the applicable historical period, 
                        multiplied by the payment reduction factor 
                        established under subsection (d)(3) for the 
                        applicable prospective period.
                            ``(iii) Risk classes.--In this 
                        subparagraph, the term `risk classes' means 
                        such exhaustive and mutually exclusive risk 
                        classes as the Secretary shall establish in 
                        order to apply a risk-adjustment methodology 
                        that meets the criteria in subsection (j)(2) 
                        and account for the age, reason for admission, 
                        severity of illness, and other risk factors 
                        identified by the Secretary of patients at the 
                        time of hospital admission.
                    ``(B) Aggregate payments for excess inpatient 
                hospital potentially preventable complications.--
                            ``(i) In general.--The term `aggregate 
                        payments for excess inpatient hospital 
                        potentially preventable complications' means, 
                        for an applicable hospital and other applicable 
                        healthcare delivery organizations determined 
                        appropriate by the Secretary and applicable 
                        historical period, for all types of inpatient 
                        hospital potentially preventable complications 
                        identified under paragraph (2), an amount equal 
                        to the sum of the amount determined under 
                        clause (ii) for such hospital and other 
                        applicable healthcare delivery organizations 
                        determined appropriate by the Secretary for 
                        each type of inpatient hospital potentially 
                        preventable complication for such period.
                            ``(ii) Amount determined.--The amount 
                        determined under this clause, with respect to 
                        an applicable hospital and other applicable 
                        healthcare delivery organizations determined 
                        appropriate by the Secretary and an applicable 
                        historical period, for a type of inpatient 
                        hospital potentially preventable complication 
                        identified under paragraph (2) is equal to the 
                        product of--
                                    ``(I) the excess inpatient hospital 
                                potentially preventable complications 
                                (as defined in subparagraph (A)) of the 
                                applicable hospital and other 
                                applicable healthcare delivery 
                                organizations determined appropriate by 
                                the Secretary for the type of inpatient 
                                hospital potentially preventable 
                                complication during the applicable 
                                historical period; and
                                    ``(II) the estimated national 
                                average standardized incremental cost 
                                of that inpatient hospital potentially 
                                preventable complication for applicable 
                                hospitals and other applicable 
                                healthcare delivery organizations 
                                determined appropriate by the Secretary 
                                during the applicable historical period 
                                (as determined under clause (iii)) 
                                adjusted by each hospital's applicable 
                                payment adjustment factors.
                            ``(iii) Methodology for estimating national 
                        average incremental cost of inpatient hospital 
                        potentially preventable complications.--In 
                        carrying out clause (ii)(II), the Secretary 
                        shall establish and apply a methodology to 
                        estimate the national average standardized 
                        incremental cost of each inpatient hospital 
                        potentially preventable complication identified 
                        under paragraph (2).
            ``(2) Inpatient hospital potentially preventable 
        complications.--For purposes of this subsection, the Secretary 
        shall select a methodology of identifying potentially 
        preventable complications that includes each inpatient hospital 
        complication that meets all of the following requirements:
                    ``(A) The complication occurs during the stay and 
                was not present on admission as an inpatient.
                    ``(B) The complication is a harmful event, such as 
                a surgical complication, or an acute illness, such as 
                an infection or an acute exacerbation of underlying 
                chronic disease.
                    ``(C) The complication could reasonably be 
                prevented with adequate care and treatment and is not a 
                natural progression of a patient's underlying illnesses 
                present on admission.
                    ``(D) The complication may be reasonably construed 
                as related to the care rendered during the stay.
                    ``(E) The complication meets criteria applicable 
                under subsection (j)(1) to the outcome described in 
                this subsection.
    ``(f) Aggregate Payments for Excess Potentially Preventable 
Readmissions.--
            ``(1) Excess potentially preventable readmissions; 
        aggregate payments for excess potentially preventable 
        readmissions defined.--For purposes of this subsection:
                    ``(A) Excess potentially preventable 
                readmissions.--
                            ``(i) In general.--The term `excess 
                        potentially preventable readmissions' means, 
                        for an applicable hospital or other applicable 
                        healthcare delivery organization determined 
                        appropriate by the Secretary for an applicable 
                        historical period and with respect to 
                        potentially preventable readmissions identified 
                        under paragraph (2) for each risk class (as 
                        defined in clause (iii)) the difference 
                        between--
                                    ``(I) the expected number of 
                                potentially preventable readmissions 
                                for the applicable hospital based on 
                                the standard readmission rate in each 
                                risk class (as defined in clause (ii)); 
                                and
                                    ``(II) the applicable hospital's 
                                actual number of potentially 
                                preventable readmissions in each risk 
                                class for the applicable historical 
                                period.
                        Such difference may be a positive or negative 
                        number.
                            ``(ii) Standard readmission rate.--In 
                        carrying out clause (i)(I), the standard 
                        readmission rate shall be based on the average 
                        potentially preventable readmission rate in 
                        each risk class, as established under clause 
                        (iii), in the applicable historical period, 
                        multiplied by the payment reduction factor 
                        established under subsection (d)(3) for the 
                        applicable prospective period.
                            ``(iii) Risk adjustment.--In this 
                        subparagraph, the term `risk classes' means 
                        such exhaustive and mutually exclusive risk 
                        classes as the Secretary shall establish in 
                        order to apply a risk-adjustment methodology 
                        that meets the criteria in subsection (j)(2) 
                        and account for the age, reason for admission, 
                        severity of illness, and other risk factors 
                        identified by the Secretary of patients that 
                        were present in patients at the time of 
                        hospital discharge from the hospital admission 
                        that preceded their readmission.
                    ``(B) Aggregate payments for excess potentially 
                preventable readmissions.--
                            ``(i) In general.--The term `aggregate 
                        payments for excess potentially preventable 
                        readmissions' means, for an applicable 
                        historical period, for all potentially 
                        preventable readmissions identified under 
                        paragraph (2), an amount equal to the amount 
                        determined under clause (ii).
                            ``(ii) Amount determined.--The amount 
                        determined under this clause, with respect to 
                        an applicable hospital and other applicable 
                        healthcare delivery organizations determined 
                        appropriate by the Secretary and an applicable 
                        historical period, is equal to the sum across 
                        all risk classes of the product of--
                                    ``(I) the excess potentially 
                                preventable readmissions in the risk 
                                class for the applicable hospital and 
                                other applicable healthcare delivery 
                                organizations determined appropriate by 
                                the Secretary for the applicable 
                                historical period; and
                                    ``(II) the average payment for 
                                potentially preventable readmissions 
                                (as defined in clause (iii)) in the 
                                risk class for applicable hospitals and 
                                other applicable healthcare delivery 
                                organizations determined appropriate by 
                                the Secretary for the applicable 
                                historical period.
                            ``(iii) Average payment for potentially 
                        preventable readmissions.--In clause (ii)(II), 
                        the term `average payment for potentially 
                        preventable readmissions for a risk class' 
                        means, for applicable hospitals and other 
                        applicable healthcare delivery organizations 
                        determined appropriate by the Secretary for an 
                        applicable historical period, the average 
                        payment for all potentially preventable 
                        readmissions that follow a prior discharge in 
                        that risk class.
            ``(2) Potentially preventable readmissions.--For purposes 
        of this subsection, the Secretary shall select a methodology of 
        identifying potentially preventable readmissions under 
        paragraph (1) that includes each readmission that meets all of 
        the following requirements:
                    ``(A) The readmission is within 30 days from the 
                date of the initial discharge and could reasonably have 
                been prevented by--
                            ``(i) the provision of appropriate care 
                        consistent with accepted standards in the prior 
                        discharge;
                            ``(ii) adequate discharge planning;
                            ``(iii) adequate post-discharge followup; 
                        or
                            ``(iv) improved coordination between the 
                        inpatient and outpatient healthcare teams.
                    ``(B) The readmission is for a condition or 
                procedure related to the care during the prior 
                admission or during the care immediately following the 
                prior discharge, including--
                            ``(i) a readmission for the same or closely 
                        related condition or procedure as the prior 
                        discharge;
                            ``(ii) a readmission for an infection or 
                        other complication of care;
                            ``(iii) a readmission for a condition or 
                        procedure indicative of a failed surgical 
                        intervention; and
                            ``(iv) a readmission for an acute 
                        decompensation of a coexisting chronic disease.
                    ``(C) The readmission is back to the same hospital 
                or to any other hospital.
                    ``(D) The readmission does not occur under any of 
                the following circumstances:
                            ``(i) The original discharge was a patient-
                        initiated discharge and was against medical 
                        advice and the circumstances of such discharge 
                        and readmission are documented in the patient's 
                        medical record.
                            ``(ii) The readmission was a planned 
                        readmission.
                            ``(iii) Such other exclusion as the 
                        Secretary determines appropriate.
                    ``(E) The readmission meets criteria applicable 
                under subsection (j)(1) to the outcome described in 
                this subsection.
    ``(g) Aggregate Payments for Excess Potentially Preventable 
Admissions.--
            ``(1) Excess potentially preventable admissions; aggregate 
        payments for excess potentially preventable admissions 
        defined.--In this subsection:
                    ``(A) Excess potentially preventable admissions.--
                            ``(i) In general.--The term `excess 
                        potentially preventable admissions' means, for 
                        an applicable healthcare delivery organization 
                        for an applicable historical period and with 
                        respect to potentially preventable admissions 
                        identified under paragraph (2), for each risk 
                        class (as defined in clause (iii)) the 
                        difference between--
                                    ``(I) the expected number of 
                                beneficiaries with one or more 
                                potentially preventable admissions for 
                                the applicable healthcare delivery 
                                organization based on the standard 
                                potentially preventable admission rate 
                                for beneficiaries in each risk class; 
                                and
                                    ``(II) the applicable healthcare 
                                delivery organization's actual number 
                                of beneficiaries with one or more 
                                potentially preventable admissions in 
                                each risk class for the applicable 
                                historical period for beneficiaries 
                                assigned to the risk class.
                        Such difference may be a positive or negative 
                        number.
                            ``(ii) Standard potentially preventable 
                        admission rate.--In carrying out clause (i)(I), 
                        the standard potentially preventable admission 
                        rate shall be based on the average number of 
                        beneficiaries with one or more potentially 
                        preventable admissions in each risk class, as 
                        defined in clause (iii), in the applicable 
                        historical period, multiplied by the payment 
                        reduction factor established under subsection 
                        (d)(3) for the applicable prospective period.
                            ``(iii) Risk adjustment.--In this 
                        subparagraph, the term `risk classes' means 
                        such exhaustive and mutually exclusive risk 
                        classes as the Secretary shall establish in 
                        order to apply a risk-adjustment methodology 
                        that meets the criteria in subsection (j)(2) 
                        and account for the age, reason for admission, 
                        severity of illness, and other risk factors 
                        identified by the Secretary. The risk class for 
                        a beneficiary shall be assigned under this 
                        subparagraph based on the beneficiary's chronic 
                        illness burden and history of healthcare 
                        services for a time period of not less than 6 
                        months preceding the beginning of the 
                        applicable historical period.
                    ``(B) Aggregate payments for excess potentially 
                preventable admissions.--
                            ``(i) In general.--The term `aggregate 
                        payments for excess potentially preventable 
                        admissions' means, for an applicable historical 
                        period, for potentially preventable admissions 
                        identified under paragraph (2), an amount equal 
                        to the amount determined under clause (ii).
                            ``(ii) Amount determined.--The amount 
                        determined under this clause, with respect to 
                        an applicable healthcare delivery organization 
                        and an applicable historical period, for all 
                        beneficiaries with one or more potentially 
                        preventable admissions identified under 
                        paragraph (2) is equal to the sum across all 
                        risk classes of the product of--
                                    ``(I) the excess potentially 
                                preventable admissions (as defined in 
                                subparagraph (A)) in the risk class for 
                                the applicable healthcare delivery 
                                organization during the applicable 
                                historical period; and
                                    ``(II) the average payment per 
                                beneficiary of all potentially 
                                preventable admissions for 
                                beneficiaries in the risk class (as 
                                determined under clause (iii)) for 
                                applicable healthcare delivery 
                                organizations during the applicable 
                                historical period.
                            ``(iii) Average payment per beneficiary of 
                        all potentially preventable admissions.--The 
                        term `average payment per beneficiary of all 
                        potentially preventable admissions' for a risk 
                        class means, for applicable healthcare delivery 
                        organizations for an applicable historical 
                        period, the average payment per beneficiary for 
                        all potentially preventable admissions in the 
                        risk class.
            ``(2) Potentially preventable admissions.--For purposes of 
        this subsection, the Secretary shall select a methodology of 
        identifying potentially preventable admissions under paragraph 
        (1) that includes each admission that meets all of the 
        following requirements:
                    ``(A) The admission could reasonably have been 
                prevented with adequate access to ambulatory care or 
                coordinated healthcare services.
                    ``(B) The services provided as part of the 
                admission could be safely performed in an outpatient 
                facility.
                    ``(C) The admission is not of a beneficiary with 
                extensive comorbid disease or high severity of illness 
                that may necessitate that care be delivered in a 
                hospital setting.
                    ``(D) The admission meets criteria applicable under 
                subsection (j)(1) to the outcome described in this 
                subsection.
    ``(h) Aggregate Payments for Excess Potentially Preventable 
Emergency Room Visits.--
            ``(1) Excess potentially preventable emergency room visits; 
        aggregate payments for excess potentially preventable emergency 
        room visits defined.--In this subsection:
                    ``(A) Excess potentially preventable emergency room 
                visits.--
                            ``(i) In general.--The term `excess 
                        potentially preventable emergency room visits' 
                        means, for an applicable healthcare delivery 
                        organization for an applicable historical 
                        period and with respect to potentially 
                        preventable emergency room visits identified 
                        under paragraph (2), for each risk class (as 
                        defined in clause (iii)) the difference 
                        between--
                                    ``(I) the expected number of 
                                beneficiaries with one or more 
                                potentially preventable emergency room 
                                visits for the applicable healthcare 
                                delivery organization based on the 
                                standard potentially preventable 
                                emergency room visit rate for 
                                beneficiaries in each risk class (as 
                                defined in clause (ii)); and
                                    ``(II) the applicable healthcare 
                                delivery organization's actual number 
                                of beneficiaries with one or more 
                                potentially preventable emergency room 
                                visits for the applicable historical 
                                period for beneficiaries assigned to 
                                the risk class.
                        Such difference may be a positive or negative 
                        number.
                            ``(ii) Standard potentially preventable 
                        emergency room visit rate.--In carrying out 
                        clause (i)(I), the standard potentially 
                        preventable emergency room visit rate shall be 
                        based on the average number of beneficiaries 
                        with one or more potentially preventable 
                        emergency room visits in each risk class, as 
                        defined in clause (iii) in the applicable 
                        historical period, multiplied by the payment 
                        reduction factor established under subsection 
                        (d)(3) for the applicable prospective period.
                            ``(iii) Risk adjustment.--In this 
                        subparagraph, the term `risk classes' means 
                        such exhaustive and mutually exclusive risk 
                        classes as the Secretary shall establish in 
                        order to apply a risk-adjustment methodology 
                        that meets the criteria in subsection (j)(2) 
                        and account for the age, reason for admission, 
                        severity of illness, and other risk factors 
                        identified by the Secretary. The risk class for 
                        a beneficiary shall be assigned based on the 
                        beneficiary's chronic illness burden and 
                        history of healthcare services for a time 
                        period of not less than 6 months preceding the 
                        beginning of the applicable historical period.
                    ``(B) Aggregate payments for excess potentially 
                preventable emergency room visits.--
                            ``(i) In general.--The term `aggregate 
                        payments for excess potentially preventable 
                        emergency room visits' means, for an applicable 
                        historical period, for potentially preventable 
                        emergency room visits identified under 
                        paragraph (2), an amount equal to the amount 
                        determined under clause (ii).
                            ``(ii) Amount determined.--The amount 
                        determined under this clause, with respect to 
                        an applicable healthcare delivery organization 
                        and an applicable historical period, for all 
                        beneficiaries with one or more potentially 
                        preventable emergency room visits identified 
                        under paragraph (2) is equal to the sum across 
                        all risk classes of the product of--
                                    ``(I) the excess potentially 
                                preventable emergency room visits (as 
                                defined in subparagraph (A)) in the 
                                risk class for the applicable 
                                healthcare delivery organization during 
                                the applicable historical period; and
                                    ``(II) the average payment per 
                                beneficiary of all potentially 
                                preventable emergency room visits for 
                                beneficiaries in the risk class (as 
                                determined under clause (iii)) for 
                                applicable healthcare delivery 
                                organizations during the applicable 
                                historical period.
                            ``(iii) Average payment per beneficiary of 
                        all potentially preventable emergency room 
                        visits.--The term `average payment per 
                        beneficiary of all potentially preventable 
                        emergency room visits' means, for applicable 
                        healthcare delivery organizations for an 
                        applicable historical period for a risk class, 
                        the average payment per beneficiary for all 
                        potentially preventable emergency room visits 
                        in the risk class.
            ``(2) Potentially preventable emergency room visits.--For 
        purposes of this subsection, the Secretary shall select a 
        methodology of identifying potentially preventable emergency 
        room visits under paragraph (1) that includes each such visit 
        that meets all of the following requirements:
                    ``(A) The visit did not require emergency medical 
                attention because the condition could be treated or 
                prevented by a physician or other healthcare provider 
                in a nonemergency setting.
                    ``(B) The beneficiary involved does not have an 
                extensive comorbid disease or high severity of illness 
                that may necessitate that care be delivered in an 
                emergency room setting.
                    ``(C) The visit meets criteria applicable under 
                subsection (j)(1) to the outcome described in this 
                subsection.
    ``(i) Aggregate Payments for Excess Potentially Preventable 
Outpatient Procedures and Tests.--
            ``(1) Excess potentially preventable outpatient procedures 
        and tests; aggregate payments for excess potentially 
        preventable outpatient procedures and tests defined.--In this 
        subsection:
                    ``(A) Excess potentially preventable outpatient 
                procedures and tests.--
                            ``(i) In general.--The term `excess 
                        potentially preventable outpatient procedures 
                        and tests' means, for an applicable healthcare 
                        delivery organization for an applicable 
                        historical period and with respect to 
                        potentially preventable outpatient procedures 
                        and tests identified under paragraph (2), for 
                        each risk class (as defined in clause (iii)) 
                        the difference between--
                                    ``(I) the expected number of 
                                beneficiaries with one or more 
                                potentially preventable outpatient 
                                procedures and tests for the applicable 
                                healthcare delivery organization based 
                                on the standard potentially preventable 
                                rate of potentially preventable 
                                outpatient procedures and tests for 
                                beneficiaries in each risk class (as 
                                defined in clause (ii)); and
                                    ``(II) the applicable healthcare 
                                delivery organization's actual number 
                                of beneficiaries with one or more 
                                potentially preventable outpatient 
                                procedures and tests in each risk class 
                                for the applicable historical period 
                                for beneficiaries assigned to the risk 
                                class.
                        Such difference may be a positive or negative 
                        number.
                            ``(ii) Standard potentially preventable 
                        rate of outpatient procedures and tests.--In 
                        carrying out clause (i)(I), the standard 
                        potentially preventable rate of outpatient 
                        procedures and tests shall be based on the 
                        average number of beneficiaries with one or 
                        more potentially preventable outpatient 
                        procedures and tests in each risk class, as 
                        defined in clause (iii) in the applicable 
                        historical period, multiplied by the payment 
                        reduction factor established under subsection 
                        (d)(3) for the applicable prospective period.
                            ``(iii) Risk adjustment.--In this 
                        subparagraph, the term `risk classes' means 
                        such exhaustive and mutually exclusive risk 
                        classes as the Secretary shall establish in 
                        order to apply a risk-adjustment methodology 
                        that meets the criteria in subsection (j)(2) 
                        and account for the age, reason for admission, 
                        severity of illness, and other risk factors 
                        identified by the Secretary. The risk class for 
                        a beneficiary shall be assigned based on the 
                        beneficiary's chronic illness burden and 
                        history of healthcare services for a time 
                        period of not less than 6 months preceding the 
                        beginning of the applicable historical period.
                    ``(B) Aggregate payments for excess potentially 
                preventable outpatient procedures and tests.--
                            ``(i) In general.--The term `aggregate 
                        payments for excess potentially preventable 
                        outpatient procedures and tests' means, for an 
                        applicable historical period, for all 
                        beneficiaries with one or more potentially 
                        preventable outpatient procedures and tests 
                        identified under paragraph (2), an amount equal 
                        to the amount determined under clause (ii).
                            ``(ii) Amount determined.--The amount 
                        determined under this clause, with respect to 
                        an applicable healthcare delivery organization 
                        and an applicable historical period, for 
                        potentially preventable outpatient procedures 
                        and tests identified under paragraph (2) is 
                        equal to the sum across all risk classes of the 
                        product of--
                                    ``(I) the excess potentially 
                                preventable outpatient procedures and 
                                tests (as defined in subparagraph (A)) 
                                for the risk class for the applicable 
                                healthcare delivery organization during 
                                the applicable historical period; and
                                    ``(II) the average payment per 
                                beneficiary of all potentially 
                                preventable outpatient procedures and 
                                tests for beneficiaries in the risk 
                                class (as determined under clause 
                                (iii)) for applicable healthcare 
                                delivery organizations during the 
                                applicable historical period.
                            ``(iii) Average payment per beneficiary of 
                        all potentially preventable outpatient 
                        procedures and tests.--The term `average 
                        payment per beneficiary of all potentially 
                        preventable outpatient procedures and tests' 
                        for a risk class means, for applicable 
                        healthcare delivery organizations for an 
                        applicable historical period, the average 
                        payment per beneficiary of all potentially 
                        preventable outpatient procedures and tests in 
                        the risk class.
            ``(2) Potentially preventable outpatient procedures and 
        tests.--For purposes of this subsection, the Secretary shall 
        select a methodology of identifying potentially preventable 
        outpatient procedures and tests that includes each procedure or 
        test that meets all of the following requirements:
                    ``(A) The procedure or test is provided or ordered 
                by a physician or other healthcare provider to 
                supplement or support the evaluation or treatment of a 
                beneficiary including a procedure, diagnostic test, 
                laboratory test, therapy service, or radiology service.
                    ``(B) The procedure or test may be overused in the 
                provision healthcare or treatment.
                    ``(C) The procedure or test is not for a 
                beneficiary with extensive comorbid disease or high 
                severity of illness that may necessitate frequent 
                monitoring with outpatient procedures and tests.
                    ``(D) The procedure or test meets criteria 
                applicable under subsection (j)(1) to the outcome 
                described in this subsection.
    ``(j) Selection of Methods for Identifying Potentially Preventable 
Outcomes and Method of Risk Adjustment.--
            ``(1) Selection criteria for method for identifying 
        potentially preventable outcomes.--The Secretary shall select a 
        methodology of identifying each of the potentially preventable 
        outcomes. For each type of potentially preventable outcome the 
        methodology selected shall meet the following criteria:
                    ``(A) Be comprehensive with a uniform structure.
                    ``(B) Have available a method of risk adjustment 
                that meets the criteria in paragraph (2).
                    ``(C) Be clinically meaningful having exclusions 
                for beneficiaries for whom the outcome is not 
                potentially preventable including those beneficiaries 
                with extensive comorbid disease or high severity of 
                illness.
                    ``(D) To the extent possible have been successfully 
                implemented in the payment organization of a State 
                Medicaid program or a major payer or be certified by an 
                entity with a contract under section 1890(a).
                    ``(E) Be open, transparent, and available for 
                review and comment.
                    ``(F) To the extent possible, be in the public 
                domain.
                    ``(G) If commercially available methods are the 
                only viable methods that meet the criteria in 
                subparagraphs (A), (B), (C), and (D), the Secretary may 
                select such commercial methods as long as such methods 
                meet the criteria in subparagraph (E).
            ``(2) Selection criteria for method of risk adjustment.--
        The Secretary shall select a methodology for risk adjusting the 
        rate of each of the potentially preventable outcomes. For each 
        type of potentially preventable outcome, the methodology for 
        risk adjustment shall meet the following criteria:
                    ``(A) The methodology is comprehensive with a 
                uniform structure.
                    ``(B) The methodology is clinically meaningful and 
                explicitly recognize severity of illness, chronic 
                illness burden, and patients with extensive comorbid 
                disease or high severity of illness.
                    ``(C) To the extent possible, the methodology has 
                been successfully implemented in payment under a State 
                Medicaid program or by a major payer or is certified by 
                an entity with a contract under section 1890(a).
                    ``(D) The methodology is open and transparent and 
                available for review and comment.
                    ``(E) To the extent possible, the methodology is in 
                the public domain.
                    ``(F) If commercially available methods are the 
                only viable methods that meet the criteria in 
                subparagraphs (A), (B), and (C), the Secretary may 
                select such commercial methods as long as such methods 
                meet the criteria in subparagraph (D).
    ``(k) Definitions.--In this section:
            ``(1) Applicable healthcare delivery organization.--The 
        term `applicable healthcare delivery organization' means a 
        Medicare Advantage Plan receiving payments under part C, health 
        home, accountable care organization, applicable hospital (as 
        defined in subparagraph (C)), ambulatory surgery center, 
        federally qualified health center, or other healthcare delivery 
        organization identified by the Secretary.
            ``(2) Applicable historical period.--The term `applicable 
        historical period' means, with respect to an applicable 
        healthcare delivery organization for a fiscal year, the most 
        recent 2-year period for which data from the organization are 
        available for purposes of this section.
            ``(3) Applicable hospital.--The term `applicable hospitals' 
        means a subsection (d) hospital (as defined in section 
        1886(d)(1)(B).
            ``(4) Applicable prospective period.--The term `applicable 
        prospective period' means--
                    ``(A) with respect to an organization, the fiscal 
                year in which the healthcare delivery organization 
                specific adjustment factor under subsection (a)(2) for 
                an applicable historical period applies to the payments 
                to the healthcare delivery organization; and
                    ``(B) with respect to healthcare professionals, the 
                year in which the geographic-specific potentially 
                preventable outcomes adjustment factor under subsection 
                (b)(2) for an applicable historical period applies to 
                payments to the professionals.
            ``(5) Potentially preventable outcomes.--The term 
        `potentially preventable outcomes' means inpatient potentially 
        preventable complications under subsection (e)(2), potentially 
        preventable readmissions under subsection (f)(2), potentially 
        preventable admissions under subsection (g)(2), potentially 
        preventable emergency room visits under subsection (h)(2), and 
        potentially preventable outpatient procedures and tests under 
        subsection (i)(2).''.
    (b) Reporting of Potentially Preventable Outcomes.--
            (1) Reporting to healthcare delivery organizations.--For 
        each applicable historical period, the Secretary of Health and 
        Human Services (in this section referred to as the 
        ``Secretary'') shall provide confidential reports to applicable 
        healthcare delivery organizations with respect to potentially 
        preventable outcomes. The confidential reports shall be 
        provided to a healthcare delivery organization at least 90 days 
        before the date of their release to the public regarding 
        potentially preventable outcomes of the healthcare delivery 
        organization.
            (2) Reporting health delivery organization specific 
        information.--
                    (A) In general.--The Secretary shall make 
                information available to the public regarding 
                potentially preventable outcomes of each applicable 
                healthcare delivery organization.
                    (B) Opportunity to review and submit corrections.--
                The Secretary shall ensure that an applicable 
                healthcare delivery organization has the opportunity to 
                review, and submit corrections for, the information to 
                be made public prior to such information being made 
                public.
                    (C) Web site posting.--Such information shall be 
                posted on the Hospital Compare Internet Web Site in an 
                easily understandable format.
    (c) Applicability to Medicaid.--The Secretary shall apply to State 
plans (or waivers) under title XIX of the Social Security Act 
regulations relating to payment adjustments for potentially preventable 
outcomes (as defined in section 1899B(k) of such Act) as appropriate 
for the Medicaid program. Such regulations shall be in effect no later 
than October 1, 2017.
    (d) Quality Improvement Grants.--
            (1) In general.--Subject to paragraph (4)(D), beginning in 
        fiscal year 2017 the Secretary shall award quality improvement 
        grants to eligible healthcare delivery organizations described 
        in paragraph (2) that meet the criteria established under 
        paragraph (3).
            (2) Eligible healthcare delivery organization.--For 
        purposes of this subsection for a fiscal year, an eligible 
        healthcare delivery organization is an applicable healthcare 
        delivery organization that has a healthcare delivery 
        organization-specific adjustment factor for the fiscal year (as 
        determined under section 1899B(a)(2) of the Social Security 
        Act, as added by subsection (a)), that is lower than the 
        healthcare delivery organization-specific adjustment factor 
        (under such section) for 75 percent of all other healthcare 
        delivery organizations in such fiscal year.
            (3) Criteria.--The Secretary shall establish criteria for 
        awarding grants under this subsection.
            (4) Limitations.--
                    (A) Use of grant funds.--A healthcare delivery 
                organization that applies for and receives a grant 
                under this subsection shall use such grant to implement 
                processes that lower the rate of potentially 
                preventable outcomes.
                    (B) Term of grant.--Grants under this subsection 
                shall be for 2 years.
                    (C) Reports.--A healthcare delivery organization 
                that applies for and receives a grant under this 
                subsection shall, not later than 30 months after the 
                date of receiving such grant, submit a report to the 
                Secretary on the processes funded by such grant and the 
                resulting impact on rates of potentially preventable 
                outcomes.
                    (D) Amount of grants.--The aggregate amount of 
                funds awarded as grants under this subsection for a 
                fiscal year shall not exceed 5 percent of the sum of 
                the composite aggregate payments for excess potentially 
                preventable outcomes for all healthcare delivery 
                organizations in the applicable historical period (as 
                determined under section 1899B(c)(1) of the Social 
                Security Act).
            (5) Authorization of appropriations.--There are authorized 
        to be appropriated to carry out this subsection such sums as 
        may be necessary for each of fiscal years 2017 through 2021.
    (e) GAO Report.--Not later than January 1, 2018, the Comptroller 
General of the United States shall submit to Congress a report on the 
impact of section 1899B of the Social Security Act, as added by 
subsection (a), on Medicare beneficiaries care, Medicare expenditures, 
and Medicare providers, including the quality of care furnished under 
the Medicare program.
    (f) Application of Definitions.--In this section, the terms 
``applicable healthcare delivery organization'', ``applicable 
historical period'', ``potentially preventable outcomes'' have the 
meanings given such terms in section 1899B(j) of the Social Security 
Act, as added by subsection (a).
                                 <all>