[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6274 Introduced in House (IH)]

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114th CONGRESS
  2d Session
                                H. R. 6274

 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

                           September 28, 2016

 Mr. Paulsen (for himself, Mr. Marchant, and Mr. Kind) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 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 ``Hospital Outcomes 
Act of 2016''.
    (b) Findings.--Congress makes the following findings:
            (1) Payment penalties for hospital acquired conditions 
        under section 1886(p) of the Social Security Act, as added by 
        section 3008 of the Patient Protection and Affordable Care Act, 
        are based on a limited number of hospital acquired conditions 
        but are applied to all Medicare inpatient prospective payments 
        to a hospital (as defined in section 1886(d) of the Social 
        Security Act), resulting in payment penalties that are not 
        proportional to the financial impact of the hospital acquired 
        conditions. The method of risk adjustment used to determine the 
        hospital acquired conditions performance of hospitals does not 
        adequately account for the chronic illness burden and severity 
        of illness of Medicare beneficiaries.
            (2) Payment penalties for hospital readmissions under 
        section 1886(q) of the Social Security Act, as added by section 
        3025 of the Patient Protection and Affordable Care Act, are 
        based on a limited number of clinical conditions, including 
        readmissions that are not related to the prior discharge and 
        are not proportional to the overall financial impact of the 
        readmission performance of the hospital. The method of risk 
        adjustment used to determine the readmission performance of 
        hospitals does not adequately account for the chronic illness 
        burden and severity of illness of Medicare beneficiaries.
            (3) The payment penalties for hospital acquired conditions 
        and readmission should be restructured to be based on a 
        comprehensive and clinically credible definition of 
        potentially-avoidable complications and potentially-avoidable 
        readmissions, be based on the risk adjusted rate of occurrence 
        potentially-avoidable complications and potentially-avoidable 
        readmissions and include both payment penalties and bonuses 
        that are proportional to the actual financial impact of 
        potentially-avoidable complications and potentially-avoidable 
        readmissions.
            (4) The existing methods of risk adjustment used to 
        determine the quality of care performance of hospitals should 
        be restructured and replaced by a methodology that is composed 
        of exhaustive and mutually exclusive risk categories that are 
        clinically credible and explicitly recognize the severity of 
        illness and chronic illness burden of Medicare beneficiaries, 
        thereby accounting for patient characteristics that may impact 
        access to care.

SEC. 2. HOSPITAL OUTCOMES.

    (a) Payment Adjustments for Hospital Outcomes.--Section 1886 of the 
Social Security Act (42 U.S.C. 1395ww) is amended by adding at the end 
the following new subsection:
    ``(t) Hospital Outcomes.--
            ``(1) In general.--In the case of an applicable hospital 
        for an applicable prospective period beginning on or after 
        October 1, 2017--
                    ``(A) for each discharge of such hospital occurring 
                during such period, in addition to and after 
                application of any increase under paragraph (6) of 
                subsection (o) and any adjustment under paragraph (7) 
                of such subsection to the base operating DRG payment 
                amount (as defined in paragraph (7)(D) of such 
                subsection) that would otherwise apply to such hospital 
                during such period without application of this 
                subsection, such operating DRG payment amount shall be 
                adjusted by the potentially-avoidable outcome 
                adjustment factor described in paragraph (2) for the 
                hospital for such period; and
                    ``(B) the potentially-avoidable outcome adjustment 
                factor shall apply only with respect to the applicable 
                prospective period, and the Secretary shall not take 
                into account such adjustment factor in making payments 
                to hospitals under this section in a subsequent 
                applicable prospective period.
            ``(2) Potentially-avoidable outcome adjustment factor.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the potentially-avoidable outcome adjustment factor 
                described in this paragraph for an applicable hospital 
                for an applicable prospective period, subject to 
                subparagraph (B), is equal to 1.0 minus the 
                potentially-avoidable outcome performance fraction 
                determined under paragraph (3) for the hospital and 
                period.
                    ``(B) Hospital-specific cap and floor.--In no 
                circumstance may the potentially-avoidable outcome 
                adjustment factor for an applicable hospital for an 
                applicable prospective period under subparagraph (A) 
                be--
                            ``(i) for applicable prospective periods 
                        occurring in fiscal years 2018 through 2020, 
                        less than 0.97 or more than 1.03; and
                            ``(ii) for applicable prospective periods 
                        occurring in or after fiscal year 2021, less 
                        than 0.95 or more than 1.05.
            ``(3) Determination of potentially-avoidable outcome 
        performance fraction.--
                    ``(A) In general.--The potentially-avoidable 
                outcome performance fraction for an applicable hospital 
                for an applicable prospective period, subject to 
                subparagraph (C), is equal to the ratio of--
                            ``(i) the total hospital-specific financial 
                        impact, as described in subparagraph (B), for 
                        the hospital and data collection period with 
                        respect to such applicable prospective period; 
                        to
                            ``(ii) the aggregate amount of standardized 
                        payments (as defined in paragraph (4)(G)(ii)) 
                        made to the hospital during the data collection 
                        period with respect to such applicable 
                        prospective period.
                    ``(B) Total hospital-specific financial impact 
                described.--For purposes of subparagraph (A), the term 
                `total hospital-specific financial impact' means, with 
                respect to a hospital for an applicable prospective 
                period, the sum of the following:
                            ``(i) The financial impact determined in 
                        accordance with paragraph (4)(F) for such 
                        hospital and data collection period with 
                        respect to the performance category described 
                        in paragraph (5)(A) (relating to 
                        complications).
                            ``(ii) The financial impact determined in 
                        accordance with subsection (4)(F) for such 
                        hospital and data collection period with 
                        respect to the performance category described 
                        in paragraph (5)(B) (relating to readmissions).
                    ``(C) Budget neutrality of potentially-avoidable 
                outcome adjustment factor across all hospitals.--The 
                Secretary shall determine a budget neutrality rate 
                reduction fraction that, when applied in paragraph 
                (4)(B)(ii), will result in a potentially-avoidable 
                outcome factor determined under subparagraph (A) for an 
                applicable prospective period that reduces the total 
                payments under subsection (d) across all applicable 
                hospitals and all potentially-avoidable outcomes for 
                such period by an amount equal to the reduction in 
                payments under such subsection for such period that 
                would have resulted from the application of subsections 
                (p) and (q) if the amendments made by the Hospital 
                Outcomes Act of 2016 had not applied.
            ``(4) Process of determination of potentially-avoidable 
        outcomes performance; financial impact.--For purposes of 
        paragraph (3), the Secretary shall, for each performance 
        category described in paragraph (5) and each data collection 
        period that is with respect to an applicable prospective period 
        beginning on or after October 1, 2017, determine each of the 
        following:
                    ``(A) Nationwide-average rates.--With respect to 
                each risk category specified under paragraph (6)(B), 
                the ratio of--
                            ``(i) the number of discharges occurring 
                        among all applicable hospitals during such 
                        applicable data collection period that are with 
                        respect to such risk category and that involve 
                        the potentially-avoidable outcomes in such 
                        performance category; to
                            ``(ii) the number of applicable discharges 
                        among all applicable hospitals for such 
                        applicable data collection period and risk 
                        category.
                    ``(B) Nationwide target rates.--With respect to 
                each risk category specified under paragraph (6)(B), 
                the product of--
                            ``(i) subject to subparagraph (H), the 
                        ratio determined under subparagraph (A) for 
                        such period and risk category; and
                            ``(ii) the budget neutrality rate reduction 
                        fraction determined under paragraph (3)(C) for 
                        such period.
                    ``(C) Hospital-specific actual number.--With 
                respect to each applicable hospital and each such risk 
                category, the number of discharges occurring with 
                respect to such hospital during such applicable data 
                collection period that involve the potentially-
                avoidable outcomes in such performance category.
                    ``(D) Hospital-specific expected number.--With 
                respect to each applicable hospital, each applicable 
                data collection period, and each such risk category, 
                the number that is the product of--
                            ``(i) subject to subparagraph (H), the 
                        ratio determined under subparagraph (B) for 
                        such period and risk category; and
                            ``(ii) the number of applicable discharges 
                        of the hospital for such period and risk 
                        category.
                    ``(E) Hospital-specific potentially-avoidable 
                outcome performance.--With respect to each applicable 
                hospital and applicable data collection period, the 
                difference between--
                            ``(i) the sum of the numbers determined 
                        under subparagraph (C) for the hospital for 
                        such period for all risk categories; and
                            ``(ii) the sum of the numbers determined 
                        under subparagraph (D) for the hospital for 
                        such period for all risk categories.
                    ``(F) Financial impact.--
                            ``(i) With respect to each applicable 
                        hospital and applicable data collection period, 
                        the financial impact attributable to 
                        potentially-avoidable outcomes performance 
                        within such performance category, determined as 
                        the product of the following:
                                    ``(I) the difference calculated 
                                under subparagraph (E) for such 
                                hospital and period; and
                                    ``(II) the financial conversion 
                                factor determined in accordance with 
                                clause (ii) for the performance 
                                category.
                            ``(ii) Financial conversion factors.--For 
                        purposes of clause (i), the Secretary shall 
                        determine a financial conversion factor for the 
                        performance category that--
                                    ``(I) in the case of the 
                                performance category described in 
                                paragraph (5)(A), is, with respect to 
                                inpatient hospital services that are 
                                furnished with respect to a discharge, 
                                equal to the average amount of increase 
                                in the standardized payments for such 
                                inpatient hospital services for such 
                                discharge that is attributable to the 
                                potentially-avoidable complication; and
                                    ``(II) in the case of the 
                                performance category described in 
                                paragraph (5)(B), is, with respect to 
                                an initial discharge, equal to the 
                                average standardized payment for 
                                inpatient hospital services that are 
                                furnished with respect to a 
                                potentially-avoidable readmission 
                                following the initial discharge.
                    ``(G) Definitions.--For purposes of this section:
                            ``(i) Potentially-avoidable outcomes.--The 
                        term `potentially-avoidable outcomes' means, as 
                        applicable--
                                    ``(I) a potentially-avoidable 
                                complication within the category 
                                described in paragraph (5)(A); and
                                    ``(II) a potentially-avoidable 
                                readmission within the category 
                                described in paragraph (5)(B).
                            ``(ii) Standardized payments.--The term 
                        `standardized payment' means payment for 
                        inpatient hospital services under section 
                        1886(d) furnished by an applicable hospital 
                        that is adjusted to remove payment adjustments 
                        that are not directly related to the amount and 
                        type of services to be utilized for patient 
                        care (such as local or regional price 
                        differences, graduate indirect medical 
                        education payments, disproportionate share 
                        payments, and such other adjustments as may be 
                        determined by the Secretary).
                            ``(iii) Applicable discharges.--With 
                        respect to an applicable data collection period 
                        and risk category, the term `applicable 
                        discharges' means, in the case of--
                                    ``(I) the performance category 
                                described in paragraph (5)(A), 
                                discharges occurring during such 
                                applicable data collection period that 
                                are with respect to such risk category; 
                                and
                                    ``(II) the performance category 
                                described in paragraph (5)(B), 
                                discharges occurring during such 
                                applicable data collection period that 
                                are with respect to such risk category 
                                and that are not identified as 
                                potentially-avoidable readmissions 
                                under the methodology selected under 
                                paragraph (6)(A).
                    ``(H) Exception to use of nationwide-average 
                rates.--In the case that the methodology selected under 
                paragraph (6)(B) for such performance category does not 
                meet the criteria described in clause (iii) of such 
                paragraph, the Secretary shall--
                            ``(i) develop groups of hospitals based on 
                        the overall proportion of inpatients in such 
                        hospitals who are full-benefit dual eligible 
                        individuals (as defined in section 1935(c)(6));
                            ``(ii) compute, with respect to each such 
                        group and each risk category specified under 
                        paragraph (6)(B)--
                                    ``(I) the number of discharges 
                                occurring among all applicable 
                                hospitals in such group during such 
                                applicable data collection period that 
                                are with respect to such risk category 
                                and that involve the potentially-
                                avoidable outcomes in such performance 
                                category; to
                                    ``(II) the number of applicable 
                                discharges occurring among all 
                                applicable hospitals in such group for 
                                such applicable data collection period 
                                and risk category; and
                            ``(iii) treat each reference in this 
                        paragraph to the ratio determined under 
                        subparagraph (A) or (B), as applicable, for a 
                        period and risk category as a reference to the 
                        ratio determined under subparagraph (A) or (B), 
                        as applicable, for a group, period, and risk 
                        category.
            ``(5) Performance categories described.--The performance 
        categories described in this paragraph are the following 
        categories:
                    ``(A) Potentially-avoidable complications.--The 
                category of complications (referred to in this section 
                as `potentially-avoidable complications') that, with 
                respect to items and services furnished to an 
                individual entitled to benefits under part A in an 
                applicable hospital, meet all of the following 
                requirements:
                            ``(i) The complication occurs during the 
                        stay of the individual and was not present at 
                        the time of the admission of such individual to 
                        such hospital as an inpatient.
                            ``(ii) 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).
                            ``(iii) The complication is potentially 
                        avoidable with adequate care and treatment.
                            ``(iv) The complication is not a natural 
                        progression of the underlying illnesses of the 
                        individual that are present on admission of 
                        such individual to such hospital.
                            ``(v) The complication may be reasonably 
                        construed as related to the care rendered 
                        during the stay of the individual at the 
                        hospital.
                    ``(B) Potentially-avoidable readmissions.--
                            ``(i) In general.--The category of 
                        readmissions (referred to in this section as 
                        `potentially-avoidable readmissions') of 
                        individuals entitled to benefits under part A 
                        to any hospitals following a discharge 
                        (referred to in this section as an `initial 
                        discharge') of such individuals to an 
                        applicable hospital if the initial discharge 
                        and readmission involved satisfy all of the 
                        following requirements:
                                    ``(I) The readmission of the 
                                individual could reasonably have been 
                                prevented by--
                                            ``(aa) the provision of 
                                        appropriate care during the 
                                        episode of care ending in such 
                                        initial discharge that was 
                                        consistent with accepted 
                                        standards;
                                            ``(bb) adequate discharge 
                                        planning with respect to such 
                                        initial discharge;
                                            ``(cc) adequate post-
                                        discharge follow-up with 
                                        respect to such initial 
                                        discharge; or
                                            ``(dd) improved 
                                        coordination between the 
                                        providers furnishing the 
                                        inpatient or outpatient 
                                        hospital services during the 
                                        episode of care ending in such 
                                        initial discharge and the 
                                        providers furnishing care 
                                        during the post-discharge 
                                        period with respect to such 
                                        initial discharge.
                                    ``(II) The readmission is for a 
                                condition or procedure related to the 
                                episode of care ending in such initial 
                                discharge, including a readmission for 
                                a condition or procedure that is any of 
                                the following:
                                            ``(aa) The same (or a 
                                        closely related) condition or 
                                        procedure as the condition 
                                        addressed in, or the procedure 
                                        provided during the episode of 
                                        care ending in such initial 
                                        discharge.
                                            ``(bb) An infection or 
                                        other complication of care 
                                        provided during the episode of 
                                        care ending in such initial 
                                        discharge.
                                            ``(cc) A condition or 
                                        procedure indicative of a 
                                        failed procedure provided 
                                        during the episode of care 
                                        ending in such initial 
                                        discharge.
                                            ``(dd) An acute 
                                        decompensation of a coexisting 
                                        chronic disease that was 
                                        precipitated by the care 
                                        furnished during the episode of 
                                        care ending in such initial 
                                        discharge.
                                    ``(III) The readmission is not a 
                                documented readmission with respect to 
                                a documented discharge that was 
                                initiated by the individual contrary to 
                                medical advice provided to such 
                                individual during the episode of care 
                                with respect to such initial discharge.
                                    ``(IV) The readmission could not 
                                reasonably be considered a planned 
                                readmission.
                                    ``(V) The readmission occurs during 
                                the 30-day period following an 
                                inpatient discharge of such an 
                                individual from the applicable hospital 
                                with respect to such initial discharge.
                                    ``(VI) The readmission was not due 
                                to a traumatic injury that occurred 
                                after the episode of care ending in 
                                such initial discharge.
                                    ``(VII) The readmission does not 
                                fall under such other exclusions as the 
                                Secretary determines appropriate.
                            ``(ii) Definitions.--For purposes of this 
                        subsection:
                                    ``(I) Readmission.--The term 
                                `readmission' means a readmission that 
                                satisfies the criteria described in 
                                clause (i)(V).
                                    ``(II) Documented.--The term 
                                `documented' means, with respect to a 
                                readmission or discharge (as 
                                applicable) of an individual entitled 
                                to benefits under part A, that the 
                                circumstances of such readmission or 
                                discharge are documented in the medical 
                                record of the individual.
            ``(6) Selection of methods for identifying potentially-
        avoidable outcomes and method of risk adjustment.--
                    ``(A) Methods for identifying potentially-avoidable 
                outcomes.--The Secretary shall select a methodology for 
                identifying potentially-avoidable complications and a 
                methodology for identifying potentially-avoidable 
                readmissions, and shall specify the circumstances under 
                which such complications and such readmissions would be 
                considered potentially-avoidable. Each such methodology 
                shall meet the following criteria:
                            ``(i) The methodology shall provide--
                                    ``(I) in the case of potentially-
                                avoidable complications, a 
                                comprehensive identification of all 
                                conditions that could reasonably be 
                                considered a complication of care that 
                                meets the requirements under paragraph 
                                (5)(A) to be included as a potentially-
                                avoidable complication; and
                                    ``(II) in the case of potentially-
                                avoidable readmissions, a comprehensive 
                                identification of all initial 
                                discharges described in paragraph 
                                (5)(B) and corresponding readmissions 
                                described in such paragraph that each 
                                meet the requirements for such 
                                readmission to be included as a 
                                potentially-avoidable readmission.
                            ``(ii) To the extent possible, the 
                        methodology shall be a methodology that has 
                        been successfully implemented for the purpose 
                        of adjusting payments to hospitals by a State 
                        plan under title XIX or by a major commercial 
                        payer or be a methodology that has been 
                        certified by an entity with a contract under 
                        section 1890(a).
                            ``(iii) The methodology shall be open, 
                        transparent, and available for review and 
                        comment by the public.
                            ``(iv) The Secretary may select proprietary 
                        methodologies that meet the criteria in clauses 
                        (i) through (iii).
                    ``(B) Selection criteria for method of risk 
                adjustment.--For purposes of paragraph (4), the 
                Secretary shall, with respect to each category 
                described in a subparagraph of paragraph (5), select a 
                methodology for specifying risk categories and for 
                assigning individuals entitled to benefits under part A 
                to such categories, and shall so specify such risk 
                categories and so assign such individuals to such 
                categories. Each such methodology shall meet the 
                following criteria:
                            ``(i) The methodology shall result in an 
                        exhaustive and mutually exclusive list of risk 
                        categories.
                            ``(ii) The methodology shall be clinically 
                        credible and explicitly account for the 
                        severity of illness, chronic illness burden, 
                        and extensive comorbid diseases and high 
                        severity of illness of patients.
                            ``(iii) The methodology shall account for 
                        patient characteristics that may impact access 
                        to care.
                            ``(iv) The methodology shall assign a risk 
                        category to an individual based on the 
                        condition of the individual at the time of--
                                    ``(I) in the case of potentially-
                                avoidable complications, hospital 
                                admission; and
                                    ``(II) in the case of potentially-
                                avoidable readmissions, hospital 
                                discharge with respect to the initial 
                                discharge.
                            ``(v) To the extent possible, the 
                        methodology shall be a methodology that has 
                        been successfully implemented for the purpose 
                        of adjusting payments to hospitals by a State 
                        plan under title XIX or by a major commercial 
                        payer or be a methodology that has been 
                        certified by an entity with a contract under 
                        section 1890(a).
                            ``(vi) The methodology shall be open, 
                        transparent, and available for review and 
                        comment by the public.
                            ``(vii) The Secretary may select 
                        proprietary methodologies that meet the 
                        criteria in clauses (i) through (vi).
                    ``(C) Publication of specifications.--Not later 
                than 15 days prior to each applicable prospective year, 
                the Secretary shall make available, such as by publicly 
                posting on the Internet Web site of the Centers for 
                Medicare & Medicaid Services the annual updates to each 
                methodology selected under a subparagraph of this 
                paragraph.
            ``(7) Reporting by secretary.--
                    ``(A) Reports to hospitals.--For each data 
                collection period that is with respect to an applicable 
                prospective period beginning on or after October 1, 
                2017, the Secretary shall provide to each applicable 
                hospital, not later than the first day of such 
                applicable prospective period, a confidential report 
                with respect to the potentially-avoidable outcomes of 
                such hospital during such data collection period.
                    ``(B) Reports to public.--For each data collection 
                period that is with respect to an applicable 
                prospective period described in paragraph (1), the 
                Secretary shall, not later than 90 days after the first 
                day of such applicable prospective period, make 
                available to the public (including by posting on the 
                Hospital Compare Web site) in an easily understandable 
                format information regarding the performance of each 
                applicable hospital during such data collection period 
                with respect to potentially-avoidable outcomes.
            ``(8) Definitions.--In this subsection:
                    ``(A) Applicable hospital.--The term `applicable 
                hospital' means a subsection (d) hospital.
                    ``(B) Data collection period.--The term `data 
                collection period' means, with respect to an applicable 
                prospective period, a period specified by the Secretary 
                that is the most recent period for which data are 
                available for purposes of determining the potentially-
                avoidable outcome adjustment factor described in 
                paragraph (2) to be applied for such applicable 
                prospective period.
                    ``(C) Applicable prospective period.--The term 
                `applicable prospective period' means a fiscal year.
            ``(9) Limitation on judicial review.--There shall be no 
        administrative or judicial review under section 1869, section 
        1878, or otherwise of a potentially-avoidable outcome 
        adjustment factor applied under this section.''.
    (b) Conforming Amendments.--
            (1) Relationship to existing payments.--Section 1886(o) of 
        the Social Security Act (42 U.S.C. 1395ww(o)) is amended--
                    (A) in paragraph (6)(A), by inserting ``and before 
                application of subsection (t)'' after ``(7)(B)(i)''; 
                and
                    (B) in paragraph (7)(B)(i), by inserting ``, before 
                application of subsection (t),'' after ``The Secretary 
                shall''.
            (2) Sunsetting existing adjustment for complications.--
        Section 1886(p) of the Social Security Act (42 U.S.C. 
        1395ww(p)) is amended--
                    (A) in paragraph (1), by inserting ``(before fiscal 
                year 2018)'' after ``a subsequent fiscal year''; and
                    (B) in paragraph (5), by inserting ``(before fiscal 
                year 2018)'' after ``each subsequent fiscal year''.
            (3) Sunsetting existing adjustment for readmissions.--
        Section 1886(q) of the Social Security Act (42 U.S.C. 
        1395ww(q)) is amended--
                    (A) in paragraph (1), by inserting ``and ending 
                before October 1, 2017'' after ``October 1, 2012,'';
                    (B) in paragraph (3)(C)(iii), by inserting ``before 
                fiscal year 2018'' after ``and subsequent fiscal 
                years''; and
                    (C) in paragraph (5)(B), by inserting ``and ending 
                with fiscal year 2017'' after ``fiscal year 2015''.
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