[Congressional Record Volume 155, Number 12 (Wednesday, January 21, 2009)]
[Senate]
[Pages S723-S726]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN:
  S. 295. A bill to amend title XVIII of the Social Security Act to 
improve the quality and efficiency of the Medicare program through 
measurement of readmission rates and resource use and to develop a 
pilot program to provide episodic payments to organized groups of 
multispecialty and multilevel providers of services and suppliers for 
hospitalization episodes associated with select, high cost diagnoses; 
to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Medicare 
Quality and Payment Reform Act of 2009. This legislation will help 
improve the quality and efficiency of the Medicare program by analyzing 
readmission and resource use and adjusting Medicare payments 
accordingly. In addition, the legislation develops a large scale pilot 
project to allow for episodic payments to organized groups of 
multispecialty and multilevel providers for select, high cost 
diagnosis. Reforms such as these have been recommended by the non-
partisan Medicare Payment Advisory Commission or ``MedPAC,'' the 
Commonwealth Fund and many other experts. In their December 2008 Budget 
Options report, the Congressional Budget Office, CBO, estimates reforms 
such as these could result in more than 28 billion dollars in savings 
to the Federal Government over 10 years.
  For several years, growth in healthcare spending, including in the 
Medicare program, has far exceeded the rate of inflation for all other 
goods and services without a concomitant rise in health care quality. 
According to the 2007 report of the McKinsey Global Institute, 
``Accounting for the Costs of Healthcare in The United States,'' the 
U.S. spends almost half a trillion dollars more on healthcare than 
other similarly situated countries, when adjusted for population and 
income. Moreover, according to a 2008 Dartmouth report, total waste in 
the U.S. healthcare system accounts for approximately $700 billion. 
These data are startling and deeply troubling to me and many of my 
colleagues in the Congress. As we move to consider comprehensive 
healthcare reform legislation in the 111th Congress, it is critical 
that we consider bold and decisive reforms to incentivize quality and 
efficiency in the U.S. healthcare system.
  Many experts tell us that the present fee-for-service payment system 
does little to encourage the prevention of readmissions or control the 
volume of care and cost of services delivered. MedPAC, CBO, and others 
believe this fee-for-service distortion is a major driver of excess 
spending in the healthcare system. Consequently, per-beneficiary 
spending varies between regions by as much as one-third without any 
measurable difference in patient outcomes. In addition, a la carte 
health care delivery focuses on individual procedures and patient 
interactions without much regard for the integration of care and 
appropriate mix of services necessary.
  For example, MedPAC reports that within 30 days of discharge, 17.6 
percent of Medicare admissions are readmitted for which Medicare spent 
$15 billion in 2005. The Commonwealth Fund Commission on a High 
Performance Health System found that Medicare 30-day readmission rates 
varied from 14 percent to 22 percent with respect to the lowest and 
highest decile of states.
  MedPAC and other expert groups report that the bundling of Medicare 
payments around episodes of care will align financial incentives within 
the program to maximize quality and efficiency for Medicare 
beneficiaries. It is

[[Page S724]]

critical to note that such reforms not only lower overall healthcare 
costs but also have the potential to lower Medicare beneficiaries out 
of pocket expenses while improving their health. For example, the 
Medicare Participating Heart Bypass Center Demonstration conducted from 
1990 to 1996 explored the utility of payment bundling. In this 
demonstration, participating centers were reimbursed with a bundled 
payment for episodes of care related to heart bypass cases. The 
demonstration resulted in reduced spending on laboratory diagnostics, 
pharmacy services, intensive care, and unnecessary physician consults 
while still maintaining a high quality of care. In the end, the 
demonstration saved the Medicare program approximately 10 percent on 
cost of bypass treatments.

  There is considerable agreement in the health policy community about 
a move toward ``episodic'' or bundled payments. The 16th Commonwealth 
Fund/Modern Health Care Opinion Leaders Survey, released November 3, 
2008, found that more than \2/3\ respondents reported that the fee-for-
service system is not effective at encouraging high quality and 
efficient care. More than \3/4\ of respondents prefer a move toward 
bundled per patient payments. Shared accountability for resource use 
also was favored as a means for improving efficiency, and \2/3\ of the 
experts surveyed supported realigning provider payment incentives to 
improve efficiency and effectiveness.
  This legislation makes three broad reforms to the Medicare program 
leading to higher quality and more efficient care. First, the 
legislation requires the U.S. Department of Health and Human Services, 
HHS, to report on risk adjusted readmission rates and resource use to 
Medicare providers, and over time, to the public. Second, the 
legislation establishes risk-adjusted benchmarks based upon these data 
that, over time, will be utilized to adjust Medicare payments. Finally, 
the legislation institutes a voluntary ``episodic payment'' pilot 
program.
  Readmission will be defined by the Secretary of HHS and will include 
a time frame of at least 30 days between the initial diagnosis and 
readmission, insure that the readmission rate captures readmissions to 
any hospital and not be limited to the initial health care provider 
entity, and verify that the diagnosis for both initial and readmission 
are related. Within 1 year from enactment, HHS will be tasked with 
confidentially reporting to provider entities risk adjusted for 
readmission rates and risk adjusted resource use for select high-volume 
diagnosis-related groups, DRG, associated with high-rates of 
readmission. After 3 years, HHS will publically release these reports 
with an annual review of the list of DRGs reported. The data reported 
will be risk adjusted taking into account variations in health status 
and other patient characteristics. Physician's not reporting these data 
to HHS for analysis will be penalized; although physicians do have the 
ability to apply for hardship exceptions.
  The legislation requires HHS to establish benchmarks for risk 
adjusted readmission rates and resource utilization for a given DRG and 
within 2 years of enactment, report to Congress on methodologies used 
to develop such benchmarks. Three years from the date of enactment, the 
base operating DRG payment to hospitals not meeting the established 
benchmarks will be reduced by 1 percent or an amount that is 
proportionate to the number of readmissions exceeding the benchmark. 
The Secretary of HHS will devise a mechanism to allocate accountability 
among providers associated with the episode of care with regard to 
penalty distribution. The benchmark and penalty will be evaluated and 
updated annually.
  The legislation goes further and establishes a voluntary pilot 
program to allow for bundled episodic payments to organized groups of 
multispecialty and multilevel providers for select high cost 
interventions. Payments would be risk adjusted and would cover all 
Medicare Part A and B costs associated with a hospitalization episode 
including care delivered 30 days after discharge. Payments would be 
issued to the participating provider group which, in turn, would 
reimburse negotiated payments to all individual providers associated 
with episode of treatment. The pilot would include testing models in a 
variety of settings including rural and underserved areas. The initial 
pilot will begin 2 years from date of enactment and continue for a 
period of 5 years. If the pilot proves successful, the Secretary of HHS 
will have the authority to expand the payment mechanism to a larger set 
of providers.
  I urge my colleagues to join me in supporting this important piece of 
legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 295

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

     SECTION 1. SHORT TITLE.

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

     SEC. 2. FINDINGS.

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

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

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


      ``payment adjustment for readmission rates and resource use

       ``Sec. 1899.  (a) Reporting of Readmission Rates and 
     Resource Use.--
       ``(1) Annual review.--Beginning not later than 1 year after 
     the date of enactment of this section, the Secretary shall 
     conduct an annual review of readmission rates and resource 
     use for conditions selected by the Secretary under paragraph 
     (5)--
       ``(A) with respect to subsection (d) hospitals and 
     affiliated physicians (or similarly licensed providers of 
     services and suppliers); and
       ``(B) with respect to the program under this title.
       ``(2) Reporting.--

[[Page S725]]

       ``(A) To hospitals and affiliated physicians.--Beginning 
     not later than 1 year after the date of enactment of this 
     section, taking into consideration the results of the annual 
     review under paragraph (1), the Secretary shall provide 
     confidential reports to subsection (d) hospitals and to 
     affiliated physicians (or similarly licensed providers of 
     services and suppliers) that measure the readmission rates 
     and resource use for conditions selected by the Secretary 
     under paragraph (5).
       ``(B) To the public.--Beginning not later than 3 years 
     after such date of enactment, taking into consideration the 
     results of such annual review, the Secretary shall make 
     available to the public an annual report that measures the 
     readmission rates and resource use under this title for 
     conditions selected by the Secretary under paragraph (5). 
     Such annual reports shall, to the extent practicable, be 
     integrated into public reporting of data submitted under 
     section 1886(b)(3)(B)(viii) with respect to subsection (d) 
     hospitals and data submitted under section 1848(m) with 
     respect to eligible professionals.
       ``(3) Definition of readmission.--The Secretary shall 
     define readmission for purposes of this section. Such 
     definition shall--
       ``(A) include a time frame of at least 30 days between the 
     initial admission and the applicable readmission;
       ``(B) capture readmissions to any hospital (as defined in 
     section 1861(e)) or any critical access hospital (as defined 
     in section 1861(mm)(1)) and not be limited to readmissions to 
     the subsection (d) hospital of the initial admission; and
       ``(C) ensure that the diagnosis for both the initial 
     admission and the applicable readmission are related.
       ``(4) Penalties for non-reporting.--The Secretary shall 
     establish procedures for the collection of data necessary to 
     carry out this subsection. Such procedures shall--
       ``(A) subject to subparagraph (B), provide for the 
     imposition of penalties for subsection (d) hospitals and 
     affiliated physicians (or similarly licensed providers of 
     services and suppliers) that do not submit such data; and
       ``(B) include a hardship exceptions process for affiliated 
     physicians (and similarly licensed providers of services and 
     suppliers) who do not have the resources to participate 
     (except that such process may not apply to more than 20 
     percent of affiliated physicians (or similarly licensed 
     providers of services and suppliers)).
       ``(5) Selection of conditions.--
       ``(A) Initial selection.--The Secretary shall select 
     conditions for the reporting of readmission rates and 
     resource use under this subsection--
       ``(i) that have a high volume under this title; or
       ``(ii) that have high readmission rates under this title.
       ``(B) Updating conditions selected.--Not less frequently 
     than every 3 years, the Secretary shall review and update as 
     appropriate the conditions selected under subparagraph (A).
       ``(6) Time period of measurement.--The Secretary shall, as 
     appropriate and subject to the requirements of this 
     subsection, determine an appropriate time period for the 
     measurement of readmission rates and resource use for 
     purposes of this section.
       ``(7) Risk adjustment of data.--The Secretary shall make 
     appropriate adjustments to any data used in analyzing or 
     reporting readmission rates and resource use under this 
     section, including any data used to conduct the annual review 
     under paragraph (1), in the preparation of reports under 
     subparagraph (A) or (B) of paragraph (2), or in the 
     determination of whether a subsection (d) hospital or an 
     affiliated physician (or a similarly licensed provider of 
     services or supplier) has met the benchmarks established 
     under subsection (b)(1)(A)(i) to take into account variations 
     in health status and other patient characteristics.
       ``(8) Incorporation into quality reporting initiatives.--
     The Secretary shall, to the extent practicable, incorporate 
     readmission rates and resource use measurements into quality 
     reporting initiatives for other Medicare payment systems, 
     including such initiatives with respect to skilled nursing 
     facilities and home health agencies.
       ``(b) Payment Adjustment for Readmission Rates and Resource 
     Use.--
       ``(1) In general.--
       ``(A) Benchmarks.--
       ``(i) In general.--The Secretary shall establish benchmarks 
     for measuring the readmission rates and resource use of 
     subsection (d) hospitals and affiliated physicians (or 
     similarly licensed providers of services and suppliers) under 
     this section.
       ``(ii) Report to congress on methodologies used to 
     establish benchmarks.--Not later than 2 years after the date 
     of enactment of this section, the Secretary shall submit to 
     Congress a report on the methodologies used to establish the 
     benchmarks under clause (i).
       ``(iii) Risk adjustment of data.--In determining whether a 
     subsection (d) hospital has met the benchmarks established 
     under clause (i) for purposes of the payment adjustment under 
     this subsection, the Secretary shall provide for risk 
     adjustment of data in accordance with subsection (a)(7).
       ``(B) Payment adjustment.--Not later than 3 years after the 
     date of enactment of this section, in the case of a 
     subsection (d) hospital that the Secretary determines does 
     not meet 1 or more of the benchmarks established under 
     subparagraph (A)(i) during the time period of measurement, 
     the Secretary shall reduce the base operating DRG payment 
     amount (as defined in subparagraph (C)) for the subsection 
     (d) hospital for each discharge occurring in the succeeding 
     fiscal year by--
       ``(i) 1 percent or an amount that the Secretary determines 
     is proportionate to the number of readmissions of the 
     subsection (d) hospital which exceed the applicable benchmark 
     established under subparagraph (A)(i), whichever is greater; 
     or
       ``(ii) in the case where the Secretary updates the amount 
     of the payment adjustment under paragraph (3), such updated 
     amount.
       ``(C) Base operating drg payment amount defined.--
       ``(i) In general.--Except as provided in clause (ii), in 
     this subsection, the term `base operating DRG payment amount' 
     means, with respect to a subsection (d) hospital for a fiscal 
     year--

       ``(I) the payment amount that would otherwise be made under 
     section 1886(d) for a discharge if this subsection did not 
     apply; reduced by
       ``(II) any portion of such payment amount that is 
     attributable to payments under paragraphs (5)(A), (5)(B), 
     (5)(F), and (12) of such section 1886(d).

       ``(ii) Special rules for certain hospitals.--

       ``(I) Sole community hospitals.--In the case of a sole 
     community hospital, in applying clause (i)(I), the payment 
     amount that would otherwise be made under subsection (d) for 
     a discharge if this subsection did not apply shall be 
     determined without regard to subparagraphs (I) and (L) of 
     subsection (b)(3) of section 1886 and subparagraph (D) of 
     subsection (d)(5) of such section.
       ``(II) Hospitals paid under section 1814.--In the case of a 
     hospital that is paid under section 1814(b)(3), the term 
     `base operating DRG payment amount' means the payment amount 
     under such section.

       ``(2) Shared accountability.--The Secretary shall examine 
     ways to create shared accountability with providers of 
     services and suppliers associated with episodes of care, 
     including how any penalty could be distributed among such 
     providers of services and suppliers as appropriate and how to 
     avoid inappropriate gainsharing by such providers of services 
     and suppliers.
       ``(3) Annual update.--The Secretary shall annually update 
     the benchmarks established under paragraph (1)(A)(i) and the 
     payment adjustment under paragraph (1)(B) to further 
     incentivize improvements in readmission rates and resource 
     use.
       ``(4) Incorporation of new measures.--In the case where the 
     Secretary updates the conditions selected under subsection 
     (a)(5)(B), any new condition selected shall not be considered 
     in determining whether a subsection (d) hospital has met the 
     benchmarks established under paragraph (1)(A)(i) for purposes 
     of the payment adjustment under paragraph (1)(B) during the 
     period beginning on the date of the selection and ending 1 
     year after such date.''.
       (2) Conforming amendment.--Section 1886(d)(1)(A) of the 
     Social Security Act (42 U.S.C. 1395ww(d)(1)(A)), in the 
     matter preceding clause (i), is amended by striking ``section 
     1813'' and inserting ``sections 1813 and 1899''.
       (b) Voluntary Pilot Program for Bundled Payments for 
     Episodes of Treatment.--
       (1) Initial implementation.--
       (A) In general.--The Secretary of Health and Human Services 
     (in this subsection referred to as the ``Secretary'') shall 
     establish a pilot program to provide episodic payments to 
     hospitals and other organizing entities for items and 
     services associated with hospitalization episodes of Medicare 
     beneficiaries with respect to 1 or more conditions selected 
     under subparagraph (B).
       (B) Selection.--The Secretary shall initially implement the 
     pilot program for hospitalization episodes with respect to 
     conditions that have a high volume, high readmission rate, or 
     high rate of post-acute care under the Medicare program under 
     title XVIII of the Social Security Act (42 U.S.C. 1395 et 
     seq.) (as determined by the Secretary).
       (C) Payments.--
       (i) In general.--Under the pilot program, episodic payments 
     shall--

       (I) be risk adjusted; and
       (II) cover all costs under parts A and B of the Medicare 
     program associated with a hospitalization episode with 
     respect to the selected condition, which includes the period 
     beginning on the date of hospitalization and ending 30 days 
     after the date of discharge.

       (ii) Compatibility of payment mechanisms.--The Secretary 
     shall, to the extent feasible, ensure that the payment 
     mechanism under the pilot program functions with payment 
     mechanisms under the original Medicare fee for service 
     program under parts A and B of title XVIII of the Social 
     Security Act and under the Medicare Advantage program under 
     part C of such title.
       (iii) Process.--Under the pilot program, episodic payments 
     shall be made to a hospital or other organizing entity 
     participating in the pilot program. The participating 
     hospitals and other organizing entities shall make payments 
     to other providers of services and suppliers who furnished 
     items or services associated with the hospitalization episode 
     (in an amount negotiated between the participating hospital 
     and the provider of services or supplier).
       (iv) Savings.--The Secretary shall establish procedures to 
     ensure that the Secretary,

[[Page S726]]

     participating hospitals or other organizing entities, 
     providers of services, and suppliers share any savings 
     associated with higher efficiency care furnished under the 
     pilot program.
       (D) Inclusion of variety of providers of services and 
     suppliers.--In selecting providers of services and suppliers 
     to participate in the pilot program, the Secretary shall 
     establish criteria to ensure the inclusion of a variety of 
     providers of services and suppliers, including providers of 
     services and suppliers that serve a wide range of Medicare 
     beneficiaries, including Medicare beneficiaries located in 
     rural and urban areas and low-income Medicare beneficiaries.
       (E) Duration.--The Secretary shall conduct the pilot 
     program under this paragraph for a 5-year period.
       (F) Implementation.--The Secretary shall implement the 
     pilot program not later than 2 years after the date of 
     enactment of this Act.
       (G) Definition of organizing entity.--In this subsection, 
     the term ``organizing entity'' means an entity responsible 
     for the organization and administration of the furnishing of 
     items and services associated with a hospitalization episode 
     of a Medicare beneficiary with respect to 1 or more 
     conditions selected under subparagraph (B).
       (2) Expanded implementation.--
       (A) Establishment of thresholds for expansion.--The 
     Secretary shall, prior to the implementation of the pilot 
     program under paragraph (1), establish clear thresholds for 
     use in determining whether implementation of the pilot 
     program should be expanded under subparagraph (B).
       (B) Expanded implementation.--If the Secretary determines 
     the thresholds established under subparagraph (A) are met, 
     the Secretary may expand implementation of the pilot program 
     to additional providers of services, suppliers, and episodes 
     of treatment not covered under the pilot program as conducted 
     under paragraph (1), which may include the implementation of 
     the pilot program on a national basis.
       (3) Authorization of appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this subsection.

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