SECTION 1. SHORT TITLE.

    This Act may be cited as the ``ACO Improvement Act of 2016''.

SEC. 2. MEDICARE ACO PROGRAM IMPROVEMENTS.

    (a) Improving Outcomes Through Greater Beneficiary Engagement.--
            (1) In general.--Section 1899 of the Social Security Act 
        (42 U.S.C. 1395jjj) is amended by adding at the end the 
        following new subsection:
    ``(l) Improving Outcomes Through Greater Beneficiary Engagement.--
            ``(1) Use of beneficiary incentives.--Subject to approval 
        of the Secretary, the Secretary shall permit an ACO--
                    ``(A) to reduce or eliminate cost-sharing otherwise 
                applicable under part B for some or all primary care 
                services (as identified by the ACO) furnished by health 
                care professionals (including, as applicable, 
                professionals furnishing services through a rural 
                health clinic or Federally qualified health center) 
                within the network of the ACO; and
                    ``(B) to develop additional incentives to encourage 
                patient engagement and participation in their own 
                wellness.
        The cost of the incentives under this paragraph shall be borne 
        by the ACO and shall not affect the payments to the ACO under 
        subsection (d).
            ``(2) Fostering stronger patient-provider ties.--
                    ``(A) Permitting prospective assignment of 
                beneficiaries.--
                            ``(i) In general.--Subject to clause (ii), 
                        in carrying out subsection (c) with respect to 
                        any agreement with an ACO under this section, 
                        the ACO may elect under any such agreement 
                        prospective assignment of Medicare fee-for-
                        service beneficiaries before the beginning of a 
                        year to the ACO and a primary care ACO 
                        professional.
                            ``(ii) Beneficiary selection of primary 
                        care aco professionals.--The Secretary shall 
                        permit a beneficiary to select the primary care 
                        ACO professional within the ACO to which the 
                        beneficiary is assigned.
                    ``(B) Inclusion of aco information in welcome to 
                medicare visit and annual wellness visits.--The 
                Secretary may encourage a primary care ACO professional 
                to include, as part of the initial preventive physical 
                examination under section 1861(ww)(1) or personalized 
                prevention plan services under section 1861(hhh)(1) for 
                a Medicare fee-for-service beneficiary assigned to that 
                professional under this section, to provide the 
                beneficiary with information concerning the ACO program 
                under this section, including information on any cost-
                sharing reductions allowed under this section.
            ``(3) Moving from volume to value.--Subject to paragraph 
        (4)--
                    ``(A) Regulatory relief for moving to two-sided 
                risk.--In the case of an ACO that has elected a two-
                sided risk model (as provided for under regulations), 
                in addition to the authority provided under paragraph 
                (1), the Secretary shall provide the following 
                regulatory relief:
                            ``(i) 3-day prior hospitalization waiver 
                        for snf services.--Waiver of the 3-day prior 
                        hospitalization requirement for coverage of 
                        skilled nursing facility services.
                            ``(ii) Homebound requirement waiver for 
                        home health services.--Waiver of the homebound 
                        requirement for coverage of home health 
                        services.
                    ``(B) Improving care coordination through access to 
                telehealth.--
                            ``(i) Flexibility in furnishing telehealth 
                        services.--In applying section 1834(m) in the 
                        case of an ACO, the Secretary shall grant a 
                        waiver, and the ACO may elect, to have the 
                        limitations on originating site (under 
                        paragraph (4)(C) of such section) and on the 
                        use of store-and-forward technologies (under 
                        paragraph (1) of such section) not apply. The 
                        previous sentence shall not be construed as 
                        affecting the authority of the Secretary under 
                        subsection (f) to waive other provisions of 
                        such section.
                            ``(ii) Provision of remote monitoring in 
                        connection with home health services.--Nothing 
                        in this section shall be construed as 
                        preventing an ACO from paying for remote 
                        patient monitoring and home-based video 
                        conferencing services in connection with the 
                        provision of home health services (under 
                        conditions for which payment for such services 
                        would not be made under section 1895 for such 
                        services) in a manner that is financially not 
                        more expensive than the furnishing of a home 
                        health visit.
                    ``(C) Moving up risk track annually.--Each year of 
                an agreement period, the Secretary shall permit an ACO 
                to make an election to assume greater risk.
            ``(4) Discretionary revocation.--The Secretary may revoke, 
        at the Secretary's discretion, a waiver granted under paragraph 
        (3).
            ``(5) Provisions for sharing of internal cost savings.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, the Secretary shall 
                permit an ACO to distribute internal cost savings among 
                ACO participants pursuant to an internal cost savings 
                sharing arrangement if the arrangement meets the 
                requirements of subparagraph (B) and the ACO meets the 
                reporting requirements of subparagraph (C) with respect 
                to such arrangement.
                    ``(B) Requirements relating to design of 
                arrangement.--The requirements of this subparagraph for 
                an internal cost savings sharing arrangement of an ACO 
                are as follows:
                            ``(i) No reduction in medically necessary 
                        care.--ACO participants may not reduce or limit 
                        medically necessary items and services 
                        furnished to Medicare fee-for-service 
                        beneficiaries.
                            ``(ii) Voluntary participation.--
                        Participation by providers of services and 
                        suppliers in the arrangement is voluntary.
                            ``(iii) Transparency.--The arrangement is 
                        transparent and subject to audit by the 
                        Secretary.
                            ``(iv) Quality of care.--ACO participants 
                        participating in the arrangement meet quality 
                        performance standards established by the 
                        Secretary under subsection (b)(3).
                            ``(v) Payment methodology.--Distributions 
                        of internal cost savings under the arrangement 
                        is not based on the volume or value of 
                        referrals or business otherwise generated.
                    ``(C) Reporting requirements.--The requirements of 
                this subparagraph for an arrangement of an ACO is that 
                the ACO provides the following information to the 
                Secretary for purposes of evaluating the arrangement:
                            ``(i) Methodology.--The methodology for 
                        distributions of internal cost savings under 
                        the arrangement among all ACO participants, 
                        including the frequency of and the criteria for 
                        such distributions.
                            ``(ii) Care redesign.--A detailed 
                        explanation of how the arrangement will achieve 
                        improved quality and patient experience, as 
                        well as the anticipated cost savings.
                            ``(iii) Eligibility to participate in 
                        arrangement.--The criteria for participation by 
                        ACO participants, particularly professionals, 
                        in the arrangement.
                            ``(iv) Distribution plan.--A comprehensive 
                        plan for distributions of internal cost savings 
                        under the arrangement.
                    ``(D) Waivers.--The Secretary shall waive such 
                provisions of this title and title XI as may be 
                necessary to carry out this paragraph.
                    ``(E) Definitions.--In this paragraph:
                            ``(i) Internal cost savings sharing 
                        arrangement.--The term `internal cost savings 
                        sharing arrangement' means an arrangement among 
                        ACO participants of an ACO for the 
                        distributions of internal cost savings to such 
                        ACO participants, including to ACO 
                        professionals, solely from gains or savings 
                        that are a direct result of collaborative 
                        efforts among ACO participants of an ACO to 
                        improve the quality and efficiency of care 
                        furnished to Medicare fee-for-service 
                        beneficiaries, but does not include shared 
                        savings under subsection (d)(2).
                            ``(ii) Distribution of internal cost 
                        savings.--The term `distribution of internal 
                        cost savings' means a payment of a percentage 
                        of the gains or savings from an internal cost 
                        savings sharing arrangement to ACO 
                        participants.
                            ``(iii) ACO participants.--The term `ACO 
                        participants' means providers of services and 
                        suppliers participating in an ACO who 
                        voluntarily participate in an internal cost 
                        savings sharing arrangement under this 
                        paragraph.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply as if included in the enactment of section 3022 of 
        Public Law 111-148.
            (3) Conforming amendment.--Effective as if included in the 
        enactment of section 3021 of Public Law 111-148, the provisions 
        of section 1899(l)(5) of the Social Security Act (relating to 
        authority for distributions of internal cost savings under 
        internal cost savings sharing arrangements), as added by 
        paragraph (1), shall apply to participants in accountable care 
        organization payment and service delivery models (and other 
        appropriate models) tested pursuant to section 1115A of the 
        Social Security Act (42 U.S.C. 1315a).
    (b) Study and Report on Feasibility on Providing Electronic Access 
to Medicare Claims Data.--
            (1) Study.--The Secretary of Health and Human Services 
        shall conduct a study regarding the feasibility of establishing 
        a system of electronic access of providers of services and 
        suppliers to in-process and complete patient claims data. Such 
        system may be a modification of an existing database, such as 
        the Virtual Research Data Center. The study shall take into 
        account the measures needed to ensure the security and privacy 
        of beneficiary and provider information.
            (2) Report.--Not later than six months after the date of 
        the enactment of this Act, the Secretary shall submit to 
        Congress a report on such study. The Secretary shall include in 
        such report such recommendations as the Secretary deems 
        appropriate.
    (c) Assignment Taking Into Account Services of Non-Physician 
Practitioners in Cases of ACOs in Rural or Underserved Areas or 
Affiliated With an FQHC or Rural Health Clinic.--Section 1899(c) of the 
Social Security Act (42 U.S.C. 1395jjj(c)) is amended by inserting 
before the period at the end the following: ``, except that, for 
performance years beginning on or after January 1, 2017, in the case of 
an ACO that is located in a rural or medically underserved area or that 
is affiliated with a Federally qualified health center or rural health 
clinic, such determination shall be based on their utilization of 
primary care services provided under this title by any ACO 
professional''.
    (d) Permitting De Minimis Variation From Minimum Enrollment 
Requirement.--Section 1899(b)(2)(D) of the Social Security Act (42 
U.S.C. 1395jjj(b)(2)(D)) is amended by inserting before the period at 
the end the following: ``, except that the Secretary may permit an ACO 
with fewer than 5,000 participants by a de minimis number (not to 
exceed 100) to be eligible to continue to participate in cases where 
such fewer number does not negatively impact the ACO's participation in 
the program and the ACO meets other conditions to be so eligible''.
    (e) Payments for Shared Savings.--Section 1899(d)(2) of the Social 
Security Act (42 U.S.C. 1395jjj(d)(2)) is amended by adding at the end 
the following: ``For plan years beginning on or after January 1, 2017, 
the Secretary may use a sliding scale to increase by up to 10 
percentage points the appropriate percent otherwise applied under this 
paragraph for an ACO that achieves the median of quality performance 
standards, or achieves quality improvement scores above such median, 
established under subsection (b)(3). The Secretary shall not decrease 
such appropriate percent otherwise applied to an ACO because of the 
application of an increase under the previous sentence for another 
ACO.''.
    (f) Demonstration for Allowing Growth of HCC Scores.--Section 
1899(d)(1)(B)(ii) of the Social Security Act (42 U.S.C. 
1395jjj(d)(1)(B)(ii)) is amended by adding at the end the following: 
``In carrying out this subsection, the Secretary shall establish a 3-
year demonstration project that develops and applies a methodology, 
similar to the Medicare Advantage normalization factor applied under 
section 1853(a)(3), that allows growth of HCC scores for those who are 
continuously enrolled with an ACO. The Secretary shall submit to 
Congress a report on the results of such demonstration project.''.
    (g) Creating Incentives for ACO Development.--The Secretary of 
Health and Human Services may develop a mechanism to make permanent 
those ACO-related pilot programs, including the Advance Payment ACO 
Model, that have been successful. The Secretary shall submit to 
Congress a report on the mechanism and shall include in the report such 
recommendations, including such changes in legislation, as the 
Secretary deems appropriate.
ACO Improvement Act of 2016 This bill amends title XVIII (Medicare) of the Social Security Act to allow an accountable care organization (ACO) to: (1) reduce or eliminate certain cost-sharing for primary care services provided within the ACO's network; (2) develop incentives to encourage patient engagement; (3) elect prospective assignment of Medicare fee-for-service beneficiaries; and (4) if specified requirements are met, distribute internal cost savings. The Centers for Medicare &amp; Medicaid Services (CMS) shall waive specified regulatory requirements for ACOs that have elected to share in both savings and losses under a "two-sided risk model."  In addition, the bill: (1) requires CMS to waive, with respect to certain ACOs,&nbsp;specified limitations regarding telehealth services; (2) allows certain ACOs to depart slightly from specified minimum enrollment requirements; (3) requires CMS to establish a demonstration project for allowing growth of&nbsp;certain prospective risk&nbsp;scores; (4) and allows CMS to make permanent certain ACO-related pilot programs that have been successful.
ACO Improvement Act of 2016