II 

109TH CONGRESS 

1ST SESSION S. 1356 

To amend title XVIII of the Social Security Act to provide incentives for 

the provision of high qaulity care under the medicare program. 

IN THE SENATE OF THE UNITED STATES 

JUNE 30, 2005 

Mr. GRASSLEY (for himself, Mr. BAUCUS, Mr. ENZI, and Mr. KENNEDY) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XVIII of the Social Security Act to provide 

incentives for the provision of high quality care under 

the medicare program. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU4 RITY ACT; REFERENCE TO SECRETARY; 

5 TABLE OF CONTENTS. 

6 (a) SHORT TITLE.—This Act may be cited as the 

7 ‘‘Medicare Value Purchasing Act of 2005’’. 

8 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex9 cept as otherwise specifically provided, whenever in this 
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1 Act an amendment is expressed in terms of an amendment 

2 to or repeal of a section or other provision, the reference 

3 shall be considered to be made to that section or other 

4 provision of the Social Security Act. 

5 (c) REFERENCE TO SECRETARY.—In this Act, the 

6 term ‘‘Secretary’’ means the Secretary of Health and 

7 Human Services. 

8 (d) TABLE OF CONTENTS.—The table of contents of 

9 this Act is as follows: 

Sec. 1. Short title; amendments to Social Security Act; reference to Secretary; 

table of contents. 

Sec. 2. Findings; purpose. 

TITLE I—MEASURING QUALITY AND EFFICIENCY OF CARE 

Sec. 101. Establishment of quality measurement systems for medicare valuebased purchasing programs. 

Sec. 102. MedPAC study and reports on the impact of medicare value-based 

purchasing programs. 

TITLE II—VALUE-BASED PURCHASING FOR HOSPITALS 

Subtitle A—PPS Hospitals 

Sec. 201. PPS hospital value-based purchasing program. 

Subtitle B—Critical Access Hospitals 

Sec. 211. MedPAC study and report regarding a value-based purchasing program for critical access hospitals. 

Sec. 212. Value-based purchasing demonstration program for critical access 

hospitals. 

TITLE III—VALUE-BASED PURCHASING FOR PHYSICIANS AND 

CERTAIN PRACTITIONERS 

Sec. 301. Physician and practitioner value-based purchasing program. 

Sec. 302. Demonstration project on data coordination through the use of health 

information technology. 

Sec. 303. Sense of the Senate regarding payments under medicare physician fee 

schedule. 

TITLE IV—VALUE-BASED PURCHASING FOR PLANS 

Subtitle A—Medicare Advantage Plans 

Sec. 401. Plan value-based purchasing program. 
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Subtitle B—Plans Offering Part D Prescription Drug Coverage 

Sec. 411. MedPAC study and report regarding a value-based purchasing program for plans offering part D prescription drug coverage. 

TITLE V—VALUE-BASED PURCHASING FOR PROVIDERS AND FACILITIES THAT PROVIDE SERVICES TO MEDICARE BENEFICIARIES WITH END STAGE RENAL DISEASE 

Sec. 501. End stage renal disease provider and facility value-based purchasing 

program. 

Sec. 502. Value-based purchasing under the demonstration of bundled case-mix 

adjusted payment system for ESRD services. 

Sec. 503. Chronic kidney disease demonstration projects. 

Sec. 504. MedPAC study and report regarding a value-based purchasing program for pediatric renal dialysis facilities. 

Sec. 505. MedPAC report on ESRD provider and facility value-based purchasing program. 

Sec. 506. Sense of the Senate regarding an update to the composite rate payment for dialysis services. 

TITLE VI—VALUE-BASED PURCHASING FOR HOME HEALTH 

AGENCIES 

Sec. 601. Home health agency value-based purchasing program. 

TITLE VII—VALUE-BASED PURCHASING FOR SKILLED NURSING 

FACILITIES 

Sec. 701. Requirement for skilled nursing facilities to report functional capacity 

of medicare residents upon admission and discharge. 

Sec. 702. HHS study on measures of quality for skilled nursing facilities; voluntary reporting of skilled nursing facility quality data. 

Sec. 703. MedPAC study and report regarding a value-based purchasing program for skilled nursing facilities. 

TITLE VIII—ADDITIONAL PROVISIONS 

Sec. 801. Exception to Federal anti-kickback and physician self referral laws 

for the provision of permitted support. 

Sec. 802. National health information pilot project. 

Sec. 803. Health care value project. 

Sec. 804. Demonstration project on data aggregation across all payors of health 

care. 

Sec. 805. GAO studies and reports on the accuracy and completeness of quality 

data. 

Sec. 806. HHS study and report regarding telehealth and telemedicine. 

1 SEC. 2. FINDINGS; PURPOSE. 

2 (a) FINDINGS.—Congress makes the following find3 ings: 
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1 (1) The United States pays more per capita for 

2 health care than any other developed nation, yet— 

3 (A) we rank 37th in health care quality ac4 cording to the World Health Organization; and 

5 (B) as many as 100,000 patients die each 

6 year in the United States as a result of medical 

7 errors. 

8 (2) The Institute of Medicine of the National 

9 Academy of Sciences has highlighted problems with 

10 our health care system in the areas of quality and 

11 patient safety, and has concluded that the United 

12 States should commit to building an information in13 frastructure to support health care delivery, quality 

14 measurement and improvement, consumer health, 

15 public accountability, research, education, and evi16 dence-based medicine. 

17 (3) The New England Journal of Medicine has 

18 published research in an article entitled ‘‘The Qual19 ity of Health Care Delivered to Adults in the United 

20 States’’ showing that adults in the United States re21 ceive recommended health care only about half of 

22 the time. 

23 (4) Health Affairs has published an article enti24 tled ‘‘Medicare Spending, the Physician Workforce, 
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1 and Beneficiaries’ Quality of Care’’ showing that 

2 more care is not necessarily better care. 

3 (5) Duke University has published a survey 

4 showing that 65 percent of United States business 

5 leaders, unlike their European and Asian counter6 parts, feel that it is very important for Congress to 

7 address the cost of health care. 

8 (6) The Midwest Business Group on Health has 

9 found that inefficient resource use in health care 

10 represents more than 30 percent of health care 

11 spending in the United States. 

12 (7) Payment policies under the medicare pro13 gram under title XVIII of the Social Security Act do 

14 not include mechanisms designed to improve the 

15 quality of care. 

16 (8) The medicare program should reward health 

17 care providers who show that they are delivering 

18 high quality health care and that they are achieving 

19 improvements in the quality of care delivered to 

20 their patients. 

21 (9) The medicare program should promote the 

22 adoption of health information technology, which can 

23 enhance the quality of health care services, prevent 

24 medical errors, and enable greater efficiency of 

25 health care delivery with improved outcomes. 
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1 (10) Reimbursement for items and services fur2 nished under the medicare program should be based 

3 on a value-based purchasing system. 

4 (b) PURPOSE.—The purpose of this Act is to require 

5 the Secretary of Health and Human Services to develop 

6 and implement value-based purchasing programs under 

7 the medicare program in order to improve the quality and 

8 efficiency of health care. 

9 TITLE I—MEASURING QUALITY 

10 AND EFFICIENCY OF CARE 

11 SEC. 101. ESTABLISHMENT OF QUALITY MEASUREMENT 

12 SYSTEMS FOR MEDICARE VALUE-BASED PUR13 CHASING PROGRAMS. 

14 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et 

15 seq.) is amended— 

16 (1) by redesignating part E as part F; and 

17 (2) by inserting after part D the following new 

18 part: 

19 ‘‘PART E—VALUE-BASED PURCHASING

20 ‘‘QUALITY MEASUREMENT SYSTEMS FOR VALUE-BASED

21 PURCHASING PROGRAMS

22 ‘‘SEC. 1860E–1. (a) ESTABLISHMENT.— 

23 ‘‘(1) IN GENERAL.—The Secretary shall develop 

24 quality measurement systems for purposes of pro25 viding value-based payments to— 
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1 ‘‘(A) hospitals pursuant to section 1860E– 

2 2; 

3 ‘‘(B) physicians and practitioners pursuant 

4 to section 1860E–3; 

5 ‘‘(C) plans pursuant to section 1860E–4; 

6 ‘‘(D) end stage renal disease providers and 

7 facilities pursuant to section 1860E–5; and 

8 ‘‘(E) home health agencies pursuant to 

9 section 1860E–6. 

10 ‘‘(2) QUALITY.—The systems developed under 

11 paragraph (1) shall measure the quality of the care 

12 furnished by the provider involved. 

13 ‘‘(3) HIGH QUALITY HEALTH CARE DEFINED.— 

14 In this part, the term ‘high quality health care’ 

15 means health care that is safe, effective, patient-cen16 tered, timely, equitable, efficient, necessary, and ap17 propriate. 

18 ‘‘(b) REQUIREMENTS FOR SYSTEMS.—Under each 

19 quality measurement system described in subsection 

20 (a)(1), the Secretary shall do the following: 

21 ‘‘(1) MEASURES.— 

22 ‘‘(A) IN GENERAL.—Subject to subpara23 graph (B), the Secretary shall select measures 

24 of quality to be used by the Secretary under 

25 each system. 
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1 ‘‘(B) REQUIREMENTS.—In selecting the 

2 measures to be used under each system pursu3 ant to subparagraph (A), the Secretary shall, to 

4 the extent feasible, ensure that— 

5 ‘‘(i) such measures are evidence6 based, reliable and valid, and feasible to 

7 collect and report; 

8 ‘‘(ii) measures of process, structure, 

9 outcomes, beneficiary experience, effi10 ciency, and equity are included; 

11 ‘‘(iii) measures of overuse and 

12 underuse of health care items and services 

13 are included; 

14 ‘‘(iv)(I) at least 1 measure of health 

15 information technology infrastructure that 

16 enables the provision of high quality health 

17 care and facilitates the exchange of health 

18 information, such as the use of one or 

19 more elements of a qualified health infor20 mation system (as defined in subparagraph 

21 (E)), is included during the first year each 

22 system is implemented; and 

23 ‘‘(II) additional measures of health in24 formation technology infrastructure are in25 cluded in subsequent years; 
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1 ‘‘(v) in the case of the system that is 

2 used to provide value-based payments to 

3 hospitals under section 1860E–2, by not 

4 later than January 1, 2008, at least 5 

5 measures that take into account the unique 

6 characteristics of small hospitals located in 

7 rural areas and frontier areas are included; 

8 and 

9 ‘‘(vi) measures that assess the quality 

10 of care furnished to frail individuals over 

11 the age of 75 and to individuals with mul12 tiple complex chronic conditions are in13 cluded. 

14 ‘‘(C) REQUIREMENT FOR COLLECTION OF

15 DATA ON A MEASURE FOR 1 YEAR PRIOR TO

16 USE UNDER THE SYSTEMS.—Data on any 

17 measure selected by the Secretary under sub18 paragraph (A) must be collected by the Sec19 retary for at least a 12-month period before 

20 such measure may be used to determine wheth21 er a provider receives a value-based payment 

22 under a program described in subsection (a)(1). 

23 ‘‘(D) AUTHORITY TO VARY MEASURES.— 

24 ‘‘(i) UNDER SYSTEM APPLICABLE TO

25 HOSPITALS.—In the case of the system ap-
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1 plicable to hospitals under section 1860E– 

2 2, the Secretary may vary the measures se3 lected under subparagraph (A) by hospital 

4 depending on the size of, and the scope of 

5 services provided by, the hospital. 

6 ‘‘(ii) UNDER SYSTEM APPLICABLE TO

7 PHYSICIANS AND PRACTITIONERS.—In the 

8 case of the system applicable to physicians 

9 and practitioners under section 1860E–3, 

10 the Secretary may vary the measures se11 lected under subparagraph (A) by physi12 cian or practitioner depending on the spe13 cialty of the physician, the type of practi14 tioner, or the volume of services furnished 

15 to beneficiaries by the physician or practi16 tioner. 

17 ‘‘(iii) UNDER SYSTEM APPLICABLE TO

18 ESRD PROVIDERS AND FACILITIES.—In the 

19 case of the system applicable to providers 

20 of services and renal dialysis facilities 

21 under section 1860E–5, the Secretary may 

22 vary the measures selected under subpara23 graph (A) by provider or facility depending 

24 on the type of, the size of, and the scope 
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1 of services provided by, the provider or fa2 cility. 

3 ‘‘(iv) UNDER SYSTEM APPLICABLE TO

4 HOME HEALTH AGENCIES.—In the case of 

5 the system applicable to home health agen6 cies under section 1860E–6, the Secretary 

7 may vary the measures selected under sub8 paragraph (A) by agency depending on the 

9 size of, and the scope of services provided 

10 by, the agency. 

11 ‘‘(E) QUALIFIED HEALTH INFORMATION

12 SYSTEM DEFINED.—For purposes of subpara13 graph (B)(iv)(I), the term ‘qualified health in14 formation system’ means a computerized sys15 tem (including hardware, software, and train16 ing) that— 

17 ‘‘(i) protects the privacy and security 

18 of health information and properly 

19 encrypts such health information; 

20 ‘‘(ii) maintains and provides access to 

21 patients’ health records in an electronic 

22 format; 

23 ‘‘(iii) incorporates decision support 

24 software to reduce medical errors and en25 hance health care quality; 
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1 ‘‘(iv) is consistent with data standards 

2 and certification processes recommended 

3 by the Secretary; 

4 ‘‘(v) allows for the reporting of quality 

5 measures; and 

6 ‘‘(vi) includes other features deter7 mined appropriate by the Secretary. 

8 ‘‘(2) WEIGHTS OF MEASURES.— 

9 ‘‘(A) IN GENERAL.—The Secretary shall 

10 assign weights to the measures used by the Sec11 retary under each system. 

12 ‘‘(B) CONSIDERATION.—If the Secretary 

13 determines appropriate, in assigning the 

14 weights under subparagraph (A)— 

15 ‘‘(i) measures of clinical effectiveness 

16 shall be weighted more heavily than meas17 ures of beneficiary experience; and 

18 ‘‘(ii) measures of risk adjusted out19 comes shall be weighted more heavily than 

20 measures of process; and 

21 ‘‘(3) RISK ADJUSTMENT.—The Secretary shall 

22 establish procedures, as appropriate, to control for 

23 differences in beneficiary health status and bene24 ficiary characteristics. To the extent feasible, such 
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1 procedures may be based on existing models for con2 trolling for such differences. 

3 ‘‘(4) MAINTENANCE.— 

4 ‘‘(A) IN GENERAL.—The Secretary shall, 

5 as determined appropriate, but not more often 

6 than once each 12-month period, update each 

7 system, including through— 

8 ‘‘(i) the addition of more accurate and 

9 precise measures under the systems and 

10 the retirement of existing outdated meas11 ures under the system; 

12 ‘‘(ii) the refinement of the weights as13 signed to measures under the system; and 

14 ‘‘(iii) the refinement of the risk ad15 justment procedures established pursuant 

16 to paragraph (3) under the system. 

17 ‘‘(B) UPDATE SHALL ALLOW FOR COM18 PARISON OF DATA.—Each update under sub19 paragraph (A) of a quality measurement system 

20 shall allow for the comparison of data from one 

21 year to the next for purposes of providing 

22 value-based payments under the programs de23 scribed in subsection (a)(1). 

24 ‘‘(5) USE OF MOST RECENT QUALITY DATA.— 
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1 ‘‘(A) IN GENERAL.—Except as provided in 

2 subparagraph (B), the Secretary shall use the 

3 most recent quality data with respect to the 

4 provider involved that is available to the Sec5 retary. 

6 ‘‘(B) INSUFFICIENT DATA DUE TO LOW

7 VOLUME.—If the Secretary determines that 

8 there is insufficient data with respect to a 

9 measure or measures because of a low number 

10 of services provided, the Secretary may aggre11 gate data across more than 1 fiscal or calendar 

12 year, as the case may be. 

13 ‘‘(c) REQUIREMENTS FOR DEVELOPING AND UPDAT14 ING THE SYSTEMS.—In developing and updating each 

15 quality measurement system under this section, the Sec16 retary shall— 

17 ‘‘(1) take into account the quality measures de18 veloped by nationally recognized quality measure19 ment organizations, researchers, health care provider 

20 organizations, and other appropriate groups; 

21 ‘‘(2) consult with, and take into account the 

22 recommendations of, the entity that the Secretary 

23 has an arrangement with under subsection (e); 

24 ‘‘(3) consult with provider-based groups and 

25 clinical specialty societies; 
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1 ‘‘(4) take into account existing quality measure2 ment systems that have been developed through a 

3 rigorous process of validation and with the involve4 ment of entities and persons described in subsection 

5 (e)(2)(B); and 

6 ‘‘(5) take into account— 

7 ‘‘(A) each of the reports by the Medicare 

8 Payment Advisory Commission that are re9 quired under the Medicare Value Purchasing 

10 Act of 2005; 

11 ‘‘(B) the results of— 

12 ‘‘(i) the demonstrations required 

13 under such Act; 

14 ‘‘(ii) the demonstration program 

15 under section 1866A; 

16 ‘‘(iii) the demonstration program 

17 under section 1866C; and 

18 ‘‘(iv) any other demonstration or pilot 

19 program conducted by the Secretary relat20 ing to measuring and rewarding quality 

21 and efficiency of care; and 

22 ‘‘(C) the report by the Institute of Medi23 cine of the National Academy of Sciences under 

24 section 238(b) of the Medicare Prescription 
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1 Drug, Improvement, and Modernization Act of 

2 2003 (Public Law 108–173). 

3 ‘‘(d) REQUIREMENTS FOR IMPLEMENTING THE SYS4 TEMS.—In implementing each quality measurement sys5 tem under this section, the Secretary shall consult with 

6 entities— 

7 ‘‘(1) that have joined together to develop strate8 gies for quality measurement and reporting, includ9 ing the feasibility of collecting and reporting mean10 ingful data on quality measures; and 

11 ‘‘(2) that involve representatives of health care 

12 providers, health plans, consumers, employers, pur13 chasers, quality experts, government agencies, and 

14 other individuals and groups that are interested in 

15 quality of care. 

16 ‘‘(e) ARRANGEMENT WITH AN ENTITY TO PROVIDE

17 ADVICE AND RECOMMENDATIONS.— 

18 ‘‘(1) ARRANGEMENT.—On and after July 1, 

19 2006, the Secretary shall have in place an arrange20 ment with an entity that meets the requirements de21 scribed in paragraph (2) under which such entity 

22 provides the Secretary with advice on, and rec23 ommendations with respect to, the development and 

24 updating of the quality measurement systems under 
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1 this section, including the assigning of weights to 

2 the measures under subsection (b)(2). 

3 ‘‘(2) REQUIREMENTS DESCRIBED.—The re4 quirements described in this paragraph are the fol5 lowing: 

6 ‘‘(A) The entity is a private nonprofit enti7 ty governed by an executive director and a 

8 board. 

9 ‘‘(B) The members of the entity include 

10 representatives of— 

11 ‘‘(i)(I) health plans and providers re12 ceiving reimbursement under this title for 

13 the provision of items and services, includ14 ing health plans and providers with experi15 ence in the care of the frail elderly and in16 dividuals with multiple complex chronic 

17 conditions; or 

18 ‘‘(II) groups representing such health 

19 plans and providers; 

20 ‘‘(ii) groups representing individuals 

21 receiving benefits under this title; 

22 ‘‘(iii) purchasers and employers or 

23 groups representing purchasers or employ24 ers; 
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1 ‘‘(iv) organizations that focus on qual2 ity improvement as well as the measure3 ment and reporting of quality measures; 

4 ‘‘(v) State government health pro5 grams; 

6 ‘‘(vi) persons skilled in the conduct 

7 and interpretation of biomedical, health 

8 services, and health economics research 

9 and with expertise in outcomes and effec10 tiveness research and technology assess11 ment; and 

12 ‘‘(vii) persons or entities involved in 

13 the development and establishment of 

14 standards and certification for health in15 formation technology systems and clinical 

16 data. 

17 ‘‘(C) The membership of the entity is rep18 resentative of individuals with experience 

19 with— 

20 ‘‘(i) urban health care issues; 

21 ‘‘(ii) safety net health care issues; and 

22 ‘‘(iii) rural and frontier health care 

23 issues. 

24 ‘‘(D) The entity does not charge a fee for 

25 membership for participation in the work of the 
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1 entity related to the arrangement with the Sec2 retary under paragraph (1). If the entity does 

3 require a fee for membership for participation 

4 in other functions of the entity, there shall be 

5 no linkage between such fee and participation 

6 in the work of the entity related to such ar7 rangement with the Secretary. 

8 ‘‘(E) The entity— 

9 ‘‘(i) permits any member described in 

10 subparagraph (B) to vote on matters of 

11 the entity related to the arrangement with 

12 the Secretary under paragraph (1); and 

13 ‘‘(ii) ensures that such members have 

14 an equal vote on such matters . 

15 ‘‘(F) With respect to matters related to the 

16 arrangement with the Secretary under para17 graph (1), the entity conducts its business in an 

18 open and transparent manner and provides the 

19 opportunity for public comment. 

20 ‘‘(G) The entity operates as a voluntary 

21 consensus standards setting organization as de22 fined for purposes of section 12(d) of the Na23 tional Technology Transfer and Advancement 

24 Act of 1995 (Public Law 104–113) and Office 

25 of Management and Budget Revised Circular 
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1 A–119 (published in the Federal Register on 

2 February 10, 1998). 

3 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.— 

4 For the purpose of carrying out the provisions of 

5 this subsection, there are authorized to be appro6 priated— 

7 ‘‘(A) for each of the fiscal years 2006 and 

8 2007, $3,000,000; and 

9 ‘‘(B) for fiscal year 2008 and each subse10 quent fiscal year, an amount equal to the sum 

11 of— 

12 ‘‘(i) $3,000,000; and 

13 ‘‘(ii) such amount multiplied by the 

14 percentage (if any) by which the average of 

15 the Consumer Price Index for all urban 

16 consumers (United States city average) for 

17 the 12-month period ending with June of 

18 the calendar year in which such fiscal year 

19 begins exceeds such average for the 12- 

20 month period ending with June 2006.’’. 

21 (b) CONFORMING REFERENCES TO PREVIOUS PART

22 E.—Any reference in law (in effect before the date of the 

23 enactment of this Act) to part E of title XVIII of the So24 cial Security Act is deemed a reference to part F of such 

25 title (as in effect after such date). 
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1 SEC. 102. MEDPAC STUDY AND REPORTS ON THE IMPACT 

2 OF MEDICARE VALUE-BASED PURCHASING 

3 PROGRAMS. 

4 (a) STUDY.—The Medicare Payment Advisory Com5 mission shall conduct a study on how the medicare value6 based purchasing programs under part E of title XVIII 

7 of the Social Security Act, as added by this Act, will im8 pact medicare beneficiaries, medicare providers, and the 

9 Federal Hospital Insurance Trust Fund and the Federal 

10 Supplementary Medical Insurance Trust Fund under sec11 tions 1817 and 1841, respectively, of the Social Security 

12 Act (42 U.S.C. 1395i; 1395t), including how such pro13 grams will impact the access of such beneficiaries to items 

14 and services under the medicare program and the volume 

15 and utilization of such items and services. 

16 (b) REPORTS.— 

17 (1) INITIAL REPORT.— 

18 (A) IN GENERAL.—Not later than March 

19 1, 2008, the Commission shall submit a report 

20 to Congress and the Secretary on the study 

21 conducted under subsection (a). 

22 (B) CONTENTS.—The report submitted 

23 under subparagraph (A) shall include— 

24 (i) an analysis of the impact of the 

25 data collection and submission and report26 ing requirements under the amendments 
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1 made by this Act on the quality of care 

2 under the medicare program, including the 

3 impact of such requirements on— 

4 (I) subsection (d) hospitals (as 

5 defined in section 1886(d)(1)(B) of 

6 the Social Security Act (42 U.S.C. 

7 1395w(d)(1)(B)) with a low number 

8 of inpatient beds or a low volume of 

9 discharges in a year; and 

10 (II) physicians with a low num11 ber of patient encounters in a year; 

12 (ii) a detailed description of issues for 

13 the Secretary to consider in implementing 

14 and updating the medicare value-based 

15 purchasing programs under part E of title 

16 XVIII of such Act and recommendations 

17 on such issues; and 

18 (iii) recommendations for such legisla19 tion and administrative actions as the 

20 Commission considers appropriate. 

21 (2) INTERIM AND FINAL REPORT.— 

22 (A) IN GENERAL.—Not later than March 

23 1, 2011, and June 1, 2012, the Commission 

24 shall submit a report to Congress and the Sec-
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1 retary on the study conducted under subsection 

2 (a). 

3 (B) CONTENTS.—The reports submitted 

4 under subparagraph (A) shall include— 

5 (i) an update on the items described 

6 in clauses (i) and (ii) of paragraph (1)(B); 

7 (ii) an analysis of the impact of the 

8 payment changes on providers under the 

9 medicare program by reason of the amend10 ments made by this Act; and 

11 (iii) recommendations for such legisla12 tion and administrative actions as the 

13 Commission considers appropriate. 

14 TITLE II—VALUE-BASED 

15 PURCHASING FOR HOSPITALS 

16 Subtitle A—PPS Hospitals 

17 SEC. 201. PPS HOSPITAL VALUE-BASED PURCHASING PRO18 GRAM. 

19 (a) VOLUNTARY SUBMISSION OF HOSPITAL QUALITY

20 DATA.— 

21 (1) UPDATE FOR HOSPITALS THAT SUBMIT

22 QUALITY DATA.—Section 1886(b)(3)(B) (42 U.S.C. 

23 1395ww(b)(3)(B)) is amended— 

24 (A) in clause (vii)— 
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1 (i) in subclause (I), by striking ‘‘for 

2 each of fiscal years 2005 through 2007’’ 

3 and inserting ‘‘for fiscal years 2005 and 

4 2006’’; and 

5 (ii) in subclause (II), by striking 

6 ‘‘Each’’ and inserting ‘‘For fiscal years 

7 2005 and 2006, each’’; and 

8 (B) by adding at the end the following new 

9 clause: 

10 ‘‘(viii)(I) For purposes of clause (i)(XX), for fiscal 

11 year 2007 and each subsequent fiscal year, in the case 

12 of a subsection (d) hospital that does not submit data in 

13 accordance with subclause (II) with respect to such a fis14 cal year, the applicable percentage increase under such 

15 clause for such fiscal year shall be reduced by 2 percentage 

16 points. Such reduction shall apply only with respect to the 

17 fiscal year involved, and the Secretary shall not take into 

18 account such reduction in computing the applicable per19 centage increase under clause (i)(XX) for a subsequent 

20 fiscal year. 

21 ‘‘(II) For fiscal year 2007 and each subsequent fiscal 

22 year, each subsection (d) hospital shall submit to the Sec23 retary such data that the Secretary determines is appro24 priate for the measurement of health care quality, includ25 ing data necessary for the operation of the PPS hospital 
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1 value-based purchasing program under section 1860E–2. 

2 Such data shall be submitted in a form and manner, and 

3 at a time, specified by the Secretary for purposes of this 

4 clause. 

5 ‘‘(III) The Secretary shall establish procedures for 

6 making data submitted under subclause (II) available to 

7 the public in a clear and understandable form. Such proce8 dures shall ensure that a subsection (d) hospital has the 

9 opportunity to review the data that is to be made public 

10 with respect to the hospital prior to such data being made 

11 public.’’. 

12 (2) CONFORMING AMENDMENTS.—Section 

13 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 

14 amended— 

15 (A) in subclause (XIX), by striking 

16 ‘‘2007’’ and inserting ‘‘2006’’; and 

17 (B) in subclause (XX)— 

18 (i) by striking ‘‘2008’’ and inserting 

19 ‘‘2007’’; and 

20 (ii) by inserting ‘‘subject to clause 

21 (viii),’’ after ‘‘fiscal year,’’. 

22 (b) PROGRAM.—Title XVIII (42 U.S.C. 1395 et seq.) 

23 is amended by inserting after section 1860E–1, as added 

24 by section 101(a), the following new section: 

25 ‘‘PPS HOSPITAL VALUE-BASED PURCHASING PROGRAM

26 ‘‘SEC. 1860E–2. (a) PROGRAM.— 
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1 ‘‘(1) IN GENERAL.—The Secretary shall estab2 lish a program under which value-based payments 

3 are provided each fiscal year to hospitals that dem4 onstrate the provision of high quality health care to 

5 individuals who are entitled to benefits under part A 

6 and are inpatients of the hospital. 

7 ‘‘(2) PROGRAM TO BEGIN IN FISCAL YEAR

8 2007.—The Secretary shall establish the program 

9 under this section so that value-based payments de10 scribed in subsection (b) are made with respect to 

11 fiscal year 2007 and each subsequent fiscal year. 

12 ‘‘(3) APPLICABILITY OF PROGRAM TO HOS13 PITALS.—For purposes of this section, the term 

14 ‘hospital’ means a subsection (d) hospital (as defined 

15 in section 1886(d)(1)(B)). 

16 ‘‘(b) VALUE-BASED PAYMENTS.— 

17 ‘‘(1) IN GENERAL.—Subject to paragraph (4), 

18 the Secretary shall make a value-based payment to 

19 a hospital with respect to a fiscal year if the Sec20 retary determines that the quality of the care pro21 vided in that year to individuals who are entitled to 

22 benefits under part A and are inpatients of the hos23 pital— 

24 ‘‘(A) has substantially improved (as deter25 mined by the Secretary) over the prior year; or 
27 

•S 1356 IS 

1 ‘‘(B) exceeds a threshold established by the 

2 Secretary. 

3 ‘‘(2) USE OF SYSTEM.—In determining which 

4 hospitals qualify for a value-based payment under 

5 paragraph (1), the Secretary shall use the quality 

6 measurement system developed for this section pur7 suant to section 1860E–1(a). 

8 ‘‘(3) DETERMINATION OF AMOUNT OF AWARD

9 AND ALLOCATION OF AWARDS.— 

10 ‘‘(A) IN GENERAL.—The Secretary shall 

11 determine— 

12 ‘‘(i) the amount of a value-based pay13 ment under paragraph (1) provided to a 

14 hospital; and 

15 ‘‘(ii) subject to subparagraph (B), the 

16 allocation of the total amount available 

17 under subsection (d) for value-based pay18 ments for any fiscal year between pay19 ments with respect to hospitals that meet 

20 the requirement under subparagraph (A) 

21 of paragraph (1) and hospitals that meet 

22 the requirement under subparagraph (B) 

23 of such paragraph. 

24 ‘‘(B) REQUIREMENTS REGARDING THE

25 AMOUNT OF FUNDING AVAILABLE FOR VALUE- 
28 

•S 1356 IS 

1 BASED PAYMENTS FOR HOSPITALS EXCEEDING

2 A THRESHOLD.—The Secretary shall ensure 

3 that— 

4 ‘‘(i) a majority of the total amount 

5 available under subsection (d) for value6 based payments for any fiscal year is pro7 vided to hospitals that are receiving such 

8 payments because they meet the require9 ment under paragraph (1)(B); and 

10 ‘‘(ii) with respect to fiscal year 2008 

11 and each subsequent fiscal year, the per12 centage of the total amount available 

13 under subsection (d) for value-based pay14 ments for any fiscal year that is used to 

15 make payments to hospitals that meet such 

16 requirement is greater than such percent17 age in the previous fiscal year. 

18 ‘‘(4) REQUIREMENTS.— 

19 ‘‘(A) REQUIRED SUBMISSION OF DATA.— 

20 In order for a hospital to be eligible for a value21 based payment for a fiscal year, the hospital 

22 must have complied with the requirements 

23 under section 1886(b)(3)(B)(viii)(II) with re24 spect to that fiscal year. 
29 

•S 1356 IS 

1 ‘‘(B) ATTESTATION REGARDING DATA.—In 

2 order for a hospital to be eligible for a value3 based payment for a fiscal year, the hospital 

4 must have provided the Secretary (under proce5 dures established by the Secretary) with an at6 testation that the data submitted under section 

7 1886(b)(3)(B)(viii)(II) for the fiscal year is 

8 complete and accurate. 

9 ‘‘(5) TOTAL AMOUNT OF VALUE-BASED PAY10 MENTS EQUAL TO TOTAL AMOUNT OF AVAILABLE

11 FUNDING.—The Secretary shall establish payment 

12 amounts under paragraph (3)(A) so that, as esti13 mated by the Secretary, the total amount of value14 based payments made in a fiscal year under para15 graph (1) is equal to the total amount available 

16 under subsection (d) for such payments for the year. 

17 ‘‘(6) PAYMENT METHODS AND TIMING OF PAY18 MENTS.— 

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graph (B), the payment of value-based pay21 ments under paragraph (1) shall be based on 

22 such a method as the Secretary determines ap23 propriate. 

24 ‘‘(B) TIMING.—The Secretary shall ensure 

25 that value-based payments under paragraph (1) 
30 

•S 1356 IS 

1 with respect to a fiscal year are made by not 

2 later than the close of the following fiscal year. 

3 ‘‘(c) DESCRIPTION OF HOW HOSPITALS WOULD

4 HAVE FARED UNDER PROGRAM IF PROGRAM HAD AP5 PLIED TO FISCAL YEAR 2006.—Not later than January 

6 1, 2007, the Secretary shall provide each hospital with a 

7 description of the Secretary’s estimate of how payments 

8 to the hospital under this title would have been affected 

9 with respect to items and services furnished in fiscal year 

10 2006 if the program under this section (and the amend11 ments made by subsections (a) and (c) of section 201 of 

12 the Medicare Value Purchasing Act of 2005) had been in 

13 effect with respect to fiscal year 2006. 

14 ‘‘(d) FUNDING.— 

15 ‘‘(1) AMOUNT.—The amount available for 

16 value-based payments under this section with respect 

17 to a fiscal year shall be equal to the amount of the 

18 reduction in expenditures under the Federal Hos19 pital Insurance Trust Fund under section 1817 in 

20 the year as a result of the amendments made by sec21 tion 201(c) of the Medicare Value Purchasing Act of 

22 2005, as estimated by the Secretary. 

23 ‘‘(2) PAYMENTS FROM TRUST FUND.—Pay24 ments to hospitals under this section shall be made 

25 from the Federal Hospital Insurance Trust Fund.’’. 
31 

•S 1356 IS 

1 (c) REDUCTION OF AVERAGE STANDARDIZED

2 AMOUNT FOR HOSPITALS THAT SUBMIT QUALITY DATA

3 IN ORDER TO FUND PROGRAM.— 

4 (1) IN GENERAL.—Section 1886(d)(3)(B) (42 

5 U.S.C. 1395ww(d)(3)(B)) is amended to read as fol6 lows: 

7 ‘‘(B) REDUCTION OF AVERAGE STANDARDIZED

8 AMOUNT FOR VALUE OF OUTLIER PAYMENTS AND

9 TO FUND VALUE-BASED PURCHASING PROGRAM.— 

10 ‘‘(i) OUTLIER PAYMENTS.—The Secretary 

11 shall reduce each of the average standardized 

12 amounts determined under subparagraph (A) 

13 (and determined without regard to any reduc14 tion under clause (ii)) by a factor equal to the 

15 proportion of payments under this subsection 

16 (as estimated by the Secretary as if the applica17 ble percent in clause (ii) were zero) based on 

18 DRG prospective payment amounts which are 

19 additional payments described in paragraph 

20 (5)(A) (relating to outlier payments). 

21 ‘‘(ii) VALUE-BASED PURCHASING PRO22 GRAM.—In the case of a subsection (d) hospital 

23 that complies with the submission requirements 

24 under subsection (b)(3)(B)(viii))(II) for a fiscal 

25 year, in addition to the reduction under clause 
32 

•S 1356 IS 

1 (i), the Secretary shall reduce each of the aver2 age standardized amounts determined under 

3 subparagraph (A) for that fiscal year (and de4 termined without regard to any reduction under 

5 clause (i)) by the applicable percent (as defined 

6 in clause (iii)) for that fiscal year. 

7 ‘‘(iii) APPLICABLE PERCENT.—For pur8 poses of clause (ii), the term ‘applicable per9 cent’ means— 

10 ‘‘(I) for fiscal year 2007, 1.0 percent; 

11 ‘‘(II) for fiscal year 2008, 1.25 per12 cent; 

13 ‘‘(III) for fiscal year 2009, 1.5 per14 cent; 

15 ‘‘(IV) for fiscal year 2010, 1.75 per16 cent; and 

17 ‘‘(V) for fiscal year 2011 and each 

18 subsequent year, 2.0 percent.’’. 

19 (2) CONFORMING AMENDMENT.—Section 

20 1886(d)(5)(A)(iv) (42 U.S.C. 1395ww(d)(5)(A)(iv)) 

21 is amended by adding at the end the following new 

22 sentence: ‘‘Such projection or estimate shall be made 

23 as if the applicable percent under paragraph 

24 (3)(B)(ii) were zero.’’. 
33 

•S 1356 IS 

1 Subtitle B—Critical Access 

2 Hospitals 

3 SEC. 211. MEDPAC STUDY AND REPORT REGARDING A 

4 VALUE-BASED PURCHASING PROGRAM FOR 

5 CRITICAL ACCESS HOSPITALS. 

6 (a) STUDY.—The Medicare Payment Advisory Com7 mission shall conduct a study on the advisability and feasi8 bility of establishing a value-based purchasing program 

9 under the medicare program under title XVIII of the So10 cial Security Act for critical access hospitals (as defined 

11 in section 1861(mm)(1) of such Act (42 U.S.C. 

12 1395x(mm)(1)). 

13 (b) REPORT.—Not later than March 1, 2007, the 

14 Commission shall submit a report to Congress and the 

15 Secretary on the study conducted under subsection (a) to16 gether with recommendations for such legislation and ad17 ministrative actions as the Commission considers appro18 priate. 

19 SEC. 212. VALUE-BASED PURCHASING DEMONSTRATION 

20 PROGRAM FOR CRITICAL ACCESS HOS21 PITALS. 

22 (a) ESTABLISHMENT.— 

23 (1) IN GENERAL.—Not later than 6 months 

24 after the date of enactment of this Act, the Sec25 retary shall establish a demonstration program 
34 

•S 1356 IS 

1 under which the Secretary establishes a value-based 

2 purchasing program under the medicare program 

3 under title XVIII of the Social Security Act for crit4 ical access hospitals (as defined in section 

5 1861(mm)(1) of such Act (42 U.S.C. 

6 1395x(mm)(1)) in order to test innovative methods 

7 of measuring and rewarding quality health care fur8 nished by such hospitals. 

9 (2) DURATION.—The demonstration program 

10 under this section shall be conducted for a 2-year 

11 period. 

12 (3) SITES.—The Secretary shall conduct the 

13 demonstration program under this section at 6 crit14 ical access hospitals. The Secretary shall ensure that 

15 such hospitals are representative of the spectrum of 

16 such hospitals that participate in the medicare pro17 gram. 

18 (b) WAIVER AUTHORITY.—The Secretary may waive 

19 such requirements of titles XI and XVIII of the Social 

20 Security Act as may be necessary to carry out the dem21 onstration program under this section. 

22 (c) FUNDING.—The Secretary shall provide for the 

23 transfer from the Federal Hospital Insurance Trust Fund 

24 under section 1817 of the Social Security Act (42 U.S.C. 
35 

•S 1356 IS 

1 1395i) of such funds as are necessary for the costs of car2 rying out the demonstration program under this section. 

3 (d) REPORT.—Not later than 6 months after the 

4 demonstration program under this section is completed, 

5 the Secretary shall submit to Congress a report on the 

6 demonstration program together with— 

7 (1) recommendations on the establishment of a 

8 permanent value-based purchasing program under 

9 the medicare program for critical access hospitals; 

10 and 

11 (2) recommendations for such other legislation 

12 or administrative action as the Secretary determines 

13 appropriate. 

14 TITLE III—VALUE-BASED PUR15 CHASING FOR PHYSICIANS 

16 AND CERTAIN PRACTI17 TIONERS 

18 SEC. 301. PHYSICIAN AND PRACTITIONER VALUE-BASED 

19 PURCHASING PROGRAM. 

20 (a) VOLUNTARY SUBMISSION OF PHYSICIAN AND

21 PRACTITIONER QUALITY DATA.— 

22 (1) UPDATE FOR PHYSICIANS AND PRACTI23 TIONERS THAT SUBMIT QUALITY DATA.—Section 

24 1848(d)(4) (42 U.S.C. 1395w–4(d)(4)) is amended 
36 

•S 1356 IS 

1 by adding at the end the following new subpara2 graph: 

3 ‘‘(G) ADJUSTMENT IF QUALITY DATA NOT

4 SUBMITTED.— 

5 ‘‘(i) ADJUSTMENT.—For 2007 and 

6 each subsequent year, in the case of serv7 ices furnished by a physician or a practi8 tioner (as defined in section 1860E– 

9 3(a)(3)) that does not submit data in ac10 cordance with clause (ii) with respect to 

11 such a year, the update under subpara12 graph (A) shall be reduced by 2 percentage 

13 points. Such reduction shall apply only 

14 with respect to the year involved, and the 

15 Secretary shall not take into account such 

16 reduction in computing the conversion fac17 tor for a subsequent year. 

18 ‘‘(ii) SUBMISSION OF QUALITY

19 DATA.—For 2007 and each subsequent 

20 year, each physician and practitioner (as 

21 defined in section 1860E–3(a)(3)) shall 

22 submit to the Secretary such data that the 

23 Secretary determines is appropriate for the 

24 measurement of health outcomes and other 

25 indices of quality, including data necessary 
37 

•S 1356 IS 

1 for the operation of the physician and 

2 practitioner value-based purchasing pro3 gram under section 1860E–3. Such data 

4 shall be submitted in a form and manner, 

5 and at a time, specified by the Secretary 

6 for purposes of this subparagraph. 

7 ‘‘(iii) AVAILABLE TO THE PUBLIC.— 

8 ‘‘(I) IN GENERAL.—Subject to 

9 subclause (II), the Secretary shall es10 tablish procedures for making data 

11 submitted under clause (ii), with re12 spect to items and services furnished 

13 on or after January 1, 2008, available 

14 to the public in a clear and under15 standable form. Such procedures shall 

16 ensure that a physician or practitioner 

17 has the opportunity to review the data 

18 that is to be made public with respect 

19 to the physician or practitioner prior 

20 to such data being made public. 

21 ‘‘(II) EXCEPTIONS.—The Sec22 retary shall establish exceptions to the 

23 requirement for making data available 

24 to the public under the first sentence 

25 of subclause (I). In providing for such 
38 

•S 1356 IS 

1 exceptions, the Secretary shall take 

2 into account the size and specialty 

3 representation of the practice in4 volved.’’. 

5 (2) CONFORMING AMENDMENT.—Section 

6 1848(d)(4)(A) (42 U.S.C. 1395w–4(d)(4)(A)) is 

7 amended, in the matter preceding clause (i), by 

8 striking ‘‘subparagraph (F)’’ and inserting ‘‘sub9 paragraphs (F) and (G)’’. 

10 (b) PROGRAM.—Title XVIII (42 U.S.C. 1395 et seq.) 

11 is amended by inserting after section 1860E–2, as added 

12 by section 201(b), the following new section: 

13 ‘‘PHYSICIAN AND PRACTITIONER VALUE-BASED

14 PURCHASING PROGRAM

15 ‘‘SEC. 1860E–3. (a) PROGRAM.— 

16 ‘‘(1) IN GENERAL.—The Secretary shall estab17 lish a program under which value-based payments 

18 are provided each year to physicians and practi19 tioners that demonstrate the provision of high qual20 ity health care to individuals enrolled under part B. 

21 ‘‘(2) PROGRAM TO BEGIN IN 2008.—The Sec22 retary shall establish the program under this section 

23 so that value-based payments described in subsection 

24 (b) are made with respect to 2008 and each subse25 quent year. 
39 

•S 1356 IS 

1 ‘‘(3) DEFINITION OF PHYSICIAN AND PRACTI2 TIONER.—In this section: 

3 ‘‘(A) PHYSICIAN.—The term ‘physician’ 

4 has the meaning given that term in section 

5 1861(r). 

6 ‘‘(B) PRACTITIONER.—The term ‘practi7 tioner’ means— 

8 ‘‘(i) a practitioner described in section 

9 1842(b)(18)(C); 

10 ‘‘(ii) a physical therapist (as described 

11 in section 1861(p)); 

12 ‘‘(iii) an occupational therapist (as so 

13 described); and 

14 ‘‘(iv) a qualified speech-language pa15 thologist (as defined in section 

16 1861(ll)(3)(A)). 

17 ‘‘(4) IDENTIFICATION OF PHYSICIANS AND

18 PRACTITIONERS.—For purposes of applying this sec19 tion and paragraphs (4)(G) and (6) of section 

20 1848(d), the Secretary shall establish procedures for 

21 the identification of physicians and practitioners, 

22 such as through physician or practitioner billing 

23 units or other units. 

24 ‘‘(b) VALUE-BASED PAYMENTS.— 
40 

•S 1356 IS 

1 ‘‘(1) IN GENERAL.—Subject to paragraph (4), 

2 the Secretary shall make a value-based payment to 

3 a physician or a practitioner with respect to a year 

4 if the Secretary determines that both the quality of 

5 the care and the efficiency of the care provided in 

6 that year by the physician or practitioner to individ7 uals enrolled under part B— 

8 ‘‘(A) has substantially improved (as deter9 mined by the Secretary) over the prior year; or 

10 ‘‘(B) exceeds a threshold established by the 

11 Secretary. 

12 ‘‘(2) USE OF SYSTEMS AND DATA.— 

13 ‘‘(A) IN GENERAL.—In determining which 

14 physicians and practitioners qualify for a value15 based payment under paragraph (1), the Sec16 retary shall use— 

17 ‘‘(i) the quality measurement system 

18 developed for this section pursuant to sec19 tion 1860E–1(a) with respect to the qual20 ity of the care provided by the physician or 

21 practitioner; and 

22 ‘‘(ii) the comparative utilization sys23 tem developed under subsection (c) with 

24 respect to the efficiency of such care. 
41 

•S 1356 IS 

1 ‘‘(3) DETERMINATION OF AMOUNT OF AWARD

2 AND ALLOCATION OF AWARDS.— 

3 ‘‘(A) IN GENERAL.—The Secretary shall 

4 determine— 

5 ‘‘(i) the amount of a value-based pay6 ment under paragraph (1) provided to a 

7 physician or a practitioner; and 

8 ‘‘(ii) subject to subparagraph (B), the 

9 allocation of the total amount available 

10 under subsection (e) for value-based pay11 ments for any year between payments with 

12 respect to physicians and practitioners that 

13 meet the requirement under subparagraph 

14 (A) of paragraph (1) and physicians and 

15 practitioners that meet the requirement 

16 under subparagraph (B) of such para17 graph. 

18 ‘‘(B) REQUIREMENTS REGARDING THE

19 AMOUNT OF FUNDING AVAILABLE FOR VALUE20 BASED PAYMENTS FOR PHYSICIANS AND PRAC21 TITIONERS EXCEEDING A THRESHOLD.—The 

22 Secretary shall ensure that— 

23 ‘‘(i) a majority of the total amount 

24 available under subsection (e) for value25 based payments for any year is provided to 
42 

•S 1356 IS 

1 physicians and practitioners that are re2 ceiving such payments because they meet 

3 the requirement under paragraph (1)(B); 

4 and 

5 ‘‘(ii) with respect to 2009 and each 

6 subsequent year, the percentage of the 

7 total amount available under subsection (e) 

8 for value-based payments for any year that 

9 is used to make payments to physicians 

10 and practitioners that meet such require11 ment is greater than such percentage in 

12 the previous year. 

13 ‘‘(4) REQUIREMENTS.— 

14 ‘‘(A) REQUIRED SUBMISSION OF DATA.— 

15 In order for a physician or a practitioner to be 

16 eligible for a value-based payment for a year, 

17 the physician or practitioner must have com18 plied with the requirements under section 

19 1848(d)(6)(B)(ii) with respect to that year. 

20 ‘‘(B) ATTESTATION REGARDING DATA.—In 

21 order for a physician or a practitioner to be eli22 gible for a value-based payment for a year, the 

23 physician or practitioner must have provided 

24 the Secretary (under procedures established by 

25 the Secretary) with an attestation that the data 
43 

•S 1356 IS 

1 submitted under section 1848(d)(6)(B)(ii) with 

2 respect to that year is complete and accurate. 

3 ‘‘(5) TOTAL AMOUNT OF VALUE-BASED PAY4 MENTS EQUAL TO TOTAL AMOUNT OF AVAILABLE

5 FUNDING.—The Secretary shall establish payment 

6 amounts under paragraph (3)(A) so that, as esti7 mated by the Secretary, the total amount of value8 based payments made in a year under paragraph (1) 

9 is equal to the total amount available under sub10 section (e) for such payments for the year. 

11 ‘‘(6) PAYMENT METHODS AND TIMING OF PAY12 MENTS.— 

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B), the payment of value-based pay15 ments under paragraph (1) shall be based on 

16 such a method as the Secretary determines ap17 propriate. 

18 ‘‘(B) TIMING.—The Secretary shall ensure 

19 that value-based payments under paragraph (1) 

20 with respect to a year are made by not later 

21 than December 31 of the subsequent year. 

22 ‘‘(c) COMPARATIVE UTILIZATION SYSTEM.— 

23 ‘‘(1) DEVELOPMENT.—The Secretary shall de24 velop a comparative utilization system for purposes 
44 

•S 1356 IS 

1 of providing value-based payments under subsection 

2 (b). 

3 ‘‘(2) ADDITIONAL MEASURES OF EFFICIENT RE4 SOURCE USE.—The comparative utilization system 

5 developed under paragraph (1) shall measure the ef6 ficiency of the care provided by a physician or prac7 titioner. 

8 ‘‘(3) REQUIREMENTS FOR SYSTEM.—Under the 

9 comparative utilization system described in para10 graph (1), the Secretary shall do the following: 

11 ‘‘(A) MEASURES.—The Secretary shall se12 lect measures of efficiency to be used by the 

13 Secretary under the system. 

14 ‘‘(B) USE OF CLAIMS DATA FOR UTILIZA15 TION PATTERNS AND EFFICIENCY.— 

16 ‘‘(i) REVIEW OF CLAIMS DATA.—The 

17 Secretary shall review claims data with re18 spect to services furnished or ordered by 

19 physicians and practitioners. 

20 ‘‘(ii) USE OF MOST RECENT CLAIMS

21 DATA.—The Secretary shall use the most 

22 recent claims data with respect to the phy23 sician or practitioner that is available to 

24 the Secretary. 
45 

•S 1356 IS 

1 ‘‘(C) RISK ADJUSTMENT.—The Secretary 

2 shall establish procedures, as appropriate, to 

3 control for differences in beneficiary health sta4 tus and beneficiary characteristics. 

5 ‘‘(4) ANNUAL REPORTS.—Beginning in 2006, 

6 the Secretary shall provide physicians and practi7 tioners with annual reports on the utilization of 

8 items and services under this title based upon the 

9 review of claims data under paragraph (3)(B). With 

10 respect to reports provided in 2006 and 2007, such 

11 reports are confidential and the Secretary shall not 

12 make such reports available to the public. 

13 ‘‘(d) DESCRIPTION OF HOW PHYSICIANS AND PRAC14 TITIONERS WOULD HAVE FARED UNDER PROGRAM IF

15 PROGRAM HAD APPLIED TO 2007.—Not later than March 

16 1, 2008, the Secretary shall provide each physician and 

17 practitioner with a description of the Secretary’s estimate 

18 of how payments to the physician or practitioner under 

19 this title would have been affected with respect to items 

20 and services furnished in 2007 if the program under this 

21 section (and the amendments made by subsections (a) and 

22 (c) of section 301 of the Medicare Value Purchasing Act 

23 of 2005) had been in effect with respect to 2007. 

24 ‘‘(e) FUNDING.— 
46 

•S 1356 IS 

1 ‘‘(1) AMOUNT.—The amount available for 

2 value-based payments under this section with respect 

3 to a year shall be equal to the amount of the reduc4 tion in expenditures under the Federal Supple5 mentary Medical Insurance Trust Fund under sec6 tion 1841 in the year as a result of the amendments 

7 made by section 301(c) of the Medicare Value Pur8 chasing Act of 2005, as estimated by the Secretary. 

9 ‘‘(2) PAYMENTS FROM TRUST FUND.—Pay10 ments to physicians and practitioners under this sec11 tion shall be made from the Federal Supplementary 

12 Medical Insurance Trust Fund.’’. 

13 (c) REDUCTION IN CONVERSION FACTOR FOR PHYSI14 CIANS AND PRACTITIONERS THAT SUBMIT QUALITY

15 DATA IN ORDER TO FUND PROGRAM.— 

16 (1) IN GENERAL.—Section 1848(d) (42 U.S.C. 

17 1395w–4(d)) is amended by adding at the end the 

18 following new paragraph: 

19 ‘‘(6) REDUCTION IN CONVERSION FACTOR FOR

20 PHYSICIANS AND PRACTITIONERS IN ORDER TO

21 FUND VALUE-BASED PURCHASING PROGRAM.— 

22 ‘‘(A) IN GENERAL.—For 2008 and each 

23 subsequent year, the single conversion factor 

24 otherwise applicable under this subsection to 

25 services furnished in the year by a physician or 
47 

•S 1356 IS 

1 a practitioner (as defined in section 1860E– 

2 3(a)(3)) that complies with the requirements 

3 under paragraph (4)(G)(ii) for the year (deter4 mined after application of the update under 

5 paragraph (4)) shall be reduced by the applica6 ble percent. 

7 ‘‘(B) APPLICABLE PERCENT.—For pur8 poses of subparagraph (A), the term ‘applicable 

9 percent’ means— 

10 ‘‘(i) for 2008, 1.0 percent; 

11 ‘‘(ii) for 2009, 1.25 percent; 

12 ‘‘(iii) for 2010, 1.5 percent; 

13 ‘‘(iv) for 2011, 1.75 percent; and 

14 ‘‘(v) for 2012 and each subsequent 

15 year, 2.0 percent.’’. 

16 (2) CONFORMING AMENDMENT.—Section 

17 1848(d)(1)(A) (42 U.S.C. 1395w–4(d)(1)(A)) is 

18 amended by striking ‘‘The conversion factor’’ and in19 serting ‘‘Subject to paragraph (6), the conversion 

20 factor’’. 

21 SEC. 302. DEMONSTRATION PROJECT ON DATA COORDINA22 TION THROUGH THE USE OF HEALTH INFOR23 MATION TECHNOLOGY. 

24 (a) DEMONSTRATION PROJECT.— 
48 

•S 1356 IS 

1 (1) ESTABLISHMENT.—Not later than 6 

2 months after the date of enactment of this Act, the 

3 Secretary, in consultation with the National Coordi4 nator for Health Information Technology, shall es5 tablish a demonstration project to determine the 

6 threshold amount of information technology 

7 connectivity that is necessary in order to improve 

8 the ability of physicians and practitioners (as de9 fined in section 1860E–3(a)(3) of the Social Secu10 rity Act, as added by section 301(b)) in rural and 

11 frontier areas to— 

12 (A) collect, report, and maintain data on 

13 quality of care; and 

14 (B) use such data as a resource for im15 proving the quality and efficiency of the care 

16 provided to medicare beneficiaries by such phy17 sicians and practitioners. 

18 (2) DURATION.—The demonstration project 

19 under this section shall be conducted for a 3-year 

20 period. 

21 (3) SITES.—The Secretary shall conduct the 

22 project under this section at 6 sites. 

23 (4) PARTICIPANTS.—Participants in the dem24 onstration project under this section may include re25 gional networks, public-private partnerships includ-
49 

•S 1356 IS 

1 ing health care providers, persons or entities in2 volved in the delivery of health care through the use 

3 of telemedicine and telehealth, and other persons or 

4 entities determined appropriate by the Secretary. 

5 (5) REQUIREMENT FOR PARTICIPANTS.—Par6 ticipants in the demonstration project under this 

7 section shall comply with any interoperability and 

8 certification standards and processes that have been 

9 developed or adopted by the Secretary or a designee 

10 of the Secretary. 

11 (b) REPORT.— 

12 (1) IN GENERAL.—Not later than 6 months 

13 after the demonstration project under this section is 

14 completed, the Secretary shall submit to Congress a 

15 report on the demonstration project. 

16 (2) CONTENTS.—The report submitted under 

17 paragraph (1) shall include— 

18 (A) an analysis of— 

19 (i) the types of information accessed, 

20 transferred, and exchanged through dif21 ferent models for information technology 

22 connectivity; 

23 (ii) the characteristics of such models 

24 that have been successful in providing im-
50 

•S 1356 IS 

1 proved information flow and improved 

2 quality and efficiency in health care; and 

3 (iii) barriers to widespread adoption 

4 of such models; and 

5 (B) recommendations for such legislation 

6 and administrative actions as the Secretary con7 siders appropriate. 

8 (c) FUNDING.—There are authorized to be appro9 priated to the Secretary such sums as may be necessary 

10 to carry out this section. 

11 SEC. 303. SENSE OF THE SENATE REGARDING PAYMENTS 

12 UNDER MEDICARE PHYSICIAN FEE SCHED13 ULE. 

14 (a) FINDINGS.—The Senate makes the following 

15 findings: 

16 (1) Based on current projections, estimates sug17 gest that, absent any action, payment amounts 

18 under the physician fee schedule under section 1848 

19 of the Social Security Act (42 U.S.C. 1395w–4) will 

20 be reduced by 4.3 percent in 2006 and further re21 duced each year thereafter until 2011. 

22 (2) Future increases in medicare beneficiary 

23 cost-sharing raise concerns about the affordability of 

24 the medicare program for such beneficiaries: The 

25 medicare part B premium will be increased due to 
51 

•S 1356 IS 

1 any update of the physician fee schedule and such 

2 beneficiaries will also begin paying a premium for 

3 the prescription drug benefit under part D of the 

4 medicare program in January 2006. 

5 (3) The current formula under the physician fee 

6 schedule that is used to reimburse physicians under 

7 the medicare program— 

8 (A) has not been successful in appro9 priately controlling the volume of services pro10 vided by physicians; and 

11 (B) is not a sustainable model for deter12 mining physician payments under the medicare 

13 program in the future. 

14 (4) The Centers for Medicare & Medicaid Serv15 ices should use its administrative authority to ex16 clude medicare-covered drugs and biologicals from 

17 the formula used under the physician fee schedule 

18 and accurately reflect in the formula the direct and 

19 indirect cost of increases due to coverage decisions, 

20 administrative actions, and rules and regulations. 

21 (b) SENSE OF THE SENATE.—It is the sense of the 

22 Senate that, while the provisions of, and amendments 

23 made by, this Act develop a value-based purchasing pro24 gram for physicians and other practitioners under the 

25 medicare program, further action by Congress is needed 
52 

•S 1356 IS 

1 to address the negative physician payment updates under 

2 such program in order to ensure— 

3 (1) the long-term stability of the medicare pay4 ment system for items and services furnished by 

5 physicians and other health care professionals; 

6 (2) appropriate reimbursement under the medi7 care program for such items and services that is 

8 consistent with high quality and efficient delivery of 

9 such items and services; and 

10 (3) future access to, and the affordability of, 

11 such items and services for medicare beneficiaries. 

12 TITLE IV—VALUE-BASED 

13 PURCHASING FOR PLANS 

14 Subtitle A—Medicare Advantage 

15 Plans 

16 SEC. 401. PLAN VALUE-BASED PURCHASING PROGRAM. 

17 (a) SUBMISSION OF QUALITY DATA.— 

18 (1) MEDICARE ADVANTAGE ORGANIZATIONS.— 

19 Section 1852(e) (42 U.S.C. 1395w–22(e)), as 

20 amended by section 722 of the Medicare Prescrip21 tion Drug, Improvement, and Modernization Act of 

22 2003 (Public Law 108–173; 117 Stat. 2347), is 

23 amended— 

24 (A) in paragraph (1), by striking ‘‘an MA 

25 private fee-for-service plan or’’; and 
53 

•S 1356 IS 

1 (B) in paragraph (3)— 

2 (i) in subparagraph (A)— 

3 (I) in clause (i), by adding at the 

4 end the following new sentence: ‘‘Such 

5 data shall include data necessary for 

6 the operation of the plan value-based 

7 purchasing program under section 

8 1860E–4.’’; 

9 (II) by redesignating clause (iv) 

10 as clause (vi); and 

11 (III) by inserting after clause 

12 (iii) the following new clauses: 

13 ‘‘(iv) APPLICATION TO MA PRIVATE

14 FEE-FOR-SERVICE PLANS.—The Secretary 

15 shall establish as appropriate by regulation 

16 requirements for the collection, analysis, 

17 and reporting of data that permits the 

18 measurement of health outcomes and other 

19 indices of quality for MA organizations 

20 with respect to MA private fee-for-service 

21 plans.’’. 

22 ‘‘(v) AVAILABILITY TO THE PUBLIC.— 

23 The Secretary shall establish procedures 

24 for making data reported under this sub25 paragraph available to the public in a clear 
54 

•S 1356 IS 

1 and understandable form. Such procedures 

2 shall ensure that an MA organization has 

3 the opportunity to review the data that is 

4 to be made public with respect to the plan 

5 offered by the organization prior to such 

6 data being made public.’’; and 

7 (ii) in subparagraph (B)— 

8 (I) in clause (i), by striking 

9 ‘‘The’’ and inserting ‘‘Subject to 

10 clause (ii), the’’; and 

11 (II) by striking clause (ii) and in12 serting the following new clause: 

13 ‘‘(ii) CHANGES IN TYPES OF DATA.— 

14 Subject to clause (iii), the Secretary may 

15 only change the types of data that are re16 quired to be submitted under subpara17 graph (A) after submitting to Congress a 

18 report on the reasons for such changes 

19 that was prepared— 

20 ‘‘(I) in the case of data necessary 

21 for the operation of the plan value22 based purchasing program under sec23 tion 1860E–4, after the requirements 

24 under subsections (c) and (d) of sec-
55 

•S 1356 IS 

1 tion 1860E–1 have been complied 

2 with; and 

3 ‘‘(II) in the case of any other 

4 data, in consultation with MA organi5 zations and private accrediting bod6 ies.’’. 

7 (2) ELIGIBLE ENTITIES WITH REASONABLE

8 COST CONTRACTS.—Section 1876(h) (42 U.S.C. 

9 1395mm(h)) is amended by adding at the end the 

10 following new paragraph: 

11 ‘‘(6)(A) With respect to plan years beginning on or 

12 after January 1, 2006, an eligible entity with a reasonable 

13 cost reimbursement contract under this subsection shall 

14 submit to the Secretary such data that the Secretary de15 termines is appropriate for the measurement of health out16 comes and other indices of quality, including data nec17 essary for the operation of the plan value-based pur18 chasing program under section 1860E–4. Such data shall 

19 be submitted in a form and manner, and at a time, speci20 fied by the Secretary for purposes of this subparagraph. 

21 ‘‘(B) The Secretary shall establish procedures for 

22 making data reported under subparagraph (A) available 

23 to the public in a clear and understandable form. Such 

24 procedures shall ensure that an eligible entity has the op25 portunity to review the data that is to be made public with 
56 

•S 1356 IS 

1 respect to the contract prior to such data being made pub2 lic.’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to plan years begin5 ning on or after January 1, 2006. 

6 (4) SENSE OF THE SENATE.—It is the sense of 

7 the Senate that, in establishing the timeframes for 

8 Medicare Advantage organizations and entities with 

9 a reasonable cost reimbursement contract under sec10 tion 1876(h) of the Social Security Act (42 U.S.C. 

11 1395mm(h)) to report quality data under sections 

12 1852(e)(3) and 1876(h)(6), respectively, of such 

13 Act, as added by this section, the Secretary should 

14 take into account other timeframes for reporting 

15 quality data that such organizations and entities are 

16 subject to under other Federal and State programs 

17 and in the commercial market. 

18 (b) PROGRAM.—Title XVIII (42 U.S.C. 1395 et seq.) 

19 is amended by inserting after section 1860E–3, as added 

20 by section 301(b), the following new section: 

21 ‘‘PLAN VALUE-BASED PURCHASING PROGRAM

22 ‘‘SEC. 1860E–4. (a) PROGRAM.— 

23 ‘‘(1) IN GENERAL.—The Secretary shall estab24 lish a program under which value-based payments 

25 are provided each year to Medicare Advantage orga26 nizations offering Medicare Advantage plans under 
57 

•S 1356 IS 

1 part C that demonstrate the provision of high qual2 ity health care to enrollees under the plan. 

3 ‘‘(2) PROGRAM TO BEGIN IN 2009.—The Sec4 retary shall establish the program under this section 

5 so that value-based payments under subsection (b) 

6 are made with respect to 2009 and each subsequent 

7 year. 

8 ‘‘(3) DEFINITIONS OF MEDICARE ADVANTAGE

9 ORGANIZATION AND PLAN.— 

10 ‘‘(A) IN GENERAL.—In this section: 

11 ‘‘(i) MEDICARE ADVANTAGE ORGANI12 ZATION.—The term ‘Medicare Advantage 

13 organization’ has the meaning given such 

14 term in section 1859(a)(1). 

15 ‘‘(ii) MEDICARE ADVANTAGE PLAN.— 

16 The term ‘Medicare Advantage plan’ has 

17 the meaning given such term in section 

18 1859(b)(1). 

19 ‘‘(B) APPLICABILITY OF PROGRAM TO

20 MEDICARE ADVANTAGE REGIONAL AND LOCAL

21 PLANS.—For purposes of this section, the term 

22 ‘Medicare Advantage plan’ shall include both 

23 Medicare Advantage regional plans (as defined 

24 in section 1859(b)(4)) and Medicare Advantage 

25 local plans (as defined in section 1859(b)(5)). 
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•S 1356 IS 

1 ‘‘(C) APPLICABILITY OF PROGRAM TO REA2 SONABLE COST CONTRACTS.—Except for para3 graphs (5) and (6) of subsection (b), for pur4 poses of this section, the terms— 

5 ‘‘(i) ‘Medicare Advantage organiza6 tion’ and ‘organization’ include an organi7 zation that is providing benefits under a 

8 reasonable cost reimbursement contract 

9 under section 1876(h); and 

10 ‘‘(ii) ‘Medicare Advantage plan’ and 

11 ‘plan’ include such a contract. 

12 ‘‘(b) VALUE-BASED PAYMENTS.— 

13 ‘‘(1) IN GENERAL.—Subject to paragraph (4), 

14 the Secretary shall make value-based payments to 

15 Medicare Advantage organizations with respect to 

16 each Medicare Advantage plan offered by the organi17 zation during a year if the Secretary determines that 

18 the quality of the care provided under the plan— 

19 ‘‘(A) has substantially improved (as deter20 mined by the Secretary) over the prior year; or 

21 ‘‘(B) exceeds a threshold established by the 

22 Secretary. 

23 ‘‘(2) USE OF SYSTEM.—In determining which 

24 organizations offering Medicare Advantage plans 
59 

•S 1356 IS 

1 qualify for a value-based payment under paragraph 

2 (1), the Secretary shall— 

3 ‘‘(A) use the quality measurement system 

4 developed for this section pursuant to section 

5 1860E–1(a); and 

6 ‘‘(B) ensure that awards are based on data 

7 from a full 12-month period (or 24-month pe8 riod in the case of an award described in para9 graph (1)(A)), such periods determined without 

10 regard to calendar year periods. 

11 ‘‘(3) DETERMINATION OF AMOUNT OF AWARD

12 AND ALLOCATION OF AWARDS.— 

13 ‘‘(A) IN GENERAL.—The Secretary shall 

14 determine— 

15 ‘‘(i) the amount of a value-based pay16 ment under paragraph (1) provided to an 

17 organization with respect to a plan; and 

18 ‘‘(ii) subject to subparagraph (B), the 

19 allocation of the total amount available 

20 under subsection (d) for value-based pay21 ments for any year between payments with 

22 respect to plans that meet the requirement 

23 under subparagraph (A) of paragraph (1) 

24 and plans that meet the requirement under 

25 subparagraph (B) of such paragraph. 
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•S 1356 IS 

1 ‘‘(B) REQUIREMENT REGARDING THE

2 AMOUNT OF FUNDING AVAILABLE FOR VALUE3 BASED PAYMENTS FOR PLANS EXCEEDING A

4 THRESHOLD.—The Secretary shall ensure 

5 that— 

6 ‘‘(i) a majority of the total amount 

7 available under subsection (d) for value8 based payments for any year is provided to 

9 organizations, with respect to plans offered 

10 by such organizations, that are receiving 

11 such payments because they meet the re12 quirement under paragraph (1)(B); and 

13 ‘‘(ii) with respect to 2010 and each 

14 subsequent year, the percentage of the 

15 total amount available under subsection (d) 

16 for value-based payments for any year that 

17 is used to make payments to organizations, 

18 with respect to plans offered by such orga19 nizations, that meet such requirement is 

20 greater than such percentage in the pre21 vious year. 

22 ‘‘(4) USE OF PAYMENTS.—Value-based pay23 ments received under this section may only be used 

24 for the following purposes: 
61 

•S 1356 IS 

1 ‘‘(A) To invest in quality improvement pro2 grams operated by the organization with respect 

3 to the plan. 

4 ‘‘(B) To enhance beneficiary benefits under 

5 the plan. 

6 ‘‘(5) REQUIRED SUBMISSION OF DATA.—In 

7 order for an organization to be eligible for a value8 based payment for a year with respect to a Medicare 

9 Advantage plan or a reasonable cost contract, the 

10 organization must have provided for the collection, 

11 analysis, and reporting of data pursuant to sections 

12 1852(e)(3) (or submitted the data under section 

13 1876(h)(6) in the case of a reasonable cost contract) 

14 with respect to the plan or contract for the 2 years 

15 preceding that year. 

16 ‘‘(6) NO EFFECT ON MEDICARE ADVANTAGE

17 PLAN BIDS.—In order for a Medicare Advantage or18 ganization to be eligible for a value-based payment 

19 for a year with respect to a Medicare Advantage 

20 plan, the organization must have provided the Sec21 retary with an attestation that the program under 

22 this section, including the payment adjustments 

23 made by reason of the amendments made by section 

24 401(c)(1) of the Medicare Value Purchasing Act of 

25 2005, had no effect on the integrity and actuarial 
62 

•S 1356 IS 

1 soundness of the bid submitted under section 1854 

2 for the plan for the year. 

3 ‘‘(7) TOTAL AMOUNT OF VALUE-BASED PAY4 MENTS EQUAL TO TOTAL AMOUNT OF REDUCTION IN

5 PAYMENTS.—The Secretary shall establish payment 

6 amounts under paragraph (3)(A) so that, as esti7 mated by the Secretary, the total amount of value8 based payments made in a year under paragraph (1) 

9 is equal to the total amount available under sub10 section (d) for such payments for the year. 

11 ‘‘(8) PAYMENT METHODS AND TIMING OF PAY12 MENTS.— 

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B), the payment of value-based pay15 ments under paragraph (1) shall be based on 

16 such a method as the Secretary determines ap17 propriate. 

18 ‘‘(B) TIMING.—The Secretary shall ensure 

19 that value-based payments under paragraph (1) 

20 with respect to a year are made by not later 

21 than March 1 of the subsequent year. 

22 ‘‘(c) DESCRIPTION OF HOW PLANS WOULD HAVE

23 FARED UNDER PROGRAM IF PROGRAM HAD APPLIED TO

24 2008.—Not later than March 1, 2009, the Secretary shall 

25 provide each Medicare Advantage organization offering a 
63 

•S 1356 IS 

1 Medicare Advantage plan with a description of the Sec2 retary’s estimate of how payments under this title to such 

3 organization with respect to the plan for 2008 would have 

4 been affected if the program under this section (and the 

5 amendments made by subsections (a) and (c) of section 

6 401 of the Medicare Value Purchasing Act of 2005) had 

7 been in effect with respect to 2008. 

8 ‘‘(d) FUNDING.— 

9 ‘‘(1) AMOUNT.—The amount available for 

10 value-based payments under this section with respect 

11 to a year shall be equal to the amount of the reduc12 tion in expenditures under the Federal Hospital In13 surance Trust Fund under section 1817 and the 

14 Federal Supplementary Medical Insurance Trust 

15 Fund under section 1841 in the year as a result of 

16 the amendments made by section 401(c) of the 

17 Medicare Value Purchasing Act of 2005, as esti18 mated by the Secretary. 

19 ‘‘(2) PAYMENTS FROM TRUST FUNDS.—Pay20 ments to organizations under this section shall be 

21 made from the Federal Hospital Insurance Trust 

22 Fund and the Federal Supplementary Medical In23 surance Trust Fund in the same proportion as pay24 ments to Medicare Advantage organizations are 
64 

•S 1356 IS 

1 made from such Trust Funds under the first sen2 tence of section 1853(f).’’. 

3 (c) REDUCTION IN PAYMENTS TO ORGANIZATIONS IN

4 ORDER TO FUND PROGRAM.— 

5 (1) MEDICARE ADVANTAGE PAYMENTS.— 

6 (A) IN GENERAL.—Section 1853(a)(1) (42 

7 U.S.C. 1395w–23(a)(1)), as amended by section 

8 222(e) of the Medicare Prescription Drug, Im9 provement, and Modernization Act of 2003 

10 (Public Law 108–173; 117 Stat. 2200), is 

11 amended— 

12 (i) in clauses (i) and (ii) of subpara13 graph (B), by inserting ‘‘and, for 2009 and 

14 each subsequent year, except in the case of 

15 an MSA plan or an MA plan for which 

16 there was no contract under section 1857 

17 during either of the preceding 2 years, re18 duced by the applicable percent (as defined 

19 in subparagraph (I))’’ after ‘‘(G)’’; and 

20 (ii) by adding at the end the following 

21 new subparagraph: 

22 ‘‘(I) APPLICABLE PERCENT.—For pur23 poses of clauses (i) and (ii) of subparagraph 

24 (B), the term ‘applicable percent’ means— 

25 ‘‘(i) for 2009, 1.0 percent; 
65 

•S 1356 IS 

1 ‘‘(ii) for 2010, 1.25 percent; 

2 ‘‘(iii) for 2011, 1.5 percent; 

3 ‘‘(iv) for 2012, 1.75 percent; and 

4 ‘‘(v) for 2013 and each subsequent 

5 year, 2.0 percent.’’. 

6 (B) REDUCTIONS IN PAYMENTS DO NOT

7 AFFECT THE REBATE FOR BIDS BELOW THE

8 BENCHMARK.—The amendments made by sub9 paragraph (A) shall not be construed to have 

10 any effect on— 

11 (i) the determination of whether a 

12 Medicare Advantage plan has average per 

13 capita monthly savings described in para14 graph (3)(C) or (4)(C) of section 1854(b) 

15 of the Social Security Act (42 U.S.C. 

16 1395w–24(b)); or 

17 (ii) the amount of such savings. 

18 (2) REASONABLE COST CONTRACT PAY19 MENTS.—Section 1876(h) (42 U.S.C. 1395mm(h)), 

20 as amended by subsection (a)(2), is amended by 

21 adding at the end the following new paragraph: 

22 ‘‘(7) Notwithstanding the preceding provisions of this 

23 subsection, the Secretary shall reduce each payment to an 

24 eligible organization under this subsection with respect to 

25 benefits provided on or after January 1, 2009, by an 
66 

•S 1356 IS 

1 amount equal to the applicable percent (as defined in sec2 tion 1853(a)(1)(I)) of the payment amount. The preceding 

3 sentence shall have no effect on payments to eligible orga4 nizations for the provision of qualified prescription drug 

5 coverage under part D.’’. 

6 (d) REQUIREMENT FOR REPORTING ON USE OF

7 VALUE-BASED PAYMENTS.— 

8 (1) MA PLANS.—Section 1854(a) (42 U.S.C. 

9 1395w–24(a)), as amended by section 222(a) of the 

10 Medicare Prescription Drug, Improvement, and 

11 Modernization Act of 2003 (Public Law 108–173; 

12 117 Stat. 2193), is amended— 

13 (A) in paragraph (1)(A)(i), by striking ‘‘or 

14 (6)(A)’’ and inserting ‘‘(6)(A), or (7)’’; and 

15 (B) by adding at the end the following: 

16 ‘‘(7) SUBMISSION OF INFORMATION OF HOW

17 VALUE-BASED PAYMENTS WILL BE USED.—For an 

18 MA plan for a plan year beginning on or after Janu19 ary 1, 2011, the information described in this para20 graph is a description of how the organization offer21 ing the plan will use any value-based payments that 

22 the organization received under section 1860E–4 

23 with respect to the plan for the year preceding the 

24 year in which such information is submitted.’’. 
67 

•S 1356 IS 

1 (2) REASONABLE COST CONTRACTS.—Section 

2 1876(h) (42 U.S.C. 1395mm(h)), as amended by 

3 subsection (c)(2), is amended by adding at the end 

4 the following new paragraph: 

5 ‘‘(8) Not later than July 1 of each year (beginning 

6 in 2010), any eligible entity with a reasonable cost reim7 bursement contract under this subsection that received a 

8 value-based payment under section 1860E–4 with respect 

9 to the contract for the preceding year shall submit to the 

10 Secretary a report containing a description of how the or11 ganization will use such payments under the contract.’’. 

12 Subtitle B—Plans Offering Part D 

13 Prescription Drug Coverage 

14 SEC. 411. MEDPAC STUDY AND REPORT REGARDING A 

15 VALUE-BASED PURCHASING PROGRAM FOR 

16 PLANS OFFERING PART D PRESCRIPTION 

17 DRUG COVERAGE. 

18 (a) STUDY.—The Medicare Payment Advisory Com19 mission shall conduct a study on the advisability and feasi20 bility of establishing a value-based purchasing program 

21 under the medicare program under title XVIII of the So22 cial Security Act with respect to the provision of prescrip23 tion drug coverage under part D of such title under pre24 scription drug plans and fallback prescription drug plans 

25 under such part D, under Medicare Advantage plans 
68 

•S 1356 IS 

1 under part C of such Act, and under reasonable cost con2 tracts under section 1876(h) of such Act (42 U.S.C. 

3 1395mm). 

4 (b) REPORT.—Not later than March 1, 2007, the 

5 Commission shall submit a report to Congress and the 

6 Secretary on the study conducted under subsection (a) to7 gether with recommendations for such legislation and ad8 ministrative actions as the Commission considers appro9 priate. 

10 TITLE V—VALUE-BASED PUR11 CHASING FOR PROVIDERS 

12 AND FACILITIES THAT PRO13 VIDE SERVICES TO MEDI14 CARE BENEFICIARIES WITH 

15 END STAGE RENAL DISEASE 

16 SEC. 501. END STAGE RENAL DISEASE PROVIDER AND FA17 CILITY VALUE-BASED PURCHASING PRO18 GRAM. 

19 (a) VOLUNTARY SUBMISSION OF QUALITY DATA.— 

20 Section 1881(b) (42 U.S.C. 1395rr(b)) is amended by 

21 adding at the end the following new paragraph: 

22 ‘‘(14) By not later than July 31, 2006, the Sec23 retary shall establish procedures under which pro24 viders of services and renal dialysis facilities that re25 ceive payments under paragraph (12) or (13) may 
69 

•S 1356 IS 

1 submit to the Secretary data that permits the meas2 urement of health outcomes and other indices of 

3 quality.’’. 

4 (b) PROGRAM.—Title XVIII (42 U.S.C. 1395 et seq.) 

5 is amended by inserting after section 1860E–4, as added 

6 by section 401(b), the following new section: 

7 ‘‘ESRD PROVIDER AND FACILITY VALUE-BASED

8 PURCHASING PROGRAM

9 ‘‘SEC. 1860E–5. (a) PROGRAM.— 

10 ‘‘(1) IN GENERAL.—The Secretary shall estab11 lish a program under which value-based payments 

12 are provided each year to providers of services and 

13 renal dialysis facilities that— 

14 ‘‘(A) provide items and services to individ15 uals with end stage renal disease who are en16 rolled under part B; and 

17 ‘‘(B) demonstrate the provision of high 

18 quality health care to such individuals. 

19 ‘‘(2) PROGRAM TO BEGIN IN 2007.—The Sec20 retary shall establish the program under this section 

21 so that value-based payments described in subsection 

22 (b) are made with respect to 2007 and each subse23 quent year. 

24 ‘‘(3) EXCLUSIONS FROM PROGRAM.— 

25 ‘‘(A) PEDIATRIC FACILITIES.—Any renal 

26 dialysis facility at least 50 percent of whose pa-
70 

•S 1356 IS 

1 tients are individuals under 18 years of age 

2 shall not be included in the program under this 

3 section. 

4 ‘‘(B) PROVIDERS AND FACILITIES CUR5 RENTLY PARTICIPATING IN BUNDLED CASE-MIX

6 DEMONSTRATION NOT INCLUDED IN PRO7 GRAM.—Any provider of services or renal dialy8 sis facility that is currently participating in the 

9 bundled case-mix adjusted payment system for 

10 ESRD services demonstration project under 

11 section 623(e) of the Medicare Prescription 

12 Drug, Improvement, and Modernization Act of 

13 2003 (Public Law 108–173) shall not be in14 cluded in the program under this section, but 

15 only for so long as the provider or facility is so 

16 participating. 

17 ‘‘(b) VALUE-BASED PAYMENTS.— 

18 ‘‘(1) IN GENERAL.—Subject to paragraph (4), 

19 the Secretary shall make a value-based payment to 

20 a provider of services or a renal dialysis facility with 

21 respect to a year if the Secretary determines that 

22 the quality of the care provided in that year by the 

23 provider or facility to individuals with end stage 

24 renal disease who are enrolled under part B— 
71 

•S 1356 IS 

1 ‘‘(A) has substantially improved (as deter2 mined by the Secretary) over the prior year; or 

3 ‘‘(B) exceeds a threshold established by the 

4 Secretary. 

5 ‘‘(2) USE OF SYSTEM.—In determining which 

6 providers of services and renal dialysis facilities 

7 qualify for a value-based payment under paragraph 

8 (1), the Secretary shall use the quality measurement 

9 system developed for this section pursuant to section 

10 1860E–1(a). 

11 ‘‘(3) DETERMINATION OF AMOUNT OF AWARD

12 AND ALLOCATION OF AWARDS.— 

13 ‘‘(A) IN GENERAL.—The Secretary shall 

14 determine— 

15 ‘‘(i) the amount of a value-based pay16 ment under paragraph (1) provided to a 

17 provider of services or a renal dialysis fa18 cility; and 

19 ‘‘(ii) subject to subparagraphs (B) 

20 and (C), the allocation of the total amount 

21 available under subsection (c) for value22 based payments for any year between pay23 ments with respect to providers and facili24 ties that meet the requirement under sub25 paragraph (A) of paragraph (1) and pro-
72 

•S 1356 IS 

1 viders and facilities that meet the require2 ment under subparagraph (B) of such 

3 paragraph. 

4 ‘‘(B) REQUIREMENT REGARDING AMOUNT

5 OF FUNDING AVAILABLE FOR VALUE-BASED

6 PAYMENTS FOR PROVIDERS AND FACILITIES

7 EXCEEDING A THRESHOLD.—The Secretary 

8 shall ensure that— 

9 ‘‘(i) a majority of the total amount 

10 available under subsection (c) for value11 based payments for any year is provided to 

12 providers of services and renal dialysis fa13 cilities that are receiving such payments 

14 because they meet the requirement under 

15 paragraph (1)(B); and 

16 ‘‘(ii) with respect to 2009 and each 

17 subsequent year, the percentage of the 

18 total amount available under subsection (c) 

19 for value-based payments for any year that 

20 is used to make payments to providers and 

21 facilities that meet such requirement is 

22 greater than such percentage in the pre23 vious year. 

24 ‘‘(C) ONLY VALUE-BASED PAYMENTS FOR

25 PROVIDERS AND FACILITIES EXCEEDING A
73 

•S 1356 IS 

1 THRESHOLD IN 2007.—With respect to 2007, 

2 the entire amount available under subsection (c) 

3 for value-based payments for that year shall be 

4 used to make payments to providers of services 

5 and renal dialysis facilities that meet the re6 quirement under paragraph (1)(B). 

7 ‘‘(4) REQUIREMENTS.— 

8 ‘‘(A) REQUIRED SUBMISSION OF DATA.— 

9 ‘‘(i) IN GENERAL.—In order for a pro10 vider of services or a renal dialysis facility 

11 to be eligible for a value-based payment for 

12 a year, the provider or facility must have 

13 provided for the submission of data in ac14 cordance with clause (ii) with respect to 

15 that year. 

16 ‘‘(ii) SUBMISSION OF DATA.—For 

17 2007 and each subsequent year, each pro18 vider of services and renal dialysis facility 

19 that receives payments under paragraph 

20 (12) shall submit to the Secretary such 

21 data that the Secretary determines is ap22 propriate for the measurement of health 

23 outcomes and other indices of quality, in24 cluding data necessary for the operation of 

25 the program under this section. Such data 
74 

•S 1356 IS 

1 shall be submitted in a form and manner, 

2 and at a time, specified by the Secretary 

3 for purposes of this clause. 

4 ‘‘(iii) AVAILABILITY TO THE PUB5 LIC.—The Secretary shall establish proce6 dures for making data submitted under 

7 clause (ii) available to the public in a clear 

8 and understandable form. Such procedures 

9 shall ensure that a provider or facility has 

10 the opportunity to review the data that is 

11 to be made public with respect to the pro12 vider or facility prior to such data being 

13 made public. 

14 ‘‘(B) ATTESTATION REGARDING DATA.—In 

15 order for a provider of services or a renal dialy16 sis facility to be eligible for a value-based pay17 ment for a year, the provider or facility must 

18 have provided the Secretary (under procedures 

19 established by the Secretary) with an attesta20 tion that the data submitted under subpara21 graph (A)(ii) for the year is complete and accu22 rate. 

23 ‘‘(5) TOTAL AMOUNT OF VALUE-BASED PAY24 MENTS EQUAL TO TOTAL AMOUNT OF AVAILABLE

25 FUNDING.—The Secretary shall establish payment 
75 

•S 1356 IS 

1 amounts under paragraph (3)(A) so that, as esti2 mated by the Secretary, the total amount of value3 based payments made in a year under paragraph (1) 

4 is equal to the total amount available under sub5 section (c) for such payments for the year. 

6 ‘‘(6) PAYMENT METHODS AND TIMING OF PAY7 MENTS.— 

8 ‘‘(A) IN GENERAL.—Subject to subpara9 graph (B), the payment of value-based pay10 ments under paragraph (1) shall be based on 

11 such a method as the Secretary determines ap12 propriate. 

13 ‘‘(B) TIMING.—The Secretary shall ensure 

14 that value-based payments under paragraph (1) 

15 with respect to a year are made by not later 

16 than December 31 of the subsequent year. 

17 ‘‘(c) FUNDING.— 

18 ‘‘(1) AMOUNT.—The amount available for 

19 value-based payments under this section with respect 

20 to a year shall be equal to the amount of the reduc21 tion in expenditures under the Federal Supple22 mentary Medical Insurance Trust Fund under sec23 tion 1841 in the year by reason of the application 

24 of section 1881(b)(12)(G), as estimated by the Sec25 retary. 
76 

•S 1356 IS 

1 ‘‘(2) PAYMENTS FROM TRUST FUND.—Pay2 ments to providers of services and renal dialysis fa3 cilities under this section shall be made from the 

4 Federal Supplementary Medical Insurance Trust 

5 Fund.’’. 

6 (c) REDUCTION IN CASE-MIX ADJUSTED PROSPEC7 TIVE PAYMENT AMOUNT IN ORDER TO FUND PRO8 GRAM.—Section 1881(b)(12) (42 U.S.C. 1395rr(b)(12)) is 

9 amended— 

10 (1) by redesignating subparagraph (G) as sub11 paragraph (H); and 

12 (2) by inserting after subparagraph (F) the fol13 lowing new subparagraph: 

14 ‘‘(G)(i) In the case of any payment made under 

15 this paragraph for an item or service furnished on 

16 or after January 1, 2007, such payment shall be re17 duced by the applicable percent. The preceding sen18 tence shall not apply to a payment for an item or 

19 service furnished by a provider of services or a renal 

20 dialysis facility that is excluded from the program 

21 under section 1860E–5 by reason of subsection 

22 (a)(3) of such section at the time the item or service 

23 is furnished. 

24 ‘‘(ii) For purposes of clause (i), the term ‘appli25 cable percent’ means— 
77 

•S 1356 IS 

1 ‘‘(I) for 2007, 1.0 percent; 

2 ‘‘(II) for 2008, 1.25 percent; 

3 ‘‘(III) for 2009, 1.5 percent; 

4 ‘‘(IV) for 2010, 1.75 percent; and 

5 ‘‘(V) for 2011 and each subsequent year, 

6 2.0 percent.’’. 

7 SEC. 502. VALUE-BASED PURCHASING UNDER THE DEM8 ONSTRATION OF BUNDLED CASE-MIX AD9 JUSTED PAYMENT SYSTEM FOR ESRD SERV10 ICES. 

11 Section 623(e) of the Medicare Prescription Drug, 

12 Improvement, and Modernization Act of 2003 (42 U.S.C. 

13 1395rr note) is amended by adding at the end the fol14 lowing new paragraph: 

15 ‘‘(7) VALUE-BASED PURCHASING PROGRAM.— 

16 As part of the demonstration project under this sub17 section, the Secretary shall, beginning January 1, 

18 2007, implement a value-based purchasing program 

19 for providers and facilities participating in the dem20 onstration project. The Secretary shall implement 

21 such value-based purchasing program in a similar 

22 manner as the ESRD provider and facility value23 based purchasing program is implemented under 

24 section 1860E–5 of the Social Security Act, includ25 ing the funding of such program.’’. 
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1 SEC. 503. CHRONIC KIDNEY DISEASE DEMONSTRATION 

2 PROJECTS. 

3 (a) IN GENERAL.—Not later than January 1, 2007, 

4 the Secretary shall establish demonstration projects to— 

5 (1) increase public awareness about— 

6 (A) the factors that lead to chronic kidney 

7 disease; 

8 (B) how to prevent such disease; 

9 (C) how to treat such disease; and 

10 (D) how to avoid kidney failure; 

11 (2) enhance surveillance systems and expand re12 search to better assess the prevalence and incidence 

13 of chronic kidney disease; and 

14 (3) evaluate approaches for providing outreach 

15 and education to groups or special populations with 

16 a high prevalence of chronic kidney disease, such as 

17 Native Americans and Alaskan Natives. 

18 (b) SCOPE AND DURATION.— 

19 (1) SCOPE.—The Secretary shall select at least 

20 3 States in which to conduct demonstration projects 

21 under this section. In selecting the States under this 

22 paragraph, the Secretary shall take into account the 

23 size of the population of medicare beneficiaries with 

24 end-stage renal disease in the State and ensure the 

25 participation of individuals who reside in rural and 

26 urban areas. 
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•S 1356 IS 

1 (2) DURATION.—The demonstration projects 

2 under this section shall be conducted for a period 

3 not to exceed 3 years. 

4 (c) WAIVER AUTHORITY.—The Secretary may waive 

5 such requirements of titles XI and XVIII of the Social 

6 Security Act as may be necessary to carry out the dem7 onstration projects under this section. 

8 (d) REPORT.—Not later than 6 months after the date 

9 on which the demonstration projects under this section are 

10 completed, the Secretary shall submit to Congress a report 

11 on the demonstration projects together with recommenda12 tions for such legislation and administrative action as the 

13 Secretary determines appropriate. 

14 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

15 are authorized to be appropriated such sums as may be 

16 necessary to carry out this section. 

17 SEC. 504. MEDPAC STUDY AND REPORT REGARDING A 

18 VALUE-BASED PURCHASING PROGRAM FOR 

19 PEDIATRIC RENAL DIALYSIS FACILITIES. 

20 (a) STUDY.—The Medicare Payment Advisory Com21 mission shall conduct a study on the advisability and feasi22 bility of— 

23 (1) including renal dialysis facilities described 

24 in subsection (a)(3)(A) of section 1860E–5 of the 

25 Social Security Act, as added by section 501(b), in 
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•S 1356 IS 

1 the value-based purchasing program under such sec2 tion 1860E–5; or 

3 (2) establishing a value-based purchasing pro4 gram under the medicare program under title XVIII 

5 of such Act for such facilities. 

6 (b) REPORT.—Not later than June 1, 2007, the Com7 mission shall submit a report to Congress and the Sec8 retary on the study conducted under subsection (a) to9 gether with recommendations for such legislation and ad10 ministrative actions as the Commission considers appro11 priate. 

12 SEC. 505. MEDPAC REPORT ON ESRD PROVIDER AND FA13 CILITY VALUE-BASED PURCHASING PRO14 GRAM. 

15 (a) REPORT.—Not later than June 1, 2008, the 

16 Medicare Payment Advisory Commission shall submit a 

17 report to Congress and the Secretary on the implementa18 tion of the ESRD provider and facility value-based pur19 chasing program under section 1860E–5 of the Social Se20 curity Act, as added by section 501(b). 

21 (b) CONTENTS.—The report submitted under sub22 section (a) shall include— 

23 (1) a detailed description of issues for the Sec24 retary to consider in operating the ESRD provider 
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1 and facility value-based purchasing program and 

2 recommendations on such issues; and 

3 (2) recommendations for such legislation and 

4 administrative actions as the Commission considers 

5 appropriate. 

6 (c) CONSIDERATION OF DEMONSTRATION

7 PROJECT.—In preparing the report to be submitted under 

8 subsection (a), the Commission shall take into account the 

9 results to date of the demonstration of bundled case-mix 

10 adjusted payment system for ESRD services under section 

11 623(e) of the Medicare Prescription Drug, Improvement, 

12 and Modernization Act of 2003 (42 U.S.C. 1395rr note). 

13 SEC. 506. SENSE OF THE SENATE REGARDING AN UPDATE 

14 TO THE COMPOSITE RATE PAYMENT FOR DI15 ALYSIS SERVICES. 

16 It is the sense of the Senate that— 

17 (1) while the provisions of, and amendments 

18 made by, this Act develop a value-based purchasing 

19 program for providers of services and renal dialysis 

20 facilities furnishing dialysis services to medicare 

21 beneficiaries, Congress should address the need for 

22 an update to the composite rate payment for dialysis 

23 services under section 1881(b)(12) of the Social Se24 curity Act (42 U.S.C. 1395rr(b)(12)) in order to en25 sure— 
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•S 1356 IS 

1 (A) appropriate reimbursement under the 

2 medicare program for such services that is con3 sistent with high quality and efficient delivery 

4 of such services; and 

5 (B) future access to, and the affordability 

6 of, such services for medicare beneficiaries; 

7 (2) if Congress determines that an update to 

8 such composite rate payment is appropriate, Con9 gress should ensure that the update takes into ac10 count any change in the costs of furnishing dialysis 

11 services resulting from— 

12 (A) the adoption of scientific and techno13 logical innovations used to provide such serv14 ices; 

15 (B) changes in the manner or method of 

16 furnishing such services; and 

17 (C) productivity improvements in the fur18 nishing of such services. 
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•S 1356 IS 

1 TITLE VI—VALUE-BASED PUR2 CHASING FOR HOME HEALTH 

3 AGENCIES 

4 SEC. 601. HOME HEALTH AGENCY VALUE-BASED PUR5 CHASING PROGRAM. 

6 (a) UPDATE FOR HOME HEALTH AGENCIES THAT

7 SUBMIT QUALITY DATA.—Section 1895(b)(3)(B) (42 

8 U.S.C.fff(b)(3)(B)) is amended— 

9 (1) in clause (ii)(IV), by inserting ‘‘subject to 

10 clause (v),’’ after ‘‘subsequent year,’’; and 

11 (2) by adding at the end the following new 

12 clause: 

13 ‘‘(v) ADJUSTMENT IF QUALITY DATA

14 NOT SUBMITTED.— 

15 ‘‘(I) ADJUSTMENT.—For pur16 poses of clause (ii)(IV), for 2007 and 

17 each subsequent year, in the case of a 

18 home health agency that does not sub19 mit data in accordance with subclause 

20 (II) with respect to such a year, the 

21 home health market basket percentage 

22 increase applicable under such clause 

23 for such year shall be reduced by 2 

24 percentage points. Such reduction 

25 shall apply only with respect to the 
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•S 1356 IS 

1 year involved, and the Secretary shall 

2 not take into account such reduction 

3 in computing the prospective payment 

4 amount under this section for a subse5 quent year. 

6 ‘‘(II) SUBMISSION OF QUALITY

7 DATA.—For 2007 and each subse8 quent year, each home health agency 

9 shall submit to the Secretary such 

10 data that the Secretary determines is 

11 appropriate for the measurement of 

12 health care quality, including data 

13 necessary for the operation of the 

14 home health agency value-based pur15 chasing program under section 

16 1860E–6. Such data shall be sub17 mitted in a form and manner, and at 

18 a time, specified by the Secretary for 

19 purposes of this clause. 

20 ‘‘(III) The Secretary shall estab21 lish procedures for making data sub22 mitted under subclause (II) available 

23 to the public in a clear and under24 standable form.’’. 
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•S 1356 IS 

1 (b) PROGRAM.—Title XVIII (42 U.S.C. 1395 et seq.) 

2 is amended by inserting after section 1860E–5, as added 

3 by section 501(b), the following new section: 

4 ‘‘HOME HEALTH AGENCY VALUE-BASED PURCHASING

5 PROGRAM

6 ‘‘SEC. 1860E–6. (a) PROGRAM.— 

7 ‘‘(1) IN GENERAL.—The Secretary shall estab8 lish a program under which value-based payments 

9 are provided each year to home health agencies that 

10 demonstrate the provision of high quality health care 

11 to individuals entitled to benefits under part A or 

12 enrolled under part B. 

13 ‘‘(2) PROGRAM TO BEGIN IN 2008.—The Sec14 retary shall establish the program under this section 

15 so that value-based payments described in subsection 

16 (b) are made with respect to 2008 and each subse17 quent year. 

18 ‘‘(3) HOME HEALTH AGENCY DEFINED.—In 

19 this section, the term ‘‘home health agency’’ has the 

20 meaning given that term in section 1861(o). 

21 ‘‘(b) VALUE-BASED PAYMENTS.— 

22 ‘‘(1) IN GENERAL.—Subject to paragraph (4), 

23 the Secretary shall make a value-based payment to 

24 a home health agency with respect to a year if the 

25 Secretary determines that the quality of the care 

26 provided in that year by the agency to individuals 
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•S 1356 IS 

1 entitled to benefits under part A or enrolled under 

2 part B— 

3 ‘‘(A) has substantially improved (as deter4 mined by the Secretary) over the prior year; or 

5 ‘‘(B) exceeds a threshold established by the 

6 Secretary. 

7 ‘‘(2) USE OF SYSTEM.—In determining which 

8 home health agencies qualify for a value-based pay9 ment under paragraph (1), the Secretary shall use 

10 the quality measurement system developed for this 

11 section pursuant to section 1860E–1(a). 

12 ‘‘(3) DETERMINATION OF AMOUNT OF AWARD

13 AND ALLOCATION OF AWARDS.— 

14 ‘‘(A) IN GENERAL.—The Secretary shall 

15 determine— 

16 ‘‘(i) the amount of a value-based pay17 ment under paragraph (1) provided to a 

18 home health agency; and 

19 ‘‘(ii) subject to subparagraph (B), the 

20 allocation of the total amount available 

21 under subsection (d) for value-based pay22 ments for any year between payments with 

23 respect to agencies that meet the require24 ment under subparagraph (A) of para25 graph (1) and agencies that meet the re-
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•S 1356 IS 

1 quirement under subparagraph (B) of such 

2 paragraph. 

3 ‘‘(B) REQUIREMENTS REGARDING THE

4 AMOUNT OF FUNDING AVAILABLE FOR VALUE5 BASED PAYMENTS FOR AGENCIES EXCEEDING A

6 THRESHOLD.—The Secretary shall ensure 

7 that— 

8 ‘‘(i) a majority of the total amount 

9 available under subsection (d) for value10 based payments for any year is provided to 

11 home health agencies that are receiving 

12 such payments because they meet the re13 quirement under paragraph (1)(B); and 

14 ‘‘(ii) with respect to 2009 and each 

15 subsequent year, the percentage of the 

16 total amount available under subsection (d) 

17 for value-based payments for any year that 

18 is used to make payments to agencies that 

19 meet such requirement is greater than 

20 such percentage in the previous year. 

21 ‘‘(4) REQUIREMENTS.— 

22 ‘‘(A) REQUIRED SUBMISSION OF DATA.— 

23 In order for a home health agency to be eligible 

24 for a value-based payment for a year, the agen25 cy must have complied with the requirements 
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•S 1356 IS 

1 under section 1895(b)(3)(B)(v)(II) with respect 

2 to that year. 

3 ‘‘(B) ATTESTATION REGARDING DATA.—In 

4 order for a home health agency to be eligible for 

5 a value-based payment for a year, the agency 

6 must have provided the Secretary (under proce7 dures established by the Secretary) with an at8 testation that the data submitted under section 

9 1895(b)(3)(B)(v)(II) with respect to that year 

10 is complete and accurate. 

11 ‘‘(5) TOTAL AMOUNT OF VALUE-BASED PAY12 MENTS EQUAL TO TOTAL AMOUNT OF AVAILABLE

13 FUNDING.—The Secretary shall establish payment 

14 amounts under paragraph (3)(A) so that, as esti15 mated by the Secretary, the total amount of value16 based payments made in a year under paragraph (1) 

17 is equal to the total amount available under sub18 section (d) for such payments for the year. 

19 ‘‘(6) PAYMENT METHODS AND TIMING OF PAY20 MENTS.— 

21 ‘‘(A) IN GENERAL.—Subject to subpara22 graph (B), the payment of value-based pay23 ments under paragraph (1) shall be based on 

24 such a method as the Secretary determines ap25 propriate. 
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•S 1356 IS 

1 ‘‘(B) TIMING.—The Secretary shall ensure 

2 that value-based payments under paragraph (1) 

3 with respect to a year are made by not later 

4 than December 31 of the subsequent year. 

5 ‘‘(c) DESCRIPTION OF HOW AGENCIES WOULD HAVE

6 FARED UNDER PROGRAM IF PROGRAM HAD APPLIED TO

7 2007.—Not later than January 1, 2008, the Secretary 

8 shall provide each home health agency with a description 

9 of the Secretary’s estimate of how payments to the agency 

10 under this title would have been affected with respect to 

11 items and services furnished in 2007 if the program under 

12 this section (and the amendments made by subsections (a) 

13 and (c) of section 601 of the Medicare Value Purchasing 

14 Act of 2005) had been in effect with respect to 2007. 

15 ‘‘(d) FUNDING.— 

16 ‘‘(1) AMOUNT.—The amount available for 

17 value-based payments under this section with respect 

18 to a year shall be equal to the amount of the reduc19 tion in expenditures under the the Federal Hospital 

20 Insurance Trust Fund under section 1817 and Fed21 eral Supplementary Medical Insurance Trust Fund 

22 under section 1841 in the year as a result of the ap23 plication of section 1895(b)(3)(D), as estimated by 

24 the Secretary. 
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•S 1356 IS 

1 ‘‘(2) PAYMENTS FROM TRUST FUND.—Pay2 ments to home health agencies under this section 

3 shall be made from the the Federal Hospital Insur4 ance Trust Fund and Federal Supplementary Med5 ical Insurance Trust Fund, in the same proportion 

6 as payments for home health services are made from 

7 such trust funds.’’. 

8 (c) REDUCTION IN STANDARD PROSPECTIVE PAY9 MENT AMOUNT FOR AGENCIES THAT SUBMIT QUALITY

10 DATA IN ORDER TO FUND PROGRAM.—Section 

11 1895(b)(3) (42 U.S.C. 1395fff(b)(3)) is amended by add12 ing at the end the following new subparagraph: 

13 ‘‘(D) REDUCTION IN ORDER TO FUND

14 VALUE-BASED PURCHASING PROGRAM.— 

15 ‘‘(i) IN GENERAL.—For 2008 and 

16 each subsequent year, in the case of a 

17 home health agency that complies with the 

18 submission requirements under section 

19 1895(b)(3)(B)(v)(II) for the year, the 

20 standard prospective payment amount (or 

21 amounts) otherwise applicable under this 

22 paragraph for the year shall be reduced by 

23 the applicable percent. 
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•S 1356 IS 

1 ‘‘(ii) APPLICABLE PERCENT.—For 

2 purposes of clause (i), the term ‘applicable 

3 percent’ means— 

4 ‘‘(I) for 2008, 1.0 percent; 

5 ‘‘(II) for 2009, 1.25 percent; 

6 ‘‘(III) for 2010, 1.5 percent; 

7 ‘‘(IV) for 2011, 1.75 percent; 

8 and 

9 ‘‘(V) for 2012 and each subse10 quent year, 2.0 percent.’’. 

11 TITLE VII—VALUE-BASED PUR12 CHASING FOR SKILLED NURS13 ING FACILITIES 

14 SEC. 701. REQUIREMENT FOR SKILLED NURSING FACILI15 TIES TO REPORT FUNCTIONAL CAPACITY OF 

16 MEDICARE RESIDENTS UPON ADMISSION 

17 AND DISCHARGE. 

18 Section 1819(b) (42 U.S.C. 1395i–3(b)) is amended 

19 by adding at the end the following new paragraph: 

20 ‘‘(9) REPORTING FUNCTIONAL CAPACITY AT AD21 MISSION AND DISCHARGE.— 

22 ‘‘(A) IN GENERAL.—On and after October 

23 1, 2006, a skilled nursing facility must submit 

24 a report to the Secretary on the functional ca-
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•S 1356 IS 

1 pacity of each resident who is entitled to bene2 fits under this part at the time of— 

3 ‘‘(i) the admission of such resident; 

4 and 

5 ‘‘(ii) the discharge of such resident. 

6 ‘‘(B) TIMEFRAME.—A report required 

7 under subparagraph (A) shall be submitted 

8 within 10 days of the admission or discharge, 

9 as the case may be.’’. 

10 SEC. 702. HHS STUDY ON MEASURES OF QUALITY FOR 

11 SKILLED NURSING FACILITIES; VOLUNTARY 

12 REPORTING OF SKILLED NURSING FACILITY 

13 QUALITY DATA. 

14 (a) HHS STUDY AND REPORT ON MEASURES OF

15 QUALITY FOR SKILLED NURSING FACILITIES.— 

16 (1) STUDY.—The Secretary shall conduct a 

17 study to determine the appropriate measures, includ18 ing process and staffing measures, that should be 

19 used to evaluate the quality of the health care pro20 vided by skilled nursing facilities to individuals who 

21 are entitled to benefits under part A of title XVIII 

22 of the Social Security Act. 

23 (2) REPORT.—Not later than July 1, 2008, the 

24 Secretary shall submit a report to Congress on the 

25 study conducted under paragraph (1) together with 
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•S 1356 IS 

1 recommendations for such legislation and adminis2 trative actions as the Secretary considers appro3 priate. 

4 (3) CONSULTATION.—In conducting the study 

5 under paragraph (1) and preparing the report under 

6 paragraph (2), the Secretary shall consult with the 

7 entities described in subsections (c)(1), (c)(2), and 

8 (d) of section 1860E–1 of the Social Security Act, 

9 as added by section 101. 

10 (b) VOLUNTARY SUBMISSION OF SKILLED NURSING

11 FACILITY QUALITY DATA.— 

12 (1) UPDATE FOR SKILLED NURSING FACILITIES

13 THAT SUBMIT QUALITY DATA.—Section 

14 1888(e)(4)(E) (42 U.S.C. 1395yy(e)(4)(E)) is 

15 amended— 

16 (A) in clause (ii)(IV), by inserting ‘‘subject 

17 to clause (iii),’’ after ‘‘subsequent fiscal year,’’; 

18 and 

19 (B) by adding at the end the following new 

20 clause: 

21 ‘‘(iii) ADJUSTMENT IF QUALITY DATA

22 NOT SUBMITTED.— 

23 ‘‘(I) ADJUSTMENT.—For pur24 poses of clause (ii)(IV), for fiscal year 

25 2009 and each subsequent fiscal year, 
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•S 1356 IS 

1 in the case of a skilled nursing facility 

2 that does not submit data in accord3 ance with subclause (II) with respect 

4 to such a fiscal year, the skilled nurs5 ing facility market basket percentage 

6 change applicable under such clause 

7 for such fiscal year shall be reduced 

8 by 2 percentage points. Such reduc9 tion shall apply only with respect to 

10 the fiscal year involved, and the Sec11 retary shall not take into account 

12 such reduction in computing the Fed13 eral per diem rate under this section 

14 for a subsequent fiscal year. 

15 ‘‘(II) SUBMISSION OF QUALITY

16 DATA.—For fiscal year 2009 and each 

17 subsequent fiscal year, each skilled 

18 nursing facility shall submit to the 

19 Secretary such data that the Sec20 retary determines is appropriate for 

21 the measurement of health outcomes 

22 and other indices of quality. Such 

23 data shall be submitted in a form and 

24 manner, and at a time, specified by 
95 

•S 1356 IS 

1 the Secretary for purposes of this 

2 clause. 

3 ‘‘(III) The Secretary shall estab4 lish procedures for making data sub5 mitted under subclause (II) available 

6 to the public in a clear and under7 standable form. Such procedures shall 

8 ensure that a facility has the oppor9 tunity to review the data that is to be 

10 made public with respect to the facil11 ity prior to such data being made 

12 public.’’. 

13 SEC. 703. MEDPAC STUDY AND REPORT REGARDING A 

14 VALUE-BASED PURCHASING PROGRAM FOR 

15 SKILLED NURSING FACILITIES. 

16 (a) STUDY.—The Medicare Payment Advisory Com17 mission shall conduct a study on the advisability and feasi18 bility of establishing a value-based purchasing program 

19 under the medicare program under title XVIII of the So20 cial Security Act for skilled nursing facilities (as defined 

21 in section 1819(a) of such Act (42 U.S.C. 1395i–3(a)). 

22 (b) REPORT.—Not later than March 1, 2009, the 

23 Commission shall submit a report to Congress and the 

24 Secretary on the study conducted under subsection (a) to25 gether with recommendations for such legislation and ad-
96 

•S 1356 IS 

1 ministrative actions as the Commission considers appro2 priate. 

3 TITLE VIII—ADDITIONAL 

4 PROVISIONS 

5 SEC. 801. EXCEPTION TO FEDERAL ANTI-KICKBACK AND 

6 PHYSICIAN SELF REFERRAL LAWS FOR THE 

7 PROVISION OF PERMITTED SUPPORT. 

8 (a) ANTI-KICKBACK.—Section 1128B(b) (42 U.S.C. 

9 1320a–7b(b)(3)) is amended— 

10 (1) in paragraph (3)— 

11 (A) in subparagraph (G), by striking 

12 ‘‘and’’ at the end; 

13 (B) in subparagraph (H), as added by sec14 tion 237(d) of the Medicare Prescription Drug, 

15 Improvement, and Modernization Act of 2003 

16 (Public Law 108–173; 117 Stat. 2213)— 

17 (i) by moving such subparagraph 2 

18 ems to the left; and 

19 (ii) by striking the period at the end 

20 and inserting a semicolon; 

21 (C) by redesignating subparagraph (H), as 

22 added by section 431(a) of the Medicare Pre23 scription Drug, Improvement, and Moderniza24 tion Act of 2003 (Public Law 108–173; 117 

25 Stat. 2287), as subparagraph (I); 
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•S 1356 IS 

1 (D) in subparagraph (I), as so redesig2 nated— 

3 (i) by moving such subparagraph 2 

4 ems to the left; and 

5 (ii) by striking the period at the end 

6 and inserting ‘‘; and’’; and 

7 (E) by adding at the end the following 

8 new: 

9 ‘‘(J) during the 5-year period beginning on 

10 the date the Secretary issues the interim final 

11 rule under section 801(c)(1) of the Medicare 

12 Value Purchasing Act of 2005, the provision, 

13 with or without charge, of any permitted sup14 port (as defined in paragraph (4)).’’; and 

15 (2) by adding at the end the following new 

16 paragraph: 

17 ‘‘(4) PERMITTED SUPPORT.— 

18 ‘‘(A) DEFINITION OF PERMITTED SUP19 PORT.—Subject to subparagraph (B), in this 

20 section, the term ‘permitted support’ means the 

21 provision of any equipment, item, information, 

22 right, license, intellectual property, software, 

23 training, or service used for developing, imple24 menting, operating, or facilitating the use of 

25 systems designed to improve the quality of 
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•S 1356 IS 

1 health care and to promote the electronic ex2 change of health information. 

3 ‘‘(B) EXCEPTION.—The term ‘permitted 

4 support’ shall not include the provision of— 

5 ‘‘(i) any support that is determined in 

6 a manner that is related to the volume or 

7 value of any referrals or other business 

8 generated between the parties for which 

9 payment may be made in whole or in part 

10 under a Federal health care program; 

11 ‘‘(ii) any support that has more than 

12 incidental utility or value to the recipient 

13 beyond the exchange of health care infor14 mation; or 

15 ‘‘(iii) any health information tech16 nology system, product, or service that is 

17 not capable of exchanging health care in18 formation in compliance with data stand19 ards consistent with interoperability. 

20 ‘‘(C) DETERMINATION.—In establishing 

21 regulations with respect to the requirement 

22 under subparagraph (B)(iii), the Secretary shall 

23 take in account— 

24 ‘‘(I) whether the health information 

25 technology system, product, or service is 
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•S 1356 IS 

1 widely accepted within the industry and 

2 whether there is sufficient industry experi3 ence to ensure successful implementation 

4 of the system, product, or service; and 

5 ‘‘(II) whether the health information 

6 technology system, product, or service im7 proves quality of care, enhances patient 

8 safety, or provides greater administrative 

9 efficiencies.’’. 

10 (b) PHYSICIAN SELF-REFERRAL.—Section 1877(e) 

11 (42 U.S.C. 1395nn(e)) is amended by adding at the end 

12 the following new paragraph: 

13 ‘‘(9) PERMITTED SUPPORT.—During the 5-year 

14 period beginning on the date the Secretary issues 

15 the interim final rule under section 801(c)(1) of the 

16 Medicare Value Purchasing Act of 2005, the provi17 sion, with or without charge, of any permitted sup18 port (as defined in section 1128B(b)(4)).’’. 

19 (c) REGULATIONS.—In order to carry out the amend20 ments made by this section— 

21 (1) the Secretary shall issue an interim final 

22 rule with comment period by not later than the date 

23 that is 180 days after the date of enactment of this 

24 Act; 
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•S 1356 IS 

1 (2) the Secretary shall issue a final rule by not 

2 later than the date that is 180 days after the date 

3 that the interim final rule under paragraph (1) is 

4 issued. 

5 SEC. 802. NATIONAL HEALTH INFORMATION NETWORK 

6 PILOT PROJECT. 

7 (a) PILOT PROJECT.— 

8 (1) ESTABLISHMENT.—For the purpose of im9 proving health care quality, not later than 6 months 

10 after the date of enactment of this Act, the Sec11 retary, in consultation with the National Coordinator 

12 for Health Information Technology, shall establish a 

13 pilot project to facilitate the exchange of— 

14 (A) clinical claims and outcomes data with 

15 respect to beneficiaries under the medicare and 

16 medicaid programs, particularly such bene17 ficiaries who are dually eligible under such pro18 grams; and 

19 (B) clinical research findings and practice 

20 guidelines. 

21 (2) DURATION.—The pilot project under this 

22 section shall be conducted for a 3-year period. 

23 (3) SITES.—The Secretary shall conduct the 

24 pilot project in 4 regions that— 
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1 (A) include at least 3 distinct health care 

2 markets; and 

3 (B) are located in a State or multiple 

4 States. 

5 (4) PARTICIPANTS.—Participants in the pilot 

6 project under this section— 

7 (A) shall include a physician, a physician 

8 group practice, a hospital, a free-standing lab9 oratory, a renal dialysis provider or facility, a 

10 home health agency, a skilled nursing facility, a 

11 safety net provider, and any other entity or per12 son determined appropriate by the Secretary; 

13 and 

14 (B) may include regional health informa15 tion networks, health plans, providers under the 

16 medicare program not described in subpara17 graph (A), vendors of health information tech18 nology systems and software, academic entities, 

19 and other entities involved in the exchange of 

20 data related to patient health status, clinical 

21 care guidelines, medical research, billing, 

22 claims, and health care quality. 

23 (5) REQUIREMENT FOR PARTICIPANTS.—Par24 ticipants in the pilot project under this section 

25 shall— 
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1 (A) comply with any interoperability stand2 ards and certification requirements and proc3 esses that have been developed or adopted by 

4 the Secretary or a designee of the Secretary; 

5 (B) to the extent feasible, use existing re6 sources, including the Internet; and 

7 (C) incorporate data systems and software 

8 from more than one competing vendor. 

9 (6) WAIVER AUTHORITY.—The Secretary may 

10 waive such requirements of titles XI and XVIII of 

11 the Social Security Act as may be necessary to carry 

12 out the pilot project under this section. 

13 (b) REPORTS.— 

14 (1) IN GENERAL.—Not later than the date that 

15 is 6 months prior to the date that the pilot project 

16 under this section is completed, and not later than 

17 the date that is 6 months after the date the project 

18 is completed, the Secretary shall submit to Congress 

19 a report on the pilot project. 

20 (2) CONTENTS.—Each report submitted under 

21 paragraph (1) shall include— 

22 (A) an analysis of— 

23 (i) the methodologies for building a 

24 National Health Information Infrastruc25 ture; and 
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1 (ii) the impact of the pilot project on 

2 medicare beneficiaries, medicare providers, 

3 and the Medicare Trust Funds; 

4 (B) findings regarding access to, and the 

5 quality of, care, efficiency of resource use, vol6 ume and utilization rates, and the projected fu7 ture impact on the Medicare Trust Funds and 

8 other health care spending if the pilot project is 

9 expanded under subsection (c); 

10 (C) a detailed description if issued related 

11 to the nationwide expansion of the pilot project 

12 pursuant to subsection (c); and 

13 (D) recommendations for such legislation 

14 and administrative actions as the Secretary con15 siders appropriate, including actions related to 

16 the nationwide expansion of the pilot project 

17 under subsection (c). 

18 (3) MEDICARE TRUST FUNDS DEFINED.—In 

19 this title, the term ‘‘Medicare Trust Funds’’ means 

20 the Federal Hospital Insurance Trust Fund under 

21 section 1817 of the Social Security Act (42 U.S.C. 

22 1395i) and the Federal Supplementary Medical In23 surance Trust Fund under section 1841 of such Act 

24 (42 U.S.C. 1395t). 
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1 (c) EXPANSION.—After conducting the pilot project 

2 under this section for not less than 2 years, the Secretary 

3 may transition and implement such project on a national 

4 basis. 

5 (d) FUNDING.—There are authorized to be appro6 priated to the Secretary such sums as may be necessary 

7 to carry out this section. 

8 SEC. 803. HEALTH CARE VALUE PROJECT. 

9 (a) PROJECT.— 

10 (1) ESTABLISHMENT.—Not later than 6 

11 months after the date of enactment of this Act, the 

12 Secretary shall establish a project to document, 

13 track, and quantify the value created, both in terms 

14 of patient outcomes and reduced expenditures under 

15 the Medicare Trust Funds, by delivering high-quality 

16 health care to individuals under the medicare pro17 gram under title XVIII of the Social Security Act. 

18 (2) DURATION.—The project under this section 

19 shall be conducted for a 1-year period. 

20 (3) PROJECT REQUIREMENTS.— 

21 (A) SITES.—The Secretary shall conduct 

22 the project under this section at 6 sites, of 

23 which— 

24 (i) 2 shall include community-based 

25 seatings; and 
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1 (ii) 2 shall include rural or frontier 

2 health care facilities. 

3 (B) TEAMS.— 

4 (i) IN GENERAL.—Under the project, 

5 the Secretary shall assign to each site se6 lected under subparagraph (A) a team 

7 made up of— 

8 (I) process engineers skilled at 

9 identifying and correcting flaws within 

10 the system of health care delivery; 

11 (II) health care providers and 

12 practitioners located at the site; and 

13 (III) activity-based cost account14 ants skilled at attaching real costs to 

15 health care outcomes. 

16 (ii) REQUIREMENT.—The Secretary 

17 should select members of the team under 

18 clause (i) from within the local community 

19 when possible. 

20 (C) DUTIES.— 

21 (i) IN GENERAL.—Under the project, 

22 members of the team assigned to a site 

23 shall perform detailed observations on the 

24 process of health care delivery, process 

25 analysis and improvement, and financial 
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1 analysis using hospital data, clinical data 

2 from the site, and medicare claims data. 

3 (ii) MEDICARE CLAIMS DATA.—In 

4 order to provide for a more complete anal5 ysis of the total costs and value of care, 

6 the Secretary shall make all medicare 

7 claims data available to members of the 

8 team so that links can be made to charges 

9 associated with physician visits, skilled 

10 nursing facility stays, and home health vis11 its, inpatient and outpatient rehabilitation, 

12 durable medical equipment, clinical labora13 tory tests and other diagnostic tests, in14 cluding imaging, and other items and serv15 ices furnished to medicare beneficiaries. 

16 (4) INCENTIVE PAYMENTS.—If the Secretary 

17 determines that the project under this section will 

18 result in reduced expenditures under the Medicare 

19 Trust Funds, the Secretary may make incentive pay20 ments at a site to encourage entities and persons to 

21 participate in the project. The total amount of such 

22 payments may not exceed the total amount of such 

23 reduced expenditures, as estimated by the Secretary. 

24 (5) WAIVER AUTHORITY.—The Secretary may 

25 waive such requirements of titles XI and XVIII of 
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1 the Social Security Act as may be necessary to carry 

2 out the project under this section. 

3 (b) REPORT.— 

4 (1) IN GENERAL.—Not later than 18 months 

5 after the date of enactment of this Act, the Sec6 retary shall submit to Congress a report on the 

7 project under this section. 

8 (2) CONTENTS.—The report submitted under 

9 paragraph (1) shall include— 

10 (A) a detailed description of the findings 

11 from each of the 6 sites at which the project 

12 was conducted; and 

13 (B) recommendations for such legislation 

14 and administrative actions as the Secretary con15 siders appropriate. 

16 (c) FUNDING.—There are authorized to be appro17 priated to the Secretary such sums as may be necessary 

18 to carry out this section. 

19 SEC. 804. DEMONSTRATION PROJECT ON DATA AGGREGA20 TION ACROSS ALL PAYORS OF HEALTH CARE 

21 SERVICES. 

22 (a) DEMONSTRATION PROJECT.— 

23 (1) ESTABLISHMENT.—Not later than 6 

24 months after the date of enactment of this Act, the 

25 Secretary shall establish a demonstration project to 
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1 evaluate the process, costs, and benefits of aggre2 gating data on quality of care across all payors of 

3 health care costs within health care delivery mar4 kets. 

5 (2) DATA.—In selecting data to be aggregated 

6 under the demonstration project under this section, 

7 the Secretary shall give priority to measures which 

8 have the most potential to inform health care deci9 sions by consumers and patients, to improve quality 

10 and efficiency of care delivered, and to be imple11 mented by providers in a timely manner. 

12 (3) DURATION.—The demonstration project 

13 under this section shall be conducted for a 2-year 

14 period. 

15 (4) SITES.—The Secretary shall conduct the 

16 demonstration project under this section in 3 health 

17 care delivery markets or geographic areas, at least 

18 1 of which shall be a market or an area where qual19 ity of care data is being aggregated from multiple 

20 sources in the private sector. 

21 (5) PARTICIPANTS.—Participants in the dem22 onstration project under this section may include re23 gional health information networks, health plans, 

24 self-insured employers, State health programs, and 

25 other entities responsible for payment of costs asso-
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1 ciated with health care coverage and with the ex2 change of data related to patient health status, bill3 ing, claims, and health care quality. 

4 (6) REQUIREMENT FOR PARTICIPANTS.—Par5 ticipants in the demonstration project under this 

6 section shall comply with any interoperability and 

7 certification standards and processes that have been 

8 developed or adopted by the Secretary or a designee 

9 of the Secretary. 

10 (7) WAIVER AUTHORITY.—The Secretary may 

11 waive such requirements of titles XI and XVIII of 

12 the Social Security Act as may be necessary to carry 

13 out the demonstration project under this section. 

14 (b) REPORT.— 

15 (1) IN GENERAL.—Not later than 1 year after 

16 the demonstration project under this section is com17 pleted, the Secretary shall submit to Congress a re18 port on the demonstration project. 

19 (2) CONTENTS.—The report submitted under 

20 paragraph (1) shall include— 

21 (A) an analysis of— 

22 (i) the methodologies for data aggre23 gation, including processes for aggregation, 

24 analysis, attribution, risk adjustment, and 

25 reporting; 
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1 (ii) issues related to privacy, security, 

2 and data ownership; 

3 (iii) the cost-effectiveness of different 

4 methodologies for data aggregation; and 

5 (iv) the effects of aggregation on the 

6 information provided to consumers and pa7 tients; and 

8 (B) recommendations for such legislation 

9 and administrative actions as the Secretary con10 siders appropriate. 

11 (d) FUNDING.—There are authorized to be appro12 priated to the Secretary such sums as may be necessary 

13 to carry out this section. 

14 SEC. 805. GAO STUDIES AND REPORTS ON THE ACCURACY 

15 AND COMPLETENESS OF QUALITY DATA. 

16 (a) STUDIES.—The Comptroller General of the 

17 United States shall conduct a study on the following: 

18 (1) The accuracy and completeness of the data 

19 submitted by hospitals pursuant to section 

20 1886(b)(3)(B)(viii)(II) of the Social Security Act, as 

21 added by section 201(a)(1)(B), and the appropriate22 ness of value-based payments made to hospitals 

23 under section 1860E–2 of such Act, as added by 

24 section 201(b), based on such data. 
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1 (2) The accuracy and completeness of the data 

2 submitted by physicians and practitioners pursuant 

3 to section 1848(d)(4)(G)(ii) of the Social Security 

4 Act, as added by section 301(a)(1), and the appro5 priateness of value-based payments made to physi6 cians and practitioners under section 1860E–3 of 

7 such Act, as added by section 301(b), based on such 

8 data. 

9 (3) The accuracy and completeness of the data 

10 submitted by organizations pursuant to sections 

11 1852(e)(3) and 1876(h)(6) of the Social Security 

12 Act, as added by section 401(a), and the appro13 priateness of value-based payments made to organi14 zations under section 1860E–4 of such Act, as 

15 added by section 401(b), based on such data. 

16 (4) The accuracy and completeness of the data 

17 submitted by providers of services and renal dialysis 

18 facilities pursuant to subsection (b)(4) of section 

19 1860E–5 of the Social Security Act, as added by 

20 section 501(b), and the appropriateness of value21 based payments made to organizations under such 

22 section 1860E–5 based on such data. 

23 (5) The accuracy and completeness of the data 

24 submitted by home health agencies pursuant to sec25 tion 1895(b)(3)(B)(v)(II) of the Social Security Act, 
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1 as added by section 601(a), and the appropriateness 

2 of value-based payments made to organizations 

3 under such section 1860E–6 of such Act, as added 

4 by section 601(b), based on such data. 

5 (b) REPORTS.—Not later than 2 years after the im6 plementation of each of the value-based purchasing pro7 grams under sections 1860E–2, 1860E–3, 1860E–4, 

8 1860E–5, and 1860E–6 of the Social Security Act, as 

9 added by this Act, the Comptroller General of the United 

10 States shall submit to Congress and the Secretary a report 

11 on the study conducted under subsection (a) that relates 

12 to data used under the applicable program, together with 

13 such recommendations for legislative or administrative ac14 tion as the Comptroller General determines to be appro15 priate. 

16 SEC. 806. HHS STUDY AND REPORT REGARDING TELE17 HEALTH AND TELEMEDICINE. 

18 (a) STUDY.—The Secretary shall conduct, or contract 

19 with a private entity to conduct, a study that examines 

20 the following: 

21 (1) The variation among State laws that relate 

22 to the licensure of physicians and practitioners (as 

23 defined in section 1860E–3(a)(3) of the Social Secu24 rity Act, as added by section 301(b)). 
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1 (2) How such variation impacts the electronic 

2 exchange of health information for the purposes of 

3 telehealth and telemedicine. 

4 (3) How such variation impacts the quality and 

5 safety of care furnished to, the experience of, and 

6 the financial cost incurred by, individuals in under7 served and frontier areas who must travel long dis8 tances for routine visits with out-of-State physicians 

9 and practitioners (as so defined). 

10 (4) The potential for interstate coordination be11 tween State licensure boards in regulating the prac12 tices of physician and practitioners (as so defined) 

13 to improve the matters described in paragraph (3), 

14 and the potential costs of such coordination. 

15 (b) REPORT.—Not later than 1 year after the date 

16 of enactment of this Act, the Secretary shall submit a re17 port to Congress on the study conducted under subsection 

18 (a) together with recommendations for such legislation 

19 and administrative actions as the Secretary considers ap20 propriate. 

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