II 

111TH CONGRESS 

1ST SESSION S. 295 

To amend title XVIII of the Social Security Act to improve the quality 

and efficiency of the Medicare program through measurement of readmission rates and resource use and to develop a pilot program to provide 

episodic payments to organized groups of multispecialty and multilevel 

providers of services and suppliers for hospitalization episodes associated 

with select, high cost diagnoses. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 21, 2009 

Mr. BINGAMAN 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 improve 

the quality and efficiency of the Medicare program 

through measurement of readmission rates and resource 

use and to develop a pilot program to provide episodic 

payments to organized groups of multispecialty and 

multilevel providers of services and suppliers for hospitalization episodes associated with select, high cost diagnoses. 

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


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Medicare Quality and 

3 Payment Reform Act of 2009’’. 

4 SEC. 2. FINDINGS. 

5 (a) FINDINGS RELATING TO MEDICARE REPORTING

6 OF READMISSION RATES AND RESOURCE USE AND THE

7 MEDICARE FEE-FOR-SERVICE PAYMENT SYSTEM.—Con8 gress makes the following findings: 

9 (1) The Medicare program under title XVIII of 

10 the Social Security Act (42 U.S.C. 1395 et seq.) 

11 does not publically or privately report to health care 

12 providers on resource use and, as a result, many 

13 health care providers are unaware of their practices 

14 with respect to resource use. 

15 (2) In 2008, the Congressional Budget Office 

16 reported that areas with higher Medicare spending 

17 scored lower, on average, on a composite indicator of 

18 quality of care furnished to Medicare beneficiaries. 

19 (3) Feedback on resource use has been shown 

20 to increase awareness among health care providers 

21 and encourage positive behavioral changes. 

22 (4) The Medicare program pays for all patient 

23 hospitalizations based on the diagnosis, regardless of 

24 whether the hospitalization is a readmission or the 

25 initial episode of care. 


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1 (5) The Medicare Payment Advisory Commis2 sion reports that within 30 days of discharge from 

3 a hospital, 17.6 percent of admissions are re4 admitted to the hospital. In 2005, the Medicare pro5 gram spent $15,000,000,000 on such readmissions. 

6 (6) The Commonwealth Fund Commission on a 

7 High Performance Health System found that Medi8 care 30-day readmission rates varied from 14 per9 cent to 22 percent with respect to the lowest and 

10 highest decile of States. 

11 (b) FINDINGS RELATING TO THE BUNDLING OF

12 MEDICARE PAYMENTS TO HEALTH CARE PROVIDERS.— 

13 Congress makes the following findings: 

14 (1) Bundled payments incentivize health care 

15 providers to determine and provide the most efficient 

16 mix of services to Medicare beneficiaries with regard 

17 to cost and quality. 

18 (2) The Medicare Payment Advisory Commis19 sion reports that bundled payments around a given 

20 episode of care under the Medicare program would 

21 encourage collaboration among providers of services 

22 and suppliers, reduce fragmentation in health care 

23 delivery, and improve the accountability for cost and 

24 the quality of care. 


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1 (3) The Medicare Participating Heart Bypass 

2 Center Demonstration which was conducted during 

3 the period of 1990 to 1996 found that bundled pay4 ments for cardiac bypass cases were successful in re5 ducing spending on laboratory diagnostics, pharmacy 

6 services, intensive care, physician consults, and post7 discharge care while maintaining a high quality of 

8 care. The Medicare program saved approximately 10 

9 percent on bypass patients treated under the dem10 onstration. 

11 (4) The 16th Commonwealth Fund/Modern 

12 Healthcare Health Care Opinion Leaders Survey, released November 3, 2008, found that more than 2 13 ⁄3

14 of respondents reported that the fee-for-service pay15 ment system under the Medicare program is not ef16 fective at encouraging high quality and efficient care 

and more than 3 17 ⁄4 of respondents reported preferring 

18 a move toward bundled per patient payments under 

19 the Medicare program. Respondents favored shared 

20 accountability for resource use as a means for improving efficiency, and at least 2 21 ⁄3 of respondents 

22 supported realigning payment incentives for pro23 viders of services and suppliers under the Medicare 

24 program in order to improve efficiency and effective25 ness. 


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1 SEC. 3. PAYMENT ADJUSTMENT FOR READMISSION RATES 

2 AND RESOURCE USE. 

3 (a) PAYMENT ADJUSTMENT.— 

4 (1) IN GENERAL.—Title XVIII of the Social Se5 curity Act (42 U.S.C. 1395 et seq.) is amended by 

6 adding at the end the following new section: 

7 ‘‘PAYMENT ADJUSTMENT FOR READMISSION RATES AND

8 RESOURCE USE

9 ‘‘SEC. 1899. (a) REPORTING OF READMISSION

10 RATES AND RESOURCE USE.— 

11 ‘‘(1) ANNUAL REVIEW.—Beginning not later 

12 than 1 year after the date of enactment of this sec13 tion, the Secretary shall conduct an annual review of 

14 readmission rates and resource use for conditions se15 lected by the Secretary under paragraph (5)— 

16 ‘‘(A) with respect to subsection (d) hos17 pitals and affiliated physicians (or similarly li18 censed providers of services and suppliers); and 

19 ‘‘(B) with respect to the program under 

20 this title. 

21 ‘‘(2) REPORTING.— 

22 ‘‘(A) TO HOSPITALS AND AFFILIATED PHY23 SICIANS.—Beginning not later than 1 year after 

24 the date of enactment of this section, taking 

25 into consideration the results of the annual re26 view under paragraph (1), the Secretary shall 


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1 provide confidential reports to subsection (d) 

2 hospitals and to affiliated physicians (or simi3 larly licensed providers of services and sup4 pliers) that measure the readmission rates and 

5 resource use for conditions selected by the Sec6 retary under paragraph (5). 

7 ‘‘(B) TO THE PUBLIC.—Beginning not 

8 later than 3 years after such date of enactment, 

9 taking into consideration the results of such an10 nual review, the Secretary shall make available 

11 to the public an annual report that measures 

12 the readmission rates and resource use under 

13 this title for conditions selected by the Sec14 retary under paragraph (5). Such annual re15 ports shall, to the extent practicable, be inte16 grated into public reporting of data submitted 

17 under section 1886(b)(3)(B)(viii) with respect 

18 to subsection (d) hospitals and data submitted 

19 under section 1848(m) with respect to eligible 

20 professionals. 

21 ‘‘(3) DEFINITION OF READMISSION.—The Sec22 retary shall define readmission for purposes of this 

23 section. Such definition shall— 


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1 ‘‘(A) include a time frame of at least 30 

2 days between the initial admission and the ap3 plicable readmission; 

4 ‘‘(B) capture readmissions to any hospital 

5 (as defined in section 1861(e)) or any critical 

6 access hospital (as defined in section 

7 1861(mm)(1)) and not be limited to readmis8 sions to the subsection (d) hospital of the initial 

9 admission; and 

10 ‘‘(C) ensure that the diagnosis for both the 

11 initial admission and the applicable readmission 

12 are related. 

13 ‘‘(4) PENALTIES FOR NON-REPORTING.—The 

14 Secretary shall establish procedures for the collection 

15 of data necessary to carry out this subsection. Such 

16 procedures shall— 

17 ‘‘(A) subject to subparagraph (B), provide 

18 for the imposition of penalties for subsection 

19 (d) hospitals and affiliated physicians (or simi20 larly licensed providers of services and sup21 pliers) that do not submit such data; and 

22 ‘‘(B) include a hardship exceptions process 

23 for affiliated physicians (and similarly licensed 

24 providers of services and suppliers) who do not 

25 have the resources to participate (except that 


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1 such process may not apply to more than 20 

2 percent of affiliated physicians (or similarly li3 censed providers of services and suppliers)). 

4 ‘‘(5) SELECTION OF CONDITIONS.— 

5 ‘‘(A) INITIAL SELECTION.—The Secretary 

6 shall select conditions for the reporting of read7 mission rates and resource use under this sub8 section— 

9 ‘‘(i) that have a high volume under 

10 this title; or 

11 ‘‘(ii) that have high readmission rates 

12 under this title. 

13 ‘‘(B) UPDATING CONDITIONS SELECTED.— 

14 Not less frequently than every 3 years, the Sec15 retary shall review and update as appropriate 

16 the conditions selected under subparagraph (A). 

17 ‘‘(6) TIME PERIOD OF MEASUREMENT.—The 

18 Secretary shall, as appropriate and subject to the re19 quirements of this subsection, determine an appro20 priate time period for the measurement of readmis21 sion rates and resource use for purposes of this sec22 tion. 

23 ‘‘(7) RISK ADJUSTMENT OF DATA.—The Sec24 retary shall make appropriate adjustments to any 

25 data used in analyzing or reporting readmission 


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1 rates and resource use under this section, including 

2 any data used to conduct the annual review under 

3 paragraph (1), in the preparation of reports under 

4 subparagraph (A) or (B) of paragraph (2), or in the 

5 determination of whether a subsection (d) hospital 

6 or an affiliated physician (or a similarly licensed 

7 provider of services or supplier) has met the bench8 marks established under subsection (b)(1)(A)(i) to 

9 take into account variations in health status and 

10 other patient characteristics. 

11 ‘‘(8) INCORPORATION INTO QUALITY REPORT12 ING INITIATIVES.—The Secretary shall, to the extent 

13 practicable, incorporate readmission rates and re14 source use measurements into quality reporting ini15 tiatives for other Medicare payment systems, includ16 ing such initiatives with respect to skilled nursing 

17 facilities and home health agencies. 

18 ‘‘(b) PAYMENT ADJUSTMENT FOR READMISSION

19 RATES AND RESOURCE USE.— 

20 ‘‘(1) IN GENERAL.— 

21 ‘‘(A) BENCHMARKS.— 

22 ‘‘(i) IN GENERAL.—The Secretary 

23 shall establish benchmarks for measuring 

24 the readmission rates and resource use of 

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1 sicians (or similarly licensed providers of 

2 services and suppliers) under this section. 

3 ‘‘(ii) REPORT TO CONGRESS ON

4 METHODOLOGIES USED TO ESTABLISH

5 BENCHMARKS.—Not later than 2 years 

6 after the date of enactment of this section, 

7 the Secretary shall submit to Congress a 

8 report on the methodologies used to estab9 lish the benchmarks under clause (i). 

10 ‘‘(iii) RISK ADJUSTMENT OF DATA.— 

11 In determining whether a subsection (d) 

12 hospital has met the benchmarks estab13 lished under clause (i) for purposes of the 

14 payment adjustment under this subsection, 

15 the Secretary shall provide for risk adjust16 ment of data in accordance with subsection 

17 (a)(7). 

18 ‘‘(B) PAYMENT ADJUSTMENT.—Not later 

19 than 3 years after the date of enactment of this 

20 section, in the case of a subsection (d) hospital 

21 that the Secretary determines does not meet 1 

22 or more of the benchmarks established under 

23 subparagraph (A)(i) during the time period of 

24 measurement, the Secretary shall reduce the 

25 base operating DRG payment amount (as deVerDate Nov 24 2008 06:13 Jan 22, 2009 Jkt 079200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S295.IS S295

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1 fined in subparagraph (C)) for the subsection 

2 (d) hospital for each discharge occurring in the 

3 succeeding fiscal year by— 

4 ‘‘(i) 1 percent or an amount that the 

5 Secretary determines is proportionate to 

6 the number of readmissions of the sub7 section (d) hospital which exceed the appli8 cable benchmark established under sub9 paragraph (A)(i), whichever is greater; or 

10 ‘‘(ii) in the case where the Secretary 

11 updates the amount of the payment adjust12 ment under paragraph (3), such updated 

13 amount. 

14 ‘‘(C) BASE OPERATING DRG PAYMENT

15 AMOUNT DEFINED.— 

16 ‘‘(i) IN GENERAL.—Except as pro17 vided in clause (ii), in this subsection, the 

18 term ‘base operating DRG payment 

19 amount’ means, with respect to a sub20 section (d) hospital for a fiscal year— 

21 ‘‘(I) the payment amount that 

22 would otherwise be made under sec23 tion 1886(d) for a discharge if this 

24 subsection did not apply; reduced by 


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1 ‘‘(II) any portion of such pay2 ment amount that is attributable to 

3 payments under paragraphs (5)(A), 

4 (5)(B), (5)(F), and (12) of such sec5 tion 1886(d). 

6 ‘‘(ii) SPECIAL RULES FOR CERTAIN

7 HOSPITALS.— 

8 ‘‘(I) SOLE COMMUNITY HOS9 PITALS.—In the case of a sole com10 munity hospital, in applying clause 

11 (i)(I), the payment amount that would 

12 otherwise be made under subsection 

13 (d) for a discharge if this subsection 

14 did not apply shall be determined 

15 without regard to subparagraphs (I) 

16 and (L) of subsection (b)(3) of section 

17 1886 and subparagraph (D) of sub18 section (d)(5) of such section. 

19 ‘‘(II) HOSPITALS PAID UNDER

20 SECTION 1814.—In the case of a hos21 pital that is paid under section 

22 1814(b)(3), the term ‘base operating 

23 DRG payment amount’ means the 

24 payment amount under such section. 


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1 ‘‘(2) SHARED ACCOUNTABILITY.—The Sec2 retary shall examine ways to create shared account3 ability with providers of services and suppliers asso4 ciated with episodes of care, including how any pen5 alty could be distributed among such providers of 

6 services and suppliers as appropriate and how to 

7 avoid inappropriate gainsharing by such providers of 

8 services and suppliers. 

9 ‘‘(3) ANNUAL UPDATE.—The Secretary shall 

10 annually update the benchmarks established under 

11 paragraph (1)(A)(i) and the payment adjustment 

12 under paragraph (1)(B) to further incentivize im13 provements in readmission rates and resource use. 

14 ‘‘(4) INCORPORATION OF NEW MEASURES.—In 

15 the case where the Secretary updates the conditions 

16 selected under subsection (a)(5)(B), any new condi17 tion selected shall not be considered in determining 

18 whether a subsection (d) hospital has met the bench19 marks established under paragraph (1)(A)(i) for 

20 purposes of the payment adjustment under para21 graph (1)(B) during the period beginning on the 

22 date of the selection and ending 1 year after such 

23 date.’’. 

24 (2) CONFORMING AMENDMENT.—Section 

25 1886(d)(1)(A) of the Social Security Act (42 U.S.C. 


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1 1395ww(d)(1)(A)), in the matter preceding clause 

2 (i), is amended by striking ‘‘section 1813’’ and in3 serting ‘‘sections 1813 and 1899’’. 

4 (b) VOLUNTARY PILOT PROGRAM FOR BUNDLED

5 PAYMENTS FOR EPISODES OF TREATMENT.— 

6 (1) INITIAL IMPLEMENTATION.— 

7 (A) IN GENERAL.—The Secretary of 

8 Health and Human Services (in this subsection 

9 referred to as the ‘‘Secretary’’) shall establish a 

10 pilot program to provide episodic payments to 

11 hospitals and other organizing entities for items 

12 and services associated with hospitalization epi13 sodes of Medicare beneficiaries with respect to 

14 1 or more conditions selected under subpara15 graph (B). 

16 (B) SELECTION.—The Secretary shall ini17 tially implement the pilot program for hos18 pitalization episodes with respect to conditions 

19 that have a high volume, high readmission rate, 

20 or high rate of post-acute care under the Medi21 care program under title XVIII of the Social 

22 Security Act (42 U.S.C. 1395 et seq.) (as deter23 mined by the Secretary). 

24 (C) PAYMENTS.— 


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1 (i) IN GENERAL.—Under the pilot 

2 program, episodic payments shall— 

3 (I) be risk adjusted; and 

4 (II) cover all costs under parts A 

5 and B of the Medicare program asso6 ciated with a hospitalization episode 

7 with respect to the selected condition, 

8 which includes the period beginning 

9 on the date of hospitalization and 

10 ending 30 days after the date of dis11 charge. 

12 (ii) COMPATIBILITY OF PAYMENT

13 MECHANISMS.—The Secretary shall, to the 

14 extent feasible, ensure that the payment 

15 mechanism under the pilot program func16 tions with payment mechanisms under the 

17 original Medicare fee for service program 

18 under parts A and B of title XVIII of the 

19 Social Security Act and under the Medi20 care Advantage program under part C of 

21 such title. 

22 (iii) PROCESS.—Under the pilot pro23 gram, episodic payments shall be made to 

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1 ticipating hospitals and other organizing 

2 entities shall make payments to other pro3 viders of services and suppliers who fur4 nished items or services associated with the 

5 hospitalization episode (in an amount ne6 gotiated between the participating hospital 

7 and the provider of services or supplier). 

8 (iv) SAVINGS.—The Secretary shall 

9 establish procedures to ensure that the 

10 Secretary, participating hospitals or other 

11 organizing entities, providers of services, 

12 and suppliers share any savings associated 

13 with higher efficiency care furnished under 

14 the pilot program. 

15 (D) INCLUSION OF VARIETY OF PROVIDERS

16 OF SERVICES AND SUPPLIERS.—In selecting 

17 providers of services and suppliers to partici18 pate in the pilot program, the Secretary shall 

19 establish criteria to ensure the inclusion of a 

20 variety of providers of services and suppliers, 

21 including providers of services and suppliers 

22 that serve a wide range of Medicare bene23 ficiaries, including Medicare beneficiaries lo24 cated in rural and urban areas and low-income 

25 Medicare beneficiaries. 


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1 (E) DURATION.—The Secretary shall con2 duct the pilot program under this paragraph for 

3 a 5-year period. 

4 (F) IMPLEMENTATION.—The Secretary 

5 shall implement the pilot program not later 

6 than 2 years after the date of enactment of this 

7 Act. 

8 (G) DEFINITION OF ORGANIZING ENTI9 TY.—In this subsection, the term ‘‘organizing 

10 entity’’ means an entity responsible for the or11 ganization and administration of the furnishing 

12 of items and services associated with a hos13 pitalization episode of a Medicare beneficiary 

14 with respect to 1 or more conditions selected 

15 under subparagraph (B). 

16 (2) EXPANDED IMPLEMENTATION.— 

17 (A) ESTABLISHMENT OF THRESHOLDS

18 FOR EXPANSION.—The Secretary shall, prior to 

19 the implementation of the pilot program under 

20 paragraph (1), establish clear thresholds for use 

21 in determining whether implementation of the 

22 pilot program should be expanded under sub23 paragraph (B). 

24 (B) EXPANDED IMPLEMENTATION.—If the 

25 Secretary determines the thresholds established 


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1 under subparagraph (A) are met, the Secretary 

2 may expand implementation of the pilot pro3 gram to additional providers of services, sup4 pliers, and episodes of treatment not covered 

5 under the pilot program as conducted under 

6 paragraph (1), which may include the imple7 mentation of the pilot program on a national 

8 basis. 

9 (3) AUTHORIZATION OF APPROPRIATIONS.— 

10 There are authorized to be appropriated such sums 

11 as may be necessary to carry out this subsection. 

Æ 


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