by provider location and provider type of 
the 
type 
described 
in 
subparagraph 
(B)(ii)(II). 
‘‘(D) BASE
PERIOD
DEFINED.—In this 
paragraph, except as provided in subparagraph 
(C)(ii), the term ‘base period’ means the most 
recent 3-year period for which complete data 
are available to carry out this subsection. 
‘‘(g) FEE-FOR-SERVICE BUNDLED PAYMENT MODEL 
WITH SHARED SAVINGS AND SHARED LOSSES.— 
‘‘(1) FEE-FOR-SERVICE-BASED
PAYMENT.—If 
the payment model under this subsection is selected 
by a qualified entity, the Secretary shall pay pro-
viders of services and suppliers of the entity for ap-
plicable services for an applicable condition during 
an episode of care amounts payable under parts A 
and B for such services in the same manner as such 
providers and suppliers would otherwise be paid 
under such parts (referred to in this subsection as 
‘fee-for-service payments’). 
‘‘(2) SHARED SAVINGS AND LOSSES.— 
‘‘(A) COMPUTATION OF EACH QUALIFIED 
ENTITY’S
ACTUAL
STANDARDIZED
AVERAGE 
SPENDING PER EPISODE OF CARE.—In applying 
this subsection, in calculating the actual stand-
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ardized average fee-for-service spending per epi-
sode of care for a discharging hospital for each 
applicable condition in each agreement year, the 
Secretary shall exclude outlier episodes of care 
described in subsection (f)(2)(B)(ii)(I), as esti-
mated by the Secretary, based on data applica-
ble to payments in the agreement year and shall 
standardize such spending per episode of care 
in 
the 
manner 
provided 
in 
subsection 
(f)(2)(B)(ii)(II). For the purpose of identifying 
outlier episodes of care for each applicable con-
dition, the percentile ranking of each episode of 
care and applicable condition and the 95th per-
centile shall be based on payments standardized 
by adjustments for provider location and pro-
vider type of the type described in subsection 
(f)(2)(B)(ii)(II). 
‘‘(B) COMPUTATION
OF
GROSS
SHARED 
SAVINGS AND SHARED LOSSES FOR EACH AP-
PLICABLE CONDITION FOR EACH DISCHARGING 
HOSPITAL.—For purposes of applying subpara-
graph (C), if actual standardized average fee- 
for-service payments to a qualified entity for all 
episodes of care for an applicable condition in 
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an agreement year for a discharging hospital, 
as calculated under subparagraph (A), are— 
‘‘(i) less than the applicable spending 
target under subsection (f)(2)(C) for such 
condition, year, and hospital, there shall be 
a gross shared savings for such applicable 
condition, year, and hospital equal to 60 
percent of the difference between such ac-
tual average payments and the spending 
target for such condition, year, and hos-
pital; or 
‘‘(ii) greater than such applicable 
spending target, there shall be a gross 
shared loss for such applicable condition, 
year, and hospital equal to 60 percent of 
such difference. 
‘‘(C) RETROSPECTIVE RECONCILIATION.— 
‘‘(i) TOTALING
GROSS
SHARED
SAV-
INGS AND LOSSES FOR ALL CONDITIONS 
AND ALL DISCHARGING HOSPITALS FOR A 
QUALIFIED ENTITY.—At the end of each 
agreement year for each qualified entity, 
for purposes of applying clauses (ii) and 
(iii), the Secretary shall aggregate the 
gross shared savings and the gross shared 
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losses under subparagraph (B) of such en-
tity for the year for all applicable condi-
tions and for all discharging hospitals. 
‘‘(ii) PAYMENT
TO
ENTITY
OF
NET 
SAVINGS.—Subject to clause (iv) and sub-
section (j)(3) (relating to quality perform-
ance thresholds), if such aggregate gross 
shared savings exceeds such aggregate 
gross shared losses for a qualified entity 
for an agreement year, the Secretary shall 
pay to the qualified entity a lump sum 
amount equal to such excess for such year. 
‘‘(iii) COLLECTION FROM ENTITY OF 
NET
LOSSES.—Subject to clause (iv), if 
such aggregate gross shared losses exceeds 
such aggregate gross shared savings for a 
qualified entity for an agreement year, the 
qualified entity shall pay to the Secretary 
(and the Secretary shall collect from the 
entity) a lump sum amount equal to such 
excess for such year. 
‘‘(iv) CAP ON PAYMENTS.—In no case 
shall the payment under clause (ii) or (iii) 
with respect to a qualified entity for an 
agreement year exceed 10 percent of the 
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aggregate spending target for that quali-
fied entity for all applicable conditions and 
all discharging hospitals for that year. 
‘‘(h) PROSPECTIVE BUNDLED PAYMENT MODEL FOR 
ADVANCED QUALIFIED ENTITIES.— 
‘‘(1) IN GENERAL.—Subject to approval by the 
Secretary, if the payment model under this sub-
section is selected, a qualified entity may elect to re-
ceive a prospective bundled payment for each episode 
of care for each applicable condition and discharging 
hospital in the agreement year equal to the spending 
target for such episode, year, and hospital under 
subsection (f)(2) and the provisions of subsection (g) 
do not apply. Such spending target shall be ad-
justed, in the same manner described in subsection 
(g)(2)(B), in order to take into account outlier epi-
sodes of care and standardized adjustments for pro-
vider location and provider type of the type de-
scribed in subsection (f)(2)(B)(ii)(II). 
‘‘(2) RULE
OF
CONSTRUCTION.—Nothing in 
this section shall be construed as prohibiting a quali-
fied entity that receives bundled payments under 
this subsection from participating in an accountable 
care organization under section 1899. 
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‘‘(3) RELATIONSHIP TO BPCI.—The Secretary 
may not terminate the Bundled Payments for Care 
Improvement initiative conducted pursuant to sec-
tion 1115A until the prospective bundled payment 
model is implemented under this subsection. 
‘‘(i) QUALITY AND EFFICIENCY ARRANGEMENTS.— 
‘‘(1) IN
GENERAL.—Subject to subsection 
(c)(1)(D) (relating to application requirements for 
notice of quality and efficiency arrangements and 
their structure) and subsection (j)(3) (relating to 
minimum quality performance thresholds), qualified 
entities participating in either the fee-for-service 
bundled payment model under subsection (g) or the 
prospective bundled payment model under subsection 
(h) may enter into quality and efficiency arrange-
ments under which physicians and other health care 
practitioners work to improve the quality and effi-
ciency of care under this title. 
‘‘(2) TYPES OF ARRANGEMENTS.—The arrange-
ments under paragraph (1) shall take into account 
the utilization of the resources of providers of serv-
ices and suppliers and may provide for a distribution 
of a portion of any shared savings (or internal sav-
ing, as the case may be) realized under this section 
to qualifying providers and suppliers. 
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‘‘(j) QUALITY MEASURES.— 
‘‘(1) SELECTION; DEVELOPMENT.— 
‘‘(A) SELECTION.—For each applicable 
condition, the Secretary shall select quality 
measures related to care provided by providers 
of services and suppliers through qualified enti-
ties to which bundled payments are made under 
this section. In selecting quality measures, to 
the extent appropriate and practicable, the Sec-
retary shall choose measures that— 
‘‘(i) are endorsed and validated by the 
entity with a contract under section 1890; 
‘‘(ii) pertain to the National Quality 
Strategy’s six priorities; 
‘‘(iii) are used by the Secretary under 
other provisions of this title; and 
‘‘(iv) minimize the incremental data 
extraction and reporting burden on pro-
viders and suppliers. 
‘‘(B) DEVELOPMENT OF ELECTRONICALLY 
SPECIFIED
EPISODIC
MEASURES.—The Sec-
retary shall develop longitudinal quality and ef-
ficiency measures to assess performance of 
qualified entities with respect to patient out-
comes and the care provided for each applicable 
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condition across the associated episodes of care. 
Such measures shall be electronically specified 
for submittal through the use of qualified elec-
tronic health records (as defined in section 
3000(13) of the Public Health Service Act (42 
U.S.C. 300jj(13))). 
‘‘(2) REPORTING ON QUALITY MEASURES.— 
‘‘(A) IN
GENERAL.—A qualified entity 
shall submit data to the Secretary on quality 
measures selected under paragraph (1) for each 
agreement year in a form and manner specified 
by the Secretary consistent with the succeeding 
provisions of this paragraph. 
‘‘(B) SUBMISSION
OF
DATA
THROUGH 
ELECTRONIC HEALTH RECORD.—To the extent 
practicable, such data shall be submitted 
through the use of a qualified electronic health 
record (as defined in section 3000(13) of the 
Public 
Health 
Service 
Act 
(42 
U.S.C. 
300jj(13))). 
‘‘(C) SUBMISSION
OF
DATA
USED
IN 
OTHER
PROGRAMS.—Insofar as quality meas-
ures established under paragraph (1) are the 
same as those measures used by the Secretary 
under other provisions of this title, such as 
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those selected under section 1886(b)(3)(B)(viii), 
the Secretary shall use existing processes for 
the submission of data for such measures under 
this paragraph. 
‘‘(3) QUALITY PERFORMANCE THRESHOLDS.— 
‘‘(A) ESTABLISHMENT.—For each applica-
ble condition, the Secretary shall establish min-
imum quality performance thresholds for the 
measures established under paragraph (1). In 
the case of a quality and efficiency arrange-
ment, such performance thresholds shall be de-
veloped using the quality measures identified by 
the qualified entity in its application under sub-
section (c)(1)(D) if approved by the Secretary. 
‘‘(B) LOSS OF SHARED SAVINGS PAYMENT 
AND QUALITY AND EFFICIENCY ARRANGEMENTS 
FOR FAILURE TO MEET MINIMUM QUALITY PER-
FORMANCE THRESHOLDS.—If a qualified entity 
fails to meet the minimum quality performance 
thresholds established under subparagraph (A) 
for an agreement year— 
‘‘(i) no payment may be made to the 
entity under subsection (g)(2)(C)(ii) with 
respect to that year; and 
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‘‘(ii) the entity may not implement 
any quality and efficiency arrangement 
under subsection (i) for that year. 
‘‘(k) WAIVERS.— 
‘‘(1) IN GENERAL.—The Secretary shall waive 
such provisions of this title and title XI as may be 
necessary to carry out the program, including the 
following: 
‘‘(A) With respect to authorizing quality 
and efficiency arrangements between qualified 
entities and providers of services and suppliers, 
section 1877(a) (relating to physician self-refer-
ral), paragraphs (1) and (2) of sections 
1128A(b) (relating to the gainsharing civil 
money penalties), and paragraphs (1) and (2) 
of section 1128B(b) (relating to the anti-kick-
back statute). 
‘‘(B) Section 1128A(a)(5) of the Act (re-
lating to the inducement civil money penalties). 
‘‘(C) Section 1861(i) (relating to the 3-day 
acute hospitalization prerequisite before eligi-
bility for post-hospital extended care services). 
‘‘(D) With respect to home health serv-
ices— 
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‘‘(i) 
sections 
1814(a)(2)(C) 
and 
1835(a)(2)(A) (relating to the requirement 
that an individual be confined to home in 
order to be eligible for benefits for home 
health services); 
‘‘(ii) limitations on the amount, fre-
quency, and duration on home health serv-
ices; and 
‘‘(iii) prohibitions of free preoperative 
home safety assessments by home health 
agencies for patients scheduled to undergo 
surgery (such as under Advisory Opinion 
No. 06–01 of the Inspector General of the 
Department of Health and Human Serv-
ices). 
‘‘(2) AUTHORITY TO MODIFY WAIVERS UNDER 
CERTAIN CIRCUMSTANCES.— 
‘‘(A) IN GENERAL.—In the case of a quali-
fied entity with respect to which one or more 
waivers under paragraph (1) is in effect, if 
upon a review of the performance or an audit 
of the entity the Secretary finds a pattern of 
deficiencies or harm to applicable beneficiaries, 
the Secretary may modify or revoke any such 
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waiver at any time as applied to that qualified 
entity. 
‘‘(B) TERMINATION OF CERTAIN WAIVERS 
IN THE CASE OF EXCESS SHARED LOSSES.— 
‘‘(i) IN
GENERAL.—Subject to the 
process described in clause (ii), in the case 
of a qualified entity that has selected the 
payment model under subsection (g) and 
has gross shared losses exceeding the cap 
under subsection (g)(2)(C)(iv) with respect 
to an applicable condition, the Secretary 
shall terminate waivers described in para-
graphs (1)(C) and (1)(D) with respect to 
such qualified entity and applicable condi-
tion. 
‘‘(ii) 
PRE-TERMINATION
NOTICE.— 
The Secretary shall establish a process 
whereby a qualified entity is furnished no-
tice of any deficiency that may give rise to 
a termination of waivers under clause (i) 
not later than 6 months before the pro-
posed effective date of the termination. 
‘‘(l) INDEPENDENT EVALUATION AND REPORTS ON 
PROGRAM.— 
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