418 
Surface under clause (i), the sup-
plier of such item shall offer the 
individual the option to accept or 
reject transfer of title to a Group 
3 Support Surface after the 13th 
continuous month during which 
payment is made for the rental of 
the Group 3 Support Surface 
under clause (i). Such title shall 
be transferred to the individual 
only if the individual notifies the 
supplier not later than 1 month 
after the supplier makes such 
offer that the individual agrees to 
accept transfer of the title to the 
Group 3 Support Surface. Unless 
the individual accepts transfer of 
title to the Group 3 Support Sur-
face in the manner set forth in 
this subclause, the individual 
shall be deemed to have rejected 
transfer of title. If the individual 
agrees to accept the transfer of 
the title to the Group 3 Support 
Surface, the supplier shall trans-
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fer such title to the individual on 
the first day that begins after the 
13th continuous month during 
which payment is made for the 
rental of the Group 3 Support 
Surface under clause (i). 
‘‘(bb) SPECIAL
RULE.—If, 
on the effective date of this sub-
clause, an individual’s rental pe-
riod for a Group 3 Support Sur-
face has exceeded 10 continuous 
months, but the first day that be-
gins after the 13th continuous 
month during which payment is 
made for the rental under clause 
(i) has not been reached, the sup-
plier shall, within 1 month fol-
lowing such effective date, offer 
the individual the option to ac-
cept or reject transfer of title to 
a Group 3 Support Surface. Such 
title shall be transferred to the 
individual only if the individual 
notifies the supplier not later 
than 1 month after the supplier 
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makes such offer that the indi-
vidual agrees to accept transfer 
of title to the Group 3 Support 
Surface. Unless the individual ac-
cepts transfer of title to the 
Group 3 Support Surface in the 
manner set forth in this sub-
clause, the individual shall be 
deemed to have rejected transfer 
of title. If the individual agrees 
to accept the transfer of the title 
to the Group 3 Support Surface, 
the supplier shall transfer such 
title to the individual on the first 
day that begins after the 13th 
continuous month during which 
payment is made for the rental of 
the Group 3 Support Surface 
under clause (i) unless that day 
has passed, in which case the 
supplier shall transfer such title 
to the individual not later than 1 
month after notification that the 
individual accepts transfer of 
title. 
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‘‘(cc) TREATMENT OF SUB-
SEQUENT RESUPPLY WITHIN PE-
RIOD
OF
REASONABLE
USEFUL 
LIFETIME OF GROUP 3 SUPPORT 
SURFACE IN CASE OF NEED.—If 
an individual rejects transfer of 
title to a Group 3 Support Sur-
face under this subclause and the 
individual requires such Support 
Surface at any subsequent time 
during the period of the reason-
able useful lifetime of such equip-
ment (as defined by the Sec-
retary) beginning with the first 
month for which payment is 
made for the rental of such 
equipment under clause (i), the 
supplier shall supply the equip-
ment without charge to the indi-
vidual or the program under this 
title during the remainder of 
such period, other than payment 
for maintenance and servicing 
during such period which would 
otherwise have been paid if the 
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individual had accepted title to 
such equipment. The previous 
sentence shall not affect the pay-
ment of amounts under this part 
for such equipment after the end 
of such period of the reasonable 
useful lifetime of the equipment. 
‘‘(dd) PAYMENTS.—Mainte-
nance and servicing payments 
shall be made in accordance with 
clause (iv), in the case of a sup-
plier that transfers title to the 
Group 3 Support Surface under 
this subclause, after such trans-
fer and, in the case of an indi-
vidual who rejects transfer of 
title under this subclause, after 
the end of the period of medical 
need during which payment is 
made under clause (i).’’; and 
(2) in clause (iv), by inserting ‘‘or, in the case 
of an individual who rejects transfer of title to a 
Group 3 Support Surface under clause (ii), after the 
end of the period of medical need during which pay-
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ment is made under clause (i),’’ after ‘‘under clause 
(ii)’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to durable medical 
equipment not later than January 1, 2011. 
SEC. 
1142. 
EXTENSION 
OF 
PAYMENT 
RULE 
FOR 
BRACHYTHERAPY. 
Section 1833(t)(16)(C) of the Social Security Act (42 
U.S.C. 1395l(t)(16)(C)), as amended by section 142 of the 
Medicare Improvements for Patients and Providers Act of 
2008 (Public Law 110–275), is amended by striking, the 
first place it appears, ‘‘January 1, 2010’’ and inserting 
‘‘January 1, 2012’’. 
SEC. 1143. HOME INFUSION THERAPY REPORT TO CON-
GRESS. 
Not later than July 1, 2011, the Medicare Payment 
Advisory Commission shall submit to Congress a report 
on the following: 
(1) The scope of coverage for home infusion 
therapy in the fee-for-service Medicare program 
under title XVIII of the Social Security Act, Medi-
care Advantage under part C of such title, the vet-
eran’s health care program under chapter 17 of title 
38, United States Code, and among private payers, 
including an analysis of the scope of services pro-
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vided by home infusion therapy providers to their 
patients in such programs. 
(2) The benefits and costs of providing such 
coverage under the Medicare program, including a 
calculation of the potential savings achieved through 
avoided or shortened hospital and nursing home 
stays as a result of Medicare coverage of home infu-
sion therapy. 
(3) An assessment of sources of data on the 
costs of home infusion therapy that might be used 
to construct payment mechanisms in the Medicare 
program. 
(4) Recommendations, if any, on the structure 
of a payment system under the Medicare program 
for home infusion therapy, including an analysis of 
the payment methodologies used under Medicare Ad-
vantage plans and private health plans for the provi-
sion of home infusion therapy and their applicability 
to the Medicare program. 
SEC. 1144. REQUIRE AMBULATORY SURGICAL CENTERS 
(ASCS) TO SUBMIT COST DATA AND OTHER 
DATA. 
(a) COST REPORTING.— 
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(1) IN GENERAL.—Section 1833(i) of the Social 
Security Act (42 U.S.C. 1395l(i)) is amended by 
adding at the end the following new paragraph: 
‘‘(8) The Secretary shall require, as a condition of 
the agreement described in section 1832(a)(2)(F)(i), the 
submission of such cost report as the Secretary may speci-
fy, taking into account the requirements for such reports 
under section 1815 in the case of a hospital.’’. 
(2) DEVELOPMENT
OF
COST
REPORT.—Not 
later than 3 years after the date of the enactment 
of this Act, the Secretary of Health and Human 
Services shall develop a cost report form for use 
under section 1833(i)(8) of the Social Security Act, 
as added by paragraph (1). 
(3) AUDIT REQUIREMENT.—The Secretary shall 
provide for periodic auditing of cost reports sub-
mitted under section 1833(i)(8) of the Social Secu-
rity Act, as added by paragraph (1). 
(4) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to agreements applica-
ble to cost reporting periods beginning 18 months 
after the date the Secretary develops the cost report 
form under paragraph (2). 
(b) ADDITIONAL DATA ON QUALITY.— 
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(1) IN GENERAL.—Section 1833(i)(7) of such 
Act (42 U.S.C. 1395l(i)(7)) is amended— 
(A) in subparagraph (B), by inserting 
‘‘subject to subparagraph (C),’’ after ‘‘may oth-
erwise provide,’’; and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(C) Under subparagraph (B) the Secretary shall re-
quire the reporting of such additional data relating to 
quality of services furnished in an ambulatory surgical fa-
cility, including data on health care associated infections, 
as the Secretary may specify.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall to reporting for years begin-
ning with 2012. 
SEC. 1145. TREATMENT OF CERTAIN CANCER HOSPITALS. 
Section 1833(t) of the Social Security Act (42 U.S.C. 
1395l(t)) is amended by adding at the end the following 
new paragraph: 
‘‘(18) AUTHORIZATION
OF
ADJUSTMENT
FOR 
CANCER HOSPITALS.— 
‘‘(A) STUDY.—The Secretary shall conduct 
a study to determine if, under the system under 
this subsection, costs incurred by hospitals de-
scribed in section 1886(d)(1)(B)(v) with respect 
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to ambulatory payment classification groups ex-
ceed those costs incurred by other hospitals fur-
nishing services under this subsection (as deter-
mined appropriate by the Secretary). 
‘‘(B) AUTHORIZATION OF ADJUSTMENT.— 
Insofar as the Secretary determines under sub-
paragraph (A) that costs incurred by hospitals 
described in section 1886(d)(1)(B)(v) exceed 
those costs incurred by other hospitals fur-
nishing services under this subsection, the Sec-
retary shall provide for an appropriate adjust-
ment under paragraph (2)(E) to reflect those 
higher costs effective for services furnished on 
or after January 1, 2011.’’. 
SEC. 1146. PAYMENT FOR IMAGING SERVICES. 
(a) ADJUSTMENT IN PRACTICE EXPENSE TO RE-
FLECT A PRESUMED LEVEL OF UTILIZATION.—Section 
1848 of the Social Security Act (42 U.S.C. 1395w–4) is 
amended— 
(1) in subsection (b)(4)— 
(A) in subparagraph (B), by striking ‘‘sub-
paragraph (A)’’ and inserting ‘‘this paragraph’’; 
and 
(B) by adding at the end the following new 
subparagraph: 
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‘‘(C) ADJUSTMENT IN PRACTICE EXPENSE 
TO REFLECT A PRESUMED LEVEL OF UTILIZA-
TION.—Consistent with the methodology for 
computing the number of practice expense rel-
ative value units under subsection (c)(2)(C)(ii) 
with respect to advanced diagnostic imaging 
services (as defined in section 1834(e)(1)(B)) 
furnished on or after January 1, 2011, the Sec-
retary shall adjust such number of units so it 
reflects a presumed rate of utilization of imag-
ing equipment of 75 percent.’’; and 
(2) in subsection (c)(2)(B)(v)), by adding at the 
end the following new subclause: 
‘‘(III) CHANGE
IN
PRESUMED 
UTILIZATION LEVEL OF CERTAIN AD-
VANCED DIAGNOSTIC IMAGING SERV-
ICES.—Effective for fee schedules es-
tablished beginning with 2011, re-
duced expenditures attributable to the 
presumed utilization of 75 percent 
under subsection (b)(4)(C) instead of 
a presumed utilization of imaging 
equipment of 50 percent.’’. 
(b) ADJUSTMENT IN TECHNICAL COMPONENT ‘‘DIS-
COUNT’’ ON SINGLE-SESSION IMAGING TO CONSECUTIVE 
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BODY PARTS.—Section 1848 of such Act (42 U.S.C. 
1395w–4) is further amended— 
(1) in subsection (b)(4), by adding at the end 
the following new subparagraph: 
‘‘(D) ADJUSTMENT IN TECHNICAL COMPO-
NENT DISCOUNT ON SINGLE-SESSION IMAGING 
INVOLVING
CONSECUTIVE
BODY
PARTS.—For 
services furnished on or after January 1, 2011, 
the Secretary shall increase the reduction in ex-
penditures attributable to the multiple proce-
dure payment reduction applicable to the tech-
nical component for imaging under the final 
rule published by the Secretary in the Federal 
Register on November 21, 2005 (part 405 of 
title 42, Code of Federal Regulations) from 25 
percent to 50 percent.’’; and 
(2) in subsection (c)(2)(B)(v), by adding at the 
end the following new subclause: 
‘‘(III) 
ADDITIONAL
REDUCED 
PAYMENT
FOR
MULTIPLE
IMAGING 
PROCEDURES.—Effective 
for 
fee 
schedules established beginning with 
2011, reduced expenditures attrib-
utable to the increase in the multiple 
procedure payment reduction from 25 
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percent to 50 percent as described in 
subsection (b)(4)(D).’’. 
SEC. 1147. DURABLE MEDICAL EQUIPMENT PROGRAM IM-
PROVEMENTS. 
(a) WAIVER OF SURETY BOND REQUIREMENT.—Sec-
tion 1834(a)(16) of the Social Security Act (42 U.S.C. 
1395m(a)(16)) is amended by adding at the end the fol-
lowing sentence: ‘‘The requirement for a surety bond de-
scribed in subparagraph (B) shall not apply in the case 
of a pharmacy or supplier that exclusively furnishes eye-
glasses or contact lenses described in section 1861(s)(8) 
if the pharmacy or supply has been enrolled under section 
1866(j) as a supplier of durable medical equipment, pros-
thetics, orthotics, and supplies and has been issued (which 
may include renewal of) a supplier number (as described 
in the first sentence of this paragraph) for at least 5 years, 
and if a final adverse action (as defined in section 
424.57(a) of title 42, Code of Federal Regulations) has 
never been imposed for such pharmacy or supplier.’’. 
(b) ENSURING SUPPLY OF OXYGEN EQUIPMENT .— 
(1) IN GENERAL.—Section 1834(a)(5)(F) of the 
Social Security Act (42 U.S.C. 1395m(a)(5)(F)) is 
amended— 
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(A) in clause (ii), by striking ‘‘After the’’ 
and inserting ‘‘Except as provided in clause 
(iii), after the’’; and 
(B) by adding at the end the following new 
clause: 
‘‘(iii) CONTINUATION OF SUPPLY.—In 
the case of a supplier furnishing such 
equipment to an individual under this sub-
section as of the 27th month of the 36 
months described in clause (i), the supplier 
furnishing such equipment as of such 
month shall continue to furnish such 
equipment to such individual (either di-
rectly or though arrangements with other 
suppliers of such equipment) during any 
subsequent period of medical need for the 
remainder of the reasonable useful lifetime 
of the equipment, as determined by the 
Secretary, regardless of the location of the 
individual, unless another supplier has ac-
cepted responsibility for continuing to fur-
nish such equipment during the remainder 
of such period.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall take effect as of the date of 
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the enactment of this Act and shall apply to the fur-
nishing of equipment to individuals for whom the 
27th month of a continuous period of use of oxygen 
equipment described in section 1834(a)(5)(F) of the 
Social Security Act occurs on or after July 1, 2010. 
(c) TREATMENT OF CURRENT ACCREDITATION AP-
PLICATIONS.—Section 1834(a)(20)(F) of such Act (42 
U.S.C. 1395m(a)(20)(F)) is amended— 
(1) in clause (i)— 
(A) by striking ‘‘clause (ii)’’ and inserting 
‘‘clauses (ii) and (iii)’’; and 
(B) by striking ‘‘and’’ at the end; 
(2) by striking the period at the end of clause 
(ii)(II) and by inserting a semicolon; 
(3) by inserting after clause (ii) the following 
new clauses: 
‘‘(iii) the requirement for accredita-
tion described in clause (i) shall not apply 
for purposes of supplying diabetic testing 
supplies, canes, and crutches in the case of 
a pharmacy that is enrolled under section 
1866(j) as a supplier of durable medical 
equipment, prosthetics, orthotics, and sup-
plies; and 
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‘‘(iv) a supplier that has submitted an 
application for accreditation before August 
1, 2009, shall retain the supplier’s provider 
or supplier number until an independent 
accreditation organization determines if 
such supplier complies with requirements 
under this paragraph.’’; and 
(4) by adding at the end the following new sen-
tence: ‘‘Nothing in clauses (iii) and (iv) shall be con-
strued as affecting the application of an accredita-
tion requirement for suppliers to qualify for bidding 
in a competitive acquisition area under section 
1847,’’. 
(d) RESTORING 36-MONTH OXYGEN RENTAL PERIOD 
IN CASE OF SUPPLIER BANKRUPTCY FOR CERTAIN INDI-
VIDUALS.—Section 1834(a)(5)(F) of such Act (42 U.S.C. 
1395m(a)(5)(F)), as amended by subsection (b), is further 
amended by adding at the end the following new clause: 
‘‘(iv) 
EXCEPTION
FOR
BANK-
RUPTCY.—If a supplier who furnishes oxy-
gen and oxygen equipment to an individual 
is declared bankrupt and its assets are liq-
uidated and at the time of such declaration 
and liquidation more than 24 months of 
rental payments have been made, such in-
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dividual may begin a new 36-month rental 
period under this subparagraph with an-
other supplier of oxygen.’’. 
SEC. 1148. MEDPAC STUDY AND REPORT ON BONE MASS 
MEASUREMENT. 
(a) IN GENERAL.—The Medicare Payment Advisory 
Commission shall conduct a study regarding bone mass 
measurement, including computed tomography, duel-en-
ergy x-ray absorptriometry, and vertebral fracture assess-
ment. The study shall focus on the following: 
(1) An assessment of the adequacy of Medicare 
payment rates for such services, taking into account 
costs of acquiring the necessary equipment, profes-
sional work time, and practice expense costs. 
(2) The impact of Medicare payment changes 
since 2006 on beneficiary access to bone mass meas-
urement benefits in general and in rural and minor-
ity communities specifically. 
(3) A review of the clinically appropriate and 
recommended use among Medicare beneficiaries and 
how usage rates among such beneficiaries compares 
to such recommendations. 
(4) In conjunction with the findings under (3), 
recommendations, if necessary, regarding methods 
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for reaching appropriate use of bone mass measure-
ment studies among Medicare beneficiaries. 
(b) REPORT.—The Commission shall submit a report 
to the Congress, not later than 9 months after the date 
of the enactment of this Act, containing a description of 
the results of the study conducted under subsection (a) 
and the conclusions and recommendations, if any, regard-
ing each of the issues described in paragraphs (1), (2) (3) 
and (4) of such subsection. 
SEC. 1149. TIMELY ACCESS TO POST-MASTECTOMY ITEMS. 
(a) IN GENERAL.—Section 1834(h)(1) of the Social 
Security Act (42 U.S.C. 1395m) is amended— 
(1) by redesignating subparagraph (H) as sub-
paragraph (I); and 
(2) by inserting after subparagraph (G) the fol-
lowing new subparagraph: 
‘‘(H) SPECIAL PAYMENT RULE FOR POST- 
MASTECTOMY EXTERNAL BREAST PROSTHESIS 
GARMENTS.—Payment for post-mastectomy ex-
ternal breast prosthesis garments shall be made 
regardless of whether such items are supplied to 
the beneficiary prior to or after the mastectomy 
procedure or other breast cancer surgical proce-
dure. The Secretary shall develop policies to en-
sure appropriate beneficiary access and utiliza-
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tion safeguards for such items supplied to a 
beneficiary prior to the mastectomy or other 
breast cancer surgical procedure.’’ 
(b) EFFECTIVE DATE.—This amendment shall apply 
not later than January 1, 2011. 
SEC. 1149A. PAYMENT FOR BIOSIMILAR BIOLOGICAL PROD-
UCTS. 
(a) IN GENERAL.—Section 1847A of the Social Secu-
rity Act (42 U.S.C. 1395w–3a) is amended— 
(1) in subsection (b)(1)— 
(A) in subparagraph (A), by striking ‘‘or’’ 
at the end; 
(B) in subparagraph (B), by striking the 
period at the end and inserting ‘‘; or’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) in the case of one or more inter-
changeable biological products (as defined in 
subsection (c)(6)(I)) and their reference biologi-
cal product (as defined in subsection (c)(6)(J)), 
which shall be included in the same billing and 
payment code, the sum of— 
‘‘(i) the average sales price as deter-
mined using the methodology described in 
paragraph (6) applied to such interchange-
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able and reference products for all Na-
tional Drug Codes assigned to such prod-
ucts in the same manner as such para-
graph (6) is applied to multiple source 
drugs; and 
‘‘(ii) 6 percent of the amount deter-
mined under clause (i); 
‘‘(D) in the case of a biosimilar biological 
product (as defined in subsection (c)(6)(H)), 
the sum of— 
‘‘(i) the average sales price as deter-
mined using the methodology described in 
paragraph (4) applied to such biosimilar 
biological product for all National Drug 
Codes assigned to such product in the 
same manner as such paragraph (4) is ap-
plied to a single source drug; and 
‘‘(ii) 6 percent of the amount deter-
mined under paragraph (4) or the amount 
determined under subparagraph (C)(ii), as 
the case may be, for the reference biologi-
cal product (as defined in subsection 
(c)(6)(J)); or 
‘‘(E) in the case of a reference biological 
product for both an interchangeable biological 
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product and a biosimilar product, the amount 
determined in subparagraph (C).’’; and 
(2) in subsection (c)(6)— 
(A) by amending subparagraph (D)(i) to 
read as follows: 
‘‘(i) a biological, including a reference 
biological product for a biosimilar product, 
but excluding— 
‘‘(I) a biosimilar biological prod-
uct; 
‘‘(II) an interchangeable biologi-
cal product; 
‘‘(III) a reference biological prod-
uct for an interchangeable biological 
product; and 
‘‘(IV) a reference biological prod-
uct for both an interchangeable bio-
logical product and a biosimilar prod-
uct; or’’; and 
(B) by adding at the end the following new 
subparagraphs: 
‘‘(H) BIOSIMILAR BIOLOGICAL PRODUCT.— 
The term ‘biosimilar biological product’ means 
a biological product licensed as a biosimilar bio-
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logical product under section 351(k) of the 
Public Health Service Act. 
‘‘(I) 
INTERCHANGEABLE
BIOLOGICAL 
PRODUCT.—The term ‘interchangeable biologi-
cal product’ means a biological product licensed 
as an interchangeable biological product under 
section 351(k) of the Public Health Service Act 
‘‘(J) REFERENCE BIOLOGICAL PRODUCT.— 
The term ‘reference biological product’ means 
the biological product that is referred to in the 
application for a biosimilar or interchangeable 
biological product licensed under section 351(k) 
of the Public Health Service Act.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to payments for biosimilar bio-
logical products, interchangeable biological products, and 
reference biological products beginning with the first day 
of the second calendar quarter after the date of the enact-
ment of this Act. 
SEC. 1149B. STUDY AND REPORT ON DME COMPETITIVE 
BIDDING PROCESS. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study to evaluate the potential es-
tablishment of a program under Medicare under title 
XVIII of the Social Security Act to acquire durable med-
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ical equipment and supplies through a competitive bidding 
process among manufacturers of such equipment and sup-
plies. Such study shall address the following: 
(1) Identification of types of durable medical 
equipment and supplies that would be appropriate 
for bidding under such a program. 
(2) Recommendations on how to structure such 
an acquisition program in order to promote fiscal re-
sponsibility while also ensuring beneficiary access to 
high quality equipment and supplies. 
(3) Recommendations on how such a program 
could be phased-in and on what geographic level 
would bidding be most appropriate. 
(4) In addition to price, recommendations on 
criteria that could be factored into the bidding proc-
ess. 
(5) Recommendations on how suppliers could be 
compensated for furnishing and servicing equipment 
and supplies acquired under such a program. 
(6) Comparison of such a program to the cur-
rent competitive bidding program under Medicare 
for durable medical equipment, as well as any other 
similar Federal acquisition programs, such as the 
General Services Administration’s vehicle purchasing 
program. 
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(7) Any other consideration relevant to the ac-
quisition, supply, and service of durable medical 
equipment and supplies that is deemed appropriate 
by the Comptroller General. 
(b) REPORT.—Not later than 12 months after the 
date of the enactment of this Act, the Comptroller General 
of the United States shall submit to Congress a report 
on the findings of the study under subsection (a). 
Subtitle C—Provisions Related to 
Medicare Parts A and B 
SEC. 1151. REDUCING POTENTIALLY PREVENTABLE HOS-
PITAL READMISSIONS. 
(a) HOSPITALS.— 
(1) IN GENERAL.—Section 1886 of the Social 
Security Act (42 U.S.C. 1395ww), as amended by 
section 1103(a), is amended by adding at the end 
the following new subsection: 
‘‘(p) ADJUSTMENT
TO HOSPITAL PAYMENTS
FOR 
EXCESS READMISSIONS.— 
‘‘(1) IN GENERAL.—With respect to payment 
for discharges from an applicable hospital (as de-
fined in paragraph (5)(C)) occurring during a fiscal 
year beginning on or after October 1, 2011, in order 
to account for excess readmissions in the hospital, 
the Secretary shall reduce the payments that would 
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otherwise be made to such hospital under subsection 
(d) (or section 1814(b)(3), as the case may be) for 
such a discharge by an amount equal to the product 
of— 
‘‘(A) the base operating DRG payment 
amount (as defined in paragraph (2)) for the 
discharge; and 
‘‘(B) the adjustment factor (described in 
paragraph (3)(A)) for the hospital for the fiscal 
year. 
‘‘(2) 
BASE
OPERATING
DRG
PAYMENT 
AMOUNT.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), for purposes of this sub-
section, the term ‘base operating DRG payment 
amount’ means, with respect to a hospital for a 
fiscal year, the payment amount that would 
otherwise be made under subsection (d) for a 
discharge if this subsection did not apply, re-
duced by any portion of such amount that is at-
tributable to payments under subparagraphs 
(B) and (F) of paragraph (5). 
‘‘(B) ADJUSTMENTS.—For purposes of 
subparagraph (A), in the case of a hospital that 
is paid under section 1814(b)(3), the term ‘base 
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operating DRG payment amount’ means the 
payment amount under such section. 
‘‘(3) ADJUSTMENT FACTOR.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the adjustment factor under this 
paragraph for an applicable hospital for a fiscal 
year is equal to the greater of— 
‘‘(i) the ratio described in subpara-
graph (B) for the hospital for the applica-
ble period (as defined in paragraph (5)(D)) 
for such fiscal year; or 
‘‘(ii) the floor adjustment factor speci-
fied in subparagraph (C). 
‘‘(B) RATIO.—The ratio described in this 
subparagraph for a hospital for an applicable 
period is equal to 1 minus the ratio of— 
‘‘(i) the aggregate payments for ex-
cess readmissions (as defined in paragraph 
(4)(A)) with respect to an applicable hos-
pital for the applicable period; and 
‘‘(ii) the aggregate payments for all 
discharges 
(as 
defined 
in 
paragraph 
(4)(B)) with respect to such applicable 
hospital for such applicable period. 
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‘‘(C) FLOOR ADJUSTMENT FACTOR.—For 
purposes of subparagraph (A), the floor adjust-
ment factor specified in this subparagraph 
for— 
‘‘(i) fiscal year 2012 is 0.99; 
‘‘(ii) fiscal year 2013 is 0.98; 
‘‘(iii) fiscal year 2014 is 0.97; or 
‘‘(iv) a subsequent fiscal year is 0.95. 
‘‘(4) AGGREGATE PAYMENTS, EXCESS READMIS-
SION RATIO DEFINED.—For purposes of this sub-
section: 
‘‘(A) AGGREGATE PAYMENTS FOR EXCESS 
READMISSIONS.—The term ‘aggregate payments 
for excess readmissions’ means, for a hospital 
for a fiscal year, the sum, for applicable condi-
tions (as defined in paragraph (5)(A)), of the 
product, for each applicable condition, of— 
‘‘(i) the base operating DRG payment 
amount for such hospital for such fiscal 
year for such condition; 
‘‘(ii) the number of admissions for 
such condition for such hospital for such 
fiscal year; and 
‘‘(iii) the excess readmissions ratio (as 
defined in subparagraph (C)) for such hos-
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sistent with such a methodology) for 
such hospital for such condition with 
respect to such applicable period. 
‘‘(ii) EXCLUSION
OF
CERTAIN
RE-
ADMISSIONS.—For purposes of clause (i), 
with respect to a hospital, excess readmis-
sions shall not include readmissions for an 
applicable condition for which there are 
fewer than a minimum number (as deter-
mined by the Secretary) of discharges for 
such applicable condition for the applicable 
period and such hospital. 
‘‘(iii) ADJUSTMENT.—In order to pro-
mote a reduction over time in the overall 
rate of readmissions for applicable condi-
tions, the Secretary may provide, beginning 
with discharges for fiscal year 2014, for 
the determination of the excess readmis-
sions ratio under subparagraph (C) to be 
based on a ranking of hospitals by read-
mission ratios (from lower to higher read-
mission ratios) normalized to a benchmark 
that is lower than the 50th percentile. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section: 
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‘‘(A) APPLICABLE CONDITION.—The term 
‘applicable condition’ means, subject to sub-
paragraph (B), a condition or procedure se-
lected by the Secretary among conditions and 
procedures for which— 
‘‘(i) readmissions (as defined in sub-
paragraph (E)) that represent conditions 
or procedures that are high volume or high 
expenditures under this title (or other cri-
teria specified by the Secretary); and 
‘‘(ii) measures of such readmissions— 
‘‘(I) have been endorsed by the 
entity with a contract under section 
1890(a); and 
‘‘(II) such endorsed measures 
have appropriate exclusions for re-
admissions that are unrelated to the 
prior discharge (such as a planned re-
admission or transfer to another ap-
plicable hospital). 
‘‘(B) EXPANSION OF APPLICABLE CONDI-
TIONS.—Beginning with fiscal year 2013, the 
Secretary shall expand the applicable conditions 
beyond the 3 conditions for which measures 
have been endorsed as described in subpara-
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graph (A)(ii)(I) as of the date of the enactment 
of this subsection to the additional 4 conditions 
that have been so identified by the Medicare 
Payment Advisory Commission in its report to 
Congress in June 2007 and to other conditions 
and procedures which may include an all-condi-
tion measure of readmissions, as determined 
appropriate by the Secretary. In expanding 
such applicable conditions, the Secretary shall 
seek the endorsement described in subpara-
graph (A)(ii)(I) but may apply such measures 
without such an endorsement. 
‘‘(C) APPLICABLE
HOSPITAL.—The term 
‘applicable hospital’ means a subsection (d) hos-
pital or a hospital that is paid under section 
1814(b)(3). 
‘‘(D) APPLICABLE PERIOD.—The term ‘ap-
plicable period’ means, with respect to a fiscal 
year, such period as the Secretary shall specify 
for purposes of determining excess readmis-
sions. 
‘‘(E) READMISSION.—The term ‘readmis-
sion’ means, in the case of an individual who is 
discharged from an applicable hospital, the ad-
mission of the individual to the same or another 
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applicable hospital within a time period speci-
fied by the Secretary from the date of such dis-
charge. Insofar as the discharge relates to an 
applicable condition for which there is an en-
dorsed measure described in subparagraph 
(A)(ii)(I), such time period (such as 30 days) 
shall be consistent with the time period speci-
fied for such measure. 
‘‘(6) LIMITATIONS ON REVIEW.—There shall be 
no administrative or judicial review under section 
1869, section 1878, or otherwise of— 
‘‘(A) the determination of base operating 
DRG payment amounts; 
‘‘(B) the methodology for determining the 
adjustment factor under paragraph (3), includ-
ing excess readmissions ratio under paragraph 
(4)(C), aggregate payments for excess readmis-
sions under paragraph (4)(A), and aggregate 
payments for all discharges under paragraph 
(4)(B), and applicable periods and applicable 
conditions under paragraph (5); 
‘‘(C) the measures of readmissions as de-
scribed in paragraph (5)(A)(ii); and 
‘‘(D) the determination of a targeted hos-
pital under paragraph (8)(B)(i), the increase in 
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payment under paragraph (8)(B)(ii), the aggre-
gate cap under paragraph (8)(C)(i), the hos-
pital-specific limit under paragraph (8)(C)(ii), 
and the form of payment made by the Secretary 
under paragraph (8)(D). 
‘‘(7) MONITORING INAPPROPRIATE CHANGES IN 
ADMISSIONS PRACTICES.—The Secretary shall mon-
itor the activities of applicable hospitals to determine 
if such hospitals have taken steps to avoid patients 
at risk in order to reduce the likelihood of increasing 
readmissions for applicable conditions or taken other 
inappropriate steps involving readmissions or trans-
fers. If the Secretary determines that such a hos-
pital has taken such a step, after notice to the hos-
pital and opportunity for the hospital to undertake 
action to alleviate such steps, the Secretary may im-
pose an appropriate sanction. 
‘‘(8) ASSISTANCE TO CERTAIN HOSPITALS.— 
‘‘(A) IN GENERAL.—For purposes of pro-
viding funds to applicable hospitals to take 
steps described in subparagraph (E) to address 
factors that may impact readmissions of indi-
viduals who are discharged from such a hos-
pital, for fiscal years beginning on or after Oc-
tober 1, 2011, the Secretary shall make a pay-
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ment adjustment for a hospital described in 
subparagraph (B), with respect to each such 
fiscal year, by a percent estimated by the Sec-
retary to be consistent with subparagraph (C). 
The Secretary shall provide priority to hospitals 
that serve Medicare beneficiaries at highest risk 
for readmission or for a poor transition from 
such a hospital to a post-hospital site of care. 
‘‘(B) TARGETED
HOSPITALS.—Subpara-
graph (A) shall apply to an applicable hospital 
that— 
‘‘(i) had (or, in the case of an 
1814(b)(3) hospital, otherwise would have 
had) a disproportionate patient percentage 
(as defined in section 1886(d)(5)(F)) of at 
least 30 percent, using the latest available 
data as estimated by the Secretary; and 
‘‘(ii) provides assurances satisfactory 
to the Secretary that the increase in pay-
ment under this paragraph shall be used 
for purposes described in subparagraph 
(E). 
‘‘(C) CAPS.— 
‘‘(i) AGGREGATE CAP.—The aggregate 
amount of the payment adjustment under 
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sult in higher than normal readmission 
rates, including transitional care services 
described in clause (ii) and any or all of 
the other activities described in clause (iii). 
‘‘(ii) 
TRANSITIONAL
CARE
SERV-
ICES.—The transitional care services de-
scribed in this clause are transitional care 
services furnished by a qualified transi-
tional care provider, such as a nurse or 
other health professional, who meets rel-
evant experience and training requirements 
as specified by the Secretary that support 
a beneficiary under this section beginning 
on the date of an individual’s admission to 
a hospital for inpatient hospital services 
and ending at the latest on the last day of 
the 90-day period beginning on the date of 
the individual’s discharge from the applica-
ble hospital. The Secretary shall determine 
and update services to be included in tran-
sitional care services under this clause as 
appropriate, based on evidence of their ef-
fectiveness in reducing hospital readmis-
sions and improving health outcomes. Such 
services shall include the following: 
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‘‘(I) Conduct of an assessment 
prior to discharge, which assessment 
may include an assessment of the in-
dividual’s physical and mental condi-
tion, cognitive and functional capac-
ities, medication regimen and adher-
ence, social and environmental needs, 
and primary caregiver needs and re-
sources. 
‘‘(II) Development of a evidence- 
based plan of transitional care for the 
individual developed after consultation 
with the individual and the individ-
ual’s primary caregiver and other 
health team members, as appropriate. 
Such plan shall include a list of cur-
rent therapies prescribed, treatment 
goals and may include other items or 
elements as determined by the Sec-
retary, such as identifying list of po-
tential health risks and future services 
for both the individual and any pri-
mary caregiver. 
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‘‘(iii) OTHER ACTIVITIES.—The other 
activities described in this clause are the 
following: 
‘‘(I) Providing other care coordi-
nation services not described under 
clause (ii). 
‘‘(II) Hiring translators and in-
terpreters. 
‘‘(III) Increasing services offered 
by discharge planners. 
‘‘(IV) Ensuring that individuals 
receive a summary of care and medi-
cation orders upon discharge. 
‘‘(V) Developing a quality im-
provement plan to assess and remedy 
preventable readmission rates. 
‘‘(VI) Assigning appropriate fol-
low-up care for discharged individuals. 
‘‘(VII) Doing other activities as 
determined appropriate by the Sec-
retary. 
‘‘(F) GAO REPORT ON USE OF FUNDS.— 
Not later than 3 years after the date on which 
funds are first made available under this para-
graph, the Comptroller General of the United 
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States shall submit to Congress a report on the 
use of such funds. Such report shall consider 
information on the effective uses of such funds, 
how the uses of such funds affected hospital re-
admission rates (including at 6 months post- 
discharge), health outcomes and quality, reduc-
tions in expenditures under this title and the 
experiences of beneficiaries, primary caregivers, 
and providers, as well as any appropriate rec-
ommendations.’’. 
(b) APPLICATION
TO
CRITICAL
ACCESS
HOS-
PITALS.—Section 1814(l) of the Social Security Act (42 
U.S.C. 1395f(l)) is amended— 
(1) in paragraph (5)— 
(A) by striking ‘‘and’’ at the end of sub-
paragraph (C); 
(B) by striking the period at the end of 
subparagraph (D) and inserting ‘‘; and’’; 
(C) by inserting at the end the following 
new subparagraph: 
‘‘(E) the methodology for determining the ad-
justment factor under paragraph (5), including the 
determination of aggregate payments for actual and 
expected readmissions, applicable periods, applicable 
conditions and measures of readmissions.’’; and 
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(D) by redesignating such paragraph as 
paragraph (6); and 
(2) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) The adjustment factor described in section 
1886(p)(3) shall apply to payments with respect to a crit-
ical access hospital with respect to a cost reporting period 
beginning in fiscal year 2012 and each subsequent fiscal 
year (after application of paragraph (4) of this subsection) 
in a manner similar to the manner in which such section 
applies with respect to a fiscal year to an applicable hos-
pital as described in section 1886(p)(2).’’. 
(c) POST ACUTE CARE PROVIDERS.— 
(1) INTERIM POLICY.— 
(A) IN GENERAL.—With respect to a read-
mission to an applicable hospital or a critical 
access hospital (as described in section 1814(l) 
of the Social Security Act) from a post acute 
care provider (as defined in paragraph (3)) and 
such a readmission is not governed by section 
412.531 of title 42, Code of Federal Regula-
tions, if the claim submitted by such a post- 
acute care provider under title XVIII of the So-
cial Security Act indicates that the individual 
was readmitted to a hospital from such a post- 
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acute care provider or admitted from home and 
under the care of a home health agency within 
30 days of an initial discharge from an applica-
ble hospital or critical access hospital, the pay-
ment under such title on such claim shall be the 
applicable percent specified in subparagraph 
(B) of the payment that would otherwise be 
made under the respective payment system 
under such title for such post-acute care pro-
vider if this subsection did not apply. In apply-
ing the previous sentence, the Secretary shall 
exclude a period of 1 day from the date the in-
dividual is first admitted to or under the care 
of the post-acute care provider. 
(B) APPLICABLE PERCENT DEFINED.—For 
purposes of subparagraph (A), the applicable 
percent is— 
(i) for fiscal or rate year 2012 is 
0.996; 
(ii) for fiscal or rate year 2013 is 
0.993; and 
(iii) for fiscal or rate year 2014 is 
0.99. 
(C) EFFECTIVE DATE.—Subparagraph (1) 
shall apply to discharges or services furnished 
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(as the case may be with respect to the applica-
ble post acute care provider) on or after the 
first day of the fiscal year or rate year, begin-
ning on or after October 1, 2011, with respect 
to the applicable post acute care provider. 
(2) DEVELOPMENT AND APPLICATION OF PER-
FORMANCE MEASURES.— 
(A) 
IN
GENERAL.—The 
Secretary 
of 
Health and Human Services shall develop ap-
propriate measures of readmission rates for 
post acute care providers. The Secretary shall 
seek endorsement of such measures by the enti-
ty with a contract under section 1890(a) of the 
Social Security Act but may adopt and apply 
such measures under this paragraph without 
such an endorsement. The Secretary shall ex-
pand such measures in a manner similar to the 
manner in which applicable conditions are ex-
panded under paragraph (5)(B) of section 
1886(p) of the Social Security Act, as added by 
subsection (a). 
(B) 
IMPLEMENTATION.—The 
Secretary 
shall apply, on or after October 1, 2014, with 
respect to post acute care providers, policies 
similar to the policies applied with respect to 
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applicable hospitals and critical access hospitals 
under the amendments made by subsection (a). 
The provisions of paragraph (1) shall apply 
with respect to any period on or after October 
1, 2014, and before such application date de-
scribed in the previous sentence in the same 
manner as such provisions apply with respect to 
fiscal or rate year 2014. 
(C) MONITORING
AND
PENALTIES.—The 
provisions of paragraph (7) of such section 
1886(p) shall apply to providers under this 
paragraph in the same manner as they apply to 
hospitals under such section. 
(3) DEFINITIONS.—For purposes of this sub-
section: 
(A) POST
ACUTE
CARE
PROVIDER.—The 
term ‘‘post acute care provider’’ means— 
(i) a skilled nursing facility (as de-
fined in section 1819(a) of the Social Secu-
rity Act); 
(ii) an inpatient rehabilitation facility 
(described in section 1886(h)(1)(A) of such 
Act); 
(iii) a home health agency (as defined 
in section 1861(o) of such Act); and 
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(iv) a long term care hospital (as de-
fined in section 1861(ccc) of such Act). 
(B) OTHER TERMS .—The terms ‘‘applica-
ble condition’’, ‘‘applicable hospital’’, and ‘‘re-
admission’’ have the meanings given such terms 
in section 1886(p)(5) of the Social Security 
Act, as added by subsection (a)(1). 
(d) PHYSICIANS.— 
(1) STUDY.—The Secretary of Health and 
Human Services shall conduct a study to determine 
how the readmissions policy described in the pre-
vious subsections could be applied to physicians. 
(2) 
CONSIDERATIONS.—In 
conducting 
the 
study, the Secretary shall consider approaches such 
as— 
(A) creating a new code (or codes) and 
payment amount (or amounts) under the fee 
schedule in section 1848 of the Social Security 
Act (in a budget neutral manner) for services 
furnished by an appropriate physician who sees 
an individual within the first week after dis-
charge from a hospital or critical access hos-
pital; 
(B) developing measures of rates of read-
mission for individuals treated by physicians; 
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(C) applying a payment reduction for phy-
sicians who treat the patient during the initial 
admission that results in a readmission; and 
(D) methods for attributing payments or 
payment reductions to the appropriate physi-
cian or physicians. 
(3) REPORT.—The Secretary shall issue a pub-
lic report on such study not later than the date that 
is one year after the date of the enactment of this 
Act. 
(e) FUNDING.—For purposes of carrying out the pro-
visions of this section, in addition to funds otherwise avail-
able, out of any funds in the Treasury not otherwise ap-
propriated, there are appropriated to the Secretary of 
Health and Human Services for the Center for Medicare 
& Medicaid Services Program Management Account 
$25,000,000 for each fiscal year beginning with 2010. 
Amounts appropriated under this subsection for a fiscal 
year shall be available until expended. 
SEC. 1152. POST ACUTE CARE SERVICES PAYMENT REFORM 
PLAN AND BUNDLING PILOT PROGRAM. 
(a) PLAN.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the 
‘‘Secretary’’) shall develop a detailed plan to reform 
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payment for post acute care (PAC) services under 
the Medicare program under title XVIII of the So-
cial Security Act (in this section referred to as the 
‘‘Medicare program)’’. The goals of such payment 
reform are to— 
(A) improve the coordination, quality, and 
efficiency of such services; and 
(B) improve outcomes for individuals such 
as reducing the need for readmission to hos-
pitals from providers of such services. 
(2) BUNDLING
POST
ACUTE
SERVICES.—The 
plan described in paragraph (1) shall include de-
tailed specifications for a bundled payment for post 
acute services (in this section referred to as the 
‘‘post acute care bundle’’), and may include other 
approaches determined appropriate by the Secretary. 
(3) POST ACUTE SERVICES.—For purposes of 
this section, the term ‘‘post acute services’’ means 
services for which payment may be made under the 
Medicare program that are furnished by skilled 
nursing facilities, inpatient rehabilitation facilities, 
long term care hospitals, hospital based outpatient 
rehabilitation facilities and home health agencies to 
an individual after discharge of such individual from 
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a hospital, and such other services determined ap-
propriate by the Secretary. 
(b) DETAILS.—The plan described in subsection 
(a)(1) shall include consideration of the following issues: 
(1) The nature of payments under a post acute 
care bundle, including the type of provider or entity 
to whom payment should be made, the scope of ac-
tivities and services included in the bundle, whether 
payment for physicians’ services should be included 
in the bundle, and the period covered by the bundle. 
(2) Whether the payment should be consoli-
dated with the payment under the inpatient prospec-
tive system under section 1886 of the Social Secu-
rity Act (in this section referred to as MS–DRGs) 
or a separate payment should be established for such 
bundle, and if a separate payment is established, 
whether it should be made only upon use of post 
acute care services or for every discharge. 
(3) Whether the bundle should be applied 
across all categories of providers of inpatient serv-
ices (including critical access hospitals) and post 
acute care services or whether it should be limited 
to certain categories of providers, services, or dis-
charges, such as high volume or high cost MS– 
DRGs. 
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(4) The extent to which payment rates could be 
established to achieve offsets for efficiencies that 
could be expected to be achieved with a bundle pay-
ment, whether such rates should be established on a 
national basis or for different geographic areas, 
should vary according to discharge, case mix, 
outliers, and geographic differences in wages or 
other appropriate adjustments, and how to update 
such rates. 
(5) The nature of protections needed for indi-
viduals under a system of bundled payments to en-
sure that individuals receive quality care, are fur-
nished the level and amount of services needed as 
determined by an appropriate assessment instru-
ment, are offered choice of provider, and the extent 
to which transitional care services would improve 
quality of care for individuals and the functioning of 
a bundled post-acute system. 
(6) The nature of relationships that may be re-
quired between hospitals and providers of post acute 
care services to facilitate bundled payments, includ-
ing the application of gainsharing, anti-referral, 
anti-kickback, and anti-trust laws. 
(7) Quality measures that would be appropriate 
for reporting by hospitals and post acute providers 
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(such as measures that assess changes in functional 
status and quality measures appropriate for each 
type of post acute services provider including how 
the reporting of such quality measures could be co-
ordinated with other reporting of such quality meas-
ures by such providers otherwise required). 
(8) How cost-sharing for a post acute care bun-
dle should be treated relative to current rules for 
cost-sharing for inpatient hospital, home health, 
skilled nursing facility, and other services. 
(9) How other programmatic issues should be 
treated in a post acute care bundle, including rules 
specific to various types of post-acute providers such 
as the post-acute transfer policy, three-day hospital 
stay to qualify for services furnished by skilled nurs-
ing facilities, and the coordination of payments and 
care under the Medicare program and the Medicaid 
program. 
(10) Such other issues as the Secretary deems 
appropriate. 
(c) CONSULTATIONS AND ANALYSIS.— 
(1) CONSULTATION WITH STAKEHOLDERS.—In 
developing the plan under subsection (a)(1), the Sec-
retary shall consult with relevant stakeholders and 
shall consider experience with such research studies 
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and demonstrations that the Secretary determines 
appropriate. 
(2) ANALYSIS AND DATA COLLECTION.—In de-
veloping such plan, the Secretary shall— 
(A) analyze the issues described in sub-
section (b) and other issues that the Secretary 
determines appropriate; 
(B) analyze the impacts (including geo-
graphic impacts) of post acute service reform 
approaches, including bundling of such services 
on individuals, hospitals, post acute care pro-
viders, and physicians; 
(C) use existing data (such as data sub-
mitted on claims) and collect such data as the 
Secretary determines are appropriate to develop 
such plan required in this section; and 
(D) if patient functional status measures 
are appropriate for the analysis, to the extent 
practical, build upon the CARE tool being de-
veloped pursuant to section 5008 of the Deficit 
Reduction Act of 2005. 
(d) ADMINISTRATION.— 
(1) FUNDING.—For purposes of carrying out 
the provisions of this section, in addition to funds 
otherwise available, out of any funds in the Treasury 
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not otherwise appropriated, there are appropriated 
to the Secretary for the Center for Medicare & Med-
icaid 
Services 
Program 
Management 
Account 
$15,000,000 for each of the fiscal years 2010 
through 2012. Amounts appropriated under this 
paragraph for a fiscal year shall be available until 
expended. 
(2) EXPEDITED
DATA
COLLECTION.—Chapter 
35 of title 44, United States Code shall not apply to 
this section. 
(e) PUBLIC REPORTS.— 
(1) INTERIM
REPORTS.—The Secretary shall 
issue interim public reports on a periodic basis on 
the plan described in subsection (a)(1), the issues 
described in subsection (b), and impact analyses as 
the Secretary determines appropriate. 
(2) FINAL REPORT.—Not later than the date 
that is 3 years after the date of the enactment of 
this Act, the Secretary shall issue a final public re-
port on such plan, including analysis of issues de-
scribed in subsection (b) and impact analyses. 
(f) CONVERSION OF ACUTE CARE EPISODE DEM-
ONSTRATION TO PILOT PROGRAM AND EXPANSION TO IN-
CLUDE POST ACUTE SERVICES.— 
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(1) IN GENERAL.—Part E of title XVIII of the 
Social Security Act is amended by inserting after 
section 1866C the following new section: 
‘‘CONVERSION OF ACUTE CARE EPISODE DEMONSTRATION 
TO PILOT PROGRAM AND EXPANSION TO INCLUDE 
POST ACUTE SERVICES 
‘‘SEC. 1866D. (a) CONVERSION AND EXPANSION.— 
‘‘(1) IN GENERAL.—By not later than January 
1, 2011, the Secretary shall, for the purpose of pro-
moting the use of bundled payments to promote effi-
cient, coordinated, and high quality delivery of 
care— 
‘‘(A) convert the acute care episode dem-
onstration program conducted under section 
1866C to a pilot program; and 
‘‘(B) subject to subsection (c), expand such 
program as so converted to include post acute 
services and such other services the Secretary 
determines to be appropriate, which may in-
clude transitional services. 
‘‘(2) BUNDLED PAYMENT STRUCTURES.— 
‘‘(A) IN GENERAL.—In carrying out para-
graph (1), the Secretary may apply bundled 
payments with respect to— 
‘‘(i) hospitals and physicians; 
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