‘‘(ii) The shared savings program 
under section 1899. 
‘‘(iii) A demonstration under section 
1866C. 
‘‘(iv) A demonstration required by 
Federal law. 
‘‘(D) ELIGIBLE
ALTERNATIVE
PAYMENT 
MODEL (APM).— 
‘‘(i) IN GENERAL.—The term ‘eligible 
alternative payment model’ means, with re-
spect to a year, an alternative payment 
model— 
‘‘(I) that requires use of certified 
EHR technology (as defined in sub-
section (o)(4)); 
‘‘(II) that provides for payment 
for covered professional services based 
on quality measures comparable to 
measures under the performance cat-
egory 
described 
in 
section 
1848(q)(2)(B)(i); and 
‘‘(III) that satisfies the require-
ment described in clause (ii). 
‘‘(ii) ADDITIONAL
REQUIREMENT.— 
For purposes of clause (i)(III), the require-
ment described in this clause, with respect 
to a year and an alternative payment 
model, is that the alternative payment 
model— 
‘‘(I) is one in which one or more 
entities bear financial risk for mone-
tary losses under such model that are 
in excess of a nominal amount; or 
‘‘(II) is a medical home expanded 
under section 1115A(c). 
‘‘(4) LIMITATION.—There shall be no adminis-
trative or judicial review under section 1869, 1878, 
or otherwise, of the following: 
‘‘(A) The determination that an eligible 
professional is a qualifying APM participant 
under paragraph (2) and the determination 
that an alternative payment model is an eligible 
alternative payment model under paragraph 
(3)(D). 
‘‘(B) The determination of the amount of 
the 5 percent payment incentive under para-
graph (1)(A), including any estimation as part 
of such determination.’’.
(3) 
COORDINATION
CONFORMING
AMEND-
MENTS.—Section 1833 of the Social Security Act 
(42 U.S.C. 1395l) is further amended— 
(A) in subsection (x)(3), by adding at the 
end the following new sentence: ‘‘The amount 
of the additional payment for a service under 
this subsection and subsection (z) shall be de-
termined without regard to any additional pay-
ment for the service under subsection (z) and 
this subsection, respectively.’’; and 
(B) in subsection (y)(3), by adding at the 
end the following new sentence: ‘‘The amount 
of the additional payment for a service under 
this subsection and subsection (z) shall be de-
termined without regard to any additional pay-
ment for the service under subsection (z) and 
this subsection, respectively.’’. 
(4) ENCOURAGING DEVELOPMENT AND TEST-
ING OF CERTAIN MODELS.—Section 1115A(b)(2) of 
the Social Security Act (42 U.S.C. 1315a(b)(2)) is 
amended— 
(A) in subparagraph (B), by adding at the 
end the following new clauses: 
‘‘(xxi) Focusing primarily on physi-
cians’ services (as defined in section
1848(j)(3)) furnished by physicians who 
are not primary care practitioners. 
‘‘(xxii) Focusing on practices of 15 or 
fewer professionals. 
‘‘(xxiii) Focusing on risk-based models 
for small physician practices which may in-
volve two-sided risk and prospective patient 
assignment, and which examine risk-ad-
justed decreases in mortality rates, hos-
pital readmissions rates, and other relevant 
and appropriate clinical measures. 
‘‘(xxiv) Focusing primarily on title 
XIX, working in conjunction with the Cen-
ter for Medicaid and CHIP Services.’’; and 
(B) in subparagraph (C)(viii), by striking 
‘‘other public sector or private sector payers’’ 
and inserting ‘‘other public sector payers, pri-
vate sector payers, or Statewide payment mod-
els’’. 
(5) CONSTRUCTION
REGARDING
TELEHEALTH 
SERVICES.—Nothing in the provisions of, or amend-
ments made by, this Act shall be construed as pre-
cluding an alternative payment model or a qualifying 
APM participant (as those terms are defined in sec-
tion 1833(z) of the Social Security Act, as added by
100 
paragraph (1)) from furnishing a telehealth service 
for which payment is not made under section 
1834(m) of the Social Security Act (42 U.S.C. 
1395m(m)). 
(6) INTEGRATING
MEDICARE
ADVANTAGE
AL-
TERNATIVE PAYMENT MODELS.—Not later than July 
1, 2015, the Secretary of Health and Human Serv-
ices shall submit to Congress a study that examines 
the feasibility of integrating alternative payment 
models in the Medicare Advantage payment system. 
The study shall include the feasibility of including a 
value-based modifier and whether such modifier 
should be budget neutral. 
(7) STUDY AND REPORT ON FRAUD RELATED 
TO
ALTERNATIVE
PAYMENT
MODELS
UNDER
THE 
MEDICARE PROGRAM.— 
(A) STUDY.—The Secretary of Health and 
Human Services, in consultation with the In-
spector General of the Department of Health 
and Human Services, shall conduct a study 
that— 
(i) examines the applicability of the 
Federal fraud prevention laws to items and 
services furnished under title XVIII of the 
Social Security Act for which payment is
101 
made under an alternative payment model 
(as defined in section 1833(z)(3)(C) of 
such Act (42 U.S.C. 1395l(z)(3)(C))); 
(ii) identifies aspects of such alter-
native payment models that are vulnerable 
to fraudulent activity; and 
(iii) examines the implications of waiv-
ers to such laws granted in support of such 
alternative 
payment 
models, 
including 
under any potential expansion of such 
models. 
(B) REPORT.—Not later than 2 years after 
the date of the enactment of this Act, the Sec-
retary shall submit to Congress a report con-
taining the results of the study conducted under 
subparagraph (A). Such report shall include 
recommendations for actions to be taken to re-
duce the vulnerability of such alternative pay-
ment models to fraudulent activity. Such report 
also shall include, as appropriate, recommenda-
tions of the Inspector General for changes in 
Federal fraud prevention laws to reduce such 
vulnerability. 
(f) IMPROVING PAYMENT ACCURACY.—
102 
(1) STUDIES AND REPORTS OF EFFECT OF CER-
TAIN
INFORMATION
ON
QUALITY
AND
RESOURCE 
USE.— 
(A) STUDY
USING
EXISTING
MEDICARE 
DATA.— 
(i) STUDY.—The Secretary of Health 
and Human Services (in this subsection re-
ferred to as the ‘‘Secretary’’) shall conduct 
a study that examines the effect of individ-
uals’ socioeconomic status on quality and 
resource use outcome measures for individ-
uals under the Medicare program (such as 
to recognize that less healthy individuals 
may require more intensive interventions). 
The study shall use information collected 
on such individuals in carrying out such 
program, such as urban and rural location, 
eligibility for Medicaid (recognizing and ac-
counting for varying Medicaid eligibility 
across States), and eligibility for benefits 
under the supplemental security income 
(SSI) program. The Secretary shall carry 
out this paragraph acting through the As-
sistant Secretary for Planning and Evalua-
tion.
103 
(ii) REPORT.—Not later than 2 years 
after the date of the enactment of this Act, 
the Secretary shall submit to Congress a 
report on the study conducted under clause 
(i). 
(B) STUDY USING OTHER DATA.— 
(i) STUDY.—The Secretary shall con-
duct a study that examines the impact of 
risk factors, such as those described in sec-
tion 1848(p)(3) of the Social Security Act 
(42 U.S.C. 1395w–4(p)(3)), race, health 
literacy, limited English proficiency (LEP), 
and patient activation, on quality and re-
source use outcome measures under the 
Medicare program (such as to recognize 
that less healthy individuals may require 
more intensive interventions). In con-
ducting such study the Secretary may use 
existing Federal data and collect such ad-
ditional data as may be necessary to com-
plete the study. 
(ii) REPORT.—Not later than 5 years 
after the date of the enactment of this Act, 
the Secretary shall submit to Congress a
104 
report on the study conducted under clause 
(i). 
(C) EXAMINATION
OF
DATA
IN
CON-
DUCTING STUDIES.—In conducting the studies 
under subparagraphs (A) and (B), the Sec-
retary shall examine what non-Medicare data 
sets, such as data from the American Commu-
nity Survey (ACS), can be useful in conducting 
the types of studies under such paragraphs and 
how such data sets that are identified as useful 
can be coordinated with Medicare administra-
tive data in order to improve the overall data 
set available to do such studies and for the ad-
ministration of the Medicare program. 
(D) RECOMMENDATIONS TO ACCOUNT FOR 
INFORMATION
IN
PAYMENT
ADJUSTMENT 
MECHANISMS.—If the studies conducted under 
subparagraphs (A) and (B) find a relationship 
between the factors examined in the studies and 
quality and resource use outcome measures, 
then the Secretary shall also provide rec-
ommendations for how the Centers for Medicare 
& Medicaid Services should— 
(i) obtain access to the necessary data 
(if such data is not already being collected)
105 
on such factors, including recommenda-
tions on how to address barriers to the 
Centers in accessing such data; and 
(ii) account for such factors in deter-
mining payment adjustments based on 
quality and resource use outcome measures 
under the eligible professional Merit-based 
Incentive Payment System under section 
1848(q) of the Social Security Act (42 
U.S.C. 1395w–4(q)) and, as the Secretary 
determines appropriate, other similar pro-
visions of title XVIII of such Act. 
(E) FUNDING.—There are hereby appro-
priated from the Federal Supplementary Med-
ical Insurance Trust Fund under section 1841 
of the Social Security Act to the Secretary to 
carry out this paragraph $6,000,000, to remain 
available until expended. 
(2) CMS ACTIVITIES.— 
(A) HIERARCHAL
CONDITION
CATEGORY 
(HCC) IMPROVEMENT.—Taking into account the 
relevant studies conducted and recommenda-
tions made in reports under paragraph (1), the 
Secretary, on an ongoing basis, shall, as the 
Secretary determines appropriate, estimate how
106 
an individual’s health status and other risk fac-
tors affect quality and resource use outcome 
measures and, as feasible, shall incorporate in-
formation from quality and resource use out-
come measurement (including care episode and 
patient condition groups) into provisions of title 
XVIII of the Social Security Act that are simi-
lar to the eligible professional Merit-based In-
centive Payment System under section 1848(q) 
of such Act. 
(B) ACCOUNTING FOR OTHER FACTORS IN 
PAYMENT ADJUSTMENT MECHANISMS.— 
(i) IN
GENERAL.—Taking into ac-
count the studies conducted and rec-
ommendations made in reports under para-
graph (1) and other information as appro-
priate, the Secretary shall, as the Sec-
retary determines appropriate, account for 
identified factors with an effect on quality 
and resource use outcome measures when 
determining payment adjustment mecha-
nisms under provisions of title XVIII of 
the Social Security Act that are similar to 
the eligible professional Merit-based Incen-
107 
tive 
Payment 
System 
under 
section 
1848(q) of such Act. 
(ii) ACCESSING DATA.—The Secretary 
shall collect or otherwise obtain access to 
the data necessary to carry out this para-
graph through existing and new data 
sources. 
(iii) PERIODIC ANALYSES.—The Sec-
retary shall carry out periodic analyses, at 
least every 3 years, based on the factors 
referred to in clause (i) so as to monitor 
changes in possible relationships. 
(C) FUNDING.—There are hereby appro-
priated from the Federal Supplementary Med-
ical Insurance Trust Fund under section 1841 
of the Social Security Act to the Secretary to 
carry out this paragraph and the application of 
this paragraph to the Merit-based Incentive 
Payment System under section 1848(q) of such 
Act $10,000,000, to remain available until ex-
pended. 
(3) STRATEGIC
PLAN
FOR
ACCESSING
RACE 
AND ETHNICITY DATA.—Not later than 18 months 
after the date of the enactment of this Act, the Sec-
retary shall develop and report to Congress on a
108 
strategic plan for collecting or otherwise accessing 
data on race and ethnicity for purposes of carrying 
out the eligible professional Merit-based Incentive 
Payment System under section 1848(q) of the Social 
Security Act and, as the Secretary determines ap-
propriate, other similar provisions of title XVIII of 
such Act. 
(g) COLLABORATING WITH THE PHYSICIAN, PRACTI-
TIONER, AND OTHER STAKEHOLDER COMMUNITIES TO 
IMPROVE RESOURCE USE MEASUREMENT.—Section 1848 
of the Social Security Act (42 U.S.C. 1395w–4), as 
amended by subsection (c), is further amended by adding 
at the end the following new subsection: 
‘‘(r) COLLABORATING WITH THE PHYSICIAN, PRAC-
TITIONER, AND OTHER STAKEHOLDER COMMUNITIES TO 
IMPROVE RESOURCE USE MEASUREMENT.— 
‘‘(1) IN GENERAL.—In order to involve the phy-
sician, practitioner, and other stakeholder commu-
nities in enhancing the infrastructure for resource 
use measurement, including for purposes of the 
value-based performance incentive program under 
subsection (q) and alternative payment models under 
section 1833(z), the Secretary shall undertake the 
steps described in the succeeding provisions of this 
subsection.
109 
‘‘(2) DEVELOPMENT OF CARE EPISODE AND PA-
TIENT
CONDITION
GROUPS
AND
CLASSIFICATION 
CODES.— 
‘‘(A) IN
GENERAL.—In order to classify 
similar patients into care episode groups and 
patient condition groups, the Secretary shall 
undertake the steps described in the succeeding 
provisions of this paragraph. 
‘‘(B) PUBLIC AVAILABILITY OF EXISTING 
EFFORTS TO DESIGN AN EPISODE GROUPER.— 
Not later than 120 days after the date of the 
enactment of this subsection, the Secretary 
shall post on the Internet website of the Cen-
ters for Medicare & Medicaid Services a list of 
the episode groups developed pursuant to sub-
section (n)(9)(A) and related descriptive infor-
mation. 
‘‘(C) STAKEHOLDER
INPUT.—The Sec-
retary shall accept, through the date that is 60 
days after the day the Secretary posts the list 
pursuant to subparagraph (B), suggestions 
from physician specialty societies, applicable 
practitioner organizations, and other stake-
holders for episode groups in addition to those 
posted pursuant to such subparagraph, and
110 
specific clinical criteria and patient characteris-
tics to classify patients into— 
‘‘(i) care episode groups; and 
‘‘(ii) patient condition groups. 
‘‘(D) DEVELOPMENT OF PROPOSED CLAS-
SIFICATION CODES.— 
‘‘(i) IN
GENERAL.—Taking into ac-
count the information described in sub-
paragraph (B) and the information re-
ceived under subparagraph (C), the Sec-
retary shall— 
‘‘(I) establish care episode groups 
and patient condition groups, which 
account for a target of an estimated 
2⁄3 of expenditures under parts A and 
B; and 
‘‘(II) 
assign 
codes 
to 
such 
groups. 
‘‘(ii) CARE EPISODE GROUPS.—In es-
tablishing the care episode groups under 
clause (i), the Secretary shall take into ac-
count— 
‘‘(I) the patient’s clinical prob-
lems at the time items and services 
are furnished during an episode of
111 
care, such as the clinical conditions or 
diagnoses, whether or not inpatient 
hospitalization is anticipated or oc-
curs, and the principal procedures or 
services planned or furnished; and 
‘‘(II) other factors determined 
appropriate by the Secretary. 
‘‘(iii) PATIENT CONDITION GROUPS.— 
In 
establishing 
the 
patient 
condition 
groups under clause (i), the Secretary shall 
take into account— 
‘‘(I) the patient’s clinical history 
at the time of each medical visit, such 
as the patient’s combination of chron-
ic conditions, current health status, 
and recent significant history (such as 
hospitalization and major surgery dur-
ing a previous period, such as 3 
months); and 
‘‘(II) other factors determined 
appropriate by the Secretary, such as 
eligibility status under this title (in-
cluding 
eligibility 
under 
section 
226(a), 226(b), or 226A, and dual eli-
gibility under this title and title XIX).
112 
‘‘(E) DRAFT CARE EPISODE AND PATIENT 
CONDITION
GROUPS
AND
CLASSIFICATION 
CODES.—Not later than 180 days after the end 
of the comment period described in subpara-
graph (C), the Secretary shall post on the 
Internet website of the Centers for Medicare & 
Medicaid Services a draft list of the care epi-
sode and patient condition codes established 
under subparagraph (D) (and the criteria and 
characteristics assigned to such code). 
‘‘(F) SOLICITATION OF INPUT.—The Sec-
retary shall seek, through the date that is 60 
days after the Secretary posts the list pursuant 
to subparagraph (E), comments from physician 
specialty societies, applicable practitioner orga-
nizations, and other stakeholders, including rep-
resentatives of individuals entitled to benefits 
under part A or enrolled under this part, re-
garding the care episode and patient condition 
groups (and codes) posted under subparagraph 
(E). In seeking such comments, the Secretary 
shall use one or more mechanisms (other than 
notice and comment rulemaking) that may in-
clude use of open door forums, town hall meet-
ings, or other appropriate mechanisms.
124 
‘‘(B) QUALITY DOMAINS.—For purposes of 
this subsection, the term ‘quality domains’ 
means at least the following domains: 
‘‘(i) Clinical care. 
‘‘(ii) Safety. 
‘‘(iii) Care coordination. 
‘‘(iv) Patient and caregiver experience. 
‘‘(v) Population health and preven-
tion. 
‘‘(C) CONSIDERATION.—In developing the 
draft plan under this paragraph, the Secretary 
shall consider— 
‘‘(i) gap analyses conducted by the en-
tity with a contract under section 1890(a) 
or other contractors or entities; 
‘‘(ii) whether measures are applicable 
across health care settings; 
‘‘(iii) clinical practice improvement ac-
tivities 
submitted 
under 
subsection 
(q)(2)(C)(iv) for identifying possible areas 
for future measure development and identi-
fying existing gaps with respect to such 
measures; and 
‘‘(iv) the quality domains applied 
under this subsection.