1288 
(E) BUDGET NEUTRALITY.—The Secretary 
shall implement changes described in subpara-
graph (D) in a manner such that the estimated 
expenditures under such future skilled nursing 
facility services classification system for a fiscal 
year beginning with fiscal year 2011 with such 
changes would be equal to the estimated ex-
penditures that would otherwise occur under 
title XVIII of the Social Security Act under 
such future skilled nursing facility services clas-
sification system for such year without such 
changes. 
(c) OUTLIER POLICY FOR NTA AND THERAPY.—Sec-
tion 1888(e) of the Social Security Act (42 U.S.C. 
1395yy(e)) is amended by adding at the end the following 
new paragraph: 
‘‘(13) OUTLIERS FOR NTA AND THERAPY.— 
‘‘(A) 
IN
GENERAL.—With 
respect 
to 
outliers because of unusual variations in the 
type or amount of medically necessary care, be-
ginning with October 1, 2010, the Secretary— 
‘‘(i) shall provide for an addition or 
adjustment to the payment amount other-
wise made under this section with respect 
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to non-therapy ancillary services in the 
case of such outliers; and 
‘‘(ii) may provide for such an addition 
or adjustment to the payment amount oth-
erwise made under this section with re-
spect to therapy services in the case of 
such outliers. 
‘‘(B) OUTLIERS
BASED
ON
AGGREGATE 
COSTS.—Outlier adjustments or additional pay-
ments described in subparagraph (A) shall be 
based on aggregate costs during a stay in a 
skilled nursing facility and not on the number 
of days in such stay. 
‘‘(C) BUDGET
NEUTRALITY.—The Sec-
retary shall reduce estimated payments that 
would otherwise be made under the prospective 
payment system under this subsection with re-
spect to a fiscal year by 2 percent. The total 
amount of the additional payments or payment 
adjustments for outliers made under this para-
graph with respect to a fiscal year may not ex-
ceed 2 percent of the total payments projected 
or estimated to be made based on the prospec-
tive payment system under this subsection for 
the fiscal year.’’. 
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(d) 
CONFORMING
AMENDMENTS.—Section 
1888(e)(8) of such Act (42 U.S.C. 1395yy(e)(8)) is 
amended— 
(1) in subparagraph (A), by inserting ‘‘and ad-
justment under section 1111(b) of the America’s Af-
fordable Health Choices Act of 2009; 
(2) in subparagraph (B), by striking ‘‘and’’; 
(3) in subparagraph (C), by striking the period 
and inserting ‘‘; and’’; and 
(4) by adding at the end the following new sub-
paragraph: 
‘‘(D) the establishment of outliers under 
paragraph (13).’’. 
SEC. 1112. MEDICARE DSH REPORT AND PAYMENT ADJUST-
MENTS IN RESPONSE TO COVERAGE EXPAN-
SION. 
(a) DSH REPORT.— 
(1) IN GENERAL.—Not later than January 1, 
2016, the Secretary of Health and Human Services 
shall submit to Congress a report on Medicare DSH 
taking into account the impact of the health care re-
forms carried out under subdivision A in reducing 
the number of uninsured individuals. The report 
shall include recommendations relating to the fol-
lowing: 
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(A) The appropriate amount, targeting, 
and distribution of Medicare DSH to com-
pensate for higher Medicare costs associated 
with serving low-income beneficiaries (taking 
into account variations in the empirical jus-
tification for Medicare DSH attributable to hos-
pital characteristics, including bed size), con-
sistent with the original intent of Medicare 
DSH. 
(B) The appropriate amount, targeting, 
and distribution of Medicare DSH to hospitals 
given their continued uncompensated care costs, 
to the extent such costs remain. 
(2) COORDINATION WITH MEDICAID DSH RE-
PORT.—The Secretary shall coordinate the report 
under this subsection with the report on Medicaid 
DSH under section 1704(a). 
(b) PAYMENT ADJUSTMENTS IN RESPONSE TO COV-
ERAGE EXPANSION.— 
(1) IN GENERAL.—If there is a significant de-
crease in the national rate of uninsurance as a result 
of this division (as determined under paragraph 
(2)(A)), then the Secretary of Health and Human 
Services shall, beginning in fiscal year 2017, imple-
ment the following adjustments to Medicare DSH: 
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(A) The amount of Medicare DSH shall be 
adjusted based on the recommendations of the 
report under subsection (a)(1)(A) and shall 
take into account variations in the empirical 
justification for Medicare DSH attributable to 
hospital characteristics, including bed size. 
(B) Subject to paragraph (3), increase 
Medicare DSH for a hospital by an additional 
amount that is based on the amount of uncom-
pensated care provided by the hospital based on 
criteria for uncompensated care as determined 
by the Secretary, which shall exclude bad debt. 
(2) SIGNIFICANT DECREASE IN NATIONAL RATE 
OF UNINSURANCE AS A RESULT OF THIS DIVISION.— 
For purposes of this subsection— 
(A) IN GENERAL.—There is a ‘‘significant 
decrease in the national rate of uninsurance as 
a result of this division’’ if there is a decrease 
in the national rate of uninsurance (as defined 
in subparagraph (B)) from 2012 to 2014 that 
exceeds 8 percentage points. 
(B) NATIONAL
RATE
OF
UNINSURANCE 
DEFINED.—The 
term 
‘‘national 
rate 
of 
uninsurance’’ means, for a year, such rate for 
the under-65 population for the year as deter-
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mined and published by the Bureau of the Cen-
sus in its Current Population Survey in or 
about September of the succeeding year. 
(3) UNCOMPENSATED CARE INCREASE.— 
(A) COMPUTATION OF DSH SAVINGS.—For 
each fiscal year (beginning with fiscal year 
2017), the Secretary shall estimate the aggre-
gate reduction in Medicare DSH that will result 
from the adjustment under paragraph (1)(A). 
(B) 
STRUCTURE
OF
PAYMENT
IN-
CREASE.—The Secretary shall compute the in-
crease in Medicare DSH under paragraph 
(1)(B) for a fiscal year in accordance with a 
formula established by the Secretary that pro-
vides that— 
(i) the aggregate amount of such in-
crease for the fiscal year does not exceed 
50 percent of the aggregate reduction in 
Medicare DSH estimated by the Secretary 
for such fiscal year; and 
(ii) hospitals with higher levels of un-
compensated care receive a greater in-
crease. 
(c) MEDICARE DSH.—In this section, the term 
‘‘Medicare DSH’’ means adjustments in payments under 
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section 1886(d)(5)(F) of the Social Security Act (42 
U.S.C. 1395ww(d)(5)(F)) for inpatient hospital services 
furnished by disproportionate share hospitals. 
Subtitle B—Provisions Related to 
Part B 
PART 1—PHYSICIANS’ SERVICES 
SEC. 1121. SUSTAINABLE GROWTH RATE REFORM. 
(a) TRANSITIONAL
UPDATE
FOR
2010.—Section 
1848(d) of the Social Security Act (42 U.S.C. 1395w– 
4(d)) is amended by adding at the end the following new 
paragraph: 
‘‘(10) UPDATE FOR 2010.—The update to the 
single conversion factor established in paragraph 
(1)(C) for 2010 shall be the percentage increase in 
the MEI (as defined in section 1842(i)(3)) for that 
year.’’. 
(b) REBASING SGR USING 2009; LIMITATION ON 
CUMULATIVE ADJUSTMENT PERIOD.—Section 1848(d)(4) 
of such Act (42 U.S.C. 1395w–4(d)(4)) is amended— 
(1) in subparagraph (B), by striking ‘‘subpara-
graph (D)’’ and inserting ‘‘subparagraphs (D) and 
(G)’’; and 
(2) by adding at the end the following new sub-
paragraph: 
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‘‘(G) REBASING USING 2009 FOR FUTURE 
UPDATE
ADJUSTMENTS.—In determining the 
update adjustment factor under subparagraph 
(B) for 2011 and subsequent years— 
‘‘(i) the allowed expenditures for 2009 
shall be equal to the amount of the actual 
expenditures for physicians’ services during 
2009; and 
‘‘(ii) the reference in subparagraph 
(B)(ii)(I) to ‘April 1, 1996’ shall be treat-
ed as a reference to ‘January 1, 2009 (or, 
if later, the first day of the fifth year be-
fore the year involved)’.’’. 
(c) LIMITATION
ON
PHYSICIANS’ SERVICES
IN-
CLUDED IN TARGET GROWTH RATE COMPUTATION TO 
SERVICES COVERED UNDER PHYSICIAN FEE SCHED-
ULE.—Effective for services furnished on or after January 
1, 2009, section 1848(f)(4)(A) of such Act is amended 
striking ‘‘(such as clinical’’ and all that follows through 
‘‘in a physician’s office’’ and inserting ‘‘for which payment 
under this part is made under the fee schedule under this 
section, for services for practitioners described in section 
1842(b)(18)(C) on a basis related to such fee schedule, 
or for services described in section 1861(p) (other than 
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such services when furnished in the facility of a provider 
of services)’’. 
(d) 
ESTABLISHMENT
OF
SEPARATE
TARGET 
GROWTH RATES FOR CATEGORIES OF SERVICES.— 
(1) 
ESTABLISHMENT
OF
SERVICE
CAT-
EGORIES.—Subsection (j) of section 1848 of the So-
cial Security Act (42 U.S.C. 1395w–4) is amended 
by adding at the end the following new paragraph: 
‘‘(5) SERVICE CATEGORIES.—For services fur-
nished on or after January 1, 2009, each of the fol-
lowing categories of physicians’ services (as defined 
in paragraph (3)) shall be treated as a separate 
‘service category’: 
‘‘(A) Evaluation and management services 
that are procedure codes (for services covered 
under this title) for— 
‘‘(i) services in the category des-
ignated Evaluation and Management in the 
Health Care Common Procedure Coding 
System (established by the Secretary under 
subsection (c)(5) as of December 31, 2009, 
and as subsequently modified by the Sec-
retary); and 
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‘‘(ii) preventive services (as defined in 
section 1861(iii)) for which payment is 
made under this section. 
‘‘(B) All other services not described in 
subparagraph (A). 
Service categories established under this paragraph 
shall apply without regard to the specialty of the 
physician furnishing the service.’’. 
(2) ESTABLISHMENT
OF
SEPARATE
CONVER-
SION
FACTORS
FOR
EACH
SERVICE
CATEGORY.— 
Subsection (d)(1) of section 1848 of the Social Secu-
rity Act (42 U.S.C. 1395w–4) is amended— 
(A) in subparagraph (A)— 
(i) by designating the sentence begin-
ning ‘‘The conversion factor’’ as clause (i) 
with the heading ‘‘APPLICATION OF SIN-
GLE
CONVERSION
FACTOR.—’’ and with 
appropriate indentation; 
(ii) by striking ‘‘The conversion fac-
tor’’ and inserting ‘‘Subject to clause (ii), 
the conversion factor’’; and 
(iii) by adding at the end the fol-
lowing new clause: 
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‘‘(ii) APPLICATION OF MULTIPLE CON-
VERSION
FACTORS
BEGINNING
WITH 
2011.— 
‘‘(I) IN
GENERAL.—In applying 
clause (i) for years beginning with 
2011, separate conversion factors 
shall be established for each service 
category of physicians’ services (as de-
fined in subsection (j)(5)) and any 
reference in this section to a conver-
sion factor for such years shall be 
deemed to be a reference to the con-
version factor for each of such cat-
egories. 
‘‘(II) INITIAL CONVERSION FAC-
TORS.—Such factors for 2011 shall be 
based upon the single conversion fac-
tor for the previous year multiplied by 
the update established under para-
graph (11) for such category for 
2011. 
‘‘(III) UPDATING
OF
CONVER-
SION
FACTORS.—Such factor for a 
service category for a subsequent year 
shall be based upon the conversion 
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factor for such category for the pre-
vious year and adjusted by the update 
established for such category under 
paragraph (11) for the year in-
volved.’’; and 
(B) in subparagraph (D), by striking 
‘‘other physicians’ services’’ and inserting ‘‘for 
physicians’ services described in the service cat-
egory described in subsection (j)(5)(B)’’. 
(3) ESTABLISHING UPDATES FOR CONVERSION 
FACTORS
FOR
SERVICE
CATEGORIES.—Section 
1848(d) of the Social Security Act (42 U.S.C. 
1395w–4(d)), as amended by subsection (a), is 
amended— 
(A) in paragraph (4)(C)(iii), by striking 
‘‘The allowed’’ and inserting ‘‘Subject to para-
graph (11)(B), the allowed’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(11) UPDATES FOR SERVICE CATEGORIES BE-
GINNING WITH 2011.— 
‘‘(A) IN GENERAL.—In applying paragraph 
(4) for a year beginning with 2011, the fol-
lowing rules apply: 
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‘‘(II) APPLICATION OF CATEGORY 
SPECIFIC
TARGET
GROWTH
RATE.— 
The growth rate applied under clause 
(ii)(II) of such paragraph shall be the 
target growth rate for the service cat-
egory involved under subsection (f)(5). 
‘‘(B) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—In applying paragraph (4) for a 
year beginning with 2010, notwithstanding sub-
paragraph (C)(iii) of such paragraph, the al-
lowed expenditures for a service category for a 
year is an amount computed by the Secretary 
as follows: 
‘‘(i) FOR 2010.—For 2010: 
‘‘(I) TOTAL
2009
ACTUAL
EX-
PENDITURES FOR ALL SERVICES IN-
CLUDED
IN
SGR
COMPUTATION
FOR 
EACH SERVICE CATEGORY.—Compute 
total actual expenditures for physi-
cians’ services (as defined in sub-
section (f)(4)(A)) for 2009 for each 
service category. 
‘‘(II) 
INCREASE
BY
GROWTH 
RATE TO OBTAIN 2010 ALLOWED EX-
PENDITURES
FOR
SERVICE
CAT-
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EGORY.—Compute allowed expendi-
tures for the service category for 2010 
by increasing the allowed expenditures 
for the service category for 2009 com-
puted under subclause (I) by the tar-
get growth rate for such service cat-
egory under subsection (f) for 2010. 
‘‘(ii) FOR SUBSEQUENT YEARS.—For 
a subsequent year, take the amount of al-
lowed expenditures for such category for 
the preceding year (under clause (i) or this 
clause) and increase it by the target 
growth rate determined under subsection 
(f) for such category and year.’’. 
(4) 
APPLICATION
OF
SEPARATE
TARGET 
GROWTH RATES FOR EACH CATEGORY.— 
(A) IN GENERAL.—Section 1848(f) of the 
Social Security Act (42 U.S.C. 1395w–4(f)) is 
amended by adding at the end the following 
new paragraph: 
‘‘(5) APPLICATION
OF
SEPARATE
TARGET 
GROWTH RATES FOR EACH SERVICE CATEGORY BE-
GINNING WITH 2010.—The target growth rate for a 
year beginning with 2010 shall be computed and ap-
plied separately under this subsection for each serv-
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ice category (as defined in subsection (j)(5)) and 
shall be computed using the same method for com-
puting the target growth rate except that the factor 
described in paragraph (2)(C) for— 
‘‘(A) the service category described in sub-
section (j)(5)(A) shall be increased by 0.02; and 
‘‘(B) the service category described in sub-
section (j)(5)(B) shall be increased by 0.01.’’. 
(B) USE OF TARGET GROWTH RATES.— 
Section 1848 of such Act is further amended— 
(i) in subsection (d)— 
(I) in paragraph (1)(E)(ii), by in-
serting ‘‘or target’’ after ‘‘sustain-
able’’; and 
(II) in paragraph (4)(B)(ii)(II), 
by inserting ‘‘or target’’ after ‘‘sus-
tainable’’; and 
(ii) in the heading of subsection (f), 
by inserting ‘‘AND
TARGET
GROWTH 
RATE’’ 
after 
‘‘SUSTAINABLE
GROWTH 
RATE’’; 
(iii) in subsection (f)(1)— 
(I) by striking ‘‘and’’ at the end 
of subparagraph (A); 
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(II) in subparagraph (B), by in-
serting ‘‘before 2010’’ after ‘‘each 
succeeding year’’ and by striking the 
period at the end and inserting ‘‘; 
and’’; and 
(III) by adding at the end the 
following new subparagraph: 
‘‘(C) November 1 of each succeeding year 
the target growth rate for such succeeding year 
and each of the 2 preceding years.’’; and 
(iv) in subsection (f)(2), in the matter 
before subparagraph (A), by inserting after 
‘‘beginning with 2000’’ the following: ‘‘and 
ending with 2009’’. 
(e) APPLICATION TO ACCOUNTABLE CARE ORGANI-
ZATION PILOT PROGRAM.—In applying the target growth 
rate under subsections (d) and (f) of section 1848 of the 
Social Security Act to services furnished by a practitioner 
to beneficiaries who are attributable to an accountable 
care organization under the pilot program provided under 
section 1866D of such Act, the Secretary of Health and 
Human Services shall develop, not later than January 1, 
2012, for application beginning with 2012, a method 
that— 
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(1) allows each such organization to have its 
own expenditure targets and updates for such practi-
tioners, with respect to beneficiaries who are attrib-
utable to that organization, that are consistent with 
the methodologies described in such subsection (f); 
and 
(2) provides that the target growth rate appli-
cable to other physicians shall not apply to such 
physicians to the extent that the physicians’ services 
are furnished through the accountable care organiza-
tion. 
In applying paragraph (1), the Secretary of Health and 
Human Services may apply the difference in the update 
under such paragraph on a claim-by-claim or lump sum 
basis and such a payment shall be taken into account 
under the pilot program. 
SEC. 1122. MISVALUED CODES UNDER THE PHYSICIAN FEE 
SCHEDULE. 
(a) IN GENERAL.—Section 1848(c)(2) of the Social 
Security Act (42 U.S.C. 1395w–4(c)(2)) is amended by 
adding at the end the following new subparagraphs: 
‘‘(K) POTENTIALLY MISVALUED CODES.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall— 
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‘‘(I) periodically identify services 
as being potentially misvalued using 
criteria specified in clause (ii); and 
‘‘(II) review and make appro-
priate adjustments to the relative val-
ues established under this paragraph 
for services identified as being poten-
tially misvalued under subclause (I). 
‘‘(ii) 
IDENTIFICATION
OF
POTEN-
TIALLY MISVALUED CODES.—For purposes 
of identifying potentially misvalued services 
pursuant to clause (i)(I), the Secretary 
shall examine (as the Secretary determines 
to be appropriate) codes (and families of 
codes as appropriate) for which there has 
been the fastest growth; codes (and fami-
lies of codes as appropriate) that have ex-
perienced substantial changes in practice 
expenses; codes for new technologies or 
services within an appropriate period (such 
as three years) after the relative values are 
initially established for such codes; mul-
tiple codes that are frequently billed in 
conjunction with furnishing a single serv-
ice; codes with low relative values, particu-
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larly those that are often billed multiple 
times for a single treatment; codes which 
have not been subject to review since the 
implementation of the RBRVS (the so- 
called ‘Harvard-valued codes’); and such 
other codes determined to be appropriate 
by the Secretary. 
‘‘(iii) REVIEW AND ADJUSTMENTS.— 
‘‘(I) The Secretary may use ex-
isting 
processes 
to 
receive 
rec-
ommendations on the review and ap-
propriate adjustment of potentially 
misvalued services described clause 
(i)(II). 
‘‘(II) The Secretary may conduct 
surveys, other data collection activi-
ties, studies, or other analyses as the 
Secretary determines to be appro-
priate to facilitate the review and ap-
propriate adjustment described in 
clause (i)(II). 
‘‘(III) The Secretary may use 
analytic contractors to identify and 
analyze 
services 
identified 
under 
clause (i)(I), conduct surveys or col-
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lect data, and make recommendations 
on the review and appropriate adjust-
ment of services described in clause 
(i)(II). 
‘‘(IV) The Secretary may coordi-
nate the review and appropriate ad-
justment described in clause (i)(II) 
with the periodic review described in 
subparagraph (B). 
‘‘(V) As part of the review and 
adjustment described in clause (i)(II), 
including with respect to codes with 
low relative values described in clause 
(ii), the Secretary may make appro-
priate 
coding 
revisions 
(including 
using existing processes for consider-
ation of coding changes) which may 
include consolidation of individual 
services into bundled codes for pay-
ment under the fee schedule under 
subsection (b). 
‘‘(VI) The provisions of subpara-
graph (B)(ii)(II) shall apply to adjust-
ments to relative value units made 
pursuant to this subparagraph in the 
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same manner as such provisions apply 
to adjustments under subparagraph 
(B)(ii)(II). 
‘‘(L) 
VALIDATING
RELATIVE
VALUE 
UNITS.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall establish a process to validate relative 
value units under the fee schedule under 
subsection (b). 
‘‘(ii) COMPONENTS
AND
ELEMENTS 
OF
WORK.—The process described in 
clause (i) may include validation of work 
elements (such as time, mental effort and 
professional judgment, technical skill and 
physical effort, and stress due to risk) in-
volved with furnishing a service and may 
include validation of the pre, post, and 
intra-service components of work. 
‘‘(iii) SCOPE OF CODES.—The valida-
tion of work relative value units shall in-
clude a sampling of codes for services that 
is the same as the codes listed under sub-
paragraph (K)(ii). 
‘‘(iv) METHODS.—The Secretary may 
conduct the validation under this subpara-
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graph using methods described in sub-
clauses (I) through (V) of subparagraph 
(K)(iii) as the Secretary determines to be 
appropriate. 
‘‘(v) ADJUSTMENTS.—The Secretary 
shall make appropriate adjustments to the 
work relative value units under the fee 
schedule under subsection (b). The provi-
sions of subparagraph (B)(ii)(II) shall 
apply to adjustments to relative value units 
made pursuant to this subparagraph in the 
same manner as such provisions apply to 
adjustments 
under 
subparagraph 
(B)(ii)(II).’’. 
(b) IMPLEMENTATION.— 
(1) FUNDING.—For purposes of carrying out 
the provisions of subparagraphs (K) and (L) of 
1848(c)(2) of the Social Security Act, as added by 
subsection (a), in addition to funds otherwise avail-
able, out of any funds in the Treasury not otherwise 
appropriated, there are appropriated to the Sec-
retary of Health and Human Services for the Center 
for Medicare & Medicaid Services Program Manage-
ment Account $20,000,000 for fiscal year 2010 and 
each subsequent fiscal year. Amounts appropriated 
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under this paragraph for a fiscal year shall be avail-
able until expended. 
(2) ADMINISTRATION.— 
(A) Chapter 35 of title 44, United States 
Code and the provisions of the Federal Advisory 
Committee Act (5 U.S.C. App.) shall not apply 
to this section or the amendment made by this 
section. 
(B) Notwithstanding any other provision of 
law, the Secretary may implement subpara-
graphs (K) and (L) of 1848(c)(2) of the Social 
Security Act, as added by subsection (a), by 
program instruction or otherwise. 
(C) Section 4505(d) of the Balanced 
Budget Act of 1997 is repealed. 
(D) Except for provisions related to con-
fidentiality of information, the provisions of the 
Federal Acquisition Regulation shall not apply 
to this section or the amendment made by this 
section. 
(3) FOCUSING
CMS
RESOURCES
ON
POTEN-
TIALLY
OVERVALUED
CODES.—Section 1868(a) of 
the Social Security Act (42 U.S.C. 1395ee(a)) is re-
pealed. 
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SEC. 1123. PAYMENTS FOR EFFICIENT AREAS. 
Section 1833 of the Social Security Act (42 U.S.C. 
1395l) is amended by adding at the end the following new 
subsection: 
‘‘(x) 
INCENTIVE
PAYMENTS
FOR
EFFICIENT 
AREAS.— 
‘‘(1) IN GENERAL.—In the case of services fur-
nished under the physician fee schedule under sec-
tion 1848 on or after January 1, 2011, and before 
January 1, 2013, by a supplier that is paid under 
such fee schedule in an efficient area (as identified 
under paragraph (2)), in addition to the amount of 
payment that would otherwise be made for such 
services under this part, there also shall be paid (on 
a monthly or quarterly basis) an amount equal to 5 
percent of the payment amount for the services 
under this part. 
‘‘(2) IDENTIFICATION OF EFFICIENT AREAS.— 
‘‘(A) IN GENERAL.—Based upon available 
data, the Secretary shall identify those counties 
or equivalent areas in the United States in the 
lowest fifth percentile of utilization based on 
per capita spending under this part and part A 
for services provided in the most recent year for 
which data are available as of the date of the 
enactment of this subsection, as standardized to 
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eliminate the effect of geographic adjustments 
in payment rates. 
‘‘(B) 
IDENTIFICATION
OF
COUNTIES 
WHERE SERVICE IS FURNISHED.—For purposes 
of paying the additional amount specified in 
paragraph (1), if the Secretary uses the 5-digit 
postal ZIP Code where the service is furnished, 
the dominant county of the postal ZIP Code (as 
determined by the United States Postal Service, 
or otherwise) shall be used to determine wheth-
er the postal ZIP Code is in a county described 
in subparagraph (A). 
‘‘(C) LIMITATION
ON
REVIEW.—There 
shall be no administrative or judicial review 
under section 1869, 1878, or otherwise, respect-
ing— 
‘‘(i) the identification of a county or 
other area under subparagraph (A); or 
‘‘(ii) the assignment of a postal ZIP 
Code to a county or other area under sub-
paragraph (B). 
‘‘(D) PUBLICATION OF LIST OF COUNTIES; 
POSTING ON WEBSITE.—With respect to a year 
for which a county or area is identified under 
this paragraph, the Secretary shall identify 
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such counties or areas as part of the proposed 
and final rule to implement the physician fee 
schedule under section 1848 for the applicable 
year. The Secretary shall post the list of coun-
ties identified under this paragraph on the 
Internet website of the Centers for Medicare & 
Medicaid Services.’’. 
SEC. 1124. MODIFICATIONS TO THE PHYSICIAN QUALITY 
REPORTING INITIATIVE (PQRI). 
(a) FEEDBACK.—Section 1848(m)(5) of the Social 
Security Act (42 U.S.C. 1395w–4(m)(5)) is amended by 
adding at the end the following new subparagraph: 
‘‘(H) FEEDBACK.—The Secretary shall 
provide timely feedback to eligible professionals 
on the performance of the eligible professional 
with respect to satisfactorily submitting data on 
quality measures under this subsection.’’. 
(b) APPEALS.—Such section is further amended— 
(1) in subparagraph (E), by striking ‘‘There 
shall be’’ and inserting ‘‘Subject to subparagraph 
(I), there shall be’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(I) INFORMAL APPEALS PROCESS.—Not-
withstanding subparagraph (E), by not later 
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than January 1, 2011, the Secretary shall es-
tablish and have in place an informal process 
for eligible professionals to appeal the deter-
mination that an eligible professional did not 
satisfactorily submit data on quality measures 
under this subsection.’’. 
(c) INTEGRATION OF PHYSICIAN QUALITY REPORT-
ING AND EHR REPORTING.—Section 1848(m) of such 
Act is amended by adding at the end the following new 
paragraph: 
‘‘(7) INTEGRATION OF PHYSICIAN QUALITY RE-
PORTING
AND
EHR
REPORTING.—Not later than 
January 1, 2012, the Secretary shall develop a plan 
to integrate clinical reporting on quality measures 
under this subsection with reporting requirements 
under subsection (o) relating to the meaningful use 
of electronic health records. Such integration shall 
consist of the following: 
‘‘(A) The development of measures, the re-
porting of which would both demonstrate— 
‘‘(i) meaningful use of an electronic 
health record for purposes of subsection 
(o); and 
‘‘(ii) clinical quality of care furnished 
to an individual. 
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‘‘(B) The collection of health data to iden-
tify deficiencies in the quality and coordination 
of care for individuals eligible for benefits under 
this part. 
‘‘(C) Such other activities as specified by 
the Secretary.’’. 
(d) EXTENSION OF INCENTIVE PAYMENTS.—Section 
1848(m)(1) of such Act (42 U.S.C. 1395w–4(m)(1)) is 
amended— 
(1) in subparagraph (A), by striking ‘‘2010’’ 
and inserting ‘‘2012’’; and 
(2) in subparagraph (B)(ii), by striking ‘‘2009 
and 2010’’ and inserting ‘‘for each of the years 2009 
through 2012’’. 
SEC. 1125. ADJUSTMENT TO MEDICARE PAYMENT LOCAL-
ITIES. 
(a) IN GENERAL.—Section 1848(e) of the Social Se-
curity Act (42 U.S.C.1395w–4(e)) is amended by adding 
at the end the following new paragraph: 
‘‘(6) TRANSITION
TO
USE
OF
MSAS
AS
FEE 
SCHEDULE AREAS IN CALIFORNIA.— 
‘‘(A) IN GENERAL.— 
‘‘(i) REVISION.—Subject to clause (ii) 
and notwithstanding the previous provi-
sions of this subsection, for services fur-
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nished on or after January 1, 2011, the 
Secretary shall revise the fee schedule 
areas used for payment under this section 
applicable to the State of California using 
the Metropolitan Statistical Area (MSA) 
iterative Geographic Adjustment Factor 
methodology as follows: 
‘‘(I) The Secretary shall con-
figure the physician fee schedule areas 
using 
the 
Core-Based 
Statistical 
Areas-Metropolitan Statistical Areas 
(each in this paragraph referred to as 
an ‘MSA’), as defined by the Director 
of the Office of Management and 
Budget, as the basis for the fee sched-
ule areas. The Secretary shall employ 
an iterative process to transition fee 
schedule areas. First, the Secretary 
shall list all MSAs within the State by 
Geographic Adjustment Factor de-
scribed in paragraph (2) (in this para-
graph referred to as a ‘GAF’) in de-
scending order. In the first iteration, 
the Secretary shall compare the GAF 
of the highest cost MSA in the State 
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to the weighted-average GAF of the 
group of remaining MSAs in the 
State. If the ratio of the GAF of the 
highest cost MSA to the weighted-av-
erage GAF of the rest of State is 1.05 
or greater then the highest cost MSA 
becomes a separate fee schedule area. 
‘‘(II) In the next iteration, the 
Secretary shall compare the MSA of 
the second-highest GAF to the weight-
ed-average GAF of the group of re-
maining MSAs. If the ratio of the sec-
ond-highest 
MSA’s 
GAF 
to 
the 
weighted-average of the remaining 
lower cost MSAs is 1.05 or greater, 
the second-highest MSA becomes a 
separate 
fee 
schedule 
area. 
The 
iterative process continues until the 
ratio of the GAF of the highest-cost 
remaining MSA to the weighted-aver-
age of the remaining lower-cost MSAs 
is less than 1.05, and the remaining 
group of lower cost MSAs form a sin-
gle fee schedule area, If two MSAs 
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have identical GAFs, they shall be 
combined in the iterative comparison. 
‘‘(ii) TRANSITION.—For services fur-
nished on or after January 1, 2011, and 
before January 1, 2016, in the State of 
California, after calculating the work, prac-
tice expense, and malpractice geographic 
indices described in clauses (i), (ii), and 
(iii) of paragraph (1)(A) that would other-
wise apply through application of this 
paragraph, the Secretary shall increase any 
such index to the county-based fee sched-
ule area value on December 31, 2009, if 
such index would otherwise be less than 
the value on January 1, 2010. 
‘‘(B) SUBSEQUENT REVISIONS.— 
‘‘(i) PERIODIC REVIEW AND ADJUST-
MENTS IN FEE SCHEDULE AREAS.—Subse-
quent to the process outlined in paragraph 
(1)(C), not less often than every three 
years, the Secretary shall review and up-
date the California Rest-of-State fee sched-
ule area using MSAs as defined by the Di-
rector of the Office of Management and 
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Budget and the iterative methodology de-
scribed in subparagraph (A)(i). 
‘‘(ii) LINK WITH GEOGRAPHIC INDEX 
DATA REVISION.—The revision described in 
clause (i) shall be made effective concur-
rently with the application of the periodic 
review of the adjustment factors required 
under paragraph (1)(C) for California for 
2012 and subsequent periods. Upon re-
quest, the Secretary shall make available 
to the public any county-level or MSA de-
rived data used to calculate the geographic 
practice cost index. 
‘‘(C) REFERENCES
TO
FEE
SCHEDULE 
AREAS.—Effective for services furnished on or 
after January 1, 2010, for the State of Cali-
fornia, any reference in this section to a fee 
schedule area shall be deemed a reference to an 
MSA in the State.’’. 
(b) CONFORMING AMENDMENT TO DEFINITION OF 
FEE SCHEDULE AREA.—Section 1848(j)(2) of the Social 
Security Act (42 U.S.C. 1395w(j)(2)) is amended by strik-
ing ‘‘The term’’ and inserting ‘‘Except as provided in sub-
section (e)(6)(C), the term’’. 
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PART 2—MARKET BASKET UPDATES 
SEC. 
1131. 
INCORPORATING 
PRODUCTIVITY 
IMPROVE-
MENTS 
INTO 
MARKET 
BASKET 
UPDATES 
THAT DO NOT ALREADY INCORPORATE SUCH 
IMPROVEMENTS. 
(a) OUTPATIENT HOSPITALS.— 
(1) IN GENERAL.—The first sentence of section 
1833(t)(3)(C)(iv) of the Social Security Act (42 
U.S.C. 1395l(t)(3)(C)(iv)) is amended— 
(A) by inserting ‘‘(which is subject to the 
productivity adjustment described in subclause 
(II) 
of 
such 
section)’’ 
after 
‘‘1886(b)(3)(B)(iii)’’; and 
(B) by inserting ‘‘(but not below 0)’’ after 
‘‘reduced’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to increase factors for 
services furnished in years beginning with 2010. 
(b) AMBULANCE SERVICES.—Section 1834(l)(3)(B) 
of such Act (42 U.S.C. 1395m(l)(3)(B))) is amended by 
inserting before the period at the end the following: ‘‘and, 
in the case of years beginning with 2010, subject to the 
productivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’. 
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(c) AMBULATORY SURGICAL CENTER SERVICES.— 
Section 
1833(i)(2)(D) 
of 
such 
Act 
(42 
U.S.C. 
1395l(i)(2)(D)) is amended— 
(1) by redesignating clause (v) as clause (vi); 
and 
(2) by inserting after clause (iv) the following 
new clause: 
‘‘(v) In implementing the system described in clause 
(i), for services furnished during 2010 or any subsequent 
year, to the extent that an annual percentage change fac-
tor applies, such factor shall be subject to the productivity 
adjustment described in section 1886(b)(3)(B)(iii)(II).’’. 
(d) LABORATORY SERVICES.—Section 1833(h)(2)(A) 
of such Act (42 U.S.C. 1395l(h)(2)(A)) is amended— 
(1) in clause (i), by striking ‘‘for each of years 
2009 through 2013’’ and inserting ‘‘for 2009’’; and 
(2) clause (ii)— 
(A) by striking ‘‘and’’ at the end of sub-
clause (III); 
(B) by striking the period at the end of 
subclause (IV) and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subclause: 
‘‘(V) the annual adjustment in the fee schedules 
determined under clause (i) for years beginning with 
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2010 shall be subject to the productivity adjustment 
described in section 1886(b)(3)(B)(iii)(II).’’. 
(e) CERTAIN DURABLE MEDICAL EQUIPMENT.—Sec-
tion 1834(a)(14) of such Act (42 U.S.C. 1395m(a)(14)) 
is amended— 
(1) in subparagraph (K), by inserting before 
the semicolon at the end the following: ‘‘, subject to 
the productivity adjustment described in section 
1886(b)(3)(B)(iii)(II)’’; 
(2) in subparagraph (L)(i), by inserting after 
‘‘June 2013,’’ the following: ‘‘subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II),’’; 
(3) in subparagraph (L)(ii), by inserting after 
‘‘June 2013’’ the following: ‘‘, subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’; and 
(4) in subparagraph (M), by inserting before 
the period at the end the following: ‘‘, subject to the 
productivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’. 
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PART 3—OTHER PROVISIONS 
SEC. 1141. RENTAL AND PURCHASE OF POWER-DRIVEN 
WHEELCHAIRS. 
(a) IN GENERAL.—Section 1834(a)(7)(A)(iii) of the 
Social Security Act (42 U.S.C. 1395m(a)(7)(A)(iii)) is 
amended— 
(1) in the heading, by inserting ‘‘CERTAIN COM-
PLEX REHABILITATIVE’’ after ‘‘OPTION FOR’’; and 
(2) by striking ‘‘power-driven wheelchair’’ and 
inserting ‘‘complex rehabilitative power-driven wheel-
chair recognized by the Secretary as classified within 
group 3 or higher’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on January 1, 2011, and 
shall apply to power-driven wheelchairs furnished on or 
after such date. Such amendments shall not apply to con-
tracts entered into under section 1847 of the Social Secu-
rity Act (42 U.S.C. 1395w–3) pursuant to a bid submitted 
under such section before October 1, 2010, under sub-
section (a)(1)(B)(i)(I) of such section. 
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 
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first place it appears, ‘‘January 1, 2010’’ and inserting 
‘‘January 1, 2012’’. 
SEC. 1143. HOME INFUSION THERAPY REPORT TO CON-
GRESS. 
Not later than 12 months after the date of enactment 
of this Act, 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-
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 
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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.— 
(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 
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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.— 
(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.’’. 
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(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 
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 
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higher costs effective for services furnished on 
or after January 1, 2011.’’. 
SEC. 1146. MEDICARE IMPROVEMENT FUND. 
Section 1898(b)(1)(A) of the Social Security Act (42 
U.S.C. 1395iii(b)(1)(A)) is amended to read as follows: 
‘‘(A) the period beginning with fiscal year 
2011 and ending with fiscal year 2019, 
$8,000,000,000; and’’. 
SEC. 1147. PAYMENT FOR IMAGING SERVICES. 
(a) ADJUSTMENT IN PRACTICE EXPENSE TO RE-
FLECT HIGHER PRESUMED UTILIZATION.—Section 1848 
of the Social Security Act (42 U.S.C. 1395w) is amend-
ed— 
(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: 
‘‘(C) ADJUSTMENT IN PRACTICE EXPENSE 
TO
REFLECT
HIGHER
PRESUMED
UTILIZA-
TION.—In computing the number of practice 
expense relative value units under subsection 
(c)(2)(C)(ii) with respect to advanced diagnostic 
imaging 
services 
(as 
defined 
in 
section 
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1834(e)(1)(B)), the Secretary shall adjust such 
number of units so it reflects a 75 percent 
(rather than 50 percent) presumed rate of utili-
zation of imaging equipment.’’; and 
(2) in subsection (c)(2)(B)(v)(II), by inserting 
‘‘AND OTHER PROVISIONS’’ after ‘‘OPD PAYMENT 
CAP’’. 
(b) ADJUSTMENT IN TECHNICAL COMPONENT ‘‘DIS-
COUNT’’ ON SINGLE-SESSION IMAGING TO CONSECUTIVE 
BODY PARTS.—Section 1848(b)(4) of such Act is further 
amended by adding at the end the following new subpara-
graph: 
‘‘(D) ADJUSTMENT IN TECHNICAL COMPO-
NENT DISCOUNT ON SINGLE-SESSION IMAGING 
INVOLVING
CONSECUTIVE
BODY
PARTS.—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.’’. 
(c) EFFECTIVE DATE.—Except as otherwise pro-
vided, this section, and the amendments made by this sec-
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tion, shall apply to services furnished on or after January 
1, 2011. 
SEC. 1148. 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: ‘‘The requirement for a surety bond described in 
subparagraph (B) shall not apply in the case of a phar-
macy (i) that has been enrolled under section 1866(j) as 
a supplier of durable medical equipment, prosthetics, 
orthotics, and supplies and has been issued (which may 
include renewal of) a provider number (as described in the 
first sentence of this paragraph) for at least 5 years, and 
(ii) for which a final adverse action (as defined in section 
424.57(a) of title 42, Code of Federal Regulations) has 
never been imposed.’’. 
(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— 
(A) in clause (ii), by striking ‘‘After the’’ 
and inserting ‘‘Except as provided in clause 
(iii), after the’’; and 
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(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 
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 
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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 ‘‘; and’’; and 
(3) by adding at the end the following: 
‘‘(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. 
Any supplier that has submitted an application 
for accreditation before August 1, 2009, shall 
be deemed as meeting applicable standards and 
accreditation requirement under this subpara-
graph until such time as the independent ac-
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creditation organization takes action on the 
supplier’s application.’’. 
(d) RESTORING 36-MONTH OXYGEN RENTAL PE-
RIOD IN CASE OF SUPPLIER BANKRUPTCY FOR CERTAIN 
INDIVIDUALS.—Section 1834(a)(5)(F) of such Act (42 
U.S.C. 1395m(a)(5)(F)) is amended by adding at the end 
the following new clause: 
‘‘(iii) 
EXCEPTION
FOR
BANK-
RUPTCY.—If a supplier of oxygen to an in-
dividual is declared bankrupt and its assets 
are liquidated and at the time of such dec-
laration and liquidation more than 24 
months of rental payments have been 
made, the individual may begin under this 
subparagraph a new 36-month rental pe-
riod with another supplier of oxygen.’’. 
SEC. 1149. 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 
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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 
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. 
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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 
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 
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‘‘(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 
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— 
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‘‘(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. 
‘‘(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. 
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‘‘(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-
pital for the applicable period for such fis-
cal year minus 1. 
‘‘(B) AGGREGATE PAYMENTS FOR ALL DIS-
CHARGES.—The term ‘aggregate payments for 
all discharges’ means, for a hospital for a fiscal 
year, the sum of the base operating DRG pay-
ment amounts for all discharges for all condi-
tions from such hospital for such fiscal year. 
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‘‘(C) EXCESS READMISSION RATIO.— 
‘‘(i) IN GENERAL.—Subject to clauses 
(ii) and (iii), the term ‘excess readmissions 
ratio’ means, with respect to an applicable 
condition for a hospital for an applicable 
period, the ratio (but not less than 1.0) 
of— 
‘‘(I) the risk adjusted readmis-
sions based on actual readmissions, as 
determined consistent with a readmis-
sion measure methodology that has 
been 
endorsed 
under 
paragraph 
(5)(A)(ii)(I), for an applicable hospital 
for such condition with respect to the 
applicable period; to 
‘‘(II) the risk adjusted expected 
readmissions 
(as 
determined 
con-
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 
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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: 
‘‘(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 
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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-
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 
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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 
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. 
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‘‘(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 
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 
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if such hospitals have taken steps to avoid patients 
at risk in order to reduce the likelihood of increasing 
readmissions for applicable conditions. If the Sec-
retary determines that such a hospital has taken 
such a step, after notice to the hospital and oppor-
tunity for the hospital to undertake action to allevi-
ate such steps, the Secretary may impose an appro-
priate 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-
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). 
‘‘(B) TARGETED
HOSPITALS.—Subpara-
graph (A) shall apply to an applicable hospital 
that— 
‘‘(i) received (or, in the case of an 
1814(b)(3) hospital, otherwise would have 
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been eligible to receive) $10,000,000 or 
more in disproportionate share payments 
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 
this paragraph for a fiscal year shall not 
exceed 5 percent of the estimated dif-
ference in the spending that would occur 
for such fiscal year with and without appli-
cation of the adjustment factor described 
in paragraph (3) and applied pursuant to 
paragraph (1). 
‘‘(ii) HOSPITAL-SPECIFIC LIMIT.—The 
aggregate amount of the payment adjust-
ment for a hospital under this paragraph 
shall not exceed the estimated difference in 
spending that would occur for such fiscal 
year for such hospital with and without ap-
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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 
(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 
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the Secretary) who is determined under sub-
paragraph (B) of section 1860D–14(a)(3) to be 
a subsidy eligible individual.’’. 
(b) AUTOMATIC
ENROLLMENT.—Section 1860D– 
1(b)(1) of the Social Security Act (42 U.S.C. 1395w– 
101(b)(1)) is amended by adding at the end the following 
new subparagraph: 
‘‘(D) SPECIAL RULE FOR SUBSIDY ELIGI-
BLE
INDIVIDUALS.—The process established 
under subparagraph (A) shall include, in the 
case of an individual described in section 
1860D–1(b)(3)(D) who fails to enroll in a pre-
scription drug plan or an MA–PD plan during 
the special enrollment established under such 
section applicable to such individual, the appli-
cation of the assignment process described in 
subparagraph (C) to such individual in the 
same manner as such assignment process ap-
plies to a part D eligible individual described in 
such subparagraph (C). Nothing in the previous 
sentence shall prevent an individual described in 
such sentence from declining enrollment in a 
plan determined appropriate by the Secretary 
(or in the program under this part) or from 
changing such enrollment.’’. 
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