SECTION 1. SHORT TITLE; PURPOSE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Medicare Physician Payment Innovation Act of 2012’’. 
(b) PURPOSE.—The purpose of this Act is to reform 
the system of Medicare payment for physicians’ services— 
(1) by ending the application of the sustainable 
growth rate (SGR) system; 
(2) to stabilize payments for 2013; 
(3) to promote the rapid development and im-
plementation of alternative improved payment and 
delivery models that incentivize high quality, high- 
value care; and 
(4) to provide continuing incentives for physi-
cian adoption of such alternative payment and deliv-
ery models. 
SEC. 2. MEDICARE PHYSICIAN PAYMENT REFORM. 
(a) REPEAL OF SGR PAYMENT METHODOLOGY.— 
Section 1848 of the Social Security Act (42 U.S.C. 
1395w–4) is amended— 
(1) in subsection (d)— 
(A) in paragraph (1)(A), by inserting ‘‘or 
a subsequent paragraph’’ after ‘‘paragraph 
(4)’’; and 
(B) in paragraph (4)— 
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(i) in the heading, by striking ‘‘YEARS 
BEGINNING
WITH
2001’’ and inserting 
‘‘2001, 2002, AND 2003’’; and 
(ii) in subparagraph (A), by striking 
‘‘a year beginning with 2001’’ and insert-
ing ‘‘2001, 2002, and 2003’’; and 
(2) in subsection (f)— 
(A) in paragraph (1)(B), by inserting 
‘‘through 2012’’ after ‘‘of such succeeding 
year’’ ; and 
(B) in paragraph (2), by inserting ‘‘and 
ending with 2012’’ after ‘‘beginning with 
2000’’. 
(b) STABILIZING 2013 PAYMENT RATES AT CUR-
RENT LEVEL.— 
(1) IN
GENERAL.—Subsection (d) of section 
1848 of the Social Security Act (42 U.S.C. 1395w– 
4) is amended by adding at the end the following 
new paragraph: 
‘‘(14) UPDATE FOR 2013.—In lieu of the update 
to the single conversion factor established in para-
graph (1)(C) that would otherwise apply for 2013, 
the update to the single conversion factor shall be 0 
percent for 2013.’’. 
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(2) TECHNICAL
AMENDMENT.—Effective for 
years beginning with 2013, section 1848(m)(7)(C)(i) 
of the Social Security Act (42 U.S.C. 1395w– 
4(m)(7)(C)(i)) is amended by inserting ‘‘, the pro-
gram of Osteopathic Continuous Certification of the 
American Osteopathic Association,’’ after ‘‘Special-
ties Maintenance of Certification program’’. 
(c) ESTABLISHMENT OF DIFFERENTIAL UPDATES 
BEGINNING WITH 2014 TO PROMOTE ACCESS TO PRI-
MARY CARE 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 paragraphs: 
‘‘(5) SERVICE CATEGORIES.— 
‘‘(A) IN GENERAL.—For services furnished 
on or after January 1, 2014, each of the fol-
lowing categories of services shall be treated as 
a separate ‘service category’: 
‘‘(i) PRIMARY
CARE.—Primary care 
services (as defined in subparagraph (B)) 
furnished by a qualifying practitioner. 
‘‘(ii) OTHER SERVICES.—Other physi-
cians’ services. 
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‘‘(B) PRIMARY
CARE
SERVICES.—In this 
subsection, the term ‘primary care services’ 
means services identified, as of April 1, 2012, 
with the following HCPCS codes (and as subse-
quently modified by the Secretary): 
‘‘(i) OFFICE
AND
OUTPATIENT
VIS-
ITS.—99201 through 99215. 
‘‘(ii) 
HOSPITAL
OBSERVATIONAL 
SERVICES.—99217 through 99220. 
‘‘(iii) HOSPITAL
INPATIENT
VISITS 
SERVICES.—99221 through 99239. 
‘‘(iv) NURSING
HOME, DOMICILIARY, 
REST HOME OR CUSTODIAL CARE VISITS.— 
99304 through 99340. 
‘‘(v) HOME SERVICE VISITS.—99341 
through 99350. 
‘‘(vi) 
WELCOME
TO
MEDICARE 
VISIT.—G0402. 
‘‘(vii) ANNUAL
WELLNESS
VISITS.— 
G0438 and G0439. 
‘‘(C) INCLUSION
OF
PREVENTIVE
SERV-
ICES.—Such term also includes preventive serv-
ices described in section 1861(ddd)(3) and addi-
tional preventive services described in section 
1861(ddd)(1). 
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‘‘(D) INCLUSION
OF
ADDITIONAL
SERV-
ICES.—Such term also includes services, such 
as care coordination services, telemedicine serv-
ices, non-face-to-face care management services, 
preparation and supervision of long-term care 
plans, home care plan oversight services, and 
similar services that the Secretary identifies, by 
regulation, as being similar to the services de-
scribed in subparagraph (B) or (C). 
‘‘(6) QUALIFYING
PRACTITIONER.—The term 
‘qualifying practitioner’ means, with respect to the 
furnishing of primary care services, an individual— 
‘‘(A) for whom primary care services has 
accounted for at least 60 percent of the allowed 
charges under this part (not counting any such 
charges attributable to in-office clinical labora-
tory services) in a prior period as determined by 
the Secretary; or 
‘‘(B) who does not have claims under this 
part during such a prior period and whom the 
Secretary determines is likely to meet the re-
quirement of subparagraph (A) for the subse-
quent period.’’. 
(2) ESTABLISHMENT
OF
SEPARATE
CONVER-
SION FACTORS FOR EACH SERVICE CATEGORY.—Sec-
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tion 1848(d)(1) of the Social Security Act (42 
U.S.C. 1395w–4(d)(1)) 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: 
‘‘(ii) APPLICATION OF MULTIPLE CON-
VERSION
FACTORS
BEGINNING
WITH 
2014.— 
‘‘(I) IN
GENERAL.—In applying 
clause (i) for each year beginning with 
2014, separate conversion factors 
shall be established for each service 
category of physicians’ services (as de-
fined in subsection (j)(5)(A)) and any 
reference in this section to a conver-
sion factor for such years shall be 
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(42 U.S.C. 1395w–4(d)), as amended by subsection 
(b), is amended by adding at the end the following 
new paragraph: 
‘‘(15) UPDATES BY SERVICE CATEGORY BEGIN-
NING
WITH
2014; UPDATES
FOR
2014
THROUGH 
2017.—In applying paragraph (4) for each year be-
ginning with 2014, the following rules apply: 
‘‘(A) APPLICATION OF SEPARATE UPDATE 
ADJUSTMENTS
FOR
EACH
SERVICE
CAT-
EGORY.—Pursuant to paragraph (1)(A)(ii)(I), 
for each year beginning with 2013, the update 
shall be made to the conversion factor for each 
service category (as defined in subsection 
(j)(5)(A)). 
‘‘(B) UPDATES FOR 2014 THROUGH 2017.— 
The updates for 2014, 2015, 2016, and 2017 
for the conversion factor for the services cat-
egory described in— 
‘‘(i) subsection (j)(5)(A)(i) shall be 
2.5 percent; and 
‘‘(ii) subsection (j)(5)(A)(ii) shall be 
0.5 percent.’’. 
(d) PROMOTING TESTING AND EVALUATION OF NEW 
PAYMENT AND DELIVERY MODELS (PHASE I).— 
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(1) EXPANSION OF TESTING IN MULTIPLE GEO-
GRAPHIC REGIONS.—Section 1115A(a)(5) of the So-
cial Security Act (42 U.S.C. 1315a(a)(5)) is amend-
ed by inserting before the period at the end the fol-
lowing: ‘‘, but shall (to the maximum extent feasible) 
including testing of each such model in geographic 
areas in at least 3 regions’’. 
(2) INCLUSION
OF
PHYSICIAN
IMPLEMENTA-
TION
COSTS
IN
EVALUATIONS.—Section 
1115A(b)(4)(A) of the Social Security Act (42 
U.S.C. 1315a(b)(4)(A)) is amended— 
(A) by striking ‘‘and’’ at the end of clause 
(i); 
(B) by striking the period at the end of 
clause (ii) and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
clause: 
‘‘(iii) the average cost, per physician, 
of implementation of the model.’’. 
(3) ACCELERATING TESTING AND EVALUATION 
PROCESS.—Section 1115A(b) of the Social Security 
Act (42 U.S.C. 1315a(b)) is amended by adding at 
the end the following new paragraph: 
‘‘(5) TIMING.—The Secretary, acting through 
the Center, shall conduct activities under this sub-
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section in such a timely manner so that evaluations 
of initial models can be initially completed so that 
physicians can begin to transition to implementation 
of such models beginning not later than January 1, 
2017.’’. 
(4) INVOLVEMENT OF PROVIDER GROUPS IN SE-
LECTION OF MODELS.—Section 1115A(b)(4) of such 
Act is amended by adding at the end the following 
subparagraph: 
‘‘(D) INVOLVEMENT OF PROVIDER GROUPS 
IN
MODEL
SELECTION.—The Secretary shall 
consult and work closely with physician and 
other provider groups in the selection of models 
under this subsection and subsection (c).’’. 
(5) USE OF OTHER MODELS.—Section 1115A 
of such Act is further amended— 
(A) by adding at the end of subsection 
(b)(4) the following new subparagraph: 
‘‘(E) USE OF OTHER MODELS.—Nothing 
in this section shall be construed as preventing 
the Secretary from selecting, for expansion 
under subsection (c), a model that was not test-
ed under this subsection.’’; and 
(B) in subsection (c), by inserting ‘‘or 
other model’’ after ‘‘section 1866C’’. 
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(6) GAO REVIEW
AND
STUDY.—The Comp-
troller General of the United States shall conduct a 
study of the evaluations made under subsection (b) 
of section 1115A of the Social Security Act, as 
amended by this section. Such study shall include an 
analysis of the alternative payment and delivery 
models identified under such section for payment for 
physicians’ services (and other services) under the 
Medicare program. Not later than April 1, 2016, the 
Comptroller General shall submit a report to Con-
gress on such study and shall include in the report 
such recommendations as the Comptroller General 
deems appropriate for— 
(A) changes in the development and imple-
mentation process under such section; and 
(B) alternative payment and delivery mod-
els identified under such section as being appro-
priate for expansion under subsection (c) of 
such section. 
(7) PUBLICATION
OF
LIST
OF
SUCCESSFUL 
MODELS.—Beginning on October 1, 2016, and each 
year thereafter, the Secretary of Health and Human 
Services shall publicly release a comprehensive list of 
such health care delivery and payment models identi-
fied, under section 1115A of the Social Security Act 
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or otherwise, as meeting (or likely to meet) the re-
quirements of subsection (c)(1) of such section. Such 
list shall include at least 4 health care delivery and 
payment models and may include models not tested 
under subsection (b) of such section. 
(8) CONSIDERATIONS.—The Comptroller Gen-
eral in making recommendations under paragraph 
(6) and the Secretary in releasing the list of models 
under paragraph (7) shall take into account vari-
ations among providers in size, specialty mix, case 
mix, and patient demographics, as well as regional 
health care infrastructure variations and variations 
in cost of living among areas, and shall specifically 
consider appropriate variations that take into ac-
count the special circumstances of providers in rural 
and other underserved areas. 
(e) IMPLEMENTATION OF PAYMENT AND DELIVERY 
MODEL OPTIONS (PHASE II).— 
(1) IN GENERAL.—Based on the report of the 
Comptroller General under subsection (d)(4) and not 
later than October 1, 2016, the Secretary of Health 
and Human Services shall provide information to 
physicians, nurse practitioners, group practices and 
institutions employing Medicare part B providers on 
how best to transition to alternative health care de-
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livery and payment models that are aimed at im-
proving the coordination, quality and efficiency of 
health care, including those developed under section 
1115A or 1866E of the Social Security Act (42 
U.S.C. 1315a, 1395cc–5). 
(2) INCREASING FLEXIBILITY IN IMPLEMENTA-
TION.—Section 1115A(c) of the Social Security Act 
(42 U.S.C. 1315a(c)) is amended by inserting after 
‘‘through rulemaking’’ the following: ‘‘(which may 
include the issuance of interim, final rules) or 
through publication of a directive or other guid-
ance’’. 
(3) TIMING.—Such section is further amended 
by adding at the end the following: ‘‘The Secretary 
shall seek to effect such expansion to the maximum 
extent feasible so that physicians may begin to tran-
sition to implementation of such models beginning 
not later than January 1, 2017.’’. 
(f) TRANSITION DURING 2018.— 
(1) FREEZE
IN
FEE
SCHEDULE
FOR
2018.— 
Subsection (d) of section 1848 of the Social Security 
Act (42 U.S.C. 1395w–4), as amended by sub-
sections (b) and (c)(3), is amended by adding at the 
end the following new paragraph: 
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‘‘(15) UPDATE FOR 2018.—The update to both 
of the conversion factors for 2018 shall be 0 per-
cent.’’. 
(2) EXPANDED
ASSISTANCE
THROUGH
RE-
GIONAL EXTENSION CENTERS AND OTHER QUALI-
FIED ENTITIES.—Section 1115A(d) of the Social Se-
curity Act (42 U.S.C. 1315a(d)) is amended by add-
ing at the end the following new paragraph: 
‘‘(4) ASSISTANCE IN IMPLEMENTATION.— 
‘‘(A) IN GENERAL.—Using funds available 
under subsection (f)(1) and consistent with this 
paragraph, the Secretary shall enter into con-
tracts and agreements with regional extension 
centers, in coordination with the National Coor-
dinator for Health Information Technology, and 
other appropriate entities to provide guidance 
and assistance on how physicians may transi-
tion to implementation of alternative health 
care delivery models identified as representing 
best practices under this section. 
‘‘(B) DEDICATED FUNDING.— 
‘‘(i) IN
GENERAL.—Of the amounts 
available under subsection (f)(1)(B), the 
Secretary shall make $720,000,000 avail-
able to the Office of the National Coordi-
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nator for Health Information Technology 
for the awarding of grants and incentive 
payments under a competitive process to 
regional extension centers (receiving fund-
ing under section 3012(c) of the Public 
Health Service Act) and other qualified en-
tities for activities described in subpara-
graph (A). Such grants and payments shall 
not be available for assistance after De-
cember 31, 2018. 
‘‘(ii) PROCESS.—Under clause (i), the 
Office shall— 
‘‘(I) establish a competitive selec-
tion process for the selection of re-
gional extension centers (and other 
qualified entities) in the third quarter 
of 2014; and 
‘‘(II) provide for the initial dis-
tribution of funds to such centers and 
entities by January 1, 2015. 
‘‘(iii) COLLABORATION.—The Center 
shall collaborate with the Office in pro-
viding direction to such centers and enti-
ties in conducting activities under this 
paragraph, including the development of 
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performance benchmarks based on provider 
participation and progress toward integra-
tion. 
‘‘(iv) PRIORITY.—The grants and in-
centive payments under this subparagraph 
shall be directed to target assistance to 
solo and small specialty practices as well as 
community health centers and similar pro-
viders of primary care services.’’. 
(g) CONTINUING INCENTIVES FOR PHYSICIANS PRO-
VIDING HIGH-QUALITY, HIGH-VALUE CARE.— 
(1) 
FEE
SCHEDULE
ADJUSTMENTS.—Sub-
section (d) of section 1848 of the Social Security Act 
(42 U.S.C. 1395w–4), as amended by subsections 
(b), (c)(3), and (f), is amended by adding at the end 
the following: 
‘‘(17) UPDATES FOR 2019 THROUGH 2022.— 
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, the update to each of the con-
version factors— 
‘‘(i) for 2019 shall be minus 2 per-
cent; 
‘‘(ii) for 2020 shall be minus 3 per-
cent; 
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‘‘(iii) for 2021 shall be minus 4 per-
cent; and 
‘‘(iv) for 2022 shall be minus 5 per-
cent. 
‘‘(B) TREATMENT
OF
SERVICES
PAID 
USING ALTERNATIVE PAYMENT AND DELIVERY 
MODELS.—In the case of physicians’ services 
for which payment is covered under an alter-
native payment and delivery model, such as 
those implemented under section 1115A, sub-
paragraph (A) does not apply. 
‘‘(C) GENERAL
EXEMPTION.—The Sec-
retary shall, by regulation, exempt a provider 
from the application of the negative payment 
update specified in subparagraph (A) for a year 
if the Secretary determines that— 
‘‘(i) the provider— 
‘‘(I) is a meaningful EHR user 
(as 
determined 
under 
subsection 
(o)(2) with respect to the year); and 
‘‘(II) meets the qualifications 
under subparagraph (B) of subsection 
(m)(7) (relating to additional incen-
tive payments) for an additional in-
centive payment under subparagraph 
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(A) of such subsection (which includes 
satisfactory participation in the qual-
ity reporting system and participation 
in an approved Maintenance of Cer-
tification program); or 
‘‘(ii) the payment modifier for the 
provider under subsection (p), which is 
based upon the performance of the pro-
vider on measures of quality of care fur-
nished compared to cost and which is ex-
pressed as a percentage of payment, is 
within the top 25 percent of such payment 
modifiers for providers within the same fee 
schedule area, as determined by the Sec-
retary. 
‘‘(D) CASE-BY-CASE
HARDSHIP
EXEMP-
TION.—The Secretary may, on a case-by-case 
basis, exempt a provider from the application of 
the negative payment update specified in sub-
paragraph (A) for a year if the Secretary deter-
mines, subject to annual renewal, that because 
of limitations in the nature of a medical prac-
tice, limitations in the number of Medicare 
beneficiaries that may be served by the pro-
vider, or other special circumstances, imposing 
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a financial disincentive under such subpara-
graph for failure to adopt an alternative pay-
ment and delivery model referred to in subpara-
graph (B) would result in a significant hardship 
to the provider. 
‘‘(18) UPDATES BEGINNING WITH 2023.— 
‘‘(A) IN GENERAL.—The update to both of 
the conversion factors for each year beginning 
with 2023 shall be 0 percent. 
‘‘(B) TREATMENT
OF
SERVICES
PAID 
USING ALTERNATIVE PAYMENT AND DELIVERY 
MODELS.—In the case of physicians’ services 
for which payment is covered under an alter-
native payment and delivery model, such as 
those implemented under section 1115A, sub-
paragraph (A) does not apply.’’. 
(2) 
CONSIDERATIONS
IN
PROMULGATING 
GROWTH RATES FOR ALTERNATIVE PAYMENT AND 
DELIVERY MODELS.— 
(A) IN
GENERAL.—In determining the 
growth rates to be recognized beginning with 
2019 for alternative payment and delivery mod-
els under the Medicare program that cover phy-
sicians’ services, such as those implemented 
under section 1115A of the Social Security Act, 
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the Secretary of Health and Human Services 
shall consider (among other factors) the fol-
lowing: 
(i) Ensuring access to primary care 
and specialty services, including participa-
tion of primary care practitioners and spe-
cialists and newly graduating practitioners. 
(ii) Restraining spending growth. 
(iii) Ensuring access to services for 
vulnerable populations. 
(B) LIMITATIONS.—In no case shall the 
growth factor determined under this paragraph 
for a year— 
(i) be less than 1 percent; or 
(ii) be greater than the percentage in-
crease in the MEI (as defined in section 
1842(i)(3) of the Social Security Act, 42 
U.S.C. 1395u(i)(3)) for such year. 
(C) APPLICATION OF CONGRESSIONAL RE-
VIEW ACT.—Chapter 8 of title 5, United States 
Code, applies with respect to the promulgation 
of a growth factor under this paragraph for a 
year. 
(h) IMPACT REPORT.—Not later than January 1, 
2022, the Secretary of Health and Human Services shall 
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submit to Congress a report the impact on spending and 
on access to services under title XVIII of the Social Secu-
rity Act, including under part A of such title, resulting 
from changes to Medicare delivery and payment systems, 
including under the amendments made by this section. 
SEC. 3. SAVINGS FROM OVERSEAS CONTINGENCY AND RE-
LATED ACTIVITIES. 
(a) IN GENERAL.—Section 251(b)(2) of the Balanced 
Budget and Emergency Deficit Control Act of 1985 (2 
U.S.C. 901(b)(2)) is amended by adding at the end the 
following new subparagraph: 
‘‘(E) OVERSEAS
CONTINGENCY
AND
RE-
LATED ACTIVITIES.— 
‘‘(i) CAP ADJUSTMENT.—If a bill or 
joint resolution making appropriations for 
a fiscal year is enacted that specifies an 
amount for overseas contingency and re-
lated activities for that fiscal year after 
taking into account any other bills or joint 
resolutions enacted for that fiscal year that 
specify an amount for overseas contingency 
and related activities, but do not exceed in 
the aggregate the amounts specified in 
clause (ii), then the adjustments for that 
fiscal year shall be the additional new 
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budget authority provided in that Act for 
such activities for that fiscal year. 
‘‘(ii) LEVELS.—The levels for overseas 
contingency and related activities specified 
in this subparagraph are as follows: 
‘‘(I) 
For 
fiscal 
year 
2013, 
$83,000,000,000 in budget authority. 
‘‘(II) 
For 
fiscal 
year 
2014, 
$50,000,000,000 in budget authority. 
‘‘(III) For fiscal year 2015, 
$50,000,000,000 in budget authority. 
‘‘(IV) For fiscal year 2016, 
$50,000,000,000 in budget authority. 
‘‘(V) 
For 
fiscal 
year 
2017, 
$50,000,000,000 in budget authority. 
‘‘(VI) For fiscal year 2018, 
$50,000,000,000 in budget authority. 
‘‘(VII) For fiscal year 2019, 
$50,000,000,000 in budget authority. 
‘‘(VIII) For fiscal year 2020, 
$50,000,000,000 in budget authority. 
‘‘(IX) For fiscal year 2021, 
$50,000,000,000 in budget author-
ity.’’. 
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(b) BREACH.—Section 251(a)(2) of such Act (2 
U.S.C. 901(a)(2)) is amended to read as follows: 
‘‘(2) ELIMINATING A BREACH.— 
‘‘(A) IN GENERAL.—Each non-exempt ac-
count within a category shall be reduced by a 
dollar amount calculated by multiplying the en-
acted level of sequestrable budgetary resources 
in that account by the uniform percentage nec-
essary to eliminate a breach within that cat-
egory. 
‘‘(B) 
OVERSEAS
CONTINGENCIES.—Any 
amount of budget authority for overseas contin-
gency operations and related activities for fiscal 
years 2013 through 2021 in excess of the levels 
set in subsection 251(b)(2)(E) shall be counted 
in determining whether a breach has occurred 
in the security category and the nonsecurity 
category on a proportional basis to the total 
spending for overseas contingency operations in 
the security category and the nonsecurity cat-
egory.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
251(b)(2)(A) of such Act (2 U.S.C. 901(b)(2)(A)) is 
amended to read as follows: 
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‘‘(A) EMERGENCY
APPROPRIATIONS.—If, 
for any fiscal year, appropriations for discre-
tionary accounts are enacted that the Congress 
designates as emergency requirements in stat-
ute on an account by account basis and the 
President subsequently so designates, the ad-
justment shall be the total of such appropria-
tions in discretionary accounts designated as 
emergency requirements.’’. 
Æ 
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