Title: Healthcare Outcomes Act of 2017
Policy area: Health

Summary:
Healthcare Outcomes Act of 2017
This bill amends title XVIII (Medicare) of the Social Security Act to replace the existing methodology for calculating Medicare payment adjustments for subsection (d) hospitals based on outcomes in readmissions and complications with a new methodology based on value-based outcomes in those and other areas. (In general, a "subsection (d) hospital" is an acute care hospital that receives payments under Medicare's inpatient prospective payment system.)
Specifically, the bill: (1) establishes a methodology for determining a hospital's financial impact attributable to complications, readmissions, return emergency room visits, and post-acute care episode expenditures; and (2) requires the Centers for Medicare & Medicaid Services (CMS) to select methodologies for identifying potentially avoidable outcomes in those categories. Subject to both a ceiling and a floor, among other specified refinements, a hospital's payment adjustment factor for an applicable prospective period shall be based on the ratio of that financial impact to the aggregate amount of standardized payments made to the hospital with respect to that period.
The CMS must ensure budget neutrality with respect to application of the payment adjustment factor across all subsection (d) hospitals.
The CMS shall regularly report to hospitals and to the public on each hospital's performance with regard to potentially avoidable outcomes.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3611 Introduced in House (IH)]

<DOC>






115th CONGRESS
  1st Session
                                H. R. 3611

 To amend title XVIII of the Social Security Act to create incentives 
 for healthcare providers to promote quality healthcare outcomes, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 28, 2017

 Mr. Paulsen (for himself, Mr. Kind, and Mr. Marchant) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend title XVIII of the Social Security Act to create incentives 
 for healthcare providers to promote quality healthcare outcomes, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Healthcare 
Outcomes Act of 2017''.
    (b) Findings.--Congress makes the following findings:
            (1) Payment penalties for hospital acquired conditions 
        under section 1886(p) of the Social Security Act, as added by 
        section 3008 of the Patient Protection and Affordable Care Act, 
        are based on a limited number of hospital acquired conditions 
        but are applied to all Medicare inpatient prospective payments 
        to a hospital (as defined in section 1886(d) of the Social 
        Security Act), resulting in payment penalties that are not 
        proportional to the financial impact of the hospital acquired 
        conditions. The method of risk adjustment used to determine the 
        hospital acquired conditions performance of hospitals does not 
        adequately account for the chronic illness burden and severity 
        of illness of Medicare beneficiaries.
            (2) Payment penalties for hospital readmissions under 
        section 1886(q) of the Social Security Act, as added by section 
        3025 of the Patient Protection and Affordable Care Act, are 
        based on a limited number of clinical conditions, including 
        readmissions that are not related to the prior discharge and 
        are not proportional to the overall financial impact of the 
        readmission performance of the hospital. The method of risk 
        adjustment used to determine the readmission performance of 
        hospitals does not adequately account for the chronic illness 
        burden and severity of illness of Medicare beneficiaries.
            (3) Payment penalties and bonuses for hospital Value Based 
        Purchasing under section 1886(o) of the Social Security Act, as 
        added by section 3001 of the Patient Protection and Affordable 
        Care Act, are overly complex and burdensome, are based on 
        arbitrary weighting factors, and are not proportional to the 
        overall financial impact of the value based purchasing 
        performance of the hospital. The methods of risk adjustment 
        used to determine the value based purchasing performance of 
        hospitals does not adequately account for the chronic illness 
        burden and severity of illness of Medicare beneficiaries.
            (4) Per case payment penalties for hospital acquired 
        conditions under section 1886(d)(4)(D), as added by section 
        5001(c) of the Deficit Reduction Act of 2005, are duplicative 
        with the payment penalties for hospital acquired conditions 
        under section 1886(p) of the Social Security Act, as added by 
        section 3008 of the Patient Protection and Affordable Care Act.
            (5) The payment penalties for hospital acquired conditions 
        and readmissions and the payment penalties and bonuses for 
        hospital value based purchasing should be restructured to be 
        based on a comprehensive and clinically credible definition of 
        potentially-avoidable outcomes, including potentially-avoidable 
        complications, potentially-avoidable readmissions, potentially-
        avoidable return emergency room visits and post-acute case 
        episode expenditures, be based on the risk adjusted comparison 
        of the potentially-avoidable outcomes for a hospital to 
        nationwide average rates and include both payment penalties and 
        bonuses that are proportional to the actual financial impact of 
        the potentially-avoidable outcomes.
            (6) The existing methods of risk adjustment used to 
        determine the quality of care performance of hospitals under 
        such sections 1886(p), 1886(q), 1886(o), and 1886(d)(4)(D) of 
        the Social Security Act should be replaced by a methodology 
        that is composed of exhaustive and mutually exclusive risk 
        categories that are clinically credible and explicitly 
        recognize the severity of illness and chronic illness burden of 
        Medicare beneficiaries, thereby accounting for patient 
        characteristics that may impact access to care.

SEC. 2. HOSPITAL OUTCOMES.

    (a) Payment Adjustments for Hospital Outcomes.--Section 1886 of the 
Social Security Act (42 U.S.C. 1395ww) is amended by adding at the end 
the following new subsection:
    ``(t) Hospital Outcomes.--
            ``(1) In general.--In the case of an applicable hospital 
        for an applicable prospective period beginning on or after 
        October 1, 2018--
                    ``(A) for each discharge of such hospital occurring 
                during such period, in addition to and after 
                application of any increase under paragraph (6) of 
                subsection (o) and any adjustment under paragraph (7) 
                of such subsection to the base operating DRG payment 
                amount (as defined in paragraph (7)(D) of such 
                subsection) that would otherwise apply to such hospital 
                during such period without application of this 
                subsection, such operating DRG payment amount shall be 
                adjusted by the value based outcome adjustment factor 
                described in paragraph (2) for the hospital for such 
                period; and
                    ``(B) the value based outcome adjustment factor 
                shall apply only with respect to the applicable 
                prospective period, and the Secretary shall not take 
                into account such adjustment factor in making payments 
                to hospitals under this section in a subsequent 
                applicable prospective period.
            ``(2) Value based outcome adjustment factor.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the value based outcome adjustment factor described in 
                this paragraph for an applicable hospital for an 
                applicable prospective period, subject to subparagraph 
                (B), is equal to 1.0 minus the value based outcome 
                performance fraction determined under paragraph (3) for 
                the hospital and period.
                    ``(B) Hospital-specific cap and floor.--In no 
                circumstance may the value based outcome adjustment 
                factor for an applicable hospital for an applicable 
                prospective period under subparagraph (A) be--
                            ``(i) for applicable prospective periods 
                        occurring in fiscal years 2019 through 2022, 
                        less than 0.97 or more than 1.03; and
                            ``(ii) for applicable prospective periods 
                        occurring in or after fiscal year 2023, less 
                        than 0.95 or more than 1.05.
            ``(3) Determination of value based outcome performance 
        fraction.--
                    ``(A) In general.--The value based outcome 
                performance fraction for an applicable hospital for an 
                applicable prospective period, subject to subparagraph 
                (C), is equal to the ratio of--
                            ``(i) the total hospital-specific financial 
                        impact, as defined in subparagraph (B), for the 
                        hospital and data collection period with 
                        respect to such applicable prospective period; 
                        to
                            ``(ii) the aggregate amount of standardized 
                        hospital payments (as defined in paragraph 
                        (4)(H)(ii)(I)) made to the hospital during the 
                        data collection period with respect to such 
                        applicable prospective period.
                    ``(B) Total hospital-specific financial impact 
                described.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the term `total hospital-
                        specific financial impact' means, with respect 
                        to a hospital for an applicable prospective 
                        period, the sum, subject to clause (ii), of the 
                        financial impacts determined in accordance with 
                        paragraph (4)(G) for such hospital and data 
                        collection period with respect to each 
                        performance category described in paragraph 
                        (5).
                            ``(ii) Performance category contribution 
                        upper limit.--
                                    ``(I) In general.--In the case that 
                                the financial impact for such a 
                                performance category, as determined in 
                                accordance with paragraph (4)(G) for a 
                                hospital and hospital data collection 
                                period, exceeds the amount calculated 
                                under subclause (II) with respect to 
                                such hospital and period, the Secretary 
                                shall, in applying clause (i) with 
                                respect to such hospital and period, 
                                substitute the amount calculated under 
                                such subclause for the financial impact 
                                that is so determined with respect to 
                                such performance category.
                                    ``(II) Calculation of amount.--The 
                                Secretary shall, with respect to a 
                                hospital for an applicable prospective 
                                period, calculate an amount that is 
                                equal to the product of 0.03 and the 
                                aggregate amount of standardized 
                                hospital payments (as defined in 
                                paragraph (4)(G)(ii)(I)) made to the 
                                hospital during the data collection 
                                period with respect to such applicable 
                                prospective period.
                    ``(C) Budget neutrality of value based outcome 
                adjustment factor across all hospitals.--The Secretary 
                shall determine a budget neutrality reduction fraction 
                that, when applied in paragraph (4)(B)(ii), will result 
                in a value based outcome adjustment factor determined 
                under subparagraph (A) for an applicable prospective 
                period that reduces the total payments under subsection 
                (d) across all applicable hospitals and all 
                potentially-avoidable outcomes for such period by an 
                amount equal to the reduction in payments under such 
                subsection for such period that would have resulted 
                from the application of subsections (d)(4)(D), (o), 
                (p), and (q) if the amendments made by the Healthcare 
                Outcomes Act of 2017 had not applied.
            ``(4) Process for determining financial impacts.--For 
        purposes of paragraph (3), the Secretary shall, for each 
        performance category described in paragraph (5) and each data 
        collection period that is with respect to an applicable 
        prospective period beginning on or after October 1, 2018, 
        determine each of the following:
                    ``(A) Nationwide-average rates.--With respect to 
                each risk category specified under paragraph (6)(B), 
                the ratio of--
                            ``(i) the number of discharges occurring 
                        among (or, in the case of the performance 
                        category described in paragraph (5)(D), the 
                        total amount of standardized post acute care 
                        episode expenditures made with respect to) all 
                        applicable hospitals during such applicable 
                        data collection period that are with respect to 
                        such risk category and that involve the 
                        potentially-avoidable outcomes in such 
                        performance category; to
                            ``(ii) the number of applicable discharges 
                        among all applicable hospitals for such 
                        applicable data collection period and risk 
                        category.
                    ``(B) Nationwide target rates.--With respect to 
                each risk category specified under paragraph (6)(B), 
                the product of--
                            ``(i) subject to subparagraph (H), the 
                        applicable ratio determined under subparagraph 
                        (A) for such period and risk category; and
                            ``(ii) the budget neutrality reduction 
                        fraction determined under paragraph (3)(C) for 
                        such period.
                    ``(C) Hospital-specific actual number.--With 
                respect to each applicable hospital and each such risk 
                category, the number of discharges (or, in the case of 
                the performance category described in paragraph (5)(D), 
                the total amount of standardized post acute care 
                episode expenditures) occurring with respect to such 
                hospital during such applicable data collection period 
                that involve (or, in the case of such performance 
                category, that are with respect to) the potentially-
                avoidable outcomes in such performance category.
                    ``(D) Hospital-specific expected number.--With 
                respect to each applicable hospital, each applicable 
                data collection period, and each such risk category, 
                the number that is the product of--
                            ``(i) subject to subparagraph (H), the 
                        product determined under subparagraph (B) for 
                        such period and risk category; and
                            ``(ii) the number of applicable discharges 
                        of the hospital for such period and risk 
                        category.
                    ``(E) Hospital-specific potentially-avoidable 
                outcome performance.--With respect to each applicable 
                hospital and applicable data collection period, the 
                difference between--
                            ``(i) the sum of the numbers determined 
                        under subparagraph (C) for the hospital for 
                        such period for all risk categories; and
                            ``(ii) the sum of the numbers determined 
                        under subparagraph (D) for the hospital for 
                        such period for all risk categories.
                    ``(F) Financial impact.--
                            ``(i) With respect to each applicable 
                        hospital and applicable data collection period, 
                        the financial impact attributable to 
                        potentially-avoidable outcomes performance 
                        within such performance category, determined as 
                        the product of the following:
                                    ``(I) the difference calculated 
                                under subparagraph (E) for such 
                                hospital and period; and
                                    ``(II) the financial conversion 
                                factor determined in accordance with 
                                clause (ii) for the performance 
                                category.
                            ``(ii) Financial conversion factors.--For 
                        purposes of clause (i), the Secretary shall 
                        determine a financial conversion factor for the 
                        performance category that--
                                    ``(I) in the case of the 
                                performance category described in 
                                paragraph (5)(A), is, with respect to 
                                inpatient hospital services that are 
                                furnished with respect to a discharge, 
                                equal to the average amount of increase 
                                in the standardized payments for such 
                                inpatient hospital services for such 
                                discharge that is attributable to the 
                                potentially-avoidable complication;
                                    ``(II) in the case of the 
                                performance category described in 
                                paragraph (5)(B), is, with respect to 
                                an initial discharge, equal to the 
                                average standardized payment for 
                                inpatient hospital services that are 
                                furnished with respect to a 
                                potentially-avoidable readmission 
                                following the initial discharge;
                                    ``(III) in the case of the 
                                performance category described in 
                                paragraph (5)(C), is, with respect to 
                                an initial discharge, equal to the 
                                average standardized payment for 
                                hospital emergency room services that 
                                are furnished with respect to a 
                                potentially-avoidable return emergency 
                                room visit following the initial 
                                discharge; and
                                    ``(IV) in the case of the 
                                performance category described in 
                                paragraph (5)(D), is equal to 1.0.
                    ``(G) Definitions.--For purposes of this section:
                            ``(i) Potentially-avoidable outcomes.--The 
                        term `potentially-avoidable outcomes' means, as 
                        applicable--
                                    ``(I) a potentially-avoidable 
                                complication within the category 
                                described in paragraph (5)(A);
                                    ``(II) a potentially-avoidable 
                                readmission within the category 
                                described in paragraph (5)(B);
                                    ``(III) a potentially-avoidable 
                                emergency room visit within the 
                                category described in paragraph (5)(C); 
                                and
                                    ``(IV) post-acute care episode 
                                expenditures within the category 
                                described in paragraph (5)(D).
                            ``(ii) Standardized payments.--
                                    ``(I) Standardized hospital 
                                payment.--The term `standardized 
                                hospital payment' means payment for 
                                inpatient hospital services under 
                                section 1886(d) furnished by an 
                                applicable hospital that is adjusted to 
                                remove payment adjustments that are not 
                                directly related to the amount and type 
                                of services to be utilized for patient 
                                care (such as local or regional price 
                                differences, graduate indirect medical 
                                education payments, disproportionate 
                                share payments, and such other 
                                adjustments as may be determined by the 
                                Secretary).
                                    ``(II) Standardized post-acute care 
                                episode expenditures.--The term 
                                `standardized post-acute care episode 
                                expenditures' means post-acute care 
                                episode expenditures, adjusted to 
                                remove any payment adjustments not 
                                directly related to the amount and type 
                                of services to be utilized for patient 
                                care (such as adjustments for local or 
                                regional price differences).
                            ``(iii) Applicable discharges.--With 
                        respect to an applicable data collection period 
                        and risk category, the term `applicable 
                        discharges' means, in the case of--
                                    ``(I) the performance category 
                                described in paragraph (5)(A), 
                                discharges occurring during such 
                                applicable data collection period that 
                                are with respect to such risk category; 
                                and
                                    ``(II) the performance category 
                                described in paragraph (5)(B), 
                                discharges occurring during such 
                                applicable data collection period that 
                                are with respect to such risk category 
                                and that are not identified as 
                                potentially-avoidable readmissions 
                                under the methodology selected under 
                                paragraph (6)(A).
                            ``(iv) Documented.--The term `documented' 
                        means, with respect to a readmission or 
                        discharge (as applicable) of an individual 
                        entitled to benefits under part A, that the 
                        circumstances of such readmission or discharge 
                        are documented in the medical record of the 
                        individual.
                    ``(H) Exception to use of nationwide-average 
                rates.--In the case that the methodology selected under 
                paragraph (6)(B) for such performance category does not 
                meet the criteria described in clause (iii) of such 
                paragraph, and that there is a systematic negative bias 
                in the payment adjustments against hospitals treating a 
                disproportionate share of full-benefit dual eligible 
                individuals (as defined in section 1935(c)(6)), the 
                Secretary shall--
                            ``(i) develop groups of hospitals based on 
                        the overall proportion of inpatients in such 
                        hospitals who are full-benefit dual eligible 
                        individuals (as defined in section 1935(c)(6));
                            ``(ii) determine, with respect to each such 
                        group and each risk category specified under 
                        paragraph (6)(B), the ratio of--
                                    ``(I) the number of discharges 
                                occurring among (or, in the case of the 
                                performance category described in 
                                paragraph (5)(D), the total amount of 
                                standardized post acute care episode 
                                expenditures made with respect to) all 
                                applicable hospitals in such group 
                                during such applicable data collection 
                                period that are with respect to such 
                                risk category and that involve the 
                                potentially-avoidable outcomes in such 
                                performance category; to
                                    ``(II) the number of applicable 
                                discharges occurring among (or, in the 
                                case of the performance category 
                                described in paragraph (5)(D), the 
                                total amount of standardized post acute 
                                care episode expenditures made with 
                                respect to) all applicable hospitals in 
                                such group for such applicable data 
                                collection period and risk category;
                            ``(iii) treat each reference in this 
                        paragraph to the ratio determined under 
                        subparagraph (A) for a period and risk category 
                        as a reference to the ratio determined under 
                        clause (ii) for a group, period, and risk 
                        category; and
                            ``(iv) treat each reference in this 
                        paragraph to the product determined under 
                        subparagraph (B) for a period and risk category 
                        as a reference to the ratio determined under 
                        such subparagraph for a group, period, and risk 
                        category.
            ``(5) Performance categories described.--The performance 
        categories described in this paragraph are the following:
                    ``(A) Potentially-avoidable complications.--The 
                performance category of complications (referred to in 
                this section as `potentially-avoidable complications') 
                that, with respect to items and services furnished to 
                an individual entitled to benefits under part A in an 
                applicable hospital, meet all of the following 
                requirements:
                            ``(i) The complication occurs during the 
                        stay of the individual and was not present at 
                        the time of the admission of such individual to 
                        such hospital as an inpatient.
                            ``(ii) The complication is a harmful event 
                        (such as a surgical complication) or an acute 
                        illness (such as an infection or an acute 
                        exacerbation of underlying chronic disease).
                            ``(iii) The complication is potentially 
                        avoidable with adequate care and treatment.
                            ``(iv) The complication is not a natural 
                        progression of the underlying illnesses of the 
                        individual that are present on admission of 
                        such individual to such hospital.
                            ``(v) The complication may be reasonably 
                        construed as related to the care rendered 
                        during the stay of the individual at the 
                        hospital.
                    ``(B) Potentially-avoidable readmissions.--
                            ``(i) In general.--The performance category 
                        of readmissions (referred to in this section as 
                        `potentially-avoidable readmissions') of 
                        individuals entitled to benefits under part A 
                        to any hospitals following a discharge 
                        (referred to in this section as an `initial 
                        discharge') of such individuals to an 
                        applicable hospital if the initial discharge 
                        and readmission involved satisfy all of the 
                        following requirements:
                                    ``(I) The readmission of the 
                                individual could reasonably have been 
                                prevented by--
                                            ``(aa) the provision of 
                                        appropriate care during the 
                                        episode of care ending in such 
                                        initial discharge that was 
                                        consistent with accepted 
                                        standards;
                                            ``(bb) adequate discharge 
                                        planning with respect to such 
                                        initial discharge;
                                            ``(cc) adequate post-
                                        discharge follow-up with 
                                        respect to such initial 
                                        discharge; or
                                            ``(dd) improved 
                                        coordination between the 
                                        providers furnishing the 
                                        inpatient or outpatient 
                                        hospital services during the 
                                        episode of care ending in such 
                                        initial discharge and the 
                                        providers furnishing care 
                                        during the post-discharge 
                                        period with respect to such 
                                        initial discharge.
                                    ``(II) The readmission is for a 
                                condition or procedure related to the 
                                episode of care ending in such initial 
                                discharge, including a readmission for 
                                a condition or procedure that is any of 
                                the following:
                                            ``(aa) The same (or a 
                                        closely related) condition or 
                                        procedure as the condition 
                                        addressed in, or the procedure 
                                        provided during the episode of 
                                        care ending in such initial 
                                        discharge.
                                            ``(bb) An infection or 
                                        other complication of care 
                                        provided during the episode of 
                                        care ending in such initial 
                                        discharge.
                                            ``(cc) A condition or 
                                        procedure indicative of a 
                                        failed procedure provided 
                                        during the episode of care 
                                        ending in such initial 
                                        discharge.
                                            ``(dd) An acute 
                                        decompensation of a coexisting 
                                        chronic disease that was 
                                        precipitated by the care 
                                        furnished during the episode of 
                                        care ending in such initial 
                                        discharge.
                                    ``(III) The readmission is not a 
                                documented readmission with respect to 
                                a documented discharge that was 
                                initiated by the individual contrary to 
                                medical advice provided to such 
                                individual during the episode of care 
                                with respect to such initial discharge.
                                    ``(IV) The readmission could not 
                                reasonably be considered a planned 
                                readmission.
                                    ``(V) The readmission occurs during 
                                the 30-day period following an 
                                inpatient discharge of such an 
                                individual from the applicable hospital 
                                with respect to such initial discharge.
                                    ``(VI) The readmission was not due 
                                to a traumatic injury that occurred 
                                after the episode of care ending in 
                                such initial discharge.
                                    ``(VII) The readmission does not 
                                fall under such other exclusions as the 
                                Secretary determines appropriate.
                            ``(ii) Readmission chains.--For purposes of 
                        this subsection, in the case that an individual 
                        has multiple readmissions with respect to an 
                        initial discharge that, but for the application 
                        of this clause, would be considered 
                        potentially-avoidable readmissions with respect 
                        to such initial discharge, the following shall 
                        apply:
                                    ``(I) Only one of such readmission 
                                may be considered a potentially-
                                avoidable readmission with respect to 
                                such initial discharge.
                                    ``(II) None of such readmissions 
                                may be considered a new initial 
                                discharge for purposes of this 
                                subsection.
                    ``(C) Potentially-avoidable return emergency room 
                visits.--The performance category of return emergency 
                room visits (referred to in this section as 
                `potentially-avoidable return emergency room visits') 
                of individuals entitled to benefits under part A to any 
                hospitals following a discharge (referred to in this 
                section as an `initial discharge') of such individuals 
                to an applicable hospital if the initial discharge and 
                return emergency room visit involved would satisfy the 
                requirements described in subclauses (I), (II), (III), 
                (V), (VI), and (VII) if--
                            ``(i) the references in such subclauses to 
                        readmissions instead were references to return 
                        emergency room visits; and
                            ``(ii) the reference in such subclause (V) 
                        to a 30-day period instead were a reference to 
                        a 15-day period.
                    ``(D) Post-acute care episode expenditures.--
                            ``(i) In general.--The performance 
                        category, in the case of individuals entitled 
                        to benefits under part A and enrolled in part B 
                        who are discharged from an applicable hospital 
                        (referred to in this section as an `initial 
                        discharge'), of expenditures (referred to in 
                        this section as `post-acute care episode 
                        expenditures') that are made (including any 
                        cost-sharing amounts expended by the 
                        individual) with respect to items and services 
                        furnished to such individuals for which payment 
                        is made under this title and that are so 
                        furnished during the respective post-acute care 
                        episode periods applicable to such individuals, 
                        subject to clause (ii), if the initial 
                        discharge and individual (as applicable) 
                        satisfy all of the following requirements:
                                    ``(I) The initial discharge is 
                                assigned to an applicable DRG (as 
                                defined in clause (iii)).
                                    ``(II) The individual was entitled 
                                to benefits under part A and enrolled 
                                in part B for the entirety of the post-
                                acute care episode period that is with 
                                respect to the initial discharge.
                                    ``(III) The individual did not have 
                                a readmission that is not a 
                                potentially-avoidable readmission 
                                during the post-acute care episode 
                                period that is with respect to the 
                                initial discharge.
                                    ``(IV) The initial discharge was 
                                not a documented discharge that was 
                                initiated by the individual contrary to 
                                medical advice provided to such 
                                individual during the episode of care 
                                with respect to such initial discharge.
                                    ``(V) Such other requirements as 
                                the Secretary may specify.
                            ``(ii) Exceptions.--Such category shall not 
                        include expenditures with respect to any of the 
                        following:
                                    ``(I) Expenditures that are with 
                                respect to readmissions of an 
                                individual that occur during the 30-day 
                                period following an inpatient discharge 
                                of such an individual.
                                    ``(II) Expenditures that are with 
                                respect to return emergency room visits 
                                of an individual that occur during the 
                                15-day period following an inpatient 
                                discharge of such an individual.
                                    ``(III) Such other expenditures as 
                                may be specified by the Secretary.
                            ``(iii) Additional definitions.--
                                    ``(I) Applicable drg.--For purposes 
                                of clause (i)(I), the term `applicable 
                                DRG' means a diagnosis-related group 
                                (including, as applicable, a sub-
                                categorization of a diagnosis-related 
                                group) for which there is a reasonable 
                                expectation that the pattern of post-
                                acute care expenditures is stable and 
                                predictable based on the reason for the 
                                initial discharge.
                                    ``(II) Post-acute care episode 
                                period.--
                                            ``(aa) In general.--For 
                                        purposes of clause (i), the 
                                        term `post-acute care episode 
                                        period' means, with respect to 
                                        an initial discharge of an 
                                        individual and subject to item 
                                        (bb), the period consisting of 
                                        the 30-day period that begins 
                                        with the date of such initial 
                                        discharge.
                                            ``(bb) No overlap of 
                                        periods.--For purposes of this 
                                        subsection, an individual may 
                                        not be considered, at any one 
                                        time, to be within more than 
                                        one post-acute care episode.
            ``(6) Selection of methods for identifying potentially-
        avoidable outcomes and method of risk adjustment.--
                    ``(A) Methods for identifying potentially-avoidable 
                outcomes.--The Secretary shall select a methodology for 
                identifying potentially-avoidable complications and a 
                methodology for identifying potentially-avoidable 
                readmissions, and shall specify the circumstances under 
                which such complications and such readmissions would be 
                considered potentially avoidable. Each such methodology 
                shall meet the following criteria:
                            ``(i) The methodology shall provide--
                                    ``(I) in the case of potentially-
                                avoidable complications, a 
                                comprehensive identification of all 
                                conditions that could reasonably be 
                                considered a complication of care that 
                                meets the requirements under paragraph 
                                (5)(A) to be included as a potentially-
                                avoidable complication; and
                                    ``(II) in the case of potentially-
                                avoidable readmissions, a comprehensive 
                                identification of all initial 
                                discharges described in paragraph 
                                (5)(B) and corresponding readmissions 
                                described in such paragraph that each 
                                meet the requirements for such 
                                readmission to be included as a 
                                potentially-avoidable readmission.
                            ``(ii) To the extent possible, the 
                        methodology shall be a methodology that has 
                        been successfully implemented for the purpose 
                        of adjusting payments to hospitals by a State 
                        plan under title XIX or by a major commercial 
                        payer or be a methodology that has been 
                        certified by an entity with a contract under 
                        section 1890(a).
                            ``(iii) The methodology shall be open, 
                        transparent, and available for review and 
                        comment by the public.
                            ``(iv) The Secretary may select proprietary 
                        methodologies that meet the criteria in clauses 
                        (i) through (iii).
                    ``(B) Selection criteria for method of risk 
                adjustment.--For purposes of paragraph (4), the 
                Secretary shall, with respect to each category 
                described in a subparagraph of paragraph (5), select a 
                methodology for specifying risk categories and for 
                assigning individuals entitled to benefits under part A 
                to such categories, and shall so specify such risk 
                categories and so assign such individuals to such 
                categories. Each such methodology shall meet the 
                following criteria:
                            ``(i) The methodology shall result in an 
                        exhaustive and mutually exclusive list of risk 
                        categories.
                            ``(ii) The methodology shall be clinically 
                        credible and explicitly account for the 
                        severity of illness, chronic illness burden, 
                        and extensive comorbid diseases and high 
                        severity of illness of patients.
                            ``(iii) The methodology shall account for 
                        patient characteristics that may impact access 
                        to care.
                            ``(iv) The methodology shall assign a risk 
                        category to an individual based on the 
                        condition of the individual at the time of--
                                    ``(I) in the case of potentially-
                                avoidable complications, hospital 
                                admission; and
                                    ``(II) in the case of potentially-
                                avoidable readmissions, hospital 
                                discharge with respect to the initial 
                                discharge.
                            ``(v) To the extent possible, the 
                        methodology shall be a methodology that has 
                        been successfully implemented for the purpose 
                        of adjusting payments to hospitals by a State 
                        plan under title XIX or by a major commercial 
                        payer or be a methodology that has been 
                        certified by an entity with a contract under 
                        section 1890(a).
                            ``(vi) The methodology shall be open, 
                        transparent, and available for review and 
                        comment by the public.
                            ``(vii) The Secretary may select 
                        proprietary methodologies that meet the 
                        criteria in clauses (i) through (vi).
                    ``(C) Publication of specifications.--Not later 
                than 15 days prior to each applicable prospective year, 
                the Secretary shall make available, such as by publicly 
                posting on the Internet Web site of the Centers for 
                Medicare & Medicaid Services the annual updates to each 
                methodology selected under a subparagraph of this 
                paragraph.
            ``(7) Reporting by secretary.--
                    ``(A) Reports to hospitals.--For each data 
                collection period that is with respect to an applicable 
                prospective period beginning on or after October 1, 
                2018, the Secretary shall provide to each applicable 
                hospital, not later than the first day of such 
                applicable prospective period, a confidential report 
                with respect to the potentially-avoidable outcomes of 
                such hospital during such data collection period.
                    ``(B) Reports to public.--For each data collection 
                period that is with respect to an applicable 
                prospective period described in paragraph (1), the 
                Secretary shall, not later than 90 days after the first 
                day of such applicable prospective period, make 
                available to the public (including by posting on the 
                Hospital Compare Web site) in an easily understandable 
                format information regarding the performance of each 
                applicable hospital during such data collection period 
                with respect to potentially-avoidable outcomes.
            ``(8) Definitions.--In this subsection:
                    ``(A) Applicable hospital.--The term `applicable 
                hospital' means a subsection (d) hospital.
                    ``(B) Data collection period.--The term `data 
                collection period' means, with respect to an applicable 
                prospective period, a period specified by the Secretary 
                that is the most recent period for which data are 
                available for purposes of determining the potentially-
                avoidable outcome adjustment factor described in 
                paragraph (2) to be applied for such applicable 
                prospective period.
                    ``(C) Applicable prospective period.--The term 
                `applicable prospective period' means a fiscal year.
            ``(9) Limitation on judicial review.--There shall be no 
        administrative or judicial review under section 1869, section 
        1878, or otherwise of a potentially-avoidable outcome 
        adjustment factor applied under this section.''.
    (b) Conforming Amendments.--
            (1) Sunsetting existing hospital value-based purchasing 
        program.--Section 1886(o)(2) of the Social Security Act (42 
        U.S.C. 1395ww(o)(2)) is amended--
                    (A) in the heading, by inserting ``and end with 
                fiscal year 2018'' after ``2013''; and
                    (B) by adding ``, and before October 1, 2018'' 
                before the period at the end.
            (2) Sunsetting existing adjustment for complications.--
        Section 1886(p) of the Social Security Act (42 U.S.C. 
        1395ww(p)) is amended--
                    (A) in paragraph (1), by inserting ``(before fiscal 
                year 2019)'' after ``a subsequent fiscal year''; and
                    (B) in paragraph (5), by inserting ``(before fiscal 
                year 2019)'' after ``each subsequent fiscal year''.
            (3) Sunsetting existing adjustment for readmissions.--
        Section 1886(q) of the Social Security Act (42 U.S.C. 
        1395ww(q)) is amended--
                    (A) in paragraph (1), by inserting ``and ending 
                before October 1, 2018'' after ``October 1, 2012,'';
                    (B) in paragraph (3)(C)(iii), by inserting ``before 
                fiscal year 2019'' after ``and subsequent fiscal 
                years''; and
                    (C) in paragraph (5)(B), by inserting ``and ending 
                with fiscal year 2018'' after ``fiscal year 2015''.
            (4) Sunsetting existing adjustment for certain hospital 
        acquired infections.--Section 1886(d)(4)(D) of the Social 
        Security Act (42 U.S.C. 1395ww(d)(4)(D)) is amended by 
        inserting ``and before October 1, 2018'' after ``2008,''.
                                 <all>