I 113th CONGRESS 2d Session H. R. 4673 IN THE HOUSE OF REPRESENTATIVES May 19, 2014 Mr. McKinley (for himself and Mr. Price of Georgia ) introduced the following bill; which was referred to the Committee on Ways and Means , and in addition to the Committee on Energy and Commerce , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend title XVIII of the Social Security Act to provide bundled payments for post-acute care services under parts A and B of Medicare, and for other purposes.

1. Short title This Act may be cited as the Bundling and Coordinating Post-Acute Care Act of 2014 and as the BACPAC Act of 2014 . 2. Purposes The purposes of this Act are to— (1) foster the delivery of high-quality post-acute care services in the most cost-effective manner possible; (2) preserve the ability of patients, with the guidance of their physicians, to select their preferred providers of post-acute care services; (3) promote competition among post-acute care providers on the basis of quality, cost, accountability, and customer service; (4) achieve long-term sustainability by ensuring operational stability through regional breadth and the engagement of experienced care PAC coordinators; (5) advance innovation in fields including telehealth, care coordination, medication management, and hospitalization avoidance; and (6) provide for the financial security of the Medicare program by achieving substantial program savings through maximized efficiencies, cost avoidance, and outcomes improvement. 3. Providing bundled payments for post-acute care services under parts A and B of Medicare Title XVIII of the Social Security Act is amended by inserting after section 1866E (42 U.S.C. 1395cc–5) the following new section: 1866F. Providing bundled payments for post-acute care services (a) In general For a PAC bundle with respect to qualifying discharges occurring on or after January 1, 2016, instead of the payment otherwise provided under parts A and B, there shall be paid a single payment amount (determined under subsection (d) and as limited under paragraph (4) of such subsection) to be paid to a PAC coordinator (as described in subsection (c)) selected by an individual under such subsection. (b) PAC-Related definitions In this section: (1) PAC bundle The term PAC bundle means PAC services furnished to an individual during a PAC period in a PAC area. (2) PAC services (A) In general The term PAC services includes— (i) post-hospital extended care services, subject to subparagraph (C)(i); (ii) home health services, subject to subparagraph (C)(ii); (iii) inpatient services provided in a rehabilitation facility, subject to subparagraph (C)(iii); (iv) inpatient hospital services provided by a long-term care hospital, subject to subparagraph (C)(iv); (v) durable medical equipment; (vi) outpatient prescription drugs and biologicals; and (vii) skilled nursing facility services. (B) Exceptions Such term does not include— (i) physicians’ services; (ii) hospice care; (iii) outpatient hospital services; (iv) ambulance services; (v) outpatient physical therapy services; (vi) outpatient occupational therapy services; (vii) outpatient speech-language pathology services; and (viii) the items and services described in section 1861(s)(9). (C) Nonapplication of certain coverage limitations (i) Waiver of skilled nursing facility three-day stay requirement In applying subparagraph (A)(i), the 3-day stay requirement described in section 1861(i) (requiring that an individual’s inpatient stay in a discharging hospital be for a duration of not less than 3 consecutive days) shall not apply. (ii) Waiver of homebound requirement for home health services In applying subparagraph (A)(ii), the requirements cited in sections 1814(a)(2)(C) and 1835(a)(2)(A) that home health services are or were required because the individual is or was confined to the home of the individual shall not apply. (iii) Nonapplication of rehabilitation facility percentage requirement In applying subparagraph (A)(iii), any requirement that a specified percentage of the inpatient population served by the facility require intensive rehabilitation services for treatment of one or more of the conditions specified in section 412.29(b)(2) of title 42, Code of Federal Regulations, as of December 19, 2013, shall not apply. (iv) Nonapplication of long-term care hospital percentage requirement In applying subparagraph (A)(iv), any requirement that a specified percentage of the discharged Medicare inpatient population of the long-term care hospital or its satellite facility be admitted to the hospital or its satellite facility from its co-located hospital shall not apply. (3) PAC period The term PAC period means the period beginning on the date of a qualifying discharge (as defined in paragraph (10)) and ending on the date that is the earlier of the following: (A) The date that is 90 days after the date of such discharge. (B) The date on which the individual is admitted to a hospital for purposes of receiving services for a condition that is not related to the condition for which the individual received the acute care inpatient hospital services described in paragraph (10)(A). (4) PAC area The term PAC area means an area with respect to which a PAC coordinator has a PAC agreement in effect under subsection (c)(1)(B). (5) PAC physician The term PAC physician means, with respect to an individual receiving a PAC bundle, the physician who has primary responsibility with respect to supervising the delivery of services during the course of a PAC period. (6) PAC provider The term PAC provider means, with respect to PAC services, the provider of services or supplier furnishing such services. (7) PAC network agreement The term PAC network agreement means, in the case that an individual has selected a PAC coordinator under subsection (c)(4)(A) for the furnishing of PAC services, an agreement of a PAC coordinator with one or more PAC providers to provide such services to such individual. (8) PAC readmission The term PAC readmission means, with respect to an individual receiving a PAC bundle, the individual's admission to a hospital within 90 days of the date of the qualifying discharge of the individual, for purposes of receiving services for a condition that is related to the condition for which the individual received the acute care inpatient hospital services described in paragraph (10)(A). (9) PAC assessment tool The term PAC assessment tool means the Continuity Assessment Record and Evaluation (CARE) tool (or such equivalent assessment tool as the Secretary may specify). (10) Qualifying discharge Subject to subsection (e), the term qualifying discharge means a discharge after receiving acute care inpatient hospital services (as defined by the Secretary) in a subsection (d) hospital (as defined in section 1886(d)(1)(B)) for which the discharge plan includes the furnishing of PAC services. (11) CRG The term CRG means a condition-related group established under subsection (d)(1). (c) PAC coordinators (1) In general In this section, the term PAC coordinator means an entity (such as a hospital, health insurance issuer, third-party benefit manager, or PAC provider) that— (A) is certified, under a process established by the Secretary, as meeting appropriate requirements specified by the Secretary, including the requirements specified in paragraph (2); and (B) has entered into and has in effect a PAC agreement with the Secretary described in paragraph (3). (2) Requirements The requirements specified in this paragraph, with respect to an entity serving a PAC area, are the following: (A) Financial solvency The entity has the capacity, and provides sufficient assurances of solvency, to bear financial risk as a PAC coordinator under this section. (B) Capacity to manage care and funding The entity has the capability to manage the care and funding for PAC services in such area. (C) PAC network agreements (i) Network capacity to serve PAC area The entity has entered into PAC network agreements with one or more PAC providers in a PAC area in a manner sufficient to ensure the availability of PAC services for individuals residing in the area who select the entity for the furnishing of PAC services. (ii) Limitation on balance billing Such a PAC network agreement shall provide that the PAC provider shall accept as payment in full for PAC services furnished by such PAC provider the applicable amount described in paragraph (3)(C). (iii) Quality assurance Such a PAC network agreement shall provide that the PAC provider shall have in effect a written plan of quality assurance and improvement, and procedures implementing such plan, that meet such quality standards as the Secretary may specify. (D) Credit-worthiness The entity has demonstrated credit-worthiness. (E) Medical director The entity employs or contracts with a medical director who has an appropriate medical background. (3) Terms of PAC agreement The PAC agreement described in this paragraph between an entity and the Secretary shall, with respect to the PAC area specified under subparagraph (B), have such terms and conditions as are specified by the Secretary consistent with this section and shall include the following: (A) Care coordination With respect to an individual who selects the entity under paragraph (4)(A)— (i) the entity shall select one or more PAC providers in such area to furnish, directly or indirectly, clinically appropriate PAC services (as determined through the use of the PAC assessment tool) to the individual; and (ii) the entity shall coordinate the furnishing of all such services for the individual. (B) PAC area covered The PAC agreement shall specify the PAC area under the PAC agreement. (C) Payment amount for PAC services For PAC services furnished by a PAC provider and furnished with respect to a qualifying discharge that occurs— (i) before January 1, 2019, the entity shall pay the PAC provider under the PAC network agreement between the entity and the PAC provider— (I) with respect to such PAC services that are services for which the PAC provider would receive payment under this title without regard to this section, an amount that is not less than the amount that would otherwise be paid to such PAC provider under this title for such services; and (II) with respect to such PAC services that are services for which the PAC provider would not receive payment under this title without regard to this section, an amount specified under such PAC network agreement; and (ii) on or after January 1, 2019, the entity shall pay the PAC provider under such PAC network agreement an amount specified under such agreement. (D) Distribution of savings Insofar as the payment amount to a PAC coordinator under subsection (d)(3) for a PAC bundle furnished to an individual is greater than the aggregate amounts paid to PAC providers under subparagraph (C) for such bundle for such individual, the entity shall not retain an amount greater than 70 percent of such savings and shall pay an amount equivalent to— (i) not less than 10 percent of such savings to such PAC providers; (ii) not less than 10 percent of such savings to the PAC physician of the individual; and (iii) in the case that there is no PAC readmission of the individual, not less than 10 percent of such savings to the hospital discharging the individual immediately prior to the furnishing of such services. Payments shall be made under each of clauses (i), (ii), and (iii) to individuals and entities independent of whether payment may be made to such an individual or entity under another such clause. (E) Maintenance of advisory committee The entity shall maintain an advisory committee of PAC providers and of patient stakeholders to advise the entity regarding its activities under this section. (4) Selection and change of selection of PAC coordinators by individual (A) In general The Secretary shall establish a process for the selection and change of selection of a PAC coordinator by an individual who is receiving inpatient hospital services and whose discharge has been or is likely to be classified as a qualifying discharge. (B) Limitation on selection due to network adequacy The process established under subparagraph (A) may not allow an individual to select (or to change a selection to) a PAC coordinator in a PAC area unless the PAC coordinator has entered into PAC network agreements with such PAC providers in such PAC area such that the PAC coordinator has a sufficient number and range of health care professionals and providers willing to provide services under the terms of the PAC agreement. (5) Construction relating to PAC coordinators offering non-PAC services Nothing in this section shall be construed as prohibiting PAC providers from offering, either directly or indirectly, services that contribute to patient care, safety, and readmission avoidance (such as medication management, telehealth technologies, home environment services, and transportation services) that are not PAC services. (6) Construction regarding flexibility in the delivery of PAC services Nothing in this section shall be construed to prevent a PAC network agreement from permitting a PAC provider to subcontract for the furnishing of PAC services that the PAC provider is otherwise obligated to provide under the agreement so long as the subcontractor meets the same terms and conditions in furnishing such services as would apply if the PAC provider were to provide such services. (d) Payment amounts (1) Classification of conditions by CRGs; methodology for classification The Secretary shall establish a classification of the conditions of individuals receiving a PAC bundle by CRG and a methodology for classifying specific PAC bundles within these groups. The methodology shall, to the extent feasible, classify such bundles through the use of the PAC assessment tool. (2) Computation of base rate (A) In general The Secretary shall compute an average payment rate for PAC bundles classified in each CRG and furnished during a PAC period ending in the base year selected under subparagraph (B). (B) Base year selection The Secretary shall select as a base year the most recent year ending before the date of the enactment of this section for which data are available to carry out this section. (C) Budget-neutral computation The average payment rate for a PAC bundle classified in a CRG shall be computed in a manner so that, if it had been applied in the base year, the aggregate payments for PAC bundles classified in such CRG and furnished during a PAC period ending in such year would be equivalent to the aggregate payments under this title for such bundles. (3) Calculation of payment amount based on base rate Subject to the succeeding provisions of this subsection, the amount of the single payment described in this paragraph, with respect to a PAC bundle classified within a CRG and furnished to an individual during a PAC period ending— (A) in 2016, is the base average payment rate for such bundle computed under paragraph (2), increased by such percentage as the Secretary estimates is the average rate of increase in payments under this title for such bundle between the base year and 2016; and (B) in a subsequent year, is the amount of the single payment for such bundle computed under this paragraph for the previous year, increased by a percentage specified by the Secretary consistent with paragraph (4). (4) Calculation of annual percentage increase In calculating the percentage increases applied under paragraph (3)(B), the Secretary shall ensure that total expenditures for all PAC bundles provided in accordance with this section do not exceed 96 percent of the applicable baseline over the 8-fiscal-year period beginning with fiscal year 2016. (5) Adjustment for readmissions during PAC period The amount paid to a PAC coordinator under this subsection for a PAC bundle in a PAC period that includes a PAC readmission shall be reduced by an amount equal to the aggregate amount of payments made for such PAC readmission of such individual. (6) Adjustment for geographic and risk factors The Secretary shall adjust the amount of payment described in paragraph (3) with respect to services furnished to an individual in a PAC area in a budget-neutral manner for a year— (A) by an appropriate factor that reflects variations in costs for the furnishing of PAC bundles among different geographic areas; (B) by an appropriate factor that accounts for variations in costs for the furnishing of such PAC services to the individual based upon the health status of the individual; and (C) by an amount that accounts for historical local (hospital referral cluster) pricing. (7) Adjustment in case of change of selection by individual In the case of a change of selection of PAC coordinator by the individual under subsection (c)(4) during a PAC period, the Secretary shall adjust the amount of payment described in paragraph (3) in order to provide appropriate partial payments to be paid to the PAC coordinator selected initially by the individual and to the PAC coordinator selected under the change of selection by the individual. The method of calculating the respective amounts of such appropriate partial payments shall be based on the method used for the Home Health Partial Episode Payment adjustment. (8) Use of PAC assessment tool for purposes of adjustment for risk factors In determining an appropriate factor under paragraph (6)(B) with respect to an individual, the Secretary shall take into account an assessment of the individual conducted using the PAC assessment tool. (e) Phase-In (1) Determination of PAC expenditures by CRG Based on the most recent data available, the Secretary shall determine the aggregate amount of expenditures under this title for PAC services furnished during the PAC period for each CRG (as defined in paragraph (b)(11)). (2) Ranking of CRGs by volume of expenditure The Secretary shall rank the CRGs in order based on the aggregate amount of expenditures for PAC services described in clause (i) for each CRG. (3) Grouping of CRGs The Secretary shall group CRGs into four groups as follows: (A) First group The first group consists of the CRGs that have the highest rank under clause (ii) and that collectively account for 25 percent of the aggregate amount of expenditures for PAC services described in clause (i). (B) Second group The second group consists of the CRGs that have the next highest rank under clause (ii) after the first group in subclause (I) and that collectively account for 25 percent of the aggregate amount of expenditures for PAC services described in clause (i). (C) Third group The third group consists of the CRGs that have the next highest rank under clause (ii) after the second group in subclause (II) and that collectively account for 25 percent of the aggregate amount of expenditures for PAC services described in clause (i). (D) Fourth group The fourth group consists of the CRGs that are not included in the first, second, or third group under this clause. (4) Phase-in by CRG grouping In applying this section for discharges in— (A) 2016, only discharges that are classified within the first group under subclause (I) of clause (iii) shall be included; (B) 2017, only discharges that are classified within the first or second group under subclause (I) or (II) of clause (iii) shall be included; (C) 2018, only discharges that are classified within the first, second, or third group under subclause (I), (II), or (III) of clause (iii) shall be included; and (D) 2019 and subsequent years, discharges that are classified within any group of CRGs shall be included. . 4. Transitional care management payments for physicians For purposes of encouraging transitional care management by PAC physicians (as defined in section 1866F(b)(5) of the Social Security Act), in carrying out section 1848(e) of the Social Security Act ( 42 U.S.C. 1395w–4(e) ), the Secretary of Health and Human Services shall establish a new Transitional Care Management (TCM) code to pay for care management by such a PAC physician or revise and expand the use of existing TCM codes 99495 and 99494.