I 114th CONGRESS 2d Session H. R. 5841 IN THE HOUSE OF REPRESENTATIVES July 14, 2016 Mr. Kelly of Pennsylvania (for himself and Mr. Neal ) 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 establish a population based payment demonstration project under which Patient Care Networks are paid prospective monthly capitated payments for coordinated care furnished to Medicare beneficiaries.

1. Population Based Payment Demonstration Project Title XVIII of the Social Security Act ( 42 U.S.C. 1395x et seq. ) is amended by adding at the end the following new section: 1899C. Population Based Payment Demonstration Project (a) In general Beginning not later than January 1, 2017, the Secretary shall establish a 5-year Population Based Payment Demonstration Project (in this section referred to as the demonstration project ) to promote efficiency of care and improve health outcomes for Medicare fee-for-service beneficiaries (as defined in subsection (m)). Under the demonstration project, providers of services and suppliers may, in accordance with the subsequent subsections of this section, form Patient Care Networks (in this section referred to as PCNs )— (1) through which providers of services and suppliers shall furnish items and services for which payment would otherwise be made under parts A and B to participating beneficiaries, as defined in subsection (m); (2) which shall, with respect to participating beneficiaries of such PCN, provide for payment, in accordance with subsection (b)(2)(C), for all items and services for which payment would otherwise be made under parts A and B furnished to such beneficiaries; and (3) to which the Secretary shall prospectively make, instead of any other payment that would otherwise be made under such parts for such items and services furnished to such participating beneficiaries, capitated payments in accordance with subsection (d), for each month during a year for which the PCN participates in the demonstration project for all such items and services furnished to such participating beneficiaries. (b) Patient Care Networks (1) Eligible PCNs Subject to the succeeding provisions of this subsection, as determined appropriate by the Secretary, a group composed of at least the following providers of services and suppliers which has established a mechanism for shared governance is eligible to enter into agreement under paragraph (2) to participate as a PCN under the demonstration program under this section: (A) Physicians (as defined in section 1861(r)(1)) and practitioners (as described in section 1842(b)(18)(C)(i)) in group practice arrangements. (B) At least one hospital. (C) Federally qualified health center (as defined in section 1861(aa)(4)). (D) Such other providers of services and suppliers as the Secretary determines appropriate. (2) Requirements A PCN shall meet the following requirements to participate in the demonstration project: (A) The PCN shall be an integrated system of care which directly provides items and services under parts A and B. (B) The PCN shall employ and enter into appropriate contractual arrangements— (i) with a sufficient number, as determined by the Secretary, of primary care physicians to furnish items and services described in subparagraph (A) to at least twenty thousand participating beneficiaries; and (ii) agree to enter into appropriate contractual arrangements to establish a network of providers of services and suppliers to provide sufficient access for participating beneficiaries with respect to such PCN to items and services for which payment may otherwise be made under parts A and B. (C) The PCN shall, subject to paragraph (5), be responsible for— (i) payment to providers of services and suppliers participating in or otherwise entering into agreements with the PCN for items and services furnished to participating beneficiaries with respect to such PCN, in such amounts as specified by the PCN for such items and services; and (ii) payment to providers of services and suppliers not described in clause (i) for items and services furnished to participating beneficiaries with respect to such PCN, in such amounts as specified by the PCN for such items and services furnished by a provider of services or supplier that is described in such clause. (D) The PCN shall be willing to become accountable for the quality, cost, and overall care of participating beneficiaries with respect to such PCN. (E) The PCN shall enter into an agreement with the Secretary under paragraph (3). (F) The PCN shall have a formal legal structure that would allow the organization to receive and distribute payments made to the PCN under subsection (d) to participating providers of services and suppliers. (G) The PCN shall provide the Secretary with such information regarding providers of services and suppliers participating in the PCN as the Secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to a PCN, the implementation of quality requirements under subsection (f), other reporting requirements, and the determination of payments to the PCN under subsection (d). (H) The PCN shall have in place a leadership and management structure that includes clinical and administrative systems. (I) The PCN shall provide for beneficiary protections for Medicare fee-for-service beneficiaries participating in such PCN under the demonstration, including with respect to network adequacy, appeals rights, and out-of-pocket costs. (3) Participation agreement (A) In general Each PCN that applies for participation in the demonstration project and is approved for such participation by the Secretary shall enter into an agreement with the Secretary to participate in the demonstration project for at least 3 years. Under such agreement, the Secretary may require a PCN to demonstrate, through financial instruments including surety bonds, lines of credit, or other means, sufficient financial resources in order to meet reasonably anticipated obligations that would arise as a result of participation in the demonstration project. (B) Renewal An agreement under subparagraph (A) may be renewed or extended by mutual agreement of the PCN and the Secretary for up to a total of 5 years. (C) Termination The Secretary may terminate an agreement under this paragraph with a PCN before the end of the term of the agreement if the PCN fails to meet minimum quality standards established by the Secretary pursuant to subsection (f) or for any other reason specified by the Secretary. (4) Treatment of entities in existing agreements An organization of providers of services and suppliers that would otherwise be a PCN eligible to participate in the demonstration project, but that has entered into another agreement with the Secretary that involves shared savings under this title and includes downside risk may elect to apply under paragraph (3) to transition from such other agreement into an agreement with the Secretary under paragraph (3) to participate in the demonstration project under this section. Any such organization that transitions under this paragraph to the demonstration project under this section shall do so in a manner that is consistent with any transition provisions as the Secretary may specify. (5) Cost-sharing (A) In general Under the demonstration project, cost-sharing that would otherwise apply with respect to an item or service under this title shall apply with respect to such item or service furnished through a PCN, except to the extent such PCN may modify such cost-sharing pursuant to a waiver under subsection (h) and subparagraph (B). (B) Secretarial approval The Secretary shall establish a process under which a PCN participating under the demonstration program may apply to the Secretary for a waiver under subsection (h) in order to modify cost-sharing for items and services furnished through such PCN under the demonstration program. (c) Beneficiary assignment (1) Assignment to PCN (A) In general Upon entering in a contract with a PCN under subsection (b)(3), the Secretary shall establish a process to, with respect to each year during the demonstration project, prospectively assign Medicare fee-for-service beneficiaries to such PCN for such year. Such assignment shall be based on utilization of primary care services furnished under this title by a provider of services or supplier participating in the PCN involved. (B) Selection The Secretary shall allow PCNs to establish a pilot program under which such PCNs have a process through which Medicare fee-for-service beneficiaries may select a PCN. Such selection by the beneficiary shall be treated for purposes of this section as the assignment of the beneficiary to the PCN and shall supercede any other assignment by the Secretary under subparagraph (A) with respect to such beneficiary. (C) Opt out The process under paragraph (1) shall allow for Medicare fee-for-service beneficiaries to opt out of this section. (2) Primary care physician assignment Upon assignment under paragraph (1) of a Medicare fee-for-service beneficiary to a PCN, the Secretary shall allow the PCN to contact the beneficiary to designate a primary care physician participating in the PCN who shall be accountable for the coordination of the medical care of the beneficiary. The Secretary shall also allow the PCN to communicate with other individuals entitled to benefits under part A or enrolled under part B in the region served by the PCN regarding the opportunity to participate in th PCN. The Secretary shall promulgate regulations to govern the assignment of an individual to a primary care physician participating in the PCN in the absence of such designation by the individual in a manner that promotes patient engagement and stability in assignment and that takes into account primary care visits by physicians, nurse practitioners, and physician assistants. (3) Payments with respect to population Except in circumstances specified by the Secretary, during the period for which a Medicare fee-for-service beneficiary is a participating beneficiary with respect to a PCN under this section, payment may not be made under part A or B with respect to such beneficiary other than under this section. (4) Services from out-of-PCN providers (A) In general In the case of an item or service covered under the demonstration project which is furnished to a participating beneficiary, with respect to a PCN, during the period in which the beneficiary is participating in such PCN under the demonstration project from a provider of services or supplier not participating in or otherwise entering into an agreement with the PCN with respect to such item or service (in this paragraph referred to as an out-of-network provider , with respect to such PCN), in addition to any cost-sharing responsibility specified by the PCN, the beneficiary shall be responsible for any amount by which— (i) the amount payable under part A or B for such item or service; exceeds (ii) the payment amount that would be paid by the PCN for such item or service if such item or service were furnished by a provider of services or supplier who is participating in, or otherwise has an agreement with, the PCN with respect to such item or service. (B) Reimbursement by PCN (i) In general In applying this paragraph, the Secretary shall ensure that an out-of-network provider, with respect to a PCN that furnishes an item or service to a participating beneficiary, with respect to such PCN, is reimbursed by the PCN in such a manner that avoids fraud and duplication of payment. For purposes of the previous sentence, the Secretary shall establish a process by which such a provider may establish a contractual relationship with a PCN for reimbursement, subject to clause (ii), for items and services furnished to participating beneficiaries, with respect to such PCN. (ii) Limitation Any out-of-network provider, with respect to a PCN, may not be reimbursed by the PCN for an item or service by an amount that is more than 90 percent of the amount that would otherwise be payable for such item or service under part A or part B, as applicable. (d) Calculation of population health budgets and payments to PCNs (1) Calculation of Population Health Budgets Under the demonstration project, the Secretary shall calculate PCN specific monthly prospective population health budgets to PCNs as follows: (A) Base annual population health budget Subject to subparagraph (C), the Secretary shall calculate a base annual prospective population health budget for each PCN, which shall be the actual annual per capita total costs payable under parts A and B during the year prior to the first year of the demonstration project attributable to all individuals enrolled under Medicare fee-for-service. (B) PCN specific population health budget Subject to subparagraphs (C) and (D), for each year for which a PCN participates under the demonstration project, the Secretary shall calculate the PCN specific prospective population health budget for the PCN by— (i) adjusting the base annual prospective population health budget under subparagraph (A) for such year for beneficiary characteristics (including age, gender, and health status) of the participating beneficiaries with respect to such PCN and the geographic factors with respect to such PCN; (ii) updating such budget annually to account for changes in population; (iii) updating such budget by the projected growth in parts A and B services under the original Medicare fee-for-service program, as estimated by the Secretary; and (iv) multiplying such budget by the number of participating beneficiaries accounted for in the previous payment year in the PCN service area. (C) Non-application of certain provisions In calculating the base annual population health budget under subparagraph (A) and the PCN specific population health budgets under subparagraph (B), subsections (p) and (q) of section 1886 shall not be taken into account. (D) Limitations (i) Initial 3 years The PCN specific prospective population health budgets under subparagraph (B) for all PCNs shall be established in a manner that will result in total expenditures under this section being— (I) for the first year of the demonstration project, not more than 99 percent of the total expenditures under parts A and B that otherwise would have been expended for such participating beneficiaries for such year, as prospectively estimated by the Secretary; and (II) for the second and third years of the demonstration project, not less than 97 percent of the total expenditures under parts A and B that otherwise would have been expended for such participating beneficiaries for the year, as prospectively estimated by the Secretary. (ii) Subsequent years The Secretary may establish a generally applicable savings benchmark for all PCNs in the demonstration project for any year subsequent to the third year of the demonstration project, provided that in establishing such benchmark the Secretary shall not recapture the savings retained by PCNs in prior years in any manner. (2) Payments to PCNs (A) In general For each month of each year a PCN participates in the demonstration project, the Secretary shall pay each PCN a prospective, monthly payment equal to one-twelfth of the PCN specific population health budget under paragraph (1)(B) calculated for such PCN for such year. In carrying out the previous sentence, any payment so made shall be made to the PCN and not to a provider of services or supplier participating in such PCN. (B) Special circumstances The Secretary shall identify special circumstances in which payment may be made under parts A and B with respect to a participating beneficiary other than under this section. The Secretary shall ensure that each PCN establishes a mechanism for reimbursement and budget adjustment in the case of such special circumstances attributable to participating beneficiaries and a method for adjusting the PCN specific prospective population health budgets to the PCNs involved in such cases to account for payments made under parts A and B in such circumstances for such participating beneficiaries to providers of services and suppliers that are not participating in (or contracting with) the PCN involved. (e) Data sharing The Secretary shall promptly provide necessary data on a regular basis to a PCN, including each claim for items and services for which payment may be made under parts A, B, and D associated with participating beneficiaries of such PCN, to enable the coordination of care for participating beneficiaries with respect to such PCN. (f) Quality reports The Secretary shall establish performance standards (and a method to assess the performance of PCNs with respect to such quality standards) to assess the quality of care furnished by PCNs. Such assessment shall initially be based on the quality measures used for organizations that have entered into shared savings agreements pursuant to sections 1115A and 1899. The Secretary shall seek to improve the quality of care furnished by PCNs over time by specifying higher standards, new measures, or both for purposes of assessing such quality of care. (g) Coordination The Secretary may, in such manner and according to such methods as specified by the Secretary, coordinate the activities of PCNs with respect to covered part D drugs in order to increase the quality and availability of health care items or services to participating beneficiaries and may elect to contract with PCNs to provide prescription drug coverage. (h) Waiver authority The Secretary shall waive such requirements of sections 1128A and 1128B of this title as may be necessary to carry out the provisions of this section. Such waivers shall include, without limitation, a waiver of prohibition on beneficiary inducements in the form of co-pay waivers, medical transportation, provision of tele-health and medical monitoring equipment for home use, contracts with providers of services and suppliers participating in the PCN, and waivers allowing the provision of other supplies and services that permit the efficient delivery of care in home, post-acute, and alternative settings. Any waivers established pursuant to section 1899(f) shall also apply to the demonstration project. (i) Administration Chapter 35 of title 44, United States Code, shall not apply to the demonstration project. (j) State insurance laws; preemption A PCN shall not be required to be licensed as a health insurance company or health maintenance organization under the laws of any State. Any State law that would undermine the purpose of this section is preempted. (k) Reports to congress The Secretary shall for each year of the demonstration project submit to Congress a report on the status and results of the demonstration project. (l) Expansion of project The Secretary may, through rulemaking, expand (including implementation on a nationwide basis) the duration and the scope of the demonstration project, to the extent determined appropriate by the Secretary, if— (1) the Secretary determines that such expansion is expected to— (A) reduce spending under this title without reducing the quality of care; or (B) improve the quality of patient care without increasing spending; (2) the Chief Actuary of the Centers for Medicare & Medicaid Services certifies that such expansion would reduce (or would not result in any increase in) net program spending under this title; and (3) the Secretary determines that such expansion would not deny or limit the coverage or provision of benefits under the applicable title for applicable individuals. (m) Definitions In this section: (1) The term hospital means a subsection (d) hospital (as defined in section 1886(d)(1)(B)). (2) The term Medicare fee-for-service beneficiary has the meaning given such term in section 1899(h)(3). (3) The term participating beneficiary means, with respect to a PCN, a Medicare fee-for-service beneficiary who has been assigned under subsection (c) to such PCN. .