http://news.harvard.edu/gazette/story/2012/07/moving-beyond-health-cares-fee-for-service/

Researchers from Harvard Medical School’s Department of Health Care Policy have analyzed claims data from Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract (AQC), a global budget program in which 11 health care provider organizations were given a budget to care for patients who use Blue Cross Blue Shield of Massachusetts insurance. Such a model contrasts with widely used fee-for-service systems, where providers are reimbursed for each medical service they deliver.

The AQC predates, but is similar to, the Pioneer Accountable Care Organization contracts that Medicare began this year through the Affordable Care Act, an initiative in which Medicare will reward groups of providers based on improved outcomes and lower health care spending.

The researchers looked at the first two years of data from the AQC and found that the program has, in fact, succeeded in lowering total medical spending while simultaneously improving quality of care.

On average, groups in the AQC spent 3.3 percent less than fee-for-service groups in the second year, the study showed. Provider groups that entered AQC from a traditional fee-for-service contract model achieved even greater spending reductions of 9.9 percent in year two, up from 6.3 percent in the first year. Compared with those groups, groups that entered from contracts that were already similar to the AQC achieved fewer savings in both years. The researchers also found that the improvements in quality of chronic care management, adult preventive care, and pediatric care associated with the AQC grew in the second year.

“Moving away from fee-for-service models is high on the agenda of those looking to establish a fiscally sustainable, efficient health care system,” said Michael Chernew, professor of health care policy at Harvard Medical School (HMS) and senior author on the study. “It is likely that this type of new payment model will grow rapidly in coming years in the nation as a whole, and particularly in Massachusetts. By analyzing this program, we’re studying the future before it gets here.”

The problem with the ACA is a lack of cost control measures.

http://en.wikisource.org/wiki/Patient_Protection_and_Affordable_Care_Act/Title_III/Subtitle_A/Part_III


PART III--ENCOURAGING DEVELOPMENT OF NEW PATIENT CARE MODELS

SEC. 3021. ESTABLISHMENT OF CENTER FOR MEDICARE AND MEDICAID INNOVATION WITHIN CMS.[edit]
(a) In General- Title XI of the Social Security Act is amended by inserting after section 1115 the following new section:`CENTER FOR MEDICARE AND MEDICAID INNOVATION`Sec. 1115A. (a) Center for Medicare and Medicaid Innovation Established- `(1) IN GENERAL- There is created within the Centers for Medicare & Medicaid Services a Center for Medicare and Medicaid Innovation (in this section referred to as the `CMI') to carry out the duties described in this section. The purpose of the CMI is to test innovative payment and service delivery models to reduce program expenditures under the applicable titles while preserving or enhancing the quality of care furnished to individuals under such titles. In selecting such models, the Secretary shall give preference to models that also improve the coordination, quality, and efficiency of health care services furnished to applicable individuals defined in paragraph (4)(A).`(2) DEADLINE- The Secretary shall ensure that the CMI is carrying out the duties described in this section by not later than January 1, 2011.`(3) CONSULTATION- In carrying out the duties under this section, the CMI shall consult representatives of relevant Federal agencies, and clinical and analytical experts with expertise in medicine and health care management. The CMI shall use open door forums or other mechanisms to seek input from interested parties.`(4) DEFINITIONS- In this section: `(A) APPLICABLE INDIVIDUAL- The term `applicable individual' means-- `(i) an individual who is entitled to, or enrolled for, benefits under part A of title XVIII or enrolled for benefits under part B of such title;`(ii) an individual who is eligible for medical assistance under title XIX, under a State plan or waiver; or`(iii) an individual who meets the criteria of both clauses (i) and (ii).`(B) APPLICABLE TITLE- The term `applicable title' means title XVIII, title XIX, or both.`(b) Testing of Models (Phase I)- `(1) IN GENERAL- The CMI shall test payment and service delivery models in accordance with selection criteria under paragraph (2) to determine the effect of applying such models under the applicable title (as defined in subsection (a)(4)(B)) on program expenditures under such titles and the quality of care received by individuals receiving benefits under such title.`(2) SELECTION OF MODELS TO BE TESTED- `(A) IN GENERAL- The Secretary shall select models to be tested from models where the Secretary determines that there is evidence that the model addresses a defined population for which there are deficits in care leading to poor clinical outcomes or potentially avoidable expenditures. The models selected under the preceding sentence may include the models described in subparagraph (B).`

(B) OPPORTUNITIES- The models described in this subparagraph are the following models: `(i) Promoting broad payment and practice reform in primary care, including patient-centered medical home models for high-need applicable individuals, medical homes that address women's unique health care needs, and models that transition primary care practices away from fee-for-service based reimbursement and toward comprehensive payment or salary-based payment.`(ii) Contracting directly with groups of providers of services and suppliers to promote innovative care delivery models, such as through risk-based comprehensive payment or salary-based payment.`(iii) Utilizing geriatric assessments and comprehensive care plans to coordinate the care (including through interdisciplinary teams) of applicable individuals with multiple chronic conditions and at least one of the following: `(I) An inability to perform 2 or more activities of daily living.`(II) Cognitive impairment, including dementia.`(iv) Promote care coordination between providers of services and suppliers that transition health care providers away from fee-for-service based reimbursement and toward salary-based payment.`(v) Supporting care coordination for chronically-ill applicable individuals at high risk of hospitalization through a health information technology-enabled provider network that includes care coordinators, a chronic disease registry, and home tele-health technology.`(vi) Varying payment to physicians who order advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)) according to the physician's adherence to appropriateness criteria for the ordering of such services, as determined in consultation with physician specialty groups and other relevant stakeholders.`(vii) Utilizing medication therapy management services, such as those described in section 935 of the Public Health Service Act.`(viii) Establishing community-based health teams to support small-practice medical homes by assisting the primary care practitioner in chronic care management, including patient self-management, activities.`(ix) Assisting applicable individuals in making informed health care choices by paying providers of services and suppliers for using patient decision-support tools, including tools that meet the standards developed and identified under section 936(c)(2)(A) of the Public Health Service Act, that improve applicable individual and caregiver understanding of medical treatment options.`(x) Allowing States to test and evaluate fully integrating care for dual eligible individuals in the State, including the management and oversight of all funds under the applicable titles with respect to such individuals.`(xi) Allowing States to test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals.`(xii) Aligning nationally recognized, evidence-based guidelines of cancer care with payment incentives under title XVIII in the areas of treatment planning and follow-up care planning for applicable individuals described in clause (i) or (iii) of subsection (a)(4)(A) with cancer, including the identification of gaps in applicable quality measures.`(xiii) Improving post-acute care through continuing care hospitals that offer inpatient rehabilitation, long-term care hospitals, and home health or skilled nursing care during an inpatient stay and the 30 days immediately following discharge.`(xiv) Funding home health providers who offer chronic care management services to applicable individuals in cooperation with interdisciplinary teams.`(xv) Promoting improved quality and reduced cost by developing a collaborative of high-quality, low-cost health care institutions that is responsible for-- `(I) developing, documenting, and disseminating best practices and proven care methods;`(II) implementing such best practices and proven care methods within such institutions to demonstrate further improvements in quality and efficiency; and`(III) providing assistance to other health care institutions on how best to employ such best practices and proven care methods to improve health care quality and lower costs.`(xvi) Facilitate inpatient care, including intensive care, of hospitalized applicable individuals at their local hospital through the use of electronic monitoring by specialists, including intensivists and critical care specialists, based at integrated health systems.`(xvii) Promoting greater efficiencies and timely access to outpatient services (such as outpatient physical therapy services) through models that do not require a physician or other health professional to refer the service or be involved in establishing the plan of care for the service, when such service is furnished by a health professional who has the authority to furnish the service under existing State law.`(xviii) Establishing comprehensive payments to Healthcare Innovation Zones, consisting of groups of providers that include a teaching hospital, physicians, and other clinical entities, that, through their structure, operations, and joint-activity deliver a full spectrum of integrated and comprehensive health care services to applicable individuals while also incorporating innovative methods for the clinical training of future health care professionals.`

(C) ADDITIONAL FACTORS FOR CONSIDERATION- In selecting models for testing under subparagraph (A), the CMI may consider the following additional factors: `(i) Whether the model includes a regular process for monitoring and updating patient care plans in a manner that is consistent with the needs and preferences of applicable individuals.`(ii) Whether the model places the applicable individual, including family members and other informal caregivers of the applicable individual, at the center of the care team of the applicable individual.`(iii) Whether the model provides for in-person contact with applicable individuals.`(iv) Whether the model utilizes technology, such as electronic health records and patient-based remote monitoring systems, to coordinate care over time and across settings.`(v) Whether the model provides for the maintenance of a close relationship between care coordinators, primary care practitioners, specialist physicians, community-based organizations, and other providers of services and suppliers.`(vi) Whether the model relies on a team-based approach to interventions, such as comprehensive care assessments, care planning, and self-management coaching.`(vii) Whether, under the model, providers of services and suppliers are able to share information with patients, caregivers, and other providers of services and suppliers on a real time basis.`(3) BUDGET NEUTRALITY- `(A) INITIAL PERIOD- The Secretary shall not require, as a condition for testing a model under paragraph (1), that the design of such model ensure that such model is budget neutral initially with respect to expenditures under the applicable title.`(B) TERMINATION OR MODIFICATION- The Secretary shall terminate or modify the design and implementation of a model unless the Secretary determines (and the Chief Actuary of the Centers for Medicare & Medicaid Services, with respect to program spending under the applicable title, certifies), after testing has begun, that the model is expected to-- `(i) improve the quality of care (as determined by the Administrator of the Centers for Medicare & Medicaid Services) without increasing spending under the applicable title;`(ii) reduce spending under the applicable title without reducing the quality of care; or`(iii) improve the quality of care and reduce spending. Such termination may occur at any time after such testing has begun and before completion of the testing. `(4) EVALUATION- `(A) IN GENERAL- The Secretary shall conduct an evaluation of each model tested under this subsection. Such evaluation shall include an analysis of-- `(i) the quality of care furnished under the model, including the measurement of patient-level outcomes and patient-centeredness criteria determined appropriate by the Secretary; and`(ii) the changes in spending under the applicable titles by reason of the model.`(B) INFORMATION- The Secretary shall make the results of each evaluation under this paragraph available to the public in a timely fashion and may establish requirements for States and other entities participating in the testing of models under this section to collect and report information that the Secretary determines is necessary to monitor and evaluate such models.`(c) Expansion of Models (Phase II)- Taking into account the evaluation under subsection (b)(4), the Secretary may, through rulemaking, expand (including implementation on a nationwide basis) the duration and the scope of a model that is being tested under subsection (b) or a demonstration project under section 1866C, to the extent determined appropriate by the Secretary, if-- `(1) the Secretary determines that such expansion is expected to-- `(A) reduce spending under applicable title without reducing the quality of care; or`(B) improve the quality of care and reduce spending; and`(2) the Chief Actuary of the Centers for Medicare & Medicaid Services certifies that such expansion would reduce program spending under applicable titles.`(d) Implementation- `(1) WAIVER AUTHORITY- The Secretary may waive such requirements of titles XI and XVIII and of sections 1902(a)(1), 1902(a)(13), and 1903(m)(2)(A)(iii) as may be necessary solely for purposes of carrying out this section with respect to testing models described in subsection (b).`(2) LIMITATIONS ON REVIEW- There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of-- `(A) the selection of models for testing or expansion under this section;`(B) the selection of organizations, sites, or participants to test those models selected;`(C) the elements, parameters, scope, and duration of such models for testing or dissemination;`(D) determinations regarding budget neutrality under subsection (b)(3);`(E) the termination or modification of the design and implementation of a model under subsection (b)(3)(B); and`(F) determinations about expansion of the duration and scope of a model under subsection (c), including the determination that a model is not expected to meet criteria described in paragraph (1) or (2) of such subsection.`(3) ADMINISTRATION- Chapter 35 of title 44, United States Code, shall not apply to the testing and evaluation of models or expansion of such models under this section.`(e) Application to CHIP- The Center may carry out activities under this section with respect to title XXI in the same manner as provided under this section with respect to the program under the applicable titles.`(f) Funding- `(1) IN GENERAL- There are appropriated, from amounts in the Treasury not otherwise appropriated-- `(A) $5,000,000 for the design, implementation, and evaluation of models under subsection (b) for fiscal year 2010;`(B) $10,000,000,000 for the activities initiated under this section for the period of fiscal years 2011 through 2019; and`(C) the amount described in subparagraph (B) for the activities initiated under this section for each subsequent 10-year fiscal period (beginning with the 10-year fiscal period beginning with fiscal year 2020).Amounts appropriated under the preceding sentence shall remain available until expended. `(2) USE OF CERTAIN FUNDS- Out of amounts appropriated under subparagraphs (B) and (C) of paragraph (1), not less than $25,000,000 shall be made available each such fiscal year to design, implement, and evaluate models under subsection (b).`(g) Report to Congress- Beginning in 2012, and not less than once every other year thereafter, the Secretary shall submit to Congress a report on activities under this section. Each such report shall describe the models tested under subsection (b), including the number of individuals described in subsection (a)(4)(A)(i) and of individuals described in subsection (a)(4)(A)(ii) participating in such models and payments made under applicable titles for services on behalf of such individuals, any models chosen for expansion under subsection (c), and the results from evaluations under subsection (b)(4). In addition, each such report shall provide such recommendations as the Secretary determines are appropriate for legislative action to facilitate the development and expansion of successful payment models.'.(b) Medicaid Conforming Amendment- Section 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)), as amended by section 8002(b), is amended-- (1) in paragraph (81), by striking `and' at the end 2) in paragraph (82), by striking the period at the end and inserting `; and'; and(3) by inserting after paragraph (82) the following new paragraph:`(83) provide for implementation of the payment models specified by the Secretary under section 1115A(c) for implementation on a nationwide basis unless the State demonstrates to the satisfaction of the Secretary that implementation would not be administratively feasible or appropriate to the health care delivery system of the State.'.(c) Revisions to Health Care Quality Demonstration Program- Subsections (b) and (f) of section 1866C of the Social Security Act (42 U.S.C. 1395cc-3) are amended by striking `5-year' each place it appears.
SEC. 3022. MEDICARE SHARED SAVINGS PROGRAM.[edit]

Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is amended by adding at the end the following new section:
`SHARED SAVINGS PROGRAM`Sec. 1899. (a) Establishment- `(1) IN GENERAL- Not later than January 1, 2012, the Secretary shall establish a shared savings program (in this section referred to as the `program') that promotes accountability for a patient population and coordinates items and services under parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery. Under such program-- `(A) groups of providers of services and suppliers meeting criteria specified by the Secretary may work together to manage and coordinate care for Medicare fee-for-service beneficiaries through an accountable care organization (referred to in this section as an `ACO'); and`(B) ACOs that meet quality performance standards established by the Secretary are eligible to receive payments for shared savings under subsection (d)(2).`(b) Eligible ACOs- `(1) IN GENERAL- Subject to the succeeding provisions of this subsection, as determined appropriate by the Secretary, the following groups of providers of services and suppliers which have established a mechanism for shared governance are eligible to participate as ACOs under the program under this section: `(A) ACO professionals in group practice arrangements.`(B) Networks of individual practices of ACO professionals.`(C) Partnerships or joint venture arrangements between hospitals and ACO professionals.`(D) Hospitals employing ACO professionals.`(E) Such other groups of providers of services and suppliers as the Secretary determines appropriate.`(2) REQUIREMENTS- An ACO shall meet the following requirements: `(A) The ACO shall be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it.`(B) The ACO shall enter into an agreement with the Secretary to participate in the program for not less than a 3-year period (referred to in this section as the `agreement period').`(C) The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings under subsection (d)(2) to participating providers of services and suppliers.`(D) The ACO shall include primary care ACO professionals that are sufficient for the number of Medicare fee-for-service beneficiaries assigned to the ACO under subsection (c). At a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it under subsection (c) in order to be eligible to participate in the ACO program.`(E) The ACO shall provide the Secretary with such information regarding ACO professionals participating in the ACO as the Secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to an ACO, the implementation of quality and other reporting requirements under paragraph (3), and the determination of payments for shared savings under subsection (d)(2).`(F) The ACO shall have in place a leadership and management structure that includes clinical and administrative systems.`(G) The ACO shall define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.`(H) The ACO shall demonstrate to the Secretary that it meets patient-centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans.`(3) QUALITY AND OTHER REPORTING REQUIREMENTS- `(A) IN GENERAL- The Secretary shall determine appropriate measures to assess the quality of care furnished by the ACO, such as measures of-- `(i) clinical processes and outcomes;`(ii) patient and, where practicable, caregiver experience of care; and`(iii) utilization (such as rates of hospital admissions for ambulatory care sensitive conditions).`(B) REPORTING REQUIREMENTS- An ACO shall submit data in a form and manner specified by the Secretary on measures the Secretary determines necessary for the ACO to report in order to evaluate the quality of care furnished by the ACO. Such data may include care transitions across health care settings, including hospital discharge planning and post-hospital discharge follow-up by ACO professionals, as the Secretary determines appropriate.`(C) QUALITY PERFORMANCE STANDARDS- The Secretary shall establish quality performance standards to assess the quality of care furnished by ACOs. The Secretary shall seek to improve the quality of care furnished by ACOs over time by specifying higher standards, new measures, or both for purposes of assessing such quality of care.`(D) OTHER REPORTING REQUIREMENTS- The Secretary may, as the Secretary determines appropriate, incorporate reporting requirements and incentive payments related to the physician quality reporting initiative (PQRI) under section 1848, including such requirements and such payments related to electronic prescribing, electronic health records, and other similar initiatives under section 1848, and may use alternative criteria than would otherwise apply under such section for determining whether to make such payments. The incentive payments described in the preceding sentence shall not be taken into consideration when calculating any payments otherwise made under subsection (d).`(4) NO DUPLICATION IN PARTICIPATION IN SHARED SAVINGS PROGRAMS- A provider of services or supplier that participates in any of the following shall not be eligible to participate in an ACO under this section: `(A) A model tested or expanded under section 1115A that involves shared savings under this title, or any other program or demonstration project that involves such shared savings.`(B) The independence at home medical practice pilot program under section 1866E.`(c) Assignment of Medicare Fee-for-service Beneficiaries to ACOs- The Secretary shall determine an appropriate method to assign Medicare fee-for-service beneficiaries to an ACO based on their utilization of primary care services provided under this title by an ACO professional described in subsection (h)(1)(A).`(d) Payments and Treatment of Savings- `(1) PAYMENTS- `(A) IN GENERAL- Under the program, subject to paragraph (3), payments shall continue to be made to providers of services and suppliers participating in an ACO under the original Medicare fee-for-service program under parts A and B in the same manner as they would otherwise be made except that a participating ACO is eligible to receive payment for shared savings under paragraph (2) if-- `(i) the ACO meets quality performance standards established by the Secretary under subsection (b)(3); and`(ii) the ACO meets the requirement under subparagraph (B)(i).`(B) SAVINGS REQUIREMENT AND BENCHMARK- `(i) DETERMINING SAVINGS- In each year of the agreement period, an ACO shall be eligible to receive payment for shared savings under paragraph (2) only if the estimated average per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries for parts A and B services, adjusted for beneficiary characteristics, is at least the percent specified by the Secretary below the applicable benchmark under clause (ii). The Secretary shall determine the appropriate percent described in the preceding sentence to account for normal variation in expenditures under this title, based upon the number of Medicare fee-for-service beneficiaries assigned to an ACO.`(ii) ESTABLISH AND UPDATE BENCHMARK- The Secretary shall estimate a benchmark for each agreement period for each ACO using the most recent available 3 years of per-beneficiary expenditures for parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO. Such benchmark shall be adjusted for beneficiary characteristics and such other factors as the Secretary determines appropriate and updated by the projected absolute amount of growth in national per capita expenditures for parts A and B services under the original Medicare fee-for-service program, as estimated by the Secretary. Such benchmark shall be reset at the start of each agreement period.`(2) PAYMENTS FOR SHARED SAVINGS- Subject to performance with respect to the quality performance standards established by the Secretary under subsection (b)(3), if an ACO meets the requirements under paragraph (1), a percent (as determined appropriate by the Secretary) of the difference between such estimated average per capita Medicare expenditures in a year, adjusted for beneficiary characteristics, under the ACO and such benchmark for the ACO may be paid to the ACO as shared savings and the remainder of such difference shall be retained by the program under this title. The Secretary shall establish limits on the total amount of shared savings that may be paid to an ACO under this paragraph.`(3) MONITORING AVOIDANCE OF AT-RISK PATIENTS- If the Secretary determines that an ACO has taken steps to avoid patients at risk in order to reduce the likelihood of increasing costs to the ACO the Secretary may impose an appropriate sanction on the ACO, including termination from the program.`(4) TERMINATION- The Secretary may terminate an agreement with an ACO if it does not meet the quality performance standards established by the Secretary under subsection (b)(3).`(e) Administration- Chapter 35 of title 44, United States Code, shall not apply to the program.`(f) Waiver Authority- The Secretary may waive such requirements of sections 1128A and 1128B and title XVIII of this Act as may be necessary to carry out the provisions of this section.`(g) Limitations on Review- There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of-- `(1) the specification of criteria under subsection (a)(1)(B);`(2) the assessment of the quality of care furnished by an ACO and the establishment of performance standards under subsection (b)(3);`(3) the assignment of Medicare fee-for-service beneficiaries to an ACO under subsection (c);`(4) the determination of whether an ACO is eligible for shared savings under subsection (d)(2) and the amount of such shared savings, including the determination of the estimated average per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries assigned to the ACO and the average benchmark for the ACO under subsection (d)(1)(B);`(5) the percent of shared savings specified by the Secretary under subsection (d)(2) and any limit on the total amount of shared savings established by the Secretary under such subsection; and`(6) the termination of an ACO under subsection (d)(4).`(h) Definitions- In this section: `(1) ACO PROFESSIONAL- The term `ACO professional' means-- `(A) a physician (as defined in section 1861(r)(1)); and`(B) a practitioner described in section 1842(b)(18)(C)(i).`(2) HOSPITAL- The term `hospital' means a subsection (d) hospital (as defined in section 1886(d)(1)(B)).`(3) MEDICARE FEE-FOR-SERVICE BENEFICIARY- The term `Medicare fee-for-service beneficiary' means an individual who is enrolled in the original Medicare fee-for-service program under parts A and B and is not enrolled in an MA plan under part C, an eligible organization under section 1876, or a PACE program under section 1894.'.
SEC. 3023. NATIONAL PILOT PROGRAM ON PAYMENT BUNDLING.[edit]

Title XVIII of the Social Security Act, as amended by section 3021, is amended by inserting after section 1886C the following new section:

NATIONAL PILOT PROGRAM ON PAYMENT BUNDLING`Sec. 1866D. (a) Implementation- `(1) IN GENERAL- The Secretary shall establish a pilot program for integrated care during an episode of care provided to an applicable beneficiary around a hospitalization in order to improve the coordination, quality, and efficiency of health care services under this title.`(2) DEFINITIONS- In this section: `(A) APPLICABLE BENEFICIARY- The term `applicable beneficiary' means an individual who-- `(i) is entitled to, or enrolled for, benefits under part A and enrolled for benefits under part B of such title, but not enrolled under part C or a PACE program under section 1894; and`(ii) is admitted to a hospital for an applicable condition.`(B) APPLICABLE CONDITION- The term `applicable condition' means 1 or more of 8 conditions selected by the Secretary. In selecting conditions under the preceding sentence, the Secretary shall take into consideration the following factors: `(i) Whether the conditions selected include a mix of chronic and acute conditions.`(ii) Whether the conditions selected include a mix of surgical and medical conditions.`(iii) Whether a condition is one for which there is evidence of an opportunity for providers of services and suppliers to improve the quality of care furnished while reducing total expenditures under this title.`(iv) Whether a condition has significant variation in-- `(I) the number of readmissions; and`(II) the amount of expenditures for post-acute care spending under this title.`(v) Whether a condition is high-volume and has high post-acute care expenditures under this title.`(vi) Which conditions the Secretary determines are most amenable to bundling across the spectrum of care given practice patterns under this title.`(C) APPLICABLE SERVICES- The term `applicable services' means the following: `(i) Acute care inpatient services.`(ii) Physicians' services delivered in and outside of an acute care hospital setting.`(iii) Outpatient hospital services, including emergency department services.`(iv) Post-acute care services, including home health services, skilled nursing services, inpatient rehabilitation services, and inpatient hospital services furnished by a long-term care hospital.`(v) Other services the Secretary determines appropriate.`(D) EPISODE OF CARE- `(i) IN GENERAL- Subject to clause (ii), the term `episode of care' means, with respect to an applicable condition and an applicable beneficiary, the period that includes-- `(I) the 3 days prior to the admission of the applicable beneficiary to a hospital for the applicable condition;`(II) the length of stay of the applicable beneficiary in such hospital; and`(III) the 30 days following the discharge of the applicable beneficiary from such hospital.`(ii) ESTABLISHMENT OF PERIOD BY THE SECRETARY- The Secretary, as appropriate, may establish a period (other than the period described in clause (i)) for an episode of care under the pilot program.`(E) Physicians' SERVICES- The term `physicians' services' has the meaning given such term in section 1861(q).`(F) PILOT PROGRAM- The term `pilot program' means the pilot program under this section.`(G) PROVIDER OF SERVICES- The term `provider of services' has the meaning given such term in section 1861(u).`(H) READMISSION- The term `readmission' has the meaning given such term in section 1886(q)(5)(E).`(I) SUPPLIER- The term `supplier' has the meaning given such term in section 1861(d).`(3) DEADLINE FOR IMPLEMENTATION- The Secretary shall establish the pilot program not later than January 1, 2013.`(b) Developmental Phase- `(1) DETERMINATION OF PATIENT ASSESSMENT INSTRUMENT- The Secretary shall determine which patient assessment instrument (such as the Continuity Assessment Record and Evaluation (CARE) tool) shall be used under the pilot program to evaluate the applicable condition of an applicable beneficiary for purposes of determining the most clinically appropriate site for the provision of post-acute care to the applicable beneficiary.`(2) DEVELOPMENT OF QUALITY MEASURES FOR AN EPISODE OF CARE AND FOR POST-ACUTE CARE- `(A) IN GENERAL- The Secretary, in consultation with the Agency for Healthcare Research and Quality and the entity with a contract under section 1890(a) of the Social Security Act, shall develop quality measures for use in the pilot program-- `(i) for episodes of care; and`(ii) for post-acute care.`(B) SITE-NEUTRAL POST-ACUTE CARE QUALITY MEASURES- Any quality measures developed under subparagraph (A)(ii) shall be site-neutral.`(C) COORDINATION WITH QUALITY MEASURE DEVELOPMENT AND ENDORSEMENT PROCEDURES- The Secretary shall ensure that the development of quality measures under subparagraph (A) is done in a manner that is consistent with the measures developed and endorsed under section 1890 and 1890A that are applicable to all post-acute care settings.`(c) Details- `(1) DURATION- `(A) IN GENERAL- Subject to subparagraph (B), the pilot program shall be conducted for a period of 5 years.`(B) EXTENSION- The Secretary may extend the duration of the pilot program for providers of services and suppliers participating in the pilot program as of the day before the end of the 5-year period described in subparagraph (A), for a period determined appropriate by the Secretary, if the Secretary determines that such extension will result in improving or not reducing the quality of patient care and reducing spending under this title.`(2) PARTICIPATING PROVIDERS OF SERVICES AND SUPPLIERS- `(A) IN GENERAL- An entity comprised of providers of services and suppliers, including a hospital, a physician group, a skilled nursing facility, and a home health agency, who are otherwise participating under this title, may submit an application to the Secretary to provide applicable services to applicable individuals under this section.`(B) REQUIREMENTS- The Secretary shall develop requirements for entities to participate in the pilot program under this section. Such requirements shall ensure that applicable beneficiaries have an adequate choice of providers of services and suppliers under the pilot program.`(3) PAYMENT METHODOLOGY- `(A) IN GENERAL- `(i) ESTABLISHMENT OF PAYMENT METHODS- The Secretary shall develop payment methods for the pilot program for entities participating in the pilot program. Such payment methods may include bundled payments and bids from entities for episodes of care. The Secretary shall make payments to the entity for services covered under this section.`(ii) NO ADDITIONAL PROGRAM EXPENDITURES- Payments under this section for applicable items and services under this title (including payment for services described in subparagraph (B)) for applicable beneficiaries for a year shall be established in a manner that does not result in spending more for such entity for such beneficiaries than would otherwise be expended for such entity for such beneficiaries for such year if the pilot program were not implemented, as estimated by the Secretary.`(B) INCLUSION OF CERTAIN SERVICES- A payment methodology tested under the pilot program shall include payment for the furnishing of applicable services and other appropriate services, such as care coordination, medication reconciliation, discharge planning, transitional care services, and other patient-centered activities as determined appropriate by the Secretary.`(C) BUNDLED PAYMENTS- `(i) IN GENERAL- A bundled payment under the pilot program shall-- `(I) be comprehensive, covering the costs of applicable services and other appropriate services furnished to an individual during an episode of care (as determined by the Secretary); and`(II) be made to the entity which is participating in the pilot program.`(ii) REQUIREMENT FOR PROVISION OF APPLICABLE SERVICES AND OTHER APPROPRIATE SERVICES- Applicable services and other appropriate services for which payment is made under this subparagraph shall be furnished or directed by the entity which is participating in the pilot program.`(D) PAYMENT FOR POST-ACUTE CARE SERVICES AFTER THE EPISODE OF CARE- The Secretary shall establish procedures, in the case where an applicable beneficiary requires continued post-acute care services after the last day of the episode of care, under which payment for such services shall be made.`(4) QUALITY MEASURES- `(A) IN GENERAL- The Secretary shall establish quality measures (including quality measures of process, outcome, and structure) related to care provided by entities participating in the pilot program. Quality measures established under the preceding sentence shall include measures of the following: `(i) Functional status improvement.`(ii) Reducing rates of avoidable hospital readmissions.`(iii) Rates of discharge to the community.`(iv) Rates of admission to an emergency room after a hospitalization.`(v) Incidence of health care acquired infections.`(vi) Efficiency measures.`(vii) Measures of patient-centeredness of care.`(viii) Measures of patient perception of care.`(ix) Other measures, including measures of patient outcomes, determined appropriate by the Secretary.`(B) REPORTING ON QUALITY MEASURES- `(i) IN GENERAL- A entity shall submit data to the Secretary on quality measures established under subparagraph (A) during each year of the pilot program (in a form and manner, subject to clause (iii), specified by the Secretary

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and on and on and on